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SHF - Steinhoff - Unaudited Interim Results For The Six Months Ended

Release Date: 05/03/2008 12:32
Code(s): SHF
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SHF - Steinhoff - Unaudited Interim Results For The Six Months Ended 31 December 2007 and dividend declaration STEINHOFF INTERNATIONAL HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration no. 1998/003951/06) Ordinary share code: "SHF" ISIN: ZAE000016176 ("Steinhoff") Unaudited interim results for the six months ended 31 December 2007 HIGHLIGHTS - HEADLINE EARNINGS INCREASE BY 35% - HEADLINE EARNINGS PER ORDINARY SHARE INCREASE BY 22% - OPERATING MARGIN INCREASED TO 9,6% - STRONG BALANCE SHEET WITH GEARING REDUCED TO 27% - TURNAROUND ACHIEVED IN UK RETAIL CONDENSED CONSOLIDATED INCOME STATEMENT Notes Six months Restated(1) % Year ended Six months change ended 31 Dec ended 30 June 2007 31 Dec 2007
Unaudited 2006 Audited R`000 Unaudited R`000 R`000

Revenue 20 570 051 17 886 012 15 34 228 573 Operating 2 331 267 1 873 009 24 3 932 profit before 691 depreciation and capital items Depreciation (356 641) (357 118) (720 539) Operating 1 974 626 1 515 891 30 3 212 profit before 152 capital items Capital items 1 (132 926) (2 359) (234 500) Earnings 1 841 700 1 513 532 22 2 977 before 652 interest, dividend income, associated earnings and taxation Net finance (237 139) (235 064) (453 charges 827) Dividend 303 10 815 24 209 income Earnings 1 604 864 1 289 283 24 2 548 before 034 associated earnings and taxation Share of 24 166 47 923 67 159 profit of associate companies Profit before 1 629 030 1 337 206 22 2 615 taxation 193 Taxation (162 853) (197 593) (325 208)
Profit for the 1 466 177 1 139 613 29 2 289 period from 985 continuing operations Profit for the - 70 722 142 552 period from discontinued operations Profit on - - 541 903 disposal of discontinued operations Profit for the 1 466 177 1 210 335 21 2 974 period 440 Attributable to: Equity holders 1 455 087 1 176 072 24 2 969 of the parent 621 Minority 11 090 34 263 4 819 interest Profit for the 1 466 177 1 210 335 21 2 974 period 440 Headline 120,4 99,0 22 214,1(2) earnings per ordinary share (cents) Diluted 117,1 97,5 20 206,3(2) headline earnings per ordinary share (cents) From continuing and discontinued operations: Basic earnings 110,6 99,1 12 241,9 per share (cents) Fully diluted 107,8 96,7 11 233,0 earnings per share (cents) From continuing operations: Basic earnings 110,6 92,9 19 184,3 per share (cents) Fully diluted 107,8 90,6 19 177,1 earnings per share (cents) Number of 1 308 445 1 139 826 15 1 256 shares in 453 issue (`000) Weighted 1 263 494 1 141 224 11 1 188 average number 015 of shares in issue (`000) Earnings 2 1 397 002 1 130 446 24 2 873 attributable 508 to ordinary shareholders (R`000) Headline 3 1 521 574 1 130 082 35 2 542 earnings 990 attributable to ordinary shareholders (R`000) Average 9,8000 9,2834 6 9,4103 currency translation rate (rand:euro) ADDITIONAL INFORMATION (1)Prior year figures have been restated to reflect the effects of provisionally determined and changes to fair values of prior year business combinations, early adoption of IFRIC 11, the group`s discontinued operations, change in accounting policy related to common control transactions and reclassifications. (2)Headline earnings and diluted headline earnings per ordinary share were restated for both 31 December 2006 and 30 June 2007 in accordance with Circular 8/2007 - Headline Earnings, effective for financial periods ending on or after 31 August 2007. Note 1: Capital items Closure costs (1 033) (922) (177 994) Goodwill adjustments 5 833 (3 973) - Impairments (139 131) - (81 901) (Loss)/profit on scrapping (3 682) 4 537 (8 523) of rental fleet vehicles Profit on disposal of - - 978 business Profit/(loss) on disposal 5 087 (2 001) 32 940 of property, plant and equipment (132 926) (2 359) (234 500) Profit on disposal of - - 541 903 discontinued operations Capital items included in - 177 (6 678) discontinued operations (132 926) (2 182) 300 725
Note 2: Earnings attributable to ordinary shareholders Earnings attributable to 1 455 087 1 176 072 2 969 621 equity holders Dividend entitlement on non- (58 085) (45 626) (96 113) redeemable cumulative preference shares (including STC) 1 397 002 1 130 446 2 873 508 Note 3: Headline earnings calculation Earnings attributable to 1 455 087 1 176 072 2 969 621 equity holders Adjustment for: Capital items (note 1) 132 926 2 182 (300 725) Taxation effects on capital (7 433) (1 215) (28 798) items Share of minorities in - - (995) capital items Profit on disposal of (921) (1 331) - property, plant and equipment included in share of associate income Dividend entitlement on non- (58 085) (45 626) (96 113) redeemable cumulative preference shares (including STC) Headline earnings for the 1 521 574 1 130 082 2 542 990 period attributable to ordinary shareholders CONDENSED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Restated(1) Six months Six months Year ended ended ended
31 Dec 31 Dec 30 June 2007 2006 2007 Unaudited Unaudited Audited R`000 R`000 R`000
