| Tue 11 May 2004, 12:11 | | RESULTS FOR THE YEAR ENDED FEBRUARY 29, 2004 |
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L.A. GROUP LIMITED - REVIEWED GROUP RESULTS FOR THE YEAR ENDED FEBRUARY 29, 2004
L.A. Group Limited
(Registration Number 1936/008786/06)
Share code: LAR ISIN: ZAE000028676
"N" share code: LAN ISIN: ZAE000028684
REVIEWED GROUP results for the year ended February 29, 2004
Operating profit before tax 63%
Headline earnings per share 52%
Proposed dividend per share 36%
GROUP INCOME STATEMENT (R"000)
Continuing Discontinuing
Operations Operations Total
2004 2003 2004 2003 2004 2003
INCOME STATEMENT
TURNOVER 600 712 611 022 - 39 288 600 712 650 310
OPERATING
INCOME (LOSS)
BEFORE THE
FOLLOWING ITEMS 79 666 73 648 (3 795) (6 718) 75 871 66 930
Depreciation
and
amortisation
of goodwill
and trademarks (5 676) (6 340) - (132) (5 676) (6 472)
Losses on
foreign
Exchange (12 130) (17 246) - (2 625) (12 130) (19 871)
OPERATING
INCOME (LOSS)
BEFORE
NET INTEREST 61 860 50 062 (3 795) (9 475) 58 065 40 587
Net interest
paid (9 716) (8 716) (1 138) (2 984) (10 854) (11 700)
OPERATING
PROFIT (LOSS)
BEFORE TAXATION 52 144 41 346 (4 933) (12 459) 47 211 28 887
Taxation 19 155 11 482 - (2 345) 19 155 9 137
INCOME (LOSS)
AFTER TAXATION 32 989 29 864 (4 933) (10 114) 28 056 19 750
Loss
attributable to
outside
shareholders - (867) - - - (867)
NET INCOME
(LOSS)
ATTRIBUTABLE
TO ORDINARY
SHAREHOLDERS 32 989 30 731 (4 933) (10 114) 28 056 20 617
Dividend paid 6 020 6 537 - - 6 020 6 537
RETAINED
EARNINGS 26 969 24 194 (4 933) (10 114) 22 036 14 080
Number of
ordinary
and "N"
ordinary
shares in
issue 62 001 701 62 001 701
At weighted
average 54 731 779 60 285 578
Diluted 56 202 819 61 898 901
Headline earnings
per ordinary and
"N" ordinary shares - cents
At weighted average 52.08 34.11
Diluted 50.71 33.22
Earnings per ordinary and
"N" ordinary shares - cents
At weighted average 51.26 34.20
Diluted 49.92 33.31
Proposed cash distribution per ordinary and
"N" ordinary share - cents 15.00 11.00
Net tangible asset value per share - cents 434.52 404.34
Property, plant and equipment
Depreciation 5 161 6 242
Capital expenditure 9 968 11 413
Intangibles
Amortisation 515 230
Capital expenditure 4 267 -
Capital commitments 17 750 13 811
GROUP BALANCE SHEET (R"000)
2004 2003
ASSETS
Non-current assets
Property, plant and equipment 17 134 12 559
Intangible assets 5 430 1 678
Deferred taxation 29 921 35 086
52 485 49 323
Current assets
Inventories 149 222 177 983
Trade and other receivables 128 058 152 067
Taxation 1 800 1 198
Deposits on property acquisitions 1 535 -
Cash and cash equivalents 36 309 18 683
316 924 349 931
Total Assets 369 409 399 254
EQUITY AND LIABILITIES
Equity
Ordinary shareholders" equity 243 250 222 983
Outside shareholders" interest - 2 156
243 250 225 139
Non-current liabilities
Non-interest bearing 1 210 380
Interest bearing 3 782 5 208
4 992 5 588
Current liabilities
Non-interest bearing
Trade and other payables 57 450 72 189
Owing on forward exchange contracts 4 779 11 766
Taxation 7 174 10 214
Interest bearing
Current portion of non-current liabilities 5 031 4 690
Short term loans 7 764 13 461
Bank overdraft 38 969 56 207
121 167 168 527
Total Equity and Liabilities 369 409 399 254
GROUP CASH FLOW STATEMENT (R"000)
2004 2003
OPERATING ACTIVITIES
Operating profit before interest and taxation 58 065 40 587
Adjustment for non-cash flow items 5 608 6 251
Cash generated by operations 63 673 46 838
Movement in working capital 31 043 (7 969)
Interest received 972 1 387
