| Fri 25 Apr 2003, 15:06 | | Tradehold Limited Group Results For The Period To |
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Tradehold Limited group results for the period to 28 February 2003
Tradehold Limited
(Registration number 1970/009054/06)
JSE share code: TDH
ISIN: ZAE000026902
Tradehold Limited group results for the period to 28 February 2003
As Tradehold has changed its year-end from June to February, this report covers
the 34 weeks to 28 February 2003. This change was made to align the group"s
statutory year-end with the seasonal year-end of its subsidiaries.
Comparing the results for the period under review with those of the previous
financial year therefore offers no meaningful basis of evaluation.
The period to 28 February has been one of intense restructuring of the group"s
holdings. Tradegro UK, a wholly-owned subsidiary of Tradehold, acquired three of
the four retail chains owned by Brown & Jackson plc, in which your company holds
the controlling interest.
These three chains - What Everyone Wants (WEW), Your More Store (YMS) and the
Famous Brunswick Warehouse (TFBW) - all recorded losses during the 2002
financial year. These losses impacted negatively on Brown & Jackson"s market
rating and were, as a consequence, eroding substantial shareholder value.
As part of the transaction Tradegro UK also gained a portfolio of 73 freehold
properties valued at GBP34,4 million as well as 16 stores in Poland. At the time
all these properties were occupied by outlets in the group.
The restructuring left Brown & Jackson with its core business only, the 338-
store retail chain Poundstretcher, the only one of the four chains to record a
profit in the 2002 financial year. Mr Angus Monro, a well-known figure in
British retail, acquired 10% of the issued share capital of Brown & Jackson on
his appointment as managing director of the company. Senior former colleagues of
Mr Monro who joined the top management team together acquired 5% of the shares
in the company.
To make these transactions possible Tradehold divested itself of 14% of its
shares in Brown & Jackson thereby reducing its holding from 69% to 54%. This
holding still represents Tradehold"s most important investment by far.
OPERATING REVIEW
Brown & Jackson plc
The restructuring left Brown & Jackson in an excellent position - ungeared and
with cash in the bank, and its new management free to devote all its attention
to the re-engineering of Poundstretcher which is impacting on every aspect of
the business.
The new senior management team, all with extensive knowledge and expertise in
the value retail sector, is establishing a more dynamic, focussed and task-
driven culture in a business where the skills base has been greatly expanded
through a concerted investment in people.
The chain"s product offering is being upgraded extensively and the new ranges
already in stores have been enthusiastically received by customers with sales
far exceeding expecta-tions. By September, 85% of the ranges will reflect the
chain"s new positioning. A key strategy in creating added value is to source
products directly. Savings achieved in this way are being re-invested in
significantly improving the quality and value of the products on offer.
In addition, an extensive programme has been launched to raise housekeeping and
merchandising standards. A low-cost modernisation programme, to be rolled out to
all the larger stores by September, has also been introduced to improve product
presentation and create a more pleasant shopping environment.
Management plans to increase the number of stores to 650 in the next five years.
This will treble net selling space to about 600 000 sq m. However, in the light
of the scale of the task of bringing the present store complement up to the
required standard, just eight new stores will be opened in the present year.
To service a larger store network, a new distribution centre of 35 000 sq m is
being planned, for completion in the second half of 2004. The new centre, which
will also accommodate the company"s head office, will incorporate greatly
improved distribution systems.
In the review period, Brown & Jackson achieved a like for-like-sales growth of
2,8% and an operating profit of GBP6,7 million in its continuing operations
(Poundstretcher). However, losses suffered in or flowing from the disposal of
the discontinued operations resulted in a retained loss of GBP1,6 million.
Expected write-offs and contractual costs mainly related to the closing of a
number of smaller units and the relocation of a number of others have resulted
in impairment and other charges of GBP19,6 million.
The results for the first eight weeks of the new financial year have exceeded
expectations.
Total sales were up 7% and like-for-like sales up 5,5% compared to the
corresponding period last year which itself was a period of strong trading.
Tradegro UK
Even before the acquisition of WEW, TFBW and YMS by Tradegro UK, an extensive
programme was instituted to arrest their deteriorating performance. These
included far-reaching management changes and the extensive clearing of ageing
stock which was clogging up the supply chain. The latter unavoidably involved
heavy write-downs, which greatly affected the bottom line.
Although at the time of their acquisition by Tradegro UK it seemed as if the
deteriorating performance of the these chains had been arrested, it was also
clear that management had only started to lay the foundation for a return to
profitability, and that it would, at best, be a slow, risky and costly process.
Although by early December the performance of WEW in particular had improved,
the boards of directors of both WEW and TFBW felt the substantial additional
capital investment required for the full recovery of these two businesses could
not be justified. Consequently, on 9 December 2002, the directors successfully
applied for the two chains to be placed under administration.
YMS, the only remaining chain, also experienced difficult trading conditions.
