| Tue 9 Feb 2010, 9:00 | | ARH - ARB Holdings Limited - Unaudited Interim Results for the Six Months |
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ARH
ARH
ARH - ARB Holdings Limited - Unaudited Interim Results for the Six Months
Ended 31 December 2009 and Further Cautionary Announcement
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH & ISIN: ZAE000109435
("ARB" or "the company" or "the group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2009 AND
FURTHER CAUTIONARY ANNOUNCEMENT
HIGHLIGHTS
- Improved operating performance in comparison to the immediately preceding
six month period
- Net tangible asset value increased to 200 cents per share
- Net cash on hand of R239 million
- Acquisition of Paragon Electrical
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2009 2008 2009
R000`s R000`s R000`s
Revenue 544 364 647 212 1 186 659
Profit before interest and taxation 51 785 77 843 114 701
Investment income 594 - 401
Interest received 8 275 5 351 14 044
Interest paid (109) (716) (1 346)
Profit before taxation 60 545 82 478 127 800
Taxation 16 807 27 110 39 973
Profit for the period 43 738 55 368 87 827
Other comprehensive income - - 7 253
Total comprehensive income for the period 43 738 55 368 95 080
Profit for the period attributable to
Non-controlling interest 8 051 10 183 15 173
Ordinary shareholders 35 687 45 185 72 654
Total comprehensive income attributable to
Non-controlling interest 8 051 10 183 15 173
Ordinary
shareholders 35 687 45 185 79 907
Other comprehensive income consists of the revaluation of property, plant and
equipment net of taxation.
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2009 2008 2009
R000`s R000`s R000`s
Reconciliation of Headline Earnings
Profit for the period attributable to
ordinary shareholders 35 687 45 185 72 654
Headline earnings adjustment net of
taxation - (4) (4)
Headline earnings 35 687 45 181 72 650
Ordinary number of shares in issue (000`s) 235 000 235 000 235 000
Weighted average number of shares (000`s) 235 000 235 000 235 000
Diluted number of shares (000`s) 235 620 235 000 235 620
Earnings per share (cents) 15.19 19.23 30.92
Diluted earnings per share (cents) 15.15 19.23 30.84
Headline earnings per share (cents) 15.19 19.23 30.91
Diluted headline earnings per share (cents) 15.15 19.23 30.83
The headline earnings adjustment relates to the surplus on disposal of
property, plant and equipment.
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2009 2008 2009
R000`s R000`s R000`s
ASSETS
Non-current assets
Property, plant and equipment 111 057 98 327 112 447
Intangible asset 302 - 194
Deferred taxation 2 497 1 593 1 503
Current assets
Inventory 174 194 250 685 175 888
Trade and other receivables 120 580 133 399 165 067
Deferred lease payments 11 29 29
Taxation overpaid 34 3 765 23
Cash resources 239 108 95 664 200 562
TOTAL ASSETS 647 783 583 462 655 713
EQUITY AND LIABILTIES
Equity and reserves
Share capital 24 24 24
Share premium 147 875 171 375 171 375
Revaluation reserve 37 150 29 897 37 150
Accumulated profits 286 769 223 613 251 082
Attributable to ordinary shareholders 471 818 424 909 459 631
Non-controlling interest 77 341 64 300 69 290
Total shareholders` funds 549 159 489 209 528 921
Non-current liabilities
Interest-bearing borrowings - 5 835 -
Deferred lease payments 94 68 96
Deferred taxation 16 931 14 224 16 579
Current liabilities
Trade and other payables 78 743 68 986 105 169
Provisions 1 395 926 2 495
Interest-bearing borrowings - 2 080 -
Taxation payable 1 412 2 064 2 406
Bank overdraft 49 70 47
TOTAL EQUITY AND LIABILITIES 647 783 583 462 655 713
Number of ordinary shares in issue (000`s) 235 000 235 000 235 000
Net asset value per share (cents) 200.77 180.81 195.59
Net tangible asset value per share (cents) 199.58 180.12 194.85
ABRIDGED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2009 2008 2009
R000`s R000`s R000`s
Cash generated by operating activities 72 451 57 434 177 851
Interest received 8 275 5 351 14 044
Interest paid (109) (716) (1 136)
Investment income 594 - 401
Dividends paid - (39 910) (39 910)
Taxation paid (18 454) (29 037) (38 401)
Secondary tax on companies paid - (3 991) (3 991)
Cash flows from operating activities 62 757 (10 869) 108 858
Cash flows from investing activities (713) (3 827) (10 583)
Cash flows from financing activities
Reduction of share premium (23 500) - -
Loan repaid - (2 216) (10 266)
Net increase in cash resources 38 544 (16 912) 88 009
Cash resources at beginning of period 200 515 112 506 112 506
Cash resources at end of period 239 059 95 594 200 515
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation
Capital Premium Reserve
R000`s R000`s R000`s
Balance at 30 June 2008 (audited) 24 171 375 29 897
Total comprehensive income for the period - - -
Dividends paid - - -
Balance at 31 December 2008 (unaudited) 24 171 375 29 897
Total comprehensive income for the period - - 7 253
Balance at 30 June 2009 (audited) 24 171 375 37 150
Total comprehensive income for the period - - -
Reduction of share premium - (23 500) -
Balance at 31 December 2009 (unaudited) 24 147 875 37 150
