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STEINHOFF AFRICA RETAIL LIMITED - Results For The Year Ended 30 September 2017

Release Date: 04/12/2017 07:05
Code(s): SRR     PDF:  
Wrap Text
Results For The Year Ended 30 September 2017

Steinhoff Africa Retail Limited 
Registration number: 2017/221869/06
Share code: SRR
ISIN: ZAE000247995
(‘STAR’ or ‘the company’ or ‘the group’) 

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2017


PRO FORMA HIGHLIGHTS

- 13.2% INCREASE IN REVENUE TO R58.6BN

- 100 BPS  MARGIN INCREASE TO 10.4%

- 25.2% INCREASE IN OPERATING PROFIT* TO R6.1BN

- R6.5BN CASH FROM OPERATIONS**

*  Before capital items
** Statutory results


On 20 September 2017, Steinhoff Africa Retail (STAR) successfully listed on the main board of the Johannesburg Stock Exchange. 
The listing provides investors the opportunity to directly access an African retail champion with significant scale. 
The listing resulted in the issue of 750 million shares (21.47% of issued share capital) at R20.50, in addition to 50 million 
shares sold indirectly by Steinhoff International Holdings N.V. The overall placement raised R16.4 billion and represents, 
in aggregate, 23.19% of the issued share capital. STAR distributed the placement proceeds to Steinhoff International Holdings N.V.

Results                                          Statutory audited                                           Pro forma

                                 12 months ended     15 months ended                   12 months ended     12 months ended 
                                    30 September        30 September                      30 September        30 September
                                            2017                2016             %                2017                2016             %
                                          (FY17A)             (FY16A)       change             (FY17PF)            (FY16PF)       change
Revenue (Rm)                              57 850              61 154           (5%)             58 582              51 766         13.2%
Operating profit 
before capital items (Rm)                  5 815               4 050           44%               6 078               4 855         25.2%
Headline earnings per share (c)            133.6                60.4          121%   

In evaluating the 2017 financial year’s performance (FY17), the following factors influence comparability:

- Change in financial year-end: STAR’s financial year-end was changed from June to September in 2016, and therefore the comparative 
  statutory numbers pertain to a 15-month period.
- Impact of acquisitions and one-off restructuring - refer to the ‘Additional information’ section of these results.
- Impact of listing on earnings per share: Issuing 750 million new shares on 20 September 2017 increased the total number of shares 
  in issue to 3 450 million.

To enhance comparability, performance commentary is provided based on pro forma results that are based on the 12-month periods ending 
30 September 2017 (FY17PF) and 30 September 2016 (FY16PF) and adjusted for the impact of acquisitions and one-off restructuring costs.

During a period characterised by downbeat consumer confidence and low growth, STAR delivered a solid operating performance. A continued 
focus on price leadership and value offerings across STAR’s expanding store footprint drove market share gains in major retail brands. 
For the 12 months to September 2017, pro forma revenue increased by 13.2% to R58.6 billion (FY16PF: R51.8 billion), and pro forma 
operating profit was up 25.2% to R6.1 billion.

Notably, trading densities continued to rise above cost inflation while STAR expanded its retail presence through trading space growth 
of 5% to 2.3 million square meters. STAR group opened 272 stores on a net basis, and the acquisition of Tekkie Town added 308 stores 
to the group’s footprint. As at September 2017, STAR traded from 4 953 retail locations.

STAR’s strategic focus on lowering the cost of doing business and accessing new products and services through existing infrastructure 
drove group operating profit growth. The operating margin increased by 100 basis points to 10.4% of total sales. Pep and Ackermans 
were the main contributors to group operating profit growth, in addition to the turnaround of the furniture and appliances business.


OPERATIONAL REVIEW

Discount and value
This division reported revenue of R44.1 billion and operating margin strengthened. Revenue growth was largely attributable 
to Pep and Ackermans, which, in aggregate, account for 85% of divisional revenue. Like-for-like revenue growth of 6.5% was achieved 
by Pep and Ackermans in aggregate, influenced by a weaker fourth quarter. Within product categories, kids’ wear and cellular delivered 
stand out performances. Home, adult wear and FMCG also supported growth. 

The Flash business, servicing customers in informal areas, performed well, driven by a 23% increase in active traders with the number 
of devices exceeding 121 000 at year-end.

