Annual Report 2010
Customers
Growth
Profitability
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 by:
➔ Being innovative in everything we do;
➔ Continuous and consistent development and optimisation of customer and supplier relationships, sound levels of service,
values, ethics and business principles;
➔ The ongoing development of our employees;
➔ The continuous enhancement of management and leadership skills; and
➔ 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:
➔Honesty and integrity
Ability to communicate and behave openly without fear, focused on one truth as the only norm, based on mutual trust and respect
and where the intent of any communication and/or behaviour is unquestionable.
➔Valuing diversity
Individually and/or collectively understanding, accepting and valuing the different backgrounds, cultures, personal preferences and
competencies of people.
➔Responsibility and accountability
Role defined responsibilities and accountabilities are not only vested in the function, but also in the person and are not
transferable.
➔Urgency
Urgency in all we do is a non-negotiable value.
➔Performance driven
The journey to achieve world-class status is impossible without the individual and collective commitment of all the people
of the Group to own the performance driven value.
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:
➔Traditional Retail
Optimisation of retail efficiency and delivery of required return on sales.
➔Cash Retail
Product and service differentiation, store expansion and delivery of required return on sales.
➔International Retail
Store expansion and delivery of required return on sales.
➔Financial Services
Risk management, collection optimisation, product development and delivery of required return on capital employed.
➔New Business Development
New product and market development and delivery of required return on capital employed.
www.jdgroup.co.za
Profile
The JD Group is strategically positioned in South and southern Africa as:
➔ a leading diversified mass consumer financier; and
➔ a differentiated furniture, appliance, electronic goods, home entertainment and office automation retailer.
The JD Group primarily targets the mass middle market with a secondary focus on the entry and top end market segments.
The Group operates in southern Africa through five business divisions and one international business division. These
markets are served through a multi-branded channel network representing 11 retail brands, with a footprint of 1 041 stores
in southern Africa and 74 stores in Poland. Each brand is positioned to focus on a specific market segment based on brand
identity, store layout, merchandise range and market profile.
Positioning of the different brands is driven by a differentiation strategy and allows clients to enter at the lower end and
migrate to the upper end as their diverse needs, aspirations and requirements change over time.
Why the Art
of Service?
It will enable our resources to provide an excellent and consistent customer experience.
➔ We will exceed the expectations of internal and external customers.
➔ 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.
➔ When thousands of employees are reached and inspired, their energy and intent begin to flow in the same direction.
➔ As individuals respond to the message, they join as one force, the critical mass is reached and tides turn.
Art of Service is embraced by all and adopted as a personal value system, a change in behaviour becomes tangible
across the employee spectrum.
➔ As the
➔ The impact is felt and experienced by the customer as changes in attitude and behaviour translate into new levels of
customer satisfaction.
➔ The new customer experience strengthens customer loyalty, leading to growth in market share and increased revenue and
profit, being the ultimate impact for our stakeholders.
Brand portfolio
Financial highlights
31 August
2010
31 August
2009
12 922
Revenue
Rm
13 224
Profit attributable to shareholders
Rm
501
Total assets
Rm
9 281
8 922*
Shareholders’ equity (before minorities)
75
Rm
5 154
4 831
Gearing ratio
%
12,9
13,2
Operating margin
%
5,8
5,0
Headline earnings per share
cents
303,6
44,4
Cash equivalent dividends per share
cents
150,0
41,0
Net asset value per share
cents
3 022,8
2 833,5
Return on assets managed
%
11,9
10,0
Return on average shareholders’ equity
%
10,0
1,6
Note: Definitions for the terms above are reflected in the Annual Financial Statements.
3 500
621,7
697,6
2 800
2 717,0
823,5
12 922
12 914
12 610
11 939
800
9 933
12 000
2 833,5
1000
15 000
2 822,9
(cents)
3 160,5
Net asset value per share
(cents)
2 804,5
Headline earnings per share
(R million)
13 224
Revenue
3 022,8
*Restated in terms of IFRS 3 as reflected in note 1 of the Annual Financial Statements.
600
2 100
6 000
400
1 400
3 000
200
303,6
301,0
9 000
44,4
700
0
0
05 06 07 08 09 10
0
05 06 07 08 09 10
Revenue by business line
Operating profit by business line
3,99% (3,51%)
3,50% (29,92%)
23,58%
Traditional Retail
21,78%
05 06 07 08 09 10
Cash Retail
40,37%
International Retail
Financial Services
4,79%
Cash Retail
76,68%
International Retail
24,61%
New Business Development
Corporate
Traditional Retail
Financial Services
New Business Development
1,55%
Corporate
32,58%
➔
➔
➔
Financial highlights
R13 224m
Revenue up 2%
Investment case
Contents
A description of the business
activities of the Group including
overviews of our markets,
the Group’s strategy, measures
of performance and the outlook
for 2010
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service code 2010
1
2
3
4
6
7
10
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
14
18
20
26
28
46
Sustainability and stakeholder review
Corporate governance
Group value added statement
66
100
125
Ten year review
Directors’ approval
Independent auditors report
Certificate by company secretary
Directors’ report
Audit committee report
Directors’ remuneration
Definitions
Accounting policies
Group statement of comprehensive income
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 scheme
Salient features of the JD Group Employee
Share Incentive Scheme
Salient features of the JD Group Share
Appreciation Rights Scheme
JD Group Limited – Company financial
statements
Subsidiaries
Annexure A – Insurance businesses
Analysis of shareholders
Notice of annual general meeting
Form of proxy
Administration
128
132
133
133
134
138
140
145
146
156
157
158
159
160
Group review
2009 R12 922m
R303,6 cents
The Chairman’s report, our board
and management structures and
the overall performance of our
market segments as reviewed
by the Chief Executive Officer
Headline earnings per share up 584%
2009 44,4 cents (251,5 cents excluding
Sustainability and
governance
the tax settlement)
R3 022,8
cents
Net asset value per share up 7%
The Group’s contribution to
sustainable development and
the rollout of our corporate
governance strategies
Annual Financial
Statements
2009 R2 833,5 cents
Key shareholder information
and data
R9 281m
Total assets up 4%
2009 R8 922m
R753m
Debtors costs down 32%
2010 R1 109m
JD Group Annual Report 2010
1
161
193
196
197
199
201
202
204
207
209
215
ibc
Investment case
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service Code 2010
Investment offering
A long term investment opportunity
for the Group and previously
JD Group offers shareholders an
disadvantaged people are
opportunity to invest in a leading,
achieving senior management
predominantly southern African retailer
status and positions.
and financial services business, that is well
positioned to take strategic advantage of
the challenging market environment
through its leading and progressive brands
– Transformation is a key strategy
➔ Delivery
– Management has built solid
foundations from which to grow
and operational structures.
the business by successfully
➔ Presence
in new and existing markets.
– Our leading brands are well
entrenched in the minds and lives of
consumers where we trade both
locally and internationally.
implementing growth strategies
➔ Growth prospects
for future growth through a
– Our 11 brands have been trading for
disciplined and methodical
many years thereby cementing their
approach in its endeavours to
places as market leaders.
ensure improved and sustainable
returns for the Group over the
➔ Customer centricity
longer term.
– We strive to achieve world-class
service through the establishment of
of financial, human capital and
treated like our only customer.
space utilisation.
– We provide expanded, relevant and
differentiated products and services
to our customers.
– Consistent and continuous
improvement of the productivity
a culture whereby each customer is
– The Group has planted the seeds
– With the restructuring
successfully completed, the
Group is well placed to further
➔ Strong management team
– Our 10 retail chief executives have
substantial 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.
2
JD Group Annual Report 2010
optimise its processes and to
take full advantage of any
upswing in the economy.
Business operating structure
Divisions
Brands
Business goal
Traditional Retail
Barnetts
Optimisation of retail efficiency
and the delivery of a required
return on sales
Bradlows
Electric Express
Joshua Doore
Morkels
Price ‘n Pride
Russells
Supreme
Incredible Connection
Product and service
differentiation, store expansion
and delivery of a required
return on sales
Abra
Store expansion and delivery
of a required return on sales
Hi-Fi Corporation
Cash Retail
International Retail
Relevant risk management,
collection optimisation and
delivery of a required return
on capital employed
Financial Services
New Business
Development
Maravedi Group
Blake & Associates
(90,5%)
(70%)
New product development,
market development and
delivery of a required return
on capital employed
JD Group Annual Report 2010
3
Operating portfolio
Investment case
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service Code 2010
Traditional Retail
Cash Retail
Contribution
2010
5 339
Revenue (Rm)
182
Operating profit (Rm)
Operations
4 308
Revenue (Rm)
190
Operating profit (Rm)
The Traditional Retail (TR) division comprises eight leading
The division targets cash consumers in the
retail chains which service a broad spectrum of the mass
electronics and technology segment.
middle market.
Hi-Fi Corporation targets the mass market and
The decoupling of the retail activities from the financial
is repositioning its brand to allow it to optimise
services activities two years ago enabled a renewed
product ranges, revamp its store interiors and
focus on superior retailing practices. In-store sales
introduce value added services.
staff sharpened their retail skills focus, planning and
merchandising to meet customer expectations and
entrenching the Art
of Service to build loyalty.
The strategy of Incredible Connection is to be the
dominant information technology retailer in South
Africa. It has an extensive range of international
In 2010, the division continued bedding down its retail focus
products and provides a one-stop technology
while undertaking reviews to optimise its retail portfolio
shop supported by expert advice, after sales
and merchandising practices to enhance its cost-to-income
service and value added services. It has focused
ratio. It focused on qualifying customer requirements and
on store development to leverage its leadership
ensuring each brand’s ability to deliver, including educating
position in the market.
customers on product features and benefits.
The Cash Retail division leverages its purchasing
The implementation of new systems in the Financial
power to achieve better merchandising terms and
Services division also provided TR the ability to have
optimise lease terms with landlords. A centralised
customers scored upfront for creditworthiness, increasing
support centre services the customers of both
the ability to sell on credit, which dampened the effects of
brands. The division is also centralising its logistics
the tough market.
in support of Group-wide initiatives.
Stores
949 stores
92 stores
Core brands
Barnetts
Bradlows
Electric Express
Joshua Doore
Highlight
9%
2010
2009
Page reference
4
2010
JD Group Annual Report 2010
28
Morkels
Price n Pride
Russells
Supreme
Hi-Fi Corporation
Incredible Connection
increase in revenue for second six months
2 562
2 350
8%
2010
2009
32
increase in revenue
4 308
3 976
International Retail
New Business Development
Financial Services
2010
2010
Revenue (Rm)
634
Operating profit (Rm)
12
2 880
Revenue (Rm)
592
Operating profit (Rm)
2010
527
Revenue (Rm)
27
Operating profit (Rm)
Since it was established 20 years ago, Abra has
The division provides credit to customers of the
The division develops new financial services
become the leading furniture retailer in Poland,
Group’s eight retail chains for furniture, electrical
product and channel, to deliver on the Group’s
with more than two million customers visiting its
and electronic purchases and provides other
strategic objective of developing new revenue
stores annually. Its brand’s strength is underpinned
non-retail related financial services products.
streams from non-traditional and non-Group
by continual improvement of the retail strategy,
customers.
It has customer facing financial services
innovative marketing and communication
consultants in each of the Group’s stores,
Blake is a provider of premier contact centre
supported by centralised credit origination and
solutions, serving niche markets and identifying
Operating through 74 stores, Abra offers a wide
collections. The division runs two contact centres,
and operating within unique partnerships. Blake
selection of well priced furniture directed at the
the larger in Johannesburg having some 600
operates from southern Africa and Mauritius.
lower and middle income segments. Abra can
agents and the smaller working from Blake with
The first phase of its business intelligence platform
offer instant delivery to customers supported by
about 200 agents.
was implemented in its contact centre.
solutions.
appropriate stock levels.
The core focus of the division is the origination
Maravedi extended its business-to-business
Due to its close working relationships with
and management of financial services products
debt collection and small-value unsecured credit
suppliers, Abra leads market trends, offering
across the value chain.
provision with new products into new markets in
innovative and functional products. It also offers
line with its strategy.
The division implemented an updated decision
non-standard products that can be selected
management and scoring tool for credit origination
from catalogues, extending its range to generate
additional turnover and strengthen profit margins.
and a new credit account and customer
management solution in 2010, which paid off
within their first year in operation.
74 stores
949 points of presence
Abra
JD Financial Services
Maravedi
Blake
36%
>100%
7%
increase in number of stores
2010
2009
40
74
69
2010
2009
36
reduction in total debtors costs
692
increase in operating profit
2010
1 082
2009
27
(3)
42
JD Group Annual Report 2010
5
Geographic footprint
Investment case
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service Code 2010
10
4
1
9
8
8
1
Electric Express
33
13
19
8
13
10
8
7
1
112
Joshua Doore
36
20
17
19
14
12
12
12
4
146
Morkels
35
16
12
8
11
8
9
8
2
109
Price 'n Pride
25
19
8
17
25
10
15
12
3
134
Russells
51
27
33
24
14
15
13
21
9
Total number
of stores
13
11
Poland
North West
35
13
Swaziland
Eastern Cape
21
11
Namibia
Limpopo
23
29
Botswana
Mpumalanga
22
Free State
KwaZulu-Natal
Barnetts
Bradlows
Operational areas
Western Cape
Gauteng
Northern Cape
Footprint and market share
Traditional Retail
Supreme Furnishers
129
92
2
207
20
20
Cash Retail
Hi-Fi Corporation
12
5
7
2
1
2
2
1
1
1
34
Incredible Connection
27
6
12
3
1
3
2
1
1
1
1
58
270
140
108
115
125
82
79
74
22
22
2
International Retail
Abra
Total
*Maravadi has operations in Midrand and has two stores in South Africa.
**Blake operates from Durban, Botswana, Namibia and Mauritius.
Poland
Namibia
Mauritius
Botswana
South Africa
6
JD Group Annual Report 2010
2
74
74
74
1 115
Core expertise and strategy
To enable the strategy, the Group’s core
expertise is embedded in:
➔ automation and standardisation of
business processes through the
Art of Service
Progress with strategy
➔ Distinctive service capability where
realisation
the customer is central to every
Stabilisation of new business and
business process.
operating model
implementation of leading technology
solutions, driving cost down and
Operational excellence
increasing efficiencies;
➔ National, standardised and
➔ understanding of the risk environment
operating model, being the decoupling
consistent application of
relating to the changing mass middle
operational processes according to
market from a financial services
predefined standards, aimed at
product offering perspective;
continuous improvement.
➔ exceptional skill, underpinned by a fully
automated collection capability and
capacity to cover the end-to-end value
Resource management
goal in mind, namely, optimisation
collections;
of the Group’s assets and capital
importance of being customer centred;
and
➔ engaged staff, enabled by highly
trained, committed and developed
leadership teams.
Our strategy
clients in the various market segments in
which it operates, and in so doing, fulfil
their lifecycle needs over time. The
foundation of this strategy is embedded
Group’s customers’ needs and the
Development division, has been
successfully implemented. Significant
benefits have already been realised in
more benefits are expected for the
2011 financial year from all the
divisions.
Systems
capacity
➔ New generation systems (SAP) are
➔ Identify, attract and retain top
talent, as good people are central
to the Group’s ability to deliver
being implemented in the
Traditional and Cash Retail
operating divisions:
outstanding service and sustain the
future of the organisation.
The planning, analysis and pilot
phases have been successfully
Sustainable growth
➔ Identification and conversion of
organic and acquisitive growth
opportunities within the diverse set
of the Operating Divisions.
completed and implementation will
commence in the 2011 financial
year.
➔ New generation systems (Capstone
and Vision Plus) in Financial
Services and Maravedi:
Transformation
➔ Fundamental understanding of the
an outward facing New Business
Enterprise Resource Planning (ERP)
Building and optimising people
in the following cornerstones:
Customer centricity
Services and the establishment of
structure.
The core strategy of the Group is to offer
a differentiated value proposition to its
of Traditional Retail and Financial
the Financial Services division, whilst
➔ Management of resources with one
chain of risk management and
➔ essential understanding of the
The diversified new business and
➔ Owning transformation as a key
The planning and analysis phase is in
full swing, with conference room
imperative for the future success
pilots to follow, with the expected final
of the Group and South Africa.
implementation date being 2011/12.
development of capability and capacity
to satisfy such needs through
differentiated products and service
offerings.
➔ Insurance information systems:
Successful implementation of both
the Alfinanz and FAFA systems in
the insurance companies.
JD Group Annual Report 2010
7
Investment case
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service Code 2010
Core expertise and strategy (continued)
Centralisation of logistics
Five sites have been successfully
implemented and a further nine are
scheduled for 2011.
➔ Increase in dividend per share
of 109 cents per share.
Clear strategy
A successful turnaround within
The Group strategy aims to optimise
Maravedi has been accomplished with
the new business and operating model
a positive contribution for the current
allowing a distinct level of autonomy
financial year.
whilst leveraging off the collective
Blake has provided a solid
synergies.
contribution and is well poised for
Within the context of the new business
growth in the new financial year.
and operating model, three fundamentals
Executive management teams in
all the operating divisions are well
established, with an extensive
assessment programme now
completed and appropriate, diverse
development programmes agreed
upon and actioned.
Our performance in 2010
drive the strategy of the Group:
➔ Optimisation of existing
infrastructure and resources,
resulting in the use of our network
channel as a distribution network
for both retail and multiple financial
services products;
➔ Organic growth through the
identification of new market
opportunities driven by market
dynamics and optimal location of
Key performance metrics:
stores based on customer
➔ Revenue growth of 2% (second half
migration patterns; and
growth of 4%);
➔ Gross margin on merchandise sales
of 29,8%;
➔ Total debtors costs reduced
by 32%;
JD Group Annual Report 2010
share of 584%; and
New business development
Leadership development
8
➔ Increase in headline earnings per
➔ Acquisitive growth through the
identification of opportunities that
will expand both the customer base
and product basket.
Growth prospects
Return on sales/capital employed
Actual
Objective
2007/8
2008/9
2009/10
Target
The Group has successfully journeyed
2010/11
through the biggest single transformation
since its inception, namely the acceptance
Traditional Retail
Optimisation of retail
efficiency and delivery of
required return on sales
and implementation of the new business
2,5%
Cash Retail
Product and service
differentiation, store
expansion and delivery of
required return on sales
4,5%
12,5%
return on sales
3,9%
and operating model, resulting in the:
➔ decoupling of Financial Services and
Traditional Retail;
➔ migrating from a decentralised to a
5,8%
5,5%
7%
return on sales
4,4%
centralised collections model; and
➔ increased capacity with respect to risk
management.
International Retail
Store expansion and delivery
of required return on sales
6,2%
7,1%
10%
return on sales
1,9%
The disruption of the implementation of
the new business and operating model is
Financial Services
Risk management, collection
optimisation and delivery of
required return on capital
employed
now behind us. The model serves as a
12,8%
New Business Development
New product and market
development and delivery of
required return on capital
employed
2,0%
19,0%
25%
return on capital
employed
sound foundation for the implementation
of a number of growth strategies that
envisage:
➔ aggressive entry into the rural areas;
n/a
Loss
18,8%
25%
return on capital
employed
➔ organic and inorganic growth within
the operating divisions;
➔ the optimisation of existing joint
ventures;
Customer satisfaction
Customer satisfaction results from the
engagement percentage of 77,4%.
This is expected to exceed 80% in 2011.
reduction through the implementation
of SAP, Capstone and VisionPlus;
bi-annual survey indicate an overall
customer satisfaction rating of 77,7%.
➔ the unlocking of efficiencies and cost
Supplier relationships
➔ increasing the scale of centralised
The target is in excess of 80% for 2011.
Supply chain efficiencies with local
This was positively confirmed by the
suppliers have improved significantly
Morkels Chain receiving the annual
based on enhanced demand
Hi-Fi Corporation and Maravedi in the
Ask Africa Orange Index Award as the
forecasting and the ability of suppliers
New Business Development division,
leading South African Furniture Retail
to deliver quality merchandise on time.
whilst Blake offers exciting growth
brand for customer satisfaction for 2010.
International supplier relationships
opportunities.
logistics model; and
➔ leveraging off successful turnaround of
have improved on the back of import
Employee engagement
programmes that have secured
The Group average for employee
exclusive arrangements for quality
engagement bi-annual survey results
products at competitive pricing.
reflected an overall employee
JD Group Annual Report 2010
9
Investment case
Vision, mission, values, goals
Financial highlights
Investment offering
Business operating structure
Operating portfolio
Geographic footprint
Core expertise and strategy
Service Code 2010
All our customers should
feel that we believe we
are privileged in having
the opportunity to serve
them.
Service Code 2010
The art of making a difference
A structured, yet flexible approach
In line with David Sussman’s philosophy
. . . “A journey of a thousand miles begins
that “All our customers should feel that we
with a single step.” (Lao-tzu). After
believe we are privileged in having the
16 months of implementation, we have
opportunity to serve them” and the view
taken a great step forward in improving our
of Grattan Kirk, “We haven’t got a business
customer service culture. This has been
if we haven’t got customers. They are
achieved through a structured change
the most important part of our business!”,
process that creates a unified framework in
the Art
terms of customer service, whilst allowing
of Service was launched in 2009,
the intent of which was and is to make a
room for the uniqueness of each of the
difference in our customers’ lives, through
chains and support environments in
putting them at the centre of everything
the Group.
we do.
In order for the culture shift to happen,
The results of the Art
of Service have
all Group employees needed to align
impacted our business and our people
themselves with the philosophy of the
indelibly. Having concluded the first year
Art of Service.
of implementation, this overview serves to
provide an outline of the progress made
Internal service focus
We began our change journey in 2009 in
and the impact realised.
our head office environment, where a core
Our guiding framework
At the centre of the Art
team was empowered to lead the critical
of Service is our
In order to effect change with the critical
consideration both intangible and tangible
mass, this team was geared to see, own,
drivers of customer service as well as
commit to and be empowered to deliver
elements that have an indirect and direct
on the Art
impact on the customer experience.
This core team empowered their teams
“The Service Code must translate into a
using the framework provided by the
way of life in which each and every person
Service Code.
in the Group has a fundamental part to
Ultimately the internal service department
play, in order to create extraordinary levels
teams focused on improving the service
of customer service, both internally and
they deliver to their customers – the people
externally.” (JD Group Annual Report, 2009).
and chains of the JD Group. The results of
In order to realise this statement, our
their efforts culminated in a 10%
implementation has focused on
improvement (66% to 76%) in internal
empowering our employees to embrace
service levels (measured by an Internal
the Service Code, to use it as a means to
Customer Satisfaction Survey) between
drive service improvement and ultimately
May 2009 and April 2010.
organisation.
JD Group Annual Report 2010
of Service.
Service Code. The Service Code takes into
change the culture of service across the
10
mass towards realising the Art
of Service.
In order to facilitate a shared
understanding of the journey and to
reconfirm the intent and purpose of
the Art
of Service, a communications
and alignment campaign was
launched to all employees at the end
of 2009. This campaign created a
platform for our operations staff to
gain exposure to the principles and
energy of the Art
of Service, thereby
creating alignment and readiness for
the operations rollout planned for
2010.
Now that we have taken the first step
Having achieved a shift in the culture at
head office, in 2010 we commenced
implementation in operations. During the
process we empowered 1 338 managers
(including branch, regional and general
managers) to take this message to
of Service with the service
and have laid the foundation, we will
continue to embed the Art
of Service in
all aspects of our business as guided by
our Service Code, starting with our
leaders and their ability to actively lead
a service culture. Customer-focused
Leadership Survey results indicate that
14 000 employees.
Although our current external customer
satisfaction rating of 78% compares well
with best practise, we look forward to
reviewing the results of our September/
October 2010 survey to see the impact
A culmination of the successes yielded
by the Art
External service focus
on our customers following the
implementation within our operations.
our ability to lead the service culture has
improved from 76% to 78% between
May 2009 and April 2010. We will
continue to focus on leadership as a
pivotal component of our service culture.
Finally, we acknowledge that
sustainability is assured when constant
measurement is applied, and to this
departments, the impact of the
communications and alignment
Sustaining the process
end, we will continue to measure our
campaign as well as other people
Facilitated by ongoing conversation,
progress and report back at the
engagement initiatives undertaken,
vigorous debate, intensive
highest level.
resulted in our Employee Engagement
communication and the practice
Survey measurements increasing by
of finding a better way to serve our
7,77% between April 2010 and the
customers every day, the Art
previous year. We are proud to report
has permeated the very fibre of our
that our employee engagement score
business.
of Service
A way of being
Our wish is that the impact of our service
will continue to gain momentum and
make a difference in the lives of all those
of 77% is comparable to top
we touch, building on the original dream
performing organisations nationally.
and shaping our future.
JD Group Annual Report 2010
11
Group review
Customers
Growth
Large customer base across the
Profitability
Group’s divisions
A customer is defined as a patron; one who purchases or receives
a product or service from a business or merchant, or plans to.
Customers are key critical to ensuring our profitability. Without them
there is simply no profitability and no growth.
Our operational regions in S.A.
Gauteng, KwaZulu-Natal, Western Cape, Mpumalanga, Limpopo,
Eastern Cape, North West, Free State, Northern Cape
Southern Africa
Namibia
Mauritius
Botswana
Swaziland
South Africa
Europe
Poland
Group review
Value creation for our customers
“You’ll never have a product or price
advantage again. They can be easily
duplicated, but a strong customer service
culture can’t be copied.”
Jerry Fritz
JD Group Annual Report 2010
13
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Executive Chairman’s report
Delivering on our
strategy
The merit of our growth
strategy, with its separate
focus on retail and
financial services, has
been vindicated during
the year under review as
we started reaping
tangible benefits across
the Group. Although the
trading environment
remained challenging
throughout 2010, our
continued focus on
strengthening our
business models within
David Sussman
Executive Chairman
these specialist areas
ensures that we are now
well positioned for an
eventual recovery.
Highlights
➔ Tangible benefits derived from the decoupling of Financial Services and
Traditional Retail
➔ Improved customer satisfaction and employee engagement results driven
by the
Art of Service initiative
➔ Investment in technology already generating results in Financial Services
14
JD Group Annual Report 2010
There is no doubt that every area of our
It is particularly pleasing that while we
While the strategic repositioning resulted
business was radically re-engineered
embarked on these changes during one of
in separate focused divisions within the
during the last two years. As with any
the worst economic environments in living
JD Group, the Art
process of extensive repositioning,
memory, we maintained the momentum
also delivered a tangible differentiator in
we were faced with challenges.
of change during the year under review.
the business as the workforce embraced
We successfully overcame these hurdles
The Group’s strategy implementation is
the initiative when it was launched in
and the evolution of the JD Group is
coming to fruition, and the quantifiable
the previous year at the head office.
starting to bear fruit on all fronts.
benefits are in line with the analyses which
The commitment of the leadership team
The process of strategic implementation
we conducted during the planning stages
to making a difference in the lives of the
has been exact and has brought with it
and which preceded the economic
Group’s customers filtered throughout the
increased knowledge of the business.
downturn. It was fortuitous that the
organisation as the Art
As a result, the Group’s leadership is
Group had already embarked on these
was rolled out across the operations in
equipped with more in-depth
far-reaching changes before the downturn,
2010. A number of operational and human
understanding than ever before relating
as the re-engineering increased the
resource managers were trained as
to every aspect of the business and more
businesses’ resilience to weather these
facilitators during the upskilling of
especially its customers. It is therefore
conditions. Without exception, every facet
1 338 operations managers to facilitate
able to adapt more quickly to changing
of the business which was affected by the
the Art of
circumstances. The Group-wide focus on
reorganisation showed a markedly
their branches. During the year, some
skills has also enabled JD Group to develop
improved performance.
14 000 employees were trained by their
a thorough understanding of its people
and their inherent strengths, both in retail
and financial services.
The financial performance of the Group
was however negatively affected by a
disappointing peak festive trading season
of Service initiative has
of Service initiative
Service training programme in
branch managers and an overall
satisfaction rating of 92,5% was achieved
across all Art
of Service initiatives
implemented.
Subsequent to the segregation of the
in November and December 2009.
disparate business focus areas, the Group
While the entire market was impacted by
also embarked on significant investments
nationwide job losses and high levels of
in its information technology backbone to
consumer indebtedness, these were
harness the full impact of the fundamental
exacerbated by poor sentiment arising
No progress has been made with regard to
changes which had been implemented at
from job insecurity and the Group also lost
the conclusion of a B-BBEE ownership
an operational level. The Group continues
market share over this period. The benefits
transaction. This is due to recent turmoil in
to introduce the new technologies and
of the retail focus were however realised
the financial markets. Such a transaction,
systems to deepen its understanding of
in the second half of the financial year,
incorporating a broad-based business
customers, and contribute to a more
with an annualised revenue growth in
partner and staff, will most certainly be
focused and differentiated company.
excess of 9% on the previous year,
pursued when the time is deemed to be
New systems implemented by the
reflecting an increased market share.
propitious. We continue to focus on the
Financial Services division are providing
The Financial Services division also
other aspects of the B-BBEE scorecard and
individual customer insights to the
achieved near record collection rates on
continuously evaluate procurement across
Traditional Retail division which were not
the debtors’ book with bad debts declining
the operations to verify the credentials of
possible previously. Accordingly, our retail
by some 36% year-on-year, a remarkable
our suppliers.
brands have sharpened their ability to
achievement given the current trading
Recruiting people from previously
adapt sales and merchandising strategies
environment.
disadvantaged backgrounds at a
Broad-Based Black Economic
Empowerment (B-BBEE)
to specific conditions.
JD Group Annual Report 2010
15
Group review
Executive Chairman’s report (continued)
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
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.
Social responsibility
As one of the leading retailers in South
Africa, JD Group firmly believes that the
future prosperity of our country, as well as
As the Chairman of this
that of the Group, hinges on, among other
Group, I am absolutely
things, the transformation and upliftment
determined to ensure
of the communities in which we conduct
that any substandard
our business. We rely on the communities’
service is regarded as
and our customers’ support to grow our
an absolute crisis.
business and produce sustainable profits
for our shareholders. In turn, our
customers expect excellent service,
whilst the communities rely on
our corporate social investment support
to enhance their quality of life.
JD Group’s corporate social investment
programme continues to concentrate
on the development of individual and
community self sufficiency through
education, training, skills development
and job creation. In 2010 we have made
significant investments in our social
responsibility programme, which included
enterprise development projects and
direct donations.
Our main projects include among others,
the Techno-agricultural Innovation for
Poverty Alleviation (Tipa) project. Tipa is
based on the concept of the African
Garden Market, part of the Food Security
for Africa initiative. For additional details
on these and other projects refer to the
Sustainability Report on page 77.
16
JD Group Annual Report 2010
Dividend
The board declared a dividend of
150 cents (2009: 41 cents) for the year
ended 31 August 2010. Our strong balance
sheet allows us to maintain a two times
dividend cover.
Board of Directors
Gerald Völkel resigned as the Group’s
Financial Director with effect from
30 April 2010. On behalf of the board,
I thank Gerald for his loyal and dedicated
contribution to the Group.
Bennie van Rooy succeeded Gerald as
Group Financial Director with effect from
1 May 2010, having joined JD Group from
the Absa Group on 1 January 2010 as
Group Financial Controller. Bennie has
extensive experience in credit risk
management, capital management and
balance sheet optimisation.
Mervyn King resigned from the board of
JD Group with effect from 1 July 2010. His
association with JD Group spanned
28 years during which he served on the
Group board as an independent nonexecutive director for 15 years.
Management and the board extend their
gratitude to Mervyn for his loyal and
dedicated contribution to the Group and
wish him well in his future endeavours.
Prospects
Although the South African consumer
remains highly indebted and the timing of
a sustained consumer recovery remains
uncertain, the Group is on track with its
focus on core competencies within the
retail and financial services environments.
Due to recent investments in new systems
corporate merchandise and marketing
in the Financial Services division, as well
function.
as strengthening its positioning and value
➔ Pamela Barletta has been instrumental
proposition within all brands in the Cash
in leading an outstanding
and Traditional Retail divisions, the Group
transformation of the Human Resource
is confident that its strategic repositioning
function during the year.
will continue to gain traction.
➔ Ian Thompson has successfully
Accordingly the Group is confident of an
re-structured our funding requirements
improved performance in the year ahead.
in an exemplary fashion.
➔ Some time ago Johan Kok made known
Acknowledgements
his intention to retire at the end of
As Chairman of this organisation, I am
2010. Seldom have I seen an
indebted to all our people for their
individual remain so committed and
tremendous support during the year.
determined to executing a new strategy
Our people have managed the far-reaching
despite his imminent retirement.
change in a way that most academics
would have regarded as impossible.
Our highly capable executive management
team is the custodian of our strategy
implementation and accordingly, the
sustainability of the performance of
the Group.
➔ Grattan Kirk has once again clearly
➔ Phillip Kruger and his executive team
take the place of
persistence. Talent will
not; nothing is more
common than
unsuccessful men with
talent. Genius will not;
unrewarded genius is
almost a proverb.
have achieved what most would have
Education will not; the
regarded as impossible.
world is full of educated
➔ Abra remains one of our best run
operations.
➔ Both Blake and Maravedi have excellent
derelicts. Persistence and
determination alone are
omnipotent.
leadership.
➔ The resilience and tenacity displayed by
demonstrated his determination and
all the executives and in particular
skills as a leader in motivating the
those in the retail environment has
re-engineering of our organisation.
been an eye opener.
➔ Bennie van Rooy, our new Group
Nothing in the world can
Ray Kroc – McDonalds.
The unfailing commitment of our non-
Financial Director, has developed an
executive directors during these times of
insight into every aspect of our
change has once again proved invaluable.
business in a very short space of time.
➔ The implementation of our strategy
under the helm of Henk Greeff has
ensured that the change did not lead
to chaos.
➔ Richard Chauke has been able to elicit
commitment from executive management
I David Sussman
Executive Chairman
along our journey of transformation.
➔ David Hirsch has, in no uncertain terms,
brought a new dimension to the
JD Group Annual Report 2010
17
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Board of directors
Executive directors
Chief Executive Officer of the JD Group in
June 2008. Grattan has 14 years’ experience in
auditing and 14 years’ experience in retail.
1.David Sussman (62)
3. Richard Chauke (43)
Com
B
Executive Chairman
Appointed 1 April 1986.
Appointed chairman in February 1989.
David Sussman is the founder and
Executive Chairman of the JD Group.
Before forming the JD Group, David
founded his own company, Sustein
(Pty) Ltd (trading as Price ‘n Pride) in 1983.
In 1986, David persuaded the then
Chairman of Rusfurn, Mervyn King, to
sell Joshua Doore to Sustein (Pty) Ltd.
At the time, Sustein had three Price ‘n
Pride stores and the acquisition of Joshua
Doore required that Sustein be listed
on the Johannesburg Stock Exchange
as Joshua Doore Limited. After further
acquiring World Furnishers and Bradlows
in 1988, the name of the listed company
was changed to JD Group Limited.
The JD Group has expanded over time
to include the acquisition of Profurn and
Incredible Connection, as well as a 70%
equity stake in Blake & Associates. In
2005, the JD Group launched Maravedi
Financial Services, a financial services
alliance with Absa Group and Thebe
Investment Corporation, and recently,
JD Financial Services division was
launched with contact centres in
Johannesburg and Durban.
Under David’s guidance and leadership,
the Group has been inspired to be
world-class in its field of expertise and
is whole-heartedly committed to
making a real difference through its Art of Service culture.
2.Grattan Kirk (46)
FCA, CA(SA)
Chief Executive Officer
Appointed 17 September 2007.
Joined the Group in 2005.
Born and educated in Dublin, Ireland.
Grattan qualified as a chartered
accountant with Deloitte & Touche
in 1987 and transferred to their offices in
Johannesburg in 1990. He was appointed
an Audit Partner in 1994. He left
Deloitte & Touche to take up the position
of Financial Director of Connection Group
Holdings Limited in 1997. He was appointed
Chief Executive Officer of Connection
Group Holdings Limited in 2003.
After JD Group acquired Connection
Group Holdings Limited in 2005, Grattan
served as Chief Executive of the Cash
division, encompassing Hi-Fi Corporation
and Incredible Connection as well as
assuming responsibility for Abra, the
Group’s International brand in Poland. In May 2007, he was appointed Chief
Operating Officer of the Traditional and
Cash Retail divisions. He was appointed
18
JD Group Annual Report 2010
BCom (Hons), MCom (South African and
International Tax), MTP (SA)
Director: Transformation, Tax, Risk,
Internal Audit and Compliance
Appointed September 2007.
Joined the Group in February 2006.
Richard has 12 years’ experience
in auditing and taxation, four years’
lecturing and four years’ experience in
retail. The experiences were gained from
his employ at the South African Revenue
Service, the University of Venda for
Science and Technology, Deloitte
& Touche, the Office of the Auditor
General and Ernst & Young. He is
a member of the JD Group Risk
Management Committee and of the
Group’s Executive Committee and a
director of JDG Trading. He also serves
on the boards of three external private
companies in his personal capacity.
4. Ian Thompson (42)
BCom, BAcc, CA(SA)
Director: Finance and Corporate Affairs
Appointed 13 November 2008.
Joined the Group in September 2003.
Ian was born in Malawi and educated in
South Africa, qualifying as a chartered
accountant while completing articles with
Deloitte & Touche in 1992. Ian has worked
in a number of industries including
four years in auditing, four years in
Corporate Finance, six years in General
Finance and seven years in Retail. This
broad exposure has allowed Ian to
gain experience in multiple financial
disciplines including general financial
management, mergers and acquisitions,
capital raising and JSE related issues
among others. He is a member of the
JD Group risk management committee,
the Group’s Executive Committee
and a director of JDG Trading, Blake &
Associates and Maravedi.
5. Bennie van Rooy (35) BCom Hons, CA(SA)
Group Financial Director
Appointed 1 May 2010.
Joined the Group in January 2010 as
Group Financial Controller.
After completing his articles at
PricewaterhouseCoopers in 2000, Bennie
gained exposure to various financial
services disciplines such as mergers
and acquisitions, financial consulting
and risk management. He joined the
Absa Group in September 2005 where
he specialised in credit risk management
before being appointed as Head: Group
Capital Management and Balance Sheet
Optimisation in the Group Treasury
function on 1 January 2007. He is a
member of the JD Group risk management
committee and of the Group’s Executive
Committee and a director on the boards of JDG
Trading, Blake & Associates, Maravedi and the
two JDG Insurance companies.
6.Dr Henk Greeff (51)
Ed (Ed Management) (cum laude), PhD,
M
Programme in Strategic Transformation (USB),
Programme in Strategic Change (Stanford, USA)
Director: Strategy and Human Resources
Appointed 17 September 2007.
Joined the Group in 2003.
Nine 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. Seven years’
experience in retail.
Henk is a member of the JD Group Risk
Management Committee and of the Group’s
Executive Committee. He is also a director
on the board of JDG Trading.
Non-executive directors
7.Ivan Levy (72)
Dip Law
Attorney and Director of Companies
Appointed 1 December 1994.
Chief Executive Officer of Levy,
Feinsteins & Associates Inc – corporate
legal advisors to the JD Group. Chairman
of the JD Group Nominations Committee,
member (formerly Chairman) of the JD Group
Remuneration Committee, former chairman
of the JD Group Pension and Provident Funds,
executive director of numerous private
companies, former non-executive director
of various listed companies.
8.Vusi Khanyile (60)
BCom (Hons)
Director of Companies
Appointed 13 November 2008.
Chairman and founding managing director
of Thebe Investment Corporation. Director
of numerous companies, listed and private
including Altech Netstar Group, SAFRIPOL,
Santam, Shell SA Refining and Vodacom. With
effect from 9 March 2009, was appointed lead
Independent Non-Executive Director.
9. Martin Shaw (72) CA(SA)
Director of Companies
Appointed 1 June 2001.
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. Formerly
a 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 Audit
Committee, a member of the Remuneration,
Risk Management and Nominations
Committees.
10.Maureen Lock (61)
BCom CA(SA)
Corporate Financier
1.
2.
4.
5.
7.
8.
9.
10.
11.
12.
13.
Appointed 2 April 2001.
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.
Executive directors
11.Günter Steffens OBE (73)
CA(SA)
Director of Companies
Appointed 13 November 2008.
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 the German
– British Chamber of Industry and Commerce and
of the Foreign Banks Association in London. A nonexecutive director of various companies in South
Africa and in Europe. Chairman of the JD Group Risk
Management Committee.
3.
6.
12.Dr Len Konar (56)
BCom CA(SA), MAS, DCom
Director of Companies
Appointed 19 July 1995.
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 Durban-Westville
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 non-executive director
of the South African Reserve Bank, Sappi,
Alexander Forbes and Illovo Sugar. Member of the
JD Group Audit, Risk Management, Remuneration
(Chairman) and Nominations Committees.
Non-executive
Executive directors
directors
13.Jacques Schindehütte (51)
BCom (Hons), CA(SA), H Dip Tax
Appointed 10 November 2010.
Jacques is a chartered accountant who served his
articles with the then Arthur Young & Company
(now Ernest & Young). He is the past financial
director of Absa Group Limited, a role he occupied
for five years up to February 2010. He served on
a number of Absa subsidiaries and Group board
subcommittees and was an ex officio member
of the audit committee, the directors’ affairs
committee as well as the remuneration committee,
amongst others. Prior to joining Absa, Jacques
was employed by Transnet in a number of senior
roles over more than a decade. During his career
he has amassed a broad range of experience from
disciplines such as general management, financial
services, finance, auditing, marketing, transport,
property development and telephony, to name but
a few.
JD Group Annual Report 2010
19
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Chief Executive Officer’s report
Focusing on long-term
value creation
Two years have passed
since the inception of the
new strategy of the
Group, and during this
time, the executive team
has been fixated on
executing its strategic
objectives.
Grattan Kirk
Chief Executive Officer
Highlights
➔ Attributable earnings of R501 million, up from R75 million (R413 million excluding
the prior year tax settlement)
➔ HEPS of 303,6 cents from 44,4 cents (251,5 cents excluding the prior year
tax settlement)
➔ Dividends per share of 150 cents per share from 41 cents per share in 2009
➔ Debtors costs down 32% on the prior year
20
JD Group Annual Report 2010
Overview
Financial overview
Financial position and cash flow
It gives me great pleasure to report this
The Group reported a 2,3% growth
JD Group’s financial position remains
year as so much has been achieved in
in revenue to R13,2 billion (2009:
healthy with net gearing of
the last 12 months. The strategy set out
R12,9 billion) notwithstanding the fact
R667 million (2009: R639 million),
in 2008 continues to gain momentum
that the durable goods sector came
reflecting a gearing ratio of 12,9%
against a background of relatively low
under continued pressure during
(2009: 13,2%), which is extremely
top-line sales growth across most of the
the year.
conservative. Long-term borrowings
businesses in which we trade.
The newly separated Traditional Retail
were rolled during the year with
repayments of R716 million due over
The management team remains
and Financial Services divisions
steadfastly committed to delivering on
matured their value propositions
the strategy and is confident that the
during the year. In the retail-focused
improved financial performance
divisions, extensive efficiency projects
indicators, evidenced in the second six
dampened the impact of the benign
months, will continue to come from a
revenue growth, while upgraded
recovery in the trading environment. The
systems implemented in Financial
Traditional Retail
Group is now in year two of its three year
Services during the year, resulted in
The Traditional Retail division reported
strategy. Although we did not achieve
a significant improvement in the
merchandise sales of R4,62 billion
the financial benchmarks we set for
quality of the debtors’ book. Debtors’
(2009: R4,47 billion), a growth of
ourselves for the current year, we are
costs declined 32% to R753 million
3,3%. Household disposable income
still on track to deliver on our long-term
(2009: R1,1 billion). Operations across
remained under pressure in 2010
targets, albeit 18 to 24 months behind
the Group also exercised excellent
while high levels of indebtedness
our initial timeline.
cost management and gross margin
limited the ability of consumers to take
was maintained at R2,8 billion. The
up new loans. However, with its eight
impact of revisiting internal efficiencies
diversified retail brands and the
and margin management is also far
Financial Services division’s improved
reaching in that the Group has
scoring capability, Traditional Retail
established a strong platform for
was shielded from the worst impacts
growth once the economy starts to
of the economic downturn. Following
emerge from the difficult trading
a disappointing peak December
environment.
trading period in 2009, the market
short space of time and is starting to
Operating profit before debtors’ cost
started showing signs of improvement
extend the debtors’ book outside the
amounted to R1,5 billion (2009:
in the second half of the financial year.
traditional JD Group channels.
R1,8 billion), while operating profit
The achievement of an operating profit
after debtors’ cost of R772 million
of R182 million (2009: R202 million)
(2009: R646 million) increased by 20%.
was facilitated by broad-ranging
With our strong brands, the Group is very
well positioned to leverage the growth
platform as demand recovers. The
Traditional and Cash Retail divisions made
excellent progress with ongoing
optimisation projects during the year. The
Financial Services division has established
a well-differentiated platform in a very
the next two years. The Group is well
placed to increase the level of gearing
in line with its strategic objectives.
Operational overview
operational efficiency initiatives
JD Group Annual Report 2010
21
Group review
Chief Executive Officer’s report (continued)
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
including the optimisation of the Chain
Hi-Fi Corporation maintained the
footprint and merchandise range, as
momentum of its repositioning strategy
well as stringent cost management at
during the year, completing the revamp
a store level. The centralisation of
of 13 of its 34 stores. In line with its
logistics gained momentum during the
strategy to relocate stores to higher
year with five distribution centres now
foot-traffic malls and regional shopping
operational. At 3,4%, the reported
centres, a further four stores were
return on sales (2009: 4,4%) remains
relocated with an additional four
below the three-year return objective
earmarked for relocation to higher
of 12,5%, due largely to muted
foot-traffic locations in 2011. The Chain
revenue growth.
also made progress with its
Incredible Connection
Traditional Retail will maintain
maintained its leading
initiatives to optimise sales and to
position in the local
continue improving its cost-to-income
information technology
ratio. The division will also continue to
retail segment in
optimise inventory and extend its
South Africa.
targeted merchandising strategy. The
merchandise strategy comprising of fully
supported international brands as well
as private label products in all major
categories. Hi-Fi Corporation also
established a centralised distribution
centre in Aeroton, Johannesburg.
continued progress of the centralised
Incredible Connection maintained its
logistics function and commissioning
leading position in the local
of the Group-wide enterprise resource
information technology retail segment
planning platform (SAP) will also
in South Africa. Incredible Connection
support profitable growth.
delivered revenue growth of 7%.
It continued to differentiate its
Cash Retail
launch of new services, including
Hi-Fi Corporation and Incredible
“Incredibles OnSite”, its mobile field
Connection, showed a 8,4% increase
technician service. The Chain
in revenue to R4,3 billion (2009:
continued its store development
R3,98 billion). Hi-Fi Corporation
strategy, opening four new stores
successfully recovered market share
during the year. It also revisited the
during the year as a result of aggressive
configuration of its stores, with its
price cutting, delivering revenue growth
10 mega stores anchoring the brand in
of 9,9%, albeit at a lower margin. The
major centres. Incredible Connection
division’s operating profit decreased
focused closely on effective inventory
by 12,8% to R190 million (2009:
management to deal with the impact
R218 million), due primarily to the lower
of price deflation. The Chain opened
product margins achieved at Hi-Fi
a new distribution centre in
Corporation, as well as the impact of
Longmeadow in July 2010 which is set
the stronger Rand on imported
to realise efficiencies in 2011. The
merchandise.
22
JD Group Annual Report 2010
proposition in the market with the
The Cash Retail division, comprising
Chain started exploring opportunities
Notwithstanding the adverse trading
facilitating more efficient management
in outlying regions which have been
environment which led to ongoing
of key performance areas. In the year
identified as an area of growth.
pressure on credit sales across the
ahead, a number of new initiatives will
industry, the Financial Services division
be pursued, together with increased
International Retail
delivered revenue of R2,9 billion
operational efficiencies and cost
The Polish economy continued to be
(2009: R3,0 billion). The implementation
savings. It will increase its use of
influenced by the global economic
of Blaze Software enabled the division
technology, including e-commerce,
downturn in 2010. In line with the
to score existing customers upfront,
social media and other electronic
industry downturn, Abra, our retail
which provided opportunities to sell
channels to assist in the delivery of
Chain in Poland, reported a 24,8%
additional products.
its product offering.
The performance of the debtors’ book
Maravedi’s strategy remains the
exceeded all expectations, reflecting
exploration of new products, new
a decrease in debtors’ costs of 36%
markets and new channels. It
to R692 million (2009: R1 082 million).
continued developing non-credit
decline in revenue to R634 million
(2009: R843 million). The Chain
upgraded its warehouse capacity to
improve distribution efficiencies, while
the implementation of supply chain
and advanced planning and scheduling
software, enhanced merchandise
planning and order fulfilment.
Priorities for the year ahead include
driving organic growth and improving
the sales performance despite the
uncertain trading conditions.
Increasing conversion rates will be
a key factor in 2011.
Financial Services
The Financial Services division
continued to bed down its value
proposition and implemented updated
decision management credit risk
scoring and customer management
solutions during the year. As a result,
the quality of new business that was
added to the debtors’ book during the
year improved substantially.
The Financial Services division will
continue to invest in its technology
platform to differentiate its value
proposition, to effectively mitigate
credit risk as well as improve
income streams and markets during
the year, to broaden its range of
value-added financial services
products, while benefiting from
economies of scale.
productivity. Personal loans are
During the year, Maravedi made solid
currently being piloted with the
progress with its initiatives to introduce
national roll-out projected to take
a revolving credit offer as well as the
place in the new calendar year, in
expansion of its secured finance offer
line with the division’s objective
through HiFinance. The HiFinance offer
to increase its product offering.
was rolled out to 26 Incredible
Connection stores. The subsidiary also
New Business Development
showed a further improvement in its
Blake, which provides premium
cost-to-income ratio. Although the
contact centre solutions in the
market is expected to remain tough
Customer Lifecycle Management
through 2011, Maravedi is optimistic
segment, achieved a return on capital
that its financial services activities will
in excess of 30% for the year under
continue to deliver growth.
review. Its core Collections division
and Mauritian operation delivered a
strong performance while the
restructuring of the division servicing
the United Kingdom reduced Blake’s
overall risk profile. Blake implemented
a new business intelligence platform in
the collections environment which is
Strategic overview
In 2010, the focus of the Group was
aimed at unlocking the anticipated
benefits of its new strategy. Significant
progress was made including the
consolidation of the financial services
activities into a new division,
JD Group Annual Report 2010
23
Group review
Chief Executive Officer’s report (continued)
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
continuing the implementation of the
their strategic objective is to extend
new centralised technology platform,
their reach outside the Group. The
sharpening the focus on merchandise
systems and processes which have
across all retail chains, repositioning
been and are still being implemented
Hi-Fi Corporation and pursuing
in the financial services environment
revenue streams from granting loans
will enable the Group to build
and insurance products outside of the
micro-finance books outside of our
Group’s traditional business.
traditional channels.
The building blocks of the new
The management team will continue
strategy are now in place, with the
to periodically revisit its strategic
segregation of the financial services
intent to confirm that it is being
Management is confident
and retail businesses, which was
properly entrenched across the
that it has a solid
executed in a very precise and
Group’s approximate 1 000 points of
foundation to achieve
judicious manner. The retail businesses
presence. The strategy must be
growth as the economy
are entirely focused on the execution
translated into improved efficiency,
improves.
of their retail activities, including store
operational disciplines, customer
roll-out, new merchandise range and
service and stock availability.
customer service to the highest
standards. The Financial Services
division is dedicated to its mandate of
granting and managing credit. All the
strategic initiatives are on track and
are becoming inculcated into the
business. Management is confident
that it has a solid foundation to
achieve growth as the economy
improves.
24
JD Group Annual Report 2010
The team that has been mandated to
translate the strategic repositioning
into executable actions and delivering
on the financial benchmarks has
changed fundamentally in the past
18 months. While several sector
specialists from within the Group were
redeployed at an executive level, a
number of external industry experts
were also recruited. Accordingly, the
The Group’s Traditional Retail division
executive team of 17 members
has historically provided the channel
comprises 10 industry experts who
to market for the Financial Services
joined the management team recently.
division’s loan products. Financial
I am confident that we have the right
Services is now ready to take centre
people with the right competencies
stage in the next phase of the
in the fields of human resources,
strategy to pursue growth
information technology, mechandise,
opportunities inside the Group
marketing and logistics amongst
business by augmenting its current
others. They are totally aligned with
product offer outside of furniture
what needs to be delivered. The team
loans. While Maravedi and Blake
is not steeped in the past and is
provide channels to market financial
therefore willing to make the
products to non-JD Group customers,
necessary changes which will ensure
delivery of the strategy for the longer
the centralised back office functions,
The primary financial objective is the
term benefit of the Group.
including credit origination, risk rating
operating divisions’ achievement of
and collections through to product
the Group’s strategic business goals.
The way forward
development.
These financial targets were initially
The business environment is showing
In the Traditional Retail and Cash Retail
indications that demand is recovering,
environments, the Group will continue
albeit off a low base. JD Group has
to optimise its portfolio, ensure the
implemented its platform for growth
availability of inventory and the
and is confident that the team, which
unlocking of further efficiencies
has been tasked to execute on the
derived from the centralised logistics
strategy, is clear on what needs to
project and the roll-out of the new
be achieved in the years ahead. The
ERP technology platform.
Group executives will ensure that
the necessary resources and support
structures are in place to facilitate this
delivery.
intended to be achieved by 2011, but
with the lack of top-line sales growth
in 2009/2010, we anticipate that the
benchmarks may only be achieved by
2012/2013. We remain nonetheless
totally committed to these financial
targets.
The Group will proactively manage the
business to ensure that it delivers
against its strategic business goals
across all operating divisions.
An important objective is the
Accordingly, it will continue its
development of revenue streams
investment in building critical skills and
outside of the traditional JD Group
resources across the Group. The Group
channels and to leverage the
and its operations will continue to
extensive investment in the Financial
focus on people development,
Services division. Once the Group-wide
attracting the right leadership with the
enterprise resource planning system
necessary competencies, growing,
has been implemented, it will also
coaching and mentoring its people so
have the scalability to introduce new
that it has the capacity to follow
micro-finance products supported by
through on the vision for the business.
Grattan Kirk
Chief Executive Officer
JD Group Annual Report 2010
25
Group review
Executive management
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Connection Group was later acquired
by the Group, David was responsible for
Merchandise and Marketing for the Cash
Division, prior to his appointment to the
JDG Trading board in his current portfolio
as Group Executive: Merchandise and
Marketing. He is a member of the Group’s
Executive Committee and a director of
JDG Trading.
1.Pamela Barletta (41)
ip Labour law, Dip Human Resources
D
Global Executive Development
programme: GIBS 2007
Group executive: Human Resources
Pamela joined the Group in 2007 as the
Corporate Executive: Human Capital
Development after having served on
the Incredible Connection board as
the HR Director since 2004. She joined
Incredible Connection in 2002 as the
Human Resources Executive. When the
JDG Trading business model incorporated
business divisions within retail, Pamela
was appointed as the Executive: Human
Resources for the Cash Division,
comprising of Incredible Connection
and Hi-Fi Corporation. In September
2008 Pamela was appointed the Group
Executive: Human Resources, and
appointed to Exco in September 2009.
Prior to this, she managed her own
labour law consulting firm for four years
providing specialised services in the field
of industrial relations to retail businesses
as well as other large corporations across
diverse industries.
Pamela began her career in Personnel
Management in 1986 at Dion Stores. In
1999, when she left that chain to open
her own labour consulting company,
Dion was part of the Massmart Group
of companies.
Pamela serves on the following
HR related committees, namely the
Leadership and Development council,
the Employment Equity and Training
committee for the Group and Cash
division and the Group HR Strategic
Portfolio committee and is a member of
the JD Group Executive committee and
a director of JDG Trading.
2. David Hirsch (40) Group executive: Merchandise and
Marketing
19 years’ experience in retail.
