Integrated
report 2011
[VISION]
[ C O M PA N Y ]
[FUTURE]
Disclosure Structure and navigation map
The structure of this report differs somewhat from the previous
annual report as it incorporates all of the elements of an
The JD Group aims to achieve the highest integrated report. Most notably the report does not include the
disclosure standards in this report in order detailed set of financial statements.
to provide meaningful, accurate, complete, The navigation table below details the elements of integrated
transparent and balanced information to reporting and the sections where these elements are
stakeholders. incorporated in the report:
The following further disclosures required
in terms of the JSE Listings Requirements Elements of Sections of
are set out in the integrated report: integrated integrated Page
reporting report ref
» Directors and management Stakeholders Investment overview 17
pages 30 and 38 respectively. Material issues Investment overview 18
» Major shareholders of the Company Strategy Investment overview 6
page 76. Performance Investment overview 9
Future Executive Chairman’s report 29
» Directors’ interests in the Company’s performance
securities and their remuneration Remuneration Sustainability and 80
page 80. stakeholder review
» Share capital of the Company
note 17 of the annual financial statements.
For more detailed information about the JD Group and its financial
statements please refer to our website:
www.jdgroup.co.za
Sustainability approach
Our approach to sustainability stems from our
fundamental intent to prosper as a business
and to facilitate human potential through
connecting present and future generations.
The goal of sustainability is to meet the needs
of the present without compromising the ability
of future generations to meet their own needs.
While it cannot be achieved by one organisation
on its own, we believe that our business can
make an important contribution to encourage
ongoing global to sustainability.
Integrated report 2011 « JD Group
Scope and boundary
This report, compiled for JD Group Limited and
its subsidiaries, covers the financial year from
1 September 2010 to 31 August 2011.
It is our aim with this integrated report, to present
the risks and opportunities that the Company faces,
together with disclosure of our environmental, social
and governance responsibilities and issues. This report
allows us to emphasise the fundamental link between
our financial and non-financial performance and how
they are derived from and influence our business
strategy.
The JSE Limited (JSE) requires listed companies
to produce integrated reports, in line with the
recommendations of the South African Code of
Corporate Practice and Conduct set out in the third
King Report on Corporate Governance (King III).
What constitutes integrated reporting remains the
subject of international debate. We have been guided
by what typically constitutes annual reporting best
practice through internal research, external advice
and the assistance provided by the Global Reporting
Initiative’s (GRI) G3 Reporting Guidelines. The Group
also views the integrated reporting process as an
evolutionary journey, allowing best practice to be followed
as it develops world-wide. This year, we have published
our detailed annual financial statements electronically
on the JD Group web site (www.jdgroup.co.za), which
together with our integrated report, will provide
our stakeholders with a comprehensive view of our
financial and non-financial performance during the
year under review.
This integrated report focuses on the material
sustainability issues that drive our business strategy.
The issues identified are a result of an analysis of
stakeholder concerns, business risk analysis and global
trends and how they impact JD Group’s long-term
business sustainability. Sustainability issues that are
not considered material to our business have not been
disclosed.
Our annual financial statements were prepared
according to International Financial Reporting
Standards (IFRS), the requirements of the South
African Companies Act, the regulations of the JSE and
recommendations of King III.
The JSE Limited (JSE) has granted the JD Group Limited a listing in respect
of 219 830 000 ordinary shares (the listing), share code JDG and
ISIN: ZAE000030771 (the Company)
Financial year-end: 31 August of each year
Notice of annual general meeting
Featured on pages 168 to 176 of this report
Tear-out form of proxy is on pages 177 to 178
About this report » Our integrated approach
Financial statements
The condensed financial information contained in
this report has been prepared in accordance with the
recognition and measurement criteria of International
Financial Reporting Standards (IFRS). The auditors,
Deloitte & Touche, have issued an unmodified opinion
on the Group’s financial statements for the year ended
31 August 2011. These condensed financial statements
have been derived from the Group financial statements
and are consistent in all material respects with the
Group financial statements.
This report has not been independently assured as
a whole. We envisage obtaining limited assurance
in the near term, as will be determined by the Audit
committee. Assurance in this report is however derived
from non-financial sustainability measures, through
internal controls and internal audit engagements.
There have been no significant restatements for
the period covered by this integrated report with
the exception of Abra that has been disclosed as a
discontinued operation and the reclassification of
Maravedi to Financial Services in the segmental report.
Maravedi was previously disclosed as a part of New
Business Development. The results of the Unitrans
Motor Enterprises (Pty) Ltd (Unitrans Auto) and
Steinhoff Doors and Building Materials (Pty) Ltd
(SteinBuild) businesses, which were acquired in July
2011, have been disclosed separately in the segmental
report on page 160 – 161 for comparability purposes.
Board responsibility
It is the board’s responsibility to ensure the integrity of
the integrated report.
A mandated board subcommittee has accordingly
applied its mind to the integrated report and in its
opinion, the integrated report addresses all material
issues, and presents fairly the integrated performance
of the organisation and its impacts.
The integrated report has been prepared in line with
best practice pursuant to the recommendations
of King III (principle 9.1). The board authorised the
integrated report for release on 11 November 2011.
Signed by the Chairman, David Sussman and
Grattan Kirk, the Chief Executive Officer,
who have been duly authorised thereto by the board.
JD Group » Integrated report 2011
1
Contents
The JD Group is currently strategically positioned in South Africa, » Scope and boundary ifc
Botswana and Namibia as: » Our integrated approach ifc
» Vision, mission and values 2
» a leading diversified mass consumer financier » Investment offering 3
» Strategic business goals 4
Investment overview
» a differentiated furniture, household appliance, consumer
» Core expertise and strategy 5
electronic goods, home entertainment, office automation » Progress on strategy 6
and building supplies retailer » Business structure 7
» Group’s operating portfolio 8
» a diversified retailer of motor vehicles, vehicle servicing and » Financial performance highlights 9
parts » Financial performance 10
» Operating performance 11
JD Group primarily targets the mass-middle market with a » Ten-year review 12
» Geographic footprint 16
secondary focus on the entry- and top-end market segments.
» Our stakeholders 17
» Our material issues 18
The Group operates in southern Africa through six operating
business divisions. These markets are served through a multi-
branded channel network representing 12 retail brands, with
» Executive Chairman’s report 26
a footprint of 1 143 retail stores and 84 motor dealerships in
review
» Board of directors 30
Group
southern Africa. Each retail brand is positioned to focus on » Chief Executive Officer’s report 32
a specific market segment based on brand identity, store layout, » Executive management 38
» Group Financial Director’s review 40
merchandise range and market profile.
Positioning of the different brands is driven by a differentiation
» Furniture Retail 48
Operational
strategy and allows customers to enter at the lower end and
review
» Cash Retail 52
migrate to the upper end as their diverse needs, aspirations and
» Unitrans Auto 56
requirements change over time. » SteinBuild 60
» Financial Services (including Maravedi) 64
» New Business Development – Blake 68
Revenue
»
Sustainability
» Sustainability and stakeholder review 74
governance
(including directors’ remuneration)
and
» Corporate governance 112
25%
Revenue increased by 25% to
R15 741 million from
R12 590 million in 2010
» Directors’ report 142
» Audit committee report 146
Headline earnings
»
» Directors’ approval of the annual
financial statements 149
34%
Headline earnings per share » Report of the independent auditors 150
increased by 34% to 407,7 cents » Certificate by Company secretary 150
from 303,6 cents in 2010 » Definitions 151
Condensed annual financial statements
» Group statement of 152
comprehensive income
» Group statement of financial position 153
Total assets
»
» Group cash flow statement 154
» Notes to the Group 155
80
Total assets increased by 80% to cash flow statement
% R16 734 million from
R9 281 million in 2010
»
»
Group statement of changes in equity
Condensed notes to the annual
156
157
financial statements
» Segmental analysis 159
» Share incentive trust and salient features 162
Net asset value
»
» Salient features of the JD Group
Employee Share Incentive Scheme 163
22
Net asset value per share »
%
Salient features of the JD Group Share
increased by 22% to 3 688 cents Appreciation Rights Scheme 164
from 3 023 cents in 2010 » Subsidiaries 166
» Notice of annual general meeting 168
» Form of proxy and notes 177
» Administration 179
» Shareholders’ diary for 2012 179
Integrated report 2011 « JD Group
2 Investment overview
Vision, mission and values
Vision
The Group’s vision is “to be world-class in our fields of expertise”.
Mission
To lead in our chosen sectors by satisfying our customers’ needs and our stakeholders’ expectations
through the delivery of consistent, sustainable profit growth which will be achieved by:
» Being innovative in everything we do
» Continuous and consistent development, and optimisation of customer and supplier relationships, sound
levels of customer service, values, ethics and business principles
» The ongoing development of our employees
» The continuous enhancement of management and leadership skills
» Remaining conscious of and committed to sustainable business practices
Values
The Group’s values, upon which the foundation of our cultures and behaviours are built, are outlined below:
Honesty and integrity
Ability to communicate and behave openly without fear, focused on one truth as the only norm, based on
mutual trust and respect and where the intent of any communication and/or behaviour is unquestionable.
Valuing diversity
Individually and/or collectively understanding, accepting and valuing the different backgrounds, cultures,
personal preferences and competencies of people.
Responsibility and accountability
Role-defined responsibilities and accountabilities are not only vested in the function, but also in the person
and are not transferable.
Urgency
Urgency in everything we do is a non-negotiable value.
Performance driven
The journey to achieve world-class status is impossible without the individual and collective commitment of
all the people of the Group to own the performance driven value.
JD Group » Integrated report 2011
3
Investment offering
A long-term investment opportunity
JD Group offers shareholders an opportunity to invest in a leading, diversified retailer and consumer finance
business, that is well positioned to take strategic advantage of opportunities in a challenging market environment
through its leading and progressive diverse portfolio of retail brands and consumer finance solutions.
Presence
» Our leading brands are well entrenched in the minds and lives of consumers where we currently trade
predominately in southern Africa
» Our multiple brands have built a high level of credibility and brand equity in the minds of our consumers
Customer centricity
» We strive to achieve world-class service through the establishment of a culture where each customer is treated
like our only customer
» We provide expanded, relevant and differentiated products and services to our customers
Strong management team
» Our Retail chief executives have substantial experience in their respective retail industry sectors
» Our Financial Services and other executives have the requisite skills and expertise to deliver on the set
benchmarks
» Transformation is a key strategy for the Group
Delivery
» Solid foundations exist from which to grow the business by successfully implementing growth strategies in new
and existing markets
Growth prospects
» The Group has successfully repositioned itself to cater for the current and emerging demands of our chosen
markets
» Consistent and continuous productivity improvement including financial, human capital and space utilisation
Integrated report 2011 « JD Group
4 Investment overview
Strategic business goals
Our strategic goals are central to drive the implementation and realisation of the Group’s strategy.
We have set ourselves clear goals as we enter the fine-tuning phase of our journey towards the Art of Service.
We believe that we are well equipped to realise our key objectives and to meet the future challenges. We use
both objective and subjective criteria to measure our ability to create value.
The strategic business goals of the Group’s business divisions are as follows:
Furniture Retail
Optimise retail efficiency, rural store expansion and deliver required return on sales (see page 10).
Cash Retail
Product and service differentiation, store expansion and deliver required return on sales (see page 10).
Automotive Retail and Services
Optimise retail efficiency, create service differentiation, vehicle franchise extension and deliver required return on
sales (see page 10).
Building Supplies
Product and service differentiation, store expansion and deliver required return on sales (see page 10).
Financial Services
Risk management, collection optimisation, product development and deliver required return on capital employed
(see page 10).
New Business Development – Blake
New product and market development and deliver required return on capital employed (see page 10).
Growth prospects
The Group will continue along the path of becoming a fully diversified retail and consumer finance group. In the
past financial year, the Group acquired the businesses Unitrans Auto and SteinBuild. These new businesses
participate in clearly segmented and differentiated consumer markets – retailing motor vehicles as well as building
supplies.
Going forward, the Group will focus on a number of growth areas:
» leveraging the newly implemented IT platforms in Retail and Financial Services to extract productivity and
efficiency gains
» expanding the rural and small-town portfolio in both Furniture and Cash Retail, by opening a further 70 rural
based stores
» continuously refreshing the positioning and offering of Incredible Connection and HiFi Corp towards a service
and solution- orientation business
» expand product offering in the consumer finance segment
» create an on-line channel for all sales, marketing and consumer finance products
» drive excellence in merchandising, marketing and product pricing
JD Group » Integrated report 2011
5
Core expertise and strategy
To enable the strategy, the Group’s core expertise is embedded in:
» automation and standardisation of business processes by implementing leading technology solutions, driving
down costs and increasing efficiencies
» understanding of the risk environment relating to the changing mass-middle market from a consumer finance
product offering perspective
» exceptional skill, underpinned by a fully automated debt-collection capability and capacity across the entire
credit risk management and collections value chain
» essential understanding of the importance of being customer centred experienced
» engaged staff, enabled by highly trained, committed and developed leadership teams
» the ability of management to execute the strategy
The core strategy of the Group is to offer a differentiated value proposition to its consumers in its various
market segments and in so doing, fulfil their lifecycle needs over time. The foundation of this strategy is
embedded as follows:
Overview Outcome
Fundamental understanding of the Group’s A single view of our customers
Customer centricity 1. customers’ needs and segmentation and the
development of capability and capacity to
enabling insights to serve each
customer’s unique individual
satisfy such needs through differentiated requirements
products and services
Art of Service 2. Distinctive is central to every business
consumer
service delivery where the Satisfied consumers valuing the
consistent differentiated service
process
National, standardised and consistent Benchmarking operational efficiencies
Operational excellence 3. applicationtoofpredefined standards,
according
operational processes and effectiveness
aimed at continuous improvements
Management of resources with one goal in Improving return on equity
Resource management 4. mind, namely, optimisation of the Group’s
assets and capital structure
Building nd optimising Identify, attract and retain top talent, as people Engaged people on all levels, exceeding
people capacity 5. are central to the Group’s ability to deliver employee engagement targets
outstanding service and sustain the future
growth of the organisation
Sustainable growth
and
6. Identification and conversion of organic the
acquisitive growth opportunities within
Consistent and reliable growth
diverse set of the operating divisions to
deliver on benchmark returns
Transformation and
sustainability 7. Embracing transformation and sustainable
business practices as a key imperative for
Staff complement to reflect the diversity
of South Africa and community
the future success of the Group and South involvement improving the living
Africa conditions of all South Africans
Integrated report 2011 « JD Group
6 Investment overview
Progress on strategy
Following the decoupling of Retail from Financial Services, the Group’s core strategic priority has
been rebuilding and reinforcing the foundations of the two divisions to increase efficiencies.
Priority Progress on key priorities:
Market share growth and The Group has increased store openings (43 additional stores) in Furniture and
margin maintenance Cash Retail and is turning around loss-making stores.
Margins have improved in a highly competitive operating context through
improvements in merchandise and marketing practices.
HiFi Corp has completely redesigned the look and feel of its stores.
Introduced a solution component to the Incredible Connection value proposition.
Expansion of Financial Launched:
Services value propositions » a personal loan product.
including value added » a long-term car rental product.
services » a short-term insurance product in conjunction with Cash Retail.
» a funeral insurance product in conjunction with Furniture Retail and
JDG Insurance.
Refreshing the Retail IT The Group is making good progress with the SAP implementation.
platform
Refreshing the Financial The Group is on track with the implementation of the Financial Services loan
Services IT platform management platform (VisionPLUS). This is expected to be completed in the 2012
financial year allowing the Group to accelerate product development.
Centralisation of supply The Group has opened 12 of the planned 33 distribution centres and expects
chain centres to open another 13 during 2012. In addition, the supply chain processes and
practices have been redesigned.
The Art of Service Employee engagement and customer service levels have improved.
Top six and top three positions of the 2011 Ask Afrika Orange Index® Service
Excellence Benchmark for Furniture Retail and Electronics and Appliance Retail
Categories respectively.
People and leadership Leadership development is ongoing.
practices
JD Group » Integrated report 2011
7
Business structure
Divisions Retail brands Business focus Strategic
business goal
Furniture Retail Barnetts
Bradlows appliances retail and deliver required return
on sales
Electric Express
Joshua Doore
Morkels
Price ’n Pride
Russells
Supreme (Botswana)
Cash Retail
HiFi Corp
technology and household differentiation, store
Incredible Connection appliances retail expansion and deliver
required return on sales
Automotive Retail Multiple local vehicle
brands servicing, vehicle parts efficiency, create service
retail and wholesale and differentiation, vehicle
Hertz Car Rental short-term car rental franchise extension and
deliver required return
on sales
Building Supplies Pennypinchers
and DIY retail differentiation, store
Timbercity expansion and deliver
required return on sales
Financial Services JD Financial Services
insurance management, collection
JDG Insurance optimisation, product
development and deliver
required return on capital
employed
New Business
Blake and Associates
Development [70%] centre supporting customer market development and
lifecycles deliver required return on
capital employed
Integrated report 2011 « JD Group
8 Investment overview
Group’s operating portfolio
Operating segment
The Furniture Retail (FR) division comprises eight leading retail chains that service a broad spectrum of the mass-
middle market. The retail activities are focused on providing a superior customer retail experience through excellent
housekeeping, optimisation of merchandise and inventory planning to meet customer expectations, entrenching
Furniture the Art of Service to build loyalty and ensure re-serve opportunities.
A key driver of FR is its understanding of customer requirements, ensuring each brand’s ability to deliver, including
Retail educating customers on product features and benefits.
FR has continued with the journey of implementing its strategic projects in 2011, including the Art of Service, the SAP
implementation, centralised distribution and accordingly, it has strengthened its position in the market.
Cash Retail (CR) is a retailer of consumer electronics and technology products. It comprises two established brands in
southern Africa, namely Incredible Connection and HiFi Corp.
Incredible Connection’s aim is to be the dominant information technology retailer in South Africa. It has an extensive
range of international products and provides a one-stop technology shop supported by expert advice, after sales
service and value-added services. It has differentiated its business model through service, product and price, including
initiatives to service new markets.
Cash Retail HiFi Corp targets the mass market and has enhanced the quality of its range and in-store service, leading to improved
consumer perception of the brand. The business is driven by its ability to offer compelling price points and value to
consumers.
CR leverages its purchasing power to achieve better merchandising terms and optimise lease terms with landlords.
A centralised support centre services the customers of both brands. The division will also centralise its logistics in
support of Group-wide initiatives.
Unitrans Auto offers a broad range of new and pre-owned vehicles, parts and accessories, servicing and insurance,
complemented by the Hertz car rental division. Unitrans Auto targets consumers across the income spectrum and has
a significant market share of the top selling volume brands as well as a number of luxury brands.
It represents a number of international motoring brands in the mass market and services its customers from its
network of 84 dealerships located throughout South Africa.
Automotive Unitrans Auto is cash generative and fits strategically with JD Group’s retail and consumer finance strategy. It presents
and Building significant financial services growth opportunities to serve the now expanded JD Group customer base.
SteinBuild is a retailer of building materials and related products and services comprising two well established brands
Supplies with 59 retail outlets. Timbercity provides an extensive range of boards, shelving and timber, laminates, modular furniture
and flooring. Pennypinchers is a building and construction material specialist that has a specialist but comprehensive
range of building materials, hardware and home improvement products. The majority of SteinBuild’s customers are
professional contractors, subcontractors and artisans. SteinBuild provides trade credit to its professional customers
and is planning to grant credit to consumers, backed by JD Group’s expertise in this segment.
Blake develops tailored contact centre sales and service solutions and leverages its highly skilled staff, technology and
New business intelligence platforms to develop innovative solutions that its clients use to dynamically engage with their
Business customers. Underpinned by its highly entrepreneurial culture and continual product innovation and development, it
has developed a leading market position in a number of sectors including debt collection, inbound and outbound sales
Develop- and social media solutions among others. Recognising the trend towards multiple customer engagement channels,
ment – Blake Blake established an in-house E-Commerce business unit, which will add multifaceted solutions to Blake’s offering.
Financial Services (FS) provides credit solutions to customers of the Group’s eight Furniture Retail chains. It also
provides third-party consumer finance to external retailers and other non-retail related financial services products.
FS’s customer-facing consultants in each store are supported by a centralised back office credit origination and
collections environment including two contact centres with a collective staff complement of 800 agents.
In addition to its core focus of developing, granting and managing financial services products across the entire value
Financial chain, FS is well-placed to provide extensive business intelligence relating to customer spending behaviours within
Services the Group.
FS is on track with the roll-out of new loan management and debt origination systems (VisionPLUS and Capstone)
to enhance its product distribution capability. During the year, FS launched a personal-loan product across all retail
branches with the book growing to R374 million on a gross basis by year end.
JD Group » Integrated report 2011
9
Financial performance highlights
Highlights Contribution Core brands/operating profit
2011 2010 Barnetts Morkels
Bradlows Price ’n Pride
73
Revenue (Rm) 5 775 5 339
%
Increase in Electric Express Russells
operating Operating profit (Rm) 315 182
Joshua Doore Supreme
profit Stores 988 949
No of employees 9 035 8 928
’11 315
’10 182
2011 2010 HiFi Corp
Incredible Connection
18%
Increase in Revenue (Rm) 4 578 4 308
operating Operating profit (Rm) 224 190
profit Stores 96 92
No of employees 3 625 3 608
’11 224
’10 190
2011 Unitrans Auto Pennypinchers
Timbercity
R59m
Contribution to Revenue (Rm) 2 376
operating profit Operating profit (Rm) 59
for two months
Points of presence 143
to August
No of employees 6 015
’11 59
2011 2010 Blake
Revenue (Rm) 245 267
100
Increase in
% operating
profit
Operating profit (Rm) 30 15
No of employees 1 646 1 551
’11 30
’10 15
2011 2010 JD Financial Services
Revenue (Rm) 3 314 3 140 JDG Insurance
21,7
Return on
% equity Operating profit (Rm) 723 604
Stores 988 949
No of employees 4 809 4 560
’11 723
’10 604
Integrated report 2011 « JD Group
10 Investment overview
Financial performance
Return on sales/capital employed
Actual
Objective 2008/09 2009/10 2010/11 Target
Furniture Retail
Optimise retail efficiency and deliver required return 12,5%
on sales 4,5% 3,9% 6,4% return on sales
Cash Retail
Product and service differentiation, store expansion 5%
and deliver required return on sales 5,5% 4,4% 4,9% return on sales
Automotive Retail (two months)
Optimise retail efficiency, create service
differentiation, vehicle franchise extension and 2,8%
deliver required return on sales n/a n/a 2,6%* return on sales
Building Supplies (two months)
Product and service differentiation, store expansion 5%
and deliver required return on sales n/a n/a 2,6%* return on sales
Financial Services
Appropriate risk management, collection 25%
optimisation, product development and deliver return on capital
required return on capital employed 2,0% 19,0% 21,7% employed
New Business Development – Blake 25%
New product development, market development return on capital
and deliver required return on capital employed 16,5% 26,4% 30,4% employed
*Reported on a consolidated basis in the Segmental Report.
Headline earnings
Revenue (Rm) Operating profit (Rm)
per share (cents)
16 000 1 000 2 500
800 2 000
12 000
600 1 500
8 000
400 1 000
4 000
200 500
0 0 0
06 07 08 09 10 11 06 07 08 09 10 11 06 07 08 09 10 11
JD Group » Integrated report 2011
11
Operating performance
In this report the Group has adopted more extensive reporting in relation to its sustainability
initiatives, as recommended by King III.
Through sustainable development, the Group endeavours to provide all stakeholders with
a transparent and comprehensive description of the economic, environmental and social
challenges that are linked to our operations and describe applicable strategies and solutions.
Economic
continuously explore ways to reduce costs and improve efficiency of operations
ensure cash flow returns that allow for continued reinvestment in and replacement of fixed assets
deliver on benchmark returns
Operational
continue to uphold an open culture of communication through all divisions
improve level of customer service
develop innovative retail and consumer finance solutions
Environmental
reduce energy consumption
employing proven, cost-effective energy saving technology such as fitting low wattage light fittings
installation of timers and motion sensors throughout the stores
Social
assist with uplifting of disadvantaged communities by investing in and employing resources from the
communities in which JD Group operates
continue to develop B-BBEE in line with applicable guidelines and legislation
skills transfer in disadvantaged communities with a further spend on training
Integrated report 2011 « JD Group
12 Investment overview
Ten-year review
12 months Restated**
31 August 31 August
2011 2010
Share performance
Total shares in issue ’000 219 830 170 500
Weighted average number of shares in issue ’000 172 142 164 314
Headline earnings per share cents 407,7 303,6
Cash equivalent dividends per share cents 200,0 150,0
Dividend cover times 2,0 2,0
Net asset value per share cents 3 687,8 3 022,8
Profitability, liquidity and gearing
Revenue Rm 15 741 12 590
Operating profit Rm 1 057 760
Profit before finance costs Rm 1 064 764
Profit attributable to shareholders Rm 699 501
Closing shareholders’ equity Rm 8 107 5 154
Average shareholders’ equity Rm 6 631 4 993
Net interest-bearing debt Rm 1 315 667
Average total assets less non-interest-bearing debt Rm 8 932 6 537
Total assets Rm 16 734 9 281
Operating margin % 6,7 6,0
Profit attributable to shareholders on revenue % 4,4 4,0
Return on closing shareholders’ equity % 8,6 9,7
Return on average shareholders’ equity % 10,5 10,0
Return on assets managed % 11,9 11,9
Interest cover times 11,2 7,7
Gearing ratio % 14,5 12,9
Current ratio :1 2,0 2,5
Shareholders’ equity to total assets % 48,4 55,5
Productivity
Number of stores 1 227 1 041
Revenue per store R000 12 829 12 094
Number of employees 25 718 19 186
Revenue per employee R000 612 656
Stock exchange performance
Closing share price cents 4 075 4 361
Number of shares traded ’000 227 024 296 265
Value of shares traded Rm 10 811 13 027
Volume traded as % of issued shares % 103,3 173,8
Market value per share
– high cents 6 069 5 299
– low cents 3 743 3 835
All ratios have been calculated using amounts in R000s as opposed to Rm.
** 2010 has been restated to reflect Abra as a discontinued operation.
ø The 2009 comparatives have been restated to reflect the changes made to the “at acquisition” fair values of net assets acquired in terms of IFRS 3.
# The 2007 comparatives have been restated for the change in the basis of accounting for insurance premiums and initiation fees. Prior years have not been
restated for the new basis of accounting.
* The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards
(IFRS). Prior years have not been restated to reflect the changes required to comply with IFRS.
JD Group » Integrated report 2011
13
31 August 31 August 31 August 31 August 31 August 31 August 31 August 31 August
2009ø 2008 2007# 2006 2005* 2004 2003 2002
170 500 170 500 180 000 178 000 175 500 172 000 166 830 112 730
163 245 169 807 177 861 176 271 172 221 166 930 133 196 112 070
44,4 301,0 621,7 823,5 697,6 518,5 340,5 226,5
41,0 152,0 303,0 412,0 352,0 240,0 110,0 56,0
1,1 2,0 2,1 2,0 2,0 2,0 3,1 3,8
2 833,5 2 822,9 2 804,5 3 160,5 2 717,0 2 297,0 2 033,0 1 715,1
12 922 12 610 12 914 11 939 9 933 9 056 5 966 4 083
646 797 1 591 2 024 1 755 1 256 747 467
643 813 1 662 2 083 1 809 1 280 762 478
75 514 1 113 1 457 1 202 784 449 241
4 831 4 813 5 048 5 626 4 768 3 951 3 392 1 933
4 822 4 931 5 337 5 197 4 360 3 671 2 663 1 922
639 158 76 (304) (457) (19) 894 1 048
6 447 6 426 7 030 7 028 6 035 5 308 4 224 3 557
8 922 8 673 8 891 10 115 8 440 7 739 7 185 4 243
5,0 6,3 12,3 17,0 17,7 13,9 12,5 11,4
0,6 4,1 8,6 12,2 12,1 8,7 7,5 5,9
1,5 10,7 22,1 25,9 25,2 19,9 13,2 12,5
1,6 10,4 20,9 28,0 27,6 21,4 16,9 12,5
10,0 12,7 23,7 29,6 30,0 24,1 18,1 13,4
7,3 9,6 11,0 21,9 12,7 8,8 4,9 2,7
13,2 3,3 1,5 (5,4) (9,6) (0,5) 26,3 54,2
2,6 2,3 2,9 3,4 3,6 3,1 2,6 4,0
54,1 55,5 56,8 55,6 56,5 51,1 47,2 45,6
1 094 1 095 1 078 1 028 963 952 978 695
11 812 11 516 11 980 11 614 10 315 9 513 6 100 5 875
21 247 18 989 19 577 18 361 16 459 16 167 15 738 10 064
608 644 660 650 603 560 379 406
4 249 3 010 6 970 6 660 7 400 4 550 3 161 1 675
265 525 281 087 293 949 271 264 167 697 137 612 73 828 56 740
9 587 11 781 22 976 20 383 10 634 5 552 1 716 1 466
155,7 160,6 165,1 152,4 95,6 80,0 44,3 50,3
5 020 7 100 10 600 9 625 7 800 4 690 3 180 4 060
2 216 2 101 5 920 5 939 4 659 2 950 1 440 1 300
Integrated report 2011 « JD Group
14 Investment overview
Ten-year review (continued)
31 August 31 August
2011 2010*
Statement of comprehensive income
Revenue 15 741 12 590
Cost of sales 8 550 6 307
Operating profit 1 057 760
Investment income (including equity accounted profits) 7 4
Profit before finance costs 1 064 764
Finance costs – net 95 108
Profit before taxation 969 656
Taxation 264 163
Profit after taxation from continuing operations 705 493
(Loss)/profit after taxation from discontinued operations (1) 15
Profit for the year 704 508
Attributable to minorities 5 7
Profit attributable to shareholders 699 501
Statement of financial position
Assets
Non-current assets 4 630 1 617
Property, plant and equipment 1 440 767
Vehicle rental fleet 17 —
Goodwill 1 324 493
Intangible assets 1 658 212
Investments and loans 84 30
Interest in associate company 6 —
Interest in joint venture — —
Deferred taxation 101 115
Current assets 11 887 7 664
Inventories 3 059 1 575
Trade-, loan- and other receivables 6 704 5 276
Vehicle rental fleet 352 —
Financial assets 1 —
Taxation 395 34
Bank balances and cash 1 376 779
Assets classified as held for sale 217 —
Total assets 16 734 9 281
Equity and liabilities
Equity and reserves
Share capital and premium 4 245 1 779
Treasury shares (263) (378)
Non-distributable and other reserves 231 158
Retained earnings 3 644 3 464
Reserves of the discontinued operation classified as held for sale 34 —
Shareholders for dividend 216 131
Shareholders’ equity 8 107 5 154
Minority interest 58 34
Non-current liabilities 2 448 1 057
Interest-bearing long-term liabilities 1 717 922
Non-interest-bearing long-term liability 202 75
Deferred taxation 529 60
Current liabilities 6 030 3 036
Trade, other payables and provisions 4 974 2 424
Interest-bearing liabilities 946 502
Financial liabilities — 4
Taxation 82 84
Bank overdrafts 28 22
Liabilities classified as held for sale 91 —
Total equity and liabilities 16 734 9 281
* The 2010 comparatives have been restated to exclude discontinued operations (Abra).
ø The 2009 comparatives have been restated to reflect the changes made to the at acquisition fair values of net assets acquired in terms of IFRS 3.
# The 2007 comparatives have been restated for the change in the basis of accounting for insurance premiums and initiation fees. Prior years have not been
restated for the new basis of accounting.
** The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards
(IFRS). Prior years have not been restated to reflect the changes required to comply with IFRS.
JD Group » Integrated report 2011
15
31 August 31 August 31 August 31 August 31 August 31 August 31 August 31 August
2009ø 2008 2007# 2006 2005** 2004 2003 2002
12 922 12 610 12 914 11 939 9 933 9 056 5 966 4 083
6 428 6 627 6 517 5 811 4 571 4 148 2 613 1 657
646 797 1 591 2 024 1 755 1 256 747 467
(3) 16 71 59 54 24 15 11
643 813 1 662 2 083 1 809 1 280 762 478
88 84 151 95 142 145 154 179
555 729 1 511 1 988 1 667 1 135 608 299
475 215 398 531 465 351 160 60
80 514 1 113 1 457 1 202 784 448 239
— — — — — — — —
80 514 1 113 1 457 1 202 784 448 239
5 — — — — — 1 2
75 514 1 113 1 457 1 202 784 449 241
1 673 1 397 1 403 1 380 662 645 1 026 345
756 653 578 491 287 210 210 144
— — — — — — — —
493 347 347 347 — — 42 54
256 256 294 332 145 165 315 —
92 93 111 124 110 110 146 110
— 28 23 19 16 — — —
— (15) 3 10 — — — —
76 35 47 57 104 160 313 37
7 249 7 276 7 488 8 735 7 778 7 094 6 159 3 898
1 491 1 448 1 348 1 066 867 784 739 427
4 910 4 503 5 041 6 046 5 259 4 871 4 860 3 231
— — — — — — — —
8 3 1 5 1 34 36 13
104 187 123 1 67 77 80 5
736 1 135 975 1 617 1 584 1 328 444 222
— — — — — — — —
8 922 8 673 8 891 10 115 8 440 7 739 7 185 4 243
1 779 1 779 2 118 2 057 1 995 1 903 1 778 782
(411) (435) (255) (18) (15) (88) (39) (22)
166 245 226 193 150 137 127 24
3 230 3 157 2 859 3 072 2 346 1 746 1 415 1 124
— — — — — — — —
67 67 100 322 292 253 111 25
4 831 4 813 5 048 5 626 4 768 3 951 3 392 1 933
27 — — — — — — 21
1 299 700 1 223 1 937 1 539 1 537 1 412 1 310
878 293 739 1 151 810 947 831 1 049
83 83 79 65 66 75 — —
338 324 405 721 663 515 581 261
2 765 3 160 2 620 2 552 2 133 2 251 2 381 979
2 153 2 068 2 218 2 073 1 768 1 794 1 801 745
486 1 000 312 162 317 362 506 219
3 — — — — 8 9 11
112 92 90 317 48 87 64 2
11 — — — — — 1 2
— — — — — — — —
8 922 8 673 8 891 10 115 8 440 7 739 7 185 4 243
Integrated report 2011 « JD Group
16 Investment overview
Geographic footprint
Botswana
Namibia
Swaziland
South Africa
Total number
Northern Cape
KwaZulu-Natal
Western Cape
Eastern Cape
Mpumalanga
North West
Free State
Swaziland
of stores
Botswana
Limpopo
Gauteng
Namibia
Operational areas
Furniture Retail
Barnetts 22 23 21 36 13 10 4 1 130
Bradlows 28 11 13 12 9 9 8 1 2 93
Electric Express 37 16 19 10 16 10 9 8 1 126
Joshua Doore 36 20 17 20 17 16 13 12 3 154
Morkels 36 17 12 8 12 8 9 8 1 111
Price 'n Pride 26 21 9 17 26 15 15 12 4 145
Russells 49 27 32 25 15 14 19 21 8 210
Supreme Furnishers 19 19
Cash Retail
HiFi Corp 13 5 7 2 1 2 2 1 1 1 35
Incredible Connection 28 6 12 3 2 3 2 2 1 1 1 61
SteinBuild
Pennypinchers 2 1 14 7 1 2 27
Timbercity 10 2 4 4 2 1 1 24
Other 1 5 2 8
Unitrans Motors Dealerships
BMW 3 3
General Motors 7 2 1 5 1 16
MAN 1 1
Mercedes-Benz and Chrysler 1 1
Nissan 7 7
Toyota 14 1 7 3 7 11 43
Volkswagen 8 2 1 1 1 13
Total 327 154 135 129 143 112 89 89 21 21 4 3 1 227
The Group operates in southern Africa through six business divisions. These markets are served through
a multi-branded channel network representing 12 retail brands, with a footprint of 1 143 retail stores and
84 motor dealerships in southern Africa.
JD Group » Integrated report 2011
17
Our stakeholders
Stakeholder Stakeholder imperatives
Customers » Create relevant and lasting relationships with present and future customers
by providing them with appropriate value added product-offerings and
solutions to facilitate their household economic upliftment
Shareholders and » Deliver sustainable earnings growth and enhance shareholder value (total
funders shareholder return)
Employees » Create a positive, supportive and diversity-friendly working environment in
which staff can achieve their full potential through challenging work and
development opportunities – with the assurance of being recognised and
rewarded for excellence in performance
Suppliers » Create optimised relationships and ensure that the total supply chain delivers
quality experiences and value to the end consumer
Government and » Obey all laws, regulations and corporate governance rules in countries where
regulators the Group operates and seek to engender constructive and healthy relations
with all levels of governments and regulators
Communities and society » Be a concerned corporate citizen and grow partnerships as an engaged
at large member of local communities where our stores, warehouses and offices are
located through the support of local and selected national sustainable
development initiatives
These are discussed in the sustainability report
Customers
Shareholders
Communities and and funders
society at large
Employees
Government and
regulators
Suppliers
Integrated report 2011 « JD Group
18 Investment overview
Our material issues
Addressing material issues is seen as a cornerstone of integrated reporting and provides a view of what
the Group and its stakeholders deem important. Material issues have a direct or indirect impact on whether the
Group is addressing its economic, environmental and social risks while creating value for itself, its stakeholders
and society.
Material issues
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Governance, To apply King III » Adequate governance structures » Compliance with King III as » All divisions Corporate
leadership and recommendations, are in place, including among detailed in this integrated report governance
sustainability comply with the others, the board, Audit together with a full set of (page 112)
new Companies Act committee, Risk committee, internal processes.
requirements and Remuneration committee and
maintain high Exco. Similar committees exist in
standards of subsidiaries that are not 100%
governance owned by the Group. A formal
reporting framework exists and
subsidiaries report to the main
board, audit and risk committees.
» Codes of conduct and ethics » Code of conduct and ethics » All divisions Corporate
have been applied across measures applied to individual governance
the Group. staff performance. (page 112)
» The Group is committed to the » JSE SRI index » All divisions Corporate
recommendations of King III. governance
External compliance reviews have (page 112)
been performed evidencing >95%
compliance and corrective
measures put in place where
necessary.
» A risk management culture has » Core governance indicators » All divisions Corporate
been developed where risks are governance
identified, quantified and controls (page 112)
are put in place to mitigate the
risk appropriately or a decision
taken to accept the risk. These
are measured and monitored
continuously.
» A securities dealing code and
closed period policy have been
maintained.
» Board and committee assessments
have been conducted.
Compliance with new » Continuous review of the Group’s Sustainability
legislation policies and procedures to ensure and
compliance. The Group monitors stakeholders
adherence to the policies on an review
ongoing basis. (page 74)
» Customers are made aware of Corporate
their rights and obligations and governance
ad hoc store audits ensure that (page 112)
compliance with procedures has
taken place.
» The majority of staff have been
trained this year on Consumer
Protection Act (CPA) related issues.
Sustainable Shareholder returns » The Group has delivered a » Return on sales and return on » All divisions Financial
business significant increase in earnings in capital employed performance
the period under review and (page 10)
continues to focus on driving
earnings growth and real economic
returns for shareholders. The Group
continues to pay dividends
semi-annually.
JD Group » Integrated report 2011
19
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Sustainable Sustainable business » The business model has been » Return on capital employed » All divisions Contents
business model revised in recent years and the (page 1)
(continued) benefits are now being reflected in
the income statement and » HEPS and NAV growth Contents
statement of financial position. The (page 1)
changed business model combined
with centralised logistics and the » Dividend payments Directors’ report
new IT systems, will allow the (page 143)
business to become more agile in
an increasingly competitive market.
Even though the individual business
targets as defined in 2009 have not
yet been achieved, the
commitment to achieve them by
FY 2013/14 remains intact.
Appropriate granting of » Central collection and granting of » Financial Review of
credit credit have yielded very positive Services operations
results and have been designed Financial
to sustain the business in the Services
long term.
(page 64)
Appropriate ERP » New IT systems, namely SAP , » Completion of core strategic » Furniture Review of
systems VisionPLUS and Capstone, programmes on schedule Retail operations
are being implemented in the Furniture Retail
Furniture Retail and Financial (page 48)
Services businesses. These will
result in the businesses being far Review of
more agile and will significantly » Financial operations
enhance the ability to sell new Services Financial
products and services. This will Services
enhance the long-term
(page 64)
sustainability of the business.
Centralised distribution » Strategic central distribution » Furniture Review of
centres are being acquired to Retail operations
secure long-term tenure. 12 were Furniture Retail
commissioned in 2011 and a (page 48)
further 13 will be commissioned
in 2012. The remaining eight will
be commissioned in 2013.
Acquisition of Unitrans » The acquisition of these » Unitrans Auto Review of
Auto and SteinBuild businesses widens the retail SteinBuild operations
business presence and allow the Unitrans Auto
diversification of financial services (page 56)
products into these businesses in
Review of
line with the Group strategy. In
operations
addition, commercial agreements
were concluded to allow the SteinBuild
Group to access the expertise (page 60)
of Steinhoff in the form of retail
know-how and combined
sourcing.
Integrated report 2011 « JD Group
20 Investment overview
Our material issues (continued)
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Risk To identify, monitor and Corporate
management manage risk relating to governance
the following key areas
appropriately:
Assets » Group Regional Security Managers » Year-on-year reduction of » All divisions page 137
are deployed through the Group overall cost of insurance risk
to manage physical risks that
affect Group’s assets. The Group
carries certain insurance risk on
the statement of financial position
that is monitored on a monthly
basis, with corrective actions
being taken where required.
Year-on-year, the total cost of risk
has reduced over the last three
years as a result of this focus.
Credit risk, credit » Credit is modelled, granted and » Total credit risk charge » Financial page 132
granting and collected centrally. The process Services
collections has evolved significantly in recent
years resulting in significantly
tighter vintage curves and more
acceptable levels of bad debts
now being recorded. Overall
debtors’ cost have reduced
year-on-year.
Fraud » Fraud prevention policies have » Number and quantum of » All divisions page 132
been developed and are applied incidents
and monitored across the Group.
Information technology » Information technology processes » Independent survey » All divisions page 133
have been tested against
Information Technology
Infrastructure Library standards by
an external party.
Funding, liquidity » Funding, liquidity and interest rate » Cost of debt and debt » Group level page 133
and interest rate risk risk is monitored on an ongoing ratings from independent
basis at a board level. The funding rating agencies
profile of the Group has changed
significantly over the last three
years. The Group is currently
restructuring its statement of
financial position to appropriately
fund the various asset classes.
Reputational » Reputational risk is difficult to » Negative exposure in the media » All divisions page 134
measure, however it is monitored
on an ongoing basis via the
various compliance and risk
functions within the Group.
Disaster recovery » IT-specific disaster recovery and » Downtime measurements » Group level page 133
business continuity processes are
addressed via the Group’s
enterprise-wide programme.
Utility prices » The Group is affected by utility » Increase in expenses » Furniture page 133
prices through its large store Retail
base. This largely uncontrollable » Cash Retail
expense is monitored and state of
the art monitoring software to
minimise electricity usage has
been put in place to minimise the
exposure to such rising costs
where possible.
JD Group » Integrated report 2011
21
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Engaging To engage with our key » Communication with shareholders » Roadshows and one-on-one » Group level Sustainability
stakeholders stakeholders, both is ongoing with regular road meetings with shareholders and stakeholder
internally and shows and one-on-one meetings review (page 74
externally with major shareholders – page 91)
semi-annually in addition to SENS
and press announcements
» Staff are engaged at various levels » Staff engagement surveys » All divisions Sustainability
including ongoing engagement and stakeholder
with the unions. review (page 74
– page 91)
» Government and regulators are Sustainability
engaged throughout the year across and stakeholder
all areas of the business. The Group review (page 74
partakes among others in the – page 91)
Consumer Goods Council of South
Africa and various other forums and
has taken a leading role in the
National Debt Mediation Association.
» Customers are engaged at many » Customer engagement surveys » Furniture Sustainability
levels and are monitored by sales Retail and stakeholder
performance and specific review (page 89)
» Cash Retail
customer surveys. In 2011 we
contacted 25 333 customers as » Financial
a part of various surveys. Services
» Suppliers are engaged by the
merchandisers on an ongoing basis
including defining 12-month plans
with suppliers, to optimise the
product type and availability through
the trading cycles of the Group.
» The various divisions engage with » Corporate social investment » All divisions Sustainability
the broader communities in spend and stakeholder
addition to various CSI initiatives review (page 94)
that are driven at a corporate level.
Customer To enhance the » The Art of Service programme was » Internal and external surveys » Furniture Sustainability
experience customer experience implemented in 2010 and has and awards Retail and stakeholder
both internally and yielded significant results as review (page 91)
» Cash Retail
externally evidenced by the 2011 Ask Afrika®
Orange Index Service Excellence » Financial
Benchmark received by the Group’s Services
chains. The top six places in the
» Corporate
Furniture Retail category were
Services
awarded to the Group’s Furniture
Retail chains and the top three
places in the electronics and
appliance retail category were
awarded to the Group’s three
electronics retailers, reflecting
absolute dominance in the sectors
in which the Group trades.
» External customer surveys are
conducted. This year the survey
results reflected that 80% of
customers viewed our service as
a “strength”.
» Improved customer complaints
processes have been implemented
and the number of outstanding
complaints reduced significantly.
Employees Retaining and » Employment equity. » Staff turnover statistics » All divisions Sustainability
motivating employees » Healthy staff (HIV/Aids testing and and stakeholder
health programme). review (page 77)
» Training and development.
» Market-related wages and
benefits.
» Employment opportunities.
» Succession planning.
Integrated report 2011 « JD Group
22 Investment overview
Our material issues (continued)
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Business Diverse sustainable » Ability to diversify the retail » Acquisitions and new retail » Furniture Sustainability
products product portfolio offering through organic and chains Retail and stakeholder
and services acquisitive growth as evidenced » Cash Retail review (page 89)
with Unitrans and SteinBuild
» Financial
acquisitions.
Services
» Ability to launch new products
» Unitrans Auto
within the various retail channels
SteinBuild
will be enhanced with VisionPLUS.
Transformation Application of B-BBEE » The Group monitors the » B-BBEE ratings » All divisions Sustainability
codes transformation strategy on an and stakeholder
» Enterprise-
ongoing basis and aims to wide review (page 86)
become more representative of
the demographics of South Africa,
particularly in the middle and
senior levels of the Group.
» The Group embraces all aspects
of B-BBEE and has recently been
rated at level 5 by Empowerdex
(2010: level 6).
Responsible » Local procurement » Support and development of » B-BBEE ratings » All divisions Sustainability
procurement small businesses (procurement, and stakeholder
» Application of » Enterprise-
and CSI local procurement and wide review (page 92
B-BBEE codes
empowerment) and socio- and page 94)
economic development is a focus
of the Group and is evidenced by
its high level of local sourcing of
furniture and furniture related
products. Furthermore the Group
has dedicated CSI spending.
JD Group » Integrated report 2011
23
Key
performance Core Cross-
Category Issue Response indicators (KPIs) divisions references
Biophysical Use of energy » Energy monitoring systems have » Energy usage and » Furniture Sustainability
environment been installed in all high usage recycling measures Retail and stakeholder
stores such as HiFi Corp and » Cash Retail review (page 94
– page 97)
Incredible Connection and the » Financial
management of usage reductions Services
was outsourced to third-party » JD Group
specialists. Energy monitoring Head Office
systems will be implemented at
all new stores and warehouses to
manage the cost and usage of
energy.
» All new warehouses of the
centralisation of logistics
programme, are being built in an
energy efficient manner. This
encompasses both the
development process and
materials, and the design of the
building to minimise the use of
energy.
» In the past three years, the Group
replaced the majority of the
elevators and replaced the
electrical reticulation system at its
head office, reducing energy
usage by approximately 30%.
Further elevators will be replaced
in the forthcoming year, reducing
energy usage and cost further.
Use of fuel » The centralisation of logistics will » Furniture Sustainability
reduce the consumption of fuel Retail and stakeholder
due to more effective and review (page 94
– page 97)
efficient route planning. In
addition, sophisticated tracking
systems monitor driver behaviour
that is acted upon where
necessary.
Recycling of electronic » Incredible Connection recycled » Cash Retail Sustainability
goods sold 122 tonnes of electronic waste and stakeholder
this year with its DESCO review (page 94
– page 97)
programme.
Waste paper recycling » The majority of waste at the » JD Group Sustainability
Group’s head office is removed Head Office and stakeholder
for recycling purposes. Recycled review (page 94
– page 97)
paper is used as far as practically
possible. 100 tonnes of waste
from the head office was recycled
during the year.
Integrated report 2011 « JD Group
[VISION]
Group review
[ The Group’s strategy for growth has gained momentum and the future
a
of the Group’s businesses is totally aligned with the delivery targets ]
delivery
26 Group review
p
Executive Chairman’s report
David Sussman
Executive Chairman
We have set ourselves the goal that when JD Group celebrates its 30th
anniversary in 2013, we will be totally renewed. We are well on track to achieve
this objective in the next 20 months.
Earnings Material issues covered in this section
»
» The acquisition of Unitrans Auto and SteinBuild has enabled
40 %
Increase in attributable the Group to reduce its concentration risk by reducing its
earnings to R699 million from
historic reliance on Furniture Retail.
R501 million in 2010
» JD Group has entrenched a sustainable business with the
roll-out of Group-wide IT and logistics projects, the
acquisition of Unitrans Auto and SteinBuild and through its
Dividends
»
focused and well positioned financial services and retail
activities.
33 %
Dividends per share increased
to 200 cents from 150 cents » The Art of Service focuses the Group’s commitment to
in 2010 delivering a positive customer experience by anticipating
and recognising consumers’ requirements and delivering
on their expectations.
Revenue
»
» The Group’s employees continued to perform their duties
efficiently during the implementation of SAP and centralised
25%
Group revenue increased
logistics.
to R15,7 billion compared
to R12,6 billion in 2010 » During the review period, the Group’s readiness for King III
was independently assessed and recorded at 97%.
» The Group has defined its stakeholders and continued to
engage actively with all groupings during the year as fully
discussed in the sustainability report.
» A budget of R4 million was allocated to corporate social
investment activities in 2011 with an additional budget of
R3,7 million for enterprise development.
» The roll-out of 33 centralised distribution centres in Furniture
Retail will reduce the Group’s carbon emissions and its
impact on the biophysical environment as deliveries for all
chains will be consolidated.
JD Group » Integrated report 2011
27
Introduction that exceeded inflation as well as the low interest rate
environment, both of which led to improved disposable
The 2011 financial year has been the most gratifying year
income within our target markets. JD Group’s focus on
for JD Group since the strategy to refocus the Group into
excellence within its divisions, augmented by the
retail and financial services was set in motion. It has been
Art of Service initiatives, resulted in an improved
another year of strategic delivery as Furniture Retail and
performance.
Financial Services continued to benefit from recent
investments and considerable efforts to cement their
business models. Both divisions were rewarded with a
Strategic intent
marked improvement in their bottom line. It is equally The Group continued to make good progress on its strategic
pleasing that the Cash Retail division showed top-line objectives during the year. The financial indicators provide
growth through volume and market share gains despite further evidence that the decision taken three years ago to
the severe deflationary and competitive pressures separate our financial services and retail activities were fully
affecting their businesses. justified and that the strategy has been well executed.
JD Group’s raison d’être is to serve consumers in the
A milestone for the year was undoubtedly the transaction
mass-middle market. The Group’s sustainable success and
with Steinhoff. It has introduced two substantial businesses
customer loyalty has been built on recognising and
into the Group in line with the core strategy to establish and
anticipating the needs of consumers and then not only
grow a world-class diversified retail and financial services
satisfying these needs, but exceeding its customers’
group. The transaction has strengthened the ties between
expectations. The Group aims to engage intimately with
the two organisations. With the Steinhoff Group as a
each and every one of our customers, on the basis that
strategic shareholder, JD Group will gain access to its global
they are spending their hard-earned cash at our stores.
reach and intellectual capital, with benefits relating to
The year under review was characterised by a marked
product sourcing and new store formats, among others. It
improvement in service levels across all areas of the
has also renewed JD Group’s focus on southern Africa with
business, which is proof that the extensive Art of Service
the disposal of Abra as part of this transaction. Abra, the
has had the required impact on customer services.
Group’s subsidiary operating in Poland, was faced with
tough trading conditions. However this did not detract from The stated strategy is to establish and grow a world-class
the overall performance of the Group. diversified retail and financial services entity by expanding
the customer base, product range and distribution channels.
A particularly noteworthy aspect of the 2011 performance is
All new initiatives are tested against the barometer of how
that the total sales of Furniture Retail (on a 52-week basis)
they will enable the Group to improve its ability to serve
reached R5 billion for the first time since 2006. The
consumers. A primary objective is enhancing the
implementation of the National Credit Act (NCA) in 2007,
affordability of the product range in the target market.
resulted in more stringent credit granting conditions and
temporarily constrained retail sales. The division has since Organic growth is achieved through expansion of the store
been faced with the impact of pedestrian domestic base, pursuing additional market share and introducing new
economic growth. The achievement of visible top-line financial services products. With the acquisition of Unitrans
Auto and SteinBuild from Steinhoff during the year, the
growth can be attributed to the focus of Furniture Retail on
Group secured new high-potential markets and customers
its core retailing competencies as well as meeting and
in the motor retail and the home improvement segments.
exceeding the expectations of its customers, giving rise to
We have diversified the risks associated with its historic
pleasing market share gains, which once again validates the
reliance on furniture and appliance retail to generate
decision to separate retail and financial services.
income and a pipeline for the financial services business.
The transaction has delivered on the diversification
Business environment
objective while introducing a whole new channel to
Although there were indications of an improving economy distribute Financial Services’ associated credit offering and
in South Africa during the financial year, with muted GDP new financial products which are under development.
growth, the overall outlook remains cautious but optimistic. Accordingly, it squarely meets JD Group’s objective of
Unemployment remains a key challenge with minimal serving consumers better in our target market. As a
evidence, if any, of meaningful job creation. However, with growth opportunity for the Group, its potential cannot
its focus on serving consumers in the mass-middle market, be underestimated.
JD Group benefited from country-wide wage settlements
Integrated report 2011 « JD Group
28 Group review
Executive Chairman’s report (continued)
Progress on strategy » 84% of internal customers were satisfied with the quality of
service received – an increase of 7% on the previous year
The Group continued to make good progress with a number of
ambitious and substantial projects that will enable it to There is no doubt that as we have continued investing to
sustainably deliver on its strategic objectives into the future. ensure the sustainability of the business model, every
From a Group perspective, these included the implementation employee has been impacted at some point. Our employees
of the new Group-wide SAP ERP system that is on track and are to be complimented for effectively managing and
the centralisation of the logistics function in Furniture Retail overcoming the impact of these changes, as the successful
and Cash Retail, costing approximately R600 million, which will implementation would not have been possible without their
reduce operating costs and improve efficiencies. Financial commitment.
Services continued to make good progress with our
investments in new systems and its roll-out of VisionPLUS and Board of directors and corporate
Capstone, which will improve our ability to develop and governance
manage new financial products, while improving our ability to
Mr IS (Ivan) Levy sadly passed away on 5 February 2011.
measure the creditworthiness of consumers. New systems
Ivan had served on the board of JD Group for 17 years and
being implemented in the retail environment will lead to
was a member of the JD Group Remuneration committee
greater efficiencies and reduce costs, ultimately leading to
and the Chairman of the JD Group Nominations committee.
better value for the Group’s customers.
Ivan is sadly missed, foremost as a friend of many years,
Over the last three years, these investments and the but also as a colleague and board member. He always
centralisation of the credit environment in Financial Services added meaningful value and brought thoughtful insights to
have provided the Group with far greater insights into the JD Group board deliberations.
behaviours of consumers. The objective credit granting
With effect from 1 September 2011, Ms N (Nerina) Bodasing
process, together with standardised debt collection
and Mr MP (Matsobane) Matlwa were appointed as
practices, has unlocked significant efficiencies and
independent non-executive directors to the board.
improvements that underpinned the improved performance.
It is particularly pleasing that total receivables costs declined » Nerina, BSc (Hons) is the founder and managing director
to 12% of net loans, as a direct consequence of the ability of a fully empowered independent management
to assess each potential customer’s ability to service their consultancy that provides strategic and financial
debt. In addition, Furniture Retail’s market share was communication advice to South African corporates on the
achieved without compromising the quality of the debtors’ capital markets. She has considerable experience in
book, which is a clear demonstration that the financial shareholder communication, capital markets and
services focus is unlocking value. corporate practice. Early in her career, Nerina worked in
equity sales and assisted strategy research for global
People investment bank UBS.
Once again, the performance of JD Group’s employees has » Matsobane, a CA(SA), is the current executive president
been exemplary. Customer surveys across all the divisions of the South African Institute of Chartered Accountants
reflected improvements and demonstrated that the (SAICA). He has held senior positions at the South African
Art of Service is alive at every level of the organisation. In Revenue Services and at Absa Bank Limited and served
particular, a survey conducted during the year reflected that on a number of committees in the field of governance
80% of customers regard service as a strength of JD Group and financial reporting. He has a broad range of
when engaging with our brands. experience, spanning finance, auditing, taxation and
general management.
The results from a number of employee surveys conducted
during the year were equally pleasing: The board welcomes both Nerina and Matsobane who will
bring new perspectives to board deliberations.
» 85% of employees view the leadership as being
completely focused on both internal and external
customers, up 2% from the previous year Direct donations
» 93% of employees of the Group are actively engaged in The Group’s direct donations policy aims at providing
their day to day work activities a year-on-year financial assistance to poverty and community
improvement of 11% development, education, crime, health, art and agriculture
with a bias towards disadvantaged children and the youth.
JD Group » Integrated report 2011
29
Four noteworthy projects include: of costs, which are inevitable to ensure seamless service
» the Ekhaya lo Musa which houses and cares for babies, delivery during the transition.
children and young adults affected by HIV/Aids The Group is confident that within the next few years, the
» the Mitzvah School, a tutoring for disadvantaged students value added by the acquisition of Unitrans Auto and
in their final year of schooling have consistently produced SteinBuild will make a positive contribution to its
pass rates in excess of 90% performance in the form of higher returns for shareholders.
