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ELLERINE - UNAUDITED INTERIM PROFIT STATEMENT FOR THE SIX MONTHS ENDED 29
FEBRUARY 2004
ELLERINE HOLDINGS LIMITED
Registration number 1968/013402/06
Share code: ELH
ISIN number: ZAE000022752
UNAUDITED INTERIM PROFIT STATEMENT FOR THE SIX MONTHS ENDED 29 FEBRUARY 2004
* Turnover up 26,1%
* Operating profit up 43,6%
* Operating margin at 17,0%
* Attributable profit up 28,1%
* Headline earnings per share up 35,3%
* Strong cash flows
* Gearing at 21,5%
* Wetherlys successfully integrated
CONSOLIDATED INCOME STATEMENT
6 months to February 12 months to August
2004 2003 2003
R"000 R"000 % R"000
Unaudited Unaudited Change Audited
Turnover 1 442 32 1 144 208 26,1 2 183 984
Cost of sales 641 483 473 355 35,5 879 700
Gross profit 800 837 670 853 19,4 1 304 284
Operating expenses 431 190 359 710 19,9 780 92
Debtors costs 123 942 133 325 (7,0) 180 193
245 705 177 818 38,2 343 170
Foreign exchange
translation loss (54) (6 709) (505)
Operating profit 245 651 171 109 43,6 342 665
Net (finance costs)/
investment income (7 002) 7 853 (189,2) 14 062
Goodwill amortised (9 298) - -
Income from associate 2 463 - 312
Profit before taxation 231 814 178 962 357 039
Taxation (73 876) (55 691) 32,7 (109 809)
Profit attributable to
ordinary shareholders 157 938 123 271 28,1 247 230
Determination of
headline earnings
Profit attributable to
ordinary shareholders 157 938 123 271 247 230
Goodwill amortised 9 298 - -
Fair value adjustments
and profit on disposal of properties (786) - 841
Net profit on disposal
of assets (2 500) (2 803) (3 905)
Tax effect thereon 750 841 1 172
Headline earnings 164 700 121 309 35,8 245 338
Number of ordinary
shares:
Weighted average 73 311 327 73 070 684 72 163 592
In issue 76 198 299 73 805 200 73 805 200
Treasury (2 886 972) (734 516) (1 641 608)
Fully diluted weighted
average 75 594 452 73 393 584 73 241 671
Earnings per share: Cents Cents Cents
Attributable 215,4 168,7 27,7 342,6
Headline 224,7 166,0 35,3 340,0
Fully diluted
attributable 208,9 168,0 24,4 337,6
Fully diluted headline 217,9 165,3 31,8 335,0
CONSOLIDATED BALANCE SHEET
February February August
2004 2003 2003
R"000 R"000 R"000
Unaudited Unaudited Audited
Assets
Non-current assets 948 315 502 175 455 129
Property and equipment 258 309 130 864 137 681
Goodwill 269 635 - -
Investment in associate 26 025 - 23 562
Investments at bankers 304 184 286 311 208 886
Other financial assets 90 162 85 000 85 000
Current assets 2 089 358 1 801 348 1 846 805
Inventories 227 596 135 041 130 838
Trade receivables 2 562 981 2 314 616 2 319 343
Provisions (866 555) (763 933) (779 240)
1 696 426 1 550 683 1 540 103
Term loans 64 099 75 827 67 456
Provisions (34 337) (40 103) (36 516)
29 762 35 724 30 940
Other receivables 32 530 31 864 49 329
Funds on call, bank balances
and cash 103 044 48 036 95 595
Total assets 3 037 673 2 303 523 2 301 934
Equity and Liabilities
Shareholders" equity and
reserves 1 739 311 1 508 796 1 574 973
Non-current liabilities 463 447 322 434 287 069
Deferred taxation 204 290 239 284 204 237
Interest bearing borrowings 259 157 83 150 82 832
Current liabilities 834 915 472 293 439 892
Taxation 24 420 4 753 59 306
Trade and other payables 198 498 139 771 179 559
Bank overdrafts 611 997 327 769 201 027
Total equity and liabilities 3 037 673 2 303 523 2 301 934
Net asset value per share -
cents 2 328 2 065 2 224
Current ratio 2,5 3,8 4,2
Net interest bearing debt:
Equity (%) 21,5 (0,6) (6,7)
CONSOLIDATED CASH FLOW STATEMENT
February February August
2004 2003 2003
R"000 R"000 R"000
Unaudited Unaudited Audited
Cash generated from operating
activities 327 874 224 079 441 656
Working capital changes (196 607) (203 880) (189 870)
Cash generated from operations 131 267 20 199 251 786
Exchange rate difference on
translation of
foreign entities (13 254) (6 653) (17 161)
Net (finance costs)/
