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AMA
AMA
AMA - Amalgamated Appliance Holdings - Unaudited Interim Results For Six The
Months Ended 31 December 2007
AMALGAMATED APPLIANCE HOLDINGS LIMITED
Registration number 1997/004130/06
Share code: AMA & ISIN: ZAE000012647
(_gAMAP_hor_gthe Group_h)
www.amapholdings.co.za
UNAUDITED INTERIM RESULTS FOR SIX THE MONTHS ENDED 31 DECEMBER 2007
CONDENSED GROUP INCOME STATEMENT
for the six months ended 31 December 2007
% Unaudited Unaudited Audited
change 6 months 6 months 12 months
31 December 31 December 30 June
2007 2006 2007
R`000 R`000 R`000
Revenue (16) 954 709 1 139 379 1 979 662
Operating (loss)/profit (14 072) 114 806 130 254
Fair value adjustments 2 863 (8 376) (8 877)
on financial instruments
Net interest paid (5 738) (5 579) (12 289)
(Loss)/profit before tax (16 947) 100 851 109 088
Taxation 3 819 (30 256) (33 206)
(Loss)/profit (119) (13 128) 70 595 75 882
attributable to ordinary
shareholders
Basic (loss)/earnings (119) (6,3) 34,0 36,4
per share - (cents)
Diluted basic (6,3) 33,7 36,2
(loss)/earnings per (119)
share - (cents)
Capital distribution - - - 12,0
(cents)
CONDENSED GROUP BALANCE SHEET
as at 31 December 2007
Unaudited Unaudited Audited
31 December 31 December 30 June
2007 2006 2007
R`000 R`000 R`000
ASSETS
Non-current assets 78 490 55 441 64 681
Property, plant and equipment 47 464 36 950 46 140
Goodwill 1 170 1 170 1 170
Trademarks 4 596 5 204 4 596
Other financial assets - 5 573 2 319
Deferred taxation 25 260 6 544 10 456
Current assets 983 256 909 031 824 250
Inventory 419 009 503 396 366 422
Trade and other receivables 324 462 358 486 293 463
Taxation prepaid 3 518 - 3 518
Derivative financial asset 1 520 1 581 -
Bank and cash on hand 234 747 45 568 160 847
Total assets 1 061 746 964 472 888 931
EQUITY AND LIABILITIES
Total equity 510 367 547 030 551 163
Capital and reserves 510 367 547 030 551 163
Non-current liabilities 12 905 10 165 10 242
Long-term borrowings 9 941 6 755 7 116
Deferred taxation 2 964 3 410 3 126
Current liabilities 538 474 407 277 327 526
Trade, other payables and 313 689 385 265 305 434
provisions
Derivative financial liability - - 139
Capital distribution and dividends 172 232 146
payable
Taxation 938 21 780 17 989
Bank overdraft 219 253 - -
Short-term portion of long-term 4 422 - 3 818
liability
Total equity and liabilities 1 061 746 964 472 888 931
CONDENSED GROUP CASH FLOW STATEMENT
for the six months ended 31 December 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
31 December 31 December 30 June
2007 2006 2007
R`000 R`000 R`000
Cash flow from operating (139 256) (195 625) (68 117)
activities
Cash generated by trading 1 916 125 162 153 379
Working capital changes (81 800) (216 909) (96 365)
Cash (utilised in)/generated by (79 884) (91 747) 57 014
operations
Net interest paid (5 738) (5 579) (12 289)
Taxation paid (28 198) (56 017) (70 473)
Capital distribution and (25 436) (42 282) (42 369)
dividends paid
Cash flow from investing (7 096) (4 756) (18 524)
activities
Additions property, plant and (7 234) (5 441) (19 279)
equipment
Proceeds on disposal of 138 119 189
property, plant and equipment
Decrease in other financial - 566 566
assets
Cash flow from financing 1 000 1 682 3 221
activities
Net movement in treasury shares (2 431) 1 536 2 822
Increase in long-term borrowings 3 431 146 399
Net decrease in cash and cash (145 352) (198 699) (83 420)
equivalents
Cash surplus at the beginning of 160 847 244 267 244 267
the of period
Cash surplus at the end of the 15 495 45 568 160 847
period
SUPPLEMENTARY INFORMATION
for the six months ended 31 December 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
31 December 31 December 30 June
2007 2006 2007
Shares in issue (000`s) 212 190 212 190 212 190
Shares in issue - weighted 208 928 207 905 208 194
(000`s)
Diluted number of shares - 209 103 209 554 209 453
weighted (000`s)
Net asset value per share 241 258 260
(cents)
Cost of sales (R`000) 802 112 882 523 1 550 928
Interest received (R`000) 2 830 3 064 4 443
Interest paid (R`000) (8 568) (8 643) (16 732)
Capital expenditure (R`000) 7 234 5 440 19 279
Capital commitments (R`000) 780 2 580 1 637
Depreciation, amortisation 5 734 4 780 9 856
and impairment charge (R`000)
Finance and operating lease 37 215 45 964 34 537
commitments (R`000)
(Loss)/profit attributable to (13 128) 70 595 75 882
ordinary shareholders (R`000)
Loss/(profit) on disposal of 37 (15) 87
property, plant and equipment
(R`000)
Impairment of property, plant - - (1 179)
and equipment and trademarks
(R`000)
Total tax effects of (11) 4 317
adjustments (R`000)
Headline (loss)/earnings (13 102) 70 584 75 107
(R`000)
Headline (loss)/earnings per (6,3) 34,0 36,1
share - (cents)
Diluted headline (6,3) 33,7 35,9
(loss)/earnings per share -
(cents)
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2007
Unaudited Share Share Treasury Accu- Share- Attribu-
