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Ellerine - Consolidated audited results for the year ended 31 August 2004
Ellerine Holdings Limited
Registration number 1968/013402/06
Share code: ELH ISIN number: ZAE000022752
Consolidated audited results for the year ended 31 August 2004
* Turnover up 30%
* Operating profit up 49%
* Operating margin at 18%
* Ellerines again adjudged No 1 furniture brand
* Headline earnings up 39%
* Cash flow per share up 36%
* Net gearing at 12%
* Strong balance sheet
CONSOLIDATED INCOME STATEMENT
2004 % 2003
R`000 Change R`000
Turnover 2 832 903 30 2 183 984
Cost of sales 1 219 304 879 700
Gross profit 1 613 599 24 1 304 284
Operating expenses 963 722 23 780 585
Debtors costs 138 497 (23) 180 193
Operating profit 511 380 49 343 506
Net (finance costs)/investment
income (17 191) 14 062
Fair value adjustments and profit
on disposal of properties 9 466 (841)
Goodwill amortised (23 767) -
Income from associate 4 426 312
Profit before taxation 484 314 36 357 039
Taxation (155 264) 41 (109 809)
Profit attributable to ordinary
shareholders 329 050 33 247 230
Determination of headline earnings
Profit attributable to ordinary
shareholders 329 050 247 230
Goodwill amortised 23 767 -
Fair value adjustments and profit
on disposal of properties (9 466) 841
Net profit on disposal of assets (5 356) (3 905)
Tax effect thereon 2 670 1 172
Headline earnings 340 665 39 245 338
Number of ordinary shares:
Weighted average 73 953 150 72 163 592
In issue 77 313 815 73 805 200
Treasury (3 360 665) (1 641 608)
Fully diluted weighted average 76 420 393 73 241 671
Earnings per share: Cents Cents
Attributable 444,9 30 342,6
Headline 460,6 35 340,0
Fully diluted attributable 430,6 28 337,6
Fully diluted headline 445,8 33 335,0
Gross profit (%) 57,0 59,7
Operating margin (%) 18,1 15,7
Tax rate (%) 31,1 30,7
CONSOLIDATED BALANCE SHEET
2004 2003
R`000 R`000
Assets
Non-current assets 946 280 455 129
Property and equipment 261 494 137 681
Goodwill 264 736 -
Investment in associate 27 988 23 562
Investments at bankers 307 062 208 886
Other financial assets 85 000 85 000
Current assets 2 199 645 1 846 805
Inventories 246 562 130 838
Trade receivables 2 576 821 2 319 343
Provisions (853 370) (779 240)
1 723 451 1 540 103
Term loans 61 665 67 456
Provisions (34 232) (36 516)
27 433 30 940
Other receivables 61 080 49 329
Funds on call, bank balances and
cash 141 119 95 595
Total assets 3 145 925 2 301 934
Equity and Liabilities
Shareholders` equity and reserves 1 916 373 1 574 973
Non-current liabilities 468 040 287 069
Deferred taxation 212 244 204 237
Interest bearing borrowings 255 796 82 832
Current liabilities 761 512 439 892
Taxation 16 726 59 306
Provisions 49 160 46 612
Trade and other payables 190 513 132 947
Bank overdrafts 505 113 201 027
Total equity and liabilities 3 145 925 2 301 934
Net asset value per share - cents 2 557 2 224
Current ratio 2,9 4,2
Net interest bearing debt: Equity
(%) 11,9 (6,7)
Number of ordinary shares 74 960 623 70 810 188
In issue 78 404 200 73 805 200
Treasury (3 443 577) (2 995 012)
CONSOLIDATED CASH FLOW STATEMENT
2004 2003
R`000 R`000
Cash generated from operating
activities 620 378 441 656
Working capital changes (232 671) (189 870)
Cash generated from operations 387 707 251 786
Exchange rate difference on
