JD GROUP LIMITED - Unaudited interim results for the six months ended 31 December 2014

Release Date: 02/03/2015 12:05
Code(s): JDG
 
Wrap Text
Unaudited interim results for the six months ended 31 December 2014

JD Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1981/009108/06)
ISIN: ZAE000030771
JSE share code: JDG  
("JD Group Limited" or "the Group")

Unaudited interim results
For the six months ended 31 December 2014

# Extracted financial information from the unaudited results for the six months ended 31 December 2014.

Key features
Revenue from continuing operations increased by 10,5% to R17,0 billion  (1H2014: R15,3 billion)

Headline earnings per share from continuing operations increased by 57,2% to70,9 cents (1H2014: 45,1 cents)

Operating profit from continuing operations increased by 16,3% to
R356 million  (1H2014: R306 million)

Loss from discontinued operations  of R1,6 billion (1H2014: R236 million)
Sale of the Consumer Finance business approved by shareholders

Summarised group financial statements
                                                                                  *Re-presented
Summarised group statement of comprehensive income                   Unaudited        Unaudited          Audited
                                                                      6 months         6 months        12 months
                                                                         ended            ended            ended
                                                                   31 December      31 December          30 June
                                                                          2014             2013             2014
                                                                     R million        R million        R million                                                                                     

Continuing operations
Revenue                                                                 16 968           15 349           30 582
Cost of sales                                                          (12 590)         (11 284)         (22 656)
Operating expenses                                                      (4 022)          (3 759)          (7 389)
Administration and other expenses                                       (3 347)          (3 386)          (6 564)
Debtors' costs                                                            (426)            (110)            (326)
Depreciation and amortisation                                             (240)            (242)            (452)
Capital items (note 2)                                                      (9)             (21)             (47)

Operating profit                                                           356              306              537
Investment income                                                            2                7               11
Net finance costs                                                         (127)            (141)            (213)
Share of loss of joint venture                                               -                -               (6)
Share of loss of associate                                                   -               (4)               -
Profit before taxation from continuing operations                          231              168              329
Taxation                                                                   (34)             (67)            (128)
Profit for the period from continuing operations                           197              101              201
Loss for the period from discontinued operations (note 3)               (1 632)            (236)          (2 124)
Loss for the period                                                     (1 435)            (135)          (1 923)
Profit for the period from continuing operations attributable to:
Owners of parent                                                           181               85              177
Non-controlling interests                                                   16               16               24
Profit for the period from continuing operations                           197              101              201
Loss for the period from discontinued operations attributable to:
Owners of parent                                                        (1 632)            (236)          (2 124)
Non-controlling interests                                                    -                -                -
Loss for the period from discontinued operations                        (1 632)            (236)          (2 124)

* The prior period figures have been re-presented to reflect the impact of the discontinued operations.

Summarised group statement of other comprehensive income             Unaudited        Unaudited          Audited
                                                                      6 months         6 months        12 months
                                                                         ended            ended            ended
                                                                   31 December      31 December          30 June
                                                                          2014             2013             2014
                                                                     R million        R million        R million

Loss for the period                                                     (1 435)            (135)          (1 923)
Exchange differences on translating foreign operations                      11               13               18
Total comprehensive loss for the period                                 (1 424)            (122)          (1 905)
Attributable to:
Owners of parent                                                        (1 440)            (138)          (1 929)
Non-controlling interests                                                   16               16               24
Total comprehensive loss for the period                                 (1 424)            (122)          (1 905)

Summarised group statement  of cash flows                            Unaudited    *Re-presented    *Re-presented
                                                                      6 months        Unaudited          Audited
                                                                         ended         6 months        12 months
                                                                   31 December            ended            ended
                                                                          2014      31 December          30 June
                                                                     R million             2013             2014
                                                                                      R million        R million

