| Tue 23 Mar 2010, 14:11 | | EXL - Excellerate Holdings Limited - Unaudited results for the six months |
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EXL
EXL
EXL - Excellerate Holdings Limited - Unaudited results for the six months
ended 31 December 2009 and further cautionary announcement
EXCELLERATE HOLDINGS LIMITED
Registration number 1997/009884/06
JSE code: EXL ISIN: ZAE000026092
(Incorporated in the Republic of South Africa)
Unaudited results for the six months ended 31 December 2009 and further
cautionary announcement
HIGHLIGHTS
- Revenue growth of 9% over the comparative period
- Profit before tax growth of 8% for continuing operations over the
comparative period
- Cash generated from operations of R5,3 million
- Trading - Distribution segment delivers a significant improvement in
operational profitability
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
Continuing operations
Revenue 370 065 340 754 654 998
Gross profit 109 439 102 983 210 928
Profit before net finance 30 538 29 325 50 953
costs and taxation
Net finance costs (2 080) (2 881) (8 317)
Profit before taxation 28 458 26 444 42 636
Taxation (8 888) (7 938) (12 036)
Profit and total 19 570 18 506 30 600
comprehensive income for the
period from continuing
operations
Discontinued operations
Loss for the period from (3 718) (740) (1 791)
discontinued operations
Profit and total 15 852 17 766 28 809
comprehensive income for the
period
Profit attributable to:
Equity holders of the parent 16 130 17 968 28 607
Non-controlling interest (278) (202) 202
15 852 17 766 28 809
Shares in issue (000`s) 217 864 219 329 217 329
Weighted average number of 217 436 219 137 219 211
shares in issue (000`s)
Fully diluted weighted 220 744 224 121 223 846
average number of shares in
issue (000`s)
Total operations
Earnings per share (cents) 7,4 8,2 13,0
Headline earnings per share 7,4 8,2 11,9
(cents)
Diluted earnings per share 7,3 8,0 12,8
(cents)
Diluted headline earnings per 7,3 8,0 11,7
share (cents)
Continuing operations
Earnings per share (cents) 9,1 8,5 13,8
Headline earnings per share 9,1 8,5 12,8
(cents)
Diluted earnings per share 9,0 8,3 13,6
(cents)
Diluted headline earnings per 9,0 8,3 12,5
share (cents)
Discontinued operations
Earnings per share (cents) (1,7) (0,3) (0,8)
Headline earnings per share (1,7) (0,3) (0,9)
(cents)
Diluted earnings per share (1,7) (0,3) (0,8)
(cents)
Diluted headline earnings per (1,7) (0,3) (0,8)
share (cents)
Reconciliation between income
attributable to equity
holders of the parent and the
headline earnings
attributable to the equity
holders of the parent:
Attributable to ordinary 16 130 17 968 28 607
shareholders
- negative goodwill - - (2 498)
- net (gain)/loss on sale of (28) 27 113
property, plant and equipment
- taxation effect of the 8 (8) (32)
adjustments
Headline earnings 16 110 17 987 26 190
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets 184 673 171 429 188 732
Property, plant and 68 912 69 359 71 506
equipment
Intangible assets 103 938 91 128 106 147
Investment in associate 5 645
Interest bearing 103 757 560
receivables
Amounts owing by joint - - 306
venture partners
Deferred tax asset 6 075 10 185 10 213
Current assets 313 332 316 736 279 034
Inventories 81 719 107 511 95 025
Trade and other receivables 173 738 179 955 139 022
Interest bearing 4 297 408 1 238
receivables
Amounts owing by joint 18 670 10 095 13 449
venture partners
Taxation receivable 8 697 3 982 8 455
Other financial assets 642 - -
Cash and cash equivalents 25 569 14 785 21 845
Total assets 498 005 488 165 467 766
EQUITY AND LIABILITIES
Equity and reserves 212 094 193 939 203 507
Equity attributable to 211 387 193 358 202 522
equity holders of the parent
Non-controlling interest 707 581 985
Non-current liabilities 32 240 27 393 25 765
Interest bearing debt 25 130 21 335 18 788
Deferred tax liability 7 110 6 058 6 977
Current liabilities 253 671 266 833 238 494
Trade and other payables 177 393 210 227 184 286
Amounts owing to joint 15 114 8 779 12 473
venture partners
Taxation payable 13 506 12 858 14 427
Interest bearing debt 7 419 5 980 13 342
Other financial liabilities 50 80 909
Shareholders for dividend 6 - 79
Bank overdrafts 27 205 11 077 -
Vendors for acquisitions 12 978 17 832 12 978
Total equity and liabilities 498 005 488 165 467 766
Net asset value per share 97,0 88,2 93,2
(cents)
Net tangible asset value per 50,7 46,6 44,3
