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L.A. Group Limited - Interim results announcement
L.A. Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1936/008786/06
Share code: LAR
ISIN: ZAE000028676
Share code: LAN
ISIN: ZAE000028684
GROUP INCOME STATEMENT (R `000)
Six months Six months 12 months to
% to August 31 to August 31 February 29
change 2004 2003 2004
Unaudited Unaudited Audited
REVENUE 22 328,037 267,987 600712
-continuing operations
OPERATING PROFIT
BEFORE DEPRECIATION,
AMORTISATION
AND FOREIGN CURRENCY
LOSS 39,656 31,814 75,871
-continuing operations 39,656 34,476 79,666
-discontinued operation
(loss) (2,662) (3,795)
Depreciation, goodwill
and trademark
amortisation 3,042 2,687 5,676
Foreign currency loss 8,997 6,494 12,130
OPERATING PROFIT
BEFORE NET INTEREST 22 27,617 22,633 58,065
-continuing operations 27,617 25,295 61,860
-discontinued
operation (loss) (2,662) (3,795)
Net interest paid 1,797 7,011 10,854
OPERATING PROFIT
BEFORE TAXATION 65 25,820 15,622 47,211
-continuing operations 25,820 18,629 52,144
-discontinued operation
(loss) (3,007) (4,933)
Taxation 9,017 5,315 19,155
NET PROFIT ATTRIBUTABLE
TO 63 16,803 10,307 28,056
ORDINARY SHAREHOLDERS
Number of ordinary
and `N` ordinary
shares in issue 62,001,701 62,001,701 62,001,701
At weighted average 54,841,914 54,731,779 54,731,779
Diluted 56,415,335 56,031,657 56,202,819
Headline earnings per
ordinary and `N`
ordinary shares
- cents
At weighted average 65 31.63 19.19 52.08
Diluted 64 30.75 18.75 50.71
Earnings per ordinary
and `N` ordinary
shares - cents
At weighted average 63 30.64 18.83 51.26
Diluted 62 29.78 18.39 49.92
Net tangible asset
value per
share - cents 13 449.45 398.47 434.52
Depreciation
ADDITIONAL INFORMATION
Property, plant and
equipment
Depreciation 2,725 2489 5161
Capital expenditure 3,473 7294 9967
Intangible assets
Amortisation 317 198 515
Capital expenditure 4267
GROUP BALANCE SHEET (R `000)
August 31 August 31 February 29
2004 2003 2004
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and
equipment 7,775 17,009 17,134
Intangible assets 5,113 5,717 5,430
Deferred taxation 29,301 33,994 29,921
52,189 56,720 52,485
Current assets
Inventories 145,617 163,806 149,222
Trade and other receivables 175,166 138,983 128,058
Taxation prepaid 383 533 1,800
Deposits on property
acquisitions 1,473 1,535
Cash and cash equivalents 35,327 24,333 36,309
357,966 327,655 316,924
Total Assets 410,155 384,375 369,409
EQUITY AND LIABILITIES
Equity
Shareholders` equity 251,106 223,804 243,250
Non-current liabilities
Non - interest bearing 241 2,073 1,105
Interest bearing 3,884 4,599 3,083
4,125 6,672 4,188
Current liabilities
Non-interest bearing
Trade and other payables 88,037 70,293 56,591
Owing on forward
exchange contracts 3,639 8,105 4,779
Taxation 12,906 2,722 7,174
Interest bearing
Current portion
of non-current
liabilities 1,733 2028 6,694
Short term loans 8,469 15,162 7,764
Bank overdraft 40,140 55,589 38,969
154,924 153,899 121,971
Total Equity and Liabilities 410,155 384,375 369,409
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
(R `000) Six months Six months 12 months
to August 31 to August 31 to February 29
2004 2003 2004
Unaudited Unaudited Audited
Balance at beginning of period 243,250 222,983 222,983
Proceeds of share options
exercised 194
Earnings attributable to
shareholders 16,803 10,307 28,056
Dividends paid (8,231) (6,020) (6,020)
Foreign currency translation
reserve (910) (3,466) (1,769)
251,106 223,804 243,250
RECONCILIATION OF EARNINGS TO Six months Six months 12 months to
HEADLINE EARNINGS
(R`000) to August 31 to August 31 February 29
2004 2003 2004
Unaudited Unaudited Audited
Net earnings per income 16,803 0,307 28,056
statement
Goodwill and trademark 317 198 515
amortisation
Profits on sale of property, (68)
plant and equipment
HEADLINE EARNINGS 17,210 10,505 28,503
Six months Six months 12 months to
GROUP CASH FLOW STATEMENT to August 31 to August 31 February 29
