21 Years Young Annual Report 2004 - ShareData · established chain, Barnetts, has now traded for...
Transcript of 21 Years Young Annual Report 2004 - ShareData · established chain, Barnetts, has now traded for...
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21 Years YoungAnnual Report 2004
www.jdg.co.za
Ann
ual
Rep
ort
2004
2
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21
Y
EA R
S YOU
NG
19 8 3 - 2 0 0
4
Our vision, philosophy and profile ....................................... 2
Financial performance ......................................................... 4
Corporate objectives and opportunities ............................... 5
Brands and their operational areas ...................................... 6
Directors and management ............................................... 10
Group value added statement ........................................... 13
Executive chairman’s report ............................................... 14
Social citizenship ............................................................... 23
Chains .............................................................................. 29
Corporate services.............................................................. 41
M a x x N e w M e d i aC o n c e p t a n d d e s i g n
G R A P H I C O R 3 1 2 8 9
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1
In only 21 years, JD has grown from one store to one of the most successful
and profitable retailers in South Africa. As we celebrate our 21st birthday,
the dream of the JD Group is very much alive in all of our hearts. Our
philosophies and values remain true. It’s about satisfying the consumer and
making an acceptable profit by developing our people and being innovative
in all we do; in merchandising and marketing, developing supplier alliances
based on sound business principles, by constantly developing management
and leadership skills, and by never forgetting about the world around us and
our responsibility to the planet and the communities we live in.
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Our vision is to be World Class in our fields of expertise
PHILOSOPHY
To lead the industry by satisfying our customers’ needs and our
stakeholders’ expectations through the delivery of consistent, acceptable
profit growth, which will be achieved globally by:
■ being innovative in everything we do
■ continuous and consistent development and optimisation of customer
and supplier relationships based on sound levels of service, values,
ethics and business principles
■ the ongoing development of our people
■ the continuous enhancement of management and leadership skills
■ remaining conscious of our social responsibility
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PROFILE
JD Group, a mass consumer financier, is South Africa’s leading differentiated
furniture retailer operating through eight chains in southern Africa and one
in Poland. It is listed on the JSE Securities Exchange in the Cyclical services:
General Retailers – Hardlines Sector and on the Namibian Stock Exchange –
Retail Sector.
Each chain is positioned in the marketplace in a differentiated way with a
specific focus on a market segment, own brand identity and store layout,
merchandise range and market profile.
All eight South African chains offer a wide range of value for money,
differentiated quality furniture, appliances, home entertainment and
consumer finance products supported by a high level of personal service.
Hi-Fi Corporation and Electric Express qualify as typical category specialists
due to the focused product range they offer.
The JD Group covers the mass market through its eight South African chains
with a mass merchandise focus.
JD Group services the mass market through a total of 952 (2003: 978)
stores, including 36 (2003: 26) stores in Poland, generating annual
revenue of R9,1 billion (2003: R6,0 billion) and an annual cash inflow of
some R8,4 billion (2003: R5,1 billion) from trading activities.
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Financial performanceOver 21 years, a pioneering spirit has fuelled the Group’s growth,
both organic and by acquisition. Today, JD Group is synonymous
with innovation in retailing and financial services.
* Proforma 12 months
Financial performance
31 August 31 August
2004 2003
Revenue Rm 9 056 5 966
Income attributable to shareholders Rm 790 449
Total assets Rm 7 739 7 185
Shareholders’ equity Rm 4 008 3 392
Gearing ratio % – 26,3
Operating margin % 14,0 12,5
Headline earnings per share cents 522,0 340,5
Cash equivalent dividends per share cents 240,0 110,0
Net asset value per share cents 2 330,1 2 033,0
Return on assets managed % 24,1 18,1
Return on average shareholders’ equity % 21,4 16,9
Note: Definitions of the terms above are reflected in the Annual Financial Statements
2004 book.
Revenue (R million)
95
2 20
5
96
2 47
9
97
2 72
6
98
2 89
6
99
3 01
6
00*
3 42
9
01
3 78
8
02
4 08
3
03
5 96
6
04
9 05
6
Headline earnings per share (cents)
95
86,1
96
119,
1
97
137,
7
98
185,
7
99
243,
0
00*29
3,7
01
353,
2
02
226,
5
03
340,
5
04
522,
0Net asset value per share (cents)
95
699,
0
96
799,
1
97
917,
2
98
1 08
5,0
99
1 30
5,0
00*
1 54
1,5
01
1 69
5,9
02
1 71
5,1
03
2 03
3,0
04
2 33
0,1
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Global aspirations
The Group owns 100% of the equity in Abra, operating in
Poland. Abra is positioned to grow its store base to 50 within
the next two years.
Solid foundation
The eight southern African chains have collectively traded for
446 years, or an average of 56 years per chain. The longest
established chain, Barnetts, has now traded for 108 years; followed
by Bradlows 101; Morkels 67; Russells 61; Electric Express 46;
Joshua Doore 31; Price ’n Pride 21 and Hi-Fi Corporation 11.
Abra has traded in Poland for 14 years.
Extensive data network
The Group processes some 465 million transactions each year
from 1 110 sites via its satellite based communications network
(V-Sat) and terrestrial lines. The Group administers in excess
of 1,7 million current customer accounts and has approximately
11,6 million paid up customers on its database. The average cash
inflow from customers approximates R28 million per day.
Sales
Annually, the Group distributes over 156 million catalogues to
customers and potential customers and in excess of 7,4 million
club magazines to club members. Our inventory system
facilitated the processing of 2,95 million line items sold
across 164 departments and sub-departments.
Products and services
The Group will continue to pursue opportunities with the
introduction of innovative products and services.
Customers
To develop a “customer centric” culture, committed to providing
real value for money and excellence of service, thereby ensuring
customer satisfaction and loyalty.
Profit and growth
To be a desired investment for all investors as a result of above
average performance and consistent growth.
Our people
To be the most sought after employer by providing ongoing
development and training for all our people, thereby creating
a career orientated environment allowing our people to share
in the Group’s success.
Suppliers
To deal transparently with all suppliers on the basis of sound
business principles, thereby ensuring that long lasting alliances
are maintained for our mutual benefit.
Innovation
To be innovative in all our business activities, thereby satisfying our
desire to provide better service.
Social responsibility
To meet our social responsibilities through providing a better life
for the disadvantaged and less fortunate members of the
communities in which we trade.
The environment
To manage the environmental impacts of our activities
by complying with all relevant safety, health and environmental
legislation and by enhancing awareness amongst our employees.
Management and leadership
To develop the leadership potential amongst us, together with the
ongoing enhancement of our managerial skills, thereby ensuring
ongoing success.
Corporate objectives and opportunities
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Household merchandise and appliances
retailer selling entry level and middle of
the range products in predominantly
rural areas (equivalent to new universal
LSM 3 to 6)
Furniture and appliances retailer serving
the lower end of the middle mass
market in the rural and urban
communities (equivalent to new
universal LSM 4 to 6)
Furniture retailer serving the mass
market in Poland (equivalent to new
universal LSM 5 to 8)
Established national retailer selling
quality branded furniture, appliances
and home entertainment products to
the aspirational upper middle mass
market (equivalent to new universal
LSM 4 to 8)
Specialist appliances and home
entertainment retailer selling for cash
and on terms at discount prices in
dynamically displayed stores to the
middle mass market (equivalent to new
universal LSM 5 to 6)
The largest furniture and appliance
discounter in southern Africa selling to
the middle mass market (equivalent to
new universal LSM 4 to 6)
Branded furniture and appliances
retailer serving the middle to upper
mass market in metropolitan and urban
areas (equivalent to new universal
LSM 4 to 7)
Retails electronic goods and household
appliances to the mid to upper end of
the consumer market (equivalent to
new universal LSM 6 to 10)
Offers branded appliances, home
entertainment, computers and quality
furniture on affordable terms
(equivalent to new universal
LSM 4 to 8)
Brands and their operational areas
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222 113 99 102 97 83 72 68 23 21 6 1 2 7 36 952
ElectricExpress
Abra
35 12 22 10 10 11 6 7 1 114
36 36
KW
AZU
LU-N
ATA
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GA
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NG
WES
TER
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APE
MPU
MA
LAN
GA
LIM
POPO
EAST
ERN
CA
PE
NO
RTH
WES
T
FREE
STA
TE
NO
RTH
ERN
CA
PE
BO
TSW
AN
A
LESO
THO
NA
MIB
IA
SWA
ZILA
ND
MO
ZAM
BIQ
UE
POLA
ND
TOTA
L
27 12 11 9 9 8 7 1 84
20 14 6 10 22 11 15 11 3 6 118
8 1 3 1 1 1 1 1 17
36 17 20 16 10 14 11 17 5 146
32 16 14 10 10 9 10 5 3 4 113
50 27 34 23 11 15 14 16 9 199
16 2 7 25
14 14 21 25 13 8 4 1 100
Barnetts
Bradlows
Hi-FiCorporation
JoshuaDoore
Morkels
Price ‘nPride
Russells
Other
Total
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Lets go back 21 years when the world lost one of its finest musical talents
Personal computers hit our desks and in 1984Apple Macintosh introduced thecomputer that promises 1984isn’t going to be like 1984 . . .