investment income (7 002) 7 853 14 062
Taxation paid (100 226) (80 833) (123 324)
Dividends paid (62 479) (53 854) (53 065)
Cash flows from operating
activities (51 694) (113 288) 72 298
Investment in associate - - (23 250)
Acquisition of Wetherlys
Investment Holdings Limited (511 694) - -
Purchase of property and
equipment (34 302) (15 956) (45 607)
Prodeeds on disposal of
property and equipment 5 581 3 866 8 998
Cash flows from investing
activities (540 415) (12 090) (59 859)
Acquisition of treasury shares (12 234) (12 187) (52 810)
Proceeds from the issues of
new shares 94 437 - -
Increase/(Decrease) in
interest bearing borrowings 152 961 (383) (701)
Cash flows from financing
activities 235 164 (12 570) (53 511)
Net decrease in cash and cash
equivalents (356 945) (137 948) (41 072)
Cash and cash equivalents on
acquisition of Wetherlys
Investment Holdings Ltd 48 723 - -
Cash and cash equivalents at
the beginning of the year 103 454 144 526 144 526
Cash and cash equivalents at
the end of the year (204 768) 6 578 103 454
Attributable cash flow per
share (cents) 14,7 (81,3) 173,7
STATEMENT OF CHANGES IN EQUITY
Insu- Non-
rance
con- distrib- Distrib- At At
Share Share tin- utable utable February February
gency
R"000 Ca- premium Re- reserves reserves 2004 2003
pital serve
Balance at
31 August 3 676 40 586 26 490 42 960 1 337 067 1 450 779 1 275 824
2002
Exchange rate
difference
arising
on
translation (17 161) (17 161) 17 888
of foreign
entities
Treasury
shares (135) (52 654) (52 789) (3 587)
purchased and
held
Net profit
for the year 247 230 247 230 212 942
Transfer to
insurance
contingency
reserve 4 196 (4 196) - -
Transfer of
realised
profits on
disposal of
owner
occupied
properties to
non-
distributable
reserves 996 (996) - -
Transfer of
revalution of
investment
properties to
non-
distributable (543 (543 - -
reserves
Dividend paid (53 086) (53 086) (52 288)
Balance at 31
August 2003 3 541 40 586 30 686 26 252 1 473 908 1 574 973 1 450 779
Exchange rate
difference
arising on
translation
of
foreign (13 254) (13 254) (6 653)
entities
Issue of new
shares 229 94 208 94 437 -
Treasury
shares (35) (12 199) (12 234) (3 261)
purchased and
held
Net profit
for the 157 938 157 938 123 271
period
Transfer to
insurance
contingency
reserve 3 881 (3 881) - (1 462)
Dividend paid (62 549) (62 549) (53 878)
- Total (64 409) (64 409) (53 878)
- Treasury 1 860 1 860 -
shares
Balance at 29
February 2004 3 735 134 794 34 567 12 998 1 553 217 1 739 311 1 508 796
COMMENTS
Trading Environment
Buoyant trading conditions were experienced resulting from the lower interest
rate environment, reduced personal taxes and lower inflation which impacted
positively on consumer credit sales. The Group has taken full advantage of these
conditions.
Group Structure
The Wetherlys acquisition was successfully integrated into the Group with effect
from 28 October 2003. Their results are included in the Group"s figures for the
first time.
The effect of the changes in the composition of the financial statements as at
February 2004, with the inclusion of the Wetherlys division for the first time,
are as follows:
Rm Trading Property Total
Total assets 235,0 73,6 308,6
Equity and liabilities
Shareholders" equity at 182,9 49,9 232,80
acquisition
Post acquisition earnings for the
period 19,6 1,8 21,4
Liabilities 32,5 21,9 54,4
Total equity and liabilities 235,0 73,6 308,6
Goodwill
Shareholders" equity at 232,80
acquisition
Cost of Wetherlys acquisition 511,60
Goodwill amortised over 10 years 278,80
The Wetherlys acquisition cost of R511,6 million has been funded by way of a
long term loan of R150 million, repayable in 2007, bearing interest at the rate
of 3,5% below prime, with the balance funded out of short term borrowings.
The Wetherlys executive, management and staff continue to demonstrate their full
commitment and the integration of the Group is progressing well.