Non-
Accumulated Controlling
Profit Interest Total
R000` R000`s R000`s
Balance at 30 June 2008 (audited) 208 978 63 477 473 751
Total comprehensive income for the
period 45 185 10 183 55 368
Dividends paid (30 550) (9 360) (39 910)
Balance at 31 December 2008 (unaudited) 223 613 64 300 489 209
Total comprehensive income for the
period 27 469 4 990 39 712
Balance at 30 June 2009 (audited) 251 082 69 290 528 921
Total comprehensive income for the
period 35 687 8 051 43 758
Reduction of share premium - - (23 500)
Balance at 31 December 2009 (unaudited) 286 769 77 341 549 159
ABRIDGED GROUP SEGMENT REPORT
Unaudited for the six months ended 31 December 2009
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 13 963 544 188 2 033
Profit before taxation 18 200 41 776 569
Depreciation 1 139 839 17
Capital expenditure 1 206 227 108
Segment assets 298 489 395 326 1 023
Segment liabilities 20 597 98 758 82
Inter-
company
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (15 820) 544 364
Profit before taxation - 60 545
Depreciation - 1 995
Capital expenditure - 1 541
Segment assets (47 055) 647 783
Segment liabilities (20 813) 98 624
Unaudited for the six months ended 31 December 2008
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 35 228 656 939 1 938
Profit before taxation 49 478 59 432 208
Depreciation 974 888 14
Capital expenditure 3 230 1 055 5
Segment assets 292 167 471 062 947
Segment liabilities 24 199 223 753 773
Inter-
company
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (46 893) 647 212
Profit before taxation (26 640) 82 478
Depreciation - 1 876
Capital expenditure - 4 290
Segment assets (180 714) 583 462
Segment liabilities (154 472) 94 253
Audited for the year ended 30 June 2009
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 45 141 1 209 412 4 368
Profit before taxation 77 775 86 088 650
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
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (72 262) 1 186 659
Profit before taxation (36 713) 127 800
Depreciation - 4 526
Capital expenditure - 12 976
Segment assets (44 436) 655 713
Segment liabilities (18 194) 126 792
BASIS OF PREPARATION
The abridged unaudited consolidated interim financial statements for the
period have been prepared in compliance with International Accounting Standard
(IAS34) - Interim Financial Reporting and in terms of the Listings
Requirements of the JSE Limited. Other than IAS1 and IFRS8, the accounting
policies applied in preparing these abridged unaudited consolidated interim
financial statements are consistent with those applied in the annual financial
statements for the year ended 30 June 2009 and the six months to 31 December
2008 and comply with International Financial Reporting Standards ("IFRS") and
the South African Companies Act, 1973. Consequently, the comparative
information has been restated for the new disclosures as required in IAS1 and
IFRS8.
INTRODUCTION
The board of ARB ("the Board") is pleased to present the group`s interim
results for the six months ended 31 December 2009 ("the period"). Despite the
challenging economic climate, the group produced an improved set of results
when compared to the immediately preceding six month period ended 30 June
2009.
FINANCIAL AND OPERATIONAL REVIEW
The recovery in the copper price in US dollars during the period under review
was largely offset by the strengthening of the Rand against the US Dollar
resulting in the average daily copper price per ton in Rands over the period
being 8% lower than during the corresponding prior period. Market pricing
remained depressed, with sales price deflation of approximately 20%-25% being
experienced by the group.
The price deflation and margin pressure impacted the group`s power cable and
conductor products where copper and aluminium content is highest. These
products account for over 60% of group revenue.
As in the prior year, marginal volume growth was achieved although this is not
evident in the group`s revenue due to the significant impact of price
deflation, as mentioned above. This resulted in a decline of 16% in the
group`s revenue for the period, off the high, largely pre-recession base of
the comparative period.
The pressure on price levels translated into an overall reduction of
approximately 1% in the group`s gross margin to 18.1% from 19.3% in the
comparative period.
In response to the tougher trading and economic environment, the group`s cost
containment initiatives resulted in total cash overheads (excluding accounting
provisions and depreciation) declining by 7% compared to the comparative
period.
Whilst this helped temper the effects of revenue and gross margin pressures,
the group`s operating margin declined from 12.0% for the comparative period to
9.5%.
Despite lower interest rates, net interest received increased by 76%
reflecting the group`s tight management of working capital, as discussed
below.
The decision to make a distribution by way of capital reduction in lieu of a
final dividend, and the resultant saving in STC, reduced the effective tax
rate to 28% from 33% for the comparative period.