Following the closure of approximately 300 stores, the restructuring of the furniture and appliances business is complete. Despite 
closing uneconomical trading locations and the operational disruption caused by the restructuring, the business increased revenue 
on a comparable basis, reaching break-even operating profit.

Africa, being countries other than South Africa, Botswana, Lesotho, Namibia and Swaziland (SA and BLNS), represents approximately 
5% of STAR group revenue. A constrained economic environment and currency volatility in some of these countries continued to weigh 
on operations, resulting in reduced momentum in store openings. In addition, adjustment of product costing rates to manage exchange 
rate volatility slowed growth in Angola.

Discount and value brands opened a total of 222 stores on a net basis during FY17, expanding the total footprint to 3 679 stores 
at 30 September 2017.

Speciality
The speciality division, now enlarged by the Tekkie Town footwear business, contributed approximately 25% to group revenue, supported 
by a robust performance from the Clothing, Footwear and Home (CFH) retail brands. Operating margin strengthened, supported by improved 
profitability in the do-it-yourself (DIY) business and improved performance in the other retail brands. 

In line with its peers, the DIY business experienced a challenging year. Weak market demand for building materials and a store 
portfolio review resulted in a revenue contraction and 17 store closures. That said, the portfolio review, which is nearing completion, 
contributed to improved profitability through integration cost benefits.

The G2 brands reported an acceptable performance in a challenging market where margins are comparatively lower to other businesses 
within the group. 

In speciality bedding, Sleepmasters continued to perform well, expanding its store footprint to 168 stores at 30 September 2017.

Speciality brands opened 50 stores on a net basis during FY17, resulting in a total footprint of 1 274 stores at 30 September 2017.


FINANCIAL REVIEW

Good revenue momentum has been maintained in the business and the increased profitability achieved during the year is most encouraging. 
All divisions contributed to improved pro forma operating profit compared to the prior year, with group pro forma operating profit 
(before capital items) at R6 078 million (FY16PF: R4 855 million) representing growth of 25.2%.

As described in STAR’s pre-listing statement and this set of results, caution should be exercised when comparing the statutory 
12-month audited financial statements with the 15-month comparative period. In particular, earnings growth on a statutory basis 
is not representative and should be considered on a pro forma basis. 

Tax rate
The effective tax rate was 30.9%, marginally higher than the statutory South African tax rate, mainly due to withholding taxes.

Working capital
Net working capital increased by R805 million, largely as a result of the acquisition of Tekkie Town and increased inventory levels 
of a larger store base, in anticipation of the festive season trading period. 

Capital structure
As part of the listing process, the balance sheet was restructured and the net debt on 30 September 2017 amounted to R12.0 billion, 
resulting in a net debt/EBITDA ratio of 1.8 times. Shareholders are reminded that the debt was only introduced as part of the listing 
process at the end of the period and the calculated interest cover of 10.9 times is expected to reduce in future.

Debt structure                                             30 September      30 September
                                                                   2017              2016
                                                                     Rm                Rm 
Interest-bearing long-term liabilities                               16                27
Loans due to Steinhoff and its subsidiaries - long term          11 000                 -
Interest-bearing short-term liabilities                              11                98
Loans due to Steinhoff and its subsidiaries - short term          4 868            18 196 
Bank overdrafts and short-term facilities                            89                79 
Loans due by Steinhoff and its subsidiaries                        (236)           (7 763)
Cash and cash equivalents                                        (3 797)           (2 771)
Net interest-bearing debt                                        11 951              
EBITDA                                                            6 775             
Net finance charges                                                (620)             
EBITDA: interest cover (times)                                     10.9               
Net debt: EBITDA (times)                                            1.8               
Pro forma net debt: EBITDA (times)                                  1.7              

Cash flow
Cash generated from operations before working capital changes increased by 20.8% to R7 269 million (fifteen months to 30 September 2016: 
R6 016 million).

The cash conversion (cash generated from operations/operating profit before capital items) was 111%, despite cyclical increased inventory 
levels in anticipation of the build-up to the festive season. Cash flow was further supported by the furniture retail business’s focus 
on lay-by products and the group’s limited credit sales, which amounted to 12% of total revenue. 

Outlook
While real market growth is expected to be subdued, positive sales momentum is expected to continue as STAR’s more affordable offer 
and lower prices resonate with a constrained consumer. Similarly, the positive momentum in the speciality division is expected to continue 
at improved margins, further supporting group margins. 

In addition, the business is well on track to open another 350 stores during the 2018 financial year.

