| Mon 9 May 2005, 10:03 | | LA Group - Reviewed results for the year ended 28 |
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LA Group - Reviewed results for the year ended 28 February 2005
LA GROUP LTD
Registration No: 1936/008786/06
Share code: LAR ISIN: ZAE000028676
`N` Share code: LAN ISIN: ZAE000028684
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2005
HEADLINE EARNINGS PER SHARE UP 55%
OPERATING PROFIT BEFORE TAX UP 44%
PROPOSED DIVIDEND UP 33%
NET TANGIBLE ASSET VALUE PER SHARE UP 20%
GROUP INCOME STATEMENT
%
CHANGE 2005 2004
R`000 R`000
REVENUE 22.3 734 841 600 712
OPERATING PROFIT BEFORE THE
FOLLOWING ITEM 81 294 63 741
Continuing operations 81 294 67 536
Discontinuing operations - (3 795)
Depreciation and
amortisation of goodwill
and trademarks (7 111) (5 676)
PROFIT BEFORE NET INTEREST 27.8 74 183 58 065
NET INTEREST (6 063) (10 854)
Continuing operations (6 063) (9 716)
Discontinuing operations - (1 138)
NET PROFIT BEFORE TAXATION 44.3 68 120 47 211
Continuing operations 68 120 52 144
Discontinuing operations - (4 933)
TAXATION 27 818 19 155
NET PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 43.6 40 302 28 056
Number of ordinary and
`N` ordinary shares
In issue 52 909 416 62 001 701
Treasury shares included above 7 000 172 7 269 922
At weighted average 50 592 493 54 731 779
At weighted average - diluted 54 774 952 56 202 819
Earnings per ordinary and
`N` ordinary share - cents
At weighted average 55.4 79.66 51.26
Diluted 47.4 73.58 49.92
Headline earnings per ordinary
and `N` ordinary
shares - cents
At weighted average 55.2 80.82 52.08
Diluted 47.2 74.65 50.71
Proposed cash distribution
per ordinary and
`N` ordinary share - cents 33.3 20.00 15.00
Net tangible asset value
per share - cents 20.1 521.70 434.52
Property, plant and equipment
Depreciation 6 451 5 161
Capital expenditure 17 543 9 967
Intangible assets
Amortisation 660 515
Capital expenditure - 4 267
Commitments
Capital expenditure 14 800 17 750
Share buy-back 28 170
SEGMENTAL ANALYSIS
Revenue % Results % Net assets %
2005 R`000 R`000 R`000
Corporate clothing 218 709 30 (7 116) (10) 76 379 31
Branded distribution 516 132 70 71 944 97 145 588 60
Property 452 1 706
Corporate
unallocated expenses
and net assets 8 903 12 21 598 9
Total 734 841 100 74 183 100 244 271 100
Revenue % Results % Net assets %
2004 R`000 R`000 R`000
Corporate clothing 228 961 38 (6 517) (11) 91 243 37
Branded distribution 371 751 62 54 420 94 125 835 52
Corporate
unallocated expenses
and net assets 10 162 17 26 172 11
Total 600 712 100 58 065 100 243 250 100
GEOGRAPHICAL ANALYSIS
Revenue % Results % Net assets %
2005 R`000 R`000 R`000
South Africa 579 135 79 70 760 95 199 748 82
International 155 706 21 3 423 5 44 523 18
Total 734 841 100 74 183 100 244 271 100
Revenue % Results % Net assets %
2004 R`000 R`000 R`000
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
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Non- Distri-
Share capital distri- butable Total
and share butable reserves
premium reserves
R`000 R`000 R`000 R`000
Balance at
1 March 2003 37 074 (7 624) 193 533 222 983
Earnings attributable
to shareholders 28 056 28 056
Dividends paid (6 020) (6 020)
Foreign currency
translation reserve (1 769) (1 769)
Balance at
1 March 2004 37 074 (9 393) 215 569 243 250
Cost of hare
buy-back (25 873) (25 873)
Treasury shares
used for staff options 329 329
Earnings attributable
to shareholders 40 302 40 302
Dividends paid (8 231) (8 231)
Foreign currency
translation reserve (5 506) (5 506)
Balance at
28 February 2005 11 530 (14 899) 247 640 244 271
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS
2005 2004
R`000 R`000
