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Steinhoff International Holdings Ltd - Audited results for the year ended 30

Release Date: 09/09/2003 07:27
Code(s): SHF
Wrap Text

Steinhoff International Holdings Ltd - Audited results for the year ended 30 June 2003 Steinhoff International Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 1998/003951/06) Share code: SHF ISIN Code: ZAE000016176 Audited results for the year ended 30 June 2003 Our strength and strategies deliver sustainable growth - Revenue up by 21% to R9,95 billion (2002: R8,2 billion) - Headline earnings per share up 15% to 105 cents (2002: 91 cents) - Net gearing ratio down from 24% to 15% - Continued strong cash generation from operations - Proposed dividend per share up 20% to 18 cents (2002: 15 cents) Abridged consolidated income statement for the year ended 30 June 2003 Audited Audited* year year ended ended
30/06/03 30/06/02 % Note R"000 R"000 increase Revenue 9 948 595 8 207 936 21 Operating income 1 300 913 1 040 014 25 before depreciation Depreciation (191 858) (163 563) Operating income 1 109 055 876 451 27 after depreciation Exceptional items 1 (79 389) (107 174) Earnings before 1 029 666 769 277 34 goodwill, interest and taxation Goodwill amortised (31 429) (36 549) Earnings before 998 237 732 728 36 interest and taxation Net finance charges (121 181) (79 299) Earnings before 877 056 653 429 34 taxation Taxation (97 950) (52 609) Earnings after 779 106 600 820 30 taxation Share of associate 91 056 55 964 income Attributable to 2 881 1 809 outside shareholders Income attributable 873 043 658 593 33 to shareholders Number of shares in 946 055 906 616 4 issue ("000) Weighted average 939 970 864 754 9 number of shares in issue ("000) Attributable income 873 043 658 593 33 (R"000) Headline earnings 2 984 865 785 021 25 (R"000) Earnings per share 93 76 22 (cents) Headline earnings 105 91 15 per share (cents) As previously stated 93 Changes to comply (2) with circular 7/2002 Diluted earnings per 90 74 22 share (cents) Diluted headline 101 88 15 earnings per share (cents) Proposed dividend 18 15 20 per share (cents) Note 1: Exceptional items (R"000) - Profit on disposal 12 000 of business - Loss on disposal (9 793) of business - Impairment of (5 954) intangible assets - Closure costs (37 362) (83 171) - Impairment of (38 280) (24 003) property, plant and equipment (79 389) (107 174)
Note 2: Headline earnings calculation Income attributable 873 043 658 593 to shareholders Adjustment for: - Exceptional items 79 389 107 174 - Goodwill 31 429 36 549 amortisation - Loss/(Profit) on 4 977 (17 295) disposal of property, plant and equipment - Loss on disposal 107 of property, plant and equipment included in share of associate income - Goodwill 4 590 amortisation included in share of associate income - Negative goodwill (8 670) included in share of associate income Headline earnings 984 865 785 021 for the year * Headline earnings for the year ended 30/06/2002 have been restated to comply with circular 7/2002. Abridged consolidated balance sheet at 30 June 2003 Audited Audited 30/06/03 30/06/02 R"000 R"000
ASSETS Non-current assets Property, plant and equipment and 2 529 182 2 731 424 intangible assets Investments and loans 1 180 365 1 246 109 Deferred tax assets 33 750 5 727 3 743 297 3 983 260 Current assets Accounts receivable and short 2 850 635 2 563 859 term loans Inventories 893 754 1 109 204 Cash and cash equivalents 1 462 943 405 052 5 207 332 4 078 115 Total assets 8 950 629 8 061 375 EQUITY AND LIABILITIES Capital and reserves 4 942 186 4 384 369 Outside shareholders" interest 14 782 28 073 Non-current liabilities Deferred tax liabilities 44 360 7 223 Long term liabilities 1 437 591 746 811 Long term licence fee liability 209 188 237 873 1 691 139 991 907 Current liabilities Net interest bearing 624 916 622 083 Accounts payable and provisions 1 677 606 2 034 943 2 302 522 2 657 026 Total equity and liabilities 8 950 629 8 061 375 Net asset value per share (cents) 522 484 Gearing ratio (net) 15% 24% Closing exchange rate - Rand : 8,61 10,25 Euro Abridged group cash flow statement for the year ended 30 June 2003 Audited Audited year year ended ended 30/06/03 30/06/02
R"000 R"000 Operating profit before working 1 253 339 932 557 capital changes Net changes in working capital (355 074) 22 454 Cash generated from operations 898 265 955 011 Net finance costs (121 181) (79 299) Dividends paid (16 763) (26 694) Dividends received 17 230 7 506 Taxation (85 728) (59 457) Net cash inflow from operating 691 823 797 067 activities Net cash outflow from investing (812 189) (1 380 076) activities Net cash inflow from financing 993 633 753 506 activities Net increase in cash and cash 873 267 170 497 equivalents Effects of exchange rate changes 147 790 (308 989) on cash and cash equivalents Cash and cash equivalents - 979 169 1 117 661 beginning of period Cash and cash equivalents - end 2 000 226 979 169 of period Cash and cash equivalents can be reconciled to the balance sheet as follows: Cash and cash equivalents above 2 000 226 979 169 Overdrafts included in 537 283 574 117 financing activities Cash and cash equivalents per 1 462 943 405 052 balance sheet Statement of changes in equity for the year ended 30 June 2003 Non- Share distribut Distribut capital able able and reserves reserves Total
