| Mon 24 Feb 2003, 14:01 | | Pepkor Limited - Pepkor Limited |
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(Registration number: 1965/007765/06)
JSE share code: PEP ISIN: ZAE000005344
Interim results for the six months ended 31 December 2002
Turnover
Up by 19% to R3 550 million
Operating profit
Up by 28% to R234 million
Earnings per share
Up by 21% to 50,1 cents
Group income statement
(R`000) Unaudited Unaudited 12 months
6 months to 6 months to Change to
31/12/02 31/12/01 % 30/06/01
Turnover 3 549 525 2 981 071 19 6 066 438
Operating profit 233 714 183 090 28 335 989
Net (interest paid)/
investment income (155 529) 61 402 91 764
Investment income 12 423 24 362 35 016
Interest paid (72 502) (70 195) (117 855)
Exchange rate difference (95 450) 107 235 174 603
Profit before exceptional 78 185 244 492 (68) 427 753
items
Exceptional items (13 143) 49 998 71 933
Amortisation of goodwill (2 470) (494) (2 221)
Profit before taxation 62 572 293 996 (79) 497 465
Taxation 59 018 78 755 (25) 143 395
Profit after taxation 3 554 215 241 (98) 354 070
Outside shareholders` interest 5 295 5 156 3 10 092
Net (loss)/profit (1 741) 210 085 343 978
Earnings per share (cents)
- before exceptional items 6,4 72,4 (91) 123,8
- after exceptional items
(excluding finance exchange
rate difference) 50,1 41,5 21 69,7
- after exceptional items (0,8) 94,7 155,0
- headline earnings 6,5 72,6 (91) 124,7
Dividend (cents per share) 13,0 11,0 18 24,0
Dividend cover - before
finance exchange rate
difference (times) 3,9 3,8 2,9
Number of shares for
calculation of earnings per
share (`000) 218 127 221 936 221 936
Group balance sheet
(R`000) Unaudited
31/12/02 30/06/02
Non-current assets 991 177 955 226
Property, plant and equipment 500 071 486 503
Goodwill 94 145 96 600
Investments 366 212 323 339
Deferred taxation 30 749 48 784
Current assets 2 116 129 2 017 192
Inventories 1 367 489 1 244 174
Accounts receivable 49 323 94 643
Bank balances and cash 699 317 678 375
Total assets 3 107 306 2 972 418
Ordinary shareholders` funds 1 173 559 1 291 415
Preference share capital 92 92
Outside shareholders` interest 27 809 23 420
Non-current liabilities 55 605 63 002
Long-term loans - 1 202
Deferred taxation 9 797 17 189
Other non-current liabilities 45 808 44 611
Current liabilities 1 850 241 1 594 489
Short-term loans and bank overdrafts 498 402 514 376
Other current liabilities 1 351 839 1 080 113
Total shareholders` funds and liabilities 3 107 306 2 972 418
Group cash flow statement
(R`000) Unaudited
6 months to
31/12/02 31/12/01
Cash flow from operations 263 692 589 915
Dividends paid (28 852) (19 974)
Cash retained from operations 234 840 569 941
Investment activities (196 722) (469 893)
Net acquisition of fixed assets (95 364) (136 499)
Other investment activities (101 358) (333 394)
Net cash flow 38 118 100 048
Financing activities
- Net debt (repaid)/raised (17 176) 10 577
Increase in bank balances and cash 20 942 110 625
Group statement of changes in shareholders`
funds
(R`000) Unaudited
6 months to
31/12/02 31/12/01
Balance at 1 July 1 291 415 980 087
Acquisition of treasury shares (47 516) -
Adjustment at 1 July in terms of AC 133
in respect of derivatives (4 666) -
Decrease in value of listed investments (13 768) -
Exchange rate adjustments (21 313) 41 411
Net (loss)/profit for the period (1 741) 210 085
Dividend paid (28 852) (19 974)
Balance at 31 December 1 173 559 1 211 609
Supplementary information
(R`000) Unaudited
6 months to
31/12/02 31/12/01
1. Depreciation for the period 57 670 50 544
2. Dividends received included in
investment income 4 840 4 456
3. Capital expenditure for the period 102 900 109 027
4. Calculation of headline earnings
Net (loss)/profit (1 741) 210 085
Attributable exceptional items 13 143 (49 998)
Amortisation of goodwill 2 470 494
Loss on sale and scrapping of fixed
assets after
taxation and outside shareholders` 408 612
interest
14 280 161 193
Unaudited
31/12/02 30/06/02
5. Number of shares in issue (`000) 212 281 221 936
6. Net asset value per share (cents) 552,8 581,9
7. Investments
Listed investments at cost less amounts
written off and market value 298 595 292 217
Unlisted investments at cost less
amounts
written off and directors` valuation 486 7 444
Loans 67 131 23 678
366 212 323 339
8. Capital commitments 79 491 59 337
9. Contingent liabilities 30 000 79 179
10. Operating lease commitments 1 444 702 1 435 090
Segmental analysis
(R`000) Unaudited
6 months to
31/12/02
Turnover
Pep 1 774 527 1 499 360
Ackermans 746 795 609 156
Best & Less 1 028 203 872 555
3 549 525 2 981 071
Operating profit
