Wrap Text
Unaudited interim condensed consolidated results for the six months ended 31 December 2017
REX TRUEFORM GROUP LIMITED
(Formerly Rex Trueform Clothing Company Limited)
(Incorporated in the Republic of South Africa) (Registration number 1937/009839/06)
JSE SHARE CODES: RTO - RTN - RTOP
ISIN: ZAE000250387 - ZAE000250395 - ZAE000250403
("the company")
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS
for the six months ended 31 December 2017
HIGHLIGHTS
Revenue increased by 13.1% to R317.7 million (31 December 2016: R280.9 million)
Operating profit increased by 122.4% to R9.6 million (31 December 2016: R4.3 million)
Gross profit margin % decreased to 52.7% (31 December 2016: 55.1%)
Headline earnings per share increased by 70.9% to 38.8 cents (31 December 2016: 22.7 cents)
Earnings per share increased by 87.0% to 38.7 cents (31 December 2016: 20.7 cents)
Net asset value per share increased by 3.2% to R12.99 (31 December 2016: R12.59)
Ordinary dividend per share paid amounted to nil cents (31 December 2016: 27 cents)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
ASSETS
Non-current assets 158 395 158 497 159 628
Property, plant and equipment 60 776 56 061 57 150
Investment property 69 667 72 027 71 032
Intangible assets 23 821 24 600 24 773
Other investments 524 576 524
Deferred tax asset 3 607 5 233 6 149
Current assets 175 004 171 600 169 120
Inventories 67 461 74 003 77 842
Trade and other receivables 28 052 23 464 28 292
Accrued operating lease asset 3 189 3 438 3 558
Forward exchange contracts - - 38
Income tax receivable 134 1 050 1 301
Cash and cash equivalents 76 168 69 645 58 089
Total assets 333 399 330 097 328 748
EQUITY AND LIABILITIES
Capital and reserves 267 439 259 428 259 464
Share capital 1 777 1 777 1 777
Share premium 25 836 25 836 25 836
Treasury shares (117) (1 133) (117)
Share-based payment reserve (214) 568 (214)
Other reserves 1 846 934 1 846
Retained earnings 238 311 231 446 230 336
Non-current liabilities 23 295 23 736 22 301
Post-retirement liability 660 1 614 650
Accrued operating lease liability 18 843 19 432 18 537
Deferred tax liability 3 792 2 690 3 114
Current liabilities 42 665 46 933 46 983
Trade and other payables 40 616 46 383 46 959
Forward exchange contracts 2 049 519 -
Income tax payable - 31 24
Total equity and liabilities 333 399 330 097 328 748
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
% 2017 2016 2017
change Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 13.1 317 716 280 913 549 046
Turnover 13.8 307 987 270 740 528 759
Cost of sales (145 578) (121 463) (237 200)
Gross profit 8.8 162 409 149 277 291 559
Other income 0.1 7 955 7 946 15 826
Other operating costs 5.1 (160 737) (152 894) (306 630)
Operating profit 122.4 9 627 4 329 755
Dividend income 22 20 21
Finance income 1 752 2 207 4 440
Finance costs (72) (79) (133)
Profit before tax 74.9 11 329 6 477 5 083
Income tax expense (3 346) (2 202) (1 908)
Profit for the period 86.7 7 983 4 275 3 175
Other comprehensive income
Fair value adjustment on available-for-sale financial asset - - (52)
Actuarial gain on post-retirement defined benefit plan - - 964
Total comprehensive income for the period 7 983 4 275 4 087
Profit attributable to:
Ordinary and "N" ordinary shareholders 7 975 4 267 3 158
Preference shareholders 8 8 17
Profit for the period 7 983 4 275 3 175
Total comprehensive income attributable to:
Ordinary and "N" ordinary shareholders 7 975 4 267 4 070
Preference shareholders 8 8 17
Total comprehensive income for the period 7 983 4 275 4 087
Reconciliation of headline earnings
Profit attributable to ordinary and "N" ordinary shareholders 7 975 4 267 3 158
Adjusted for:
Loss from disposal of property, plant and equipment 6 398 421
Headline earnings 7 981 4 665 3 579
Basic earnings per ordinary share (cents) 87.0 38.7 20.7 15.3
Headline earnings per ordinary share (cents) 70.9 38.8 22.7 17.4
Diluted basic earnings per ordinary share (cents) 87.0 38.7 20.7 15.3
Diluted headline earnings per ordinary share (cents) 71.7 38.8 22.6 17.4
Weighted average number of equity shares on which
earnings per share is based (000's) 20 584 20 582 20 584
Weighted average number of equity shares on which
diluted earnings per share is based (000's) 20 584 20 613 20 589