Educated in Durban, David Hirsch began
his career in sales on the shop floor. His
focus then turned to procurement and
while with the Connection Group, he
opened and managed the group’s USA
office in New York for several years, prior
to returning to South Africa. Thereafter,
he was instrumental in opening, and
jointly managed, the first Incredible
Connection store in Woodmead.
Various appointments followed, namely
Operations Executive for Incredible
Connection, Merchandise Executive
and later Merchandise Director. When
26
JD Group Annual Report 2010
before being appointed as Group
Credit Executive. With the operational
restructuring during July 2008, Phillip
was appointed Chief Executive of the
Financial Services Division.
He is a member of the JD Group risk
management committee and of the
Group’s Executive Committee and a
director of JDG Trading.
3.Johan Kok (59)
5.Komani Mfuni (45)
Chief Operating Officer
40 years’ experience in retail
Johan started his career as a heavy-duty
truck driver in 1970, but after 14 months
joined Edgars Stores and so commenced
a distinguished career in the retail
environment.
He started right at the bottom as a retail
trainee, but soon moved through the ranks,
from a branch manager to regional
manager – a position he held for five years.
Johan then moved into the human
resources sphere for two years, where he
satisfied one of his personal interest
aspirations. He followed this with a short
tenure as divisional merchandising
manager for Sales House Midlands Division,
before resigning and joining JD Group in
June 1994.
Johan was appointed regional manager and
after one year with JD Group became
general manager, a position he held for the
next eight years before again venturing into
the human resources arena for three years,
where he played a leading role in
integrating and rightsizing the newly
acquired Rusfurn chains. Following this
assignment, Johan became the CEO of one
of the Group’s operating divisions for three
years, before stepping into the role of chief
operating officer of the Group, a role he has
been fulfilling since 2000.
For the greater part of the financial year
Johan fulfilled a dual role by also acting as
the chief executive of the Traditional Retail
division, since the regular CE had been
seconded to a programme for the
implementation of a new IT architectural
and operating system across the Group.
He is a member of the Group’s Executive
Committee and a director of JDG Trading.
Johan will retire on 31 December 2010.
Sc (Hons), Quantity Surveying
B
– Reading University (United
Kingdom), MBA (Maastricht School
of Management – The Netherlands)
Group executive: Strategy
Research and Business Intelligence
Three years’ experience in financial
services and ten years in strategy
development and planning
consulting.
Komani joined JD Group in January
2009 as Group Executive: Group
Strategy and is responsible for
strategy development and business
intelligence.
Prior to this, Komani was a Strategist
and Planner for Absa Bank, where
he worked directly with the CEO,
Exco members, the Board and the
Heads of Strategic Business Units
and Specialist Functions. Komani
co-created strategies and advised
on various strategic matters,
recommending value-adding routes.
He was instrumental in embedding
world-class strategy practices and
played a commanding role in shaping
the strategic positioning of his former
employer in the banking industry.
Prior to that, Komani spent three
years with one of the leading
global strategy and management
consultancy firms (Paris-based
Gemini Consulting) where he
specialised in strategy development,
mergers and alliances, as well
as commercialisation of public
enterprises. Komani worked in a
number of different industries gaining
experience in best approaches and
processes for developing executable
strategies.
Prior to that, Komani spent
approximately three years as a
banker at Standard Bank. In addition,
Komani gained three years’ project
management and financial feasibility
and analysis experience in the
construction industry in the United
Kingdom with Hyder Consulting,
where he was involved in both the
design and construction phases of
many large-scale projects.
4. Phillip Kruger (48)
Com
B
Chief executive: Financial Services
20 years’ experience in retail.
Phillip joined JD Group in 1997 as
Debtors Executive for the Bradlows
chain. He has since held various
operational positions in the Group,
including Debtors Executive and later
Operations Executive for Russells,
6. Andrew Murray (48)
BSc Eng (Mech/Ind), PrEng
Chief Information Officer
2
3 years’ experience in retail, IT,
manufacturing, warehousing, distribution
and finance.
Andrew joined the Group in December
2008 as IT Executive for Financial
Services and was appointed Group CIO
in May 2009. Andrew graduated from
the University of the Witwatersrand in
1997 and worked in manufacturing,
maintenance, warehousing, logistics,
distribution and business process
re-engineering fields in the first 10 years
of his career. During this time his career
moved into the field of Information
Technology where he has subsequently
been involved in dotcom initiatives,
outsourcing from both a customer and
supplier perspective, and enterprise
resource planning implementations and
support, particularly in the Retail and
FMCG sectors.
Andrew is currently the Chief Information
Officer of the Group. He is a member
of the JD Group risk management
committee, the Group’s Executive
Committee and a director of JDG Trading.
1.
2.
3.
4.
5.
6.
7.
8.
Executive
management
7.Arie Neven (51)
Chief executive: Traditional Retail
3
0 years’ experience in retail.
Arie joined the retail industry and the
Group in March 1986 as a regional
manager in training for Joshua Doore and
Price ‘n Pride. He then became a general
manager in the Joshua Doore and Price
‘n Pride chains and was instrumental in
the bedding down of acquisitions, where
he gained enormous experience from an
operational perspective, which led to his
appointment as Operations Executive for
Joshua Doore and later Price ‘n Pride. He
then became the CEO for the combined
Price ‘n Pride/Score business chain.
Arie subsequently became the CEO
for Joshua Doore, gaining experience
in a market quite removed from the
traditional retail environment. After
Joshua Doore, he moved again to a more
sophisticated, higher LSM market in order
to broaden his experience across the
complete market as CEO of Bradlows,
a position he held for three years.
Arie then became a member of the
Group Executive Management team
as CEO of the Operating Divisions for
approximately 400 stores in the JD Group,
managing Price ‘n Pride, Joshua Doore
and Bradlows.
He moved on and became CEO of all
credit retail operating chains in the
Group, a portfolio he still holds today,
managing eight chains with 949 outlets.
For the greater part of the past financial
year (2009/2010), Arie was seconded to
a programme for the implementation of
a new IT architectural and operating
system across the Group. He is a member
of the JD Group’s Executive Committee
and a director of JDG Trading. Arie serves
on numerous committees such as Credit
risk, Financial Services exco, Insurance
exco, Internal Risk management, Property
committee, Project Toumai, Centralised
Logistics and Fleet.
8.Guy Pearce (44)
BSc, BCom, MBA
Chief executive: New Business
Development
14 years’ experience in financial services,
eight years’ experience in IT.
Guy began his career in financial
services IT, developing bespoke CRM,
term loan and investment management
systems, and also pioneering executive
information systems over what was
then an infant Internet. He then entered
the retail banking industry, first as an
information manager and then as an
internal strategy consultant.
Following this, he spent six years
in strategy consulting, successfully
delivering on 34 engagements for a
diversity of corporate clients, mainly
within the financial services and utilities
sectors, becoming especially skilled
at business simulation, value-based
management and at value-at-risk
modeling for capital investment purposes.
He then re-entered banking, this time
in business banking. Here he applied
his mind to developing competitive
business development strategies for SME
customers, winning a prestigious award
from his employer for his contribution.
He presented many of his findings at
peer-reviewed conferences in Europe,
the USA and Canada on topics such as
information management, brand equity,
customer equity, CRM strategy and
small business development for global
organisations such as the Academy of
Marketing, the Academy of Marketing
Science, the International Council of Small
Business (ICSB) as well as for global, big
brand technology vendors.
He is also a past guest lecturer to
master’s students at Wits Business
School, and is a voluntary reviewer of
SME research submitted to the ICSB by
the international community.
JD Group Annual Report 2010
27
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations
Traditional Retail
Introduction
to the breadth of its exposure across the
The Traditional Retail division
comprises eight leading retail chains
which service a broad spectrum of the
mass middle market.
The decoupling of the retail activities
from the financial services activities
two years ago, enabled a renewed
focus on superior retailing practices.
Accordingly, in-store sales staff
sharpened their retail skills focus
Arie Neven Chief Executive
during the year, ensuring good
housekeeping on the shop floor,
Traditional Retail Exco
Johan Kok (59)
Arie Neven (51)
Colin Bresler (47)
planning and merchandising to
meet customer expectations and
entrenching the Art
of Service to
Julian Hanmer (48)
David Hirsch (40)
Pat Kimmince (45)
George Annandale (46)
Mike Roberts (55)
Linda Sithole (43)
Anthony Smith (44)
Matthew van der Walt (38)
Philip Kruger (48)
Pieter Pienaar (41)
Gerrie van Niekerk (49)
Morné van Wyk (36)
chain. The implementation of new
systems in the Financial Services division
also provided the division with the ability
to score customers upfront for
creditworthiness which dampened
the effects of the tough market.
The economic downturn had a
minimal impact on spending patterns
in the premium market although
customers in this segment showed
a greater sensitivity to interest rates.
Volumes in this highly aspirational
segment were buoyed by the growing
middle class in South Africa.
build loyalty and ensure re-serve
In the lower segments of the mass
opportunities.
market, customers’ ability to spend has
Johan Coetsee (51)
Toy de Klerk (50)
durable and semi-durable retail value
During the 2010 financial year, the
division continued bedding down its
retail focus while it undertook reviews
to optimise its retail portfolio and
merchandising practices in order to
enhance its cost-to-income ratios. It
been curtailed by significant job losses
and low credit extension growth. However,
the completion of approximately
300 000 housing units every year should
provide support for durable and semidurable retail sales growth.
focused on qualifying customer
Across the board, customers are
requirements, ensuring each brand’s
becoming more sophisticated and
ability to deliver, including educating
focused on quality as demonstrated
customers on product features and
by a shift towards higher price points.
benefits.
In the higher end of the furniture
segment, customers’ tastes are
Business environment
increasingly gravitating towards
Credit granting was negatively affected
European fashion trends. Audiovisual
by the rate of impaired credit records
demand is migrating towards plasma
among consumers which is at record
screen TVs and LCDs. This segment is
highs. At the same time, household
faced with continual and aggressive
disposable income has been under
price deflation.
continued pressure with consumers
28
JD Group Annual Report 2010
still highly indebted.
Performance
However, JD Group’s Traditional Retail
Although the full year performance
division was shielded from the worst
of the Traditional Retail division was
impacts of the economic downturn due
negatively impacted by a weak
December trading period, the market
Although the overall chain footprint
started improving in the fourth quarter
remained fairly stable, a number of
of the financial year. Accordingly, the
changes were effected in the
division recorded a significantly
underlying portfolio during the year.
Revenue (Rm)
improved second half performance
In line with the optimisation strategy
across all brands with sales up 9% on
across Traditional Retail, a review of
the previous corresponding period.
the chain footprint and store portfolio
In particular Electric Express continued
led to improved efficiencies and
to flourish after a good performance in
increased trading densities. During
2009 and Barnetts gained momentum,
the year, the division embarked on a
especially towards the end of the
far reaching assessment of existing
financial year.
markets using geospacial analyses to
During the year under review, the
confirm the viability of its stores in
average deal size increased by 8%.
terms of reviewing the store footprint
In the furniture segment, price
against the specific regional market
increases were in line with inflation
opportunities. This enabled Traditional
but sharp price reductions were
Retail to start reconfiguring
experienced by the technology and
underperforming operations by either
audio visual segment in the months
exchanging brands within existing
running up to the 2010 FIFA
locations, rightsizing stores, as well as
World CupTM. However, the product
consolidating retail brands in towns
mix benefitted from a marginal
and regions where the analyses
improvement in the contribution of
revealed that it was overexposed. The
Strategic objectives for 2011
higher margin furniture sales. The
division also opened 37 new stores
➔ Extend progress of centralised
Traditional Retail environment will
where growth opportunities were
continue to focus on optimising its
identified. The optimisation process
product mix with a higher contribution
will continue in the year ahead to
from furniture.
further enhance returns in the
While cash sales showed pleasing
growth year on year, the credit
environment remained under pressure
Traditional Retail environment. Due
Traditional Retail at a glance:
2010
2009
5 339
5 203
Gross
margin (%)
34,5
34,9
Operating
profit (Rm)
182
202
Stores
949
935
10 773
10 286
Trading
density (Rm2)
Achievements in 2010
➔ Revenue increased by 9% in the
second half
➔ Strong performance from Electric
Express and Barnetts
➔ Optimisation of retail portfolio
➔ Introduction of regionalised
merchandising strategy
logistics strategy
➔ Leverage cost-to-income ratio
➔ Sharpen retail skills and
Art of Service
to its cautious expansionary stance
during the retail boom, the impact
due to high unemployment and the
of the economic downturn on the
sharp increase in the number of
division was not as sharp as in the
consumers with impaired credit records.
overall industry.
In order to participate in opportunities
Achievements
for growth identified in outlying
The focus of the Traditional Retail
markets, the Traditional Retail division
division in 2010 was on optimisation
embarked on a pilot project to fine
across several disciplines within its
tune its model to penetrate smaller
retail portfolio to enhance efficiencies
regional towns where it has had
across all aspects of the division.
limited exposure to date. Accordingly,
JD Group Annual Report 2010
29
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
Traditional Retail (continued)
market studies were conducted to
introducing further stock efficiencies.
evaluate the retail potential of outlying
However, the chains remained
regions while the property team was
cognisant at all times of the payoff
deployed to identify suitable locations
between offering customers sufficient
within viable towns. A number of
choice while ensuring stock availability
locations have now been targeted and
to deliver on their requirements.
the Traditional Retail division opened
new Russels stores in Frankfort and
Heilbron. As the regional model
matures, the division will deploy its
small town expansion programme
The Group-wide
in brand clusters to suit the
Art of Service initiative
demographics of the particular area.
remained a high
In line with the ongoing objective of
priority and was fully
driving trading density, the division
implemented across
made progress with initiatives to
each of the 949
customise its merchandising activities
Traditional Retail
to specific stores and regions rather
stores in 2010.
than generically supplying stock
across each of the retail brands. In
support of this strategy its focus also
evolved from stocking the maximum
number advertised lines on each shop
JD Group Annual Report 2010
to a specific focus on clearing existing
inventory across all brands of
distressed, damaged and end-of-range
products. Accordingly, Traditional Retail
closed the financial year with
higher-quality inventory across the
board.
The final stages of separating
Traditional Retail from Financial
Services entailed continued
investments in training customer
facing sales staff to equip them with
superior selling skills. As opposed to
the typical cash retail sale which is
immediate, a credit purchase has a
floor to stocking the top 40 selling
longer decision-making period, with
items for an individual store within
additional delays during the credit
each brand. This led to leaner
approval process. The relationship with
inventory levels. Rather than
the customer also extends across the
merchandising all stores nationwide
full term of the loan until the purchase
within a given brand with identical
has been fully paid off. Accordingly,
ranges and inventory, the Traditional
the Traditional Retail environment is
Retail division took into account the
service intense and heavily reliant on
spending patterns and style
a relationship of trust between the
preferences at each particular store or
store and the customer. Sales training
region and merchandised accordingly.
and development programmes
The enabler of this targeted
focused on building selling and
merchandising approach has been the
customer service skills to suit the
Group’s significant investments in IT
Traditional Retail environment.
infrastructure.
30
The range optimisation also extended
Managing the cost-to-income ratio
In a similar vein, product ranges were
of the division remains a core focus.
also streamlined to match these to
Individual stores are mandated to
regional spending behaviours,
manage their controllable expenditure
which is monitored monthly. The
➔ An ongoing focus on optimising
Traditional Retail brands focus on the
operational efficiencies and the
strategic components of the cost-to-
property portfolio targeting
income ratio and interventions to
improvements in trading densities
leverage profitability including the
to reduce the cost-to-income ratio.
Outlook and objectives
In the year ahead, Traditional Retail
will continue to optimise its sales
initiatives and pursue opportunities to
leverage its cost-to-income ratio. The
following:
The Group-wide Art
➔ Centralisation of the logistics
remained a high priority and was fully
will be supported by investments in
environment that gained
implemented across each of the 949
training and development. In line with
momentum during the year with
Traditional Retail stores in 2010.
the initiatives set in motion in 2010,
the establishment of two additional
Tangible benefits started to materialise
the division will continue to optimise
centralised distribution centres in
as evidenced by the results of two
its inventory while extending its
Phuthaditjhaba and Mthatha
customer satisfaction surveys which
targeted merchandising strategy. It will
following the successful pilot
were conducted across all the brands.
also continue to support the major
project in Botshabelo in 2009.
Both the employee engagement
strategic projects including centralised
A fourth facility is currently under
measures and the external customer
logistics, commissioning of SAP as well
construction in Rustenburg and is
satisfaction index exceeded their
as an ongoing focus on optimising its
on track to be commissioned in
respective benchmarks. The cultural
property portfolio.
June 2011. Centralisation has also
and behaviour changes associated
commenced in the Aeroton
with the Art
distribution centre. Servicing all the
most marked across the sales force,
Traditional Retail brands, these
leading to a step change in their
centralised logistics centres have
attention to detail and heightened
already had a positive impact on
focus on providing a high quality
customer service with the
customer interaction.
introduction of daily deliveries.
Efficiencies also improved as a
result of optimal transport loads.
The centralisation of logistics is an
ongoing focus for the medium term
and, on completion, the division’s
949 stores across the country will
be serviced from 32 centralised
distribution warehouses.
➔ Although the current IT systems are
of Service initiative
ongoing development of retail skills
of Service have been the
The Traditional Retail environment
is implementing processes and
procedures to ensure full compliance
with the requirements of the
Consumer Protection Act as part of a
major project across the Group. It is
working with external experts to make
sure that all areas of impact have been
identified and mitigation strategies
implemented. The roll-out across all
performing to satisfaction,
operations is progressing ahead of the
Traditional Retail is preparing for
April 2011 implementation.
SAP which will reduce IT costs and
unlock efficiencies.
JD Group Annual Report 2010
31
Pat Kimmince (45) Chief Executive_26 years’ experience in retail
Executive team
Ria de Clerck (44)
Marketing and Merchandise_25 years’ experience in retail
Donny McCulloch (56)
Human Resources_36 years’ experience in retail
Craig Garson (47)
THED (4 years)
Operations_25 years’ experience in retail
Barnetts is one of the oldest retailers in South Africa and this year celebrates its
114th birthday. The brand trades predominantly in the more rural parts of the country out
of 129 stores. It offers a wide range of value for money, furniture, bedding and electrical
products and related services with a focus on functionality and practicality.
The brand’s aim is to be the leading furniture chain in its defined market segment by
serving a traditional orientated community in the emerging mass market. This is
underpinned by a set of non-negotiable values that focus on being target and goal driven,
building relationships based on dignity and respect, working together as one team,
celebrating the achievements of staff, always being well presented and developing its
people.
Barnetts continuously evaluates its promise of delivering “Service and Value You Can
Trust” by remaining an integral part of the communities that it serves and by valuing the
relationships that are established with customers by providing honest, friendly and
efficient service.
Service and Value you can Trust
Matthew van der Walt (38) Chief Executive_13 years’ experience in retail
Executive team
Grant Adendorff (42)
BSocSci, Dip Labour Law, Dip Adv Labour Law
Human Resources_14 years’ experience in retail
Linda Breedt (36)
Merchandise and Marketing_nine years’ experience in retail
Michelle van der Merwe (43)
Operations_24 years’ experience in retail
Bradlows was established in 1903 and acquired by the Group in 1998 and currently
trades out of 92 stores in South Africa.
The chain aims to exceed its customers’ expectations by making a unique difference in
their lives. The Chain is positioned to be a provider of aspirational furniture and appliances
to the middle and upper end of the mass middle market.
With its value proposition “You’re the Difference” the Chain differentiates itself with its
modern store layouts, unique merchandise designs and its excellent customer service.
Supreme is positioned to provide quality furniture and appliances to the middle income
groups in Botswana. It was established in 1989 and acquired by the Group in 2003. The
Chain trades out of 20 stores located in Botswana.
Supreme delivers on its promise of “Value and Quality you can Trust” by providing quality
merchandise at competitive prices, above-average service through dedicated and
knowledgeable employees.
You’re the Difference
Value and Quality You Can Trust
Linda Sithole (43)
EMD, MBA
Chief Executive_21 years’ experience
Executive team
Craig Robertson (46)
Merchandise_22 years’ experience
Thomas Muller (42)
Operations_22 years’ experience
Electric Express was established in 1958 and acquired by the JD Group in 1993. The
chain is a specialist retailer of household electrical and home entertainment merchandise,
trading out of 112 stores conveniently situated throughout South Africa.
The Chain provides consumers in its target market, who are predominantly first time
homemakers, with a complete range of quality appliances, affordable technology, digital
merchandise and dedicated services at highly competitive prices
Electric Express has successfully integrated with the Morkels chain, optimising the
logistics and human resource processes. The synergies have resulted in a very
competitive range of products being offered to its customers.
Electric Express has embarked on an extensive footprint expansion programme into new
geographical areas within South Africa.
The main ingredient of Electric Express’s success has been a focus on superior customer
service, which has been reinforced through the Art of Service culture that prevails in the
chain.
We’ve got the power
Colin Bresler (46) Chief Executive_28 years’ experience in retail
Executive team
Anneke Britz (40)
Operations_19 years’ experience in retail
Arthur Beeming (36)
Diploma CNC Programmer
Merchandise and Marketing_15 years’ experience in retail
Tanja van der Merwe (34)
Management diploma in HR
Human Resources_10 years’ experience in retail
Joshua Doore was established in 1973 and acquired by the Group in 1986 and currently
trades out of 146 stores.
The Chain offers the mass middle market an extensive range of exclusive furniture
products and top branded appliances. The “Uncle” remains the face of the brand as “he”
is recognised, respected and trusted within the communities that Joshua Doore serves.
The “Uncle’s” proposition to customers is:
U
N
C
L
E
–
–
–
–
–
Unbelievable Value
Nothing but the Best
Customer Service
Low Monthly Payments
Enormous Range
You’ve got an uncle in the furniture business
Linda Sithole (43) EMD, MBA
Chief Executive_21 years’ experience
Executive team
Kevin McKey (55)
Merchandise and Marketing_30 years’ experience
Anton de Necker (40)
Operations_19 years’ experience
Morkels was established in 1937 and acquired by the JD Group in 2003 and currently
trades out of 109 stores in South Africa offering the discerning South African consumer
a unique shopping and after sales experience.
Morkels continues to pursue a vision to become the consumer’s first choice destination
store when needing to purchase top quality, guaranteed product. It is the only furniture
retailer in South Africa providing a “Two year guarantee” underwritten by the Chain, on
high quality furniture, home improvements and branded appliances.
Morkels’ ability to deliver exceptional service is frequently monitored and measured
through Art of Service surveys. This has been recognised by the chain winning the
prestigious annual “Ask Africa Orange Index Award” as the leading South African furniture
retail brand for customer satisfaction in 2010. The Orange Index is a unique consumer
satisfaction index in South Africa and is highly reputable in the retail industry.
Morkels prides itself in continuously looking for ways to enhance the customers’
shopping experience by creating an ambience that differentiates the chain from its
competitors.
Your Two year guarantee store
Mike Roberts (55) Chief Executive_28 years’ experience in retail
Executive team
Eppo Joubert (40)
Operations_21 years’ experience in retail
Herbie Lindhorst (49)
Merchandise and Marketing_26 years’ experience in retail
Molefi Makhetha (46)
BA (Hons) (Psychology)
Human Resources_15 years’ experience in retail
Price ‘n Pride was established in 1983 and is the founding brand of the JD Group trading
out of 134 stores in South Africa. The Price ’n Pride target market is the brand-conscious
aspirational buyer in the lower half of the middle mass rural and urban market.
The Chain’s purpose is to improve and add value to its customers’ lifestyle by providing
an affordable range of quality merchandise and exemplary levels of customer service,
delivered by competent and proud staff in a caring, respectful and honest environment.
Price ‘n Pride values are grounded in retail performance, customer focus, teamwork and
integrity.
We’ll Treat You Like Our Only Customer
Toy de Klerk (51)
Chief Executive_30 years’ experience in retail
Executive team
Scott Allan (41)
Operations_20 years’ experience in retail
Millicent Nortje (54)
BA (Hons), MBA
Human Resources_35 years’ experience in retail
Pieter Schoeman (54)
Merchandise and Marketing_29 years experience in retail
Russells was established in 1943 and acquired by the JD Group in 1993 and trades out of
207 stores in all the major cities and towns in South Africa.
Russells trades in the mass middle market offering quality and affordable furniture,
appliances and electronic goods on cash or credit. The reliable business relationships with
our suppliers enable Russells to be at the forefront of product sourcing, be it local or
international, bringing best value for money products to its valued customers.
Russells prides itself on delivering exceptional service to customers, in line with its value
proposition “Your home lifestyle partner, quality guaranteed.” This is further supported by
the Art of Service initiative that enables and energises the staff to engage professionally
with customers and business partners, making every interaction a special experience.
Russells has recently embarked on its small town expansion programme, growing its
already large national footprint by taking the brand to smaller towns in rural areas. This
strategy will be aggressively pursued and it is envisaged that Russells will trade out of 225
stores by the end of the 2011 financial year.
See how little style costs
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
Cash Retail
Introduction
and human resources, among others.
The Cash Retail division, comprising
Having taken cognisance that market
the Hi-Fi Corporation and Incredible
conditions would remain challenging
Connection brands, target cash
during the year under review, the Cash
consumers in the electronics and
Retail division was focused on optimising
technology segment. The two brands
efficiencies and product ranges as well
are at varying stages of their respective
as store development.
life cycles with different ranges,
merchandise and business models.
Hi-Fi Corporation targets the middle to
Business environment
upper consumer electronic sector of the
Price deflation persisted across all
market while Incredible Connection is
categories of the technology and
aimed at the higher end of the market
consumer electronics segments of the
with a specialist technological product
market. Whilst the persistent strength of
range. Both brands are positioned as
the Rand during the year impacted the
specialists in their respective markets.
landed price of imported products,
While the brands are distinctly different,
economies of scale in Asian production
there is alignment as the Cash Retail
capacity also led to lower manufacturing
division leverages its aggregated
costs, which in turn translated into
Hi-Fi Corporation Executive
Committee
purchasing power to achieve better
cheaper selling prices.
Allan Herman (53)
the merchandise functions. It also
Mark Wood (45)
leverages its critical mass to optimise
Grattan Kirk
Chief Executive Officer
Cash Retail
Neil Mclean (54)
Piwe Makaula (32)
Victor da Silva (43)
Jonathan Bromley (34)
Debra Teles (44)
Grattan Kirk (46)
terms where overlaps exist between
lease terms and space optimisation.
Consolidation of support infrastructures
makes commercial sense in some
instances. For example, both brands are
participating in the Group-wide migration
The television segment was among the
most severely affected categories with
the prices of some models declining by
up to 60% during the year. Notebook
computer prices were also affected
by deflation with reductions of up to
30% on certain models.
Incredible Connetion Executive
Committee
to the standard ERP platform. A
To address the impacts of price deflation
centralised support centre services the
and accelerating obsolescence cycles on
David Miller (40)
customers of both brands. There are also
technology and consumer electronics,
synergies relating to support functions
the Cash Retail division brought to bear
including employee management,
its merchandise skills to manage its
Victor da Silva (43)
distribution, back office and supply chain
inventories. This included greater scrutiny
Grattan Kirk (46)
which have also been consolidated.
of order quantities and lead times. In the
The businesses however have
longer term, interventions including the
independent management teams for key
commissioning of the centralised
aspects of their businesses including
warehousing and distribution centres,
merchandise, marketing, operations
will address some of these challenges.
Stefan Marnewick (39)
Sean Nelson (37)
Deanne Nicolau (42)
Pamela Barletta (41)
Johan Coetsee (51)
David Hirsch (40)
32
JD Group Annual Report 2010
Performance
In order to regain and grow market share,
Hi-Fi Corporation engaged in aggressive
price cutting and as a result reported
revenue growth of 9,9%. Although operating
profit decreased by 6%, the strategy was
across the category from cash-andcarry retailers, the Group opted to
differentiate Hi-Fi Corporation’s business
23,8
25,1
Operating
profit (Rm)
190
218
92
90
Trading
density (Rm2)
47 541
47 491
Revenue per
employee
(R000)
1 194
1 112
introducing strong after sales support.
two years. Good expense control
to adopt stricter operational disciplines
countered a portion of the margin erosion.
and merchandising standards. It also
it has maintained its leading position in
3 976
Gross
margin (%)
team which came in during 2009, was
flows. Its performance demonstrates that
4 308
improved shopping experience while
of the market position it lost over the last
underpinned by strong operational cash
2009
Revenue (Rm)
The first priority of the new management
6,9% growth in total sales revenue
2010
model by providing customers with an
successful and the brand recouped much
Incredible Connection delivered a
Cash Retail at a glance:
defined the brand strategy which was
the catalyst for the repositioning.
The inventory range was overhauled
Stores
and the store profile, look and feel
and positioning was re-evaluated.
Achievements in 2010
➔ Revenue up in second half by 9%
the market, supported by its strong brand,
In 2010, the merchandise and product
excellent supplier relationships as well as
ranges were further optimised and value
➔ Stringent cost management focus
its specialist approach to customer
added services were launched. A major
➔ Solid progress with repositioning of
service. Low levels of penetration across
revamp of the store interiors was
the South African consumer technology
effected to reflect the new brand
landscape and rapid replacement cycles
positioning. Hi-Fi Corporation achieved
supported demand in Incredible
all its strategic objectives during the
Connection’s markets and will continue to
year. However, due to a conscious
positively influence the business for the
decision to reduce prices in order
foreseeable future.
to recover lost market share, gross
margin was sacrificed.
Achievements
Hi-Fi Corporation
By financial year end, 13 of
Hi-Fi Corporation’s 34 stores had
been renovated, exchanging the
Hi-Fi Corporation is a category specialist
traditional warehouse interiors with more
in the consumer electronics retail sector
sophisticated layouts and fixtures, while
targeting the LSM 6 to 9 category. The
maintaining an ambience that customers
brand was originally positioned as
are still getting value for money.
a high-volume discount store.
Reflecting the migration up the value
A repositioning exercise was initiated
chain and the new brand proposition of
in 2008 to meet the increasing
Hi-Fi Corporation, the portfolio is
sophistication of consumers and their
progressively evolving away from value
need for a specialist retail experience
malls to store locations that are either in
coupled with a superior after sales
or adjacent to high foot-traffic malls and
service. With more intense competition
regional shopping centres. During the
Hi-Fi Corporation
➔ 6,9% revenue growth from
Incredible Connection underpinned
by strong cash flows
Strategic objectives for 2011
➔ Progress centralised distribution
facilities
➔ Margin improvement initiatives at
Hi-Fi Corporation
➔ Rural store development strategy
for Incredible Connection
JD Group Annual Report 2010
33
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
Cash Retail (continued)
year, three stores were relocated namely
nationwide. It has an extensive range of
Kolonnade, Nelspruit and Capegate. The
international products and provides a
relocation of several more large-format
one-stop technology shop, supported
stores to major regional shopping
by expert advice and after sales
centres in KwaZulu-Natal, Western Cape
service. All products are backed by a
and Gauteng is currently being evaluated.
guarantee which in turn is supported
The brand launched a number of
private label products under the
byD:sign brand in each of the major
categories. These are exclusive to
Hi-Fi Corporation and improve the
overall product mix aligned to the good,
better, best merchandise strategy.
Within the branded international
products, Hi-Fi Corporation carries
of value-added products, including
insurance and its onsite technician
service, “Incredibles OnSite”. With its
value-added services, the brand has
widened the gap between itself and its
competitors in the cash-and-carry
environment.
To date, Incredible Connection stores
major consumer electronics categories,
have been categorised into three tiers to
being television, large appliances, small
service different sized regional markets.
appliances, computers, gaming, camera
The brand is anchored by its 10 large
and audiovisual equipment.
format stores or “theatres of technology”,
Hi-Fi Corporation maintained a
stringent focus on managing costs in
order to protect profitably. With the
major cost levers being rentals and
employee related costs, it continually
reviews its operations to confirm that it
has the right people and the optimal
space to maximise its trading density.
All other costs including distribution,
marketing and information technology
are monitored in line with
Hi-Fi Corporation’s low-cost ethos.
Incredible Connection
The strategy of Incredible Connection
is to be the dominant information
technology retailer in South Africa
through its 58 stores which are located
JD Group Annual Report 2010
Connection also provides a number
a broad range in each of the seven
In the year under review,
34
by international warranties. Incredible
which are located in high foot-traffic
super regional shopping centres such as
Canal Walk, Somerset West, Gateway,
Clearwater Mall and Menlyn. These
stores have longer trading hours
364 days a year, extensive products of
all categories and a fully fledged service
centre to advise both consumers and
small to medium sized businesses. The
second tier, comprises 40 stores which
are located in regional shopping centres
and carry a narrower but more focused
range of products. The third tier, being
the eight smallest stores, are located in
smaller towns and accordingly carry a
smaller range. During the year, four new
stores were opened, increasing its total
trading area by 4% to 40 456 m2.
Incredible Connection relocated four
stores during the year in line with
its store development strategy.
Incredible Connection is currently
evaluating opportunities to introduce
national presence and ongoing efforts
The Cash Retail division continues to
to ensure its service and merchandise
invest in human capital as necessitated
range remain relevant.
by the specialist nature of the brands,
as its core of salespeople require
a fourth tier of small stores in the rural
market where technology penetration
Outlook and objectives
technical expertise and customer
services skills which support the
is low. It is investigating a number of
In support of the Group-wide
options to grow the brand in South
centralisation of logistics to unlock
Art of Service initiative.
African rural towns where growth
efficiencies, Incredible Connection
The growth of the Cash Retail division
opportunities exist due to these markets
opened a new distribution centre in
will be underpinned by the store
being under-serviced.
Longmeadow, measuring 10 000 m²,
development of Incredible Connection
during July 2010. In addition to
that will be concentrated in the
enhancing efficiencies in the
rural environment as well as
distribution environment, the facility
Hi-Fi Corporation’s migration towards
will also streamline deliveries by
higher foot-traffic locations.
Although e-commerce is not yet
pervasive in South Africa due to low
bandwidth availability and high
telecommunications costs, Incredible
Connection anticipates that the segment
suppliers to one central location and
With regard to participating in the
is set for significant uptake. Accordingly,
optimise inventories.
anticipated uptake of consumer
it will bring to bear expertise and
Hi-Fi Corporation also consolidated its
electronics and technology on the
has purposefully positioned itself to
distribution centre in Aeroton to align
African continent outside South Africa,
participate in the trend as the Internet
it to its new merchandise strategy.
the Cash Retail division is evaluating
becomes more pervasive in South Africa.
Hi-Fi Corporation will reanalyse the
opportunities in Mozambique, Zambia
and Angola, but will only conclude
Incredible Connection continually
levers of its profitability in order to
evaluates emerging technologies to
increase efficiencies while benefiting
ensure it is positioned at the cutting
from its increased market share.
edge of the technology curve. The
Primary focus areas will include supply
The division is in place to deliver on
brand’s growth is expected to be
chain management as well maximising
its published medium-term targets
underpinned by its pervasiveness,
its private label brand.
of a 7% return on sales in the next
agreements that make sense from
a business perspective.
18 to 24 months.
JD Group Annual Report 2010
35
Allan Herman (53) Chief Executive_26 years’ experience in retail
Executive team
Neil Mclean (54)
Marketing_37 years’ experience in retail
Debra Teles (44)
Human Resources and Services_20 years’ experience in retail
Mark Wood (45)
H Dip Marketing
Merchandise_21 years’ experience in retail
Jonathan Bromley (34)
Operations_17 years’ experience in retail
Piwe Makaula (32)
BCom (Hons), CA(SA)
Finance_9 years’ experience in finance and taxation affairs
Hi-Fi Corporation founded in 1993 and acquired by the JD Group in 2003, remains the
largest audio-visual category specialist in the southern hemisphere. The chain operates
through 34 Hi-Fi stores in southern Africa, located in the major metropolitan areas and is
focused on capturing the mass cash market.
The chain provides comprehensive ranges of aggressively priced merchandise categories
that are underpinned by international brands, warranties and consistent quality and
service, with expert advice and an exciting shopping experience for customers.
Lowest prices everyday
David Miller (40) BBA (Hons)
Chief Executive_16 years’ experience in retail
Executive team
Stefan Marnewick (39)
BCom (Hons), CA(SA)
Financial director_12 years’ experience in retail
Sean Nelson (37)
Operations_17 years’ experience in retail
Deanne Lynn Nicolau (42)
AAA Dip in Advertising
Marketing_20 years’ experience in retail
Victor da Silva (43)
IT Cash Retail_17 years’ experience in retail and IT
Incredible Connection was founded in 1990 and was acquired by the Group in 2005 and
trades out of 58 stores in South Africa, Botswana and Namibia.
The Chain is positioned as a specialist retailer, focusing on consumer and small business
technology products and services as well as offering a choice of value-added solutions.
The value proposition is driven through international brands, a wide range of product,
highly trained sales staff, on-site service, recycling of computer waste material and an
extensive geographic presence.
Where technology & humanity meet
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
Financial Services
Introduction
The Financial Services division
supports JD Group’s stated financial
growth targets by providing credit into
the Group’s eight retail chains for
furniture, electrical and electronic
purchases and the provision of other
non-retail related financial services
customer spending behaviours and
movements between the eight
Traditional Retail Chains. Using this
information, the Traditional Retail
Chains can customise their products
and customer engagement to assist in
delivering sustainable and profitable
growth of the debtors’ book.
products.
Prior to the establishment of Financial
Services as a stand-alone division,
Phillip Kruger Chief Executive: Financial Services
the Group’s credit activities were
integrated with its retail businesses.
In-store sales staff were responsible
for certian credit granting procedures,
collections and sales. The separation
Financial Services Executive
Committee
Phillip Kruger (48) BCom
Chief Executive: Financial Services­_20 years’
experience in retail and financial services
Grattan Kirk (46) FCA, CA(SA)
into specialised businesses has
enabled greater focus on core
competencies.
Financial Services is represented in
each of the Group’s stores, with
Chief Executive Officer
customer-facing Financial Services
Bennie van Rooy (35) BCom Hons, (CA)SA
consultants who are supported by
Group Financial Director
Arie Neven (51)
the centralised back office credit
Business environment
According to the National Credit
Regulator and credit bureaux,
consumers became more indebted in
2010. In addition, evidence mounted
that the number of consumers with
negative credit information continues
to increase. As a result, credit sales
across the industry remained under
pressure as the average consumer
remains financially stretched.
The number of people currently under
debt review with the National Credit
Regulator increased substantially
during the year. Accordingly, the
number of active credit customers
Chief Executive: Traditional Retail
origination and collections
Clyde Briell (48) BCom (Hons)
environment. The division runs two
Head: Information Technology_30 years’ experience
in IT and financial services
contact centres, the larger having
Johan Claassen (48)
some 600 agents in Johannesburg
Head: Collections_27 years’retail and debtors
experience
while the smaller works from Blake
Barry Dell (55)
and has about 200 contact centre staff.
Head: Human Resources_16 years’ experience in
furniture retail
It also provides certain credit risk and
Performance
collections functions to the New
Financial performance improved
BCom (Hons), Investment Management
Head: Credit and Risk_14 years’ experience in financial
services
Business Development division.
substantially on the back of a 36%
While the core focus of the Financial
reduction in debtors’ costs and cost
Jeannine Naude-Terblanche (35) BProc, LLB, MBA
Services division is the granting and
containment.
Francois Grobler (35) BCom (Hons) (Economics),
Executive: Customer Services and Legal_3 years’ legal
experience and 8 years’ experience in financial services
came under additional downward
pressure as consumers undertaking
debt review are not permitted to apply
for further credit.
managing of financial services
Following the successful
Corrie Neven (55)
products across the entire value chain,
Head: Operations_27 years’ experience in retail and
debtors
implementation of updated decision
it is also well-placed to provide
management, scoring and customer
extensive business intelligence to
management solutions during the year,
other Group operations relating to
the performance of the debtors’ book
Jaco van Jaarsveldt (38) BCom Sport and Recreation
Management, BCom (Hons) Econometrics (cum laude)
Head: Strategy and Analytics_15 years’ experience in
financial services and retail
36
JD Group Annual Report 2010
exceeded all expectations. Total
amount being applied for. The overall
debtors’ costs declined by 36% in 2010
impact has been that Traditional Retail
to R692 million.
sales staff have additional
In addition, these improved systems
provided the division with a tangible
differentiator, being its ability to
evaluate the total creditworthiness of
customers. In addition, the average
deal size grew by 10% during the year,
while the division continued to provide
credit without over-committing
customers to unaffordable debt levels.
extended the benefits of its separation
into a stand-alone business during the
year.
2 880
2 980
products required by customers
Operating
profit before
debtors’
costs (Rm)
1 284
1 433
Debtors’
costs (Rm)
692
1 082
Operating
profit (Rm)
592
351
61
64
without additional credit applications,
as well as selling down to customers
when approvals do not meet the
original amounts applied for. The new
system’s flexibility relating to credit
risk, enhanced the ability of the
Financial Services division to price risk
deals while pricing in additional risk for
customers who are less creditworthy.
This has ultimately enabled Financial
implementation of two new software
on equity in line with Group targets.
November and December 2009.
Although the systems were initially
evaluated based on a three year
payback period, their performance far
exceeded expectations, achieving a
positive return on investment within
their first year in operation.
A new credit account and customer
management solution (Triad) was also
implemented which has enhanced the
significant new system
implementations within one year
➔ Continued improvement in quality
of debtors’ book
Strategic objectives for 2011
➔ Implementation of upgraded loan
management and credit origination
through continuous learning, thereby
applications
increasing productivity and reducing
collections costs. For example, based
on the observation that 90% of
low-risk customers settle arrears at
month end, the division adjusted its
scoring tool (Blaze) for credit
approach and significantly reduced its
origination was implemented and is
follow-up calls by postponing the
now being integrated into the credit
process until after month end.
decision-making processes. The
Accordingly, only 10% of these low-risk
system provided immediate benefits
customers need to be prompted for
to the Financial Services division due
payments, resulting in more effective
to its ability to score existing
debt collection.
the overall creditworthiness of new
➔ Achieved payback on two
division’s collections strategies
An updated decision management and
customers upfront. It also measures
Achievements in 2010
Services to take on better quality loans
to its book whilst improving the return
live during the peak trading period of
Average
yield (%)
competitive. Accordingly, it can provide
A significant highlight of 2010 was the
systems (Blaze and Triad) which went
2009
Revenue (Rm)
good customers with more affordable
The Financial Services division
2010
opportunities to ‘up-sell’ additional
in the current market which is very
Achievements
Financial Services at a glance:
➔ New product launches starting
with personal loans
➔ Further increase in quality of
debtors’ book
The division, which is planning new
product launches in the next year,
customers rather than vetting only the
JD Group Annual Report 2010
37
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
Financial Services (continued)
including personal loans, is able to
effectively mitigate risks and improve
process applications for existing
productivity. In addition to the two
customers quickly as a result of the
systems which went live in 2010, two
new systems.
further software solutions will be
The Financial Services division
contributed positively to the success
of the Group-wide Art
of Service
initiative during the year. To this end, it
implemented a customer care system
enabling a single view of customer
issues across the Group which can be
viewed across divisions to evaluate
issues facing customers regardless
of whether they are related to the
product itself or the associated loan.
The centralised customer complaints
platform ensures that all matters are
addressed consistently and resolved
timeously. The Financial Services
Corporate Debtors_26 years’ experience retail debtors
Rein Coetzee (37) BA (Hons), MA (cum laude)
current group of experts whose
industry experience spans clothing
retail, banking, motor finance, legal
and credit consulting. With the
combined multidisciplinary skills and
experience of its senior team, the
Lucia Hefer (46) BCom (Hons)
Finance, Strategy and Analytics_23 years’ experience
in finance and 2 years in strategy and analytics
placed to achieve its ambitions of
Joey Kok (61)
credit house.
building a fully fledged consumer
Information Technology_43 years’ experience in retail
debtors and IT
Dolf van der Merwe (53)
Specialised division_31 years’ experience in retail and
financial services
38
JD Group Annual Report 2010
The system, which will integrate into
SAP, has the flexibility to manage all
known financial services products
which is in line with the division’s
strategy to launch new products.
A loan originating system is also
planned to facilitate credit application
vetting, obtaining credit histories, and
origination and approval processes.
Services division will have ‘connected
Financial Services division is well
Credit Strategy_8 years’ experience in credit risk
service fees and raising statements.
Group during the year.
Contact centre_14 years’ experience in retail
René Moonsamy (29)
calculating interest charges and
implementations, the Financial
from two senior specialists to its
Herman Bakkes (50) BCom, MBA
their entire life cycle, including
customer surveys on behalf of the
its team of Financial Services experts
Specialised department_28 years’ experience in retail
debtors
commissioned to manage loans across
On completion of these
during the last three years, ramped up
Lynette Basson (53)
management system will be
contact centre conducted two
The Financial Services division has
Executive team
implemented in 2011. A new loan
decisioning’ capability, being an
integrated customer view across the
life cycle rather than a discrete view.
The benefits will include an enhanced
decision-making ability with regard
to credit granting as well as more
relevant and targeted product
marketing. JD Group Financial Services
will be one of only a few South African
businesses with fully fledged
connected decisioning capability. This
will provide the division with a tangible
differentiator based on a superior
understanding of customer life cycles,
leading to informed customer related
Outlook and objectives
Financial Services will continue to
invest in its technology platform to
differentiate its value proposition,
decisions and the financial benefits of
a higher quality debtors’ book.
In line with the Financial Services
division’s objective to increase its
product offering, personal loans are
In 2011, the Financial Services division
currently being piloted with the
will continue to refine its business
national roll-out projected to take
model to ensure its continued
place early in the new calendar year.
relevance in the prevailing economic
The division is exploring channels to
climate. An important objective for
bring other new products to market.
2011 is the launch of new financial
The integrated view of its customers,
services products, starting with
which was enabled by the recent
personal loans, to deliver growth and
technology investments, will facilitate
for the division to come of age as a
more rapid product development while
true financial services business in
effectively mitigating credit risks.
every way.
The improved quality of the debtors’
book of the Financial Services division
underpinned the significant reduction
in debtors’ costs in 2010. The quality
of the debtors’ book is expected
to normalise to sustainable levels
in 2011.
JD Group Annual Report 2010
39
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
International Retail
Abra
Introduction
During its 20-year history, Abra (acquired
by JD Group in 2000) has grown to
become the leading furniture retailer in
Poland, with more than two million
customers visiting its stores annually.
The strength of its brand is underpinned
by continual improvement of the retail
strategy, steady organic growth
Piotr Krazanowski
Chief Executive
supported by innovative marketing and
communication solutions.
Operating through 74 stores, Abra offers
a wide selection of well-priced furniture
directed at the lower and middle
income segments. Professional sales
consultants in all the stores ensure a
Abra team
unique customer sales experience. Due
Piotr Krazanowski (56) MSc
to its close working relationships with
Chief Executive_20 years’ experience in retail
Aneta Filik (40) M (Psychology)
suppliers, Abra leads market trends,
Human Resources_15 years’ experience in retail
offering innovative and functional
Piotr Lisowski (42) MSc
Merchandise and Marketing_17 years’ experience
in retail
products. In order to meet customers’
Marek Zelek (35) BSc (IT)
are supported by market research. By
Logistics_11 years’ experience in retail
expectations, all merchandising activities
maintaining appropriate stock levels,
Abra can offer instant delivery to
customers and this alone gives Abra
a significant advantage over competitors
in the same market segments. By
offering additional non-standard
products, that can be selected from
catalogues, the range has effectively
been extended to generate additional
turnover and strengthen profit margins.
Business environment
Tough trading conditions in the wake of
the global economic crisis continued to
impact the Polish economy during 2010.
Consumers postponed purchasing
decisions due to growing unemployment
40
JD Group Annual Report 2010
and inflation, as well as negative news
from the European Union which dented
consumer confidence. The Polish
furniture segment, including white and
brown goods, were impacted. Recent
indicators, including the growing
domestic industrial production, suggest
that trading conditions have bottomed
and will start to improve in coming
months. However, the state of Polish
public sector finances remain a concern,
mainly due to Polish internal debt levels,
which recently led to a significant
increase in VAT. The Polish Central Bank
also introduced regulation of credit policy
in 2010 and consequently, financing has
become less readily available for
consumer purchases and housing.
Floods in southern and central Poland
during May and June 2010 further
affected retail sales and also caused
extensive damage at one of Abra’s
warehouses.
Performance
Deteriorating trading conditions and poor
consumer confidence impacted Abra’s
financial performance in 2010 with
sales revenue showing a 24,8% decline
to R634 million (2009: R843 million).
The extent of consumer pessimism is
reflected in the foot traffic to stores,
which dropped 27% during the year on a
like-for-like basis.
Achievements
Despite the challenging backdrop, Abra
achieved a number of operational
milestones during the year:
➔ New products were made available
to customers, as a result of the
cooperation with Steinhoff International
awareness of the Abra brand as the
Sourcing, which acts
preferred furniture retailer and employer.
International Retail at a glance:
2010
2009
634
843
Operating
profit (Rm)
12
58
Gross
margin (%)
32,2
31,9
74
69
Trading
density (Rm2)
11 285
18 029
Revenue per
employee
(R’000)
741
998
as Abra’s agent in the Far East;
Outlook and objectives
➔ The warehouse base was upgraded
during the year, including two new
leases which has led to significant
distribution efficiency gains;
Although the outlook for sales remains
uncertain, Abra is targeting growth by
increasing conversion rates. Further
organic growth of the brand is also a
➔ The implementation of supply chain
priority despite the limited availability of
and advanced planning and scheduling
appropriate retail space. The launch of the
software has improved Abra’s analytical,
Abra franchise project and the conversion
planning and ordering capabilities;
of franchise prospects into trading partners
➔ For the second consecutive year,
is a high priority for the year ahead in order
Abra won the Consumers’ Golden
to grow revenue and profitability.
Laurel award which recognises the
Customer retention and communication will
value of products and services offered
be addressed by way of an Abra loyalty
to customers;
scheme which will be launched in 2011.
➔ The brand’s efforts to become a leading
Continuous staff training and development
Revenue (Rm)
Stores
Achievements in 2010
➔ Additional warehouse capacity
secured to enhance distribution
➔ Industry recognition for value of
employer in Poland was recognised
programmes are aimed at shaping a
products and services offered to
with the award of the “Dependable
creative and efficient organisational culture
customers
Employer of the Year”, an award which
and minimising staff rotation.
was adjudicated on factors such as
work environment, (eg labour law),
ratings with government institutions,
creating new jobs, etc;
➔ A public relations communication
strategy was launched to build further
Abra is evaluating the feasibility of
launching a parallel retail brand directed
at the upper end of the consumer market
segment.
Strategic objectives for 2011
➔ Increased conversion rates to
support growth in tough market
➔ Focus on launching a successful
franchise project
➔ Investigation into launching
a parallel upmarket brand
JD Group Annual Report 2010
41
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
New Business Development
Introduction
The New Business Development
division is mandated to develop new
financial services, product and channel
development projects to deliver on the
long-term strategic growth objectives
of JD Group.
The division’s, namely Blake and
Maravedi, focuses on making a
meaningful contribution to the Group’s
Howard Blake
Joint Chief Executive Officer – Blake
stated objective of developing new
revenue streams from non-traditional
and non-JD Group customers.
Blake
Overview
and business process outsourcing are
evolving in the South African market.
These, together with broad-ranging
cost saving initiatives among
corporates, will support Blake’s activity
levels.
While Blake will continue to market
traditional business services, it is also
pursuing opportunities to leverage its
executive skill set to enhance business
processes and provide differentiated
service levels.
Performance and achievements
Blake achieved a return on capital in
excess of 30%. In particular, its core
Collections division and Mauritian
Blake is a premier provider of contact
Blake team
operation delivered solid results. The
centre solutions in Customer Lifecycle
International division, which services
Howard Blake (48) BProc
Management, offering a differentiated
the United Kingdom, was restructured
solution based on servicing niche
during the year, releasing working
Michael Miller (45) BCompt
Joint Chief Executive Officer_17 years’ experience in
contact centre management
markets and identifying unique
capital back into the Group and
partnerships involving business
reducing Blake’s overall risk profile.
David Holding (47) BCom, Associate Diploma
process enhancement and back-office
Joint Chief Executive Officer­_26 years’ experience in
contact centre management
(CAIB), Legal Debt Certificate, Specialist Banking
Management Programme
Collections_23 years’ experience in contact centre
management
outsourced solutions.
The first phase of Blake’s business
intelligence platform was implemented
Blake adds value through technology,
in the collections and telephony areas.
Desiree Milne (40)
people, process and relationships to
Customer Services_17 years’ experience in contact
centre management
As a result, current and historic data
improve service levels and productivity
are now available for analysis and to
De Waal Muller (42) BJuris
as well as delivering successful
Information Technology_16 years’ experience in IT
and contact centre management
assist decision making, as well as to
business outcomes. It also builds
provide the ability to efficiently analyse
Mark Parker (35) BCompt (Hons), CA(SA)
partnerships that enhance its
and measure key performance areas.
Finance_10 years’ experience in contact centre
management
customer value chain.
Tracey Swart (44) Banking Certificate, Programme
The subsidiary is well positioned to
Customer Lifecycle Management,
benefit from the economic cycle which
Blake has embarked on various joint
is showing signs of improving and is
ventures, mainly in the financial
committed to working with clients
services sector, to enhance business
regarding their customer life cycle
processes using technology and its
management. Client acquisition,
contact centre.
in Management (Henley)
Sales and Client Relationships_25 years’ in client
and contact centre management
customer service, customer retention
42
JD Group Annual Report 2010
In addition to the full spectrum of
Due to heightened competition,
While Blake will remain focused on its
margins remain under pressure.
core competencies, its management
Against the trend of ongoing
team will continue to pursue
commoditisation of contact centre
complementary services to enhance
services, differentiation provided by
the revenue mix. Increased use of
niche offerings is crucial. To this end,
technology, including e-commerce,
Blake will remain focused on its core
social media and other electronic
offering which it will complement with
channels, is set to improve its service
process enhancement opportunities.
delivery.
Outlook and objectives
Blake will pursue revenue growth in
2011, while improved operational
efficiencies and cost management
savings in its existing divisions will
result in enhanced quality of earnings
and profitable growth over the short
and medium term.
JD Group Annual Report 2010
43
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of operations (continued)
New Business Development (continued)
Maravedi
Since Maravedi originated as a
business-to-business (B2B) debt
increased diversity of products on
offer through Maravedi’s channels.
Performance and achievements
collector and provider of small-value
unsecured credit, it has diversified its
portfolio in terms of the diversity of
B2B customers, the breadth of
financial products and the markets
which it serves.
Maravedi’s top priorities in 2010 were
to institutionalise its revolving credit
acquisition (Connection Card), expand
the secured finance acquisition
(HiFinance), formalise the unsecured
loans business (Maravedi Personal
Overview
Guy Pearce
Chief Executive – Maravedi
The strategy of Maravedi is to develop
new products, markets and channels.
Maravedi team
Guy Pearce (44) BSc, BCom, MBA
Chief executive_8 years’ experience in IT and
14 years in financial services
Dalene Opperman (51) BCom, MBL, PMP
Chief Operating Officer_22 years’ experience
in financial services and 10 years in financial
management
Henk Klopper (42) BCom (Hons), CA(SA)
Financial Director_15 years’ experience in financial
services
Gerrie Esterhuizen (36) BA
Head MCS_10 years’ experience in financial
services Jan Blom (49) BPL, Dip Labour Relations
Human Resources and Shared Services
Executive_ 24 years’ experience in HR
Leoni Groenewald (37) Dip Adv Business and
Technology Studies
Chief Information Officer_12 years’ experience in IT
Marc Joubert (38)
Marketing Executive_12 years’ experience in
marketing and 5 years in financial services
44
JD Group Annual Report 2010
Loans), and re-engineer the B2B
collections business (Maravedi Credit
Solutions (Pty) Ltd).
