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JDG - JD Group - Reviewed results for the six months ended 28 February 2011

Release Date: 16/05/2011 07:05
Code(s): JDG
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JDG - JD Group - Reviewed results for the six months ended 28 February 2011 JD Group Limited: ("JD" or "the Company" or "the Group") Registration number: 1981/009108/06 Share code: JDG ISIN: ZAE000030771 Reviewed Results R7 463m Revenue up 9% 2010: R6 835m 202,9 cents Headline earnings per share up 44% 2010: 141,1 cents R515m Operating profit up 38% 2010: R372m 100 cents Dividend per share up 43% 2010: 70 cents Commentary Business environment JD Group is pleased to report the continued improvement in the financial results for the period under review with Headline Earnings increasing 44%. The separated Financial Services and Furniture Retail divisions continue to pay dividends as both divisions are now totally focussed on their core competencies, both strategically and operationally. While much work remains to be done in respect of maximising the ultimate potential of the Group, key tangible improvements have been realised in the last six months. Most areas of the business have shown a real improvement over the past period. Trading in the Furniture Retail division was particularly pleasing with sales up 18% and operating profit up 133% to R294 million. Despite the effects of significant price deflation in the Cash division, sales were up by a respectable 7,1%. This resulted in a 24% increase in operating profit to R97 million. Margins across the Group have continued to improve as has the performance of the receivables with overall debtors costs down 15%. The above resulted in the Group increasing profit before tax by 46% to R482 million. Financial review General The improved financial performance experienced during the second half of 2010 continued during the first six months of the 2011 financial year with pleasing results reported in most areas of the business. The key features of the interim results are the following: Revenue up 9,2% to R7,5 billion (2010: R6,8 billion) A 38,4% increase in operating profit to R515 million (2010: R372 million) The reduction in debtors cost (including Maravedi) to R384 million (down from R454 million in 2010) Headline earnings per share of 202,9 cents (2010: 141,1 cents) Dividend per share of 100 cents (2010: 70 cents) An 11% increase in merchandise sales to R5,5 billion (2010: R5,0 billion) Traditional Retail Particularly encouraging was the performance of our Furniture Retail division where an operating margin of 8,9% (2010: 4,5%) was achieved. The strong sales growth of 18% was further supported by a 1,6% improvement in gross margin to 35,8%. The division generated an operating profit of R294 million (2010: R126 million). Cash Retail The Cash Retail division reported satisfactory results, characterised by a 7,1% year-on-year growth in sales and a 0,8% improvement in gross margin to 23,5%. This resulted in operating profit up 24% from R78 million in 2010 to R97 million in 2011. This was achieved despite the impact of the strong Rand and the competitive environment, which resulted in price deflation of up to 16% in certain product categories. The repositioning of Hi-Fi Corporation has also yielded improved results. Financial Services The strong sales growth from the Furniture division contributed to a 10,5% increase in receivables from R4,9 billion to R5,4 billion. It was particularly pleasing to see a further reduction in debtors cost from R427 million in 2010 to R344 million in 2011 and the impairment ratio reducing from 12,6% to 8,8%. The division generated an operating profit of R242 million (2010: R239 million). Revenue grew marginally due to the impact of the lower interest rates. International The results of Abra were impacted by the prolonged effects of the recession experienced in Poland and the impact of adverse weather conditions on deliveries particularly over the festive season. New Business Development The New Business Development division consists of Blake and Maravedi. This division outperformed the results of 2010 and reported a much improved operating profit. It is pleasing to note that the operating profit generated by Blake is as a result of the execution of the strategy implemented over the past year. Balance Sheet and Cash Flow Cash generated by trading increased from R480 million to R635 million during the period as a result of the substantial increase in operating profit. R676 million was utilised in growing the receivables book. R142 million was invested in the acquisition of property, plant and equipment for the centralisation of the