| Thu 24 Oct 2002, 16:03 | | L.a. Group Limited - Unaudited Interim Results |
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L.A. Group Limited - Unaudited Interim Results
(Registration Number 1936/008786/06)
Share Code: LAR ISIN Code: ZAE000028676
"N" Share Code: LAN ISIN Code: ZAE000028684
UNAUDITED INTERIM results for the six months ended August 31, 2002
- Turnover up 10%
- Operating income up 22%
- Headline earnings up 23%
GROUP INCOME STATEMENT (R`000)
Six months Six months 12 months
to August 31 to August 31 to February 28
% 2002 2001 2002
change Unaudited Unaudited Audited
REVENUE 10 301 695 274 332 639 297
continuing
operations 298 860 240 216 575 596
discontinued
operation 2 835 34 116 63 701
OPERATING INCOME (LOSS)
BEFORE DEPRECIATION
AND AMORTISATION 32 991 27 708 61 283
continuing operations 38 730 34 767 76 593
discontinued operation (5 739) (7 059) (15 310)
Depreciation,
goodwill and
trademark
amortisation 2 989 3 171 6 041
OPERATING INCOME
(LOSS) BEFORE THE
FOLLOWING ITEMS 22 30 002 24 537 55 242
continuing operations 35 833 32 595 72 561
discontinued operation (5 831) (8 058) (17 319)
Net interest paid (3 611) (2 234) (6 031)
Impairment losses
and provisions (5 000)
Foreign currency
translation gains 196 7 277 14 732
OPERATING INCOME
(LOSS) BEFORE TAXATION 26 587 24 580 63 943
continuing operations 33 034 38 551 83 582
discontinued operation (6 447) (13 971) (19 203)
Taxation 11 928 12 653 18 362
INCOME AFTER
TAXATION 23 14 659 11 927 45 581
Loss (income) attributable
to outside shareholders 147 (170) (173)
NET INCOME ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 14 806 11 757 45 408
Number of ordinary and "N" ordinary shares
in issue 66 496 701 72 699 218 72 633 818
At weighted average 64 341 043 65 429 296 65 423 846
Diluted 66 011 838 67 211 294 66 450 951
Headline earnings per ordinary and
`N` ordinary shares - cents
At weighted
average 23 22.92 18.58 72.16
Diluted 24 22.34 18.09 71.04
Earnings per ordinary and
`N` ordinary shares - cents
At weighted
average 28 23.01 17.97 69.40
Diluted 28 22.43 17.49 67.67
Net tangible asset
value per share
- cents 34 398.51 298.19 362.13
Depreciation 2 874 2 737 5 811
Capital expenditure 9 032 1 552 3 018
Capital commitments 1 350 1 054 6 500
GROUP CASH FLOW STATEMENT (R `000)
Six months Six months 12 months
to August 31 to August 31 to February 28
2002 2001 2002
Unaudited Unaudited Audited
OPERATING ACTIVITIES
Operating income
before interest
and taxation 30 002 24 537 55 242
Adjustment for
non cash flow items 3 290 7 432 27 190
Cash generated by
operations 33 292 31 969 82 432
Increase in
working capital (51 147) (25 515) (47 366)
Net interest paid (3 611) (2 234) (6 031)
Dividends paid (6 536) (3 926) (3 926)
Taxation paid (4 108) (4 464) (16 724)
Net cash (outflow)
inflow from operating
activities (32 110) (4 170) 8 385
INVESTING ACTIVITIES Acquisitions of
fixed assets (9 032) (1 552) (3 018)
Proceeds from sale
of fixed assets 1 165 53 1 983
Net cash outflow from
investing activities (7 867) (1 499) (1 035)
FINANCING ACTIVITIES
Share buy back (9 309) - (59)
Movement in borrowings 1 441 (11 196) (2 215)
Payments to vendors (12 223) (6 860) (24 444)
Net cash outflow
from financing activities (20 091) (18 056) (26 718)
Net decrease in cash
and cash equivalents (60 068) (23 725) (19 368)
Cash and cash equivalents
at beginning of period (8 526) (2 602) (2 602)
Effect of foreign
exchange movements 29 (117) 13 444
Cash and cash equivalents
at end of period (68 565) (26 444) (8 526)
NOTE
Cash and cash equivalents comprise bank overdrafts less bank and cash balances
GROUP BALANCE SHEET (R`000)
August 31 August 31 February 28
2002 2001 2002
Unaudited Unaudited Audited
ASSETS
Non-current assets
Fixed assets 15 300 14 183 9 987
Intangible assets 1 793 2 117 1 908
Loan staff share trust 1 063 1 047
Deferred taxation 30 056 26 489 32 107