Stock markets arecrashing around usand Aids is firstacknowledged as thechilling threat it is
21 years ago a path was set. A future dreamed. Destined to be fulfilled.On the 27th of July 1983, Price ’n Pride opened its first store. The seed of a dream was
planted that would change the face of retailing in South Africa. From humble beginnings,
we had no idea how great the dream was or how great the reality would become.
We believed in people from the start. This is why in a Price ’n Pride
warehouse in 1985, the Freedom School was set up, later to become
the highly respected St Enda’s Community College in Joubert Park.
A spirit of giving that set the scene for our future.
After 21 years we have only just begun
1983
1985
1987
1984
In 1987 Joshua Doore introduces catalogue selling
– an innovative first, bringing value, comfort and
lifestyle to the platteland people.
This sees warehouses, transport and advertising being
optimised, making the bottom line look sexy.
And hats off to our people and their passion because
operating income before interest rises from a mere
R500 thousand to a staggering R9 million.
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Three years after our first doors open,
Joshua Doore is acquired and later that
year on the 18th of August the business
is listed on the Johannesburg Stock
Exchange at a share price of R2,75.
The dream begins to grow and we share
our success by forming socially responsible
organisations like the Mitzvah School,
providing tutoring for the underprivileged
Matric students from Alexandra.
By 1986 trains can travelfaster than a speeding bullet
George Bush is elected as the 41st president of the United States . . .
In 1988, another acquisition heralds more change and we welcome Bradlows
and Score.
We continue to invest in our prime assets – our people, introducing a minimum
salary of R500 for employees . . . a first in the industry.
Our new acquisition means our debtors book doubles. Our people buy into our
dream, and thanks to their commitment and hard work, bad debts drop by an
astonishing 70%!
1986
1988
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Executive directors
Executive directors
David Sussman (56) BComExecutive chairmanAppointed 1 April 1986.Appointed chairman in February 1989. 31 years’ experience in furniture retail.Founded the Group in 1983.
Mias Strauss (52)Chief executive officerAppointed 1 December 1993.Responsible for Group operations. 34 years’ experience in furniture retail. Joined Russells in 1971 and appointed chief executive of that chain in 1989.
Jan Bezuidenhout (49)BCom LLBDirector – Corporate servicesAppointed 16 March 1994.Responsible for Group strategic planning,investor liaison and corporate legal andstatutory services.13 years’ experience in merchant andcorporate banking and 11 years’ experiencein furniture retail.
Gerald Völkel (44)BAcc CA(SA)Group financial director Appointed 2 April 2001.Joined the Group in November 1995.15 years’ experience in auditing andnine years’ experience in furniture retail.
Johan Kok (53)Chief operating officerAppointed 1 March 2004.Joined the Group in 1984.Became chief operating officer in 1996.33 years’ experience in retail.
These five executive directors of the Group and
the four members of the executive management
are members of Sustein Management (Pty) Ltd,
the Group’s management company. Together,
they comprise the executive team which
manages the affairs of the Group.
David Sussman (56) Mias Strauss (52) Jan Bezuidenhout (49)
Gerald Völkel (44) Johan Kok (53)
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Executive management
Arie Neven (45)Chief executive operating divisions –Barnetts, Joshua Doore, Morkels and Price ’n Pride. 24 years’ experience in furniture retail.
Athol Beeforth (57)BCom CA(SA)Chief executive operating divisions –Bradlows, Electric Express, Hi-Fi Corporation and Russells. 32 years’ experience in furniture retail.
Mark Richards (46)CA(SA) ACAGroup executive – Corporate supportservices19 years’ experience in auditing andseven years’ experience in furniture retail.
Vivian Horn (53)Group executive – Sales33 years’ experience in furniture retail.
Executive management
Arie Neven (45) Athol Beeforth (57) Mark Richards (46)
Vivian Horn (53)
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Non-executive directors
Independent non-executive directors
Dr Len Konar (50)BCom HDip Acc MAS Cert Tax Law DComCA(SA)Director of companiesAppointed 19 July 1995.Chairman of the risk managementcommittee and member of the audit,nominations and remuneration committees.
Maureen Lock (55)BCom CA(SA)Director of companiesAppointed 2 April 2001.
Mervyn King SC (67)BA LLB (cum laude) HDip in Tax LawChairman of the King Committee onCorporate Governance and directorof companiesAppointed 2 May 1995.Chairman of the audit committee andmember of the nominations andremuneration committees.
Martin Shaw (66)CA(SA)Consultant and director of companiesAppointed 1 June 2001.Member of the risk management, audit, nominations and remuneration committees.
Non-executive director
Ivan S Levy (66)Dip LawAttorney and director of companiesAppointed 1 December 1994. Chairman of the nominations andremuneration committees and chairmanof the board of trustees of the Group’sretirement funds.
Dr Len Konar (50) Maureen Lock (55) Mervyn King SC (67)
Martin Shaw (66) Ivan S Levy (66)
pic to comepic to come
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2004 2003
Rm % Rm* %
Revenue 9 056 5 966
Investment income 24 15
Interest received 62 49
9 142 6 030
Cost of merchandise, services and expenses (6 370) (4 195)
Value added 2 772 100,0 1 835 100,0
Distributed as follows:
Employees
Salaries, commissions and other benefits 1 296 46,8 933 50,8
Government
Taxation, assessment rates and
regional services council levies 179 6,5 47 2,6
Providers of capital 622 22,4 363 19,8
Distribution to shareholders 415 15,0 160 8,7
Finance costs 207 7,4 203 11,1
Reinvestment in the Group 675 24,3 492 26,8
To provide for depreciation 94 3,4 67 3,7
To provide for deferred taxation 206 7,4 136 7,4
Reinvested for expansion 375 13,5 289 15,7
2 772 100,0 1 835 100,0
Statement of money exchanges with government
Assessment rates and taxes 16 13
Company taxes 148 24
Employees’ tax deducted from remuneration paid 164 112
Net value added tax and general sales tax (refunded)/collected 69 (4)
Regional services council levies 15 10
412 155
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 reinvested in the Group for the replacement of
assets and development of operations.
* Restated
Group value added statement
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Executive chairman’s report
David Sussman: Executive Chairman
“A clearly defined strategy makes the job easier, the directionis clear and the critical issues are known. It frees managementto maximise the process and anticipate the future.”
Michael Robert
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Achieving the goals is then all about effective implementation.
Operating environment
The favourable economic conditions in the local durables retail
market prevailed throughout the financial year. The benefits
flowing from the real growth in consumers’ disposable income has
materially reduced the credit risk profile of the Group and has
further enhanced the cash generated.
Financial overview
The comparative figures for the year to 31 August 2003
(“comparative period” or “2003”) only included the results of
the ex-Profurn Limited (“Profurn”) stores for the five months from
23 April 2003.
Revenue increased by 52% to R9,1 billion (2003: R6,0 billion),
the sale of merchandise increased by 61% to R6,1 billion
(2003: R3,8 billion). The increase in revenue represents like on like
growth of 16% in the historical operations in southern Africa and
17% in the acquired businesses. Sale of merchandise constituted
68% of total revenue (2003: 64%), with the remainder being
finance charges, financial and other services.
Southern African revenue contributed 97% of total revenue
(2003: 95%). Abra grew revenue in Zloty terms by 26%.
