|
Edgars Consolidated Stores Limited
(Registration No: 1946/022751/06)
(Incorporated in the Republic of South Africa)
Share Code: ECOP
ISIN code: ZAE000018396
SALIENT FEATURES
Retail sales growth of 24%
(organic growth 15%, purchased growth 9%)
Record headline earnings per share
(up 148% to 753 cents)
New dividend policy
(moving to twice covered)
Strategic acquisitions
(CNA, Super Mart and RAG)
The retail environment
While global markets remained depressed and were characterised by
economic uncertainty and the tensions of war, the South African economy,
in contrast, continued to grow steadily.
Improved economic activity and the stimulus from cuts in personal taxes
announced by the Minister of Finance, fuelled consumer confidence, and
retail spending gained momentum during 2002. However, the relatively
strong Rand, together with high interest rates, began to curb this
enthusiasm in the last quarter of 2002.
Against this background, clothing, footwear and textile (CFT) sales were
buoyant. Based on S.A. Reserve Bank data, consumer spending on semi-
durable goods increased by 9,3%, in real terms, during the calendar year
2002. Furthermore, statistics provided by the Retailers" Liaison
Committee indicate that national CFT sales in the year to March 2003
rose by 15%, in nominal terms, while inflation in the sector is
estimated at 5%.
Group results
The past year has been very pleasing for Edcon as the full impact of
changes implemented by management over the past few years is now being
reflected in the financial performance.
The Directors are proud to announce that Edcon achieved its highest ever
headline earnings per share of 753 cents, up 148% on last year (previous
record 636 cents per share in 1996). This follows the strong growth of
42% already achieved in the previous financial year and demonstrates the
sustainable momentum of the turnaround strategy.
Impressive retail sales growth of 24%, of which 9% relates to new
businesses acquired, was recorded for the year under review. The
organic sales growth of 15% was achieved with 4% less retail space.
Consequent comparable store sales growth of 19%, driven by continued
improvements in product and service, highlights Edcon"s ability to
increase further its market share. Efficiencies and productivity in the
supply chain process contributed materially towards the improvement in
the gross profit margin from 36,4% to 38,6%.
The Edgars chain regained market share by increasing its CFT turnover by
16% with 4% less retail space. Significant benefits are now materialisng
from the chain"s merchandise strategy; focus on customer service and
improved employee efficiency levels. As a result, the chain increased
its retail trading profit by 39%. Strong performances across a broad
range of merchandise contributed to the outstanding results, with
turnover growths in excess of 20% for ladies" and kids" apparel being
major drivers. Merchandise management continues to receive high focus
and the effectiveness of distribution and inventory control processes
are evidenced in the improvement in Edgars" stock turn from 3,5 last
year to 4,8 times.
United Retail, incorporating Jet, Sales House, Cuthberts and Smiley"s
Wearhouse, made great strides during the year and achieved CFT turnover
growth of 13%, despite trading in 3% less retail space. The chain is
now realising the full benefit of the space and inventory management
changes implemented over the past year. This process has improved the
chain"s performance dramatically and is reflected in the 58% improvement
in retail trading profit. All departments achieved positive growth, and
this was especially evident in childrenswear and ladieswear. The
efficiency in merchandise management is highlighted by a marked
improvement in United Retail"s stock turn from 3,9 times last year to
5,8 times and by a stockholding reduction of 13% over the year.
The CNA chain"s trading was hampered by difficulties in rebalancing and
stocking merchandise ranges. Sales for the period met Edcon"s targets.
Margins have unavoidably been impacted by aggressive markdowns required
to clear excess stock. CNA"s post acquisition trading loss, which
accounts for integration costs, has been contained to only R2 million,
which was in line with expectations. The integration of CNA with Edcon"s
systems, distribution and support infrastructures is proceeding
according to plan. The positive impact of synergies with Edcon will only
start to be realised in the 2004 financial year.
