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Interim Results for the 6 months ended 31 December 2012, Dividend Declaration and Changes to the Board
Steinhoff International Holdings Limited
Registration number: 1998/003951/06
(Incorporated in the Republic of South Africa)
(Steinhoff or the company or the group)
JSE share code: SHF
ISIN: ZAE000016176
Unaudited interim results for the six months ended 31 December 2012, dividend to preference shareholders and changes to the board
Operating profit increases to R5.0bn (1H12: R3.7bn)
Cash generated from operations rises by 44% to R4.5bn
Headline earnings per share improves 5% to 173 cps
NAV per share grows by 9% to R26.96 per share
Condensed consolidated income statement
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited % Audited
Notes Rm Rm change Rm
Revenue 57 292 37 645 52 80 434
Operating profit before depreciation, amortisation and
capital items 6 289 4 528 39 9 812
Depreciation and amortisation (1 272) (829) (1 801)
Operating profit before capital items 5 017 3 699 36 8 011
Capital items 1 27 (5) (96)
Earnings before interest, dividend income, associate earnings
and taxation 5 044 3 694 37 7 915
Net finance charges (880) (585) (1 378)
Dividend income 2 3 24
Share of profit of associate companies 100 236 345
Profit before taxation 4 266 3 348 27 6 906
Taxation (619) (315) (863)
Profit for the period 3 647 3 033 20 6 043
Attributable to:
Owners of the parent 3 241 2 907 11 5 655
Non-controlling interests 406 126 388
Profit for the period 3 647 3 033 20 6 043
Headline earnings per ordinary share (cents) 173.4 165.8 5 315.4
Fully diluted headline earnings per ordinary share (cents) 157.8 149.9 5 287.1
Basic earnings per ordinary share (cents) 173.9 165.5 5 312.3
Fully diluted earnings per ordinary share (cents) 158.2 149.7 6 284.6
Number of ordinary shares in issue (m) 1 825 1 723 6 1 756
Weighted average number of ordinary shares in issue (m) 1 781 1 665 7 1 711
Earnings attributable to ordinary shareholders (Rm) 2 3 096 2 757 12 5 345
Headline earnings attributable to ordinary shareholders (Rm) 3 3 087 2 761 12 5 398
Average currency translation rate (rand:euro) 10.8224 10.5137 3 10.4141
The capitalisation share award on 5 December 2012 led to the restatement of comparative per share numbers, none of which resulted
in a deviation of more than 1.6 cents.
Additional information
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Note 1: Capital items
Loss on disposal of intangible assets (1)
Profit/(loss) on disposal of property, plant and equipment and investment
property 24 (5) (20)
Loss on scrapping of vehicle rental fleet (4) (12)
Loss on disposal of investments and associate companies (84)
Negative goodwill 93
Reversal of impairments/(impairments) 7 (72)
27 (5) (96)
Note 2: Earnings attributable to ordinary shareholders
Earnings attributable to owners 3 241 2 907 5 655
Dividend entitlement on cumulative preference shares (145) (150) (310)
3 096 2 757 5 345
Note 3: Headline earnings attributable to ordinary shareholders
Earnings attributable to owners of the parent 3 241 2 907 5 655
Adjusted for:
Capital items (note 1) (27) 5 96
Taxation effects of capital items 7 (1) (46)
Non-controlling interests' portion of capital items 11 3
Dividend entitlement on cumulative preference shares (145) (150) (310)
3 087 2 761 5 398
Note 4: Consumer finance
Revenue (included in revenue) 2 195 1 020
Finance costs (net) (included in net finance charges) (149) (48)
Debtors' costs (included in operating expenses) (345) (84)
Risk-adjusted consumer finance income 1 701 888
Condensed consolidated statement of cash flows
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Cash generated before working capital changes 6 392 4 552 9 748
Increase in inventories (719) (1 082) (1 079)
(Increase)/decrease in vehicle rental fleet (391) 152
(Increase)/decrease in receivables (1 137) (1 037) 788
Increase in payables 382 703 759