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2009 2008 2009
R`000 R`000 R`000
Cash flows from operating (10 779) 1 547 44 039
activities
Cash generated from 5 308 11 586 64 813
operations
Net finance costs (1 972) (1 344) (5 594)
Dividends paid (7 594) (6 797) (6 718)
Taxation paid (6 521) (1 898) (8 462)
Cash flows from investing (6 769) (39 839) (66 874)
activities
Net additions to property, (6 583) (7 725) (18 202)
plant and equipment
Additions to intangible (186) - (2 301)
assets
Net acquisition in - (32 114) (46 371)
businesses and joint ventures
Cash flows from financing (5 933) (7 988) (5 309)
activities
Net interest bearing debt 419 (5 130) (690)
raised/(repaid)
Net increase in amounts (4 007) (3 224) (3 184)
owing by joint venture
partners and associates
Shares repurchased (10) (173) (1 908)
Employee share options 267 240 -
exercised
Sale of treasury shares - - 500
Decrease in interest (2 602) 299 (27)
bearing receivables
Net decrease in cash and cash (23 481) (46 280) (28 144)
equivalents
Cash and cash equivalents at 21 845 49 989 49 989
beginning of period
Cash and cash equivalents at (1 636) 3 709 21 845
end of period
CONDENSED SEGMENTAL REPORT
Trading
Services distribution Corporate Total
R`000 R`000 R`000 R`000
2009
Revenue (external) 170 953 198 226 1 392 370 571
Less: Revenue from (506) (506)
discontinued operation
170 953 197 720 1 392 370 065
Revenue (internal) 21 770 5 790 4 380 31 940
192 723 203 510 5 772 402 005
Trading profit 16 880 16 018 (2 360) 30 538
Discontinued operation (4 905) (4 905)
(Profit before taxation)
2008
Revenue (external) 154 224 197 662 - 351 886
Less: Revenue from (11 132) (11 132)
discontinued operation
154 224 186 530 - 340 754
Revenue (internal) 5 317 5 437 4 486 15 240
159 541 191 967 4 486 355 994
Trading profit 19 449 12 367 (2 491) 29 325
Discontinued operation (1 023) (1 023)
(Profit before taxation)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
based
Share Share payment Retained
capital premium reserve earnings
R`000 R`000 R`000 R`000
Balance at 30 June 2008 2 190 66 078 1 830 112 022
Total comprehensive income
for the period
Profit for the period 17 968
Transactions with owners,
recorded directly into
equity
Dividends declared (6 797)
Arising on acquisition of 13 570
joint ventures
Re-assessment of share (13 570)
premium
Repurchase of shares (2) (171)
Sale of treasury shares 5 235
Balance at 31 December 2008 2 193 66 142 1 830 123 193
Total comprehensive income
for the period
Profit for the period 10 639
Transactions with owners,
recorded directly into
equity
Repurchase of shares (20) (1 715)
Sale of treasury shares - 260
Movement in share-based (97) 97
payment reserve
Balance at 30 June 2009 2 173 64 687 1 733 133 929
Total comprehensive income
for the period
Profit for the period 16 130
Transactions with owners,
recorded directly into
equity
Dividends declared (7 521)
Movement in share-based (138) 138
payment reserve
Repurchase of shares - (10)
Sale of treasury shares 6 260
Balance at 31 December 2009 2 179 64 937 1 595 142 676
Attributable
to equity Non-
holders controlling
of parent interest Total
R`000 R`000 R`000
Balance at 30 June 2008 182 120 783 182 903
Total comprehensive income
for the period
Profit for the period 17 968 (202) 17 766
Transactions with owners,
recorded directly into equity
Dividends declared (6 797) (6 797)
Arising on acquisition of 13 570 13 570
joint ventures
Re-assessment of share (13 570) (13 570)
premium
Repurchase of shares (173) (173)
Sale of treasury shares 240 240
Balance at 31 December 2008 193 358 581 193 939
Total comprehensive income
for the period
Profit for the period 10 639 404 11 043
Transactions with owners,
recorded directly into equity
Repurchase of shares (1 735) (1 735)
Sale of treasury shares 260 260
Movement in share-based - -
payment reserve
Balance at 30 June 2009 202 522 985 203 507
Total comprehensive income
for the period
Profit for the period 16 130 (278) 15 852
Transactions with owners,
recorded directly into equity
Dividends declared (7 521) (7 521)
Movement in share-based - -
payment reserve
Repurchase of shares (10) (10)
Sale of treasury shares 266 266
Balance at 31 December 2009 211 387 707 212 094
COMMENTARY
GENERAL OVERVIEW
In the context of a continued harsh economic environment, the Excellerate
Board is pleased to report a sound performance by the Group, with increased
revenue and operating profitability supported by prudent cash flow management.