Actuarial (losses)/gains (33 487) - 37 709 recognised in equity Exchange differences on (52 665) 128 010 248 662 consolidation of foreign subsidiaries Cash flow hedges (10 917) (14 830) (50 357) recognised in equity Net (expense)/income (97 069) 113 180 236 014 recognised directly in equity Profit for the period 1 466 177 1 210 335 2 974 440 Total recognised income 1 369 108 1 323 515 3 210 454 and expense for the period Attributable to: Equity holders of the 1 358 018 1 289 252 3 205 635 parent Minority interest 11 090 34 263 4 819 1 369 108 1 323 515 3 210 454 CONDENSED CONSOLIDATED BALANCE SHEET Restated(1) 31 Dec 31 Dec 30 June 2007 2006 2007 Unaudited Unaudited Audited
R`000 R`000 R`000 ASSETS Non-current assets Property, plant and 8 905 822 6 141 246 7 998 870 equipment and biological assets Intangible assets and 10 175 770 8 696 797 10 247 043 goodwill Investments and loans 4 306 185 3 740 726 3 217 203 Deferred taxation assets 757 646 498 183 706 213 24 145 423 19 076 952 22 169 329 Current assets Accounts receivable, short-term loans and other current assets 8 170 794 7 057 998 6 848 698 Inventories 3 582 708 3 391 889 3 451 445 Cash and cash 5 097 482 5 470 444 5 064 987 equivalents 16 850 984 15 920 331 15 365 130
Total assets 40 996 407 34 997 283 37 534 459 EQUITY AND LIABILITIES Capital and reserves Ordinary share capital 17 835 197 11 747 514 16 232 948 and reserves Preference share capital 1 042 474 1 041 552 1 042 474 18 877 671 12 789 066 17 275 422 Minority interest 28 482 772 742 82 121 Total equity 18 906 153 13 561 808 17 357 543 Non-current liabilities Deferred taxation 1 106 517 1 086 172 991 324 liabilities Interest-bearing long- 8 766 573 8 041 267 7 261 391 term liabilities Other long-term 594 316 561 034 418 321 liabilities and provisions 10 467 406 9 688 473 8 671 036 Current liabilities Net interest-bearing 5 020 782 3 637 749 3 974 843 liabilities Accounts payable, 6 602 066 8 109 253 7 531 037 provisions and other current liabilities 11 622 848 11 747 002 11 505 880 Total equity and 40 996 407 34 997 283 37 534 459 liabilities Net asset value per 1 363 1 031 1 292 ordinary share (cents) Gearing ratio (net) (%) 27 46 24 Closing exchange rate 9,9782 9,2226 9,5735 (rand:euro) CONDENSED CONSOLIDATED CASH FLOW STATEMENT Restated(1) Six months Six months Year ended ended ended
31 Dec 31 Dec 30 June 2007 2006 2007 Unaudited Unaudited Audited R`000 R`000 R`000
Operating profit before 2 320 506 1 960 015 3 929 485 working capital changes Net changes in working (1 432 005) (1 315 231) (475 637) capital Cash generated from 888 501 644 784 3 453 848 operations Net finance costs (237 139) (235 064) (453 827) Dividends paid (54 731) (40 706) (86 603) Dividends received 11 140 22 124 51 537 Taxation paid (160 681) (199 198) (377 878) Net cash inflow from 447 090 191 940 2 587 077 operating activities Net cash outflow from (1 998 817) (2 099 607) (1 943 674) investing activities Net cash 1 467 736 2 330 429 (649 852) inflow/(outflow) from financing activities Net (decrease)/increase (83 991) 422 762 (6 449) in cash and cash equivalents Effects of exchange rate 116 486 (9 746) 14 008 changes on cash and cash equivalents Cash and cash 5 064 987 5 057 428 5 057 428 equivalents at beginning of period Cash and cash 5 097 482 5 470 444 5 064 987 equivalents at end of period SEGMENTAL ANALYSIS Restated(1) Six months Six months Year
ended ended ended 31 Dec 31 Dec 30 June 2007 2006 2007 Unaudited Unaudited % Audited
R`000 R`000 change R`000 Revenue Retail activities - Household goods 4 325 244 4 327 857 - 9 175 267 and building supplies - Motor vehicles 6 415 793 6 289 962 2 11 699 666 and finance Manufacturing and 9 382 425 7 153 914 31 13 786 631 sourcing of household goods and related raw materials Logistical 2 347 753 1 925 310 22 3 784 845 services Corporate services - Brand management 146 177 135 946 275 472 - Investment 121 157 86 893 176 074 participation - Central treasury 386 924 92 676 369 510 and other activities 23 125 473 20 012 558 16 39 267 465 Intersegment (2 555 422) (2 126 546) (5 038 892) eliminations 20 570 051 17 886 012 15 34 228 573 Operating profit before capital items Retail activities - Household goods 292 969 99 938 193 255 128 and building supplies - Motor vehicles 247 366 205 165 21 464 108 and finance Manufacturing and 1 027 455 870 150 18 1 682 973 sourcing of household goods and related raw materials Logistical 181 679 158 108 15 313 845 services Corporate services - Brand management 146 177 135 946 275 412 - Investment 121 157 86 893 176 035 participation - Central treasury 127 522 117 917 374 000 and other activities 2 144 325 1 674 117 28 3 541 501 Intersegment (169 699) (158 226) (329 349) eliminations 1 974 626 1 515 891 30 3 212 152 Restated(1) 31 Dec 31 Dec 30 June 2007 2006 2007
Unaudited Unaudited Audited R`000 % R`000 % R`000 Total assets Retail activities - Household goods 5 555 158 16 5 543 148 20 7 665 and building 963 supplies - Motor vehicles 2 816 970 8 2 786 405 10 2 519 and finance 547 Manufacturing and 14 782 414 42 11 345 719 40 11 534 sourcing of 491 household goods and related raw materials Logistical services 4 021 528 12 2 886 637 10 3 705 085
