| Thu 12 Aug 2010, 7:05 | | 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
2010, dividend and capital distribution announcement and Notice of Annual
General Meeting
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH ISIN: ZAE000109435
("ARB" or "the company" or "the group")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2010, DIVIDEND AND CAPITAL
DISTRIBUTION ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
* Acquisition and integration of Paragon Electrical
* Regional expansion into Limpopo province
* Net cash on hand increased by R60 million to R261 million
* Net tangible asset value per share up 11% to 216 cents per share
* Annual dividend of 11.5 cents per share
* An additional R31.7 million returned to shareholders out of share premium
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year to year to
30 June 30 June
2010 2009
R000`s R000`s
Revenue 1 086 507 1 186 659
Profit before interest and taxation 96 635 114 701
Investment income 594 401
Interest received 18 004 14 044
Interest paid (240) (1 346)
Profit before taxation 114 993 127 800
Taxation 31 868 39 973
Profit for the year 83 125 87 827
Other comprehensive income 6 437 7 253
Total comprehensive income for the year 89 562 95 080
Profit for the year attributable to: 83 125 87 827
Non-controlling interest 14 433 15 173
Ordinary shareholders 68 692 72 654
Total comprehensive income attributable to: 89 562 95 080
Non-controlling interest 14 433 15 173
Ordinary shareholders 75 129 79 907
Other comprehensive income consists of the revaluation of property, plant and
equipment net of taxation.
Audited Audited
year to year to
30 June 30 June
2010 2009
R000`s R000`s
Reconciliation of Headline Earnings
Profit for the year attributable to
ordinary shareholders 68 692 72 654
Headline earnings adjustment net of
taxation (14) (4)
Headline earnings 68 678 72 650
Ordinary number of shares in issue (000`s) 235 000 235 000
Weighted average number of shares (000`s) 235 000 235 000
Diluted number of shares (000`s) 235 480 235 620
Earnings per share (cents) 29.23 30.92
Diluted earnings per share (cents) 29.17 30.84
Headline earnings per share (cents) 29.22 30.91
Diluted headline earnings per share (cents) 29.16 30.83
The headline earnings adjustment relates to the surplus on disposal of property,
plant and equipment.
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
30 June 30 June
2010 2009
R000`s R000`s
ASSETS
Non-current assets
Property, plant and equipment 138 724 112 447
Intangible asset 372 194
Deferred taxation 3 165 1 503
Current assets
Inventory 181 048 175 888
Trade and other receivables 176 175 165 067
Deferred lease payments - 29
Taxation overpaid 467 23
Cash resources 260 938 200 562
TOTAL ASSETS 760 889 655 713
EQUITY AND LIABILTIES
Equity and reserves
Share capital 24 24
Share premium 147 875 171 375
Revaluation reserve 43 587 37 150
Accumulated profits 319 774 251 082
Attributable to ordinary shareholders 511 260 459 631
Non-controlling interest 83 723 69 290
Total shareholders` funds 594 983 528 921
Non-current liabilities
Deferred lease payments 94 96
Deferred taxation 19 198 16 579
Current liabilities
Trade and other payables 142 519 105 169
Provisions 3 207 2 495
Deferred lease payments 3 -
Taxation payable 885 2 406
Bank overdraft - 47
TOTAL EQUITY AND LIABILITIES 760 889 655 713
Number of ordinary shares in issue (000`s) 235 000 235 000
Net asset value per share (cents) 217.56 195.59
Net tangible asset value per share (cents) 216.05 194.85
ABRIDGED GROUP STATEMENT OF CASH FLOWS
Audited Audited
year to year to
30 June 30 June
2010 2009
R000`s R000`s
Cash generated by operating activities 133 359 177 852
Interest received 18 004 14 044
Interest paid (240) (1 346)
Investment income 594 401
Dividends paid - (39 910)
Taxation paid (35 379) (38 192)
Secondary tax on companies paid - (3 991)
Cash flows from operating activities 116 338 108 858
Cash flows from investing activities (32 415) (10 583)
Cash flows from financing activities
Capital distribution from share premium (23 500) -
Loan repaid - (10 266)
Net increase in cash resources 60 423 88 009
Cash resources at beginning of year 200 515 112 506
Cash resources at end of year 260 938 200 515
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 year - - 7 253
Dividends paid - - -
Balance at 30 June 2009 (audited) 24 171 375 37 150
Total comprehensive income for the year - - 6 437
Reduction of share premium - (23 500) -
Balance at 30 June 2010 (audited) 24 147 875 43 587
Non-
Accumulated Controlling
Profit Interest Total
R000`s R000`s R000`s
Balance at 30 June 2008 (audited) 208 978 63 477 473 751
Total comprehensive income for the
year 72 654 15 173 95 080
Dividends paid (30 550) (9 360) (39 910)
Balance at 30 June 2009 (audited) 251 082 69 290 528 921
Total comprehensive income for the
year 68 692 14 433 89 562
Reduction of share premium - - (23 500)
Balance at 30 June 2010 (audited) 319 774 83 723 594 983
ABRIDGED GROUP SEGMENT REPORT
Audited for the year ended 30 June 2010
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 24 654 1 087 571 5 373
Profit before taxation 41 868 77 284 1 686
Depreciation 2 226 2 471 35
Capital expenditure 20 261 3 192 29
Segment assets 346 998 474 332 2 149
Segment liabilities 51 508 152 232 394
Inter-
company
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (31 091) 1 086 507
Profit before taxation (5 845) 114 993
Depreciation - 4 732
Capital expenditure - 23 482
Segment assets (62 590) 760 889
Segment liabilities (38 228) 165 906
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 306 651 392 503 994
Segment liabilities 18 527 125 980 478
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 audited consolidated annual financial statements for the year ended
30 June 2010 ("the year") have been prepared in compliance with International
Financial Reporting Standards ("IFRS"), IAS34, AC500, 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.