» the Group continues to support St Enda’s Community Other stakeholders of the Group will also benefit –
Centre, a secondary school in Joubert Park that it founded consumers’ needs will be better serviced by the extended
in one of its warehouses in 1985 product range offered by the retail and financial services
» Africa Community Trust provides assistance to a township divisions while the career advancement opportunities for
feeding scheme and clothing for approximately 300 employees will increase.
(2010: 200) underprivileged youth, especially young JD Group is optimistic about the year ahead, both in terms
people orphaned by HIV/Aids, child-headed families and of its existing operations that are well positioned to deliver
displaced persons further organic growth and the newly acquired businesses,
which will enable the Group to achieve its long-term
Transformation strategic growth and diversification objectives. However,
given the uncertain economic outlook, JD Group’s earnings
The Group remains committed to continued transformation
growth for the year ahead is not expected to match that
of its business in line with all dimensions of B-BBEE. We are
achieved in 2011.
pleased that the PDI representation of our board increased
to 42,9% from 31% during the year, including two PDI
women and four PDI men. In support of our objectives to Acknowledgements
transform our broader workforce, 93% of all new recruits It has been a privilege for me to work with all those who
in the 2011 financial year were employment equity have engaged with JD Group during the year, especially as
appointments. The Group improved its B-BBEE rating from we start realising the positive impacts of our substantial
a level 6 to a level 5 contributor during its 2010/2011 efforts of the last three years.
Empowerdex Scorecard verification.
I acknowledge the essential contribution of the non-
executive directors as we debated and adopted the new
Prospects initiatives that have created a solid foundation for the future.
The extensive investments to ensure the Group’s ability to I value your loyalty and commitment to JD Group.
sustainably grow its core business are well on track. The Grattan Kirk’s outstanding leadership has ensured that our
Group is now positioned to continue showing returns on highly capable and motivated executive team delivered on
these investments. The new risk management and their objectives for the year under review, with JD Group
prospecting systems which have been implemented in emerging in a stronger position. I thank them for their
Financial Services are paying off, while the centralisation of thorough approach to executing our strategy.
the distribution centres in both Furniture and Cash Retail
Whenever I have the opportunity of walking through our
are already unlocking efficiencies. The SAP implementation,
operations, I engage with our employees and each time
which is scheduled for completion in Furniture Retail by the
I am heartened by the level of engagement and
end of 2012, will also add value in the environment with an
expected bottom line benefit. In 2013, Cash Retail is
commitment to the Art of Service. I commend each and
every one of you for your efforts and look forward to
expected to commence with its SAP implementation. The
continuing the journey with you as part of the JD family.
real upside lies in the fact that the Group is only now
beginning to gain traction with all the initiatives at Group
level. While investment in the new software platform is
already bearing fruit, its full potential has yet to be
maximised. For example, systems will continue to operate
off duplicated platforms until the end of 2013 and there are
cost duplications as centralised distribution centres are
rolled out. The long-term benefits of these initiatives will, I David Sussman
however, more than make up for the short-term duplication Executive Chairman
Integrated report 2011 « JD Group
30 Group review
Board of directors
1. 2. 3. 4. 5. 6. 7.
Executive directors
encompassing HiFi Corp and Incredible Ian is also a director on the board of various
1. David Sussman (63)
Connection as well as assuming responsibility other internal JD Group subsidiaries.
for Abra. In May 2007, he was appointed
BCom » Appointed: 13 November 2008
Chief Operating Officer of the Furniture and
Executive Chairman
Cash Retail divisions. He was appointed Chief
David Sussman is the founder and Executive Executive Officer of the JD Group in June 5. Bennie van Rooy (36)
Chairman of the JD Group. Before forming 2008.
the JD Group, David founded his own BCom (Hons), CA(SA) »
Grattan has 14 years’ experience in auditing Group Financial Director
company, Sustein (Pty) Ltd (trading as Price ‘n and 15 years’ experience in retail.
Pride) in 1983. Bennie joined the Group in January 2010 as
Grattan is also a director on the board of Group Financial Controller. After completing
In 1986, David persuaded the then Chairman various other internal JD Group subsidiaries. his articles at PricewaterhouseCoopers in
of Rusfurn, Mervyn King, to sell Joshua Doore
Appointed: 17 September 2007 2000, Bennie gained exposure to various
to Sustein (Pty) Ltd. At the time, Sustein had
financial services disciplines such as mergers
three Price ‘n Pride stores and the acquisition and acquisitions, financial consulting and
of Joshua Doore required that Sustein be 3. Richard Chauke (44)
risk management.
listed on the Johannesburg Stock Exchange BCom (Hons) MCom (South African and He joined the Absa Group in September 2005
as Joshua Doore Limited. After further International (Tax), MTP (SA) » where he specialised in credit risk
acquiring World Furnishers and Bradlows in Director: Transformation, Tax, Risk, management before being appointed as
1988, the name of the listed company was Internal Audit and Compliance Head: Group Capital Management and
changed to JD Group Limited. Balance Sheet Optimisation in the Group
Richard has 12 years’ experience in auditing
The JD Group has expanded over time to and taxation, four years’ lecturing and five Treasury function on 1 January 2007. He is a
include the acquisition of Profurn and years’ experience in retail. member of the JD Group Risk Management
Incredible Connection, a 70% equity stake in committee and of the Group’s Executive
Richard has gained experience from his
Blake & Associates, as well as the acquisition committee and a director on the boards of
time at the South African Revenue
of Unitrans Auto and Steinbuild. JDG Trading, Blake & Associates, the two
Service, the University of Venda for Science
JDG Insurance companies, and various other
Under David’s guidance and leadership, the and Technology, Deloitte & Touche, the Office
internal JD Group subsidiaries.
Group has been inspired to be world-class in of the Auditor-General and Ernst & Young.
its fields of expertise and is whole-heartedly He is a member of the JD Group Risk Appointed: 1 May 2010
committed to making a real difference through Management committee and of the Group’s
Executive committee and a director of JDG
itsArt of Service culture.
Trading. He also serves on the boards of
6. Dr Henk Greeff (52)
David is also a director on the board of three external private companies in his
MEd (Ed Management) (cum laude), PhD,
Homestyle Group Plc, other personal personal capacity.
Programme in Strategic Transformation
investment companies and trusts, as well as Appointed: 17 September 2007 (USB), Programme in Strategic Change
various other internal JD Group subsidiaries. (Stanford, USA) »
Appointed: 1 April 1986 4. Ian Thompson (43) Director: Strategy and Human Resources
Henk joined the Group in 2003.
2. Grattan Kirk (47) BCom, BAcc, CA(SA) » Nine years’ experience in strategic
Director: Finance and Corporate Affairs management consulting in a diverse set
FCA, CA(SA) » Ian joined the Group in September 2003. of industry types. Led a number of large
Chief Executive Officer Ian was born in Malawi and educated in scale strategic programmes from design
South Africa, qualifying as a chartered to successful implementation. Eight years’
Born and educated in Dublin, Ireland. Grattan
accountant while completing articles with experience in retail.
qualified as a chartered accountant with
Deloitte & Touche in 1992. Ian has worked in Henk is a member of the JD Group Risk
Deloitte & Touche in 1987 and transferred
a number of industries including four years Management committee and of the Group’s
to their offices in Johannesburg in 1990. He Executive committee. He is also a director
in auditing, four years in Corporate Finance,
was appointed an Audit Partner in 1994. He on the board of JDG Trading and the two JDG
six years in General Finance and eight years
left Deloitte & Touche to take up the position in Retail. This broad exposure has allowed insurance companies.
of Financial Director of Connection Ian to gain experience in multiple financial Appointed: 17 September 2007
Group Holdings Limited in 1997. He was disciplines including general financial
appointed Chief Executive Officer of management, mergers and acquisitions,
Connection Group Holdings Limited in 2003. capital raising and JSE related issues among
After JD Group acquired Connection Group others. He is a member of the JD Group
Holdings Limited in 2005, Grattan served Risk Management committee, the Group’s
Executive committee and a director of JDG
as Chief Executive of the Cash division,
Trading and Blake & Associates.
JD Group » Integrated report 2011
31
8. 9. 10. 11. 12. 13. 14.
Non-executive directors
Banks Association in London. A non-executive
7. Vusi Khanyile (61) 13. Nerina Bodasing (36)
director of Astrapak Ltd, Imara Holdings
BCom (Hons) » Ltd and Ridge Mining Plc and other entities BSc (Hons) »
Director of Companies in Europe. Chairman of the JD Group Risk
Management committee. Nerina is the founder and managing director of
Chairman and founding managing director of a fully empowered independent management
Thebe Investment Corporation. Director of Appointed: 13 November 2008 consultancy that provides strategic and financial
numerous companies, listed and private communication advice to South African
including Altech Netstar Group, SAFRIPOL, 11. Dr Len Konar (57) corporates on the capital markets. She obtained
Santam, Shell SA Refining and Vodacom. With a BSc degree from the University of Natal and
effect from 9 March 2009, was appointed Lead BCom CA(SA), MAS, DCom » a BSc (Hons) from the University of Durban-
Independent Non-executive Director. Director of Companies Westville. She also holds a postgraduate diploma
Vusi is also a director of Santam Ltd, Member of the King Committee on in business management from the University of
Vodacom Ltd, various companies in the Corporate Governance in South Africa, Natal. Nerina gained considerable experience in
and the Institute of Directors. Formerly the fields of shareholder communication, capital
Thebe Group, Combined Motor Holding Ltd
professor and head of the department of markets and corporate practice in her role as
and various other investment companies
accountancy at the University of Durban- Head of Investor Relations at Absa Group Limited
and trusts. Westville and chairperson of the Ministerial and Sasol Limited in recent years. Prior to these
Appointed: 13 November 2008 Panel for the review of the regulations of appointments, she served on the executive
accountants and auditors in South Africa committee of Gold Fields in the capacity of
in 2003.
8. Martin Shaw (73) senior vice-president: Investor Relations &
Served as chairman of the audit committee Corporate Affairs. Early in her career, Nerina
CA(SA) » of the International Monetary Fund, co- worked in equity sales and assisted strategy
Director of Companies chairman of the Implementation Oversight research for global investment bank UBS.
Panel at the World Bank, Washington.
Prior to retirement, served as managing Chairman of Steinhoff International, Exxaro Appointed: 1 September 2011
partner, chief executive and chairman of and Mustek, and a non-executive director
Deloitte & Touche and acted as chairman of of Sappi, Alexander Forbes and Illovo Sugar.
14. Matsobane Matlwa (56)
Deloitte Consulting global from 1998 to 2003. Member of the JD Group Audit,
Formerly a non-executive director of Risk Management, Remuneration CA(SA) »
Reunert, Illovo Sugar and Standard Bank. (Chairman) and Nominations committees.
Past president of the Natal Society of Matsobane is a chartered accountant who
Appointed: 19 July 1995
Chartered Accountants and also of SAICA. served his articles with Pim Goldby. He has a
Chairman of the JD Group Audit committee, Masters in Business Administration and is the
a member of the Remuneration, Risk
12. Jacques Schindehütte (52) executive president of the South African Institute
Management and Nominations committees. of Chartered Accountants, where he serves
BCom (Hons), CA(SA), H Dip Tax » on a number of SAICA board subcommittees,
Appointed: 1 June 2001 Chief Financial Officer of Telkom Ltd including the Exco, the Audit & Risk, Strategy and
Jacques is a chartered accountant who the IT Governance Committees.. Prior to joining
served his articles with the then Arthur SAICA, Matsobane held senior positions at the
9. Maureen Lock (62) Young & Company (now Ernst & Young). South African Revenue Services and at Absa
He is the past financial director of Absa Bank Limited. Earlier in his career he worked for
BCom CA(SA) »
Group Limited, a role he occupied for the Financial Services Board, Anglo American
Corporate Financier
five years up to February 2010. He served Corporation of SA, Transnet Limited and other
Corporate financier with extensive private companies. He was also an audit partner
on a number of Absa subsidiaries and Group
experience in business re-engineering, at Ernst & Young. Amongst others, he is involved
board subcommittees and was an ex officio
primarily in the retail and engineering in the Thuthuka Bursary Fund and serves
member of the Audit committee, the
sectors. First woman appointed as a on the board of the Australian-based Global
Directors’ Affairs committee as well as the
partner of Ernst & Young in 1981. Accounting Alliance. He is currently a member
remuneration committee, amongst others.
Appointed: 2 April 2001 Prior to joining Absa, Jacques was employed of the International Federation of Accountants
by Transnet in a number of senior roles over Council, the Institute of Directors and the SAICA
more than a decade. During his career he has Advisory Council. He is also the past chairman
10. Günter Steffens OBE (74) amassed a broad range of experience from of the Forum of Accounting Bodies and a former
disciplines such as general management, member of the India, Brazil and South Africa
Director of Companies » financial services, finance, auditing, Taxation Working Group. During his career he
Former general manager at Dresdner Bank AG marketing, transport, property development has amassed a broad range of experience from
in London and in South Africa. Before joining and telephony, to name but a few. the disciplines of finance, auditing, taxation and
Dresdner Bank, worked for international general management.
Jacques is also a director on the board of
banks in Montreal, Zürich and Paris. A past Avusa Ltd. Appointed: 1 September 2011
chairman of the German – British Chamber of
Appointed: 10 November 2010
Industry and Commerce and of the Foreign
Integrated report 2011 « JD Group
32 Group review
Chief Executive Officer’s report
Grattan Kirk
Chief Executive Officer
We have achieved our objective of implementing a solid platform for JD Group’s
long-term growth, with Furniture Retail, Cash Retail and Financial Services
delivering a very solid performance for 2011.
Non-financial highlights
Revenue
»
» The decision taken three years ago to separate financial
Revenue increased by services and Furniture Retail pays off.
25% 25% to R15,7 billion » The acquisition of Unitrans Auto and SteinBuild further
diversifies the retail strategy as well as providing
additional distribution channels for Financial Services.
Operating profit
»
» Good progress with internal projects to ensure the
Operating profit increased by long-term sustainability of the Group.
39% 39% to R1,1 billion
» Art of Service entrenched across all operations.
» Operations well positioned to deliver organic growth.
Headline earnings
»
Material issues covered in this section
Headline earnings per share » Risk Management through diversification – by
34% increased by 34% to 407,7 cents broadening its retail base, the Group has reduced its
historical reliance on furniture and appliance retail. Our
state-of-the-art Financial Services’ systems equip the
Cash flow from operations
»
Group to accurately gauge the creditworthiness of
Cash flow from operations consumers, as reflected by the significant reduction in
%
35 increased to R1,3 billion
total debtors’ costs.
JD Group » Integrated report 2011
33
» A sustainable business through diversification. The inflation relating to administered costs, municipal charges
acquisition of Unitrans and SteinBuild will provide and rentals did dampen profit growth somewhat. As
exposure to the motor and home improvement segments strategic projects are completed, the financial performance
as well as additional channels to distribute Financial is set to continue improving, notwithstanding the economic
Services’ products. Steinhoff’s global network will provide growth constraints that are expected to persist into the
JD Group with additional product sourcing and retail future.
format expertise, ensuring the continued relevance of its
Operational overview
business products and services.
Key performance indicators
» The Group-wide SAP implementation and the new
loan-management system at Financial Services are crucial Although the Group continues to make progress towards
to the long-term sustainability of the business. the three-year financial targets that were outlined in 2008,
overall progress has been hampered by slower revenue
» A superior customer experience has been guaranteed
growth in the current economic environment. Financial
by the Group-wide Art of Service initiative.
Services achieved a solid return on capital employed of
» In support of the Group’s commitment to the highest
21,7% (2010: 19,0%) against our own internal target
standards of governance and customer service, Furniture
of 25%. Furniture Retail delivered return of sales of 6,4%,
Retail, Financial Services and Cash Retail provided
and although this falls short of its long-term target of 12,5%,
CPA training to the majority of employees.
the division is on track to achieve this within two years.
Performance In the environment of aggressive competitor activity and
continued price deflation across the Cash Retail business,
We are proud to announce a very solid financial
the return on sales target of 7,0% has been adjusted down
performance for 2011. The Group reported total revenue of
to 5,0%, which the division should attain by the end of 2013.
R15,7 billion (2010: R12,6 billion), an increase of 25% due to
organic growth of R700 million (6%) and acquisitive growth Furniture Retail
of R2,4 billion (19% ). This is despite a 50-week trading
The Furniture Retail division delivered a strong financial and
year for Furniture Retail and HiFi Corp (2010: 52 weeks),
operational performance in 2011 as the benefits of its
which arose from the decision to align the trading month
complete focus on retailing gained momentum.
with calendar month as part of the SAP implementation.
Merchandise sales increased by 7,4% to R4,96 billion
Operating profit before debtors’ cost of R1,7 billion (2010:
(2010: R4,62 billion) underpinned by real wage increases
R1,5 billion) translates into 15% growth while operating
and recent investments in credit vetting systems by
profit after debtors’ cost of R1 057 million
Financial Services that allowed qualifying consumers to
(2010: R760 million) increased by 39%. This has resulted in
make additional purchases.
strong headline earnings growth of 34% from 303,6 to
Operating profit increased significantly to R315 million
407,7 cents per share in 2011.
(2010: R182 million) as Furniture Retail’s operating expenses
The improvement in the financial performance is particularly
remained relatively constant despite upward cost pressures
pleasing considering that the recovery in consumer
from higher employee costs, electricity tariffs, municipal
spending was slower than we anticipated due to subdued
rates and rentals. This was offset by lower distribution and
economic growth and lack of job creation. In addition, cost
logistics costs and strict controls over general and
administration expenses.
Integrated report 2011 « JD Group
34 Group review
Chief Executive Officer’s report (continued)
Furniture Retail achieved a return on sales of 6,4%, Incredible Connection delivered same store sales growth of
compared to 3,9% in the previous year. Although progress 8,5% and 10,7% if you include the three new stores opened
towards our 12,5% KPI has been delayed by the lower during the year. The hardware segments, including laptops,
revenue growth since 2008, the division is expecting to PCs and monitors, digital and multimedia, performed
achieve these targets by 2013. exceptionally well with volume growth of over 30%.
The first Furniture Retail store went live on SAP in During the year it enhanced its long-term positioning by
November 2011, with completion scheduled for the end of further differentiating its business model through service,
2012. The centralisation of merchandise planning, sourcing product and price, including initiatives to service new
and distribution across all chains is expected to yield markets. It also focused on improving returns from its core
improved purchasing terms as a result of the consolidation business activities. The chain strengthened its sales model
of its buying power. Further benefits will emerge when the by increasing the service and product related selling skills of
roll out of the 33 centralised distribution centres is its customer facing employees. It is also making investments
completed by the end of 2013. To date, 12 centralised to improve its stock integrity, service levels and range
distribution centres have been commissioned with a further management. A centralised distribution centre was opened
13 planned for 2012 and the balance of eight scheduled for in Gauteng to centrally manage distribution to its 61 stores
2013. The strategy of centralised distribution is expected to nationwide. Incredible Connection opened three new stores,
generate both customer and delivery efficiencies as well as whilst four mega stores were refurbished during the year.
cost benefits over the next three years.
Total sales at HiFi Corp (previously “HiFi Corporation”)
increased by 4% on a like-on-like basis and the retail
Cash Retail
Chain maintained its strict focus on managing margins and
Cash Retail, comprising Incredible Connection and HiFi Corp
repositioning its product portfolio to reduce after-sale
reported a 5,5% growth in sales to R4,5 billion (2010:
service costs. It maintained its stringent management of all
R4,3 billion), despite pressure from continued price
costs to counteract the impact of commoditisation and
deflation. The chains achieved market share gains in most
price deflation in the consumer electronics category.
major categories. Operating profit improved a very credible
HiFi Corp continued to refine its business model and
17,9% to R224 million (2010: R190 million). The division has
upgrade its range. Since this strategy was initiated two years
not met its three-year target return on sales KPI of 7,0%, but
ago, HiFi Corp has enhanced the quality of its range and
did achieve 4,9%. This is largely attributable to increased
in-store service, leading to improved consumer perception
competition in the market driven by lower dollar input
of the brand. The business will continue to be driven by its
prices in computing, TV and audio as well as the strong
ability to offer compelling price points and value to
rand. As we do not anticipate this trading environment
consumers. HiFi Corp has also evolved its logistics strategy
changing into the future, we have lowered our long-term
and reduced its inventory holding without compromising
return on sales benchmark from 7,0% to 5,0%. We believe
service levels.
that a 5,0% return on sales for the consolidated cash
division is still a world-class performance.
JD Group » Integrated report 2011
35
Of its total footprint of 35 stores, 15 stores have now been consolidated into Financial Services, which allows us to
refurbished to the new store layout that is in line with global ramp up on product development capability for the launch
trends of convenience shopping. Two stores were also of new products into our own JD channels as well as
relocated to super regional shopping centres. In-store non-JD channels.
product signage was rolled out to provide additional
International Retail
information to assist customers’ purchasing decisions. The
decision to launch its in-house brand “By: Dsign” in 2010 The results of Abra have been shown separately as a
paid off, as consumer acceptance-levels exceeded discontinued operation. The division reported a loss of
expectations. R1 million for the year against a profit of R15 million in 2010.
The sale of Abra to Steinhoff Europe became effective on
Financial Services
1 September 2011.
Financial Services extended the value that it adds to
The Art of Service
JD Group during the year, further improving its return on
capital employed to 21,7% against its KPI target of 25%. The The Art of Service is now fully entrenched across the entire
division achieved an 5,5% increase in revenue to R3,3 billion JD Group.
(2010: R3,1 billion). The recent investments in credit vetting » In Furniture Retail, improved service levels led to a
systems and its rigorous debt collection processes 50% reduction in customer related issues. The division
facilitated a further reduction of 10% in receivables costs also achieved outstanding results in the 2011 Ask Afrika
to R675 million (2010: R753 million) resulting in a credit Orange Index® Service Excellence Benchmark.
impairment ratio of 9,2% (11,2%). Operating profit increased Price ‘n Pride, Barnetts, Joshua Doore, Morkels, Bradlows
19,7% to R723 million (2010: R604 million) after having and Russells were ranked number one to six respectively
expensed additional costs amounting to more than in the Furniture Retail category.
R20 million to ensure the sustainability of Financial Services’
» Surveys conducted during the year showed continued
business.
improvements relating to customer satisfaction as well as
Although the industry was generally impacted by lower employee engagement in the Cash Retail environment.
approval rates, Financial Services provided credit to Tools were developed to monitor the internal and
previously under-serviced segments using our enhanced external drivers of in-store service levels at Incredible
credit risk assessment tools, contributing to revenue Connection and as a result, customer satisfaction has
growth. In particular, Financial Services successfully improved markedly. Incredible Connection was ranked as
launched a personal loan product across all retail branches the top retailer in the Electronics and Appliance Retail
with the book growing to R390 million on a gross basis by category in the 2011 Ask Afrika Orange Index® Service
year end. Excellence Benchmark, which benchmarks the service
The division is on track with the roll-out of the VisionPLUS levels in the domestic market, followed by HiFi Corp in
loan management product and the Capstone debt second place and Electric Express third. I was humbled
origination system, which will provide an excellent when we received these awards and I am immensely
distribution capability for our existing and new financial proud of every one of our employees working in our
services products. During the year Maravedi was retail operations.
Integrated report 2011 « JD Group
36 Group review
Chief Executive Officer’s report (continued)
» Through the Art of Service, Financial Services’ superior that arose with the introduction of the Consumer Protection
customer service provides a differentiator. Investments to Act (CPA). The majority of employees attended
enhance systems that accurately assess the CPA training, thereby mitigating the Group’s exposure
creditworthiness of new customers, enable it to develop to the risk of non-compliance.
new products that are relevant to our customers’ needs.
The way forward
Risk management Despite the domestic economy that remains uncertain
The Internal Risk Management committee is responsible for for the year ahead, JD Group’s existing operations are
monitoring risk and risk management processes across strategically positioned to continue delivering strong
every facet of the Group. In addition, each division monitors organic growth:
the specific risks relating to their areas of the business. » Furniture Retail is on a solid footing with its absolute
The Group continued to make progress with the SAP focus on retail and customer loyalty engendered through
implementation during the year under review. Inventory was the Art of Service. To support long-term growth, the roll out
converted onto the SAP inventory module during of new Russells stores in rural towns will continue and the
September 2011, enabling more effective stock programme will be expanded to include Joshua Doore and
management while improving customer service levels. The Barnetts in outlying regions. In addition, further new store
Furniture Retail division is scheduled to be fully migrated to openings are planned for Price ’n Pride, Bradlows and
SAP by the end of 2012, while Financial Services is on track Morkels to ensure their critical mass. We anticipate opening
to implement VisionPLUS and Capstone by the end of 2012. in the order of 70 new furniture stores in 2012 taking our
Thereafter the Cash Retail businesses will be converted Furniture Retail footprint to 1 058 outlets.
onto the SAP ERP modules. » the recent rand weakness should dampen the
Stringent risk management is critical for Financial Services, deflationary pressures that affected Cash Retail in 2011.
whose activities centre around the granting of credit. The With its well-defined business model and strong
division not only complies with the Group’s systems and management teams, the division is equipped to deliver
processes, but has invested heavily to ensure its ability to on its strategy to continue providing specialist products
accurately gauge and monitor the creditworthiness of and services in the consumer electronics category. Both
consumers. Its Credit Risk committee has oversight on all brands have identified opportunities to extend their retail
policies, processes and limits relating to the division’s footprint and we will open a further four stores in 2012.
activities. Financial Services receivables costs continued to » while the consumer will undoubtedly remain under
decline in the year under review, attesting to the quality of pressure in the year ahead, Financial Services is well
our risk management practices. positioned to extend its strong performance as its credit
The relevance and quality of the product ranges in both systems enable the addition of high quality credit to its
Furniture Retail and Cash Retail are continually managed book while driving down receivables costs. The recent
through regular range reviews including longer-term acquisition of Unitrans Auto and SteinBuild by JD Group
planning with suppliers. During the year, these divisions also presents attractive opportunities for Financial Services to
had to ensure that their risk management processes were expand its product suite. Accelerating the pace of new
in place to address the additional compliance requirements product and channel development has also been
JD Group » Integrated report 2011
37
prioritised. We intend to convert approximately
100 Financial Services kiosks inside the current Furniture
Retail stores to a more formalised environment to
capitalise on the introduction of additional financial
services products.
» Unitrans Auto is well positioned to maintain its strong
position in the vehicle retail industry and generate solid
returns. In addition we are optimistic about the
opportunity to offer a vehicle finance solution to
entry-level motor vehicle buyers.
» we will continue to look for opportunities to grow the
footprint of SteinBuild especially in rural areas and further
enhance the business model with a consumer finance
solution.
With the platform for JD Group’s long-term sustainable
growth now in place, Furniture Retail, Cash Retail and
Financial Services have shown solid growth in 2011. We
anticipate that the Group will benefit further into the future
as we progress with our substantial investments in the SAP
implementation, Financial Services’ IT systems and the
centralisation of our distribution infrastructure. We are
confident that we will once again reach the strategic
milestones that we have set ourselves in the year ahead.
More than ever before, this is an exciting time for each and
every employee to be part of the JD Group as we deliver on
our strategic objectives for the benefit of all stakeholders.
Grattan Kirk
Chief Executive Officer
Integrated report 2011 « JD Group
38 Group review
Executive Management
1. 2. 3. 4.
1. Pamela Barletta (42) 2. David Hirsch (41) When Malbak Motor Holdings was acquired
by Unitrans Limited in 1998, he was
Dip Labour law, Dip Human Resources Group executive: Merchandise and appointed to the Unitrans Limited board.
Global Executive Development programme: Marketing He was instrumental in the rapid growth of
GIBS 2007 » 20 years’ experience in retail. Unitrans Auto which comprised 84 franchise
Group executive: Human Resources dealerships, the Hertz Rent-a-Car Southern
Educated in Durban, David Hirsch began
African operations and a financial services
Pamela joined the Group in 2007 as the his career in sales on the shop floor. His
division.
Corporate Executive: Human Capital focus then turned to procurement and while
Development after having served on the with the Connection Group, he opened and Steve holds executive responsibility for
managed the Group’s USA office in New York the Motor and Financial Services Division
Incredible Connection board as the HR
of Unitrans Auto and sits on the Executive
Director since 2004. She joined Incredible for several years, prior to returning to South
committee of the Group.
Connection in 2002 as the Human Resources Africa. Thereafter, he was instrumental
Executive. When the JDG Trading business in opening, and jointly managed, the first He was appointed to the JDG Trading board
model incorporated business divisions Incredible Connection store in Woodmead. after the acquisition by JD Group of Unitrans
within retail, Pamela was appointed as the Various appointments followed, namely Auto.
Executive: Human Resources for the Cash Operations Executive for Incredible
Division, comprising Incredible Connection Connection, Merchandise Executive and later 4. Theodore de Klerk (41)
and HiFi Corp. In September 2008 Pamela Merchandise Director. When Connection
was appointed the Group Executive: Human Group was later acquired by the Group, BCom (Hons) » CTA » HDip Taxation »
Resources, and appointed to Exco in David was responsible for Merchandise and Cert Financial Markets »
September 2009. Marketing for the Cash Division, prior to Managing director: SteinBuild
Prior to this, she managed her own labour his appointment to the JDG Trading board After completing his articles with Ernst &
law consulting firm for four years providing in his current portfolio as Group Executive: Young, Theodore worked for four years as a
specialised services in the field of industrial Merchandise and Marketing. He is a member corporate tax consultant for Ernst & Young
relations to retail businesses as well as other of the Group’s Executive committee and a and Deloitte & Touche respectively. He joined
large corporations across diverse industries. director of JDG Trading. Murray & Roberts as Financial Director of
Pamela began her career in personnel its marine construction operation as well
3. Steve Keys (50) as its operating companies in Malaysia and
management in 1986 at Dion Stores. In 1999,
she left to open her own labour consulting Indonesia. In 1999 he joined the corporate
CA(SA) » finance advisory unit of Gensec Investment
company.
Managing director: Unitrans Auto Bank focusing on mergers and acquisitions,
Pamela serves on the Leadership and 20 years’ experience in motor retail. capital raisings and related structuring
Development Council, the Employment functions. During this time Theodore worked
Steve qualified as a Chartered Accountant
Equity and Training committee for the Group closely with the Steinhoff Group. In 2003
(SA) in 1983 and joined an international
and Cash division, the Group HR Strategic he joined Steinhoff International Limited
chemical manufacturer as Financial Director
Portfolio committee and is a member of the on a full-time basis in the group services
after completing his articles. In 1988 he joined
JD Group Executive committee and a director division with responsibility for Mergers and
Malbak Limited as a Management Accountant
of JDG Trading. where he was involved in the company’s Acquisitions, Corporate Advisory Services
corporate finance activities for three years. and Investor Relations. Having worked with
He subsequently moved to Malbak the Steinhoff’s retail business in different
Motor Holdings where he held various parts of the world and being a member of
responsibilities including Finance Director divisional and associate company board of
and Operations Director. At the same time directors, Theodore was appointed to his
he also served as a non-executive director of current position in June 2008 and appointed
Ellerine Holdings Limited, which was listed on to JDG Trading board in November 2011 after
the Furniture Retail sector of the JSE. the acquisition by JD Group of SteinBuild.
JD Group » Integrated report 2011
39
5. 6. 7. 8.
5. Philip Kruger (49) Prior to that, Komani spent approximately 8. Arie Neven (52)
three years as a banker at Standard Bank.
BCom » In addition, Komani gained three years’ Chief executive: Furniture Retail
Chief executive: Financial Services project management and financial feasibility 31 years’ experience in retail.
21 years’ experience in retail. and analysis experience in the construction Arie joined the retail industry and the Group
Philip joined JD Group in 1997 as Debtors industry in the United Kingdom with Hyder in March 1986 as a regional manager in
Executive for the Bradlows Chain. He has Consulting. training for Joshua Doore and Price ‘n Pride.
since held various operational positions He then became a general manager in the
in the Group, including Debtors Executive He is a member of the Group’s Executive
committee and a director of JDG Trading. Joshua Doore and Price ‘n Pride Chains and
and later Operations Executive for Russells,
before being appointed as Group Credit was instrumental in the bedding down of
Executive. With the operational restructuring acquisitions, where he gained enormous
during July 2008, Philip was appointed Chief 7. Andrew Murray (49)
experience from an operational perspective,
Executive of the Financial Services division. which led to his appointment as Operations
BSc Eng (Mech/Ind), PrEng »
He is a member of the JD Group Risk Executive for Joshua Doore and later
Chief Information Officer
Management committee and of the Group’s Price ‘n Pride. He then became the CEO for
24 years’ experience in retail, IT,
Executive committee and a director of
manufacturing, warehousing, distribution the combined Price ‘n Pride/Score business
JDG Trading.
and finance. chain.
Andrew joined the Group in December Arie subsequently became the CEO for
6. Komani Mfuni (46) 2008 as IT Executive for Financial Services Joshua Doore. After Joshua Doore, he moved
and was appointed Group CIO in May 2009. again to a more sophisticated, higher LSM
BSc (Hons), Quantity Surveying – Reading Andrew graduated from the University of market in order to broaden his experience
University (United Kingdom), MBA (Maastricht the Witwatersrand in 1997 and worked in across the complete market as CEO of
School of Management – The Netherlands) » manufacturing, maintenance, warehousing, Bradlows, a position he held for three years.
Group executive: Strategy logistics, distribution and business process Arie then became a member of the Group
Research and Business Intelligence re-engineering fields in the first 10 years of Executive Management team as CEO of the
Three years’ experience in financial services his career. During this time his career moved Operating Divisions for approximately 400
and ten years in strategy development and into the field of Information Technology stores in the JD Group, managing Price ‘n
planning consulting. where he has subsequently been involved Pride, Joshua Doore and Bradlows.
in dotcom initiatives, outsourcing from
Komani joined JD Group in January 2009 He moved on and became CEO of all credit
both a customer and supplier perspective,
as Group Executive: Group Strategy and is retail operating Chains in the Group, a
and enterprise resource planning
responsible for strategy development and portfolio he still holds today, managing eight
implementations and support, particularly in
business intelligence. chains.
the Retail and FMCG sectors.
Prior to this, Komani was a Strategist and He is a member of the JD Group’s Executive
Andrew is currently the Chief Information
Planner for Absa Bank, where he worked committee and a director of JDG Trading.
Officer of the Group. He is a member of the
directly with the CEO, Exco members, the Arie serves on numerous committees such
JD Group Risk Management committee, the
Board and the Heads of Strategic Business as Financial Services Executive committee,
Group’s Executive committee and a director
Units and Specialist Functions. Insurance Executive committee, Internal
of JDG Trading.
Prior to that, Komani spent three years Risk Management, Property and Centralised
with one of the leading global strategy and Logistics.
management consultancy firms (Paris-based
Gemini Consulting) where he specialised in
strategy development, mergers and alliances,
as well as commercialisation of public
enterprises.
Integrated report 2011 « JD Group
40 Group review
Group Financial Director’s review
Bennie van Rooy
Group Financial Director
The financial results showed continued improvement in 2011 with headline
earnings increasing by 34,3%. The balance sheet is particularly strong with
a gearing ratio of 14,5% which provides the Group with scope to fund growth
with debt.
Net asset value per share Introduction
»
The Group is pleased to report that the financial results
22 %
Increase in net asset value
per share to R36,88 from showed continued improvement for the 2011 year with
R30,23 in 2010 headline earnings increasing 34,3% to 407,7 cents a share
from 303,6 cents per share in 2010.
Debtors’ cost The 2011 financial year can be described as an important
»
year in terms of changing the Group Structure:
10 %
Debtors’ cost down 10%
from R753 million » the acquisition of Unitrans Auto and SteinBuild with effect
to R677 million from 1 July 2011 added complementary retail assets that
have further diversified the Group from its reliance on
Gearing Furniture Retail. These businesses were acquired for a
»
total consideration of R3,2 billion, settled by way of
14,5 %
Very conservative 49,3 million JD Group shares that were issued to Steinhoff
balance sheet poised
for future growth (representing R2,46 billion of the R3,0 billion payable in
respect of Unitrans Auto) with the balance of the
acquisition consideration amounting to R702 million being
settled in cash.
» the disposal of our interest in our Polish business Abra.
JD Group » Integrated report 2011
41
The Group’s audited financial results for the year ended 31 August 2011 and 31 August 2010 respectively are not comparable,
due to the following events:
» the results of Unitrans Auto and SteinBuild were included for the two-month period from the effective date of the acquisition
of these businesses in July 2011 to the financial year-end
» the disposal of our international operations in Poland, Abra, has resulted in its financial results being disclosed as discontinued
operations in 2011 and 2010
» a change in the reporting month end from mid-month to calendar month-end in Furniture Retail and HiFi Corp resulted in a
50-week trading year for these two divisions. This change was necessitated by the implementation of the General Ledger
module of SAP in April 2011.
The key features of the annual results for the year ended 31 August 2011 are as follows:
» turnover up 31,9% to R11,7 billion
» a 39,1% increase in operating profit to R1,06 billion (2010: R760 million)
» a 10% reduction in debtors’ cost to R677 million (2010: R753 million)
» trade and other loan receivables book growing 13,2% to R5,9 billion at 31 August 2011 (31 August 2010: R5,2 billion)
» headline earnings per share of 407,7 cents (2010: 303,6 cents), up 34,3%
» dividend per share increased 33,3% to 200 cents (2010: 150 cents)
» return on equity of 10,5% (2010: 10,0%).
Operating performance
The divisional operating profit breakdown detailed in the chart below, illustrates the improved contribution made by all areas
of the business.
(Rm)
59 30 (294)
224
723 (88)
(270)
699
315
FR FS CR UT/SB Blake Corp Interest Tax/Min 11
2010
% change 73 20 18 n/a 100 36 (15) 59 40
2010 182 604 190 — 15 216 104 170 501
Rm
Integrated report 2011 « JD Group
42 Group review
Group Financial Director’s review (continued)
The improvement in the majority of the key dials is especially pleasing. Strong revenue growth in our Furniture and Cash
Retail divisions of 11,8% and 7,4% respectively on a pro forma 52-week year, complemented the 5,5% increase in Financial
Services revenue and a 10% reduction in debtors’ cost.
Statement of financial position
The profile of the statement of financial position changed significantly as a result of the Unitrans Auto and SteinBuild
acquisition. The fair value of the assets and liabilities acquired as part of this transaction, are disclosed in Note 31 to the
annual financial statements, and comprised mainly the following:
» property, plant, equipment and a motor vehicle fleet amounting to R503 million
» trade and other receivables of R794 million
» inventories amounting to R1,5 billion
» trade and other payables of R2,3 billion
» cash resources amounting to R830 million
» the surplus of the acquisition price above the value of the net assets determined in terms of the requirements of IFRS 3,
resulted in intangible assets and goodwill amounting to R1,48 billion and R831 million respectively being reflected on the
statement of financial position.
Rm 2011 2010 %
Total assets 16 734 9 281 80,3
Shareholders’ equity (including minorities) 8 165 5 188 57,4
Non-current liabilities 2 448 1 057 >100
Current liabilities 6 030 3 036 98,9
Gearing (%) 14,5 12,9 —
EBITDA to net interest (times) 13,5 12,9 40,6
Return on assets managed (%) 11,9 11,7 —
Return on average equity (%) 10,5 10,0 —
Yield on receivables book 60,0 61,0 —
Net asset value per share (cents) 3 688 3 023 22,0
Summarised statement of financial position and key ratios.
In addition to the assets and liabilities that were acquired, the Group invested additional working capital of R313 million. This was
primarily driven by the growth in trade and other receivables. The investment in our new ERP systems furthermore resulted in
capitalised assets under construction of R512 million.
Our statement of financial position remains particularly strong with net interest-bearing debt of R1,2 billion at a gearing ratio of
14,5%. This provides the Group with scope to fund its future growth strategy with debt.
The statement of financial position profile of the Group is expected to continue evolving as it delivers on its strategic objectives
of further diversifying the consumer finance activities and as the centralisation of our supply chain and logistics activities lead to
further increases in the Group’s trade and other receivables and property, plant and equipment investments. The board has
already approved additional investments in distribution centres amounting to approximately R580 million.
In order to facilitate the changing statement of financial position profile, it will be restructured in two phases:
» phase one includes holding all existing and new properties in a separate property company, funded by long-term property
finance. Approval has been received from all the term funders to move the Group’s existing properties from its statement of
financial position to the new property company. All new properties relating to the new distribution centres are being acquired
by the property company.
JD Group » Integrated report 2011
43
» phase two includes ringfencing the consumer finance business and all the term debt. This will enable the Group to obtain
a formal debt rating backed by our consumer finance book while further diversifying our sources of funding by accessing the
listed debt market.
Future funding requirements include funding needed for statement of financial position growth as well as the replacement of
maturing facilities. The repayment and maturity profile of our current debt facilities is detailed below:
Repayment profile (interest and capital) (Rm)
1 000
800
600
400
200
0
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Q1 Q2 Q3 Q4 FY FY FY FY FY
11 11 11 11 12 12 12 12 12 12 12 12 13 13 13 13 14 15 16 17 18
Cash flow
Cash generated by trading increased from R980 million in 2010 to R1,3 billion for the year as a result of the substantial increase
in operating profit as detailed in the table below. We utilised R313 million to fund the increased working capital requirements
(relating mainly to trade receivables) and a further R710 million to fund additions to property, plant and equipment. This relates
chiefly to the investment in our key strategic initiatives with the roll-out of the new ERP systems in Furniture Retail and Financial
Services as well as the acquisition of a number of new distribution centres.
The Group raised R1,6 billion in long-term borrowings with maturities of three years or longer, in order to fund its investing and
working capital activities.
Rm 2011 2010 %
Cash generated by trading 1 322 980
Movement in working capital (313) (334) 6,3
Cash generated by operations 1 009 646 56,2
Tax and dividends paid (579) (496) 16,7
Net additions to property, plant and equipment (710) (161) >100
Acquisition of subsidiary company and joint venture interests 128 — >100
Financing activities 1 008 69 >100
Other (127) (26) >100
Net increase in cash and cash equivalents 729 32 >100
Integrated report 2011 « JD Group
44 Group review
Group Financial Director’s review (continued)
Furniture Retail
Rm 2011 2010 %
Sales of merchandise 4 963 4 619 7,5
Commission – Financial Services 522 450 16,0
Delivery 290 270 7,4
Revenue 5 775 5 339 8,2
Gross profit 1 785 1 594 12,0
Gross margin (%) 36,0 34,5 —
Operating expenses 2 282 2 132 7,0
Operating profit 315 182 73,1
Operating margin (%) 5,5 3,4 —
Cash sales (% of total) 35,9 31,5 14,0
Furniture Retail reported excellent results for the year, with operating profit increasing 73,1% to R315 million (2010: R182 million).
On a like-on-like basis, adjusting for a full 52 weeks of operation, results in a pleasing sales growth of 11,8%. The division also
increased its gross margin from 34,5% to 36,0% and contained expense growth to 7,1%.
Cash Retail
The Cash Retail division, comprising Incredible Connection and HiFi Corp, reported excellent results with a 17,9% growth in
operating profit to R224 million in 2011 (2010: R190 million). Particularly noteworthy is the increase in the operating margin to
4,9% (2010: 4,4%). This was achieved despite the impact of significant price deflation in key categories and a highly competitive
trading landscape. That being said, sales on a like-on-like basis were up by 7,4%, if one adjusts the results of HiFi Corp to reflect
a 52-week year.
Rm 2011 2010 %
Revenue 4 578 4 308 6,3
Gross profit 1 075 1 019 5,5
Gross margin (%) 23,8 23,8 —
Operating expenses 911 855 6,6
Operating profit 224 190 17,9
Operating margin (%) 4,9 4,4 —
Financial Services
Financial Services, including the results of Maravedi that was previously reported as part of the New Business Development
division, continued to show an impressive performance by generating operating income of R723 million (2010: R604 million).
Rm 2011 2010 %
Finance charges earned and initiation 1 587 1 575 0,8
Insurance premiums 1 132 1 050 7,8
Club and services fees 595 515 15,5
Revenue 3 314 3 140 5,5
Operating expenses 1 916 1 783 7,5
Operating profit before debtors’ costs 1 398 1 357 3,0
Debtors’ costs 675 753 (10,4)
Operating profit 723 604 19,7
Average finance rate charged – new deals 22,3 25,1 (11,2)
JD Group » Integrated report 2011
45
Revenue growth was restricted due to the lower interest
Net book and
rate environment, limiting the growth in finance income to net impairment
0,8% year-on-year. The division, however, achieved solid
growth in insurance and other revenue lines, supporting a (Rm) (%)
6 250 12
5,5% increase in revenue to R3,3 billion (2010: R3,1 billion).
Credit granting and credit collections are a core strength 6 000
of the Financial Services division, as reflected by the bad 11
5 750
debt write-off levels, which declined to R711 million from
R930 million in the previous year. Current collection rates, 5 500
a measure of cash collections as a percentage of the gross 10
5 250
trade receivables book, were reported at 6,4% (2010: 6,1%).
Especially pleasing was the reduction in debtors’ cost to 5 000
9
R675 million (2010: R753 million) and the impairment ratio
4 750
of 9,2% (2010: 11,2%) as evidenced in the adjacent graph.
This was achieved despite the growth in the debtors’ 4 500 8
Aug Feb Aug
book. Consumer finance debtors grew to R5,9 billion 10 11 11
(2010: R5,2 billion) with the credit risk profile continuing Net book (Rm)
to improve. This is clearly illustrated by the reduction in Net impairment (%)
our advances that are two and more instalments in arrears,
Impairment ratio and the net consumer finance debtors’ book.
featured in the vintages graph below.
JDG vintages – two or more cycles delinquent (CD 2+ balances as % of original debt)
18
16
14
12
10
8
6
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Jan 09 – Dec 09 average Jan 10 Feb 10 Mar 10
Apr 10 May 10 Jun 10 Jul 10
Aug 10 Sep 10 Oct 10 Nov 10
Dec 10 Jan 11 Feb 11 Mar 11
Apr 11 May 11 Jun 11
Vintages measure the percentage of accounts that are two or more than two instalments in arrears.
Integrated report 2011 « JD Group
46 Group review
Group Financial Director’s review (continued)
It is also pleasing to report that the return on equity generated by our consumer finance business is showing clear signs of
improvement. The return on equity of 21,7% is a commendable performance and the decomposition is illustrated by the
table below:
% 2011 2010
Total income yield 60 61
Charge for credit losses (12) (15)
Operating expenses and finance cost (37) (37)
Total charges (49) (52)
Return on advances 11 9
Advances/assets 100 95
Return on assets 11 10
Multiply
Gearing (times) 2 2
Equals
Return on equity (%) 21,7 19,0
International
The results of Abra have been disclosed separately as a discontinued operation. The division reported a loss after tax
of R0,6 million for the year against a profit after tax of R15,0 million in 2010. The sale of Abra to Steinhoff Europe became
effective on 1 September 2011.
New Business Development
Our New Business Development division, which now only consists of Blake, generated an operating profit of R30,3 million
(2010: R14,5 million). The core business activities of Blake are delivering sustainable results on the back of more efficient use
of its contact centre and an unwavering focus on cost control.
Rm 2011 2010 %
Revenue 245 267 (8,2)
Operating expenses 215 252 (14,7)
Operating profit 30 15 100,0
Unitrans Auto and SteinBuild
It is also gratifying to report on the results of our newly acquired businesses Unitrans Auto and SteinBuild. The two businesses
generated operating profit for the two months since the acquisition became effective, amounting to R59 million.
Rm 2 months to August 2011
Sales of merchandise 2 259
Financial Services 67
Other services 50
Revenue 2 376
Gross profit 312
Gross margin (%) 13,8
Operating expenses 368
Operating profit 59
Operating margin (%) 2,5
JD Group » Integrated report 2011
47
Priorities in the next financial year
The financial reporting priorities for the next year are detailed below:
Priority Matters to be addressed
SAP implementation » Critical modules to be implemented in 2012.
» Key strategic initiative of the Group.
» Move away from dependency on legacy system and become solely dependent on SAP.
» Bedding down of monthly reporting and new budgeting and forecasting module.
» Satisfying the reporting requirements of all stakeholders.
» Further investment in staff required from a training perspective.
Statement of financial » Separation of retail and consumer finance balance sheets and set-up of property company.
position restructuring » Enable funding to be raised for specific purposes, that is debtors and property.
» Benefits include access to increased sources of funding.
» Access to capital markets and property specific funding.
» Expected to reduce average funding cost.
Operational efficiencies » SAP implementation resulting in a single reporting, accounts payable and payment
platform.
» Efficiencies in finance from a staff utilisation perspective.
» Allocation of staff to new functions such as treasury (funding) and performance
management.
Performance » Proactively identify the opportunities to achieve financial performance the targets.
management » Use balanced scorecard/executive dashboard approach to drive strategy down to a
balanced set of strategic and tactical goals and measures.
» Optimise/refine capital allocation.
» Group return on equity optimisation.
Optimisation of funding » On the back of the separation of retail and consumer finance statements of financial
cost position.
» Obtain credit rating for the ringfenced consumer finance business.
» Achieve three objectives:
1. diversification of sources of funding
2. diversification of funding costs
3. increase sources of contingency funding.
Further improve » Implement enhanced integrated report for annual reporting.
corporate governance
Structures and director » Obtain official corporate governance rating in 2012.
support
Bennie van Rooy
Group Financial Director
Integrated report 2011 « JD Group
48 Operational review
Review of operations Furniture Retail
Arie Neven
Chief Executive
Furniture Retail Executive committee
Arie Neven, David Hirsch, Philip Kruger, Julian Hanmer, Pieter Pienaar, Johan Coetsee, Charles Louw, Ivan Nefdt, Toy de Klerk,
Pat Kimmince, Matthew van der Walt, Linda Sithole, Colin Bresler, Mike Roberts, Ant Smith, Morné van Wyk
Non-financial highlights
» The Art of Service campaign recognised by South African consumers with
Furniture Retail taking the top six positions in the Furniture Retail category of
the 2011 Ask Afrika Orange Index® Service Excellence Benchmark
» Roll out of 12 centralised distribution centres in total, delivering anticipated
cost reduction and efficiency improvements
» A net 39 new stores opened during the year
» Efficiencies gained from centralised buying with gross margin improving by
1,5% to 36%
Material issues covered in this section
» Furniture Retail ensured that it complied with the Consumer Protection Act,
by training the majority of employees in support of the Group’s governance
undertaking.
» Constructive stakeholder engagement included agreement reached with
organised labour on wage demands and the excellent ongoing relationship
with our unions.
» Group risk management practices are entrenched across the division while
Furniture Retail at a glance the risk associated with consumer demand is managed through full range
reviews that are conducted twice every year.
2011 2010
Revenue (Rm) 5 775 5 339 » A number of initiatives are in progress to ensure a sustainable business by
Gross margin (%) 36,0 34,5 including the centralisation of the distribution centres, the national SAP
Operating profit (Rm) 315 182 implementation as well as the continued strategy of organic growth and
Stores 988 949
market share gains.
JD Group » Integrated report 2011
Integrated report 2011 « JD Group i
Pat Kimmince (46)
Chief Executive » 27 years’ experience in retail
Executive team
Ria de Clerck (45)
Merchandise and Marketing » 26 years’ experience in retail
Donny McCulloch (57)
Human Resources Business Partner » 37 years’ experience in retail
Craig Garson (48)
Operations » 26 years’ experience in retail
With its 115-year track record in furniture retail, Barnetts is one of the longest-standing retailers in South Africa.
Its target market, namely traditional orientated communities in the emerging mass market, are serviced from its 130 stores that are
concentrated in the outlying and smaller country towns where it has developed a loyal customer base. Barnetts offers a broad range of
furniture, bedding and electrical products as well as other related services with a focus on value, functionality and practicality. It also has
long-standing relationships with customers backed by honest, friendly and efficient service
The chain’s objective is to be the leading furniture chain in its target market segment. It has a target- and goal-driven approach,
underpinned by strong relationships and teamwork, a culture which celebrates its staff’s achievements and develops its people in support
of the Art of Service. Barnetts was ranked second in the Furniture Retail category of the 2011 Ask Afrika Orange Index® Service Excellence
Benchmark.
In order to deliver its chain promise of delivering “Service and Value You Can Trust” Barnetts is committed to being integrally involved in
the communities that it serves.
ii JD Group » Integrated report 2011
Matthew van der Walt (39)
Chief Executive » 14 years’ experience in retail
Executive team
Linda Breedt (37)
Merchandise and Marketing » 10 years’ experience in retail
Grant Adendorff (43)
BSocSci, Dip Labour Law, Dip Adv Labour Law
Human Resources Business Partner » 15 years’ experience in retail
Michelle van der Merwe (44)
Operations » 25 years’ experience in retail
Bradlows was established in 1903 and was acquired by the Group in 1998.
The chain has 93 stores located throughout South Africa, servicing the middle to upper end of the middle-mass market as a provider of
aspirational furniture.
The chain’s pursuit of customer excellence and a personal in-store experience is encompassed in its value proposition – “You’re the
Difference”. Bradlows was ranked fifth in the Furniture Retail category of the 2011 Ask Afrika Orange Index® Service Excellence
Benchmark. The chain has further differentiated itself through its modern store layouts and unique merchandise designs.
Supreme provides quality furniture and appliances to middle income groups in Botswana. It was established in 1989 and was acquired
by the Group in 2003. The chain trades from its network of 19 stores located in Botswana.
Supreme delivers on its promise of “Value and Quality You Can Trust” by providing quality merchandise at competitive prices, above-
average service through dedicated and knowledgeable employees.
Integrated report 2011 « JD Group iii
Linda Sithole (44)
EMD, MBA
Chief Executive » 22 years’ experience in retail
Executive team
Thomas Muller (43)
Operations » 23 years’ experience in retail
Loueen Jones (42)
Human Resources Business Partner » BA(Hons) » 1 year experience in retail
Craig Robertson (47)
Merchandise » 23 years’ experience in retail
Electric Express was established in 1958 and was acquired by the Group in 1993.
The Chain is a specialist retailer of household electrical and home entertainment merchandise to its target market comprising
predominantly first-time homemakers. The Chain provides consumers with a complete range of quality appliances, affordable technology,
digital merchandise and dedicated services at highly competitive prices.
Electric Express trades from 126 stores that are conveniently situated throughout South Africa. Several support functions are shared with
Morkels, including logistics optimisation and human resource processes, enabling the Chain to offer a highly competitive range of
products to customers.
Electric Express has embarked on an extensive footprint expansion programme into new geographical areas within South Africa.
Electric Express’s success is founded on its commitment to superior customer service, underpinned by the Art of Service culture that is
embedded throughout the Chain. These efforts were rewarded during the year when it was ranked number three in the Electronics and
Appliance Retail category of the 2011 Ask Afrika Orange Index® Service Excellence Benchmark.
iv JD Group » Integrated report 2011
Colin Bresler (47)
Chief Executive » 29 years’ experience in retail
Executive team
Anneke Britz (41)
Operations » 20 years’ experience in retail
Arthur Beeming (37)
Diploma CNC Programmer
Merchandise and Marketing » 16 years’ experience in retail
Tanja van der Merwe (35)
Management diploma in HR
Human Resources Business Partner » 11 years’ experience in retail
Joshua Doore was established in 1973 and was acquired by the Group in 1986.
Its customers in the mass-middle market are serviced from the chain’s network of 154 stores that are located nationwide in the major
urban areas as well as regional towns. It supplies an extensive range of exclusive furniture products and top rated appliances.
The chain has, for a number of decades, been successfully represented by “your Uncle in the furniture business” who is recognised,
respected and trusted within the communities that Joshua Doore serves. The “Uncle’s” value proposition to customers is a top quality
customer-centric brand that provides compelling price points. Joshua Doore was ranked third in the Furniture Retail category of the 2011
Ask Afrika Orange Index® Service Excellence Benchmark.
Integrated report 2011 « JD Group v
Linda Sithole (44)
EMD, MBA
Chief Executive » 22 years’ experience in retail
Executive team
Kevin McKey (56)
Merchandise and Marketing » 31 years’ experience in retail
Anton de Necker (41)
Operations » 20 years’ experience
Loueen Jones (42)
Human Resources Business Partner » BA (Hons) » 1 year experience in retail
Morkels was established in 1937 and was acquired by the Group in 2003.
Its vision is to be the first choice of consumers seeking top quality, guaranteed products. Its customers are serviced from its retail network
of 111 stores located throughout South Africa and that offers the discerning South African consumer a unique shopping and after-sales
experience.
It has a further differentiator, being the only South African furniture retailer that extends an internally underwritten “Two year guarantee”
on its high-quality furniture, home improvements and appliances. Its value proposition is strengthened by Morkels’ continuous pursuit of
new initiatives to enhance customers’ shopping experience, creating an ambience that differentiates the Chain from its competitors.
To monitor and measure the quality of in-store service, Morkels conducts frequent surveys. Confirming the success of its Art of Service
initiatives, Morkels was ranked fourth in the Furniture Retail category of the 2011 Ask Afrika Orange Index® Service Excellence Benchmark.
vi JD Group » Integrated report 2011
Mike Roberts (56)
Chief Executive » 29 years’ experience in retail
Executive team
Herbie Lindhorst (50)
Merchandise and Marketing » 27 years’ experience in retail
Molefi Makhetha (47)
BA (Hons) (Psychology)
Human Resources Business Partner » 16 years’ experience in retail
Eppo Joubert (41)
Operations » 22 years’ experience in retail
Price ‘n Pride was established in 1983 and was the founding chain of the JD Group.
As the name suggests, its target market is the aspirational consumer in the lower half of both the urban and rural middle market. The
chain trades from 145 stores in South Africa.
The purpose of the Chain is to improve and add value to its customers’ lifestyle by providing an affordable range of quality merchandise.
It is also driven by an unconditional commitment to customer service, delivered by competent and proud staff who are in turn provided
with a caring and respectful work environment. Price ‘n Pride was ranked number one in the Furniture Retail category of the 2011 Ask
Afrika Orange Index® Service Excellence Benchmark, a clear demonstration of the success of its customer service initiatives that
encompass the Art of Service.
