Wrap Text
Unaudited Interim Results For The Six Months Ended 31 December 2013
JD GROUP
Incorporated in the Republic of South Africa
Registration number: 1981/009108/06
JSE share code: JDG
ISIN: ZAE000030771
JSE bond code: JDGCB
ISIN: ZAE000168415
("JD Group Limited" or " the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013 #
- Revenue increased to R17,1bn - 1H2013: R16,4bn
- Impairment provision increased to R1,6bn - FY2013: R966m, Representing 15,2% of loan book FY2013: 9,9%
# Extracted financial information from the unaudited results for the six months ended 31 December 2013.
Financial statements
SUMMARISED GROUP STATEMENT OF TOTAL COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R million R million R million
Revenue 17 068 16 359 32 210
Retail operations
Revenue 14 593 14 164 27 401
Cost of sales (11 284) (10 784) (20 974)
Gross retail margin 3 309 3 380 6 427
Consumer Finance
Revenue 2 475 2 195 4 809
Finance costs (185) (149) (323)
Debtors' costs (note 2) (1 097) (345) (914)
Risk-adjusted consumer finance income 1 193 1 701 3 572
Operating expenses (4 523) (4 354) (8 968)
Administration and other expenses (4 242) 4 095) (8 123)
Depreciation and amortisation (260) (253) (489)
Capital items (note 3) (21) (6) (356)
Operating (loss)/profit (21) 727 1 031
Income from investments 29 25 57
Finance costs (163) (68) (216)
Share of (loss)/profit of associate (4) 1 -
(Loss)/profit before taxation (159) 685 872
Taxation 24 (181) (240)
(Loss)/profit for the period (135) 504 632
Other comprehensive income
Exchange differences on translating foreign operations 13 - 3
Total comprehensive (loss)/income for the period (122) 504 635
(Loss)/profit for the period attributable to:
Owners of parent (151) 502 606
Non-controlling interests 16 2 26
(135) 504 632
Total comprehensive (loss)/income for the period attributable to:
Owners of parent (138) 502 609
Non-controlling interests 16 2 26
(122) 504 635
EBITDA (excluding capital items) 445 1 135 2 199
Basic (loss)/earnings per share (cents) (67,1) 232,6 276,3
Headline (loss)/earnings per share (cents) (59,1) 234,4 395,2
Reconciliation of headline earnings
(Loss)/profit attributable to owners of parent (151) 502 606
Capital items (note 3) 21 6 356
Taxation thereon (3) (2) (96)
Headline (loss)/earnings (133) 506 866
Number of shares in issue (000) 229 338 219 830 229 338
Treasury shares held (000) (3 657) (3 657) (3 657)
Number of shares held outside the Group (000) 225 681 216 173 225 681
Weighted average number of shares in issue (000)
– basic 225 681 215 839 219 157
– diluted 226 297 234 796 237 609
Diluted headline (loss)/earnings per share (cents) (58,9) 227,0 391,1
Diluted basic (loss)/earnings per share (cents) (66,9) 225,3 275,5
Operating margin (%) (0,1%) 4,4% 3,2%
Distribution to shareholders (cents) - 115 232
– interim - 115 115
– final n/a n/a 117
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R million R million R million
Assets
Bank balances and cash 1 295 1 067 973
Taxation - 53 34
Financial assets 1 - 3
Inventories 4 482 4 246 4 049
Trade, loan and other receivables (note 4) 10 433 10 673 10 804
Vehicle rental fleet 715 708 455
Deferred taxation 390 185 254
Investments and loans 201 69 128
Property, plant and equipment 2 694 2 156 2 788
Intangible assets and goodwill 3 582 3 789 3 646
Total assets 23 793 22 946 23 134
Equity and liabilities
Bank overdraft 946 15 182
Taxation 44 56 99
Trade and other payables and provisions 6 165 5 883 5 281
Deferred taxation 475 662 562
Non-interest-bearing liabilities 234 224 237
Interest-bearing liabilities 7 228 7 148 7 632
Total liabilities 15 092 13 988 13 993
Ordinary share capital and reserves 8 654 8 862 9 056
Non-controlling interests 47 96 85
Total equity 8 701 8 958 9 141
Total equity and liabilities 23 793 22 946 23 134
The statement of financial position is presented based on order of liquidity.