Maintaining a low cost of doing business will remain a focus area within all retail brands. STAR plans to expand its distribution capacity 
in South Africa with the fit out of two distribution centres and the development of a new distribution centre in Angola, resulting in an 
increase in the capital expenditure-to-revenue ratio to 3%. 

The group will continue to explore new trading formats and also expand its market share in ladies’ wear and additional services.

As communicated during the listing process, STAR was only listed for 11 days during the 2017 financial year and thus no further dividend 
will be declared for FY17. The group targets a dividend cover of two times headline earnings for the next financial year. 

Appreciation
STAR’s board of directors would like to thank the group’s employees, shareholders, customers and suppliers for their continued support 
and loyalty.

On behalf of the board

Jayendra Naidoo      Ben la Grange                Riaan Hanekom
Chairman             Chief executive officer      Chief financial officer

30 November 2017


SUMMARISED CONSOLIDATED INCOME STATEMENT 
                                                                                                  Twelve months           Fifteen months
                                                                                                          ended                    ended
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                        Audited                  Audited
                                                                                    Notes                    Rm                       Rm
Revenue                                                                                                  57 850                   61 154 
Cost of sales                                                                                           (37 412)                 (41 154)
Gross profit                                                                                             20 438                   20 000 
Other income                                                                                                701                    1 107 
Operating expenses                                                                                      (14 364)                 (15 926)
Operating profit before depreciation, amortisation 
and capital items                                                                                         6 775                    5 181 
Depreciation and amortisation                                                                              (960)                  (1 131)
Operating profit before capital items                                                                     5 815                    4 050 
Capital items                                                                           2                   (29)                    (408)
Operating profit                                                                        2                 5 786                    3 642 
Net finance charges                                                                                        (620)                    (738)
Share of profit of equity accounted companies                                                                 -                       (5)
Profit before taxation                                                                                    5 166                    2 899 
Taxation                                                                                3                (1 599)                  (1 582)
Profit for the period                                                                                     3 567                    1 317 
   
Profit attributable to:   
Owners of the parent                                                                                      3 550                    1 290 
Non-controlling interests                                                                                    17                       27 
Profit for the period                                                                                     3 567                    1 317 
   
Basic earnings per share (cents)                                                        5                 132.6                     50.2 
Headline earnings per share (cents)                                                     5                 133.6                     60.4 
Diluted earnings per share (cents)                                                      5                 132.6                     50.2 
Diluted headline earnings per share (cents)                                             5                 133.6                     60.4 

SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                                                  Twelve months           Fifteen months
                                                                                                          ended                    ended
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                        Audited                  Audited
                                                                                                             Rm                       Rm
Profit for the period                                                                                     3 567                    1 317 
  
Other comprehensive income/(loss)  
Items that may be reclassified subsequently to profit or loss:  
Exchange differences on translation of foreign operations                                                   (84)                      92 
Net fair value gain/(loss) on cash flow hedges and other fair 
value reserves                                                                                              768                     (751)
Deferred taxation                                                                                           (74)                     165 
Foreign currency translation reserve released to profit or loss 
on disposal of investment                                                                                     -                      (70)
Other reserves transferred to non-controlling interests                                                       -                        3 
Total other comprehensive income/(loss) for the period                                                      610                     (561)
Total comprehensive income for the period                                                                 4 177                      756 
  
Total comprehensive income attributable to:  
Owners of the parent                                                                                      4 160                      729 
Non-controlling interests                                                                                    17                       27 
Total comprehensive income for the period                                                                 4 177                      756 

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
                                                                                                                           Twelve months
                                                                                                                                   ended
                                                                                                                            30 Sept 2017
                                                                                                                                 Audited
                                                                                                                                      Rm
Balance at the beginning of the period                                                                                            52 695 
Changes in ordinary stated capital 
Shares issued in terms of internal restructure                                                                                    70 177 
Common control adjustment                                                                                                        (10 471)
Shares issued upon listing                                                                                                        15 375 
Share issue expenses capitalised                                                                                                    (230)
Capital distribution                                                                                                             (20 632)
Changes in reserves 
Total comprehensive income for the period attributable to owners of the parent                                                     4 160 
Dividends paid                                                                                                                    (2 013)
Net shares bought from non-controlling interests                                                                                      (5)
Share-based payments                                                                                                                  (2)
Other reserve movements                                                                                                              693 
Common control adjustment                                                                                                        (56 826)
Changes in non-controlling interests 
Total comprehensive income for the period attributable to non-controlling interests                                                   17 
Net shares bought from non-controlling interests                                                                                     (21)
Balance at end of period                                                                                                          52 917 
 
