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Steinhoff International Holdings Ltd - Audited results for the year ended 30
June 2003
Steinhoff International Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/003951/06)
Share code: SHF ISIN Code: ZAE000016176
Audited results
for the year ended 30 June 2003
Our strength and strategies
deliver sustainable growth
- Revenue up by 21% to R9,95 billion
(2002: R8,2 billion)
- Headline earnings per share up 15% to 105 cents (2002: 91 cents)
- Net gearing ratio down from 24% to 15%
- Continued strong cash generation from operations
- Proposed dividend per share up 20% to 18 cents (2002: 15 cents)
Abridged consolidated income statement for the year ended 30 June 2003
Audited Audited*
year year
ended ended
30/06/03 30/06/02 %
Note R"000 R"000 increase
Revenue 9 948 595 8 207 936 21
Operating income 1 300 913 1 040 014 25
before depreciation
Depreciation (191 858) (163 563)
Operating income 1 109 055 876 451 27
after depreciation
Exceptional items 1 (79 389) (107 174)
Earnings before 1 029 666 769 277 34
goodwill, interest
and taxation
Goodwill amortised (31 429) (36 549)
Earnings before 998 237 732 728 36
interest and
taxation
Net finance charges (121 181) (79 299)
Earnings before 877 056 653 429 34
taxation
Taxation (97 950) (52 609)
Earnings after 779 106 600 820 30
taxation
Share of associate 91 056 55 964
income
Attributable to 2 881 1 809
outside shareholders
Income attributable 873 043 658 593 33
to shareholders
Number of shares in 946 055 906 616 4
issue ("000)
Weighted average 939 970 864 754 9
number of shares in
issue ("000)
Attributable income 873 043 658 593 33
(R"000)
Headline earnings 2 984 865 785 021 25
(R"000)
Earnings per share 93 76 22
(cents)
Headline earnings 105 91 15
per share (cents)
As previously stated 93
Changes to comply (2)
with circular 7/2002
Diluted earnings per 90 74 22
share (cents)
Diluted headline 101 88 15
earnings per share
(cents)
Proposed dividend 18 15 20
per share (cents)
Note 1: Exceptional
items (R"000)
- Profit on disposal 12 000
of business
- Loss on disposal (9 793)
of business
- Impairment of (5 954)
intangible assets
- Closure costs (37 362) (83 171)
- Impairment of (38 280) (24 003)
property, plant and
equipment
(79 389) (107 174)
Note 2: Headline
earnings calculation
Income attributable 873 043 658 593
to shareholders
Adjustment for:
- Exceptional items 79 389 107 174
- Goodwill 31 429 36 549
amortisation
- Loss/(Profit) on 4 977 (17 295)
disposal of
property, plant and
equipment
- Loss on disposal 107
of property, plant
and equipment
included in share of
associate income
- Goodwill 4 590
amortisation
included in share of
associate income
- Negative goodwill (8 670)
included in share of
associate income
Headline earnings 984 865 785 021
for the year
* Headline earnings for the year ended 30/06/2002 have been restated to comply
with circular 7/2002.
Abridged consolidated balance sheet at 30 June 2003
Audited Audited
30/06/03 30/06/02
R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment and 2 529 182 2 731 424
intangible assets
Investments and loans 1 180 365 1 246 109
Deferred tax assets 33 750 5 727
3 743 297 3 983 260
Current assets
Accounts receivable and short 2 850 635 2 563 859
term loans
Inventories 893 754 1 109 204
Cash and cash equivalents 1 462 943 405 052
5 207 332 4 078 115
Total assets 8 950 629 8 061 375
EQUITY AND LIABILITIES
Capital and reserves 4 942 186 4 384 369
Outside shareholders" interest 14 782 28 073
Non-current liabilities
Deferred tax liabilities 44 360 7 223
Long term liabilities 1 437 591 746 811
Long term licence fee liability 209 188 237 873
1 691 139 991 907
Current liabilities
Net interest bearing 624 916 622 083
Accounts payable and provisions 1 677 606 2 034 943
2 302 522 2 657 026
Total equity and liabilities 8 950 629 8 061 375
Net asset value per share (cents) 522 484
Gearing ratio (net) 15% 24%
Closing exchange rate - Rand : 8,61 10,25
Euro
Abridged group cash flow statement for the year ended 30 June 2003
Audited Audited
year year
ended ended
30/06/03 30/06/02
R"000 R"000
Operating profit before working 1 253 339 932 557
capital changes
Net changes in working capital (355 074) 22 454
Cash generated from operations 898 265 955 011
Net finance costs (121 181) (79 299)
Dividends paid (16 763) (26 694)
Dividends received 17 230 7 506
Taxation (85 728) (59 457)
Net cash inflow from operating 691 823 797 067
activities
Net cash outflow from investing (812 189) (1 380 076)