The values of Price ‘n Pride are founded on retail performance, customer focus, teamwork and integrity.
Integrated report 2011 « JD Group vii
Toy de Klerk (52)
Chief Executive » 31 years’ experience in retail
Executive team
Scott Allan (42)
Operations » 21 years’ experience in retail
Pieter Schoeman (55)
Merchandise and Marketing » 30 years’ experience in retail
Millicent Nortjé (55)
Human Resources Business Partner » 37 years’ experience in retail
Christo du Plessis (37)
BA (Hons), MBA
Operations (Central, Cape and Northern Divisions) » 36 years’ experience in retail
Russells was established in 1943 and was acquired by the Group in 1993.
It services the mass-middle market with its range of quality and affordable furniture, appliances and electronic goods which are sold for
cash or on credit. The chain trades from 210 stores that are located in the major urban centres and towns throughout South Africa.
In order to meet its customers’ needs, it has developed long-standing business relationships with suppliers in order to source the latest
products, both locally and internationally, and to deliver the best value for money to its valued customers.
Russells prides itself on delivering exceptional customer service, as defined by its value proposition “Your home lifestyle partner, quality
guaranteed.” It has also embraced the Art of Service to motivate and equip staff to engage professionally with customers and service
providers. Russells was ranked sixth in the Furniture Retail category of the 2011 Ask Afrika Orange Index® Service Excellence Benchmark.
In 2010, Russells embarked on its small-town expansion programme after extensive analyses indicated that this segment of the market
was underserviced. It has since opened 11 stores in smaller outlying towns. The results have been pleasing and it will expand on this
strategy in 2012.
viii JD Group » Integrated report 2011
Integrated report 2011 « JD Group ix
x JD Group » Integrated report 2011
49
Furniture Retail benefited from real income growth in our target market, improving
the affordability of additional credit purchases at our eight retail chains. From an
operational perspective, we are well positioned due to our uncompromising focus on
retail disciplines and the Art of Service to ensure the loyalty of our existing customers.
» The evolution of Furniture Retail’s workforce is on track Overview
and most of its employees are committed retail
Notwithstanding the temporary diversionary impact during
specialists. Internal staff promotions reached a record
the implementation of the strategic initiatives to support
high during the year and we have a strong pipeline of
long-term growth, such as the centralisation of the logistics
emerging talent.
,
environment and the implementation of SAP Furniture Retail
delivered a strong performance for the year under review, not
Introduction only from a financial perspective but also on our non-financial
The Furniture Retail division comprises eight leading retail performance metrics.
chains that service a broad spectrum of the mass-middle The benefits of segregating Financial Services and retail
market from its 988 branches located throughout South continue to show value. Financial Services’ enhanced insights
Africa and Botswana. The retail activities are focused on into the creditworthiness of customers provided additional
providing a superior customer retail experience by ensuring sales opportunities to Furniture Retail. Our focus on
excellent housekeeping on the shop floor, optimisation of merchandise also contributed to the improved performance.
merchandise and inventory planning to meet customer In particular, the better quality of visual in-store
expectations, entrenching the Art of Service to build merchandising has enhanced the visibility of our wide
customer and employee loyalty and ensure re-serve selection of well-priced products. Combined with the credit
opportunities. offering and leading credit granting techniques, Furniture
During the 2011 financial year, the division continued Retail has grown its market share during the year.
bedding down its retail focus while we undertook reviews The centralised distribution roll-out is on track and 12 regional
to optimise the retail portfolio and merchandising practices distribution centres were commissioned during the year, a
in order to enhance our cost-to-income ratios. We focused further 13 will be completed in 2012 with the balance of eight
on understanding customer requirements, ensuring each set for completion by 2014. A number of these are greenfields
brand’s ability to deliver, including educating customers on projects, resulting in longer development lead times for
product features and benefits. The Furniture Retail division construction of custom built warehouses. Those centralised
continued to make solid progress with its strategic initiatives distribution centres that were brought on line in 2011 are
in 2011, including the Art of Service, the SAP implementation delivering the anticipated cost benefits despite the inevitable
and centralised distribution. Accordingly, we are in on our duplication of some third-party costs during the transition
strongest position since the launch of the dedicated retail period, including costs such as leases, staff and vehicles.
focus in 2008 to capitalise on the opportunities we identify. However, through careful management, these impacts are
being minimised.
Integrated report 2011 « JD Group
50 Operational review
Review of operations Furniture Retail (continued)
The centralisation of merchandise planning, sourcing and addition, Electric Express was ranked third in the Electronics
distribution across all chains is expected to unlock and Appliance Retail category, with the Cash Retail Chains
significant efficiencies as Furniture Retail further taking the top two positions.)
consolidates its planning and buying power across its eight Staff turnover within Furniture Retail reached a record low
chains. This will assist in achieving improved lead times and of less than 20% during the year, significantly below the
terms on its larger orders. In the year under review, the industry benchmark. The majority of our employees are now
gross margin has already improved by 1,5% to 36% with committed retail specialists. Furniture Retail sharpened its
the added benefit that centralised buying will enable lower recruitment and selection criteria, leveraging Group
stock holdings and improved stock turns. practices to ensure continual improvement of the standard
Furniture Retail changed its trading month-end from the of its workforce. A focus on external recruitment also
15th of the month to the calendar month-end which was improved the division’s intellectual capital. Job specifications
triggered by the SAP implementation. A once off impact of have been fully documented, and in many instances, the job
the change was the loss of two weeks’ trading in the 2011 requirements have been raised. During the year, a record
financial year, dampening the reported growth of the proportion of the total workforce attended training
initiatives, with the majority of staff attending Consumer
division. This change required significant internal change
Protection Act training. A tangible indicator that these
management. Aspects such as commissions, incentives and
human resource practices are starting to pay off is that
stock delivery had to be adjusted, with a domino effect
internal staff promotions also reached a record high during
throughout the business. The SAP implementation will
the year. The division has a strong pipeline of talent to
however lead to significant downstream benefits,
maintain this trend.
automating the majority of in-store month-end reporting
processes that were previously carried out manually. The In order to guarantee the long-term relevance of our
first store goes live on SAP in November 2011 with merchandise and to manage the risk of stock obsolescence,
completion of all 988 business units in Furniture Retail each retail brand undergoes two full range reviews every
scheduled for the end of 2012. year to analyse the sales patterns for the entire stock file.
This includes a review of trends and innovations, as well as
The Art of Service has become a way of life throughout
customer facing focus groups.
Furniture Retail. The enthusiasm, commitment and retail
focus of our workforce, from the executive team down to
Performance
sales staff in all operations, was an important contributor to
the market share gains that were recorded in all eight retail Spending patterns within Furniture Retail’s typical customer
chains. External customer satisfaction was recorded at in the mass-middle market were buoyant partly as a result
89,2% during the year. Another stark demonstration of of good wage settlements among organised labour in South
improved service levels has been the 50% drop in customer Africa. Real income increases in our target market improved
the affordability of additional credit purchases at our eight
related issues from 16 000 a year ago to 8 000 at the end
retail chains, especially in those serving the lower end of
of the financial year. This provides strong evidence that the
the market. However, at the higher end of the market,
Art of Service is fully entrenched across our 988 stores.
consumers remain highly geared which continued to impact
Furniture Retail also achieved excellent results in the 2011
demand. Although Furniture Retail’s higher end brands were
Ask Afrika Orange Index® Service Excellence Benchmark,
affected by tougher trading conditions, they proved more
South Africa’s largest service excellence benchmark,
resilient than their peers.
identifying the country’s top service-oriented companies. Its
Price ’n Pride and Barnetts, which cater to the lower end of
chains were ranked as the top six Furniture Retail chains,
the market, continued to deliver strong returns while
with Price ‘n Pride coming in at the number one position,
Russells, Morkels and Joshua Doore staged strong
followed by Barnetts, Joshua Doore, Morkels, Bradlows and
recoveries at the operating profit level. Although the
Russells who were ranked second to sixth respectively. (In
performance of Electric Express retraced marginally during
JD Group » Integrated report 2011
51
the year, its turnaround has been sustained since 2009. The ongoing centralisation of distribution centres, with
Supreme (Botswana) had a disappointing year, but this was 13 new facilities to be commissioned in 2012, as well as
in line with the economic downturn of Botswana but the the SAP implementation and a continued focus on the
Group remains committed to trading in that country. quality of our retailing skills are all anticipated to unlock
further efficiencies.
A further analysis is included in the Group Financial
Director’s review. Furniture Retail made good progress with its strategy to
roll out smaller format stores in rural areas with 11 new
Sustainability Russells stores being opened during 2011. Benefiting
from lower overhead costs, the return on sales from
A rigorous approach to energy saving is adopted during
these stores has been ahead of expectations. Having
store renovations or when new stores are opened. This
demonstrated the feasibility of this strategy, it is being
entails the installation of prismatic three-lamp electronic
extended to Barnetts and Joshua Doore. With its centralised
ballast light fittings that reduces consumption by between
stock availability and door-to-door delivery, Furniture Retail
5% and 15%. Independent metering systems are also being
has a tangible differentiator that will ensure the success of
installed in the 120 Furniture Retail stores that have
its strategy to increase its presence in smaller South African
historically shown the highest electricity consumption per
towns.
square metre.
In addition to the small format roll-out, the roll-out of
Priorities and outlook Bradlows and Morkels will be accelerated to enable them to
reach their critical mass, with 12 new Bradlows and 14 new
Even though muted overall retail growth is expected in the
Morkels stores scheduled to open by the end of 2012.
year ahead, Furniture Retail’s target market should continue
Overall, it is anticipated that 70 new stores will be opened in
to show positive demand as real wage increases persist.
the 2012 financial year.
From an operational perspective, the division is well
positioned due to its uncompromising focus on retail
disciplines and the Art of Service to ensure the loyalty of our
existing customers.
Integrated report 2011 « JD Group
52 Operational review
Review of operations Cash Retail
Grattan Kirk
Chief Executive
Officer
Non-financial highlights
» Market share gains across most major product categories.
» The activation of Art of Service across both brands is delivering benefits.
» Centralised distribution centre opened at Incredible Connection.
» Three new Incredible Connection stores opened.
» Continued repositioning of HiFi Corp supported by roll-out of consistent and
upgraded store layouts.
» HiFi Corp’s focus on stock management.
Material issues covered in this section
» Cash Retail ensured that it complied with the Consumer Protection Act,
training more than 3 900 employees in support of the Group’s governance
requirements.
» The consumer electronics segment is a sustainable business due to the low
penetration in South Africa and rapid replacement cycles.
» Customer experience continued to improve as Incredible Connection was
ranked as the top Electronics and Appliance Retail Company in the 2011 Ask
Afrika Orange Index® Service Excellence Benchmark, followed by HiFi Corp in
second place.
» The workforce of both chains is made up of motivated employees, thereby
Cash Retail at a glance strengthening the sales model with more stringent and specialised
requirements for customer facing employees.
2011 2010
Revenue (Rm) 4 578 4 308 » Strong supplier relationships as well as specialised merchandise and service
Gross margin (%) 23,8 23,8 related strategies in both chains ensure the relevance of business products
Operating profit (Rm) 224 190 and services in Cash Retail.
Stores 96 92 » Incredible Connection is assisting its customers to reduce their impact on
Trading density (Rm2) 46 744 47 541
the biophysical environment by providing green DESCO bins in all stores
Revenue per employee
for disposal of electronic waste, that is then recycled or disposed of in an
(R000) 1 263 1 194
environmentally responsible manner.
JD Group » Integrated report 2011
Allan Herman (54)
Chief Executive » 27 years’ experience in retail
Executive team
Jonathan Bromley (35) Preeti Neerachand (34)
Operations » 18 years’ Human Resources Business
experience in retail Partner » BA » 11 years’
Mark Wood (46) experience in retail
H Dip Marketing Piwe Makaula (33)
Merchandise » 22 years’ BCom (Hons), CA(SA)
experience in retail Finance » 10 years’
Neil Mclean (55) experience in finance
Marketing » 38 years’ and taxation affairs
experience in retail
HiFi Corp was founded in 1993 and was acquired by the Group in 2003.
Having successfully repositioned its business in the last two years, it confirmed its position as the largest audio-visual category specialist
in the southern hemisphere. The chain operates 35 HiFi Corp stores that are located in southern Africa. In order to be located conveniently
to its mass cash market customers, the stores are located in major metropolitan areas.
The chain provides comprehensive ranges of aggressively priced merchandise categories that are underpinned by international brands,
with expert advice and an exciting shopping experience for customers. HiFi Corp was ranked number two in the Electronics and Appliance
Retail category of the 2011 Ask Afrika Orange Index® Service Excellence Benchmark.
The chain’s retail network is being progressively upgraded to better reflect its value proposition and provide a consistent shopping
experience across all its stores.
Integrated report 2011 « JD Group xi
xii JD Group » Integrated report 2011
David Miller (41)
BBA (Hons)
Chief Executive » 17 years’ experience in retail
Executive team
Victor da Silva (44) Stefan Marnewick (40)
IT Cash Retail » 18 years’ BCom (Hons), CA(SA)
experience in retail and IT Financial director » 13 years’
experience in retail
Sean Nelson (38)
Operations » 18 years’ Ansgar Pabst (39)
experience in retail Merchandise Executive » B Bus Admin
Tessa Pintusewitz (43) » 17 years’ experience in retail
Human Resources Business
Partner » BCom (Hons)
» 1 year experience in retail
Incredible Connection was founded in 1990 and was acquired by the Group in 2005.
The chain is positioned as a specialist retailer, focusing on consumer and small business technology products and services as well as
offering a choice of value-added solutions.
Incredible Connection has 61 stores in South Africa, Botswana and Namibia.
The value proposition is driven through international brands, a wide range of product, highly trained sales staff, on-site service, recycling
of computer waste material and an extensive geographic presence. Its offering is differentiated through service, store ambiance,
innovative products and competitive pricing. It was ranked number one in the Electronics and Appliance Retail category of the 2011 Ask
Afrika Orange Index® Service Excellence Benchmark.
Integrated report 2011 « JD Group xiii
xiv JD Group » Integrated report 2011
53
Cash Retail achieved a 5,5% year-on-year growth in sales despite consistent price
deflation as it continues benefiting from rapid replacement cycles in the consumer
electronics segment. With its well-articulated and understood business model and
strong management, the division is positioned to execute on its strategy.
Introduction Overview
The consumer electronics and technology markets within Incredible Connection
which Incredible Connection and HiFi Corp trade, continues Surveys conducted during the year showed continued
to present growth opportunities in southern and sub improvements relating to customer satisfaction as well as
Saharan Africa. This is driven by a growing middle class employee engagement. This demonstrates that internally,
and the ongoing rapid pace of consumer uptake of Incredible Connection has fully embraced the Art of Service.
consumer electronic goods and services. While computer Efforts to better understand the internal and external drivers
penetration remains low across many urban households in of in-store service levels and the development of tools to
South Africa, the increasing need for technology in our daily monitor these, enabled Incredible Connection to tangibly
lives, represents ongoing sales opportunities to new improve customer satisfaction levels. In particular, it was
customer segments and replacement of old technologies ranked as the top retailer in the Electronics and Appliance
in existing ones. Retail category in the 2011 Ask Afrika Orange Index® Service
JD Group is confident that the consumer electronics Excellence Benchmark, which evaluates service levels in the
segment will continue to present significant growth domestic market among more than 100 participating
opportunities, especially as consumers become more retailers.
affluent and technologically aware. With its strong market The focus of Incredible Connection during the year was
presence Cash Retail has clearly demonstrated its ongoing on enhancing the positioning of the business for long-term
ability to trade successfully in subdued economic trading sustainability. In order to address increasing competition
environments that have been characterised by low as well as the greater product knowledge of customers,
consumer confidence and low levels of disposable income. Incredible Connection heightened its focus on differentiating
While the competitive environment remains tough and is its business model by service, store ambiance, innovative
influenced by substantial price deflation, rapid replacement products and competitive pricing. There has been a
product lifecycles present ongoing sales opportunities. renewed focus on serving the specific requirements of
Incredible Connection and HiFi Corp continue to grow their particular segments of shoppers, with customised or
businesses organically through store openings, new targeted solutions and products as well as products aligned
categories of merchandise and product innovation, while to specific preferences. In addition, it focused on enhancing
also having the capability to provide affordable credit to returns from its core business activities.
consumers wanting access to these products.
Integrated report 2011 « JD Group
54 Operational review
Review of operations Cash Retail (continued)
During the year, the chain strengthened its sales model after-sales service. This entailed improving the sales model
with more stringent requirements for customer facing with a more specialist service focus. Good progress was
employees, selling skills and increased specialist product made in migrating customer facing employees towards the
knowledge to enhance the customer service experience. new, more service intensive business model, as confirmed
by the independent survey results.
Incredible Connection is enhancing its merchandising
capability with investments in its systems and people to HiFi Corp also initiated a new logistics strategy to support
improve its performance in terms of stock integrity, service the rapidly growing demand for white goods and to
levels and range management. A centralised distribution effectively manage its inventory, which is impacted by the
centre was opened in Gauteng to manage distribution to rapid obsolescence cycles in the consumer electronics and
its 61 stores. Suppliers have now started delivering appliance segments. In this context, the sustainable success
merchandise to this central facility, which has enabled of HiFi Corp is predicated on its ability to manage its stock
larger and more frequent deliveries from one source to levels. This is an ongoing area of focus and overall
each individual store thereby, increasing efficiencies. inventories have been managed to historically low levels
during the year without compromising service levels.
The six megastores located in super regional shopping
centres are performing well and Incredible Connection is In line with its repositioning, HiFi Corp continued to upgrade
increasingly regarded as a desirable tenant. This ensures the layout and flow to introduce consistent shopping
that it has continued access to the top locations for its experiences across all of its stores. The new, more
stores. convenient layouts have been well received by customers.
Two large regional stores were relocated to super regional
Incredible Connection opened three new stores during the
shopping centres during the year, in line with the brand’s
year, while four of its key stores were refurbished. One store
repositioning and to be located more conveniently for its
was closed during the year.
customers. Of its total footprint of 35 stores, 15 stores have
Increasing its domestic presence remains a high priority.
now been refurbished to the new design that is in line with
Incredible Connection is selectively pursuing opportunities
the global trends towards convenience shopping.
to open stores in specific shopping centres where it has
In addition to the interior redesign, in-store product signage
established, through detailed research, that it can improve
has been upgraded to provide additional information to
its access to the target market. Detailed feasibility studies
assist customers’ purchasing decisions. Specifications and
include geospatial analyses to analyse spending patterns.
product category attributes have been added to signboards
HiFi Corp
in addition to the brand, price and name of the product. This
HiFi Corp continued to refine its business model as part of initiative came about after extensive analysis of customer
the process initiated two years ago to upgrade the brand. requirements at the purchase point and complements the
Independent market research into the quality of its in-store greater focus on in-store services. It has been rolled out in
and after-sales service confirmed that HiFi Corp is now all the new stores, and is now continuing into the rest of the
ranked ahead of its peer group, a marked improvement chain. It is a cost-effective mechanism to increase service
over a two-year time horizon. It was ranked second in the levels.
Electronics and Appliance Retail category of the 2011 Ask
The decision to launch a completely new in-house brand,
Afrika Orange Index® Service Excellence Benchmark. In the
“by D:sign” in the previous financial year is starting to pay
last two years, it has made strong inroads in terms of the
off and consumer acceptance exceeded expectations in all
quality of range and the consumer perception of the brand.
categories. In line with this change, the contribution to
To cement these changes, the brand was repositioned
revenue from in house brands was lower in 2011 than in the
during the year, including a new corporate identity and
previous year. However, these sales were largely substituted
shortening its name from HiFi Corporation to HiFi Corp.
by primary branded products, which offer similar returns on
While HiFi Corp’s business will always be driven by its ability a net basis. The emphasis on primary brands with a single
to offer compelling price points and value to consumers, consolidated house brand has been beneficial to the chain
service is increasingly seen as a differentiator. In support of as the cost of after-sales services has decreased
the Group’s Art of Service objectives, HiFi Corp evolved a significantly.
service oriented operating strategy to improve in-store and
JD Group » Integrated report 2011
55
Having refined and entrenched its new business model, the Incredible Connection recycled 122 tonnes of e-waste in
focus of HiFi Corp has now moved to growing its footprint in 2011, in partnership with an external electronic recycling
southern Africa. We are targeting up to three new stores specialist. Customers and other members of the public use
annually for the next five years in addition to relocating the e-waste bins located in each of the Incredible
existing stores to locations that better meet our new Connection stores throughout the country to dispose of
business model. The current focus is in the primary urban their used computer and electronic components. The waste
areas where there is still significant opportunity. is collected and transported to the recycler’s processing
plant in Gauteng where mainstream waste is manually
Performance dismantled, sorted and recycled. Independent parallel
Incredible Connection performed particularly well with same electricity consumption metering systems have been
store sales growth of 8,5% or 10,7% including sales from the installed across Cash Retail. These have highlighted
three new stores opened during the year, also reflecting instances of abnormally high consumption and savings of
market share gains across most major categories. With its up to 15% are being achieved.
strong volume growth, the Cash Retail chain overcame
ongoing aggressive competitor activity and lower consumer
Priorities and outlook
confidence. Incredible Connection delivered double-digit The focus for Cash Retail is to continue benefiting from the
operating profit growth, as well as exceeding its return on rapid replacement cycles as well as serving the many new
sales targets. entrants into the consumer electronics and technology
segment. The rand remained persistently strong during
Total sales of HiFi Corp were stable in rand terms
2011, but has shown signs of weakening since year end.
notwithstanding price deflation across most major
This should dampen some of the deflationary pressures
categories. In key areas of its business where it has
we experienced in the last 12 months.
recovered market share, volumes increased substantially.
Margins were enhanced through the repositioning of Cash Retail has a well-articulated and understood business
product portfolios and the improvement in after-sales model with strong management teams to execute on its
service costs. In order to protect its operating margins, the strategy. It will continue to provide a specialist service in the
Chain maintained its strict focus on expense management. consumer electronics category in order to differentiate itself.
Both Incredible Connection and HiFi Corp have positioned
Sustainability themselves as specialist, customer centric, consumer
In addition to supporting the Group’s corporate social electronics and technology retailers, conveniently located
investment and environmental initiatives, HiFi Corp directly with a depth and breadth of international brands to service
supports a number of worthy causes. During the year it the South African consumer.
contributed to “Reach for a Dream” and SARLA, an Both Chains have also identified many opportunities to
organisation which conducts drug awareness programmes extend their retail footprint in South Africa. In addition, the
and feeds thousands of streetchildren. Incredible division is cautiously evaluating opportunities to expand its
Connection, made 52 charity donations during the year footprint into the rest of Africa.
valued at over R1 million.
While the market is expected to remain challenging, Cash
HiFi Corp’s commitment to managing its environmental Retail is a well-managed and strongly positioned business,
impact was formalised with the completion of its charter with a broad product offering and an indepth understanding
during the year. Its programmes include an in-store initiative of its value proposition. It should therefore continue to
to promote electronic waste (e-waste) recycling in eight thrive in its growing market segments. By enhancing our
stores that will be rolled out to all HiFi Corp stores in the value propositions and heightening investments in people,
next 12 months. To reduce the use of plastic bags, HiFi Corp both Incredible Connection and HiFi Corp should continue
is charging customers for bags and is in the process of showing growth in the year ahead.
introducing environmentally responsible hemp bags
manufactured by local communities.
Integrated report 2011 « JD Group
56 Operational review
Review of operations Unitrans Auto
eve
Steve Keys
anaging
Managing Director:
Unitrans Auto
itrans
Unitrans Auto Executive committee
Steve Keys, Neil Rubelli, André Rhoodie, Gordon Samuelson, Brynn Stephenson, Roy Pepper, Kevin Gillmer, Bernie du Plessis, Gary Alge,
Steve Cloete and Kassie Govender.
Non-financial highlights
» Recognition by a number of manufacturers as Dealer of the Year.
» Improvement in customer satisfaction measures.
Material issues covered in this section
» As a result of its strong relationships with OEM manufacturers and access to
JD Group’s extensive customer base, Unitrans Auto has a sustainable
business model.
» Unitrans Auto has performed well in all manufacturer programmes,
demonstrating the quality of its customer experience.
» Motivated employees.
» With access to the JD Group’s Financial Services offering as well as its retail
expertise, Unitrans Auto has the potential to extend its business products
and services.
Strong growth continued in 2011, Overview
underpinned by demand
for new vehicles Unitrans Auto traces its origins back to the 1920s and today offers a broad
range of vehicles (both new and pre-owned), parts and accessories, servicing
and insurance, complemented by the Hertz Car Rental division. Unitrans Auto
targets consumers across the income spectrum and has a significant market
Improved operating margin share of the top selling volume brands as well as a number of luxury brands.
due to stringent cost
management Unitrans Auto operates in the franchised motor retail market, representing a
number of international motoring brands such as Toyota, Lexus, General Motors,
Strong cash flow generation
JD Group » Integrated report 2011
57
Unitrans Auto is a high-quality and cash-generative asset. Although it will continue
to operate autonomously, it will explore operational and trading synergies with
JD Group’s retail and consumer finance division.
Volkswagen, Audi, Nissan, Renault, Mercedes-Benz, BMW Strategic fit with JD Group
and MAN. Its focus is the volume market. The division
Unitrans Auto is a high-quality and cash-generative asset
services its customers from its network of 84 dealerships
that has a good fit with JD Group’s retail and consumer
that are located throughout South Africa. Unitrans Auto is
finance strategy.
the third largest dealer group in South Africa, selling one out
The division participates in an industry that has attractive
of every 14 new cars. Its annual volumes amount to
prospects. The motor retail industry is in a recovery phase,
approximately 30 000 new vehicles and 2 400 used vehicles.
following demand declines in 2008, from its peak in the
It has a strong relationship with the Original Equipment
mid-2000s. A recovery in consumer spending and credit
Manufacturers (OEMs) and is, according to NAAMSA, the
growth should provide support for near- to medium-term
number one dealer in Toyota vehicles (the number one OEM
growth. JD Group believes that growth will be particularly
in South Africa in 2010 by market share) and General Motors
strong in popular brands where Unitrans Auto has a
vehicles (the third largest OEM in South Africa in 2010 by
favourable position.
market share). It is also the number three dealer in
Given its successful track record in credit granting and
Volkswagen (the second largest OEM in South Africa in 2010
collections, JD Group believes that Unitrans Auto will
by market share) and Audi vehicles.
present significant financial services growth opportunities
In addition to retailing vehicles, the division also trades in
to serve the expanded JD Group customer base, including
used vehicles and provides after sale services including
opportunities to provide vehicle rental products, extended
parts and servicing to customers. Another strategically
maintenance or vehicle repair financial products and
important product line is extending finance and insurance
finance to those customers who would not qualify for
products to customers. Unitrans is also exposed to car
traditional vehicle finance.
rental market through its association with Hertz Rent-A-Car.
Although it continues to operate autonomously, the division
The long-term objectives of Unitrans Auto are to grow its
has been successfully integrated into the JD Group. It is
share of the South African retail market and to provide a
starting to explore the operational and trading synergies
one-stop shop for its customers’ motoring needs.
inherent in the Group. Unitrans Auto’s exposure to the
Integrated report 2011 « JD Group
58 Operational review
Review of operations Unitrans Auto (continued)
non-motor related retail activities is expected to add The finance and insurance activities benefited from the
value to its business with its acquisition by the JD Group. improved vehicle sales volumes.
In addition, the Group’s Financial Services offerings will
Unitrans Auto achieved a pleasing improvement in
provide it with exposure to a much larger customer base
operating margins even though the product mix became
and enable it to bring new products to its existing
more biased towards the new vehicle market that is
customers.
characterised by lower margins in this highly competitive
market. Strict expense controls throughout Unitrans Auto’s
Performance retail network counteracted these lower gross margins.
Unitrans Auto has been consolidated for two months from
General Motors and Volkswagen/Audi produced good
1 July 2011 to 31 August 2011 for the period under review.
results, mirroring the brands’ increasing international
The performance for the two months was supported by a market share. This was achieved despite a high level of
buoyant new vehicle market which continued to show model run-outs during the year. The performance of Nissan
growth over last year. Demand for new vehicle sales was also affected by model run, exacerbated by supply
increased 11,0% year-on-year to the end of August 2011, challenges following the March 2011 floods in Japan.
driven largely by the passenger car market that represents DaimlerChrysler showed a strong turnaround during the
approximately 70% of total vehicle sales. Higher volumes of year. Unitrans Auto’s Toyota dealers showed growth despite
new car sales were underpinned by improved domestic the brand’s loss of market share in South Africa. Overall,
market sentiment, increased availability of credit for Unitrans Auto has defended its share of the total vehicle
vehicles increased and interest rates that remained low. In market in South Africa despite heightened levels of
addition, OEM vehicle manufacturers offered attractive competition.
incentives that supported demand.
Unitrans Auto’s asset control was pleasing and the division
The used vehicle market was somewhat subdued as produced strong cash flows from operations.
customers perceived value on offer from the motor
In addition to achieving financial results which were in line
manufacturers as they supported sales growth with
with management’s expectations, customer satisfaction
incentives and special offers. However, the market started
scores continued to improve and the division fared well in
to improve in the latter part of the year.
all manufacturer programmes for the period under review.
Hertz continues to make pleasing progress although the car
rental segment came under pressure during the year. Sustainability
Management interventions including changes to the
Unitrans Auto’s Volkswagen and Audi division supported the
structure, improved pricing and service delivery started
Anti-Rhino Poaching initiatives of the Honorary Rangers and
to pay off.
SA National Parks in an attempt to combat the scourge of
The after-sales activities have started to recover from the poaching in the National Parks. This initiative includes both
effects of a drop in industry volumes since 2007 and remain funding and the donation of vehicles to help combat
a strong underpin to the results achieved by the division poaching in the year ahead.
although the market remains competitive.
JD Group » Integrated report 2011
59
Priorities and outlook
The market is expected to come under pressure in the year
ahead. Higher interest rates are anticipated as well as
pricing pressure resulting from the weaker rand against the
US dollar since the end of the 2011 financial year. Unitrans
Auto’s strong positioning in the high volume segment of the
market should dampen the impact of any slowdown in
demand. At the same time, its dealerships are exploring a
number of new marketing imperatives in conjunction with
the JD Group.
The prospects for Unitrans Auto remain positive,
notwithstanding a challenging market. It is expected to
benefit from a number of high potential and synergistic
opportunities that exist within the JD Group, including
access to existing Group customers. Accordingly, Unitrans
Auto anticipates real growth in earnings for the year ahead.
Integrated report 2011 « JD Group
60 Operational review
Review of operations SteinBuild
Theodore de Klerk
Managing Director:
SteinBuild
SteinBuild Executive committee
Theodore de Klerk, André de Jager, Christo Bester, Dave Granger, Helene Zsilavecz, Wayne Opperman.
Non-financial highlights
» Continued market share gains.
» Timbercity recognised as a finalist in the Sunday Times Retail Awards for two
years running.
» Acquisition by JD Group presents new growth opportunities by providing
existing customers with expanded product categories, extending credit on
consumer sales and opening new stores.
Material issues covered in this section
» The retail chains maintained their regulatory compliance with representatives
Maintaining profitability despite the
challenging business environment from each store attending CPA training during the year.
» SteinBuild has developed rigorous stock and customer credit management
systems to effectively mitigate of its key risks.
» Opportunities to extend credit to consumers and opening new stores to
service JD Group’s existing customers will ensure a sustainable business.
Strict cost controls achieved to
maintain operating margins » SteinBuild has a formalised programme to monitor and continually enhance
its customer services and will adopt the Art of Service going forward.
» Knowledgeable employees provide a high quality in-store experience as a
result of ongoing product training.
Debtors costs have remained stable
Good working capital management
JD Group » Integrated report 2011
61
As part of the JD Group, SteinBuild is presented with exciting new growth
opportunities. These include extending credit solutions to individuals by leveraging
Financial Services expertise and providing the Group’s traditional customers with
conveniently located specialist home improvement products and services.
» Through its local and international suppliers, SteinBuild DIY enthusiasts and stocks a comprehensive local and
continually improves the range of its business products international range of building materials and hardware
and services and its employees attend product related products. It provides services including material
training to continually extend their knowledge. estimates, roof truss manufacture and deliveries.
Pennypinchers serves the residential, commercial and
» The impact on the biophysical environment is managed
industrial segments of the construction industry.
by selling only FSC certified timber and other green
products throughout its stores. » Tilehouse was founded in 1988 and supplies high quality
imported tiles from its stores located in the Western and
Overview Southern Cape. Sourced internationally, the products
reflect the latest trends and are of the highest quality. It
SteinBuild is a retailer of building materials and related
provides extensive pre-sale advice to customers including
products and services that was acquired by the JD Group
detailed specification documents relating to installation
with effect from 1 July 2011. It comprises three well
and maintenance.
established brands, namely:
Pennypinchers, Timbercity and Tilehouse trade
» Timbercity, which was founded in 1974 in the Western
independently, however they were streamlined into a
Cape and the first franchise store was opened in 1979. Its
standalone business division in 2010. The three chains have
product range includes an extensive choice of boards,
a total of 59 retail outlets located throughout South Africa,
shelving and timber, high pressure laminates, modular
although they have the greatest penetration in the Western
furniture and cabinets, flooring and the associated
Cape and Gauteng. Approximately one-third of its stores are
hardware and consumables. It also has a range of
franchised, a proven model that is effective in managing its
services including cutting, edging and drilling. The chain
stores in outlying areas. The majority of its customers are
focuses on providing superior products and outstanding
professional contractors, subcontractors and artisans as
service delivery to professional contractors,
well as more sophisticated homeowners who carry out
subcontractors and artisans as well as sophisticated
renovations and building projects themselves.
“do-it-yourself” enthusiasts.
SteinBuild currently provides trade credit to its professional
» Pennypinchers, a building and construction material
customers who represent approximately 70% of total sales,
specialist that has been in existence for more than
with an average balance of R20 000, but has to date not
20 years. It targets contractors, developers and individual
Integrated report 2011 « JD Group
62 Operational review
Review of operations SteinBuild (continued)
extended credit to consumers. Backed by JD Group’s processes to manage inventory including range
Financial Services’ offering, there is an immediate management to ensure relevance, managing losses and
opportunity to grant credit to consumers, enabling them to storage to avoid damage. SteinBuild provides trade credit to
accelerate improvements to their homes instead of having some 70% of its contractor and artisan customers and
to save for extended periods before making purchases. manages these credit exposures through a formalised but
highly interactive process to evaluate the ongoing
SteinBuild’s brands are differentiated in the market through
creditworthiness of these customers, the majority of whom
the division’s focus on selling solutions rather than
are regular customers.
individual products to its customers, providing extensive
pre-sales services and advice. This is underpinned by
product knowledge gained as a result of selling to the
Strategic fit with JD Group
professional market. As consumers increasingly take on SteinBuild presents a significant growth opportunity and is
ambitious home improvement projects themselves, a strong fit with JD Group’s retail and consumer finance
this product knowledge is becoming a stronger strategy.
competitive edge.
The acquisition allows JD Group to diversify and scale up its
SteinBuild’s workforce comprises approximately retail and financial services operations and opens new
2 000 employees across the three brands. Its customer avenues for growth in the building materials and DIY retail
facing employees have strong selling skills, but more business. This is a logical extension of the Group’s
importantly, they are highly knowledgeable on all product penetration in the retail value chain, that has to date been
lines. In order to keep pace with the continual development focused on furniture, appliances and consumer electronics.
of new and more sophisticated products, sales staff in each The mass middle target market includes a large number of
store attend at least two product related training initiatives first time buyers of entry level homes. The potential for
per month. SteinBuild has also developed an accredited successive improvement projects such as tiling, flooring and
retail skills programme. In the last year, 90 employees household extensions, in addition to furniture and
registered for the programme. In 2011, SteinBuild provided appliances from JD Group stores in this segment, is high.
CPA training to its store employees as part of a process to JD Group will also be able to leverage its successful track
ensure its full compliance with the new legislation. record in consumer financial services within SteinBuild’s
target market.
In line with its service-intensive business model, SteinBuild
has a formalised customer service programme across each
of its stores. Its relationships with the contractors and
Performance
artisans who comprise its base of approximately SteinBuild has been consolidated for two months from
10 000 active professional customers is monitored 1 July 2011 to 31 August 2011.
interactively, while end-consumers are surveyed through
Revenue came under pressure during the last three years in
questionnaires. Going forward, the division will roll out the
line with the decline in residential building projects, which
Art of Service initiative across all stores. SteinBuild has was one of the sectors worst affected by the global
invested heavily in building its brands. All stores are
economic crisis. Since early 2010, the environment has
managed on a consistent ERP system which consolidates
stabilised and the three retail chains continued to gain
the stock files across all three brands. Delivery to
market share supported by its in-store services and
SteinBuild’s 59 stores is provided by suppliers for the vast
solutions focus.
majority of products while imported products are distributed
Wide ranging initiatives to reduce overheads and improve
from three central warehouses.
efficiencies along with the creation of a centralised support
From an internal perspective, SteinBuild’s biggest risk is
office providing treasury, finance, human resources,
considered to be the management of its inventory, and the
information technology and business process functions to
granting and collection of credit. It has well established
all stores, have been implemented. At store level, cost
JD Group » Integrated report 2011
63
savings were achieved with initiatives to increase Priorities and outlook
efficiencies, energy savings and a specific focus on
Spending is expected to remain under pressure in the year
reducing stock wastage.
ahead, due to the continued economic uncertainty.
Stable debtor costs in the last year, despite the tight Accordingly SteinBuild is anticipating muted sales growth on
economic environment, confirmed the relevance of its a same store basis. However, as part of JD Group, it can
credit vetting and collections systems. access new growth opportunities by extending credit
solutions from trade customers to individuals. At the entry
Sustainability level, even creditworthy consumers have historically not
During the financial year, SteinBuild’s stores were involved had access to credit to increase the affordability of home
in a broad range of corporate social investment initiatives to improvement purchases.
support worthly causes in their communities. These SteinBuild will leverage its network to access the Group’s
spanned a wide range, biased towards education and Furniture Retail customers in the mass middle market
childcare in underprivileged communities. The value of where significant cross-selling opportunities have been
these donations amounted to more than R850 000 in 2011. identified. JD Group has established that there is a need
SteinBuild is fully supportive of stocking green products in among its existing customers to access conveniently
its stores including solar power products, geyser blankets, located specialist home improvement products and
energy saving lighting, water and conservancy tanks and services. SteinBuild will benefit from the Group’s extensive
solar geysers. All timber supplied is FSC certified. knowledge of its market segments, geospatial and
demographic analyses, business intelligence and experience
in the development of new store concepts to open new
stores in the future.
From a non-financial perspective, SteinBuild will focus on
being the first choice retailer for the professional contractor,
further improving its customer service, enhancing its brand
awareness and assisting customers with their smaller home
improvement projects. The division will continue to operate
autonomously, however it will have access to JD Group
resources, especially in relation to property management,
the Art of Service and other support functions.
Integrated report 2011 « JD Group
64 Operational review
Review of operations Financial Services (including Maravedi)
Philip Kruger
Chief Executive
Financial Services Executive committee
Philip Kruger, Barry Dell, Corrie Neven, Johan Claassen, Francois Grobler, Johan Breytenbach, Reneé Griessel, Jeannine Naudé Terblanche,
Clyde Briell, David Sussman, Arie Neven, Pieter Pienaar, Morné van Wyk, Andrew Murray, Grattan Kirk, Bennie van Rooy, Charl van Rhyn.
Non-financial highlights
» Successful launch of personal loans in the Furniture Retail stores with the
19,7
book growing to R374 million (gross value).
%
Operating profit
up 19,7% to
» Continued productivity gains.
R723 million
» New system implementations on track with roll out of VisionPLUS and
Capstone in progress.
10,4 %
Reduction in » Consolidation of Maravedi Financial Services to leverage intellectual skills pool
debtors’ costs
to R675 million for accelerated product development.
Material issues covered in this section:
» Investment in best practice risk management processes and systems were
21,7%
Strong performance
against KPI target instrumental in reducing provisions and extending credit to new customers.
with ROCE of 21,7%
The Credit committee has oversight on credit granting decisions.
» The recent acquisitions by JD Group bring new opportunities for Financial
Services while the division continues to implement additional IT systems to
ensure a long-term sustainable business.
» Financial Services employees further improved their productivity.
» The centralised contact centre supports the Art of Service to deliver superior
customer experience with its immediate allocation of queries to the correct
department to ensure a quick resolution.
Financial Services at a glance » Financial Services is now focused on rolling out new business products and
services that are relevant to its existing and new customers.
2011 2010
Revenue (Rm) 3 314 3 140
Operating profit before
debtors’ costs (Rm) 1 398 1 357
Debtors’ cost (Rm) 675 753
Operating profit (Rm) 723 604
Average yield (%) 60 61
JD Group » Integrated report 2011
65
Financial Services delivered a strong performance in 2011, tracking closer to its
targeted 25% return on capital employed. This was supported by stable vintage
curves and the division’s ability to selectively provide credit to underserved
segments of the market, as a result of its enhanced credit-vetting systems.
Introduction years. The gains include improved productivity as well as a
much enhanced credit risk management processes, thereby
The Financial Services division supports JD Group’s stated
leading to a significant improvement in operating profits.
financial growth targets by providing credit into the Group’s
eight Furniture Retail chains and consumer finance via Financial Services Credit Risk committee is integral to its risk
Hi-Finance to the Group’s two Cash Retail Chains. It also management processes. It considers decisions regarding
provides third-party consumer finance to external retailers amendments to any credit risk related activity (with impact
and other non-retail related financial services products. analyses) for approval. These include implementing new
Financial Services is represented in each of the Group’s credit-risk strategies or products and making amendments
Furniture and Cash Retail stores, with customer-facing to current credit risk strategies or products. In addition, the
Financial Services Consultants who are supported by the committee considers the underwriting of credit applications,
centralised back-office credit origination and collections application fraud investigations, credit risk portfolio
environment. The division operates out of two contact reporting, credit risk rules and strategies on existing and
centres, the larger having approximately 600 agents in new products, as well as the development, implementation
Johannesburg while the smaller works from Blake in and monitoring of scorecards, risk models and credit
Durban, that has about 200 contact centre staff. strategies (inclusive of originations, collections, customer
management, credit facilities and recovery strategies).
While the core focus of Financial Services is developing,
granting and managing financial services products across In addition, while Financial Services is governed by the
the entire value chain, it is also well-placed to provide Group’s risk management systems and processes, its core
extensive business intelligence to other Group operations activity of providing credit to the Group’s customers has
relating to customer spending behaviours across the eight necessitated the implementation of best practice risk
Furniture Retail chains. Using this information, the Furniture management processes across all its activities and
Retail chains can customise their products and customer functions. Results from the Blaze decision engine and
engagement to assist in delivering sustainable and scoring tool, that were fully integrated into the operations
profitable growth of the debtors book. during the year, exceeded all expectations. Its success was
reflected in reduced provisions on new business as well as
Overview measurable benefits in extending credit to new customers,
The centralisation of Financial Services into a standalone as Blaze allowed more accurate segmentation of new
division has delivered significant gains in the last three customers.
Integrated report 2011 « JD Group
66 Operational review
Review of operations Financial Services (continued)
Financial Services increased its investment in redundancy queries and complaints are handled and recorded centrally
and fail over capacity, to improve the stability of our IT through the contact centre. The system allocates queries to
systems, especially during the peak trading periods. the correct department to ensure quick and proactive
resolution within required deadlines. The customer service
In the current consumer credit environment, players are
dashboard is reported to the board on a quarterly basis.
seeking to differentiate themselves within the range of
credit offerings in the market, in order to attract and retain Financial Services has ensured that its employees are highly
customers. Financial Services is equipped to face its motivated and engaged. The positive impact is reflected
competitors head on, backed by the Group-wide in the performance of the division as a whole, especially
Art of Service initiatives as well as its new credit assessment in relation to the productivity gains that have been achieved
technology to develop new products in line with its in the last three years. Collection rates have increased
customers’ needs. This includes sophisticated techniques to to 6,4% at year end, an impressive improvement from
prospect our existing and potential customers, focusing on rates of 6,1% a year ago, while quality assurance results
their specific requirements and addressing these needs with in the contact centre improved from approximately
relevant customised products and services. 88% 18 months ago, to above 95% at year end.
Following a year of detailed planning, the initial roll-out of Maravedi Financial Solutions was merged into Financial
the VisionPLUS and Capstone systems is on track for the Services during the year in order to leverage its product
end of the 2011 calendar year. The systems are piloted in development capability with Financial Services’ expertise
11 stores during November 2011, followed by the expected and infrastructure. The expanded Financial Services
conversion of all remaining stores in the Furniture Retail product development team has the relevant expertise to
environment by February 2012. Having implemented the extend its product development beyond Furniture Retail,
solution throughout the retail environment, the Group will into the recently acquired SteinBuild and Unitrans Auto
have an excellent distribution and product management businesses. These present attractive opportunities for
capability for its new financial services products with a Financial Services to extend its offering to a wider
single customer view, ensuring not only effective exposure spectrum of customers’ purchases. Accordingly the Group
management internally, but a sound foundation to will now be positioned to provide innovative financing
individually manage each customer across products and solutions for our mass-middle market customers’ homes
retail chains. and home improvements as well as providing non-
traditional financing solutions for an underserviced
Financial Services’ business intelligence and decision
segment of the vehicle financing market.
support systems will ensure the successful launch of new
products by treating each customer as an individual,
Performance
ensuring individualised solutions ranging from interest rate,
fees and insurance options, based on individual needs and Although the industry has shown a slight deterioration in
payment performance over time. This will be achieved approval rates on new credit applications, Financial
through segmented acquisition and account management Services’ recent investments to improve its credit risk
strategies, using its decision technologies, Blaze Advisor and assessment systems, enabled it to segment the market and
TRIAD account management. provide credit to underserviced segments of the market.
This supported the revenue growth, which is particularly
Although the recently implemented Consumer Protection
pleasing given the lower average interest rates on the
Act did not have a direct impact on Financial Services, the
debtors’ book and that most loans granted in a higher
division was central to the Group’s compliance initiatives,
interest rate environment have now matured. The launch of
which affected Furniture and Cash Retail more severely.
personal loans across all Furniture Retail branches in
These also support JD Group’s Art of Service initiatives,
January 2011 contributed to the increase, with the book
spanning all operations. With Financial Services’ centralised
growing to R374 million by year end.
contact centre, all customer product or financial services
JD Group » Integrated report 2011
67
The vintage curves stabilised during the year providing Financial Services will also continue to monitor internal
evidence that the decisions taken with regard to efficiencies to increase its ROCE towards the 25% target.
investments in credit vetting and risk management systems The investment in new systems will not only unlock further
in the last three years were proving effective. productivity gains, but will also drive down debtors costs.
As the division provides evidence of the quality of its
Sustainability debtors book, it will become better positioned to secure
The role of Financial Services in preventing crime and fraud more attractive funding rates, thereby increasing its returns.
in South Africa was recognised when it won the Southern Completing the implementation of the loan management
African Fraud Prevention Services Platinum Award for active and debt origination systems is a high priority in support of
participation and contribution to fraud prevention in South the division’s sustainable growth.
Africa. In particular, an employee won the Southern African
Ramping up the rate of new product development has been
Fraud Prevention Services Gold Merit Award for excellent
prioritised. Following on the successful launch of personal
work done towards fraud prevention.
loans in 2011, Financial Services has fine-tuned its capability
During the year, Financial Services was the first division to vis à vis new product development. It will maintain its
implement the Group’s new HIV policy that was revised and cautious approach to new credit, underpinned by its credit
brought in line with local and international best practice. vetting techniques, to expand on this offering in various
Health testing was made available to its 2 127 employees at segments of the Group’s client base.
its sites during August 2011.
Over the next 12 months we will aggressively roll out
dedicated Financial Services kiosks within the current
Priorities and outlook
Furniture Retail stores. While we currently have Financial
While the consumer will undoubtedly remain under
Services representation in every branch, the intent is to
pressure in the year ahead, Financial Services is well
formalise the area within each store and to introduce a
positioned to extend its strong performance of the last
more intimate Financial Services interaction. We anticipate
three years.
rolling out between 150 and 250 kiosks over the next
The benefits of its significant investments are expected to 12 months.
further gain momentum in 2012 as it capitalises on its
systems to service existing customers, while the credit
vetting tools should further enhance the quality of its book.
Integrated report 2011 « JD Group
68 Operational review
Review of operations New Business Development – Blake
Howard Blake
Chief Executive Officer
Blake Executive committee
Howard Blake, Michael Miller, Tracey Swart, Mark Parker, Dave Holding and De Waal Muller.
Non-financial highlights
» Retained leading position in debt collections.
» E-Commerce division launched to provide multi-channel solutions.
Material issues covered in this section
» Blake’s motivated employees have a direct impact on the conversion rate
30 % Return on capi- that is a measure of the effectiveness of its services to clients. With its highly
tal employed
incentivised reward structure and extensive training programmes, the division
KPI exceeded
has developed a strong track record in a number of key industry sectors.
» A sustainable business is maintained through its innovative and tailored
solutions, ongoing training programmes and the constant renewal of its
100 % Strong profit products and services. An E-Commerce business unit was launched during
growth from the year to ensure Blake’s ability to interface with customers across multiple
core business
underpinned by channels and media.
solid cash flow » Its corporate social investment initiatives comprised its established call
centre learnership partnership with government that provided opportunities
to approximately 1 000 young people in the 2010 calendar year and is
scheduled to continue through to 2012.
» Blake has effective risk management processes that enabled it to effectively
mitigate its identified risks relating to all areas of governance. In particular, the
IT division complies with the stringent regulatory standards of clients in the
New Business Development – Blake at
a glance financial services and retail sectors.
2011 2010
Revenue (Rm) 245 267
Operating expenses (Rm) 215 252
Operating profit (Rm) 30 15
Return on capital
employed (%) 30 21
JD Group » Integrated report 2011
69
Enabled by its entrepreneurial approach, Blake continues to extend its business
model to sustain growth. It recently established several new business lines
including an E-Commerce division that provides multi-channel solutions. With
its strong track record in key market segments and these new products, the
performance it delivered in 2011, is sustainable.
Introduction Overview
Blake develops tailored contact centre sales and service During the year under review, Blake continued to focus on
solutions that generate results by understanding and entrenching the sustainability of its value proposition by
embracing changes in the manner in which consumers shifting its focus from a service oriented business that sells
interact. It leverages its highly skilled people, technology and a value add, to providing tailored and targeted solutions
business intelligence platforms to develop innovative comprising products, services and intellectual capital that
solutions that assist its clients in engaging with their satisfy its clients unique requirements.
customers in an ever-evolving environment.
Blake was rebranded to ensure its relevance against the
The division is highly entrepreneurial and continually rapidly changing business landscape. Its company’s web
enhances its core service offerings while also developing site, www.blake.co.za was renewed to integrate it as an
products to benefit from identified opportunities. interactive business tool, facilitating business activity while
Accordingly it has developed a leading market position in also providing information to prospective clients.
key segments including debt collection, inbound and
Blake’s business model is people intensive and as such,
outbound sales, business process outsourcing, customer
it has invested in extensive training and development
service support, social media solutions and E-Commerce
programmes as well as incentivising all of its employees to
conversion optimisation solutions. These products and
ensure a motivated workforce, especially as the skills in the
services are supported by a team of bespoke systems
call centre industry are highly mobile.
developers and intelligent data solutions experts.
The majority of training is conducted electronically and
Underpinned by its strong offering and track record in core
e-learning programmes have been implemented throughout
segments, Blake delivered a strong performance, with
the organisation. These enable Blake to rapidly train school
substantial operating profit growth and improved cash flow.
leavers to become qualified client facing agents, including a
highly successful learnership programme with government.
Integrated report 2011 « JD Group
70 Operational review
Review of operations New Business Development (continued)
Training encompasses both the softer skills required of call Performance
centre agents as well as client specific training to ensure a
Blake delivered strong profit growth from its core activities.
thorough understanding of their specific products and
Its pre-tax profit showed threefold growth and translated
services. To this end, training is conducted for each
into strong cash flows. The improved performance was
individual client campaign. Leadership training has been
based on more effective and efficient utilisation of its
heightened at the management level to ensure sufficient
contact centre infrastructure as well as a stringent focus on
executive capacity to support growth.
cost reduction and control. All business units are now
The performance of Blake on individual customer delivering sustainable profit.
campaigns is directly measurable by the conversion rates,
In particular, Interactive Solutions, a systems development
regardless of whether these relate to new product sales,
house that provides customised expert systems for the
debt collection or customer services. Peer group contact
credit, risk and sales contact centre environments more
centre performance rankings are conducted industry-wide,
than doubled its pre-tax profit. Metonymy, a business unit
enabling Blake to monitor its services. For example, in debt
offering intelligence-based profiling solutions, continued its
collection that comprises a significant portion of its
turnaround, reporting a stable revenue base. A new service,
business, Blake is an industry leader on the majority of its
providing insurance claim investigation services was
client engagements. This has over time, enabled it to further
established during the year, making a contribution to
enhance its market share in the segment.
Blake’s overall performance.
Blake embraces high standards of corporate governance.
Meaningful engagement with internal audit, Audit Sustainability
committee and board structures ensure the sustainability
Blake has partnered with government’s Services Seta to
of its business. Regular sessions are held on assessing
provide call centre learnerships for school leavers. During
and controlling all risks in the business and more recently,
the 2010 calendar year the opportunity was extended to
a strong emphasis has been placed on ensuring compliance
approximately 1 000 young people although there were
with the recommendations of King III and compliance with
limited opportunities to sponsor further learnerships in
the new Companies Act.
2011. Blake continued to work with government during the
In support of the Group’s risk management parameters, year and is progressing with an opportunity to extend the
Blake has evaluated its top risks. To ensure the quality of programme to approximately 2 000 people in 2012. This is
service to clients, it has addressed all the key governance viewed by Blake not only as an initiative that enables it to
risks associated with its IT platforms and systems. It attract and retain skills, but from a broader perspective, as a
complies with the regulatory and legislative standards of its socio-economic investment contributing to the long-term
clients across a number of highly regulated industries sustainability of the industry in South Africa.
including banking, insurance, cellular and retail industries.
JD Group » Integrated report 2011
71
Priorities and outlook
Blake has recognised its clients’ increasing need to provide
a quality interface with customers across multiple channels,
which is in line with global trends. The proportion of
customers who interact with contact centre agents purely
by means of inbound and outbound calls is rapidly
declining. To meet this demand, Blake has established a
fully functional in-house E-Commerce business unit, which
will add multifaceted solutions to Blake’s existing business
for its established client base in addition to securing new
business. This business unit has already developed a unique
social media strategy that is expected to drive future growth
to Blake’s local and international client base.
With its highly skilled workforce, good track record of client
service and its continual commitment to high governance
standards, all of Blake’s business units are well positioned
to deliver a strong performance in 2012.
Integrated report 2011 « JD Group
[ C O M PA N Y ]
Sustainability and governance
[ With a variety of strong brands, the Group is welll positioned to
leverage the growth platform as demand recovers ]
demaand
74 Sustainability and governance
Sustainability and stakeholder review
Introduction underestimated. Our existence and future profitability can
This Sustainability Report forms an integral part of the only be achieved with the continued support of our
Group’s integrated report. In this report, the Group customers and the communities in which we operate.”
endeavours to provide a transparent, accurate and integrated
perspective of its sustainability philosophy by covering not Accountability and assurance
only its economic performance, but also portraying the scope The board has mandated the Audit committee to oversee
of the Group’s associated social, environmental and sustainability reporting within JD Group and the Finance and
governance initiatives. The emphasis is on the link between Corporate Affairs Director (Ian Thompson) is the accountable
the Group’s financial and non-financial performance, in an executive board member. The Audit committee has
effort to demonstrate how these factors interacted and reviewed the disclosure of sustainability matters in the
influenced the business during the past year. The Group integrated report and found them to be accurately reported
views the integrated reporting process as an evolutionary and not in conflict with the financial disclosures. It
journey that will evolve as global developments in this field furthermore recommended that management is not
mature. The Group has adopted the Global Reporting required to involve external third-party assurance providers
Initiative’s (GRI) G3 Index for reporting purposes however, in this early stage of the Group’s sustainability journey.
reporting has been based on a substance over form principle, Management expects that the status of this report is at
in that sustainability issues that are not considered material least at the G3 C-level.
to JD Group’s business have not been disclosed. The Group has not formulated an overarching Sustainability
Policy, however, over the years it has adopted a number of
Role of the board and the overarching sustainability-related policies such as a Transformation
philosophy Policy, an HIV/Aids Policy, an Ethics Policy, a Gifts Policy, an
JD Group is committed to creating long-term sustainable Anti-fraud Policy, a Risk Policy and a Health and Safety
stakeholder value through ethical business practices, Policy. These policies are aligned to the triple-bottom line
providing employment, minimising environmental impacts aspects and support the Group’s business strategy. In
and promoting social and economic development. The board addition, it has commenced building formal reporting and
regards JD Group as integral to the South African society and monitoring structures for measuring and verifying its future
therefore acts as a responsible citizen in its social, sustainability efforts. The Company also obtained advice
environmental and economic interactions with stakeholders. from our independent advisors, KPMG on the most suitable
Decisions take cognisance of the impact on sustainability. sustainability framework to be implemented and the most
Current needs are evaluated to ensure that the ability of appropriate reporting format, which is the product of this
future generations to meet their needs is not compromised. report.