Comprising 
Ordinary stated capital                                                                                                           64 690 
Common control reserve                                                                                                           (11 755)
Distributable reserves                                                                                                               (88)
Share-based payment reserve                                                                                                           33 
Other reserves                                                                                                                        12 
Non-controlling interests                                                                                                             25 
Balance at the end of the period                                                                                                  52 917 

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                        Audited                  Audited
                                                                                                             Rm                       Rm
ASSETS  
Non-current assets  
Goodwill and intangible assets                                                                           60 826                   57 341 
Property, plant and equipment                                                                             4 613                    3 714 
Investments and loans                                                                                       170                      950 
Deferred taxation assets                                                                                  1 586                    2 553 
                                                                                                         67 195                   64 558

Current assets  
Inventories                                                                                              10 954                    8 732 
Trade and other receivables                                                                               4 931                    5 021 
Loans due by Steinhoff and its subsidiaries                                                                 236                    7 763 
Cash and cash equivalents                                                                                 3 797                    2 771 
                                                                                                         19 918                   24 287 
Total assets                                                                                             87 113                   88 845 
  
EQUITY AND LIABILITIES  
Capital and reserves  
Ordinary stated capital                                                                                  64 690                   10 471
Reserves                                                                                                (11 798)                  42 195
Total equity attributable to equity holders of the parent                                                52 892                   52 666
Non-controlling interests                                                                                    25                       29 
Total equity                                                                                             52 917                   52 695
  
Non-current liabilities  
Interest-bearing loans and borrowings                                                                        16                       27 
Loans due to Steinhoff and its subsidiaries                                                              11 000                        -
Employee benefits                                                                                           112                      134 
Deferred taxation liabilities                                                                             4 050                    3 724 
Provisions                                                                                                  727                      993 
Trade and other payables                                                                                    533                      501 
                                                                                                         16 438                    5 379

Current liabilities  
Trade and other payables                                                                                 11 722                   11 364 
Loans due to Steinhoff and its subsidiaries                                                               4 868                   18 196 
Employee benefits                                                                                           737                      425 
Provisions                                                                                                  331                      609 
Interest-bearing loans and borrowings                                                                        11                       98 
Bank overdrafts and short-term facilities                                                                    89                       79 
                                                                                                         17 758                   30 771 
Total equity and liabilities                                                                             87 113                   88 845

Net asset value per ordinary share (cents)                                                              1 533.1                  2 050.6 

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS 
                                                                                                  Twelve months           Fifteen months
                                                                                                          ended                    ended
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                        Audited                  Audited
                                                                                    Notes                    Rm                       Rm
CASH FLOWS FROM OPERATING ACTIVITIES   
Operating profit:                                                                                         5 786                    3 642 
Adjusted for:   
Debtors' costs                                                                                              284                      425 
Depreciation and amortisation                                                                               960                    1 131 
Non-cash adjustments                                                                                        239                      818 
                                                                                                          7 269                    6 016 
Working capital changes   
Inventories                                                                                              (1 910)                    (967)
Receivables                                                                                                  31                   (1 899)
Payables                                                                                                  1 074                    1 882 
Changes in working capital                                                                                 (805)                    (984)
   
Cash generated from operations                                                                            6 464                    5 032 
Net movement in installment sale and loan receivables                                                      (188)                    (369)
Net dividends paid                                                                                       (1 963)                     (40)
Net finance charges                                                                                        (670)                    (744)
Taxation paid                                                                                            (1 396)                  (1 523)
Net cash inflow from operating activities                                                                 2 247                    2 356 

CASH FLOWS FROM INVESTING ACTIVITIES     
Net additions to property, plant and equipment and intangible assets                                     (1 667)                  (1 514)
Acquisition of businesses, net of cash on hand at acquisition                           6                  (429)                  (1 264)
Decrease/(increase) in long-term investments and loans                                                      780                     (480)
Net increase in investments in equity accounted companies                                                    -                       (16)
Net cash outflow from investing activities                                                               (1 316)                  (3 274)
   