premium R"000 R"000 R"000 R"000 Balance at 30 1 681 887 139 918 1 074 001 2 895 806 June 2001 as previously stated Change in 1 468 1 468 accounting policy Balance at 30 1 681 887 139 918 1 075 469 2 897 274 June 2001 restated Earnings 658 593 658 593 attributable to shareholders Dividends paid (26 694) (26 694) Issue of shares 473 538 473 538 Increase in foreign currency translation 381 658 381 658 reserve Share of associate companies" retained earnings transferred to non-distributable 55 964 (55 964) reserves Transfer to (95) 95 distributable reserves Balance at 30 2 155 425 577 445 1 651 499 4 384 369 June 2002 Earnings 873 043 873 043 attributable to shareholders Dividends paid (16 955) (16 955) Issue of shares 98 178 98 178 Decrease in foreign currency translation (378 696) (378 696) reserve Acquisition of the remainder of shares in an associate (1 248) (1 248) company Share of associate companies" retained earnings transferred to non-distributable 66 320 (66 320) reserves Reserves released (12 033) (4 472) (16 505) to income Balance at 30 2 253 603 251 788 2 436 795 4 942 186 June 2003 Commentary Financial overview The Board is pleased to report a 21% growth in revenue to R9,95 billion (2002: R8,2 billion). Headline earnings for the year under review increased by 25% to R985 million (2002: R785 million). The Group achieved real growth in revenue notwithstanding the continued challenging trading conditions globally. Operating margin improved further to 12,1% (2002: 11,4%). The improved margin was achieved mainly as a result of the relative strength of the Euro against the USD and Polish Zloty, a more effective and higher throughput of products and improved sourcing of third party products. Net finance charges increased to R121,1 million (2002: R79,3 million) mainly as a result of the utilisation of low interest rate funding in Europe to finance the Group"s offshore capital expenditure. Interest cover amounts to 9,1 times (2002: 11,1 times) and the net interest bearing debt to equity ratio reduced to 15% (2002: 24%), well within the Group"s self-imposed borrowing limitation of 50%. Taxation expense increased to R97,9 million (2002: R52,6 million) and is in line with expectations. The average tax rate increased to 11,2% (2002: 8,1%) and it is anticipated that the average tax rate will range between 12% to 15% for the foreseeable future. Headline earnings per share increased 15% to 105 cents (2002: 91 cents) while basic earnings per share increased 22% to 93 cents (2002: 76 cents). The weighted average number of shares increased by 9% during the year to 939,97 million (2002: 864,75 million). Shareholders" funds increased to R4 942 million (2002: R4 384 million) and return on average shareholders" funds was stable at 21% (2002: 22%) during the year. The net asset value per share further improved by 7,9%, from 484 cps to 522 cps, despite an increase in the number of issued shares to 946,1 million (2002: 906,6 million). The Group"s cash flow from operations continues to be strong and amounted to R898 million (2002: R955 million), further benefiting from sound working capital management. Cash generation is after a net increase in working capital of R355 million (2002: reduction of R22,5 million) caused mainly by accelerated payments to suppliers to benefit from more favourable settlement terms. The increase in short-term cash and cash equivalents should be viewed against the seasonal nature of the business, with June being the low ebb of the business cycle in Europe, immediately preceding the summer holidays. SEGMENTAL ANALYSIS The Group"s main activity as an integrated global lifestyle supplier is focused on manufacturing and wholesale & distribution. Year ended 30 June 2003 Earnings before exceptional
items, goodwill, interest and R"000 Revenue % taxation Manufacturing 7 260 028 73 845 847 Wholesale & distribution 2 688 567 27 358 149 Total 9 948 595 100 1 203 996 R"000 % Net assets % Manufacturing 70 3 517 335 71 Wholesale & distribution 30 1 424 851 29 Total 100 4 942 186 100 Year ended 30 June 2002 Earnings before
exceptional items, goodwill, interest and
