25th September 2018
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Company Data
 
Deacons (East Africa) PLC
http://deacons.co.ke/
Par Value:                  
Closing Price:           0.60
Total Shares Issued:          123558228.00
Market Capitalization:        74,134,937
EPS:             -6.82
PE:                 -0.088
 

Deacons (East Africa) PLC H1 2018 results through 30th June 2018 vs. 30th June 2017
H1 Revenue 378.073m vs. 1.077695b -64.918%
H1 Net operating profit 54.024m vs. 333.572m -83.804%
H1 Expenses [264.024m] vs. [523.969m] +49.504%
H1 EBITDA [210.561m] vs. [190.397m] -10.591%
H1 Net foreign exchange [loss]/ gain 22.361m vs. 17.450m +28.143%
H1 Profit from continuing operations [266.504m] vs. [257.746m] -3.398%
H1 Profit before taxation [266.504m] vs. [257.746m] -3.398%
H1 [Loss] from discontinued operations [61.410m] vs.
H1 Profit before tax from continuing operations [327.913m] vs. [257.746m] -27.223%
H1 Total comprehensive income for the period [229.539m] vs. [180.422m] -27.223%
H1 Basic and diluted EPS [2.16] vs. [2.09] -3.349%
Total Assets 1.137149b
Cash and cash equivalents at end of period [120.424m] vs. [80.154m] -50.241%

Commentary

The overall retail trading environment during the period was characterised by extraordinary and exceptional events that adversely affected the business.
1. Loss of Revenue from discontinued operations amounting to 529m [MRP formed over 50% of our business]
2. Performance was largely affected by cash constraints
3. Retail Space reduced from 190,341 square feet in 2017 to 69,614 in 2018
4. non performance of major anchor tenants
5. aggressive sale offers in Q2 reduced average gross margins

Issues a Profits Warning

restructuring capital base and has appointed an Investment Bank to advise on overall Strategy

Deacons (East Africa) PLC full year 2017 results through 31st December 2017 vs. 31st December 2016
FY Revenue 2.005767b vs. 2.309091b -13.136%
FY Cost of sales [1.344997b] vs. [1.295175b] +3.847%
FY Gross profit 660.770m vs. 1.013916b -34.830%
FY Other income 13.562m vs. 16.080m -15.659%
FY Total income 674.332m vs. 1.029996b -34.531%
FY Administrative expenses [1.484191b] vs. [1.372886b] +8.107%
FY Net foreign exchange loss [13.341m] vs. [42.167m] -68.362%
FY Total expenses [1.497532b] vs. [1.415053b] +5.829%
FY Operating [Loss] before taxation [832.200m] vs. [385.057m] -116.124%
FY [Loss] for the year [841.428m] vs. [276.345m] -204.485%
Basic and diluted EPS [6.81] vs. [2.24] -204.018%
Total Assets 1.552835b vs. 2.281680b -31.943%
Shareholders Funds 330.018m vs. 1.172632b -71.857%
Cash cash equivalents as at 31st December [103.389m] vs. [12.343m] -737.633%
No dividend

Company Commentary

Group faced a challenging economic environment during the year 2017 in Kenya.
Formal retail sector in Kenya had further challenges that depressed its overall performance.
Over supply of formal retail property leading to cannibalisation
Collapse of Key Anchor Tenants that reduced customer Footfall into sopping malls by over 60%
Increased competition and change in customer shopping trends

Group also faced disruptions in its supply chain following the decision by Mr. Price to reduce trading margins, which led to cash flow constraints that negatively affected performance of all brands.
Group revenues declined by 303m
MR Price brand alone contributed a decline of 324m with a margin loss of 154m as a result of discontinued supply of stock by the Franchisor.
MR Price fixtures and inventory impairment amounted to 150.6m with an overall loss contribution of 78% to the bottom line
Business bore further impairment from discontinued operations of the baby sop store at the Junction Mall. and the Angelo store at the Sarit centre of 15m
F&F brand continued to post positive results across the Chain with a revenue of 131m in 2017
Board has appointed a Transaction Advisor to restructure the Capital Base.

Conclusions

I remain of the view that E Commerce is a big Disruptor.

Deacons (East Africa) PLC H1 2017 results through 30th June 2017 vs. 30th June 2016
H1 Revenue 1.077695b vs. 1.026090b +5.029%
H1 Net operating profit 333.572m vs. 491.342m -32.110%
H1 Expenses [523.969m] vs. [466.396m] +12.344%
H1 EBITDA [190.397m] vs. 24.946m -863.237%
H1 Depreciation [48.172m] vs. [50.844m] -5.255%
H1 Finance costs [36.627m] vs. [46.848m] -21.817%
H1 Net foreign exchange [Loss]/ gain 17.450m vs. 2.578m +576.881%
H1 Profit from continuing operations [257.746m] vs. [70.168m] -267.327%
H1 Profit before taxation [257.746m] vs. [70.168m] -267.327%
H1 Profit/ [loss] for the period [180.422m] vs. [52.626m] -242.838%
H1 Basic and diluted EPS [2.09] vs. [0.57] -266.667%
No interim dividend

