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Reviewed condensed consolidated preliminary financial statements results for the year ended 30 June 2014
AFRICAN & OVERSEAS ENTERPRISES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1947/027461/06)
JSE share codes: AOO - AON - AOVP
ISIN: ZAE000000485 - ZAE000009718 - ZAE000000493
("the company" or "the group" or "African & Overseas")
REVIEWED CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2014
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2014 2013
(Reviewed) (Audited)
R'000 R'000
ASSETS
Non-current assets 142 159 114 458
Property, plant and equipment 108 762 89 631
Investment property 5 440 5 551
Intangible assets 13 920 8 010
Other investments 524 524
Deferred tax asset 13 513 10 742
Current assets 154 697 204 901
Inventories 82 124 88 231
Trade and other receivables 13 671 11 187
Forward exchange contracts - 3 660
Income tax receivable 215 1 656
Cash and cash equivalents 58 687 100 167
Total assets 296 856 319 359
EQUITY AND LIABILITIES
Capital and reserves 239 458 260 464
Share capital 1 200 1 200
Share premium 6 076 6 076
Other reserves 553 544
Retained earnings 124 760 135 692
Non-controlling interest 106 869 116 952
Non-current liabilities 15 775 16 123
Post-retirement liability 2 653 2 776
Accrued operating lease liability 12 833 11 168
Deferred tax liability 289 2 179
Current liabilities 41 623 42 772
Provisions - 3 077
Trade and other payables 40 604 39 631
Forward exchange contracts 927 -
Income tax payable 92 64
Total equity and liabilities 296 856 319 359
OTHER INFORMATION
Capital commitments
Authorised - not contracted for 36 362 32 361
Authorised - contracted for 11 989 3 048
Gross profit margin 49.2% 51.3%
Operating loss margin (3.8%) (4.3%)
Retail segment operating loss margin (2.8%) (3.1%)
Net asset value - R 11.37 12.31
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% 2014 2013
change (Reviewed) (Audited)
R'000 R'000
Revenue 3.6% 500 843 483 517
Turnover 3.7% 492 079 474 438
Cost of sales (249 774) (231 176)
Gross profit (0.4%) 242 305 243 262
Other income 96.2% 5 118 2 608
Other operating costs (0.1%) (265 971) (266 220)
Operating loss (8.9%) (18 548) (20 350)
Dividend income 16 13
Finance income 3 630 6 458
Finance costs (251) (241)
Loss before tax 7.3% (15 153) (14 120)
Income tax expense 3 900 3 380
Loss for the year 4.8% (11 253) (10 740)
Other comprehensive income
Actuarial gain on post-retirement defined
benefit plan 9 -
Total comprehensive income for the year (11 244) (10 740)
Loss attributable to:
Ordinary and "N" ordinary shareholders of the parent (6 930) (6 659)
Preference shareholders 181 181
Loss attributable to equity holders of the parent (6 749) (6 478)
Non-controlling interest (4 504) (4 262)
Loss for the year (11 253) (10 740)
Total comprehensive income attributable to:
Ordinary and "N" ordinary shareholders of the parent (6 925) (6 659)
Preference shareholders 181 181
Loss attributable to equity holders of the parent (6 744) (6 478)
Non-controlling interest (4 500) (4 262)
Total comprehensive income for the year (11 244) (10 740)
Reconciliation of headline loss
Loss attributable to equity holders (6 930) (6 659)
Adjusted for:
(Profit)/loss from disposal of property, plant
and equipment (454) 43
Impairment loss/(reversal) on equipment and
shopfittings 1 346 (170)
Headline loss (6 038) (6 786)
Basic loss per ordinary share (cents) 4.1% (60.9) (58.5)
Headline loss per ordinary share (cents) (11.1%) (53.0) (59.6)
Diluted basic loss per ordinary share (cents) 4.1% (60.7) (58.3)
Diluted headline loss per ordinary share (cents) (10.9%) (52.9) (59.4)
Dividend cover (based on headline loss) - (1.7)
Weighted average number of equity shares on
which loss per share is based (000's) 11 387 11 387
Weighted average number of equity shares on
which diluted loss per share is based (000's) 11 417 11 427
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
2014 2013
(Reviewed) (Audited)
R'000 R'000
Share capital 1 200 1 200
Share premium 6 076 6 076
Other reserves
Opening balance 544 535
Share-based payment expense 4 9
Actuarial gains on post-retirement defined benefit plans 5 -
Closing balance 553 544
Retained earnings
Opening balance 135 692 146 524
Loss for the year (6 749) (6 478)
Preference dividends paid (181) (181)
Ordinary dividends paid (3 986) (3 986)
Net effect of take-up of share options 31 145
Change in degree of control (47) (332)
Closing balance 124 760 135 692
Non-controlling interest
Opening balance 116 952 126 416
Loss for the year (4 504) (4 262)
