| Fri 30 Aug 2002, 0:00 | | Tradehold Limited - Group Results For The Year To |
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Tradehold Limited - Group results for the year to 30 June 2002
Tradehold Limited
(Registration number 1970/009054/06)
Luxemburg
JSE share code: TDH ISIN number: ZAE000026902
Group results for the year to 30 June 2002
Introduction
Tradehold`s results were severely affected by the operating loss suffered by
Brown & Jackson, the listed UK retailer of which it now holds 55%. As this
investment is by far Tradehold`s biggest asset, the results of Brown & Jackson
to a very large extent determines Tradehold`s financial performance.
Tradehold`s board was reconstituted just before the end of the financial year in
the light of the company`s decision to establish an office in Luxemburg to more
effectively manage its investments overseas. Tradehold remains incorporated in
South Africa and the company`s listing on the JSE Securities Exchange South
Africa is not affected. On a practical level the move has no effect on
Tradehold`s shareholders. Three directors have resigned from the board in the
light of the above decision. They are Messrs Jimmy Fouch, Whitey Basson and
Doug Anderson.
Operational review
The reporting period, which covered the 53 weeks to 6 July 2002, was an
extremely taxing one for Brown & Jackson, and the company reported an operating
loss of 19,2 million before amortisation, impairment of goodwill and gain on
investments. This equates a loss per share of 27p against a profit of 5,7p in
2001. Of the four retail chains owned by Brown & Jackson only one,
Poundstretcher, which is also the largest component, reported a profit.
Brown & Jackson`s poor financial performance was the outcome of an aggressive
growth strategy instituted in 2000 and aimed at increasing its competitiveness
on a national basis. However, this strategy was not supported by adequate
resources due to an extensive cost-cutting programme introduced at more or less
the same time. This resulted in under-investment in crucial areas such as
management, information systems and staff development at a time when such
investment was most needed. And with management focusing on growth, other
crucial areas were neglected, such as store upgrades, product selection and
logistics management. One of the consequences of the latter was a large
accumulation of old and slow-moving stock in stores across the chains.
In the second half of the year an extensive programme was instituted to turn the
various businesses around and to restore the loss-making ones to profitability
while at the same time shoring up Poundstretcher in order to further improve its
profit potential. Far-reaching management changes were introduced from the top
down and a number of key executives were either replaced or given different
responsibilities in an effort to strengthen the leadership in the group. Much
attention was focused on cleaning up accumulated stock. This was achieved to a
large extent by the year-end, but required heavy write-downs which greatly
affected the bottom-line.
- Poundstretcher
Poundstretcher, which is responsible for about 60% of group turnover, at the end
of the period operated 338 outlets, having added 13 new ones while increasing
turnover by 8,8% and like-for-like sales by 3,3%. Although still performing
satisfactorily, profit margins were coming under increasing pressure and a
number of actions were launched to raise its profitability. One of these
involved an aggressive programme to clear the supply chain of old and slow-
moving stock which involved heavy mark-downs. The product offering was at the
same time rationalised and general housekeeping improved. In-store merchandising
has also been receiving much attention, with the focus on increasing product
visibility, improving customer circulation and in general enhancing the shopping
experience. As an extension of the above, a new store format is being tested
which, once refined, will be rolled out in the second half of the new financial
year, depending on customer response.
The total merchandising and buying process is being reviewed in an effort to
improve the efficiency of the supply chain. Just after the end of the reporting
period the management team was greatly strengthened with the appointment of a
new and highly experienced managing director as well as new heads of all the
major divisions in the business - buying, merchandising and distribution,
operations and store development.
- What Everyone Wants (WEW)
This chain, which operates 136 stores, is one of two in the group that needed
major corrective action. In the last two financial years it has suffered
substantial losses. When the new managing director - Mr Daan Venter, previously
head of Ackermans - took over in November 2001, WEW was in a terminal condition.
Much has been done since to stem the decline and turn the business around.
Substantial losses were also incurred in this chain in writing down old and slow
moving merchandise.
