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EXL
EXL
EXL - Excellerate Holdings Limited - Unaudited results for the six months ended
31 December 2008
EXCELLERATE HOLDINGS LIMITED
Registration number 1997/009884/06
JSE code: EXL
ISIN: ZAE000026092
(Incorporated in the Republic of South Africa)
("Excellerate" or "the Group")
Unaudited results
for the six months ended 31 December 2008
HIGHLIGHTS
* Revenue growth of 17,9% over the prior period
* Attributable profit for the six months up 15,2% over the prior period
* Operating cash flow generation up 139,3% over the prior period
* Announced acquisitions bedded down
CONDENSED GROUP INCOME STATEMENT
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Revenue 351 886 298 438 587 406
Gross profit 108 127 98 022 201 692
Profit before net finance 27 241 23 679 44 017
costs and taxation
Net finance costs (1 820) (1 608) (1 654)
Profit before taxation 25 421 22 071 42 363
Taxation (7 655) (6 418) (13 003)
Profit after taxation 17 766 15 653 29 360
Attributable to:
Equity holders of the 17 968 15 595 28 925
parent
Minority interest (202) 58 435
17 766 15 653 29 360
Shares in issue (000`s) 219 329 219 045 219 045
Weighted average number of 219 137 218 929 219 004
shares in issue (000`s)
Fully diluted weighted 224 121 223 659 224 174
average number of shares
in issue (000`s)
Earnings per share (cents) 8,2 7,1 13,2
Headline earnings per 8,2 7,1 13,2
share (cents)
Diluted basic earnings per 8,0 6,9 12,9
share (cents)
Diluted headline earnings 8,0 6,9 12,9
per share (cents)
Reconciliation between
income attributable to
ordinary shareholders and
the headline earnings
attributable to ordinary
shareholders:
Attributable to ordinary 17 968 15 595 28 925
shareholders
- impairment of assets - - 5
- gain on disposal of - - (62)
business
- net loss/(gain) on sale 27 (39) (38)
of property, plant and
equipment
- tax thereon (8) 11 27
Headline earnings 17 987 15 567 28 857
CONDENSED GROUP BALANCE SHEET
Restated
Unaudited unaudited Audited
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
ASSETS
Non-current assets 197 261 100 714 128 661
Property, plant and 69 359 30 400 35 981
equipment
Intangible assets 105 105 53 651 74 017
Other financial assets 12 612 901 6 356
Deferred taxation 10 185 15 762 12 307
Current assets 302 251 248 415 279 081
Cash and cash 14 785 15 585 49 989
equivalents
Other current assets 287 466 232 830 229 092
Total assets 499 512 349 129 407 742
EQUITY AND LIABILITIES
Equity and reserves 207 509 169 694 182 903
Equity attributable to 206 928 168 790 182 120
equity holders of the
parent
Minority interests 581 904 783
Non-current liabilities 35 490 11 877 21 786
Interest bearing debt 21 335 10 584 20 039
Deferred taxation 6 058 1 293 1 747
Vendors for acquisitions 8 097 - -
Current liabilities 256 513 167 558 203 053
Other current 235 294 151 285 196 299
liabilities
Bank overdrafts 11 077 16 273 -
Vendors for acquisitions 10 142 - 6 754
Total equity and 499 512 349 129 407 742
liabilities
Net asset value per share 94,3 77,1 83,1
(cents)
Net tangible asset value 46,4 52,6 49,4
per share (cents)
CONDENSED GROUP CASH FLOW STATEMENT
Restated
Unaudited unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Cash flows from operating 8 344 (21 215) 39 794
activities
Cash 11 586 (14 563) 56 200
generated/(utilised) by
operations
Net finance costs (1 344) (1 608) (4 575)
Taxation paid (1 898) (5 044) (11 831)
Cash flows from investing (39 839) (9 518) (13 957)
activities
Net additions to (7 725) (6 066) (13 404)
property, plant and
equipment and software
Net acquisition in (32 114) (3 452) (553)
businesses and joint
ventures