capital premium shares mulated based table to
R`000 R`000 R`000 profits compen- equity
R`000 sation holders
reserve of the
R`000 parent
Total
R`000
Balance at 2 122 162 741 (9 945) 360 356 1 728 517 002
30 June 2006
(audited)
Net profit for - - - 70 595 - 70 595
the period
Capital - (42 438) - - - (42 438)
distribution
Net treasury - - 1 536 - - 1 536
movement
Share-based - - - - 335 335
payment
Balance at 2 122 120 303 (8 409) 430 951 2 063 547 030
31 December 2006
Acquisition of - - - (3 008) - (3 008)
minority
interest
Net profit for - - - 5 287 - 5 287
the period
Net treasury - - 1 286 - - 1 286
movement
Share-based - - - - 568 568
payment
Balance at 30 2 122 120 303 (7 123) 433 230 2 631 551 163
June 2007
(audited)
Net loss for the - - - (13 128) - (13 128)
period
Capital - (25 462) - - - (25 462)
distribution
Net treasury - - (2 431) - - (2 431)
movement
Share-based - - - - 225 225
payment
Balance at 2 122 94 841 (9 554) 420 102 2 856 510 367
31 December 2007
NOTES
1 Basis of preparation
The interim report is prepared in accordance with:
- International Financial Reporting Standards (IFRS) and IAS 34 interim
financial reporting;
- The requirements of the South African Companies ACT, 61 of 1973, as
amended; and
- The Listings Requirements of the JSE Limited
These interim results incorporate accounting policies that are consistent
with those used in preparing the financial results for the year ended 30
June 2007.
The condensed interim results have not been reviewed or audited by the
Group`s auditors.
2 Diluted basic and headline (loss)/earnings per share
Diluted basic and headline (loss)/earnings per share are determined by
adjusting the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive ordinary shares.
3 Related-party transactions
The company entered into various related-party transactions. These
transactions are no less favourable than those arranged with third parties.
4 Trade and other receivables
Included in trade and other receivables is an amount of R22 million
representing customs and excise duties paid following a determination made
by The South African Revenue Services ("SARS") in March 2007. The Group has
objected to the determination and, based on the legal advice received, is
actively pursuing the recovery of this amount, however, in the interests of
prudence, this amount has been fully provided for in the 6 month period
under review.
5 Contingent liability
As disclosed in the Group`s annual report for the year ended 30 June 2007,
SARS issued a letter of intent, in February 2007, to levy customs and
excise on a wholly owned subsidiary for R29 million. The subsidiary has
raised a formal objection, in line with professional advice from external
legal and customs duty advisors, and remains confident that its objection
will be upheld.
There is no obligation, current or pending, which is considered likely to have
an adverse effect on the Group.
COMMENTARY
Trading environment
The introduction of the National Credit Act, coupled with the multiple interest
rate hikes and increases in the cost of fuel have dampened sales of consumer
durables. This slowdown in demand for the products distributed by the Group
combined with the fierce competition for market share and disappointing festive
season trading all contributed to creating the toughest trading environment
experienced during Amap`s 11 years as a listed entity.
Operational review
The Group experienced its worst six months trading in brown goods since our
listing over 11 years ago with first half revenue being 32% lower than in the
prior year. The combination of lower revenue coupled with significantly lower
margins resulted in a very disappointing trading result. Increased service and
distribution costs further compounded the disappointing performance. Whilst
trading in brown goods as a whole was unsatisfactory, certain product sub-
categories returned acceptable performances.
Trading in small domestic appliances, on the other hand, returned a pleasing
performance despite the tough trading environment, with the Group once again
growing sales in all key brands and categories. Total revenue from these
products reflected top line growth over the comparative period although at lower
gross margins. Overhead costs were largely in line with budgeted levels however,
additional marketing costs were incurred in supporting the Group`s key small
domestic appliance brands.
The slow down in demand for CRT televisions and supply chain challenges on the
sourcing of LCD kits continued in the period under review. The feasibility of
local manufacture continues to be re-assessed and where necessary the
appropriate recovery plans are being evaluated to minimize future losses. In
this regard, several exciting revenue diversification opportunities are being
considered.
Overhead costs, excluding the restructuring and distribution costs, were well
contained and were flat year-on-year.
