ADMINISTRATION
JD Group Limited
ADR depository
(“JD” or “the Group”)
Registration number: 1981/009108/06
JSE code: JDG
ISIN code: ZAE000030771
File number 82-4401
The Bank of New York 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)
KR Chauke, Dr HP Greeff, ID Thompson, G Völkel
Sponsor
Non-executive director
IS Levy
Independent non-executive directors
VP Khanyile, ME King, Dr D Konar, M Lock, MJ Shaw,
GZ Steffens
Company secretary
JMWR Pieterse
Registered office
11th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
(PO Box 4208, Johannesburg, 2000)
Telephone: +27 11 408 0408
Facsimile: +27 11 408 0604
E-mail: info@jdg.co.za
Independent auditors
Deloitte & Touche
221 Waterkloof Road
Waterkloof
Pretoria
0181
Attorneys
Feinsteins (Levy, Feinsteins & Associates Incorporated)
10th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
Telephone: +27 11 712 0700
Facsimile: +27 11 712 0712
E-mail: isl@feinsteins.co.za
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 11 370 5000
Facsimile: +27 11 688 5238
E-mail: proxy@computershare.co.za
5 February 2009
Published May
Declared May
31 August
Published November
Published November
Declared November
Published November
BASTION GRAPHICS
www.jdgroup.co.za
TWENTY FIVE YEARS
redefining the future . . .
ANNUAL REPORT 2008
SHAREHOLDERS’ DIARY FOR 2009
Annual general meeting
Announcement of interim results
Interim dividend declaration
Financial year end
Annual financial statements
Announcement of annual results
Final dividend declaration
Annual report
TWENTY FIVE YEARS
J D G R O U P AN N UAL R E P O R T 2 0 0 8
PSG Capital (Proprietary) Limited
Building No 8, Woodmead Estate,
1 Woodmead Drive, Woodmead, Sandton, 2157
Telephone: +27 11 797 8400
Facsimile: +27 11 802 3689
driving our business forward . . .
JD Group, a mass consumer financier, is South Africa’s leading
differentiated furniture, appliances, electronic goods, home and
office automation retailer, operating in southern Africa through
four business divisions and 10 brands, and internationally with
one business division and one brand in Poland.
CONTENTS
The JD Group covers the mass middle market and services the
market through 1 033 stores in southern Africa and 62 stores in
Strategy statement
2
Financial summary
3
Poland.
Brands and operational areas
8
JD Group generated annual revenue of R12,6 billion and an annual
Directorate
10
Executive management
12
Executive chairman’s report
14
Each brand is positioned in the mass middle market in a
Chief executive officer’s report
18
differentiated way with a specific focus on a market segment, brand
Review of operations
22
identity and store layout, merchandise range and market profile.
Review of corporate services
36
Sustainability and stakeholder review
48
Corporate governance
59
cash inflow of R1,3 billion from trading activities.
CONTENTS (continued)
Ten year review
Group cash flow statement
106
Notes to the Group cash flow statement
107
80
Group statement of changes in equity
108
Report of the independent auditors
81
Certificate by company secretary
81
Notes to the Group annual
financial statements
109
Directors’ report
82
Segmental analysis
139
Directors’ remuneration
84
Definitions
92
Share incentive trust and
salient features
142
JD Group Limited – company
financial statements
145
Subsidiaries
146
Shareholder information
148
Directors’ approval of the annual
financial statements
Accounting policies
76
93
Group income statement
104
Group balance sheet
105
GROUP REVIEW
redefining the future...
TWENTY FIVE YEARS
1
J D G R O U P AN N UAL R E P O R T 2 0 0 8
sharpening our focus
REDESIGN THE FUTURE
The ability to predict the future in the modern world becomes an elusive and unattainable goal. The paradox
statement: “The pace of change has never been as fast as it is today – it will never be so slow again” is more
true than ever before.
The recent events on the financial markets of the world and their impact on the local economy and consumer
market confirm the challenging environment within which companies have to design future sustainable
strategies.
In the context of the above, business strategy design must have a sufficient level of robustness to adapt to
unpredicted events impacting on organisations. The final acid test for business strategy is and will be its ability
to weather storms successfully, whilst serving as stable platforms to capitalise on new business opportunities
into the future.
The Group is convinced that its future business and operating model is robust enough to cater for most events
whilst serving as a stable platform to facilitate growth in its five business divisions.
REVENUE
HEADLINE EARNINGS PER SHARE
NET ASSET VALUE PER SHARE
3 500
15 000
1 000
12 000
800
9 000
600
2 000
6 000
400
1 500
3 000
200
0
0
03
04
05
06
07
R million
2
J D G R O U P AN N UAL R E P O R T 2 0 0 8
08
3 000
2 500
1 000
500
0
03
cents
04
05
06
07
08
03
cents
04
05
06
07
08
Customer centricity
Continuous focus to serve our existing and new customers with the best possible range of differentiated
9
merchandise and financial services offerings, underpinned by excellent service.
• Customer service
Achieve world-class customer service through the establishment of a culture whereby each customer
is treated like our only customer.
• Product ranges and differentiation
Providing expanded, relevant and differentiated products and services to our customers, thereby maximising the
financial performance of the Group and those of identified strategic business partners.
31 August
2008
Financial summary
31 August*
2007
Revenue
Rm
12 610
Profit attributable to shareholders
Rm
514
12 914
1 113
Total assets
Rm
8 673
8 891
Shareholders’ equity
5 048
Rm
4 813
Gearing ratio
%
3,3
1,5
Operating margin
%
6,3
12,3
Headline earnings per share
cents
301,0
621,7
Cash equivalent dividends per share
cents
152,0
303,0
Net asset value per share
cents
2 822,9
2 804,5
Return on assets managed
%
12,7
23,7
Return on average shareholders’ equity
%
10,4
20,9
Note: Definitions of the terms above are reflected on page 92 of the annual financial statements.
*The 2007 comparatives have been restated for the change in the basis of accounting for insurance income and initiation fees (refer note 1).
3
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Sustainable growth
Secure short and medium term business performance to satisfy stakeholders’ needs, while focusing on market
trends, to ensure future relevance and market growth.
9
• Business performance optimisation
Continuous focus on the identification of opportunities to increase efficiencies.
• Operational excellence
Protecting stakeholders’ interests and compliance within a legislative framework.
• Growth (local and international)
Scanning the market environment for organic and acquisitive growth opportunities, both locally and internationally.
• Corporate governance and social responsibility
Adherence to good corporate governance principles and meeting our social responsibilities by providing a better
life for the communities in which we trade.
FUTURE BUSINESS AND OPERATING MODEL
The Group progressed well in its endeavour to follow through on its business and operating model announced in
the previous financial year. The design and planning work for all five business divisions have been completed and
the primary focus shifted to implementation and benefits realisation.
The five business divisions of the Group, serving as the operating platform for execution, are represented in the
following diagram:
Business and operating model
TRADITIONAL
RETAIL
CASH
RETAIL
INTERNATIONAL
RETAIL
Barnetts
Hi-Fi Corporation
Abra
Bradlows
Incredible Connection
Electric Express
Joshua Doore
FINANCIAL
SERVICES
NEW BUSINESS
DEVELOPMENT
90%*
Maravedi Group
55%*
Blake & Associates
Morkels
Price ’n Pride
Russells
Supreme
4
J D G R O U P AN N UAL R E P O R T 2 0 0 8
*The acquisition of additional shareholdings in these entities are subject to certain conditions precedent as further
described on page 34.
Building and optimising people capacity
9
Creating and establishing a culture of continuous learning, leadership development and business performance.
• Learning and growth
Creation and growth of a continuous learning culture.
• Leadership development
Securing succession planning as a base for successful future growth through excellent leadership development
programmes in partnership with reputable external business partners.
BUSINESS PHILOSOPHY
VALUES
The business and operating model on page 4
Honesty and integrity
required a significant shift away from a relative
Ability to communicate and behave openly without
symbiotic and integrated centrally controlled
fear, focused on one truth as the only norm, based on
environment, to a definitive decentralised and
mutual trust and respect and where the intent of any
autonomous business division environment, within
communication and/or behaviour is unquestionable.
the preagreed broad Group strategy parameters.
This decentralised model is fundamentally
underpinned by autonomy linked with a clear
understanding of the accompanied accountability
and responsibility imperative vested in the executive
management teams of the different business
Valuing diversity
Individually and/or collectively understanding,
accepting and valuing the different backgrounds,
cultures, personal preferences and competencies
of people.
divisions. The restructuring and realignment of
Responsibility and accountability
executive team capabilities to cater for this
Role-defined responsibilities and accountabilities are
requirement have been completed.
not only vested in the function but fundamentally also
Service department resource redeployment has
in the person and are not transferable.
taken place as a natural consequence of this
business philosophy. Every business division is
therefore fully equipped from an operational and
service department perspective.
Urgency
Urgency in all we do is a non-negotiable value.
Performance driven
The journey to achieve world-class status is
VISION
impossible without the individual and collective
The Group’s vision is: “To be world-class in our fields
the performance-driven value.
commitment of all the people of the Group to own
of expertise” in the differentiated and unique
context of the specific business division.
Growth into the future will be driven by specific
opportunities relevant for the differentiated divisions
and can be organic or by acquisition.
5
J D G R O U P AN N UAL R E P O R T 2 0 0 8
9
Optimised technology enablement
Establish, maintain and grow technology capacities that will enable a differentiated customer experience and secure
maximised business efficiencies.
• Appropriate technology producing optimised business intelligence
Develop and implement a user-friendly business intelligence application for the retail and financial services
environment, enabling measurement capability on the progress of strategic business drivers.
STRATEGIC BUSINESS GOALS
The strategic business goals are central in the drive to implement the Group’s business strategy. The business
goals per business division are depicted below:
JD
Vision
“To be world-class in our
fields of expertise.”
Store expansion and
delivery of required return
on revenue
New product and
market development
and delivery of
required return on
capital employed
NE
W
EV BUS
INE
EL
SS
OP
ME
NT
AL
CI
S
AN
FIN VICE
R
SE
Relevant risk
management, collection
centralisation and
delivery of required
return on capital
employed
CUSTOMER
FOCUS AND
MARKET
SHARE
Product and service
differentiation,
store expansion and
delivery of required
return on revenue
D
Optimisation of
retail efficiency and
delivery of required
return on revenue
SH
CA
IL
TA
RE
TR
AD
ITI
O
RE
TA NA
L
IL
GROUP
INTERNATIONAL
RETAIL
The strategic business goals will be underpinned by the operational strategies in all cases.
6
J D G R O U P AN N UAL R E P O R T 2 0 0 8
9
Transformation
• Transformation
Driving transformation as a key imperative for the future success of South Africa and the Group.
OPERATIONAL STRATEGIES
IMPLEMENTATION
• Customer centricity
The Group has accepted a three year time horizon
• Sustainable growth
to implement and follow through on its new business
• Building and optimising people capacity
and operating model. The end goal for achievement
• Optimised technology enablement
has been disclosed upfront and agreed with every
• Transformation
business division for the next three years. The
following diagram depicts the journey of followthrough of the Group’s new business and operating
model and the realisation of envisaged benefits:
CASH RETAIL
(CR)
INTERNATIONAL
RETAIL
(ABRA)
FINANCIAL
SERVICES
(FS)
NEW BUSINESS
DEVELOPMENT
(NBD)
NBD
TRADITIONAL
RETAIL
(TR)
COR P OR AT E SERVICE D EPARTMENTS
ABRA
SHORT
2008/2009
MEDIUM
2009/2010
LONG
2010/2011
CR
Anchoring principles
guiding the business
plan for the future
FS
Delivery channels driven by differentiated market position
L I NE OF S I GHT – VISIO N 2011 AND BEYO ND
TR
TO UG H MAR K ET CON DIT I ON S AN D C HANGI N G DY NAM I CS
The foundation of the future – Vision 2011 and beyond
25%
return on capital
employed
25%
return on capital
employed
10%
return on revenue
including commission
earned from FS
7%
return on revenue
12,5%
return on revenue
including commission
earned from FS
7
J D G R O U P AN N UAL R E P O R T 2 0 0 8
BRANDS AND OPERATIONAL AREAS
TRADITIONAL RETAIL
Retailer of affordable and functionally designed household merchandise and appliances,
focused predominantly in the rural areas of the mass middle market.
National retailer selling quality branded furniture, appliances and home entertainment
products to the aspirational upper mass middle market.
Category specialist selling affordable appliances and home entertainment products,
serving the lower end of the mass middle market with branded merchandise from a national
footprint of compact dynamically displayed stores.
Furniture and appliance retailer, offering an extensive range of discounted merchandise
through a national footprint of stores aimed at serving the mass middle market and
first time buyers.
Retailer of high quality, guaranteed and sophisticated household furniture and appliances
to the upper end of the mass middle market with a national footprint in the urban and
metropolitan areas.
Retailer of affordable, quality and branded household merchandise focused on the rural and
urban communities of the mass middle market.
Branded furniture and appliances retailer serving the middle mass market in metropolitan
and urban areas.
Botswana based retailer, providing a wide range of household furniture and appliances,
satisfying the needs of the lower, middle and aspirational markets.
CASH RETAIL
Retailer of electronic goods and household appliances to the mid to upper end of the
consumer market.
Incredible Connection is southern Africa’s largest technology retailer serving the upper mass
market in all metropolitan areas.
INTERNATIONAL RETAIL
Furniture retailer serving the mass market in Poland.
NEW BUSINESS DEVELOPMENT
The acquisition of the increased shareholdings in the Maravedi Group and Blake & Associates will ensure
continuous improvement in expanding the range of financial products, risk management and collection
strategies within the Group.
8
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Projected new
number of stores
for 2008/9
Total number
of stores
Poland
Swaziland
Namibia
Botswana
Northern Cape
Free State
North West
Eastern Cape
Limpopo
Mpumalanga
Western Cape
KwaZulu-Natal
Gauteng
OPERATIONAL AREAS
122
4
94
1
1
122
0
13
5
147
2
9
8
2
115
0
11
15
11
3
130
5
15
13
17
9
203
5
20
0
21
19
21
33
13
10
4
1
31
13
13
11
9
7
7
1
40
13
22
9
14
9
6
8
37
18
19
17
13
13
12
36
15
13
12
11
9
25
17
7
16
25
51
27
34
23
14
2
20
TOTAL
12
3
6
2
1
1
2
1
1
1
1
31
3
21
5
11
3
1
2
2
1
1
1
1
49
4
62
62
10
62
1 095
34
274
130
112
116
123
82
76
70
24
22
2
2
9
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORATE
1
2
3
4
5
6
Executive directors
1.
David Sussman (60)
BCom, Executive chairman
Appointed 1 April 1986. Appointed chairman in February 1989. 35 years’ experience in retail. Founded the Group in 1983.
2.
Grattan Kirk (44)
FCA, CA(SA), Chief executive officer
Appointed 17 September 2007. Joined the Group in December 2005. Joined Incredible Connection in October 1997. Appointed
chief executive of Incredible Connection in 2003. 10 years’ experience in auditing and 11 years’ experience in retail.
3.
Richard Chauke (41)
BCom (Hons), MCom (South African and International Tax), MTP (SA), Director: Transformation
and Taxation Affairs
Appointed 17 September 2007. Joined the Group in February 2006. 12 years’ experience in auditing and taxation, three years’
lecturing and three years’ experience in retail.
4.
Dr Henk Greeff (49)
MEd (Ed Management) (cum laude), PhD, Director: Strategy and Human Resources
Appointed 17 September 2007. Joined the Group in April 2003. Eight years’ experience in strategic management consulting and
five years’ experience in retail.
5.
Ian Thompson (40)
BCom, BAcc, CA(SA), Director: Finance and Corporate Affairs
Appointed 13 November 2008. Joined the Group in September 2003. 12 years’ experience in finance, auditing and taxation and
five years’ experience in retail.
6.
Gerald Völkel (48)
BAcc, CA(SA), Chief financial officer
Appointed 2 April 2001. Joined the Group in November 1995. 15 years’ experience in auditing and 13 years’ experience in retail.
Note: With effect from 30 May 2008, Johan Kok and Mias Strauss retired as executive directors from the JD Group board.
10
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Non-executive director
7.
Ivan S Levy (70)
Dip Law, Attorney and director of companies
Appointed 1 December 1994. Chairman of the remuneration and nominations committees and chairman of the board of trustees of the
Group’s pension and provident funds.
Independent non-executive directors
8.
Vusi Khanyile (57) 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.
Mervyn King SC (71)
9.
BA, LLB (cum laude), H Dip Tax, PhD (hc) in Law, Director of companies
Appointed 2 May 1995. A former judge of the Supreme Court of South Africa. Chairman of the King Committee on Corporate Governance
in South Africa. Professor extraordinaire at UNISA on Corporate Citizenship. First vice president of the Institute of Directors Southern
Africa. Chairman of the Global Reporting Initiative in Amsterdam, United Nations Committee on Governance and Oversight, as well as
of Strate, Brait Société Anonyme listed in Luxembourg, London and in Johannesburg. Chairman of the JD Group audit committee and
member of the remuneration and nominations committees.
10.
Dr Len Konar (54)
11.
Maureen Lock (59)
12.
Martin Shaw (70)
CA(SA), Director of companies
Appointed 1 June 2001. Member of the audit, remuneration, nominations and risk management committees. Prior to retirement, served as
managing partner, chief executive and chairman of Deloitte & Touche. Chairman of Pretoria Portland Cement and Reunert and a non-executive
director of Liberty Holdings, Illovo Sugar and Standard Bank.
13.
Günter Steffens OBE (71) Director of companies
BCom, CA(SA), MAS, DCom, an independent consultant and professional director
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. A non-executive director of Old Mutual South Africa, the South
African Reserve Bank, Sappi and Kumba Resources. Chairman of the JD Group risk management committee and member of the audit,
remuneration and nominations committees.
BCom, CA(SA), Corporate financier
Appointed 2 April 2001. Corporate financier with extensive experience in business re-engineering. First women appointed as a partner of
Ernst & Young in 1981.
Appointed 13 November 2008. Former general manager at Dresdner Bank AG in London and in South Africa. A past chairman of German –
British Chamber of Industry and Commerce and of the Foreign Banks Association in London.
A non-executive director of various companies in South Africa and Europe.
7
8
9
10
11
12
13
11
J D G R O U P AN N UAL R E P O R T 2 0 0 8
EXECUTIVE MANAGEMENT
1.
Ian Child (50)
1
2
3
4
5
6
BCom (Hons), BAcc, CA(SA), Chief information officer
23 years’ experience in retail, IT and finance.
2.
David Hirsch (38)
Group executive: Merchandise and Marketing
17 years’ experience in retail.
3.
Johan Kok (57)
Chief operating officer
37 years’ experience in retail*.
4.
Phillip Kruger (46)
BCom, Chief executive: Financial Services
18 years’ experience in retail.
5.
Arie Neven (49)
Chief executive: Traditional Retail
28 years’ experience in retail.
6.
Guy Pearce (42)
BSc, BCom, MBA, Chief executive: New Business Development
12 years’ experience in financial services, eight years’ experience in IT.
*Note:
• With effect from 30 May 2008, Johan Kok retired from the JD Group board but remains on as a member of executive management.
• Fred Ginsberg, Vivian Horn, Mark Richards and Mike Roberts retired as members of executive management.
12
J D G R O U P AN N UAL R E P O R T 2 0 0 8
focusing on implementing our
strategy for the future...
13
J D G R O U P AN N UAL R E P O R T 2 0 0 8
EXECUTIVE CHAIRMAN’S REPORT
Business environment
Two years have passed since the credit cycle turned
with arrear payments in our receivables moving out
since July 2006. This downturn was exacerbated by
the proliferation of credit in the run up to the
National Credit Act. In fact, the unprecedented
appetite for debt in recent years resulted in the
consumer’s current state of overindebtedness. While
the downturn in the credit cycle did not take us by
surprise, the severity of this correction could not be
anticipated. I am of the opinion that this has been the
most severe downcycle that I have experienced since
we opened the doors to our first store 25 years ago.
Redefining the business and operating model
for future growth
Notwithstanding the current challenges, JD Group
has emerged from all downcycles in the past in a
much stronger position and this time will be no
exception. It is my view that although tough times
are not very palatable, they are key to the health of
an organisation because they call for a review of all
aspects of the business. While we had initiated a
number of improvements before the current
downturn, we are now more focused to ensure that
our business emerges in better shape to prosper in
the future. The difficult trading conditions have
severely impacted sales in our Traditional Retail
division and have also resulted in product margin
erosion. This, together with the increase in bad
debts, reflects the conditions that have prevailed
over the past two years.
However, our determination to safeguard the
strength of our balance sheet has paid off, with a
gearing ratio of 3,3% at year end. The Group enjoys
very strong cash flows and the underlying quality of
our receivables remains intact. Our strategy going
forward is undoubtedly relevant and our track record
bears testimony to our ability to execute the plan.
We are faced with a number of tasks, which we will
undertake with the same determination and zeal
that we as a team have always displayed.
14
J D G R O U P AN N UAL R E P O R T 2 0 0 8
“You can’t do today’s job with yesterday’s methods and be in business
tomorrow.” Anonymous
• The Group enjoys strong cash flows and the
underlying quality of our receivables remains intact.
• Our people are the face of our business and one
• We have emerged from all downcycles in a
stronger position and the long term outlook
remains positive.
cannot underestimate the role that they fulfil as
ambassadors for the Group.
We took the decision in January 2006 to separate
Financial Services from Traditional Retail. It has
become patently clear that the revenue generated
from Financial Services was subsidising Traditional
Retail. Any subsidisation, by definition, leads to
inefficiency and in order to achieve our aim of being
world-class retailers, this had to be addressed.
Furthermore, our Financial Services division was not
efficient enough to compete with its peers who are
now providing finance to our target market. It was
clear that separating the two entities into stand alone
businesses would bring about a singleminded focus,
allowing both divisions to excel.
The time spent evaluating the separation during the
past two years highlighted the issues and potential
pitfalls. Ideally, we would have liked to be a year
ahead of where we currently are, but the process
was deferred to ensure full compliance ahead of the
National Credit Act, which came into force in June
2007. Our focus now is on implementing our strategy,
which includes driving greater efficiencies
throughout the organisation.
To date, the Group has funded Financial Services
internally. However, our corporate advisors are of
the opinion that this entity could conservatively gear
up to about 50% of the gross receivables, providing
extensive growth potential while also addressing the
cost of capital.
The separation of Financial Services from Traditional
Retail also drew our attention to the inappropriate
overhead structure in Traditional Retail which
needed to be addressed. When we reviewed the
market positioning of each of our brands in 2003, we
recognised that we were embarking on a journey.
While much has been accomplished, Traditional
Retail will be further positioned as a stand alone
division to achieve its full potential.
During the 2009 financial year, our focus will be to bed
down the new structure into the operating divisions,
namely Traditional Retail, Cash Retail, International
Retail and Financial Services, as well as our New
Business Development division currently housing
Maravedi and Blake. Towards the end of the financial
year, we implemented separate management
structures for each operating division, with the major
impact being on Traditional Retail and Financial
Services. The segregation into these separate
business divisions will allow us to improve service
levels through specialised skill sets in each operation.
Subsequent to the year end, the Group increased its
shareholding in Blake, a well known contact centre
operation, from 27,5% to 55,0%. The founding
members of Blake will retain equity in the operation
and continue to manage its day to day operations.
At the same time, the JD Group acquired Absa
Group Limited’s shareholding in Maravedi,
increasing our stake from 42,7% to 90,5%. Thebe
Investment Corporation (Proprietary) Limited
remains a 9,5% shareholder in Maravedi. At the
time of publication of this annual report, both
transactions were still subject to approval by the
Competition Authorities. In the year under review,
Blake and Maravedi were equity accounted, but
after completion of the transactions, these will
be consolidated into the Group’s results.
Both Blake and Maravedi are critical components
of the Group’s long term growth strategy into
financial services.
15
J D G R O U P AN N UAL R E P O R T 2 0 0 8
EXECUTIVE CHAIRMAN’S REPORT
continued
The New Business Development division, which
currently houses Maravedi and Blake, will act as the
incubator for the Group’s next generation Financial
Services business. The necessary skills have been
recruited from the banking sector to head up this
division. New products will be launched into our
existing retail channels, further leveraging our
extensive national footprint. However, as Maravedi
becomes a fully fledged financial services provider, it
will establish its own channels and brands, reducing
its reliance on the Group’s retail footprint. We also
envisage the introduction of private label cards into
the Cash Retail environment.
Our International division, comprising the very
successful Abra retail chain, together with our Cash
Retail division, which consists of Incredible
Connection and Hi-Fi Corporation, are core to the
strategy of the Group. These businesses provide
balance and diversification benefits to the Group,
dampening the cyclicality of our Traditional Retail
activities.
Our people
Our people are the face of our business, and our
customers’ view of the Group is predicated on the
quality of their interaction with our staff in each and
every store. One cannot underestimate the role that
our employees fulfil as ambassadors for the Group.
The increased regulatory requirements of credit
extension introduced by the National Credit Act have
raised the fiduciary responsibility of our customer
facing employees.
To ensure the quality and continuity of service, as well
as our compliance with the legislative environment,
we have heightened our focus on the training of staff
at all levels. In the South African operations, more
than 8 600 of our 17 700 strong workforce attended
training during the year. In addition, JD Group
supports Business Leadership South Africa in its
efforts to train people in the priority skills areas as
identified by the Joint Initiative on Priority Skills
Acquisition (JIPSA).
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
Broad-based black economic empowerment
(B-BBEE)
The Group remains committed to concluding a
B-BBEE transaction, incorporating a broad-based
business partner and staff in order to address
transformation at the ownership level. Progress in
this regard has been hampered by the recent turmoil
in the financial markets.
In addition, the Group continues to focus on the
other aspects of the B-BBEE scorecard and
continuously evaluates procurement across the
operations to verify the credentials of its suppliers.
Recruiting people of colour at a management level
is a priority, supported by our bursary, training and
mentorship programmes.
Social responsibility
The JD Group’s corporate social investment
programme remains focused on the development of
individual and community self sufficiency through
education and training, skills development and job
creation. During the 2008 financial year, we invested
more than R4,0 million in our social responsibility
programme, with our main projects including, among
others, the Techno-agricultural Innovation for
Poverty Alleviation (Tipa) project and the B’nai B’rith
Food Highway. Tipa is based on the concept of the
African Garden Market, part of the Food Security for
Africa initiative and B’nai B’rith, which undertakes
communal projects for the underprivileged, joined
forces with the Group to expand its successful Food
Highway project.
For additional details refer to the sustainability
report on page 57.
Share buy back and dividend
During the year, the Group applied excess cash
to purchase and cancel 9,5 million shares, in addition
to increasing the number of shares held in the share
trust at a total cost of R527 million. This was
performed under our general authority to repurchase
shares. We will continue to repurchase shares for
cancellation as opportunities arise, effectively
returning excess capital to our shareholders to
enhance returns.
Underpinned by our long term confidence in the
Group’s business model and our continued cash
generation, we have maintained our historic dividend
cover of two times. The board declared a final
dividend of 41 cents (2007: 57 cents) per share for
the year ended 31 August 2008.
Board of directors
Mias Strauss retired from his position as chief
executive officer on 30 May 2008. He played an
instrumental role in the success of the Group since
his appointment in 1993 and will continue to be
involved in the business on a project basis. I extend
my heartfelt thanks for his commitment and support
over the years and it is comforting to know that he
will continue to play a role in the future.
In addition, Johan Kok retired from the board with
effect from 30 May 2008. He has committed to
continue in the role of chief operating officer,
supporting the implementation of our new strategy.
I wish to congratulate Grattan Kirk, our recently
appointed chief executive officer, on his new role.
Grattan’s experience and success at Incredible
Connection have provided the platform for him to
make a very real difference to JD Group.
I am delighted to announce the appointment of
Vusi Khanyile and Günter Steffens as independent
non-executive directors to our board. The Group has
been associated with both Vusi and Günter for a
number of years, Vusi, through Thebe’s holding in
Maravedi, and Günter, as a non-executive on the
board of Incredible Connection. Vusi will assume the
role of lead independent non-executive director in
the new year and Günter assumes the chairmanship
of the risk committee. It also gives me great
pleasure to advise that Ian Thompson has been
appointed as an executive director. His contribution
to the Finance department has been invaluable,
particularly in dealing with issues relating to
taxation and the treasury function.
The board of directors appointed Johann Pieterse
as the company secretary with effect from
9 September 2008. Johann’s wealth of experience
has already manifested itself in the short time he
has been with us.
Prospects
We maintain that despite the current difficult trading
conditions, the long term outlook remains positive.
Of immediate interest is the question of when the
consumer demand cycle will turn. Our strategy to
separate Financial Services from Traditional Retail
has been set in motion and increased efficiencies
will bring about financial benefits during 2009.
Notwithstanding our very conservative expectation
for top line growth in the year ahead, we expect
a pleasing improvement in earnings.
Acknowledgements
We have operated in a demanding environment over
the past two years and I am pleased to say that our
people, from senior management through to our
employees at store level, rose to the challenge. It is
satisfying for me to experience the fortitude and
determination of our staff. We are committed to
coming out of these tough times a much better
organisation and with the commitment of all our
JD Group people, I am convinced that this will be the
case. I extend my gratitude to each and every member
of the team for their efforts and loyalty in 2008.
Ray Kroc, the founder of McDonald’s, once said that
“nothing in the world can take the place of
persistence. Persistence and determination alone
are omnipotent.” My executive team exemplifies
these attributes and for this I am truly grateful.
I also wish to acknowledge the tremendous support and
wise counsel received from our non-executive directors.
I David Sussman
Chairman
14 November 2008
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
CHIEF EXECUTIVE OFFICER’S REPORT
Financial review
Revenue declined by 2,4% to R12,6 billion (2007:
R12,9 billion), as the trading environment was once
again impacted by lower discretionary income. The
Group’s gross profit margin was down from 30,1%
to 28,6%, due to a highly competitive trading
environment in the second half of the year, with
Traditional Retail bearing the brunt.
The ongoing decrease in demand for consumer
credit negatively impacted Traditional Retail, which
reported an 11,6% decline in revenue for the year to
R5,2 billion (2007: R5,9 billion). In order to preserve
market share, the furniture chains were forced to cut
prices and this significantly affected margins by
2,8% year on year. The division, however, contained
expenses to an increase of 1,9% compared to 2007,
but this was not sufficient to offset the lower
margin. As a result, operating profit decreased by
R531 million to R111 million. Worthy of mention is the
performance of the two entry level chains, namely
Price ’n Pride and Barnetts, which fared better than
the other chains in Traditional Retail.
The Group’s Cash Retail activities, comprising
Incredible Connection and Hi-Fi Corporation,
delivered revenue of R4,0 billion, reflecting a 4,0%
increase (2007: R3,9 billion). However, operating
profit was down 14,8% on the prior year. Incredible
Connection performed exceptionally well, growing
its market share. Hi-Fi Corporation was subjected to
increased price competition, exacerbated by lower
consumer spending. Although Hi-Fi Corporation’s
top line sales declined by 5,4% year on year, there
has been a slight improvement in gross margin.
Incredible Connection grew its top line by a very
pleasing 17,1%, with its operating margin at
7,6%. Overall, the reported operating margin of the
Cash Retail division, whilst down on last year, was
still at an acceptable 5,7%.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
“The past year has been a turning point in JD Group’s history as we
took the fundamental decision to restructure our business in line with
international trends and current best practice. It is with great pride
that, during this time of transformation, I have been tasked to lead the
evolution of our Group.” Grattan Kirk
• The ongoing decrease in demand for consumer
credit negatively impacted Traditional Retail.
• Incredible Connection performed exceptionally
well, growing its market share.
• The Cash Retail division produced an acceptable
5,7% operating margin.
• Abra achieved a superior operating margin of
6,1% with operating profit up R27 million to
R49 million.
• The gearing ratio remains extremely conservative
and increases the Group’s resilience to the
adverse economic and credit environment.
• The new structure facilitates a material
reduction in costs.
• Hi-Fi Corporation’s top line has been affected by
increased competition with resultant pressure
on margins.
• Financial Services was impacted by lower new
business inflows from Traditional Retail.
Abra, based in Poland, performed well above
Balance sheet and cash flow
expectations. The enlarged store base now provides
Despite cash generated by operations decreasing
the necessary critical mass which yielded improved
from R1 552 million to R1 309 million, the Group
economies of scale. Revenue increased by 60% to
remains highly cash generative with over 164% of
R800 million, delivering rand hedge benefits to the
operating profits being converted into cash.
Group. Abra has achieved a superior operating
Working capital was particularly well managed over
margin of 6,1% with operating profit up R27 million
the 12 months. During the year, R527 million was
to R49 million.
used to buy back and cancel 9,5 million shares and
In line with muted consumer demand, Financial
Services was impacted by lower new business
inflows during the year. Revenue showed a 6,5%
decline to R3,1 billion (2007: R3,3 billion) with
operating profit decreasing by 23% to R622 million
(2007: R808 million). Bad debt write offs and
impairment provision costs increased by 8,8%
year on year, resulting in the operating margin
to increase treasury shares held in the share trust
from 4,5 million to 7,4 million. The balance sheet
reflects net gearing of R158 million compared to
R76 million at 31 August 2007. The gearing ratio of
3,3%, compared to 1,5% at 31 August 2007, remains
extremely conservative and increases the Group’s
resilience to the adverse economic and credit
environment.
declining to 20,2%.
Strategy Implementation
Maravedi, our joint venture with Absa and Thebe,
Traditional Retail
continued to grow its receivables. Whilst its financial
Through the restructuring, the Traditional Retail
performance has been pedestrian, it has developed
division, which comprises the eight furniture and
and introduced a number of new products into
appliance brands, has strengthened and
the market over the past year. Blake performed
consolidated its skills in merchandising, retail
exceptionally well and is poised for strong
operations, human capital and customer relationship
organic growth.
management while optimising the supporting IT
systems and infrastructure. The new structure
19
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CHIEF EXECUTIVE OFFICER’S REPORT
continued
facilitates a material reduction in costs. Clearly
chain opened five new stores, bringing its store base
defined reporting structures were put in place
to 49. The Incredible Connection business model will
towards the end of the past financial year. Previously
continue to evolve through its ongoing focus on
Traditional Retail operated off four different IT
customer centricity, supplier relationships and value
platforms. All the Traditional Retail chains now
added services.
operate off one common platform.