translation of foreign entities (12 235) (17 161)
Net (finance costs)/investment
income (17 191) 14 062
Taxation paid (183 469) (123 324)
Dividends paid (62 486) (53 065)
Cash flows from operating
activities 112 326 72 298
Investment in associate - (23 250)
Proceeds on disposal of preference
shares 5 162 -
Acquisition of Wetherlys Investment
Holdings Ltd (511 629) -
Acquisition of additional interest
in Wetherlys Spain (10 052) -
Purchase of property and equipment (67 558) (45 607)
Prodeeds on disposal of property
and equipment 25 135 8 998
Cash flows from investing
activities (558 942) (59 859)
Acquisition of treasury shares (7 284) (52 810)
Proceeds from the issues of new
shares 94 415 -
Increase/(Decrease) in interest
bearing borrowings 148 544 (701)
Cash flows from financing
activities 235 675 (53 511)
Net decrease in cash and cash
equivalents (210 941) (41 072)
Cash and cash equivalents on
acquisition
of Wetherlys Investment Holdings
Ltd 50 555 -
Cash and cash equivalents at the
beginning of the year 103 454 144 526
Cash and cash equivalents at the
end of the year (56 932) 103 454
Attributable cash flow per share
(cents) 236,4 173,7
STATEMENT OF CHANGES IN EQUITY
Insurance Non-
con- distrib- Distrib-
Share Share tingency utable utable
R`000 capital premium reserve reserves reserves Total
Balance at 31
August 2002 3 676 40 586 26 490 42 960 1 337 067 1 450 779
Exchange rate
differences
arising
on translation
of foreign
entities (17 161) (17 161)
Treasury shares
purchased and
held (135) (52 654) (52 789)
Net profit for
the year 247 230 247 230
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
reserves (543) 543 -
Dividend paid (53 086) (53 086)
Balance at 31
August 2003 3 541 40 586 30 686 26 252 1 473 908 1 574 973
Exchange rate
differences
arising on
translation of
foreign entities (12 235) (12 235)
Issue of shares 230 94 208 94 438
Treasury shares
purchased and
held (23) (7 281) (7 304)
Net profit for
the year 329 050 329 050
Transfer to
insurance
contingency
reserve 5 754 (5 754) -
Transfer of
realised profits
on disposal of
owner occupied
properties to
non-
distributable
reserves 10 983 (10 983) -
Transfer of
revaluation of
investment
properties to
non-
distributable
reserves 2 263 (2 263) -
Dividend paid (62 549) (62 549)
- Total (64 409) (64 409)
- Treasury
shares 1 860 1 860
Balance at 31
August 2004 3 748 134 794 36 440 27 263 1 714 128 1 916 373
GEOGRAPHICAL SEGMENT ANALYSIS
2004 2004 2004
RSA Foreign Total
R`000 % R`000 % R`000
Turnover (2 487 247) 88 (345 656) 12 (2 832 903)
Operating profit (451 711) 88 (59 669) 12 (511 380)
Carrying value of
assets 2 828 827 90 317 098 10 3 145 925
Liabilities (1 153 734) 94 (75 817) 6 (1 229 552)
Depreciation
of assets 35 795 84 6 893 16 42 688
Impairment &
revaluation of
properties 1 517 100 1 517
Cost to aquire assets 59 831 89 7 726 11 67 557
Operating margin % 18 17 18
Credit sales (2 039 386) 87 (313 709) 13 (2 353 096)
Cash sales (447 860) 93 (31 947) 7 (479 807)
Cash sales % 18,0 9,2 16,9
Total sales of
merchandise (1 509 607) 87 (234 287) 13 (1 743 894)
% of Turnover 61 68 62
Number of stores 577 87 88 13 665
Turnover per store (4 311) (3 928) (4 260)
Number of employees 8 038 88 1 095 12 9 133
Turnover per employee
(Rands) (309 436) (315 668) (310 183)
Operating profit per