Distribution Centres and the roll-out of the new ERP systems in Traditional Retail and Financial Services. The cash invested in operating activities was funded by an additional R384 million of long-term borrowings raised during the period. The strong balance sheet reflects net interest bearing debt of R1,3 billion at a gearing ratio of 25,2% which provides a very solid basis to fund future growth. Acquisition of Unitrans Auto, Steinbuild and the disposal of Abra The transaction announced on 14 March 2011 will bring further complementary diversification to the Group. It has always been our stated objective to make the Group less reliant on the Furniture division by introducing other businesses that cater for the middle mass market. In addition, the transaction facilitates the Group`s strategy of diversifying our channel and product offering in the Financial Services division. Steinhoff`s global sourcing capabilities will further enhance the Group`s ability to compete in the market place. The shareholders meeting is expected to take place on 23 June 2011. It is anticipated that the outcome of the Competition Commission findings will be available before 30 June 2011. Prospects The performance of the first six months gives us reason for an optimistic outlook for the second half. Board of directors Mr IS (Ivan) Levy sadly passed away on 5 February 2011. The Board of Directors is at present not King III compliant as the non-executive directors are not in the majority. The Group`s Nominations Committee has, however, identified suitable non-executive candidates and Board appointments are imminent. Review by the independent auditors The financial information presented has been reviewed, but not audited by Deloitte & Touche, whose unmodified review report is available for inspection at the Company`s registered office. Dividend The directors have declared an interim dividend of 100 cents per share for the six- month period ended 28 February 2011. In accordance with the settlement procedures of Strate, the following dates will apply to the interim dividend: Last day to trade cum dividend Friday, 17 June 2011 Trading ex dividend commences Monday, 20 June 2011 Record date Friday, 24 June 2011 Dividend payment date Monday, 27 June 2011 Share certificates may not be dematerialised or re-materialised between Monday, 20 June 2011 and Friday, 24 June 2011, both dates inclusive. By order of the Board I David Sussman Grattan Kirk Bennie van Rooy Executive Chairman Chief Executive Officer Financial Director 13 May 2011 Condensed Group income statement Audited Reviewed Reviewed 12 months 6 months 6 months ended ended ended 31 August 28 February 28 February 2010 2011 2010 Change R million R million R million % 9 520 Sale of 5 535 4 993 11 merchandise 1 575 Finance charges 794 792 - earned 1 180 Financial 624 567 10 services 949 Other services 510 483 6 13 224 Revenue 7 463 6 835 9 6 727 Cost of sales 3 857 3 551 9 4 972 Operating 2 707 2 458 10 expenses
1 203 Administration 640 603 and other expenses 193 Depreciation and 111 101 amortisation 2 227 Employees 1 205 1 063 354 Marketing 217 199 755 Occupancy 399 373 26 Share-based 16 12 payment 217 Transport and 118 107 travel
(3) (Surplus)/loss on 1 - disposal of property, plant and equipment
1 525 Operating profit 899 826 9 before debtors costs 753 Debtors costs 384 454 (15) (note 2) 772 Operating profit 515 372 38 84 Investment and 30 40 finance income
(181) Finance costs (64) (81) - Share of profits 1 - of associates 675 Profit before 482 331 46 taxation 167 Taxation 148 99 49 508 Profit for the 334 232 44 period
Attributable to: 501 Shareholders 333 231 7 Minorities 1 1 508 334 232 Earnings per share (cents) 304,9 - basic 202,4 140,9 301,4 - diluted 199,6 139,1 Condensed Group statement of other comprehensive income Audited Reviewed Reviewed 12 months 6 months 6 months ended ended ended 31 August 28 February 28 February 2010 2011 2010 R million R million R million 508 Profit for the period 334 232 (31) Exchange differences on 8 (4) translating foreign operations 477 Total comprehensive 342 228 income for the period Attributable to: 470 Shareholders 341 227 7 Minorities 1 1 477 342 228 Supplementary information Audited Reviewed Reviewed 12 months 6 months 6 months ended ended ended 31 August 28 February 28 February 2010 2011 2010 R million R million R million Reconciliation of headline earnings 501 Profit attributable to 333 231 shareholders
(3) (Surplus)/loss on disposal 1 - of property, plant and equipment 1 Taxation thereon - - 499 Headline earnings 334 231 170 500 Number of shares in issue 170 500 170 500 (000) (6 208) Treasury shares held (000) (5 108) (5 981) 164 292 Number of shares held 165 392 164 519 outside the Group (000) Weighted average number of shares in issue