Credit sales accounted for 50,4% of total sales (2003: 62,0%),
considerably lower than the corresponding period. This is largely
attributable to the inclusion of Hi-Fi Corporation for the full year
which is a cash business and also to an increase in cash sales in the
other chains.
It is most gratifying to note that the Group was able to increase
overall product margin to 32,3% (2003: 31,6%) notwithstanding
the inclusion of Hi-Fi Corporation which operates as a discounter
working on lower margins. Stock markdowns of R49 million
(2003: R38 million) were incurred due primarily to product
deflation. Retail prices of electrical goods declined by 11% due to
the strength of the rand and a decline in US dollar prices. This
impacted on Hi-Fi Corporation as well as the electrical goods
component of our credit chains in southern Africa. Furniture
inflation during the past financial year was 1%.
Finance charges earned increased by 31% over the comparable
period to R1,5 billion. Financial services, which includes all the
Group’s insurance offerings, increased by 44% to R1 095 million.
This combined contribution to revenue is relatively lower due to
the lower credit sales to revenue ratio and the lower interest rate
environment.
Operating expenses grew by 37% to R3,5 billion. The increase in
southern African costs was largely due to the inclusion of Profurn
for the full year.
The R306 million operating loss reflected under corporate in the
segmental analysis includes expenses of R65,3 million relating to
both historic and acquired operations which are of a non-recurring
nature and therefore cannot be allocated to the individual chains
without distorting the ratios.
■ Revenue up by 52% to R9,1 billion
■ Operating income up by 69% to R1,3 billion
■ Headline earnings per share up by 53% to 522,0 cents
■ No gearing
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Operating income grew by 69% to R1,3 billion with the operating
margin improving to 14,0% from 12,5%.
Headline earnings increased to R871 million (2003: R453 million).
Headline earnings per share rose by 53% to 522,0 cents
(2003: 340,5 cents).
Net instalment sale receivables only grew by 1,2% to R4,5 billion.
This negligible increase is due to higher deposits, improved
payment patterns and the write-off of already fully provided for
accounts which have been transferred to Blake & Associates
Holdings (Pty) Ltd (“Blakes”). Total provisions as a percentage of
gross instalment sale receivables stand at 28,9% (2003: 31,9%).
The Group continues to insure its South African instalment sale
receivables.
Bad debts written off in the historical operations increased from
5,9% to 6,9% of gross receivables. In addition, an amount of
R101 million of fully provided for accounts from the historic chains
has been transferred to Blakes thus enabling us to focus our
attention on the front end of the book. This amount is reflected
under corporate in the segmental analysis. This increases the bad
debts written off in the historical book to 9,1%. An amount of
R107 million relating to bad debts written off on instalment sale
receivables arising at the date of acquisition of Profurn is disclosed
in the segmental analysis under corporate. This amount was
provided for at the time of the acquisition. This write off brings the
quality of the instalment sale receivables acquired in line with that
of the historic operations. Receivables’ arrears represented 12,5%
of gross receivables, down from 17,4% at the last year end. It is
significant to note that the rand amount of arrears reduced from
R1,14 billion to R798 million. The average length of the book
declined to 14,3 months.
The Group has now finalised the fair values of the assets and
liabilities acquired on the acquisition of Profurn. The amount
of R329 million initially allocated as a provisional trademark,
has been adjusted to R193 million which now reflects the amended
allocation of the acquisition values. The impact of this restatement
on the amortisation of trademarks is a reduction of R5,7 million in
the current year. The amortisation period remains 10 years from the
effective date of acquisition. The amortisation charge for future
years would therefore approximate R19,3 million per annum.
Notwithstanding significant increases in sales, inventories
increased marginally by 6,1% on the previous year.
The Group currently has no gearing (2003: 26%). Cash generated
by trading increased to R1,45 billion (2003: R816 million). This
includes a net amount of R208 million collected on closed books
of the acquired operations. Working capital cash requirements
declined from R108 million to R38 million.
Operational overview
The past year saw significant focus being placed on the
differentiation of our brands in order to capture as much of our
target market as possible and at the same time to minimise
competition between our own brands. Our direction has never been
clearer and the critical issues enjoy top of mind awareness. Our
strategy of maximising the potential of our brands through
satisfying the changing needs of our customers is entrenched at all
levels of our organisation.
The Group now administers in excess of 1,7 million current
customer accounts.
President Dwight Eisenhower once said, ”wars are won in the
planning room, not on the battlefield”. The successes achieved
over the past year are clear indications of the direction of our
strategy. However, we see ourselves at the beginning of this
journey and very real value is still to be unlocked, the benefits of
which will impact on the short, medium and long term.
The spread of our brands and their clearly defined positioning
obviously reduces risk to all investors and stakeholders. This is
illustrated in the arrear profiles of the respective brands. Reduced
risk enables our universal brands to work on lower product margin
without this impacting on profitability.
A total of 19 stores were closed in the BLNS countries. The Group
is in the process of disposing of all 7 stores in Mozambique. These
closures represent the Profurn legacy stores which were
highlighted in the prior year’s segmental analysis as operations to
be integrated, disposed of or discontinued.
BoConcept
In June we sold the master licence for “BoConcept UK”, 3 stores
and the contracts division back to the Danish parent company. In
addition we assigned another 2 leases and put the balance of the
Executive chairman’s report continued
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17
business, which was in effect 3 remaining leases, into voluntary
liquidation on 29 October 2004. We remain convinced that
BoConcept is an excellent retail format. The fact that we were not
able to resolve our problems with Club 8 is in no way a reflection
on the integrity and commitment of that company. With the best
will in the world they were unable to fulfil their obligation in terms
of the “Supply Agreement”. Notwithstanding our exiting
BoConcept, we wish Club 8 every success in the future.
Abra
Our Polish operation is now on a sound footing and ready to
grow. The task that lies ahead is the opening of stores and the
development and training of our people. While much has been
achieved on the “people” side, we have a long way to go before
we can say that the Polish team has the skills, confidence and
motivation to maximise the potential of that market.
We intend to use Poland as a springboard into central and Eastern
Europe. However we need a sustainable, profitable business in
Poland before we can consider the next move.
Nedcor Alliance
During November 2004 a joint decision was taken to terminate
the Alliance with effect from 19 November 2004. This termination
will not have any material financial effect on either party. JD Group
has had various approaches from other financial institutions
“Wars are won in the planning room,not on the battlefield.”
President Dwight Eisenhower
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to make use of our credit expertise and the extensive footprint
we enjoy. A further announcement will be made in this regard
in due course.
Blakes
The Group announced on 12 August 2004 that it would acquire
half of Unifer Holdings Limited’s (“Unifer”), (a wholly owned
subsidiary of ABSA Bank Limited) stake in Blakes, a company with
comprehensive debtors management capabilities. Subsequent to
that announcement JD Group and Unifer jointly acquired a further
5% shareholding from a minority shareholder, which brings
our holding to 27,5%. Competition Tribunal approval was only
obtained in October 2004 following which, the purchase
consideration was paid.
Blakes has a significant call centre operation. The 1 000 seat
call centre situated near Durban utilises the latest technology,
inhouse developed software and two predictive dialler platforms.
This provides a scalable platform from which JD Group can
leverage its direct marketing initiatives to its existing and new
customer bases.
Corporate governance
JD Group complies with the Code of Corporate Practices and
Conduct as set out in the King II Report on Corporate Governance
and the JSE Securities Exchange South Africa Listing Requirements.
Triple bottom line
The Group remains committed to support HIV/Aids interventions,
sound labour relations, enhanced skills training and the
development of our people in an environment which allows
employees to develop to their fullest potential. Black economic
empowerment within our South African communities remains an
integral part of the Group’s strategy.
Directorate
Mr JHC Kok was appointed as an executive director with effect
from 1 March 2004.
Prospects
This Group has never been better positioned to take full
advantage of the prevailing consumer confidence and the
buoyant trading conditions that lie ahead. The recently
announced commitment by government to infrastructural
development will most certainly extend this trading cycle. The
“peoples’ contract” overwhelmingly endorsed by this country’s
people in the last election enables our government to steam
ahead with the eradication of poverty and the creation of a better
future for all. Furthermore, South Africa’s winning of the bid for
the FIFA Soccer World Cup in 2010 will bring about a “pulling
together” of all our people, the likes of which has never been
experienced before. As we get closer to 2010 we will enjoy more
and more of the international focus. We have every confidence
that we will live up to the high expectations that South Africa as
a country has created.