The trading period to December proved challenging for the Group as the general
economy continued to struggle through the recessionary environment. This
impact was more significant in business units directly exposed to the retail
sector, with the result that some of these business units have not generated
the required returns appropriate for the level of funds invested, and have
therefore impacted the overall returns generated by the Group. Returns were
also impacted by the effect of one off costs resulting from the closure and
disposal of the remaining operations of the Sunkist business.
The first quarter in the period under review proved particularly slow, however
an improvement in year on year volumes was experienced in the subsequent
quarter which is traditionally the Group`s strongest trading period. In
general however, the improvement in the business environment remains
relatively slow, and management will continue to focus on those areas which it
believes it can influence, namely the addition of quality revenue, the
responsible reduction of operating costs, and the containment of working
capital investment in order to drive cash generation.
The Group remains both operationally and financially sound, and given the low
levels of gearing, is well placed to take advantage of improving economic
conditions.
FINANCIAL OVERVIEW
Results for the six months have been affected by the prevailing market
conditions, particularly where the Group has exposure to the retail sector.
Results were also affected by losses of R3,7 million (2008: R0,7 million)
associated with the closure and disposal of the remaining operations of the
Sunkist business. However, despite the impact thereof, revenues and operating
profits have increased, and have been supported by positive cash generation
from operations.
Revenue for the six months rose by R29,3 million or 8,6%, to R370,1 million
(2008: R340,7 million). Profit for continuing operations increased to R28,5
million (2008: R26,4 million), an increase of 7,6%. After taking into account
losses incurred by discontinued operations of R3,7 million, net profit
attributable to shareholders decreased by 10,8% to R15,9 million (2008: R17,7
million).
Diluted earnings per share and diluted headline earnings per share decreased
by 8,8% to 7,3 cents per share (2008: 8,0 cents) from the comparative period.
However, diluted earnings per share and diluted headline earnings per share
for continuing operations increased by 8,4% to 9,0 cents per share (2008: 8,3
cents) from the comparative period.
Positive cash flows generated from operations amounted to R5,3 million
compared to cash generated from operations of R11,6 million in the comparative
period. This decrease is attributable to cash losses incurred in the winding
down of Sunkist of R3,2 million, additional working capital required to grow
the Nu-Africa Comm Trading business of R0,65 million, and a moderate increase
in normal operating working capital levels. Interest paid increased by R0,6
million to R2,0 million, taxes paid increased by R4,6 million to R6,5 million,
and dividend payments in respect of the June 2009 year-end amounting to R7,6
million, resulting in an overall cash consumption from operating activities of
R10,8 million for the period under review.
Cash flows utilised in investing activities amounted to R6,8 million (2008:
R39,9 million). The majority of this investment related to additions to
property, plant and equipment for the period of R6,6 million (2008: R7,7
million). After cash flows utilised in financing activities of R5,9 million,
net cash utilised for the period was R23,5 million resulting in a negative
closing cash balance of R1,6 million.
