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AFRICAN AND OVERSEAS ENTERPRISES LD - Unaudited condensed consolidated interim group results for the six months ended 31 December 2015

Release Date: 04/03/2016 13:38
Code(s): AON AOO AOVP     PDF:  
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Unaudited condensed consolidated interim group results for the six months ended 31 December 2015

AFRICAN AND OVERSEAS ENTERPRISES LIMITED 
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA) (REGISTRATION NUMBER 1947/027461/06)
("the company" or "the group" or "African and Overseas)
JSE share codes: AOO - AON - AOVP
ISIN: ZAE000000485 - ZAE000009718 - ZAE000000493


UNAUDITED CONDENSED CONSOLIDATED INTERIM GROUP RESULTS 
for the six months ended 31 December 2015


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                       As at        As at       As at
                                                 31 December  31 December     30 June
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
                                           Notes       R'000        R'000       R'000
ASSETS
Non-current assets                                   148 602      148 689     151 146
  Property, plant and equipment              4.1      51 319      118 207      54 467
  Investment property                        4.1      73 177        3 510      72 539
  Intangible assets                          4.4      18 717       16 039      17 396
  Other investments                                      576          524         576
  Deferred tax asset                                   4 813       10 409       6 168
Current assets                                       189 585      164 406     175 955
  Inventories                                         71 601       68 334      70 084
  Trade and other receivables                         16 347       24 635      20 978
  Forward exchange contracts                 4.3       4 383        1 498         883
  Income tax receivable                                    2          264         303
  Accrued operating lease asset*                       2 425            -       1 926
  Cash and cash equivalents                           94 827       69 675      81 781
Total assets                                         338 187      313 095     327 101

EQUITY AND LIABILITIES
Capital and reserves                                 264 950      250 967     261 960
  Share capital                              4.5       1 200        1 200       1 200
  Share premium                                        6 076        6 076       6 076
  Other reserves                             4.6         540          553         540
  Retained earnings                                  139 174      130 717     136 581
  Non-controlling interest                           117 960      112 421     117 563
Non-current liabilities                               23 515       19 831      21 548
  Post-retirement liability                            2 703        2 675       2 673
  Accrued operating lease liability                   18 677       15 533      17 084
  Deferred tax liability                               2 135        1 623       1 791
Current liabilities                                   49 722       42 297      43 593
  Trade and other payables                            49 176       42 259      43 573
  Income tax payable                                     546           38          20
Total equity and liabilities                         338 187      313 095     327 101

*  Trade and other receivables as at 31 December 2014 included an amount of R1 160 000 
   relating to an accrued operating lease asset.                    


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                  Six months   Six months        Year
                                                       ended        ended       ended
                                                 31 December  31 December     30 June
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
                                        % change       R'000        R'000       R'000
Revenue                                      7.2     296 097      276 336     536 217
Turnover                                     6.5     286 042      268 660     516 086
Cost of sales                                       (128 640)    (121 537)   (225 698)
Gross profit                                 7.0     157 402      147 123     290 388
Other income                                           7 452       10 198      16 509
Other operating costs                        4.8    (149 065)    (142 248)   (278 227)
Operating profit                             4.8      15 789       15 073      28 670
Dividend income                                           20           18          18
Finance income                                         2 583        1 324       3 604
Finance costs                                           (115)        (140)       (214)
Profit before tax                           12.3      18 277       16 275      32 078
Income tax expense                                    (5 480)      (4 741)     (9 501)
Profit for the period                       11.0      12 797       11 534      22 577
Other comprehensive income
Actuarial loss on post-retirement 
  defined benefit plan                                     -            -         (77)
Fair value adjustment on 
  available-for-sale financial assets                      -            -          52
Total comprehensive income for the period             12 797       11 534      22 552
Profit attributable to:
Ordinary and 'N' ordinary shareholders                 6 579        5 957      11 821
Preference shareholders                                  165           17          33
Profit attributable to equity 
  holders of the parent                                6 744        5 974      11 854
Non-controlling interest                               6 053        5 560      10 723
Profit for the period                                 12 797       11 534      22 577
Total comprehensive income attributable to:
Ordinary and 'N' ordinary shareholders 
  of the parent                                        6 579        5 957      11 808
Preference shareholders                                  165           17          33
Profit attributable to equity holders 
  of the parent                                        6 744        5 974      11 841
Non-controlling interest                               6 053        5 560      10 711
Total comprehensive income for the period             12 797       11 534      22 552
Reconciliation of headline earnings
Profit attributable to equity holders                  6 579        5 957      11 821
Adjusted for:
Profit from disposal of property, 
  plant and equipment and investment property              -       (1 780)     (1 840)
Impairment loss on equipment and shopfittings              -            -         305
Headline earnings                                      6 579        4 177      10 286