Financial performance
As a consequence of the difficult trading conditions and the factors mentioned
above, Group revenue for the period was 16% lower than in the prior year. As a
result of increased competition, gross margins were under pressure, particularly
in brown goods. The Group`s gross margin declined from 22,5% in the comparative
period to 16,0% in the current year.
Under the leadership of the previous management team, some remedial action was
taken including inter alia a focus on reducing inventories, the outsourcing of
the servicing of brown goods and the restructuring of the sales and
administration activities.
During the six months under review, restructuring costs of approximately R8,9
million were incurred, the benefits of which will only flow through in the
second half of the current financial year.
Notwithstanding the poor first half trading result, the balance sheet remains
very strong with a very low level of gearing.
From a cash flow perspective, the Group typically utilises cash during the first
half of its financial year due to the considerable investment in inventory
leading up to the festive season peak trading period. Anticipated sales levels
over this period however did not materialise.
The comparatively lower investment in net working capital during the period
under review mitigated the higher interest rate resulting in a very similar
amount of net interest paid when compared to net interest paid for the same
period in the prior year.
The Group had net cash on hand of R 15,5 million, comprising bank and cash on
hand of R 234,7 million and a bank overdraft of R 219,2 million.
The way forward
The Group remains fully committed to delivering sustainable value to all its
stakeholders however, with the benefit of hindsight, it has become apparent that
certain decisions made in the past were strategically misguided and contributed
to the Group`s poor financial performance. To this end, we have identified
several key strategic imperatives which include:
- A reduction in inventory levels throughout the Group;
- An improvement in the collection of trade receivables;
- A refocusing of the brown goods business in order to ensure a return to
profitability;
- A systematic assessment of all other business activities with a view to
enhancing operational efficiencies and profitability;
- A focus on overhead cost reduction; and
- Continued investment in and support of the Group`s key brands.
The above initiatives are designed not only to release cash currently tied up in
working capital but also to drive the efficiency of the Group`s operations.
Although the trading environment is not expected to improve in the short-term,
the combination of the Group`s formidable stable of brands, its entrenched trade
relationships, its strong and virtually ungeared balance sheet and a new and
focused management team coupled with the strategic imperatives outlined above
provide a solid underpin to the Group`s drive towards a return to profitability
and restoring and creating shareholder value.
Distribution to shareholders
The board has resolved to continue the policy of considering a single
distribution to shareholders at the end of each financial year.
Changes to the board and senior management
The following changes to the Board have taken place since the date of our last
report:
- Meyer Kahn (non-executive director) - resigned with effect from 30 November
2007;
- Sheldon Cohen (previous group chief executive officer) - resigned with
effect from 30 November 2007;
- Steve Muller (non-executive director) - appointed with effect from 30
November 2007;
- Rian du Plessis (non-executive director) - appointed with effect from 30
November 2007;
- Leon Campher (non-executive director) - appointed with effect from 30
November 2007 and as chairman with effect from 1 February 2008;
- Allan Nossel (previous chief executive officer of the Electronics
division) - resigned with effect from 31 December 2007;
- Jack Cohen (previous non-executive chairman) - retired with effect from
31 January 2008;
- Alan Coward - appointed as group chief executive officer and executive
director with effect from 1 February 2008;
- Byron Nichles - appointed as group chief financial officer and executive
director with effect from 1 February 2008;
- Myron Berzack - (non-executive director) and Stanley Green (alternate) -
resigned with effect from 26 February 2008.
At the company`s board meeting held on Thursday, 6 March 2008, George Bernhardt,
chief executive officer of manufacturing, informed the board of his intention to
retire on 30 June 2008, after 45 years of service. The board wishes to thank
George for his contribution to the Group and wishes him well in his retirement.
In addition to the above, the Group announced on SENS on 22 February 2008, the
appointment of Des Oliver as managing director of brown goods with effect from 1
April 2008.
Segmental reporting
The Group markets and distributes consumer durables predominantly in southern
Africa and therefore the board does not consider the disclosure of segmental
information in terms of IAS 14 to be meaningful.
Corporate governance
The Group subscribes to the spirit of good corporate governance as set out in
the King II Report and accepts the need to conduct the enterprise with
integrity, transparency and equal opportunity.
Subsequent events
No events material to the understanding of the report have occurred in the
period between 31 December 2007 and the date of this report.
For and on behalf of the board
Leon Campher Alan Coward
Non-executive Chairman Group Chief Executive Officer
Johannesburg
10 March 2008
Directors: *P L Campher (Chairman), S G Bernhardt (CEO - Manufacturing), A S
Coward (Group CEO), *W A du Plessis, *J P Kieser, *S A Levitt, R D Marais (CEO -
Appliances), *S H Muller, B Nichles (Group CFO), *S Scafidas Secretary: B G
Drummond *Non-executive
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107
Registered office: 29 Heronmere Road, Reuven 2091 PO Box 39186, Booysens 2016,
Telephone (011) 490 9000 Sponsor: Bridge Capital Advisors (Pty) Limited, 27
Fricker Road, Illovo.
Date: 10/03/2008 07:47:09 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
