| Tue 1 Oct 2002, 15:42 | | Profurn Limited - Interim Results And Further Caut |
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Profurn Limited - Interim Results and further Cautionary
PROFURN LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1968/015363/06)
Share code: PON ISIN ZAE 000016481
("Profurn")
Audited interim resultsfor the six months ended 30 June 2002
Group Balance Sheet
Audited Unaudited Audited
30 June 30 June 31 December
R000`s 2002 2001 2001
Non-current assets 287 301 284 907 271 933
Tangible assets 227 345 253 755 224 512
Goodwill - 16 683 -
Financial assets - 14 469 34 236
Deferred taxation 59 956 - 13 185
Current assets 2 764 398 3 509 655 3 225 297
Inventories 462 927 549 820 593 191
Trade receivables (note 3) 2 032 449 2 725 392 2 433 263
Sundry receivables 65 079 78 315 104 592
Cash and cash equivalents 203 943 156 128 94 251
Total assets 3 051 699 3 794 562 3 497 230
Shareholders` equity 2 009 775 2 007 772 1 688 610
Share capital 1 560 413 965 744 982 430
Revaluation and other
reserves 16 (105 369) 120 798
Retained earnings 449 346 1 099 606 585 382
Minority shareholders`
interest - 47 791 -
Non-current liabilities 146 905 350 602 177 542
Long-term interest bearing
debt (note 4) 88 229 78 648 118 871
Deferred taxation - 196 458 -
Loan from share incentive
scheme 58 676 75 496 58 671
Current liabilities 895 019 1 436 188 1 631 078
Trade and other payables 512 291 451 530 571 548
Provisions (note 5) 85 000 75 000 85 000
Short-term interest bearing
debt (note 4) 289 243 891 775 962 420
Ttaxation 8 485 17 883 12 110
Total equity and liabilities 3 051 699 3 794 562 3 497 230
Group Income Statement
Audited Unaudited Audited
30 June 30 June 31 December
R000`s 2002 2001 2001
Cash sales 649 497 714 140 1 534 700
Credit sales 435 030 691 568 1 525 695
Total sales 1 084 527 1 405 708 3 060 395
Finance charges earned 294 853 330 342 567 891
Other income 225 027 308 922 718 784
Turnover 1 604 407 2 044 972 4 347 070
Cost of sales (775 722) (975 114) (2 127 576)
Gross profit 828 685 1 069 858 2 219 494
Operating expenses (952 434) (965 679) (1 903 700)
Operating (loss)/profit
before exceptional charges (123 749) 104 179 315 794
Exceptional charges - - (840 769)
Operating (loss)/profit (123 749) 104 179 (524 975)
Finance costs (56 424) (47 390) (130 684)
(Loss)/profit before
taxation (180 173) 56 789 (655 659)
Taxation 44 137 (7 477) 169 521
(Loss)/profit after taxation (136 036) 49 312 (486 138)
Minority interest - (21 226) -
(Loss)/profit attributable
to shareholders (136 036) 28 086 (486 138)
Earnings per share (cents)
Basic (179,6) 52,3 (901,9)*
Fully diluted (179,6) 49,4 (852,1)*
Headline earnings
per share (cents)
Fully diluted (179,6) 49,4 (634,7)*
KEY FINANCIAL INFORMATION
Gross profit margin (%) 28,5 30,6 30,5
Net asset value per
share (cents) 739,5 3 533,8 2 932,6*
Total shares in
issue (000`s) 271 783 56 817 57 581*
Weighted average number
of shares in issue (000`s) 75 735 53 669 53 903*
Diluted weighted average
number of shares in
issue (000`s) 75 735 56 817 57 051*
Depreciation and
amortisation (R000`s) 37 889 35 122 76 995*
Instalment sale debtor
arrears (%) 11,0 14,6 15,5
*Restated due to the 1 for 20 share consolidation.