However, as much as the Group acknowledges that social
transformation is important to redress the unfair practices of Review of stakeholder engagements and
the past and that sustainability ensures its future wellbeing, initiatives
JD Group’s business perspective remains aligned first and
Stakeholders
foremost with the expectations of its shareholders whose
The Group has identified the following as its key
capital it manages, because informed investors assess the
stakeholders:
quality and sustainability of the Company’s economic
performance as most essential in this triple-bottom line
» shareholders (and potential investors)
accord – and as such, anti-competitiveness is not tolerated » the board of directors
in any shape or form. » employees (other than executive directors)
The philosophy of leadership, sustainability and corporate » customers (and potential clients)
citizenship is core to JD Group’s own strategy and evidenced » suppliers
by the statement of its Chairman, David Sussman: “As one of » organised labour
the leading furniture retailers in South Africa, JD Group » government and regulators
embraces any initiative aimed at ensuring the future
» communities
prosperity of our country, as well as that of the Group. The
» other individuals and entities that engage with the Group
importance of transformation and upliftment of the
on a regular basis.
communities in which we conduct our business cannot be
JD Group » Integrated Report 2011
75
Wealth creation – various beneficiaries Shareholders benefited with a total dividend for the year of
200 cents per share. In addition, 2,8% of the profit was
The Group’s primary purpose is to create and generate
allocated to the Group’s corporate social investment (CSI)
sustainable wealth for the benefit of all stakeholders. This
budget, amounting to R20 million, which will be applied in
can only be achieved by maintaining profitable business
the 2012 financial year to benefit communities. As a result
operations and ongoing engagement with stakeholders. It
of the profits generated and the resulting payment of taxes
requires a continuing commitment to satisfy consumers’
to SARS, the government benefited handsomely. During the
needs, while pursuing persistent and satisfactory profit
year, staff members received market-related salary
growth, through both organic and non-organic strategies.
increases, commissions and performance-based incentive
For the year ended 31 August 2011, the Group generated
payments. The value added statement presented below is
satisfactory profit and made further progress towards
testimony to the value created by the Group during the year
achievement of its strategic goals, as stated on page 10.
under review.
Attributable earnings for the year amounted to R699 million.
Group value added statement
2011 2011 2010* 2010
Rm % Rm %
Revenue 15 741 12 590
Investment income 5 4
Finance income 65 73
Equity accounted profits 2 —
15 813 12 667
Cost of merchandise, services and expenses (11 895) (9 477)
Value added 3 918 100,0 3 190 100,0
Distributed at follows:
Employees
Salaries, commissions and other benefits 2 550 65,1 2 158 67,6
Government
Taxation, assessment rates and other levies (34) (0,9) 395 12,4
Providers of capital 551 14,1 436 13,7
Distribution to shareholders 391 10,0 255 8,0
Finance costs 160 4,1 181 5,7
Reinvestment in the Group 851 21,7 201 6,3
To provide for depreciation 199 5,1 149 4,7
To provide for deferred taxation 344 8,8 (194) (6,1)
Reinvestment for expansion 308 7,8 246 7,7
3 918 100,0 3 190 100,0
Statement of money exchanges with government
Assessment rates and taxes 27 21
Company taxes (80) 357
Employees’ tax deducted from remuneration paid 249 211
Net value added tax and general sales tax collected 179 106
RSC and other levies 19 17
394 712
Value added is the amount of wealth the Group has created by purchasing and selling its merchandise. The statement above
shows how this wealth has been distributed. The calculation takes into account the amounts retained and invested in the Group
for the replacement of assets and the development of operations.
*Restated to reflect the discontinued operation (Abra).
Integrated Report 2011 « JD Group
76 Sustainability and governance
Sustainability and stakeholder review (continued)
Shareholders Group’s directors hold 0,3% of the issued capital. From a
A detailed analysis of the Group’s 4 016 shareholders at government, institutional and fund manager investor
31 August 2011 in various prescribed categories is set out in perspective, the Public Investment Corporation (PIC) and the
the table below. It is noteworthy that approximately 77,9% Government Employees Pension Fund count among the
of shares are held locally, and that 72,1% of investors are Group’s key shareholders, with a joint stake in excess of
private investors, holding 1,2% of the shares in issue. The 20%. Open communication lines and a constructive working
relationship exist between the PIC and top management.
Analysis of shareholders
Number of % of Number of % of
shareholders total shares total
Geographical location of shareholders
South Africa 3 817 95,0 171 259 522 77,9
United States of America 50 1,3 38 447 882 17,5
United Kingdom 37 0,9 7 492 463 3,4
Namibia 75 1,9 1 770 118 0,8
Luxembourg 5 0,1 356 346 0,2
Other 32 0,8 503 669 0,2
4 016 100,0 219 830 000 100,0
Size of holding
1 – 1 000 2 779 69,2 913 211 0,4
1 001 – 10 000 810 20,2 2 449 343 1,1
10 001 – 100 000 252 6,3 10 197 264 4,7
100 001 – 1 000 000 143 3,5 47 456 687 21,6
Over 1 000 000 32 0,8 158 813 495 72,2
4 016 100,0 219 830 000 100,0
Category of shareholders
Banks 69 1,7 36 891 061 16,8
Brokers 37 0,9 5 414 250 2,5
Insurance companies 32 0,8 10 097 734 4,6
Investment companies 13 0,3 4 243 919 1,9
Mutual funds 155 3,9 30 500 548 13,9
Other companies and corporate bodies 224 5,6 71 838 500 32,7
Other managed funds 428 10,6 2 452 232 1,1
Pension funds 163 4,1 51 330 724 23,3
Private investors 2 894 72,1 2 751 505 1,2
Share incentive scheme 1 0,0 4 309 527 2,0
4 016 100,0 219 830 000 100,0
Non-public shareholders
(included above)
Directors 3 0,1 760 000 0,3
Share incentive scheme 1 0,0 4 309 527 2,0
4 0,1 5 069 527 2,3
Number of
shares % held
To the best of the Company’s knowledge:
Beneficial shareholders with a holding of 5% or more
Steinhoff Africa Holdings (Pty) Ltd 63 403 828 28,8
Government Employees Pension Fund 26 509 553 12,1
89 913 381 40,9
Fund managers with a holding of 5% or more
Investec Asset Management (Pty) Ltd 23 398 228 10,6
Public Investment Corporation 18 256 755 8,3
41 654 983 18,9
JD Group » Integrated Report 2011
77
The Group recognises the importance of fostering good under review. Shareholders are continuously informed of
relationships with its shareholders and the value of clear, the Group’s business performance through interim results
transparent and unambiguous communication. Direct announcements and at least two trading updates per year.
communication with shareholders and the market takes
Other community and national communication channels
place via this integrated report, the Group’s results
such as radio, press and the television media, from
announcements, shareholder meetings, communiqués
time-to-time hold interviews and conduct business
dispatched to registered shareholders and through the
performance reviews that keep the broader stakeholder
media. At least two annual investor road shows and frequent
audience well informed of the Group’s actions.
one-on-one investor meetings provide a platform for
During the past year the Group has invested about
directors to keep the major shareholders informed of its
R390 million in state-of-the art IT systems. This initiative will
plans and progress towards achieving its strategic targets.
continue in 2012 with a further investment of approximately
The annual general meeting provides a forum for any
R100 million to ensure that the Group retains its competitive
shareholder, and especially the minority shareholders and
advantage for realisation of sustainable future profits.
shareholder activists, to interrogate the board on its conduct
in the presence of the media. All issues raised at the annual
Employees
general meeting were adequately addressed subsequent to
the meeting. Employment and benefits
As a committed South African citizen, the Group employs
The Group also makes use of the JSE Limited’s SENS to
and provides security and stability to 24 783 staff members
disseminate trading updates and other events of
in its South African operations. All labour resources in South
shareholder interest to the investor community at large. In
Africa are sourced locally in terms of B-BBEE regulations.
line with the needs of the electronically conscious investor,
The Group also employs 935 individuals outside of South
the Group’s website (www.jdgroup.co.za) provides wide-
Africa’s borders.
ranging and indepth information relating to the Group and
its activities. From this year onwards, the Group will publish The table below summarises the Group’s employment
its detailed annual financial statements electronically on the statistics per Patterson grade level and it can be seen that
website. Together with the integrated report, this will the growth in the business has directly benefited society as
provide stakeholders with a comprehensive view of both the Group employed 5 676 more employees this year than
the financial and non-financial performance during the year in the 2010 financial year.
Patterson Total Total
Occupational levels grade RSA Non-RSA 2011 2010
Top management F 2 — 2 2
Senior management E 106 10 116 49
Professionally qualified and experienced specialists
and mid-management D 1 427 29 1 456 862
Skilled technical and academically qualified workers,
junior management, supervisors, foremen and
superintendents C 7 536 192 7 728 5 514
Semi-skilled and discretionary decision-making B 12 504 582 13 086 11 034
Unskilled and defined decision-making A 3 208 122 3 330 2 581
Total 24 783 935 25 718 20 042
Integrated Report 2011 « JD Group
78 Sustainability and governance
Sustainability and stakeholder review (continued)
Statistics on disabled staff Statistics on staff age groups (as per SEATA
reporting requirements)
Number of
disabled Group
Organisation employees Age group %
JD Group 15 Under 35 52
Blake 0 35 to 55 42
Maravedi 2 Above 55 6
The Group’s employee turnover ratio per region and age group is depicted in the table below. The statistics show clearly that the
Group staff turnover rates have reduced during the past year.
Females as % of total turnover Males as % of total turnover
Region Age group 2010 2011 2010 2011
RSA 20 to 30 30,2 28,7 27,3 29,6
30 to 40 10,3 2,7 9,4 2,7
40 to 50 4,8 5,6 4,3 5,3
>50 3,7 3,9 3,4 3,2
Outside RSA 20 to 30 1,5 1,6 1,0 2,6
30 to 40 2,0 1,9 1,2 1,7
40 to 50 0,5 1,2 0,2 5,4
>50 0,1 2,3 0,1 1,6
Remuneration philosophy – overview » to demonstrate to all stakeholders that the remuneration of
In accordance with principles 2.25, 2.26 and 2.27 of King III in senior executives of the Group is set by a committee of the
South Africa, JD Group has formulated and maintains a holistic board in a fair and responsible manner
remuneration philosophy and a Remuneration Policy, the key » to ensure that remuneration decisions are impartial as the
elements and constituents of which are summarised below. committee members have no personal interest in the
JD Group subscribes to and applies the recommended outcomes of their decisions and give due regard to the
principles of good governance, as well as the methodology, interests of the shareholders and to the financial and
philosophy and transparency recommendations in the code. commercial health of the Group
JD Group rewards its employees and executive directors fairly
» annually appraise the performance of the CEO
responsibly and consistently according to their roles and each
» annually review policies for senior executives’ and directors’
individual’s work.
remuneration
JD Group Remuneration committee » determine specific remuneration packages for executives of
The JD Group Remuneration committee (the Committee) plays the Company
a major role in the Group’s remuneration framework and » approve the design of short-term incentive schemes,
approach. A key purpose of the committee is to assist the including determining targets and participation thresholds
board in fulfilling its responsibilities in establishing formal and » approve the design of long-term incentive schemes,
transparent policies for remuneration and talent management. including determining the allocation criteria and
The members of the committee are Dr Len Konar performance conditions
(Independent Chairperson), Martin Shaw (Chairman of the » ensure remuneration for executives is based on
JD Group Audit committee) and Vusi Khanyile (the Group’s performance and rewards
Lead Independent Non-executive Director).
» recommend to the board, the fees to be paid to each
The committee’s terms of reference include the following key non-executive director for services on the board and its
responsibilities: committees, including transformation and B-BBEE
» annually review the Group’s remuneration strategy, » review and monitor progress in people management
approach and the Remuneration Policy, with specific » prepare an annual remuneration report for inclusion in the
reference to senior executives’ and directors’ remuneration Company’s integrated report (this report)
JD Group » Integrated Report 2011
79
The committee also makes use of the services of reputable been approved by executive management or the
survey houses to advise on executive remuneration and to Remuneration committee (as the case may be) a high-
provide advice on market data, remuneration trends, retention performing individual that may have specific scarce skills that
strategy and performance related pay. Specialist benchmark is critical in the business of JD Group may be positioned at or
exercises that survey companies and jobs that are relevant, above the maximum of the scale. As a consequence, there will
are used. be differentiation in remuneration between employees
performing similar roles at the more senior levels in the
The committee is supported by JD Group’s well-established
organisation, directly linked to the individual’s performance,
Human Resource Department at head office, which is
skills, experience and the value that he or she adds to the
responsible for the implementation and management of
organisation.
human resources and remuneration strategies, policies and
practices across the Group’s operations. The guaranteed remuneration of JD’s employees and executive
directors is competitive in the external marketplace. Total
The CEO and the Executive Chairman from time to time attend
packages are referenced to the external market’s guaranteed
meetings by invitation in order to advise on the remuneration
package figures based on the retail industry’s 50th and
of executives. They do not attend or participate in any
75th percentiles. When referencing the external market,
discussions or decisions relating to their own remuneration.
a competitive guaranteed remuneration approach is followed
The committee meets at least twice a year. for high-performing employees.
(More detail of the Remuneration committee and its role The JD Group grading structure is aligned to general practice
and operations are set out on page 122 of the Corporate in the retail industry which is known for its utilisation of the
Governance Report.) Patterson classic grading structure. This grading structure is
used as the basis from which the pay structures and scales
General overview of remuneration strategy are developed, which seek to obtain the balance between
JD Group’s remuneration philosophy is designed to attract, affordability and competitiveness.
develop and retain talented people who are required to
JD Group is competing for skills and strives to attract, motivate
implement the overall JD strategy and create long-term value
and retain the right employees. All reward practices being
for shareholders. The remuneration strategy for executives is
applied by JD Group are in compliance with remuneration and
based on principles of retention of key individuals and critical
labour related South African law.
skills to drive performance to achieve the Group’s strategy. The
alignment of performance and shareholders’ interest is driven Elements of executive remuneration
through guaranteed pay and short and long-term incentives. Total guaranteed pay (TGP) which includes benefits, is subject
A significant portion of executives’ total potential to an annual review by the committee. The targeted pay
remuneration is performance related in order to drive the right position for guaranteed total package is aimed between the
behaviour to optimise business performance. median and upper quartile when benchmarked against major
South African retail and non-retail companies, and is adjusted
Pay-for-performance is an overriding guiding principle in the
according to an individual’s performance and responsibility.
remuneration approach for senior employees, and especially
executive directors. This approach, together with a Long-term incentive share schemes are deigned to align the
performance-based variable pay programme, ensures that objectives of executives with those of shareholders and
internal and external equity in fixed remuneration is therefore ensure sustainable long-term performance. Shares
maintained while performance is rewarded appropriately. are considered an essential element of reward and represent
JD Group invests in human capital on the basis of affordability a material part of an executive’s remuneration package. It also
and seeks to obtain a good return on this investment by using ensures that the Group attracts and retains core competencies
all elements of total reward. In order to find a balance required for formulating and implementing the Group’s
between the need to employ staff at cost-effective rates and business strategies.
the need to compete for scarce skills and top performers, the
Share purchase and option scheme – there are a number of
market median is regarded as the most appropriate market
participants in the old share option scheme who still hold
reference point and this point is used as an anchor around
share options that will vest over time, up until June 2016.
which remuneration and employee pay scales are built. The
scales are wide enough (50% spread) to allow for Grants of share appreciation rights (SARs) are conditional
differentiation based on performance and scarce skills, where rights to receive JD Group shares equal to the value of the
applicable. The maximum of the scales represents a reference difference of the share price at the time that the rights were
point where, if exceeded, can lead to a violation of the reward granted and the share price when the rights are exercised.
philosophy and constitute an unsatisfactory investment in SARs can only vest if performance conditions have been met
human capital. However, in certain instances where it has over a specified period of not less than two years. In the event
Integrated Report 2011 « JD Group
80 Sustainability and governance
Sustainability and stakeholder review (continued)
that the performance conditions have not been met, these will Remuneration Policy
be retested twice in the years thereafter at higher The Remuneration Policy (the Policy) is applicable to all
performance thresholds. If not vested after these tests, the JD Group employees, including the executive directors on the
grant will lapse. The performance conditions are determined Board. The purpose of the Policy is to provide the philosophy
by the board after consultation with the Committee and
and methodology in all matters pertaining to employee
disclosed annually in the integrated report.
remuneration and reward and is primarily aimed at servicing
Short-term incentives of executives, being the variable the business and ensuring alignment between business
remuneration, is based on achievement or outperformance of operations and shareholder expectations. The Remuneration
the budget and certain performance targets relating to Policy follows the recommendations of King III, and is based
headline earnings per share. on the following principles:
Executive directors’ service contracts » that all remuneration practices are aligned and designed to
The executive directors’ service contracts do not contain enable achievement of the Group’s strategic business
notice periods exceeding 12 months. objectives
Non-executive directors’ fees and emoluments » that all decisions are applied consistently
Non-executive directors receive fees for rendering services to » that performance is formally reviewed twice a year in line
the Company and board committees. They do not receive with JD Group’s performance improvement strategy, which
short-term incentives and do not participate in any long-term forms an integral part of the Group vision to be ‘world-
incentive share scheme. class’
The fees for non-executive directors are recommended by the » that all salaries are reviewed annually, based on a formal
Committee to the board for their approval, after they have appraisal of performance, however, an annual increase is
been benchmarked in the retail and non-retail market and not guaranteed. (A triangulated approach is applied to
once having received and considered input from the executive determine whether an increase will be approved based on
directors. The board recommends the forward looking fees to market conditions, business performance and individual
shareholders for approval at the annual general meeting. performance)
The proposed non-executive directors’ fees for the 2012 » that all benchmarks and grading is set at levels that are
financial year are set out in the notice to the annual general competitive and relevant within the market and the specific
meeting on pages 172 and 173. business operating division.
Directors’ remuneration
Share-
Basic Retirement Medical Variable based
salary Allowances contributions contributions remuneration* payments Total
2011
Executive directors’
remuneration
ID Sussman 3 404 293 291 480 593 892 23 336 3 310 000 ** 7 623 001
AG Kirk 3 074 737 297 794 414 000 90 256 2 820 000 — 6 696 787
KR Chauke 1 279 629 223 260 164 520 31 948 745 000 — 2 444 357
Dr HP Greeff 1 433 905 223 260 187 920 24 484 1 282 500 378 250 3 530 319
ID Thompson 1 562 034 192 840 206 100 29 460 920 000 — 2 910 434
BJ van Rooy 1 499 213 189 280 241 692 15 096 1 396 046 — 3 341 327
12 253 811 1 417 914 1 808 124 214 580 10 473 546 378 250 26 546 225
Prescribed
officers***
A 1 220 940 177 240 159 480 — 1 280 000 — 2 837 660
B 572 992 64 280 88 305 7 756 1 023 900 — 1 757 233
C 1 345 342 208 980 167 400 28 114 1 257 500 78 400 3 085 736
D 1 471 141 208 980 164 737 45 890 697 500 — 2 588 248
4 610 415 659 480 579 922 81 760 4 258 900 78 400 10 268 877
JD Group » Integrated Report 2011
81
Share-
Basic Retirement Medical Variable based
salary Allowances contributions contributions remuneration* payments Total
2010
Executive directors
ID Sussman 3 015 486 291 480 593 892 22 828 1 146 000 5 430 039 10 499 725
AG Kirk 2 715 439 256 440 414 000 82 340 970 400 — 4 438 619
KR Chauke 1 088 182 192 840 164 520 29 704 554 880 — 2 030 126
Dr HP Greeff 1 251 658 192 840 187 920 22 828 554 880 604 400 2 814 526
ID Thompson 1 373 894 192 840 206 100 27 412 584 880 871 400 3 256 526
BJ van Rooy (appointed 462 698 57 596 68 275 — 211 500 — 800 069
1 May 2010)
G Völkel (resigned
30 April 2010) 2 796 709 96 420 100 074 6 920 2 554 000 2 638 266 8 192 389
12 704 066 1 280 456 1 734 781 192 032 6 576 540 9 544 105 32 031 980
Prescribed
officers***
A 1 058 440 157 080 159 480 — 461 500 — 1 836 500
B 1 619 662 192 840 264 916 22 582 509 460 — 2 609 460
C 1 130 720 174 600 167 400 27 280 561 500 — 2 061 500
D 1 342 410 174 600 164 737 44 408 531 500 — 2 257 655
5 151 232 699 120 756 533 94 270 2 063 960 — 8 765 115
The top three earners outside of the directors and prescribed officers earned an average of R3 232 356 (2010: R2 077 664).
*Cash amount paid during the period.
**500 000 share options were exercised by purchasing the shares at the option price.
***Prescribed officers have been defined as those that exercise general executive control over a significant portion of the business, and are not directors of
JD Group Limited.
Board Audit Risk Remuneration Nominations Other
members committee committee committee committee services Total
2011
Non-executive
directors
VP Khanyile 232 500 — — 6 000 6 000 3 000 247 500
Dr D Konar 250 000 60 000 60 000 62 000 6 000 12 000 450 000
IS Levy† 125 000 — — 15 000 — 3 000 143 000
M Lock 250 500 — — — — 3 000 253 500
MJ Shaw 250 000 120 000 60 000 36 000 6 000 9 000 481 000
JH Schindehütte* 256 000 — — — — 630 000 886 000
GZ Steffens 250 000 60 000 112 000 — — 6 000 428 000
1 614 000 240 000 232 000 119 000 18 000 666 000 2 889 000
*Mr Jacques Schindehütte acted as chairman of the ad hoc Investment committee, overseeing the acquisition process of Unitrans Auto and SteinBuild.
†
Mr IS Levy passed away on 5 February 2011.
Integrated Report 2011 « JD Group
82 Sustainability and governance
Sustainability and stakeholder review (continued)
Nomina- Share-
Board Audit Risk Remuneration tions Other Sub based
members committee committee committee committee services total payments Total
2010
Non-
executive
directors
(continued)
VP Khanyile 250 000 — — — — — 250 000 — 250 000
ME King 125 000 60 000 — — — — 185 000 — 185 000
Dr D Konar 250 000 — — — — — 250 000 — 250 000
IS Levy† 250 000 — — — — — 250 000 — 250 000
M Lock 250 000 — — — — — 250 000 1 861 604 2 111 604
MJ Shaw 250 000 30 000 — 25 000 — — 305 000 — 305 000
GZ Steffens 365 500 21 000 121 000 — — — 507 500 — 507 500
1 740 500 111 000 121 000 25 000 — — 1 997 500 1 861 604 3 859 104
Directors and prescribed officers share options/share appreciation rights units held at year end
Offer date and price ID Sussman AG Kirk KR Chauke Dr HP Greeff ID Thompson BJ van Rooy A B C D
2011
Executive directors and
prescribed officers
Share options held at
year end*
20/02/2003 – R16,19 375 000
10/09/2003 – R28,03 5 000
24/05/2005 – R56,25 60 000 18 750
07/06/2005 – R54,00 20 000 20 000 16 000
30/11/2005 – R72,50 194 903
07/02/2007 – R79,83 30 000 20 000 25 000 25 000
31/07/2007 – R63,63 75 000 30 000 50 000 30 000 20 000 25 000 60 000
26/02/2008 – R37,21 200 000 100 000 50 000 50 000 50 000 40 000 40 000
Share appreciation rights
held at year end**
21/08/2009 – R41,71 200 000 65 000 65 000 65 000 40 000 65 000 65 000
26/02/2010 – R43,03 200 000 65 000 65 000 65 000 50 000 40 000 50 000 40 000
24/02/2011 – R51,30 265 000 175 000 50 000 50 000 50 000 50 000 40 000 50 000 40 000
900 000 974 903 280 000 300 000 305 000 100 000 140 000 276 000 263 750
Exercised during the period
– Quantum/average price
– 2011
25/02/2004 – R36,90 5 000/
R52,58
19/05/2004 – R35,10 500 000/ 25 000/
R35,10 R50,23
Share appreciation rights
granted during the period
– 2011
24/02/2011 – R51,30 265 000 175 000 50 000 50 000 50 000 50 000 40 000 50 000 40 000
265 000 175 000 50 000 50 000 50 000 50 000 40 000 50 000 40 000
Mr I S Levy passed away on 5 February 2011.
†
JD Group » Integrated Report 2011
83
Offer date and price ID Sussman AG Kirk KR Chauke Dr HP Greeff ID Thompson BJ van Rooy A B C D
2010
Executive directors and
prescribed officers
Share options held at year
end*
20/02/2003 – R16,19 375 000 20 000
10/09/2003 – R28,03 5 000
25/02/2004 – R36,90 5 000
19/05/2004 – R35,10 500 000 25 000
24/05/2005 – R56,25 60 000 35 000 18 750
07/06/2005 – R54,00 20 000 20 000 16 000
30/11/2005 – R72,50 194 903
07/02/2007 – R79,83 30 000 20 000 25 000 25 000
31/07/2007 – R63,63 75 000 30 000 50 000 30 000 20 000 25 000 60 000
26/02/2008 – R37,21 200 000 100 000 50 000 50 000 50 000 50 000 40 000 40 000
Share appreciation rights
held at year end**
21/08/2009 – R41,71 200 000 65 000 65 000 65 000 40 000 100 000 65 000 65 000
26/02/2010 – R43,03 200 000 65 000 65 000 65 000 50 000 40 000 100 000 50 000 40 000
1 135 000 799 903 230 000 275 000 255 000 50 000 100 000 305 000 231 000 223 750
*Share options may be exercised in lots of 25% after two years from the date of offer and 25% every year thereafter.
**Share appreciation rights – vesting subject to performance criteria.
Offer date and price IS Levy‡ M Lock
2011
Non-executive directors
No share options were held by non-executive directors at year end.
2010
Share options held at year end*
02/05/2000 — R27,20 100 000 #
24/05/2005 — R56,25 20 000 ##
120 000 —
#
M Lock exercised 100 000 options at an average price of R46,00.
##
Options cancelled during the period.
Directors’ (and their associates) direct and indirect interest in shares of the Company
at the year end and 12 November 2011, the date on which the financial results were approved.
2011 2010
ID Sussman (indirect) 750 000 250 000
Dr D Konar (direct) 10 000 10 000
IS Levy (passed away 5 February 2011)‡ — 2 428
760 000 262 428
The options previously held by the late Mr IS Levy formed a part of his estate after his passing.
‡
There are no non-beneficial interests.
There have been no changes in the directors’ interest between the financial year-end and the date of this report.
Integrated Report 2011 « JD Group
84 Sustainability and governance
Sustainability and stakeholder review (continued)
Permanent employee benefits trustees, manage the fund. The appointed administrator is
Full-time employees reap the benefit of a healthy Alexander Forbes Financial Services (Pty) Ltd. The SA
employment relationship. In addition to a basic salary, other Commercial Catering and Allied Workers Union National
benefits include retirement fund, risk and medical aid Provident Fund (SNPF) is an umbrella fund in which a
benefits which are subsidised at differing levels, dependent number of employers participate in terms of a collective
upon an employee’s position and selection of benefit type. bargaining agreement with SACCAWU. Old Mutual Life
Assurance Company (South Africa) Limited (Employee
Retirement funds and medical aid
Benefits Industry Funds Unit Division) is the appointed
Approximately 95% of Group employees are members of a
administrator of this fund.
retirement fund in which the Group participates. The Group’s
The actuarial report indicates a satisfactory status.
full-time employees also have the right to belong to one of
two leading medical aid service providers which offer a Employees of the Group in Botswana and in Namibia belong
wide range of progressive and affordable medical and to various umbrella funds in these countries.
hospital plans.
Minimum wages and basic salaries
A summary of the key retirement funds are provided below: The Group participates in and is party to the sectoral
» the Alexander Forbes Retirement Fund (AFRF) is an determination which governs the wholesale and retail
umbrella fund in which employees of JDG Trading and sector in respect of minimum wages and conditions of
Connection Group Holdings have membership as a employment. The Group fully complies with the wages and
condition of employment. It comprises the following two terms and conditions prescribed by this regulation and
sub-funds: currently remunerates its employees at the “area A”
» the Alexander Forbes Retirement Fund (Pension and minimum wages within South Africa where the regulation is
Provident Sections): JDG Trading (Pty) Ltd; applicable. This does not preclude the Group from applying
» the Alexander Forbes Retirement Fund (Provident the rules regarding the other category areas in the future.
Section): Connection Group Holdings (Pty) Ltd. The ratio of basic salaries of males to females across all
categories and in all operating areas in the Group in South
Alexander Forbes Financial Services (Pty) Ltd is the
Africa is 98% and outside South Africa it is 106%. The
appointed administrator of the AFRF. This fund is
majority of the Group’s employees are covered by collective
managed by a professional board of trustees. In terms
bargaining agreements between the Group, organised
of the rules of the fund, each participating employer is
labour and bargaining unit employees. This year the
required to establish a management committee
bargaining unit employees received increases in excess of
comprising both employer-appointed and member-
the current inflation rate (see page 88 for a detailed
elected representatives. For JDG Trading there are four
discussion of organised labour related matters).
employer-appointed and four employee-elected
representatives. The employer-appointed representatives Training and development
are Johan Coetsee (chairman), George Annandale, The development of the Group’s employees is a high
Yondela Ndema and Richard Chauke. priority. The Group offers a host of programmes for skills
For Connection Group, there are three employer- development and lifelong learning that support the
appointed and three employee-elected representatives. continued employability of staff and assist them in
The employer representatives are Johan Coetsee, David progressing their careers. During the review period,
Miller and Natalie Smith. The management committee, employees were exposed to 500 456 hours of training. In
among other activities, monitors and reviews the selected addition, the Group sponsored a successful Basic
investment strategy, assists in the distribution of death Management Development Programme (BMDP), an
benefits payable and monitors continued participation Intermediate Management Development Programme (IMDP),
in the fund. and for selected employees with potential at corporate
» JD Group Defined Benefit Pension Fund has been closed to executive level, an Advanced Management Development
new entrants since October 1996. This fund is managed by Programme (AMDP) was presented.
a board of trustees. In terms of the rules four employer-
appointed trustees, namely Johan Coetsee (chairman),
George Annandale (principal officer), Richard Chauke and
Xavier Schatz, as well as four member-elected
JD Group » Integrated Report 2011
85
The Group’s key training and development statistics are set » Black males 11 (aged between 25 and 54)
out in the table below. » Black female 5 (aged between 30 and 39)
Total hours » Indian males 8 (aged between 25 and 32)
Employee category 2011 2010
» Indian females 8 (aged between 28 and 40)
Senior management » White male 2 (aged between 30 and 47)
(E1 and above) 1 136 672
» White female 2 (aged between 30 and 37)
Professionals (D1 – D5) 25 720 34 536
Skilled (C2 – C5) 70 800 178 578 The committee complies with the statutory requirements in
Supervisory (C1) 65 176 55 242 South Africa and serves as a representative and consultative
Sales (B5) 184 268 220 266 body that enhances Employment Equity (EE).
Semi-skilled (B1 – B4) 148 380 90 252 The Group is also a member of and maintains a sound
Unskilled (A3) 4 976 12 366 relationship with the Wholesale and Retail Sector Education
Total 500 456 591 912 and Training Authority (W&R SETA), the Bank Sector
Education and Training Authority and Services Sector
Education and Training Authority (Bank SETA), and makes
The Group has a formal bursary committee, comprising both
proactive contributions towards the development of tailored
management and organised labour representatives.
development programmes for the furniture and appliance
The committee assisted 194 (341) needy students during the
industry.
past financial year. An Employment Equity and Training
committee (EE&TC) operates in addition to the Bursary During the review period, JD Group distributed R1,2 million
committee. The governance body of the EE&TC comprises (2010: R1,1 million) in supporting young disadvantaged
employees from all categories across the Group, learners, while a further R932 000 was allocated to
represented by: employees and their children in the learning environment.
The table below reflects the statistics of the Group’s training
initiatives for the past year per race group and gender
category, as well as the financial value of the interventions.
Training interventions
Female Male
White Black Coloured Indian Total White Black Coloured Indian Total
2010 3 581 13 368 2 558 916 20 423 1 676 8 788 1 293 704 12 461
2011 1 895 9 162 1 439 1 856 14 352 1 464 5 136 761 972 8 333
Total
Total number of
number of training
PDI staff inter-
*PDI female total *PDI male total attended ventions
2010 16 842 10 785 27 627 32 884
2011 12 457 6 869 19 326 22 685
Key to table: PDI = previously disadvantaged individuals.
Integrated Report 2011 « JD Group
86 Sustainability and governance
Sustainability and stakeholder review (continued)
Transformation from an employee
B-BBEE scorecard
perspective
The Group supports the empowerment of previously
disadvantaged individuals and is committed to its own 2010 2011 2012 2013
transformation in order to meet the country’s imperatives to
transform the economy. Its transformation policy and
practices are aligned with relevant legislation, codes of good
practice and general best business practices. A board 1,90 11,47 13,00 15,00 100+ = 1 135%
1 Ownership
85+ = 2 125%
1
director oversees the Group’s programme of transformation, 3,80 4,46 5,29 6,50 Management
75+ = 3 110%
1 Employment
which focuses on addressing the inequalities of the past in equity
5,70 3,87 8,50 9,80
65+ = 4 100%
1
respect of race, age, disability and gender in the workplace. Skills
4,30 3,88 6,00 9,80 55+ = 5 80% development
Transformation is monitored monthly across the Group and
45+ = 6 60%
15,10 12,9 18,00 13,00 Procurement
reported to the Executive committee (Exco). Almost 80%
40+ = 7 50% Enterprise
(2010: 88%) of the total positions in the Group are occupied 15,00 15,00 10,00 9,80 development
30+ = 8 10%
Socio-economic
by previously disadvantaged individuals (PDIs). 5,00 4,02 5,00 3,30 30– = 0 0% development
50,80 55,60 65,79 67,2 Total
Transformation from a Broad-based Black Verified Verified Target Target
level 6 level 5 level 4 level 4
Economic Empowerment (B-BEEE)
perspective issued on 3 June 2011, where the designated employers
The Group has not entered into a B-BBEE ownership who submitted their 2010 EE reports were listed.
transaction and the current economic situation is not The Group has a targeted procurement strategy and
conducive to such a transaction. Consequently, the current progressively increases its procurement from companies
ownership score is derived from indirect shareholding, using that have made significant progress in the area of B-BBEE.
the flow through principles as contained in the B-BBEE The Group continues to engage with its suppliers to assist
Codes. them in becoming B-BBEE compliant or increasing their
In respect of the ‘management’ element of the scorecard, status. Based on the most recently verified scorecard by
two PDI females currently serve on the board, while four Empowerdex (for the 2010/11 financial year), JD Group
PDI males also hold directorships. During the year, the total improved from a level 6 to a level 5 contributor.
PDI representation on the board has increased from 31% to
Employee relations, ethical conduct and
42,9% at the date of this report.
human rights
In an effort to redress the current inequalities with regard to
The Group acknowledges the fundamental rights of
race, gender and disabilities, all recruitment and
employees to freedom of expression, association and
appointments are continually monitored, especially at senior
representation. Through its ethics policy and other related
management levels. Currently JD Group lags the
value-based policies, practices and processes, the Group’s
Employment Equity (EE) targets for senior and middle
employees uphold fundamental human rights, integrity and
management, however, proactive efforts are continually
ethical practices, which are regarded as the guiding
made to find suitable EE candidates. In this regard, the
philosophies defining the way business is conducted across
Group had exceptional success, which is reflected in the
the Group and not as a legislative requirement. Altogether
fact that 93% of all recruitment concluded in the period
4,08% (2010: 4,45%) of total employees have received an
1 September 2010 to 31 August 2011 resulted in EE
aggregate of 16 328 hours (2010: 15 192 hours) of training on
appointments. Non-compliance EE statistics are reported to
aspects such as diversity, the Group’s Disciplinary Code and
the Director of Transformation and to the Group CEO on a
processes, human resources administration, industrial
monthly basis. The Group’s reporting on EE for the 2010
relations, employee relations and other related subjects.
financial year was confirmed in the Government Gazette
JD Group » Integrated Report 2011
87
In addition, 46,16% (2010: 18,7%) of the total employee » Nil (2010: 4) written warnings
population collectively attended 185 736 hours (2010: » 1 (2010: 9) counselling sessions and verbal warnings
101 196 hours) of training in the organisation’s anti-
» Insufficient evidence was obtained on the remaining
corruption policies and procedures relating to fraud
66 (2010: 77) incidents, resulting in no action being taken.
detection and prevention, the National Credit Act (NCA),
The Group was party to 160 (2010: 153) CCMA cases during
Consumer Protection Act (CPA), the Financial Advisory and
the year of which 102 (2010: 90) of the cases were won,
Intermediary Services Act (FAIS), whistle-blowing procedures
13 (2010: 18) cases were lost and 45 (45) were settled.
and other brand-relevant internal risk policies and
procedures relevant to operations. Employees are expected The Group’s policies do not discriminate on the grounds of
to maintain high ethical standards and in this regard the race, age, disability, gender or religion and are monitored,
Group follows a zero tolerance approach in respect of tracked and reported on through the EE&TC. Given the
corruption or fraud incidents. Perpetrators are subjected to Group’s stance against abuse and violation of human rights,
the Group’s disciplinary procedures and practices. it has not experienced or received any reported or recorded
incidents of discrimination, child labour, forced or
During the year, it was targeted by various fraud syndicates.
compulsory labour or any other violation involving
In order to analyse the fraud incidents, these are split into
discrimination or rights of people. The Group is not aware of,
three sections, namely fraud, suspected fraud and
and will not support, any suppliers who conduct any such
attempted fraud (see table below). Suspected fraud refers to
practices. None of the Group’s operations restrict
a suspected loss to the Company. Many of these relate to
employees’ right to exercise freedom of association or
customers who disappear after taking delivery of a product
collective bargaining. No incidents of violations involving
purchased on credit. Attempted fraud refers to minor losses
rights of indigenous people have been reported or recorded.
where the fraud was prevented. The main category of fraud
relates to identify fraud perpetrated by deceitful customers
Employee communication
and/or syndicates.
The Group communicates regularly and in a transparent
Summary of fraud incidents manner with its employees. Communication takes the form
of one-on-one formal and informal on-the-job interactions,
Cases Total value (R) committee meetings, informal and social gatherings,
2010 2011 2010 2011 work-related corporate, Chain or service department
Fraud 521 335 12 950 012 3 220 561 memoranda, face-to-face written communication bulletins,
Attempted Group directives and operational instructions, promotions-
fraud 51 40 151 727 Nil
related telecasts, employee and business performance
Suspected
fraud 641 1 332 17 707 770 21 445 110 achievements and bi-annual chain road shows, where
information on business performance and strategies are
Whistle-blowing statistics shared, among others. The channels and mechanisms of
Crime Call is a whistle-blowing mechanism used by information dissemination are selected with the aim of
JD Group since April 2002. There are two anonymous ensuring effective reach, absorption and understanding of
methods of reporting crime, namely an anonymous the communication messages. All employees are subjected
dedicated Crime Call telephone line and an online web to a three-day induction programme after joining the Group,
interface. During the financial year, 86 (2010: 125) online where they are introduced to the culture and workings
web interface incidents were reported and investigated. of the Group. As part of the Art of Service initiative, all
The investigations gave rise to disciplinary enquiries with employees are regularly invited to take part in independent
the following results: and anonymous employee engagement surveys.
» 5 (2010: 26) dismissals In addition, all permanent employees have access to the
Group’s intranet site to access policies, directives and a
» 14 (2010: 9) final written warnings
Integrated Report 2011 « JD Group
88 Sustainability and governance
Sustainability and stakeholder review (continued)
host of other general information. Employees in office centralised logistics initiative. With the assistance of
environments also have internet connectivity during organised labour, the retrenchment of staff was limited to
working hours and the related messaging services linked to 50 employees during this period.
the specific application they use. The Group has adopted
and maintains an Electronic Communications Policy and Customers
practices that preclude employees from accessing offensive The Group has a large base of credit and cash customers.
sites on the internet and sending discourteous messages to JD Group services the mass-middle market in South Africa
colleagues and third parties. via numerous chains. Customers from LSM categories 4 to
10 are able to find solutions to their home environment
The Group’s in-house newsletter (Thumbs Up) serves not
needs when considering the breadth of the product range.
only as a channel to communicate progress relating to the
As the market becomes more sophisticated, the Group aims
core focuses of the Art of Service initiative, but is also a
to continue to ensure that the aspirations of our customers
mechanism to share knowledge, information and informal
can be satisfied.
commentary between divisions and chains.
Customer rights and consumer
Organised labour and consultations
complaints
More than 60% of the Group’s employees are part of
JD Group is committed to complying with the letter and
collective bargaining agreements and are therefore party to
spirit of the Consumer Protection Act No 68 (CPA) of 2008,
the associated benefits negotiated between the Group and
serving its customers in a diligent and transparent manner,
organised labour on behalf of the bargaining unit members.
with due regard to treating customers fairly and rendering
The Group continues to reap the rewards of solid, sound
quality service to customers. The CPA became effective on
and ethical relationships with the trade unions representing
1 April 2011. The driving force and purpose of the CPA is the
employees in South Africa, Botswana, Swaziland and
promotion and protection of consumers’ interests and
Namibia. The stable relationship, in particular with the South
rights. The CPA has a significant impact on the relationship
African Commercial Catering Allied Workers Union
between JD Group and its customers on the one hand, and
(SACCAWU), has been conducive to both parties for many
between JD Group and its suppliers of goods and services
years. The Group is committed to open, transparent and
on the other hand. In particular, the CPA affects the Group’s
proactive communication and engagement with organised
rights and obligations as a retailer of goods and supplier of
labour, and the fact that it has enjoyed 17 consecutive years
services.
without general wage action is evidence of the good
relationship and trust that exists between management, the In order to prepare for the impact of the CPA, a Group Project
unionised staff and the unions. This sound relationship has was implemented to ensure the smooth implementation and
been established and fostered through annual substantive alignment of business practices, processes, policies and
negotiations, quarterly National Negotiation Committee agreements to the CPA regulatory requirements to ensure
(NNC) meetings, shop steward meetings, operational compliance with its regulatory obligations as codified in the
requirements consultations, information-sharing sessions CPA. Furthermore, the Group reviewed its business practices,
(with trade union leadership) and EE&TC meetings. policies, procedures, repairs and return policies, warranties,
information technology systems, customer complaints-
Operational requirements exercises have to be embarked
handling procedures, as well as the trading terms with its
on from time to time and in such instances the Group
suppliers (and manufacturers). The CPA steering committee
strictly abides by the collective bargaining agreements’
met once a month, while the CPA working committee met
requirement of a 60-day notice period in respect of layoffs.
bi-weekly. We conducted nationwide staff training (with
During the past financial year the Group was forced to
approximately 20 000 staff participating) in order to prepare
affect the job security of 795 employees due to operational
staff for the CPA implementation.
requirements stemming from limited store relocations and
closures, as well as the continued roll-out of the Group’s
JD Group » Integrated Report 2011
89
As can be expected from a business that has a large at both state-of-the-art contact centres in Randburg and
customer base, several queries regarding products, health and Durban.
safety, information disclosure, sales processes, interest rates,
Club membership is an ancillary product offered to all
charges, fees and Credit Bureau listings procedures have
customers purchasing with credit agreements in the
been escalated to the National Credit Regulator, the National
furniture chains. This also fulfils a part of the Group’s
Consumer Commission, the Credit Information Ombud, the
customer acquisition and retention strategy, whereby
Ombud for Long-term Insurance, the Ombud for Short-term
customers can join the Club for a nominal fee per month. In
Insurance, the Ombud for Financial Services Providers, as well
return, they receive consistently high value in the benefits
as to the Department of Trade and Industry’s Consumer
package, which more than compensates for the outlay.
Investigations Directorate. However, each matter has been
These benefits include funeral and disability cover,
resolved amicably and in the best interests of the customer in
discounts, cash and product prizes, as well as educational
support of our Art of Service programme. grants and lifestyle enhancers.
The Group has received four requests for access to
Market monitoring within the furniture and appliance
information under the Promotion of Access to Information
industry is carried out on a consistent basis across the
Act and has made the necessary disclosure in each case.
country through competitive shopping exercises.
No material incident of non-compliance with regulations or
voluntary codes has been recorded that gave rise to Customer service – the Art of Service
regulatory penalties, sanctions or fines that have been
While it is an absolute truism that “the journey of a
imposed on the Group for any contravention or non-
thousand miles begins with a single step”, lasting change is
compliance with statutory obligations.
as much about the first step, as it is about staying the
distance. This encapsulates the theme for the 2011
Product range
Art of Servic implementation, expressed through the
The Group offers a wide selection of merchandise and
E-mmersion strategy, which sought, in the first instance, to
services across the home product spectrum, from
further embed the philosophy of making a difference
household furniture to a broad range of major appliances,
through service and then, to measure that difference.
audio/visual equipment and computer products. As a result
E-mmersion 2011 … activity that makes a
of the Group’s recent acquisition of Unitrans Auto and
difference
Unitrans Insurance, a short-term insurance company, as well
The E-mmersion strategy that developed from the prior
as SteinBuild, a building materials group, the consumer
offering has been extended to provide motor vehicles,
years’ Art of Service implementation, catering for the various
phases of the change process and recognising that true
service and parts, vehicle rental services through Hertz,
change, in the words of the writer John Locke “… is a
short-term insurance, home improvement and building
process of people walking all the time, in the same spot, so
products and solutions.
that a path may appear…”
Where appropriate, furniture sales across the eight furniture
The following nine elements represent the core
chains are financed through credit offerings to customers in
fundamentals of the 2011 E-mmersion strategy:
the form of secured term loans. Linked to these credit deals,
product insurance covers loss, theft or damage, as well as » the Art of Service surveys (Heart Monitor) benchmarked
credit life insurance, to settle the insured’s debt in the case leadership capability, employee engagement and external
of death, temporary or permanent disability or and internal customer service.
retrenchment. The Group also offers personal loans, as well » quality assurance was achieved through the Pulse
as funeral policies and legal access policies marketed via Check that measured the extent to which the core
the Blake outbound contact centre to existing clients. A debt teachings of the Art of Service had gained momentum and
recovery and telephone marketing support structure exists became imbedded within the culture of the Group.
Integrated Report 2011 « JD Group
90 Sustainability and governance
Sustainability and stakeholder review (continued)
» core change team on-boarding assisted in obtaining the This strategy enabled JD Group to instigate a change in the
buy-in, providing clarity of roles as well as broad-based minds and attitudes of its staff towards the delivery of
diffusion of responsibility to drive the change. service to customers. The first result of which is evidenced
» Heart Talk facilitated ongoing conversations across the by the numerous of service awards that have been won
business about making a difference to the customer in a during the past year (see page 91).
tangible and measured environment.
Employee-customer-profit chain
» PS2 is a learning programme within the strategy, aimed at
The employee-customer-profit chain, developed in the late
building and enhancing the requisite competence of staff
90s, is heralded as the benchmark of organisational
in the areas of product knowledge, sales skills and service
measurement. Its basic premise is that there is a sequence of
standards as a strategic differentiator at store level.
cause and effect running from employee behaviour to
» service standards and service level agreements and customer behaviour to profits. In order to benchmark
head office (S3) focused on the articulation and JD Group’s own performance in this regard, a service-profit
embedding of internal service standards, with a particular chain was formulated as a strategic measurement framework.
focus on staff at JD Group head office.
The JD Group service-profit chain starts with leadership’s
» business processes and policy alignment entailed
attitude towards the profit chain, due to its direct influence
aligning the Group’s core policies and procedures with
on the extent of employee engagement. Engaged
the Art of Service philosophy.
employees in turn deliver greater service, both internally
» through the communication initiative, heightened and externally. Great internal service influences employee
awareness was created of the change process. It also
engagement.
enabled a consistent message to be conveyed to staff
The diagram below provides a visual representation of the
and facilitated ongoing momentum.
relationship between the elements as well as a definition of
» the Beega Dance initiative an activation campaign geared
the components comprising the JDG service-profit chain.
to energise and engage the people of JD Group on the
promise of making a difference.
Internal External
Leadership Employment Financial
customer customer
capability engagement return
delight delight
Leaders who hold The degree to The degree to The degree to The ultimate
people accountable which employees which customers which external measure of return
and ensure are engaged in the are delighted with customers are on investment of
effective, organisation and the service they delighted with the the preceding
productive committed with receive internally. service they service-profit chain
behaviours. Leaders their ‘heads’ and receive externally. elements.
that affect their ‘hearts’.
engagement of
employees and the
culture of the
organisation
overall.
– Ken Blanchard
JD Group » Integrated Report 2011
91
Management firmly believes that superior customer service developed measures, and once we have set ourselves goals
resulting from the above service-profit chain model, will and there is absolute determination to achieving these goals,
ultimately deliver better bottom-line results and returns for we will achieve a far better work ethic and a far better
shareholders. service ethic than we currently have. We’ve got to find a way
of measuring service. Now, until that happens, nothing’s
The Art of Service surveys going to happen. But, once that happens, everything’s going
A number of service surveys were once again conducted to happen. I’m the first one to accept that this is a journey.
during the 2011 financial year. Altogether 18 632 staff took This is not going to happen overnight, it’s not going to happen
part in the internal surveys and the Group engaged with in a hundred days. This is a journey, and I am absolutely
25 333 customers as a part of the external surveys. These determined to see that I remain fixated with this journey for
were aimed at benchmarking leadership capability and as long as the Almighty blesses me with my working life”.
employee engagement in respect of both external as well
as internal customer service. The key outcomes of the Other service interventions
survey results reflected year-on-year improvement in the The various chains in the Group conduct individual mystery
vast majority of metrics as summarised below: shopping initiatives on an ad hoc basis using external
service providers. These programmes range from short-term
» 84,7% of JD Group staff view leadership as being
investigations to establish service levels in specific
completely focused on the Group’s internal and external
branches, to regular ongoing monthly shop-outs to raise
customers, a 2% improvement on the previous year’s
service delivery and improve the in-store shopping
results.
experience. In addition, the Group Merchandise department
» 93% of JD Group staff members are actively engaged
conducts ongoing competitive shopping exercises to
every day in their tasks at work, reflecting an 11,3%
compare product and price offerings within the industry.
improvement on the 2010 results.
The Group strives to communicate with its customers in
» 84% of all internal JD Group customers are delighted with
such a manner that each customer feels that he or she is
the service they receive, representing a 7% improvement
the only customer. This approach is core to the Art of Service
on the previous year’s results.
and the ultimate objective is to differentiate the Group from
» 80% of JD Group’s external customers experience the
its competitors through the delivery of excellent service to
Group’s service as a ‘strength’ when engaging with our
customers. The first step towards improved communication
chains.
with customers was implemented by the Group’s contact
» JD Group chains secured nine awards in the 2011 Ask centre in Randburg. Each customer who enters into a credit
Afrika Orange Index® Service Excellence Benchmark for transaction with the Group receives a “Welcome” follow-up
delivering excellent service to customers. call once the customer has received delivery of the
» JD Group’s Furniture Retail chains were ranked in the purchased goods. The purpose of the call is first and
top six positions in the Furniture Retail category. foremost to establish the customers’ perception of the
» JD Group’s electronics and appliance chains were service received. These interactions also serve as assurance
ranked as the top three in the Electronics and that the customer understands the financial and contractual
Appliance Retail category. elements and obligations of the transaction. Thirdly, early
» Bradlows achieved fourth place in the annual Daily Sun notice is gained of possible dissatisfaction, which enables
Retail Awards. the Group to escalate complaints and queries for specialist
intervention on a timely basis. To protect the rights of both
These customer service achievements are a function of the
the customer and the Group, all calls from the contact
combined efforts of JD Group’s staff who have committed
centres are recorded. A specialist team of quality assurers
heart and soul to this journey of change. These changes were
assesses a weekly sample of calls to determine the level of
predicted by JD Group Chairman, David Sussman in 2009,
service and whether any further training is required.
when he remarked that: “I am convinced that, once we have
Integrated Report 2011 « JD Group
92 Sustainability and governance
Sustainability and stakeholder review (continued)
In addition to the aforementioned and various other contact individuals. During new store developments and other
centre initiatives, a host of other channels are being utilised construction works, labour is largely sourced and used from
to communicate with customers. General business the local geographical area. Where possible, national
communication is conducted via telephone and electronic suppliers of store development material, such as carpets,
channels from head office and regional or local chain tiles and office furniture, make use of locally based business
offices, as well as face-to-face engagements between to make deliveries.
customers and employees at store level, where credit
The Group prides itself on the integrated nature with which
agreements and purchase documentation are concluded.
it engages with its supplier network thereby ensuring that
Marketing communication channels focus mainly on quality standards are maintained. Not only has the Group
monthly catalogues, displaying merchandise ranges and strengthened its relationships with its suppliers of
special offers, event-driven pamphlets and in-store display merchandise and services, it also assists them in becoming
material. Existing customers are also engaged via their more concerned corporate citizens. Many of the Group’s
account statements, Club magazines and with the use of suppliers have already adopted sustainability strategies and
mobile channels. are limiting their impact on the environment through
environment-friendly approaches in their production
For purposes of arrear collections, the Group makes use of
processes and product provisioning practices. In this regard
statement messages, follow-up letters and personal visits
the Group screens suppliers and contractors, confirming
by collectors to facilitate rehabilitation. Electronic-enabled
their use of environment-friendly raw materials, recycling
customers also have access to the Group’s websites, where
of raw materials for the manufacture of end-products such
a multitude of Group information is hosted, including
as carpets, tiles, office furniture, paint, etc, as well as their
customer care contact numbers for facilitating the
waste disposal practices. From time to time the Group visits
lodgement of customer complaints.
and informally inspects the facilities of its manufacturers
Contractors and suppliers of merchandise and suppliers to ensure that appropriate health and safety
and products practices and no unwarranted labour practices, such as for
The Group’s policy to support locally based suppliers is example child labour, exist. To the best of the Group’s
evidenced by the fact that 95% of its approved furniture knowledge and belief, its suppliers and contractors do not
suppliers are locally based, thereby promoting a positive use forced labour of any kind and employ only workers who
indirect impact on the economy by supporting the growth, meet the minimum legal age requirement.
development and wealth creation of locally based The Group is committed to fair trade with its suppliers via
businesses. Suppliers and contractors have not been service level agreements that contain fair terms and
subjected to formal human rights screening, however, the conditions. As a consequence the Group is able to provide
Group has ongoing engagements with suppliers and more affordable and quality merchandise to customers by
contractors, where its stance against all forms of virtue of its strong relationships with its suppliers. In order
discrimination is conveyed, as well as its expectation that to fulfil its obligations under the Consumer Protection Act’s
human rights should be upheld. The Group furthermore (CPA) product-return regime, the Group’s Merchandise
ensures that the appointment of suppliers and contractors department has negotiated improved and regulatory-
is in accordance with legislation and encourages non-racial, compliant product guarantees and return terms with its
crime-free working environments. suppliers and manufacturers. While the Group has in
Suppliers’ compliance to B-BBEE principles is informally selected instances acquired the right to sole distribution of
monitored on an ongoing basis. In respect of services such certain quality branded products within South Africa, it is
as safety and security, cleaning and common-area not involved in any price fixing or other market practices
infrastructure maintenance, the Group makes use of that could be construed as being in breach of the
external contractors who source their labour from South Competition Act or any related legislation.
African citizens, with a focus on previously disadvantaged
JD Group » Integrated Report 2011
93
Government and regulators The Group’s dialogue with government departments and
Government and regulators are engaged throughout the regulators occurs through prescribed compliance and
year in various areas of the business and the Group regulatory filings, applications, renewals of licences and
participates in various forums and in some instances play a marks, letters, telephonic conversations, business
leading role as a catalyst to effect change (as indicated negotiations and formal meetings, among others.
below in respect of the FAIS engagements) the FSB The Group is not aware of any material penalties as a result
engagements elaborated below. of any legislative or regulatory breach.
The Group, as a responsible corporate citizen, is committed In addition to the Group’s Code of Ethics and various related
to ensuring regulatory compliance and conducting its corporate policies, as well as the Board Charter and the
operations within the confines of the law. Among others, the terms of reference that have been adopted for each of the
Group engages frequently with the various law enforcement board committees, the Group has adopted the following
and government agencies in respect of its business codes and charters of note:
operations and the licences that are held in the Group,
» King III
namely, the National Credit Regulator, Council for Debt
» the National Debt Mediation Association’s Code of
Collectors Council, the National Consumer Commission, the
Conduct for affiliated credit providers
Financial Services Board, the Companies and Intellectual
Property Commission, the Johannesburg Stock Exchange, » the Credit Providers Association’s Constitution for
STRATE, the South African Revenue Services, the Master of affiliated credit providers
the High Court, the Wholesale and Retail Sector Education » Advertising Standards Code of South Africa
Training Authority, the Department of Trade and Industry and » the Consumer Goods Council of South Africa’s Charter
the Deeds Office. The Group persistently and proactively » the Southern African Fraud Prevention Service’s Code of
meets its obligations in respect of legislative and regulatory Conduct for affiliated credit providers
requirements and pays its licences on a timely basis and
» South African Insurance Association Code of Conduct
files the required statutory reports and submissions.
» Association for Savings and Investment South Africa Code
Subject-matter experts representing the Group have
of Conduct
participated in and driven industry initiatives to the benefit
» Business Unity South Africa Charter of Ethical Business
of government, regulators and the retail industry as a whole.
Practice for South Africa (Code of Ethics).
In this regard, the Chief Executive Officer of JDG Insurance
has, as a member of the Consumer Goods Council of South
Corporate social interaction and
Africa FAIS Steering Committee, been instrumental in
initiatives
negotiations with the Financial Services Board in order to in
The Group continuously increases its involvement in the
establish a FAIS compliant situation in the furniture retail
communities within which it conducts its business. Through
industry within the context of the realities of the labour
the implementation of its strategy, assisted by numerous
market in South Africa and the various insurance selling
corporate policies, processes and practices, the Group has
models adopted by participants in the furniture retail
inculcated a need among its employees to closely associate
industry. Among others, government has this year received
themselves with the Group’s stakeholders and for the social
R394 million (2010: R712 million) in the form of tax and other
upliftment of communities. The retail chains within
payments ensuing from the Group’s operations. The Group
the Group are individually accountable and responsible for
maintains good relationships with government and all
engaging with local communities within which they trade
regulators and has built sustainable working relationships
and conduct business. However, these engagements are
with most of the institutions mentioned above. This stance
planned and financed centrally at Group level.
and proactive approach assists in amicable resolution of
any issues that may arise, and the Group will continue to
promote mutually beneficial relationships going forward.