Hi-Fi Corporation’s top line has been affected by
A logistics project was launched to introduce
increased competition with resultant pressure on
greater efficiencies into the supply chain through
margins. More and more of its offering is now
centralised distribution centres across all chains.
sourced from local distributors of branded product,
A supply chain expert was recruited to head up the
enabling the chain to provide a far better shopping
centralisation project and we are currently piloting
experience to its customer base. Hi-Fi Corporation
a test facility in Bloemfontein. This initial site has
opened three new stores during the year, bringing its
already enabled us to significantly reduce the
total footprint to 31 stores. In addition to enhancing
number of vehicles. However, this exercise is not
its product range, the chain is evolving its business
simply intended to reduce costs, but must enhance
model by introducing new revenue streams including
customer service and improve our value proposition.
content download and associated services. Further
It is the Group’s intention to replicate centralised
differentiation is planned through extensive
distribution centres countrywide over the next
revamping of the current store network.
two years.
The Cash Retail division is committed to
Cash Retail
The Cash Retail division is a significant contributor
to the Group. This division dampens the cyclical
maintaining its store rollout programme and it is
envisaged that a further 30 stores will be opened
over the next three years.
nature of the Group’s Traditional Retail operations. It
International Retail
specialises in consumer electronics and serves both
Abra maintained the momentum of its improved
small to medium size businesses and the consumer
performance, delivering the benefits of our efforts
at large. The division comprises Incredible
over the past five years. The chain is now one of
Connection and Hi-Fi Corporation, two very strong
Poland’s largest furniture brands with a network of
brands on the southern African cash retail landscape.
62 stores. The Abra management team continues to
The 2008 financial year was characterised by mixed
fortunes. Incredible Connection delivered an
exceptional performance while Hi-Fi Corporation
was faced with a number of operational challenges.
seek other growth opportunities in central and
eastern Europe.
Financial Services
The Financial Services division has traditionally
Incredible Connection’s broad range of
provided term loans and associated insurance
internationally branded quality products mitigates
products to the Traditional Retail division. As already
against commoditisation pressures. Incredible
mentioned, this stand alone division will in time
Connection strives to provide its customer base with
broaden the scope of its consumer finance products
a superior shopping experience. During the year, this
in line with market trends.
20
J D G R O U P AN N UAL R E P O R T 2 0 0 8
During the year, the functional structure of Financial
and head office, along with the maximisation of
Services was finalised and the Electric Express
efficiencies, will be the key priority for the year
receivables were migrated onto the Blake platform.
ahead.
Early indications of the change in collections
methodology have been positive. In order to enhance
our ability to risk rate future debt, we have recruited
a highly skilled and experienced team. With our
upgraded information technology, together with the
newly acquired skills, we are positioned to materially
improve the efficiency of this division.
Financial Services does however require a lower cost
base. To date our existing model for receivables
follow up has been decentralised and executed at
store level, which is expensive and yields
inconsistent results. The centralised model which we
are currently piloting requires a dedicated contact
centre environment with state-of-the-art technology
and a specialised workforce. To this end we have
JD Group has a sound business and operating
model, a long established portfolio of cash
generative brands, minimal gearing and a track
record spanning 25 years. As such, the Group has
the resilience to overcome the impact of the
economic downturn and we are well positioned
to benefit when the cycle turns.
We have set ourselves specific performance targets
over the next three years and I see it as my
responsibility to deliver on these benchmarks. The
challenges ahead present the opportunity to create
the JD Group of the future and there is no doubt in
my mind that we have what it takes to unlock the
huge potential of this Group.
developed a new contact centre in Johannesburg
which will be completed by December 2008. The
contact centre will be managed by JD Group
Financial Services, using Blake’s proven collection
methodology.
The way forward
Our focus remains on implementing our stated
strategy. Reducing the cost base across all divisions
Grattan Kirk
Chief executive officer
14 November 2008
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
Traditional Retail
EXECUTIVE COMMITTEE
Arie Neven, Chief executive: Traditional Retail (Chairman)
Colin Bresler, Chief executive: Joshua Doore
Johan Coetsee, Finance executive
Toy de Klerk, Chief executive: Russells
Julian Hanmer, Group executive: Logistics
David Hirsch, Group executive: Merchandise and Marketing
Pat Kimmince, Chief executive: Barnetts
Conrad Kleingeld, Merchandise executive: Furniture
Johan Kok, Chief operating officer
Rénier Krige, Human Resources executive
Lindsay Mentor, Chief executive: Bradlows and Supreme
Preggie Naidoo, Merchandise executive: Appliances
Mike Roberts, Chief executive: Price ’n Pride
Len Rundle, Chief executive: Morkels and Electric Express
Anthony Smith, Chief information officer: Traditional Retail
Christo Viljoen, Business analytics executive
Review
The migration to one common information
The past year has been characterised by one of
technology platform for all the brands in Traditional
the toughest trading conditions known in the
Retail has been successfully completed.
history of the Group. These conditions tested the
fibre of every brand in terms of its ability to
Outlook
maintain its market share whilst satisfying the
The Traditional Retail division is well prepared to
needs of its customers. All the brands passed
follow through on its journey within the new
this acid test and used the opportunity to review
business and operating model and to unlock value
their position, efficiencies and effectiveness to
from an efficiency and effectiveness perspective
cater for business during the tough trading
and to measure itself against the benchmarks of
conditions, and to align themselves for the future
similar retail operations locally and internationally.
as a pure retail business. Going forward,
One of the key focus areas will be the completion of
Traditional Retail will still earn a commission
the centralised logistical pilot environment. This will
from Financial Services. The business plans and
confirm the relevance of an in-principle strategic
budgets of the different brands have been
decision to migrate from a decentralised logistical
successfully completed and fully aligned with
environment to a predominantly centralised and fully
the future structure of this division.
automated logistical solution.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
Pat Kimmince (43), Chief executive – 24 years’ experience in retail
EXECUTIVE TEAM
Piet Coetzee (43), Logistics – 21 years’ experience in retail
Ria de Clerck (42), Marketing and Merchandise – 23 years’ experience in retail
Donny McCulloch (54), Human Resources – 34 years’ experience in retail
Burnett van Breda (51), Debtors – 31 years’ experience in retail
Fanie Venter (44), Operations – 23 years’ experience in retail
Service and value you can trust
This dynamic business was established in 1896 and operates out of 122 stores,
positioning Barnetts as the leading furniture retailer in its market segment. The chain
seeks to differentiate itself through its people, business performance improvement
and the strength of the brand.
Lindsay Mentor (48), IPM Dip, CPIR, Chief executive – 20 years’ experience in retail
EXECUTIVE TEAM
Grant Adendorff (40), BSoc Sci, Dip Labour Law, Dip Adv Labour Law, Human Resources –
12 years’ experience in retail
Gavin Billson (47), Merchandise – 24 years’ experience in retail
Mike Shimmon (43), Marketing – 12 years’ experience in retail
Willie van Zyl (45), Operations and Debtors – 24 years’ experience in retail
You’re the difference
Established in 1903 and acquired in 1988, Bradlows aims to exceed its customers’
expectations in the delivery of its vision, ensuring that its customers feel Bradlows has
made a unique difference in their lives. Bradlows operates 94 stores in major centres in
South Africa and Swaziland.
Bradlows appeals strongly to the market through its modern store layouts and innovative and unique product
designs. With its implementation of people differentiation and its focused customer service strategy, the chain
continues to reinforce its position as a preferred destination for the aspirational market.
23
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
continued
Traditional Retail continued
Value and quality you can trust
Established in 1989 and acquired in 2003, Supreme strives to maintain its status of being a leading provider of
household durables to the credit market in Botswana, by providing quality merchandise at competitive prices,
above average service through dedicated and knowledgeable employees with the sole aim of exceeding
customers’ expectations.
Supreme continues to be a growth phenomenon in Botswana, operating through 20 stores and two
warehouses. The chain has shown yet again that success is possible during difficult trading times by
remaining focused on its customers and ensuring that it continually offers innovative and alternative
merchandise, thereby remaining ahead of the competitors.
Colin Bresler (45), Chief executive – 23 years’ experience in retail
EXECUTIVE TEAM
Brian Biccard (58), Human Resources – 34 years’ experience in retail
Linda Breedt (34), Merchandise – seven years’ experience in retail
Herbie Lindhorst (47), Logistics – 24 years’ experience in retail
Dhevan Naidoo (43), Debtors – 25 years’ experience in retail
Linda Sithole (41), EMD, MBA, Operations – 19 years’ experience in retail
Greg Smart (38), Marketing – 13 years’ experience in retail
You’ve got an uncle in the furniture business
Established in 1973 and acquired in 1986, Joshua Doore offers a wide range of
furniture, household appliances and entertainment products powered by a worldclass business philosophy that drives innovative business and extraordinary levels
of service.
Through its retail network of 147 stores, the chain is able to provide a range of products at the right price that
meets its customers’ expectations. This is supported by an ongoing merchandise training programme for its staff
that ensures a pleasant shopping experience for all its customers.
24
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Len Rundle (53), BTech, Chief executive – 29 years’ experience in retail
EXECUTIVE TEAM
Peter de Backer (43), Marketing – 23 years’ experience in retail
Gideon Gouws (43), Logistics – 16 years’ experience in retail
Faizal Jogee (43), Merchandise (Morkels) – eight years’ experience in retail
Sue Lewis (47), IPM Dip, Adv Dip (Labour Law), Human Resources – 20 years’ experience in retail
Tommie Muller (40), Operations (Electric Express) – 20 years’ experience in retail
Craig Robertson (44), Merchandise (Electric Express) – 20 years’ experience in retail
Dolf van der Merwe (51), Debtors – 29 years’ experience in retail
Michellé van der Merwe (42), Operations (Morkels) – 20 years’ experience in retail
Your two year guarantee store
Established in 1937 and acquired in 2003, Morkels offers a unique company backed two year guarantee on
quality, affordable merchandise and service provided by dedicated professional staff. Morkels offers South
African consumers a unique shopping and after sales experience through 115 stores across South Africa,
focused on branded quality merchandise for aspirational consumers. The chain continues to pursue growth
by sourcing potential new and alternative sites for business unit opportunities. Morkels enjoys the position as
South African consumers’ destination of choice for quality household furniture, appliances, audio visual
products and service.
We’ve got the power to beat any price on credit
Established in 1958 and acquired in 1993, Electric Express provides consumers in our market segment with a
range of quality and affordable technology and digital products and services at competitive prices through
consumer focused staff.
As a focused retailer of household electrical and home entertainment products at 122 stores conveniently situated
across South Africa, it is purposefully geared for consumers who see themselves as first time homemakers.
The chain serves as the pioneer for the Group in proactively pursuing back end integration with the Morkels
chain, focused on optimising the debtors, logistics and human resources processes and practices for both
chains, through synergistic application of sound leadership and purposefully designed technology and systems.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
continued
Traditional Retail continued
Mike Roberts (53), Chief executive – 26 years’ experience in retail
EXECUTIVE TEAM
Jan Hayes (45), Logistics – 20 years’ experience in retail
Eppo Joubert (38), Operations – 19 years’ experience in retail
John Kirsten (55), Marketing and Merchandise – 33 years’ experience in retail
Molefi Makhetha (44), BA Hons (Psychology), Human Resources – 13 years’ experience in retail
We’ll treat you like our only customer
Price ’n Pride was established in 1983 as the founding chain in the Group. The brand
has now cemented its position in the market since its repositioning in 2001, and
caters to its aspirational target customers in the entry level and mass middle
market. Price ’n Pride operates from 130 stores nationally, offering excellent service,
affordable products and added value to its customers. Its strategic imperative is to
improve its customers’ lifestyle by providing an affordable range of quality products and services in a caring,
respectful and honest environment, at exemplary levels of customer service by competent and proud staff.
26
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Toy de Klerk (48), Chief executive – 28 years’ experience in retail
EXECUTIVE TEAM
Scott Allan (39), Operations – 18 years’ experience in retail
Lynette Basson (51), Debtors – 28 years’ experience in retail
Millicent Nortjé (52), BA (Hons), MBA, Human Resources – 33 years’ experience in retail
Pieter Schoeman (52), Merchandise – 27 years’ experience in retail
Virna Smith (42), Marketing – 19 years’ experience in retail
Rens van Rensburg (58), Logistics – 26 years’ experience in retail
Pieter Viljoen (48), Debtors – 29 years’ experience in retail
See how little style costs
Established in 1943 and acquired in 1993, Russells is differentiated from its
competitors by offering an innovative range of furniture products and appliances
through competent employees, thereby exceeding the expectations of its target market. The retail chain has
203 stores located nationwide.
Russells enjoys the position as one of the leading credit furniture retailers in the mass middle market in
South Africa. With its focus on operational excellence, merchandise and marketing effectiveness and employee
development, it continues to surmount external challenges. The chain’s operational disciplines are focused on
customer acquisition and retention, while its employee development programme enables a healthy succession
capacity to support growth.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
continued
Cash Retail
EXECUTIVE COMMITTEE
Grattan Kirk, Chief executive officer (Chairman)
Pamela Barletta, Group executive: Human Resources
Johan Coetsee, Finance executive
Victor da Silva, Chief information officer: Cash Retail
David Hirsch, Group executive: Merchandise and Marketing
David Miller, Chief executive: Incredible Connection
Matthew van der Walt, Chief executive: Hi-Fi Corporation
Review
Outlook
The Cash Retail division has experienced a mixed
The growth potential in the product and service
picture of success in the past financial year.
offerings of home and small enterprise automation will
Business growth in the product categories of home
remain strong, whilst moderate growth is expected for
and small enterprise automation was exceptionally
the home entertainment and audio visual categories.
strong in comparison to the limited growth of the
Variables with a potential impact on the next
home entertainment and audio visual product
financial year, such as the exchange rate, economic
categories.
growth, inflation and interest rates, can have a
Incredible Connection has performed exceptionally
well under difficult market conditions.
significant positive or negative impact on growth.
A number of key strategic initiatives have been
identified and embarked upon to strengthen the
The growth in the footprint of the brands in the Cash
position of Hi-Fi Corporation in the marketplace.
Retail division has continued successfully and will
Specific areas of focus will be in the merchandise
continue to open new markets and segments.
range, store “look and feel” and staff development and
engagement arenas.
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Matthew van der Walt (36), Chief executive – 11 years’ experience in retail
EXECUTIVE TEAM
Andreas Avrabos (41), Operations – 23 years’ experience in retail
Charl du Plessis (42), BJuris, Administration – 16 years’ experience in retail
Alec Goodman (53), Merchandise – 32 years’ experience in retail
Ryan Grill (39), Sales – 12 years’ experience in retail
Neil McLean (52), Marketing – 35 years’ experience in retail
Debra Teles (42), IPM Dip, H Dip Ed, Human Resources – 18 years’ experience in retail
Lowest prices every day
Hi-Fi Corporation, founded in 1993 and acquired by the JD Group in 2003, remains
the largest audio and visual warehouse in the Southern Hemisphere. The chain
operates through 31 stores located in the major metropolitan centres and is focused
on capturing the mass cash market. It provides a comprehensive range of leading mass merchandise categories
at the lowest prices to the market, backed by consistent quality service and guarantees, thus ensuring an
exciting shopping experience for its customers.
Notwithstanding an extremely aggressive market and an increase in the number of competitors it has to contend
with, Hi-Fi Corporation has continued to maintain its position in the market. Hi-Fi Corporation has, since
inception, fought for consumer justice by bringing the lowest possible prices to market even at the expense,
in many instances, of margin.
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REVIEW OF OPERATIONS
continued
Cash Retail continued
David Miller (39), BBA (Hons), Chief executive – 14 years’ experience in retail
EXECUTIVE TEAM
Stefan Marnewick (37), BCom (Hons), CA(SA), Finance and Logistics – 10 years’
experience in retail
Sean Nelson (35), Operations – 16 years’ experience in retail
Roger Wood (40), NDip Marketing and Sales, Merchandise – 18 years’ experience
in retail
Everything for your digital lifestyle
Established in 1990 and acquired by JD Group in 2005, Incredible Connection is
southern Africa’s largest technology retailer located in all major metropolitan
areas. It focuses on the middle to top end cash and SME markets, offering a
comprehensive integrated technology solution range, underpinned by international
brands and range, at competitive prices, backed by international warranties, advanced in store experience
and delivered by the best people. Incredible Connection strives to deliver a unique business and lifestyle solution
for its customers. Incredible Connection operates through 47 stores in South Africa, one in Windhoek and one
in Gaborone.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
International Retail
Piotr Krzanowski (54), MSc, Chief executive – 18 years’ experience in retail
EXECUTIVE TEAM
Aneta Filik (38), M (Psychology), Human Resources – 13 years’ experience in retail
Piotr Lisowski (40), MSc, Marketing and Merchandise – 15 years’ experience in retail
Marek Zelek (33), BSc (IT), Logistics – nine years’ experience in retail
Review
Abra experienced its most successful year in its history. Economic conditions in
Eastern Europe and the successful implementation of retail strategies inclusive of
the growth of the store base contributed significantly to the success of this brand.
Outlook
With the strong growth of the Polish economy over the last few years and consumer
demand still remaining buoyant, there is great opportunity for further store expansion. The current store base
is 62 and 10 additional store openings are budgeted for in the forthcoming year. Although continuation of
growth is expected, it will be influenced by the time required to recover from the turmoil of financial markets
internationally, inclusive of Europe. However, we remain committed to organic growth as well as exploring
opportunities in Eastern Europe.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
continued
Financial Services
Phillip Kruger (46), BCom, Chief executive: Financial Services – 18 years’ experience in retail
EXECUTIVE TEAM
Herman Bakkes (48), BCom, MBA, Corporate debtors executive – 24 years’ debtors
experience
Johan Claassen (46), Head: Collections – 25 years’ debtors experience
Rein Coetzee (35), BA (Psychology), Executive: Contact Centre – 12 years’ experience
in retail
Barry Dell (53), Head: Human Resources – 14 years’ experience in retail
Francois Grobler (33), BCom, Head: Credit and Risk – eight years’ experience in financial
services consulting and four years’ experience in retail banking
Jeannine Naude-Terblanche (33), BProc, LLB, MBA, Executive: Customer Services and
Legal – five years’ experience in financial services consulting and one year in retail banking
Corrie Neven (53), Head: Operations – 25 years’ experience in retail
Liesel Staebe (31), Executive: Contact Centre – 11 years’ experience in contact centre
management and one year in finance
Jaco van Jaarsveldt (36), BCom (cum laude), Head: Strategy and Analytics – five years’
experience in retail, two years’ in banking and six years in credit risk consulting
Reneé Griessel (46), BLC, LLB, HDip Tax, Group executive: Insurance – 22 years’ experience
in legal and insurance services
32
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Review
of credit, has recently been established as a
The past financial year was a difficult economic
separate autonomous business. The Group has
environment for our customers who faced rising
recently been granted a short-term and long-term
fuel and food prices and increasing interest rates.
insurance licence by the Financial Services Board
As many customers were overindebted coming
(FSB). It is the Group’s intention to extend the range
into this cycle, this exacerbated their financial
of insurance products through the existing JD
circumstances. Under these conditions the potential
channels and to introduce new channels of delivery.
bad debt risk was high. However, we are pleased
to report that this risk was well managed and whilst
Outlook
the bad debt write off increased, it did so in line with
A slow recovery in the financial services markets,
similar businesses in the South African financial
inclusive of the South African market, lower interest
services sector.
rates, the containment of inflation and stable growth
The Financial Services division has completed its
design and planning to migrate from a predominantly
decentralised risk management and collection model
to a centralised and automated risk management
model. Pilot initiatives have been successfully
rates, are expected for the new financial year.
Should this occur, an increase in the demand for
financial services is expected. New products will be
offered to new and existing customers through the
existing store network and customer base.
completed and final adjustments for migration to
The implementation of a fully centralised and
a fully centralised environment are in progress.
automated risk management model will be a key
The Insurance division, which in the past provided
focus area for the new financial year.
insurance products directly related to the provision
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF OPERATIONS
continued
New Business Development
Review
The JD Group and Absa Group each previously held
The establishment of this division in the past financial
27,5% shareholding in Blake & Associates. At the
year was a significant milestone for the Group. This
financial year end, JD Group acquired Absa Group’s
division will be focused predominantly on the
stake in Blake & Associates making JD Group the
development of new financial services products and
majority shareholder with a 55% shareholding.
markets through product development, partnerships,
joint ventures and/or acquisitions.
Both of these transactions are subject to a number
of conditions precedent. As at date of this report, the
All new financial services products relevant to the
last remaining significant condition is the approval by
existing customer base of Traditional Retail and
the Competition Authorities for both transactions.
Financial Services in JD Group will be available for
cross selling. The same products will be available to
other channels and segments of the markets outside
the existing customer base of JD Group.
The Maravedi Group was previously a joint venture
The acquisition of increased shareholdings in the
Maravedi Group and Blake & Associates represent
significant progress in the development of this
division.
between Absa Group, JD Group and Thebe Investment
Outlook
Corporation. Subsequent to the financial year end,
The expansion of new financial services products
Absa Group’s shareholding was acquired by JD Group
into the JD Group customer base, as well as the
to take the Group’s shareholding up to 90,5%, with
opening of new channels and market segments, will
Thebe continuing to hold its 9,5% shareholding.
be key focus areas.
Maravedi Group
Guy Pearce (42), BSc, BCom, MBA, Chief executive: New Business Development – 12 years’
experience in financial services, eight years’ experience in IT
EXECUTIVE TEAM
Bert Griesel (55), BCom, BCom (Hons), MCom (Personnel Management), Acting managing
director: Maravedi Financial Solutions – 13 years’ experience in financial services
Dries Hattingh (39), BCom (Hons), CA(SA), Managing director: Maravedi Credit Solutions –
12 years’ experience in financial services
Leoni Groenewald (35), Dip Adv Business and Technology Studies, Chief information officer:
New Business Development – 10 years’ experience in IT
Jan Blom (47), BPL, Dip Labour Relations, Executive: Human Resources and Shared
Services – 22 years’ experience in human resources
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
The Maravedi Group consists of two subsidiaries,
can be provided through the existing
namely Maravedi Financial Solutions (MFS) and
JD channels and through alternative channels.
Maravedi Credit Solutions (MCS).
MCS offers an alternative debtors management
MFS complements the broadening of the financial
process and broadens the range of financial services
services offerings by providing a range of unsecured
solutions for JD Group. MCS has a great deal of
loan products to customers with similar profiles to
knowledge and experience in collecting overdue
the existing customers of JD Group. These products
debtors books.
Blake & Associates
Howard Blake (45), BProc, Executive chairman – 18 years’ experience in contact
centre management
EXECUTIVE TEAM
Mike Miller (43), BCompt, Chief executive officer – 15 years’ experience in contact centre
management
Sean Stringer (40), Dip Mktg, BTech Mktg, Managing director: Blake Connect – 10 years’
experience in contact centre management
Mark Parker (33), BCompt, BCompt (Hons), CA(SA), Financial director – 10 years’
experience in finance and contact centre management
David Holding (45), BCom, Managing director: Collections – 20 years’ experience in
contact centre management
Dewaal Muller (40), BJuris, IT director – 12 years’ experience in IT and contact centre
management
Blake continues to grow as a recognised leader in
which will continue into the new year with sound
the delivery of value added services through the
organic growth from the existing and prospective
medium of contact centres. The past year has seen
new clients.
continued growth in all areas of the business but
notably in the debt management and international
operations. Utilising 3 000 proprietary seats and an
additional 2 000 through joint venture relationships,
the Blake services have reach in three continents, in
French, English and Spanish language groups. Blake
has experienced a strong start to its Mauritian
operation, serving the United States of America,
As the full effects of the credit crisis worsens,
Blake’s debt management services will continue to
support aggressive growth. This will be assisted by
two new products which will widen the offerings to
clients. In the context of the rapidly changing nature
of the global economy, there will be increased
demand for cost effective subcontracted services.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF CORPORATE SERVICES
1
Finance
1. Ian Thompson (40), BCom, BAcc, CA(SA), Director: Finance and Corporate Affairs –
17 years’ experience in finance, auditing and taxation affairs
2. Johan Coetsee (49), BCom, BAcc (Hons), ACMA, Finance executive: Cash and
Traditional Retail – 27 years’ experience in finance
2
EXECUTIVE TEAM
Johan Breytenbach (43), BCom – 20 years’ experience in finance
Lucia Hefer (44), BCom (Hons) – 23 years’ experience in finance
Braam Mathee (44), Adv Dip in Tax, CA(SA) – 20 years’ experience in finance and
taxation affairs
Stefan Marnewick (37), BCom (Hons), CA(SA) – 14 years’ experience in finance
Pumla Magewa (37), BCom, HDip Tax – 13 years’ experience in finance and
taxation affairs
Louise Niehaus (45) – 27 years’ experience in finance
Sanette Oberholzer (51), BCom – 31 years’ experience in finance
Tracey Rood (40), BCom, BAcc – 18 years’ experience in finance
Elmien Rossouw (45), BCom (Hons) – 12 years’ experience in finance
The finance department is responsible for the
financial and management accounting, accounts
payable, treasury, taxation and statutory reporting
functions of the Group.
The change in accounting policy, with respect to
revenue recognition, resulted in significant changes
to the provisioning calculations. These changes are
now entrenched in the monthly reporting.
The organisational structure within the finance
function has now been clearly split into Traditional
Retail, Cash Retail, Financial Services, Corporate
and International. The new structure remains a
centralised model, but results in more focused
areas of delivery and reporting.
The forthcoming year will see the new structure
System changes have arisen from the change in
branch systems in Morkels and Barnetts to the
system utilised by the rest of the Traditional Retail
chains. A number of other system changes occurred
in Hi-Fi Corporation and Incredible Connection. The
new Navision system in Incredible Connection has
been fully rolled out and is operating successfully.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
being refined in terms of reporting outputs,
accountability and delivery in line with the new
business strategy. This process, together with the
single underlying operational system in the
Traditional Retail chains, should result in increased
efficiencies.
The ERP system in Incredible Connection will be
rolled out into Hi-Fi Corporation during the new
financial year. A single system within the cash
division will also result in increased efficiencies.
1
Human Resources
1. Dr Henk Greeff (49), MEd (Ed Management) (cum laude), PhD, Director: Strategy and
Human Resources – 13 years’ experience in strategic management consulting and retail
2. Pamela Barletta (39), Dip Labour Law; Dip Human Resources, Group executive: Human
Resources – 22 years’ experience in human resources
3. Rénier Krige (41), BCom, SMP, PLD (cum laude), Human Resources executive:
Traditional Retail – 19 years’ experience in human resources
2
EXECUTIVE TEAM
George Annandale (44), BPL, Adv Dip Labour Law and Employment Relations (cum laude),
Corporate Human Resources executive: HR Shared Services – 17 years’ experience in
human resources
Keitumetse Buda (31), Nat Dip (HRM), Corporate Human Resources executive: Service
Departments – eight years’ experience in human resources
3
With the introduction of the Group’s divisional
commenced, as well as
structure, an extended and varied range of product
the redevelopment of all
and service offerings has taken shape and continues
technical and behavioural
to be crafted as industry environments become more
learning programmes and
complex and competitive. The subsequent impact
the architectural design of
this has had on human capital management, from a
divisional talent maps. The
Group and divisional perspective, has fundamentally
integration and alignment of individual performance
changed the approach to be followed in talent
contracts with business strategy and goals were
acquisition and the maximising of people
also completed.
performance.
To further optimise talent and performance
In order to ensure execution of best of breed human
competitiveness, human capital management
capital management practices and to track human
offerings will continue to be provided via a
resource performance against pre-agreed
centralised HR Shared Services Centre, HR
benchmarks, integrated HR dials were introduced,
business partnership offerings and the introduction
via an HR dashboard, providing quarterly business
of specialised and dedicated Centres of Expertise.
intelligence on the “state of health” of people
Integrated talent management strategies, with
readiness and performance in the business. The
due focus on transformation and underpinned by
implementation of a world renowned e-HR solution
human capital management benchmarking
initiatives, will be prioritised.
37
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF CORPORATE SERVICES
continued
Internal and Forensic Audit
Pieter Pienaar (39), BCom, Group executive: Audit – 17 years’ experience in auditing
and retail
EXECUTIVE TEAM
Riaan Marais (37), Dip CJFA, CFE, ACFE, General manager: Forensic Audit – 19 years’
experience in forensic auditing and retail
Des Strydom (49), General manager: Audit – 25 years’ experience in auditing and retail
Internal and Forensic Audit provides independent,
Enterprise Risk Management as a philosophy and
objective assurance and consulting services to the
methodology in the organisation will be entrenched
Group, designed to add value and improve
to ensure that all risks are properly mitigated and
operations. It helps the Group to accomplish its
managed.
objectives by bringing a systematic, disciplined
approach to evaluate and improve the effectiveness
of risk management, internal control and governance
processes.
The department expanded to provide physical risk
assessments on high risk sites and was restructured
to support the Group structure. Audits were
expanded to include Incredible Connection.
An Enterprise Risk Management project was
launched, under the leadership of Internal Audit, to
prepare for the change to a risk based audit approach.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
The department fulfilled a consulting role by
assisting with the development of applicable policy
and procedures in various areas of the operations
in the Group.
The Group’s IT platform will be optimised to
cost effectively enhance internal and forensic
audit processes.
1
Information Technology and Communications (IT)
1. Ian Child (50), BCom (Hons), BAcc, CA(SA), Chief information officer – 23 years’
experience in retail, IT and finance
2. Victor da Silva (41), Chief information officer: Cash Retail – 15 years’ experience in
retail and IT
3. Anthony Smith (42), PhD, MBA, Chief information officer: Traditional Retail – 12 years’
experience in retail and IT
2
EXECUTIVE TEAM
Steven Friedman (37), BSc Eng (Aeronautical), MBA, IT executive: Business Intelligence
– 12 years’ experience in IT
Leoni Groenewald (35), Dip Adv Business and Technology Studies, Chief information
officer: New Business Development – 10 years’ experience in IT
Gerrie van Niekerk (47), IT executive: Operations – 23 years’ experience in IT
The IT department has focused teams providing
underpinned by two
services to the Cash Retail, Traditional Retail,
main programmes,
Financial Services and New Business Development
namely, the
divisions.
implementation of a
During the year the IT department was restructured
to reflect the change in business structure. IT has
now been structured into four major divisions.
These four divisions are supported by Group
services, providing shared service facilities and the
business intelligence team which supports the
enterprise data warehouse and the delivery of
reporting and business intelligence.
The restructuring has yielded significant benefit in
terms of providing more focused and dedicated
support and services to the lines of business.
3
national contact centre
and the conversion of
chains on disparate systems to a single
transactional system.
The transactional systems were converted onto
a single system by September 2008, simplifying IT
operations and enhancing the Group’s business
intelligence capacity.
The contact centre supports the centralisation of the
entire credit management lifecycle from credit
granting to account management. In addition, it will
support many other aspects of the Financial Services
From an IT perspective, the first stage in the split of
business and enhance our ability to comply with
Financial Services from Traditional Retail has been
legislation.
39
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF CORPORATE SERVICES
continued
Legal, Compliance and Insurance Services
Reneé Griessel (46), BLC, LLB, HDip Tax, Group executive: Insurance – 22 years’
experience in legal, compliance and insurance services
Legal, Compliance and Insurance Services was a
Reporting, systems, capital structure and statutory
newly formed department which was to provide legal
requirements concerning the establishment of these
skills and compliance services to all aspects of the
two insurance companies is currently a priority.
business.
Notice of termination of our current insurance
This department has primarily focused on the legal
and compliance issues arising from the Group’s
intermediary and insurance operations.
FAIS compliance has been substantially upgraded.
arrangements was given to the existing insurance
company as we will now take on the insurance
business in house.
The department was also involved in reviewing all
insurance related customer documentation to ensure
Furthermore, application was made to the Financial
that it is fully compliant with the relevant legislation
Services Board (FSB) in May 2008 for a short-term
and regulatory standards.
and a long-term insurance licence. These licences
were approved by the FSB in October 2008.
The insurance operations will be incorporated into
the Financial Services division as a separate
autonomous business.
40
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Logistics
Julian Hanmer (46), Group executive: Logistics – 23 years’ experience in logistics
EXECUTIVE
Clive Dicks (63), Group executive: Fleet – 45 years’ experience in retail and fleet
management
Logistics is responsible for optimising the supply
Botshabelo. The intentions are to maximise
chain management, including the aspects of
efficiencies, save on distribution costs and
procurement, maintenance and administration of
ultimately deliver a better service to our customers.
the Group’s fleet of vehicles.
Whilst this project is still in its pilot phase, we are
The past year was a challenging one for Logistics as
already seeing the benefits of better vehicle and
we experienced increased prices in diesel and
staff utilisation. We will continue to refine this model
maintenance costs for fleet. In line with our strategy
into the future.
to contain costs and optimise our supply chain, we
engaged consultants and industry professionals to
identify mechanisms to consolidate the warehouses
of the various retail chains.
In line with Group strategy, Logistics has also
undertaken a national study to establish a platform
for further warehouse consolidation initiatives. We
will also focus on rightsizing the number of vehicles in
In August 2008 we initiated a warehouse consolidation
the fleet and investigate alternative distribution and
pilot in Bloemfontein where seven retail chains
planning models to further enhance our supply chain.
are now serviced from a single warehouse in
41
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF CORPORATE SERVICES
continued
Merchandise and Marketing
David Hirsch (38), Group executive: Merchandise and Marketing – 17 years’ experience
in retail
EXECUTIVE TEAM
Conrad Kleingeld (41), Merchandise executive: Furniture – 15 years’ experience in retail
Preggie Naidoo (34), Merchandise executive: Appliances – 16 years’ experience in retail
Irene Pilavachi (51), BA (Lang), H Dip Mktg, Group executive: Marketing – 19 years’
experience in marketing and retail
Christo Viljoen (49), Business analytics executive – 29 years’ experience in retail
Corporate Merchandise and Marketing’s strategic
from existing marketing and media practices across
business objective is to support the differentiated
the Group. In addition, we will increase our business
chain merchandise and marketing initiatives by
intelligence programmes to ensure greater customer
leveraging opportunities within the full spectrum of
centricity across the business.
its activities to yield additional revenue for the Group.
