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HOLDSPORT LIMITED - Audited Summary Consolidated Financial Statements For The Year Ended 28 February 2017

Release Date: 05/05/2017 11:30
Code(s): HSP     PDF:  
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Audited Summary Consolidated Financial Statements For The Year Ended 28 February 2017

HOLDSPORT LIMITED 
("Holdsport" or "the company" or "the group")
Registration number: 2006/022562/06
Share code: HSP
ISIN: ZAE000157046


AUDITED SUMMARY CONSOLIDATED FINANCIAL STATEMENTS 
for the year ended 28 February 2017


Sales up 5.8% to R1 828.6 million
Core earnings per share before foreign exchange effect down 2.3% to 522.3 cents
Final gross dividend increased by 10.0% to 220.0 cents per share
Gross dividend yield of 5.7%


GROUP OVERVIEW
The Holdsport Limited group comprises the retail divisions Sportsmans Warehouse and 
Outdoor Warehouse and a wholesale division that includes the First Ascent, Capestorm, 
Second Skins and African Nature brands.

In a particularly challenging retail environment total sales increased by 5.8% to 
R1 828.6 million and retail sales increased by 4.4% to R1 753.2 million. Holdsport's 
sales growth during this year follows strong growth in the comparable 2016 financial year. 

Core headline earnings excluding the effect of foreign exchange adjustments were 
522.3 cents per share, a decrease of 2.3% from the 534.5 cents for the previous 
financial year. 

In evaluating this performance shareholders should take into account that the aggregate 
foreign exchange adjustment during the current year was a loss of R19.5 million compared 
to an aggregate profit of R8.4 million during the prior year. Holdsport's policy is to 
take out forward exchange contracts to cover all its imported merchandise commitments 
and this has been applied consistently with previous years. This accounting adjustment 
does not have an operational or cash flow effect.

Operating profit decreased by 11.4% to R273.7 million. Core headline earnings amounted 
to 489.0 cents per share, a 10.9% decrease on the previous year.

TRADING DIVISIONS
External sales for the various trading divisions were as follows: 
                                                                             Increase
                                                Number of         Sales      in sales
                                                   stores           R'm             %
Sportsmans Warehouse                                   39       1 335.1           4.4
Outdoor Warehouse                                      24         418.1           4.5
Retail sales                                           63       1 753.2           4.4
Wholesale                                               -          75.4          54.9 
Total sales                                            63       1 828.6           5.8

Like-for-like retail sales grew by 1.8% while the retail divisions experienced price 
inflation of approximately 8.1% for the year. The time weighted trading area increased 
by 3.4% relative to the prior year.

The Sportsmans Warehouse division now trades out of 39 stores. The division opened 
new stores in Mall of Africa and Menlyn Park Shopping Centre during the year and 
expanded the store in the Pavilion Centre. Like-for-like sales increased by 2.1%. 

The Outdoor Warehouse division comprises 24 stores. The division relocated its store 
in Nelspruit, expanded its store in Somerset West and opened a new store in George 
during the year. Like-for-like sales increased by 0.6%.

The Wholesale division's external sales were 54.9% higher than last year and sales to 
the group's retail divisions increased by 11.1%. Of the R19.5 million forex losses for 
the group R10.5 million (2016: R4.9 million profit) relates to the wholesale division.

BUSINESS ACQUISITIONS 
The group acquired a 100% interest in Second Skins (Proprietary) Limited effective 
from 1 June 2016 and the business of African Nature (Proprietary) Limited from 
1 October 2016. These acquisitions enhance the group's specialist manufacturing 
capacity and its access to niche markets.

CASH FLOW 
Holdsport refinanced its term debt of R130.0 million during the year with a new loan 
of R160.0 million. The increase in the loan funded the business acquisitions and 
accordingly net debt increased to R72.5 million (2016: R36.6 million).

The aggregate investment in working capital increased by 19.1% due to the acquisitions 
of the Second Skins and African Nature businesses and the increase in retail trading 
space, coupled with the effect of the weaker exchange rate on the cost of imported 
stock. As a result cash generated from operations decreased by 1.8% compared to the 
previous year.

