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Steers Holdings Ltd - Audited Group Results STEERS HOLDINGS LIMITED (registration number 1969 / 004875 / 06) AUDITED GROUP RESULTS OVERVIEW Despite challenging trading conditions and severe pressure on margins and costs during fiscal 2002, the Group returned positive earnings for the year ended 28 February 2002. FINANCIAL RESULTS Gross revenue increased 8% from R235.5 million to R253.9 million for the year under review. However this increase in revenue was not carried forward to operating profit before interest and taxation, which decreased by 24% from R24.8 million last year to R 18.9 million. Throughout this testing period, brand integrity amongst the Groups` brands was maintained by refusing to compromise on quality. At the same time, the Group absorbed many cost increases from suppliers, enabling franchisees to entrench the Groups` value proposition in a highly competitive retail market. SEGMENT REPORT Gross Revenue
2002 2001 Growth R000 R000 % Franchising 52 824 48 238 10 Manufacturing and 203 684 189 444 8 distribution Corporate Services 15 266 19 004 (20) Less: Inter segment (17 909) (21 152) - revenue Total 253 865 235 534 8 Operating profit 2002 2001 Growth R000 R000 %
Franchising 8 939 7 755 15 Manufacturing and 9 996 16 721 (40) distribution Corporate Services 82 486 (83) Eliminations (133) (120) - Total 18 884 24 842 (24) FRANCHISING DIVISION In the Franchising Division, the Steers and Debonairs Pizza brands showed enduring strength and maintained their leadership positions, achieving a heartening measure of growth both locally and internationally. Gross Revenue increased by 10% from R48.2 million to R52.8 million. Effective management of costs and resources resulted in 15% growth in operating profit before interest and taxation from R7.8 million to R8.9 million. During the latter half of the financial year, Steers Holdings Limited signed a master franchise agreement with AFC Enterprises, the world`s second biggest chicken franchisor. The introduction of the Church`s Chicken brand to the South African consumer will herald our entry into this rapidly expanding sector of the Quick Service Restaurant market in which we were not previously represented. The Group is now poised to roll out its first ever chicken outlet, rounding off our representation in all the major key food categories, namely burgers, pizza, fish and now chicken. As at the 28 February 2002, the Group`s franchised network was as follows: South Rest of Total Africa Africa
Steers 278 36 314 Debonairs Pizza 132 19 151 FishAways 17 0 17 Total 427 55 482 The Group exited the year with 482 branded outlets, adding a net gain of 29 outlets during the year under review. Currently there are 55 outlets located outside of the borders of South Africa. The introduction of the Church`s Chicken brand to Africa, together with the tried and tested offering of the Steers, Debonairs Pizza and FishAways brands, promises to deliver healthy growth in store numbers in the new financial year. MANUFACTURING AND DISTRIBUTION DIVISION Increased pressure on margins, in addition to one off costs in respect of the restructuring and outsourcing of the Store Development business unit, had a negative effect on the Manufacturing and Distribution Division. Consequently volume increase of 8% to R203.7 million could not be carried through to the bottom line, resulting in a decrease in operating profit before interest and taxation from R16.7 million to R10.0 million. Pressure on margins, arising primarily as a result of the increase in the price of red meat, the increase in the price of fuel, as well as the rapid devaluation of the Rand, have been addressed by management, and margins are returning to previous levels. CHANGE IN ACCOUNTING POLICIES During the year under review the Group changed its accounting policy in respect of accounting for dividends paid in order to bring it in line with South African statements of Generally Accepted Accounting Practice. The Group previously accounted for dividends on an accrual basis. Dividends will now be accounted for when declared. PROSPECTS Responsiveness to consumers has always been a strength of the Group. Our closeness to our franchisees and our quick response to changing consumer demands, will ensure the expansion of our already successful brands. We are committed to growth in South Africa and the rest of Africa. and we have begun to assess the prospects for growth out of Africa. Our ability to meet and beat the stringent quality parameters of a