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ELH
ELH
Ellerine Holdings Limited - Consolidated audited results for the year
ended 31 August 2006 and distribution
declaration
Ellerine Holdings Limited
Registration number: 1968/013402/06
Share code: ELH
ISIN number: ZAE000022752
Consolidated audited results for the year ended 31 August 2006
- Revenue up 79,2%
- Operating profit up 76,3%
- Operating margin at 16,8%
- Headline earnings per share up 28,9%
- Distribution per share up 76,1%
- Gearing down to 15,5%
"A RECORD BREAKING YEAR"
GROUP FINANCIAL REVIEW
The Ellerine Holdings Group has had an outstanding year, having achieved
record levels of revenue at R7,6 billion, pre-tax profits of R1,27 billion
and an equity base of R5,0 billion. The results of the acquired Relyant
Group are included for the full 12 months, compared to last year when their
results were only included for the four months from date of acquisition in
May 2005.
Income statement
Group revenue reflects a significant increase of 79,2% over the previous
period, with the contribution to revenue from merchandise sales at 65,5%
(2005 - 65,4%) of which cash sales constitute 42,3% (2005 - 36,2%) of total
merchandise sales.
Comparable cash sales reflect an increase of 6,1% compared to last year and
an increase of 1,5% compared to the first six months. Furniture sales
increased to 63,9% (2005 - 61,2%) of merchandise sold, which is slightly
above the 2,2% price inflation for this category. Price inflation for Group
total merchandise sold was unchanged, despite the deflation of 1,4% in
electrical goods and appliances. Retail trading space increased by 5,4% in
line with the 5,2% increase in trading outlets. The total Group revenue
increase is characterised by the buoyant consumer demand for goods,
particularly in the first six months and the sales mix in favour of cash
sales in the second half of the year under review.
Consumer financial services on credit sales, a significant contributor to
revenue, comprising insurance income and finance charges earned at R2,15
billion (2005 - R1,23 billion) increased by 74,2% and contributed 28,3%
(2005 - 29,1%) to total revenue, which is 0,8% lower than 2005 as a result
of the increased mix towards cash sales of total merchandise sold.
Although prime rates increased by 1%, Usury rates remained unchanged, which
negatively impacted finance charge income.
Merchandise gross profit at R2,2 billion increased by 70,6% over the
previous period and gross profit margins at 44,7% (2005 - 47,0%) declined
by 2,3% as a result of the inclusion of the lower margin Value Retail cash
division for the full year and margin pressure in the second half in
certain credit divisions. On a like-for-like basis, merchandise gross
profit margins are only 0,2% lower compared to the previous year.
Operating expenses at R3,1 billion have been well controlled and represent
61,9% (2005 - 65,9%) of merchandise sold, an improvement of 4,0%.
Synergistic merger expense benefits are constantly being identified and
implemented.
Debtors costs, before the movement in the IAS 39 impairment provision, at
R331,7 million increased by 6,8% on a like-for-like basis and represents
5,5% of the gross debtors book of R6,0 billion, which, on a like-for-like
basis, has reduced by 0,6% compared with the previous year. The impairment
provision increased by R64,8 million in the current year in line with the
Group"s decision to increase credit sales and take on more risk, compared
to a reduction in the provision as reported at August 2005. This represents
an increase of 14,3% in the total impairment provision, which is below the
increase of 18,2% in gross debtors and the increase of 17,1% in arrears. As
a consequence, total debtors costs at R396,5 million (2005 - R141,6
million), which include the Relyant debtors costs for the full year, have
increased to 6,6% of the debtors book of R6,0 billion compared to 4,1% on a
like-for-like basis last year.
The resultant operating margin of 16,8% (2005 - 17,1%) is marginally down
on the previous year, mainly as a result of the inclusion for the full year
of the Value Retail cash division, which realises a much lower operating
margin than the credit divisions and the impact of the increase in the
debtors impairment provision referred to above.
Given the increased borrowings of R399 million taken on at the time of the
merger in May 2005, as well as the reduction of the dividend cover from
four times to three times and a significant increase in trading volumes
during the peak season over December 2005, the Group"s net interest costs
at R79,5 million (2005 - R56,3 million) have increased accordingly. With
net interest costs at 6,2% (2005 - 7,8%) of operating profit, interest
costs remain well covered.
Earnings at R894 million are up 63,5% on the previous year. Earnings per
share at 743,4 cents (2005 - 611,1 cents) are up 21,6% on last year which
included a R53,7 million non-recurring profit on the sale of properties.
Headline earnings per share at 741,9 cents (2005 - 575,6 cents) have
increased by 28,9%. The earnings per share calculations include the 42,9
million new shares issued to Relyant shareholders in May 2005, giving a
weighted total of 120,3 million shares in issue compared to the weighted
average number of shares of the previous year of 89,5 million shares, an
increase of 34,4% in new shares issued.
In order to simplify administrative procedures and the IT integration
strategy of the Group going forward, a decision was taken by the Board to
convert to a single month-end cut-off date of the 7th of each month, in
line with the Relyant Group of companies and industry norms. As a
consequence, the Traditional and Decorating Divisions, as well as Rainbow
Loans closed their year-end on 7 September 2006 as opposed to 31 August.
The additional five and a half days trading and accrual of related costs in
those operations was not material to the Group"s results.
Balance sheet
Total assets of the Group at R7,6 billion are up 7,4% when compared to
August 2005. This is mainly due to the increase in the debtors book. The
annualised return on total assets at 17,4% (2005 - 14,0%) is above the
Group target of 16%.
Net inventories at R588 million (2005 - R534 million) increased by 10,0%
and represents a 4,7 times stock turn, based on merchandise cost of sales,
an improvement on the 4,4 times for the previous year. The direct import
component of inventories for the Group is 12%. Inventories in the Group
have been well managed and logistical improvements continue to be made in
conjunction with our suppliers and internal resources.
The gross debtors book at R6,0 billion, which is unencumbered, comprises
67% credit agreement and 33% no-deposit loan debtors. The performance of
the book has been maintained since August 2005 with arrears at 14,7% (2005
- 14,9%) and the provision for doubtful debts at 10,7% (2005 - 10,9%) of
net debtors, after deducting unearned provisions, reflects a slight
improvement. The debtors book is well provided with total provisions of
R1,7 billion at 28,2% (2005 - 27,7%).
The sophisticated credit granting procedures, incorporating the dual matrix
philosophy of combining application and behavioural scorecards of potential
customers, backed up by leading technology utilised by the three collection
centres applying internationally renowned Triad software and the use of
predictive dialers, continue to contribute substantially to the success
achieved in the management of the debtors book. At the time of writing this
report two of the Traditional Business Units viz FurnCity and Town Talk
have been fully incorporated into the collection centres. The Ellerines
Business Unit is scheduled to transfer to the collection centres in
February 2007. This transformation is expected to further improve the
performance of the Traditional debtors ledger, as well as the division"s
marketing and reporting capabilities.
At R41,27 the net asset value per share of the Group has increased by 12,1%
compared to the previous year and results in a price to book ratio of 1,62
times, which has reduced marginally when compared to 1,65 at August 2005.
Despite the increase in trading activity and the introduction of no-deposit
loan business in the Traditional Credit Division, which has had the impact
of absorbing cash during the year under review, cash flow generated from
operating activities at R486 million has increased by 27,6% or R105,1
million and resulted in a strong cash flow per share of 403,8 cents (2005 -
425,4 cents). With borrowings of R774 million and an equity base of R5,0
billion, the Group is in a lower geared position at 15,5%, compared to
18,4% at August 2005. Given a target gearing ratio of around 35%, the Group
has further debt capacity of over R1,0 billion.
