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EXL
EXL
EXL - Excellerate Holdings - Reviewed Results for the year ended
30 June 2008 and dividend declaration
EXCELLERATE HOLDINGS LIMITED
("Excellerate" or " the group")
Registration number 1997/009884/06
JSE code: EXL
ISIN: ZAE000026092
(Incorporated in the Republic of South Africa)
Reviewed Results for the year ended 30 June 2008
EXCELLENT YEAR FOR EXCELLERATE
- Strong operating and financial performances, underpinned by good cash
generation
- Diluted earnings and headline earnings per share up 79%
- Cash generated by operations of R56 million
- Substantial organic and acquisitive growth, with four significant
acquisitions announced during the year
- Continued development of entrepreneurial culture and partnership
approach
- Maiden dividend declared
PROVISIONAL CONDENSED CONSOLIDATED INCOME STATEMENT
for the year ended 30 June
Reviewed
Reviewed (restated)
2008 2007
R`000 R`000
Revenue 587 406 515 400
Cost of sales (385 714) (336 581)
Gross profit 201 692 178 819
Operating expenditure (157 610) (144 947)
Selling and distribution expenses (30 745) (39 496)
Administrative expenses (81 454) (85 716)
Other expenses (45 411) (19 735)
Operating profit 44 082 33 872
Gain on disposal of 62 205
business/subsidiary
Amortisation of trademarks (127) -
Profit before net finance costs and 44 017 34 077
taxation
Finance income 6 149 5 051
Finance costs (7 803) (7 444)
Profit before taxation 42 363 31 684
Taxation - current (8 330) (17 259)
Taxation - deferred (4 623) 1 996
Tax on dividends - Secondary Tax on (50) -
Companies
Profit for the year 29 360 16 421
Attributable to:
Equity holders of the parent 28 925 16 343
Minority interest 435 78
29 360 16 421
Basic earnings per share (cents) 13,2 8,5
Diluted earnings per share (cents) 12,9 7,2
PROVISIONAL CONDENSED CONSOLIDATED BALANCE SHEET
at 30 June
Reviewed
Reviewed (restated)
2008 2007
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 35 981 28 186
Intangible assets 74 017 52 550
Long-term receivable 307 799
Finance lease debtors 880 991
Deferred tax assets 12 307 16 477
123 492 99 003
Current assets
Inventories 103 354 89 426
Trade and other receivables 118 419 106 365
Current portion of finance lease 584 794
debtors
Amounts owing by joint venture 7 592 1 514
partners
Taxation receivable 4 583 5 664
Other financial instruments 51 -
Cash and cash equivalents 49 989 23 489
284 572 227 252
Total assets 408 064 326 255
EQUITY AND LIABILITIES
Issued capital 2 190 2 189
Share premium 66 078 65 889
Non-distributable reserves - 18 612
Share-based payment reserve 1 830 -
Retained earnings 112 022 66 220
Equity attributable to equity 182 120 152 910
holders of the parent
Minority interests 783 846
Total equity 182 903 153 756
Non-current liabilities
Deferred tax liabilities 1 747 835
Interest-bearing debt 20 039 10 575
21 786 11 410
Current liabilities
Trade and other payables 172 379 137 446
Amounts owing to joint venture 9 494 5 317
partners
Vendors for acquisitions 6 754 -
Taxation payable 9 790 14 128
Current portion of interest- 4 873 3 998
bearing debt
Other financial instruments 85 200
203 375 161 089
Total equity and liabilities 408 064 326 255
Net asset value per share (cents) 83,1 69,9
Net tangible asset value per share 49,4 45,8
(cents)
Calculation of earnings per share
Number of shares in issue (`000) 219 045 218 895
Weighted average shares in issue for 219 004 192 598
the year (`000)
Diluted weighted average shares in 224 174 226 054
issue (`000)
Earnings per share (cents) 13,2 8,5
Diluted earnings per share (cents) 12,9 7,2
Headline earnings per share (cents) 13,2 8,5
Diluted headline earnings per share 12,9 7,2
(cents)
The following adjustments to income
attributable to equity holders of the
parent were taken into account in the
calculation of headline earnings:
Attributable to equity holders of the 28 925 16 343
parent