global player like Church`s Chicken was confirmation that the Group is capable of sourcing, manufacturing, presenting and packaging products that are truly world class. DIVIDENDS The Board of Directors has resolved to declare a final dividend (number 19) of 7 cents per ordinary share. The last date to trade in order to participate in the dividend will be Friday 28 June 2002. The shares will commence trading "Ex" dividend from Monday 1 July 2002. The dividend will be payable to all shareholders recorded in the books of the Company at the close of business on Friday 5 July 2002 ("record date"). The dividend will be payable on Monday 8 July 2002. No dematerialisation or rematerialisation of share certificates may take place between Monday 24 June 2002 and Friday 5 July 2002, both days inclusive. On behalf of the Board P.Halamandaris T.Halamandaris Chairman Chief Executive Officer 14 May 2002 Registered Office 478 James Crescent Midrand 1685 PO Box 2884 Halfway House 1685 Email: investorrelations@steers.co.za Website: www.steersholdings.co.za Transfer Secretaries Ultra Registrars (Pty) Ltd (registration no: 2000/007239/07) 11 Diagonal Street Johannesburg PO Box 15610 Woodmead 3610 Directors P.Halamandaris (Chairman), T.Halamandaris (Chief Executive Officer), K.A.Hedderwick, J.L.Halamandres*, H.R.Levin*, P.Halamandaris (jnr)*. * non executive Available on SENS Share code STE ISIN code ZAE 000 008 330 CONSOLIDATED INCOME STATEMENT 28-Feb-02 28-Feb-01
R 000`s R 000`s change Gross revenue 253 865 235 534 8% Operating profit 18 884 24 842 -24% Net interest paid ( 638) ( 740) Net income before 18 246 24 102 -24% taxation Taxation ( 7 556) ( 10 044) Net income after taxation 10 690 14 058 -24% Attributable to minority - 139 shareholders Attributable profit 10 690 14 197 -25% Adjusted for: Amortisation of goodwill 479 479 Loss on loan written off 16 178 Prior year under - 1 009 provision Profit on sale of non ( 223) ( 103) current assets Headline earnings 10 962 15 760 -30% Weighted average number 63 187 62 625 933 of shares in issue 918 Operating margin 7.4% 10.5% -29% Earnings per share - 16.9 22.7 -26% cents Headline earnings per 17.3 25.2 -31% share - cents Dividends - final (prior year) 8.0 7.0 - Interim (current year) 5.0 5.0 Total dividend for the 13.0 12.0 year - final (current year)1 7.0 8.0 1. The dividend has been proposed subsequent to year end and has been presented for information purposes only. No provision regarding this dividend has been taken into account. CONSOLIDATED BALANCE SHEET 28-Feb-02 28-Feb-01 R 000`s R 000`s ASSETS Non-current assets 49 374 51 320 Tangible fixed assets 12 963 13 934 Intangible fixed assets 30 078 30 926 Loans 6 333 6 460 Current assets 76 027 63 049 Inventory 17 061 18 185 Trade and other 35 624 32 448 receivables Bank balances and cash 23 342 12 416 Total assets 125 401 114 369 EQUITY AND LIABILITIES Share capital and 75 658 69 611 reserves Ordinary shareholders` 75 515 69 467 interest Minority shareholders` 143 144 interest Non-current liabilities 2 078 4 761 Interest bearing 2 652 4 693 borrowings Deferred taxation ( 574) 68 Current liabilities 47 665 39 997 Trade and other payables 23 628 24 838 Shareholders for dividend 142 63 Taxation 1 640 4 833 Bank overdraft 22 255 10 263 Total equity and 125 401 114 369 liabilities CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 28-Feb-02 28-Feb-01 R 000`s R 000`s Balance at beginning of 63 821 56 986 year Change in accounting 5 646 4 928 policies Restated balance 69 467 61 914 Net gains not recognised 2 691 773 in the income statement - currency translation differences Attributable profit 10 690 14 197 Dividends ( 8 229) ( 7 510) Net movement in Share 896 93 Capital Ordinary shareholders 75 515 69 467 interest CONSOLIDATED CASH FLOW 28-Feb-02 28-Feb-01
R 000`s R 000`s Net cash flow from 7 394 13 335 operating activities Cash generated by 27 573 29 961 operations Net interest paid ( 638) ( 740) Taxation paid ( 11 390) ( 8 073) Dividends paid ( 8 151) ( 7 813) Net cash flow from ( 4 612) ( 2 744) investing activities Expended on non-current ( 5 507) ( 4 505) assets Proceeds from disposal of 895 1 761 non-current assets Net cash flow from ( 3 847) ( 5 386) financing activities Movement in share capital 896 ( 239) and reserves Decrease in interest ( 4 743) ( 5 147) bearing borrowings Change in cash and cash ( 1 065) 5 205 equivalents Cash and cash equivalents 2 153 ( 3 052) at beginning of year Cash and cash equivalents 1 088 2 153 at end of year Date: 14/05/2002 05:05:00 PM Produced by the SENS Department