activities
Net cash inflow from financing 993 633 753 506
activities
Net increase in cash and cash 873 267 170 497
equivalents
Effects of exchange rate changes 147 790 (308 989)
on cash and cash equivalents
Cash and cash equivalents - 979 169 1 117 661
beginning of period
Cash and cash equivalents - end 2 000 226 979 169
of period
Cash and cash equivalents can be
reconciled to the balance sheet
as follows:
Cash and cash equivalents above 2 000 226 979 169
Overdrafts included in 537 283 574 117
financing activities
Cash and cash equivalents per 1 462 943 405 052
balance sheet
Statement of changes in equity for the year ended 30 June 2003
Non-
Share distribut Distribut
capital able able
and reserves reserves Total
premium
R"000 R"000 R"000 R"000
Balance at 30 1 681 887 139 918 1 074 001 2 895 806
June 2001 as
previously stated
Change in 1 468 1 468
accounting policy
Balance at 30 1 681 887 139 918 1 075 469 2 897 274
June 2001
restated
Earnings 658 593 658 593
attributable to
shareholders
Dividends paid (26 694) (26 694)
Issue of shares 473 538 473 538
Increase in
foreign currency
translation 381 658 381 658
reserve
Share of
associate
companies"
retained earnings
transferred to
non-distributable 55 964 (55 964)
reserves
Transfer to (95) 95
distributable
reserves
Balance at 30 2 155 425 577 445 1 651 499 4 384 369
June 2002
Earnings 873 043 873 043
attributable to
shareholders
Dividends paid (16 955) (16 955)
Issue of shares 98 178 98 178
Decrease in
foreign currency
translation (378 696) (378 696)
reserve
Acquisition of
the remainder of
shares
in an associate (1 248) (1 248)
company
Share of
associate
companies"
retained earnings
transferred to
non-distributable 66 320 (66 320)
reserves
Reserves released (12 033) (4 472) (16 505)
to income
Balance at 30 2 253 603 251 788 2 436 795 4 942 186
June 2003
Commentary
Financial overview
The Board is pleased to report a 21% growth in revenue to R9,95 billion (2002:
R8,2 billion). Headline earnings for the year under review increased by 25% to
R985 million (2002: R785 million).
The Group achieved real growth in revenue notwithstanding the continued
challenging trading conditions globally. Operating margin improved further to
12,1% (2002: 11,4%). The improved margin was achieved mainly as a result of the
relative strength of the Euro against the USD and Polish Zloty, a more effective
and higher throughput of products and improved sourcing of third party products.
Net finance charges increased to R121,1 million (2002: R79,3 million) mainly as
a result of the utilisation of low interest rate funding in Europe to finance
the Group"s offshore capital expenditure. Interest cover amounts to 9,1 times
(2002: 11,1 times) and the net interest bearing debt to equity ratio reduced to
15% (2002: 24%), well within the Group"s self-imposed borrowing limitation of
50%.
Taxation expense increased to R97,9 million (2002: R52,6 million) and is in line
with expectations. The average tax rate increased to 11,2% (2002: 8,1%) and it
is anticipated that the average tax rate will range between 12% to 15% for the
foreseeable future.
Headline earnings per share increased 15% to 105 cents (2002: 91 cents) while
basic earnings per share increased 22% to 93 cents (2002: 76 cents). The
weighted average number of shares increased by 9% during the year to 939,97
million (2002: 864,75 million).
Shareholders" funds increased to R4 942 million (2002: R4 384 million) and
return on average shareholders" funds was stable at 21% (2002: 22%) during the
year. The net asset value per share further improved by 7,9%, from 484 cps to
522 cps, despite an increase in the number of issued shares to 946,1 million
(2002: 906,6 million).
The Group"s cash flow from operations continues to be strong and amounted to
R898 million (2002: R955 million), further benefiting from sound working capital
management. Cash generation is after a net increase in working capital of R355
million (2002: reduction of R22,5 million) caused mainly by accelerated payments
to suppliers to benefit from more favourable settlement terms. The increase in
short-term cash and cash equivalents should be viewed against the seasonal
nature of the business, with June being the low ebb of the business cycle in
Europe, immediately preceding the summer holidays.
SEGMENTAL ANALYSIS
The Group"s main activity as an integrated global lifestyle supplier is focused
on manufacturing and wholesale & distribution.