Corporate services - Brand management 2 666 019 8 2 526 768 9 2 623 039 - Investment 3 778 008 11 2 860 081 10 2 354 participation 667 - Central treasury 1 184 794 3 385 217 1 966 975 and other activities 34 804 891 28 333 975 100 31 369 100 767 RECONCILIATION OF TOTAL ASSETS PER SEGMENTAL ANALYSIS TO TOTAL ASSETS PER BALANCE SHEET Restated(1) 31 Dec 31 Dec 30 June 2007 2006 2007 Unaudited Unaudited Audited
R`000 R`000 R`000 Total assets per balance 40 996 407 34 997 283 37 534 459 sheet Less: Cash and cash equivalents (5 097 482) (5 470 444) (5 064 987) Investments in associate (747 220) (806 415) (866 282) companies Investment in preference (177 500) (180 000) (177 500) shares Interest-bearing (169 314) (206 449) (55 923) investments and loans Total assets per segmental 34 804 891 28 333 975 31 369 767 analysis GEOGRAPHICAL INFORMATION Restated(1) 31 Dec 31 Dec 30 June
2007 2006 2007 Unaudited Unaudited Audited R`000 % R`000 % R`000 % Revenue United 3 867 851 19 3 676 215 20 7 652 119 22 Kingdom European 5 128 497 25 3 573 988 20 6 610 368 19 Union Pacific Rim 1 318 472 6 1 392 575 8 2 662 821 8 Southern 10 255 231 50 9 243 234 52 17 303 265 51 Africa 20 570 051 100 17 886 012 100 34 228 573 100
Non-current assets United 5 810 002 24 4 144 978 22 5 991 828 27 Kingdom European 7 638 648 32 7 625 883 40 6 422 771 29 Union Pacific Rim 1 296 777 5 1 066 168 5 1 173 434 5 Southern 9 399 996 39 6 239 923 33 8 581 296 39 Africa 24 145 423 100 19 076 952 100 22 169 329 100 SELECTED EXPLANATORY NOTES STATEMENT OF COMPLIANCE The condensed interim financial information for the half-year ended 31 December 2007, have been prepared in accordance with International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting Standards Board (IASB), and the requirements of the South African Companies Act. This set of condensed interim financial statements are presented in compliance with IAS 34 - Interim Financial Reporting, and should be read in conjunction with the annual financial statements for the year ended 30 June 2007. BASIS OF PREPARATION The condensed interim financial statements are presented in thousands of South African rands (R`000) on the historical-cost basis, except for certain assets and liabilities which are carried at amortised cost, and derivative financial instruments and biological assets which are stated at their fair value. ACCOUNTING POLICIES The accounting policies adopted in preparation of the condensed interim financial information are consistent with those of the annual financial statements for the year ended 30 June 2007. RESTATEMENT OF COMPARATIVE FIGURES In accordance with IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors, comparative periods have been restated to reflect the following changes: Discontinued operations - In June 2007 Steinhoff sold its entire South African furniture manufacturing and import interests. The comparative income statement has been restated to show the discontinued operation separately from continuing operations. Common control transactions - premiums and discounts arising on subsequent purchases from, or sales to minority interest in subsidiaries - Previously, any increases and decreases in ownership interest in subsidiaries without a change in control were recognised as equity transactions. Accordingly, any premiums or discounts on subsequent purchases of equity instruments from, or sales of equity instruments to minorities were recognised directly in equity of the parent shareholder. During the previous financial year, the group changed its policy and these premiums or discounts are now treated in line with the group`s policy on goodwill. IFRIC 11 - IFRS 2 - Group and Treasury Share Transactions - This interpretation is required to be applied to accounting periods commencing on or after 1 March 2007. The group adopted this interpretation in the previous financial year. IFRS 8 - Operating segments - This standard is required to be applied to accounting periods commencing on or after 1 January 2009, with early application encouraged. The group elected for early application of IFRS 8 in the previous financial year, in the interest of improved disclosure. Steinhoff UK Retail Limited (formerly Homestyle Group Plc) - Comparative periods have been restated to reflect the at-acquisition (30 June 2005) restatement of accounting inconsistencies and misstatements in Steinhoff UK Retail Limited. RESTATEMENTS Six months ended 31 Dec 2006 R`000
Reconciliation of equity Equity previously reported 13 469 632 Common control transactions 38 883 Share-based payments 138 350 Steinhoff UK Retail Limited (85 057) Equity after adjustments 13 561 808 Reconciliation of profit for the period Profit for the period from continuing operations 1 210 335 as previously reported Discontinued operations (70 722) Profit for the period from continuing operations 1 139 613 as restated Certain reclassifications have been made to align prior year disclosures with current year classifications. COMMENTARY REVIEW OF RESULTS The growth in operating profits across all segments, reflects another period of sound performance and growth. The period under review had been challenging. RETAIL ACTIVITIES: HOUSEHOLD GOODS AND BUILDING SUPPLIES The United Kingdom (UK) retail operations had a good