The chain is introducing a new trading format involving an extensive remodelling
of both the store interior and product range, to 30 stores initially. Depending
on the results, the remaining stores in the chain will be refurbished before the
start of the 2003 festive season.
- Your More Store (YMS)
Despite growth in both turnover and like-for-like sales, Your More Store
suffered an operating loss, mainly because of substantial mark-downs to rid the
chain of old and slow-moving stock. Management has been strengthened
considerably and 15 new stores will be added to the existing 200 in the new
financial year.
- The Famous Brunswick Warehouse
This chain, which sells mainly footwear through its 69 outlets, is still beset
with problems despite concerted efforts to turn it around. The effect on the
bottom line of reducing sales has been exacerbated by heavy mark-downs of old
stock clogging up the supply line, and the chain recorded an operating loss in
the period under review.
- B&J Poland
After management changes this pilot scheme of 16 stores increased turnover by
73% and like-for-like sales by 30%. However, these stores have still not reached
break-even.
Developments since year-end
Restructuring
Just before the end of its reporting period on 6 July 2002 the board of Brown &
Jackson announced its decision to restructure the business and further
strengthen its management capabilities. In terms of this restructuring it is to
sell to Tradegro, a wholly-owned subsidiary of Tradehold, its three loss-making
chains - What Everyone Wants, Your More Store and The Famous Brunswick Warehouse
- as well as B&J Poland and certain related properties. This will leave Brown &
Jackson with only its core business, Poundstretcher.
To strengthen its management capabilities, Mr Angus Monro, a well-known figure
in UK retailing, was appointed chief executive of Poundstretcher and an
executive director of Brown & Jackson as from 2 September 2002. He has already
joined the board of Brown & Jackson as a non-executive director. Mr Monro was
previously chief executive of the UK discount retail chain Matalan plc. As such
he was responsible for the highly successful overall growth and development of
that business.
Tradehold has sold a total of 9,2 million shares in Brown & Jackson to Mr Monro,
which together with the 8,4 million shares allotted to him in a cash placement,
amounts to 10% of the issued shares in the company. Tradehold provided a loan to
him to finance these acquisitions. Tradehold has the right to acquire all these
shares from him if certain performance criteria, linked to the future market
capitalisation of Brown & Jackson, are not met. The company at the same time
sold 7,5 million Brown & Jackson shares to certain individuals who will be
joining the management team. Through these transactions Tradehold`s holding in
Brown & Jackson has been reduced from 69% to 55%.
New director
Mr Guy Bernard, well known in business circles in Luxemburg, joined the
Tradehold board on 2 July 2002. He is the first overseas director appointed to
replace the South African directors to whose resignations were referred earlier.
Accounting policies
The annual financial statements have been prepared on the historical cost basis
in accordance with South African Statements of Generally Accepted Accounting
Practice. In all material respects the accounting policies conform with those
adopted in the previous financial year.
The group`s auditors, PricewaterhouseCoopers Inc., reviewed the group results.
Their unqualified report is available on request from the company secretary.
Prospects
We believe Poundstretcher to be a business with enormous potential. We have no
doubt that with Mr Monro`s proven skills, and those of the highly experienced
team joining him, Poundstretcher will go from strength to strength, with a
resultant improvement in shareholder value.
We are proceeding apace with the return to profitability of the other retail
chains. Through the steps already taken, their deteriorating performance has
been arrested. However, we have only started to lay the foundation for
rebuilding these businesses. It will be a slow and risky process, and we do not
expect What Everyone Wants, The Famous Brunswick Warehouse or the Polish
operation to produce profits within the next 18 to 24 months. However, we should
see an improved performance in Your More Store in the next financial year.