During the year, it applied considerable
Highlights during the year are as
effort to evaluating non-credit income
follows:
streams and markets to diversify its
➔ Connection Card processes
offering beyond credit instruments.
underwent an extensive redesign in
These initiatives, which are in the
order to improve their potential to
development phase, have the potential
generate value for B2B and to
to provide diversified value-added
business-to-customer (B2C)
financial services products to
customers;
customers. They could also provide
➔ HiFinance expanded across
economies of scale as the effective
26 Incredible Connection branches,
fixed cost per unit of financial services
offering an alternative channel for
“sold” declines in line with the
generating sales in the Chain;
➔ Extensive process disciplines were
Maravedi’s cost-to-income ratio
applied to Maravedi Personal Loans,
continued trending down and its IT
especially in collections, to address
cost relative to revenue compared
changes in the credit environment;
favourably to competitors even in the
➔ Maravedi Personal Loans
underwent a rebranding initiative
based on the findings of market
Revenue (Rm)
Outlook and objectives
Operating
profit (Rm)
Maravedi remains positive on the
same-day disbursements to
future even though the year ahead
customers. Its pilot branches
is expected to remain challenging,
delivered a significant improvement
especially given declining interest
in sales performance;
margins. Its revolving credit and
implemented a redesigned
operating model to complement its
evolving business, discontinued
non-performing business activities
and reduced its dependency on a
few large customers.
at a glance:
business’ expansion mode.
research and is now able to offer
➔ Maravedi Credit Solutions (Pty) Ltd
New Business Development
secured finance products are ready for
roll-out and its personal loan products
are all set for broad distribution. The
HiFinance model is poised for
roll-out into 30 additional Incredible
Connection stores. Maravedi is
Revenue per
employee
(R’000)
2010
2009
527
400
27
(3)
261
120
Achievements in 2010
➔ Operating profit of R27 million
(2009: loss of R3 million)
➔ Blake achieved return on capital in
excess of 30%
➔ Maravedi’s HiFinance rolled out in
26 Incredible Connection stores
optimistic that it will grow its new
non-credit product and market
initiatives in 2011.
Strategic objectives for 2011
➔ Blake pursuing operational
efficiencies and complementary
services to sustain profitable
growth
➔ Maravedi pursing further roll-out
of new product offerings
JD Group Annual Report 2010
45
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services
Service Departments
Introduction
The operating divisions of the JD Group are empowered to focus on their
respective areas of the business as a result of the group service departments
which provide support spanning a broad range of functions.
Accordingly, the operational management teams’ focus on long-term growth is
undiluted. They are ensured that the dedicated service departments implement
Bennie van Rooy
Financial Director
best practices in relation to compliance, systems, people management and
finance, among others.
Particular service departments are also mandated with enhancing efficiencies
in direct support of the operating divisions’ long-term profitability including
merchandising, logistics and property management.
Finance team
Finance
Bennie van Rooy (35) BCom (Hons), CA(SA)
Financial Director_11 years’ experience in auditing,
risk management and banking.
Overview
Ian Thompson (42) BCom, BAcc, CA(SA)
The Finance department is responsible for the financial and management
Director: Finance and Corporate Affairs_19 years’
experience in finance, auditing and taxation affairs
accounting, treasury and banking, accounts payable and financial statutory
Johan Coetsee (51) BCom, BAcc (Hons), ACMA
Group Executive: Finance_29 years’ experience
in finance
Johan Breytenbach (45) BCom
reporting functions of the Group. The department’s structure allows for a clear
focus on the respective Traditional Retail, Cash Retail, Financial Services, New
Business Development, Corporate and International divisions.
Finance_22 years’ experience in finance
During the year, focus was placed on the analysis, optimisation and enhancement
Pumla Magewu (39) BCom, HDip Tax
of financial processes and simplifying the corporate structure as much as possible
Finance_15 years’ experience in finance and
taxation affairs
and in line with the requirements of the new software implementation
Piwe Makaula (32) BCom (Hons), CA(SA)
Finance_9 years’ experience in finance
Braam Mathee (46) Adv Dip in Tax, CA(SA)
Finance_22 years’ experience in finance and
taxation affairs
Louise Niehaus (47)
Finance_29 years’ experience in finance
Sanette Oberholzer (53) BCom
Finance_33 years’ experience in finance
Tracey Rood (42) BCom, BAcc
Finance_20 years’ experience in finance
Elmien Rossouw (47) BCom (Hons)
Finance_14 years’ experience in finance
Liezel Cilliers (36) BCom (Hons), CA(SA)
Finance_13 years’ experience in finance
and banking
Stefan Marnewick (39) BCom (Hons), CA(SA)
Financial Director: Incredible Connection_12 years’
experience in finance
Henk Klopper (42) BCom (Hons), CA(SA)
Financial Director: Maravedi_15 years’ experience
in finance
46
JD Group Annual Report 2010
project plan.
Term debt continued to be refinanced during the course of the year, being
replaced with a combination of traditional bank debt and commercial paper
issued to the broader debt market. The Group intends to have a credit rating
issued by an international credit rating agency and initiate a listed debt
programme in the year ahead in order to cut its funding costs and further
reduce the reliance on banks by diversifying the Group’s sources of funding.
The Finance department continues to embrace the Art
of Service initiative
and is fully aligned with the Group-wide strategic initiative.
Achievements in 2010
The significant achievements during the past financial year included the following:
➔ Refining the process of allotting corporate cost to operating divisions;
➔ Launching various initiatives to further improve governance standards; and
➔ Implemented an electronic branch banking reconciliation process.
Objectives for 2011
The Finance department will focus on the following business improvement
processes:
➔ To establish a listed debt programme;
➔ To continue involvement in the roll-out of the new SAP system;
➔ To redefine the business performance management process;
➔ To enhance the Group Treasury function, particularly in relation to the Financial
Services division, with a focus on liquidity and cash flow management; and
➔ To have an increased emphasis on balance sheet planning and structuring.
JD Group Annual Report 2010
47
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Human Resources
Overview
The Human Resources department continued on a journey of transformation. It built
on the success of the previous year’s portfolio of projects which enabled the operations
to start realising the ‘value-add’ of strategic Human Resources.
Dr Henk Greeff
Director: Strategy and Human Resources
Achievements in 2010
Having built capability and delivering on key objectives in the previous year, the focus
in 2010 turned to leveraging these projects to initiate the phased roll-out of the Human
Resources Delivery Model.
The Human Resource function is structured according to the Group’s Human Resource
Value Chain with a number of Centres of Expertise including Talent Planning and
Acquisition, People Effectiveness, Leadership and Organisational Development and
Change. These centres support operations by designing solutions for each Chain, division
or department’s specific human capital needs, while also meeting the needs of the Group
HR team
as a whole. When the roll-out is complete, each centre will be supported by a shared
Dr Henk Greeff (51) MEd (Ed Management)
(cum laude), PhD
Director: Strategy and Human Resources_9 years’
experience in strategic management consulting and
seven years’ experience in retail
services team to implement solutions in an appropriate and relevant medium.
Pamela Barletta (41) Dip Labour Law; Dip Human
Resources
Group executive: Human Resources_24 years’
experience in human resources
George Annandale (46) BPL, Adv Dip Labour Law
and Employment Relations (cum laude)
Head: Group HR Shared Services_19 years’
experience in human resources
Camilla Kenward (34) Soc Sci, HDE Programme
in Human Resources
Human Resources: Centre Lead People
Effectiveness_7 years’ experience in sales
and marketing and people performance and
development and three years in human resources
in retail
Lauren Otto (32) BA Psychology and Education,
Advanced programme in Retail
Human Resources: Centre Lead Talent Planning
and Acquisition_11 years’ experience in human
resources in retail
48
JD Group Annual Report 2010
The optimisation of the Group’s workforce is enabled by a human capital system that
is a management tool that mirrors the strategic human resource process and
principles at an operational level. Its database of analytical tools allows reporting,
predicting and planning for trends and scenarios and will support the operations and
Human Resources in day-to-day transactions. It also acts as a repository for
information relating to people development, performance management and career
and succession planning.
Objectives for 2011
Andrew Murray
Chief Information Officer
The implementation of the system is designed to increase efficiencies, define
standards and practices and to build capability and excellence within the Human
Resources department.
Information Technology and Communications
Overview
Information Technology and Communications provides core IT infrastructure services
such as networking, telephony, desktop and server support across all divisions.
The specific divisional applications are managed by divisional heads within the
IT organisation.
IT team
Andrew Murray (48) BSc Eng
Chief Information Officer_23 years’ experience
in retail, IT, manufacturing, warehousing and
distribution and finance
Clyde Briell (48) BCom(Hons)
IT Executive Financial Services_30 years’ experience
in IT and financial services
Victor da Silva (43)
IT Executive Cash Retail_17 years’ experience in
retail and IT
Leoni Groenewald (37) Dip Adv Business and
Technology Studies
IT Executive Maravedi_12 years’ experience in IT
Anthony Smith (44) PhD, MBA
IT Executive Traditional Retail_14 years’ experience
in retail and IT
Gerrie van Niekerk (49) Masters in Interdisciplinary
Studies
IT Executive Customer Service_25 years’ experience
in IT
JD Group Annual Report 2010
49
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
The department provides the technology platforms that support the operations
in driving efficiencies, while also providing process support to drive ongoing improvement
relating to governance, compliance and customer service.
Current initiatives to replace the legacy system are crucial in the separation of
Traditional Retail and Financial Services, as well as to driving operational efficiencies
throughout the business and assisting the Group to achieve its longer term goals.
Achievements in 2010
The department made significant changes during the 2010 year including:
➔ A new Enterprise Resource Planning (ERP) solution (SAP) and an implementation
partner were selected and the the design phase of the implementation project was
completed;
➔ New computing facilities, including a disaster recovery site were completed;
➔ The insurance policy management and claims processing systems were migrated to
a third party processor;
➔ An Information Technology Infrastructure Library (ITIL), aligned Service Desk solution
with automated monitoring and management of network and server environments, was
implemented; and
➔ Credit granting and credit strategy management tools were implemented which have
supported and significantly improved collections and the quality of the loan book.
Objectives for 2011
The transition stage from the legacy system to SAP will be carefully managed to avoid
business disruptions. Significant change management is required to transition the business
to the new operating model that will be supported by the SAP system, in order to ensure
its effective adoption. Key projects to achieve this change include the implementation of
the core SAP solution and its roll-out to approximately 200 stores as well as the complete
re-platforming of Financial Services.
JDG Insurance
Overview
JDG Insurance comprises three operational elements namely, JDG Micro Life Ltd (JDGML)
which is a long-term insurer, JDG Micro Insurance Ltd (JDGMI) a short-term insurer and
JDG Trading Insurance Department (JDGTI), which acts as independent intermediary for
both insurance companies.
JDGML and JDGMI operate in South Africa, offering credit insurance products to the credit
retail market.
50
JD Group Annual Report 2010
JDG Insurance’s strategic objective is to maintain the sustainability and profitability of
the current credit insurance book. It is also positioning itself to offer a diverse mix of
affordable micro insurance products to the mass market through various channels.
Achievements in 2010
During 2010, Insurance established a strong foundation from which to grow its
business and accordingly the following strategic business goals were prioritised:
➔ Remaining actively involved in ongoing industry negotiations with the Financial
Reneé Griessel
Chief Executive
Services Board (FSB) to reach an agreement on a suitable qualification requirement
for representatives and key individuals employed by the industry;
➔ Implementing a new insurance management system;
➔ Establishing an Investment and Capital Management Committee;
➔ Forming a strategic alliance with Sanlam and Santam; and
➔ Fully aligning JDG Insurance with the Group’s
Art of Service initiative.
Objectives for 2011
Insurance team
JDG Insurance will continue to focus on maintaining the sustainability and profitability
Reneé Griessel (48) BLC, LLB, H Dip Tax
of the current credit insurance book and on setting itself up to offer a diverse mix of
Chief Executive_24 years’ experience in legal,
compliance and insurance
affordable insurance products to the mass market.
A number of initiatives are currently in the process of being implemented. These
include addressing regulatory compliance matters, specifically the FAIS qualification
André Potgieter (33) BCom
Head of JDGI Finance_11 years’ experience in
insurance finance, banking and retail
requirements, and the Sanlam/Santam Strategic Alliance initiative mentioned above.
JD Group Annual Report 2010
51
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Internal Audit
Overview
The Internal Audit department provides independent, objective internal audit and
consulting services to the Group, which are designed to add value and improve
operations. This systematic, disciplined approach to evaluating and improving the
Richard Chauke
Director: Transformation, Tax, Risk, Internal Audit
and Compliance
effectiveness of risk management, control and governance processes, assists the
Group in accomplishing its objectives.
Achievements in 2010
The annual audit planning approach of Internal Audit was enhanced to enable an
increased focus on risk and a risk-based audit coverage plan was developed.
Objectives for 2011
The priorities of Internal Audit will be to continuously improve its core processes
Audit team
and approach in relation to audit plan creation, audit plan execution, findings review and
follow-up. The Internal Audit Function has employed a risk-based approach to determine
Richard Chauke (43) BCom (Hons), MCom
its priorities. In order to comply with the requirements of the Audit Coverage Plan,
(Taxation), MTP(SA)
Director: Transformation, Tax, Risk, Internal Audit
and Compliance_20 years’ experience in auditing,
taxation, lecturing and retail
approved by the Audit Committee, a decision was taken to outsource the Internal Audit
function to KPMG. Its audit coverage has been designed to focus the assurance activity
on the areas of the Group that have the most significant inherent and control risk.
Morné van Wyk (36) BCom, CIA
Chief Audit Executive_13 years’ experience in
internal auditing and retail
Risk Management team
Risk Management
Richard Chauke (43) BCom (Hons), MCom
(taxation), MTP(SA)
Director: Transformation, Tax, Risk, Internal Audit
and Compliance_20 years’ experience in auditing,
taxation, lecturing and retail
Overview
Pieter Pienaar (41) BCom
Chief Risk Officer_19 years’ experience in auditing,
risk management and retail
➔ professional risk management services;
Legal and Compliance team
Richard Chauke (43) BCom (Hons), MCom
(taxation), MTP(SA)
Director: Transformation, Tax, Risk, Internal Audit
and Compliance_20 years’ experience in auditing,
taxation, lecturing and retail
Yondela Ndema (34) BProc, LLB, LLM (Tax Law),
PhD (Law), Admitted Advocate of High Court of
South Africa
Group Legal and Compliance Officer_12 years’
experience in financial services and taxation
52
JD Group Annual Report 2010
The Risk Management department provides a professional, comprehensive risk
management service to the JD Group. This includes the provision of:
➔ effective physical risk assessment services;
➔ professional forensic audit services;
➔ business continuity implementation and assessments;
➔ cost-effective management assurance services;
➔ cost-saving initiatives; and
➔ up to date policies and procedures.
The department assisted with the mitigation of a number of risks that led to the
reduction in costs. Several previously outsourced responsibilities are now managed
internally. Reporting functionalities were established that enable the Group to clearly
identify risks from a strategic level to an operational level.
Achievements in 2010
The Risk Management function was established with a professional, dedicated team
to ensure that the mission and vision of the Group is achieved. A Management
Assurance function was set up to focus on the Traditional Retail
and Financial Services divisions that will enable Internal Audit to focus entirely
on a risk-based Internal Audit approach.
Objectives for 2011
The department will strengthen its ability to provide an integrated Risk Management
function across the Group. The electronic control self-assessment system will be
enhanced and a business unit prediction model will be implemented to assist
management in dealing more effectively with business risks.
Legal and Compliance
Overview
The objective of the Legal and Compliance department is to promote and entrench
a culture of compliance. All relevant staff members are required to be conversant with
the statutory law which applies to the Group. JD Group is committed to complying
with both the spirit and letter of all applicable legislation and to always act with due
skill, care and diligence.
JD Group Annual Report 2010
53
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Achievements in 2010
The legal department was established during the year to provide a legal advisory function
that identifies and interprets applicable laws and regulations. It is mandated to deal with
compliance matters that include a second tier of compliance, assessment of compliance
risk by law and regulation, and liaising with the regulators on regulatory compliance
issues. Its functions also include efficient and effective contract management.
A specific focus during the year included compliance with the provisions of the Consumer
Protection Act as it relates to all of the Group’s business processes, practices, systems,
documents, trading terms, and customer dealings.
Objectives for 2011
The Legal and Compliance department will focus on business improvement processes
which will include:
➔ Continuous monitoring of the legislative environment, taking corrective actions as
required and updating policies and procedures;
➔ Ongoing monitoring and evaluation of the compliance programme, goals and rating
processes;
➔ Ongoing attention to the Consumer Protection Act;
➔ Implementing processes to obtain timely updates of changes to statutory
obligations; and
➔ Conversion of legislative changes into implementable actions and risk controls.
Logistics
Overview
With the ever-increasing cost of distribution and warehousing, the primary focus of the
Group’s supply chain is to optimise logistics through centralised warehousing. This
initiative is expected to deliver improved efficiencies, better customer service and
eventually, to lower servicing costs.
The Group currently operates 79 warehouses throughout southern Africa and utilises
in excess of 1 000 vehicles to support its distribution function, a process involving
2 500 employees. The Group engaged the services of a third-party logistics service
provider to speed up the expansion and scale of the centralisation project.
54
JD Group Annual Report 2010
The warehouse consolidation project will substantially reduce the number of
duplicated activities and resources across the Group’s current warehouses, unlocking
significant cost benefits for the Traditional Retail Chains. The strategic goal of the
warehouse consolidation programme, which is in its second year, is to own and
manage 32 Distribution Centres (DC) throughout South Africa.
Achievements in 2010
In June 2010, the Group opened its third consolidated warehouse in Mthatha. Its DC is
Julian Hanmer
Group Executive: Logistics
integral to the Eastern Cape strategy to alleviate lost sales in that region. The fourth
consolidation project was completed in August 2010 with the consolidation of Morkels
and Electric Express into a single warehouse facility in Aeroton, Gauteng. After the
financial year end, in September 2010, the fifth consolidated warehouse was
established in Rustenburg.
Objectives for 2011
The Logistics division will remain focused on the consolidation project which is a key
deliverable of the Group’s strategic plan. The intention is to deliver at least nine
additional warehouses across various regions throughout southern Africa.
Logistics team
Julian Hanmer (47)
Group Executive: Logistics_24 years’ experience in
logistics.
Andrew Ross (44)
Fleet Executive_20 years’ experience in logistics
JD Group Annual Report 2010
55
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Merchandise and Marketing
Overview
The Merchandise and Marketing department supports the Traditional Retail and Cash
Retail divisions by leading strategic thought processes, proactively identifying new
opportunities and executing merchandise strategies to improve retail sales revenues
David Hirsch
Group Executive: Merchandise and Marketing
and competitiveness. The differentiation strategy of the retail division across all its
Chains is vital to maximising the value to be unlocked across the broadest possible
spectrum of the consumer populace.
Against the tough trading backdrop, the department facilitated the entrenchment of basic
retail merchandise and marketing principles and a solid platform has been laid for the
next financial year.
Achievements in 2010
The retail differentiation strategy was entrenched by way of formal range reviews, pricing
reviews, and retail brand and price matrix reviews. Inventories were optimised by reducing
Merchandise and
Marketing team
non-performing inventory, decreasing monthly stockholding, improvement in “in stock”
David Hirsch (40)
During the year, the Sansui private label brand was successfully launched with turnover
Group Executive: Merchandise and
Marketing_19 years’ experience in retail
Alec Goodman (55)
Merchandise: Appliances_34 years’ experience in
retail
Conrad Kleingeld (43)
Merchandise: Furniture_24 years’ experience in
retail
Irene Pilavachi (53) BA (Lang) H Dip Marketing
Marketing_21 years’ experience in retail
Julee Bergstrom (48) BCom
Merchandise: Planning_26 years’ experience in
retail
56
JD Group Annual Report 2010
service levels and optimising replenishment systems.
exceeding expectations.
Key market intelligence and research initiatives were introduced and marketing
efficiencies and promotional effectiveness were improved.
Objectives for 2011
In the year ahead, the Merchandise and Marketing department will continue to focus
on entrenching differentiation, increased turnover and margins including:
➔ Ensuring further optimisation across chains and maximisation of range width and
depth;
➔ Up-skilling and developing Merchandise and Marketing core competencies; and
➔ Assisting in the smooth transition from the legacy system to the new ERP platform.
Property Services
Overview
The Property Services department is responsible for sourcing, negotiating, developing
and maintaining a fit-for-purpose and cost-effective brick-and-mortar footprint for the
Group.
The department manages the Group’s property portfolio comprising approximately
1 406 leased premises with annual rental payments of R479 million (excluding Abra
and Incredible Connection) as well as 16 Company-owned properties.
Ivan Nefdt
Group Property Executive
Property Services delivers on its mandate by means of three interrelated disciplines
namely procurement, projects and legal and administration. It is aligned with the
Group’s strategic business operating model as demonstrated by the following
initiatives which are ongoing:
➔ Constant monitoring of South African retail and industrial property trends through
research and networking to evaluate and take up all appropriate available
opportunities;
➔ Containment of occupancy costs by limiting rent-roll growth, optimising trading
densities and re-negotiating the payment of unquantifiable expenses and
exorbitant assessment rate increases levied by local authorities
➔ Innovative programmes are being implemented to counteract rising power
costs; and
➔ Ongoing sourcing, designing, developing and managing suitable distribution
centres in support of the Group’s centralised distribution strategy, including nine
strategically located Group owned distribution centres in 2011, with further
roll-outs planned thereafter.
JD Group Annual Report 2010
57
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Achievements in 2010
The following was achieved during the year under review:
➔ Containment of rent-roll growth in respect of lease renewals and optimisation of retail
space against the backdrop of rising retail vacancies;
➔ Savings were achieved in respect of vacant premises; and
➔ Traditional Retail established 37 new stores and relocated 14 stores, while Cash
Retail opened four new stores and completed seven relocations.
Objectives for 2011
The Property Services department anticipates a productive year ahead based on
the following factors:
➔ Retail sales growth is expected to remain muted which will translate into
greater availability of retail space and favourable rentals; and
➔ An accelerated renovations programme has been initiated which will include
the upgrade and refurbishment of 233 Traditional Retail stores in line with the
Property team
Ivan Nefdt (47)
Group Property Executive_22 years’ experience
in retail and property services
Nico Celliers (53) BSc (Hons) Prod Eng
Projects: Traditional Retail_25 years’ experience
in furniture retail, property, project management
and property procurement
Etienne du Plessis (60) BJuris, LLB
Legal and Administration_35 years’ experience
in furniture retail, property, project management
and property procurement
Bruce Haygarth (40)
Projects: Cash Retail_12 years’ experience
in furniture retail, property, project management
and property procurement
Philip Malan (51)
Property Procurement_14 years’ experience
in furniture retail, property, project management
and property procurement
58
JD Group Annual Report 2010
approved corporate identity.
Secretariat
Overview
Secretariat primarily provides statutory support, meeting administration and general
support to the board of directors and board committees. It fulfils a corporate
governance function, providing guidance to directors and executive management on
their obligations in terms of relevant corporate laws and regulation. Secretariat is also
responsible for the Group’s trademark, shareholder and share scheme administration
Johann Pieterse
Company Secretary
in co-operation with external service providers.
The secretarial environment was dominated by the implementation of the third
King Report on Governance for South Africa and the King Code on Governance
Principles (King III) on 1 March 2010. Pro-active steps were taken to align the Group’s
business practices and governance processes with the King III recommendations.
Secretariat also prepared for the envisaged implementation of the 2008 Companies
Act and is geared to meet the regulatory and governance obligations that are likely
to emanate from the Act.
Secretariat
Achievements in 2010
Johann Pieterse (55) BA, BCom (Law)
The focus in 2010 was mainly on governance, compliance and the training of human
Company Secretary_24 years’ experience in
secretarial services
resources as follows:
➔ Implemented board, committee and director self-assessments to appraise the
performance of the directors and the various forums to identify opportunities to
improve their effectiveness;
➔ Conducted an assessment to measure the alignment between the Group’s
practices and the requirements of the Public Investment Corporation’s Corporate
Governance Investment Code, the anticipated 2008 Companies Act and King III;
➔ Updated the board charter and the terms of reference of the Audit and Risk
Management committees;
➔ Overhauled the non-executive directors’ fee structure in line with the King III
recommendations;
➔ Revised and improved the practice for approving the provision for non-audit
services by the external auditors;
➔ Provided induction training to new operating company directors;
➔ Established the required statutory, compliance and governance frameworks for the
long- and short-term insurance companies; and
➔ Implemented the Global Reporting Initiative Index as the basis for the Group’s
sustainability reporting.
JD Group Annual Report 2010
59
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Objectives for 2011
➔ Once the 2008 Companies Act is enacted, Group-wide compliance with the provisions
of the new Act will be confirmed;
➔ The implementation of a formal induction and development programme for
new Group directors;
➔ Improving the effectiveness of the Board and its committees by addressing
Dr Henk Greeff
Director: Strategy and Human Resources
the shortcomings identified by the performance assessments; and
➔ Improving the corporate governance status of the Group by addressing any
corporate governance and King III non-compliance issues.
Strategy
Overview
The Strategy department is responsible for strategy development, the management
Strategy team
Dr Henk Greeff (51) Med (Ed Management)
of all strategic programmes and projects and strategically positioning the Group to
achieve its vision of becoming world-class in its field of expertise. The department
(cum laude), PhD
Director: Strategy and Human Resources_9 years’
experience in strategic management consulting and
7 years’ experience in retail
manages all strategic projects from inception through implementation to envisaged
Komani Mfuni (45) BSc, MBA
JD Group’s strategic planning and management process
Group Executive: Strategic Research and Business
Intelligence_4 years’ experience in financial services
and 10 years’ experience in strategy development
and planning consulting
Dalene Ferreira (37) Dip Project Management
Group Executive: Programme Management_4 years’
experience in credit risk management in financial
services and 13 years’ experience in project
management
Executive team
Christo Viljoen (51)
Business Analytics_31 years’ experience in retail
60
JD Group Annual Report 2010
benefit measurement.
The Group has decision-focused, integrated strategic planning and management
processes that are fully aligned with business planning and budgeting processes.
All strategic proposals require business cases that are grounded in robust economic
rationale and are formally evaluated for investment allocation. These options are
translated into executable strategic programmes or projects. Progress of strategy
execution is monitored by way of balanced dashboards and performance dialogues.
Key players in the strategy planning and execution management process include the
Group board, executive management and relevant business unit management.
Achievements in 2010
The primary focus and achievements in 2010 included the following:
➔ Strategy development, including research to identify business specific
opportunities;
➔ Developing business intelligence reports for the divisions, the Chains and
corporate service departments; and
➔ Driving and co-ordinating implementation and benefit realisation of Group
strategic programmes and projects.
Objectives for 2011
The ongoing focus areas of the Strategy department include ensuring that the
Group holds a lead in the business and retail industry curve by exploring value
opportunities in the market. It will also conduct ongoing internal business
portfolio analyses to reveal new insights on key business drivers and levers and
identify corporate development opportunities at Group and business unit levels.
JD Group Annual Report 2010
61
Group review
Executive Chairman’s report
Board of directors
Chief Executive Officer’s report
Executive management
Review of operations
Review of corporate services
Review of corporate services (continued)
Service Departments (continued)
Transformation
Overview
JD Group has implicitly recognised the importance of transformation, not only within the
Group, but also within the broader society in which the Group trades. Recognising that
Broad-Based Black Economic Empowerment (B-BBEE) is a framework that not only
Richard Chauke
Director: Transformation, Tax, Risk, Internal Audit
and Compliance
redresses the exclusions and imbalances of the past, but also drives South Africa’s
sustainable growth, the Group continues to support and interact with a number of sector
bodies to address these challenges.
Achievements in 2010
The department has adopted a holistic approach to the transformation within the Group
management ranks. This was facilitated by engaging with internal stakeholders to develop
and implement a talent management strategy with specific focus on increasing the
number of previously disadvantaged employees and women in management positions.
The department continued to play a significant role in directing staff to make a difference
Transformation team
in the lives of the underprivileged through involvement in the Group’s social responsibility
Richard Chauke (43) BCom (Hons), MCom
(Taxation), MTP(SA)
Director: Transformation, Tax, Risk, Internal Audit
and Compliance_20 years’ experience in auditing,
taxation, lecturing and retail
programmes.
Jonny Masinga (33) NDip HRM, BTech HRM,
BTech HRD MAP
Transformation_13 years’ experience in human
resources and transformation
The department monitored and ensured compliance with employment equity legislation
through various structures within the Group.
The Group conducted diversity workshops on a monthly basis to encourage the value
placed on diversity as a core value.
The department engaged an independent verification agency which assessed the
Group’s B-BBEE status and issued a formal transformation rating.
62
JD Group Annual Report 2010
Objectives for 2011
During 2011 the focus will be on the following business improvement processes:
➔ Regular assessment, monitoring and measurement of the progress and efficacy
of the Group B-BBEE strategy;
➔ Engaging an independent verification agency to assist in assessing B-BBEE
progress; and
➔ Engaging all stakeholders in finding ways of improving the Group’s B-BBEE scores,
including the introduction of service level agreements with transformation
deliverables for all internal stakeholders.
JD Group Annual Report 2010
63
Sustainability and governance
Customers
➔
Growth
Profitability
Shareholders – Our shareholders have once again been provided with the facts of
the Group’s business performance that is headed in the correct direction to meet
and potentially exceed the Group’s strategic business goal and shareholders’
expectations. Notwithstanding the tough economic conditions, the shareholders
received a dividend of 150 cents per share as a return on their investment.
➔ Employees – The formal launch of the Group’s Art of Service business initiative
will undoubtedly benefit our employees as internal customers.
mployees including those in the bargaining unit qualified for and received salary
E
increases despite the current state of the economy.
➔
Customers – More affordable and quality merchandise was provided by virtue of
the strengthening of relationships with suppliers.
Customers enjoyed the benefit of lower insurance costs and enhanced consumer
rights with the application of the National Consumer Act (NCA).
➔
S
uppliers – The strengthening of relationships with suppliers of both merchandise
and services, assists such suppliers to become improved corporate citizens.
rganised labour – The Group continues to foster and herald the benefits of
➔ O
managing and experiencing solid, transparent and sound relationships with the
various trade unions it recognises in southern Africa and with whom formal
relationships have been negotiated and concluded.
Unions enjoy representation at various levels in the Group.
➔
➔
overnment and Regulators – Have once again experienced the Group’s
G
commitment to proactively meeting its requirements with regard to applicable
legislation and has driven industry initiatives in this regard. R712 million has been
paid to Government and Regulators comprising of taxes, licenses and fees.
C
ommunities – The Group has maintained its forward thinking approach by
positively contributing to various initiatives in the communities within which it
operates and serves.
Enriching the lives of others
“No man can become rich without himself enriching others.”
Sustainability and governance
Dale Carnegie
JD Group Annual Report 2010
65
Sustainability and governance
Sustainability and stakeholder review
Sustainability and stakeholder review
Corporate governance
Introduction
The Group is now reporting far more
extensively in terms of its sustainability
initiatives in this report. As recommended
by the third King Report on Governance
for South Africa, the Group endeavours
to provide a transparent and accurate
integrated sustainability perspective
by covering not only the economic
performance, but also depicting the scope
of the Group’s associated social and
environmental initiatives in a substance
over form manner. For purposes of
reporting its sustainability approach,
strategies and corporate behaviours,
the Group has adopted the Global
Reporting Initiative’s (GRI) G3 Index.
Role of the Board and the
overarching philosophy
JD Group is committed to creating
long-term sustainable stakeholder
value through ethical business practices,
providing employment, minimising
environmental impacts and promoting
social and economic development.
The Board plays a vital role in setting the
tone and acting in a responsible manner. It
subscribes to the philosophy that the
Group is integral to society and a citizen of
the country. Consequently, JD Group acts
as a responsible citizen in its social,
environmental and economic interactions
with stakeholders and ensures that its
decisions are made with reference not
only to the needs of the present, but
with “sustainable sensitivity” not to
compromise the ability of future
generations to meet their needs.
Notwithstanding, the informed investor
assesses the quality and sustainability of
the Company’s economic performance as
most essential in this triple bottom-line
accord. Therefore, as much as the Group
acknowledges that social transformation is
important to redress the unfair practices of
the past and that sustainability speaks to
its future wellbeing, JD Group’s presentday business perspective remains aligned
first and foremost with the expectations
of the shareholders whose capital it
manages. Consequently, and despite this
JD Group Annual Report 2010
The Board has mandated the Audit
Committee to oversee sustainability within
JD Group.
The Audit Committee has reviewed the
disclosure of sustainability matters in the
integrated report and found them reliable
and not in conflict with the financial
disclosures. It furthermore recommended
that management does not have to involve
external third-party assurance providers in
this early stage of the Group’s sustainability
journey and has self-assessed the status
of this report as falling at least in the
G3 C-level category.
integrated alliance, its approach does not
Whilst the Group over the years has
tolerate anti-competitiveness in any shape
adopted a number of sustainability-related
or form.
policies such as an Ethics Policy, a Gifts
The philosophy of leadership, sustainability
and corporate citizenship is core to
JD Group’s own strategy and evidenced
by the statement of its Chairman,
David Sussman: “As one of the leading
retailers in South Africa, JD Group firmly
believes that the future prosperity of our
country, as well as that of the Group,
hinges on, among other things, the
transformation and upliftment of the
communities in which we conduct our
business. We rely on the communities’
and our customers’ support to grow our
business and produce sustainable profits
for our shareholders. In turn, our
customers expect decent service, whilst
the communities rely on our corporate
social investment support to enhance their
quality of life.”
66
Assessment and status
Policy, an Anti-fraud Policy, a Risk Policy
and a Health and Safety Policy (to name
a few), it has not yet formulated a
stand-alone and overarching sustainability
policy, purely because many of the
so-called triple bottom-line aspects have
been core to the Group’s own business
strategy. However, to fall in line with King III
practices as well as other developments
world-wide, it has commenced building
formal reporting and monitoring structures
for measuring and verifying its future
sustainability efforts. In this regard it has
recently engaged with a number of expert
service providers to obtain insights and
advice on the most appropriate
sustainability framework to be
implemented, together with policies for
managing adverse environmental impacts.
Review of stakeholder engagements
Shareholders
Johannesburg Stock Exchange’s SENS to
and initiatives
A detailed analysis of the Group’s
communicate trading updates and other
Stakeholders
3 778 shareholders in various prescribed
events of shareholder interest to the
categories is set out in the table on
investor community at large. In line with
page 207 in the financial report.
the needs of the electronically conscious
Noteworthy is the fact that approximately
investor, the Group’s website
70% of shares are held locally, and that
(www.jdgroup.co.za) can be accessed for
70,1% of investors are private investors,
a wealth of information on the Group and
➔ Employees (other than directors)
holding 1,3% of the number of shares in
its activities. Other community and
➔ Customers (and potential clients)
issue. The Group’s directors hold 0,2% of
national communication channels such
➔ Suppliers
the issued capital. From a government,
as radio, press and the television media,
➔ Organised labour
institutional and fund manager investor
regularly hold interviews and conduct
perspective, the Public Investment
business performance reviews that keep
Corporation and the Government
the broader stakeholder audience well
Employees Pension Fund count among the
informed of the Group’s actions.
Group’s key shareholders. Open
Shareholders received both an interim
communication lines and a constructive
and final dividend of 70 and 80 cents per
working relationship exist between them
share respectively. As indicated above,
and top management.
they have been well informed of the
The Group recognises the importance of
Group’s business performance. For the
fostering good relationships with its
year under review the Group has already
shareholders and the value of clear,
invested about R232 million in new
transparent and unambiguous
state-of-the art IT systems to ensure that
communication. Direct communication
it retains its competitive advantage for
with shareholders and the market takes
realisation of sustainable future profits.
The Group has identified the following as
its key stakeholders:
➔ Shareholders (and potential investors)
➔ The Board of directors
➔ Government and Regulators
➔ Communities
➔ Other individuals and entities that
engage with the Group on a regular
basis.
Wealth creation
The Group’s primary purpose is to create
and generate sustainable wealth for the
benefit of all stakeholders through its
commitment to satisfy consumers’ needs
whilst pursuing persistent and satisfactory
profit growth, through both organic and
non-organic strategies. This can only be
achieved through profitable business
operations and ongoing engagement with
stakeholders.
Despite the downturn in the economy, the
Group generated satisfactory profit.
Attributable earnings for the year
amounted to R501 million. The Group’s
progress towards achievement of its
strategic goals set earlier is reflected on
page 9.
place via the Group’s annual report and
interim results announcement through the
Employees and benefits
media and communiqués posted to
Employment
registered shareholders. At least two road
shows annually and various one-on-one
investor meetings during the year provide
a platform for directors to keep the major
shareholders informed of its plans and
progress towards strategic targets.
The annual general meeting affords a
forum to any shareholder, and especially
the minority shareholders and shareholder
The value added statement in the financial
activists, to interrogate the Board on its
section on page 125 is testimony to the
conduct in the presence of the media.
wealth created by the Group during the
The Group furthermore makes use of the
The Group is fully committed to being
a responsible South African citizen as
promoted by the third King Report on
Governance in South Africa (King III)
and from this perspective employs
South African citizens at all levels in its
South African operations. It employs and
provides security and stability to 18 680
employees in South Africa and
1 362 employees outside South-Africa’s
borders.
year under review.
JD Group Annual Report 2010
67
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
All labour resources in South Africa are sourced locally in terms of B-BBEE regulations.
Paterson
Grade
RSA
NonRSA
Total
Top management
F
2
—
2
Senior management
E
41
8
49
Professionally qualified and experienced specialists and midmanagement
D
833
29
862
Skilled technical and academically qualified workers,
junior management, supervisors, foremen and superintendents
C
5 216
298
5 514
Semi-skilled and discretionary decision making
B
10 380
654
11 034
Unskilled and defined decision making
A
2 208
373
2 581
18 680
1 362
20 042
Age
group
Females as
% of total
turnover
Males as
% of total
turnover
20 to 30
30,2%
27,3%
30 to 40
10,3%
9,4%
40 to 50
4,8%
4,3%
>50
3,7%
3,4%
20 to 30
1,5%
1,0%
30 to 40
2,0%
1,2%
40 to 50
0,5%
0,2%
>50
0,1%
0,1%
Occupational Levels
Total
Employment turnover
The Group’s employee turnover ratio is depicted in the table below:
Region
RSA
Outside RSA
Remuneration philosophy
In accordance with the recommendations of King III in South Africa, JD Group has formulated a holistic remuneration philosophy, the key
elements of which are summarised below.
The Group’s remuneration philosophy is designed to attract and retain talented people who are required to implement the overall strategy
and create value for shareholders. The Group makes every effort to remunerate its staff and directors fairly and equitably.
68
JD Group Annual Report 2010
Performance management, succession
➔ The Alexander Forbes Retirement
as well as four member-elected
planning and talent retention
Fund (Provident Section): Connection
trustees, manage the fund.
The recruitment and retention of top talent
Group Holdings (Pty) Limited;
The appointed administrator is
is a crucial element of the Group’s people
Alexander Forbes Financial Services
strategy. Succession and succession
(Pty) Limited is the appointed
planning is at the very heart of this
administrator of the AFRF. This fund
strategy. It creates and generates future
is managed by a professional board
management sustainability and mitigates
of trustees. In terms of the rules of
the risk or lack of capacity and capability
the fund, each participating
to deliver on the promised business goals.
employer is required to establish a
Employees receive regular performance
management committee comprising
and career development reviews in line
both employer-appointed and
with the Group’s succession planning and
member-elected representatives.
training and development strategy.
For JDG Trading there are four
employer-appointed and four
Permanent employee benefits
employee-elected representatives.
Alexander Forbes Financial Services
(Pty) Limited. 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
collective bargaining agreement with
SACCAWU. Old Mutual Life Assurance
Company (South Africa) Limited
(Employee Benefits Industry Funds Unit
Division) is the appointed administrator
of this fund.
➔ Employees of the Group in Botswana
Full-time employees reap the benefit
The employer-appointed
and in Namibia belong to various
of a healthy employment relationship.
representatives are Johan Coetsee
umbrella funds in these countries,
In addition to a basic salary, other benefits
(chairman), George Annandale,
while employees of Abra are members
include retirement fund, risk and medical
Yondela Ndema and Richard
of the Social Security Fund (SSF) in
aid benefits which are subsidised at
Chauke. For Connection Group,
Poland.
differing levels, dependent upon an
there are three employer-appointed
The Group’s full-time employees are also
employee’s position and selection of
and three employee-elected
afforded the opportunity to belong to one
benefit type.
representatives. The employer
of three leading medical aid service
representatives are Johan Coetsee,
providers which offer a wide range of
Retirement funds and medical aid
Dave Miller and George Honiball.
progressive and affordable medical and
Approximately 95% of Group employees
The management committee,
hospital plans.
are members of a retirement fund in which
amongst other activities, monitors
the Group participates.
and reviews the selected
➔ Minimum wages and basic salaries
A summary of the key retirement funds
investment strategy, assists in the
The Group participates in and is party to
are provided below:
distribution of death benefits
the Sectoral Determination which governs
payable and monitors continued
the Wholesale and Retail Sector in respect
participation in the fund.
of minimum wages and conditions of
➔ The Alexander Forbes Retirement Fund
(AFRF) is an umbrella fund in which
employees of JDG Trading and
Connection Group Holdings have
membership as a condition of
employment. It comprises the following
two to sub-funds:
➔ the Alexander Forbes Retirement
Fund (Pension and Provident
Sections): JDG Trading (Pty) Limited;
➔ The JD Group Defined Benefit Pension
employment. The Group fully complies
Fund has been closed to new entrants
with the wages and terms and conditions
since October 1996. This fund is
prescribed by this regulation and currently
managed by a board of trustees.
remunerates its employees at the “area A”
In terms of the rules four employer-
minimum wages within South Africa where
appointed trustees, namely
the regulation is applicable. This does not
Johan Coetsee (chairman),
preclude the Group from applying the
George Annandale (principal officer),
rules regarding the other category areas in
Richard Chauke and Xavier Schatz,
the future. The ratio of basic salaries of
JD Group Annual Report 2010
69
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
males to females across all categories in
executives with those of shareholders
Non-executive directors’ fees and
the Group in South Africa is 110,4% and
and therefore ensure sustainable
emoluments
outside South Africa 98,2%. The majority of
long-term performance. Shares are
the Group’s employees are covered by
considered an essential element of
collective bargaining agreements between
reward and represent a material part of
the Group, Organised Labour and
an executive’s remuneration. Participation
bargaining unit employees. This year the
in a share scheme also ensures that
Bargaining Unit employees received
the Group attracts and retains core
increases in excess of the current inflation
competencies required for formulating
rate. (See page 74 for a detailed discussion
and implementing the Group’s business
of Organised Labour related matters.)
strategy.
➔ Executive remuneration
Grants of share appreciation rights (SARs)
are conditional rights to receive JD Group
Non-executive directors receive fees for
the rendering of services to the company,
i.e. for serving on the Board and on the
various Board committees, but do not
receive short-term incentives. Independent
non-executive directors do not participate
in any incentive share scheme.
The fees for non-executive directors are
recommended by the Remuneration
Committee to the Board for its approval,
after they have been benchmarked in the
The remuneration strategy for executives
ordinary shares equal to the value of the
is based on principles of retention of key
difference between the share price at the
individuals and critical skills, to drive
time that the rights were granted and the
performance in order to achieve the
share price when the rights are exercised.
Group’s strategic targets. The alignment
SARs can only vest if performance
of performance and shareholders’
conditions have been met over a specified
interests is driven through a combination
period being not less than two years. In
of guaranteed pay together with short-
the event that the performance conditions
and long-term incentives. A significant
have not been met, these will be reviewed
portion of executives’ total potential
after the third year. If the performance
remuneration is performance related in
conditions have then been satisfied, the
order to drive the correct behaviour and
grant will vest. However, if not satisfied,
to optimise business performance.
the grant will lapse. The performance
Total guaranteed pay, which includes
conditions are determined by the Board
The development of the Group’s
benefits, is subject to an annual review
after consultation with the Remuneration
employees enjoys a high priority. The
by the Remuneration Committee.
Committee and are disclosed to
Group offers a host of programmes for
The targeted pay position for guaranteed
shareholders in the Group’s annual report.
skills development and lifelong learning
total package is aimed between the
Refer to note 28.
that support the continued employability
retail and non-retail market. The Board
then recommends the fees to
shareholders for approval at the annual
general meeting.
The proposed forward-looking fees of the
non-executive directors are set out in the
notice to the annual general meeting. The
remuneration details of all directors for the
past financial year are set out on pages
140 to 144.
Training and development
of employees and assist them in
median and upper quartile when
Executive directors’ service contracts
enhancing their careers. During the review
African retail and non-retail companies,
The Executive Directors’ service contracts
period, employees were exposed to 591
and is adjusted according to individual
generally specify a notice period not
912 hours of training. In addition to the
performance and responsibility.
exceeding three months. There is no
aforementioned, the Group sponsored a
contract that exceeds a 12-month
successful Retail Leadership Development
notice period.
Programme (RLDP), and for selected
benchmarked against major South
Long-term incentive share schemes are
designed to align the objectives of
employees with potential at corporate
executive level, an Advanced Management
Development Programme (AMDP) was
presented.
70
JD Group Annual Report 2010
Key training and development statistics
Employee category
Total hours
Senior management
(E1 and above)
672
Professionals (D1 – D5)
34 536
Skilled (C2 – C5)
178 578
Supervisory (C1)
55 242
Sales (B5)
220 266
Semi-skilled (B1 – B4)
90 252
Unskilled (A3)
12 366
Total
591 912
The Group has a formal Bursary Committee, comprising both management and Organised Labour representatives. The committee assisted
34 needy students during the past financial year. An Employment Equity & Training Committee (EE&TC) operates in addition to the Bursary
Committee. The governance body of the EE&TC comprises employees from all categories across the Group, represented by:
➔ Black males 6 (aged between 32 and 52)
➔ Black female
1 (age 46)
➔ White male
1 (age 45)
➔ White female
1 (age 40)
The committee complies with the statutory requirements in South Africa and serves as a representative and consultative body that
enhances Employment Equity (EE).
Over and above the aforementioned, the Group is a member of and maintains a sound relationship with the Wholesale and Retail Sector
Education and Training Authority and makes proactive contributions towards the development of tailored development programmes for
the furniture and appliance industry.
During the review period, JD has distributed R1,1 million in supporting young disadvantaged learners, whilst a further R1,1 million was
allocated to employees and their children in the learning environment. The table below reflects the statistics of the Group’s training
initiatives for the past year:
Total number of training interventions per race group, gender and financial cost
Female
White
3 581
Black
13 368
Male
Coloured
Indian
2 558
916
Female
total
20 423
PDI female total
16 842
White
1 676
Black
8 788
Coloured
Indian
1 293
704
PDI male total
10 785
Male
total
12 461
Total
number
of PDI
staff
attended
Total
number
of training
interventions
27 627
32 884
Total
financial
spend
R37 563 231
PDI = previously disadvantaged individuals.
JD Group Annual Report 2010
71
Sustainability and stakeholder review (continued)
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
Transformation from an employee perspective
The Group supports the empowerment of previously disadvantaged individuals and is committed to its own transformation in order to
meet the country’s need to transform the economy. Its transformation policy and practices are aligned with relevant legislation, codes of
good practice and general best business practices. A Board director oversees the Group’s programme of transformation, which focuses
on addressing the inequalities of the past in respect of race, age, disability and gender in the workplace. Monthly monitoring is conducted
across the Group and reported to the Executive Committee (Exco). Almost 88% of the total positions in the Group are occupied by
Previously Disadvantaged Individuals (PDIs).
Transformation from a Broad-Based Black Economic Empowerment (B-BEEE) perspective
The Group has not entered into a B-BBEE ownership transaction as yet and the current economic situation is not conducive to such
a transaction. Consequently, the current ownership score is derived from indirect shareholding, using the mandated investment principles
as contained in the B-BBEE Codes.
From a scorecard ‘management’ perspective, one PDI female currently serves on the Board, whilst three PDI males also hold
directorships. The total PDI representation on the Board amounts to 31%.
In an effort to redress the current inequalities with regard to race, gender and disabilities, ongoing monitoring takes place of all
recruitment and appointments, especially at senior management levels. Non-compliance statistics are reported to the Director of
Transformation and to the Group CEO on a monthly basis.
The Group has a targeted procurement strategy and on an ongoing basis increases its procurement from companies that have made
significant progress in the area of B-BBEE. The Group continues to engage with its suppliers and assist them in becoming B-BBEE
compliant or increase their status.
The following scorecard as verified by Empowerdex (2009/2010), reflects the Group’s consistent progress in the area of B-BBEE:
GROUP
Group B-BBEE score
72
JD Group Annual Report 2010
2007/2008
2008/2009
2009/2010
Ownership
0
1,8
1,9
Management
1,2
2,9
3,8
Employment equity
5,5
7,9
5,7
Skills development
6
7,5
4,3
Procurement
9,2
12,2
15,1
Enterprise development
0
4,3
15
Socio-economic development
1,7
5
5
23,6
level 0
41,6
level 7
50,8
level 6
Employee relations, ethical conduct and
into three sections, namely fraud,
during the year of which 90 of the cases
human rights
suspected fraud and attempted fraud (see
were won, 18 cases were lost and 45 were
table below). Suspected fraud refers to a
settled.
The Group acknowledges the fundamental
rights of employees to freedom of
expression, association and
representation. Through its ethics policy
and other related value-based policies,
practices and processes, the Group has
engendered among its employees the
upholding of fundamental human rights,
integrity and ethical practices, which are
regarded as the way business is
conducted across the Group and not as a
suspected loss to the Company. Many of
these, relate to customers who disappear
after taking delivery of a product
purchased on credit. Attempted fraud
refers to minor losses where the fraud was
prevented. The main category of fraud
relates to identify fraud perpetrated by
deceitful customers and/or syndicates.
of total employees have received an
aggregate of 15 192 hours of training on
Fraud
aspects such as diversity, the Group’s
Attempted
Disciplinary Code and processes, human
fraud
resources administration, industrial
relations, employee relations and other
related subjects. In addition, 18,7% of the
or religion and are monitored, tracked and
reported on through the EE&TC. Given the
Group’s stance against abuse and violation
of human rights, the Group has not
experienced or received any reported or
recorded incidents of discrimination, child
other violation involving discrimination or
Cases
Total value
521
R12 950 012
rights of people. The Group is not aware of,
and will not support, any suppliers who
conduct any such practices. None of the
Group’s operations restrict employees’
51
R151 727
right to exercise freedom of association or
collective bargaining. No incidents of
Suspected
fraud
on grounds of race, age, disability, gender
labour, forced or compulsory labour or any
Summary of fraud incidents
legislative requirement. Altogether 4,45%
The Group’s policies do not discriminate
641
R17 707 770
violations involving rights of indigenous
people have been reported or recorded.
total population of employees have
Whistle-blowing statistics
Employee communication
training in the organisation’s anti-
Crime Call is a whistle-blowing facility used
The Group communicates regularly and in
corruption policies and procedures relating
in the JD Group since April 2002. There are
a transparent manner with its employees.
to fraud detection and prevention, the
two methods of reporting crime whilst
Communication takes place through
National Credit Act (NCA), Financial
remaining anonymous, ie via an
one-on-one formal and informal on-the-job
Intelligence Centre Act (FICA), whistle-
anonymous dedicated Crime Call
interactions, committee meetings, informal
blowing procedures and other brand-
telephone line or online via a web
and social gatherings, work-related
relevant internal risk policies and
interface. During the financial year, 125
corporate, Chain or service department
procedures relevant to operations.
incidents were reported and investigated.
memoranda, Face-to-Face written
Employees are expected to maintain high
The investigations gave rise to disciplinary
communication bulletins, Group Directives
ethical values and in this regard the Group
enquiries with the following results:
and Operational Instructions, promotions-
follows a zero tolerance approach in
➔ 26 dismissals;
related telecasts, employee and business
respect of corruption or fraud incidents.
➔ nine final written warnings;
performance achievements and bi-annual
collectively received 101 196 hours of
Perpetrators are subjected to the Group’s
disciplinary procedures and practices.
The Group applies the disciplinary
procedures in a consistent manner.
During the year, the Group was targeted by
various fraud syndicates. In order to
analyse the fraud incidents, these are split
➔ four written warnings;
➔ nine counselling sessions and verbal
warnings.
Insufficient evidence was obtained on the
remaining 77 incidents, resulting in no
action being taken.
The Group was a party to 153 CCMA cases
Chain road shows, where information on
business performance and strategies are
shared, among others. The channels and
mechanisms of information dissemination
are selected with the aim of ensuring
effective reach, absorption and
understanding of the communication
messages. All employees are subjected
JD Group Annual Report 2010
73
Sustainability and stakeholder review (continued)
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
to a two-day induction programme after
Botswana, Swaziland and Namibia.
LSM10 can be satisfied with merchandise
joining the Group, where they are
The stable relationship, in particular with
relevant to the home environment. As the
introduced to the culture and workings
the South African Commercial Catering
market becomes more sophisticated, the
of the Group. As part of the Art
Allied Workers Union in South Africa
Group is able to migrate customers
initiative, all employees are regularly
(SACCAWU), has been conducive for both
through the spectrum of brands.
invited to take part in independent and
parties throughout the years. The Group
anonymous employee engagement
is committed to open, transparent and
Customer rights and consumer
surveys. Over and above the
proactive communication and engagement
complaints
aforementioned, all permanent employees
with Organised Labour, and the fact that
The implementation date of the Consumer
have access to the Group’s intranet site
the Group has enjoyed 16 consecutive
Protection Act (CPA) 2008, has been
where policies, directives and a host of
years without general strike action is
deferred to 1 April 2011. The driving force
other general information is stored.
evidence of the good relationship and
and motive of the CPA is the protection
Employees in office environments also
trust that exists between management,
of the consumer’s interests and rights.
enjoy the use of internet connectivity
the unionised staff and the unions. This
The CPA will have a significant impact on
during working hours and the related
sound relationship has been established
the relationship between consumers,
messaging services linked to the specific
and fostered through annual substantive
the Group and its suppliers of goods and
application they use. The Group has
negotiations, quarterly National
services. In particular it will affect JD’s
adopted and maintains an Electronic
Negotiation Committee (NNC) meetings,
rights and obligations as a supplier of
Communications Policy and practices
Shop Steward meetings, operational
goods and services. In order to prepare for
that preclude employees from accessing
requirements consultations, information-
this situation, the Group is reviewing its
offensive sites on the internet and sending
sharing sessions (with trade union
business practices, policies, procedures,
discourteous messages to colleagues and
leadership) and EE&TC meetings.
repairs and return warranties, systems,
Operational requirements exercises have
complaints-handling procedures, as well
to be embarked on from time to time and
as the trading terms with its suppliers
in such instances the Group strictly abides
(and manufacturers). Furthermore, there
by the collective bargaining agreements’
is a Group Project in place to ensure the
requirement of a 60-day notice period
smooth implementation and alignment of
in respect of layoffs. During 2009 and
business practices, processes, policies,
continuing in the review period, the
etc to the CPA regulatory requirements.
Group was forced to embark upon the
The CPA Steering Committee meets once
restructuring of its Traditional Retail and
a month, whilst the CPA Working
Financial Services divisions within the
Committee meets bi-weekly. Development
Organised Labour and consultations
framework of the new business and
of a staff training manual has progressed
More than 60% of the Group’s employees
operating model that was implemented.
well and the development of a system to
of Service
third parties. During the past year the
Group launched an in-house publication
called Thumbs Up, which serves not only
as a channel through which the core focus
of the Art of Service initiative is
communicated, but is also a mechanism to
share knowledge, information and informal
commentary between divisions and
Chains.
facilitate compliance management is on
are covered by collective bargaining
agreements and are therefore party to
the associated benefits negotiated
between the Group and Organised Labour
on behalf of the Bargaining Unit
employees. The Group continues to reap
the rewards of solid, sound and ethical
relationships with the trade unions
representing employees in South Africa,
74
JD Group Annual Report 2010
Customers
The Group has a large base of credit and
cash customers.