Net asset value per share (cents) 3 835 4 031 4 013
SUMMARISED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R million R million R million
Cash generated by trading* 1 540 1 168 2 197
Increase in working capital (223) (580) (296)
Cash generated by operations 1 317 588 1 901
Increase in gross instalment sale and loan receivables (494) (1 873) (2 478)
Investment income 29 25 51
Dividends paid (264) (501) (761)
Taxation paid (218) (188) (412)
Total interest paid* (348) (217) (539)
Net cash flows from operating activities 22 (2 166) (2 238)
Net cash flows from investing activities (61) (841) (1 494)
Net cash flows from financing activities (403) 2 536 3 000
Net decrease in cash and cash equivalents (442) (471) (732)
Cash and cash equivalents at beginning of period 791 1 523 1 523
Cash and cash equivalents at end of period 349 1 052 791
* Finance costs of Consumer Finance have been reclassified to total
interest paid.
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY Unaudited
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R million R million R million
Balance at beginning of period 9 141 8 936 8 881
Changes in ordinary share capital and share premium
Proceeds on issue of shares - - 448
Proceeds on disposal of shares by share incentive trust - 6 7
Change in reserves
(Loss)/profit for the period attributable to owners of the parent (151) 502 606
Share-based payment through
comprehensive income - 19 (22)
Share-based payments - (2) (8)
Dividends paid (264) (501) (761)
Other reserve movements 13 (11) (8)
Change in non-controlling interests
Total comprehensive income for the period attributable to non-controlling
interests 16 2 26
Other non-controlling interests movements (54) 7 (28)
Balance at end of period 8 701 8 958 9 141
Comprising:
Ordinary share capital and share premium 4 472 4 024 4 472
Distributable reserves 4 007 4 364 4 422
Share-based payment reserve 51 116 52
Other reserves 124 358 110
Non-controlling interests 47 96 85
NOTES
1. Accounting policies
The summarised financial information has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements
as issued by the Financial Reporting Standards Council, the information required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the
requirements of the Companies Act of South Africa. The report has been prepared using accounting policies that comply with IFRS which are consistent with those
applied in the financial statements for the 12-month period ended 30 June 2013, except for the adoption of accounting standards and interpretations that became
effective during the current period. The adoption of these standards had no material impact on the Group.
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2013 2012 2013
R million R million R million
2. Debtors' costs
Increase in impairment provision 593 161 409
Bad debts written off 504 184 505
1 097 345 914
3. Capital items
Impairment of intangible assets (software) - - 345
Other impairments 5 - 17
Net loss/(profit) on disposal of assets 16 6 (6)
21 6 356
4. Trade, loan and other receivables
Instalment sale and loan receivables 10 225 9 126 9 731
Less: Impairment provision (1 559) (711) (966)
Net instalment sale and loan receivables 8 666 8 415 8 765
Trade and other receivables 1 819 2 318 2 090
Less: Impairment provision (52) (60) (51)
Net instalment sale, loan and trade and other receivables 10 433 10 673 10 804
Provisions as a percentage of total instalment sale and loan
receivables (%) 15,2% 7,8% 9,9%
5. 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, the cash value to be received in
future in respect of unissued shares granted to employees and the effect of the convertible bond.
6. 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.
7. Subsequent events
No significant events have occurred in the period between 31 December 2013 and the date of this announcement, save for the rights issue announced on SENS earlier
this month.
