21 years young annual report 2004 - sharedata · established chain, barnetts, has now traded for...

21 Years YoungAnnual Report 2004

www.jdg.co.za

Ann

ual

Rep

ort

2004

2

21

Y

EA R

S YOU

NG

19 8 3 - 2 0 0

4

Our vision, philosophy and profile ....................................... 2

Financial performance ......................................................... 4

Corporate objectives and opportunities ............................... 5

Brands and their operational areas ...................................... 6

Directors and management ............................................... 10

Group value added statement ........................................... 13

Executive chairman’s report ............................................... 14

Social citizenship ............................................................... 23

Chains .............................................................................. 29

Corporate services.............................................................. 41

M a x x N e w M e d i aC o n c e p t a n d d e s i g n

G R A P H I C O R 3 1 2 8 9

1

In only 21 years, JD has grown from one store to one of the most successful

and profitable retailers in South Africa. As we celebrate our 21st birthday,

the dream of the JD Group is very much alive in all of our hearts. Our

philosophies and values remain true. It’s about satisfying the consumer and

making an acceptable profit by developing our people and being innovative

in all we do; in merchandising and marketing, developing supplier alliances

based on sound business principles, by constantly developing management

and leadership skills, and by never forgetting about the world around us and

our responsibility to the planet and the communities we live in.

2

Our vision is to be World Class in our fields of expertise

PHILOSOPHY

To lead the industry by satisfying our customers’ needs and our

stakeholders’ expectations through the delivery of consistent, acceptable

profit growth, which will be achieved globally by:

■ being innovative in everything we do

■ continuous and consistent development and optimisation of customer

and supplier relationships based on sound levels of service, values,

ethics and business principles

■ the ongoing development of our people

■ the continuous enhancement of management and leadership skills

■ remaining conscious of our social responsibility

3

PROFILE

JD Group, a mass consumer financier, is South Africa’s leading differentiated

furniture retailer operating through eight chains in southern Africa and one

in Poland. It is listed on the JSE Securities Exchange in the Cyclical services:

General Retailers – Hardlines Sector and on the Namibian Stock Exchange –

Retail Sector.

Each chain is positioned in the marketplace in a differentiated way with a

specific focus on a market segment, own brand identity and store layout,

merchandise range and market profile.

All eight South African chains offer a wide range of value for money,

differentiated quality furniture, appliances, home entertainment and

consumer finance products supported by a high level of personal service.

Hi-Fi Corporation and Electric Express qualify as typical category specialists

due to the focused product range they offer.

The JD Group covers the mass market through its eight South African chains

with a mass merchandise focus.

JD Group services the mass market through a total of 952 (2003: 978)

stores, including 36 (2003: 26) stores in Poland, generating annual

revenue of R9,1 billion (2003: R6,0 billion) and an annual cash inflow of

some R8,4 billion (2003: R5,1 billion) from trading activities.

4

Financial performanceOver 21 years, a pioneering spirit has fuelled the Group’s growth,

both organic and by acquisition. Today, JD Group is synonymous

with innovation in retailing and financial services.

* Proforma 12 months

Financial performance

31 August 31 August

2004 2003

Revenue Rm 9 056 5 966

Income attributable to shareholders Rm 790 449

Total assets Rm 7 739 7 185

Shareholders’ equity Rm 4 008 3 392

Gearing ratio % – 26,3

Operating margin % 14,0 12,5

Headline earnings per share cents 522,0 340,5

Cash equivalent dividends per share cents 240,0 110,0

Net asset value per share cents 2 330,1 2 033,0

Return on assets managed % 24,1 18,1

Return on average shareholders’ equity % 21,4 16,9

Note: Definitions of the terms above are reflected in the Annual Financial Statements

2004 book.

Revenue (R million)

95

2 20

5

96

2 47

9

97

2 72

6

98

2 89

6

99

3 01

6

00*

3 42

9

01

3 78

8

02

4 08

3

03

5 96

6

04

9 05

6

Headline earnings per share (cents)

95

86,1

96

119,

1

97

137,

7

98

185,

7

99

243,

0

00*29

3,7

01

353,

2

02

226,

5

03

340,

5

04

522,

0Net asset value per share (cents)

95

699,

0

96

799,

1

97

917,

2

98

1 08

5,0

99

1 30

5,0

00*

1 54

1,5

01

1 69

5,9

02

1 71

5,1

03

2 03

3,0

04

2 33

0,1

5

Global aspirations

The Group owns 100% of the equity in Abra, operating in

Poland. Abra is positioned to grow its store base to 50 within

the next two years.

Solid foundation

The eight southern African chains have collectively traded for

446 years, or an average of 56 years per chain. The longest

established chain, Barnetts, has now traded for 108 years; followed

by Bradlows 101; Morkels 67; Russells 61; Electric Express 46;

Joshua Doore 31; Price ’n Pride 21 and Hi-Fi Corporation 11.

Abra has traded in Poland for 14 years.

Extensive data network

The Group processes some 465 million transactions each year

from 1 110 sites via its satellite based communications network

(V-Sat) and terrestrial lines. The Group administers in excess

of 1,7 million current customer accounts and has approximately

11,6 million paid up customers on its database. The average cash

inflow from customers approximates R28 million per day.

Sales

Annually, the Group distributes over 156 million catalogues to

customers and potential customers and in excess of 7,4 million

club magazines to club members. Our inventory system

facilitated the processing of 2,95 million line items sold

across 164 departments and sub-departments.

Products and services

The Group will continue to pursue opportunities with the

introduction of innovative products and services.

Customers

To develop a “customer centric” culture, committed to providing

real value for money and excellence of service, thereby ensuring

customer satisfaction and loyalty.

Profit and growth

To be a desired investment for all investors as a result of above

average performance and consistent growth.

Our people

To be the most sought after employer by providing ongoing

development and training for all our people, thereby creating

a career orientated environment allowing our people to share

in the Group’s success.

Suppliers

To deal transparently with all suppliers on the basis of sound

business principles, thereby ensuring that long lasting alliances

are maintained for our mutual benefit.

Innovation

To be innovative in all our business activities, thereby satisfying our

desire to provide better service.

Social responsibility

To meet our social responsibilities through providing a better life

for the disadvantaged and less fortunate members of the

communities in which we trade.

The environment

To manage the environmental impacts of our activities

by complying with all relevant safety, health and environmental

legislation and by enhancing awareness amongst our employees.

Management and leadership

To develop the leadership potential amongst us, together with the

ongoing enhancement of our managerial skills, thereby ensuring

ongoing success.

Corporate objectives and opportunities

6

Household merchandise and appliances

retailer selling entry level and middle of

the range products in predominantly

rural areas (equivalent to new universal

LSM 3 to 6)

Furniture and appliances retailer serving

the lower end of the middle mass

market in the rural and urban

communities (equivalent to new

universal LSM 4 to 6)

Furniture retailer serving the mass

market in Poland (equivalent to new


Established national retailer selling

quality branded furniture, appliances

and home entertainment products to

the aspirational upper middle mass

market (equivalent to new universal

LSM 4 to 8)

Specialist appliances and home

entertainment retailer selling for cash

and on terms at discount prices in

dynamically displayed stores to the

middle mass market (equivalent to new


The largest furniture and appliance

discounter in southern Africa selling to

the middle mass market (equivalent to

new universal LSM 4 to 6)

Branded furniture and appliances

retailer serving the middle to upper

mass market in metropolitan and urban

areas (equivalent to new universal

LSM 4 to 7)

Retails electronic goods and household

appliances to the mid to upper end of

the consumer market (equivalent to

new universal LSM 6 to 10)

Offers branded appliances, home

entertainment, computers and quality

furniture on affordable terms

(equivalent to new universal

LSM 4 to 8)

Brands and their operational areas

7

222 113 99 102 97 83 72 68 23 21 6 1 2 7 36 952

ElectricExpress

Abra

35 12 22 10 10 11 6 7 1 114

36 36

KW

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NG

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TER

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APE

MPU

MA

LAN

GA

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POPO

EAST

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PE

NO

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STA

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NO

RTH

ERN

CA

PE

BO

TSW

AN

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LESO

THO

NA

MIB

IA

SWA

ZILA

ND

MO

ZAM

BIQ

UE

POLA

ND

TOTA

L

27 12 11 9 9 8 7 1 84

20 14 6 10 22 11 15 11 3 6 118

8 1 3 1 1 1 1 1 17

36 17 20 16 10 14 11 17 5 146

32 16 14 10 10 9 10 5 3 4 113

50 27 34 23 11 15 14 16 9 199

16 2 7 25

14 14 21 25 13 8 4 1 100

Barnetts

Bradlows

Hi-FiCorporation

JoshuaDoore

Morkels

Price ‘nPride

Russells

Other

Total

8

Lets go back 21 years when the world lost one of its finest musical talents

Personal computers hit our desks and in 1984Apple Macintosh introduced thecomputer that promises 1984isn’t going to be like 1984 . . .

