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RELYANT RETAIL LIMITED - UNAUDITED INTERIM ANNOUNCEMENT
RELYANT RETAIL LIMITED
Registration number 1937/010108/06
Share code: RLY ISIN number: ZAE000016457
UNAUDITED INTERIM ANNOUNCEMENT
for the six months ended 31 December 2003
Cash and credit businesses have traded profitably
Retained earnings rise by 46%
Fully diluted headline EPS up by 25%
Positive net cash generated - a turnaround of R182 million
Gearing reduced from 39% at June 2003 to 30%
GROUP INCOME STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited % unaudited audited
Notes R000"s change R000"s R000"s
Revenue 3 1 516 309 3,6 1 463 199 2 674 002
Cost of sales (702 491) (673 961) (1 247 964)
Trading profit before
depreciation and
amortisation ("EBITDA") 170 128 15,1 147 846 178 442
Depreciation of fixtures,
equipment and vehicles (11 964) (12 555) (25 024)
Amortisation of
intangibles (3 750) (3 558) (7 308)
Trading profit 154 414 17,2 131 733 146 110
Net financing costs (26 879) (39 624) (81 655)
Interest received 662 358 1 745
Financing costs on bank
borrowings (27 541) (39 982) (83 400)
Profit before
exceptional items 127 535 38,5 92 109 64 455
Exceptional gain 29 224 29 224
Profit before taxation 127 535 121 333 93 679
Taxation 4 (6 753) (33 132) (25 419)
Profit after taxation 120 782 36,9 88 201 68 260
Share of joint venture
loss - discontinued (5 500) (8 908)
Earnings attributable to
ordinary shareholders 120 782 46,0 82 701 59 352
Ordinary shares in issue
(000"s)
- closing 5 959 278 959 278 959 278
- weighted average 5 959 278 811 853 811 853
Fully diluted weighted
average number of
ordinary shares (000"s) 6 959 278 822 264 822 264
Earnings per share -
basic (cents) 12,6 23,6 10,2 7,3
Headline earnings per
share - basic (cents) 12,7 23,5 10,3 7,6
Headline earnings per
share - fully diluted
(cents) 12,7 25,1 10,1 7,5
Reconciliation of
attributable earnings to
headline and fully
diluted earnings R000"s R000"s R000"s
Attributable earnings,
as above 120 782 82 701 59 352
Adjustments:
Amortisation of goodwill
during the period 1 176 984 2 160
Profit on sale of non-
current assets (456) (478) 586
Taxation on adjustments 137 143 (176)
Headline earnings and
headline earnings fully
diluted 121 639 45,9 83 350 61 922
GROUP BALANCE SHEET
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
Notes R000"s R000"s R000"s
ASSETS
Non-current assets
Goodwill 11 152 13 504 12 328
Trademarks 31 599 36 747 34 173
Fixtures, equipment and
vehicles 104 524 115 018 105 779
Insurance companies"
investments 7 77 702 65 612 60 075
Investment in microloan
joint venture 10 269
Deferred taxation 290 009 282 258 290 009
514 986 523 408 502 364
Current assets
Accounts receivable 8 1 538 343 1 433 467 1 383 643
Other debit balances 53 518 65 194 61 376
Taxation 890 6 449 5 740
Inventories 366 759 404 884 310 994
Cash on hand 167 213 180
1 959 677 1 910 207 1 761 933
Total assets 2 474 663 2 433 615 2 264 297
EQUITY AND LIABILITIES
Ordinary share capital and
premium 1 673 569 1 673 569 1 673 569
Non-distributable reserves 15 054 21 388 17 189
Accumulated loss (410 078) (508 066) (530 860)
Ordinary shareholders"
equity 1 278 545 1 186 891 1 159 898
Non-current liabilities
Interest bearing bank
borrowings 383 154 601 551 450 194
Current liabilities
Amount due to vendor 13 669
Accounts payable and
accruals 752 992 541 232 576 722
Provisions 59 972 73 937 77 483
Preference shareholder for
dividends 16 335
812 964 645 173 654 205
Total equity and liabilities 2 474 663 2 433 615 2 264 297
Gearing (%) 30,0 50,7 38,8
Tangible net asset value per
share, fully diluted (cents) 9 128,8 117,2 114,8
GROUP STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS" EQUITY
Ordinary
share
Share capital and Non-
capital premium distribut-
and to be able Accumu-
premium issued reserves lated loss Total
R000"s R000"s R000"s R000"s R000"s
Balance at 30
June 2002 391 245 1 269 551 27 651 (572 548) 1 115 899
Net present
value discount
on rights
issue proceeds 16 965 (16 965) -
Share issue
expenses (4 192) (4 192)
Ordinary share
capital and
premium issued 1 269 551 (1 269 551) -
Loss on
translation of
foreign entity (6 263) (6 263)
Opening
adjustment:
(adoption of
AC133) (1 254) (1 254)
Attributable
earnings for the
period 82 701 82 701
Balance at 31
December 2002 1 673 569 - 21 388 (508 066) 1 186 891
Share issue
expenses (5 001) 5 001 -
Ordinary share
capital and
premium issued 5 001 (5 001) -
Insurance
statutory
contingency
reserve movement (555) 555 -
Realisation of
investment
revaluation
reserve (382) (382)
Loss on
translation of
foreign entity (3 262) (3 262)
Attributable
loss for the
period (23 349) (23 349)
Balance at
30 June 2003 1 673 569 - 17 189 (530 860) 1 159 898
Loss on hedged
instruments (1 577) (1 577)
Loss on
translation of
foreign entity (558) (558)
Attributable
earnings for the
period 120 782 120 782
Balance at
31 December 2003 1 673 569 - 15 054 (410 078) 1 278 545
Share capital and premium as stated above is net of the cost of Treasury shares
amounting to R39,1 million.
