| Fri 30 Mar 2001, 0:00 | | Heritage Collection Holdings Limited - Annual Fina |
|
HERITAGE COLLECTION HOLDINGS LIMITED
Balance sheet at 31 December 2000
Group Company
2000 1999 2000 1999
R'000 R'000 R'000 R'000
ASSETS
Non-Current Assets
Tangible assets 15 768 13 738 8 672 -
Subsidiaries - - 52 290 66 892
Employee share Trust 3 360 750 3 360 750
Deferred tax 18 294 15 598 146 -
37 422 30 086 64 468 67 642
Current assets
Taxation 2 116 1 659 285 -
Inventories 18 412 14 466 - -
Accounts receivable 123 577 114 530 154 446
Prepayments 7 349 8 877 444 -
Cash and cash equivalents 2 704 5 744 53 23
154 158 145 276 936 469
Total Assets 191 580 175 362 65 404 68 111
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 89 89 89 89
Share premium 47 536 47 830 47 536 47 830
Non - distributable reserves 5 899 - 8 355 8 355
Distributable reserves/
Accumulated (loss) 53 537 43 185 (2 888) 444
Total share holders' equity 107 061 91 104 53 092 56 718
Non-current liabilities
Long-term liabilities 10 941 1 767 7 180 -
10 941 1 767 7 180 -
Current liabilities
Deferred income 19 556 12 553 - -
Accounts payable 31 609 64 018 2 677 9 108
Current portion of
long-term debt 1 468 76 1 383 -
Bank overdrafts 20 924 8 1 072 -
Ordinary dividend proposed - 1 778 - 1 778
Taxation 21 4 058 - 507
73 578 82 491 5 132 11 393
Total equity and liabilities 191 580 175 362 65 404 68 111
HERITAGE COLLECTION HOLDINGS LIMITED
Income statement
for the year ended 31 December 2000
Group Company
15 months 15 months
2000 1999 2000 1999
R'000 R'000 R'000 R'000
Revenue 189 153 231 135 12 673 -
Operating Expenses (172 529) (198 611) (26 782) (1 032)
Operating profit/(loss) 16 624 32 524 (14 109) (1 032)
Investment income 321 3 014 10 853 3 763
Profit on ordinary activities
before finance costs 16 945 35 538 (3 256) 2 731
Finance costs (3 389) (1 246) (222) (2)
Profit on ordinary
activities before taxation 13 556 34 292 (3 478) 2 729
Taxation (3 204) (11 801) 146 (507)
Net profit for the period 10 352 22 491 (3 332) 2 222
Earnings per share (cents) 11.6 36.8
Fully diluted earnings per
share (cents) 11.6 33.5
Headline earnings per
share (cents) 13.7 36.7
Annualised headline
earnings per share(cents) 11.6 30.4
NOTES
Change in accounting policy
In order to comply with AC 102 (revised):
income taxes, the group changed its accounting
policy with regard to raising deferred tax assets
relating to assessed losses, trademarks, and other
temporary differences.
The effect of the change in accounting policy
on the 1999 opening accumulated profit, as
previously reported, amounts to an increase of
R23.5 million
Net profit after tax for the year has been reduced by
R10,437 million (1999: R7.3 million).
HERITAGE COLLECTION HOLDINGS LIMITED
StartCashFlow - bookmark - do not delete
Cash flow statement
for the year ended 31 December 2000
Group Company
15 months 15 months
2000 1999 2000 1999
R'000 R'000 R'000 R'000
Cash flow from operating
activities
Cash generated from operations (17 328) (16 931) (18 620) 8 076
Investment income 321 3 014 10 853 3 763
Finance costs (3 389) (1 246) (222) (2)
Taxation 25.2 (5 002) 45 (792) -
Dividend paid 25.3 25.3 (1 778) - (1 778)
Net cash flow from operating
activities (27 176) (15 118) (10 559) 11 837
Cash flow from investing
activities
Acquisition of subsidiary net
of cash acquired - (15 573) - (21 827)
Change in loans to subsidiaries
and joint ventures - - 14 602 (31 856)
Investments (2 610) (750) (2 610) (750)
Proceeds on disposal of fixed assets 105 - (13)
Purchase of property, plant
and equipment (4 547) (6 214) (11 025) -
Net cash flow from investing
activities (7 052) (22 537) 954 (54 433)
Cash flow from financing activities
Proceeds from issue of share capital - 47 619 - 47 619
Share issue expenses (294) - - -
Change in net debt 10 566 (3 987) 8 563 (5 000)
Net cash flow from financing activities 10 272 43 632 8 563 42 619
Net change in cash and cash equivalents (23 956) 5 977 (1 042) 23
Cash and cash equivalents at beginning
of period 5 736 (241) 23 -
Cash and cash equivalents at end of
period (18 220) 5 736 (1 019) 23
ANNUAL REPORT 2000
CHAIRMAN'S REPORT
Operating profits for the year finalised at a disappointing R16,6 million
before finance costs. There were two major reasons why our profits were lower
than expected. Firstly, we had to write off R28 million in respect of bad
debts, a major portion of which was an exceptional item in respect of bad
debts incurred on certain promotions done during the previous financial year,
prior to our consolidation of our computer systems. Had it not been for this
exceptional write-off, our profits would have been well over forecast and our
profit margins would have exceeded 20%.