Cash generated by trading                                                1 471            1 540            2 698
Decrease in working capital                                                 16              732            1 429
Cash generated by operations                                             1 487            2 272            4 127
Increase in installment sales receivables                                 (815)            (998)          (1 754)
Dividends paid                                                              (4)            (264)            (274)
Taxation paid                                                             (154)            (218)            (454)
Interest paid                                                             (341)            (348)            (736)
Interest received                                                           34               29               41
Net cash flows from operating activities                                   207              473              950
Net cash flows from investing activities                                   (88)             (61)            (212)
Net cash flows from financing activities                                   189             (854)            (658)
Effect of exchange rate translation on cash and  cash equivalents           11                -               19
Net increase/(decrease) in cash and cash equivalents                       319             (442)              99
Cash and cash equivalents at beginning of the period                       890              791              791
Cash and cash equivalents at end of the period                           1 209              349              890

* The cash flow has been re-presented to combine the secured and unsecured instalment sales receivables movement, previously disclosed separately under
working capital and cash flows from operating activities. Additions to vehicle rental fleet, which are financed through finance leases, are now excluded
from working capital movements as a non-cash item.

Summarised group statement of financial position                              Unaudited      Unaudited      Audited
                                                                               6 months       6 months    12 months
                                                                                  ended          ended        ended
                                                                            31 December    31 December      30 June
                                                                                   2014           2013         2014
                                                                              R million      R million    R million

Assets
Non-current assets
Intangible assets and goodwill                                                    3 246          3 582        3 341
Property, plant and equipment                                                     2 446          2 694        2 525
Investments and loans                                                               119            201          130
Deferred taxation asset                                                           1 441            390          801
Trade-, loan- and other receivables                                                  55          2 406           55
Total non-current assets                                                          7 307          9 273        6 852
Current assets
Inventories                                                                       4 423          4 482        4 124
Trade- and loan receivables and other current  financial assets                   1 778          8 028        1 464
Vehicle rental fleet                                                              1 162            715          534
Taxation                                                                             69              -           13
Cash and cash equivalents                                                         1 224          1 295        1 199
Total current assets                                                              8 656         14 520        7 334
Assets classified as held for sale                                                4 746              -        6 849
Total assets                                                                     20 709         23 793       21 035
Equity and liabilities
Stated capital                                                                    5 445          4 472        5 445
Other reserves                                                                      (48)           175          (67)
Retained earnings                                                                   946          4 007        2 399
Shareholders' equity                                                              6 343          8 654        7 777
Non-controlling interests                                                            58             47           47
Total equity                                                                      6 401          8 701        7 824
Non-current liabilities
Interest-bearing borrowings                                                         860          7 228        1 860
Loans from related parties                                                        1 122              -        3 174
Non-interest-bearing liabilities and provisions                                     260            234          399
Deferred taxation liability                                                         238            475          293
Total non-current liabilities                                                     2 480          7 937        5 726
Current liabilities
Trade, other payables, provisions and other current  financial liabilities        6 545          6 165        5 656
Interest-bearing borrowings                                                       2 351              -        1 324
Loans from related parties                                                        2 883              -            -
Taxation                                                                              -             44            -
Bank overdraft                                                                       15            946          309
Total current liabilities                                                        11 794          7 155        7 289
Liabilities classified as held for sale                                              34              -          196
Total liabilities                                                                14 308         15 092       13 211
Total equity and liabilities                                                     20 709         23 793       21 035
Net debt                                                                          6 007          6 879        5 468
Gearing ratio (net) (%)                                                              95             79           70
Net asset value per share (cents)                                                 2 387          3 835        2 927

Supplementary information                                                     Unaudited      Unaudited      Audited
                                                                               6 months       6 months    12 months
                                                                                  ended          ended        ended
                                                                            31 December    31 December      30 June
                                                                                   2014           2013         2014
                                                                              R million      R million    R million