The group invested R60.3 million in maintaining and expanding its operations in the year.

During the year the group purchased and awarded R15.4 million of Holdsport shares in 
terms of and subject to the rules of the 2011 Holdsport Forfeitable Share Plan (FSP). 
The forfeitable share plan is expensed over the vesting period and the expense for 
this year was R11.4 million (2016: R11.6 million).

Holdsport holds 1 260 878 shares in treasury at 28 February 2017, which equates to 
2.92% of its issued share capital. The shares were purchased over the last three 
financial years at an average cost of R51.41 per share. 

STORE EXPANSION
The group signed lease agreements for a further three new stores to be opened in the 
next financial year.

PROSPECTS
Holdsport continues to face low levels of consumer confidence, weak economic growth 
and a sporting goods industry which is intensely competitive. 

Household budgets are under pressure due to high food inflation, rising utility costs 
and increasing taxation whilst real incomes are stagnating within a low-growth 
environment. The recent political disruptions and subsequent downgrades are concerning 
and may result in muted sales growth over the medium term. In these difficult times 
the group is firmly committed to its strategies to enhance returns for our stakeholders.

FINAL DIVIDEND ANNOUNCEMENT
The directors declared a final gross dividend of 220.0 cents per share payable on 
Monday, 12 June 2017 to ordinary shareholders recorded in the books of the company at 
the close of business on Friday, 9 June 2017. The gross dividend for the year is 
covered 1.5 times by the core headline earnings for the year, excluding the effect 
of foreign exchange adjustments. This represents a gross dividend yield of 5.7% on 
the year-end share price of R61.22 per share.

The last day to trade ("cum" the dividend) in order to participate in the dividend 
will be Tuesday, 6 June 2017. The Holdsport Limited ordinary shares will commence 
trading "ex" the dividend from the commencement of business on Wednesday, 7 June 2017 
and the record date, as indicated, will be Friday, 9 June 2017.

Ordinary shareholders should take note that share certificates may not be dematerialised 
or rematerialised during the period Wednesday, 7 June 2017 to Friday, 9 June 2017, 
both dates inclusive.

In terms of the withholding tax on dividends which became effective on 1 April 2012, 
the following additional information is disclosed:
-  the dividend has been declared out of total reserves;
-  the South African tax dividend rate is 20%;
-  the net local dividend amount is 176.0 cents per ordinary share for shareholders 
   liable to pay dividend tax, and 220.0 cents per ordinary share for shareholders 
   exempt from the dividend tax;
-  the issued share capital of Holdsport at the date of declaration is 43 150 220 
   ordinary shares; and
-  Holdsport's tax reference number is 9618595152.

Certificated ordinary shareholders are reminded that all entitlements to dividends with 
a value less than R5.00 per certificated shareholder will be aggregated and the proceeds 
donated to a registered charity of the directors' choice, in terms of the memorandum 
of incorporation of the company.

Signed on behalf of the board


SA MULLER                KG HODGSON
Chairman                 CEO

Cape Town
5 May 2017


SUMMARISED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 
                                                                     At            At
                                                            28 Feb 2017   29 Feb 2016
                                                                Audited       Audited
                                                                  R'000         R'000 
ASSETS                        
Non-current assets                        
Property, plant and equipment                                   131 233       145 429 
Goodwill and other intangibles                                  608 748       594 410 
Total non-current assets                                        739 981       739 839 
                        
Current assets                        
Inventories                                                     511 845       459 191 
Assets held for sale                                             21 082             - 
Trade and other receivables                                      30 879        23 994 
Cash and cash equivalents                                        87 505        93 363 
Taxation                                                          7 451             - 
Derivative instruments                                                -         1 726 
Total current assets                                            658 762       578 274 
Total assets                                                  1 398 743     1 318 113 
                        
