| Mon 11 Sep 2006, 16:49 | | Steinhoff - Audited Results For The Year Ended 30 |
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SHF SHFF
SHF
Steinhoff - Audited Results For The Year Ended 30 June 2006 and
distribution declaration
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1998/003951/06)
("Steinhoff")
Share Code: SHF
ISN Code: ZAE000016176
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2006
COMPLEMENTARY GEOGRAPHICAL STRATEGY RELATING TO VERTICAL
INTEGRATION UNDERPIN FUTURE PROSPECTS
HIGHLIGHTS
- Group revenues increased 70% in rand and 72% in euro
- Headline earnings per ordinary share increased 25% in rand and 27% in euro
- R3,3 billion cash generated from operations
- Free cash flow per share is 237 cents (2005: 95 cents)
- Distribution to shareholders increased 25% to 37,5 cents per share
- Substantial retail investments and continued alliances underpin growth
CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 30 June 2006
Audited
Audited Restated*
Year ended Year ended
30 June 30 June %
2006 2005 change
Note R"000 R"000
REVENUE 32 238 322 18 958 014 70
Operating income before
depreciation 3 384 086 2 365 229 43
Depreciation (637 541) (423 767)
Operating income after
depreciation 2 746 545 1 941 462 41
Capital items 1 (88 356) (10 441)
Earnings before interest,
income from investments,
associated earnings and
taxation 2 658 189 1 931 021 38
Net finance costs (291 425) (193 448)
Dividend income 17 382 3 130
Earnings before share of
associates and taxation 2 384 146 1 740 703 37
Share of profit of
associated companies 61 083 58 014
Profit before taxation 2 445 229 1 798 717 36
Taxation (427 712) (213 332)
Profit for the year 2 017 517 1 585 385 27
Attributable to
Equity holders of the parent 1 953 376 1 544 998 26
Minority interest 64 141 40 387
Profit for the year 2 017 517 1 585 385 27
Explanatory notes:
Number of shares in issue
("000) 1 141 442 1 130 584 1
Weighted average number of
shares in issue ("000) 1 133 345 1 128 054
Attributable income (R"000) 2 1 880 694 1 544 998 22
Headline earnings (R"000) 4 1 959 352 1 557 109 26
Basic earnings per share
(cents) 166 137 21
Headine earnings per share
(cents) 173 138 25
Diluted earnings per share
(cents) 164 134 22
Diluted headline earnings
per share (cents) 171 135 27
Distribution per ordinary
share 37,5 30 25
Average currency translation
(rand : euro) 7,8196 7,9091
Note 1: Capital items (R"000)
Loss on disposal of
businesses (1 434)
Closure costs (54 095) (9 270)
Profit on disposal of
businesses and investments 1 907
(Loss)/profit on disposal of
property, plant and equipment (8 475) 37 503
Negative goodwill released 1 434
Impairments (27 693) (38 674)
(88 356) (10 441)
Note 2: Earnings attributable
to ordinary shareholders
(R"000)
Earnings attributable to
equity holders 1 953 376 1 544 998
Dividend entitlement on
non-redeemable cumulative
preference shares
(including STC) (72 682)
1 880 694 1 544 998
Note 3: Headline earnings
calculation (R"000)
Earnings attributable to
equity holders 1 953 376 1 544 998
Adjustment for:
- Capital items 88 356 10 441
- Taxation effects on
capital items (5 615)
- Share of minorities on
capital items (4 083)
-Loss on disposal of property,
plant and equipment included
in share of associate income 1 527
- Impairment/amortisation of
goodwill included in share
of associate income 143
Headline earnings for the
year 2 032 034 1 557 109
Note 4: Headline earnings
attributable to ordinary
shareholders (R"000)
Headline earnings
attributable to equity
holders 2 032 034 1 557 109
Dividend entitlement on
non-redeemable cumulative
preference shares
(including STC) (72 682)
1 959 352 1 557 109
*Prior year figures have been restated to reflect the effects of the transition
to IFRS, the consolidation of special-purpose entities, the adoption of SAICA
circular 9/2006 and the reassessment of provisionally determined fair values of
prior year business combinations.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2006
Audited
Audited Restated*
Year ended Year ended
30 June 30 June
2006 2005
R"000 R"000
Operating profit before working capital
changes 3 350 469 2 439 225
Net changes in working capital (45 015) (990 526)
Cash generated from operations 3 305 454 1 448 699
Net interest paid (291 425) (193 448)
Dividends and capital distribution paid (411 833) (333 076)
Dividends received 26 785 23 087
Taxation paid (339 601) (201 083)
Net cash inflow from operating activities 2 289 380 744 179
Net cash outflow from investing activities (5 977 659) (2 479 035)
Net cash inflow from financing activities 3 375 328 3 036 809
Net (decrease)/increase in cash and cash
equivalents (312 951) 1 301 953
Effects of exchange rate changes on cash
and cash equivalents 352 913 (502)
Cash and cash equivalents at beginning
of year 4 957 893 3 656 442
Cash and cash equivalents at end of year 4 997 855 4 957 893
Cash and cash equivalents can be reconciled
to the balance sheet as follows:
- Cash and cash equivalents above 4 997 855 4 957 893
- Overdrafts included in financing
activities (155 525) (731 948)
Cash and cash equivalents per balance sheet 4 842 330 4 225 945
*Prior year figures have been restated to reflect the effects of the transition
to IFRS, the consolidation of special-purpose entities, the adoption of SAICA
circular 9/2006 and the reassessment of provisionally determined fair values of
prior year business combinations.