(000) 164 314 - basic 164 580 164 047 166 253 - diluted 166 848 166 275 Headline earnings per share
(cents) 303,6 - basic 202,9 141,1 300,1 - diluted 200,1 139,2 150 Distribution to 100 70 shareholders (cents) 70 - Interim (proposed) 100 70 80 - Final 5,8 Operating margin (%) 6,9 5,4 The earnings and headline earnings per share are calculated in R thousands as opposed to R million. Condensed Group balance sheet Audited Reviewed Reviewed 31 August 28 February 28 February 2010 2011 2010 R million R million R million Assets
1 617 Non-current assets 1 635 1 648 767 Property, plant and 809 750 equipment 493 Goodwill (note 3) 493 493 212 Intangible assets (note 3) 193 234 30 Investments and loans 30 92 - Interest in associate 1 - company
115 Deferred taxation 109 79 7 664 Current assets 8 522 7 603 1 575 Inventories 1 730 1 629 5 276 Trade and other 5 952 5 190 receivables (note 4) - Financial assets - 1 34 Taxation 423 85 779 Bank balances and cash 417 698 9 281 Total assets 10 157 9 251 Equity and liabilities Equity and reserves 1 779 Share capital and premium 1 779 1 779 (378) Treasury shares (310) (369) 158 Non-distributable and 191 184 other reserves 3 464 Retained earnings 3 593 3 315 131 Shareholders for dividend 165 115 5 154 Shareholders` equity 5 418 5 024 34 Minority shareholders` 33 28 interest
5 188 Total equity 5 451 5 052 1 057 Non-current liabilities 1 627 1 374 922 Interest bearing long-term 1 136 953 liabilities
75 Non-interest bearing long- 71 80 term liability 60 Deferred taxation 420 341 3 036 Current liabilities 3 079 2 825 2 424 Trade and other payables 2 350 2 167 (note 5) - Provisions - 6 502 Interest bearing 643 547 liabilities 4 Financial liabilities 1 1 84 Taxation 85 96 22 Bank overdraft - 8 9 281 Total equity and 10 157 9 251 liabilities 30 Directors` valuation of 30 92 unlisted investment
155 Capital expenditure 143 83 authorised and contracted 234 Capital expenditure 899 98 authorised and not yet
contracted 1 480 Operating lease 1 545 1 534 commitments 3 022,8 Net asset value per share 3 177,6 2 946,6 (cents) 12,9 Gearing ratio (net) (%) 25,2 16,1 Condensed statement of changes in equity Audited Reviewed Reviewed 31 August 28 February 28 February 2010 2011 2010 R million R million R million 1 779 Share capital and premium 1 779 1 779 1 779 Opening balance 1 779 1 779 (378) Treasury shares (310) (369) (411) Opening balance (378) (411) (18) Shares purchased by share - - incentive trust 27 Proceeds on disposal of 38 21 shares by share incentive trust
24 Loss on disposal of 30 21 treasury shares 80 Share-based payment 96 89 reserve
77 Opening balance 80 77 26 Share-based payment 16 12 (23) Transfer to retained - - income
78 Non-distributable reserves 95 95 89 Opening balance 78 89 (31) Translation of foreign 8 (4) entities
20 Transfer from retained 9 10 income 3 464 Retained earnings 3 593 3 315 3 230 Opening balance 3 464 3 230 501 Profit attributable to 333 231 shareholders (24) Loss on disposal of (30) (21) treasury shares
(255) Distributable to (170) (119) shareholders 9 Distributable to share 5 4 incentive trust
23 Transfer from share-based - - payment reserve (20) Transfer to non- (9) (10) distributable reserves
131 Shareholders for dividend 165 115 67 Opening balance 131 67 255 Distributable to 170 119 shareholders
(9) Distributable to share (5) (4) incentive trust (189) Paid to shareholders (136) (70) 7 Paid to share incentive 5 3 trust 5 154 Shareholders equity 5 418 5 024 34 Minority shareholders` 33 28 interest
27 Opening balance 34 27 7 Profit attributable to 1 1 minorities - Dividends paid to (2) - minorities 5 188 Total 5 451 5 052 Condensed Group cash flow statement Audited Reviewed Reviewed 12 months 6 months 6 months ended ended ended 31 August 28 February 28 February 2010 2011 2010 R million R million R million 62 Cash flows from operating (600) (118) activities 980 Cash generated by trading 635 480 (334) Increase in working capital (898) (402) 646 Cash generated/(utilised) (263) 78 by operations 4 Investment income - 1 (92) Finance costs - net (37) (37) (314) Taxation paid (166) (93) 244 Cash available from (466) (51) /(utilised by) operating
activities (182) Dividends paid (134) (67) (99) Cash flows from investing (134) (74) activities
62 Investment and loan - - receipts 27 Proceeds on disposal of 8 7 property, plant and
equipment (188) Additions to property, (142) (81) plant and equipment 69 Cash flows from financing 394 157 activities 27 Proceeds on disposal of 38 21 treasury shares by share incentive trust
