MAC3761/QB002
Table of contents – QUESTIONS
ANALYSIS OF FINANCIAL INFORMATION, STRATEGY AND RISK MANAGEMENT
Question 01: EDCARS ..................................................................................................... 12
Question 02: CARLO TITO MARIO AFRICA ..................................................................... 18
Question 03: DRESSED FOR SUCCESS ......................................................................... 23
Question 04: SPLITZ STORES ......................................................................................... 26
Question 05: NEW MUTUAL ............................................................................................ 27
WORKING CAPITAL MANAGEMENT
Question 06: TOY STARS ................................................................................................ 30
Question 07: A GREYS .................................................................................................... 32
Question 08: ZENZEL ....................................................................................................... 34
CAPITAL STRUCTURE AND COST OF CAPITAL
Question 09: KINGSTON .................................................................................................. 35
Question 10: QUEEN POWER ......................................................................................... 37
Question 11: CHAPTERS & NOVELS ............................................................................... 40
Question 12: SIMON & SON ............................................................................................. 43
Question 13: S & S ........................................................................................................... 46
Question 14: SIMUNYE GOLD ......................................................................................... 47
CAPITAL BUDGETING
Question 15: SANRAL ...................................................................................................... 50
Question 16: MASHESHA ................................................................................................ 52
Question 17: PICTURE PERFECT .................................................................................... 54
Question 18: CITY OF NKANDLA ..................................................................................... 55
Question 19: PURIFIED H2O ............................................................................................ 57
Question 20: AFRICAN FISH & CHIPS ............................................................................. 59
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VALUATIONS AND MERGERS & ACQUISITIONS
Question 21: KGORONG .................................................................................................. 66
Question 22: AFRICAN BAG ............................................................................................ 67
Question 23: FAST AND QUICK........................................................................................ 68
Question 24: FAZEBOOK ................................................................................................. 69
Question 25: BOXER CASH & CARRY ............................................................................ 72
Question 26: LION BRANDS ............................................................................................ 75
INTEGRATED QUESTIONS
Question 27: PBC LIMITED .............................................................................................. 79
Question 28: umfula.co.za ................................................................................................ 84
Question 29: HEALTH MATTERS .................................................................................... 88
Question 30: DISTELL ...................................................................................................... 95
Question 31: TILES & STYLES OF AFRICA ................................................................... 104
Question 32: MAGNUS ORANGE .................................................................................. 113
Question 33: MBOWENI TRADING ................................................................................ 118
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QUESTION 01: EDCARS (120 marks; 3½ hours)
Edcars Group Limited (also known as “Edcars”) is the largest non-food retailer in South Africa
and is listed on the Johannesburg Stock Exchange (JSE). The company is the leading retailer
of clothing, home appliances, stationery, cosmetics, accessories and cellular products in
Southern Africa with more than 3 000 retail stores, the majority of which are in South Africa.
Edcars caters for different LSM groups and also has become one of South Africa’s most
trusted brands.
The company’s main rivals are clothing retailers with less exposure in home appliances and
cellular products retail market than Edcars. Home appliances and related cellular products
tend to have quite higher margins than the clothing segment and these items are generally
sold on credit due to their high value.
The influx of discounted Chinese imports, coupled with high unemployment rates, has put the
company’s profit margins under pressure. The recent depreciation of the rand against world’s
major currencies (exacerbated by local politics) has sent the JSE share index into a downward
spiral and the shareholders of Edcars Group Limited have also seen a sharp decline in their
investment value in the company.
Edcars managed to increase its sales in the current year by almost a double-digit figure,
despite strict lending guidelines by the National Credit Regulator (NCR). This increase is partly
as the result of a more robust marketing campaign the company embarked on during the
financial year. Fifteen new stores opened in November 2015 and have performed above
expectations. Management of Edcars has invested a significant amount of capital in getting
these stores fully functioning.
The prime lending rate during the current financial year was 11,25% per annum and there are
365 days in a year. The target capital structure of Edcars Group Limited is 40: 60.
