Wrap Text
Steinhoff - Interim results for the six months ended 31
December 2004
Steinhoff International Holdings Ltd
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
JSE share code: SHF
ISIN code: ZAE000016176
("Steinhoff" or "the company" or "the Group")
Interim results for the six months ended 31 December 2004
Global diversification delivers continued growth
Highlights
* Group revenues up by 37% in euros (31% in rand)
* HEPS increased by 21% in euros (15% in rand)
* Strong balance sheet
* Operating margins maintained
* Attributable income up 36% in rands
* Strong operating cash flow
Abridged consolidated income statement
for the six months ended 31 December 2004
Unaudited
six months
ended
31/12/04
Notes R"000
Revenue 7 058 754
Operating income before 935 003
depreciation
Depreciation (143 478)
Operating income after 791 525
depreciation
Exceptional items 1 (134)
Earnings before 791 391
goodwill, interest and
taxation
Goodwill amortised -
Earnings before 791 391
interest and taxation
Net finance charges (56 541)
Earnings before 734 850
taxation
Taxation (96 890)
Earnings after taxation 637 960
Share of associated 42 186
companies" retained
income
Attributable to outside 700
shareholders
Income attributable to 680 846
shareholders
Number of shares in 1 129 321
issue ("000)
Weighted average number 1 126 257
of shares in issue
("000)
Attributable income 680 846
(R"000)
Headline earnings 2 677 703
(R"000)
Earnings per share 60
(cents)
Headline earnings per 60
share (cents)
Dividend per share
(cents)
Average currency 7,8312
translation rate
(rand:euro)
Note 1: Exceptional
items (R"000)
- Profit on disposal of
business
- Discontinued
operations
- Impairment of (134)
property, plant and
equipment
(134)
Note 2: Headline
earnings calculation
Income attributable to 680 846
shareholders
Adjustment for:
- Exceptional items 134
- Goodwill amortisation -
- (Profit)/loss on (4 571)
disposal of property,
plant and equipment
- Loss on disposal of 1 183
property, plant and
equipment included in
share of associate
income
- 111
Impairment/amortisation
of goodwill included in
share of associate
income
- Negative goodwill
included in share of
associate income
Headline earnings for 677 703
the period
Abridged consolidated income statement
for the six months ended 31 December 2004
Unaudited Audited
restated* twelve
six months months
ended ended
31/12/03 % 30/6/04
R"000 change R"000
Revenue 5 387 194 31 10 572 130
Operating income before 714 186 31 1 535 355
depreciation
Depreciation (114 136) (214 302)
Operating income after 600 050 32 1 321 053
depreciation
Exceptional items (14 736) (128 922)
Earnings before 585 314 35 1 192 131
goodwill, interest and
taxation
Goodwill amortised (13 826) (38 592)
Earnings before 571 488 38 1 153 539
interest and taxation
Net finance charges (64 125) (80 147)
Earnings before 507 363 45 1 073 392
taxation
Taxation (61 452) (150 381)
Earnings after taxation 445 911 43 923 011
Share of associated 54 091 (22) 117 853
companies" retained
income
Attributable to outside (325) (4 012)
shareholders
Income attributable to 499 677 36 1 036 852
shareholders
Number of shares in 1 122 881 1 1 122 966
issue ("000)
Weighted average number 1 021 081 10 1 067 461
of shares in issue
("000)
Attributable income 499 677 36 1 036 852
(R"000)
Headline earnings 528 717 28 1 191 738
(R"000)
Earnings per share 49 22 97
(cents)
Headline earnings per 52 15 112
share (cents)
Dividend per share 22
(cents)
Average currency 8,2051 (5) 8,2145
translation rate
(rand:euro)
Note 1: Exceptional
items (R"000)
- Profit on disposal of 234
business
- Discontinued (69 652)
operations
- Impairment of (14 736) (59 504)
property, plant and
equipment
(14 736) (128 922)
Note 2: Headline
earnings calculation
Income attributable to 499 677 1 036 852
shareholders
Adjustment for:
- Exceptional items 14 736 128 922
- Goodwill amortisation 13 826 38 592
- (Profit)/loss on (1 414) (6 514)
disposal of property,
plant and equipment
- Loss on disposal of (66) (707)
property, plant and
equipment included in
share of associate
income
- 1 958 3 493
Impairment/amortisation
of goodwill included in
share of associate
income
- Negative goodwill (8 900)
included in share of
associate income
Headline earnings for 528 717 28 1 191 738
the period
* Prior year figures have been restated to reflect the
consolidation of the share trust, and adjusting the weighted
average number of shares in issue with the capitalisation
shares issued during 2004, in terms of AC104. These
adjustments had the effect of reducing earnings per share
from 50 cents to 49 cents and headline earnings per share
from 53 cents to 52 cents.