result, especially against the background of the turnaround to profitability achieved by the retail division, comprising Harveys, Cargo and Beds Division (Bensons, Bed Shed and Sleepmaster). The retail division`s performance should be viewed in perspective to a substantial reduction in net trading space caused by the closure of loss-making stores and Beds concessions lost. The results confirmed that the remedial steps previously taken have successfully addressed some key supply chain issues that adversely impacted on the business in the past. Improvements include: improved image, changed product offerings, staff training, aggressive advertising and better supply chain and customer complaint management which resulted in enhanced service levels, shorter lead times and substantially reduced goods returns levels. The rationalisation of distribution centres and optimisation of logistics capacity utilisation and management changes have also had the desired results. The entire property portfolio is being actively managed in terms of store closures, trading space reductions and re-allocations in order to optimise the coverage of the entire retail division`s footprint. Due to its importance, it is appropriate to report on Harveys` Winter Sale results, even though they do not fall within the reporting period. Confirmed sale orders at good margins, over the period from December 2007 to February 2008 represent an 8% year-on-year increase which were achieved with 5% fewer staff and 8% less trading space. These results are in contrast to the trading updates of listed competitors which announced like-for-like sales figures over the comparable period ranging from 16% to 22% down on last year. The Cargo chain achieved pleasing results. In the Pacific Rim region, trading conditions had been challenging due to economic factors adversely affecting furniture sales. Although the Freedom chain had a difficult six months, particularly in New Zealand, performance subsequent to the reporting date has been much improved. BayLeatherRepublic continued its strong performance and delivered good results. The bedding specialist chain, Snooze, is well on track to improve its performance after management changes and replacement of some franchisees in Western Australia. The discontinuation of BaySwiss was completed and the roll-out of the new Freedom At Home stores is continuing. During the review period, a number of significant projects have been completed which should lead to much improved results in the near future. These projects include the consolidation of group logistics and distribution head offices and the relocation and restructure of manufacturing facilities in Sydney, all of which were completed on time and within budget. The Hungarian retail operations performed satisfactorily and further shop roll-outs will be undertaken in conjunction with our retail partners in the German region. Pennypinchers and Timbercity had a satisfactory result and initiatives are ongoing to expand their footprint across all appropriate areas in South Africa. RETAIL ACTIVITIES: MOTOR VEHICLES AND FINANCE The Unitrans motor retail division outperformed the industry, benefiting from its sales mix of lower- to middle-end passenger vehicles and light commercial vehicles, as well as the shift towards increased workshop sales and spare parts. Hertz performed well and service levels have improved substantially. MANUFACTURING AND SOURCING OF HOUSEHOLD GOODS AND RELATED RAW MATERIALS The group`s UK manufacturing and raw material interests, overall, achieved a good result and benefited from increased intra-group trading levels with the UK`s own retail division. The European manufacturing and sourcing division performed well and continued to benefit from increased intra-group trading. Steinhoff continues to benefit from market share gains in the German region brought about by the consolidation trend prevalent in that region, its geographic reach and flexibility in terms of product sourcing, breadth of product offering, logistics and brand-related competitive advantages. The wholesale and trading joint venture in the Benelux and German region performed exceptionally well and the growth of the Henders & Hazel store-within-a-store concept continued unabated. In eastern Europe, all Polish manufacturing facilities in the mass and discount upholstery segment is being consolidated, which together with the Ukraine factories, stand to benefit substantially from increased supply into our mass market and discount retail alliance partners` distribution bases in the German region. In order to counter the adverse effects of the Zloty strength relative to the Euro and the labour migration situation in Poland, all administration and distribution functions will be centralised in a new tax-free zone at Rzepin in Poland. This initiative which is expected to be completed towards the end of 2008, is anticipated to result in substantial cost savings for the Polish production facilities. The international sourcing operations continue to grow substantially due to increased intra-group trading levels. This division also benefited the group as a result of the strength of the Euro, British Pound and Australian