(R`000) 2004 2003 2004
Unaudited Unaudited Audited
OPERATING ACTIVITIES
Operating income before 27,617 22,633 58,065
interest and taxation
Adjustment for non cash flow 3,042 2,687 5,608
items
Cash generated by operations 30,659 25,320 63,673
Movement in working capital (13,197) 21,725 30,185
Interest received 1,613 760
Interest paid (3,410) (7,011) (11,614)
Dividends paid (8,231) (6,020) (6,020)
Taxation paid less received (989) (10,487) (17,785)
Net cash inflow from 6,445 23,527 59,199
operating activities
INVESTING ACTIVITIES
Proceeds of staff options 194
exercised
Acquisitions of property, (3,473) (7,294) (9,967)
plant and equipment
Proceeds from sale of 112
property, plant and equipment
Acquisition of intangible (4,267) (4,267)
assets
Acquisition of outside (2,156) (2,156)
shareholders interest
Deposits on property (1,535)
acquisitions
Net cash outflow from (3,279) (13,717) (17,813)
investing activities
FINANCING ACTIVITIES
Increase (decrease) in long (63) 225 (1,400)
term borrowings
Decrease in short term (4,257) (3,795) (3,693)
borrowings
Increase in amount owing to 3,758
vendors
Net cash( outflow)inflow (4,320) 188 (5,093)
from financing activities
Net increase (decrease) in (1,154) 9,998 36,293
cash and cash equivalents
Cash and cash equivalents at (2,660) (37,524) (37,524)
beginning of period
Effect of foreign exchange (999) (3,730) (1,429)
movements
Cash and cash equivalents at (4,813) (31,256) (2,660)
end of period
Note
Cash and cash equivalents
comprise
bank overdrafts less bank and
cash balances
SEGMENTAL ANALYSIS (R`000)
Six months ended Revenue % Results % Net Assets %
August 31, 2004 (unaudited) (liabilities)
Corporate clothing 113,758 35 (3,447) (12) 87,781 35
Branded distribution 214,279 65 26,429 96 138,166 55
Property 2,019 1
Corporate royalties and
unallocated corporate
expenses 4,635 16 23,140 9
Total 328,037 100 27,617 100 251,106 100
Six months ended August
31, 2003 (unaudited)
Retail - (407) (2) -
Corporate clothing 129,183 48 2,922 13 144,513 65
Branded distribution 138,804 52 14,358 63 88,614 40
Corporate royalties and
unallocated corporate
expenses 5,760 25 (9,323) (4)
Total 267,987 100 22,633 100 223,804 100
12 months ended
February 28, 2004
(audited)
Corporate clothing 228961 38 (6,517) (11) 91,243 37
Branded distribution 371751 62 54,420 94 125,835 52
Corporate royalties and
unallocated corporate
expenses 10,162 17 26,172 11
Total 600,712 100 58,065 100 243,250 100
GEOGRAPHICAL ANALYSIS (R`000)
Six months ended Revenue % Results % Net Assets %
August, 31 2004 (unaudited)
South Africa 246,445 75 23,002 83 187,945 75
International 81,592 25 4,615 17 63,161 25
Total 328,037 100 27,617 100 251,106 100
Six months ended August 31, 2003 (unaudited)
South Africa 182,037 68 20,992 93 166,161 74
International 85,950 32 1,641 7 57,643 26
Total 267,987 100 22,633 100 223,804 100
12 months ended February 28, 2004 (audited)
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
INTRODUCTION
The L.A. Group Limited (`the Group`) is a leading apparel and footwear wholesale
distribution company with two main divisions. One division supplies corporate
clothing to both the local and international markets while the other 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 strong performance of the Group is as a result of the buoyant retail
environment. Group turnover was 22% higher to R328-million (2003: R268-million)
while Group operating profit was 22% up to R27.6-million (2003: R22,6-million).
The operating margin for the Group was therefore maintained at 8.4%. The good
growth in operating income can be ascribed to the better than expected
performance from the branded distribution division and the turnaround at the UK
corporate clothing business, Allen & Douglas. The UK business benefited from the
restructuring process mentioned previously and the in-flow of new contracts,
which saw this division`s return to profitability.