GROUP CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
Note R000"s R000"s R000"s
Cash receipts from customers 1 525 675 1 484 708 2 883 413
Cash generated from trading 169 672 147 368 180 839
Net increase in working
capital (17 451) (116 207) 80 361
Cash generated from operations 152 221 31 161 261 200
Net financing costs paid 10 (40 515) (62 253) (93 431)
Taxation paid (1 616) (9 601) (8 541)
Cash generated by operating
activities 110 090 (40 693) 159 228
Closure costs paid (15 183) (29 791) (49 245)
Preference dividends paid (16 700) (33 035)
Net cash generated 94 907 (87 184) 76 948
Acquisition of business (13 669)
Net capital expenditure (10 545) (10 946) (14 485)
Net portion of proceeds on
sale of microloan business 13 829 13 829
Insurance companies"
investments (17 335) (11 634) (7 234)
Cash outflows from investment
activities (27 880) (8 751) (21 559)
Net cash inflow before
financing activities 67 027 (95 935) 55 389
Ordinary shareholder funding 785 636 785 636
Repayment of interest bearing
bank borrowings (67 040) (689 708) (841 065)
Cash outflows from financing
activities (67 040) 95 928 (55 429)
Net decrease in cash and cash
equivalents (13) (7) (40)
Cash and cash equivalents at
the beginning of the period 180 220 220
Cash and cash equivalents at
the end of the period 167 213 180
GROUP SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Revenue
Value retailing 419 857 428 617 788 226
Credit chains 863 466 802 818 1 481 272
Insurance and repair services 232 986 231 764 404 504
Total 1 516 309 1 463 199 2 674 002
EBITDA
Value retailing 8 279 12 985 12 949
Credit chains 149 022 120 627 178 112
Insurance and repair services 19 466 21 720 11 995
Corporate (6 639) (7 486) (24 614)
Total 170 128 147 846 178 442
Gross capital expenditure
Value retailing 203 6 124 8 270
Credit chains 11 185 11 158 16 612
Insurance and repair services 951 1 031 1 278
Total 12 339 18 313 26 160
Depreciation and amortisation
Value retailing 2 454 5 815 12 340
Credit chains 6 672 8 113 13 886
Insurance and repair services 1 189 1 585 3 067
Corporate 5 399 600 3 039
Total 15 714 16 113 32 332
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Total assets
Value retailing 346 852 362 129 315 432
Credit chains 1 862 713 1 834 983 1 691 816
Insurance and repair services 265 098 236 503 257 049
Total 2 474 663 2 433 615 2 264 297
Interest bearing bank
borrowings
Value retailing 33 201 65 010 61 279
Credit chains 349 953 536 541 388 915
Total 383 154 601 551 450 194
Interest free liabilities
Value retailing 205 712 179 106 202 042
Credit chains 568 396 423 244 409 005
Insurance and repair services 38 856 12 819 43 158
Amount due to vendor 13 669
Corporate - preference
shareholder for dividends 16 335
Total 812 964 645 173 654 205
NOTES
Note 1 - Accounting policies and basis of accounting
The principal accounting policies and basis of accounting used, are in all
material respects consistently applied, except for the definition of revenue as
noted in note 2. These policies conform with South African Statements of
Generally Accepted Accounting Practice ("GAAP").
Consistent with prior periods, for administrative purposes, trading month-ends
close on the seventh of each subsequent month.
