Wrap Text
Unaudited interim results for the six months ended 31 December 2013
Steinhoff International Holdings Limited
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
(“Steinhoff” or “the company” or “the group”)
JSE share code: SHF
ISIN: ZAE000016176
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013*
* Extracted financial information from the unaudited interim results for the six months ended 31 December 2013.
Headline earnings per share (HEPS) improves by 41% to 243 cps
Cash generated from operations at R5.6 billion
Operating margin increases 70 bps to 9.4%
Revenue per segment
45% Retail activities – International operations
21% Retail activities – African operations
20% Manufacturing, sourcing and logistics – International operations
10% Manufacturing, sourcing and logistics – African operations
2% Properties
2% Corporate services
Revenue per geographical region
55% Continental Europe
37% Southern Africa
6% United Kingdom
2% Pacific Rim
Total assets per segment
47% Retail activities – International operations
14% Retail activities – African operations
6% Manufacturing, sourcing and logistics – International operations
8% Manufacturing, sourcing and logistics – African operations
21% Properties
4% Corporate services
Condensed consolidated income statement
Six months Six months Year
ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) % Audited(1)
Notes Rm Rm change Rm
Revenue 67 423 57 437 17 116 165
Operating profit before depreciation,
amortisation and capital items 7 779 6 283 24 14 038
Depreciation and amortisation (1 411) (1 266) (2 694)
Operating profit before capital items 6 368 5 017 27 11 344
Capital items 1 (53) 27 (350)
Earnings before interest, dividend income,
equity accounted earnings and taxation 6 315 5 044 25 10 994
Net finance charges (1 124) (885) (2 033)
Dividend income 3 2 3
Share of profit of equity accounted companies 116 74 254
Profit before taxation 5 310 4 235 25 9 218
Taxation (591) (621) (1 269)
Profit for the period 4 719 3 614 31 7 949
Attributable to:
Owners of the parent 4 611 3 201 44 7 296
Non-controlling interests 108 413 653
Profit for the period 4 719 3 614 31 7 949
Headline earnings per ordinary share (cents) 243.0 171.8 41 394.5
Fully diluted headline earnings
per ordinary share (cents) 217.9 156.5 39 350.7
Basic earnings per ordinary share (cents) 242.0 171.6 41 389.6
Fully diluted earnings per ordinary share (cents) 217.1 156.4 39 347.1
Number of ordinary shares in issue (m) 2 022 1 825 11 1 825
Weighted average number of ordinary shares in issue (m) 1 851 1 781 4 1 803
Earnings attributable to ordinary shareholders (Rm) 2 4 478 3 056 47 7 022
Headline earnings attributable
to ordinary shareholders (Rm) 3 4 497 3 060 47 7 111
Average currency translation rate (rand:euro) 13.5482 10.8224 25 11.4635
Additional information
Six months Six months
ended ended Year ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
Note 1: Capital items
(Impairments)/reversal of impairments (18) 7 (385)
(Loss)/profit on disposal of investments and equity accounted companies (17) – 8
Loss on disposal of intangible assets (38) – (9)
Loss on scrapping of vehicle rental fleet (3) (4) (4)
Profit on disposal of property, plant and equipment and investment property 23 24 40
(53) 27 (350)
Note 2: Earnings attributable to ordinary shareholders
Earnings attributable to owners 4 611 3 201 7 296
Dividend entitlement on cumulative preference shares (133) (145) (274)
4 478 3 056 7 022
Note 3: Headline earnings attributable to ordinary shareholders
Earnings attributable to owners of the parent 4 611 3 201 7 296
Adjusted for:
Capital items (note 1) 53 (27) 350
Taxation effects of capital items (13) 7 (84)
Non-controlling interests’ portion of capital items (18) 11 (127)
Capital items of equity accounted companies (net of taxation) (3) 13 (50)
Dividend entitlement on cumulative preference shares (133) (145) (274)
4 497 3 060 7 111
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended Year ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
Profit for the period 4 719 3 614 7 949
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss:
Actuarial (loss)/gain on defined benefit plans (67) 11 103
Deferred taxation 12 (2) (25)
(55) 9 78
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries 5 633 2 748 6 279
Net value gain on cash flow hedges and other fair value reserves (29) (111) (41)
Deferred taxation 14 35 (3)
Other comprehensive income/(loss) of equity accounted companies,