The consumers’ indebtedness to their disposable income is at a
very acceptable level. The progressive fiscal policies of the
authorities have done much to instil a greater degree of
confidence within South Africa and with the world at large. We as
a country are doing so many things right. If the trading of the first
two months of the new financial year are anything to go by, we
can look forward to an outstanding 2005.
Whilst we expect compliance with the new Consumer Credit Bill
to increase costs, it will most certainly enhance transparency and
do much to protect the end consumer against reckless lending.
The team
An organisation can have all the blue sky thinking but unless it is
supported by impeccable implementation, it amounts to naught.
Mias Strauss, our chief executive officer, supported by our chief
operating officer, Johan Kok and his very able team, enable me to
say with absolute conviction that these results reflect only the
beginning of great things to come. Gerald Völkel, the Group’s
financial director together with his team of people have once
again defied the odds, still having to live with the inadequacies of
the old Profurn IT platform. Jan Bezuidenhout with his corporate
services portfolio has ensured that our net cost of funding remains
substantially below best borrowing rates. His interaction with the
investor community enables existing shareholders and prospective
shareholders to make investment decisions in our Group with the
confidence and knowledge that what they see is real. It is not
Executive chairman’s report continued
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19
possible for me to mention by name all our other handpicked
executives who continue to make such a huge impact on the well
being of this Group.
Our success is underpinned by our commitment to the
development and growth of all members of the JD team. The
efforts placed by management in this regard are clearly illustrated
under the Human Resources and Strategy sections of this report.
Good business sense demands of us that all levels of management
reflect the demographic spread of our country’s population.
Currently in excess of 42% of managerial positions are held by
people falling within the “previously disadvantaged” category. We
go to great lengths to make individuals aware of the opportunities
that exist within the Group.
Social actions
In keeping with our philosophy of assisting the less fortunate it is
with a sense of pride and gratification that the Group was able
to provide financial assistance to more than 40 projects. Our focus
remains with the development of our children, their education and
poverty alleviation. Our most recent project in conjunction with
the Israeli government and Ikamva Labantu encompasses the
provision of Israeli irrigation technology and the training and
development of destitute people as farmers. The initial
results have been quite astounding. Not only has the annual
yield of crops increased by five times, but the farmers are able to
produce enough fresh produce for their own families’ sustenance
and still have surplus crops to sell. This project is now being
adopted by a number of other organisations. It is hoped that
with the success being achieved Ikamva Labantu will receive
further support from other corporates. This is surely one of the
best ways of making a difference and assisting our government in
the fight against poverty.
Thanks
Probably one of the greatest strengths of this Group is our
commitment to building strategic alliances with our suppliers of
goods, funds and services. These alliances are built on the simple
principle of ensuring a “win win” situation for all the parties
concerned. Our success is largely due to the good relationships
that have been built over the past 21 years.
We all know that no legislation will bring about inherent honesty.
Our non-executive director Mervyn King defines good governance
as “the way you behave when you are not being watched”. Over
regulation can be stifling and the cost of compliance both in time
and money is becoming more and more of an issue. Of course
there is always a fine balance between “too much” and “too
little”. Incremental costs are ultimately borne by the consumer.
I hope that at the end of the day good business sense will prevail
and that we will be allowed to get on with the job. Our
non-executive board not only provides all stakeholders with the
necessary peace of mind, but also gives our executive team a
tremendous amount of assistance and confidence in determining
the road ahead. I thank them for their input and wise counsel,
which is always so readily available.
I David Sussman
Executive chairman
25 November 2004
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20
Abolition of apartheid laws
1989 sees operating margin rise above 10%.
Through the conversion of 53 stores into Score Price ’n Pride, this chain truly
becomes a force to be reckoned with.
Of course, in any business there are good times and challenging times. 1989
also brings challenge in the form of strikes disrupting sales, collections,
customer services and impacting negatively on profits.
But through staying positive, we managed to strengthen our relationships and
understanding with organised labour and finally achieve turnover in excess of
R500 million.
It is now 1991 and another breakthrough comes in the form of the first Central
Distribution Centre of 40 000 square metres being opened in Aeroton. State of the
art scanning equipment and bar coding equipment is introduced in the distribution
centres, equipment designed exclusively for the JD Group.
1991 also sees Bradlows growing to 60 stores with the debtors book exceeding
R600 million.
The Group’s value system has always been one of sharing and in that spirit,
R1 million is invested in the Housing and Educational Trust. This investment
results in a continual improvement in the living standards of our employees.
Times of growth are often followed by times of challenge. By 1991, crime and
corruption rises, unemployment is a harsh reality and confidence is low.
We mourn as one of SouthAfrica’s leaders, Chris Hani,is tragically assassinated
By 1993, 10 years after our humble beginning, the dream of being the
biggest and the best furniture retailer becomes a reality when JD acquires the
Rusfurn Group.
This deal brings with it the brands of Russells and Electric Express and the Group
can now satisfy the aspirations and needs of all South African consumers.
The JD Group now has in excess of 500 stores and over 10 000 employees.
The dream becomes greater than ever before.
Now the vision is “to become a global leader in our fields of expertise.”
1989
1991
1993
One of the world’sworst divisions ofhumanity crumbles
After 21 years we have only just begun
-
21
By 1994 turnover more than trebles to over
R2 billion and the share price shot from R3,50 to an
awe inspiring R12, a fitting tribute to JD’s people.
The JD Group supports the King Luthuli transformation
centre, an organisation committed to non-violent
transformation and voter education as South Africa
prepares for its first democratic elections.
Training and development remain a vital priority and
lead to the establishment of the JD University.
In 1994, your Uncle in the furniture business turns 21
and Russells celebrates its 50th birthday.
The JD Group has been built on people helping each other
and so despite hard times the Group’s housing assistance
programme grants loans to over 1 110 employees.
Homes furnished with love, and a commitment from
a company that cares.
The first McDonaldsin Moscow tells theworld the Cold War isreally over
The swearingin of NelsonMandela as thepresident of theRepublic ofSouth Africa
1994
1992
1990
-
“Small opportunities are often the beginning of great enterprises.”Denosthenes
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23
“. . . and our responsibilityto the planet and the communitieswe live in.”
Social citizenship Lerato Love Home
Social impacts
Corporate objective
To meet our social responsibilities through providing a better lifefor the disadvantaged and less fortunate members of thecommunities in which we trade.
Policy
The focus of the JD Group Corporate Social InvestmentProgramme is on the development of individual and communityself sufficiency through education and training, skills developmentand job creation.
Projects are selected on the basis of sound management,sustainability and the potential to be replicated.
We attempt, in certain instances, to forge partnerships with otherstakeholders to maximise funding.
A percentage of budget is allocated to smaller, once off annualdonations to organisations which are acknowledged as providingspecific services to their community.
Funding is allocated to secular organisations only.
No funding or sponsorship is granted for individual endeavours.
To ensure openness and transparency, no funding or sponsorshipis granted to political parties.
Funding and sponsorship
JD Group remains aware of the need to participate in communityprojects. In a country like ours, where such enormous disparityexists between the “haves” and the “have nots”, it is incumbenton us to participate in activities that would normally beundertaken by governments in developed countries.
JD Group is also aware that no South African Government, ofwhatever political persuasion, has the practical means to providethe social services equivalent to those enjoyed by developednations, nor will it have the means in the foreseeable future. Forthis reason, the contributions of the private sector are absolutelyvital to the development and upliftment of the disadvantagedmajority of the South African population.
The Techno-agricultural Innovation for Poverty Alleviation (Tipa)project is based on the concept of the African Garden Market,part of the Food Security for Africa initiative presented in 2002 atthe World Summit for Sustainable Development (WSSD) inJohannesburg by the Israeli Department of Foreign Affairs.
Both Tipa and the African Garden Market make use of the FamilyDrip Irrigation System (FDIS). The FDIS, state of the art irrigationtechnology, developed in Israel, has been combined with gravitypowered low water pressure, which allows traditional farmers toenjoy all the advantages of drip irrigation at low cost. Without theneed to introduce any further technology, each FDIS project is ableto cover an area up to 500 m2.