Changes in working capital (1 865) (1 416) 620
Cash generated from operations 4 527 3 136 10 368
Net movement in instalment sale and loan receivables (1 873) (523)
Dividends received 17 88 114
Dividends paid (462) (40) (339)
Net finance costs (535) (446) (1 020)
Taxation paid (641) (326) (771)
Net cash inflow from operating activities 1 033 2 412 7 829
Net cash outflow from investing activities (4 103) (3 415) (9 403)
Net cash inflow from financing activities 2 901 570 3 038
Net (decrease)/increase in cash and cash equivalents (169) (433) 1 464
Effects of exchange rate changes on cash and cash equivalents 458 329 226
Cash and cash equivalents at beginning of period 8 011 6 321 6 321
Cash and cash equivalents at end of period 8 300 6 217 8 011
Condensed consolidated statement of financial position
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
ASSETS
Non-current assets
Intangible assets and goodwill 53 251 38 675 49 406
Property, plant and equipment, investment property and biological assets 41 051 32 240 37 015
Investments in associate companies 2 411 4 765 2 353
Investments and loans 963 5 835 884
Deferred taxation assets 721 432 697
Other long-term assets 97 94 166
98 494 82 041 90 521
Current assets
Inventories 16 752 10 248 14 794
Accounts receivable, short-term loans and other current assets 24 117 13 306 19 736
Cash and cash equivalents 8 300 6 217 8 011
49 169 29 771 42 541
Total assets 147 663 111 812 133 062
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and reserves 49 196 38 749 43 292
Preference share capital 3 497 4 056 3 837
52 693 42 805 47 129
Non-controlling interests 6 191 3 331 6 508
Total equity 58 884 46 136 53 637
Non-current liabilities
Interest-bearing long-term liabilities 38 051 27 360 33 858
Deferred taxation liabilities 8 380 6 899 7 765
Other long-term liabilities and provisions 3 371 2 969 3 016
49 802 37 228 44 639
Current liabilities
Accounts payable, provisions and other current liabilities 29 594 21 686 27 558
Interest-bearing short-term liabilities 6 800 4 684 5 136
Bank overdrafts and short-term facilities 2 583 2 078 2 092
38 977 28 448 34 786
Total equity and liabilities 147 663 111 812 133 062
Net asset value per ordinary share (cents) 2 696 2 249 2 466
Closing exchange rate (rand:euro) 11.2224 10.5023 10.3447
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Profit for the period 3 647 3 033 6 043
Other comprehensive income/(loss)
Actuarial gain/(loss) on defined benefit plans 1 (32) (284)
Exchange differences on translation of foreign subsidiaries 2 731 1 566 2 331
Net value (loss)/gain on cash flow hedges and other fair value reserves (111) 162 76
Deferred taxation 35 (36) 41
Other comprehensive income for the period, net of taxation 2 656 1 660 2 164
Total comprehensive income for the period 6 303 4 693 8 207
Total comprehensive income attributable to:
Owners of the parent 5 897 4 378 7 655
Non-controlling interests 406 315 552
Total comprehensive income for the period 6 303 4 693 8 207
Condensed consolidated statement of changes in equity
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Balance at beginning of the period 53 637 40 830 40 830
Changes in ordinary share capital and share premium
Capital distribution (1 690) (1 311) (1 311)
Net shares issued 1 580 1 948 2 700
Net utilisation of treasury shares 64 35
Changes in preference share capital and share premium
Redemption of preference shares (398) (225)
Net utilisation of treasury shares 58 6
Changes in reserves
Total comprehensive income for the period attributable to
owners of the parent 5 897 4 378 7 655
Equity portion of convertible bond issued and redeemed net
of deferred taxation 92 51
Preference dividends (147) (37) (349)
Share-based payments 127 16 84
(Discount)/premium on introduction and recognition of
non-controlling interests (20) 684
Other reserve movements 1 6 (6)
Changes in non-controlling interests
