JD GROUP ANNUAL REPORT 2009
www.jdgroup.co.za
Annual Report 2009
Contents
Group review
Financial summary
Business operating structure
Operating portfolio
Vision and strategies
Our service code
Directorate
Executive management
Executive chairman’s report
Chief executive officer’s report
Review of operations
Review of corporate services
2
4
6
8
10
14
16
18
22
28
43
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
56
69
Annual financial statements
Ten year review
Directors’ approval
Report of the independent auditors
Certificate by Company secretary
Directors’ report
Audit committee report
Directors’ remuneration
Definitions
Accounting policies
Group income statement
Group balance sheet
Group cash flow statement
Notes to the Group cash flow statement
Group statement of changes in equity
Notes to the Group annual financial
statements
Segmental analysis
Share incentive trust and salient
features
Salient features of the Share
Appreciation Rights Scheme
JD Group Limited – Company financial
statements
Subsidiaries
Annexure A – Insurance businesses
Shareholder information
Notice of annual general meeting
Form of proxy
Administration
Shareholders’ diary for 2010
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97
98
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102
110
111
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IBC
IBC
www.jdgroup.co.za
Making a difference
our focus for the future
JD Group has committed to making a difference in our customers’
lives through our ËArt of Service’ culture. The manner in which we
treat the customer is at the centre of everything that we do.
JD Group, a mass consumer financier, is South Africa’s leading differentiated
furniture, appliances, electronic goods, home entertainment and office
automation retailer, operating in southern Africa through four business
divisions and 10 brands and internationally through one business division and
brand in Poland.
JD Group predominantly trades across the mass middle market and services
this market through 1 025 stores in southern Africa and 69 stores in Poland.
Each brand is positioned in the mass middle market in a differentiated manner
with a specific focus on a market segment, brand identity, store layout,
merchandise range and market profile.
JD Group generated annual revenue of R12,9 billion and an annual cash inflow
of R871 million from trading activities.
JD Group_Annual Report 2009
1
Financial summary
31 August
2009
31 August
2008
12 610
Revenue
Rm
12 922
Profit attributable to shareholders
Rm
75
514
Total assets
Rm
8 926
8 673
Shareholders’ equity
Rm
4 831
4 813
Gearing ratio
%
13,2
3,3
Operating margin
%
5,0
6,3
cents
44,4
301,0
Headline earnings per share
Cash equivalent dividends per share
cents
41,0
152,0
Net asset value per share
cents
2 833,5
2 822,9
Return on assets managed
%
10,0
12,7
Return on average shareholders’ equity
%
1,6
10,4
Note: Definitions of the terms above are reflected on page 110 of the annual financial statements.
2 833,5
2 822,9
2 717,0
44,4
301,0
518,5
2 297,0
621,7
697,6
12 922
9 933
9 056
2 804,5
cents
3 160,5
cents
823,5
R million
12 610
Net asset value per share
12 914
Headline earnings
per share
11 939
Revenue
04 05 06 07 08 09
04 05 06 07 08 09
R12 922m
44,4 cents
1983
1986
– Price ’n Pride established.
– Joshua Doore acquired.
– Joshua Doore Ltd trading as
Price ’n Pride and Joshua Doore
is listed on the JSE.
2
JD Group_Annual Report 2009
1988
– Joshua Doore Ltd acquired
Bradlows, Score Furnishers
and World Furnishers.
– Name changed to JD Group Ltd.
04 05 06 07 08 09
2 834 cents
1991
– JD Group Ltd became a cash
business, whilst simultaneously
managing the credit business of
JD Sales (Pty) Ltd.
Investment offering
a portfolio of investment opportunity
JD Group offers shareholders an opportunity to invest in a leading, predominantly southern
African retailer and financial services business that is well positioned to take strategic
advantage of the challenging market environment through its leading and progressive brands
and operational structures.
S Presence
– Our leading brands are well entrenched in the minds and lives of consumers where we trade both locally and
internationally.
– Our 11 brands have been trading for an average of 50 years thereby cementing their places as market
leaders.
S Customer centricity
– We strive to achieve world-class service through the establishment of a culture whereby each customer is
treated like our only customer.
– We provide expanded, relevant and differentiated products and services to our customers.
S Strong management team
– Our 10 retail chief executives have an average of 23 years’ experience in the retail industry.
– Our Financial Services and New Business Development executives have the requisite skills and expertise to
deliver on the set benchmarks.
– Transformation is a key strategy for the Group and previously disadvantaged people are achieving senior
management status and positions.
S Delivery
– Management has built solid foundations from which to grow the business by successfully implementing growth
strategies in new and existing markets.
S Growth prospects
– The Group has planted the seeds for future growth through a disciplined and methodical approach in its
endeavours to ensure improved and sustainable returns for the Group over the longer term.
– Consistent and continuous improvement of the productivity of financial, human capital and space utilisation.
– With the restructuring successfully completed, the Group is well placed to further optimise its processes and
to take full advantage of any upswing in the economy.
1993
– Became the largest retailer of
furniture, household appliances
and home entertainment in
Africa.
1994
1996
1999
– JD Group International (Pty) Ltd
operated the Group’s foreign
businesses.
– JD Group, in partnership with
Telkom, installed and
commissioned satellite
communication known as
V-Sat to all outlets.
– JD Group acquired a 90% stake
in Abra, trading in Poland.
JD Group_Annual Report 2009
3
Business operating structure
achieving service excellence
The five business divisions serve as the operating platform of the Group. The structure and the divisional
business goals are represented below.
Divisions
Brands
Business goal
Optimisation of retail efficiency and
delivery of required return on revenue
Barnetts
Traditional Retail
Bradlows
Electric Express
Joshua Doore
Morkels
Price ’n Pride
Russells
Supreme
Product and service differentiation,
store expansion and delivery of
required return on revenue
Hi-Fi Corporation
Cash Retail
Incredible Connection
International Retail
Store expansion and delivery
required return on revenue
Abra
Relevant risk management, collection
optimisation and delivery of required
return on capital employed
Financial Services
New Business
Development
Maravedi Group
Blake & Associates
2001
– Score Furnishers is discontinued
and Price ‘n Pride is relaunched
to cater for a higher segment
of the market.
4
(90,5%)
New product and market development
and delivery of required return on
capital employed
(70%)
2002
2003
2004
– JD Group selected the
“PeopleSoft” centralised branch
processing architecture.
– JD Group acquired the business
of Profum Ltd.
– JD Group acquired a 27,5% equity
stake in Blake & Associates – a
leading call centre and debt
collection solutions group.
JD Group_Annual Report 2009
of
4
1
8
8
1
Electric Express
29
12
15
8
12
10
7
6
1
100
Joshua Doore
36
17
19
18
13
13
12
13
5
146
Morkels
36
15
11
12
11
8
9
8
2
112
Price'n Pride
24
19
7
16
25
10
15
12
3
131
Russells
51
27
34
24
14
15
13
18
9
205
Total number
of stores
Northern Cape
10
9
Poland
Free State
13
11
Swaziland
North West
35
13
Namibia
Eastern Cape
21
13
Botswana
Limpopo
22
28
Western Cape
22
Bradlows
KwaZulu-Natal
Barnetts
Gauteng
Mpumalanga
Geographic footprint
Operational areas
Traditional Retail
Supreme Furnishers
128
2
93
20
20
Cash Retail
Hi-Fi Corporation
12
6
7
2
1
2
2
1
1
1
1
36
Incredible
Connection
25
5
12
3
1
2
2
1
1
1
1
54
International Retail
Abra
69
69
69
1 094
New Business
Development
Maravedi Group
Blake & Associates
Total
2005
– Maravedi Group established
a financial services alliance
with Absa Group and Thebe
Investment Corporation.
263
136
105
117
123
82
78
71
24
22
2
2
2007
2008
2009
– Maravedi Financial Solutions
established a presence in 745
selected JD Group business
units.
– JD Group celebrated 25 years.
– The Financial Services division is
launched with contact centres
in Johannesburg and Durban.
JD Group_Annual Report 2009
5
Operating portfolio
how we serve you best
Traditional Retail
Cash Retail
SÊ Contribution
2009
Revenue (Rm)
5 203
Operating profit (Rm)
202
Number of employees
SÊ Operations
8 037
2009
Revenue (Rm)
3 976
Operating profit (Rm)
218
Number of employees
The Traditional Retail division maintains its status
The
of leading retail brands focused on affordable and
outperform
functionally designed household merchandise
specialist retail division with leading brands
and appliances offering these services across the
in technology automation, electronic merchandise,
broad spectrum of the mass middle market.
home entertainment, audio visual products and
The national footprint of Traditional Retail spans
Cash
3 575
Retail
its
division
competitors
continues
set
as
to
a
household appliances.
southern Africa with some 935 stores, ensuring
Consumers are continually and consistently
that the merchandise and services are available to
enticed to the brands within this division by virtue
consumers for their convenience.
of the extensive ranges of merchandise on offer
The conveniently located stores are displayed in
natural room settings to enable consumers to
at competitive prices, providing consumers with
compelling reasons to shop at these brands.
experience the merchandise look and feel and to
Consumers across the middle to upper mass
visualise how it could look in their homes.
market are the focus of this division, however,
The brands are strategically positioned across the
mass middle market to ensure that irrespective
the brands are experiencing a wider customer
footprint than has been enjoyed previously.
of a consumer’s aspirational needs, one of the
Group’s brands is able to exceed the consumer’s
expectations.
SÊ Stores
SÊ Core brands
SÊ Highlight
935 stores
Barnetts
Bradlows
Electric Express
Joshua Doore
Morkels
Price ’n Pride
Russells
Supreme
82%
2008
6
JD Group_Annual Report 2009
Hi-Fi Corporation
Incredible Connection
Incredible Connection
increased revenue by 11%
increase in operating profit
202
2009
SÊ Page reference
90 stores
28
111
and operating profit by
2009
2008
36
27%
218
230
International Retail
New Business Development
Financial Services
2009
Revenue (Rm)
843
Operating profit (Rm)
58
Number of employees
845
2009
Revenue (Rm)
2 980
Operating profit (Rm)
351
Number of employees
4 895
2009
Revenue (Rm)
400
Operating loss (Rm)
Number of employees
(3)
3 343
The International Retail division consists of
The Financial Services division is well
The Group’s strategic intent to establish the
the Abra brand located in Poland servicing
established and operational as the stand
New Business Development division has been
the lower to mass middle market. Given the
alone financial services division of the
significantly augmented with the increased
average size of accommodation in Poland,
Group. The focus going forward will be to
shareholding in both Maravedi Group and
merchandise requirements provide a unique
implement, over the ensuing years, best
Blake & Associates.
challenge for this retailer in meeting and
of
exceeding the requirements of the consumer.
solutions to enable the division to meet
Abra continues to seek and achieve store
expansion and will pursue an exciting new
opportunity of a franchised business model.
The Group’s intention is to continue the
organic growth path for Abra as well as
exploring business opportunities in eastern
breed
financial
services
technology
the Group’s strategic intent and benefit
realisation of the new operating business
model.
The division is primarily represented in
Gauteng and KwaZulu-Natal with two state of
the art contact centres, which provide a range
of debt management services to the Group
Europe.
Maravedi Group is strategically positioned
to improve and expand its range of financial
product offerings, risk management and
collection strategies both within the Group
and the external market.
Blake & Associates consists of a world-class
premium inbound and outbound contact
centre offering, servicing customers both
locally and internationally.
and its consumers. In addition, the division
is represented in all Traditional Retail stores
Blake & Associates will continue to seek
for credit application facilities.
business enhancing opportunities both locally
and internationally.
69 stores
Abra
Revenue growth of
11,7% and an increase of
18,8%
in operating profit in Polish currency
58
2009
2008
39
49
935 points of
presence
935 points of
presence
JDG Trading Financial Services
Maravedi
Blake
The Group achieved its primary objective to
The Group increased its shareholding in
successfully separate the Financial Services
Maravedi Group from 42,7% to 90,5% and
business from the Traditional Retail business
increased its stake in Blake & Associates from
and established short term and long term
27,5% to 70% during the year.
insurance companies which are now registered
and operational.
40
41
JD Group_Annual Report 2009
7
Vision
The Group’s vision is “to be world-class in our fields of expertise”.
Mission and 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:
S Being innovative in everything we do;
S Continuous and consistent development and optimisation of customer and supplier relationships on sound levels of
service, values, ethics and business principles;
S The ongoing development of our employees;
S The continuous enhancement of management and leadership skills; and
S Remaining conscious of and committed to our social responsibility.
Values
The Group’s values, upon which the foundation of our cultures and behaviours are built, are outlined below:
S Honesty and integrity
Ability to communicate and behave openly without fear, focused on one truth as the only norm, based on mutual trust
and respect and where the intent of any communication and/or behaviour is unquestionable.
S Valuing diversity
Individually and/or collectively understanding, accepting and valuing the different backgrounds, cultures, personal
preferences and competencies of people.
S Responsibility and accountability
Role defined responsibilities and accountabilities are not only vested in the function, but fundamentally also in the
person and are not transferable.
S Urgency
Urgency in all we do is a non-negotiable value.
S Performance driven
The journey to achieve world-class status is impossible without the individual and collective commitment of all the
people of the Group to own the performance driven value.
Strategic business goals
Our strategic goals are central to drive the implementation and realisation of the Group’s strategy.
We have set clear goals for ourselves as we enter a phase of our journey towards perfecting the ‘Art of Service’. Believing
that we are well equipped to realise key objectives and to meet whatever challenges the future may bring. We use both
objective and subjective criteria to measure our ability to create value.
The following are the Group’s business divisions’ strategic business goals:
S Traditional Retail
Optimisation of retail efficiency and delivery of required return on revenue.
S Cash Retail
Product and service differentiation, store expansion and delivery of required return on revenue.
S International Retail
Store expansion and delivery of required return on revenue.
S Financial Services
Risk management, collection optimisation and delivery of required return on capital employed.
S New Business Development
New product and market development and delivery of required return on capital employed.
8
JD Group_Annual Report 2009
Strategies
Strategic business goals of the operating divisions
Target
Actual
Objective
2007/8
2008/9
2010/11
Traditional Retail
Optimisation of retail efficiency and delivery of required return
on revenue
2,1%
4,4%#
return on revenue
Cash Retail
Product and service differentiation, store expansion and delivery
of required return on revenue
5,7%
5,5%
return on revenue
International Retail
Store expansion and delivery of required return on revenue
6,1%
6,9%
return on revenue
12,8%
5,4%*
return on capital employed
n/a
Loss
return on capital employed
Financial Services
Risk management, collection optimisation and delivery of
required return on capital employed
New Business Development
New product and market development and delivery of required
return on capital employed
12,5%
7%
10%
25%
25%
#
Adjusted for restructuring costs of R29 million.
*Return = operating profit plus restructuring costs less interest on 50% of average gross book divided by capital employed (50% of average gross book).
Group operational strategies
Strategy
Customer centricity
Continuous focus to serve our existing and new customers with the best possible range of differentiated merchandise and
financial services offerings, underpinned by excellent service.
Sustainable growth
Secure short and medium term business performance to satisfy stakeholders’ needs, while focusing on market trends, to
ensure future relevance and market growth.
Building and optimising people capacity
Creating and establishing a culture of continuous learning, leadership development and business performance.
Optimised technology enablement
Establish, maintain and grow technology capacities that will enable a differentiated customer experience and secure
maximised business efficiencies.
Transformation
Driving transformation as a key imperative for the future success of South Africa and the Group.
JD Group_Annual Report 2009
9
Our service code
what drives our business
In the beginning
The story of the creation of
the JD legend!
Creed
Why are we here?
The future
Making a difference
through service
Customer service is
elevated as a strategic
driver and is measured
What cannot be measured
cannot be managed
Core ideology
VISION:
“To be world-class in
our fields of expertise”
VALUES:
Honesty_Integrity_Value
diversity_Responsibility
Accountability_Urgency
Performance driven
The leaders
Leaders walking
the talk
Leaders who lead
from the front
Artefacts
s Policies
s Processes
s Systems
s The way we dress
s The way we treat the
customer
The rituals
s Remuneration – leaders
s Performance management –
leaders
s Celebrations s Customer meetings
s Exco agenda s Steerco
s Incentives
The sacred word - hand talk
(4x4xU)
are at the centre
of all we do
1. Focus on the small things
2. Commit: Make every experience a great experience
3. Confront the brutal facts
4. Pulse: Every interaction
The whole notion of our service code is to bring about a functional change to our system, which entails
changing the culture of service across the organisation. In order to bring about this change, one needs to look
at the organisation as a holistic and integrated environment.
This is a way of life and a way of work in which each and every person in the Group has a fundamental part
to play, in order to create extraordinary levels of customer service, both internally and externally.
10
JD Group_Annual Report 2009
Making a difference
our focus for the future
Why the
‘Art of Service’?
S
It will enable our resources to provide an excellent and consistent customer experience.
S
We will exceed the expectations of internal and external customers.
S
This will result in improved, increased and sustainable profit and brand equity.
The impact of this strategic initiative has various levels. On every level, there is a people
process, from its reach to its value, through to its ultimate impact . . . the customer.
SÊ W
Ê hen thousands of employees are reached and inspired, their energy and intent begin to flow
in the same direction.
SÊ A
Ê s individuals respond to the message, they join as one force, the critical mass is reached and
tides turn.
SÊ A
Ê s
the ‘Art
of Service’ is embraced by all and adopted as a personal value system, a change
in behaviour becomes tangible across the employee spectrum.
SÊ T
Ê he
impact is felt and experienced by the customer as changes in attitude and behaviour
translate into new levels of customer satisfaction.
SÊ T
Ê he
new customer experience strengthens customer loyalty, leading to growth in market
share and increased revenue and profit . . . the ultimate impact for our stakeholders.
JD Group_Annual Report 2009
11
%
+82
Service delivery...
12
JD Group_Annual Report 2009
Group review
Price ’n Pride – Tsakane Mall
JD Group_Annual Report 2009
13
Board of directors
Executive directors
1.
5.
3.
6.
5. Gerald Völkel (49)
BAcc, CA(SA)
Appointed 2 April 2001.
2.
4.
1. David Sussman (61)
BCom
Appointed 1 April 1986.
David was appointed chairman in
February 1989. He has 36 years’
experience in retail. Founded the
Group in 1983.
Executive chairman
2. Grattan Kirk (45)
3. Richard Chauke (42)
BCom (Hons), MCom (Taxation), MTP
(SA)
Appointed 17 September 2007.
Richard joined the Group in February
2006. He has 12 years’ experience
in auditing and taxation, four years’
lecturing and three years’ experience
in retail.
Director: Transformation, Tax, Risk,
Internal Audit and Compliance
FCA, CA(SA)
Appointed 17 September 2007.
Grattan joined the Group in December
2005. He joined Incredible Connection
in October 1997 and was appointed
chief executive of Incredible Connection
in 2003. He has 10 years’ experience
in auditing and 12 years’ experience
in retail.
Chief executive officer
14
JD Group_Annual Report 2009
Gerald joined the Group in November
1995 as the assistant to the financial
director and took over that role in
October 1997 and now 14 years with
the Group. Completed five years’ articles
with Ernst & Whinney and qualified as
a CA(SA) in 1985. Ended 15 years’ in
the auditing profession as an audit
partner with Ernst & Young before
joining the Group.
Financial director
6. Dr Henk Greeff (50)
MEd (Ed Management) (cum laude),
PhD,
Programme
in
Strategic
Transformation (USB), Programme in
Strategic Change (Stanford, USA)
Appointed 17 September 2007.
4. Ian Thompson (41)
BCom, BAcc, CA(SA)
Appointed 13 November 2008.
Ian joined the Group in September 2003.
He has 12 years’ experience in finance,
corporate finance, auditing and taxation
and six years’ experience in retail.
Director: Finance and Corporate Affairs
Eight years’ experience in strategic
management consulting in a diverse
set of industry types. Led a number of
large scale strategic programmes from
design to successful implementation.
Six years’ experience in retail.
Director: Strategy and Human
Resources
Group review continued
Non-executive and independent directors
7. Ivan S Levy (71)
Dip Law, Attorney and director of companies
Appointed 1 December 1994.
Chairman of the Group’s nominations
committee and of the pension and provident
funds, as well as a member of the JD Group
remuneration committee.
7.
Non-executive director
8.
10.
12.
13.
12. Dr Len Konar (55)
BCom, CA(SA), MAS, DCom, an independent
consultant and professional director
Appointed 19 July 1995.
9.
11.
8. Vusi Khanyile (59)
10. Maureen Lock (60)
BCom (Hons), director of companies
BCom, CA(SA), corporate financier
Appointed 13 November 2008.
Appointed 2 April 2001.
Chairman and founding managing
director of Thebe Investment Corporation.
Director of numerous companies, listed
and private. With effect from 9 March
2009, appointed lead independent nonexecutive director.
Corporate financier with extensive
experience in business re-engineering,
primarily in the retail and engineering
sectors. First woman appointed as a
partner of Ernst & Young in 1981.
Independent director
Independent director
11. Günter Steffens OBE (72)
9. Martin Shaw (71)
Director of companies
CA(SA), director of companies
Appointed 13 November 2008.
Appointed 1 June 2001.
Former general manager at Dresdner
Bank AG in London and in South Africa.
Before joining Dresdner Bank, worked
for international banks in Montreal,
Zurich and Paris. A past chairman
of German – British Chamber of
Industry and Commerce and of the
Foreign Banks Association in London.
A non-executive director of various
companies in South Africa and in
Europe. Chairman of the JD Group risk
management committee.
Prior to retirement, served as managing
partner, chief executive and chairman
of Deloitte & Touche and acted as
chairman of Deloitte Consulting global
from 1998 to 2003. Non-executive
director of Reunert, Illovo Sugar and
Standard Bank. Past president of the
Natal Society of Chartered Accountants
and also of SAICA. Chairman of the JD
Group remuneration committee and a
member of the audit, risk management
and nominations committees.
Independent director
Independent director
Member of the King Committee on Corporate
Governance in South Africa, the Securities
Regulation Panel and the Institute of Directors.
Formerly professor and head of the department
of accountancy at the University of DurbanWestville and chairperson of the Ministerial
Panel for the review of the regulations of
accountants and auditors in South Africa in 2003.
Served as chairman of the audit committee of
the International Monetary Fund, co-chairman
of the Implementation Oversight Panel at the
World Bank, Washington. Chairman of Steinhoff
International, Exxaro and Mustek and a nonexecutive director of the South African Reserve
Bank, Sappi and Illovo Sugar. Member of the JD
Group audit, risk management, remuneration
and nominations committees.
Independent director
13. Mervyn King SC (72)
BA, LLB (cum laude), H Dip Tax, PhD (hc) in
Law, director of companies
Appointed 2 May 1995.
A former judge of the High Court of South
Africa. Chairman of the King Committee
on Corporate Governance in South Africa.
Professor extraordinaire at UNISA on Corporate
Citizenship. First vice president of the Institute
of Directors Southern Africa. Chairman of
the Global Reporting Initiative in Amsterdam,
United Nations Committee on Governance and
Oversight, as well as of Strate. Chairman of the
JD Group audit committee and member of the
remuneration and nominations committees.
Independent director
JD Group_Annual Report 2009
15
Executive management
1.
3.
2.
1. Pamela Barletta* (40)
2. David Hirsch (38)
Diploma Labour Law, Diploma Human
Resources
23 years’
resources.
experience
in
human
4.
3. Johan Kok (58)
18 years’ experience in retail.
38 years’ experience in retail.
Group executive: Merchandise and
Marketing
Chief operating officer
4. Phillip Kruger (47)
Group executive: Human Resources
BCom
19 years’ experience in retail.
Chief executive: Financial Services
*Note:
3 With effect from 16 September 2009, Pamela Barletta was appointed a member of executive management and a
director on the board of JDG Trading (Pty) Ltd.
16
JD Group_Annual Report 2009
Group review continued
5.
8.
6.
5. Komani Mfuni* (44)
7.
7. Arie Neven (50)
8. Guy Pearce (43)
BSc, MBA
29 years’ experience in retail.
BSc, BCom, MBA
Three years’ experience in financial
services and nine years in strategy
development and planning consulting.
Chief executive: Traditional Retail
13 years’ experience in financial services,
eight years’ experience in IT.
Group executive: Strategic Research
and Business Intelligence
Chief executive:
Development
New
Business
6. Andrew Murray* (47)
BSc Eng
22 years’ experience in retail, IT,
manufacturing and finance.
Chief information officer
*Note:
3 With effect from 14 September 2009, Komani Mfuni was appointed a member of executive management and a
director on the board of JDG Trading (Pty) Ltd.
3 With effect from 1 May 2009, Andrew Murray was appointed a member of executive management and a director on
the board of JDG Trading (Pty) Ltd.
JD Group_Annual Report 2009
17
Executive chairman’s report
David Sussman_Chairman
“Unmanaged change becomes chaos, unmanaged stability becomes
stagnation.” General Alexander Haig
“The Group is well on course with
the implementation of its strategy
initiated in 2008. These initiatives
which have been implemented
across the organisation will ensure
its future success.”
18
JD Group_Annual Report 2009
Group review continued
At the time of our year end results in 2008, we had clearly
in 2009 continued to feel the effects of over indebtedness,
mapped out and planned our objectives for the current year.
increased job losses and a lack of disposable income.
It is with a strong sense of pride that I am able to report that
Secondly, when we embarked on the project to centralise our
we have achieved these objectives and that we have
debt collection processes, it was with the understanding that
successfully separated our financial services and retail
this would inevitably result in an initial deterioration of the
businesses. This has resulted in each of these businesses
debtors book, followed by a period of stabilisation after which,
achieving total focus on their core competencies. One year
it would start to outperform the decentralised model.
ago we had a combined retail and financial services business.
I am pleased to say that we are through the stabilisation
Today we can forge ahead confidently with our ultimate goal
phase and we now look forward to optimising the new
of being a world-class retail and financial services group.
centralised model. We have already seen signs of an
improvement in the Group’s vintage curves, which augurs
It is particularly pleasing for me that we achieved these goals
well for 2010.
in a relatively short period of time and that we were not
sidetracked despite the tough trading environment which
With the Group now segregated into Retail and Financial
could easily have diverted our attention during the vitally
Services, we have aligned our balance sheet accordingly. This
important implementation phase.
has facilitated accurate tracking of divisional performance
while optimising the use of the Group’s financial resources
The retail business incorporates three divisions, Traditional Retail
and working capital.
being the seven furniture and appliance chains, Cash Retail
being Hi-Fi Corporation and Incredible Connection and our
At the half year stage we communicated that the worst
international business, Abra in Poland. The financial services
was definitely over. The trading performance in the second
business incorporates two divisions, being the Traditional Retail
half of the year confirms this conviction and we see clear
debtors book, including the insurance business, and the New
signs that market conditions are no longer deteriorating.
Business Development division of Maravedi and Blake. Our
priority for 2010 is to fine tune these businesses to cement their
positioning for long term value creation.
Current uncertainty revolves around job preservation in the
economy. The average consumer remains highly leveraged
and paying off debts is a high priority. It will take time for
As part of the implementation phase we recruited some
consumers to rebuild the capacity to service new debt as is
highly experienced financial services specialists and they
clearly demonstrated by the fact that credit applications are
have added enormous value in this regard. On 23 November
down by 15% year on year. Only 52% (2008: 55%) of submitted
2009, our new risk rating software will go live. This is an
applications are currently being converted to actual deals.
enormous step forward as it will ensure our ability to risk
It is fair to say that the National Credit Act has changed the
rate our customers consistently across all our brands, which
playing field forever.
in turn will mean that we charge accurately for the
commensurate risk. We are confident that this will enhance
our competitiveness.
JD Group has gained market share in a shrinking market. The
operating profit before debtors costs, adjusted for the
restructuring costs, also showed a strong improvement
Although our bad debts and provisions increased during the
of 9%, which clearly demonstrates that we are doing
year, this was no surprise. The reasons are twofold. The first
something right. Some of this success must be attributed to
being the overall economic environment. Our customer base
our
‘Art of Service’
initiatives which gained momentum
JD Group_Annual Report 2009
19
Executive chairman’s report
continued
during the year. We have an absolute determination to serve
our customers better. The
‘Art of Service’ initiative required
us to revisit our business processes in order to empower our
employees at store level to provide our customers with the
quality of service they deserve. Continually enhancing the
skills of our employees is also of paramount importance.
Social responsibility
The JD Group’s corporate social investment programme
remains focused on the development of individual and
community self sufficiency through education, training, skills
development and job creation. During the 2009 financial year
we invested more than R8 million in our social responsibility
will contribute to profit growth as
programme, which consists of R3,2 million in enterprise
consumers recognise that our brands are totally committed
development projects and R4,8 million in direct donations.
to a broad value proposition which extends beyond price,
Our main projects include among others, the Techno-
and that we are committed to giving them a superior shopping
agricultural Innovation for Poverty Alleviation (Tipa) project.
experience. We have already seen and felt a new attitude
Tipa is based on the concept of the African Garden Market,
among our senior and middle management and our challenge
part of the Food Security for Africa initiative.
The
‘Art of Service’
is now to ensure that this enthusiasm cascades all the way
through to store level.
Broad-based black economic empowerment
For additional details refer to the sustainability report on
page 56.
Dividend
(B-BBEE)
No interim dividend was paid in order to facilitate the payment
No progress has been made with regard to the conclusion
of a B-BBEE transaction. This is due to recent turmoil in the
financial markets. Such a transaction, incorporating a broad-
of the tax settlement. However, cash flow projections and
current trading enabled the board to declare a final dividend
of 41 cents per share.
based business partner and staff will most certainly be
pursued when the time is deemed to be propitious. We
continue to focus on the other aspects of the B-BBEE
scorecard and continuously evaluate procurement across
the operations to verify the credentials of our suppliers.
Recruiting people from previously disadvantaged backgrounds
at a management level is a priority and is supported by our
bursary, training and mentorship programmes. While we have
made progress in this regard, we fully acknowledge that much
is still to be achieved.
20
JD Group_Annual Report 2009
Prospects
While the market has stabilised and there are indications that
the global recession is coming to an end, we maintain that
the economic recovery will be slow. Notwithstanding the
uncertain timing of the local recovery, the fundamentals are in
place at JD Group. The Group is well on course with the
implementation of its strategy initiated in 2008. These
initiatives which have been implemented across the
organisation will ensure its future success.
Group review continued
Acknowledgements
The JD Group has most certainly undergone the most
momentous change in its 26 year history. It was relatively
easy to buy into this strategy if one was integral in its
formulation. For many of our employees it required a leap
of faith.
I wish to extend my heartfelt thanks to the JD family for their
ongoing commitment and loyalty. Their efforts enabled us to
follow through and achieve the targets which we set for
ourselves during the year despite the market turmoil. The
strategy to redefine our business was a daunting task and
was only made possible by the resilience and determination
displayed by our people.
In particular, I have been delighted by the leadership qualities
displayed by our new CEO, Grattan Kirk, and our executive
team during these challenging times. I am grateful to all
members of the team for their assistance in bringing about
the changes that are required in our business.
Our shareholders, providers of finance and our suppliers of
goods and services have once again displayed a huge amount
of confidence in the management of JD Group. Without your
ongoing support this business would not be what it is today.
Thank you.
To our non-executive directors, your continued support and
commitment during these challenging times are most
appreciated.
I David Sussman_Chairman
JD Group_Annual Report 2009
21
Chief executive officer’s report
Grattan Kirk_Chief executive officer
“Nothing changes if nothing changes.”
“The Group’s strategy to separate its
activities into focused retail and
financial services businesses started to
deliver tangible benefits . . . Our like for
like operating profit before debtors
costs increased by 9,3%.”
22
JD Group_Annual Report 2009
Group review continued
Even though we operated in a tough environment during the
continues to be very conservative and provides the
year, we maintained our focus on implementing the strategy
Group with a healthy balance sheet to grow the
which we set in motion in the previous year. We now have
business into its areas of strategic focus in the years
two focused and standalone retail and financial services
ahead. 2009 also allowed us to consolidate our funding
operations. Our priority is to fine tune these businesses to
position by raising over R900 million in long term
cement their positioning for long term value creation.
borrowings.
Financial overview
Traditional Retail
We are pleased to report a growth in revenue of 2,5% to
R12,9 billion (2008: R12,6 billion). Whilst not significant
growth, it does represent an increase in our share of the
durable goods sector which declined 6,2% in the period
under review. The Group’s strategy to separate its activities
into focused retail and financial services businesses started
to deliver tangible benefits, as the gross profit increased by
6,3% to R2,8 billion (2008: R2,6 billion). Accordingly, the gross
profit margin improved to 30,5% from 28,6% a year ago.
These results are underpinned by solid performances
The durable goods market was severely impacted by the
consumers’ limited ability to take on more debt during the
year, with the sector down 6,2% in the period under review.
The Traditional Retail division reported stable merchandise
sales of R4,47 billion (2008: R4,49 billion). Facilitated by our
focus on retail, the division became more effective in relation
to its merchandise – buying the right quantities and ensuring
that these products were distributed to the right place at the
right time.
across all five operating divisions, as all brands, with the
Despite ongoing inflationary pressures, Traditional Retail
exception of Hi-Fi Corporation, performed in line with
managed to increase its product margin and reduce its
expectation.
operating expenses, thereby delivering a 108% increase in
Operating profit before debtors costs was R1 755 million, up
3,5% on 2008. If we exclude the R98 million in restructuring
costs that the Group incurred this year, our like for like
operating profit (excluding restructuring costs of R29 million)
to R231 million (2008: R111 million). Return on revenue at
4,4% is up from 2,1% in 2008.
operating profit before debtors costs increased by 9,3%. This
The division made further progress with the centralisation of
reflects the success we have achieved during the year in
its logistics functions through the conclusion of a very
managing both our product margins and expenses.
successful pilot project in Bloemfontein. During September
Operating profit after debtors costs of R646 million
2009 a second centralised facility in Phuthaditjhaba was
(2008: R797 million) showed a decline of 18,9% on the
opened. Traditional Retail will continue to aggressively roll
previous year as a result of the restructuring costs of
out its centralised distribution model during the next two
R98 million and a 23,5% increase in the bad debts charge to
years in order to unlock further cost benefits while also
R1 109 million (2008: R898 million).
enhancing the ‘Art
of Service’.
Barnetts, Electric Express, Price ‘n Pride and Russells
Balance sheet and cash flow
delivered positive top line growth while all chains, with the
The balance sheet reflects net gearing of R639 million
exception of Morkels, delivered higher operating profit
compared to R158 million at 31 August 2008. The
despite the limitations on sales growth imposed by the very
gearing ratio of 13,2%, compared to 3,3% at 31 August 2008,
tough trading environment.
JD Group_Annual Report 2009
23
Chief executive officer’s report
continued
Looking forward, Traditional Retail will focus on ensuring the
its performance was negatively impacted by inventory write
relevance of its brands in the southern African retail
offs resulting in a 76,4% reduction in operating profit. The
landscape, thus providing the Group with sustainable growth.
programme initiated in 2008, to procure all merchandise
This division is positioned to achieve its three-year return on
through the local supply channel, was carried through and
revenue objective of 12,5% through better management of
all products are now supported and guaranteed by local
its margins as well as the ongoing focus on expenses and
distributors. Hi-Fi Corporation also redefined its brand
operating efficiencies.
strategy to penetrate the branded, specialised consumer
electronics market, from entry level to top of the range
Cash Retail
products across all categories. During the year a new
Incredible Connection and Hi-Fi Corporation make up
management team was put in place to facilitate this strategy.
the Group’s Cash Retail division, delivering revenue of
By the end of November 2009, 11 of the 36 retail outlets will
R3,98 billion (2008: R4,01 billion). Operating profit is down
have been upgraded to the new store format, with all
5,2% on the prior year at R218 million (2008: R230 million)
11 stores now carrying the new focused range of
due to a very poor trading performance at Hi-Fi
merchandise. There are positive early indications that
Corporation.
Hi-Fi Corporation is now on solid ground for future growth.
Incredible Connection extended its track record with an
International Retail
excellent performance, reporting an 11% increase in revenue
with its operating profit up 27% on 2008. These results
demonstrate the resilience of the business model despite
adverse market conditions. With no single consolidated
competitor, its strong supplier orientation, extensive product
range and specialised employees, enable Incredible
Connection to extend its leadership position in the local
marketplace. Incredible Connection will continue to grow
organically by opening new stores in areas which have good
Abra, the Group’s retail chain based in Poland, continues to
grow its footprint and perform well. It opened seven new
retail outlets during the year, bringing its network to
69 stores. The chain delivered solid revenue growth of
11,7% with operating profit improving by 18,8% in Polish
currency. The rand strength during the year dampened its
revenue growth to 5,4%, however, its operating profit was
18,4% up in rand terms.
growth potential. Incredible Connection is also committed to
Abra is evaluating opportunities to introduce a franchise
evolving its model to ensure its relevance with the
business model to facilitate further expansion and the
introduction of an extended warranty product, a new
Group is confident in the brand’s ability to extend its
e-commerce site and an on-site service. In 2009, we
growth track record. The objective of pursuing acquisition
introduced an updated store format, designed to enhance
opportunities in central and eastern Europe was put on
our customers’ in store experience. The new store format is
hold due to the economic downturn in the region.
being aggressively rolled out to entrench our market
leadership.
Financial Services
Hi-Fi Corporation is experiencing a complete makeover. We
The performance of the Financial Services division
embarked on a strategy to reposition the brand and its
mirrored
merchandise as well as to modernise and upgrade the store
environment, with the impact of lower loan volumes offset
format. The brand reported an 11,5% decline in revenue and
to a degree by the increase in the average loan value.
24
JD Group_Annual Report 2009
the
experience
in
the
traditional
retail
Group review continued
Revenue of R3,0 billion (2008: R3,1 billion) was in line with
Blake delivered a stable performance for the year under
last year. Although the division took a conscious decision
review and assisted in accelerating the roll out of the
to reduce its insurance rates by 25% during the year, the
Group’s centralised contact centre. This world-class
introduction of service fees in terms of the National Credit
inbound and outbound contact centre based in Durban,
Act did compensate for the lower insurance income.
remains a key strategic investment for the Group. We
The separation of the Financial Services division into a
standalone operation enabled a better control of expenses.
Despite the reduction in operating expenses, the 20,5%
increase in debtors costs, meant that the Financial Services
division reported a 43,6% decline in operating profit to
R351 million (2008: R622 million). Even though the
performance of the debtors book was poor, we remain
convinced that the centralisation of debtors will improve
collections in the year ahead. The introduction of new loan
and insurance products to our customer base and an
increased our stake from 27,5% to 70% during the year.
The way forward
JD Group is well on course with implementing the strategy
initiated in 2008. The pleasing operating performance of
the business on a like for like basis in 2009, provides
confirmation that our strategic direction will
unlock the
potential of JD Group. In the year ahead, we will be focused
on optimising and consolidating the business model to drive
the long term value of the business.
improvement in the trading environment, augurs well for us
The Group is committed to extending the progress
achieving our benchmark return on capital employed of 25%
made in 2009 towards achieving the specific performance
by 2011.
targets in each of the divisions. By leveraging the successes
and achievements during the year under review, JD Group
New Business Development
is positioned to achieve these benchmarks.
The New Business Development division, consisting of
Maravedi and Blake, is of critical strategic importance to
the Group.
Maravedi performed in line with expectation and continues
to make good progress towards its strategic imperative of
introducing new financial products into the Group’s target
Grattan Kirk_Chief executive officer
market. We increased our stake from 42,7% to 90,5% during
the year. In addition to launching a broker channel, Maravedi
opened two pilot retail outlets under its own brand.
Unsecured loans and additional insurance products have
been introduced. Subsequent to year end, Maravedi has
taken over the Incredible Connection and Hi-Fi Corporation
debtors books. A private label credit card will be introduced
in the new year.
JD Group_Annual Report 2009
25
%
+27
Service excellence...
26
JD Group_Annual Report 2009
Group review continued
Incredible Connection – Cresta
JD Group_Annual Report 2009
27
Review of operations_Traditional Retail
Arie Neven
Chief executive: Traditional Retail
Executive committee
Review
Colin Bresler
The past year was, in more than one dimension, a cornerstone year for the
Chief executive: Joshua Doore
Johan Coetsee
division in its endeavour to adopt and adapt to the new business and
Group executive: Finance
operating model as a pure retail organisation, decoupled from Financial
Toy de Klerk
Chief executive: Russells
Services, but establishing an optimised partnership with Financial
Julian Hanmer
Services.
Group executive: Logistics
David Hirsch
Group executive: Merchandise and Marketing
Pat Kimmince
Chief executive: Barnetts
The complexity of this endeavour was compounded by one of the
toughest trading environments ever experienced, driven primarily by:
3 Negative economic conditions having an impact on a significant
Johan Kok
slowdown in market demand;
Chief operating officer
Rénier Krige
3 The migration to one retail technology platform to remove complexity
Human Resources executive
and increase efficiency; and
Mike Roberts
Chief executive: Price ’n Pride
3 Embarking on a journey of migration from a decentralised logistics
Len Rundle
Chief executive: Morkels and Electric Express
Anthony Smith
Information Technology executive: Traditional Retail
Matthew van der Walt
Chief executive: Bradlows and Supreme
environment to one of a centralised business process, with a successful
pilot delivered in Botshabelo.
Fundamental changes under these conditions test the social and
leadership fibre of an organisation and it can be stated with confidence
that the Traditional Retail division successfully journeyed through this
transformation, maintaining and growing its market share.
The division is ready to take advantage of improved economic conditions
and increased demand for its merchandise and services.
Outlook
The new financial year offers significant optimisation opportunities
through the:
3 Launch of a customer centric retail practice through the
‘Art of Service’ initiative;
3 Contribution of the roll out of a centralised logistics capacity and
capability nationally;
3 Optimisation of merchandise management;
3 Development of retail leadership capacity and competence;
Analysis of Group operating profit
8,98%
31,27%
8 Traditional Retail
8 Finance Services
8 Cash Retail
33,74%
8 International Retail
New Business
Development (0,46%)
54,33%
Corporate (27,86%)
3 Closing of the gaps to achieve the retail return on revenue benchmarks
set for each brand in the division; and
3 Planning the migration to a new Enterprise Resource Planning (ERP)
system that will facilitate the optimation of business processes and
will in turn unlock value.
Achieving the envisaged retail return on revenue benchmark target is
a collective goal to be driven relentlessly and is central in our quest to
become world-class retailers.
28
JD Group_Annual Report 2009
Group review continued
Pat Kimmince (44)
Chief executive_25 years’ experience in retail
Executive team
Barnetts was established in 1896 and is one of the oldest retailers in
Ria de Clerck (43)
South Africa. This dynamic business was acquired in 2003 and trades
Merchandise and Marketing_24 years’ experience
in retail
out of 128 stores servicing the emerging lower to middle income
Craig Garson (46) THed
Operations_24 years’ experience in retail
segment of the market. The chain offers a wide range of value for
Donny McCulloch (55)
Human Resources_35 years’ experience in retail
money furniture, bedding and electrical merchandise and related
services, with a focus on functionality and practicality.
The ongoing training and development of its employees is a key
enabler for Barnetts to offer superior levels of service and to continue
to capture market share. The chain is an integral part of the communities
that it serves and values the relationships that are established with
customers through providing honest, friendly and efficient service.
