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EXL
EXL
EXL - Excellerate Holdings - Audited results for the year ended 30 June 2007
Excellerate Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/009884/06
JSE code: EXL ISIN: ZAE000026092
Audited results for the year ended 30 June 2007
- 81,3% - Increase in profit attributable to equity holders of the parent
- 62,3% - Increase in earnings per share
- R28,2 million - Increase in cash and cash equivalents
Review of the year:
The board is pleased to announce a significant improvement in the results for
the year. The primary focus has been on restoring base levels of profitability
in the group, mainly by resolving the problems at the food-trading division and
through streamlining operations and activities into a more cost-effective and
efficient decentralised management structure. The board is confident that the
foundation has been laid both from a structural and cultural perspective to
support the group`s ambitions for strong growth and cash generation.
Financial performance
Results for the year to 30 June 2007 were much improved on the previous twelve
months.
Rationalisation of the food-trading division (Sunkist) resulted in a significant
reduction of turnover in this unit. Consequently group revenue for the year
decreased by 2,8% to R495,0 million. However, excluding Sunkist, revenue rose by
13,2% from R382,6 million to R433,0 million, giving a more accurate reflection
of the overall performance of the rest of the group.
Net profit attributable to shareholders showed an improvement to R16,6 million
for the twelve months, an increase of 81,3% over the comparative period. This
improvement was despite earnings being impacted by the cost of implementing
shareholder transactions, the restructuring of Sunkist and the costs associated
with reducing the centralised management structure.
Earnings per share (on a fully diluted basis) went up by 79% to 7,5 cents per
share, while fully diluted headline earnings per share increased by 80% to 7,4
cents per share.
A highlight of these results has been the strong cash generation by the business
units, of R28,2 million (2006: R3,6 million), achieved through profitable
trading and good working capital management. Cash flows generated by operations
amounted to R42,5 million (2006: R22,2 million). After investing and financing
activities, cash and cash equivalents increased to R23,0 million from a negative
R5,2 million at the prior year end.
As stated in the annual report at 30 June 2006, a contingent liability has been
noted for several years in respect of amounts claimed by SARS as owing by
Excellerate in respect of SARS disallowing the claiming of certain trademark
allowances against taxable income. Due to the continued likelihood of a
prolonged legal process and the expected high legal costs involved to resolve
this matter, Excellerate has made a proposal to SARS for reaching a financial
settlement. The company has provided for an amount which it believes appropriate
under the circumstances. The remainder of the disputed amount will continue to
be reflected as a contingency.
Were it not for this abnormal tax provision, net profit attributable to
shareholders would have shown an improvement to R21,6 million for the twelve
months, an increase of 136,3% over the comparative period. Similarly the fully
diluted earnings per share would have increased by 131,0% to 9,7 cents per share
and fully diluted headline earnings per share would have increased by 134,2% to
9,6 cents per share.
Excellerate`s balance sheet remains strong with minimal gearing and the group is
well-placed to access any funding we need to fulfill our growth ambitions.
As the group intends to pursue opportunities to grow by acquisition, the board
has decided not to declare a dividend at this time. However during the year, the
group undertook a share buy-back exercise whereby R3,8 million was utilised to
acquire shares. This has in effect given an additional return to shareholders.
Review of operations
Overall, it has been a good year for Excellerate from an operational point of
view with each of the main operational segments experiencing growth.
Trading
Goldenmarc
Growth of existing Goldenmarc lines as well as new lines resulted in revenue
growth of 11,4%. However, within Ferrengi, the manufacturing unit managed by
Goldenmarc, turnover came under pressure in the face of strong competition.
Coupled with wage cost pressures in this unit, the overall performance of the
unit was affected. These factors coupled with adequate cost management resulted
in earnings before interest and taxes (EBIT) growth of 6,2%.
Although rising transport costs, and hence higher distribution costs, combined
with increased employment costs will place pressure on margins, Goldenmarc
management believes that this business unit has a good platform for growth in
the coming financial year.
Foodserv
Growth within the hospitality and catering industry in general, as well as new
agencies acquired by Foodserv, resulted in strong revenue growth of 23,7%.
Favourable exchange and interest rates, which have made products more affordable
to local customers, have also had a positive impact. These factors, together
with satisfactory cost management, resulted in EBIT growth of 52,4%.
While the interest rate outlook is a cause for concern, Foodserv is well
positioned for continued growth.