R"000 Revenue % taxation Manufacturing 6 154 814 75 636 666 Wholesale & distribution 2 053 122 25 280 263 Total 8 207 936 100 916 929 R"000 % Net assets % Manufacturing 69 3 288 639 75 Wholesale & distribution 31 1 095 730 25 Total 100 4 384 369 100 Geographical analysis The Group"s operations are located in Southern Africa, the European Community, eastern Europe, Australia and New Zealand. Year ended 30 June 2003 Earnings before
exceptional items, goodwill, interest and
R"000 Revenue % taxation Southern 2 668 211 27 236 272 Africa European 4 397 708 44 569 319 Community Eastern 2 381 148 24 378 596 Europe Australia 501 528 5 19 809 Total 9 948 595 100 1 203 996 R"000 % Net assets % Southern 20 1 289 668 26 Africa European 47 2 689 541 55 Community Eastern 31 901 295 18 Europe Australia 2 61 682 1 Total 100 4 942 186 100 Year ended 30 June 2002 Earnings
before exceptional items, goodwill,
interest and R"000 Revenue % taxation Southern 2 502 161 30 226 230 Africa European 3 589 038 44 413 391 Community Eastern 1 820 556 22 267 273 Europe Australia 296 181 4 10 035 Total 8 207 936 100 916 929 R"000 % Net assets % Southern 25 1 227 305 28 Africa European 45 2 417 465 55 Community Eastern 29 657 435 15 Europe Australia 1 82 164 2 Total 100 4 384 369 100 The average exchange rate used to translate foreign currency income and expenditure into South African rand was R9,415: 1 Euro (2002: R9,00 : 1 Euro). R962 million (2002: R936 million) of Southern Africa"s revenue of R2 668,2 million (2002: R2 502,2 million) represents exports to the USA and the European community, amounting to approximately 36% (2002: 37%) of its activities. It is the stated intention of the Group to continue to grow exports, notwithstanding the stronger Rand; it has the production capacity available to achieve economies of scale and grow critical mass. The Group"s revenue exposure to the local South African furniture market amounted to 17% (2002: 19%). Including exports from South Africa, the Group generated 83% (2002: 81%) of its total revenues in foreign currencies during the year. Funding During December 2002, Steinhoff International issued a 6-year redeemable bond of Euro 37,5 million at a discount, yielding an amount of Euro 30 million, which proceeds were advanced to Steinhoff Europe to expand its capital base. The bond, together with the proceeds of an off-shore placement of 20 million shares for cash in December 2002, was concluded preparatory to the syndicated loan. As announced in April 2003, Steinhoff Europe successfully concluded a syndicated term loan and revolving credit facility of Euro 175 million with a number of European banks. These funding initiatives enable Steinhoff Europe to be financially self-sufficient with regard to its funding requirements, largely independent from its South African holding company. Corporate Activity The Group did not conclude any material acquisitions during the year under review. It continues to evaluate and pursue quality opportunities from time to time which will augment the Group"s core strengths and competencies and capabilities. Corporate Governance The Group complies in all material respects with the JSE Securities Exchange South Africa ("JSE") Listing Requirements and the Code of Corporate Practice and Conduct published in the King Report on Corporate Governance. Listing anniversary Steinhoff celebrates its fifth anniversary as a listed company on the JSE on 23 September 2003. Despite tough and challenging conditions in both the trading environment and world financial markets in general Steinhoff has grown its market capitalisation from R2,6 billion at listing to the current R7 billion. These pleasing results confirm the substance of the group, its management and its sustainable growth potential. The compound growth in headline earnings over the four years since listing, amount to 45,6%. Headline earnings per share has grown by a compound rate of 33,4% over the same period. Triple Bottom Line The Group"s commitment to and support of HIV/AIDS interventions, sound labour relations, skills training and development and creating an environment where all of its employees worldwide can develop to their fullest potential, continues as planned. Compliance with environmental regulations remains a priority. The Group"s production processes and raw materials used are constantly evaluated to ensure acceptable standards. Black Economic Empowerment (BEE) of enterprises within our Southern African communities is an integral part of the group"s growth strategy. This strategy complies with the general practice of BEE, and is intended to introduce unique features to achieve real empowerment specific to our industry. The Group is continuously pursuing BEE opportunities in its Southern African operations. Prospects The European and Australian operations are continuing to gain further market share through leveraging their core strengths and competencies. The expanded manufacturing base in Poland, Hungary and