Abridged consolidated cash flow statement
for the six months ended 31 December 2004
Unaudited
Unaudited restated* Audited
six six year
months months
ended ended ended
31/12/04 31/12/03 30/06/04
R"000 R"000 R"000
Operating profit before 930 432 712 930 1 441 942
working capital changes
Net changes in working (479 531) (234 916) 97 420
capital
Cash generated from 450 901 478 014 1 539 362
operations
Net finance costs (56 542) (64 125) (80 147)
Dividends paid (333 013) (34 025) (34 333)
Dividends received 19 957 18 560 21 869
Taxation (115 326) (61 671) (117 480)
Net cash (outflow)/inflow (34 023) 336 753 1 329 271
from operating activities
Net cash outflow from (817 389) (897 250) (1 363 982)
investing activities
Net cash inflow from 686 187 1 367 476 1 688 230
financing activities
Net (decrease)/increase (165 225) 806 979 1 653 519
in cash and cash
equivalents
Effects of exchange rate 8 275 3 031 2 392
changes on cash and cash
equivalents
Cash and cash equivalents 3 656 442 2 000 226 2 000 531
- beginning of period
Cash and cash equivalents 3 499 492 2 810 236 3 656 442
- end of period
Cash and cash equivalents
can be reconciled to the
balance sheet as follows:
- Cash and cash 3 499 492 2 810 236 3 656 442
equivalents above
- Overdrafts included in 366 383 21 146 10 677
financing activities
Cash and cash equivalents 3 133 109 2 789 090 3 645 765
per balance sheet
* Prior year figures have been restated to reflect the
consolidation of the share trust.
Abridged consolidated balance sheet
at 31 December 2004
Unaudited
Unaudited restated* Audited
31/12/04 31/12/03 30/06/04
R"000 R"000 R"000
ASSETS
Non-current assets
Property, plant and 3 497 610 2 746 626 3 291 880
equipment, plantations
and intangible assets
Investments and loans 1 436 793 1 295 600 1 371 016
Deferred tax assets 109 420 35 099 103 924
5 043 823 4 077 325 4 766 820
Current assets
Accounts receivable and 4 301 985 3 348 655 3 766 704
short-term loans
Inventories 1 509 357 1 110 654 1 348 515
Cash and cash equivalents 3 133 109 2 789 090 3 645 765
Net cash balances 3 114 417 2 591 942 3 645 705
Near cash financial 18 692 197 148 60
instruments
8 944 451 7 248 399 8 760 984
Total assets 13 988 11 325 13 527 804
274 724
EQUITY AND LIABILITIES
Capital and reserves 7 087 161 6 309 775 6 525 251
Outside shareholders" 32 890 14 131 35 241
interest
Non-current liabilities
Deferred tax liabilities 146 701 50 634 118 512
Long-term liabilities 2 930 284 2 569 156 3 088 178
Long-term licence fee 135 548 201 337 180 621
liability
3 212 533 2 821 127 3 387 311
Current liabilities
Net interest-bearing 1 049 884 409 798 523 269
Accounts payable and 2 605 806 1 770 893 3 056 732
provisions
3 655 690 2 180 691 3 580 001
Total equity and 13 988 11 325 13 527 804
liabilities 274 724
Net asset value per share 628 562 581
(cents)
Gearing ratio (net) (%) 12 6 -
Closing exchange rate 7,6623 8,3773 7,5563
(rand: euro)
* Prior year figures have been restated to reflect the
consolidation of the share trust.
Statement of changes in equity
for the six months ended 31 December 2004
Share Non
capital distributa Distribut
and ble able
premium reserves reserves Total
R"000 R"000 R"000 R"000
Balance at 30 3 161 878 (83 425) 3 446 798 6 525 251
June 2004 as
previously
stated
Negative 36 633 36 633
goodwill
released (refer
note 2)
Balance at 30 3 161 878 (83 425) 3 483 431 6 561 884
June 2004
restated
Earnings 680 846 680 846
attributable to
shareholders
Dividends paid (248 366) (248 366)
Issue of shares 24 825 24 825
Increase in 68 411 68 411
foreign currency
translation
reserve
Share of 22 229 (22 229) -
associate
companies"retain
ed earnings
transferred to
non-
distributable
reserves
Decrease in (439) (439)
investment
reserve
Balance at end 3 186 703 6 776 3 893 682 7 087 161
of period
Notes
1. These consolidated summarised interim financial
statements are prepared in accordance with AC127: Interim
Financial Reporting. The accounting policies and methods of
computation for the financial statements for the six months
ended 31 December 2004 are consistent with those applied in
the year ended 30 June 2004 except as described in note 2
below and are in accordance with South African Statements of
Generally Accepted Accounting Practice and the Companies Act
in South Africa.
