Wrap Text
Unaudited interim condensed consolidated results for the six months ended 31 December 2018
Rex Trueform Group Limited
(Incorporated in the Republic of South Africa - Reg No. 1937/009839/06)
("the company" or "Rex Trueform")
JSE share codes: RTO - RTN - RTOP
ISIN: ZAE000250387 - ZAE000250395 - ZAE000250403
Unaudited interim condensed consolidated results for the six months ended 31 December 2018
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six Six Year
months ended months ended ended
31 December 31 December 30 June
2018 2017 2018
% Unaudited Unaudited Audited
Change R'000 R'000 R'000
Revenue 13.9 361 935 317 716 608 540
Turnover 13.5 349 567 307 987 587 632
Cost of sales (158 739) (145 578) (267 730)
Gross profit 17.5 190 828 162 409 319 902
Other income 14.2 9 088 7 955 16 241
Other operating costs 4.3 (167 690) (160 737) (322 061)
Operating profit 234.7 32 226 9 627 14 082
Dividend income 23 22 45
Finance income 3 257 1 752 4 622
Finance costs (46) (72) (53)
Share of profit of associate (net of taxation) 26 516 - -
Dilution loss on investment in associate (14 811) - -
Profit before tax 316.3 47 165 11 329 18 696
Income tax expense (10 213) (3 346) (5 876)
Profit for the period 362.9 36 952 7 983 12 820
Other comprehensive income
Items that are or may be subsequently reclassified
to profit or loss
Fair value adjustment on available-for-sale financial asset - - 240
Fair value adjustment on assets held at fair value through
other comprehensive income 10 - -
Total comprehensive income for the period (net of taxation) 36 962 7 983 13 060
Profit attributable to:
Ordinary and "N" ordinary shareholders 36 944 7 975 12 803
Preference shareholders 8 8 17
Profit for the period 36 952 7 983 12 820
Total comprehensive income attributable to:
Ordinary and "N" ordinary shareholders 36 954 7 975 13 043
Preference shareholders 8 8 17
Total comprehensive income for the period 36 962 7 983 13 060
Reconciliation of headline earnings
Profit attributable to Ordinary and "N" ordinary shareholders 36 944 7 975 12 803
Adjusted for:
(Profit) / loss from disposal of property, plant and equipment
(net of taxation) (160) 6 21
Dilution loss on investment in associate 14 811 - -
Non-headline earnings items included in earnings from associate (31 500) - -
Gain from bargain purchase of investment (31 507) - -
Loss from disposal of property, plant and equipment
(net of taxation) 7 - -
Headline earnings 20 095 7 981 12 824
Basic earnings per ordinary share (cents) 363.0 179.2 38.7 62.1
Headline earnings per ordinary share (cents) 151.0 97.4 38.8 62.2
Diluted basic earnings per ordinary share (cents) 363.0 179.2 38.7 62.1
Diluted headline earnings per ordinary share (cents) 151.0 97.4 38.8 62.2
Weighted average number of equity shares on which earnings per
share is based (000's) 20 621 20 584 20 621
Weighted average number of equity shares on which diluted
earnings per share is based (000's) 20 621 20 584 20 621
KEY RATIOS
Gross profit margin % 54.6 52.7 54.4
Retail operating costs to turnover % 46.3 50.5 53.0
Other operating costs to revenue % 46.3 50.6 52.9
Operating profit margin % 9.2 3.1 2.4
Retail segment operating profit margin % 8.4 2.3 1.4
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
Notes R'000 R'000 R'000
ASSETS
Non-current assets 206 697 158 395 156 090
Property, plant and equipment 59 623 60 776 60 721
Investment property 67 195 69 667 68 741
Intangible assets 21 880 23 821 22 980
Investment in associate 4.1 11 705 - -
Loan to associate 4.1 43 092 - -
Other investments 842 524 829
Deferred tax asset 2 360 3 607 2 819
Current assets 192 500 175 004 192 409
Inventories 4.2 129 607 67 461 92 132
Trade and other receivables 21 880 28 052 27 475
Accrued operating lease asset 2 525 3 189 2 859
Forward exchange contracts 227 - 746
Income tax receivable 267 134 163
Cash and cash equivalents 37 994 76 168 69 034
Total assets 399 197 333 399 348 499
Equity and liabilities
Capital and reserves 309 461 267 439 272 507
Share capital 4.3 1 777 1 777 1 777
Share premium 25 836 25 836 25 836
Treasury shares (117) (117) (117)
Share-based payment reserve (214) (214) (214)
Other reserves 2 096 1 846 2 086
Retained earnings 280 083 238 311 243 139
Non-current liabilities 20 608 18 268 19 589
Post-retirement liability 559 660 574
Accrued operating lease liability 13 903 13 816 14 235
Deferred tax liability 6 146 3 792 4 780
Current liabilities 69 128 47 692 56 403
Trade and other payables 56 293 42 665 51 538
Accrued operating lease liability 4 635 5 027 4 849
Income tax payable 8 200 - 16