Total comprehensive income for the period attributable to
non-controlling interests 406 315 552
Recognition on acquisition of subsidiaries 6 186
Dividends and capital distributions paid (312) (2) (111)
Shares purchased from non-controlling interests (413) (3 152)
Other transactions with non-controlling interests 2 (7) 8
Balance at end of the period 58 884 46 136 53 637
Comprising:
Ordinary share capital and share premium 9 852 9 111 9 898
Preference share capital and share premium 3 497 4 056 3 837
Distributable reserves 32 756 27 146 29 616
Convertible and redeemable bonds reserve 1 066 923 974
Foreign currency translation reserve 4 451 936 1 720
Share-based payment reserve 764 608 637
Other reserves 307 25 447
Non-controlling interests 6 191 3 331 6 508
58 884 46 136 53 637
Segmental analysis
Six months Six months
ended ended Year ended
31 Dec 31 Dec 30 June
2012 2011* 2012
Unaudited Unaudited Audited
Rm Rm % change Rm
Revenue
Retail activities
International operations 29 075 28 094 3 52 459
African operations 16 359 7 451
Manufacturing, sourcing and logistics
International operations 11 601 11 283 3 20 064
African operations 7 901 5 094 55 11 063
Properties 953 856 11 1 658
Corporate services
Brand management 191 196 (3) 383
Investment participation 256 (100) 482
Central treasury and other activities 187 110 70 274
66 267 45 889 44 93 834
Intersegment revenue eliminations (8 975) (8 244) (13 400)
57 292 37 645 52 80 434
Operating profit before capital items
Retail activities
International operations 1 553 1 404 11 2 478
African operations 886 639
Manufacturing, sourcing and logistics
International operations 870 770 13 1 690
African operations 672 547 23 1 116
Properties 935 849 10 1 638
Corporate services
Brand management 191 196 (3) 383
Investment participation 256 (100) 482
Central treasury and other activities 198 85 133 290
5 305 4 107 29 8 716
Intersegment profit eliminations (288) (408) (705)
5 017 3 699 36 8 011
31 Dec 31 Dec 30 June
2012 2011* 2012
Unaudited Unaudited Audited
Rm % Rm % Rm %
Total assets
Retail activities
International operations 57 848 43 48 601 50 52 438 44
African operations 23 197 17 19 265 16
Manufacturing, sourcing and logistics
International operations 7 397 6 9 086 9 7 842 6
African operations 13 459 10 10 465 11 12 938 11
Properties 26 415 20 20 869 22 22 867 19
Corporate services
Brand management 5 023 4 4 663 5 4 646 4
Investment participation 3 205 3
Central treasury and other activities 660 209 509
133 999 100 97 098 100 120 505 100
* Prior period segments have been restated as the group has decided to disclose its properties as a separate segment.
Reconciliation of total assets per statement of financial position to total assets per segmental analysis
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm Rm Rm
Total assets per statement of financial position 147 663 111 812 133 062
Less: Cash and cash equivalents (8 300) (6 217) (8 011)
Less: Investments in associate companies (2 411) (4 765) (2 353)
Less: Investments in PSG Group Limited (971)
Less: Interest-bearing assets (2 953) (2 761) (2 193)
Total assets per segmental analysis 133 999 97 098 120 505
Geographical information
Six months Six months Year
ended ended ended
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm % Rm % Rm %
Revenue
Continental Europe 28 601 50 28 342 75 52 390 65
Pacific Rim 1 464 3 1 412 4 2 924 4
Southern Africa 24 160 42 5 132 14 18 350 23
United Kingdom 3 067 5 2 759 7 6 770 8
57 292 100 37 645 100 80 434 100
31 Dec 31 Dec 30 June
2012 2011 2012
Unaudited Unaudited Audited
Rm % Rm % Rm %
Non-current assets
Continental Europe 70 653 72 59 227 72 62 708 69
Pacific Rim 1 707 2 1 658 2 1 633 2
Southern Africa 21 488 22 15 136 19 20 459 23
United Kingdom 4 646 4 6 020 7 5 721 6
98 494 100 82 041 100 90 521 100
Notice
The preparation of these condensed interim financial statements has been supervised by Frikkie (FJ) Nel CA(SA).