Group Cash Flow Statement
Audited Unaudited Audited
6 months 6 months 12 months
30 June 30 June 31 December
R000`s 2002 2001 2001
Cash flows from operating
activities:
Cash generated from
operations 311 051 14 088 42 050
Interest paid (56 424) (47 390) (130 684)
Taxes paid (6 341) (19 708) (40 352)
Net cash from/(used in)
operating activities 248 286 (53 010) (128 986)
Cash flows from investing
activities:
Additions to tangible
assets (59 348) (18 705) (44 796)
Investment - - (34 236)
Disposal/(acquisition) of
businesses 50 845 - (8 273)
Increase in loan from share
incentive scheme 6 2 056 2 049
Foreign currency translation
adjustment 9 405 - (25 035)
Net cash from/(used in)
investing activities 908 (16 649) (110 291)
Cash flows from financing
activities:
(Decrease)/increase in
long-term borrowings (29 928) 3 139 (250 924)
Proceeds of share issue 577 983 - (133)
Net cash from/(used in)
financing activities 548 055 3 139 (251 057)
Effect of exchange rate
changes on cash and cash
equivalents (13 667) (49 852) 26 090
Net increase/(decrease) in
cash and cash equivalents 783 582 (116 372) (464 244)
Cash and cash equivalents at
beginning of period (814 801) (460 848) (276 020)
Cash in Zimbabwe at
beginning of period - - (74 537)
Cash and cash equivalents
at end of period (31 219) (577 220) (814 801)
Notes to the Consolidated Interim Financial Statements
1. ACCOUNTING POLICIES
These consolidated interim financial statements are prepared in accordance with
Statements of Generally Accepted Accounting Practice in South Africa. The
accounting policies used in the preparation of the interim financial statements
are consistent with those used in the annual financial statements for the year
ended 31 December 2001.
These interim financial statements should be read in conjunction with the 2001
annual financial statements.
2. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit by the
weighted average number of ordinary shares in issue during the period, excluding
the average number of ordinary shares purchased by the company and held as
treasury shares.
For fully diluted earnings per share the weighted average number of shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares, being options granted to employees.
For headline earnings per share the fully diluted weighted average number of
shares is used. Net profit is adjusted to exclude items of a capital nature in
accordance with AC306.
Audited Unaudited Audited
6 months 6 months 12 months
R000`s 30 June 30 June 31 December
2002 2001 2001
3. TRADE RECEIVABLES
Instalment sale debtors 2 780 825 3 323 710 3 599 417
Provisions for unearned
finance charges (345 416) (389 127) (493 194)
Provisions for doubtful
debts (402 960) (209 191) (672 960)
2 032 449 2 725 392 2 433 263
4. NET BORROWINGS
Long-term interest bearing
debt
Finance leases 17 162 23 979 20 162
Long-term debt 125 148 86 659 152 077
Total long-term interest
bearing debt 142 310 110 638 172 239
Less: Current portion 54 081 31 990 53 368
88 229 78 648 118 871
Short-term interest bearing
debt
Current portion of long-term
interest bearing debt 54 081 31 990 53 368
Short-term bank borrowings 235 162 859 785 909 052
289 243 891 775 962 420
Cash and cash equivalents 203 943 156 128 94 251
NET BORROWINGS 173 529 814 295 987 040
5. PROVISIONS
Warranty provision 10 000 - 10 000
Provision for insurance
claims 75 000 75 000 75 000
85 000 75 000 85 000
6. AUDIT REPORT
The interim results have been audited by Grant Thornton Kessel Feinstein. Their
unqualified audit opinion is available for inspection at the company`s
registered office.
Group Statement of Changes in Equity
Stated Treasury Retained
R000`s capital shares earnings
Balance at 1 January 2001 1 228 412 (262 668) 1 071 520
Net profit for the period 28 086
Deferred tax on trademarks
Foreign currency translation
adjustment
Balance at 30 June 2001 1 228 412 (262 668) 1 099 606
Balance at 1 January 2002 1 245 098 (262 668) 585 382
Net proceeds of share issue 577 983
Net loss for the period (136 036)
Foreign currency translation
adjustment
Balance at 30 June 2002 1 823 081 (262 668) 449 346
Group Statement of Changes in Equity (continued)
Revaluation
and other
R000`s reserves Total
Balance at 1 January 2001 (104 472) 1 932 792
Net profit for the period 28 086
Deferred tax on trademarks 86 587 86 587
Foreign currency translation adjustment (87 484) (87 484)
Balance at 30 June 2001 (105 369) 1 959 981
Balance at 1 January 2002 120 798 1 688 610
Net proceeds of share issue 577 983
Net loss for the period (136 036)
Foreign currency translation adjustment (120 782) (120 782)
Balance at 30 June 2002 16 2 009 775
Commentary
Introduction
The first half of 2002 has been a traumatic period for Profurn. Our bankers
required a reduction in facility utilisation beyond that which could have been
achieved from operating cash flow in the short-term. There was an urgent need to
change Profurn`s capital structure and to create substantial positive cash
flows.
The rights offer and FirstRand`s disposal to JDGroup
The rights offer of R600 million was underwritten by FNB Corporate, a division
of FirstRand Bank Limited, which finally took up almost all of the 214 million
new shares, and which now owns 78,8% of Profurn. FNB Corporate`s stated
intention was not to be a long-term holder of shares in Profurn. Accordingly, it
was announced on 27 June 2002 that FirstRand had entered into a memorandum of
understanding with JD Group Limited regarding the sale of the businesses of
Profurn to JD Group ("the proposed transaction").