Total equity and liabilities 399 197 333 399 348 499
OTHER INFORMATION AND KEY RATIOS
As at
As at As at 30 June
31 December 31 December 2018
2018 2017 Audited/
Unaudited Unaudited Unaudited
R'000 R'000 R'000
Capital commitments
Authorised - not contracted for (R'000) 3 046 6 199 12 102
Authorised - contracted for (R'000) 2 273 2 372 5 723
Return on equity ^ % 21.4 6.1 4.8
Return on capital ^ % 28.4 8.7 7.0
Return on assets ^ % 22.1 6.9 5.5
Inventory turn ^ times 2.9 4.0 3.2
Asset turn ^ times 1.9 1.9 1.7
Net asset value per share R 14.99 12.99 13.20
^ Ratios for December have been annualised
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Six Year
months ended months ended ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Operating profit before working capital changes 44 210 25 461 40 712
Working capital changes (26 790) 4 647 (8 195)
Interest received 1 627 1 752 4 622
Interest paid (46) (72) (53)
Dividends paid (8) (8) (17)
Dividends received 23 22 45
Income tax (paid) / received (311) 1 017 184
Net cash inflows from operating activities 18 705 32 819 37 298
Additions to property, plant and equipment (7 789) (13 422) (22 951)
Additions to investment properties (311) (517) (1 494)
Additions to intangible assets (533) (801) (1 908)
Proceeds from disposal of property, plant and equipment 215 - -
Loan advanced to associate (41 327) - -
Net cash outflows from investing activities (49 745) (14 740) (26 353)
Net (decrease) / increase in cash and cash equivalents (31 040) 18 079 10 945
Cash and cash equivalents at the beginning of the period 69 034 58 089 58 089
Cash and cash equivalents at the end of the period 37 994 76 168 69 034
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six Six Year
months ended months ended ended
31 December 31 December 30 June
2018 2017 2018
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) (117) (117)
Other reserves and share based payment reserve 1 882 1 632 1 872
Opening balance 1 872 1 632 1 632
Fair value adjustment on available-for-sale financial assets - - 240
Fair value adjustment on assets held at fair value through
other comprehensive income 10 - -
Retained earnings 280 083 238 311 243 139
Opening balance 243 139 230 336 230 336
Profit for the period 36 952 7 983 12 820
Preference dividends paid / declared (8) (8) (17)
Total capital and reserves 309 461 267 439 272 507
GROUP SEGMENTAL REPORTING
Six Six Year
months ended months ended ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue
Total external retail revenue 349 852 308 229 588 173
Retail segment revenue 352 399 310 220 592 185
Intersegment revenue earned (2 547) (1 991) (4 012)
Total external property revenue 8 667 7 713 15 700
Property segment revenue 11 543 10 518 21 381
Intersegment revenue earned (2 876) (2 805) (5 681)
Water infrastructure revenue 136 - -
Dividend income 23 22 45
Finance income 3 257 1 752 4 622
Total group revenue 361 935 317 716 608 540
Segment operating profit
Retail segment profit 29 364 7 003 8 171
Property segment profit 5 566 4 894 9 984
Water infrastructure profit 98 - -
Group services loss* (2 802) (2 270) (4 073)
Total group operating profit 32 226 9 627 14 082
Depreciation and amortisation
Retail 10 317 11 409 22 791
Property 2 032 2 013 4 046
Total group depreciation and amortisation 12 349 13 422 26 837
Segment assets
Retail 242 492 222 619 213 844
Property 76 885 75 234 78 475
Water infrastructure 54 797 - -
Group services* 25 023 35 546 56 180
Total group segment assets 399 197 333 399 348 499
Segment liabilities
Retail 79 123 58 573 67 805
Property 8 889 5 854 7 019
Water infrastructure 583 - -
Group services* 1 141 1 533 1 168
Total group segment liabilities 89 736 65 960 75 992
Capital expenditure
Retail 8 193 13 198 22 734
Property 440 1 542 3 619
Total group capital expenditure 8 633 14 740 26 353
* Group services include corporate costs
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 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 2018, except for
the adoption of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers. Neither standards
however had a material impact on these results or comparative information.
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 D Franklin CA (SA), the company's
financial director, and were approved by the board of directors on 25 March 2019.
3. Preference dividend
A dividend on the 6% cumulative preference shares for the six months ended 31 December 2018 in the amount of R8 400
was declared by the board of directors on 14 December 2018 and was paid on 14 January 2019.
