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Relyant Retail Limited - Unaudited Interim Announcement For The Six Months Ended
31 December 2004?????
Relyant Retail Limited
Registration number 1937/010108/06
Share code: RLY ISIN number: ZAE000016457
UNAUDITED INTERIM ANNOUNCEMENT
for the six months ended 31 December 2004
Buoyant market conditions continue
EBITDA increased by 39% to R237 million
Fully diluted headline earnings per share up 61% to 20 cents
Gearing improved from 26% to 22%
GROUP INCOME STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 % 2003 2004
unaudited improve- unaudited audited
Notes R000`s ment R000`s R000`s
Revenue 2 1 771 328 16,8% 1 516 309 2 883 013
Cost of sales (815 530) (702 491) (1 340 069)
Trading profit
before
depreciation and
amortisation
(`EBITDA`) 237 213 39,4% 170 128 260 577
Depreciation of
fixtures,
equipment and
vehicles (11 333) (11 964) (23 860)
Amortisation of
intangibles (2 713) (3 750) (7 500)
Trading profit
before
exceptional 223 167 44,5% 154 414 229 217
items
Exceptional (12 838)
items
Operating profit 223 167 44,5% 154 414 216 379
Net financing
costs (18 374) 31,6% (26 879) (50 982)
Interest 1 305 662 4 724
received
Financing costs
on bank
borrowings (19 679) (27 541) (55 706)
Profit before
taxation 204 793 60,6% 127 535 165 397
Taxation 3 (8 981) (6 753) (5 375)
Earnings
attributable to
ordinary
shareholders 195 812 62,1% 120 782 160 022
Closing,
weighted average
and fully
diluted
weighted average
number of
ordinary shares
(000`s) 4 959 278 959 278 959 278
Earnings per
share - basic
and fully
diluted (cents) 20,4 61,9% 12,6 16,7
Headline
earnings per
share - basic
and fully
diluted (cents) 20,4 60,6% 12,7 18,0
Reconciliation
of attributable
earnings to
headline and
fully diluted
headline R000`s R000`s R000`s
earnings
Attributable
earnings, as
above 195 812 120 782 160 022
Adjustments:
Amortisation of
goodwill during
the period 1 176 2 352
Impairment of
goodwill during
the period 9 422
Profit on sale
of fixed assets (550) (456) 1 870
Taxation on
adjustments 165 137 (561)
Headline and
fully diluted
headline 195 427 60,7% 121 639 173 105
earnings
GROUP BALANCE SHEET
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
Notes R000`s R000`s R000`s
ASSETS
Non-current assets
Goodwill 554 11 152 554
Trademarks 26 312 31 599 29 025
Fixtures, equipment and
vehicles 104 603 104 524 104 985
Insurance companies`
investments 5 105 937 77 702 76 918
Deferred taxation 289 646 290 009 289 968
527 052 514 986 501 450
Current assets
Accounts receivable 6 1 776 379 1 538 343 1 485
774
Other debit balances 53 599 53 518 51 636
Taxation 4 751 890 5 147
Inventories 368 199 366 759 303 413
Cash on hand 208 167 188
2 203 136 1 959 677 1 846
158
Total assets 2 730 188 2 474 663 2 347
608
EQUITY AND LIABILITIES
Ordinary share capital and
premium 1 673 569 1 673 569 1 673 569
Non-distributable reserves 13 820 15 054 13 114
Accumulated loss (175 347) (410 078) (371 159)
Ordinary shareholders`
equity 1 512 042 1 278 545 1 315 524
Non-current liabilities
Interest bearing bank
borrowings 337 336 383 154 336 796
Current liabilities (non-
interest bearing)
Accounts payable and
accruals 841 448 752 992 666 269
Provisions 33 823 59 972 28 455
Taxation 5 539 564
880 810 812 964 695 288
Total equity and
liabilities 2 730 188 2 474 663 2 347 608
Gearing (%) 22,3 30,0 25,6
Tangible net asset value
per share, fully
diluted (cents) 7 154,8 128,8 134,1
GROUP STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS` EQUITY
Ordinary Non-
share distribut-
capital and able Accumu-
premium reserves lated loss Total
R000`s R000`s R000`s R000`s
Balance at 30 June
2003 - audited 1 673 569 17 189 (530 860) 1 159 898
Loss on hedged
instruments (1 577) (1 577)
Loss on translation
of foreign entity (558) (558)
Attributable
earnings for the
period 120 782 120 782
Balance at 31
December 2003 -
unaudited 1 673 569 15 054 (410 078) 1 278 545
Gain on hedged
instruments 2 716 2 716
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 (4 686) (4 686)
Attributable
earnings for the
period 39 240 39 240
Balance at 30 June
2004 - audited 1 673 569 13 114 (371 159) 1 315 524
Gain on hedged
instruments 97 97
Gain on translation
of foreign entity 609 609
Attributable
earnings for the
period 195 812 195 812
Balance at 31
December 2004 -
unaudited 1 673 569 13 820 (175 347) 1 512 042
Share capital and premium as stated above is net of the cost of Treasury shares
amounting to R39,1 million.