Service and value you can trust
JD Group_Annual Report 2009
29
Review of operations
continued
Matthew van der Walt (37)
Chief executive_12 years’ experience in retail
Executive team
Established in 1903 and acquired in 1988, Bradlows aims to exceed its
Grant Adendorff (41) BSocSci, Dip Labour Law,
Dip Adv Labour Law
Human Resources_13 years’ experience in retail
customers’ expectations in the delivery of its vision: that Bradlows will
Linda Breedt (35)
Bradlows appeals strongly to the market through its modern store
Merchandise and Marketing_8 years’ experience
in retail
layouts and innovative, unique merchandise designs. With the
André Kock (43)
Operations_20 years’ experience in retail
make a unique difference in their lives. Operating through 93 stores,
implementation of the ‘Art
of Service’, the chain continues to reinforce
its position as a preferred destination for the aspirational market.
Supreme was established in 1989 and acquired in 2003, and strives to
maintain its status of being a leading provider of household durables to
the credit market in Botswana. Supreme does this by providing quality
merchandise at competitive prices, above average service through
dedicated and knowledgeable employees with the sole aim of exceeding
customers’ expectations.
You’re the difference
30
JD Group_Annual Report 2009
Value and quality you can trust
Group review continued
Len Rundle (54) BTech
Chief executive_30 years’ experience in retail
Executive team
Established in 1958 and acquired in 1993, Electric Express provides
Sue Lewis (48) IPM Dip, Adv Dip (Labour Law)
Human Resources_21 years’ experience in retail
consumers in its market segment with a range of quality and affordable
Thomas Muller (41)
technology and digital merchandise and services at competitive prices
Operations_21 years’ experience in retail
through consumer focused staff. As a specialist retailer of household
Craig Robertson (45)
electrical and home entertainment merchandise through 100 stores
Merchandise_21 years’ experience in retail
conveniently situated across South Africa, it is purposefully geared for
consumers who see themselves as first time homemakers.
The chain serves as the pioneer within the Group in proactively
pursuing back end integration with the Morkels chain, focused on
optimising the logistics and human resources processes and practices
for both chains, through synergistic application of sound leadership
and purposefully designed technology and systems.
We’ve got the power to beat any price on credit
JD Group_Annual Report 2009
31
Review of operations
continued
Colin Bresler (46)
Chief executive_27 years’ experience in retail
Executive team
Established in 1973 and acquired in 1986, Joshua Doore offers a wide
Brian Biccard (59)
range of furniture, household appliances and entertainment
Human Resources_35 years’ experience in retail
merchandise powered by a business philosophy that drives innovative
Linda Sithole (42) EMD, MBA
Operations_20 years’ experience in retail
Jan Snyder (54) MBA
Merchandise and Marketing_35 years’ experience
in retail
business and extraordinary levels of service.
Through its retail network of 146 stores, the chain is able to provide a
range of quality and branded merchandise at the right price that meets
its customers’ expectations. This is supported by an ongoing training
programme for its employees that ensures a pleasant shopping
experience for all its customers.
You’ve got an uncle in the furniture business
32
JD Group_Annual Report 2009
Group review continued
Len Rundle (54) BTech
Chief executive_30 years’ experience in retail
Executive team
Established in 1937 and acquired in 2003, Morkels offers a unique
Anton de Necker (39)
company backed two year guarantee on quality, affordable
Operations_18 years’ experience in retail
merchandise and service provided by dedicated professional
Sue Lewis (48) IPM Dip, Adv Dip (Labour Law)
Human Resources_21 years’ experience in retail
employees. Morkels offers South African consumers a unique shopping
Greg Smart (39) NDiploma in Marketing
and after sales experience through 112 stores across South Africa,
Merchandise and Marketing_14 years’ experience
in retail
focused on quality branded merchandise for aspirational consumers.
The chain continues to pursue growth by sourcing potential and
alternative sites for new stores. Morkels enjoys the position as the
South African consumers’ destination of choice for quality household
furniture, appliances, audio visual merchandise and service.
Your two year guarantee store
JD Group_Annual Report 2009
33
Review of operations
continued
Mike Roberts (54)
Chief executive_27 years’ experience in retail
Executive team
Price ‘n Pride was established in 1983 as the founding chain in the
Eppo Joubert (39)
Group. The brand has now cemented its position in the market since its
Operations_20 years’ experience in retail
repositioning in 2001, and caters to its aspirational target customers at
John Kirsten (56)
Merchandise and Marketing_34 years’ experience
in retail
Molefi Makhetha (45) BA (Hons) (Psychology)
Human Resources_14 years’ experience in retail
the entry level and mass middle market. Price ‘n Pride operates from
131 stores nationally, offering excellent service, affordable products and
added value to its customers.
The chain’s strategic imperative is to improve its customers’ lifestyle
by providing an affordable range of quality merchandise and services
in a caring, respectful and honest environment, through exemplary
levels of customer service provided by competent and proud
employees.
We’ll treat you like our only customer
34
JD Group_Annual Report 2009
Group review continued
Toy de Klerk (49)
Chief executive_29 years’ experience in retail
Executive team
Established in 1943 and acquired in 1993, Russells is differentiated
Scott Allan (40)
from its competitors by offering an innovative range of furniture
Operations_19 years’ experience in retail
and appliances through competent employees, thereby exceeding the
Millicent Nortjé (53) BA (Hons), MBA
Human Resources_34 years’ experience in retail
expectations of its target market. The retail chain has 205 stores
Pieter Schoeman (53)
located nationwide.
Merchandise and Marketing_28 years’ experience
in retail
Rens van Rensburg (59)
Logistics_27 years’ experience in retail
Russells enjoys the position as one of the leading credit furniture
retailers in the mass middle market in South Africa. With its focus on
operational excellence, merchandise and marketing effectiveness and
employee development, it continues to overcome external challenges.
Russells further prides itself on high levels of service delivery to its
customers and business partners. The chain’s operational disciplines
are focused on customer acquisition and retention, while its employee
development programme enables a healthy succession capacity to
support growth.
See how little style costs
JD Group_Annual Report 2009
35
Review of operations_Cash Retail
continued
Grattan Kirk
Chief executive officer (Chairman)
Executive committee
Review
Pamela Barletta
Consumer electronics, home entertainment, audio visual and household
Group executive: Human Resources
Johan Coetsee
appliances came under severe pressure in the period under review, while
Group executive: Finance
a number of new competitors entered the marketplace, indicative of the
Victor da Silva
Information Technology executive: Cash Retail
Allan Herman
worldwide economic operating environment.
Chief executive: Hi-Fi Corporation
Hi-Fi Corporation spent the year focusing on strategically repositioning the
David Hirsch
brand in the market and experienced a softer sales performance in line
Group executive: Merchandise and Marketing
David Miller
with the industry. Incredible Connection on the other hand, delivered
Chief executive: Incredible Connection
another pleasing business performance with both market share and
business growth.
The growth in the footprint of the brands in the Cash Retail division has
and will continue in new markets and segments.
Outlook
Notwithstanding the pressure consumers are experiencing at present, the
brands in Cash Retail believe that modest growth can be achieved across
most categories. The impact of the exchange rate, interest rates and a
recovery in consumer spending across the durable merchandise categories
will impact on the business performance over the next 12 months.
Hi-Fi Corporation will continue with its strategic imperative to reposition
the brand in the marketplace, providing a comprehensive range of
branded merchandise in a revitalised store format. The intention is to
Analysis of Group revenue
6,52% 3,10%
40,26%
8 Traditional Retail
Incredible Connection will continue to maintain its leading position of
8 Finance Services
being the largest technology retailer in southern Africa by being innovative
8 Cash Retail
30,77%
8 International Retail
8 New Business Development
23,06%
36
renovate the majority of the stores by the end of the 2011 financial year.
h
Corporate (3,71%)
JD Group_Annual Report 2009
in driving customer service with reliable technology brands. The chain
will open another five stores during the 2010 financial year.
Group review continued
Allan Herman (52)
Chief executive_25 years’ experience in retail
Executive team
Hi-Fi Corporation, founded in 1993 and acquired by the JD Group in
Jonathan Bromley (33)
2003, remains the largest audio and visual category specialist in the
Operations_16 years’ experience in retail
southern hemisphere. The chain operates through 36 stores in southern
Neil McLean (53)
Marketing_36 years’ experience in retail
Africa, located in the major metropolitan areas and is focused on
Debra Teles (43) IPM Dip, H Dip Ed
capturing the mass cash market. It provides a comprehensive range of
Human Resources_19 years’ experience in retail
Mark Wood (44)
merchandise categories at the lowest prices to the market, underpinned
Merchandise_20 years’ experience in retail
by international brands, warranties and consistent quality and service,
thereby ensuring an exciting shopping experience for its customers.
Lowest prices every day
JD Group_Annual Report 2009
37
Review of operations
continued
David Miller (40) BBA (Hons)
Chief executive_15 years’ experience in retail
Executive team
Established in 1990 and acquired by JD Group in 2005, Incredible
George Honiball (39) MA (Industrial Psychology)
Human Resources_12 years’ consulting experience
including a number of retail clients
Connection is southern Africa’s leading and largest technology retailer.
Stefan Marnewick (38) BCom (Hons), CA(SA)
Finance and Logistics_11 years’ experience in retail
through 54 locations in high traffic metropolitan based shopping malls
Sean Nelson (36)
Operations_17 years’ experience in retail
Roger Wood (41) N Dip Marketing and Sales
Merchandise_19 years’ experience in retail
It offers leading brands and the widest range of the latest merchandise
and areas, including Windhoek in Namibia and Gaberone in Botswana.
It is focused on providing the middle to upper cash and small medium
enterprise (SME) consumer markets with exceptional value, competitive
pricing, international warranties and a superior in store ambiance
and service, within which to engage, interact and transact with
knowledgeable staff.
The chain is focused on delivering a more advanced sales and after
sales experience and has implemented a number of innovative
products and business processes to support this initiative in its aim to
exceed its customers’ expectations.
Everything for your digital lifestyle
38
JD Group_Annual Report 2009
Group review continued
Review of operations_International Retail
Piotr Krzanowski (55) MSc
Chief executive_19 years’ experience in retail
Executive team
Abra was established in 1990 and acquired in 2000. Despite a difficult
Aneta Filik (39) M (Psychology)
Human Resources_14 years’ experience in retail
economic environment Abra experienced another successful year
Piotr Lisowski (41) MSc
Merchandise and Marketing_16 years’ experience
in retail
Marek Zelek (34) BSc (IT)
Logistics_10 years’ experience in retail
building on the previous year’s success. Poland is unique among other
European countries still showing a small but positive GDP growth,
largely fuelled by retail sales growth. Such market conditions, combined
with the ongoing and successful implementation of retail strategies,
inclusive of the organic growth, contributed significantly to building a
strong market presence of our brand.
The current store base is 69, with 10 additional store openings planned
for in the coming year. Strategically Abra intends to pursue a new
channel of distribution by establishing a franchise network of furniture
stores operating under the Abra trading name, with the initial goal being
to build strong, long term partnerships with at least five franchisees.
Abra remains committed to exploring business opportunities in eastern
Europe for its expansion beyond Poland.
We know how!
JD Group_Annual Report 2009
39
Review of operations_Financial Services
continued
Phillip Kruger (47) BCom
Chief executive: Financial Services_19 years’
experience in retail and financial services
Executive committee
Clyde Briell (47) BCom (Hons)
Head: Information Technology_29 years’
experience in IT and financial services
Johan Claassen (47)
Head: Collections_26 years’ debtors
experience
Barry Dell (54)
Head: Human Resources_15 years’ experience
in furniture retail
Francois Grobler (34) BCom (Hons)
(Economics), BCom (Hons) Investment
Management
Head: Credit and Risk_13 years’ experience in financial services
Jeannine Naude-Terblanche (34) BProc, LLB, MBA
Executive: Customer Services and Legal_6 years’ experience in financial services consulting and one year in retail banking
Corrie Neven (54)
Head: Operations_26 years’ experience in retail and debtors
Jaco van Jaarsveldt (37) BCom (cum laude)
Head: Strategy and Analytics_6 years’ experience in retail, 2 years’ in banking and 6 years’ in credit risk consulting
Executive team
Lynette Basson (52)
Specialised department_27 years’ experience in
retail debtors
The challenges of the past financial year brought to world markets have
been wide ranging, impacting on various economic and financial fronts.
The most pertinent of these challenges has been the adverse impact on
our customers’ affordability, ability to maintain monthly payments,
Herman Bakkes (49) BCom, MBA
sustainable employment and income. Given these conditions and
Corporate debtors _25 years’ debtors experience
trends, bad debt risk remained higher than normal.
Rein Coetzee (36) BA (Hons), MA (cum laude)
Contact centre_13 years’ experience in retail
Further to the tight management of risk during the past year, the
Dalene Ferreira (35) Diploma: Project
Financial Services division completed its migration from a decentralised
Management in the Services Industry
Strategic Change Enablement_9 years’ project
management experience, of which 3 years’
programme/portfolio management experience
to a fully automated centralised risk management and collections
Lucia Hefer (45) BCom (Hons)
Finance, Strategy and Analytics_24 years’
experience in finance
model. This change is already starting to show significant benefits in
productivity and debtors performance.
Whilst we expect a slow recovery in the financial services markets over
the next financial year, we are confident that our focus on extracting full
Joey Kok (60)
value from our new centralised model will reap commensurate business
Information Technology_42 years’ experience in
retail debtors and IT
performance improvements.
Vusi Mahlangu (38) B Tech, HRM, Postgraduate
Diploma in Labour Law
Human Resources_12 years’ experience in retail
René Moonsamy (28)
Credit Strategy_7 years’ experience in credit risk
Liesel Staebe (32)
Contact centre_12 years’ experience in contact
centre management and design and 2 years’ in
financial services
Dolf van der Merwe (52)
Specialised division_30 years’ experience in retail
and financial services
40
JD Group_Annual Report 2009
Group review continued
Review of operations_New Business Development
Guy Pearce (43) BSc, BCom, MBA
Chief executive: New Business Development_13 years’
experience in financial services, 8 years’ experience in IT
Dries Hattingh (40) BCom (Hons), CA(SA)
Managing director_13 years’ experience in financial
services
Executive team
The Competition Commission approved JD Group’s acquisition of Absa
Jan Blom (48) BPL, Dip Labour Relations
Group’s shareholding in Maravedi Group in December 2008, taking
Human Resources and Shared Services_23 years’
experience in human resources
Leoni Groenewald (36) Dip Adv Business and
Technology Studies. Information Technology_11 years’
experience in IT
JD Group’s shareholding of Maravedi Group up to 90,5%, with Thebe
continuing to hold its 9,5% shareholding.
The Maravedi Group has two subsidiaries – Maravedi Financial Solutions
Marc Joubert (37)
(MFS) and Maravedi Credit Solutions (MCS). MFS provides unsecured
Marketing_12 years’ experience in marketing and
advertising, 4 years’ experience in financial services
loan products to customers with similar demographic profiles to
Henk Klopper (41) BCom (Hons), CA(SA)
customers within the Traditional Retail division of JD Group. It also
Finance_14 years’ experience in financial services
provides secured loan products to customers with similar demographic
profiles to customers within the Cash Retail division. MCS is in the
process of repositioning itself specifically with respect to applying an
increasing focus in coming years on the overdue debtors book of the
JD Group.
As the division was created to develop new financial services, product
The challenges of the past financial year brought to world markets have
and channel development projects were predominantly the focus in
been wide ranging, impacting various economic and financial fronts.
2009, such as the development of shorter term, unsecured lending
The most pertinent of these challenges has been the adverse impact on
products, the establishment of its own larger footprint using the
our customers’ affordability, ability to maintain monthly payments,
Traditional Retail footprint as leverage, as well as an agent channel.
sustainable employment and income. Given these conditions and
Incrediblehigher
Connection
Private Label card business was also
trends, bad debt The
risk remained
than normal.
acquired from a third party financial services provider.
Further to the tight management of risk during the past year, the
division
initiatedits
the
processfrom
of integrating
the Hi-Fi Corporation
Financial ServicesThe
Division
completed
migration
a decentralised
secured
lending business
operation into
Maravedi.
Initially, this process
to a fully automated
centralised
risk management
and
collections
is concerned
with to
Hi-Fi
Corporation’s
African
model. This change
is alreadyonly
starting
show
significantSouth
benefits
in operations.
productivity and While
debtorsthe
performance.
products distributed by means of the Traditional Retail
are complementary
to services
the financial
services
Whilst we expectfootprint
a slow recovery
in the financial
markets
over offerings of the
Services
division,
the focus
product
also accessible by
the next financialFinancial
year, we are
confident
that our
on portfolio
extractingisfull
customers
external
thereap
customer
base of JD
Group.
value from our new
centralised
modeltowill
commensurate
business
performance improvements.
Product and channel development will continue to be the focus of the
division. Furthermore, operating model development will be pursued
with the objective of further increasing the competitiveness of the
division.
JD Group_Annual Report 2009
41
Review of operations
continued
Howard Blake (46) BProc
Chairman_19 years’ experience in contact centre
management
Mike Miller (44) BCompt
Chief executive officer_16 years’ experience in contact
centre management
Executive team
Blake is a contact centre offering premium service levels surpassing
David Holding (46) BCom
industry standards, delivered by a professional team. Blake is
Blake domestic_21 years’ experience in contact centre
management
represented on three continents offering services in English, French
Dewaal Muller (41) BJuris
Information Technology_13 years’ experience in IT and
contact centre management
and Spanish, with the primary site located in Mt. Edgecombe, housing
Mark Parker (34) BCompt, BCompt (Hons), CA(SA)
of voice and data to any number of locations thereby aligning the right
Finance_11 years’ experience in finance and contact
centre management
skills and language to the required output and service level.
a 3 000 seat contact centre. The Blake business model allows routing
The Blake vision is to leverage business intelligence, based on
proprietary data, facilitating full customer lifecycle management.
Furthermore, Blake provides additional channel networks, such as
electronic stores, electronic catalogues and business process reengineering to such customers.
Blake’s international operation in Mauritius, serving the United States
of America, had significant growth in the past year. As a group, Blake
continues to show sustained growth through traditional collections,
sales, attorney joint ventures and the growth of the e-commerce
channel from concept to reality.
Blake market share acquisition strategies include the continued
development of the sales team, leveraging off all relationships across
all business units, centralisation of marketing initiatives and opening
of new markets (customer service, lifecycle management and
business intelligence), thus working for continuous customer
satisfaction.
42
JD Group_Annual Report 2009
Group review continued
Review of corporate services
Finance
Gerald Völkel (49)
BAcc, CA(SA)
Financial director_15 years’
experience in auditing and
14 years’ experience in retail
Ian Thompson (41)
BCom, BAcc, CA(SA)
Director: Finance and
Corporate Affairs_18 years’
experience in finance, auditing
and taxation affairs
Johan Coetsee (50)
BCom, BAcc (Hons), ACMA
Group executive: Finance_28 years’
experience in finance
Executive team
The Finance department is responsible for the financial and management
Johan Breytenbach (44) BCom
Finance_21 years’ experience in finance
accounting, treasury and banking, accounts payable and statutory
Pumla Magewu (38) BCom, HDip Tax
Finance_14 years’ experience in finance and taxation
affairs
Piwe Makaula (31) BCom (Hons), CA(SA)
Finance_8 years’ experience in finance
Stefan Marnewick (38) BCom (Hons), CA(SA)
reporting functions of the Group. The organisational structure within the
finance department has been restructured with clear focus on the
respective divisions of Traditional Retail, Cash Retail, Financial Services,
New Business Development, Corporate and International.
Finance_15 years’ experience in finance
The alignment of the Finance department with the new business
Braam Mathee (45) Adv Dip in Tax, CA(SA)
strategy was completed during the year, with the new insurance
Finance_21 years’ experience in finance and taxation
affairs
companies being effectively incorporated into the reporting process.
Louise Niehaus (46)
Finance_28 years’ experience in finance
Focus in the new financial year will be placed on the analysis and
Sanette Oberholzer (52) BCom
optimisation of financial processes and tidying up the corporate
Finance_32 years’ experience in finance
Tracey Rood (41) BCom, BAcc
Finance_19 years’ experience in finance
Elmien Rossouw (46) BCom (Hons)
Finance_13 years’ experience in finance
structure as far as possible. This should reduce costs and increase
efficiencies.
A significant portion of term debt was refinanced during the course of
the year. This debt has been replaced with a mix of traditional bank
debt and a portion of commercial paper issued to the broader
debt market.
This process will continue into the future, with the aim of reducing the
Group’s reliance on traditional bank debt. The intra group funding model
will also change in the new financial year and will result in the divisions
being funded more appropriately, giving a true reflection of the divisional
performance.
The Finance department has embraced the
‘Art of Service’ initiative
and is fully aligned with the broader Group strategic initiative.
JD Group_Annual Report 2009
43
Review of corporate services
continued
Human Resources
Dr Henk Greeff (50) MEd (Ed Management) (cum laude),
PhD
Director: Strategy and Human Resources_8 years’ experience in
strategic management consulting and 6 years’ experience in retail
Pamela Barletta (40) Diploma Labour Law,
Diploma Human Resoruces
Group executive: Human Resources_23 years’ experience in
human resources in retail
Executive team
George Annandale (45) BPL, Adv. Dip.
Labour Law and Employment Relations (cum laude)
Human Resources: Group HR Shared Services_18 years’
experience in human resources
Rénier Krige (42) BCom, SMP (cum laude),
PLD (cum laude), EDP (cum laude)
Human Resources: Traditional Retail_20 years’
experience in human resources
s ‘Art
of Service’:
A holistic and integrated intervention launched
during July 2009, which is aimed at delivering a differentiated
customer experience enabled by customer centric business
processes, policies and procedures, delivered by engaged and
energised employees.
s Leadership: Building leadership competence and capacity within
different levels of work to enable the achievement of vision 2011,
commenced in March 2009 and the leadership learning and
development curriculums have been aligned and updated.
s Human Resources Delivery Model: Entails the design and
implementation of an HR delivery model that transforms the service
offering to be more efficient and effective, through the design,
The changes in the Group’s business and
operating model have important implications
for the business’s expectations on the services
and support being provided by the Human
Resource department. Group Human
Resources therefore embarked upon a
journey of transformation which manifested in
a portfolio of strategic projects. The overall
objective of the Human Resources portfolio of
projects is to create capabilities to execute
on a number of objectives that clearly
position the human resource function as a
value adding business partner.
The portfolio of projects is outlined below:
s e-HR: An HRIS system, enabling automated
business processes and accurate reporting
that has been designed and developed to
cater for all the chains and business
operating divisions and will be deployed to
the business during the second and third
quarter of the 2010 year.
development and deployment of system and process based capabilities
that will deliver strategic solutions for critical business challenges.
s Skills Development: Designed to empower employees through
targeted skills development interventions delivered through a blended
learning methodology.
s Change: An undertaking aimed at developing and implementing
change management capability and capacity to enable people to
manage change effectively.
In order to ensure execution of best of breed human capital management
practices and to track human resource performance against agreed
benchmarks, integrated HR dials were introduced during the year under
review via an HR dashboard that provides quarterly business intelligence
on the “state of health” of people readiness and performance in the
business.
To further optimise talent and performance competitiveness, human
resources management offerings will continue to be provided via a
human resources services delivery model that consists of centralised
shared services, augmented by the introduction of selected centres of
expertise executed through human resource business partners and line
management.
44
JD Group_Annual Report 2009
Group review continued
Information Technology
and Communications
Andrew Murray (47) BSc Eng
Chief information officer_22 years’ experience
in retail, IT, manufacturing and finance
Executive Team
The IT department has a Group Services function providing core
Clyde Briell (47) BCom (Hons)
services across all divisions such as networking, server and desktop
Information Technology: Financial Services_29 years’
experience in IT and financial services
support, as well as a Business Intelligence team focused on
Victor da Silva (42)
supporting the enterprise data warehouse and the delivery of
Information Technology: Cash Retail_16 years’ experience
in retail and IT
consolidated reporting and business intelligence. Further to this
Leoni Groenewald (36) Dip Adv Business and
Technology Studies
Information Technology: New Business
Development_11 years’ experience in IT
Craig Moffitt (40) BSc, MBA
Cash Retail, Traditional Retail, Financial Services and New Business
Development have a focused application team headed by an
IT executive providing specialised services and solutions to these
Information Technology: Business Intelligence_10 years’
experience in IT
divisions.
Anthony Smith (43) PhD, MBA
One of the main focuses during the year was on the investigation into
Information Technology: Traditional Retail_13 years’
experience in retail and IT
a new Enterprise Resource Planning (ERP) solution for the Group which
Gerrie van Niekerk (48) Masters in Interdisciplinary
will be finalised during late 2009 and decisions made regarding
Studies
Information Technology: Group Services_24 years’
experience in IT
determining the future end state. In addition, there was significant
effort on piloting a new loan management system which has laid the
foundation for the further decoupling of the traditional furniture
business from that of the Financial Services division during 2010.
The bedding down of the technology solutions in the national contact
centres has provided Financial Services with the opportunity to
significantly improve on the follow up and collections processes,
adding further value to the Group.
JD Group_Annual Report 2009
45
Review of corporate services
continued
JDG Insurance
Reneé Griessel (47) BLC, LLB, H Dip Tax
Chief executive_23 years’ experience in legal,
compliance and insurance
Executive team
JDG Insurance is a newly formed department which focuses on the
André Potgieter (32) BCom
Group’s Credit Insurance and Intermediary operations. The department
Finance_10 years’ experience in insurance finance,
banking and retail
comprises a long term insurance licence held by JDG Micro Life Ltd
and a short term insurance licence held by JDG Micro Insurance Ltd
and the Group’s intermediary operations housed in JDG Trading
(Pty) Ltd.
JDG Insurance has primarily focused on setting up the two insurance
companies and stabilising the Group’s existing intermediary and
insurance operations. The insurance licences were granted on
8 January 2009 and the insurance companies commenced operating
on 16 January 2009.
Reporting, systems, capital structure and statutory requirements
received priority and JDG Insurance’s FAIS and general legal
compliance has been substantially upgraded.
JDG Insurance is a separate autonomous business within the Group. In
the coming financial year it will focus on bedding down some
establishment and compliance issues. However, primary focus is
on the growth of the insurance and intermediary operations.
46
JD Group_Annual Report 2009
Group review continued
Internal Audit and
Risk Management
Pieter Pienaar (40) BCom
Chief risk officer_18 years’ experience in auditing, risk
management and retail
Executive team
The Internal and Forensic Audit department was restructured into
Morné van Wyk (36) BCom, CIA
Internal Audit_13 years’ experience in internal auditing
and retail
two operating departments of Risk Management and Internal Audit.
Internal Audit provides independent, objective assurance and
consulting services to the Group, designed to add value and improve
operations. It assists the Group to accomplish its objectives by bringing
a systematic, disciplined approach to evaluate and improve the
effectiveness of risk management, internal control and governance
processes.
An Enterprise Risk Management (ERM) capability and process was
established. This will entrench ERM as a philosophy and methodology
in the organisation, ensuring that all risks are properly mitigated and
managed throughout the Group.
Risk Management provides a professional, comprehensive risk
management service to the Group to enable the Group to strive to be
world-class in their fields of expertise.
JD Group_Annual Report 2009
47
Review of corporate services
continued
Logistics
Julian Hanmer (47)
Group executive: Logistics_24 years’ experience in
logistics
Executive team
In addition to this, the Group embarked on an additional consolidation
Andrew Ross (43)
site in Phuthaditjhaba, Free State. This was done to retest our baseline
Fleet_19 years’ experience in retail and fleet
management
findings of the original analysis and improve on the lessons learnt from
the Botshabelo pilot site. The project in Phuthaditjhaba started in
September 2009 with full functionality of the facility commencing on
1 October 2009.
Based on the successes of these two initiatives, it is the Group’s stated
intention to escalate the consolidation of further warehouses
Logistics is responsible for supply chain
throughout South Africa and thereby optimise the Group’s logistics
management, which includes the procurement,
capacity and capability.
maintenance and administration of the Group’s
Fleet also experienced a redesign of its strategic framework to address
fleet of vehicles.
key issues within the department. Essential to this strategy was an in
Reflecting on the past year’s achievements,
the Group has successfully completed the
warehouse consolidation pilot project in
Botshabelo, Free State. Key to this initiative
was the capability to service the warehousing
and distribution requirements of all seven
depth analysis, which highlighted the necessity to replace essential
fleet management software capability and the outdated vehicle
tracking systems. The Group has procured key items of technology in
this area, which are currently being installed and will be operational
within the next financial year.
The main strategic business goals for Fleet in the ensuing year will
be to ensure that the new technology delivers substantial benefits
Traditional Retail chains whilst inventory was
and to have even tighter management control of vehicle utilisation
stored in multiple bin locations within a
and expenditure. These initiatives will unlock opportunities to further
centralised warehouse.
enhance the Group’s competitive status within the industry.
48
JD Group_Annual Report 2009
Group review continued
Merchandise and
Marketing
David Hirsch (39)
Group executive: Merchandise and
Marketing_18 years’ experience in retail
Executive team
relevance and continuous improvement, focused on basic processes
Alec Goodman (54)
and policies that constitute key elements of the foundation. In addition,
Merchandise: Appliances_33 years’ experience in retail
the Corporate Merchandise and Marketing team was staffed
Conrad Kleingeld (42)
Merchandise: Furniture_16 years’ experience in retail
accordingly, to provide the necessary support for these improvements
Irene Pilavachi (52) BA (Lang), H Dip Mktg,
and the requisite insight into the rest of the business, aligned with
Marketing_20 years’ experience in marketing and retail
Group strategic objectives post the decoupling of Traditional Retail and
Financial Services.
Merchandise initiatives commenced with inventory and margin
management, focusing on the improvement of efficiencies, streamlining
any previous inconsistencies related to system architecture or
Group Merchandise and Marketing’s strategic
business
objective
differentiated
marketing
is
chain
initiatives
to
support
merchandise
by
traditional methodology and revenue management in order to unlock
further value for the Group.
the
and
leveraging
opportunities within the full spectrum of its
activities to yield additional revenue and
effective retail disciplines across the Group.
A solid foundation was laid during the year
under review with the restructuring of the
chain merchandise and marketing teams to
harness the requisite resources and skill sets
Marketing initiatives focused on continued provision of insight into
market trends and consumer behaviour, customer acquisition and
retention programmes, Group procurement efficiencies in media, print
and paper, significantly improved Club membership benefits and driving
value from all partnerships.
In the ensuing financial year, which will in all likelihood see the
continuance of tough trading conditions, all initiatives will be developed
and implemented within the identified strategic business goals for the
department. This Merchandise and Marketing platform will provide
the right framework for entrenching the fundamentals and continue
in order to move ahead as a focused retail
the focused planning around improving efficiencies, unlocking value
organisation. Part of this process heralded
and managing inventory, whilst constantly ensuring differentiation
development programmes for the merchandise
across all chains. The corporate team will steer and implement strategy
and marketing employees in the business.
to ensure targeted and sustainable product offerings to the mass
These initiatives provided a framework of
middle market South African consumers.
JD Group_Annual Report 2009
49
Review of corporate services
continued
Property Services
Ivan Nefdt (46)
Group Property executive_21 years’ experience in retail
and property services
Executive team
Property Services is responsible for sourcing, negotiating, developing
Nico Celliers (52) BSc (Hons), Prod Eng
Projects: Traditional Retail_24 years’ experience in retail,
property and project management
and maintaining a bricks and mortar property portfolio for the Group.
Etienne du Plessis (59) BJuris, LLB
portfolio which comprises approximately 1 393 leased properties with
Legal and administration_34 years’ experience in retail
and property services
annual rental payments of R442 million (excluding the Abra and
Bruce Haygarth (39)
Incredible Connection chains) and 13 company owned properties
Projects: Cash Retail_11 years’ experience in retail
operations, property and project management
valued at R460 million.
Philip Malan (50)
Property procurement_13 years’ experience in retail
and property services
The department is responsible for managing the Group’s property
During the past financial year 76 stores were renovated (three in Cash
Retail and 73 in Traditional Retail). In addition to the above, 17 stores
were relocated (six in Cash Retail and 11 in Traditional Retail). The
establishment of new stores, renovations and relocations amounted to
R115,7 million (R77,3 million in Cash Retail and R38,4 million in
Traditional Retail).
Property Services achieves its mandate by means of three interrelated
disciplines namely property procurement, projects and legal and
administration and the department’s full range of functions are totally
aligned with the Group’s strategic business operating model.
50
JD Group_Annual Report 2009
Group review continued
Secretariat
Johann Pieterse (54) BA, BCom (Law)
Company secretary_23 years’ experience in secretarial
services
Secretariat primarily provides a service in the
areas of statutory and meeting administration
s Initiated and assisted with the establishment and staffing of a Legal
and Compliance function for the Group.
as well as corporate governance. It is also
s Implemented a quarterly assessment of the Group’s compliance with
responsible for shareholder administration and
the JSE Listings Requirements in cooperation with an external JSE
general executive support that includes
specialist.
providing guidance to directors and executive
s Assisted with revamping and implementing a new generation share
management on their rights and obligations in
appreciation rights scheme and assisted on an ongoing basis to
terms of relevant corporate laws and regulation,
improve the governance, administration and communication of the
as well as governance support to the board of
directors and board committees.
During
the
past
year,
the
Group’s share schemes.
s Moved the Group’s sensitive statutory records (such as securities,
secretarial
environment saw the publishing of the new
Companies Act (2008) which is set to replace
the existing Companies Act (1973) mid 2010.
share certificates, minute books, agreements, etc) to a secure on-site
fire-proof/water-proof environment.
s Renewed the look-and-feel of the board and board committee
documentation.
In addition, the third King Report on
s Further developed the existing skills within Secretariat to enhance
Governance for South Africa (incorporating
service delivery in respect of legislation, compliance and the
a Code of Governance Principles) was
management of statutory records.
released in September 2009 and will come
into effect in March 2010.
s Assisted with the production of the 2009 annual report.
In the year ahead, a second-phase assessment of the Group’s
Achievements during the review period were
governance practices will be conducted to ensure a troublefree
mainly governance and compliance related.
implementation of the new Companies Act and King III. Specific action
Amongst others, Secretariat:
plans will be implemented to address the Group’s identified governance
s Carried out a first phase forward looking
shortcomings ensuing from the aforementioned two governance
assessment of the governance structures in
assessments.
the JD Group to determine the status of
Also earmarked for attention but dependant on the successful sourcing
compliance
and
and implementation of an appropriate scanning solution for the Group,
governance provisions ensuing from the
is the migration of all statutory and other records into an electronic filing
new Act and King III.
format to enhance record keeping and to save costs. The liquidation and
with
the
regulatory
deregistration of redundant and non-operating entities will receive
ongoing attention.
JD Group_Annual Report 2009
51
Review of corporate services
continued
Strategy
Dr Henk Greeff (50) MEd (Ed Management) (cum laude),
PhD
Director: Strategy and Human Resources_8 years’
experience in strategic management consulting and
6 years’ experience in retail
Komani Mfuni (44) BSc, MBA
Group executive: Strategic Research and Business
Intelligence_3 years’ experience in financial services and
9 years’ experience in strategy development and planning
consulting
Lindsay Mentor (49) IPM Dip, CPIR
Group executive: Strategic Projects_21 years’
experience in retail
Executive team
The focus of Group Strategy to lead future strategic design and
Christo Viljoen (50)
planning on a Group level, shifted to the implementation thereof in this
Business analytics_30 years’ experience in retail
period to ensure a stable foundation for the new business and
operating model. A stable platform serves as prerequisite to unlocking
optimisation opportunities in the future.
A fully fledged and resourced Research and Business Intelligence
(demand) organisation has been established to enhance the existing
capabilities to ensure the consistent delivery of reliable, accurate and
relevant information. This enables faster and better decision making
processes for business leaders.
The next two years will be characterised by an increased level of
focus on following through on identified opportunities in all business
divisions and service departments. In addition the Research and
Business Intelligence services will be further enhanced.
The process of monitoring and tracking the realisation of benefits, in
terms of individual business division and service department plans, will
be core to the department’s central review function.
52
JD Group_Annual Report 2009
Group review continued
Transformation, Legal
and Compliance
Richard Chauke (42) BCom, (Hons), MCom (Taxation)
MTP (SA)
Director: Transformation, Tax, Risk, Internal Audit and
Compliance_19 years’ experience in auditing, taxation,
lecturing and retail
Executive team
to previously disadvantaged individuals and identify, recruit and
Jonny Masinga (32) N Dip HRM, BTech HRM,
develop black people at executive and management level.
BTech HRD MAP
Transformation_12 years’ experience in human resources
and transformation
Yondela Ndema (33) BProc, LLB, LLM (Tax Law),
PhD (Law) Admitted Advocate of High Court of South Africa
Legal officer_11 years’ experience in financial services and
taxation
s The formation of divisional employment equity and skills development
committees to assist the Group to fast track compliance to both the
Employment Equity and Skills Development Acts.
s Continued to encourage our suppliers to comply with the B-BBEE Act
and provided them with support when requested to do so.
s We continued with our Enterprise Development projects i.e. both the
TIPA project and the Debt Collection project. The Group remains
committed to a targeted procurement policy, focused on empowering
black business.
The Transformation department continued to
s A number of institutions, communities and previously disadvantaged
make remarkable strides forward to ensure
individuals continued to receive Group support through the
compliance with B-BBEE. The Group continued
Socio-Economic Development programmes and funding, including
with the monitoring of the elements of the
the offer of bursaries to previously disadvantaged learners.
B-BBEE generic scorecard and the Financial
Services Sector Charter codes, which includes
socio-economic development, preferential
s Structures were put in place at the divisional level and supported by
the Group Leadership and Development Council to ensure monitoring
and evaluation of the progress on the B-BBEE scorecard.
procurement, employment equity, skills
development, management control, enterprise
development and ownership control.
In the year under review, transformation was
Looking ahead (2010 to 2012) – The Transformation department
will ensure:
s Meaningful transformation and the resultant commercial value thereof.
accelerated and the following were areas
s B-BBEE Act compliance and stakeholder engagement.
of focus:
s Accelerated advancement of designated groups.
s Recognising the indirect ownership by black
s Introduction of Graduate Development in order to fast track our talent
companies, black empowered companies
and black shareholding in assessing overall
black ownership credentials.
s Our recruitment and advancement policies
pipeline and bring designated people into the Group.
s Every division of the Group demonstrates its commitment to diversity
by implementing ambitious divisional diversity transformation plans
in support of the Group wide plans.
and practices were strengthened through
A legal and compliance officer was appointed who is in the process of
the introduction of the Employment Equity
implementing formal processes and procedures to enhance legal
Policy to give preference wherever possible
compliance throughout the Group.
JD Group_Annual Report 2009
53
%*
+18,8
Abra continued to grow its footprint and perform well. It
delivered solid revenue growth of 11,7% with operating profit
improving by 18,8% in Polish currency terms.
*In Polish currency
Service quality...
54
JD Group_Annual Report 2009
Sustainability and governance
Abra – Poland
JD Group_Annual Report 2009
55
Sustainability and stakeholder review
JD Group’s commitment to sustainability
potentially exceed the Group's strategic business goal
and shareholders' expectations. Notwithstanding the tough
Introduction
The Group’s strategic intent and commitment is to build
sustainable wealth and create value for its stakeholders.
economic conditions, the shareholders received a dividend
of 41 cents per share as a return on their investment.
3 Employees – The formal launch of the Group’s
As a foundation for the Group’s sustainability commitment,
Service’
the King Report on Corporate Governance forms the backbone
employees as internal customers.
against which the Group develops its approach, strategies
and corporate behaviours in ensuring that the Group promotes
integrated sustainability.
The goal of sustainable development is to meet the needs of
the present without compromising the ability of future
generations to meet their own needs. JD Group, as one of the
‘Art of
business initiative will undoubtedly benefit our
Employees including those in the bargaining unit qualified
for and received salary increases despite the current state
of the economy.
3 Customers – More affordable and quality merchandise was
provided by virtue of the strengthening of relationships
with suppliers.
leading retailers in South Africa, firmly believes that it has a
critical role to play and a responsibility to assist the country to
Customers enjoyed the benefit of lower insurance costs
achieve this goal as stated and outlined by the Group’s
and enhanced consumer rights with the application of the
executive chairman, David Sussman.
National Consumer Act (NCA).
“JD Group believes that the future prosperity of our country,
3 Suppliers – The strengthening of relationships with
as well as that of the Group, hinges, amongst other
suppliers of both merchandise and services, assists
things, on the positive transformation and upliftment of our
such suppliers to become improved corporate citizens.
communities. It is the effects of this transformation process
3 Organised labour – The Group continues to foster and
on standards and quality of life of our people that are at the
herald the benefits of managing and experiencing solid,
heart of our concerns in achieving a sustainable economy.”
transparent and sound relationships with the various trade
JD Group further believes and is committed to ensuring the
unions it recognises in southern Africa and with whom
financial, economic, social and environmental prosperity of
formal relationships have been negotiated and concluded.
the Group, today, tomorrow and into the future.
Unions enjoy representation at various levels in the Group.
The challenge that remains for the Group is how, whilst
3 Government
and
Regulators – Have
once
again
recognising the current market and financial environment
experienced the Group’s commitment to proactively
within which it trades, the Group can maintain its
meeting its requirements with regard to applicable
commitments to realise the overall benefits of a more
legislation and has driven industry initiatives in this regard.
sustainable Group and country.
R795 million has been paid to Government and Regulators
comprising of taxes, licenses and fees.
Developments
3 Communities – The Group has maintained its forward
Positive developments for the year under review include, but
thinking approach by positively contributing to various
are not limited to, the following:
initiatives in the communities within which it operates and
3 Shareholders – Our shareholders have once again been
serves.
provided with the facts of the Group’s business performance
that is headed in the correct direction to meet and
56
JD Group_Annual Report 2009
Sustainability and governance continued
Challenges
an improved shopping experience for our customers which
Challenges in maintaining and achieving progress in
should result in a higher market share and consequential
business expansion, more job opportunities, improved
sustainability include, but are not limited to the following:
remuneration and better conditions of employment.
3 Attracting and recruiting, especially at senior management
levels, the best possible available talent to the Group
to meet the EE targets and to ensure continuity and
sustainability.
3 Customers – An improved shopping experience being
provided by committed employees embracing the Group’s
‘Art of Service’ initiative through a new and inculcated
way of life.
3 During the year under review the Group has launched a
number of major, large scale projects with wide reaching
change management implications for the Group and its
employees alike, which projects are aligned to deliver on
the new business and operating model. The challenge is to
manage change fatigue and successful implementation.
3 Suppliers – With the new business and operational model
and the aggression with which the Group will continue to
take market share, suppliers will as a natural consequence
of the higher demand for merchandise, benefit from the
improvement in business performance.
3 Organised labour – There will be a continued focus on
2010 and beyond
striving for sound, solid, fair and equitable employee
JD Group is committed to delivering on the Group’s new
relations’ engagements, agreements and enhanced
business and operating model, which is crucial for the
benefits.
realisation of benefits for all stakeholders and in so doing,
3 Government and Regulators – Will continue to experience
believe the following will be achieved:
the Group’s open, transparent and proactive approach to
3 Shareholders – The shareholders will benefit from the
compliance it has enjoyed to date on all fronts, as both
anticipated improved business performance as the Group
parties strive to attain sustainability through constructive
recoups its winning ways and meets the challenging
dialogue and agreements.
targets that have been set, giving rise to significantly
In addition, Government and Regulators will continue to
improved earnings yields.
benefit from the Group’s contribution to the revenue
3 Employees – The execution of the Group’s ‘Art
business
initiative
will
equally
of Service’
benefit
the
employees as internal customers, given the delivery of
authorities and the Group’s role in providing jobs in the
economy.