With the decoupling of Financial Services from the
All marketing activities were under severe pressure
Traditional Retail business, Corporate Merchandise
due to the high indebtedness of households in our
needs to move from pure facilitation to
target market. This, coupled with media inflation
implementation of best practice merchandise
of 11,3%, necessitated the fine tuning of existing
strategies.
marketing practices, as well as the removal of
non-performing components of the marketing mix,
to yield better returns on marketing spend.
The Corporate Merchandise department has been
strengthened to:
• revitalise current merchandise ranges in keeping
The increase in the number of lenders who finance
with the ongoing trends of the customer as
furniture purchases has resulted in a more
verified by business intelligence;
competitive environment, not only regarding pricing
but also in respect of product differentiation.
Increased margin pressure on merchandise was
experienced as a result of ongoing reaction to
competitor activities, both within Traditional Retail
and Cash Retail.
Corporate Marketing will continue to support the retail
chains by initiating new methods to extract efficiencies
42
J D G R O U P AN N UAL R E P O R T 2 0 0 8
• implement market research programmes to
provide the chains with tools to make more
informed procurement decisions;
• grow key partnerships with suppliers and strategic
alliances; and
• build a culture which encourages innovation,
differentiation and merchandise efficiencies.
Property Services
Ivan Nefdt (45), Group executive: Property Services – 20 years’ experience in retail and
property services
EXECUTIVE TEAM
Nico Celliers (51), BSc (Hons), Prod Eng, Projects executive: Traditional Retail – 23 years’
experience in retail, property and project management
Etienne du Plessis (58), BJuris, LLB, Executive: Legal and Administration – 33 years’
experience in retail and property services
Bruce Haygarth (38), Projects executive: Cash Retail – 10 years’ experience in retail,
property and project management
Philip Malan (49), Executive: Property Procurement – 12 years’ experience in retail and
property services
Property Services is responsible for the Group’s
The department comprises three disciplines,
property negotiations, property projects, store
namely property procurement, projects and legal
renovations, lease administration and related
and administration.
legal matters.
During the past financial year, 24 new stores were
The department is responsible for managing the
established (13 in Cash Retail and 11 in Traditional
Group’s property portfolio which comprises
Retail) and 79 stores were renovated (12 in Cash
approximately 1 390 leased properties with annual
Retail and 67 in Traditional Retail).
rental payments of R397 million (excluding Abra and
Incredible Connection) and 12 company owned
properties valued at R393 million, plus two recently
The department is focused on supporting the
Group’s strategy.
acquired properties awaiting transfer.
43
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REVIEW OF CORPORATE SERVICES
continued
Secretariat
Johann Pieterse (53), BA, BCom (Law), Company Secretary – 22 years’ experience in
secretarial services
Secretariat primarily provides a service in the areas
of statutory and meeting administration, as well as
general support to the board of directors and board
• a strengthening of the relationship and affiliation
with the Institute of Directors;
• the gaining of an in depth understanding of the
committees. It is also responsible for shareholder
challenges that face directors in the boardroom
administration, corporate governance and provides
via the Institute of Directors’ Accelerated
guidance to directors and executive management on
Directorship Programme;
their obligations in terms of relevant corporate laws
and regulations.
The secretarial environment was overshadowed by
the coming into effect of the Corporate Laws
Amendment Act (CLA) which appended the existing
Companies Act. Steps were taken to ensure that the
regulatory and governance issues ensuing from the
CLA were incorporated into the business practices
of the Group.
• the provision of inputs and comments on the draft
Companies Bill; and
• a clean up of the Group’s statutory records
following an independent, third party audit thereof.
The publication of the King III Report is imminent
and flowing from this event, a comprehensive
internal assessment of the company’s existing board
and committee governance practices will be
conducted. Also in the pipeline is the conversion of
Achievements during the review period focused
all statutory and other records to electronic format
mainly on skills development and include:
in order to save costs and enhance record keeping.
• the gaining of an understanding of the
Other aspects that will receive attention include the
requirements and implications of the CLA,
liquidating of redundant and non-operational trusts
and other new relevant legislation;
and the deregistering of dormant companies.
44
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Strategy
Dr Henk Greeff (49), MEd (Ed Management) (cum laude), PhD, Director: Strategy and
Human Resources – 13 years’ experience in strategic management consulting and retail
Group strategy focuses on business strategy design,
The process to convert concept and design into
research, coordination and facilitation of strategic
executable planning is approaching its logical closure
planning. This function supports all business
to coincide with the new financial year.
divisions and service departments. Group strategies
are converted into projects and implemented with
project management principles and practices, as the
foundation for implementation.
The principle decision to implement the strategy in
all the business divisions over a three year period
with pre-quantified targets and deliverables has
been collectively and individually agreed with all
The architecture of the Group’s new business and
business division leaders and is regarded as work
operating model has been completed and
in progress.
extensively validated against international best
practice with third party independent strategic
management consulting partners.
The core focus for the future will be on the
implementation of the strategy through a
dedicated project driven approach in order
to achieve its defined targets and envisaged
benefits.
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REVIEW OF CORPORATE SERVICES
continued
Transformation
Richard Chauke (41), BCom (Hons), MCom (South African and International Tax), MTP (SA),
Director: Transformation and Taxation Affairs – 18 years’ experience in retail and taxation
EXECUTIVE
Jonny Masinga (31), NDip HRM, BTech HRM, Transformation executive – 11 years’ experience in human resources
and transformation
The transformation department will focus on
The initiatives below will maintain our position for
entrenching empowerment on a sustainable basis in
driving transformation:
the Group in order to ensure the effective
• Our recruitment and bursary programme, which is
participation of black people in ownership,
focused on increasing demographic representation
management control, employment equity, skills
in our workforce.
development and preferential procurement as
envisaged in the broad-based black economic
empowerment (B-BBEE) Code of Good Practice.
The department also contributes to enterprise
development and socioeconomic development.
In the year under review the department was engaged in
dual strategies of affirmative action and transformation.
Strides were made in ensuring that there is compliance
with B-BBEE, by ensuring that staff numbers begin
• Our targeted procurement policy, focused on
empowering black business.
• Our active support of community programmes.
• Continuous transformation of our management
structures.
• A close working relationship with our suppliers
and assisting them in their transformation drive.
• Our recruitment and advancement policies and
to reflect the demographics of South Africa. We also
practices that give preference wherever possible
commenced with the monitoring of the other
to previously disadvantaged individuals.
elements of the B-BBEE generic scorecard, which
includes socio-economic development, preferential
procurement, employment equity, skills development,
management control, enterprise development and
ownership control.
• Continuing to monitor and evaluate the progress
on the B-BBEE scorecard.
• Finalising and implementing the initiatives for
enterprise development.
• Finalising and implementing the graduate
The fundamental challenge for the JD Group has
programme for 2009 as well as the intake of 2009
been and remains how to play a leading role in
bursary and retail programme students.
significantly growing the total number of black
executives and future black business leaders in
the Group.
46
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND GOVERNANCE
expanding our reach
and relationships...
SUSTAINABILITY AND STAKEHOLDER REVIEW
“JD Group believes that the future prosperity of our country, as well as that of
the Group, hinges, amongst other things, on the positive transformation and
upliftment of our communities. It is the effects of this transformation process
on standards and quality of life of our people that are at the heart of our
concerns in achieving a sustainable economy.” David Sussman, Executive chairman
Introduction
stakeholders and determined the most effective and
Sustainability is about ensuring financial prosperity
strategic methods of communicating key issues to
and stability for our investors and staff, integrating
them.
social and environmental responsibility for our
communities and the countries in which we operate,
Stakeholder engagement
and remaining relevant and accessible to our
The board of directors is aware of the importance
customers. In all our activities, we remain
of balanced and understandable communication
committed to contributing to, and investing in,
of the Group’s activities to stakeholders and strives
South Africa’s prosperity, growth and development
through sustainable business practices.
As a truly South African Group we believe that
to clearly present any material matters to ensure
a proper appreciation of the Group’s position. The
interests and concerns of stakeholders are addressed
by communicating information as it becomes known.
sustainable development is a process which has as
its primary aim realising human development in an
Investors
inclusive, connected and equitable way. At the
The directors foster a mutual understanding of
JD Group, we recognise our business responsibility
objectives shared between the Group and its
to actively work towards addressing the inequalities
institutional shareholders by meeting with and
of the country’s past.
making presentations to them on a regular basis.
The King Code and JD Group’s own code of conduct
are at the foundation of our approach to sustainable
development. We support the King Code’s
recommendations for integrated sustainability.
The board welcomes and encourages the attendance
of private shareholders at the annual general
meeting and other general meetings and gives them
the opportunity to direct questions to management.
At last year’s annual general meeting, all resolutions
JD Group’s objective is to be profitable in a
were passed by a poll. The number of proxies lodged
responsible and accountable manner to the broader
on each resolution and the outcome of the voting
society and communities it serves, while nurturing
was announced at the meeting.
and respecting the environment in which it operates.
The Group makes a concerted effort to communicate
openly with its stakeholders and is committed to
transparency. The Group has defined its
48
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Channels: Annual and interim reports, profit
announcements, SENS announcements, annual
general meeting, investor relations programme,
results presentations and website.
Employees
Channels: Contracts, meetings, letters, e-mail
The Group is committed to transparent
updates, account statements, magazines, brochures,
communication with its entire workforce and
pamphlets and posters.
realises that this is crucial in order to retain
motivated staff. It has developed a number of
Suppliers
channels to ensure that relevant information is
The JD Group operates a tightly integrated network
distributed timeously to all employees. The channels
of suppliers to ensure that the Group’s exacting
have been designed to suit the urgency, the
quality standards are met and it also forms long-
audience and the topics which need to be
lasting relationships with suppliers. Service level
communicated. The communication materials are
agreements and contracts with suppliers specify
stored centrally on the Group’s intranet, the Wiki.
JD Group’s obligations relating to terms and
Channels: Face-to-Face for brief topical issues;
chain memoranda for each of the operating brands
with event driven content, internal chain newsletters
for each of the 10 brands which convey news
relating to each retail chain, geographic roadshows
by the executive team to meet employees and to
discuss matters relating to future strategy and
priorities, among others.
Customers
The JD Group recognises that in addition to offering
its customers quality products at affordable prices, it
payment. The Group is committed to be fair to
suppliers in exchange for their obligation to provide
products and services which meet the Group’s
required standards. The Group encourages its
suppliers to become fully compliant with the
Department of Trade and Industry’s (DTI) B-BBEE
Codes of Good Practice and also engages with
suppliers and service providers to ensure that they
comply with regulations. The Group is committed to
enterprise development to develop the suppliers of
the future. JD Group does not condone unfair labour
practices across its supplier network.
also has a fiduciary duty associated with the financial
Channels: Contracts and service level agreements,
products sold. In store campaigns to communicate
letters, e-mails, invoices, statements and meetings.
customers’ rights to them are in place in all stores
across the Group. When the National Credit Act
Trade unions
(NCA) was introduced in 2007, JD Group took further
The Group engages actively with trade unions to
measures to engage with its customers via additional
ensure its compliance in all matters and engages
in-store campaigns. Staff underwent intensive
in consultative discussions relating to issues of
training to ensure that during the credit approval
interest as well as collective bargaining on topics
process, all fiduciary obligations in respect of the
pertaining to wages and conditions of employment.
customer are met. All products are clearly marked
We have regular discussions with the trade union
in brochures and on in-store price ticketing, with the
SACCAWU (South African Commercial Catering
cash price, monthly instalment amount and interest
and Allied Workers Union), with elected employees
rate, in line with NCA requirements. Each brand has
included in our meetings.
its own branded monthly magazine which is used to
Channels: Informal discussions and quarterly
reinforce messages relating to our customers’ rights
National Negotiation Committee meetings with
and the Group’s obligations.
trade unions.
49
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND STAKEHOLDER REVIEW
continued
Regulatory bodies
We remain committed to our international
The Group has dedicated resources to ensure its
expansion, that started in Poland with the Abra
compliance with all relevant legislation pertaining to
business, which is now one of the largest furniture
its operations. It also adopts an open door policy to
retailers in Poland. In South Africa, we continue to
ensure productive relationships with regulatory
refine the Group’s structure and strategy in line with
bodies including the FSB, the National Credit
international retail trends to ensure the long-term
Regulator (NCR), the Department of Labour and the
economic viability of the business.
Wholesale and Retail (W&R) SETA, among others. In
addition, the Group is represented on the Furniture
Wealth creation
Traders’ Association, the Credit Providers’
The value added statement on page 51 is a measure
Association and is a founder member of the National
of the wealth created by the Group during the year
Debt Mediation Association.
under review. The statement shows the total wealth
Channels: Informal discussions, regular reporting as
required by the regulatory bodies, attendance at
formal meetings and industry forums.
Communities
The Group adopts a proactive stance in timely
dissemination of appropriate information to
stakeholders through print and electronic news
releases and the statutory publication of the Group’s
financial performance.
Channels: Public relations, profit announcements,
website and meetings with local community
committees.
Economic sustainability
At the cornerstone of our business is our
commitment to satisfy our consumers in the pursuit
of consistent, acceptable profit growth. We create
wealth for the benefit of all stakeholders.
50
J D G R O U P AN N UAL R E P O R T 2 0 0 8
created and how it was distributed.
Indirect impacts
The total economic impact of an organisation
includes indirect impacts. These are usually benefits
arising in the course of its business to which a
monetary amount is not directly attributable.
JD Group does not assess and quantify its indirect
economic impacts. However, some of the Group’s
indirect economic impacts are as follows:
• The JD Group spent R9,9 billion during the year on
inventory purchases and services from suppliers.
This in turn creates opportunities for our suppliers
to employ more staff to keep pace with the
Group’s demands. Our first concern in supplier
relationships is to meet legal and contractual
obligations, acknowledging that for many
suppliers, their greatest need is to be paid on time.
Group value added statement
2008
Rm
2007
%
Rm
Revenue
Investment income
Finance income
Equity accounted losses
12 610
30
104
(14)
12 914
75
36
(4)
Cost of merchandise, services and expenses
12 730
(9 877)
13 021
(9 547)
Value added
Distributed as follows:
Employees
Salaries, commissions and other benefits
Government
Taxation, assessment rates and other levies
Providers of capital
Distribution to shareholders
Finance costs
Reinvestment in the Group
To provide for depreciation
To provide for deferred taxation
Reinvestment for expansion
Value distributed
Statement of money exchanges with government
Assessment rates and taxes
Company taxes
Employees’ tax deducted from remuneration paid
Net value added tax and general sales tax collected
RSC and other levies
%
2 853
100,0
3 474
100,0
1 777
62,3
1 639
47,2
305
452
10,8
15,7
414
733
12,0
21,0
264
188
9,2
6,5
546
187
15,7
5,3
319
11,2
688
19,8
132
(63)
250
4,6
(2,2)
8,8
117
4
567
3,4
0,1
16,3
3 474
100,0
2 853
100,0
14
278
164
40
13
12
394
193
36
8
509
643
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.
51
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND STAKEHOLDER REVIEW
continued
• During the year the JD Group paid R340 million
in income taxation, for the ultimate benefit of all
South Africans. In addition, the Group places the
highest priority on maintaining constructive
relationships with government at local and
national levels.
• Chains and corporate service departments must
comply with all laws and seek constructive
engagements with public authorities where
necessary. As part of the accountability process,
each chain and corporate service department is
required to report all incidences of prosecutions
or fines, major ongoing disputes and any formal
investigations.
• The Group engages with contractors and
subcontractors across all operations and, in so
doing, supports the growth and development of
smaller businesses, injecting wealth to their
communities.
• The JD Group also engages with small businesses
in the role of mentor through its informal
enterprise development programme, offering
assistance in growing and developing their
businesses, and indirectly contributing to the
socio-economic development of South Africa.
Transformation
The Group actively supports initiatives directed at
the empowerment of previously disadvantaged
groups in the South African community. The Group
is committed to transformation goals and objectives
and views transformation as an opportunity for
further growth and development in line with the BEE
Act, DTI’s B-BBEE Codes of Good Practice and the
Employment Equity Act.
The JD Group focuses on entrenching empowerment
on a sustainable platform in its businesses to ensure
the effective participation of black people in
ownership, control and skilled occupations, and has
52
J D G R O U P AN N UAL R E P O R T 2 0 0 8
introduced a transformation strategy that focuses
on all seven elements of the generic scorecard.
The strategy adopted by the Group will give
credence to the seven elements of the generic
scorecard that will position the Group to become
B-BBEE compliant.
Ownership: The Group remains committed to
concluding a B-BBEE transaction, incorporating a
broad-based business partner and staff in order to
address transformation at the ownership level.
Progress in this regard was hampered by the turmoil
in financial markets during the 2008 financial year.
Management control: The Group remains committed
to transformation of its board and executive
management, to ensure that the people who manage
and lead the Group broadly reflect the diverse profile
of the South African population and that they are
appropriately empowered and skilled to manage the
Group towards its strategic objectives. However, the
pool of suitably qualified and experienced executives
is limited and, in order to nurture black talent, the
Group has introduced informal mentorship
programmes. The new CEO of the Group is renewing
the focus on transformation at the executive level.
Preferential procurement: During the year, the Group
embarked on an internal evaluation of all its suppliers
in order to accurately measure its BEE procurement
spend. The process will be completed in 2009
whereafter JD Group will appoint an independent
verification agency to obtain an official accreditation.
Employment equity: The JD Group is committed to
redressing inequalities with regard to race, gender,
disability and culture among the Group’s employees
and to accelerate the development and retention of
a diverse pool of skilled employees in the Group in
order to achieve equitable representation in all
occupational categories and levels of employment.
Quarterly monitoring and evaluation continue at the
executive committee level.
Our bursary training programme provides the Group
with a pool of talented individuals, while our informal
mentorship programme dampens the impact of staff
turnover which characterises the retail industry. The
Group has a formal employment equity policy which
has been approved by the CEO.
Skills development: The Group has a number of skills
development initiatives (as detailed on page 55 of
this report). During the training year, more than 8 600
employees attended formal training programmes, of
which over 70% were from the race categories black,
coloured and Indian.
White female 16%
Black male 22%
White male 12%
Indian female 4%
Indian male 4%
Coloured female 8%
Black female 29%
Coloured male 5%
Employee’s attending formal training programmes by race category
Enterprise development: A number of initiatives are
in the final stages of planning and these will be
implemented during the 2009 financial year.
Corporate social development: During the year
under review, JD Group invested R4,0 million in
corporate social investments. For additional
information, refer to page 57.
Environmental
Notwithstanding the JD Group’s retail and financial
services activities being classified as having a low
environmental impact, we encourage all our
employees to adopt sustainable environmental
business practices to minimise the impact of the
Group’s activities on all stakeholders and on the
environment as a whole. This commitment is
supported by our compliance to all relevant safety,
health and environmental legislation and by
enhancing awareness among our employees.
In relation to the environment, the Group aims at all
times to adopt an all encompassing approach to
environmental protection measures with the object
of achieving continuous improvements.
We strive to keep waste materials to a minimum
and to reduce, recycle and, where necessary,
dispose of waste by the safest and most responsible
means available to reduce environmental impact.
Documents and policies are accessible on the
JD Group intranet, Wiki, in order to minimise printing
and paper consumption as well as waste.
The Group’s Internal Audit department assesses
compliance with key features of existing
environmental, health and safety legislation, and
reviews performance against agreed targets.
The Group remains committed to the Braamfontein
Regeneration Project which is a key factor in driving
inner city growth and renewal in Johannesburg. Ivan
Levy, a non-executive director, is chairman of the
regeneration project in the current year. The Group,
whose corporate head office is situated in
Braamfontein, together with other major corporates,
has been an integral part of this process, as
evidenced by its investment in JD House in 2002 and
an adjacent building in 2005, refurbishments thereto
and the building of a parkade. In 2008, we continued
to manage and maintain our buildings in this area.
53
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND STAKEHOLDER REVIEW
continued
The Group is also an active participant in the
Corporate Precinct Public Environment Upgrade,
which not only benefits some 800 corporate office
employees, business partners, associates and
visitors, but also the community at large.
Policy
JD Group is in the process of compiling and
adopting a formal environmental policy which will be
rolled out across all its operations with appropriate
environmental management systems. It is the
Group’s intention to encourage environmentally
sustainable practices across its supply chain by
including such measures in service level agreements
with suppliers and contractors, including furniture
and appliance manufacturers.
Electricity
The lifts, central air conditioning plant and lighting
in the Group’s head office which is located at
JD House, have been replaced with new generation,
energy efficient systems. In addition, the electrical
reticulation has also been replaced. A building
management system has been installed to manage
the lifts and air conditioning in an effective and
efficient manner. Throughout the building, lighting
is connected to timers which switch off all nonessential lights at night. During the 2008 financial
year, the Group’s electricity saving initiatives
resulted in a reduction in usage of more than 10%.
The JD Group has also contracted an external
service provider to conduct an analysis of the
electrical consumption of all the major sites.
Preliminary reports indicate that consumption is
being well managed. This process will be rolled out
to all stores. Future initiatives will include the
installation of demand regulators to further balance
and reduce the consumption of electricity.
54
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Water
To reduce water wastage, all renovations concluded
during the 2008 financial year included the
replacement of all standard taps with “demand” taps.
Air conditioning
The Group is in the process of installing central
control units in premises where multiple air
conditioning units are situated. This will provide
management with the means to control the
temperature and set the “start and stop” times,
effectively reducing the environmental impact
and cost.
Solar heating
An investigation is under way to determine the
viability of installing solar heating to provide hot
water for JD House. This will result in the hot water
boiler being disconnected from the current
petroleum gas burner, thereby reducing the emission
of carbons into the atmosphere.
Fuel
The Group has installed an active tracking device
in all its vehicles. Regular reports on excessive
speeding and idling are produced. By addressing
these issues, the fuel consumption is controlled and
managed, reducing carbon emissions into the
environment and saving costs.
Recycling
Within the Group’s Cash Retail activities, Incredible
Connection runs an annual promotion offering
consumers discounts on the purchase of new
computers, laptops and monitors against trade-ins
on old equipment. The promotion spans a full month
and where traded in equipment is usable, it is
refurbished and donated to schools by Incredible
Connection. Obsolete equipment is disposed of in an
environmentally friendly manner through authorised
third parties.
In addition, the Group has implemented mechanisms
to ensure environmentally responsible disposal of its
8 000 computers through certified agents, when this
equipment is replaced or upgraded.
Social
The Group prioritises its responsibility to uphold
basic human rights within the organisation and has
an ethics policy which is included in the Human
Resources Manual and is available to all members of
staff on the JD Group intranet. It is strictly adhered
to at all times. The Group does not consider this as
purely a legislative requirement, but sees these
guidelines, which reflect its core values and beliefs,
as intrinsic to operating a sustainable business.
The Group recognises the importance of effective
development of staff as a key success factor for its
future success.
The human resource policies include a broad
framework of corporate values and are driven
by the need to ensure effective utilisation of
and investment in human resources. Merit and
competence are the key criteria for advancement in
the Group. Acknowledging the diversity of cultures
in the employee complement is a key fundamental of
the relationship between employer and employee.
The Group applies policies that do not discriminate
on grounds of race, age, disability, gender or religion
and that provide good opportunities for previously
disadvantaged sections of the community.
Training and development
The Group strives to create an environment in which
all individuals and teams may develop their full
potential for the benefit of themselves and the
Group. As such, training requirements have been
fully mapped for each job occupation and specified
across all the Group’s core operations. These are
linked to individual development plans (IDPs) for
each job occupation which define the Group’s
generic training programmes. In addition, bi-annually
each employee has a formal performance appraisal
and then a unique individual and developmental and
growth plan is formulated.
The JD Group has made a formal commitment to
Business Leadership South Africa’s initiatives to
deliver on training people in the priority or scarce
skill categories identified in the government’s Joint
Initiative on Priority Skills Acquisition (JIPSA)
project. Merchants, business managers, cashiers,
credit controllers and sales people have been
identified as scarce skills in the Group.
JD Group recognises the importance of training and
development on the sustainability of its business
activities and has extensive initiatives to support the
development and further education of its employees.
JD Group has a sound relationship with the W&R
SETA and during the year it contributed to a number
of SETA/Standard Generating Body (SGB) projects.
In addition, the Group continually engages with the
W&R SETA to further develop programmes tailored
for the changing needs of the furniture and financial
services retail industry. The Group prioritised
occupationally focused training through SETA
accredited service providers, including focused
courses for cashiers, stock controllers, sales and
merchandising employees, amongst others. The
Group also supported the newly launched SETA
designed leadership programme, with one of its
employees among 16 candidates selected to attend
the local learning and international study tour to
the USA and Canada.
55
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND STAKEHOLDER REVIEW
continued
During the year, 8 642 employees of the JD Group’s
southern African operations attended training at a
total cost of approximately R19 million.
Semi-skilled
workers
8%
Senior officials and
managers
15%
In-store
sales staff
22%
Training by job category
Clerical and administration
(including cashiers
and credit controllers)
55%
The Group has a formal bursary committee
comprising members of the management team as
well as trade union members. Annual funding of
approximately R1,2 million is set aside to support
employees and their children. Applications are
formally assessed using predetermined selection
criteria. During the year, 34 employees participated
in the education assistance programme and study
loans programme, while educational assistance was
provided to 242 children of our employees.
During 2008, the Group continued to roll out its
successful Retail Management Programme (RMP).
Twelve candidates, who set out on the programme in
2007, were awarded university bursaries to pursue
business related qualifications after completion. The
2008 RMP comprises 16 students, 10 of whom will be
56
J D G R O U P AN N UAL R E P O R T 2 0 0 8
given the opportunity to pursue tertiary studies after
completing the curriculum. A target of 25 students,
aged between 18 and 25 years, has been set for the
Graduate Development Programme which has been
developed to provide further training for bursars who
have completed their university studies.
JD Group also provided advanced training for its
senior management team at the Gordon Institute for
Business Studies (GIBS) and Unisa. In addition, the
Retail Leadership Development Programme (RLDP)
and the Advanced Management Development
Programme (AMDP) were conducted in house
during the year.
In the current year, 12 senior employees completed
the RLDP, which makes a total of 54 delegates that
have finished this programme since inception.
Twelve employees also completed the AMDP in
2008, and since inception 29 delegates have finished
this programme.
Employee relations
The Group recognises the rights of employees
associated with freedom of expression, freedom of
association and representation. The Group affirms
that employees have the right to choose to
participate in organised labour structures and
collective bargaining for the designated bargaining
unit. Where appropriate, employee participation in
problem solving and decision making is encouraged.
A formal recognition and relationship agreement
exists between the trade union, SACCAWU and the
JD Group. The principles of this agreement are
strictly adhered to in terms of managing the
relationship between related stakeholders.
No Group related strike action has occurred
during the past nine years.
Health and safety
The Group complies with all relevant safety and
health legislation and has engaged the services of
an external service provider to manage its
compliance to the Occupational Health and Safety
Act and the Compensation for Occupational Injuries
and Diseases Act.
Using an online platform, the service is being rolled
out at all Group sites, regardless of location and
number of employees. The JD Group is working with
its service provider to assess health and safety
training requirements and to ensure that all relevant
staff are coached and trained to the required
standards. Regulatory reports are completed online,
enhancing the ability to obtain a consolidated Group
view of health and safety compliance, which is
reported to the Group risk management committee.
HIV/Aids
The Group engages and supports the initiatives of
its primary healthcare service providers, Discovery,
Ingwe and Moremed, who currently offer employees
medical aid products. Voluntary HIV/Aids testing and
counselling programmes are made available to
employees through these service providers.
JD Group is committed to rolling out an HIV/Aids
management programme in 2009 with the support
of a global risk management consulting company
which has received international funding to support
local HIV/Aids initiatives. The provision of
antiretroviral therapy will be explored in partnership
with the consultancy. An integrated and enterprise
health risk assessment will also be conducted to
determine optimisation opportunities in employee
absenteeism management.
The Group has ongoing communication and
awareness campaigns to educate its workforce
about prevention and treatment of diseases
including HIV/Aids and tuberculosis.
Corporate Social Investment
The focus of the Group Corporate Social Investment
Programme is on the development of individual and
community self sufficiency through education and
training, skills development and job creation.
Projects are selected on the basis of sound
management and sustainability. We attempt, in
certain instances, to forge partnerships with other
stakeholders to maximise funding. A percentage of
the budget is allocated to smaller, once off annual
donations to organisations that are acknowledged
as providing specific services to their community.
Funding is allocated to secular organisations only
and no funding or sponsorship is granted for
individual endeavours. To ensure openness and
transparency, no funding or sponsorship is granted
to political parties.
During the 2008 financial year, JD Group invested
more than R4,0 million in corporate social
investments.
The Group’s main corporate social investment
programmes are as follows:
• Tipa project
The Techno-agricultural Innovation for Poverty
Alleviation (Tipa) project is based on the concept of
the African Garden Market, part of the Food Security
for Africa initiative presented in 2002 at the World
Summit for Sustainable Development (WSSD).
Both Tipa and the African Garden Market make use
of the Family Drip Irrigation System (FDIS). The
FDIS state-of-the-art irrigation technology developed
in Israel, has been combined with gravity powered
low water pressure, which allows traditional farmers
to enjoy all the advantages of drip irrigation at low
cost. Without the need to introduce any further
technology, each FDIS project is able to cover an
area up to 500m2.
57
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUSTAINABILITY AND STAKEHOLDER REVIEW
continued
• B’nai B’rith Food Highway
B’nai B’rith, an international service organisation
which undertakes communal projects for the
underprivileged and less fortunate members of the
communities, joined forces with the Group to expand
its successful Food Highway project. This project
was initiated to assist sectors of the disadvantaged
community who are undernourished and suffering
from malnutrition, including Lerato Love Home.
The Group has contributed to sponsoring the cost of
bulk purchases of the ingredients required for the
100g food packets, resulting in 50 000 meals being
made available to underprivileged children monthly.
• Johannesburg Philharmonic Orchestra (JPO)
The Johannesburg Philharmonic Orchestra,
established in June 2000, strives, through training
and mentorship, to nurture and develop world-class
South African musicians who in turn will ensure the
ongoing sustainability and growth of music
traditions in South Africa.
The Group continued to support the JPO during the
current year.
• Other institutions
– Little Champs Sports Academy runs facilities
which provide pre-schoolers with physical,
emotional and social development, embracing
teamwork, sharing and Ubuntu.
– The Mitzvah School, a registered school and
examination centre, provides quality tutoring for
students from Alexandra in their final year of
schooling. The school caters for 50 students
and has consistently produced a pass rate
exceeding 90%.
– Lerato Love Home relocated to a community
centre neighbouring Alexandra, providing
accommodation for babies, children and young
adults, the majority of whom are victims of abuse,
abandonment, neglect and HIV and Aids. We
acknowledge the significant contribution made by
the Bidvest Group to this facility, as well as various
contributions of money, clothing and food made by
the Group’s suppliers and employees.
– Up With Science, a science enrichment
programme for senior secondary school pupils
presented by the Centre for Science Education
at the University of Pretoria, the North West
University and Business Against Crime.
We continue to support numerous education and other
institutions. The major beneficiaries are listed below:
Currently 242 children of employees and 34 staff
members are receiving education and study
assistance.
– St Enda’s Community Centre, a highly respected
secondary school in Joubert Park, Johannesburg,
that was originally established in one of our
warehouses in 1985.
For the past 14 years, corporate office
employees have regularly been donating blood
in conjunction with the South African Blood
Service at JD House.
– Claremont Child Care, an institution which assists
destitute children, with whom we have a long
standing association.
58
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
Introduction
Furthermore, during the year under review, the
The board of directors (the board) is committed to
Group appointed a new CEO, thereby continuing
and subscribes to the values of good corporate
to ensure that the roles of chairman and CEO are
governance contained in the Code of Corporate
not vested in a single person.
Practices and Conduct recommended by the 2002
King Report on Corporate Governance for South
Endorsement of King II
Africa (King II).
The Group is fully committed to the principles of
The board endorses the principles of integrity and
accountability advocated by King II. In all dealings,
the board strives to ensure that the interests of
stakeholders are foremost in their decisions. The
Group’s corporate governance structures and
practices are reviewed on an ongoing basis in
response to changes within and external to the Group.
effective corporate governance and application of
the highest ethical standards in the conduct of its
business. We endorse the principles of integrity and
accountability advocated by King II. In all dealings
we strive to ensure that the interests of stakeholders
are foremost in our decisions and that they are fully
informed of decisions relevant to them. We support
the view that good corporate governance is
This corporate governance statement sets out the key
essentially about leadership and for this reason
governance principles and practices of the Group, one
we conduct the enterprise with integrity and in
of which is fair, honest and understandable disclosure
compliance with best international practices, whilst
to both our internal and external stakeholders.
taking cognisance of the value systems of the
countries in which we operate.
Statement of compliance
The Listings Requirements of the JSE require that
listed companies report on the extent to which they
comply with the principles incorporated in King II.
Chairman and board of directors
Chairman
The executive chairman is David Sussman, founder
Based on the information set out in this corporate
of the Group. The board delegated to the chairman
governance statement, the board believes that
the responsibility for ensuring the effectiveness of
throughout the accounting period under review, it
governance practices. The chairman leads the board
has applied the practices and spirit of King II.
and is responsible for representing the board to
shareholders.
Executive chairman
In regard to the appointment of an executive
chairman, rather than an independent non-executive
director, the Group has complied with the provisions
set out in the Listings Requirements of the JSE, by
explaining below its adopted practice of having an
executive chairman.
Although the chairman is not an independent
non-executive director as recommended by King II,
there is a clear division of responsibilities at the head
of the Group to ensure that there is an appropriate
balance of power and authority, such that no one
individual has unfettered powers of decision making.
59
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
To further enhance the balance of power and
Guy Pearce, are invited to attend board meetings,
influence on the board, a lead independent non-
however, there remains a clear division between the
executive director will be appointed in the new year.
responsibilities of the board and management.