Basic earnings per ordinary share (cents)   10.5        57.8         52.3       103.8
Headline earnings per ordinary share 
  (cents)                                   57.5        57.8         36.7        90.3
Diluted basic earnings per 
  ordinary share (cents)                                57.6         52.2       103.6
Diluted headline earnings per ordinary 
  share (cents)                                         57.6         36.6        90.1
Weighted average number of equity shares on 
  which earnings per share is based (000's)           11 387       11 387      11 387
Weighted average number of equity shares on 
  which diluted earnings per share is based (000's)   11 414       11 418      11 414


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                  Six months   Six months        Year
                                                       ended        ended       ended
                                                 31 December  31 December     30 June
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
                                           Notes       R'000        R'000       R'000
Share capital                                4.5       1 200        1 200       1 200
Share premium                                          6 076        6 076       6 076
Other reserves                               4.6
  Opening balance                                        540          553         553
  Fair value adjustment on 
    available-for-sale financial assets                    -            -          29
  Actuarial loss on post-retirement 
    defined benefit plan                                   -            -         (42)
  Closing balance                                        540          553         540
Retained earnings
  Opening balance                                    136 581      124 760     124 760
  Profit for the period                                6 744        5 974      11 854
  Preference dividends declared/paid                    (165)         (17)        (33)
  Ordinary dividends paid                             (3 986)           -           -
  Closing balance                                    139 174      130 717     136 581
Non-controlling interest
  Opening balance                                    117 563      106 869     106 869
  Profit for the period                                6 053        5 560      10 723
  Preference dividends declared/paid                      (8)          (8)        (17)
  Ordinary dividends paid                             (5 648)          -            -
  Actuarial loss on post-retirement 
    defined benefit plan                                   -           -          (35)
  Fair value adjustment on available-for-sale
    financial assets                                       -           -           23
  Closing balance                                    117 960      112 421     117 563
Total capital and reserves                           264 950      250 967     261 960


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                  Six months   Six months        Year
                                                       ended        ended       ended
                                                 31 December  31 December 31 December
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
                                                       R'000        R'000       R'000
Operating profit before working capital changes       26 214       23 029      50 328
Working capital changes                                8 929        9 340       4 849
Interest income                                        2 583        1 324       3 604
Interest expense                                        (115)        (140)       (214)
Dividends paid                                        (9 634)           -         (50)
Dividends received                                        20           18          18
Normal tax paid                                       (2 954)        (405)       (814)
Net cash inflow from operations                       25 043       33 166      57 721
Additions to property, plant and equipment            (7 686)     (20 321)    (31 775)
Additions to investment property                      (2 290)           -      (5 295)
Additions to intangible assets                        (2 021)      (2 295)     (3 823)
Proceeds from disposal of property, plant 
  and equipment                                            -          438         471
Proceeds from disposal of investment property              -            -       5 795
Net cash outflow from investing activities           (11 997)     (22 178)    (34 627)
Net increase in cash and cash equivalents             13 046       10 988      23 094
Cash and cash equivalents at the beginning 
  of the period                                       81 781       58 687      58 687
Cash and cash equivalents at the end of the period    94 827       69 675      81 781


