JSE-listed lifestyle investment company Long4Life says it has delivered a credible performance in the financial year ended February 29, with trading profit up 15% year-on-year to R520-million.
Headline earnings a share increased by 12% year-on-year to 43.4c.
Long4Life has three segments making up the company – sport and recreation, with brands including Sportsmans Warehouse; beverages, with brands including Chill Beverages; and personal care and wellness, with brands including Sorbet.
Each of these segments delivered turnover growth in the year under review. The company says group revenue was up 12% year-on-year to R4-billion, compared with R3.6-billion revenue in the prior financial year.
Long4Life generated R531-million in cash from operations in the reporting year, compared with R465-million generated in the prior year. However, the company also spent more on capital expenditure, at R179-million in the year under review, compared with R155-million spent in the prior year.
The increase in expenditure was driven by the introduction of new stores, some store closures, and costs incurred in the beverages segment as a result of planned growth initiatives.
Further, the company reports that its return on funds employed (ROFE) was 38% in the reporting year, compared with 42% in the prior year. While this exceeded the company’s ROFE weighted target of 35%, it was negatively impacted on by lower returns in the beverages segment, which was owing to the high level of investment in upgrades.
Meanwhile, Long4Life progressed with its share buy-back programme in the year under review, with 104-million shares acquired at an average price of R4.09 apiece. This amounted to a total of R426-million.
Group headline earnings were R367-million in the year under review, compared with R348-million headline earnings in the prior reporting year.
The company has warned that the retail sectors in which it operates continue to be negatively affected under the Level 4 lockdown scenario in South Africa, and stores are only partially open for trading.
The financial effect of Covid-19 is still unknown for the company, but is expected to be significant in the short term.
Long4Life is taking all possible steps to mitigate the risks by conserving capital, including by suspending capital expenditure plans and implementing cost containment measures.
The company is also actively increasing the use of its online portals, which are expected to add to the group’s competitiveness in the short term.
The executives of Long4Life have decided to take pay cuts of about 30% for three months, including director’s fees.
This saving, as well as a further R1-million, is being donated to the Solidarity Fund to assist in slowing the spread of Covid-19 and aiding the country’s economic recovery.
The company has contributed to the broader national effort by donating, through its beverage brands Inhle and Chill, about R2.5-million worth of bottled Long4Life water and Fitch and Leedes products in support of homeless shelters, various charitable institutions and essential service provider employees.
“We also recognise the difficulties facing the Sorbet franchise owners and their employees, who are small business owners and whose stores are all closed for trading.
“Besides waiving franchise fees over this period, we are also providing about R7-million to all the employees of the Sorbet franchisees (which include 3 500 therapists and workers) in the form of food vouchers for two months,” Long4Life states.
The company has resolved to not declare a dividend for the year under review.
In a broader context, CEO Brian Joffe believes that Covid-19 will give rise to a drastic increase in online sale platforms of retail stores, while will be rethinking around supply chains, comparing the risks between offshore and localisation. He adds that there will likely be acceleration of electronic transactions and other forms of digital payments.
He adds that the willingness of banks to fund companies will change, as a result of retail closures or consolidations, while we will experience deflation, instead of inflation, if spending is depressed.
At the same time, consumers will become less prone to outdoor activities and increase their participation in virtual experiences, instead of physical experiences.
Joffe explains that the company is focusing on staff motivation, reworking budgets, prioritising cash, monitoring liquidity headroom and protecting its asset base.
“At Long4Life, we have the flexibility and imagination to shape our own future.”