Secondly, the year under review has been marked by two completely different six
month periods. The first six months sales were extremely encouraging, with our
Books, Music and Household product divisions performing in excess of forecast.
During this period sales of the higher priced household products items were
substantially above forecast. As these products were offered on long (up to 16
months) payment terms, cash flow turned negative. Accordingly the group had no
option but to restrict credit sales in the second half of the year, in
particular those of new higher-priced products, and concentrate on reducing
inventory, reducing the debtors' book and improving the quality of credit
sales. To this end we have been extremely successful, and experiencing a
negative change in working capital of over R45 million in the first six months,
we have improved the situation substantially in the second six months with a
positive change in working capital of R9 million, a not insignificant
achievement in these difficult times.
As anticipated, the introduction of the National Lottery, the substantial
increase in the petrol price, the enormous increase in expenditure on cell
phones and the proliferation of new casinos throughout the country had a
negative effect on the Group's sales during the last six months. In line with
experience overseas, we anticipate that this effect will be of short duration
and that consumers will return to their normal spending habits in the near
future.
All shareholders will be aware of the proposed link up with New Clicks Holdings
Limited and the controversy that has surrounded this deal. I am pleased that
the matter has now been referred to arbitration for a final decision, New
Clicks having originally declared that they were entitled to withdraw from the
agreement. I am extremely confident, after having had a thorough investigation
done by our financial and legal advisors and legal advisors, that there is no
reason why this deal should not go ahead as per the agreement. We are
confident that a merger with New Clicks will be of tremendous benefit to both
our companies. They will gain enormous access to direct marketing "know how"
and we will gain access to their retail outlets for our products, as well as
the ability to market our products to their substantial number of Clicks card
holders.
The merger of the computer systems of The Heritage Collection and the Reader's
Digest was finally completed in the last quarter of 2000. We anticipate that
the full benefits of merging these databases will be realised this year.
Cost-cutting exercises from the merger of the two operations continue unabated.
Our warehouse operations are now consolidated as are all areas of marketing,
customer services, data capture, finance and debt collection. All debt
collection activities have now been brought in-house with a substantial
lowering of costs and a significant improvement in cash collections.
Some positive aspects emerged from the year 2000. Our magazine advertising
sales picked up strongly, in particular at the end of the year. We have a very
fine and dedicated team in place and all indications are that the sales for the
year 2001 will easily surpass those for the year 2000.
Our retail sales, primarily in the books area, have improved substantially.
Although this is a small area of the business, it is an indication that our
products are being extremely well received in the market. Again, early
indications from this year are that we will considerably exceed last year's
figures.
Africa continues to be an area of great promise - and at the same time great
disappointment. The disappointments are, of course, that Zimbabwe has not
regained it's traditional important role in our business and as a result of the
current government policies in place in that country, our sales have greatly
diminished.
Encouragingly though, has been the performance of other African countries,
notably Tanzania and Kenya where our sales continue to grow unabated although
off a very low base. We believe that our products have tremendous potential in
Africa, provided we can overcome the problematic infrastructure in those
countries.
Development on our websites continues but we are extremely cautious to avoid
the so-called "cash burn" problems experienced by so many new websites. Sales
from our traditional sites more than cover our costs of development and the
development of subsidiary sites such as health, DIY, Gardening, Cooking is
proceeding apace. All sites will offer Digest and Heritage products and will be
linked to Reader's Digest worldwide websites. We anticipate continued steady
growth of sales in this area.
South African Revenue Services confirm that the trademark and copyright
deductions amounting to R29 million claimed by the group can be written off
over a period of up to 10 years. This will have a positive meaningful effect
on the Group's tax situation in the future.
In terms of our 15-year licence agreement, Reader's Digest International
continues to supply us with vast intellectual material, in the form of proven,
tested direct mail packages, ready made books, music and videos, all which have
been rigorously tested throughout the world. We are grateful to the Reader's
Digest for their continued support.
Our prospects for 2001 are encouraging. Because of the difficult retail
conditions experienced during the last six months of last year, we have made
more than adequate provision for doubtful debts in addition to the exceptional
write-off of R28 million. We have also redesigned and strengthened our billing,
collections and list selection systems.
We shall endeavour to ensure that the company becomes cash positive, in line
with virtually every other Reader's Digest company in the world.
Unfortunately, the first quarter of this year has seen a substantial postal
strike which will negatively impact our results in the first half of this year.
Nevertheless, we are confident that the company will continue to prosper, in
view of its profound underlying intellectual strengths.