Revenue per geographical region
50% Continental Europe
42% Southern Africa
5% United Kingdom
3% Pacific Rim
Total assets per segment
43% Retail activities - International
17% Retail activities - Africa
6% Manufacturing, sourcing and logistics - International
10% Manufacturing, sourcing and logistics - Africa
20% Properties
4% Corporate services
Revenue per segment
44% Retail activities - International
25% Retail activities - Africa
18% Manufacturing, sourcing and logistics - International
12% Manufacturing, sourcing and logistics - Africa
1% Properties
Operational review
International operations
The integrated retail business in Europe reported solid results and increased market share in many of the territories
where the group operates. Margins were supported by synergy benefits that continue to flow through from the enlarged
business model.
Retail activities: Household goods
Despite subdued consumer spending in Europe and the Pacific Rim, the retail operations increased revenue by 3% and
operating profit by 11% to R1.6 billion for the six months under review. Margins for the retail business improved
to 5.3% (1H 2012: 5%).
Continental Europe
The Conforama group reported market share gains in all the territories where it operates, however revenue for the
period under review was 1.7% lower than the prior year, negatively affecting profitability. The market for electronic
goods, especially the television product category, reported double-digit declines in the period under review. Encouragingly,
good growth was experienced in the more profitable furniture and decoration product categories compared to the prior
period. Our strategy to change our product mix and overhead structure to focus on furniture and home decoration sales
(in contrast with electronic goods) should prove decisive in growing future margins.
The European Retail Management (ERM) business continued to perform well, benefiting from the store expansion programme
over the last three years. These stores are now all operating profitably supported by the prevailing resilient markets in
the German-speaking territories. This businesss competitive value proposition, product mix and successful national marketing
campaign continue to increase sales per square metre, resulting in improved margins.
As reported in June 2012, the group converted participating loans into equity investments and acquired underlying businesses
and brands as a result of this transaction, now forming part of the ERM business. The contribution of these businesses is
therefore no longer disclosed as investment participation and has contributed to ERM since October 2012. The focused value
proposition inherent in these businesses continues to support good results in the Eastern European countries where the spending
power of the consumer remains under pressure. Since becoming part of the ERM business, the Polish retail business benefits from
the extensive market knowledge and marketing expertise of the ERM management team. This business is set to open its first megastore
in Wroclaw during March 2013, which will result in increased benefits and recognition for the ABRA brand throughout Poland.
United Kingdom
The UK group reported increased profits and improved margins during the period under review. This result is especially pleasing
when taking into account that the group is trading from 22 fewer stores than in the comparative period and that 28 of its most
productive stores were temporarily closed for refurbishment during this trading period.
Pacific Rim
The new Freedom store format and continued focus to drive efficiencies in the supply chain delivered the required results.
Profitability in Freedom improved markedly compared to the previous year.
The bedding division reported another set of good results well ahead of the prior period.
In April this year the group will open its first mega discount concept store in Sydney to diversify its market positioning
in that region.
Manufacturing, sourcing and logistics
The enlarged purchasing power of the group, increased intra-group trade and reduced costs, continue to improve margins for the
manufacturing, sourcing and logistics business, as well as the underlying retail operations they serve.
Continental Europe
The European and Eastern European manufacturing and wholesaling divisions reported a pleasing set of results. Improved capacity
utilisation continues to drive efficiencies in the Polish manufacturing units. In addition, the customer and product rationalisation
programme and increased intra-group trade supported the improved gross margin contribution.
United Kingdom
The UK manufacturing division benefited from the marked improvement of the UK retail business, both in the mattress and upholstery
manufacturing units. The demand for mattresses in the UK continues to present the groups manufacturing business with new opportunities
in supplying owned and external retailers.
International sourcing and logistics
The merged global sourcing operations in the east, of Conforama and Steinhoff, now operate as a key sourcing arm for the entire group
from its office in Shenzhen, China. This arrangement has enabled the group to capitalise on its global purchasing power. Good progress
was made during the period under review to rationalise the supplier base, reduce overhead costs and merge the satellite offices
in the rest of Asia.
African operations
The African operations now consist of two independently listed companies, JD Group Limited (JD Group), in which the group owns
54% (at 31 December 2012) and KAP Industrial Holdings Limited (KAP), in which the group owns 62%. In addition, the African operations
include an associate holding through our 20% investment in the listed PSG Group Limited (PSG).
