'All systems go' for JD Group

"The big issue facing us this year is to get our new IT platform in place, to complete our new centralised distribution expansion and to start maximising the potential of this reengineered group," executive chairman David Sussman told I-Net Bridge/BusinessLIVE.

The company reported an increase in headline earnings per share of 14.2% on a like-for-like basis to 170.1 cents for the four months ended December 2011.

Since its last reported results JD Group has both changed its year-end, from August to June, and incorporated the Unitrans and SteinBuild businesses into its results.

For the period under review, revenue was up 11.4% to R10.7 billion, while operating profit gained 24% to R590 million, on a like-for-like basis.

"What these results show is that the core JD businesses have continued to perform well, while the acquisitions from Steinhoff have added a real lustre to the group," Sussman said.

In what was described by the company as a "watershed" year, JD Group in 2011 acquired Steinhoff Holding's (SHF) South African retail assets in July for a cash payment of about R702 million and the issue of JD Group shares for the remaining R2.467 billion rand.

The deal also included the sale of JD Group's Polish subsidiary, Abra Spolka Akcyjna (Abra) to an associate of Steinhoff for R134.1 million.

JD Group now comprises six divisions, including furniture retail, cash retail, automotive and home improvement on the retail side, with financial services and new business development, which provides a consumer finance offering to all its retail formats.

On Monday, the company said its strategy of separating financial services from furniture retail continued to bear fruit.

"The benefits realised from the centralisation of credit granting and collections include a significant improvement in the quality of the debtors' book with a reduction in the risk profile and an increase in collection rates," it added.

During the past four months, net trade receivables grew 11% to R6.6 billion while the impairment ratio dropped to 8.4% from 9.6% and debtors' costs reduced 18% to R209 million.

"There is no tail off in applications for credit, but what we're seeing is a 5% or 500 point decline in the acceptance rate from an affordability point of view - that's the current trend," Sussman told I-Net Bridge/BusinessLIVE.

JD Group's Furniture Retail division generated operating income of R269 million on a like-for-like basis from R260 million in 2010. While merchandise sales only grew by 3.7%, gross margin improved by 1.7% to 36.9%. Sales over the festive season were up 6.5%.

Its cash retail division, which includes the results of SteinBuild for the first time, reported satisfactory results, delivering 18.8% growth in operating profit from R69 million on a like-for-like basis in 2010, to R82 million in 2011.

However, both Incredible Connection and HiFi Corp continued to be impacted negatively by price deflation across most of the technology and consumer electronics categories.

Unitrans Auto generated operating income of R120 million, up 33%, on the back of a 19% increase in vehicle sales.

Sussman said the group's strong balance sheet reflected net interest-bearing debt of R2 billion at a gearing ratio of 24.7% - "this provides us a solid base to fund future growth".

"We are certainly on the lookout [for acquisitions] all the time... anything that makes good sense, we're looking at," he added.

In January it was announced that Steinhoff would up its stake in JD Group through a share swap deal, in which it would ultimately hold 50.1% of JD Group from its current 32.4% stake.

Steinhoff plans to trade part of its holding in manufacturing unit Kap International Holdings (KAP) for shares in JD Group.

"This should be in place by the end of March," Sussman noted.