JD Group, together with Ikamva Labantu and The Embassy ofIsrael in Pretoria, established a Tipa demonstration project inCradock in the Eastern Cape. Three local people were selected bythe community to be trained to support the local farmers.
Tipa has established a business orientated co-operative of farmerswho each maintain their independence, while sharing training,the buying of necessities, security arrangements, and possiblemarketing. The co-operative can then establish business initiativeson its own, or participate as a supplier to existing enterprises.
Following the achievements of Tipa in Cradock, JD Group hasasked the Embassy of Israel and Ikamva Labantu to roll out
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24
additional projects throughout South Africa and to provide thenecessary ongoing technical support.
During the period under review, JD Group contributed someR1,6 million to the Tipa project.
We continue to support numerous education and otherinstitutions. The major beneficiaries are listed below.
St Enda’s Community Centre, a highly respected secondary schoolin Joubert Park, Johannesburg, was originally established asFreedom School in one of our warehouses in 1985.
Claremont Child Care, an institution which assists destitutechildren, with whom we have a long association.
Little Champs Sports Academy runs two facilities, in Alexandraand Springs, which provide pre-schoolers with physical, emotionaland social development, embracing teamwork, sharing andUbuntu. A third academy is scheduled to open in due course.
The Topsy Foundation, situated in Grootvlei, Heidelberg, Gauteng,is a private and corporate initiative with its core function being toprovide a multifaceted approach to HIV/Aids in an attempt toensure that South Africa does not suffer another “lostgeneration”. It is a home which provides sanctuary for Aidsorphans, and runs an “Adopt a Child” programme.
The Mitzvah School, a registered school and examination centre,provides quality tutoring for students from Alexandra in their finalyear of schooling. The school caters for 50 students and hasconsistently produced a pass rate exceeding 90%.
Lerato Love Home is a place of refuge in Alexandra for babies,children and young adults, the majority of whom are victims ofabuse, abandonment, neglect and HIV/Aids. Lerato Love Home
will be relocating to a children’s community centre which willconsist of three residential units and an undeveloped vacant lotneighbouring Alexandra. We acknowledge the significantcontribution made by Bidvest Group to this facility, as well asvarious contributions of money, clothing and food made byJD Group suppliers, and employees.
The goals of Lerato Love Home are to:
■ secure and develop 18 community centres nationwide;
■ encourage residents to become self-sufficient; and
■ provide Aids education and life skills.
The Bird Street Teacher Training Campus of the University of PortElizabeth.
Up With Science, a science enrichment programme for seniorsecondary school pupils presented by the Centre for ScienceEducation at the University of Pretoria.
Currently 200 children of employees are receiving financialassistance from JD Group for their studies.
For the past 10 years corporate head office employees have beendonating blood in conjunction with the South African BloodService on a regular basis at JD House.
HIV/Aids report
JD Group has for some time recognised the gravity and potentialimpact of the evolving HIV/Aids epidemic on its customers,markets, operations, workforces and employee benefits.
In 1988 the Group undertook a study to estimate the potentialimpact of HIV/Aids on its diverse customer base of approximately
St Enda’s SchoolSocial citizenship continued
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25
one million account holders. Based on these projections, theGroup embarked on a repositioning strategy to minimise theimpact of the epidemic on its current and future markets via acombination of the following:
■ expansion into other markets such as Poland;
■ discontinuation of certain chains within the Group andadjustments to other chains;
■ decreased exposure to geographical high risk areas;
■ introduction of additional products such as financial services;and
■ improved credit risk monitoring and management.
The above repositioning strategies are now bearing fruit. The
Group’s retirement and life and disability insurance schemes were
also restructured to minimise the impact of HIV/Aids.
Together with the Department of Health, the Group maintains an
HIV/Aids awareness programme at all major workplaces.
There is a disciplined approach to the gathering and analysis of all
relevant data, which allows for regular updates of business models
that monitor both the internal (human resources) and external
(markets, business partners and customers) impacts of the
epidemic. As a result, management are able to make informed
decisions about HIV related business strategies.
In addition, the Group continues to foster non-discriminatory
and empathetic workplace environments that ensure that HIV
positive employees are managed with care and compassion. All
HIV positive employees have access to high quality disease
management programmes, either through their medical scheme
or state facilities, and are encouraged to access these facilities.
Mitzvah School
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26
South Africa become champions of the 1995Rugby World Cup . . .
Mobile phone technologyis so entrenched, SouthAfricans begin to talk toeach other in ways they’venever done before
This year is no different. Taking the good
with the bad, the Group understands the
task of tackling the future, adapting to
circumstances, installing anti-hijack devices
and armed guards on delivery vehicles,
while at the same time introducing
innovative concepts like the EVA principle,
empowering store managers to run their
stores as if it were their own business.
As adapting to change becomes the norm,
this time the Giddy’s chain is repositioned as
Electric Express, another success story in the
JD dream.
In 1997 the JD Group adopts the Alexandra police station, a move to develop
management skills as part of Business Against Crime and we take great delight in
establishing a much needed and deeply appreciated park in Mamelodi. A refuge for
the people, happily named the President Mandela Park.
The year of 1997 also sees competency based modular learning introduced. This is a
programme designed to create a learning culture and at the same time 25% of credit
applications are rejected to improve the debtors book, not to mention the introduction
of the owner driver empowerment scheme.
1999 sees innovative
financial services
introduced with
12 successful test sites.
These facilities are to help
customers and to give the
company a new edge.
This positive move is tempered by ongoing security
problems.
369 stores are burgled which is not only disruptive
but costs millions.
1995
1997
1999
After 21 years we have only just begun
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27
The share price doubled to over R23 and our market cap to over
R2,5 billion in less than 12 months, whilst gearing drops by 50%.
The world is moving fast. Things are changing by the day, the hour,
the second. We are edging closer to the new millennium and technology
is the new kid on the block. Never afraid of change, embracing new
opportunities, the Group hits the technology frontier as satellite
communication systems are installed and electronic data interchange
provides management information and improved communication
with suppliers.
The company continues to grow, market
cap breaks R4 billion, 70 stores are opened
and we pay R100 million in tax.
Penny Heynsscoops 3 OlympicGold Medals
By 1998 e-mail is all therage, dot.coms are happening,the world-wide-web is it!
The new Millennium dawns and a potential merger between JD
and Ellerine Holdings is prohibited by the Competition Tribunal.
The good relationship with organised labour leads to the
conclusion of a two year wage agreement bringing smiles to
everyone in the company.
2000 becomes another landmark year for JD as the Group’s global
dream is realised by acquiring Abra in Poland. This is a proud
moment and could not have been possible without the ongoing
support of suppliers, investors, JD people and customers, a
winning combination. The Group continues to grow with the share
price reaching an all time high of R50!
1996
1998
2000
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28
21 years young with a fresh face to take the JD Group forward, we looked at the brands under our banner and decided to refresh them. To prepare us for the years ahead,
to keep up with the times. To stay contemporary without forgetting our heritage. A little face lift that will
keep our brands in tune with the times.
JD Brands – a fresh face
Each of the Group’s nine chains or brands has its own identity,
merchandise range and market profile, concentrating on offering
customers a wide range of value for money quality furniture,
appliances, home entertainment and consumer finance products,
supported by high level of personal service.
Following a comprehensive analysis of each chain’s branding,
competitors and target markets, a differentiation strategy has
been approved and implemented, with varying degrees of change
required for the different brand identities. Pilot concept stores in
five chains, to test the new look and feel have been exceptionally
well received by customers. Concept stores for another three
chains will be completed by calendar year end. The new or revised
identities will be incrementally rolled out across stores in each
chain over the next few years.
-
Abra – practical solutions for your home
Established in 1990 and acquired
in December 2000 Abra operates
36 stores (2003: 26) in major cities and
towns in Poland, targeting the middle
to lower mass market and offering an
extensive range of furniture products.
Piotr Krzanowski (50)Chief executive – 14*
Executive management
Kazi Borowicz (43)MScFinance and administration – 14*
Piotr Lisowski (36)MScMarketing and merchandise – 11*
* years experience in furniture
retail
Mission
To become the preferred leading furniture retailer in Central
Eastern Europe through the supply of consistent quality products
and services to our customers, with the collective involvement and
contribution of all our employees and business partners.