Note 2 - Change in accounting policy
Revenue
During the period, the Group changed its definition of Revenue. In line with the
practice in the industry, Revenue now includes amounts invoiced by Group
companies for goods and services and is recognised on sale of goods and
rendering of services, plus net finance and insurance premiums earned on
instalment and other credit sales, but excludes interest on arrears, intra-group
revenue and amounts invoiced in respect of value added tax. Previously called
Turnover, this did not include insurance premiums earned on instalment and other
credit sales, but did include interest on arrears. Comparatives have been
restated accordingly. This change had no effect on the income statement or
balance sheet other than the calculation of Revenue as noted above.
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Note 3 - Revenue
Comprises:
Cash sales 499 221 486 067 905 084
Credit sales 583 016 564 318 1 000 962
Total sales 1 082 237 1 050 385 1 906 046
Finance charges earned 168 759 156 791 324 884
Interest on arrears 36 311 30 211 68 020
As previously disclosed 1 287 307 1 237 387 2 298 950
Interest on arrears (36 311) (30 211) (68 020)
Insurance premiums 200 204 196 022 336 573
Services rendered 65 109 60 001 106 499
Revenue 1 516 309 1 463 199 2 674 002
Note 4 - Taxation
Prior to the recapitalisation in 2002, the Group suffered losses to such an
extent that the Group currently has an accumulated loss of R410 million. At the
beginning of the current financial year, the Group had unutilised tax losses of
some R514 million. In view of the improved profitability and the continued
positive outlook of the general economic environment in which the Group
operates, the directors have estimated that the current year"s tax rate will
approximate 5,3%. As required by AC127 ("Interim Financial reporting"), this tax
rate has been applied in the income statement for the period.
As a result, tax losses previously unrecognised, amounting to R111 million, have
been utilised in the period under review.
The effective tax rate reflected in the income statement of 5,3% is reconciled
to the standard rate as follows:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Tax at standard rate 38 261 36 400 28 104
Tax effect of:
Permanent differences 1 833 1 901 4 053
Excempt income (5 089) (7 194)
Foreign tax rate differential and
withholding taxes (188) (80) 456
Tax losses now recognised (33 153)
6 753 33 132 25 419
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
000"s 000"s 000"s
Note 5 - Ordinary shares in issue
Total ordinary shares in issue -
closing 966 367 966 367 966 367
Treasury shares held by the Relyant
Share Option Trust (7 089) (7 089) (7 089)
Ordinary shares in issue - closing 959 278 959 278 959 278
Total ordinary shares in issue -
weighted average 966 367 818 942 818 942
Treasury shares held by the Relyant
Share Option Trust (7 089) (7 089) (7 089)
Ordinary shares in issue -
weighted average 959 278 811 853 811 853
Note 6 - Fully diluted shares - weighted
average
Total fully diluted shares - weighted
average 966 367 830 382 830 382
Treasury shares held by the Relyant
Share Option Trust (7 089) (7 089) (7 089)
Rights to acquire Relyant shares held
by the Relyant Executive Share
Purchase Trust (1 029) (1 029)
Fully diluted shares - weighted average 959 278 822 264 822 264
R000"s R000"s R000"s
Note 7 - Insurance companies" investments
Comprises:
Listed shares 32 445 24 350 27 179
Money market instruments 45 257 41 262 32 896
77 702 65 612 60 075
Note 8 - Accounts receivable
Gross instalment debtors 2 095 411 2 061 321 1 935 157
Provision for unearned income (289 519) (289 197) (272 812)
Provision for doubtful debts (269 944) (335 881) (275 582)
Net instalment debtors 1 535 948 1 436 243 1 386 763
Net trade debtors 2 395 (2 776) (3 120)
1 538 343 1 433 467 1 383 643
The Group has ceded its accounts receivable book to its principal bankers as
security for the syndicated term loan facilities granted.
Note 9 - Tangible net asset value per share, fully diluted
This is calculated by dividing ordinary shareholders" equity, less intangible
assets, by the closing number of ordinary shares, on a fully diluted basis:
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Ordinary shareholders" equity per
balance sheet 1 278 545 1 186 891 1 159 898
Less: Goodwill (11 152) (13 504) (12 328)
Less: Trademarks (31 599) (36 747) (34 173)
Adjusted total shareholders" equity 1 235 794 1 136 640 1 113 397
Closing number of ordinary shares,
fully diluted (000"s) 959 278 969 689 969 689
Tangible net asset value per share,
fully diluted (cents) 128,8 117,2 114,8
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Note 10 - Net financing costs paid
Net financing costs per income statement
(26 879) (39 624) (81 655)
Movement in accrued interest (13 636) (5 664) 5 189
Net present value discount on rights
issue proceeds (16 965) (16 965)
Net financing costs paid (40 515) (62 253) (93 431)
Note 11 - Capital expenditure
Incurred 12 339 18 313 26 160
31 December 31 December 30 June
2003 2002 2003
unaudited unaudited audited
R000"s R000"s R000"s
Committed 6 468 3 753 593
Authorised but not contracted 14 832 11 425 33 046
Note 12 - Commitments
Operating lease commitments 441 376 562 732 503 882
Note 13 - Related party transactions
Related parties exist within the Group. However, all purchasing and selling
transactions are concluded at arm"s length. The Group"s insurance subsidiaries
conduct certain insurance and re-insurance business with a director of the
insurance subsidiaries, all at arm"s length.