In addition, as required in terms of the Listings
Requirements of the JSE, the role of the chairman
is separate from that of the chief executive officer.
Board
The Group is headed by an effective unitary board
that both leads and controls the Group. At the date
of this report, the board comprised of 13 directors of
whom six are independent non-executive directors
and one a non-executive director. The guidelines
contained in the Listings Requirements of the JSE
The primary responsibilities of the board, amongst
others, are to review strategic direction, consider
investment decisions, monitor performance against
approved plans and budgets, assess the levels of
compliance with relevant legislation, consider
governance structures, review competitor activity and
compare performance with best practice, locally and
internationally. The board retains full and effective
control of the Group and a range of decisions on
material matters are reserved for the board.
were used to test the independence and category
The board meets four times per annum and more
most applicable to each director. Based on this
frequently if circumstances dictate.
assessment, the board found Vusi Khanyile,
Mervyn King, Len Konar, Maureen Lock, Martin Shaw
and Günter Steffens to be independent nonexecutive directors, while Ivan Levy is regarded
as a non-executive director, but not independent.
Meetings are conducted in accordance with formal
agendas, ensuring that all substantive matters are
properly addressed. Agendas are regularly reviewed
for effectiveness and relevance.
Amongst others, these directors ensure that the
The chairman sets the agenda for each meeting in
chairman encourages proper deliberation of all
consultation with the chief executive officer and the
matters requiring the board’s attention and that no
company secretary. Any director may request that
one individual or block of individuals dominate the
additional matters be added to the agenda. Board
board’s deliberations or its decisions. In this way, the
papers are circulated to the directors in advance of
full spectrum of shareowner interests are protected,
the meetings to allow enough time for directors to
including minority rights.
scrutinise the content. This is but one of the
The executive contingent of the board comprises
Richard Chauke, Henk Greeff, Ian Thompson and
measures that supports the decision making
process at board level.
Gerald Völkel, as well as David Sussman and
Directors are appointed on the basis of skill, acumen,
Grattan Kirk, the chairman and chief executive
experience and level of contribution to impact on the
officer respectively. The latter takes full
activities of the Group. Non-executive directors
responsibility for all operations.
contribute an unfettered and impartial view on
The following executive management (Exco)
members, namely Ian Child, David Hirsch,
Johan Kok, Phillip Kruger, Arie Neven and
60
J D G R O U P AN N UAL R E P O R T 2 0 0 8
matters considered by the board and enjoy significant
influence in deliberations at meetings. All directors
have the requisite knowledge and experience required
to properly execute their duties, and all participate
actively in the proceedings at board meetings. The
Grattan Kirk, Henk Greeff and Richard Chauke were
non-executive directors have no fixed term of office,
appointed on 17 September 2007. As Ian Thompson,
while all of the executive directors have entered into
Vusi Khanyile and Günter Steffens were appointed to
employment contracts with JDG Trading (Proprietary)
the board on 13 November 2008, being between two
Limited with one year’s notice from either party.
annual general meetings, their appointments will
No director has an employment contract with the
require shareholder confirmation in terms of the
Group exceeding three years.
Group’s articles of association.
Some of the non-executive directors hold
The biographical details for each of the directors are
directorships or executive positions in companies
set out on pages 10 and 11 of this annual report.
with which the Group has commercial relationships.
The board has considered all these relationships and
Interests in contracts
does not believe any of them compromise the
During the year ended 31 August 2008, none of the
independence of the directors concerned.
directors had a significant interest in any contract
All directors are entitled, at the Group’s expense, to
seek independent professional advice about the
affairs of the Group in relation to the execution of
or arrangement entered into by the Company or
its subsidiaries, other than as disclosed in note 27
to the annual financial statements.
their duties, if such expertise is required. A proper
Company secretary
procedure exists to facilitate this process.
The appointment and removal of the company
Both the directors and the members of board
secretary is a matter for consideration by the board
committees are supplied with full and timely
as a whole. On 31 May 2008, Janine van Eden
information that enable them to properly discharge
resigned as company secretary and Johann Pieterse
their responsibilities. All directors have unrestricted
was appointed by the board with effect from
access to all Group information. Non-executive
9 September 2008. As this position was vacant for
directors have access to management and from time
a period exceeding 90 days (maximum period
to time meet separately with management without
permitted by the Companies Act), a member of Exco,
the executive directors being present.
Mark Richards, was authorised to act in this role and
One third of the directors are subject, by rotation, to
retirement and re-election at each annual general
meeting in terms of the Company’s articles of
association. In addition, all appointments of
directors to fill casual vacancies on the board
between two annual general meetings, are subject
to confirmation by shareholders at the first annual
general meeting after their initial appointment.
Mias Strauss and Johan Kok both retired from the
to carry out all of the duties of the company
secretary in the interim period. The company
secretary advises the board on the appropriate
procedures for the management of meetings and the
implementation of governance procedures and is
further responsible for providing the board
collectively, and each director individually, with
guidance on the discharge of their responsibilities in
terms of the legislation and regulatory requirements
applicable to South Africa.
board during the review period on 30 May 2008, while
61
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
Business model
Corporate service departments
The Group’s business model has been changed to
• Finance
comprise the following divisions, namely Traditional
• Human Resources
Retail, Cash Retail, International Retail, Financial
• Internal and Forensic Audit
Services and New Business Development. The new
model is explained in detail on pages 4 to 7.
The board is of the opinion that the new business
model is appropriate and sound and provides a solid
platform for continued growth. The board is
nevertheless aware of the changing dynamics of the
• Information Technology and Communications (IT)
• Legal, Compliance and Insurance Services
• Logistics
• Merchandise and Marketing
• Property Services
industry and will modify Group strategy and models
• Secretariat
from time to time in accordance with changing
• Strategy
circumstances.
• Transformation
The following comprise the individual business
Strategic business goals
components of each division:
The Group’s corporate objectives and opportunities
Traditional Retail
• Barnetts
are set out on page 6 and provides a framework for
the strategic direction of the Group.
• Bradlows and Supreme
Board committees
• Joshua Doore
While the board remains accountable and
• Morkels and Electric Express
responsible for the performance and affairs of the
• Price ’n Pride
Group, subcommittees of the Group board have
• Russells
been appointed. Ad hoc subcommittees are created
from time to time to assist the board in discharging
Cash Retail
its duties and obligations. Each committee has a
• Hi-Fi Corporation
clear mandate and operates in accordance with its
• Incredible Connection
own specific written terms of reference that has
been approved by the Group board and adopted by
International Retail
• Abra
the individual committee.
The chairman of each subcommittee reports at each
Financial Services
scheduled meeting of the board and minutes of
• Traditional Retail credit
subcommittee meetings are provided to the board in
• Short-term and long-term insurance
summarised form. The majority of the members, and
New Business Development
subcommittee are independent non-executive
• Maravedi Group
directors.
• Blake & Associates
62
J D G R O U P AN N UAL R E P O R T 2 0 0 8
in many instances all of the members, of each
A diagrammatic outline of the entities to which delegations have been made, is set out below:
JD GROUP MAIN BOARD
Board
committees
Management
committees
Alliances
Audit
Exco
Blake & Associates*
Remuneration
Internal risk
management
Maravedi Group*
Nominations
Traditional Retail
Risk
management
Cash Retail
JDG Trading
board
Employee
benefit funds
Abra
Other committees
*Following approval from the Competition Authorities, these alliances will become subsidiaries.
Audit committee
The audit committee comprises three independent
non-executive directors, namely Mervyn King
(chairman), Len Konar and Martin Shaw. Executive
directors Richard Chauke, Henk Greeff, Grattan Kirk,
David Sussman, Ian Thompson and Gerald Völkel
attend meetings by invitation, as does the nonexecutive director, Ivan Levy. Other invitees include
Ian Child, Johan Kok and Phillip Kruger (all Exco
members) and Pieter Pienaar (the head of Internal
and Forensic Audit).
The audit committee met formally three times
during the financial year to consider financial
reporting issues and to advise the board on a range
of matters, including corporate governance
practices, internal control policies and procedures,
and internal and external audit management.
The external auditors attend the audit committee
meetings and have unrestricted informal access to
the chairman of the audit committee. The audit
committee has approved a non-audit services policy
and set the principles for recommending the use of
external auditors for non-audit services and has
pre-approved all non-audit work undertaken by the
auditors. The audit committee is satisfied that the
independence of the external auditors is not
compromised by the present scale of non-audit
related fees paid to them.
Through the audit committee, the board regularly
reviews processes and procedures to ensure the
effectiveness of internal systems of control so that
its decision making capability and the accuracy of
its reporting is maintained at a high level at all
times. The committee, furthermore, identifies and
monitors non-financial aspects relevant to the
businesses of the Group and reviews appropriate
non-financial information that goes beyond assessing
the financial and quantitative performance factors.
During the financial year, the audit committee:
• nominated Deloitte & Touche for re-appointment
after satisfying itself of the latter’s independence;
63
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
• determined the fees to be paid to Deloitte &
Remuneration for the executives consists of an
Touche and their terms of engagement and were
all inclusive total cost to company fixed element,
satisfied that they complied with all relevant
a variable element and share incentives. Full details
legislation relating to the appointment of
of the remuneration of the individual directors and
independent auditors;
information on share options are set out on page 84
• recommended the Group’s financial statements
of the annual financial statements.
for the year ended 31 August 2008 to the board
The fixed element of remuneration is reviewed
for approval and onward submission to
annually. The committee compares current rates of
shareholders; and
pay to those observed in similar relevant companies
• considered the appropriateness of the expertise
within and outside the Group. This information is then
and experience of the chief financial officer
adjusted to reflect both the Group’s performance
(see abbreviated curriculum vitae on page 10).
compared with the performance of similar
Remuneration committee
companies as well as the individual’s performance.
The remuneration committee, under the chairmanship
An annual variable element is awarded as an
of non-executive director Ivan Levy, comprises four
incentive to executives to achieve predetermined
members, the remaining three of whom are
financial and other targets.
independent non-executive members, namely Mervyn
The Group’s primary executive remuneration
King, Len Konar and Martin Shaw. David Sussman
objective is to reward executives so as to ensure that
attends the meetings by invitation but recuses
their services are retained and that their interests
himself in relation to matters concerning himself.
are, as far as possible, commensurate and aligned
Its main responsibility is to review and approve the
with the interests of the shareholders.
remuneration and employment terms of executive
The Group currently operates a share incentive
directors and senior group executives. In addition to
scheme for directors and senior executives. The
the aforementioned, the remuneration committee
committee grants rights that relate to the executives’
also considers the most appropriate share incentive
contributions and responsibilities. Rights granted
schemes for implementation by the Group, as well as
under this scheme are subject to time limits. It is the
allocations under such schemes. The committee
intention of the Group to replace the existing option
makes recommendations to the board and
scheme with a new generation share appreciation
shareholders on the aforementioned aspects. The
rights scheme (the salient details of which will be
remuneration committee formally met once during
distributed to shareholders in due course). Rights
the financial year.
under this scheme will be subject to the achievement
In determining the remuneration of the executives,
of certain performance criteria. These criteria will
the remuneration committee aims to provide the
be set by the remuneration committee and it is
appropriate packages required to attract, retain and
envisaged that this process will more closely align
motivate talented executives, whilst giving due
the interests of executive management with those of
consideration to remuneration levels, both within
the shareholders. Shareholders will be requested to
and outside the Group. To meet these objectives
consider the new scheme on 5 February 2009 at a
the committee takes advice from external
members’ meeting to be held immediately after the
remuneration specialists.
Group’s annual general meeting.
64
J D G R O U P AN N UAL R E P O R T 2 0 0 8
The forward looking remuneration of the non-
directors (Len Konar and Martin Shaw), executive
executive directors is determined by the executive
directors (Richard Chauke, Grattan Kirk,
chairman in consultation with the Group’s advisors
Ian Thompson and Gerald Völkel), Exco members
and recommended, via the remuneration committee,
(Ian Child, Johan Kok and Phillip Kruger) and the
to the shareholders for final approval.
head of Internal and Forensic Audit (Pieter Pienaar).
The remuneration of the chairman is set by the
remuneration committee while he is not in
attendance.
Subject experts and a contingent from the
independent external auditors attend in an ex officio
capacity. Len Konar chaired the meetings in the
current financial year. Chairmanship of this committee
Nominations committee
will be taken up by Günter Steffens in future.
The nominations committee comprises four non-
Meetings are held at least three times per annum.
executive directors, three of whom are independent.
The purpose of this committee is to address general
The members are Ivan Levy (chairman), Mervyn King,
business risks applicable to the business divisions
Len Konar and Martin Shaw. The committee did not
and corporate service departments. Amongst
meet during the current financial year. However, it did
others, these include credit risks, exchange rate
meet during November 2008 in order to recommend the
exposure, investment risk, insurable losses,
appointment of Ian Thompson as an executive director
adequacy of systems and controls, interest rate and
to the board, and Vusi Khanyile and Günter Steffens as
liquidity risks, market risk, legislative risk, reputation
non-executive directors. This recommendation was
risks, as well as insurance risks, business continuity
approved by the board on 13 November 2008 and is
risk and financial risk. The findings of this committee
subject to shareholder approval.
are reported to the audit committee and to the board
The nominations committee supports and advises
via regular quarterly reports.
the board on the appointment of individuals who are
An internal risk management subcommittee,
best able to discharge the responsibilities of
comprising Exco members, chain and corporate service
directors, having regard to the law and the highest
department executives, also reports to this committee.
standards of governance, by:
• assessing the skills required on the board;
• assessing the extent to which the required skills
are represented on the board;
• establishing processes for the review of the
performance of individual directors and the board
as a whole; and
• establishing processes for the identification of
suitable candidates for appointment to the board.
The board is confident that appropriate fundamental
processes are in place to ensure compliance with
current and future risk management requirements.
Risks are identified and monitored through the planning
process, the close involvement of the executive
directors in the Group’s operations and the periodic
monitoring of key issues to ensure that the significant
risks faced by the Group are evaluated in terms of
impact and severity and appropriately managed.
Risk management committee
Risks are evaluated at the internal risk management
The risk management committee is a stand alone
committee using the Barnowl risk management
subcommittee of the board. This committee
application to determine the degree of inherent risk
comprises a mix of independent non-executive
and then the likelihood of occurrence. The control
65
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
environment relevant to this risk is then evaluated
The internal risk management subcommittee ranks
and a score is given to the residual risk and its
the top risks and presents these risks to the board
likelihood of occurrence. In this manner the major
risk management committee. The risks are regularly
risks to the Group are monitored as well as the
updated to take into account changing market,
various management actions aimed at mitigating
economic, political, environmental and legislative
these risks. The internal risk management sub-
conditions. The majority of inherent risks remain
committee also considers the adequacy of:
constant, but new risks arise from time to time and
• insurance (including self insurance) cover, in
the impact these may have on business operations
conjunction with experts from the insurance
are assessed on an ongoing basis.
industry. This also covers a review of risks not
Risk is not only viewed from a negative perspective.
covered by insurance; and
The review process also identifies areas of
• business continuity planning.
opportunity, such as where effective risk
management can become a competitive advantage.
The major risks as at the date of this report are as follows:
Financial performance
Ensure more than adequate financial performance of the Group for all stakeholders
without compromising prudent accounting standards, policies and levels of provisioning.
Maximise income and revenue streams. Establish efficient cost structures.
Constantly monitor performance and provide feedback to operations and the
service departments.
Information technology
(IT)
Ensure that the money spent on IT is effectively managed and that the investment
potential is maximised.
Broad-based black
economic empowerment
(B-BBEE) and
employment equity
Implementing an overall transformation strategy to introduce more representation
of the dynamics of South Africa into middle and senior management of the Group.
Embrace all aspects of B-BBEE for the long term sustainability, growth and
profitability of the Group.
Compliance and
customer education
Ensure the Group remains compliant with the many laws and regulations that govern
the environment in which the Group operates.
Ensure customers are made aware of their rights and obligations.
Continually review Group policy and procedures to ensure compliance is established and
monitor adherence to policy via operational excellence and the Internal Audit department.
Crime
Monitor the impact of criminal activities such as cash and inventory losses, fraud,
burglary and damage to Company assets. Proactively consider and implement
preventative measures to combat the impact of crime such as drop safes, security
guard services, alarm systems and vehicle tracking systems.
Credit management
This relates to the Group’s ability to collect the debtors book. In an environment
where the customer is becoming over indebted, ensure strict credit granting rules are
maintained. Constantly review debt recovery systems and optimise. Closely monitor
the performance of the debtors book. Ensure correct provisions are raised for debts
that are unlikely to be recovered. Convert collection of the debtors book to a
centralised environment.
66
J D G R O U P AN N UAL R E P O R T 2 0 0 8
HIV/Aids
This refers to the Group’s ability to understand and respond to the impact of HIV/Aids
on its stakeholders, particularly on the customer base and the staff complement.
Market behaviour
Constantly monitor market behaviour or changing demographics, customer buying
patterns, competitor activity and customer indebtedness.
Various mechanisms are in place to monitor these changing market behaviours,
e.g. merchandise and marketing review meetings.
Ensure that a range of financial services products is developed to suit the changing
needs of the customer.
People skills
Attract and retain the right people. Ensure they are correctly trained and developed.
Maintain appropriate succession planning, especially for key positions, taking
cognisance of employment equity.
Supplier base and
logistics
Carefully plan the mix between local and imported supply of goods to ensure good
product mix and margin is maintained that satisfies the needs of the customer at
the right price and quality.
Optimise the supply chain as all retail chains have independent warehouse and distribution
structures. Consolidate warehousing where possible and maximise efficiencies.
Increase the use of third party service providers to increase productivity, reduce
corporate and divisional costs and minimise risk.
The combination of distribution units will unlock value and accelerate the delivery
of orders by optimising key assets and infrastructure.
Cash flow and treasury
management
Manage the risks associated with the Group’s funding requirements together with
foreign exchange fluctuations, interest rate changes, instalment terms and finance
charges and other related incomes and expenses. Take out appropriate cover and
hedges where required.
Taxation
Monitor and manage all taxation risks applicable to the Group, utilising both internal
and external resources. Furthermore, to monitor changes or potential changes to
the applicable legislation.
Establishment of a
separate Financial
Services business
Until recently the Financial Services business has been inextricably linked with the
Traditional Retail business.
Separate the financial performance of the Financial Services business from that
of Retail.
Establish dedicated management teams to optimise the performance of the Financial
Services business.
Expand the range of products and services in the financial services arena.
Traditional Retail
business
Optimise the performance of the Traditional Retail business through becoming
excellent retailers without relying on the incomes of the Financial Services business
to cross subsidise financial performance.
Disaster recovery and
business continuity
Further enhance the Group’s disaster recovery and business continuity capability
especially as the Group migrates to a more centralised environment.
67
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
Attendance register
the financial year ended 31 August 2008 is provided
The attendance by directors at Group board
below. As evidenced by the statistics, the
meetings and board subcommittee meetings during
attendance of directors is regarded as satisfactory.
Board
Audit
4
3
Number of meetings
ID Sussman
AG Kirkc
KR Chaukec
HP Greeffc
JHC Kokr
HC Straussr
G Völkel
ME King
D Konar
IS Levy
M Lockn
MJ Shaw
4
4
4
4
2 + 1a
2 + 1a
4
4
4
4
2 + 2a
4
Remuneration
3i
3i
1i
n/a
3i
3i
3i
3
3
2i
2i
3
1
1i
n/a
n/a
n/a
n/a
n/a
n/a
1
1
1
n/a
0a
Risk
Nominations
3
n/a
n/a
3
n/a
n/a
3
3
3
n/a
3
n/a
n/a
3
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
r = resignations during the review period (HC Strauss and JHC Kok, with effect from 30 May 2008).
c = appointments during the review period (AG Kirk, KR Chauke and HP Greeff, with effect from 17 September 2007).
n = non-resident.
i = attended by invitation.
a = apologies tendered.
JDG Trading board
Amongst others, the directors of this board are
JDG Trading (Proprietary) Limited is the wholly owned
individually and jointly mandated, empowered and
South African trading company of JD Group Limited.
held accountable for:
The board of JDG Trading consists of the six
• implementing the strategies and key policies
executive directors of the JD Group and seven senior
executives, namely Ian Child, David Hirsch, Johan Kok,
determined by the JD Group board;
• managing and monitoring the business and affairs
Phillip Kruger, Arie Neven, Guy Pearce and
of the Group in accordance with approved
Mark Richards. Meetings are chaired by Grattan Kirk.
business plans and budgets;
Mias Strauss and Mike Roberts resigned as
directors of this board with effect from 30 May 2008
and 7 August 2008 respectively. David Hirsch was
appointed on 7 August 2008 and Guy Pearce on
1 September 2008.
• prioritising the allocation of capital and other
resources;
• establishing best management and operating
practices; and
• structuring management succession planning to
The purpose of the board is, amongst others, to serve
identify, develop and advance future leaders in the
as a governance mechanism through the process of
Group.
bi-annual Group performance reporting.
68
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Formal meetings are held bi-annually to coincide
The committee’s agenda includes the monitoring of
with the announcements of results and on an
strategic business goals, performance review, risk
ad hoc basis, as required. The great majority of
review, succession planning and business
decisions are taken by way of written resolutions
intelligence. It also facilitates establishing and
signed by the directors in terms of section 242(2)
monitoring Group policies and procedures. Meetings
of the Companies Act.
are held on a monthly basis.
Management committees
Internal risk management subcommittee
Specific responsibilities have been delegated to
The internal risk management subcommittee
various management committees, all of which have
comprises Richard Chauke (chairman) and
defined terms of references in place. The former
Pieter Pienaar. Other Exco members and Corporate
Tradeco and Servco committees have been replaced
Service department executives attend for part of
by a Traditional Retail Exco and a Cash Retail Exco.
the meeting to provide feedback from their relevant
An International Retail Exco convenes in Poland on
operational or service department perspective.
a regular basis and the current informal Financial
Services Exco will convert into a formal forum
once the two insurance companies commence
with their operations.
The purpose of this committee is to identify and
review the risks presented by the Group’s local and
offshore operations and by the corporate service
departments from an internal Group perspective,
Executive committee (Exco)
and to rate these risks in terms of probability and
The committee comprises Grattan Kirk (chairman),
impact. It reports to the Group risk management
Richard Chauke, Ian Child, Henk Greeff, David Hirsch,
committee and to the JDG Trading board. This
Johan Kok, Phillip Kruger, Arie Neven, Guy Pearce,
committee meets on a quarterly basis.
David Sussman, Ian Thompson and Gerald Völkel.
Julian Hanmer and Reneé Griessel attend in their
ex officio capacities.
Traditional Retail Exco
The committee comprises Arie Neven (chairman),
Colin Bresler, Johan Coetsee, Toy de Klerk,
The purpose of the committee is to:
Julian Hanmer, David Hirsch, Pat Kimmince,
• translate Group board strategic direction into
Conrad Kleingeld, Johan Kok, Rénier Krige,
a Group strategic plan;
• address other items considered crucial for
business success; and
• secure successful implementation of the strategic
plan and monitor Group performance in
Lindsay Mentor, Preggie Naidoo, Mike Roberts,
Len Rundle, Anthony Smith and Christo Viljoen.
Grattan Kirk, Richard Chauke, Henk Greeff and
other executives are regular attendees at the
Traditional Retail Exco.
accordance with this plan.
69
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
The purpose of the committee is to translate, plan
management and performance, people development,
and implement Group strategy in the Traditional
research and development trends internally and
Retail chain businesses and to monitor progress
externally, compliance with operational policies and
thereon, to ensure compliance with policies and to
progress reviews on divisional projects. It also
manage attainment of business goals and agreed
attends to other important initiatives which may
performance milestones.
impact on the Cash Retail businesses. Meetings are
The agendas include deliberations on Group
strategic business goals, operational business goals,
business performance measurements, receivables
and inventory management and performance, people
development, performance of service departments
and of suppliers in terms of service level
held on a quarterly basis.
Abra board
The management board of Abra in Poland carries
out the same functions as that of the JDG Trading
board.
agreements, research and development trends
The supervisory board of Abra includes
internally and externally, compliance with operational
David Sussman (chairman), Johan Coetsee and
policies and progress reviews on divisional projects.
Grattan Kirk.
It also attends to other important initiatives which
may impact on the Traditional Retail businesses.
Meetings are held on a monthly basis.
Other management committees
Leadership and development council
This committee comprises Grattan Kirk (chairman),
Cash Retail Exco
Pamela Barletta, Richard Chauke, Henk Greeff,
The committee comprises Grattan Kirk (chairman),
Johan Kok, Rénier Krige, Arie Neven and
Pamela Barletta, Johan Coetsee, Victor da Silva,
Gerald Völkel. The committee’s terms of reference
David Hirsch and the Cash Retail chain chief
include leadership development, succession
executives, namely Dave Miller (Incredible
management and expediting the achievement of
Connection) and Matthew van der Walt (Hi-Fi
equity targets.
Corporation). Richard Chauke, Henk Greeff and
other executives are regular attendees at the Cash
Chain and corporate service department committees
Retail Exco.
The chain chief executives and the heads of the
The purpose of the committee is to translate, plan
and implement Group strategy for the Cash Retail
chain businesses and to monitor progress thereon,
to ensure compliance with policies and to manage
attainment of business goals and agreed
performance milestones.
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 service
department attend these meetings.
Marketing and merchandise review meetings
The agendas include deliberations on Group
A marketing and merchandising meeting is held
strategic business goals, operational business goals,
monthly for both the Traditional Retail chains and
business performance measurements, inventory
the Cash Retail chains. These meetings are attended
70
J D G R O U P AN N UAL R E P O R T 2 0 0 8
by the marketing executives and by representatives
The retirement funds are:
from the respective chain advertising agencies. In
• the Alexander Forbes Retirement Fund (JDG
addition, Grattan Kirk, David Hirsch, Arie Neven,
Trading (Pty) Ltd – pension and provident section)
Irene Pilavachi and David Sussman attend these
(AFRF);
Traditional Retail meetings, while David Hirsch,
Grattan Kirk and David Sussman also attend the
Cash Retail meetings.
These meetings deal with two key matters each,
namely all the marketing promotions of the Group
for the next two to three months in advance, and the
merchandise plans that underpin the marketing plan.
The purpose of these meetings are to ensure that
sales are maximised, the required number of product
units are sold and that gross margins are achieved.
• the JD Group Defined Benefit Pension Fund
(Defined Benefit Pension Fund);
• Connection Group Holdings Provident Fund
(Connection Group Holdings (Pty) Limited);
• the SA Commercial Catering and Allied Workers
Union National Provident Fund (SNPF); and
• various small funds in Botswana and Namibia and
the Social Security Fund (SSF) in Poland.
The AFRF is an umbrella fund in which a number
of employees and employers participate. It has
Credit meetings
a professional board of trustees in place.
Credit meetings are chaired by Arie Neven. The
Management committees comprising four
Traditional Retail chain chief executives, operations
employer appointed and four employee elected
executives and debtors executives, together with
members monitor and review the AFRF, monitor
Johan Kok and Phillip Kruger attend. The purpose of
investments, and assist in the distribution of
these meetings is to review all aspects of the
death benefits. The employer appointed
performance of the receivables books and related
management committee members who represent
matters. These meetings are held on a monthly
JDG Trading on the AFRF are Ivan Levy
basis.
(chairman), George Annandale, Rénier Krige and
Connection Group board and subcommittees
Johan Coetsee.
The Group acquired Connection Group with effect
The SNPF is an umbrella fund in which a number
from 1 December 2005. Three of the JD Group board
of employees participate in terms of a collective
directors, namely Grattan Kirk, David Sussman and
bargaining arrangement with SACCAWU. Old
Gerald Völkel, serve on the board of Connection
Mutual Employee Benefits Industry Funds Unit is
Group Holdings (Pty) Limited, the holding company
the administrator of the SNPF.
of this group of companies. The subcommittees of
The Defined Benefit Pension Fund employer
the latter Group, namely the remuneration
trustees are Ivan Levy (chairman/employer trustee),
committee and audit committee, were incorporated
Rénier Krige (principal officer/employer trustee),
into the JD Group committees respectively.
George Annandale (employer trustee) and Johan
Employment benefit funds
Approximately 95% of Group employees are
Coetsee (employer trustee), and four members
elected as employee trustees.
members of a retirement fund offered by the Group.
71
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
The AFRF and Defined Benefit Pension Fund hold
necessarily absolute, assurance regarding the
formal management committee/trustee meetings on
reliability of the financial information used within
an annual basis with informal meetings as and when
the business and for publication and to ensure that
required.
assets are safeguarded.
Details of the Group’s retirement funds and impact
The key features of the internal control systems that
on the financial statements are set out in note 26 of
operated throughout the year under review are
the annual financial statements.
described below:
Financial control and reporting
Control environment
The directors are responsible for ensuring that
A documented organisational structure with clearly
Group companies maintain adequate records and
defined lines of responsibility and delegation of
report accurately and reliably on the financial
authority from the board to the chains and corporate
position, activities and results of the Group.
service departments is in place. The board has
Financial reporting procedures are applied in the
established policies and procedures, including a
Group at all levels to meet this responsibility.
levels of authority document and a code of conduct
Financial and other information is constantly
to foster a strong ethical climate.
reviewed and remedial action taken, where
necessary.
Improvements to the quality of reported information
are continually effected by means of replacing or
upgrading information systems.
Financial monitoring systems
The Group operates a comprehensive annual
planning and budgeting process. The annual budget
is approved by the board. The financial reporting
system compares results with plans, budgets and
The Group’s annual financial statements are
with the previous year’s results and is able to
prepared in accordance with International Financial
identify deviations on a daily and monthly basis.
Reporting Standards. Appropriate accounting
Reports include regular cash flow statements,
policies are consistently applied unless an
income statements and balance sheets projected for
accounting policy requires revision or there is a
12 months ahead, which are used in determining
requirement to adopt new accounting standards,
future funding needs.
in which case proper disclosure will be made.
Reasonable and prudent judgements and estimates
Main control procedures
are made, in order to properly disclose the Group’s
The directors have adopted a schedule of matters
financial status.
which are required to be brought to it for decision,
thus ensuring that it maintains full and effective
Internal control and internal audit
control over appropriate strategic, financial,
The board has overall responsibility for ensuring that
organisational and compliance issues. The board
the Group maintains a system of internal financial
has identified a number of key areas which include
control to provide it with reasonable, but not
treasury, legislative requirements, information
72
J D G R O U P AN N UAL R E P O R T 2 0 0 8
technology, strategic business goals and other
matters which are subject to regular reporting.
Financial controls and procedures are in place,
• credible processes for feedback on risk
management and assurance; and
• objective confirmation that the board receives
including procedures for seeking and obtaining
assurance from management that information is
approval for major transactions and organisational
reliable.
changes. Organisational controls involving the
segregation of incompatible duties and controls
relating to the security of assets are also covered.
The purpose, authority and responsibility of the
Internal Audit activity are formally defined in an
internal audit terms of reference, which was
The board regularly reviews the operations and
approved by the board and which is consistent with
effectiveness of internal financial control. The board
the Institute of Internal Auditors’ definition of
confirms that to the best of its knowledge and belief
internal auditing.
there have been no weaknesses which have led to
any material losses or contingencies during this
financial year.
The activities of the internal auditors are
coordinated by the Group internal audit executive,
who has unrestricted access to the audit committee
Internal control
chairman and its members.
The directors accept responsibility for maintaining
Internal Audit coordinates with the external auditors
appropriate internal control systems to ensure that
to ensure proper coverage and to minimise
the Group’s assets are safeguarded and managed,
duplication of effort. The external auditors have
and losses arising from fraud or other illegal acts are
access to reports issued by Internal Audit.
minimised. Control systems are monitored and
improved in accordance with generally accepted
best practice.
Audit plans for each business unit are tabled
annually to take account of changing business
needs. Follow up audits are conducted in areas
Internal Audit
where weaknesses are identified.
Internal Audit is an independent, objective assurance
The internal audit plan, approved by the audit
and consulting function designed to add value to and
committee, is based on risk assessments, which are
improve the Group’s operations. It helps the Group
continually updated so as to identify not only
accomplish its objectives by bringing a systematic,
existing and residual risks, but also emerging risks,
disciplined approach to evaluate and improve the
as well as issues highlighted by the audit committee
effectiveness of risk management, control and
and the risk management committee. Internal audits
compliance processes. Amongst others it provides:
are conducted formally at each business unit and
• assurance that the management processes are
corporate service department workplace on a
adequate to identify and monitor significant risks;
regular basis.
• confirmation of the adequacy and effective
operation of the established internal control
systems;
73
J D G R O U P AN N UAL R E P O R T 2 0 0 8
CORPORATE GOVERNANCE
continued
Fraud and illegal acts
Code of conduct
The Group does not engage in or accept or condone
The Group is committed to the highest ethical
any illegal acts in the conduct of its business. The
standards of business conduct and to fully comply
directors’ policy is to actively pursue and prosecute
with all applicable laws and regulations.
the perpetrators of fraudulent or other illegal
activities, should they become aware of any such acts.
Insider trading
No employee or director (or their associates) of the
Group may deal, directly or indirectly, in JD Group
shares on the basis of unpublished price sensitive
information regarding the business or affairs of
the Group. No director or executive (or their
associates) who participates in the JD Group
share incentive scheme may trade in JD Group
shares during closed periods as defined in the JSE
Listings Requirements. The board has approved a
dealing code and twice annually defines the
closed periods, which are adhered to strictly. To
the best of the board’s knowledge, none of the
Group’s directors or their associates have been
involved in insider trading.
74
J D G R O U P AN N UAL R E P O R T 2 0 0 8
The directors, employees, employees of outsourced
functions, as well as suppliers to the JD Group, are
all expected to comply with the principles of this
Code and to act in terms thereof. The ethical
standards of the Group, as stipulated in the Code,
are monitored and the directors believe that they
are being met. Where there is non-compliance with
the Code, the appropriate discipline is enforced with
consistency as the Group responds to offences. It
also serves as a measure to prevent recurrence.
Going concern
The directors report that, after making enquiries,
they have a reasonable expectation that the Group
has adequate resources to continue in operational
existence for the foreseeable future. For this reason,
the Group continues to adopt the going concern
basis in preparing the annual financial statements.