Review
Abra ended the year with 36 stores in 31 cities and towns. The
chain expanded its base by opening 13 new stores. At the same
time the existing base was optimised, resulting in the closure of
three underperforming stores.
The customer survey carried out as part of a brand positioning
and communication strategy confirmed our position in targeting
the middle to lower mass market. A new catalogue was launched
in May, starting the process of building brand awareness across
the country.
The foot traffic counters installed indicated that 200 000 people
had visited our stores and in addition the number of customers
visiting our website showed a healthy growth.
Gross margin has improved consistently over the year and the
average transaction value has also increased. Stock turn has
improved significantly.
Outlook
13 New stores, many of which will be a smaller format, and one
new warehouse are budgeted for in 2005, which will give Abra
a presence throughout Poland.
The new concept of catalogue showrooms will be tested in smaller
towns and the option for franchise operations remains open.
Despite the rapid network growth the head count at head office
did not grow exponentially, however, the move to a new head
office in March 2005 will accommodate an increase in employee
complement as the store base grows.
With the increased critical mass of the store base, Abra is
expected to make a small contribution towards Group profits in
2005 and a greater contribution from 2006 onwards.
29
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30
Barnetts – service and value you can trust
Established in 1896 and acquired in
2003, this 108 year old business retails
entry level and middle of the range
household merchandise and
appliances on affordable terms,
predominantly in rural areas. Barnetts
has stores in eight provinces of South
Africa and operates 100 stores.
Mission
To establish Barnetts as the leading furniture retailer in its
market segment.
Review
In a year characterised by strategic repositioning, consolidation
and rationalisation, Barnetts recorded an excellent performance.
Top line sales grew by 17,7% like on like and margins improved.
A new range of products was introduced which proved very
successful. Costs were well controlled and the chain recorded a
marked improvement in operating efficiencies. The state of the
debtors book improved considerably, with arrears at record lows
and collections well ahead of sector averages. The decrease in the
closed book size and improved risk profile of the current book
reflect better human resources deployment and improved
collection methods.
Information technology processes were integrated and operating
processes aligned to those of the JD Group. Other key
developments included the introduction of an electronic credit
scoring system, improved merchandise planning and procurement
processes, the roll out of people development programmes and a
business improvement initiative. Collectively, these have resulted
in cost efficient business practices.
The new brand identity has already increased awareness amongst
employees and customers. Supported by a policy of exceptional
service and consistently adding value, Barnetts is well positioned
for the future.
Outlook
Through enhanced brand building, differentiated products and
services and the development and empowerment of our
employees, Barnetts will become a leading and highly profitable
furniture retailer in its market segment. The focus will remain
on responsible credit granting practices, effective debtors
management and cost efficient collection methods.
Toy de Klerk (44)
Chief executive – 24*
Executive management
Piet Trichardt (46)Operations – 17*
Burnette van Breda (47)Debtors – 27*
Andreas Hinrichsen (48)Marketing – 20*
Hennie Spies (53)Merchandise – 30*
Donny McCulloch (50)Human resources – 30*
* years experience in furnitureretail
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31
Bradlows – you’re the difference
Established in 1903 and acquiredin1988. Bradlows has entrenchedits appeal to the aspirationalhomemakers’ market, offeringbranded appliances, homeentertainment products and superiorquality furniture on affordable terms.
Mission
To provide quality products and services at competitive prices and
thereby exceeding customer expectations.
Review
Bradlows operates through 84 stores in major centres in South
Africa. This team also manages the 16 Supreme operations in
Botswana and the two Bradlows stores in Swaziland.
Bradlows has further enhanced the consumers unique shopping
experience by introducing merchandise which is more affordable.
As a result sales have grown substantially at improved gross
margins, resulting in a significant growth in bottom line profit.
Research has shown that the Bradlows image of providing the
aspirational customer with exceptional service remains entrenched
and sets it apart from the rest of the mass credit furniture market.
The Bradlows debtors book remains in excellent condition with
reduced arrears and improved instalment collection rates.
Mike Roberts (49)
Chief executive – 22*
Executive management
Corrie Neven (49)Operations – 21*
Arthur Flemix (57)Operations – 38*
Willie van Zyl (41)Debtors – 20*
Mike Shimmon (39)Marketing – 8*
Conrad Kleingeld (37)Merchandise – 11*
Robin van der Merwe (50)IPM DipHuman resources – 15*
Andrew Ross (38)Logistics – 13*
* years experience in furnitureretail
Outlook
The differentiation process which commenced during the current
year will gain momentum during the new year with the new
branding being introduced in advertising and store identification.
Stores are being modernised in terms of the new strategy and
additional focus is to be placed on customer service in terms of the
Bradlows promise, “you’re the difference”.
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32
Electric Express – we’ve got the power to beat any price on credit
Established in 1958 and acquired in
1993, Electric Express specialises in
household electrical appliances and
home entertainment products
through 114 stores which offer
professional expertise, exceptional
customer service and the best
discount prices for cash or on
easy terms.
Mission
We will achieve our vision by having highly skilled and motivated
employees who offer extraordinary service to our customers on a
broad range of quality products at the most competitive prices in
exciting, conveniently situated stores.
Review
Electric Express’ unique low cost trading formula, which offers
domestic electrical and entertainment products at discounted
prices on credit, has ensured that they remain the market leaders
in their sphere of operation. The continued strengthening of the
rand resulted in price deflation but a significant increase in unit
sales has ensured growth in sales at improved gross margins.
Debtors management remained excellent with the percentage of
arrear instalments being one of the lowest in the industry.
Outlook
The already differentiated store look has been further enhanced to
provide a look that reflects the exciting Electric Express brand.
Even more aggressive promotional activity and merchandising will
see a continued growth in the return on assets.
Bill Chalmers (53)
Chief executive – 14*
Executive management
Albert Fick (53)Operations – 4*
Herbie Lindhorst (43)Debtors – 20*
Greg Smart (34)Marketing – 9*
Craig Robertson (40)Merchandise – 16*
Millicent Nortjé (48)Human resources – 29*
* years experience in furnitureretail
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33
Mission
Lowest prices, on every product, everyday, guaranteed.
Review
Hi-Fi Corporation’s mission has ensured that they maintain their
status as “category specialists” by dominating their product
market. Unit sales for the review period have increased by 72%
although this is offset by price deflation, caused by the reduction
in imported supply prices, due to the strengthening of the rand
against the dollar. Notwithstanding, sales for the year increased by
more than 40% and gross margins remained intact.
Excellent cost controls, together with sales and gross margin
performance, has resulted in increased trading margin and return
on assets.
Outlook
The return on assets being achieved by Hi-Fi Corporation and its
relatively narrow trading footprint, offers an opportunity for this
chain to be expanded into the market place. An expansion
programme, which will ensure that the store base will increase
significantly over the next three years, is in place. In order to
accommodate this expansion, a programme to review business
processes, systems and people requirements is being embarked
upon. This will ensure a smooth transition into the next life cycle
of the chain and will result in maximised Economic Value Added.
Founded in 1993 and acquired in
2003, Hi-Fi Corporation is the largest
audio and visual warehouse in the
southern hemisphere, retailing
electronic goods and household
appliances to the mid and upper
end of the consumer market through
15 stores in South Africa and one
each in Namibia and Botswana.
Diane Bowran (38)Chief executive – 12*
Executive management
Matthew van der Walt (32)Operations – 8*
Ryan Grill (35)Marketing – 8*
Alec Goodman (49)Merchandise – 28*
Debra Teles (38)Human resources – 15*
Martin Barbour (47)Logistics – 10*
Riekie Susini (41)Administration – 4*
* years experience in furniture retail
Hi-Fi Corporation – the lowest prices, on every product, everyday, guaranteed
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34
Mission
To offer a wide range of furniture, household appliances,
entertainment products and financial services, geared by a
philosophy that drives an innovative business approach and an
extraordinary level of service to internal and external stakeholders.
Review
Joshua Doore recorded good results for the third consecutive year,
achieving sales growth of 15,3%. This reflects the benefits of its
focus on guaranteeing the lowest prices in selected product
categories and aggressive marketing through its own catalogue
and electronic media.
In a highly competitive sector, margins were protected by
innovative sourcing of value added local and imported products.