(18) Acquisition of shares by - - share incentive trust 633 Long-term borrowings raised 519 292 (527) Long-term borrowings repaid (135) (132) (46) Finance lease liabilities (28) (24) repaid 32 Net increase/(decrease) in (340) (35) cash and cash equivalents
725 Cash and cash equivalents 757 725 at beginning of period 757 Cash and cash equivalents 417 690 at end of period
Notes 1. Accounting policies The condensed financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board and the in accordance with IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the Companies Act. The report has been prepared using accounting policies that comply with IFRS which are consistent with those applied in the financial statements for the year ended 31 August 2010, except for the adoption of the following new or revised accounting standards and interpretations: - IAS 27 - Consolidated and Separate Financial Statements: Transitional provisions - IAS 32 - Financial Instruments: Presentation - Classification of Rights Issue - IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments The adoption of these standards had no material impact on the Group. Audited Reviewed Reviewed 12 months 6 months 6 months ended ended ended 31 August 28 February 28 February 2010 2011 2010 R million R million R million 2. Debtors costs (177) Decrease in impairment (43) (18) provision 930 Bad debts written off 427 472 753 384 454 3. Goodwill and intangible assets Goodwill comprises: 493 Carrying value at 493 493 beginning of period 493 Carrying value at end of 493 493 period Intangible assets comprise: 256 Carrying value at 212 256 beginning of period (44) Amortisation for the (19) (22) current period 212 Carrying value at end of 193 234 period 4. Trade and other receivables 5 224 Instalment sale 5 663 5 258 receivables (a)
27 Other loans and advances 135 33 42 Trade receivables 47 74 5 293 Total instalment sale 5 845 5 365 and trade receivables
(586) Less: Impairment (543) (743) provision 4 707 Net instalment sale and 5 302 4 622 trade receivables
569 Other receivables 650 568 5 276 Total trade and other 5 952 5 190 receivables 11,1 Provisions as a 9,3 13,8 percentage of total instalment sale and trade receivables (%)
In accordance with industry norms, amounts due from instalment sale receivables after one year are included in current assets. The credit terms of instalment sale receivables range from six to 36 months. a. Classified as loans and receivables and carried at amortised cost. 5. Trade and other payables The directors consider the carrying amount of trade and other payables to approximate their fair values. The credit period of trade payables ranges between 30 and 120 days. 6. Diluted earnings and headline earnings per share The number of shares for diluted earnings purposes has been calculated after considering the dilutive impact of share options and the cash value to be received in future, in respect of unissued shares granted to employees. 7. Related parties The Group entered into various transactions with related parties which occurred under terms that are no more favourable than those arranged with independent third parties. 8. Subsequent events No significant events have occurred in the period between 28 February 2011 and the date of this announcement, other than the transaction referred to in the commentary above. Segmental report - business divisions 6 months ended 28 February Traditional Retail 2011 2010 Revenue Rm 3 309 2 777 Operating profit Rm 294 126 Depreciation Rm 27 20 Total assets Rm 1 188 965 Total current liabilities Rm 1 266 1 162 Capital expenditure Rm 44 9 Operating margin % 8,9 4,5 Total sale of merchandise Rm 2 830 2 399 Share of Group sale of % 51,1 48,1 merchandise Credit sales Rm 1 874 1 614 Percentage of total % 66,2 67,3 Cash sales Rm 956 785 Percentage of total % 33,8 33,7 Number of stores 970 946 Retail square meterage 500 125 503 167 Number of employees 9 092 8 871 Instalment sale receivables Rm Impairment provision Rm Bad debts written off Rm Receivables` arrears Rm Deposit rate on credit sales % Collection rate % #Elimination of interdivisional commissions and origination fees. Segmental report - business divisions (continued) 6 months ended 28 February Financial Services 2011 2010 Revenue Rm 1 510 1 427 Operating profit Rm 242 239 Depreciation Rm 10 7 Total assets Rm 5 633 4 630 Total current liabilities Rm 317 122 Capital expenditure Rm 8 22 Operating margin % 16,0 16,7 Total sale of merchandise Rm Share of Group sale of merchandise % Credit sales Rm Percentage of total % Cash sales Rm Percentage of total % Number of stores 970 946 Retail square meterage 55 569 55 908 Number of employees 4 180 4 011 Instalment sale receivables Rm 5 275 4 872 Impairment provision Rm 466 612 Bad debts written off Rm 339 455 Receivables` arrears Rm 963 925 Deposit rate on credit sales % 5,6 8,3 Collection rate % 6,4 5,9 #Elimination of interdivisional commissions and origination fees. Segmental report - business divisions (continued) 6 months ended 28 February Cash Retail 2011 2010