Stock markets arecrashing around usand Aids is firstacknowledged as thechilling threat it is

21 years ago a path was set. A future dreamed. Destined to be fulfilled.On the 27th of July 1983, Price ’n Pride opened its first store. The seed of a dream was

planted that would change the face of retailing in South Africa. From humble beginnings,

we had no idea how great the dream was or how great the reality would become.

We believed in people from the start. This is why in a Price ’n Pride

warehouse in 1985, the Freedom School was set up, later to become

the highly respected St Enda’s Community College in Joubert Park.

A spirit of giving that set the scene for our future.

After 21 years we have only just begun

1983

1985

1987

1984

In 1987 Joshua Doore introduces catalogue selling

– an innovative first, bringing value, comfort and

lifestyle to the platteland people.

This sees warehouses, transport and advertising being

optimised, making the bottom line look sexy.

And hats off to our people and their passion because

operating income before interest rises from a mere

R500 thousand to a staggering R9 million.

9

Three years after our first doors open,

Joshua Doore is acquired and later that

year on the 18th of August the business

is listed on the Johannesburg Stock

Exchange at a share price of R2,75.

The dream begins to grow and we share

our success by forming socially responsible

organisations like the Mitzvah School,

providing tutoring for the underprivileged

Matric students from Alexandra.

By 1986 trains can travelfaster than a speeding bullet

George Bush is elected as the 41st president of the United States . . .

In 1988, another acquisition heralds more change and we welcome Bradlows

and Score.

We continue to invest in our prime assets – our people, introducing a minimum

salary of R500 for employees . . . a first in the industry.

Our new acquisition means our debtors book doubles. Our people buy into our

dream, and thanks to their commitment and hard work, bad debts drop by an

astonishing 70%!

1986

1988

10

Executive directors

Executive directors

David Sussman (56) BComExecutive chairmanAppointed 1 April 1986.Appointed chairman in February 1989. 31 years’ experience in furniture retail.Founded the Group in 1983.

Mias Strauss (52)Chief executive officerAppointed 1 December 1993.Responsible for Group operations. 34 years’ experience in furniture retail. Joined Russells in 1971 and appointed chief executive of that chain in 1989.

Jan Bezuidenhout (49)BCom LLBDirector – Corporate servicesAppointed 16 March 1994.Responsible for Group strategic planning,investor liaison and corporate legal andstatutory services.13 years’ experience in merchant andcorporate banking and 11 years’ experiencein furniture retail.

Gerald Völkel (44)BAcc CA(SA)Group financial director Appointed 2 April 2001.Joined the Group in November 1995.15 years’ experience in auditing andnine years’ experience in furniture retail.

Johan Kok (53)Chief operating officerAppointed 1 March 2004.Joined the Group in 1984.Became chief operating officer in 1996.33 years’ experience in retail.

These five executive directors of the Group and

the four members of the executive management

are members of Sustein Management (Pty) Ltd,

the Group’s management company. Together,

they comprise the executive team which

manages the affairs of the Group.

David Sussman (56) Mias Strauss (52) Jan Bezuidenhout (49)

Gerald Völkel (44) Johan Kok (53)

11

Executive management

Arie Neven (45)Chief executive operating divisions –Barnetts, Joshua Doore, Morkels and Price ’n Pride. 24 years’ experience in furniture retail.

Athol Beeforth (57)BCom CA(SA)Chief executive operating divisions –Bradlows, Electric Express, Hi-Fi Corporation and Russells. 32 years’ experience in furniture retail.

Mark Richards (46)CA(SA) ACAGroup executive – Corporate supportservices19 years’ experience in auditing andseven years’ experience in furniture retail.

Vivian Horn (53)Group executive – Sales33 years’ experience in furniture retail.


Arie Neven (45) Athol Beeforth (57) Mark Richards (46)

Vivian Horn (53)

Non-executive directors

Independent non-executive directors

Dr Len Konar (50)BCom HDip Acc MAS Cert Tax Law DComCA(SA)Director of companiesAppointed 19 July 1995.Chairman of the risk managementcommittee and member of the audit,nominations and remuneration committees.

Maureen Lock (55)BCom CA(SA)Director of companiesAppointed 2 April 2001.

Mervyn King SC (67)BA LLB (cum laude) HDip in Tax LawChairman of the King Committee onCorporate Governance and directorof companiesAppointed 2 May 1995.Chairman of the audit committee andmember of the nominations andremuneration committees.

Martin Shaw (66)CA(SA)Consultant and director of companiesAppointed 1 June 2001.Member of the risk management, audit, nominations and remuneration committees.

Non-executive director

Ivan S Levy (66)Dip LawAttorney and director of companiesAppointed 1 December 1994. Chairman of the nominations andremuneration committees and chairmanof the board of trustees of the Group’sretirement funds.

Dr Len Konar (50) Maureen Lock (55) Mervyn King SC (67)

Martin Shaw (66) Ivan S Levy (66)

pic to comepic to come

12

13

2004 2003

Rm % Rm* %

Revenue 9 056 5 966

Investment income 24 15

Interest received 62 49

9 142 6 030

Cost of merchandise, services and expenses (6 370) (4 195)

Value added 2 772 100,0 1 835 100,0

Distributed as follows:

Employees

Salaries, commissions and other benefits 1 296 46,8 933 50,8

Government

Taxation, assessment rates and

regional services council levies 179 6,5 47 2,6

Providers of capital 622 22,4 363 19,8

Distribution to shareholders 415 15,0 160 8,7

Finance costs 207 7,4 203 11,1

Reinvestment in the Group 675 24,3 492 26,8

To provide for depreciation 94 3,4 67 3,7

To provide for deferred taxation 206 7,4 136 7,4

Reinvested for expansion 375 13,5 289 15,7

2 772 100,0 1 835 100,0

Statement of money exchanges with government

Assessment rates and taxes 16 13

Company taxes 148 24

Employees’ tax deducted from remuneration paid 164 112

Net value added tax and general sales tax (refunded)/collected 69 (4)

Regional services council levies 15 10

412 155

Value added is the amount of wealth the Group has created by purchasing and selling its merchandise. The statement above shows how this

wealth has been distributed. The calculation takes into account the amounts retained and reinvested in the Group for the replacement of

assets and development of operations.

* Restated

Group value added statement

14

Executive chairman’s report

David Sussman: Executive Chairman

“A clearly defined strategy makes the job easier, the directionis clear and the critical issues are known. It frees managementto maximise the process and anticipate the future.”

Michael Robert

15

Achieving the goals is then all about effective implementation.

Operating environment

The favourable economic conditions in the local durables retail

market prevailed throughout the financial year. The benefits

flowing from the real growth in consumers’ disposable income has

materially reduced the credit risk profile of the Group and has

further enhanced the cash generated.

Financial overview

The comparative figures for the year to 31 August 2003

(“comparative period” or “2003”) only included the results of

the ex-Profurn Limited (“Profurn”) stores for the five months from

23 April 2003.

Revenue increased by 52% to R9,1 billion (2003: R6,0 billion),

the sale of merchandise increased by 61% to R6,1 billion

(2003: R3,8 billion). The increase in revenue represents like on like

growth of 16% in the historical operations in southern Africa and

17% in the acquired businesses. Sale of merchandise constituted

68% of total revenue (2003: 64%), with the remainder being

finance charges, financial and other services.

Southern African revenue contributed 97% of total revenue

(2003: 95%). Abra grew revenue in Zloty terms by 26%.