- impairment of assets 5 -
- gain on disposal of business (62) (205)
- net (profit)/loss on sale of (38) 129
property, plant and equipment
- taxation effects of adjustments 27 22
Headline earnings 28 857 16 289
RESTATEMENT OF PRIOR YEAR RESULTS
Year ended
30 June
2007
R`000
Reconciliation of net profit for the year
As previously reported 16 660*
Attributable to minority shareholders 78
Attributable to equity holders of the parent 16 582
Adjusted for:
Proportionately consolidating joint ventures, 200
previously equity accounted as associates
Prior year errors (439)
16 421
Reconciliation of total equity
As previously reported 155 617*
Attributable to minority shareholders 846
Attributable to equity holders of the parent 154 771
Adjusted for:
Proportionately consolidating joint ventures, 166
previously equity accounted as associates
Prior year errors (2 027)
Amortisation of the trademark (1 707)1
Other prior year errors (320)
* As published in the 2007 annual report
1 Trademark erroneously assessed as having an indefinite useful life,
reassessed as having a finite life
CASH FLOW STATEMENT
for the year ended 30 June
Reviewed
Reviewed (restated)
2008 2007
R`000 R`000
Cash flows from operating activities 39 294 31 485
Cash generated by operations 56 199 47 659
Finance income 6 149 5 051
Finance costs (10 725) (10 313)
Dividends paid (498) -
Taxation paid (11 831) (10 912)
Cash flow from investing activities (13 957) (8 655)
Additions to property, plant and
equipment
- to expand (5 576) (1 412)
- to maintain (8 122) (8 960)
Additions to intangible assets (820) (300)
Proceeds on disposal of property, 1 114 487
plant and equipment
Acquisition of businesses (3 426) -
Proceeds on disposal of business 2 873 1 530
Cash flow from financing activities 1 163 4 567
Increase in interest-bearing debt 2 059 6 162
Decrease/(increase) of long-term 492 (118)
receivable
(Increase)/decrease in loans to joint (6 077) 640
venture partners
Increase in loans from joint venture 4 178 774
partners
Shares repurchased - (3 781)
Net increase/(decrease) in finance 321 (363)
lease debtors
Employee share options exercised 190 1 253
Net increase in cash equivalents 26 500 27 397
Cash and cash equivalents at 23 489 (3 908)
beginning of year
Cash and cash equivalents at end of 49 989 23 489
year
SUMMARISED GROUP SEGMENTAL REPORT
for the year ended 30 June
Trading and
Services distribution Corporate
R`000 R`000 R`000
2008
Revenue (external) 196 488 390 918 -
Revenue (internal) 477 8 681 7 999
196 965 399 599 7 999
Depreciation expense (5 539) (3 820) (266)
Amortisation expense (127) - -
Finance income 4 052 6 170 2 015
Finance costs (1 530) (5 244) (7 117)
2 522 926 (5 102)
Profit before tax 28 619 24 666 (10 922)
Taxation (8 064) (6 906) 1 967
Additions to non-current 9 842 3 794 62
assets
Segment assets 187 764 224 285 (3 985)
Segment liabilities (118 501) (99 034) (7 626)
Segment equity (69 263) (125 251) 11 611
Cash flow from operating 25 540 22 890 (9 136)
activities
Cash flow from investing (13 334) (583) (40)
activities
Cash flow from financing (8 943) 10 543 (437)
activities
2007
Revenue (external) 152 822 362 578 -
Revenue (internal) 1 939 6 414 7 413
154 761 368 992 7 413
Depreciation expense (3 779) (3 017) (248)
Finance income 1 327 1 985 6 296
Finance costs (231) (1 465) (10 305)
1 096 520 (4 009)
Profit before tax 24 003 20 671 (12 990)
Taxation (6 961) (5 995) (2 307)
Additions to non-current 6 080 3 999 293
assets
Segment assets 113 805 205 365 7 085
Segment liabilities (84 933) (96 897) 9 331
Segment equity (28 872) (108 468) (16 416)
Cash flow from operating 26 238 14 927 (9 680)
activities
Cash flow from investing (5 994) (2 369) (292)
activities
Cash flow from financing 1 495 (9 700) 12 772
activities
Total
R`000 Notes
2008
Revenue (external) 587 406 (1)
Revenue (internal) 17 157
604 563
Depreciation expense (9 625)
Amortisation expense (127)