Loss per share from continuing and discontinued operations:
Headline loss per ordinary share (cents)                                         (450,9)         (59,1)      (563,2)
Diluted headline loss per ordinary share (cents)                                 (447,6)         (58,9)      (518,8)
Basic loss per ordinary share (cents)                                            (546,0)         (67,1)      (859,5)
Diluted basic loss per ordinary share (cents)                                    (542,0)         (66,9)      (791,7)
Earnings per share from continuing operations:
Headline earnings per ordinary share (cents)                                       70,9           45,1         93,9
Diluted headline earnings per ordinary share (cents)                               70,3           45,0         86,5
Basic earnings per ordinary share (cents)                                          68,3           37,1         77,9
Diluted basic earnings per ordinary share (cents)                                  67,8           37,0         71,8
Reconciliation of headline loss
From continuing and discontinued operations:
Loss attributable to owners of parent                                            (1 451)          (151)      (1 947)
Capital items (note 2)                                                              351             21          909
Taxation thereon                                                                    (98)            (6)        (236)
Headline loss                                                                    (1 198)          (136)      (1 274)
Reconciliation of headline earnings
From continuing operations:
Profit attributable to owners of parent                                             181             85          177
Capital items (note 2)                                                                9             21           47
Taxation thereon                                                                     (3)            (6)         (10)
Headline earnings from continuing operations                                        187            100          214
Number of shares held outside the Group (000)                                   265 681        225 681      265 681
Weighted average number of shares in issue (000)
- basic                                                                         265 681        225 681      226 558
- diluted                                                                       267 641        244 808      245 958
EBITDA from continuing operations (excluding capital items)                         605            569        1 036

The earnings/(loss) and headline earnings/(loss) per share are calculated based on actual amounts as opposed to amounts rounded to R million. Where
dilutive earnings per share are anti-dilutive, these have been included for reconciliation purposes only.

Summarised group statement of changes in equity                                         Unaudited      Unaudited      Audited
                                                                                         6 months       6 months    12 months
                                                                                            ended          ended        ended
                                                                                      31 December    31 December      30 June
                                                                                             2014           2013         2014
                                                                                        R million      R million    R million

Balance at beginning of the period                                                          7 824          9 141        9 141
Changes in stated capital
Proceeds from rights issue (net of costs associated with rights issue)                          -              -          973
Change in reserves
Loss for the period attributable to owners of the parent                                   (1 451)          (151)      (1 947)
Foreign currency translation reserve through other comprehensive income                        11             13           18
Share-based payment                                                                             8              -          (26)
Dividends paid                                                                                  -           (264)        (264)
Settlement of convertible bond, net of tax                                                      -              -          (22)
Other reserve movements                                                                        (3)             -          (11)
Change in non-controlling interests
Total comprehensive income for the period attributable  to non-controlling interests           16             16           24
Other non-controlling interests movements                                                      (4)           (54)         (62)
Balance at end of period                                                                    6 401          8 701        7 824

Notes

1. Accounting policies and basis of preparation
The summarised consolidated financial information has been prepared and presented in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the Listings Requirements of the JSE Limited, the
information as required by IAS 34: Interim Financial Reporting and the requirements of the South African Companies Act 71 of 2008. 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 30 June
2014, 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
                                                                          6 months       6 months    12 months
                                                                             ended          ended        ended
                                                                       31 December    31 December      30 June
                                                                              2014           2013         2014
                                                                         R million      R million    R million
2.  Capital items
    From continuing operations
    Loss on disposal of assets                                                   9             16           45
    Other impairments                                                            -              5            -
    Impairment of goodwill                                                       -              -            2
    Total                                                                        9             21           47
    From discontinued operations
    Impairment loss on disposal group                                          342              -          808
    Impairment of goodwill                                                       -              -           54
    Total                                                                      342              -          862
    Total capital items                                                        351             21          909
3.  Loss for the period from discontinued operations
    Included in the loss for the period from discontinued operations:
    Debtors' costs                                                           1 903            985        2 932

4. 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 rights, the cash value to be
received in future in respect of unissued shares granted to employees.

5. 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.

6. Subsequent events
On 25 February 2015, a general meeting of shareholders was held and the sale of the Consumer Finance division was approved by 100% of all shares voted by
shareholders present in person or represented by proxy. The remaining conditions precedent will be fulfilled or waived on or before 31 May 2015.