Super Mart, the Group"s newly acquired general merchandise discount
retailer, in spite of inflationary pressures and higher interest rates
and their impact on lower income earners, performed satisfactorily and
achieved a trading profit of R10 million for the period since
acquisition. An aggressive store expansion strategy is proceeding and 5
new stores have already been opened.
Management"s focus on productivity and cost disciplines within the
overall Group"s store environment limited store expense growth to 6% for
Edgars and United and 16% for the Group. Despite further investment in,
and accelerated depreciation of, the systems infrastructure,
consolidation of additional support functions and integration costs
relating to the new acquisitions, all reflected under other operating
costs, retail trading profit increased by an impressive 47%.
Another very significant achievement for the Group has been its ability
to convert the total cost of financing from R119 million last year to a
profit of R7 million. This performance was driven by the ongoing
improvement of the quality of the debtors book, with 86% being current
and able to buy this year. Credit sales now account for 63% of total
sales, down from last year"s 66% partly due to the acquisition of the
CNA and Super Mart cash chains. Higher interest rates boosted financing
income, while bad debt was constrained well below that in the prior
year. A R36 million gain, from better than anticipated collections on
the debtors" book purchased from Retail Apparel Group (RAG), has also
been recognised. The Financial Services division, with its innovative
customer insurance offerings, continued to record substantial growth.
The effective taxation rate increased from 35,2% to 39,1%, mainly as a
consequence of the Secondary Tax on Companies of R37m incurred on the
repurchase and cancellation of 5,7 million shares. Earnings
attributable to ordinary shareowners effectively doubled to reach R347
million while the growth in headline earnings per share was 148%,
calculated after adjusting for goodwill write offs and capital items,
and the lower weighted number of shares in issue after the share
buyback.
DIVIDEND
Mindful of the improved profitability of the Group and the liquidity
benefits resulting from the successful securitisation of receivables,
the Directors have amended Edcon"s dividend policy. A revised policy of
covering dividends twice (previously 2,6 times) has been approved by the
Board and was applied to this year"s second half attributable earnings.
In terms of this policy the Board has declared a record final dividend
of 185 cents per share, reflecting 128% growth on last year"s final
dividend. Total dividends of 308 cents per share were covered by an
average of 2,2 times attributable earnings per share for the year. The
2,0 times policy will be applied in the 2004 financial year.
Cash flows and financial position
The substantial lift in profitability, together with the Group"s focus
on working capital management, facilitated a meaningful increase in cash
generated from operating activities. Cash inflow from operations rose
by 19% from the previous year to R727 million and the attributable cash
flow per share increased 34% to 1 445 cents.
The securitisation of certain receivables was completed in July 2002 and
generated net proceeds of R798 million. The proceeds from this allowed
the Group to reduce its interest bearing debt and to continue its policy
of utilising excess capital to fund the buyback of shares. During the
year a further 5 882 044 shares were purchased for R324 million. No
further share buybacks are envisaged in the foreseeable future.
Key strategic acquisitions during the past year included:
- The rights to RAG"s retail brands, its debtors book, customer
database and a number of its retail stores for R252 million on 1 July
2002. A discount of R30 million was recognised on the transaction.
- Super Mart on 1 October 2002. The purchase price, consisting of an
upfront payment of R86 million and contingency payments totalling a
further R70 million dependent on future earnings, has given rise to
goodwill of R107 million which is being amortised over 7 years.
- Selected assets and certain liabilities of CNA, effective 21 October
2002, for a net purchase price of R130 million. Foreign companies of
CNA in Botswana, Lesotho, Swaziland, and Namibia were also acquired for
an additional R8 million. After providing for retrenchment costs,
goodwill of R31 million resulting from the transactions has been written
off.
The strength of Edcon"s financial position is evident in the positive
cash and cash equivalents balance, net of interest bearing debt, of R115
million at year-end. Further substantial flexibility is provided by the
negative gearing of 0,05 at the year-end and the existence of R865
million unutilised borrowing facilities.