Finance income 12 237 (2)
Finance costs (13 891) (3)
(1 654)
Profit before tax 42 363
Taxation (13 003)
Additions to non-current 13 698
assets
Segment assets 408 064
Segment liabilities (225 161)
Segment equity (182 903) (4)
Cash flow from operating 39 294
activities
Cash flow from investing (13 957)
activities
Cash flow from financing 1 163
activities
2007
Revenue (external) 515 400 (1)
Revenue (internal) 15 766
531 166
Depreciation expense (7 044)
Finance income 9 608 (2)
Finance costs (12 001) (3)
(2 393)
Profit before tax 31 684
Taxation (15 263)
Additions to non-current 10 372
assets
Segment assets 326 255
Segment liabilities (172 499)
Segment equity (153 756) (4)
Cash flow from operating 31 485
activities
Cash flow from investing (8 655)
activities
Cash flow from financing 4 567
activities
Reconciliations of reportable segment revenues, profit or loss, assets and
liabilities and other material items
2008 2007
R`000 R`000
1 Revenues
Total revenue for reportable segments 604 563 531 166
Elimination of inter-segment revenue (17 157) (15 766)
Consolidated revenue 587 406 515 400
2 Finance income
Total finance income for reportable 12 237 9 608
segments
Elimination of inter-segment finance (6 088) (4 557)
income
Consolidated finance income 6 149 5 051
3 Finance costs
Total finance costs for reportable (13 891) (12 001)
segments
Elimination of inter-segment finance 6 088 4 557
costs
Consolidated finance costs (7 803) (7 444)
4 For the purpose of internal performance management, certain inter-
company loans and cash have been treated as segment equity.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Compulsory
Issued Share convertible
capital premium debentures
R`000 R`000 R`000
Balance at 30 June 2006 as 1 741 50 224 18 641
restated
Balance at 30 June 2006 as 1 741 50 224 18 641
previously reported
Prior year adjustments
Profit for the year as
restated
Profit for the year as
previously stated
Prior year adjustments
Share-based payment
transactions
Sale of treasury shares 26 1 227
Repurchase of shares (51) (3 730)
Conversion of compulsory 473 18 168 (18 641)
convertible debentures into
ordinary shares
Balance at 30 June 2007 as 2 189 65 889 -
restated
Balance at 30 June 2007 as 2 189 65 889 -
previously reported
Prior year adjustments
Profit for the year
Transfer to share-based
payment reserve
Transfer to retained income
Dividend to minority
shareholders of
subsidiaries
Share-based payment
transactions
Sale of treasury shares 1 189
Balance at 30 June 2008 2 190 66 078 -
Share-
Non- based
distributable payment Retained
reserves reserve earnings
R`000 R`000 R`000
Balance at 30 June 2006 as 18 952 49 877
restated
Balance at 30 June 2006 as 18 952 51 499
previously reported
Prior year adjustments (1 622)
Profit for the year as 16 343
restated
Profit for the year as 16 582
previously stated
Prior year adjustments (239)
Share-based payment (340)
transactions
Sale of treasury shares
Repurchase of shares
Conversion of compulsory
convertible debentures into
ordinary shares
Balance at 30 June 2007 as 18 612 66 220
restated
Balance at 30 June 2007 as 18 612 68 081
previously reported
Prior year adjustments (1 861)
Profit for the year 28 925
Transfer to share-based (1 735) 1 735
payment reserve
Transfer to retained income (16 877) 16 877
Dividend to minority
shareholders of
subsidiaries
Share-based payment 95
transactions
Sale of treasury shares
Balance at 30 June 2008 - 1 830 112 022
Attributable
to equity
holders Minority
of parent interest Total
R`000 R`000 R`000
Balance at 30 June 2006 as 139 435 768 140 203
restated
Balance at 30 June 2006 as 141 057 768 141 825
previously reported
Prior year adjustments (1 622) (1 622)
Profit for the year as 16 343 78 16 421
restated
Profit for the year as 16 582 78 16 660
previously stated
Prior year adjustments (239) (239)
Share-based payment (340) (340)
transactions
Sale of treasury shares 1 253 1 253