Year ended 30 June 2003
Earnings
before
exceptional
items,
goodwill,
interest and
R"000 Revenue % taxation
Manufacturing 7 260 028 73 845 847
Wholesale &
distribution 2 688 567 27 358 149
Total 9 948 595 100 1 203 996
R"000 % Net assets %
Manufacturing 70 3 517 335 71
Wholesale &
distribution 30 1 424 851 29
Total 100 4 942 186 100
Year ended 30 June 2002
Earnings
before
exceptional
items,
goodwill,
interest and
R"000 Revenue % taxation
Manufacturing 6 154 814 75 636 666
Wholesale &
distribution 2 053 122 25 280 263
Total 8 207 936 100 916 929
R"000 % Net assets %
Manufacturing 69 3 288 639 75
Wholesale &
distribution 31 1 095 730 25
Total 100 4 384 369 100
Geographical analysis
The Group"s operations are located in Southern Africa, the European Community,
eastern Europe, Australia and New Zealand.
Year ended 30 June 2003
Earnings
before
exceptional
items,
goodwill,
interest and
R"000 Revenue % taxation
Southern 2 668 211 27 236 272
Africa
European 4 397 708 44 569 319
Community
Eastern 2 381 148 24 378 596
Europe
Australia 501 528 5 19 809
Total 9 948 595 100 1 203 996
R"000 % Net assets %
Southern 20 1 289 668 26
Africa
European 47 2 689 541 55
Community
Eastern 31 901 295 18
Europe
Australia 2 61 682 1
Total 100 4 942 186 100
Year ended 30 June 2002
Earnings
before
exceptional
items,
goodwill,
interest and
R"000 Revenue % taxation
Southern 2 502 161 30 226 230
Africa
European 3 589 038 44 413 391
Community
Eastern 1 820 556 22 267 273
Europe
Australia 296 181 4 10 035
Total 8 207 936 100 916 929
R"000 % Net assets %
Southern 25 1 227 305 28
Africa
European 45 2 417 465 55
Community
Eastern 29 657 435 15
Europe
Australia 1 82 164 2
Total 100 4 384 369 100
The average exchange rate used to translate foreign currency income and
expenditure into South African rand was R9,415: 1 Euro (2002: R9,00 : 1 Euro).
R962 million (2002: R936 million) of Southern Africa"s revenue of R2 668,2
million (2002: R2 502,2 million) represents exports to the USA and the European
community, amounting to approximately 36% (2002: 37%) of its activities. It is
the stated intention of the Group to continue to grow exports, notwithstanding
the stronger Rand; it has the production capacity available to achieve economies
of scale and grow critical mass. The Group"s revenue exposure to the local South
African furniture market amounted to 17% (2002: 19%).
Including exports from South Africa, the Group generated 83% (2002: 81%) of its
total revenues in foreign currencies during the year.
Funding
During December 2002, Steinhoff International issued a 6-year redeemable bond of
Euro 37,5 million at a discount, yielding an amount of Euro 30 million, which
proceeds were advanced to Steinhoff Europe to expand its capital base. The bond,
together with the proceeds of an off-shore placement of 20 million shares for
cash in December 2002, was concluded preparatory to the syndicated loan. As
announced in April 2003, Steinhoff Europe successfully concluded a syndicated
term loan and revolving credit facility of Euro 175 million with a number of
European banks. These funding initiatives enable Steinhoff Europe to be
financially self-sufficient with regard to its funding requirements, largely
independent from its South African holding company.
Corporate Activity
The Group did not conclude any material acquisitions during the year under
review. It continues to evaluate and pursue quality opportunities from time to
time which will augment the Group"s core strengths and competencies and
capabilities.
Corporate Governance
The Group complies in all material respects with the JSE Securities Exchange
South Africa ("JSE") Listing Requirements and the Code of Corporate Practice and
Conduct published in the King Report on Corporate Governance.
Listing anniversary
Steinhoff celebrates its fifth anniversary as a listed company on the JSE on 23
September 2003. Despite tough and challenging conditions in both the trading
environment and world financial markets in general Steinhoff has grown its
market capitalisation from R2,6 billion at listing to the current R7 billion.
These pleasing results confirm the substance of the group, its management and
its sustainable growth potential. The compound growth in headline earnings over
the four years since listing, amount to 45,6%. Headline earnings per share has
grown by a compound rate of 33,4% over the same period.
Triple Bottom Line
The Group"s commitment to and support of HIV/AIDS interventions, sound labour
relations, skills training and development and creating an environment where all
of its employees worldwide can develop to their fullest potential, continues as
planned.
Compliance with environmental regulations remains a priority. The Group"s
production processes and raw materials used are constantly evaluated to ensure
acceptable standards.
Black Economic Empowerment (BEE) of enterprises within our Southern African
communities is an integral part of the group"s growth strategy. This strategy
complies with the general practice of BEE, and is intended to introduce unique
features to achieve real empowerment specific to our industry. The Group is
continuously pursuing BEE opportunities in its Southern African operations.