Sunkist
Revenue at Sunkist decreased by R64,2 million from R126,0 million to R61,8
million as a result of the restructuring process. The unprofitable Trojan Food
business was disposed of in February 2007, while Sunkist incurred some
significant costs in winding up historically non-profitable areas of the
business. Nonetheless, the ongoing operations achieved a break even position.
The focus for the coming year will be on consolidating this division`s position
in its market segments, and building stronger revenues off a more controlled
overhead base.
Services
Interpark
A strong emphasis on the maintenance of contracts and relationships in the face
of opportunistic competition resulted in a growth in turnover of 11,1%. These
difficulties, combined with temporary disruption at a major contract, resulting
in EBIT improving by 16,4%.
However, cost management remained well controlled and Interpark expects a
stronger growth performance in the year ahead, based on better contract
maintenance and the achievement of new site contracts
Sterikleen
Again, the maintenance of contracts and relationships, together with new
contracts, resulted in modest turnover growth. EBIT improved by 9,5%.
Sterikleen expects a stronger growth performance in 2008 based on contract
maintenance and the addition of new contracts.
Levingers
Levingers had a good performance the past year, and together with rolling out
new stores, managed to increase revenue by 11,9% and EBIT by 51,9%.
Another solid performance is expected in 2008 through the opening of new stores.
Light manufacturing
This area covers two business units, Ferrengi, which is managed by Goldenmarc,
and Fruti Flow managed by Sunkist. These units are relatively small in the
context of the group, and as such have not been separately analysed here.
However, this segment has the potential to form a meaningful part of the core
growth strategy in future should suitable acquisition opportunities arise.
Black economic empowerment
The board has been very pleased to welcome Akenton Services as partners in the
group, and believe that the company will add significant value, not only as a
BEE partner, but also through its innovative and dynamic outlook on business.
Subsequent to the final implementation of the transaction in February 2007,
management in each business unit has started to create their own relationships
with Akenton, and we anticipate that these relationships will start to bear
fruit in the next financial year.
Excellerate also has a 49% investment in the Katanga group, which continues to
yield good results. Katanga is a BEE group, 51% owned by the Ikamva Labantu
group, which provides a range of outsourced services and supplies trade
products. Several new contracts have been secured in the services segment during
the year.
Thanks
Chris Hall, previously CEO of the group, left Excellerate with effect from
December 2006. The board and management extend their thanks for his contribution
to the group. Thanks are also extended to our board, our management, our
partners, and our employees for their contribution to our success this year.
Prospects
The group is now in a strong financial position and intends to pursue value-
enhancing acquisitions in order to further drive growth in earnings and
profitability during the year ahead. Now that the restructuring of the group has
been completed and as the group`s more decentralised system of operating takes
effect, the company expects to gain financial and operating benefits both at the
head office and at the business unit level. The group is also highly focused on
developing a culture of strong growth and cash generation, and it is expected
that this too will have a positive impact in the coming period.
Gordon Hulley
CEO
Sandton
19 September 2007
Basis of preparation of results
The financial information contained in this announcement has been audited by
Grant Thornton. A copy of their unqualified audit opinion is available for
inspection at Excellerate`s registered office.
The profit announcement has been prepared in compliance with the listing
requirements of the JSE Limited ("the JSE"). The accounting policies of the
Excellerate group comply with International Financial Reporting Standards
("IFRS"). All the accounting policies have remained consistent with those
applied in the audited financial statements for the year ended 30 June 2006.
The deferred taxation asset relating to trademarks had been misstated in prior
years by R1 577 000. The comparative amounts have been appropriately adjusted.
This correction of the prior period error had no effect on the income statement
for 2006, but the opening retained earnings at 1 July 2005 have been adjusted.