employee (Rands) (56 197) (54 492) (55 993)
Retail m2 369 147 87 57 407 13 426 554
Turnover per m2 (Rands)
(6 738) (6 021) (6 641)
Trade receivables
ratios
Trade receiveables 2 267 637 86 370 850 14 2 638 487
Bad debts written off 112 799 81 25 698 19 138 497
Bad debts written off %
5 7 5
Average length of book
in months 12,0 13,6 12,2
Arrears 469 932 87 71 762 13 541 694
Arrears % 20 21 21
Collection rate % 5,88 5,92 5,87
Deposit rate % 12,5 15,6 14,9
2003 2003 2003
RSA Foreign Total
R`000 % R`000 % R`000
Turnover (1 836 313) 84 (347 671) 16 (2 183 984)
Operating profit (277 762) 81 (65 744) 19 (343 506)
Carrying value of assets 1 901 615 83 400 319 17 2 301 934
Liabilities (640 051) 88 (86 910) 12 (726 961)
Depreciation of assets 29 084 82 6 587 18 35 671
Impairment & revaluation
of properties 1 837 1 837
Cost to aquire assets 38 104 84 7 503 16 45 607
Operating margin % 15 19 16
Credit sales (1 780 697) 85 (324 857) 15 (2 105 554)
Cash sales (55 616) 71 (22 814) 29 (78 430)
Cash sales % 3,0 6,6 3,6
Total sales of
merchandise (939 112) 81 (225 393) 19 (1 164 505)
% of Turnover 51 65 53
Number of stores 548 85 94 15 642
Turnover per store (3 351) (3 699) (3 402)
Number of employees 6 749 87 1 038 13 7 787
Turnover per employee
(Rands) (272 087) (334 943) (280 465)
Operating profit per
employee (Rands) (41 156) (63 337) (44 113)
Retail m2 322 522 85 59 120 15 381 642
Turnover per m2 (Rands) (5 694) (5 881) (5 723)
Trade receivables ratios
Trade receiveables 2 011 423 84 375 376 16 2 386 799
Bad debts written off 145 791 81 34 341 19 180 132
Bad debts written off % 7 9 8
Average length of book
in months 12,2 13,3 12,4
Arrears 496 833 87 74 239 13 571 072
Arrears % 25 20 24
Collection rate % 5,39 5,85 5,42
Deposit rate % 12,1 16,7 15,8
BUSINESS SEGMENT ANALYSIS
Ellerines Towntalk FurnCity
BU BU BU
R`000 % R`000 % R`000 %
For the year
ended 31 August 2004
Turnover (787 787) 28 (469 906) 17 (405 134) 14
Operating profit (215 176) 42 (126 173) 25 (71 068) 14
Carrying value
Of assets 932 514 30 555 627 18 454 270 14
Liabilities (61 908) 5 (32 632) 3 (30 049) 2
Depreciation
of assets 10 192 24 5 267 12 7 414 17
Impairment &
revaluation of
properties
Cost to aquire assets
11 158 17 5 658 8 9 544 14
Operating margin % 27 27 18
Credit sales (743 277) 32 (452 519) 19 (363 810) 15
Cash sales (44 510) 9 (17 387) 4 (41 324) 9
Cash sales % 5,7 3,7 10,2
Total sales of
merchandise (559 229) 32 (330 280) 19 (301 427) 17
% of Turnover 71 70 74
Number of stores 249 37 136 20 120 18
Turnover per store (3 164) (3 455) (3 376)
Number of employees 3 079 34 1 941 21 1 626 18
Turnover per employee
(Rands) (255 858) (242 095) (249 160)
Operating profit per
employee
(Rands) (69 885) (65 004) (43 707)
Retail m2 153 988 36 88 243 21 79 091 19
Turnover per m2 (Rands) (5 116) (5 325) (5 122)
Trade receivables ratios
Trade receiveables 1 083 329 41 652 365 25 504 847 19
Bad debts written off 47 519 34 27 962 20 36 402 26
Bad debts written off % 4 4 7
Average length of book
in months 15,7 15,6 15,0
Arrears 234 404 43 137 414 26 98 113 18
Arrears % 22 21 19
Collection rate % 5,83 5,87 5,95
Deposit rate % 12,5 12,0 13,0
Total
Foreign Credit
BU Retail
R`000 % R`000 %
For the year
ended 31 August 2004
Turnover (286 228) 10 (1 949 055) 69
Operating profit (47 943) 9 (460 361) 90
Carrying value