3 Communities – The Group will continue to plough back into
the communities within which it operates and serves, both
financially and in sweat equity.
JD Group_Annual Report 2009
57
Sustainability and stakeholder review
continued
The table below provides an indication of the progress achieved for the period under review, within the sustainability
categories and elements as measured against the JD Group commitments.
The Group’s sustainability commitment overview
Sustainability
Sustainability
category
elements
Economic
Shareholders
JD Group commitment
Progress on commitments for the
period under review
3 Delivery of the business and
operating model and its targets.
3 Strategic projects have commenced and
the realisation of benefits remains
in scope for 2011. See page 9 for
strategic goals.
Employees
3 Continual investment in skills
and development.
Customers
3 Retention and acquisition of
customers.
3 32 963 training interventions.
3 10 301 employees trained.
3 Customer acquisition and retention
strategies are continually being honed
and pursued.
h
3 Growing market share.
3 The Group’s strategy of organic and
non-organic business growth remains a
h
strategic focus.
h
3 Improved channels of
communication.
3 Conduct regular customer
focus group sessions.
3 Two large scale contact centres
operational.
3 Reputable international consultants were
appointed and conducted independent
customer focus groups on behalf of the
h
Group and its brands.
h
3 Customer education.
3 Continual customer education regarding
credit is conducted daily through the
contact centres and at stores.
Suppliers
3 Supplier and procurement
appointments.
3 B-BBEE compliance audits have been
conducted with all suppliers of
merchandise and services.
Organised labour
3 Retention and enhancement of
the relationships forged and
fostered with recognised trade
unions.
3 Annual wage, terms and conditions
agreements concluded.
3 Successful operational requirements
exercise conducted across Traditional
Retail and Financial Services divisions.
58
JD Group_Annual Report 2009
Sustainability and governance continued
Sustainability
Sustainability
category
elements
JD Group commitment
Progress on commitments for the
period under review
Government and
Fulfilment of obligations with
Regulators
regard to:
3 compliance;
3 Established a compliance committee.
3 Appointed a risk officer and a legal and
compliance officer.
3 legislation;
3 SARS tax settlement.
3 governance; and
3 Conducted a governance assessment in
3 economic contribution.
respect of King Code III.
3 Conducted a compliance assessment in
respect of the South African Companies
Act, 2008.
3 Money exchanges with Government of
R795 million.
Communities
3 To continue practising
3 Maintained and strengthened our existing
community engagement within
relationships with communities. See
which the brands operate and
pages 67 and 68.
serve.
Environmental
Materials
3 Paper management.
3 Paper management operational
processes implemented to achieve
reductions in paper utilisation.
Energy
3 Reduction of energy usage.
3 A number of operational changes have
been implemented to conserve energy
utilisation.
Water
3 Reduction of water usage.
3 A number of operational changes have
been implemented to manage water
usage.
Biodiversity
3 Awareness.
3 Relationships with associated
authoritative bodies are being sought.
Emissions, effluents
3 Waste management.
and waste
Suppliers
3 Operational directives implemented
regarding waste management.
3 Risk mitigation.
3 Suppliers’ contracts are being reviewed
to ensure adequate risk mitigation.
Merchandise
3 Awareness and consideration.
3 Suppliers are monitored with regard to
their adoption of environmental
awareness procedures.
Compliance
3 Compliance with legislation
and regulations.
3 Established a compliance committee.
3 Appointed a risk officer and a legal and
compliance officer.
3 The Group has not received any
environmental related correspondence
or fines.
JD Group_Annual Report 2009
59
Sustainability and stakeholder review
continued
The Group’s sustainability commitment overview (continued)
Sustainability
Sustainability
category
elements
Transport
JD Group commitment
Progress on commitments for the
period under review
3 Fleet optimisation.
3 As part of the Group’s strategic intent the
fleet is being reduced and routing optimised,
reducing environmental emissions.
Social
Employment
3 Being an employer of choice.
3 Annual review and upgrading of
employee practices, benefits and reward
policies take place.
Labour relations
Health and safety
Training and
3 Solid relationship with
3 Negotiated agreements are in place and
organised labour.
strictly managed and adhered to.
3 Compliance with the
3 Policy and procedures implemented
Occupational Health and Safety
and are being applied in accordance with
Act.
the Act.
3 Continual investment in
education
employees’ skills training and
3 32 963 training interventions.
3 10 301 employees trained.
development.
Diversity and
3 Equal opportunity employer.
opportunity
3 Employment equity ratio of middle
management increased to 73% of
previously disadvantaged people, against
a target of 68%.
Human rights
3 Recognition and observation.
3 Upheld by the Group’s values and people
practices.
Communities
3 Ongoing involvement.
3 Community involvement is conducted by
the brands in the various communities
within which they trade.
Bribery, corruption
3 Full application of the Group’s
and fraud
Code of Ethics.
3 Negotiated and agreed policies and
procedures are in place to manage
incidents.
h
3 Company gift registers.
3 A gifts policy has been formulated and
gift registers are maintained across all
h
departments in the Group.
h
3 Fraud reporting line.
3 Anonymous fraud line in place and being
monitored.
Product and
3 Quality and service.
responsibility
Service levels
3 Customer education on merchandise
care and service conditions implemented.
3 Differentiated shopping
experience.
3 Launch of the Group’s ‘Art
of Service’
initiative.
3 Internal and external communication
mechanisms are in place and are being
fully utilised to resolve consumer
complaints and queries.
60
JD Group_Annual Report 2009
Sustainability and governance continued
Group value added statement
2009
Rm
Revenue
Investment income
2008
%
Rm
12 922
12 610
9
30
Finance income
184
104
Equity accounted losses
(12)
(14)
Cost of merchandise, services and expenses
Value added
%
13 103
12 730
(9 988)
(9 877)
3 115
100,0
2 853
100,0
2 103
67,5
1 777
62,3
525
16,9
305
10,8
342
11,0
452
15,7
Distributed as follows:
Employees
Salaries, commissions and other benefits
Government
Taxation, assessment rates and other levies
Providers of capital
Distribution to shareholders
Finance costs
Reinvestment in the Group
70
2,2
264
9,2
272
8,8
188
6,5
145
4,6
319
11,2
To provide for depreciation
155
5,0
132
4,6
To provide for deferred taxation
(15)
(0,5)
(63)
(2,2)
5
0,1
250
8,8
3 115
100,0
2 853
100,0
Reinvestment for expansion
Statement of money exchanges with government
18
14
Company taxes
Assessment rates and taxes
490
278
Employees’ tax deducted from remuneration paid
189
164
Net value added tax and general sales tax collected
81
40
RSC and other levies
17
13
795
509
Value added is the amount of wealth the Group has created by purchasing and selling its merchandise. The statement above shows
how this wealth has been distributed. The calculation takes into account the amounts retained and invested in the Group for the
replacement of assets and the development of operations.
JD Group_Annual Report 2009
61
Sustainability and stakeholder review
continued
Stakeholder engagement
Employees
In order to attain its goal of building sustainable wealth and
The Group is fully committed to communication with its
creating value for stakeholders, the Group is committed to
employees and strives to ensure that the correct, relevant
ongoing dialogue and engagement. The Group has therefore
and accurate dissemination of information occurs timeously
established and utilises multiple mechanisms, methodologies,
to the appropriate employees, through the following
processes and channels to facilitate quality, two way
mechanisms:
communication
3 Employee induction programmes;
and
engagement
with
its
various
stakeholders.
The channels and mechanisms of communication are
3 Independent and transparent employee engagement
surveys conducted biannually;
designed and selected with the aim of ensuring effective
3 Intranet sites (Wiki and SharePoint);
reach, absorption and understanding of the communication.
3 Annual, quarterly, monthly, weekly and daily meetings
These various mechanisms are outlined below for the
take place at all levels in the Group, where various issues
respective stakeholder groups.
are deliberated;
3 Telecast communications focused on product promotions,
Shareholders
employee and business performance achievements;
The Group recognises the importance of fostering and
3 Face to face written communication bulletins;
ensuring clear, transparent and unambiguous communication.
3 Group directives and operational instructions;
In this regard the Group regularly communicates its strategies
and objectives to its shareholders and meets with major
3 General
Group,
Chain
or
Service
Department
memoranda; and
shareholders to make presentations and receive feedback
and contributions thereon.
3 Biannual roadshows where executives share and receive
feedback from specific audiences of employees on business
Communication with Shareholders takes place via the
performance, strategies and other company information.
following mechanisms:
3 Annual and interim reports;
Customers
3 Website (www.jdgroup.co.za);
The Group strives to communicate with its customers in such
3 Annual general meeting (AGM);
a manner that each customer feels as though he/she is the
3 Special general meetings;
only customer. This customer centric approach will be further
3 JSE’s news service (SENS);
enhanced by the Group’s ‘Art
3 Profit and other announcements;
Various mechanisms are utilised to communicate with
3 Road shows and one on one investor meetings; and
customers, including the following:
3 Media releases.
3 Head office, regional offices and stores – telephonic and
of Service’ initiative.
electronic;
3 Contact centres – telephonic;
62
JD Group_Annual Report 2009
Sustainability and governance continued
3 Direct engagement through employees at store level;
Organised labour
3 Customer focus groups;
The Group will continue to reap the rewards of solid, sound
3 Instore customer education;
and ethical relationships with the trade unions representing
3 Website (www.jdgroup.co.za);
employees in various countries, in particular with SACCAWU
3 Credit
application
documentation
and
concluded
contracts;
(South African Commercial Catering Allied Workers Union) in
South Africa.
3 Letters, e-mails, SMS promotional communication;
The Group is committed to open, transparent and proactive
3 Account statements;
communication and engagement with organised labour.
3 Club magazines; and
3 Marketing material, i.e. brochures, pamphlets, instore
posters and advertising through TV, press and radio.
Engagement takes place through the following mechanisms:
3 Annual substantive negotiations;
3 Quarterly national negotiation committee (NNC) meetings;
3 Shop steward meetings;
Suppliers
3 Operational requirements consultations;
The Group prides itself on the integrated nature with which it
3 Information sharing with trade union leadership; and
engages with its supplier network, thereby ensuring that
3 Employment equity and training committee (EE&TC)
quality standards are maintained. The Group is equally
meetings.
committed to fair trade with its suppliers under agreed SLAs
and terms and conditions.
Government and Regulators
Communication with suppliers include the following
The Group maintains relationships with Government and
mechanisms:
Regulators with whom it engages and will continue to
3 Group and supplier contracts;
3 Service level agreements (SLAs);
3 Invoices and statements;
3 Contact meetings;
3 Written communications in the form of letters, e-mails and
memoranda;
3 Supplier award ceremonies; and
3 Trade associations, meetings and memberships.
promote mutually beneficial relationships going forward. This
attitude and proactive approach to our relationships with
Government and Regulators assist in addressing any issues
through dialogue and negotiations and ensure sound working
relationships into the future.
The Group has regular contact with a host of Government
departments and Regulators such as:
3 South African Revenue Service (SARS), the Wholesale and
Retail Sector Education Training Authority (W & R SETA), the
Department of Trade and Industries (DTI), the Department
of Labour, etc.;
JD Group_Annual Report 2009
63
Sustainability and stakeholder review
continued
3 Regulatory bodies with whom the Group has built
sustainable working relationships, where the Group is
required to engage for business and compliance purposes,
include the National Credit Regulator (NCR) and the Financial
Wealth creation
The value added statement on page 61 reflects the
measurement of the wealth created by the Group for the year
under review and how such wealth was distributed.
Services Board (FSB), etc.
Communication occurs through the following:
Indirect impacts
3 The filing of legislative or regulatory reports, forms,
The Group engages in activities in the ordinary course of
updates, etc;
business which have an indirect impact on stakeholders,
3 Applications, renewals, payments of licences; and
which are typically not measured in monetary terms. An
3 Profit and other announcements.
example of this would include sourcing of inventory from
suppliers, which in turn creates jobs and opportunities for the
Communities
staff of such suppliers. Of note is the high level of local
The brands within the Group are individually accountable and
suppliers to the Traditional Retail division, thereby creating
responsible for engaging with local communities within which
wealth and supporting the growth and development of locally
they trade and serve. Information and feedback derived from
based businesses.
these engagements are shared across the Group to optimise
community engagement.
Communication with communities include the following
mechanisms:
3 Community newspapers and radio;
3 Sponsorships and donations;
3 Local community meetings;
Remuneration and terms and conditions of employment
The Group participates in and is party to the Sectoral
Determination which governs the Wholesale and Retail
Sector with regard to minimum wages and conditions of
employment. The Group fully complies with the wages and
terms and conditions prescribed by this regulation.
The Group currently remunerates its employees at the “area
3 Brand stores and community leadership meetings;
A” minimum wages within South Africa where the regulation
3 Local community marketing and promotions;
is applicable. This does not preclude the Group from applying
3 Public relations; and
the rules regarding the other category areas in the future.
3 Employee initiatives within local communities.
Environmental sustainability
Economic sustainability
The Group has been classified as having an overall medium
The Group’s primary purpose is to create and generate wealth
environmental impact because of its involvement in retailing
for the benefit of all stakeholders through our commitment to
and financial services. Whilst currently not able to report
satisfying our consumers’ needs whilst pursuing consistent,
factually against environmental improvements for the year
acceptable profit growth, through organic and non-organic
under review, the Group has committed to implement
strategies.
mechanisms to enable the accurate and formal measurement
and progress reporting against targets going forward.
64
JD Group_Annual Report 2009
Sustainability and governance continued
Notwithstanding the above, the Group has made some
3 Management
notable improvements in the following environmental areas:
h The Group remains committed to the transformation of its
3 A number of company policies and directives have been
issued and are being adhered to regarding the reduction of
water wastage and electricity consumption.
board and executive management which progress is
evident when compared to previous years.
h Whilst the talent pool of suitably qualified and experienced
3 The Group’s strategic intent to centralise its logistics
executives is limited, the Group, through various external
operations has begun to realise benefits through the
and internal business development programmes, is creating
reduction in the Group’s fleet, thereby reducing its
its own capacity and capability.
associated fuel consumption and carbon emissions into
the environment.
3 Procurement practices
h The Group continually evaluates suppliers as to their
Social sustainability
Through the development and implementation of its ethics
and other associated policies, practices and processes, the
Group has engendered amongst its employees and closely
associated stakeholders, the enhancement, upliftment and
upholding of the fundamentals of human rights.
B-BBEE status and will appoint independent agencies for
official accreditation once complete.
3 Employment equity (EE)
h The Group has always been and continues to be fully
committed to addressing inequalities with regard to race,
age, disability, gender and religion.
The Group has further subscribed to and holds its employees
and suppliers accountable to its values and human rights
practices, which determine the way business is conducted
h Monthly, quarterly and annual EE monitoring is conducted
across the Group and reported to the executive committee
(Exco) on a quarterly basis.
across the Group. The Group’s policies and practices do not
discriminate on grounds of race, age, disability, gender or
religion and are monitored, tracked and reported on through
its employment equity and training committee (EE&TC).
Transformation
Training and development
The acquisition and retention of top talent is a crucial element
and focus of the Group’s people strategy. Succession and
succession planning is at the very heart of this strategy. It
creates and generates future management sustainability and
The Group is committed to and supports the empowerment
of previously disadvantaged groups within the South African
mitigates the risk or lack of capacity and capability to deliver
on a sustainable basis.
community. Its transformation policy and practices are aligned
with relevant legislation, codes of good practice and general
The following initiatives were implemented in the review
best business practices.
period.
In striving towards the sustainability of the Group as a whole,
3 Wholesale and Retail Sector Education and Training
the Group is committed to its own transformation, aligned
with the country’s need to transform our economy as well the
social upliftment of communities.
3 Ownership
Authority (W & R SETA)
h The Group is a member of and maintains a sound
relationship with the W & R SETA and engages on the
development of tailored development programmes for the
furniture and appliance industry.
h The Group remains committed to concluding a B-BBEE
transaction at an opportune time to incorporate
a business partner that addresses the Group’s goal of
transformation at an ownership level.
3 Bursary committee
h The Group has a formal bursary committee consisting of
management and trade union representatives. During the
JD Group_Annual Report 2009
65
Sustainability and stakeholder review
continued
review period the committee distributed R1,3 million in
The following employee relations initiatives took place during
supporting young previously disadvantaged learners and a
the review period:
further R1,0 million in supporting employees and their
3 Annual negotiations and consultations
children in the learning environment.
h Despite a large scale operational requirements exercise
3 Leadership development
that the Group was forced to embark upon given the
h In the year under review the Group sponsored and
restructuring of its Traditional Retail and Financial Services
experienced
Leadership
divisions within the framework of the new business and
Development Programme and an Advanced Management
another
successful
Retail
operating model, the Group successfully negotiated and
Development Programme.
concluded wages and terms and conditions agreements
with organised labour.
3 Operational training
h An operational requirements exercise was concluded
h During 2009, 10 301 employees experienced and were
during the year. Even though 3 389 employees were
exposed to 32 963 training interventions, a 19% increase on
identified as “affected”, through the proactive management
the previous year’s training. This is statistical evidence of
of the process, this figure was significantly reduced to
the Group’s commitment to its employees in terms of
801 (23,6%) employees who were retrenched within the
lifelong learning and development.
bounds of the collective agreements.
3 Employment equity and training committee (EE&TC)
The governance body of the EE&TC comprises employees
h 62% of the Group’s employees are covered by collective
bargaining agreements and are therefore party to the
associated benefits negotiated, agreed and implemented.
representing all categories across the Group with due
consideration for gender, race and age and has a mandate
to review EE related policies and behaviours and make
recommendations for change.
3 Performance management reviews
54% of the Group’s employees are currently receiving
regular performance and career development reviews in
line with the Group’s succession planning and training and
development strategies.
Employee relations
3 Workforce
h The Group employs and thereby provides security and
stability to 21 247 permanent and temporary employees
and their extended families.
h The Group’s employee turnover in South Africa is 33%
for females and 39% for males and outside South Africa,
12% for females and 20% for males.
3 Employee benefits
h The Group continues to provide its full time employees with
retirement fund, risk and medical aid benefits which are
The Group acknowledges the fundamental rights of employees
to freedom of expression, association and representation. The
Group currently negotiates, consults and has formal
relationships with trade unions in South Africa, Botswana and
Swaziland.
66
JD Group_Annual Report 2009
subsidised at differing levels dependent upon an employee’s
selection of benefit type.
Sustainability and governance continued
Health and safety
The Group complies with relevant health and safety legislation
and has trained and appointed health and safety committees
to manage and advise on the Group’s compliance with such
Donations were made to initiatives that promote HIV/Aids
training external to the Group and its healthcare service
providers. Voluntary counselling and testing is available to
employees through the existing healthcare service providers.
legislation.
3 8% of the total workforce is represented in formal
Corporate social investment
joint management and employee health and safety
The Group’s corporate social investment strategy is managed
committees.
within the dimensions of enterprise development projects
3 The Group experienced 669 work related injuries in South
Africa and 26 outside South Africa – no work related
fatalities were recorded.
and direct donations. Certain of the more significant
contributions are outlined in detail below.
Enterprise development projects
HIV/Aids
During the year under review the Group was involved in two
The Group’s HIV/Aids approach is focused on the elimination
major projects, namely:
of discrimination against employees who live with HIV/Aids.
The Group monitors HIV/Aids prevalence rates and supports
the initiatives and practices of its primary healthcare service
providers. The Group’s prevalence rates in 2005 were 21,6%,
which decreased to 14,8% in 2009. It is anticipated, based on
model extrapolation, to be at 13,5% by 2015.
3 JD Group/ADRS collectors initiative
h This initiative was born out of the operational requirements
exercise conducted to establish JDG Trading Financial
Services where collectors were identified as affected
employees. The Group assisted these employees to
acquire vehicles at reduced prices and thereby afforded
The Group has engaged an external service provider to assist
the Group in formalising its approach to managing the
associated HIV/Aids risks.
Whilst no records are kept of HIV/Aids associated costs and
exposures to the Group, estimated costs may be determined
through a preparedness and contingency plan initiative that
the Group will embark upon with the assistance of an external
service provider. The direct costs of HIV/Aids fatalities cannot
be calculated accurately due to the ineffective manner of
reporting thereon in South Africa.
them the opportunity of continuing debt collection on a self
sustained basis.
h The Group contributed R1,1 million to this enterprise
development project.
3 Isaac/Techno-agricultural
Innovation
for
Poverty
Alleviation (TIPA)
h TIPA is based on the concept of the African Garden Market,
part of the Food Security for Africa initiative presented in
2002 at the World Summit for Sustainable Development
(WSSD). The Group contributed R2,2 million to this enterprise
development project.
JD Group_Annual Report 2009
67
Sustainability and stakeholder review
continued
Direct donations
The Group’s direct donations policy is focused on providing
as many applicants as is possible with financial assistance
and is steeply leaned towards disadvantaged children and
youth. The Group made direct donations in excess of
R4,8 million in the year under review. The following are but
a few of the strong relationships and bonds that the Group
has fostered with caring organisations:
3 The Lerato Love Home provides accommodation and
care for babies, children and young adults, who have
generally been the victims of abuse, abandonment, neglect
and orphaned due to HIV/Aids.
3 The Mitzvah School is a registered school and examination
centre which provides tutoring for disadvantaged students
in their final year of schooling and who have consistently
produced pass rates in excess of 90% every year.
3 St. Enda’s Community Centre is a secondary school in
Joubert Park with whom the Group has held a proud and
time honoured association and respect since commencing
this project in one of the Group’s warehouses in 1985.
3 Little Champs Sports Academy manages facilities that
provide disadvantaged prescholars with physical, emotional
and social development with strong emphasis on teamwork
and sharing.
The TIPA project for poverty alleviation.
68
JD Group_Annual Report 2009
Sustainability and governance continued
Corporate governance
Introduction
This corporate governance report sets out the key governance
principles and practices of the Group, one of which is fair,
honest and understandable disclosure to both our internal
and external stakeholders.
The Group is fully committed to the principles of effective
operate on the forefront of international corporate governance
best practice and as such the board regularly receives best
advice on a timely basis that enables it to remain ahead of the
evolution of corporate governance practices in the domestic
and international business environments.
Chairman and chief executive officer
corporate governance and application of the highest ethical
standards in the conduct of its business. We support the view
that good corporate governance is essentially about leadership
and for this reason we conduct the enterprise with integrity
and in compliance with South African best practice, whilst
taking cognisance of the value systems of the countries in
which we operate.
Endorsement of the King Code
The role of the chairman is separate from that of the CEO. The
roles are clearly delineated and set out in the Board Charter.
Each has a very specific and defined set of duties in order to
prevent overlap of obligations and responsibilities and to
eliminate any possible conflict of function. While the CEO
takes full responsibility for the operations of the Group, the
board has delegated to the chairman the responsibility to lead
the board, to ensure the effectiveness of governance
practices, to represent the board to shareholders and to build
The board of directors (the board) is committed to and
and maintain shareholders’ trust and confidence in the Group.
subscribes to the values of good corporate governance and
As a consequence, there exists no uncertainty between the
the conduct recommended in the King Report for Governance
two individuals as to their respective terrain of operations.
in South Africa and in its Code of Governance Principles
(collectively King II). The board endorses the principles of
integrity and accountability advocated by King II.
Executive chairman and a best practice board
In regard to the appointment of an executive chairman, rather
than
an
independent
non-executive
chairman,
as
Statement of compliance
recommended by the King II, the board appointed David
The Listings Requirements of the JSE Ltd require that listed
Sussman, founder of the Group, as its executive chairman.
companies report on the extent to which they comply with
Largely on the grounds of independence, risk mitigation and
the principles incorporated in King II. Accordingly, the board
objectivity, codes on corporate governance, including in South
can declare that it has applied the practices of King II throughout
Africa King II and the JSE, have recommended that the
the accounting period under review and has conducted the
chairman of a public listed company should be an independent
enterprise in the spirit of the King II guidelines.
non-executive director.
The role of chairman and chief executive officer (CEO) are not
Globally and locally, however, this recommendation has not
vested in a single person as recommended by the JSE. Whilst
found favour in a significant number of instances where
the Group’s chairman is not an independent non-executive
chairmen have had many years of experience in successfully
director, appropriate steps have been taken in this regard
running their companies. The fact that almost one third of all
which are discussed in more detail below.
JSE listed companies still have executive chairmen is evidence
The Group’s corporate governance structures and practices are
of this standpoint and even more so in America where more
reviewed on an ongoing basis in response to changes within
and external to the Group. Furthermore, the board is in the
than 80% of the S&P500 US corporations still have executive
chairmen1.
fortunate position that a number of its non-executive directors
1
From the 2008 Spencer Stuart Board Index that reflects the state of corporate governance among the S&P500 corporation in America.
JD Group_Annual Report 2009
69
Corporate governance
continued
In addition, the results of world wide research2 are inconclusive
chairman who has an independent mindedness about him.
as to the value of the independent chairman model. To this
Such attributes and traits, coupled to business acumen and
date, empirical proof is lacking that links higher earnings or
experience, are valued by shareholders above perceived
higher share prices or enhanced corporate governance
independence. This is the case in the JD Group where the
oversight or risk mitigation or financial disclosure transparency,
board considers the business experience, and especially the
as a direct consequence of the CEO/chairman split role and
retail expertise, of David Sussman to be of inestimable value.
independent chairman model. This was recently confirmed by
the failure of well known FTSE350 corporate institutions in
Britain due mainly to poor risk management decisions by their
boards – of whom 79%3 had split role models in place and
were led by non-executive chairmen. This clearly disputes the
assertion that the presence of an independent chairman per
se adds a risk mitigating value to a board or promotes an
independent view that encourages a greater level of
Of more importance than an independent chairman, it seems,
is to have a balanced and ethical board. Governance experts
have found the presence of certain common elements in a
best practice board. Amongst others, these include sensible
leadership, a board that “does the right thing”, an optimal
board composition with strong minded individuals, solicitation
of external advice, introspection, as well as holding of nonexecutive meetings.
interrogation in the decision making process. These qualities
can equally well be brought to the board by an executive
The Group’s board has been benchmarked against these
characteristics and the results are shown in the table below.
Executive chairman and balanced board
Sensible
leadership
and
experience
Best practice board
JD Group board
3 A chair with subject specific expertise and/or
3 JD’s chair is a retail expert, acknowledged by his peers,
with industry specific experience.
✓
the media and analysts as one of the best.
3 A chair with general business experience, a
3 The chair has experienced multiple business cycles, his
wide industry network and with appropriate
knowledge of retail markets and retail business is second
leadership attributes will be invaluable and is
to none and he is a reputable businessman.
✓
likely to improve the decision making
process.
Doing the
right thing/
Ethical board
3 A balanced, independence mindedness
board, acting at all times in the best interest
of the company.
3 The JD board is well balanced with more than half of the
directors
being
non-executive
and
46%
independent.
3 A board with a balance between executive
3 The directors act at all times in the best interest of the
and independent non-executive directors, all
company with an unquestionable level of independence
acting in the best interest of the company by
applying their minds independently.
enable robust oversight and decision making towards
upholding values that will influence and
directing of strategy, monitoring of performance and
fair and transparent.
✓
mindedness.
3 The board has proper governance structures in place to
3 At all times acting in an ethical manner and
guide behaviour to be responsible, accountable,
✓
being
✓
controlling of risk.
3 The board subscribes to a Code of Conduct that ensures
✓
ethical, responsible, accountable, fair and transparent
behaviour in all its decisions and actions.
2
See studies by JA Brickley and GJ Jarrell (University of Rochester Business School); JL Coles (Arizona State University Business School); B Black and V Mahajan (University of
Texas) S Bhagat (University of Colorado); BR Baliga (Wake Forest University Babcock Management School); RC Moyer (University of Louisville Business College); and RP Rao
(Oklahoma State University).
3
As reported by IM Millstein from the Yale School of Management in October 2008 in a study on leadership in America.
70
JD Group_Annual Report 2009
Sustainability and governance continued
Board
composition
Best practice board
JD Group board
3 Boards should comprise of directors that are
3 The JD board comprises of directors that are experts in a
experts in the fields of finance, audit, risk,
wide range of fields, such as finance, audit, tax, banking,
law, IT, HR, strategy etc.
risk, law, insurance, IT, HR, strategy, retail, corporate
3 Each board should tolerate at least one
“devil’s advocate” or “maverick” to provoke
non-conformist, dissenting views.
✓
governance etc.
3 Non-conformist or dissenting views are often provoked
✓
by members of the board.
3 Each board should have an entrepreneur to
3 Entrepreneurial and innovative business ideas are
induce out of the box, novel and innovative
induced from time to time as evidenced by the formulation
business ideas.
of the Group’s new strategy and operating model.
3 A board structured with the aforementioned
3 The board recently appointed an independent, non-
key individuals, should have a higher
executive lead director to act in instances where the
probability of making better judgement calls.
executive Chairman may ostensibly have a perceived
✓
✓
conflict of interest.
3 The board benefits from a competent and forthright
company
secretary
that
independently
✓
monitors
governance compliance.
3 The aforementioned JD Group board structure facilitates
✓
a higher probability of better, long term decision making.
External
advice
3 The board should have the character and
3 The JD board often draws on advice from external
insight to draw on advice from external
experts when faced with a challenging situation (tax, new
experts when it is faced with a situation that
legislation, etc.) that demands advice beyond its collegiate
demands advice beyond its collegiate domain
domain of expertise.
✓
of expertise.
Introspection
3 The board should annually conduct a
3 The JD board currently does not conduct formal
performance assessment (it can initially take
performance assessments annually, but intends to
the form of a self assessment and later
introduce annual self assessments as part of its corporate
progress to individual director assessments
governance enhancement programme in 2010.
✗
by an independent expert).
Non-
3 Independent directors should have meetings
3 JD’s independent non-executive directors have regular
executive
with management without the executive
meetings with management without the executive
meetings
chairman and/or the CEO in attendance.
chairman and CEO in attendance and as a rule have free
✓
and uncontrolled access to management and the
external auditors.
JD Group_Annual Report 2009
71
Corporate governance
continued
The board therefore matches up well against a best practice
believe any of them compromise the independence of the
board. The board does not believe that there is any lack of
directors concerned. The outside interests of the non-
independence or objectivity.
executive directors are not so demanding that it negatively
affects the time and attention that they devote to the Group
Lead independent non-executive director
Furthermore and in line with the recommendations of King III
(becoming effective on 1 March 2010), the board appointed
Vusi Khanyile as lead independent non-executive director in
March 2009 to act in instances where the chairman’s
independence may ostensibly be impaired.
and its affairs. Non-executive directors have access to
management and from time to time meet separately with
management without the executive directors being present.
Amongst others, these directors ensure that the chairman
promotes proper deliberation of all matters requiring the
board’s attention and that no one individual or block of
individuals dominate the board’s deliberations or its decisions.
JD Group board
In this way, the full spectrum of share owner interests are
protected, including minority rights.
The Group is headed by an effective unitary board that both
leads and controls the Group. A formal and transparent
process is followed when appointments to the board are
made, which appointments are a matter for the board as a
whole, assisted by the nomination committee. There is an
appropriate balance of power and authority on the board,
such that no one individual has unfettered powers of
decision making.
The executive representation on the board comprises
Richard Chauke, Henk Greeff, Ian Thompson and Gerald Völkel,
as well as David Sussman and Grattan Kirk, the executive
chairman and chief executive officer respectively. All of the
executive directors have entered into employment contracts
with JDG Trading (Pty) Ltd with one year’s notice from either
party. No director has an employment contract with the Group
exceeding three years.
At the date of this report, the board comprised of 13 directors
of whom seven are non-executive directors. One of the nonexecutive directors is not independent.
The board retains full and effective control of the Group and
has reserved a range of decision making power of material
importance for its own consideration.
The JSE guidelines were applied in testing the independence
and category most applicable to each director. Based on this
assessment, the board found Vusi Khanyile, Mervyn King,
Len Konar, Maureen Lock, Martin Shaw and Günter Steffens to
be independent non-executive directors, while Ivan Levy is
regarded as a non-executive director, but not fully
independent.
The board meets four times per annum and more frequently
if circumstances dictate otherwise. Meetings are conducted
in accordance with formal and structured agendas, ensuring
that all substantive matters are receiving proper attention.
Agendas and the content of board and committee papers, as
well as the board’s and committees’ information needs, are
regularly reviewed for effectiveness and relevance.
Non-executive directors contribute an unfettered and impartial
view on matters considered by the board and enjoy significant
influence in deliberations at meetings. All directors have the
requisite knowledge and experience required to properly
execute their duties and all participate actively in the
proceedings at board meetings. The non-executive directors
have no fixed term of office. Some of the non-executive
directors hold directorships or executive positions in
companies with which the Group has commercial relationships.
The board has considered all these relationships and does not
72
JD Group_Annual Report 2009
During the review period, and as part of its primary
responsibilities, the board reviewed and gave strategic
direction, considered and made new business expansion
investments, monitored performance against plans and
budgets, assessed the levels of compliance with relevant
legislation, considered and revised governance structures,
reviewed competitor activity and compared performance
with best practice, locally and internationally.
Sustainability and governance continued
The chairman sets the agenda for each meeting in consultation
In terms of the Board Charter and the terms of references of
with the chief executive officer and the company secretary.
each board committee, all directors and committee members
Directors are afforded the opportunity to add matters to the
are entitled, at the Group’s expense, to seek independent
agenda. To facilitate the decision making process at board
professional advice about the affairs of the Group in relation
level, the board papers are circulated to the directors well in
to the execution of their duties, if and when such expertise is
advance of meetings to allow enough time for directors to
required. A proper procedure exists to facilitate this process.
properly scrutinise the content thereof and formulate
challenging questions.
The following executive committee (Exco) members, namely
Johan Kok, Phillip Kruger, Andrew Murray and Arie Neven are
Directors are appointed on the basis of skill, acumen,
regularly invited to attend board meetings. However, there
experience and level of contribution to ensure the widest
remains a clear division between the responsibilities of the
possible positive impact on the activities of the Group.
board and management.
However, being a board that operates in a unique South
African milieu, elements such as the size and other
demographical aspects, as well as diversity, labour legislation
and transformation requirements, also play a role in board
Both the directors and the members of board committees are
supplied with full and timely information that enable them to
properly discharge their responsibilities. All directors have
unrestricted access to relevant Group information.
succession planning and in determining the most appropriate
board composition. The diagrams below provide a graphic
reflection of the current board structure.
Board – JSE categorisation
46%
54%
8 Executive
8 Non-executive
Board – Gender
8%
8 Male
8 Female
92%
Board – Race
31%
8 White
69%
8 Previously
Disadvantaged
Individuals
JD Group_Annual Report 2009
73
Corporate governance
continued
One third of the directors are subject, by rotation, to retirement
and re-election at each annual general meeting in terms of
the company’s articles of association. Messrs Richard Chauke,
Ivan Levy, Martin Shaw and Mrs Maureen Lock retire by
rotation and, being eligible for re-election, have made
Interests in contracts
During the year ended 31 August 2009, none of the directors
had a significant interest in any contract or arrangement
entered into by the company or its subsidiaries, other than as
disclosed in note 26 to the annual financial statements.
themselves available for re-election at the forthcoming
annual general meeting (AGM). In addition, all casual vacancy
Company secretary
appointments of directors between two annual general
meetings are subject to confirmation by shareholders at the
first subsequent AGM following their appointment. There
were no casual vacancy appointments during the review
period and consequently shareholders need not confirm any
The board is responsible for appointing a competent company
secretary, who has an ongoing duty to provide the board
collectively, and each director individually, with guidance on
the discharge of their responsibilities in terms of legislation
and regulatory requirements. Amongst others, he is also
director appointments at this year’s AGM.
responsible to advise the board on appropriate procedures
The biographical details for each of the directors are set out
on pages 14 and 15 of this annual report.
for the management of meetings and further has an obligation
to implement and ensure that prudent governance procedures
The board met formally five times during the review period.
are maintained throughout the Group. These duties have been
carried out diligently during the year under review.
Board attendance register
Director
ID Sussman (Chairman)
AG Kirk (CEO)
KR Chauke
HP Greeff
ID Thompson
G Völkel
VP Khanyile
ME King
D Konar
IS Levy
M Lock
MJ Shaw
GZ Steffens
P = Present
A = Apologies
PT = Present by telecommunications
74
JD Group_Annual Report 2009
9 March
2009
6 May
2009
17 July
2009
P
P
P
P
P
P
P
P
P
P
PT
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
P
P
P
P
PT
PT
P
P
Special
5 October 11 November
2009
2009
P
P
P
P
P
P
P
P
P
P
PT
PT
P
P
P
P
P
P
P
P
A
P
P
P
P
P
Sustainability and governance continued
Business model
The Group’s new business model, comprising of Traditional
Retail, Cash Retail, International Retail, Financial Services
(including Insurance) and New Business Development as
business divisions, has been implemented successfully during
the year. The new model is reflected in greater detail on pages
Whilst Maravedi has recently opened two of its own branded
stores in Johannesburg and Cape Town, most of its distribution
capacity originates from agents and the Group’s Traditional
Retail infrastructure. Maravedi currently offers short term
unsecured loans, consumer finance and card based revolving
credit products.
4 to 7. The board is of the opinion that the new business
Blake is a provider of premium contact centre solutions.
model provides a solid platform for continued growth. The
Processes including client acquisition, customer service,
board is intensely aware of the changing dynamics of the
business process integration and rehabilitation are supported
industry and the economy and closely monitors approved
by sophisticated customer relationship management software
strategy and the business model to ensure that it adapts
using in-house business intelligence. Blake is active in South
timeously to changing circumstances.
Africa, Namibia, Botswana and Mauritius, servicing both
Details of the individual business components of each division
are provided on pages 28 to 42.
domestic and international clients in the various geographies.
Blake is in the process of establishing B-BBEE partnerships
that will further enhance its business opportunities.
In summary, the Traditional Retail division operates through
eight brands and out of 935 stores, namely Barnetts, Bradlows,
Electric Express, Joshua Doore, Morkels, Price ‘n Pride and
Russells across South Africa, Supreme operates only in
Botswana, while Bradlows also trade in Swaziland.
The Financial Services division provides credit based products
to Traditional Retail and collects the receivables book utilising
the central contact centre in Johannesburg. The centralisation of
all credit related functions was completed during the past
financial year.
The Cash Retail division operates from 36 Hi-Fi Corporation
stores, while Incredible Connection serves its customers from
54 stores. Both chains also have a presence in Botswana and
Namibia.
There are 11 corporate service departments that support the
business units, namely Finance, Human Resources, Internal
and Forensic Audit, Risk Management, Information Technology
and Communications, Logistics and Fleet, Merchandise and
JDG Insurance provides life and short term insurance offerings
to customers through the Group’s infrastructure and store
Marketing, Property Services, Secretariat, Strategy as well as
Transformation, Legal and Compliance.
network throughout South Africa.
Abra has expanded its operations to 69 stores in Poland and
has also established an e-shop. It is also in the process of
designing and developing a franchise store model that will
complement the operating structure.
Strategic business goals
The Group’s strategic business goals and
operational
strategies are set out on page 8 and 9 and provide a
framework for the strategic direction of the Group.
The New Business Development division comprises Maravedi,
a micro lender and debt recovery operation, and Blake &
Associates (Blake), a provider of premium contact centre
solutions.
JD Group_Annual Report 2009
75
Corporate governance
continued
Board committees
same date as the termination of the directorship in such
instance.
While the board remains accountable and responsible for the
performance and affairs of the Group, four permanent
Each board committee has a clear mandate and operates in
subcommittees of the board have been appointed to assist
accordance with its own specific written terms of reference
the board in discharging its duties and obligations, namely the
duly approved by the Group board and adopted by the
Group audit committee, the Group risk management
individual committee.
committee, the Group remuneration committee and
Committee meetings are conducted in accordance with
the Group nominations committee. In addition to the
formal and structured agendas, ensuring that pertinent
aforementioned, ad hoc subcommittees are created from
matters receive proper attention. Agendas and the content of
time to time to assist with specific subject matters, such as
committee papers are regularly reviewed for effectiveness
reviewing the results for announcement in the media or
and relevance.
reviewing this corporate governance report for publication in
In accordance with the terms of references of each board
the annual report.
committee, all members are entitled, in accordance with a
The majority of the members, and in many instances all of the
prescribed procedure and at the Group’s expense, to seek
members, of each subcommittee are independent non-
independent professional advice about the affairs of the
executive directors. The board has the power at any time to
Group in relation to the execution of their duties.
remove a delinquent director from the board in accordance
Whilst the minutes of subcommittee meetings are not included
with the provisions of the company’s memorandum of
in the board papers, they are freely available to the directors
incorporation, the 2008 Companies Act and the directors’
and summarised by the chairmen of each subcommittee in a
letter of appointment and based on the premise that sub-
report at each board meeting, which report is either in writing
committee members are first and foremost directors of the
or verbal, as dictated by circumstances.
Group, the director’s membership on the subcommittee will
A diagrammatic representation of the entities to which
automatically and immediately terminate so as to fall on the
delegations have been made, is reflected below.
JD GROUP MAIN BOARD
Board
committees
JDG Trading
board
Management
committees
Subsidiaries
Audit
Exco
Blake & Associates
Risk management
Internal risk
management
Maravedi Group
Remuneration
Traditional Retail
JDG Micro Life
Nominations
Cash Retail
JDG Micro
Insurance
Financial Services
Abra
Other committees
76
JD Group_Annual Report 2009
Employee benefit
funds
Sustainability and governance continued
Audit committee
3 internal control;
The audit committee comprises three independent non-
3 financial accounting control; and
executive directors, namely Mervyn King (chairman),
3 stakeholder reporting.
Len Konar and Martin Shaw. All directors of the Group board,
despite not being official members of the committee, have
Remuneration committee
an open invitation to attend audit committee meetings.