net of deferred taxation 10 (1) (1)
5 628 2 671 6 234
Other comprehensive income for the period 5 573 2 680 6 312
Total comprehensive income for the period 10 292 6 294 14 261
Total comprehensive income attributable to:
Owners of the parent 10 185 5 866 13 542
Non-controlling interests 107 428 719
Total comprehensive income for the period 10 292 6 294 14 261
Condensed consolidated statement of financial position
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
ASSETS
Non-current assets
Goodwill and intangible assets 66 934 53 251 60 435
Property, plant and equipment, investment property and biological assets 53 641 41 122 47 138
Investments in equity accounted companies 2 826 2 376 2 634
Investments and loans 6 999 937 1 124
Deferred taxation assets 926 721 730
Other long-term assets 3 164 3 183 3 174
134 490 101 590 115 235
Current assets
Inventories 20 890 16 886 16 902
Accounts receivable, short-term loans and other current assets 27 343 21 182 23 631
Cash and cash equivalents 10 947 8 335 9 249
59 180 46 403 49 782
Total assets 193 670 147 993 165 017
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and reserves 72 308 49 135 56 616
Preference share capital 3 381 3 497 3 497
75 689 52 632 60 113
Non-controlling interests 6 459 6 383 6 655
Total equity 82 148 59 015 66 768
Non-current liabilities
Interest-bearing long-term liabilities 48 607 38 046 45 041
Deferred taxation liabilities 10 587 8 379 9 652
Other long-term liabilities and provisions 4 089 3 372 3 562
63 283 49 797 58 255
Current liabilities
Accounts payable, provisions and other current liabilities 35 430 29 741 31 715
Interest-bearing short-term liabilities 8 348 6 857 5 117
Bank overdrafts and short-term facilities 4 461 2 583 3 162
48 239 39 181 39 994
Total equity and liabilities 193 670 147 993 165 017
Net asset value per ordinary share (cents) 3 576 2 692 3 102
Closing exchange rate (rand:euro) 14.4990 11.2224 12.9209
Condensed consolidated statement of changes in equity
Six months Six months Year
ended ended ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
Balance at beginning of the period 66 768 53 763 53 763
Changes in ordinary share capital and share premium
Capital distribution – (1 690) (1 690)
Net shares issued 7 009 1 580 1 518
Net utilisation of treasury shares 5 64 75
Changes in preference share capital and share premium
Redemption of preference shares (378) (398) (398)
Net utilisation of treasury shares 262 58 58
Changes in reserves
Total comprehensive income for the period attributable to owners of the parent 10 185 5 866 13 542
Equity portion of convertible bonds issued and redeemed net of deferred taxation (2) 92 105
Ordinary dividends (1 516) – –
Preference dividends (99) (147) (282)
Share-based payments 175 127 147
Premium on introduction and recognition of non-controlling interests (22) (20) (55)
Other reserve movements (43) 15 8
Changes in non-controlling interests
Total comprehensive income for the period attributable to non-controlling interests 107 428 719
Dividends and capital distributions paid (198) (312) (365)
Shares purchased from non-controlling interests (56) (413) (448)
Other transactions with non-controlling interests (49) 2 71
Balance at end of the period 82 148 59 015 66 768
Comprising:
Ordinary share capital and share premium 16 815 9 852 9 801
Preference share capital and share premium 3 381 3 497 3 497
Distributable reserves 39 968 32 672 36 786
Convertible and redeemable bonds reserve 858 1 066 1 079
Foreign currency translation reserve 13 499 4 452 7 865
Share-based payment reserve 811 764 636
Other reserves 357 329 449
Non-controlling interests 6 459 6 383 6 655
82 148 59 015 66 768
Financial instruments carried at fair value
Fair value Fair value Fair value
as at as at as at Fair value
31 Dec 2013 31 Dec 2012 30 June 2013 hierarchy
Rm Rm Rm Rm
Investments and loans 126 70 73 Level 1(#)
Investments and loans 214 53 68 Level 2(*)
Derivative financial assets 60 125 242 Level 2(*)
Long-term interest-bearing loans and borrowings (1 602) (1 339) (1 539) Level 2(*)
Derivative financial liabilities (239) (95) (33) Level 2(*)
(#) Valued using unadjusted quoted prices in active markets for identical financial instruments. This category includes listed
equity shares and unit trusts.
(*) Valued using techniques where all of the inputs that have a significant effect on the valuation are directly or indirectly
based on observable market data. These inputs include published interest rate yield curves and foreign exchange rates.