CONDENSED CONSOLIDATED BALANCE SHEET
at 30 June 2006
Audited
Audited Restated*
Year ended Year ended
30 June 30 June
2006 2005
R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment, biological
assets and intangible assets 13 358 558 8 908 511
Investments and loans 3 315 157 1 417 883
Deferred tax assets 529 741 466 047
17 203 456 10 792 441
Current assets
Accounts receivable, short-term loans
and other current assets 6 261 127 5 859 569
Inventories 3 290 566 2 937 671
Cash and cash equivalents 4 842 330 4 225 945
14 394 023 13 023 185
Total assets 31 597 479 23 815 626
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and reserves 10 872 655 8 187 472
Preference share capital 1 022 122 643 879
11 894 777 8 831 351
Minority interest 814 998 882 750
Total equity 12 709 775 9 714 101
Non-current liabilities Deferred tax
liabilities 1 284 184 927 188
Long-term liabilities and provisions 8 672 889 6 034 046
Long-term licence fee liability 88 655 143 894
10 045 728 7 105 128
Current liabilities
Net interest bearing liabilities 2 241 465 763 445
Accounts payable and provisions 6 600 511 6 232 952
8 841 976 6 996 397
Total equity and liabilities 31 597 479 23 815 626
Net asset value per ordinary share (cents) 953 724
Gearing ratio (net) 30% 21%
Closing exchange rate - rand : euro 9,1600 8,0965
*Prior year figures have been restated to reflect the effects of the transition
to IFRS, the consolidation of special-purpose entities, the adoption of SAICA
circular 9/2006 and the reassessment of provisionally determined fair values of
prior year business combinations.
SEGMENTAL ANALYSIS
year ended 30 June 2006 Wholesale,
retail and
Manufacturing distribution Total
R"000 R"000 R"000
Revenue 9 499 580 22 738 742 32 238 322
Income before interest,
taxation and capital items,
including share of associate
companies" income, and
excluding minority interests 1 457 952 1 281 452 2 739 404
Gross assets 17 496 521 14 364 242 31 860 763
Gross liabilities (11 243 244) (8 722 742) (19 965 986)
Net assets 6 253 277 5 641 500 11 894 777
Wholesale,
retail and
Manufacturing distribution Total
year ended 30 June 2005 R"000 R"000 R"000
Revenue 9 249 865 9 708 149 18 958 014
Income before interest,
taxation and capital items
including share of associate
companies" income, and
excluding minority interests
("segment results") 1 181 290 779 470 1 960 760
Gross assets 12 174 984 12 397 758 24 572 742
Gross liabilities (6 549 399) (9 191 992) (15 741 391)
Net assets 5 625 585 3 205 766 8 831 351
GEOGRAPHICAL ANALYSIS
year ended 30 June 2006
Southern European Pacific
Africa Community Rim Total
R"000 R"000 R"000 R"000
Revenue 17 928 399 12 049 652 2 260 271 32 238 322
Income before
interest, taxation,
and capital items,
including share
of associate
companies" income,
and excluding
minority interests 995 329 1 566 359 177 716 2 739 404
Gross assets 11 494 300 17 623 061 2 743 402 31 860 763
Gross liabilities (8 477 363) (10 254 487) (1 234 136) (19 965 986)
Net assets 3 016 937 7 368 574 1 509 266 11 894 777
Southern European Pacific
year ended Africa Community Rim Total
30 June 2005 R"000 R"000 R"000 R"000
Revenue 9 958 051 6 616 334 2 383 629 18 958 014
Income before
interest, taxation,
and capital items
including share
of associate
companies" income,
and excluding
minority interests 615 028 1 104 987 240 745 1 960 760
Gross assets 8 902 924 14 330 633 1 339 185 24 572 742
Gross liabilities (6 868 993) (8 300 970) (571 428) (15 741 391)
Net assets 2 033 931 6 029 663 767 757 8 831 351
SEGMENTAL ANALYSIS IN EURO "000
year ended 30 June 2006
Revenue Revenue
30 June 30 June %
2006 2005 change
Manufacturing 1 214 842 1 169 522 4
Wholesale, retail and
distribution 2 907 916 1 227 466 137
Total 4 122 758 2 396 988 72
Segment Segment
results results
30 June 30 June %
2006 2005 change
Manufacturing 186 448 149 358 25
Wholesale, retail and
distribution 163 877 98 554 66
Total 350 325 247 912 41
GEOGRAPHICAL ANALYSIS IN EURO "000
year ended 30 June 2006
Revenue Revenue
30 June 30 June %
2006 2005 change
Southern Africa 2 292 751 1 259 063 82
European Community 1 540 955 836 547 84
Pacific Rim 289 052 301 378 (4)
Total 4 122 758 2 396 988 72
Segment Segment
results results
30 June 30 June %
2006 2005 change
Southern Africa 127 286 77 762 64
European Community 200 312 139 711 43
Pacific Rim 22 727 30 439 (25)
Total 350 325 247 912 41
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2006
Ordinary Total
share Non-distri- Distri- ordinary
capital butable butable shareholders"
and premium reserves reserves
R"000 R"000 R"000 R"000
Balance at
30 June 2004 as
restated* 3 161 878 158 131 3 151 060 6 471 069
Profit for
the year 1 544 998 1 544 998
Restatement of
available-for-sale
financial assets