EQUITY AND LIABILITIES                        
Capital and reserves                        
Share capital                                                   229 312       229 312 
Share-based payment reserve                                     (25 724)      (21 726)
Treasury shares                                                 (64 832)      (63 895)
Retained earnings                                               885 296       832 912 
Equity attributable to owners of the company                  1 024 052       976 603 
                        
Non-current liabilities                        
Loan                                                            160 000             - 
Deferred taxation                                                30 762        28 070 
Straight-lining lease liability                                  42 497        36 496 
Total non-current liabilities                                   233 259        64 566 
                        
Current liabilities                        
Trade and other payables                                        138 376       143 808 
Derivative instruments                                            3 056             - 
Loan                                                                  -       130 000 
Taxation                                                              -         3 136 
Total current liabilities                                       141 432       276 944 
Total liabilities                                               374 691       341 510 
Total equity and liabilities                                  1 398 743     1 318 113


SUMMARISED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                        
                                                             Year ended    Year ended
                                                            28 Feb 2017   29 Feb 2016
                                                                Audited       Audited
                                                                  R'000         R'000
Sales                                                         1 828 600     1 727 436 
Cost of sales                                                  (950 080)     (899 421)
Gross profit                                                    878 520       828 015 
Other income                                                      9 568         6 294 
Trading expenses                                               (614 400)     (525 384)
Operating profit                                                273 688       308 925 
Finance income                                                    6 439         6 591 
Finance cost                                                    (14 074)      (11 388)
Profit before taxation                                          266 053       304 128 
Taxation                                                        (74 858)      (85 352)
Profit and total comprehensive income for the year 
  attributable to equity holders of the company                 191 195       218 776


SUMMARISED CONSOLIDATED CASH FLOW STATEMENTS                        
                                                             Year ended    Year ended
                                                            28 Feb 2017   29 Feb 2016
                                                                Audited       Audited
                                                                  R'000         R'000
Cash flows from operating activities                        
Cash generated from operations                                  311 378       316 971 
Finance income                                                    6 439         6 591 
Finance costs                                                   (14 074)      (11 388)
Dividends paid                                                 (138 811)     (121 619)
Taxation paid                                                   (88 729)      (89 202)
Net cash inflows from operating activities                       76 203       101 353 
                        
Cash flows from investing activities                        
Additions to property, plant and equipment                      (60 286)      (73 500)
Acquisition of new businesses                                   (38 494)            - 
Proceeds on sale of property, plant and equipment                 3 010         2 544 
Net cash outflows from investing activities                     (95 770)      (70 956)
                        
Cash flows from financing activities                        
Increase in loans                                                30 000             - 
Treasury shares acquired                                           (937)      (51 811)
Forfeitable share plan awards                                   (15 354)      (15 069)
Net cash inflows/(outflows) from financing activities            13 709       (66 880)
                        
Net decrease in cash and cash equivalents                        (5 858)      (36 483)
Cash and cash equivalents at the beginning of the year           93 363       129 846 
Cash and cash equivalents at the end of the year                 87 505        93 363


SUMMARISED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

                                              Share-
                                               based
                                  Share      payment   Treasury   Retained      Total 
                                capital      reserve     shares   earnings     equity
                                  R'000        R'000      R'000      R'000      R'000
Balance at 1 March 2015 
  (audited)                     229 312      (18 278)   (12 084)   735 755    934 705 
Share-based payment reserve: 
  initial award                       -      (15 069)         -          -    (15 069)
Share-based payment expense           -       11 621          -          -     11 621 
Treasury shares acquired              -            -    (51 811)         -    (51 811)
Dividends paid                        -            -          -   (121 619)  (121 619)
Total comprehensive income 
  for the year                        -            -          -    218 776    218 776 
Balance at 29 February 2016 
  (audited)                     229 312      (21 726)   (63 895)   832 912    976 603 
Balance at 1 March 2016 
  (audited)                     229 312      (21 726)   (63 895)   832 912    976 603 
Share-based payment reserve: 
  initial award                       -      (15 354)         -          -    (15 354)
Share-based payment expense           -       11 356          -          -     11 356 
Treasury shares acquired              -            -       (937)         -       (937)
Dividends paid                        -            -          -   (138 811)  (138 811)
Total comprehensive income 
  for the year                        -            -          -    191 195    191 195 
Balance at 28 February 2017 
  (audited)                     229 312      (25 724)   (64 832)   885 296  1 024 052