Condensed consolidated statement of cash flows
Six months Six months
ended ended Year ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
Cash generated before working capital changes 7 951 6 399 14 514
(Increase)/decrease in inventories (2 095) (736) 814
Increase in vehicle rental fleet (553) (391) (773)
Increase in receivables (379) (1 116) (313)
Increase/(decrease) in payables 633 358 (1 156)
Changes in working capital (2 394) (1 885) (1 428)
Cash generated from operations 5 557 4 514 13 086
Movement in instalment sale and loan receivables (494) (1 873) (2 478)
Dividends received 22 17 55
Dividends paid (1 814) (462) (751)
Net finance costs (780) (539) (1 599)
Taxation paid (704) (646) (1 093)
Net cash inflow from operating activities 1 787 1 011 7 220
Net cash outflow from investing activities (4 297) (4 089) (8 650)
Net cash inflow from financing activities 3 335 2 897 1 251
Net increase/(decrease) in cash and cash equivalents 825 (181) (179)
Effects of exchange rate changes on cash and cash equivalents 873 459 1 371
Cash and cash equivalents at beginning of period 9 249 8 057 8 057
Cash and cash equivalents at end of period 10 947 8 335 9 249
Segmental analysis
Six months Six months
ended ended Year ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) % Audited(1)
Rm Rm change Rm
Revenue
Retail activities
– International operations 36 654 29 075 26 57 449
– African operations 17 068 16 359 4 32 210
Manufacturing, sourcing and logistics
– International operations 16 227 11 917 36 23 300
– African operations 8 052 7 746 4 15 350
Properties 1 295 953 36 2 134
Corporate services
– Brand management 263 191 38 533
– Central treasury and other income 1 071 217 394 1 144
80 630 66 458 21 132 120
Intersegment revenue eliminations (13 207) (9 021) (15 955)
67 423 57 437 17 116 165
Operating profit before capital items
Retail activities
– International operations 2 279 1 548 47 3 040
– African operations 185 886 (79) 1 714
Manufacturing, sourcing and logistics
– International operations 1 403 880 59 2 309
– African operations 712 669 6 1 346
Properties 1 266 935 35 2 040
Corporate services
– Brand management 257 191 35 433
– Central treasury and other income net of intersegment eliminations 266 (92) – 462
6 368 5 017 27 11 344
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm % Rm % Rm %
Total assets
Retail activities
– International operations 82 818 47 57 848 43 63 511 43
– African operations 23 856 14 23 197 17 23 552 16
Manufacturing, sourcing
and logistics
– International operations 10 061 6 7 835 6 10 255 7
– African operations 13 749 8 13 429 10 13 589 9
Properties 36 615 21 26 415 20 31 324 21
Corporate services
– Brand management 6 274 4 5 023 4 6 478 4
– Central treasury and
other assets 822 – 582 – 487 –
174 195 100 134 329 100 149 196 100
Reconciliation of total assets per statement of financial position to total assets per segmental analysis
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm Rm Rm
Total assets per statement of financial position 193 670 147 993 165 017
Less: Cash and cash equivalents (10 947) (8 335) (9 249)
Less: Investments in equity accounted companies (2 826) (2 376) (2 634)
Less: Investment in preference shares (418) (380) (453)
Less: Interest-bearing short-term loans receivable (4 955) (2 418) (3 228)
Less: Interest-bearing long-term loans receivable (329) (155) (257)
Total assets per segmental analysis 174 195 134 329 149 196
Geographical information
Six months Six months
ended ended Year ended
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm % Rm % Rm %
Revenue
Continental Europe 36 821 55 28 917 50 59 107 51
Pacific Rim 1 669 2 1 464 3 2 855 2
Southern Africa 24 941 37 24 005 42 47 362 41
United Kingdom 3 992 6 3 051 5 6 841 6
67 423 100 57 437 100 116 165 100
31 Dec 2013 31 Dec 2012 30 June 2013
Unaudited Unaudited(1) Audited(1)
Rm % Rm % Rm %
Non-current assets
Continental Europe 100 962 75 70 741 70 81 376 71
Pacific Rim 1 985 1 1 707 2 1 769 2
Southern Africa 25 487 19 24 522 24 24 879 22
United Kingdom 6 056 5 4 620 4 7 211 5
134 490 100 101 590 100 115 235 100
Notes
(1) Prior period disclosure has been restated to account for the adoption of new and revised accounting standards.
Notice
The preparation of these summarised financial statements was supervised by financial director Frikkie (FJ) Nel CA(SA).