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Share capital 1 777 1 777 1 777
Share premium 25 836 25 836 25 836
Treasury shares (117) (1 133) (117)
Other reserves and share-based payment reserve 1 632 1 502 1 632
Opening balance 1 632 1 502 1 502
Actuarial gain on post-retirement defined benefit plan - - 964
Delivery of treasury shares - - (782)
Loss on available-for-sale instrument - - (52)
Retained earnings 238 311 231 446 230 336
Opening balance 230 336 232 736 232 736
Profit for the period 7 983 4 275 3 175
Preference dividends paid/declared (8) (8) (17)
Ordinary dividends paid - (5 557) (5 558)
Total capital and reserves 267 439 259 428 259 464
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Operating profit before working capital changes 25 461 16 755 27 197
Working capital changes 4 647 (6 638) (17 014)
Interest received 1 752 2 207 4 440
Interest paid (72) (79) (133)
Dividends paid (8) (5 557) (5 575)
Dividends received 22 20 21
Income tax paid 1 017 (375) (832)
Net cash inflows from operating activities 32 819 6 333 8 104
Additions to property, plant and equipment (13 422) (11 876) (22 745)
Additions to investment properties (517) (1 973) (2 810)
Additions to intangible assets (801) (1 508) (3 410)
Proceeds from disposal of property, plant and equipment 152 199
Acquisition of business (2 939) (2 939)
Net cash outflows from investing activities (14 740) (18 144) (31 705)
Proceeds from delivery of employee share options - - 234
Net cash inflow from financing activities - - 234
Net increase/(decrease) in cash and cash equivalents 18 079 (11 811) (23 367)
Cash and cash equivalents at the beginning of the period 58 089 81 456 81 456
Cash and cash equivalents at the end of the period 76 168 69 645 58 089
GROUP SEGMENTAL REPORTING
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue
Total external retail revenue 308 229 271 310 529 555
Retail segment revenue 310 220 273 418 533 329
Intersegment revenue earned (1 991) (2 108) (3 774)
Total external property revenue 7 713 7 376 15 030
Property segment revenue 10 518 9 893 20 359
Intersegment revenue earned (2 805) (2 517) (5 329)
Dividends received 22 20 21
Interest income 1 752 2 207 4 440
Total group revenue 317 716 280 913 549 046
Segment operating profit
Retail segment profit 7 003 3 174 (1 923)
Property segment profit 4 894 3 958 7 951
Group services operating loss (2 270) (2 803) (5 273)
Total group operating profit 9 627 4 329 755
Depreciation and amortisation
Retail 11 409 10 393 21 742
Property 2 013 1 808 3 720
Total group depreciation and amortisation 13 422 12 201 25 462
Segment assets
Retail 222 619 220 493 216 059
Property 75 234 79 828 80 797
Group services* 35 546 29 776 31 892
Total group segment assets 333 399 330 097 328 748
Segment liabilities
Retail 58 573 62 305 61 737
Property 5 854 5 192 5 884
Group services* 1 533 3 172 1 663
Total group segment liabilities 65 960 70 669 69 284
Capital expenditure
Retail 13 198 12 737 23 904
Property 1 542 2 620 5 061
Total group capital expenditure 14 740 15 357 28 965
* Group services include corporate costs.
OTHER INFORMATION
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
Audited
Capital commitments
Authorised - not contracted for (R'000) 6 199 10 218 21 553
Authorised - contracted for (R'000) 2 372 7 475 7 632
Gross profit margin (%) 52.7 55.1 55.1
Operating profit margin (%) 3.1 1.6 0.1
Retail segment operating profit/(loss) margin (%) 2.3 1.2 (0.4)
Net asset value per share (R) 12.99 12.59 12.57
NOTES
1 Basis of presentation of financial statements
The unaudited condensed consolidated interim financial statements are prepared in accordance with
the requirements of the JSE Limited Listings Requirements and the requirements of the Companies
Act of South Africa. The JSE Listings Requirements require interim 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.
These financial statements have been prepared using accounting policies that comply with IFRS and
which are consistent with those applied in the preparation of the annual financial statements for
the year ended 30 June 2017.
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), the company's financial director and were approved by the board of
directors on 8 March 2018.
