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Steers Holdings Limited - Unaudited Interim Results For The Six Months Ended 31
August 2003 And Cautionary Announcement
STEERS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1969/004875/06)
(Share Code: STE ISIN number: ZAE000008330)
("Steers Holdings" or "the company")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2003 AND CAUTIONARY ANNOUNCEMENT
Gross Revenue up 15%
Operating profit up 38%
Headline earnings up 39%
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
Ended ended ended
31 Aug 31 Aug 28 Feb
2003 2002 % 2003
R000s R000s change R000s
Gross revenue 163 101 142 049 15 291 063
Operating profit
before depreciation 18 408 13 787 34 28 641
Depreciation (3 828) (3 216) (4 804)
Operating profit 14 580 10 571 38 23 837
Net interest
received/(paid) (179) (69) 112
Net income before
taxation 14 401 10 502 37 23 949
Taxation (5 033) (3 906) (7 777)
Net income after
taxation 9 368 6 596 42 16 172
Attributable to outside
shareholders - - -
Attributable profit 9 368 6 596 42 16 172
Adjusted for:
Amortisation of goodwill 537 220 695
Loss on loans written off - - 3
Profit on sale of non-current
assets (552) (97) (224)
Headline earnings 9 353 6 719 39 16 646
Weighted average number of shares
in issue 64 513 599 64 513 599 64 513 599
Operating margin - % 8,9 7,4 20 8,2
Earnings per share - cents 14,5 10,2 42 25,1
Headline earnings per
share - cents 14,5 10,4 39 25,8
CONSOLIDATED BALANCE SHEET
Six months Six months Year
ended ended ended
31 Aug 31 Aug 28 Feb
2003 2002 2003
R000s R000s R000s
ASSETS
Non-current assets 64 877 54 203 60 678
Tangible fixed assets 13 849 12 923 13 850
Intangible fixed assets 41 394 31 841 37 943
Deferred taxation 1 463 1 710 2 873
Loans 8 171 7 729 6 012
Current assets 63 882 67 933 64 625
Inventory 24 152 21 731 22 162
Accounts receivable 27 369 37 957 32 650
Bank 12 361 8 245 9 813
Total assets 128 759 122 136 125 303
EQUITY AND LIABILITIES
Share capital and
reserves 90 212 77 678 81 444
Ordinary shareholders"
interest 90 069 77 535 81 301
Outside shareholders"
interest 143 143 143
Non-current liabilities 11 898 3 080 10 597
Long-term liabilities 11 898 3 080 10 597
Deferred taxation - - -
Current liabilities 26 649 41 378 33 262
Accounts payable 21 462 36 297 29 374
Shareholders for dividend 155 142 155
South African Revenue
Service 5 032 4 939 3 733
Total equity and
Liabilities 128 759 122 136 125 303
CONSOLIDATED CHANGES IN EQUITY
Six months Six months Year
ended ended ended
31 Aug 31 Aug 28 Feb
2003 2002 2003
R000s R000s R000s
Balance at start
of period 81 301 75 516 75 516
Net gains not recognised
in the income statement -
currency translation
differences (600) (661) (2 597)
Attributable earnings 9 368 6 596 16 172
Dividends (4 516) (8 387)
Net movement in share
capital 600 597
Balance at end
of period 90 069 77 535 81 301
CONSOLIDATED CASH FLOW
Six months Six months Year
ended ended ended
31 Aug 31 Aug 28 Feb
2003 2002 2003
R000s R000s R000s
Net cash flow from
operating activities 10 846 14 993 15 128
Cash generated by
operations 17 968 13 691 28 048
Change in working
capital (4 621) 5 971 3 325
Net interest paid (179) (69) 112
Taxation paid (2 322) (84) (7 983)
Dividends paid ( 4 516) (8 374)
Net cash flow from
investing activities (9 000) (6 235) (15 438)
Expended on non-current
assets (8 571) (5 226) (17 137)
Proceeds from disposal
of non current assets 1 730 387 479
Increase in loans
receivable (2 159) (1 396) 1 220
Net cash inflow from
financing activities 702 (1 600) 9 036
(Decrease)/increase in
share capital and
reserves (599) (60) 597
Increase/(decrease) in
Long-term liabilities 1 301 (1 540) 8 439
Change in cash and cash
Equivalents 2 548 7 158 8 726
Cash and cash equivalents
at beginning of period 9 813 1 087 1 087
Cash and cash equivalents
at end of period 12 361 8 245 9 813
Notes:
These financial statements have been prepared in conformity with South African
Statements of Generally Accepted Accounting Practice, and the accounting
policies are consistent with those applied in the previous year ended 28
February 2003.
