| Wed 5 Aug 2009, 10:00 | | ARH - ARB HOLDINGS LIMITED - Abridged Audited Results For The Year Ended 30 June |
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ARH
ARH
ARH - ARB HOLDINGS LIMITED - Abridged Audited Results For The Year Ended 30 June
2009, Distribution Announcement And Notice Of Annual General Meeting
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH ISIN: ZAE00109435
("ARB" or "the company" or "the group")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2009, DISTRIBUTION
ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
- Net cash on hand in excess of R200 million
- Net tangible asset value per share up 12% to 195 cents per share
- Proposed cash distribution of 10 cents per share
- Headline earnings of R72.7 million
BASIS OF PREPARATION
The abridged audited consolidated annual financial statements for the year ended
30 June 2009 ("the year") have been prepared in compliance with International
Financial Reporting Standards ("IFRS"), IAS34, the South African Companies` Act,
1973 and the Listings Requirements of the JSE Limited. The accounting policies
applied are consistent with those applied in the prior year. The annual
financial statements have been audited by PKF (Durban), whose unqualified audit
opinion is available for inspection at the company`s registered office.
ABRIDGED GROUP INCOME STATEMENT
Audited Audited
Year to Year to
30 June 2009 30 June 2008
R000`s R000`s
Revenue 1 186 659 1 343 909
Profit before interest and taxation 114 701 195 115
Investment income 401 -
Interest received 14 044 7 492
Interest paid (1 346) (6 541)
Profit before taxation 127 800 196 066
Taxation 39 973 60 992
Profit for the year 87 827 135 074
Minority interest 15 173 30 930
Earnings attributable to ordinary shareholders 72 654 104 144
Headline earnings adjustment net of taxation (4) (4)
Headline earnings 72 650 104 140
Ordinary number of shares in issue (000`s) 235 000 235 000
Weighted average number of shares (000`s) 235 000 221 325
Diluted number of shares (000`s) 235 620 221 325
Earnings per share (cents) 30,92 47,05
Diluted earnings per share (cents) 30,84 47,05
Headline earnings per share (cents) 30,91 47,05
Diluted headline earnings per share(cents) 30,83 47,05
The headline earnings adjustment relates to the surplus on disposal of property,
plant and equipment.
ABRIDGED GROUP BALANCE SHEET
Audited Audited
30 June 2009 30 June 2008
R000`s R000`s
ASSETS
Non-current assets
Property, plant and equipment 112 447 94 168
Intangible asset 194 -
Deferred taxation 1 503 2 113
Current assets
Inventory 175 888 307 966
Trade and other receivables 165 067 234 975
Deferred lease payments 29 58
Taxation overpaid 23 122
Cash resources 200 562 112 589
TOTAL ASSETS 655 713 751 991
EQUITY AND LIABILITIES
Equity and reserves
Share capital 24 24
Share premium 171 375 171 375
Revaluation reserve 37 150 29 897
Accumulated profits 251 082 208 978
Attributable to
ordinary shareholders 459 631 410 274
Minority interest 69 290 63 477
Total shareholders` funds 528 921 473 751
Non-current liabilities
Interest-bearing borrowings - 4 212
Deferred lease payments 96 68
Deferred taxation 16 579 14 033
Current liabilities
Trade and other payables 105 169 248 687
Provisions 2 495 2 390
Interest-bearing borrowings - 3 716
Taxation payable 2 406 5 051
Bank overdraft 47 83
TOTAL EQUITY AND LIABILITIES 655 713 751 991
Number of ordinary shares in issue (000`s) 235 000 235 000
Net asset value per share (cents) 195,59 174,58
Net tangible asset value per share (cents) 194,85 173,66
ABRIDGED GROUP CASH FLOW STATEMENT
Audited Audited
30 June 2009 30 June 2008
R000`s R000`s
Cash generated by operating activities 177 851 183 688
Interest received 14 044 7 492
Interest paid (1 136) (6 541)
Investment income 401 -
Dividends paid (39 910) (57 700)
Taxation paid (38 401) (68 660)
Secondary tax on companies paid (3 991) (3 275)
Cash flows from operating activities 108 858 55 004
Cash flows from investing activities (10 583) (10 417)
Cash flows from financing activities
Issue of shares - 171 379
Loans repaid (10 266) (81 460)
Net increase in cash resources 88 009 134 506
Cash resources at beginning of year 112 506 (22 000)
Cash resources at end of year 200 515 112 506
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Non- Re-