The remuneration committee (RemCom) comprises four
Executive directors Richard Chauke, Henk Greeff, Grattan Kirk,
members of whom three are independent non-executive
David Sussman, Ian Thompson and Gerald Völkel also attend
directors and one a non-executive director who is not
as does the non-executive director, Ivan Levy. Other invitees
independent. Martin Shaw is the independent non-executive
include Johan Kok, Phillip Kruger, Andrew Murray (all Exco
chairman. He is assisted by fellow independent members
members), Pieter Pienaar (Chief Risk Officer) and Morné van
Mervyn King and Len Konar, as well as by Ivan Levy, the non-
Wyk (Internal Audit Executive). The external auditors attend all
independent non-executive member of RemCom. The Group
audit committee meetings and have unrestricted access to
chairman, the Group CEO and the Group financial director
the chairman of the audit committee.
attend meetings by invitation, but recuse themselves in
Through the audit committee, the board regularly reviews
situations where a conflict of interest arises or when the
processes and procedures to ensure the effectiveness of
chairman of the committee believes there is sufficient
internal systems of control so that its decision making capability
justification to exclude them from a meeting or from a
and the accuracy of its reporting are maintained at a high level
discussion of a particular agenda item, such as when their
at all times. The committee furthermore identifies, monitors
remuneration is determined.
and assesses non financial information relating to the Group
RemCom’s main responsibility is to review and approve the
beyond financial and quantitative performance factors.
remuneration and employment terms of directors and senior
The audit committee met formally three times during the
group executives. In addition to the aforementioned, the
review period to consider a range of matters relating to
remuneration committee makes recommendations to the
internal control, financial accounting control and stakeholder
board and shareholders on the most appropriate share and
reporting, as well as corporate governance practices and
other incentive schemes for implementation by the Group, as
other aspects of an internal and external audit management
well as allocations under such schemes. It also recommends
nature.
the non-executive directors’ fees (via the board) to
At its last meeting in the 2009 calendar year, the committee
shareholders for approval at each annual general meeting.
reported on the extent to which it had carried out its duties as
The Group’s primary executive remuneration objective is to
set out in King II, the Companies Act, the committee’s terms
reward executives so as to ensure that their services are
of reference and the committee’s annual plan. Given the
retained and that their interests are commensurate and
duties listed on pages 100 and 101 of this annual report, the
aligned with the interests of shareholders. In determining their
Committee concluded (and reported to the board) that it had
remuneration, RemCom aims to construct appropriate
appropriately addressed its key responsibilities in respect of:
packages required to attract, retain and motivate talented
Audit committee attendance register
Director
ME King (Chairman)
D Konar
MJ Shaw
5 February
2009
A
P
P#
6 May
2009
11 November
2009
P
P
P
A
P
P#
P = Present
A = Apologies
# = Acting chairman
JD Group_Annual Report 2009
77
Corporate governance
continued
executives, whilst giving due consideration to remuneration
save for the chairmen of the committees who each receive an
levels, both within and outside the Group. To meet these
additional amount for rendering this service. Going forward, and
objectives, RemCom takes advice from external remuneration
in line with the recommendations of King III, non-executive
specialists from time to time.
directors will not qualify for share options or receive any share
Remuneration for executives consists of an all inclusive total
based payments.
cost to company fixed element, a variable element and share
The Group follows a policy to pay fees only to those directors
incentives. Performance related elements of remuneration
who attend meetings.
constitute a substantial portion of the total remuneration
Full disclosure is made of directors’ remuneration on an
package of executive directors in order to ensure above
individual basis. This can be found on pages 102 to 109, where
ordinary performance linked to strategic goals. The fixed
details of earnings, share options and all other benefits are
element of remuneration is reviewed annually. RemCom
reflected.
compares current rates of pay to those observed in similar
In August 2009, the Group’s shareholders approved a share
relevant companies within and outside the industry. This
appreciation rights incentive scheme (the SAR Scheme) to
information is then adjusted to reflect both the Group’s
replace the existing JD Group Employee Share Incentive
performance, compared with the performance of similar
Scheme. The operation of the SAR Scheme is administered by
companies as well as the individual’s performance. An annual
RemCom under a mandate and directives from the board.
variable element of reward is awarded as an incentive to
Qualifying employees receive share appreciation rights (as
executives to achieve predetermined financial targets.
opposed to share options). The vesting of rights is subject to
The forward looking remuneration of the non-executive directors
the achievement of predetermined performance conditions
is determined by the executive chairman in consultation with
which are aligned to the Group’s strategic goals. Furthermore,
the Group’s advisors, based on benchmarked remuneration
the SAR Scheme facilitates the attraction and retention of key
information from the Group’s peers and the wider industry. The
talent. Details regarding the mechanics and the rules of the
board, via the RemCom, recommends these fees to shareholders
SAR Scheme are set out on pages 165 and 166.
for approval at each annual general meeting. Through this
The Group’s employee share incentive scheme is being
approach, shareholders are actively involved in the setting of
phased out and no further allocations will be made in terms
directors’ fees, rather than merely endorsing a fait accompli. The
of this scheme.
board pays uniform fees to non-executive directors and does
not remunerate its directors for serving on board committees,
The remuneration committee met five times during the review
period.
Remuneration committee attendance register
Director
5 February
2009
6 May
2009
7 August
2009
9 September
2009
11 November
2009
P
P
P
P
P
P
A
P
P
P
P
P
P
PT
P
A
P
P
A
P
IS Levy (Chairman)
MJ Shaw (Chairman with
effect from 6 May 2009)
ME King
D Konar
P = Present
A = Apologies
PT = Present by telecommunications
78
JD Group_Annual Report 2009
Sustainability and governance continued
Nominations committee
Risk management committee
The nominations committee comprises four non-executive
The risk management committee is a standalone subcommittee
directors, three of whom are independent. The chairman is
of the board. Günter Steffens is the chairman of the committee
Ivan Levy and the independent non-executive members are
which comprises a mix of independent non-executive
Mervyn King, Len Konar and Martin Shaw. The committee’s main
directors, executive directors, Exco members and the heads
responsibility is to make recommendations to the board
of Internal Audit and Risk Management. Len Konar and
regarding succession planning and to advise the board on the
Martin Shaw are the independent non-executive directors,
appointment of individuals who are best able to discharge the
while the executive directors are Richard Chauke, Grattan Kirk,
responsibilities of directors, having regard to the law and the
Ian Thompson and Gerald Völkel. The Exco representatives are
highest standards of governance, by:
Johan Kok, Phillip Kruger and Andrew Murray. Internal Audit
and Risk Management are represented by Morné van Wyk
3 assessing the skills required on the board;
and Pieter Pienaar respectively. Subject experts, certain
3 assessing the extent to which the required skills are
represented on the board;
divisional CEs and a delegation from the independent external
auditors also attend.
3 establishing processes for the review of the performance of
individual directors and the board as a whole; and
The purpose of the committee is to address risks applicable
to the Group. Amongst others, these include credit risks,
3 establishing processes and criteria (including transformation
exchange rate exposure, investment risk, insurable losses,
requirements) for the identification of suitable candidates for
adequacy of systems and controls, interest rate and liquidity
appointment to the board.
risks, market risk, legislative risk, reputation risks, as well as
The committee meets only when there is a need to consider
insurance risks, business continuity risk and financial risk. The
new candidates. As there were no new appointments or a need
key findings of this committee are reported monthly to Exco
to reconstruct the board during the review period, the committee
and more detailed reports are presented quarterly to the
did not meet during the review period.
audit committee and to the board.
The committee met four times during the review period.
Risk committee attendance register
Director
GZ Steffens (Chairman)
KR Chauke
IR Child (Resigned with effect from
15 April 2009)
AP Murray (Appointed with effect
from 1 May 2009)
AG Kirk
JHC Kok
D Konar
PC Kruger
PJ Pienaar
MJ Shaw
ID Thompson
G Völkel
5 February
2009
6 May
2009
23 July
2009
11 November
2009
P
P
P
P
P
P
P
P
P
—
—
—
—
P
P
P
P
P
P
P
P
—
P
P
P
P
P
P
P
P
P
P
P
P
P
P
A
P
P
P
P
P
P
P
P
P
P
P
P = Present
A = Apologies
JD Group_Annual Report 2009
79
Corporate governance
continued
Attendance at meetings
The attendance by directors at board and board subcommittee
meetings is satisfactory as is evidenced by the attendance
statistics provided for each individual forum.
3 serve as a governance mechanism through the process of
ongoing Group performance assessment and biannual
statutory reporting.
Formal meetings have been held biannually in 2009 to
coincide with the announcement of the Group’s results,
Other supporting governance structures and
however, going forward, quarterly meetings will be held in line
management committees
with the requirements of the company’s articles of association.
Additional ad hoc meetings are held when circumstances
JDG Trading board
JDG Trading (Pty) Ltd (JDGT) is the wholly owned South African
trading company of the Group. The board of JDGT consists of
dictate such a need. A number of decisions are taken by way
of written resolutions signed by the directors in terms of
section 242(2) of the Companies Act.
the six executive directors of the Group and eight senior
executives, namely Pamela Barletta, David Hirsch, Johan Kok,
JDGT executive committee (Exco)
Phillip Kruger, Komani Mfuni, Andrew Murray, Arie Neven and
This is the CEO’s committee and it is an exact reflection of the
Guy Pearce. Meetings are chaired by Grattan Kirk, the Group
JDG Trading board as regards membership and composition.
CEO.
The purpose of the committee is to:
Ian Child resigned as a director of this board with effect from
3 translate Group board strategic direction into a strategic
15 April 2009 and was replaced by Andrew Murray on 1 May
plan and ensure, through ongoing monitoring, the successful
2009. Komani Mfuni became a director of JDGT on
implementation of the plan;
14 September 2009, while Pamela Barletta joined the board
on 16 September 2009.
3 monitor Group performance in accordance with the plan;
and
The directors of this board are individually and jointly
3 address any item considered crucial for business success.
mandated, empowered and held accountable for, amongst
Through its comprehensive agenda, Exco monitors strategic
others, to:
business goals, day to day operations related challenges,
3 implement the strategies and key policies determined by
performance reviews, risk and IT reviews, succession planning,
the Group board;
transformation progress, strategic project developments and
3 manage and monitor the business and affairs of the Group
other Group issues. It also facilitates the formulation and
in accordance with approved business plans and budgets;
monitoring of Group policies and procedures. Meetings are
3 prioritise the allocation of capital and other resources;
3 establish best management and operating practices;
3 structure management succession planning to identify,
develop and advance future leaders in the Group; and
80
JD Group_Annual Report 2009
held on a monthly basis.
Sustainability and governance continued
Management committees
procedures so as to provide an enterprise wide risk
Specific responsibilities have been delegated to various
management committees, all of which have defined terms of
references in place. These include the internal risk management
management service in the future. (See page 87 for more
details.)
Risks are evaluated by the IRMC, using the Barnowl risk
committee (IRMC), the Traditional Retail Exco, the Cash Retail
management application to record the degree of inherent
Exco, the Financial Services Exco as well as other departmental
risk and then the likelihood of occurrence. The control
committees. In addition, the executive committees of Abra,
environment relevant to each risk is then evaluated and
Blake
the
a score is assigned to the residual risk and its likelihood of
new calendar year, the JDG Insurance Exco will convene on
occurrence. The top risks are ranked and all of the
a monthly basis.
aforementioned are reported to the Group risk management
and
Maravedi
convene
regularly.
In
committee. In this manner the major risks to the Group are
Internal risk management committee (IRMC)
The IRMC is a subcommittee of and reports to the Group risk
management committee as well as to the JDG Trading board.
Its members comprise Richard Chauke (chairman) and
Pieter Pienaar. Other Exco members and Corporate Service
department executives attend the meeting to provide risk
related feedback from their relevant operational areas or
service departments.
The purpose of this committee is to identify and review the
risks presented by the Group’s local and offshore operations
and by the corporate service departments from an internal
Group perspective.
Risks are identified and monitored through the planning
monitored, as well as the various management corrective
actions aimed at mitigating these risks. The risks are updated
regularly to take account of changing market, economic,
political, environmental, legislative and other conditions or
changes in the business environment. The majority of inherent
risks remain constant, but new risks arise from time to time
and the impact these may have on business operations are
assessed on an ongoing basis.
Risk is not only viewed from a negative perspective. The
review process also identifies areas of opportunity, such as
where effective risk management can become a competitive
advantage.
The IRMC also considers:
process, the close involvement of the executive directors in
3 the adequacy of insurance cover (including self insurance),
the Group’s operations and the periodic monitoring of key
in conjunction with experts from the insurance industry;
issues to ensure that the significant risks faced by the Group
3 risks not covered by insurance; and
are evaluated in terms of impact and severity and appropriately
3 business continuity management and disaster recovery
managed and mitigated. The board is confident that
appropriate fundamental processes are in place to ensure
planning.
The IRMC met four times during the review period.
compliance with current risk management requirements.
In order to provide enhanced, independent risk assurance
going forward, the Risk Management function is currently in
a process of transforming its structures, processes and
The board is confident that appropriate fundamental processes
are in place to ensure compliance with current risk
management requirements.
JD Group_Annual Report 2009
81
Corporate governance
continued
The major risks as at the date of this report are as follows:
Financial performance
s Ensure adequate financial performance of the Group without compromising prudent accounting
standards, policies and levels of provisioning.
s Maximise existing income and revenue streams, identify alternative income streams, expand the
Group’s footprint and maximise retention of customer base, by providing the customer with
excellent service and the appropriate mix of physical and financial service product at the right
place at the right time.
s Establish efficient cost structures and monitor expenses against budget.
s Constantly monitor financial performance and implement corrective measures where necessary.
Information
technology (IT)
s Ensure that the Group has appropriate IT structures in place that facilitate integration across
business divisions.
s Reduce dependence on external service providers.
s Ensure that IT-specific disaster recovery (DR) and business continuity (BC) processes are
addressed via the Group’s enterprise-wide DR and BC programme.
Disaster recovery and
s Further enhance the Group’s disaster recovery and business continuity capabilities.
business continuity
planning
s Maintain appropriate succession planning, especially for key positions, taking cognisance of
employment equity.
Broad-Based Black
Economic
s Monitor the overall transformation strategy and become more representative of the demographics
of South Africa, particularly at the middle and senior management levels of the Group.
Empowerment and
transformation (B-BBEE)
s Ensure and monitor that all aspects of B-BBEE are embraced for long term sustainability, growth
and profitability of the Group.
s Ensure that an empowerment deal is concluded at the appropriate time.
Customer service
s Embrace the
‘Art of Service’ initiative to improve service delivery to both internal and external
customers.
s Constantly monitor market behaviour, changing demographics, customer buying patterns,
competitor activity and customer indebtedness in order to ensure customer satisfaction.
Effective execution of
s Execution of all plans and processes via detailed project management, monitoring and report
the Financial Service
back through the management structures, to ensure the successful implementation of the
strategy
defined strategy.
Legal compliance
including FAIS
s Ensure the Group remains compliant with the laws and regulations that govern the environment
in which the Group operates.
compliance
82
JD Group_Annual Report 2009
Sustainability and governance continued
Legal compliance
s Continuously review Group policies and procedures to ensure compliance is established and
including FAIS
monitor adherence to policies via operational excellence and the risk management and internal
compliance (continued)
audit function within the Group.
s Ensure that customers are made aware of their rights and obligations and that compliance with
procedures has taken place.
Credit management
s E
nsure that the ability to collect the debtors book is constantly improved through enhanced
processes, technology and the optimisation of procedures.
s Ensure credit granting rules are maintained and updated in order that the Group acquires credit
risk appropriate to its credit risk appetite.
s Constantly monitor the performance of the debtors book and timeously implement corrective
measures where necessary.
s Ensure that sufficient provisions are raised for receivables that are unlikely to be recovered.
Cash Retail Exco
Traditional Retail Exco
The
committee
comprises
Arie
Neven
(chairman),
The
committee
comprises
Grattan
Kirk
(chairman),
Colin Bresler, Johan Coetsee, Toy de Klerk, Julian Hanmer,
Pamela Barletta, Johan Coetsee, Victor da Silva, David Hirsch,
David Hirsch, Pat Kimmince, Johan Kok, Rénier Krige,
and the Cash Retail chain chief executives, namely
Mike
and
Dave Miller (Incredible Connection) and Allan Herman
Mathew van der Walt. Grattan Kirk, Richard Chauke,
(Hi-Fi Corporation). Richard Chauke, Henk Greeff and other
Henk Greeff and other executives are regular attendees at
executives are regular attendees at the Cash Retail Exco.
the Traditional Retail Exco.
The purpose of the committee is to translate, plan and
The purpose of the committee is to translate, plan and
implement Group strategy for the Cash Retail chain businesses
implement Group strategy in the Traditional Retail chain
and to monitor progress thereon, to ensure compliance with
businesses and to monitor progress thereon, to ensure
policies and to manage attainment of business goals and
compliance with policies and to manage attainment of
agreed performance milestones. It also attends to other
business goals and agreed performance milestones. It also
important aspects that may impact on the Cash Retail
attends to other important aspects that may impact on the
businesses.
Traditional Retail businesses in general.
The agendas include deliberations on Group strategic business
Discussion points on the committee’s agendas include
goals, operational business goals, business performance
operational business goals (and their link with Group strategic
measurements, inventory management and performance,
business goals), business performance measurements,
people development, research and development trends
and inventory management and performance, people
internally and externally, compliance with operational policies
development, performance of service departments and of
and progress reviews on divisional projects. Meetings are held
suppliers in terms of service level agreements, research and
on a quarterly basis.
Roberts,
Len
Rundle,
Anthony
Smith
development trends internally and externally, compliance
with operational policies and progress reviews on divisional
projects. Meetings are held on a quarterly basis.
Financial Services Exco and subcommittees
The Financial Services (FS) division is managed by the
FS Executive Committee (FS Exco) with the following
supporting governance structures:
JD Group_Annual Report 2009
83
Corporate governance
continued
3 The FS Exco is chaired by Phillip Kruger, the FS chief
The audit and actuarial committee has an independent
executive. Permanent members include Grattan Kirk,
non-executive chairman in Mark Scharneck. Permanent
Arie Neven, the entire FS executive team, and by
members of the committee are Fernando Patrizi (independent
invitation, David Sussman, Reneé Griessel, Mike Miller,
non-executive director) and Gerald Völkel. The independent
Guy Pearce and Pieter Pienaar.
auditors, the statutory actuary and management also attend
3 The Change committee is responsible for prioritising
meetings as invitees. The committee attends to all audit,
projects and initiatives across all strategically aligned
actuarial and investment matters in the insurance environment
programmes within FS. This meeting is chaired by
within the Group. Meetings are held on a quarterly basis.
Jaco van Jaarsveldt, the FS Head of Strategy. Permanent
The JDGI executive committee (JDGI Exco) will commence
members include Henk Greeff, Phillip Kruger, the entire
its operations in the new calendar year. The committee is
FS executive team and Dalene Ferreira, the FS Strategic
chaired by the JDGI CE, Reneé Griessel. Permanent members
Change Enablement executive.
of the committee are Grattan Kirk, Gerald Völkel, Barry Dell,
3 The Credit Risk committee considers decisions regarding
amendments to any credit risk related activity. This meeting
is chaired by Francois Grobler, the Head of Credit and Risk.
Permanent members include Grattan Kirk, Phillip Kruger,
Arie Neven, Jaco van Jaarsveldt and by invitation, the entire
FS Exco.
3 Departmental Management committees – the Head of each
department is chairman of his/her department’s meetings
where divisional performance and strategic initiatives are
discussed.
Henk Greeff, Andrew Murray, Arie Neven, Pieter Pienaar,
Andre Potgieter and Jaco van Jaarsveldt.
The purpose of the committee is to translate, plan and
implement JDGI’s strategy, to align it with Group strategy and
to monitor progress thereon, to ensure compliance with
policies and to manage attainment of business goals and
agreed performance milestones. It will attend to other
important aspects that may impact on the business of JDGI.
The agendas will be structured to include consideration of
strategic business goals, operational business goals, business
The above structure ensures complete alignment with all
performance measurements, legal and compliance, financial
strategies and initiatives of the FS division.
and investment performance, people development, research
and development trends internally and externally. Meetings
JDG Insurance board and board subcommittees
will be held on a monthly basis.
The JDG Insurance (JDGI) board comprises two independent
non-executive directors, three non-executive directors and
Maravedi board and board subcommittees
one executive director. Fernando Patrizi acts as the
The Maravedi board comprises an independent non-executive
independent non-executive chairman and his co-directors
director, three non-executive directors and three executive
are Mark Scharneck (independent non-executive) and three
directors, namely Günter Steffens, Ian Thompson (JD),
non-executive directors from the Group, namely Grattan Kirk,
Johan Kok (JD), Mfanyana Salanje (Thebe representative),
Phillip Kruger and Gerald Völkel. Reneé Griessel (JDGI CE) is
Dries Hattingh (Maravedi MD), Henk Klopper (Maravedi FD),
the sole executive director on the board. The statutory
and Guy Pearce (Maravedi CE) respectively. A number of
actuary is a permanent invitee to board meetings. Pending
executive management are permanent invitees to board
the establishment of a JDGI risk committee, the board takes
meetings, which are held on a quarterly basis.
responsibility for all risk related matters. Meetings are held on
a quarterly basis.
The Maravedi board is supported by an audit and risk
committee in addition to an investment committee. The audit
The JDGI board is supported by an audit and actuarial
and risk committee attend to all audit and risk related matters
committee, as well as an executive committee (recently
and to which the external auditors are invited attendees at
established).
half year and year end. The audit and risk committee were
chaired by Ian Thompson this past year and will be chaired by
84
JD Group_Annual Report 2009
Sustainability and governance continued
Günter Steffens going forward. The external auditors have
unlimited access to the chairman at all times and meet
Other management committees
Leadership and development council
with the chairman independently before each meeting. The
investment committee attends to investment related matters.
All of these committees include a representative from Thebe.
This
committee
George
comprises
Annandale,
Grattan
Pamela
Kirk
Barletta,
(chairman),
Jan
Blom,
Richard Chauke, Barry Dell, Henk Greeff, Johan Kok,
The Maravedi executive committee meets on a monthly basis
and deals with both strategic and operational matters. The
committee consists of senior Maravedi management.
JD representatives are invited attendees to all such
Phillip Kruger, Arie Neven and Guy Pearce. The committee’s
terms of reference include leadership development,
succession management and expediting the achievement of
equity targets.
meetings.
Employment equity and training committee (EE & TC)
Blake board and board subcommittees
The committee monitors and ensures the Group’s overall
The Blake board comprises an independent non-executive
compliance to EE and skills development. In this role it
director, two non-executive directors and three executive
ensures that the Group fulfils the requirements of its
directors namely Johan Geldenhuys, David Sussman (JD),
EE initiatives and the stipulations of the Employment Equity
Mias Strauss (ex JD CEO), Ian Thompson (JD), Howard Blake
Act, particularly insofar as they relate to the Group’s business
and Mike Miller respectively. Board meetings are held on a
in South Africa. The committee reports to the Transformation
quarterly basis and the board is supported by an audit
department, with a split reporting line into the HR
and risk committee. The audit and risk committee attends to
department.
audit and risk related matters and is chaired by Ian Thompson.
The external auditors are invited attendees at half year and
year end and have unlimited access to the chairman at
all times. The chairman meets with the external auditors
independently before each meeting.
The committee comprises members from occupational
categories, designated groups, non designated groups,
women and it also has Union representation. Richard Chauke
acts as chairman and the individual members are
Johnny Masinga, Mlungisi Thabethe, Pamela Barletta,
The Blake executive committee meets on a monthly basis
Mirriam Khumalo, Walter Moeletsi, Lucas Radebe and
and deals with both strategic and operational matters.
Nelson Mothapo. The committee is assisted by a facilitation
The committee consists of senior Blake management.
team comprising of seven members (not members of the
JD representatives are invited attendees to all such
committee). The meeting convenes on a quarterly basis.
meetings.
International – Abra board
The committee has assisted the Group to compile an
employment equity report. Under its leadership, the Group
also adopted and implemented an employment equity policy.
The management board of Abra in Poland carries out similar
The main focus into the future will be to position the Group as
functions to those which the JDG Trading board carries out in
a preferred employer.
the South African context, namely, it serves to manage and
monitor the operations of the company. The management
board manages and monitors the operations in Poland under
Employment equity and skills development committees also
exist at divisional level in the Group.
a mandate and upon directives from the supervisory board.
Chain and corporate service department committees
The members of the supervisory board of Abra are David
The chain chief executives and the heads of the corporate
Sussman (chairman), Johan Coetsee and Grattan Kirk. The
service departments act as chairpersons of either chain or
management board comprises of Piotr Krzanowski and
corporate service department meetings which are held on a
Piotr Lisowski.
monthly basis. The executive management teams of the chain
or service department attend these meetings.
JD Group_Annual Report 2009
85
Corporate governance
continued
Marketing and merchandise review meetings
A marketing and merchandising review meeting is held
monthly for both the Traditional Retail chains and the Cash
Retail chains. These meetings are attended by the marketing
executives and by representatives from the respective chain
advertising agencies. Grattan Kirk, David Hirsch, Arie Neven,
Conrad Kleingeld, Alec Goodman, Johan Kok, Irene Pilavachi
and David Sussman attend the Traditional Retail meetings.
David Hirsch, Grattan Kirk and David Sussman also attend the
Cash Retail meetings.
Alexander Forbes Financial Services (Pty) Ltd is the
appointed administrator of the AFRF. This fund is managed
by a professional board of trustees. In terms of the rules of
the fund, each participating employer is required to establish
a management committee comprising both employer
appointed and member elected representatives. For JDG
Trading there are four employer appointed and four
employee elected representatives. The employer appointed
representatives are Ivan Levy (chairman), George Annandale,
Xavier Schatz and Johan Coetsee. For Connection Group,
there are three employer appointed and three employee
Each of these meetings deal with three key matters, namely
the previous month’s performance by merchandise category,
all the marketing promotions of the Group for the next two to
three months in advance and the merchandise plans that
underpin the overall marketing plan. The purpose of the
meeting is to ensure that sales are maximised, the required
number of product units are sold and that gross margins
are achieved.
Connection Group board and subcommittees
elected representatives. The employer representatives are
Johan Coetsee, David Miller and George Honiball. The
management committee, amongst other activities, monitors
and reviews the selected investment strategy, assists in the
distribution of death benefits payable and monitors
continued participation in the fund.
3 The JD Group Defined Benefit Pension Fund has been
closed to new entrants since October 1996. This fund is
managed by a board of trustees. In terms of the rules of this
fund, four employer appointed trustees, namely Ivan Levy
The Group acquired Connection Group in December 2005.
Three of the JD Group board executive directors, namely
Grattan Kirk, David Sussman and Gerald Völkel, serve on the
board of Connection Group Holdings (Pty) Ltd, together with
other Group executives, David Hirsch, Johan Coetsee and
(chairman),
Johan
Coetsee
(principal
officer),
George Annandale and Xavier Schatz, as well as four
member elected trustees, manage the fund. The appointed
administrator is Alexander Forbes Financial Services
(Pty) Ltd.
David Miller. The two subcommittees of the Group, namely the
remuneration committee and audit committee, were
incorporated into the JD Group committees respectively.
3 The SA Commercial Catering and Allied Workers Union
National Provident Fund (SNPF) is an umbrella fund in
which a number of employers participate in terms of a
Employment benefit funds
collective bargaining agreement with SACCAWU. Old Mutual
Life Assurance Company (South Africa) Limited (Employee
Approximately 95% of Group employees are members of a
Benefits Industry Funds Unit Division) is the appointed
retirement fund in which the Group participates. A summary
administrator of this fund.
of the key retirement funds are provided below.
3 Employees of the Group in Botswana and Namibia belong
3 The Alexander Forbes Retirement Fund (AFRF) is an
to various umbrella funds in these countries, while
umbrella fund in which employees of the Group have
employees of Abra are members of the Social Security
membership as a condition of employment. It comprises
Fund (SSF) in Poland.
the following two sub funds:
– the Alexander Forbes Retirement Fund (Pension and
Provident Sections): JDG Trading (Pty) Ltd;
– The Alexander Forbes Retirement Fund (Provident
Section): Connection Group Holdings (Pty) Ltd;
86
JD Group_Annual Report 2009
Financial related details of the Group’s retirement funds are
set out in note 25 of the annual financial statements.
Sustainability and governance continued
Financial control and reporting
Financial monitoring systems
The directors are responsible for ensuring that Group
The Group operates a comprehensive annual planning and
companies maintain adequate records and report accurately
budgeting process. The annual budget is approved by the
and reliably on the financial position, activities and results of
board. The financial reporting system compares results with
the Group. Financial reporting procedures are applied in the
plans, budgets and with the previous year’s results and is able
Group at all levels to meet this responsibility. Financial and
to identify deviations on a daily and monthly basis. Reports
other information is constantly reviewed and remedial action
include regular cash flow statements, income statements and
taken, where necessary.
balance sheets projected for 12 months ahead, which are
Improvements to the quality of reported information are
used in determining future funding needs.
continually effected by means of replacing or upgrading
information systems. The Group has embarked on the
Main control procedures
implementation of an Enterprise Resource Planning solution
The directors have adopted a schedule of matters which are
to provide for improved reporting, control and efficiencies
required to be brought to it for decision, thus ensuring that it
across the Group.
maintains full and effective control over appropriate strategic,
The Group’s annual financial statements are prepared in
accordance with International Financial Reporting Standards.
Appropriate accounting policies are consistently applied
unless an accounting policy requires revision or there is
a requirement to adopt new accounting standards or
interpretations, in which case proper disclosure is made.
Reasonable and prudent judgements and estimates are made
in order to properly disclose the Group’s financial status.
financial, organisational and compliance issues. Financial
controls and procedures are in place, including procedures
for seeking and obtaining approval for major transactions and
organisational changes in terms of the Group’s levels of
authority document. Organisational controls involving the
segregation of incompatible duties and controls relating to
the security of assets are also in place and maintained on an
ongoing basis.
The board regularly reviews the operations and effectiveness
Internal financial control
The board has overall responsibility for ensuring that the
Group maintains a system of internal financial control to
provide it with reasonable, but not necessarily absolute,
of internal financial control. The board confirms that to the
best of its knowledge and belief there have been no
weaknesses which have led to any material losses or
contingencies during this financial year.
assurance regarding the reliability of the financial information
used within the business and for publication and to ensure
Internal control systems
that assets are safeguarded.
The directors accept responsibility for maintaining appropriate
The key features of the internal financial control systems that
operated throughout the year under review are described
below.
internal control systems to ensure that the Group’s assets are
safeguarded and managed, and losses arising from fraud or
other illegal acts are minimised. Control systems are monitored
and improved in accordance with generally accepted best
Control environment
An organisational structure with clearly defined lines of
practice.
Risk Management
responsibility and delegation of authority from the board to
the chains, corporate service departments and subsidiaries
is in place and presented on page 76. The board has
established policies and procedures, including a levels of
During the review period, the Internal and Forensic Audit
department was decoupled into two departments, namely
a Risk Management function and an Internal Audit function.
authority document and a Code of Conduct, to foster a
proper governance structure and a strong ethical climate in
the Group.
JD Group_Annual Report 2009
87
Corporate governance
continued
Risk Management provides a professional, comprehensive
The internal audit plan, approved by the audit committee, is
risk management service to the Group to enable it to be
based on risk assessments that are continually updated so as
world-class in the field of risk management.
to identify not only existing and residual risks, but also
An enterprise risk management (ERM) process was established
recently. This will entrench ERM as a philosophy and
methodology in the organisation, ensuring that all risks are
properly mitigated and managed throughout the Group.
Internal Audit
Internal Audit is an independent, objective assurance and
consulting function designed to add value to and improve the
Group’s operations. It helps the Group accomplish its
objectives by bringing a systematic, disciplined approach to
evaluate and improve the effectiveness of risk management,
control and compliance processes.
Amongst others it provides:
3 assurance that the management processes are adequate
to identify and monitor significant risks;
emerging risks, as well as issues highlighted by the audit
committee and the risk management committee. Internal
audits are conducted formally at each business unit and
corporate service department workplace on a regular basis.
Fraud and illegal acts
The Group does not engage in or accept or condone any
illegal acts in the conduct of its business. The board’s policy is
to actively pursue and prosecute the perpetrators of fraudulent
or other illegal activities, should they become aware of any
such acts.
The Group has a whistle-blowing procedure in place through
which employees can report illegal acts anonymously to
Crime Call Anonymous without fear of reprisal.
Insider trading and closed periods
3 confirmation of the adequacy and effective operation of the
established internal control systems;
3 credible processes for feedback on risk management and
assurance; and
No employee or director (or their associates) of the Group may
deal, directly or indirectly, in JD Group shares (including
share options) on the basis of unpublished price sensitive
information regarding the business or affairs of the Group. To
3 objective confirmation that the board receives assurance
from management that information is reliable.
the best of the board’s knowledge, none of the Group’ directors
or their associates have been involved in insider trading. The
The purpose, authority and responsibility of the Internal Audit
Group twice annually defines closed periods, which are strictly
function are formally defined in the internal audit terms of
adhered to. As a general rule, closed periods commence
reference and are consistent with the Institute of Internal
about 45 days prior to the interim and year end results
Auditors’ definition of internal auditing. The internal audit terms
reporting dates, and end once the results have been disclosed
of reference were recently reviewed and approved by the
to the market. Closed periods are also observed prior to
board.
corporate actions as required by the JSE. No employee or
The activities of the internal auditors are coordinated by the
director (or their associates) of the Group may trade in the
internal audit executive, who has unrestricted access to the
Group’s ordinary shares (or share options) during closed
audit committee chairman and its members.
periods. The Board Charter includes a dealing code that
Internal Audit coordinates the activities of the external
auditors to ensure proper coverage and to minimise
duplication of effort. The external auditors have access to
reports issued by Internal Audit.
Audit plans for each business operation are tabled annually to
take account of changing business needs. Follow up audits
are conducted in areas where weaknesses are identified.
88
JD Group_Annual Report 2009
regulates dealings in the Group’s shares (and share options).
Executives and directors have to obtain written approval
from the Group chairman (amongst others) prior to dealing in
any Group securities.
Records of all transactions and approvals in respect of executives
and directors are kept by the Secretariat and all directors’
dealings are timeously disclosed on SENS and any movement in
shareholding is disclosed in the annual report.
Sustainability and governance continued
Code of conduct
identified the following as the Group’s key stakeholders:
The Group is committed to the highest ethical standards of
3 Shareholders, analysts, investors and the financial media;
business conduct and fully comply with all applicable laws and
3 Employees and Organised Labour;
regulations. The board has adopted a Code of Conduct that
3 Customers;
stipulates the ethical standards applicable and the expected
3 Suppliers;
behaviour of each employee and director of the Group.
The directors, employees, employees of outsourced functions,
as well as suppliers to the Group, are all expected to comply
with the principles and the ethical standards of this Code and
to act in terms thereof at all times. Amongst others, each
department maintains a gift register where all gifts from
suppliers, service providers and customers are entered
for record and auditing purposes. Gifts are limited to
3 Government and Regulators; and
3 Communities.
The Group’s engagements with each of these stakeholders
are set out in detail in the sustainability and stakeholder
reviews which is set out from page 56.
Industry engagement and membership
a predetermined value. The behaviour of all role players
The Group plays a role in shaping industry events through its
in respect of this Code is monitored on an ongoing basis and
participation in and membership of industry and professional
the directors believe that a high standard of ethics has been
bodies, of which the following is merely a synopsis:
achieved. Where there is non-compliance with the Code, the
3 The Unilever Institute of Strategic Marketing;
appropriate discipline is enforced with consistency. This
3 The Compliance Institute of South Africa;
serves as a measure to prevent recurrence.
3 The Institute of Internal Auditors of South Africa;
3 The Institute of Directors in South Africa;
Art of service
3 The Consumer Goods Council of South Africa;
Service is the essential element and the strategic intent of the
‘Art of Service’ programme. The creation of extraordinary
levels of customer service will elevate the JD Group from the
ordinary and differentiate it from its competitors. By enabling
3 The Wholesale and Retail SETA;
3 The Retailers Association of South Africa;
3 The Furniture Traders’ Association of South Africa;
all its resources, starting with people, JD aims to provide
3 The Association for Savings and Investments South Africa;
an excellent and consistent customer experience that is
3 The South African Insurance Association;
world-class. The ‘Art
3 The Ombuds for FAIS, Long-term Insurance and Short-term
of Service’ commitment should exceed
the expectations of both internal and external customers. Its
success and strength lie in customer driven processes,
ultimately delivered by empowered, engaged and energised
human capital. A more detailed description of this initiative is
provided on pages 10 and 11.
Stakeholder engagement
Insurance;
3 The Institute of Futures Research and the Bureau of
Economic Research at Stellenbosch University;
3 The Bureau of Market Research at UNISA;
3 Econometrix; and
3 The South African Institute of Race Relations.
In all dealings, the board strives to ensure that the interests of
stakeholders are foremost in its decisions and that they are
fully informed of decisions relevant to them. The board has
JD Group_Annual Report 2009
89
%
+25
The introduction of new loan and insurance products and an
improved trading environment augurs well for us achieving our
benchmark return on capital employed of 25% by 2011.
Service commitment...
90
JD Group_Financial Statements 2009
Annual Financial Statements
JDG Trading Financial
Services – Randburg
JD Group_Financial Statements 2009
91
Ten year review
31 August
31 August
2009
2008
31 August
2007#
Share performance
Total shares in issue
‘000
170 500
170 500
180 000
Weighted average number of shares in issue
‘000
163 245
169 807
177 861
Headline earnings per share
cents
44,4
301,0
621,7
Cash equivalent dividends per share
cents
41,0
152,0
303,0
Dividend cover
times
1,1
2,0
2,1
Net asset value per share
cents
2 833,5
2 822,9
2 804,5
Revenue
Rm
12 922
12 610
12 914
Operating profit
Rm
646
797
1 591
Profit before finance costs
Rm
643
813
1 662
Profit attributable to shareholders
Rm
75
514
1 113
Closing shareholders’ equity
Rm
4 831
4 813
5 048
Average shareholders’ equity
Rm
4 822
4 931
5 337
Net interest bearing debt
Rm
639
158
76
Average total assets less non-interest bearing debt
Rm
6 447
6 426
7 030
Total assets
Profitability, liquidity and gearing
Rm
8 926
8 673
8 891
Operating margin
%
5,0
6,3
12,3
Profit attributable to shareholders on revenue
%
0,6
4,1
8,6
Return on closing shareholders’ equity
%
1,5
10,7
22,1
Return on average shareholders’ equity
%
1,6
10,4
20,9
Return on assets managed
%
10,0
12,7
23,7
times
7,3
9,6
11,0
Gearing ratio
%
13,2
3,3
1,5
Current ratio
:1
2,6
2,3
2,9
Shareholders’ equity to total assets
%
54,1
55,5
56,8
1 094
1 095
1 078
R000
11 812
11 516
11 980
21 247
18 989
19 577
608
664
660
Interest cover
Productivity
Number of stores
Revenue per store
Number of employees
Revenue per employee
R000
Stock exchange performance
Closing share price
cents
4 249
3 010
6 970
‘000
265 525
281 087
293 949
Rm
9 587
11 781
22 976
%
155,7
160,6
165,1
– high
cents
5 020
7 100
10 600
– low
cents
2 216
2 101
5 920
Number of shares traded
Value of shares traded
Volume traded as % of issued shares
Market value per share
All ratios have been calculated using amounts in R000s as opposed to Rm.
#The 2007 comparatives have been restated for the change in the basis of accounting for insurance premiums and initiation fees. Prior years have not been restated
for the new basis of accounting.
*The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards (IFRS).
Prior years have not been restated to reflect the changes required to comply with IFRS.
92
JD Group_Financial Statements 2009
Financial Statements continued
31 August
2006
31 August
2005*
12 months
14 months
31 August
31 August
31 August
31 August
31 August
2004
2003
2002
2001
2000
178 000
175 500
172 000
166 830
112 730
112 609
111 651
176 271
172 221
166 930
133 196
112 070
111 484
110 322
823,5
697,6
518,5
340,5
226,5
353,2
301,8
412,0
352,0
240,0
110,0
56,0
94,0
78,0
2,0
2,0
2,0
3,1
3,8
2,6
3,9
3 160,5
2 717,0
2 297,0
2 033,0
1 715,1
1 695,9
1 531,5
11 939
9 933
9 056
5 966
4 083
3 788
3 928
2 024
1 755
1 256
747
467
657
565
2 083
1 809
1 280
762
478
665
572
1 457
1 202
784
449
241
275
335
5 626
4 768
3 951
3 392
1 933
1 910
1 710
5 197
4 360
3 671
2 663
1 922
1 810
1 575
(304)
(457)
(19)
894
1 048
802
709
7 028
6 035
5 308
4 224
3 557
3 241
2 509
10 115
8 440
7 739
7 185
4 243
4 529
3 499
17,0
17,7
13,9
12,5
11,4
17,3
14,4
12,2
12,1
8,7
7,5
5,9
7,3
8,5
25,9
25,2
19,9
13,2
12,5
14,4
19,6
28,0
27,6
21,4
16,9
12,5
15,2
21,3
29,6
30,0
24,1
18,1
13,4
20,5
22,8
21,9
12,7
8,8
4,9
2,7
6,6
6,5
(5,4)
(9,6)
(0,5)
26,3
54,2
42,0
41,5
3,4
3,6
3,1
2,6
4,0
4,1
4,8
55,6
56,5
51,1
47,2
45,6
42,2
48,9
1 028
963
952
978
695
684
671
11 614
10 315
9 513
6 100
5 875
5 538
5 855
18 361
16 459
16 167
15 738
10 064
9 984
9 704
650
603
560
379
406
379
405
6 660
7 400
4 550
3 161
1 675
4 050
4 860
271 264
167 697
137 612
73 828
56 740
53 420
69 142
20 383
10 634
5 552
1 716
1 466
2 107
3 021
152,4
95,6
80,0
44,3
50,3
47,4
61,9
9 625
7 800
4 690
3 180
4 060
4 905
5 500
5 939
4 659
2 950
1 440
1 300
2 990
3 100
JD Group_Financial Statements 2009
93
Ten year review
Continued
Rm
31 August
2009
31 August
2008
31 August
2007#
12 922
12 610
6 428
6 627
6 517
Income statements
Revenue
Cost of sales
12 914
Operating profit
Investment income (including equity accounted profits)
646
(3)
797
16
1 591
71
Profit before finance costs
Finance costs – net
643
88
813
84
1 662
151
Profit before exceptional item
Exceptional item : loss on discontinuance
555
—
729
—
1 511
—
Profit before taxation
Taxation
555
475
729
215
1 511
398
Profit after taxation
Attributable to minorities
80
5
514
—
1 113
—
Profit attributable to shareholders
75
514
1 113
1 635
1 397
1 403
756
455
256
92
—
—
76
653
347
256
93
28
(15)
35
578
347
294
111
23
3
47
7 291
7 276
7 488
1 491
4 952
8
104
736
1 448
4 503
3
187
1 135
1 348
5 041
1
123
975
Total assets
8 926
8 673
8 891
Equity and liabilities
Equity and reserves
Share capital and premium
Treasury shares
Non-distributable and other reserves
Retained earnings
Shareholders for dividend
1 779
(411)
166
3 230
67
1 779
(435)
245
3 157
67
2 118
(255)
226
2 859
100
Shareholders’ equity
Minority interest
Non-current liabilities
4 831
31
1 299
4 813
—
700
5 048
—
1 223
878
83
338
293
83
324
739
79
405
2 765
3 160
2 620
2 153
486
3
112
11
2 068
1 000
—
92
—
2 218
312
—
90
—
8 926
8 673
8 891
Balance sheets
Assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Interest in associate company
Interest in joint venture
Deferred taxation
Current assets
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
Interest bearing long term liabilities
Non-interest bearing long term liability
Deferred taxation
Current liabilities
Trade, other payables and provisions
Interest bearing liabilities
Financial liabilities
Taxation
Bank overdrafts
Total equity and liabilities
#The 2007 comparatives have been restated for the change in the basis of accounting for insurance premiums and initiation fees. Prior years have not been restated
for the new basis of accounting.
*The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards (IFRS).
Prior years have not been restated to reflect the changes required to comply with IFRS.