to fair value 482 482
Investment
reserves released
to income (3 638) (3 638)
Exchange
differences on
consolidation of
foreign
subsidiaries 345 638 345 638
Share-based
payment reserve 48 916 48 916
Dividends paid (248 970) (248 970)
Issue of share
capital 28 977 28 977
Share of associate
companies
transferred to
retained earnings (133 356) 133 356
Net increase on
acquisition and
disposal of
subsidiaries
Balance at
30 June 2005 as
restated* 3 190 855 416 173 4 580 444 8 187 472
Profit for the
year 1 953 376 1 953 376
Capital
distribution (340 225) (340 225)
Preference
dividend (43 234) (43 234)
Issue of share
capital 162 695 162 695
Foreign currency
translation
reserve movement 665 706 665 706
Investment
reserves released
to income (1 447) (1 447)
Cash flow hedges 37 927 37 927
Actuarial gains 25 656 25 656
Share-based
payment reserve 39 765 39 765
Convertible bond
issue - equity
portion 220 712 220 712
Transfer to
contingency
reserve 1 827 (2 394) (567)
Minority
transactions (35 181) (35 181)
Balance at
30 June 2006 3 013 325 1 371 138 6 488 192 10 872 655
*Prior year figures have been restated to reflect the effects of the transition
to IFRS, the consolidation of special-purpose entities, the adoption of SAICA
circular 9/2006 and the reassessment of provisionally determined fair values of
prior year business combinations.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2006
Preference
share Total
capital Minority shareholders"
and premium interest equity
R"000 R"000 R"000
Balance at
30 June 2004 as
restated* 35 241 6 506 310
Profit for the
year 40 387 1 585 385
Restatement of
available-for-sale
financial assets
to fair value 482
Investment
reserves released
to income (3 638)
Exchange
differences on
consolidation of
foreign
subsidiaries 835 346 473
Share-based
payment reserve 48 916
Dividends paid (248 970)
Issue of share
capital 643 879 672 856
Share of associate
companies
transferred to
retained earnings
Net increase on
acquisition and
disposal of
subsidiaries 806 287 806 287
Balance at
30 June 2005
as restated* 643 879 882 750 9 714 101
Profit for the
year 64 141 2 017 517
Capital
distribution (27 833) (368 058)
Preference
dividend (43 234)
Issue of share
capital 378 243 540 938
Foreign currency
translation
reserve movement (6 784) 658 922
Investment
reserves released
to income (1 447)
Cash flow hedges 37 927
Actuarial gains 16 499 42 155
Share-based
payment reserve 39 765
Convertible bond
issue - equity
portion 220 712
Transfer to
contingency
reserve 567
Minority
transactions (114 342) (149 523)
Balance at
30 June 2006 1 022 122 814 998 12 709 775
*Prior year figures have been restated to reflect the effects of the transition
to IFRS, the consolidation of special-purpose entities, the adoption of SAICA
circular 9/2006 and the reassessment of provisionally determined fair values of
prior year business combinations.
NOTES
1. CHANGES IN ACCOUNTING POLICIES
The group is reporting under International Financial Reporting Standards (IFRS)
for the first time for the year ended 30 June 2006, and accordingly,
comparatives have been restated where required. The transition to IFRS has been
accounted for in accordance with IFRS 1 (First-time Adoption of International
Financial Reporting Standards) with 1 July 2004 as the date of transition. The
group also adopted SAICA circular 9/2006 retrospectively. The changes in
accounting policies as a consequence of the transition to IFRS are described
below.
2. SIGNIFICANT CHANGES TO THE GROUP"S ACCOUNTING POLICIES FOLLOWING ADOPTION OF
IFRS AND IFRS 1 - FIRST-TIME ADOPTION ELECTION OF EXEMPTIONS
2.1 Business combinations
The group has elected, in terms of IFRS 1, to apply the requirements of IFRS 3
to all business combinations with effective dates on or after 1 April 2004. The
classification and accounting treatment of business combinations with effective
dates prior to 1 April 2004 have not been reconsidered, and previously reported
goodwill has been included on the basis of its deemed cost.
2.2 Property, plant and equipment
IAS 16 - Property, Plant and Equipment ("IAS 16") differs in certain respects
from the previous South African Generally Accepted Accounting Practice ("SA
GAAP") equivalent, AC 123 - Property, plant and equipment ("AC 123"), applied by
the group until 30 June 2005. IAS 16 requires an entity to measure the residual
value of an item of property, plant and equipment as the amount the entity
estimates it would receive currently for the asset as if the asset was already
of the age and in the condition it is expected to be at the end of its useful
life. The group has previously, under SA GAAP, accounted for residual values
based on the approach adopted in terms of the requirements of AC 123.