The continuous focus on instalment collections, with a
concomitant improvement in cash flows, further improved
returns. Cash flows were also boosted by an increased level of
cash sales during the year.
Joshua Doore pays particular attention to employee development
and succession planning, recognising that well trained employees
will deliver premium results. Effective management training is
conducted via development programmes, in which individuals are
developed to their full potential. This ensures a pool of trained
people ready for higher positions, as reflected in Joshua Doore’s
excellent track record of internal promotions.
Outlook
Given a stable exchange rate and low interest rates, the market
remains buoyant. Joshua Doore will capitalise on this via increased
promotional activity and constantly reviewing its merchandise
range to best satisfy customer demand.
Continued focus on its differentiation strategies and business
performance improvement, supported by expansion of its store
base, will allow Joshua Doore to unlock more value and ensure
continued real growth in the next financial year.
Established in 1973 and acquired in
1986, Joshua Doore is the largest
furniture, appliances and home
entertainment products discounter
in South Africa with 146 stores.
James Gibson (53)Chief executive – 32*
Executive management
Fanie Venter (40)Operations – 19*
Johan Delport (55)Debtors – 35*
Christo Viljoen (45)Marketing – 25*
Fred de Jager (55)Merchandise – 33*
Brian Biccard (54)Human resources – 30*
André Barnard (42)Logistics – 20*
* years experience in furnitureretail
Joshua Doore – your uncle offers a discounted range on credit
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35
Mission
We offer a unique company backed two year guarantee on
quality, affordable merchandise provided by dedicated,
professional people at exceptional service levels.
Review
During the year Morkels was successfully restructured to align its
business to the JD Group trading formula. Its product range was
refined to offer its target market affordable, quality merchandise.
Aggressive marketing of this more competitive offering, backed by
the strength of its well known two year guarantee, resulted in
Morkels increasing market share. Top line sales rose by 15,9% like
on like.
The debtors book performed extremely well during the year,
particularly on the collection and management of bad debts,
resulting in a substantial reduction in arrears. An online
automated credit scoring system was introduced late in the
financial year which will further improve the debtors book.
Morkels’ integration into the JD Group has been extremely well
controlled, reflecting the strength of their middle management,
the commitment of all employees to manage the transition and to
deliver on shareholder expectations. Service and quality continue
to differentiate the Morkels brand.
Outlook
Morkels will continue to capitalise on the extensive JD Group
infrastructure and selectively expand its geographical footprint
within the boundaries of South Africa. The focus will remain on
improving operational efficiencies, managing expenses and
optimising its excellent supplier relationships in order to provide
discerning customers the quality, affordable products and services
they demand.
Established in 1937 and acquired in
2003, Morkels operates 113 stores in
major cities and towns in South Africa
and Botswana. Morkels appeals to the
aspirational customer, offering branded
appliances, home entertainment,
computers and quality furniture,
on affordable terms.
Jannie Els (55)Chief executive – 36*
Executive management
Rowland Jonck (44)Operations – 22*
Charl du Plessis (38)BJurisDebtors – 12*
Peter De Backer (39)Marketing – 19*
Colin Bresler (41)Merchandise – 5*
Sue Lewis (43)Human resources – 16*
Pat Kimmince (39)Logistics – 20*
* years experience in furnitureretail
Morkels – your two year guarantee store
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36
Mission
To improve our customers’ lifestyle by providing an affordable
range of quality products and services in a caring, respectful and
honest environment, at exemplary levels of customer service
through competent and proud employee.
Review
The benefits of repositioning the Price ’n Pride brand emerged
strongly during the year, with top line sales growth of 22,7%
and a marked improvement in the debtors book, reflecting
the appeal of the products and service offering in the target
market. Independent market research has verified the accuracy
of this repositioning and its attractiveness to an ever growing
customer base. The focus on business performance improvement,
productive employee levels, performance based rewards and
effective distribution strategies has further improved service levels
and profitability.
Over the past three years Price ’n Pride has instilled an
entrepreneurial culture throughout the chain, resulting in
healthy competition between its people for recognition and
acknowledgement of their professionalism by customers.
Outlook
Price ’n Pride is projecting top line sales growth of 20% for 2005,
with further improvements in all indicators on the debtors book.
Continued focus will be placed on the development of the chain’s
people with appropriate recognition for outstanding performance.
Established in 1983 as the founding
chain in the Group and repositioned
to cater for a more aspirational
market. Price ’n Pride operates
118 stores in urban and rural
communities throughout South Africa
and Lesotho, offering excellent
service and affordable products
to its customer base.
Len Rundle (49)BTechChief executive – 25*
Executive management
Ian McKay (38)Operations – 16*
Pieter Labuschagne (58)Debtors – 28*
Neil McLean (48)Marketing – 31*
Laurie Barnard (46)Merchandise – 22*
George Annandale (40)Human resources – 5*
* years experience in furnitureretail
Price ’n Pride – we treat you like our only customer
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37
Mission
Differentiate ourselves from our competitors by offering an
innovative range of furniture products, appliances and financial
services through competent employees, thereby exceeding the
expectations of our target market.
Review
Russells, with its large national footprint, continues to be the
largest contributor to the Group’s profit performance. Aggressive,
creative, highly successful marketing and merchandise campaigns
have resulted in turnover growth well ahead of the market. This
has been supported by a strong focus on operational disciplines
and efficiencies, resulting in very positive cash flows and a
consequent excellent return on assets.
Russells pioneered the differentiation drive. Fourteen stores have
been converted to the new look, supported by improved customer
facilities and service. Results from these stores have validated the
acceptance of our new look and feel by the target market.
Management development through various programmes has
ensured a steady flow of trained talent to provide for succession.
Outlook
Russells is perfectly poised to take further advantage of the
buoyant market and increase its market share even further. The
recently introduced programme for Business Performance
Improvement will ensure that efficiencies continue to add
economic value.
Established in 1943 and acquired in
1993, Russells operates 199 stores
in major cities and towns in South
Africa. Customers enjoy affordable
terms on quality furniture, branded
appliances and home entertainment
products.
Wietske van der Westhuizen (51)Chief executive – 25*
Executive management
Philip Kruger (42)BComOperations – 14*
Ronnie Mostert (51)Operations – 30*
Tokkie Combrink (62)Debtors – 37*
Wikus Labuschagne (45)Debtors – 25*
Kobus Minnaar (51)Marketing – 17*
Pieter Schoeman (48)Merchandise – 23*
Barry Dell (49)Human resources – 10*
Rens van Rensburg (54)Logistics – 22*
* years experience in furniture retail
Russells – your home lifestyle partner,quality guaranteed
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38
Our world changed onSeptember the eleventhforever, and keepschanging every day since
Mark Shuttleworth – first South African in space
2001
2002
Joshua Doore opens the doors of its
150th store.
Interest rates are riding high, while the rand
drops to a shocking low, factors that impact
on consumer confidence and resulting in the
share price dipping to R16.
After 21 years we have only just begun
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39
Score is absorbed into a repositioned Price ‘n Pride transforming a loss of R7 million into
a profit of R44 million. A huge achievement by our people and testimony to their
unwavering support.
In the spirit of sharing good fortune, JD continues to invest in the lives of people in the
communities. The company launches The To Life Trust which supports the Lerato Love
Home in the Alexandra township.
The Group now turns 18.
2003 The Group, never forgetting the importance of people,launches the Retail Leadership Development Programme,
opens the JD Group learning academy and with the
sponsorship of Price ’n Pride and Joshua Doore sets
up two Little Champs Academies, focusing on
pre-school kids.
The JD Group is in a stronger position than ever and
acquires the Profurn Group. The jewels in our crown,
now include Morkels – “your two year guarantee store”,
Hi-Fi Corporation with it’s unique trading formula and
Barnetts – with a rich heritage of more than 100 years.
The Group now consists of 1 000 stores, employs over
16 000 people, drives a fleet of 2 300 vehicles and
purchases goods for resale in excess of R4 billion a year.
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40
The corporate service departments provide the backbone of support to the chains. Each department has a
field of expertise employing people with specialist skills to maximise the service they give to the chains.
Corporate services
21 years young with the expertise to support and take theJD Group forward.
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41
Ensuring that Group credit
management strategies, policies and
procedures are conceptually sound
and observed in all operations.