ANNUAL FINANCIAL STATEMENTS
sharpening our focus . . .
TEN YEAR REVIEW
31 August
2008
31 August
2007#
31 August
2006
Share performance
Total shares in issue
Weighted average number of shares in issue
Headline earnings per share
Cash equivalent dividends per share
Dividend cover
Net asset value per share
’000
’000
cents
cents
times
cents
170 500
169 807
301,0
152,0
2,0
2 822,9
180 000
177 861
621,7
303,0
2,1
2 804,5
Profitability, liquidity and gearing
Revenue
Operating profit
Profit before finance costs
Profit attributable to shareholders
Closing shareholders’ equity
Average shareholders’ equity
Net interest bearing debt
Average total assets less non-interest bearing debt
Total assets
Operating margin
Profit attributable to shareholders on revenue
Return on closing shareholders’ equity
Return on average shareholders’ equity
Return on assets managed
Interest cover
Gearing ratio
Current ratio
Shareholders’ equity to total assets
Rm
Rm
Rm
Rm
Rm
Rm
Rm
Rm
Rm
%
%
%
%
%
times
%
:1
%
12 610
797
813
514
4 813
4 931
158
6 426
8 673
6,3
4,1
10,7
10,4
12,7
9,6
3,3
2,3
55,5
12 914
1 591
1 662
1 113
5 048
5 337
76
7 030
8 891
12,3
8,6
22,1
20,9
23,7
11,0
1,5
2,9
56,8
11 939
2 024
2 083
1 457
5 626
5 197
(304)
7 028
10 115
17,0
12,2
25,9
28,0
29,6
21,9
(5,4)
3,4
55,6
R000
1 095
11 516
18 989
664
1 078
11 980
19 577
660
1 028
11 614
18 361
650
cents
’000
Rm
%
3 010
281 087
11 781
160,6
6 970
293 949
22 976
165,1
6 660
271 264
20 383
152,4
cents
cents
7 100
2 101
10 600
5 920
9 625
5 939
Productivity
Number of stores
Revenue per store
Number of employees
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
– high
– low
R000
178 000
176 271
823,5
412,0
2,0
3 160,5
All ratios have been calculated using amounts in R000s as opposed to Rm.
The 2007 comparatives have been restated for the change in the basis of accounting for insurance income and initiation fees. Prior years have not been
restated for the new basis of accounting.
*The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards
(“IFRS”). Prior years have not been restated to reflect the changes required to comply with IFRS.
#
76
J D G R O U P AN N UAL R E P O R T 2 0 0 8
31 August
2005*
175 500
172 221
697,6
352,0
2,0
2 717,0
9 933
1 755
1 809
1 202
4 768
4 360
(457)
6 035
8 440
17,7
12,1
25,2
27,6
30,0
12,7
(9,6)
3,6
56,5
31 August
2004
31 August
2003
31 August
2002
12 months
31 August
2001
14 months
31 August
2000
12 months
30 June
1999
172 000
166 930
518,5
240,0
2,0
2 297,0
166 830
133 196
340,5
110,0
3,1
2 033,0
112 730
112 070
226,5
56,0
3,8
1 715,1
112 609
111 484
353,2
94,0
2,6
1 695,9
111 651
110 322
301,8
78,0
3,9
1 531,5
110 350
108 935
243,0
65,0
3,7
1 305,0
5 966
747
762
449
3 392
2 663
894
4 224
7 185
12,5
7,5
13,2
16,9
18,1
4,9
26,3
2,6
47,2
4 083
467
478
241
1 933
1 922
1 048
3 557
4 243
11,4
5,9
12,5
12,5
13,4
2,7
54,2
4,0
45,6
3 788
657
665
275
1 910
1 810
802
3 241
4 529
17,3
7,3
14,4
15,2
20,5
6,6
42,0
4,1
42,2
3 928
565
572
335
1 710
1 575
709
2 509
3 499
14,4
8,5
19,6
21,3
22,8
6,5
41,5
4,8
48,9
3 016
407
407
265
1 439
1 307
457
2 058
2 719
13,5
8,8
18,4
20,3
19,8
5,5
31,7
5,0
53,0
9 056
1 256
1 280
784
3 951
3 671
(19)
5 308
7 739
13,9
8,7
19,9
21,4
24,1
8,8
(0,5)
3,1
51,1
963
10 315
16 459
603
952
9 513
16 167
560
978
6 100
15 738
379
695
5 875
10 064
406
684
5 538
9 984
379
671
5 855
9 704
405
678
4 449
9 613
314
7 400
167 697
10 634
95,6
4 550
137 612
5 552
80,0
3 161
73 828
1 716
44,3
1 675
56 740
1 466
50,3
4 050
53 420
2 107
47,4
4 860
69 142
3 021
61,9
3 690
41 561
1 349
37,7
7 800
4 659
4 690
2 950
3 180
1 440
4 060
1 300
4 905
2 990
5 500
3 100
4 400
1 650
77
J D G R O U P AN N UAL R E P O R T 2 0 0 8
TEN YEAR REVIEW
continued
Rm
Income statements
Revenue
Cost of sales
Operating profit
Investment income (including equity accounted profits)
Profit before finance costs
Finance costs – net
Profit before exceptional item
Exceptional item: loss on discontinuance
Profit before taxation
Taxation
Profit after taxation
Attributable to outside shareholders
Profit attributable to shareholders
Balance sheets
Assets
Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Interest in associate company
Interest in joint venture
Deferred taxation
Current assets
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
31 August
2008
12 610
6 627
797
16
813
84
729
—
729
215
514
—
514
31 August
2007#
31 August
2006
31 August
2005*
12 914
6 517
1 591
71
1 662
151
1 511
—
1 511
398
1 113
—
1 113
11 939
5 811
2 024
59
2 083
95
1 988
—
1 988
531
1 457
—
1 457
9 933
4 571
1 755
54
1 809
142
1 667
—
1 667
465
1 202
—
1 202
1 397
653
347
256
93
28
(15)
35
7 276
1 448
4 503
3
187
1 135
1 403
578
347
294
111
23
3
47
7 488
1 348
5 041
1
123
975
1 380
491
347
332
124
19
10
57
8 735
1 066
6 046
5
1
1 617
662
287
—
145
110
16
—
104
7 778
867
5 259
1
67
1 584
Total assets
Equity and liabilities
Equity and reserves
Share capital and premium
Treasury shares
Non-distributable and other reserves
Retained earnings
Shareholders for dividend
Shareholders’ equity
Minority interest
Non-current liabilities
Interest bearing long term liabilities
Non-interest bearing long term liability
Deferred taxation
Current liabilities
Trade, other payables and provisions
Interest bearing liabilities
Financial liabilities
Taxation
Bank overdrafts
8 673
8 891
10 115
8 440
1 779
(435)
245
3 157
67
4 813
—
700
293
83
324
3 160
2 068
1 000
—
92
—
2 118
(255)
226
2 859
100
5 048
—
1 223
739
79
405
2 620
2 218
312
—
90
—
Total equity and liabilities
8 673
8 891
2 057
(18)
193
3 072
322
5 626
—
1 937
1 151
65
721
2 552
2 073
162
—
317
—
10 115
1 995
(15)
150
2 346
292
4 768
—
1 539
810
66
663
2 133
1 768
317
—
48
—
8 440
The 2007 comparatives have been restated for the change in the basis of accounting for insurance income and initiation fees. Prior years have not been
restated for the new basis of accounting.
*The 2005 comparatives have been restated to reflect the changes required to comply with the new or revised International Financial Reporting Standards
(“IFRS”). Prior years have not been restated to reflect the changes required to comply with IFRS.
#
78
J D G R O U P AN N UAL R E P O R T 2 0 0 8
31 August
2004
31 August
2003
31 August
2002
12 months
31 August
2001
14 months
31 August
2000
12 months
30 June
1999
9 056
4 148
1 256
24
1 280
145
1 135
—
1 135
351
784
—
784
5 966
2 613
747
15
762
154
608
—
608
160
448
1
449
4 083
1 657
467
11
478
179
299
—
299
60
239
2
241
3 788
1 530
657
8
665
101
564
167
397
123
274
1
275
3 928
1 541
565
7
572
88
484
—
484
149
335
—
335
3 016
1 198
407
—
407
74
333
—
333
68
265
—
265
645
210
—
165
110
—
—
160
7 094
784
4 871
34
77
1 328
1 026
210
42
315
146
—
—
313
6 159
739
4 860
36
80
444
345
144
54
—
110
—
—
37
3 898
427
3 231
13
5
222
259
127
6
—
110
—
—
16
4 270
359
3 255
—
1
655
211
109
—
—
102
—
—
—
3 288
354
2 884
—
9
41
105
104
—
—
1
—
—
—
2 614
341
2 242
—
1
30
7 739
7 185
4 243
4 529
3 499
2 719
1 903
(88)
137
1 746
253
3 951
—
1 537
947
75
515
2 251
1 794
362
8
87
—
1 778
(39)
127
1 415
111
3 392
—
1 412
831
—
581
2 381
1 801
506
9
64
1
782
(22)
24
1 124
25
1 933
21
1 310
1 049
—
261
979
745
219
11
2
2
781
(22)
4
1 105
42
1 910
(1)
1 577
1 261
—
316
1 043
722
192
—
125
4
762
(22)
—
935
35
1 710
—
1 106
750
—
356
683
679
—
—
4
—
727
(2)
—
686
28
1 439
–
760
485
—
275
520
470
2
—
48
—
7 739
7 185
4 243
4 529
3 499
2 719
79
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ APPROVAL OF THE ANNUAL FINANCIAL STATEMENTS
Responsibility for the annual financial
statements
To the best of our knowledge and belief, based on the
The directors are responsible for the preparation, integrity
breakdown in the operation of the systems of internal
and objectivity of annual financial statements that fairly
control and procedures has occurred during the year
present the state of affairs of the Group and the Company
under review.
at the end of the financial year, the income and cash flow
The Group consistently adopts appropriate and recognised
for that period and other information contained in this
accounting policies.
annual report.
The annual financial statements have been prepared in
To enable the directors to meet these responsibilities:
accordance with the provisions of the South African
• the board and management set standards and
Companies Act and comply with International Financial
above, the directors are satisfied that no material
management implements systems of internal control,
Reporting Standards.
accounting and information systems aimed at providing
The directors are of the opinion that the business will be a
reasonable assurance that assets are safeguarded and
going concern for the foreseeable future, and accordingly,
the risks of error, fraud or loss are reduced in a cost
the annual financial statements are prepared on a going
effective manner. These controls, contained in
concern basis.
established policies and procedures, include the proper
It is the responsibility of the independent external auditors
delegation of responsibilities and authorities within a
to express an opinion on the annual financial statements.
clearly defined framework, effective accounting
Their report to the members of the Company is set out on
procedures and adequate segregation of duties;
page 81.
• 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,
Approval of the annual financial statements
The directors’ report and the annual financial statements,
which appear on pages 82 to 147, were approved by the
board of directors on 14 November 2008 and are signed by:
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 independent
external and internal auditors, plays an integral role in
ID Sussman
Executive chairman
assessing matters relating to financial internal control,
accounting policies, reporting and disclosure.
G Völkel
Chief financial officer
80
J D G R O U P AN N UAL R E P O R T 2 0 0 8
REPORT OF THE INDEPENDENT AUDITORS
To the members of JD Group Limited
We have audited the annual financial statements and
Group annual financial statements of JD Group Limited,
which comprise the directors’ report, the balance sheets at
31 August 2008, and the income statements, consolidated
statement of changes in equity and consolidated cash flow
statement for the year then ended, a summary of
significant accounting policies and other explanatory notes,
set out on pages 82 to 147.
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.
assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation
of the 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 Company and the Group financial
position of JD Group Limited at 31 August 2008 and of their
financial performance and cash flows for the year then
ended in accordance with International Financial Reporting
Standards as issued by the International Accounting
Standards Board and in the manner required by the
Companies Act of South Africa.
Auditors’ responsibility
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our
audit in accordance with International Standards on
Auditing. Those standards require that we comply with
ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on
the auditors’ judgement, including the assessment of the
risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk
Deloitte & Touche
Per X Botha
Partner
14 November 2008
221 Waterkloof Road
Waterkloof
Pretoria
0181
National Executive: GG Gelink Chief Executive AE Swiegers Chief
Operating Officer GM Pinnock Audit DL Kennedy Tax & Legal and
Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman
Finance TJ Brown Clients & Markets NT Mtoba Chairman of the Board
C Qually Deputy Chairman of the Board.
A full list of partners and directors is available on request.
CERTIFICATE BY COMPANY SECRETARY
In terms of section 268G(d) of the Companies Act, 61 of 1973, as amended, I certify that, to the best of my knowledge and belief,
the Company has lodged with the Registrar of Companies for the financial year ended 31 August 2008 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
14 November 2008
81
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ REPORT
The directors have pleasure in submitting their report
chairman be an independent non-executive director, the
together with the Company and Group annual financial
directors have complied with the principal aspects of the
statements for the year ended 31 August 2008.
Code which are applicable to the Group’s activities.
Nature of business
The Group carries on business of furniture and appliance
retail as well as the provision of financial services. The
Group operates through nine chains in southern Africa
and one in Poland.
Results of operations
The results of operations are set out in the Group and
Company income statements and Group segmental
analysis.
Going concern
The financial statements have been prepared using
appropriate accounting policies, supported by reasonable
and prudent judgements and estimates. The directors have
a reasonable expectation, based on an appropriate
assessment of a range of factors, that the Group and the
Company have adequate resources to continue as a going
concern in the foreseeable future.
Accounting policies
The annual financial statements have been prepared in
accordance with International Financial Reporting
Standards (IFRS) and their interpretation adopted by the
International Accounting Standards Board (IASB), the
Listings Requirements of the JSE and the Companies Act,
61 of 1973, as amended. The accounting policies applied in
the preparation of these annual financial statements remain
consistent with those of the previous financial year, except
for the adoption of revised accounting standards as
disclosed in the Accounting Policies note.
In addition to the above, the Group has also opted to change
The Group is totally committed to the principles of
transparency, integrity and accountability as set out in the
Code and the directors are fully cognisant of the need to
conduct the Group’s business in accordance with generally
accepted corporate practices, having due regard for the
rights of their employees, suppliers, lenders, customers, the
environment and society at large.
Independent auditors
The independent auditors, Deloitte & Touche, have been
re-appointed during the year. All non-audit services
provided by Deloitte & Touche are tabled and approved by
the audit committee prior to commencement of any such
work. The non-audit services in the current year are
provided in note 5 on page 111.
Share capital and share premium
Details of the authorised and issued share capital, the
share premium and the movements during the year are
provided in note 17 on page 120 of the annual financial
statements. The board acted on its mandate from
shareholders obtained at the annual general meeting in
February 2008 and repurchased 9,5 million of its own issued
shares for a consideration of R338,6 million during the year.
These shares have been cancelled as issued capital.
Share incentive trust
25 575 000 (2007: 27 000 000) unissued ordinary shares of
5 cents each have been placed under the control of the
directors of the Company with the power to allot and issue
them in accordance with the terms of The JD Group
Employee Share Incentive Scheme. Refer to note 17 on
page 120.
its basis of accounting for recognising insurance income
and initiation fees. An explanation of how the adoption of
Subsidiary companies
this revised basis of accounting has affected the reported
Details of the Company’s subsidiaries are set out on
financial position and performance of the Group is provided
page 146. The Company’s interest in the profits and losses
in note 1 to the annual financial statements.
after taxation of subsidiaries are as follows:
Corporate governance
During the year under review, other than the
2008
2007
Rm
Rm
recommendation of the King Report on Corporate
Profits
580
1 026
Governance for South Africa (“the Code”) that the
Losses
39
59
82
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Distribution to shareholders
There are no non-beneficial interests.
A final dividend of 41 cents (2007: 57 cents) per share was
declared on Thursday, 13 November 2008 and is payable on
Monday, 15 December 2008. An interim dividend of 111 cents
(2007: 246 cents) per share was declared on Wednesday, 21 May
2008 and paid to shareholders on Monday, 30 June 2008.
No director has directly or indirectly more than 1% interest
in the share capital. No change in the directors’ interests
occurred between the end of the financial year and the
date of this report.
A detailed breakdown of each individual director’s direct
Directors and secretary
and indirect holding in the Company is provided in the
The names of the directors and secretary of the Company
directors’ remuneration report on pages 84 to 91.
in office at the date hereof are set out on the inside back
Significant shareholders
cover of this report.
In terms of the articles of association, Messrs ME King,
ID Sussman, G Völkel and Dr D Konar retire at the
forthcoming annual general meeting and, being eligible,
offer themselves for re-election.
Details of significant shareholders are included on
page 148.
Special resolution passed by JD Group
During the period under review, the authority for JD Group
In terms of the articles of association, new appointments to
to purchase its own shares, subject to the relevant
the board during the year retain office until the next annual
provisions of the Companies Act, 61 of 1973, as amended,
general meeting, when they shall retire and be eligible for
and the Listings Requirements of the JSE Limited, was
re-election. Shareholders will be requested to confirm at
renewed for a maximum period of a further 15 months by
the forthcoming annual general meeting the appointments
a special resolution approved by shareholders of the
to the board of Messrs VP Khanyile and GZ Steffens as
Company on 6 February 2008.
independent non-executive directors and Mr ID Thompson
as an executive director, with effect from 13 November 2008.
In addition, special resolutions were passed by Arengo 231
Changes to the board and secretary
articles of association with the provisions of the Long-term
The resignations of Messrs JHC Kok and HC Strauss as
Short-term Insurance Acts to enable them to conduct
executive directors, effective 30 May 2008, were accepted
insurance business. These two companies will undergo
by the board.
name changes in due course. Going forward they will be
Ms Janine van Eden resigned as the company secretary
with effect from 31 May 2008 and Mr Johann Pieterse was
appointed as company secretary with effect from
9 September 2008. Mr Mark Richards carried out the duties
of the company secretary during the nine day period during
which this position was vacant beyond the 90 day period
allowed by the Companies Act.
Limited of Abrina 6197 Limited, aligning the companies’
utilised as the vehicles through which JD Group provides
insurance to its clients.
Subsequent events
Subject to approval by the Competition Authorities, the
Group announced that it had acquired a further 27,5%
interest in Blake & Associates Holdings (Proprietary)
Limited, and an additional 47,8% interest in Maravedi Group
Directors’ interests
(Proprietary) Limited on 17 September 2008.
The aggregate beneficial interest of directors in the issued
No other material events occurred between the financial
share capital and options of the Company is as follows:
year end and the date of this report.
Number of shares and options
2008
2007
Direct
Indirect
2 859 903
254 856
3 204 403
254 856
Total
3 114 759
3 459 259
83
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ REMUNERATION
This report on remuneration and related matters covers
issues which are the concern of the board as a whole in
addition to those which are dealt with by the remuneration
committee.
Remuneration policy
• 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.
The remuneration committee has a clearly defined
mandate from the board aimed at:
Directors’ service contracts
• ensuring that the Group’s chairman, directors and senior
executives are fairly rewarded for their individual
contributions to the Group’s overall performance; and
subject to 12 calendar months’ notice, Non-executive
All executive directors’ normal service contracts are
directors are not bound by service contracts. No director
has an employment contract with the Group exceeding
three years.
Basic
salary
R
2008
Executive directors
ID Sussman
AG Kirk
HC Strauss (nine months)
KR Chauke
Dr HP Greeff
JHC Kok (nine months)
G Völkel
Fees for
services
R
Allowances*
R
Retirement
contributions
R
2 777 181
1 903 497
1 683 602
771 308
971 293
1 004 207
1 414 499
306 330
146 573
206 555
199 290
192 165
142 605
192 165
601 460
335 873
282 277
130 121
164 439
187 574
194 363
10 525 587
1 385 683
1 896 107
2 583 927
2 115 952
1 273 650
1 262 806
1 319 208
301 010
268 485
206 818
179 318
233 736
599 370
379 159
152 643
248 619
198 553
8 555 543
1 189 367
1 578 344
Non-executive directors
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
225 000
225 000
225 000
80 000
160 000
915 000
2007
Executive directors
ID Sussman
HC Strauss
JL Bezuidenhout
JHC Kok
G Völkel
Non-executive directors
ME King
Dr D Konar
IS Levy
M Lock
MJ Shaw
225 000
225 000
225 000
80 000
160 000
915 000
*Travel, entertainment and subsistence allowances.
#
Variable remuneration is calculated using the headline earnings per share multiplied by the number of units allocated to each individual as
determined by the remuneration committee.
Variable remuneration relating to each financial year is payable as follows:
– 60% of estimated headline earnings per share for the first half year during December.
– The remainder of the headline earnings per share for the first half year during May.
– Headline earnings per share for the second half year during November.
Variable remuneration for a financial year will include earnings for the second half of the previous financial year and the first half of the current financial year.
84
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Medical
contributions
R
Cash
package
R
18 470
54 597
13 733
23 906
20 214
13 631
11 554
156 105
Variable remuneration#
Current
R
Prior
R
Subtotal
R
Share scheme
gains
R
Total
R
3 703 441
2 440 540
2 186 167
1 124 625
1 348 111
1 348 017
1 812 581
1 330 040
883 760
883 760
265 128
265 128
463 974
552 350
—
—
452 400
113 100
113 100
237 510
237 510
5 033 481
3 324 300
3 522 327
1 502 853
1 726 339
2 049 501
2 602 441
—
—
—
—
—
—
—
5 033 481
3 324 300
3 522 327
1 502 853
1 726 339
2 049 501
2 602 441
13 963 482
4 644 140
1 153 620
19 761 242
—
19 761 242
225 000
225 000
225 000
80 000
160 000
225 000
225 000
225 000
80 000
160 000
—
—
—
—
—
225 000
225 000
225 000
80 000
160 000
915 000
915 000
—
915 000
17 167
17 167
35 958
17 140
10 819
3 501 474
2 780 763
1 669 069
1 707 883
1 762 316
—
—
1 025 220
1 025 220
1 025 220
2 191 200
1 460 800
766 920
766 920
766 920
5 692 674
4 241 563
3 461 209
3 500 023
3 554 456
—
—
7 499 400
942 555
2 587 250
5 692 674
4 241 563
10 960 609
4 442 578
6 141 706
98 251
11 421 505
3 075 660
5 952 760
20 449 925
11 029 205
31 479 130
225 000
225 000
225 000
80 000
160 000
225 000
225 000
225 000
80 000
160 000
—
2 433 000
—
—
3 060 000
225 000
2 658 000
225 000
80 000
3 220 000
915 000
915 000
5 493 000
6 408 000
85
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ REMUNERATION
continued
Directors’ share options
The following share options and rights in shares in the Company were outstanding in favour of directors of the Company
under the Company’s share option scheme at the year end and 14 November 2008, the date on which the financial results were
approved:
2008
Executive directors
ID Sussman
Offer date
Options
held at
year end
Exercise
price
R
25/05/2000
20/02/2003
19/05/2004
24/05/2005
26/02/2008
250 000
375 000
500 000
60 000
200 000
29,84
16,19
35,10
56,25
37,21
1 385 000
KR Chauke
07/02/2007
31/07/2007
26/02/2008
Dr HP Greeff
25/07/2003
10/09/2003
19/05/2004
07/06/2005
31/07/2007
26/02/2008
AG Kirk
30/11/2005
07/02/2007
31/07/2007
26/02/2008
JHC Kok
20/02/2003
19/05/2004
24/05/2005
26/02/2008
20 000
30 000
50 000
79,83
63,63
37,21
100 000
15 000
10 000
25 000
20 000
50 000
50 000
23,42
28,03
35,10
54,00
63,63
37,21
170 000
194 903
30 000
75 000
100 000
72,50
79,83
63,63
37,21
399 903
89 500
150 000
35 000
50 000
16,19
35,10
56,25
37,21
324 500
HC Strauss
20/02/2003
19/05/2004
24/05/2005
150 000
300 000
50 000
16,19
35,10
56,25
500 000
G Völkel
20/02/2003
19/05/2004
24/05/2005
31/07/2007
26/02/2008
105 000
150 000
35 000
75 000
50 000
415 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
86
J D G R O U P AN N UAL R E P O R T 2 0 0 8
16,19
35,10
56,25
63,63
37,21
Options
exercised
during year
Date
exercised
Exercise
price
R
Exercise
cost
R
Sale/market
price
R
Sale/market
value
R
Gain
R
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
87
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ REMUNERATION
continued
Offer date
2008
Non-executive directors
ME King
02/05/2001
24/05/2005
Options
held at
year end
Exercise
price
R
100 000
20 000
120 000
27,20
56,25
Dr D Konar
IS Levy
02/05/2001
24/05/2005
M Lock
02/05/2001
24/05/2005
MJ Shaw
24/05/2005
2007
Executive directors
ID Sussman
HC Strauss
25/05/2000
20/02/2003
19/05/2004
24/05/2005
20/02/2003
19/05/2004
24/05/2005
—
100 000
20 000
120 000
100 000
20 000
120 000
20 000
20 000
250 000
375 000
500 000
60 000
1 185 000
150 000
300 000
50 000
500 000
27,20
56,25
27,20
56,25
56,25
29,84
16,19
35,10
56,25
16,19
35,10
56,25
JL Bezuidenhout
KR Chauke
07/02/2007
31/07/2007
Dr HP Greeff
25/07/2003
10/09/2003
19/05/2004
07/06/2005
31/07/2007
AG Kirk
30/11/2005
07/02/2007
31/07/2007
JHC Kok
20/02/2003
19/05/2004
24/05/2005
G Völkel
20/02/2003
19/05/2004
24/05/2005
31/07/2007
—
20 000
30 000
50 000
15 000
10 000
25 000
20 000
50 000
120 000
194 903
30 000
75 000
299 903
89 500
150 000
35 000
274 500
105 000
150 000
35 000
75 000
365 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
*These share options were cancelled at the request of the director concerned.
88
J D G R O U P AN N UAL R E P O R T 2 0 0 8
79,83
63,63
23,42
28,03
35,10
54,00
63,63
72,50
79,83
63,63
16,19
35,10
56,25
16,19
35,10
56,25
63,63
Options
exercised
during year
Sale/market
value
R
Gain
R
—
Options
cancelled
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4 367 500
3 764 250
3 592 000
627 813
12 351 563
—
2 612 500
2 914 275
1 837 000
135 625
7 499 400
Date
exercised
Exercise
price
R
—
20 000*
20 000
—
50 000
52 500
50 000
8 750
161 250
20/10/2007
17/01/2007
26/06/2007
26/06/2007
26/06/2007
56,25
35,10
16,19
35,10
56,25
Exercise
cost
R
—
1 755 000
849 975
1 755 000
492 188
4 852 163
Sale/market
price
R
87,35
71,70
71,84
71,75
—
—
—
—
—
—
—
—
—
15 500
05/06/2007
16,19
—
250 945
77,00
—
1 193 500
—
942 555
15 500
25 000
25 000
12/01/2007
15/01/2007
35,10
35,10
250 945
877 500
877 500
86,69
87,00
1 193 500
2 167 250
2 175 000
942 555
1 289 750
1 297 500
4 342 250
2 587 250
50 000
1 755 000
89
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DIRECTORS’ REMUNERATION
continued
Offer date
Options
held at
year end
Exercise
price
R
02/05/2001
100 000
27,20
24/05/2005
20 000
56,25
2007
Non-executive directors
ME King
120 000
Dr D Konar
24/05/2005
20 000
56,25
20 000
IS Levy
02/05/2001
100 000
27,20
24/05/2005
20 000
56,25
120 000
M Lock
02/05/2001
100 000
27,20
24/05/2005
20 000
56,25
120 000
MJ Shaw
24/05/2005
20 000
56,25
20 000
Share options may be exercised in lots of 25% after two years from the offer date and 25% every year thereafter.
Directors’ (and their associates) direct and indirect interest in shares of the Company
at the year end and 14 November 2008, the date on which the financial results were approved.
ID Sussman
ME King
Dr D Konar
IS Levy
None of these interests is of a non-beneficial nature.
90
J D G R O U P AN N UAL R E P O R T 2 0 0 8
2008
2007
250 000
250 000
2 428
2 428
10 000
10 000
2 428
2 428
264 856
264 856
Options
exercised
during year
Date
exercised
Exercise
price
R
Exercise
cost
R
Sale/market
price
R
Sale/market
value
R
Gain
R
50 000
08/12/2006
27,20
1 360 000
75,86
3 793 000
2 433 000
3 793 000
2 433 000
4 541 000
3 060 000
4 541 000
3 060 000
50 000
50 000
50 000
1 360 000
10/05/2007
29,62
1 481 000
1 481 000
90,82
91
J D G R O U P AN N UAL R E P O R T 2 0 0 8
DEFINITIONS
Revenue
Dividend cover
Revenue comprises net invoiced value of merchandise sold
Earnings per share divided by cash equivalent
excluding value added tax, net finance charges earned and
dividends per share.
income generated from financial and other services.
Return on closing shareholders’ equity
Cost of sales
Profit attributable to shareholders divided by shareholders’
Cost of sales comprises costs of purchase and other
equity at year end.
costs incurred in bringing inventories to their present
location and condition, net of volume and settlement
Return on average shareholders’ equity
discounts.
Profit attributable to shareholders divided by average
shareholders’ equity.
Operating margin
Operating profit divided by revenue.
Return on assets managed
Operating profit and investment income divided by average
Interest cover
total assets (excluding deferred taxation) less average
Operating profit and investment income divided by net
non-interest bearing debt.
finance costs.
Net asset value per share
Earnings per share
Shareholders’ equity divided by the total number of shares
Profit attributable to shareholders divided by the weighted
in issue, including treasury shares.
average number of shares in issue, excluding treasury
shares.
Gearing ratio
Interest bearing debt less cash resources divided by
Headline earnings per share
shareholders’ equity.
Profit attributable to shareholders adjusted for exceptional
losses on discontinuance in terms of IFRS 5 – Non-current
Current ratio
assets held for sale and discontinued operations, surpluses
Current assets divided by current liabilities.
or losses on disposal of property, plant and equipment and
goodwill impaired, divided by the weighted average number
of shares in issue, excluding treasury shares.
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.
92
J D G R O U P AN N UAL R E P O R T 2 0 0 8
ACCOUNTING POLICIES
JD Group Limited is a South African registered company.
The adoption of the other revised accounting standards
The consolidated annual financial statements of JD Group
had no significant effect on the financial results of the
Limited for the year ended 31 August 2008 comprises
Group for the year ended 31 August 2008 or the financial
JD Group Limited and its subsidiaries (together referred to
position of the Group as at that date.
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) issued by the
International Accounting Standards Board (IASB), the
interpretations of the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB and the
requirements of the South African Companies Act.
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 2008.
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 2007,
except for the adoption of the following revised accounting
standards and interpretations:
• IFRS 7 – Financial instruments: Disclosures.
• Amendment to IAS 1 – Capital Disclosures.
• IFRIC 10 – Interim financial reporting and impairment.
• IFRIC 11 – Share-based payment involving an entity’s
In addition to the above, the Group has changed its basis of
accounting for recognising insurance revenue and initiation
fees. An explanation of how the adoption of this revised
basis of accounting has affected the reported financial
position and performance of the Group is provided in note 1
to the annual financial statements.
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 2008.
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
own equity instruments in which an entity chooses or is
based on historical experience and various other factors
required to buy its own equity instruments (treasury
that are believed to be reasonable under the
shares) to settle the share-based payment obligation.
circumstances, the results of which form the basis of
The Group adopted IFRS 7 – Financial instruments:
making the judgements about carrying values of assets and
Disclosures and Amendment to IAS 1 – Capital Disclosures
liabilities that are not readily apparent from other sources.
with effect from 1 September 2007. The impact of the
The estimates and underlying assumptions are reviewed on
adoption of these standards has been to expand the
an ongoing basis. Revisions to accounting estimates are
disclosures provided in the financial statements regarding
recognised in the period in which the estimate is revised if
the Group’s financial instruments and the management of
the revision only affects that period, or in the period of the
capital as set out in note 25.
revision and future periods if the revision affects both
current and future periods.
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ACCOUNTING POLICIES
continued
The accounting policies have been applied consistently by
more than six months prior to the Group’s year end, the
all Group entities.
most recent available management accounting results have
been brought into account. The carrying value of such
Basis of consolidation
interests is reduced to recognise any decline, other than a
Subsidiaries
temporary decline, in the value of individual investments.
Subsidiaries are entities controlled by the Company
Where a Group enterprise transacts with an associate of
(including special purpose entities). Control exists when
the Group, unrealised profits and losses are eliminated to
the Company has the power to, directly or indirectly, govern
the extent of the Group’s interest in the relevant associate
the financial and operating policies of an entity so as to
company, except where unrealised losses provide evidence
obtain benefits from its activities.
of an impairment of the asset transferred.
On acquisition, the assets and liabilities and contingent
Any difference between the cost of acquisition and the
liabilities of the subsidiary are measured at fair value at the
Group’s share of the net identifiable assets, liabilities and
acquisition date. Any excess of the cost of acquisition over
contingent liabilities, fairly valued, is recognised and
the fair values of the identifiable net assets acquired is
treated according to the Group’s accounting policy for
recognised as goodwill. Any deficiency of the cost of
goodwill and included in the carrying value of the
acquisition below the fair values of the identifiable net
investment.
assets acquired (i.e. discount on acquisition) is credited to
profit and loss in the period of acquisition. The interest of
Joint venture companies
minority shareholders is stated at the minority’s proportion
A joint venture is defined as a contractual arrangement
of the fair values of assets and liabilities recognised.
whereby two or more entities undertake an economic
Subsequently, any losses applicable to the minority interest
activity, which is subject to joint control. Joint control
in excess of the minority interest are allocated against the
implies that neither of the contracting parties is in a
interests of the parent, unless the minority has a binding
position to unilaterally control the assets of the venture.
obligation to fund the losses and is able to make an
Joint venture companies are accounted for using the equity
additional investment to cover their losses.
method of accounting based on their most recent financial
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.
statements as described in the policy above relating to
interest in associate companies.