3 Preference dividend
A dividend on the 6% cumulative preference shares for the six months ended 31 December 2017 in
the amount of R8 400 was declared by the board of directors on 18 December 2017 and was paid on
15 January 2018.
4 Notes to the financial results
4.1 Acquisition of business
A payment of R2 939 000 was made for the acquisition of the business operated by Queenspark
Proprietary Limited's Namibian franchisee effective 2 October 2016.
The purchase price is comprised of the following:
R'000
Intangible asset 1 100
Fixed assets 500
Inventory 1 339
2 939
4.2 Share capital is comprised of the following:
As at As at As at
31 Dec 31 Dec 30 June
2017 2016 2017
Unaudited Unaudited Audited
R'000 R'000 R'000
Ordinary share capital 1 497 1 497 1 497
Preference share capital 280 280 280
1 777 1 777 1 777
4.3 Financial instruments
Financial instruments included in trade and other receivables, trade and other payables and
forward exchange contract liabilities are short term in nature, are settled within 12 months
and the carrying value substantially approximates the fair value.
5 Standards and interpretations issued but not yet effective
A number of new standards, amendments to standards and interpretations are effective for annual
periods beginning on or after 1 July 2018, and have not been applied in preparing these financial
statements. Those which may be relevant to the group are set out below. The group does not plan
to adopt these standards early. These will be adopted in the period that they become mandatory
unless otherwise indicated.
Effective for the financial year commencing 1 July 2018
IFRS 15: Revenue from Contracts with Customers
IFRS 9: Financial Instruments
Effective for the financial year commencing 1 July 2019
IFRS 16: Leases
IFRS 15: Revenue
IFRS 15, published in May 2014, introduces a new revenue recognition model for contracts with
customers. It replaces IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC-31. IFRS 15 includes
extensive new disclosure requirements.
The standard is effective for the financial year ending June 2019 and will be applied using the
cumulative effect method.
Sales of goods
For the sale of goods, revenue is currently recognised when the goods are purchased, which is
taken to be the point in time at which the customer accepts the goods and the related risks and
rewards of ownership transfer. Revenue is recognised at this point provided that the revenue and
costs can be measured reliably, the recovery of the consideration is probable and there is no
continuing management involvement with the goods. The value of returned goods is considered
immaterial.
Effectively under IFRS 15 revenue will be recognised when a customer obtains control of the goods.
Under IFRS 15 revenue will be recognised for these contracts to the extent that it is probable
that a significant reversal in the amount of cumulative revenue recognised will not occur.
Based on its preliminary assessment, management is of the opinion that the requirements of
IFRS 15 will not have a material impact on the financial statements, as currently the revenue
recognition is in line with the IFRS principles.
IFRS 9: Financial Instruments
On 24 July 2014 the IASB issued the final IFRS 9: Financial Instruments Standards, which replaces
earlier versions of IFRS 9.
IFRS 9 contains a new classification and measurement approach for financial instruments that
reflects the business model in which the assets and liabilities are managed and their cash flow
characteristics.
The three principal classification categories for financial instruments are: measured at amortised
cost, fair value through profit or loss ("FVTPL") and fair value through other comprehensive
income ("FVOCI").
Based on its preliminary assessment, the group believes that the new classification requirements
will not have a material impact on its accounting for financial instruments.
IFRS 9 replaces the "incurred loss" model in IAS 39 with a forward-looking "expected credit loss"
("ECL") model. This will require considerable judgement as to how changes in economic factors
affect ECLs, which will be determined on a probability-weighted basis.
The new impairment model will apply to financial assets measured at amortised cost or FVOCI,
except for investments in equity instruments, and to contract assets.
The group believes that impairment losses (if any) are not likely to increase in terms of the
scope of the IFRS 9 impairment model.
IFRS 16: Leases
IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee
recognises a right-of-use asset representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. There are optional exemptions for
short-term leases and leases of low-value items. Lessor accounting remains similar to the current
standard - i.e. lessors continue to classify leases as finance or operating leases.
IFRS 16 replaces existing leases guidance, including IAS 17: Leases, IFRIC 4: Determining
Whether an Arrangement Contains a Lease, SIC-15: Operating Leases - Incentives and SIC-27:
Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The standard is effective for the financial year ending 30 June 2020.
The group has started an initial assessment of the potential impact on its consolidated financial
statements. So far the most significant impact identified is that the group will recognise new
assets and liabilities for its store operating leases. In addition, the nature of expenses related
to those leases will now change as IFRS 16 replaces the straight-line operating lease expense with
a depreciation charge for right-of-use assets and interest expense on lease liabilities.
As a lessee, the group can either apply the standard using a:
- full retrospective approach; or
- modified retrospective approach with optional practical expedients.