GROUP CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
Note R000`s R000`s R000`s
Cash receipts from
customers 1 671 928 1 525 675 3 071 790
Cash generated from
trading 236 569 169 672 261 350
Net increase in working
capital (168 982) (17 451) (5 405)
Cash generated from
operations 67 587 152 221 255 945
Net financing costs paid 8 (22 090) (40 515) (63 048)
Taxation paid (3 289) (1 616) (4 566)
Cash generated by
operating activities 42 208 110 090 188 331
Closure costs paid (3 402) (15 183) (33 952)
Net cash generated 38 806 94 907 154 379
Gross capital expenditure (13 324) (12 339) (31 281)
Proceeds on disposal of
fixed assets 2 923 1 794 6 345
Insurance companies`
investments (28 925) (17 335) (16 037)
Cash outflows from
investment activities (39 326) (27 880) (40 973)
Increase in interest
bearing bank borrowings
and cash on hand (520) 67 027 113 406
GROUP SEGMENTAL ANALYSIS
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Revenue
Value retailing 455 513 419 857 823 557
Credit chains 1 022 435 863 466 1 628 464
Insurance and repair services 293 380 232 986 430 992
Total 1 771 328 1 516 309 2 883 013
EBITDA
Value retailing 10 884 8 279 16 628
Credit chains 205 288 149 022 251 474
Insurance and repair services 27 618 19 466 17 637
Corporate (6 577) (6 639) (25 162)
Total 237 213 170 128 260 577
Gross capital expenditure
Value retailing 4 045 203 3 473
Credit chains 7 432 11 185 25 228
Insurance and repair services 1 847 951 2 580
Total 13 324 12 339 31 281
Depreciation and amortisation
Value retailing 2 152 2 454 4 759
Credit chains 5 881 6 672 13 151
Insurance and repair services 1 161 1 189 2 337
Corporate 4 852 5 399 11 113
Total 14 046 15 714 31 360
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Total assets
Value retailing 362 694 346 852 322 356
Credit chains 2 070 271 1 862 713 1 751 467
Insurance and repair services 297 223 265 098 273 785
Total 2 730 188 2 474 663 2 347 608
Interest bearing bank
borrowings
Value retailing 40 543 33 201 50 577
Credit chains 296 793 349 953 286 219
Total 337 336 383 154 336 796
Interest free liabilities
Value retailing 198 443 205 712 166 099
Credit chains 633 396 568 396 481 837
Insurance and repair services 48 971 38 856 47 352
Total 880 810 812 964 695 288
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. 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.
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Note 2 - Revenue
Comprises:
Cash sales 567 054 499 221 988 405
Credit sales 699 331 583 016 1 072 779
Total sales 1 266 385 1 082 237 2 061 184
Finance charges earned 163 506 168 759 335 814
Insurance premiums 260 222 200 204 365 329
Services rendered 81 215 65 109 120 686
Revenue 1 771 328 1 516 309 2 883 013
Note 3 - Taxation
The effective tax rate reflected in the income statement of 4,4% (December 2003:
5,3%) (June 2004: 3,2%) is reconciled to the standard rate as follows:
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Tax at standard rate (61 438) (38 261) (49 619)
Tax effect of:
Non-deductible expenses (1 669) (1 833) (8 175)
Exempt income 1 877
Foreign tax rate differential and
withholding taxes (69) 188 (519)
Tax losses now recognised 54 195 33 153 51 061
(8 981) (6 753) (5 375)
Unutilised tax losses 198 700 403 140 379 350
The unutilised tax losses give rise to a potential further deferred taxation
asset amounting to some R60 million (December 2003: R121 million) (June 2004:
R114 million) which has not been recognised. Although the Group continues to
generate positive earnings, the directors believe that after considering the
extent of the tax losses and the time horizon in which the recovery of the asset
is probable, it is prudent not to recognise the unutilised tax losses available
to the Group.