Of assets 255 785 8 2 198 196 70
Liabilities (52 158) 4 (176 747) 14
Depreciation
of assets 6 289 15 29 162 68
Impairment &
revaluation of
properties
Cost to aquire assets 4 464 7 30 824 46
Operating margin % 17 24
Credit sales (265 906) 11 (1 825 512) 78
Cash sales (20 322) 4 (123 542) 26
Cash sales % 7,1 6,3
Total sales of
merchandise (199 326) 11 (1 390 262) 80
% of Turnover 70 71
Number of stores 86 13 591 89
Turnover per store (3 328) (3 298)
Number of employees 1 085 12 7 731 85
Turnover per employee
(Rands) (263 805) (252 109)
Operating profit per
employee
(Rands) (44 187) (59 547)
Retail m2 55 607 13 376 929 88
Turnover per m2 (Rands) (5 147) (5 171)
Trade receivables ratios
Trade receiveables 332 870 13 2 573 410 98
Bad debts written off 21 806 16 133 689 97
Bad debts written off % 7 5
Average length of book
in months 14,4 15,3
Arrears 71 762 13 541 694 100
Arrears % 22 21
Collection rate % 5,92 5,87
Deposit rate % 15,6 14,9
Total
Wetherlys Osiers Spain Cash
Retail
R`000 % R`000 % R`000 % R`000 %
For the year
ended 31
August 2004
Turnover (269 036) 9 (76 149) 3 (9 435) (354 620) 13
Operating
profit (34 112) 7 (17 905) 4 1 562 (50 455) 10
Carrying value
of assets 123 566 4 41 478 1 19 175 1 184 219 6
Liabilities (42 755) 3 (1 604) (17 129) 1 (61 488) 5
Depreciation
of assets 3 065 7 723 2 160 3 948 9
Impairment &
revaluation of
properties
Cost to aquire
assets 5 565 8 1 190 2 505 1 7 260 11
Operating
margin % 13 24 (17) 14
Credit sales
Cash sales (269 036) 56 (76 149) 16 (9 435) 2 (354 620) 74
Cash sales % 100 100 100 100
Total sales of
merchandise (266 987) 15 (75 629) 4 (9 371) 1 (351 987) 20
% of Turnover 99 99 99 99
Number of
stores 12 2 8 1 2 22 3
Turnover per
store (22 420) (9 519) (4 718) (16 119)
Number of
employees 511 6 244 3 10 765 8
Turnover per
employee
(Rands) (526 489) (312 086) (943 500) (463 556)
Operating
profit per
employee
(Rands) (66 755) (73 381) 156 200 (65 954)
Retail m2 34 100 8 10 400 2 1 800 46 300 11
Turnover per
m2 (Rands) (7 890) (7 322) (5 242) (7 659)
Trade
receivables
ratios
Trade
receiveables 3 412 3 412
Bad debts
written off
Bad debts
written off %
Average length
of
book in months
Arrears
Arrears %
Collection
rate %
Deposit rate %
Manufacturing
Financial
Roodefurn Properties Services
R`000 % R`000 % R`000 %
For the year
ended 31 August 2004
Turnover (1 645) (527 583) 19
Operating profit (5 651) 1 (27 122) 5 (87 819) 17
Carrying value
of assets 11 211 89 465 3 272 827 9
Liabilities (2 439) (33 905) 3 (26 542) 2
Depreciation
of assets 1 232 3 237 1 869 2
Impairment &
revaluation of
properties 1 709 113
Cost to aquire assets 400 1 1 000 1 595 1
Operating margin % 344
Credit sales (527 583) 22
Cash sales (1 645)
Cash sales % 100
Total sales of
merchandise (1 645)
% of Turnover 100
Number of stores 52 8
Turnover per store
Number of employees 176 2 172 2
Turnover per employee
(Rands) (9 347)
Operating profit per
employee
(Rands) (32 108)
Retail m2 3 325 1
Turnover per m2 (Rands)
Trade receivables
ratios
Trade receiveables 61 665 2
Bad debts written off 4 808 3
Bad debts written off %
Average length of book
in months
Arrears
Arrears %
Collection rate %
Deposit rate %
Total
Corporate Group
R`000 % R`000
For the year
ended 31 August 2004
Turnover (2 832 903)
Operating profit 120 028 (23) (511 380)