Retail activities
JD Group (54%)
The results of JD Group, a diversified retail and financial services business, were equity-accounted for the comparative period and
consolidated for the six months ended 31 December 2012. JD Group became an associate (32%) of Steinhoff on 30 June 2011 and remained
an associate of Steinhoff until the end of March 2012. Following the successful implementation of the Partial Offer to JD Group
shareholders, JD Group became a subsidiary of Steinhoff effective 2 April 2012.
JD Group reported headline earnings of R506 million for the period, a 3.5% improvement when compared to the previous pro forma
corresponding period. The consumer finance business reported good results, supported by its product diversification strategy. The newly
introduced personal loan product, mainly to existing low risk customers, showed sound growth. The retail business increased revenue
by 4.2% to R6.9 billion for the six months under review. Encouragingly, operating margins were largely maintained in a period where
the roll-out of the new central distribution centres and related technology resulted in some cost duplication. The investment in
technology and infrastructure is expected to continue to improve customer service, collections, working capital management and margins
in the business. The automotive division increased operating profit by 9.7% to R193 million despite a subdued performance from Hertz.
JD Group declared an interim dividend of 115 cps (2011: 100 cps) payable on 29 April 2013. Shareholders are referred to the detailed
JD Group results announcement released on the JSE Limiteds news service (SENS) and on the groups website (www.jdgroup.co.za) for a
comprehensive review of the JD Group results.
Manufacturing, sourcing and logistics
KAP (62%)
The results of KAP Industrial Holdings Limited (Traditional KAP), a diversified industrial business, were equity-accounted for the
comparative period and consolidated for the six months ended 31 December 2012. KAP has been an associate investment of Steinhoff since
2005 in which Steinhoff held 34% at the end of March 2012. Steinhoff acquired the Traditional KAP business through the reverse listing
of all of its African industrial assets (including logistics, timber and manufacturing assets), thereby increasing its stake in the
combined KAP business. Following the implementation of the Partial Offer, Steinhoff holds 61.8% in the combined KAP group.
For the six months ended 31 December 2012, the combined KAP group reported operating profit and headline earnings of R673 million
and R337 million respectively. The 8.5% like-for-like improvement in operating profit was attributable to good performances by all
three divisions (logistics, integrated timber and manufacturing). In addition, margin growth on a like-for-like basis was reported
in each of the three divisions. The marked improvement in the working capital management and cash flow generation of the combined
group during its peak trading period was particularly encouraging. In line with historical policy, the group has not declared an
interim dividend. Shareholders are referred to the KAP results announcement released on SENS and on the groups website (www.kap.co.za)
for a comprehensive review of the KAP results.
Properties
The Property segment comprises all properties managed centrally by corporate services. The industrial and retail properties in this
segment are located in Africa, Europe and the UK. The total property assets of the group were R26.4 billion, as recorded at cost, at
the end of December 2012 (FY12: R22.9 billion). Operating profit of R935 million was earned on these properties for the six months
under review. In the current low interest rate environment, particularly in Europe, the availability of long-term financing at
competitive rates continues to provide the group with good investment opportunities. The annual target criteria for rental yields
on properties remains at an average of 7%.
Financial review
JD Group and KAP became subsidiaries of Steinhoff with effect from 2 April 2012 and their results were consolidated for the six
months ended 31 December 2012. Both JD Group and the Traditional KAP were previously associated companies of Steinhoff and were
accordingly equity accounted for the comparative period.
Revenue
Revenue for the group increased by 52% to R57.3 billion (1H 2012: R37.6 billion). Turnover for the African operations amounted
to R24.2 billion, while the European business reported revenue of EUR3.1 billion (R33.1 billion). The groups reporting currency
(rand) weakened by 3% against the euro from an average translation rate of R10.5137:1 euro in 1H 2012 to R10.8224:1 euro during
the period under review.
Operating profit
Operating profit before capital items increased by 36% to R5.0 billion (1H 2012: R3.7 billion). The group operating margin came
in at 8.8% compared to 9.8% in the comparative period. However, margin comparison is distorted by the acquired businesses of
JD Group and the Traditional KAP business which earn margins in the region of 5%. The lower margins of these acquired businesses
affect the period-on-period comparison of group margins. The European business margins were supported by the synergies and effect
of the increased purchasing power of the European business following the Conforama acquisition.
