| Tue 28 Oct 2003, 14:11 | | Interim results for the six months ended Aug 03 |
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L.A. Group Limited - Unaudited Interim results for the six months ended August
31, 2003
L.A. GROUP LIMITED
(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, 2003
GROUP INCOME STATEMENT (R"000)
Six months to Six months to 12 months to
August 31 August 31 February 28
2003 2002 2003
Unaudited Unaudited Audited
REVENUE 267 987 301 695 650 310
continuing operations 267 987 279 789 611 022
discontinued operation 21 906 39 288
OPERATING INCOME (LOSS)
BEFORE DEPRECIATION
AND AMORTISATION 31 814 32 991 66 930
continuing operations 34 476 34 227 73 648
discontinued operation (2 662) (1 236) (6 718)
Depreciation, goodwill and
trademark amortisation 2 687 2 989 6 472
OPERATING INCOME (LOSS)
BEFORE THE FOLLOWING ITEMS 29 127 30 002 60 458
continuing operations 31 789 31 330 67 308
discontinued operation (2 662) (1 328) (6 850)
Net interest paid 7 011 3 611 11 700
Foreign currency
translation losses (gains) 6 494 (196) 19 871
OPERATING INCOME (LOSS)
BEFORE TAXATION 15 622 26 587 28 887
continuing operations 18 629 29 042 41 346
discontinued operation (3 007) (2 455) (12 459)
Taxation 5 315 11 928 9 137
INCOME AFTER TAXATION 10 307 14 659 19 750
Loss attributable to
outside shareholder 147 867
NET INCOME ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 10 307 14 806 20 617
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Number of ordinary and
"N" ordinary shares
in issue 62 001 701 66 496 701 62 001 701
At weighted average 54 731 779 64 341 043 60 285 578
Diluted 56 031 657 66 011 838 61 898 901
Headline earnings per
ordinary and "N"
ordinary shares - cents
At weighted average 19.19 22.92 34.11
Diluted 18.75 22.34 33.22
Earnings per ordinary and
"N" ordinary shares - cents
At weighted average 18.83 23.01 34.20
Diluted 18.39 22.43 33.31
Net tangible asset
value per share - cents 398.47 398.51 404.34
Depreciation 2 489 2 874 6 242
Capital expenditure 7 294 9 032 12 558
Capital commitments 8 500 1 350 13 811
GROUP CASH FLOW STATEMENT (R"000)
Six months Six months 12 months to
to August 31 to August 31 February 28
2003 2002 2003
Unaudited Unaudited Audited
OPERATING ACTIVITIES
Operating income before
interest and taxation 22 633 30 002 40 587
Adjustment for non
cash flow items 2 687 3 290 6 251
Cash generated by operations 25 320 33 292 46 838
Movement in working capital 21 725 (51 147) (7 969)
Net interest paid (7 011) (3 611) (11 700)
Dividends paid (6 020) (6 537) (6 537)
Taxation paid (10 487) (4 107) (12 997)
Net cash inflow (outflow)
from operating activities 23 527 (32 110) 7 635
INVESTING ACTIVITIES
Acquisitions of fixed assets (7 294) (9 032) (11 413)
Acquisitions of minority
shareholder and Polo costs (6 337)
Proceeds from sale of
fixed assets 1 165 1 179
Decrease in loans 1 063
Net cash outflow from
investing activities (13 631) (7 867) (9 171)
FINANCING ACTIVITIES
Share buy back (9 309) (17 038)
(Decrease) increase in
short term loans (3 881) 1 441 5 614
Increase (decrease) in
long term liabilities 225 (662)
Increase (decrease) in
amount owing to vendors 3 758 (12 223) (12 223)
Net cash inflow (outflow)
from financing activities 102 (20 091) (24 309)
Net increase (decrease) in
cash and cash equivalents 9 998 (60 068) (25 845)
Cash and cash equivalents at
beginning of period (37 524) (8 526) (8 526)
Effect of foreign
exchange movements (3 730) 29 (3 153)
Cash and cash equivalents
at end of period (31 256) (68 565) (37 524)
NOTE Cash and cash equivalents comprise bank overdrafts less bank and cash
balances
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS (R"000)
to August 31 to August 31 February 28
2003 2002 2003
Unaudited Unaudited Audited
Net earnings per
income statement 10 307 14 806 20 617
Goodwill and trademark
Amortisation 198 115 230
Profits on sale of property,
plant and equipment (173) (286)
HEADLINE EARNINGS 10 505 14 748 20 561
GROUP BALANCE SHEET (R"000)
August 31 August 31 February 28
2003 2002 2003
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 17 009 15 300 12 559
Intangible assets 5 717 1 793 1 678
Deferred taxation 33 994 30 056 35 086
56 720 47 149 49 323
Current assets
Inventories 163 806 201 564 177 983
Trade and other receivables 138 983 181 932 152 067
Taxation 533 1 198
Cash and cash equivalents 24 333 18 184 18 683