2. Change in accounting policy
IFRS3 (AC140): Business Combinations
The adoption of this statement resulted in a change in the
accounting policy for goodwill. For all business
combinations on or after 31 March 2004 goodwill is measured
as the excess of the cost of the acquisition "over the
interest in the fair value of the assets, liabilities and
contingent liabilities acquired and recognised".
Until 30 June 2004, goodwill was amortised on a straight
line basis over its useful life generally not exceeding 20
years.
In accordance with the provisions of IFRS3(AC140):
- the Group no longer amortises goodwill from 1 July
2004;
- the provisional amount of negative goodwill arising
from the consolidation of PG Bison was transferred to
reserves; and
- from 1 July 2004 onwards goodwill is measured annually
for impairment in terms of IAS36 (AC128: impairment of
assets), as well as when there are indications of
impairment.
CORPORATE GOVERNANCE
The Group subscribes to and complies with generally accepted
corporate governance practices and principles as enunciated
in its Charter.
SOCIAL Responsibility
Steinhoff continues to be recognised for its corporate
social investment activities. Management remains committed
to the related initiatives and is conscious about the needs
in this regard.
Commentary
Review of results
Performance
The group"s headline earnings for the period increased by
28% to R678 million (2003: R529 million) and revenues
increased by 31% to R7 059 million (2003: R5 387 million).
The average conversion rate used for the translation of
foreign income and expenditure was R7,8312: Euro1 compared
to R8,2051: Euro1 in respect of the corresponding period in
2003, representing a strengthening in the Rand conversion
rate of 5%.
The group generated 71% (2003: 81%) of its consolidated
revenues in currencies other than South African rand,
primarily euro, pound sterling, US dollar and Australian
dollar. In euro terms, the growth in revenues amounted to
37%, from Euro657 million to Euro901 million. Organic growth
over the period was augmented by acquisitive growth.
The results, yet again, confirm the group"s business model
off an expanded geographical base, combining and growing the
mix between third party sourcing vis-a-vis own
manufacturing, and diversification strategies followed in
different regions. The results were achieved in a period
where the economic and trading conditions in Europe and the
United Kingdom were fiercely competitive, whereas the
Pacific Rim was challenging and South Africa experienced
strong consumer demand.
Headline earnings per share increased by 15% to 60 cents
(2003: 52 cents) with basic earnings per share increasing by
22% from 49 cents to 60 cents. The weighted average number
of shares in issue over the period increased by 10% to 1 126
million (2003: 1 021 million), principally as a result of
the 145 million shares that were issued in terms of the
International Equity placement of November 2003 and
consequently had a limited impact on the weighted average
number of shares for the corresponding period.
Shareholders" funds grew to R7 087 million (2003 : R6 310
million) and the annualised return on average shareholders"
funds over the six months was stable at 20% (2003: 19%). The
net asset value per share increased by 8,1% from 581 cents
on 30 June 2004 to 628 cents at 31 December 2004.
The group continued to generate positive cash flow from
operations of R451 million (2003: R478 million). The group
also continued its stated policy of funding suppliers and
third party producers to secure preference of supply and
favourable settlement discounts that benefited margins. The
current period cash flow is stated after providing for the
increased working capital requirements, which included the
expanded Pacific Rim operations, acquired in December 2003.
Cash outflow from investing activities primarily represents
normal maintenance capital expenditure. The cash inflow from
financing activities represents normal treasury activities;
in the previous period, cash inflow from this source
included the proceeds of the International Equity placement.
The group"s strategy of low-cost sourcing in terms of own
manufactured, combined with third party produced products,
is continuing to deliver pleasing results. This strategy
enhances the group"s flexibility and product offering and
continues to increase its market share in its principal
markets.