Net finance charges
Net finance charges increased to R880 million (1H 2012: R585 million). The increase in consolidated finance charges and debt relates
to the acquired businesses, mostly that of JD Group with gross debt of R7.1 billion. The difference in the cash net finance costs
paid of R535 million compared to the R880 million disclosed in the income statement is mostly attributable to the accounting
treatment of the convertible bonds.
In addition, the net finance cost increased following the conversion of the participating loans, thereby reducing the interest
income received on these loans.
The groups future serviceability of debt continues to be healthy, evidenced by the EBITDA interest cover at 7.1 times.
Taxation
The average tax rate at 14.5% (1H 2012: 9.4%) is mainly due to the higher proportion of profits now being generated in higher tax
jurisdictions in the European Union and the consolidation of JD Group, whose effective tax rate for the period was 26%. Management
continues to hold the view that the sustainable average tax rate of the group should not exceed 15% for the foreseeable future.
Non-controlling interests
Non-controlling interests at R406 million (1H 2012: R126 million) increased as a result of the consolidation of JD Group and the
KAP businesses that became subsidiaries of Steinhoff with effect from 2 April 2012.
Earnings per share (EPS) and headline earnings per share (HEPS)
EPS and HEPS increased by 5% to 173.9 cps (1H 2012: 165.5 cps) and 173.4 cps (1H 2012: 165.8 cps) respectively.
Assets
Total assets of the group increased to R147.7 billion (June 2012: R133.1 billion) during the period. The increase is partly as a result
of the devaluation of the rand and its impact on the translation of the European asset base at a euro/rand closing rate of 11.2224
compared to 10.3447 at June 2012. The group continued to invest in infrastructure and fixed assets in both its International and
African operations.
Investments made in the International operations include a central distribution centre in Lutterworth, England, the refurbishment of
the new format UK store estate and new Confo Deco and Conforama stores, which includes the new flagship store in Etoile, Paris. In
addition, the group continued to invest in properties where the current rent paid or saved provides the group with a blended yield
of 7% on these investments.
JD Group investments include R717 million in central warehouses and related infrastructure and R702 million (gross) in additions to
the vehicle rental fleet. An amount of R516 million was also invested, predominantly in vehicle fleet in the KAP group.
The net asset value per share increased to R26.96 (June 2012: R24.66 cps). In translating the balance sheets of foreign subsidiaries
to rand, a R2.7 billion gain (R1.47 per share) was credited directly to equity.
Debt
The groups gross debt less cash increased to R39.1 billion (FY12: R33.1 billion) during the period under review. The groups
European debt, when converted to rand, increased by the 8.5% increase in the EUR:ZAR closing exchange rate.
1H13 FY12
Rm Rm
Interest-bearing short-term liabilities 6 800 5 136
Bank overdrafts and short-term facilities 2 583 2 092
Interest-bearing long-term liabilities 38 051 33 858
47 434 41 086
Less cash and cash equivalents (8 300) (8 011)
Gross debt less cash 39 134 33 075
Less interest-bearing assets (2 953) (2 193)
Less interest-bearing receivables (forms part of accounts receivables) (8 266) (6 633)
Net interest-bearing debt 27 915 24 249
Total equity 58 884 53 637
Net interest-bearing debt: equity 47% 45%
Net finance charges 880 1 378
EBITDA 6 months 6 289
EBITDA 12 months 9 812
EBITDA interest cover (times) 7.15 7.12
In analysing the groups gross debt liabilities (as disclosed in the annual financial statements of the group) the average interest
charge on the groups debt is currently at 4.5%. These underlying credit spreads continue to give the group comfort that the risk
inherent in the groups debt profile is acceptable to debt providers, and the group is able to maintain these competitive interest rates.
The serviceability of the groups debt, as measured by EBITDA/interest cover at 7.1 times provides comfort in the sustainability of
the groups capital structure. In addition, the group maintains a diverse mix of debt instruments and sources of funds so as to not
be reliant on any single source. These instruments range from listed bonds, preference shares, convertible bonds, bank debt and
US Private Placements.