Integrated Report 2011 « JD Group
94 Sustainability and governance
Sustainability and stakeholder review (continued)
Corporate social investment and socio- » the Mitzvah School is a registered school and examination
economic development centre which provides tutoring for disadvantaged students
The management of the Group’s corporate social in their final year of schooling and who have consistently
investment (CSI) and socio-economic development (SED) is produced pass rates in excess of 90% every year.
categorised as enterprise development (ED) projects, direct » St Enda’s Community Centre is a secondary school in
donations and deserving ‘sweat equity’ community Joubert Park with whom the Group has held a proud and
initiatives. A budget was allocated during 2011 for time-honoured association since this project was founded
CSI activities and a further budget was set aside for in one of the Group’s warehouses in 1985.
enterprise development initiatives.
» Africa Community Trust provides assistance to a township
During the year under review, the Group was involved in feeding scheme and clothing for approximately 300 (2010:
two major ED projects, namely the Dirang Lotlhe Farming 200) underprivileged youth. The targeted youth include
Project Co-Operative and the Isaac Isaac/Techno-agricultural those orphaned through HIV/Aids, child-headed families
Innovation for Poverty Alleviation (TIPA) project. The TIPA and displaced persons.
project is an agricultural initiative that aims to alleviate
In addition, Incredible Connection, made 52 (2010: 177)
poverty, create employment and empower communities.
charitable donations during the year totalling
The Group has been involved in the project for a number of
R600 367 (2010: R195 500), comprising 82 (2010: 63)
years and contributed R2,9 million (2010: R2,2 million) during
personal computers, 25 printers and two proximas, to name
the year. It revolves around the concept of the African
but a few of the articles donated to the needy.
Garden Market that forms part of the Food Security for
The Group’s socio-economic development spend and
Africa initiative that was presented in 2002 at the World
donations are reflected in the table below:
Summit for Sustainable Development. Projects are run in
Diepsloot, Hazyview, Kokstad, King William’s Town, Durban Amount
2011 2010
and more recently also at Bethanie in the Rustenburg area.
Category R R
The new Bethanie project involves five farmers and with the
Community development 1 760 499 1 562 273
co-operation of Isaac Isaac, the Group assisted them with, Skills upliftment and education 2 562 002 847 000
among others, acquiring farming equipment and drip Health (including disability) 62 797 187 500
irrigation. The aim for 2012 is to expand the scope of the Sports development 25 661 6 000
TIPA projects and possibly introduce more ED projects, with Arts and culture 260 000 260 000
Other 940 113 218 019
the support of both Incredible Connection and JDG Trading.
Total 5 611 072 3 080 792
Direct donations
The Group’s direct donations policy is focused on providing Environmental sustainability
financial assistance to as many applicants as possible to The Group has been classified as having an overall medium
address challenges relating to poverty and community environmental impact because it is involved in “retailer
development, education, crime, health, art and agriculture, business operations and financial services, not elsewhere
prioritising the needs of disadvantaged children and the classified”. In line with this classification, the Group’s efforts in
youth. Among the vast number of projects that the Group sustaining the environment were mainly focused on reducing
supports, the four projects that follow provide evidence of its overall carbon footprint by focusing on water and electricity
the strong relationships and bonds that the Group has consumption and savings, recycling paper products, reducing
fostered with caring organisations: of greenhouse gas emissions, as well as other interventions
» the Ekhaya lo Musa provides accommodation and care including the recycling of used computer components.
for babies, children and young adults, who have generally
been the victims of abuse, abandonment and neglect and
orphaned due to HIV/Aids.
JD Group » Integrated Report 2011
95
Ecofriendly building and design initiatives » natural ventilation
Unprecedented global forces are reshaping the retail, » use of ecofriendly products in the construction of
industrial and commercial property landscape, forcing buildings where possible
financiers, landlords and tenants alike to revisit their thinking
» introduction of indigenous plants in the landscaping
not only in terms of building design and construction, but
design.
also relating to how these structures are managed
Management is not aware of any JD Group-owned
operationally. The following examples illustrate this principle:
properties or leased properties that are in or adjacent to
» climate change necessitates optimal use of natural protected areas. The Group operations did not have any
ventilation and natural light, coupled with fit-for-purpose
material negative impact on the biodiversity environment
artificial heating and cooling systems.
and JD Group is also not aware of any negative impact on
» depletion of fossil fuels dictate the implementation of the environment by its material suppliers.
energy saving operational regimes, application of best
practice design with regards to energy consumption and Electricity consumption interventions
the use of alternate sources of energy. Independent parallel electricity consumption metering and
» sustainable design and construction of buildings have monitoring systems have been installed in all the Cash
brought concepts such as ecological design, lifecycle Retail stores of HiFi Corp and Incredible Connection. Similar
costing, and high performance, multi-functional buildings, independent metering systems are being installed in the
recycling of waste and green buildings to the fore. 120 Furniture Retail stores that have historically shown the
highest electricity consumption per square metre. The
» sustainable building design has been incorporated into
management of energy reductions systems has been
all new structures that the Group exclusively owns or
outsourced to third-party electricity consumption watchdog
tenants such as:
specialists and it is foreseen that tangible savings will
» optimisation of interior space (“smaller is better”);
become evident during the 2012 financial year. Preliminary
» energy efficiency by the use of natural light and heat,
results have already highlighted numerous instances of
efficient natural ventilation, proper insulation, use of
extraordinary high consumption due to a lack of adherence
renewable energy, etc;
to operational disciplines and due to incorrect billing by
» simplified architectural design by applying simple service providers. Analysis of results to date indicates that
building geometry to ensure standardised ceiling savings to the order of 15% can be achieved by addressing
heights, sound ergonomic principles relating to people these anomalies through strict adherence to operational
movement, etc; and disciplines and stringent bill validation.
» designing for durability, ensuring congruence of All new warehouses that are being developed as a part of
affordability, durability and minimal environmental the centralisation of logistics programme (Project Sebenzile),
impact. are constructed in an energy-efficient manner. This
A number of these ecofriendly elements have been encompasses the construction process and materials, as
introduced in the construction of new Incredible Connection well as the design of the building, with a view to minimising
and HiFi Corp mega stores. In constructing the Group’s the use of energy. Among others, all new stores and
centralised warehouses (Project Sebenzile), ecofriendly warehouses will have energy monitoring systems in place to
designs and building materials are being used wherever reduce the overall cost and usage of energy.
possible, which should minimise their impact on the As a part of the Group’s scheduled refurbishment and
environment. These include, among others: renovation of stores, the following energy-efficiency
» energy-saving lighting and the use of natural light initiatives will be rolled out in 2012 and thereafter:
» recycling of roof run-off water by an improved roof design » installation of timers and/or key switches that detects
occupancy and turn lights on or off
Integrated Report 2011 « JD Group
96 Sustainability and governance
Sustainability and stakeholder review (continued)
» disconnection of all geysers that supply heated water to The Group’s total water consumption at its head office in
hand washbasins in stores and offices Braamfontein for the past financial year amounted to 636 kℓ
» re-evaluation/redesign of existing standardised electrical (2010: 626 kℓ).
wiring of shops in order to ensure reduced consumption
Gas emissions, fuel consumption and
» retro-fitting of energy-efficient light fittings such as LED
other logistics-related interventions
lights or fibre-optic lighting.
The Group’s strategic initiative to centralise its supply chain
Industry benchmarking has shown that these and other and distribution activities across South Africa (Project
initiatives can result in further electricity consumption Sebenzile) has brought about improved warehouse-
savings of 10%. In the past three years, the Group has management principles including more effective and
replaced the majority of the elevators at its head office in efficient route planning, giving rise to more accurate and
Braamfontein and has also replaced the electrical timely deliveries of goods to customers as well as reducing
reticulation system in that building, reducing energy usage carbon emissions and fuel consumption. This initiative
by approximately 30%. More elevators will be replaced included the installation of a vehicle-tracking system to
during 2012 to ensure a further reduction in energy usage. monitor driver behaviour with the added benefit of ensuring
Additional energy-efficient or renewable energy-based that the fleet’s exhaust emissions are reduced. The tracking
initiatives that could further reduce the Group’s energy system also enables management to constantly monitor
requirements in the future include an investigation into solar actual routes to avoid unnecessary kilometres travelled. A
water heating to replace the heaters in the boilers as well newly introduced fleet management system ensures tighter
as the possible usage of hydro-boilers in the kitchens. all-round control on fleet vehicles and in particular detects
and monitors vehicles with excessive fuel consumption. The
The Group’s total electricity consumption at its head office
total fuel consumption by the Group’s fleet amounted to
in Braamfontein for the past financial year amounted to
50 154 372 litres.
5 991 297kW (2010: 5 438 698kW). The increase in electricity
consumption is a direct result of having additional people
Waste and recycling
in the buildings relating to the IT implementations.
Recyclable waste continues to be generated in spite of
ongoing migration towards a “paperless” office environment.
Water consumption interventions
The Group continues to retain the services of a specialist
The Group is acutely aware of the fact that water is a scarce
waste disposal company to dispose of recyclable waste,
resource in South Africa and has issued a number of
while materials not suitable for recycling are disposed of in
internal directives to its stores regarding water usage.
an environmentally friendly way. At the Group head office, an
Push-down demand taps have been installed in all shops
independent waste contractor has been engaged to sort
that have been renovated during the past three years.
waste by type on site before removing it for resale to
This has not only led to lower water wastage, but as a
specialist companies for recycling purposes. In terms of a
secondary benefit, has also reduced the incidence of water
Group policy, all used materials that are not earmarked for
damage due to taps inadvertently being left switched on.
recycling are disposed in an environmental friendly way and
Separate water-level consumption metering is also
usage of municipal disposal sites is compulsory. Suppliers
conducted in all retail operations. Efficient storm-water
are encouraged to use environmental friendly raw materials
management, rainwater harvesting and grey-water systems
in their manufacturing processes.
has been incorporated into newly developed Company-
owned or Company-tenanted distribution centres and
contact centre office buildings. The Group relies totally on
municipal water supply and does not withdraw any water
from the environment.
JD Group » Integrated Report 2011
97
The table below indicates the waste generated at the introduce more ecofriendly raw materials in the
Group’s head office for recycling during the past year. manufacturing processes.
2011 2010
Health and safety
Code Type of waste (kg) (kg)
The Group complies with relevant health and safety
HL Paper, three colours or less 6 242 739
legislation and has appointed health and safety committees
CO Paper, more than three
colours 4 668 425 to manage and advise on the Group’s compliance with
TI Tin 1 207 38 OHASA and the Compensation for Occupation Injuries and
CP Clear plastic 2 778 127 Diseases Act. A total of 5,5% based on 1 000 staff (2010: 8%)
SP S Coloured plastic 1 507 47 of the workforce is represented in formal joint management
K4 Cardboard boxes 62 952 3 731 and employee health and safety committees and have
Paper towels 3 421 167
received relevant training. The Health and Safety framework
Total 82 775 5 274 at the Group head office comprises 55 (2010: 11) certified
first aiders and evacuation marshals.
Incredible Connection recycled 191 tonnes (2010:
184 tonnes) of electronic waste (e-waste) in 2011 in During the review period, the Group experienced 149 (2010:
partnership with an external electronic recycling specialist 189) work-related injuries in South. At the same time,
who has an 18 year track record of environmentally 1 429 days (2010: 78 days) were lost in the Group’s South
responsible e-waste recycling. Customers and other African operations due to work-related injuries, while
members of the public use the e-waste bins located in all 23 days were lost in the Group’s operations outside South
Incredible Connection stores to dispose of their used Africa. The majority of the injuries were of a minor nature.
computer and electronic components. Well-documented All offices, stores and warehouses have adequate natural
and reliable processes, structured according to International ventilation and periodically, assurance is obtained that fully
Standards 9001, 14001 and Operational Health and Safety ventilated spray-painting facilities exist in accordance with
Act (OHASA) 18001, are used in the recycling process. The OHASA regulations in the factories of the Group’s suppliers
recycling processes are benchmarked internationally to where painting is required in the manufacturing process.
ensure that they are aligned with the latest sustainable
technological innovation and processes. The recycler is also
HIV/Aids and employee wellness
ISO 14001 compliant and a certified BEE level 1 contributor. The Philakahle wellness programme
The table below indicates the e-waste recycled by Incredible The Group introduced an employee wellness programme
Connection during the past three years. with a strong HIV focus during the year. As the prevalence
of the HIV epidemic has stabilised, it was decided to
e-waste recycling (tonnes)
broaden the HIV programme into a more general wellness
2009 60 394
programme. The name of the programme is Philakahle,
2010 183 378 which is a Zulu word meaning ‘live well’ in the sense of
2011 190 275 living in a way where one takes care of oneself. Accordingly,
the programme slogan is ‘Take care of yourself’.
Total 434 047
The Philakahle programme was launched in July 2011 by the
The CO2 emission saving equates to 9 994 tonnes. JD Group CEO, Grattan Kirk. Both he and Richard Chauke
underwent HIV screening during the launch. A video of the
Product manufacturing processes
launch and health testing was shown to employees via the
Suppliers are encouraged to subscribe to and become
Vivid network. A representative committee, which includes a
members of the Green Building Council of South Africa and
trade union representative, was established to guide the
to develop ergonomically designed safe work spaces for
implementation of the project.
their employees and furthermore are encouraged to
Integrated Report 2011 « JD Group
98 Sustainability and governance
Sustainability and stakeholder review (continued)
The Philakahle wellness programme has a proactive an infection rate of anything between 13,5% to 14,8% in 2010.
approach to addressing medical problems including the ten
In addition to the above, the Group’s HIV Policy was aligned
domains of human wellness, namely physical, medical,
with local and international best practice and was
emotional, social, spiritual, occupational, intellectual,
communicated to all employees in the Group.
environmental, financial and sexual. The programme is
based on a behaviour-change communication methodology Indirect economic impacts
that moves beyond providing information. It focuses on The Group engages in activities in the ordinary course of
helping employees to change their health behaviour and the business that have an indirect impact on stakeholders,
programme comprises a number of elements, including which are typically not measured in monetary terms. An
health education and testing, as well as a health club with example of this would include the sourcing of inventory
fully trained health educators. from suppliers, which in turn creates jobs and opportunities
During 2011, the key focus of the programme was on health for the staff of such suppliers.
testing, especially in operations with a high concentration of
Industry engagement and membership
employees, such as JD House, Randburg Financial Services,
The Group plays a role in shaping industry events through its
Roodekop and Aeroton in Gauteng. More than 2 000
participation in and membership of industry and professional
employees were reached and health testing was made
bodies, of which the following is merely a synopsis:
available to all employees at these sites during August 2011.
The Group paid for the testing of all employees who are not » Credit Providers Association
medically insured. The uptake of the testing far exceeded » National Debt Mediation Association
expectations with 784 employees being tested. This » Consumer Group Council of South Africa
represented 37% of the total workforce at these sites. The
» Member of the Braamfontein Improvement District Forum
testing also provided the Group with a profile of the health
» the Unilever Institute of Strategic Marketing
of its employees at the various sites, enabling targeted
» the Compliance Institute of South Africa
programmes to address specific health risks that are
currently under development. At JD House, for example, the » the Institute of Internal Auditors of South Africa
results showed that 95% of employees were at risk » the Institute of Directors in South Africa
regarding nutritional intake. The Group addressed this by » Wholesale and Retail Sector Education and Training
negotiating discounts on healthy meals for employees at a Authority
local food provider. » Consumer Goods Council of South Africa
Although the health profiles differ from site-to-site, a range of » the Association for Savings and Investments South Africa
common health risks were highlighted, which include » the South African Insurance Association
smoking, nutritional intake deficiencies, lack of physical
» the Ombuds for FAIS, for Long-term Insurance and for
activity, hypertension, and obesity. This information allows the
Short-term Insurance for Credit Information and for
Group to assess, minimise and manage risks relating to the
Financial Services Providers
health of its employees. For example, 42% of employees
» the Institute of Futures Research and the Bureau of
tested at JD House are at risk on at least five of these risk
Economic Research at Stellenbosch University
criteria and 8% are at risk of a cardiovascular incident within
» the Bureau of Market Research at Unisa
the next ten years. Altogether 4,1% of the total workforce at
these sites subjected themselves to HIV testing. The results » Econometrix
reflected an HIV infection rate of 4,6%, however, due to the » the South African Institute of Race Relations.
unrepresentative and relatively small sample, these cannot
be used as an accurate reflection of the HIV infection rate for
Challenges in 2011 and beyond
The Group’s strategic targets have been addressed in the
the Group as a whole. However, it is a positive indicator
CEO’s report detailed on pages 32 to 37.
compared to the Group’s estimated statistical projection of
JD Group » Integrated Report 2011
99
GRI index commitments overview
Sustainability Sustainability JD Group Progress on commitments for the period
category elements commitment under review
Economic Shareholders » Delivery of the business and » Strategic projects have commenced and
operating model and its targets. benefits realisation remains in scope and
are discussed in the CEO’s report on
pages 32 to 37.
Employees » Continual investment in skills » 22 685 training interventions. (Some
and development. employees have been trained more than
once.)
Customers » Retention and acquisition of » Customer acquisition and retention
customers. strategies are continually being refined.
» Growing market share. » Good progress has been made in respect
» Improved channels of of the Group’s strategy of organic and
communication. non-organic market share and business
» Conduct regular customer focus growth.
group sessions. » Two large-scale contact centres
» Customer education. operational.
» Independent customer focus groups
conduct research sessions for the Group.
» Ongoing informal customer credit
education is conducted through the
contact centre.
Suppliers » Supplier and procurement » B-BBEE compliance audits/verification
appointments. have been conducted with all suppliers of
merchandise and services.
Organised labour » Retention and enhancement of » Annual wage and terms and conditions
the relationships forged and agreements concluded.
fostered with recognised trade » Successful operational requirements
unions. exercise conducted across a number of
the Group’s divisions.
Government and Fulfilment of obligations with » Established a compliance committee.
regulators regard to: » Established a standalone Management
» compliance Assurance Function.
» legislation » Outsourced the Internal Audit Function to
» governance an independent service provider.
» Conducted a readiness assessment in
respect of King III.
» Conducted an assessment in respect of
the PIC’s Corporate Governance
Investment Code.
» Provided training and staff education in
respect of the implementation of the
Consumer Protection Act.
Communities » Community engagement in the » Maintained and strengthened the existing
areas where the Group conducts relationships with communities via
its business. community development projects, skills
upliftment and education as well as
substantial CSI donations and SED ‘sweat
equity’ involvement.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
100 Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability Sustainability JD Group Progress on commitments for the period
category elements commitment under review
Environmental Materials » Paper management. » Paper management measures maintained
to achieve reductions in paper utilisation.
» Board and committee papers printed
back-to-back to save paper.
» Recycled 77 283kg of paper at JD’s head
office.
Energy » Reduction of energy usage. » Various measures have been maintained
to conserve energy utilisation.
Water » Reduction of water usage. » Various measures have been maintained
to manage water usage.
Biodiversity » Awareness. » Relationships are being sought with
associated authoritative bodies.
Emissions, » Waste management and gas » Various enhanced measures have been
effluents and emissions. implemented to reduce emissions.
waste » Recycled 82 775kg of waste at JD’s head
office.
» Where appropriate, directors from remote
destinations take part in meetings via
conference facilities, thereby reducing air
travel, fuel consumption and related
emissions.
Suppliers » Reputational risk mitigation. » Suppliers’ environmental stance and
actions are monitored constantly.
Merchandise » Awareness and compliance. » Manufacturing of products and
merchandise in accordance with
acceptable business practices and
standards are monitored.
Compliance » Compliance with legislation and » Trained approximately 20 000 staff on the
regulations. implications of the Consumer Protection
» Adopted a Compliance Policy. Act.
» Adopted a Compliance Policy.
» The Group has not received any material
regulatory fines.
Transport » Fleet optimisation. » The Group’s fleet will continue to be
reduced and routing optimised to reduce
both emissions and fuel consumption.
» Where appropriate, directors from remote
destinations take part in meetings via
conference facilities, thereby reducing air
travel, fuel consumption and related
emissions.
Social Employment » Being an employer of choice. » Annual review and upgrading of employee
practices, benefits and reward policies.
» Employee engagement statistics
monitored and measured.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
101
Sustainability Sustainability JD Group Progress on commitments for the period
category elements commitment under review
Social Labour relations » Solid relationship with organised » Negotiated agreements are in place and
(continued) labour. strictly managed and adhered to.
» 17 consecutive years without general
wage action.
Health and safety » Compliance with the » Policy and procedures implemented in
Occupational Health and Safety accordance with the Act.
Act. » Maintained OHASA committees and
trained members.
Training and » Continual investment in » 22 685 training interventions.
education employees’ skills and » Approximately 20 000 staff trained on the
development. implications of the Consumer Protection
Act.
Diversity and » Equal opportunity employer. » Employment Equity (EE) ratio of middle
opportunity management at 29%.
» EE ratios at other levels receiving focused
attention.
Human rights » Recognition. » Ethical values and human dignity are
upheld.
Communities » Ongoing involvement. » Community involvement is conducted by
the brands in the various communities
within which they trade.
» Community development via skills
upliftment, education, donations and
‘sweat’ equity.
Bribery and » Full application of the Group’s » Policies and procedures are in place.
corruption Code of Ethics. » Gift registers are maintained across all
departments in the Group.
» Maintained a whistle-blowing mechanism
for reporting crime.
» Updated the Group’s Code of Conduct.
Products » Quality and service. » Customer education implemented in
respect of merchandise care and service
conditions.
» Where applicable, products conform to
prescribed standards.
Customer service » Differentiated shopping » Consolidating the Art of Service initiative
levels experience. into the operations of the Group.
» Internal and external mechanisms exist
and are fully utilised to resolve consumer
complaints and queries.
» Customer service surveys are conducted
to measure the Group’s levels of service
delivery.
» Won nine Ask Afrika Orange Index® Service
Excellence Benchmark awards.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
102 Sustainability and governance
Sustainability and stakeholder review (continued)
Global Reporting Initiative Index
The Group’s Sustainability Report and review contains details regarding the respective aspects. This table provides specific
reference as to where in the report the performance indicators as per the GRI reference guidelines can be found.
GRI ref GRI indicator JD Group status Page ref
Strategy
1.1 Statement from senior decision-maker on the » See the Executive Chairman’s statement in 26 – 29
relevance and importance of sustainability to this report.
the vision and strategy of the Group.
1.2 Description of key impacts, risks and » Key risks and opportunities are covered in the 18 – 23
opportunities. table of material issues.
Organisational profile
2.1 Name of the reporting organisation. » JD Group Limited. Inside back
cover
2.2 Primary brands, products and/or services. » The brands are outlined and explained in the 7
Business Structure and Operational Review.
» The product range is described in this
Sustainability Report under “Product Range”
2.3 Operational structure of the organisation. » The structure is depicted in the Business 7
Structure.
2.4 Location of the organisation’s headquarters. » JD House, 27 Stiemens Street, Braamfontein, Inside back
Johannesburg, South Africa. cover
2.5 Countries in which organisation’s operations » South Africa, Botswana, Namibia, Swaziland 16
are located. and Mauritius.
2.6 Nature of ownership/legal form. » The Group’s holding company is incorporated Inside back
in South Africa and listed on the JSE. It has cover
approximately 4 016 private and institutional
investors as shareholders.
2.7 Markets served. » Predominantly the mass-middle market. 8
2.8 Scale of reporting organisation. » Scale details are expressed in various 152 – 158
sections of the report, in particular the
financial statements.
2.9 Significant changes during the reporting » The Group sold its retail operations in Poland 152 – 158
period. (Abra) at year-end.
» The Group acquired SteinBuild and Unitrans
Auto.
2.10 Awards received during the reporting period. » See the Ask Afrika Orange Index® Service 91
Excellence Benchmark awards listed in this
Sustainability Report.
Report scope and boundary
3.1 Reporting period. » The 12 months ended 31 August 2011. n/a
3.2 Date of most recent previous report. » The 12 months ended 31 August 2010. n/a
3.3 Reporting cycle. » Annual and interim reports at 12 and six n/a
months respectively.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
103
GRI ref GRI indicator JD Group status Page ref
3.4 Contact point for report. » info@jdg.co.za Inside back
cover
3.5 Process for defining report. » The information contained in this report n/a
complies with the requirements of the JSE,
the Companies Act and King III. The Group
also provides relevant information of interest
to its defined stakeholders.
3.6 Boundary of report. » The report provides information on all n/a
operations, however, it should be noted that
with regard to stakeholder reporting, the
focus is mainly on its South African operations
which generate the bulk of total revenue.
3.7 Limitations on the scope or boundary of the » The report mainly focuses on South Africa, n/a
report. being the material part of the business.
3.8 Reporting on joint ventures and other » No significant impacts or effects recorded, n/a
situations affecting comparability. other than those noted in the annual financial
statements.
3.9 Data measurement techniques and the bases » The Group is IFRS compliant. The annual n/a
for calculations. financial statements have been prepared in
terms of AC500.
3.10 Restatements of information provided in » Refer to the notes to the annual financial Inside front
earlier reports. statements regarding disclosing Abra as a cover
discontinued operation.
3.11 Significant changes in the scope, boundary or » None. n/a
measurement methods applied.
3.12 Table identifying the location of the standard » This GRI index table. n/a
disclosures in the report.
3.13 External assurance of the report. » None. n/a
Governance
4.1 Governance structure of the organisation. » JD Group complies with King III and full 112 – 139
disclosure of the governance structures is
provided in the Corporate Governance report.
» The macro governance framework is depicted
in the Corporate Governance report.
4.2 Independence of Chairman. » The Chairman is considered to be non- 112 – 113
independent because of his executive status.
» As recommended by King III and the JSE
Listings Requirements, the JD Group board
has appointed a Lead Independent Non-
executive Director to act in instances where
the Chairman may be deemed to be
conflicted.
4.3 Number of board members that are » All eight of the non-executive directors are 114
independent and that are defined as independent non-executive directors.
non-executive.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
104 Sustainability and governance
Sustainability and stakeholder review (continued)
GRI ref GRI indicator JD Group status Page ref
4.4 Mechanisms for shareholders to provide » A number of mechanisms exist and are used 76 – 77
recommendations. by shareholders to communicate with the
Group, such as face-to-face meetings during
road shows, shareholder interaction at AGMs,
written communication by institutional
shareholders, etc.
4.5 Linkage between executive compensation and » A portion of executive remuneration is 79 – 80
the achievement of objectives and incentive-based and linked to headline
organisation’s performance. earnings per share performance and varies
from executive to executive.
» The vesting of rights in respect of the share
incentive scheme is directly linked to preset
performance targets.
4.6 Process of the highest governance body to » The process of managing conflicts of interest 114 – 117
ensure conflicts of interest are avoided. is settled in the JD Group board, via the Board
Charter and board agenda and applied rigorously.
4.7 Process for determining the qualifications and » The JD Group Nominations committee verifies 114
expertise of the board. all directors’ formal qualifications and
identifies skills and expertise required to
ensure a balanced board. This is verified by
formal board performance assessments.
4.8 Mission statements, values, codes of conduct » The Group’s vision, philosophy, values and Inside front
and principles relevant to economic, code of conduct are outlined in the cover
environmental and social performance. introduction to this integrated report.
4.9 Procedures for overseeing the organisation’s » The Group Audit committee has been 120 – 122
identification and management of economic, mandated to oversee the process of
environmental and social performance. sustainability reporting.
4.10 Processes for evaluating the highest » The performance of the board and its 120 – 122
governance body’s performance, particularly committees is continually monitored by
with respect to economic, environmental and analysts, the media and shareholders. The key
social performance. board and board committees have
undertaken performance self-assessments.
4.11 Precautionary approach. » The Group conducts a risk/quality assessment 89 – 92
on new products before implementing them.
4.12 Economic, environmental and social charters. » Economic, environmental and social charters n/a
are not in place for the furniture and
appliance industry. Discussions are currently
in process with various stakeholders.
4.13 Industry and business association » The Group subscribes to and holds 93
memberships. memberships with various associations as
stated in the Sustainability Report.
4.14 List of stakeholder groups. » The board has identified the stakeholders 17 and 74
with which it engages on a regular basis with
an emphasis on shareholders, customers,
employees, suppliers, regulators and
communities.
4.15 Identification of major stakeholders. » The identification of stakeholder groups has 74
been approved by the board and is stated in
the sustainability report.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
105
GRI ref GRI indicator JD Group status Page ref
4.16 Stakeholder engagement. » The Group makes use of various 74 – 94
communication mechanisms to share
information and obtain feedback from its
stakeholders. The communication channels
are outlined in the sustainability report.
4.17 Key topics and concerns that have been » Key topics are highlighted in the sustainability 77
raised through stakeholder engagement and report as well as in the Corporate Governance
how the organisation has responded to those Report.
key topics and concerns.
Economic performance indicators
EC1 Direct economic value generated and » Value-added statement. 75
distributed.
EC2 Financial implications and other risks and » None. n/a
opportunities for the organisation’s activities
owing to climate change.
EC3 Coverage of the organisation’s defined benefit » The Actuarial Report indicates a satisfactory 84
plan obligations. status.
EC4 Significant financial assistance received from » None. n/a
government.
EC5 Entry level wage compared with local » All minimum wages are aligned and are in full 84
minimum wage for significant locations of compliance with the “Area A” minimum wages
operation. as per the Sectoral Determination for the
Wholesale and Retail Sector.
EC6 Policy and spending on locally based » At least 95% of furniture suppliers are based 92
suppliers. in South Africa.
EC7 Hiring of senior employees from the » The majority of employees are South African 77
community. citizens. All employees are hired to meet the
Group’s skills requirements, in accordance
with the Group’s EE goals.
EC8 Description of infrastructure investment and » The Group has a CSI strategy that benefits 93 – 94
services that provide public benefit. communities and previously disadvantaged
groups. Details are set out in the Sustainability
Report.
EC9 The organisation’s significant and indirect » By the nature of the Group’s business n/a
economic impacts. activities and its CSI strategy there are many
indirect economic benefactors. Refer to the
Sustainability Report.
Environmental performance indicators
EN1 Materials used by weight or volume. » Where available, details of materials used n/a
have been provided.
EN2 Percentage of materials used that are recycled » Where available, details of materials recycled cna
input materials. have been provided.
EN3 Direct energy consumption by primary source. » Where available, details of energy 95 and 96
consumption have been provided.
EN4 Indirect energy consumption by primary » As indicated in EN3. 95 and 96
source.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
106 Sustainability and governance
Sustainability and stakeholder review (continued)
GRI ref GRI indicator JD Group status Page ref
EN5 Energy saved owing to conservation and » Where available, details of energy 95 and 96
efficiency improvements. conservation have been provided.
EN6 Initiatives to provide energy-efficient or » Where available, details of energy, efficiency, 94 – 96
renewable energy-based products and renewable energy-based products and
services and reductions in energy reduction of energy requirements have been
requirements. provided.
EN7 Initiatives to reduce indirect energy » As indicated in EN6. 94 – 96
consumption and reduction achieved.
EN8 Total water withdrawal by source. » Municipal water only. n/a
EN9 Water sources significantly affected by water » None. n/a
withdrawal.
EN10 Percentage and total volume of water » Mechanisms to enable the accurate cna
recycled or reused. measurement of water recycled or re-used
will be enhanced over time.
EN11 Location and size of land owned, leased or » No known sites. n/a
managed that is in or adjacent to protected
areas.
EN12 Description of significant biodiversity impacts » Not applicable. n/a
or activities on protected areas.
EN13 Habitats protected or restored. » Not applicable. n/a
EN14 Strategies, current actions and future plans for » Refer to Sustainability Report with particular 95
managing impacts on biodiversity. reference to new buildings.
EN15 Number of ICUN Red List species. » Not applicable. n/a
EN16 Greenhouse gas emissions. » Where available, details of gas emissions have 96
been provided.
EN17 Other relevant indirect greenhouse gas » As indicated in EN16. 96
emissions and reductions achieved.
EN18 Initiatives to reduce greenhouse gas emissions » Where available, details of gas emission 96
and reductions achieved. reductions have been provided. Emissions
reduced through centralisation of logistics
programme and reduction of fleet.
EN19 Emissions of ozone depleting substances by » Not applicable. n/a
weight.
EN20 NO, SO and other significant air emissions by » Not applicable. n/a
weight.
EN21 Water discharges. » Not applicable. n/a
EN22 Weight of waste by type and disposal method. » Where available, details of waste type and 96 and 97
disposal method have been provided.
EN23 Significant spills. » None. n/a
EN24 Weight of transported waste deemed » Not applicable. n/a
hazardous.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
107
GRI ref GRI indicator JD Group status Page ref
EN25 Identity, size, protected status and biodiversity » Not applicable. n/a
value of water bodies and related habitats
significantly affected by discharges to water
and run-off.
EN26 Initiatives to mitigate environmental impacts » Mechanisms to enable accurate cna
of products and services. measurement of environment impacts of
products and services will be enhanced over
time where there is a direct link to or impact
on the Group’s strategy.
EN27 Percentage of products sold and their » This is currently estimated to be at 30% of the n/a
packaging materials that are reclaimed. wrapping and packaging materials.
EN28 Monetary, non-monetary value of significant » None. n/a
fines and sanctions.
EN29 Significant environmental impacts of » None other than those related to vehicles 96
transporting products and other goods and used for the delivery of product, which
materials used for the organisation’s transport is being optimised through the
operations and the transporting of members centralisation of logistics.
of the workforce.
EN30 Total environmental expenditure by type. » Mechanisms to enable the accurate cna
measurement of environmental expenditure
by type will be enhanced over time where
there is a direct link to or impact on the
Group’s strategy.
Social performance indicators
Labour practices
LA1 Total workforce by contract type and region. » Employees in RSA: 24 783 77
» Employees outside RSA: 935
LA2 Total employee turnover by gender and region » In South Africa 78
(as a percentage of total turnover). Female: 40,9%
Male: 40,8%
» Outside South Africa
Female: 7,0%
Male: 11,3%
LA3 Benefits provided to full-time employees that » Retirement fund benefits 84
are not provided to temporary or part-time » Risk benefits
employees. » Medical scheme benefits
» Vehicle allowance.
LA4 Percentage of employees covered by » >60% of employees are covered by collective 88
collective bargaining agreements. bargaining agreements.
LA5 Minimum notice period(s) regarding » 60 days as specified in the respective 88
operational changes, including whether it is collective bargaining agreements.
specified in collective agreements.
LA6 Percentage of total workforce represented in » 5,5% of total workforce is represented in 97
formal joint management worker health and formal joint management worker health and
safety committees that help monitor and safety committees that help monitor and
advise on occupational health and safety advise on occupational health and safety
programmes. programmes.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
108 Sustainability and governance
Sustainability and stakeholder review (continued)
GRI ref GRI indicator JD Group status Page ref
LA7 Rates of injury, occupational diseases, lost » Days lost due to work-related injuries in the 97
days, absenteeism and number of work- last 12 months:
related fatalities by region. In South Africa: 1 429
Outside South Africa: 26
No work-related fatalities were recorded.
LA8 Education, training, counselling, prevention » Voluntary counselling and testing in respect of 97 – 98
and risk-control programmes in place to assist HIV/Aids is available to employees through
workforce members, their families, or the external healthcare service providers and
community members regarding serious the Philakahle wellness programme.
diseases.
LA9 Health and safety topics covered in formal » This topic is managed by joint-participating 136
agreements with trade unions. structures, but not directly with trade unions
only.
LA10 Average hours of training per year per » As detailed in the sustainability report. 85
employee by employee category.
LA11 Programmes for skills management and » Various as outlined in the sustainability report. 84 – 85
lifelong learning that support the continued
employability of employees and assist them in
managing career endings.
LA12 Percentage of employees receiving regular » Employees are receiving regular performance 80
performance and career development reviews. and career development reviews.
LA13 Composition of governance bodies and » The membership of the governance body for 136
breakdown of employees per category Employment Equity and Training committee
according to gender, age group, minority (EE&TC) has been detailed in the corporate
group membership and other indicators of governance report.
diversity.
LA14 Ratio % of basic salary of men to women by » Ratio in South Africa is 98%. 84
region. » Ratio outside South Africa is 106%.
Human rights
HR1 Percentage and total number of significant » Investment agreements have not undergone cna
investment agreements that include human human rights screening as yet.
rights clauses or that have undergone human
rights screening.
HR2 Percentage of significant suppliers and » Suppliers and contractors are envisaged to cna
contractors that have undergone screening on undergo human rights screening by end 2012.
human rights and actions taken. » Certain major suppliers have confirmed their
commitment to human rights issues.
HR3 Total hours of employee training on policies » 1% of total employees were trained on 86 – 87
and procedures concerning aspects of human policies and procedures concerning aspects
rights that are relevant to operations, including of human rights that are relevant to
the percentage of employees trained. operations.
HR4 Total number of incidents of discrimination » No incident of discrimination has been n/a
and actions taken. formally reported.
HR5 Operations identified in which the right to » No operations were identified within the n/a
exercise freedom of association and collective Group or its suppliers where freedom of
bargaining may be at significant risk, and association and collective bargaining is at risk.
actions taken to support these rights.
HR6 Operations identified as having significant risk » No operations were identified within the 92
for incidents of child labour and measures Group or its suppliers where there is a risk of
taken to contribute to the elimination of child child labour.
labour.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
109
GRI ref GRI indicator JD Group status Page ref
HR7 Operations identified as having significant risk » No operations were identified within the 92
for incidents of forced or compulsory labour, Group or its suppliers where there is a risk of
and measures to contribute to the elimination forced or compulsory labour.
of forced or compulsory labour.
HR8 Percentage of security personnel trained in » The provision of security is outsourced. n/a
the organisation’s policies or procedures
concerning aspects of human rights that are
relevant to operations.
HR9 Total number of incidents of violations » No incident of violations of rights of n/a
involving rights of indigenous people and indigenous people has been reported.
actions taken.
Society
SO1 Nature, scope and effectiveness of any » Communication takes place prior to 88
programmes and practices that assess and operations being opened within communities.
manage the impacts of operations on » Closing of operations are discussed with
communities, including entering, operating organised labour and employees. Details of
and exiting. such instances are provided in the
Sustainability Report.
SO2 Percentage and total number of business » Policies and procedures are in place to 137 – 138
units analysed for risk-related to corruption. manage risk, fraud and corruption across all
operations in the Group and effectiveness
thereof is audited by the Group’s
Management Assurance function as part of its
audit coverage programme.
SO3 Percentage of employees trained in » Approximately 19% of employees received 85
organisation’s anti-corruption policies and training in anti-corruption and related policies
procedures. and procedures.
SO4 Actions taken in response to incidents of » Any corruption identified is addressed via the 87 and 139
corruption. disciplinary procedures and practices in a
consistent manner.
» The Group has a zero tolerance approach in
respect of corruption.
SO5 Public policy positions and participation in » None. n/a
public policy development and lobbying.
SO6 Total value of financial and in-kind » None. n/a
contributions to political parties, politicians
and related institutions by country.
SO7 Total number of legal actions for anti- » None. n/a
competitive behaviour, anti-trust and
monopoly practices and their outcomes.
SO8 Monetary value of significant fines and total » None. n/a
number of non-monetary sanctions for
non-compliance with laws and regulations.
Product responsibility
PR1 Lifecycle stages in which health and safety » Processes are currently under way to build not
impacts of products and services are these lifecycle studies. material
assessed for improvement and percentage of to the
significant products and services categories business
subject to such procedures.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
110 Sustainability and governance
Sustainability and stakeholder review (continued)
GRI ref GRI indicator JD Group status Page ref
PR2 Total number of incidents of non-compliance » None. n/a
with regulations and voluntary codes
concerning health and safety impacts of
products.
PR3 Type of product and service information » Product labelling has valid descriptions and n/a
required by procedures and percentage of internationally recognised barcodes where
significant products and services subject to applicable.
such information requirements.
PR4 Total number of incidents of non-compliance » One – amicably resolved. 89
with regulations and voluntary codes
concerning products, service info and labelling
by type of outcomes.
PR5 Practices related to customer satisfaction, » Various customer satisfaction surveys are 89 – 91
including results of surveys measuring conducted across the Group. The details are
customer satisfaction. reported in the Sustainability Report.
PR6 Programmes for adherence to laws, standards » The Group adheres to all laws relating to 88 and 91
and voluntary codes related to marketing marketing and communication.
communications, including advertising, » About 20 000 employees were trained on the
promotion and sponsorship. implications of the Consumer Protection Act.
» The Group has adopted a number of voluntary
industry codes of good practice and ethics.
Details are reported in the Sustainability
Report.
PR7 Total number of incidents of non-compliance » Refer to PR4. n/a
with regulations and voluntary codes
concerning marketing communications,
including advertising, promotion and
sponsorship by type of outcomes.
PR8 Total number of substantiated complaints » None. n/a
regarding breaches of customer privacy and
losses of customer data.
PR9 Monetary value of significant fines for » None. n/a
non-compliance with laws and regulations
concerning the provision and use of products
and services.
HIV/Aids reporting
1 Describe the organisation’s HIV/Aids policy. » The Group’s HIV/Aids policy focuses on 97 – 98
employee wellness and the elimination of
unfair discrimination against employees who
live with HIV/Aids. Details are reported in the
Sustainability Report.
2 Describe the overall strategy for managing the » The Group monitors the HIV/Aids prevalence 97 – 98
HIV/Aids risk. rates and has also engaged an external
service provider to assist the Group to
formalise an approach for managing any
associated risks.
3 Describe the extent of preparedness and » The Group has, with the assistance of an 97 – 98
contingency planning in anticipation of external service provider, embarked on
expected HIV/Aids impacts. preparedness and contingency planning.
n/a – not applicable.
cna – currently not available.
JD Group » Integrated Report 2011
111
GRI ref GRI indicator JD Group status Page ref
4 Describe how the organisation monitors » The Group has embarked on a formal roll-out 97 – 98
progress. of the HIV/Aids/wellness project and
monitoring takes place at regular project
meetings.
5 Describe how the organisation involves » Organised labour and other stakeholders, 97 – 98
stakeholders in the formulation of HIV/Aids including employees, are involved through
policy, strategy and implementation. various consultation processes in the
formulation of its HIV/Aids strategy and policy
implementation.
6 Indicate current and projected future HIV/Aids » The Group’s estimated prevalence rates are 97 – 98
prevalence and incidence rates among as follows:
relevant populations. 2005 – 21,6%
2009 – 14,8%
2015 – 13,5% (model extrapolation).
2011 – 4,6% sample rate (4,1% of total
population).
7 Report current HIV/Aids-associated costs and » The HIV/Aids/wellness programme has an See 10
exposures to the organisation. allocated annual budget. below
» No record has been kept of HIV/Aids-
associated exposures.
8 Indicate total assumed future HIV/Aids- » The costs associated with HIV/Aids/wellness 97 – 98
associated costs and exposures. programme will increase steadily as the
programme is rolled out to more employees
within the the Group. The direct cost of HIV/
Aids fatalities for the Group cannot be
accurately calculated due to the inefficient
manner of reporting thereon in South Africa.
9 Describe the workplace and workplace-related » The Group supports and maintains a 97 – 98
HIV/Aids programmes and interventions, and workplace environment respectful of human 86 – 87
the extent to which they maintain a workplace rights and has procedures in place to deal with
environment respectful of human and legal any departure from the prescribed human and
rights. legal rights issues in the workplace.
10 Indicate total allocated budget dedicated to » R1,5 million. n/a
HIV/Aids and Philakhahle wellness programmes
per annum.
11 Detail the organisation’s voluntary counselling » Voluntary counselling and testing were rolled 97 – 98
and testing programme. out at all Group sites that have more than
250 employees at no cost to the employees.
In excess of 30% of the employees made use
of the voluntary counselling and testing
offered.
12 Describe other support and counselling » Affected employees receive support and 97 – 98
programmes and measures. counselling through their existing healthcare
service providers.
» The Group subsidises employees’ membership
to two leading medical hospital plans.
13 Describe the organisation’s HIV/Aids education » The Group will educate a number of health 84
and training programmes. educators as part of the HIV/Aids/wellness
programme. They will serve all the Group sites
that have more than 250 employees at no cost
to the employees.
n/a – not applicable.
cna – currently not available.
Integrated Report 2011 « JD Group
112 Sustainability and governance
Corporate governance
Introduction and endorsement of sound Group’s compliance with the requirements and
corporate governance principles recommendations of King III was assessed by the
This corporate governance statement sets out the key independent outsourced internal audit function (KPMG)
governance principles and practices of JD Group Limited and the Group achieved a 97%-readiness level.
(the Group).
Integrated report and sustainability
The board of directors (the board) is committed to and
reporting
subscribes to the values of good corporate governance
The Company has produced an integrated report as
contained in the third King Report on Governance for South
advocated by King III. As set out in the foreword to the
Africa and the King Code of Governance Principles (jointly
integrated report, there is still some uncertainty as to the
King III). The board endorses the principles of fairness,
exact form of such a report. For this reason, the Group
responsibility, transparency and accountability advocated by
solicited the assistance of an independent expert (KPMG)
King III. In all dealings, the board applies a stakeholder-
for advice on the approach and structure of a best-practice
inclusive approach, ensuring that the interests of the
integrated report. As a consequence, the Group is confident
Company are of the utmost importance in their decisions,
that it has produced an integrated report where substance
but subject always to proper consideration of the legitimate
over form prevailed, i.e. where sustainability issues were
interests and expectations of relevant stakeholders. As good
integrated with financial-, governance- and human
corporate governance is essentially about leadership, the
resources reporting. Even though the focus has shifted and
board leads by example in promoting high ethical values, a
coverage in this report is fundamentally linked to material
sense of duty and sound morals, which are encapsulated in
aspects that have a direct influence or impact on the
the board’s Code of Conduct. It conducts the enterprise
Company’s strategy, the sustainability reporting is materially
with integrity and in compliance with best practices, while
in accordance with the Global Reporting Initiative’s (GRI) G3
taking cognisance of the value systems of the countries in
guidelines. JD Group appreciates the importance of being a
which the Group operates. As the key decision-makers and
responsible corporate citizen and therefore the board does
leaders of the organisation, the directors recognise that
not make decisions based only on the needs of the present,
social transformation in South Africa in particular is a
without considering the impact on the needs of future
business imperative, not only affording opportunities to the
generations. The directors understand the principle
previously disadvantaged, but also benefiting the Company
that nature, society and business are interconnected and
and its stakeholders. As a consequence, the Company
direct the Group’s operations in a manner that assures
remains closely involved in the communities where it
sustainable economic, social and environmental
conducts its business and subscribes to the various
performance is assured. The board has identified its key
transformation and empowerment codes applicable to its
stakeholders (see page 74 of the sustainability report) and
business in South Africa.
to facilitate communication with them, encourages their
attendance at annual general meetings.
Statement of compliance
The Group’s corporate governance structures and practices
Chairman and Chief Executive Officer
are reviewed and enhanced on an ongoing basis in
The role of the Chairman is separate from that of the Chief
response to changes within and external to the Group.
Executive Officer (CEO). Their clearly delineated roles and
In line with the “apply or explain” principle of King III and the functions are formalised and set out in the Board Charter.
requirements of the Listings Requirements of the Each has a very specific and defined set of duties in order
Johannesburg Stock Exchange (the JSE Rules), the Company to prevent overlap of obligations and responsibilities and to
has made relevant disclosure, supported by an explanation eliminate any possible conflict of function. The CEO takes
where a different practice has been adopted, in the full responsibility and is accountable for the operations
exceptional instances where the Group has not applied a of the Group and provides leadership to the executive
specific King III principle. During the review period, the team. He is also accountable for the effectiveness of
JD Group » Integrated report 2011
113
governance practices. The Chairman leads the board, In addition, the Group is in the fortunate position that a
represents the board to shareholders, builds and maintains number of its non-executive directors have constant
shareholders’ trust and confidence and facilitates exposure to international boardroom practices and at least
constructive relations between executive and non-executive one of them operates at the forefront of international
directors. As a consequence, there is no uncertainty corporate governance best practice. As such the board
between the two individuals relating to their respective regularly receives best advice on a timely basis that enables
terrain of operations. The Chairman does not serve as it to remain at the forefront of the evolution of corporate
chairman of another listed entity. governance, risk, accounting and other business practices in
the domestic and international business environments. The
Executive Chairman non-executive directors bring balance and valuable insights
The board has appointed David Sussman, founder of the to all board deliberations. In addition, during the review
Group, as its Chairman. While the Chairman is not an period, the Chairman’s performance has been assessed by
independent non-executive director as prescribed by the each board member and he was found to be an exemplary
JSE Rules and recommended by King III, the board is of the leader. The directors do not believe that there is any lack of
view that his appointment is in the best interest of the independence, objectivity or experience at board level, and
Group and does not negatively affect the board’s recommends that shareholders continue to support the
independence, risk-mitigating ability or objectivity. In this current Executive Chairman as leader of the board.
regard the board relies on world-wide research findings
which are inconclusive as to the value of the independent- Lead Independent Non-executive Director
chairman model. To date empirical proof is lacking that links As a further safeguard, the board has appointed Vusi
higher earnings, higher share prices, enhanced corporate Khanyile as Lead Independent Non-executive Director
governance oversight, risk mitigation or financial disclosure to act in instances where the Chairman may be conflicted
transparency, as a direct consequence of the independent- or where his independence is deemed to be impaired.
chairman model. The presence of an independent chairman
per se does not necessarily add a risk-mitigating value to a JD Group board
board or promote an independent view that gives rise to a The Group is headed by an effective unitary board that both
greater level of interrogation in the decision-making leads and controls the Group. There is an appropriate
process. These qualities can equally well be brought to the balance of power and authority on the board, such that no
board by an executive chairman who has an independent- one individual has unfettered powers of decision-making
mindedness about him. and no one individual or block of individuals, dominates the
board’s deliberations or its decisions. In this way, the full
These attributes and traits, coupled with business acumen
spectrum of shareholder interests are protected, including
and retail expertise, are the characteristics of the current
minority rights. The board has reserved a range of aspects
serving Executive Chairman and are more highly valued in
of material importance for its own consideration and
the business environment than perceived independence. Of
decision-making. These are, among others, set out in the
greater importance than an independent chairman, is the
Board Charter, the Company’s articles and the Group’s
value of having a balanced and ethical best-practice board
Delegation of Authority Framework. During the review
that conducts introspection from time to time and with a
period, and being the primary responsibilities as set out in
sensible and ethical leader. Such a board composition
its Charter, the board among others reviewed and gave
equates to individuals with the requisite skills and
strategic direction, monitored performance against plans
experience, who are strong-minded with integrity and who
and budgets, assessed the levels of compliance with
are independent of character, but who will solicit external
relevant legislation, codes and regulations, monitored risk
advice when necessary. The Group’s board has been
and its mitigation, considered and revised governance
assessed against these characteristics and the results
structures, reviewed competitor activity and compared
confirm that the composition of the board is appropriate.
Integrated report 2011 « JD Group
114 Sustainability and governance
Corporate governance (continued)
performance with best practice and ensured that ethical non-compliant to the King III recommendations as non-
standards have been upheld throughout the Group. executive directors did not comprise the majority on the
board. This fact was disclosed to both the JSE and the
Composition and structure
market. None of the board members has actual or
At the date of this integrated report, the board comprised
perceived political connections or exposure.
14 directors of whom eight were independent non-
executive directors. The guidelines set out in the JSE Rules, The diagrams below represents a graphic reflection of the
read with the principles of King III, were applied in testing improvement in the board structure during the review
the independence and category most applicable to each period, up to the date of this annual report. The diagram
director. Based on this assessment, the board found Nerina clearly illustrates the Group’s commitment to transform
Bodasing, Vusi Khanyile, Dr Len Konar, Matsobane Matlwa, the composition of the board.
Maureen Lock, Martin Shaw, Günter Steffens and Jacques
Schindehütte to be independent non-executive directors. Improvement in board structure (%)
The non-executive directors have no fixed term of office.
A number of the non-executive directors hold other
directorships, however, their outside interests are not so 57 60
54
demanding that they negatively affect the time and
50
attention that these directors devote to the Group and its
43
affairs. The directorships of the directors are summarised
40
in their abbreviated curricula vitae on page 30 and 31
31
of this integrated report. 29 30
23
The executive representation on the board comprises
20
Richard Chauke, Dr Henk Greeff, Ian Thompson and
14
Bennie van Rooy, as well as David Sussman and Grattan
8 10
Kirk, the Executive Chairman and CEO respectively. All of the
executive directors have entered into employment contracts 0
with JDG Trading (Pty) Ltd with a one-year or shorter notice
Non-executive Previously Previously Previously
period from either party. No director has an employment % of total disadvantaged disadvantaged disadvantaged
% of total females males
contract with the Group exceeding three years. Some of the % of total % of total
executive directors serve on company boards external to 2010 2011
the Group, however, none of these directorships has a
Succession planning and induction
negative impact on their executive duties or available time.
A formal and transparent nominations process is followed
At each meeting of the board, the directors declare their
when appointments to the board are made, which is a
interest in writing and where there are any potential
matter for the board as a whole. The board is assisted by
conflicts of interest, these are minuted and the affected
the Nomination committee in this regard. The succession
director is recused from relevant debate and decision-
planning approach and director appointment process are
making.
presented in more detail on page 122 where the activities of
During the year under review, Mr Ivan Levy, a non-executive the Nominations committee are discussed. Suffice to state
director, sadly passed away after having served on the that the main objective at all times is to establish and
board for 17 years. At the time of his death he was the maintain the most appropriate, balanced and ethical board.
chairman of the Nominations committee and a member of
The Group’s induction programme is facilitated by the
the Remuneration committee. Consequently and for an
company secretary and introduces new directors to key
interim period, from 6 February to 1 September 2011, until
aspects of the business and provides them with insights
Nerina Bodasing and Matsobane Matlwa were appointed as
into their rights and obligations. It follows a bespoke
independent non-executive directors, the board was
approach as opposed to a “one-size-fits-all” curriculum, as
JD Group » Integrated report 2011
115
the needs of inexperienced directors are vastly different the performance of the various committee chairmen, and a
from those of seasoned directors. The programme is separate assessment of the performance of the board
customised in accordance with the specific needs of each Chairman, as well as a rigorous test to confirm each
individual director, who at his or her own discretion, selects non-executive director’s independence. The shortcomings
appropriate elements from the programme. Generally, new that were identified by the evaluations are being addressed
directors are introduced to all the business operations and by each forum, assisted by the company secretary. A less
the relevant managing executives, the overall strategy, as comprehensive assessment process will be followed for the
well as their rights and obligations from a King III, JSE Rules 2011/2012 period, however, in the subsequent year, the
and legal perspective. Specific development needs (if any) board’s performance will be assessed by an external expert
may also be identified at this stage. or body to verify the self-assessment findings of the previous
periods and to provide independent assurance.
Rotation and election of directors
In terms of the Company’s articles of association, one third Meetings, agendas and information needs
of the directors (excluding the CEO) are subject to All directors have the requisite knowledge and experience
retirement (and re-election) at each annual general meeting. to execute their duties and all participate actively in the
In addition, King III requires that one third of the non- proceedings at board meetings. Non-executive directors
executive directors rotate annually. At the same time, the provide an unfettered and impartial view on matters
new Companies Act has empowered shareholders to elect considered by the board and enjoy significant influence in
at least 50% of the members of the board. In addition, all deliberations at meetings. The board meets four times per
casual vacancy appointments of directors between two year and more frequently if circumstances dictate, as was
AGMs are subject to confirmation by shareholders at the the case during the review period. Each meeting is
first subsequent AGM following their appointment. In terms conducted in accordance with a formal and structured
of these requirement, all read together, Messrs Richard agenda. The agenda of the regular board meetings are
Chauke, Ian Thompson (both executive directors), as well aligned with the annual board plan to ensure that all
as Mrs Maureen Lock and Messrs Martin Shaw and substantive matters that require the board’s attention are
Günter Steffens (all independent non-executive directors) included on the agenda and are presented in an organised
will retire by rotation, while the appointments of the two manner and in a prioritised order. The Chairman sets the
new non-executive directors, Mr Matsobane Matlwa and agenda for each meeting in consultation with the CEO
Ms Nerina Bodasing, are subject to shareholders’ and the company secretary and all directors are afforded the
confirmation at the AGM. Given the aforementioned seven opportunity to add matters to the agenda. The non-executive
confirmation/re-elections, the Company has afforded directors ensure that the Chairman promotes proper
shareholders the right in accordance with section 66(4)(b) deliberation of all key strategic issues at meetings, including
of the Act, to elect at least 50% of the Board members. the governance of IT risk and sustainability matters.
The summarised curriculum vitae for each of the directors To facilitate the decision-making process, board papers are
are set out on pages 30 and 31 of this integrated report. circulated to the directors well in advance of meetings to
Refer to the Directors’ report on page 143 for additional allow sufficient time for directors to properly scrutinise the
information relating to the resignation and appointment content thereof and to formulate challenging questions.
of directors. Both the directors and the members of board committees
are supplied with comprehensive and accurate information
Board and committee performance evaluations
that enables them to properly discharge their
With the exception of the new directors appointed during the
responsibilities. Agendas and the content of board and
2011 financial year and post the year-end, the directors and
committee papers, as well as the board’s and committees’
board committee members conducted performance
information needs, are regularly reviewed for effectiveness
assessments via comprehensively benchmarked
and relevance. All directors have unrestricted access to
questionnaires to evaluate the effectiveness of the board and
relevant Group information.
of the main board committees. It included an assessment of
Integrated report 2011 « JD Group
116 Sustainability and governance
Corporate governance (continued)
Non-executive directors have access to management and Meeting attendance
from time-to-time meet separately with management The board met formally five times during the review period.
without the executive directors being present. A special meeting was convened on 28 February 2011 to
recommend the acquisition of the Unitrans Auto and
In terms of the Board Charter, and the terms of reference
SteinBuild transaction to shareholders and to approve a
of each board committee, all directors and committee
joint venture agreement with Associated Motor Holdings
members are entitled, at the Group’s expense, and by
(Pty) Ltd (a subsidiary of the Imperial Group Limited) aimed
following a proper prescribed procedure, which is facilitated
at promoting motor vehicle finance solutions to entry-level
by the company secretary, to seek independent professional
motor vehicle buyers. In addition to the annual general
advice to assist them in executing their duties in a prudent
meeting held on 17 February 2011, the Company convened
manner. Philip Kruger, Andrew Murray and Arie Neven were
a special general meeting on 23 June 2011 where the
regularly invited to attend board meetings to provide expert
Steinhoff transaction was approved.
perspectives on key aspects of certain business operations.