Group income statement
Audited Audited
year ended year ended
30 June 30 June
2007 2006
R`000 R`000
Revenue 494 802 508 714
Cost of sales 331 392 360 607
Gross profit 163 410 148 107
Operating expenditure 134 086 137 037
Selling and distribution costs 39 550 39 871
Administrative expenses 74 746 74 830
Other expenses 19 790 22 336
Operating profit 29 324 11 070
Gain on disposal of business/subsidiary 205 1 245
Fair value adjustments on loan accounts - (173)
Share of undistributed profits of 3 548 4 316
associates
Impairment of goodwill - (150)
Profit before interest and taxation 33 077 16 308
Finance revenue 4 957 5 301
Finance costs (7 440) (9 396)
Profit before taxation 30 594 12 213
Taxation - current (15 683) (8 688)
- deferred 1 749 5 725
Profit for the year 16 660 9 250
Attributable to:
Equity holders of the parent 16 582 9 147
Minority interest 78 103
16 660 9 250
Earnings per share (cents) 8.6 5.3
Fully diluted basic earnings per share 7.5 4.2
(cents)
Group cash flow statement
Audited Audited
year ended year ended
30 June 30 June
2007 2006
R`000 R`000
Cash flows from operating activities 27 680 9 282
Cash generated by operations 42 503 22 168
Net finance costs (5 104) (6 308)
Taxation paid (9 719) (6 578)
Cash flows from investing activities (8 538) (8 177)
Additions to property, plant and (10 226) (9 734)
equipment
Additions to goodwill (300) (1 155)
Proceeds on disposal of property, plant
and equipment 458 1 972
Proceeds on disposal of 1 530 740
businesses/subsidiaries
Cash flows from financing activities 9 068 2 454
Long term liabilities raised/(repaid) 5 307 (3 113)
Short term loan paid (118) -
Short term loan received 855 -
Shares repurchased (3 781) -
Employee share options exercised 1 253 482
Loans repaid by associate companies 5 552 5 085
Net increase in cash equivalents 28 210 3 559
Cash and cash equivalents at beginning (5 218) (8 777)
of year
Cash and cash equivalents at end of year 22 992 (5 218)
Group balance sheet
Audited (as
Audited previously
Audited (restated) reported)
as at as at as at
30 June 30 June 30 June
2007 2006 2006
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 27 440 24 664 24 664
Intangible assets 55 198 54 898 54 898
Investment in associates 462 2 466 2 466
Other financial assets 799 681 681
Deferred tax assets 17 471 15 892 17 469
101 370 98 601 100 178
Current assets
Inventories 90 419 83 224 83 224
Trade and other receivables 93 170 87 443 87 443
Taxation 5 664 4 734 4 734
Derivative financial - 1 344 1 344
instruments
Cash and cash equivalents 22 992 2 515 2 515
212 245 179 260 179 260
Total assets 313 615 277 861 279 438
EQUITY AND LIABILITIES
Issued capital 2 189 1 741 1 741
Share premium 65 889 50 224 50 224
Compulsory convertible
debentures - 18 641 18 641
Non-distributable reserves 18 612 18 952 18 952
Retained earnings 68 081 51 499 53 076
Equity attributable to equity
holders of the parent 154 771 141 057 142 634
Minority interests 846 768 768
Total equity 155 617 141 825 143 402
Non-current liabilities
Deferred tax liabilities 835 1 001 1 001
Interest bearing debt 10 575 5 268 5 268
11 410 6 269 6 269
Current liabilities
Trade and other payables 129 622 110 531 110 531
Compulsory convertible
debenture liability - 2 462 2 462
Taxation 12 768 5 874 5 874
Current portion of interest
bearing long term liabilities 3 998 3 143 3 143
Derivative financial 200 23 23
instruments
Bank overdrafts - 7 734 7 734
146 588 129 767 129 767
Total equity and liabilities 313 615 277 861 279 438
Calculations of earnings per share
Audited Audited
year ended year ended
30 June 30 June
2007 2006
Weighted average number of shares 192 598 296 173 563 611
in issue
Fully diluted weighted average
number of
shares in issue 226 053 665 224 990 010
Basic earnings per share (cents) 8.6 5.3
Fully diluted basic earnings per 7.5 4.2
share (cents)
Headline earnings per share (cents) 8.6 5.1
Fully diluted headline earnings per 7.4 4.1
share (cents)
The following adjustments to income
attributable to shareholders were
taken
into account in the calculation of
headline earnings: R`000 R`000
Attributable to ordinary 16 582 9 147
shareholders
- impairment of - 323
goodwill/investments
- gain on disposal of (205) (1 245)
business/subsidiary
- net loss on sale of property,