Review
Good progress was made with the fine tuning and enhancement
of the Group’s credit application and scoring systems, which now
include sophisticated fraud detection models. All credit granting
chains in the Group have been linked, online and in real time, to
the system, which is one of the most efficient and comprehensive
of its kind in the consumer credit industry.
Development of the Group’s new automated debtors collection
system, which will function in conjunction with the about to be
launched PeopleSoft operating system, is well advanced. Roll out
of these systems to the chains will commence, in earnest, in the
first quarter of 2005.
The emphasis on quality customer acquisition, identification and
categorisation of credit risk and fine focus on debtors delinquency,
down to individual account level, has reaped gratifying rewards
and led to significant improvement in the overall quality of the
Group’s debtors books. This emphasis and focus has become and
will continue to be a way of life at JD Group.
Outlook
The quest for better control through automation and the
employment of world class technology and methodology,
together with unwavering management focus, will ensure that
customer service is enhanced, collections maximised and bad
debts minimised, leading to the unlocking of opportunities for the
broadening of the Group’s reach within the consumer credit
market place.
Dick Behrens (64)
Group executive – Credit and
administration – 45*
Executive management
Herman Bakkes (44)BCom(Acc) MBADebtors – 20*
* years experience in furnitureretail/IT
Credit and administration
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42
Review
The main focus of the period under review was characterised by
the continued integration and alignment of the various Profurn
systems and processes with the existing systems. In addition, the
budgeting and forecasting process was revised, and included the
relevant modelling for the Business Performance Improvement
initiative within the Group’s chains, which will remain one of our
focus areas.
The implementation of the PeopleSoft operating system into a
number of stores required significant preparation and testing and
will be an ongoing process throughout the new year.
Outlook
In addition to the PeopleSoft implementation process, the
department will focus on the re-engineering of the value chain
within finance department and strive to increase the level of
electronic integration between both internal and external systems,
including those of the banks and other stakeholders. Training and
development of employees will continue and include candidates in
various management development programmes.
Responsible for the financial
accounting and reporting for
the Group.
Leslie van Doesburgh (48)BComptGroup executive – Chain finance – 28*
Ian Thompson (36)BCom BAcc CA(SA)Group executive – Head office finance andtreasury – 13*
Executive management
Johan Breytenbach (39)BComFinance – 16*
Roelof Cornelissen (33)BCom (Hons) CA(SA)Finance – 11*
Lucia Hefer (40)BCom (Hons)Finance – 19*
Sanette Oberholzer (47)BComFinance – 27*
Susan Olivier (47)Finance – 30*
Tracey Rood (36)BCom BAccFinance – 14*
Elmien Rossouw (41)BCom (Hons)Finance – 8*
Fanie van der Merwe (36)MCom CA(SA)Finance – 14*
* years experience infinance/banking/auditing
Finance
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43
Review
The role of fleet management is to purchase the most appropriate
commercial and sedan vehicles for the Group’s needs. Careful
selection ensures a cost effective and efficient delivery service.
Fleet management administers these vehicles and provides the
management information systems to run the fleet in the most
productive manner. The department has integrated the fleets from
Profurn and JD, balanced the portfolio and disposed of vehicles
that were surplus, uneconomic or inappropriate to the needs of
the Group. The department has been successful in maintaining
the fleet in a good condition and minimising running costs.
Strong relationships have been forged with major suppliers. The
purchasing power of the Group has ensured highly competitive
vehicle purchase prices, as well as maximised vehicle disposal value.
Outlook
As operating costs for transport continue to increase so the need to
be more productive and manage costs to the finest detail becomes
more important. Management information will be enhanced to
facilitate the close monitoring of costs and productivity.
Fleet management strives towards being a world class customer
service based department in all aspects of its operations.
Clive Dicks (59)
Fleet management executive – 41*
* years experience in retail/financialservices/consulting/transport
Managing the procurement,
maintenance, administration,
insurance and disposal of a
fleet of over 2 600 vehicles.
Fleet management
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44
Review
The focus this year shifted from integrating the Profurn business
into JD towards enhancing and fine tuning the efficiencies and
effectiveness of the human resources business process value chain.
Final consolidation of all retirement funds and medical schemes for
employees has been completed. Employees can now look forward
to more professional services and timeous communication.
Since inception in April 2003, the JD Group Learning Academy has
hosted over 11 000 delegates. This bears testimony to the Group’s
drive towards and commitment to the ongoing training and
development of its people. Two additional leadership
development programmes were introduced at general
management and executive levels. These programmes have the
added credibility and prestige of being accredited and partnered
with the University of South Africa from 2005.
The Group was selected as the pioneer company to partner with
the Wholesale and Retail Sector Education and Training Authority,
in a R1 million learnership project for people with disabilities. The
success of the project culminated in a graduation and certification
ceremony at JD House on 19 November 2004.
Responsible for training and
development, employee relations,
remuneration administration and
employee benefits. The department
enhances business performance
by enabling, providing and
implementing best practice people
management solutions.
Lindsay Mentor (44)IPM Dip CPIRGroup executive – Humanresources – 16*
Executive management
Christine Grobler (37)BA (Hons) M(Phil) Labour Law and Employment RelationsEmployee relations – 19*
Rénier Krige (37)BCom SMPTraining and development – 15*
* years experience in humanresources
Annual negotiations for 2004 were concluded after just one
sitting, a clear indication of management’s transparency in sharing
relevant information for the negotiations and organised labour’s
(SACCAWU) appreciation of the information.
An industrial relations training programme for managers and shop
stewards, facilitated jointly by HR managers and full time shop
stewards, was successfully launched in 2004 and has significantly
contributed to fostering sound relationships between labour and
management at chain level.
Outlook
The launch of the new HR technology platform in the coming year will
provide the chains and service departments, through their respective
HR practitioners, with a real time analytical capability to more
effectively and efficiently manage the Group’s human resources.
Meeting and exceeding the Group’s employment equity policy and
plan, through the focused continuation of training and development
of our people, remains top of mind for the department.
Human resources
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45
Comprises a direct audit services
division, a centralised audit
function and a forensic audit division.
The 70 auditors have an appropriate
balance of operational and audit
experience. This division is also
responsible for security operations
in the Group.
Review
Over 1 535 audits were conducted during the year at Group
operations, locally and abroad, reflecting the multi-skilled
expertise of our auditors and entrenching the Group’s internal
audit function at the forefront of its field.
Much focus was applied during the year to enhance appropriate
audit processes for the Group across the various operating systems.
The use of centralised auditing techniques continues to be enhanced
through the effective use of audit interrogation applications.
The forensic audit function managed 3 980 incidents which varied
from minor to more serious incidents. The crime call centre
has produced valuable information and is realising significant
cost savings.
Incorporating safety and security functions into this department,
under the auspices of the new safety and security committee, has
improved cost efficiencies. Various initiatives have been
implemented to add value and reduce costs.
Pieter Pienaar (35)
BCom
Internal audit executive – 13*
* years experience inretail/auditing
Outlook
Internal and forensic audit provides assistance with the
integration of multiple systems and will develop new audit
programmes for the new PeopleSoft operating system.
Centralised auditing techniques will be further developed,
especially on the back of the central database in PeopleSoft.
An external quality control review will be conducted to ensure the
department is operating effectively and efficiently.
Internal and forensic audit
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46
Review
Following the integration of the legacy Profurn chains in the previous
year, there were two main thrusts. Firstly the integration of the
Frontier credit scoring engine to the Morkels and Barnetts chains and
secondly the enhancement of management information for these
two chains. This required the stabilisation of the store processing
system and the ability of disparate systems to interact.
In line with our end goal we have implemented the PeopleSoft
operating system, on a pilot basis, in six stores. This has been
running for a number of months and the major teething problems
have been resolved. The integration of PeopleSoft into the new
debtors collection system is nearing completion, with the first pilot
due to be rolled out mid November. Full roll out of the integrated
PeopleSoft system should commence early next year.
Implementation of the PeopleSoft system will require ongoing
improvement in the reliability and manageability of the network.
This remains a key focus going forward.
Supports the operational and
management information system
needs of the Group via the
rigorous application of formal
information architecture, software
quality assurance and a process of
continuous improvement in the
information system operation.
From an IT operations point of view we have commenced with the
implementation of the Microsoft Operations framework which
incorporates ISO standards. This initiative is in line with the
philosophy of continu