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
000`s 000`s 000`s
Note 4 - Ordinary shares in issue
Total ordinary shares in issue -
closing 966 367 966 367 966 367
Treasury shares held by the
Relyant Share Option Trust (7 089) (7 089) (7 089)
Ordinary shares - closing,
weighted average and fully
diluted weighted average 959 278 959 278 959 278
R000`s R000`s R000`s
Note 5 - Insurance companies`
investments
Comprises:
Listed shares 37 820 32 445 26 851
Money market instruments 68 117 45 257 50 067
105 937 77 702 76 918
Note 6 - Accounts receivable
Gross instalment debtors 2 296 693 2 095 411 1 966 155
Provision for unearned income (304 944) (289 519) (256 925)
Provision for doubtful debts (220 081) (269 944) (223 987)
Net instalment debtors 1 771 668 1 535 948 1 485 243
Net trade debtors 4 711 2 395 531
1 776 379 1 538 343 1 485 774
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 period`s
collection rates, the average
length of the book is 15,1 months
(December 2003: 14,7 months)
(June 2004: 13,4 months).
Note 7 - 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 1 512 042 1 278 545 1 315 524
Less: Goodwill (554) (11 152) (554)
Less: Trademarks (26 312) (31 599) (29 025)
Adjusted ordinary shareholders`
equity 1 485 176 1 235 794 1 285 945
Closing number of ordinary
shares, fully diluted (000`s) 959 278 959 278 959 278
Tangible net asset value per
share, fully diluted (cents) 154,8 128,8 134,1
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Note 8 - Net financing costs paid
Net financing costs per income
statement (18 374) (26 879) (50 982)
Movement in accrued interest (3 716) (13 636) (12 066)
Net financing costs paid (22 090) (40 515) (63 048)
Note 9 - Capital expenditure
Incurred 13 324 12 339 31 281
31 December 31 December 30 June
2004 2003 2004
unaudited unaudited audited
R000`s R000`s R000`s
Committed 7 572 6 468 9 962
Authorised but not contracted 20 563 14 832 31 497
The capital expenditure will be
financed through the utilisation
of existing borrowing
facilities.
Note 10 - Commitments
Operating lease commitments 555 639 441 376 470 927
Note 11 - 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 certain directors 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 these directors.
COMMENTS
Trading
Buoyant trading conditions in the durables retail sector continued for the first
half of the year, but intensifying competition contributed to a fall in real
product prices. Sales and revenue (which comprises sales plus finance charges
earned and other amounts invoiced for services and insurance) increased by some
17%. Volume growth helped to offset the adverse impact of lower average unit
prices and finance charge rates. The Value Retail division continued to
underperform.
EBITDA and Earnings
EBITDA for the period increased by 39% as a result of improvements in gross
margin and productivity ratios. The combination of positive trading conditions
and our focus on merchandise management resulted in an improved gross profit
percentage on sales of 35,6% for the period, compared to the first half of last
year`s 35,1%. Despite the decrease in finance charges earned of 3,1%, a 17%
growth in total income was achieved due to improved income streams. Overheads
increased by 10%. As a result, a trading margin of 12,6% was achieved, an
improvement on last year`s first half trading margin of 10,2%. Although these
results are encouraging, there is still room for improvement in this area, in
comparison with industry averages.
Compared to the same period last year, reduced average bank borrowings, together
with lower interest rates, resulted in a saving of R9 million in net financing
costs. Consequently, the Group`s profit before taxation of R205 million
represents an improvement of 61% over last year`s first half of R128 million.
The profitability of the Group was further enhanced through a low tax rate of
some 4% (2003: 5%), resulting from the utilisation of previously unrecognised
tax losses. The Group`s attributable earnings grew by 62% to R196 million (2003:
R121 million). This translates into headline earnings per share of 20,4 cents
(2003: 12,7 cents), on a fully diluted basis, an increase of 61% over last year.
Dividend
No dividend has been declared at the interim stage.
Credit management
Increased credit sales resulted in growth in the net debtors book of R238
million over last December. Ongoing strict credit granting criteria and improved
collections resulted in total arrears, which are measured on a gross basis,
decreasing to 11,1% at December 2004 (June 2004: 12,5%, December 2003: 14,6%).
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 22,9% (June 2004: 24,5%,
December 2003: 26,7%).
Cash flow and financial position
Although working capital requirements increased as a result of growth in the
Group`s core debtors` book, the Group remained cash neutral for the period.
Interest bearing bank borrowings at 31 December 2004 amounted to R337 million
compared to the level at June 2004 of R337 million and last December of R383
million. Gearing further improved to 22% at 31 December 2004, down from 26% at
30 June 2004 and 30% at 31 December 2003.
Proposed merger with Ellerines
The Competition Commission has unconditionally recommended to the Competition
Tribunal that it approve the Group`s proposed merger with Ellerines. The
Competition Tribunal is scheduled to hear the matter during the week commencing
7 March 2005 and a ruling on the proposed merger is expected to be made shortly
thereafter. The offer by Ellerines to Relyant shareholders is contingent upon a
final ruling by the Competition Tribunal, approving the transaction.
Prospects
The Board expects that the buoyant trading conditions in the durables retail
sector will continue for the second six months of the 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
28 February 2005
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 (Chief Financial Officer)
(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
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