4. Notes to the financial results
4.1. Investment in and loan to associate:
During the period under review the group subscribed for 33.78% of the issued share capital of SA Water Works Holding
Company (RF) (Pty) Ltd (formerly SA Water Works Holding Company (Pty) Ltd) ("SAWW") for a nominal consideration through
its wholly-owned subsidiary, Ombrecorp Trading (RF) (Pty) Ltd (formerly Ombrecorp Trading (Pty) Ltd) ("Ombrecorp")
which was acquired as a shelf company for this purpose.
SAWW was specifically incorporated to house the water business interests of the group and is accounted for as an
associate within the group. Simultaneously with the subscription, SAWW acquired, through a wholly-owned subsidiary,
a majority equity interest in Sembcorp Siza Water (RF) (Pty) Ltd ("Sembcorp Siza") through shareholder and external
loan funding.
Sembcorp Siza conducts a water concession business operating predominantly in the municipal boundaries of the
Ilembe District Municipality and surrounding areas in Kwazulu-Natal, South Africa. Founded in 1998, it provides
water and water services to residential, industrial and commercial consumers pursuant to a concession agreement
executed between the Ilembe District Municipality and Sembcorp Siza's predecessors-in-title.
Subsequent to the aforementioned acquisition, SAWW acquired, via the same wholly-owned subsidiary, [i] 100% of the
ordinary issued share capital of SA Water Works Utilities Proprietary Limited (formerly Sembcorp Utilities South Africa
Proprietary Limited) ("SA Water Works Utilities") which holds 52% of the ordinary issued shares in Silulumanzi - and
[ii] 48% of the ordinary issued shares in the share capital of Silulumanzi, from Sembcorp Utilities (Netherlands) NV.
SA Water Works Utilities has been in existence since 1998 and provides operation and maintenance services to
Silulumanzi. Silulumanzi conducts a water concession business, operating in the municipal boundaries of the
City of Mbombela Local Municipality and the greater parts of Nelspruit and, since 1999, has provided water
and water services to residential, commercial and industrial consumers pursuant to the concession agreement
executed between the City of Mbombela Local Municipality and Silulumanzi's predecessors-in-title.
Persuant to the introduction of a new SAWW shareholder, Ombrecorp's shareholding in SAWW was subsequently diluted
from 33.78% to 15.16%.
Subsequent to the reporting date, Rex Trueform entered into a subscription agreement with certain not-for-profit
organisations (being The Community Chest of the Western Cape, Cornerstone Institute (RF) NPC, Desmond Tutu HIV
Foundation NPC, the Trustees for the time being of the District Six Museum Foundation Trust and the Trustees for
the time being of the Wheatfield Estate Foundation Trust) (collectively, the "new Ombrecorp Shareholders") and
Ombrecorp whereby Rex Trueform and each of the new Ombrecorp shareholders subscribed for new shares in Ombrecorp.
Rex Trueform's shareholding in Ombrecorp was consequently diluted from 100% to 52% due to the introduction of the
new Ombrecorp shareholders.
In addition, Ombrecorp subscribed for further SAWW ordinary shares and advanced further funding to SAWW such that
Ombrecorp now holds 30% of the issued share capital of SAWW. Further detail in this regard is contained in the SENS
announcement issued by Rex Trueform on 25 February 2019.
4.2. Inventories:
Inventories increased in line with the increased store foot print and the strategic acceleration of new store roll
outs in conjunction with a drive to increase turnover per store.
4.3. Share capital is comprised of the following:
As at As at
31 December 31 December As at
2018 2017 30 June 2018
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
5. Standards and interpretations issued but not yet effective
The following standard and interpretation that are relevant to the group have been issued but are not effective for
the period under review.
IFRS 16: Leases
Effective for annual period beginning on or after 1 January 2019
IFRS 16 replaces the existing lease standard, IAS 17 Leases, and related interpretations. The standard will be
adopted for the first time by the group for the financial year commencing 1 July 2019.
The group's property segment will not be significantly impacted as lessor accounting will remain largely unchanged.
The standard will significantly impact the group's retail segment operating from leased premises. Based on the new
standard the group will no longer be required to straight-line operating lease payments, as a result, occupancy costs
will decrease.
The new standard will require the recognition of a right of use asset and a corresponding lease liability resulting
in increased depreciation and finance costs. Key metrics in the statement of financial position and statement of
comprehensive income will be affected.
Optional exemptions for short-term leases and leases of low-value items will lessen the impact of the standard.
The group continues to assess the potential impact of the new standard on its consolidated financial statements,
including the assessment of the practical application of the principles contained in the new standard.
The actual impact of applying IFRS 16 on the financial statements in the period of initial application will depend
on, inter alia, future economic conditions including the group's borrowing rate at 1 July 2019, the criteria that meet
the definition of a lease, the composition of the store lease portfolio and the group's assessment of its intent to
exercise lease renewal options.
Once the new standard is adopted, the group will either apply the standard on a full or modified, with practical
expedients allowed per IFRS 16, retrospective basis.
