Interim Results to December 2007 by gyvwpsjkko

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									Interim Results to December 2007



          March, 2008
                         Agenda

•   When last we spoke

•   What has changed since then
     • External environment
     • Internal environment

•   Current status
      • Management team & board of directors
      • Results to December 2007
      • Operational review

•   The way forward
      • Vision
      • Management focus and priorities

•   Conclusion
                           When last we spoke

•   Signs of a slowdown, esp. in furniture channel

•   Major logistics cost shock

•   Higher than anticipated service and warranty costs on large
    volumes of audio/DVD’s sold in prior years

•   Aggressive price cutting by competitors set to continue

•   Low factory utilisation & overstocked position

•   Highlighted expectation of restructuring costs to come

•   Strategic acquisitions (white goods & Steinfurn) failed to materialise

•   New financial year off to a poor start / expectations of a very tough
    first quarter
                          When last we spoke

•   Insight into management’s restructure plan:

      •   Prune non-contributing activities

      •   Reduce service/warranty costs through improved product
          sourcing and vendor selection

      •   Restructure Electronics through reducing fixed costs

      •   Re-invigorate Atlantis factory through LCD production and
          market facing opportunities

      •   Reduce stock levels

      •   Reconfigure logistics
                           So what has changed

•   External factors:

      •   400 basis point increase in interest rates

      •   Introduction of the National Credit Act

      •   High levels of currency volatility

      •   Record oil prices

      •   Rolling blackouts

      •   Decline in consumer and business confidence levels to lowest
          levels seen in years
                             So what has changed

•   External factors:




                        Source: Financial Mail, 7 March 2008
                           So what has changed

•   Internal factors:

      •   Appointment of a new Group CEO – Sept 2007

      •   Departure of ‘new’ CEO after 3 months – Nov 2007

      •   Departure of CEO of Electronics – Dec 2007

      •   Stalled restructure plan / limited decision making

      •   Chairman retires after 47 years – Jan 2008

      •   Appointment of new CEO, CFO & MD of Electronics – Feb 2008

      •   Widespread changes to the Board
                           Current status – New management

•   Alan Coward CA(SA)
    Group CEO
       • Group MD of Panasonic (9 years)
       • GM of IBM Global Services
       • MD of Budget (Bidvest)

•   Byron Nichles CA(SA), ACMA
    Group CFO
      • Deloitte Corporate Finance
      • A founding member & director of Bridge Capital
      • 10 years M&A advisory relationship with Amap

•   Des Oliver
    MD of Electronics
      • 28+ years in consumer electronics industry with Sanyo, Frank &
          Hirsch, Panasonic
      • GM of Saco Systems (Reunert)
                           Current status – Existing management

•   Rob Marais
    CEO of Appliances
     •   2 years at Amap
     •   8 years as CEO of Whirlpool SA

•   George Bernhardt/Steve Karele
    Manufacturing

•   Herman Ellis
    Logistics & Service

•   Johan Deetlefs
    Human Resources

•   Ian Molyneux
    Business Systems

•   Bruce Drummond
    Group Finance and Company Secretary
                            Current status – Board of directors

•   Leon Campher – Independent non-executive chairman
    Sun International, Brimstone, STRATE, BESA, Directorate of Market Abuse

•   Steve Muller – Independent non-executive
    ex-Gensec (now Sanlam Capital Markets)

•   Rian du Plessis – Independent non-executive
    ex-Comparex (now Business Connexion)

•   Joe Kieser – Independent non-executive
    Global brand consultant

•   Steve Levitt – Non-executive
    Macsteel, private equity

•   Spiros Scafidas – Non-executive
    Former CEO – Appliances
                               Current status – Interim results

•     Income statement
                                    6 months    6 months
                                    Dec 2007    Dec 2006    % Change
    Revenue                          954 709    1 139 379       (16%)
    Cost of Sales                   (802 112)   (882 523)

    Gross Profit                     152 597     256 856
    Gross Margin                       16.0%       22.5%
    Overheads                       (166 668)   (142 052)       +17%

    Operating Profit/(Loss)          (14 071)    114 804
    Operating Margin                  (1.5%)       10.1%

    Fair Value Adjustment              2 863      (8 376)

    Interest                          (5 738)     (5 579)
    Profit/(Loss) Before Tax         (16 947)    100 851       (118%)
    Tax                                3 819     (30 256)
    Profit/(Loss) After Tax          (13 128)     70 595       (119%)
                                  Current status – Interim results