Where components of an item of property, plant and equipment have different
useful lives, they are accounted for as separate items of property, plant and
equipment. Residual values and useful lives of all assets are reassessed
annually. In addition, depreciation of an item of property, plant and equipment
commences when it is available for use and ceases at the earlier of the date it
is classified as held for sale or the date that it is derecognised.
The group has assessed the useful lives and residual values of all individual
components of property, plant and equipment and adjusted the carrying value of
those assets at the date of transition accordingly.
The adjustments to the residual values and useful lives of certain items of
property, plant and equipment and the corresponding change in their carrying
values at 1 July 2004 has also impacted depreciation charges subsequent to 1
July 2004.
The group has elected, in terms of IFRS 1, to measure certain items of property,
plant and equipment at the transition date to IFRS at their respective fair
values, and used those fair values as the deemed cost at that date. The group
adjusted the carrying values of the individual items of property, plant and
equipment for those specified items to which the exemption was applied.
Changes in estimated decommissioning and restoration liabilities that occurred
before the transition date to IFRS have also been adjusted at the transition
date on a net basis, in accordance with the provisions of IFRIC 1 and the
applicable exemptions under IFRS 1.
2.3 Share-based payment transactions
The fair value of share options under employee share incentive schemes and other
equity instruments granted to group employees is recognised as an employee
expense, with a corresponding increase in equity. The fair value is measured at
grant date and expensed over the period during which the employee becomes
unconditionally entitled to the equity instruments. The fair value of the
instruments granted is measured using generally accepted valuation techniques,
taking into account the terms and conditions upon which the instruments are
granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that vest, except where forfeiture is only due to
performance conditions not being met. This accounting policy has been applied to
all equity instruments granted after 7 November 2002 that had not yet vested at
1 January 2005. The fair value of share-based payments was not recognised under
the group"s previous accounting policies.
2.4 Black economic empowerment transactions
Share-based payments
The group is applying the scope of IFRS 2 - Share-based Payments, to include the
group"s Black economic ownership initiatives in accordance with international
interpretations in this regard. Where goods or services are received from Black
economic empowerment partners as consideration for equity instruments of the
group, these transactions are accounted for in terms of IFRS 2. This accounting
policy is applicable to equity instruments that had not yet vested by 1 January
2005, and thus had no application in the current period.
2.5 Foreign operations
The group has elected, in terms of IFRS 1, that cumulative foreign currency
translation reserves in existence at the transition date, 1 July 2004, arising
from the previous application of SA GAAP, have been recognised in retained
income in determining the opening IFRS balance sheet at that date.
2.6 Designation of previously recognised financial instruments
The group has also elected, in terms of IFRS 1, to designate certain financial
liabilities previously recognised at amortised cost to fair value through profit
and loss. The rationale for the designation was to eliminate an accounting
mismatch arising from measuring related assets and liabilities and recognising
gains and losses on different bases.
2.7 Common control transactions - premia and discounts arising on subsequent
purchases from or sales to minority interests in subsidiaries
Following the presentation of minority interests in equity, any increases and
decreases in ownership interests in subsidiaries without a change in control,
are recognised as equity transactions in the consolidated financial statements.
Accordingly, any premia or discounts on subsequent purchases of equity
instruments from or sales of equity instruments to minority interests are
recognised directly in the equity of the parent shareholder.
Previously, premia on subsequent purchases of equity instruments from minorities
were recognised as goodwill and premia or discounts on subsequent disposal of
equity instruments to minorities were taken to income as a capital item in the
income statement.
2.8 Earnings per share - cumulative preference shares
In order to calculate earnings per share, the after-tax amount of preference
dividends for cumulative preference shares accrued for that period, whether or
not declared, is deducted from profit attributable to equity holders in
determining earnings per share. The amount of preference dividends for the
period used to calculate earnings per share does not include the amount of any
preference dividends for cumulative preference shares paid or declared during
the current period, in respect of previous periods.
2.9 Capital items
Capital items are defined as items of income and expenditure relating to the
acquisition, disposal or impairment of investments, businesses, property, plant
and equipment and intangible assets, closure of businesses, as well as the
impairment of goodwill.
3. RECONCILIATION BETWEEN IFRS, PREVIOUS SOUTH AFRICAN GENERALLY ACCEPTED
ACCOUNTING PRACTICE AND OTHER RESTATEMENTS
3.1 SIC 12 - Transaction recognition criteria
In circumstances where equity in a subsidiary or associate company is disposed
and serves as security for the funding of the proceeds receivable, the
accounting recognition of the disposal of such shares in the group financial
statements is deferred until the funding subject to the security of the equity
sold has been fully repaid. In previous years, such transactions were recognised
upon entering into the respective sale agreements. The comparative results and
financial position have been restated accordingly.
3.2 SAICA circular 9/2006 - Transactions giving rise to adjustments to
Revenue/Purchases
Previously, the group had accounted for certain rebates received and settlement
discounts granted as income and expense in the income statement. In terms of
Circular 9/2006 issued by the South African Institute of Chartered Accountants,
these rebates received and settlement discounts granted need to be set off
against turnover and cost of sales and, where applicable, estimated at the date
the related asset is recognised and capitalised to cost of the asset. As a
result, the revenue and cost of sales in the comparative financial statements
have been restated to reflect the net turnover or cost of sale and, where
applicable, the income recognised has been reversed against the cost of the
asset and the depreciation charged for the prior year decreased.
