Wrap Text
Unaudited interim condensed consolidated results for the six months ended 31 December 2017
AFRICAN AND OVERSEAS ENTERPRISES LIMITED
(Incorporated in the Republic of South Africa - Registration number 1947/027461/06)
JSE SHARE CODES: AOO - AON - AOVP
ISIN: ZAE000000485 - ZAE000009718 - ZAE000000493
("the company")
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS
for the six months ended 31 December 2017
HIGHLIGHTS
Revenue increased by 13.1% to R317.5 million (31 December 2016: R280.7 million)
Operating profit increased by 147.7% to R8.9 million (31 December 2016: R3.6 million)
Gross profit margin % decreased to 52.7% (31 December 2016: 55.1%)
Headline earnings per share increased by 106.5% to 31.8 cents (31 December 2016: 15.4 cents)
Earnings per share increased by 134.8% to 31.7 cents (31 December 2016: 13.5 cents)
Net asset value per share increased by 1.8% to R12.62 (31 December 2016: R12.40)
Ordinary dividend per share paid amounted to nil cents (31 December 2016: 17 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 158 395 158 498 159 628
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 5 234 6 149
Current assets 176 085 174 030 170 987
Inventories 67 461 74 003 77 842
Trade and other receivables 27 971 23 267 28 300
Forward exchange contracts - - 38
Income tax receivable 134 1 052 1 304
Accrued operating lease asset 3 189 3 438 3 558
Cash and cash equivalents 77 330 72 270 59 945
Total assets 334 480 332 528 330 615
EQUITY AND LIABILITIES
Capital and reserves 268 005 261 432 260 795
Share capital 1 200 1 200 1 200
Share premium 6 616 6 076 6 616
Share-based payment reserve (116) 314 (116)
Other reserves 1 301 731 1 301
Retained earnings 138 132 136 291 134 518
Non-controlling interest 120 872 116 820 117 276
Non-current liabilities 23 545 24 128 22 549
Post-retirement liability 910 2 006 899
Accrued operating lease liability 18 843 19 432 18 536
Deferred tax liability 3 792 2 690 3 114
Current liabilities 42 930 46 968 47 271
Trade and other payables 40 878 46 418 47 245
Forward exchange contracts 2 049 519 -
Income tax payable 3 31 26
Total equity and liabilities 334 480 332 528 330 615
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2017 2016 2017
% Unaudited Unaudited Audited
change R'000 R'000 R'000
Revenue 13.1 317 506 280 656 548 572
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 1.2 7 705 7 616 15 243
Other operating costs 5.2 (161 236) (153 309) (307 583)
Operating profit/(loss) 147.7 8 878 3 584 (781)
Dividend income 22 20 21
Finance income 1 792 2 280 4 549
Finance costs (99) (111) (163)
Profit before tax 83.5 10 593 5 773 3 626
Income tax expense (3 358) (2 222) (1 939)
Profit for the period 103.7 7 235 3 551 1 687
Other comprehensive income
Fair value adjustment on available-for-sale investments - - (52)
Actuarial gain on post-retirement defined benefit plan - - 1 072
Total comprehensive income for the period 7 235 3 551 2 707
Profit attributable to:
Ordinary and "N" ordinary shareholders of the parent 3 614 1 539 147
Preference shareholders 17 85 102
Profit attributable to equity holders of the parent 3 631 1 624 249
Non-controlling interest 3 604 1 927 1 438
Profit for the period 7 235 3 551 1 687
Total comprehensive income attributable to:
Ordinary and "N" ordinary shareholders of the parent 3 614 1 539 756
Preference shareholders 17 85 102
Profit attributable to equity holders of the parent 3 631 1 624 858
Non-controlling interest 3 604 1 927 1 849
Total comprehensive income for the period 7 235 3 551 2 707
Reconciliation of headline earnings
Earnings attributable to ordinary and "N" ordinary
shareholders of the parent 3 614 1 539 147
Adjusted for:
Loss from disposal of property, plant and equipment 3 219 232
Headline earnings 3 617 1 758 379
Basic earnings per ordinary share (cents) 134.8 31.7 13.5 1.3
Headline earnings per ordinary share (cents) 106.5 31.8 15.4 3.3
Diluted earnings per ordinary share (cents) 134.8 31.7 13.5 1.3
Diluted headline earnings per ordinary share (cents) 106.5 31.8 15.4 3.3
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) 11 387 11 418 11 393
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 1 200 1 200 1 200
Share premium 6 616 6 076 6 616
Other reserves and share-based payment reserve 1 185 1 045 1 185
Opening balance 1 185 1 045 1 045
Actuarial gain on post-retirement defined benefit plan - - 638
Fair value adjustment for available-for-sale financial assets - - (29)
Change in degree of control - - (39)
Delivery of treasury shares (430)
Retained earnings 138 132 136 291 134 518
Opening balance 134 518 136 688 136 688
Profit for the period 3 631 1 624 249
Preference dividends declared/paid (17) (85) (102)
Ordinary dividends paid - (1 936) (1 936)
Change in degree of control - - (381)
Non-controlling interest 120 872 116 820 117 276
Opening balance 117 276 117 401 117 401
Profit for the period 3 604 1 927 1 438
Fair value adjustment for available-for-sale financial assets (23)
Preference dividends declared/paid (8) (8) (17)
Ordinary dividends paid - (2 500) (2 501)
Delivery of treasury shares - - 430
Reallocation relating to share options - - (540)
Proceeds from delivery of employee share options - - 234
Change in degree of control - - 420
Actuarial gain on post-retirement defined benefit plan - - 434
Total capital and reserves 268 005 261 432 260 795
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 24 713 16 022 25 640
Working capital changes 4 710 (7 466) (17 731)
Interest received 1 792 2 280 4 549
Interest paid (99) (111) (163)
Dividends paid (25) (4 453) (4 556)
Dividends received 22 20 21
Normal tax paid 1 012 (396) (862)
Net cash inflow from operations 32 125 5 896 6 898
Additions to property, plant and equipment (13 422) (11 876) (22 745)
Additions to investment property (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 outflow from investing activities (14 740) (18 144) (31 705)
Proceeds from delivery of employee share option - - 234
Net cash inflow from financing activities - - 234
Net increase/(decrease) in cash and cash equivalents 17 385 (12 248) (24 573)
Cash and cash equivalents at the beginning of the period 59 945 84 518 84 518
Cash and cash equivalents at the end of the period 77 330 72 270 59 945
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 307 979 270 980 528 972
Retail segment revenue 309 970 273 088 532 746
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 1 792 2 280 4 549
Total group revenue 317 506 280 656 548 572
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 (3 019) (3 548) (6 809)
Total group operating profit/(loss) 8 878 3 584 (781)
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* 36 627 32 207 33 759
Total group segment assets 334 480 332 528 330 615
Segment liabilities
Retail 58 573 62 305 61 737
Property 5 855 5 192 5 884
Group services* 2 047 3 599 2 199
Total group segment liabilities 66 475 71 096 69 820
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
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/(loss) margin (%) 2.9 1.3 (0.1)
Retail segment operating profit/(loss) margin (%) 2.3 1.2 (0.4)
Net asset value per share (R) 12.62 12.40 12.31
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 R16 500 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 comprises 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 650 650 650
Preference share capital 550 550 550
1 200 1 200 1 200
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
The principal operating subsidiary Rex Trueform Group Limited reports as follows:
"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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