The average operating margin of the group was stable at
11,2% (2003: 11,1%) which should be viewed in relation to
the traditionally higher full-year margins, resulting from
the seasonal nature of the business. The improvement in
efficiencies throughout the supply chain continues and stand
to further benefit from critical mass achieved as a result
of organic growth supplemented by recent acquisitions. The
group is particularly pleased with the growing success of
its combined European and Australian import and distribution
business of products sourced from China and other countries
in the Pacific Rim.
Net finance charges, which include interest received on
suppliers" funding, for the year were R57 million (2003: R64
million). The group"s treasury operation actively utilises
the improved capital structure to enhance the credit profile
to secure efficient funding and lower interest rates in all
the regions in which it operates.
At 31 December 2004 Steinhoff had net interest-bearing debt
of R866 million (2003: R387 million) resulting in a debt:
shareholders" funds ratio of 12% (2003: 6%). The increased
net borrowings arose from the payment of the 2004 cash
dividend (2003: mainly scrip dividend) and the acquisition
funding incurred during the period (e.g. the cash element of
the PG Bison acquisition). A portion of the group"s cash
resources in South Africa at 31 December 2004 was earmarked
for the Unitrans acquisition which became unconditional in
January 2005.
The taxation charge increased to R97 million (2003: R62
million) in line with management expectations. Management
remains confident that the average tax rate of the group
will be maintained at these levels for the foreseeable
future.
Segmental analysis
The group"s main activity as an integrated global lifestyle
supplier is focused on manufacturing and wholesale &
distribution.
SEGMENTAL ANALYSIS IN EURO
6 months ended 31 December 2004
Revenue Revenue %
Euro "000 31 Dec 31 Dec change
2004 2003
Manufacturing 610 733 446 465 37
Wholesale & distribution 290 630 210 101 38
Total 901 363 656 566 37
6 months ended 31 December 2003
Earnings* Earnings* %
Euro "000 31 Dec 31 Dec change
2004 2003
Manufacturing 71 029 53 482 33
Wholesale & distribution 35 102 26 260 34
Total 106 131 79 742 33
Geographical analysis in euro
6 months ended 31 December 2004
Revenue Revenue# %
Euro "000 31 Dec 31 Dec change
2004 2003
Southern Africa 320 716 180 664 78
European Community 424 378 375 865 13
Pacific Rim 156 269 100 037 56
Total 901 363 656 566 37
6 months ended 31 December 2003
Earnings* Earnings*# %
Euro "000 31 Dec 31 Dec change
2004 2003
Southern Africa 32 547 17 994 81
European Community 59 697 54 125 10
Pacific Rim 13 887 7 623 82
Total 106 131 79 742 33
* Earnings before interest, taxation and impairment
writeoffs, including share of associate companies income.
# Prior year figures have been allocated to incorporate
the reclassification used for the current reporting period.
Segmental analysis IN RAND
6 months ended 31 December 2004
Net
R"000 Revenue % Earnings* % assets** %
Manufacturing 4 782 771 68 556 241 67 4 677 531 66
Wholesale & 2 275 983 32 274 893 33 2 409 630 34
distribution
Total 7 058 754 100 831 134 100 7 087 161 100
6 months ended 31 December 2003
Net
R"000 Revenue % Earnings* % assets** %
Manufacturing 3 663 292 68 438 824 67 4 412 960 70
Wholesale & 1 723 902 32 215 470 33 1 896 815 30
distribution
Total 5 387 194 100 654 294 100 6 309 775 100
Geographical analysis IN RAND
6 months ended 31 December 2004
Net
R"000 Revenue % Earnings* % assets** %
Southern 2 511 591 36 254 883 31 1 722 742 24
Africa
European 3 323 389 47 467 499 56 4 652 162 66
Community
Pacific Rim 1 223 774 17 108 752 13 712 257 10
Total 7 058 754 100 831 134 100 7 087 161 100
6 months ended 31 December 2003
Net
Rand "000 Revenue# % Earnings*# % assets** %
Southern 1 482 370 28 147 642 23 1 422 680 23
Africa
European 3 084 010 57 444 101 67 4 821 303 76
Community
Pacific Rim 820 814 15 62 551 10 65 792 1
Total 5 387 194 100 654 294 100 6 309 775 100
* Earnings before interest, taxation and impairment write
offs, including share of associate companies income.
** Prior year figures have been restated to reflect the
consolidation of the share trust.
# Prior year figures have been allocated to incorporate
the reclassification used for the current reporting period.
An amount of R496 million (2003: R445 million) of Africa"s
revenue represents exports to the European Community and the
USA, amounting to approximately 20% (2003: 30%) of its
activities. The Group"s direct exposure to the local South
African furniture market amounted to 13% (2003: 19%).