Dollar, relative to the US Dollar as the principal sourcing currency. PG Bison Holdings (Proprietary) Limited achieved excellent results in a market where demand still outstrips supply, notwithstanding production capacity constraints, particularly in respect of medium density fibreboard. The new chipboard plant at Ugie in the North Eastern Cape produced its first particle board on 13 December 2007, one month ahead of schedule and within budget. It is particularly pleasing to report that the plant, with a capacity of 1 000 m3 per day, has already achieved a production output of 700 m3 per day of top quality product which compares with equivalent product standards available in Europe. The results of the South African raw material division were adversely affected by the slowdown in consumer spending on furniture and other household goods products in South Africa. LOGISTICAL SERVICES Unitrans Supply Chain Services division benefited from good quality new contracts gained to counter the effects of higher fixed operating costs. Although the new contracts that were not budgeted for required higher capital expenditure, the quality of these contracts provides great comfort in terms of market positioning and service levels of this division. The passenger division also achieved good results and has an exciting pipeline for new business. The UK logistics division was restructured and after the substantial top-management changes recently effected, is expected to return to profitability by the end of the current financial year. CORPORATE SERVICES Brand ownership and management remains an important competitive priority and delivered the desired results. Steinhoff`s investment participation activities achieved good results and are expected to grow from the expansion of the related retail bases. The group`s treasury activities relating to cash management, interest rate and currency exposures risk management are integral to the operating activities, and have contributed substantially to operating income, as well as increased group-related volume rebates and other sundry income. The corporate services segment also includes income in respect of the property portfolio recently acquired and property-related services which are undertaken centrally at corporate level. PERFORMANCE Subsequent to the reporting period, the South African Rand (ZAR) exchange rate declined substantially. This augers well for ZAR-denominated profitability in respect of the remainder of the current financial year. The average exchange rate used for converting Euro income and expenditure to ZAR for the period under review was R9,80: 1 Euro compared to R9,2834: 1 Euro in respect of the corresponding six months of the previous financial year. The group`s revenues increased by 15% from R17 886 million to R20 570 million, notwithstanding the continued increase in intra-group sales, in line with the business model of vertical integration. The group generated 50% (2006: 48%) of its revenues in currencies other than South African Rand, principally Euro, British Pound and Australian Dollar. The actual foreign revenue achieved in currencies other than South African Rand, but denominated in Euro, increased by 14% from Euro 903 million to Euro 1 033 million. Headline earnings attributable to ordinary shareholders grew by 35% to R1 522 million, compared to R1 130 million in the six months ended 31 December 2006. Headline earnings per ordinary share increased by 22% to 120,4 cents (2006: 99,0 cents) with basic earnings per ordinary share from continuing and discontinued operations, increasing 12% to 110,6 cents (2006: 99,1 cents). The difference between the reported headline and basic earnings per ordinary share is largely attributable to an impairment provision against the group`s carrying value of its listed associate company, Amalgamated Appliance Holdings Limited. The weighted average number of ordinary shares in issue during the period increased by 11% to 1 263 million (2006: 1 141 million), mainly as a result of the 133 million shares issued, in respect of the Homestyle and Unitrans minority transactions undertaken during the latter six months of the 2007 financial year. Ordinary shareholders` funds at 31 December 2007 amounted to R17 835 million (30 June 2007: R16 233 million). The net asset value per ordinary share increased to 1 363 cents per share from 1 031 cents per share as at 31 December 2006. This increase is stated after the payment, in November 2007, of a 50 cents cash distribution per share from share premium account, amounting to R650 million. The group generated R889 million (2006: R645 million) cash from operations. Cash generation is calculated after taking into account the net increase in working capital of R1 432 million (2006: R1 315 million) in line with the increased activity levels and the end of calendar year trading cycle. The net increase in working capital should be viewed in the context of the continued settlement practices that allows the group to secure attractive discounts and best buying prices of raw materials and household goods products. The group`s average operating margin improved to 9,6% (2006: 8,5%), mainly due to the turnaround to profitability