Intangible assets and goodwill
Goodwill
Associate companies
All business combinations are accounted for by applying
An associate is an enterprise over which the Group is
the purchase method. In respect of business acquisitions
in a position to exercise significant influence, through
that have occurred since 31 March 2004, goodwill arising
participation in the financial and operating policy decisions
on consolidation represents the excess of the cost of
of the investee, but which it does not control.
acquisition over the Group’s interest in the fair value of the
The results of associates are incorporated in these
financial statements using the equity method of
accounting based on their most recent financial
net identifiable assets and liabilities of a subsidiary,
associate or jointly controlled entity at the date of
acquisition.
statements. If the most recent available financial
Goodwill is stated at cost less any accumulated
statements are for an accounting period which ended
impairment losses. For the purpose of impairment testing,
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
goodwill is allocated to each of the Group’s cash
benefits embodied in the specific asset to which it relates.
generating units expected to benefit from the synergies of
All other expenditure is expensed as incurred.
the combination. Cash generating units to which goodwill
has been allocated are tested for impairment annually or
Amortisation
sooner if an impairment indicator exists. An impairment
Amortisation of intangible assets is recognised in the
loss recognised for goodwill is not reversed in a
income statement on a straight line basis over the assets’
subsequent period.
estimated useful lives unless such lives are indefinite.
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.
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
Where the Group’s interest in the fair value of the net
impaired. Other intangible assets are amortised from the
assets and liabilities acquired exceeds the cost of
date they are available for use.
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
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.
anticipated that development costs will be recovered
The gross carrying amount of property, plant and
through future commercial activity. Such development
equipment is initially measured using the historical cost
costs are capitalised as an intangible asset and amortised
basis of accounting. Subsequent expenditure relating to an
on a straight line basis over the life of the project from the
item of property, plant and equipment is capitalised to the
date of commencement of commercial operation.
carrying value of the asset when it is probable that future
economic benefits, in excess of the originally assessed
Other intangible assets
standard of performance of the item concerned, will flow
Other intangible assets that are acquired by the Group are
to the Group. All other subsequent expenditures are
stated at cost less accumulated amortisation and
recognised as expenses in the period in which they are
impairment losses. If an intangible asset is acquired in a
incurred.
business combination, the cost of that intangible asset is
measured at its fair value at the acquisition date.
Depreciation is provided on the straight line basis at rates
that will reduce the book values to estimated residual
Expenditure on internally generated goodwill and brands is
values over the expected useful lives of the assets. The
recognised in the income statement as an expense when
method and rates used are determined by conditions in the
incurred.
industry. The estimated useful lives and residual values are
reviewed annually. Depreciation rates vary between 3%
Subsequent expenditure
and 25% per annum as disclosed in note 9. Land is not
Subsequent expenditure on capitalised intangible assets is
depreciated. Lease improvements on capitalised leased
capitalised only when it increases the future economic
premises are written off over their expected useful lives on
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ACCOUNTING POLICIES
continued
the same basis as owned assets or, where shorter, over the
be measured reliably. Costs of the day to day servicing
term of the lease.
of property, plant and equipment are recognised in the
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.
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,
Surplus or loss arising on disposal of assets is determined
the recoverable amount of the asset is estimated in order
as the difference between the sale proceeds and carrying
to determine the extent of the impairment loss, if any.
value of the asset and is recognised in net profit or loss for
Where it is not possible to estimate the recoverable amount
the period.
of an individual asset, the Group estimates the recoverable
amount of the cash generating unit to which the asset
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
rate 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.
belongs.
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.
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.
Other leases, which merely confer the right to the use of an
asset, are treated as operating leases, with lease payments
Operating leases
charged against operating profit on a straight line basis
Payments and receipts under operating leases are
over the period of the lease.
recognised in the income statement on a straight line basis
over the term of the lease. Lease incentives received or
Subsequent costs
granted are recognised in the income statement as an
The Group recognises in the carrying value of an item of
integral part of the total lease expense or revenue.
property, plant and equipment the cost of replacing part of
such an item when the cost is incurred, if it is probable that
Inventories
additional future economic benefits embodied within the
Inventories comprise merchandise for resale and are stated
item will flow to the Group and the cost of such item can
at the lower of cost and net realisable value. Cost is
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
determined on the weighted average cost basis. Net
unconditionally entitled to equity instruments. The fair
realisable value is the estimated selling price in the
value of the instruments granted is measured using the
ordinary course of business, less the estimated costs
“binomial” option pricing model, taking into account the
of selling and distribution expenses.
terms and conditions upon which the instruments are
Where necessary, the carrying value of inventory is
adjusted for obsolete, slow moving and defective
inventories.
Share capital
Treasury shares
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 share capital in the consolidated balance sheet
and the premium attached to them is netted off against the
share premium account.
Dividends received on treasury shares are eliminated on
consolidation. Treasury shares are taken into account in
the calculation of earnings per share.
Dividends
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.
granted. The amount recognised as an expense is adjusted
to reflect the actual number of share options that vest,
except where forfeiture is only due to share prices not
achieving the threshold for vesting.
Taxation
Current taxation
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.
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.
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,
Repurchase of issued shares
deferred tax liabilities are recognised for all taxable
When issued shares are repurchased, the consideration
temporary differences and deferred tax assets are
paid is accounted for as a set off against equity and
recognised to the extent that is it probable that taxable
reserves in the Group’s consolidated balance sheet.
profit will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are
Share-based payment transactions
Equity settled
The fair value of share options 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
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.
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ACCOUNTING POLICIES
continued
Deferred tax liabilities are recognised for taxable
Exchange differences are recognised in profit or loss in
temporary differences arising on investments in
the period in which they arise except for:
subsidiaries and associates and interests in joint ventures,
• exchange differences which relate to assets under
except where the Group is able to control the reversal of
construction for future productive use, which are
temporary differences and it is probable that the temporary
included in the cost of those assets where they are
difference will not reverse in the foreseeable future.
regarded as an adjustment to interest costs on foreign
Deferred tax is calculated at the tax rates that are
currency borrowings;
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
• exchange differences on transactions entered into in
order to hedge certain foreign currency risks; and
• exchange differences on monetary items receivable
items credited or charged directly to equity, in which case
from or payable to a foreign operation, and which are
the deferred taxation is also dealt with in equity.
recognised in the foreign currency translation reserve
Secondary taxation on companies
Secondary taxation on companies (STC) arising from the
and recognised in profit or loss on disposal of the net
investment.
distribution of dividends is recognised in the income
For the purpose of presenting consolidated financial
statement in the year that dividends are paid in accordance
statements, the assets and liabilities of the Group’s foreign
with the Group dividend cycle.
operations are expressed in CUs using exchange rates
prevailing at the balance sheet date. Income and expense
Foreign currency
items are translated at the average exchange rates for the
The individual financial statements of each Group entity
period, unless exchange rates fluctuated significantly
are presented in the currency of the primary economic
during that period, in which case the exchange rates at the
environment in which the entity operates (its functional
dates of the transactions are used. Exchange differences
currency). For the purpose of the consolidated financial
arising, if any, are classified as equity and transferred to
statements, the results and financial position of each
the Group’s translation reserve. Such exchange differences
entity are expressed in currency units (CUs), which is the
are recognised in profit or loss in the period in which the
functional currency of the Company, and the presentation
foreign operation is disposed of. Goodwill and fair value
currency for the consolidated financial statements.
adjustments arising on the acquisition of a foreign
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
operation are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
Revenue recognition
transactions. At each balance sheet date, monetary items
Instalment sales
denominated in foreign currencies are retranslated at the
Consideration from transactions under instalment sales are
rates prevailing at the balance sheet date. Non-monetary
included in revenue when goods are delivered and title has
items carried at fair value that are denominated in foreign
passed. Finance charges, calculated on the effective
currencies are retranslated at the rates prevailing at the
interest rate method, are accounted for over the period of
date when the fair value was determined. Non-monetary
the agreements as instalments become due. This method
items that are measured in terms of historical cost in a
approximates the net present value of anticipated future
foreign currency are not retranslated.
cash flows.
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Sale of goods
All other borrowing costs are expensed in the period in
Revenue from the sale of goods is recognised when
which they are incurred.
substantially all the risks and rewards of ownership have
been transferred to the buyer and the enterprise does not
Employee benefits
retain continuing managerial control of the goods to a
Short term employee benefits
degree usually associated with ownership, when the
The cost of all short term employee benefits are
amount of revenue and costs incurred or to be incurred in
recognised during the period in which the employee
respect of the sale transactions can be measured reliably
renders the related service. The provisions for employee
and when the collectability of the consideration in respect
entitlements to salaries, performance bonuses and annual
of the sale is reasonably assured.
leave represent the amounts which the Group has a present
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.
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
obligation to pay as a result of the employees’ services
provided. The provisions have been calculated at
undiscounted amounts based on current salary levels.
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.
of the cost of those assets. The capitalisation rate applied
The amount recognised in the balance sheet represents the
is the weighted average of the net borrowing costs
present value of defined benefit obligations as adjusted for
applicable to the net borrowings of the Group.
unrecognised actuarial gains and losses, past service
Capitalisation of such borrowing costs ceases when the
costs, and as reduced by the fair value of plan assets.
assets are substantially ready for their intended use or
Any asset resulting from the calculation is limited to the
sale. Investment income earned on temporary investment
unrecognised actuarial losses and past service costs, plus
of specific borrowings pending their expenditure on
the present value of available refunds and reductions in
qualifying assets is deducted from borrowing costs
future contributions to the plan.
capitalised.
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ACCOUNTING POLICIES
continued
Provisions
are recognised immediately through the income statement.
Provisions are recognised when the Group has a present,
Financial instruments are recognised on trade date.
constructive or legal obligation as a result of a past event
and it is probable that it will result in an outflow of
Subsequent measurement
economic benefits that can be reasonably estimated.
Subsequent to initial measurement, financial instruments
are measured either at fair value or amortised cost,
An onerous contract is a contract under which the
depending on their classification.
unavoidable costs of meeting the obligation exceeds the
economic benefit expected to be received under it. When
Equity instruments
a contract becomes onerous, the present obligation under
An equity instrument is any contract that evidences a
a contract is recognised and measured as a provision.
residual interest in the assets of an entity after deducting
A restructuring provision is recognised when the Group
all of its liabilities. Equity instruments issued by the Group
has developed a detailed formal plan for the restructuring
are recorded at the proceeds received, net of direct issue
and has raised a valid expectation in those affected that
costs.
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
Financial assets and liabilities at fair value through
profit or loss (FVTPL)
Financial assets and liabilities are classified as FVTPL
where the financial instrument is either held for trading or
designated at FVTPL.
associated with the ongoing activities of the entity.
A financial asset or liability is held for trading if:
If the effect is material, provisions are determined by
• it has been acquired or incurred principally for the
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.
purpose of selling or repurchasing in the near future; or
• it is part of an identified portfolio that the Group
manages together and has a recent actual pattern
of short term profit taking; or
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and
• it is a derivative that is not designated and effective as
a hedging instrument.
deposits on call with banks and investment banks and other
short term, highly liquid investments that are readily
The Group has designated foreign exchange contracts as
convertible to cash and are subject to an insignificant risk
financial instruments at FVTPL.
of changes in value. Bank overdrafts are only included where
Financial assets at FVTPL are stated at fair value, with any
the Group has a legal right of set off due to cash
resultant gain or loss recognised in profit or loss. The net
management.
gain or loss recognised in profit or loss incorporates
Financial instruments
interest earned on the financial asset. Fair value is
determined in the manner described in note 25.
Initial recognition and measurement
Financial instruments include all financial assets and
Available-for-sale (AFS) financial assets
liabilities held for liquidity, investment or trading. Financial
Unlisted shares held by the Group that are traded in an
instruments are initially recognised at fair value plus
active market are classified as being AFS and are stated at
transaction costs, except those carried at fair value
fair value. Fair value is determined in the manner described
through profit and loss (FVTPL), where transaction costs
in note 25.
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For AFS investments, gains and losses arising from
or economic conditions that correlate with defaults on
changes in fair value are recognised directly in equity, in
receivables.
the investments revaluation reserve, with the exception of
impairment losses, interest calculated using the effective
interest rate method and foreign exchange gains and
losses on monetary assets, which are recognised directly
in profit or loss. Where the investment is disposed of or
determined to be impaired, the cumulative gain or loss
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.
previously recognised in the investments revaluation
The carrying amount of the financial asset is reduced by
reserve is included in profit or loss for the period.
the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount
Loans and receivables
is reduced through the use of an allowance account. When
Trade and other receivables that have fixed or determinable
a trade receivable is considered uncollectable, it is written
payments that are not quoted in an active market, other
off against the carrying value of the trade receivable.
than those classified by the Group as FVTPL or AFS, are
Subsequent recoveries of amounts previously written off,
classified as loans and receivables. Loans and receivables
as well as changes in the carrying amount of the allowance
are measured at initial recognition at fair value and are
account, are recognised in the profit and loss for the year.
subsequently measured at amortised cost using the
effective interest rate 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.
Impairment of financial assets
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
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.
evidence that, as a result of one or more events that
In respect of AFS equity securities, impairment losses
occurred after the initial recognition of the financial asset,
previously recognised through profit or loss are not
the estimated future cash flows of the investment have
reversed through profit or loss. Any increase in fair value
been impacted.
subsequent to an impairment loss is recognised directly
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.
in equity.
Derecognition
The Group derecognises a financial asset only when the
For certain categories of financial assets, such as trade
contractual rights to the cash flows from the asset expire,
receivables, assets that are assessed not to be impaired
or it transfers the financial asset and substantially all the
individually are subsequently assessed for impairment on
risks and rewards of ownership of the asset to another
a collective basis. Objective evidence of impairment for
entity. If the Group neither transfers nor retains
a portfolio of receivables includes the level of arrears of
substantially all the risks and rewards of ownership and
a customer, part payment of instalments or missed
continues to control the transferred asset, the Group
instalments, as well as observable changes in national
recognises its retained interest in the asset and an
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ACCOUNTING POLICIES
continued
associated liability for amounts it may have to pay. If the
Derivatives embedded in other financial instruments or
Group retains substantially all the risks and rewards of
other host contracts are treated as separate derivatives
ownership of a transferred financial asset, the Group
when their risks and characteristics are not closely related
continues to recognise the financial asset and also
to those of the host contracts and the host contracts are
recognises a collateralised borrowing for the proceeds
not measured at fair value with changes in fair value
received.
recognised in profit or loss.
The Group derecognises financial liabilities when, and only
when, the Group’s obligations are discharged, cancelled or
they expire.
Effective interest rate method
The effective interest rate 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.
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
Income is recognised on an effective interest basis for debt
analyses regarding these assumptions are provided in
instruments other than those financial assets designated
note 25.
as at FVTPL.
Offsetting financial assets and liabilities
Derivative financial instruments
Financial assets and liabilities are set off where the Group
The Group uses derivative financial instruments to manage
has a legal and enforceable right to set off and there is an
its risk associated with foreign currency and interest rate
intention to settle the liability and realise the asset
fluctuations relating to certain firm commitments and
simultaneously, or to settle on a net basis.
forecasted transactions, including foreign exchange
at fair value at the date a derivative contract is entered
Non-current assets held for sale and
discontinued operations
into and are subsequently remeasured to their fair value at
Non-current assets are classified as held for sale if their
each balance sheet date. The resulting gain or loss is
carrying amount will be recoverable principally through a
recognised in profit or loss immediately.
sale transaction, not through continuing use. The condition
forward contracts. Such derivatives are initially recorded
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.
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J D G R O U P AN N UAL R E P O R T 2 0 0 8
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
the consolidated Group. A segment is a distinguishable
amount and fair values less cost to sell.
component of the Group that is engaged in providing
A discontinued operation is a significant distinguishable
component of the Group’s business that is abandoned or
products or services which are subject to risks and rewards
that are different from those of other segments.
terminated pursuant to a single formal plan, and which
The primary basis for reporting segment information are
represents a separate major line of business or
the four autonomous business divisions. The secondary
geographical area of operation. Classification as a
basis is by significant geographical region, which is based
discontinued operation occurs upon disposal or when the
on the location of assets. These bases are consistent with
operation meets the criteria to be classified as held for
internal reporting for management.
sale. A disposal group that is to be abandoned may also
qualify as a discontinued operation, but not as assets held
Contingencies and commitments
for sale.
Transactions are classified as contingencies where the
The profit or loss on sale or abandonment of a discontinued
Group’s obligation depends on uncertain future events.
operation is determined from the formalised
Items are classified as commitments where the Group
discontinuance date. Discontinued operations are
commits itself to future transactions or if the items will
separately recognised in the financial statements once
result in the acquisition of assets.
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.
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
Segment reporting
associated companies is included in these financial
Segment accounting policies are consistent with those
statements. Details of loans to and from subsidiaries and
adopted for the preparation of the financial statements of
associated companies are also provided.
103
J D G R O U P AN N UAL R E P O R T 2 0 0 8
GROUP INCOME STATEMENT
for the year ended 31 August
Restated
2008
2007
Notes
Rm
Rm
2
12 610
12 914
Cost of sales
6 627
6 517
Operating expenses
4 288
3 981
1 003
937
Revenue
Administration and other expenses
170
155
Employees
1 787
1 666
Marketing
407
416
Occupancy
632
553
Depreciation and amortisation
Share-based payment
Transport and travel
Operating profit before debtors costs
3
Operating profit
Finance costs
Share of losses of associates
233
(11)
1 695
2 416
898
825
797
1 591
30
75
4
104
36
4
(188)
(187)
13
(14)
(4)
Investment income
Finance income
32
261
(4)
Surplus on disposal of property, plant and equipment
Debtors costs
32
5
729
1 511
6
215
398
Profit attributable to shareholders
514
1 113
Headline earnings
511
1 105
7
302,8
626,2
– diluted
7
300,1
614,3
Cash equivalent dividends per share (cents)
8
152,0
303,0
Profit before taxation
Taxation
Earnings per share (cents)
– basic
– 2007 basic as previously reported
104
J D G R O U P AN N UAL R E P O R T 2 0 0 8
605,7
GROUP BALANCE SHEET
at 31 August
Restated
Notes
2008
2007
Rm
Rm
1 397
1 403
Assets
Non-current assets
9
653
578
Goodwill
10
347
347
Intangible assets
11
256
294
Investments and loans
12
93
111
Interest in associate company
13.1
28
23
Interest in joint venture
13.2
(15)
3
35
47
7 276
7 488
Property, plant and equipment
Deferred taxation
14
Current assets
Inventories
15
1 448
1 348
Trade and other receivables
16
4 503
5 041
Financial assets
25
3
1
187
123
1 135
975
8 673
8 891
1 779
2 118
Taxation
Bank balances and cash
Total assets
Equity and liabilities
Equity and reserves
Share capital and premium
17
Treasury shares
18
(435)
Non-distributable and other reserves
19
245
226
3 157
2 859
67
100
4 813
5 048
700
1 223
739
Retained earnings
Shareholders for dividend
Shareholders’ equity
Non-current liabilities
(255)
Interest bearing long term liabilities
20
293
Non-interest bearing long term liability
21
83
79
Deferred taxation
14
324
405
3 160
2 620
2 206
Current liabilities
Trade and other payables
21
2 064
Provisions
22
4
12
Interest bearing liabilities
20
1 000
312
92
90
8 673
8 891
Taxation
Total equity and liabilities
105
J D G R O U P AN N UAL R E P O R T 2 0 0 8
GROUP CASH FLOW STATEMENT
for the year ended 31 August
Notes
Cash flows from operating activities
2008
Restated
2007
Rm
Rm
629
(21)
Cash generated by trading
a
1 008
Decrease/(increase) in working capital
b
301
1 309
Cash generated by operations
Investment income
1 772
(220)
1 552
30
75
Finance costs – net
c
(86)
(146)
Taxation paid
d
(340)
(740)
913
741
e
(284)
(762)
(188)
(183)
Cash available from operating activities
Dividends paid
Cash flows from investing activities
Increase in investment in joint venture
(7)
—
Investment and loans receipts
18
10
Proceeds on disposal of property, plant and equipment
11
17
Additions to property, plant and equipment
(210)
(210)
Cash flows from financing activities
(281)
(438)
4
Proceeds on disposal of treasury shares by share incentive trust
46
Shares purchased by the share incentive trust
(188)
Shares bought back and cancelled
(339)
—
550
—
Long term borrowings repaid
(200)
(170)
Finance lease liabilities repaid
(108)
(92)
Long term borrowings raised
(222)
Net increase/(decrease) in cash and cash equivalents
160
Cash and cash equivalents at beginning of year
975
1 617
1 135
975
Cash and cash equivalents at end of year
106
J D G R O U P AN N UAL R E P O R T 2 0 0 8
f
(642)
NOTES TO THE GROUP CASH FLOW STATEMENT
for the year ended 31 August
a
2008
Restated
2007
Rm
Rm
797
1 591
132
117
38
38
Cash generated by trading
Operating profit
Non-cash items
Depreciation
Amortisation – intangible assets
9
3
Share-based payment
32
32
Surplus on disposal of property, plant and equipment
(4)
(11)
4
2
1 008
1 772
Operating lease costs adjustments
Revaluation of financial assets/liabilities
b
Decrease/(increase) in working capital
Increase in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Unrealised foreign currency translation
c
Interest received (note 4)
Fair value adjustments of financial assets and liabilities
66
11
(3)
301
(220)
(188)
(187)
104
36
(2)
5
(86)
(146)
33
(316)
(278)
(391)
(95)
(33)
(340)
(740)
Amount payable at beginning of year
(100)
(322)
Declared during the year
(251)
(540)
67
100
(284)
(762)
Per income statement (note 6)
Amount receivable at end of year
Dividends paid
Amount payable at end of year
f
(1)
(148)
Taxation paid
Amount receivable/(payable) at beginning of year
e
(282)
538
Finance costs – net
Interest paid (note 4)
d
(100)
Cash and cash equivalents
Bank balances and cash
1 135
975
107
J D G R O U P AN N UAL R E P O R T 2 0 0 8
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 August
Balance at 31 August 2006
– restated
– as previously reported
– restatement for revised basis of
accounting for insurance and
initiation fees
Balance at 31 August 2007
– restated
– as previously reported
– restatement for revised basis of
accounting for insurance and
initiation fees
108
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Total
Rm
Share
premium
Rm
9
2 048
(18)
193
2 286
322
4 840
9
2 048
(18)
193
3 072
322
5 626
(786)
(786)
1 113
(546)
6
546
(6)
(324)
1 113
—
—
(324)
2
(443)
2
(443)
3
61
(61)
3
—
(222)
(222)
46
46
32
1
32
1
9
2 109
(255)
226
2 859
100
5 048
9
2 109
(255)
226
3 609
100
5 798
(750)
Profit attributable to shareholders
Distribution to shareholders
Distribution to share incentive trust
Paid to shareholders – 10 December 2007
Paid to share incentive trust –
10 December 2007
Paid to shareholders – 30 June 2008
Paid to share incentive trust –
30 June 2008
Shares purchased by JD Group Limited
and cancelled
Purchase of treasury shares by share
incentive trust
Proceeds on disposal of treasury shares
by share incentive trust
Loss on disposal of treasury shares
included in attributable profit
Share-based payment
Transfer to retained earnings
Translation of foreign entities
Balance at 31 August 2008
Retained
earnings
Rm
Shareholders
for
dividend
Rm
Share
capital
Rm
Profit attributable to shareholders
Distribution to shareholders
Distribution to share incentive trust
Paid to shareholders – 11 December 2006
Paid to share incentive trust –
11 December 2006
Paid to shareholders – 11 June 2007
Paid to share incentive trust –
11 June 2007
Shares issued to share incentive trust
Purchase of treasury shares by share
incentive trust
Proceeds on disposal of treasury shares
by share incentive trust
Share-based payment
Translation of foreign entities
Treasury
shares
Rm
Nondistributable
and other
reserves
Rm
514
(264)
13
(750)
264
(13)
(102)
514
—
—
(102)
4
(194)
4
(194)
8
(339)
(339)
(188)
(188)
4
4
4
32
(35)
22
9
1 770
8
(435)
245
4
32
—
22
35
3 157
67
4 813
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
1.
Restatement of prior year figures
The Group issues, as an intermediary, insurance contracts underwritten by a third party insurance company.
Industry practice was that single insurance premiums payable to insurance and credit retail industries during the year
were accounted for using one of two generally accepted methods. The insurance income was either recognised
immediately upon inception of the contract or over the period for which insurance cover is provided. The Group applied
the former. Consideration of the continued application of this policy, both as it relates to policies sold before and after
the implementation of the National Credit Act, has led the Group to conclude that despite the diversity in practice, it is
now better reflected in being accounted for on a time proportionate basis.
Furthermore, the National Credit Act also requires our industry to compute and collect insurance income from our
customers on a monthly basis and not to write these insurance premiums into the credit agreements for the term of the
credit agreements.
The recognition of initiation fees, which as an industry practice has been recognised at inception, will now also be
recognised over the term of the credit agreements.
These changes have resulted in changes to the provisions that the Group is required to carry. The existing rebate
provision is no longer required. In addition, the gross value of a debtors account used to calculate the impairment
provision now excludes these income streams, unless such income is in arrears.
As a result of this change in the basis of accounting, comparative figures have been restated to account for insurance
income and initiation fees over the term of the credit agreements, including adjustments to the related provisions
previously carried.
Impact of restatements on reported balance sheets
Net instalment sale receivables
Balance as previously reported
Restatement effect – 1 September 2006
Restatement effect
Balance as currently reported
Other receivables
Balance as previously reported
Restatement effect – 1 September 2006
Restatement effect
Balance as currently reported
Trade and other payables
Balance as previously reported
Restatement effect – 1 September 2006
Restatement effect
Balance as currently reported
Retained income
Balance as previously reported
Restatement effect – 1 September 2006
Restatement effect – income statement
Balance as currently reported
Deferred taxation liability
Balance as previously reported
Restatement effect – 1 September 2006
Restatement effect
Balance as currently reported
31 August
31 August
2007
2006
Rm
Rm
5 620
(1 134)
52
5 711
(1 134)
—
4 538
4 577
375
130
(2)
335
130
—
503
465
2 115
92
(1)
2 073
92
—
2 206
2 165
3 609
(786)
36
3 072
(786)
—
2 859
2 286
700
(310)
15
721
(310)
—
405
411
109
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
31 August
2007
1.
Rm
Restatement of prior year figures (continued)
Impact of restatements on reported income statement
Revenue
Balance as previously reported
12 907
Restatement effect
7
Balance as currently reported
12 914
Debtors costs
Balance as previously reported
869
Restatement effect
(44)
Balance as currently reported
825
Taxation
Balance as previously reported
383
Restatement effect
15
Balance as currently reported
398
Profit attributable to shareholders
Balance as previously reported
1 077
Restatement effect
36
Balance as currently reported
1 113
The impact of restatements on the current year’s profit attributable to
shareholders is a reduction of R59 million.
Restated
Previously
reported
Cents
Cents
– basic
621,7
601,3
– diluted
609,8
589,8
– basic
626,2
605,7
– diluted
614,3
594,2
Impact of restatements on reported earnings per share
Headline earnings per share
Earnings per share
Impact of restatements on reported cash flow statement
The restatements had no cash flow effect, but there was a reclassification
between cash generated by trading and working capital of R51 million.
110
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Restated
2.
2008
2007
Rm
Rm
Sale of merchandise
9 275
9 325
Finance charges earned
1 483
1 736
Financial services
1 313
1 374
539
479
12 610
12 914
Revenue
Other services
3.
Debtors costs
Increase in impairment provision
Bad debts written off
4.
36
184
862
641
898
825
Finance costs – net
Finance costs
Interest paid – finance leases
Interest paid – other
Fair value losses on financial instruments
53
69
135
113
—
5
188
187
(102)
(36)
Finance income
Interest received
Fair value gains on financial instruments
Finance costs – net
5.
(2)
—
(104)
(36)
84
151
8
7
2
1
1
1
11
9
132
117
Profit before taxation
is stated after taking account of the following items:
Auditors’ remuneration
Audit fees – current
– prior
Other services
Depreciation of property, plant and equipment
Owned
Directors’ remuneration (see disclosure on page 84)
Services as directors
Other services (including the management fees below)
Foreign exchange profits
1
1
20
20
21
21
(9)
(6)
111
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
Restated
5.
2008
2007
Rm
Rm
10
27
505
44
441
33
549
474
75
5
69
5
80
74
Supplier relationship amortisation
10
10
Surplus on disposal of property, plant and equipment
Owned
(4)
(11)
Trademark amortisation
28
28
107
82
Profit before taxation (continued)
Management fees
Sustein Management (Pty) Ltd (included in directors’ remuneration – other
services)
Operating leases
Business premises
Office equipment
Retirement benefit costs
Defined contribution funds
Defined benefit funds
Write down of inventories to net realisable value
6.
Taxation
South African taxation
Normal – current
– prior
Deferred – current
– prior
– rate adjustment
Secondary taxation on companies
194,0
21,1
(31,7)
(31,0)
(7,2)
27,5
315,1
3,7
4,6
(3,1)
—
71,8
172,7
392,1
15,1
20,2
6,2
0,4
3,3
—
2,3
—
41,9
5,6
Total taxation
214,6
397,7
Dealt with as follows:
Current taxation
Deferred taxation
277,9
(63,3)
393,9
3,8
214,6
397,7
Foreign taxation
Normal – current
– prior
Deferred – current
– prior
112
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Restated
6.
2008
2007
Rm
Rm
28,0
29,0
Taxation at standard rate
Adjusted for
Foreign tax rate differential
Expenditure disallowed
Exempt income
Prior years
Rate adjustment
Deferred tax assets not raised
Secondary taxation on companies
Withholding tax and tax on foreign income
204,1
438,1
(4,7)
35,3
(53,2)
10,7
(7,2)
(0,6)
27,5
2,7
(3,1)
18,8
(123,2)
0,6
—
(5,4)
71,8
0,1
Taxation charged to income
214,6
397,7
Effective rate of taxation (%)
29,5
26,2
259,4
246,3
291,9
255,2
13,1
36,7
3,7
8,2
Taxation (continued)
Reconciliation of tax charge
Domestic standard normal rate of taxation (%)
Estimated tax losses available for set off against future taxable income
Tax losses available
Deferred tax assets not raised
Deferred tax assets raised
Effective tax assets at country rate of tax (note 14)
Deferred tax assets relating to tax losses of R246,3 million (2007: R255,2 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.
7.
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
514
(4)
1
1 113
(11)
3
Headline earnings
511
1 105
169 807
177 861
Cents
Cents
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
302,8
(2,5)
0,7
626,1
(6,2)
1,8
Headline earnings per share
301,0
621,7
Diluted
Dilutive effect of bonus element in share options (’000)
1 514
3 458
171 321
181 319
Diluted weighted average number of shares in issue during the year of (’000)
113
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
Restated
7.
2008
2007
Cents
Cents
Earnings per share and headline earnings per share (continued)
Diluted earnings per share
Surplus on disposal of property, plant and equipment
Taxation effect thereon
300,1
(2,5)
0,7
614,2
(6,2)
1,8
Diluted headline earnings per share
298,3
609,8
Rm
Rm
(102)
102
(324)
325
194
443
70
102
264
546
The above are calculated based on R000s amounts.
8.
Distribution to shareholders
Final dividend prior year
– declared 57 cents on 180 000 000 shares (2007: 182 cents on 178 000 000 shares)
– paid 57 cents on 180 000 000 shares (2007: 182 cents on 178 500 000 shares)
Interim dividend
– declared and paid 111 cents on 174 980 000 shares (2007: 246 cents on
180 000 000 shares)
Final dividend
– proposed 41 cents on 170 500 000 shares (2007: 57 cents on 180 000 000 shares)
Total distribution to shareholders
Leasehold
improveProperty
ments
Rm
Rm
9.
Property, plant and equipment
2008
At beginning of year
Cost
Accumulated depreciation
Net book value
Movement for the year
Additions
Depreciation
Disposals
– cost
– accumulated depreciation
Foreign currency translation
– cost
– accumulated depreciation
Office
Vehicles
equipment,
and
furniture
forklift Computer Computer
and
trucks hardware
software
fittings
Rm
Rm
Rm
Rm
Total
Rm
212
(5)
280
(129)
268
(96)
20
(13)
42
(36)
101
(66)
923
(345)
207
151
172
7
6
35
578
18
—
76
(66)
44
(46)
35
(4)
4
(3)
33
(13)
210
(132)
—
—
(38)
36
(38)
34
(2)
2
(1)
1
(4)
3
(83)
76
—
—
5
(2)
1
(1)
2
(2)
2
(1)
—
—
10
(6)
At end of year
Cost
Accumulated depreciation
230
(5)
323
(161)
275
(109)
55
(17)
47
(39)
130
(76)
1 060
(407)
Total net book value
225
162
166
38
8
54
653
3 – 5,5
20
12,5 – 20
25
25
10 – 25
Depreciation rates (%)
Directors’ valuation of property
114
J D G R O U P AN N UAL R E P O R T 2 0 0 8
393
Leasehold
improveProperty
ments
9.
Vehicles
and
forklift
trucks
Computer
hardware
Office
equipment,
furniture
Computer
and
software
fittings
Total
Rm
Rm
Rm
Rm
Rm
Rm
Rm
199
(4)
264
(147)
222
(84)
21
(16)
39
(33)
95
(65)
840
(349)
195
117
138
5
6
30
491
15
(2)
90
(56)
80
(41)
6
(4)
4
(4)
15
(10)
210
(117)
(2)
1
(74)
74
(34)
29
(7)
7
(1)
1
(9)
9
(127)
121
At end of year
Cost
Accumulated depreciation
212
(5)
280
(129)
268
(96)
20
(13)
42
(36)
101
(66)
923
(345)
Total net book value
207
151
172
7
6
35
578
3 – 5,5
20
12,5 – 20
25
25
10 – 25
Property, plant and equipment
(continued)
2007
At beginning of year
Cost
Accumulated depreciation
Net book value
Movement for the year
Additions
Depreciation
Disposals
– cost
– accumulated depreciation
Depreciation rates (%)
Directors’ valuation of property
359
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 31 on page 136 for applicable judgements and estimates.
10.
Goodwill
Cost
Arising on the acquisition of Connection Group
2008
2007
Rm
Rm
347
347
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 31 for judgements and estimates applicable for the
assessment of goodwill.
