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Wetherlys Investment - Reviewed interim report for the six months to 31
August 2002
Wetherlys Investment Holdings Limited
(Registration number 1996/016455/06)
(Share code WET) (ISIN ZAE000013827)
Reviewed interim report for the six months to 31 August 2002
Revenue up 40%
Operating income up 44%
HEPS up 37%
Summarised group income statement
Reviewed Unaudited Audited
6 Months 6 Months Year to
to to
31 August 31 August 29 February
2002 2001 2002
Revenue 173,640 123,797 269,788
Operatin
g income
before
deprecia
tion
and net 29,421 20,399 58,041
finance
income
Deprecia (2,144) (1,391) (3,911)
tion
Operatin 27,277 19,008 54,130
g income
before
net
finance
income
Finance 2,178 2,605 2,271
income
Investmen 3,282 2,994 3,167
t income
Interest (1,104) (389) (896)
paid
Net 29,455 21,613 56,401
income
before
taxation
Taxation (9,476) (7,123) (16,897)
Net
income
attribut
able to
ordinary 19,979 14,490 39,504
sharehol
ders
Number 127.7 127.0 127.7
of
shares
in issue
(million
s)
127.7 126.7 127.0
Weighted
average
number
of
shares
(million
s)
15.6 11.4 31.1
Earnings
and
headline
earnings
per
share
(cents)
Summarised group balance sheet
Reviewed Unaudited Audited
31 August 31 August 29 February
2002 2001 2002
Assets
Tangib 96,134 78,180 89,601
le
fixed
assets
Intang 1,402 1,494
ible
fixed
assets
-
tradem
arks
Deferr 5,199 3,018 5,755
ed
taxati
on
Long 9,753 4,000 7,443
term
loans
Financ 36,479 35,823 36,410
ial
assets
Curren 129,055 95,479 114,001
t
assets
Inventory 74,173 51,883 55,165
Accounts 12,380 14,587 13,370
receivabl
e
Bank 42,502 29,009 45,466
balances
Total 278,022 216,500 254,704
Assets
Equity
and
Liabil
ities
Shareh 195,738 159,406 185,588
olders
funds
Non- 24,365 11,272 23,653
curren
t
liabil
ities
Curren 57,919 45,822 45,463
t
liabil
ities
Accounts 51,306 42,543 42,628
payable
Short 1,282 1,276
term
portion
of long
term
liabiliti
es
Taxation 5,331 3,279 1,559
Total 278,022 216,500 254,704
equity
and
liabli
ties
Net 152.2 125.5 144.2
tangib
le
asset
value
per
share
(cents
)
Statement of changes in equity
Reviewed Unaudited Audited
6 Months 6 Months to Year to
to
31 August 31 August 29 February
2002 2001 2002
Balance at the 185,588 153,298 151,712
beginning of
the period
Attributable 19,979 14,490 39,504
profit
Proceeds of 825 1,993
share issue
Change in (1,586)
accounting
policy
Ordinary (7,621) (7,621)
dividend paid
Goodwill on (890)
acquisistion
written off
Distribution (8,939)
out of share
premium
account
Balance at the 195,738 159,406 185,588
end of the
period
Abridged group cashflow statement
Reviewed Unaudited Audited
6 Months to 6 Months Year to
to
31 August 31 August 29 February
2002 2001 2002
Cash 20,426 22,941 54,451
genera
ted
from
operat
ions
Net 2,178 2,605 2,271
finance
income
Net (7,620) (4,482)
dividends
paid
Taxation (5,150) (7,060) (20,881)
paid
Cash 17,454 10,866 31,359
flows
from
operat
ing
activi
ties
Cash (14,691) (3,461) (23,961)
flows
from
invest
ing
activi
ties
Cashfl (5,727) (1,881) 14,583
ows
from
financ
ing
activi
ties
Net loans 3,212
raised
Distribut (8,939)
ion out
of share
premium
account
Net (2,964) 5,524 21,981
(decre
ase)/i
ncreas
e in
cash
Bank 45,466 23,485 23,485
balanc
es at
beginn
ing of
period
Bank 42,502 29,009 45,466
balanc
es at
the
end of
the
period
Financial review
We are pleased to report that Wetherlys achieved a positive growth in
earnings, in line with management`s objectives, for the six month period
to 31 August 2002.
Revenue for the period increased 40% to R 173.6 m, with operating income
increasing 44% to R 27.2m. Headline earnings per share increased 37% to
15.6 cents per share. This growth is consistent with the current retail
industry trend and is enhanced by the full effect of the Osiers stores
which were new additions in the comparative period.
Operating margins are lower than generally experienced on an annualised
basis. This is attributable to costs incurred in funding the opening of
the new Wetherlys and Osiers warehouses in Wendywood and Nelspruit which
opened in May and August respectively. Margins were also impacted by
costs incurred in preparing our new Distribution Centre for operation
from 1 September. Management is confident that operating margins of
around 20% will be restored once the new stores are trading to their
full potential. Cost containment continues to be an operational focus
and the operating cost to turnover ratio has remained in line with the
group`s objectives. A principal objective in the establishment of the
Distribution Centre (discussed in more detail below) was to enable the
group to manage its costs more efficiently.