Carrying value
of assets 390 007 12 3 145 925
Liabilities (928 431) 76 (1 229 552)
Depreciation
of assets 7 240 17 42 688
Impairment &
revaluation of
properties (192) (13) 1 517
Cost to aquire assets 27 478 41 67 557
Operating margin % 18
Credit sales (2 353 096)
Cash sales (479 807)
Cash sales % 16,9
Total sales of
merchandise (1 743 894)
% of Turnover 62
Number of stores 665
Turnover per store (4 260)
Number of employees 289 3 9 133
Turnover per employee
(Rands) (310 183)
Operating profit per
employee
(Rands) (55 993)
Retail m2 426 554
Turnover per m2 (Rands)
(6 641)
Trade receivables ratios
Trade receiveables 2 638 487
Bad debts written off 138 497
Bad debts written off % 5
Average length of book
in months 12,2
Arrears 541 694
Arrears % 21
Collection rate % 5,87
Deposit rate % 14,9
Ellerines Town Talk FurnCity
BU BU BU
R`000 % R`000 % R`000 %
For the year ended
31 August 2003
Turnover (683 011) 31 (401 498) 18 (330 211) 15
Operating profit (135 996) 40 (66 558) 19 (46 050) 13
Carrying value
of assets 737 870 32 420 285 18 357 593 16
Liabilities (33 430) 5 (15 893) 2 (10 475) 1
Depreciation
of assets 10 549 30 5 662 16 6 415 18
Impairment & revaluation
of properties
Cost to aquire assets 13 501 30 5 995 13 7 560 17
Operating margin % 20 17 14
Credit sales (660 745) 31 (392 023) 19 (306 337) 15
Cash sales (22 266) 28 (9 475) 12 (23 874) 30
Cash sales % 3,3 2,4 7,2
Total sales of
merchandise (446 868) 38 (267 526) 23 (224 718) 19
% of Turnover 65 67 68
Number of stores 247 38 138 21 115 18
Turnover per store (2 765) (2 909) (2 871)
Number of employees 3 035 39 1 837 24 1 458 19
Turnover per
employee (Rands) (225 045) (218 562) (226 482)
Operating profit
per employee (Rands) (44 809) (36 232) (31 584)
Retail m2 155 636 41 87 536 23 76 217 20
Turnover per m2
(Rands) (4 389) (4 587) (4 333)
Trade receivables ratios
Trade receiveables 946 489 40 572 112 24 425 366 18
Bad debts written off 55 310 31 44 142 25 31 791 18
Bad debts written off % 6 8 7
Average length of book
in months 15,5 15,7 15,0
Arrears 251 272 44 142 768 25 102 793 18
Arrears % 27 25 24
Collection rate % 5,33 5,37 5,46
Deposit rate % 11,9 11,7 12,6
Total
Foreign Credit
BI Retail
R`000 % R`000 %
For the year ended
31 August 2003
Turnover (278 558) 13 (1 693 278) 78
Operating profit (50 728) 15 (299 332) 87
Carrying value
of assets 285 423 12 1 801 171 78
Liabilities (85 103) 12 (144 901) 20
Depreciation
of assets 6 587 18 29 213 82
Impairment & revaluation
of properties
Cost to aquire assets 7 503 16 34 559 76
Operating margin % 18 18
Credit sales (255 744) 12 (1 614 848) 77
Cash sales (22 814) 29 (78 430) 100
Cash sales % 8,2 4,6
Total sales of
merchandise (225 393) 19 (1 164 505) 100
% of Turnover 81 69
Number of stores 94 15 594 93
Turnover per store (2 963) (2 851)
Number of employees 1 038 13 7 368 95
Turnover per
employee (Rands) (268 360) (229 815)
Operating profit
per employee (Rands) (48 871) (40 626)
Retail m2 59 120 15 378 509 99
Turnover per m2
(Rands) (4 712) (4 474)
Trade receivables ratios
Trade receiveables 375 376 16 2 319 343 97
Bad debts written off 34 341 19 165 584 92
Bad debts written off % 9 7
Average length of book
in months 16,9 15,7
Arrears 74 239 13 571 072 100
Arrears % 20 25
Collection rate % 5,85 5,42
Deposit rate % 16,7 15,8
Credit Financial
Retail Properties Services