Cash flows from financing (14 786) 6 559 663
activities
Dividends paid (6 797) - (498)
Other financing (7 989) 6 559 1 161
activities
Net (decrease)/increase in (46 281) (24 174) 26 500
cash and cash equivalents
Cash and cash equivalents 49 989 23 486 23 489
at beginning of period
Cash and cash equivalents 3 708 (688) 49 989
at end of period
CONDENSED GROUP SEGMENTAL REPORT
Trading
Services distribution Corporate Total
R`000 R`000 R`000 R`000
2008
Revenue (external) 154 224 197 662 - 351 886
Revenue (internal) 5 317 5 437 4 486 15 240
159 541 203 099 4 486 367 126
Profit before tax 19 627 11 666 (5 872) 25 421
Segment assets 302 028 245 703 8 593 556 324
2007
Revenue (external) 81 328 217 110 - 298 438
Revenue (internal) 1 424 4 656 4 060 10 140
82 752 221 766 4 060 308 578
Profit before tax 12 368 14 779 (5 076) 22 071
Segment assets 128 478 245 886 5 868 380 231
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share
Non- based
Share Share distributable payment
capital premium reserve reserve
R`000 R`000 R`000 R`000
Balance at 30 June 2 189 65 889 18 612
2007
Share based 95
payment
transactions
Sale of treasury 1 189
shares
Profit for the
period
Balance at 31 2 190 66 078 18 707
December 2007
Transfer to share (1 830) 1 830
based payment
reserve
Transfer to (16 877)
retained earnings
Profit for the
period
Dividends to
minority
shareholders
Balance at 30 June 2 190 66 078 - 1 830
2008
Dividends declared
Arising on 13 570
acquisition of
joint ventures
Repurchase of (2) (171)
shares
Sale of treasury 5 235
shares
Profit for the
period
Balance at 31 2 193 79 712 - 1 830
December 2008
Attributable
to equity
Retained holders Minority
earnings of parent interest Total
R`000 R`000 R`000 R`000
Balance at 30 June 66 220 152 910 846 153 756
2007
Share based 95 95
payment
transactions
Sale of treasury 190 190
shares
Profit for the 15 595 15 595 58 15 653
period
Balance at 31 81 815 168 790 904 169 694
December 2007
Transfer to share - -
based payment
reserve
Transfer to 16 877 - -
retained earnings
Profit for the 13 330 13 330 377 13 707
period
Dividends to - (498) (498)
minority
shareholders
Balance at 30 June 112 022 182 120 783 182 903
2008
Dividends declared (6 797) (6 797) (6 797)
Arising on 13 570 13 570
acquisition of
joint ventures
Repurchase of (173) (173)
shares
Sale of treasury 240 240
shares
Profit for the 17 968 17 968 (202) 17 766
period
Balance at 31 123 193 206 928 581 207 509
December 2008
COMMENTARY
GENERAL OVERVIEW
The past six months has been both exciting and challenging as the Group
continued to focus on organic growth, integrating the recent acquisitions and
cautiously considering new opportunities. Continued focus on sound cash
management and quality revenue has resulted in positive performance in both of
these areas. This has been achieved despite the current depressed consumer and
corporate spending environment which affected the economy during the latter
stages of the reporting period. The diverse nature of the Group has the benefit
of cushioning some of the pressures being experienced by the trading and
distribution divisions through the consistent performance of the service
orientated companies. The economic and commercial climate is likely to remain
negative for the foreseeable future, but the Board is confident that the Group
is well placed to manage through this period given the anticipated performance
of group companies, low current debt levels and continued positive cash
generation. The Group will continue to seek value enhancing acquisitions, but
will apply stringent valuation methodologies appropriate to the current economic
environment in assessing new opportunities.