OVERVIEW
Steers Holdings Limited is South Africa"s leading Quick Service Restaurant (QSR)
group, with 595 franchised outlets under management. Operating in the four key
QSR market segments, burgers, pizza, fish and chicken, the Group is represented
by its Steers, Debonairs Pizza and FishAways brands, and Church"s Chicken which
it operates under license from AFC Enterprises. During the period under review
the Group"s reach was further extended into the fast-growing franchised coffee
outlet category with the acquisition of the House of Coffees Coffee Shop, ESP
Illy Boutique and Brazilian Coffee Shop brands.
The strong results delivered for the review period are a reflection of the
health of the Group"s brand portfolio and its committed franchisee and licensee
network, which is underpinned by a world-class franchising system that extends
across the product supply chain.
FINANCIAL RESULTS
For the six months ended 31 August 2003, gross revenue improved by 15% to R163,1
million (2002: R142,0 million). Net income before tax increased by 38% to R14,6
million, compared with R10,6 million for the prior comparable period, while
headline earnings increased by 39% to R9,4 million (2002: R6,7 million).
SEGMENTAL REPORT
Gross revenue
Six months ended
31 August 2003 31 August 2002 Growth
R000s R000s %
Franchising 31 306 27 780 13
Manufacturing and
Distribution 132 609 114 381 16
Management Services 11 174 9 549 17
Eliminations (11 988) (9 661) 24
Total 163 101 142 049 15
Operating profit
Six months ended
31 August 2003 31 August 2002 Growth
R000s R000s %
Franchising 5 708 3 705 54
Manufacturing and
Distribution 8 464 6 536 30
Management Services 586 352 67
Eliminations (178) (22) +100
Total 14 580 10 571 38
FRANCHISING DIVISION
Gross revenue improved by 13% to R31,3 million (2002: R27,8 million), while
operating profit was boosted by 54% to R5,7 million from R3,7 million in the
previous period. Improved cost containment measures and the strength of the
Group"s brands, coupled with the increase in store numbers and related revenues
were significant contributors to the enhanced profits.
As at 31 August 2003, the Group"s franchised network comprised:
South Africa International Total
Steers 286 40 326
Debonairs Pizza 148 25 173
FishAways 31 1 32
Church"s Chicken 11 - 11
House of Coffees 38 - 38
Brazilian 15 - 15
Total 529 66 595
MANUFACTURING AND DISTRIBUTION DIVISION
Focus on quality and cost-efficiency ensured franchisee loyalty, and the strong
performance of the Franchising Division is reflected in the results of the
Manufacturing and Distribution Division.
Gross revenue improved by 16% to R132,6 million from R114,4 million, while
operating profit increased by 30% to R8,5 million from R6,5 million because of
improved efficiencies in both the purchasing and manufacturing processes.
These improvements will be further enhanced with the centralisation of the
KwaZulu-Natal and Eastern Cape regional administration functions. With effect
from 01 September 2003 additional efficiencies will be introduced to the Group"s
retail sauce business with a change in supplier and increase in the supplier"s
scope of responsibility.
ACQUISITIONS
Creative Coffee Franchise Systems (Pty) Limited
During the period under review the Group acquired the entire issued share
capital of Creative Coffee Franchise Systems (Pty) Limited, a company licensed
to develop franchised coffee outlets under The House of Coffees, Brazilian and
ESP Illy Boutique branded trademarks.
Management is pleased to report that the acquired brands have been successfully
integrated into the Group"s existing infrastructure.