Interest paid (11 826) (13 087)
Dividend paid (6 020) (6 537)
Taxation paid (17 784) (12 997)
Net cash inflow from operating activities 60 058 7 635
INVESTING ACTIVITIES
Acquisitions of property, plant and equipment (9 968) (11 413)
Proceeds from sale of property, plant and equipment 112 1 179
Acquisition of intangible assets (4 267)
Acquisition of outside shareholders interest (2 156)
Deposits on property acquisitions (1 535)
Increase in loans 342 1 063
Net cash outflow from investing activities (17 472) (9 171)
FINANCING ACTIVITIES
Decrease in long term borrowings (596) (662)
Share buy back - (17 038)
Movement in borrowings (5 697) 5 614
Payment to vendors - (12 223)
Net cash outflow from financing activities (6 293) (24 309)
Net increase (decrease) in cash and
cash equivalents 36 293 (25 845)
Cash and cash equivalents at beginning of year (37 524) (8 526)
Effect of foreign exchange movements (1 429) (3 153)
Cash and cash equivalents at end of year (2 660) (37 524)
SEGMENTAL ANALYSIS (R"000)
2004 Revenue % Results % Net Assets %
Corporate clothing 228 961 38 (6 517) (11) 91 243 37
Branded distribution 371 751 62 54 420 94 125 835 52
Corporate unallocated
expenses and net assets - - 10 162 17 26 172 11
Total 600 712 100 58 065 100 243 250 100
2003 Revenue % Results % Net Assets %
Retail 3 044 - (6 551) (16) 3 -
Corporate clothing 300 603 47 (7 630) (19) 113 212 50
Branded distribution 346 663 53 41 970 103 95 304 42
Corporate unallocated
expenses and net assets - - 12 798 32 16 620 8
Total 650 310 100 40 587 100 225 139 100
GEOGRAPHIC ANALYSIS (R"000)
2004 Revenue % Result % Net assets %
South Africa 443 519 74 59 182 102 182 867 75
International 157 193 26 (1 117) (2) 60 383 25
Total 600 712 100 58 065 100 243 250 100
2003 Revenue % Results % Net Assets %
South Africa 419 192 64 48 943 121 152 264 68
International 231 118 36 (8 356) (21) 72 875 32
Total 650 310 100 40 587 100 225 139 100
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS EQUITY (R"000)
Share Non-
capital distributable Distributable
and premium reserves reserves Total
Balance at
March 1, 2002 54 112 5 044 179 453 238 609
Share buy-backs (17 038) - - (17 038)
Earnings
attributable to
shareholders 20 617 20 617
Dividend paid (6 537) (6 537)
Foreign currency
translation reserve (12 668) - (12 668)
Balance at
February 28, 2003 37 074 (7 624) 193 533 222 983
Earnings attributable
to shareholders 28 056 28 056
Dividend paid (6 020) (6 020)
Foreign currency
translation reserve (1 769) - (1 769)
Balance at
February 29, 2004 37 074 (9 393) 215 569 243 250
INTRODUCTION
The L.A. Group ("the Group") is one of the country"s leading clothing and
apparel companies. Its main focus is the distribution of branded clothing and
footwear, and the supply of corporate clothing in both the local and
international markets. In addition, the Group earns royalty income from the
Polo brand.
OVERVIEW OF RESULTS
GROUP OVERVIEW
Although the Group turnover was down by 7,6 percent to R600-million from R650-
million, the South African operations generated increased turnover of 6 percent.
The reduction in turnover is due to the inclusion in the previous year"s figures
of R39-million of turnover from the now discontinued operation of the USA joint
venture and the effect of translating the international turnover to Rands at
reduced exchange rates. In terms of overall contribution to sales, the local
divisions accounted for R443-million (73,8 percent) while the offshore operation
contributed R157-million (26,2 percent) to the Group.