However, notwithstanding this arrangement, there remains The attendance statistics for the 2011 financial year are
a clear division between the responsibilities of the board reflected in the combined attendance table below.
and management.
JD Group board, committees and annual general meeting attendance register
Meeting and
number of
meetings
General
meetings Board Audit Risk Remuneration Nominations
Directors (2) (5) (3) (4) (3) (2)
ID Sussman 2/2 5/5
AG Kirk 2/2 5/5 4/4
HP Greeff 2/2 4/5 3/4
KR Chauke 2/2 5/5 4/4
ID Thompson 2/2 5/5 4/4
BJ van Rooy 2/2 5/5 4/4
VP Khanyile 1/2* 4/5 2/3** 1/2**
D Konar 2/2 4/5† 3/3 4/4 3/3 2/2
M Lock 0/2 5/5
JH Schindehütte 2/2 5/5
MJ Shaw 2/2 4/5 3/3 4/4 3/3 2/2
G Steffens 2/2 5/5 3/3 4/4
IS Levy n/a 1/5‡ 1/2‡
MP Matlwa Appointed after 2011
N Bodasing financial year-end date
Key:
Director is not a member of this forum.
* Director was unable to attend special general meeting that was scheduled on an ad hoc basis due to other commitments scheduled earlier.
** Director was appointed to the committee on 18 February 2011 and has maintained a 100% attendance record since his appointment.
†
Director was not invited to the special board meeting on 28 February 2011, being conflicted in the matter discussed at the meeting, namely the
Steinhoff transaction.
‡
Director passed away on 5 February 2011 – maintained a 100% attendance record prior to death.
JD Group » Integrated report 2011
117
Code of Conduct (ethics) and legal compliance with the JSE Rules. Each year the company
compliance secretary informs the JSE that the individual directors, the
Ethics board as a whole and the Company, have complied with the
The Group is committed to the highest ethical standards of provisions of the JSE for the preceding 12 months. The
business conduct. During the review period, Dr Yondela representative of the JSE sponsor carries out a quarterly JSE
Ndema was appointed as the Group’s Ethics Officer. compliance audit which results provide evidence and form
The board has adopted and maintains its own Code of the basis for the aforementioned declarations by directors.
Conduct (Code of Ethics) that stipulates the applicable The Group has confidentiality agreements in place between
ethical standards and the expected behaviour of each itself and its third-party service providers to mitigate the risk
director. The Group also maintains an Employee Code of around the disclosure of price-sensitive information. The
Conduct that demands similar exemplary behaviour from adoption of a formal Group policy in this regard is imminent.
the employees of the Group. The executive directors,
Interests in contracts and related-party
employees, employees of outsourced functions, as well as
transactions
suppliers to the Group, are all expected to comply with the
The company secretary maintains a register of all board
principles and the ethical standards of the aforementioned
members’ interests, which is inspected annually by the
codes and to act in terms thereof. Various other policies,
external auditors. The interests and potential conflicts of
codes and measures exist in support of the aforementioned
each director are declared formally in writing at the
codes, such as among others a Securities Dealing Code,
commencement of each board meeting. When an actual
a Declaration of Interest Policy, a Closed Period Code,
conflict arises during deliberations it is declared verbally
a whistle-blowing procedure (Crime Call Anonymous),
and recorded in the minutes. The affected director is
a Fraud-prevention Policy as well as a Gifts Policy, among
immediately recused from further debate on the matter and
others. In respect of the latter, each department maintains
may also not vote on the matter. This was the case with
a gift register wherein all gifts from suppliers, service
Dr Konar, who, as chairman of Steinhoff International
providers and customers are entered for record and
Holdings Limited, recused himself from all JD Group
auditing purposes. The behaviour of all roleplayers in
deliberations regarding the recent acquisition by JD Group
respect of these codes is continually monitored and the
of the Unitrans Auto and SteinBuild assets from Steinhoff. At
directors believe that a high standard of ethics has been
instances during the review period, Vusi Khanyile and Martin
achieved. Where there is non-compliance of the codes, the
Shaw have also made their co-directors aware of potential
appropriate discipline is consistently enforced to serve as
conflicts/interests during certain board deliberations.
a measure to prevent recurrence.
Only Jacques Schindehütte holds an executive position in an
Legal compliance entity, namely Telkom Limited with which the Group has a
The Group’s compliance officer (Dr Yondela Ndema), commercial relationship. The board has considered this
a qualified and non-practising advocate, heads up the legal relationship and does not believe that it compromises his
and compliance function. The Group compliance officer has fiduciary disposition. The directors provide an annual written
established an effective compliance framework during the declaration to the external auditors, clarifying any related-
past two years, including a Compliance committee that party transaction. During the year ended 31 August 2011,
convenes at least four times a year. (A summary of this none of the directors had a significant interest in any
committee’s operations is provided on page 134 below.) contract or arrangement entered into by the Company or its
JSE compliance subsidiaries, other than as disclosed in note 27 to the
On an annual basis, each director provides a written annual financial statements.
declaration to the company secretary, confirming his or her
Integrated report 2011 « JD Group
118 Sustainability and governance
Corporate governance (continued)
Insider trading, closed periods and securities delegation of authority from the board to mandated officials
trading across the various divisions and subsidiaries throughout the
No affected employee or director (or their associates) of the Group is embodied in the Group’s Levels of Authority
Group may deal, directly or indirectly, in JD Group shares, Framework. This document, which among others
which incorporates share options and other rights, on the also contains the Group’s bank signing mandates, is
basis of unpublished price sensitive information regarding updated regularly. All divisions have adopted this framework
the business or affairs of the Group. The Group defines and the boards of all operating subsidiaries have adopted
closed periods on a semi-annual basis, which are strictly signing authorities and mandates materially similar to the
adhered to. As a general rule, closed periods commence on Group’s authorities and mandates, but customised for their
the day following the interim and year end reporting dates. unique set of business circumstances. Likewise, and to the
The closed periods each last for about 45 days and end only extent that it does not conflict with any such similar
once the results have been disclosed to the market. Closed document approved by the individual company’s board, all
periods are also observed prior to corporate actions as subsidiaries and divisions in the Group have adopted the
required by the JSE Rules. Prior to the start of each closed corporate policies, instructions, directives, rules, codes,
period, all affected individuals are advised in writing not to mandates, terms of references, charters and other
trade in the Company’s securities and also reminded to governance and compliance related documents and
inform their associates, brokers and fund managers directives that have been issued by the Group.
accordingly. The Board Charter contains a Securities Dealing
Fiduciary duties
Code that regulates dealings in the Group’s securities.
All directors are aware of their duty to act in the best
Executives, directors of major subsidiaries and board
interest of the Company on whose board they serve and
directors have to obtain written approval from the Group
the holding company respects this fiduciary principle in
Chairman (among others) prior to dealing in any Group
respect of its directors serving in representative capacities
securities. Records of all transactions and approvals in
on subsidiary and other boards.
respect of the aforementioned are kept by the Secretariat
and all directors’ dealings are timeously released on SENS. Company secretary
The movement in directors’ shareholding is reported at The board is assisted by a competent, suitably-qualified
each board meeting and annually disclosed in the annual company secretary (Johann Pieterse) with adequate
report. David Sussman and Dr Henk Greeff, as well as Philip experience, who is not a director of the Company and who
Kruger (a director of the board of JDG Trading (Pty) Ltd) has been empowered to properly fulfil his duties. While
exercised share options during open periods in the past providing the board collectively, and each director
financial year, for which they have obtained appropriate individually, where needed, with guidance on the discharge
prior written approval. To the best of the board’s knowledge, of their duties, the company secretary maintains an
none of the Group’s directors or their associates have been arm’s-length relationship with the board. Among others,
involved in insider trading. he advises the board on appropriate procedures for the
Powers of authority and mandate framework management of meetings and ensures that a prudent
An organisational structure with clearly defined lines of corporate governance framework is being maintained
responsibility and delegation of authority from the board to throughout the organisation. He assists with the evaluation
subsidiaries and key committees in the Group, is maintained of the board and board committees, as well as with the
and graphically presented on page 119. The directors have appointment of new directors, and facilitates their induction
identified in the Board Charter the matters which are into the Group. He has carried out his statutory duties
required to be approved by the board, thus ensuring that it and has diligently and on a regular basis kept the board
maintains full and effective control over key strategic, abreast of key changes in risks, laws and the environment,
financial, organisational, governance and compliance issues, as well as informed them of other developments that may
among others. The responsibilities, signing powers and in future affect the Group’s operations.
JD Group » Integrated report 2011
119
Business model and strategic business goals
The business model (separated Furniture Retail and Financial Services divisions), announced in 2009, has stabilised and early
success in the significant reduction in debtors’ cost in the Financial Services division is already evident. The Company has in an
attempt to further diversify its retail and consumer finance revenue streams, acquired Unitrans Auto and SteinBuild. The board
closely monitors strategy achievement and is aware of the changing dynamics of the industry and the domestic economy to
ensure that the business model is evaluated and revised when required to benefit from changing circumstances. During August
2011, executive management formally reviewed and rejuvenated the Group’s strategic intent for the medium term, which plan
has subsequently been endorsed by the full board.
Key operating entities
Details of the operations of the individual business entities are provided on pages 4 and 5. A diagrammatic representation of the
entities to which delegations have been made, is reflected below:
JD GROUP BOARD
Board committees Key subsidiaries Board committees
Management committees Employee benefit funds
(with independent board
committees – as indicated)
Alexander Forbes
Audit JD Group Exco
Retirement Fund
JDG Trading board
JD Group Defined Benefit
Risk Management Internal risk management
Pension fund
Unitrans Automotive
Remuneration (board, audit and Group compliance SACCAWU Provident Fund
risk and Exco)
Group Integrated Steering
Nominations Other cross-border funds
(Temporary IT forum)
SteinBuild
(board, audit and
risk and Exco) Marketing and Merchandise
review
Furniture Retail
Blake and Associates
Exco
(board, audit and
risk and Exco)
Incredible Connection
Exco
JDG Micro Life and JDG Micro
HiFi Corp
Insurance (board, risk, audit
Exco
and actuarial and Exco)
Financial Services
Exco and Credit Risk
Abra
Supervisory board
Management board JDG Insurance
Exco, audit and risk Exco and Investment
Leadership and
Other subsidiaries Development Council
Employment Equity and
Training
Property and Logistics
Other divisional
management committees
Integrated report 2011 « JD Group
120 Sustainability and governance
Corporate governance (continued)
The governance structure supporting the JD Group board is The terms of reference of each subcommittee specifies that
discussed below. all members are entitled, at the Group’s expense, and in
accordance with a prescribed procedure facilitated by the
Board committees company secretary, to seek independent professional
While the board remains accountable and responsible for advice about the affairs of the Group in relation to the
the performance and affairs of the Group, four permanent execution of their duties. While the full minutes of board
board subcommittees have been formed to assist the board committee meetings are not included in the board papers,
in discharging its duties and obligations. These are the they are freely available to the directors and at each board
Group Audit committee, the Group Risk Management meeting, report-back is given by the chairman of each
committee, the Group Remuneration committee and committee, which report is either in writing or verbal, as
the Group Nominations committee. In accordance with the dictated by circumstances.
requirements of the new Companies Act, a Social and Ethics
JD Group Audit committee
committee will be established before 1 May 2012. In
The JD Group Audit committee (the GAC) is integral to the
addition, ad hoc subcommittees are created from time to
Group’s risk management process. The GAC has a dual
time to assist with specific matters, such as reviewing the
reporting role. It reports internally to the board on the duties
results for disclosure or assisting with a special project, as
assigned to it by the board. In addition, it reports to
has been the case with Project Sebenzile (the centralisation
shareholders on the extent to which it carried out its
of the Group’s distribution centres) and Project Caspian (the
statutory oversight duties in respect of the external
transaction with Steinhoff) during the review period.
auditors, the appropriateness of the financial statements
Due to the important role that management plays in
and the accounting practices, as well as the effectiveness of
managing operational risks, the Risk Management
internal financial controls and the integrity of the
committee is the only board committee that has members
information in the integrated report.
other than independent non-executive directors. As a
Composition and membership
consequence, all subcommittee chairmen are also
All the members of the GAC are independent non-executive
independent non-executive directors as prescribed by
directors of the Company in accordance with the
King III. The board has the power at any time to remove a
Companies Act and there has been no change in the
delinquent director from the board in accordance with the
composition of the GAC during the review period. Martin
provisions of the Company’s articles, the Companies Act
Shaw, an accomplished chartered accountant and former
and, in the instance of non-executive directors, their letter
managing partner in an international auditing firm, is
of appointment. Based on the premise that board
chairman of the GAC. His co-members are Dr Len Konar and
committee members are first and foremost directors of the
Günter Steffens, both directors with current exposure to
Group, a director’s membership on the board committee will
international boards. The GAC members as a collective body
automatically and immediately terminate when his or her
are subject-matter specialists in fields including finance, risk,
directorship is terminated. Each board committee has a
auditing, compliance, banking and corporate governance,
clear mandate and operates in accordance with its own
and therefore have sufficient qualifications, skills and
specific written terms of reference that has been adopted
experience to fulfil their obligations as required by the new
by the relevant committee and approved by the board.
Companies Act regulations. Notwithstanding their extensive
Board committee meetings are conducted in accordance
knowledge base and skills-set, whenever necessary, the
with formal and structured agendas, ensuring that pertinent
GAC solicits advice from specialists in other fields of
matters are receiving proper and timely attention as per
expertise to assist with carrying out its duties, as was the
each committee’s Annual Work Plan contained in its terms
case with the appointment of KPMG to assist and advise it
of reference. Agendas and the content of committee papers
on the approach to be followed in producing an integrated
are regularly reviewed for effectiveness and relevance and
report.
members have an opportunity at each meeting to add
matters to the agenda.
JD Group » Integrated report 2011
121
Role and obligations Certain types of services by the Group’s external auditors
Through verbal feedback reports at each board meeting, the are prohibited altogether (category “A”), while others
GAC chairman keeps the board fully informed of key (category “B”) are deemed not to impair auditor
matters considered by the GAC. At the board meeting in independence and are regarded as pre-approved for the
November 2011, the GAC reported on the extent to which it year ahead. Services that do not fall into either category
had carried out the duties set out in King III, the Companies (category “C”) are subject to specific pre-approval. During
Act, the JSE Rules, the GAC’s terms of reverance and its the review period, the approach in respect of spending on
related Annual Work Plan. non-audit services was reviewed in order to ensure that
auditors’ independence is not prejudiced in any way.
Most notably during the 2011 financial year the GAC:
Spending on non-audit services may not exceed 50% of the
» considered the effectiveness of the internal audit function
Group’s spending on audit and audit-related services. An
(IAF) that is outsourced to KPMG, approved the internal
analysis of actual spending is tracked and presented at
audit plan and obtained confirmation that an independent
each GAC meeting.
quality review of the IAF’s operations is scheduled in the
foreseeable future; No material weakness in financial controls was identified
that resulted in actual financial loss or fraud.
» appointed an external service provider to advise on the
format of the integrated report, recommended the report The GAC has assessed the expertise of both the Group
to the board for onward submission to shareholders and, Financial Director and the finance function and is satisfied
recommended not to seek independent assurance on the that they have the appropriate expertise, skills and
sustainability report until the Group’s approach and experience to enable them to fulfil their obligations.
systems have matured;
The GAC played no role in the formal performance
» ensured that the combined assurance model has assessment of the Chief Audit Executive (CAE) or his
adequately addressed the Group’s significant risks, appointment, as this is considered a task that could be
monitored the effectiveness of compliance, regulatory carried out more effectively by the CAE’s direct line
and legal governance in co-operation with the Group Risk management.
Management committee, monitored the effective
The GAC’s detailed report to the board, for onward
application of the Code of Conduct (ethics), aligned the
submission to shareholders, regarding the fulfilment of
GAC’s terms of reference with legislative changes,
its obligations, is presented on page 146 of this integrated
considered corporate governance developments and in
report. As evidenced by the above and the detailed report,
particular ensured that the principles of King III as well as
the GAC has addressed all its oversight responsibilities in
those of the Public Investment Corporation (being one of
respect of sustainability reporting, internal financial controls,
the Group’s major shareholders) are embedded into the
financial accounting controls, financial and fraud, as well as
Group;
IT risks as they relate to financial reporting. Accordingly, it
» secured feedback from the subsidiaries’ independent
was concluded that the GAC had appropriately fulfilled its
Audit committees;
obligations.
» carried out a self-assessment of the GAC’s effectiveness
Meetings and attendance
and recommended that the existing three independent
All directors of the board have an open invitation to attend
directors, being appropriately qualified and experienced,
the GAC’s proceedings. Despite not being members of the
be appointed by shareholders at the annual general
GAC, the Chairman of the board as well as the executive
meeting in February 2012 to serve as the members of the
directors attend all GAC meetings. Other individuals who
JD Group Audit committee up to the next subsequent
attend on an ad hoc basis include the non-member
annual general meeting.
independent non-executive directors on the board, as well
The GAC has maintained a non-audit services policy. Three as executive management members such as the Chief
categories of non-audit services have been identified. Information Officer, the Chief Operations Officer, the Chief
Integrated report 2011 « JD Group
122 Sustainability and governance
Corporate governance (continued)
Risk Officer (CRO) and the Chief Audit Executive (CAE). The ensure that directors and executives are remunerated fairly
independent external auditors (Deloitte & Touche) and the and responsibly and to ensure that their services are
internal auditors (represented by KPMG) also attend all retained and their interests remain aligned with those of
GAC meetings. Together with the CRO and the CAE, the shareholders. The RemCom recommended to the board the
aforementioned auditors all have unrestricted access to the Company’s policy on remuneration (see pages 78 to 80),
GAC chairman. that will be presented to shareholders for a non-binding
advisory vote at the annual general meeting in February
The GAC chairman meets with the CAE, the internal
2012.
auditors and the external auditors prior to each GAC
meeting without management being present and, less than The Group’s remuneration policy is aligned with the strategy
one month before disclosure of the annual financial results, of the Company and promotes individual performance. It
meets with the external auditors to discuss the financial aims to attract, retain and motivate talented executives and
statements and the findings of their audit. The GAC is benchmarked internally and externally to remuneration
chairman attends the annual general meeting and where levels. It addresses key principles such as base pay and
required, addresses shareholders’ questions. The GAC met bonuses, employee contracts, severance and retirement
formally three times during the review period. benefits, as well as guiding principles relating to share-
based and other long-term and short-term incentive
The attendance statistics are reflected in the combined
schemes. In finding the optimum remuneration approach,
attendance table on page 116.
RemCom takes advice from external remuneration
The JD Group Remuneration committee specialists as and when required.
(RemCom) Within the boundaries of the policy, remuneration of
Composition and membership executive directors consists of an all-inclusive total cost to
The RemCom comprises three members, all of whom are company fixed element of pay, a variable element and a
independent non-executive directors of the Company. share-based incentive. The fixed element of remuneration is
Dr Len Konar is the independent non-executive chairman reviewed annually. The annual variable element of reward is
of RemCom. The other members are Martin Shaw, the designed to incentivise the executives to achieve
chairman of the GAC, and Vusi Khanyile, the Group’s Lead predetermined financial targets based on the Group
Independent Non-executive Director. Vusi Khanyile was budgets and headline earnings per share. The performance-
appointed to the RemCom on 18 February 2011 following related elements of remuneration constitute
the death of Ivan Levy on 5 February 2011. a substantial portion of the total remuneration package
The Group Chairman attends all meetings by invitation to of executive directors in order to ensure above-ordinary
present information to RemCom and is accompanied by the performance with the achievement of strategic goals.
Group CEO and the Group Financial Director (the FD) in Remuneration that is paid in excess of the median to
some instances. However they recuse themselves when any staff member or executive is justified by the shortage
conflicts of interest arise or when the chairman of RemCom of appropriately qualified and experience skilled
believes there is sufficient justification to exclude them from talent required to drive business execution in the
a meeting or from a discussion relating to a particular Group, by extraordinary performance and for purposes
agenda item, such as debates relating to their remuneration. of retention.
Remuneration objective and policy Remuneration disclosure
The main responsibility of the RemCom is to assist the RemCom sets the forward-looking remuneration of
board in setting and administering the Group’s remuneration non-executive directors in consultation with the Executive
philosophy and to review and approve the remuneration Chairman, based on benchmarked remuneration
and employment terms of directors and senior Group information from the Group’s peers and the wider industry.
executives. RemCom’s primary remuneration objective is to These fees are fixed at the start of every year and approved
JD Group » Integrated report 2011
123
via a special resolution of shareholders at each AGM and JD Group Nominations committee
fully disclosed in the integrated report. The fees comprise a Composition and membership
base fee and an attendance fee per meeting, but do The Nominations committee comprises three non-executive
not include any share-based or other performance-linked directors, all of whom are independent. The chairman is Vusi
incentives that encourage a short-term focus of Group Khanyile, who replaced Ivan Levy on 18 February 2011. The
performance. None of the non-executive directors hold any other members of the committee are Dr Len Konar and
share options. Details of the share-incentive and share Martin Shaw.
appreciation rights schemes are reported in note on
Role and obligations
pages 162 to 165.
The Nomination committee’s main responsibility is to drive
No ex gratia payments were made to directors during the succession planning and to establish processes and criteria
review period. for the identification of suitable candidates for appointment
The Company identified its prescribed officers and disclosed to the board. When considering board succession, and
their remuneration in detail on pages 81 and 82 without on identifying any shortcomings in board or board
naming the officers. In terms of the King III recommendations, subcommittee composition, it makes recommendations to
the Company also disclosed the aggregate remuneration of the board to enhance the combined skills-set or experience.
its three highest paid executive staff members that are It screens potential candidates and advises the board on
non-directors. However, as King III does not specifically the appointment of individuals who are best able to
define the detail or form of disclosure, and since the discharge the responsibilities of directors.
Company and the individual staff members are both The primary consideration when appointing new directors is
prohibited from disclosing any remuneration particulars in their skill, acumen and experience to maximise their
terms of the confidentiality clause contained in the contribution to the activities of the Group. However, taking
employment agreement between the parties, the Company into consideration that the Company operates in a unique
may not legally disclose such information. In any event, the South African context, selection criteria include
Company does not regard the detailed disclosure of the demographic disposition, diversity, race, gender and relevant
staff members’ remuneration to be in the best interest of legislation, while transformation requirements also play a
the Company nor of the affected staff members and has role in determining the most appropriate board and
therefore disclosed their remuneration in aggregate, without committee composition. In co-operation with the Chairman
naming the individual staff members. of the board and the CEO, the Nominations committee also
Performance assessment considers members’ terms in office, as well as the need for
The RemCom also establishes the processes for the review balancing continuity with fresh perspectives.
of the performance of the board, the directors, as well as Meetings and attendance
the board subcommittees and their members. It approved The Nominations committee meets as required to consider
self-assessment questionnaires as the tool for performance new board candidates. Following the death of Ivan Levy, and
evaluation of these forums during the review period. reflecting a general desire to introduce fresh perspectives to
A scaled-down self-assessment will be conducted during the board, the opportunity arose to reconstruct the board.
the 2012 financial year. An independent external expert will Extensive discussions took place between the individual
assess the effectiveness of the board and its members of the committee and the Chairman of the board,
subcommittees in 2013, thus completing the three-year the CEO and a number of prospective director candidates.
assessment cycle as agreed upon at the start of the This screening process led to a short list of four candidates
process. for appointment to the board and the eventual appointment
Meetings and attendance of three new directors, namely Nerina Bodasing, Matsobane
The RemCom met three times during the financial year. Matlwa and Jacques Schindehütte.
The attendance statistics are reflected in the combined
attendance table on page 116.
Integrated report 2011 « JD Group
124 Sustainability and governance
Corporate governance (continued)
The meeting attendance statistics are reflected in the within the risk limits of the Group. Key risks have been
combined attendance table on page 116. quantified, where practical. The CRO has access to and
interacts regularly with executive management, the Audit
JD Group Risk Management committee committee, the Risk Management committee and the board.
Composition and membership Risks are prioritised, ranked and rated through the BarnOwl
Günter Steffens, an independent non-executive director technology platform in order to focus management’s
with international banking experience, is the chairman of responses and implement mitigating interventions. A
the Risk Management committee (RMC). The committee systematic, formal assessment of risks is continually
comprises a mix of independent non-executive directors, conducted and documented. These assessments include all
executive management, members and heads of the risks affecting the various income streams of the Group, the
Management Assurance and Risk Management functions. critical dependencies of the business, sustainability, as well
Non-executive independent directors, Dr Len Konar and as the interests and expectations of legitimate stakeholders,
Martin Shaw sit on the RMC, while the current serving among others. While it is virtually impossible to anticipate
executive directors, Richard Chauke, Grattan Kirk, unpredictable risks, a framework, methodologies and
Dr Henk Greeff, Ian Thompson and Bennie van Rooy, are also mechanisms have been entrenched across the Group to
members. The executive management representatives increase the probability of anticipating unpredictable,
are Phillip Kruger, Arie Neven and Andrew Murray. The unexpected or unusual risks. Detailed reports and risk
Management Assurance and Risk Management functions registers are reviewed and presented quarterly to both the
are represented by Morné van Wyk and Pieter Pienaar. Internal Risk Management committee and the RMC, while
A delegation from the independent external auditors executive management receives monthly feedback on a
(Deloitte & Touche) also attends, as well as two directors of range of risk issues via the JDG Trading Exco agenda. Key
KPMG, the outsourced internal audit service provider. risks are reported to the Audit committee and where
Subject-matter experts, certain divisional CEs and other necessary, escalated to the board. As a summary only, and
individuals who can add value on specific subjects, attend not to be seen as an exhaustive list, the committee reviews
from time-to-time by invitation. adequacy of systems and controls, interest rate and liquidity
Role and obligations risks, market risk, legislative risk, corporate governance,
The RMC is a standalone subcommittee of the board and compliance and reputation risks, exchange rate exposure,
its purpose is to assist the board in carrying out its investment risk, insurable losses, as well as insurance risks,
responsibilities relating to risk and to ensure that processes business continuity risk and financial risk. While the
are in place to enable complete, timely, relevant and committee has oversight of credit risk at a Group level,
accurate risk disclosure. While the board retains overall credit risk exposures are principally managed by the
accountability for risk, it has delegated the responsibility for Financial Services Credit Risk committee, as described on
implementing and executing the board’s risk strategy by page 126.
means of risk management plans, systems and processes As recommended by King III, the committee also satisfies
to management. itself that an effective IT internal control framework exists,
that the IT strategy is integrated and aligned with the
Risk strategy, responsibilities and accountability
Group’s strategy and business processes, and that IT risks
The CRO has developed a Risk Management Plan and Policy,
are addressed appropriately in conjunction with the CIO,
which were communicated to staff throughout the Group.
who is a member of the committee. The Group has not
The CRO drives the risk methodology and processes in the
taken any undue risk in the pursuit of reward nor has it
Group and ensures that an appropriate risk control
suffered any material loss during the review period resulting
framework is maintained and that risk management
from unusual or undue risk taken. Given the aforementioned
principles are integrated into the day-to-day activities of the
processes and measures, the CRO has given written
Group. The committee expresses an opinion on the levels of
assurance to the Risk Management committee that he is of
risk tolerance annually and monitors that risks taken are
JD Group » Integrated report 2011
125
the view that risk is managed and controlled prudently and Philip Kruger, Komani Mfuni, Andrew Murray, Arie Neven,
effectively throughout the Group. In addition, the outsourced Theodore de Klerk and Steve Keys. The latter two directors,
internal audit function (KPMG), confirmed to the JD Group being the CEs of Unitrans Auto and SteinBuild respectively,
Audit committee that, based on assessments during their joined the board after the 2011 financial year end on
engagements, it is of the view that overall a good control 1 November 2011 and 23 September 2011 respectively.
framework is in place throughout the Group. The prevailing Guy Pearce resigned as a director and left the Group on
system of internal controls was rated as acceptable in all 31 August 2011, while Johan Kok, the then Group Chief
material respects. Based on the existence of these processes, Operating Officer, retired on 31 December 2010. Meetings
measures, frameworks and assurance statements, the are chaired by Grattan Kirk, the Group CEO.
committee is of the view, and has given assurance to the
Three formal meetings were held during the 2011 financial
board, that risk is managed and controlled prudently and
year. Additional ad hoc meetings are held when
effectively throughout the Group and that nothing material
circumstances dictate. Between board meetings, key
has come to its attention that would indicate that the
business decisions requiring formal approval by the board
framework of internal controls is inadequate.
are taken by way of written resolutions, signed by all
Meetings and attendance directors. This methodology facilitates the prompt
The committee met four times during the financial year. The conclusion of day-to-day business imperatives and prevents
attendance statistics are reflected in the combined unnecessary delays.
attendance table on page 116.
JDG Trading Executive committee (Exco)
Exco is the CEO’s committee and it is an exact reflection of
Other supporting governance structures
the JDG Trading board as regards membership composition.
JDG Trading board and Executive committee
JDG Trading board At a macro-level, the purpose of Exco is to:
JDG Trading (Pty) Ltd (JDGT) is the wholly-owned South » translate and implement the Group’s strategic direction
African trading company of the Group. This board manages into a operational plan
and monitors the operations of the Company and its » monitor successful implementation of this plan and the
directors are individually and jointly mandated, empowered achievement of performance in accordance with the
and held accountable, among others, to: agreed-upon budgets and timelines
» manage and monitor the business and affairs of the » prioritise the allocation of capital throughout the Group’s
Group by establishing best management and operating operations
practices » implement and maintain key Group policies, plans and
» implement the strategies and key policies determined by directives
the Group board » serve as a governance mechanism, that is ensuring that
» monitor the Group’s performance against approved proper compliance and corporate governance
business plans, budgets and strategic targets frameworks exist to facilitate full compliance with
» serve as a governance mechanism by ensuring that the applicable laws, regulations and best-practice codes
Group complies with all its legal, corporate governance relevant to the industry
and other compliance obligations » monitor operational risk mitigation and specifically
» prioritise the allocation of capital and other resources manage reputational risk
» manage management succession planning by identifying, » uphold the principles of the Group’s Code of Ethics
developing and advancing future leaders in the Group. » oversee human development and succession planning in
At the date of this report, the board of JDGT consisted order to develop future leaders for the Group
of the six executive directors of JD Group and eight senior » allocate human resources throughout the Group and
executives, namely Pamela Barletta, David Hirsch, specifically manage transformation initiatives
Integrated report 2011 « JD Group
126 Sustainability and governance
Corporate governance (continued)
» ensure that appropriate IT systems exist to support the Rooy, Clyde Briell, Johan Claassen, Barry Dell, Francois
business operations and to provide useful management Grobler, Jeanine Naude-Terblanche, Corrie Neven, Marc
information to facilitate effective decision-making Joubert, Henk Klopper, Charl van Rhyn and Jaco van
» attend to all other important aspects that are crucial for Jaarsveldt and by invitation David Sussman, Pieter Pienaar,
business success or which may impact on the operations Andrew Murray and Reneé Griessel.
of the JD Group. » The FS Projects Portfolio Steering committee is
The Exco’s comprehensive agenda is used to monitor the responsible for prioritising projects and initiatives across
aspects described above. This not only addresses day-to- all strategically aligned programmes within FS. This
day operations-related challenges, but also strategic committee is chaired by Jaco van Jaarsveldt, the FS head
business issues, including sustainability issues, strategic of growth, innovation and product development.
project developments, etc. Meetings are held on a monthly Permanent members include Dr Henk Greeff, Philip Kruger,
basis. the entire FS executive team and Dalene Grobler, the
group project office executive.
The governance structure in place at the Group’s other key
operating entities are summarised below: The CRC considers decisions regarding amendments to any
credit-risk related activity, which include among others, new
Furniture Retail and Cash Retail divisions
credit-risk strategies, and amendments to current credit-risk
The Furniture Retail (FR) division operates out of 988 stores strategies or products. In addition, the CRC is responsible
under eight brands. for considering underwriting of credit applications,
The Cash Retail (CR) division operates out of 96 HiFi Corp application fraud investigations, credit-risk portfolio
and Incredible Connection (IC) stores in South Africa, reporting, as well as credit risk rules and strategies in
Botswana and Namibia. respect of both existing and new products. It also attends to
the development, implementation and monitoring of risk
Financial Services division
models and credit strategies (inclusive of originations,
Financial Services (FS) is a division of JDG Trading. It provides
collections, customer management, credit facilities and
a centralised credit and debt-management service to the
recovery strategies).
Group from its contact centres in Randburg and Durban.
The CRC meets monthly and is chaired by Francois Grobler,
Financial Services Exco and subcommittees
the head of customer lifecycle management. Permanent
The Financial Services (FS) division is managed by the
members include Grattan Kirk, Bennie van Rooy, Arie Neven,
FS executive committee (FS Exco) with supporting
Philip Kruger, Jaco van Jaarsveldt, Charl van Rhyn, and by
governance structures comprising the FS Projects Portfolio
invitation the FS Exco members. Subject-matter experts
Steering committee, the Credit Risk committee (CRC) and
from other Group divisions and departments attend from
various departmental management committees that ensure
time-to-time by invitation.
complete alignment of all FS divisional strategies and
initiatives. JDG Insurance board and board sub-committees
JDG Insurance (JDGI) comprises two insurance companies,
» The main purpose of the FS Exco is to translate, plan and
namely JDG Micro Insurance Limited and JDG Micro Life
implement the Group’s strategy in the Financial Services
Limited, respectively the Group’s short-term and long-term
business environment and to monitor progress in this
insurance entities. These two companies are wholly-owned
regard while adhering to credit policies and managing its
subsidiaries of JDG Trading (Pty) Ltd. Their boards manage
progress towards FS ROCE targets and other agreed
and monitor the operations of the two companies.
performance milestones. It also attends to other
At each company, the directors are individually and jointly
important aspects that may impact on the FS businesses.
mandated, empowered and, among others,held
The FS Exco is chaired by Philip Kruger. Permanent
accountable to:
members include Grattan Kirk, Arie Neven, Bennie van
JD Group » Integrated report 2011
127
» manage and monitor the business and affairs of the with the Group Audit committee’s terms of reference.
company by establishing best management and The DGI Audit committee is led by an independent
operating practices non-executive chairman, Mark Scharneck. The permanent
» serve as a governance mechanism by ensuring ongoing members of the committee are Fernando Patrizi
performance against approved business plans, budgets (independent non-executive director), Howard Walker
and strategic targets (independent non-executive director) and Bennie van Rooy
(non-executive director). The Actuarial committee comprises
» prioritise the allocation of capital and other resources
five members. Mark Scharneck is its independent non-
» manage management succession planning and to identify,
executive chairman and Jonathan Bagg (statutory actuary),
develop and advance future leaders in the Group.
Fernando Patrizi (independent non-executive director),
The boards of the two insurance companies are a mirror Howard Walker (independent non-executive director) and
of each other, comprising three independent non-executive Bennie van Rooy (non-executive director) are the members.
directors, three non-executive directors and two executive
The independent auditors, the advisory actuary, the internal
directors. Fernando Patrizi acts as the independent
auditor, the JD Group CAE, the JD Group CRO and
non-executive chairman and his co-directors are Mark
management attend both committee meetings as invitees.
Scharneck (independent non-executive), Howard Walker
Meetings are held on a quarterly basis. Additional ad hoc
(independent non-executive) and the three non-executive
meetings are held when circumstances dictate.
directors from the Group, namely Grattan Kirk, Philip Kruger
and Bennie van Rooy. Reneé Griessel is the chief executive JDGI Exco
of both companies. Dr Henk Greeff is the second executive The JDG Insurance Executive committee (JDGI Exco) is a
director on the board. Howard Walker was appointed on standalone committee with its own terms of reference. It
1 September 2011. The statutory actuary has a permanent serves both insurance companies and has the same basic
invitation to attend board meetings. The companies have responsibilities as the JDG Trading Exco, but with a specific
decided to appoint a standalone Risk committee that was focus on insurance matters. In summary, the JDGI Exco
properly constituted at the JDGI board meeting held on translates, plans and implements JDGI strategy for the
31 October 2011. Four formal meetings were held during insurance business (in alignment with Group strategy),
the 2011 financial year. Additional ad hoc meetings are held manages and monitors attainment of business goals and
as circumstances dictate. agreed performance milestones as well as financial and
investment performance. It also attends to other important
JDGI Audit and Actuarial committee
aspects that may impact on JDGI’s business, such as legal
The JDGI board is supported by an Audit and an Actuarial
and compliance, IT and corporate governance issues, as
committee, an Executive committee (Exco) and an
well as people development, among others. The committee
Investment and Capital Management committee. The Audit
is chaired by the JDGI CE, Reneé Griessel. Permanent
and Actuarial committees are standalone committees,
members of the committee are Dr Henk Greeff, Olga Grobler,
however, for practical reasons these are held as joint
Grattan Kirk, Philip Kruger, Komani Mfuni, Andrew Murray,
meetings. The Audit committee has the same overall
Arie Neven, Corrie Neven, Pieter Pienaar, S’khumbuzo
responsibilities as the JD Group Audit committee, with the
Mlangeni, Maxwell Letlape, Sihle Zulu, Imraan Ismail,
objective of ensuring compliance with the Short-term and
Jaco van Jaarsveldt, Bennie van Rooy and Esther van
Long-term insurance Acts as well the Companies Act. The
Rooyen. The CAE, Morné van Wyk, has an open invitation to
JDGI committees report to the JDGI board and the JDGI Audit
attend JDGI Exco meetings. Meetings are held monthly.
committee provides regular feedback and updates to the
JD Group Audit committee on pertinent matters that may New Business Development
have a bearing on the JD Group. The JDGI Audit committee During the review period, the New Business Development
has its own terms of reference which are closely aligned operations of JD Group were conducted via two standalone
Integrated report 2011 « JD Group
128 Sustainability and governance
Corporate governance (continued)
legal entities, namely Maravedi and Blake & Associates, of all important audit and risk matters to the relevant
both being subsidiaries of the Group. A summary of their JD forums. The MARC comprised three non-executive
governance structures is provided below. directors, namely Günter Steffens (chairman), Ian Thompson
and Bennie van Rooy.
Maravedi Group (Pty) Ltd
Maravedi Group is a subsidiary of JDG Trading (Pty) Ltd Blake & Associates
and has various subsidiaries. It is a micro-lender and Blake & Associates Holdings (Pty) Ltd (Blake) is a subsidiary
debt-recovery operation. As a result of a further acquisition of JDG Trading (Pty) Ltd and has various subsidiaries. Blake is
by JDG Trading of Maravedi’s issued share capital with effect a provider of premier contact centre solutions. Processes,
from 29 July 2011, Maravedi Group became a wholly-owned including client acquisition, customer service, business
subsidiary of JDG Trading. process integration and rehabilitation, are supported by
sophisticated customer relationship management software
During the review period, the Maravedi board managed and
using in-house business intelligence. Blake has operations in
monitored the operations of the Maravedi Group. At each
South Africa, Namibia, Botswana, Mauritius and has a
subsidiary company, the directors were mandated,
worldwide customer base.
empowered and held accountable to:
» manage and monitor the business and affairs of the The Blake board manages and monitors the operations of
company by establishing best management and operating the Blake Group. At each company, the directors are
practices mandated, empowered and held accountable to:
» implement strategies and key policies in line with Group » manage and monitor the business and affairs of the
directives and plans company by establishing best management and operating
practices
» serve as a governance mechanism by ensuring ongoing
performance against approved business plans, budgets » implement strategies and key policies in line with Group
and strategic targets directives and plans
» prioritise the allocation of capital and other resources » serve as a governance mechanism by ensuring ongoing
performance against approved business plans, budgets
» manage management succession planning and to identify,
and strategic targets
develop and advance future leaders in the Group.
» prioritise the allocation of capital and other resources
The Maravedi Group board consisted of four non-executive
» manage management succession planning to identify,
and two executive directors, namely Ian Thompson
develop and advance future leaders in the Group.
(non-executive chairman), Günter Steffens (independent
non-executive), Bennie van Rooy (non-executive director), The Blake board consists of three non-executive and two
Nthabiseng Mmatli (independent non-executive), executive directors, namely David Sussman (non-executive
Henk Klopper (Financial Director) and Guy Pearce (Chief chairman), Ian Thompson and Bennie van Rooy (non-
Executive). Following the abovementioned restructuring of executive directors), as well as Howard Blake and
the Maravedi Group into JD Group, the two independent Mike Miller.
non-executive directors and Guy Pearce resigned with
Blake Audit and Risk committee (BARC)
effect from 31 August 2011.
The Blake Group board is supported by a combined Audit
Maravedi Audit and Risk committee (MARC) and Risk committee. The BARC has the same responsibilities
The Maravedi Group board was supported by a combined as the JD Group Audit committee and the JD Group Risk
Audit and Risk committee. The MARC (now defunct) had the Management committee and reports to the relevant Group
same responsibilities as the JD Group Audit committee and forums. The BARC consists of three non-executive directors,
the JD Group Risk Management committee. During the namely Ian Thompson (chairman), David Sussman and
review period the MARC regularly presented written reports Bennie van Rooy.
JD Group » Integrated report 2011
129
Unitrans Auto Unitrans Insurance
Unitrans Insurance Limited is a public company and for the
Board and sub-structures
period under review was an indirect wholly-owned
In July 2011 JD Group acquired Unitrans Auto from
subsidiary of Steinhoff International Holdings Limited, prior
Steinhoff Africa. The main legal entities in the automotive
to the sale of the company to JD Group in July 2011. The
retail structure are Unitrans Motor Enterprises (Pty) Ltd,
company operates in the short-term insurance industry and
Unitrans Motors (Pty) Ltd (both holding companies) and
has applied sound governance principles across its business
Unitrans Automotive (Pty) Ltd, which is the actual operating
operations. It has adopted the principles of King III, as well
company that houses all of the motor retail businesses. The
as other best practices and industry codes to the extent
directors of the aforementioned entities are common to all
that these add value to its business and serve a practical
three, namely Jo Grove (non-executive chairman), Hein
and useful purpose. Unitrans Insurance has adequate
Odendaal (non-executive director) and Steve Keys (the
structures and frameworks in place to mitigate corporate
managing director). Neil Rubelli is the company secretary.
governance and compliance risks and the board receives
The trading operations are divided along franchise (as
regular reports to enable it to review the state of the
opposed to geographical) lines. Each franchise has a
company’s governance and compliance. The Company is,
divisional chief executive and a divisional finance executive
among others, subject to and has complied fully with the
who are responsible for the entire operations and all
provisions of the Short-term Insurance Act and other
governance issues relating to the franchise. Support is
applicable laws, such as the Companies Act. Except for the
provided from the Group head office in the form of legal
provisions relating to the constitution of an audit committee
compliance, information technology, human resources, as
with at least three independent directors (section 94), the
well as the specialist fields of parts and service, but
company believes that it has fully complied with its
responsibility for all functions remain in the divisions.
obligations since inception of the Act.
The divisional chief executives are Brynn Stephenson
The directors of the Company are Jo Grove (non-executive
(Toyota/Hino/Lexus), Roy Pepper (General Motors), Kevin
chairman), André Rhoodie (managing executive), Steve Keys
Gillmer (Volkswagen/Audi), Gary Alge (BMW/Mini),
and Neil Rubelli (both non-executive directors), JCM Wethmar
Bernie du Plessis (Nissan/Renault), and Joel Stransky (Hertz).
and AFW Peters (both independent non-executive directors),
Steve Keys also looks after Mercedes Benz, Chrysler and
as well as Howard Walker, who was appointed as an
Mitsubishi. The two specialists based at Group head office
independent non-executive director on 1 September 2011.
are Kassie Govender (Parts) and Steve Cloete (Service).
Unitrans Insurance Audit committee report
Board meetings are held three times per year, and all of the
The Unitrans Insurance Audit committee is an independent
people mentioned above are invited as attendees and
statutory committee, as well as a committee of the board of
participate in the decision-making process.
Unitrans Insurance. The committee has conducted its affairs
Unitrans Auto Audit and Risk committee in compliance with the board-approved terms of reference
Unitrans Auto has its own formal Audit committee in place. and has discharged its responsibilities. The overall objective
The non-executive chairman is Hein Odendaal. The of the committee is to assist the board in discharging its
committee members are Jo Grove (non-executive) and duties relating to the safeguarding of assets, the operation
Steve Keys (MD). The committee meets twice per year and of adequate systems and internal financial controls
follows a standard agenda, similar to the Group audit’s processes, the reviewing of financial information and the
agenda. Both the external auditors and the internal auditors preparation of the annual financial statements. During the
(from Steinhoff Africa) attend these meetings. The period from 1 July 2010 to 30 June 2011, the committee met
committee reviews all audit reports, as well as reviewing the twice and has discharged all its duties, including, among
Cura risk analysis which is updated for each meeting. others, the following:
Feedback is given at all board meetings. » assisted the board in discharging its duties relating to
safeguarding of assets
Integrated report 2011 « JD Group
130 Sustainability and governance
Corporate governance (continued)
» assisted the board in monitoring the operation of two executive directors, namely Theodore de Klerk and
adequate systems, control and reporting process Wayne Opperman. Both non-executive directors are
» assisted the board in the preparation of accurate newly appointed, replacing the Steinhoff Africa
reporting and financial statements in compliance with appointments post the acquisition of the business by
the applicable legal requirements and accounting JD Group Limited in July 2011.
standards Four formal meetings have been held during the 2011
» assessed and approved the internal audit plan financial year. In addition, when circumstances dictate,
» assessed and commented on the report from both additional meeting are held to deal with specific matters.
the internal and external auditors The board’s sphere of responsibility and accountability
» assessed the going-concern status of the company includes:
» received and reviewed reports from both internal and » strategy (definition and execution thereof)
external auditors concerning the effectiveness of the » performance management against approved business
internal control environment, systems and processes plans, budgets and targets
» considered the independence and objectivity of the » risk management (operational, environmental, health
external auditors and safety)
» nominated the auditors for reappointment and » defining, approving and management of compliance of
determined their fee company policies and procedures
» pre-approved non-audit work » prioritising the allocation of capital and other
» reviewed and recommended for adoption by the resources
board such financial information that is publicly » managing succession planning and developing
disclosed for the year high-potential individuals.
» considered the effectiveness of internal audit,
SteinBuild Audit committee and Executive committee
approved the one-year operational strategic internal
The SteinBuild board is supported by an Internal Audit
audit plan and monitored adherence of internal audit
committee (which meets four times per year) and an
to its annual plan
Executive committee (monthly meetings).
» evaluated the annual financial statements for the year
The internal audit function is independently managed
ended 30 June 2011 and recommended the annual
and staffed by Steinhoff Africa.
financial statements for approval to the board.
Risk is managed by the Executive committee who
Membership of the committee during the year under
reports to the board.
review comprised solely independent non-executive
directors, a non-executive director and the chairman. The Executive committee (Exco) is represented by the
Representatives from the external auditors, the head of following portfolios:
the internal audit service provider and board members » strategy
also attended the meetings as permanent invitees. The » financial and capital management
Company is in the process of appointing a third
» operations and marketing
independent non-executive director.
» procurement
SteinBuild » risk management
SteinBuild board » human resources
The SteinBuild board comprises four directors. The two » business processes and information technology
non-executive directors are the non-executive chairman,
» transformation.
David Sussman and Grattan Kirk. They are supported by
JD Group » Integrated report 2011
131
There are six permanent members on the Exco. conjunction with insurance industry experts, all risks not
Specialist managers are invited from time to time to covered by insurance, as well as business continuity
provide input on their fields of expertise. management and disaster recovery planning. The
possible risk of fraud in the various areas of the business
Services departments
is also considered and analysed in this forum. Risks and
There are eleven corporate service departments that
key issues are identified and continually monitored using
support the business units, namely Finance, Human
the planning process and close involvement by
Resources, Risk Management (comprising Management
executive management in the Group’s operations.
Assurance, Enterprise Risk Management, Forensic Audit,
Safety and Security), Information Technology and Risk information, indicating all risks identified on a
Communications (IT), Legal and Compliance, Supply residual level above the risk appetite, as well as the
Chain Services, Merchandise and Marketing, Property mitigating controls and/or action plans, are reported.
Services, Secretariat, Strategy, as well as the These risks are then evaluated by the IRMC, using the
Transformation department. Some of these departments BarnOwl risk management application, to record the
have committees that play an important role in the degree of inherent impact and the likelihood of
Group’s governance framework. occurrence. The control environment relevant to this risk
is evaluated and a qualitative or quantitative score is
Management committees
assigned to the residual risk. The top risks are ranked
In addition to the forums mentioned above, specific
and all of the aforementioned are reported to the Group
responsibilities have been delegated to various
Risk Management committee. In this manner the
management committees across the Group’s
significant and major risks facing the Group are
operations. These include forums such as the Internal
monitored, as well as the effectiveness of the various
Risk Management committee (IRMC), the Furniture
management corrective actions aimed at mitigating
Retail Exco, the Incredible Connection Exco, the HiFi
these risks.
Corp Exco, the Maravedi Exco (now defunct), the Blake
Exco and the Abra Exco (no longer part of the Group), The risks are regularly updated to take account of
as well as other departmental and certain subject- changing market, economic, political, environmental,
matter or topic-specific committees. The most important legislative and other conditions and changes in the
of these forums are discussed below. business environment. The majority of inherent risks
remain constant, but new risks arise from time to time
Internal Risk Management committee (IRMC)
and the impact these may have on business operations
The IRMC is a subcommittee of and reports to the Group
are assessed on an ongoing basis.
Risk Management committee and indirectly to the JDG
Risk is not only viewed from a negative perspective. The
Trading board. The purpose of the IRMC is to identify and
review process also identifies areas of opportunity, such
review the risks presented by the Group’s operational
as where effective risk management can become a
divisions and by the corporate service departments. An
competitive advantage. In order to provide enhanced
internal risk plan and approach has been developed,
independent risk-assurance going forward, the risk
which has been informed by the Group’s strategy. The
management function transformed its structures,
aforementioned provides guidance relating to the
processes and procedures to provide an enterprise-wide
maintenance of an effective governance, risk
risk management service. During the review period, the
management and internal control framework.
Group’s risk management function and framework were
The IRMC reviews issues of strategy, risk, performance,
assessed by the independent outsourced internal audit
sustainability and compliance and monitors the
function (KPMG). The prevailing system of risk
integration of governance and ethics with risk
management was found to be “mature” at Group level.
management. The committee also considers the
adequacy of insurance cover (including self-insurance) in
Integrated report 2011 « JD Group
132 Sustainability and governance
Corporate governance (continued)
The IRMC is chaired by Richard Chauke (the Group’s Executive Director: Transformation, Tax, Risk, Internal Audit and
Compliance) and the other member of the committee is Pieter Pienaar, the CRO. Other JDGT Exco members and Corporate
Service department executives attend the meeting to provide risk-related feedback from their relevant operational areas or
service departments. The IRMC met four times during the review period.
The IRMC confirmed that the Group has not taken any undue risk in the pursuit of reward and has suffered no material
losses during the review period as a result of any unusual or undue risk taken.
The major risks as at the financial year-end date that could potentially prevent the Group from achieving its strategic objectives
are as follows:
Group risk Mitigation of the risk
» Poor customer centricity » Embrace the Art of Service initiative to improve service delivery to both internal and
and quality of service external customers.
delivery » Constantly monitor market behaviour, changing demographics, customer buying
patterns, competitor activity and customer indebtedness in order to ensure customer
satisfaction.
» Sustainable future growth » Ensure adequate financial performance of the Group without compromising prudent
» Non-achievement of the accounting standards, policies and levels of provisioning.
ROCE targets, expense vs » Maximise existing income and revenue streams, identify alternative income streams,
income growth expand the Group’s footprint and maximise retention of the customer base, by
management, non- providing the customer with excellent service and the appropriate mix of physical
achievement of top-line and financial service products at the right place at the right time.
sales, limited revenue » Establish efficient cost structures and monitor expenses against budget.
streams and centralisation
» Constantly monitor financial performance and implement corrective measures where
of logistics.
necessary.
» Centralise the logistics function in order to realise cost benefits to the Group.
» Credit risk, credit granting » Ensure that the ability to collect the debtors’ book is constantly improved by
and collections, fraud enhancing processes, technology and optimising procedures.
» Ensure credit granting rules are maintained and updated in order that the Group
acquires credit risk appropriate to its credit risk appetite.
» Constantly monitor the performance of the debtors’ book and timeously implement
corrective measures where necessary.
» Ensure that sufficient provisions are raised for receivables that are unlikely to be
recovered.
» Ensure that appropriate fraud prevention processes are in place to reduce fraud to
the minimum.
JD Group » Integrated report 2011
133
Group risk Mitigation of the risk
» Building and optimising » Maintain appropriate succession planning, especially for key positions, taking
people capacity cognisance of employment equity.
» Maintain appropriate development initiatives.
» Optimised technology » Ensure that the Group has appropriate IT structures in place that facilitate integration
enablement across business divisions.
» Dependency on external » Ensure that IT-specific disaster recovery (DR) and business continuity (BC) processes
service providers, are addressed via the Group’s enterprise-wide DR and BC programme.
implementation of SAP and ,
» New IT systems (being SAP VisionPLUS and Capstone) are being implemented in the
VisionPLUS, disaster Furniture Retail and Financial Services operations to enable these to be more agile
recovery and business and to enhance the ability to sell new products and services while more effectively
continuity managing the long-term sustainability of the business.
» Reliance on third-party vendors (external service providers) will be reduced through
the use of more generic software.
» Transformation » Monitor the overall transformation strategy and become more representative of the
» B-BBEE compliance with demographics of South Africa, particularly at the middle and senior management
targets levels of the Group.
» Ensure and monitor that all aspects of B-BBEE are embraced for long-term
sustainability, growth and profitability of the Group.
» Ensure that an ownership transaction is concluded at the appropriate time.
» Compliance with new » Ensure that the Group remains compliant with the laws and regulations that govern
legislation the environment in which the Group operates.
» Continuously review Group policies and procedures to ensure compliance is
established and monitor adherence to policies.
» Ensure that customers are made aware of their rights and obligations and that
compliance with procedures has taken place.
» Engage with stakeholders and the community and ensure that the Group maintains
its corporate citizen and inclusive approach towards integrated sustainability.
» Funding and liquidity » Funding, liquidity and interest rate risk is monitored on an ongoing basis at a board
level.
» The funding profile of the Group has improved significantly over the last three years.
» The Group is currently restructuring its balance sheet to fund the various asset
classes appropriately.
» Occupancy costs » Strategic central distribution centres are being acquired to secure long-term tenure.
Integrated report 2011 « JD Group
134 Sustainability and governance
Corporate governance (continued)
The CRO has taken the first steps in quantifying the A formal compliance policy has been adopted during
Group’s entire risk portfolio. Although the process the first quarter of the new financial year. Through
requires further refinement, it provides a very useful quarterly reports and personal interaction,
view at a glance of the Group’s quantified risk position the compliance officer keeps the JD Group Risk
at any given moment in time. In the unlikely event that Management committee and the board well-informed of
all losses materialise simultaneously, the aggregate loss the Group’s compliance status and also assists the
would be R1,1 billion (compared to JD Group’s total company secretary in carrying out his primary obligation
capital resources of R8,1 billion). This provides comfort of advising the board on relevant and applicable
that reserves are adequate to absorb all losses without legislation impacting on the Company.
any solvency risk.
Two important legislations with far-reaching implications
The Group Compliance committee for the Group’s operations, namely the Consumer
Protection Act (the CPA) and the Companies Act 2008
The Compliance committee is responsible for
(the Act) were implemented during the year. Through a
overseeing and reviewing the effectiveness of the
well-planned programme, the compliance officer
compliance and legal framework across the Group. It
orchestrated the upskilling of staff in the intricacies of
considers the adequacy of the processes and systems
the NCA across all Chains in the Group. Since the NCA
that have been implemented to monitor and ensure
was implemented, a number of compliance audits have
compliance with applicable legislation and regulations in
been carried out at various stores to assurance-test the
a pro active manner. At its meetings, it considers
effectiveness of these NCA learnings. The Group uses
compliance, legal and risk issues reported to it under
customised risk plans in respect of key legislation to
the escalation policy and reviews compliance issues
assist the organisation in mitigating the risk of legal
raised by any regulatory body, as well as any
compliance. A legal dashboard and various related
reputational issues. It reviews breaches (non-
compliance control measures have been implemented
compliance or transgressions) in respect of regulatory
through which about 120 key pieces of legislation are
obligations and considers key compliance failures and
being monitored.
management’s remedial actions. It also monitors and
assesses the role and effectiveness of the Group’s A number of subject-matter experts among staff have
compliance at subsidiary, divisional and departmental each taken accountability for legal compliance in the
level. specific areas of their business to ensure that the Group
remains fully compliant with all material provisions of
The committee ensures that there is adequate
applicable laws and regulations. The committee
integration of regulatory requirements into business
has enterprise-wide representation and is chaired by
processes and monitors any litigation actions in which
Richard Chauke. The members are
the Group may be involved. The committee meets on a
Dr Yondela Ndema, Grattan Kirk, Bennie van Rooy,
quarterly basis and through its extensive agenda,
Ian Thompson, Pieter Pienaar, Morne van Wyk,
analyses the Group’s regulatory universe, the
Andrew Murray, Johann Pieterse, as well as
compliance, legal and regulatory obligations and specific
Philip Kruger, Pamela Barletta, David Hirsch, Arie Neven,
risk areas pertaining to regulatory compliance. It also
Reneé Griessel, Julian Hanmer, Allan Herman,
monitors compliance with applicable operational
Dave Miller, Charl du Plessis, Lucky Phalafala,
requirements and makes enquiries as to whether the
Henk Klopper and George Annandale (as alternate
controls provide reasonable assurance that the Group is
for Pamela Barletta).
in compliance with the regulatory universe to which it is
subject. More information around compliance interaction with
Regulators is reported in the sustainability report on
pages 88, 89 and 93.