Ukraine augurs well for increased exports into the European Union, particularly the United Kingdom, France and the Benelux countries. The growing contribution of higher margin branded products to the sales-mix is expected to continue. The establishment of the new logistics centre in Germany is also expected to enhance centralised distribution and logistics efficiencies. Steinhoff Africa continues to grow its exports from South Africa, benefiting from economies of scale and better utilisation of production capacity, despite a strengthening Rand environment. The Group will make further investments in raw material production facilities to ensure long-term sources of supply, particularly in sawmilling and timber resources. The Australian operations continue to benefit from sales growth and better efficiencies. The South African operations are benefiting from the improvement in macro- economic fundamentals which have a distinct favourable effect on consumer spending patterns in relation to durable goods. Management expect to achieve growth in headline earnings from the continuing operations for the year ahead. Accounting Policies The accounting policies and methods of computation for the financial statements for the year ended 30 June 2003 are in all material respects consistent with those applied in prior years, except for AC 133 - Financial Instruments - Recognition and Measurement and AC 137 - Agriculture which were adopted during the current year, and are in accordance with South African Statements of Generally Accepted Accounting Practice. In terms of the transitional arrangements of AC 133, figures in respect of previous years are not restated. The impact of the application of AC 133 and AC 137 has not been material on the group"s results. Audit Report The results have been audited by Deloitte & Touche. Their unqualified audit opinion is available for inspection at the company"s registered office. On behalf of the Board of Directors B E Steinhoff M J Jooste Chairman Chief executive officer 8 September 2003 8 September 2003 Declaration of capitalisation share award with dividend election option The board has resolved to award capitalisation shares to shareholders recorded in the register at the close of business on Friday, 7 November 2003 ("the share award"). Shareholders will, however, be entitled to decline the share award or any part thereof and instead elect to receive a cash dividend of 18 cents (2002: 15 cents) per share. The last day to trade Steinhoff shares on the JSE to ensure that a purchaser appears as a shareholder on the record date (7 November 2003) will be Friday, 31 October 2003. Shares will commence trading ex dividend from the commencement of trading on Monday, 3 November 2003. Payment and issue date will be on Monday, 10 November 2003. Share certificates may not be dematerialised or rematerialised from Monday, 3 November 2003 to Friday, 7 November 2003, both days inclusive. The terms of the share award will be announced on Friday, 17 October 2003, and documentation relating thereto will be posted by Friday, 17 October 2003. Elections in respect of the cash dividend will close on Friday, 7 November 2003. Dematerialised shareholders will have their CSDP or broker accounts credited/updated on Monday, 10 November 2003. Cheques/electronic transfers (where elected) and/or share certificates will be posted to shareholders on/about Monday, 10 November 2003. Shareholders are furthermore advised to provide and/or verify their banking details to the relevant CSDP, Broker or the Transfer Secretaries to ensure safe transfer of any funds. Annual Report The Annual Report will be mailed to shareholders in due course. The annual general meeting is scheduled to take place on Monday, 1 December 2003, at the registered office of the Company. By order of the board S J Grobler Company Secretary 8 September 2003 Bruno Steinhoff, Executive Chairman commented: "These results bear testimony to Steinhoff"s ability to achieve sustainable growth from our stated strategies and strengths amidst a volatile global trading environment". ADMINISTRATION Registration number: 1998/003951/06 JSE share code: SHF ISIN code: ZAE 000016176 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 Limited 70 Marshall Street, Johannesburg, 2001 Company secretary S J Grobler Auditors Deloitte & Touche Investor Relations College Hill (Proprietary) Limited Sponsor Gensec Bank Limited Directors: B E Steinhoff* (Chairman), M J Jooste (Chief Executive Officer), D E Ackerman+, C E Daun+*, J N S du Plessis+, K J Grove+, D Konar+, J F Mouton+, F J Nel, F A Sonn+, N W Steinhoff*, D M van der Merwe, *German +Non-executive www.steinhoffinternational.com Date: 09/09/2003 07:27:33 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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