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Relyant Retail Limited - Reviewed preliminary results announcement and further
cautionary announcement for the year ended 30 June 2004
Relyant Retail Limited
Registration number 1937/010108/06
Share code: RLY ISIN number: ZAE000016457
REVIEWED PRELIMINARY RESULTS ANNOUNCEMENT AND FURTHER CAUTIONARY ANNOUNCEMENT
for the year ended 30 June 2004
EBITDA increased by 46% to R261 million
Fully diluted headline earnings per share up by 140% to 18 cents
Interest bearing debt reduced by R113 million to R337 million
Gearing improved from 39% to 26%
GROUP INCOME STATEMENT
Year Year
ended ended
30 June 30 June
2004 % 2003
reviewed improvement audited
Notes R000`s R000`s
Revenue 3 2 883 013 7,8 2 674 002
Cost of sales (1 340 069) (1 247 964)
Trading profit before
depreciation and
amortisation (`EBITDA`) 260 577 46,0 178 442
Depreciation of fixtures,
equipment and vehicles (23 860) (25 024)
Amortisation of
intangibles (7 500) (7 308)
Trading profit before
exceptional items 229 217 56,9 146 110
Exceptional items 4 (12 838) 29 224
Operating profit 216 379 23,4 175 334
Net financing costs (50 982) 37,6 (81 655)
Interest received 4 724 1 745
Financing costs on bank
borrowings (55 706) (83 400)
Profit before taxation 165 397 76,6 93 679
Taxation 5 (5 375) (25 419)
Profit after taxation 160 022 134,4 68 260
Share of joint venture
loss - discontinued (8 908)
Earnings attributable to
ordinary shareholders 160 022 169,6 59 352
Ordinary shares in issue
(000`s)
- closing 6 959 278 959 278
- weighted average 6 959 278 811 853
Fully diluted weighted
average number
of ordinary shares (000`s) 7 959 278 822 264
Earnings per share - basic
(cents) 16,7 128,8 7,3
Earnings per share - fully
diluted (cents) 16,7 131,9 7,2
Headline earnings per
share - basic (cents) 18,0 136,8 7,6
Headline earnings per
share - fully diluted
(cents) 18,0 140,0 7,5
R000`s R000`s
Reconciliation of attributable
earnings to headline and fully
diluted earnings
Attributable earnings, as above 160 022 59 352
Adjustments:
Amortisation of goodwill during the
year 2 352 2 160
Impairment of goodwill during the
year 9 422
Loss on sale of fixed assets 1 870 143
Taxation on adjustments (561) (43)
Headline earnings and headline
earnings fully diluted 173 105 181,0 61 612
R000`s
Headline earnings and headline earnings fully diluted (as
previously reported) 61 922
Restated for after tax effect of change in accounting
policy to classify the insurance companies` investments
as `held for trading` instead of `available for sale` (310)
Headline earnings and headline earnings fully diluted (as
reflected above) 61 612
GROUP BALANCE SHEET
30 June 30 June
2004 2003
reviewed audited
Notes R000`s R000`s
ASSETS
Non-current assets
Goodwill 554 12 328
Trademarks 29 025 34 173
Fixtures, equipment and vehicles 104 985 105 779
Insurance companies` investments 8 76 918 60 075
Deferred taxation 289 968 290 009
501 450 502 364
Current assets
Accounts receivable 9 1 485 774 1 383 643
Other debit balances 51 636 61 376
Taxation 5 147 5 740
Inventories 303 413 310 994
Cash on hand 188 180
1 846 158 1 761 933
Total assets 2 347 608 2 264 297
EQUITY AND LIABILITIES
Ordinary share capital and premium 1 673 569 1 673 569
Non-distributable reserves 13 114 17 189
Accumulated loss (371 159) (530 860)
Ordinary shareholders` equity 1 315 524 1 159 898
Non-current liabilities
Interest bearing bank borrowings 336 796 450 194
Current liabilities (non-interest bearing)
Accounts payable and accruals 666 833 576 722
Provisions 28 455 77 483
695 288 654 205
Total equity and liabilities 2 347 608 2 264 297
Gearing (%) 25,6 38,8
Tangible net asset value per share,
fully diluted (cents) 10 134,1 114,8
GROUP STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS` EQUITY
Ordinary
Share share
capital capital and Non-
and premium to distributable Accumulated
premium be issued reserves loss Total
R000`s R000`s R000`s R000`s R000`s
Balance at 30
June 2002 -
audited 391 245 1 269 551 27 651 (572 548) 1 115 899
Opening
adjustment:
(adoption of
AC133) (1 254) (1 254)
391 245 1 269 551 27 651 (573 802) 1 114 645
Net present
value discount
on rights
issue proceeds 16 965 (16 965) -
Share issue
expenses (9 193) 5 001 (4 192)
Ordinary share
capital and
premium issued 1 274 552 (1 274 552) -
Insurance
statutory
contingency
reserve
movement (555) 555 -
Realisation of
investment
revaluation
reserve (382) (382)
Loss on
translation of
foreign entity (9 525) (9 525)
Attributable
earnings for
the year 59 352 59 352
Balance at 30
June 2003 -
audited 1 673 569 - 17 189 (530 860) 1 159 898
Gain on hedged
instruments 1 139 1 139
Capital
adequacy
reserve
movement 304 (304) -
Insurance
statutory
contingency
reserve
movement 17 (17) -
Realisation of
investment
revaluation
reserve (291) (291)
Loss on
translation of
foreign entity (5 244) (5 244)
Attributable
earnings for
the year 160 022 160 022
Balance at 30
June 2004 -
reviewed 1 673 569 - 13 114 (371 159) 1 315 524
Share capital and premium as stated above is net of the cost of Treasury shares
amounting to R39,1 million.
GROUP CASH FLOW STATEMENT
Year Year
ended ended
30 June 30 June
2004 2003
reviewed audited
Note R000`s R000`s
Cash receipts from customers 3 071 790 2 883 413
Cash generated from trading 261 350 180 839
Net increase in working capital (5 405) 80 361
Cash generated from operations 255 945 261 200
Net financing costs paid 11 (63 048) (93 431)
Taxation paid (4 566) (8 541)
Cash generated by operating activities 188 331 159 228
Closure costs paid (33 952) (49 245)
Preference dividends paid (33 035)
Net cash generated 154 379 76 948
Acquisition of business (13 669)
Gross capital expenditure (31 281) (26 160)
Proceeds on disposal of fixed assets 6 345 11 675
Net portion of proceeds on sale of
microloan business 13 829
Insurance companies` investments (16 037) (7 234)
Cash outflows from investment
activities (40 973) (21 559)
Net cash inflow before financing
activities 113 406 55 389
Ordinary shareholder funding 785 636
Decrease in interest bearing bank
borrowings and cash on hand (113 406) (841 025)
Cash outflows from financing activities (113 406) (55 389)
GROUP SEGMENTAL ANALYSIS
Year Year
ended ended
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Revenue
Value retailing 823 557 788 226
Credit chains 1 628 464 1 481 272
Insurance and repair services 430 992 404 504
Total 2 883 013 2 674 002
EBITDA
Value retailing 16 628 12 949
Credit chains 251 474 178 112
Insurance and repair services 17 637 11 995
Corporate (25 162) (24 614)
Total 260 577 178 442
Gross capital expenditure
Value retailing 3 473 8 270
Credit chains 25 228 16 612
Insurance and repair services 2 580 1 278
Total 31 281 26 160
Depreciation and amortisation
Value retailing 4 759 12 340
Credit chains 13 151 13 886
Insurance and repair services 2 337 3 067
Corporate 11 113 3 039
Total 31 360 32 332
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Total assets
Value retailing 322 356 315 432
Credit chains 1 751 467 1 691 816
Insurance and repair services 273 785 257 049
Total 2 347 608 2 264 297
Interest bearing bank borrowings
Value retailing 50 577 61 279
Credit chains 286 219 388 915
Total 336 796 450 194
Interest free liabilities
Value retailing 166 099 202 042
Credit chains 481 837 409 005
Insurance and repair services 47 352 43 158
Total 695 288 654 205
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 and
classification of the insurance companies` investments as noted in note 2. These
policies conform with South African Statements of Generally Accepted Accounting
Practice (`GAAP`).
Consistent with prior years, for administrative purposes, trading month-ends
close on the seventh of each subsequent month.
Note 2 - Changes in accounting policies
Revenue
During the year, 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.
Insurance companies` investments
During the year, the Group changed its classification of the insurance
companies` investments from `available for sale` to `held for trading`. This
change had no effect on the Group income statement or balance sheet.