327 655 401 680 349 931
Total Assets 384 375 448 829 399 254
EQUITY AND LIABILITIES
Equity
Ordinary shareholders" equity 223 804 237 817 222 983
Outside shareholders" interest 3 274 2 156
223 804 241 091 225 139
Non-current liabilities
Non - interest bearing 1 214 380
Interest bearing 4 599 7 192 5 208
Deferred taxation 4 429
5 813 11 621 5 588
Current liabilities
Non-interest bearing
Vendors for businesses acquired 6 558
Trade and other payables 70 293 82 589 72 168
Owing on forward exchange
contracts 8 105 11 766
Taxation 2 722 14 968 10 214
Interest bearing
Vendors for businesses acquired 2 800 2 800
Short term portion of
non - current liabilities 2 028 1 786
Short term loans 9 463 7 225 15 372
Bank overdraft 55 589 86 749 56 207
154 758 196 117 168 527
Total Equity and Liabilities 384 375 448 829 399 254
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS EQUITY (R"000)
Six months Six months 12 months
to August 31 to August 31 February 28
2003 2002 2003
Unaudited Unaudited Audited
Balance at beginning
of period 222 983 238 609 238 609
Share buy backs (9 309) (17 038)
Earnings attributable to
shareholders 10 307 14 806 20 617
Dividends paid (6 020) (6 537) (6 537)
Foreign currency translation
reserve, less current and
deferred taxation (3 466) 248 (12 668)
223 804 237 817 222 983
SEGMENTAL ANALYSIS (R"000)
Primary segmentation
Six months ended August 31, 2003 (unaudited)
Revenue % Results % Net Assets %
(liabilities)
Retail (407) (2)
Corporate clothing 129 183 48 (913) (4) 144 513 65
Branded distribution 138 804 52 14 953 66 88 614 40
Corporate royalties
and unallocated
corporate expenses 9 000 40 (9 872) (5)
Total 267 987 100 22 633 100 223 255 100
Six months ended August 31, 2002 (unaudited)
Retail 2 835 1 (5 661) (19) 380
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 30 198 100 297 204 100
12 months ended February 28, 2003 (audited)
Retail 3 044 (6 551) (16) (1 918) (1)
Corporate clothing 300 603 47 (7 630) (19) 149 960 67
Branded distribution 346 663 53 41 970 103 105 216 47
Corporate royalties
and unallocated
corporate expenses 12 798 32 (28 119) (13)
Total 650 310 100 40 587 100 225 139 100
GEOGRAPHIC ANALYSIS (R"000)
Six months ended August 31, 2003 (unaudited)
Revenue % Results % Net Assets %
South Africa 182 037 68 22 504 99 151 483 68
European community 85 950 32 129 1 71 772 32
Total 267 987 100 22 633 100 223 255 100
Six months ended August 31, 2002 (unaudited)
South Africa 200 993 67 30 659 102 181 303 61
Europe and USA 100 702 33 (461) (2) 115 901 39
Total 301 695 100 30 198 100 297 204 100
12 months ended February 28, 2003 (audited)
South Africa 419 192 64 48 943 121 152 264 68
Europe and USA 231 118 36 (8 356) (21) 72 875 32
Total 650 310 100 40 587 100 225 139 100
INTRODUCTION
The L.A. Group Limited ("The Group") is a leading apparel and footwear wholesale
distribution company with two core divisions. The one supplies corporate
clothing to both the local and international markets while the second focuses on
the wholesale distribution of branded clothing, footwear and accessories. The
company also owns the Polo trademark which it licenses to various parties.
OVERVIEW OF RESULTS
The core business of the Group performed well. Despite turnover being down by
11% to R268-million (2002:
R301,7-milion) operating income is in line with the comparative period last
year. The lower turnover is mainly due to the UK division"s results being
translated at a lower exchange rate and the Branded Division not achieving its
budgeted turnover.
The operating income was further eroded by foreign exchange losses to the value
of R6,5-million, compared to a forex gain of R196 000 in the previous period,
and higher finance costs of R7-million (2002: R3,6-million). Operating income
before taxation was therefore R15,6-million (2002: R26,6-million).
Headline earnings from continuing operations were 24,7 cents per share
(2002:28,7 cents). The overall headline earnings per share on total operations
however amounted to 19,2 cents (2002: 22,9 cents) as a result of the above
factors and R3-million net losses sustained in the discontinued operations.
CONTINUING OPERATIONS
Turnover was marginally down by 4,3% to R268-million (2002: R279,8-million)
while operating income before net interest and forex losses was up at R31, 8-
milion (2002: R31,3-million).