Selected explanatory notes
Statement of compliance
The consolidated interim financial information for the six months ended 31 December 2013, 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 Listing Requirements and the Companies Act, 71 of 2008, as amended, of South Africa. The consolidated interim financial information
should be read in conjunction with the annual financial statements for the year ended 30 June 2013.
Basis of preparation
The condensed interim financial statements are prepared in millions of South African rands (Rm) on the historical-cost basis, except for
certain assets and liabilities which are carried at amortised cost, and certain financial instruments, and biological assets which are
stated at their fair values.
Accounting policies
The accounting policies adopted in the preparation of the condensed interim financial information are consistent with those of the annual
financial statements for the year ended 30 June 2013 except as described below. During the period under review, the group adopted all the
IFRS and interpretations that were effective and deemed applicable to the group. The standards which had an effect on the prior period
results are discussed below.
IFRS 10 – Consolidated Financial Statements, IFRS 12 – Disclosure of Interests in Other Entities and IAS 27 – Consolidated and Separate
Financial Statements
IFRS 10 provides a new definition of control which requires the investor to assess control by referring to the investor’s exposure
or rights to variable returns from its involvement with the investee and the ability to affect those returns through its power over
the investee.
The group has reassessed the control conclusion for its investees at 1 July 2013. As a consequence, the group has determined that it has
control of Van Den Bosch Beheer BV which was previously accounted for as a joint venture using the proportionate method of consolidation.
The group has determined that it has control over White Rock Insurance, which was previously not accounted for. The group has applied the
transitional provisions and the 2013 results have been restated accordingly.
IFRS 11 – Joint Arrangements and IAS 28 – Investment in Associates and Joint Ventures
IFRS 11 has removed the option to account for joint ventures using proportionate consolidation and instead joint arrangements that meet
the definition of a joint venture under IFRS 11 must be accounted for using the equity method.
The group previously accounted for joint ventures using the proportionate consolidation method. The group has applied IFRS 11
retrospectively in accordance with the transitional provisions and the 2013 results have been restated accordingly.
IFRS 13 – Fair Value Measurement
IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements
are required or permitted by other IFRSs. IFRS 13 provides for a revised definition of fair value, being the price at which an orderly
transaction to sell an asset or transfer a liability would take place between market participants at the measurement date. It replaces and
expands the disclosure requirement about fair value measurements on other IFRSs, including IFRS 7 – Financial Instruments – Disclosures.
The group has included additional disclosures in this regard.
IAS 19 (revised) – Employee Benefits
IAS 19R includes a number of amendments to the accounting for defined benefit plans. The principal impact arises from the requirement to
replace the interest cost on the defined benefit obligation and the expected return on plan assets with a net interest cost/income based
on the net benefit liability/asset, calculated using the discount rate used to measure the defined benefit obligation. This has increased
the income statement charge as the discount rate now applied to the assets is lower than the expected return on plan assets. There is a
limited effect on total comprehensive income as the increased charge in the income statement is offset by a credit in other comprehensive
income. The group has applied the standard retrospectively in accordance with the transitional provisions and the 2013 results have been
restated accordingly.
Effect of restatement of prior periods
The adoption of IFRS 10, IFRS 11 and IAS 19R has resulted in the restatement of certain financial statement line items for the prior
periods disclosed. None of the restatements are material to the group financial statements. IFRS 10 and IFRS 11 decreased profit for
the six months ended 31 December 2012 by R24 million (year ended 30 June 2013: increased by R26 million), and increased the net asset
value as at 31 December 2012 by R133 million (30 June 2013: R151 million). IAS 19R decreased profit for the six months ended
31 December 2012 by R9 million (year ended 30 June 2013: R17 million), and decreased the net asset value as at 31 December 2012 by
R2 million (30 June 2013: R2 million). These restatements have been combined in the table below.
The effect of the above restatements was a decrease in the earnings per share amounts for the six months ended 31 December 2012 of
between 1.3 cents per share and 2.3 cents per share and a decrease for the year ended 30 June 2013 of between 0.3 cents per share and
0.4 cents per share.
Effect of reclassification of prior period
Two reclassifications were made to the disclosure for the six months ended 31 December 2012. A reclassification of R136 million was
made between revenue and cost of sales in the African manufacturing, sourcing and logistics segment to bring prior period disclosures
in line with current period disclosure. The non-current portion of JD Group’s instalment sales and loan receivables of R3 086 million
was classified from current assets to non-current assets.