plant and
equipment 129 976
- taxation effect of adjustments (37) (326)
Headline earnings 16 469 8 875
Group segmental report
Trading- Corpo- Elimi-
distributio Services rate nations Total
n
R`000 R`000 R`000 R`000 R`000
Audited year
ended
30 June 2007
Revenue 364 010 130 792 - 494 802
Operating profit 24 387 21 332 (16 395) (3) 29 324
Depreciation 3 017 3 475 249 6 741
Capital 4 028 5 906 292 10 226
expenditure
Segment assets 217 379 83 175 197 051 (183 990) 313 615
Segment 218 845 61 631 (63 862) (58 616) 157 998
liabilities
Cash flows from
operating 17 651 27 519 (17 490) 27 680
activities
Cash flows from
investing
activities (2 398) (5 848) (292) (8 538)
Cash flows from
financing
activities 124 8 526 418 9 068
Audited
(restated) year
ended 30 June
2006
Revenue 386 747 121 967 - 508 714
Operating profit 2 228 19 440 (10 598) (1) 11 070
(2)
Depreciation 2 958 3 319 156 6 433
Capital 5 483 3 520 731 9 734
expenditure
Segment assets 195 847 78 514 152 198 (147 121) 279 438
Segment 199 490 60 952 22 715 (147 121) 136 036
liabilities
Cash flows from
operating
activities (2 043) 26 555 (15 230) 9 282
Cash flows from
investing
activities (6 194) (3 368) 1 385 (8 177)
Cash flows from
financing
activities (2 508) (605) 5 567 2 454
(1) Net of
profit on
disposal of
property of
R976 000
(2) Prior year
error in
operating
profits per
segment
- as (3 799) 25 467 (10 598) 11 070
previously
stated
- as 2 228 19 440 (10 598) 11 070
restated
(3) Corporate
expenditure
- expenses 16 395
for the
year
- once off (5 769)
restructuri
ng costs
- 10 626
continuing
costs
Group statement of changes in equity
Compulsory Non-
Issued Share convertible distributable
capital premium debentures reserves
R`000 R`000 R`000 R`000
Balance at 1 July 1 731 49 752 18 641 18 787
2005 as
previously
reported
Restatement of
deferred taxation
asset
Balance at 1 July 1 731 49 752 18 641 18 787
2005 as restated
Profit for the
year
Share-based 165
payment
transactions
Sale of treasury 10 472
shares
Balance at 30 1 741 50 224 18 641 18 952
June 2006 as
restated
Balance at 30 1 741 50 224 18 641 18 952
June 2006 as
previously
reported
Restatement of
deferred taxation
asset
Profit for the
year
Share-based (340)
payment
transactions
Sale of treasury 26 1 227
shares
Repurchase of (51) (3 730)
shares
Conversion of
compulsory
convertible
debentures
into ordinary 473 18 168 (18 641)
shares
Balance at 30 2 189 65 889 - 18 612
June 2007
Attributa
ble
to equity
Retained holders Minority
of
earnings parent interest Total
R`000 R`000 R`000 R`000
Balance at 1 July 43 929 132 840 665 133 505
2005 as previously
reported
Restatement of (1 577) (1 577) (1 577)
deferred taxation
asset
Balance at 1 July 42 352 131 263 665 131 928
2005 as restated
Profit for the 9 147 9 147 103 9 250
year
Share-based 165 165
payment
transactions
Sale of treasury 482 482
shares
Balance at 30 June 51 499 141 057 768 141 825
2006 as restated
Balance at 30 June 53 076 142 634 768 143 402
2006 as previously
reported
Restatement of (1 577) (1 577) (1 577)
deferred taxation
asset
Profit for the 16 582 16 582 78 16 660
year
Share-based (340) (340)
payment
transactions
Sale of treasury 1 253 1 253
shares
Repurchase of (3 781) (3 781)
shares
Conversion of
compulsory
convertible
debentures
into ordinary - -
shares
Balance at 30 June 68 081 154 771 846 155 617
2007
REGISTERED OFFICE 1st Floor, Atholl Square, Cnr Katherine Street and Wierda Road
East, Sandown, 2196 PO Box 785448, Sandton 2146
Tel: (+27 11) 523 2980.
Fax: (+27 11) 523 2990
E-mail: info@excellerate.co.za
DIRECTORS Gordon Hulley# (CEO), Harold Bloch, Peter Kramer, Alan Lipchin, Athol
Stewart, Rob Owens, Rudi Stumpf*, Clive Howell*, Graham Davel*, Michael Mohohlo*
(*Non-executive directors, # British)
COMPANY SECRETARY ER Goodman Secretarial Services CC (represented by E Goodman)
2nd Floor North Wing Building, Thrupps Centre, 204 Oxford Road, Illovo 2196.
Tel (+27 11) 268 0562
Fax (+27 11) 268 0564.
E-mail: ergoodmn@netactive.co.za
SHARE TRANSFER SECRETARIES Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001 PO Box 61051, Marshalltown, 2107
Tel: (+27 11) 370 5000
Fax: (+27 11) 688 7721
Date: 20/09/2007 14:00:01 Produced by the JSE SENS Department.
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