In addition the day to day operations and management of the insurance
subsidiaries are oursourced to a company partly owned by the director"s
insurance consulting practice.
COMMENTS
Trading
Trading conditions have improved following the recent reduction in inflation and
interest rates, although the retail durables market remains highly competitive,
especially in the middle to upper cash market. The credit chains grew comparable
sales by 9% and total revenues by 8%. Strict credit granting policies have
remained in place, restricting sales growth in the credit chains. The value
retail brands, which sell mostly for cash, experienced a decline of 2% in same
store sales.
The competitive trading conditions also resulted in a gross profit percentage on
sales of 35,1% for the period, compared with last period"s achievement of 35,8%.
By focusing on improving income streams, productivity ratios and maintaining
strict overhead controls, the Group has achieved an increase in EBITDA of 15%.
Earnings
The benefit of strong cash flows and substantially lower interest bearing
borrowings, coupled with lower interest rates, resulted in a saving of R13
million in net financing costs for the period under review. The Group"s profit
before exceptional items of R128 million represents an improvement of 38% over
the previous period.
This improvement in profitability of the Group was preserved through a low tax
rate of 5,3%, resulting in the utilisation of previously unrecognised tax
losses, which offset the effects of last year"s exceptional gain (which arose
from the adoption of AC133).
Consequently, the Group"s attributable earnings grew by 46% to R121 million
(2002: R83 million). This translates into headline earnings per share of 12,7
cents, on a fully diluted basis, an increase of 25% compared with the prior
period.
Dividend
No dividend has been declared at the interim stage.
Credit management
Ongoing strict credit granting criteria resulted in total arrears, which are
measured on a gross basis, decreasing to 14,6%, compared with June 2003 (14,9%).
As a result of the ongoing improvement in the debtors" book, total provisions
against the gross instalment book now represent 26,7% (June 2003: 28,3%).
Cash flow and financial position
Through added focus and proactive management, the Group"s working capital
requirement in the current period was restricted to only R17 million (December
2002: R116 million). Net cash generated amounted to R95 million, a turnaround of
R182 million (December 2002: utilisation of R87 million).
Interest bearing bank borrowings at 31 December 2003 amounted to R383 million
compared to the level at June 2003 of R450 million and last December of R602
million. Gearing has decreased from 51% at 31 December 2002 to 30% at 31
December 2003 (30 June 2003: 39%).
Directorate
The Board welcomes John Main and Derrick Minnie, whose appointments as non-
executive directors were effective from 26 February 2004.
Prospects
The Board expects that lower inflation and interest rates in South Africa will
continue to drive the recovery in consumer spending on household durables.
Against this background, the directors remain committed to further improve the
operating performance of the Group.
As noted in the last Annual Report, a number of opportunities with significant
long-term benefits were identified after the successful recapitalisation in late
2002. These initiatives could materially enhance the Group"s long-term growth
prospects in a changing and increasingly competitive market. This will, however,
require significant investment and additional funding. While the Group has a
robust balance sheet and sufficient funding to meet its normal capital
expenditure and working capital requirements, the Board wishes to maintain a
strong balance sheet and an ethos of financial prudence.
As stated previously, the Board will only commit the Group to take advantage of
these long-term opportunities if additional shareholder funding were made
available to it.
For and on behalf of the Board
PJB Pohlmann AM Schlesinger
Chairman Chief Executive Officer
1 March 2004
Non-executive Directors:
PJB Pohlmann(1) (Chairman), HM Khoza, MT Lategan, RJ Main, ND Minnie,
JM Moore(2)
Executive Directors:
AM Schlesinger (Chief Executive Officer), RBG Sinclair
(1) German (2) British
Registered office
Relyant House, 131 van Beek Street, Ellis Park, 2094
Telephone (011) 401-5000
Transfer secretaries
Computershare Limited, Investor Services Division
70 Marshall Street, Johannesburg, 2001
Telephone (011) 370-7700
Auditors
Deloitte & Touche
Sponsor
Investec Bank Limited
Internet site
www.relyant.co.za
Date: 01/03/2004 09:30:19 AM Produced by the JSE SENS Department
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