CASH FLOWS FROM FINANCING ACTIVITIES   
Proceeds of ordinary shares issued                                                                       15 375                        -
Capital distribution                                                                                    (15 132)                       -
Share issue expenses                                                                                       (123)                       -
Transactions with non-controlling interests                                                                 (26)                      (9)
Net movement in other financing activities                                                                 (172)                  (3 012)
Increase in related party loans and receivables                                                             293                    4 384 
Net cash inflow from financing activities                                                                   215                    1 363 
   
NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                 1 146                      445 
Effects of exchange rate translations on cash and cash equivalents                                         (120)                       -
Cash and cash equivalents at beginning of the period                                                      2 771                    2 326 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                                3 797                    2 771 

NOTES TO THE SUMMARISED ANNUAL FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2017

Statement of compliance
The provisional summarised consolidated financial statements have been prepared and presented in accordance with the framework concepts 
and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting 
Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting 
Standards Council, the Listings Requirements of the JSE Limited as applicable to provisional reports, the information at a minimum 
as required by IAS 34: Interim Financial Reporting and the requirements of the South African Companies Act, No. 71 of 2008 as applicable 
to the summarised financial statements. The summarised consolidated financial statements have been prepared using accounting policies that 
comply with IFRS, which are consistent with those applied in the consolidated financial statements for the period ended 30 September 2016.

Basis of preparation
The summarised consolidated financial statements are prepared in millions of South African rand (Rm) on the historical cost basis, except 
for certain assets and liabilities that are carried at amortised cost, and derivative financial instruments that are stated at their fair 
values. The preparation of the summarised consolidated financial statements and the full set of consolidated financial statements for the 
year ended 30 September 2017 was supervised by RG Hanekom CA(SA), the group’s chief financial officer. The full set of financial statements 
was approved by the board on 30 November 2017. The comparative amounts comprise the aggregated historical financial information, being 
the Steinhoff Africa Retail Assets group recorded historical information, which was prepared in accordance with IFRS and section 8.1 
to 8.13 of the JSE Listings Requirements for the 15 months ended 30 September 2016.

Internal restructure accounting
The acquisition by Steinhoff Africa Retail Limited of the Steinhoff Africa Retail Assets are common control transactions, as all 
the combining entities, being Steinhoff Africa Retail Limited and the Steinhoff Africa Retail Assets, are ultimately controlled by 
the same party, being Steinhoff International Holdings N.V., before and after the combination, and that control is not transitory.

As IFRS provides no guidance for common control transactions, the following principles of US GAAP have been applied:
When accounting for a transfer of assets or exchange of shares between entities under common control, the entity that receives the net 
assets or the equity interests shall initially measure the recognised assets and liabilities transferred at their carrying amounts in the 
accounts of the transferring entity at the date of transfer. If the carrying amounts of the assets and liabilities transferred differ from 
the historical cost of the parent of the entities under common control, for example, because fair value adjustments in business combinations
have been recognised on consolidation, then the financial statements of the receiving entity shall reflect the transferred assets 
and liabilities at the historical cost of the group. As a result, the receiving entity effectively applies pushdown accounting in its 
separate financial statements.

There is no change in value for the net assets received, because there is no change in control over the net asset or equity interests 
from the ultimate parent’s perspective. A difference between any proceeds transferred and the carrying amounts of the net assets received 
is recognised in equity in the receiving entity’s separate financial statements. No additional goodwill is created.

Earnings per share, diluted earnings per share and headline earnings per share
The calculation of the weighted average number of shares weighed the shares issued in terms of the private placement from the date of issue,
being 20 September 2017, as well as the issue of the shares relating to the purchase of Tekkie Town from the date of acquisition, 
1 February 2017. The remaining ordinary shares were assumed to be in issue since the beginning of the 2016 financial year. This treatment 
is in line with the principles applied in accounting for the transfer of assets between entities under common control, detailed in the basis
of preparation.

Financial statements
The consolidated financial statements for the year, which have been audited by Deloitte & Touche, and their accompanying unmodified audit 
report as well as their unmodified audit report on this set of summarised financial information, are available for inspection at the 
company’s registered office. Information included under the headings ‘Outlook’ and ‘Operational review’ and any reference to future 
financial information included in the summarised financial information, has not been audited or reviewed. The auditor’s report does 
not necessarily report on all the information contained in this announcement. Shareholders are therefore advised that, in order to obtain 
a full understanding of the nature of the auditor’s engagement, they should obtain a copy of the auditor’s report together with the 
accompanying financial information from the issuer’s registered office. The results were approved by the board of directors on 
30 November 2017.