Pleasure Foods (Pty) Limited
During the review period Steers Holdings acquired the entire shareholding of
Pleasure Foods (Pty) Limited, comprising the Wimpy and Whistle Stop brands, for
a purchase price of R150,6 million, which consideration will be funded via a
combination of cash reserves and debt and equity finance.
The acquisition is subject to the fulfilment of the following remaining
suspensive conditions, namely the favourable finding of the Competition
Commission, which finding is expected at the latest on 09 December 2003, and the
approval of the acquisition by the shareholders of Steers Holdings. A circular
detailing the effects of this acquisition and requesting the approval of this
transaction has been distributed to shareholders. Shareholders should take
cognisance of the following important dates and times:
2003
Last day to lodge proxy with transfer Monday, 10 November
secretaries by no later than 09:00 on
General meeting of Steers Holdings Wednesday, 12 November
shareholders at 09:00 on
Results of general meeting published on Wednesday, 12 November
SENS
Results of general meeting published in Thursday, 13 November
the press
Listing of vendor consideration Monday, 22 December
placement shares
Notes
1. The abovementioned dates and times are subject to change at the instance of
Steers Holdings. Any changes will be announced in the press and on SENS.
This transaction will catapult Steers Holdings" complement of franchised
restaurants to in excess of 1 000, firmly establishing it as the leading QSR
franchisor on the African continent. The acquisition is strongly aligned with
the Group"s strategic intent and core competencies. It is anticipated that the
integration of the two entities will be relatively seamless given that the
acquired brands are well established and key personnel will be retained.
The pro forma financial effects of the acquisition on the historical earnings of
Steers Holdings as reported for the period ended 28 February 2003 include an
increase in historical headline earnings per share of 14,5% to 29,5 cents from
25,8 cents, and an increase in historical fully diluted headline earnings per
share of 11,0% to 28,6 cents from 25,8 cents. The acquisition will also enhance
the net asset value of Steers Holdings from 91,5 cents per share pre-acquisition
to 103,1 cents per share post-acquisition.
WAREHOUSE FIRE
The Group is pleased to report that no significant disruption to business or
financial loss was experienced as a result of the fire that occurred at the
offices and warehouse facilities located in Midrand on 11 June 2003. The
successful recommencement of operations within 24 hours of the fire is in large
measure due to the support of stakeholders, suppliers and staff. To date
interim insurance payments amounting to R19 million have been received, and
final settlement of all liabilities is expected before the end of the calendar
year. The rebuilding of the warehouse and offices damaged in the fire has
commenced, and it is anticipated that the new warehouse will be operational by
15 November 2003, in advance of the December peak trading period.
PROSPECTS
The trading environment will remain competitive, but consumer sentiment should
be buoyed by the increase in disposable income effected by significantly reduced
interest rates. Management is confident that the Group"s current performance
will continue through to the full year.
CAPITAL DISTRIBUTION AND CAUTIONARY ANNOUNCEMENT
The Board of Directors has resolved to declare a capital distribution in lieu of
dividends of 6.5 cents per share, subject to JSE Securities Exchange South
Africa and shareholder approval. A further announcement will be made to
shareholders detailing the financial effects and the salient dates and times of
the capital distribution.
Shareholders are advised to exercise caution in their dealings in Steers shares
until such time as a further announcement regarding the capital distribution has
been made.
On behalf of the Board
P Halamandaris
Chairman
T Halamandaris
Chief executive Officer
27 October 2003
Registered office
478 James Crescent Midrand 1685 P O Box 2884 Halfway House 1685
email: investorrelations@steers.co.za
website: www.steersholdings.co.za
Transfer secretaries: Ultra Registrars (Pty) Ltd
(Registration number 2000/007239/07)
11 Diagonal Street Johannesburg PO Box 15610 Woodmead 3610
Sponsor: Java Capital
(Registration number 2002/031862/07)
2 Arnold Road Rosebank PO Box 2087 Parklands 2121
Directors P Halamandaris (Chairman) T Halamandaris (Chief Executive Officer)
KA Hedderwick JL Halamandres* HR Levin* P Halamandaris (jnr)* * Non-
executive Company secretary P Papageorgiou Available on SENS
Date: 27/10/2003 08:00:10 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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