115
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
11.
2008
2007
Rm
Rm
Arising on the acquisition of Profurn
193
193
Arising on the acquisition of Connection Group
220
220
413
413
119
81
38
38
157
119
256
294
92
110
Intangible assets
Cost
Accumulated amortisation
Opening balance
Amortisation
Net book value
The intangible assets included above have finite useful lives over which these
assets are amortised.
The intangible assets arising on the acquisition of Profurn consist of acquired
trademarks that are amortised over a period of 10 years.
The intangible assets arising on the acquisition of Connection Group comprise
a trademark, amortised over 20 years and capitalised supplier relationships,
amortised over five years.
Refer to note 31 for an assessment of impairment of intangible assets.
12.
Investments and loans
12.1
Unlisted
Shares at cost, which approximates fair value
Endowment policy, classified as available for sale
Investment in non-consolidated subsidiaries
Shares at cost
Loans to non-consolidated subsidiaries#
Impairment*
Directors’ valuation of unlisted investments
1
1
—
—
1
1
30
162
31
163
(31)
(163)
93
111
93
111
1
1
Southern Life endowment policy:
The endowment policy asset comprises Erf 322 Rivonia Extension 20 Gauteng
and is stated at fair value.
* The impairment has been calculated based on the directors’ estimation of cash to be received on the respective loans.
#
Refer to subsidiaries on page 146 and note 27 on page 133 for further details.
116
J D G R O U P AN N UAL R E P O R T 2 0 0 8
12.
12.2
2008
2007
Rm
Rm
Investments and loans (continued)
Abridged aggregated balance sheet of non-consolidated subsidiaries
Equity
1
1
Distributable reserves
(46)
(180)
Opening balance
(180)
(174)
134
(6)
15
17
Opening balance
17
13
Movement
(2)
4
Movement
Non-distributable reserves
Shareholders’ equity
(30)
(162)
Loans from consolidated subsidiaries less amounts written off
(30)
(162)
Total assets
(30)
(162)
(30)
(162)
30
162
—
—
15
15
– Prior year equity accounted profit
8
4
– Current year equity accounted profit
7
6
– Current year taxation charge
(2)
(2)
Carrying value
28
23
Unlisted
%
%
27,5
27,5
Rm
Rm
66
23
Reconciliation of estimated recoverable portion of loans
Net asset value
Loans from consolidated subsidiaries after amounts written off
13.
Interest in associate and joint venture companies
13.1
Interest in associate company
Shares at cost
Attributable share of post-acquisition retained earnings
Blake & Associates – effective interest
Directors’ valuation of unlisted interest
Subsequent to the year end, the Group increased its interest in
Blake & Associates to 55% (note 29).
Nature of business
Provides comprehensive contact centre capabilities to clients.
117
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
2008
2007
Rm
Rm
Non-current assets
48
35
Current assets
70
49
118
84
Capital and reserves
50
34
Non-current liabilities
24
15
Current liabilities
44
35
118
84
13.
Interest in associate and joint venture companies (continued)
13.1
Interest in associate company (continued)
Aggregate financial information in respect of associate company
The information presented below is extracted from the consolidated annual
financial statements of Blake & Associates Holdings (Pty) Ltd for the year ended
31 March 2008:
Balance sheet
Income statement
13.2
Profit before tax
28
26
Tax
(7)
(8)
Profit after tax
21
18
15
8
Interest in joint venture
Shares at cost
Attributable share of post-acquisition retained earnings
– Prior year equity accounted (loss)/profit
– Current year equity accounted loss
– Current year taxation (charge)/credit
Carrying value
Unlisted
Maravedi Group – effective interest
Directors’ valuation of unlisted interest
Subsequent to the year end, the Group increased its interest in Maravedi Group
to 90,5% (note 29).
Nature of business
In May 2005, Maravedi Group was formed with the participation of Absa Bank
and Thebe Investment Corporation. Maravedi Financial Solutions, a 100%
subsidiary of Maravedi Group, offers a suite of financial products and has a
presence in 745 selected JD Group business units.
118
J D G R O U P AN N UAL R E P O R T 2 0 0 8
(5)
2
(21)
(10)
(4)
3
(15)
3
%
%
42,7
42,7
Rm
Rm
(15)
3
Restated
13.
13.2
2008
2007
Rm
Rm
31
334
22
85
365
107
(68)
38
395
(12)
17
102
365
107
Income statement
Loss before tax
Tax (charge)/credit
(47)
(9)
(22)
6
Loss after tax
(56)
(16)
Deferred taxation
Amount provided at beginning of year
Deferred tax on equity accounted losses
Charged to income statement (note 6)
358
(6)
(63)
354
—
4
289
358
197
(98)
70
(2)
7
119
(4)
245
(88)
75
(2)
7
129
(8)
289
358
(35)
324
(47)
405
289
358
1 487
(39)
1 359
(11)
1 448
1 348
Interest in associate and joint venture companies (continued)
Interest in joint venture (continued)
Aggregate financial information in respect of joint venture
The information presented below is extracted from the consolidated annual
financial statements of Maravedi Group for the year ended 31 August 2008:
Balance sheet
Non-current assets
Current assets
Capital and reserves
Non-current liabilities
Current liabilities
14.
The deferred taxation provision comprises the following temporary differences:
Instalment sale receivables’ allowances
Provisions disallowed
Trademarks
Assets unrealised
Payments in advance
Other
Tax losses (note 6)
Deferred taxation is disclosed as:
Asset
Liability
15.
Inventories
Merchandise net of obsolescence
Provision for write down to net realisable value
119
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
Restated
16.
2008
2007
Rm
Rm
Trade and other receivables
Instalment sale receivables(1)
Less: Impairment provision
4 636
(617)
5 119
(581)
Net instalment sale receivables
Other receivables
4 019
484
4 538
503
Total trade and other receivables
4 503
5 041
13,3
11,3
The maturity profile of instalment sale receivables is as follows:
– receivable within one year
– receivable thereafter
3 523
1 113
4 125
994
Total instalment sale receivables
4 636
5 119
Share capital and premium
Share capital
Authorised
250 000 000 (2007: 250 000 000) ordinary shares of 5 cents each
13
13
Issued
170 500 000 (2007: 180 000 000) ordinary shares of 5 cents each
9
9
2 109
2 048
Provision as a percentage of instalment sale receivables (%)
In accordance with industry norms, amounts due from instalment sale
receivables after one year are included in current assets. The credit terms of
instalment sale receivables range from 6 to 36 months.
The directors consider the carrying amount of trade and other receivables to
approximate their fair values.
(1) Classified as originated loans and receivables and carried at amortised cost.
Bank borrowings are secured by a negative pledge of instalment sale
receivables (note 20).
17.
Share premium
Balance at beginning of year
2007: 2 000 000 ordinary shares issued at premiums of 1,423 to 7,245 cents in
terms of options exercised by employees participating in The JD Group
Employee Share Incentive Scheme
Redeemed on the purchase and cancellation of 9 500 000 shares by the Company
—
(339)
61
—
Balance at end of year
1 770
2 109
Total share capital and premium
1 779
2 118
435
255
435
255
9 584 033 (2007: 7 708 133) 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 143).
15 990 967 (2007: 19 291 867) shares are under the control of the directors to be
granted in terms of The JD Group Share Incentive Scheme (page 142).
A maximum of 10 million of the remaining unissued shares are under the control
of the directors until the forthcoming annual general meeting. None of these
shares under the control of the directors can be issued to the JD Group
Employee Share Incentive Trust.
18.
Treasury shares
JD Group Limited ordinary shares of 5 cents each held by the employee share
incentive trust at cost:
The JD Group Employee Share Incentive Scheme
7 364 892 (2007: 4 505 992) ordinary shares
120
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Restated
19.
20.
Non-distributable and other reserves
Are made up as follows:
Foreign currency translation reserve
Revaluation of shares issued pursuant to the acquisition of Profurn
Share-based payment reserve
Interest bearing liabilities
Bank borrowings
Finance lease liabilities
Payable within one year reflected under current liabilities
2008
2007
Rm
Rm
(16)
139
122
(38)
139
125
245
226
1 050
243
700
351
1 293
(1 000)
1 051
(312)
293
739
850
200
200
500
—
1 050
700
These liabilities are carried at amortised cost. The directors consider the
carrying value of interest bearing liabilities to approximate their fair value.
Bank borrowings are secured by a negative pledge of instalment sale
receivables of R4 636 million (2007: R5 119 million).
The interest rates per annum are:
2008:
– on R200 million: variable rate linked to prime, currently at 12,0%;
– on R500 million: variable rate linked to JIBAR, fixed at 13,18% for the period to
24 October 2008;
– on R350 million: variable rate linked to JIBAR, fixed at 13,22% for the period to
29 September 2008.
The above are repayable in quarterly instalments of interest of approximately
R6 million, R16 million and R12 million respectively, with single capital
repayments on 1 October 2012, 25 April 2009 and 27 August 2009 respectively.
2007:
– on R200 million: variable rate linked to prime, currently at 10,0%;
– on R500 million: variable rate linked to JIBAR, fixed at 10,82% for the period to
24 October 2007.
The above are repayable in quarterly instalments of interest of approximately
R4 million and R13,5 million respectively, with a single capital repayment on
1 October 2007 and 25 April 2009 respectively.
Finance lease liabilities are secured by internally generated intellectual property.
Finance lease liabilities bear interest at effective rates of 13,81% to 15,64%
(2007: 13,81% to 15,64%) per annum and are repayable in bi-annual instalments
of capital and interest of approximately R81 million each (2007: R81 million).
Interest bearing liabilities are repayable in the following financial years:
Bank borrowings
2008
2009
2013
121
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
20.
2008
2007
Rm
Rm
150
31
36
26
112
147
31
36
25
243
351
The obligations payable under finance leases are analysed further as follows:
Minimum lease payments:
Amounts payable within one year
Amounts payable thereafter
161
109
161
270
Less: future finance charges
270
(27)
431
(80)
Present value of lease obligations
243
351
69
53
65
46
122
111
92
(83)
81
(79)
9
2
Interest bearing liabilities (continued)
Finance lease liabilities – present value of lease obligations
2008
2009
2010
2011
2012
In terms of the articles of association of the Company and all its subsidiaries,
borrowing powers are unlimited.
21.
21.1
21.2
22.
Trade and other payables
The directors consider the carrying amount of trade and other payables to
approximate their fair values. The credit period of trade payables ranges
between 30 and 120 days from the date of the invoice. No interest is charged
on the trade payables for the first 120 days from the date of the invoice. The
Group has financial risk management policies to ensure that all payables are
paid within the negotiated credit timeframe.
The following accruals are included in trade and other payables:
Leave pay
Annual bonus
The following amounts are included in trade and other payables:
Operating lease costs adjustment
Less: included in non-interest bearing long term liability
Provisions
Amounts raised on acquisition of Profurn:
Provisions comprise:
Retrenchment costs
Lease closure costs
Restructuring provision – staff costs
122
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Raised at
acquisition
Balance at
31 August
2007
Utilised during
31 August
2008
Balance at
31 August
2008
Rm
Rm
Rm
Rm
43
134
11
1
(11)
(1)
—
—
177
12
(12)
—
Balance at
31 August
2007
Raised during
31 August
2008
Balance at
31 August
2008
Rm
Rm
Rm
—
4
4
23.
2008
2007
Rm
Rm
Commitments
Capital expenditure
Authorised and contracted
177
12
Authorised but not yet contracted
144
141
321
153
This expenditure will be financed from internal sources and existing borrowing
facilities.
Operating lease commitments (predominantly premises)
516
415
1 071
976
1 587
1 391
Debt(i)
1 293
1 051
Cash and cash equivalents
1 135
975
158
76
Equity(ii)
4 813
5 048
Net debt to equity ratio
3,3%
1,5%
Due within one year
Due within two to five years
24.
Foreign assets
Total assets subject to exchange control of a foreign country amount to
R68 million (2007: R54 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 2007.
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 reviews the capital
structure on a semi-annual basis.
As part of this review, the committee considers the cost of capital and the risks
associated with each class of capital. The Group has set a maximum target
gearing ratio of 50% determined as the proportion of net debt to equity.
The gearing ratio at year end was as follows:
Net debt
(i) Debt is defined as long and short term borrowings, as detailed in note 20.
(ii) Equity includes all capital and reserves of the Group.
123
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
25.
Financial instruments (continued)
25.2 Categories of financial instruments
25.2.1 Financial assets
Designated
at fair value
through
profit/loss
Rm
2008
Assets
Non-current assets
—
Loans and
receivables
Rm
Held to
maturity
Rm
—
—
28
(15)
35
3
3
Total
5 575
63
1 397
653
347
256
93
28
(15)
35
1 635
7 276
1 448
1 448
4 503
3
187
1 135
187
63
3
5 575
63
93
2 939
8 673
—
—
—
111
1 292
1 403
578
347
294
23
3
47
578
347
294
111
23
3
47
1 471
7 488
1 348
1 348
5 041
1
123
975
111
1
1
Total
1
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Total
carrying
value
Rm
1 072
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
124
—
4 503
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Interest in associate company
Interest in joint venture
Deferred taxation
Current assets
1 304
93
Inventories
Trade and other receivables
Financial assets
Taxation
Bank balances and cash
2007
Assets
Non-current assets
93
653
347
256
Property, plant and equipment
Goodwill
Intangible assets
Investments and loans
Interest in associate company
Interest in joint venture
Deferred taxation
Current assets
NonAvailable
financial
for sale instruments
Rm
Rm
5 733
283
—
5 041
123
692
283
5 733
283
111
2 763
8 891
25.
25.2
Financial instruments (continued)
Categories of financial instruments (continued)
25.2.2 Financial liabilities
Designated
at fair value
through
profit/loss
Financial
liabilities at
Nonamortised
financial
cost instruments
Held for
trading
Rm
Rm
Rm
—
—
293
Total
carrying
value
Rm
Rm
4 813
4 813
407
700
2008
Liabilities
Shareholders’ equity
Non-current liabilities
Interest bearing long term
liabilities
293
Non-interest bearing long term
liability
83
83
324
324
2 747
413
3 160
1 747
317
2 064
Deferred taxation
Current liabilities
—
—
Trade and other payables
Provisions
4
Interest bearing liabilities
1 000
Taxation
Total
293
—
—
3 040
—
—
739
4
1 000
92
92
5 633
8 673
2007
Liabilities
Shareholders’ equity
Non-current liabilities
Interest bearing long term
liabilities
1 223
—
—
Trade and other payables
739
79
79
405
405
2 137
483
2 620
1 825
381
2 206
Deferred taxation
Provisions
12
Interest bearing liabilities
312
Taxation
Total
5 048
484
739
Non-interest bearing long term
liability
Current liabilities
5 048
—
—
2 876
12
312
90
90
6 015
8 891
125
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
25.
Financial instruments (continued)
25.3
Financial risk management objectives
Senior executives meet on a regular basis to analyse interest rate exposures and evaluate treasury management
strategies against revised economic forecasts. Compliance with Group policies and exposure limits are reviewed at
quarterly meetings of the board. The directors believe, to the best of their knowledge, that there are no undisclosed
financial risks.
These risks include market risk (currency risk and fair value interest rate risk), credit risk, liquidity risk and cash flow
interest rate risk. The Group does not enter into or trade financial instruments for speculative purposes.
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 carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting
date are as follows:
Assets
2008
Euro
GB pound
Metical
Pula
US dollar
Zloti
2007
Liabilities
2008
Rm
2007
Rm
Rm
—
—
4
4
3
3
—
—
Rm
65
51
—
—
215
158
47
26
23
21
3
2
229
110
154
92
535
343
208
124
Foreign currency sensitivity analysis
The Group is mainly exposed to fluctuations in Pula and Zloti. However, as most of the foreign currency denominated
assets and liabilities are located in the Group’s foreign operations, fluctuations in exchange rates between these
currencies and the South African Rand are reflected in the movement in the foreign currency translation reserve and
not in the Group’s income statement. Refer to the statement of changes in equity on page 108.
The closing rates used to translate assets and liabilities denominated in foreign currency at year end were as follows:
2008
2007
11,301
9,797
Metical
0,328
0,277
Pula
1,191
1,167
US dollar
8,041
7,179
Zloti
3,373
2,550
Euro
126
J D G R O U P AN N UAL R E P O R T 2 0 0 8
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
Rand
Market
Fair
currency
equivalent
value
value
000
R000
R000
R000
9 504
74 733
78 105
3 372
16 075
115 529
116 163
634
1 239
—
—
—
—
—
—
—
Covered forward commitments
2008
US dollars
2007
US dollars
Uncovered forward commitments
2008
US dollars
2007
US dollars
The fair values of the forward exchange contracts of R3,4 million (2007: R0,6 million) are included in financial assets.
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 2008, 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 repriced for new credit agreements as deemed appropriate by the directors but within
the rules prescribed by the NCA.
Interest earned on short term cash surpluses invested with major banking institutions is priced at variable market
related rates.
127
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
25.
Financial instruments (continued)
25.3
Financial risk management objectives (continued)
25.3.3 Interest rate risk management (continued)
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:
z profit for the year ended 31 August 2008 would decrease/increase by R3,1 million (2007: decrease/increase by
R0,7 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.
25.4
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group.
Potential concentrations of credit risk consist principally of short term cash investments and trade receivables.
As regards short term cash investments, the Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that
are rated the equivalent of investment grade and above. This information is supplied by independent rating agencies
where available and, if not available, the Group uses other publicly available financial information and its own trading
records to rate its customers. The Group’s exposure and the credit ratings of such counterparties are continuously
monitored and the aggregate value of transactions concluded is spread amongst its approved counterparties. Credit
exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee
annually. At present, the Group deposits short term cash surpluses equally between three major South African banks
of high credit standing.
Trade receivables comprise a large, widespread customer base. The Group manages and grants credit based on a
combination of empirically developed application behaviour and credit bureau scoring models. These models (and
accompanying business rules) are reviewed and updated on an ongoing basis and credit is therefore granted based
on the Group’s appetite for risk and within the ambit of relevant regulations. Redevelopment and the implementation
of second generation application and behaviour scoring models is expected to commence in the next financial year.
Such a redevelopment enables the Group to identify and segment potential high risk applications for credit even more
accurately, thereby reducing credit losses, whilst also improving sales volumes by identifying low risk credit
applications more precisely.
As at 31 August 2008, 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 as at the year
end reporting dates, reconciled to the carrying value of net instalment sale receivables as reported in note 16.
128
J D G R O U P AN N UAL R E P O R T 2 0 0 8
25.
25.4
Financial instruments (continued)
Credit risk management (continued)
Credit exposures by class
Class 1
Rm
Class 2
Rm
Class 3
Rm
Total
Rm
540
92
139
275
923
239
310
712
520
135
202
549
1 983
466
651
1 536
27
49
39
31
129
43
98
81
73
417
34
77
64
56
318
104
224
184
160
864
1 046
2 184
1 406
4 636
2008
Up to date
Rehabilitated
Arrears ⭐ one instalment
Arrears ⬎ one instalment
Arrears ⭐ 2 instalments
Arrears ⭐ 3 instalments
Arrears ⭐ 4 instalments
Arrears ⭐ 5 instalments
Arrears ⬎ 5 instalments
Total instalment sale receivables
Roll forward of the impairment provision
Balance at the beginning of the year
Bad debts written off
Increase in impairment provision
86
(128)
140
292
(484)
489
203
(250)
269
581
(862)
898
98
297
222
617
Net carrying value
948
1 887
1 184
4 019
2007
Up to date
Rehabilitated
Arrears ⭐ one instalment
Arrears ⬎ one instalment
545
139
199
260
1 032
375
390
742
642
134
160
501
2 219
648
749
1 503
26
59
46
33
96
40
128
108
90
376
24
79
69
57
272
90
266
223
180
744
1 143
2 539
1 437
5 119
Balance at the end of the year
Arrears ⭐ 2 instalments
Arrears ⭐ 3 instalments
Arrears ⭐ 4 instalments
Arrears ⭐ 5 instalments
Arrears ⬎ 5 instalments
Total instalment sale receivables
Roll forward of the impairment provision
Balance at the beginning of the year
Bad debts written off
Increase in impairment provision
Balance at the end of the year
Net carrying value
50
(90)
126
187
(341)
446
160
(210)
253
397
(641)
825
86
292
203
581
1 057
2 247
1 234
4 538
129
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
25.
25.4
Financial instruments (continued)
Credit risk management (continued)
Definitions applied in compiling these tables:
The “classes” have been determined on the basis of the market segment in which the chains operate.
Class 1 = Bradlows, Morkels and Hi-Finance
Class 2 = Joshua Doore, Russells and Electric Express
Class 3 = Barnetts, Price ‘n Pride and Supreme
The debtors book has been analysed into the following types of accounts, reflecting the accounts in the following
categories:
a. Up to date
These accounts have no arrears, are therefore up to date and are therefore neither past due nor impaired.
No impairment provision is recorded for these accounts.
b. Rehabilitated
These accounts, whilst being in arrears and considered past due, have paid their last six instalments.
No impairment provision is recorded for these accounts.
c. Arrears ⭐ one instalment
These accounts are in arrears by one instalment or less and are considered to be past due.
No impairment provision is recorded for these accounts.
d. Arrears ⬎ one instalment
These accounts are in arrears by more than one instalment and carry an impairment provision.
Risk analysis – up to date accounts
2008
Class 1
Rm
Class 2
Rm
Class 3
Rm
Total
Rm
Low risk
Medium risk
High risk
87
366
87
92
615
216
59
323
138
238
1 304
441
Total up to date accounts
540
923
520
1 983
The risk categories have been determined based on the type of credit agreement the Group enters into with its
customers.
The Group currently uses the following types:
ED: Existing customer paying a deposit – low risk
EN: Existing customer not paying a deposit – medium risk
ND: New customer paying a deposit – medium risk
NN: New customer not paying a deposit – high risk
The above classifications determine the interest rate that the customer is charged. These deal types were introduced
with the implementation of the NCA on 1 June 2007. Previously the Group’s credit agreements were governed by the
numerous regulations replaced by the NCA and similar comparative information is not available.
25.5
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing
facilities, by continuously monitoring forecast and actual cash flows.
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.
Banking facilities
Total banking and loan facilities
Bank borrowings (note 20)
Unutilised banking facilities
2008
Rm
2007
Rm
1 665
1 050
1 779
700
615
1 079
In addition, the Group has cash on hand at year end of R1 135 million (2007: R975 million).
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.
130
J D G R O U P AN N UAL R E P O R T 2 0 0 8
25.
Financial instruments (continued)
25.5
Liquidity risk management (continued)
0-6
months
Rm
7 - 12
months
Rm
> 1 year
Rm
2-5
years
Rm
149
1 008
68
325
1 157
1 617
71
1 688
1 766
1 079
329
145
474
1 597
87
1 684
1 926
232
Total
Rm
2008
Interest bearing long term liabilities
Short term portion of long term liabilities
Trade and other payables
393
68
325
3 238
1 157
393
1 550
2007
Interest bearing long term liabilities
Short term portion of long term liabilities
Trade and other payables
26.
Employee benefit plans
26.1
Retirement benefits
1 157
393
3 708
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 which indicated a past service deficit
of R8,6 million. The information presented below is extracted from the report on actuarial calculations for IAS 19
(revised) purposes as at 31 August 2008.
2008
%
2007
%
Inflation
5,3
5,8
Increase in salaries
6,3
6,7
Increase in pensions
1,4
1,9
Return on investment
8,8
9,0
Discount rate
8,5
9,0
In arriving at their conclusion, the actuaries took into account the following
reasonable long term estimates:
131
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
2008
2007
Rm
Rm
4,5
4,6
Current service cost
4,1
3,9
Interest cost
7,7
8,0
(9,9)
(9,4)
2,6
2,1
86,4
84,6
26.
Employee benefit plans (continued)
26.1
Retirement benefits (continued)
The actuarially determined fair value of assets of the defined benefit scheme
was R106 million (2007: R111 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 R85 million
(2007: R86 million).
Cost recognised
Expected return on plan assets
Asset utilised
Reconciliation of defined benefit obligation
Defined benefit obligation as at 31 August 2007
Current service cost
4,1
3,9
Member contributions
1,8
2,0
Interest cost
7,7
8,0
Actuarial loss
(1,2)
1,9
Benefits paid
(12,9)
(12,6)
Risk premiums
(1,1)
(1,4)
Defined benefit obligation as at 31 August 2008
84,8
86,4
110,6
102,6
Reconciliation of fair value of plan assets
Assets at fair market value as at 31 August 2007
Expected return on assets
9,9
9,4
Contributions
6,2
6,6
(1,1)
(1,4)
Benefits paid
(12,9)
(12,6)
Actuarial gain
(6,3)
6,0
Risk premiums
Assets at fair market value as at 31 August 2008
Any deficit as determined by the actuaries is funded either immediately or
through increased contributions to ensure the ongoing soundness of the scheme.
132
J D G R O U P AN N UAL R E P O R T 2 0 0 8
106,4
110,6
27.
2008
2007
Rm
Rm
Finserve Mauritius Limited
29
29
Prosure Insurance Limited
(3)
(3)
Related parties
Directors
All dealings with directors have been dealt with elsewhere in this report and the
directors’ remuneration included on pages 84 to 91.
Non-consolidated subsidiaries
The Group’s dealings with its non-consolidated subsidiaries comprise:
Loans
Supreme Furnishers (Zambia) Limited
Supreme Furnishers (Namibia) (Proprietary) Limited
4
4
—
132
30
162
Interest received
Finserve Mauritius Limited
(3)
(3)
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 inclusive of its subsidiaries and investments, which has concluded
transactions of approximately R24,2 million (2007: R1 066,6 million) with the Group and to whom the Group owes
an amount of Rnil (2007: R108,9 million) at year end.
– Old Mutual Limited who owns approximately 4% (2007: 13%) of the issued share capital of the Group.
– The South African Reserve Bank which approves any transactions between the Group and its offshore subsidiaries.
Mr ME King holds a directorship in STRATE Limited with whom the Group has concluded transactions amounting to
R0,1 million.
Mr MJ Shaw holds directorships in the following related parties:
– Reunert Limited (Panasonic division) which has concluded transactions of approximately R17,9 million (2007:
R65,6 million) with the Group and to whom the Group owes an amount of R0,3 million (2007: R2,2 million) at year end.
– Standard Bank Group Limited, one of the bankers to the Group.
All the Group’s corporate legal matters are performed by a company in which Ivan Levy has a controlling interest.
Legal services amounting to R3,2 million (2007: R2,3 million) have been provided to the Group by this company.
Dr HP Greeff holds a directorship in Compensation Technologies Consulting (Pty) Ltd which has concluded
transactions with the Group amounting to R0,2 million.
2008
2007
Rm
Rm
Short term employee benefits
12
15
Share option gains
—
12
12
27
Key management personnel
Remuneration to key personnel compensation during the year comprised:
Key personnel are defined as executive management as set out on page 12.
133
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
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 143. Details regarding the pricing of options granted and the exercising of options,
including vesting periods, are also provided on page 143.
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:
Weighted
Number
average
of share
exercise
options
price
R
2008
Outstanding at beginning of year
7 076 783
Granted during the year
2 268 000
50,58
37,21
Forfeited during the year
(251 000)
(50,73)
Exercised during the year
(114 000)
(29,72)
8 979 783
47,46
Outstanding at beginning of year
6 351 059
39,73
Granted during the year
2 115 000
Outstanding at end of year
2007
72,76
Forfeited during the year
(275 819)
(30,23)
Exercised during the year
(1 113 457)
(33,50)
Outstanding at end of year
7 076 783
50,58
The options outstanding at 31 August 2008 have an exercise price in the range of R16,19 to R79,83 and a weighted
average contractual life of 2,44 years (2007: 2,30 years).
The weighted average share price at the date of exercise for share options exercised in 2008 was R59,20 (2007: R83,01).
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.
134
J D G R O U P AN N UAL R E P O R T 2 0 0 8
28.
Share-based payment (continued)
Fair value of share options and assumptions:
2008
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
2007
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 08
R13,53 to
R13,84
R41,35
R37,21
30,84%
5,55%
8,64%
6 years
7 Feb 07
R27,05 to
R30,57
R88,70
R79,83
31,62%
4,82%
7,55%
6 years
31 Jul 07
R23,71 to
R25,74
R70,70
R63,63
29,91%
4,98%
8,58%
6 years
29.
Subsequent events
Subject to approval by the Competition Authorities, the Group announced that it had acquired a further 27,5%
interest in Blake & Associates Holdings (Proprietary) Limited, and an additional 47,8% interest in Maravedi Group
(Proprietary) Limited on 17 September 2008.
No other significant events have occurred in the period between the year end and the date of approval of these annual
financial statements.
30.
Contingent liabilities
Certain Group companies are involved in disputes where the outcome is uncertain. The Group is regularly subject to
evaluations, by the tax authorities, of its direct and indirect taxation filings and in connection with such reviews, disputes
sometimes arise with the taxation authorities. These disputes may not necessarily be resolved in a manner that is
favourable for the Group and the resolution of these disputes could potentially result in an obligation for the Group.
The Group remains in discussions with the relevant taxation authorities on specific matters and transactions in
addition to those mentioned below, regarding the application and interpretation of taxation legislation affecting the
Group and the industry in which it operates.
The directors are confident that the Group will be able to defend any actions and that the probability of significant
outflow or settlement is remote.
Towards the end of 2006, the South African Revenue Service (“SARS”) issued an additional assessment against a group
company for the 2002 year of assessment amounting to R45 million (excluding interest and penalties), disallowing the tax
deduction that was claimed in relation to an intellectual property sale and leaseback transaction entered into during 2001.
The company objected to the SARS assessment. The Group will, based on advice received from legal and other advisors,
including senior counsel, continue to dispute this assessment and remains confident that it is unlikely that a significant
liability will arise in this regard. Should assessments be issued on a similar basis for the 2003 to 2008 years, additional
taxation of R264 million (excluding interest and penalties) will be levied. The transaction concludes in 2009.
Towards the end of 2007, SARS served notice of its intention to assess a group company for the 2001 and 2002 years of
assessment amounting to R28 million (excluding interest and penalties), disallowing the interest deduction that was
claimed in relation to a compulsory convertible loan transaction entered into during 2001. The Group has, based on
advice received from legal and other advisors including senior counsel, submitted its reasons why it believes that SARS
has no grounds to issue such assessment. Should SARS assess the 2003 to 2006 years on a similar basis, additional
taxation of R120 million (excluding interest and penalties) will be levied. The transaction concluded in 2006.
135
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
30.
Contingent liabilities (continued)
In the early part of 2008 a third party was issued with an additional assessment for periods up to 2005 by SARS relating
to a debt defeasance transaction. The liability relating to this additional assessment will be claimed by the third party
from a group company. The third party has taken advice from senior counsel and is confident that it can defend the
assessment. The assessment gives rise to additional taxation of R114 million (excluding interest and penalties). Should
SARS assess the 2006 year on a similar basis, additional taxation of R5 million (excluding interest and penalties) will be
levied. The transaction concluded in 2006.
In addition, in a matter related to the compulsory convertible loan transaction mentioned above, a third party has
claimed R197 million from the Group. The Group will, based on advice obtained from legal and other external advisors,
defend this matter and remains confident that it is unlikely that a significant liability will arise in this regard.
The issues in dispute are of a complex nature and it is anticipated that these matters will remain unresolved for an
extended period.
31.
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 relationships (refer to note 11)
5 – 20 years
Property, plant and equipment
Buildings
Leasehold improvements
Vehicles and forklift trucks
Computer hardware and software
Office equipment, furniture and fittings
18 – 35 years
5 years
5 – 8 years
4 years
4 – 10 years
The estimated useful lives and residual values are reviewed annually taking cognisance of the projected commercial
and economic realities and through benchmarking of accounting treatments in the specific industries where these
assets are used.
Goodwill
The goodwill acquired in a business combination is allocated, at acquisition, to the cash generating unit that is
expected to benefit from that business. Goodwill is assessed for impairment annually, irrespective of whether there is
any indication of impairment or not.
The recoverable amount of the cash generating unit is determined from the value-in-use calculation. The key
assumptions for the value-in-use calculation are those regarding the discount rates, growth rates and the expected
changes to the selling prices and indirect cost during the period. Management estimated discount rates using 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.
136
J D G R O U P AN N UAL R E P O R T 2 0 0 8
31.
Judgements and estimates (continued)
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 R347 million:
Connection Group
Discount
rate
Forecast
cash
flow
16,60%
4 years
Intangible assets
The value of acquired trademarks and capitalised supplier relationships included in intangible assets is R256 million
(2007: R294 million). Intangible assets acquired as part of the Connection Group acquisition were valued at the
acquisition date using the following key assumptions and methodologies:
Discount
rate
Forecast
cash
flow
Trademarks – valued using the relief from royalty method
17,50%
20 years
Capitalised supplier relationships – valued using the residual income method
17,00%
5 years
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%
15 years
Connection Group - trademark
17,50%
17 years
Connection Group - capitalised supplier relationships
17,00%
2 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.
137
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS
continued
32.
New accounting pronouncements
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:
z IFRS 2 – Share-based Payments
z IFRS 3 – Business Combinations
z IFRS 8 – Operating segments
z Amendment to IAS 1 – Presentation of financial statements
z IAS 23 – Borrowing Costs
z IAS 27 – Consolidated and Separate Financial Statements
z IAS 28 – Investments in Associates
z IAS 31 – Interests in joint ventures
z IAS 39 – Financial Instruments: Recognition and Measurement
z IFRIC 12 – Service Concession Arrangements
z IFRIC 13 – Customer Loyalty Programmes
z IFRIC 14 – IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction
z IFRIC 15 – Agreements for the Construction of Real Estate
z IFRIC 16 – Hedges of a Net Investment in a Foreign Operation
On 22 May 2008, the International Accounting Standards Board (IASB) issued its latest Standard titled
“Improvements to International Financial Reporting Standards 2008.” The Standard included 35 amendments
to various standards.
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.