Accounting policies
The accounting policies of the group have been applied consistently to the periods presented in the summarised consolidated financial 
statements.

Events subsequent to the balance sheet date
Effective 1 October 2017, Steinbuild acquired 100% of Building Supply Group (‘BSG’). The purchase consideration was based on an enterprise 
value of R646 million and is subject to a potential 13% adjustment, up or down, dependent on BSG’s 12-month results to 30 September 2018.

STAR has exercised call options whereby it will indirectly acquire 128.2 million Shoprite ordinary shares from various parties. 
The implementation of the call options remains subject to the required regulatory approvals (expected by middle 2018) and will result 
in STAR indirectly acquiring a 23.1% economic interest in Shoprite,and voting control of 50.6%.

The consideration payable for the implementation of the call options will be settled through the issue of 1.7 billion STAR shares, 
representing approximately 33.6% interest in the ordinary share capital of STAR. 

                                                                                                  Twelve months           Fifteen months
                                                                                                          ended                    ended
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                             Rm                       Rm
1. SEGMENTAL ANALYSIS  
   
   REVENUE  
   Discount and value                                                                                    44 130                   47 418
   Speciality                                                                                            13 720                   13 736
                                                                                                         57 850                   61 154 
   OPERATING PROFIT BEFORE CAPITAL ITEMS  
   Discount and value                                                                                     5 585                    4 191
   Speciality                                                                                               230                     (141)
                                                                                                          5 815                    4 050 
   SEGMENTAL ASSETS  
   Integrated retail: consumer goods                                                                     82 910                   77 361 
   
   RECONCILIATION BETWEEN TOTAL ASSETS PER STATEMENT 
   OF FINANCIAL POSITION AND SEGMENTAL ASSETS  
   Total assets per statement of financial position                                                      87 113                   88 845 
   Less: Cash and cash equivalents                                                                       (3 797)                  (2 771)
   Less: Long-term investments and loans                                                                   (170)                    (950)
   Less: Loans due by Steinhoff and its subsidiaries                                                       (236)                  (7 763)
   Segmental assets                                                                                      82 910                   77 361 
   
   Despite the fact that the brands have different sales channels, the product sourcing, supply chain and treasury systems are largely 
   integrated and, as a result, the presentation of segmental assets are limited to one single segment within the group.

2. OPERATING PROFIT  
   
   Capital items  
   Capital items reflect and affect the resources committed in producing operating/trading performance 
   and are not the performance itself. These items deal with the platform/capital base of the entity. 
   Capital items are required to be reported by the Johannesburg Stock Exchange (JSE) as part of the 
   calculation of headline earnings.    
    
   Impairments                                                                                                7                      485 
   Loss/(profit) on disposal of intangible assets                                                            27                       (7)
   Profit on disposal and dilution of investment                                                             (5)                       -
   Foreign currency translation reserve released to profit or loss on disposal of investment                  -                      (70)
                                                                                                             29                      408 

3. TAXATION  
   
   Reconciliation of profit before taxation to adjusted profit before taxation  
   Profit before taxation                                                                                 5 166                    2 899 
   Share of profit of equity accounted companies                                                              -                        5 
   Capital items                                                                                             29                      408 
   Adjusted profit before taxation                                                                        5 195                    3 312 
   
   Reconciliation of taxation to taxation before capital items  
   Taxation                                                                                               1 599                    1 582 
   Taxation on capital items                                                                                  3                      148 
   Taxation before capital items                                                                          1 602                    1 730 
                                                                                                              %                        %
   Effective rate of taxation based on adjusted profit before taxation (%)                                 30.8                     52.2

4. FAIR VALUES OF FINANCIAL INSTRUMENTS  
                                                                                               Fair value as at         Fair value as at 
                                                                                                   30 Sept 2017             30 Sept 2016
                                                                                                             Rm                       Rm
   Derivative financial assets - Level 2 fair value hierarchy                                               202                       83 
   Derivative financial liabilities - Level 2 fair value hierarchy                                          (27)                    (825)
                                                                                                            175                     (742)

   Level 2 financial instruments consist of foreign exchange contracts that are valued using techniques where all of the inputs that 
   have a significant effect on the valuation are directly or indirectly based on observable market data. These inputs included foreign 
   exchange rates.