Preference dividends paid (17) (17)
Ordinary dividends paid (5 643) (5 643)
Net effect of take-up of share options 26 118
Change in degree of control 47 332
Other 8 8
Closing balance 106 869 116 952
Total capital and reserves 239 458 260 464
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
2014 2013
(Reviewed) (Audited)
R'000 R'000
Operating profit/(loss) before working capital changes 1 811 (2 971)
Working capital changes 9 190 (18 225)
Finance income 3 630 6 458
Finance costs (251) (241)
Dividends paid (9 827) (9 827)
Dividends received 16 13
Income tax received/(paid) 708 (777)
Net cash inflows/(outflows) from operating activities 5 277 (25 570)
Additions to property, plant and equipment (42 704) (31 866)
Additions to intangible assets (5 170) (4 134)
Proceeds from disposal of property, plant and equipment 60 195
Proceeds from disposal of trademark 1 000 -
Net cash outflows from investing activities (46 814) (35 805)
Proceeds on delivery of shares by share trust 57 263
Net cash inflows from financing activities 57 263
Net decrease in cash and cash equivalents (41 480) (61 112)
Cash and cash equivalents at the beginning of the year 100 167 161 279
Cash and cash equivalents at the end of the year 58 687 100 167
GROUP SEGMENTAL REPORTING
2014 2013
(Reviewed) (Audited)
R'000 R'000
Revenue
Total external retail revenue 493 292 475 447
Retail segment revenue 496 938 478 234
Intersegment revenue earned (3 646) (2 787)
Total external property revenue 3 905 1 599
Property segment revenue 8 146 5 527
Intersegment revenue earned (4 241) (3 928)
Dividends received 16 13
Interest income 3 630 6 458
Total group revenue 500 843 483 517
Segment operating loss
Retail segment loss (14 046) (14 754)
Property segment profit/(loss) 22 (243)
Group services operating loss (4 524) (5 353)
Total group operating loss (18 548) (20 350)
Depreciation and amortisation
Retail 22 151 17 308
Property 751 277
Total group depreciation and amortisation 22 902 17 585
Segment assets
Retail 203 295 217 474
Property 60 622 32 672
Group services* 32 939 69 213
Total group segment assets 296 856 319 359
Segment liabilities
Retail 49 908 51 333
Property 3 373 2 606
Group services* 4 117 4 956
Total group segment liabilities 57 398 58 895
Capital expenditure
Retail 19 718 19 030
Property 28 156 16 970
Total group capital expenditure 47 874 36 000
* Group services include corporate costs.
NOTES
1 Review by auditors
The reviewed condensed consolidated preliminary financial statements of
African & Overseas Enterprises Limited for the year ended 30 June 2014 have
been reviewed by the company's auditors, KPMG Inc. In their review report dated
8 September 2014, which is available for inspection at the company's registered office,
KPMG Inc. state that their review was conducted in accordance with the International
Standard on Review Engagements 2410, Review of Interim Information Performed by the
Independent Auditor of the Entity, which applies to a review of consolidated preliminary
financial information, and have expressed an unmodified conclusion on the reviewed
condensed consolidated preliminary financial statements.
2 Basis of preparation
The reviewed condensed consolidated preliminary financial statements are prepared in
accordance with the framework concepts and recognition and measurement principles of
International Financial Reporting Standards and presented in accordance with the
minimum content, including disclosures, prescribed by IAS 34: Interim Financial
Reporting applied to year-end reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council, the requirements of the Companies Act
of South Africa and the JSE Listings Requirements. These reviewed results have been
prepared under the supervision of the group financial director, Damian Johnson CA(SA).
3 Accounting policies
The accounting policies applied are consistent with those applied in the preparation
of the group's annual financial statements for the year ended 30 June 2013, except
for the adoption of new standards and interpretations effective as of 1 July 2013.
The new standards have no impact on the reviewed condensed consolidated preliminary
financial statements and are not expected to impact the annual consolidated financial
statements.
The integrated annual report containing a detailed review of the operations of the
company will be posted to shareholders towards the end of September 2014. The annual
financial statements will be posted on the company's website www.rextrueform.co.za
at the end of September 2014.