•     Reconciliation of operating profit

                                                                Revenue down 16%
                                    6 months
                                       R’000                    GP down to 16% from
                                                                22.5%
    Operating profit 2006             114 804

    Gross profit ‘gap’              (104 259)

    Additional overheads              (24 616)                  Restructuring – R9m
    Operating loss 2007               (14 071)                  Marketing – R5m*
                                                                Distribution – +30%
                                                                Depreciation – R1m




                         * Continued investment in our brands
                             Current status – Interim results

 •      Balance sheet                                              Capex – R7m

                              31 Dec 07   31 Dec 06                Deferred tax - R19m

                                  R’000       R’000   % Change
Non-current assets               75 526      52 031      +45%
Current assets                 764 003     909 031
Inventory                      419 009     503 396       (17%)
Receivables                    324 462     358 486        (9%)
Cash                             15 494      45 568
Other                             5 038       1 581
TOTAL ASSETS                   839 529     961 062
Equity                         510 367     547 030        (7%)   Cap distribution – R25m
                                                                 Loss - R13m
Long-term liabilities             9 941       6 755
Current liabilities            319 221     407 277
Payables                       313 689     385 265       (19%)
Short-term liabilities            4 422           -
Other                             1 110      22 012
TOTAL EQUITY & LIABILITIES     839 529     961 062
                              Current status – Interim results

    •   Working capital / cash flow analysis



                                     Reduced by
                                     R34m                    Reduced by
                                                             R72m
                 600
Reduced by
R84m             500

                 400   104
             Rm 300          95      57           80             'Dec 06
                                                                 'Dec 07
                 200                      62           71

                 100

                   0
                       Inventory   Receivables    Payables
                           Current status – Operational review

Electronics

•   Revenue down, margins down

•   Slowdown in sales resulted in lower factory utilisation

•   Retrenchment costs

•   Main area of concern – TV

•   Overstocked position

•   Additional stock provisions required
                         Current status – Operational review

Appliances

•   Achieved revenue budget but margins lower due to extraordinary
    increases in input costs from the East (addressed in Jan 2008)

•   Poor seasonal sales due to late summer

•   Key brands consolidated leading market shares
                             Current status – Operational review

Manufacturing

•   Atlantis – low utilisation

•   In discussion with various OEMs

•   Pilot media project successful, currently negotiating next phase

•   Digital Set Top Box – discussions ongoing

•   Inadequate policing of duties by government dilutes competitive
    advantage of local manufacture

•   Factory feasibility continues to be monitored and evaluated
                          Vision




•   We are a single business


•   We are a SALES & MARKETING company


•   We invest in and support our brands


•   World class, lowest cost shared services
                           Management focus & priorities

•   Reduction in inventory levels across the Group to acceptable levels

•   Refocusing of Electronics business

•   Evaluation of Atlantis factory

•   Systematic review of all other business activities

•   Reduction in overhead costs

•   Continued investment in our brands
So what gives us confidence?
                       So what gives us confidence?

•   A formidable stable of brands with continuous new product
    development
                        So what gives us confidence?

•   Excellent and well entrenched trade relationships
                       So what gives us confidence?

•   A very strong, ungeared balance sheet capitalised at R510m




     200

                       241c         227c
     150


     100


      50


       0

                 NAV per share   NTAV per share
                            So what gives us confidence?

•     A new and focused management team


                                   Alan Coward*
                                    Group CEO




                                                                   George Bernhardt*
    Byron Nichles*      Rob Marais*                  Des Oliver
                                                                     (Steve Karele)
     Group CFO           Appliances                  Electronics
                                                                     Manufacturing




    Ian Molyneux      Herman Ellis             Johan Deetlefs      Bruce Drummond
    Bus. Systems     Service/Logistics              HR              Finance/Co. Sec


                             * Main board director
                                So what gives us confidence?

      •     A clear vision and focus



Finance & admin                                        Logistics




       HR                          BRANDS                 Bus. Systems




          Service                                      Warehousing
                           Conclusion

•   Calendar year 2007 = a year to forget but learn from


•   Back to basics:
      • One company, one business
      • Sales & marketing organisation
      • Reduce stock levels
      • Streamline and right-size organisation


•   Lots of work to do but a lot to work with


•   Look forward with confidence
Thank You

								
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