Prospects
The European and Australian operations are continuing to gain further market
share through leveraging their core strengths and competencies. The expanded
manufacturing base in Poland, Hungary and Ukraine augurs well for increased
exports into the European Union, particularly the United Kingdom, France and the
Benelux countries.
The growing contribution of higher margin branded products to the sales-mix is
expected to continue. The establishment of the new logistics centre in Germany
is also expected to enhance centralised distribution and logistics efficiencies.
Steinhoff Africa continues to grow its exports from South Africa, benefiting
from economies of scale and better utilisation of production capacity, despite a
strengthening Rand environment. The Group will make further investments in raw
material production facilities to ensure long-term sources of supply,
particularly in sawmilling and timber resources.
The Australian operations continue to benefit from sales growth and better
efficiencies.
The South African operations are benefiting from the improvement in macro-
economic fundamentals which have a distinct favourable effect on consumer
spending patterns in relation to durable goods.
Management expect to achieve growth in headline earnings from the continuing
operations for the year ahead.
Accounting Policies
The accounting policies and methods of computation for the financial statements
for the year ended 30 June 2003 are in all material respects consistent with
those applied in prior years, except for AC 133 - Financial Instruments -
Recognition and Measurement and AC 137 - Agriculture which were adopted during
the current year, and are in accordance with South African Statements of
Generally Accepted Accounting Practice. In terms of the transitional
arrangements of AC 133, figures in respect of previous years are not restated.
The impact of the application of AC 133 and AC 137 has not been material on the
group"s results.
Audit Report
The results have been audited by Deloitte & Touche. Their unqualified audit
opinion is available for inspection at the company"s registered office.
On behalf of the Board of Directors
B E Steinhoff M J Jooste
Chairman Chief executive officer
8 September 2003 8 September 2003
Declaration of capitalisation share award with dividend election option
The board has resolved to award capitalisation shares to shareholders recorded
in the register at the close of business on Friday, 7 November 2003 ("the share
award"). Shareholders will, however, be entitled to decline the share award or
any part thereof and instead elect to receive a cash dividend of 18 cents (2002:
15 cents) per share.
The last day to trade Steinhoff shares on the JSE to ensure that a purchaser
appears as a shareholder on the record date (7 November 2003) will be Friday, 31
October 2003. Shares will commence trading ex dividend from the commencement of
trading on Monday, 3 November 2003. Payment and issue date will be on Monday, 10
November 2003.
Share certificates may not be dematerialised or rematerialised from Monday, 3
November 2003 to Friday, 7 November 2003, both days inclusive.
The terms of the share award will be announced on Friday, 17 October 2003, and
documentation relating thereto will be posted by Friday, 17 October 2003.
Elections in respect of the cash dividend will close on Friday, 7 November 2003.
Dematerialised shareholders will have their CSDP or broker accounts
credited/updated on Monday, 10 November 2003. Cheques/electronic transfers
(where elected) and/or share certificates will be posted to shareholders
on/about Monday, 10 November 2003. Shareholders are furthermore advised to
provide and/or verify their banking details to the relevant CSDP, Broker or the
Transfer Secretaries to ensure safe transfer of any funds.
Annual Report
The Annual Report will be mailed to shareholders in due course. The annual
general meeting is scheduled to take place on Monday, 1 December 2003, at the
registered office of the Company.
By order of the board
S J Grobler
Company Secretary
8 September 2003
Bruno Steinhoff, Executive Chairman commented:
"These results bear testimony to Steinhoff"s ability to achieve sustainable
growth from our stated strategies and strengths amidst a volatile global trading
environment".
ADMINISTRATION
Registration number: 1998/003951/06
JSE share code: SHF ISIN code: ZAE 000016176
Registered office
28 Sixth Street, Wynberg, Sandton, 2090, Republic of South Africa
Tel +27 (11) 445 3000, Fax +27 (11) 445 3099
Transfer secretaries: Computershare Limited
70 Marshall Street, Johannesburg, 2001
Company secretary
S J Grobler
Auditors
Deloitte & Touche
Investor Relations
College Hill (Proprietary) Limited
Sponsor
Gensec Bank Limited
Directors:
B E Steinhoff* (Chairman), M J Jooste (Chief Executive Officer), D E Ackerman+,
C E Daun+*,
J N S du Plessis+, K J Grove+, D Konar+, J F Mouton+, F J Nel, F A Sonn+, N W
Steinhoff*,
D M van der Merwe, *German +Non-executive
www.steinhoffinternational.com
Date: 09/09/2003 07:27:33 AM Produced by the JSE SENS Department
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