The return on average shareholders" equity at 19,0% and return on average
funds employed at 23,5%, reflect a strong performance.
OPERATIONAL SEGMENTAL REVIEW
Traditional - Credit Retail Division
The Traditional - Credit Retail Division targets the lower to middle income
segments of the furniture and appliances consumer market, with Ellerines,
Town Talk and FurnCity as the major brands. A separate dedicated Business
Unit operates under the same brand names in the neighbouring states of
South Africa, as well as in Zambia.
The buoyant consumer retail activity in South Africa was enjoyed for most
of the year in the Traditional Division, with the foreign operations,
however, experiencing negative growth except for Zambia.
Total revenue for the division at R2,50 billion (2005 - R2,17 billion) is
15,1% up on the previous year and constitutes 33,0% (2005 - 51,4%) of Group
revenue, trading out of 621 outlets (2005 - 606).
The sale of merchandise at R1,81 billion (2005 - R1,60 billion) is 13,3%
(2005 - 15,0%) above the previous period. The merchandise volumes recorded
in RSA increased by 15,6% for the year, which is below the 18,6% reported
at the interim stage and is indicative of a slow down in trading activity
during the second half of the year.
Given the introduction of no-deposit, term-loan agreement sales in the
Traditional Credit Division for South African outlets during September
2005, gross finance charges written increased by 40,5% to R534,2 million.
The finance charge rate applied to term-loan deals is higher than that
charged under a credit agreement sale, with term-loan deals comprising
approximately 30% of total revenue. As a consequence, the unearned finance
charges increased substantially by R77,3 million, resulting in net finance
charges earned of R456,9 million, an increase of 24,4% over the previous
period.
The Customer Club introduced from December 2005 in the Traditional Division
generated gross revenue of R54,8 million of which R43,7 million is
unearned, as the Club fee is earned over the contract period, resulting in
net Club income earned of R11,1 million. As the initial provisions have now
been created for deferred Club income, the bottom line contribution in the
year ahead will be much improved. The operating profit at R640 million
(2005 - R536 million) increased by 19,5% resulting in an operating margin
of 25,6% (2005 - 24,7%) which reflects an excellent result due to the
increased volumes and related income generating drivers, as well as an
improvement in the operating expense to income ratio.
The gross trade receivables at R3,3 billion (2005 - R2,8 billion) have
increased by 16,8%, which is in line with the increase in revenue and the
strategy to introduce no-deposit term-loan sales from September 2005. The
gross term-loan debtors book amounts to R715,7 million. The condition of
the debtors book was maintained with arrears at 18,3% (2005 - 18,5%). The
monthly collection rate at 6,1% is unchanged compared to last year. Given
the growth in the debtors book, the doubtful debt provision at R278,3
million (2005 - R255,2 million) an increase of 9,1%, is 10,8% (2005 -
11,4%) of the net debtors book, after taking to account unearned debtors
provisions.
Inventory management has been excellent, with inventory levels only
increasing by 1% over the comparable period last year.
The Foreign Business Unit reflects a decrease in revenue of 4,6% compared
to last year and a reduction in operating margin at 18,7% reduced by 0,9%.
With the exception of Zambia, where performance was well above
expectations, the results from Namibia, Lesotho and particularly Botswana
continue to be disappointing. The Foreign Business Unit contributes 3,6% to
Group revenue.
Wetherlys - Cash Decorating Division
The Wetherlys - Cash Decorating Division with revenue at R509 million (2005
- R468 million), comprising 6,7% of Group revenue, reflects an increase of
8,6%, with the Wetherlys brand increasing by 4,5% and the Osiers brand,
which continues to impress with its fine merchandise range of cane and home
furnishings, increasing by 21,9%. The year under review includes two
additional Wetherlys and two additional Osiers outlets.
Trading in the division during the second half of the year saw a slow down
with revenue increasing by 7,6% compared to a buoyant previous year, as
opposed to the first half when revenue was up 9,9% on the comparable prior
period.
The operating margin for the division at 15,1% (2005 - 13,3%) improved
considerably for the year under review, with trading gross margins having
increased by 2,1% as a result of improved merchandise purchasing
initiatives and the extension of the range of internally manufactured
products. The resultant operating profit of R76,8 million (2005 - R62,1
million) reflects an increase of 23,5% over last year, which is a most
pleasing result.
Roodefurn"s two manufacturing operations significantly improved their
operating profit compared to the previous year and now contribute a
meaningful 15,5% to the division. A limited number of manufactured lines
for the greater Group were introduced by Roodefurn during the second half
of the year.
Inventories at R146 million (2005 - R115 million) have increased
considerably over last year as a result of an additional R22 million held
for the four new outlets and the early receipt of new imported ranges
during July and August for the coming peak season. Old stocks were cleared
out of the system during the sale period in the last quarter of the
financial year and the obsolescence provision reduced by over 17%. The
inventory stock turn for the year at 1,86 times (2005 - 2,1 times) is
expected to improve in the year ahead.
Universal - Credit Retail Division
The Universal - Credit Retail Division targets the middle to upper income
segments of the furniture and appliances consumer market, with Beares, Geen
& Richards and Lubners as the major brands. The Savells/Fairdeal brand is
included in this division and targets the entry level lower end of the
market.
Total revenue for the division at R2,41 billion constitutes 31,9% of Group
revenue and trades out of 442 (2005 - 415) outlets having increased their
retail trading space by 9,1%.
Merchandise sales in the middle income segment brands of the market reflect
an increase of 12,4% on a like-for-like basis compared to last year, while
the brands targeting the lower end of the market have traded at 16,7% above
last year. Cash sales comprise 33,8% (2005 - 31,9%) of merchandise sales
and 25,6% (2005 - 24,0%) of total revenue. The shift towards cash sales in
this division has occurred predominantly in the upper income Geen &
Richards brand, where customers have increased their use of credit card
purchases.
It is pleasing to report the improvement in the operating margin to 18,0%
(2005 - 16,3%) which is reflective of the operating and merchandising
efficiencies introduced into the division over the past year and the
increase in Savells/Fairdeal revenue which has the highest credit content.
The reduction in the expense to income ratio has also contributed to this
improvement.
The gross trade receivables at R2,3 billion have increased by 18,6%
compared to last year, which is slightly above the increase in gross credit
revenue levels. The condition of the total debtors book has been
maintained, with arrears increasing slightly to 10,5% (2005 - 10,3%), and
the monthly collection rate fractionally improved to 7,6% (2005 - 7,5%).
Debtors costs at 5,7% of the gross debtors book remain encouraging.
Inventory management has been well controlled with inventory levels 6,3%
above the comparable period last year, and which is below the increase in
merchandise sales.
Value Retail - Cash Division
The Value Retail - Cash Division targets the middle to upper income
segments of the furniture, appliances and bedding consumer market, with
Furniture City, Dial-a-Bed and Mattress Factory trading out of 68 (2005 -
62) outlets. The division has performed exceptionally well. Total revenue
for the division at R888 million increased by 21,6% on a like-for-like
basis over last year and constitutes 11,7% of Group revenue.