JD Group » Integrated report 2011
135
Furniture Retail Executive committee (FR Exco) internally and externally and compliance with
The purpose of the FR Exco is to translate, plan and operational and administrative policies and progress
implement Group strategy in the Furniture Retail division reviews on divisional projects. Contracted KPAs for each
and to monitor progress to ensure compliance with Exco member ensures their participation not only as
policies and to manage progress towards business functional head, but as business leaders who contribute
goals and agreed performance milestones. It also to the strategic well being of the business and raise or
attends to other important aspects that may impact on question any business related issue, review or report,
the Furniture Retail businesses in general. Discussion with the sole objective of business improvement.
points on the committee’s agendas include operational Meetings are held monthly.
business goals (and their link with Group strategic
The Incredible Connection (IC) Executive committee
business goals), business performance measurements,
comprises David Miller (chairman), Grattan Kirk,
receivables and inventory management, performance,
Pamela Barletta and David Hirsch, Johan Coetsee, as well
people development, performance of suppliers in terms
as Stefan Marnewick, Sean Nelson, Natalie Smith, Ansgar
of service level agreements, research and development
Pabst, Tessa Pintusewitz, Victor da Silva, Jan Swanepoel
trends internally and externally, compliance with
and John Beetge. Senior JDG Trading executives have open
operational policies and progress reviews on divisional
invitations to attend the IC Exco meetings.
projects. Meetings are held quarterly.
The HiFi Corp Executive committee comprises
As at the date of this report, the FR Exco membership
Allan Herman, Mark Wood, Neil McLean,
comprised Arie Neven (Chairman), Colin Bresler,
Jonathan Bromley, Piwe Makaula, Victor da Silva
Johan Coetsee, Toy de Klerk, Julian Hanmer,
and Grattan Kirk. Senior JDG Trading executives
David Hirsch, Pat Kimmince, Mike Roberts,
have open invitations to attend the HiFi Corp Exco.
Anthony Smith, Matthew van der Walt, George
Connection Group board and subcommittees
Annandale and Linda Sithole. Other executives,
Since 2005 when JD Group acquired Connection Group
including Morné van Wyk, Pieter Pienaar,
Holdings (Pty) Ltd, the Connection Group Holdings board
Bennie van Rooy, Gerrie van Niekerk and Philip Kruger
retained its independence, however, its two
have an open invitation and attend the FR Exco
subcommittees, namely the Remuneration committee
meetings from time to time.
and Audit committee, were incorporated into the
Incredible Connection and HiFi Corp Executive respective Group committees. Two of the JD Group
committees (Cash Excos) board executive directors, namely Grattan Kirk and
The purpose of these two committees is to translate,
David Sussman, serve on the Connection Group board
plan and implement Group strategy for the Cash Retail
together with David Hirsch, Johan Coetsee and
division businesses and to monitor progress thereon, to
David Miller.
ensure compliance with policies and to manage
progress towards business goals and agreed Other key management committees
performance milestones. It also attends to other and forums
important aspects that may impact on the Cash Retail Leadership and Development Council (LDC)
businesses. Discussion points on the Cash Exco The LDC’s terms of reference include leadership
agendas include operational business goals (and their development, succession management and expedition
link with Group strategic business goals), business of the achievement of equity targets. The LDC meets on
performance measurements, inventory management, a quarterly basis and its membership comprises Grattan
financial performance, people development, Kirk (chairman), Pamela Barletta, Richard Chauke,
performance of suppliers in terms of service level Dr Henk Greeff, Philip Kruger and Arie Neven (all being
agreements, research and development trends JDG Trading directors), as well as senior human
Integrated report 2011 « JD Group
136 Sustainability and governance
Corporate governance (continued)
resources management team members the property portfolio. The Property committees directs
George Annandale, Camilla Kenward, Lauren Otto, the property services department to pursue
Debra Teles and Charles Louw. negotiations in accordance with mandates agreed at
each committee meeting.
Employment Equity & Training committee (EE&TC)
The EE&TC monitors and ensures the Group’s overall The FR Property committee meeting is chaired by
compliance to employment equity (EE) and skills Ivan Nefdt. The members comprise Arie Neven, and the
development. In this role it ensures that the Group fulfils individual chain chief executives, as well as the
the requirements of its EE initiatives and the stipulations operations executives and relevant senior managers
of the Employment Equity Act, particularly in relation to within the property services department. The CR
the Group’s business in South Africa. The EE&TC reports Property committee meeting is chaired by Ivan Nefdt,
to the transformation department, with a split reporting the Group Executive: Property. The members are
line into the human resources department. Among Grattan Kirk, the relevant Chain chief executives,
others, the EE&TC assists the Group in compiling its as well as Jonathan Bromley from HiFi Corp,
employment equity report. Under its leadership, the Stefan Marnevick and relevant senior management
Group also adopted and implemented an employment of the property services department. Matters on the
equity policy. The main focus into the future will be to agenda include issues such as lease renewals within
drive the implementation of the policy to ensure an a ten-month horizon, relocations, new developments,
equitable, diverse and transformed workforce. closures and renovations. Meetings are held monthly.
Delegates from occupational categories, designated Marketing and merchandise review (MMR)
groups, non-designated groups, women and also staff meetings
unions are represented on the EE&TC. Richard Chauke The purpose of the monthly MMR meetings is to review
acts as chairman. During the review period, Mlungisi the individual performances of the chains to ensure that
Thabethe, Pamela Barletta, Mirriam Khumalo, sales are maximised, suitable merchandise is managed
Walter Moeletsi Lucas Radebe and Nelson Mothapo and advertised and that gross margins are achieved.
served as members. Each of these meetings deal with three key areas,
namely:
The EE&TC is assisted by a facilitation team of seven
individuals (not members of the EE&TC). The meeting » A brief overview of the chain’s business performance
convenes quarterly. Employment equity and skills » The previous month’s performance by merchandise
development committees also exist at divisional, chain category
and corporate department level in the Group. » Results of marketing activity for each of the chains
within the Group for the previous and coming month.
Chain Property committees
The Group is assisted by three Property committees, These meetings are attended by the chain executive
one each for the Furniture Retail Chains (FR) and the team and by representatives from the respective
Cash Retail Chains (CR) and a separate committee for chain advertising agencies. The Furniture Retail MMR
Property Logistics (PLC). These committees operate meetings are chaired by David Sussman, with
under the same terms of reference and ensure that attendance from Grattan Kirk, David Hirsch and
new stores, relocations, closures and other related Arie Neven, Conrad Kleingeld and Alec Goodman (both
property matters are discussed and receive attention in corporate merchandise executives), Michael Da Paixao
accordance with operational requirements. The main (merchandise planning executive) and Irene Pilavachi
objective is to ensure that sign-off is received from each (corporate marketing executive). David Sussman (as
relevant committee in respect of any property decision chairman), Grattan Kirk and David Hirsch also serve on
that is taken that will bind the Group financially in any the Cash Retail MMR committee, which has a similar
way, and further to identify any trading risk relating to composition and member attendance as the FR MMRs.
JD Group » Integrated report 2011
137
Important enterprise-wide governance charter, wherein the purpose, authority and
functions and structures responsibility of the IAF are formally defined. The
Internal audit function (IAF) activities of the internal auditors are coordinated by
The IAF provides the board of directors, the Audit the CAE, who has unrestricted access to the Audit
committee and management of business operations committee chairman and its members.
with independent and objective consulting and
Risk management
assurance services that evaluates and improves
The board of JD Group is responsible for overseeing the
governance, risk management and control processes.
risk management activities of the Group. Management
During the review period, the IAF was outsourced to
is responsible for applying prudent risk management
KPMG. The IAF takes account of the activities of the
practices to mitigate risk in its day-to-day business
external auditors and the Management Assurance
operations. The risk management function (RMF)
function to ensure proper coverage and to minimise
provides a professional and comprehensive enterprise-
duplication of effort. The external auditors (Deloitte &
wide risk management (ERM) service to the Group to
Touche) have access to reports issued by the IAF. Audit
enable it to be a leader in the field of risk management.
plans for each business operation are tabled annually to
The ERM process entrenches ERM as a philosophy and
accommodate changing business needs.
methodology throughout the organisation, ensuring that
Among others the IAF provides: all risks are properly mitigated and managed across all
» confirmation that risks are appropriately identified business operations. The Group applies a logical,
and managed systematic and repetitive methodology to identify,
analyse, access, treat and monitor all risks, whether or
» confirmation of the adequate and effective operation
not insurable. The effectiveness of the ERM process
of the established internal control systems
is measured by how well it aligns the key fundamentals
» confirmation that significant legislative or regulatory
of governance, business objectives, ethics, policies,
issues impacting on the Group are recognised and
standards, strategies and compliance. The RMF
addressed appropriately
recognises the complexity and diversity of risks that
» objective confirmation that reliable information is
face the Group’s operational activities and ensures that
provided to the board by management.
efforts are integrated to maximise opportunities and
An internal audit plan is approved annually by the Audit minimise exposures to risks and reduce them, where
committee and is based on risk assessments that are necessary, to levels matching its risk appetite. The
continually updated to identify not only existing and Group has taken appropriate steps to ensure that
residual risks, but also emerging risks, as well as issues adequate systems are in place for the assets of the
highlighted by the Audit committee and the Risk Group to be safeguarded through the prevention and
Management committee. Internal audits are conducted detection of fraud and other irregularities and material
formally at business units and corporate service misstatements. The system of internal controls is
departments in accordance with the approved coverage considered appropriate and the risks taken have been
plan. Audit results are reported to management who at an acceptable level in the context of the business
is responsible for corrective action to eliminate environment of the Group.
weaknesses. Follow-up audits are conducted in areas Group regional security managers are deployed through
where weaknesses have been identified. The IAF verifies the Group to manage physical risks to the Group’s
that the corrective actions implemented by assets. The Group carries some insurance risk on the
management are effective in strengthening internal statement of financial position, which is carefully
controls in order to mitigate business risk. Annually the monitored on a monthly basis, with corrective actions
Audit committee reviews and ratifies the internal audit being taken where required. Year-on-year total cost of
Integrated report 2011 « JD Group
138 Sustainability and governance
Corporate governance (continued)
risk has reduced over the last three years. During the confirmed that the prevailing system of internal controls
year, a number of improvements to internal controls is in all material respects acceptable and that overall, a
where implemented. No significant weakness has been good control framework exist in the JD Group. Therefore,
identified that has resulted in any material loss. Given based on the aforementioned and various other
the aforementioned processes and measures, the CRO interrogations it made during the review period, the
has given written assurance to the JD Group Audit board is able to confirm that it is not aware of any
committee that risk is managed and controlled prudently weaknesses in control frameworks that have
and effectively throughout the Group. The scope and led to any material loss or contingency during this
operations of the Internal Risk Management committee financial year.
and of the JD Group Risk Management committee are
set out on pages 124 and 131 respectively. Financial control and reporting
The directors are responsible for ensuring that Group
Management assurance function
companies maintain adequate records and report
A management assurance function (MAF) has been
accurately and reliably on the financial position,
established during the review period and forms an
activities and results of the Group. Financial reporting
integral part of the risk management function. It focuses
procedures are applied in the Group at all levels to meet
mainly on providing assurance services at a business
this responsibility. Financial and other information is
unit level, with a particular concentration on compliance
constantly reviewed and remedial action taken, where
with policies and procedures. The CAE heads up this
necessary. Improvements to the quality of reported
function.
information are continually effected by means of
replacing or upgrading information systems. The Group’s
Control environment
annual financial statements are prepared in accordance
The directors have accepted responsibility for
with International Financial Reporting Standards.
maintaining appropriate internal control systems to
Appropriate accounting policies are consistently
ensure that the Group’s assets are safeguarded and
applied, unless an accounting policy requires revision or
maintained, and that losses arising from fraud or other
there is a requirement to adopt new accounting
illegal acts are minimised. Control systems are
standards, in which case proper disclosure is made.
monitored and improved in accordance with generally
Reasonable and prudent judgements and estimates are
accepted best practice. The board has reserved key
made in order to properly disclose the Group’s financial
matters which are required to be brought to it for
status and these are reviewed by the external auditors
decision, thus ensuring that it maintains full and
(Deloitte & Touche) and the JD Group Audit committee.
effective control over strategic and certain financial,
The Group has progressed well with the implementation
organisational, governance and compliance matters,
of SAP to enhance reporting, control and efficiencies
among others.
across the Group. Key IT processes have been tested
The MAF together with the IAF monitors compliance
against ITIAL standards by an external party.
with policies and procedures and the effectiveness of
the internal control system and highlights significant Main internal financial control
findings in respect of non-compliance. The IAF procedures
(outsourced to KPMG) has provided the Audit The board has overall responsibility for ensuring that the
committee with a written statement, pointing out that Group maintains a system of internal financial control to
the IAF has identified control weaknesses during the provide it with reasonable, but not necessarily absolute,
course of delivering its programme of assurance during assurance regarding the reliability of the financial
the review period. However, the identified control information used within the business and for
weaknesses have been addressed and the IAF has publication, and to ensure that assets are safeguarded.
JD Group » Integrated report 2011
139
Prudent financial controls and procedures are in place, Fraud and illegal acts
including controls involving the segregation of The Group does not engage in or accept or condone
incompatible duties and controls relating to the security any illegal acts in the conduct of its business. The
of assets. The operations and effectiveness of internal board’s policy is to actively pursue and prosecute the
financial controls are reviewed on a regular basis. perpetrators of fraudulent or other illegal activities,
Procedures for seeking and obtaining approval for should it become aware of any such acts. The Group
financial transactions are contained in the Group’s has a whistle-blowing procedure in place through which
Levels of Authority document and applied diligently employees can report illegal acts anonymously to Crime
across the Group’s finance operations. These authorities Call Anonymous without fear of reprisal. More details in
and the bank signing mandates have been reviewed this regard can be found on page 87 of the sustainability
and updated during the review period. The Group report.
operates a comprehensive annual planning and
budgeting process. The annual budget is approved by Stakeholder engagement and industry
the board. The financial reporting system compares membership
results with plans, budgets and with the previous year’s In all dealings, the board strives to ensure that the
results and is able to identify deviations on a daily and interests of stakeholders are taken into consideration in
monthly basis. Reports include regular cash flow its decisions and that they are fully informed of
statements, income statements and balance sheets decisions relevant to them. The Group’s engagements
projected for 12 months ahead, which are used, among with each of its stakeholders and its industry
others, to determine future funding needs. membership details are set out on pages 75 to 94 and
on page 98 of the sustainability report respectively.
Integrated report 2011 « JD Group
[FUTURE]
Financial Statements
Condensed Annual
[ The Group has implemented its platform for growth and will ensure that
it delivers against its strategic business goals across all operating divisions ]
142 Condensed annual financial statements
Directors’ report
The directors have pleasure in submitting their report Corporate governance
together with the Company and Group annual financial
The Group is totally committed to the principles of
statements for the year ended 31 August 2011.
transparency, integrity and accountability as set out in
King III. The directors are fully committed to conducting the
Nature of business
Group’s business in accordance with generally accepted
The Group carries on business of furniture and appliance corporate practices. Although the board is accountable to
retail. It also provides financial, insurance, microlending and the Company itself, and at all times acts in the best interest
debt recovery services as well as contact centre solutions. of the Company, its inclusive decision-making approach
In the latter half of the financial year under review, the accommodates the legitimate interests and expectations of
Group acquired the South African retail assets of Steinhoff its stakeholders. The directors support the notion that good
International, namely Unitrans Auto and SteinBuild. After the governance is essentially about effective leadership and
acquisition, the Group has four retail divisions, a consumer that sustainability is a moral and economic imperative. The
finance and new business development divisions. Company therefore regards itself as a leading corporate
The Group operates its Furniture Retail operations through citizen of South Africa and endeavours to achieve
eight chains in southern Africa and one in Poland, namely sustainable outcomes for people and the planet, whilst
Abra SA. This international operation has been sold to making a fair profit. During the year under review, the
Steinhoff International as a part of the greater Unitrans/ directors have applied the recommendations of King III to
SteinBuild/Abra transaction and has been accounted for on the Group’s activities. In exceptional instances, where the
a discontinued basis in the financial statements. The Group’s board regarded the recommendations not to be in the best
Cash Retail operations are conducted through two Chains in interest of the Company, the principles have not been
South Africa. The automotive business offers a broad range applied. In each such instance, a rational and judicious
of vehicles, parts and accessories, servicing and insurance, reason has been given for the board’s decision. These
while the building materials business operates under three and other related matters are set out in detail in a
key, well-entrenched brands in South Africa. comprehensive overview of the Group’s governance status
in the Corporate Governance section included in the
Results of operations integrated report.
More details of the aforementioned businesses, their retail
Independent auditors
outlets and the results of their operations are set out in the
Group and Company income statements and in the Group After having assessed and verified their independence, the
segmental analysis. JD Group Audit committee, at its meeting in November 2011,
has recommended that shareholders appoint Deloitte &
Going concern Touche as the Company’s external independent auditor for
the 2012 financial year. The rotation of the designated
The financial statements have been prepared using
auditor has been monitored closely and in this regard,
appropriate accounting policies, supported by reasonable
Xavier Botha will retire as the designated auditor having
and prudent judgements and estimates. The directors have
served the maximum period allowed as the auditor
a reasonable expectation, based on an appropriate
responsible for the audit at JD Group. Brian Escott has been
assessment of a comprehensive range of factors, that the
nominated to serve as the designated auditor for JD Group
Group and the Company have adequate resources to
from the 2012 financial year to the 2016 financial year.
continue as going concerns in the foreseeable future.
Deloitte & Touche has confirmed that Brian Escott is
registered with the JSE and eligible to serve as the
Accounting policies designated auditor. Both Deloitte & Touche and Brian Escott
The annual financial statements have been prepared in are registered with the Independent Regulatory Board for
accordance with International Financial Reporting Standards Auditors (IRBA) and the firm is a JSE-accredited firm,
(IFRS) and their interpretation as adopted by the entitling it to provide services to a listed entity. All non-audit
International Accounting Standards Board (IASB), the Listings services provided by Deloitte & Touche are in terms of an
Requirements of the Johannesburg Stock Exchange (the JSE approved non-audit services policy and all such work is
Rules) and the requirements of the Companies Act No. 71 presented to and approved by the Audit committee. Certain
of 2008 (the Act). The accounting policies applied in the non-audit services are approved prior to commencement of
preparation of these annual financial statements remain any such work.
consistent with those of the previous financial year, except
for the adoption of revised accounting standards as
disclosed in the annual financial statements.
JD Group » Integrated report 2011
143
Share capital, share premium and shares under the directors have granted a further 2 828 000 share
the control of the directors appreciation rights to participants at a strike price
of R51,30 each. As at 31 August 2011, altogether
As a result of the acquisition agreement entered into
1 159 500 shares subject to appreciation rights still
between JD Group and Steinhoff, 49 330 000 shares were
remain under the control of the directors for purposes
issued to Steinhoff Africa Holdings (Pty) Ltd as
of the SAR Scheme, ensuing from the specific authorities
compensation for the acquisition of Unitrans Auto and
obtained from shareholders in 2009 and 2010.
SteinBuild. As a consequence, the Company’s issued share
capital has increased from 170 500 000 shares to At the annual general meeting on 16 February 2012,
219 830 000 shares. At the same time, the share premium shareholders will be requested to place approximately
increased from R1 770 million to R4 234 million as the 3 500 000 (2010: 3 500 000) unissued ordinary shares of
acquisition shares were issued at a premium of R49,95 5 cents each under the control of the Group’s directors
per share. As a result of this transaction and a further with the power to allot and issue them solely to SAR
proposed transaction detailed in a SENS announcement on Scheme participants in accordance with the SAR Scheme
19 October 2011, JD Group may become a subsidiary of rules, the Company’s articles of association, the JSE Rules
Steinhoff Africa in the near future. and the provisions of the Act.
The board did not act on its mandate from shareholders, to More details in respect of these two incentive schemes are
repurchase its own shares, obtained at the annual general provided in note 17 of the annual financial statements.
meeting on 17 February 2011.
Subsidiary companies
Details of the authorised and issued share capital, the share
premium and the movements during the year are provided Details of the Company’s subsidiaries are set out on
in note 17 of the annual financial statements. page 166 of the annual financial statements. The Company’s
interest in the profits and losses after taxation of
Share incentive trusts subsidiaries are as follows:
2011 2010
At a special general meeting in August 2009, 11 375 783
Rm Rm
unissued ordinary shares of 5 cents each have been placed
under the control of the Group’s directors with the power Profits 805 575
to allot and issue them in order to phase out the existing, Losses (52) (53)
outdated JD Group Employee Share Incentive Scheme
(the Scheme). As at 31 August 2011, altogether 7 078 557
Distribution to shareholders
shares subject to options still remain under the control of
the directors for phasing out the Scheme by 1 June 2016 An interim dividend of 100 cents per share (2010: 70 cents
when the seven-year term of the final grant, number 27, per share) was declared, and paid on 27 June 2011. A final
reaches its lapse date. dividend of 100 cents per share (2010: 80 cents per share)
has been recommended by directors for payment to
During the year, the Trustees of the Scheme did not acquire
shareholders on Monday, 12 December 2011. The last date
any JD Group shares in the open market.
to trade cum dividend is Friday, 2 December 2011, while the
At the special general meeting on 12 August 2009, the record date in terms of the JSE’s prescribed time-table is
shareholders placed 2 500 000 of the unissued ordinary Friday, 9 December 2011.
shares of 5 cents each under the control of the directors
via a specific authority. Changes to the board and board committees
By way of general authorities, additional shares of Mr Ivan Levy, a non-executive director who served on the
2 000 000 and 3 500 000 were placed under the directors’ board for 17 years, sadly passed away on 5 February 2011.
control at the annual general meetings on 3 February 2010 At the time of his death he was the chairman of the
and 17 February 2011, respectively. The Directors were JD Group Nominations committee and a member of the
given the power to allot and issue these shares for the sole JD Group Remuneration committee.
purpose of the replacement share incentive scheme,
As a consequence of the afore mentioned, Mr Vusi Khanyile,
namely the JD Group Share Appreciation Rights Scheme
the Group’s Lead Independent Non-executive Director,
(the SAR Scheme). Prior to the 2011 financial year, the
was appointed chairman of the Nominations committee
directors have granted share appreciation rights on
and a member of the Remuneration committee.
4 012 500 JD Group ordinary shares to participants.
During the review period, on 24 February 2011, upon At the board meeting on 10 November 2010, Mr Jacques
recommendation by the JD Group Remuneration committee, Schindehütte was appointed to the board as an
independent non-executive director.
Integrated report 2011 « JD Group
144 Condensed annual financial statements
Directors’ report (continued)
Post the Company’s year-end date, on 1 September 2011, The performance of the board of directors as a whole has
Ms Nerina Bodasing and Mr Matsobane Matlwa, were been assessed during the past financial year and was found
appointed to the Company’s board of directors. adequate. In addition, the independence status of the
independent non-executive directors were considered and
Five directors of the board are up for re-election at the
found untainted. The independent status of Dr Len Konar,
annual general meeting on 16 February 2012. These
Mr Martin Shaw and Mrs Maureen Lock, who have served
re-elections ensue from the provisions of the Company’s
more than nine years on the board, was evaluated robustly
articles of association (retirement by rotation) and the
and found untainted. As a consequence, and in accordance
King III principles (rotation of non-executive directors).
with the requirements of the JSE Listings Requirements read
Mrs Maureen Lock and Messrs Martin Shaw and Günter with King III, the directors were categorised as follows:
Steffens (all independent non-executive directors), retire by
rotation at the forthcoming annual general meeting in terms Executive directors
of principle 2.18.6 of King III, which recommends that at David Sussman (Chairman)
least one-third of the non-executive directors on the board Richard Chauke
should retire each year. Dr Henk Greeff
In addition, Messrs Richard Chauke and Ian Thompson Grattan Kirk
retire in terms of clause 94 of the Company’s articles of Ian Thompson
association. Bennie van Rooy
In total the retirement of these five directors fulfils the
Independent non-executive directors
rotation requirements of the Company’s articles, namely
that one third of all directors should retire at the annual Vusi Khanyile (Lead Independent Non-executive Director)
general meeting. Being eligible, all of the aforementioned Nerina Bodasing
directors have offered themselves for re-election at the Dr Len Konar
annual general meeting. Maureen Lock
Matsobane Matlwa
The articles of association and the Companies Act
Jacques Schindehütte
furthermore provide that all new appointments to the board
Martin Shaw
of a company between two annual general meetings, shall
Günter Steffens
retain office until the first annual general meeting following
their appointment, when they shall retire and be eligible for The full and current membership of the board committees
re-election. Therefore, it is recommended that shareholders as at the date of this report is set out in the Corporate
at the forthcoming annual general meeting confirm the governance section of the integrated report.
appointment of Ms Nerina Bodasing and Mr Matsobane
Matlwa, both being independent non-executive directors, Directors’ interests and remuneration
having been appointed between two annual general
The aggregate beneficial interest of directors in the issued
meetings.
share capital and options on ordinary shares of the
Having regard to the aforementioned seven confirmation/ Company is as follows:
re-elections, the Company has fulfilled its obligations under Number of shares and options
the Act (section 66[4][b]), namely affording shareholders the 2011 2010
right to elect at least 50% of the board.
Direct 2 869 903 2 874 903
An abbreviated curriculum vitae of each director standing Indirect 750 000 252 428
for re-election is provided in this integrated report on
pages 30 and 31. Total 3 619 903 3 127 331
No director has any non-beneficial interests in the share
capital of the Company.
JD Group » Integrated report 2011
145
No director has directly or indirectly more than 1% interest In addition to the above, special resolutions in respect of
in the share capital of the Company. No change in the financial assistance and name changes, have been passed
directors’ interests occurred between the end of the by subsidiaries in the Group.
financial year-end and the date of this report.
Subsequent events
A detailed breakdown of each individual director’s direct
The disposal consideration of the Polish operation, Abra,
and indirect share holding in the Company in addition
is based on its audited results as at 31 August 2011 as
to remuneration received by such directors during the 2011
disclosed in the Group circular dated 24 May 2011. The
financial year, is provided in the Directors’ Remuneration
closing actions relating to the sale are currently in process.
report on pages 80 to 83.
The sale should be concluded by mid-December.
Details of the proposed remuneration of both the
The Group announced in a SENS on 19 October 2011 that
non-executive and executive directors are set out
Steinhoff International Holdings Limited (Steinhoff) had
in the AGM notice.
acquired from existing shareholders, subject to certain
conditions precedent, call options over JD Group Limited
Significant shareholders
ordinary shares, which, if exercised may result in Steinhoff’s
Details of significant shareholders are included in the shareholding in JD Group increasing from approximately
Shareholder Analysis table on page 76. 32% to in excess of 50%. The call options expire on
31 March 2012.
Special resolutions passed by JD Group and its
As a result of Steinhoff’s existing shareholding exceeding
major subsidiaries
25%, the Group is considering changing its year-end to
During the period under review, shareholders have passed 30 June to coincide with that of Steinhoff.
the following special resolutions:
» on 17 February 2011, authority was given for JD Group to
purchase its own shares, subject to the relevant
provisions of the Act and the JSE Rules. To date, the Group
has not acted on this mandate.
» on 17 February 2011, the non-executive directors’
forward-looking remuneration for the 2011 financial year
was approved.
» on 23 June 2011, authority was given to the Company to
provide direct and indirect financial assistance to any
related or inter-related company in the Group.
Integrated report 2011 « JD Group
146 Condensed annual financial statements
Audit committee report
1. Introduction » reviewed interim reports, result announcements,
The Company has a constituted Audit committee (the and other releases of price-sensitive information
committee), comprising the following three independent » reviewed the quality of earnings.
non-executive directors: Since the annual financial statements complied, in all
» MJ Shaw (Chairman) material aspects, with the aforementioned and appropriate
» Dr D Konar Internal Financial Reporting Standards, and as no complaints
relating to the accounting practices or the contents or
» GZ Steffens.
auditing of the financial statements, or to any related
There has been no change in the composition of the
matter, were received, the committee has approved and
committee during the past financial year.
recommended the annual financial statements for approval
to the board. The board has subsequently approved the
2. Background financial statements, which will be presented to
The committee is an independent statutory committee, as shareholders for discussion at the forthcoming annual
well as a committee of the JD Group board (the board) general meeting in February 2012.
in respect of other duties assigned to it by the board. The
overall objective of the committee is to assist the board 3.2 Integrated report
in discharging its duties relating to, amongst others, the
In addition to the annual financial statements, the
safeguarding of assets, the operation of adequate internal
committee has overseen the compilation of the integrated
controls and systems, ensuring that adequate financial
report and amongst others has evaluated the sustainability
accounting controls and processes exist, reviewing
report, the corporate governance report and the directors’
stakeholder information and the annual financial statements
report contained in the integrated report for the year ended
for presentation to shareholders, as well as overseeing that
31 August 2011 and:
statutory and regulatory requirements are met on an
ongoing basis. » considered all factors and risk that may impact on the
integrated report
The committee is pleased to present its report for the
» ensured that the sustainability issues in the integrated
financial year ended 31 August 2011. The report is
report are reliable, consistent and do not conflict with the
presented in accordance with the Company’s articles
financial information
of association, the requirements of the Companies Act,
No. 71 of 2008 (the Act), as well as the recommendations » recommended that external assurance not be sought for
contained in the third King Report on Governance for sustainability reporting.
South Africa and the King Code of Governance Principles The committee has recommended the integrated report for
(King III). Amongst others, the committee’s operations approval to the board and the board has approved the
are guided by a formal detailed Terms of Reference report for presentation to shareholders.
(ToR) that is in line with the provisions, requirement
and recommendations of the aforementioned documents, 3.3 Internal audit function
as well as with the rules of the JSE Listings Requirements. The Company’s internal audit function has been outsourced
to an independent external service provider, namely KPMG.
3. Duties carried out The committee has played an oversight role in respect of
During the financial year ended 31 August 2011, the the IAF to ensure its effectiveness. Amongst others, the
committee convened three times to discharge both its committee:
statutory and board responsibilities. As an overview only, » approved the IAF’s mandate and ensured that the IAF is
and not to be regarded as an exhaustive list, the committee an effective risk-based function that adheres to the IIA
carried out the following duties: Standards and Code of Ethics
» ensured that the IAF has a risk-based audit plan that
3.1 Annual financial statements addressed the full spectrum of risks
» approved the internal audit plan
The committee has evaluated JD Group’s consolidated
annual financial statements for the year ended 31 August
» ensured that the IAF has adopted a board-approved
internal audit charter
2011. Amongst others, the committee:
» ensured that the IAF has a CAE at its head and that
» reviewed the principles, policies and accounting practices he has effectively managed the relationship with the
and standards adopted in preparation of companies in outsourced service provider
the JD Group and commented thereon and monitored » ensured that the CAE reports functionally to the
compliance with all statutory/legal/regulatory committee
requirements
JD Group » Integrated report 2011
147
» ensured that the IAF has an appropriate budget and that » determined the fees to be paid to D&T and ensured that
it is appropriately skilled and resourced the fees are fair and equitable
» obtained confirmation that an independent quality review » maintained a non-audit services policy which determines
of the IAF’s operations will be conducted in the near the nature and extent of any non-audit services that D&T
future and that the IAF maintains a quality assurance and may provide to the Company
improvement programme » pre-approved a number of proposed contracts with D&T
» ensured that the IAF has performed a self-assessment of for the provision of non-audit services to the Company
its performance and effectiveness » ensured that the details and monetary scope of the
» ensured that the IAF has assessed the risk management non-audit services carried out by D&T have been
and internal control framework and the business disclosed in the annual financial statements of the
processes and has made a written statement in respect Company
of the adequacy of the Company’s prevailing system of » regularly met separately in confidence with D&T
internal controls (which it rated in all material aspects to » through enquiry, ascertained that D&T has not identified
be “acceptable”) any irregularity that required reporting thereof to IRBA
» reviewed the internal audit charter » having considered the matter, confirmed the need for
» regularly met separately with the IAF and the CAE an interim review audit.
» did not receive any complaints relating to the internal
audit of the Company. 3.5 Risk, management assurance and ethics
The committee formed an integral component of the risk
3.4 External audit and related matters
management framework and, amongst others, monitored
Deloitte & Touche (D&T) is the Company’s appointed financial reporting risks, internal financial controls, fraud
external auditors. The committee has played an oversight risks as it relates to financial reporting and IT risks as it
role in respect of the external audit process to ensure its relates to financial reporting. The committee has played an
effectiveness. Amongst others, the committee: oversight role in respect of risk, combined assurance and
» set/approved D&T’s terms of engagement ethics and:
» reviewed the quality and effectiveness of the external » ensured the application of the management assurance
audit process model and monitored that it had appropriately and
» assessed D&T’s delivery versus planned expectations adequately addressed the significant risks facing the
» assessed D&T’s quality control procedures Company
» reviewed the external auditors’ report to the committee » reviewed the management of risk and the monitoring of
and management’s responses thereto compliance and the legal governance effectiveness within
» reviewed significant judgements and/or unadjusted the Company
differences resulting from the audit, as well as any » ensured that close cooperation had existed throughout
reporting decisions made the review period between external and internal audit
» satisfied itself through enquiry that D&T and X Botha, the (KPMG), MAF, the risk management function, the
designated auditor for 2011 and B Escott the designated secretariat, the legal and compliance function and other
auditor for 2012, are independent as defined in terms of assurance providers
prescribed legislation and that there has been no » monitored the application and the effectiveness of the
occurrence during the review period that has impaired Company’s code of conduct (ethics) and reviewed reports
this independent relationship between the Company on the conduct of the Company and its officials
and D&T » reviewed the Company’s process for monitoring
» ensured that D&T is accredited as a JSE accredited audit compliance with the laws and regulations applicable to it
firm entitled to provide audit services to a listed entity and its compliance with corporate governance practices,
and that each of its partners and the firm are registered and considered the impact and implications of the
with the Independent Regulatory Board for Auditors aforementioned on the Company’s operations
(IRBA) » considered developments in corporate governance and
» considered the auditor’s rotation cycle and nominated ensured that the principles of King III are embedded
D&T for reappointment and B Escott for appointment as within the Company
the designated auditor, having obtained confirmation that » fulfilled the Audit committee function on behalf of certain
he is qualified to serve as the designated auditor subsidiaries of the Company and secured regular
» ensured that the aforementioned appointments comply feedback from the Audit/Risk committees of such
with the provisions of all relevant legislation relating to subsidiaries
the appointment of auditors
Integrated report 2011 « JD Group
148 Condensed annual financial statements
Audit committee report (continued)
» reviewed and assured that the committee’s terms of to the committee’s deliberations and make positive
reference (ToR) is aligned with the most recent applicable contributions on an ongoing basis. Throughout the review
legislation and governance codes period they remained independent of character and their
» reviewed the text of various reports, including the judgement has not been impaired in any way.
corporate governance statement, for inclusion in the Given the above, the committee is of the opinion that it has
integrated report, the internal audit assurance statement appropriately addressed its key responsibilities in respect
and the risk management assurance of, amongst others, internal control, financial accounting
» reviewed tax reports control, stakeholder reporting and statutory and regulatory
» reviewed related-party transactions requirements.
» reviewed the Letters of Representation and
management’s responses thereto 5. Recommendation to shareholders
» assisted the board in assessing IT governance risks,
Against this background, the board has recommended that
controls and its overall effectiveness
Shareholders appoint the abovementioned independent
» reviewed the committee’s ToR
non-executive directors to be the members of the
» conducted a self-assessment of the effectiveness of the
Company’s Audit committee for the 2012 financial year.
committee.
4. Conclusion on fulfilment of duties and
obligations
The committee members are subject-matter specialists and
collectively have sufficient qualifications and experience in
the fields of commerce, finance, economics, external and
internal audit processes, risk, financial, integrated and
sustainability reporting, risk management, governance, Martin Shaw
compliance and law to fulfil their obligations. In addition, Chairman
the members have kept up to date with the latest
developments in the business and in the audit environment. On behalf of the Audit committee
The members all bring invaluable integrity and experience 11 November 2011
JD Group » Integrated report 2011
149
Directors’ approval of the annual financial statements
Responsibility for the annual financial The Group consistently adopts appropriate and recognised
statements accounting policies.
The directors are responsible for the preparation, integrity The annual financial statements have been prepared in
and objectivity of annual financial statements that fairly accordance with the requirements of the Companies Act
present the state of affairs of the Group and the Company of South Africa and comply with IFRS and the AC500
at the end of the financial year, the income and cash flow standards as issued by the Accounting Practices Board or
for that period and other information contained in this its successor.
annual report. The directors are of the opinion that the business will be a
To enable the directors to meet these responsibilities: going concern for the foreseeable future, and accordingly,
the annual financial statements are prepared on a going –
» the board and management set standards and
concern basis.
management implements systems of internal control,
accounting and information systems aimed at providing It is the responsibility of the independent external auditors
reasonable assurance that assets are safeguarded and to express an opinion on the annual financial statements.
the risks of error, fraud or loss are reduced in a cost – Their report to the members of the Company is set out on
effective manner. These controls, contained in established page 150.
policies and procedures, include the proper delegation of
responsibilities and authorities within a clearly defined Approval of the annual financial statements
framework, effective accounting procedures and The directors’ report and the condensed financial
adequate segregation of duties statements, were approved by the board of directors
» the Group’s outsourced internal audit function, which on 11 November 2011 and are signed by:
operates independently and unhindered and has
unrestricted access to the Audit committee, appraises,
evaluates and, when necessary, recommends
improvements in the systems of internal control and
accounting practices, based on audit plans which take
cognisance of the relative degrees of risk of each function
or aspect of the business David Sussman Grattan Kirk
» the Audit committee, together with the internal auditors, Executive chairman Chief executive officer
plays an integral role in assessing matters relating to
financial internal control, accounting policies, reporting
and disclosure.
To the best of our knowledge and belief, based on the
above, the directors are satisfied that no material
breakdown in the operation of the systems of internal
Bennie van Rooy
control and procedures has occurred during the year under
review. Group Financial Director
Integrated report 2011 « JD Group
150 Condensed annual financial statements
Report of the independent auditors
on the condensed financial statements
Financial statements
The auditors, Deloitte & Touche, have issued their opinion on the Group’s financial statements for the year ended 31 August
2011. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit
opinion. These condensed financial statements have been derived from the Group financial statements and are consistent in all
material respects with the Group financial statements.
Certificate by Company secretary
In terms of section 88(2)(e) of the Companies Act, No. 71 of 2008, I certify that, to the best of my knowledge and belief, the
Company has lodged with the Company and Intellectual Property Commission, all such returns and notices as required of a public
company for the financial year ended 31 August 2011 and that all such returns are true, correct and up to date.
Johann Pieterse
Company secretary
11 November 2011
JD Group » Integrated report 2011
151
Definitions
Revenue Diluted earnings and headline earnings
Revenue comprises net invoiced value of merchandise sold
per share
excluding value added tax, net finance charges earned and As for earnings and headline earnings per share after
income generated from financial and other retail services. including the dilutive impact of share options in respect
of unissued shares granted to employees in the weighted
Cost of sales average number of shares in issue.
Cost of sales comprises costs of purchase and other costs
incurred in bringing inventories to their present location
Dividend cover
and condition, net of volume and settlement discounts. Earnings per share divided by cash equivalent dividends
per share.
Operating margin
Operating profit divided by revenue.
Return on closing shareholders’ equity
Profit attributable to shareholders divided by shareholders’
Interest cover equity at year end.
Operating profit and investment income divided by net
finance costs.
Return on average shareholders’ equity
Profit attributable to shareholders divided by average
Earnings per share shareholders’ equity.
Profit attributable to shareholders divided by the weighted
average number of shares in issue, excluding treasury
Return on assets managed
shares. Operating profit and investment income divided by average
total assets (excluding deferred taxation) less average
Headline earnings per share non-interest-bearing debt.
The Group previously adopted Circular 3/2009, issued by the
South African Institute of Chartered Accountants, replaced Net asset value per share
Circular 8/2007. It provides guidance on the calculation of
Shareholders’ equity divided by the total number of shares
headline earnings, ensuring that headline earnings reflect
in issue, including treasury shares.
the operating earnings of the business by generally
excluding items of remeasurement. Gearing ratio
Interest-bearing debt less cash resources divided by
shareholders’ equity.
Current ratio
Current assets divided by current liabilities.
Integrated report 2011 « JD Group
152 Condensed annual financial statements
Group statement of comprehensive income
for the year ended 31 August
Audited Restated*
2011 2010
Note Rm Rm
Continuing operations
Revenue 15 741 12 590
Cost of sales 8 550 6 307
Operating expenses 5 457 4 770
Administration and other expenses 1 207 1 188
Depreciation and amortisation 229 187
Employees 2 550 2 158
Marketing 363 321
Occupancy 824 696
Share-based payment 35 26
Transport and travel 246 198
Loss/(surplus) on disposal of property, plant and equipment 3 (4)
Operating profit before debtors’ costs 1 734 1 513
Debtors’ costs 2 677 753
Operating profit 1 057 760
Investment income 5 4
Finance income 65 73
Finance costs (160) (181)
Share of profits of associate 2 —
Profit before taxation from continuing operations 969 656
Taxation 264 163
Profit for the year from continuing operations 705 493
(Loss)/profit after tax for the year from discontinued operations (1) 15
Profit for the year 704 508
Attributable to:
Shareholders 699 501
Minorities 5 7
Profit for the year 704 508
Headline earnings 702 499
Earnings per share (cents)
– basic 406,2 304,9
– diluted 402,0 301,4
Cash equivalent dividends per share (cents) 200,0 150,0
Group statement of other comprehensive income
Profit for the year 704 508
Exchange differences on translating foreign operations (1) (31)
Total comprehensive income for the year 703 477
Attributable to:
Shareholders 698 470
Minorities 5 7
703 477
*The prior year figures have been restated to reflect the discontinued operations.
JD Group » Integrated report 2011
153
Group statement of financial position
at 31 August
Audited Audited
2011 2010
Notes Rm Rm
Assets
Non-current assets 4 630 1 617
Property, plant and equipment 1 440 767
Vehicle rental fleet 17 —
Goodwill 3 1 324 493
Intangible assets 3 1 658 212
Investments and loans 84 30
Interest in associate 6 —
Deferred taxation 101 115
Current assets 11 887 7 664
Inventories 3 059 1 575
Trade-, loan- and other receivables 4 6 704 5 276
Vehicle rental fleet 352 —
Financial assets 1 —
Taxation 395 34
Bank balances and cash 1 376 779
Assets classified as held-for-sale 217 —
Total assets 16 734 9 281
Equity and liabilities
Equity and reserves
Share capital and premium 4 245 1 779
Treasury shares (263) (378)
Non-distributable and other reserves 231 158
Retained earnings 3 644 3 464
Reserves of the discontinued operation classified as held-for-sale 34 —
Shareholders for dividend 216 131
Shareholders’ equity 8 107 5 154
Minority shareholders’ interest 58 34
Total equity 8 165 5 188
Non-current liabilities 2 448 1 057
Interest-bearing long-term liabilities 1 717 922
Non-interest-bearing long-term liability 202 75
Deferred taxation 529 60
Current liabilities 6 030 3 036
Trade and other payables 6 4 933 2 424
Provisions 41 —
Interest-bearing liabilities 946 502
Financial liabilities — 4
Taxation 82 84
Bank overdraft 28 22
Liabilities classified as held-for-sale 91 —
Total equity and liabilities 16 734 9 281
Integrated report 2011 « JD Group
154 Condensed annual financial statements
Group cash flow statement
for the year ended 31 August
Audited Audited
2011 2010
Notes Rm Rm
Cash flows from operating activities 343 62
Cash generated by trading a 1 322 980
Increase in working capital b (313) (334)
Cash generated by operations 1 009 646
Investment income 5 4
Finance costs – net c (92) (92)
Taxation paid d (282) (314)
Cash available from operating activities 640 244
Dividends paid e (297) (182)
Cash flows from investing activities (622) (99)
Acquisition of subsidiary companies f 128 —
Investment and loan receipts — 62
Proceeds on disposal of property, plant and equipment 12 27
Additions to property, plant and equipment (722) (188)
Proceeds on disposal of rental fleet vehicles 43 —
Additions to rental fleet vehicles (83) —
Cash flows from financing activities 1 008 69
Proceeds on disposal of treasury shares by share incentive trust 65 27
Acquisition of shares by share incentive trust — (18)
Increase in shareholding in subsidiary (12) —
Settlement of minority interest in business combination (7) —
Long-term borrowings raised 1 632 633
Long-term borrowings repaid (588) (527)
Finance lease liabilities repaid (82) (46)
Net increase in cash and cash equivalents 729 32
Cash and cash equivalents at beginning of year 757 725
Cash and cash equivalents at end of year 1 486 757
Included in disposed business held for sale (138) —
Cash and cash equivalents at end of year from continuing operations g 1 348 757
JD Group » Integrated report 2011
155
Notes to the Group cash flow statement
for the year ended 31 August
Audited Audited
2011 2010
Rm Rm
a Cash generated by trading
Operating profit from continuing operations 1 057 760
Operating (loss)/profit from discontinued operations (6) 12
1 051 772
Non-cash items
Depreciation 199 149
Amortisation – intangible assets 36 44
Operating lease costs adjustments (3) (9)
Share-based payment 35 26
Loss/(surplus) on disposal of property, plant and equipment 4 (3)
Revaluation of financial assets/liabilities — 1
1 322 980
b Increase in working capital
Increase in inventories (3) (84)
Increase in trade and other receivables (632) (494)
Increase in trade and other payables 317 272
Unrealised foreign currency translation 5 (28)
(313) (334)
c Finance costs – net
Interest paid (160) (181)
Interest received 65 80
Fair value adjustments of financial assets and liabilities 3 9
(92) (92)
d Taxation paid
Amount (payable)/receivable at beginning of year (50) (8)
Per income statement 80 (356)
Acquisition of subsidiary companies 1 —
Amount (receivable)/payable at end of year (313) 50
(282) (314)
e Dividends paid
Amount in equity at beginning of year (131) (67)
Declared during the year (382) (246)
Amount in equity at end of year 216 131
(297) (182)
f Acquisition of subsidiary companies
Property, plant and equipment 162 —
Vehicle rental fleet 341 —
Deferred taxation (137) —
Trade and other receivables 794 —
Financial liabilities 54 —
Inventories 1 546 —
Taxation 1 —
Interest-bearing liabilities (277) —
Non-interest-bearing liabilities (147) —
Trade and other payables (2 284) —
Bank and cash 830 —
Minority interest (28) —
855 —
Intangible assets 1 482 —
Goodwill 831 —
Cost of investment 3 168 —
Issue of shares (2 466) —
Bank and cash acquired (830) —
Cash flow from acquisition of subsidiaries (128) —
g Cash and cash equivalents
Bank balances and cash (net of overdraft) 1 348 757
Integrated report 2011 « JD Group
156 Condensed annual financial statements
Group statement of changes in equity
for the year ended 31 August
Non-
distribut- Share- Minority
able and holders share- Discon-
Share Share Treasury other Retained for holders’ tinued
capital premium shares reserves earnings dividend interest operation Total
Rm Rm Rm Rm Rm Rm Rm Rm Rm
Balance at 31 August 2009 9 1 770 (411) 166 3 230 67 27 4 858
Profit attributable to shareholders 501 7 508
Translation of foreign entities (31) (31)
Distribution to shareholders (255) 255 —
Distribution to share incentive trust 9 (9) —
Paid to shareholders –
14 December 2009 (70) (70)
Paid to share incentive trust –
14 December 2009 3 3
Paid to shareholders –
28 June 2010 (119) (119)
Paid to share incentive trust –
28 June 2010 4 4
Shares purchased by the share incentive
trust (18) (18)
Proceeds on disposal of treasury shares
by share incentive trust 27 27
Loss on disposal of treasury shares
included in attributable profit 24 (24) — —
Share-based payment 26 26
Transfer to retained earnings of vested
share options (23) 23 —
Transfer to statutory reserve 20 (20) —
Balance at 31 August 2010 9 1 770 (378) 158 3 464 131 34 — 5 188
Profit attributable to shareholders 699 5 704
Translation of foreign entities (1) (1)
Distribution to shareholders (391) 391 —
Distribution to minorities (4) (4)
Distribution to share incentive trust 9 (9) —
Paid to shareholders –
13 December 2010 (136) (136)
Paid to share incentive trust –
13 December 2010 5 5
Paid to shareholders –
27 June 2011 (171) (171)
Paid to share incentive trust –
27 June 2011 5 5
Reserves in discontinued operation 19 (53) 34 —
Proceeds from share issue 2 2 464 2 466
Acquisition of subsidiaries 28 28
Net disposal of joint venture interests (2) (5) (7)
Increase in shareholding in subsidiary (12) (12)
Proceeds on disposal of treasury shares
by share incentive trust 65 65
Loss on disposal of treasury shares
included in attributable profit 50 (50) —
Share-based payment 35 35
Transfer to statutory reserve 22 (22) —
Balance at 31 August 2011 11 4 234 (263) 231 3 644 216 58 34 8 165
JD Group » Integrated report 2011
157
Condensed notes to the annual financial statements
for the year ended 31 August
1. Accounting policies
The condensed financial information has been prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting
Practices Board and the information as required by IAS 34: Interim Financial Reporting, the JSE Listings Requirements and the
Companies Act. The report has been prepared using accounting policies that comply with IFRS which are consistent with those
applied in the financial statements for the year ended 31 August 2010, except for the adoption of the accounting standards and
interpretations that became effective during the current year:
The adoption of these standards and interpretations had no material impact on the Group.
Audited Audited
31 August 31 August
2011 2010
Rm Rm
2. Debtors’ costs
Decrease in impairment provision (34) (177)
Bad debts written off 711 930
677 753
3. Goodwill and intangible assets
Goodwill comprises:
Carrying value at beginning of year 493 493
Arising on acquisitions during the year 831 —
Carrying value at end of year 1 324 493
Intangible assets comprise:
Carrying value at beginning of year 212 256
Arising on acquisitions during the year 1 482 —
Amortisation for the current year (36) (44)
Carrying value at end of year 1 658 212
4. Trade and other receivables
Instalment sale and other loan receivables (a) 5 921 5 224
Trade receivables 629 69
Total instalment sale, loan and other trade receivables 6 550 5 293
Less: Impairment provision (598) (586)
Net instalment sale, loan and other trade receivables 5 952 4 707
Other receivables 752 569
Total trade and other receivables 6 704 5 276
Provisions as a percentage of total instalment sale and trade receivables (%) 9,1 11,1
In accordance with industry norms, amounts due from instalment sale receivables after one year are included in current
assets. The credit terms of instalment sale receivables range from six to 36 months.
a. Classified as loans and receivables and carried at amortised cost.
Integrated report 2011 « JD Group
158 Condensed annual financial statements
Condensed notes to the Group annual financial statements (continued)
5. Acquisition of subsidiary companies (provisional values)
Unitrans SteinBuild
Rm Rm
Property, plant and equipment 109 53
Vehicle rental fleet 341 —
Deferred taxation (135) (2)
Trade and other receivables 621 173
Investments 54 —
Inventories 1 405 141
Taxation 3 (2)
Interest-bearing liabilities (269) (8)
Non-interest-bearing liabilities (120) (27)
Trade and other payables (2 034) (250)
Bank and cash 807 23
Minority interest — (28)
782 73
Intangible assets 1 453 29
Goodwill 765 66
Cost of investment 3 000 168
Settled by issue of shares (2 466) —
Bank and cash acquired (807) (23)
Cash flow from acquisition of subsidiaries (273) 145
6. Trade and other payables
The directors consider the carrying amount of trade and other payables to approximate their fair values.
The credit period of trade payables ranges between 30 and 180 days.
7. Diluted earnings and headline earnings per share
The number of shares for diluted earnings purposes has been calculated after considering the dilutive impact of share options
and the cash value to be paid in future, in respect of unissued shares granted to employees.
8. Related parties
The Group entered into various transactions with related parties which occurred under terms that are no more favourable
than those arranged with independent third parties.
9. Subsequent events
The sale of Abra is based on its audited results to 31 August 2011 as disclosed in the Group circular dated 24 May 2011. The
closing actions relating to the sale are currently in process. The sale should be concluded by mid-December.
The Group announced on SENS on 19 October 2011 that Steinhoff International Holdings Limited (Steinhoff) had acquired from
the existing shareholders, subject to certain conditions precedent, call options over JD Group Limited ordinary shares, which,
if exercised, may result in Steinhoff’s shareholding in the Group increasing from approximately 32% to in excess of 50%. The
call options expire on 31 March 2012.
As a result of Steinhoff’s existing shareholding exceeding 25%, the Group is considering changing its year end to 30 June to
coincide with that of Steinhoff.
Other than those disclosed in the condensed financial statements, no other significant events have occurred in
the period between 31 August 2011 and the date of this report.
Note:
The “Analysis of Shareholders” report has been presented in the sustainability report on page 76.
JD Group » Integrated report 2011
159
Segmental analysis – geographical
for the year ended 31 August
Europe/
Neighbouring Discontinued
South Africa countries operations Total
2011
Revenue Rm 15 242 499 — 15 741
Operating profit Rm 1 010 47 — 1 057
Depreciation Rm 190 3 — 193
Total assets Rm 16 212 305 217 16 734
Total current liabilities Rm 5 959 71 — 6 030
Capital expenditure Rm 803 2 — 805
Operating margin % 6,6 9,4 6,7
Total sale of merchandise Rm 11 322 418 11 740
Share of Group sale of merchandise % 96,4 3,6 100,0
Credit sales Rm 3 082 99 3 181
Percentage of total % 27,2 23,7 27,1
Cash sales Rm 8 240 319 8 559
Percentage of total % 72,8 76,3 72,9
Number of stores 1 202 25 1 227
Revenue per store R000 12 681 19 960 12 829
Number of employees 24 783 935 25 718
Revenue per employee R000 615 534 612
Instalment sale receivables Rm 5 810 111 5 921
2010 – restated*
Revenue Rm 12 109 481 — 12 590
Operating profit Rm 740 20 — 760
Depreciation Rm 141 3 — 144
Total assets Rm 8 744 305 232 9 281
Total current liabilities Rm 2 843 81 112 3 036
Capital expenditure Rm 179 3 6 188
Operating margin % 6,1 4,2 6,0
Total sale of merchandise Rm 8 491 410 8 901
Share of Group sale of merchandise % 95,4 4,6 100,0
Credit sales Rm 3 043 119 3 162
Percentage of total % 35,8 29,0 35,5
Cash sales Rm 5 448 291 5 739
Percentage of total % 64,2 71,0 64,5
Number of stores 1 015 26 1 041
Revenue per store R000 11 930 18 500 12 094
Number of employees 18 680 506 19 186
Revenue per employee R000 648 951 656
Instalment sale receivables Rm 5 110 114 5 224
*The prior year figures have been restated to reflect the discontinued operations.
Integrated report 2011 « JD Group
160 Condensed annual financial statements
Segmental analysis – business divisions
for the year ended 31 August
Furniture Retail Financial Services Cash Retail
2011 2010 2011 2010# 2011 2010
Revenue Rm 5 775 5 339 3 314 3 140 4 578 4 308
Operating profit Rm 315 182 723 604 224 190
Depreciation and amortisation Rm 57 32 24 21 51 46
Total assets Rm 1 374 1 016 5 965 4 961 1 070 507
Total current liabilities Rm 1 547 1 249 80 323 770 619
Capital expenditure Rm 114 44 16 23 46 56
Operating margin % 5,5 3,4 21,8 19,2 4,9 4,4
Total sale of merchandise Rm 4 963 4 619 4 518 4 282
Share of Group sale of merchandise % 42,3 51,9 38,5 48,1
Credit sales Rm 3 181 3 162
Percentage of total % 64,1 68,5
Cash sales Rm 1 782 1 457 4 518 4 282
Percentage of total % 35,9 31,5 100,0 100,0
Number of stores 988 949 988 949 96 92
Revenue per store R000 5 845 5 626 3 354 3 035 47 688 46 826
Retail square meterage 496 372 495 584 55 152 55 065 97 938 90 617
Revenue per square metre Rand 11 634 10 773 46 744 47 541
Number of employees 9 035 8 928 4 809 4 560 3 625 3 608
Revenue per employee R000 639 598 689 704 1 263 1 194
Instalment sale and other loan receivables Rm 5 921 5 224
Impairment provision Rm 545 586
Bad debts written off Rm 711 930
Receivables’ arrears Rm 1 058 1 022
Deposit rate on credit sales % 5,9 7,6
Collection rate % 6,4 6,1
* Elimination of interdivisional origination fees.
†
Results of discontinued operations have been disclosed in note 32 in the annual financial statements.
‡
2010 has been restated to eliminate Abra, which is disclosed as a discontinued operation.
#
Maravedi has been integrated into Financial Services and restated from New Business Development.
JD Group » Integrated report 2011
161
New Business
Development Unitrans/SteinBuild Corporate Discontinued operations Group
2011 2010# 2011 2010 2011 2010 2011 2010‡ 2011 2010
245 267 2 376 (547)* (464)* — — 15 741 12 590
30 15 59 (294) (231) — — 1 057 760
16 19 19 26 26 — — 193 144
103 397 5 311 2 694 2 168 217 232 16 734 9 281
22 442 2 565 1 046 291 — 112 6 030 3 036
10 15 88 531 44 — 6 805 188
12,2 5,6 2,5 6,7 6,0
2 259 11 740 8 901
19,2 100,0 100,0
3 181 3 162
27,1 35,5
2 259 8 559 5 739
100,0 72,9 64,5
143 1 227 1 041
16 615 12 829 12 094
568 994 1 218 456 641 266
4 176 12 919 19 633
1 646 1 551 6 015 588 539 25 718 19 186
149 261 395 612 656
5 921 5 224
53 598 586
711 930
1 058 1 022
5,9 7,6
6,4 6,1
Integrated report 2011 « JD Group
162 Condensed annual financial statements
Share incentive trust and salient features
The JD Group Employee Share Incentive Scheme
Number of shares
2011 2010
Share options granted
At beginning of year 9 052 365 10 542 944
Options forfeited (75 250) (516 829)
Options exercised (1 898 558) (973 750)
At end of year 7 078 557 9 052 365
Number of participants 162 166
Shares available for utilisation
At beginning of year 6 208 085 6 756 892
Shares acquired in the open market — 424 943
Options exercised (1 898 558) (973 750)
At end of year 4 309 527 6 208 085
Rm Rm
Loan by the Company to the Trust 321 395
Fair value of shares 176 271
JD Group » Integrated report 2011
163
Salient features of the JD Group
Employee Share Incentive Scheme trust deed
1. Purpose
The JD Group Employee Share Incentive Scheme, which was approved by the directors on 29 March 1996, amended by
special resolution on 31 January 2001 and amended again on 11 August 2003, served as an incentive to current
employees (including executive and non-executive directors) of JD Group to render services to the Company by giving
them the opportunity to acquire ordinary shares and enabling them to share in the wealth of the Company. This scheme
has become redundant and is being phased out.