SUMMARISED CONSOLIDATED SEGMENTAL ANALYSIS
                             Sportsmans    Outdoor  Performance
                              Warehouse  Warehouse    Wholesale  Corporate      Group
                                  R'000      R'000        R'000      R'000      R'000
Year ended 28 February 2017 
  (audited)                                    
Total sales                   1 335 076    418 116      182 908          -  1 936 100 
Less inter-segment sales              -          -     (107 500)         -   (107 500)
External sales                1 335 076    418 116       75 408          -  1 828 600 
External interest received            -          -          503      5 936      6 439 
External interest paid                -          -         (175)   (13 899)   (14 074)
Depreciation and amortisation   (34 007)   (13 139)      (6 362)   (14 613)   (68 121)
Profit/(loss) before taxation   268 784     53 345       11 497    (67 573)   266 053 
Capital expenditure              39 347     13 143        2 945      4 851     60 286 
Segment assets                  444 226    166 321      155 232    632 964  1 398 743 
Segment liabilities             115 078     32 282       14 798    212 533    374 691 
Year ended 29 February 2016 
  (audited)                                    
Total sales                   1 278 569    400 210      145 400        -    1 824 179 
Less inter-segment sales              -          -      (96 743)       -      (96 743)
External sales                1 278 569    400 210       48 657        -    1 727 436 
External interest received            -          -          306      6 285      6 591 
External interest paid                -          -           (6)   (11 382)   (11 388)
Depreciation and amortisation   (31 411)   (10 273)      (4 061)   (14 625)   (60 370)
Profit/(loss) before taxation   281 406     58 227       28 481    (63 986)   304 128 
Capital expenditure              42 219     21 600        7 315      2 366     73 500 
Segment assets                  393 761    143 820      134 420    646 112  1 318 113 
Segment liabilities             111 705     26 955       10 386    192 464    341 510


NOTES TO THE SUMMARY FINANCIAL STATEMENTS
1.  These summary consolidated financial statements for the year ended 28 February 2017 
    have been audited by KPMG Inc., who expressed an unmodified opinion thereon. The auditor 
    also expressed an unmodified opinion on the annual consolidated financial statements 
    from which these summary consolidated financial statements were derived.

    A copy of the auditor's report on the summary consolidated financial statements and 
    of the auditor's report on the annual consolidated financial statements are available 
    for inspection at the company's registered office, together with the financial 
    statements identified in the respective auditor's reports. The auditor's report does 
    not necessarily report on all of the information contained in these financial results. 
    Shareholders are therefore advised that in order to obtain a full understanding of 
    the nature of the auditor's engagement, they should obtain a copy of the auditor's 
    report together with the accompanying financial information from the company's 
    registered office. 

    The summary consolidated financial statements presented in this announcement have been
    summarised from the audited consolidated financial statements. The summary consolidated 
    financial statements are prepared in accordance with the requirements of the 
    JSE Listings Requirements for preliminary reports and the requirements of the 
    Companies Act applicable to summary financial statements. The Listings Requirements 
    require preliminary reports to be prepared in accordance with the framework concepts 
    and the measurement and recognition requirements of International Financial Reporting 
    Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting 
    Practices Committee and Financial Pronouncements as issued by the Financial Reporting 
    Standards Council and to also, as a minimum, contain the information required by 
    IAS 34: Interim Financial Reporting. 

    The accounting policies applied in the preparation of the consolidated financial 
    statements from which the summary financial statements were derived are in terms of 
    International Financial Reporting Standards and are consistent with those accounting 
    policies applied in the preparation of the previous consolidated annual financial 
    statements.

    These audited summarised consolidated results have been prepared under the 
    supervision of the group's Chief Financial Officer, JP Loubser (CA(SA)).
                              