capital premium distributab valuationre
R000`s R000`s le serve
reserve R000`s
R000`s
Balance at 30 June 2007 20 - 9 374 23 893
Issue of shares 4 171 375 - -
Profit for the year - - - -
Dividends paid - - - -
Transfer of reserves - - (9 374) -
Revaluation of property, - - - 6 004
plant and equipment net
of taxation
Balance at 30 June 2008 24 171 375 - 29 897
Profit for the year - - - -
Dividends paid - - - -
Revaluation of property, - - - 7 253
Plant and equipment net
of taxation
Balance at 30 June 2009 24 171 375 - 37 150
Accumulated Minority Total
Profits interest R000`s
R000`s R000`s
Balance at 30 June 2007 152 120 33 587 218 994
Issue of shares - - 171 379
Profit for the year 104 144 30 930 135 074
Dividends paid (56 660) (1 040) (57 700)
Transfer of reserves 9 374 - -
Revaluation of property, - - 6 004
plant and equipment net
of taxation
Balance at 30 June 2008 208 978 63 477 473 751
Profit for the year 72 654 15 173 87 827
Dividends paid (30 550) (9 360) (39 910)
Revaluation of property, - - 7 253
plant and equipment net
of taxation
Balance at 30 June 2009 251 082 69 290 528 921
ABRIDGED GROUP SEGMENT REPORT
Audited for the year ended 30 June 2009
Investment Electrical IT Services
and rental wholesaling R000`s
income R000`s
R000`s
Sales to external customers 489 1 184 801 1 858
Profit before interest and 52 232 98 879 704
taxation
Depreciation 2 173 2 317 36
Capital expenditure 9 744 3 200 32
Segment assets 306 652 392 503 994
Segment liabilities 18 528 125 980 478
Inter-company Total
eliminations R000`s
and re-
allocations
R000`s
Sales to external customers (489) 1 186 659
Profit before interest and taxation (37 114) 114 701
Depreciation - 4 526
Capital expenditure - 12 976
Segment assets (44 436) 655 713
Segment liabilities (18 194) 126 792
Audited for the year ended 30 June 2008
Investment Electrical IT Services
and rental wholesaling R000`s
income R000`s
R000`s
Sales to external customers 141 1 341 981 1 928
Profit before interest and 23 597 182 617 134
taxation
Depreciation 2 441 1 657 27
Capital expenditure 10 268 2 617 213
Segment assets 278 188 602 195 1 033
Segment liabilities 22 362 358 052 1 003
Inter-company Total
eliminations R000`s
and re-
allocations
R000`s
Sales to external customers (141) 1 343 909
Profit before interest and (11 233) 195 115
taxation
Depreciation - 4 125
Capital expenditure 65 13 163
Segment assets (129 425) 751 991
Segment liabilities (103 177) 278 240
COMMENTARY
Financial Review
In an extremely challenging market, the group did well to record marginal volume
growth. The strict and disciplined management of working capital, together with
the decision to reduce stock holdings to a targeted level of 60 days, resulted
in the group`s inventory days improving from 106 days in the prior year to 66
days in the current year and its debtors` days improving from 56 days to 45 days
over the same period. This resulted in the group generating R178 million of cash
during the year. From a profitability perspective, however, the year proved to
be a year of two halves. During the first half of the year the group recorded
revenue growth of 8.5% although lower margins and rapidly falling metal prices
hinted at what was to follow. The second half of our financial year saw a sharp
decline in both revenues and margins due to significant sales price deflation
and increased competition. Overall for the year, the group recorded a 12%
decline in revenue and achieved gross margins of 17.5% (2008: 20.8%). Operating
costs were reasonably well contained, given marginally higher sales volumes and
transportation cost increases, particularly during the first half of the year.
Notwithstanding the decline in profitability, the strong cash generation
referred to above resulted in a twelve-fold increase in the group`s net interest
received despite falling interest rates.
While headline earnings decreased by 30%, headline earnings per share decreased
by 34% due to an increase in the weighted average number of shares in issue
during the current year.
As at 30 June 2009, the group had no gearing and held net cash amounting to over
R200 million. The group`s net tangible asset value per share increased by 12.2%
to 194.9 cents per share (2008: 173.7 cents per share).