Net earnings per income statement 40 302 28 056
Amortisation of goodwill and trademarks 660 515
Profit on sale of plant and equipment (75) (68)
HEADLINE EARNINGS 40 887 28 503
GROUP BALANCE SHEET
2005 2004
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 28 446 17 134
Intangible assets 4 762 5 430
Deferred taxation 24 928 29 921
58 136 52 485
Current assets
Inventories 143 718 149 222
Trade and other receivables 133 718 128 058
Taxation 3 049 1 800
Deposits on property acquisitions 761 1 535
Cash and cash equivalents 61 849 36 309
343 095 316 924
Total assets 401 231 369 409
EQUITY AND LIABILITIES
Equity
Ordinary shareholders` equity 244 271 243 250
Non-current liabilities
Non-interest bearing 222 1 105
Interest bearing 10 304 3 083
10 526 4 188
Current liabilities
Non-interest bearing
Trade and other payables 69 766 61 370
Taxation 8 652 7 174
Interest bearing
Current portion of non-current liabilities 2 580 6 694
Short-term loans 23 455 7 764
Bank overdraft 41 981 38 969
146 434 121 971
Total equity and liabilities 401 231 369 409
GROUP CASH FLOW STATEMENT
2005 2004
R`000 R`000
OPERATING ACTIVITIES
Profit before net interest and taxation 74 183 58 065
Adjustment for non-cash-flow items 7 171 5 608
Cash generated by operations 81 354 63 673
Movement in working capital 8 240 30 185
Interest received 3 057 760
Interest paid (9 120) (11 614)
Dividends paid (8 231) (6 020)
Taxation paid (22 680) (17 785)
Net cash inflow from operating activities 52 620 59 199
INVESTING ACTIVITIES
Acquisitions of property, plant and equipment (17 543) (9 967)
Proceeds from sale of property,
plant and equipment 446 112
Acquisition of intangible assets - (4 267)
Acquisition of outside shareholders` interest - (2 156)
Deposits on property acquisitions (376) (1 535)
Net cash outflow from investing activities (17 473) (17 813)
FINANCING ACTIVITIES
Increase (decrease) in long-term borrowings 6 338 (1 400)
Proceeds of share options 194
Cost of share buy-backs (25 873)
Increase (decrease) in short-term borrowings 11 577 (3 693)
Net cash outflow from financing activities (7 764) (5 093)
Net increase in cash and cash equivalents 27 383 36 293
Cash and cash equivalents at beginning of year (2 660) (37 524)
Effect of foreign exchange movements (4 855) (1 429)
Cash and cash equivalents at end of year 19 868 (2 660)
COMMENTARY
INTRODUCTION
L.A. Group Limited (`the Group`) is a leading entrepreneurial black economic
empowerment holding company. The Group currently focuses on the wholesale
distribution of apparel and footwear with two main divisions. The one division
supplies corporate clothing to both the local and international markets; the
other focuses on the wholesale distribution of branded clothing, footwear and
accessories. The Group owns the Polo trademark, which it licenses to various
parties and on which it earns a royalty income.
The directors are pleased to announce excellent results for the year.
Compared to 2004, turnover has increased by 22%; net profit attributable to
shareholders is up by 44% and headline earnings per share is higher by 55%.
Dividend proposed is 33% higher and net tangible asset value per share grew by
20%.
OVERVIEW OF RESULTS
The buoyant economic environment in South Africa encouraged increased consumer
spending with the resultant strong impact on sales of the Group`s products and
services. Group turnover in the 12 months under review was 22% higher at
R734,8 million (2004: R600,7 million). In terms of overall contribution to
turnover, South African operations accounted for R579,1 million (2004: R443,5
million) while international operations contributed R155,7 million (2004:
R157,2 million).