The summarised effect of these restatements and reclassifications is:
Six months ended 31 Dec 2012
Restate- Reclassifi- Year ended
ments cations Total 30 June 2013
Rm Rm Rm Rm
Income statement impact
(Increase)/decrease in revenue (281) 136 (145) (679)
Decrease/(increase) in profit for the period 33 – 33 (9)
Decrease in profit attributable to owners of the parent 40 – 40 4
Increase in profit attributable to non-controlling interests (7) – (7) (13)
Comprehensive income impact
Increase in other comprehensive income for the period (24) – (24) (49)
Decrease/(increase) in total comprehensive income attributable
to owners of the parent 31 – 31 (6)
Increase in total comprehensive income attributable
to non-controlling interests (22) – (22) (52)
Decrease/(increase) in total comprehensive income for the period 9 – 9 (58)
Statement of financial position impact
Increase in non-current assets 10 3 086 3 096 29
Increase/(decrease) in current assets 320 (3 086) (2 766) 349
Decrease/(increase) in non-current liabilities 5 – 5 (1)
Increase in current liabilities (204) – (204) (228)
Increase in equity (131) – (131) (149)
OPERATIONAL REVIEW
International operations
The integrated retail business and group procurement initiatives continue to benefit from the enlarged European retail network. In a
period where consumer confidence in Europe showed some improvement, market share gains and margin improvement were prominent in many
of the countries where we operate.
Retail activities: Household goods
During the period under review, revenue attributable to the group’s international retail activities increased by 26% to R36.7 billion
(1H13: R29.1 billion) and operating profit increased by 47% to R2.3 billion (1H13: R1.5 billion).
Continental Europe
The European household goods market started to show some signs of recovery from October 2013. Conforama continued to report market share
gains across most territories. The cost rationalisation programmes embarked upon last year supported improved margins, particularly in
France and Italy. Spain, Portugal and Croatia also increased profitability. Encouragingly, Conforama’s multi-channel e-commerce strategy
is starting to bear fruit and sales from this channel increased by 19%.
The resilient economies in central and northern Continental Europe, coupled with the group’s investment in stores and real estate
during the past five years, continue to support good growth for the group’s German retail operations. A particularly strong performance
in Switzerland further supplemented growth. During the period, the European Retail Management (ERM) division also increased its intra-group
activities, both in logistics and manufacturing and sourcing, that culminated in increased margins. The local small store concept in Poland
continued to perform well. The bigger store in Wroclaw will be converted to the successful German Poco concept.
United Kingdom
Against a backdrop of a growing bedding market but a very competitive lounge, dining and homeware market, the UK retail business
continued to grow revenue and profit. This growth was achieved despite the reduction in total trading space with 30 stores being closed
for refurbishment during the period. The merging of the supply chain operations of both the bedding and furniture retail operations is
progressing well and cost-saving benefits are expected to be realised in the near future.
Pacific Rim
Both the Australian and New Zealand furniture and homeware retail stores reported good revenue growth that translated into a much improved
profit performance. In line with the group’s bedding retail operations across Europe, the Australian bedding market continues to grow,
benefiting our retail operations in this market.
Manufacturing, sourcing and logistics
The manufacturing division, that includes the global sourcing and logistics division, reported a 36% increase in revenue and a 59% increase
in operating profit.
In line with the increased profitability of this division previously reported, the group continues to benefit from optimising its global
supply chain, particularly with regard to:
- a material reduction in global shipping costs;
- cost savings through the rationalisation of Asian sourcing offices;
- increased intra-group trading through the group’s manufacturing operations, specifically in upholstered and mattress products; and
- the consolidation of the global supplier base resulting in additional supplier rebates.
In addition, the weakness in emerging market currencies and the relative strength of the euro, especially against the US dollar, continue
to benefit margins. The trading arm of the sourcing division has now successfully been transformed into a specialised trading unit for
new products forming part of the group’s Global Range initiative. The implementation of the group’s central order management system is
progressing well and should further result in better efficiencies and stock control throughout the group.
African operations†
The African operations are invested in three independently listed companies, JD Group Limited (JD Group), and KAP Industrial Holdings
Limited (KAP) and an associate investment of 20% in PSG Group Limited.