of the UK retail operations, as well as the beneficial impact on the group`s margins, given the relative strength of the Euro, British pound and Australian Dollar against the US Dollar. The group continues to benefit from enhanced efficiencies throughout the supply chain, capacity utilisation as a result of improved economies of scale and the favourable terms of sourced products sold through the retail distribution base. Net finance charges for the period at R237 million (2006: R235 million), remained stable due to improved working capital management throughout all divisions, and increased interest income earned on funding provided to suppliers and retail alliance partners. At 31 December 2007, Steinhoff had net interest-bearing debt of R5'133 million (31 December 2006: R5 863 million) resulting in a debt: equity ratio of 27% (31 December 2006: 46%), well within the group`s self-imposed covenants. The Board is particularly pleased to advise that the guaranteed registered South African bond of R1 billion was redeemed on 28 February 2008 and re-financed by 5-year senior unsecured fixed rate notes at a favourable cost, notwithstanding the adverse conditions prevailing in financial markets (refer "Corporate Activity" below). The group`s taxation charge was R163 million (2006: R198 million), translating to an average tax rate of 10% (2006: 14,8%), mainly attributable to group tax relief benefits that are now available to the UK operations after Steinhoff UK Retail Limited`s return to profitability and the creation of a single UK tax group. As a result of the lower statutory tax rates applicable in certain jurisdictions and the favourable tax dispensations and allowances available to the group, notably in Poland and in respect of the North Eastern Cape Forests Joint Venture (NECF) project, management expect the average tax rate not to exceed 15% of pre-tax income for the foreseeable future. As reflected in the segmental analysis, the group benefited substantially from improved operating margins, particularly in respect of the retail of household goods and building supplies segment of the business, with a margin, before inter-segment eliminations, of 6,8% (2006: 2,3%). This improvement was largely attributable to the turnaround achieved in the UK retail division. The intra-group trading levels have also increased to 11,1% (2006: 10,6%) of group sales, before inter-segment eliminations, in line with the business model of vertical integration. CORPORATE ACTIVITY The group concluded, or is in the process of concluding the following corporate transactions: - PG Bison acquired the entire issued share capital of, and all shareholders` claims against, Woodchemicals SA (Proprietary) Limited (Woodchem), a producer of resin. Resin is a raw material used in the manufacturing of particle board. The acquisition of Woodchem now makes PG Bison totally self-sufficient in respect of its resin requirements for the foreseeable future. - PG Bison acquired from the Industrial Development Corporation of South Africa Limited, its remaining interests in the NECF, together with its shares in, and loan claims against, Goeiehoop Farming (Proprietary) Limited. The aggregate purchase consideration was settled by the delivery of 4 289 105 Steinhoff shares which were held as treasury shares, at a price of 2273 cents per share. - On 21 November 2007 Unitrans Services (Proprietary) Limited, a wholly owned subsidiary of Steinhoff, issued R1 billion senior unsecured fixed rate notes (UTR02) due on 21 November 2012, and bearing interest at a fixed rate of 10,49% per annum payable six monthly in arrears on 21 May and 21 November of each year. The proceeds have been used to re-finance the guaranteed registered bonds (SHF01) of R1 billion issued in the Steinhoff Africa group, which were redeemed on 28 February 2008. - During the period under review, the group continued to expand its retail participation relationships with key retail alliance partners in continental Europe. Apart from the financial merits of these arrangements, the group`s manufacturing and sourcing operations are increasingly benefiting from the resultant increased supply into the related retail distribution bases. - Shareholders are referred to the announcement dated 10 December 2007 wherein salient details of an empowerment transaction involving a 20% equity shareholding in Steinhoff Africa were presented. The Steinhoff Board is pleased to report that the required debt funding facilities for the proposed transaction have been procured. However, given the current weakened financial markets and macro-economic conditions worldwide, Steinhoff, in liaising with its empowerment partners, have resolved to continue with the implementation of the proposed transaction albeit at a somewhat more measured pace given the initial time line proposed. All parties remain committed to a mutually beneficial transaction that will be implemented in the near future. Further details will be announced in due course. OUTLOOK Retail activities: household goods and building supplies In the UK, management continues to focus on business improvement strategies to sustain and further improve on the positive results