No further options will be issued under this scheme.
2. Option price
The price payable by a participant upon the exercise of share options in terms of this scheme, is an amount equal to
90% of the closing price at which shares of the Company are traded at the close of business on the JSE on the trading
day immediately preceding the date upon which the board will have resolved to grant, or direct the trustees to grant, the
relevant option.
Each share option shall confer the right on the holder thereof to subscribe for or purchase one share at the option price.
3. Exercise of share options
Share options may not be exercised until after a period, calculated from the date of acceptance of the offer, as follows:
3.1 more than two years shall have elapsed, in which event not more than 25%;
3.2 more than three years shall have elapsed, in which event not more than 50% cumulatively;
3.3 more than four years shall have elapsed, in which event not more than 75% cumulatively; and
3.4 more than five years shall have elapsed, in which event all of the relevant share options may be exercised, but within
seven years, provided that the board may, subject to the lapsing of a share option, permit exercise dates
contemplated above to be anticipated or postponed to such other date(s) and to the extent determined by the board.
4. Share options granted
Number of
shares at
Price 31 August
Date of grant (cents) 2011
30 May 2002 1 428 11 250
20 February 2003 1 619 395 000
25 July 2003 2 342 15 000
10 September 2003 2 803 59 300
19 May 2004 3 510 25 000
24 May 2005 5 625 235 000
7 June 2005 5 400 525 000
30 November 2005 7 250 733 365
7 February 2007 7 983 895 500
31 July 2007 6 363 732 750
26 February 2008 3 721 1 639 600
19 November 2008 2 520 146 300
26 February 2009 2 700 1 550 492
1 June 2009 3 380 115 000
7 078 557
5. Dividends and voting rights
Dividends in respect of shares held in terms of the credit sale scheme are payable to the trust and are credited to the
participant’s loan account until such time as the shares have been paid for in full by the participant, whereafter the
dividends accrue and are paid to the participant.
Voting rights in respect of shares held in terms of the credit sale scheme vest with the trustees until such time as the
shares have been paid for in full by the participant.
6. Principal terms of loans
6.1 Loans between the Company and the trust:
Loans bear interest at rates agreed to between the trustees and the Company from time to time.
6.2 Loans between the trust and participants:
Loans bear interest at rates determined by the trustees from time to time.
Integrated report 2011 « JD Group
164 Condensed annual financial statements
Salient features of the JD Group
Share Appreciation Rights Scheme (the SAR scheme)
1. Overview and purpose
The SAR Scheme, which was approved by shareholders on 12 August 2009, is a new generation incentive scheme with
the overarching goal of creating value to shareholders and financial benefits for participants. The SAR Scheme is
structured to optimise JD Group’s interests, as only the appreciation value of the share price is settled. Compared to a
normal share option scheme, this reduces the dilutive impact considerably. The SAR Scheme also facilitates the
attraction and retention of key talent.
2. Mechanics of the SAR Scheme
Participants receive share appreciation rights as opposed to share options. Share appreciation rights are rights to
receive shares equal to the value of the difference between the grant price and the exercise price of the instrument.
Of critical importance is that the vesting of rights is subject to the achievement of challenging predetermined
performance conditions.
SARs are granted at market value and against a face value of the average total cost to company (CTC) of an employee,
adjusted to make provision for unique and individual retention risk and other circumstances and factors. Certain
maximum thresholds of awards apply, namely that no employee, save for those on Patterson job grade F or higher, may
receive an allocation in excess of 200% of the employee’s annual CTC. The maximum number of shares that may be
allocated to a participant, inclusive of all unvested awards granted to that participant in respect of any and all incentive
schemes in operation by the Group, may not exceed 1% of JD Group’s total issued share capital from time to time.
When rights are exercised, the Company settles the difference between the then current market price and the grant
price. Consequently, participants require no financial assistance to acquire any shares, neither at the moment of grant
nor upon exercising of the SAR. Furthermore, participants will not be liable for the payment of tax in respect of the SAR
Scheme prior to the realisation of any benefits.
While the JD Group Remuneration committee (RemCom) has been mandated to propose awards and thresholds in
respect of executive directors, Exco shall act accordingly in respect of other employees. Eligible participants include
executive directors, but exclude non-executive directors.
The primary intent is to settle the benefits ensuing from a vested SAR by purchasing shares in the market for delivery to
participants. However, the Company retains the right to settle the benefits in any other manner that may be in the best
interests of the Company. Circumstances will in each instance dictate the most appropriate mode of settlement.
3. Manager of the SAR Scheme
The operation of the SAR Scheme is administered by the RemCom, a subcommittee of the JD Group board (the board).
The RemCom, exclusively comprising non-executive directors, has an independent non-executive director as chairman.
RemCom manages the SAR Scheme in accordance with the rules of the SAR Scheme and operates under a mandate
and directives from the board, which include, amongst others, to make ad hoc and annual grants to participants.
RemCom may not change the rules of the SAR Scheme in a way that would abrogate or adversely affect the subsisting
rights of a participant, unless it has obtained the written consent of participants who are entitled to acquire 75% of the
shares. Material changes of substance to the SAR Scheme rules are subject to shareholders’ approval in general
meeting.
In terms of its mandated discretion, RemCom has procured the services of Compensation Technologies (Pty) Ltd and
JD Group Secretariat to assist with the task of operating and administering the SAR Scheme.
The board has a supervisory function and may issue directives and mandates to the RemCom and other forums as it
deems appropriate from time to time in terms of the rules of the SAR Scheme.
4. Performance criteria and assessments
The performance criteria are set by the RemCom annually in a forward looking manner, subject to board approval. The
terms of the criteria are disclosed on page 165 in this integrated report. In line with global best practice, the performance
conditions are applicable to three, four and five-year periods and, whilst stretched, they are both simple to understand
and achievable in order to maximise the retention effect and motivational value. Consequently, the board approved HEPS
growth, measured against CPI to ensure a real return in excess of inflation, as the basic performance condition. An
additional condition for the vesting of rights is the achievement of a minimum growth rate in net asset value (NAV) per
share, calculated as if dividends are reinvested over the vesting period.
JD Group » Integrated report 2011
165
Salient features of the JD Group
Share Appreciation Rights Scheme (the SAR scheme)
The following performance criteria have been set by the RemCom and approved by the board in respect of SAR Scheme
offer numbers 2 and 3 (granted during the 2010 financial year):
» 2012 HEPS of 485 cents and a minimum compounded growth in NAV of 10%, or
» 2013 HEPS of 570 cents and a minimum compounded growth in NAV of 11%, or
» 2014 HEPS of 660 cents and a minimum compounded growth in NAV of 12%.
The following performance criteria have been set by the RemCom and approved by the board in respect of SAR Scheme
offer number 4 (granted on 24 February 2011):
» 2013 HEPS of 580 cents and a minimum compounded growth in NAV of 11%, or
» 2014 HEPS of 660 cents and a minimum compounded growth in NAV of 12%, or
» 2015 HEPS of 730 cents and a minimum compounded growth in NAV of 12%.
The aforementioned HEPS and NAV targets are aligned with the Group’s strategic growth targets.
5. SAR Scheme Offer Number 4
On 24 February 2011, the RemCom granted the following SARs to participants, based on the volume-weighted average
market price of JD Group’s ordinary shares quoted on the JSE Limited as at 23 February 2011:
Date of grant 24 February 2011
Price (cents) 5 130
Number of SARS allocated 2 828 000
6. Vesting and exercise of SARS and other rights
The vesting of SARs is subject to the achievement of set performance criteria, which are aligned to the Group’s strategic
goals and which are unique for each grant. A vesting period of three years and an expiry date of seven years after the
date of grant, apply.
At the end of the vesting period, i.e. three years after the date of grant, RemCom will assess whether fulfilment of the
performance criteria has occurred. Retesting of the performance conditions is allowed on the fourth and fifth
anniversary from the date of grant. In the instance that the performance criteria have not been achieved by then, the
SARs will not vest and the rights will lapse and be of no effect.
No purchase price is payable by a participant following the vesting and exercise of a SAR. The appreciation value of the share
price is settled by the Company, i.e. the difference between the then current market price and the grant price is settled.
Vested SARs that have been both exercised and released from the Scheme shall rank pari passu in all respects with
existing JD Group ordinary shares in issue. From the release date onwards, the beneficial owner of such shares will
qualify for dividends from the Company and will have full voting rights in respect of JD Group’s ordinary shares.
Shares set aside for purposes of the SAR Scheme may not be voted or be taken account of at general meetings for
resolution approval purposes or for purposes of determining categorisations as set out in the JSE Listings Requirements.
7. Principal terms of loans
7.1 Loans between the Company and participating companies
Loans between the Company and participating companies will bear interest at rates as agreed upon between the
Company and the participating companies from time to time.
7.2 Loans between the Company and participants
There are no loans between the Company or participating companies and participants of the SAR Scheme.
Integrated report 2011 « JD Group
166 Condensed annual financial statements
Subsidiaries
for the year ended 31 August
Percentage interest held
Country of 2011 2010
Notes incorporation % %
Direct subsidiary
JDG Trading (Pty) Ltd* South Africa 100 100
Unitrans Motor Enterprises (Pty) Ltd** South Africa 100 —
Steinhoff Doors and Building Material (Pty) Ltd*** South Africa 100 —
Indirect subsidiaries
Courts Megastore (Pty) Ltd* South Africa 100 100
Connection Group Holdings (Pty) Ltd* South Africa 100 100
JD Group Asset Financing (Pty) Ltd† South Africa 100 100
JD Group International (Pty) Ltd‡ South Africa 100 100
JDG Investment Holding Company (Pty) Ltd‡ South Africa 100 100
JDG Micro Insurance Ltd@ South Africa 100 100
JDG Micro Life Ltd@ South Africa 100 100
Profurn Limited‡ South Africa 100 100
Protea Furnishers S.A. (Pty) Ltd* South Africa 100 100
Supreme Furnishers (Pty) Ltd‡ South Africa 100 100
Blake & Associates Holdings (Pty) Ltd! South Africa 70 70
Maravedi Group (Pty) Ltd& South Africa 100 90,5
JD Group Europe B.V.ø The Netherlands 100 100
Abra S.A.* Poland 100 100
Aazad Electrical Construction (Pty) Ltd* Botswana 100 100
Hi Fi & Electric Warehouse (Pty) Ltd* Botswana 100 100
JD Group (Botswana) (Pty) Ltd* Botswana 100 100
Supreme Furnishers (Botswana) (Pty) Ltd* Botswana 100 100
JD Group (Lesotho) (Pty) Ltd* Lesotho 100 100
Supreme Furnishers (Lesotho) (Pty) Ltd* Lesotho 100 100
Profurn (Mocambique) Limitada* Mozambique 100 100
JD Financial Services (Pty) Ltd Namibia 100 100
JD Group (Namibia) (Pty) Ltd* Namibia 100 100
Protea Furnishers (Namibia) (Pty) Ltd* Namibia 100 100
Supreme Furnishers (Namibia) (Pty) Ltd* Namibia 100 100
Barnetts (Swaziland) (Pty) Ltd* Swaziland 100 100
JD Group (Swaziland) (Pty) Ltd* Swaziland 100 100
Non-consolidated subsidiaries
Finserve Mauritius Limited 4 Mauritius 100 100
Prosure Insurance Limited 4 Mauritius 100 100
Notes
1. All the above are unlisted companies.
2. Activities of subsidiaries
* Retailers of household furniture, appliances and home entertainment products
** Retailer in automotive vehicle including vehicle services and part sales and vehicle rental services
*** Retailer in building materials
†
Asset financing company
‡
Investment holding company
@
Insurance companies
!
Contact centre services company
&
Microlending company
ø
European investment holding company
3. A list of dormant and name protection companies is available for inspection by members at the registered office
of the Company.
4. The winding up and deregistration of these non-trading companies is in process but not yet complete.
JD Group » Integrated report 2011
167
Direct interest of holding company
Issued share capital Shares Indebtedness
2011 2010 2011 2010 2011 2010
Currency* Currency* Rm Rm Rm Rm
655 660 655 660 1 091 1 091 166 810
100 — 1 106 — 1 899 —
100 — — — 169 —
1 000 1 000
1 753 041 1 753 041
200 200
11 11
100 100
20 000 000 20 000 000
25 000 000 25 000 000
543 565 543 565
30 000 30 000
224 224
1 001 1 001
1 050 1 050
18 151# 18 151#
44 090 820 44 090 820
100 100
100 100
100 100
10 10
100 100
1 000 1 000
842 500 842 500
100 100
100 100
1 1
1 1
200 200
2 2
1 1
100 000 100 000
2 197 1 091 2 234 810
*
Reflected in local currency (Mauritius in US dollars)
#
Reflected in euro
Integrated report 2011 « JD Group
168 Condensed annual financial statements
Notice of annual general meeting
JD GROUP LIMITED financial statements and the abovementioned reports
(Registration number 1981/009108/06) must be presented to shareholders annually. The effect
(Incorporated in the Republic of South Africa) of this resolution is that the Company’s shareholders
JSE code: JDG ISIN code: ZAE000030771 confirm that the board-approved consolidated annual
(“JD Group” or “the Company” or “the Group”) financial statements and the abovementioned reports
incorporated therein have been presented to them.
Notice is hereby given that the annual general meeting of
the Company’s shareholders (AGM) will be held in the
2. Ordinary resolution number 2 – appointment of
David Sussman Auditorium, Ground Floor, JD House,
auditors
27 Stiemens Street, Braamfontein, Johannesburg on
Thursday, 16 February 2012 at 08:00. Section 90 of the Act stipulates that shareholders must
on an annual basis appoint an independent auditor for
Purpose and general information a public company. Having found that the firm Deloitte &
Touche appropriately qualified and sufficiently
The purpose of the AGM is to transact the business set out
independent of the Company and having ascertained
in the agenda below.
that they are accredited with the JSE Limited (JSE) and
Save for ordinary resolution number 8, in order for a the Independent Regulatory Board for Auditors and
proposed ordinary resolution to be approved by having further received confirmation that Mr Brian
shareholders, it must be supported by more than 50% of the Escott, a member of the aforementioned firm, is eligible
voting rights exercised on the resolution by shareholders to serve in terms of the rotation requirements of the Act
present or represented by proxy at the meeting. and that he is appropriately registered, the JD Group
In order for a proposed special resolution and ordinary Audit committee recommended at its meeting on
resolution number 8 to be approved by shareholders, it 11 November 2011 that Deloitte & Touche be re-
must be supported by at least 75% of the voting rights appointed as auditors of the Group for the period until
exercised on the resolution by shareholders present or the next AGM, and that Mr Brian Escott be appointed as
represented by proxy at the meeting. the individual designated auditor to carry out the
Company’s audit. As a consequence, it is proposed that
Agenda shareholders pass the following ordinary resolutions
with or without any modification:
1. Ordinary resolution number 1 – presentation of the 2.1 “To reappoint, on the recommendation of the
audited annual financial statements and various JD Group Audit committee, the firm Deloitte &
reports incorporated therein Touche as auditors of the Group for the period
Sections 61(8) and 62(3) of the Companies Act, No 71 of until the next AGM.”
2008, as amended (the Act) stipulates that the Group’s 2.2 “To appoint, on the recommendation of the
annual financial statements and various other specific JD Group Audit committee, Mr Brian Escott, a
reports should be presented to shareholders annually. registered auditor and member of the firm Deloitte
Having presented these to shareholders in the & Touche as the individual designated auditor
integrated annual report, it is proposed that responsible for undertaking the audit of the Group,
shareholders pass the following ordinary resolution, having ascertained that the aforementioned
with or without any modification: individual is eligible to serve in terms of the
“To receive and consider the consolidated annual rotation requirements of the Act.”
financial statements of the Company and its
subsidiaries (the Group) and of the Company for the Reason for and effect of this resolution
financial year ended 31 August 2011, which financial The reason for this resolution is that section 90 of the
statements have been approved by the board of Act stipulates that shareholders should annually appoint
directors (the board) and signed by three directors and auditors which are independent of the Company and
include the Directors’ report, the report of the also designate a registered individual auditor to carry
Independent Auditors, as well as the report of the out the audit, which individual is not disqualified from
JD Group Audit committee.” serving in terms of prescribed rotation requirements.
The effect of this resolution would be that the Group’s
Reason for and effect of this resolution
shareholders have appointed an independent firm of
The reason for this resolution is that section 61(8) of the auditors and a qualified designated individual auditor to
Act stipulates that the Group’s consolidated annual carry out the audit of the Company.
JD Group » Integrated report 2011
169
3. Ordinary resolution number 3 – re-election of retiring 3.1 “To re-elect, by way of individual standalone
directors and confirmation of casual vacancy resolutions, the following five directors, three of
appointments whom are non-executive directors, subject to the
The Act, the Company’s articles of association (defined rotation requirements in the Company’s articles:
as the “memorandum of incorporation” in the Act), and 3.1.1 Mr Ian Thompson (as executive director)
the third King Report on Governance for South Africa
3.1.2 Mr Richard Chauke (as executive director)
and the King Code of Governance Principles (jointly
King III), as well as the JSE, jointly stipulate that 3.1.3 Mr Martin Shaw (as non-executive
shareholders must annually elect or re-elect (as the director)
case may be) at least one third of the non-executive 3.1.4 Mrs Maureen Lock (as non-executive
directors and in aggregate at least 50% of the director)
directors of the board. It is accordingly proposed that
shareholders elect directors of the Company as follows: 3.1.5 Mr Günter Steffens (as non-executive
director).”
» In accordance with the provisions of section 66(4)(b)
of the Act, shareholders should elect at least 50% of 3.2 “To elect, by way of individual stand-alone
the directors to the board. resolutions, the following two non-executive
directors who were appointed by the board since
» In accordance with clause 94 and 95 of the
Company’s articles of association (the articles) at the last AGM:
least one-third of the directors shall retire, being 3.2.1 Ms Nerina Bodasing, appointed on
those longest in office (since their last re- 1 September 2011;
appointment) at the date of the AGM. Such directors
3.2.2 Mr Matsobane Matlwa, appointed on
may offer themselves for re-election.
1 September 2011.”
» In accordance with principle 2.18.6 of King III, at least
An abbreviated curriculum vitae of each of the
one third of the non-executive directors in office
should retire annually. Such directors may offer abovementioned directors is set out on pages 30
themselves for re-election. and 31 of this integrated annual report and is deemed
to form an integral part of this AGM notice.
» In accordance with clause 90 of the Company’s
articles and section 68(3) of the Act, all director
Reason for and effect of the above resolutions
appointments made by the board since the previous
AGM require confirmation by shareholders. The reason for the resolutions is to afford shareholders
the opportunity to elect at least 50% of the directors to
In summary, shareholders must elect at least seven
the Company’s board in terms of various prescribed
directors at the AGM, being equal to at least 50% of the
number of board members and at least three of these election and rotation criteria and the effect of this
should be non-executive directors. All elections shall be resolution is that shareholders will have elected at least
effected by individual stand-alone resolutions in terms 50% of the members on the board.
of the provisions of the Act.
4. Ordinary resolution number 4 – election of directors
It is confirmed that the performance of all directors and
to serve as members of the JD Group Audit
the independence status of the non-executive directors,
committee
especially those that have been in office for more than
nine years, have been assessed. In each case the Section 94 of the Act stipulates that shareholders must
performance was found satisfactory and the non- on an annual basis elect at least three independent
executive director’s independence undiminished, non-executive directors who are, collectively as a body,
uncompromised and untainted. The continued suitably qualified or experienced to serve as members
membership of the undermentioned directors as of a public company’s Audit committee.
members of the board is considered invaluable. The board is satisfied that the undermentioned directors
Having regard to the above, and as the undermentioned are suitably skilled and experienced independent
directors have made themselves available for non-executive directors and that they collectively have
re-election and the board recommends their the appropriate experience and qualifications to fulfil
reappointment, it is proposed that shareholders elect their Audit committee obligations as set out in the Act.
the following directors to serve on the board of the As a consequence, and since the continuing
Company by passing the following ordinary resolutions membership of the undermentioned directors as
with or without any modification: members of the JD Group Audit committee is
Integrated report 2011 « JD Group
170 Condensed annual financial statements
Notice of annual general meeting (continued)
considered invaluable, it is proposed that shareholders JD Group Remuneration committee may identify. This
elect the following independent non-executive directors authority shall remain in force until the next AGM of the
to serve as the members of the JD Group Audit Company as a general authority.”
committee, by passing the following individual stand-
alone resolutions with or without any modification: Reason for and effect of the resolution
“To individually re-elect the following independent The reason for this resolution is to place a limited
non-executive directors as members of the JD Group number of the Company’s unissued shares under the
Audit Committee until the next AGM: control of the directors so that they can be issued to
4.1 Mr Martin Shaw (Chairman) participants of the SAR Scheme and the effect is that the
directors will have the authority to issue not more than
4.2 Dr Len Konar
3 500 000 shares to participants under the SAR Scheme.
4.3 Mr Günter Steffens.”
6. Ordinary resolution number 6 – authority to place the
An abbreviated curriculum vitae of each of the
Company’s unissued shares under the control of the
abovementioned directors, reflecting their experience
directors for purposes other than the SAR Scheme
and qualifications, is set out on pages 30 and 31 of this
integrated annual report and forms an integral part of It is proposed that shareholders place shares equivalent
this notice of AGM. to 10% of the Company’s current issued share capital
under the control of the directors until the Company’s
Reason for and effect of this resolution
next AGM for allotment and issue by the board in the
The reason for this resolution is that the Company, best interests of the Company when opportune
being a public company, must appoint an Audit situations arise, by passing the following ordinary
committee comprising at least three independent resolution, with or without any modification:
non-executive directors at each AGM and the effect of
“Resolved that, as a general authority, subject to the JSE
this resolution is that shareholders will have elected
Listings Requirements and the Act, 21 983 000 (twenty
such directors as members of the audit committee of
one million nine hundred and eighty three thousand) of
the Company.
the Company’s unissued but authorised ordinary shares
5. Ordinary resolution number 5 – renewal of the of R0,05 (five cents) each, equivalent to 10% of the
authority to place the Company’s unissued shares Company’s current issued capital, be placed under the
under the control of the directors for purposes of the control of the directors until the Company’s next AGM,
JD Group Share Appreciation Scheme which shares may be issued and allotted by the directors
on such terms and conditions as they may in their sole
With the approval of the JD Group Share Appreciation
discretion determine in the best interest of the
Rights (SAR) Scheme on 12 August 2009, shareholders
Company.”
resolved that not more than 5% of the Company’s
unissued capital may be placed under the control of the
Reason for and effect of this resolution
directors and that such shares should be utilised solely
for purposes of the SAR Scheme. Consequently, it is The reason for this resolution is to place a limited
proposed that shareholders consider and pass with or number of the Company’s unissued shares under the
without any modification, the following ordinary control of the directors so that they can be allotted and
resolution in order to provide the directors of the issued when commercial opportunities arise. The effect
Company with flexibility to issue the unissued ordinary of the resolution is that the board will be mandated, until
shares of the Company as and when suitable situations the Company’s next AGM, to allot and issue a limited
arise for purposes of the SAR Scheme: number of the Company’s unissued shares in the
Company’s best interests.
“Resolved that 3 500 000 (three million five hundred
thousand) of the Company’s authorised but unissued
7. Ordinary resolution number 7– General authority to
ordinary shares of R0,05 (five cents) each, equivalent to
make certain distributions to shareholders
1,6% of the Company’s current issued share capital, be
placed under the control of the directors, who are It is proposed that shareholders authorise the board to
hereby authorised, subject to the requirements of the make distributions of any share capital, share premium
Company’s articles, the Act and the JSE Listings and/or reserves of the Company in accordance with the
Requirements, to allot and issue such shares, in the provisions of the Act, the JSE Listings Requirements and
best interests of the Company and in accordance with the Company’s articles, with or without the right to
the SAR Scheme Rules, to such participants as the receive shares as a capitalisation award, by passing the
JD Group » Integrated report 2011
171
following ordinary resolution with or without any shares (a general issue) up to a maximum of 21 983 000
modification: (twenty-one million nine hundred and eighty three
thousand) ordinary shares of R0,05 (five cent) each in
“Resolved that the directors be authorised to distribute
the capital of the Company, equating to 10% (ten per
to shareholders of the Company any share capital,
cent) of the Company’s issued share capital, subject to
share premium and/or reserves of the Company in
a conversion premium of not less than 20% (twenty per
accordance with the provisions of section 46 of the Act,
cent) above the volume-weighted traded price of the
the JSE Listings Requirements and the Company’s
shares in the Company for the 30 (thirty) trading days
articles, with or without the right to receive shares as a
prior to pricing and further subject to such other terms
capitalisation award.”
and conditions as the directors may determine in their
This authority will provide the board with the flexibility sole and absolute discretion in accordance with the JSE
to distribute any surplus capital of the Company in cash Listings Requirements, which aforementioned authority
and/or by way of a capitalisation award to its shall be valid only until the next AGM of the Company
shareholders, provided that: or for 15 months from the date of the passing of this
» the authority shall be valid until the Company’s next resolution, whichever is the earlier.
AGM or for 15 (fifteen) months from the passing of It is recorded that the Company will:
this ordinary resolution, whichever period is the
» after effecting any such general issue which
shorter
represents, on a cumulative basis within a financial
» any payment by the Company shall not exceed 15% year, 5% (five per cent) or more of the number of
(fifteen per cent) of the Company’s issued share shares in issue prior to that issue, publish an
capital and reserves, excluding minority interests and announcement containing full details of the issue,
any revaluation of assets and intangible assets not or such other announcement that may be required
supported by an independent professional acceptable by the JSE;
to the JSE » include a statement by an independent expert
» the directors are authorised to afford shareholders acceptable to the JSE confirming that the issue is fair
the election to receive capitalisation awards or cash insofar as the shareholders are concerned, which
distributions statement shall have been prepared in accordance
with the provisions of Schedule 5 of the JSE Listings
» any payment and/or capitalisation award is made
Requirements.
pro rata to all shareholders
It being recorded further that any additional ordinary
» a resolution of the board has been passed authorising
shares in the capital of the Company which may be
the distribution and confirming that the Company
issued pursuant to the conversion of the convertible
satisfied the solvency and liquidity test in terms of
securities so issued by the Company, may be issued
section 4 of the Act.
pursuant to the authority granted in terms of this
Shareholders are referred to the “statement and ordinary resolution number 8.
disclosure” under special resolution number 12 below,
A 75% (seventy-five per cent) majority vote cast by
which information applies mutatis mutandis to this
those eligible shareholders present or represented and
resolution.
voting at the AGM will be required in order for this
ordinary resolution number 8 to become effective.
Reason for and effect of this resolution
The reason for this resolution is to obtain authority for Reason for and effect of the resolution
the board to make the aforementioned distributions and The reason for this resolution is to obtain authority
the effect of the resolution is that the board is granted a for the board to effect a general issue of debentures
mandate to make such distributions. convertible into ordinary shares up to a maximum of
10% (ten per cent) of the Company’s issued share
8. Ordinary resolution number 8 – general authority to capital. The effect of the resolution will be that the
issue convertible debentures board would have a mandate to effect a general issue
Resolved that the directors of the Company be and are of equity securities convertible into ordinary shares
hereby authorised, in accordance with section 5(50)(b) up to a maximum of 10% (ten per cent) of the
and section 5(52) of the JSE Listings Requirements and Company’s issued share capital subject to the
the provisions of section 41 of the Act, to effect a conditions set out in the resolution.
general issue of debentures, convertible into ordinary
Integrated report 2011 « JD Group
172 Condensed annual financial statements
Notice of annual general meeting (continued)
9. Ordinary resolution number 9 – non-binding for “services as directors”, may be paid only in
resolution by shareholders in respect of the accordance with a special resolution approved by
Company’s Remuneration Policy shareholders and further stipulates, in section 65(11) of
King III stipulates that shareholders should annually pass the Act, that shareholders should authorise “the basis
a non-binding advisory vote on the Company’s for compensation” to directors. In addition, principle
Remuneration Policy. JD Group’s Human Resources 2.25.4 of King III defines the form and compensation
Department has reviewed the Group’s Remuneration elements of non-executive directors and further
approach and its Remuneration Policy and an abridged recommends, in principle 2.27.2, that the board should
version of the remuneration approach and the policy, be mandated to determine the remuneration of the
containing the key elements and the guiding principles executive directors in accordance with the guiding
as to how staff, executives and especially directors principles of the Company’s Remuneration Policy.
should be remunerated, are set out on pages 78 to 85 Against this background, the JD Group Remuneration
of the sustainability report and is deemed to form an committee, having compared and benchmarked the
integral part of this AGM notice. Amongst others, the directors’ remuneration with peers in the market and
Remuneration Policy addresses elements of base pay
having found it fair, and further having considered the
and bonuses, employee contracts, severance and
aforegoing requirements, recommends that
retirement benefits, as well as medical benefits,
shareholders approve the undermentioned directors’
share-based and other long-term incentive schemes
remuneration for the 2012 financial year by passing the
and ensures that the remuneration being paid by the
following special resolutions:
Group is fair and aligned with the strategy of the
Company and that a portion of it is linked to “10.1 Non-executive directors’ remuneration
performance. That shareholders consider, as special business,
The JD Group Remuneration committee, having the under-mentioned remuneration structure for
considered and approved the principles and key non-executive directors, and if deemed fit, to
elements of the remuneration approach and the approve, with or without any modification, the
Remuneration Policy, recommends that shareholders following as the elements of the remuneration
should note and/or advise on the Group’s Remuneration that should be applied to the non-executive
Policy by passing the following non-binding ordinary directors of the Company during the 2012 financial
resolution with or without any modification: year, commencing on 1 September 2011:
“Resolved that the JD Group Remuneration Policy and 10.1.1 As director (per meeting):
approach, the elements and guiding principles of which
» A base fee for serving as a director on
are set out on pages 78 to 85 of the sustainability
the board – R46 000
report, forming an integral part of this AGM notice,
be approved for application to staff and directors of » A fee for attending a board meeting
JD Group during the 2012 financial year.” – R20 000
10.1.2 A fee for attending committee meetings
Reason for and effect of this resolution as a member (per meeting):
The reason for this resolution is to communicate the » A fee for attending an Audit committee
key elements and the guiding principles of the
meeting – R21 000
Company’s Remuneration Policy and approach to
shareholders for a non-binding vote. The effect of this » A fee for attending a Risk Management
resolution is that the shareholders have taken note of committee meeting – R15 500
the key elements and guiding principles of the » A fee for attending a Remuneration
Company’s Remuneration Policy and approach and committee meeting – R15 500
have given an indication as to whether they have found
» A fee for attending a Nominations
the aforementioned appropriate.
committee meeting – nil *
» A fee for attending a Social & Ethics
Special business
committee meeting – R15 000
10. Special resolution number 1 – directors’ *Nil if it falls on the same date as the
remuneration Remuneration committee meeting, otherwise
R3 250 per hour.
Section 66(9) of the Act stipulates that payment of
compensation for directors, described as remuneration
JD Group » Integrated report 2011
173
10.1.3 As chairman: 11. Special resolution number 2 – provision of financial
assistance to related parties
» For each Audit committee meeting
chaired – R42 000 In terms of section 45 of the Act, a company is required
to obtain shareholder approval by way of a special
» For each Risk Management committee
resolution for the provision by it of direct or indirect
meeting chaired – R26 000
financial assistance to a related party. The board will
» For each Remuneration committee satisfy itself that immediately after providing any direct
meeting chaired – R26 000 or indirect financial assistance approved in terms of this
» For each Nominations committee resolution, the Company will satisfy the solvency and
meeting chaired – R26 000 liquidity test and that the terms of the financial
assistance to be given will be fair and reasonable to the
» For each Social & Ethics committee
Company. As a consequence, it is proposed that
meeting chaired – R20 000
shareholders authorise the board by way of a general
» For each board meeting chaired by a authority, to provide financial assistance to any related
person other than the Group Executive or inter-related company in accordance with the
Chairman (i.e. in his absence) – R50 000 provisions of section 45 of the Act, by passing the
10.1.4. Other fees for services as director: following special resolution with or without any
modification:
A fee of R3 250 per hour for attending ad
hoc, pre-meetings or other informal
“Resolved that, to the extent required, the Company
meetings or engagements on behalf of the
may:
Company or for attending to other
assignments for the benefit and in the » provide direct or indirect financial assistance to any
interest of the Company. related or inter-related company (as defined in the
Act) by way of a general authority in terms of section
10.2 Executive directors’ fees
45(3)(a)(ii) of the Act
“That shareholders, as special business, mandate
» provide direct or indirect financial assistance for
the board, through the JD Group Remuneration
purposes of the Company and/or its subsidiaries or
committee, to determine and pay fair and
related or inter-related companies entering into
responsible remuneration to the executive
funding and facility agreements and debt capital
directors in accordance with the guiding principles
market and domestic medium-term note
of the Company’s Remuneration Policy and
programmes with financing, banking and investment
substantially based on a pay-for-performance
institutions in respect of facilities and funding
approach for the services they render to the
afforded to the Group and/or any one or more of the
Company as directors on the board and for
subsidiaries, related or inter-related companies
carrying out their obligations as employees of the
Company in terms of their contract with the » provide any subordination of its claims held on
Company.” shareholders’ and/or inter-company (related-
company) loan accounts against any subsidiary and/
Reason for and effect of this special resolution or related or inter-related company.”
The reason for this special resolution is to fix the
Reason for and effect of this special resolution
remuneration of the non-executive directors for the
ensuing year and mandating the board to set and pay The reason for this special resolution is that, from time
the executive directors’ remuneration on a pay-for- to time, the Company may be required to provide
performance basis. The effect of this special resolution financial assistance to subsidiaries and other related
would be that the non-executive directors’ companies within the Group. The effect of this special
remuneration is fixed for the 2012 financial year and resolution is that the Company will be authorised to
that the board would have the authority to set and pay provide financial assistance to subsidiaries and other
fair and responsible remuneration to the executive related parties within the Group.
directors for the 2012 financial year.
Integrated report 2011 « JD Group
174 Condensed annual financial statements
Notice of annual general meeting (continued)
12. Special resolution number 3 – authority to repurchase a repurchase programme where the dates and
shares quantities of securities to be traded during the
period are fixed, i.e. not subject to variation, and
Notwithstanding that a repurchase of shares is not
full details of the programme have been
contemplated at the date of this notice, the board
disclosed in an announcement over SENS prior to
believes it to be in the interest of the Company that
the commencement of the prohibited period
shareholders provide the Company with optimum
flexibility to repurchase shares as and when an 12.7 the repurchase of securities shall not, in the
opportunity arises. It is consequently proposed that the aggregate, in any one financial year, and calculated
board be given a general authority to repurchase shares as at the date this authority is given, exceed 20%
of the Company and for any subsidiary of the Company (twenty per cent), equating to 43 966 000 (forty-
to acquire shares issued by the Company subject to the three million nine hundred and sixty-six thousand)
provisions of the Act, the Company’s articles and the ordinary securities in aggregate of the Company’s
JSE Listings Requirements by passing, with or without issued securities of that class, and where the
any modification, the following special resolution: Company’s issued securities are repurchased by its
subsidiaries, it shall not exceed a maximum of 10%
“Resolved that the Company and/or a subsidiary of the
(ten per cent), equating to 21 983 000 (twenty-one
Company, be and is hereby authorised to acquire
million nine hundred and eighty-three thousand)
securities issued by the Company, upon such terms and
ordinary securities in aggregate of the Company’s
conditions and in such amounts as the directors of the
issued securities of that class
Company and of such subsidiary may from time to time
determine, subject to the relevant requirements of the 12.8 the repurchase of securities may not be made at
Company’s articles, the Act and the JSE Listings a price greater than 10% (ten per cent) above the
Requirements, provided that: weighted average of the market value for the
securities for the 5 (five) business days
12.1 such acquisition is permitted in terms of the Act
immediately preceding the date on which the
and the relevant company’s articles
transaction is effected
12.2 the repurchase of securities is effected through
12.9 the Company’s sponsor shall, prior to the
the order book operated by the JSE trading
Company and/or its subsidiaries entering into the
system (in the open market) and be done without
market to acquire such securities, provide the JSE
any prior understanding or arrangement between
with a written working capital statement as laid
the Company and the counterparty
down by section 2.12 of the JSE Listings
12.3 such authorisation shall be valid only until the Requirements
next AGM of the Company or for 15 months from
12.10 a resolution has been passed by the board,
the date of this special resolution, whichever is
authorising the repurchase, and confirming that
the earlier
the Company has satisfied the solvency and
12.4 an announcement be made in accordance with liquidity test and following the test, that no
the JSE Listings Requirements when the Company material change to the financial position of the
and/or its subsidiaries have cumulatively Group has taken place, i.e. the Company and the
repurchased 3% (three per cent) of the initial Group has remained solvent and liquid
number, i.e. the number of shares in issue at the immediately after completing the proposed
time that the general authority from shareholders repurchase of shares.”
is granted (the initial number) and for each 3%
The board does not intend to use this mandate unless
(three per cent) in aggregate of the initial number
prevailing circumstances (including the tax dispensation
of securities of that class of securities acquired
and market conditions) warrant such a step. All required
thereafter
certificates and relevant statements shall be issued.
12.5 at any one time the Company and/or its
subsidiaries may only appoint one agent to effect Reason for and effect of this special resolution
any repurchase of the Company’s securities on
The reason for this special resolution is to grant the
behalf of the Company
Company and its subsidiaries a general authority to
12.6 the repurchase of securities by the Company repurchase the Company’s securities by way of open
and/or its subsidiaries shall not take place during market transactions on the JSE, subject to the
a prohibited period (as defined in the JSE Listings requirements of the relevant company’s articles, the Act
Requirements), unless the Company has in place and the JSE Listings Requirements. The effect of this
JD Group » Integrated report 2011
175
special resolution is that the Company and its » the consolidated assets of the Company and the
subsidiaries are authorised to repurchase the Group, fairly valued in accordance with International
Company’s securities on the open market, subject to Financial Reporting Standards and the accounting
the requirements of the relevant company’s articles, the policies of the Group as reflected in the latest audited
Companies Act and the JSE Listings Requirements. annual financial statements of the Group, will be in
excess of the consolidated liabilities of the Company
Statement and disclosures by the board and the Group
In accordance with paragraph 11.26 of the JSE Listings » the Company and the Group will have adequate
Requirements, the attention of shareholders is drawn to the ordinary capital and reserves for ordinary business
importance of this resolution. Should shareholders be in any purposes for a period of 12 (twelve) months after the
doubt as to what action to take, they are advised to consult date of the repurchase
appropriate independent advisors.
» the working capital and reserves of the Company and
The directors of the Company hereby state that: the Group will be adequate for ordinary business
» the intention of the directors of the Company is to utilise purposes for a period of 12 (twelve) months after the
the authority if, at some future date, the cash resources date of the repurchase
of the Company are in excess of its requirements. In this » the Company may not enter the market to proceed
regard the directors will take account of, inter alia, an with any repurchase of securities until the Company’s
appropriate capitalisation structure for the Company, the sponsor, PSG Capital (Pty) Ltd, has confirmed in writing
long-term cash needs of the Company and will ensure to the JSE the adequacy of the Company’s working
that any such utilisation is in the interests of the capital for the purposes of undertaking a repurchase of
shareholders securities.
» the method by which the Company intends to repurchase
its securities and the date on which such repurchase will 13. General
take place, has not yet been determined To transact such other business as may be transacted
» the directors, whose names are given on page 179 at an AGM.
collectively and individually accept full responsibility for
the information given in this notice and certify that to the 14. Authority
best of their knowledge and belief there are no facts that Any director or secretary of the Company, for the time
have been omitted which would make any statement being, be and is hereby authorised to take all such
false or misleading and that all reasonable enquiries to steps and sign all such documents and to do all such
ascertain such facts have been made acts, matters and things for and on behalf of the
» there have been no material changes in the financial or Company as may be necessary to give effect to the
trading position of the Group since the publication of the special and ordinary resolutions passed at the AGM.
financial results for the year ended 31 August 2011 and
the date of this notice Further disclosures
» other than disclosed or accounted for in this integrated The following further disclosures required in terms of the
JSE Listings Requirements are set out as indicated in the
annual report, the directors are not aware of any
integrated annual report of which this notice forms an
information on any legal or arbitration proceedings,
integral part:
including any proceedings that are pending or threatened,
that may have or have had, in the previous 12 (twelve) Directors and management – pages 30 to 31 and 38 to 39
months, a material effect on the Group’s financial respectively.
position Major shareholders of the Company – page 76.
» the directors are of the opinion, after considering the Directors’ interests in the Company’s securities – page 144.
effect of a maximum repurchase of shares, that, for a Share capital of the Company – page 143.
period of 12 (twelve) months after the date of this notice:
» the Company shall meet the solvency and liquidity test Material changes
as contemplated by sections 46(1)(b) and 46(1)(c) of the Other than the facts and developments reported on in this
Act integrated annual report, there have been no material
» the Company and the Group will be able, in the changes in the affairs, financial or trading position of the
ordinary course of business, to pay its debts Company or the Group since the signature date of this
integrated annual report and the posting date thereof.
Integrated report 2011 « JD Group
176 Condensed annual financial statements
Notice of annual general meeting (continued)
Voting, attendance and important general (Computershare Investor Services (Pty) Ltd) at the applicable
information address set out on page 178, by no later than at 08:00 on
Tuesday, 14 February 2012.
Certificated shareholders
Quorum
Shareholders wishing to attend the AGM have to confirm
beforehand with the Transfer Secretaries of the Company The AGM will not begin, or a matter begin to be debated, as
that their shares are in fact registered in their name. Should the case may be, unless:
this not be the case and the shares are registered in » at least three shareholders are present at the meeting
another name, or in the name of a nominee company, it is
incumbent on shareholders attending the meeting to make » sufficient individuals are present at the meeting to
the necessary arrangements with that party to be able to exercise at least 25% of all of the voting rights that are
attend and vote at the meeting. A shareholder entitled to entitled to be exercised in respect of at least one matter
attend and vote at the AGM is entitled to appoint a proxy or on the agenda
proxies to attend, speak, and on a poll, vote in his/her » sufficient individuals are present at the meeting to
stead. A proxy need not be a shareholder of the Company. exercise at least 25% of all of the voting rights that are
entitled to be exercised in respect of any matter at the
Uncertificated shareholders time the matter is called on the agenda.
Beneficial owners of dematerialised shares who wish to After a quorum has been established, at least one
attend the AGM have to request their Central Securities shareholder must remain present at the AGM, with voting
Depository Participant (CSDP) or broker to provide them rights that may be exercised, for the meeting to continue
with a letter of representation, or they must provide the and to consider matters on the agenda.
CSDP or broker with their voting instructions in terms of
the relevant custody agreement entered into between Identification of members
them and the CSDP or broker.
Any person wishing to attend or participate in the
proceedings of the AGM, must present reasonably
Voting
satisfactory identification and the Chairman at the meeting
On a show of hands, every member of the Company must be reasonably satisfied that the person has a right to
present in person and entitled to vote, or any member participate and vote, either as a shareholder or as a proxy
represented by proxy, shall have one vote only. On a poll, for a shareholder, or that a person may, in his sole
every ordinary shareholder entitled to vote shall have one discretion, attend.
vote in respect of each share held. As a general rule, the
Company affects all voting at general meetings by means
of a poll.
Proxies
For the convenience of shareholders, a form of proxy is
enclosed herewith. The form of proxy must only be
completed by shareholders who are holding shares in By order of the board
certificated form or who are recorded on the electronic Johann Pieterse
subregister in “own name” dematerialised form. The
Company secretary
instrument appointing a proxy and the authority (if any)
under which it is signed, must reach the Transfer Secretaries 11 November 2011
JD Group » Integrated report 2011
177
JD GROUP LIMITED Form of proxy
(Registration number 1981/009108/06)
(Incorporated in the Republic of South Africa
JSE code: JDG ISN code: ZAE000030771
(the Company)
To be used by the holders of ordinary shares in JD Group Limited (JD Group shareholders) at the annual general meeting of JD Group Limited (the Company),
scheduled to be held in the David Sussman auditorium, at JD House, 27 Stiemens Street, Braamfontein, Johannesburg, on Thursday, 16 February 2012,
commencing at 08:00 (the AGM).
To be completed by certificated shareholders and dematerialised shareholders who have selected “own name” registration. (Please refer to the notes overleaf.)
I/we
(please print full names in block letters)
of
(address)
being the registered holder(s) of ordinary shares in the Company,
(number of shares)
hereby appoint:
1. or failing him/her,
2. or failing him/her,
the Chairman of the meeting, as my/our proxy to act for me/us at the AGM for the purposes of considering and, if deemed fit, passing, with or without
modification, the resolutions to be proposed thereat and at each adjournment or postponement thereof and to vote for and/or against the resolutions and/or
abstain from voting in respect of the shares registered in my/our name(s) in accordance with the instructions as indicated below.
In favour Against Abstain
1. Ordinary resolution number 1 – To adopt the consolidated annual financial statements for the financial year
ended 31 August 2011, including the Directors’ report, the Auditors report and Audit committee report.
2. Ordinary resolution number 2:
2.1 To reappoint the firm Deloitte & Touche as auditors of the Group for the period until the next AGM.
2.1 To appoint Mr Brian Escott of the firm Deloitte & Touche as the individual designated auditor for the
period until the next AGM.
3. Ordinary resolution number 3 – election of directors:
3.1 To re-elect, by way of individual stand alone resolutions, the following five directors in terms of
rotation requirements:
3.1.1 Mr Ian Thompson (as executive director)
3.1.2 Mr Richard Chauke (as executive director)
3.1.3 Mr Martin Shaw (as non-executive director)
3.1.4 Mrs Maureen Lock (as non-executive director)
3.1.5 Mr Günter Steffens (as non-executive director)
3.2 To confirm, by way of individual standalone resolutions, the following two non-executive directors
who were appointed by the board on 1 September 2011:
3.2.1 Ms Nerina Bodasing
3.2.2 Mr Matsobane Matlwa
4. Ordinary resolution number 4 – election, by way of individual standalone resolutions, the following three
directors to serve as members of the JD Group Audit committee:
4.1 Mr Martin Shaw (Chairman)
4.2 Dr Len Konar
4.3 Mr Günter Steffens
5. Ordinary resolution number 5 – To place 3 500 000 of the Company’s shares under the control of the
directors to allot and issue for purposes of the SAR Scheme.
6. Ordinary resolution number 6 – To place 21 983 000 of the Company’s shares under the control of the
directors for purposes other than the SAR Scheme for them to issue and allot as they deem fit.
7. Ordinary resolution number 7 – General authority to directors to distribute to shareholders any share
capital, share premium and/or reserves of the Company with or without the right to receive shares as a
capitalisation award.
8. Ordinary resolution number 8 – General authority to directors to issue debentures convertible into ordinary
shares up to a maximum of 21 983 000 ordinary shares as the directors may deem fit.
9. Ordinary resolution number 9 – Non-binding resolution by shareholders to endorse the Company’s
Remuneration Policy and approach containing the guiding principles for application to staff and directors
of JD Group during the 2012 financial year.
Special business
10. Special resolution number 1 – directors’ remuneration:
10.1 To approve the non-executive directors’ fees for the 2012 financial year, commencing on
1 September 2011 as set out in the Notice.
10.2 To mandate the board to determine and pay fair and responsible remuneration to the executive
directors in accordance with the guiding principles of the Company’s Remuneration Policy.
11. Special resolution number 2 – To authorise the directors to provide direct or indirect financial assistance to
any related or inter-related company by way of a general authority in terms of section 45(3)(a)(ii) of the Act.
12. Special resolution number 3 – To authorise the Company and/or a subsidiary to repurchase securities
issued by the Company on terms as the directors may deem fit,
13. General – To transact such other business as may be transacted at an AGM.
Signed at on 2011/2012
Signature(s)
Assisted by
(where applicable and state capacity and full name)
Each JD Group shareholder is entitled to appoint one or more proxy(ies) who need not be a shareholder(s) of the Company to attend, speak and vote in place
of the shareholder at the AGM.
Please refer to the notes overleaf.
Integrated report 2011 « JD Group
178 Condensed annual financial statements
Notes and instructions to the form of proxy
Notes and shareholder rights
» The date on which shareholders must be recorded as such in the share register maintained by the transfer secretaries of the Company (the share register) for
purposes of being entitled to receive this notice, is Friday, 6 January 2012.
» The date on which shareholders must be recorded in the share register for purposes of being entitled to attend and vote at this meeting is Friday, 10 February
2012, with the last day to trade being Friday, 3 February 2012.
» Dematerialised shareholders, other than own-name registered dematerialised shareholders, who wish to attend the annual general meeting in person will need to
request their Central Securities Depository Participant (CSDP) or broker to provide them with the necessary Letter of Representation in terms of the custody
agreement entered into between such shareholders and the CSDP or broker.
» Dematerialised shareholders, other than own-name registered dematerialised shareholders, who are unable to attend the annual general meeting and who wish to
be represented thereat, must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between themselves and
the CSDP or broker in the manner and time stipulated therein.
» A copy of the complete annual financial statements for the 2011 financial year is published on the JD Group website at www.jdgroup.co.za.
1. Summary of rights contained in section 58 of the Act
In terms of section 58 of the Act:
» a shareholder may, at any time and in accordance with the provisions of section 58 of the Act, appoint any individual (including an individual who is not a
shareholder) as a proxy to participate in, and speak and vote at, a shareholders’ meeting on behalf of such shareholder
» a proxy may delegate her or his authority to act on behalf of a shareholder to another person, subject to any restriction set out in the instrument appointing
such proxy
» irrespective of the form of instrument used to appoint a proxy, the appointment of a proxy is suspended at any time and to the extent that the relevant
shareholder chooses to act directly and in person in the exercise of any of such shareholder’s rights as a shareholder (see note 8)
» any appointment by a shareholder of a proxy is revocable, unless the form of instrument used to appoint such proxy states otherwise
» if an appointment of a proxy is revocable, a shareholder may revoke the proxy appointment by: (i) cancelling it in writing, or making a later inconsistent
appointment of a proxy and (ii) delivering a copy of the revocation instrument to the proxy and to the Company
» a proxy appointed by a shareholder is entitled to exercise, or abstain from exercising, any voting right of such shareholder without direction, except to the
extent that the relevant company’s memorandum of incorporation, or the instrument appointing the proxy, provides otherwise (see note 4).
2. Every member present in person or represented by proxy and entitled to vote at the AGM of the Company shall, on a show of hands, have only one vote,
irrespective of the number of shares such member holds. In the event of a poll, every member present in person or represented by proxy and entitled to vote
shall be entitled to that proportion of the total votes in the Company which the aggregate amount of the nominal value of the shares held by such member bears
to the aggregate amount of the nominal value of all the shares issued by the Company.
3. A member may insert the name of a proxy or the names of two alternative proxies of the member’s choice in the space(s) provided overleaf, with or without
deleting “the Chairman of the annual general meeting”, but any such deletion must be initialled by the member. Should this space be left blank, the proxy will be
exercised by the Chairman of the AGM. The person whose name appears first in the list of names which has not been deleted on this form of proxy and who is
present at the AGM will be entitled to act as proxy to the exclusion of those whose names follow.
4. A member’s voting instructions to the proxy must be indicated by the insertion of an “X”, or the number of votes exercisable by that member, in the appropriate
spaces provided overleaf. Failure to do so will be deemed to authorise the proxy to vote or to abstain from voting at the AGM, as he/she thinks fit in respect of all
the member’s exercisable votes. A member or his/her proxy is not obliged to use all the votes exercisable by him/her or by his/her proxy, but the total number of
votes cast, or those in respect of which abstention is recorded, may not exceed the total number of votes exercisable by the member or by his/her proxy.
5. A minor must be assisted by his/her parent or guardian unless the relevant documents establishing his/her legal capacity are produced or have been registered
by the Transfer Secretaries.
6. To be valid, the completed forms of proxy must be lodged with the Transfer Secretaries at the applicable address as set out below, to reach them by no later than
at 08:00 on Tuesday, 14 February 2012 (South African time), alternatively, such forms of proxy may be handed to the Company secretary or Chairman of the AGM
not later than 30 minutes prior to the commencement of the AGM.
7. The power of attorney or other authority establishing the authority of a person signing this form of proxy in a representative capacity, or a notarially certified
copy hereof, must be attached to this form of proxy unless previously recorded by the Transfer Secretaries or waived by the Chairperson of the AGM.
8. The completion and lodging of this form of proxy will not preclude the relevant member from attending the AGM and speaking and voting in person thereat to
the exclusion of any proxy appointed in terms hereof, should such member wish to do so.
9. The completion of any blank spaces overleaf need not be initialled. Any alterations or corrections to this form of proxy must be initialled by the signatory(ies).
10. The Chairman of the AGM may accept any form of proxy which is completed, other than in accordance with these instructions and notes, provided that the
Chairman is satisfied as to the manner in which a member wishes to vote.
11. A vote given in accordance with this form of proxy shall be valid, notwithstanding the previous legal incapacity of the principal or revocation of this form of
proxy or the transfer of the shares in respect of which the vote is given, unless an intimation in writing of such legal incapacity or transfer shall have been
lodged with the Transfer Secretaries at the applicable address as set out below, to reach them by no later than at 08:00 on Tuesday, 14 February 2012 (South
African time).
Electronic participation
Shareholders wishing to participate electronically in the AGM are required to deliver written notice to the JD Group Company secretary, with a copy to the Transfer
Secretaries, at the applicable addresses as set out below, by no later than at 08:00 on Thursday, 9 February 2012, stating that they wish to participate via electronic
communication at the AGM the (electronic notice).
In order for the electronic notice to be valid it must contain:
a. if the shareholder is an individual, a certified copy of his identity document and/or passport
b. if the shareholder is not an individual, a certified copy of a resolution by the relevant entity and a certified copy of the identity documents and/or passports of
the persons who passed the relevant resolution and the relevant resolution must set out who from the relevant entity is authorised to represent the relevant
entity at the AGM via electronic communication
c. a valid email address and/or facsimile number (the contact address/number)
d. Note that shareholders will merely be able to participate, but not vote, via electronic communication.
By no later than 24 hours prior to the time of the AGM, the Company shall use its reasonable endeavours to communicate with each shareholder who has delivered
a valid Electronic Notice, by notifying such shareholder at its contract address/number of the relevant details through which the shareholder can participate via
electronic communication.
The Company reserves the right not to provide for electronic participation at the AGM in the event that it proves not practical to do so.
The costs of accessing any means of electronic participation provided by the Company will be borne by the shareholder so accessing the electronic participation.
Contact particulars of Company secretary Contact particulars of Transfer Secretaries
JD Group Limited, Computershare Investor Services (Pty) Ltd
JD House, 27 Stiemens Street Ground Floor, 70 Marshall Street
Braamfontein, Johannesburg, 2001 Johannesburg, 2001
(PO Box 4208, Marshalltown, 2000) (PO Box 61051, Marshalltown, 2107)
JD Group » Integrated report 2011
179
Administration
JD Group Limited ADR depository receipt transfer agent
(“JD” or “the Group”) File number 82-4401
Registration number: 1981/009108/06 The Bank of New York Mellon Corporation
JSE code: JDG BNY Mellon Shareowner Services
ISIN: ZAE000030771 PO Box 358516
Pittsburgh, PA15252-8516
Executive directors US toll-free telephone
ID Sussman (Executive Chairman) (+1) 888 269 2377
AG Kirk (Chief Executive Officer) Telephone: (+1) 201 680 6825
KR Chauke, Dr HP Greeff, ID Thompson, BJ van Rooy Email: shrrelations@ bnymellon.com
Independent non-executive directors Sponsor
N Bodasing, VP Khanyile, Dr D Konar, M Lock, MP Matlwa, PSG Capital (Pty) Ltd
MJ Shaw, JH Schindehütte, GZ Steffens Ground Floor, DM Kisch House, Inanda Greens
Business Park, 54 Wierda Road West, Wierda
Company secretary Valley, Sandton, 2196
JMWR Pieterse Telephone: (+27) 11 784 1712
Facsimile: (+27) 11 784 4755
Registered office (PO Box 987, Parklands, 2121)
11th Floor, JD House
27 Stiemens Street Independent auditors
Braamfontein, Johannesburg, 2001 Deloitte & Touche
(PO Box 4208, Johannesburg, 2000) 221 Waterkloof Road
Telephone: (+27) 11 408 0408 Waterkloof
Facsimile: (+27) 408 0604 Pretoria
Email: info@jdg.co.za 0181
(PO Box 11007, Hatfield, 0028)
Transfer secretaries
Computershare Investor Services (Pty) Ltd Attorneys
70 Marshall Street, Johannesburg, 2001 Fluxmans Attorneys
(PO Box 61051, Marshalltown, 2107) (Registration number 2000/024775/21)
Telephone: (+27) 11 370 5000 11 Biermann Avenue
Facsimile: (+27) 11 688 5238 (for proxies only) Rosebank, Johannesburg, 2196
Email: proxy@computershare.co.za (Private Bag X41, Saxonwold, 2132)
Preparer
The condensed financial statements were prepared by
Bennie van Rooy (the Group Financial Director)
Shareholders’ diary for 2012
Annual general meeting 16 February
Announcement of interim results Mid-May
Interim dividend declaration Mid-May
Payment of interim dividend Mid-June
Financial year end 31 August
Announcement of annual results and publication of annual financial statements Mid-November
Final dividend declaration Mid-November
Publication of annual report 30 November
Payment of final dividend Mid-December
*The board is considering changing the year end to 30 June. Should such change occur, the abovementioned dates will change accordingly.
Integrated report 2011 « JD Group
www.jdgroup.co.za