Retail activities
JD Group (57%)
JD Group, a diversified retail and consumer finance business, announced a 4% increase in revenue to R17.1 billion (1H13: R16.4 billion)
for the six months ended 31 December 2013. The automotive, Do-it-Yourself (DIY), and consumer electronics and appliance retail divisions
delivered good performances while the furniture and, in particular, the consumer finance business reported disappointing results for the
period under review.
As a result of continued pressure on disposable income of consumers and the deterioration in the credit quality of both the secured
and unsecured lending market, JD Group adopted a more prudent provisioning approach which saw the impairment provision increasing to
R1.6 billion, or 15% of the gross loan book, negatively impacting the profitability of JD Group. While operating cash flow increased
to R1.3 billion (1H13: R588 million), the group reported a headline loss of R133 million (1H13: headline earnings of R506 million).
This translated to a headline loss per share of 59.1 cents and consequently no interim dividend was declared.
Manufacturing, sourcing and logistics
KAP (62%)
KAP, the diversified emerging market industrial group, reported a solid set of results for the period under review. Revenue from continuing
operations increased by 9% to R7 832 million (1H13: R7 208 million). Growth was achieved across all major divisions, particularly the
logistics, passenger, integrated timber and PET manufacturing divisions. Operating profit from continuing operations increased to
R710 million (1H13: R650 million) which translated to headline earnings of 16.0 cents per share (1H13: 13.8 cents per share). In terms of
KAP’s current dividend policy, KAP declares dividends annually during August.
† Shareholders are referred to the JD Group/KAP results announcements released on the JSE Limited’s news service (SENS) and on the groups’
websites (www.jdg.co.za)/(www.kap.co.za) for a comprehensive review of the JD Group/KAP results.
Properties
The property segment comprises all properties managed centrally by Steinhoff corporate services. The industrial and retail properties in
this segment are located in Africa, Europe and the UK.
Operating profit of R1.3 billion (1H13: R935 million) was earned on these properties for the period under review. The annual rental yield
on properties remains at an average of 7%. In the current low interest rate environment, particularly in Europe, the availability of
long-term financing at competitive rates continues to provide the group with good property investment opportunities.
FINANCIAL REVIEW
Revenue and operating profit before capital items
Group revenue for the six months ended 31 December 2013 (1H14) increased by 17% to R67.4 billion (1H13: R57.4 billion), while operating
profit before capital items increased by 27% to R6.4 billion (1H13: R5.0 billion). Profit attributable to owners of the group increased
by 44% to R4.6 billion (1H13: R3.2 billion). The group’s reporting currency (rand) weakened against the euro during the period, with
a sharper decline occurring in the last few months leading up to the reporting date.
Turnover, after intersegmental eliminations, earned in currencies other than rand, as measured in euro, increased to EUR3.1 billion,
amounting to R42.5 billion (1H13: R33.4 billion), a 27% increase. In line with the European strategy to focus on increasing margins,
group margins increased with 70 basis points from 8.7% to 9.4%.
Net finance charges
Net finance charges increased to R1.1 billion (1H13: R885 million) mainly as a result of the group’s European finance charges being
translated into the group’s reporting currency at a 25% weaker rand:euro translation rate.
The group’s future serviceability of debt continues to be healthy, evidenced by the EBITDA interest cover at 6.9 times.
Taxation
The average tax rate of 11.1% (1H13: 14.7%) reconfirms management’s view that the sustainable tax rate of the group should not exceed
15% in the foreseeable future. The average tax rate in any particular reporting period is influenced by the relative profit contributions
of the foreign versus Southern African operations of the group. The decrease in the average tax rate was influenced by the loss reported
by JD Group.
Headline earnings attributable to ordinary shareholders
While profit for the period increased by 31% to R4.7 billion, headline earnings attributable to ordinary shareholders increased by 47%
to R4.5 billion (1H13: R3.1 billion). Profit attributable to non-controlling shareholders declined from R413 million to R108 million,
mainly as a result of the reported loss of JD Group of which approximately 43% is held by minority shareholders.
Earnings per share (EPS) and headline earnings per share (HEPS)
In line with the trading update released on 11 February 2014, EPS and HEPS increased by 41% to 242.0 cps (1H13: 171.6 cps) and 243.0 cps
(1H13: 171.8 cps) respectively. These increases were achieved despite an increase of 4% in the weighted average number of ordinary shares
in issue to 1 851 million (1H13: 1 781 million).