Group profit before net interest was 27% up at R74,2 million (2004: R58,1
million) and the operating margin on turnover for the Group was maintained at
10 per cent. The reasons for the strong performance in operating income are
threefold. Firstly the turnaround at the UK corporate clothing business, Allen
& Douglas, has been successful with a 9% increase in turnover and the company
declared an operating profit of R5,9 million compared to an operating profit
of R2 million in the previous year. Secondly, the profit contribution from the
branded distribution division - consisting of Polo and Skye- increased by 32%
to R71,9 million from R54,4 million, with both companies in this division once
again delivering sustainable gains. Lastly, the continuing efficient
management of working capital added to the good operating results.
The increase in Group profit before net interest was achieved despite the
losses of R10,5 million incurred by the local corporate clothing company,
Carter Harris, in respect of South African business (2004: R5,4 million). The
expenses include restructuring costs of R2,9 million. The Carter Harris
Watford operation in the UK was incorporated with that of Allen & Douglas, and
in South Africa management changes were effected. The strict measures applied
will ensure a positive contribution from the beginning of the 2006 financial
year.
Net interest paid was significantly lower at R6,1 million (2004: R10,9
million) due to lower interest rates and efficient working capital management.
Net profit before tax was 44% higher at R68,1 million (2004: R47,2 million)
while net profit after tax was 44% higher at R40,3 million (2004: R28,1
million). The overall taxation charge remains high mainly due to the payment
of Secondary Tax on Companies (STC), resulting from the share buy-backs
completed during September 2004, as well as certain disallowable expenses.
Headline earnings per ordinary and `N` ordinary share increased by 55% to
80,82 cents (2004: 52,08 cents). This is due to the overall improved
performance as well as the benefit of the lower number of shares in issue
following the first share buy-back of 756 373 ordinary and 8 327 874 `N`
ordinary shares during September 2004, for a total consideration of R25 435
892. The `odd-lot offer` during the year had no effect on earnings per share.
BALANCE SHEET
The total assets of the Group have increased by approximately 10%. Inventories
and trade receivables have remained the same at R277 million while net cash
and cash equivalents have increased substantially from net negative balances
of R2,7 million last year to net positive balances of R19 million.
Property, plant and equipment is 66% higher at R28,4 million as at 28 February
2005 mainly as a result of the acquisition of the property housing the Skye
footwear division for R7,9 million during the year. The increase in the fixed
assets was financed by long-term loan finance, the resultant interest-bearing
loans increasing to R10,3 million.
The increase in the interest-bearing short-term loans of the Group which
amounts to R15 million relates to the settlement of intergroup loans which
enabled a share buy-back programme to be implemented during the year under
review.
The equity of the Group has remained unchanged from last year notwithstanding
the profits for the year, due to the share buy-back and the increase in the
debit foreign currency translation reserve.
The net tangible asset value as at 28 February 2005 increased by 20%, to
521,70 cents (29 February 2004: 434,5 cents).
DIVIDENDS PAID
A cash dividend of 15 cents per share in respect of the year ended 29 February
2004 was paid to the holders of ordinary and `N` ordinary shares registered on
Friday, 11 June 2004. In accordance with the Group`s accounting policy, this
payment is only reflected in the period during which it is paid.
CAPITAL COMMITMENTS
The capital commitments for the next financial year comprise the following:
Carter Harris Building R7,2 million
Group Plant and Equipment R7,6 million
Second share buy-back from a private investor on 4 March 2005, of 641 296
ordinary shares and 5 618 615 `N` ordinary shares, for a total consideration
of R28 169 600.
This repurchase was approved by shareholders.
With the exception of the share buy-back, it is proposed to fund the above
with long-term financing arrangements.
CONTINGENT LIABILITIES
The damages claim by Platinum Holding (Pty) Ltd (`Platinum`) on the disputed
agreement with regard to the sale of some retail stores in 2001 continues. The
claim amount has
been amended by Platinum and now ranges in the alternative from R78 million to
R178 million. The directors are confident of the merits of the LA Group`s case
and are doing everything possible to ensure that this matter is soon brought
to finality.