Working capital
Despite the groups increased activity levels, taking into account the acquired businesses, and the peak trading period in Europe
during December and January, investment in working capital remains at acceptable levels. The group remains confident that the integrated
supply chain model will be working capital neutral on a normalised basis.
Cash flow
Cash generated from operations increased by 44% to R4.5 billion (1H12: R3.1 billion) reflecting the increased profitability of the group.
The percentage of operating profit generated in cash from operations increased to 90% versus 85% in the comparative period, reflecting
managements entrenched focus on, and commitment to, sustainable earnings growth supported by solid cash generation.
In addition to the fixed asset investments and in line with JD Groups product diversification strategy, it invested an additional
R1.9 billion in its consumer finance loan book, that is targeting a 25% return on equity.
Corporate activity
The group implemented the following transactions during the period under review:
- Steinhoff Finance GmbH (an indirect wholly owned subsidiary of Steinhoff) raised an amount of EUR420 million of senior unsecured
guaranteed convertible bonds maturing in May 2017 (the 2017 Bonds). An amount of approximately R1.6 billion of the proceeds was
specifically earmarked, as a liability management initiative, to re-purchase the R1.5 billion convertible bond (2013 Bond) that
would have matured in July 2013 (the 2013 Bond re-purchase). The offering in respect of the 2017 Bonds was oversubscribed and the
interest coupon was fixed at a 6.375% p.a., with the conversion premium at 30% above the reference price of Steinhoff shares listed
on the JSE from launch to pricing, of R26.70, i.e. a conversion price of R34.71. Following the 2013 Bond re-purchase only R12 million
of 2013 Bonds remain outstanding. From a dilution perspective, the 2017 Bonds represent 130.8 million underlying SHF shares at a
conversion price of R34.71 in respect of which 53.5 million Steinhoff shares reserved for the 2013 Bonds have been cancelled at their
conversion price of R27.40.
- On 14 December 2012 JD Group announced the acquisition of rental enterprises, comprising 19 dealership properties, from
Steinhoff Properties Proprietary Limited. The purchase consideration of R447 million payable by JD Group has been settled by the
issue of 9.5 million new ordinary shares in JD Group. Over the period under review Steinhoff invested R400 million cash in respect
of open market purchases of JD Group shares. These purchases, together with the property transaction above, resulted in Steinhoffs
shareholding in JD Group increasing from 54% to 56%, excluding treasury shares, at the date of this announcement.
Outlook
The fragmented European household goods retail market continues to present many opportunities to our retail operations focused on
the mass-market value-conscious consumer. In many of the markets where the Conforama group operates, our strategy to change our
product mix and overhead structure to focus on furniture and home decoration sales (in contrast with electronic goods) should prove
decisive in growing margins.
In Africa, the industrial businesses of KAP expect to benefit from infrastructural development both in southern Africa and selected
other African countries. JD Group remains confident that its consumer finance division will continue to generate acceptable returns
on capital employed. In addition, the previous investments in technology and infrastructure should result in efficiencies to support
sustainable margins of the retail business.
The global markets and future consumer spending patterns remain uncertain. However, the group is satisfied that the diversity inherent
in its earnings will continue to protect the group against any prolonged downturn in any one market where we operate.
Len Konar Markus Jooste
INDEPENDENT CHAIRMAN CHIEF EXECUTIVE OFFICER
5 March 2013
Selected explanatory notes
Statement of compliance
The condensed consolidated interim financial information for the six months ended 31 December 2012 has been prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS),
the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as
issued by the Financial Reporting Standards Council, the information required by IAS 34 Interim Financial Reporting, the JSE Listing
Requirements and the Companies Act of South Africa. The consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 30 June 2012.
Basis of preparation
The condensed interim financial statements are prepared in millions of South African rand (Rm) on the historical-cost basis, except
for certain assets and liabilities which are carried at amortised cost, and derivative financial instruments, available for sale
financial assets and biological assets which are stated at their fair value.
Accounting policies
The accounting policies adopted in the preparation of the condensed interim financial information are consistent with those of the
annual financial statements for the year ended 30 June 2012. For a full list of standards and interpretations which have been adopted
we refer you to the 30 June 2012 annual financial statements. During the period under review, the group adopted all the IFRS and
interpretations being effective and deemed applicable to the group. None of these standards and interpretations had a material
impact on the results.
