David Sussman_Chairman
		“Unmanaged change becomes chaos, unmanaged stability becomes stagnation.” General Alexander Haig

“The Group is well on course with the implementation of its strategy initiated in 2008. These initiatives which have been implemented across the organisation will ensure its future success.”

At the time of our year end results in 2008, we had clearly mapped out and planned our objectives for the current year. It is with a strong sense of pride that I am able to report that we have achieved these objectives and that we have successfully separated our financial services and retail businesses. This has resulted in each of these businesses achieving total focus on their core competencies. One year ago we had a combined retail and financial services business. Today we can forge ahead confidently with our ultimate goal of being a world-class retail and financial services group.

It is particularly pleasing for me that we achieved these goals in a relatively short period of time and that we were not sidetracked despite the tough trading environment which could easily have diverted our attention during the vitally important implementation phase.

The retail business incorporates three divisions, Traditional Retail being the seven furniture and appliance chains, Cash Retail being Hi-Fi Corporation and Incredible Connection and our international business, Abra in Poland. The financial services business incorporates two divisions, being the Traditional Retail debtors book, including the insurance business, and the New Business Development division of Maravedi and Blake. Our priority for 2010 is to fine tune these businesses to cement their positioning for long term value creation.

As part of the implementation phase we recruited some highly experienced financial services specialists and they have added enormous value in this regard. On 23 November 2009, our new risk rating software will go live. This is an enormous step forward as it will ensure our ability to risk rate our customers consistently across all our brands, which in turn will mean that we charge accurately for the commensurate risk. We are confident that this will enhance our competitiveness.

Although our bad debts and provisions increased during the year, this was no surprise. The reasons are twofold. The first being the overall economic environment. Our customer base in 2009 continued to feel the effects of over indebtedness, increased job losses and a lack of disposable income. Secondly, when we embarked on the project to centralise our debt collection processes, it was with the understanding that this would inevitably result in an initial deterioration of the debtors book, followed by a period of stabilisation after which, it would start to outperform the decentralised model. I am pleased to say that we are through the stabilisation phase and we now look forward to optimising the new centralised model. We have already seen signs of an improvement in the Group’s vintage curves, which augurs well for 2010.

With the Group now segregated into Retail and Financial Services, we have aligned our balance sheet accordingly. This has facilitated accurate tracking of divisional performance while optimising the use of the Group’s financial resources and working capital.

At the half year stage we communicated that the worst was definitely over. The trading performance in the second half of the year confirms this conviction and we see clear signs that market conditions are no longer deteriorating.

Current uncertainty revolves around job preservation in the economy. The average consumer remains highly leveraged and paying off debts is a high priority. It will take time for consumers to rebuild the capacity to service new debt as is clearly demonstrated by the fact that credit applications are down by 15% year on year. Only 52% (2008: 55%) of submitted applications are currently being converted to actual deals. It is fair to say that the National Credit Act has changed the playing field forever.

JD Group has gained market share in a shrinking market. The operating profit before debtors costs, adjusted for the restructuring costs, also showed a strong improvement of 9%, which clearly demonstrates that we are doing something right. Some of this success must be attributed to our ‘Art of Service’ initiatives which gained momentum during the year. We have an absolute determination to serve our customers better. The ‘Art of Service’ initiative required us to revisit our business processes in order to empower our employees at store level to provide our customers with the quality of service they deserve. Continually enhancing the skills of our employees is also of paramount importance.

The ‘Art of Service’ will contribute to profit growth as consumers recognise that our brands are totally committed to a broad value proposition which extends beyond price, and that we are committed to giving them a superior shopping experience. We have already seen and felt a new attitude among our senior and middle management and our challenge is now to ensure that this enthusiasm cascades all the way through to store level.