Credit sales accounted for 50,4% of total sales (2003: 62,0%),

considerably lower than the corresponding period. This is largely

attributable to the inclusion of Hi-Fi Corporation for the full year

which is a cash business and also to an increase in cash sales in the

other chains.

It is most gratifying to note that the Group was able to increase

overall product margin to 32,3% (2003: 31,6%) notwithstanding

the inclusion of Hi-Fi Corporation which operates as a discounter

working on lower margins. Stock markdowns of R49 million

(2003: R38 million) were incurred due primarily to product

deflation. Retail prices of electrical goods declined by 11% due to

the strength of the rand and a decline in US dollar prices. This

impacted on Hi-Fi Corporation as well as the electrical goods

component of our credit chains in southern Africa. Furniture

inflation during the past financial year was 1%.

Finance charges earned increased by 31% over the comparable

period to R1,5 billion. Financial services, which includes all the

Group’s insurance offerings, increased by 44% to R1 095 million.

This combined contribution to revenue is relatively lower due to

the lower credit sales to revenue ratio and the lower interest rate

environment.

Operating expenses grew by 37% to R3,5 billion. The increase in

southern African costs was largely due to the inclusion of Profurn

for the full year.

The R306 million operating loss reflected under corporate in the

segmental analysis includes expenses of R65,3 million relating to

both historic and acquired operations which are of a non-recurring

nature and therefore cannot be allocated to the individual chains

without distorting the ratios.

■ Revenue up by 52% to R9,1 billion

■ Operating income up by 69% to R1,3 billion

■ Headline earnings per share up by 53% to 522,0 cents

■ No gearing

16

Operating income grew by 69% to R1,3 billion with the operating

margin improving to 14,0% from 12,5%.

Headline earnings increased to R871 million (2003: R453 million).

Headline earnings per share rose by 53% to 522,0 cents

(2003: 340,5 cents).

Net instalment sale receivables only grew by 1,2% to R4,5 billion.

This negligible increase is due to higher deposits, improved

payment patterns and the write-off of already fully provided for

accounts which have been transferred to Blake & Associates

Holdings (Pty) Ltd (“Blakes”). Total provisions as a percentage of

gross instalment sale receivables stand at 28,9% (2003: 31,9%).

The Group continues to insure its South African instalment sale

receivables.

Bad debts written off in the historical operations increased from

5,9% to 6,9% of gross receivables. In addition, an amount of

R101 million of fully provided for accounts from the historic chains

has been transferred to Blakes thus enabling us to focus our

attention on the front end of the book. This amount is reflected

under corporate in the segmental analysis. This increases the bad

debts written off in the historical book to 9,1%. An amount of

R107 million relating to bad debts written off on instalment sale

receivables arising at the date of acquisition of Profurn is disclosed

in the segmental analysis under corporate. This amount was

provided for at the time of the acquisition. This write off brings the

quality of the instalment sale receivables acquired in line with that

of the historic operations. Receivables’ arrears represented 12,5%

of gross receivables, down from 17,4% at the last year end. It is

significant to note that the rand amount of arrears reduced from

R1,14 billion to R798 million. The average length of the book

declined to 14,3 months.

The Group has now finalised the fair values of the assets and

liabilities acquired on the acquisition of Profurn. The amount

of R329 million initially allocated as a provisional trademark,

has been adjusted to R193 million which now reflects the amended

allocation of the acquisition values. The impact of this restatement

on the amortisation of trademarks is a reduction of R5,7 million in

the current year. The amortisation period remains 10 years from the

effective date of acquisition. The amortisation charge for future

years would therefore approximate R19,3 million per annum.

Notwithstanding significant increases in sales, inventories

increased marginally by 6,1% on the previous year.

The Group currently has no gearing (2003: 26%). Cash generated

by trading increased to R1,45 billion (2003: R816 million). This

includes a net amount of R208 million collected on closed books

of the acquired operations. Working capital cash requirements

declined from R108 million to R38 million.

Operational overview

The past year saw significant focus being placed on the

differentiation of our brands in order to capture as much of our

target market as possible and at the same time to minimise

competition between our own brands. Our direction has never been

clearer and the critical issues enjoy top of mind awareness. Our

strategy of maximising the potential of our brands through

satisfying the changing needs of our customers is entrenched at all

levels of our organisation.

The Group now administers in excess of 1,7 million current

customer accounts.

President Dwight Eisenhower once said, ”wars are won in the

planning room, not on the battlefield”. The successes achieved

over the past year are clear indications of the direction of our

strategy. However, we see ourselves at the beginning of this

journey and very real value is still to be unlocked, the benefits of

which will impact on the short, medium and long term.

The spread of our brands and their clearly defined positioning

obviously reduces risk to all investors and stakeholders. This is

illustrated in the arrear profiles of the respective brands. Reduced

risk enables our universal brands to work on lower product margin

without this impacting on profitability.

A total of 19 stores were closed in the BLNS countries. The Group

is in the process of disposing of all 7 stores in Mozambique. These

closures represent the Profurn legacy stores which were

highlighted in the prior year’s segmental analysis as operations to

be integrated, disposed of or discontinued.

BoConcept

In June we sold the master licence for “BoConcept UK”, 3 stores

and the contracts division back to the Danish parent company. In

addition we assigned another 2 leases and put the balance of the

Executive chairman’s report continued

17

business, which was in effect 3 remaining leases, into voluntary

liquidation on 29 October 2004. We remain convinced that

BoConcept is an excellent retail format. The fact that we were not

able to resolve our problems with Club 8 is in no way a reflection

on the integrity and commitment of that company. With the best

will in the world they were unable to fulfil their obligation in terms

of the “Supply Agreement”. Notwithstanding our exiting

BoConcept, we wish Club 8 every success in the future.

Abra

Our Polish operation is now on a sound footing and ready to

grow. The task that lies ahead is the opening of stores and the

development and training of our people. While much has been

achieved on the “people” side, we have a long way to go before

we can say that the Polish team has the skills, confidence and

motivation to maximise the potential of that market.

We intend to use Poland as a springboard into central and Eastern

Europe. However we need a sustainable, profitable business in

Poland before we can consider the next move.

Nedcor Alliance

During November 2004 a joint decision was taken to terminate

the Alliance with effect from 19 November 2004. This termination

will not have any material financial effect on either party. JD Group

has had various approaches from other financial institutions

“Wars are won in the planning room,not on the battlefield.”

President Dwight Eisenhower

18

to make use of our credit expertise and the extensive footprint

we enjoy. A further announcement will be made in this regard

in due course.

Blakes

The Group announced on 12 August 2004 that it would acquire

half of Unifer Holdings Limited’s (“Unifer”), (a wholly owned

subsidiary of ABSA Bank Limited) stake in Blakes, a company with

comprehensive debtors management capabilities. Subsequent to

that announcement JD Group and Unifer jointly acquired a further

5% shareholding from a minority shareholder, which brings

our holding to 27,5%. Competition Tribunal approval was only

obtained in October 2004 following which, the purchase

consideration was paid.

Blakes has a significant call centre operation. The 1 000 seat

call centre situated near Durban utilises the latest technology,

inhouse developed software and two predictive dialler platforms.

This provides a scalable platform from which JD Group can

leverage its direct marketing initiatives to its existing and new

customer bases.

Corporate governance

JD Group complies with the Code of Corporate Practices and

Conduct as set out in the King II Report on Corporate Governance

and the JSE Securities Exchange South Africa Listing Requirements.

Triple bottom line

The Group remains committed to support HIV/Aids interventions,

sound labour relations, enhanced skills training and the

development of our people in an environment which allows

employees to develop to their fullest potential. Black economic

empowerment within our South African communities remains an

integral part of the Group’s strategy.

Directorate

Mr JHC Kok was appointed as an executive director with effect

from 1 March 2004.

Prospects

This Group has never been better positioned to take full

advantage of the prevailing consumer confidence and the

buoyant trading conditions that lie ahead. The recently

announced commitment by government to infrastructural

development will most certainly extend this trading cycle. The

“peoples’ contract” overwhelmingly endorsed by this country’s

people in the last election enables our government to steam

ahead with the eradication of poverty and the creation of a better

future for all. Furthermore, South Africa’s winning of the bid for

the FIFA Soccer World Cup in 2010 will bring about a “pulling

together” of all our people, the likes of which has never been

experienced before. As we get closer to 2010 we will enjoy more

and more of the international focus. We have every confidence

that we will live up to the high expectations that South Africa as

a country has created.