Company Commentary

overall retail trading environment during the period under review was characterised by extraordinary and exceptional events that adversely affected the business, key among them as follows
1. Drought reduction in disposable income, coupled with lack of consumer credit ad a direct impact on customer shopping trends.
2. Overall unit sales increased by 14% and total number of transactions +9.00% average unit price sold reduced by 13% with a drop in per customer average spend by 17%
3. 190,341 square feet in 2017 versus 169,516 in 2016 8 additional stores. marginal 5% increase in revenue. Resultant cannibalisation led to a drop in traffic into all malls
4. non performance of major anchor tenants reduced traffic into all malls With 98% of our stores operating in malls whose anchor tenants are experiencing stocking challenges, data sows that footfall as decreased by over 60% with Customers closing to visit other facilities.
5. National elections fever
6. aggressive sale offers in Q2 reduced average gross margins to 39%
wellness and leisure market segment will continue to represent growth opportunities
Bossing Adidas and Lifefitness brands posted good results
a reduction in margins by a major brand did not lead to an increase in volume sales

Conclusions

Lots of Detail in the commentary. I am just concerned that this type of business is going to get uber'ed

FY Sales 2.309091b vs. 2.383297b -3.114%
FY Cost of sales [1.295175b] vs. [1.274514b] +1.621%
FY Gross profit 1.013916b vs. 1.108783b -8.556%
FY Other income 16.080m vs. 49.886m -67.767%
FY Total income 1.029996b vs. 1.277434b -19.370%
FY Administrative expenses [1.306460b] vs. [1.161412b] +12.489%
FY Net foreign exchange gains [42.167m] vs. 25.573m -264.889%
FY Total expenses [1.415053b] vs. [1.135839b] +24.582%
FY Operating [Loss] Profit before taxation [385.057m] vs. 141.595m -371.943%
FY [Loss] profit for the year [276.345m] vs. 113.750m -342.941%
Basic and diluted EPS [2.24] vs. 0.92 -343.478%
Total Assets 2.281680b vs. 2.486072b -8.221%
Shareholders Funds 1.172632b vs. 1.512294b -22.460%
Cash cash equivalents as at 31st December [12.343m] vs. 136.724m -109.028%
No dividend

Company Commentary

in 2 of 2016, several factors negatively impacted the peak trading season tat resulted in suppressed sales and margins. existing Malls registered lower footfall and new retail property registered lower purchase conversion rates that led to cannibalisation.
Revenues declined by -3.1% over Y2015 across key brands as a result of product supply challenges from South Africa during 2 of the Year.

Conclusions

Soft FY Results, interesting commentary about Malls.

H1 Revenue 1.026090b vs. 949.053m +8.117%
H1 Net operating profit 491.343m vs. 363.439m +35.192%
H1 Expenses [466.396m] vs. [392.840m] +18.724%
H1 EBITDA 24.946m vs. [29.400m] +184.850%
H1 Finance costs [46.848m] vs. [26.097m] +79.515%
H1 Profit from continuing operations [70.168m] vs. [99.098m] -29.193%
H1 Share of profit from associate vs. 27.425m
H1 Profit before tax [70.168m] vs. [71.673m] -2.100%
H1 Profit [Loss] for the period [52.626m] vs. [53.755m] -2.100%
EPS [0.57] vs. [0.80] -28.750%
Cash and cash equivalents at the end of the period [49.399m]
No interim dividend

Company Commentary

Revenue growth +8.00% versus same period 2015 This was driven by Uganda Operations and new stores launched at the HUB and Garden City in Q2 2016
Net Operating Margin for first half of the year is 48% up from 38% last year same period
Expenses +19%
Exciting new developments at Two Rivers and Kigali Heights are significantly delayed
Average Price Over the last 5 Weeks
Average Price Over the last 5 Months
No. Of Shares Traded Over the last 5 Weeks
No. Of Shares Traded Over the last 5 Months
Market Capitalization Over the last 5 Weeks
Market Capitalization Over the last 5 Months
Data Source: Nairobi Stock Exchange
Trading Day: 24 Sep 2018
 
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  06-JUN-2018 ::  AGM Notice
  Notice of Annual General Meeting

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  04-JUN-2018 ::  Public Notice
  Appointment of Directors.

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  02-MAY-2018 ::  Full Year Results
  Audited Financial Results for the Year Ended 31st December 2017.

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  02-MAY-2018 ::  Full Year Results (Additional Information)
  Audited Financial Results for the Year Ended 31st December 2017. (Additional Information)

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  06-APR-2018 ::  AGM Resolutions
  Annual General Meeting Resolutions.

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  09-MAR-2018 ::  AGM Notice
  Notice of General Meeting.

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  01-FEB-2018 ::  Public Notice
  Public Notice

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  17-JAN-2018 ::  Public Announcement
  Public Announcement

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  27-DEC-2017 ::  Profit Warning Announcement
  Profit Warning Announcement

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  04-DEC-2017 ::  Changes in the board.
  Changes in the board.

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  09-OCT-2017 ::  Public Announcement
  Proposed Sale of the Mr. Price Franchise Business.

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