achieved. These strategies include ongoing management of the property portfolio, continued efforts to reduce lead times, enhanced product availability of fast moving items and increased coverage of all trading facias. The difficulties currently experienced by competitors create opportunities. The restructured Pacific Rim operations should deliver stable results for the foreseeable future. In continental Europe, possible joint ventures with retail alliance partners present interesting opportunities for expanding the group`s geographic coverage also into new territories, outside of the German and Austrian regions. It is planned to expand the South African retail footprint of PG Bison`s Pennypinchers and Timbercity trade retail operations, in line with the group`s vertical integration strategies. Retail activities: motor vehicles and finance In South Africa the motor retail division should continue to deliver positive results, albeit not at the same growth levels as in the past. MANUFACTURING AND SOURCING OF HOUSEHOLD GOODS AND RELATED RAW MATERIALS The group`s UK manufacturing and raw material interests are continuing to grow from increased intra-group supply and, in the case of Pritex, as a result of its increased penetration of the automotive and industrial sectors and exports into new markets outside of the UK. In continental Europe, Steinhoff`s manufacturing and sourcing interests stand to further benefit from the continued consolidation and expanded retail alliances, as well as the retructuring and cost-saving initiatives undertaken in respect of the Polish operations. The sourcing activities in Asia are anticipated to grow further and are driven at top-executive level to maximise scale benefits and synergistic opportunities available within the group. PG Bison`s NECF project presents exciting strategic possibilities in terms of import replacement and market share gains. The South African raw material interests stand to benefit from the diversification into new markets for its products, in addition to the furniture and household goods sector. LOGISTICAL SERVICES The southern African logistics operations are well placed to benefit from new contracts gained in the Unitrans Supply Chain Services and passenger divisions. After the changes effected to the UK logistics division, management is confident about the prospects of a return to profitability of this division as an integral part of all activities in the UK. CORPORATE SERVICES The group`s corporate services segment, including brand management, investment participations and treasury and other activities, are integral to the success of the group`s regional strategies.The resultant competitive advantages are anticipated to preserve the group`s profitable growth prospects for the current financial year and thereafter. GENERAL As a general statement as far as all of the South African operations are concerned, it is noted that the recent power outages may affect Steinhoff`s operations in South Africa. Where possible, stand-by generators are being installed and other contingency plans are in place to prevent any material business disruptions that may arise as a result of load shedding Management expects to achieve growth in headline earnings for the remainder of the current financial year. DIRECTORATE In line with good Corporate Governance Practice, it has been agreed that Mr Bruno Steinhoff, the Company`s executive chairman, will resign from his executive duties with effect from 1 April 2008. He will remain on as non- executive chairman until September 2008 in order to afford the Nominations Committee sufficient time to consider the appointment of an independent non- executive director as chairman of the Board. Bruno has agreed to remain available on a consultancy basis with a view to concluding and/or assisting on projects, especially relating to the increasing retail initiatives in the European Union. After this change to the Board and the recent appointment of Mrs Yolanda Cuba and Mr Dave Brink as independent non-executive directors, the Board will comprise of five executive directors and eight non-executive directors. In addition, Mr Jannie Mouton has resigned from, and will be succeeded by Mr Dave Brink as a member of the Audit and Risk Committee. ORDINARY DIVIDEND It is the group`s policy to declare cash distributions 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 5 March 2008 STEINHOFF INVESTMENT HOLDINGS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1954/001893/06) (JSE share code: SHFF) (ISIN code: ZAE 000068367) Preference shareholders are referred to the above results of Steinhoff for a full appreciation of the consolidated results and financial position of Steinhoff Investments. DECLARATION OF DIVIDEND NUMBER 5 TO PREFERENCE SHAREHOLDERS The Board of Steinhoff Investments has resolved to declare a dividend of 516,47 cents per preference share in respect of the period from 1 July 2007 up to and including 31 December 2007 (the dividend period), payable on Tuesday, 29 April 2008, to those preference shareholders recorded in the books of the company at the close of business on Friday, 25 April 2008. This dividend has been determined on the basis of 75% of