94
JD Group_Financial Statements 2009
Financial Statements continued
31 August
2006
31 August
2005*
31 August
2004
31 August
2003
31 August
2002
12 months
31 August
2001
14 months
31 August
2000
11 939
9 933
9 056
5 966
4 083
3 788
3 928
5 811
4 571
4 148
2 613
1 657
1 530
1 541
2 024
59
1 755
54
1 256
24
747
15
467
11
657
8
565
7
2 083
95
1 809
142
1 280
145
762
154
478
179
665
101
572
88
1 988
—
1 667
—
1 135
—
608
—
299
—
564
167
484
—
1 988
531
1 667
465
1 135
351
608
160
299
60
397
123
484
149
1 457
—
1 202
—
784
—
448
1
239
2
274
1
335
—
1 457
1 202
784
449
241
275
335
1 380
662
645
1 026
345
259
211
491
347
332
124
19
10
57
287
—
145
110
16
—
104
210
—
165
110
—
—
160
210
42
315
146
—
—
313
144
54
—
110
—
—
37
127
6
—
110
—
—
16
109
—
—
102
—
—
—
8 735
7 778
7 094
6 159
3 898
4 270
3 288
1 066
6 046
5
1
1 617
867
5 259
1
67
1 584
784
4 871
34
77
1 328
739
4 860
36
80
444
427
3 231
13
5
222
359
3 255
—
1
655
354
2 884
—
9
41
10 115
8 440
7 739
7 185
4 243
4 529
3 499
2 057
(18)
193
3 072
322
1 995
(15)
150
2 346
292
1 903
(88)
137
1 746
253
1 778
(39)
127
1 415
111
782
(22)
24
1 124
25
781
(22)
4
1 105
42
762
(22)
—
935
35
5 626
—
1 937
4 768
—
1 539
3 951
—
1 537
3 392
—
1 412
1 933
21
1 310
1 910
(1)
1 577
1 710
—
1 106
1 151
65
721
810
66
663
947
75
515
831
—
581
1 049
—
261
1 261
—
316
750
—
356
2 552
2 133
2 251
2 381
979
1 043
683
2 073
162
—
317
—
1 768
317
—
48
—
1 794
362
8
87
—
1 801
506
9
64
1
745
219
11
2
2
722
192
—
125
4
679
—
—
4
—
10 115
8 440
7 739
7 185
4 243
4 529
3 499
JD Group_Financial Statements 2009
95
Directors’ approval of the
annual financial statements
Responsibility for the annual financial statements
The directors are responsible for the preparation, integrity and
The Group consistently adopts appropriate and recognised
accounting policies.
objectivity of annual financial statements that fairly present
The annual financial statements have been prepared in
the state of affairs of the Group and the Company
accordance with the provisions of the Companies Act of
at the end of the financial year, the income and cash flow
South Africa (as amended) and comply with International
for that period and other information contained in this
Financial Reporting Standards.
annual report.
The directors are of the opinion that the business will be
To enable the directors to meet these responsibilities:
a going concern for the foreseeable future, and accordingly,
3 the board and management set standards and management
implements systems of internal control, accounting and
the annual financial statements are prepared on a going
concern basis.
information systems aimed at providing reasonable
It is the responsibility of the independent external auditors
assurance that assets are safeguarded and the risks of
to express an opinion on the annual financial statements.
error, fraud or loss are reduced in a cost effective manner.
Their report to the members of the Company is set out on
These controls, contained in established policies and
page 97.
procedures, include the proper delegation of responsibilities
and authorities within a clearly defined framework,
Approval of the annual financial statements
effective accounting procedures and adequate segregation
The directors’ report and the annual financial statements,
of duties;
which appear on pages 98 to 172, were approved by the
3 the Group’s internal audit function, which operates
board of directors on 13 November 2009 and are signed by
independently and unhindered and has unrestricted access
to the audit committee, appraises, evaluates and, when
necessary, recommends improvements in the systems of
internal control and accounting practices, based on audit
plans which take cognisance of the relative degrees of risk
of each function or aspect of the business; and
3 the audit committee, together with the internal auditors,
ID Sussman
Executive chairman
plays an integral role in assessing matters relating to
financial internal control, accounting policies, reporting and
disclosure.
To the best of our knowledge and belief, based on the above,
the directors are satisfied that no material breakdown in the
operation of the systems of internal control and procedures
has occurred during the year under review.
96
JD Group_Financial Statements 2009
G Völkel
Financial director
Financial Statements continued
Report of the independent auditors
To the members of JD Group Limited
We have audited the annual financial statements and Group
annual financial statements of JD Group Limited, which
comprise the directors’ report, audit committee report, balance
sheets at 31 August 2009, and the income statements,
consolidated statement of changes in equity and consolidated
cash flow statement for the year then ended, a summary of
significant accounting policies and other explanatory notes, set
out on pages 98 to 172.
design audit procedures that are appropriate in the
circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of
accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Directors’ responsibility for the financial statements
The Company’s directors are responsible for the preparation
and fair presentation of these financial statements in
accordance with International Financial Reporting Standards
and in the manner required by the Companies Act of South
Africa (as amended). This responsibility includes: designing,
implementing and maintaining internal control relevant to the
preparation and fair presentation of financial statements that
are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies;
and making accounting estimates that are reasonable in the
circumstances.
Opinion
In our opinion, these financial statements present fairly, in
all material respects, the Company and the Group financial
position of JD Group Limited at 31 August 2009 and of their
financial performance and cash flows for the year then ended
in accordance with International Financial Reporting Standards
and in the manner required by the Companies Act of South
Africa (as amended).
Auditors’ responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance
whether the financial statements are free from material
misstatement.
Deloitte & Touche
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to
National Executive: GG Gelink Chief Executive AE Swiegers Chief
Operating Officer GM Pinnock Audit DL Kennedy Tax & Legal and Risk
Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman
Finance TJ Brown Clients & Markets NT Mtoba Chairman of the Board
CR Qually Deputy Chairman of the Board.
Registered Auditors
Per X Botha
Partner
221 Waterkloof Road
Waterkloof
Pretoria, 0181
13 November 2009
Regional Leader: X Botha
A full list of partners and directors is available on request.
Certificate by company secretary
In terms of section 268G(d) of the Companies Act, 61 of 1973, as amended, I certify that, to the best of my knowledge and belief, the
Company has lodged with the Registrar of Companies for the financial year ended 31 August 2009 all such material returns
as are required of a public company in terms of the Companies Act and that all such returns are true, correct and up to date.
JMWR Pieterse
Company secretary
13 November 2009
JD Group_Financial Statements 2009
97
Directors‘ report
The directors have pleasure in submitting their report together
with the Company and Group annual financial statements for
the year ended 31 August 2009.
Nature of business
The Group carries on business of furniture and appliance retail
as well as the provision of financial, insurance, microlending and
debt recovery services. It is also a provider of contact centre
solutions. The Group operates through 10 brands in southern
Africa and one in Poland.
Results of operations
The results of operations are set out in the Group and
Company income statements and Group segmental analysis.
As reported on SENS on 31 March 2009, the Group settled its
outstanding contingent liabilities with SARS, disclosed as
contingent liabilities in the 2008 Annual Report, for an amount
of R325 million (refer note 5).
The Group is totally committed to the principles of transparency,
integrity and accountability as set out in King II and the
directors are fully cognisant of the need to conduct the
Group’s business in accordance with generally accepted
corporate practices, having due regard for the rights of their
employees, suppliers, lenders, customers, the environment
and society at large.
Independent auditors
The independent auditors, Deloitte & Touche, have been reappointed during the year. All non-audit services provided by
Deloitte & Touche are presented and approved by the audit
committee prior to commencement of any such work. Detail
relating to the non-audit services in the current year is
provided in note 4 on page 128.
Share capital, share premium and shares under the
control of the directors
There were no changes to capital during the review period.
Going concern
The financial statements have been prepared using appropriate
accounting policies, supported by reasonable and prudent
judgements and estimates. The directors have a reasonable
expectation, based on an appropriate assessment of a range
of factors, that the Group and the Company have adequate
resources to continue as going concerns in the foreseeable
future.
Accounting policies
The annual financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRS) and their interpretations adopted by the International
Accounting Standards Board (IASB), the Listings Requirements
of the JSE Limited and the Companies Act, 61 of 1973, as
amended. The accounting policies applied in the preparation
of these annual financial statements remain consistent with
those of the previous financial year, except for the adoption of
revised accounting standards as disclosed in the Accounting
Policies note.
Corporate governance
During the year under review, other than the recommendation
of the King Report on Corporate Governance for South Africa
(King II) that the chairman be an independent non-executive
director, the directors have complied with the principal
aspects of King II that have been applicable to the Group’s
activities during the review period. The board has appointed a
lead independent non-executive director to act in instances
where the executive chairman may have a perceived conflict
of interest or a lack of independence. This aspect is discussed
in detail in the Corporate Governance section.
98
JD Group_Financial Statements 2009
The board did not act on its mandate from shareholders
obtained at the annual general meeting in February 2009, i.e.
it did not repurchase any of its own shares during the year.
10 000 000 (2008: 25 575 000) unissued ordinary shares of
5 cents each were under the control of the Group’s directors
until the special general meeting on 12 August 2009, with
the power to allot and issue them in accordance with
the Company’s articles of association, the provisions of the
JSE Listings Requirements and the provisions of the Companies
Act. The board did not act on this mandate from shareholders
and consequently no shares were issued.
Details of the authorised and issued share capital, the share
premium and the movements during the year are provided in
note 16 of the annual financial statements.
Share incentive trusts
At a special general meeting on 12 August 2009, 11 375 783
unissued ordinary shares of 5 cents each have been placed
under the control of the Group’s directors with the power to
allot and issue them in order to phase out the existing
JD Group Employee Share Incentive Scheme.
At the same meeting, approval was obtained for the
implementation of a replacement share incentive scheme,
namely the JD Group Share Appreciation Rights Scheme (the
SAR Scheme). 2 500 000 unissued ordinary shares of 5 cents
each have been placed under the control of the Group’s
directors with the power to allot and issue them in accordance
with the terms of the SAR Scheme. More details in respect of
these two incentive schemes are provide on pages 162 to 166Ê
and in note 16 of the financial statements.
Financial Statements continued
Subsidiary companies
Details of the Company’s subsidiaries are set out on page 168.
The Company’s interest in the profits and losses after taxation
of subsidiaries are as follows:
Profits
Losses
2009
Rm
2008
Rm
337
252
580
39
Distribution to shareholders
A final dividend of 41 cents (2008: 41 cents) per share was
declared on Friday, 13 November 2009 and is payable on
Monday, 14 December 2009. No interim dividend was declared
or paid.
Directors and secretary
The names of the directors and secretary of the Company in
office at the date hereof are set out on the inside back cover
of this report.
In terms of the articles of association, Messrs KR Chauke,
IS Levy, MJ Shaw and Mrs M Lock retire at the forthcoming
annual general meeting and, being eligible, offer themselves
for re-election.
In terms of the articles of association, new appointments to
the board during the year retain office until the next annual
general meeting, when they shall retire and be eligible for reelection. There were no appointments to the board since the
last annual general meeting and, as a consequence, there is
no need for shareholders to confirm appointments at the
forthcoming annual general meeting.
Changes to the board
No appointments to or resignations from the board have
occurred since the last annual general meeting, however,
certain important portfolio changes were effected.
On 9 March 2009, Mr Vusi Khanyile was appointed lead
independent non-executive director of the board, to act in
instances where the executive chairman is deemed to be
conflicted.
Following his appointment to the board on 13 November
2008, Mr Günter Steffens, an independent non-executive
director, was appointed chairman of the Group risk
management committee with effect from 5 February 2009, in
place of Dr Len Konar who remained a member of the
committee.
On 6 May 2009, Mr Martin Shaw, an independent nonexecutive director, was appointed chairman of the Group
remuneration committee in place of Mr Ivan Levy, who
remained a member of the committee.
Directors’ interests
The aggregate beneficial interest of directors in the issued
share capital and options of the Company is as follows:
Number of shares and options
2009
2008
Direct
Indirect
3 359 903
275 856
2 859 903
254 856
Total
3 635 759
3 114 759
There are no non-beneficial interests.
No director has directly or indirectly more than 1% interest in
the share capital of the Company. No change in the directors’
interests occurred between the end of the financial year and
the date of this report.
A detailed breakdown of each individual director’s direct and
indirect holding in the Company is provided in the directors’
remuneration report on pages 102 to 109.
Significant shareholders
Details of significant shareholders are reported on page 173.
Special resolutions passed by JD Group and its
major subsidiaries
During the period under review, the authority for JD Group to
purchase its own shares, subject to the relevant provisions of
the Companies Act, 61 of 1973, as amended, and the Listings
Requirements of the JSE Limited, was renewed for a maximum
period of a further 15 months by a special resolution approved
by shareholders of the Company on 5 February 2009. To date,
the Group has not acted on this mandate.
In addition, special resolutions were passed by Arengo 231
Limited and Abrina 6197 Limited, aligning the two companies’
articles of association with the provisions of the Long-term
and Short-term Insurance Acts respectively, to enable them to
conduct insurance business. These two companies also
underwent name changes and are now known as JDG Micro
Life Limited and JDG Micro Insurance Limited respectively and
are utilised as the vehicles through which JD Group provides
insurance to its clients.
Subsequent events
The Group raised an additional R200 million term debt
subsequent to the year end date.
No other material events occurred between the financial year
end and the date of this report.
JD Group_Financial Statements 2009
99
Audit committee report
Introduction
The audit committee comprises the following three
independent non-executive directors:
3 ME King (Chairman);
3 Dr D Konar; and
3 MJ Shaw.
3 monitored compliance with accounting standards and legal
requirements;
3 ensured that all regulatory compliance matters have been
considered in the preparation of the financial statements;
3 ensured that the sustainability issues in the integrated
report are reliable and do not conflict with the financial
information;
In addition to the committee members above, all directors of
3 satisfied itself through enquiry that Deloitte & Touche and
the Group have an open invitation (and in most instances do)
X Botha, the designated auditor, are independent as
attend meetings of the committee.
defined in terms of prescribed legislation;
3 satisfied itself through enquiry that X Botha need not retire
Background
in terms of the legislative auditors’ rotation requirements
The committee is pleased to present its report for the financial
and that he is qualified to serve as the designated auditor;
year ended 31 August 2009 as recommended by the King II
3 nominated the reappointment of Deloitte & Touche and
report on Corporate Governance and in line with the
X Botha as the registered independent auditors;
Companies Act, 61 of 1973, as amended (the Act). The
3 ensured that the appointment of Deloitte & Touche complied
committee’s mandate is guided by a formal detailed terms
with the provisions of all other legislation relating to the
of reference that is in line with the Act and is approved by
appointment of auditors;
the board.
Duties carried out
3 set the terms of Deloitte & Touche’s engagement;
3 determined the fees to be paid to Deloitte & Touche and
ensured that the fees are fair and equitable;
During the financial year ended 31 August 2009 the audit
3 maintained a non-audit services policy which determines
committee carried out its duties as set out in the King II
the nature and extent of any non-audit services that
Report, the Act, the committee’s terms of reference and in
Deloitte & Touche may provide to the Group;
accordance with its annual plan. As an overview only, and not
to be seen as an exhaustive list, the committee:
3 reviewed the principles, policies and practices adopted in
preparation of the financial statements of companies in the
JD Group to ensure that the annual financial statements of
the Group comply with all statutory requirements;
3 reviewed and commented on the Group annual financial
statements and the accounting practices;
3 reviewed interim reports, result announcements and other
releases of price sensitive information;
3 reviewed the quality and effectiveness of the external audit
process;
3 reviewed the external auditor’s management letters and
management’s responses;
3 preapproved a number of proposed contracts with
Deloitte & Touche for the provision of non-audit services
to the Group;
3 is satisfied that the independence of the independent
auditors was not compromised by the scale of non-audit
related work and fees paid to them;
3 ensured that the monetary scope of the non- audit services
carried out by Deloitte & Touche has been disclosed in the
annual financial statements of the Group;
3 ascertained whether Deloitte & Touche has reported any
reportable irregularities to IRBA;
3 considered and satisfied itself of the appropriateness of the
expertise and experience of the Group financial director;
3 reviewed the management of risk and the monitoring
3 reviewed significant judgements and/or unadjusted
of compliance and legal governance effectiveness
differences resulting from the audit, as well as any reporting
within the Group and ensured that the Group’s existing
decisions made;
combined assurance model addressed the significant risks
facing the Group;
100
JD Group_Financial Statements 2009
Financial Statements continued
3 ensured that close cooperation exists between Internal
Audit, Risk Management and the Legal/Compliance
functions;
3 formed an integral component of the risk management
Annual financial statements
The audit committee has evaluated the consolidated annual
financial statements for the year ended 31 August 2009 and
concluded that it complies, in all material aspects, with the
process and, amongst others, monitored:
requirements of the Act and International Financial Reporting
– financial reporting risks;
Standards. The committee has therefore recommended the
– internal financial controls;
annual financial statements for approval to the board.
– fraud risks as they relate to financial reporting; and
– IT risks as they relate to financial reporting;
3 played an oversight role in respect of the Internal Audit
function to ensure its effectiveness;
3 reviewed developments in corporate governance and best
Conclusion
Given the above, the committee is of the opinion that it has
appropriately addressed its key responsibilities in respect of:
3 internal control;
practice and considered their impact and implications on
3 financial accounting control; and
the Group and in particular ensured that the principles of
3 stakeholder reporting.
the King II Report are embedded within the Group;
3 monitored the application and effectiveness of the Code of
Conduct (ethics) within the Group;
3 secured feedback from the audit/risk committees of
ME King_Chairman
subsidiaries in the Group in fulfilling its oversight role in this
respect;
3 reviewed and aligned the committee’s terms of reference
On behalf of the audit committee
13 November 2009
with the latest applicable legislation and governance
codes; and
3 reviewed the text of various reports, including the corporate
governance statement and the sustainability report, for
inclusion in this annual report.
JD Group_Financial Statements 2009
101
Directors’ remuneration
This report on remuneration and related matters covers
issues which are the concern of the board as a whole in
addition to those which are dealt with by the remuneration
committee.
Remuneration policy
The remuneration committee has a clearly defined mandate
from the board aimed at:
3 ensuring that the Group’s chairman, directors and senior
executives are fairly rewarded for their individual
contribution to the Group’s overall performance; and
3 ensuring that the Group’s remuneration strategies and
packages, including the remuneration schemes, are related
to performance, are suitably competitive and give due
regard to the interests of the shareholders and the financial
and commercial health of the Group.
New incentive scheme
A new generation incentive scheme, namely the JD Group
Share Appreciation Rights Scheme (the SAR Scheme), was
incorporated on 12 August 2009. The SAR Scheme benefits
are subject to the achievement of performance conditions
that are linked to the Group’s overall strategic goals. The
remuneration committee was appointed manager of the SAR
Scheme with a mandate to administer the SAR Scheme in
terms of the provisions of the scheme rules. A comprehensive
Basic salary
R
2009
Executive directors
ID Sussman
AG Kirk
KR Chauke
Dr HP Greeff
ID Thompson
G Völkel
Fees
for services
R
Allowances*
R
Retirement
contributions
R
2 888 356
2 449 930
943 945
1 082 555
1 211 104
1 538 303
294 180
296 067
195 540
195 540
188 040
195 540
593 892
393 300
150 300
172 710
193 500
194 374
10 114 193
1 364 907
1 698 076
2 777 181
1 903 497
1 683 602
771 308
971 293
1 004 207
1 414 499
306 330
146 573
206 555
199 290
192 165
142 605
192 165
601 460
335 873
282 277
130 121
164 439
187 574
194 363
10 525 587
1 385 683
1 896 107
Non-executive directors
VP Khanyile
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
GZ Steffens
120 000
280 000
260 000
280 000
240 000
280 000
300 000
1 760 000
2008
Executive directors
ID Sussman
AG Kirk
HC Strauss (9 months)
KR Chauke
Dr HP Greeff
JHC Kok (9 months)
G Völkel
Non-executive directors
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
225 000
225 000
225 000
80 000
160 000
915 000
* Travel and subsistence allowances.
# Variable remuneration is calculated using the headline earnings per share multiplied by the number of units allocated to each individual as determined by the
remuneration committee.
Variable remuneration relating to each financial year is payable as follows:
– 60% of estimated headline earnings per share for the first half year during December.
– The remainder of the headline earnings per share for the first half year during May.
– Headline earnings per share for the second half year during November.
Variable remuneration for a financial year will include earnings for the second half of the previous financial year and the first half of the current financial year.
102
JD Group_Financial Statements 2009
Financial Statements continued
review of the SAR Scheme can be found on pages 165 and
166 of this annual report. The Group’s existing incentive
scheme, the JD Group Employee Share Incentive Scheme, is
being phased out and no further allocations will be made in
terms of this scheme.
Directors’ service contracts
All executive directors’ normal service contracts are subject
to 12 calendar months’ notice. Non-executive directors are
not bound by service contracts. No director has an employment
contract with the Group exceeding three years.
Variable remuneration#
Current
Prior
R
R
Medical
contributions
R
Cash package
R
Subtotal
R
Share
scheme gains
R
Total
R
20 452
73 800
26 650
23 462
24 584
12 716
3 796 880
3 213 097
1 316 435
1 474 267
1 617 228
1 940 933
—
—
—
—
—
—
480 360
320 240
96 072
96 072
80 060
200 150
4 277 240
3 533 337
1 412 507
1 570 339
1 697 288
2 141 083
—
—
—
—
—
670 250
4 277 240
3 533 337
1 412 507
1 570 339
1 697 288
2 811 333
181 664
13 358 840
—
1 272 954
14 631 794
670 250
15 302 044
120 000
280 000
260 000
280 000
240 000
280 000
300 000
120 000
280 000
260 000
280 000
240 000
280 000
300 000
—
1 506 000
—
—
—
—
—
120 000
1 786 000
260 000
280 000
240 000
280 000
300 000
1 760 000
1 760 000
1 506 000
3 266 000
18 470
54 597
13 733
23 906
20 214
13 631
11 554
3 703 441
2 440 540
2 186 167
1 124 625
1 348 111
1 348 017
1 812 581
1 330 040
883 760
883 760
265 128
265 128
463 974
552 350
—
—
452 400
113 100
113 100
237 510
237 510
5 033 481
3 324 300
3 522 327
1 502 853
1 726 339
2 049 501
2 602 441
—
—
—
—
—
—
—
5 033 481
3 324 300
3 522 327
1 502 853
1 726 339
2 049 501
2 602 441
156 105
13 963 482
4 644 140
1 153 620
19 761 242
—
19 761 242
225 000
225 000
225 000
80 000
160 000
225 000
225 000
225 000
80 000
160 000
—
—
—
—
—
225 000
225 000
225 000
80 000
160 000
915 000
915 000
—
915 000
JD Group_Financial Statements 2009
103
Directors’ remuneration
Continued
Directors’ share options
The following share options and rights in shares in the Company were outstanding in favour of directors of the Company under the
Company’s share option scheme at the year end and 13 November 2009, the date on which the financial results were approved:
2009
Executive directors
ID Sussman
Offer date
Options and
SARs held
at year end
25/05/2000
20/02/2003
19/05/2004
24/05/2005
26/02/2008
250 000
375 000
500 000
60 000
200 000
Exercise
price
R
29,84
16,19
35,10
56,25
37,21
1 385 000
AG Kirk
30/11/2005
07/02/2007
31/07/2007
26/02/2008
21/08/2009
194 903
30 000
75 000
100 000
200 000
72,50
79,83
63,63
37,21
41,71**
599 903
KR Chauke
07/02/2007
31/07/2007
26/02/2008
21/08/2009
20 000
30 000
50 000
65 000
79,83
63,63
37,21
41,71**
165 000
Dr HP Greeff
25/07/2003
10/09/2003
19/05/2004
07/06/2005
31/07/2007
26/02/2008
21/08/2009
ID Thompson
25/07/2003
10/09/2003
19/05/2004
07/06/2005
07/02/2007
31/07/2007
26/02/2008
21/08/2009
15 000
10 000
25 000
20 000
50 000
50 000
65 000
23,42
28,03
35,10
54,00
63,63
37,21
41,71**
235 000
15 000
10 000
20 000
20 000
25 000
30 000
50 000
65 000
23,42
28,03
35,10
54,00
79,83
63,63
27,21
41,71**
235 000
G Völkel
20/02/2003
19/05/2004
24/05/2005
31/07/2007
26/02/2008
21/08/2009
80 000
150 000
35 000
75 000
50 000
100 000
490 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
**Share appreciation rights; vesting subject to performance criteria.
104
JD Group_Financial Statements 2009
16,19
35,10
56,25
63,63
37,21
41,71**
Financial Statements continued
Options
exercised
during year
Date
exercised
Exercise
price
R
Exercise
cost
R
Sale/market
price
R
Sale/market
value
R
Gain
R
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1 075 000
670 250
1 075 000
670 250
25 000
25 000
22/07/2009
16,19
404 750
404 750
43,00
JD Group_Financial Statements 2009
105
Directors’ remuneration
Continued
Directors’ share options (continued)
Offer date
Options held
at year end
IS Levy
02/05/2001
24/05/2005
100 000
20 000
M Lock
02/05/2001
24/05/2005
Exercise
price
R
2009
Non-executive directors
ME King
—
27,20
56,25
120 000
100 000
20 000
27,20
56,25
120 000
MJ Shaw
—
2008
Executive directors
ID Sussman
25/05/2000
20/02/2003
19/05/2004
24/05/2005
26/02/2008
250 000
375 000
500 000
60 000
200 000
29,84
16,19
35,10
56,25
37,21
1 385 000
AG Kirk
30/11/2005
07/02/2007
31/07/2007
26/02/2008
KR Chauke
07/02/2007
31/07/2007
26/02/2008
Dr HP Greeff
25/07/2003
10/09/2003
19/05/2004
07/06/2005
31/07/2007
26/02/2008
JHC Kok
20/02/2003
19/05/2004
24/05/2005
26/02/2008
HC Strauss
20/02/2003
19/05/2004
24/05/2005
G Völkel
20/02/2003
19/05/2004
24/05/2005
31/07/2007
26/02/2008
194 903
30 000
75 000
100 000
72,50
79,83
63,63
37,21
399 903
20 000
30 000
50 000
79,83
63,63
37,21
100 000
15 000
10 000
25 000
20 000
50 000
50 000
23,42
28,03
35,10
54,00
63,63
37,21
170 000
89 500
150 000
35 000
50 000
16,19
35,10
56,25
37,21
324 500
150 000
300 000
50 000
16,19
35,10
56,25
500 000
105 000
150 000
35 000
75 000
50 000
415 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
†These options were cancelled at the request of the director concerned.
106
JD Group_Financial Statements 2009
16,19
35,10
56,25
63,63
37,21
Financial Statements continued
Options
exercised
during year
Date
exercised
Exercise
price
R
Exercise
cost
R
Sale/market
price
R
Sale/market
value
R
Gain
R
100 000
25/08/2009
20 000† Options cancelled
27,20
56,25
2 720 000
42,26
4 226 000
1 506 000
120 000
2 720 000
4 226 000
1 506 000
—
—
—
—
—
—
—
20 000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
20 000† Options cancelled
56,25
JD Group_Financial Statements 2009
107
Directors’ remuneration
Continued
Directors’ share options (continued)
2008
Non-executive directors
ME King
Offer date
Options held
at year end
Exercise
price
R
02/05/2001
24/05/2005
100 000
20 000
27,20
56,25
120 000
Dr D Konar
—
IS Levy
02/05/2001
24/05/2005
100 000
20 000
27,20
56,25
120 000
M Lock
02/05/2001
24/05/2005
100 000
20 000
27,20
56,25
120 000
MJ Shaw
24/05/2005
20 000
56,25
20 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
†These options were cancelled at the request of the director concerned.
Directors’ (and their associates) direct and indirect interest in shares of the Company
at the year end and 13 November 2009, the date on which the financial results were approved.
2009
ID Sussman
ME King
Dr D Konar
IS Levy
There are no non-beneficial interests.
108
JD Group_Financial Statements 2009
250
23
10
2
2008
000
428
000
428
250 000
2 428
10 000
2 428
285 856
264 856
Financial Statements continued
Options
exercised
during year
Date
exercised
Exercise
price
R
20 000† Options cancelled
56,25
Exercise
cost
R
Sale/market
price
R
Sale/market
value
R
Gain
R
20 000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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JD Group_Financial Statements 2009
109
Definitions
Revenue
Dividend cover
Revenue comprises net invoiced value of merchandise sold
Earnings per share divided by cash equivalent dividends per
excluding value added tax, net finance charges earned and
share.
income generated from financial and other services.
Return on closing shareholders’ equity
Cost of sales
Cost of sales comprises costs of purchase and other costs
Profit attributable to shareholders divided by shareholders’
equity at year end.
incurred in bringing inventories to their present location and
condition, net of volume and settlement discounts.
Return on average shareholders’ equity
Profit attributable to shareholders divided by average
Operating margin
shareholders’ equity.
Operating profit divided by revenue.
Return on assets managed
Interest cover
Operating profit and investment income divided by average
Operating profit and investment income divided by net
total assets (excluding deferred taxation) less average non-
finance costs.
interest bearing debt.
Earnings per share
Net asset value per share
Profit attributable to shareholders divided by the weighted
Shareholders’ equity divided by the total number of shares in
average number of shares in issue, excluding treasury
issue, including treasury shares.
shares.
Gearing ratio
Headline earnings per share
The Group adopted Circular 3/2009, issued by the South
Interest bearing debt less cash resources divided by
shareholders’ equity.
African Institute of Chartered Accountants, during the current
year, which replaces Circular 8/2007. It provides guidance on
the calculation of headline earnings, ensuring that headline
earnings reflect the operating earnings of the business by
generally excluding items of remeasurement.
Diluted earnings and headline earnings per share
As for earnings and headline earnings per share after
including the dilutive impact of share options in respect of
unissued shares granted to employees in the weighted
average number of shares in issue.
110
JD Group_Financial Statements 2009
Current ratio
Current assets divided by current liabilities.
Financial Statements continued
Accounting policies
JD Group Limited is a South African registered company. The
as appropriate. South African rand is the currency in which the
consolidated annual financial statements of JD Group Limited
majority of the Group’s transactions are denominated. Unless
for the year ended 31 August 2009 comprise JD Group Limited
otherwise stated, all amounts in the annual financial statements
and its subsidiaries (together referred to as the JD Group) and
are shown rounded off to the nearest R million.
the Group’s interest in associate companies and joint
ventures.
Consistent with prior financial reporting periods, the trading
cycle ends on the 15th of each following month. These
financial statements are therefore for the year ended
Statement of compliance
The consolidated and Company financial statements have
been prepared in accordance with International Financial
Reporting Standards (IFRS), the interpretations of the
International Financial Reporting Interpretations Committee
(IFRIC) of the International Accounting Standards Board
(IASB) and the requirements of the Companies Act of South
Africa (as amended).
Adoption of new or revised IFRS
The Group has adopted all applicable IFRS statements and
interpretations issued or revised and effective up to the
annual reporting date of 31 August 2009.
15 September 2009.
The preparation of financial statements in conformity with
IFRS requires management to make judgements, estimates
and assumptions that may affect the application of policies
and reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are
based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not
readily apparent from other sources.
The estimates and underlying assumptions are reviewed on
an ongoing basis. Revisions to accounting estimates are
The accounting policies applied in the preparation of the
recognised in the period in which the estimate is revised if the
annual financial statements are consistent with those applied
revision only affects that period, or in the period of the
in the previous financial year ended 31 August 2008, except
revision and future periods if the revision affects both current
for the adoption of the following revised accounting standards
and future periods.
and interpretations:
3 IFRIC 12 – Service Concession Arrangements.
The accounting policies have been applied consistently by all
Group entities.
3 IFRIC 13 – Customer Loyalty Programmes.
3 IFRIC 14 – IAS 19 – The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction.
Basis of consolidation
Subsidiaries
3 Circular 3/2009 on Headline Earnings.
Subsidiaries are entities controlled by the company (including
The adoption of these revised accounting standards and
interpretations had no significant effect on the financial
results of the Group for the year ended 31 August 2009 or the
financial position of the Group as at that date.
Basis of preparation
special purpose entities). Control exists when the Company
has the power to, directly or indirectly, govern the financial
and operating policies of an entity so as to obtain benefits
from its activities.
On acquisition, the assets and liabilities and contingent
liabilities of the subsidiary are measured at fair value at the
The annual financial statements are presented in South African
rand on the historical cost basis, except for financial assets
and liabilities which are stated at fair value or amortised cost
acquisition date. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired is
recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets
JD Group_Financial Statements 2009
111
Accounting policies
Continued
acquired (i.e. discount on acquisition) is credited to profit and
loss in the period of acquisition. The interest of minority
shareholders is stated at the minority’s proportion of the fair
values of assets and liabilities recognised. Subsequently, any
losses applicable to the minority interest in excess of the
minority interest are allocated against the interests of the
parent, unless the minority has a binding obligation to fund
the losses and is able to make an additional investment to
cover their losses.
Joint venture companies
A joint venture is defined as a contractual arrangement
whereby two or more entities undertake an economic activity,
which is subject to joint control. Joint control implies that
neither of the contracting parties is in a position to unilaterally
control the assets of the venture. Joint venture companies are
accounted for using the equity method of accounting based
on their most recent financial statements as described in the
policy above relating to interest in associate companies.
The results of subsidiaries are included from the effective
dates of acquisition and up to the effective dates of disposal.
All material intergroup transactions and balances between
Intangible assets and goodwill
Goodwill
Group companies are eliminated on consolidation.
All business combinations are accounted for by applying the
Associate companies
An associate is an enterprise over which the Group is in a
position to exercise significant influence, through participation
in the financial and operating policy decisions of the investee,
but which it does not control.
purchase method. In respect of business acquisitions that
have occurred since 31 March 2004, goodwill arising on
consolidation represents the excess of the cost of acquisition
over the Group’s interest in the fair value of the net identifiable
assets and liabilities of a subsidiary, associate or jointly
controlled entity at the date of acquisition.
The results of associates are incorporated in these financial
statements using the equity method of accounting based on
their most recent financial statements. If the most recent
available financial statements are for an accounting period
which ended more than six months prior to the Group’s year
end, the most recent available management accounting
results have been brought into account. The carrying value of
such interests is reduced to recognise any decline, other than
a temporary decline, in the value of individual investments.
Where a Group enterprise transacts with an associate of the
Group, unrealised profits and losses are eliminated to the
extent of the Group’s interest in the relevant associate
Goodwill is stated at cost less any accumulated impairment
losses. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash generating units
expected to benefit from the synergies of the combination.
Cash generating units to which goodwill has been allocated
are tested for impairment annually or sooner if an impairment
indicator exists. An impairment loss recognised for goodwill is
not reversed in a subsequent period.
On disposal of a subsidiary, associate or joint venture
company, the attributable amount of goodwill is included in
the determination of profit or loss on disposal.
company, except where unrealised losses provide evidence of
Where the Group’s interest in the fair value of the net assets
an impairment of the asset transferred.
and liabilities acquired exceeds the cost of acquisition, the
Any difference between the cost of acquisition and the
Group’s share of the net identifiable assets, liabilities and
amount is directly recognised in profit or loss.
Research and development
contingent liabilities, fairly valued, is recognised and treated
according to the Group’s accounting policy for goodwill and
Research costs are recognised as an expense in the period in
included in the carrying value of the investment.
which they are incurred.
112
JD Group_Financial Statements 2009
Financial Statements continued
Expenditure on development activities is charged to income
in the year in which it is incurred, except where a clearly
defined project is undertaken and it is reasonably anticipated
Property, plant and equipment
Owned assets
that development costs will be recovered through future
Property, plant and equipment is stated at historical cost to the
commercial activity. Such development costs are capitalised
Group, less accumulated depreciation and impairment losses.
as an intangible asset and amortised on a straight line basis
The gross carrying amount of property, plant and equipment
over the life of the project from the date of commencement
is initially measured using the historical cost basis of
of commercial operation.
accounting. Subsequent expenditure relating to an item of
property, plant and equipment is capitalised to the carrying
Other intangible assets
value of the asset when it is probable that future economic
Other intangible assets that are acquired by the Group are
benefits, in excess of the originally assessed standard of
stated at cost less accumulated amortisation and impairment
performance of the item concerned, will flow to the Group. All
losses. If an intangible asset is acquired in a business
other subsequent expenditures are recognised as expenses
combination, the cost of that intangible asset is measured at
in the period in which they are incurred.
its fair value at the acquisition date.
Depreciation is provided on the straight line basis at rates that
Expenditure on internally generated goodwill and brands is
will reduce the book values to estimated residual values over
recognised in the income statement as an expense when
the expected useful lives of the assets. The method and rates
incurred.
used are determined by conditions in the industry. The
estimated useful lives and residual values are reviewed
Subsequent expenditure
annually. Depreciation rates vary between 3% and 25% per
Subsequent expenditure on capitalised intangible assets is
annum as disclosed in note 8. Land is not depreciated. Lease
capitalised only when it increases the future economic
improvements on capitalised leased premises are written off
benefits embodied in the specific asset to which it relates. All
over their expected useful lives on the same basis as owned
other expenditure is expensed as incurred.
assets or, where shorter, over the term of the lease.
The recorded value of depreciated assets is periodically
Amortisation
compared to the anticipated recoverable amount if assets
Amortisation of intangible assets is recognised in the income
were to be sold. Where an asset’s recorded value has declined
statement on a straight line basis over the assets’ estimated
below the recoverable amount and the decline is expected to
useful lives unless such lives are indefinite. Goodwill, intangible
be of a permanent nature, the asset is written down to its
assets with an indefinite useful life and intangible assets not
recoverable amount and the decline is recognised as an
yet available for use are not amortised but are tested for
expense.
impairment annually and whenever there is an indication that
the asset may be impaired. Other intangible assets are
amortised from the date they are available for use.
The amortisation methods, estimated useful lives and residual
Surplus or loss arising on disposal of assets is determined as
the difference between the sale proceeds and carrying value
of the asset and is recognised in net profit or loss for the
period.
values are reassessed annually.
Leased assets
Lease agreements which transfer substantially all the risks
and rewards associated with ownership of an asset to the
JD Group_Financial Statements 2009
113
Accounting policies
Continued
lessee are regarded as finance leases. Assets subject to
amount of the asset or cash generating unit is reduced to its
finance lease agreements are capitalised at the lower of the
recoverable amount. Impairment losses are recognised as an
present value of the minimum lease payments and their cash
expense immediately.
cost equivalent and the corresponding liability to the lessor is
raised.
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash generating unit, except for
Lease payments are allocated using the effective interest rate
goodwill, is increased to the revised estimate of its recoverable
method to determine the lease finance cost, which is charged
amount, but so that the increased carrying amount does not
against operating profit and the capital repayment, which in
exceed the carrying amount that would have been determined
turn reduces the liability to the lessor. These assets are
had no impairment loss been recognised for the asset or cash
depreciated on the same basis as the property, plant and
generating unit in prior years. A reversal of an impairment loss
equipment owned by the Group over the period of the lease.
is recognised in the income statement immediately.
Other leases, which merely confer the right to the use of an
asset, are treated as operating leases, with lease payments
Operating leases
charged against operating profit on a straight line basis over
Payments and receipts under operating leases are recognised
the period of the lease.
in the income statement on a straight line basis over the term
of the lease. Lease incentives received or granted are
Subsequent costs
recognised in the income statement as an integral part of the
The Group recognises in the carrying value of an item of
total lease expense or revenue.
property, plant and equipment the cost of replacing part of
such an item when the cost is incurred, if it is probable that
Inventories
additional future economic benefits embodied within the item
Inventories comprise merchandise for resale and are stated
will flow to the Group and the cost of such item can be
at the lower of cost and net realisable value. Cost is
measured reliably. Costs of the day to day servicing of
determined on the weighted average cost basis. Net realisable
property, plant and equipment are recognised in the income
value is the estimated selling price in the ordinary course of
statement as an expense when incurred.
business, less the estimated costs of selling and distribution
expenses.
Impairment of tangible and intangible assets
(excluding goodwill)
Where necessary, the carrying value of inventory is adjusted
for obsolete, slow moving and defective inventories.
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
Share capital
whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable
Treasury shares
amount of the asset is estimated in order to determine the
Shares purchased by wholly owned Group companies in their
extent of the impairment loss, if any. Where it is not possible to
holding company and by the employee share trust are
estimate the recoverable amount of an individual asset, the
classified as treasury shares, held at cost. For presentation
Group estimates the recoverable amount of the cash
purposes, treasury shares are netted off against the Group’s
generating unit to which the asset belongs.
share capital in the consolidated balance sheet and the
If the recoverable amount of an asset or cash generating unit
is estimated to be less than its carrying amount, the carrying
114
JD Group_Financial Statements 2009
premium attached to them is netted off against the share
premium account.
Financial Statements continued
Dividends received on treasury shares are eliminated on
Current tax is the expected tax payable on the taxable income
consolidation. Treasury shares are taken into account in the
for the year, using tax rates enacted or substantially enacted
calculation of earnings per share.
at the balance sheet date and any adjustment to tax payable
in respect of previous years.
Dividends
Dividends declared to equity holders are included in the
Deferred taxation
statement of changes in equity in the year in which they are
Deferred tax is accounted for using the balance sheet liability
declared. Taxation costs incurred on dividends are dealt with
method in respect of temporary differences. Temporary
in the income statement in the year in which they are paid.
differences arise from differences between the carrying
amount of assets and liabilities in the financial statements
Repurchase of issued shares
and the corresponding tax base. In general, deferred tax
When issued shares are repurchased, the consideration paid
liabilities are recognised for all taxable temporary differences
is accounted for as a setoff against equity and reserves in the
and deferred tax assets are recognised to the extent that is it
Group’s consolidated balance sheet.
probable that taxable profit will be available against which
deductible temporary differences can be utilised. Such assets
Share-based payment transactions
Equity settled
and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition of other
assets and liabilities (other than a business combination)
The fair value of share options and share appreciation rights
which affects neither taxable profit nor the accounting profit.
granted to employees is recognised in profit and loss with a
Deferred tax assets are reduced to the extent that it is no
corresponding increase in equity. The fair value is measured
longer probable that the related tax benefits will be realised.
at grant date and expensed over the period during which
employees are required to provide services in order to
become unconditionally entitled to equity instruments. The
fair value of the instruments granted is measured using the
“binomial” option pricing model, taking into account the
terms and conditions upon which the instruments are granted.
The amount recognised as an expense is adjusted to reflect
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and
associates and interests in joint ventures, except where the
Group is able to control the reversal of temporary differences
and it is probable that the temporary difference will not
reverse in the foreseeable future.
the actual number of share options or share appreciation
Deferred tax is calculated at the tax rates that are expected to
rights that vest, except where forfeiture is only due to share
apply in the period when the asset is realised or the liability is
prices not achieving the threshold for vesting.
settled. Deferred tax is charged or credited in the income
statement, except when it relates to items credited or
Taxation
charged directly to equity, in which case the deferred taxation
is also dealt with in equity.
Current taxation
Income tax on the profit or loss for the year comprises current
Secondary taxation on companies
and deferred tax. Taxable profit differs from profit as reported
Secondary taxation on companies (STC) arising from the
in the income statement because it excludes items of income
distribution of dividends is recognised in the income statement
or expense that are taxable or deductible in other years and
in the year that dividends are paid in accordance with the
it further excludes items that are never taxable or
Group dividend cycle.
deductible.
JD Group_Financial Statements 2009
115
Accounting policies
Continued
Foreign currency
The individual financial statements of each Group entity are
presented in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity
translation reserve. Such exchange differences are recognised
in profit or loss in the period in which the foreign operation is
disposed of. Goodwill and fair value adjustments arising on
the acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at the
closing rate.
are expressed in currency units (CUs), which is the functional
currency of the Company, and the presentation currency for
Revenue recognition
the consolidated financial statements.