Group operating profit before tax was 63 percent higher at R47,2-million (2003:
R28,9 million). The previous years figures included losses of R12,5-million from
discontinued operations compared to R4,9-million for this year.
Headline earnings per ordinary and "N" ordinary share for the Group increased by
52,7 percent from 34,11 cents to 52,08 cents. Net tangible asset value per
share for the group was higher at 434,52 cents (2003: 404,34 cents).
CONTINUING OPERATIONS
Although the South African operations generated an increased turnover of 6
percent to R443,5-million (2003: R419,2-million), the effect of translating the
turnover of the UK businesses at a lower exchange rate of R12,02:GBP1 (2003:
R15,30:GBP1) resulted in an overall reduction of turnover by 1,7 percent to R600
million (2003: R611-million). The increased South African turnover was achieved
despite reduction in selling prices while maintaining gross margin.
Operating income from continuing operations was 23 percent higher at R61,86-
million (2003: R50,06-million) on account of strong growth from the local
branded distribution division, Skye and Polo royalties, as well as the
turnaround experienced at the UK corporate clothing division, Allen & Douglas
(A&D), and reduced losses on foreign exchange transactions of R12,1-million
(2003: R17,2-million). The turnaround at A&D can be attributed to the new
management team and increased marketing efforts. Unfortunately the loss
incurred by the local corporate clothing division, Carter Harris - compared to a
positive contribution over the same period last year - impacted on these Group
results.
Of the foreign exchange losses of R12,1-million, R4,4-million relates to the
valuation of forward exchange contracts (FEC"s) in existence at year end, while
the remainder relates to the translation of foreign assets and liabilities and
actual losses.
The net interest charge for the year was R9,7-million, compared to R8,7-million
for the previous year, mainly as a result of short term borrowings which were
settled by year end.
Operating income before taxation showed an increase of 26 percent to R52-million
(2003: R41,3-million). The overall taxation provision was at a higher than
standard rate due to prior year adjustments in respect of normal and deferred
tax and disallowable expenses. Consequently, income after taxation was only 10
percent higher at R33-million compared to R30-million in 2003.
Headline earnings per ordinary and "N" ordinary share on continuing operations
increased by 20 percent from 50,88 cents to 61,09 cents as a result of the
increase in net income together with the benefit of the shares bought back in
the previous year.
DISCONTINUED OPERATIONS
The current year"s loss of R4,93-million after interest relates mainly to the
final costs associated with the US joint venture discontinued during 2003. No
further expenses will occur in the forthcoming year.
CASH FLOW
The Group continues with its focus on better management of working capital. This
increased focus has paid off and is evident in the current set of results as the
net inflow from operations increased from R7,6-million in 2003 to R60-million by
end February 2004. This is further evident from the substantial increase in
cash and cash equivalents as well as the substantially reduced liabilities.
Damages claim
A trial date for the Platinum Holdings (Pty) Ltd claim of R93,1-million has been
set down for October 2004 and the Group is confident that the claim will be
successfully defended. The claim relates to the disputed agreement in respect of
the sale of certain LA Jeans stores some years ago.
Tax Dispute with SARS
The Group has received revised assessments from the South African Revenue
Services (SARS) in respect of the disallowance of deductible amounts for
trademarks, which were previously allowed. It has also received assessments for
additional Secondary Tax on Companies (STC) relating to share buy backs in the
past. SARS have completed their investigation and the Group has made extensive
representation in this regard. The Directors and the Group"s legal advisors are
confident of the outcome.
The tax on the trademark disallowances to February 29, 2004 amounts to R20,7-
million, while the amount in respect of future year"s taxes, currently reflected
in deferred tax assets, amount to R11,4-million. The STC amount raised for
previous years is R1,95-million.
In view of the uncertainties no provision has been made in these financial
statements for these taxes and interest thereon.
FINANCIAL INFORMATION
DIVIDEND PAID
A 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 recorded in the
register on Friday, July 11, 2003. In accordance with the Group"s accounting
policy, this payment is only reflected in the results for the period in which it
is paid.