COMMENTARY
The board of ARB ("the Board") is pleased to present the group`s audited results
for the year ended 30 June 2010. Despite the challenging economic climate and a
21% year-on-year deficit in first half headline earnings, the group produced a
satisfactory set of results for the full year.
Financial and Operational Review
The advancement of the group`s expansion strategy through the acquisition of
Paragon Electrical, comprising five electrical wholesaling operations in the
greater Pretoria and Centurion areas, was the key highlight of the year.
From a trading perspective, the year proved to be a mirror image of the previous
financial year with the first half performance below that of the previous year
but the second half performance well ahead. For the full year under review,
headline earnings per share was 5% below the 30.91 cents per share reported in
2009.
Although market prices firmed on the back of a recovery in the Rand Copper Price
towards the end of the year under review, this proved insufficient to counteract
the significant price deflation experienced during the first half of the year.
After taking into account the consolidation of Paragon Electrical for the last 4
months of the year, an 8% decline in revenue for the full year was reported.
Pleasingly, the group`s gross profit margin during the second half of the year
was 3% higher than in the corresponding period last year, resulting in the gross
profit margin for the full year (18.4%) being almost a full percentage point
higher than in the prior year (17.5%).
Notwithstanding the inclusion of Paragon Electrical`s overheads for the last 4
months of the year, total cash overheads (i.e. excluding accounting provisions
and depreciation) increased by only 6% year-on-year reflecting the success of
the group`s cost-containment initiatives.
Despite lower interest rates during the year, net interest received increased by
40%, evidencing the continued focus on strict working capital management.
The increase in inventory days from 66 in 2009 to 75 days is misleading due to
the consolidation of only 4 months of Paragon Electrical`s results for the
current year. Similarly, debtor`s days increased from 45 days in 2009 to 52
days. In addition to the skewing effect of the Paragon acquisition, this
increase is attributable to disappointing June collections when certain
municipalities and parastatals appeared to be gripped by the excitement of the
2010 FIFA World Cup(TM). Although this necessitated additional provisioning, the
total charge in respect of bad and doubtful debts for the year, represents less
than 0.5% of revenue, which is still within acceptable levels. The bulk of
these outstanding debtors have since paid. The increase in the accounts payable
balance is a function of the mix, timing and extent of stock orders outstanding
at year-end.
Notwithstanding the payment of a capital distribution amounting to R23.5
million; the acquisition of Paragon Electrical for a cash consideration of R22.7
million; net capital expenditure of R9.7 million and tax payments of R35.4
million during the year, the group generated net cash of R60 million during the
year, resulting in net cash resources of R261 million as at 30 June 2010.
The group`s balance sheet remains ungeared.
Corporate Activity and Expansion
In line with the stated strategy of growing market share and extending its
national footprint, ARB concluded its first acquisition since its listing in
late 2007 with the acquisition of Paragon Electrical, with effect from 1 March
2010.
In terms of the acquisition, ARB acquired the business operations of Paragon
Electrical for a cash consideration of R22.7 million, which included R10.7
million in respect of immoveable property. Paragon Electrical contributed
revenue of R47.1 million and profit before tax of R1.0 million to the group for
the 4 months ended 30 June 2010 which was in line with expectations. Paragon
Electrical has now been fully integrated into ARB Electrical Wholesalers and is
expected to make a more meaningful contribution in the new financial year as the
group`s influence takes effect.
Furthermore, in line with the group`s strategic plan to expand geographically,
with effect from 1 July 2010 a branch was opened in Polokwane - its 13th branch
countrywide. This provides the group with a formal presence in the Limpopo
province and will serve as a platform from which to service South Africa`s
northern neighbours.