JD Group is fortunate to be able to service
the mass middle market in South Africa via
numerous Chains. When considering the
product width, customers from LSM3 to
schedule.
As can be expected from a business that
has a large customer base, several queries
concerning products, health and safety,
information disclosure, sales processes,
interest rates, charges, fees and Credit
Bureau listings procedures have been
escalated to the National Credit Regulator,
the Credit Information Ombud, the Ombud
or retrenchment. JD Group recently
only customer. This approach is core to
for Long-term Insurance, the Ombud for
introduced funeral products, as well as
the Art
Short-term Insurance, the Ombud for
legal access products marketed via the
ultimate objective is to differentiate the
Financial Services Providers, as well as to
Blake outbound contact centre to the
Group from its competitors through the
the Department of Trade and Industry’s
Russells clientbase.
delivery of excellent service to customers.
Consumer Investigations Directorate,
however, each matter has been resolved
amicably.
Another ancillary product offering is the
Club subscription. Part of the Group’s
customer acquisition and retention
The Group has received four requests
strategy resides in the Club offering,
for access to information under the
whereby customers can become members
Promotion of Access to Information Act
for a nominal fee per month. In return,
and has made the necessary disclosure
they receive consistently high value in the
in each case. No material incident
benefits which more than compensate for
of non-compliance with regulations or
the outlay. These benefits include funeral
voluntary codes have been recorded that
cover, discounts, cash and product prizes,
gave rise to regulatory penalties, sanctions
as well as educational grants and lifestyle
or fines that have been imposed on the
enhancers.
Group for any contravention or noncompliance with statutory obligations.
Product range
Competitive shopping exercises are
carried out from time to time in order to
compare the Group’s product and price
offerings within the industry.
household furniture to a broad selection
of major home appliances, audio/visual
equipment and computer products.
These are complemented by a
comprehensive range of financial services
products. Over and above the
aforementioned, the Group conducts debt
recovery and telephone marketing via its
state-of-the-art contact centres.
Where appropriate, furniture sales across
the eight southern African furniture Chains
are financed through credit offerings to
customers in the form of a secured term
loan. Linked to the credit sales, product
Customer service –
Art of Service
The various Chains in the Group have
conducted individual mystery shopping
initiatives on an ad hoc basis using
external service providers. These
programmes range from short-term
investigations to establish service levels
in specific branches, to regular ongoing
monthly shop-outs to raise service delivery
and improve the in-store shopping
experience.
In addition, Group Merchandise carries out
ongoing competitive shopping exercises in
order to compare product and price
offerings within the industry.
insurance that covers the loss, theft or
damage to the merchandise sold on credit,
as well as credit life insurance, which
covers the insured’s debt in the case of
death, temporary or permanent disability
The first steps towards improved
communication with customers have been
taken through the Group’s contact centre
in Randburg. Each customer who enters
into a credit transaction with the Group
receives a “Welcome” follow-up call once
the customer has received delivery of the
purchased goods. The purpose of the call
is first and foremost to establish the
customers’ perception of the service
received. Secondly, assurance is obtained
that the customer understands the
The Group offers a wide spectrum of
products and services, ranging from
of Service initiative and the
Communication
financial and contractual elements and
obligations of the transaction. Thirdly, early
notice is gained of possible dissatisfaction,
which enables the Group to timeously
escalate complaints and queries for
specialist intervention. For protection of
the rights of both the customer and the
Group, all calls from the contact centres
are recorded. A specialist team of quality
assurers assesses a weekly sample of calls
to determine the level of service and
whether any further training is required.
In addition to the aforementioned and
various other Contact Centre initiatives, a
host of other channels are being utilised to
communicate with customers. General
business communication is conducted via
telephone and electronic channels from
head office and regional or local Chain
offices, as well as face-to-face
engagements between customers and
employees at store level, where credit
agreements and purchase documentation
The Group strives to communicate with
are concluded.
its customers in such a manner that each
customer feels as though he/she is the
Marketing communication channels focus
mainly on monthly catalogues, displaying
JD Group Annual Report 2010
75
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
merchandise ranges and special offers,
support to suppliers. The Group promotes
conditions. As a consequence the Group
event-driven pamphlets and in-store
the purchase of material from B-BBEE and
is able to provide more affordable and
display material. Existing customers are
SMME suppliers and enterprises. In respect
quality merchandise to customers by
also reached via their account statements,
of services such as safety and security,
virtue of its strong relationships with its
Club magazines and mobile channels.
cleaning and common-area infrastructure
suppliers. In anticipation of the implications
maintenance, the Group makes use of
that the Consumer Protection Act’s (CPA)
external contractors who source their
product-return regime will have, the
labour from South African citizens, with a
Merchandise department is in the process
focus on individuals with a previously
of negotiating more suitable product
disadvantage background. During new
guarantees and return terms with the
store developments, labour is sourced and
suppliers and manufacturers. Whilst the
used from the local geographical area.
Group has in selected instances acquired
National suppliers of store development
the right to sole distribution of certain
material, such as carpets, tiles and office
quality branded products within South
furniture, make use of locally-based
Africa, it is not involved in any price fixing
business to effect deliveries.
or other market practices that could be
For purposes of arrear collections, the
Group makes use of statement messages,
follow-up letters and personal visits by
collectors to facilitate rehabilitation.
Electronic-enabled customers also
have access to the Group’s website
(www.jdgroup.co.za), where a multitude of
Group information is hosted, including
Customer Care contact numbers for
facilitating the lodgement of customer
complaints.
The Group prides itself on the integrated
construed as being in breach of the
Competition Act or any related legislation.
Contractors and suppliers of
nature with which it engages with its
merchandise and products
supplier network thereby ensuring that
The Group’s policy to support locally-based
quality standards are maintained. Not only
Government and Regulators
suppliers is evidenced by the fact that 97%
has the Group strengthened its relationships
The Group engages frequently with the
of its approved suppliers are locally based,
with its suppliers of merchandise and
National Credit Regulator, the Registrar of
thereby promoting a positive indirect
services, it also assists them in becoming
Financial Services, the Johannesburg Stock
impact on the economy by supporting the
more concerned corporate citizens. Many of
Exchange, Strate, the South African
growth, development and wealth creation
the Group’s suppliers have already adopted
Revenue Services, the Master of the High
of locally-based businesses. Suppliers and
sustainability strategies and are limiting their
Court, the Registrar of Companies, the
contractors have not been subjected to
impact on the environment through
Registrar of Trademarks, the Wholesale and
formal human rights screening, however,
environmental-friendly approaches in their
Retail Sector Education Training Authority,
the Group has ongoing engagements with
production processes and product
the Department of Trade and Industries
suppliers and contractors, where its stance
provisioning practices. In this regard the
and the Deeds Office. The Group
against all forms of discrimination is
Group has implemented a screening
persistently and proactively meets its
conveyed, as well as its expectation that
questionnaire for suppliers and contractors
obligations in respect of legislative and
human rights should be upheld. The Group
that enquires about their use of
regulatory requirements and timeously
furthermore ensures that the appointment
environmental-friendly raw materials,
pays its licences and files the required
of suppliers and contractors is in
recycling of raw materials for the
submissions. Subject-matter experts
accordance with legislation and
manufacture of end products such as
representing the Group have taken part
encourages non-racial, crime-free working
carpets, tiles, office furniture, paint, etc,
in and driven industry initiatives to the
environments.
as well as their practices around the disposal
benefit of both government, regulators
of waste materials.
and the retail industry as a whole. Among
is monitored on an ongoing basis and
The Group is committed to fair trade with
others, government has this year received
where there is a need for assistance, the
its suppliers via service level agreements
R712 million as tax and other payments
Group’s Transformation department offers
(SLAs) that contain fair terms and
ensuing from the Group’s operations. The
Suppliers’ compliance to B-BBEE principles
76
JD Group Annual Report 2010
Group maintains good relationships with
Corporate social interaction and
The Group assisted these employees
Government and all Regulators and has
initiatives
to acquire vehicles at reduced prices,
built sustainable working relationships with
The Group continuously increases its
provided them with an opportunity to
continue their profession as debt
most of the aforementioned institutions.
involvement in the communities within
This stance and proactive approach assist
which it conducts business. Through the
in amicable resolution of any impasse that
implementation of its strategy, assisted
become independent entrepreneurs.
may arise, and the Group will continue to
by numerous corporate policies, processes
An amount of R1,1 million was
promote mutually beneficial relationships
and practices, the Group has inculcated
contributed to this project.
going forward. The Group’s dialogue with
a need among its employees to closely
The TIPA project is an agricultural
Government departments and Regulators
associate themselves with the Group’s
initiative with the aim of alleviating poverty,
occurs through prescribed compliance and
stakeholders and for the social upliftment
creating employment and empowering
regulatory filings, applications, renewals
of communities. The nine Chains within
communities. The Group has been
of licences and marks, letters, telephonic
the Group are individually accountable
involved in the project for a number of
conversations, business negotiations and
and responsible for engaging with local
years and has made significant financial
formal meetings, among others.
communities within which they trade and
contributions. It revolves around the
conduct business. However, for purposes
concept of the African Garden Market,
of community engagement optimisation,
part of the Food Security for Africa
these engagements are planned and
initiative presented in 2002 at the World
financed centrally at Group level.
Summit for Sustainable Development.
The newly incorporated insurance
companies were subjected to Regulatory
inspections during the year. No concerns
of a material nature were raised.
The Group is not aware of any material
penalties as a result of any legislative or
regulatory breach.
In addition to the Group’s Code of Ethics
and various related corporate policies, as
well as the Board Charter and the terms
of reference that have been adopted for
each of the Board committees, the Group
has adopted the following Codes and
Charters of note:
collectors and at the same time to
Projects are run in Diepsloot, Hazyview,
Corporate social investment and
Kokstad, King William’s Town and Durban.
socio-economic development
The Group contributed R2,2 million to this
The Group’s corporate social investment
project over the past year.
(CSI) and socio-economic development
(SED) strategy is managed within the
dimensions of enterprise development
projects, direct donations and deserving
‘sweat equity’ community initiatives.
A budget of R4 million was allocated
during 2010 for CSI activities and a further
➔ King III;
R5 million for enterprise development
➔ The National Debt Mediation
initiatives.
Direct donations
The Group’s direct donations policy is
focused on providing as many applicants
as possible with financial assistance to
address challenges pertaining to poverty
and community development, education,
crime, health, art and agriculture and is
steeply leaned towards disadvantaged
Association’s Code of Conduct for
During the year under review, the Group
children and the youth. The following
affiliated credit providers;
was involved in two major SED projects,
four are merely a few of the strong
➔ The Credit Providers Association’s
namely the JD ADRS Collectors’ initiative
relationships and bonds that the Group
Constitution for affiliated credit
and the Isaac Isaac/Techno-agricultural
has fostered with caring organisations:
providers;
Innovation for Poverty Alleviation (TIPA)
➔ The Consumer Goods Council of South
Africa’s Charter; and
➔ The Southern African Fraud Prevention
Service’s Code of Conduct for affiliated
credit providers.
project. The ADRS initiative was born out
of the operational requirements exercise
conducted to establish JDG Financial
Services and where collectors were
identified as affected employees.
➔ The Lerato Love home provides
accommodation and care for babies,
children and young adults, who have
generally been the victims of abuse,
abandonment and neglect and
orphaned due to HIV/Aids.
JD Group Annual Report 2010
77
Sustainability and stakeholder review (continued)
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
➔ The Mitzvah School is a registered
school and examination centre which
The Group has been classified as having
provides tutoring for disadvantaged
an overall medium environmental impact
students in their final year of schooling
because it is involved in “retailer business
and who have consistently produced
operations and financial services, not
pass rates in excess of 90% every year.
elsewhere classified”. In line with this
➔ St Enda’s Community Centre is a
classification, the Group’s efforts in
secondary school in Joubert Park with
sustaining the environment were mainly
whom the Group has held a proud and
focused on reducing its overall carbon
time-honoured association since
footprint by interventions through water
commencing this project in one of the
Group’s warehouses in 1985.
➔ Africa Community Trust provides the
township feeding scheme and clothing
for approximately 200 underprivileged
youth. The targeted youths include
those orphaned through HIV/Aids,
child-headed families and displaced
persons.
tariff increases, spread over a three-year
period, that will have a potential threefold
increase in energy costs in real terms.
This could increase the Group’s annual
electricity costs to an estimated
R200 million by 2012. In an effort to
minimise its exposure to these increases,
the Group has embarked on the following
four-pronged strategy:
➔ Ensure that the electricity consumption
and electricity consumption and savings,
charge is accurate/legitimate – to
recycling of paper products, reducing of
validate consumption, independent
greenhouse gas emissions, as well as
electrical metering systems, parallel
other interventions in the area of wildlife
to those being used by landlords/
conservation.
suppliers, are being installed in stores
and warehouses. In a trial run it has
Water consumption
The Group is acutely aware of the fact that
water is a scarce resource in South Africa
and has issued a number of internal
been ascertained that overcharging
by as much as 20% has occurred in
the past.
➔ Ensure that the correct rate per unit
consumed is charged – this is done by
In addition to the above, the Group’s
directives to its stores regarding water
computer retailing Chain, Incredible
usage. Push-type demand taps have
Connection, made 177 charity donations
been installed in all shops that have been
during the year totalling R195 500 in value,
renovated during the past two years.
comprising 63 personal computers,
This has not only resulted in reducing water
64 monitors and two notebooks, to name
wastage, but as a secondary benefit, has
but a few of the articles donated to the
also reduced the incidence of water damage
operational disciplines with regard to
needy.
as taps can no longer be left open absent-
energy savings such as not firing up
mindedly. Investigations are under way for
lighting, air-conditioning and computers
The Group’s socio-economic development
the possible use of grey-water tanks for
simultaneously, disconnecting geysers,
spend and donations are reflected below:
toilets, backed up by rainwater tanks. The
not using heaters and hot plates,
Group relies totally on municipal water
switching off non-essential lights and
supply and does not withdraw any water
appliances after trading hours, etc.
Category
Community development
Amount
R1 562 273
from the environment.
analysing the reports gleaned from the
independent metering exercise and
comparing data with approved rates
versus rates charged.
➔ Ensure that stores adhere to the basic
➔ Employing proven, cost-effective
energy-saving technology such as
Skills upliftment and
education
R847 000
Electricity consumption
Health (including disability)
R187 500
The Group’s total electricity consumption
During store renovations or when new
at its head office in Braamfontein
stores are established, energy-saving is
for the past financial year amounted to
high on the agenda. A rigorous approach
3 990 154 kW. During the year under
has been established, which entails the
review, the National Energy Regulator of
installation of 1 200 x 600 prismatic
South Africa (Nersa) approved electricity
three-lamp electronic ballast light fittings
Sports development
78
Environmental sustainability
R6 000
Arts and culture
R260 000
Other
R218 019
Total
R3 080 792
JD Group Annual Report 2010
fitting low wattage light fittings.
that has the potential of achieving savings
Gas emissions, fuel consumption
carbon footprint, fuel consumption and
on consumption of between 5% and 15%.
and other logistics-related
carbon emissions.
In addition, these light fittings produce a
interventions
lower ambient temperature which reduces
the risk of fire.
It is a Group strategic intent to centralise
Waste and recycling
its logistics operations across South Africa.
At the Group head office, an independent
The following energy-conservation and
In furthering this objective and to reduce
waste contractor is responsible for waste
efficiency improvements were effected at
its carbon footprint, the Group has
management. Waste is sorted by type on
the Group head office building during the
commenced with a programme to reduce
site and then taken off site and sold to
past years:
the number of warehouses by
specialist companies for recycling
➔ Upgraded the centralised air-
consolidating smaller warehouses into
purposes. The table below indicates the
centralised distribution centres (CDCs).
waste generated at the Group’s head
Improved warehouse-management
office for recycling during the past year.
conditioning system;
➔ Overhauled the electrical reticulation;
➔ Installed energy-efficient lighting
throughout the building;
➔ Installed timers and motion sensors
throughout the building, in the parkade
and in the basements to regulate lights;
➔ Reduced the number of lights in the
principles are envisaged to give rise
to more accurate and timeous deliveries of
goods to customer addresses, reducing
Code
Type of waste
HL
Paper, three colours
or less
739
Paper, more than
three colours
425
the number of redeliveries and in the
process also reducing carbon emissions
CO
and fuel consumption. As part of this
logistics initiative, the Group also
TI
Tin
CP
Clear plastic
braking, excess idling and speeding to
SP S
Coloured plastic
Following these actions, a report from an
ensure that the fleet’s exhaust emissions
K4
Cardboard boxes
independent electrical consultant was
are reduced. The tracking system also
obtained, indicating a 20% saving against
enables management to constantly
the 2007 baseline energy usage statistics.
monitor the routes driven by delivery
parkade
➔ upgraded the lifts to more electricalsufficient lifts.
An agreement has been concluded with
an external service provider who
specialises in power metering to
independently monitor/measure actual
electricity usage in all Hi-Fi Corporation
stores. Negotiations are under way to
roll-out this technology to all JDG Trading
properties. The appointment of a Group
Energy Manager is also being considered.
Future energy-efficient or renewable
energy-based initiatives to reduce energy
requirements include an investigation into
solar water heating to replace the heaters
in the boilers and an investigation into
the possible usage of hydro boilers in the
kitchens.
introduced a new vehicle-tracking system
to monitor driver behaviour such as harsh
crews to ensure that no excess kilometres
are driven. This has a further positive
effect on gas emissions and fuel
consumption. A newly introduced fleet
management system ensures tighter
all-round control on fleet vehicles and in
particular detects and monitors vehicles
with excessive fuel consumption.
In some instances, when Board and
committee meetings are held and
directors are not in close proximity, use is
being made of teleconference facilities.
During the past year, one of the directors
followed this approach twice as opposed
to flying in from the United Kingdom, thus
contributing to a reduction of the Group’s
kg
38
127
47
3 731
Paper towels
Total
167
5 274
In terms of a Group policy, all used
materials not earmarked for recycling are
disposed in an environmental friendly way
and usage of municipal disposal sites is
compulsory. Suppliers are encouraged to
use environmental friendly raw materials
in the production of their products.
Eco-friendly and wildlife initiatives
Management is not aware of any JD-owned
properties or leased properties that are in or
adjacent to protected areas. The Group
operation did not have any material negative
impact on the biodiversity environment and
JD is also not aware of any negative impact
on the environment by its material suppliers.
JD Group Annual Report 2010
79
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
Products are manufactured with materials in
Incredible Connection has recycled
Secondary and support processes are
accordance with ISO regulations and there is
121,7 tons of electronic waste (e-waste)
linked to downstream vendors
a constant drive for the introduction of more
during the past year in partnership with
ensuring that re-use and recycling
eco-friendly raw materials in manufacturing
an electronic recycle external specialist,
takes place with very little or no landfill
processes. Suppliers are encouraged to
an environmentally-responsible e-waste
at all. The recycler is also ISO 14001
subscribe to and become members of the
recycler of 18-years’ standing.
compliant and a certified BEE Level 1
Green Building Council of South Africa and to
develop ergonomically designed safe work
Contributor.
public use the e-waste bins located in
each of the Incredible Connection
Health and Safety
In constructing the CDCs mentioned
stores throughout the country to
The Group complies with relevant
above, eco-friendly designs and building
dispose of their used computer and
health and safety legislation and has
materials will be used wherever possible,
electronic components, such as old or
appointed health and safety
which is envisaged to have a positive
broken computers, monitors,
committees to manage and advise on
effect on the environment through, among
keyboards and other internal
the Group’s compliance with the
others:
computer and e-parts. The waste is
Occupational Health and Safety Act
➔ energy-saving lighting by the use of
then collected and transported to the
(OHASA) and the Compensation for
recycler’s processsing plant in
Occupation Injuries and Diseases Act.
Gauteng where it is weighed, offloaded
Altogether 8% of the total workforce is
and sorted into waste streams for
represented in formal joint
further processing. Mainstream waste
management and employee health
is manually dismantled, sorted into
and safety committees and have
controlled waste fractions and passed
received relevant training. The Health
spaces for its employees.
sky lights;
➔ recycling of roof run-off water by an
improved roof design;
➔ natural ventilation; and
➔ introducing indigenous plants in the
landscaping design.
through to the next level of
and Safety framework at the Group
A number of “green” elements have been
processing. Selected fractions of
head office comprises 17 certified first
introduced in the construction of the new
material containing aluminium, alloys
aiders and eight individuals who are
Incredible Connection Mega store in
of tin, zinc, copper, nickel or precious
still in training. There are also 11
Somerset West in line with the global
metals are shredded and these
certified fire and evacuation marshals
efforts to reduce the carbon footprint.
fractions are used in state-of-the-art
and seven who are not yet fully
Similar initiatives have also been
smelting plants or foundries to
certified. During the review period, the
introduced in recent renovations of
produce new alloys or pure metal.
Group experienced 189 work-related
Hi-Fi Corporation stores.
Well-documented and reliable
injuries in South Africa and 26 outside
JD Group, through its Incredible
processes, structured according to
South Africa. At the same time, 78
Connection brand, donated two state-of-
International Standards 9001, 14001
days were lost in the Group’s South
the-art night-vision goggles to the Dream
and OHASA 18001, are used in the
African operations due to work-related
Team, a group of field operatives who are
recycling process. The recycling
injuries, whilst 23 days were lost in the
tracking and combating rhino poaching
processes are benchmarked against
Group’s operations outside South
syndicates. The second-generation
processes worldwide to ensure that
Africa. The majority of the injuries
bi-ocular goggles are valued at R27 900
they are aligned with the latest
were of a minor nature. No fatalities
each and will give the Dream Team a
sustainable technological innovation
were recorded during the review
technical edge in combating poaching
and processes in the e-waste industry.
period.
efforts at night.
80
Customers and other members of the
JD Group Annual Report 2010
All offices, stores and warehouses
Group believes that the direct cost of
inventory from suppliers, which in turn
have adequate natural ventilation and
HIV/Aids fatalities cannot be calculated
creates jobs and opportunities for the
from time to time assurance is
accurately due to the inefficient
staff of such suppliers.
obtained that fully ventilated spray-
manner in which the statistics are
painting facilities exist in accordance
reported on in South Africa. No
with OHASA regulations in the
specific budget or education and
factories of the Group’s suppliers
training has been allocated to HIV/Aids
where painting is required in the
programmes within the Group, save
manufacturing process.
for donations and initiatives that
promote HIV/Aids training external to
HIV/Aids
At present, the Group’s HIV/Aids policy
is focused on the elimination of unfair
discrimination against employees who
live with HIV/Aids. Organised Labour
and employees of the Group are
involved in consultation processes to
formulate a formal HIV/Aids strategy
and policy for implementation. The
Group monitors the HIV/Aids
prevalence rates and has engaged an
external service provider to assist with
the formalisation of an alternative
approach in managing any associated
risks in respect of HIV/Aids
and to help with HIV/Aids
preparedness and contingency
planning.
The Group’s estimated prevalence
rates are as follows:
the Group and its healthcare service
providers. Voluntary counselling and
testing is available to employees
through the external healthcare
service providers, who also provide
support and counselling to affected
employees. Given the dispersed nature
of the Group’s operations, a condom
and/or femidom distribution
programme is not in place.
No additional benefits and support for
employees sick, dying or deceased
from Aids-related conditions are in
place. Full-time employees of the
Group are afforded an opportunity, as
a supplementary employment benefit,
to belong to one of a number of
healthcare plans that provide a range
of general healthcare and wellness
benefits to them and their qualifying
family members. The Group subsidises
➔ 2005 – 21,6%
the healthcare plans elected by
➔ 2009 – 14,8%
employees.
Awards received
During the year under review, entities
and subsidiaries in the Group have
received a number of prominent
awards, of which the following are the
most important:
➔ The Morkels furniture Chain has
won the annual Ask Africa Orange
Index Award as the leading South
African furniture retail brand for
customer satisfaction in 2010. The
Orange Index is a highly reputable
and prestigious consumer
satisfaction index in the retail
industry in South Africa.
In addition to Morkels, Joshua
Doore and Price ‘n Pride were also
voted amongst the top five
furniture retail brands in the Ask
Africa Orange Index Award.
➔ JD Financial Services has won the
Southern African Fraud Prevention
Services Platinum Award for active
participation and contribution to
fraud prevention in South Africa,
and Fayza Madav has won the
Southern African Fraud Prevention
Services Gold Merit Award for
excellent work done towards fraud
➔ 2015 – 13,5% (model extrapolated).
No separate identifiable record is kept
Indirect economic impacts
of HIV/Aids-associated costs and
The Group engages in activities in the
exposures for the Group. The
ordinary course of business that have
estimated costs will be determined by
an indirect impact on stakeholders,
the aforementioned preparedness and
which are typically not measured in
contingency planning programme.
monetary terms. An example of this
Notwithstanding these efforts, the
would include the sourcing of
prevention.
➔ Abra again, won Poland’s
Consumers’ Golden Laurel Award
for the value of its products and
services.
Abra won the ‘Dependable
Employer of the Year’ award.
JD Group Annual Report 2010
81
Sustainability and stakeholder review (continued)
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
Industry engagement and membership
The Group plays a role in shaping industry events through its participation in and membership of industry and professional bodies, of
which the following is merely a synopsis:
➔ Credit Providers Association;
➔ National Debt Mediation Association;
➔ Consumer Group Council of South Africa;
➔ Member of the Braamfontein Improvement District Forum;
➔ The Unilever Institute of Strategic Marketing;
➔ The Compliance Institute of South Africa;
➔ The Institute of Internal Auditors of South Africa;
➔ The Institute of Directors in South Africa;
➔ The Wholesale and Retail SETA;
➔ The Retailers Association of South Africa;
➔ The Association for Savings and Investments South Africa;
➔ The South African Insurance Association;
➔ The Ombuds for FAIS, for Long-term Insurance and for Short-term Insurance for Credit Information and for Financial Services
Providers;
➔ The Institute of Futures Research and the Bureau of Economic Research at Stellenbosch University;
➔ The Bureau of Market Research at Unisa;
➔ Econometrix; and
➔ The South African Institute of Race Relations.
Challenges in 2011 and beyond
The Group’s strategic targets have been addressed in the CEO’s report on page 20.
GRI index commitments overview
82
Sustainability
category
Sustainability JD Group
elements
commitment
Economic
Shareholders
➔ Delivery of the business and operating
model and its targets.
➔ Strategic projects have commenced and
benefits realisation remains in scope
and are discussed in the CEO’s report on
page 20.
Employees
➔ Continual investment in skills and
development.
➔ 32 884 training interventions.
(Some employees have been trained more
than once.)
JD Group Annual Report 2010
Progress on commitments for the period
under review
Sustainability
category
Sustainability JD Group
elements
commitment
Economic
(continued)
Customers
➔ Retention and acquisition of customers.
➔ Growing market share.
➔ Improved channels of communication.
➔ Conduct regular customer focus group
sessions.
➔ Customer education.
Progress on commitments for the period
under review
➔ Customer acquisition and retention
strategies are continually being refined.
➔ The Group’s strategy of organic and
non-organic market share and business
growth remains a strategic focus.
➔ Two large-scale contact centres operational.
➔ Independent customer focus groups
conduct research sessions for the Group.
➔ Ongoing informal customer credit education
is conducted through the Contact Centre.
Suppliers
➔ Supplier and procurement appointments.
➔ B-BBEE compliance audits/verification have
been conducted with all suppliers of
merchandise and services.
Organised
labour
➔ Retention and enhancement of the
➔ Annual wage and terms and conditions
agreements concluded.
Government
and regulators
relationships forged and fostered with
recognised trade unions.
➔ Successful operational requirements
exercise conducted across a number of
the Group’s divisions.
Fulfilment of obligations with regard to:
➔ Established a Compliance Committee.
➔ Compliance;
➔ Legislation; and
➔ Established a stand alone Risk Management
Function.
➔ Governance.
➔ Appointed a qualified Legal and Compliance
Officer.
➔ Conducted an assessment in respect of
King III.
➔ Conducted an assessment in respect of the
PIC’s Corporate Governance Investment
Code.
➔ Conducted an assessment of the Group’s
readiness for the envisaged implementation
of the 2008 Companies Act.
➔ Conducted an assessment of the Group’s
readiness for the envisaged implementation
of the Consumer Protection Act.
Communities
➔ Community engagement in the areas where
the Group conducts its business.
➔ Maintained and strengthened the existing
relationships with communities.
JD Group Annual Report 2010
83
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
Sustainability
category
Sustainability JD Group
elements
commitment
Environmental
Materials
➔ Paper management.
Progress on commitments for the period
under review
➔ Paper management operational changes
implemented to achieve reductions in paper
utilisation.
➔ Board and committee papers printed
back-to-back to save paper.
Energy
➔ Reduction of energy usage.
➔ Various operational changes have been
implemented to conserve energy utilisation.
Water
➔ Reduction of water usage.
➔ Various operational changes have been
implemented to manage water usage.
Biodiversity
➔ Awareness.
➔ Relationships are being sought with
associated authoritative bodies.
Emissions,
effluents and
waste
➔ Waste management and gas emissions.
➔ Various operational changes have been
implemented to reduce emissions and to
recycle waste.
➔ Where appropriate, directors from remote
destinations take part in meetings via
conference facilities, thereby reducing
air travel, fuel consumption and related
emissions.
Suppliers
➔ Reputational risk mitigation.
➔ Suppliers’ environmental stance and actions
are monitored constantly.
Merchandise
➔ Awareness and compliance.
➔ Manufacturing of products and
merchandise in accordance with acceptable
business practices and standards are
monitored.
Compliance
➔ Compliance with legislation and regulations.
➔ Established a Compliance Committee.
➔ Appointed a qualified Legal and Compliance
Officer.
➔ The Group has not received any material
regulatory fines.
Transport
➔ Fleet optimisation.
➔ The Group’s fleet is being reduced and
routing optimised to reduce both emissions
and fuel consumption.
➔ Where appropriate, directors from remote
destinations take part in meetings via
conference facilities, thereby reducing
air travel, fuel consumption and related
emissions.
84
JD Group Annual Report 2010
Sustainability
category
Sustainability JD Group
elements
commitment
Social
Employment
➔ Being an employer of choice.
➔ Annual review and upgrading of employee
practices, benefits and reward policies.
Labour
relations
➔ Solid relationship with Organised Labour.
➔ Negotiated agreements are in place and
strictly managed and adhered to.
Health and
safety
➔ Compliance with the Occupational Health
and Safety Act.
➔ Policy and procedures implemented in
accordance with the Act.
Progress on commitments for the period
under review
➔ Formed OHASA Committees and trained
members.
Training and
education
➔ Continual investment in employees’ skills
and development.
➔ 32 884 training interventions.
(Some employees are trained more
than once.)
Diversity and
opportunity
➔ Equal opportunity employer.
➔ Employment Equity (EE) ratio of middle
management increased to 73%.
➔ EE ratios at other levels receiving focused
attention.
Human rights
➔ Recognition.
➔ Ethical values and human dignity are upheld.
Communities
➔ Ongoing involvement.
➔ Community involvement is conducted by the
brands in the various communities within
which they trade.
Bribery and
corruption
➔ Full application of the Group’s Code of
Ethics.
➔ Policies and procedures are in place.
Products
➔ Quality and service.
➔ Customer education implemented in respect
of merchandise care and service conditions.
➔ Gift registers are maintained across all
departments in the Group.
➔ Where applicable, products conform to
prescribed standards.
Customer
service levels
➔ Differentiated shopping experience.
➔ Cascading of the Art of Service initiative
into the operations of the Group.
➔ Internal and external mechanisms exist and
are fully utilised to resolve consumer
complaints and queries.
➔ Customer service surveys are conducted
to measure the Group’s levels of service
delivery.
JD Group Annual Report 2010
85
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
Global Reporting Initiative Index
The Group’s Sustainability Report and review contains details regarding the respective aspects. This table provides specific reference as to
where in the report the performance indicators as per the GRI reference guidelines can be found.
GRI
ref
Page
ref
GRI indicator
JD Group status
1.1
Statement from senior decision maker on the
relevance and importance of sustainability to the
vision and strategy of the Group.
➔ S
ee the Executive Chairman’s statement in this
report.
16
1.2
Description of key impacts, risks and opportunities.
➔ Key risks and opportunities are covered in
various sections of the report, in particular the
Corporate Governance report.
115
Strategy
Organisational profile
2.1
Name of the reporting organisation.
➔ JD Group Limited.
2.2
Primary brands, products and/or services.
➔ The brands are outlined and explained in the
Operations review and overview.
3–5
➔ The product range is described in this
Sustainability Report under “Product Range”.
75
2.3
Operational structure of the organisation.
➔ The structure is depicted in the Operations
Inside back
cover
3, 105
review and overview.
2.4
Location of the organisation’s headquarters.
➔ JD House, 27 Stiemens Street, Braamfontein,
Johannesburg, South Africa.
Inside back
cover
2.5
Countries in which organisation’s operations are
located.
➔ South Africa, Botswana, Namibia, Swaziland,
Mauritius and Poland.
6, 12
2.6
Nature of ownership/legal form.
➔ The Group’s holding company is a public
company incorporated in South Africa and listed
on the Johannesburg Stock Exchange. It has
approximately 3 778 private and institutional
investors as shareholders.
2.7
Markets served.
➔ Predominantly the mass middle market.
2.8
Scale of reporting organisation.
➔ Scale details are expressed in various sections
of the report, in particular the financial
statements.
2.9
Significant changes during the reporting period.
➔ There were no significant changes in the
organisation’s profile.
n/a
2.10
Awards received during the reporting period.
➔ See the various risk-related and customer
service awards listed in this Sustainability
Report.
81
n/a = not applicable cna = currently not available
86
JD Group Annual Report 2010
Inside
back cover
74
126 – 208
GRI
ref
GRI indicator
Page
ref
JD Group status
Report scope and boundary
3.1
Reporting period.
➔ The 12 months ended 31 August 2010.
n/a
3.2
Date of most recent previous report.
➔ The 12 months ended 31 August 2009.
n/a
3.3
Reporting cycle.
➔ Annual and interim reports at 12 and six months
respectively.
n/a
3.4
Contact point for report.
➔ info@jdg.co.za
3.5
Process for defining report.
➔ The information contained in this report
complies with the requirements of the
Johannesburg Stock Exchange, the Companies
Act and King III. The Group also provides relevant
information of interest to its defined
stakeholders.
66, 100,
134
3.6
Boundary of report.
➔ The report provides information on all
operations, however, it should be noted that
with regard to stakeholder reporting, the focus is
mainly on its South African operations which
generate the bulk of total revenue.
193
3.7
Limitations on the scope or boundary of the report.
➔ The report is mainly South Africa focused, being
the material part of the business.
193
3.8
Reporting on joint ventures and other situations
affecting comparability.
➔ No significant impacts or effects recorded, other
than those noted in the Annual Financial
Statements.
n/a
3.9
Data measurement techniques and the bases for
calculations.
➔ The Group is IFRS compliant. The annual
financial statements have been prepared in
terms of AC 500.
132
3.10
Restatements of information provided in earlier
reports.
➔ Refer to note 1 of the Annual Financial
Statements regarding the fair values of
subsidiaries acquired.
161
3.11
Significant changes in the scope, boundary or
➔ None.
n/a
Inside back
cover
measurement methods applied.
3.12
Table identifying the location of the standard
disclosures in the report.
➔ This GRI index table.
3.13
External assurance of the report.
➔ None.
86
n/a
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
87
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
GRI
ref
GRI indicator
JD Group status
Governance structure of the organisation.
➔ JD Group complies with King III and full
disclosure of the governance structures is
provided in the Corporate Governance report.
Page
ref
Governance
4.1
107
➔ The macro governance framework is depicted
in the Corporate Governance report.
4.2
Independence of Chairman.
➔ The Chairman is subjectively considered
non-independent because of his executive
status. As recommended by King III and the JSE
Listings Requirements, the JD Group Board has
appointed a Lead Independent Non-Executive
Director to act in instances where the Chairman
may be deemed to be conflicted.
4.3
Number of Board members that are independent
and that are defined as non-executive.
➔ Six of the seven non-executive directors are
independent non-executive directors.
4.4
Mechanisms for shareholders to provide
recommendations.
➔ A number of mechanisms exist and are utilised
by shareholders for communicating with the
Group, such as questions at road shows,
shareholder interaction at AGMs, written
communication by institutional shareholders,
etc.
4.5
Linkage between executive compensation and the
achievement of objectives and organisation’s
performance.
➔ A portion of executive remuneration is incentive
based and linked to performance and varies
from executive to executive.
➔ The vesting of rights in respect of the share
incentive scheme is directly linked to preset
performance targets.
18, 19, 101
67
70,
199 – 200
4.6
Process of the highest governance body to ensure
conflicts of interest are avoided.
➔ The process of managing conflicts of interest is
settled in the JD Group Board, via the Board
Charter and Board agenda and applied
rigorously.
105
4.7
Process for determining the qualifications and
expertise of the Board.
➔ The JD Group Nominations Committee verifies all
directors’ formal qualifications and identifies
skills and expertise required to ensure a
balanced Board. This is verified by formal Board
performance assessments.
112
4.8
Mission statements, values, codes of conduct and
principles relevant to economic, environmental and
social performance.
➔ The Group’s vision, philosophy, values and code
of conduct are outlined in the introduction to
this annual report.
Inside
front cover
4.9
Procedures for overseeing the organisation’s
identification and management of economic,
environmental and social performance.
➔ The Group Audit committee has been mandated
to oversee the process of sustainability
reporting.
109
n/a = not applicable cna = currently not available
88
100 – 101
JD Group Annual Report 2010
GRI
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JD Group status
Governance (continued)
4.10
Processes for evaluating the highest governance
body’s performance, particularly with respect to
economic, environmental and social performance.
➔ The performance of the Board and its
committees is continually monitored by
analysts, the media and shareholders. The key
Board and Board committees have undertaken
performance self-assessments.
103
4.11
Precautionary approach.
➔ The Group conducts a risk/quality assessment
on new products before implementing them.
76
4.12
Economic, environmental and social charters.
➔ Economic, environmental and social charters
are not in place for the furniture and appliance
industry. Discussions are currently in process
with various stakeholders.
n/a
4.13
Industry and business association memberships.
➔ The Group subscribes to and holds
memberships with various associations as
stated in the Sustainability Report.
82
4.14
List of stakeholder groups.
➔ The Board has identified the stakeholders
with which it engages on a regular basis
with emphasis on shareholders, customers,
employees and communities.
67
4.15
Identification of major stakeholders.
➔ The identification of stakeholder groups has
67
been approved by the Board and is stated in
the Sustainability Report.
4.16
Stakeholder engagement.
➔ The Group makes use of various communication
mechanisms to share information and
obtain feedback from its stakeholders.
The communication channels are outlined
in the Sustainability Report.
67 – 77
4.17
Key topics and concerns that have been raised
through stakeholder engagement and how the
organisation has responded to those key topics
and concerns.
➔ Key topics are highlighted in the Sustainability
Report as well as the Corporate Governance
Report and relate to a corporate governance
issue raised at the AGM that was resolved.
110
Economic performance indicators
EC1
Direct economic value generated and distributed.
➔ Refer to the value added statement.
125
EC2
Financial implications and other risks and
opportunities for the organisation’s activities owing
to climate change.
➔ None.
n/a
EC3
Coverage of the organisation’s defined benefit plan
obligations.
➔ The Actuarial Report indicates a satisfactory
status.
183
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
89
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
GRI
ref
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JD Group status
Page
ref
Economic performance indicators (continued)
EC4
Significant financial assistance received from
government.
➔ None.
n/a
EC5
Entry level wage compared with local minimum
wage for significant locations of operation.
➔ All minimum wages are aligned and are in full
compliance with the “Area A” minimum wages
as per the Sectoral Determination for the
Wholesale and Retail Sector.
69
EC6
Policy and spending on locally based suppliers.
➔ 97% of suppliers for the southern African Chain’s
are locally based.
76
EC7
Hiring of senior employees from the community.
➔ The majority of employees are South African
citizens. All employees are hired to meet the
Group’s skills requirements, in accordance with
the Group’s Employment Equity goals.
67
EC8
Description of infrastructure investment and
services that provide public benefit.
➔ The Group has a corporate social investment
(CSI) strategy through which communities and
previously disadvantaged groups benefit. Details
are set out in the Sustainability Report.
77 – 78
EC9
The organisation’s significant and indirect economic
impacts.
➔ By the nature of the Group’s business activities
and its CSI strategy there are many indirect
economic benefactors. Refer to the Sustainability
Report.
n/a
cna
Environmental performance indicators
EN1
Materials used by weight or volume.
➔ Where available, details of materials used have
been provided.†
EN2
Percentage of materials used that are recycled
input materials.
➔ Where available, details of materials recycled
have been provided.†
79
EN3
Direct energy consumption by primary source.
➔ Where available, details of energy consumption
have been provided.†
78
EN4
Indirect energy consumption by primary source.
➔ As indicated in EN3.
78
EN5
Energy saved owing to conservation and efficiency
improvements.
➔ Where available, details of energy conservation
have been provided.†
†Mechanisms to enable the accurate measurement hereof will be enhanced over time.
n/a = not applicable cna = currently not available
90
JD Group Annual Report 2010
78 – 80
GRI
ref
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Page
ref
JD Group status
Environmental performance indicators (continued)
EN6
Initiatives to provide energy-efficient or renewable
energy-based products and services and reductions
in energy requirements.
➔ Where available, details of energy, efficiency,
renewable energy-based products and
reduction of energy requirements have been
provided.†
78 – 80
EN7
Initiatives to reduce indirect energy consumption
and reduction achieved.
➔ As indicated in EN6.
78 – 80
EN8
Total water withdrawal by source.
➔ Municipal water only.
n/a
EN9
Water sources significantly affected by water
withdrawal.
➔ None.
n/a
EN10
Percentage and total volume of water recycled or
re-used.
➔ Mechanisms to enable the accurate
measurement of water recycled or re-used will
be enhanced over time.†
cna
EN11
Location and size of land owned, leased or
managed that is in or adjacent to protected areas.
➔ No known sites.
cna
EN12
Description of significant biodiversity impacts
or activities on protected areas.
➔ Not applicable.
n/a
EN13
Habitats protected or restored.
➔ Not applicable.
n/a
EN14
Strategies, current actions and future plans for
managing impacts on biodiversity.
➔ Mechanisms to enable reporting on current
actions and future plans for managing impacts
on bio diversity will be enhanced over time.†
cna
EN15
Number of ICUN Red List species.
➔ Not applicable.
n/a
EN16
Greenhouse gas emissions.
➔ Where available, details of gas emissions have
been provided.†
79
EN17
Other relevant indirect greenhouse gas emissions
and reductions achieved.
➔ As indicated in EN16.
79
EN18
Initiatives to reduce greenhouse gas emissions and
reductions achieved.
➔ Where available, details of gas emission
reductions have been provided.†
79
➔ Project has commenced for plotting of all sites.
†Mechanisms to enable the accurate measurement hereof will be enhanced over time.
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
91
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
GRI
ref
GRI indicator
JD Group status
Page
ref
Environmental performance indicators (continued)
EN19
Emissions of ozone depleting substances by weight.
➔ Not applicable.
n/a
EN20
NO, SO and other significant air emissions by
weight.
➔ Not applicable.
n/a
EN21
Water discharges.
➔ Not applicable.
n/a
EN22
Weight of waste by type and disposal method.
➔ Where available, details of waste type and
disposal method have been provided.†
EN23
Significant spills.
➔ None.
n/a
EN24
Weight of transported waste deemed hazardous.
➔ Not applicable.
n/a
EN25
Identity, size, protected status and biodiversity value
of water bodies and related habitats significantly
affected by discharges to water and run off.
➔ Not applicable.
n/a
EN26
Initiatives to mitigate environmental impacts of
products and services.
➔ Mechanisms to enable accurate measurement
of environment impacts of products and
services will be enhanced over time.
cna
EN27
Percentage of products sold and their packaging
materials that are reclaimed.
➔ This is currently estimated to be at 30% of the
wrapping and packaging materials.†
n/a
EN28
Monetary, non-monetary value of significant fines
and sanctions.
➔ None.
n/a
EN29
Significant environmental impacts of transporting
products and other goods and materials used for
the organisation’s operations and the transporting
of members of the workforce.
➔ None other than those related to vehicles used
for the delivery of product.
79
EN30
Total environmental expenditure by type.
➔ Mechanisms to enable the accurate
measurement of environmental expenditure by
type will be enhanced over time.†
cna
†Mechanisms to enable the accurate measurement hereof will be enhanced over time.
n/a = not applicable cna = currently not available
92
JD Group Annual Report 2010
79
GRI
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JD Group status
Social performance indicators
Labour practices
LA1
LA2
Total workforce by contract type and region.
Total employee turnover by gender and region
(as a percentage of total turnover).
➔ Employees in RSA:
➔ Employees outside RSA:
1 362
➔ In South Africa
Female:
Male:
49,0%
44,4%
➔ Outside South Africa
Female:
Male:
LA3
Benefits provided to full-time employees that are
not provided to temporary or part-time employees.
18 680
68
68
4,1%
2,5%
69
➔ Retirement Fund benefits;
➔ Risk benefits;
➔ Medical Scheme benefits; and
➔ Vehicle allowance.
LA4
Percentage of employees covered by collective
bargaining agreements.
➔ 62% of employees are covered by collective
bargaining agreements.
74
LA5
Minimum notice period(s) regarding operational
changes, including whether it is specified in
collective agreements.
➔ 60 days as specified in the respective collective
bargaining agreements.
74
LA6
Percentage of total workforce represented in formal
joint management worker health and safety
committees that help monitor and advise on
occupational health and safety programmes.
➔ 8% of total workforce is represented in formal
joint management worker health and safety
committees that help monitor and advise on
occupational health and safety programmes.
80
LA7
Rates of injury, occupational diseases, lost days,
absenteeism and number of work related fatalities
by region.
➔ Days lost due to work-related injuries in the
last 12 months:
In South Africa:
78
Outside South Africa:
26
No work related fatalities were recorded.
80
LA8
Education, training, counselling, prevention and
risk-control programmes in place to assist
workforce members, their families, or community
members regarding serious diseases.
➔ Voluntary counselling and testing in respect of
HIV/Aids is available to employees through the
external healthcare service providers.
81
LA9
Health and safety topics covered in formal
agreements with trade unions.
➔ This topic is managed by joint-participating
structures, but not directly with trade unions
only.
81
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
93
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
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JD Group status
Page
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Labour practices (continued)
LA10
Average hours of training per year per employee by
employee category.
➔ As detailed in the Sustainability Report.
71
LA11
Programmes for skills management and lifelong
learning that support the continued employability
of employees and assist them in managing career
endings.
➔ Various as outlined in this Sustainability Report.
69 -– 71
LA12
Percentage of employees receiving regular
performance and career development reviews.
➔ 54% of employees are receiving regular
performance and career development reviews.
69
LA13
Composition of governance bodies and breakdown
of employees per category according to gender,
age group, minority group membership and other
indicators of diversity.
➔ The membership of the governance body for
Employment Equity and Training Committee
(EE&TC) has been detailed in the Sustainability
Report.
71
LA14
Ratio % of basic salary of men to women by region.
➔ Ratio in South Africa is 110,4%.
70
➔ Ratio outside South Africa is 98,2%
Human rights
HR1
Percentage and total number of significant
investment agreements that include human rights
clauses or that have undergone human rights
screening.
➔ Investment agreements have not undergone
human rights screening as yet.
cna
HR2
Percentage of significant suppliers and contractors
that have undergone screening on human rights
and actions taken.
➔ Suppliers and contractors have not undergone
human rights screening as yet.
cna
HR3
Total hours of employee training on policies and
procedures concerning aspects of human rights
that are relevant to operations, including the
percentage of employees trained.
➔ 1% of total employees were trained on policies
and procedures concerning aspects of human
rights that are relevant to operations.
73
HR4
Total number of incidents of discrimination and
actions taken.
➔ No incident of discrimination has been reported.
73
HR5
Operations identified in which the right to exercise
➔ No operations were identified within the Group
or its suppliers where freedom of association
and collective bargaining is at risk.
73
freedom of association and collective bargaining
may be at significant risk, and actions taken to
support these rights.
n/a = not applicable cna = currently not available
94
JD Group Annual Report 2010
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Human rights (continued)
HR6
Operations identified as having significant risk for
incidents of child labour and measures taken to
contribute to the elimination of child labour.
➔ No operations were identified within the Group
or its suppliers where there is a risk of child
labour.
73
HR7
Operations identified as having significant risk for
incidents of forced or compulsory labour, and
measures to contribute to the elimination of forced
or compulsory labour.
➔ No operations were identified within the Group
or its suppliers where there is a risk of forced
or compulsory labour.
73
HR8
Percentage of security personnel trained in the
organisation’s policies or procedures concerning
aspects of human rights that are relevant to
operations.
➔ The provision of security is outsourced.
HR9
Total number of incidents of violations involving
rights of indigenous people and actions taken.
➔ No incident of violations of rights of indigenous
people has been reported.
73
Nature, scope and effectiveness of any
programmes and practices that assess and manage
the impacts of operations on communities,
including entering, operating and exiting.
➔ Communication takes place prior to operations
74
SO2
Percentage and total number of business units
analysed for risk-related to corruption.
➔ Policies and procedures are in place to manage
risk, fraud and corruption across all operations
in the Group and effectiveness thereof is audited
by the Group’s Management Assurance function
as part of its audit coverage programme.
SO3
Percentage of employees trained in organisation’s
anti-corruption policies and procedures.
➔ 18,87% of employees received training in
anti-corruption and related policies and
procedures.
73
SO4
Actions taken in response to incidents of
corruption.
➔ Any corruption identified is addressed via the
disciplinary procedures and practices in a
consistent manner.
73
cna
Society
SO1
being opened within communities. Closing of
operations are discussed with Organised Labour
and employees. Details of such instances are
provided in the Sustainability Report.
73, 124
➔ The Group has a zero tolerance approach in
respect of corruption.
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
95
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
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Society (continued)
SO5
Public policy positions and participation in public
policy development and lobbying.
➔ None.
n/a
SO6
Total value of financial and in-kind contributions to
political parties, politicians and related institutions
by country.
➔ None.
n/a
SO7
Total number of legal actions for anti-competitive
behaviour, anti-trust and monopoly practices and
their outcomes.
➔ None.
76 – 77
SO8
Monetary value of significant fines and total
➔ None.
76 – 77
number of non-monetary sanctions for noncompliance with laws and regulations.
Product responsibility
PR1
Lifecycle stages in which health and safety impacts
of products and services are assessed for
improvement and percentage of significant
products and services categories subject to such
procedures.
➔ Processes are currently under way to build
these lifecycle studies.
PR2
Total number of incidents of non-compliance with
regulations and voluntary codes concerning health
and safety impacts of products.
➔ One incident reported and was amicably
resolved.
PR3
Type of product and service information required by
procedures and percentage of significant products
and services subject to such information
requirements.
➔ Product labelling is discussed and agreed with
suppliers.
PR4
Total number of incidents of non-compliance with
regulations and voluntary codes concerning
products, service info and labelling by type of
outcomes.
➔ O
ne. See PR2 for details.
PR5
Practices related to customer satisfaction, including
results of surveys measuring customer satisfaction.
➔ Various customer satisfaction surveys are
conducted across the Group. The details are
reported in the Sustainability Report.
n/a = not applicable cna = currently not available
96
JD Group Annual Report 2010
cna
74 – 75
76
74 – 75
10 – 11, 74
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Product responsibility (continued)
PR6
Programmes for adherence to laws, standards and
voluntary codes related to marketing
communications, including advertising, promotion
and sponsorship.
➔ The Group adheres to all laws relating to
marketing and communication.
77
PR7
Total number of incidents of non-compliance with
regulations and voluntary codes concerning
marketing communications, including advertising,
promotion and sponsorship by type of outcomes.
➔ No incident of non-compliance with regard to
marketing, advertising, promotions and
sponsorships were reported/recorded.
PR8
Total number of substantiated complaints regarding
breaches of customer privacy and losses of
customer data.
➔ The Group faced one complaint from a customer
regarding a breach of customer privacy. As there
was contributory negligence on the part of the
customer, an amicable financial settlement was
reached.
75
PR9
Monetary value of significant fines for noncompliance with laws and regulations concerning
the provision and use of products and services.
➔ None.
77
n/a
HIV/Aids reporting
1
Describe the organisation’s
HIV/Aids policy.
➔ The Group’s HIV/Aids policy is focused on the
elimination of unfair discrimination against
employees who live with HIV/Aids. Details are
reported in the Sustainability Report.
81
2
Describe the overall strategy for managing the
HIV/Aids risk.
➔ The Group monitors the HIV/Aids prevalence
rates and has also engaged an external service
provider to assist the Group to formalise an
approach for managing any associated risks.
81
3
Describe the extent of preparedness and
contingency planning in anticipation of expected
HIV/Aids impacts.
➔ The Group has, with the assistance of an
external service provider, embarked on
preparedness and contingency planning.
81
4
Describe how the organisation monitors progress.
➔ The Group has not embarked on the roll-out of
the project plan as yet.
n/a
n/a = not applicable cna = currently not available
JD Group Annual Report 2010
97
Sustainability and governance
Sustainability and stakeholder review (continued)
Sustainability and stakeholder review
Corporate governance
GRI
ref
GRI indicator
JD Group status
Page
ref
HIV/Aids reporting (continued)
5
Describe how the organisation involves
stakeholders in the formulation of HIV/Aids policy,
strategy and implementation.
➔ Organised Labour and other stakeholders,
including employees, are involved through
various consultation processes in the
formulation of its HIV/Aids strategy and policy
implementation.
81
6
Indicate current and projected future HIV/Aids
prevalence and incidence rates among relevant
populations.
➔ The Group’s estimated prevalence rates are as
follows:
2005 – 21,6%
2009 – 14,8%
2015 – 13,5% (model extrapolation).
81
7
Report current HIV/Aids-associated costs and
exposures to the organisation.
➔ No record has been kept of HIV/Aids-associated
costs and exposures.†
cna
8
Indicate total assumed future HIV/Aids-associated
costs and exposures.
➔ The estimated costs associated with HIV/Aids
will be determined by the preparedness and
contingency planning the Group embarked
upon. The direct cost of HIV/Aids fatalities for
the Group cannot be accurately calculated due
to the inefficient manner of reporting thereon in
South Africa.
cna
9
Describe the workplace and workplace-related
HIV/Aids programmes and interventions, and
the extent to which they maintain a workplace
environment respectful of human and legal rights.
➔ The Group supports and maintains a workplace
environment respectful of human rights and has
procedures in place to deal with any departure
from the prescribed human and legal rights
issues in the workplace.
81
10
Indicate total allocated budget dedicated to
HIV/Aids programmes per annum.
➔ No specific budget has been allocated to
HIV/Aids programmes.
11
Detail the organisation’s voluntary counselling and
testing programme.
➔ No voluntary internal counselling and testing
programmes are in place. The external
healthcare service providers provide such
a service.
†Mechanisms to enable the accurate measurement hereof will be enhanced over time.
n/a = not applicable cna = currently not available
98
JD Group Annual Report 2010
cna
81
GRI
ref
GRI indicator
Page
ref
JD Group status
HIV/Aids reporting (continued)
12
Describe other support and counselling
programmes and measures.
➔ Affected employees receive support and
counselling through their existing healthcare
service providers.
81
13
Describe the organisation’s
HIV/Aids education and training programmes.
➔ No specific HIV/Aids education and training
programme is currently in place.
81
14
Describe the organisation’s condom and femidom
distribution programme.
➔ No condom and femidom distribution
programme is in place due to the distributed
nature of the business.