SEGMENTAL ANALYSIS
RETAIL CONSUMER FINANCE AUTOMOTIVE CORPORATE GROUP
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
for the six-month period ended 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012
Revenue Rm 6 442 6 899 2 475 2 195 8 485 7 611 (334)^ (346)^ 17 068 16 359
Sale of merchandise Rm 5 968 6 351 - - 7 635 6 817 - - 13 603 13 168
Operating profit/(loss) Rm 151 417 (187) 334 232 193 (217) (217) (21) 727
Operating margin % 2,3 6,0 (7,6) 15,2 2,7 2,5 (0,1) 4,4
Total assets Rm 4 409 4 172 10 485 10 829 6 360 5 957 2 539 1 988 23 793 22 946
Capital expenditure
(excluding rental fleet) Rm 70 140 22 281 28 14 28 282 148 717
Sale of merchandise on credit Rm 1 729 2 142 1 729 2 142
Unsecured loan disbursements Rm 453 1 352 453 1 352
Number of stores No. 1 223 1 226 121 114 1 344 1 340
^ Elimination of interdivisional origination fees.
for additional information www.jdg.co.za
Commentary
OPERATING ENVIRONMENT
During the period under review, the South African consumer environment continued to be difficult. Subdued consumer demand, prevalent throughout the period, worsened
during the 2013 festive season, negatively impacting merchandise sales of household goods during the Group's peak trading period.
Customers are facing continued pressure on disposable income due to increased living costs and higher debt-to-income levels, impacting spending on furniture and
household goods.
During the period under review, the Company adopted a more prudent provisioning approach as a result of the deteriorating credit quality in both the secured
and unsecured lending market. Newly introduced stricter credit granting criteria continued to reduce acceptance rates of credit applications, which further impacted
sales negatively.
Management continued with the restructuring of the business and cost-cutting initiatives.
The key features of the period's results are as follows:
- Revenue increased by 4,3% to R17,1 billion (1H2013: R16,4 billion)
- Impairment provision on the loan book increased to R1,6 billion, representing 15,2% of the loan book
- A decrease in EBITDA to R445 million (1H2013: R1,1 billion)
- Operating cash flow increased to R1,3 billion (1H2013: R588 million)
- Headline loss per share of 59,1 cents compared to headline earnings per share of 234,4 cents for 1H2013
- Basic loss per share of 67,1 cents compared to basic earnings per share of 232,6 cents for 1H2013
RETAIL
The Retail business generated merchandise sales of R6,0 billion (1H2013: R6,4 billion) and an operating profit of R151 million (1H2013: R417 million). These results
are contextualised as follows:
Furniture Retail (including Supply Chain Services)
The furniture chains had a particularly challenging six months and reported a reduction in merchandise sales of 14,7%. The external factors contributing to these
results include reduced consumer expenditure and consumer over-indebtedness. The internal factors which exacerbated the impact of these external factors on the
results include the distraction caused to the business by the implementation of new IT systems and the knock-on effects on merchandise and inventory planning.
During the reporting period, management embarked on a major restructuring of the business into four clusters focused on the specific consumers and market segments
they serve. Corporate head office functions, like finance, property management, merchandising and marketing, were decentralised into the respective clusters,
resulting in increased control and accountability of operations. However, the performance of the Furniture Retail business continues to be negatively impacted by the
high distribution costs present in the Supply Chain Services component of the business.
Consumer electronics & appliances
The consumer electronics and appliances business, which includes Incredible Connection and HiFi Corp, also experienced challenging operating conditions as a result of
reduced customer spending and resulted in a reduction in merchandise sales of 13,3%. Gross margins were, however, successfully increased as a result of more conservative
product discounting practices.
The consolidation of the back-office functions of the two brands resulted in successfully reducing operating expenses during the period.
Building materials & DIY
SteinBuild's continued investment in stores, expansion of stock ranges and improved brand awareness resulted in the business taking market share during the past six
months. SteinBuild reported revenue growth of 51,9% (including Hardware Warehouse) and increased operating margins.
During October 2013, the Hardware Warehouse store footprint was expanded with the opening of two new stores in KwaZulu-Natal and the Eastern Cape.
CONSUMER FINANCE
The Consumer Finance business reported disappointing results for the period.
Debtors' cost increased to R1,1 billion, consisting of an increase in the impairment provision of R593 million and bad debts of R504 million written off.
At 31 December 2013, the impairment provision of R1,6 billion on the loan book (FY13: R996 million) represented approximately 15,2% (FY13: 9,9%) of the book.