GROUP SEGMENTAL REPORTING
                                                  Six months   Six months        Year
                                                       ended        ended       ended
                                                 31 December  31 December 31 December
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
                                                       R'000        R'000       R'000
Revenue
  Total external retail revenue                      286 614      269 577     517 314
    Retail segment revenue                           288 515      272 687     521 822
    Intersegment revenue earned                       (1 901)      (3 110)     (4 508)
  Total external property revenue                      6 880        5 417      11 417
    Property segment revenue                           9 358        7 585      15 942
    Intersegment revenue earned                       (2 478)      (2 168)     (4 525)
  Dividends received                                      20           18          18
  Interest income                                      2 583        1 324       3 604
  Profit on sale of property                               -            -       3 864
  Total group revenue                                296 097      276 336     536 217
Segment operating profit
  Retail segment profit                               14 942       13 912      26 807
  Property segment profit                              4 048        4 479       7 825
  Group services operating loss                       (3 201)      (3 318)     (5 962)
  Total group operating profit                        15 789       15 073      28 670
Segment profit before tax
  Retail segment profit before tax                    14 942       13 912      26 807
  Property segment profit before tax                   4 048        4 479       7 825
  Group services loss before tax                        (713)      (2 116)     (2 554)
  Total group profit before tax                       18 277       16 275      32 078
Depreciation and amortisation
  Retail                                              11 508        9 619      20 121
  Property                                             1 678        1 251       2 103
  Total group depreciation and amortisation           13 186       10 870      22 224
Segment assets
  Retail                                             223 255      220 345     216 705
  Property                                            80 222       78 001      79 204
  Group services*                                     34 710       14 749      31 192
  Total group segment assets                         338 187      313 095     327 101
Segment liabilities
  Retail                                              64 545       54 556      55 895
  Property                                             3 412        4 039       4 987
  Group services*                                      5 280        3 533       4 259
  Total group segment liabilities                     73 237       62 128      65 141
Capital expenditure
  Retail                                               9 683        8 552      21 433
  Property                                             2 314       14 064      19 460
  Total group capital expenditure                     11 997       22 616      40 893
               
*  Group services include corporate costs.


OTHER INFORMATION
                                                  Six months   Six months        Year
                                                       ended        ended       ended
                                                 31 December  31 December     30 June
                                                        2015         2014        2015
                                                   Unaudited    Unaudited     Audited
Capital commitments                    
Authorised - not contracted for           (R'000)     16 482       16 929      35 950
Authorised - contracted for               (R'000)      6 803       18 193       5 566
Gross profit margin                           (%)       55.0         54.8        56.3
Operating profit/(loss) margin                (%)        5.5          5.6         5.6
Retail segment operating profit/(loss) margin (%)        5.2          5.2         5.2
Net asset value                               (R)      12.60        11.88       12.38


Notes

1  Basis of presentation of financial statements 
   These unaudited condensed consolidated interim financial statements for the six months 
   ended 31 December 2015 have been prepared in accordance with the framework concepts 
   and the measurement and recognition requirements of International Financial Reporting 
   Standards ("IFRS"), the interpretations adopted by the International Accounting 
   Standards Board, the South African Institute of Chartered Accountants Financial 
   Reporting Guides as issued by the Accounting Practices Committee and Financial 
   Reporting Pronouncements as issued by the Financial Reporting Standards Council and 
   include disclosure as required by IAS 34: Interim Financial Reporting, the Companies 
   Act of South Africa 2008 and the JSE Listings Requirements.

   The financial statements have been prepared using accounting policies that comply with 
   IFRS and which are consistent with those applied in the preparation of the financial 
   statements for the year ended 30 June 2015. 

2  Unaudited results
   These results have not been reviewed nor audited by the group's auditors. The 
   unaudited condensed consolidated interim financial statements have been prepared 
   under the supervision of Damian Johnson CA(SA) and were approved by the board of 
   directors on 3 March 2016.

3  Preference dividend
   A dividend on the 6% cumulative preference shares for the six months ended 
   31 December 2015 in the amount of R165 000 was declared by the board of directors 
   on 14 December 2015 and paid on 11 January 2016.

4  Note to the financial results
   4.1  Property, plant and equipment - During the prior year there was a 
        reclassification from property, plant and equipment to investment property. 
        This property was previously owner occupied, but was reclassified on 
        1 January 2015 when Queenspark Proprietary Limited moved to a smaller space 
        within the building, resulting in the previously occupied space being rented 
        out to third parties.