Pep 137 246 123 535
Ackermans 57 899 42 219
Best & Less 45 582 22 236
Financing, investments and head office (7 013) (4 900)
233 714 183 090
Geographical spread of operating profit
South Africa 171 406 131 974
Rest of Africa 16 726 28 880
Australia 45 582 22 236
233 714 183 090
Pepkor`s local and Australian businesses once again performed outstandingly on
operational level in the six months to 31 December 2002. While the group`s
results benefited from some external factors such as high inflation and the
disappearance of certain competitors, this did not detract from the performance
produced by the three chains - Pep, Ackermans and Best & Less. Sound cost and
stock management, increasing client support and the dedication of a loyal corps
of employees played a key role. All three businesses, but especially Pep and
Ackermans, have built a momentum over the past few years that enables them to
perform consistently and sustainably.
Pep
Pep, the anchor business in the group, once again performed extremely well at
operational level. Operating profit before exchange rate differences increased
68% from R109 million to R183 million. However, an exchange rate loss of R46
million (as against an exchange rate gain of R15 million in the corresponding
period) restricted growth in operating profit to 11% - from R124 million to R137
million. This loss was mainly the result of the strengthening of the rand on
Pep`s foreign assets.
Pep performed very well in South Africa and the BLNS countries, and in its
Africa division (Zambia, Mozambique, Malawi and Ghana) turned the loss suffered
the previous year into a profit, largely as a result of the good performance of
its stores in Zambia and Malawi. The chain has, however, decided to withdraw
from Ghana because of distribution channel problems and the country`s poor
economic prospects.
Pep performed well in all its product categories, with growth on existing
business in South Africa and the BLNS countries of 21%, as against an already
high 16% the previous year, and the chain further increased its market share.
Pep continued to open an increasing number of stores in shopping centres aimed
at its target market, while the store renovation programme was accelerated in
view of the large increase in turnover generated by these refurbished stores.
An advanced computer programme, which will further enhance stock management in
the chain`s 1 262 stores, was installed in the period under review. Although
turnover increased, stockholding and stock ageing have been reduced.
Ackermans
Ackermans grew at an accelerated rate during the period under review, increasing
its consumer support over a broad geographic front. Its product offering was
improved in quality and variety, and aligned more precisely with the preferences
of its target market. Integrity of sales information was further improved,
enhancing the precision with which stock is managed.
Results surpassed all the key budgets set for the period, with operating profit
37% higher at R57,9 million. The improvement in managerial efficiency is
reflected in the fact that the increase in operating profit (37%) is
substantially higher than the 23% in turnover. Although inflation was undeniably
a contributing factor, it remains an excellent achievement. The growing pains
experienced in implementing a new distribution strategy the previous year were
largely overcome, and cost management was improved in all divisions of the
business.
The chain opened 13 Ackermans and 3 Hang Ten stores in the period under review
and now operates a network of 290 outlets, 13 of them Hang Ten. The sharp
increase in consumer support is evident from the 17,3% growth in existing
business compared with 7,4% in the corresponding period. The Hang Ten stores in
particular performed extremely well, thanks to the availability of a much larger
product range. In the light of this success it has been decided to open five
more Hang Ten stores in the second half of the year.
In the period under review Ackermans successfully repositioned various
categories of products - textiles, cellular products and ladies` wear. The chain
will continue building on this success in the next six months.
Best & Less
The latest results achieved by Best & Less are a great improvement on those of
the corresponding six months. In the period under review our Australian chain
continued to consolidate its position after the dramatic turnaround brought
about in the previous financial year. Management succeeded in increasing
turnover by 17,8% to R1,028 billion while simultaneously improving
profitability.