47 149 43 852 45 049
Current assets
Inventories 201 564 163 720 169 838
Trade and other
receivables 181 932 139 377 148 819
Taxation 976 626
Cash and cash
equivalents 18 184 26 842 39 173
401 680 330 915 358 456
Total Assets 448 829 374 767 403 505
EQUITY AND LIABILITIES
Equity
Ordinary shareholders`
equity 237 817 197 026 238 609
Outside shareholders`
interest 3 274 2 500 3 253
241 091 199 526 241 862
Non-current liabilities
Interest bearing 7 192 6 212 5 600
Non - interest bearing 650
Deferred taxation 4 429 4 527
11 621 6 212 10 777
Current liabilities
Non-interest bearing
Vendors for
businesses acquired 14 783 12 223
Provision for
discontinuing operation 5 000
Trade and other payables 82 589 75 218 68 927
Taxation 14 968 9 698 9 642
Interest bearing
Vendors for
businesses acquired 2 800 2 800 2 800
Short term portion of
non - current liabilities 1 786
Short term loans 7 225 8 244 9 575
Bank overdraft 86 749 53 286 47 699
196 117 169 029 150 866
Total Equity and
Liabilities 448 829 374 767 403 505
RECONCILIATION OF EARNINGS PER SHARE TO HEADLINE EARNINGS PER SHARE (R`000)
to August 31 to August 31 February 28
2002 2001 2002
Unaudited Unaudited Audited
Net earnings per
income statement 14 806 11 757 45 408
Goodwill and
trademark amortisation 115 434 230
Loss on disposal of
interest in subsidiary 251
(Profits) losses on
sale of tangible assets (173) (34) 1 906
Gain on payment to vendor
for business acquired (583)
HEADLINE EARNINGS 14 748 12 157 47 212
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS EQUITY (R`000)
Six months Six months 12 months
to August 31 to August 31 February 28
2002 2001 2002
Unaudited Unaudited Audited
Balance at beginning
of period 238 609 191 872 191 872
Share buy backs (9 309) (59) Earnings
attributable to
shareholders 14 806 11 757 45 408
Dividends paid (6 536) (3 926) (3 926)
Foreign currency
translation reserve,
less current and
deferred taxation 247 (2 677) 5 314
237 817 197 026 238 609
SEGMENTAL ANALYSIS (R`000)
Six months ended August 31, 2002 (unaudited)
Revenue % Results % Net Assets %
(liabilities)
Retail 2 835 1 (5 857) (19) 380 0
Corporate clothing 152 778 51 7 302 24 194 937 66
Branded
distribution 146 082 48 22 495 75 110 702 37
Corporate royalties
and unallocated
corporate expenses 6 062 20 (8 815) (3)
Total 301 695 100 30 002 100 297 204 100
Six months ended August 31, 2001 (unaudited)
Retail 34 116 12 (13 306) (54) 17 976
9 Corporate
clothing 122 260 45 10 377 42 136 307
65 Branded
distribution 117 956 43 18 243 74 77 145
37 Corporate royalties
and unallocated
corporate expenses 9 223 38 (21 406) (11)
Total 274 332 100 24 537 100 210 022 100
12 months ended February 28, 2002 (audited)
Retail 63 701 10 (17 865) ( 25) 3 658 2
Corporate clothing 269 840 42 19 856 28 57 951 68
Branded
distribution 305 756 48 43 275 61 84 779 36
Corporate royalties
and unallocated
corporate expenses 9 976 36 (14 564) (6)
Total 639 297 100 55 242 100 231 824 100
GEOGRAPHIC ANALYSIS (R`000)
Six months ended August 31, 2002 (unaudited)
Revenue % Results % Net Assets %
South Africa 200 993 67 30 463 102 81 303 61
European community 100 702 33 (461) (2) 115 901 39
Total 301 695 100 30 002 100 297 204 100
Six months ended August 31, 2001 (unaudited)
South Africa 181 422 66 19 714 80 16 456 55
European community 92 910 34 4 823 20 93 566 45
Total 274 332 100 24 537 100 210 022 100
12 months ended February 28, 2002 (audited)
South Africa 433 423 68 47 416 89 144 741 62
European community 205 874 32 7 826 11 87 083 38
Total 639 297 100 55 242 100 231 824 100
INTRODUCTION
The L.A. Group Limited ("the Group") is one of the country`s leading apparel and
footwear wholesale distribution company. Its main focus is the supply of
corporate clothing for both the local and international markets and the
wholesale distribution of branded clothing and footwear.