Markdowns had to be increased further to reduce the still high level of old
stock. At the end of the review period all seasonal merchandise older than two
years had been cleared.
With the accent on stock clearance and improved housekeeping, no stores were
added to the existing 200. In terms of GAAP an impairment provision has been
made for the closing of those unprofitable stores expected to remain in a loss
position.
The period under review saw a number of management changes at YMS with both Mr
Johan Visser (managing director) and Mr Francis Marra (operations director)
departing. Management changes were also implemented at regional and store level.
COMMENTS ON THE RESULTS
The results of WEW and TFBW were deconsolidated as from 9 December 2002, the
date on which the two businesses were placed under administration.
Exceptional items of GBP33 million resulted from impairment and other charges of
GBP19,6 million relating to write-offs and contractual obligations in Brown &
Jackson; irrecoverable loans and other expenses of GBP9,6 million associated
with the closure of WEW and TFBW; and impairment and other costs totalling
GBP3,8 million in YMS.
ACCOUNTING POLICY
The annual financial statements have been prepared mainly on the historical cost
basis in accordance with South African Statements of Generally Accepted
Accounting Practice. In all material respects the accounting policies accord
with those adopted during the previous financial year, except as set out below.
The new statement AC 133: Financial Instruments - Recognition and Measurement,
has been applied as from 1 July 2002. Unrealised profits and losses resulting
from changes in the fair value of derivatives are from that date accounted for
in the Income Statement in the period in which they arise. 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 re-measuring of
derivatives on 1 July 2002 is set off directly against the reserves. On 1 July
2002 reserves were reduced by GBP0,5 million while other current liabilities
were increased accordingly.
The group"s auditors, PricewaterhouseCoopers Inc., reviewed the group"s results.
Their unqualified report is available on request from the company secretary.
OUTLOOK
With WEW and TFBW under administration, Tradehold will no longer have to
shoulder the financial burden of these businesses. It can consequently apply all
its resources to growing its other retail interests. The heavy expenses incurred
in the restructuring of the group now also lie in the past. The initial results
following the re-engineering of Pound-stretcher are most encouraging, and we
believe the chain is firmly on its way to achieving strong, sustainable profits.
The Board consequently feels it can view the future with considerable
confidence.
NEW OFFICES
In view of its investment focus on the UK and Europe, Tradehold has established
a branch office on the Continent to more effectively manage its overseas
interests. A treasury and financing function has also been located in Europe.
However, the company remains incorporated in South Africa and its listing on the
JSE Securities Exchange South Africa is not affected.
DEVELOPMENTS SINCE YEAR-END
After year-end Tradehold reached agreement to sell control of YMS to a
consortium, which includes the chain"s management. Tradehold will retain a 26%
interest in YMS. The finalisation of the transaction is subject to certain
suspensive conditions and regulatory approvals. At the start of these
negotiations Mr Carel Stassen as an interested party resigned as a director of
Tradehold and Mr Cornus Moore, an executive director of the company, has taken
on his responsibilities at Tradegro UK.
REPORTING CURRENCY
As the operations of Tradehold"s subsidiaries are conducted in pound sterling
and because of the distortion caused by the fluctuating value of the rand, the
company is reporting its results in the former currency. Rand equivalents are
provided to comply with regulatory requirements.
C H Wiese C Moore
Chairman Director
Luxembourg
24 April 2003
Tradehold Limited
Registration number: 1970/009054/06)
Group results
Group income statement
Audited Reviewed Reviewed Audited
12 months 8 months to 8 months to 12 months to
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
451 673 276 997 Turnover 4 184 191 6 824 309
Continued
324 914 225 472 operations 3 369 226 4 909 112
Discontinued
126 759 51 525 operations 814 965 1 915 197
(19 238) (8 129) Operating loss (124 823) (268 904)
Continued
4 363 5 754 operations 94 763 59 724
Discontinued
(23 601) (13 883) operations (219 586) (328 628)
Net interest
(610) 738 received/(paid) 11 073 (4 685)
Loss before
(19 848) (7 391) exceptional items (113 750) (273 589)
(4 009) (33 845) Exceptional items (477 126) (63 924)