FINANCIAL RESULTS
The Board is pleased to report to shareholders an improved performance for the
six month period from July to December 2008, in comparison with both the
previous six months and the comparative period for the prior year.
Revenue for the six months rose by R53,5 million or 17,9%, to R351,9 million.
Net profit attributable to shareholders increased to R18,0 million, an increase
of 15,2% over the comparative period.
Diluted basic earnings and diluted headline earnings per share increased by
15,9% to 8,0 cents per share.
Positive cash flows generated from operating activities amounted to R8,3 million
compared to a cash utilisation of R21,2 million in the prior period. This has
been achieved, in part, through focused management of inventory and debtors
levels. The cyclical nature of the trading businesses should precipitate a
further reduction in the Group`s investment in working capital to June 2009.
Cash flows utilised in investing activities amounted to R39,9 million (prior
period R9,5 million). The majority (R32,1 million) of this cash flow related to
the acquisition of the Vital group of companies and Delawood Designs. No
external funding was required for these investments. Additions to property,
plant and equipment for the period was R7,7 million (prior period R6,1 million).
The overall effect of these items, along with R8,0 million utilised in financing
activities and R6,8 million in dividends declared in respect of the year ended
June 2008, was a decrease in cash and cash equivalents amounting to R46,2
million resulting in a closing balance of R3,7 million.
REVIEW OF OPERATIONS
Trading - Distribution
The Trading and Distribution division comprises Goldenmarc, Foodserv, Sunkist
and Ferrengi.
Revenue in the Trading and Distribution division decreased by R18,7 million
(8,4%) from R221,8 million to R203,1 million. Profit before tax decreased by
R3,1 million (21,1%) to R11,7 million.
Foodserv continued to show strong revenue and profit growth and the outlook for
Foodserv remains very positive. Goldenmarc has experienced both volume and
margin pressure indicative of the current weak retail environment. This has
resulted in material reductions in their revenue and profitability for the
period. Management continues to focus on achieving improved volumes and margins
but these are largely dependent on the improvement in trading conditions. In
addition, Goldenmarc`s management is implementing measures to significantly
reduce fixed overheads.
The restructuring of Sunkist is largely completed with a few sales categories
still to be eliminated or disposed off. As a result of this process, Sunkist`s
revenue decreased by 61,4% or R17,7 million for the period. Sunkist is now
relatively small within the trading and distribution division and management
continues to explore ways of optimising shareholder value in this business.
Services
The Services division comprises Interpark, Sterikleen, Vital Distribution, Vital
Fleet, Staffing Logistics, Chattels, Delawood and Levingers.
Revenue in the Services division increased by R76,8 million (92,8%) to R159,5
million and profit before tax improved by R7,3 million (59,3%) to R19,6 million.
The significant growth in revenues and profitability is due to the introduction
of the new acquisitions as well as solid performances of the existing business
units in the current period. Vital is only included in these results from 1
October 2008, whilst Delawood Designs is included from 1 November 2008. Initial
results indicate that these companies are performing as anticipated and should
continue to do so for the coming six months to June 2009.
Due to lower than expected industry activity, Chattels did not achieve
anticipated revenues to December. However the cyclical nature of the business
and the strong order book to June 2009 should result in a solid annual
performance. In addition, Chattels is currently pursuing significant growth
opportunities which if successful will have a meaningful positive impact on
future performance.
Interpark and Sterikleen continue to achieve positive sustainable results. The
continued focus of management in these companies is on cost and margin
maintenance, which is even more relevant in the current economic environment.
Both Interpark and Sterikleen have been actively developing innovative revenue
opportunities within the core businesses, which are now beginning to deliver
results. This will be a continued focus of management to maximise revenue
growth.
Levingers is highly geared on an operating level, which combined with lower
volumes due to a weaker retail environment has resulted in Levingers performing
below growth expectations for the reporting period. However, aggressive cost
management has resulted in continuing profitability, and any improvement in the
retail environment will see significant improvements in results. In addition,
management are currently pursuing opportunities to reduce the operational
gearing within the company.