Merchandise cash sales comprise 71,0% (2005 - 73,6%) of total Value Retail
revenue, which is reflective of the engineered shift by management towards
credit sales in the Furniture City brand. Dial-a-Bed and Mattress Factory
remain at 100% cash sales and market their brands as bedding discounters.
Operating profit at R72,2 million was achieved and is double that, on a
like-for-like basis, to August 2005. This results in an improved operating
margin of 8,1% (2005 - 5,9%) derived from, in particular, the shift towards
credit sales in Furniture City and the gradual improvement in the operating
and merchandising efficiencies introduced into the division over the past
year.
The gross trade receivables attributable to the Furniture City brand at
R285 million (2005 - R215 million) have increased by 32,5%. Credit control
performed extremely well with a collection rate of 8,0% and an arrears
content of only 6,0%.
Inventory management has improved considerably, with inventory levels
marginally below last year.
Financial Services
Financial Services include Group insurance activities, as well as the
unsecured short-term loans provided by Rainbow Loans.
The Group owns three insurance licences, two of which offer short-term
customer protection insurance and the other funeral cover to our customers.
The division generated revenue earned of R1,15 billion (2005 - R657
million), an increase of 75,6% and constitutes 15,2% of Group total
revenue, which is in line with August 2005 and with the increase in Group
total revenue.
On a like-for-like basis, revenue earned is up 31,9% over the comparative
year.
The increase in revenue is a result of the continued take-up by customers
of insurance products on offer and the higher sales volumes generated in
the credit divisions. As a consequence, the total unearned premium
provision at August 2006 amounted to R385,7 million (2005 - R340,2
million), an increased charge against revenue of 13,3%, amounting to R45,5
million since August 2005.
The current consumer financial services activities and the format of
products on offer to customers, remain a high priority within the Group. A
number of strategic alternatives have been extensively analysed, in
addition, proposals from both local and international sources have been
evaluated over the past year. Proposals are presently under review and
shareholders will be advised accordingly of the progress made in this
regard. Caution has been exercised by management, given the pending
implementation of The National Credit Act with effect from 1 June 2007.
Service Division
The value added niche services of Early Bird, which provides aerial
installations and repair services for TV, audio and sound equipment, was
introduced to the greater Group during the last quarter of 2005, with re-
organisation plans implemented during the same period. This has had the
effect of improving the operating procedures and will enhance future
profitability of the business unit. While like-for-like revenue only
increased by 4,9%, profitability improved by over 20%. This value added
service to our customers is considered important.
RELYANT MERGER UPDATE
It is once again pleasing to report that the operational and corporate
integration process is complete and the extraction of synergistic benefits
is progressing and is on track, with the overall trading results of the
acquired divisions having improved considerably.
The corporate functions have been consolidated into Bedfordview and with
the operational divisions occupying the Durban and Doornfontein premises,
all functional aspects of the Group have been aligned, focused and
integrated. The final selection of the Group IT platform will be
recommended to the Board during the first quarter of 2007. Synergistic
benefits extracted as a result of the merger have been numerous and for the
year under review we are pleased to report that around R52 million has been
quantified as synergistic benefits to the Group. The major contribution has
come from merchandise and marketing management, as well as instalment sales
initiatives.
The stated target of the contribution to pre-tax profit of R50 million for
the year to August 2007 will be achieved and initiatives in the credit
control arena have commenced, with the remaining benefit of R50 million
accruing during 2008.
THE NATIONAL CREDIT ACT (NCA)
The NCA and the applicable Regulations are planned for implementation on 1
June 2007. The challenges and opportunities which the legislation poses,
particularly with changes to information technology systems and procedures,
are in the process of being finalised.
Given the time line for the introduction of the Act and the allied
Regulations, management is confident that the technical interpretation and
design of operating procedures will be implemented effectively.
PROSPECTS
The slow down of trading activity experienced in our consumer and credit
market in the second half of the financial year is expected to continue for
the foreseeable future. Despite the tightening of the market and the
uncertainty the NCA has created, management expects that a satisfactory
performance will be achieved.
REPORT OF INDEPENDENT AUDITORS
The Group"s independent auditors, Grant Thornton, have audited the Group"s
results. The unqualified report is available for inspection at the
Company"s registered office.
DISTRIBUTION TO ORDINARY SHAREHOLDERS
The Board has resolved to declare a distribution to shareholders, by way of
a capital distribution out of share premium, of 112,9 cents per share.
Shareholders will be asked to consider and, if deemed fit, to approve the
capital distribution at the annual general meeting of Ellerines to be held
on or about 12 January 2007. Salient dates and times pertaining to the
capital distribution will be announced following the annual general
meeting.
DIRECTORS
The Board regrets to advise that Humphrey Khoza, a Non-Executive Director
of Ellerine Holdings Limited passed away tragically on Friday, 27 October
2006. Humphrey served the Group with distinction since 1998 and his
contribution to the Group will be sadly missed. The Board, management and
staff extend their deepest condolences to his wife, Thandi, and the family.
With effect from 15 August 2006, Non-Executive Director Sandile Zungu
resigned from the Board. The Board wishes to thank Sandile for his
contribution over the past few years and wishes him every success for the
future.
The Board is pleased to report that with effect from 28 August 2006 Marc
Moca, who has been with the Group for 35 years, was appointed as an
Executive Director and Excom member of Ellerine Holdings Limited.