The consumers’ indebtedness to their disposable income is at a

very acceptable level. The progressive fiscal policies of the

authorities have done much to instil a greater degree of

confidence within South Africa and with the world at large. We as

a country are doing so many things right. If the trading of the first

two months of the new financial year are anything to go by, we

can look forward to an outstanding 2005.

Whilst we expect compliance with the new Consumer Credit Bill

to increase costs, it will most certainly enhance transparency and

do much to protect the end consumer against reckless lending.

The team

An organisation can have all the blue sky thinking but unless it is

supported by impeccable implementation, it amounts to naught.

Mias Strauss, our chief executive officer, supported by our chief

operating officer, Johan Kok and his very able team, enable me to

say with absolute conviction that these results reflect only the

beginning of great things to come. Gerald Völkel, the Group’s

financial director together with his team of people have once

again defied the odds, still having to live with the inadequacies of

the old Profurn IT platform. Jan Bezuidenhout with his corporate

services portfolio has ensured that our net cost of funding remains

substantially below best borrowing rates. His interaction with the

investor community enables existing shareholders and prospective

shareholders to make investment decisions in our Group with the

confidence and knowledge that what they see is real. It is not

Executive chairman’s report continued

19

possible for me to mention by name all our other handpicked

executives who continue to make such a huge impact on the well

being of this Group.

Our success is underpinned by our commitment to the

development and growth of all members of the JD team. The

efforts placed by management in this regard are clearly illustrated

under the Human Resources and Strategy sections of this report.

Good business sense demands of us that all levels of management

reflect the demographic spread of our country’s population.

Currently in excess of 42% of managerial positions are held by

people falling within the “previously disadvantaged” category. We

go to great lengths to make individuals aware of the opportunities

that exist within the Group.

Social actions

In keeping with our philosophy of assisting the less fortunate it is

with a sense of pride and gratification that the Group was able

to provide financial assistance to more than 40 projects. Our focus

remains with the development of our children, their education and

poverty alleviation. Our most recent project in conjunction with

the Israeli government and Ikamva Labantu encompasses the

provision of Israeli irrigation technology and the training and

development of destitute people as farmers. The initial

results have been quite astounding. Not only has the annual

yield of crops increased by five times, but the farmers are able to

produce enough fresh produce for their own families’ sustenance

and still have surplus crops to sell. This project is now being

adopted by a number of other organisations. It is hoped that

with the success being achieved Ikamva Labantu will receive

further support from other corporates. This is surely one of the

best ways of making a difference and assisting our government in

the fight against poverty.

Thanks

Probably one of the greatest strengths of this Group is our

commitment to building strategic alliances with our suppliers of

goods, funds and services. These alliances are built on the simple

principle of ensuring a “win win” situation for all the parties

concerned. Our success is largely due to the good relationships

that have been built over the past 21 years.

We all know that no legislation will bring about inherent honesty.

Our non-executive director Mervyn King defines good governance

as “the way you behave when you are not being watched”. Over

regulation can be stifling and the cost of compliance both in time

and money is becoming more and more of an issue. Of course

there is always a fine balance between “too much” and “too

little”. Incremental costs are ultimately borne by the consumer.

I hope that at the end of the day good business sense will prevail

and that we will be allowed to get on with the job. Our

non-executive board not only provides all stakeholders with the

necessary peace of mind, but also gives our executive team a

tremendous amount of assistance and confidence in determining

the road ahead. I thank them for their input and wise counsel,

which is always so readily available.

I David Sussman

Executive chairman

25 November 2004

20

Abolition of apartheid laws

1989 sees operating margin rise above 10%.

Through the conversion of 53 stores into Score Price ’n Pride, this chain truly

becomes a force to be reckoned with.

Of course, in any business there are good times and challenging times. 1989

also brings challenge in the form of strikes disrupting sales, collections,

customer services and impacting negatively on profits.

But through staying positive, we managed to strengthen our relationships and

understanding with organised labour and finally achieve turnover in excess of

R500 million.

It is now 1991 and another breakthrough comes in the form of the first Central

Distribution Centre of 40 000 square metres being opened in Aeroton. State of the

art scanning equipment and bar coding equipment is introduced in the distribution

centres, equipment designed exclusively for the JD Group.

1991 also sees Bradlows growing to 60 stores with the debtors book exceeding

R600 million.

The Group’s value system has always been one of sharing and in that spirit,

R1 million is invested in the Housing and Educational Trust. This investment

results in a continual improvement in the living standards of our employees.

Times of growth are often followed by times of challenge. By 1991, crime and

corruption rises, unemployment is a harsh reality and confidence is low.

We mourn as one of SouthAfrica’s leaders, Chris Hani,is tragically assassinated

By 1993, 10 years after our humble beginning, the dream of being the

biggest and the best furniture retailer becomes a reality when JD acquires the

Rusfurn Group.

This deal brings with it the brands of Russells and Electric Express and the Group

can now satisfy the aspirations and needs of all South African consumers.

The JD Group now has in excess of 500 stores and over 10 000 employees.

The dream becomes greater than ever before.

Now the vision is “to become a global leader in our fields of expertise.”

1989

1991

1993

One of the world’sworst divisions ofhumanity crumbles


21

By 1994 turnover more than trebles to over

R2 billion and the share price shot from R3,50 to an

awe inspiring R12, a fitting tribute to JD’s people.

The JD Group supports the King Luthuli transformation

centre, an organisation committed to non-violent

transformation and voter education as South Africa

prepares for its first democratic elections.

Training and development remain a vital priority and

lead to the establishment of the JD University.

In 1994, your Uncle in the furniture business turns 21

and Russells celebrates its 50th birthday.

The JD Group has been built on people helping each other

and so despite hard times the Group’s housing assistance

programme grants loans to over 1 110 employees.

Homes furnished with love, and a commitment from

a company that cares.

The first McDonaldsin Moscow tells theworld the Cold War isreally over

The swearingin of NelsonMandela as thepresident of theRepublic ofSouth Africa

1994

1992

1990

“Small opportunities are often the beginning of great enterprises.”Denosthenes

23

“. . . and our responsibilityto the planet and the communitieswe live in.”

Social citizenship Lerato Love Home

Social impacts

Corporate objective

To meet our social responsibilities through providing a better lifefor the disadvantaged and less fortunate members of thecommunities in which we trade.

Policy

The focus of the JD Group Corporate Social InvestmentProgramme is on the development of individual and communityself sufficiency through education and training, skills developmentand job creation.

Projects are selected on the basis of sound management,sustainability and the potential to be replicated.

We attempt, in certain instances, to forge partnerships with otherstakeholders to maximise funding.

A percentage of budget is allocated to smaller, once off annualdonations to organisations which are acknowledged as providingspecific services to their community.

Funding is allocated to secular organisations only.

No funding or sponsorship is granted for individual endeavours.

To ensure openness and transparency, no funding or sponsorshipis granted to political parties.

Funding and sponsorship

JD Group remains aware of the need to participate in communityprojects. In a country like ours, where such enormous disparityexists between the “haves” and the “have nots”, it is incumbenton us to participate in activities that would normally beundertaken by governments in developed countries.

JD Group is also aware that no South African Government, ofwhatever political persuasion, has the practical means to providethe social services equivalent to those enjoyed by developednations, nor will it have the means in the foreseeable future. Forthis reason, the contributions of the private sector are absolutelyvital to the development and upliftment of the disadvantagedmajority of the South African population.

The Techno-agricultural Innovation for Poverty Alleviation (Tipa)project is based on the concept of the African Garden Market,part of the Food Security for Africa initiative presented in 2002 atthe World Summit for Sustainable Development (WSSD) inJohannesburg by the Israeli Department of Foreign Affairs.

Both Tipa and the African Garden Market make use of the FamilyDrip Irrigation System (FDIS). The FDIS, state of the art irrigationtechnology, developed in Israel, has been combined with gravitypowered low water pressure, which allows traditional farmers toenjoy all the advantages of drip irrigation at low cost. Without theneed to introduce any further technology, each FDIS project is ableto cover an area up to 500 m2.