The turnaround from the UK corporate clothing company, Allen & Douglas, is
welcomed. Although the UK business performed reasonably well, increasing
turnover and operating income in GBP terms, the translation thereof at
GBP11,38:R1 reduced the impact of its gains over this period when compared to a
rate of GBP16,38:R1 for the comparative period.
The Branded Division also suffered from the impact of forex losses which could
not all be passed on to its customers. Notwithstanding the lower turnover and
forex losses from this division, it maintained its operating margin.
While Corporate Clothing SA increased its turnover and maintained its operating
margin, finance charges relating to working capital requirements increased.
As with most corporates which have an exposure to international markets, the
foreign currency translation losses once again impacted on the Group"s results.
Of the R6,5-million loss, R4,7-million relates to the Branded Division and R1,4
million is in respect of translation of UK assets. Operating income before tax
for continued operations was declared at R18,6-million (2002: R29-million).
DISCONTINUED OPERATIONS
The loss of R3-million relates to the final expenses of the
LA retail stores and the now non-operational US Corporate Clothing joint venture
which was disposed of on February 28, 2003.
BALANCE SHEET
Non-current Assets:
The increase in property, plant and equipment to R17-million from R12,6-million
at the end of February 2003 includes the acquisition of additional Skye premises
for R3,4-million, with the balance made up of furniture and fittings for the
premises.
Intangible assets are higher at R5,7-million (Feb 2003: R1,7-million). This
relates to the purchase of the remaining 7,5% shares from John Allen, the
previous MD of Allen & Douglas, as well as a further payment to the vendors of
the Polo trademark for R3,5-million.
Net Current Assets:
After including an amount of R6,6-million in respect of vendor payments, the net
current assets have decreased from R181-million to R172-million.
CASH FLOW
The improvement in the Group"s cash flow can be ascribed to a concerted effort
from management to manage working capital more effectively, with a resultant
better utilisation of assets. The bank borrowings are well within the Group"s
financial resources.
DIVIDEND PAID
A cash dividend of 11 cents per share in respect of the year ended February 28,
2003 was paid to the holders of ordinary and "N" ordinary shares registered on
July 11, 2003. In accordance with the Group"s accounting policy, this payment is
reflected in the results for the period in which it is paid.
CAPITAL COMMITMENTS
The Group has entered into a deed of sale to acquire the Carter Harris premises
in Sandton for R7,5-million. The purchase is subject to certain sub-divisional
conditions which are likely to be fulfilled.
CONTINGENT LIABILITIES
The damages claim of R93,1-million by Platinum Holdings (Pty) Ltd on the
disputed agreement with regard to the sale of some LA Jean retail stores
continues. The directors remain confident that this will be successfully
defended.
The Group has received notification from the SA Revenue Services (SARS) that it
is considering disallowing certain trademark deductions previously claimed by
the Group. SARS contends that the full purchase price of the business was not
determined as the sale was subject to certain conditions relating to
performance, subsequent to the date of acquisition. The amount of taxation
from 1999 to 2003 amounts to R2,67-million. In addition, if SARS is
successful, the deferred tax asset would have to be reversed and charged back to
the income statement to the extent of R3,08-million. The board of directors
will take steps to contest any action proposed by SARS.
NUMBER OF SHARES FOR THE CALCULATION OF EARNINGS AND NET ASSET VALUE PER SHARE
The current period"s calculations of earnings, headline earnings and diluted
earnings and net asset value per share have been adjusted in respect of the 7
269 922 treasury shares held by the wholly owned subsidiary, SA Global
Investment Alliance (Pty) Ltd.
ACCOUNTING POLICIES
The principal accounting policies as set out in the 2003 annual report, have
been applied consistently throughout the year. These financial statements have
been prepared in accordance with South African statements of Generally Accepted
Accounting Practice.
PROSPECTS
The Group anticipates improved trading in the second half of the year and with
the further reduction in interest rates, increased consumer spending is expected
to make a positive impact on sales leading up to year end particularly for the
Skye Division. Polo"s new management is expected to continue with its solid
growth in its niche market.
Carter Harris continues to secure new contracts and the Allen & Douglas team has
renewed a number of existing contracts on a long-term basis.
Subject to any major changes in the economic environment, the Group remains
confident of achieving continued sustainable earnings.
Signed on behalf of the Group
AK Peer SA Mukadam
Executive Chairman Group Managing Director
October 28, 2003
Registered office
Colinton House, The Oval, Oakdale Road, Newlands 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, RV Orlin, I Vukic*, TP Taylor**, KD Penkin**, T Oliphant**
* Non-Executive
** Independent Non-Executive
Company Secretary
AM Bissett
Sponsor
Sasfin Bank Ltd
Website: www.lagroup.co.za
Date: 28/10/2003 02:00:15 PM Produced by the JSE SENS Department