IFRIC Interpretation 23: Uncertainty over Income Tax Treatment.
Effective for annual periods beginning on or after 1 January 2019
The interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects
the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically
include requirements relating to interest and penalties associated with uncertain tax treatments.
Management is in the process of assessing the potential impact of this new interpretation on the group.
COMMENTARY
Group profile
Rex Trueform Group Ltd ("Rex Trueform") is an investment holding company and is currently invested in property, retail
and water infrastructure. Its interest in retail is through its wholly-owned subsidiary company, Queenspark (Pty) Ltd
("Queenspark"), and its subsidiary. Rex Trueform's interest in property includes direct property ownership as well as
indirect property investment through a subsidiary. Rex Trueform's investment in water infrastructure is through its
wholly-owned subsidiary Ombrecorp Trading (RF) (Pty) Ltd and its investments. During the prior period, Rex Trueform
changed its name from Rex Trueform Clothing Company Ltd to Rex Trueform Group Ltd to better reflect the diverse nature
of its business.
Group results
The group produced a pleasing performance during the first half of the financial year. Revenue, mainly impacted by the
retail segment, increased by 13.9% to R361.9 million (2017: R317.7 million). The gross profit generated from the retail
segment increased by 17.5% to R190.8 million (2017: R162.4 million). Other group income which includes rental income
increased by 14.2%. Operating costs were contained and increased by 4.3%.
The result is that operating profit has increased by 234.7% to R32.2 million (2017: R9.6 million). Profit before tax
has increased by 316.3% to R47.2 million (2017: R11.3 million) resulting in the basic earnings per share increasing by
363.0%. Headline earnings per share has increased by 151.0%, mainly due to the exclusion of the gain from bargain purchase
of the investment in the water infrastructure business, amounting to R31.5 million.
Net asset value per share increased to R14.99 per share (2017: R12.99 per share).
Retail
The Queenspark store growth strategy progressed well with the opening of five new stores and the closure of one in the
period bringing the total number of walk-in stores in South Africa and Namibia to seventy-four, excluding one franchise
store in Kenya. Where feasible and the risk of cannibalisation is low, Queenspark continues to introduce new brands to
complement the existing ranges.
As a result of the implementation of its strategy, Queenspark's turnover increased by 13.5% and it achieved a gross
profit margin of 54.6% (2017: 52.7%). Retail operating costs, which included additional store costs, were well contained
and increased by a modest 3.9%. This resulted in a retail operating profit of R29.4 million (2017: R7.0 million).
Property
The Rex Trueform Office Park complex in Salt River is the main income generating operation within the group's property
segment. There are a further two undeveloped properties in the Salt River precinct: one has heritage significance and
the other is vacant land.
One further property is situated in the Wynberg precinct in Cape Town and is leased to Queenspark as a distribution centre.
The operating profit of this segment for the period amounted to R5.6 million (2017: R4.9 million). This improvement in
operating profit was partly due to the containment of operating costs.
Water infrastructure
The investment in water infrastructure was made during the period under review and contributed R11.8 million to the
profit for the period of the group.
Please refer to note 4.1 to the results for further details of the acquisition.
Group services
Costs for group services increased by 25.1% to R2.8 million (2017: R2.3 million). This was largely due to costs
incurred in setting up an employee share incentive scheme as well as printing and publication costs pertaining to the water
infrastructure investment.
Prospects
Retail
While the Queenspark strategy and initiatives are delivering the required result, management is cognisant of the
difficult trading environment (including having regard to the recent recurrence of load-shedding in South Africa) and
subdued economy.
Management however remains confident in the retail segment's future and in its ability to deliver sustainable growth
and value creation for shareholders.
Property
Rex Trueform has the intention to develop the two undeveloped properties in the medium term, both situated in the Cape
Town area, and is continuing to consider development options in this regard. One of the undeveloped properties has
heritage significance. As a result, decisions regarding the development of the property have been delayed in order to
consider the significance of the property in this regard and heritage guidelines more fully, whilst also ensuring that
any development is sustainable and economically viable. Financing is also being carefully considered in relation to all
development options.
MA Golding
(Chairman)
CL Lloyd
(Chief Executive Officer)
Cape Town
25 March 2019
ADMINISTRATION
Directors:
MA Golding+ (Chairman), CL Lloyd (Chief Executive Officer), D Franklin (Financial Director),
HB Roberts*, PM Naylor*, LK Sebatane*, MR Molosiwa*
+ Non-executive
*Independent non-executive
CEA Radowsky resigned as the Chief Executive Officer of the company with effect from 12 March 2019 with CL Lloyd being
appointed as the Chief Executive Officer of the company in her stead.
Registered office:
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
Websites:
http://www.queenspark.com
http://www.rextrueform.com
Date: 25/03/2019 04:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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