By order of the Board
Peter Pohlmann Peter Squires
Chairman Chief Executive Officer
6 November 2006
Consolidated income statement
2006 2005 %
Notes R"000 R"000 change
Continuing operations
Revenue 6 7 575 158 4 227 957 79,2
Sale of merchandise 6 4 959 408 2 764 927 79,4
Cost of merchandise sold (2 740 706) (1 464 684) 87,1
Gross profit 2 218 702 1 300 243 70,6
Other operating revenue 6 2 522 557 1 385 335 82,1
Debtors costs (396 530) (141 649) 179,9
Operating expenses (3 071 578) (1 821 683) 68,6
Advertising (243 614) (122 065) 99,6
Depreciation and
amortisation (92 526) (62 881) 47,1
Cost of employment (1 540 821) (986 442) 56,2
Motor and delivery (219 816) (133 797) 64,3
Property expenses (440 714) (252 133) 74,8
Administration and other
expenses (534 087) (264 365) 102,0
Operating profit 1 273 151 722 246 76,3
Income from associate 13 457 7 080 90,1
Profit on disposal of
owner occupied properties - 53 793
Impairment of goodwill - (16 831)
Insurance investment
income 7 61 520 49 613 24,0
Net finance costs (79 508) (56 313) 41,2
Interest received 41 151 36 075 14,1
Interest paid (120 659) (92 388) 30,6
Profit before taxation 1 268 620 759 588 67,0
Taxation (372 164) (199 070) 87,0
Profit attributable to
ordinary shareholders
- continuing operations 896 456 560 518 59,9
Loss attributable to ordinary
shareholders - discontinued
operations (2 139) (13 609)
Profit attributable to
ordinary shareholders 894 317 546 909 63,5
Earnings per share
- continuing operations 8 Cents Cents
Attributable 745,1 626,3 19,0
Headline 743,4 590,5 25,9
Fully diluted attributable 734,3 613,3 19,7
Fully diluted headline 732,5 578,3 26,7
Earnings per share
- total operations 8
Attributable 743,4 611,1 21,6
Headline 741,9 575,6 28,9
Fully diluted attributable 732,5 598,4 22,4
Fully diluted headline 731,1 563,7 29,7
Dividends per share - paid 283,0 105,0 169,5
Interim 139,6 -
Final 143,4 105,0
Dividends and distributions
per share - declared 252,5 143,4 76,1
Interim dividends 139,6 -
Final distributions 112,9 143,4
% %
Gross profit 44,7 47,0
Operating margin 16,8 17,1
Tax rate 29,3 26,2
Consolidated balance sheet
2006 2005
Notes R"000 R"000
ASSETS
Non-current assets 2 347 807 2 434 500
Property, vehicles and
equipment 378 687 334 243
Goodwill 824 362 805 617
Trademarks 312 000 316 503
Investment in associates - 35 644
Deferred taxation 199 199 316 570
Insurance financial assets 9 633 559 625 923
Current assets 5 175 800 4 617 234
Inventories 587 844 534 397
Trade and other receivables 10 4 457 162 3 821 242
Taxation 874 1 702
Funds at call, bank balances
and cash 129 920 259 893
Non-current assets classified
as held for sale 47 500 -
TOTAL ASSETS 7 571 107 7 051 734
EQUITY AND LIABILITIES
Shareholders" equity and
reserves 4 994 792 4 419 619
Share capital and premium 2 214 214 2 195 095
Insurance contingency reserve 49 272 43 272
Foreign currency translation
reserve (33 426) (29 545)
Non-distributable reserves 27 655 22 276
Distributable reserves 2 737 077 2 188 521
Non-current liabilities 695 944 742 444
Deferred taxation 238 673 290 219
Interest bearing borrowings 457 271 452 225
Current liabilities 1 880 371 1 889 671
Trade and other payables 1 012 765 951 396
Current portion of
interest bearing borrowings 913 1 700
Taxation 133 445 40 606
Provisions 287 848 274 737
Bank overdrafts and call loans 445 400 621 232
TOTAL EQUITY AND LIABILITIES 7 571 107 7 051 734
Net asset value per share - cents 4 127 3 682
Current ratio 2,8 2,4
Interest bearing debt:
equity (%) 15,5 18,4
Consolidated cash flow statement
2006 2005
Note R"000 R"000
CASH FLOWS FROM OPERATING
ACTIVITIES 485 831 380 727
Cash generated from
operations 11 716 491 512 022
Cash receipts from
customers 6 843 926 4 125 596
Cash paid to suppliers
and employees (6 127 435) (3 613 574)
Insurance investment income 61 520 49 613
Net finance costs (79 508) (57 052)
Taxation paid (212 672) (123 856)
CASH FLOWS FROM INVESTING
ACTIVITIES (127 054) (145 282)
Purchase of property,
vehicles and equipment (147 767) (102 834)
Proceeds on disposal of property,
vehicles and equipment 17 271 107 921
Net decrease (increase) in
investment in associates 1 600 (576)
Decrease (increase) in insurance
financial assets 1 842 (140 064)
Acquisition of Relyant
Retail Limited - (8 088)
Acquisition of Wetherlys - (1 641)
CASH FLOW FROM FINANCING
ACTIVITIES (312 918) 147 864
Proceeds from interest
bearing borrowings 5 046 196 429
Dividends paid (342 247) (79 986)
Net proceeds from issue
of shares 24 283 31 421
Net increase in cash and
cash equivalents 45 859 383 309
Cash and cash equivalents on
acquisition of Relyant
Retail Limited - (399 534)
Cash and cash equivalents
at beginning of the year (361 339) (345 114)
Cash and cash equivalents at
end of the year (315 480) (361 339)
Attributable cash flow
per share - cents 403,8 425,4
Consolidated statement of changes in equity
Insurance
con-
Share Share tingency
capital premium reserve
Note R"000 R"000 R"000
Balance at
1 September 2004,
as previously
reported 5 3 748 134 794 36 440
IFRS restatements
Balance at
1 September 2004,
as restated 5 3 748 134 794 36 440
Net profit for
the year, as
restated
Dividends paid
Total
Treasury shares
Issue of shares 2 224 2 054 299
Treasury shares sold 30
Share-based payments
Exchange differences on
translating foreign
operations
Unrealised surpluses
arising from hedged
instruments
Transfer to insurance
contingency reserve 6 832
Capital adequacy
reserve movement
Transfer of realised
profits on disposal
of owner occupied
properties to
distributable
reserves
Transfer of realised
profits on disposal
of investment
properties to
distributable reserves
Transfer of
revaluation of
investment properties
to non-distributable
reserves
Balance at
1 September 2005,
as restated 5 6 002 2 189 093 43 272
Net profit for
the year
Dividends paid
Total
Treasury shares
Issue of shares 56 19 070
Treasury shares
purchased and held (7)
Share-based payments
Exchange differences
on translating
foreign operations
Unrealised surpluses
arising from hedged
instruments
Transfer to insurance
contingency reserve 6 000
Capital adequacy
reserve movement
Transfer of realised
profits on disposal
of investment
properties to
distributable reserves
Transfer of revaluation
of investment properties
to non-distributable
reserves
Balance at
31 August 2006 6 051 2 208 163 49 272
Consolidated statement of changes in equity (continued
Foreign Non-
currency distribu- Distribu-
translation table table
reserve reserves reserves Total
R"000 R"000 R"000 R"000
Balance at
1 September 2004,
as previously
reported 371 26 892 1 700 099 1 902 344
IFRS restatements 5 663 4 992 10 655
Balance at
1 September 2004,
as restated 371 32 555 1 705 091 1 912 999
Net profit for the
year, as
restated 546 909 546 909
Dividends paid (80 026) (80 026)
Total (82 324) (82 324)
Treasury shares 2 298 2 298
Issue of shares 2 056 523
Treasury shares sold 8 171 8 201