81
15
Describe the organisation’s general healthcare and
wellness provision for employees and their families.
➔ Full-time employees are members of healthcare
plans that provide benefits to them and their
families. The Group subsidises healthcare plans
elected by employees.
16
Describe additional benefits for employees sick,
dying or deceased from HIV/Aids.
➔ No additional benefits are provided for
employees sick, dying or deceased from
Aids-related conditions.
69, 81
81
JD Group Annual Report 2010
99
Sustainability and governance
Corporate governance
Sustainability and stakeholder review
Corporate governance
Introduction and endorsement of
compromise the needs of future generations.
defined set of duties in order to prevent
sound corporate governance
The directors understand that nature, society
overlap of obligations and responsibilities
principles
and business are interconnected in complex
and to eliminate any possible conflict of
ways and direct the Group’s operations in
function. The CEO takes full responsibility
such a way that sustainable economic, social
and is accountable for the operations of
and environmental performance is assured.
the Group and provides leadership to the
This corporate governance statement sets
out the key governance principles and
practices of the Group.
The Board of directors (the Board) is
committed to and subscribes to the values
of good corporate governance contained
in the third King Report on Governance
for South Africa and the King Code of
Governance Principles (jointly King III)
The Group’s corporate governance
structures and practices are reviewed and
enhanced on an ongoing basis in response
to changes within and external to the Group.
Statement of compliance
King III and the Listings Requirements
The Board endorses the principles of
of the Johannesburg Stock Exchange
fairness, responsibility, transparency and
(the JSE Rules) require that listed
accountability advocated by King III. In all
Companies report on the extent to
dealings, the board applies a stakeholder-
which they have applied the principles
inclusivity approach, ensuring that the
incorporated in King III and to explain
interests of the Company are foremost in
instances of non-compliance. Thus,
their decisions, but subject always to
where the Group has not applied a specific
proper consideration of the legitimate
King III principle, a relevant disclosure has
interests and expectations of relevant
been made, supported by an explanation
stakeholders.
why a different practice has been adopted.
about leadership and the Board leads by
the effectiveness of governance practices.
The Chairman leads the Board, represents
the Board to shareholders, builds and
maintains shareholders’ trust and
which became effective on 1 March 2010.
Good corporate governance is essentially
executive team. He is also accountable for
Integrated sustainability report
confidence and facilitates constructive
relations between executive and nonexecutive directors. As a consequence,
there exists no uncertainty between the
two individuals as to their respective
terrain of operations.
Executive Chairman and bestpractice board
The Board has appointed David Sussman,
founder of the Group, as its Chairman.
Whilst the Chairman is not an independent
non-executive director as prescribed by
the JSE and recommended by King III, the
Board is of the view that his appointment
example in espousing high ethical values,
In a committed effort to further enhance
based on sound moral duties. It conducts
the transparency of its disclosures, the
the enterprise with integrity and in
Company has produced its integrated
compliance with best practices, while taking
sustainability report in accordance with
cognisance of the value systems of the
the Global Reporting Initiative’s (GRI) G3
countries in which the Group operates. As
guidelines. Where sensible, the reporting
the key decision-makers and leaders of the
on sustainability issues has been
organisation, the directors recognise that
integrated with the financial reporting.
social transformation is a business
is in the best interest of the Group and
does not negatively affect the Board’s
independence, risk-mitigating ability or
objectivity. In this regard the Board relies
on world-wide research findings which are
inconclusive as to the value of the
independent-chairman model. To date
empirical proof is lacking that links higher
earnings, higher share prices, enhanced
imperative that gives rise to greater
Chairman and Chief Executive
opportunities, efficiencies and benefits for
Officer
both the company and its stakeholders. The
The role of the Chairman is separate from
transparency, as a direct consequence
Board appreciates the importance of being a
that of the Chief Executive Officer (CEO).
of the independent-chairman model.
responsible corporate citizen and therefore
Their clearly delineated roles and functions
The failure in recent years of well-known
does not make decisions based only on the
are formalised and set out in the Board
corporate institutions who were led by
needs of the present which may
Charter. Each has a very specific and
non-executive chairmen, clearly disputes
100
JD Group Annual Report 2010
corporate governance oversight, risk
mitigation or financial disclosure
the assertion that the presence of an
governance practices in the domestic and
primary responsibilities, the Board
independent chairman per se adds a
international business environments. The
reviewed and gave strategic direction,
risk-mitigating value to a board or
non-executive directors bring balance and
monitored performance against plans and
promotes an independent view that
valuable insights to all board deliberations.
budgets, assessed the levels of
encourages a greater level of interrogation
As a consequence, the board does not
compliance with relevant legislation,
in the decision-making process. These
believe that there is any lack of
considered and revised governance
qualities can equally well be brought to
independence, objectivity or experience
structures, reviewed competitor activity
the board by an executive chairman who
at board level, and recommends that
and compared performance with best
has an independent-mindedness about
shareholders continue to support the
practice, locally and internationally.
him. These attributes and traits, coupled
current board and Executive Chairman
with business acumen and immeasurable
as leader of the Board.
Composition and structure
At the date of this annual report, the Board
retail expertise and experience, are the
characteristics of the current serving
Lead Independent Non-Executive
comprised 13 directors of whom seven are
Executive Chairman and are more
Director
non-executive directors. One of the non-
highly-valued by shareholders than
perceived independence.
As a further safeguard, the Board
appointed Vusi Khanyile as Lead
Of more importance than an independent
Independent Non-Executive Director to
chairman, is to have a balanced and
act in instances where the Chairman may
ethical Board. Governance experts have
be conflicted or where his independence
found the presence of certain common
is deemed to be impaired.
elements in a best-practice board.
Among others, these include sensible and
ethical leadership, an optimal board
JD Group Board
executive directors is not independent. 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, Dr Len Konar, Maureen Lock,
Martin Shaw, Günter Steffens and Jacques
Schindehütte to be independent nonexecutive directors, while Ivan Levy is
Balance and power
regarded as not independent. The
with integrity who are independent of
The Group is headed by an effective
non-executive directors have no fixed term
character, but who will solicit external
unitary Board that both leads and controls
of office. Only Ivan Levy amongst the
advice when necessary. Elite boards
the Group. There is an appropriate balance
non-executive directors holds
conducts regular introspection and from
of power and authority on the Board, such
directorships and an executive position in
time to time holds non-executive
that no one individual has unfettered
an entity with which the Group has
meetings. The Group’s Board has been
powers of decision-making and no one
commercial relationships. The Board has
benchmarked against these characteristics
individual or block of individuals,
considered this relationship and does not
and the results confirm that the Group
dominates the Board’s deliberations or its
believe that it compromises the director’s
has a best-of-breed board. In addition,
decisions. In this way, the full spectrum of
fiduciary disposition. Also, the outside
the Group is in the fortunate position that
shareowner interests are protected,
interests of the non-executive directors
a number of its non-executive directors
including minority rights. The Board has
are not so demanding that it negatively
have constant exposure to international
reserved a range of aspects of material
affects the time and attention that they
boardroom practices and at least one
importance for its own consideration and
devote to the Group and its affairs.
operates on the forefront of international
decision-making. These are, amongst
The executive representation on the board
corporate governance best practice.
others, set out in the Board charter, the
comprises Richard Chauke, Dr Henk Greeff,
As such the Board regularly receives best
Company’s articles and the Group’s
Ian Thompson and Bennie van Rooy, as
advice on a timely basis that enables it to
delegation of authority framework. During
well as David Sussman and Grattan Kirk,
remain ahead of the evolution of corporate
the review period, and as part of its
the Executive Chairman and Chief
composition, strong-minded individuals
JD Group Annual Report 2010
101
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
Executive Officer respectively. All of the
None of the Board members has actual or
and obligations from a King III, JSE and
executive directors have entered into
potential political connections or exposure.
legal perspective. Specific development
employment contracts with JDG Trading
The diagrams below provide a graphic
needs (if any) are also addressed.
(Proprietary) Limited with a one-year or
reflection of the board structure as at the
shorter notice period from either party.
date of this annual report.
No director has an employment contract
with the Group exceeding three years.
Some of the executive directors serve on
company boards external to the Group,
however, none of these has a negative
impact on their executive duties or
available time and where there are
conflicts of interest, these are declared
and the director recused from relevant
decision-making.
In terms of the Company’s articles of
Succession planning and induction
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 JD Group Nomination committee.
The succession planning approach and
director appointment process are
discussed in more detail (refer to
Nominations committee on page 112).
association, one third of the directors are
subject to retirement (and re-election) at
each annual general meeting. In addition
King III requires that one third of the
non-executive directors should rotate
annually. In terms of these requirement,
Messrs Sussman and Khanyile, as well as
Drs Greeff and Konar retire by rotation
and, being eligible, have made themselves
During the year under review, Gerald Völkel
Suffice to state that the main objective at
available for re-election at the forthcoming
and Mervyn King resigned from the Board
all times is to establish and maintain the
annual general meeting (AGM). The Board
and all board committees, whilst Bennie
most appropriate, balanced and ethical
found the performance and attendance of
van Rooy was appointed as the Financial
Board that has all the essential elements
the afore-mentioned directors satisfactory.
Director of the Group. As a result of the
of a best-practice board. The Group’s
The independence of the non-executive
afore-mentioned, and for an interim
induction programme is aimed at
directors was assessed and in each case
introducing new directors to key aspects
their independence was found to be
period, from 1 July 2010 to 10 November
2010, when Jacques Schindehütte was
appointed as an independent nonexecutive director, the board was
non-compliant with King III in that the
number of non-executive directors were
not in the majority. (Please refer to the
Directors’ Report on page 136 for more
details around the resignation and
appointment dates of directors.)
102
Rotation
JD Group Annual Report 2010
of the business and providing them with
insights as to their rights and obligations. It
does not follow a “one-size-fits-all”
curriculum, as the needs of inexperienced
directors are vastly different from those of
seasoned directors. As a consequence, the
programme is customised in accordance
untainted. As a consequence, the Board
recommended all four directors for
re-appointment. In addition, all casual
vacancy appointments of directors
between two AGMs are subject to
confirmation by shareholders at the first
with the specific needs of each individual
subsequent AGM following their
director. Generally, new directors are
appointment. As a result, shareholders are
introduced to the various key business
requested to confirm the appointment of
operations, the overall strategy, their rights
Messrs Van Rooy and Schindehütte.
In addition, a rigorous review has taken
exercise will be addressed in the year
questions. Both the directors and the
place of the independence and
ahead. Going forward, the Board’s
members of Board committees are
performance of Dr Konar and Messrs
performance will be assessed annually
supplied with comprehensive and accurate
Sussman, Shaw and Levy and Mrs Lock,
and every third year the services of an
information that enables them to properly
all of whom have been in office for more
external expert will be solicited to verify
discharge their responsibilities. Agendas
than nine years. Having regard to the
the self-assessment findings and to
and the content of Board and committee
safeguards implemented to mitigate
provide independent assurance.
papers, as well as the board’s and
against the deemed subjectiveness of
the Executive Chairman (appointment of a
Lead Independent Non-executive Director),
committees’ information needs, are
Meetings, agendas and information
needs
the Board is satisfied that the
All directors have the requisite knowledge
independence of each of the afore-
and experience to sensibly execute their
mentioned directors is above reproach
duties and all participate actively in the
and that they bring indispensable
proceedings at Board meetings. Non-
experience and wisdom to the Board’s
executive directors contribute an
decision-making process. As such, it is
unfettered and impartial view on matters
recommended that they continue to serve
considered by the Board and enjoy
as directors.
significant influence in deliberations at
The biographical details for each of the
directors are set out on pages 18 and 19
of this annual report.
meetings. The Board meets four times per
year and more frequently if circumstances
dictate. Meetings are conducted in
accordance with formal and structured
Board and committee performance
agendas. The Chairman sets the agenda
evaluations
for each meeting in consultation with the
At the date of this annual report, all
directors and Board committee members
are in the process of conducting
performance assessments via
comprehensively benchmarked best-ofbreed questionnaires, to evaluate the
performance of the Board and of the main
board committees. It includes an
assessment of the performance of the
various committee chairmen, and a
separate assessment of the performance
Chief Executive Officer and the Company
Secretary and ensures that all substantive
regularly reviewed for effectiveness and
relevance. All directors have unrestricted
access to relevant Group information.
Non-executive directors have access to
management and from time to time meet
separately with management without the
executive directors being present.
In terms of the Board charter, and the
terms of reference of each Board
committee, all directors and committee
members are entitled, at the Group’s
expense, and by following a proper
prescribed procedure, to seek independent
professional advice to assist them in
executing their duties in a prudent manner.
No director has sought such advice at the
expense of the Company during the year.
matters that require the Board’s attention
During the year, Johan Kok, Phillip Kruger
are included on the agenda. All directors
and Andrew Murray, all Executive
are afforded the opportunity to add
Committee (Exco) members, were
matters to the agenda and the non-
regularly invited to attend Board meetings
executive directors ensure that the
to provide expert perspectives on key
Chairman promotes proper deliberation
critical aspects of certain business
of all key strategic issues at meetings,
operations. However, notwithstanding this
including the governance of IT risk and
arrangement, there remains a clear
sustainability matters.
division between the responsibilities of
the Board and management.
of the Board chairman, as well as a
To facilitate the decision-making process
rigorous test to confirm each non-
at board level, board papers are circulated
The Board has identified its key
executive director’s independence,
to the directors well in advance of
stakeholders (see page 67 of the
whether or not that director has been
meetings to allow enough time for
Sustainability Report) and encourages
in office longer than nine years. Any
directors to properly scrutinise the content
shareholders to attend annual general
shortcomings identified by the evaluation
thereof and formulate challenging
meetings.
JD Group Annual Report 2010
103
Corporate governance (continued)
Sustainability and governance
Sustainability and stakeholder review
Corporate governance
Meeting attendance
The Board met formally five times during the review period. One meeting being a special meeting on 5 October 2009 where a strategic
decision was taken on the procurement of an IT system. The attendance statistics for the 2010 financial year are reflected in the
combined attendance table below.
JD Group board, committees and annual general meeting attendance register
Number and date
of meetings
held
AGM (1)
Board (5)
Audit (3)
Risk (4)
Remuneration (5)
Nominations
03/02/2010
05/10/2009
11/11/2009
03/02/2010
12/05/2010
27/07/2010
11/11/2009
03/02/2010
12/05/2010
11/11/2009
03/02/2010
12/05/2010
27/07/2010
09/09/2009
11/11/2009
20/11/2009
03/02/2010
23/02/2010
No meetings were
held during the
review period
ID Sussman
1
5
AG Kirk
1
5
4
HP Greeff
1
5
3/4©
KR Chauke
1
5
4
ID Thompson
1
5
4
D Konar
1
5
Directors
MJ Shaw
1
5
G Steffens
1
5
G Völkel
MJ King****
4/5$
n/a
3
4
5
n/a
5
n/a
4
5
VP Khanyile
BJ van Rooy
3/4@
5
M Lock
IS Levy
3
1
4/5&
n/a
2/5®
1
0/1*
2/4®
2/4#
3/5
3/5**
2/3**
1/5***
Key:
Director is not a member of this forum.
*
**
***
****
104
Director absent from 3 February 2010 AGM due to re-scheduling of original meeting date and director’s unavailability on rescheduled date.
Director absent from 11 November 2009 Board and Audit Committee meetings due to re-scheduling of original meeting date and director’s unavailability on rescheduled date.
Director absent from all Remuneration Committee meetings, save for 23 February 2010 meeting.
Director resigned with effect from 1 July 2010 and therefore not entitled or required to attend the 27 July 2010 Board meeting.
&
Director absent from 12 May 2010 Board meeting due to delayed commencement time of meeting and illness.
®
Director appointed on 1 May 2010 and maintained a 100% attendance record since date of appointment.
#
Director resigned on 30 April 2010 and maintained a 100% attendance record to date of resignation.
©
Director appointed to Risk Committee on 3 February 2010 and maintained a 100% attendance record since date of appointment.
@
Director absent from 27 July 2010 Risk Committee meeting.
$
Director absent from 23 February 2010 Remuneration Committee meeting.
JD Group Annual Report 2010
Code of Conduct and legal
Committee closely monitors the Group’s
or indirectly, in JD Group shares (including
compliance
compliance with applicable legislation
share options and rights) on the basis of
and regulations in a pro-active manner.
unpublished price sensitive information
The Group has an appropriate compliance
regarding the business or affairs of the
framework in place and is fully compliant
Group. The Group twice annually defines
with all material provisions of applicable
closed periods, which are adhered to strictly.
laws and regulations.
As a general rule, closed periods commence
Ethics
The Group is committed to the highest
ethical standards of business conduct.
The Board has adopted a Code of Conduct
(Code of Ethics) that stipulates the ethical
standards applicable and the expected
behaviour of each employee and director
about 45 days prior to the interim and
Interests in contracts
year-end results’ reporting dates, and ends
The Company Secretary maintains a
once the results have been disclosed to the
register of all Board members’ interests,
market. Closed periods are also observed
which register is annually inspected by the
prior to corporate actions as required by the
external auditors. Interests are declared at
JSE Rules. The Board charter contains a
the commencement of each Board
dealing code that regulates dealings in the
meeting, and also when a conflict arises
Group’s shares (and share options and
during board deliberations. All declarations
rights). Executives and directors have to
Amongst others, each department
of conflicts are recorded in the minutes.
obtain written approval from the Group
maintains a gift register wherein all gifts
The directors annually provide a written
Chairman (amongst others) prior to dealing
from suppliers, service providers and
declaration to the external auditors,
in any Group securities. Records of all
customers are entered for record and
clarifying any related-party transaction.
transactions and approvals in respect of
auditing purposes. No gift in value
Such transactions are declared in the
executives and directors are kept by the
greater than R300 may be accepted.
annual report. No director is allowed to
Secretariat and all directors’ dealings are
The behaviour of all role players in
vote on any matter in which he or she
timeously declared on SENS. The movement
respect of this Code is monitored on an
may have an interest. During the year
in directors’ shareholding is reported at each
ongoing basis and the directors believe
ended 31 August 2010, none of the
board meeting and annually disclosed in the
that a high standard of ethics has been
directors had a significant interest in any
annual report. To the best of the board’s
achieved. Where there is non-compliance
contract or arrangement entered into by
knowledge, none of the Group’s directors or
with the Code, the appropriate discipline
the Company or its subsidiaries, other than
their associates have been involved in
is enforced with consistency to serve as
as disclosed in note 27 to the annual
insider trading.
a measure to prevent recurrence.
financial statements on page 185.
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.
Powers of authority and mandate
Legal compliance
Insider trading, closed periods and
A Legal and Compliance function and a
securities trading code
Compliance Committee were established
No affected employee or director (or their
defined lines of responsibility and
during the review period. The Compliance
associates) of the Group may deal, directly
delegation of authority from the board to
framework
An organisational structure with clearly
JD Group Annual Report 2010
105
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
the Chains, corporate service departments
governance and compliance related
He has carried out his statutory duties
and subsidiaries, is in place and presented
documents and directives that have been
and has diligently and on a regular basis
on page 107. The directors have identified
issued by the Group.
kept the Board abreast of key changes in
risks, laws and the environment, as well
in the Board Charter and via the Group’s
Fiduciary duties
as informed them of other developments
matters which are required to be brought
All directors are aware of their duty to act
that may in future affect the Group’s
to it for decision, thus ensuring that it
in the best interest of the company on
operations.
maintains full and effective control over
whose board they serve and the holding
key strategic, financial, organisational,
company respects this fiduciary principle
Business model and strategic
governance and compliance issues.
in respect of its directors serving in
business goals
Procedures for seeking and obtaining
representative capacities on subsidiary
The new business model, implemented
approval for major transactions and
and other boards.
during the previous review period,
signing authorities and mandates the
organisational changes are set out in the
106
provides a framework for the strategic
Group’s levels of authority framework.
Company Secretary
direction of the Group. The model has
This document, which amongst others
The board is assisted by a competent,
stabilised and the first fruits have been
also contains the Group’s bank signing
suitably qualified Company Secretary with
harvested by the Financial Services
mandates, has been updated by the
adequate experience, who is not a director
division, which succeeded in drastically
JD Group Risk Management Committee
of the company and who has been
reducing debtors’ cost. Details of the
during the review period and subsequently
empowered to properly fulfil his duties.
model and the Group’s corporate
endorsed by the board.
Whilst providing the Board collectively,
objectives are set out on page 3.
All divisions have adopted the framework
and each director individually, where
The Board closely monitors strategy
and the Boards of all operating
needed, with guidance on the discharge
achievement and is intensely aware of
subsidiaries have adopted signing
of their duties, the Company Secretary
the changing dynamics of the industry and
authorities and mandates materially similar
maintains an arms-length relationship with
to the Group’s authorities and mandates,
the Board. Amongst others, he advises
but customised for their unique set of
the Board on appropriate procedures for
business circumstances. Similarly, and to
the management of meetings and ensures
the extent that it does not conflict with any
that a prudent corporate governance
such similar document approved by the
framework is being maintained throughout
individual company’s Board, all subsidiaries
the organisation. He assists with the
and divisions in the Group have adopted
evaluation of the Board and board
the corporate policies, instructions,
committees, as well as with the
directives, rules, codes, mandates, terms
appointment of new directors, and
of references, charters and other
facilitates their induction into the Group.
JD Group Annual Report 2010
the economy to ensure that the business
model is adapted timeously to benefit
from changing circumstances. During
August 2010, executive management
formally reviewed and rejuvenated the
Group’s strategic intent for the medium
term, which plan has subsequently been
endorsed by the board.
Key operating entities
Details of the operations of the individual business entities and corporate divisions are provided on pages 4 and 5. A diagrammatic
representation of the entities to which delegations have been made, is reflected below:
JD Group Board
Board
Committees
JDG Trading
Board
Management
Committees
Employee
Benefit Funds
Audit
Subsidiaries (some with
independent board
committees of their own)
JD Group
Exco
Alexander Forbes
Retirement Fund
Remuneration
Blake & Associates
Internal Risk
Management
JD Group Defined Benefit
Pension Fund
Nominations
Maravedi Group
Traditional Retail
Exco
SACCAWU Provident Fund
Risk Management
JDG Micro Life
Incredible Connection
Exco
Other across-border funds
JDG Micro Insurance
Hi-Fi Corporation
Exco
Abra
Financial
Services
Exco
Other subsidiaries
JDG Insurance
Exco
Other
Committees
JD Group Annual Report 2010
107
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
The governance structure in place at the
rehabilitation, are supported by
Group Audit Committee, the Group
key operating entities are discussed below.
sophisticated customer relationship
Risk Management Committee, the
management software using in-house
Group Remuneration Committee and
business intelligence. Blake has operations
the Group Nominations Committee, all of
The Traditional Retail (TR) division operates
in South Africa, Namibia, Botswana,
which have defined terms of reference in
out of 949 stores under eight brands or
Mauritius and has a worldwide customer
place. In addition to the afore-mentioned,
Chains, namely Barnetts, Bradlows,
base.
ad hoc subcommittees are created from
Traditional Retail and Cash Retail
time to time to assist with specific subject
Joshua Doore, Morkels, Electric Express,
Price ‘n Pride and Russells across South
Financial Services and JDG Insurance
matters, such as reviewing the results for
Africa. Supreme operates in Botswana,
The Financial Services (FS) division
announcement in the media or reviewing
whilst Bradlows also has a presence at
provides a centralised credit and debt-
reports for publication in the annual report.
two venues in Swaziland.
management service to the Group from
The Cash Retail (CR) division operates
from 34 Hi-Fi Corporation stores, while
its Contact Centre in Randburg,
Johannesburg and Durban.
The majority of the members, and in
certain instances all of the members,
of each subcommittee are independent
Incredible Connection serves its customers
JDG Insurance provides of long- and
non-executive directors. The Board has the
from 58 stores in South Africa. Both Chains
short-term insurance offerings to
power at any time to remove a delinquent
also have a presence in Botswana and
customers through the Group’s
director from the Board in accordance
Namibia. Abra, the Group’s furniture
infrastructure and store network
with the provisions of the company’s
retailer in Poland, has expanded its
throughout South Africa, as well as in
memorandum of incorporation, the
operations to 74 operating stores and
Botswana, Swaziland and in Namibia.
Companies Act and, in the instance of
one e-shop.
New Business Development
The New Business Development division
comprises Maravedi, a micro-lender and
debt recovery operation, as well as Blake
& Associates, a provider of contact centre
solutions.
Whilst Maravedi has established two of its
own branded stores in Johannesburg and
Cape Town, most of its distribution
Services departments
appointment. Based on the premise that
There are 12 corporate service
subcommittee members are first and
departments that support the business
foremost directors of the Group,
units, namely Finance, Human Resources,
a director’s membership on the
Internal and Forensic Audit, Risk
subcommittee will automatically and
Management, Information Technology
immediately terminate when his or her
and Communications (IT), Legal and
directorship is terminated so as to fall on
Compliance, Logistics and Fleet,
the same date as the termination of the
Merchandise and Marketing, Property
directorship. Each committee has a clear
Services, Secretariat, Strategy and the
mandate and operates in accordance with
Transformation department.
its own specific written terms of reference
capacity originates from agents.
Maravedi currently offers short-term
non-executive directors, their letter of
that has been adopted by the relevant
Board committees
committee and approved by the Group
While the Board remains accountable
board. Committee meetings are conducted
and responsible for the performance
in accordance with formal and structured
Blake is a provider of premier contact
and affairs of the Group, four permanent
agendas, ensuring that pertinent matters
centre solutions. Processes, including
subcommittees have been appointed
are receiving proper attention. Agendas
client acquisition, customer service,
to assist the board in discharging its
and the content of committee papers are
business process integration and
duties and obligations, namely the
regularly reviewed for effectiveness and
unsecured loans, consumer finance and
card-based revolving credit products.
108
JD Group Annual Report 2010
relevance and members have an
Mervyn resigned from the Board and also
of engagement and their remuneration
opportunity at each meeting to add
as chairman of the committee. The Board
for the audit engagement, monitored
matters to the agenda.
appointed Martin Shaw, an accomplished
and reported on the independence of
The terms of reference of each Board
chartered accountant and former
the external auditor, reviewed the
committee specifies that all members are
managing partner in an international
non-audit services policy and approved
entitled, in accordance with a prescribed
auditing firm, to take over as chairman
the contracts for the rendering of
procedure and at the Group’s expense,
of the committee, whilst Günter Steffens,
non-audit services, obtained feedback
to seek independent professional advice
a risk specialist and chairman of the Risk
on possible reportable irregularities and
about the affairs of the Group in relation
Management committee, was appointed
reviewed the external auditors’ report
to the execution of their duties. Whilst the
as the third independent non-executive
to the Audit Committee and
minutes of subcommittee meetings are
member of the committee. The committee
management’s responses thereto;
not included in the board papers, they are
members jointly as a collective body are
freely available to the directors and
subject-matter specialists in the fields of
summarised by the chairmen of each
finance, risk, audit, compliance, banking
subcommittee in a report at each board
and corporate governance, and clearly
meeting, which report is either in writing
have sufficient qualifications, skills and
or verbal, as dictated by circumstances.
experience to fulfil their obligations.
Notwithstanding their extensive knowledge
Audit committee
The Audit Committee forms an integral
component of the Group’s risk
management process. The committee has
a dual reporting-role. It reports internally to
base and skills-set, whenever necessary,
the committee obtains advice from
specialists in other fields of expertise to
assist it in carrying out its duties.
addition, it reports to shareholders on the
extent to which it carried out its statutory
oversight duties in respect of the external
auditors, the appropriateness of the
financial statements, the accounting
practices as well as the effectiveness of
internal financial controls and the integrity
of the Sustainability Report.
Internal Audit function (IAF), approved
the internal audit plan and obtained
confirmation that an independent
quality review of the IAF’s operations is
scheduled for 2012;
➔ considered all factors and risks that
may impact on the integrity of the
Integrated Sustainability Report,
ensured that the sustainability aspects
disclosed are reliable and do not
Duties
conflict with the financial information,
At its meeting in November 2010, the
recommended the report to the board
committee reported on the extent to
for onward submission to shareholders
which it had carried out its duties as set
and, given that the Group’s reporting on
out in King III, the Companies Act, the
integrated sustainability aspects is not
committee’s terms of reference and the
yet mature, recommended not to
committee’s annual plan. As an overview
engage an external service provider to
only, and not to be seen as an exhaustive
provide independent assurance;
the Board on its statutory duties as well as
other duties assigned to it by the Board. In
➔ considered the effectiveness of the
list, the committee:
➔ reviewed the quality and effectiveness
➔ ensured that the combined assurance
model has addressed the significant
of the external audit process,
risks facing the Group, monitored the
Composition and membership
considered the auditors’ rotation cycle
effectiveness of compliance, regulatory
Up to 1 July 2010, the Audit Committee
and nominated the external auditor for
and legal governance, monitored the
comprised of three members, namely
appointment, ensured that the
effective application of the Code of
Mervyn King (chairman), Len Konar and
appointment of auditors complied with
Conduct (ethics), reviewed and
Martin Shaw, all being independent
the provisions of all relevant legislation,
updated the committee’s terms of
non-executive directors. On this date,
approved the external auditors’ terms
reference, considered corporate
JD Group Annual Report 2010
109
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
governance developments and in
spending on audit and audit-related
non-executive director Maureen Lock
particular ensured that the principles of
services. The actual spending is reviewed
and Exco members Andrew Murray and
King III are embedded within the Group;
annually by the committee. No material
Johan Kok. The external auditors, as well
weakness in financial controls was
as Pieter Pienaar and Morné van Wyk,
principles, policies and the accounting
identified which resulted in actual financial
respectively the chief risk officer (CRO) and
practices adopted in preparation of the
loss or fraud. The Audit Committee has
the chief audit executive (CAE), also attend
financial statements and the going
assessed the expertise of both the Group
all Audit Committee meetings and they
concern status of the Company;
Financial Director (FD) and the Finance
have unrestricted access to the chairman
department and is satisfied that both have
of the Audit Committee.
appropriate expertise, skills and
The chairman of the committee meets
experience to enable them to fulfil their
with the CAE and the external auditors at
obligations. The committee was not
least once a year without management
involved in the performance assessment
being present and, less than one month
of the chief audit executive (CAE), as this
before disclosure of the year-end financial
is considered a tasks that could be carried
results, meets with the external auditors to
inclusion in the JD Group annual report;
out more effectively by the CAE’s direct
discuss the financial statements and the
and
line management.
findings from their audit. As a result of the
➔ reviewed and commented on the
➔ reviewed the interim report and related
results announcements and other
price-sensitive disclosures, considered
and approved the Group’s consolidated
Annual Financial Statements for the
year ended 31 August 2010, as well as
the text of the various reports for
➔ secured feedback from the
As evidenced by the afore-mentioned, the
subsidiaries’ independent audit
committee has addressed all its oversight
committees.
responsibilities in respect of sustainability
The Audit Committee’s detailed report to
the Board, for onward submission to
shareholders, regarding the fulfilment of
its obligations is presented on page 138
of this annual report. The committee has
developed a non-audit services policy.
Three categories of non-audit services
reporting, internal financial controls,
financial accounting controls, financial and
fraud, as well as IT risks as they relate to
financial reporting. It was consequently
concluded that the committee had
appropriately fulfilled its obligations.
Meetings and attendance
fact that the Company had moved the
date of its AGM in February 2010, the then
chairman was unable to attend the
shareholders’ meeting, however,
Martin Shaw, who was mandated to act
in his stead, addressed shareholders’
questions at the meeting. The committee
met formally three times during the review
period. The attendance statistics are
reflected in the combined attendance
table on page 104.
have been identified. Certain types of
services by the Group’s external auditors
are prohibited altogether (category “A”),
invitation to attend the committee’s
Remuneration Committee
proceedings. As a consequence, and
Remuneration objective and policy
even though he is not a member of the
The Remuneration Committee’s (RemCom)
committee, the Chairman of the board,
main responsibility is to assist the board
ahead. Services which do not fall into
together with executive directors Richard
in setting and administering the Group’s
either of these categories (category “C”)
Chauke, Henk Greeff, Grattan Kirk, Ian
remuneration philosophy and to review
are subject to specific pre-approval. A
Thompson and Bennie van Rooy, attend
and approve the remuneration and
report on the latter is presented at each
all meetings, as does the non-executive
employment terms of directors and senior
committee meeting. As a general rule, the
directors, Ivan Levy and Günter Steffens.
group executives. RemCom’s primary
Group’s spending on non-audit services
Other individuals who attend from time
remuneration objective is to ensure that
from the external auditors may not exceed
to time include the independent
directors and executives are remunerated
whilst others (category “B”) are deemed
not to impair auditor independence and
are regarded as pre-approved for the year
110
All directors of the Board have an open
JD Group Annual Report 2010
fairly and responsibly so as to ensure that
with the Executive Chairman, based on
the Board committees and their members.
their services are retained and that their
benchmarked remuneration information
It approved widely-benchmarked
interests are aligned with the interests of
from the Group’s peers and the wider
self-assessment questionnaires as the tool
shareholders. The RemCom recommended
industry. These fees are fixed for the year
for performance evaluation in the 2010
to the Board the company’s policy of
ahead and are approved via a special
calendar year. Independent external
remuneration, which will be presented to
resolution of shareholders at the AGM.
assessments will be carried out every
shareholders for a non-binding advisory
The fees comprise both a base fee and
vote at the annual general meeting (AGM).
an attendance fee per meeting, but do
The remuneration policy is aligned with the
not include any share-based or other
strategy of the company and promotes
performance-linked incentives that
individual performance. It aims to attract,
encourages a short-term focus of Group
retain and motivate talented executives
performance. At the date of this report,
and is benchmarked to remuneration
only one non-executive director, namely
levels, both within and outside the Group.
Ivan Levy, is the beneficiary of share
It addresses key principles such as base
options, which were granted to him in
pay and bonuses, employee contracts,
2001 and 2005. The Group has made a
severance and retirement benefits, as well
comprehensive disclosure of the
as guiding principles relating to share-
remuneration of each individual director
based and other long-term incentive
on page 141 to 144, including ex-gratia
schemes. In finding the optimum
payments, but did not disclose the
remuneration approach, RemCom takes
remuneration of its three most highly-paid
result of the resignation of Mervyn King.
advice from external remuneration
officers as it does not regard this to be in
The third member of the committee is Ivan
specialists as and when required. Within
the best interest of the Company or the
Levy, a non-independent non-executive
the boundaries of the policy, remuneration
affected staff members. The maximum
director. The Group Chairman, and in some
for executives consists of an all-inclusive
expected potential dilution as a result of
instances the Group CEO and the Group
total cost-to-company fixed element,
incentive awards is shown on page 164,
FD, attend meetings by invitation, but
a variable element and a share-based
whilst details of the share-incentive
recuse themselves in situations where
incentive. The fixed element of
schemes are reported on pages 196 to
a conflict of interest arises or when the
remuneration is reviewed annually.
200. Any remuneration being paid above
chairman of the committee believes there
The annual variable element of reward is
the median is justified by the shortage of
is sufficient justification to exclude them
awarded as an incentive to executives to
appropriately qualified and experience
from a meeting or from a discussion of
achieve predetermined financial targets.
skilled talent required to drive business
a particular agenda item, such as when
The performance-related elements of
execution in the Group, by extraordinary
remuneration constitute a substantial
performance and for purposes of
portion of the total remuneration package
retention.
of executive directors in order to ensure
third year.
Composition and membership
The RemCom comprises three members of
whom two are independent non-executive
directors and one a non-executive director
who is not independent. Len Konar
replaced Martin Shaw on 1 July as the
independent non-executive chairman of
the committee. Whilst Martin Shaw
became the chairman of the Audit
Committee, he retained his RemCom
membership. These changes were as a
their remuneration is determined.
Meetings and attendance
The Remuneration Committee met five
above-ordinary performance linked to
Performance assessment
achievement of strategic goals. RemCom
The RemCom also establishes the
attendance statistics are reflected in the
sets the forward-looking remuneration of
processes for the review of the
combined attendance table on page 104.
the non-executive directors in consultation
performance of the Board, the directors,
times during the financial year. The
JD Group Annual Report 2010
111
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
Nominations committee
Meetings and attendance
Composition and membership
The committee meets only when there is
The committee’s main responsibility is to
drive succession planning and to establish
processes and criteria for the identification
of suitable candidates for appointment to
the Board. When assessing board
succession, and upon identifying any
shortcomings in Board composition, it
makes recommendations to the Board for
enhancing the Board’s combined skills-set
a need to consider new board candidates.
a need arose to reconstruct the board and
CRO has access to and interacts regularly
this gave rise to a meeting, however, this
with executive management, the Audit
meeting was not convened in the financial
Committee, the Risk Management
year which forms part of the review
Committee and the Board. Risks are
period.
prioritised, ranked and rated through the
BarnOwl technology platform in order to
Risk Management Committee
candidates and advises the Board on the
accountability
directors. Directors are appointed foremost
on the basis of skill, acumen and
experience to ensure the widest possible
positive impact on the activities of the
Group, however, being a board that
operates in a unique South African milieu,
selection criteria also include
demographical disposition, diversity and
relevant legislation, whilst transformation
requirements also play a role in
The Risk Management Committee
is responsible for monitoring risk
management in the Group, whilst the
board retains overall accountability for
risk in general. The Risk Management
Committee is a stand-alone subcommittee
of the board. The purpose of the
committee is to assist the board in
carrying out its risk responsibilities and to
ensure that there are processes in place
enabling complete, timely, relevant and
accurate risk disclosure.
determining the most appropriate board
composition. In co-operation with the
Chairman of the Board and the CEO, the
committee also considers members’ terms
in office, as well as the need for balancing
continuity with fresh perspectives.
tolerance levels. Key risks are in a process
of being quantified, where practical. The
Risk strategy, responsibilities and
able to discharge the responsibilities of
monitors that risks taken are within the
Following the resignation of Mervyn King,
or experience. It screens potential
appointment of individuals who are best
the levels of risk tolerance annually and
focus management’s responses and
mitigating interventions. A systematic,
documented, formal assessment of risks
affecting the various income streams of
the Group, the critical dependencies of the
business, sustainability and the interests
and expectations of legitimate
stakeholders, is conducted on an ongoing
basis, while mechanisms exist to increase
the probability of anticipating
unpredictable, unexpected or unusual
risks. Detailed reports and risk registers
are reviewed and presented quarterly to
both the internal Risk Management
Committee and this committee, whilst
Executive Management receives monthly
The Board has delegated to management
feedback on a range of risk issues via the
the responsibility for implementing and
JDG Trading Exco agenda. Key risks are
executing the board’s risk strategy by
reported to the Audit Committee and
means of risk management plans, systems
where necessary, escalated to the board.
and processes.
As a summary only, and not to be seen as
The Chief Risk Officer (CRO) has developed
an exhaustive list, the committee reviews
Composition and membership
a risk management plan and policy which
adequacy of systems and controls, interest
The Nominations Committee comprises
were communicated throughout the
rate and liquidity risks, market risk,
three non-executive directors, two of
Group. He drives the risk methodology and
legislative risk, corporate governance and
whom are independent. The chairman is
processes in the Group and ensures that
reputation risks, credit risk, exchange rate
Ivan Levy and the independent non-
an appropriate risk control framework is
exposure, investment risk, insurable losses,
executive members are Len Konar and
maintained and that risk is integrated into
as well as insurance risks, business
Martin Shaw. Mervyn King resigned during
the day-to-day activities of the Group.
continuity risk and financial risk. As
the review period.
The committee expressed an opinion on
recommended by King III, the committee
112
JD Group Annual Report 2010
also monitors that an effective IT internal
and Bennie van Rooy, who became a
control framework exists, that the IT
member upon the resignation of Gerald
ensuring ongoing Group performance
strategy is integrated and aligned with the
Völkel. The Exco representatives are Phillip
against approved business plans,
Kruger and the Group Chief Information
budgets and strategic targets;
Group’s strategy and business processes,
and that IT risks are addressed
appropriately in conjunction with the
Chief Information Officer (CIO), who is a
member of the committee. The Group has
not taken any undue risk in the pursuit of
Officer (CIO), Andrew Murray. Internal
Audit and Risk Management are
represented by Morné van Wyk (the CAE)
and Pieter Pienaar (the CRO) respectively.
A delegation from the independent
external auditors also attends, while
reward and has suffered no material loss
subject-matter experts, certain
during the review period as a result of any
divisional CEs and other individuals
unusual or undue risk taken. Given the
who can add value on a specific subject,
afore-mentioned processes and measures,
attend from time to time by invitation.
the Risk Management Committee is of the
view, and has given assurance to the
board, that risk is managed and controlled
prudently and effectively throughout the
Group. In addition, the Chief Audit
Meetings and attendance
The committee met four times during the
financial year. The attendance statistics are
reflected in the combined attendance
table on page 104.
Executive (CAE) has provided the Audit
➔ serve as a governance mechanism by
➔ prioritise the allocation of capital and
other resources; and
➔ manage management succession
planning and to identify, develop and
advance future leaders in the Group.
The Board of JDGT consists of the six
executive directors of JD Group and eight
senior executives, Pamela Barletta, David
Hirsch, Phillip Kruger, Komani Mfuni,
Andrew Murray, Arie Neven, Guy Pearce
and Johan Kok. Meetings are chaired by
Grattan Kirk, the Group CEO. Bennie
van Rooy was appointed to this Board
with effect from 1 January 2010 and
Gerald Völkel resigned as a director on
30 April 2010.
Committee with assurance that nothing
Other supporting governance
Three formal meetings have been held
material has come to his attention that
structures and management
during the 2010 financial year. Additional
would indicate that the framework of
committees
ad hoc meetings are held when
circumstances dictate. Between two Board
internal controls is inadequate.
Composition and membership
Günter Steffens, an independent
non-executive director, is the chairman
of the Risk Management Committee,
which comprises a mix of independent
non-executive directors, executive
directors, Exco members and the heads
of the Internal Audit and the Risk
JDG Trading Board
meetings, key business decisions requiring
JDG Trading (Pty) Limited (JDGT) is the
formal approval by the Board are taken by
wholly-owned South African trading
way of written resolutions, signed by all
company of the Group. This Board
directors. This methodology facilitates the
manages and monitors the operations
prompt conclusion of day-to-day business
of the Company. The directors of this
imperatives and prevents unnecessary
Board are individually and jointly
delays.
mandated, empowered and held
accountable, amongst others, to:
➔ manage and monitor the business and
Management functions. Len Konar and
affairs of the Group by establishing best
Martin Shaw are the independent
management and operating practices;
non-executive directors, while the
JDGT Executive Committee (Exco)
Exco is the CEO’s committee and it is an
exact reflection of the JDG Trading Board
as regards membership and composition.
➔ implement the strategies and key
executive directors are Richard Chauke,
policies determined by the Group
Grattan Kirk, Henk Greeff, Ian Thompson
Board;
JD Group Annual Report 2010
113
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
The purpose of the committee is to:
Internal Risk Management Committee
inherent impact and then the likelihood of
➔ translate Group Board strategic
(IRMC)
occurrence. The control environment
The IRMC is a subcommittee of and
ensure, through ongoing monitoring,
reports to the Group Risk Management
the successful implementation of the
Committee and indirectly to the JDG
top risks are ranked and all of the
strategic plan;
Trading Board. The purpose of the
afore-mentioned are reported to the Group
committee is to identify and review the
Risk Management Committee. In this
risks presented by the Group’s local and
manner the significant and major risks
offshore operations and by the corporate
facing the Group are monitored, as well as
service departments from an internal
the effectiveness of the various
Group perspective. An internal risk plan
management corrective actions aimed at
and approach has been developed, which
mitigating these risks. The risks are
has been informed by the Group’s strategy.
updated regularly to take account of
The afore-mentioned provides guidance as
changing market, economic, political,
to how an effective governance, risk
environmental, legislative and other
planning, sustainability issues,
management and internal control
conditions and changes in the business
transformation progress, strategic project
framework should be maintained.
environment. The majority of inherent risks
developments and other Group issues.
The committee reviews issues of strategy,
remain constant, but new risks arise from
It also facilitates the formulation and
risk, performance, sustainability and
time to time and the impact these may
monitoring of Group policies and
compliance and monitors that governance
have on business operations are assessed
procedures. Meetings are held on a
and ethics are integrated with risk
on an ongoing basis. Risk is not only
monthly basis.
management. The committee also
viewed from a negative perspective. The
considers the adequacy of insurance cover
review process also identifies areas of
Management committees
(including self insurance) in conjunction
opportunity, such as where effective risk
Specific responsibilities have been
with experts from the insurance industry,
management can become a competitive
delegated to various management
all risks not covered by insurance, as well
advantage. In order to provide enhanced
committees. Among others, these include
as business continuity management and
independent risk-assurance going forward,
the Internal Risk Management Committee
disaster recovery planning. Risks and key
the Risk Management function
(IRMC), the Traditional Retail Exco, the
issues are identified and monitored on an
transformed its structures, processes and
Incredible Connection Exco, the Hi-Fi
ongoing basis through the planning
procedures so as to provide an enterprise-
Corporation Exco, the Financial Services
process and close involvement by
wide risk management service. The
Exco, the JDG Insurance Exco,
executive management in the Group’s
committee’s members comprise Richard
the Maravedi Exco, the Blake Exco
operations. Risk information, indicating all
Chauke (chairman) and Pieter Pienaar.
and the Abra Exco, as well as other
risks identified on a residual level above
Other Exco members and Corporate
departmental and certain subject-matter
the risk appetite, as well as the mitigating
Service department executives attend the
or topic-specific.
controls and/or action plans, are reported.
meeting to provide risk-related feedback
These risks are then evaluated by the
from their relevant operational areas or
IRMC, using the BarnOwl risk management
service departments. The IRMC met four
application to record the degree of
times during the review period.
➔ monitor Group performance in
accordance with the strategic plan; and
➔ address any item considered crucial for
business success.
Through its comprehensive agenda, Exco
monitors strategic business goals,
day-to-day operations-related challenges,
performance reviews, risk, compliance,
governance and IT matters, succession
114
relevant to this risk is evaluated and a
direction into a strategic plan and
JD Group Annual Report 2010
score is assigned to the residual risk. The
The IRMC confirmed that the Group has not taken any undue risk in the pursuit of reward and has suffered no material losses during the
review period as a result of any unusual or undue risk taken. The major risks as at the financial year-end date that could potentially
prevent the Group from achieving its strategic objectives are as follows:
Group risk
Mitigation of the risk
Customer centricity
➔ Embrace the Art
customers.
Quality of service delivery
of Service initiative to improve service delivery to both internal and external
➔ Constantly monitor market behaviour, changing demographics, customer buying patterns,
competitor activity and customer indebtedness in order to ensure customer satisfaction.
Sustainable growth
Non-achievement of the
return on capital employed
targets, expense vs income
growth management, nonachievement of top line
sales, limited revenue
streams
Credit risk, credit granting
and collections
➔ Ensure adequate financial performance of the Group without compromising prudent accounting
standards, policies and levels of provisioning.
➔ Maximise existing income and revenue streams, identify alternative income streams, expand the
Group’s footprint and maximise retention of the customer base, by providing the customer with
excellent service and the appropriate mix of physical and financial service products at the right
place at the right time.
➔ Establish efficient cost structures and monitor expenses against budget.
➔ Constantly monitor financial performance and implement corrective measures where necessary.
➔ Ensure that the ability to collect the debtors’ book is constantly improved through enhanced
processes, technology and the optimisation of procedures.
➔ Ensure credit granting rules are maintained and updated in order that the Group acquires credit risk
appropriate to its credit risk appetite.
➔ Constantly monitor the performance of the debtors’ book and timeously implement corrective
measures where necessary.
➔ Ensure that sufficient provisions are raised for receivables that are unlikely to be recovered.
Building and optimising
people capacity
➔ Maintain appropriate succession planning, especially for key positions, taking cognisance of
employment equity.
Optimised technology
enablement
➔ Ensure that the Group has appropriate IT structures in place that facilitate integration across
business divisions.
Dependency on external
service providers,
implementation of SAP and
other projects, disaster
recovery and business
continuity
Transformation
B-BBEE compliance with
targets
➔ Reduce dependence on external service providers.
➔ Ensure that IT-specific disaster recovery (DR) and business continuity (BC) processes are addressed
via the Group’s enterprise-wide DR and BC programme.
➔ Further enhance the Group’s disaster recovery and business continuity capabilities.
➔ 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.
➔ Ensure and monitor that all aspects of B-BBEE are embraced for long-term sustainability, growth
and profitability of the Group.
➔ Ensure that an ownership transaction is concluded at the appropriate time.
Sustainability
Compliance with new
legislation
➔ Ensure the Group remains compliant with the laws and regulations that govern the environment in
which the Group operates.
➔ Continuously review Group policies and procedures to ensure compliance is established and
monitor adherence to policies.
➔ Ensure that customers are made aware of their rights and obligations and that compliance with
procedures has taken place.
➔ Engage with stakeholders and the community and ensure that the Group maintains its corporate
citizen and inclusive approach towards integrated sustainability.
JD Group Annual Report 2010
115
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
Traditional Retail Exco
Incredible Connection and Hi-Fi
have open invitations to attend the IC Retail
The purpose of the committee is to
Corporation Excos
Exco meetings.
translate, plan and implement Group
The purpose of these two committees is
The Hi-Fi Corporation (Hi-Fi) Executive
strategy in the Traditional Retail Chain
to translate, plan and implement Group
committee comprises Allan Herman
businesses and to monitor progress
strategy for the Cash Retail chain
(CE and chairman), Debbie Teles, Mark Wood,
thereon, to ensure compliance with
businesses and to monitor progress
Neil McLean, Jonathan Bromley,
policies and to manage attainment of
thereon, to ensure compliance with policies
Piwe Makaula, Victor da Silva, and
business goals and agreed performance
and to manage attainment of business
Grattan Kirk (Group CEO). Senior JDG Trading
milestones. It also attends to other
goals and agreed performance milestones.
executives have open invitations to attend
important aspects that may impact on
It also attends to other important aspects
the Hi-Fi Retail Exco.
the Traditional Retail businesses in general.
that may impact on the Cash Retail
Discussion points on the committee’s
businesses in general. Discussion points
Financial Services Exco and sub-
agendas include operational business
on the committees’ agendas include
committees
goals (and their link with Group strategic
operational business goals (and their link
The Financial Services (FS) division is
business goals), business performance
with Group strategic business goals),
managed by the FS Executive Committee
measurements, receivables and inventory
business performance measurements,
(FS Exco) with supporting governance
management, performance, people
inventory management, performance,
structures in the form of the FS Change
development, performance of suppliers
people development, performance of
Committee, the Credit Risk Committee and
in terms of service level agreements,
suppliers in terms of service level
various departmental management
research and development trends
agreements, research and development
committees that ensure complete alignment
internally and externally, compliance with
trends internally and externally and
of all FS divisional strategies and initiatives.
operational policies and progress reviews
compliance with operational policies and
on divisional projects. Meetings are held
progress reviews on divisional projects.
on a quarterly basis.
Each Exco member is expected through
The committee membership comprises
Arie Neven (chairman), Colin Bresler,
Johan Coetsee, Toy de Klerk, Julian Hanmer,
David Hirsch, Pat Kimmince, Johan Kok
(chairman for an interim period during
2010), Mike Roberts, Anthony Smith,
Matthew van der Walt, George Annandale,
Linda Sithole and Len Rundle. Other
contracted KPAs to participate not only as
a functional head, but as a business leader
and contributor to the strategic well being
of the business and to raise or question
any business related issue, review or
report, with the sole objective of business
improvement. Meetings are held on a
monthly basis.
➔ The main purpose of the FS Exco is to
translate, plan and implement Group
strategy in the Financial Services
business environment and to monitor
progress thereon, to ensure compliance
with credit policies and to manage
attainment of collection goals and other
agreed performance milestones. It also
attends to other important aspects that
may impact on the FS businesses in
general.The FS Exco is chaired by
executives, including the Chief Audit
The Incredible Connection (IC) Executive
Philip Kruger, the FS chief executive.
Executive, Morné van Wyk, the Chief
committee comprises Dave Miller (CE and
Permanent members include Grattan Kirk,
Risk Officer, Pieter Pienaar, the Group
chairman), Stefan Marnewick, Sean Nelson,
Arie Neven, Bennie van Rooy, Clyde Briell,
Financial Director, Bennie van Rooy,
Deanne Nicolau, George Honiball (resigned
Johan Claassen, Barry Dell, Francois
Gerrie van Niekerk and the Financial
July 2010), Roger Wood (resigned January
Grobler, Jeanine Naude-Terblanche, Corrie
Services CE, Philip Kruger, have an open
2010), Victor da Silva. Grattan Kirk (Group
Nevan and Jaco van Jaarsveldt and by
invitation and do attend the Traditional
CEO), Pamela Barletta, Johan Coetsee, and
invitation David Sussman, Pieter Pienaar,
Retail Exco meetings from time to time.
David Hirsch. Senior JDG Trading executives
Guy Pearce and Reneé Griessel.
116
JD Group Annual Report 2010
➔ The Change Committee is responsible
for prioritising projects and initiatives
where divisional performance and
non-executive directors from the Group,
strategic initiatives are considered.
namely Grattan Kirk, Phillip Kruger and
Bennie van Rooy. Reneé Griessel is the
across all strategically aligned
programmes within FS. This meeting is
JDG Insurance Board and Board
chief executive of both companies.
chaired by Jaco van Jaarsveldt, the FS
sub-committees
Henk Greeff is the second executive
Head of Strategy. Permanent members
JDG Insurance (JDGI) comprises two
include Henk Greeff, Philip Kruger, the
insurance companies, namely JDG Micro
entire FS executive team and Dalene
Insurance Limited and JDG Micro Life
Ferreira, the FS Services Change
Limited, respectively the Group’s short-
Enablement Executive.
➔ The Credit Risk Committee considers
term and long-term insurance entities.
These two companies are wholly-owned
decisions regarding amendments to
subsidiaries of JDG Trading (Pty) Limited.
any credit-risk related activity. When
Their Boards manage and monitor the
implementing new credit-risk strategies
operations of the two companies. At each
or products, or making amendments to
company, the directors are individually and
current credit risk strategies or
jointly mandated, empowered and,
products, any changes (with impact
amongst others, held accountable to:
analyses) are considered by the
committee for approval. In addition,
the committee considers underwriting
of credit applications, application fraud
investigations, credit-risk portfolio
reporting and credit risk rules and
strategies on existing and new
products, as well as the development,
implementation and monitoring of
scorecards, risk models and credit
strategies (inclusive of originations,
collections, customer management,
credit facilities and recovery strategies).
The committee meets monthly and is
➔ manage and monitor the business and
affairs of the company by establishing
best management and operating
practices;
➔ implement strategies and key policies
in line with Group directives and plans;
➔ serve as a governance mechanism by
ensuring ongoing performance against
approved business plans, budgets and
strategic targets;
➔ prioritise the allocation of capital and
other resources; and
➔ manage management succession
chaired by Francois Grobler, the Head
planning and to identify, develop and
of Credit Risk. Permanent members
advance future leaders in the Group.
director on the board. Henk Greeff
and Bennie van Rooy were respectively
appointed on 28 January 2010 and
30 April 2010, whilst Gerald Völkel has
resigned on 30 April 2010. The statutory
actuary has a permanent invitation to
attend board meetings. The companies
have decided not to appoint a stand-alone
risk committee and as a consequence, the
boards have taken responsibility for all
risk-related matters. Four formal meetings
have been held during the 2010 financial
year. Additional ad hoc meetings are held
when circumstances dictate.
JDGI Audit & Actuarial Committee
The JDGI board is supported by an Audit
and an Actuarial Committee, an Executive
Committee (Exco) and an Investment and
Capital Management Committee. The Audit
and Actuarial Committees are stand-alone
committees, however, for practical
reason, they hold joint meetings.