Recent changes to credit granting criteria reduce the inherent collection risk on new loans originated. The loan book, before credit impairments, has grown by only
R494 million (1H2013: R1,9 billion) during the period. Specifically disbursements of unsecured lending decreased by R917 million to R453 million (1H2013: R1,4 billion)
during the period under review.
During the period under review, JD Group sold its investment in Blake & Associates.
AUTOMOTIVE
Despite the motor industry strikes and disposable income of customers remaining under pressure, Unitrans Auto reported good results. Merchandise sales increased by
12,0% and gross margins were maintained during the period. Operating profit increased by 20,2% to R232 million.
Hertz delivered an improved performance during the six months under review.
STATEMENT OF FINANCIAL POSITION AND CASH FLOW
The statement of financial position reflects net gearing of R6,9 billion.
JD Group maintained its diversified funding structure and successfully renegotiated the Group's debt covenants to be more suited to the nature of the business.
All financial ratios remain within the Group's covenants.
The Board has approved a rights issue of between R1,3 billion and R1,5 billion, to be fully underwritten by Steinhoff International Holdings Limited on terms and
conditions to be agreed. This increase of the Group's equity base is appropriate for enhancing its prospects for profitable growth from a solid capital structure.
Further details will be communicated to shareholders.
Operating cash flow increased to R1,3 billion (1H2013: R588 million) with R223 million invested in working capital (1H2013: R580 million).
PROSPECTS
The Automotive division, Consumer electronics & appliances and SteinBuild should continue to perform well. Management is confident that the restructuring initiatives
and rightsizing of logistics will allow the Furniture Retail business to capitalise on its market share.
Given the deterioration of the collection rates since July 2013, the Group has adopted a more prudent provisioning approach. In terms of this approach the statistical
calculation has been changed and no longer uses a 24-month historic recovery rate, but bases the provision on a 12-month recovery rate that better reflects the current
collection environment.
In addition, the Group:
- introduced stricter credit granting criteria; and
- implemented changes to the collections strategy.
CHANGES TO THE BOARD
In terms of 3.59(a), (b) and (c) of the Listings Requirements of the JSE Limited, shareholders are advised that:
- Mr David Sussman, the Chief Executive Officer of JD Group, is on compassionate leave for an indefinite period
- Peter Griffiths has been appointed by the Board as Acting Chief Executive Officer with immediate effect on 19 February 2014.
- Mr Bennie van Rooy, the Chief Executive Officer of JD Consumer Finance, resigned with immediate effect on 19 February 2014.
DIVIDEND
The Board has resolved that, based on the performance of the Group during the past six months, no interim dividend will be declared.
By order of the Board
Vusi Khanyile
Independent Chairman
Peter Griffiths
Acting Chief Executive Officer
Jan van der Merwe
Chief Financial Officer
20 February 2014
EXECUTIVE DIRECTORS PM Griffiths (Acting Chief Executive Officer), ID Sussman*, JHN van der Merwe (Chief Financial Officer), KR Chauke
INDEPENDENT NON-EXECUTIVE DIRECTORS VP Khanyile (Independent Chairman), N Bodasing, MP Matlwa, SH Müller, JH Schindehütte
NON-EXECUTIVE DIRECTORS Dr D Konar, MJ Jooste, DM van der Merwe, AB la Grange (Jnr), AB la Grange (Snr)
COMPANY SECRETARY JMWR Pieterse Press announcement prepared by JHN van der Merwe CA(SA)
* on compassionate leave
Registered office
11th Floor,
JD House, 27 Stiemens Street,
Braamfontein,
Johannesburg,
2001
(PO Box 4208, Johannesburg, 2000)
telephone +27 11 408 0408
TRANSFER SECRETARIES
Computershare Proprietary Limited,
70 Marshall Street,
Johannesburg,
2001
telephone +27 11 370 5000
facsimile +27 11 688 5238
SPONSOR PSG Capital Proprietary Limited,
First Floor,
Building 8,
Inanda Greens Business Park,
54 Wierda Road West,
Wierda Valley,
Sandton,
2196
telephone +27 11 032 7400
facsimile +27 11 784 4755
INDEPENDENT AUDITOR Deloitte & Touche
www.jdg.co.za
Date: 20/02/2014 08:00:00 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.