Instalment sales
In preparing the financial statements of the individual entities,
Consideration from transactions under instalment sales are
transactions in currencies other than the entity’s functional
included in revenue when goods are delivered and title has
currency (foreign currencies) are recorded at the rates of
passed. Finance charges, calculated on the effective interest
exchange prevailing on the dates of the transactions. At each
rate method, are accounted for over the period of the
balance sheet date, monetary items denominated in foreign
agreements as instalments become due. This method
currencies are retranslated at the rates prevailing at the
approximates the net present value of anticipated future cash
balance sheet date. Non-monetary items carried at fair value
flows.
that are denominated in foreign currencies are retranslated at
the rates prevailing at the date when the fair value was
Sale of goods
determined. Non-monetary items that are measured in terms
Revenue from the sale of goods is recognised when
of historical cost in a foreign currency are not retranslated.
substantially all the risks and rewards of ownership have been
Exchange differences are recognised in profit or loss in the
transferred to the buyer and the enterprise does not retain
period in which they arise, except for:
continuing managerial control of the goods to a degree
3 exchange differences which relate to assets under
usually associated with ownership, when the amount of
construction for future productive use, which are included
revenue and costs incurred or to be incurred in respect of the
in the cost of those assets where they are regarded as an
sale transactions can be measured reliably and when the
adjustment to interest costs on foreign currency
collectability of the consideration in respect of the sale is
borrowings;
reasonably assured.
3 exchange differences on transactions entered into in order
Financial services
to hedge certain foreign currency risks; and
3 exchange differences on monetary items receivable from or
payable to a foreign operation, and which are recognised in
the foreign currency translation reserve and recognised in
Initiation fees and insurance income is deferred and
recognised over the term of the contract.
Interest
profit or loss on disposal of the net investment.
Interest revenue is recognised on a time basis by reference to
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are expressed in CUs using exchange rates
prevailing at the balance sheet date. Income and expense
the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset’s net carrying value.
items are translated at the average exchange rates for the
period, unless exchange rates fluctuated significantly during
that period, in which case the exchange rates at the dates of
the transactions are used. Exchange differences arising, if any,
are classified as equity and transferred to the Group’s
116
JD Group_Financial Statements 2009
Dividend income
Dividend income from investments is recognised when the
shareholders’ rights to receive payment have been
established.
Financial Statements continued
Insurance contracts
Classification of insurance contracts
Contracts under which the Group accepts significant
insurance risk from another party (the policyholder) by
agreeing to compensate the policyholder or other beneficiary
if a specified uncertain future event (the insured event)
adversely affects the policyholder or other beneficiary are
classified as insurance contracts. Insurance risk is risk other
than financial risk. Financial risk is the risk of a possible future
premiums written in the prior accounting period and an
estimate for “pipeline” premiums.
An estimate is made at the balance sheet date to recognise
retrospective adjustments to premiums or commissions. The
earned portion of premiums received is recognised as
revenue. Premiums are earned from the date of attachment
of risk, over the indemnity period, based on the pattern of
risks underwritten.
Unearned premium provision
change in one or more of a specified interest rate, security
price, commodity price, foreign exchange rate, index of prices
or rates, a credit rating or credit index or other variable,
provided in the case of a non-financial variable it is not
specific to a party to the contract. Insurance contracts may
also transfer some financial risk.
Principles of valuation and profit recognition – long term
insurance contracts
The provision for unearned premiums comprises the
proportion of gross premiums written which is estimated to
be earned in the following or subsequent financial years,
computed separately for each insurance contract using the
daily pro rata method.
Claims
Claims incurred in respect of general business consist of
Assets and liabilities in respect of insurance contracts are
claims and claims handling expenses paid during the financial
valued according to the requirements of the professional
year together with the movement in the provision for
guidance notes (PGNs) issued by the Actuarial Society of
outstanding claims.
South Africa (ASSA). Of particular relevance to the insurance
asset and liability calculation is PGN 104: Life Offices –
Valuation of long term insurers.
Outstanding claims comprise provisions for the Group’s
estimate of the ultimate cost of settling all claims incurred but
unpaid at the balance sheet date whether reported or not
The insurance contracts are valued in terms of the financial
and related internal and external claims handling expenses
soundness valuation (FSV) basis contained in PGN 104 issued
and an appropriate margin.
by the ASSA. An asset or liability for contractual benefits that
are expected to be realised or incurred in the future is
Deferred acquisition costs
recorded in respect of the existing policy book when the
Acquisition costs comprise all direct and indirect costs arising
premiums are recognised. The liability consists of both
from the conclusion of insurance contracts. Deferred
an incurred but not reported (IBNR) and an unearned premium
acquisition costs represent the proportion of acquisition costs
(UPR) component.
incurred which correspond to the unearned premium
Compulsory margins to adverse deviations are included in the
provision.
assumptions as required in terms of PGN 104.
Contingency reserve
Premiums
In terms of the Short-term Insurance Act in South Africa, a
Written premiums comprise the premiums on contracts
contingency reserve of 10% of premiums written less
entered into during the year, irrespective of whether they
approved reinsurance (as defined in the Short-term Insurance
relate in whole or in part to a later accounting period.
Act, 1998) is required. This reserve can only be utilised with
Premiums are disclosed gross of commission payable to
prior permission of the Registrar of Insurance. Transfers to and
intermediaries and exclude taxes and levies based on
from this reserve are treated as appropriations of retained
premiums. Premiums written include adjustments to
earnings.
JD Group_Financial Statements 2009
117
Accounting policies
Continued
Borrowing costs
Borrowing costs directly attributable to the acquisition,
already vested, and otherwise are amortised on a straight line
basis over the average remaining working lives of members.
construction or production of qualifying assets (i.e. assets that
The amount recognised in the balance sheet represents the
necessarily take a substantial period of time to get ready for
present value of defined benefit obligations as adjusted for
their intended use or sale) are capitalised as part of the cost
unrecognised actuarial gains and losses, past service costs,
of those assets. The capitalisation rate applied is the weighted
and as reduced by the fair value of plan assets. Any asset
average of the net borrowing costs applicable to the net
resulting from the calculation is limited to the unrecognised
borrowings of the Group. Capitalisation of such borrowing
actuarial losses and past service costs, plus the present value
costs ceases when the assets are substantially ready for their
of available refunds and reductions in future contributions to
intended use or sale. Investment income earned on temporary
the plan.
investment of specific borrowings pending their expenditure
on qualifying assets is deducted from borrowing costs
Provisions
capitalised.
Provisions are recognised when the Group has a present,
All other borrowing costs are expensed in the period in which
constructive or legal obligation as a result of a past event and
they are incurred.
it is probable that it will result in an outflow of economic
benefits that can be reasonably estimated.
Employee benefits
A onerous contract is a contract under which the unavoidable
Short term employee benefits
costs of meeting the obligation exceeds the economic benefit
The cost of all short term employee benefits are recognised
during the period in which the employee renders the related
service. The provisions for employee entitlements to salaries,
expected to be received under it. When a contract becomes
onerous, the present obligation under a contract is recognised
and measured as a provision.
performance bonuses and annual leave represent the
A restructuring provision is recognised when the Group has
amounts which the Group has a present obligation to pay as
developed a detailed formal plan for the restructuring and has
a result of the employees’ services provided. The provisions
raised a valid expectation in those affected that it will carry
have been calculated at undiscounted amounts based on
out the restructuring by starting to implement the plan or
current salary levels.
announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the
Defined contribution plans
direct operating expenditures arising from the restructuring,
Payments to defined contribution retirement benefit plans are
which are those amounts that are both necessarily entailed
recognised as an expense in the income statement as
by the restructuring and not associated with the ongoing
incurred. Obligations to state managed pension schemes are
activities of the entity.
dealt with as defined contribution plans where the Group’s
If the effect is material, provisions are determined by
obligation under the schemes are equivalent to those arising
discounting the expected future cash flows that reflect
in a defined contribution benefit plan.
current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
Defined benefit plans
For defined retirement benefit plans the cost of providing the
Cash and cash equivalents
benefit is determined using the projected unit credit method.
Cash and cash equivalents comprise cash on hand and
The scheme is actuarially valued for financial reporting
deposits on call with banks and investment banks and other
purposes at each reporting date. Past service costs are
short term, highly liquid investments that are readily
recognised immediately to the extent that the benefits are
convertible to cash and are subject to an insignificant risk of
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JD Group_Financial Statements 2009
Financial Statements continued
changes in value. Bank overdrafts are only included where the
earned on the financial asset. Fair value is determined in the
Group has a legal right of setoff due to cash management.
manner described in note 24.
Financial instruments
Available-for-sale (AFS) financial assets
Initial recognition and measurement
Unlisted shares held by the Group that are traded in an active
market are classified as being AFS and are stated at fair value.
Financial instruments include all financial assets and liabilities
Fair value is determined in the manner described in note 24.
held for liquidity, investment or trading. Financial instruments
are initially recognised at fair value plus transaction costs,
except those carried at fair value through profit and loss
(FVTPL), where transaction costs are recognised immediately
through the income statement. Financial instruments are
recognised on trade date.
For AFS investments, gains and losses arising from changes in
fair value are recognised directly in equity, in the investments
revaluation reserve with the exception of impairment losses,
interest calculated using the effective interest rate method
and foreign exchange gains and losses on monetary
assets, which are recognised directly in profit or loss. Where
Subsequent measurement
Subsequent to initial measurement, financial instruments are
measured either at fair value or amortised cost, depending on
their classification.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded
at the proceeds received, net of direct issue costs.
the investment is disposed of or determined to be impaired,
the cumulative gain or loss previously recognised in the
investments revaluation reserve is included in profit or loss
for the period.
Loans and receivables
Trade and other receivables that have fixed or determinable
payments that are not quoted in an active market, other than
those classified by the Group as FVTPL or AFS, are classified
as loans and receivables. Loans and receivables are measured
at initial recognition at fair value and are subsequently
Financial assets and liabilities at fair value through profit or
measured at amortised cost using the effective interest rate
loss (FVTPL)
method, less any impairment losses. Interest income is
Financial assets and liabilities are classified as FVTPL where
the financial instrument is either held for trading or designated
at FVTPL.
recognised by applying the effective interest rate, except for
short term receivables when the recognition of interest would
be immaterial.
A financial asset or liability is held for trading if:
Impairment of financial assets
3 it has been acquired or incurred principally for the purpose
Financial assets, other than those at FVTPL, are assessed for
of selling or repurchasing in the near future; or
indicators of impairment at each balance sheet date. Financial
3 it is part of an identified portfolio that the Group manages
assets are impaired where there is objective evidence that, as
together and has a recent actual pattern of short term
a result of one or more events that occurred after the initial
profit taking; or
recognition of the financial asset, the estimated future cash
3 it is a derivative that is not designated and effective as a
hedging instrument.
flows of the investment have been impacted.
For unlisted shares classified as AFS, a significant or prolonged
The Group has designated foreign exchange contracts as
decline in the fair value of the security below its cost is
financial instruments at FVTPL.
considered to be objective evidence of impairment.
Financial assets at FVTPL are stated at fair value, with any
For certain categories of financial assets, such as trade
resultant gain or loss recognised in profit or loss. The net gain
receivables, assets that are assessed not to be impaired
or loss recognised in profit or loss incorporates interest
individually are subsequently assessed for impairment on
JD Group_Financial Statements 2009
119
Accounting policies
Continued
a collective basis. Objective evidence of impairment for a
the asset and an associated liability for amounts it may have
portfolio of receivables includes the level of arrears of
to pay. If the Group retains substantially all the risks and
a customer, part payment of instalments or missed
rewards of ownership of a transferred financial asset, the
instalments, as well as observable changes in national or
Group continues to recognise the financial asset and also
economic conditions that correlate with defaults on
recognises a collateralised borrowing for the proceeds
receivables.
received.
For financial assets carried at amortised cost, the amount
The Group derecognises financial liabilities when, and only
of impairment is the difference between the asset’s
when, the Group’s obligations are discharged, cancelled or
carrying amount and the present value of estimated future
they expire.
cash flows, discounted at the financial asset’s original effective
interest rate.
Effective interest rate method
The carrying amount of the financial asset is reduced by the
The effective interest rate method is a method of calculating
impairment loss directly for all financial assets with the
the amortised cost of a financial asset or liability and of
exception of trade receivables, where the carrying amount is
allocating interest or expense over the relevant period. The
reduced through the use of an allowance account. When a
effective interest rate is the rate that exactly discounts
trade receivable is considered uncollectible, it is written off
estimated future cash receipts or payments (including all fees
against the carrying value of the trade receivable. Subsequent
on points paid or received that form an integral part of the
recoveries of amounts previously written off as well as
effective interest rate, transaction costs and other premiums
changes in the carrying amount of the allowance account are
or discounts) through the expected life of the financial asset
recognised in the profit and loss for the year.
or financial liability, or, where appropriate, a shorter period.
With the exception of AFS equity instruments, if, in a
Income is recognised on an effective interest basis for debt
subsequent period, the amount of the impairment loss
instruments other than those financial assets designated as
decreases and the decrease can be related objectively to an
at FVTPL.
event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through
Derivative financial instruments
profit or loss to the extent that the carrying amount of the
The Group uses derivative financial instruments to manage its
investment at the date the impairment is reversed does not
risk associated with foreign currency and interest rate
exceed what the amortised cost would have been had the
fluctuations relating to certain firm commitments and
impairment not been recognised.
forecasted transactions, including foreign exchange forward
In respect of AFS equity securities, impairment losses
previously recognised through profit or loss are not reversed
through profit or loss. Any increase in fair value subsequent to
an impairment loss is recognised directly in equity.
contracts. Such derivatives are initially recorded at fair value
at the date a derivative contract is entered into and are
subsequently remeasured to their fair value at each balance
sheet date. The resulting gain or loss is recognised in profit or
loss immediately.
Derecognition
A derivative is presented as a non-current asset or non-
The Group derecognises a financial asset only when the
current liability if the remaining maturity of the instrument is
contractual rights to the cash flows from the asset expire or it
more than 12 months and it is not expected to be realised or
transfers the financial asset and substantially all the risks and
settled within 12 months. Other derivatives are presented as
rewards of ownership of the asset to another entity. If the
current assets or current liabilities.
Group neither transfers nor retains substantially all the risks
Derivatives embedded in other financial instruments or other
and rewards of ownership and continues to control the
host contracts are treated as separate derivatives when their
transferred asset, the Group recognises its retained interest in
risks and characteristics are not closely related to those of
120
JD Group_Financial Statements 2009
Financial Statements continued
the host contracts and the host contracts are not measured
area of operation. Classification as a discontinued operation
at fair value with changes in fair value recognised in profit or
occurs upon disposal or when the operation meets the
loss.
criteria to be classified as held for sale. A disposal group that
is to be abandoned may also qualify as a discontinued
Fair value of derivatives and other financial instruments
operation, but not as assets held for sale.
As described in note 24, the directors use their judgement in
The profit or loss on sale or abandonment of a discontinued
selecting an appropriate valuation technique for financial
operation is determined from the formalised discontinuance
instruments not quoted in an active market. Valuation
date. Discontinued operations are separately recognised in
techniques commonly used by market practitioners are
the financial statements once management has made a
applied. For derivative financial instruments, assumptions are
commitment to discontinue the operation without a realistic
made based on quoted market rates adjusted for specific
possibility of withdrawal which should be expected to qualify
features of the instrument. Other financial instruments are
for recognition as a completed sale within one year of
valued using a discounted cash flow analysis based on
classification.
assumptions supported, where possible, by observable market
prices or rates. The estimation of fair value of unlisted shares
includes some assumptions not supported by observable
market prices or rates. Details of the assumptions used and of
the results of sensitivity analyses regarding these assumptions
are provided in note 24.
Offsetting financial assets and liabilities
Segment reporting
Segment accounting policies are consistent with those
adopted for the preparation of the financial statements of the
consolidated Group. A segment is a distinguishable component
of the Group that is engaged in providing products or services
which are subject to risks and rewards that are different from
those of other segments.
Financial assets and liabilities are set off where the Group has
a legal and enforceable right to setoff and there is an intention
to settle the liability and realise the asset simultaneously, or to
settle on a net basis.
The primary basis for reporting segment information are the
five autonomous business divisions. The secondary basis is by
significant geographical region, which is based on the location
of assets. These bases are consistent with internal reporting
Non-current assets held for sale and discontinued
for management.
operations
Contingencies and commitments
Non-current assets are classified as held for sale if their
carrying amount will be recoverable principally through a sale
transaction, not through continuing use. The condition is
Transactions are classified as contingencies where the Group’s
obligation depends on uncertain future events.
regarded as met only when the sale is highly probable and the
Items are classified as commitments where the Group
asset is available for immediate sale in its present condition.
commits itself to future transactions or if the items will result
These assets may be a component of an entity, a disposal
in the acquisition of assets.
group or an individual non-current asset. Upon initial
classification as held for sale, non-current assets and
disposal groups are recognised at the lower of carrying
amount and fair values less cost to sell.
Related party transactions
The Group does not have one single controlling shareholder.
All subsidiaries and associated companies of the Group are
A discontinued operation is a significant distinguishable
related parties. A list of the major subsidiaries and associated
component of the Group’s business that is abandoned or
companies is included in these financial statements. Details
terminated pursuant to a single formal plan, and which
of loans to and from subsidiaries and associated companies
represents a separate major line of business or geographical
are also provided.
JD Group_Financial Statements 2009
121
Group income statement
for the year ended 31 August
Revenue
2009
2008
Notes
Rm
Rm
1
12 922
12 610
Cost of sales
6 428
6 627
Operating expenses
4 739
4 288
1 102
1 003
Administration and other expenses
Depreciation and amortisation
Employees
197
170
2 103
1 787
Marketing
361
407
Occupancy
706
632
Share-based payment
Transport and travel
Surplus on disposal of property, plant and equipment
2
Operating profit
Investment income
Finance income
Finance costs
Share of losses of associates
32
261
(3)
Operating profit before debtors costs
Debtors costs
24
249
(4)
1 755
1 695
1 109
898
646
797
9
30
3
184
104
3
(272)
(188)
12
(12)
(14)
Profit before taxation
4
555
729
Taxation
5
475
215
80
514
75
514
5
—
73
511
Profit for the year
Attributable to:
Shareholders
Minorities
Headline earnings
Earnings per share (cents)
– basic
6
45,8
302,8
– diluted
6
45,6
300,1
Cash equivalent dividends per share (cents)
7
41,0
152,0
122
JD Group_Financial Statements 2009
Financial Statements continued
Group balance sheet
at 31 August
Notes
2009
2008
Rm
Rm
1 635
1 397
Assets
Non-current assets
Property, plant and equipment
8
756
653
Goodwill
9
455
347
Intangible assets
10
256
256
Investments and loans
11
92
93
Interest in associate company
12.1
—
28
Interest in joint venture
12.2
—
(15)
13
76
35
7 291
7 276
Deferred taxation
Current assets
Inventories
14
1 491
1 448
Trade and other receivables
15
4 952
4 503
Financial assets
24
8
3
Taxation
104
187
Bank balances and cash
736
1 135
8 926
8 673
1 779
1 779
Total assets
Equity and liabilities
Equity and reserves
Share capital and premium
16
Treasury shares
17
Non-distributable and other reserves
18
(411)
(435)
166
245
3 230
3 157
67
67
4 831
4 813
31
—
Total equity
4 862
4 813
Non-current liabilities
1 299
700
293
Retained earnings
Shareholders for dividend
Shareholders’ equity
Minority shareholders’ interest
Interest bearing long term liabilities
19
878
Non-interest bearing long term liability
20
83
83
Deferred taxation
13
338
324
2 765
3 160
2 064
Current liabilities
Trade and other payables
20
2 141
Provisions
21
12
4
Interest bearing liabilities
19
486
1 000
Financial liabilities
24
Taxation
Bank overdraft
Total equity and liabilities
3
—
112
92
11
—
8 926
8 673
JD Group_Financial Statements 2009
123
Group cash flow statement
for the year ended 31 August
Notes
Cash flows from operating activities
2009
2008
Rm
Rm
(15)
629
Cash generated by trading
a
871
(Increase)/decrease in working capital
b
(325)
Cash generated by operations
546
Investment income
9
1 008
301
1 309
30
Finance costs – net
c
(109)
(86)
Taxation paid
d
(393)
(340)
53
913
e
(68)
(284)
(431)
(188)
(234)
—
Cash available from operating activities
Dividends paid
Cash flows from investing activities
Acquisition of subsidiary companies
f
Increase in investment in joint venture
Investment and loan receipts
Proceeds on disposal of property, plant and equipment
—
(7)
1
18
20
11
(218)
(210)
Cash flows from financing activities
36
(281)
Proceeds on disposal of treasury shares by share incentive trust
16
4
2
—
Additions to property, plant and equipment
Proceeds from minority shareholders’ loans
Shares purchased by the share incentive trust
—
(188)
Shares bought back and cancelled
—
(339)
Long term borrowings raised
929
550
Long term borrowings repaid
(762)
(200)
Finance lease liabilities repaid
(149)
(108)
(410)
160
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
124
JD Group_Financial Statements 2009
g
1 135
975
725
1 135
Financial Statements continued
Notes to the Group cash flow statement
for the year ended 31 August
a
2009
Rm
2008
Rm
646
797
155
42
(1)
24
(3)
8
132
38
9
32
(4)
4
Cash generated by trading
Operating profit
Non-cash items
Depreciation
Amortisation – intangible assets
Operating lease costs adjustments
Share-based payment
Surplus on disposal of property, plant and equipment
Revaluation of financial assets/liabilities
871
b
(Increase)/decrease in working capital
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Unrealised foreign currency translation
c
(43)
(279)
32
(35)
(100)
538
(148)
11
(325)
301
(272)
184
(21)
(188)
104
(2)
(109)
(86)
95
(490)
(6)
8
33
(278)
—
(95)
(393)
(340)
(67)
(67)
(1)
67
(100)
(251)
—
67
(68)
(284)
Property, plant and equipment
Deferred taxation
Trade and other receivables
Financial liabilities
Life reserve fund
Taxation
Interest bearing liabilities
Non-interest bearing liabilities
Trade and other payables
Bank overdraft
Minority interest
61
11
170
(19)
(1)
(6)
(53)
(7)
(47)
(77)
(25)
—
—
—
—
—
—
—
—
—
—
—
7
42
108
—
Intangible assets
Goodwill
—
Cost of investment
Bank overdraft acquired
157
77
—
—
Cash flow from acquisition of subsidiaries
234
—
Cash and cash equivalents
Bank balances and cash, net of bank overdraft
725
1 135
Finance costs – net
Interest paid (note 3)
Interest received (note 3)
Fair value adjustments of financial assets and liabilities
d
Taxation paid
Amount receivable at beginning of year
Per income statement (note 5)
Acquisition of subsidiary companies
Amount payable/(receivable) at end of year
e
Dividends paid
Amount payable at beginning of year
Declared during the year
Payable to minority shareholders
Amount payable at end of year
f
g
1 008
Acquisition of subsidiary companies
JD Group_Financial Statements 2009
125
Group statement of changes in equity
for the year ended 31 August
Share
capital
Rm
Share
premium
Rm
Balance at 31 August 2007
Profit attributable to shareholders
Distribution to shareholders
Distribution to share incentive trust
Paid to shareholders –
10 December 2007
Paid to share incentive trust –
10 December 2007
Paid to shareholders – 30 June 2008
Paid to share incentive trust –
30 June 2008
Shares purchased by JD Group Limited
and cancelled
Purchase of treasury shares by share
incentive trust
Proceeds on disposal of treasury
shares by share incentive trust
Loss on disposal of treasury shares
included in attributable profit
Share-based payment
Transfer to retained earnings of vested
share options
Translation of foreign entities
9
2 109
Balance at 31 August 2008
9
Nondistributable
Treasury and other
shares reserves
Rm
Rm
(255)
226
Retained
earnings
Rm
2 859
514
(264)
13
264
(13)
5 048
514
—
—
(102)
(102)
4
(194)
4
(194)
8
8
(188)
(188)
4
4
4
4
32
32
1 770
(435)
(35)
22
35
245
3 157
—
22
67
75
Distribution to share incentive trust
Paid to shareholders –
15 December 2008
Paid to share incentive trust –
15 December 2008
—
4 813
5
80
25
25
(70)
70
—
3
(3)
—
(70)
(70)
3
Paid to minority shareholders
Funding received from minority
shareholders
Proceeds on disposal of treasury
shares by share incentive trust
Loss on disposal of treasury shares
included in attributable profit
3
(1)
(1)
2
2
16
16
8
Share-based payment
Transfer to retained earnings of
vested share options
8
24
24
(69)
69
Transfer to statutory reserve
4
(4)
Translation of foreign entities
(38)
JD Group_Financial Statements 2009
100
9
1 770
Total
Rm
(339)
Distribution to shareholders
126
Minority
shareholders’
interest
(339)
Profit attributable to shareholders
Arising on acquisition of subsidiary
companies
Balance at 31 August 2009
Shareholders
for
dividend
Rm
(411)
166
—
—
(38)
3 230
67
31
4 862
Financial Statements continued
Notes to the
Group annual financial statements
1.
2009
2008
Rm
Rm
Sale of merchandise
9 244
9 275
Finance charges earned
1 505
1 483
Financial services
1 254
1 313
919
539
12 922
12 610
Revenue
Other services
2.
Debtors costs
Increase in impairment provision
Bad debts written off
3.
52
36
1 057
862
1 109
898
Finance costs – net
Finance costs
Interest paid – finance leases
Interest paid – other
Fair value losses on financial instruments
36
53
230
135
6
—
272
188
(157)
(102)
(27)
(2)
(184)
(104)
88
84
Finance income
Interest received
Fair value gains on financial instruments
Finance costs – net
Finance costs include an amount of R13 million relating to the “tax settlement” – refer note 5.
JD Group_Financial Statements 2009
127
Notes to the
Group annual financial statements
Continued
4.
2009
2008
Rm
Rm
11
8
1
2
1
1
13
11
155
132
Profit before taxation
is stated after taking account of the following items:
Auditors’ remuneration
Audit fees – current
– prior
Other services
Depreciation of property, plant and equipment
Owned
Directors’ remuneration (see disclosure on page 102)
Services as directors
2
1
15
20
17
21
(14)
(9)
—
10
558
505
43
44
601
549
89
75
4
5
93
80
12
10
Owned
(3)
(4)
Trademark amortisation
30
28
8
107
– current
129,8
194,0
– prior
330,1
Other services (including the management fees below)
Foreign exchange profits
Management fees
Sustein Management (Pty) Ltd (included in directors’ remuneration – other services)
Operating leases
Business premises
Office equipment
Retirement benefit costs
Defined contribution funds
Defined benefit funds
Supplier relationship amortisation
Surplus on disposal of property, plant and equipment
Writedown of inventories to net realisable value
5.
Taxation
South African taxation
Normal
Deferred – current
– prior
– rate adjustment
Secondary taxation on companies
128
JD Group_Financial Statements 2009
21,1
(8,7)
(31,7)
(10,0)
(31,0)
—
(7,2)
6,1
27,5
447,3
172,7
Financial Statements continued
5.
2009
2008
Rm
Rm
24,0
0,4
3,3
—
15,1
20,2
6,2
0,4
27,7
41,9
Total taxation
475,0
214,6
Dealt with as follows:
Current taxation
Deferred taxation
490,4
(15,4)
277,9
(63,3)
475,0
214,6
28,0
28,0
Taxation at standard rate
Adjusted for
Foreign tax rate differential
Expenditure disallowed
Exempt income
Prior years
Rate adjustment
Deferred tax assets not raised
Secondary taxation on companies
Withholding tax and tax on foreign income
155,6
204,1
(5,8)
36,0
(30,2)
320,5
—
(8,4)
6,1
1,1
(4,7)
35,3
(53,2)
10,7
(7,2)
(0,6)
27,5
2,7
Taxation charged to income
475,0
214,6
Effective rate of taxation (%)
85,6
29,5
408,6
346,3
259,4
246,3
Deferred tax assets raised
62,3
13,1
Effective tax assets at country rate of tax (note 13)
17,4
3,7
Taxation (continued)
Foreign taxation
Normal – current
– prior
Deferred – current
– prior
Reconciliation of tax charge
Domestic standard normal rate of taxation (%)
Estimated tax losses available for setoff against future taxable income
Tax losses available
Deferred tax assets not raised
Deferred tax assets relating to tax losses of R346,3 million (2008: R246,3 million) have
not been raised in accordance with Group policy because the probability of utilising
these losses in the foreseeable future is considered to be remote.
As reported on SENS on 31 March 2009, the Group settled its outstanding contingent
liabilities with SARS, disclosed as contingent liabilities in the 2008 Annual Report, for
an amount of R325 million. This amount has been included in the normal tax – prior
year charge of R330,1 million.
The tax settlement amount comprises the following:
Paid directly to SARS
Tax effect on R13 million included in finance costs (note 3)
Paid via third party financiers to SARS
140
(4)
189
—
—
—
325
—
JD Group_Financial Statements 2009
129
Notes to the
Group annual financial statements
Continued
6.
2009
2008
Rm
Rm
Profit attributable to shareholders
75
514
Surplus on disposal of property, plant and equipment
(3)
(4)
Taxation thereon
1
1
Headline earnings
73
511
163 245
169 807
Cents
Cents
Earnings per share
45,8
302,8
Surplus on disposal of property, plant and equipment
(1,9)
(2,5)
0,5
0,7
44,4
301,0
869
1 514
164 114
171 321
Cents
Cents
Diluted earnings per share
45,6
300,1
Surplus on disposal of property, plant and equipment
(1,9)
(2,5)
0,5
0,7
44,2
298,3
Rm
Rm
Earnings per share and headline earnings per share
Reconciliation of headline earnings
Basic
Weighted average number of shares in issue during the year of (000)
Taxation effect thereon
Headline earnings per share
Diluted
Dilutive effect of bonus element in share options (000)
Diluted weighted average number of shares in issue during the year of (000)
Taxation effect thereon
Diluted headline earnings per share
The above are calculated based on R000s amounts.
7.
Distribution to shareholders
Final dividend prior year
– declared 41 cents on 170 500 000 shares (2008: 57 cents on 180 000 000 shares)
(70)
(102)
– paid 41 cents on 170 500 000 shares (2008: 57 cents on 180 000 000 shares)
70
102
Interim dividend
– declared and paid nil cents on 170 500 000 shares
(2008: 111 cents on 174 980 000 shares)
—
194
– proposed 41 cents on 170 500 000 shares (2008: 41 cents on 170 500 000 shares)
70
70
Total distribution to shareholders
70
264
Final dividend
130
JD Group_Financial Statements 2009
Financial Statements continued
8.
Vehicles
Office
Leasehold
and
equipment,
improve-
forklift
Computer
Property
ments
trucks
hardware
Computer
furniture
Rm
Rm
Rm
Rm
Rm
Rm
230
(5)
323
(161)
275
(109)
55
(17)
47
(39)
130
(76)
225
162
166
38
8
54
653
—
—
45
—
(2)
—
—
—
—
8
(2)
87
—
(65)
(59)
56
(4)
2
1
—
12
—
(32)
(57)
47
(2)
—
56
(24)
32
(27)
(21)
(5)
3
(2)
2
27
(19)
8
—
(10)
(13)
11
(4)
3
26
(12)
34
27
(25)
(44)
44
—
1
118
(57)
218
—
(155)
(178)
161
(12)
8
At end of year
Cost
Accumulated depreciation
275
(7)
355
(170)
229
(94)
109
(57)
65
(54)
173
(68)
1 206
(450)
Total net book value
268
185
135
52
11
105
756
3 – 5,5
20
12,5 – 20
25
25
10 – 25
software and fittings
Total
Rm
Property, plant and equipment
2009
At beginning of year
Cost
Accumulated depreciation
Net book value
Movement for the year
Acquisition of subsidiaries during
the year
– cost
– accumulated depreciation
Additions
Category reclassification
Depreciation
Disposals – cost
– accumulated depreciation
Foreign currency translation – cost
– accumulated depreciation
Depreciation rates (%)
Directors’ valuation of property
2008
At beginning of year
Cost
Accumulated depreciation
1 060
(407)
460
212
(5)
280
(129)
268
(96)
20
(13)
42
(36)
101
(66)
923
(345)
207
151
172
7
6
35
578
18
—
—
—
—
—
76
(66)
(38)
36
5
(2)
44
(46)
(38)
34
1
(1)
35
(4)
(2)
2
2
(2)
4
(3)
(1)
1
2
(1)
33
(13)
(4)
3
—
—
210
(132)
(83)
76
10
(6)
At end of year
Cost
Accumulated depreciation
230
(5)
323
(161)
275
(109)
55
(17)
47
(39)
130
(76)
1 060
(407)
Total net book value
225
162
166
38
8
54
653
3 – 5,5
20
12,5 – 20
25
25
10 – 25
Net book value
Movement for the year
Additions
Depreciation
Disposals – cost
– accumulated depreciation
Foreign currency translation – cost
– accumulated depreciation
Depreciation rates (%)
Directors’ valuation of property
393
A register of property is available for inspection by members at the registered office of the Company.
There was no change in the nature of property, plant or equipment or in the policy regarding their use.
Refer to note 30 for applicable judgements and estimates.
JD Group_Financial Statements 2009
131
Notes to the
Group annual financial statements
Continued
9.
2009
2008
Rm
Rm
Arising on the acquisition of Connection Group
347
347
Arising on the acquisition of Blake & Associates
92
—
Arising on the acquisition of Maravedi Group
16
—
455
347
Goodwill
Cost
The Group tests goodwill annually for impairment, or more frequently if there are
indications that goodwill might be impaired.
The recoverable amounts of the cash generating units (CGUs) are determined from
value in use calculations. The key assumptions for the value in use calculations are
those regarding the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. Management estimates discount rates using
pretax rates that reflect current market assessments of the time value of money and
the risks specific to the CGU. The growth rates are based on industry growth forecasts.
Changes in selling prices and direct costs are based on past practices and
expectations of future changes in the market. Refer to note 30 for judgements and
estimates applicable for the assessment of goodwill.
10.
Intangible assets
Cost
Trademarks
381
365
Supplier relationships
48
48
Customers relationships
19
—
7
—
455
413
160
131
36
26
Customers relationships
2
—
Information database
1
—
199
157
256
256
42
38
Information database
Accumulated amortisation
Trademarks
Supplier relationships
Net book value
Amortisation
The intangible assets included above have finite useful lives over which these assets are amortised.
The intangible assets arising on the acquisition of Profurn consist of acquired trademarks that are amortised over a period
of 10 years.
The intangible assets arising on the acquisition of Connection Group comprise a trademark, amortised over 20 years, and
capitalised supplier relationships, amortised over five years.
The intangible assets arising on the acquisition of Blake & Associates comprise trademarks, customer relationships and a
database. The trademarks are amortised over a period of either five or 15 years, while the customer relationships are
amortised over either five or 10 years. The database is amortised over a five year period.
Refer to note 30 for an assessment of impairment of intangible assets.
132
JD Group_Financial Statements 2009
Financial Statements continued
11.
Investments and loans
11.1
Unlisted
2009
2008
Rm
Rm
92
Shares at cost, which approximates fair value
92
Endowment policy, classified as available for sale
—
1
Investment in non-consolidated subsidiaries
—
—
Shares at cost
Loans to non-consolidated subsidiaries#
1
1
33
30
34
31
(34)
(31)
92
93
Directors’ valuation of unlisted investments
92
93
Southern Life endowment policy:
The endowment policy asset comprised Erf 322 Rivonia Extension 20 Gauteng
and was stated at fair value.
—
1
Impairment*
*The impairment has been calculated based on the directors’ estimation of cash to be received on the
respective loans.
# Refer to Subsidiaries on page 168 and note 26 for further details.
11.2
Abridged aggregated balance sheet of non-consolidated subsidiaries
Equity
1
1
Distributable reserves
25
(46)
Opening balance
(46)
(180)
71
134
(58)
15
Movement
Non-distributable reserves
Opening balance
Movement
Shareholders’ equity
Net current assets
15
17
(73)
(2)
(32)
(30)
1
—
Loans from consolidated subsidiaries less amounts written off
(33)
(30)
Total assets
(32)
(30)
(32)
(30)
33
30
1
—
Reconciliation of estimated recoverable portion of loans
Net asset value
Loans from consolidated subsidiaries after amounts written off
JD Group_Financial Statements 2009
133
Notes to the
Group annual financial statements
Continued
12.
12.1
2009
2008
Rm
Rm
—
15
Prior year equity accounted profits
13
8
Current year equity accounted (loss)/profit
(4)
7
1
(2)
(10)
—
Carrying value
—
28
Unlisted
%
%
Interest in associate and joint venture companies
Interest in associate company
Shares at cost
Attributable share of post-acquisition retained earnings
Current year taxation credit/(charge)
Adjusted on conversion to subsidiary company
Blake & Associates – effective interest
27,5
Rm
Rm
—
66
Non-current assets
—
48
Current assets
—
70
Total assets
—
118
Capital and reserves
—
50
Non-current liabilities
—
24
Current liabilities
—
44
Total equity and liabilities
—
118
Profit before tax
—
28
Tax
—
(7)
Profit after tax
—
21
Directors’ valuation of unlisted interest
During the year, the Group first increased its interest to 55% and then to 70%. This
entity is now included in the Group’s consolidated results.
Nature of business
Provides comprehensive contact centre capabilities to clients.
Aggregate financial information in respect of associate company
The information presented below is extracted from the consolidated annual financial
statements of Blake & Associates Holdings (Pty) Ltd for the year ended 31 March 2008:
Balance sheet
Income statement
134
JD Group_Financial Statements 2009
Financial Statements continued
12.
Interest in associate and joint venture companies (continued)
12.2
Interest in joint venture
Shares at cost
2009
2008
Rm
Rm
—
15
Attributable share of post-acquisition retained earnings
Prior year equity accounted losses
(30)
(5)
Current year equity accounted loss
(8)
(21)
Current year taxation charge
(2)
(4)
Adjusted on conversion to subsidiary company
40
—
Carrying value
—
(15)
Unlisted
%
%
Maravedi Group – effective interest
42,7
Directors’ valuation of unlisted interest
Rm
Rm
—
(15)
During the year, the Group increased its interest in Maravedi Group to 90,5%. This
entity is now included in the Group’s consolidated results.
Nature of business
The provision of financial services to the mass middle market, debtors management
services and the collection of defaulting debt on behalf of third parties.
Aggregate financial information in respect of joint venture
The information presented below is extracted from the consolidated annual financial
statements of Maravedi Group for the year ended 31 August 2008:
Balance sheet
Non-current assets
—
31
Current assets
—
334
Total assets
—
365
Capital and reserves
—
(68)
Non-current liabilities
—
38
Current liabilities
—
395
Total equity and liabilities
—
365
Loss before tax
—
(47)
Tax charge
—
(9)
Loss after tax
—
(56)
Income statement
JD Group_Financial Statements 2009
135
Notes to the
Group annual financial statements
Continued
13.
The deferred taxation provision comprises the following temporary differences:
Instalment sale receivables’ allowances
Provisions disallowed
Trademarks
Assets unrealised
Payments in advance
Other
Tax losses (note 5)
Deferred taxation is disclosed as:
Asset
Liability
Rm
289
(1)
(11)
(15)
358
(6)
—
(63)
262
289
179
(91)
72
(3)
7
115
(17)
197
(98)
70
(2)
7
119
(4)
262
289
(76)
338
(35)
324
262
289
Inventories
Merchandise net of obsolescence
Provision for write down to net realisable value
15.
2008
Rm
Deferred taxation
Amount provided at beginning of year
Deferred tax on equity accounted losses
Deferred tax assets at acquisition date of subsidiary companies
Charged to income statement (note 5)
14.
2009
1 518
(27)
1 487
(39)
1 491
1 448
Instalment sale receivables(1)
Other loans and advances
Trade receivables
4 959
26
70
4 636
—
—
Total trade receivables
Less: Impairment provision
5 055
(719)
4 636
(617)
Net trade receivables
Other receivables
4 336
616
4 019
484
Total trade and other receivables
4 952
4 503
14,2
13,3
The maturity profile of instalment sale receivables is as follows:
– receivable within one year
– receivable thereafter
3 851
1 108
3 523
1 113
Total instalment sale receivables
4 959
4 636
Trade and other receivables
Provisions as a percentage of trade receivables (%)
In accordance with industry norms, amounts due from instalment sale receivables after one year are included in current
assets. The credit terms of instalment sale receivables range from 6 to 36 months.
The directors consider the carrying amount of trade and other receivables to approximate their fair values.
(1) Classified as originated loans and receivables and carried at amortised cost.
Bank borrowings are secured by a negative pledge of instalment sale receivables (note 19).
136
JD Group_Financial Statements 2009
Financial Statements continued
16.
2009
2008
Rm
Rm
13
13
9
9
1 770
2 109
—
(339)
Balance at end of year
1 770
1 770
Total share capital and premium
1 779
1 779
411
435
411
435
Share capital and premium
Share capital
Authorised
250 000 000 (2008: 250 000 000) ordinary shares of 5 cents each
Issued
170 500 000 (2008: 170 500 000) ordinary shares of 5 cents each
Share premium
Balance at beginning of year
Redeemed on the purchase and cancellation of 9 500 000 shares by the Company
10 542 944 (2008: 9 584 033) shares are under option to employees of the Group in
terms of The JD Group Employee Share Incentive Scheme at prices varying between
R14,28 and R79,83 per share (page 163).
No more (2008: 15 990 967) shares are under the control of the directors to be granted
in terms of The JD Group Employee Share Incentive Scheme (page 162).
1 105 000 (2008: nil) share appreciation rights are allocated to employees of the Group
in terms of The JD Group Share Appreciation Rights Scheme at a price of R41,71 per
share (page 166).
1 395 000 (2008: nil) share appreciation rights are under the control of the directors to
be allocated in terms of The JD Group Share Appreciation Rights Scheme (page 166).
A maximum of 10 million of the unissued shares were under the control of the
directors until the special general meeting held on 12 August 2009. At the
same meeting, shareholders placed 2 500 000 shares under the control of the
directors to be utilised for The JD Group Share Appreciation Rights Scheme.
17.
Treasury shares
JD Group Limited ordinary shares of 5 cents each held by the JD Group Employee
Share Incentive Scheme at cost:
6 756 892 (2008: 7 364 892) ordinary shares
18.
Non-distributable and other reserves
Are made up as follows:
Foreign currency translation reserve
(54)
(16)
Revaluation of shares issued pursuant to the acquisition of Profurn
139
139
77
122
4
—
166
245
Share-based payment reserve
Statutory reserve – insurance contingency
JD Group_Financial Statements 2009
137
Notes to the
Group annual financial statements
Continued
19.
2009
2008
Rm
Rm
1 217
1 050
147
243
Interest bearing liabilities
Bank borrowings
Finance lease liabilities
1 364
Payable within one year reflected under current liabilities
(486)
878
These liabilities are carried at amortised cost. The directors consider the carrying
value of interest bearing liabilities to approximate their fair value.
Bank borrowings are secured by a negative pledge of instalment sale receivables
of R4 959 million (2008: R4 636 million).