These committees serve both insurance
companies and the Audit Committee has
the same basic responsibilities as that of
the JD Group Audit Committee, but with a
specific focus on actuarial and investment
matters in the insurance environment.
include Grattan Kirk, Bennie van Rooy,
The Boards of the two insurance
The JDGI Audit Committee reports to the
Arie Neven, Philip Kruger, Jaco van
companies are a mirror of each other
JD Group Audit Committee, who has
Jaarsveldt, and by invitation the FS Exco
and comprise of two independent
oversight accountability. The JDGI Audit
members. Collections, Recoveries,
non-executive directors, three non-
Committee has its own terms of reference
Traditional Retail and Finance also have
executive directors and two executive
which is closely aligned with that of the
representation on the committee.
directors. Fernando Patrizi acts as the
Group Audit Committee’s terms of
independent non-executive chairman and
reference. The JDGI Audit Committee is
chairman of his/her department’s
his co-directors are Mark Scharneck
led by an independent non-executive
Departmental Management Committee
(independent non-executive) and the three
chairman, Mark Scharneck.
➔ The Head of each department is
JD Group Annual Report 2010
117
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
Permanent members of the committee
Henk Greeff, Olga Grobler, Grattan Kirk,
operations of the Maravedi Group
are Fernando Patrizi (independent
Philip Kruger, Komani Mfuni,
companies. At each company, the directors
non-executive director) and Bennie van
Andrew Murray, Arie Neven, Corrie Neven,
are mandated, empowered and held
Rooy (non-executive director). Gerald
Pieter Pienaar, Andre Potgieter,
accountable to:
Völkel resigned on 30 April 2010. The
Jaco van Jaarsveldt, Bennie van Rooy
➔ manage and monitor the business and
Actuarial Committee comprises four
and Esther van Rooyen. The Chief Audit
affairs of the company by establishing
members. Mark Scharneck is its
Executive, Morné van Wyk, has an open
best management and operating
independent non-executive chairman and
invitation to attend JDGI Exco meetings.
practices;
Jonathan Bagg (statutory actuary),
Meetings are held monthly.
Fernando Patrizi (independent nonexecutive director) and Bennie van Rooy
(non-executive director) are the members.
The independent auditors, the Advisory
Actuary, the internal auditor, the JD Group
Chief Risk Officer and management attend
both committee meetings as invitees.
Meetings are held on a quarterly basis.
JDGI investment and Capital
Management Committee (ICMC)
in line with Group directives and plans;
➔ serve as a governance mechanism by
ensuring ongoing performance against
The purpose of the committee is to
monitor the capital requirements of both
insurance companies and to ensure that
the two companies are at all times solvent
from a statutory perspective. At the same
time, it ensures that they do not tie up
approved business plans, budgets and
strategic targets;
➔ prioritise the allocation of capital and
other resources; and
➔ manage management succession
planning and to identify, develop and
JDGI Exco
unnecessary capital. It ensures that an
The JDG Insurance Executive Committee
appropriate investment strategy exists for
(JDGI Exco) is a stand-alone committee
both JDG Micro Insurance and JDG Micro
The Maravedi Group Board consists of four
with its own terms of reference. It serves
Life, taking into consideration the
non-executive and two executive directors,
both insurance companies and has the
short-term nature of the risks both
namely Ian Thompson (chairman), Günter
same basic responsibilities as that of JDG
companies insure. The committee
Steffens, Bennie van Rooy, Nthabiseng
Trading Exco, but with a specific focus on
comprises of nine members and is chaired
insurance matters. In summary, JDGI Exco
by Reneé Griessel, the JDGI CE. The other
translates, plans and implements JDG
permanent members are Jonathan Bagg
Insurance’s strategy (in alignment with
(statutory actuary), Henk Greeff, Fernando
Group strategy), manages and monitors
Patrizi (independent non-executive
attainment of business goals and agreed
director), Komani Mfuni, Ian Thompson,
performance milestones and financial and
Bennie van Rooy, André Potgieter, as well
investment performance. It also attends to
as the advisory actuary, namely Alex Roux.
other important aspects that may impact
The committee convenes monthly.
compliance, IT and corporate governance
Maravedi Board
Mmatli, Guy Pearce (Chief Executive) and
Henk Klopper (Financial Director) being the
non-executive and executive directors
respectively.
Maravedi Audit and Risk Committee
The Maravedi Group Board is supported
by an Audit and Risk Committee.
The committee has the same
Risk Committees and reports to such
committees. The committee consists of
issues, as well as people development,
Maravedi Group (Pty) Limited is a
amongst others. The committee is chaired
subsidiary of JDG Trading (Pty) Limited
by the JDGI CE, Reneé Griessel. Permanent
and has various subsidiaries. The Maravedi
members of the committee are
Board manages and monitors the
JD Group Annual Report 2010
advance future leaders in the Group.
responsibilities as the Group Audit and
on JDGI’s business, such as legal and
118
➔ implement strategies and key policies
three non-executive members, being
Günter Steffens (chairman), Ian Thompson
and Bennie van Rooy.
Blake Board
International – Abra Board
Blake & Associates Holdings (Pty) Limited
The company is a wholly-owned subsidiary
(Blake) is a subsidiary of JDG Trading (Pty)
of JDG Trading (Pty) Limited and operates
Limited and has various subsidiaries.
under a two-tier board structure in Poland.
The Board manages and monitors the
The management Board operates upon
operations of the Blake companies.
directives from the Supervisory Board and
At each company, the directors are
in accordance with the provisions of its
mandated, empowered and held
articles of incorporation and Polish
accountable to:
legislation, as well as in terms of mandates
➔ manage and monitor the business and
that have been agreed with JDG Trading
affairs of the company by establishing
(Pty) Limited. The Management Board of
best management and operating
Abra carries out similar functions to those
practices;
➔ implement strategies and key policies
in line with Group directives and plans;
➔ serve as a governance mechanism by
which the JDG Trading board carries out in
the South African context, namely it serves
to manage and monitor the operations
of the company. The members of the
ensuring ongoing performance against
Supervisory Board of Abra are
approved business plans, budgets and
David Sussman (chairman), Johan Coetsee,
strategic targets;
Grattan Kirk and Johann Pieterse. The
➔ prioritise the allocation of capital and
other resources; and
Management Board comprises of
Piotr Krzanowski and Piotr Lisowski.
➔ manage management succession
planning and to identify, develop and
advance future leaders in the Group.
The Blake Board consists of three
non-executive and two executive directors,
namely David Sussman (chairman),
Ian Thompson, Bennie van Rooy, Howard
Blake and Mike Miller being the non-
Other management committees
the Group fulfils the requirements of its EE
initiatives and the stipulations of the
Employment Equity Act, particularly insofar
as they relate to the Group’s business in
South Africa. The committee reports to the
Transformation department, with a split
reporting line into the HR department.
The committee assists the Group in
compiling its employment equity report.
Under its leadership, the Group also adopted
and implemented an employment equity
policy. The main focus into the future will be
to position the Group as a preferred
employer. The committee comprises
members from occupational categories,
designated groups, non-designated groups,
women and also has Union representation.
Richard Chauke acts as chairman and the
individual members are Johnny Masinga,
Mlungisi Thabethe, Pamela Barletta, Mirriam
Khumalo, Walter Moeletsi, Lucas Radebe,
and Nelson Mothapo. The committee is
assisted by a facilitation team of seven
individuals (not members of the committee).
Leadership and Development council
The meeting convenes on a quarterly basis.
The council’s terms of reference include
Employment Equity And Skills
leadership development, succession
Development Committees also exist
management and expedition of the
at divisional level in the Group.
achievement of equity targets. The
committee meets on a quarterly basis and
Chain Property Committees
its membership comprises Grattan Kirk
The Group is assisted by three property
(chairman), Pamela Barletta, Richard Chauke,
committees, one each for the Traditional
Blake Audit and Risk Committee
Henk Greeff, Johan Kok, Arie Neven,
Retail (TR) Chains and the Cash Retail (CR)
The Blake Group Board is supported by an
George Annandale, Guy Pearce, Philip
Chains and a separate committee for
Audit and Risk Committee. The committee
Kruger, Jan Blom and Barry Dell.
Property Logistics. These committees
executive and executive directors
respectively.
has the same responsibilities as the Group
Audit and Risk Committees and reports to
such committees. The committee consists
operate under the same terms of
Employment Equity (EE) & Training
Committee
reference and ensure that new stores,
relocations, closures and other related
of three non-executive members, being
The committee monitors and ensures the
property matters are discussed and
Ian Thompson (chairman), David Sussman
Group’s overall compliance to EE and skills
receive attention in accordance with
and Bennie van Rooy.
development. In this role it ensures that
operational requirements. The main
JD Group Annual Report 2010
119
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
objective is to ensure that sign-off is
centres (Project Sebenzile). It considers
management of key interdependencies
received from the committee in respect
all activities relating to the logistics
perspective. Its main purpose is to ensure
of any property decision that is taken that
consolidation process, i.e. it attends to
that there is co-ordination of effort and
will bind the Group financially in any way,
all future logistics warehouse and site
alignment to the Group’s strategy and IT
and further to identify any trading risk
procurements, ensuring that these are in
architecture on a continuous basis across
relating to the property portfolio.
close proximity of Traditional Retail stores.
the Group. The committee has the final say
The Property Committee directs the
It also deals with decisions taken or
in matters where business process,
Property Services department to pursue
mandated to Property Services in respect
ownership and IT architectural issues
negotiations in accordance with mandates
of new developments, closures,
cannot be resolved. The committee’s
agreed at each committee meeting.
enlargements, acquisitions and any
current scope will be maintained until
The TR Property Committee meeting is
property risk-associated matter.
completion of the afore-mentioned
chaired by the Group Executive: Property,
The meeting is chaired by Johan Kok
initiatives in 2012, at which point in time
namely Ivan Nefdt. The members
and the members comprise of Grattan Kirk
an IT Steering Committee will be
comprise of the Chief Operating Officer,
(the Group CEO) the Chief Executives
established as recommended by King III.
Johan Kok, the TR Chief Executive,
of the Traditional Retail Chains,
The meeting is chaired by Henk Greeff,
Arie Neven, and the individual Chain CEs,
the Operations Executive from
and the members are Andrew Murray,
as well as the Operations Executives and
Hi-Fi Corporation, the Chief Financial
Dalene Ferreira and Bennie van Rooy,
relevant senior managers within the
Officer of Incredible Connection and
with other attendees being Philip Kruger,
Property Services department. The CR
relevant senior management of the
Guy Pearce, Arie Neven, Clyde Briell,
Property Committee meeting is chaired by
Property Services department. The Group
Ant Smith, Leoni Groenewald and
the Group Executive: Property, Ivan Nefdt.
Executive: Logistics, Julian Hanmer, also
Victor da Silva. Agenda matters are largely
The members are Grattan Kirk (the Group
attends meetings.
driven by the issues at hand, but mainly
ensure conformance of initiatives to the
CEO), the relevant Chain CEs, as well
Group Integrated Steering Committee
Group’s strategy and IT architectures.
Hi-Fi Corporation, the Chief Financial
The Group has embarked on an extensive
Meetings occur monthly, but there is an
Officer of Incredible Connection and
programme for the replacement of its
alternative process for resolution of urgent
relevant senior management of the
current Enterprise Resource Planning (ERP)
issues should the need arise.
Property Services department. Matters on
system (Ceres) with SAP in the Retail
the agenda include issues such as lease
environment and Capstone (Fair Isaac) and
Marketing and Merchandise Review
renewals within a ten-month horizon,
VisionPlus (First Data) in the Financial
(MMR) meetings
relocations, new developments, closures
Services division. Due to the extensive
The purpose of the MMR meetings is to
and renovations, to name but a few of the
nature of the IT changes, these projects
ensure that sales are maximised, the
key issues. Meetings are held monthly.
are sanctioned by the JD Group Board and
required number of product units are sold
reviewed monthly in the JDG Trading Excos
and that gross margins are achieved.
and quarterly at Group Board meetings.
Each of these meetings deal with three
The Property Logistics Committee
There is thus sufficient leadership
key matters, namely the previous month’s
convenes monthly and its main objective
involvement in the programmes at senior
performance by merchandise category, all
is to provide a service in accordance with
executive level. This forum’s current
the marketing promotions of the Group for
the requirements arising from the project
mandate is to oversee the implementation
the next two to three months in advance,
to centralise the Group’s distribution
process from an integration and
and the merchandise plans that underpin
as the Operations Executive from
Property Logistics Committee
120
JD Group Annual Report 2010
the overall marketing plan. These meetings
(non-compliance or transgressions) in
Connection Group Board and
are attended by the Chain merchandise and
respect of regulatory obligations and
subcommittees
marketing executives, respective Chain CEs
considers key compliance failures and
and by representatives from the respective
management’s remedial actions. It also
Chain advertising agencies. The meeting is
monitors and assesses the role and
chaired by David Sussman. Grattan Kirk,
effectiveness of the Group’s Compliance
David Hirsch, Arie Neven, Conrad Kleingeld,
function. The committee meets on a
Alec Goodman, Johan Kok and Irene
quarterly basis and through its extensive
Pilavachi attend the TR meetings. David
agenda, analyses the Group’s regulatory
Hirsch, Grattan Kirk and David Sussman (as
universe, the compliance, legal and
chairman) also serve on the Cash Retail
regulatory obligations and specific risk
Committee, which has the same
areas pertaining to regulatory compliance.
composition and member attendance as the
It monitors compliance with applicable
TR MMRs, sans the advertising agencies. A
regulations and operational requirements
Marketing and Merchandising Review
and enquires as to whether the controls
meeting is held monthly for both the
Traditional Retail
provide reasonable assurance that the
JD Group acquired Connection Group
Holdings (Pty) Limited in December 2005.
The Connection Group Holdings Board
retained its independence, however, its two
subcommittees, namely the Remuneration
Committee and Audit Committee, were
incorporated into the respective Group
committees. Two of the Group Board
executive directors, namely Grattan Kirk
and David Sussman, serve on the board
together with David Hirsch, Johan Coetsee
and Dave Miller. Gerald Völkel resigned
from the board on 30 April 2010.
company is in compliance with the
regulatory universe to which it is subject
Employment benefit funds
and within which it must operate.
Approximately 95% of Group employees are
Chain and Corporate Service
The committee furthermore ensures
members of a retirement fund in which the
Department Committees
that there is adequate integration of
Group participates. A summary of the key
regulatory requirements into business
retirement funds is provided in the
processes and monitors any litigation
Sustainability Report on page 69, while
(TR) Chains and the Cash Retail (CR) Chains.
The Chain Chief Executives and the heads
of the Corporate Service departments act
as chairpersons of either Chain or
Corporate Service department meetings
which are held on a monthly basis.
The executive management teams of the
Chain or Corporate Service departments
attend these meetings.
actions in which the Group may be
involved. It also considers the adequacy
of the processes and systems in place
page 183 in note 26 of the annual financial
statements.
to monitor and ensure compliance
with laws and regulations. The meeting
Financial control and reporting
has enterprise-wide representation
and is chaired by Richard Chauke.
The members are Yondela Ndema
Group Compliance Committee
financial related details are set out on
(the Group’s Compliance Officer),
The directors are responsible for ensuring
that Group companies maintain adequate
records and report accurately and reliably on
the financial position, activities and results of
The Group Compliance Committee is
Pieter Pienaar, Morne van Wyk,
responsible for overseeing and reviewing
Andrew Murray, Philip Kruger,
the Group. Financial reporting procedures are
the effectiveness of the compliance and
Hendrik Klopper, George Annandale,
applied in the Group at all levels to meet this
legal framework across the Group. It
Renee Griessel, Pamela Barletta,
responsibility. Financial and other information
considers compliance, legal and risk issues
Morne van Wyk, Julian Hanmer,
is constantly reviewed and remedial action
reported to it under the escalation policy
David Hirsch, Johann Pieterse,
taken, where necessary. Improvements to the
and reviews compliance issues raised by
Bennie van Rooy, Allan Herman,
quality of reported information are
any regulatory body, as well as any
Dave Miller, Charl du Plessis, Grattan Kirk,
continually effected by means of replacing or
reputational issues. It reviews breaches
Arie Neven and Lucky Phalafala.
upgrading information systems. The Group’s
JD Group Annual Report 2010
121
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
Annual Financial Statements are prepared
These authorities and the bank signing
effective control over strategic and certain
in accordance with International Financial
mandates have been reviewed and
financial, organisational, governance and
Reporting Standards. Appropriate
updated during the review period.
compliance matters, amongst others.
accounting policies are consistently
The Group operates a comprehensive
The Internal Audit Function (IAF) monitors
applied, unless an accounting policy
annual planning and budgeting process.
compliance with policies and procedures
requires revision or there is a requirement
The annual budget is approved by the
and the effectiveness of the internal
to adopt new accounting standards, in
board. The financial reporting system
control system and highlights significant
which case proper disclosure is made.
compares results with plans, budgets and
findings in respect of non-compliance.
Reasonable and prudent judgements and
with the previous year’s results and is able
The CAE provided the Audit Committee
estimates are made in order to properly
to identify deviations on a daily and
with a written statement, pointing out that
disclose the Group’s financial status and
monthly basis. Reports include regular cash
the IAF has identified control weaknesses
these are reviewed by the external auditors
flow statements, income statements and
during the course of delivering its
and the JD Group Audit Committee. The
balance sheets projected for 12 months
programme of assurance during the
Group is currently in the process of
ahead, which are used, amongst others, to
review period. However, the identified
implementing an enterprise resource
determine future funding needs.
control weaknesses have been addressed
and the CAE confirmed that reasonable
planning IT solution to enhance reporting,
Control environment
assurance can be given that nothing has
An organisational structure with clearly
come to the IAF’s attention that would
defined lines of responsibility and
indicate that the framework of internal
delegation of authority from the Board
controls is ineffective or that the afore-
The Board has overall responsibility for
to the Chains, the Corporate Service
mentioned weaknesses have resulted in
ensuring that the Group maintains a system
departments and the subsidiaries, is in
any material loss. Therefore, based on the
of internal financial control to provide it
place and presented on page 107.
afore-mentioned and various other
with reasonable, but not necessarily
The board has established policies and
interrogations it made during the review
absolute, assurance regarding the reliability
procedures, including a delegation of
period, the board is able to confirm that it
of the financial information used within the
authority framework, as well as a Code of
is not aware of any weaknesses in control
business and for publication, and to ensure
Conduct (Code of Ethics) to foster a proper
frameworks that have led to any material
that assets are safeguarded. Prudent
governance structure and a strong ethical
loss or contingency during this financial
financial controls and procedures are in
climate in the Group. The directors have
year.
place, including controls involving the
accepted responsibility for maintaining
segregation of incompatible duties and
appropriate internal control systems to
controls relating to the security of assets.
ensure that the Group’s assets are
The Board of JD Group is responsible for
The operations and effectiveness of internal
safeguarded and maintained, and that
overseeing the risk management activities
financial controls are maintained and
losses arising from fraud or other illegal
of the Group. Management is responsible
reviewed on a regular basis. Procedures for
acts are minimised. Control systems are
for applying prudent risk management
seeking and obtaining approval for financial
monitored and improved in accordance
practices to mitigate risk in its day-to-day
transactions are contained in the Group’s
with generally accepted best practice. The
business operations. The Risk Management
levels of authority document and applied
board has reserved key matters which are
function (RMF) provides a professional and
diligently across the Group’s finance
required to be brought to it for decision,
comprehensive enterprise-wide risk
operations.
thus ensuring that it maintains full and
management (ERM) service to the Group
control and efficiencies across the Group.
Main internal financial control
procedures
122
JD Group Annual Report 2010
Risk Management
to enable it to be leading-edge in the field
controlled prudently and effectively
around the adequacy and effectiveness
of risk management. The ERM process
throughout the Group. In addition, both the
of risk-monitoring processes and of the
entrenches ERM as a philosophy and
IAF and management have provided the
internal control systems, as well as the
methodology throughout the organisation,
Audit Committee with assurance that
reliability of management’s feedback
ensuring that all risks are properly
nothing material has come to their
processes in respect of risk management
mitigated and managed across all business
attention that would indicate that the
and risk information. Other
operations. The Group applies a logical,
framework of internal controls is
recommendations from King III, such as
systematic and repetitive methodology to
inadequate. The scope and operations
the requirement to move to combined
identify, analyse, access, treat and monitor
of the Internal Risk Management
assurance, will also receive the IAF’s
all risks, whether or not insurable.
Committee and of the JD Group Risk
attention in the year ahead. The afore-
The effectiveness of the ERM process
Management Committee are set out
mentioned will enable the Group to
is measured by how well it aligns the key
on pages 114 and 112 respectively.
accomplish its objectives by bringing a
systematic, disciplined approach to
fundamentals of governance, business
objectives, ethics, policies, standards,
strategies and compliance. The RMF
recognises the complexity and diversity
of risks that face the Group’s operational
activities and ensures that efforts are
integrated to maximise opportunities and
minimise exposures to risks and reduce
them, where necessary, to levels matching
its risk appetite. The Group has taken
appropriate steps to ensure that adequate
systems are in place for the assets of the
Group to be safeguarded through the
prevention and detection of fraud and
other irregularities and material
misstatements. The system of internal
controls is considered appropriate and
the risks taken were at an acceptable
level within the context of the business
environment of the Group. During the year,
Internal Audit
The IAF provides the board of directors,
the Audit Committee and management of
business operations with independent and
objective assurance that policies and
processes are operating effectively to
mitigate risk controls. Among others it also
provides:
➔ confirmation of the adequate and
effective operation of the established
internal control systems;
➔ confirmation that significant legislative
or regulatory issues impacting the
Group are recognised and addressed
appropriately; and
➔ objective confirmation that the board
receives assurance from management
that the information is reliable.
evaluate and improve the effectiveness of
risk management, control and compliance
processes. The IAF takes account of 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 the IAF.
Audit plans for each business operation
are tabled annually to accommodate
changing business needs.
The internal audit plan is approved
annually by the Audit Committee and is
based on risk assessments that are
continually updated so as to identify not
only existing and residual risks, but also
emerging risks, as well as issues
highlighted by the Audit Committee and
the Risk Management Committee. Internal
audits are conducted formally at each
a number of improvements to internal
During the review period, the IAF has
business unit and Corporate Service
controls where implemented.
changed its audit approach from
department in accordance with the
No significant weakness has been
compliance-based to risk-based, however,
approved coverage plan. Audit results are
identified that has resulted in any material
its coverage plan still had a strong
reported to management who is
loss. Given the afore-mentioned processes
compliance focus. The current approved
responsible for corrective action to
and measures, the CRO has given written
coverage plan for the 2011 financial year
eliminate weaknesses. Follow-up audits
assurance to the JD Group Audit
will enable IAF to provide more
are conducted in areas where weaknesses
Committee that risk is managed and
comprehensive assurance to the board
have been identified. The IAF verifies that
JD Group Annual Report 2010
123
Sustainability and governance
Corporate governance (continued)
Sustainability and stakeholder review
Corporate governance
the corrective actions implemented by
management are effective in strengthening
internal controls in order to mitigate
business risk. Annually the Audit
Committee reviews and ratifies the
internal audit charter, wherein the purpose,
authority and responsibility of the IAF are
formally defined. The activities of the
Art of Service
Service is the essential element and
the strategic intent of the Art
of Service
programme. The creation of extraordinary
levels of customer service will differentiate
the Group from its competitors. A detailed
description of this initiative is provided
on page 10.
internal auditors are coordinated by the
CAE, who has unrestricted access to
Stakeholder engagement and
the Audit Committee chairman and its
industry membership
members.
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 whistleblowing procedure in place through which
employees can report illegal acts
anonymously to Crime Call Anonymous
without fear of reprisal. More details in this
regard have been reported on page 73 of
the Sustainability Report.
Going concern
The directors report that, after having
considered a wide range of factors, they
have a reasonable expectation that the
Group has adequate resources to continue
in operation for the foreseeable future. For
this reason, the Group continues to adopt
the going concern basis in preparing its
annual financial statements.
124
JD Group Annual Report 2010
In all dealings, the Board strives to ensure
that the interests of stakeholders are taken
into consideration in its decisions and that
they are fully informed of decisions
relevant to them.
The Group’s engagements with each of its
stakeholders and its industry membership
details are set out on pages 67 to 78 and
on page 82 of the Sustainability Report.
Group value added statement
2010
Rm
Revenue
2009
%
13 224
Rm
12 922
4
9
Finance income
80
184
Share of losses of associates
—
(12)
13 308
13 103
(10 044)
(9 988)
Investment income
Cost of merchandise, services and expenses
Value added
%
3 264
100,0
3 115
100,0
2 227
68,2
2 103
67,5
Distributed as follows:
Employees
Salaries, commissions and other benefits
Government
Taxation, assessment rates and other levies
395
12,1
525
16,9
Providers of capital
436
13,4
342
11,0
Distribution to shareholders
255
7,8
70
2,2
Finance costs
181
5,6
272
8,8
Reinvestment in the Group
206
6,3
145
4,6
To provide for depreciation
To provide for deferred taxation
Reinvestment for expansion
149
4,6
155
5,0
(189)
(5,8)
(15)
(0,5)
246
7,5
5
0,1
3 264
100,0
3 115
100,0
Statement of money exchanges with government
21
18
Company taxes
357
490
Employees’ tax deducted from remuneration paid
211
189
Net value added tax and general sales tax collected
106
81
17
17
712
795
Assessment rates and taxes
RSC and other levies
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 2010
125
Annual financial statements
Customers
Revenue of
Profitability
R13 224 million, up by 2%
Operating profit of
HEPS of
Growth
R772 million, up by 20%
303,6 cents, up by 584%
Ten year review
Directors’ approval
Independent auditors’ report
Certificate by company secretary
Directors’ report
Audit committee report
Directors’ remuneration
Definitions
Accounting policies
Group statement of comprehensive income
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 scheme
Salient features of the JD Group Employee Share
Incentive Scheme
Salient features of the JD Group Share Appreciation
Rights Scheme
JD Group Limited – Company financial statements
Subsidiaries
Annexure A – Insurance businesses
Analysis of shareholders
Notice of annual general meeting
Form of proxy
Administration
128
132
133
133
134
138
140
145
146
156
157
158
159
160
161
193
196
197
199
201
202
204
207
209
215
ibc
Annual Financial Statements
Returns for our shareholders
“Profit in business comes from repeat customers,
customers that boast about your product or service,
and that brings friends with them.”
W Edward Deming
JD Group Annual Report 2010
127
Ten year review
31 August
2010
31 August
2009ø
31 August
2008
Share performance
Total shares in issue
‘000
170 500
170 500
170 500
Weighted average number of shares in issue
‘000
164 314
163 245
169 807
Headline earnings per share
cents
303,6
44,4
301,0
Cash equivalent dividends per share
cents
150,0
41,0
152,0
Dividend cover
times
2,0
1,1
2,0
Net asset value per share
cents
3 022,8
2 833,5
2 822,9
Revenue
Rm
13 224
12 922
12 610
Operating profit
Rm
772
646
797
Profit before finance costs
Rm
776
643
813
Profit attributable to shareholders
Rm
501
75
514
Closing shareholders’ equity
Rm
5 154
4 831
4 813
Average shareholders’ equity
Rm
4 993
4 822
4 931
Net interest bearing debt
Rm
667
639
158
Average total assets less non-interest bearing debt
Rm
6 537
6 447
6 426
Total assets
Profitability, liquidity and gearing
Rm
9 281
8 922
8 673
Operating margin
%
5,8
5,0
6,3
Profit attributable to shareholders on revenue
%
3,8
0,6
4,1
Return on closing shareholders’ equity
%
9,7
1,5
10,7
Return on average shareholders’ equity
%
10,0
1,6
10,4
Return on assets managed
%
11,9
10,0
12,7
times
7,7
7,3
9,6
Gearing ratio
%
12,9
13,2
3,3
Current ratio
:1
2,5
2,6
2,3
Shareholders’ equity to total assets
%
55,5
54,1
55,5
1 115
1 094
1 095
R000
11 860
11 812
11 516
Interest cover
Productivity
Number of stores
Revenue per store
Number of employees
20 042
21 247
18 989
R000
660
608
664
cents
4 361
4 249
3 010
‘000
296 265
265 525
281 087
Rm
13 027
9 587
11 781
%
173,8
155,7
160,6
– high
cents
5 299
5 020
7 100
– low
cents
3 835
2 216
2 101
Revenue per employee
Stock exchange performance
Closing share price
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
ø
The 2009 comparatives have been restated to reflect changes made to the at acquisition fair values of net assets acquired in terms of International Financial Reporting
Standards (IFRS3).
#
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 IFRS. Prior years have not been restated to reflect
the changes required to comply with IFRS.
128
JD Group Annual Report 2010
31 August
2007#
31 August
2006
31 August
2005*
31 August
31 August
31 August
31 August
2004
2003
2002
2001
180 000
178 000
175 500
172 000
166 830
112 730
112 609
177 861
176 271
172 221
166 930
133 196
112 070
111 484
621,7
823,5
697,6
518,5
340,5
226,5
353,2
303,0
412,0
352,0
240,0
110,0
56,0
94,0
2,1
2,0
2,0
2,0
3,1
3,8
2,6
2 804,5
3 160,5
2 717,0
2 297,0
2 033,0
1 715,1
1 695,9
12 914
11 939
9 933
9 056
5 966
4 083
3 788
1 591
2 024
1 755
1 256
747
467
657
1 662
2 083
1 809
1 280
762
478
665
1 113
1 457
1 202
784
449
241
275
5 048
5 626
4 768
3 951
3 392
1 933
1 910
5 337
5 197
4 360
3 671
2 663
1 922
1 810
76
(304)
(457)
(19)
894
1 048
802
7 030
7 028
6 035
5 308
4 224
3 557
3 241
8 891
10 115
8 440
7 739
7 185
4 243
4 529
12,3
17,0
17,7
13,9
12,5
11,4
17,3
8,6
12,2
12,1
8,7
7,5
5,9
7,3
22,1
25,9
25,2
19,9
13,2
12,5
14,4
20,9
28,0
27,6
21,4
16,9
12,5
15,2
23,7
29,6
30,0
24,1
18,1
13,4
20,5
11,0
21,9
12,7
8,8
4,9
2,7
6,6
1,5
(5,4)
(9,6)
(0,5)
26,3
54,2
42,0
2,9
3,4
3,6
3,1
2,6
4,0
4,1
56,8
55,6
56,5
51,1
47,2
45,6
42,2
1 078
1 028
963
952
978
695
684
11 980
11 614
10 315
9 513
6 100
5 875
5 538
19 577
18 361
16 459
16 167
15 738
10 064
9 984
660
650
603
560
379
406
379
6 970
6 660
7 400
4 550
3 161
1 675
4 050
293 949
271 264
167 697
137 612
73 828
56 740
53 420
22 976
20 383
10 634
5 552
1 716
1 466
2 107
165,1
152,4
95,6
80,0
44,3
50,3
47,4
10 600
9 625
7 800
4 690
3 180
4 060
4 905
5 920
5 939
4 659
2 950
1 440
1 300
2 990
JD Group Annual Report 2010
129
Ten year review
(continued)
Rm
Income statements
Revenue
31 August
2010
31 August
2009ø
31 August
2008
13 224
12 922
12 610
6 727
6 428
6 627
Operating profit
Investment income (including equity accounted profits)
772
4
646
(3)
797
16
Profit before finance costs
Finance costs – net
776
101
643
88
813
84
Profit before exceptional item
Exceptional item : loss on discontinuance
675
—
555
—
729
—
Profit before taxation
Taxation
675
167
555
475
729
215
Profit after taxation
Attributable to minorities
508
7
80
5
514
—
Profit attributable to shareholders
501
75
514
1 617
1 673
1 397
767
493
212
30
—
—
115
756
493
256
92
—
—
76
653
347
256
93
28
(15)
35
Current assets
7 664
7 249
7 276
1 575
5 276
—
34
779
1 491
4 910
8
104
736
1 448
4 503
3
187
1 135
Total assets
9 281
8 922
8 673
Equity and liabilities
Equity and reserves
Share capital and premium
Treasury shares
Non-distributable and other reserves
Retained earnings
Shareholders for dividend
1 779
(378)
158
3 464
131
1 779
(411)
166
3 230
67
1 779
(435)
245
3 157
67
Shareholders’ equity
Minority interest
Non-current liabilities
5 154
34
1 057
4 831
27
1 299
4 813
—
700
922
75
60
878
83
338
293
83
324
Cost of sales
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
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
3 036
2 765
3 160
2 424
502
4
84
22
2 153
486
3
112
11
2 068
1 000
—
92
—
9 281
8 922
8 673
Trade, other payables and provisions
Interest bearing liabilities
Financial liabilities
Taxation
Bank overdrafts
Total equity and liabilities
ø
The 2009 comparatives have been restated to reflect changes made to the at acquisition fair values of net assets acquired in terms of International Financial Reporting
Standards (IFRS 3).
#
The 2007 comparatives have been restated for the change in the basis of accounting for insurance premiums and initiation fees. Prior years have not been restated for the
new basis of accounting.
*The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised IFRS. Prior years have not been restated to reflect the changes
required to comply with IFRS.
130
JD Group Annual Report 2010
31 August
2007#
31 August
2006
31 August
2005*
31 August
2004
31 August
2003
31 August
2002
31 August
2001
12 914
11 939
9 933
9 056
5 966
4 083
3 788
6 517
5 811
4 571
4 148
2 613
1 657
1 530
1 591
71
2 024
59
1 755
54
1 256
24
747
15
467
11
657
8
1 662
151
2 083
95
1 809
142
1 280
145
762
154
478
179
665
101
1 511
—
1 988
—
1 667
—
1 135
—
608
—
299
—
564
167
1 511
398
1 988
531
1 667
465
1 135
351
608
160
299
60
397
123
1 113
—
1 457
—
1 202
—
784
—
448
1
239
2
274
1
1 113
1 457
1 202
784
449
241
275
1 403
1 380
662
645
1 026
345
259
578
347
294
111
23
3
47
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
7 488
8 735
7 778
7 094
6 159
3 898
4 270
1 348
5 041
1
123
975
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
8 891
10 115
8 440
7 739
7 185
4 243
4 529
2 118
(255)
226
2 859
100
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
5 048
—
1 223
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
739
79
405
1 151
65
721
810
66
663
947
75
515
831
—
581
1 049
—
261
1 261
—
316
2 620
2 552
2 133
2 251
2 381
979
1 043
2 218
312
—
90
—
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
8 891
10 115
8 440
7 739
7 185
4 243
4 529
JD Group Annual Report 2010
131
Directors’ approval of the annual financial statements
Responsibility for the annual financial statements
The Group consistently adopts appropriate and recognised
The directors are responsible for the preparation, integrity
and objectivity of annual financial statements that fairly
present the state of affairs of the Group and the Company at
the end of the financial year, the income and cash flow for
that period and other information contained in this annual
report.
accounting policies.
To enable the directors to meet these responsibilities:
➔ the board and management set standards and
management implements systems of internal control,
accounting and information systems aimed at providing
reasonable assurance that assets are safeguarded and
the risks of error, fraud or loss are reduced in a cost
effective manner. These controls, contained in
established policies and procedures, include the proper
delegation of responsibilities and authorities within a
clearly defined framework, effective accounting
procedures and adequate segregation of duties;
➔ the Group’s Internal Audit function, which operates
independently and unhindered and has unrestricted
access to the Audit Committee, appraises, evaluates and,
when necessary, recommends improvements in the
systems of internal control and accounting practices,
based on audit plans which take cognisance of the
relative degrees of risk of each function or aspect of the
business; and
➔ the Audit Committee, together with the internal auditors,
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
and assurances received from the CAE and the CRO, 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.
132
JD Group Annual Report 2010
The annual financial statements have been prepared in
accordance with the provisions of the Companies Act of
South Africa and comply with International Financial
Reporting Standards, and the AC 500 standards as issued
by the Accounting Practices Board or its successor.
The directors are of the opinion, having considered a wide
range of factors, that the business will be a going concern
for the foreseeable future, and accordingly, the annual
financial statements are prepared on a going concern basis.
It is the responsibility of the independent external auditors
to express an opinion on the annual financial statements.
Their report to the members of the Company is set out on
page 133.
Approval of the annual financial statements
The Directors’ Report and the annual financial statements,
which appear on pages 134 to 206, were approved by the
board of directors on 12 November 2010 and are signed by:
ID Sussman
Executive Chairman
BJ van Rooy
Financial Director
Independent auditors’ report
To the members of JD Group Limited
We have audited the Group annual financial statements and
annual financial statements of JD Group Limited, which
comprise the Directors’ Report, Audit Committee Report, the
consolidated and separate balance sheets at 31 August
2010, and the consolidated and separate income
statements, consolidated statement of changes in equity
and consolidated cash flow statement for the year then
ended, and a summary of significant accounting policies and
other explanatory notes set out on pages 134 to 206.
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. 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.
financial statements in order to 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.
Opinion
In our opinion, these financial statements present fairly, in all
material respects, the consolidated and separate financial
position of JD Group Limited at 31 August 2010 and its
consolidated and separate financial performance and
consolidated 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.
Auditor’s 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.
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
Deloitte & Touche
Registered Auditors
Per X Botha
Partner
221 Waterkloof Road
Waterkloof
Pretoria, 0181
12 November 2010
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 MJ Comber Deputy Chairman of the Board.
Pretoria 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, No 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 2010 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
12 November 2010
JD Group Annual Report 2010
133
Directors’ report
The directors have pleasure in submitting their report
those of the previous financial year, except for the adoption
together with the Company and Group annual financial
of revised accounting standards as disclosed in the
statements for the year ended 31 August 2010.
Accounting Policies note.
Nature of business
Corporate governance
The Group carries on business of furniture and appliance
The Group is totally committed to the principles of
retail. It also provides financial, insurance, micro-lending and
transparency, integrity and accountability as set out in the
debt recovery services as well as contact centre solutions.
third King Report on Governance for South Africa and the
The Group operates through ten retail Chains in southern
King Code of Governance Principles (King III). The directors
Africa and one in Poland.
are fully committed to conducting the Group’s business in
accordance with generally accepted corporate practices.
Results of operations
The results of operations are set out in the Group and
Company income statements and Group segmental analysis
and discussed in detail in the Report on Operations
commencing on page 28.
Going concern
Although the board is accountable to the company itself,
and at all times acts in the best interest of the company,
its inclusive decision-making approach accommodates the
legitimate interests and expectations of its stakeholders.
The directors support the notion that good governance is
essentially about effective leadership and that sustainability
is a moral and economic imperative. The company therefore
regards itself as a leading corporate citizen of South Africa
The financial statements have been prepared using
and endeavours to achieve sustainable outcomes for people
appropriate accounting policies, supported by reasonable
and the planet, whilst making a fair profit.
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
During the year under review, the directors have applied the
recommendations of King III to the Group’s activities. In
exceptional instances, where the board regarded the
recommendations not to be in the best interest of the
Company, the principles have not been applied. In each such
instance, a rational and judicious reason has been given for
the board’s decision. These and other related matters are set
The annual financial statements have been prepared in
out in detail in a comprehensive overview of the Group’s
accordance with International Financial Reporting Standards
governance status in the Corporate Governance report on
(IFRS) and their interpretation as adopted by the International
page 100.
Accounting Standards Board (IASB), the Listings
Requirements of the JSE Limited (the JSE Rules) and the
provisions of the Companies Act, 61 of 1973 (the Act), as
amended. The accounting policies applied in the preparation
of these annual financial statements remain consistent with
134
JD Group Annual Report 2010
Independent auditors
After having assessed and verified their independence and
upon a recommendation from the directors, the external
auditors, Deloitte & Touche, have been re-appointed as the
company’s independent auditors for the past year. At its
the power to allot and issue them in order to phase out the
meeting in November 2010, the JD Group Audit committee
existing, outdated JD Group Employee Share Incentive
recommended that shareholders re-appoint Deloitte &
Scheme (the Scheme). As at 31 August 2010, 9 052 365
Touche for the 2011 financial year. The rotation of the
shares subject to options still remain under the control of
designated auditor is monitored closely to ensure that the
the directors for phasing out the Scheme by 1 June 2016
individual auditor is eligible to serve. All non-audit services
when the seven-year term of the final offer, grant
provided by Deloitte & Touche are presented to and
number 27, reaches its lapse date.
approved by the Audit committee. Certain non-audit services
are approved prior to commencement of any such work.
More details on the non-audit services policy is provided in
the Corporate Governance report on page 110, whilst the
financial scope of the non-audit services rendered during
the current year is provided in note 5 of the financial
statements.
Share capital, share premium and shares under
the control of the directors
There were no changes to the company’s capital during
the review period.
During the year, the Trustees of the Scheme acquired
424 943 ordinary JD Group shares in the open market at
a total cost of R18 217 335.
At the special general meeting on 12 August 2009, the
shareholders placed 2 500 000 of the unissued ordinary
shares of 5 cents each under the control of the directors
via a specific authority and at the annual general meeting on
3 February 2010, shareholders placed a further 2 000 000 of
the unissued ordinary shares under the control of the
Group’s directors via a general authority, with the power
to allot and issue the shares in accordance with the terms
of the replacement share incentive scheme, namely the
The board did not act on its mandate from shareholders
JD Group Share Appreciation Rights Scheme (the SAR
obtained at the annual general meeting on 3 February 2010,
Scheme). Upon recommendation by the JD Group
i.e. it did not issue or repurchase any of its own shares
Remuneration committee, the directors have granted share
during the year.
appreciation rights on 1 105 000 JD Group ordinary shares
During the past financial year, 2 000 000 (2009: 2 500 000)
to participants on 21 August 2009 and a further 2 907 500
unissued ordinary shares of 5 cents each were under the
rights to participants since the annual general meeting on
control of the Group’s directors for the sole use thereof by
3 February 2010. As at 31 August 2010, altogether 487 500
the JD Group Share Appreciation Rights Scheme.
shares subject to appreciation rights still remain under the
Details of the authorised and issued share capital, the share
premium and the movements during the year are provided
in note 17 of the annual financial statements.
control of the directors for purposes of the SAR Scheme,
ensuing from the specific authority obtained from
shareholders on 12 August 2009.
Share incentive trusts
At a special general meeting held 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
JD Group Annual Report 2010
135
Directors’ report
(continued)
At the annual general meeting on 17 February 2011,
independent non-executive director, Mr ME King resigned
shareholders will be requested to place 3 500 000
from the board and the Group’s Remuneration and Audit
(2,05%) unissued ordinary shares of 5 cents each under the
Committees with effect from 1 July 2010.
control of the Group’s directors with the power to allot and
issue them solely to SAR Scheme participants in accordance
with the SAR Scheme rules, the company’s articles of
Following Mr King’s resignation, Mr Günter Steffens, an
independent non-executive director and chairman of the
Risk Management Committee, was appointed a member of
association, the JSE Rules and the provisions of the Act.
the Audit Committee with effect from 1 July 2010. At the
More details in respect of these two incentive schemes are
same date, Mr Martin Shaw, the independent chairman of
provided in note 17 of the financial statements.
the Remuneration Committee, relinquished this
chairmanship position and whilst remaining an ordinary
member of the Remuneration Committee, was appointed
Subsidiary companies
chairman of the Audit Committee. Also on this date, Dr Len
Details of the company’s subsidiaries are set out on
page 202 of the financial statements. The company’s interest
in the profits and losses after taxation of subsidiaries are as
Konar, an independent non-executive director, was
appointed chairman of the Remuneration Committee.
At the board meeting on 10 November 2010, Mr Jacques
follows:
2010
2009
Rm
Rm
Profits
575
337
Losses
53
252
Schindehütte was appointed to the board as an independent
non-executive director.
Directors, Company Secretary and rotation
In terms of the articles of association, Drs Henk Greeff
Distribution to shareholders
and Len Konar as well as Messrs Vusi Khanyile and
David Sussman retire at the forthcoming annual general
An interim dividend of 70 cents (2009: nil) per share was
meeting on 17 February 2011 and, being eligible, offer
declared, and paid on 28 June 2010. A final dividend of
themselves for re-election.
80 cents (2009: 41 cents) per share was recommended
by directors for payment to shareholders on Monday,
13 December 2010.
Changes to the board and board committees
The articles of association furthermore provide that all new
appointments to the board between two annual general
meetings, shall retain office until the first annual general
meeting following their appointment, when they shall retire
and be eligible for re-election. Therefore, it is recommended
Mr Gerald Völkel resigned from the board and the Group’s
that shareholders at the forthcoming annual general meeting
Risk Management committee on 30 April 2010 having served
confirm the appointment of Messrs Bennie van Rooy and
for 12 years as the company’s Financial Director.
Jacques Schindehütte, respectively as the Financial Director
Mr Bennie van Rooy replaced him with effect from
of the company and an independent non-executive director.
1 May 2010. Having served for a term of 15 years as an
136
JD Group Annual Report 2010
The full and current membership of the board and the board
A detailed breakdown of each individual director’s direct and
committees as at the date of this report, is set out on
indirect interest in the share capital of the Company is
pages 101 to 112 of the Corporate Governance report. In
provided in the Directors’ Remuneration report on pages 141
addition, the names of the directors and secretary of the
to 144.
company in office at the date of this report are displayed
on the inside back cover of this report.
Significant shareholders
Details of significant shareholders are included in the
Directors’ interests
Shareholder Analysis table on page 208.
The aggregate beneficial interest of directors in the issued
share capital, options on and rights to ordinary shares of the
Company is as follows:
During the period under review, the authority for JD Group to
Number of shares
options and rights
Direct
Indirect
Total
Special resolutions passed by JD Group and its
major subsidiaries
purchase its own shares, subject to the relevant provisions
2010
2009
2 874 903
3 359 903
252 428
275 856
3 127 331
3 635 759
No director has any non-beneficial interests in the share
capital of the Company.
No director has directly or indirectly more than 1% interest
of the Act and the JSE Rules, was renewed for a maximum
period of a further 15 months by a special resolution
approved by shareholders of the Company on 3 February
2010. To date, the Group has not acted on this mandate.
Subsequent events
No material events occurred between the financial year end
and the date of this report.
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.
JD Group Annual Report 2010
137
Audit committee report
Introduction
The Company has a constituted Audit committee (the
Committee), comprising the following three
independent non-executive directors:
➔ MJ Shaw (Chairman)
➔ Dr D Konar
➔ GZ Steffens
On 1 July 2010, the Audit Committee chairman,
Mr Mervyn King, resigned. Mr Martin Shaw replaced him as
chairman on this date. At the same date,
Mr Günter Steffens was appointed a member of the
Committee. Background
The Committee is pleased to present its report for
the financial year ended 31 August 2010. The report is
presented in accordance with the requirements of the
Companies Act (the Act) and the recommendations
contained in the third King Report on Governance for South
Africa and the King Code of Governance Principles (King III).
Amongst others, the Committee’s operations are guided by
a formal detailed Terms of Reference (ToR) that is in line with
the Act and the recommendations of King III. During the
review period, the ToR has been updated and approved by
the board.
Duties carried out
During the financial year ended 31 August 2010, the
Committee carried out its duties as set out in the
Committee’s ToR and in accordance with its annual plan.
As an overview only, and not to be seen as an exhaustive
list, the Committee: ➔ 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;
➔ reviewed the quality and effectiveness of the external
audit process;
➔ reviewed and commented on the annual financial
statements and the accounting practices;
➔ reviewed interim reports, result announcements and
other releases of price-sensitive information;
138
JD Group Annual Report 2010
➔ reviewed the external auditor’s report to the Committee
and management’s responses;
➔ reviewed significant judgements and/or unadjusted
differences resulting from the audit, as well as any
reporting decisions made;
➔ monitored compliance with accounting standards and
legal requirements;
➔ ensured that all regulatory compliance matters had been
considered in the preparation of the financial statements;
➔ ensured that the sustainability issues in the integrated
report are reliable and do not conflict with the financial
information;
➔ satisfied itself through enquiry that Deloitte & Touche and
Xavier Botha, the designated auditor, are independent as
defined in terms of prescribed legislation and that
Xavier Botha may continue to serve as the designated
auditor;
➔ nominated the re-appointment of Deloitte & Touche and
Xavier Botha as the registered independent auditors;
➔ ensured that the appointment of Deloitte & Touche
complied with the provisions of all other legislation
relating to the appointment of auditors;
➔ set the terms of Deloitte & Touche’s engagement;
➔ determined the fees to be paid to Deloitte & Touche
and ensured that the fees are fair and equitable;
➔ maintained a non-audit services policy which determines
the nature and extent of any non-audit services that
Deloitte & Touche may provide to the Company;
➔ pre-approved a number of proposed contracts with
Deloitte & Touche for the provision of non-audit services
to the Company;
➔ ensured that the details and monetary scope of the
non-audit services carried out by Deloitte & Touche have
been disclosed in the annual financial statements of the
Group;
➔ ascertained that Deloitte & Touche has not reported any
Reportable Irregularities to IRBA;
➔ reviewed the management of risk and the monitoring
of compliance and legal governance effectiveness within
JD Group, and ensured that the Group’s existing
combined assurance model addressed the significant
risks facing the Group;
➔ ensured that close co-operation exists between Internal
Audit, Risk Management and the Legal/Compliance
functions;
➔ formed an integral component of the risk management
process and, amongst others, monitored:
➔ financial reporting risks;
➔ internal financial controls;
➔ fraud risks as they relate to financial reporting;
➔ information technology (IT) risks as they relate
to financial reporting;
➔ played an oversight role in respect of the Internal Audit
function to ensure its effectiveness;
➔ reviewed developments in corporate governance
and best practice and considered their impact and
implications on the JD Group and in particular ensured
that the principles of King III are embedded within the
Group;
➔ monitored the application and the effectiveness of
JD Group’s Code of Conduct (ethics) across the Group;
➔ satisfied itself that the Financial Director is suitable
and appropriately qualified to fulfil his role and that the
JD Finance function is suitably resourced and skilled to
carry out its obligations;
➔ in fulfilling its risk and audit oversight role, secured
regular feedback from the audit/risk committees of
subsidiaries in the Group;
Recommendation to shareholders
The board ensured itself that the Committee members
jointly as a collective body are subject-matter specialists in
the fields of finance, risk, audit, compliance and corporate
governance, and have sufficient qualifications, skills and
experience to fulfil their obligations. In addition, all members
are independent of character and their judgement is not
impaired in any way. They all bring invaluable integrity and
experience to the Committee’s deliberations and make
positive contributions on an ongoing basis. As a
consequence, the board has recommended that
shareholders appoint the above-mentioned independent
non-executive directors as members of the company’s Audit
Committee for the 2011 financial year. Conclusion on fulfilment of duties and obligations
Given the above, the Committee is of the opinion that it has
appropriately addressed its key responsibilities in respect of:
➔ internal control;
➔ financial accounting control;
➔ stakeholder reporting; and
➔ statutory and regulatory requirements.
➔ reviewed and aligned the Committee’s ToR with the latest
applicable legislation and governance codes; and
➔ reviewed the text of various reports, including the
corporate governance statement, the internal audit
assurance statement, the risk management assurance
statement, the sustainability report and the directors
report, for inclusion in the JD Group 2010 annual report.
MJ Shaw
On behalf of the Audit Committee
12 November 2010
Annual financial statements
The audit committee has evaluated the consolidated annual
financial statements for the year ended 31 August 2010 and
ensured that they comply, in all material aspects, with the
requirements of the Act and appropriate International
Financial Reporting Standards. The Committee has therefore
recommended the annual financial statements for approval
to the board. The board has subsequently approved the
financial statements, which will be open for discussion at
the forthcoming annual general meeting.
JD Group Annual Report 2010
139
Directors’ remuneration
This report on remuneration and related matters covers
issues that are the concern of the board as a whole in
addition to those which are dealt with by the remuneration
committee.
Non-executive directors are not bound by service contracts.
No director has an employment contract with the Group
exceeding three years.
Incentive Scheme
Remuneration policy
The remuneration committee has a clearly defined mandate
from the board aimed at:
➔ ensuring that the Group’s chairman, directors and senior
executives are fairly rewarded for their individual
contribution to the Group’s overall performance; and
➔ 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, as
detailed on pages 68 to 70.
Directors’ service contracts
All executive directors’ normal service contracts are subject
periods of between three and 12 calendar months’ notice.
140
JD Group Annual Report 2010
A new generation incentive scheme, namely the JD Group
Share Appreciation Rights (SAR) Scheme, was incorporated
on 12 August 2009. The 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 Scheme in terms of
the provisions of the scheme rules.
A comprehensive review of the SAR Scheme can be found
on page 199 of this annual report. The Group’s existing,
outdated incentive scheme, the JD Group Employee Share
Incentive Scheme, is being phased out and no options will
henceforth be issued from this scheme.
Executive directors’ remuneration
Basic
salary
Allowances
Retirement
contributions
291
256
192
192
192
57
593
414
164
187
206
68
Medical
contributions
Variable
remuneration
Share
based
payments
Total
2010
ID Sussman
AG Kirk
KR Chauke
Dr HP Greeff
ID Thompson
BJ van Rooy
(appointed 1 May
2010)
G Völkel (resigned
30 April 2010)
3
2
1
1
1
015
715
088
251
373
462
486
439
182
658
894
698
480
440
840
840
840
596
892
000
520
920
100
275
22
82
29
22
27
828
340
704
828
412
—
1 146
970
554
554
584
211
000
400
880
880
880
500
5 430 039
—
—
604 400
871 400
—
10
4
2
2
3
499
438
030
814
256
800
725
619
126
526
526
069
2 796 709
96 420
100 074
6 920
2 554 000
2 638 266
8 192 389
12 704 066
1 280 456
1 734 781
192 032
6 576 540
9 544 105
32 031 980
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
20 452
73 800
26 650
23 462
24 584
12 716
480 360
320 240
96 072
96 072
80 060
200 150
—
—
—
—
—
670 250
4 277 240
3 533 337
1 412 507
1 570 339
1 697 288
2 811 333
10 114 193
1 364 907
1 698 076
181 664
1 272 954
670 250
15 302 044
2009
ID Sussman
AG Kirk
KR Chauke
Dr HP Greeff
ID Thompson
G Völkel
Non-executive directors’ remuneration
Audit
Risk
Board Committee Committee
RemuneNomiration
nations
Committee Committee
Sub
total
Share
based
payments
Total
2010
VP Khanyile
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
GZ Steffens
250
125
250
250
250
250
365
000
000
000
000
000
000
500
30 000
21 000
121 000
1 740 500
111 000
121 000
250
185
250
250
250
305
507
000
000
000
000
000
000
500
—
—
—
—
1 861 604
—
—
250
185
250
250
2 111
305
507
—
1 997 500
1 861 604
3 859 104
20 000
20 000
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
20 000
20 000
1 760 000
1 506 000
3 266 000
60 000
25 000
25 000
000
000
000
000
604
000
500
2009
VP Khanyile
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
GZ Steffens
120 000
240 000
240 000
240 000
240 000
240 000
240 000
1 560 000
40 000
20 000
40 000
60 000
80 000
80 000
JD Group Annual Report 2010
141
Directors’ remuneration
(continued)
Executive directors’ share options/share appreciation rights held at year end
ID Sussman
Offer date and price
AG Kirk
KR Chauke Dr HP Greeff
ID Thompson BJ van Rooy
2010
Share options*
20/02/2003 – R16,19
375 000
19/05/2004 – R35,10
500 000
24/05/2004 – R56,25
60 000
25 000
20 000
20 000
30 000
50 000
30 000
100 000
50 000
50 000
50 000
21/08/2009 – R41,71
200 000
65 000
65 000
65 000
26/02/2010 – R43,03
200 000
65 000
65 000
65 000
50 000
799 903
230 000
275 000
255 000
50 000
07/06/2005 – R54,00
30/11/2005 – R72,50
194 903
07/02/2007 – R79,83
30 000
20 000
31/07/2007 – R63,63
75 000
200 000
26/02/2008 – R37,21
25 000
Share appreciation rights**
1 135 000
*Share options may be exercised in lots of 25% after two years from the date of offer and 25% every year thereafter.