Management continues to evaluate further strategic growth initiatives, both
organic and acquisitive, on an ongoing basis.
Prospects
From a macro-economic perspective, although public sector infrastructure related
spend is forecast to continue for several years, the private sector, which
typically constitutes more than two-thirds of total gross fixed capital
formation spend, hasn`t yet shown any signs of emerging from its state of
hibernation. As and when the macro-economic environment recovers, private sector
spend especially in the mining and manufacturing sectors, will provide ARB with
growth opportunities.
Consistent with its recent strategy, ARB will over the next few years, focus
on growing its market share through the continued expansion of its national
footprint. This will be achieved through a combination of new branches and
value adding acquisitions. Closely related diversification opportunities will
also be pursued.
Over the medium to longer term, Africa, with a landmass similar to that of the
USA, China, India and Europe combined, but with total available electricity
similar to that of Spain, remains a largely untapped market which should provide
an increasing contribution to the group`s revenue and profit.
With an ungeared balance sheet and significant cash resources, the group is well
placed 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.
The above prospects statements have not been reviewed or reported on by the
company`s auditors.
Board of Directors
Due to her extensive cross border business commitments, Ms Makhosazana ("Khosi")
Sibisi resigned from the Board with effect from 30 June 2010.
Ralph Patmore has been appointed as the Lead Independent Director of the Board
in accordance with the recommendations set out in King III.
Dividends
In view of the group`s strong cash generation over the past 18 months and its
ungeared balance sheet, the board has revised the annual dividend policy from a
maximum payout of one-third of net profit after taxation to forty percent of net
profit after taxation.
Accordingly, a dividend of 11.5 cents per share (as opposed to a 10 cents per
share capital distribution in the prior year) has been declared as detailed
below.
Capital reduction distribution
Given the excess cash reserves, and in addition to the annual dividend above,
shareholders are hereby advised that, in terms of the general authority approved
at the company`s last Annual General Meeting held on 19 October 2009 ARB will
make a 13.5 cents per share (2009: 10 cents) capital reduction payment to all
shareholders out of the company`s share premium ("the capital reduction").
The salient dates of the dividend payment and the capital reduction ("the
distributions") are as follows:
Last date to trade "cum" the Friday, 03 September 2010
distributions
Shares to commence trading "ex" the Monday, 06 September 2010
distributions
Record date Friday, 10 September 2010
Payment date Monday, 13 September 2010
Share certificates may not be dematerialised or rematerialised between Monday,
06 September 2010 and Friday, 10 September 2010, 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
2010.
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 and headline earnings per
share, the capital reduction was effected on 1 July 2009; and
- for the purpose of calculating net asset value per share and net tangible
asset value per share, the capital reduction was effected on 30 June 2010.
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 per share and net tangible asset value per share based on the
audited results of the company for the year ended 30 June 2010.
Before the After the Change
capital capital %
reduction(1) reduction
(2)(3)(4)
Earnings per share (cents) 29.23 28.65 (2.00)
Headline earnings per share 29.22 28.64 (2.00)
(cents)
Net asset value per share 217.56 204.06 (6.21)
(cents)
Net tangible asset value per 216.05 202.55 (6.25)
share (cents)
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
2010 as set out above.
2. Existing cash resources of R31.725 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 2009; and
(b) interest was foregone on R31.725 million at an average call rate of 6%
pre-tax.
4. Adjustments to net asset value per share and net tangible asset value per
share have been made on the assumption that the capital distribution was
done on 30 June 2010.
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.
The pro forma financial information has not been reported on by the company`s
auditors.
Following the dividend and the capital reduction referred to above, the group
will still hold cash reserves of over R200 million, which the board believes is
sufficient to fund the anticipated organic and acquisitive growth opportunities.
Subsequent events
Save for the opening of the Polokwane branch in July 2010, 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, 18 October 2010 at the company`s registered office
located at 10 Mack Road, Prospecton, Durban to transact the business as stated
in the notice of the Annual General Meeting contained in the Annual Report,
which is in the process of being prepared and which will be posted to
shareholders by no later than 23 September 2010.
Appreciation
We thank our management teams and staff for their outstanding commitment and
hard work in a trying economic environment. We also express our gratitude 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
12 August 2010
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; DF Muhlwa*;
B Nichles (Chief Executive Officer); WR Neasham (Financial Director); RB
Patmore*>; CC Robertson
*non-executive >independent
Registered office: 10 Mack Road, Prospecton, Durban, 4110 (PO Box 26426,
Isipingo Beach, 4115)
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)
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)
Investor relations: ChilliBush Investor Relations, Chilli House, 58 Jan Smuts
Avenue, Forest Town, 2000 (PO Box 1432, Cramerview, 2060)
Date: 12/08/2010 07:05:16 Produced by the JSE SENS Department.
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