Repurchase of shares (3 781) (3 781)
Conversion of compulsory - -
convertible debentures into
ordinary shares
Balance at 30 June 2007 as 152 910 846 153 756
restated
Balance at 30 June 2007 as 154 771 846 155 617
previously reported
Prior year adjustments (1 861) (1 861)
Profit for the year 28 925 435 29 360
Transfer to share-based - -
payment reserve
Transfer to retained income - -
Dividend to minority - (498) (498)
shareholders of
subsidiaries
Share-based payment 95 95
transactions
Sale of treasury shares 190 190
Balance at 30 June 2008 182 120 783 182 903
REVIEW OF THE YEAR
The Board is pleased once again to announce a significant improvement in
the results for the year in terms of financial performance, as well as
organic and acquisitive growth that has placed the group in a sound
position at year end. Of particular importance has been the further
embedding of an entrepreneurial culture that empowers management to
optimise their businesses, placing an emphasis on cash generation and
profitability, and that seeks value-adding opportunities for growth.
Four key acquisitions were announced during the year, in line with the
group`s philosophy of acquiring businesses in those areas that are
complementary to its core businesses and where it has strong management in
place, or where it seeks to partner and invest in companies that are well
run and have the potential for high growth and profitability.
These key acquisitions were:
- With effect from 1 November 2007, Excellerate acquired a 50% interest in
Chattels, a highly successful event management and infrastructure
development company. Excellerate has identified key areas of growth for
this business in a wide range of applications and, particularly, in
developing semi-permanent structures for sale or lease at a time when the
construction sector is under significant cost and capacity pressures.
- With effect from 1 February 2008, Levingers acquired 100% of the retail
trading businesses of VIP Dry Cleaners, Procleen Dry Cleaners, and BC Dry
Cleaners, significantly increasing its retail footprint, and allowing
synergies to be exploited.
- With effect from 1 March 2008, Excellerate acquired 100% of the parking
management businesses of Omnipark, thereby increasing the group`s
footprint in this core business area, particularly in the Western Cape,
and providing further impetus to its gate management services at national
parks. Other than Interpark and Katanga, Omnipark is the only parking
management business that has identified this area as a value-adding
business.
- Post year-end, on 3 September 2008, shareholders approved the
acquisition of 37,4% of Vital Distribution Solutions and 50% interests in
Staffing Logistics and Vital Fleet. On 22 September 2008, these
transactions were approved by the Competition Commission, thereby
fulfilling the last outstanding condition precedent to the transactions.
Vital`s businesses revolve around warehousing and secondary distribution
on the one hand and labour broking, specialising in warehousing and
distribution staff on the other. This acquisition ties into our strategy
of further developing our Trading and Distribution division, but will also
in the longer term create further synergies between the business segments
and underpin the group`s strategy to exploit the value between them. We
see continued and even greater need in the future, both in South Africa
and into Africa, for importing and distribution of goods, and Vital is
well positioned to increase its market share in this growth area.
FINANCIAL OVERVIEW
Results for the year ended 30 June 2008 were once again much improved on
the previous 12 months, reflecting the strong underlying performance of
the business. Importantly, the cash generation and earnings flow from
acquisitions during the year have only been included in these results from
the respective effective dates of acquisition.