**Share appreciation rights – vesting subject to performance criteria.
Executive directors’ share options/share appreciation rights exercised/granted during the period
Offer date and price
ID Sussman
AG Kirk
KR Chauke Dr HP Greeff
ID Thompson
G Völkel BJ van Rooy
Quantum exercised/
average price
25/05/2000 – R29,84
250 000/
R51,56
20/02/2003 – R16,19
80 000/
R49,17
25/07/2003 – R23,42
15 000/
R49,40
15 000/
R49,00
10/09/2003 – R28,03
10 000/
R49,47
10 000/
R49,00
19/05/2004 – R35,10
20 000/
R49,00
250 000/
R51,56
25 000/
R49,44
45 000/
R49,00
80 000/
R49,17
Share appreciation
rights granted during
the period
26/02/2010 – R43,03
142
JD Group Annual Report 2010
200 000
65 000
65 000
65 000
100 000
50 000
200 000
65 000
65 000
65 000
100 000
50 000
Executive Directors’ share options/share appreciation rights held at year end
Offer date and price
ID Sussman
AG Kirk
KR Chauke Dr HP Greeff
ID Thompson
15 000
10 000
25 000
15 000
10 000
20 000
20 000
20 000
G Völkel
2009
Share options*
25/05/2000 – R29,84
20/02/2003 – R16,19
25/07/2003 – R23,42
10/09/2003 – R28,03
19/05/2004 – R35,10
24/05/2004 – R56,25
07/06/2005 – R54,00
30/11/2005 – R72,50
07/02/2007 – R79,83
31/07/2007 – R63,63
26/02/2008 – R37,21
Share appreciation rights**
21/08/2009 – R41,71
250 000
375 000
80 000
500 000
60 000
200 000
1 385 000
150 000
35 000
194 903
30 000
75 000
100 000
20 000
30 000
50 000
50 000
50 000
25 000
30 000
50 000
75 000
50 000
200 000
65 000
65 000
65 000
100 000
599 903
165 000
235 000
235 000
490 000
Gerald Völkel exercised 25 000 options at a price of R43,00 (options issued on 20/02/2003 at R16,19) in the 2009 financial year.
*Share options may be exercised in lots of 25% after two years from the date of offer and 25% every year thereafter.
**Share appreciation rights – vesting subject to performance criteria.
JD Group Annual Report 2010
143
Directors’ remuneration
(continued)
Non-executive directors’ share options/share appreciation rights units held at year end
Offer date and price
IS Levy
M Lock
02/05/2001 – R27,20
100 000
—#
24/05/2005 – R56,25
20 000
—##
120 000
—
100 000
20 000
100 000
20 000
120 000
120 000
2010
Share options held at year end*
2009
Share options held at year end*
02/05/2001 – R27,20
24/05/2005 – R56,25
Mervyn King exercised 100 000 options at a price of R42,26 (options issued on 02/05/2001 at R27,20) and cancelled 20 000
options issued on 24/05/2005 at R56,25 in the 2009 financial year.
#M Lock exercised 100 000 options at an average price of R46,00.
##
Options cancelled during the year.
*Share options may be exercised in lots of 25% after two years from the date of offer and 25% every year thereafter.
Directors’ direct and indirect interests
Directors’ (and their associates) direct and indirect interest in shares of the company
at the year end and 12 November 2010, the date on which the financial results were approved.
ID Sussman
ME King
Dr D Konar
IS Levy
There are no non-beneficial interests.
144
JD Group Annual Report 2010
2010
2009
250 000
250 000
—
23 428
10 000
10 000
2 428
2 428
262 428
285 856
Definitions
Revenue
Dividend cover
Revenue comprises net invoiced value of merchandise sold
excluding value added tax, net finance charges earned and
income generated from financial and other services.
Earnings per share divided by cash equivalent dividends
per share.
Return on closing shareholders’ equity
Cost of sales
Cost of sales comprises costs of purchase and other costs
incurred in bringing inventories to their present location and
condition, net of volume and settlement discounts.
Operating margin
Profit attributable to shareholders divided by shareholders’
equity at year end.
Return on average shareholders’ equity
Profit attributable to shareholders divided by average
shareholders’ equity.
Operating profit divided by revenue.
Return on assets managed
Interest cover
Operating profit and investment income divided by net
finance costs.
Operating profit and investment income divided by average
total assets (excluding deferred taxation) less average
non-interest bearing debt.
Earnings per share
Net asset value per share
Profit attributable to shareholders divided by the weighted
average number of shares in issue, excluding treasury
shares.
Shareholders’ equity divided by the total number of shares
in issue, including treasury shares.
Gearing ratio
Headline earnings per share
The Group adopted Circular 3/2009, issued by the South
African Institute of Chartered Accountants, during the
previous year, which replaced 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.
Interest bearing debt less cash resources divided by
shareholders’ equity.
Current ratio
Current assets divided by current liabilities.
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.
JD Group Annual Report 2010
145
Accounting policies
JD Group Limited is a South African registered company.
The consolidated annual financial statements of JD Group
Limited for the year ended 31 August 2010 comprises
JD Group Limited and its subsidiaries (together referred
to as the JD Group) and the Group’s interest in associate
companies and joint ventures.
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), the AC 500 standards as issued by the Accounting
Practices Board or its successor 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 2010.
The accounting policies applied in the preparation of the
annual financial statements are consistent with those
applied in the previous financial year ended 31 August 2009,
except for the adoption of the following revised accounting
standards and interpretations:
➔ Amendment to IAS 1 – Presentation of financial
statements
➔ IFRS 2 – Share-based Payment
➔ IFRS 3 – Business Combinations
➔ IFRS 7 – Financial Instruments: Disclosures
Basis of preparation
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 as appropriate. South African rand is the
currency in which the majority of the Group’s transactions
are denominated. Unless otherwise stated, all amounts in
the annual financial statements are shown rounded off to
the nearest R million.
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
15 September 2010.
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
recognised in the period in which the estimate is revised
if the revision only affects that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
The accounting policies have been applied consistently by
all Group entities.
➔ IFRS 8 – Operating Segments
➔ IAS 23 – Borrowing Costs
Basis of consolidation
➔ IAS 27 – Consolidated and Separate Financial Statements
Subsidiaries
➔ IAS 32 – Financial Instruments: Presentation
Subsidiaries are entities controlled by the company
(including 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.
➔ IFRIC 15 – Agreements for the Construction of Real Estate
➔ IFRIC 16 – Hedges of a Net Investment in a Foreign
Operation
➔ IFRIC 17 – Distribution of Non-cash Assets to Owners
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 2010 or
the financial position of the Group as at that date, other
than certain additional disclosures.
146
JD Group Annual Report 2010
On acquisition, the assets and liabilities and contingent
liabilities of the subsidiary are measured at fair value at the
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 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.
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
Group companies are eliminated on consolidation.
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.
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
company, except where unrealised losses provide evidence
of an impairment of the asset transferred.
Any difference between the cost of acquisition and the
Group’s share of the net identifiable assets, liabilities and
contingent liabilities, fairly valued, is recognised and treated
according to the Group’s accounting policy for goodwill and
included in the carrying value of the investment.
as described in the policy above relating to interest in
associate companies.
Intangible assets and goodwill
Goodwill
All business combinations are accounted for by applying the
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.
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.
Where the Group’s interest in the fair value of the net assets
and liabilities acquired exceeds the cost of acquisition, the
amount is directly recognised in profit or loss.
Research and development
Research costs are recognised as an expense in the period
in which they are incurred.
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 that development costs will be recovered
through future commercial activity. Such development costs
are capitalised as an intangible asset and amortised on a
straight line basis over the life of the project from the date
of commencement of commercial operation.
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
Other intangible assets
Other intangible assets that are acquired by the Group
are stated at cost less accumulated amortisation and
impairment losses. If an intangible asset is acquired in a
business combination, the cost of that intangible asset is
measured at its fair value at the acquisition date.
JD Group Annual Report 2010
147
Accounting policies
(continued)
Expenditure on internally generated goodwill and brands is
recognised in the income statement as an expense when
incurred.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets
is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates.
All other expenditure is expensed as incurred.
Amortisation
Amortisation of intangible assets is recognised in the income
statement on a straight line basis over the assets’ estimated
useful lives unless such lives are indefinite. Goodwill,
intangible assets with an indefinite useful life and intangible
assets not yet available for use are not amortised but are
tested for 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 values are reassessed annually.
Property, plant and equipment
Owned assets
Property, plant and equipment is stated at historical cost to
the Group, less accumulated depreciation and impairment
losses.
The gross carrying amount of property, plant and equipment
is initially measured using the historical cost basis of
accounting. Subsequent expenditure relating to an item of
property, plant and equipment is capitalised to the carrying
value of the asset when it is probable that future economic
benefits, in excess of the originally assessed standard of
performance of the item concerned, will flow to the Group.
All other subsequent expenditures are recognised as
expenses in the period in which they are incurred.
Depreciation is provided on the straight line basis at rates
that will reduce the book values to estimated residual values
over the expected useful lives of the assets. The method and
rates used are determined by conditions in the industry. The
estimated useful lives and residual values are reviewed
annually. Depreciation rates vary between 3% and 25% per
annum as disclosed in note 9. Land is not depreciated. Lease
improvements on capitalised leased premises are written off
over their expected useful lives on the same basis as owned
assets or, where shorter, over the term of the lease.
148
JD Group Annual Report 2010
The recorded value of depreciated assets is periodically
compared to the anticipated recoverable amount if assets
were to be sold. Where an asset’s recorded value has
declined below the recoverable amount, and the decline is
expected to be of a permanent nature, the asset is written
down to its recoverable amount and the decline is
recognised as an expense.
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.
Leased assets
Lease agreements which transfer substantially all the risks
and rewards associated with ownership of an asset to the
lessee are regarded as finance leases. Assets subject to
finance lease agreements are capitalised at the lower of the
present value of the minimum lease payments and their
cash cost equivalent and the corresponding liability to the
lessor is raised.
Lease payments are allocated using the effective interest
method to determine the lease finance cost, which is
charged against operating profit and the capital repayment,
which in turn reduces the liability to the lessor. These assets
are depreciated on the same basis as the property, plant
and equipment owned by the Group over the period of
the lease.
Other leases, which merely confer the right to the use of an
asset, are treated as operating leases, with lease payments
charged against operating profit on a straight line basis over
the period of the lease.
Subsequent costs
The Group recognises in the carrying value of an item of
property, plant and equipment the cost of replacing part of
such an item when the cost is incurred, if it is probable that
additional future economic benefits embodied within the
item will flow to the Group and the cost of such item can
be measured reliably. Costs of the day to day servicing of
property, plant and equipment are recognised in the income
statement as an expense when incurred.
Impairment of tangible and intangible assets
(excluding goodwill)
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss, if any. Where
it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable
amount of the cash generating unit to which the asset
belongs.
share capital in the consolidated balance sheet and the
premium attached to them is netted off against the share
premium account.
If the recoverable amount of an asset or cash generating
unit is estimated to be less than its carrying amount, the
carrying amount of the asset or cash generating unit is
reduced to its recoverable amount. Impairment losses are
recognised as an expense immediately.
Dividends declared to equity holders are included in the
statement of changes in equity in the year in which they are
declared. Taxation costs incurred on dividends are dealt with
in the income statement in the year in which they are paid.
Where an impairment loss subsequently reverses, the
carrying amount of the asset or cash generating unit, except
for goodwill, is increased to the revised estimate of its
recoverable amount, but so that the increased carrying
amount does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset or cash generating unit in prior
years. A reversal of an impairment loss is recognised in
the income statement immediately.
Repurchase of issued shares
Operating leases
Payments and receipts under operating leases are
recognised in the income statement on a straight line basis
over the term of the lease. Lease incentives received or
granted are recognised in the income statement as an
integral part of the total lease expense or revenue.
Inventories
Inventories comprise merchandise for resale and are stated
at the lower of cost and net realisable value. Cost is
determined on the weighted average cost basis. Net
realisable value is the estimated selling price in the ordinary
course of business, less the estimated costs of selling and
distribution expenses.
Dividends received on treasury shares are eliminated on
consolidation. Treasury shares are taken into account in
the calculation of earnings per share.
Dividends
When issued shares are repurchased, the consideration paid
is accounted for as a set off against equity and reserves in
the Group’s consolidated balance sheet.
Share-based payment transactions
Equity settled
The fair value of share options and share appreciation rights
granted to employees is recognised in profit and loss with a
corresponding increase in equity. The fair value is measured
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 the actual number of share options or share
appreciation rights that vest, except where forfeiture is only
due to share prices not achieving the threshold for vesting.
Taxation
Current taxation
Treasury shares
Income tax on the profit or loss for the year comprises
current and deferred tax. Taxable profit differs from profit as
reported in the income statement because it excludes items
of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or
deductible.
Shares purchased by wholly owned Group companies in
their holding company and by the employee share trust are
classified as treasury shares, held at cost. For presentation
purposes treasury shares are netted off against the Group’s
Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantially
enacted at the balance sheet date and any adjustment to
tax payable in respect of previous years.
Where necessary, the carrying value of inventory is adjusted
for obsolete, slow moving and defective inventories.
Share capital
JD Group Annual Report 2010
149
Accounting policies
(continued)
Deferred taxation
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences.
Temporary differences arise from differences between the
carrying amount of assets and liabilities in the financial
statements and the corresponding tax base. In general,
deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are
recognised to the extent that is it probable that taxable profit
will be available against which deductible temporary
differences can be utilised. Such assets 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) which affects neither
taxable profit nor the accounting profit. Deferred tax assets
are reduced to the extent that it is no longer probable that
the related tax benefits will be realised.
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.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the asset is realised or the
liability is settled. Deferred tax is charged or credited in the
income statement, except when it relates to items credited
or charged directly to equity, in which case the deferred
taxation is also dealt with in equity.
Secondary taxation on companies
Secondary taxation on companies (STC) arising from the
distribution of dividends is recognised in the income
statement in the year that dividends are paid in accordance
with the Group dividend cycle.
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
are expressed in currency units (CUs), which is the functional
currency of the company, and the presentation currency for
the consolidated financial statements.
150
JD Group Annual Report 2010
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the
rates of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at
the balance sheet date. Non-monetary items carried at fair
value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise except for:
➔ exchange differences which relate to assets under
construction for future productive use, which are
included in the cost of those assets where they are
regarded as an adjustment to interest costs on foreign
currency borrowings;
➔ exchange differences on transactions entered into in
order to hedge certain foreign currency risks; and
➔ 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 profit or loss on disposal of the net
investment.
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
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
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.
Revenue recognition
Instalment sales
Consideration from transactions under instalment sales are
included in revenue when goods are delivered and title has
passed. Finance charges, calculated on the effective interest
rate method, are accounted for over the period of the
agreements as instalments become due. This method
approximates the net present value of anticipated future
cash flows.
Sale of merchandise
Revenue from the sale of merchandise is recognised when
substantially all the risks and rewards of ownership have
been transferred to the buyer and the enterprise does not
retain continuing managerial control of the goods to a
degree usually associated with ownership, when the amount
of revenue and costs incurred or to be incurred in respect of
the sale transactions can be measured reliably and when
the collectability of the consideration in respect of the sale
is reasonably assured.
Financial services
Initiation fees and insurance income is deferred and
recognised over the term of the contract.
Interest
Interest revenue is recognised on a time basis by reference
to 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.
Dividend income
Dividend income from investments is recognised when the
shareholders’ rights to receive payment have been
established.
Insurance contracts
Classification of insurance contracts
Contracts under which the Group accepts significant
insurance risk from another party (the policy holder) 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 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
Assets and liabilities in respect of insurance contracts are
valued according to the requirements of the professional
guidance notes (PGNs) issued by the Actuarial Society of
South Africa (ASSA). Of particular relevance to the insurance
asset and liability calculation is PGN 104: Life Offices –
Valuation of Long-term Insurers.
The insurance contracts are valued in terms of the financial
soundness valuation (FSV) basis contained in PGN 104
issued by the ASSA. An asset or liability for contractual
benefits that are expected to be realised or incurred in the
future is recorded in respect of the existing policy book
when the premiums are recognised. The liability consists of
both an incurred but not reported (IBNR) and an unearned
premium (UPR) component.
Compulsory margins to adverse deviations are included in
the assumptions as required in terms of PGN 104.
Premiums
Written premiums comprise the premiums on contracts
entered into during the year, irrespective of whether they
relate in whole or in part to a later accounting period.
Premiums are disclosed gross of commission payable to
intermediaries and exclude taxes and levies based on
premiums. Premiums written include adjustments to
premiums written in the prior accounting period and an
estimate for ‘pipeline’ premiums.
An estimate is made at the reporting 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
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
claims and claims handling expenses paid during the
financial year together with the movement in the provision
for outstanding claims.
JD Group Annual Report 2010
151
Accounting policies
(continued)
Outstanding claims comprise provisions for the Group’s
estimate of the ultimate cost of settling all claims incurred
but unpaid at the reporting date whether reported or not,
and related internal and external claims handling expenses
and an appropriate margin.
Deferred acquisition costs
Acquisition costs comprise all direct and indirect costs
arising from the conclusion of insurance contracts. Deferred
acquisition costs represent the proportion of acquisition
costs incurred which correspond to the unearned premium
provision.
Contingency reserve
In terms of the Short-term Insurance Act in South Africa, a
contingency reserve of 10% of premiums written less
approved reinsurance (as defined in Short-term Insurance
Act, 1998) is required. This reserve can only be utilised with
prior permission of the Registrar of Insurance. Transfers to
and from this reserve are treated as appropriations of
retained earnings.
Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets (i.e. assets
that necessarily take a substantial period of time to get
ready for their intended use or sale) are capitalised as part
of the cost of those assets. The capitalisation rate applied is
the weighted average of the net borrowing costs applicable
to the net borrowings of the Group. Capitalisation of such
borrowing costs ceases when the assets are substantially
ready for their intended use or sale. Investment income
earned on temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted
from borrowing costs capitalised.
All other borrowing costs are expensed in the period in
which they are incurred.
Employee benefits
Short term employee benefits
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,
performance bonuses and annual leave represent the
amounts which the Group has a present obligation to pay as
a result of the employees’ services provided. The liabilities
have been calculated at undiscounted amounts based on
current salary levels.
152
JD Group Annual Report 2010
Defined contribution plans
Payments to defined contribution retirement benefit plans
are recognised as an expense in the income statement as
incurred. Obligations to state managed pension schemes are
dealt with as defined contribution plans where the Group’s
obligation under the schemes are equivalent to those arising
in a defined contribution benefit plan.
Defined benefit plans
For defined retirement benefit plans the cost of providing
the benefit is determined using the projected unit credit
method. The scheme is actuarially valued for financial
reporting purposes at each reporting date. Past service costs
are recognised immediately to the extent that the benefits
are already vested, and otherwise are amortised on a
straight line basis over the average remaining working lives
of members.
The amount recognised in the balance sheet represents the
present value of defined benefit obligations as adjusted for
unrecognised actuarial gains and losses, past service costs,
and as reduced by the fair value of plan assets. Any asset
resulting from the calculation is limited to the unrecognised
actuarial losses and past service costs, plus the present
value of available refunds and reductions in future
contributions to the plan.
Provisions
Provisions are recognised when the Group has a present,
constructive or legal obligation as a result of a past event
and it is probable that it will result in an outflow of economic
benefits that can be reasonably estimated.
An onerous contract is a contract under which the
unavoidable costs of meeting the obligation exceeds the
economic benefit expected to be received under it. When
a contract becomes onerous, the present obligation under
a contract is recognised and measured as a provision.
A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and
has raised a valid expection in those affected that it will
carry out the restructuring by starting to implement the plan
or announcing its main features to those affected by it. The
measurement of a restructuring provision includes only the
direct operating expenditures arising from the restructuring,
which are those amounts that are both necessarily entailed
by the restructuring and not associated with the ongoing
activities of the entity.
If the effect is material, provisions are determined by
discounting the expected future cash flows that reflect
current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and
deposits on call with banks and investment banks and other
short-term, highly liquid investments that are readily
convertible to cash and are subject to an insignificant risk
of changes in value. Bank overdrafts are only included
where the Group has a legal right of set off due to cash
management.
Financial instruments
Initial recognition and measurement
Financial instruments include all financial assets and
liabilities 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.
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.
Financial assets and liabilities at fair value through profit
or loss (FVTPL)
➔ it is a derivative that is not designated and effective as a
hedging instrument.
The Group has designated foreign exchange contracts as
financial instruments at FVTPL.
Financial assets at FVTPL are stated at fair value, with any
resultant gain or loss recognised in profit or loss. The net
gain or loss recognised in profit or loss incorporates interest
earned on the financial asset. Fair value is determined in the
manner described in note 25.
Available-for-sale (AFS) financial assets
Unlisted shares held by the Group that are traded in an
active market are classified as being AFS and are stated at
fair value. Fair value is determined in the manner described
in note 25.
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 method and foreign exchange gains and losses on
monetary assets, which are recognised directly in profit or
loss. Where 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 measured at amortised cost using the
effective interest method, less any impairment losses.
Interest income is recognised by applying the effective
interest rate, except for short-term receivables when the
recognition of interest would be immaterial.
Financial assets and liabilities are classified as FVTPL where
the financial instrument is either held for trading or
designated at FVTPL.
Other financial liabilities
A financial asset or liability is held for trading if:
➔ it has been acquired or incurred principally for the
purpose of selling or repurchasing in the near future; or
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with
interest expense recognised on an effective yield basis.
➔ it is part of an identified portfolio that the Group manages
together and has a recent actual pattern of short-term
profit-taking; or
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
JD Group Annual Report 2010
153
Accounting policies
(continued)
interest rate is the rate that exactly discounts estimated
future cash payments through the expected life of the
financial liability, or (where appropriate) a shorter period,
to the net carrying amount on initial recognition.
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.
Impairment of financial assets
Derecognition
Financial assets, other than those at FVTPL, are assessed
for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective
evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset,
the estimated future cash flows of the investment have been
impacted.
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire or
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If
the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may
have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds
received.
For unlisted shares classified as AFS, a significant or
prolonged decline in the fair value of the security below its
cost is considered to be objective evidence of impairment.
For certain categories of financial assets, such as trade
receivables, assets that are assessed not to be impaired
individually are subsequently assessed for impairment on
a collective basis. Objective evidence of impairment for
a portfolio of receivables includes the level of arrears of
a customer, part payment of instalments or missed
instalments, as well as observable changes in national or
economic conditions that correlate with defaults on
receivables.
For financial assets carried at amortised cost, the amount of
impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash
flows, discounted at the financial asset’s original effective
interest rate.
The carrying amount of the financial asset is reduced by the
impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount
is reduced through the use of an allowance account. When
a trade receivable is considered uncollectable, it is written
off against the carrying value of the trade receivable.
Subsequent recoveries of amounts previously written off as
well as changes in the carrying amount of the allowance
account are recognised in the profit and loss for the year.
With the exception of AFS equity instruments, if, in a
subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the
investment at the date the impairment is reversed does not
exceed what the amortised cost would have been had the
impairment not been recognised.
154
JD Group Annual Report 2010
The Group derecognises financial liabilities when, and only
when, the Group’s obligations are discharged, cancelled or
they expire.
Effective interest method
The effective interest method is a method of calculating
the amortised cost of a financial asset or liability and of
allocating interest or expense over the relevant period.
The effective interest rate is the rate that exactly discounts
estimated future cash receipts or payments (including all
fees on points paid or received that form an integral part
of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the
financial asset or financial liability, or where appropriate,
a shorter period.
Income is recognised on an effective interest basis for debt
instruments other than those financial assets designated as
at FVTPL.
Derivative financial instruments
The Group uses derivative financial instruments to manage
its risk associated with foreign currency and interest rate
fluctuations relating to certain firm commitments and
forecasted transactions, including foreign exchange forward
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.
A derivative is presented as a non-current asset or
non-current liability if the remaining maturity of the
instrument is more than 12 months and it is not expected to
be realised or settled within 12 months. Other derivatives are
presented as current assets or current liabilities.
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of
the host contracts and the host contracts are not measured
at fair value with changes in fair value recognised in profit
or loss.
Fair value of derivatives and other financial instruments
As described in note 25, the directors use their judgement
in selecting an appropriate valuation technique for financial
instruments not quoted in an active market. Valuation
techniques commonly used by market practitioners are
applied. For derivative financial instruments, assumptions
are made based on quoted market rates adjusted for
specific features of the instrument. Other financial
instruments are valued using a discounted cash flow
analysis based on 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 25.
Offsetting financial assets and liabilities
Financial assets and liabilities are set off where the Group
has a legal and enforceable right to set off and there is
an intention to settle the liability and realise the asset
simultaneously, or to settle on a net basis.
Non-current assets held for sale and discontinued
operations
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 regarded as met only when the sale is highly probable
and the asset is available for immediate sale in its present
condition. These assets may be a component of an entity,
a disposal 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.
A discontinued operation is a significant distinguishable
component of the Group’s business that is abandoned or
terminated pursuant to a single formal plan, and which
represents a separate major line of business or geographical
area of operation. Classification as a discontinued operation
occurs upon disposal or when the operation meets the
criteria to be classified as held for sale. A disposal group that
is to be abandoned may also qualify as a discontinued
operation, but not as assets held for sale.
The profit or loss on sale or abandonment of a discontinued
operation is determined from the formalised discontinuance
date. Discontinued operations are separately recognised in
the financial statements once management has made a
commitment to discontinue the operation without a realistic
possibility of withdrawal which should be expected to qualify
for recognition as a completed sale within one year of
classification.
Segment reporting
IFRS 8 requires operating segments to be identified on the
basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision
maker in order to allocate resources to the segments and
to assess their performance.
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.
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 for management.
Contingencies and commitments
Transactions are classified as contingencies where the
Group’s obligation depends on uncertain future events.
Items are classified as commitments where the Group
commits itself to future transactions or if the items will
result in the acquisition of assets.
Related party transactions
The Group does not have one single controlling shareholder.
All subsidiaries and associated companies of the Group
are related parties. A list of the major subsidiaries and
associated companies is included in these financial
statements. Details of loans to and from subsidiaries and
associated companies are also provided.
JD Group Annual Report 2010
155
Group statement of comprehensive income
for the year ended 31 August
Revenue
2010
2009
Notes
Rm
Rm
2
13 224
12 922
Cost of sales
6 727
6 428
Operating expenses
4 972
4 739
Administration and other expenses
1 203
1 102
193
197
2 227
2 103
Marketing
354
361
Occupancy
755
706
Depreciation and amortisation
Employees
Share-based payment
Transport and travel
Operating profit before debtors costs
3
Operating profit
Finance costs
249
(3)
1 525
1 755
753
1 109
772
646
4
9
4
80
184
4
(181)
(272)
Investment income
Finance income
24
217
(3)
Surplus on disposal of property, plant and equipment
Debtors costs
26
13
—
(12)
Profit before taxation
5
675
555
Taxation
6
167
475
508
80
501
75
7
5
508
80
7
499
73
– basic
7
304,9
45,8
– diluted
7
301,4
45,6
Cash equivalent dividends per share (cents)
8
150,0
41,0
Share of losses of associates
Profit for the year
Attributable to:
Shareholders
Minorities
Profit for the year
Headline earnings
Earnings per share (cents)
Group statement of other comprehensive income
Profit for the year
508
80
Exchange differences on translating foreign operations
(31)
(38)
Total comprehensive income for the year
477
42
470
37
7
5
477
42
Attributable to:
Shareholders
Minorities
156
JD Group Annual Report 2010
Group balance sheet
at 31 August
Notes
2010
Restated
2009
Rm
Rm
1 617
1 673
Assets
Non-current assets
9
767
756
Goodwill
10
493
493
Intangible assets
11
212
256
Investments and loans
12
30
92
Deferred taxation
14
115
76
7 664
7 249
Property, plant and equipment
Current assets
Inventories
15
1 575
1 491
Trade and other receivables
16
5 276
4 910
Financial assets
25
—
8
34
104
779
736
9 281
8 922
1 779
1 779
Taxation
Bank balances and cash
Total assets
Equity and liabilities
Equity and reserves
Share capital and premium
17
Treasury shares
18
(378)
Non-distributable and other reserves
19
158
166
3 464
3 230
131
67
5 154
4 831
34
27
Retained earnings
Shareholders for dividend
Shareholders’ equity
Minority shareholders’ interest
(411)
Total equity
5 188
4 858
Non-current liabilities
1 057
1 299
878
Interest bearing long term liabilities
20
922
Non-interest bearing long term liability
21
75
83
Deferred taxation
14
60
338
3 036
2 765
2 141
Current liabilities
Trade and other payables
21
2 424
Provisions
22
—
12
Interest bearing liabilities
20
502
486
Financial liabilities
25
4
3
Taxation
84
112
Bank overdraft
22
11
9 281
8 922
Total equity and liabilities
JD Group Annual Report 2010
157
Group cash flow statement
for the year ended 31 August
Notes
Cash flows from operating activities
Restated
2009
Rm
Rm
62
(15)
Cash generated by trading
a
980
871
Increase in working capital
b
(334)
(325)
646
546
Cash generated by operations
4
Investment income
9
Finance costs – net
c
(92)
(109)
Taxation paid
d
(314)
(393)
244
53
e
(182)
(68)
(99)
(431)
—
(234)
Cash available from operating activities
Dividends paid
Cash flows from investing activities
Acquisition of subsidiary companies
f
Investment and loan receipts
62
1
Proceeds on disposal of property, plant and equipment
27
20
(188)
(218)
69
36
Additions to property, plant and equipment
Cash flows from financing activities
27
16
Acquisition of shares by share incentive trust
(18)
—
Proceeds from minority shareholders’ loans
—
2
Long term borrowings raised
633
929
Long term borrowings repaid
(527)
(762)
Finance lease liabilities repaid
(46)
(149)
Proceeds on disposal of treasury shares by share incentive trust
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
158
2010
JD Group Annual Report 2010
g
32
(410)
725
1 135
757
725
Notes to the Group cash flow statement
for the year ended 31 August
a
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
b
Increase in working capital
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Unrealised foreign currency translation
c
Finance costs – net
Interest paid (note 4)
Interest received (note 4)
Fair value adjustments of financial assets and liabilities
d
Taxation paid
Amount (payable)/receivable at beginning of year
Per income statement (note 6)
Acquisition of subsidiary companies
Amount payable at end of year
e
Dividends paid
Amount in equity at beginning of year
Declared during the year
Payable to minority shareholders
Amount in equity at end of year
f
g
Acquisition of subsidiary companies
2010
Restated
2009
Rm
Rm
772
646
149
44
(9)
26
(3)
1
155
42
(1)
24
(3)
8
980
871
(84)
(494)
272
(28)
(43)
(279)
32
(35)
(334)
(325)
(181)
80
9
(272)
184
(21)
(92)
(109)
(8)
(356)
—
50
95
(490)
(6)
8
(314)
(393)
(67)
(246)
—
131
(67)
(67)
(1)
67
(182)
(68)
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
128
(19)
(1)
(6)
(53)
(7)
(47)
(77)
(21)
Intangible assets
Goodwill
—
—
—
(31)
42
146
Cost of investment
Bank overdraft acquired
—
—
157
77
Cash flow from acquisition of subsidiaries
—
234
757
725
Cash and cash equivalents
Bank balances and cash (net of overdraft)
JD Group Annual Report 2010
159
Group statement of changes in equity
for the year ended 31 August
Balance at 31 August 2008
Profit attributable to shareholders
Translation of foreign entities
Arising on acquisition of subsidiary
companies
Distribution to shareholders
Distribution to share incentive trust
Paid to shareholders –
15 December 2008
Paid to share incentive trust –
15 December 2008
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
Share-based payment
Transfer to retained earnings of
vested share options
Transfer to statutory reserve
Balance at 31 August 2009 –
restated
Share
capital
Rm
Share
premium
Rm
9
1 770
Nondistributable
Treasury and other
shares reserves
Rm
Rm
(435)
245
67
—
5
4 813
80
(38)
21
(70)
3
70
(3)
21
—
—
(70)
(70)
3
(1)
2
2
16
8
8
24
24
9
1 770
(411)
(69)
4
69
(4)
166
3 230
—
—
67
501
27
4 858
7
508
(31)
(31)
(255)
9
Distribution to share incentive trust
Paid to shareholders –
14 December 2009
Paid to share incentive trust –
14 December 2009
255
—
(9)
—
(70)
(70)
3
3
(119)
Paid to shareholders – 28 June 2010
Paid to share incentive trust –
28 June 2010
Shares purchased by the share
incentive trust
Proceeds on disposal of treasury
shares by share incentive trust
Loss on disposal of treasury shares
included in attributable profit
(119)
4
4
(18)
(18)
27
27
24
(24)
—
26
Share-based payment
Transfer to retained earnings of
vested share options
Transfer to statutory reserve
9
1 770
Total
Rm
(1)
16
Distribution to shareholders
JD Group Annual Report 2010
3 157
75
Retained
earnings
Rm
3
Profit attributable to shareholders
160
Minority
shareholders’
interest
Rm
(38)
Translation of foreign entities
Balance at 31 August 2010
Shareholders
for
dividend
Rm
(378)
26
(23)
23
—
20
(20)
—
158
3 464
131
34
5 188
Notes to the Group annual financial statements
for the year ended 31 August
2009
Rm
1.
Restatement of amounts previously reported for 2009
In terms of IFRS 3, the Group has been reporting provisional amounts in connection with the
acquisition of Blake & Associates Holdings (Pty) Limited (Blake) and Maravedi Group (Pty) Limited
(Maravedi) during December 2008. The fair value of the assets and liabilities acquired as part of these
transactions were finalised during the current year. The finalisation has resulted in the restatement
of certain balance sheet amounts relating to Maravedi and previously reported as follows:
Goodwill
Balance as previously reported
Restatement impact
455
38
Balance as currently reported
493
Trade and other receivables
Balance as previously reported
Restatement impact
4 952
(42)
Balance as currently reported
4 910
Minority shareholders’ interest
Balance as previously reported
Restatement impact
31
(4)
Balance as currently reported
27
The restatements had no impact on the profit attributable to shareholders previously reported.
The above restatements had no cash flow effect, but there was a reclassification between the trade and other
receivables, minority interest and goodwill in note f to the cash flow statement.
2.
9 520
1 575
1 180
949
9 244
1 505
1 254
919
13 224
12 922
Debtors costs
(Decrease)/increase in impairment provision
Bad debts written off
4.
2009
Rm
Revenue
Sale of merchandise
Finance charges earned
Financial services
Other services
3.
2010
Rm
(177)
930
52
1 057
753
1 109
16
156
9
36
230
6
181
272
(80)
—
(157)
(27)
(80)
(184)
101
88
Finance costs – net
Finance costs
Interest paid – finance leases
Interest paid – other
Fair value losses on financial instruments
Finance income
Interest received
Fair value gains on financial instruments
Finance costs – net
Finance costs for 2009 include an amount of R13 million relating to the “tax settlement” – refer to note 6.
JD Group Annual Report 2010
161
Notes to the Group annual financial statements
5.
(continued)
2010
2009
Rm
Rm
12
11
1
1
1
1
14
13
149
155
Profit before taxation
is stated after taking account of the following items:
Auditors’ remuneration
Audit fees – current
– prior
Non-audit services
Depreciation of property, plant and equipment
Owned
Directors’ remuneration (see disclosure on page 141)
2
2
22
15
24
17
24
(14)
Business premises
583
558
Office equipment
41
43
624
601
106
89
5
4
111
93
Supplier relationship amortisation
13
12
Trademark amortisation
31
30
(3)
(3)
Services as directors
Other services
Foreign exchange losses/(profits)
Operating leases
Retirement benefit costs
Defined contribution funds
Defined benefit funds
Surplus on disposal of property, plant and equipment
Owned
Write down of inventories to net realisable value
6.
148
8
300,2
129,8
30,9
330,1
Taxation
South African taxation
Normal
– current
– prior
Deferred – current
– prior
Secondary taxation on companies
162
JD Group Annual Report 2010
(127,8)
(8,7)
(61,4)
(10,0)
18,0
6,1
159,9
447,3
6.
2010
2009
Rm
Rm
Taxation (continued)
Foreign taxation
7,8
24,0
(0,3)
0,4
—
3,3
7,5
27,7
167,4
475,0
Current taxation
356,6
490,4
Deferred taxation
(189,2)
(15,4)
167,4
475,0
28,0
28,0
189,4
155,6
Normal
– current
– prior
Deferred – current
Total taxation
Dealt with as follows:
Reconciliation of tax charge
Domestic standard normal rate of taxation (%)
Taxation at standard rate
Adjusted for
Foreign tax rate differential
(0,5)
(5,8)
Expenditure disallowed
29,6
36,0
Exempt income
(17,1)
(30,2)
Prior years
(30,8)
320,5
Deferred tax assets not previously raised
(23,0)
(8,4)
18,0
6,1
1,8
1,1
Taxation charged to income
167,4
474,9
Effective rate of taxation (%)
24,7
85,6
Tax losses available
624,5
408,6
Deferred tax assets not raised
485,1
346,3
Deferred tax assets raised
139,4
62,3
39,0
17,4
Paid directly to SARS
—
140
Tax effect on R13 million included in finance costs (note 4)
—
(4)
Paid via third party financiers to SARS
—
189
—
325
Secondary taxation on companies
Withholding tax and tax on foreign income
Estimated tax losses available for set off against future taxable income
Effective tax assets at country rate of tax (note 14)
Deferred tax assets relating to tax losses of R485,1 million (2009: R346,3 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 in 2009.
The tax settlement amount comprises the following:
JD Group Annual Report 2010
163
Notes to the Group annual financial statements
7.
(continued)
2010
2009
Rm
Rm
501
75
Earnings per share and headline earnings per share
Reconciliation of headline earnings
Profit attributable to shareholders
Surplus on disposal of property, plant and equipment
Taxation thereon
Headline earnings
(3)
(3)
1
1
499
73
164 314
163 245
Cents
Cents
304,9
45,8
Basic
Weighted average number of shares in issue during the year of (000)
Earnings per share
Surplus on disposal of property, plant and equipment
Taxation effect thereon
Headline earnings per share
(1,8)
(1,9)
0,5
0,5
303,6
44,4
1 939
869
166 253
164 114
Cents
Cents
301,4
45,6
Diluted
Dilutive effect of bonus element in share options (000)
Diluted weighted average number of shares in issue during the year of (000)
Diluted earnings per share
(1,8)
(1,9)
0,5
0,5
300,1
44,2
Rm
Rm
(70)
(70)
70
70
119
—
– proposed 80 cents on 170 500 000 shares (2009: 41 cents on 170 500 000 shares)
136
70
Total distribution to shareholders
255
70
Surplus on disposal of property, plant and equipment
Taxation effect thereon
Diluted headline earnings per share
The above are calculated based on R000s amounts.
8.
Distribution to shareholders
Final dividend prior year
– declared 41 cents on 170 500 000 shares (2009: 41 cents on 170 500 000 shares)
– paid 41 cents on 170 500 000 shares (2009: 41 cents on 170 500 000 shares)
Interim dividend
– declared and paid 70 cents on 170 500 000 shares (2009: nil cents on
170 500 000 shares)
Final dividend
164
JD Group Annual Report 2010
Leasehold
improvements
Property
Rm
Rm
9.
Office
Vehicles
equipment,
and
furniture
forklift Computer Computer
trucks hardware software and fittings
Rm
Rm
Rm
Rm
2010
Rm
Property, plant and equipment
2010
At beginning of year
Cost
Accumulated depreciation
275
(7)
355
(170)
229
(94)
109
(57)
65
(54)
173
(68)
268
185
135
52
11
105
756
—
(1)
—
—
—
—
74
(53)
(54)
49
(4)
1
27
(26)
(29)
19
(3)
2
29
(29)
(27)
21
(1)
—
45
(12)
(2)
—
—
1
13
(28)
(17)
16
(1)
1
188
(149)
(129)
105
(9)
5
At end of year
Cost
Accumulated depreciation
275
(8)
371
(173)
224
(99)
110
(65)
108
(65)
168
(79)
1 256
(489)
Total net book value
267
198
125
45
43
89
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
2009
At beginning of year
Cost
Accumulated depreciation
1 206
(450)
767
463
230
(5)
323
(161)
275
(109)
55
(17)
47
(39)
130
(76)
1 060
(407)
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
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
460
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.
Assets with a net book value of R10 million are encumbered under finance lease liabilities as described in note 20.
JD Group Annual Report 2010
165
Notes to the Group annual financial statements
10.
(continued)
2010
Restated
2009
Rm
Rm
Arising on the acquisition of Connection Group
347
347
Arising on the acquisition of Blake & Associates
92
92
Arising on the acquisition of Maravedi Group
54
54
493
493
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 pre-tax 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.
11.
Intangible assets
Cost
381
381
Supplier relationships
48
48
Customer relationships
19
19
7
7
455
455
191
160
46
36
Customer relationships
4
2
Information database
2
1
243
199
212
256
44
42
Trademarks
Information database
Accumulated amortisation
Trademarks
Supplier relationships
Net book value
Amortisation charge for the year
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 comprises 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.
166
JD Group Annual Report 2010
2010
2009
Rm
Rm
Shares at cost, which approximates fair value
30
92
Investment in non-consolidated subsidiaries
—
—
12.
Investments and loans
12.1
Unlisted
Shares at cost
Loans to non-consolidated subsidiaries#
Impairment*
Directors’ valuation of unlisted investments
1
1
24
33
25
34
(25)
(34)
30
92
30
92
*The impairment has been calculated based on the directors’ estimation of cash to be received on the
respective loans.
#
12.2
Refer to Subsidiaries included in note 27 for further details.
Abridged aggregated balance sheet of non-consolidated subsidiaries
1
1
Distributable reserves
26
25
Opening balance
25
(46)
1
71
Non-distributable reserves
(50)
(58)
Opening balance
(58)
15
8
(73)
(23)
(32)
Equity
Movement
Movement
Shareholders’ equity
1
1
Loans from consolidated subsidiaries less amounts written off
(24)
(33)
Total assets
(23)
(32)
(23)
(32)
24
33
1
1
Net current assets
Reconciliation of estimated recoverable portion of loans
Net asset value
Loans from consolidated subsidiaries after amounts written off
JD Group Annual Report 2010
167
Notes to the Group annual financial statements
(continued)
2010
2009
Rm
Rm
—
—
– Prior year equity accounted profits
—
13
– Current year equity accounted loss
—
(4)
– Current year taxation credit
—
1
– Adjusted on conversion to subsidiary company
—
(10)
Carrying value
—
—
—
—
– Prior year equity accounted losses
—
(30)
– Current year equity accounted loss
—
(8)
– Current year taxation charge
—
(2)
– Adjusted on conversion to subsidiary company
—
40
Carrying value
—
—
13.
Interest in associate and joint venture companies
13.1
Interest in associate company
Shares at cost
Attributable share of post-acquisition retained earnings
During the prior year, the Group first increased its interest in Blake 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.
13.2
Interest in joint venture
Shares at cost
Attributable share of post-acquisition retained earnings
During the prior 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, debtor’s management services and the collection of
defaulting debt on behalf of third parties.
168
JD Group Annual Report 2010
14.
2010
2009
Rm
Rm
262
289
Deferred taxation
Amount provided at beginning of year
Deferred tax on equity accounted losses
—
(1)
Deferred tax assets at acquisition date of subsidiary companies
—
(11)
Charged to income statement (note 6)
(189)
(15)
Release of Profurn at acquisition provision
(128)
—
(55)
262
The deferred taxation provision comprises the following temporary differences:
31
179
(92)
(91)
Trademarks
60
72
Assets unrealised
(3)
(3)
Instalment sale receivables’ allowances
Provisions disallowed
Payments in advance
9
7
Other
(21)
115
Tax losses (note 6)
(39)
(17)
(55)
262
Deferred taxation is disclosed as:
Asset
Liability
15.
(115)
(76)
60
338
(55)
262
Inventories
Merchandise net of obsolescence
Provision for write down to net realisable value
1 597
(22)
1 575
1 518
(27)
1 491
JD Group Annual Report 2010
169
Notes to the Group annual financial statements
16.
(continued)
2010
2009
Rm
Rm
Trade and other receivables
5 224
4 959
Other loans and advances
27
26
Trade receivables
42
70
5 293
5 055
Instalment sale receivables(1)
Total instalment sale and trade receivables
Less: Impairment provision
Net instalment sale and trade receivables
Other receivables
Total trade and other receivables
Provisions as a percentage of instalment sale and trade receivables (%)
(586)
(761)
4 707
4 294
569
616
5 276
4 910
11,1
15,1
The maturity profile of instalment sale receivables is as follows:
– receivable within one year
4 127
3 851
– receivable thereafter
1 097
1 108
Total instalment sale receivables
5 224
4 959
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 three to 36 months.
The directors consider the carrying amount of trade and other receivables to
approximate their fair values.
Classified as originated loans and receivables and carried at amortised cost.
(1)
Bank borrowings are secured by a negative pledge of instalment sale receivables
(note 20).
170
JD Group Annual Report 2010
17.
2010
2009
Rm
Rm
13
13
9
9
1 770
1 770
—
—
Balance at end of year
1 770
1 770
Total share capital and premium
1 779
1 779
378
411
Share capital and premium
Share capital
Authorised
250 000 000 (2009: 250 000 000) ordinary shares of 5 cents each
Issued
170 500 000 (2009: 170 500 000) ordinary shares of 5 cents each
Share premium
Balance at beginning of year
Movement during the year
9 052 365 (2009: 10 542 444) 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 197).
No further shares are under the control of the directors to be granted in terms of
The JD Group Share Incentive Scheme (page 197).
3 912 500 (2009: 1 105 000) share appreciation rights are allocated to employees of
the Group in terms of The JD Group Share Appreciation Rights Scheme (page 199)
at prices varying between R40,67 and R43,03 per share (page 200).
487 500 (2009: 1 395 000) share appreciation rights are under the control of the
directors to be allocated in terms of The JD Group Share Appreciation Rights
Scheme.
18.
Treasury shares
JD Group Limited ordinary shares of 5 cents each held by the JD Group Employee
Share Incentive Scheme at cost:
6 208 085 (2009: 6 756 892) ordinary shares
19.
Non-distributable and other reserves
Are made up as follows:
Foreign currency translation reserve
(85)
(54)
Revaluation of shares issued pursuant to the acquisition of Profurn
139
139
Share-based payment reserve
80
77
Statutory reserve – insurance contingency
24
4
158
166
JD Group Annual Report 2010
171
Notes to the Group annual financial statements
20.
2010
2009
Rm
Rm
1 323
1 217
101
147
1 424
1 364
Interest bearing liabilities
Bank borrowings
Finance lease liabilities
Payable within one year reflected under current liabilities
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 R5 224 million (2009: R4 959 million).
The interest rates per annum are:
2010:
– on R225 million: variable rate linked to JIBAR, fixed at 10,96% until 26 April 2011;
repayable in 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 JIBAR, fixed at 11,38% until 30 September
2010; repayable in quarterly instalments of interest of approximately R5,7 million,
with a final capital repayment due on 30 September 2016.
– on R200 million: variable rate linked to prime less 3.5%, currently at 6,0%;
repayable in quarterly instalments of interest of approximately R4 million and a
single capital instalment on 1 October 2012.
– on R200 million: variable rate linked to JIBAR, fixed at 8,49% until 1 November
2010; repayable in quarterly instalments of capital and interest of approximately
R21 million.
– on R140 million: variable rate linked to JIBAR, fixed at 9,22% until 1 October 2010;
repayable in quarterly instalments of interest of approximately R3,3 million, with a
final capital repayment due on 20 May 2013.
– on R131 million: variable rate linked to JIBAR, fixed at 10,58% until 28 October
2010; repayable in quarterly instalments of capital and interest of approximately
R12 million and with a final capital repayment of R75 million on 30 April 2012.
– on R117 million: variable rate linked to JIBAR, fixed at 8,52% until 30 September
2010; repayable in quarterly instalments of capital and interest of approximately
R18 million.
– on R60 million: variable rate linked to JIBAR, fixed at 9,62% until 1 October 2010;
repayable in quarterly instalments of interest of approximately R1,4 million, with a
final capital repayment due on 18 May 2011.
– on R50 million: variable rate linked to JIBAR, fixed at 10,12% until 1 October 2010;
repayable in quarterly instalments of interest of approximately R1,3 million, with a
final capital repayment due on 18 May 2012.
172
(continued)
JD Group Annual Report 2010
(502)
(486)
922
878
20.
2010
2009
Rm
Rm
2010
—
434
2011
456
389
2012
260
194
2013
407
200
2014 or later
200
—
1 323
1 217
Interest bearing liabilities (continued)
2009:
– on R325 million: variable rate linked to JIBAR, fixed 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.
– on R24 million: variable rate linked to JIBAR, fixed at 8,71% until 1 March 2010, on
which date capital and interest is due.
Finance lease liabilities amounting to R83 million (2009: R114 million) are secured by
internally generated intellectual property and bear interest at an effective rate of
13,81% (2009: 13,81%).
Lease liabilities are repayable in bi-annual instalments of capital and interest of
approximately R27 million each (2009: R27 million).
Finance lease liabilities amounting to R18 million (2009: R33 million) are secured by
moveable assets as disclosed in note 9 and bear interest at rates varying between
8,0% and 15,2% (2009: 9,38% – 13%), repayable in monthly instalments of capital
and interest.
Interest bearing liabilities are repayable in the following financial years:
Bank borrowings
JD Group Annual Report 2010
173
Notes to the Group annual financial statements
20.
(continued)
2010
2009
Rm
Rm
2010
—
52
2011
46
47
2012
53
48
2013
2
—
101
147
Interest bearing liabilities (continued)
Finance lease liabilities – present value of lease obligations
The obligations payable under finance leases are analysed further as follows:
Minimum lease payments:
Amounts payable within one year
56
65
Amounts payable thereafter
60
107
116
172
Less: future finance charges
(15)
(25)
Present value of lease obligations
101
147
Leave pay
85
81
Annual bonus
61
53
146
134
In terms of the articles of association of the company and all its subsidiaries,
borrowing powers are unlimited.
21.
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
seven 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.
21.1
21.2
The following accruals are included in trade and other payables:
The following amounts are included in trade and other payables:
91
100
(75)
(83)
16
17
Raised during Utilised during
31 August
31 August
2010
2010
Balance at
31 August
2010
Operating lease costs adjustment
Less: included in non-interest bearing long term liability
Balance at
31 August
2009
Rm
22.
Rm
Rm
Rm
Provisions
Provisions comprise:
174
Restructuring provision – staff costs
6
—
(6)
—
Lease closure costs
6
—
(6)
—
12
—
(12)
—
JD Group Annual Report 2010
23.
2010
2009
Rm
Rm
Authorised and contracted
155
72
Authorised but not yet contracted
234
98
389
170
Due within one year
549
549
Due within two to five years
931
989
1 480
1 538
Commitments
Capital expenditure
This expenditure will be financed from internal sources and existing borrowing
facilities.
Operating lease commitments (predominantly premises)
24.
Foreign assets
Total assets subject to exchange control of a foreign country amount to R36 million
(2009: R45 million).
25.
Financial instruments
25.1
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 2009.
The capital structure of the Group consists of debt, which includes borrowings and
finance leases as disclosed in note 20, cash and cash equivalents and equity
attributable to equity holders of the parent, comprising issued capital, reserves and
retained earnings as disclosed in notes 17 and 19 respectively.
25.1.1 Gearing ratio
The Group’s board and risk management committee review 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 gearing ratio at year end was as follows:
1 424
1 364
Cash and cash equivalents
757
725
Net debt
667
639
Equity(ii)
5 154
4 831
Net debt-to-equity ratio
12,9%
13,2%
Debt(i)
Debt is defined as long and short term borrowings, as detailed in note 20.
(i)
Equity includes all capital and reserves of the Group.
(ii)
JD Group Annual Report 2010
175
Notes to the Group annual financial statements
25.
Financial instruments (continued)
25.2
Categories of financial instruments
(continued)
25.2.1 Financial assets
Designated
at fair value
Loans
through
and
profit/loss receivables
Held to
maturity
Available
for sale
Nonfinancial
instruments
Total
carrying
value
Rm
Rm
Rm
Rm
Rm
Rm
—
—
—
30
1 587
1 617
Property, plant and equipment
767
767
Goodwill
493
493
Intangible assets
212
212
115
115
1 824
7 664
2010
Assets
Non-current assets
30
Investments and loans
Deferred taxation
Current assets
—
5 827
13
—
Inventories
5 061
Trade and other receivables
1 575
1 575
215
5 276
34
Taxation
Bank balances and cash
766
13
34
779
Total
—
5 827
13
30
3 411
9 281
2009 – restated
Assets
Non-current assets
—
—
—
92
1 581
1 673
756
493
256
76
756
493
256
92
76
1 595
7 249
1 491
1 491
4 910
8
104
736
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Deferred taxation
Current assets
176
30
92
8
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
8
Total
8
JD Group Annual Report 2010
5 603
43
—
4 910
104
693
43
5 603
43
92
3 176
8 922
25.
Financial instruments (continued)
25.2
Categories of financial instruments (continued)
25.2.2 Financial liabilities
Designated
at fair value
through
profit/loss
Rm
Financial
liabilities at
amortised Non-financial
cost instruments
Rm
Total
carrying
value
Rm
Rm
5 154
5 154
34
34
2010
Liabilities
Shareholders’ equity
Minority shareholders’ interest
Total equity
—
—
5 188
5 188
Non-current liabilities
—
922
135
1 057
922
Interest bearing long term liabilities
922
Non-interest bearing long term liability
75
75
Deferred taxation
60
60
2 622
410
3 036
Trade and other payables
2 098
326
2 424
Interest bearing liabilities
502
Current liablities
Financial liabilities
4
4
84
Taxation
22
Bank overdraft
Total
4
3 544
—
—
Interest bearing long term liabilities
Non-interest bearing long term liability
Deferred taxation
Current liablities
Trade and other payables
Provisions
Interest bearing liabilities
Financial liabilities
Taxation
Bank overdraft
Total
22
9 281
4 831
27
4 831
27
4 858
421
4 858
1 299
83
338
878
83
338
2 329
433
2 765
1 832
309
12
2 141
12
486
3
112
11
—
878
878
3
486
3
112
11
3
84
5 733
2009
Liabilities – restated
Shareholders’ equity
Minority shareholders’ interest
Total equity
Non-current liabilities
502
4
3 207
5 712
8 922
JD Group Annual Report 2010
177
Notes to the Group annual financial statements
25.
25.3
(continued)
Financial instruments (continued)
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.
25.3.1 Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see note
25.3.2) and interest rates (see note 25.3.3). 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.
25.3.2 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 fair value of foreign exchange contracts has been classified as a Level 2 determination.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting date
are as follows:
Liabilities
Assets
Euro
GB pound
2010
2009
2010
2009
Rm
Rm
Rm
Rm
3
3
2
2
—
—
3
11
Metical
—
—
19
42
Pula
32
46
192
180
Rupees
11
10
5
8
2
2
—
—
112
123
217
226
160
184
438
469
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.
The closing rates used to translate assets and liabilities denominated in foreign currency at year end were as follows:
178
2010
2009
Euro
9,448
11,251
Metical
0,195
0,274
Pula
1,076
1,147
US dollar
7,294
7,499
Zloty
2,331
2,686
JD Group Annual Report 2010
25.
Financial instruments (continued)
25.3
Financial risk management objectives (continued)
25.3.2 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
Rand
equivalent
Market
value
Fair
value
’000
R’000
R’000
R’000
US dollars – purchase
11 003
83 312
79 136
(4 176)
2009
US dollars – purchase
GB pounds – 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
US dollars
—
—
—
—
2009
US dollars
—
—
—
—
Covered forward commitments
2010
Uncovered forward commitments
2010
The fair values of the forward exchange contracts of R4,2 million (2009: R5,5 million) are included in financial assets and
financial liabilities.