Since then, JD Group has provided selected retail expertise and services to
Profurn whilst the competition authorities consider the proposed transaction.
Results
Continued difficult trading conditions affected all of Profurn`s chains. Against
this backdrop, the strong focus on cash generation in this period has resulted
in cash flow from operations of R311 m. This was achieved by reduced buying and
a consequent reduction in inventories. Credit granting criteria were raised and
"zero-deposit" business was significantly curtailed. Cash sale promotions were
undertaken to replace lost credit sales. Forty-eight stores were closed in the
first quarter, although this was fully provided for at 31 December 2001.
These measures resulted in a 20,7% increase in cash sales from continuing
operations. However, credit sales from continuing operations decreased by 27,8%,
with a commensurate decrease in add-on charges. The gross profit margin on
merchandise sales, at 28,5%, was 2% lower than last year, reflecting the higher
proportion of cash sales. Operating expenses were maintained at 2001 levels.
The operating loss of R123 million (2001: profit R104 million) was mainly the
result of reduced credit sales, and the continued difficult trading environment.
Finance costs declined from R83 million in the second half of 2001 to R56
million, despite an increase in interest rates.
Financial position
The balance sheet, post the rights issue, is sound, with net gearing of only
8,6%. Net borrowings amount to R173,5 million, of which R142 million comprises
long-term facilities in the form of finance leases and securitised loans.
Cash flow
Cash generation in the first half amounted to R940 million, of which R578
million came from the rights issue, R311 million from operations, and R51
million from disposal of businesses. R122 million was utilised in acquisitions
of assets and interest and tax payments, and the balance was utilised to reduce
borrowings by R814 million.
Debtors book
The lower volume of credit sales and the focus on collections has resulted in a
decrease in the net debtors book to R2 032 million (Dec. 2001: R2 433 million).
Approximately R500 million in old accounts that were fully provided has been
written off. Consequently arrears have declined from 15,5% to 11%, and the
provision for doubtful debts has decreased from 18,7% to 14,5%. Doubtful debt
provisions now amount to 132% of arrears, which is up from 120% in December
2001. Unearned finance charge provisions have declined from 13,7% to 12,4% of
gross debtors, which reflects the shorter credit terms granted and the maturing
of the debtors book. Collection rates are at higher levels we have experienced
for some time, and we are confident that the provisions are adequate.
Debtors book analysis
Total
gross Arrear Total
debtors balances provisions
Division June Dec June Dec June Dec
2002 2001 2002 2001 2002 2001
Rm Rm
Supreme 834 1 019 12,6% 7,6% 28,3% 26,1%
Morkels 929 1 111 3,0% 6,7% 26,2% 28,4%
Protea 1 012 1 467 17,0% 27,8% 26,4% 39,8%
Other 6 3 0,0% 0,0% 38,7% 38,6%
Total 2 781 3 600 11,0% 15,5% 26,9% 32,4%
Board of directors
Gavin Walker resigned as Chief Executive Officer on 25 March 2002, and has not
been replaced. On 24 June 2002 Gerald Rubenstein and Michael Hacker resigned as
non-executive directors and were replaced by Theunie Lategan and Martin Keyser,
representing FirstRand.
With effect from 11 July 2002 Phillip Vallet and Carlos dos Santos resigned as
Non-executive Chairman and Non-executive Director respectively. On 18 July 2002
Derrick Minnie and Alwyn Martin were appointed as independent directors, and
Derrick Minnie assumed the position of Non-executive Chairman.
Further cautionary announcement
As the ruling from the competition authorities is expected only during October
2002, shareholders are advised to continue to exercise caution when dealing in
their Profurn shares.
For and on behalf of the board
N D Minnie
Chairman
K W Boyers
Chief Financial Officer
Johannesburg
1 October 2002
Directors:
N D Minnie* (Chairman) J Kaplan (Managing Director) M S Roberts (Chief
Operating Officer) KWBoyers (Chief Financial Officer) F K Anderson* L Balkind
M E Keyser* M T Lategan* A R Martin* *non-executive
Transfer secretaries:
Computershare Investor Service Limited
11 Diagonal Street
Johannesburg 2001
Registered office:
8th floor Profurn House
66 De Korte St
Braamfontein 2017
Registration number: 1968/015363/06
ISIN: ZAE000016481
Company code: PON
Results on internet: http//:www.profurn.com
Company secretary: D Bijker
E-mail: info@profurn.com
Telephone: (011) 403 7124
Fax: (011) 403 7147
Date: 01/10/2002 02:45:00 PM Produced by the JSE SENS Department