Revenue Rm 2 426 2 267 Operating profit Rm 97 78 Depreciation Rm 25 22 Total assets Rm 1 123 1 050 Total current liabilities Rm 675 660 Capital expenditure Rm 26 28 Operating margin % 4,0 3,4 Total sale of merchandise Rm 2 417 2 257 Share of Group sale of % 43,7 45,2 merchandise Credit sales Rm Percentage of total % Cash sales Rm 2 417 2 257 Percentage of total % 100,0 100,0 Number of stores 94 91 Retail square meterage 93 362 92 261 Number of employees 3 665 3 537 Instalment sale receivables Rm Impairment provision Rm Bad debts written off Rm Receivables` arrears Rm Deposit rate on credit sales % Collection rate % #Elimination of interdivisional commissions and origination fees. Segmental report - business divisions (continued) 6 months ended 28 February International 2011 2010 Revenue Rm 293 341 Operating profit Rm 5 7 Depreciation Rm 3 3 Total assets Rm 193 200 Total current liabilities Rm 64 72 Capital expenditure Rm 4 3 Operating margin % 1,7 2,1 Total sale of merchandise Rm 288 337 Share of Group sale of % 5,2 6,7 merchandise Credit sales Rm Percentage of total % Cash sales Rm 288 337 Percentage of total % 100,0 100,0 Number of stores 74 72 Retail square meterage 52 004 53 000 Number of employees 841 890 Instalment sale receivables Rm Impairment provision Rm Bad debts written off Rm Receivables` arrears Rm Deposit rate on credit sales % Collection rate % #Elimination of interdivisional commissions and origination fees. Segmental report - business divisions (continued) 6 months ended 28 February New Business Dev 2011 2010 Revenue Rm 233 265 Operating profit Rm 6 - Depreciation Rm 11 12 Total assets Rm 573 390 Total current liabilities Rm 61 112 Capital expenditure Rm 7 4 Operating margin % 2,6 - Total sale of merchandise Rm Share of Group sale of % merchandise Credit sales Rm Percentage of total % Cash sales Rm Percentage of total % Number of stores Retail square meterage Number of employees 1 958 3 355 Instalment sale receivables Rm 388 386 Impairment provision Rm 77 131 Bad debts written off Rm 88 17 Receivables` arrears Rm 91 103 Deposit rate on credit sales % 11,0 10,3 Collection rate % 6,6 6,4 #Elimination of interdivisional commissions and origination fees. Segmental report - business divisions (continued) 6 months ended 28 February Corporate Group 2011 2010 2011 2010 Revenue Rm 7 463 6 835 (308)# (242)# Operating profit Rm (129) (78) 515 372 Depreciation Rm 35 37 111 101 Total assets Rm 1 447 2 016 10 157 9 251 Total current Rm 696 697 3 079 2 825 liabilities Capital expenditure Rm 53 15 142 81 Operating margin % 6,9 5,4 Total sale of Rm 5 535 4 993 merchandise Share of Group sale % 100,0 100,0 of merchandise Credit sales Rm 1 874 1 614 Percentage of total % 33,9 32,3 Cash sales Rm 3 661 3 379 Percentage of total % 66,1 67,7 Number of stores 1 138 1 109 Retail square 701 060 704 336 meterage Number of employees 537 543 20 273 21 207 Instalment sale Rm 5 663 5 258 receivables Impairment provision Rm 543 743 Bad debts written off Rm 427 472 Receivables` arrears Rm 1 054 1 028 Deposit rate on % 6,2 8,4 credit sales Collection rate % 6,4 6,0 #Elimination of interdivisional commissions and origination fees. Administration Executive directors: ID Sussman (chairman), AG Kirk (chief executive officer), KR Chauke, Dr HP Greeff, ID Thompson, BJ van Rooy. Independent non-executive directors: VP Khanyile (lead independent ), Dr D Konar, M Lock, MJ Shaw, JH Schindehutte, GZ Steffens Company secretary: JMWR Pieterse Independent auditors: Deloitte & Touche Registered office: 11th Floor, JD House, 27 Stiemens Street, Braamfontein, Johannesburg, 2001 (PO Box 4208, Johannesburg, 2000) Telephone +27 11 408 0408 Facsimile +27 11 408 0604 Email: info@jdg.co.za Transfer secretaries: Computershare Investor Services (Proprietary) Limited 70 Marshall Street, Johannesburg, 2001. Telephone +27 11 370 5000 Facsimile +27 11 688 5238. ADR depository: File number 82-4401, The Bank of New York Mellon Corporation, One Wall Street, New York, NY 10286 United States of America Telephone +1 212 495 1284 Facsimile +1 212 635 1121. Sponsor: PSG Capital (Proprietary) Limited, Ground Floor, DM Kisch House, Inanda Greens Business Park, 54 Wierda Road West, Wierda Valley, Sandton, 2196 Telephone +27 11 784 1712 Facsimile +27 11 784 4755 www.jdgroup.co.za Date: 16/05/2011 07:05:35 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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