25.3.3 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 2010, 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 2010 would decrease/increase by R7,8 million (2009: decrease/increase by R6,8 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 Annual Report 2010
179
Notes to the Group annual financial statements
25.
25.4
(continued)
Financial instruments (continued)
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 and instalment
sale 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 between four major South African banks of high credit standing.
Trade and instalment sale 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. The completion and implementation of our
second generation behaviour scoring models during the course of the year has provided the ability to assess the credit
risk of a new or existing customer with a higher level of sophistication, further reducing our credit risk.
As at 31 August 2010, 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 16.
Class 1
Class 2
Class 3
Class 4
Total
Rm
Rm
Rm
Rm
Rm
Up to date
555
1 088
629
190
2 462
Rehabilitated
114
293
187
30
624
Arrears ≤ one instalment
119
295
202
26
642
Arrears > one instalment
221
662
439
174
1 496
Arrears ≤ 2 instalments
10
25
21
9
65
Arrears ≤ 3 instalments
30
81
58
12
181
Arrears ≤ 4 instalments
25
70
48
11
154
Arrears ≤ 5 instalments
20
59
38
21
138
Arrears >5 instalments
136
427
274
121
958
1 009
2 338
1 457
420
5 224
2010
Credit exposures by class
Roll forward of the impairment provision
Balance at beginning of year
Bad debts written off
286
243
120
761
(401)
(351)
(58)
(930)
Transfer on reclassification
(2)
—
—
2
—
Increase in impairment provision
83
350
261
61
755
Balance at end of year
73
235
153
125
586
936
2 103
1 304
295
4 638
Net carrying value
180
112
(120)
JD Group Annual Report 2010
25.
Financial instruments (continued)
25.4
Credit risk management (continued)
Class 1
Rm
Class 2
Rm
Class 3
Rm
Class 4
Rm
Total
Rm
2009 – restated
Credit exposures by class
Up to date
Rehabilitated
Arrears ≤ one instalment
Arrears > one instalment
484
100
118
266
994
239
278
694
561
157
184
563
182
4
24
111
2 221
500
604
1 634
14
36
30
27
159
29
94
80
73
418
26
69
59
53
356
12
13
14
19
53
81
212
183
172
986
968
2 205
1 465
321
4 959
Roll forward of the impairment provision
Balance at beginning of year
Balance at acquisition date of subsidiaries
Bad debts written off
Transfer on reclassification
Increase in impairment provision
98
—
(143)
(14)
171
297
—
(549)
—
538
222
—
(352)
—
373
—
92
(13)
14
27
617
92
(1 057)
—
1 109
Balance at end of year
112
286
243
120
761
Net carrying value
856
1 919
1 222
201
4 198
Arrears ≤ 2 instalments
Arrears ≤ 3 instalments
Arrears ≤ 4 instalments
Arrears ≤ 5 instalments
Arrears >5 instalments
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 HiFinance
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.
An unidentified impairment is raised for these accounts.
b. Rehabilitated
These accounts, whilst being in arrears and considered past due, have paid their last six instalments.
An unidentified impairment is raised for these accounts.
c. Arrears ≤ one instalment
These accounts are in arrears by one instalment or less and are considered to be past due.
An identified impairment is raised for these accounts.
d. Arrears > one instalment
These accounts are in arrears by more than one instalment and carry an identified impairment provision.
JD Group Annual Report 2010
181
Notes to the Group annual financial statements
25.
Financial instruments (continued)
25.4
Credit risk management (continued)
Risk analysis – up to date accounts
(continued)
Class 1
Class 2
Class 3
Class 4
Total
Rm
Rm
Rm
Rm
Rm
509
1 001
561
116
2 187
46
87
68
74
275
Total up to date accounts
555
1 088
629
190
2 462
2009
Low and medium risk
High risk
354
130
719
275
371
190
99
83
1 543
678
Total up to date accounts
484
994
561
182
2 221
2010
Low and medium risk
High risk
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
JD: Blaze open to buy – low risk
The above classifications determine the interest rate that the customer is charged.
25.5
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.
2010
2009
Rm
Rm
Total banking and loan facilities
2 030
1 920
Bank borrowings (note 20)
1 323
1 217
707
703
Banking facilities
Unutilised banking facilities
In addition, the Group has cash on hand at year end of R757 million (2009: R725 million).
182
JD Group Annual Report 2010
25.
25.5
Financial instruments (continued)
Liquidity risk management
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
7 – 12
months
> 1 year
2–5
years
Total
Rm
Rm
Rm
Rm
Rm
387
724
1 111
206
415
621
1 910
164
2 074
2 116
579
350
1 691
249
118
2 041
367
2010
Interest bearing long term liabilities
Short-term portion of long term liabilities
Trade and other payables
2009
Interest bearing long term liabilities
Short-term portion of long term liabilities
Trade and other payables
26.
387
724
3 806
509
478
987
599
1 809
509
478
3 395
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:
2010
2009
%
%
Inflation
5,7
6,3
Increase in salaries
6,7
7,1
Increase in pensions
2,8
3,1
Return on investment
8,5
9,5
Discount rate
9,0
9,2
JD Group Annual Report 2010
183
Notes to the Group annual financial statements
26.
(continued)
2010
2009
Rm
Rm
Cost recognised
4,8
3,9
Current service cost
4,8
3,9
Interest cost
9,0
8,2
Expected return on plan assets
(8,8)
(10,1)
Asset utilised
(0,2)
1,9
Employee benefit plans (continued)
Retirement benefits (continued)
The actuarially determined fair value of assets of the defined
benefit scheme was R100 million (2009: R101 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 R89 million
(2009: R95 million).
Reconciliation of defined benefit obligation
95,1
84,8
Current service cost
4,8
3,9
Member contributions
1,6
1,7
Interest cost
9,0
8,2
Defined benefit obligation as at 31 August 2009
(7,4)
20,8
(12,8)
(23,1)
Risk premiums
(1,1)
(1,2)
Defined benefit obligation as at 31 August 2010
89,2
95,1
Actuarial (gain)/loss
Benefits paid
Reconciliation of fair value of plan assets
100,9
106,4
Expected return on assets
8,8
10,1
Contributions
6,7
7,6
Risk premiums
(1,1)
(1,2)
Assets at fair market value as at 31 August 2009
(12,8)
(23,1)
Actuarial (loss)/gain
(2,9)
1,1
Assets at fair market value as at 31 August 2010
99,6
Benefits paid
100,9
Any deficit as determined by the actuaries is funded either immediately or through increased contributions to ensure the
ongoing soundness of the scheme.
The defined benefit fund undertook a surplus apportionment exercise as at 31 December 2001 and a Nil Scheme was
recorded by the Financial Services Board on 1 December 2005. The Group therefore has no right to any asset relating to
the period prior to 1 December 2005. Any potential asset arising after 1 December 2005 is in the process of being
determined, but is not expected to be significant.
184
JD Group Annual Report 2010
27.
2010
2009
Rm
Rm
Finserve Mauritius Limited
23
32
Prosure Insurance Limited
(2)
(2)
4
4
25
34
—
(2)
Related parties
Directors
Directors’ remuneration is included on pages 141 to 144.
Non-consolidated subsidiaries
The Group’s dealings with its non-consolidated subsidiaries
comprise:
Loans
Supreme Furnishers (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 concluded transactions of approximately R9,4 million (2009: R8,0 million)
in 2009 with the Group.
– The Group conducts business with a subsidiary of Steinhoff International with regard to the sourcing of products from
the Far East. The Group paid commission of R4,9 million (2009: R2,9 million), determined on a third party basis.
– Old Mutual Limited who owns approximately 2,6% (2009: 5%) of the issued share capital of the Group.
– The South African Reserve Bank which approves any transactions between the Group and its offshore subsidiaries.
– Alexander Forbes with whom the Group concluded transactions of R0,3 million.
Mr ME King held a directorship in Strate Limited with whom the Group concluded transactions amounting to R0,1 million
(2009: R0,1 million).
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.
Mr VP Khanyile is the chairman of Santam Limited. The Chief Executive Officer of Santam Limited is Mr I Kirk, the brother
of Mr AG Kirk. One of the Group’s subsidiary companies has concluded transactions on a third party basis of R0,3 million.
Mr MJ Shaw holds a directorship in Reunert Limited (Panasonic division), which has concluded transactions of
approximately R0,6 million (2009: R3 million) with 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 R3,1 million (2009: R1,2 million) have been provided to the Group by this company.
JD Group Annual Report 2010
185
Notes to the Group annual financial statements
27.
(continued)
2010
2009
Rm
Rm
Short-term employee benefits
17
16
Share option gains
—
3
17
19
Related parties (continued)
Key management personnel
Remuneration to key personnel during the year comprised:
Key management personnel comprise the following individuals
who were members of the Group’s Executive Committee during
the year:
P Barletta
DB Hirsch
JHC Kok
PC Kruger
K Mfuni
AP Murray
A Neven
GF Pearce
28.
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 197. Details regarding the pricing of options granted and the exercising of options,
including vesting periods, are also provided on page 197.
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
2010
Outstanding at beginning of year
10 079 194
43,60
Forfeited during the year
(516 829)
(47,05)
Exercised during the year
(623 750)
(26,87)
Outstanding at end of year
2009
Outstanding at beginning of year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at end of year
8 938 615
44,53
8 979 783
2 202 000
(635 089)
(467 500)
47,46
27,19
(54,08)
(26,82)
10 079 194
43,60
The options outstanding at 31 August 2010 have an exercise price in the range of R16,19 to R79,83 and a weighted
average contractual life of 1,93 years (2009: 3,08 years).
The weighted average share price at the date of exercise for share options exercised in 2010 was R48,06 (2009: R43,50).
186
JD Group Annual Report 2010
28.
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.
2010
No further options may be granted under the JD Group Share Incentive Scheme.
Fair value of share options and assumptions:
2009
Date of grant
Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Expected dividend yield
Risk free interest rate
Option life
Date of grant
Fair value at measurement date
Share price at grant date
Exercise price
Expected volatility
Expected dividend yield
Risk free interest rate
Option life
26 Feb 09
R11,39 to
R11,90
R30,00
R27,00
36,29%
4,50%
7,66%
6 years
19 Nov 08
R9,37 to
R10,04
R28,00
R25,20
34,95%
6,07%
8,52%
6 years
1 Jun 09
R14,75 to
R15,50
R 37,60
R 33,80
36,97%
4,00%
8,23%
6 years
2010
2009
Details of the share appreciation rights accounted for under IFRS 2
are as follows:
Outstanding at beginning of year
Granted during the year
Forfeited during the year
1 105 000
2 907 500
(100 000)
—
1 105 000
—
Outstanding at end of year
3 912 500
1 105 000
Fair value of share appreciation rights granted and related
assumptions:
2010
Date of grant
Fair value at measurement date
Share price at grant date
Strike price
Expected volatility
Expected dividend yield
Risk free interest rate
Expected option life
26 Feb 10
R12,77
R42,80
R43,03
30,70%
4,50%
8,12%
6 years
2009
19 May 10
R12,77
R41,00
R40,67
30,70%
4,50%
8,12%
6 years
21 Aug 09
R16,27
R43,00
R41,71
37,28%
4,00%
7,98%
6 years
JD Group Annual Report 2010
187
Notes to the Group annual financial statements
29.
(continued)
Subsequent events
No significant events have occurred in the period between the year end and the date of approval of these annual
financial statements.
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 11)
5 – 20 years
Property, plant and equipment
18 – 35 years
Buildings
5 years
Leasehold improvements
5 – 8 years
Vehicles and forklift trucks
4 years
Computer hardware and software
4 – 10 years
Office equipment, furniture and fittings
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 pre-tax 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 R493 million:
Connection Group
Blake & Associates
Maravedi Group
188
JD Group Annual Report 2010
Discount
rate
Forecast
cash flow
16,80%
5 years
17,80% –
18,80%
5 years
18,80%
5 years
30.
Judgements and estimates (continued)
Intangible assets
The value of acquired trademarks, capitalised supplier relationships and capitalised customer relationships included in
intangible assets is R212 million (2009: 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:
Trademarks – valued using the relief from royalty method
Capitalised supplier relationships – valued using the residual
income method
Discount
rate
Forecast
cash flow
17,50%
20 years
17,00%
5 years
Intangible assets acquired on acquisition of the Blake & Associates Holdings Group were valued at the acquisition date
using the following key assumptions and methodologies:
Blake trademark – valued using the relief from royalty method
Metonomy trademark – valued using the relief from royalty
method
Capitalised customer relationships – valued using the multi-period
excess earnings methodology
Discount
rate
Forecast
cash flow
23,84%
10 years
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 11. 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%
13 years
Connection Group – trademark
17,50%
15 years
Connection Group – capitalised supplier relationships
17,00%
1 year
Blake – trademark
17,80%
9 years
Metonomy – trademark
18.80%
4 years
Blake – capitalised customer relationships
18,80%
9 years
Blake – information database
18,80%
4 years
Share-based payments
Refer to note 28 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 Annual Report 2010
189
Notes to the Group annual financial statements
(continued)
2009
Rm
31.
Business combinations
Blake & Associates Holdings (Pty) Limited (note 31.1)
130
Maravedi Group (Pty) Limited (note 31.2)
104
234
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 13.
31.1
Blake & Associates Holdings (Pty) Limited (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:
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
Deferred taxation
(7)
(1)
Trade and other payables
(20)
Financial liabilities
(19)
Taxation
(5)
Fair value of net assets acquired
66
Minority interest
(24)
Goodwill
92
Cost of investment
Bank balances and cash
Cash consideration
134
(4)
130
Carrying value of the assets and liabilities immediately before the business combination:
Non-current assets
59
Current assets
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 were included in the Group’s 2009 results. Equity
accounted losses included up to the date of acquiring a controlling interest have been disclosed in note 13.1.
190
JD Group Annual Report 2010
Restated
2009
Rm
31.
31.2
Business combinations (continued)
Maravedi Group (Pty) Limited (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:
Property, plant and equipment
13
Deferred taxation
12
Trade and other receivables
56
Interest bearing liabilities
(5)
Trade and other payables
(27)
Life reserve fund
(1)
Taxation
(1)
Bank overdraft
(81)
Fair value of net assets acquired
(34)
Minority interest
3
Goodwill
54
Cost of investment
23
Bank balances and cash
81
Cash consideration
104
Carrying value of the assets and liabilities immediately before the business combination:
Non-current assets
25
Current assets
98
Non-current liabilities
(5)
Current liabilities
(110)
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 were included in the Group’s 2009 results. Equity
accounted losses up to the date of acquiring a controlling interest have been disclosed in note 13.2.
JD Group Annual Report 2010
191
Notes to the Group annual financial statements
32.
(continued)
Proposed accounting standards
At the date of authorisation of these financial statements, there are Standards and Interpretations in issue but not yet
effective. These include the following Standards and Interpretations:
➔ IFRS 1 – First-time Adoption of International Financial Reporting Standards: Exemption from Comparative IFRS 7
Disclosures
➔ IFRS 2 – Share-based Payments: Group Cash-settled Share-based Payment Transactions
➔ IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations: Disclosures Required in Respect of
Non-current Assets (or Disposal Groups) Classified as Held for Sale or Discontinued Operations
➔ IFRS 8 – Operating Segments: Disclosure Information about Segment Assets
➔ IFRS 9 – Financial Instruments: Classification and Measurement of Financial Assets
➔ IAS 1 – Presentation of Financial Statements: Current/Non-current Classification of Convertible Instruments
➔ IAS 7 – Statement of Cash Flows: Classification of Expenditures of Unrecognised Assets
➔ IAS 17 – Leases: Classification of Leases on Land and Buildings
➔ IAS 18 – Revenue: Determining whether an entity is acting as a principal or as an agent
➔ IAS 24 – Related party Disclosures
➔ IAS 27 – Consolidated and Separate Financial Statements: Transitional Provisions
➔ IAS 32 – Financial Instruments: Presentation – Classification of Rights Issue
➔ IAS 34 – Interim Financial Reporting: Significant Events and Transactions
➔ IAS 36 – Impairment of Assets: Allocation of Goodwill to Cash Generating Units
➔ IAS 39 – Financial instruments: Recognition and Measurement: Scope Exemption of Business Combination Contracts
and Cash Flow Hedge Accounting
➔ IFRIC 13 – Customer Loyalty Programmes: Fair Value of Award Credits
➔ IFRIC 19 – Extinguising Financial Liabilities with Equity Instruments
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.
192
JD Group Annual Report 2010
Segmental analysis – geographical
for the year ended 31 August
South
Africa
Neighbouring
countries
Europe
Total
2010
Revenue
Rm
12 109
481
634
13 224
Operating profit
Rm
740
20
12
772
Depreciation
Rm
141
3
5
149
Total assets
Rm
8 744
305
232
9 281
Total current liabilities
Rm
2 843
81
112
3 036
Capital expenditure
Rm
179
3
6
188
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
Cash sales
%
6,1
4,2
1,9
5,8
Rm
8 491
410
619
9 520
6,5
100,0
%
89,2
4,3
Rm
3 043
119
%
35,8
29,0
Rm
5 448
291
619
33,2
6 358
64,2
71,0
100,0
66,8
1 015
26
74
1 115
11 930
18 500
8 568
11 860
18 680
506
856
20 042
R000
648
951
741
Instalment sale receivables
Rm
5 110
114
2009 – restated
Revenue
Operating profit
Depreciation
Total assets
Total current liabilities
Capital expenditure
Rm
Rm
Rm
Rm
Rm
Rm
11 591
545
148
8 363
2 542
203
488
43
2
314
100
4
843
58
5
245
123
11
12 922
646
155
8 922
2 765
218
%
Rm
%
Rm
%
Rm
%
4,7
8 028
86,9
3 086
38,4
4 942
61,6
999
11 603
19 885
583
4 842
8,8
400
4,3
99
24,7
301
75,3
26
18 769
517
944
117
6,9
816
8,8
5,0
9 244
100,0
3 185
34,5
6 059
65,5
1 094
11 812
21 247
608
4 959
Percentage of total
%
3 162
Number of stores
Revenue per store
R000
Number of employees
Revenue per employee
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
R000
R000
Rm
660
5 224
816
100,0
69
12 217
845
998
JD Group Annual Report 2010
193
Segmental analysis – business divisions
for the year ended 31 August
Traditional Retail
Financial Services
2010
2009
2010
2009
Revenue
Rm
5 339
5 203
2 880
2 980
Operating profit
Rm
182
202
592
351
Depreciation
Rm
32
43
16
9
Total assets
Rm
1 016
1 003
4 961
4 247
Total current liabilities
Rm
1 249
1 051
323
66
Capital expenditure
Rm
44
40
23
15
20,6
11,8
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
Cash sales
Percentage of total
%
3,4
3,9
Rm
4 619
4 473
%
48,5
48,4
Rm
3 162
3 185
%
68,5
71,2
Rm
1 457
1 288
%
31,5
28,8
Number of stores
Revenue per store
R000
Retail square meterage
Revenue per square metre
Rand
Number of employees
Revenue per employee
R000
949
935
949
935
5 626
5 565
3 035
3 187
495 584
505 843
55 065
56 200
10 773
10 286
8 928
8 037
4 093
4 895
598
647
704
609
4 638
Instalment sale receivables
Rm
4 804
Impairment provision
Rm
461
641
Bad debts written off
Rm
872
1 044
Receivables’ arrears
Rm
910
889
%
7,6
11,8
Deposit rate on credit sales
Collection rate
Average length of the book
Elimination of interdivisional origination fees.
Blake and Maravedi consolidated for nine months.
ø
Restated – refer note 1.
#
†
194
JD Group Annual Report 2010
%
6,1
6,0
Months
16,4
16,7
Cash Retail
New Business
Development
International
Corporate
2010
2009
2010
2009
2010
2009†ø
4 308
3 976
634
843
527
400
190
218
12
58
27
46
36
5
5
507
897
232
619
515
56
59
Group
2010
2009
(464)#
(480)#
13 224
12 922
(3)
(231)
(180)
772
646
24
24
26
38
149
155
245
397
444
2 168
2 086
9 281
8 922
112
124
442
532
291
477
3 036
2 765
6
11
15
17
44
76
188
218
5,1
(0,8)
4,4
5,5
1,9
6,9
4 282
3 955
619
816
45,0
42,8
6,5
8,8
2010
2009ø
5,8
5,0
9 520
9 244
100,0
100,0
3 162
3 185
33,2
34,5
6 358
6 059
4 282
3 955
619
816
100,0
100,0
100,0
100,0
66,8
65,5
92
90
74
69
1 115
1 094
46 826
44 178
8 568
12 217
11 860
11 812
90 617
83 722
56 180
46 757
697 446
692 522
47 541
47 491
11 285
18 029
3 608
3 575
856
845
1 194
1 112
741
998
2 018
3 343
539
552
18 961
18 659
20 042
21 247
261
120
660
608
420
321
5 224
4 959
125
120
586
761
58
13
930
1 057
112
74
1 022
963
—
—
7,6
11,8
6,3
5,4
6,1
6,0
15,8
18,6
16,3
16,8
JD Group Annual Report 2010
195
Share incentive scheme
The JD Group Employee Share Incentive Scheme
Number of shares
2010
2009
15 990 967
Shares available
At beginning of year
—
Additional shares made available to the directors in terms of the scheme
—
608 000
Options granted
—
(2 202 000)
Options forfeited
Shares no longer available to the directors due to the phasing out of The JD Group
Employee Share Incentive Scheme
—
635 089
—
(15 032 056)
At end of year
—
—
Share options granted
At beginning of year
Options granted
10 542 944
9 584 033
—
2 202 000
Options forfeited
(516 829)
(635 089)
Options exercised
(973 750)
(608 000)
At end of year
Number of participants
9 052 365
10 542 944
166
180
6 756 892
7 364 892
Shares available for utilisation
At beginning of year
Shares acquired in the open market
Options exercised
At end of year
424 943
(973 750)
—
(608 000)
6 208 085
6 756 892
Rm
Rm
Loan by the company to the trust
395
410
Fair value of shares
271
290
196
JD Group Annual Report 2010
Salient features of the JD Group
Employee Share Incentive Scheme
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 principally as a retention
mechanism and as an incentive to 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. In terms of an undertaking given
to shareholders, no further options will be issued under this scheme. The lapse date of the final offer, grant number 27,
is 1 June 2016.
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 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 conferred
the right on the holder thereof to subscribe for, or purchase one share at the option price.
3.
Exercise of share options
Share options may not be exercised until after a period, calculated from the date of acceptance of the offer, as follows:
3.1 more than two years shall have elapsed, in which event not more than 25%;
3.2 more than three years shall have elapsed, in which event not more than 50% cumulatively;
3.3 more than four years shall have elapsed, in which event not more than 75% cumulatively; and
3.4 more than five years shall have elapsed, in which event all of the relevant share options may be exercised, but
within seven years, provided that the board may, subject to the lapsing of a share option, permit exercise dates
contemplated above to be anticipated or postponed to such other date(s) and to the extent determined by the board.
4.
Share options granted
Date of grant
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
Price
(cents)
Number of
shares at
31 August 2010
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
100 000
13 750
425 000
15 000
82 500
147 000
1 220 000
255 000
572 000
733 365
903 500
736 750
1 812 000
191 000
1 730 500
115 000
9 052 365
JD Group Annual Report 2010
197
Salient features of the JD Group
Employee Share Incentive Scheme
5.
(continued)
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. Notwithstanding
this arrangement, none of the shares under the control of the trustees may be voted or be taken into account of at
general meetings for resolution approval purposes or for purposes of determining categorisations as set out in the
JSE Listings Requirements.
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.
198
JD Group Annual Report 2010
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 (SARs) 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. Calculated as a percentage of the current issued share capital, this equates to options on or rights to 1 705 000
JD Group ordinary shares.
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 interests of the company. Circumstances will in each instance dictate the most appropriate mode of settlement.
3.
Manager of the SAR scheme
The operation of the SAR scheme is administered by RemCom, a sub-committee of the JD Group board (the board).
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, which were approved by
shareholders on 12 August 2009. RemCom 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) Limited
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 RemCom and other forums as it deems
appropriate from time to time in terms of the rules of the SAR scheme.
JD Group Annual Report 2010
199
Salient features of the JD Group
Share Appreciation Rights Scheme
4.
(the SAR Scheme)
(continued)
Performance criteria and assessments
The performance criteria are set by RemCom annually 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 vesting periods and,
whilst stretched, they are both simple to understand and achievable in order to maximise the retention effect and motivational
value. Consequently, the board approved HEPS growth, measured against CPI to ensure a real return in excess of inflation, as
the basic performance condition. An additional condition for the vesting of rights is the achievement of a minimum growth rate
in net asset value (NAV) per share, calculated as if dividends are reinvested over the vesting period.
The following performance criteria have been set by RemCom and approved by the board in respect of SAR scheme offer
numbers 2 and 3:
➔ 2012 HEPS of 485 cents and a minimum compounded growth in NAV of 10%, or
➔ 2013 HEPS of 570 cents and a minimum compounded growth in NAV of 11%, or
➔ 2014 HEPS of 660 cents and a minimum compounded growth in NAV of 12%.
The aforementioned HEPS and NAV targets are aligned with the Group’s strategic growth targets.
5.
5.1
SAR scheme grants during the review period
SAR scheme offer number 2
On 26 February 2010, RemCom granted the following SARs to participants, based on the volume-weighted average
market price of JD Group’s ordinary shares listed on the JSE Limited as at 25 February 2010:
Date of grant
26 February 2010
Price (cents)
Number of SARs granted
Number of shares available for utilisation
5.2
4 303
2 822 500
487 508
SAR scheme offer number 3
On 19 May 2010, RemCom granted the following SARs to participants, based on the volumeweighted average market price of JD Group’s ordinary shares listed on the JSE Limited as at
18 May 2010:
Date of grant
19 May 2010
Price (cents)
Number of SARs allocated
6.
4 067
85 000
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 may be unique for each grant. A vesting period of three years and an expiry date of seven years after
the date of grant, apply.
At the end of the vesting period, i.e. three years after the date of grant, RemCom will assess whether fulfilment of the
performance criteria has occurred. Re-testing of the performance conditions is allowed on the fourth and fifth anniversary
from the date of grant. In the instance that the performance criteria have not been achieved by then, the SARs will not
vest and the rights will lapse and be of no effect.
No purchase price is payable by a participant following the vesting and exercise of a SAR. The appreciation value of the share
price is settled by the company, i.e. the difference between the then current market price and the grant price is settled.
Vested SARs that have been both exercised and released from the Scheme shall rank pari passu in all respects with
existing JD Group ordinary shares in issue. From the release date onwards, the beneficial owner of such shares will
qualify for dividends from the company and will have full voting rights in respect of JD Group’s ordinary shares.
Shares set aside for purposes of the SAR scheme may not be voted or be taken account of at general meetings for
resolution approval purposes or for purposes of determining categorisations as set out in the JSE Listings Requirements.
7.
Principal terms of loans
7.1 Loans between the company and participating companies
Loans between the company and participating companies will bear interest at rates as agreed upon between
the company and the participating companies from time to time.
7.2 Loans between the company and participants
There are no loans between the company or participating companies and participants of the SAR scheme.
200
JD Group Annual Report 2010
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.
Notes
2010
2009
Rm
Rm
1
11
Income statement
Dividend received from JDG Trading (Pty) Limited
Interest paid
Impairment provision (raised)/released – loan to share incentive trust
1
(2)
(1)
(4)
83
Management fees received
—
3
Other operating expenses
(1)
(3)
(Loss)/profit before taxation
(6)
93
Taxation – secondary taxation on companies
18
6
(24)
87
(Loss)/profit attributable to shareholders
Balance sheet
Assets
Investment in JDG Trading (Pty) Limited – shares at cost
Loan to JDG Trading (Pty) Limited
2
Loans to other Group companies
Interest in subsidiary company – JDG Trading (Pty) Limited
Loan to share incentive trust
Bank balances
Total assets
1 091
1 091
810
1 003
—
1
1 901
2 095
255
276
4
3
2 160
2 374
Equity and liabilities
1 779
1 779
Retained income
245
524
Opening balance
524
507
(Loss)/profit attributable to shareholders
(24)
87
(255)
(70)
135
70
2 159
2 373
1
1
2 160
2 374
Share capital and premium
3
Distribution to shareholders
Shareholders for dividend
Other liabilities
Total equity and liabilities
3
Notes
1.Due to current market conditions, the underlying fair value of the shares held by the share incentive trust amounted to
R124 million (2009: R120 million) less than the carrying value of the loan to the trust at 31 August 2010.
2.The loan to JDG Trading (Pty) Limited is interest free with no fixed date of repayment.
3.Refer to the Group statement of changes in equity.
4.The company has issued guarantees and/or sureties to the providers of finance to its direct subsidiary, JDG Trading (Pty) Limited,
for the repayment of bank borrowings (disclosed in note 20), for the amount of R1 323 million (2009: R968 million).
JD Group Annual Report 2010
201
Subsidiaries
for the year ended 31 August
Percentage interest held
Country of
2010
2009
incorporation
%
%
South Africa
100
100
Courts Megastore (Pty) Limited*
South Africa
100
100
Connection Group Holdings (Pty) Limited*
South Africa
100
100
JD Group Asset Financing (Pty) Limited†
South Africa
100
100
JD Group International (Pty) Limited‡
South Africa
100
100
JDG Investment Holding Company (Pty) Limited‡
South Africa
100
100
JDG Micro Insurance Limited@
South Africa
100
100
JDG Micro Life Limited@
South Africa
100
100
Profurn Limited‡
South Africa
100
100
Protea Furnishers S.A. (Pty) Limited*
South Africa
100
100
Supreme Furnishers (Pty) Limited‡
South Africa
100
100
Blake & Associates Holdings (Pty) Limited!
South Africa
70
70
Maravedi Group (Pty) Limited&
South Africa
90,5
90,5
Notes
Direct subsidiary
JDG Trading (Pty) Limited*
Indirect subsidiaries
The Netherlands
100
100
Poland
100
100
Aazad Electrical Construction (Pty) Limited*
Botswana
100
100
Supreme Furnishers (Botswana) (Pty) Limited*
Botswana
100
100
Hi Fi & Electric Warehouse (Pty) Limited*
Botswana
100
100
JD Group (Botswana) (Pty) Limited*
Botswana
100
100
JD Group (Lesotho) (Pty) Limited*
Lesotho
100
100
Supreme Furnishers (Lesotho) (Pty) Limited*
Lesotho
100
100
Moçambique
100
100
JD Financial Services (Pty) Limited
Namibia
100
100
JD Group (Namibia) (Pty) Limited*
Namibia
100
100
Protea Furnishers (Namibia) (Pty) Limited*
Namibia
100
100
Supreme Furnishers (Namibia) (Pty) Limited*
Namibia
100
100
Barnetts (Swaziland) (Pty) Limited*
Swaziland
100
100
JD Group (Swaziland) (Pty) Limited*
Swaziland
100
100
JD Group Europe B.V.ø
Abra S.A.*
Profurn (Moçambique) Limitada*
Non-consolidated subsidiaries
Finserve Mauritius Limited
4
Mauritius
100
100
Prosure Insurance Limited
4
Mauritius
100
100
Notes
1.All the above are unlisted companies.
2.Activities of subsidiaries.
* Retailers of household furniture, appliances and home entertainment products
†
Asset financing company
‡
Investment holding company
@
Insurance companies
!
Contact centre services company
&
Micro-lending company
ø
European investment holding company
3.A list of dormant and name protection companies is available for inspection by members at the registered office of the Company.
4.The winding up and deregistration of these non-trading companies is in process but not yet complete.
202
JD Group Annual Report 2010
Issued share capital
2010
Shares
2009
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
20 000 000
25 000 000
25 000 000
543 565
543 565
30 000
30 000
224
224
1 001
1 001
1 050
1 050
18 151#
18 151#
44 090 820
44 090 820
100
100
10
10
100
100
100
100
100
100
1 000
1 000
842 500
842 500
100
100
100
100
1
1
1
1
200
200
2
2
1
1
100 000
100 000
Direct interest of holding company
Indebtedness
2010
2009
2010
2009
Rm
Rm
Rm
Rm
1 091
1 091
810
1 003
* Reflected in local currency (Mauritius in US dollars)
#
Reflected in euro
JD Group Annual Report 2010
203
Annexure A – Insurance businesses
2010
2009
Rm
Rm
Provision for unearned premiums
13
7
Provision for outstanding claims, including IBNR
23
4
36
11
Provision for unearned premiums
15
6
Provision for outstanding claims, including IBNR
25
2
40
8
Cash on call
220
45
Cash at bank
41
19
261
64
242
50
1.
Liabilities under insurance contracts
1.1
Short-term operation
1.2
Long-term operation
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
3.1
Premium income is included in the Group’s ”Financial services” revenue category
and comprised the following:
Short-term operation
Gross premiums written
Provision for unearned premiums
Earned premiums
3.2
(7)
236
43
268
57
Long-term operation
Gross premiums written
Provision for unearned premiums
204
(6)
(9)
(6)
Earned premiums
259
51
Total premium income
495
94
JD Group Annual Report 2010
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 to 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 offers a single product with basic and comprehensive cover options. The insurance contract
protects the policyholder against physical loss or damage of the insured movable asset.
The long-term operation offers a credit life product with basic and comprehensive cover options. The insurance contract
protects the policyholder against the financial obligations from the credit sale agreement in the event of death, disability
or retrenchment. The operation also re-insures a funeral product with individual, immediate family, parent and extended
family cover options.
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 pre-determined 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
(run-off risk).
The majority of the operation’s insurance contracts are classified as ‘short-tailed’, meaning that any claim is settled within
a year after the loss date.
In terms of IFRS 4, an insurer need only disclose claims run-off information where uncertainty exists about the amount
and timing of claims payments not resolved within one year. Therefore detailed claims run-off information is not
presented.
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
The operation has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full
when due.
The major concentration of credit risk arises from the operations’ cash balances. Reputable financial institutions are
used for investing and cash handling purposes. Cash balances are placed with five reputable banking institutions, with
a domestic credit rating of at least AA–.
JD Group Annual Report 2010
205
Annexure A – Insurance businesses
4.
(continued)
Insurance risk management (continued)
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.
Capital management
The operation manages its capital base to achieve a prudent balance between maintaining capital ratios to comply with
regulatory requirements, 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.
5.
Financial risk management
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 2010, the operation’s capital adequacy requirement was R20 million (2009: R10 million) and the ratio
of excess assets to capital adequacy requirements was 5,9 times (2009: 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. The returns submitted by the operation to the regulator showed that the company met the minimum
capital requirements as at the year end.
6.
Judgements and estimates
Claims made under insurance contracts
The operations’ 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 relatively easy to predict 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.
206
JD Group Annual Report 2010
Analysis of shareholders
Number of
shareholders
% of
total
Number of
shares
% of
total
3 628
55
37
24
3
31
96,0
1,5
1,0
0,6
0,1
0,8
118 480 417
39 600 557
8 580 068
1 786 599
828 954
1 223 405
69,5
23,2
5,0
1,1
0,5
0,7
3 778
100,0
170 500 000
100,0
2 606
709
267
161
35
68,9
18,8
7,1
4,3
0,9
821 128
2 165 404
10 826 850
51 104 455
105 582 163
0,5
1,3
6,3
30,0
61,9
3 778
100,0
170 500 000
100,0
87
40
33
21
163
210
410
162
2 651
1
2,3
1,1
0,9
0,6
4,3
5,5
10,8
4,3
70,2
—
42 262 375
6 701 259
15 624 578
5 987 516
30 841 389
1 465 067
3 877 627
55 328 623
2 203 481
6 208 085
24,8
3,9
9,1
3,5
18,1
0,9
2,3
32,5
1,3
3,6
3 778
100,0
170 500 000
100,0
3
1
0,1
—
262 428
6 208 085
0,2
3,6
4
0,1
6 470 513
3,8
Geographical location of shareholders
South Africa
United States of America
United Kingdom
Namibia
Belgium
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
JD Group Annual Report 2010
207
Analysis of shareholders
(continued)
Number of
shareholders
% of
total
Number of
shares
% of
total
313
3 465
8,3
91,7
86 327
170 413 673
0,1
99,9
3 778
100,0
170 500 000
100,0
Registration
Materialised
Dematerialised
% held
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 Limited
Share incentive scheme
Fund managers with a holding of 5% or more
Investec Asset Management (Pty) Limited
Public Investment Corporation
208
JD Group Annual Report 2010
30 058 205
6 301 034
6 208 085
17,6
3,7
3,6
42 567 324
24,9
29 541 514
19 248 285
17,3
11,3
48 789 799
28,6
Notice of annual general meeting
Notice of annual general meeting
JD GROUP LIMITED
(Registration number 1981/009108/06)
(Incorporated in the Republic of South Africa)
JSE code: JDG ISIN code: ZAE000030771
(“JD Group” or “the Company”)
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
Thursday, 17 February 2011 at 08:00 to conduct the following
business:
➔ In accordance with the articles, all director
appointments made by the board of directors
(the Board) since the previous AGM require
confirmation by shareholders.
➔ In accordance with legislation, all appointments of
directors shall be effected by individual stand-alone
resolutions, unless the members at the meeting
unanimously resolve otherwise.
2.1 Based on the fact that the retiring directors have
made themselves available for re-election, it is
proposed that members re-elect the following
directors who, in terms of the articles and King III,
are required to retire by rotation at the AGM:
2.1.1 Dr HP (Henk) Greeff.
1.
Ordinary resolution number 1 – adoption of
the annual financial statements, directors’ and
auditors’ reports and sanctioning of dividends
To receive, consider and adopt the consolidated annual
financial statements of the Company and its
subsidiaries (the Group) and of the Company for the
financial year ended 31 August 2010, including the
directors’ report and the report of the independent
auditors thereon, as well as sanctioning of the
following dividends for the year:
➔ Interim dividend number 52 of 70 cents per share,
paid on 28 June 2010.
➔ Final dividend number 53 of 80 cents per share,
paid on 13 December 2010.
2.
Ordinary resolution number 2 – re-election of
retiring directors and confirmation of casual
vacancy appointments
To elect directors of the Company in terms of
prevailing legislation and the Company’s articles of
association (the articles) as follows:
➔ In accordance with the articles, at least one third of
the directors shall retire, being those longest in
office since their last rotation at the date of the
AGM. Such directors may offer themselves for
re-election.
2.1.2 Dr D (Len) Konar.
2.1.3 Mr ID (David) Sussman.
2.1.4 Mr VP (Vusi) Khanyile.
2.2 It is recommended that the below-mentioned
casual vacancy appointments made by the
Board since the previous AGM, be confirmed
by shareholders at the AGM, namely the
appointments of:
2.2.1 Mr BJ (Bennie) van Rooy on 1 May 2010; and
2.2.2 Mr JH (Jacques) Schindehütte on
10 November 2010.
In accordance with principle 2.17.7 of King III, the
performance and independence of those directors
who have been in office longer than nine years should
be assessed rigorously. The Board confirms that the
performance of all directors and the independence of
the non-executive directors, and especially those that
have been in office longer than nine years, have been
assessed. In each case the performance was found
satisfactory and the director’s independence
undiminished and uncompromised. Consequently
the Board considers their continuing membership
as members of the Board as invaluable.
An abbreviated curriculum vitae of each of the
directors is set out on pages 18 and 19 of this
annual report.
➔ In accordance with principle 2.18.6 of the third King
Report on Governance for South Africa and the King
Code of Governance Principles (jointly King III), at
least one third of the non-executive directors in
office should retire annually. Such directors may
offer themselves for re-election.
JD Group Annual Report 2010
209
Notice of annual general meeting
3.
Ordinary resolution number 3 – renewal of the
authority to place the Company’s unissued
shares under the control of the directors
With the implementation of the JD Group Share
Appreciation Rights Scheme (the SAR Scheme) on
12 August 2009, shareholders approved that not more
than 5% of the Company’s unissued capital may be
placed under the control of the directors and that such
shares should be utilised solely for purposes of the
SAR Scheme. Consequently, shareholders are
requested to consider and, if deemed fit, to renew and
pass with or without modification, the following
ordinary resolution in order to provide the directors of
the Company with flexibility to issue the unissued
ordinary shares of the Company as and when suitable
situations arise for purposes of the SAR Scheme:
“Resolved that 3 500 000 (three million five hundred
thousand) of the Company’s authorised but unissued
ordinary shares, equivalent to 2,05% of the Company’s
current issued capital, be placed under the control of
the directors, who are hereby authorised, subject to
the requirements of the Company’s articles, the
Companies Act, No 61 of 1973, as amended (the
Companies Act), and the Listings Requirements of the
JSE Limited (the JSE Listings Requirements), to allot and
issue such ordinary shares on any such terms and
conditions as they deem fit in the best interest of the
Company. This authority shall remain in force until the
next AGM of the Company as a general authority in
terms of section 221(2) of the Companies Act.”
The directors may apply this mandate only in respect
of the SAR Scheme.
4.
Ordinary resolution number 4 – appointment
of auditors and auditors’ remuneration
Having assessed the performance of the external
auditors as satisfactory and verified their
independence and the eligibility of the designated
auditor, the JD Group Audit Committee recommends
that:
4.1 “Shareholders reappoint the firm Deloitte & Touche
as the independent auditors of the Company for
the ensuing period terminating on the conclusion
of the next AGM of the Company and further that
Mr X Botha be appointed as the individual and
designated auditor who will undertake the audit
of the Company.”
210
JD Group Annual Report 2010
(continued)
4.2 “Shareholders authorise the JD Group Audit
Committee to fix the auditors’ remuneration for
the past year and recommend payment thereof
to the Board of directors.”
5.
Ordinary resolution number 5 – non-binding
resolution by shareholders in respect of the
Group’s remuneration policy
In accordance with principle 2.27 of King III,
shareholders are required yearly to pass a non-binding
advisory vote on the Group’s remuneration policy.
Consequently, JD Group’s Human Resources
department reviewed the Group’s comprehensive
remuneration policy, containing the principles and key
elements, of which an abridged version is set out on
pages 68 to 70 of the Sustainability Report. The
JD Group remuneration policy provides guiding
principles as to how staff, executives and directors
should be remunerated fairly and responsibly. It
addresses elements of base pay and bonuses,
employee contracts, severance and retirement benefits
as well as share-based and other long-term incentive
schemes. It ensures that the remuneration being paid
by the Group is aligned with the strategy of the Group
and that it is linked to performance. The proposed
remuneration for non-executive directors comprises a
base fee, as well as an attendance fee per meeting. No
provision is made for share options or any share-based
payments to non-executive directors or any other
incentive that would encourage a short-term view of
Group performance.
Therefore, the JD Group Remuneration Committee,
having considered and approved the principles and
key elements of the remuneration policy, recommends
that:
5.1 “Shareholders approve, with or without
modification, the JD Group remuneration policy, the
key principles and elements of which are set out
on pages 68 to 70 of the Sustainability Report,
deemed to be forming an integral part of this AGM
notice, for application to staff across JD Group
during the 2011 financial year and further that the
board be mandated, in accordance with principle
2.27.2 of King III, to determine the remuneration of
executive directors in accordance with this policy.”
6.
Ordinary resolution number 6 – precluding, the
JD Group Employee Share Incentive Scheme
Trustees from granting further options
To consider and, if deemed fit, to pass with or without
modification, the following ordinary resolution:
“Given that the JD Group Share Appreciation Rights
Scheme (the SAR Scheme) has been in existence since
12 August 2009 to serve as an incentive mechanism to
retain, attract and encourage staff to achieve strategic
performance goals, the Trustees of the JD Group
Employee Share Incentive Scheme (the Old Scheme)
be and are hereby precluded from allocating any
further options to participants and are further
instructed to ensure that the Old Scheme be
maintained solely for the purpose of winding down the
existing share options granted to participants. For the
purpose of clarity, it is recorded that the final offer of
the Old Scheme is Offer Number 27, granted on 1 June
2009 and due to lapse on 1 June 2016.”
7. Special resolution number 1 – non-executive
directors’ remuneration
The JD Group Remuneration Committee, having
considered and approved the principles and key
elements of the JD Group remuneration policy and
having ensured that the remuneration for nonexecutive directors comprises a base fee as well as an
attendance fee per meeting in accordance with
principle 2.25.4 of King III, and furthermore having
ensured that it does not contain share-based
payments that could encourage the fostering of a
short-term performance approach, recommends that:
7.1 “Shareholders consider, as special business, the
below-mentioned remuneration structure for
non-executive directors, and, if deemed fit, to
approve, with or without modification, the
following as the elements of the remuneration
that should be applied to the non-executive
directors of the Company during the 2011 financial
year, commencing on 1 September 2010:
7.1.1 As director:
➔ A base fee for serving as a director on
the Board – R45 000 per meeting
➔ A fee for attending a Board meeting
– R17 500 per meeting
7.1.2 A fee for attending committee meetings as
a member:
➔ A fee for attending an Audit Committee
meeting – R20 000 per meeting
➔ A fee for attending a Risk Management
Committee meeting – R15 000 per meeting
➔ A fee for attending a Remuneration
Committee meeting – R15 000 per meeting
➔ A fee for attending a Nominations
Committee meeting – nil*
*Nil if it falls on the same date as the Remuneration
Committee meeting, otherwise R3 000 per hour.
7.1.3 As chairman:
➔ For each Audit Committee meeting chaired
– R40 000
➔ For each Risk Management Committee
meeting chaired – R25 000
➔ For each Remuneration Committee
meeting chaired – R25 000
➔ For each Nominations Committee meeting
chaired – R25 000
➔ For each Board meeting chaired by a
person other than the Group Executive
Chairman (i.e. in his absence) – R50 000.
7.1.4 Other fees:
➔ A fee of R3 000 per hour be paid to a
non-executive director for attending
ad hoc, pre-meetings or other informal
meetings or engagements on behalf of the
Company or for attending to other
assignments for the benefit and in the
interest of the Company.”
The reason for this special resolution is to
fix the non-executive directors’
remuneration for the year as
recommended by King III and in
accordance with the anticipated provisions
of the proposed 2008 Companies Act.
The effect of this special resolution would
be that the non-executive directors’
remuneration is fixed for the 2011 financial
year in accordance with the
recommendations of King III and the
anticipated provisions of the proposed
2008 Companies Act.
JD Group Annual Report 2010
211
Notice of annual general meeting
8.
Special resolution number 2 – authority to
repurchase shares
As special business, to consider and, if deemed fit, to
pass with or without modification, the following special
resolution:
“Resolved that the Company and/or a subsidiary of the
Company, be and is hereby authorised by way of a
general authority in terms of sections 85 to 89 of the
Companies Act, to acquire securities issued by the
Company, upon such terms and conditions and in such
amounts as the directors of the Company may from
time to time determine, subject to the requirements of
the Company’s articles, the Companies Act and the JSE
Listings Requirements, provided that:
8.1 the Company and its subsidiaries are authorised
by their articles of association to repurchase
such securities;
8.2 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;
8.3 the Company and its subsidiaries are authorised
by their members via a special resolution taken
at a general meeting, to make such general
repurchases of the Company’s securities;
8.4 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;
8.5 an announcement be made in accordance with
the requirements of the JSE when the Company
and/or its subsidiaries have cumulatively
repurchased 3% of the initial number of
securities of a class of securities in issue at
the date that this general authority is granted
(the initial number) and for each 3% in aggregate
of the initial number of securities of that class of
securities acquired thereafter;
8.6 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;
212
JD Group Annual Report 2010
(continued)
8.7 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;
8.8 the repurchase of securities shall not, in the
aggregate, in any one financial year, and
calculated as at the date this authority is given,
exceed 20% (equating to 34 100 000 ordinary
securities) of the Company’s issued securities of
that class and, where the Company’s issued
securities are repurchased by its subsidiaries, 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;
8.9 the repurchase of securities may not be made at
a price greater than 10% above the weighted
average traded price of the market value of the
securities as determined over the five business
days immediately preceding the date on which
the transaction is effected; and
8.10 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 articles, the
Companies Act and the JSE Listings Requirements.
Statement by the Board pursuant to and in terms
of the JSE Listings Requirements
The directors of the Company hereby state that:
➔ the intention of the directors of the Company is to utilise
the authority if, at some future date, the cash resources
of the Company are in excess of its requirements. In this
regard the directors will take account of, inter alia, an
appropriate capitalisation structure for the Company, the
long-term cash needs of the Company and will ensure
that any such utilisation is in the interests of the
shareholders; and
➔ the method by which the Company intends to repurchase
its securities and the date on which such repurchase will
take place, has not yet been determined.
Disclosures required in terms of the Listings
Requirements of the JSE
In terms of the JSE Listings Requirements, the belowmentioned disclosures are required with reference to any
repurchase of the Company’s securities as set out in the
special resolution above.
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, that:
➔ the Company and the Group will be able, in the ordinary
course of business, to pay its debts;
➔ 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;
➔ the ordinary share capital and reserves of the Company
and the Group will be adequate for ordinary business
purposes;
➔ the working capital resources of the Company and the
Group will be adequate for ordinary business purposes;
and
➔ the Company may not enter the market to proceed with
any repurchase of securities until the Company’s sponsor,
PSG Capital (Pty) Limited, has confirmed in writing to the
JSE the adequacy of the Company’s working capital for
the purposes of undertaking a repurchase of securities.
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 would take place and the maximum general
payments have been made.
Litigation statement
Other than disclosed or accounted for in this annual report,
the directors of the Company, whose names are given on
pages 18 and 19 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.
Directors’ responsibility statement
The directors, whose names are given on pages 18 and 19
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
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
The following further disclosures required in terms of the
JSE Listings Requirements are set out as indicated in the
annual report of which this notice forms part:
➔ Directors and management – pages 18 – 19 and 26 – 27.
➔ Major shareholders of the Company – page 208.
➔ Directors’ interests in the Company’s securities –
page 137.
➔ Share capital of the Company – page 171 note 17.
JD Group Annual Report 2010
213
Notice of annual general meeting
Voting and attendance
Certificated shareholders
Shareholders wishing to attend the AGM 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 company, 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 AGM is entitled to appoint a proxy or proxies
to attend, speak and, on a poll, vote in his/her stead. A proxy
need not be a shareholder of the Company.
Uncertificated shareholders
(continued)
each share held. As a general rule, the Company affects all
voting at general meetings by means of a poll.
Proxies
For the convenience of shareholders, a form of proxy is
enclosed herewith. The form of proxy must only be
completed by shareholders who are holding shares in
certificated form or who are recorded on the electronic
subregister in “own name” dematerialised form. The
completed proxy form 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
08:00 on Tuesday, 15 February 2011.
By order of the board
Beneficial owners of dematerialised shares who wish to
attend the AGM have to request their Central Securities
Depository Participant (CSDP) or broker to provide them with
a letter of representation, 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
214
JD Group Annual Report 2010
JMWR Pieterse
Company Secretary
12 November 2010
JD GROUP LIMITED
Form of proxy
(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 (Full name in block letters)
of (Address in block letters)
being the registered owner(s) of
ordinary shares in the Company and entitled to vote, hereby appoint
1.
or failing him/her
2.
or failing him/her
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 Thursday, 17 February 2011, in the David Sussman Auditorium, Ground Floor, JD House, 27 Stiemens Street,
Braamfontein, Johannesburg which will be held for the purpose of considering and, if deemed fit, passing, with or without
modification, the ordinary and special resolutions to be proposed thereat and at any adjournment thereof; and to vote for and/or
against the ordinary and special resolutions and/or abstain from voting in respect of the ordinary shares registered in my/our
name(s), in accordance with the following instructions:
Number of votes
For*
1.
Ordinary resolution number 1: Adoption of annual financial statements, directors’
and auditors’ reports and sanctioning of dividends
2.
Ordinary resolution number 2: Re-election of retiring directors and confirming
of casual vacancy appointments:
Against* Abstain*
Number 2.1: Re-election of retiring directors
Number 2.1.1 Dr HP Greeff
Number 2.1.2 Dr D Konar
Number 2.1.3 Mr ID Sussman
Number 2.1.4 Mr VP Khanyile
Number 2.2: Confirming of casual vacancy appointments
Number 2.2.1 Mr BJ van Rooy
Number 2.2.2 Mr JH Schindehütte
3.
Ordinary resolution number 3: Renewal of the authority to place the Company’s
unissued shares under the control of the directors
4.
Ordinary resolution number 4: Appointment of auditors and approval of auditors’
remuneration
Number 4.1: Appointment of auditors
Number 4.1.1 Reappointment of Deloitte & Touche as the independent auditors
and Mr X Botha as the designated auditor
Number 4.2: Approval of auditors’ remuneration
Number 4.2.1 Approval of auditors’ remuneration
5.
Ordinary resolution number 5: Non-binding resolution by shareholders in respect
of the Group’s remuneration policy
6.
Ordinary resolution number 6: Precluding the JD Group Employee Share Incentive
Scheme Trustees from granting further options
7.
Special resolution number 1 – Approval of non-executive directors’ remuneration
8.
Special resolution number 2 – Authority to repurchase shares
*Please indicate with an “X” in the appropriate spaces above how you wish your votes to be cast. Unless otherwise instructed,
my/our proxy may vote as he/she thinks fit.
Signed at
on 2010/2011
Date
2010/2011
Full name(s)
Signature(s)
Assisted by (guardian*)
*If signing in a representative capacity, see note 12 on page 216.
Please read the instructions on the reverse side of this form of proxy.
JD Group Annual Report 2010
215
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 (Pty) Limited (Computershare).
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 on 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.
9. On a poll, a shareholder is entitled to one vote for each share held.
10. Voting for each of the resolutions must be effected by filling in the number of votes (one per ordinary share) under the
headings “For”, “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 (Chairman) 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.
13. The Chairman, 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 lodged at, posted to or faxed to the transfer secretaries, Computershare, 70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107, Fax (+27) 11 688 5238, to reach the transfer secretaries by no later than 08:00 on Tuesday,
15 February 2011.
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.
216
JD Group Annual Report 2010
Administration
JD Group Limited
ADR depository
(“JD” or “the Group”)
Registration number: 1981/009108/06
JSE code: JDG
ISIN: ZAE000030771
File number 82-4401
The Bank of New York Mellon Company, Inc.
One Wall Street, New York, NY 10286
United States of America
Telephone: +1 212 495 1284
Facsimile: +1 212 635 1121
Executive directors
ID Sussman (Executive Chairman)
AG Kirk (Chief Executive Officer)
Sponsor
KR Chauke, Dr HP Greeff, ID Thompson, BJ van Rooy
Non-executive director
IS Levy
PSG Capital (Pty) Ltd
Ground Floor, DM Kisch House, Inanda Greens
Business Park, 54 Wierda Road West, Wierda
Independent non-executive directors
Valley, Sandton, 2196
Telephone: (+27) 11 784 1712
Facsimile: (+27) 11 784 4755
VP Khanyile, Dr D Konar, M Lock, MJ Shaw,
JH Schindehütte, GZ Steffens
Independent auditors
Company secretary
Deloitte & Touche
221 Waterkloof Road
JMWR Pieterse
Waterkloof
Pretoria
0181
Registered office
11th Floor, JD House
27 Stiemens Street
Attorneys
Braamfontein, Johannesburg, 2001
(PO Box 4208, Johannesburg, 2000)
Telephone: (+27) 11 408 0408
Facsimile: (+27) 408 0604
E-mail: info@jdg.co.za
Feinsteins (Levy, Feinstein & Associates Incorporated)
10th Floor, JD House
27 Stiemens Street
Braamfontein, Johannesburg, 2001
Telephone: (+27) 11 712 0700
Facsimile: (+27) 11 712 0712
E-mail: mail@feinsteins.co.za
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
(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 2011
Annual general meeting
Announcement of interim results
Interim dividend declaration
Payment of interim dividend
Financial year end
Announcement of annual results and publication of annual financial statements
Final dividend declaration
Publication of annual report
Payment of final dividend
BASTION GRAPHICS
17 February
Mid-May
Mid-May
Mid-June
31 August
Mid-November
Mid-November
30 November
Mid-December
JD Group
Annual Report 2010
www.jdgroup.co.za