Group revenue for the year increased by 14,0% to R587 million. Profit
after tax for the year showed an improvement to R29,4 million for the 12
months, an increase of 78,8% over the comparative period.
Diluted earnings per share and diluted headline earnings per share both
increased by 79,2% to 12,9 cents per share.
Once again, a highlight of the group`s results has been strong cash
generation - cash generated by operations within the business units
amounted to R56,2 million (2007: R47,7 million).
Cash flows from operating activities after net finance costs, dividends
and taxation paid rose to R39,3 million (2007: R31,5 million).
After cash flows from investing and financing activities, cash and cash
equivalents increased to R50,0 million from R23,5 million at the prior
year end.
Excellerate`s balance sheet remains strong, with minimal gearing. Total
assets have increased by 25,1% to R408.0 million, whilst interest-bearing
debt rose by R10,3 million to R24,9 million. Consequently the group is
well-placed to access any funding required to fulfil further growth
ambitions.
As indicated in the annual report for the period ended 30 June 2007,
Excellerate had made a proposal to SARS for a financial settlement in
respect of disallowed claims of certain trademark allowances. During the
year under review, a settlement was reached, and the group has settled all
the amounts due.
REVIEW OF OPERATIONS
Excellerate`s businesses are focussed in three business divisions, namely
trading and distribution, services and light manufacturing. Whilst its
operations are managed on a decentralised basis, the group`s strategy
seeks to grow these business divisions organically and acquisitively, and
in the long term, exploit the synergies that exist between these divisions
that underpin much of the fabric of the economy.
The Trading and Distribution Division currently comprises Foodserv,
Goldenmarc, and Sunkist with Vital to join this division. The Services
Division comprises Interpark, Sterikleen, Levingers and Chattels. The
Light Manufacturing Division, including Ferrengi and Fruti Flow as well as
small manufacturing operations at Foodserv and Chattels, are currently
managed within the other two divisions. Therefore, from a financial
perspective, only two segments are reported.
Overall, it has been a good year for Excellerate from an operational point
of view, with both of the operational segments experiencing growth.
Trading and Distribution
The contribution to revenue from this segment increased by 8,3% year-on-
year to R400 million. Foodserv enjoyed particularly strong revenue growth
of 23,5%, whilst Goldenmarc`s moderate revenue growth of 8,9% reflected
the tougher retail trading conditions during the period. Sunkist`s
decrease in turnover of R16 million was largely owing to a strategy of
rationalisation of product lines and a focus on profitability. Hence, the
nut trading business was disposed of during the year.
Profit before tax for the segment increased by 19,3% to R24,7 million.
Again Foodserv made a significant contribution to this growth, recording
an increase in profit before tax of 18,1%.
Cash generated from operating activities within the trading and
distribution segment amounted to R22,9 million, a pleasing increase over
the prior year (2007: R14,9 million).
Services
The segmental revenue for the year increased by 27,3% to R197 million.
Interpark and Levingers enjoyed particularly strong revenue growth of
17,2% and 23,7% respectively. This was partly as a result of organic
growth and partly due to the acquisition of new businesses. Sterikleen
shed a number of unprofitable contracts and, as a result, only recorded
revenue growth of 5,9%. The acquisition of Chattels contributed revenue of
R20,6 million for the eight months from 1 November 2007.
Profit before tax for this division increased by 19,2% to R28,6 million
for the year. Interpark made a substantial contribution to this growth,
recording an increase in profit before tax of 23,4%. Chattels contributed
profit before tax of R2,7 million.
Levingers` profit before tax declined by R1,6 million notwithstanding the
healthy increase in turnover as a consequence of significant once-off
costs relating to the consolidation of the bulk of its dry cleaning
facilities into one centralised factory to accommodate its acquisitions.
With all of the once-off consolidation and efficiency costs having been
absorbed, a significant improvement in profitability is expected for the
2009 financial year.
Cash generated from operating activities within the services segment
amounted to R25,6 million, a slight decrease over the prior year (2007:
R26,2 million).