Strong Operating Performance
Group turnover is up 26,1% including the contribution of R160 million or 11%
from Wetherlys. This was achieved despite a substantial decrease in finance
charges of R47 million due to the significantly lower finance charge rates,
which prevailed. The sale of goods in the credit retail chains was up by 19%
(2003: 4,8%).
Operating margins at 17% (2003: 15%) showed a pleasing increase on the back of
higher sales volumes. Overheads were tightly controlled.
There has been a positive turnaround in the contribution from the foreign
operations while the RSA stores have continued to perform strongly. Wetherlys
has performed well and in line with expectations.
Positive Cash Flows
Due to strong cash flows from both the credit and cash divisions, the net cash
generated from operations was R131 million (2003: R20 million).
A significant improvement in the condition of the debtors ledger was achieved
through further improvements in collections. The strict credit granting criteria
has been maintained, including full deposits on all credit sales. Arrears at
24,3% of the debtors ledger are down by 2,1% compared to February 2003, despite
a 10,0% increase in gross debtors.
Segmental Report
Credit Retail Division
The Ellerine, Town Talk and FurnCity brands all performed ahead of expectations
in regard to sales volumes, collections and deposit rates with improved trading
margins. The overall cash produced by these chains was 20% up on the prior year
with a record R1,1 billion cash collected during the period. Despite a 19%
increase in sales volumes, inventories remained flat for the period and were
well controlled.
There was a major improvement in the Foreign division where operating income is
now in proportion to sales in this segment.
Cash Retail Division
The Group"s niched market division, Wetherlys, performed in line with
expectations for the four months since its incorporation and, as anticipated,
generated strong cash flows.
During the period, the remaining 50% shareholding of the Spanish joint venture
was acquired thus opening the way for further offshore expansion, with an
additional two stores due to open in May and June 2004.
A number of local leases have been entered into for the opening of a further
five outlets (four Osiers to be opened in Shopping Centres and one stand alone
Wetherlys in Port Elizabeth) to be opened by December 2004, with further local
and offshore expansion planned for 2005.
The planned expansion of the Roodefurn manufacturing capability is being
implemented with the opening of a second factory, due to commence production in
the near future.
Financial Services Division
The Group"s wholly owned short term insurance company continues to make a major
contribution to the Group with premiums up significantly due to the higher sales
volumes in the Credit Sales division and an enhanced product range.
The trading performance of Rainbow Loans has shown a further major improvement.
This business is very well managed and is generating good profits and returns.
As a consequence, a strategic decision has been made to expand these operations
with an additional four outlets due to open between March and August 2004.
The Group"s investment in CICL Investment Holdings, which owns Constantia
Insurance Company Limited and Constantia Life and Health Assurance Company
Limited, is performing in line with expectations and has contributed R2,5
million for the period, which equates to an annualised after tax return on the
investment of 21,2%.
Accounting Policies
The interim financial statements have been prepared in accordance with SA
Statements of Generally Accepted Accounting Practice.
The accounting policies applied are consistent with those used in the annual
financial statements for the year ended 31 August 2003.
Prospects
The buoyant trading conditions are expected to continue for the remainder of the
financial year to August 2004, with the Group having traded well ahead of budget
in March and April 2004. Given these factors, the increase in earnings achieved
for the period should be sustained for the remainder of the financial year.
Dividend
The Group"s policy is to declare one dividend per annum, payable after the
announcement of the year-end results.
Directors
Mr Henry Mmatli retired as an executive director on 31 March 2004 after 43
years" service with the Group. Our sincere thanks to Henry for his dedicated
service over the period and for agreeing to remain on the Board in a non-
executive capacity. We are delighted at the appointment of Mr Sandile Zungu as a
non-executive director with effect from 13 April 2004. Sandile is the chairman
of Denel and also serves on the Boards of the Edcon Group and Metropolitan
Holdings, amongst others.
By order of the Board
Denzil McGlashan Peter Squires
Chairman Chief Executive Officer
10 May 2004
Registered Office:
Gillooly"s View Office Park, Block E, Osborne Lane, Bedfordview 2008
Transfer secretaries:
Computershare Limited, 70 Marshall Street, Johannesburg, PO Box 61051,
Marshalltown, 2107
Auditors: Grant Thornton
Sponsors: Nedbank Capital
Directors
DS McGlashan* (Chairman), PJC Squires (Chief Executive Officer),
TJ Chalmers*, J Dritz**, PN Gumede*, HL Mmatli*, RA Rawlings, PEI Swartz*, AR
van den Borne, BD van der Merwe, S Zungu*
(Non-executive*) (Company Secretary**)
Date: 10/05/2004 04:00:24 PM Produced by the JSE SENS Department
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