The following reconciliations provide a quantification of the effect, after
taxation, of the transition to IFRS:
Reconciliation of equity
1 July 2004 30 June 2005
R"000 R"000
Equity previously recognised
under SA GAAP 6 489 847 10 193 882
Retrospective application of previous
SA GAAP accounting policy changes and
restatements (366 373)
Black Economic Empowerment minorities
in subsidiary eliminated pending
derecognition criteria (31 983)
Impairment losses adjusted for (16 408)
Cash discounts, rebates and extended
payment terms (2 081)
Derecognition of minorities on
consolidation of BEE entity (315 901)
Adjustment upon adoption of IFRS 16 463 (113 408)
Business combinations adjusted
retrospective to 1 April 2004 -
IFRS 3/IFRS 1 66 617 (97 925)
Property, plant and equipment -
IAS 16/IFRS 1 (54 516) (28 768)
Share-based payments - IFRS 2/IFRS 1 4 362 13 641
Re-designation of financial instruments
to fair value through income statement
- IAS 39/IFRS 1 (356)
Equity reported under IFRS 6 506 310 9 714 101
Reconciliation of profit for the period ended 30 June 2005
30 June 2005
R"000
Profit for the period attributable to
equity holders of the parent previously
reported under SA GAAP 1 591 555
Retrospective application of previous SA GAAP
accounting policy changes and restatements (26 203)
Impairment losses adjusted for (16 408)
Cash discounts, rebates and extended payment terms (2 081)
Derecognition of minorities on consolidation of
BEE equity (7 714)
Adjustment upon adoption of IFRS (20 354)
Business combinations adjusted retrospective to
1 April 2004 - IFRS 3/IFRS 1 1 404
Property, plant and equipment - IAS 16/IFRS 1 11 817
Share based payments - IFRS 2/IFRS 1 (33 164)
Re-designation of financial instruments to fair
value through income statement - IAS 39/IFRS 1 (411)
Profit for the period attributable to equity
holders of the parent previously reported
under IFRS 1 544 998
The prior year restatements reduced basic earnings per share as previously
reported from 141 cents to 137 cents per share.
4. Financial statements
This set of summarised consolidated financial statements are presented in
compliance with IAS 34 - Interim Financial Reporting. The consolidated financial
statements for the year have been audited by Deloitte & Touche and their
accompanying unmodified audit report as well as their unmodified audit report on
this set of summarised financial information is available for inspection at the
company"s registered office. Full details of the group"s business combinations
for the year, additions and disposals of property, plant and equipment as well
as commitments and contingencies are included in the group"s consolidated
financial statements.
COMMENTARY
REVIEW OF RESULTS
The group"s strategic positioning of its operations globally has yet again
delivered the desired result. The business model of geographically spread
operations and accompanying strategies of supply chain participation through
vertical integration is the platform from which sustainable growth is being
delivered. The group"s manufacturing and sourcing operations benefited from its
investment in an expanded retail base. Despite challenging market conditions
outside South Africa, the extension of the group"s retail distribution base is
poised to deliver sustainable benefits in the future.
Trading conditions in Continental Europe remain competitive, notwithstanding
moderate signs of recovery. The consolidation trend in these markets continues
and the group is well-positioned to exploit these through market coverage in
terms of variety of product and price points, as well as sourcing networks. The
investments in developing and acquiring brands have benefited both the group and
its strategic retail partners via exclusivity agreements. The Polish and
Hungarian operations performed well. The Benelux region, through its accelerated
rollout of the Henders & Hazel concept, has shown a satisfying improvement in
profitability towards the latter part of the financial year. It is anticipated
that this concept will enable the Benelux operations to continue to grow under
this new business model, which should contribute to improved performance in the
years ahead.
In addition to growth in existing markets, the group continues to pursue and
secure new markets. In the year under review the group secured new sustainable
supply agreements in Scandinavia, France and the Far East as a result of its
geographic reach and position as a preferred supplier to leading retailers in
those markets.
In the United Kingdom ("UK"), the group should continue to benefit from its
investment in Homestyle. Despite difficult trading conditions but following
decisive restructuring actions, Homestyle is now well positioned to grow. Its
operating profitability already improved in the last six months of the financial
year. The commercial relationship with Steinhoff, as a significant supplier to
Homestyle, has exceeded initial expectations and benefited the group through
incremental business gained from this retail distribution base. Steinhoff"s UK
manufacturing businesses delivered a strong performance and are well positioned
for significant growth.
Consumer confidence and spending patterns in the Pacific Rim region were
subdued, with the furniture retail market in Australia and New Zealand remaining
static during the year under review. Focused re-branding initiatives, the
development and store rollouts of the new brand, BayLeatherRepublic, and store
format conversions, are showing signs of improved performance. The International
Sourcing division in China continued to perform well, and is rapidly becoming a
key contributor to the continued success of the divisions it serves within the
group.