The continued focus on working capital management is reflected in the
inventory levels (based on annualized cost of sales) of 71.3 days (2008: 87.6
days) and the debtors collection period (based on annualized sales) which
remained constant.
Notwithstanding the payment of a capital distribution amounting to R23.5
million, net capital expenditure of R0.7 million and tax payments of R18.5
million, the group generated cash of R39 million during the period resulting
in net cash resources of R239 million as at 31 December 2009.
The group`s balance sheet remains ungeared.
When compared to the immediately preceding six month period ended 30 June
2009, revenue for the period remained constant. However the group`s gross
margin improved by 2.7% from 15.4% to 18.1%. Total cash overheads (excluding
accounting provisions and depreciation) decreased by 12% over this period.
ACQUISITION OF PARAGON ELECTRICAL
As announced on SENS on 1 December 2009, the group acquired the business of
Paragon Electrical ("Paragon") together with certain immoveable properties as
a going concern ("the acquisition"). The acquisition, the first since ARB`s
listing on the JSE in November 2007, marks a significant milestone in the
ongoing growth and development of the ARB group. The acquisition provides ARB
with an immediate and well-established presence in the fast growing Pretoria
and Centurion markets and extends ARB`s national footprint in line with its
stated growth and acquisition strategy.
Following the acquisition, ARB will have 12 branches located throughout South
Africa (in Durban, Johannesburg, Cape Town, East London, Pietermaritzburg,
Richards Bay, Nelspruit and, as a result of the Paragon acquisition, in
Pretoria and Centurion).
Several opportunities exist to unlock further value. These include:
- Improved operational efficiencies and enhanced economies of scale;
- Utilising Paragon`s well-established market presence in Pretoria as a
base from which to service the nearby high-growth regions of Witbank and
Rustenburg; and
- Combining the complimentary focuses of ARB Electrical (in power cable and
overhead line) with Paragon (in general electrical contracting materials)
to provide a holistic electrical products supply solution to contractors,
industry and parastatals throughout Gauteng.
The acquisition, which was unconditionally approved by the Competition
Commission on 26 January 2010, has an effective date of 1 March 2010.
Paragon is expected to make a modest contribution to the group`s results in
the second half of the current financial year, and the full impact of the
acquisition will only be evident in the next financial year.
PROSPECTS AND STRATEGY
The group`s focus on market share growth will be achieved through a
combination of acquisitive and organic initiatives. With an ungeared balance
sheet and significant cash resources, the group remains well positioned to
take advantage of any such opportunities. In this regard, the group is at an
advanced stage of planning for the opening of a new branch during the second
quarter of 2010. A further announcement will be made in due course. In
addition, management continues to evaluate potential value-enhancing
acquisitions on an ongoing basis.
Africa remains an exciting market for the group and during the period early
signs of success were evident in certain SADC countries. The group continues
to investigate the correct entry points and business model for penetrating sub-
Saharan Africa.
Depending on the extent of the anticipated economic recovery, the board
expects to report improved results for the second half of the current
financial year compared to the results for the comparable prior year period.
The group remains committed to delivering sustainable earnings growth and
value to its shareholders.
The above statements have not been reviewed or reported on by the company`s
auditors.
DIVIDEND
ARB`s dividend policy is to distribute a single, annual dividend for the full
year of up to a maximum of one-third of net profit after taxation. In line
with this policy, no interim dividend has been declared.
SUBSEQUENT EVENTS
Save for the Competition Commission unconditionally approving the Paragon
acquisition on 26 January 2010, no significant events occurred in the period
between the reporting date and the date of this announcement.
APPRECIATION
We are extremely grateful for the outstanding commitment and passion displayed
by our management teams and staff which enabled the group to report credible
results in the face of a challenging economic environment.
We would also like to express our appreciation to our fellow directors for
their valued contribution and wise counsel. We extend our thanks to our valued
customers, suppliers, business partners, advisors and shareholders for their
ongoing support.
FURTHER CAUTIONARY ANNOUNCMENT
Further to the cautionary announcement dated 15 December 2009, shareholders
are advised the negotiations referred to therein are still in progress and, if
successfully concluded, may have an effect on the price at which the company`s
securities trade on the JSE.
Accordingly, shareholders are advised to continue exercising caution when
dealing in the company`s securities until a further announcement is made.
For and on behalf of the Board.
Alan R Burke Byron Nichles William Neasham
Chairman Chief Executive Officer Financial Director
9 February 2010
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; DF Muhlwa*;
WR Neasham (Financial Director); B Nichles (Chief Executive Officer); RB
Patmore*>; CC Robertson; M Sibisi*>
*non-executive >independent
Registered office: 10 Mack Road, Prospecton, Durban, 4110 (PO Box 26426,
Isipingo Beach, 4115)
Sponsor: Grindrod Bank, 1st Floor, Building Three, Commerce Square, 39 Rivonia
Road, Sandhurst, 2196 (PO Box 78011, Sandton, 2146)
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: 09/02/2010 09:00:04 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
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