the prime bank overdraft lending rate of ABSA Bank Limited prevailing over the dividend period, applied to the nominal value plus premium (of R100,00 per preference share, in the aggregate). The dividend is payable in the currency of South Africa. Last date to trade cum dividend Friday, 18 April 2008 Shares trade ex dividend Monday, 21 April 2008 Record date Friday, 25 April 2008 Payment date Tuesday, 29 April 2008 No dematerialisation or rematerialisation of preference shares may take place between Monday, 21 April 2008 and Friday, 25 April 2008, both dates inclusive. On Tuesday, 29 April 2008, the preference dividend will be electronically transferred to the bank accounts of preference shareholders. Preference shareholders who have dematerialised their shares will have their accounts credited on Tuesday, 29 April 2008. PROPOSED TAXATION AMENDMENTS In the budget speech delivered by the Honourable Minister of Finance on 20 February 2008 (read with a media statement issued by the Department: National Treasury and the South African Revenue Service) more details on the second phase of the conversion of Secondary Tax on Companies (STC) to a shareholder dividend tax were announced. In the first phase of the reform STC was reduced from 12,5% to 10% with effect from 1 October 2007. The second phase of the reform entails the actual conversion into a dividend tax on shareholders. The implementation of the second phase of the reform requires the renegotiation of specific international tax treaties in which the withholding tax on dividends is currently limited to zero per cent. It is anticipated that the second phase will be completed by 2009. The dividend tax will be a final withholding tax of 10% and will apply to all non-corporate shareholders and non-resident corporate shareholders. Depending on the negotiation of treaty rates, the dividend withholding tax rate applicable to distributions to non-resident shareholders may be lower than the 10% rate. Furthermore, all STC credits accumulated prior to the implementation of the second phase of the reform will be forfeited. During phase one of the reform there is no additional taxation in the hands of the preference shareholders but during phase two it may result in an additional cost for certain preference shareholders and an equivalent benefit for Steinhoff Investments. The preference shareholders are accordingly advised that until such time as the legislation is promulgated, legal opinion and appropriate tax advice obtained, it is not possible to determine exactly what the impact will be on the cumulative non-redeemable non-participating preference shares issued by Steinhoff Investments. A further announcement in this regard will be made once the detailed legislation is published and duly considered. On behalf of the board of directors D Konar JHN van der Merwe Non-executive director Executive director 5 March 2008 OTHER NOTES 1. CORPORATE GOVERNANCE Steinhoff has embraced the recommendations of King Report on Corporate Governance and strives to provide reports to shareholders that are timely, accurate, consistent and informative. 2. SOCIAL RESPONSIBILITY Steinhoff continues to be recognised for its corporate social investment activities. Management remains committed to the related initiatives and is conscious of the needs in this regard. A number of social responsibility projects are continuing. 3. HUMAN RESOURCES A good working relationship is maintained with the relevant unions. Ongoing skills and equity activities continue to ensure compliance with current legislation. Plans continue in terms of initiatives embarked upon that contribute to broader skills development and sourcing appropriately qualified staff on an ongoing basis. 4. RELATED PARTY TRANSACTIONS The company entered into various related party transactions. These transactions are no less favourable than those arranged with third parties. 5. FURTHER EVENTS No significant events have occurred in the period between the reporting date and the date of this report. For more detail on the group`s listed investments, shareholders are referred to the results and/or corporate announcements and financial information of: - Amalgamated Appliance Holdings Limited - 10 March 2008 www.amap.co.za - KAP International Holdings Limited - 4 March 2008 www.kapinternational.com ADMINISTRATION STEINHOFF INTERNATIONAL HOLDINGS LIMITED 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 3094 Transfer secretaries: Computershare Investor Services (Proprietary) Limited 70 Marshall Street, Johannesburg, 2001 Company secretary: SJ Grobler Auditors: Deloitte & Touche Sponsor: PSG Capital (Proprietary) Limited Directors: BE Steinhoff^* (chairman), MJ Jooste (chief executive officer), DE Ackerman^, DC Brink^, YZ Cuba^, CE Daun^*, D Konar^, JF Mouton^, FJ Nel, FA Sonn^, IM Topping#, DM van der Merwe, JHN van der Merwe Alternate directors: JNS du Plessis, HJK Ferreira, SJ Grobler, KJ Grove, A Kruger-Steinhoff^* #British *German ^non-executive www.steinhoffinternational.com To view results on mobile www.steinhoff.mobi Date: 05/03/2008 12:32:32 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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