Other notes
1. Corporate governance
Steinhoff has embraced the recommendations of the King Report on Corporate Governance and strives to provide reports to shareholders
that are timely, accurate, consistent and informative.
2. Social responsibility
The group remains committed to behaving in a socially responsible manner and is conscious of its responsibilities in this regard.
3. Human resources
A constructive working relationship is maintained with our group employees and the relevant unions. Ongoing skills and equity
activities ensure compliance with current legislation.
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.
6. Changes to the board and management responsibilities
6.1 In compliance with paragraph 3.59 of the Listing Requirements of the JSE Limited, the company would like to advise its shareholders
of the appointment of Dr Christoffel Hendrik Wiese (Christo) (72) as independent non-executive director to the board with effect from
5 March 2013. Christo completed his BA and LLB degrees at the University of Stellenbosch in 1967 whereafter he joined Pep Stores for
seven years as executive director. After practising as an advocate for several years he joined Pepkor Limited as Chairman in 1981.
He received numerous awards and served on several boards of listed companies. Christo currently serves as Chairman of the following
listed companies: Pepkor Holdings Limited, Shoprite Holdings Limited, Tradehold Limited, Invicta Holdings Limited and Brait SA.
6.2 In compliance with changes in management responsibilities, the board would like to advise shareholders of the appointment of
Danie van der Merwe as chief operating officer and Ben la Grange as executive director and chief financial officer with effect from
this announcement. The executive responsibilities of the remaining executive directors and alternate directors remain unchanged.
Registered office
28 Sixth Street
Wynberg
Sandton 2090
Republic of South Africa
Tel: +27 (11) 445 3000
Fax: +27 (11) 445 3094
Directors
D Konar (chairman), MJ Jooste (chief executive officer), SF Booysen, DC Brink, YZ Cuba, CE Daun*, HJK Ferreira, SJ Grobler,
TLJ Guibert#, MT Lategan, JF Mouton, FJ Nel, FA Sonn, BE Steinhoff*, PDJ van den Bosch, DM van der Merwe (chief operating officer)
Alternate directors:
JNS du Plessis, KJ Grové, A Krüger-Steinhoff*, AB la Grange (chief financial officer), M Nel
Belgian #French *German Non-executive
Company secretary
Steinhoff Africa Secretarial Services Proprietary Limited
Auditors
Deloitte & Touche
Sponsor
PSG Capital Proprietary Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg 2001
www.steinhoffinternational.com
To view results on mobile www.steinhoff.mobi
Steinhoff Investment Holdings Limited
Registration number: 1954/001893/06
(Incorporated in the Republic of South Africa)
(Steinhoff Investments)
JSE share code: SHFF
ISIN: ZAE000068367
Dividend to preference shareholders
Preference shareholders are referred to the above results of Steinhoff for a full appreciation of the consolidated results and financial
position of Steinhoff Investments.
The board has declared a dividend of 356 cents per preference share on or about 5 March 2013, in respect of the period
from 1 July 2012 up to and including 31 December 2012 (the dividend period), payable on Monday, 22 April 2013, to those preference
shareholders recorded in the books of the company at the close of business on Friday, 19 April 2013.
The dividend will be payable in the currency of South Africa. The dividend is subject to a local dividend tax of 15%, resulting in a net
dividend of 302.6 cents per preference share, unless the shareholder is exempt from dividend tax or is entitled to a reduced rate in terms
of the applicable double tax agreement. No STC credits have been utilised. The company's income tax number is: 9375046712.
Anticipated dates: 2013
Last date to trade cum dividend Friday, 12 April
Shares trade ex dividend Monday, 15 April
Record date Friday, 19 April
Payment date Monday, 22 April
Share certificates may not be dematerialised or rematerialised between Monday, 15 April 2013, and Friday, 19 April 2013, both days inclusive.
On behalf of the board of directors.
Len Konar Piet Ferreira
NON-EXECUTIVE DIRECTOR EXECUTIVE DIRECTOR
5 March 2013
Sponsor
PSG Capital Proprietary Limited
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