South Africa"s household goods sector continued to experience strong demand and
Steinhoff Africa"s Furniture division performed particularly well due to its
positioning to take advantage of increased consumer spending and a wider
consumer base. The increases in fuel prices and the continued high consumer
spending and its accompanying inflationary impact has resulted in interest rate
hikes. This may cause a slowdown in the buoyant market conditions which
prevailed in respect of household goods. In order to address these effects,
actions have been implemented in all of the southern African operations to
remain competitive, whilst maintaining profitable growth. PG Bison, once again
delivered record results. All Steinhoff"s Timber interests have now been
rebranded under the successful PG Bison brand. This resulted in an expanded
integrated value chain, stretching from the plantations to value-added products
supplied directly to the end consumer. The Raw Material division experienced
tough trading conditions as a result of import competition. The Textile division
was repositioned during the year to improve future contribution.
The consistently sound operating performance delivered by Unitrans, vindicates
the group"s investment therein.
The average exchange rate used for converting euro income and expenditure to ZAR
was R7,8196 : 1 euro compared to R7,9091 : 1 euro in respect of the previous
financial year.
Performance
The group"s revenues increased by 70% from R18 958 million to R32 238 million. A
substantial portion of this increase was attributable to the first-time
consolidation of the full-year results of Unitrans (2005: 6 months) and
Homestyle, that became subsidiaries with effect from January 2005 and July 2005,
respectively.
The group generated 46% (2005: 52%) of its revenues in currencies other than
South African rand, principally euro, pound sterling and Australian dollar. The
impact of the inclusion of Homestyle as a subsidiary on the proportionate
contribution of foreign currency-denominated revenue, was reduced by the full-
year inclusion of Unitrans. However, if Unitrans" motor retail business is
excluded, the foreign currency-denominated revenue of the group comprises 67%
(2005: 67%). The actual foreign revenue achieved in currencies other than South
African rand, denominated in euro, increased by 61% from euro 1 138 million to
euro 1 830 million.
Headline earnings attributable to ordinary shareholders increased by 26% from R1
557 million in the year ended 30 June 2005 to R1 959 million.
Headline earnings per ordinary share increased by 25% to 173 cents (2005: 138
cents) with basic earnings per ordinary share improving 21% to 166 cents (2005:
137 cents). The weighted average number of ordinary shares in issue was 1 133,3
million (2005: 1 128,1 million).
Ordinary shareholders" funds at 30 June 2006 amounted to R10 873 million (30
June 2005: R8 187 million). The return on average ordinary shareholders" funds
was stable at 21%. The net asset value per ordinary share grew to 953 cents from
724 cents per share as at 30 June 2005. This increase is stated after accounting
for the equity portion of R221 million of the convertible bond referred to under
Corporate Activity.
The group"s cash flow from operations was R3 305 million (2005: R1 449 million).
Cash generation is calculated after taking account of the net increase in
working capital of R45 million (2005: R991 million). Net cash flow from
operating activities (as adjusted for dividends and capital distributions paid)
is 237 cents per share (2005: 95 cents per share) and exceeded headline earnings
per share at 173 cents, confirming the group"s quality of earnings. Positive
cash generation was achieved through good working capital management, containing
inventory and debtor levels, notwithstanding the substantial increase in
activity levels.
The group"s operating margin decreased, as expected, to 11,3% (2005: 12,5%)
excluding, for comparative purposes, the lower margins of the motor retail
business of Unitrans. The decreased margin is attributable to the inclusion of
Homestyle and the retail operations in the Pacific Rim, which, collectively, as
a result of continued tough trading conditions in the UK and Australasia, made a
lower proportionate contribution to group operating profits. The continued
improvement and growth in the retail trading results is anticipated to impact
favourably on margins. The group continues to benefit from improved efficiencies
throughout the supply chain and the group"s favourable terms of supply of
finished products for resale. Margins should also improve once the current
process of integrating and rationalising activities in the Pacific Rim, notably
in respect of the logistics function, have been completed.
Net finance expense for the year rose to R291 million (2005: R193 million) in
line with the expanded group operations and the funding costs incurred on the
acquisition of Homestyle, and the bank facilities assumed with the acquisition
of Steinhoff Asia Pacific in January 2006.
At 30 June 2006, Steinhoff had net interest-bearing debt of R3 566 million (30
June 2005: R1 894 million) resulting in a debt: equity ratio of 30% (30 June
2005: 21%), well within the group"s targeted debt : equity range. The group"s
permanent capital base was strengthened by the net proceeds of R378 million from
the issue of perpetual preference shares.
The group"s taxation charge increased to R428 million (2005: R213 million). The
resultant higher average tax rate was attributable mainly to Unitrans" higher
tax rate and Homestyle"s tax losses. Given the prospects of Homestyle and likely
further favourable tax incentives in respect of exports from Eastern Europe,
management remains satisfied with a favourable sustainable average tax rate of
15% anticipated for the 2007 financial year.
The wholesale, distribution and retail segment of the business now comprises 71%
(2005: 51%) of Steinhoff"s group revenues and it is anticipated that this
segment will be further expanded to facilitate increased participation through
additional added value segments of the supply chain.