Operational Review
ARB Electrical Wholesalers
The precipitous fall in metal prices, most notably copper and aluminium, in the
last quarter of 2008 gave rise to a need to write down inventories by
approximately R12 million and resulted in significant year-on-year sales price
deflation of up to 50% in certain product categories. With the sudden and
unexpected drop in metal prices and substantial curtailment of major projects in
the private sector, several wholesalers, who had previously built up significant
stock holdings, were forced to destock in an almost panicked manner, causing
major disruption to the market place.
Despite these difficult market conditions, ARB Electrical Wholesalers achieved a
marginal increase in sales volumes for the year. From a branch perspective, the
Gauteng, Richards Bay, East London and Nelspruit branches performed well whilst
the Durban, Pietermaritzburg and Cape Town branches felt the impact of depressed
regional market conditions. Notwithstanding this, each of ARB`s seven branches
was profitable for the year.
Whilst the group achieved some early success in obtaining accreditation with
numerous mining houses, the global downturn in the mining sector has stunted
this division`s growth. The group however remains focused on this key sector and
believes that it will offer exciting growth prospects once the current mining
downturn starts reversing.
With the average electrification rate in SADC countries (according to the United
Nations Human Development Report), excluding South Africa (70%) and Mauritius
(94%), being less than 18%, Africa remains a key growth market for the group.
ARB Global, although marginally profitable for the year, failed to achieve the
desired level of success and accordingly, has been restructured. The group
continues to explore alternative strategies to establish a market presence in
each of the targeted countries.
Investment and rental income
The holding company owns all properties and vehicles utilised by, and also
provides treasury services to, the group`s operating entities. During the year,
the group incurred capital expenditure of R13 million the majority of which was
incurred in developing the company`s new group owned branch in Montague Gardens,
Cape Town.
ARB IT
The group`s IT services division continued to play a key role in the enhancement
of the group`s IT infrastructure and systems during the year.
Acquisitions
During the year under review several acquisition opportunities were evaluated,
however, none of these met our strict acquisition criteria. Management continues
to evaluate possible acquisitions on an ongoing basis.
Prospects
Whilst there has been some recovery in world metal prices since the beginning of
2009, these have been largely offset by the relative strength of the Rand
against the US Dollar over this period. The relative stability of the metal
prices in Rand terms, assuming no further dramatic metal price or currency
fluctuations, coupled with the overstocked position of many wholesalers having
now been unwound should provide for a less volatile trading environment.
From an activity perspective, although public sector infrastructure related
spend continues unabated and is forecast to do so for the next few years,
spending by the private sector, which typically constitutes more than two-thirds
of total gross fixed capital formation, has slowed dramatically over the past
year. As and when the macro-economic environment recovers, private sector spend
is expected to regain some momentum off its current low base and should provide
significant growth opportunities for ARB.
Over the medium term, expansion into Africa should provide an increasing
contribution to the group`s revenue and profit growth. However, in light of the
prevailing uncertainty in world markets, we believe it premature to be
forecasting any significant recovery in the trading environment at this stage.
With an ungeared balance sheet and significant cash resources, the group is well
placed not only to weather these trying conditions but also to capitalise on the
acquisition opportunities which the current economic climate is expected to
yield.
The group remains committed to delivering sustainable earnings growth and value
to its shareholders.
Appointments to the Board
During the year, the company appointed the following directors:
- Byron Nichles, as CEO of ARB Holdings Limited with effect from 1 February
2009, to focus on the strategic growth of the group; and
- In compliance with the recommendations set out in King III, Makhosazana
("Khosi") Sibisi and Ralph Patmore were appointed as independent, non-
executive directors with effect from 16 April 2009 and 29 May 2009
respectively.
The Board now comprises 3 executive directors and 6 non-executive directors,
half of which are independent and all sub-committees are chaired by independent,
non-executive directors.
Capital reduction distribution
ARB`S dividend policy is to distribute a final dividend for the full year of up
to a maximum of one third of net profit after taxation. Shareholders are hereby
advised that, in lieu of an ordinary dividend and subject to shareholder
approval, ARB will make a 10 cents per share capital reduction payment to all
shareholders out of the company`s share premium ("the capital reduction"). The
capital reduction will be tabled for approval at the company`s Annual General
Meeting to be held on Monday, 19 October 2009.