COMMENTARY
Group results
The principal operating subsidiary Rex Trueform Clothing Company Limited reports as
follows:
"The group had a challenging year. The group's revenue increased by 3.6% to
R501.2 million (2013: R484.0 million). The gross profit which is generated from the
retail segment decreased marginally by 0.4% to R242.3 million (2013: R243.3 million).
Other income, which includes rental income, increased from R3.1 million to
R5.6 million. Trading expenditure reduced by 0.1%, positively impacted by business
initiatives introduced. The above resulted in the operating loss decreasing by 9.6%
to R17.3 million (2013: loss of R19.1 million).
As a result of the capital costs incurred during the year the cash on hand reduced
substantially which negatively impacted on the interest earned. The after-tax loss
increased by 5.6% to R10.03 million (2013: R9.5 million). The basic loss per ordinary
share increased by 5.4%, whereas the headline loss per ordinary share reduced by 13.5%
from 47.4 cents to 41 cents.
Retail
The retail segment reflected a modest increase in the turnover of 3.7%, but the gross
profit margin reduced to 49.2% compared to 51.3% in 2013 as a result of extreme
competitive pressure.
This segment managed to contain costs which were mainly influenced by the reduction in
employments costs during the year. Included in the trading expenditure is a once-off
impairment cost to the amount of R3.4 million relating to the likely closure of
unprofitable stores in the 2015 financial year. Four new stores were opened during the
year in outlying areas which were previously not serviced by the business.
The above resulted in a reduction in the segment operating loss from R14.8 million in
2013 to R14 million for the period, an improvement of 4.8%. The segment operating loss
excluding the once-off impairment (noted above) amounts to R10.6 million.
Property
The property segment revenue showed an improvement during the year, increasing to
R8.1 million from R5.5 million in 2013. The operating profit in the current year was
negatively impacted by once-off costs relating to the negotiation of leases which
were finalised towards the end of the financial year. The segment operating profit
amounted to R0.02 million compared to a loss of R0.2 million in 2013.
The main focus of this segment has been the development of the Rex Trueform Office Park
("RTOP") in Salt River of which the core construction activities were mostly completed
by June 2014. As at June 2014 leases for a substantial portion of the premises had
been concluded.
Prospects
Retail segment
The group has plans to roll out further stores to capture new markets and improve
returns. Initiatives introduced will improve the gross margin, which has been evidenced
by the first nine weeks of the new trading year. The planned closure of the impaired
unprofitable stores, and further cost management initiatives, will also add to the
improved performance of the segment.
Another initiative to positively impact the business will be the implementation of the
enterprise resource planning ("ERP") software in the 2015 financial year. The benefits
to be gained therefrom will commence in the 2015 financial year, however the major
benefits will be realised in the years thereafter.
The business is looking to increase its footprint in Africa in the medium to long term
and has recently opened its first franchise store in Kenya.
The segment is expected to perform better going forward and the objective is to return
the segment to profitability in the 2015 financial year.
Property segment
The value of the group's property portfolio will increase in the future in light of
the fact that the RTOP development will be completed during the 2015 financial year.
The group holds other properties which have future development potential.
The RTOP is located in a vibrant area within Salt River (Cape Town) and provides
approximately 11 700 square metres of office space. As at June 2014 agreements had been
entered into to let approximately 90% of the office space, inclusive of space let to
Queenspark. The remaining unlet office space is expected to be let during the 2015
financial year. Management is pleased with the progress made on the project.
The group is to prepare development feasibilities during the forthcoming year in
respect of other properties owned by the group.
Dividend
The board is not proposing dividends in respect of the ordinary and "N" ordinary shares
in the 2014 financial year."
Further to the above the net asset value per share of African & Overseas Enterprises Ltd
has been determined on the basis of total capital and reserves less non-controlling
interest divided by the number of ordinary and preference shares in issue at the end of
the reporting period.
Directors: ML Krawitz+ (Chairman), PE Shub (Chief Executive Officer) (alt ML Krawitz),
CEA Radowsky, DS Johnson, PM Naylor*, RV Orlin* and M Segal*
+ Non-executive *Independent Non-executive
We note the passing of RW Rees on 11 June 2014. M Segal was appointed as an independent
non-executive director on 2 September 2014.
Registered office: Rex Buildings, 263 Victoria Road, Salt River, Cape Town, 7925
Secretary: AT Snitcher
Transfer secretaries: Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
Sponsor: Java Capital
Websites: www.queenspark.com - www.rextrueform.com
Date: 08/09/2014 04:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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