| Mon 10 Mar 2008, 10:00 | | ILA - Iliad Africa - Audited results for the year |
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ILA
ILA
ILA - Iliad Africa - Audited results for the year ended 31 December 2007 and
dividend declaration
Iliad Africa Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/011938/06)
Share code: ILA & ISIN: ZAE000015038
("Iliad")
Turnover up 24%
Operating profit up 25%
Earnings per share up 22%
Distribution up 30%
NATURE OF BUSINESS
Iliad Africa Ltd (Iliad or "the group") focuses on sourcing, distributing,
wholesaling and retailing general and specialised building materials. A range of
customers, from large-scale contractors to do-it-yourself homeowners, are
serviced through 106 stores.
FINANCIAL HIGHLIGHTS
Iliad has posted good growth for the 12 months to 31 December 2007, continuing
the trend of the last ten years. Earnings per share rose 22% to 169 cents and
turnover by 24% to R4,2 billion while operating profit before investment income
rose by 25% to R347,4 million.
It was a challenging but successful year. Material shortages, rising interest
rates and the effects of the National Credit Act were compounded by an
unsolicited bid for the group`s equity. Given the amount of management time
required to deal with these issues, results for the year clearly reflect the
trading strength, depth and experience of management in the Iliad group.
Equally, the new structure of two focused divisions - general and specialised
building materials - has proved its worth as a platform to leverage procurement
opportunities and common pools of expertise. Selling prices were under pressure
as the market slowed. This was partially countered by the group`s procurement
power and the containment of expenses.
THE MARKETPLACE
The residential market slowed at all levels during the period as the impact of
higher interest rates and new credit legislation worked through the system.
In contrast, the commercial market continued to show reasonable growth, as did
the market for additions, refurbishments and alterations. Combined, these
largely offset lower activity levels in the residential market.
Inflationary pressure eased in the second half of the financial year as the
slower market allowed the group to leverage its procurement power. However,
across the group, inflation averaged around 8%.
OPERATIONAL REVIEW
Albeit at a slower rate of growth, Iliad`s solid operating results reflect its
unfolding strategic thrust and continued demand in the marketplace. The pressure
on gross margins during the year was countered by further enhancing internal
efficiencies and capitalising on the group`s ever-improving procurement ability.
In the last quarter of 2007 Iliad also acquired Gauteng-based Thorpe Timbers, a
timber merchant with a 20-year track record that imports and sources local
timber for redistribution to the construction, building and industrial market
segments.
In the general building materials division, Campwell Hardware (acquired in the
last quarter of 2006) exceeded its warranted profits and was smoothly integrated
into the division. This has increased Iliad`s presence in the key Western Cape
market, on the back of this highly respected regional brand led by Campwell`s
existing capable management team who are the empowerment shareholders.
The division performed exceptionally well with all regional clusters
contributing in line with or above expectation. New outlets were opened in Kathu
and Lephalale.
During the year, we expanded the general building material division`s geographic
footprint through the acquisition of Eastern Cape-based USM Building Materials,
which has outlets in Uitenhage and Jeffreys Bay.
At the end of the year, we refined the model for our general building materials
division`s cash & carry cluster (ten stores) and implemented the hub-and-spoke
model successfully developed in the pilot project. As such, key regional
branches now serve as administrative and procurement `hubs` for outlying stores,
resulting in lower costs, greater flexibility, improved supply chains, stronger
recognisable brands and credit facilities for government type work. Once this
new model has been consolidated, the store network will be further expanded
using regional brand names. Additional services, such as the supply of trusses,
will also be available from these outlets.
The specialised building materials division houses Iliad`s interests in
ceramics, boards, ironmongery, lighting, plumbing and wholesale. This
combination gives the group a competitive advantage in specification contracts,
given its breadth of products and services and its procurement capability. The
division recorded solid results for the year after a slow start, due mainly to
delays in the award of commercial contracts.
The ceramics cluster maintained volumes in a challenging marketplace, given the
changing mix between residential and commercial business.
Iliad`s new specialised building material division`s cash & carry cluster was
augmented during the year with the acquisition of National Tile Traders which
will be implemented towards the end of the first quarter of 2008. This will add
critical mass through the nine outlets and an established customer base. The
cash & carry cluster will be managed by an experienced BEE team which owns 30%
of this business.