                                                                                                  Twelve months           Fifteen months
                                                                                                          ended                    ended
                                                                                                   30 Sept 2017             30 Sept 2016 
                                                                                                        Audited                  Audited
                                                                                                        Million                  Million
5. EARNINGS PER SHARE  
    
   5.1 Weighted average number of ordinary shares  
       Issued ordinary shares at beginning of the period                                                  2 568                    2 568 
       Effect of shares issued during the period                                                             87                        -
       Effect of shares issued in terms of initial public offering                                           23                        -
       Weighted average number of ordinary shares                                                         2 678                    2 568 
       Effect of dilutive potential ordinary shares                                                           -                        -
       Diluted weighted average number of ordinary shares                                                 2 678                    2 568 
    
                                                                                                             Rm                       Rm
   5.2 Earnings and headline earnings    
       Profit for the period                                                                              3 567                    1 317 
       Attributable to non-controlling interests                                                            (17)                     (27)
       Earnings attributable to ordinary shareholders                                                     3 550                    1 290 
       Capital items                                                                                         29                      408 
       Taxation effect of capital items                                                                      (3)                    (148)
       Headline earnings attributable to ordinary shareholders                                            3 576                    1 550 
    
   5.3 Diluted earnings and diluted headline earnings per share  
       There are no dilutive instruments. Dilutive earnings and headline earnings per share are therefore equal to basic earnings 
       and basic headline earnings per share.
  
   5.4 As a result of the weighting of shares, the current year’s per share numbers should be adjusted before any future profit 
       forecasts are based on them.

6. NET CASH FLOW ON ACQUISITION OF BUSINESSES
   On 1 October 2016, a call centre and debt collector company was acquired for R471 million. On 1 February 2017, Tekkie Town was acquired 
   for a purchase price of R 3.4 billion settled through the issue of Steinhoff Africa Retail shares. For Steinhoff N.V. group purposes 
   the Tekkie Town purchase was settled through a combination of shares and cash. (2016: Iliad was purchased for a net cash consideration 
   of R1.3 billion).
      
                                                                              Call center 
                                                           Tekkie                and debt                 Total                    Total
                                                             Town               collector                  2017                     2016
                                                               Rm                      Rm                    Rm                       Rm
   Assets    
      Intangible assets                                       766                      39                   805                      478 
      Property, plant and equipment                            69                     124                   193                      176 
      Deferred taxation assets                                 23                       2                    25                       73 
      Cash on hand                                             32                      10                    42                      179 
   Liabilities                                               (230)                     (7)                 (237)                    (108)
   Working capital                                            439                      21                   460                      147 
   Total assets and liabilities acquired                    1 099                     189                 1 288                      945 
   Goodwill attributable to acquisition                     2 251                     282                 2 533                      498 
   Total consideration                                      3 350                     471                 3 821                    1 443 
   Cash on hand at date of acquisition                        (32)                    (10)                  (42)                    (179)
   Paid in issue of shares                                 (3 350)                      -                (3 350)                       -
   Net cash (inflow)/outflow on acquisition 
   of subsidiaries                                            (32)                    461                   429                    1 264 
      
  The goodwill arising on the acquisition of these companies is attributable to the strategic business advantages acquired, principal retail 
  locations and leases, as well as knowledgeable employees and management strategies that did not meet the criteria for recognition as other 
  intangible assets on the date of acquisition.

PRO FORMA FINANCIAL INFORMATION

Additional information

Pro forma 12-month results for the financial year ended 30 September 2017 and for the 12 months ended 30 September 2016
The pro forma results have been prepared for illustrative purposes only, in order to provide information about the impact 
of the adjustments on revenue, operating profit before capital items (EBIT) and operating profit before depreciation and amortisation 
(EBITDA) for the year ended 30 September 2017, and the 12-month period ended 30 September 2016.

The pro forma financial effects are presented in accordance with the JSE Listings Requirements, the Guide on Pro Forma Financial 
Information issued by SAICA and the measurement and recognition requirements of IFRS. 

Because of its nature, the pro forma financial information may not give a fair reflection on the group’s results from operations 
after the adjustments, as detailed below.

The accounting policies applied in quantifying pro forma adjustments are consistent with the STAR group’s accounting policies 
at 30 September 2017 and 30 September 2016.

The reporting accountants’ unmodified reports relating to the pro forma information is available for inspection at the company’s 
registered address. The pro forma results are the responsibility of the board. 