OVERVIEW OF RESULTS
The Group continues to build on its strong February 28, 2002 year-end
performance, with the corporate clothing business and the U.S. joint venture
trading particularly well.
Group turnover was 10% higher at R301.6-million, up from R274.3-million for the
same period last year.
Operating income increased by 22%, from R24.5-million for the six-month period
to August 31, 2001 to R30-million. Profit before tax was up by 8% from R24.5-
million to R26.5-million. Profit before tax would have reflected a 19% increase
had it not been for the R7.2-million foreign currency gain and the R5-million
impairment loss provision included in the previous results over the same period.
The net income attributable to ordinary shareholders increased by 26% from R11.7
million to R14.8-million, resulting in headline earnings per share increasing by
23% from 18,58 cents to 22,92 cents.
The major factors contributing to the reduced cash flow situation include
funding the losses of the now closed-down retail division, a substantial
increase in working capital, upgrading of premises and investment in computer
technology and the favourable buy back of L.A. Group shares including final
payments to vendors.
CONTINUING OPERATIONS
Turnover was 24% higher rising from R240.2-million to R298.8-million, with
operating income increasing by 10% from R32.5-million to R35.8-million.
Although profit after taxation decreased from R25.9-million to R21.1-million, it
must be noted that during the comparative period, there was a foreign currency
gain of R7.2-million compared to R196 000 for the current period.
As expected the brand distribution division started off slowly. However,
during the last quarter it delivered a better overall performance and, based on
forward orders anticipated for the festive period, this division should remain
the major contributor to group profit.
Turnover in the South African corporate clothing division grew substantially,
delivering the biggest growth of all the divisions as a result of the roll-out
of new contract gains reported previously. This growth also includes the
turnover achieved by the U.S. joint venture as a result of the African Growth
and Opportunities Act.
The adversely affected international transport economy as well as the overall
slowdown in the EU market affected the corporate clothing buying patterns in our
UK market. Against this background, the international corporate clothing
division has experienced a reduced demand and a wait-and-see attitude from the
majority of its transport customers. As a result of the late roll-out of
delayed contracts and an increase in costs D which have since been reduced D
budgets have now been revised.
DISCONTINUED OPERATIONS
As previously advised, the final five retail stores were sold to a consortium
comprising store management. The proceeds amount to R2.6-million, which
comprise of R887 500 for fixed assets and R1.72million for stock.
The discontinued operations reflect a loss of R6.5-million, which is attributed
to settlement costs with landlords where existing leases were in place and the
selling of final stock. No further significant losses are expected on
conclusion of the existing lease agreements. (see Contingent Liabilities)
FINANCIAL INFORMATION
Accounting policies
The principal accounting policies, as set out in the previous annual report,
have been consistently applied throughout the period under review. These
interim financial results have been prepared in accordance with South African
statements of Generally Accepted Accounting Practice.