As reported last year, the Group has made formal representation with regard to
the trademarks and STC tax disputes with the South African Revenue Services
(SARS). The amount of tax on the trademark dispute is R24 million for the tax
years from 1999 to 2005. If SARS are successful,the deferred tax asset will
have to be reversed and charged back to the income statement to the extent of
R11 million. The amount of tax on the STC dispute is R1,95 million. The
amounts stated are before interest charges. The board of directors remains
confident that this matter will be positively resolved.
ACCOUNTING POLICIES
The principal accounting policies as set out in the 2004 annual report have
been applied consistently throughout the year. The financial statements have
been prepared in accordance with South African Statements of Generally
Accepted Accounting Practice.
REVIEW BY INDEPENDENT AUDITORS
The Group`s auditors, Grant Thornton, have reviewed the year-end results.
Their unqualified review report is available for inspection at the Group`s
registered offices during business hours.
PROSPECTS
The Group now enters its tenth year as a listed entity.
As the South African economy continues to grow with lower interest rates and
inflation, it augurs well for the Group`s products and services. Growth in the
niche brands are expected to translate into increased sales. In addition,
Allen & Douglas has secured forward orders which will enable the continuation
of its recent successes. Carter Harris has secured new contracts or has
extended contracts with, amongst others, Rentokil, Telkom, Department of
Agriculture, Bank of Zambia, Standard Chartered Bank in Africa and Southern
Sun.
The increased borrowings will result in an increase in interest charges in the
coming year. Notwithstanding this, the prospects for increased earnings are
encouraging. The directors are confident of achieving double digit growth in
earnings for 2006.
DECLARATION OF ANNUAL DIVIDEND
Notice is hereby given that an annual dividend of 20 cents per ordinary and
`N` ordinary share has been declared in respect of the financial year ending
28 February 2005. This dividend is payable to shareholders recorded in the
books of the company on Friday, 10 June 2005.
The salient dates for the final dividend are:
Last day to trade (cum dividend) Friday, 3 June 2005
First day of trading (ex dividend) Monday, 6 June 2005
Record date Friday, 10 June 2005
Payment date Monday, 13 June 2005
Share certificates may not be dematerialised or rematerialised between Monday,
6 June 2005 and Friday, 10 June 2005 both dates inclusive. On Monday, 13 June
2005, the dividends will be electronically transferred to the bank accounts of
all shareholders where this facility is available. Where this is not available
or desired, cheques dated Monday, 13 June 2005 will be posted. Shareholders
who have dematerialised their share certificates will have their accounts at
their CSDP or broker credited on Monday, 13 June 2005.
Signed on behalf of the Board
AK Peer SA Mukadam
Executive Chairman Group Managing Director
9 May 2005
Directors: AK Peer (Executive Chairman), SA Mukadam (Group Managing Director),
F Peer*, K Chetty, TP Taylor**, KD Penkin**, TRA Oliphant**
*Non-executive ** Independent Non-executive
LA GROUP LIMITED
Registration No: 1936/008786/06
Registered Office: The Oval, Colinton House, Oakdale Road, Newlands 7700
(PO Box 3500, Cape Town, 8000)
Share code: LAR ISIN: ZAE000028676
`N` Share code: LAN ISIN: ZAE000028684
Company Secretary: I Bloom
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Ltd
Registration No: 2004/003647/07, 70 Marshall Street, Johannesburg 2001 (PO Box
61051, Marshalltown 2107)
Sponsor: Sasfin Corporate Finance, a division of Sasfin Bank Limited
Website: www.lagroup.co.za
WINNERS OF BUSINESSMAP 2005
BEE TOP MARKET PERFORMER AWARD
POLO
SKYE
ALLEN & DOUGLAS
CHARTER HARRIS
Date: 09/05/2005 10:00:43 AM
Produced by the JSE SENS Department