Corporate activity
In addition to the corporate transactions detailed in Steinhoff"s interim
results announcement (8 March 2006), and those concluded by Unitrans and
reported on in its own results announcement (23 August 2006), the group
concluded the following corporate transactions during the year under review:
- with effect from January 2006 Steinhoff, through one of its European
subsidiaries, acquired the remaining issued ordinary share capital held by the
management in the retail operations conducted through Steinhoff Asia Pacific
(Pty) Limited (formerly Bravoscar Nominees (Pty) Limited) in Australia and New
Zealand. The purchase consideration was settled by the assumption of debt in
Steinhoff Asia Pacific and the issue of Steinhoff shares, which are subject to
certain "lock-in" arrangements with the management concerned;
- on 30 June 2006 Steinhoff issued a seven-year rand-denominated convertible
bond ("the Bond") to raise R1,5 billion (before expenses). The Bond bears
interest six-monthly at a fixed rate of 5,7% p.a. and is convertible into 54,74
million Steinhoff ordinary shares at an issue price of 2 740 cents per share
(representing a conversion premium of 32,5% to the prevailing underlying share
price at the date of pricing). The Bond was issued exclusively to international
investors and is listed on the Singapore Stock Exchange. The net proceeds from
the Bond are earmarked for investment in the North-Eastern Cape Forestry project
("NECF") which is currently being developed by PG Bison at an estimated cost of
R1,5 billion;
- during the year Steinhoff continued to participate in the funding the
expansions in the European Community of Poco International, it"s strategic
retail partner in that region; and
- Steinhoff Investment Holdings Limited issued a further tranche of variable
rate, cumulative, non-redeemable, non-participating preference shares.
Outlook
The restructuring of Homestyle continues. It will provide a sound base from
which its turnaround in the latter half of the year under review is expected to
continue to deliver substantial growth in operating profits. As a result, the
balance of the group"s operations in the UK, Eastern Europe and Pacific Rim also
stand to further benefit from their trading relationships with Homestyle.
In the German region, the group continues to grow through its existing brand and
product strategy, and relationships with major retailers, mail order companies
and buying groups. The new Esprit product range has been successful with 120
studios already opened, and further rollout planned. The group continues to
investigate opportunities for brand expansion, through own brand development and
acquisitions. The German economy is showing moderate signs of recovery and
increased consumer confidence. The level of order books in respect of the
group"s main product categories and new ranges is growing. The successful
Henders & Hazel store-in-store concept of our Benelux operations is being
extended to other European destinations.
Steinhoff International Sourcing in China will increasingly contribute to the
success of the divisions it serves, in particular the UK region, Australasia,
the German region and South Africa. The sourcing base is being expanded to
increase the group"s supplier base. Initiatives are well advanced to improve the
logistics and distribution function to provide a more efficient service to the
group. In respect of Australia, project "Renew" (the repositioning of the
existing Freedom brand) and new store openings under the BayLeatherRepublic
brand, all bode well for improved performance in the current financial year and
thereafter.
The South African retail sector is expected to become more competitive as a
result of the macro-economic factors impacting on consumer confidence and
disposable income. The combination of the timber interests and their rebranding
under PG Bison is expected to deliver sustained growth in the years to come. PG
Bison"s NECF particleboard project is well under way and is expected to be
commissioned in January 2008, which will add capacity of 1 000 m3 of particle
board per day. This will further strengthen and improve PG Bison"s competitive
position in respect of import replacement and the anticipated continued high
level of demand in the structural industry.
The acquisition by Unitrans of Concorde Logistics and TechXpress provides a base
for Unitrans" international expansion, and these acquisitions will assist in
exploiting synergies within the larger Steinhoff group. It is anticipated that
Unitrans will deliver a satisfactory performance in the current financial year.
Management expects to achieve growth in headline earnings from continuing
operations for the current financial year.
On behalf of the board of directors
BE Steinhoff MJ Jooste
Executive chairman Chief executive officer
11 September 2006
Distribution from share premium account
Notice is hereby given that, in accordance with the authority granted to the
directors of the company in terms of Article 56A of the company"s articles of
association and the resolution passed at the annual general meeting of the
company held on 25 November 2005, a cash distribution from share premium (in
lieu of a dividend) of 37,5 cents per share (2005: 30 cents per share) has been
declared and is payable to shareholders recorded in the books of the company at
the close of business on Friday, 10 November 2006 ("the capital distribution").
The salient dates of this distribution are:
2006
Last date to trade cum capital distribution Friday, 3 November
Shares trade ex capital distribution Monday, 6 November
Record date Friday, 10 November
Payment date Monday, 13 November
On Monday, 13 November 2006, the capital distribution will be electronically
transferred to the bank accounts of certificated shareholders who utilise this
facility. In all other instances of certificated holders, cheques dated 13
November 2006 will be posted on or about that date. Shareholders who have
dematerialised their shares will have their accounts credited on 13 November
2006.
In terms of the Companies Act, the directors confirm that, after the payment of
the capital distribution, the company will be able to pay its debts as they
become due in the ordinary course of business and its consolidated assets,
fairly valued, will exceed its consolidated liabilities.
Annual report
The annual report will be mailed to shareholders in due course. The annual
general meeting is scheduled to take place on Monday, 4 December 2006, at the
registered office of the company, at 08:00.