CURRENT ASSETS
Deferred tax
Following a change in accounting policy last year, the previous period`s figures
have been restated appropriately.
CURRENT LIABILITIES
Vendor for business acquired
The R2.8-million is due to the vendors of Polo and is payable on June 30, 2003.
CONTINGENT LIABILITIES
The maximum value of lease commitments beyond August 2002 in respect of stores
closed is R561 000. Management is negotiating with landlords on an ongoing
basis to reach settlements or arrangements for sub-letting agreements.
The company continues to defend the R90-million Platinum Holdings Ltd. summons
which arose from the disputed agreement relating to the sale of the stores. As
previously advised, the board of directors, acting on legal advice, is confident
that the claim will be successfully defended. In the interim, the company has
applied for security for costs from Platinum and has also lodged a legal
exception to the claim. Both matters are expected to be heard on November 26,
2002.
Future vendor payment
In terms of the acquisition of the Polo brand there is a further amount payable
to the vendor. At August 31, 2002 this amount is estimated at R4.25-million
based on estimated royalty income to termination date. The amount is payable in
equal instalments on June 30, 2003 and 2004.
Dividend paid
A cash dividend of 10 cents per share in respect of the year ended February 28,
2002 was paid to the holders of ordinary and "N" ordinary shares on July 29,
2002. In accordance with the Group`s accounting policy, this payment is only
reflected in the results for the period in which it is paid.
It is the Group policy not to pay an interim dividend.
Share buy backs
319 683 ordinary shares and 447 684 "N" ordinary shares were bought back from
the LA Retail Staff Trust at a price of 170 cents under a specific approval
resolution as passed at the last annual general meeting.
On July 30, 2002 and August 1, 2002, 1 720 483 ordinary and 3 649 267 "N"
ordinary shares were bought back for a total value of R8 004 131 at a price of
149 cents and 150 cents. These shares were acquired under the board`s general
authority and cancelled on September 3, 2002. For the purpose of this
announcement the results have been calculated on the assumption that these
shares were cancelled, as at August 31, 2002.
The Group has authority to buy back further shares and will continue to review
whether such actions are appropriate.
Number of shares for the calculation of earnings and net asset value per share
The current period`s calculations of earnings, headline earnings, diluted
earnings and net asset value per share have been adjusted in respect of 7 269
922 shares held by a wholly-owned subsidiary, SA Global Investment Alliance
(Pty) Ltd and the 6 137 117 shares bought back and to be cancelled.
PROSPECTS
Traditionally the Skye Group and our Polo licensees perform better during the
second half of the financial year, as our key customers build-up stock in
anticipation of a busy festive season. We therefore foresee the demand for our
niche branded goods to continue while Carter Harris is expected to roll-out
additional contracts in both the local and US market.
With regard to the international corporate clothing company, management efforts
have focused on putting a working platform in place where cost-cutting measures
have been implemented. In addition, we have been short-listed for a number of
contracts which bodes well for this division.
Management is optimistic that the South African divisions should deliver
continued earnings growth over the next six months. However, adverse
international events and the state of the UK economy could affect the business
of our UK division.
Signed on behalf of the Group
AK Peer SA Mukadam
Executive Chairman Group Managing Director
October 24, 2002
Registered office
Colinton House, Fedsure Oval, Cnr Protea and Cavendish Roads, Claremont 7700
(PO Box 3500, Cape Town, 8000)
Transfer secretaries
Computershare Services (SA) (Pty) Ltd,
(Registration No: 1998/010439/07) 2nd Floor, Edura.
41 Fox Street, Johannesburg 2001 (P O Box 61051, Marshalltown 2107)
Directors
AK Peer (Executive Chairman), SA Mukadam (Group Managing Director), F Peer*, K
Chetty, R Orlin, C Qunta*, I Vukic*, TP Taylor*
* Non-Executive
Company Secretary
AM Bissett
Sponsor
Sasfin Bank Ltd
Website: www.lagroup.co.za
Date: 24/10/2002 02:47:05 PM Produced by the JSE SENS Department