   4.2  Financial instruments - The carrying value of financial instruments which are 
        short term in nature, settled within 12 months, substantially approximates the 
        fair value.

        The carrying value of financial instruments which are long term in nature, settled 
        after 12 months, substantially approximates the fair value.

   4.3  Forward exchange contracts - The increase in forward exchange contracts is due 
        to the significant weakening in the Rand.

   4.4  Intangible assets - The increase relates to the implementation of a new ERP system.

   4.5  Share capital is comprised of the following:

                                                 31 December  31 December     30 June
                                                        2015         2014        2015
                                                       R'000        R'000       R'000
        Ordinary share capital                           650          650         650
        Preference share capital                         550          550         550
                                                       1 200        1 200       1 200
                    
   4.6  Other reserves is comprised of the following:
        Share-based payment reserves                     314          314         314
        Other reserves                                   226          239         226
                                                         540          553         540


COMMENTARY
The principal operating subsidiary Rex Trueform Clothing Company Limited reports as 
follows:

"Group results 
The group produced satisfactory results for the six months ended 31 December 2015. 
Revenue increased by 7.1% to R296.2 million (2014: R276.6 million). The gross profit 
which is generated from the retail segment increased by 7.0% to R157.4 million 
(2014: R147.1 million). 

Other income increased by 15.0%, if the previous year's once-off profit of R3.9 million 
from the sale of the property situated in Atlantis is excluded from such other income. 
Trading expenses, which were a key area of focus, were contained and increased by 4.9%. 

The above resulted in the operating profit increasing by 3.4% to R16.4 million 
(2014: R15.9 million). Excluding the prior period profit on sale of the property, 
the operating profit increased by 36.6%. This increase was mainly due to the improvement 
in the trading performance of the property segment.

Profit after tax increased by 8.9% to R13.4 million (2014: R12.3 million), resulting in 
the basic earnings per share increasing by 8.9%. Headline earnings per share (which does 
not take into account the once-off profit on sale of the property in the prior period) 
increased by 47.7%. 

Retail (Queenspark)
Queenspark, while operating in a challenging market, increased turnover during the 
period by 6.5% to R286.0 million (2014: R268.7 million). The gross profit margin increased 
marginally to 55% (2014: 54.8%). This, together with the containment of costs, 
contributed to the 7.4% increase in operating profit which increased to R14.9 million 
(2014: R13.9 million). 

Key business initiatives being introduced include the recent implementation of the 
new enterprise resource planning ("ERP") system at the head office and distribution 
centre. Queenspark is in the process of rolling out the new point-of-sale system 
(connected to the ERP system) at its retail stores.

Property
The operating profit of this segment amounted to R4.0 million. The previous period's 
operating profit of R4.5 million includes the R3.9 million profit on the sale of the property.

Prospects
Retail (Queenspark)
The clothing retail market is expected to remain under pressure due to various factors 
that include the sluggish economy. The cost of goods imported is subject to the 
weakening of the Rand. Going forward the weaker Rand will likely put pressure on gross margins.

Initiatives being considered and introduced mainly focus on turnover growth and are 
predominantly aimed at improving the performance over the medium to long term. The 
recent implementation of the ERP system is expected to provide benefits in the 2017 
financial year and thereafter. The company recently started selling its product online 
through the Zando website. This is part of the company's strategy towards servicing a 
larger customer base and is showing signs of potential. 

Property
The group continues to focus on the development of the feasibility studies in respect 
of the undeveloped investment properties located in Salt River (Cape Town)." 

Signed on behalf of the board 


ML Krawitz              CEA Radowsky
(Chairman)              (Chief Executive Officer)

Cape Town
4 March 2016


Non-executive directors: ML Krawitz (Chairman), HJ Borkum*, PM Naylor*, RV Orlin* and PE Shub  
* Independent non-executive director
Executive directors: CEA Radowsky (Chief Executive Officer) and DS Johnson 
(Financial Director)
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

Date: 04/03/2016 01:38:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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