R`000 % R`000 % R`000 %
For the year ended
31 August 2003
Turnover (490 706) 22
Operating profit (20 447) 6 (90 826) 26 67 099 (20)
Carrying value
of assets 20 365 1 476 113 21 4 285
Liabilities (17 132) 2 (564 928) 78
Depreciation
of assets 1 245 3 1 161 3 4 052 11
Impairment & revaluation
of properties 1 837 100
Cost to aquire assets 340 1 2 906 6 7 802 17
Operating margin % 19
Credit sales (490 706) 23
Cash sales
Cash sales %
Total sales of
merchandise
% of Turnover
Number of stores 48 7
Turnover per store
Number of employees 166 2 253 3
Turnover per
employee (Rands)
Operating profit
per employee (Rands)
Retail m2 3 133 1
Turnover per m2 (Rands)
Trade receivables ratios
Trade receiveables 67 456 3
Bad debts written off 14 548 8
Bad debts written off %
Average length of book
in months
Arrears
Arrears %
Collection rate %
Deposit rate %
Total
Corporate Group
R`000 % R`000
For the year ended
31 August 2003
Turnover (2 183 984)
Operating profit (343 506)
Carrying value of assets
2 301 934
Liabilities (726 961)
Depreciation
of assets 35 671
Impairment & revaluation
of properties 1 837
Cost to aquire
assets 45 607
Operating margin % 16
Credit sales (2 105 554)
Cash sales (78 430)
Cash sales % 3,6
Total sales of
merchandise (1 164 505)
% of Turnover 53
Number of stores 642
Turnover per store (3 402)
Number of employees 7 787
Turnover per
employee (Rands) (280 465)
Operating profit
per employee (Rands) (44 113)
Retail m2 381 642
Turnover per m2 (Rands) (5 723)
Trade receivables ratios
Trade receiveables 2 386 799
Bad debts written
off 180 132
Bad debts written off % 8
Average length of book
in months 12,4
Arrears 571 072
Arrears % 24
Collection rate % 5,42
Deposit rate % 15,8
COMMENTS
The Group has had an outstanding year across all business divisions resulting in
an increase of 49% in the operating profit to R511 million.
The buoyant trading conditions resulting from the lower interest rates,
reduction in personal taxes and low inflation, continued for the remainder of
the financial year. This resulted in a substantial increase in merchandise
volumes.
Good progress was made with the bedding down of the Wetherlys acquisition which
includes the Wetherlys and Osiers outlets, the Roodefurn manufacturing
operations and the retail operations in Spain.
Group Financial Review
With the inclusion of Wetherlys for ten months, the Group achieved an increase
of 30% in turnover to R2,8 billion despite an effective reduction in finance
charge rates of 22%. The sale of merchandise in the credit chains increased by a
pleasing 19,4%, the highest increase recorded for many years despite the
deflationary effects on the price of goods sold which reduced by an average of
2,6%.
Revenue from finance charges earned at R474 million showed a marginal increase
of 0,4% on the prior year notwithstanding the significant drop in the finance
charge rates. Financial services which include the premiums earned by Customer
Protection Insurance Company Limited and the finance charges earned through
Rainbow Loans increased by 13,4% to R527 million over the prior year after
providing for additional unearned provisions of R30 million.
Operating Profit
The operating margin at 18,1% (2003: 15,7%) generated an operating profit of
R511 million (2003: R344 million), an increase of 49%.