The boards and ironmongery clusters recorded excellent results, increasing their
contribution to group profit despite margin pressures due mainly to the
increased percentage of commercial business.
The wholesale cluster performed above expectations and is fast approaching
target operating profit levels. With appropriate supply lines and infrastructure
in place, this cluster is now well positioned to leverage its capabilities for
the benefit of the group and external clients.
PROSPECTS
We expect the new financial year to present a more challenging operating
environment given the combined impact of a slowing global economy, higher
domestic interest rates, inflation and the unquantifiable effect of South
Africa`s power supply issues. Iliad is, however, well positioned to optimise its
operating efficiencies, capitalise on opportunities for strategic acquisitions
and maintain its trajectory towards its short-term target of R5 billion in
turnover.
ACCOUNTING POLICIES
The audited results of the group for the year ended 31 December 2007 have been
prepared in accordance with the group`s accounting policies, which comply with
the International Financial Reporting Standards (IFRS) and are consistent with
those of the prior year except for the adoption of AC 503 - Accounting for Black
Economic Empowerment (BEE) transactions that arise on the application of IFRS 2
share-based payment. The group has applied the statement retrospectively to the
options granted in terms of the BEE transaction concluded on 18 March 2005.
AUDIT REPORT
The results for the year have been audited by Grant Thornton, and their
unqualified audit report on the 31 December 2007 annual financial statements is
available for inspection at the company`s registered office.
DISTRIBUTION TO SHAREHOLDERS
In view of the good results, future growth opportunities, positive cash flows
from operating activities and a strong balance sheet, the directors increased
the distribution by 30% to 52 cents per share (2006: distribution of 40 cents
per share).
Set out in the table below are the pro forma financial effects of the
distribution based on Iliad`s audited results for the year ended
31 December 2007. The pro forma financial effects have been prepared for
illustrative purposes only to provide information on how the distribution may
have impacted on the results and financial position of Iliad. Because of their
nature, the pro forma financial effects may not give a fair reflection of
Iliad`s financial position after the distribution or the effect on future
earnings. The pro forma financial effects are the responsibility of Iliad`s
directors.
Before After Percentage
the the change
distribution distribution %
Headline earnings per share
(cents) 168.4 164.32 (2.4)
Earnings per share (cents) 169.0 164.82 (2.5)
Weighted average number of shares 146 433 408 146 433 408
Net asset value per share (cents) 639.3 587.33 (8.1)
Net tangible asset value per
share (cents) 319.5 267.53 (16.3)
Number of shares in issue 146 433 408 146 433 408
Note:
1. The figures in the "Before the distribution" column have been extracted
from the published audited results of Iliad for the year ended 31 December
2007.
2. Earnings and headline earnings per share in the "After the distribution"
column have been based on the following assumptions:
- The distribution was made on 1 January 2007, and
- Interest, at an after-tax rate of 8% per annum, was forfeited on the cash
distributed.
3. Net asset value and net tangible asset value per share in the "After the
distribution" column have been based on the assumption that the
distribution was made on 31 December 2007.
Set out below are the salient dates applicable to the distribution:
Last date to trade "cum dividend" Friday, 28 March 2008
Trading commences "ex-dividend" Monday, 31 March 2008
Record date Friday, 4 April 2008
Payment date Monday, 7 April 2008
Share certificates may not be dematerialised or rematerialised between Monday,
31 March 2008 and Friday, 4 April 2008, both dates inclusive.
For and on behalf of the board of directors
10 March 2008
Ralph Patmore, chief executive officer
Neil Goosen, financial director
BALANCE SHEET
Audited Audited
R000 31 Dec 2007 31 Dec 2006
ASSETS
Non current assets
Property, plant and equipment 71 899 56 498
Intangible assets 468 288 373 461
Deferred taxation 23 041 20 798
Total non current assets 563 228 450 757
Current assets
Inventories 735 151 584 638
Trade and other receivables 469 279 403 884
Cash and cash equivalents 96 238 156 854
Taxation 1 131 752
Total current assets 1 301 799 1 146 128
Total assets 1 865 027 1 596 885
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 162 090 204 014
Share-based payment reserve 40 247 40 247
Retained income 733 802 503 019
Total shareholders` equity 936 139 747 280
Non current liabilities
Long-term borrowings 68 286 53 209
Total non current liabilities 68 286 53 209
Current liabilities
Trade and other payables 854 833 764 552
Short-term borrowings 2 948 1 297
Taxation 2 821 30 547
Total current liabilities 860 602 796 396
Total equity and liabilities 1 865 027 1 596 885
INCOME STATEMENT
% Audited Audited
R000 Increase 31 Dec 2007 31 Dec 2006
Turnover 24% 4 180 355 3 368 388
Cost of sales 2 977 275 2 398 881
Gross margin 24% 1 203 080 969 507
Administration, selling and
distribution expenses 855 647 691 447
Operating profit before
investment income 25% 347 433 278 060
Investment income 14 721 8 510
Operating profit before finance
charges 362 154 286 570
Finance charges (22 595) (6 200)
Profit before taxation 21% 339 559 280 370
Taxation (92 126) (78 186)
Profit for the year 22% 247 433 202 184
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Profit for the year 247 433 202 184
Adjusted for:
Profit on disposal of property,
plant and equipment (782) (1 093)
Headline earnings for the year 23% 246 651 201 091
Number of ordinary shares in
issue at year end, including nil
treasury shares (2006: 7 851 111
treasury shares) 146 433 408 154 284 519
Weighted average number of
ordinary shares in issue, net of
treasury shares 146 433 408 146 240 876
Diluted weighted average number
of ordinary shares in issue net
of treasury shares 150 961 099 150 403 056
Headline earnings per share
(cents) 22% 168,4 137,5
Earnings per share (cents) 22% 169,0 138,3
Diluted headline earnings per
share (cents) 22% 163,4 133,7
Diluted earnings per share
(cents) 22% 163,9 134,4
Distribution out of stated
capital (cents per share) 30% 52,0 40,0
ABRIDGED CASH FLOW STATEMENT
Audited Audited
R000 31 Dec 2007 31 Dec 2006
Cash flows from operating activities 153 236 197 874
Operating profit before working capital
changes 361 221 301 531
Working capital changes for the year (85 511) (10 914)
Taxation paid (122 474) (92 743)
Cash utilised in investment activities (141 033) (208 128)
Cash effects on financing activities (53 177) (45 848)
Decrease in cash and cash equivalent (40 974) (56 102)
Cash and cash equivalent at beginning of the
year 156 854 192 623
Cash and cash equivalent acquired (19 642) 20 333
Cash and cash equivalent at end of the year 96 238 156 854
SUPPLEMENTARY INFORMATION
Audited Audited
31 Dec 2007 31 Dec 2006
Net asset value per share (cents) 639,3 510,3
Net tangible asset value per share (cents) 319,5 255,3
Capital expenditure (R000) 32 402 20 531
Purchase of new businesses (R000) 117 737 242 130
Capital commitments (R000)
- approved and contracted 25 721 20 150
- approved not contracted 16 272 13 600
Depreciation (R000) 22 763 22 254
STATEMENT OF CHANGES TO SHAREHOLDERS` EQUITY
Audited Audited
Year ended Year ended
R000 31 Dec 2007 31 Dec 2006
Balance at the beginning of the year 747 280 591 349
Prior year adjustment - share-based payment
reserve
Movements in stated capital 40 247 40 247
Prior year adjustment - share-based payment
reserve 40 247 40 247
Movement in retained income (40 247) (40 247)
Prior year adjustment - share-based payment
reserve (40 247) (40 247)
Balance restated 747 280 591 349
Movements in stated capital (58 574) 606
Options exercised 606
Distribution out of stated capital (58 574)
Movements in retained income 247 433 155 325
Profit after taxation 247 433 202 184
Dividends paid (46 859)
936 139 747 280
Registered address
First Floor East Block Pineslopes Office Park c/o The Straight & Witkoppen Road
Lonehill PO?Box 2572 Honeydew 2040 www.iliadafrica.co.za
Directors
HC Turner (chairman)* RB Patmore (chief executive officer) NP Goosen RT Ririe*
MY Sibisi* *non-executive
Transfer secretaries
Link Market Services SA (Pty) Ltd 11 Diagonal Street Johannesburg 2001 PO?Box
4844 Johannesburg 2000
(Incorporated in the Republic of South Africa)
(Registration number 1997/011938/06) Share code ILA ISIN ZAE000015038
Sponsor
Bridge Capital Advisors (Pty) Ltd 27 Fricker Road Second Floor Illovo 2196 PO
Box 651010 Benmore 2010
ENERGY | PASSION | FOCUS | PERFORMANCE
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