The interest rates per annum are:
2009:
– on R325 million: fixed rate at 10,96% until 26 April 2011; repayable in six quarterly
instalments of capital and interest of approximately R32 million, and one final
payment of capital and interest on 26 April 2011;
– on R200 million: variable rate linked to prime, currently at 7,0%; repayable in
quarterly instalments of interest of approximately R4 million and a single capital
instalment on 1 October 2012;
– on R183 million: variable rate linked to JIBAR, fixed at 9,48% until 30 September 2009;
repayable in quarterly instalments of capital and interest of approximately
R19 million;
– on R150 million: variable rate linked to JIBAR, fixed at 11,68% until 28 October 2009;
repayable in quarterly instalments of capital and interest of approximately
R11 million and with a final capital repayment of R75 million on 30 April 2012;
– on R130 million: variable rate linked to JIBAR, fixed at 10,39% until 28 September
2009, with interest and capital repayable on that date;
– on R70 million: variable rate linked to JIBAR, fixed at 10,08% until 1 October 2009;
repayable in quarterly instalments of interest of approximately R2 million, with a final
capital repayment due on 18 May 2010;
– on R60 million: variable rate linked to JIBAR, fixed at 10,58% until 1 October 2009;
repayable in quarterly instalments of interest of approximately R2 million, with a final
capital repayment due on 18 May 2011;
– on R50 million: variable rate linked to JIBAR, fixed at 11,08% until 1 October 2009;
repayable in quarterly instalments of interest of approximately R1,5 million, with a
final capital repayment due on 18 May 2012;
– on R25 million: variable rate linked to JIBAR, fixed at 8,13% until 30 November 2009,
on which date capital and interest is due; and
– on R24 million: variable rate linked to JIBAR, fixed at 8,71% until 1 March 2010,
on which date capital and interest is due.
2008:
– on R200 million: variable rate linked to prime, currently at 12,0%;
– on R500 million: variable rate linked to JIBAR, fixed at 13,18% for the period
to 24 October 2008; and
– on R350 million: variable rate linked to JIBAR, fixed at 13,22% for the period
to 29 September 2008.
The above are repayable in quarterly instalments of interest of approximately
R6 million, R16 million and R12 million respectively, with single capital repayments
on 1 October 2012, 25 April 2009 and 27 August 2009 respectively.
138
JD Group_Financial Statements 2009
1 293
(1 000)
293
Financial Statements continued
19.
2009
2008
Rm
Rm
Interest bearing liabilities (continued)
Finance lease liabilities amounting to R114 million (2008: R243 million) are secured
by internally generated intellectual property and bear interest at an effective rate of
13,81% (2008: 13,81% to 15,64%).
Lease liabilities are repayable in biannual instalments of capital and interest of
approximately R27 million each (2008: R81 million).
Finance lease liabilities amounting to R33 million are secured by moveable assets and
bear interest at rates varying between 9,38% and 13%, repayable in monthly instalments
of capital and interest.
Interest bearing liabilities are repayable in the following financial years:
Bank borrowings
2009
850
2010
434
—
2011
389
—
2012
194
—
2013
200
200
1 217
1 050
Finance lease liabilities – present value of lease obligations
2009
150
2010
52
31
2011
47
36
2012
48
26
147
243
The obligations payable under finance leases are analysed further as follows:
Minimum lease payments:
Amounts payable within one year
Amounts payable thereafter
65
161
107
109
172
270
Less: future finance charges
(25)
(27)
Present value of lease obligations
147
243
In terms of the articles of association of the Company and all its subsidiaries, borrowing powers are unlimited.
JD Group_Financial Statements 2009
139
Notes to the
Group annual financial statements
Continued
20.
Trade and other payables
The directors consider the carrying amount of trade and other payables to approximate their fair values. The credit period
of trade payables ranges between 30 and 120 days from the date of the invoice. No interest is charged on the trade payables
for the first 120 days from the date of the invoice. The Group has financial risk management policies to ensure that all
payables are paid within the negotiated credit timeframe.
20.1
20.2
21.
2009
2008
Rm
Rm
Leave pay
81
69
Annual bonus
53
53
134
122
The following accruals are included in trade and other payables:
The following amounts are included in trade and other payables:
Operating lease costs adjustment
100
92
Less: included in non-interest bearing long term liability
(83)
(83)
17
9
Provisions
Raised
Utilised
Balance at
during
during
Balance at
31 August
31 August
31 August
31 August
2008
2009
2009
2009
Rm
Rm
Rm
Rm
Provisions comprise:
Restructuring provision – staff costs
Lease closure costs
140
JD Group_Financial Statements 2009
4
37
(35)
6
—
8
(2)
6
4
45
(37)
12
Financial Statements continued
22.
2009
2008
Rm
Rm
Authorised and contracted
72
177
Authorised but not yet contracted
98
144
170
321
Commitments
Capital expenditure
This expenditure will be financed from internal sources and existing borrowing
facilities.
Operating lease commitments (predominantly premises)
23.
Due within one year
549
516
Due within two to five years
989
1 071
1 538
1 587
Foreign assets
Total assets subject to exchange control of a foreign country amount to R45 million (2008: R68 million).
24.
Financial instruments
24.1
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy
remains unchanged from 2008.
The capital structure of the Group consists of debt, which includes borrowings and finance leases as disclosed in note 19,
cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and
retained earnings as disclosed in notes 16 and 18 respectively.
24.1.1 Gearing ratio
The Group’s board and risk management committee reviews the capital structure on a semi-annual basis. As part of this
review, the committee considers the cost of capital and the risks associated with each class of capital. The Group has set
a maximum target gearing ratio of 50% determined as the proportion of net debt to equity.
The gearing ratio at year end was as follows:
Debt(i)
2009
2008
Rm
Rm
1 364
1 293
Cash and cash equivalents (net of bank overdraft)
725
1 135
Net debt
639
158
Equity(ii)
4 831
4 813
Net debt to equity ratio
13,2%
3,3%
(i) Debt is defined as long and short term borrowings, as detailed in note 19.
(ii) Equity includes all capital and reserves of the Group.
JD Group_Financial Statements 2009
141
Notes to the
Group annual financial statements
Continued
24.
Financial instruments (continued)
24.2 Categories of financial instruments
24.2.1 Financial assets
Designated
at fair value
through
profit/loss
Rm
Loans and
receivables
Rm
Held to
maturity
Rm
—
—
—
NonAvailable
financial
for sale instruments
Rm
Rm
Total
carrying
value
Rm
2009
Assets
Non-current assets
1 543
1 635
Property, plant and equipment
756
756
Goodwill
455
455
Intangible assets
256
256
76
76
1 595
7 291
1 491
1 491
Investments and loans
92
92
Deferred taxation
Current assets
8
5 645
43
—
Inventories
Trade and other receivables
Financial assets
4 952
4 952
8
8
Taxation
104
Bank balances and cash
Total
2008
Assets
Non-current assets
142
43
8
5 645
43
92
3 138
8 926
—
—
—
93
1 304
1 397
653
347
256
28
(15)
35
653
347
256
93
28
(15)
35
736
1 635
7 276
1 448
1 448
4 503
3
187
1 135
93
3
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
3
Total
3
JD Group_Financial Statements 2009
104
693
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Interest in associate company
Interest in joint venture
Deferred taxation
Current assets
92
5 575
63
—
4 503
187
1 072
63
5 575
63
93
2 939
8 673
Financial Statements continued
24.
Financial instruments (continued)
24.2 Categories of financial instruments (continued)
24.2.2 Financial liabilities
Designated
at fair value
through
profit/loss
Rm
Held for
trading
Rm
Financial
liabilities at
amortised Non-financial
cost instruments
Rm
Rm
Total
carrying
value
Rm
4 831
4 831
31
31
2009
Liabilities
Shareholders’ equity
Minority shareholders’ interest
Total equity
—
—
—
4 862
4 862
Non-current liabilities
—
—
878
421
1 299
Interest bearing long term liabilities
878
Non-interest bearing long term liability
83
338
338
2 329
433
2 765
1 832
309
2 141
Deferred taxation
Current liabilities
3
—
Trade and other payables
Provisions
12
Interest bearing liabilities
Financial liabilities
3
112
11
3
—
3 207
5 716
8 926
—
—
293
4 813
407
4 813
700
83
324
293
83
324
2 747
413
3 160
1 747
317
4
92
2 064
4
1 000
92
5 633
8 673
293
—
—
Trade and other payables
Provisions
Interest bearing liabilities
Taxation
Total
112
11
Interest bearing long term liabilities
Non-interest bearing long term liability
Deferred taxation
Current liabilities
486
3
Bank overdraft
2008
Liabilities
Shareholders’ equity
Non-current liabilities
12
486
Taxation
Total
878
83
1 000
—
—
3 040
JD Group_Financial Statements 2009
143
Notes to the
Group annual financial statements
Continued
24.
Financial instruments (continued)
24.3
Financial risk management objectives
Senior executives meet on a regular basis to analyse interest rate exposures and evaluate treasury management strategies
against revised economic forecasts. Compliance with Group policies and exposure limits are reviewed at quarterly meetings
of the board. The directors believe, to the best of their knowledge, that there are no undisclosed financial risks.
These risks include market risk (currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow interest
rate risk. The Group does not enter into or trade financial instruments for speculative purposes.
24.3.1 Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see note 24.3.2)
and interest rates (see note 24.3.3). The Group may enter into a variety of derivative financial instruments to manage its
exposures to interest rate and foreign currency risk. As at the reporting date the Group had entered into forward exchange
contracts to hedge the exchange rate risk arising on the importation of goods for sale.
There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the
risk.
24.3.2 Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate
fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign
exchange contracts.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date
are as follows:
Liabilities
Euro
Assets
2009
2008
2009
2008
Rm
Rm
Rm
Rm
—
3
4
2
GB pound
—
—
11
3
Metical
—
—
42
65
Pula
46
47
180
215
Rupee
10
—
8
—
2
3
—
23
123
154
226
229
184
208
469
535
US dollar
Zloty
Foreign currency sensitivity analysis
The Group is mainly exposed to fluctuations in Pula and Zloty. However, as most of the foreign currency denominated
assets and liabilities are located in the Group’s foreign operations, fluctuations in exchange rates between these
currencies and the South African Rand are reflected in the movement in the foreign currency translation reserve and
not in the Group’s income statement. Refer to the statement of changes in equity on page 126.
The closing rates used to translate assets and liabilities denominated in foreign currency at year end were as follows:
Euro
144
2009
2008
11,251
11,301
Metical
0,274
0,328
Pula
1,147
1,191
US dollar
7,499
8,041
Zloty
2,686
3,373
JD Group_Financial Statements 2009
Financial Statements continued
24.
Financial instruments (continued)
24.3 Financial risk management objectives (continued)
24.3.2 Foreign currency risk management (continued)
Forward foreign exchange contracts
It is the policy of the Group to enter into forward foreign exchange contracts to cover specific foreign currency payments
and receipts based on a predefined profile that takes into account the future expected date of payment or receipt.
The writing of option contracts is prohibited.
The amounts presented below represent the Rand equivalents of commitments to purchase foreign currencies and all of
these commitments mature within six months of the year end.
Foreign
currency
’000
Rand
equivalent
R’000
Market
value
R’000
Fair
value
R’000
Covered forward commitments
2009
US dollar – purchase
GB pound – sale
4 669
3 970
37 529
58 644
34 931
50 537
(2 598)
8 107
Total
8 639
96 173
85 468
5 509
9 504
74 733
78 105
3 372
—
—
—
—
1 239
—
—
—
2008
US dollar
Uncovered forward commitments
2009
US dollar
2008
US dollar
The fair values of the forward exchange contracts of R5,5 million (2008: R3,4 million) are included in financial assets and
financial liabilities.
24.3.3 Interest rate risk management
The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and floating interest rates.
As part of the process of managing the Group’s fixed and floating rate borrowings mix, the interest rate characteristics of
new borrowings and the refinancing of existing borrowings are positioned according to expected movements in interest
rates.
In order to hedge specific exposures in the interest rate repricing profile of existing borrowings and anticipated peak
additional borrowings, the Company and its subsidiaries may make use of interest rate derivatives, only as approved in
terms of Group policy limits. For the year ended 31 August 2009, the Group did not have any exposure to interest rate
derivative instruments.
Interest rates charged to customers on credit agreements remain fixed for the duration of the contract. The interest rates
charged to customers is only repriced for new deals written when a change to the repo rate is published.
Interest earned on short term cash surpluses invested with major banking institutions is priced at variable market related
rates.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates for both financial assets and
financial liabilities at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming that the amount
of the liability outstanding at the balance sheet date was outstanding for the whole year. A 50 basis points increase or
decrease in interest rates is used when reporting interest rate risk internally to key management personnel and represents
management’s assessment of the reasonable change in interest rates.
If interest rates had been 100 basis points higher/lower and all other variables were constant, the Group’s profit for the
year ended 31 August 2009 would decrease/increase by R6,8 million (2008: decrease/increase by R3,1 million).
This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings and variable rate short
term cash investments.
JD Group_Financial Statements 2009
145
Notes to the
Group annual financial statements
Continued
24.
Financial instruments (continued)
24.4
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group.
Potential concentrations of credit risk consist principally of short term cash investments and trade receivables.
As regards short term cash investments, the Group has adopted a policy of only dealing with creditworthy counterparties
as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the
equivalent of investment grade and above. This information is supplied by independent rating agencies where available
and, if not available, the Group uses other publicly available financial information and its own trading records to rate its
customers. The Group’s exposure and the credit ratings of such counterparties are continuously monitored and the
aggregate value of transactions concluded is spread amongst its approved counterparties.
Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually.
At present, the Group deposits short term cash surpluses equally between four major South African banks of high credit
standing.
Trade receivables comprise a large, widespread customer base. The Group manages and grants credit based on a combination
of empirically developed application behaviour and credit bureau scoring models. These models (and accompanying business
rules) are reviewed and updated on an ongoing basis and credit is therefore granted based on the Group’s appetite for risk and
within the ambit of relevant regulations. Redevelopment and the implementation of second generation application and
behaviour scoring models is expected to commence in the next financial year. Such a redevelopment enables the Group to
identify and segment potential high risk applications for credit even more accurately thereby reducing credit losses, whilst also
improving sales volumes by identifying low risk credit applications more precisely.
As at 31 August 2009, the Group did not consider that any significant concentration of credit risk existed in the instalment
sale receivables book which had not been adequately provided for.
The tables below provide an analysis of credit risk exposures inherent in the loans and receivables book at the year end
reporting dates, reconciled to the carrying value of net instalment sale receivables as reported in note 15.
Class 1
Rm
Class 2
Rm
Class 3
Rm
Class 4
Rm
Total
Rm
2 221
2009
Credit exposures by class
Up to date
484
994
561
182
Rehabilitated
100
239
157
4
500
Arrears b one instalment
118
278
184
24
604
Arrears > one instalment
266
694
563
111
1 634
Arrears b 2 instalments
14
29
26
12
81
Arrears b 3 instalments
36
94
69
13
212
Arrears b 4 instalments
30
80
59
14
183
Arrears b 5 instalments
27
73
53
19
172
Arrears > 5 instalments
159
418
356
53
986
968
2 205
1 465
321
4 959
Balance at beginning of year
98
297
222
—
617
Balance at acquisition date of subsidiaries
—
—
—
50
Roll forward of the impairment provision
Bad debts written off
146
(143)
(549)
(352)
(13)
50
(1 057)
Transfer on reclassification
(14)
—
—
14
—
Increase in impairment provision
171
538
373
27
1 109
Balance at end of year
112
286
243
78
719
Net carrying value
856
1 919
1 222
243
4 240
JD Group_Financial Statements 2009
Financial Statements continued
24.
Financial instruments (continued)
24.4
Credit risk management (continued)
Class 1
Rm
Class 2
Rm
Class 3
Rm
Class 4
Rm
Total
Rm
2008
Credit exposures by class
Up to date
Rehabilitated
Arrears b one instalment
Arrears > one instalment
540
92
139
275
923
239
310
712
520
135
202
549
—
—
—
—
1 983
466
651
1 536
Arrears b 2 instalments
Arrears b 3 instalments
Arrears b 4 instalments
Arrears b 5 instalments
Arrears > 5 instalments
27
49
39
31
129
43
98
81
73
417
34
77
64
56
318
—
—
—
—
—
104
224
184
160
864
1 046
2 184
1 406
—
4 636
86
(128)
140
292
(484)
489
203
(250)
269
—
—
—
581
(862)
898
98
297
222
—
617
948
1 887
1 184
—
4 019
Roll forward of the impairment provision
Balance at beginning of year
Bad debts written off
Increase in impairment provision
Balance at end of year
Net carrying value
Definitions applied in compiling these tables:
The ‘classes’ have been determined on the basis of the market segment which the individual trading brands operate in.
Class 1 = Bradlows, Morkels and Hi-Finance
Class 2 = Joshua Doore, Russells and Electric Express
Class 3 = Barnetts, Price ‘n Pride and Supreme
Class 4 = Maravedi
The debtors book has been analysed into the following types of accounts, reflecting the accounts in the following categories:
a. Up to date
These accounts have no arrears, are therefore up to date and are therefore neither past due nor impaired.
No impairment provision is recorded for these accounts.
b. Rehabilitated
These accounts, whilst being in arrears and considered past due, have paid their last six instalments.
No impairment provision is recorded for these accounts.
c. Arrears b one instalment
These accounts are in arrears by one instalment or less and are considered to be past due.
No impairment provision is recorded for these accounts.
d. Arrears > one instalment
These accounts are in arrears by more than one instalment and carry an impairment provision.
JD Group_Financial Statements 2009
147
Notes to the
Group annual financial statements
Continued
24.
Financial instruments (continued)
24.4
Credit risk management (continued)
Risk analysis – up to date accounts
Class 1
Rm
Class 2
Rm
Class 3
Rm
Class 4
Rm
Total
Rm
2009
Low risk
33
33
28
—
94
Medium risk
321
686
343
99
1 449
High risk
130
275
190
83
678
Total up to date accounts
484
994
561
182
2 221
2008
Low risk
Medium risk
High risk
87
366
87
92
615
216
59
323
138
—
—
—
238
1 304
441
Total up to date accounts
540
923
520
—
1 983
The risk categories have been determined based on the type of credit agreement the Group enters into with its customers.
The Group currently uses the following types:
ED: Existing customer paying a deposit – low risk
EN: Existing customer not paying a deposit – medium risk
ND: New customer paying a deposit – medium risk
NN: New customer not paying a deposit – high risk
The above classifications determine the interest rate that the customer is charged.
24.5
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, which has built in an appropriate
liquidity risk management framework for the management of the Group’s short, medium and long term funding and
liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and
liabilities.
Included below is a listing of additional undrawn facilities that the Group has at its disposal to further reduce liquidity
risk.
All facilities listed are held with reputable banking institutions.
2009
2008
Rm
Rm
Total banking and loan facilities
1 920
1 665
Bank borrowings (note 19)
1 217
1 050
703
615
Banking facilities
Unutilised banking facilities
In addition, the Group has net cash on hand at year end of R725 million (2008: R1 135 million).
148
JD Group_Financial Statements 2009
Financial Statements continued
24.
Financial instruments (continued)
24.5
Liquidity risk management (continued)
The contractual maturity profile of financial liabilities of the Group is analysed further in the tables below.
The contractual payments for interest bearing liabilities include both capital and interest payable.
0–6
months
Rm
7 – 12
months
Rm
> 1 year
Rm
2–5
years
Rm
Total
Rm
350
249
509
478
987
599
1 691
118
1 809
2 041
367
149
1 617
1 008
71
1 766
1 079
2009
Interest bearing long term liabilities
Short term portion of long term liabilities
Trade and other payables
2008
Interest bearing long term liabilities
Short term portion of long term liabilities
Trade and other payables
25.
509
478
3 395
68
325
393
1 157
1 688
68
325
3 238
Employee benefit plans
Retirement benefits
The Group has made provision for pension and provident schemes covering substantially all employees. All eligible
employees are members of either a defined benefit or a defined contribution scheme administered by Alexander Forbes
Financial Services, Old Mutual Employee Benefits Industry Funds Unit or the Social Security Fund in Poland.
One defined benefit scheme and 12 defined contribution schemes are in operation. The assets of these schemes are held
in administered trust funds separate from the Group’s assets. Scheme assets primarily consist of listed shares, property
trust units and fixed income securities. The schemes are governed by the South African Pension Funds Act of 1956 or the
Polish Social Securities System Act of 1998.
The defined benefit fund is valued actuarially at intervals of not more than three years using the projected unit credit
method. The latest statutory actuarial valuation was performed as at 31 December 2007. The information presented below
is extracted from the report on actuarial calculations for IAS 19 (revised) purposes.
In arriving at their conclusion, the actuaries took into account the following reasonable long term estimates:
2009
2008
%
%
5,3
Inflation
6,3
Increase in salaries
7,1
6,3
Increase in pensions
3,1
1,4
Return on investment
9,5
8,8
Discount rate
9,2
8,5
JD Group_Financial Statements 2009
149
Notes to the
Group annual financial statements
Continued
25.
2009
2008
Rm
Rm
3,9
4,5
Current service cost
3,9
4,1
Interest cost
8,2
7,7
(10,1)
(9,9)
1,9
2,6
84,8
86,4
Employee benefit plans (continued)
Retirement benefits (continued)
The actuarially determined fair value of assets of the defined benefit scheme was
R101 million (2008: R106 million) which corresponds with the market value at that date.
This is sufficient to cover the benefits that had accrued to members, allowing for
expected future increases in earnings, amounting to R95 million (2008: R85 million).
Cost recognised
Expected return on plan assets
Asset utilised
Reconciliation of defined benefit obligation
Defined benefit obligation as at 31 August 2008
Current service cost
3,9
4,1
Member contributions
1,7
1,8
Interest cost
Actuarial loss/(gain)
Benefits paid
8,2
7,7
20,8
(1,2)
(23,1)
(12,9)
Risk premiums
(1,2)
(1,1)
Defined benefit obligation as at 31 August 2009
95,1
84,8
106,4
110,6
Reconciliation of fair value of plan assets
Assets at fair market value as at 31 August 2008
Expected return on assets
Contributions
Risk premiums
Benefits paid
Actuarial gain/(loss)
Assets at fair market value as at 31 August 2009
Any deficit as determined by the actuaries is funded either immediately or through
increased contributions to ensure the ongoing soundness of the scheme.
150
JD Group_Financial Statements 2009
10,1
9,9
7,6
6,2
(1,2)
(1,1)
(23,1)
(12,9)
1,1
(6,3)
100,9
106,4
Financial Statements continued
26.
2009
2008
Rm
Rm
Finserve Mauritius Limited
32
29
Prosure Insurance Limited
(2)
(3)
4
4
34
30
(2)
(3)
Related parties
Directors
All dealings with directors have been dealt with elsewhere in this report and the
directors’ remuneration included on pages 102 to 109.
Non-consolidated subsidiaries
The Group’s dealings with its non-consolidated subsidiaries comprise:
Loans
Hi-Fi and Electric City (Zambia) Limited
Interest received
Finserve Mauritius Limited
Interest of directors in contracts
Mr ID Sussman holds a directorship in the following related party:
– Homestyle Group plc, incorporated in the UK, a subsidiary of Steinhoff International Holdings Limited.
Dr Len Konar holds directorships in the following related parties:
– Steinhoff International Holdings Limited which has concluded transactions of approximately R8,0 million (2008: R24,2 million)
with the Group.
– Old Mutual Limited who owns approximately 5% (2008: 4%) of the issued share capital of the Group.
– The South African Reserve Bank which approves any transactions between the Group and its offshore subsidiaries.
Mr ME King holds a directorship in Strate Limited with whom the Group has concluded transactions amounting to
R0,1 million (2008: R0,1 million).
Mr MJ Shaw holds directorships in the following related parties:
– Reunert Limited (Panasonic division) which has concluded transactions of approximately R3 million (2008: R17,9 million)
with the Group and to whom the Group owes an amount of RNil (2008: R0,3 million) at year end.
– Standard Bank Group Limited, one of the bankers to the Group.
The majority of the Group’s corporate legal matters are performed by a company in which Ivan Levy has a controlling
interest. Legal services amounting to R1,2 million (2008: R3,2 million) have been provided to the Group by this company.
Dr HP Greeff held a directorship in Compensation Technologies Consulting (Pty) Ltd which concluded transactions with the
Group amounting to R0,2 million in 2008, which directorship he terminated during the review period.
Mr VP Khanyile holds a directorship in Vodacom SA, a subsidiary of Vodacom Group Limited. Any transactions with the
Vodacom Group are concluded on an arm’s length basis.
JD Group_Financial Statements 2009
151
Notes to the
Group annual financial statements
Continued
26.
2009
2008
Rm
Rm
16
12
3
—
19
12
Related parties (continued)
Key management personnel
Remuneration to key personnel compensation during the year comprised:
Short term employee benefits
Share option gains
Key management personnel comprise the following individuals who were members
of the Group’s executive committee during the year:
IR Child (8 months)
DB Hirsch
JHC Kok
PC Kruger
AP Murray (4 months)
A Neven
GF Pearce
JMWR Pieterse
MJ Richards (3 months)
27.
Share-based payment
The Company provides a share option scheme to its employees through the The JD Group Employee Share Incentive
Scheme as described on page 163. Details regarding the pricing of options granted and the exercising of options, including
vesting periods, are also provided on page 163.
Share options granted before 2 November 2002 have not been accounted for under IFRS 2 Share-based payment (IFRS 2).
Details of the share options accounted for under IFRS 2 are as follows:
Number
of share
options
Weighted
average
exercise
price
Outstanding at beginning of year
8 979 783
47,46
Granted during the year
2 202 000
2009
27,19
Forfeited during the year
(635 089)
(54,08)
Exercised during the year
(467 500)
(26,82)
Outstanding at end of year
10 079 194
43,60
Outstanding at beginning of year
7 076 783
50,58
Granted during the year
2 268 000
2008
37,21
Forfeited during the year
(251 000)
(50,73)
Exercised during the year
(114 000)
(29,72)
Outstanding at end of year
8 979 783
47,46
The options outstanding at 31 August 2009 have an exercise price in the range of R16,19 to R79,83 and a weighted average
contractual life of 3,08 years (2008: 2,44 years).
The weighted average share price at the date of exercise for share options exercised in 2009 was R43,50 (2008: R59,20).
152
JD Group_Financial Statements 2009
Financial Statements continued
27.
Share-based payment (continued)
Assumptions
The fair value of services received in return for share options granted is measured by reference to the fair value of share
options granted. The estimated fair value of the services received is measured based on the assumption that all vesting
conditions are met and all employees remain in service. The pricing model used was a stochastic model, based on the
standard “binomial” options pricing model. The volatility was estimated using the weekly closing share prices over a rolling
four year period.
Fair value of share options and assumptions:
2009
Date of grant
Fair value at measurement date
26 Feb 09
19 Nov 08
R11,39 to
R11,90
R9,37 to
R10,04
Share price at grant date
R30,00
R28,00
Exercise price
R27,00
R25,20
Expected volatility
36,29%
34,95%
Expected dividend yield
4,50%
6,07%
Risk free interest rate
7,66%
8,52%
6 years
6 years
Option life
Date of grant
Fair value at measurement date
Share price at grant date
1 Jun 09
R14,75 to
R15,50
R37,55
Exercise price
R33,80
Expected volatility
36,97%
Expected dividend yield
Risk free interest rate
Option life
4,00%
8,23%
6 years
2008
Date of grant
Fair value at measurement date
26 Feb 08
R13,53 to
R13,84
Share price at grant date
R41,35
Exercise price
R37,21
Expected volatility
30,84%
Expected dividend yield
5,55%
Risk free interest rate
8,64%
Option life
6 years
Fair value of share appreciation rights and assumptions:
2009
Date of grant
21 Aug 09
Fair value at measurement date
R16,27
Share price at grant date
R43,00
Strike price
R41,71
Expected volatility
37,28%
Expected dividend yield
Risk free interest rate
Expected option life
4,00%
7,98%
6 years
JD Group_Financial Statements 2009
153
Notes to the
Group annual financial statements
Continued
28.
Subsequent events
The Group raised an additional R200 million term debt subsequent to the year end date.
No other significant events have occurred in the period between the year end and the date of approval of these annual
financial statements.
29.
Contingent liabilities
Certain Group companies are involved in disputes where the outcome is uncertain. The Group is regularly subject to
evaluations, by the tax authorities, of its direct and indirect taxation filings and in connection with such reviews, disputes
sometimes arise with the taxation authorities. These disputes may not necessarily be resolved in a manner that is
favourable for the Group and the resolution of these disputes could potentially result in an obligation for the Group.
30.
Judgements and estimates
Judgements and estimates are continually evaluated and are based on historical experience and other factors, including
expectation of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal related actual results. The estimates and assumptions that have a significant risk of causing material
adjustment to the carrying amounts of assets and liabilities during the next financial year are discussed below.
Useful lives and residual values
The estimated useful lives for intangible assets with a finite life and property, plant and equipment are:
Intangible assets
Acquired trademarks and capitalised supplier and customer relationships (refer to note 10)
5 – 20 years
Property, plant and equipment
Buildings
18 – 35 years
Leasehold improvements
5 years
Vehicles and forklift trucks
5 – 8 years
Computer hardware and software
4 years
Office equipment, furniture and fittings
4 – 10 years
The estimated useful lives and residual values are reviewed annually taking cognisance of the projected commercial and
economic realities and through benchmarking of accounting treatments in the specific industries where these assets are
used.
Goodwill
The goodwill acquired in a business combination is allocated, at acquisition, to the cash generating unit that is expected
to benefit from that business. Goodwill is assessed for impairment annually, irrespective of whether there is any indication
of impairment or not.
The recoverable amount of the cash generating unit is determined from the value-in-use calculation. The key assumptions
for the value in use calculation are those regarding the discount rates, growth rates and the expected changes to the
selling prices and indirect cost during the period. Management estimated discount rates using pretax rates that reflect
current market assessments of the time value of money and the risk specific to the cash generating unit. The growth rate
is based on the industry growth forecast. Changes in selling prices and direct cost are based on past practices and
expectations of the future changes in the market.
The Group prepared cash flow forecasts derived from the most recent financial budgets approved by management for the
next year and extrapolated cash flows for the following years based on an estimated growth rate as set out below:
Impairment tests for cash generating units contained in goodwill of R455 million:
154
Discount
rate
Forecast
cash flow
Connection Group
16,60%
5 years
Blake & Associates
23,84%
5 years
Maravedi Group
23,84%
5 years
JD Group_Financial Statements 2009
Financial Statements continued
30.
Judgements and estimates (continued)
Intangible assets
The value of acquired trademarks, capitalised supplier relationships and capitalised customer relationships included in
intangible assets is R256 million (2008: R256 million). Intangible assets acquired as part of the Connection Group acquisition
were valued at the acquisition date using the following key assumptions and methodologies:
Discount
rate
Forecast
cash flow
Trademarks – valued using the relief from royalty method
17,50%
20 years
Capitalised supplier relationships – valued using the residual income method
17,00%
5 years
Intangible assets acquired on acquisition of the Blake & Associates Holdings (Pty) Ltd were valued at the acquisition date
using the following key assumptions and methodologies:
Discount
rate
Forecast
cash flow
Blake trademark– valued using the relief from royalty method
23,84%
10 years
Metonomy trademark– valued using the relief from royalty method
Capitalised customer relationships – valued using the Multiperiod
Excess Earnings Methodology
23,84%
5 years
33,84%
10 years
Information database – valued using the cost approach
The estimated useful lives of intangibles assets with a finite life are summarised in note 10. Intangible assets are assessed
for impairment annually, irrespective of whether there is any indication of impairment or not.
Impairment test
Impairment tests typically take into account the most recent management forecast whereafter a reasonable rate of growth
is applied based on market industry conditions. Impairment tests are performed using a discounted cash flow model or a
relief from royalty method. Discount rates used in the discounted cash flow model are based on weighted average cost of
capital, while royalty rates are determined with reference to industry benchmarks.
Impairment tests for cash generating units contained in intangible assets:
Discount
rate
Forecast
cash flow
Hi-Fi Corporation – trademark
17,50%
14 years
Connection Group – trademark
17,50%
16 years
Connection Group – capitalised supplier relationships
17,00%
2 years
Blake – trademark
23,84%
10 years
Metonomy – trademark
23,84%
5 years
Blake – capitalised customer relationships
33,84%
10 years
Blake – information database
23,84%
5 years
Share-based payments
Refer to note 27 for details of judgements and estimates applicable to the determination of share-based payments.
Trade receivables
A provision for bad debts held against instalment sales receivables is raised when there is objective evidence that the asset
is impaired. Factors taken into account to determine impairment of an asset are the level of arrears, part payment of
instalments or missed instalments. Estimated future cash flows, that are discounted at the effective interest rate, are
determined utilising past payment history and actual bad debt written off data.
JD Group_Financial Statements 2009
155
Notes to the
Group annual financial statements
Continued
31.
2009
2008
Rm
Rm
Blake & Associates Holdings (Pty) Ltd (note 31.1)
130
—
Maravedi Group (Pty) Ltd (note 31.2)
104
—
234
—
Property, plant and equipment
48
—
Intangible assets
42
—
Trade and other receivables
72
—
Bank balances and cash
4
—
Interest bearing liabilities
(48)
—
Non-interest bearing liabilities
(7)
—
Deferred taxation
(1)
—
Trade and other payables
(20)
—
Financial liabilities
(19)
—
(5)
—
Business combinations
Details of the fair values of assets acquired for each of the above entities are set out
in the notes below. The Group previously held interests in each of these entities as
described in note 12.
31.1 Blake & Associates Holdings (Pty) Ltd (Blake)
With effect from 1 December 2008 the Group increased its effective interest in Blake
from 27,5% to 55%. A further 15% was acquired on 17 March 2009, increasing the
Group’s controlling shareholding to 70%. The fair value of assets and liabilities acquired
were determined as follows:
Taxation
Fair value of net assets acquired
Minority interest
Goodwill
Cost of investment
Bank balances and cash
Cash consideration
66
—
(24)
—
92
—
134
—
(4)
130
—
—
Carrying value of the assets and liabilities immediately before the business
combination:
Non-current assets
Current assets
59
76
Non-current liabilities
(55)
Current liabilities
(44)
36
The carrying value of the assets and liabilities before the combination equalled the fair value as disclosed except for the
intangible assets of R42 million and a deferred taxation liability of R12 million. Intangible assets were fair valued on acquisition
and comprise trademarks, customer relationships, an IT database and software, none of which were recorded in the accounting
records of Blake, as they were internally generated intangible assets. The deferred taxation liability arises on the fair valuation
of the intangible assets.
Goodwill arising on acquisition has been allocated between four cash generating units within the Blake operational
structure, three of which are in South Africa and one located in Mauritius.
Revenue of R275 million and profit after taxation of R17 million have been included in the Group’s current year results. Equity
accounted losses included up to the date of acquiring a controlling interest have been disclosed in note 12.1.
156
JD Group_Financial Statements 2009
Financial Statements continued
31.
2009
2008
Rm
Rm
Property, plant and equipment
13
—
Deferred taxation
12
—
Trade and other receivables
98
—
Interest bearing liabilities
(5)
—
Trade and other payables
(27)
—
Life reserve fund
(1)
—
Taxation
(1)
—
(81)
—
Business combinations (continued)
31.2 Maravedi Group (Pty) Ltd (Maravedi)
With effect from 10 December 2008 the Group increased its effective interest in
Maravedi from 42,7% to 90,5%. The fair value of assets and liabilities acquired were
determined as follows:
Bank overdraft
Fair value of net assets acquired
8
—
Minority interest
(1)
—
Goodwill
16
—
Cost of investment
23
—
Bank balances and cash
81
—
104
—
Non-current assets
25
—
Current assets
98
—
Non-current liabilities
(5)
—
(110)
—
Cash consideration
Carrying value of the assets and liabilities immediately before the business
combination:
Current liabilities
8
—
The carrying value of the assets and liabilities before the combination equalled the fair value as disclosed.
Revenue of R125 million and a loss after taxation of R12 million have been included in the Group’s current year results.
Equity accounted losses up to the date of acquiring a controlling interest have been disclosed in note 12.2.
JD Group_Financial Statements 2009
157
Notes to the
Group annual financial statements
Continued
32.
New accounting pronouncements
At the date of approval of these financial statements, there are Standards and Interpretations in issue but not yet effective.
These include the following Standards and Interpretations:
3
3
3
3
3
3
3
3
3
3
3
3
IFRS 2 – Share-based payments
IFRS 3 – Business Combinations
IFRS 8 – Operating segments
Amendment to IAS 1 – Presentation of financial statements
IAS 23 – Borrowing Costs
IAS 27 – Consolidated and Separate Financial Statements
IAS 28 – Investments in Associates
IAS 31 – Interests in joint ventures
IAS 39 – Financial Instruments: Recognition and Measurement
IFRIC 15 – Agreements for the Construction of Real Estate
IFRIC 17 – Distributions of Non-cash Assets to Owners
IFRIC 18 – Transfers of Assets from Customers
On 22 May 2008 the International Accounting Standards Board (IASB) issued its latest Standard titled “Improvements to
International Financial Reporting Standards 2008”. The Standard included 35 amendments to various standards. Further
amendments to several standards were issued by the IASB between March and June 2009.
The Group is in the process of assessing the potential impact, if any, that the adoption of these Standards and Interpretations
may have on its future financial performance or disclosures in the annual financial statements.
158
JD Group_Financial Statements 2009
Financial Statements continued
Segmental analysis – geographical
Neighbouring
South Africa
countries
Europe
Total
2009
Revenue
Rm
11 591
488
843
12 922
Operating profit
Rm
545
43
58
646
Depreciation
Rm
148
2
5
155
Total assets
Rm
8 367
314
245
8 926
Total current liabilities
Rm
2 542
100
123
2 765
Capital expenditure
Rm
203
4
11
218
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
%
4,7
8,8
6,9
5,0
Rm
8 028
400
816
9 244
%
86,9
4,3
8,8
Rm
3 086
99
100,0
3 185
%
38,4
24,7
Rm
4 942
301
816
%
61,6
75,3
100,0
65,5
999
26
69
1 094
11 603
18 769
12 217
11 812
19 885
517
845
21 247
R000
583
944
998
Rm
4 842
117
Revenue
Operating profit
Depreciation
Total assets
Total current liabilities
Capital expenditure
Rm
Rm
Rm
Rm
Rm
Rm
11 369
687
125
8 091
2 932
202
441
61
2
338
74
2
800
49
5
244
154
6
12 610
797
132
8 673
3 160
210
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
Cash sales
Percentage of total
Number of stores
Revenue per store
Number of employees
Revenue per employee
Instalment sale receivables
%
Rm
%
Rm
%
Rm
%
6,0
8 123
88,0
2 953
36,3
5 170
63,7
1 006
11 301
17 712
642
4 519
13,8
356
3,4
108
30,3
248
69,7
27
16 333
559
789
117
6,1
796
8,6
6,3
9 275
100,0
3 061
33,0
6 214
67,0
1 095
11 516
18 989
664
4 636
Cash sales
Percentage of total
Number of stores
Revenue per store
R000
Number of employees
Revenue per employee
Instalment sale receivables
34,5
6 059
608
4 959
2008
R000
R000
Rm
796
100,0
62
12 903
718
1 114
JD Group_Financial Statements 2009
159
Segmental analysis – business divisions
Traditional Retail
Year ended 31 August
Financial Services
2009
2008
2009
2008
Revenue
Rm
5 203
5 243
2 980
3 073
Operating profit
Rm
202
111
351
622
Depreciation
Rm
43
50
9
Total assets
Rm
1 003
1 056
4 247
4 019
Total current liabilities
Rm
1 051
1 096
66
87
Capital expenditure
Rm
40
44
15
11,8
Operating margin
Total sale of merchandise
%
3,9
2,1
Rm
4 473
4 488
Share of Group sale of merchandise
Credit sales
%
48,4
48,4
Rm
3 185
3 061
Percentage of total
Cash sales
%
71,2
68,2
Rm
1 288
1 427
%
28,8
31,8
Percentage of total
Number of stores
Revenue per store
R000
Retail square meterage
Revenue per square metre
Rand
Number of employees
Revenue per employee
R000
20,2
935
953
935
953
5 565
5 502
3 187
3 225
505 843
515 888
56 200
57 300
10 286
10 163
8 037
9 470
4 895
5 100
647
554
609
603
4 638
4 636
Instalment sale receivables
Rm
Impairment provision
Rm
641
617
Bad debts written off
Rm
1 044
862
Receivables’ arrears
Rm
889
898
%
11,8
12,9
Deposit rate on credit sales
Collection rate
Average length of the book
%
6,0
6,6
Months
16,7
15,2
#Elimination of interdivisional origination fees
*Blake and Maravedi became subsidiaries during the current financial year
160
JD Group_Financial Statements 2009
Financial Statements continued
Cash Retail
International
New Business Development
2009
2008
2009
2008
2009
3 976
4 013
843
800
400
218
230
58
49
36
31
5
897
909
515
59
Group
2009
2008
(480)#
(519)#
(3)
(180)
(215)
5
24
38
46
155
132
245
244
486
2 048
2 445
8 926
8 673
703
124
154
532
477
1 120
2 765
3 160
48
11
6
17
76
112
218
210
5,5
5,7
6,9
6,1
3 955
3 991
816
796
42,8
43,0
8,8
8,6
2008*
Corporate
(0,8)
2009
2008
12 922
12 610
646
797
5,0
6,3
9 244
9 275
100,0
100,0
3 185
3 061
34,5
33,0
6 059
6 214
3 955
3 991
816
796
100,0
100,0
100,0
100,0
65,5
67,0
90
80
69
62
1 094
1 095
44 178
50 163
12 217
12 903
11 812
11 516
83 722
77 051
46 757
44 063
692 522
694 302
47 491
52 082
18 029
18 156
18 659
18 162
3 575
3 122
845
718
3 343
21 247
18 989
1 112
1 285
998
1 114
120
608
664
321
4 959
4 636
78
719
617
13
1 057
862
74
963
898
—
11,8
12,9
552
579
5,4
6,0
6,6
18,6
16,8
15,2
JD Group_Financial Statements 2009
161
Share incentive trust
The JD Group Employee Share Incentive Scheme
2009
2008
Number of shares
Shares available
At beginning of year
Additional shares made available/(unavailable) to the directors in terms of the scheme
Options granted
Options forfeited
Shares no longer available to the directors due to the phasing out of The JD Group
Employee Share Incentive Scheme
At end of year
15 990 967
19 291 867
608 000
(1 283 900)
(2 202 000)
635 089
(15 032 056)
(2 268 000)
251 000
—
—
15 990 967
At beginning of year
9 584 033
7 708 133
Options granted
2 202 000
2 268 000
Share options granted
Options forfeited
(635 089)
(251 000)
Options exercised
(608 000)
(141 100)
At end of year
Number of participants
10 542 944
9 584 033
180
158
Shares available for utilisation
At beginning of year
Shares acquired in the open market
Options exercised
At end of year
7 364 892
4 505 992
—
3 000 000
(608 000)
(141 100)
6 756 892
7 364 892
Rm
Rm
Loan by the Company to the trust
410
429
Fair value of shares
290
226
162
JD Group_Financial Statements 2009
Financial Statements continued
Salient features of The JD Group
Employee Share Incentive Scheme trust deed
1.
Purpose
The JD Group Employee Share Incentive Scheme, which was approved by the directors on 29 March 1996, amended by special
resolution on 31 January 2001 and amended again on 11 August 2003, served as an incentive to current employees (including
executive and non-executive directors) of JD Group to render services to the Company by giving them the opportunity to
acquire ordinary shares and enabling them to share in the wealth of the Company. This scheme has become redundant and
is being phased out. No further options will be issued under this scheme.
2.
Option price
The price payable by a participant upon the exercise of share options in terms of this scheme, is an amount equal to 90% of
the closing price at which shares of the Company are traded at the close of business on the JSE on the trading day immediately
preceding the date upon which the board has granted the relevant option.
Each share option confers the right on the holder thereof to subscribe for or purchase one share at the option price.
3.