Debt
The majority of the group’s assets and liabilities are situated in Europe. In translating these assets and liabilities to rand, the closing
exchange rate as at 31 December 2013 (being R14.4990) was used, while the comparative period was translated at R12.9209. This equates to an
increase of 12.2% and affects the comparability of all assets and liabilities compared to those of the previous period. Management remains
comfortable with the group’s gearing and serviceability of debt as set out in the following table.
HY14 FY13
Rm Rm
Interest-bearing short-term liabilities 8 348 5 117
Bank overdrafts and short-term facilities 4 461 3 162
Interest-bearing long-term liabilities 48 607 45 041
61 416 53 320
Less cash and cash equivalents (10 947) (9 249)
Gross debt less cash 50 469 44 071
Less interest-bearing assets and receivables (12 992) (11 598)
Net interest-bearing debt 37 477 32 474
Total equity 82 148 66 768
Net interest-bearing debt:equity 46% 49%
Net finance charges 1 124 2 033
EBITDA 7 779 14 038
EBITDA interest cover (times) 6.9 6.9
Cash
Notwithstanding the increased investment in working capital, cash generated from operations increased by 23% to R5.6 billion
(1H13: R4.5 billion). Cash generated from operations represents 87% of operating profit (1H13: 90%) which confirms the group’s quality
of earnings and is in line with the seasonal nature of the group’s business, with the majority of cash generation occurring in the second
half of the group’s financial year.
Working capital
Despite the group’s higher activity levels, and taking into account that December and January are the group’s peak trading period in
Europe, investment in working capital remains at acceptable levels. The increased activity levels of our sourcing division, and the fact
that delays during the earlier Chinese New Year would have impacted the group during its peak trading period, our store network carried
higher inventory levels, giving rise to the increased investment in inventories. This investment is now through the cycle and investment
in inventories has normalised.
Investment and loans
The increase in investment and loans is directly related to the group’s facilitation of acquisition of Kika-Leiner as is described in
more detail within Corporate activity.
Corporate activity
The group concluded the following corporate and financing transactions during, and shortly after, the period under review:
- Steinhoff Europe facilitated the independent acquisition by Genesis Investment Holding GmbH of the Kika-Leiner group of companies referred
to in the group’s announcement in June 2013. The transaction became unconditional on 28 November 2013. The facilitation was done through
an investment of EUR375 million (through the issue of 120 million Steinhoff shares as vendor consideration placement in December 2013).
Steinhoff Europe was appointed by the shareholder of Genesis to provide management and advisory services, on market-related terms, and
will assist in the evaluation and repositioning of the Kika-Leiner businesses in Austria and the CEE countries to the shareholder. The
group intends to acquire identified assets and businesses during the calendar year and Steinhoff stakeholders will be informed thereof
accordingly.
- Conforama Holding S.A. concluded an agreement with the owners of the Fly, Atlas and Crozatier businesses in France and Switzerland,
in terms of which Conforama acquired all of the 19 Fly stores in Switzerland; 3 Atlas stores (including the properties) in France; and
assumed the leases and acquired the trading assets of a further 7 Atlas stores in France. As an integral part of this transaction a
co-operation agreement was concluded in terms of which the remaining Fly, Atlas and Crozatier businesses could conduct their buying
activities through the Steinhoff sourcing platform – an initiative which should significantly benefit both groups in terms of margin
enhancement. In addition, Conforama obtained an option exercisable at its election to acquire the remaining Fly stores within five years
at a fixed purchase price. The necessary Antitrust approvals to these transactions are expected in the near future.
- As a result of the relevant share price exceeding the threshold in respect of the outstanding 9.625% convertible bonds due 2015 (the 2015
Bonds), the company exercised its right to procure the early conversion of the 2015 Bonds. Accordingly, the outstanding principal amount
plus accreted interest of approximately R1.9 billion was redeemed by the issue of 68.1 million new Steinhoff shares.
- On 30 January 2014, Steinhoff Finance Holdings GmbH (an indirect wholly owned subsidiary of Steinhoff) raised an amount of EUR465 million
of senior unsecured guaranteed convertible bonds maturing on 30 January 2021 (the 2021 Bonds). The offering in respect of the 2021 Bonds
was substantially oversubscribed and the interest coupon was fixed at 4% p.a., with the conversion premium at 30% above the reference
price of Steinhoff shares listed on the JSE, from launch to pricing, of R45.47, i.e. a conversion price of R59.11 (or EUR3.96 per share at
a fixed ZAR:EUR exchange rate of R14.9199). The 2021 Bonds represent approximately 117.4 million underlying Steinhoff shares and the
proceeds were used to extend the debt maturity profile of the group in a leverage-neutral manner.