Pro forma 12-month results for the financial year ended 30 September 2017
The pro forma 12-month actual results and pro forma 12-month prior year actual results illustrate the effects of the acquisition 
of Tekkie Town (acquired 1 February 2017), the acquisition of Iliad (acquired, January 2016) and the JD Group discontinued brands 
(‘the adjustments’) on the group’s revenue, EBIT and EBITDA for the year ended 30 September 2017 and for the 12 months 
ended 30 September 2016.

                               Pro forma            Pro forma 
                         12 months ended      12 months ended
                       30 September 2017    30 September 2016                 
                                      Rm                   Rm                Growth %
Revenue                           58 582               51 766                   13.2%
EBITDA                             7 046                5 776                   22.0%
EBIT                               6 078                4 855                   25.2%

Pro forma year ended 30 September 2017

                                                                                                  STAR group
                                                                                                   pro forma
                                 Audited          Tekkie Town                JD Group              after all           
                              STAR group             reviewed     discontinued brands            adjustments           
                 for the 12 months ended    four months ended         12 months ended     for the year ended 
                     30 September 2017(1)   31 January 2017(2)    30 September 2017(3)     30 September 2017
                                      Rm                   Rm                      Rm                     Rm
Revenue                           57 850                  732                       -                 58 582 
EBITDA                             6 775                  199                      72                  7 046 
EBIT                               5 815                  191                      72                  6 078

Notes and assumptions
(1) The column titled ‘Audited STAR group for the 12 months ended 30 September 2017’ represents the actual audited results for 
    the STAR group for the 12 months ended 30 September 2017.
(2) The column titled ‘Tekkie Town reviewed four months ended 31 January 2017’ has been extracted from the Tekkie Town financial 
    statements, reviewed by Grant Thornton and audit partner C Minie, for the four months ended 31 January 2017. Tekkie Town 
    was acquired by the STAR group and consolidated as part of the STAR group results from 1 February 2017.
(3) The column titled ‘JD Group discontinued brands 12 months ended 30 September 2017’ includes one-off expenses that the group 
    was not allowed to provide for during the 2016 financial year, which relates to the one-off JD Group brand consolidation during 
    the 2017 financial year. 

Pro forma period ended 30 September 2016
The pro forma 12-month prior year actual results illustrate the impact of acquiring the Steinhoff Africa Retail Assets (‘SARA’); 
acquiring Tekkie Town and Iliad; and removing the one-off JD Group discontinued brands and related restructuring costs. These adjustments 
have been described in detail in the pre-listing statement (PLS) dated 4 September 2017. Refer Annexure 1F on pages 194 and 195 of the PLS. 
The amounts adjusting revenue, EBIT and EBITDA remain unchanged from previously disclosed amounts.

                                                                             JD Group
                                                                         discontinued                                         STAR group
                                Reviewed          Tekkie Town      brands and related                                          pro forma
                                    SARA              audited     restructuring costs                 Illiad       after all adjustments
                         12 months ended      12 months ended         12 months ended     three months ended     for the 12 months ended
                       30 September 2016     28 February 2017       30 September 2016       31 December 2015           30 September 2016
                                      Rm                   Rm                      Rm                     Rm                          Rm
Revenue                           51 234                1 513                  (2 087)                 1 106                      51 766 
EBITDA                             4 397                  344                     975                     60                       5 776 
EBIT                               3 485                  322                     998                     50                       4 855


Announcement date: 4 December 2017 

Steinhoff Africa Retail Limited (‘STAR’ or ‘the company’ or ‘the group’) 
Non-executive directors: J Naidoo (Chairman)*, JB Cilliers*, MJ Jooste, VP Khanyile*, SH Müller*, HJ Sonn*, AE Swiegers*, DM van der Merwe, 
JD Wiese
Executive directors: AB la Grange (Chief executive officer), RG Hanekom (Chief financial officer) 
*Independent

Registered address
28 Sixth Street
Wynberg
Sandton 2090

Postal address
PO Box 6100
Parow East 7501

Telephone: 021 929 4800  
Facsimile: 021 929 4829
E-mail: info@star-group.co.za
www.steinhoffafricaretail.co.za

Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Bierman Avenue
Rosebank 2196
 
Company secretary 
Steinhoff Secretarial Services Proprietary Limited

Auditors
Deloitte & Touche

Sponsor
PSG Capital Proprietary Limited 

Date: 04/12/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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