This arose from improved productivity in the credit retail chains and in
particular the improvement in the condition of the debtors ledger where the
number of defaulting debtors reduced substantially. The improved operating
margin was achieved despite the significant reduction in the finance charge
rates which resulted in a 2,8% drop in the gross profit margin.
Net Finance Costs
Net financing costs of R17,2 million (2003: R14,0 million investment income
earned) resulted from the financing of the purchase of the assets and
liabilities of the Wetherlys business by Ellerine Furnishers. The financing
costs have been well managed and are substantially below expectations due to the
improved cash generation by the Group and the lower than anticipated interest
rates.
Headline Earnings
Headline earnings at R340,7 million increased by 39% which equates to 460,6
cents per share, an increase of 35% due to the additional shares issued to the
Wetherlys Executives at the time of the Wetherlys acquisition.
Balance Sheet
For the year to August 2004, the balance sheet strengthened further with total
assets increasing by 36,7% to R3,1 billion which includes goodwill of R264,7
million arising from the Wetherlys acquisition. The return on total assets
increased to 18,8% (2003: 15,4%) against the Group`s target of 16%. Both the
return on average equity of 18,9% (2003: 16,3%) and the return on average funds
employed at 24,1% (2003: 18,9%) were up substantially on the prior year. Net
gearing reduced from 21,5% at February 2004 to 11,9% at the year-end.
Cash Flow
The cash generated from operations increased to R387,7 million (2003: R251,8
million), up by 54,0% with cash flow per share at 236,4 cents, an increase of
36,1%. This improvement is in the main due to the increase in collections in the
credit retail chains as well as the cash contribution from the Wetherlys
operations.
Operational Segmentation Review
Credit Retail
The credit retail operations constituted 69% of Group turnover and contributed
88% of the operating profit. There has been a major improvement in all aspects
of these operations which includes an increase in overall productivity. The
increase in sale of goods of 19,4% despite a marginal reduction in the retail
space was encouraging with the operating margin up from 18% to 23%. In
particular, the improvement in the condition of the debtors ledger was most
pleasing. The overall collection rate improved from 5,42% in 2003 to 5,87%.
Arrears reduced from 25% to 21% with credit costs (losses on repossessions and
bad debt write off`s) significantly down on the previous year.
Despite the increase in sale of goods, inventory levels were once again well
controlled and at R134 million showed an increase of 3% over the prior year.
The geographical footprint reduced from 594 stores to 591 stores which was due
to consolidation in the Botswana operations and the closure of a limited number
of satellite outlets, the remainder having been converted to stand alone stores.
The number of FurnCity superstores increased to 5 at the year-end with an
additional 2 superstores due to open in November 2004 and a further 2
superstores in the pipeline for 2005.
Cash Retail
The Wetherlys trading results for the ten months to August 2004 contributed R356
million to turnover and R56 million to pre tax profit resulting in an annualised
return on capital employed of 51,3%. These figures exclude the income generated
from the Wetherlys properties and the contribution from other Wetherlys assets
which have been absorbed into the greater Group.
A strategic decision was taken to expand the Wetherlys trading operations and to
this end, an additional Wetherlys outlet has been opened in Port Elizabeth.
Subsequent to the financial year-end, four new smaller, boutique type Osiers
outlets are due to open in shopping centres in Milnerton, Somerset West,
Centurion and on the West Rand.
With the acquisition of the remaining shares in the Spanish operations, which
are now wholly owned, the existing operation in Estepona was converted to a
distribution centre and two new retail outlets were opened in San Pedro and
Mijas in the last quarter of the year. A second factory has also been
established to increase the Roodefurn manufacturing capacity. The costs involved
in these expansion initiatives were in the main expensed in the financial year
to August 2004.
Rainbow Loans
Operating profit increased to R24,7 million with the operating margin at 50,8%
up from 23,2% in the prior year. The capital employed reduced from R35,2 million
to R28,5 million. These pleasing results have been achieved due to the high
focus and management expertise gained in this area of the business. A decision
has been taken to selectively increase the number of Rainbow Loans outlets to 60
by August 2005.
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