All JD’s brands except Hi-Fi Corp performed in line with expectations.

HILTON TARRANT: David Sussman is executive chairman of the JD Group and joins us now. David, JD Group revenue up 2.5% to R12.9bn for the year. Operating profit up over 6%, headline earnings per share, though, down 85%. I noticed an interesting beginning to your results statement this morning. A quote from General Alexander Haig, saying that "Unmanaged change becomes chaos, unmanaged stability becomes stagnation." What's behind that?

DAVID SUSSMAN: Well, I think that if you consider what's happened to JD over the last 12 months, there's been some real fundamental changes. And the changes were so critical and vital that without well-managed change it could have crippled the business. We separated financial services from retail; they are now two stand-alone businesses. That was a dream of mine way back in 2006, and it's now fulfilled. It's behind us. The execution was exemplary, and I'm delighted with what we've achieved. And, just to put the bottom-line results in context, if you take out the one-off tax settlement and the non-recurring restructuring costs of R98m, our diluted earnings were 2% down on the previous year at 295c.

HILTON TARRANT: David, looking at the overall business, you suggested at the half-year that the worst was definitely over, and it seems like you've been vindicated.

DAVID SUSSMAN: Ja, absolutely. I think the second half confirms that. We are seeing our debtors book now performing very nicely. You know, we did take a knock. We knew that with the new model the initial impact would be a deterioration in the book, and now we are outperforming the decentralised model. Last month we achieved our best collection month in 15 months. So now you've got absolute focus on the financial services side, you've got total focus on the retail side, and it is very clear what has to be done.

HILTON TARRANT: Across your portfolio of stores, all your brands except Hi-Fi Corporation performing in line with expectations. This was in years gone by the darling of the group but, by your own admission, a very poor trading performance at Hi-Fi Corp.

DAVID SUSSMAN: Yes, Hi-Fi Corp has undergone a total makeover. We have had to put in a brand-new management team, we've re-looked at the merchandising range, our new store format has been very well received. These results reflect an 11% year-on-year decline in the top line but, I've got to tell you, over the last couple of months Hi-Fi has been performing in excess of 10% year on year. So there's been a major turnaround. If you consider what's happening at Hi-Fi, and we know that our total bad debts for the coming financial year will be significantly lower than that of last year, it's also...

HILTON TARRANT: Your traditional retail and your credit businesses, more efficient; your operating profit, excluding the restructuring cost, up 208%, albeit off a fairly low base. You've cut your stores from 953 to 935, but I guess the key word there is efficiency.

DAVID SUSSMAN: Ja, and I think the big challenge there is growing the top line. We continue to trade at last year's levels. That is a fact of the economy. We are scoring fewer credit applications, 15% less this year than last year, and only 52% of those scored applications are concluded, so it's very tough for the consumer out there.

HILTON TARRANT: Looking at your financial services business, a much better control of expenses because it is a separate dividend. Now your collection rate is coming down slightly in the 12 months, bad debt impairments up, as you said earlier - a much more focused business, and one of the exciting parts of that business is the Maravedi Division.

DAVID SUSSMAN: Ja, our new business development side of financial services is an imperative. Maravedi, together with Blakes, is key-critical to our strategy going forward, and next year you can expect a nice, albeit small, contribution coming out of the new-business development side of the business.

HILTON TARRANT: David, what kind of financial services products are these two entities taking to your customers?

DAVID SUSSMAN: Well, we are now offering unsecured loans. We've got a white-label credit card, we are managing high finance through Maravedi, and it is our intention to introduce an in-store credit card in the not-too-distant future.

HILTON TARRANT: David, the two businesses are now split. You've got your retail businesses on the one side, your financial services on the other - what's the goal from here?

DAVID SUSSMAN: Well, now to maximise the potential of both. We've just had a "10 000k check-up", as it's called by the consultants that assisted us in executing our strategy, and what was so gratifying was to hear that they were so impressed that so much has been achieved in such a short time, but at the same time how much upside there still was in terms of maximising both traditional retail and financial services.

HILTON TARRANT: David Sussman is executive chairman of the JD Group. David Shapiro, final dividend 41c per share - steady.

DAVID SHAPIRO: Well, they had the tax payment, so they are retaining back tax. But I think you just have to look at the operating profit before debtor costs, and then after-debtor costs. If you improve that slightly, it falls right to the bottom lines. I think as conditions improve you'll find these profits just escalate again - and, again, that's what the market's beginning to look at.

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If HiFi Corp offered a money back guarantee like Game and PnP Hyper, they should be more popular. by TR on November 17 2009, 07:33 Find this comment inappropriate? Report it

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