Year Year
ended ended
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Note 3 - Revenue
Comprises:
Cash sales 988 405 905 084
Credit sales 1 072 779 1 000 962
Total sales 2 061 184 1 906 046
Finance charges earned 335 814 324 884
Interest on arrears 71 477 68 020
As previously disclosed 2 468 475 2 298 950
Interest on arrears (71 477) (68 020)
Insurance premiums 365 329 336 573
Services rendered 120 686 106 499
Revenue 2 883 013 2 674 002
Year Year
ended ended
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Note 4 - Exceptional items
Comprises:
Reversal of excess restructure provision 5 994
World of Interiors - closure costs (9 410)
World of Interiors - impairment of goodwill (9 422)
Adoption of AC133 - reduction in opening
provision for doubtful debts 29 224
(12 838) 29 224
The tax effect of the exceptional items amounted
to a tax credit of R1,0 million (2003: R8,8 million
debit).
Note 5 - Taxation
The effective tax rate reflected in the income
statement of 3,2% (2003: 27,1%) is reconciled to the
standard rate as follows:
Tax at standard rate 49 619 28 104
Tax effect of:
Non-deductible expenses 8 175 4 053
Exempt income (1 877) (7 194)
Foreign tax rate differential and
withholding taxes 519 456
Tax losses now recognised (51 061)
5 375 25 419
Tax losses:
Estimated tax losses available for set-off
against future taxable income 1 004 588 1 154 664
Utilised to raise deferred taxation asset (625 238) (641 014)
Unutilised tax losses 379 350 513 650
The unutilised tax losses give rise to a potential further deferred taxation
asset amounting to some R114 million (2003: R154 million) which has not been
recognised since its recoverability is not beyond reasonable doubt.
30 June 30 June
2004 2003
reviewed audited
000`s 000`s
Note 6 - Ordinary shares in issue
Total ordinary shares in issue - closing 966 367 966 367
Treasury shares held by the Relyant Share Option Trust
(7 089) (7 089)
Ordinary shares in issue - closing 959 278 959 278
Total ordinary shares in issue - weighted
average 966 367 818 942
Treasury shares held by the Relyant Share Option Trust
(7 089) (7 089)
Ordinary shares in issue - weighted average 959 278 811 853
Note 7 - Fully diluted shares - weighted average
Total fully diluted shares - weighted average 966 367 830 382
Treasury shares held by the Relyant Share Option Trust
(7 089) (7 089)
Rights to acquire Relyant shares held by the
Relyant Executive Share Purchase Trust (1 029)
Fully diluted shares - weighted average 959 278 822 264
R000`s R000`s
Note 8 - Insurance companies` investments
Comprises:
Listed shares 26 851 27 179
Money market instruments 50 067 32 896
76 918 60 075
Note 9 - Accounts receivable
Gross instalment debtors 1 966 155 1 935 157
Provision for unearned income (256 925) (272 812)
Provision for doubtful debts (223 987) (275 582)
Net instalment debtors 1 485 243 1 386 763
Net trade debtors 531 (3 120)
1 485 774 1 383 643
The Group has ceded its accounts receivable book
to its principal bankers as security for the
syndicated term loan facilities granted. Based on
the current year`s collection rates, the average
length of the book is 13,4 months (2003: 13,8 months).
Note 10 - 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:
Ordinary shareholders` equity per balance sheet 1 315 524 1 159 898
Less: Goodwill (554) (12 328)
Less: Trademarks (29 025) (34 173)
Adjusted ordinary shareholders` equity 1 285 945 1 113 397
Closing number of ordinary shares, fully diluted
(000`s) 959 278 969 689
Tangible net asset value per share, fully diluted
(cents) 134,1 114,8
Year Year
ended ended
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Note 11 - Net financing costs paid
Net financing costs per income statement (50 982) (81 655)
Movement in accrued interest (12 066) 5 189
Net present value discount on rights issue proceeds
(16 965)
Net financing costs paid (63 048) (93 431)
Note 12 - Capital expenditure
Incurred 31 281 26 160
30 June 30 June
2004 2003
reviewed audited
R000`s R000`s
Committed 9 962 593
Authorised but not contracted 31 497 33 046
The capital expenditure will be financed in the
financial year ending 30 June 2005 through the
utilisation of existing borrowing facilities.