JD Group, together with Ikamva Labantu and The Embassy ofIsrael in Pretoria, established a Tipa demonstration project inCradock in the Eastern Cape. Three local people were selected bythe community to be trained to support the local farmers.

Tipa has established a business orientated co-operative of farmerswho each maintain their independence, while sharing training,the buying of necessities, security arrangements, and possiblemarketing. The co-operative can then establish business initiativeson its own, or participate as a supplier to existing enterprises.

Following the achievements of Tipa in Cradock, JD Group hasasked the Embassy of Israel and Ikamva Labantu to roll out

24

additional projects throughout South Africa and to provide thenecessary ongoing technical support.

During the period under review, JD Group contributed someR1,6 million to the Tipa project.

We continue to support numerous education and otherinstitutions. The major beneficiaries are listed below.

St Enda’s Community Centre, a highly respected secondary schoolin Joubert Park, Johannesburg, was originally established asFreedom School in one of our warehouses in 1985.

Claremont Child Care, an institution which assists destitutechildren, with whom we have a long association.

Little Champs Sports Academy runs two facilities, in Alexandraand Springs, which provide pre-schoolers with physical, emotionaland social development, embracing teamwork, sharing andUbuntu. A third academy is scheduled to open in due course.

The Topsy Foundation, situated in Grootvlei, Heidelberg, Gauteng,is a private and corporate initiative with its core function being toprovide a multifaceted approach to HIV/Aids in an attempt toensure that South Africa does not suffer another “lostgeneration”. It is a home which provides sanctuary for Aidsorphans, and runs an “Adopt a Child” programme.

The Mitzvah School, a registered school and examination centre,provides quality tutoring for students from Alexandra in their finalyear of schooling. The school caters for 50 students and hasconsistently produced a pass rate exceeding 90%.

Lerato Love Home is a place of refuge in Alexandra for babies,children and young adults, the majority of whom are victims ofabuse, abandonment, neglect and HIV/Aids. Lerato Love Home

will be relocating to a children’s community centre which willconsist of three residential units and an undeveloped vacant lotneighbouring Alexandra. We acknowledge the significantcontribution made by Bidvest Group to this facility, as well asvarious contributions of money, clothing and food made byJD Group suppliers, and employees.

The goals of Lerato Love Home are to:

■ secure and develop 18 community centres nationwide;

■ encourage residents to become self-sufficient; and

■ provide Aids education and life skills.

The Bird Street Teacher Training Campus of the University of PortElizabeth.

Up With Science, a science enrichment programme for seniorsecondary school pupils presented by the Centre for ScienceEducation at the University of Pretoria.

Currently 200 children of employees are receiving financialassistance from JD Group for their studies.

For the past 10 years corporate head office employees have beendonating blood in conjunction with the South African BloodService on a regular basis at JD House.

HIV/Aids report

JD Group has for some time recognised the gravity and potentialimpact of the evolving HIV/Aids epidemic on its customers,markets, operations, workforces and employee benefits.

In 1988 the Group undertook a study to estimate the potentialimpact of HIV/Aids on its diverse customer base of approximately

St Enda’s SchoolSocial citizenship continued

25

one million account holders. Based on these projections, theGroup embarked on a repositioning strategy to minimise theimpact of the epidemic on its current and future markets via acombination of the following:

■ expansion into other markets such as Poland;

■ discontinuation of certain chains within the Group andadjustments to other chains;

■ decreased exposure to geographical high risk areas;

■ introduction of additional products such as financial services;and

■ improved credit risk monitoring and management.

The above repositioning strategies are now bearing fruit. The

Group’s retirement and life and disability insurance schemes were

also restructured to minimise the impact of HIV/Aids.

Together with the Department of Health, the Group maintains an

HIV/Aids awareness programme at all major workplaces.

There is a disciplined approach to the gathering and analysis of all

relevant data, which allows for regular updates of business models

that monitor both the internal (human resources) and external

(markets, business partners and customers) impacts of the

epidemic. As a result, management are able to make informed

decisions about HIV related business strategies.

In addition, the Group continues to foster non-discriminatory

and empathetic workplace environments that ensure that HIV

positive employees are managed with care and compassion. All

HIV positive employees have access to high quality disease

management programmes, either through their medical scheme

or state facilities, and are encouraged to access these facilities.

Mitzvah School

26

South Africa become champions of the 1995Rugby World Cup . . .

Mobile phone technologyis so entrenched, SouthAfricans begin to talk toeach other in ways they’venever done before

This year is no different. Taking the good

with the bad, the Group understands the

task of tackling the future, adapting to

circumstances, installing anti-hijack devices

and armed guards on delivery vehicles,

while at the same time introducing

innovative concepts like the EVA principle,

empowering store managers to run their

stores as if it were their own business.

As adapting to change becomes the norm,

this time the Giddy’s chain is repositioned as

Electric Express, another success story in the

JD dream.

In 1997 the JD Group adopts the Alexandra police station, a move to develop

management skills as part of Business Against Crime and we take great delight in

establishing a much needed and deeply appreciated park in Mamelodi. A refuge for

the people, happily named the President Mandela Park.

The year of 1997 also sees competency based modular learning introduced. This is a

programme designed to create a learning culture and at the same time 25% of credit

applications are rejected to improve the debtors book, not to mention the introduction

of the owner driver empowerment scheme.

1999 sees innovative

financial services

introduced with

12 successful test sites.

These facilities are to help

customers and to give the

company a new edge.

This positive move is tempered by ongoing security

problems.

369 stores are burgled which is not only disruptive

but costs millions.

1995

1997

1999


27

The share price doubled to over R23 and our market cap to over

R2,5 billion in less than 12 months, whilst gearing drops by 50%.

The world is moving fast. Things are changing by the day, the hour,

the second. We are edging closer to the new millennium and technology

is the new kid on the block. Never afraid of change, embracing new

opportunities, the Group hits the technology frontier as satellite

communication systems are installed and electronic data interchange

provides management information and improved communication

with suppliers.

The company continues to grow, market

cap breaks R4 billion, 70 stores are opened

and we pay R100 million in tax.

Penny Heynsscoops 3 OlympicGold Medals

By 1998 e-mail is all therage, dot.coms are happening,the world-wide-web is it!

The new Millennium dawns and a potential merger between JD

and Ellerine Holdings is prohibited by the Competition Tribunal.

The good relationship with organised labour leads to the

conclusion of a two year wage agreement bringing smiles to

everyone in the company.

2000 becomes another landmark year for JD as the Group’s global

dream is realised by acquiring Abra in Poland. This is a proud

moment and could not have been possible without the ongoing

support of suppliers, investors, JD people and customers, a

winning combination. The Group continues to grow with the share

price reaching an all time high of R50!

1996

1998

2000

28

21 years young with a fresh face to take the JD Group forward, we looked at the brands under our banner and decided to refresh them. To prepare us for the years ahead,

to keep up with the times. To stay contemporary without forgetting our heritage. A little face lift that will

keep our brands in tune with the times.

JD Brands – a fresh face

Each of the Group’s nine chains or brands has its own identity,

merchandise range and market profile, concentrating on offering

customers a wide range of value for money quality furniture,

appliances, home entertainment and consumer finance products,

supported by high level of personal service.

Following a comprehensive analysis of each chain’s branding,

competitors and target markets, a differentiation strategy has

been approved and implemented, with varying degrees of change

required for the different brand identities. Pilot concept stores in

five chains, to test the new look and feel have been exceptionally

well received by customers. Concept stores for another three

chains will be completed by calendar year end. The new or revised

identities will be incrementally rolled out across stores in each

chain over the next few years.

Abra – practical solutions for your home

Established in 1990 and acquired

in December 2000 Abra operates

36 stores (2003: 26) in major cities and

towns in Poland, targeting the middle

to lower mass market and offering an

extensive range of furniture products.

Piotr Krzanowski (50)Chief executive – 14*


Kazi Borowicz (43)MScFinance and administration – 14*

Piotr Lisowski (36)MScMarketing and merchandise – 11*

* years experience in furniture

retail

Mission

To become the preferred leading furniture retailer in Central

Eastern Europe through the supply of consistent quality products

and services to our customers, with the collective involvement and

contribution of all our employees and business partners.