Light Manufacturing
The financial impact of the manufacturing units remains small within the
group results, and therefore these units have not been reported as a
separate segment. However these units are seen as strategic components of
the group`s growth strategy, and exciting opportunities for expansion will
continue to be sought.
PROSPECTS
While it is anticipated that higher interest rates, tighter liquidity and
inflationary pressures may have a negative impact on some of the group`s
trading business units, businesses within the services segment of the
group are still robust in the current environment. Further, the group will
continue to drive a culture of cash generation from existing businesses,
seeking opportunities to exploit synergies and value-enhancing growth. The
acquisitions undertaken in the past year will be bedded down within the
group, and the growth opportunities that were identified at the time of
acquisition will be further pursued and exploited.
Excellerate is thus very well placed to deliver further value for
shareholders in the year ahead in terms of sustained earnings growth and
cash generation.
DIVIDEND
The Board is pleased to declare a maiden final dividend of 3 cents per
share, indicating a clear delivery on the implementation of the group`s
fundamental ethos that cash return must be delivered for shareholders in
addition to capital growth. The Board believes that payment of dividends
will not hinder the group`s ability to grow through acquisitions.
The salient dates for holders of ordinary shares are:
Last day for trading and to qualify for Friday, 24 October 2008
and participate in the final dividend
(cum dividend)
Trading ex dividend commences Monday, 27 October 2008
Record date Friday, 31 October 2008
Dividend payment date Monday, 3 November 2008
Share certificates may not be dematerialised or rematerialised between
Monday 27 October 2008 and Friday 31 October 2008, both days inclusive.
On behalf of the Board
Gordon Hulley
CEO
Sandton
29 September 2008
BASIS OF PREPARATION OF RESULTS
The provisional condensed consolidated financial results for the year
ended 30 June 2008 have been prepared in accordance with the recognition
and measurement criteria of IFRS, its interpretations adopted by the
International Accounting Standards Board (IASB), the presentation as well
as the disclosure requirements of IAS 34 - Interim Financial Reporting,
the Listing Requirements of the JSE Limited (the JSE) and in the manner
required by the South African Companies Act.
The accounting policies applied in the presentation of the provisional
financial results are consistent with those applied for the year ended 30
June 2007, except as follows:
- Excellerate Holdings Limited has early adopted IFRS 8 - Operating
segments. The segmental report was prepared using the measurement and
recognition criteria of IFRS. The classification of the business units
into the segments have remained the same as the previous year.
- After the acquisition of Chattels, the group adopted the policy to
proportionately consolidate joint ventures. This policy was also applied
to those joint ventures, classified erroneously in the past as associates.
Refer to the section on the restatement of prior year results.
RELATED PARTY TRANSACTIONS
The group, in the ordinary course of business, entered into various sale
and purchase transactions on an arm`s length basis at market rates with
related parties.
INDEPENDENT REVIEW
The provisional condensed consolidated balance sheet at 30 June 2008 and
the related provisional condensed consolidated income statement,
statements of changes in equity and cash flows for the year then ended
have been reviewed by KPMG Inc. Their unmodified review report is
available for inspection at the registered office of the company.
Registered office
1st Floor, Atholl Square, Corner 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
Company secretary
ER Goodman Secretarial Services CC
(represented by E Goodman).
2nd Floor, Palm Grove, Grove City,
196 Louis Botha Avenue, Houghton.
Tel: (+27 11) 728 0742
Fax: (+27 11) 728 4226
email: ergoodmn@netactive.co.za
Auditors
KPMG Inc.
Corporate advisors and sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Bankers
FirstRand Bank Limited
Nedbank Limited
The Standard Bank of South Africa Limited
Share transfer secretary
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Tel: (+27 11) 370 5000
Fax: (+27 11) 688 7721
Company registration number
Registration number 1997/009884/06
JSE code: EXL
ISIN: ZAE000026092
Sector
Cyclical Services Sector
Under sub-sector: Business Support Services
Website
www.excellerate.co.za
Date: 29/09/2008 16:35:42 Produced by the JSE SENS Department.
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