Loss before
(23 857) (41 236) taxation (590 876) (337 513)
(1 017) (1 732) Taxation (32 010) (15 000)
Loss after
(22 840) (39 504) taxation (558 866) (322 513)
Outside
shareholders"
(8 319) (12 958) interest (181 689) (118 718)
Attributable to
(6 262) (11) normal activities (657) (86 093)
Attributable to
(2 057) (12 947) exceptional items (181 032) (32 625)
(14 521) (26 546) Net loss (377 177) (203 795)
Earnings per
pence pence share cents cents
- before
exceptional
(4,5) (1,6) items (23,3) (61,9)
- after
exceptional
(5,2) (7,6) items (108,6) (73,1)
- headline
(4,4) (1,4) earnings (20,1) (60,7)
Number of shares
for calculation
of earnings
278 688 347 330 per share ("000) 347 330 278 688
Group balance sheet
Audited Reviewed Reviewed Audited
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
Non-current
83 709 71 657 assets 929 254 1 318 035
Property, plant
72 898 56 377 and equipment 731 097 1 147 807
10 811 10 956 Investments 142 083 170 228
Deferred
- 4 324 taxation 56 074 -
94 918 80 548 Current assets 1 044 542 1 494 526
57 133 29 679 Inventories 384 877 899 582
Accounts
16 777 17 891 receivable 232 009 264 167
Bank balances
21 008 32 978 and cash 427 656 330 777
178 627 152 205 Total assets 1 973 796 2 812 561
Ordinary
shareholders"
85 385 62 560 funds 811 288 1 344 455
Preference
share
12 12 capital 144 144
Outside
shareholders"
18 970 9 875 interest 128 054 298 693
Non-current
10 676 21 556 liabilities 279 538 168 098
24 - Long-term loans - 378
67 - Deferred taxation - 1 055
Other non-current
10 585 21 556 liabilities 279 538 166 665
Current
63 584 58 202 liabilities 754 772 1 001 171
Short-term loans
and bank
2 736 2 038 overdrafts 26 429 43 086
Other current
60 848 56 164 liabilities 728 343 958 085
Total
shareholders"
funds and
178 627 152 205 liabilities 1 973 796 2 812 561
Analysis of results
Audited Reviewed Reviewed Audited
12 months 8 months to 8 months to 12 months to
to
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
Attributable
earnings of
Brown &
(13 315) (350) Jackson plc (6 150) (182 502)
Earnings of
- (6 698) Tradegro(UK)Ltd (95 978) -
Earnings of
746 1 400 Tradehold Ltd 21 045 10 006
Loss before
exceptional
(12 569) (5 648) items (81 083) (172 496)
Attributable
exceptional
(1 952) (20 898) items (296 094) (31 299)
(14 521) (26 546) Net loss (377 177) (203 795)
Group cash flow statement
Audited Reviewed Reviewed Audited
12 months months to 8 months to 12 months to
to
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
Cash flow from
9 924 20 238 operations 215 823 155 152
(1 705) - Dividends paid - (20 066)
Cash retained
8 219 20 238 from operations 215 823 135 086
Investment
(9 626) 45 activities 14 598 (156 915)
Net acquisition
(7 797) (8 778) of fixed assets (130 213) (116 196)
Other investment
(1 829) 8 823 activities 144 811 (40 719)
(1 407) 20 283 Net cash flow 230 421 (21 829)
Financing
(25 893) (452) activities (5 188) (196 020)
Proceeds from
44 035 270 share issue 4 175 586 012
(69 928) (722) Net debt repaid (9 363) (782 032)
Increase/
(decrease)in bank
(27 300) 19 831 balances and 225 233 (217 849)
cash
Supplementary information
Audited Reviewed Reviewed Audited
12 months 8 months to 8 months to 12 months to
to
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
1.Depreciation
10 782 5 707 for the period 84 879 159 017
2.Capital
expenditure for
11 274 9 835 the period 145 486 166 271
3.Calculation
of headline
earnings
(14 521) (26 546) Net loss (377 177) (203 795)
Attributable
exceptional
1 952 20 898 items 296 094 31 299
Loss on sale
and scrapping
of fixed assets
after taxation
and outside
shareholders"
219 789 interest 11 309 3 226
(12 350) (4 859) (69 774) (169 270)
Audited Reviewed Reviewed Audited
30/06/02 28/02/03 28/02/03 30/06/02
4.Number of
shares in issue
347 330 347 330 ("000) 347 330 347 330
5.Net asset
value per share
24,6 18,0 (cents) 233,6 387,1
6.Investments
10 811 10 956 Loans 142 083 170 228
7.Capital
4 782 14 370 commitments 186 350 75 294
8.Contingent
12 421 18 186 liabilities 235 836 195 573
9.Operating
lease
47 923 32 452 commitments 420 837 754 567
Group Statement of Changes in Shareholders" Funds
Audited Reviewed Reviewed Audited
12 months 8 months to 8 months to 12 months to
to
30/06/02 28/02/03 28/02/03 30/06/02
GBP"000 GBP"000 R"000 R"000
Balance at
53 327 85 385 1 July 1 344 455 605 621
Adjustment at
1 July in terms
of AC 133 in
respect of
- (458) derivatives (7 198) -
Proceeds from
41 170 - share issue - 540 930
Exchange rate
6 324 (221) adjustments (220 640) 412 796
Surplus on
revaluation of
- 4 400 land and 71 848 -
buildings
Net loss for the
(14 521) (26 546) period (377 177) (203 795)
(915) - Dividend paid - (11 097)
85 385 62 560 811 288 1 344 455