Review

Abra ended the year with 36 stores in 31 cities and towns. The

chain expanded its base by opening 13 new stores. At the same

time the existing base was optimised, resulting in the closure of

three underperforming stores.

The customer survey carried out as part of a brand positioning

and communication strategy confirmed our position in targeting

the middle to lower mass market. A new catalogue was launched

in May, starting the process of building brand awareness across

the country.

The foot traffic counters installed indicated that 200 000 people

had visited our stores and in addition the number of customers

visiting our website showed a healthy growth.

Gross margin has improved consistently over the year and the

average transaction value has also increased. Stock turn has

improved significantly.

Outlook

13 New stores, many of which will be a smaller format, and one

new warehouse are budgeted for in 2005, which will give Abra

a presence throughout Poland.

The new concept of catalogue showrooms will be tested in smaller

towns and the option for franchise operations remains open.

Despite the rapid network growth the head count at head office

did not grow exponentially, however, the move to a new head

office in March 2005 will accommodate an increase in employee

complement as the store base grows.

With the increased critical mass of the store base, Abra is

expected to make a small contribution towards Group profits in

2005 and a greater contribution from 2006 onwards.

29

30

Barnetts – service and value you can trust

Established in 1896 and acquired in

2003, this 108 year old business retails

entry level and middle of the range

household merchandise and

appliances on affordable terms,

predominantly in rural areas. Barnetts

has stores in eight provinces of South

Africa and operates 100 stores.

Mission

To establish Barnetts as the leading furniture retailer in its

market segment.

Review

In a year characterised by strategic repositioning, consolidation

and rationalisation, Barnetts recorded an excellent performance.

Top line sales grew by 17,7% like on like and margins improved.

A new range of products was introduced which proved very

successful. Costs were well controlled and the chain recorded a

marked improvement in operating efficiencies. The state of the

debtors book improved considerably, with arrears at record lows

and collections well ahead of sector averages. The decrease in the

closed book size and improved risk profile of the current book

reflect better human resources deployment and improved

collection methods.

Information technology processes were integrated and operating

processes aligned to those of the JD Group. Other key

developments included the introduction of an electronic credit

scoring system, improved merchandise planning and procurement

processes, the roll out of people development programmes and a

business improvement initiative. Collectively, these have resulted

in cost efficient business practices.

The new brand identity has already increased awareness amongst

employees and customers. Supported by a policy of exceptional

service and consistently adding value, Barnetts is well positioned

for the future.

Outlook

Through enhanced brand building, differentiated products and

services and the development and empowerment of our

employees, Barnetts will become a leading and highly profitable

furniture retailer in its market segment. The focus will remain

on responsible credit granting practices, effective debtors

management and cost efficient collection methods.

Toy de Klerk (44)

Chief executive – 24*


Piet Trichardt (46)Operations – 17*

Burnette van Breda (47)Debtors – 27*

Andreas Hinrichsen (48)Marketing – 20*

Hennie Spies (53)Merchandise – 30*

Donny McCulloch (50)Human resources – 30*

* years experience in furnitureretail

31

Bradlows – you’re the difference

Established in 1903 and acquiredin1988. Bradlows has entrenchedits appeal to the aspirationalhomemakers’ market, offeringbranded appliances, homeentertainment products and superiorquality furniture on affordable terms.

Mission

To provide quality products and services at competitive prices and

thereby exceeding customer expectations.

Review

Bradlows operates through 84 stores in major centres in South

Africa. This team also manages the 16 Supreme operations in

Botswana and the two Bradlows stores in Swaziland.

Bradlows has further enhanced the consumers unique shopping

experience by introducing merchandise which is more affordable.

As a result sales have grown substantially at improved gross

margins, resulting in a significant growth in bottom line profit.

Research has shown that the Bradlows image of providing the

aspirational customer with exceptional service remains entrenched

and sets it apart from the rest of the mass credit furniture market.

The Bradlows debtors book remains in excellent condition with

reduced arrears and improved instalment collection rates.

Mike Roberts (49)



Corrie Neven (49)Operations – 21*

Arthur Flemix (57)Operations – 38*

Willie van Zyl (41)Debtors – 20*

Mike Shimmon (39)Marketing – 8*

Conrad Kleingeld (37)Merchandise – 11*

Robin van der Merwe (50)IPM DipHuman resources – 15*

Andrew Ross (38)Logistics – 13*


Outlook

The differentiation process which commenced during the current

year will gain momentum during the new year with the new

branding being introduced in advertising and store identification.

Stores are being modernised in terms of the new strategy and

additional focus is to be placed on customer service in terms of the

Bradlows promise, “you’re the difference”.

32

Electric Express – we’ve got the power to beat any price on credit


1993, Electric Express specialises in

household electrical appliances and

home entertainment products

through 114 stores which offer

professional expertise, exceptional

customer service and the best

discount prices for cash or on

easy terms.

Mission

We will achieve our vision by having highly skilled and motivated

employees who offer extraordinary service to our customers on a

broad range of quality products at the most competitive prices in

exciting, conveniently situated stores.

Review

Electric Express’ unique low cost trading formula, which offers

domestic electrical and entertainment products at discounted

prices on credit, has ensured that they remain the market leaders

in their sphere of operation. The continued strengthening of the

rand resulted in price deflation but a significant increase in unit

sales has ensured growth in sales at improved gross margins.

Debtors management remained excellent with the percentage of

arrear instalments being one of the lowest in the industry.

Outlook

The already differentiated store look has been further enhanced to

provide a look that reflects the exciting Electric Express brand.

Even more aggressive promotional activity and merchandising will

see a continued growth in the return on assets.

Bill Chalmers (53)



Albert Fick (53)Operations – 4*

Herbie Lindhorst (43)Debtors – 20*

Greg Smart (34)Marketing – 9*

Craig Robertson (40)Merchandise – 16*

Millicent Nortjé (48)Human resources – 29*


33

Mission

Lowest prices, on every product, everyday, guaranteed.

Review

Hi-Fi Corporation’s mission has ensured that they maintain their

status as “category specialists” by dominating their product

market. Unit sales for the review period have increased by 72%

although this is offset by price deflation, caused by the reduction

in imported supply prices, due to the strengthening of the rand

against the dollar. Notwithstanding, sales for the year increased by

more than 40% and gross margins remained intact.

Excellent cost controls, together with sales and gross margin

performance, has resulted in increased trading margin and return

on assets.

Outlook

The return on assets being achieved by Hi-Fi Corporation and its

relatively narrow trading footprint, offers an opportunity for this

chain to be expanded into the market place. An expansion

programme, which will ensure that the store base will increase

significantly over the next three years, is in place. In order to

accommodate this expansion, a programme to review business

processes, systems and people requirements is being embarked

upon. This will ensure a smooth transition into the next life cycle

of the chain and will result in maximised Economic Value Added.

Founded in 1993 and acquired in

2003, Hi-Fi Corporation is the largest

audio and visual warehouse in the

southern hemisphere, retailing

electronic goods and household

appliances to the mid and upper

end of the consumer market through

15 stores in South Africa and one

each in Namibia and Botswana.

Diane Bowran (38)Chief executive – 12*


Matthew van der Walt (32)Operations – 8*

Ryan Grill (35)Marketing – 8*

Alec Goodman (49)Merchandise – 28*

Debra Teles (38)Human resources – 15*

Martin Barbour (47)Logistics – 10*

Riekie Susini (41)Administration – 4*

* years experience in furniture retail

Hi-Fi Corporation – the lowest prices, on every product, everyday, guaranteed

34

Mission

To offer a wide range of furniture, household appliances,

entertainment products and financial services, geared by a

philosophy that drives an innovative business approach and an

extraordinary level of service to internal and external stakeholders.

Review

Joshua Doore recorded good results for the third consecutive year,

achieving sales growth of 15,3%. This reflects the benefits of its

focus on guaranteeing the lowest prices in selected product

categories and aggressive marketing through its own catalogue

and electronic media.

In a highly competitive sector, margins were protected by

innovative sourcing of value added local and imported products.