These results were achieved in a retail environment still dominated by the
discount war waged among the large international clothing retailers in
Australia. Best & Less achieved the best results with its children`s wear and
basic products, which are also the key focus areas of the business. In addition,
it did very well with its sales of the popular Mango trademark products, having
acquired the exclusive selling rights for this range in Australia last year.
Best & Less continued concluding strategic alliances with suppliers to improve
stock management and bring new merchandise onto the shop floor as quickly as
possible. Best & Less is also busy optimising its distribution strategy.
The company opened seven new stores and closed one in the period under review,
and now operates 128 stores, almost all located in urban shopping centres.
ACQUISITION OF FASHAF
Pepkor announced on 12 December 2002 that, subject to the approval of the
Competition Authorities, it had acquired most of the assets of Fashion Africa
Limited (Fashaf). Fashaf had been placed in provisional liquidation at the
beginning of November 2002. The final ruling of the Competition Authorities is
expected early March.
Fashaf`s main assets are the retail chains Dunns and Millers Shoes, which
together own more than 200 stores in Southern Africa. Both operate in the
clothing and footwear market and are targeted at the young, fashion-conscious
consumer in the lower-income group. The product offering of these two chains
complements those of the subsidiaries in the group very well.
We regard Fashaf as a business with first-class potential whose financial
problems were caused mainly by insufficient working capital. The company has
operated in the South African retail trade for many years and its management has
sound trading expertise and comprehensive knowledge and experience of its market
segment.
Fashaf will be operated as an independent business. The takeover of Fashaf is
not expected to have any material effect on Pepkor`s profitability in the
current financial year.
Accounting policies
The interim report has been prepared in accordance with Statement AC 127:
Interim Financial Reporting and the Fourth Schedule to the South African
Companies Act. The accounting policies comply in all material respects with
those adopted in the annual financial statements for the year ended 30 June
2002, except as outlined below.
Statement AC 133: Financial Instruments - Recognition and Measurement has been
applied as from 1 July 2002 and resulted in the following changes:
Derivatives, in the form of foreign exchange contracts, will in future
be recognised at their net fair value;
Other investments are classified as available-for-sale and disclosed at
fair values;
Unrealised profits and losses resulting from changes in the fair value
of derivatives are accounted for in the income statement in the period
in which they arise, while changes in the value of other investments are
set off directly against reserves.
In terms of the transitional arrangements of AC 133 figures in respect of
previous years are not restated, but the change in value as a result of the
remeasuring of derivatives on 1 July 2002 is set off directly against reserves.
On 1 July 2002 reserves were reduced by R5 million, while other current
liabilities and deferred tax assets were increased by R7 million and R2 million,
respectively.
Comments on the results
Finance Exchange rate differences
The group`s foreign interests are financed offshore by way of rand-denominated
debt. The strengthening in the value of the rand during the period under review
resulted in an unrealised exchange rate loss of R95 million, while the decrease
in the value of the rand in the corresponding period in the previous year
resulted in an unrealised exchange rate gain of R107 million for that period.
Exceptional items
The loss of R13 million represents the estimated cost of discontinuing Pep`s
operations in Ghana.
Repurchase of shares
In terms of a resolution adopted at the company`s annual general meeting on 25
October 2002, 7,6 million shares in Pepkor Ltd were purchased from share
incentive trusts at 500 cents per share. Additional purchases of 2,0 million
shares were made at prices ranging from 460 cents to 500 cents per share. All
these shares are held as treasury shares.
Prospects
Based on the sales figures for the first six weeks of the new reporting period,
the momentum built up in the first six months should be maintained in the second
half of the year. Although there are many factors that may influence the market
in the months ahead, the Board nevertheless expects Pepkor to report real growth
for the year as a whole.
Declaration of dividend
Notice is hereby given that the Board has declared an interim dividend of 13
cents per share for the half-year to 31 December 2002. The dividend is payable
on Monday, 31 March 2003.
In terms of the requirements of STRATE Thursday, 20 March 2003, will be the last
day on which shares can be traded cum dividend. As from Monday, 24 March 2003,
shares will be traded ex dividend. The record date is Friday, 28 March 2003.
Share certificates may not be dematerialised or rematerialised between Monday,
24 March 2003, and Friday, 28 March 2003, both dates inclusive.
By order of the Board
CH Wiese PJ Erasmus
Chairman Managing director
Cape Town
21 February 2003
36 Stellenberg Road, Parow Industria 7490
Date: 24/02/2003 01:20:29 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