The statement of comprehensive income and the statement of financial position of Edcars
Group Limited are provided below:
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, MAC3761/QB002
Statement of comprehensive income
For the year ended 30 September 2016
R million Notes 2016
Revenue 1 23 700
Cost of merchandise (13 300)
Gross profit 10 400
Other operating income 1 500
Other income 2 1 100
Trading expenses 3 (9 000)
Net finance costs 4 (1 000)
Profit before taxation 3 000
Taxation 5 ( 900)
Profit for the year 2 100
Dividends - Interim (600)
Dividends - Final (700)
Retained income for the year 800
Weighted average number of shares (million) 200
Number of outlets 3 100
Staff complement 22 200
Share price – closing (cents) 14 000
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Table of contents – QUESTIONS
ANALYSIS OF FINANCIAL INFORMATION, STRATEGY AND RISK MANAGEMENT
Question 01: EDCARS ..................................................................................................... 12
Question 02: CARLO TITO MARIO AFRICA ..................................................................... 18
Question 03: DRESSED FOR SUCCESS ......................................................................... 23
Question 04: SPLITZ STORES ......................................................................................... 26
Question 05: NEW MUTUAL ............................................................................................ 27
WORKING CAPITAL MANAGEMENT
Question 06: TOY STARS ................................................................................................ 30
Question 07: A GREYS .................................................................................................... 32
Question 08: ZENZEL ....................................................................................................... 34
CAPITAL STRUCTURE AND COST OF CAPITAL
Question 09: KINGSTON .................................................................................................. 35
Question 10: QUEEN POWER ......................................................................................... 37
Question 11: CHAPTERS & NOVELS ............................................................................... 40
Question 12: SIMON & SON ............................................................................................. 43
Question 13: S & S ........................................................................................................... 46
Question 14: SIMUNYE GOLD ......................................................................................... 47
CAPITAL BUDGETING
Question 15: SANRAL ...................................................................................................... 50
Question 16: MASHESHA ................................................................................................ 52
Question 17: PICTURE PERFECT .................................................................................... 54
Question 18: CITY OF NKANDLA ..................................................................................... 55
Question 19: PURIFIED H2O ............................................................................................ 57
Question 20: AFRICAN FISH & CHIPS ............................................................................. 59
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VALUATIONS AND MERGERS & ACQUISITIONS
Question 21: KGORONG .................................................................................................. 66
Question 22: AFRICAN BAG ............................................................................................ 67
Question 23: FAST AND QUICK........................................................................................ 68
Question 24: FAZEBOOK ................................................................................................. 69
Question 25: BOXER CASH & CARRY ............................................................................ 72
Question 26: LION BRANDS ............................................................................................ 75
INTEGRATED QUESTIONS
Question 27: PBC LIMITED .............................................................................................. 79
Question 28: umfula.co.za ................................................................................................ 84
Question 29: HEALTH MATTERS .................................................................................... 88
Question 30: DISTELL ...................................................................................................... 95
Question 31: TILES & STYLES OF AFRICA ................................................................... 104
Question 32: MAGNUS ORANGE .................................................................................. 113
Question 33: MBOWENI TRADING ................................................................................ 118
9
, MAC3761/QB002
QUESTION 01: EDCARS (120 marks; 3½ hours)
Edcars Group Limited (also known as “Edcars”) is the largest non-food retailer in South Africa
and is listed on the Johannesburg Stock Exchange (JSE). The company is the leading retailer
of clothing, home appliances, stationery, cosmetics, accessories and cellular products in
Southern Africa with more than 3 000 retail stores, the majority of which are in South Africa.
Edcars caters for different LSM groups and also has become one of South Africa’s most
trusted brands.
The company’s main rivals are clothing retailers with less exposure in home appliances and
cellular products retail market than Edcars. Home appliances and related cellular products
tend to have quite higher margins than the clothing segment and these items are generally
sold on credit due to their high value.
The influx of discounted Chinese imports, coupled with high unemployment rates, has put the
company’s profit margins under pressure. The recent depreciation of the rand against world’s
major currencies (exacerbated by local politics) has sent the JSE share index into a downward
spiral and the shareholders of Edcars Group Limited have also seen a sharp decline in their
investment value in the company.
Edcars managed to increase its sales in the current year by almost a double-digit figure,
despite strict lending guidelines by the National Credit Regulator (NCR). This increase is partly
as the result of a more robust marketing campaign the company embarked on during the
financial year. Fifteen new stores opened in November 2015 and have performed above
expectations. Management of Edcars has invested a significant amount of capital in getting
these stores fully functioning.
The prime lending rate during the current financial year was 11,25% per annum and there are
365 days in a year. The target capital structure of Edcars Group Limited is 40: 60.
The statement of comprehensive income and the statement of financial position of Edcars
Group Limited are provided below:
12
, MAC3761/QB002
Statement of comprehensive income
For the year ended 30 September 2016
R million Notes 2016
Revenue 1 23 700
Cost of merchandise (13 300)
Gross profit 10 400
Other operating income 1 500
Other income 2 1 100
Trading expenses 3 (9 000)
Net finance costs 4 (1 000)
Profit before taxation 3 000
Taxation 5 ( 900)
Profit for the year 2 100
Dividends - Interim (600)
Dividends - Final (700)
Retained income for the year 800
Weighted average number of shares (million) 200
Number of outlets 3 100
Staff complement 22 200
Share price – closing (cents) 14 000
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