The continuous focus on instalment collections, with a

concomitant improvement in cash flows, further improved

returns. Cash flows were also boosted by an increased level of

cash sales during the year.

Joshua Doore pays particular attention to employee development

and succession planning, recognising that well trained employees

will deliver premium results. Effective management training is

conducted via development programmes, in which individuals are

developed to their full potential. This ensures a pool of trained

people ready for higher positions, as reflected in Joshua Doore’s

excellent track record of internal promotions.

Outlook

Given a stable exchange rate and low interest rates, the market

remains buoyant. Joshua Doore will capitalise on this via increased

promotional activity and constantly reviewing its merchandise

range to best satisfy customer demand.

Continued focus on its differentiation strategies and business

performance improvement, supported by expansion of its store

base, will allow Joshua Doore to unlock more value and ensure

continued real growth in the next financial year.


1986, Joshua Doore is the largest

furniture, appliances and home

entertainment products discounter

in South Africa with 146 stores.

James Gibson (53)Chief executive – 32*


Fanie Venter (40)Operations – 19*

Johan Delport (55)Debtors – 35*

Christo Viljoen (45)Marketing – 25*

Fred de Jager (55)Merchandise – 33*

Brian Biccard (54)Human resources – 30*

André Barnard (42)Logistics – 20*


Joshua Doore – your uncle offers a discounted range on credit

35

Mission

We offer a unique company backed two year guarantee on

quality, affordable merchandise provided by dedicated,

professional people at exceptional service levels.

Review

During the year Morkels was successfully restructured to align its

business to the JD Group trading formula. Its product range was

refined to offer its target market affordable, quality merchandise.

Aggressive marketing of this more competitive offering, backed by

the strength of its well known two year guarantee, resulted in

Morkels increasing market share. Top line sales rose by 15,9% like

on like.

The debtors book performed extremely well during the year,

particularly on the collection and management of bad debts,

resulting in a substantial reduction in arrears. An online

automated credit scoring system was introduced late in the

financial year which will further improve the debtors book.

Morkels’ integration into the JD Group has been extremely well

controlled, reflecting the strength of their middle management,

the commitment of all employees to manage the transition and to

deliver on shareholder expectations. Service and quality continue

to differentiate the Morkels brand.

Outlook

Morkels will continue to capitalise on the extensive JD Group

infrastructure and selectively expand its geographical footprint

within the boundaries of South Africa. The focus will remain on

improving operational efficiencies, managing expenses and

optimising its excellent supplier relationships in order to provide

discerning customers the quality, affordable products and services

they demand.


2003, Morkels operates 113 stores in

major cities and towns in South Africa

and Botswana. Morkels appeals to the

aspirational customer, offering branded

appliances, home entertainment,

computers and quality furniture,

on affordable terms.

Jannie Els (55)Chief executive – 36*


Rowland Jonck (44)Operations – 22*

Charl du Plessis (38)BJurisDebtors – 12*

Peter De Backer (39)Marketing – 19*

Colin Bresler (41)Merchandise – 5*

Sue Lewis (43)Human resources – 16*

Pat Kimmince (39)Logistics – 20*


Morkels – your two year guarantee store

36

Mission

To improve our customers’ lifestyle by providing an affordable

range of quality products and services in a caring, respectful and

honest environment, at exemplary levels of customer service

through competent and proud employee.

Review

The benefits of repositioning the Price ’n Pride brand emerged

strongly during the year, with top line sales growth of 22,7%

and a marked improvement in the debtors book, reflecting

the appeal of the products and service offering in the target

market. Independent market research has verified the accuracy

of this repositioning and its attractiveness to an ever growing

customer base. The focus on business performance improvement,

productive employee levels, performance based rewards and

effective distribution strategies has further improved service levels

and profitability.

Over the past three years Price ’n Pride has instilled an

entrepreneurial culture throughout the chain, resulting in

healthy competition between its people for recognition and

acknowledgement of their professionalism by customers.

Outlook

Price ’n Pride is projecting top line sales growth of 20% for 2005,

with further improvements in all indicators on the debtors book.

Continued focus will be placed on the development of the chain’s

people with appropriate recognition for outstanding performance.

Established in 1983 as the founding

chain in the Group and repositioned

to cater for a more aspirational

market. Price ’n Pride operates

118 stores in urban and rural

communities throughout South Africa

and Lesotho, offering excellent

service and affordable products

to its customer base.

Len Rundle (49)BTechChief executive – 25*


Ian McKay (38)Operations – 16*

Pieter Labuschagne (58)Debtors – 28*

Neil McLean (48)Marketing – 31*

Laurie Barnard (46)Merchandise – 22*

George Annandale (40)Human resources – 5*


Price ’n Pride – we treat you like our only customer

37

Mission

Differentiate ourselves from our competitors by offering an

innovative range of furniture products, appliances and financial

services through competent employees, thereby exceeding the

expectations of our target market.

Review

Russells, with its large national footprint, continues to be the

largest contributor to the Group’s profit performance. Aggressive,

creative, highly successful marketing and merchandise campaigns

have resulted in turnover growth well ahead of the market. This

has been supported by a strong focus on operational disciplines

and efficiencies, resulting in very positive cash flows and a

consequent excellent return on assets.

Russells pioneered the differentiation drive. Fourteen stores have

been converted to the new look, supported by improved customer

facilities and service. Results from these stores have validated the

acceptance of our new look and feel by the target market.

Management development through various programmes has

ensured a steady flow of trained talent to provide for succession.

Outlook

Russells is perfectly poised to take further advantage of the

buoyant market and increase its market share even further. The

recently introduced programme for Business Performance

Improvement will ensure that efficiencies continue to add

economic value.


1993, Russells operates 199 stores

in major cities and towns in South

Africa. Customers enjoy affordable

terms on quality furniture, branded

appliances and home entertainment

products.

Wietske van der Westhuizen (51)Chief executive – 25*


Philip Kruger (42)BComOperations – 14*

Ronnie Mostert (51)Operations – 30*

Tokkie Combrink (62)Debtors – 37*

Wikus Labuschagne (45)Debtors – 25*

Kobus Minnaar (51)Marketing – 17*

Pieter Schoeman (48)Merchandise – 23*

Barry Dell (49)Human resources – 10*

Rens van Rensburg (54)Logistics – 22*

* years experience in furniture retail

Russells – your home lifestyle partner,quality guaranteed

38

Our world changed onSeptember the eleventhforever, and keepschanging every day since

Mark Shuttleworth – first South African in space

2001

2002

Joshua Doore opens the doors of its

150th store.

Interest rates are riding high, while the rand

drops to a shocking low, factors that impact

on consumer confidence and resulting in the

share price dipping to R16.


39

Score is absorbed into a repositioned Price ‘n Pride transforming a loss of R7 million into

a profit of R44 million. A huge achievement by our people and testimony to their

unwavering support.

In the spirit of sharing good fortune, JD continues to invest in the lives of people in the

communities. The company launches The To Life Trust which supports the Lerato Love

Home in the Alexandra township.

The Group now turns 18.

2003 The Group, never forgetting the importance of people,launches the Retail Leadership Development Programme,

opens the JD Group learning academy and with the

sponsorship of Price ’n Pride and Joshua Doore sets

up two Little Champs Academies, focusing on

pre-school kids.

The JD Group is in a stronger position than ever and

acquires the Profurn Group. The jewels in our crown,

now include Morkels – “your two year guarantee store”,

Hi-Fi Corporation with it’s unique trading formula and

Barnetts – with a rich heritage of more than 100 years.

The Group now consists of 1 000 stores, employs over

16 000 people, drives a fleet of 2 300 vehicles and

purchases goods for resale in excess of R4 billion a year.

40

The corporate service departments provide the backbone of support to the chains. Each department has a

field of expertise employing people with specialist skills to maximise the service they give to the chains.

Corporate services

21 years young with the expertise to support and take theJD Group forward.

41

Ensuring that Group credit

management strategies, policies and

procedures are conceptually sound

and observed in all operations.

Review

Good progress was made with the fine tuning and enhancement

of the Group’s credit application and scoring systems, which now

include sophisticated fraud detection models. All credit granting

chains in the Group have been linked, online and in real time, to

the system, which is one of the most efficient and comprehensive

of its kind in the consumer credit industry.