Share-based payments 4 575 4 575
Exchange differences
on translating
foreign operations (29 916) (29 916)
Unrealised surpluses
arising from hedged
instruments 354 354
Transfer to insurance
contingency reserve (6 832) -
Capital adequacy
reserve movement 39 (39) -
Transfer of realised
profits on disposal
of owner occupied
properties to
distributable
reserves (12 131) 12 131 -
Transfer of realised
profits on disposal
of investment
properties to
distributable reserves (3 397) 3 397 -
Transfer of revaluation
of investment
properties to
non-distributable
reserves 281 (281) -
Balance at
1 September 2005,
as restated (29 545) 22 276 2 188 521 4 419 619
Net profit for the
year 894 317 894 317
Dividends paid (342 247) (342 247)
Total (349 402) (349 402)
Treasury shares 7 155 7 155
Issue of shares 19 126
Treasury shares
purchased and held 5 162 5 155
Share-based payments 2 251 2 251
Exchange differences
on translating
foreign operations (3 881) (3 881)
Unrealised surpluses
arising from hedged
instruments 452 452
Transfer to insurance
contingency reserve (6 000) -
Capital adequacy
reserve movement 641 (641) -
Transfer of realised
profits on disposal
of investment
properties to
distributable reserves (44) 44 -
Transfer of
revaluation of
investment properties
to non-distributable
reserves 2 079 (2 079) -
Balance at
31 August 2006 (33 426) 27 655 2 737 077 4 994 792
Segmental analysis
DIVISIONAL
R"000
Traditional Universal Total
Retailing Retailing Credit
INCOME STATEMENT
Revenue 2006 2 498 602 2 414 883 4 913 485
2005 2 171 064 633 006 2 804 070
% v LY 15,1 281,5 75,2
Credit revenue 2006 2 274 222 1 797 412 4 071 634
2005 2 026 037 481 310 2 507 347
% v LY 12,2 273,4 62,4
Cash revenue 2006 224 380 617 471 841 851
2005 145 027 151 696 296 723
% v LY 54,7 307,0 183,7
Cash revenue % 2006 9,0 25,6 17,1
2005 6,7 24,0 10,6
v LY 2,3 1,6 6,5
Sale of merchandise 2006 1 811 597 1 825 405 3 637 002
2005 1 598 778 475 723 2 074 501
% v LY 13,3 283,7 75,3
Operating profit
(loss) 2006 640 076 434 801 1 074 877
2005 535 795 103 176 638 971
% v LY 19,5 321,4 68,2
Operating margin % 2006 25,6 18,0 21,9
2005 24,7 16,3 22,8
v LY 0,9 1,7 (0,9)
Depreciation 2006 43 398 17 612 61 010
2005 41 340 4 154 45 494
% v LY 5,0 324,0 34,1
BALANCE SHEET
Assets 2006 2 644 538 2 032 018 4 676 556
2005 2 364 734 1 822 165 4 186 899
% v LY 11,8 11,5 11,7
Liabilities 2006 (207 015) (326 542) (533 557)
2005 (197 252) (320 885) (518 137)
% v LY 4,9 1,8 3,0
Net assets 2006 2 437 523 1 705 476 4 142 999
2005 2 167 482 1 501 280 3 668 762
% v LY 12,5 13,6 12,9
Cost to acquire
assets 2006 27 455 48 073 75 528
2005 29 387 13 193 42 580
% v LY (6,6) 264,4 77,4
RESOURCES
Number of stores 2006 621 442 1 063
2005 606 415 1 021
% v LY 2,5 6,5 4,1
Number of employees 2006 8 274 5 607 13 881
2005 8 044 5 016 13 060
% v LY 2,9 11,8 6,3
Retail m2 2006 385 112 318 539 703 651
2005 379 245 291 890 671 135
% v LY 1,5 9,1 4,8
PRODUCTIVITY RATIOS
Merchandise sales:
revenue 2006 72,5 75,6 74,0
2005 73,6 75,2 74,0
v LY (1,1) 0,4
Revenue per store* 2006 4 024 5 464 4 622
2005 3 583 4 576 3 986
% v LY 12,3 19,4 16,0
Revenue per employee
(Rands)* 2006 301 982 430 691 353 972
2005 269 899 378 592 311 645
% v LY 11,9 13,8 13,6
Operating profit per
employee (Rands)* 2006 77 360 77 546 77 435
2005 66 608 61 708 64 726
% v LY 16,1 25,7 19,6
Revenue per m2
(Rands)* 2006 6 488 7 581 6 983
2005 5 725 6 506 6 064
% v LY 13,3 16,5 15,2
m2 per outlet 2006 620 721 662
2005 626 703 657
% v LY (1,0) 2,6 0,8
TRADE RECEIVABLES
Gross trade
receivables 2006 3 311 021 2 314 902 5 625 923
2005 2 835 779 1 951 213 4 786 992
% v LY 16,8 18,6 17,5
Debtors costs 2006 243 678 132 500 376 178
2005 117 160 17 120 134 280
% v LY 108,0 673,9 180,1
Debtors cost %* 2006 7,4 5,7 6,7
2005 4,1 2,6 3,5
v LY 3,3 3,1 3,2
Average length of
book in months 2006 16,4 15,5 16,0
2005 16,5 12,2 14,7
% v LY (0,1) 3,3 1,3
Arrears 2006 604 277 243 147 847 424
2005 525 966 201 760 727 726
% v LY 14,9 20,5 16,4
Arrears % 2006 18,3 10,5 15,1
2005 18,5 10,3 15,2
v LY (0,2) 0,2 (0,1)
Collection rate % 2006 6,1 7,6 6,7
2005 6,1 7,5 6,7
v LY 0,1
Deposit rate % 2006 20,0 20,9 20,4
2005 18,0 18,0 18,0
v LY 2,0 2,9 2,4
*Ratios in respect of the Relyant brands for 2005 have been annualised.
Segmental analysis (continued)
DIVISIONAL (continued) R"000
Value Total
Wetherlys Retailing Cash
INCOME STATEMENT
Revenue 2006 508 716 888 168 1 396 884
2005 468 362 245 133 713 495
% v LY 8,6 262,3 95,8
Credit revenue 2006 257 381 257 381
2005 64 753 64 753
% v LY 297,5 297,5
Cash revenue 2006 508 716 630 787 1 139 503
2005 468 362 180 380 648 742
% v LY 8,6 249,7 75,6
Cash revenue % 2006 100,0 71,0 81,6
2005 100,0 73,6 90,9
v LY (2,6) (9,3)
Sale of merchandise 2006 502 339 820 067 1 322 406
2005 463 283 227 143 690 426
% v LY 8,4 261,0 91,5
Operating profit
(loss) 2006 76 753 72 222 148 975
2005 62 142 14 383 76 525
% v LY 23,5 402,1 94,7
Operating margin % 2006 15,1 8,1 10,7
2005 13,3 5,9 10,7
v LY 1,8 2,2
Depreciation 2006 8 585 5 654 14 239
2005 7 610 1 250 8 860
% v LY 12,8 352,3 60,7
BALANCE SHEET
Assets 2006 197 976 349 306 547 282
2005 186 802 299 577 486 379
% v LY 6,0 16,6 12,5
Liabilities 2006 (54 842) (139 369) (194 211)
2005 (106 164) (123 358) (229 522)
% v LY (48,3) 13,0 (15,4)
Net assets 2006 143 134 209 937 353 071
2005 80 638 176 219 256 857
% v LY 77,5 19,1 2,4
Cost to acquire
assets 2006 10 944 17 318 28 262
2005 10 031 3 962 13 993
% v LY 9,1 337,1 102,0
RESOURCES
Number of stores 2006 25 68 93
2005 21 62 83
% v LY 19,0 9,7 12,0
Number of employees 2006 1 174 892 2 066
2005 1 106 785 1 891
% v LY 6,1 13,6 9,3
Retail m2 2006 51 022 72 606 123 628
2005 45 671 70 706 116 377
% v LY 11,7 2,7 6,2
PRODUCTIVITY RATIOS
Merchandise sales:
revenue 2006 98,7 92,3 94,7
2005 98,9 92,7 96,8
v LY (0,2) (0,4) (2,1)
Revenue per store* 2006 20 349 13 061 15 020
2005 22 303 11 861 14 503
% v LY (8,8) 10,1 3,6
Revenue per employee
(Rands)* 2006 433 319 995 704 676 130
2005 423 474 936 814 636 574
% v LY 2,3 6,3 6,2
Operating profit per
employee (Rands)* 2006 65 377 80 966 72 108
2005 56 186 54 967 55 680
% v LY 16,4 47,3 29,5
Revenue per m2
(Rands)* 2006 9 971 12 233 11 299
2005 10 255 10 401 10 344
% v LY (2,8) 17,6 9,2
m2 per outlet 2006 2 041 1 068 1 329
2005 2 175 1 140 1 402
% v LY (6,2) (6,3) (5,2)
TRADE RECEIVABLES
Gross trade
receivables 2006 3 172 284 819 287 991
2005 3 358 214 885 218 243
% v LY (5,5) 32,5 32,0
Debtors costs 2006 2 199 9 230 11 429
2005 3 158 1 219 4 377
% v LY (30,4) 657,2 161,1
Debtors cost %* 2006 69,3 3,2 4,0
2005 94,0 1,7 3,1
v LY (24,7) 1,5 0,9
Average length of
book in months 2006 13,4 13,4
2005 11,4 11,4
% v LY 2,0 2,0
Arrears 2006 17 171 17 171
2005 12 699 12 699
v LY 35,2 35,2
Arrears % 2006 6,0 6,0
2005 5,9 5,8
v LY 0,1 0,2
Collection rate % 2006 8,0 8,0
2005 8,0 8,0
v LY
Deposit rate % 2006 19,7 19,7
2005 20,0 20,0
v LY (0,3) (0,3)
*Ratios in respect of the Relyant brands for 2005 have been annualised.