Edcon has maintained its conservative policy relating to doubtful debts
and has adequately provided for any deterioration in the book that may
result from the effect on customers of the persistently high bank
interest rates.
Corporate governance
The Group, at all levels, subscribes to the values of good corporate
governance and to applying the principles of the second King Report and
the requirements of JSE Securities Exchange South Africa. It has also
committed itself to conduct business with discipline, integrity,
transparency and social responsibility.
Prospects
Interest rates remain high, but inflation is easing. The strength in
our comparable store turnover growth in the quarter to March 2003 is a
reflection of the continued resilience of our customers and their
ongoing appetite for our well-priced product offering. The Edcon Board
is of the opinion that this trading momentum will continue in the Edgars
and United chains in the year ahead, but at a somewhat slower pace than
that reported for the past year. This will, however, be supplemented by
a full year"s turnover from our recent acquisitions and coupled with a
continued focus on operating efficiencies, shareowners can expect
another rise in earnings at a rate well above that of total turnover
growth.
For and on behalf of the board
W S MacFarlane S M Ross
CHAIRMAN CHIEF EXECUTIVE OFFICER
FINAL CASH DIVIDEND
Notice is hereby given that the final ordinary dividend (No.113) of 185
cents per share in respect of the 52 weeks ended 29 March 2003 has been
declared payable to the holders of ordinary shares appearing in the
records of the company at the close of business on Friday, 27 June,
2003. The dividend is declared payable in the currency of the Republic
of South Africa and, in compliance with the requirements of the STRATE,
the following dates are applicable:
Last day to trade cum the dividend Friday, 20 June 2003
Date trading commences ex the dividend Monday, 23 June 2003
Record date Friday,27 June 2003
Date of payment Monday 30 June 2003
Share certificates may not be dematerialised or rematerialised between
Monday, 23 June 2003 and Friday 27 June 2003, both dates inclusive.
On behalf of the board Johannesburg
D J VIVIERS 20 May 2003
Group Secretary
INCOME STATEMENTS
52 weeks to 52 weeks to
March 2003 March 2002
(audited) (audited) Change
Rm Rm %
Revenue - retail sales 8 313,7 6 709,8 24
Cost of sales 5 107,0 4 264,1
Gross profit 3 206,7 2 445,7
Store costs 1 595,9 1 381,1
Other operating costs 1 047,6 680,8
Retail trading profit 563,2 383,8 47
Credit and financial
services profit/(loss) (see 51,7 (55,2)
note 2)
Operating profit before 614,9 328,6
financing costs
Net financing costs (note 3) 44,2 63,5
Profit before taxation 570,7 265,1 115
Taxation 223,2 93,4
Current 315,7 52,3
Deferred (129,8) 38,8
STC 37,3 2,3
Earnings attributable to
ordinary shareholders 347,5 171,7 102
Number of ordinary shares
(000) 50 331 56 667
In issue 45 956 51 838
Weighted average 50 331 56 667
Earnings per ordinary share
(cents)
attributable earnings 691 303 128
basis
headline earnings basis 753 304 148
cash equivalent basis 1 012 727 39
Diluted earnings per
ordinary share (cents) (note
4)
attributable earnings 647 296 118
basis
headline earnings basis 705 297 137
Dividends per ordinary share
(cents)
interim (paid) 123 36 242
final (proposed) 185 81 128
total 308 117 163
Note 1
The accounting policies adopted for the purpose of this report comply
with South African Statements of Generally Accepted Accounting Practice
and International Accounting Standards, and are consistent with those of
the previous year.
Note 2
Cost of credit (37,9) (111,4)
Financial services profit 89,6 56,2
Credit and financial 51,7 (55,2)
service profit/(loss) (per
income statement)
Notional financing costs (223,5) (197,0)
allocated on own debtors*
Total cost of credit (171,8) (252,2)
Net financing costs (per (44,2) (63,5)
income statement)
Notional financing receipts 223,5 197,0
allocated
Group net financing 179,3 133,5
receipts
Total profit/(cost) of 7,5 (118,7)
financing Total cost of
financing
* Being a market related
charge on the balance sheet
assets within the credit area.