CORPORATE ACTIVITY
The group concluded the following corporate transactions
during the period under review:
* Steinhoff exercised its pre-emptive right on the 34 216
680 shares held by Murray & Roberts Limited ("M&R") in
Unitrans Limited ("Unitrans"). The purchase price was
subsequently determined at 2 632 cents per Unitrans share
and this acquisition became unconditional on 12 January
2005. Accordingly, Steinhoff paid the purchase price of R900
million to M&R on 17 January 2005 resulting in Unitrans
becoming a 60,8% owned subsidiary of Steinhoff, with the
relevant shareholders" agreement with M&R being terminated.
The mandatory offer to Unitrans minority shareholders at 2
632 cents per share as required by the Securities Regulation
Panel was circularised on Friday, 25 February 2005 and
closes on Friday, 18 March 2005;
* with effect from 1 October 2004, Steinhoff acquired the
assets, including designs, brands, trade marks, drawings and
manufacturing equipment, of Hukla Mobelwerke GmbH, one of
its former major competitors in Germany which was placed in
liquidation. Hukla is a well-known brand in Germany, serving
the upper-end of the market for upholstery, recliner and
mattress products. With the acquisition of Hukla, Steinhoff
also gains a distribution presence in France, a region in
which it has had to date, a very limited presence, and an
entry into the German bedding market.
* Steinhoff Europe entered into a licensing agreement with
the toy distributor, Lego, in terms of which it acquired the
naming rights for Children"s Furniture to be marketed and
distributed under the "Lego" brand. The Lego addition
complements Steinhoff"s existing children"s range
distributed under the "Janosh" brand.
OUTLOOK
The European and Pacific Rim operations continue to grow
through leveraging their core strategies and competencies.
The combination of the European sourcing business with the
sourcing business in Australia is showing positive results,
and will further improve as a result of the establishment of
the centralised buying office in China. The latter will co-
ordinate world-wide sourcing activities, resulting in
critical mass related benefits, and ensures that sourced
products adhere to Steinhoff"s quality control standards.
In the German region, the market"s consolidation trend is
continuing as is evidenced by on-going liquidations. In this
environment, Steinhoff benefits from its strategic
relationships, diversity of its product offering, financial
strength, logistical support and high service levels. These
factors contribute to Steinhoff remaining one of the
suppliers of choice to many of the larger retailers and
buying groups.
The Group"s extensive product range, which was further
supplemented by the recent Hukla acquisition, and
complementary brands are continuing to gain consumer appeal.
Based on the level of interest and order intake at recent
European furniture fairs Steinhoff"s expanded product range
and price points augur well for the future.
The Group expects to benefit from the continued buoyancy in
the South African retail market. The Timber division, under
which Exports are included, has experienced a tough trading
period and is continuing to be adversely impacted by the
strong rand. Management has taken remedial steps to ensure
its viability.
PG Bison forms a fundamental part of Steinhoff"s timber
strategy and is poised to deliver the benefits associated
with its integrated strategy in South Africa.
The incorporation of Unitrans as a subsidiary and the
optimisation of the operational synergies will flow into the
future. The Group will consolidate Unitrans" results, which
are expected to make a significant contribution, for the six-
month period ending 30 June 2005.
Management expects real growth in headline earnings from the
continuing operations for the remainder of the current
financial year.
DIVIDEND
It is the group"s policy to declare dividends once a year
after its financial year-end at 30 June.
On behalf of the board of directors
BE Steinhoff MJ Jooste
Chairman Chief executive officer
7 March 2005
Administration
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
JSE share code: SHF
ISIN code: ZAE000016176
("Steinhoff" or "the company" or "the Group")
Registered office
28 Sixth Street, Wynberg, Sandton, 2090
Republic of South Africa
Tel +27 (11) 445 3000
Fax +27 (11) 445 3099
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
Company secretary
SJ Grobler
Auditors
Deloitte & Touche
Sponsor
PSG Capital Limited
Directors
BE Steinhoff* (chairman), MJ Jooste (chief executive
officer),
DE Ackerman+, CE Daun+*, JNS du Plessis+, KJ Grove,
D Konar+, JF Mouton+, FJ Nel, FA Sonn+, NW Steinhoff+*,
DM van der Merwe, JHN van der Merwe, RH Walker#
#Australian *German +Non-executive
www.steinhoffinternational.com
Date: 07/03/2005 02:57:42 PM Supplied by www.sharenet.co.za
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