Segmental analysis (continued)
DIVISIONAL (continued)
Early Financial
Bird Properties Services Corporate
INCOME STATEMENT
Revenue 2006 69 650 1 154 665 40 474
2005 21 352 657 473 31 567
% v LY 226,2 75,6 28,2
Credit revenue 2006 1 147 896
2005 655 091
% v LY 75,2
Cash revenue 2006 69 650 6 769 40 474
2005 21 352 2 382 31 567
% v LY 226,2 184,2 28,2
Cash revenue % 2006 100,0 0,6 100,0
2005 100,0 0,4 100,0
v LY 0,2
Sale of merchandise 2006
2005
% v LY
Operating profit
(loss) 2006 4 826 12 555 277 284 (245 366)
2005 921 18 228 107 832 (120 231)
% v LY 424,0 (31,1) 157,1 104,1
Operating margin % 2006 6,9 24,0
2005 4,3 16,4
v LY 2,6 7,6
Depreciation 2006 3 055 241 1 446 8 032
2005 844 240 1 384 3 390
% v LY 262,0 0,4 4,5 136,9
BALANCE SHEET
Assets 2006 16 836 24 171 826 625 1 479 637
2005 16 291 24 209 823 640 1 502 302
% v LY 3,3 (0,2) 0,4 (1,5)
Liabilities 2006 (9 067) (17 939) (152 626) (1 668 733)
2005 (8 372) (20 261) (108 066) (1 741 102)
% v LY 8,3 (11,5) 41,2 (4,2)
Net assets 2006 7 769 6 232 673 999 (161 660)
2005 7 919 3 948 715 574 (299 841)
% v LY (1,9) 57,9 (5,8) (46,1)
Cost to acquire
assets 2006 2 557 500 1 857 39 063
2005 2 015 2 492 3 820 37 534
% v LY 26,9 (79,9) (51,4) 4,1
RESOURCES
Number of stores 2006 44 70
2005 44 59
% v LY 18,6
Number of employees 2006 402 234 774
2005 399 198 700
% v LY 0,8 18,2 10,6
Retail m2 2006 7 829 4 529
2005 5 778 3 663
% v LY 35,5 23,6
PRODUCTIVITY RATIOS
Merchandise sales:
revenue 2006
2005
v LY
Revenue per store* 2006 1 583
2005 1 456
% v LY 8,7
Revenue per employee
(Rands)* 2006 173 259
2005 160 541
% v LY 7,9
Operating profit per
employee (Rands)* 2006 12 005
2005 6 925
% v LY 73,4
Revenue per m2
(Rands)* 2006 8 896
2005 11 086
% v LY (19,8)
m2 per outlet 2006 178
2005 131
% v LY 35,9
TRADE RECEIVABLES
Gross trade
receivables 2006 127 486
2005 105 369
% v LY 21,0
Debtors costs 2006 22 166 (13 243)
2005 (37) 10 617 (7 588)
% v LY 108,8 74,5
Debtors cost %* 2006 17,4
2005 10,1
v LY 7,3
Average length of
book in months 2006 21,3
2005 15,5
% v LY 5,8
Arrears 2006 24 433
2005 18 847
% v LY 29,6
Arrears % 2006 19,2
2005 17,9
v LY 1,3
Collection rate % 2006 14,9
2005 13,9
v LY 1,0
Deposit rate % 2006
2005
v LY
*Ratios in respect of the Relyant brands for 2005 have been annualised.
Segmental analysis (continued)
DIVISIONAL (continued)
Continuing Discontinued
Operations Operations Total
Group Group Group
INCOME STATEMENT
Revenue 2006 7 575 158 4 248 7 579 406
2005 4 227 957 78 067 4 306 024
% v LY 79,2 (94,6) 76,0
Credit revenue 2006 5 476 911 5 476 911
2005 3 227 191 3 227 191
% v LY 69,7 69,7
Cash revenue 2006 2 098 247 4 248 2 102 495
2005 1 000 766 78 067 1 078 833
% v LY 109,7 (94,6) 94,9
Cash revenue % 2006 27,7 100,0 27,7
2005 23,7 100,0 25,1
v LY 4,0 2,6
Sale of
merchandise 2006 4 959 408 4 248 4 963 656
2005 2 764 927 76 270 2 841 197
% v LY 79,4 (94,4) 74,7
Operating
profit (loss) 2006 1 273 151 (2 140) 1 271 011
2005 722 246 (13 618) 708 628
% v LY 76,3 (84,3) 79,4
Operating
margin % 2006 16,8 (50,4) 16,8
2005 17,1 (17,4) 16,5
v LY (0,3) (33,0) 0,3
Depreciation 2006 88 023 (66) 87 957
2005 60 212 460 60 672
% v LY 46,2 (114,3) 45,0
BALANCE SHEET
Assets 2006 7 571 107 7 571 107
2005 7 039 720 12 014 7 051 734
% v LY 7,5 7,4
Liabilities 2006 (2 576 133) (182) (2 576 315)
2005 (2 625 460) (6 655) (2 632 115)
% v LY (1,9) (97,3) (2,1)
Net assets 2006 4 994 974 (182) 4 994 792
2005 4 414 260 5 359 4 419 619
% v LY 13,2 (103,4) 13,0
Cost to acquire 2006 147 767 147 767
assets 2005 102 434 400 102 834
% v LY 44,3 43,7
RESOURCES
Number of
stores 2006 1 270 1 270
2005 1 207 14 1 221
% v LY 5,2 4,0
Number of
employees 2006 17 357 17 357
2005 16 248 167 16 415
% v LY 6,8 5,7
Retail m2 2006 839 637 839 637
2005 796 953 14 200 811 153
% v LY 5,4 3,5
PRODUCTIVITY RATIOS
Merchandise
sales: 2006 65,5 100,0 65,5
revenue 2005 65,4 97,7 66,0
v LY 0,1 2,3 (0,5)
Revenue per
store* 2006 5 965 5 968
2005 5 151 14 783 5 261
% v LY 15,8 13,4
Revenue per
employee 2006 436 432 436 677
(Rands)* 2005 382 631 1 239 299 391 347
% v LY 14,1 11,6
Operating profit
per employee 2006 73 351 73 228
(Rands)* 2005 56 851 (103 509) 55 220
% v LY 29,0 32,6
Revenue per m2 2006 9 022 9 027
(Rands)* 2005 7 801 14 575 7 920
% v LY 15,7 14,0
m2 per outlet 2006 661 661
2005 660 1 014 664
% v LY 0,2 (0,5)
TRADE RECEIVABLES
Gross trade
receivables 2006 6 041 400 6 041 400
2005 5 110 604 5 110 604
% v LY 18,2 18,2
Debtors costs 2006 396 530 93 396 623
2005 141 649 106 141 755
% v LY 179,9 (12,3) 179,8
Debtors cost %*2006 6,6 6,6
2005 3,5 3,5
v LY 3,1 3,1
Average length of 2006 16,0 16,0
book in months 2005 14,6 14,6
% v LY 1,4 1,4
Arrears 2006 889 028 889 028
2005 759 272 759 272
% v LY 17,1 17,1
Arrears % 2006 14,7 14,7
2005 14,9 14,9
v LY (0,2) (0,2)
Collection rate % 2006 6,9 6,9
2005 6,9 6,9
v LY
Deposit rate % 2006 20,4 20,4
2005 18,1 18,1
v LY 2,3 2,3
*Ratios in respect of the Relyant brands for 2005 have been annualised.