The increased stock levels are attributed to the opening of the
decorating warehouses in Wendywood and Nelspruit, and the establishment
of the Distribution Centre.
Cash resources remain strong despite the costs incurred described above
and in particular the increased investment in stock. Strong working
capital management remains a primary focus.
Accounting policies and information
The accounting policies and methods of computation used are consistent
with those applied in the previous year and comply with the South
African Statements of Generally Accepted Accounting Practice.
This report has been reviewed by the company`s auditors, Fisher Hoffman
PKF (Jhb) Inc. A copy of their report is available for inspection at the
registered office of the company.
Local operations
In line with international trends the group has established a
centralised Distribution Centre in Industria which has some 28 000
square metres of warehouse space and which became operational on 1
September. With overseas expansion now a clearly stated strategy and
local volumes increasing simultaneously, this takes the group to a new
operational level where we have had to re-evaluate our supply and
delivery logistics. This is an important development for the group and
provides a platform for more efficient working capital management and
cost containment. The more efficient stockholdings allow for improved
delivery lead times for our branches and customers. It is likewise a key
component in our export business. Investment has also been made in
improved management information systems. The new site and systems will
provide adequate infrastructure for the foreseeable future.
All Wetherlys and Osiers stores traded in line with expectations. The
design and layout of the new Wendywood Wetherlys and Osiers showrooms
set a new standard for the group and are performing well. Likewise the
stores in Nelspruit have shown immediate success, and confirms our
belief that this is a high growth area. Following the set up of the
Distribution Centre, renovations at Kya Sands have commenced. It is
intended to increase the size of the Wetherlys and Osiers stores and
incorporate complementary tenants to establish a Lifestyle Centre
similar to the successful Palms Centre in Cape Town. There are plans to
open Wetherlys and Osiers stores in the East Rand in the first half of
next year, followed by an Osiers store in Pretoria.
During the period under review the company acquired Melville Dcor in
the Eastern Cape which comprises three stores. These stores target the
proliferation of vacation homes and golf estates along the Garden Route.
They have performed in line with budget. Renovations and development
of these outlets is currently in progress which will align them more
with the Wetherlys concept, although it is planned to retain the
Melville Dcor brand for the immediate future.
The manufacturing subsidiary, Roodefurn continues to improve on its
production levels and profit contribution. With the advent of the
Distribution Centre it has been able to further streamline production to
enable it to keep abreast of the increasing demand for its products. In
the last six months, there was significant effort by Roodefurn and the
group`s other major local suppliers to provide the necessary stock
levels at the Distribution Centre. This was achieved with the maximum co-
operation from all concerned.
International operations
Management has maintained its conservative approach to international
expansion. Distribution agreements with established and approved agents
are initially entered into and the market response gauged. The expansion
roll out is further determined by the ability of our suppliers to
provide the required levels of stock on a sustainable basis, an issue
that now will be alleviated to a certain extent by the advent of the
Distribution Centre.
Operating on this basis, the group invested in 51% of an operation in
the Estepona region in Spain. The store opened there in May and whilst
it is too soon for it to have any impact on group results, indications
are that it will perform in line with expectations.
Investigations and discussions are at an advanced stage into further
market opportunities in other European countries.
Prospects
The group will continue to expand locally and internationally as
reported above. We also review our product range on an ongoing basis.
Future growth will be funded out of the group`s cash resources.
Local and international economic conditions look to be tightening in the
short term. . Management is confident the group is well positioned to
meet the challenges these conditions present, and minimise their impact
on the results for the second half of the year.
Directors and management
During the period under review Stephen Davies and David Jacobson
resigned as executive directors of the company, and the board thanks
them for their contribution to the group. We are delighted that Stephen
agreed to stay on as a non-executive director thereby giving us access
to his wealth of knowledge and experience. Robin Brickhill has been
appointed group secretary.
Significant investment is being made on an ongoing basis to develop and
incentivise management in terms of the company`s strategy for succession
planning as well as to facilitate growth globally
Dividend
In line with past dividend policy, the board of directors will not
declare an interim dividend. The board will consider declaring a final
dividend at the end of the year which will be covered not less than
three times.
For and on behalf of the board
B van der Merwe R Brickhill
Chairman Group secretary
4 October 2002
Directors:
NWG Davies, SJF Davies*, JA Smith, BD van der Merwe, AM Morgan, I Heron*
(*Non-executive director)
Registered Office
13 Springbok Road, Industria
Transfer secretaries
Computershare Investor Services Ltd., PO Box 61051, Marshalltown, 2107
Sponsor:
ENF Sponsors (Pty) Ltd, 4th floor The Forum, 2 Maude Street, Sandown
Date: 04/10/2002 10:21:00 AM Produced by the JSE SENS Department
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