Outlook
In line with the European strategy to focus on margin enhancement, the various initiatives embarked upon to extract benefits from our global
supply chain should continue to protect and enhance group margins. The Kika-Leiner and Mobilier Européen transactions will further support
the group’s retail footprint in Europe and the ability of its global supply chain to extract more efficiencies.
In Africa management has increased its focus on controllable factors such as costs, productivity and the retention and growth of market
share in our African retail and industrial businesses. Despite the increased provisions in the JD Group’s consumer finance business, should
collections continue to deteriorate, it will result in additional debtor’s costs and then the results of this division will remain subdued.
JD Group is contemplating a rights issue and engaged the Steinhoff Group for underwriting. The proposed rights issue and proposed
underwriting requires serious consideration and stakeholders will be advised as soon as the board of JD Group has finalised its
deliberations and the terms of any underwriting.
The group remains well capitalised and comfortable with the diversity of its funding structure. The volatility of the rand exchange rate
will continue to influence the group’s reported earnings.
Len Konar Markus Jooste
Independent chairman Chief executive officer
4 March 2014
Other notes
1. Corporate governance
Steinhoff has embraced the recommendations of the King Report on Governance and strives to provide reports to shareholders
that are timely, accurate, consistent and informative.
2. Social responsibility
The group remains committed to behaving in a socially responsible manner and is conscious of its responsibilities in this regard.
3. Human resources
A constructive working relationship is maintained with our group employees and the relevant unions. Ongoing skills and equity activities
ensure compliance with current legislation.
4. Related-party transactions
The company entered into various related-party transactions. These transactions are no less favourable than those arranged with
third parties.
5. Dividends
In terms of Steinhoff’s dividend policy, Steinhoff declares dividends annually during September.
6. Further events
No significant events have occurred, other than those highlighted in Corporate activity in the period between the reporting date
and the date of this report.
Administration
Registered office
28 Sixth Street, Wynberg
Sandton 2090
Republic of South Africa
Tel: +27 (11) 445 3000
Fax: +27 (11) 445 3094
Directors
D Konar• (chairman), MJ Jooste (chief executive officer), SF Booysen•, DC Brink•, CE Daun•*, HJK Ferreira, SJ Grobler, TLJ Guibert#,
AB la Grange, MT Lategan•, JF Mouton•, FJ Nel, HJ Sonn•, BE Steinhoff•*, PDJ van den Bosch•†, DM van der Merwe, CH Wiese•
Alternate directors
JNS du Plessis, KJ Grové, A Krüger-Steinhoff•*, M Nel
†Belgian #French *German •non-executive
Company secretary
Steinhoff Africa Secretarial Services Proprietary Limited
Auditors
Deloitte & Touche
Sponsor
PSG Capital Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
www.steinhoffinternational.com
Steinhoff Investment Holdings Limited
Registration number: 1954/001893/06
(Incorporated in the Republic of South Africa)
(“Steinhoff Investment”)
JSE share code: SHFF
ISIN code: ZAE000068367
Dividend to preference shareholders
Preference shareholders are referred to the above results of Steinhoff for a full appreciation of the consolidated results and financial
position of Steinhoff Investment.
The board has declared a gross dividend of 354 cents per preference share on or about 4 March 2014, in respect of the period from
1 July 2013 to 31 December 2013 (“the dividend period”) from income reserves, payable on Tuesday, 22 April 2014, to those preference
shareholders recorded in the books of the company at the close of business on Thursday, 17 April 2014.
The dividend will be payable in the currency of South Africa. The dividend is subject to a local dividend tax rate of 15%, resulting
in a net dividend of 300.9 cps, unless the shareholder is exempt from dividend tax or is entitled to a reduced rate in terms of the
applicable double-tax agreement. The company’s income tax reference number is 9375046712. At the date of declaration there were
15 000 000 preference shares in issue.
Salient dates 2014
Last date to trade cum dividend Thursday, 10 April
Shares trade ex dividend Friday, 11 April
Record date Thursday, 17 April
Payment date Tuesday, 22 April
Share certificates may not be dematerialised or rematerialised between Friday, 11 April 2014, and Thursday, 17 April 2014, both days
inclusive. No STC credits were utilised in determining the net dividend.
On behalf of the board of directors
Len Konar Piet Ferreira
Non-executive director Executive director
4 March 2014
Date: 04/03/2014 02:17:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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