Note 3
Net financing costs include 33,2 (10,1)
foreign exchange
losses/(profits) of
Note 4
Dilution on possible exercise of
share options
Note 5
These statements have been audited by Ernst & Young and the audit
certificate is available for inspection at the company"s registered
office.
INCOME STATEMENTS /continued
52 weeks to 52 weeks to
March 2003 March 2002
(audited) (audited) Change
Rm Rm %
Reconcilation of headline
earnings
Group attributable earnings 347,5 171,7
Plus: Loss on disposal of 12,1 0,6
fixed assets net of taxation
Less: Recognition of
discount on acquisition of (19,2) -
RAG receivables and assets
net of taxation
Plus: Goodwill amortised 38,4 -
Headline earnings 378,8 172,3
Segmental analysis
Retail sales
Clothing, Footwear, Textiles
and Other
Edgars 4 560,7 3 939,4 16
United Retail 2 645,4 2 339,0 13
C N A 353,5 -
Super Mart 182,5 -
7 742,1 6 278,4 23
Cellular products
Edgars 256,8 185,8 38
United Retail 278,8 245,6 14
C N A 36,0 -
571,6 431,4 32
Total retail sales 8 313,7 6 709,8 24
Retail trading profit 411,6 296,4 39
Edgars
182,8 115,5 58
United Retail
C (2,4 ) -
N A
10,2 -
Super Mart
(7,7 ) (36,6)
Manufacturing
Other including goodwill (31,3 ) 8,5
amortisation
Total 563,2 383,8 47
Retail space (m2) Edgars 374 824 391 566
United Retail 280 088 289 495
C N A 80 609 -
Super Mart 39 822 -
775 343 681 061 14
Number of facias - 151 166
Edgars
588 557
United Retail
C N A 151 -
Super Mart 12 -
902 723
CASH FLOW STATEMENTS
52 weeks to 52 weeks to
March 2003 March 2002
(audited) (audited)
Rm Rm
Cash retained from operating
activities
Operating profit (excl. dividends 609,2 325,1
received)
Depreciation, amortisation and 304,5 198,7
impairment
Dividends received 5,7 3,5
Other non-cash items (12,9) 2,7
Cash "EBITDA" 906,5 530,0
Investment in working capital (32,0) 185,7
Inventories (39,4) 181,0
Accounts receivable and prepayments (431,0) (44,0)
Accounts payable 438,4 48,7
Cash generated from operating 874,5 715,7
activities
Net financing costs paid (44,2) (63,5)
Taxation paid (103,2) (40,0)
Cash inflow from operations 727,1 612,2
Dividends paid (104,1) (57,2)
Net cash retained 623,0 555,0
Cash generated from/(utilised in)
investment activities
Investment in property, plant and (113,7) (129,0)
equipment
Acquisitions (503,4) -
Net proceeds of securitisation 798,3 -
Loans 4,8 (30,8)
Net cash generated/(invested) 186,0 (159,8)
Cash effects of financing activities
Decrease in shareowner funding (324,0) (141,5)
Decrease in interest bearing debt (393,4) (238,7)
Net cash outflow from financing (717,4) (380,2)
activities
Increase in cash and cash equivalents 91,6 15,0
Cash and cash equivalents at the 215,5 180,5
beginning of the year
Acquisitions during the year 6,2 -
Currency adjustments (15,3) 20,0
Cash and cash equivalents at the end
of the year 298,0 215,5
Attributable cash flow per share 1 445 1 080
(cents)
Cash realisation rate % 143 149
CASH VALUE ADDED STATEMENTS
52 weeks to 52 weeks to
March 2003 March 2002
(audited) (audited) Change
Rm Rm %
Cash generated
Cash derived from customers 8 765,7 6 727,2
Cash payments outside the group
to suppliers of
materials, merchandise,
facilities and services (6 364,1) (4 706,2)