Total group gearing remains low at R32,5 million, or 13,3% of net assets
employed in the company compared to R27,3 million, or 12,3% in the comparative
period. Net investment in current assets and liabilities represents R59,7
million compared to R49,9 million in the comparative period.
REVIEW OF OPERATIONS
Trading - Distribution
Revenue in the Trading - Distribution segment increased 6,0% to R203,5 million
(2008: R192,0 million), with profit before interest and tax from continuing
operations increasing 29,5% to R16,0 million (2008: R12,4 million).
The performance in this segment was achieved through improved performances at
Goldenmarc, and Ferrengi, coupled with a positive albeit relatively small
contribution from Nu-Africa Comm Trading. Foodserv maintained a solid
contribution and carries forward a strong order book for the second half of
the year.
Goldenmarc has enjoyed an improved six months, whereby notwithstanding reduced
revenue, the company has enjoyed a return to profitability as a result of
improving margins and aggressive cost cutting. However, the business is still
far from achieving its target returns, and in an environment that remains
challenging on the turnover front, management have identified and are
implementing further structural and operational changes in order to further
improve forecast profitability.
Ferrengi has also enjoyed a significantly improved six months, primarily as a
result of tight cost management and a focus on revenue growth through
aggressive targeting of new customers and revised product offerings.
Services
Revenue in the Services segment increased 20,8% to R192,7 million (2008:
R159,5 million), with profit before interest and tax decreasing 13,2% to R16,9
million (2008: R19,4 million).
The significant growth in revenues for the segment is largely attributable to
the inclusion of Vital Distribution, Vital Fleet and Staffing Logistics for a
full six months, whereas in the comparative period their results were only
included from 1 October 2008. Similarly, Delawood was included for a full six
months, whereas in the comparative period their results were only included
from 1 November 2008.
For the six months under review, solid performances were delivered by
Interpark, Sterikleen, Vital Fleet and Chattels. However, these positive
results were offset by reduced performances at Vital Distribution, Staffing
Logistics, Levingers and Delawood.
Performances at Vital Distribution and Staffing Logistics were impacted during
the current period by a reduction in retail trading volumes which affected
their operating margins. In addition, the comparative results include only the
peak trading period of these companies. Consequently, Vital Distribution and
Staffing Logistics contributed less profit to the Group for the period despite
their inclusion for the full six months. These business units which are both
fully exposed to warehousing and distribution logistics for the retail sector
(non-food), both experienced lower throughput volumes and margin pressure from
clients during the period. Whilst volumes did improve over the Christmas build-
up, the increased activity was not nearly as significant as is normally
experienced. The business units however remain profitable, and management
growth plans together with a general improvement in the retail sector should
see these companies reverting to their previous profitability levels.
Levingers struggled to maintain retail volumes particularly through its stores
targeted at the lower end of the market. In addition, despite focusing on
operational cost management, retail rents have not fallen off proportionately.
Consequently, Levingers only achieved break even profitability before interest
and tax for the period. Levingers is in the process of a significant re-
structuring exercise to restore profitability.
Delawood continues to suffer from less than anticipated volumes as the market
for luxury residential cabinetry remains depressed. This is despite success
achieved in generating significant turnover from export to other African
countries. The low volumes together with a high fixed cost base, has resulted
in a loss for the six months. Management have embarked upon a significant cost
cutting exercise to restore profitability whilst they continue to focus on
enhanced revenue generation.
ACQUISITIONS AND DISPOSALS
There are no acquisitions to report on during the current period under review.
During the period under review, the Fruti Flow and Nutribev operations were
disposed of by Sunkist in terms of a single transaction. This disposal was
funded by a term loan from Sunkist with fixed terms of repayment. As part of
the disposal, the Group has taken up a minority equity stake in a company now
operating the Fruti Flow and Nutribev operations.
All of Sunkist`s remaining operations were shut down, and with the exception
of the ongoing rental for the premises, all material liabilities (including
staff liabilities) have been settled in full. The remaining debtors book is in
the process of being collected, and all other assets have been disposed of.
PROSPECTS
Whilst it is anticipated that there will be an improvement in the prevailing
economic environment, the timing and extent of this recovery is uncertain.