2.  These financial statements incorporate the financial statements of the company, 
    all its subsidiaries and all entities over which it has operational and 
    financial control.
                                        
                                                             Year ended    Year ended
                                                            28 Feb 2017   29 Feb 2016
                                                                Audited       Audited
                                                                  R'000         R'000
3.  Trading expenses                        
    Depreciation on property, plant and equipment                54 325        47 407 
    Amortisation of intangibles                                  13 796        12 963 
    Occupancy cost                                              170 009       151 624 
    Straight-lining of leases                                     6 001         7 578 
    Staff costs                                                 223 073       201 103 
    Foreign exchange loss/(gains)                                17 236       (11 315)
    Other operating costs                                       129 960       116 024 
                                                                614 400       525 384

4.  Cash generated from operations                        
    Operating profit                                            273 688       308 925 
    Adjustments for:                        
    Depreciation                                                 54 325        47 407 
    Amortisation of intangibles                                  13 796        12 963 
    Profit on sale of property, plant and equipment                (321)         (593)
    Fair value gain on derivative instruments                     4 782        (1 339)
    Forfeitable share plan expense                               11 356        11 621 
    Straight-lining of leases                                     6 001         7 578 
    Changes in working capital:                        
    (Increase)/decrease in trade and other receivables           (5 089)        1 625 
    Increase in inventories                                     (35 976)      (93 795)
    (Decrease)/increase in trade and other payables             (11 184)       22 579 
    Cash generated from operations                              311 378       316 971 
                              
5.  Earnings per share and net asset value per share                        
    Earnings per ordinary share (cents)                        
    - Basic                                                       455.6         514.9 
    - Headline                                                    455.0         513.9 
    - Core headline                                               489.0         548.7 
    - Core headline before foreign exchange effect                522.3         534.5 
                              
    Ordinary shares in issue ('000)                              43 150        43 150 
    Weighted average ordinary shares in issue ('000)             41 969        42 488 
                              
    Net asset value per ordinary share (cents)                  2 444.7       2 332.4 
    Net tangible asset value per ordinary share (cents)         1 123.1       1 038.8


    Reconciliation to core headline earnings                        
    The group uses core headline earnings as a consistent measure of performance for 
    management purposes. Core headline earnings exclude exceptional once-off costs, 
    the amortisation of trademarks and the lease straight-lining expense, and are 
    presented below:                         
                                                             Year ended    Year ended
                                                            28 Feb 2017   29 Feb 2016
                                                                Audited       Audited
                                                                  R'000         R'000
    Basic earnings                                              191 195       218 776 
    Adjusted for (net of taxation):                        
    Profit on sale of assets                                       (231)         (427)
    Headline earnings                                           190 964       218 349 
                              
    Adjusted for (net of taxation):                        
    Amortisation of intangibles                                   9 933         9 333 
    Straight-lining of leases                                     4 321         5 455 
    Core headline earnings                                      205 218       233 138 
                              
    Adjusted for (net of taxation):                        
    Foreign exchange losses/(gains)                              12 410        (8 147)
    Foreign exchange adjustments in cost of sales                 1 592         2 124 
    Core headline earnings before foreign exchange effect       219 220       227 115 
                              
6.  Dividend per share                        
    Dividend declared per share (cents)                        
    - Interim                                                     130.0         120.0 
    - Final                                                       220.0         200.0 
    Total dividend                                                350.0         320.0 
                              
    Dividend cover (by core headline earnings 
      before foreign exchange effect)                               1.5           1.7


Registered office: The Mill House, 1 Canterbury Street, Cape Town, 8001
Executive directors: KG Hodgson, B Moritz, JP Loubser
Non-executive directors: SA Muller (Chairman), B Hopkins, P Matlakala, 
KR Moloko, KA Hedderwick
Company secretary: R Thomas
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196.
Sponsor: UBS South Africa (Proprietary) Limited

To view the results online visit www.holdsport.co.za



Date: 05/05/2017 11:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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