Exercise of share options
Share options may not be exercised until after a period, calculated from the date of acceptance of the offer, as follows:
3.1 More than two years shall have elapsed, in which event not more than 25%.
3.2 More than three years shall have elapsed, in which event not more than 50% cumulatively.
3.3 More than four years shall have elapsed, in which event not more than 75% cumulatively.
3.4 More than five years shall have elapsed, in which event all of the relevant share options may be exercised, but within
seven years, provided that the board may, subject to the lapsing of a share option, permit exercise dates contemplated
above to be anticipated or postponed to such other date(s) and to the extent determined by the board.
4.
Share options granted
Date of grant
Price
(cents)
Number of
shares at
31 August 2009
25 May 2000
2 May 2001
30 May 2002
20 February 2003
25 July 2003
10 September 2003
25 February 2004
19 May 2004
24 May 2005
7 June 2005
30 November 2005
7 February 2007
31 July 2007
26 February 2008
19 November 2008
26 February 2009
1 June 2009
2 984
2 720
1 428
1 619
2 342
2 803
3 690
3 510
5 625
5 400
7 250
7 983
6 363
3 721
2 520
2 700
3 380
250 000
200 000
13 750
655 000
45 000
180 000
237 500
1 352 500
283 750
616 000
743 944
964 000
824 000
2 003 000
201 000
1 858 500
115 000
10 542 944
JD Group_Financial Statements 2009
163
Salient features of The JD Group
Employee Share Incentive Scheme trust deed
Continued
5.
Dividends and voting rights
Dividends in respect of shares held in terms of the credit sale scheme are payable to the trust and are credited to the
participant’s loan account until such time as the shares have been paid for in full by the participant, whereafter the dividends
accrue and are paid to the participant.
Voting rights in respect of shares held in terms of the credit sale scheme vest with the trustees until such time as the shares
have been paid for in full by the participant.
6.
Principal terms of loans
6.1 Loans between the Company and the trust:
Loans bear interest at rates agreed to between the trustees and the Company from time to time.
6.2 Loans between the trust and participants:
Loans bear interest at rates determined by the trustees from time to time.
164
JD Group_Financial Statements 2009
Financial Statements continued
Salient features of The JD Group
Share Appreciation Rights Scheme
(the SAR Scheme)
1.
Overview and purpose
The SAR Scheme, which was approved by shareholders on 12 August 2009, is a new generation incentive scheme with the
overarching goal of creating value to shareholders and financial benefits for participants. The SAR Scheme is structured to
optimise JD Group’s interests, as only the appreciation value of the share price is settled. Compared to a normal share option
scheme, this reduces the dilutive impact considerably. The SAR Scheme also facilitates the attraction and retention of key
talent.
2.
Mechanics of the SAR Scheme
Participants receive share appreciation rights as opposed to share options. Share appreciation rights are rights to receive
shares equal to the value of the difference between the grant price and the exercise price of the instrument. Of critical
importance is that the vesting of rights is subject to the achievement of challenging predetermined performance conditions.
SARs are granted at market value and against a face value of the average total cost to company (CTC) of an employee, adjusted
to make provision for unique and individual retention risk and other circumstances and factors. Certain maximum thresholds
of awards apply, namely that no employee, save for those on Patterson job grade F or higher, may receive an allocation in
excess of 200% of the employee’s annual CTC. The maximum number of shares that may be allocated to a participant, inclusive
of all unvested awards granted to that participant in respect of any and all incentive schemes in operation by the Group, may
not exceed 1% of JD Group’s total issued share capital from time to time.
When rights are exercised, the Company settles the difference between the then current market price and the grant price.
Consequently, participants require no financial assistance to acquire any shares, neither at the moment of grant nor upon
exercising of the SAR. Furthermore, participants will not be liable for the payment of tax in respect of the SAR Scheme prior
to the realisation of any benefits.
Whilst the JD Group Remuneration Committee (RemCom) has been mandated to propose awards and thresholds in respect
of executive directors, Exco shall act accordingly in respect of other employees. Eligible participants include executive
directors, but exclude non-executive directors.
The primary intent is to settle the benefits ensuing from a vested SAR by purchasing shares in the market for delivery to
participants. However, the Company retains the right to settle the benefits in any other manner that may be in the best interest
of the Company. Circumstances will in each instance dictate the most appropriate mode of settlement.
3.
Manager of the SAR Scheme
The operation of the SAR Scheme is administered by the RemCom, a subcommittee of the JD Group board (the board). The
RemCom, exclusively comprising non-executive directors, has an independent non-executive director as chairman.
RemCom manages the SAR Scheme in accordance with the rules of the SAR Scheme and operates under a mandate and
directives from the board, which include, amongst others, to make ad hoc and annual grants to participants.
RemCom may not change the rules of the SAR Scheme in a way that would abrogate or adversely affect the subsisting rights
of a participant, unless it has obtained the written consent of participants who are entitled to acquire 75% of the shares.
Material changes of substance to the SAR Scheme rules are subject to shareholders’ approval in general meeting.
In terms of its mandated discretion, RemCom has procured the services of Compensation Technologies (Pty) Ltd and
JD Group Secretariat to assist with the task of operating and administering the SAR Scheme.
The board has a supervisory function and may issue directives and mandates to the RemCom and other forums as it deems
appropriate from time to time in terms of the rules of the SAR Scheme.
4.
Performance criteria and assessments
The performance criteria are set by the RemCom in a forward looking manner, subject to board approval. The terms of the
criteria, including historic performance against benchmarks, are disclosed in the annual report. In line with global best practice,
the performance conditions are applicable to three, four and five year periods and, whilst stretched, they are both simple to
understand and achievable in order to maximise the retention effect and motivational value. Consequently, the board approved
headline earnings per share (HEPS) growth, measured against CPI to ensure a real return in excess of inflation, as the basic
performance condition. An additional condition for the vesting of rights is the achievement of a minimum growth rate in net
asset value (NAV) per share, calculated as if dividends are reinvested over the vesting period.
The following performance criteria have been set by the RemCom and approved by the board in respect of SAR Scheme offer
number 1:
3 2011 HEPS of 600 cents and a minimum compounded growth in NAV of 11%, or
3 2012 HEPS of 720 cents and a minimum compounded growth in NAV of 12%, or
3 2013 HEPS of 860 cents and a minimum compounded growth in NAV of 13%.
The aforementioned HEPS and NAV targets are aligned with the Group’s strategic growth targets.
JD Group_Financial Statements 2009
165
Salient features of The JD Group
Share Appreciation Rights Scheme
(the SAR Scheme)
Continued
5.
SAR Scheme offer number 1
On 12 August 2009 the shareholders placed 2,5 million shares (1,47% of the issued share capital) under the control of the
directors for purposes of the SAR Scheme. The RemCom granted the following SARs to 15 participants, based on the volume
weighted average market price of JD Group’s ordinary shares quoted on the JSE Limited as at 20 August 2009:
Date of grant
21 August 2009
6.
Price (cents)
Number of
SARs
allocated
Number of
shares
available for
utilisation
4 171
1 105 000
1 395 000
Vesting and exercise of SARs and other rights
The vesting of SARs is subject to the achievement of set performance criteria, which are aligned to the Group’s strategic goals
and which are unique for each grant. A vesting period of three years and an expiry date, seven years after the date of grant,
apply.
At the end of the vesting period i.e. three years after the date of grant, RemCom will assess whether fulfilment of the
performance criteria has occurred. Retesting of the performance conditions is allowed on the fourth and fifth anniversary from
the date of grant. In the instance that the performance criteria have not been achieved by then, the SARs will not vest and the
rights will lapse and be of no effect.
No purchase price is payable by a participant following the vesting and exercise of a SAR. The appreciation value of the share
price is settled by the Company i.e. the difference between the then current market price and the grant price is settled.
Vested SARs that have been both exercised and released from the SAR Scheme shall rank pari passu in all respects with
existing JD Group ordinary shares in issue. From the release date onwards, the beneficial owner of such shares will qualify for
dividends from the Company and will have full voting rights in respect of JD Group’s ordinary shares.
Shares set aside for purposes of the SAR Scheme may not be voted or be taken account of at general meetings for resolution
approval purposes or for purposes of determining categorisations as set out in the JSE Listings Requirements.
7.
Principal terms of loans
7.1 Loans between the Company and participating companies
Loans between the Company and participating companies will bear interest at rates as agreed upon between the
Company and the participating companies from time to time.
7.2 Loans between the Company and participants
There are no loans between the Company and participants of the SAR Scheme.
166
JD Group_Financial Statements 2009
Financial Statements continued
JD Group Limited
– Company financial statements
The Company operates as an investment holding company only. All trading and banking is conducted through its wholly owned
subsidiaries. Consequently, no cash flow statement is presented. The statement of changes in equity has not been prepared as the
movement is evident from the Company income statement and Group statement of changes in equity.
2009
2008
Rm
Rm
Dividend received from JDG Trading (Pty) Ltd
11
30
Interest (paid)/received
(1)
Notes
Income statement
Impairment provision released/(raised) – loan to share incentive trust
1
1
83
(203)
Management fees received
3
—
Other operating expenses
(3)
(5)
Profit/(loss) before taxation
93
(177)
6
23
87
(200)
Taxation – secondary taxation on companies
Profit/(loss) attributable to shareholders
Balance sheet
Assets
Investment in JDG Trading (Pty) Ltd – shares at cost
Loan to JDG Trading (Pty) Ltd
2
Loans to other Group companies
Interest in subsidiary company – JDG Trading (Pty) Ltd
Loan to share incentive trust
Bank balances
Total assets
1 091
1 091
1 003
1 052
1
—
2 095
2 143
276
212
3
3
2 374
2 358
1 779
1 779
524
507
Equity and liabilities
Share capital and premium
3
Retained income
Opening balance
Profit/(loss) attributable to shareholders
Distribution to shareholders
Shareholders for dividend
Other liabilities
Total equity and liabilities
3
507
971
87
(200)
(70)
(264)
70
70
2 373
2 356
1
2
2 374
2 358
Notes
1. Due to current market conditions, the underlying fair value of the shares held by the share incentive trust amounted to
R120 million (2008: R203 million) less than the carrying value of the loan to the trust at 31 August 2009.
2. The loan to JDG Trading (Pty) Ltd is interest free with no fixed date of repayment.
3. Refer to the Group statement of changes in equity on page 126.
4. The Company has issued guarantees and/or sureties as to the providers of finance to its direct subsidiary, JDG Trading (Pty) Ltd,
for repayment of bank borrowings (disclosed in note 19) for the amount of R968 million (2008: R524 million).
JD Group_Financial Statements 2009
167
Subsidiaries
Percentage interest held
Country of
2009
2008
incorporation
%
%
South Africa
100
100
Courts Megastore (Pty) Ltd*
South Africa
100
100
Connection Group Holdings (Pty) Ltd*
South Africa
100
100
JD Group Asset Financing (Pty) Ltd†
South Africa
100
100
JD Group International (Pty) Ltd‡
South Africa
100
100
JDG Investment Holding Company (Pty) Ltd‡
South Africa
100
100
JDG Micro Insurance Ltd@
South Africa
100
100
JDG Micro Life Ltd@
South Africa
100
100
Profurn Ltd‡
South Africa
100
100
Protea Furnishers S.A. (Pty) Ltd*
South Africa
100
100
Supreme Furnishers (Pty) Ltd‡
South Africa
100
100
Blake & Associates Holdings (Pty) Ltd!
South Africa
70
27,5
42,7
Notes
Direct subsidiary
JDG Trading (Pty) Ltd*
Indirect subsidiaries
Maravedi Group (Pty) Ltd&
South Africa
90,5
The Netherlands
100
100
Poland
100
100
Aazad Electrical Construction (Pty) Ltd*
Botswana
100
100
Barnetts Furnitures (Botswana) (Pty) Ltd*
Botswana
100
100
Hi Fi & Electric Warehouse (Pty) Ltd*
Botswana
100
100
JD Group (Botswana) (Pty) Ltd*
Botswana
100
100
JD Group (Lesotho) (Pty) Ltd*
Lesotho
100
100
Supreme Furnishers (Lesotho) (Pty) Ltd*
Lesotho
100
100
Mozambique
100
100
JD Financial Services (Pty) Ltd
Namibia
100
JD Group (Namibia) (Pty) Ltd*
Namibia
100
100
Protea Furnishers (Namibia) (Pty) Ltd*
Namibia
100
100
Supreme Furnishers (Namibia) (Pty) Ltd*
Namibia
100
100
Barnetts (Swaziland) (Pty) Ltd*
Swaziland
100
100
JD Group (Swaziland) (Pty) Ltd*
Swaziland
100
100
JD Group Europe B.V.ø
Abra S.A.*
Profurn (Mocambique) Limitada*
Non-consolidated subsidiaries
Finserve Mauritius Ltd
4
Mauritius
100
100
Prosure Insurance Ltd
4
Mauritius
100
100
Notes
1. All the above are unlisted companies.
2. Activities of subsidiaries
* Retailers of household furniture, appliances and home entertainment products.
Asset financing company.
‡
Investment holding company.
@
Insurance companies.
!
Contact centre services company.
&
Microlending company.
ø
European investment holding company.
†
3. A list of dormant and name protection companies is available for inspection by members at the registered office of the Company.
4. The winding up and deregistration of these non-trading companies was delayed until resolution of outstanding taxation matters.
168
JD Group_Financial Statements 2009
Financial Statements continued
Issued share capital
2009
Shares
2008
Currency*
Currency*
655 660
655 660
1 000
1 000
1 753 041
1 753 041
200
200
11
11
100
100
20 000 000
70
25 000 000
70
543 565
543 565
30 000
30 000
224
224
1 001
1 001
1 050
1 050
18 151#
18 151#
44 090 820
44 090 820
100
100
10
10
100
100
100
100
100
100
1 000
1 000
842 500
842 500
Direct interest of holding company
Indebtedness
2009
2008
2009
2008
Rm
Rm
Rm
Rm
1 091
1 091
1 003
1 052
100
100
100
1
1
1
1
200
200
2
2
1
1
100 000
100 000
*Reflected in local currency (Mauritius in US dollars).
#
Reflected in euro.
JD Group_Financial Statements 2009
169
Annexure A – Insurance businesses
2009
2008
Rm
Rm
Provision for unearned premiums
7
—
Provision for outstanding claims, including IBNR
4
—
11
—
Provision for unearned premiums
6
—
Provision for outstanding claims, including IBNR
2
—
8
—
19
—
Cash on call
45
—
Cash at bank
19
—
64
—
Gross premiums written
50
—
Provision for unearned premiums
(7)
—
Earned premiums
43
—
Gross premiums written
57
—
Provision for unearned premiums
(6)
—
Earned premiums
51
—
Total premium income
94
—
1. Liabilities under insurance contracts
1.1 Short term operation
1.2 Long term operation
Total liabilities
It is expected that all insurance contract liabilities will be settled within 12 months
from year end.
The Group believes that the liabilities for claims reported in the balance sheet is
adequate. However, it recognises that the process of estimation is based upon
certain variables and assumptions which could differ when the claims arise.
The above liabilities are included in “Trade and other payables” in the Group’s
balance sheet.
2. Financial assets
Neither the short term nor the long term insurance business had any investments other
than cash and cash equivalents at year end. The following balances were included in the
Group’s bank balances and cash:
3. Revenue
Premium income is included in the Group’s “Financial services” revenue category and
comprised the following:
3.1 Short term operation
3.2 Long term operation
170
JD Group_Financial Statements 2009
Financial Statements continued
4. Insurance risk management
Risk management objectives and policies for mitigating risk
The primary insurance activity carried out by the insurance operation assumes the risk of loss from persons that are directly
subject to the risk. The insured risks are directly associated with furniture and equipment acquired by the policyholder on credit
terms from furniture retailers within the JD Group.
The theory of probability is applied to the pricing and provisioning for the portfolio of insurance contracts. The principal risk to
the operation is pricing for the relevant insurance contracts written. Pricing risk is considered to be low due to the low sums
insured and the short duration of the indemnity period. All contracts are renewable monthly.
The operation manages its insurance risk through underwriting limits, approval procedures for transactions and by reviewing its
pricing methodology regularly. The credit risk is low due to the credit worthiness of the policyholder being assessed at point of
sale by the furniture retailer.
Underwriting strategy
The operation’s underwriting strategy is to ensure a balanced portfolio and is based on a large portfolio of similar risks over a
large geographical area. This reduces the variability of the outcome.
Terms and conditions of insurance contracts
The short term operation currently offers a single product with two different indemnity options. The insurance contract protects
the policyholder against physical loss or damage of the insured movable asset.
The long term operation offers a single product with two different indemnity options. The insurance contract protects the
policyholder against the financial obligations from the credit sale agreement in the event of death, disability or retrenchment.
Claims development
The operation is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after
the end of the contract term, subject to predetermined time scales dependent on the nature of the insurance contract. The
operation is therefore exposed to the risk that claims reserves will not be adequate to fund historic claims (runoff risk). As it is
the businesses’ first year of operation, the runoff risk is minimal.
The operation’s insurance contracts are classified as ‘short tailed’, meaning that any claim is settled within a year after the
loss date.
5. Financial risk management
Transactions in financial instruments may result in the operation assuming financial risks. These include market risk, interest rate
risk, credit risk and liquidity risk. Each of these financial risks is described below, together with a summary of the ways in which
the operation manages these risks.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect
the operation’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
The operation has no significant market risk exposure due to the nature and duration of its financial instruments. The operation
does not transact in foreign currency.
Credit risk
Credit risk is the risk that a counterparty will be unable to pay amounts in full when due.
The operation structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups
of counterparties. Such risks are subject to an annual or more frequent review.
The major concentration of credit risk arises from the operation’s cash balances. Reputable financial institutions are used for
investing and cash handling purposes. Cash balances are placed with five reputable banking institutions.
Liquidity risk
The operation is exposed to daily calls on its available cash resources mainly from claims arising. Liquidity risk is the risk that
cash may not be available to pay obligations when due at a reasonable cost. Currently all cash and cash equivalents are
available on call.
JD Group_Financial Statements 2009
171
Annexure A – Insurance businesses
Continued
5. Financial risk management (continued)
Capital management
The operation manages its capital base to achieve a prudent balance between maintaining capital ratios to support business
growth and confidence, and providing competitive returns to shareholders. The capital management process ensures that the
operation maintains sufficient capital levels for legal and regulatory compliance purposes. The operation ensures that its actions
do not compromise sound governance and appropriate business practices and it eliminates any negative effect on payment
capacity, liquidity or profitability.
Long term operation
The capital adequacy requirement is determined according to generally accepted actuarial principles in terms of the guidelines
issued by the Actuarial Society of South Africa. It is an estimate of the minimum capital that will be required to provide for future
experience that is more adverse than that assumed in the calculation of policyholder liabilities. As at 31 August 2009, the
operation’s capital adequacy requirement is R10 million and the ratio of excess assets to capital adequacy requirements is
4.1 times.
Short term operation
The operation submits quarterly and annual returns to the Financial Services Board in terms of the Short-term Insurance Act,
1998. The company is required at all times to maintain a statutory surplus asset ratio as defined in the Short-term Insurance
Act.
6. Judgements and estimates
Claims made under insurance contracts
The operation’s estimates for reported and unreported losses and establishing resulting provisions are continually reviewed
and updated, and adjustments resulting from this review are reflected in income. The process relies upon the basic assumption
that past experience, adjusted for the effect of current developments and likely trends, is an appropriate basis for predicting
future events.
Process used to determine the assumptions
The process used to determine the assumptions is intended to result in estimates of the most likely or expected outcome. The
sources of data used as input for the assumptions are internal, using detailed studies that are carried out annually. The
assumptions are checked to ensure that they are consistent with observable market prices or other published information.
The nature of the business makes it easy to predict with certainty the likely outcome of claims and the ultimate cost of notified
claims. Each notified claim is assessed on a separate, case by case basis with due regard to the claim circumstances, information
available from loss adjusters and historical evidence of the size of similar claims. Case estimates are reviewed regularly and are
updated as and when new information arises. The provisions are based on information currently available. However, the ultimate
liabilities may vary as a result of subsequent developments.
172
JD Group_Financial Statements 2009
Analysis of shareholders
Geographical location of shareholders
South Africa
United States of America
United Kingdom
Luxembourg
Denmark
Other
Size of holding
1 – 1 000
1 001 – 10 000
10 001 – 100 000
100 001 – 1 000 000
Over 1 000 000
Category of shareholders
Banks
Brokers
Insurance companies
Investment companies
Mutual funds
Other companies and corporate bodies
Other managed funds
Pension funds
Private investors
Share incentive scheme
Non-public shareholders
(included above)
Directors
Share incentive scheme
Registration
Materialised
Dematerialised
To the best of the Company’s knowledge:
Beneficial shareholders with a holding of 3% or more
Government Employees Pension Fund
Liberty Life Assurance of Africa Ltd
Public Investment Corporation
Old Mutual Life Assurance Company SA
JD Group Limited Share Incentive Trust
Sanlam
Fund managers with a holding of 5% or more
Old Mutual Investment Group (South Africa) (Pty) Ltd
STANLIB Asset Management Ltd
Sanlam Investment Management (Pty) Ltd
Investec Asset Management (Pty) Ltd
Public Investment Corporation
Number of
shareholders
% of
total
Number of
shares
% of
total
3 754
57
52
8
3
38
95,9
1,5
1,3
0,2
0,1
1,0
118 817 549
35 675 180
10 346 979
2 260 335
1 258 692
2 141 265
69,7
20,9
6,1
1,3
0,7
1,3
3 912
100,0
170 500 000
100,0
2 681
724
313
159
35
68,5
18,5
8,0
4,1
0,9
829 352
2 275 472
11 855 121
46 955 899
108 584 156
0,5
1,3
7,0
27,5
63,7
3 912
100,0
170 500 000
100,0
93
34
37
41
207
209
428
200
2 662
1
2,4
0,9
1,0
1,0
5,3
5,3
10,9
5,1
68,1
—
44 858 804
5 937 513
22 591 914
21 576 034
34 930 850
876 675
4 464 268
26 214 129
2 292 921
6 756 892
26,3
3,5
13,3
12,7
20,5
0,5
2,6
15,4
1,3
3,9
3 912
100,0
170 500 000
100,0
4
1
0,1
—
285 856
6 756 892
0,2
3,9
5
0,1
7 042 748
4,1
319
3 593
8,1
91,9
87 721
170 412 279
0,1
99,9
3 912
100,0
170 500 000
100,0
% held
11 519 751
9 994 101
9 345 057
8 099 410
6 756 892
5 761 047
6,8
5,9
5,5
4,7
3,9
3,4
51 476 258
30,2
15 055 503
14 215 055
13 344 969
11 551 876
11 223 051
8,8
8,3
7,8
6,8
6,6
65 390 454
38,3
JD Group_Annual Report 2009
173
Notice of annual general meeting
JD GROUP LIMITED
2.1 Based on the fact that the retiring directors have
(Registration number 1981/009108/06)
made themselves available for re-election, it is
(Incorporated in the Republic of South Africa)
proposed that members re-elect the following
JSE code: JDG ISIN code: ZAE000030771
directors who, in terms of the articles, are required to
(“the Company”)
retire by rotation at the AGM:
2.1.1 KR Chauke;
Notice is hereby given that the annual general meeting (AGM)
of the Company’s shareholders will be held in the David
Sussman Auditorium, Ground Floor, JD House, 27 Stiemens
Street, Braamfontein, Johannesburg on Wednesday, 3 February
2010 at 08:00 to conduct the following business:
2.1.2 IS Levy;
2.1.3 M Lock; and
2.1.4 MJ Shaw.
2.2 No casual vacancies were filled by the board since
the last AGM and consequently members need not
1. Ordinary resolution number 1 – adoption of the
annual financial statements and sanctioning of
dividend
confirm any appointments.
An abbreviated curriculum vitae of each of the directors
is set out on pages 14 and 15 of this annual report.
To receive, consider and adopt the consolidated annual
financial statements of JD Group Limited and its
3. Ordinary resolution number 3 – renewal of the
subsidiaries (“the Group”) and of the Company for the
authority to place the Company’s unissued
financial year ended 31 August 2009, including the
shares under the control of the directors
directors’ report and the report of the independent
auditors therein, as well as sanctioning of the following
dividend for the year:
3 Dividend number 51 of 41 cents per share, paid on
14 December 2009.
With the implementation of the Share Appreciation Rights
(SAR) Scheme on 12 August 2009, an undertaking was
given by management, which was approved by the
members, that not more than 5% of the Company’s
unissued capital would be placed under the control of the
directors and that such shares will be utilised solely for
2. Ordinary resolution number 2 – re-election of
are requested to consider and, if deemed fit, to renew
To elect directors of the Company in terms of prevailing
and pass with or without modification, the following
legislation and the Company’s articles of association (“the
ordinary resolution in order to provide the directors of the
articles”) as follows:
Company with flexibility to issue the unissued ordinary
3 In accordance with the articles, at least one third of the
directors shall retire, being those longest in office since
174
purposes of the SAR Scheme. Consequently, shareholders
directors
shares of the Company for purposes of the SAR Scheme
as and when suitable situations arise:
their last rotation at the date of the annual general
“Resolved that 2 000 000 (two million) of the Company’s
meeting. Such directors may offer themselves for
authorised but unissued ordinary shares, equivalent to
re-election.
1,17% of the Company’s current issued capital, be placed
3 In accordance with the articles, all director appointments
under the control of the directors, who are hereby
made by the board since the previous annual general
authorised, subject to the requirements of the Company’s
meeting require confirmation by shareholders.
articles, the Companies Act, No 61 of 1973, as amended
3 In accordance with legislation, all appointments of
(“the Companies Act”), the Listings Requirements of the
directors shall be effected by individual stand alone
JSE Limited (“the JSE Listings Requirements”), to allot and
resolutions, unless the members at the meeting
issue such ordinary shares on any such terms and
unanimously resolve otherwise.
conditions as they deem fit in the best interest of the
JD Group_Annual Report 2009
Company. This authority shall remain in force until the
3 for each risk management committee
meeting chaired – R25 000
next annual general meeting of the Company as a general
authority in terms of section 221(2) of the Companies
3 of the remuneration committee, per annum
Act.”
– R25 000
The directors may apply this mandate in respect of the
3 of the nominations committee, per annum
– R25 000
SAR Scheme only.
3 of the JD Group Defined Benefit Pension
4. Ordinary resolution number 4 – appointment of
Fund – nil.”
auditors and auditors’ remuneration
4.1 To reappoint Deloitte & Touche as independent
6. Special resolution number 1 – authority to
auditors of the Company for the ensuing period
repurchase shares
terminating on the conclusion of the next AGM of the
As special business, to consider and, if deemed fit, to
Company and further to appoint Mr X Botha as the
pass with or without modification, the following special
individual and designated auditor who will undertake
resolution:
the audit of the Company.
“Resolved that the Company and/or a subsidiary of the
4.2 To authorise the directors of the Company to fix and
Company, be and is hereby authorised by way of a
pay the auditors’ remuneration for the past year.
general authority in terms of sections 85 to 89 of the
Companies Act, to acquire securities issued by the
5. Ordinary resolution number 5 – non-executive
Company, upon such terms and conditions and in such
directors’ remuneration
amounts as the directors of the Company may from time
5.1 To consider and approve, with or without modification,
to time determine, subject to the requirements of the
payment of the below-mentioned non-executive
Company’s articles, the Companies Act and the JSE
directors’ remuneration for the forthcoming year. The
Listings Requirements, provided that:
board fees show an increase of 4,2% compared to
6.1 the Company and its subsidiaries are authorised by
the 2008/9 figure. The remuneration for the various
their articles of association to repurchase such
committee chairmen reflects a substantial percentage
securities;
increase, however, this should be viewed against the
significantly more onerous obligations that these
committees will face from a legal, compliance and
governance perspective into the future.
“Resolved to pay the following non-executive
6.2 the repurchase of securities are effected through the
order book operated by the JSE trading system and
be done without any prior understanding or
arrangement between the Company and the
counterparty;
directors’ fees for the financial year commencing on
1 September 2009:
6.3 the Company and its subsidiaries are authorised by
their members via a special resolution taken at a
5.1.1 As director:
3 for each board meeting attended – R62 500
5.1.2 As chairman:
3 for each audit committee meeting chaired
– R30 000
general meeting, to make such general repurchases of
the Company’s securities;
6.4 such authorisation shall be valid only until the next
AGM of the Company or for 15 months from the date
of this special resolution, whichever is the earlier date;
JD Group_Annual Report 2009
175
Notice of annual general meeting
Continued
6.5 an announcement be made in accordance with the
6.10 the repurchase of securities may not be made at a
requirements of the JSE when the Company and/or its
price greater than 10% above the weighted average
subsidiaries have cumulatively repurchased 3% of the
traded price of the market value of the securities as
initial number of securities of a class of securities in
determined over the five business days immediately
issue at the date that this general authority is granted
preceding the date on which the transaction is
(“the initial number”) and for each 3% in aggregate of
effected; and
the initial number of securities of that class of securities
acquired thereafter;
6.6 at any one time the Company and/or its subsidiaries
may only appoint one agent to effect any repurchase of
the Company’s securities on behalf of the Company;
6.7 the repurchase of securities by the Company and/or its
subsidiaries shall not take place during a prohibited
period, unless the Company has in place a repurchase
programme where the dates and quantities of securities
to be traded during the period are fixed, i.e. not subject
to variation, and full details of the programme have
been disclosed in an announcement over SENS prior to
the commencement of the prohibited period;
6.8 after the repurchase, the Company would still be
in compliance with the shareholders’ spread
requirements as laid down by the JSE;
6.9 the repurchase of securities shall not, in the aggregate,
6.11 the Company’s sponsor shall, prior to the Company
and/or its subsidiaries entering into the market to
acquire such securities, provide the JSE with a written
working capital statement as laid down by the JSE.”
If and when appropriate opportunities arise, the directors will
utilise this authority to effectively return excess capital to
shareholders.
The reason for this special resolution is to grant the Company
and its subsidiaries a general authority to repurchase the
Company’s securities by way of open market transactions
on the JSE, subject to the requirements of the Company’s
articles, the
Companies Act
and
the
JSE
Listings
Requirements.
The effect of this special resolution would be that the
Company and its subsidiaries will have been authorised
generally to repurchase the Company’s securities on the
open market, subject to the requirements of the Company’s
in any one financial year, and calculated as at the
articles, the
date this authority is given, exceed 20% (equating to
Requirements.
Companies Act
and
the
JSE
Listings
34 100 000 ordinary securities) of the Company’s
issued securities of that class and, where the Company’s
Disclosures required in terms of the Listings
issued securities are repurchased by its subsidiaries,
Requirements of the JSE Limited
it shall not exceed a maximum of 10% (equating to
17 050 000 ordinary securities) in aggregate of the
Company’s issued securities of that class;
In terms of the JSE Listings Requirements, the following
disclosures are required with reference to any repurchase
of the Company’s securities as set out in the special
resolution above.
176
JD Group_Annual Report 2009
Working capital statement
The directors, having considered the effects of the repurchase
of the maximum number of ordinary securities in terms of the
aforementioned general authority, confirm that for a period of
12 months after the date on which this authority is given,
inside back cover of this annual report, are not aware of any
legal or arbitration proceedings, pending or threatened,
against the Group which may have or have had, in the
12 months preceding the date of this notice of the AGM,
a material effect on the Group’s financial position.
that:
3
the Company and the Group will be able, in the ordinary
course of business, to pay its debts;
3
the consolidated assets of the Company and the Group,
fairly valued in accordance with International Financial
Reporting Standards as used in the latest audited annual
financial statements of the Group, will be in excess of the
consolidated liabilities of the Company and the Group;
3
the ordinary share capital and reserves of the Company
and the Group will be adequate for ordinary business
purposes;
3
the working capital resources of the Company and the
Directors’ responsibility statement
The directors, whose names are given on the inside back
cover of this annual report, collectively and individually,
accept full responsibility for the accuracy of the information
pertaining to the above special resolution and certify that to
the best of their knowledge and belief there are no facts that
have been omitted which would make any statement false or
misleading and that all reasonable enquiries to ascertain such
facts have been made and that the above special resolution
contains all information required.
Material changes
Group will be adequate for ordinary business purposes;
and
3
the Company may not enter the market to proceed with
any repurchase of securities until the Company’s sponsor,
PSG Capital (Pty) Ltd, has confirmed in writing to the JSE
the adequacy of the Company’s working capital for the
purposes of undertaking a repurchase of securities.
Other than the facts and developments reported on in this
annual report, there have been no material changes in
the affairs, financial or trading position of the Company or
the Group since the signature date of this annual report and
the posting date thereof.
Further disclosures
At the date of this notice, having regard to the financial
position of the Company, the directors are of the opinion that
the Company would be able to fulfil the above requirements
even if the maximum number of permitted repurchases
The following further disclosures required in terms of the
JSE Listings Requirements are contained in this annual report,
which forms part of this notice:
would take place and the maximum general payments have
3
Directors and management (refer to pages 14 to 17)
been made.
3
Major shareholders of the Company (refer to page 173)
3
Directors’ interests in the Company’s securities (refer to
Litigation statement
Other than disclosed or accounted for in this annual report,
pages 99 and 108)
3
Share capital of the Company (refer to page 137)
the directors of the Company, whose names are given on the
JD Group_Annual Report 2009
177
Notice of annual general meeting
Continued
Voting and attendance
Proxies
Certificated shareholders
For the convenience of shareholders, a form of proxy is
Shareholders wishing to attend the annual general meeting
have to confirm beforehand with the transfer secretaries of
the Company that their shares are in fact registered in their
name. Should this not be the case and the shares are
registered in another name, or in the name of a nominee,
it is incumbent on shareholders attending the meeting
to make the necessary arrangements with that party to be
able to attend and vote at the meeting. A shareholder entitled
to attend and vote at the annual general meeting of the
Company is entitled to appoint a proxy or proxies to attend,
enclosed herewith. The form of proxy must only be completed
by shareholders who are holding shares in certificated form
or who are recorded on the electronic subregister in “own
name” dematerialised form. The instrument appointing a
proxy and the authority (if any) under which it is signed, must
reach the transfer secretaries of the Company (Computershare
Investor Services (Pty) Ltd) at the address specified on the
inside back cover, by no later than at 08:00 on Monday,
1 February 2010.
By order of the board
speak, and on a poll, vote in his/her stead. A proxy need not
to be a shareholder of the Company.
Uncertificated shareholders
Beneficial owners of dematerialised shares who wish to
attend the annual general meeting of the Company have to
request their Central Securities Depository Participant (CSDP)
or broker to provide them with a letter of representation,
JMWR Pieterse_Company secretary
or they must provide the CSDP or broker with their voting
instructions in terms of the relevant custody agreement
entered into between them and the CSDP or broker.
Voting
On a show of hands, every member of the Company present
in person and entitled to vote, or any member represented by
proxy, shall have one vote only. On a poll, every ordinary
shareholder entitled to vote shall have one vote in respect of
each share held. As a general rule, the Company effects all
voting by means of a poll.
178
JD Group_Annual Report 2009
13 November 2009
Form of proxy
JD GROUP LIMITED
(Registration number 1981/009108/06)
(Incorporated in the Republic of South Africa)
JSE code: JDG
ISIN code: ZAE000030771
(“the Company”)
TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME REGISTRATION ONLY
I/We
(Name in block letters)
of
(Address in block letters)
being the holder(s) of
shares in JD Group Limited and entitled to vote, hereby appoint
1.
or failing him/her
2.
or failing him/her
3. the chairman of the annual general meeting
as my/our proxy to speak and vote for me/us at the annual general meeting, to be held at 08:00 on Wednesday, 3 February 2010, in the
David Sussman Auditorium, Ground Floor, JD House, 27 Stiemens Street, Braamfontein, Johannesburg and at any adjournment thereof, as
follows:
Number of JD Group ordinary shares
Resolution
In Favour
Against
Abstain
Number 1: Adoption of annual financial statements, inclusive of sanctioning of a dividend
Number 2: Re-election of retiring directors
Number 2.1 KR Chauke
Number 2.2 IS Levy
Number 2.3 M Lock
Number 2.4 MJ Shaw
Number 3: Authority to place a maximum of two million unissued shares under the
control of the directors
Number 4: Auditors’ appointment and remuneration
Number 4.1 Reappointment of Deloitte & Touche as auditing firm and X Botha as the
individual auditor
Number 4.2 Approval of auditors’ remuneration
Number 5: Approval of non-executive directors’ fees for the forthcoming year
Number 6: Special resolution – authority to repurchase shares
Signed at
on
2009/2010
Date
2009/2010
Full name(s)
Signature(s)
Assisted by (guardian*)
*If signing in a representative capacity, see note 12 on page 180.
Please read the instructions on the reverse side of this form of proxy.
JD Group_Annual Report 2009
179
Notes and instructions to the form of proxy
1. This form of proxy is to be completed only by those shareholders who either still hold shares in a certificated form, or whose
shares are recorded in their own name in electronic form in the subregister (“eligible shareholders”).
2. Eligible shareholders are entitled to attend, speak and vote at the annual general meeting (“AGM”) of the Company or to appoint
a proxy to attend, speak and vote in their stead and such proxy need not be a shareholder of the Company. The completion and
lodging of this form of proxy does not preclude the eligible shareholder from attending the AGM and speaking and voting in
person to the exclusion of any appointed proxy.
3. Eligible shareholders who are unable to attend the AGM, but wish to be represented at the AGM, should complete and timeously
return the form of proxy to the transfer secretaries, Computershare Investor Services (Proprietary) Limited.
4. If you are the holder of dematerialised shares, but not the holder of dematerialised shares in your own name, you must
timeously inform your Central Securities Depository Participant (“CSDP”) or your stockbroker of your voting instructions for the
AGM in terms of the custody agreement between you and the CSDP or the stockbroker (in such an instance you must NOT
return this form of proxy to the transfer secretaries). However, if you wish to attend the AGM in person, you must timeously
request your CSDP or stockbroker to provide you with the necessary authority to do so and to enable you to take part in the
AGM proceedings.
5. It is incumbent on all shareholders who wish to attend the AGM to verify with the transfer secretaries that their shares are in
fact registered in their name or to ensure that the necessary arrangements have been made with their CSDP or stockbroker to
enable them to attend and to take part in the AGM proceedings.
6. If two or more proxies attend the AGM, then that person whose name appears first on the form of proxy and whose name is
not deleted, shall be regarded as the validly appointed proxy to the exclusion of the person(s) whose name(s) follow.
7. Where there are joint holders of shares, any one holder may sign the form of proxy and the vote of the shareholder whose name
appears first in the Company’s share register and who tendered a vote, whether in person or by proxy, will be accepted to the
exclusion of the votes of the other joint shareholder(s).
8. Shareholders may insert the name of a proxy or the names of two alternative proxies in the spaces provided on the form of
proxy, with or without deleting the words “the chairman of the annual general meeting”. Any alterations (other than a deletion
of alternatives) or corrections to this form of proxy, must be individually initialled by the signatory, failing which the alterations
or corrections will have no effect for purposes of the AGM, subject to the chairman’s sole discretion.
9. On a poll, a shareholder is entitled to one vote for each share held. On a show of hands, shareholders present or their proxies,
shall have one vote only
10. Voting for each of the resolutions must be effected by filling in the number of votes (one per ordinary share) under the headings
“In Favour”, “Against” or “Abstain” on the form of proxy. If no instructions are filled in on the form of proxy, the appointed proxy,
or the chairman of the AGM if he is the authorised proxy, shall be authorised to vote in favour of, against or abstain from voting
as they deem fit.
11. Shareholders or their proxies are entitled, but not obliged, to vote in respect of all the ordinary shares held by the shareholder.
However, the total number of votes for or against the resolutions and in respect of which any abstention is recorded, may not
exceed the total number of shares held by the shareholder.
12. Minors must be assisted by their parent or guardian unless the relevant documents establishing their legal capacity are
produced or have been registered by the transfer secretaries. Documentary evidence establishing the authority of a person
signing this form in a representative or other legal capacity must be attached to this form of proxy unless previously recorded
by the transfer secretaries or waived by the chairman of the AGM.
13. The chairman of the AGM, in his sole discretion, may accept or reject any form of proxy which is completed and/or received
other than in accordance with these notes, provided that he shall not accept a proxy unless he is satisfied as to the manner in
which a shareholder wishes to vote.
14. The results of the voting in respect of the resolutions set out in the notice of the AGM will be published on SENS as soon as
practically possible after conclusion of the AGM.
15. Shareholders must ensure that their forms of proxy or their letters of authority from their CSDP or stockbrokers are timeously
furnished to the transfer secretaries, Computershare Investor Services (Proprietary) Limited. In order to be effective, forms of
proxy and letters of authority must reach the transfer secretaries by no later than at 8:00 on Monday, 1 February 2010 at the
address specified on the next page.
16. Enquiries by shareholders with regard to the AGM or any of the above matters, may be directed to the Company Secretary,
Johann Pieterse, on (+27) 11 408 0220 or to johannp@jdg.co.za.
180
JD Group_Annual Report 2009
Administration
JD Group Limited
ADR depository
(“JD” or “the Group”)
File number 82-4401
Registration number: 1981/009108/06
The Bank of New York Mellon Company, Inc.
JSE code: JDG
One Wall Street, New York, NY 10286,
ISIN code: ZAE000030771
United States of America
Telephone: +1 212 495 1284
Executive directors
Facsimile: +1 212 635 1121
ID Sussman (executive chairman)
AG Kirk (chief executive officer)
Sponsor
KR Chauke, Dr HP Greeff, ID Thompson, G Völkel
PSG Capital (Proprietary) Limited
Building No 8, Woodmead Estate,
Non-executive director
1 Woodmead Drive, Woodmead, Johannesburg, 2191
IS Levy
Telephone: +27 11 797 8400
Independent non-executive directors
Facsimile: +27 11 802 3689
VP Khanyile, ME King, Dr D Konar, M Lock, MJ Shaw,
Independent auditors
GZ Steffens
Deloitte & Touche
221 Waterkloof Road
Company secretary
Waterkloof
JMWR Pieterse
Pretoria
Registered office
0181
11th Floor, JD House,
Attorneys
27 Stiemens Street,
Feinsteins (Levy, Feinsteins & Associates Incorporated)
Braamfontein, Johannesburg, 2001
10th Floor, JD House,
(PO Box 4208, Johannesburg, 2000)
27 Stiemens Street,
Telephone: +27 11 408 0408
Braamfontein, Johannesburg, 2001
Facsimile: +27 11 408 0604
Telephone: +27 11 712 0700
E-mail: info@jdg.co.za
Facsimile: +27 11 712 0712
Transfer secretaries
E-mail: mail@feinsteins.co.za
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Marshalltown, 2107
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 11 370 5000
Facsimile: +27 11 688 5238 (for proxies only)
E-mail: proxy@computershare.co.za
Shareholders’ diary for 2010
Annual general meeting
3 February
Interim dividend declaration
Mid May
Announcement of interim results
Mid May
Payment date of interim dividend
Mid June
Final dividend declaration
Mid November
Announcement of annual results and publication of annual financial statements
Mid November
Financial year end
31 August
Publication of annual report
30 November
Payment date of final dividend
Mid December
The front section of this document is printed on Magno Matt paper.
This paper uses only wood from sustainable forests, is manufactured from TCF (Totally Chlorine Free) pulp and is acid free.
The financial section of this document is printed on Cartridge 120 gsm.
A minimum of 30% fibre used in making this paper comes from well-managed forests independently certified according to the rules of the Forest Stewardship Council.
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