The lessee applies the election consistently to all of its leases. The group has yet to determine
which transactional approach to apply.
The group is not required to make any adjustments for leases in which it is a lessor, except
where it is an intermediate lessor in a sublease.
The group has not yet quantified the impact on its reported assets and liabilities of the adoption
of IFRS 16. The quantitative effect will depend on, inter alia, the criteria that meets the
definition of a lease, the transition method chosen and any additional leases that the group
enters into. The group expects to disclose its quantitative information before adoption.
COMMENTARY
Group profile
Rex Trueform Group Limited (formerly Rex Trueform Clothing Company Limited) ("Rex") is currently
invested in the property and retail segments. Its interest in retail is through its wholly-owned
subsidiary company, Queenspark Proprietary Limited ("Queenspark"). Rex's interest in property
includes direct property ownership and indirect property investment through its wholly-owned
subsidiary, Queenspark Distribution Centre Proprietary Limited. During the period under review
Rex changed its name to Rex Trueform Group Limited to better reflect the diverse nature of its business.
Group results
The group (comprising Rex and its subsidiaries) produced a pleasing performance during the first half
of the financial year notwithstanding the weak economic environment. Comparing the current period
with the corresponding prior period, revenue, mainly impacted by the retail segment, increased by
13.1% to R317.7 million (2016: R280.9 million). The gross profit generated from the retail segment
increased by 8.8% to R162.4 million (2016: R149.3 million). Other group income, including rental
and royalty income, increased by 0.1% and was impacted by the reduction of third party royalty
income. Trading expenses were contained and increased by 5.1%.
The above resulted in the operating profit increasing by 122.4% to R9.6 million (2016: R4.3 million).
Profit after tax increased by 86.7% to R8.0 million (2016: R4.3 million) resulting in the earnings
per share increasing by 87.0%.
Retail (Queenspark)
The Queenspark strategy includes the introduction of new brands to complement the existing ranges.
A number of new brands, together with new product categories, were introduced during the period
under review in an endeavour to provide an improved offering to customers. This new strategy,
although in its infancy, is progressing well. In line with its longer-term strategy Queenspark
opened eight new stores during the period under review, bringing its total number of stores to 69.
Retail comparable period
As a result of the implementation of its strategy, Queenspark's turnover increased by 13.1%.
However, its gross margin decreased to 52.7% (2016: 55.1%) partly due to more aggressive markdowns.
Retail operating costs, which included additional store costs, increased by 6.6%. The above resulted
in a retail operating profit of R7.0 million compared to a R3.2 million operating profit in the prior
corresponding period.
Property
The Rex Trueform Office Park complex is the main income-generating operation within the group's
property segment. The operating profit of this segment for the period amounted to R4.9 million
(2016: R4.0 million). This improvement in operating profit was partly due to the containment of
operating costs.
Prospects
Retail (Queenspark)
Queenspark's strategy includes the continuous consideration of new brands and products to complement
its existing ranges. Queenspark and its Namibian subsidiary will also continue to open new stores
that are considered feasible, with a view to expanding its footprint both in South Africa and Namibia.
The current tough economic trading and market conditions are still likely to continue to impact the
business in the short term.
Property
Rex has the intention to develop two further properties in the medium term, both situated in the
Cape Town area, and is continuing to consider development options in this regard. The one property
is classified as a heritage site, which limits the development opportunities and has caused delays
in the development process.
MA Golding CEA Radowsky
(Chairman) (Chief Executive Officer)
Cape Town
9 March 2018
Directors: MA Golding+ (Chairman), CEA Radowsky (Chief Executive Officer), DS Johnson
(Financial Director), HB Roberts*, PM Naylor*, LK Sebatane*, MR Molosiwa*
+ Non-executive * Independent non-executive
ML Krawitz retired as chairman and as a non-executive director of the company, and RV Orlin and
HJ Borkum retired as independent non-executive directors of the company with effect from
30 September 2017. MA Golding was elected as the chairman of the board of directors of the company
with effect from 30 September 2017. HB Roberts, LK Sebatane and MR Molosiwa were elected by
shareholders as directors of the company at the annual general meeting of the company held on
17 November 2017. DS Johnson resigned as the financial director of the company with effect from
31 March 2018.
Registered office: Rex Buildings, 263 Victoria Road, Salt River, Cape Town, 7925
Company secretary: AT Snitcher
Transfer secretaries: Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Sponsor: Java Capital Trustees and Sponsors Proprietary Limited
Date: 09/03/2018 12:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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