ACQUISITIONS
During the period under review, two previously announced transactions were
implemented as follows:
* Effective 1 October 2008, Excellerate acquired 37,4% of Vital Distribution
Solutions (Pty) Limited, 50% of Staffing Logistics (Pty) Limited and 50% of
Vital Fleet (Pty) Limited, collectively ("the Vital Transaction"); and
* Effective 1 November 2008, Excellerate acquired 50% of an entity which has
acquired the business of DLJ Interiors CC, carried on under the name Delawood
Designs ("the Delawood Transaction").
The total cost of the Vital Transaction was R34,9 million of which R25,8 million
was attributable to tangible net assets acquired, with the balance of R9,1
million attributed to goodwill and other intangible assets. From 1 October 2008
to 31 December 2008, the Vital Transaction contributed R4,4 million to the
Group`s profit after tax, after taking into account R1,0 million of pre-taxation
financing costs related to the transaction.
The total cost of the Delawood Transaction was R9,4 million of which R3,4
million was attributable to tangible net assets, and the balance of R6,0 million
attributed to goodwill and other intangible assets. From 1 November 2008 to 31
December 2008, the Delawood Transaction contributed R0,8 million to the Group`s
profit after tax, after taking into account R0,1 million of pre-taxation
financing costs related to the transaction.
PROSPECTS
The Group continues to look for investment opportunities, but is adopting a more
conservative approach to valuations consistent with the current economic
environment. It is the view of the Board that recent opportunities considered
have not yet fully discounted the inherent risks associated with local and
global markets, and consequently it has been difficult to agree value with
sellers during the current reporting period. More recently, however, the
expectation gap appears to be narrowing, and the Group is well positioned to
make acquisitions as appropriate opportunities arise.
There has also been a major effort to source innovative and material growth
opportunities for the Group`s current operating businesses, and this effort is
expected to start yielding positive results going forward.
BASIS OF PREPARATION OF RESULTS
The condensed consolidated financial results for the six months ended 31
December 2008 have been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards, its
interpretations adopted by the International Accounting Standards Board, the
presentation as well as the disclosure requirements of International Accounting
Standards 34 - Interim Financial Reporting, the Listing Requirements of the JSE
Limited and in the manner required by the South African Companies Act, No 61 of
1973.
The accounting policies applied in the presentation of the financial results are
consistent with those applied for the year ended 30 June 2008.
The results for 31 December 2007 have been restated in accordance with the
restatement of the results for the year ended 30 June 2008. The Group has
adopted the policy to proportionately consolidate joint ventures. This policy
was also applied to those joint ventures classified previously as associates.
The condensed consolidated balance sheet at 31 December 2008 and the related
condensed consolidated income statement, statement of changes in equity and cash
flow for the six months then ended have not been reviewed or reported on by the
Group`s auditors.
DIVIDEND
As is consistent with the Group`s policies regarding the payment of interim
dividends, the directors have decided not to declare a dividend at this time.
For and on behalf of the Board
G Hulley
Chief Executive Officer
Sandton
23 March 2009
DIRECTORS
Gordon Hulley Chief executive officer
Harold Bloch Executive director
Peter Kramer Executive director
Alan Lipchin Executive director
Athol Stewart Executive director
Rob Owens Executive director
Rudi Stumpf Non-executive director
Graham Davel Non-executive director
Clive Howell Non-executive director
(alternate to Graham Davel)
Michael Mohohlo Non-executive director
SHARE TRANSFER SECRETARY
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown 2107
Tel: (+27 11) 370 5000
Fax: (+27 11) 688 7721
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
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
email: info@excellerate.co.za
Sponsor:
Barnard Jacobs Mellet Corporate Finance (Pty) Ltd
Date: 23/03/2009 15:13:01 Produced by the JSE SENS Department.
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