138
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SEGMENTAL ANALYSIS – GEOGRAPHICAL
South Africa
Neighbouring
countries
Europe
Total
12 610
2008
Revenue
Rm
11 369
441
800
Operating profit
Rm
687
61
49
797
Depreciation
Rm
125
2
5
132
Total assets
Rm
8 091
338
244
8 673
Total current liabilities
Rm
2 932
74
154
3 160
Capital expenditure
Rm
202
2
6
210
%
6,0
13,8
6,1
6,3
Rm
8 123
356
796
9 275
8,6
100,0
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
Cash sales
%
88,0
3,4
Rm
2 953
108
%
36,3
30,3
Rm
5 170
248
796
3 061
33,0
6 214
63,7
69,7
100,0
67,0
1 006
27
62
1 095
11 301
16 333
12 903
11 516
17 712
559
718
18 989
R000
642
789
1 114
Rm
3 907
112
Revenue
Rm
11 989
424
501
12 914
Operating profit
Rm
1 502
67
22
1 591
Depreciation
Rm
112
2
3
117
Total assets
Rm
8 507
263
121
8 891
Total current liabilities
Rm
2 498
30
92
2 620
Capital expenditure
Rm
202
3
5
210
%
12,5
15,8
4,4
12,3
Rm
8 516
311
498
9 325
5,3
100,0
Percentage of total
%
Number of stores
Revenue per store
R000
Number of employees
Revenue per employee
Instalment sale receivables – net
664
4 019
2007
Operating margin
Total sale of merchandise
Share of Group sale of merchandise
Credit sales
Percentage of total
Cash sales
Percentage of total
%
91,3
3,4
Rm
3 489
108
%
41,0
34,7
Rm
5 027
203
498
%
59,0
65,3
100,0
61,4
996
27
55
1 078
12 037
15 704
9 109
11 980
18 329
599
629
19 557
797
Number of stores
Revenue per store
R000
Number of employees
Revenue per employee
Instalment sale receivables – net
R000
654
708
Rm
4 376
162
3 597
38,6
5 728
660
4 538
139
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SEGMENTAL ANALYSIS – BUSINESS DIVISIONS
Traditional Retail
Year ended 31 August
Financial Services
2008
2007
2008
2007
3 073
622
3 285
808
4 019
87
4 533
40
20,2
24,6
953
3 225
57 300
951
3 454
57 900
5 100
603
4 019
617
862
898
12,9
6,6
15,2
5 256
625
4 538
581
641
801
13,2
6,8
14,7
Revenue
Operating profit
Depreciation
Total assets
Total current liabilities
Capital expenditure
Rm
Rm
Rm
Rm
Rm
Rm
5 243
111
50
1 056
1 096
44
5 928
642
12
984
1 030
17
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
Retail square meterage
Revenue per square metre
Number of employees
Revenue per employee
Instalment sale receivables – net
Impairment provision
Bad debts written off
Receivables’ arrears
Deposit rate on credit sales
Collection rate
Average length of the book
%
Rm
%
Rm
%
Rm
%
2,1
4 488
48,4
3 061
68,2
1 427
31,8
953
5 502
515 888
10 163
9 470
554
10,8
4 989
53,5
3 597
72,1
1 392
27,9
951
6 233
521 094
11 376
9 915
598
R000
Rand
R000
Rm
Rm
Rm
Rm
%
%
Months
*Elimination of interdivisional origination fees.
Change in basis of presenting 2007 comparatives
The figures presented above for the 2007 financial year have been restated from those previously reported as follows:
Revenue
● Traditional Retail now earns commissions from Financial Services of 20% from the sale of product insurance policies
and 4,5% from the sale of life insurance policies.
● Club revenue previously reported by Financial Services has now been split equally between Traditional Retail and
Financial Services.
● Previously Traditional Retail received an origination fee from Financial Services of 8% on credit sales. The basis of
calculating this fee has been amended to include both credit sales and handling fees inclusive of VAT.
Operating income
● Occupancy expenses previously included under Corporate have now been correctly reflected in Traditional Retail.
● Certain Corporate costs relating to the Group’s service departments have now been allocated between Traditional
Retail, Financial Services and Cash Retail, using the same allocation principles applied in the preparation of the
2009 Group budget, since management considers this to be more representative of the services rendered by these
departments to the business divisions.
Current liabilities
● A tax balance previously incorrectly included in Cash Retail has now been correctly included in the Corporate
division.
These restatements have no effect on the overall Group results.
The comparative figures have also been restated for the effects of the change in basis of accounting for insurance
revenue and initiation fees as set out in note 1.
140
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Cash Retail
2008
2007
International
2008
4 013
230
31
909
703
48
3 857
270
21
742
571
55
800
49
5
244
154
6
501
22
3
121
92
5
5,7
3 991
43,0
7,0
3 838
41,2
6,1
796
8,6
4,4
498
5,3
3 991
100,0
80
50 163
77 051
52 082
3 122
1 285
3 838
100,0
72
53 569
72 064
53 522
3 182
1 212
796
100,0
62
12 903
44 063
18 156
718
1 114
498
100,0
55
9 109
40 718
12 304
629
797
2007
Corporate
2008
2007
(519)*
(215)
46
2 445
1 120
112
(657)*
(151)
81
2 511
887
133
579
575
Group
2008
2007
12 610
797
132
8 673
3 160
210
12 914
1 591
117
8 891
2 620
210
6.3
9 275
100.0
3 061
33,0
6 214
67,0
1 095
11 516
694 302
18 162
18 989
664
4 019
617
862
898
12,9
6,6
15,2
12,3
9 325
100.0
3 597
38,6
5 728
61,4
1 078
11 980
691 776
18 668
19 557
660
4 538
581
641
801
13,2
6,8
14,7
141
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SHARE INCENTIVE TRUST
2008
The JD Group Employee Share Incentive Scheme
2007
Number of shares
Shares available
At beginning of year
19 291 867
Additional shares (unavailable)/made available to the directors in terms of the scheme
(1 283 900)
1 940 369
Options granted
(2 268 000)
(2 115 000)
19 184 429
251 000
282 069
15 990 967
19 291 867
At beginning of year
7 708 133
7 515 571
Options granted
2 268 000
2 115 000
Options forfeited
At end of year
Share options granted
Options forfeited
(251 000)
(282 069)
Options exercised
(141 100)
(1 640 369)
At end of year
Number of participants
9 584 033
7 708 133
158
159
Shares available for utilisation
At beginning of year
Issued to the trust
Shares acquired in the open market
Options exercised
4 505 992
646 361
—
2 000 000
3 000 000
(141 100)
3 500 000
(1 640 369)
7 364 892
4 505 992
Rm
Rm
Loan by the Company to the trust
429
243
Fair value of shares
226
314
At end of year
142
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SALIENT FEATURES OF THE
JD GROUP EMPLOYEE SHARE INCENTIVE SCHEME TRUST DEED
1.
Purpose
The JD Group Employee Share Incentive Scheme, which was approved by the directors on 29 March 1996, amended by
special resolution on 31 January 2001 and amended again on 11 August 2003, is intended as an incentive to current and
future 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.
2.
Option price
The price payable by a participant upon the exercise of share options in terms of this scheme, shall be an amount equal
to 90% of the closing price at which shares of the Company are traded at the close of business on the JSE on the trading
day immediately preceding the date upon which the board will have resolved to grant, or direct the trustees to grant, the
relevant option.
Each share option shall confer 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
Number of
shares at
31 August 2008
Date of grant
Price
(cents)
4 October 1999
2 907
500
25 May 2000
2 984
250 000
2 May 2001
2 720
300 000
30 May 2002
1 428
53 750
20 February 2003
1 619
794 500
25 July 2003
2 342
60 000
10 September 2003
2 803
342 500
25 February 2004
3 690
293 000
19 May 2004
3 510
1 475 000
24 May 2005
5 625
333 750
7 June 2005
5 400
691 000
30 November 2005
7 250
761 033
7 February 2007
7 983
1 103 000
31 July 2007
6 363
913 000
26 February 2008
3 721
2 213 000
9 584 033
143
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SALIENT FEATURES OF THE
JD GROUP EMPLOYEE SHARE INCENTIVE SCHEME TRUST DEED
continued
5.
The JD Group Limited Share Incentive Trust (“Jodtrust”)
The JD Group Employee Share Incentive Trust has effectively replaced Jodtrust and Jodtrust will be wound up.
6.
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.
7.
Principal terms of loans
7.1 Loans between the Company and the trust
7.2
Loans bear interest at rates agreed to between the trustees and the Company from time to time.
Loans between the trust and participants
Loans bear interest at rates determined by the trustees from time to time.
Note: At its meeting on 13 November 2008, the JD Group board recommended the implementation of a new share
scheme, namely the Share Appreciation Rights Scheme. A circular containing all relevant details of the proposed
scheme will be forwarded to shareholders in due course.
144
J D G R O U P AN N UAL R E P O R T 2 0 0 8
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.
2008
2007
Notes
Rm
Rm
30
1 000
Income statement
Dividend received from JDG Trading (Pty) Ltd
1
Interest received
—
(203)
—
Revaluation of investments
—
218
Other operating expenses
(5)
—
(177)
1 218
Impairment provision – loan to share incentive trust
1
(Loss)/profit before taxation
23
Taxation – secondary taxation on companies (normal and deferred)
(200)
(Loss)/profit attributable to shareholders
72
1 146
Balance sheet
Assets
Investment in JDG Trading (Pty) Ltd
– shares at cost
Loan to JDG Trading (Pty) Ltd
2
Interest in subsidiary company – JDG Trading (Pty) Ltd
Loan to share incentive trust
Bank balances
Total assets
1 091
1 091
1 052
1 858
2 143
2 949
212
243
3
1
2 358
3 193
1 779
2 118
507
971
Equity and liabilities
Share capital and premium
3
Retained earnings
971
Opening balance
371
(Loss)/profit attributable to shareholders
(200)
Distribution to shareholders
(264)
(546)
70
103
2 356
3 192
2
1
2 358
3 193
Shareholders for dividend
Other liabilities
Total equity and liabilities
3
1 146
Notes
1. Due to current market conditions, the underlying fair value of shares held by the share incentive trust amounted to
R203 million less than the carrying value of the loan to the trust as at 31 August 2008.
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 on page 108.
4. The Company has issued guarantees to the providers of finance to its direct subsidiary, JDG Trading (Pty) Ltd, for
repayment of bank borrowings (disclosed in note 20) for the amount of R524,0 million (2007: R612,9 million).
145
J D G R O U P AN N UAL R E P O R T 2 0 0 8
SUBSIDIARIES
Percentage interest held
Country of
2008
2007
incorporation
%
%
JDG Trading (Pty) Ltd*
Indirect subsidiaries
South Africa
100
100
Courts Megastore (Pty) Ltd*
South Africa
100
100
Connection Group Holdings (Pty) Ltd*
South Africa
100
100
JD Group Asset Financing (Pty) Ltd†
South Africa
100
100
JD Group International (Pty) Ltd‡
South Africa
100
100
Profurn Limited‡
South Africa
100
100
Protea Furnishers S.A. (Pty) Ltd*
South Africa
100
100
Supreme Furnishers (Pty) Ltd‡
South Africa
100
100
The Netherlands
100
100
Notes
Direct subsidiary
JD Group Europe B.V.ø
Poland
100
100
Aazad Electrical Construction (Pty) Ltd*
Botswana
100
100
Barnetts Furnitures (Botswana) (Pty) Ltd*
Botswana
100
100
Hi Fi & Electric Warehouse (Pty) Ltd*
Botswana
100
100
JD Group (Botswana) (Pty) Ltd*
Botswana
100
100
Lesotho
100
100
Abra S.A.*
JD Group (Lesotho) (Pty) Ltd*
Lesotho
100
100
Moçambique
100
100
JD Group (Namibia) (Pty) Ltd*
Namibia
100
100
Protea Furnishers (Namibia) (Pty) Ltd*
Namibia
100
100
Supreme Furnishers (Namibia) (Pty) Ltd*
Namibia
100
100
Barnetts (Swaziland) (Pty) Ltd*
Swaziland
100
100
JD Group (Swaziland) (Pty) Ltd*
Non-consolidated subsidiaries
Swaziland
100
100
Supreme Furnishers (Lesotho) (Pty) Ltd*
Profurn (Moçambique) Limitada*
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.
‡
European investment holding company.
ø
3. A list of dormant and name protection companies is available for inspection by members at the registered office of the
Company.
4. The winding up and deregistration of these non-trading companies was delayed by outstanding taxation matters.
146
J D G R O U P AN N UAL R E P O R T 2 0 0 8
Direct interest of holding company
Issued share capital
2008
Currency*
655 660
Shares
2007
Currency*
655 660
1 000
1 000
1 753 041
1 753 041
200
200
11
11
543 565
543 565
30 000
30 000
224
18 151#
Indebtedness
2008
2007
2008
2007
Rm
Rm
Rm
Rm
1 091
1 091
1 052
1 858
224
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
1
1
1
1
200
200
2
2
1
1
100 000
100 000
Reflected in local currency (Mauritius in US dollars).
*
Reflected in euro.
#
147
J D G R O U P AN N UAL R E P O R T 2 0 0 8
ANALYSIS OF SHAREHOLDERS
Number of
shareholders
% of
total
Number of
shares
% of
total
3 845
63
36
11
18
34
95,9
1,6
0,9
0,3
0,4
0,9
96 940 462
34 099 630
30 646 520
6 648 217
493 132
1 672 039
56,9
20,0
18,0
3,9
0,3
0,9
4 007
100,0
170 500 000
100,0
2 809
764
262
140
32
70,1
19,1
6,5
3,5
0,8
884 942
2 294 920
9 819 839
45 359 401
112 140 898
0,5
1,3
5,8
26,6
65,8
4 007
100,0
170 500 000
100,0
116
150
171
51
21
2 824
234
439
1
2,9
3,7
4,3
1,3
0,5
70,5
5,8
11,0
62 234 469
39 642 614
35 656 391
11 007 937
7 553 462
1 752 800
1 863 288
3 424 147
7 364 892
36,5
23,3
20,9
6,5
4,4
1,0
1,1
2,0
4,3
4 007
100,0
170 500 000
100,0
4
1
1
0,1
–
–
264 856
7 200
7 364 892
0,2
–
4,3
6
0,1
7 636 948
4,5
Public shareholders
4 001
99,9
162 863 052
95,5
Registration
Materialised
Dematerialised
327
3 680
8,2
91,8
92 866
170 407 134
0,1
99,9
4 007
100,0
170 500 000
100,0
Geographical location of shareholders
South Africa
United States of America
United Kingdom
Luxembourg
Namibia
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
Pension funds
Mutual funds
Investment companies
Insurance companies
Private investors
Other companies and corporate bodies
Other managed funds
Share incentive scheme
Non-public shareholders
(included above)
Directors
Pension fund
Share incentive scheme
To the best of the Company’s knowledge:
Beneficial shareholders with a holding of 3% or more
Public Investment Corporation
Old Mutual Life Assurance Company SA
Fund managers with a holding of 5% or more
Investec Asset Management
Public Investment Corporation
Old Mutual Investment Group
148
J D G R O U P AN N UAL R E P O R T 2 0 0 8
% held
20 987 326
6 284 620
12,3
3,7
27 271 946
16,0
19 922 728
19 521 113
9 669 609
11,7
11,4
5,7
49 113 450
28,8
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
(“the Company”)
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, are required
to retire by rotation at the AGM:
2.1.1 ME King;
Notice is hereby given that the annual general meeting
2.1.2 Dr D Konar;
(AGM) of the Company’s shareholders will be held in the
2.1.3 ID Sussman; and
David Sussman Auditorium, Ground Floor, JD House,
27 Stiemens Street, Braamfontein, Johannesburg on
Thursday, 5 February 2009 at 08:00 to conduct the following
business:
2.1.4 G Völkel.
2.2 Based on the provisions of the articles, it is
proposed that members confirm the appointments
of the following directors who were appointed
1. Ordinary resolution number 1 – adoption of
the annual financial statements and
sanctioning of dividends
To receive, consider and adopt the consolidated annual
financial statements of JD Group Limited and its
during the year between two AGMs:
2.2.1 VP Khanyile, with effect from
13 November 2008;
2.2.2 Mr GZ Steffens, with effect from
13 November 2008; and
subsidiaries (“the Group”) and of the Company for the
financial year ended 31 August 2008, including the
2.2.3 Mr ID Thompson, with effect from
13 November 2008.
directors’ report and the report of the independent
auditors therein, as well as sanctioning of the dividends
An abbreviated curriculum vitae of each of the directors
for the year as follows:
is set out on pages 10 and 11 of this annual report.
• Interim dividend of 111 cents per share paid on
30 June 2008.
• Final dividend of 41 cents per share paid on
15 December 2008.
2. Ordinary resolution number 2 – re-election
of directors
3. Ordinary resolution number 3 – renewal of
the authority to place the Company’s
unissued shares under the control of the
directors
To consider and, if deemed fit, to renew and pass with
or without modification, the following ordinary
To elect directors of the Company in terms of prevailing
resolution in order to provide the directors of the
legislation and the Company’s articles of association
Company with flexibility to issue the unissued ordinary
(“the articles”) as follows:
shares of the Company as and when suitable situations
• In accordance with the articles, at least one third of
arise:
the directors, being those longest in office at the
date of the annual general meeting, shall retire, but
such directors may offer themselves for re-election.
• In accordance with the articles, all director
appointments made by the board since the previous
annual general meeting 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.
“Resolved that 10 000 000 (ten million) of the Company’s
authorised but unissued ordinary shares, equivalent to
5,86% 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”), 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 annual general meeting of
149
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTICE OF ANNUAL GENERAL MEETING
continued
the Company as a general authority in terms of section
221(2) of the Companies Act.”
The directors have no current plans to make use of this
authority, but are seeking its renewal to ensure that the
Company has maximum flexibility in managing the
Group’s capital resources.
4. Ordinary resolution number 4 –
appointment of auditors and auditors’
remuneration
4.1 To reappoint Deloitte & Touche as independent
6. Special resolution number 1 – 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
auditors of the Company for the ensuing period
time to time determine, subject to the requirements of
terminating on the conclusion of the next AGM of
the Company’s articles, the Companies Act and the JSE
the Company and further to appoint Mr X Botha as
Listings Requirements, provided that:
the individual and designated auditor who will
undertake the audit of the Company.
4.2 To authorise the directors of the Company to fix and
pay the auditors’ remuneration for the past year.
5. Ordinary resolution number 5 –
non-executive directors’ remuneration
5.1 To approve the payment of the non-executive
directors’ remuneration for the past year as set out
in the financial statements, which remuneration
6.1 the Company and its subsidiaries are authorised
by their articles of association to repurchase such
securities;
6.2 the repurchase of securities are effected through
the order book operated by the JSE trading system
and be done without any prior understanding or
arrangement between the Company and the
counterparty;
6.3 the Company and its subsidiaries are authorised
amount reflects no increase compared with the
by their members via a special resolution taken at
remuneration paid in the previous year.
a general meeting, to make such general
5.2 To consider and approve, with or without
repurchases of the Company’s securities;
modification, payment of the following non-executive
6.4 such authorisation shall be valid only until the
directors’ remuneration for the forthcoming year.
next AGM of the Company or for 15 months from
“Resolved to pay the following non-executive
the date of this special resolution, whichever is the
directors’ fees for the financial year commencing
earlier date;
on 1 September 2008:
5.2.1 As director:
• for each board meeting attended – R60 000
5.2.2 As chairman:
• for each audit committee meeting
chaired – R20 000
• for each risk committee meeting
chaired – R20 000
• of the remuneration committee per annum
– R20 000
• of the nominations committee per
annum – R20 000
• of the JD Group Defined Benefit Pension
Fund – nil.
150
J D G R O U P AN N UAL R E P O R T 2 0 0 8
6.5 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;
6.6 at any one time the Company and/or its
subsidiaries may only appoint one agent to effect
any repurchase of the Company’s securities on
behalf of the Company;
6.7 the repurchase of securities by the Company and/
The effect of this special resolution would be that the
or its subsidiaries shall not take place during a
Company and its subsidiaries will have been authorised
prohibited period, unless the Company has in
generally to repurchase the Company’s securities
place a repurchase programme where the dates
on the open market, subject to the requirements of
and quantities of securities to be traded during
the Company’s articles, the Companies Act and the
the period are fixed, i.e. not subject to variation,
JSE Listings Requirements.
and full details of the programme have been
disclosed in an announcement over SENS prior to
the commencement of the prohibited period;
6.8 after the repurchase, the Company would still be
in compliance with the shareholders’ spread
requirements as laid down by the JSE;
Disclosures required in terms of the Listings
Requirements of the JSE
In terms of the JSE Listings Requirements, the following
disclosures are required with reference to the repurchase
of the Company’s securities as set out in the special
resolution above.
6.9 the repurchase of securities shall not, in the
aggregate, in any one financial year, and
Working capital statement
calculated as at the date this authority is given,
The directors, having considered the effects of the
exceed 20% (equating to 34 100 000 ordinary
repurchase of the maximum number of ordinary securities
securities) of the Company’s issued securities of
in terms of the aforementioned general authority, confirm
that class and, where the Company’s issued
that for a period of 12 months after the date on which this
securities are repurchased by its subsidiaries, it
authority is given, that:
shall not exceed a maximum of 10% (equating to
• the Company and the Group will be able, in the ordinary
17 050 000 ordinary securities) in aggregate of the
Company’s issued securities of that class;
6.10 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
6.11 the Company’s sponsor shall, prior to the Company
and/or its subsidiaries, entering into the market to
acquire such securities, provide the JSE with a
written working capital statement as laid down by
the JSE.”
It is the intention of the directors to utilise this authority
to effectively return excess capital to shareholders if
and when appropriate opportunities arise.
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.
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) Ltd, has confirmed in
writing to the JSE the adequacy of the Company’s
working capital for the purposes of undertaking a
repurchase of securities.
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.
151
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTICE OF ANNUAL GENERAL MEETING
continued
Litigation statement
meeting to make the necessary arrangements with that
Other than disclosed or accounted for in this annual report,
party to be able to attend and vote at the meeting.
the directors of the Company, whose names are given on
A shareholder entitled to attend and vote at the annual
pages 10 and 11 of this annual report, are not aware of any
general meeting of the Company is entitled to appoint
legal or arbitration proceedings, pending or threatened,
a proxy or proxies to attend, speak, and on a poll, vote in
against the Group which may have or have had, in the
his/her stead. A proxy need not to be a shareholder of
12 months preceding the date of this notice of the AGM,
the Company.
a material effect on the Group’s financial position.
Uncertificated shareholders
Directors’ responsibility statement
Beneficial owners of dematerialised shares who wish to
The directors, whose names are given on pages 10 and 11
attend the annual general meeting of the Company have to
of this annual report, collectively and individually, accept
request their Central Securities Depository Participant
full responsibility for the accuracy of the information
(CSDP) or broker to provide them with a letter of
pertaining to the above special resolution and certify that
representation, or they must provide the CSDP or broker
to the best of their knowledge and belief there are no facts
with their voting instructions in terms of the relevant
that have been omitted which would make any statement
custody agreement entered into between them and the
false or misleading and that all reasonable enquiries to
CSDP or broker.
ascertain such facts have been made and that the above
special resolution contains all information required.
Voting
On a show of hands, every member of the Company present
Material changes
in person and entitled to vote, or any member represented
Other than the facts and developments reported on in this
by proxy, shall have one vote only. On a poll, every ordinary
annual report, there have been no material changes in the
shareholder entitled to vote shall have one vote in respect
affairs, financial or trading position of the Company or the
of each share held.
Group since the signature date of this annual report and
the posting date thereof.
Proxies
For the convenience of shareholders, a form of proxy is
Further disclosures
enclosed herewith. The form of proxy must only be
The following further disclosures required in terms of the
completed by shareholders who are holding shares in
JSE Listings Requirements are set out in accordance with
certificated form or who are recorded on the electronic
the reference pages in the annual report of which this
subregister in “own name” dematerialised form. The
notice forms part:
instrument appointing a proxy and the authority (if any)
• Directors and management (refer to pages 10 and 12).
under which it is signed, must reach the transfer
• Major shareholders of the Company (refer to page 148).
secretaries of the Company (Computershare Investor
• Directors’ interests in the Company’s securities
Services (Pty) Ltd) at the address on the inside back cover,
(refer to pages 83 and 90).
by no later than at 08:00 on Tuesday, 3 February 2009.
• Share capital of the Company (refer to page 120).
By order of the board
Voting and attendance
Certificated shareholders
Shareholders wishing to attend the annual general meeting
have to ensure 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
152
J D G R O U P AN N UAL R E P O R T 2 0 0 8
JMWR Pieterse
Company secretary
14 November 2008
FORM OF PROXY
JD GROUP LIMITED
(Registration number 1981/009108/06)
(Incorporated in the Republic of South Africa)
JSE code: JDG
ISIN code: ZAE000030771
(“the Company”)
TO BE COMPLETED BY CERTIFICATED SHAREHOLDERS AND DEMATERIALISED SHAREHOLDERS WITH OWN NAME
REGISTRATION ONLY
I/We
(Name in block letters)
of
(Address in block letters)
being the holder(s) of
shares in JD Group Limited and entitled to vote, hereby appoint
1.
or failing him/her
2.
or failing him/her
3. the chairman of the annual general meeting
as my/our proxy to speak and vote for me/us at the annual general meeting, to be held at 08:00 on Thursday, 5 February 2009, in the
David Sussman Auditorium, Ground Floor, JD House, 27 Stiemens Street, Braamfontein, Johannesburg and at any adjournment thereof,
as follows:
Number of JD Group ordinary shares
Resolution
In Favour
Against
Abstain
Number 1: Adoption of annual financial statements, inclusive of sanctioning of dividends
Number 2: Re-election of retiring directors
Number 2.1 ME King
Number 2.2 Dr D Konar
Number 2.3 ID Sussman
Number 2.4 G Völkel
Confirming appointments since last AGM
Number 2.5 VP Khanyile
Number 2.6 GZ Steffens
Number 2.7 ID Thompson
Number 3: Authority to place a maximum of 10 million unissued shares under the control of
the directors
Number 4: Auditors’ appointment and remuneration
Number 4.1 Reappointment of Deloitte & Touche as auditing firm and X Botha as the
individual auditor
Number 4.2 Approval of auditors’ remuneration
Number 5: Non-executive directors’ fees
Number 5.1 Payment of non-executive directors’ fees for the past year
Number 5.2 Approval of non-executive directors’ fees for the forthcoming year
Number 6: Special resolution – authority to repurchase shares
Signed at
on
2008/2009
Date
2008/2009
Full name(s)
Signature(s)
Assisted by (guardian*)
*If signing in a representative capacity, see note 12 on page 154.
Please read the instructions on the reverse side of this form of proxy.
153
J D G R O U P AN N UAL R E P O R T 2 0 0 8
NOTES AND INSTRUCTIONS TO THE FORM OF PROXY
1. This form of proxy is to be completed only by those shareholders who either still hold shares in a certificated form, or
whose shares are recorded in their own name in electronic form in the subregister (“eligible shareholders”).
2. Eligible shareholders are entitled to attend, speak and vote at the annual general meeting (“AGM”) of the Company or to
appoint a proxy to attend, speak and vote in their stead and such proxy need not be a shareholder of the Company. The
completion and lodging of this form of proxy does not preclude the eligible shareholder from attending the AGM and
speaking and voting in person to the exclusion of any appointed proxy.
3. Eligible shareholders who are unable to attend the AGM, but wish to be represented at the AGM, should complete and
timeously return the form of proxy to the transfer secretaries, Computershare Investor Services (Proprietary) Limited.
4. If you are the holder of dematerialised shares, but not the holder of dematerialised shares in your own name, you must
timeously inform your Central Securities Depository Participant (“CSDP”) or your stockbroker of your voting instructions
for the AGM in terms of the custody agreement between you and the CSDP or the stockbroker (in such an instance you
must not return this form of proxy to the transfer secretaries). However, if you wish to attend the AGM in person, you must
timeously request your CSDP or stockbroker to provide you with the necessary authority to do so and to enable you to take
part in the AGM proceedings.
5. It is incumbent on all shareholders who wish to attend the AGM to verify with the transfer secretaries that their shares are
in fact registered in their name or to ensure that the necessary arrangements have been made with their CSDP or
stockbroker to enable them to attend and to take part in the AGM proceedings.
6. If two or more proxies attend the AGM, then that person whose name appears first on the form of proxy and whose name is
not deleted, shall be regarded as the validly appointed proxy to the exclusion of the person(s) whose name(s) follow.
7. Where there are joint holders of shares, any one holder may sign the form of proxy and the vote of the shareholder whose
name appears first 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 “In Favour”, “Against” or “Abstain” on the form of proxy. If no instructions are filled in on the form of proxy, the
appointed proxy, or the chairman of the AGM if he is the authorised proxy, shall be authorised to vote in favour of, against
or abstain from voting as they deem fit.
11. Shareholders or their proxies are entitled, but not obliged, to vote in respect of all the ordinary shares held by the
shareholder. However, the total number of votes for or against the resolutions and in respect of which any abstention is
recorded, may not exceed the total number of shares held by the shareholder.
12. Minors must be assisted by their parent or guardian unless the relevant documents establishing their legal capacity are
produced or have been registered by the transfer secretaries. Documentary evidence establishing the authority of a person
signing this form in a representative or other legal capacity must be attached to this form of proxy unless previously
recorded by the transfer secretaries or waived by the chairman of the AGM.
13. The chairman of the AGM, in his sole discretion, may accept or reject any form of proxy which is completed and/or
received other than in accordance with these notes, provided that he shall not accept a proxy unless he is satisfied as to
the manner in which a shareholder wishes to vote.
14. The results of the voting in respect of the resolutions set out in the notice of the AGM will be published on SENS as soon
as practically possible after conclusion of the AGM.
15. Shareholders must ensure that their forms of proxy or their letters of authority from their CSDP or stockbrokers are
timeously furnished to the transfer secretaries, Computershare Investor Services (Proprietary) Limited. In order to be
effective, forms of proxy and letters of authority must reach the transfer secretaries by no later than at 8:00 on Tuesday,
3 February 2009 at the address specified on the next page.
16. Enquiries by shareholders with regard to the AGM or any of the above matters, may be directed to the Company Secretary,
Johann Pieterse, on (+27) 11 408 0220 or to johannp@jdg.co.za.
154
J D G R O U P AN N UAL R E P O R T 2 0 0 8
ADMINISTRATION
JD Group Limited
ADR depository
(“JD” or “the Group”)
Registration number: 1981/009108/06
JSE code: JDG
ISIN code: ZAE000030771
File number 82-4401
The Bank of New York 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)
KR Chauke, Dr HP Greeff, ID Thompson, G Völkel
Sponsor
Non-executive director
IS Levy
Independent non-executive directors
VP Khanyile, ME King, Dr D Konar, M Lock, MJ Shaw,
GZ Steffens
Company secretary
JMWR Pieterse
Registered office
11th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
(PO Box 4208, Johannesburg, 2000)
Telephone: +27 11 408 0408
Facsimile: +27 11 408 0604
E-mail: info@jdg.co.za
Independent auditors
Deloitte & Touche
221 Waterkloof Road
Waterkloof
Pretoria
0181
Attorneys
Feinsteins (Levy, Feinsteins & Associates Incorporated)
10th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
Telephone: +27 11 712 0700
Facsimile: +27 11 712 0712
E-mail: isl@feinsteins.co.za
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 11 370 5000
Facsimile: +27 11 688 5238
E-mail: proxy@computershare.co.za
5 February 2009
Published May
Declared May
31 August
Published November
Published November
Declared November
Published November
BASTION GRAPHICS
www.jdgroup.co.za
TWENTY FIVE YEARS
redefining the future . . .
ANNUAL REPORT 2008
SHAREHOLDERS’ DIARY FOR 2009
Annual general meeting
Announcement of interim results
Interim dividend declaration
Financial year end
Annual financial statements
Announcement of annual results
Final dividend declaration
Annual report
TWENTY FIVE YEARS
J D G R O U P AN N UAL R E P O R T 2 0 0 8
PSG Capital (Proprietary) Limited
Building No 8, Woodmead Estate,
1 Woodmead Drive, Woodmead, Sandton, 2157
Telephone: +27 11 797 8400
Facsimile: +27 11 802 3689
ADMINISTRATION
JD Group Limited
ADR depository
(“JD” or “the Group”)
Registration number: 1981/009108/06
JSE code: JDG
ISIN code: ZAE000030771
File number 82-4401
The Bank of New York 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)
KR Chauke, Dr HP Greeff, ID Thompson, G Völkel
Sponsor
Non-executive director
IS Levy
Independent non-executive directors
VP Khanyile, ME King, Dr D Konar, M Lock, MJ Shaw,
GZ Steffens
Company secretary
JMWR Pieterse
Registered office
11th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
(PO Box 4208, Johannesburg, 2000)
Telephone: +27 11 408 0408
Facsimile: +27 11 408 0604
E-mail: info@jdg.co.za
Independent auditors
Deloitte & Touche
221 Waterkloof Road
Waterkloof
Pretoria
0181
Attorneys
Feinsteins (Levy, Feinsteins & Associates Incorporated)
10th Floor, JD House,
27 Stiemens Street,
Braamfontein, Johannesburg, 2001
Telephone: +27 11 712 0700
Facsimile: +27 11 712 0712
E-mail: isl@feinsteins.co.za
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Telephone: +27 11 370 5000
Facsimile: +27 11 688 5238
E-mail: proxy@computershare.co.za
5 February 2009
Published May
Declared May
31 August
Published November
Published November
Declared November
Published November
BASTION GRAPHICS
www.jdgroup.co.za
TWENTY FIVE YEARS
redefining the future . . .
ANNUAL REPORT 2008
SHAREHOLDERS’ DIARY FOR 2009
Annual general meeting
Announcement of interim results
Interim dividend declaration
Financial year end
Annual financial statements
Announcement of annual results
Final dividend declaration
Annual report
TWENTY FIVE YEARS
J D G R O U P AN N UAL R E P O R T 2 0 0 8
PSG Capital (Proprietary) Limited
Building No 8, Woodmead Estate,
1 Woodmead Drive, Woodmead, Sandton, 2157
Telephone: +27 11 797 8400
Facsimile: +27 11 802 3689