The salient dates will be as follows:
Last date to trade Friday, 30 October 2009
Shares to commence trading "ex" the Monday, 2 November 2009
capital reduction
Record date Friday, 6 November 2009
Payment date Monday, 9 November 2009
Share certificates may not be dematerialised or rematerialised between Monday, 2
November 2009 and Friday, 6 November 2009, both days inclusive.
Pro forma financial effects of the capital reduction
The pro forma financial effects on ARB before and after the capital reduction,
as set out in the table below, are the responsibility of the company`s
directors, and have been prepared for illustrative purposes only to show how the
capital reduction may have affected ARB`s results for the year ended 30 June
2009. The assurance report by the independent reporting accountants, PKF
(Durban), on the unaudited pro forma financial information is available for
inspection at the company`s registered office.
The pro forma financial effects, which, due to their nature, may not fairly
reflect ARB`s financial performance and position after the capital reduction,
are based on the assumptions that:
- for the purpose of calculating earnings per share (basic and diluted) and
headline earnings per share (basic and diluted), the capital reduction was
effected on 1 July 2008; and
- for the purpose of calculating net asset value and net tangible asset value
per share, the capital reduction was effected on 30 June 2009.
Set out in the table below are the pro forma financial effects of the capital
reduction on the company`s earnings per share, headline earnings per share, net
asset value and net tangible asset value per share based on the audited results
of the company for the year ended 30 June 2009.
Before the After the Change
capital capital %
reduction1 reduction2,3,
4
Earnings per share (cents) 30.92 30.42 (1.63)
Headline earnings per share (cents) 30.91 30.41 (1.63)
Net asset value (cents) 195.59 185.59 (5.11)
Net tangible asset value (cents) 194.85 184.85 (5.13)
Notes
1. The "Before the capital reduction" information has been extracted,
without adjustment, from ARB`s published audited results for the year
ended 30 June 2009 as set out above.
2. Existing cash resources of R23.5 million will be utilised for purposes
of the capital reduction.
3. Adjustments to earnings per share and headline earnings per share have
been made on the assumption that:
(a) the payment to shareholders was done on 1 July 2008; and
(b) interest was foregone on R23.5 million at an average call rate of
7% pre-tax.
4. Adjustments to net asset value and net tangible asset value per share
have been made on the assumption that the capital distribution was
done on 30 June 2009.
The pro forma financial information disclosed above has been presented in a
manner consistent with both the format and accounting policies adopted by ARB
and, in quantifying pro forma adjustments, the accounting policies are on the
same basis as ARB normally adopts in preparing its annual financial statements.
Subsequent events
No significant events have occurred in the period between the reporting date and
the date of this announcement.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of shareholders will be
held at 10h00 on Monday, 19 October 2009 at the company`s registered office
located at 10 Mack Road, Prospecton, Durban, to transact the business stated
in the notice of the Annual General Meeting contained in the Annual Report,
which Annual Report is in the process of being prepared and which will be posted
to shareholders by no later than 25 September 2009.
Appreciation
We thank our management teams and staff for their outstanding commitment and
hard work in a trying economic environment. We also express our appreciation to
our fellow directors for their valued contribution and wise counsel. Last but
certainly not least, we extend our thanks to our valued customers, suppliers,
business partners, advisors and shareholders for their ongoing support.
For and on behalf of the Board.
Alan R Burke Byron Nichles William Neasham
Chairman Chief Executive Officer Financial Director
5 August 2009
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; DF Muhlwa*;
B Nichles (Chief Executive Officer); WR Neasham (Financial Director); RB
Patmore*>;
CC Robertson; M Sibisi*>;
*non-executive >independent
Registered office: 10 Mack Road, Prospecton, Durban, 4110 (PO Box 26426,
Isipingo Beach, 4115)
Sponsor: PSG Capital (Pty) Ltd, Building 8, Woodmead Estate, 1 Woodmead Drive,
Woodmead, 2191 (PO Box 987, Parklands, 2121)
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70
Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Company secretary: WR Neasham CA(SA), 10 Mack Road, Prospecton, Durban, 4110 (PO
Box 26426, Isipingo Beach, 4115)
Auditors: PKF (Durban), 12 on Palm Boulevard, Gateway, 4319 (PO Box 1858,
Durban, 4000)
Investor relations: ChilliBush Investor Relations, Chilli House, 58 Jan Smuts
Avenue, Forest Town, 2000 (PO Box 1432, Cramerview, 2060)
Date: 05/08/2009 10:00:01 Produced by the JSE SENS Department.
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