Note 13 - Commitments
Operating lease commitments 470 927 503 882
Note 14 - 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 outsourced to a company partly owned by the director`s
insurance consulting practice.
Note 15 - Audit review
The year-end results have been reviewed in terms of Rule 3.23 of the listing
requirements of the JSE Securities Exchange South Africa by the Company`s
auditors, Deloitte & Touche. Their unqualified review opinion in terms of AC127:
`Interim financial reporting` is available on request from the Company
Secretary. The annual financial statements and related audit report have not
been finalised.
Note 16 - Subsequent events
No event, material to the understanding of this announcement, has occurred in
the period between the financial year-end and the date of this announcement.
COMMENTS
Trading
Trading conditions improved significantly during the second half of the year,
resulting in growth of merchandise and repair service sales of 14% compared to
3% for the first half. In total, merchandise sales rose by almost 9% over the
prior year despite the deflationary pressures from the stronger Rand, while
repair service sales fell 4%. Strict credit granting restricted the annual
growth in credit sales to 7%, whereas cash sales increased by 9%.
The Credit chains outperformed the Value Retail division, achieving annual
growth in their merchandise sales, on a like-for-like basis, of 13%.
EBITDA and earnings
Revenue, which comprises sales plus finance charges and other amounts invoiced
for services and insurance, increased by a modest 7,8%. EBITDA for the year,
however, increased by 46% (first half: 15%) as a result of successful efforts to
improve margins and productivity ratios. Gross margins, which declined in the
first half, improved in the second half due to improved trading conditions and
renewed focus on merchandise management. In addition, by focusing on improving
other income streams, a 10% growth in total income was achieved, while strict
controls over expenses limited the growth in overheads to 5% over last year.
Exceptional items, which are analysed in note 4, resulted in a charge of some
R13 million in the current year (2003: exceptional gain of R29 million).
The benefit of continuing strong cash flows and substantially reduced interest
bearing borrowings, together with lower interest rates, resulted in a saving of
R31 million in net financing costs for the year under review. Consequently, the
Group`s profit before taxation of R165 million represents an improvement of 77%
over the previous year.
The improvement in profitability of the Group was further enhanced through a low
tax rate of some 3%, resulting from the utilisation of previously unrecognised
tax losses.
The Group`s attributable earnings grew by 170% to R160 million (2003: R59
million). This translates into headline earnings per share of 18,0 cents (2003:
7,5 cents), on a fully diluted basis, an increase of 140% over last year.
Dividend
The directors have resolved that no dividend be declared in the current year
(2003: nil).
Credit management
Although the debtors book grew by a net R102 million, ongoing strict credit
granting criteria and improved collections, especially in the second six months,
resulted in total arrears, which are measured on a gross basis, decreasing to
12,5% at June 2004, compared to December`s 14,6% and last June`s 14,9%. The
Group`s provisioning policy remains unchanged but, as a result of the further
improvement in the quality of the debtors` book, total provisions against the
gross instalment book now represent 24,5% (June 2003: 28,3%).
Cash flow and financial position
Despite the increase in working capital requirements, mainly as a result of a
deliberate investment in the Group`s core debtors` book, net cash generated
before investment activities amounted to R154 million, an improvement of R77
million over the previous year.
Interest bearing bank borrowings at 30 June 2004 reduced by R113 million to R337
million (2003: R450 million). While gearing had improved during the first half
to 30% at December 2003, down from 39% at 30 June 2003, this has reduced further
to 26% at 30 June 2004.
Further cautionary announcement
The shareholders of Relyant are referred to the Ellerines and Relyant joint
cautionary announcements dated 17 May 2004, 23 June 2004 and 4 August 2004
respectively. Further announcements in respect of the proposed transaction will
be published in due course. Until publication of such further announcements,
shareholders are advised to continue to exercise caution when dealing in their
securities.
Prospects
The Board expects that the improved trading conditions in the durable retail
sector will continue for the next financial year. Against this background, the
directors remain committed to further improve the operating performance of the
Group.
For and on behalf of the Board
PJB Pohlmann AM Schlesinger
Chairman Chief Executive Officer
6 September 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 Investor Services 2004 (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Telephone (011) 370-7700
Auditors
Deloitte & Touche
Sponsor
Investec Bank Limited
Internet site
www.relyant.co.za
Date: 06/09/2004 07:00:42 AM Produced by the JSE SENS Department
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