By order of the board
SJ Grobler
Company secretary
11 September 2006
For more detail on the group"s listed investments, shareholders are referred to
the following results announcements and financial information:
- Unitrans Limited - 23 August 2006 www.unitrans.co.za
- Homestyle Group plc - 31 August 2006 www.homestylegroup.com
- Amalgamated Appliance Holdings Limited -
22 August 2006 www.amap.co.za
- KAP International Holdings Limited -
11 September 2006 www.kapinternational.com
STEINHOFF INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1954/001893/06)
(JSE code: SHFF)
(ISIN: ZAE000068367)
("Steinhoff Investments")
Steinhoff Investments is a wholly owned subsidiary of Steinhoff International
Holdings Limited (Steinhoff) except for the variable rate, cumulative, non-
redeemable, non-participating preference shares with a par value of 0,1 cent
each in the capital of Steinhoff Investments, issued at a premium of R99,99 per
share (the preference shares). Steinhoff Investments holds the entire issued
share capital in the group"s two principal subsidiaries, Steinhoff Mbel
Holdings Alpha GmbH and Steinhoff Africa Holdings (Proprietary) Limited.
Preference shareholders are referred to the above results of Steinhoff for a
full appreciation of the consolidated results and financial position of
Steinhoff Investments.
Declaration of dividend number 2 to preference shareholders
The board of Steinhoff Investments has resolved to declare a dividend of 392
cents per preference share in respect of the period from 1 January 2006 up to
and including 30 June 2006 (the dividend period), payable on Monday, 23 October
2006, to those preference shareholders recorded in the books of the company at
the close of business on Friday, 20 October 2006. This dividend has been
determined on the basis of 75% of the prime bank overdraft lending rate of ABSA
Bank Limited prevailing over the dividend period, applied to the nominal value
plus premium (of R100,00 per preference share, in the aggregate).
The dividend is payable in the currency of South Africa.
Last date to trade cum dividend Friday, 13 October 2006
Shares trade ex dividend Monday, 16 October 2006
Record date Friday, 20 October 2006
Payment date Monday, 23 October 2006
No dematerialisation or rematerialisation of preference shares may take place
between Monday, 16 October 2006 and Friday, 20 October 2006, both dates
inclusive.
On Monday, 23 October 2006, the preference dividend will be electronically
transferred to the bank accounts of preference shareholders. In all other
instances of certificated holders, if any, cheques dated 23 October 2006 will be
posted on or about that date. Preference shareholders who have dematerialised
their shares will have their accounts credited on Monday, 23 October 2006.
On behalf of the board of directors
D Konar JHN van der Merwe
Non-executive director Executive director
11 September 2006
OTHER NOTES
1. CORPORATE GOVERNANCE
Steinhoff has embraced the recommendations of King II on Corporate Governance
and strives to provide reports to shareholders that are timely, accurate,
consistent and informative.
2. DIRECTORATE
During the year under review the composition of our board has had certain
changes and the board has resolved that the board"s committees (save for Exco)
effective from date of this announcement, will only comprise non-executive
directors. Changes which occurred during the period under review related to the
resignation from the group of RH Walker and the appointment of IM Topping,
managing director of Steinhoff"s UK operations, to the board. In addition JNS du
Plessis was reclassified from non-executive to executive and now acts as
alternate director, and the board was further strengthened with the appointment
of HJK Ferreira and SJ Grobler as alternate directors.
3. SOCIAL RESPONSIBILITY
Steinhoff continues to be recognised for its corporate social investment
activities. Management remains committed to the related initiatives and is
conscious of the needs in this regard. A number of social responsibility
projects are continuing. A good working relationship is maintained with the
relevant unions. Ongoing skills and equity activities continue to ensure
compliance with current legislation.
Plans continue in terms of initiatives embarked upon that contribute to broader
skills development and sourcing appropriately qualified staff on an ongoing
basis.
4. RELATED-PARTY TRANSACTIONS
The company entered into various related-party transactions. These transactions
are no less favourable than those arranged with third parties.
5. SUBSEQUENT EVENTS
No significant events have occurred in the period between the reporting date and
the date of this report.
ADMINISTRATION
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
JSE share code: SHF ISIN code: ZAE000016176
("Steinhoff" or "the company" or "the group")
Registered office
28 Sixth Street, Wynberg, Sandton, 2090, Republic of South Africa
Tel +27 (11) 445 3000 Fax +27 (11) 445 3099
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Company secretary: SJ Grobler
Auditors: Deloitte & Touche
Sponsor: PSG Capital Limited
Directors: BE Steinhoff* (chairman), MJ Jooste (chief executive officer), DE
Ackerman, CE Daun*, KJ Grov , D Konar, JF Mouton, FJ Nel, FA Sonn, NW
Steinhoff*, IM Topping#, DM van der Merwe, JHN van der Merwe.
Alternate directors: JNS du Plessis, HJK Ferreira, SJ Grobler
#British *German Non-executive
www.steinhoffinternational.com
To view results on mobile - www.steinhoff.mobi
Date: 11/09/2006 04:49:52 PM Produced by the JSE SENS Department