The under-performance of local corporate clothing business, Carter Harris,
however, impacted on Group results. On a more positive note, the restructuring
of Carter Harris in terms of staffing, sourcing of goods and marketing since
February, 29 2004 has already had a turnaround effect, the benefits of which
should flow through in early 2005.
Net interest paid was significantly lower at R1,8-million (2003:R7-million) due
to lower interest rates, reduction of debt and better working capital
management.
Operating profit before tax was 65% higher at R25,8-million (2003: R15,6-
million) while net attributable income was 63% higher at R16.8-million (2004:
R10,3-million).
The tax charge of R9,0-million includes secondary tax on Companies of R1,02-
million,
Headline earnings per share were 65% higher at 31,63 cents (2003: 19,19 cents)
while net asset value on August 31, 2004 was at 449,45 cents (February 29, 2004:
434,5 cents).
BALANCE SHEET
Trade and other receivables were higher at August 31, 2004 totalling R175-
million. This is as a result of the roll-out of corporate clothing contracts
and increased sales from the branded distribution division during July / August
2004. In line with this, trade and other payables were also higher although
stock levels were maintained.
Interest-bearing debt, excluding bank overdrafts, was reduced to R14,1-million
(February 29, 2004: R17,4-million).
DIVIDENDS
A cash dividend of 15 cents per share in respect of the year ended February 29,
2004 was paid to the holders of ordinary and `N` ordinary shares registered on
Friday, June 11, 2004. In accordance with the Group`s accounting policy, this
payment is reflected in the results for the period in which it is paid.
No interim dividend has been declared as company policy is to declare a dividend
once a year.
CAPITAL COMMITMENTS
The capital commitments for the next financial period comprise the following:
Property:
Carter Harris property at R7,5-million
Skye property at R7,75-million
This is in line with the Group`s objective to purchase the properties in which
it has been operating. Long term finance has been arranged to settle the
balance owing.
Other:
An amount of R5,5-million has been committed of which R4,5-million has been
earmarked for an upgraded IT installation for the Allen Douglas operation in the
UK. These acquisitions will be financed out of arranged facilities.
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 during November 2004.
The Group has made representation with regard to the trademarks and STC tax
disputes with SARS. The amount of tax on the trademark dispute is R22,7-million
for the tax years from 1999 to 2004. If SARS are successful, the deferred tax
asset will have to be reversed and charged back to the income statement to the
extent of R9,04-million. The amount of tax on the STC dispute is R1,95-million.
The board of directors is optimistic that these will be resolved.
POST BALANCE SHEET EVENTS
Shares buy-back: 756 373 L.A. Group ordinary shares and 8 327 874 L.A. Group
`N` ordinary shares were bought back from Sanlam Investment Management, a
division of Sanlam Life Insurance Limited, on September 7, 2004 for an amount of
R25,4-million.
Odd lot offer: Following the odd lot offer, the Group bought 6 652 ordinary and
1 874 `N` ordinary shares at a total cost of R31 506.
ACCOUNTING POLICIES
The principal accounting policies as set out in the 2004 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
Against the backdrop of the growing economy and increased consumer demand, the
branded division is expected to continue to increase its sales and earnings
contribution for the next six months. In addition, Allen & Douglas, to date, has
secured forward orders exceeding its budget. At Carter Harris the restructuring
process is well underway, and it is expected that a return to profitability in
this division will occur in the New Year.
The Group is therefore confident of achieving continued sustainable earnings.
Signed on behalf of the Group
AK Peer SA Mukadam
Executive Chairman Group Managing Director
October 11, 2004
Registered office
Colinton House, The Oval, Oakdale Road, Newlands 7700 (PO Box 3500, Cape Town,
8000)
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Ltd.
Registration No: 1998/010439/07) 70 Marhall Street, Johannesburg 2001, (PO Box
61051, Marshalltown 2107)
Directors
AK Peer (Executive Chairman), SA Mukadam (Group Managing Director),
F Peer*, K Chetty, TP Taylor**, KD Penkin**, T Oliphant**
*Non-Executive
** Independent Non-Executive
Company Secretary
I Bloom
Sponsor
Sasfin Bank Ltd
Website: www.lagroup.co.za
Share Code: LAR ISIN Code: ZAE000028676
`N Share Code: LAR ISIN Code: ZAE000028684
Date: 11/10/2004 12:30:30 PM
Produced by the JSE SENS Department
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