| Wed 24 Nov 2004, 12:05 | | Lack of special dividend takes shine off JD Group' |
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Lack of special dividend takes shine off JD Group`s results
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Industrial Correspondent
WHILE the results for furniture and appliance retailer JD Group are nothing to sneeze at, they came in a little below market expectations.
Revenue rose 52% to R9,1bn, operating income increased 69% to R1,3bn and attributable income surged 76% to R790m for the year to August 31.
Although the bulk of this growth came from the takeover of rival Profurn in the past year, revenue from long-held chains grew about 17%.
JD Group`s final results saw diluted headline earnings a share rise from 336,5c to 505,2c, below the INet Bridge consensus of 530c.
A retail analyst, who did not want to be named, said there was an expectation that JD Group would issue a special dividend.
When this did not materialise yesterday, its share price fell 5,2% to close at R58,89.
The analyst said the expectation of a special dividend was built on the retailer`s capital structure. As it sells goods on credit, some investors thought its capital structure should mirror that of a bank and see it carry more debt.
The analyst said that while the results were lower than expected, it was still a respectable set of figures.
Cash flows from operating activities rose from R385m to R908m. The group`s bank balances and cash rose to R1,3bn from R444m and its overall product margin increased to 32,3% from 31,6%.
Credit sales, which accounted for 50,4% of total sales, were lower than the 62% in the corresponding period last year.
This was due mostly to the inclusion of Hi-Fi Corporation for the full year, which is a cash business, and an increase in cash sales in the other chains.
JD Group executive chairman David Sussman said there was momentum in the group to drive growth for some time to come.
Apart from low interest rates and low inflation, which have been driving growth over the past 18 months, government and the private sector`s commitment to improving infrastructure is expected to support economic growth.
Sussman said the group was committed to growing its businesses organically. This sees it getting more input from its store managers for ways to drive growth.
Sussman said the group`s debtors` book had never been in better shape.
Deposits increased, arrears fell and the period customers took to pay off their accounts was down a month to 14,3 months.
Imara SP Reid senior investment analyst Warwick Lucas pointed out that the repayment term was still behind that of rival Ellerines at 12 months and Lewis` 13 months.
Lucas said JD Group`s arrears fell R346m, from 17,4% to 12,5%.
This is better than Ellerines` 20% and Lewis` 29%.
While bad debts written off in the historical operations increased from 5,9% to 6,9% of gross receivables, this loss has been fully provided for and will not have any effect on the group`s earnings.
The improvement in its debtors` book was a turnaround from the knock it took two years ago.
Back then, there was concern that the high levels of indebtedness of consumers would see a sharp rise in bad debt.
The furniture and appliance retail market was negatively affected by microlending.
JD Group research found that 20% of its customers had some kind of loan facility with microlenders and 5% of them had defaulted on payments to those institutions.
Furniture retailers also blamed JD subsidiary Profurn`s lenient policy on the granting of credit for the problems in the industry.
Sussman has said that proposed legislation on the granting of credit would see the `elimination of reckless credit granting` because the onus would be on the credit-granting institutions to make sure their customers were not overextended.