NUMBER OF SHARES FOR THE CALCULATION OF EARNINGS AND NET ASSET VALUE
PER SHARE
The current year"s calculations of earnings, headline earnings and net asset
value per share have been adjusted in respect of 7 269 922 treasury shares held
by a wholly - owned subsidiary, SA Global Investment Alliance (Pty) Ltd.
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS (R"000)
2004 2003
Net income per group income statement 28 056 20 617
Amortisation of goodwill and trademarks 515 230
Profit on sale of property, plant and equipment (68) (286)
Headline earnings 28 503 20 561
CAPITAL COMMITMENTS
The Group has entered into an agreement to purchase the building occupied by
Carter Harris situated at corner Eastern Service & Impala Roads, Eastgate Ext 8,
Sandton for R7,5-million. It is expected that the transfer, subject to approval
of the sub-division of the property, will become effective before December 31,
2004.
The Group has also entered into an agreement to buy the property occupied by the
Skye Footwear division situated at 1288 Reduktor Avenue, Stormill Ext 3,
Roodepoort from Look Alive Property Investment (Pty) Ltd which is controlled by
the Peer family. As this will be a related party transaction, it is subject to
shareholder approval. A circular and separate announcement dealing with this
acquisition will be published in due course.
The acquisitions will be substantially funded by long term loans.
ACCOUNTING POLICY
The principal accounting policies set out in the previous annual report have
been applied consistently throughout the year. These reviewed results have been
prepared in accordance with South African statements of Generally Accepted
Accounting Practice.
REVIEW BY INDEPENDENT AUDITORS
The Group"s auditors, Grant Thornton, have reviewed the year-end results. Their
unqualified review report is available for inspection at the Group"s registered
office during normal office hours.
PROSPECTS
The Group is optimistic that the turnaround at the UK corporate clothing
division, A&D will continue. It is expected that this division will make a
greater profit contribution in 2005 as a major portion of its turnover for the
year has already been secured. The branded distribution divisions of Skye and
Polo are well established in their respective niche markets and the positive
retail environment should continue to support the growth of these businesses.
Remedial action has been taken at the local corporate clothing division, Carter
Harris, and the management of this division is confident that the company will
soon return to profitability.
The directors remain focused on delivering real growth in earnings in 2005,
against the background of the continuation of the economic recovery.
DECLARATION OF FINAL DIVIDEND
Notice is hereby given that a final dividend of 15 cents per ordinary and "N"
ordinary share has been declared in respect of the financial year ending
February 29, 2004. This dividend is payable to shareholders recorded in the
books of the company on Friday, June 11, 2004.
The salient dates for the final dividend are as follows:
Last day to trade (cum dividend) Friday, June 4, 2004
First day of trading (ex dividend) Monday, June 7, 2004
Record date Friday, June 11, 2004
Payment date Monday, June 14, 2004
Share certificates may not be dematerialised or re-materialised between, Monday,
June 7, 2004 and Friday, June 11, 2004 both dates inclusive. On Monday, June 14,
2004 the dividends will be electronically transferred to the bank accounts of
all certificated shareholders where this facility is available. Where electronic
transfers are not available or desired, cheques dated Monday, June 14, 2004 will
be posted. Shareholders, who have dematerialised their share certificates, will
have their accounts at their CSDP or broker credited on Monday, June 14, 2004.
Signed on behalf of the L.A. Group
AK Peer
Executive Chairman
SA Mukadam
Group Managing Director
Monday, May 10, 2004
Secretary and registered office
AM Bissett
Colinton House, The Oval
Oakdale Road, Newlands 7700
(P O Box 3500, Cape Town 8000)
Transfer secretaries
Computershare Ltd
70 Marshall Street, Johannesburg 2001
(P O Box 61051, Marshalltown 2107)
Directors
AK Peer (Executive Chairman), SA Mukadam (Group Managing Director), K Chetty, RV
Orlin, TP Taylor*, I Vukic*, T Oliphant*, KD Penkin*, F Peer**
*Independent non-executive directors
** Non-executive director
Sponsor
Sasfin Corporate Finance, a division of Sasfin Bank Ltd.
Website: www.lagroup.co.za
Date: 11/05/2004 11:56:49 AM Produced by the JSE SENS Department