Segmental analysis for continuing operations                      RETAIL*                                   AUTOMOTIVE                  CORPORATE AND OTHER                        GROUP
                                                     6 months  6 months   12 months         6 months  6 months  12 months    6 months  6 months  12 months    6 months  6 months  12 months
                                                        ended     ended       ended            ended     ended      ended       ended     ended      ended       ended     ended      ended
                                                       31 Dec    31 Dec     30 June           31 Dec    31 Dec    30 June      31 Dec    31 Dec    30 June      31 Dec    31 Dec    30 June
                                                         2014      2013        2014             2014      2013       2014        2014      2013       2014        2014      2013       2014

Revenue                                        Rm       7 452     7 085      13 455            9 762     8 485     17 547        (246)     (221) (420)#         16 968    15 349     30 582
Sale of merchandise                            Rm       6 172     5 968      11 024            8 809     7 635     15 842           -         -         (6)     14 981    13 603     26 860
Sale of merchandise on credit                  Rm       1 696     1 729       2 920                -         -          -           -         -          -       1 696     1 729      2 920
Depreciation and amortisation                  Rm          82        78         164               98       102        172          60        62        116         240       242        452
Operating profit/(loss) before debtors' costs  Rm         613       529         609              266       232        512         (97)     (345)      (258)        782       416        863
Debtors' costs                                 Rm        (426)     (110)       (326)               -         -          -           -         -          -        (426)     (110)      (326)
Operating profit/(loss) after debtors' costs   Rm         187       419         283              266       232        512         (97)     (345)      (258)        356       306        537
Operating margin before debtors' costs          %         8,2       7,5         4,5              2,7       2,7        2,9           -         -          -         4,6       2,7        2,8
Total assets                                   Rm       5 088     4 933       5 167            6 949     6 360      6 258       3 926     3 211      2 761      15 963    14 504     14 186
Capital expenditure                            Rm          62        70          98               17        28         60          33        50        212         112       148        370
Number of stores                                        1 216     1 223       1 223              124       121        118           -         -          -       1 340     1 344      1 341
# Elimination of interdivisional origination fees
* Insurance entities are included under the retail segment following the disposal of the Consumer Finance business

for additional information www.jdg.co.za

Period under review
Challenging operating conditions within the retail market, linked to reduced consumer spending as a result of pressure on disposable income and over-
indebtedness of consumers, continued to inhibit market growth during the period under review.

Despite these conditions, the Group managed to increase revenue from continuing operations by 10,5% to R17,0 billion while gross margins, which were
subject to significant pressure due to the trading conditions, were largely maintained. The initial restructuring and cost optimisation initiatives
implemented by management resulted in operating expenses, excluding debtors' costs, decreasing by 1,5% during the period under review. Operating profit
increased by 16,3% to R356 million (1H2014: R306 million).

The other key features of the period's results are as follows:
-  Headline earnings per share from continuing operations increased by 57,2% to 70,9 cents (1H2014: 45,1 cents)
-  Basic earnings per share from continuing operations increased by 84,1% to 68,3 cents (1H2014: 37,1 cents)
-  Loss from discontinued operations of R1,6 billion (1H2014: R236 million)
Note: 1H2014 numbers have been re-presented to reflect the impact of discontinued operations.

RETAIL
The Retail segment, consists of the retail of furniture and related supply chain services, consumer electronics, appliances, building materials and do-it-
yourself (DIY) products and the Insurance operations. The Insurance operations are excluded from the sale of the Consumer Finance business. As a result of
this, and based on its direct link to retail activities, it is now reported as part of the Retail segment.

The Retail segment reported growth in merchandise sales of 3,4% to R6,2 billion (1H2014: R6,0 billion). Merchandise sales increased by 7,8% within the
furniture retail chains. This growth was achieved despite more stringent credit granting criteria being applied, reducing the credit sales mix in
furniture retail from 64,9% to 59,7%. In addition, SteinBuild reported an increase of 10,1% in merchandise sales within the building materials and
DIY market. Consumer electronics and appliances retail experienced challenging trading conditions as a result of competitive pricing.