Segmental analysis (continued)
GEOGRAPHICAL
Total
RSA Foreign Group
INCOME STATEMENT
Revenue 2006 7 077 572 501 834 7 579 406
2005 3 900 389 405 635 4 306 024
% v LY 81,5 23,7 76,0
Credit revenue 2006 5 067 896 409 015 5 476 911
2005 2 890 450 336 741 3 227 191
% v LY 75,3 21,5 69,7
Cash revenue 2006 2 009 676 92 819 2 102 495
2005 1 009 939 68 894 1 078 833
% v LY 99,0 34,7 94,9
Cash revenue % 2006 28,4 18,5 27,7
2005 25,9 17,0 25,1
v LY 2,5 1,5 2,6
Sale of
merchandise 2006 4 601 361 362 295 4 963 656
2005 2 552 869 288 328 2 841 197
% v LY 80,2 25,7 74,7
Operating profit
(loss) 2006 1 191 023 79 988 1 271 011
2005 651 169 57 459 708 628
% v LY 82,9 39,2 79,4
Operating
margin % 2006 16,8 15,9 16,8
2005 16,7 14,2 16,5
v LY 0,1 1,7 0,3
Depreciation 2006 80 645 7 312 87 957
2005 52 553 8 119 60 672
% v LY 53,5 (9,9) 45,0
BALANCE SHEET
Assets 2006 7 059 329 511 778 7 571 107
2005 6 533 101 518 633 7 051 734
% v LY 8,1 (1,3) 7,4
Liabilities 2006 (2 341 936) (234 379) (2 576 315)
2005 (2 342 495) (289 620) (2 632 115)
% v LY (19,1) (2,1)
Net assets 2006 4 717 393 277 399 4 994 792
2005 4 190 606 229 013 4 419 619
% v LY 12,6 21,1 13,0
Cost to acquire 2006 140 655 7 112 147 767
assets 2005 95 868 6 966 102 834
% v LY 46,7 2,1 43,7
RESOURCES
Number of
stores 2006 1 155 115 1 270
2005 1 096 125 1 221
% v LY 5,4 (8,0) 4,0
Number of
employees 2006 15 799 1 558 17 357
2005 14 743 1 672 16 415
% v LY 7,2 (6,8) 5,7
Retail m2 2006 767 086 72 551 839 637
2005 731 822 79 331 811 153
% v LY 4,8 (8,5) 3,5
PRODUCTIVITY RATIOS
Merchandise
sales: 2006 65,0 72,2 65,5
revenue 2005 65,5 71,1 66,0
v LY (0,5) 1,1 (0,5)
Revenue per
store* 2006 6 128 4 364 5 968
2005 5 376 4 257 5 261
% v LY 14,0 2,5 13,4
Revenue per
employee 2006 447 976 322 101 436 677
(Rands)* 2005 399 633 318 281 391 347
% v LY 12,1 1,2 11,6
Operating profit
per employee 2006 75 386 51 340 73 228
(Rands)* 2005 56 823 41 082 55 220
% v LY 32,7 25,0 32,6
Revenue per m2 2006 9 227 6 917 9 027
(Rands)* 2005 8 051 6 708 7 920
% v LY 14,6 3,1 14,0
m2 per outlet 2006 664 631 661
2005 668 635 664
% v LY (0,6) (0,6) (0,5)
TRADE RECEIVABLES
Gross trade
receivables 2006 5 527 014 514 386 6 041 400
2005 4 569 709 540 895 5 110 604
% v LY 20,9 (4,9) 18,2
Debtors costs 2006 354 113 42 510 396 623
2005 125 330 16 425 141 755
% v LY 182,5 158,8 179,8
Debtors cost %* 2006 6,4 8,3 6,6
2005 3,4 4,6 3,5
v LY 3,0 3,7 3,1
Average length of 2006 16,0 16,3 16,0
book in months 2005 14,7 15,9 14,6
% v LY 1,3 0,4 1,4
Arrears 2006 772 780 116 248 889 028
2005 655 019 104 253 759 272
% v LY 18,0 11,5 17,1
Arrears % 2006 14,0 22,6 14,7
2005 14,3 19,3 14,9
v LY (0,3) 3,3 (0,2)
Collection rate % 2006 6,8 6,6 6,9
2005 6,9 6,2 6,9
v LY (0,1) 0,4
Deposit rate % 2006 20,4 21,6 20,4
2005 18,1 19,4 18,1
v LY 2,3 2,2 2,3
*Ratios in respect of the Relyant brands for 2005 have been annualised.
Notes to the consolidated audited results
1. BASIS OF PREPARATION
The Group is, for the first time, reporting its financial results in
accordance with International Financial Reporting Standards ("IFRS"). The
date of transition to IFRS is 1 September 2004. These summarised
consolidated financial statements have therefore been prepared using
accounting policies compliant with IFRS and in accordance the South African
Companies Act 1973 (as amended).
It should be noted that as IFRS are implemented internationally, evolving
practices with regard to the interpretation and application of standards
under IFRS could impact future reported results and disclosure.
2. EFFECT OF FIRST-TIME ADOPTION OF IFRS
In terms of IFRS 1 (First-time Adoption of International Financial
Reporting Standards), the Group has restated its opening balance sheet at 1
September 2004, the consolidated balance sheet as at 31 August 2005 and the
consolidated income statement for the periods then ended. There has been no
adjustment to the cash flows previously reported as a result of adoption of
IFRS.
IFRS 1 allows a number of exemptions on adoption of IFRS. The Group has
only elected to utilise the exemptions relating to the retrospective
application of:
- IFRS 3 (Business Combinations) - the Group has not applied IFRS 3 to
business combinations before 1 September 2004 (transition date); and
- IFRS 2 (Share-based Payment) - the Group has not applied IFRS 2 to share
options granted prior to 7 November 2002.
3. CHANGES IN ACCOUNTING POLICIES AND ADJUSTMENTS ON ADOPTION OF IFRS
During the current year, the following changes to accounting policies were
made and the comparatives have been adjusted accordingly:
Revenue: The classification of the following income statement items have
been amended after consideration of IAS 1 (Presentation of Financial
Statements), IFRS 4 (Insurance Contracts) and IAS 18 (Revenue):
- Insurance premiums reinsured and reinsurance commissions received, which
were previously reported under cost of sales and operating expenses
respectively, have been reported under "Other operating revenue" which
forms part of gross revenue.
- Interest and dividends received have been disclosed as part of total
revenue.