Wealth created through cash
value added 2 401,6 2 021,0 18
Cash utilised to:
Remunerate employees for their
services 1 017,0 890,5
Pay direct taxes to the state 103,2 40,0
Provide lenders with a return
on monies borrowed 83,0 72,3
Provide lessors with a return
for the use of their premises 471,3 406,0
Provide shareowners with cash
dividends 104,1 57,2
Cash disbursed among
stakeholders 1 778,6 1 466,0 21
Net cash retained 623,0 555,0 12
BALANCE SHEETS
At March 2003 At March 2002
(audited) (audited)
Rm Rm
ASSETS
Non-current assets
Properties, fixtures, equipment and 689,2 825,8
vehicles
Goodwill 103,6 -
Investments 400,0 13,9
Other 80,6 76,0
Total non-current assets 1 273,4 915,7
Current assets
Inventories 1 186,6 993,2
Accounts receivable and prepayments 1 515,6 2 026,8
Cash and cash equivalents 298,0 215,5
Total current assets 3 000,2 3 235,5
Total assets 4 273,6 4 151,2
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareowners" equity 2 187,8 2 296,8
Minority interests 0,6 0,6
Total shareowners" funds 2 188,4 2 297,4
Interest bearing debt 183,4 575,0
Total capital employed 2 371,8 2 872,4
Interest free liabilities
Current 1 859,5 1 104,3
Deferred taxation 42,3 174,5
Total interest free liabilities 1 901,8 1 278,8
Total equity and liabilities 4 273,6 4 151,2
Gearing ratios
Net interest bearing debt/total
shareowners" funds (0,05) 0,16
Total liabilities/total shareowners" 0,95 0,81
funds
Future capital expenditure Rm Rm
Contracted 67,9 6,5
Authorised but not contracted 297,9 151,0
Net equity per ordinary share (cents) 4 761 4 431
STATEMENT OF CHANGES IN ORDINARY SHAREOWNERS" EQUITY
Share Non- Retained
capital distributable surplus Total
and reserves
premium
Rm Rm Rm Rm
Ordinary shareowners"
equity at 30 March 451,7 57,3 1 787,8 2 296,8
2002
Earnings attributable
to ordinary 347,5 347,5
shareowners
Ordinary dividends (104,1) (104,1)
paid
Foreign currency
translation reserve (32,2) (32,2)
Other 3,8 3,8
Share buyback (324.0) (324,0)
Balance at 29 March 127,7 28,9
2003 2 031,2 2 187,8
DIRECTORS
Non-executive directors
WS MacFarlane (Chairman)
AJ Aaron
TN Eboka
ZB Ebrahim
JDMG Koolen#
PL Wilmot
# Netherlands
Executive directors
SM Ross** (Chief Executive)
SR Binnie*
AVA Boshoff
MR Bower
Dr U Ferndale
JL Spotts**
**USA
* UK
Group Secretary
DJ Viviers
Transfer secretaries
Computershare Investor Services Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Fax : (011) 370-5487
Telephone : (011) 370-5000
Registered office
Edgars Consolidated Stores Limited
Registration No. 1946/022751/6
Incorporated in the Republic of South Africa
Edgardale, Press Avenue, Crown Mines, Johannesburg 2092
PO Box 100, Crown Mines 2025
Fax : (011) 837-5019
Telephone : (011) 495-6000
Auditors
Ernst & Young
Wanderers Office Park,
52 Corlett Drive, Illovo 2196
Sponsors
Cazenove South Africa (Proprietary) Limited
First Floor, Moorgate
Dunkeld Park
6 North Road, Dunkeld West
P O Box 412468, Craighall
2024
ISIN number : ZAE 000018388
Share code : ECO
These results can be viewed on the internet at: http://www.edcon.co.za
ENDS
20 May 2003
Date: 20/05/2003 03:21:45 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