Gross margins within the segment were generally maintained while operating profit, before debtors' costs, increased to R613 million (1H2014: R529 million)
resulting in an increased operating margin of 8,2% (1H2014: 7,5%). A more stringent approach has been applied to the recognition of bad debts in the
Insurance operations, resulting in debtors' costs of R426 million (1H2014: R110 million).

The logistics platform remains a key area of focus for management to improve efficiencies and profitability.

CONSUMER FINANCE
Discontinued operations
As reported previously on SENS, the Consumer Finance division, excluding the Insurance operations, is classified as a discontinued operation following the
acceptance of an offer from RCS Cards Proprietary Limited. In terms of International Financial Reporting Standards, the disposal group was written down to
its net realisable asset value of R4,7 billion on 31 December 2014, based on the purchase price formula in terms of the business sale agreement. The
proceeds will be utilised to reduce the Group's interest-bearing debt, thereby improving its gearing.

On 25 February 2015 a general meeting of shareholders was held and the business sale was approved by 100% of all shares voted by shareholders present in
person or represented by proxy. The remaining conditions precedent must be fulfilled or waived on or before 31 May 2015.

AUTOMOTIVE
Unitrans Auto reported a strong performance during the period under review, in particular during the month of December 2014. This performance can largely
be ascribed to the effective execution of management's strategy to focus on traditional automotive brands which are predominantly manufactured in South
Africa. This strategy provides a more sustainable revenue stream, which is less affected by foreign currency movements. Other market factors contributing
to the period's results include interest rates remaining low and pre-emptive buying by consumers in light of expected price increases resulting from the
weakening rand.

Merchandise sales increased by 15,4% to R8,8 billion, contributing 58,8% of the Group's total merchandise sales. Operating profit increased by 14,6% to
R266 million  (1H2014: R232 million).

Although new vehicle volumes reduced slightly, pre owned vehicle volumes improved strongly. The servicing and parts division reported good growth in
revenue, while Hertz reported pleasing results in terms of revenue and operating profit growth.

STATEMENT OF FINANCIAL POSITION AND CASH FLOW
Net debt increased from R5,5 billion at  30 June 2014 to R6,0 billion at 31 December 2014. This is a result of an increase in the related-party loan from
the Steinhoff group, the Group's majority shareholder. The loan is utilised to manage the Group's capital requirements and bears interest at market-related
rates.

Cash generated by operations amounted to R1,5 billion compared to R2,3 billion in the comparable period. This is mainly due to working capital remaining
stable compared to the decrease in the previous period.

PROSPECTS
Management will continue to implement its process of operational restructuring during the remainder of the financial year with the aim of creating long-
term sustainable retail operations.

In addition, management's focus will be on the conclusion of the sale of the Consumer Finance business, and the implementation thereof.
The Automotive segment is further expected to provide continued stable performance during the next six months.

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
Chief Executive Officer

Jan van der Merwe
Chief Financial Officer

2 March 2015

Executive directors: PM Griffiths (Chief executive officer), JHN van der Merwe (Chief financial officer), KR Chauke Independent non-executive directors: VP
Khanyile (Independent chairman), SF Booysen, DC Brink, MT Lategan, SH Muller Non-executive directors: AB la Grange (Snr), AB la Grange (Jnr), MJ Jooste, DM
van der Merwe Company secretary: Steinhoff Africa Secretarial Services Proprietary Limited 28 6th Street Wynberg Sandton, 2090 (PO Box 1955, Bramley,
2018) Press announcement prepared under the supervision of: JHN van der Merwe CA(SA) and the directors of the company take full responsibility for this
press announcement 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 Investor Services 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, Deloitte Place, The Woodlands,
20 Woodlands Drive, Woodmead, Sandton, Johannesburg, Gauteng, 2052, telephone  +27 11 806 5000, facsimile +27 11 806 5003

www.jdg.co.za


Date: 02/03/2015 12:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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