By order of the board
C H Wiese C Moore
Chairman Executive director
28 August 2002
Group income statement
Reviewed Audited
12 months to 12 months to
(R`000) 30/06/2002 30/06/2001
Turnover 6 824 309 4 756 234
Operating (loss)/profit (268 904) 134 957
Net interest paid 4 685 39 202
(Loss)/profit before exceptional items (273 589) 95 755
Exceptional items (63 924) 14 697
(Loss)/profit before taxation (337 513) 110 452
Taxation (15 000) 13 765
(Loss)/profit after taxation (322 513) 96 687
Outside shareholders` interest (118 718) 37 080
Attributable to normal activities (86 093) 32 167
Attributable to exceptional items (32 625) 4 913
Net (loss)/profit (203 795) 59 607
(Loss)/earnings per share (cents)
- before exceptional items (61,9) 44,9
- after exceptional items (73,1) 53,7
- headline (loss)/earnings (60,7) 48,6
Number of shares for calculation of
(loss)/earnings per share (`000) 278 688 110 968
Group balance sheet
Reviewed Audited
(R`000) 30/06/2002 30/06/2001
Non-current assets 1 318 035 967 986
Fixed assets 1 147 807 937 569
Investments 170 228 30 417
Current assets 1 494 526 1 599 424
Inventories 899 582 878 872
Accounts receivable 264 167 171 926
Bank balances and cash 330 777 548 626
Total assets 2 812 561 2 567 410
Ordinary shareholders` funds 1 344 455 605 621
Preference share capital 144 46
Outside shareholders` interest 298 693 242 199
Non-current liabilities 168 098 113 397
Long-term loans 378 625
Deferred taxation 1 055 6 326
Other non-current liabilities 166 665 106 446
Current liabilities 1 001 171 1 606 147
Short-term loans and bank overdrafts 43 086 824 871
Other current liabilities 958 085 781 276
Total shareholders` funds and liabilities 2 812 561 2 567 410
Analysis of net (loss)/profit
Reviewed Audited
12 months to 12 months to
(R`000) 30/06/2002 30/06/2001
Attributable (loss)/earnings from
Brown & Jackson plc (182 502) 70 377
Net operating costs of Tradehold Ltd (1 292) (4 474)
Net interest after taxation of Tradehold Ltd 11 298 (16 080)
(Loss)/profit before exceptional items (172 496) 49 823
Attributable exceptional items (31 299) 9 784
Net (loss)/profit (203 795) 59 607
Group cash flow statement
Reviewed Audited
12 months to 12 months to
(R`000) 30/06/2002 30/06/2001
Cash flow from operations 155 152 62 091
Dividends paid (20 066) (19 241)
Cash retained from operations 135 086 42 850
Investment activities (156 915) (105 421)
Net acquisition of fixed assets (116 196) (208 282)
Other investment activities (40 719) 102 861
Net cash flow (21 829) (62 571)
Financing activities (196 020) 516 633
Proceeds from share issue 586 012 172
Net debt (repaid)/raised (782 032) 516 461
(Decrease)/increase in
bank balances and cash (217 849) 454 062
Supplementary information
Reviewed Audited
12 months to 12 months to
(R`000) 30/06/2002 30/06/2001
1. Depreciation for the year 159 017 120 475
2. Capital expenditure for the year 166 271 229 963
3. Calculation of headline earnings
Net (loss)/profit (203 795) 59 607
Attributable exceptional items 31 299 (9 784)
Loss on sale and scrapping of fixed
assets after taxation and outside
shareholders` interest 3 226 4 087
(169 270) 53 910
30/06/2002 30/06/2001
4. Number of shares issued (`000) 347 330 110 968
5. Net asset value per share (cents) 387,1 545,8
6. Investments
Unlisted investments at cost and
directors` valuation - 25 416
Loans 170 228 5 001
170 228 30 417
7. Capital commitments 75 294 21 476
8. Contingent liabilities 195 573 129 489
9. Operating lease commitments 754 567 521 784
Group statement of changes in shareholders` funds
Reviewed Audited
12 months to 12 months to
(R`000) 30/06/2002 30/06/2001
Balance at 1 July 605 621 459 603
Proceeds from share issue 540 930 -
Unbundling adjustments - 23 702
Exchange rate adjustments 412 796 62 709
Net (loss)/profit for the year (203 795) 59 607
Dividends paid (11 097) -
Balance at 30 June 1 344 455 605 621
Date: 30/08/2002 01:05:38 PM Produced by the JSE SENS Department