Development of the Group’s new automated debtors collection

system, which will function in conjunction with the about to be

launched PeopleSoft operating system, is well advanced. Roll out

of these systems to the chains will commence, in earnest, in the

first quarter of 2005.

The emphasis on quality customer acquisition, identification and

categorisation of credit risk and fine focus on debtors delinquency,

down to individual account level, has reaped gratifying rewards

and led to significant improvement in the overall quality of the

Group’s debtors books. This emphasis and focus has become and

will continue to be a way of life at JD Group.

Outlook

The quest for better control through automation and the

employment of world class technology and methodology,

together with unwavering management focus, will ensure that

customer service is enhanced, collections maximised and bad

debts minimised, leading to the unlocking of opportunities for the

broadening of the Group’s reach within the consumer credit

market place.

Dick Behrens (64)

Group executive – Credit and

administration – 45*


Herman Bakkes (44)BCom(Acc) MBADebtors – 20*

* years experience in furnitureretail/IT

Credit and administration

42

Review

The main focus of the period under review was characterised by

the continued integration and alignment of the various Profurn

systems and processes with the existing systems. In addition, the

budgeting and forecasting process was revised, and included the

relevant modelling for the Business Performance Improvement

initiative within the Group’s chains, which will remain one of our

focus areas.

The implementation of the PeopleSoft operating system into a

number of stores required significant preparation and testing and

will be an ongoing process throughout the new year.

Outlook

In addition to the PeopleSoft implementation process, the

department will focus on the re-engineering of the value chain

within finance department and strive to increase the level of

electronic integration between both internal and external systems,

including those of the banks and other stakeholders. Training and

development of employees will continue and include candidates in

various management development programmes.

Responsible for the financial

accounting and reporting for

the Group.

Leslie van Doesburgh (48)BComptGroup executive – Chain finance – 28*

Ian Thompson (36)BCom BAcc CA(SA)Group executive – Head office finance andtreasury – 13*


Johan Breytenbach (39)BComFinance – 16*

Roelof Cornelissen (33)BCom (Hons) CA(SA)Finance – 11*

Lucia Hefer (40)BCom (Hons)Finance – 19*

Sanette Oberholzer (47)BComFinance – 27*

Susan Olivier (47)Finance – 30*

Tracey Rood (36)BCom BAccFinance – 14*

Elmien Rossouw (41)BCom (Hons)Finance – 8*

Fanie van der Merwe (36)MCom CA(SA)Finance – 14*

* years experience infinance/banking/auditing

Finance

43

Review

The role of fleet management is to purchase the most appropriate

commercial and sedan vehicles for the Group’s needs. Careful

selection ensures a cost effective and efficient delivery service.

Fleet management administers these vehicles and provides the

management information systems to run the fleet in the most

productive manner. The department has integrated the fleets from

Profurn and JD, balanced the portfolio and disposed of vehicles

that were surplus, uneconomic or inappropriate to the needs of

the Group. The department has been successful in maintaining

the fleet in a good condition and minimising running costs.

Strong relationships have been forged with major suppliers. The

purchasing power of the Group has ensured highly competitive

vehicle purchase prices, as well as maximised vehicle disposal value.

Outlook

As operating costs for transport continue to increase so the need to

be more productive and manage costs to the finest detail becomes

more important. Management information will be enhanced to

facilitate the close monitoring of costs and productivity.

Fleet management strives towards being a world class customer

service based department in all aspects of its operations.

Clive Dicks (59)

Fleet management executive – 41*

* years experience in retail/financialservices/consulting/transport

Managing the procurement,

maintenance, administration,

insurance and disposal of a

fleet of over 2 600 vehicles.

Fleet management

44

Review

The focus this year shifted from integrating the Profurn business

into JD towards enhancing and fine tuning the efficiencies and

effectiveness of the human resources business process value chain.

Final consolidation of all retirement funds and medical schemes for

employees has been completed. Employees can now look forward

to more professional services and timeous communication.

Since inception in April 2003, the JD Group Learning Academy has

hosted over 11 000 delegates. This bears testimony to the Group’s

drive towards and commitment to the ongoing training and

development of its people. Two additional leadership

development programmes were introduced at general

management and executive levels. These programmes have the

added credibility and prestige of being accredited and partnered

with the University of South Africa from 2005.

The Group was selected as the pioneer company to partner with

the Wholesale and Retail Sector Education and Training Authority,

in a R1 million learnership project for people with disabilities. The

success of the project culminated in a graduation and certification

ceremony at JD House on 19 November 2004.

Responsible for training and

development, employee relations,

remuneration administration and

employee benefits. The department

enhances business performance

by enabling, providing and

implementing best practice people

management solutions.

Lindsay Mentor (44)IPM Dip CPIRGroup executive – Humanresources – 16*


Christine Grobler (37)BA (Hons) M(Phil) Labour Law and Employment RelationsEmployee relations – 19*

Rénier Krige (37)BCom SMPTraining and development – 15*

* years experience in humanresources

Annual negotiations for 2004 were concluded after just one

sitting, a clear indication of management’s transparency in sharing

relevant information for the negotiations and organised labour’s

(SACCAWU) appreciation of the information.

An industrial relations training programme for managers and shop

stewards, facilitated jointly by HR managers and full time shop

stewards, was successfully launched in 2004 and has significantly

contributed to fostering sound relationships between labour and

management at chain level.

Outlook

The launch of the new HR technology platform in the coming year will

provide the chains and service departments, through their respective

HR practitioners, with a real time analytical capability to more

effectively and efficiently manage the Group’s human resources.

Meeting and exceeding the Group’s employment equity policy and

plan, through the focused continuation of training and development

of our people, remains top of mind for the department.

Human resources

45

Comprises a direct audit services

division, a centralised audit

function and a forensic audit division.

The 70 auditors have an appropriate

balance of operational and audit

experience. This division is also

responsible for security operations

in the Group.

Review

Over 1 535 audits were conducted during the year at Group

operations, locally and abroad, reflecting the multi-skilled

expertise of our auditors and entrenching the Group’s internal

audit function at the forefront of its field.

Much focus was applied during the year to enhance appropriate

audit processes for the Group across the various operating systems.

The use of centralised auditing techniques continues to be enhanced

through the effective use of audit interrogation applications.

The forensic audit function managed 3 980 incidents which varied

from minor to more serious incidents. The crime call centre

has produced valuable information and is realising significant

cost savings.

Incorporating safety and security functions into this department,

under the auspices of the new safety and security committee, has

improved cost efficiencies. Various initiatives have been

implemented to add value and reduce costs.

Pieter Pienaar (35)

BCom

Internal audit executive – 13*

* years experience inretail/auditing

Outlook

Internal and forensic audit provides assistance with the

integration of multiple systems and will develop new audit

programmes for the new PeopleSoft operating system.

Centralised auditing techniques will be further developed,

especially on the back of the central database in PeopleSoft.

An external quality control review will be conducted to ensure the

department is operating effectively and efficiently.

Internal and forensic audit

46

Review

Following the integration of the legacy Profurn chains in the previous

year, there were two main thrusts. Firstly the integration of the

Frontier credit scoring engine to the Morkels and Barnetts chains and

secondly the enhancement of management information for these

two chains. This required the stabilisation of the store processing

system and the ability of disparate systems to interact.

In line with our end goal we have implemented the PeopleSoft

operating system, on a pilot basis, in six stores. This has been

running for a number of months and the major teething problems

have been resolved. The integration of PeopleSoft into the new

debtors collection system is nearing completion, with the first pilot

due to be rolled out mid November. Full roll out of the integrated

PeopleSoft system should commence early next year.

Implementation of the PeopleSoft system will require ongoing

improvement in the reliability and manageability of the network.

This remains a key focus going forward.

Supports the operational and

management information system

needs of the Group via the

rigorous application of formal

information architecture, software

quality assurance and a process of

continuous improvement in the

information system operation.

From an IT operations point of view we have commenced with the

implementation of the Microsoft Operations framework which

incorporates ISO standards. This initiative is in line with the

philosophy of continu

21 years young annual report 2004 - sharedata · established chain, barnetts, has now traded for...

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