Consequently management is prioritising plans to enhance revenue streams and
cost management, particularly in businesses linked to the retail environment
in an effort to ensure that these units deliver returns which are consistent
with the Group targets, thereby complementing the business units that are
already achieving the benchmarks.
Of specific interest is the positioning of Chattels in relation to contracts
for the supply of temporary infrastructure for events surrounding the 2010
World Cup.
The Group will continue to drive a culture of cash generation, in order to
finance value enhancing acquisitions. Whilst no acquisitions have been
announced or implemented during the current period under review, management
believes that asset values are becoming more attractive as the spread between
seller expectations and buyer requirements is narrowing. This coupled with a
more favorable borrowing environment has created an improved acquisition
environment. Management is therefore once again aggressively focusing on new
acquisitions which are complementary to the Group.
REPORTING ENTITY
Excellerate Holdings Limited is a company domiciled in South Africa. The
condensed consolidated interim financial statements as at and for the period
ended 31 December 2009 comprise the company, its subsidiaries, joint ventures
and interest in associate.
BASIS OF PREPARATION OF RESULTS
These condensed consolidated interim financial statements for the six months
ended 31 December 2009 have been prepared in accordance with IAS 34, Interim
Financial Reporting. They do not include all the information required for full
annual financial statements and should be read in conjunction with the
consolidated financial statements of the group at 30 June 2009.
The condensed consolidated interim financial statements are presented in Rand
rounded to the nearest thousand (`000).
The accounting policies applied in the presentation of the financial results
are consistent with those applied for the year ended 30 June 2009, with the
exception of the adoption of the following new and amended standards and
interpretations, in response to changes to IFRS.
- IAS 1 - Presentation of Financial Statements
- IAS 23 - Borrowing Costs
- IAS 32 - Financial Instruments: Presentation
- IAS 39 - Financial Instruments: Recognition and Measurement
- IFRS 2 - Amendments to IFRS 2 Share Based Payment - Vesting Conditions and
Cancellations
- IFRS 3, IAS 27, IAS 28, IAS 31 and IAS 38 - Comprehensive revision on
applying the acquisition method affecting the following standards: Business
Combinations, Consolidated and Separate Financial Statements, Investments in
Associates, Interest in Joint Ventures and Intangible Assets
- IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations
- IFRS 7 - Financial Instruments: Disclosure
Results for the comparative periods have not been restated as the transitional
arrangements for IFRS 3 and IAS 27 provide exemption from retrospective
applications.
The adoption of the new and amended standards and interpretations has had no
effect on the results of the Group.
The purchase price allocation for Delawood was only completed after the
December 2008 results were published. As a result of the finalisation of the
purchase price allocation, the December 2008 results have been amended to take
this into account. This had no impact on earnings and headline earnings per
share.
In order to improve segmental performance management and analysis, capital was
re-allocated across divisions at the start of the year under review, and this
has had the effect of altering the allocation of net finance costs across
divisions. Analysis of divisional performance is therefore undertaken prior to
net finance costs.
The condensed consolidated statement of financial position at 31 December 2009
and the related condensed statement of comprehensive income, statements 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.
SUBSEQUENT EVENTS
There have been no significant subseqent event that have a material impact on
the interim financial statements.
CHANGES TO THE BOARD
Arnold Meyer was appointed to the Board of Directors of the Group with effect
from 25 November 2009. Arnold has also been appointed as a member of the Audit
and Risk Committee.
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.
FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 8 February 2010
and are advised that the Company is in discussions which, if successfully
concluded, may have a material effect on the price of the Company`s
securities.
Accordingly, shareholders are advised to continue to exercise caution when
dealing in the Company`s securities until a further announcement is made.
For and on behalf of the Board
GG Hulley
Chief Executive Officer
Sandton
23 March 2010
DIRECTORS
Gordon Hulley Chief executive officer
Harold Bloch Executive director
Peter Kramer Executive director
Alan Lipchin Executive director
Athol Stewart Executive director
James Wellsted Executive director
Rudi Stumpf Non-executive director
Clive Howell Non-executive director (alternate to Graham Davel)
Graham Davel Non-executive director
Michael Mohohlo Non-executive director, Independent
Arnold Meyer Non-executive director, Independent
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) Limited
Date: 23/03/2010 14:11:03 Produced by the JSE SENS Department.
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