- The income statement format has been amended to separately reflect
merchandise sales, cost of merchandise sold and other operating revenue.
Cash and cash equivalents: Cash and cash equivalents exclude insurance
investments at bankers.
Property, vehicles and equipment: In terms of IAS 16 (Property, Plant and
Equipment) the Group has reassessed the residual values and useful lives of
its property, vehicles and equipment. This has resulted in a restatement of
the:
- carrying value of assets at the date of transition (1 September 2004);
- the related depreciation charges and profit or loss on disposal for the
year ended 31 August 2005; and
- the comparative headline earnings (as a result of the changes to the
profit or loss on disposal).
Inventories and trade payables: IAS 2 (Inventories) requires trade
discounts, rebates and other similar items to be deducted in determining
the cost of purchase and IAS 39 (Financial Instruments) requires trade
payables to be measured at fair value on initial recognition. The cost of
purchase of inventories and the related trade payables have therefore been
restated for settlement discounts and rebates received. The amounts
previously offset against operating expenses in the income statement have
been recognised in cost of merchandise sold.
Share-based payments: In terms of IFRS 2 these payments have been
recognised as an expense in the income statement over the vesting period
with a corresponding entry to equity in the case of equity settled share
based payments and to liabilities in the case of cash settled share-based
payments. Fully diluted weighted average number of shares was adjusted
accordingly.
2004 2005
R"000 R"000
4. IFRS IMPACT ON PROFIT ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS
As previously reported 563 878
Property, vehicles and equipment - IAS 16 (955)
Depreciation 4 535
Net profit on disposal of vehicles and
equipment (5 490)
Inventories - IAS 2 (26 061)
Trade and other payables - IAS 39 9 583
Share-based payments - IFRS 2 (4 575)
Taxation 5 039
As reported under IFRS 546 909
5. IFRS IMPACT ON SHAREHOLDERS" EQUITY
AND RESERVES
As previously reported 1 902 344 4 421 358
Property, vehicles and equipment - IAS 16 28 087 27 132
Inventories - IAS 2 (22 178) (48 239)
Trade and other payables - IAS 39 8 989 18 572
Deferred tax (4 243) 796
As reported under IFRS 1 912 999 4 419 619
2006 2005
R"000 R"000
6. REVENUE
Sale of merchandise 4 959 408 2 764 927
Other operating revenue 2 522 557 1 385 335
Finance charges earned 1 043 549 620 083
Financial services 1 102 624 612 287
Net insurance income earned 1 019 984 553 103
Gross insurance income 1 776 981 892 064
Reinsurance premium (756 997) (338 961)
Short-term loan income 82 640 59 184
Rendering of services 376 384 152 965
Dividends and interest received 93 193 77 695
Total revenue 7 575 158 4 227 957
7. INSURANCE INVESTMENT INCOME
Interest received 44 489 35 389
Dividends received 7 553 6 231
Realised profit 3 131 3 959
Unrealised profit 6 347 4 034
Total insurance investment income 61 520 49 613
8. EARNINGS PER SHARE INFORMATION
8.1 Reconciliation between profit
attributable to ordinary shareholders
to headline earnings
Profit attributable to ordinary
shareholders 894 317 546 909
Net loss (profit) on disposal of
vehicles and equipment 42 (3 104)
Profit on disposal of owner occupied
properties - (53 793)
Adjustment to fair value of investment
properties (2 079) (124)
Impairment of goodwill - 16 831
Tax effect of adjustments 289 8 433
Headline earnings 892 569 515 152
8.2 Effect of discontinued operations
Profit attributable to ordinary
shareholders 894 317 546 909
Effect of discontinued operations 2 139 13 609
Profit attributable to ordinary
shareholders - continuing operations 896 456 560 518
Headline earnings 892 569 515 152
Effect of discontinued operations 1 761 13 341
Headline earnings - continuing operations 894 330 528 493
8.3 Weighted average number of
ordinary shares 120 305 470 89 498 069
Shares in issue 123 236 770 92 496 695
Shares held as treasury shares (2 931 300) (2 998 626)
Fully diluted weighted average 122 087 297 91 391 018
8.4 Number of ordinary shares in issue 121 018 826 120 039 873
In issue 123 997 044 122 887 075
Treasury (2 978 218) (2 847 202)
9. INSURANCE FINANCIAL ASSETS
Unlisted preference shares at valuation 86 000 85 000
Listed shares - equity instruments 38 140 31 763
Money market instruments 510 15 701
Investments at bankers 508 909 493 459
Total insurance financial assets 633 559 625 923
10. TRADE AND OTHER RECEIVABLES
Net instalment sale debtors 2 893 997 2 985 344
Gross instalment sale debtors 4 012 073 4 126 656
Payable within one year 2 999 386 3 186 762
Payable thereafter 1 012 687 939 894
Provisions (1 118 076) (1 141 312)
Allowance for doubtful debts (370 407) (366 252)
Provision for unearned finance charges
and club fees (462 935) (457 494)
Net provision for unearned premiums (284 734) (317 566)
Gross provision for unearned premiums (678 726) (669 681)
Reinsurance portion for unearned premiums 393 992 352 115
Net term loan debtors 1 404 365 680 836
Gross term loan debtors 1 941 647 918 041
Payable within one year 1 311 127 672 264
Payable thereafter 630 520 245 777
Provisions (537 282) (237 205)
Allowance for doubtful debts (131 914) (77 172)
Provision for unearned finance charges
and club fees (304 351) (137 394)
Net provision for unearned premiums (101 017) (22 639)
Gross provision for unearned premiums (349 161) (168 912)
Reinsurance portion for unearned premiums 248 144 146 273
Net short-term loans 39 240 29 135
Payable within one year 87 680 65 907
Provisions (48 440) (36 772)
Allowance for doubtful debts (16 274) (10 384)
Provision for unearned finance charges (27 517) (21 556)
Net provision for unearned premiums (4 649) (4 832)
Other 119 560 125 927
Total trade and other receivables 4 457 162 3 821 242
Trade receivables comprise:
Net trade debtors 4 337 602 3 695 315
Gross trade debtors 6 041 400 5 110 604
Payable within one year 4 398 193 3 924 933
Payable thereafter 1 643 207 1 185 671
Provisions (1 703 798) (1 415 289)
Allowance for doubtful debts (518 595) (453 808)
Provision for unearned finance charges
and club fees (794 803) (616 444)
Net provision for unearned premiums (390 400) (345 037)
11. CASH GENERATED FROM OPERATING
ACTIVITIES
Cash generated from operating activities 1 643 458 701 016
Working capital changes (926 967) (188 994)
(Increase) decrease in inventories (53 447) 1 111
Increase in trade and other receivables (924 429) (236 209)
Increase in trade and other payables 50 909 46 104
Cash generated from operations 716 491 512 022
Registered office:
Gillooly"s View Office Park, Block E, Osborne Lane, Bedfordview, 2008
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg. PO Box 61051, Marshalltown, 2107
Auditors:
Grant Thornton
Sponsors:
Nedbank Capital
Directors:
PJB Pohlmann+* (Chairman), DS McGlashan* (Deputy Chairman),
TJ Chalmers*, JM Moore#*, PJC Squires
(Chief Executive Officer), AFF Moca, RA Rawlings, RBG Sinclair
(*Non-Executive Directors)(+ German #British)
website: www.ellerines.co.za
Date: 06/11/2006 03:48:45 PM Produced by the JSE SENS Department
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