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AMA
AMA
AMA - Amalgamated Appliance Holdings Limited - Reviewed consolidated results for
the year ended 30 June 2010
AMALGAMATED APPLIANCE HOLDINGS LIMITED
Registration number: 1997/004130/06 ISIN: ZAE000012647?
Share code: AMA ("AMAP" or "the Group")
www.amap.co.za
HIGHLIGHTS#
*Returned to profitability
*Basic earnings per share increased to 18,7 cents
*HEPS increased to 19,0 cents
*Net cash on hand R204,4 million
#Highlighted results relate to continuing and discontinuing operations
Reviewed consolidated results for the year ended 30 June 2010
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Restated*
30 June 2010 Audited
R`000 30 June 2009
R`000
Continuing operations
Revenue 759 095 1 044 294
Operating profit/(loss) 57 336 (73 845)
Impairment of goodwill and trademarks - (5 766)
Restructuring costs - operations (926) (7 820)
Fair value adjustments on financial - 909
instruments
Net interest received/(paid) 12 215 (2 694)
Profit/(loss) before taxation 68 625 (89 216)
Taxation (19 730) 25 821
Profit/(loss) for the year from continuing 48 895 (63 395)
operations
Discontinuing operations
Loss from discontinuing operations (10 420) (5 621)
Profit/(loss) for the year 38 475 (69 016)
Total comprehensive income/(loss) for the 38 475 (69 016)
year
From continuing and discontinuing operations
Basic earnings/(loss) per share - (cents) 18,7 (33,1)
Diluted basic earnings/(loss) per share - 18,6 (33,1)
(cents)
From continuing operations
Basic earnings/(loss) per share - (cents) 23,7 (30,4)
Diluted basic earnings/(loss) per share - 23,7 (30,4)
(cents)
From discontinuing operations
Basic loss per share - (cents) (5,1) (2,7)
Diluted basic loss per share - (cents) (5,0) (2,7)
Proposed capital distribution per share - 8,0 -
(cents)**
*Restatement - refer to note 2 below.
**To be approved by shareholders, refer to commentary for further
details.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed Audited
30 June 2010 30 June 2009
R`000 R`000
ASSETS
Non-current assets 66 886 87 459
Property, plant and equipment 8 585 11 890
Trademarks 1 645 1 645
Deferred taxation 56 656 73 924
Current assets 554 412 514 244
Inventories 145 958 154 293
Trade and other receivables 181 755 187 289
Taxation receivable 10 615 6 649
Bank and cash on hand 204 377 124 943
542 705 473 174
Current assets classified as held for sale 11 707 41 070
Total assets 621 298 601 703
EQUITY AND LIABILITIES
Total equity 465 135 438 672
Non-current liabilities 1 257 1 433
Long-term borrowings 101 676
Deferred taxation 1 156 757
Current liabilities 154 906 161 598
Trade and other payables 110 174 96 729
Derivative financial liability 439 2 077
Capital distribution and dividends payable 157 157
Taxation - 318
Bank overdraft - 868
Short-term portion of long-term liability 482 1 125
Provisions 31 947 19 254
143 199 120 528
Liabilities directly associated with assets 11 707 41 070
classified as held for sale
Total equity and liabilities 621 298 601 703
CONDENSED GROUP STATEMENT OF CASH FLOWS
Reviewed Audited
30 June 2010 30 June 2009
R`000 R`000
Cash flow from operating activities 103 186 138 591
Cash generated/(utilised) by trading 51 333 (77 848)
Working capital changes 42 720 230 699
Cash generated by operations 94 053 152 851
Net interest received/(paid) 12 145 (2 694)
Taxation paid (3 012) (11 564)
Dividends paid and capital distribution - (2)
Cash flow from investing activities 4 851 (301)
Additions to property, plant and equipment (3 058) (2 636)
Proceeds on disposal of property, plant and 7 909 2 335
equipment
Cash flow from financing activities (18 976) (5 524)
Net movement in treasury shares (13 266) 74
Decrease in long-term borrowings (5 710) (5 598)
Net increase in cash and cash equivalents 89 061 132 766
Cash surplus/(deficit) beginning of year 115 316 (17 450)
Cash surplus at the end of the year 204 377 115 316
NOTES TO THE CONDENSED GROUP STATEMENT OF CASH FLOWS
Reviewed Audited
30 June 2010 30 June 2009
R`000 R`000
Cash flow from operating activities 103 186 138 591
- Continuing operations 96 725 126 447
- Discontinuing operations 6 461 12 144
Cash flow from investing activities 4 851 (301)
- Continuing operations (1 940) (3 090)
- Discontinuing operations 6 791 2 789
Cash flow from financing activities (18 976) (5 524)
- Continuing operations (14 484) (2 747)
- Discontinuing operations (4 492) (2 777)
Cash surplus at the end of the year 204 377 115 316
- Continuing operations 204 377 124 075
- Discontinuing operations - (8 759)
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
30 June 2010 30 June 2009
R`000 R`000
Balance as at 1 July 438 672 506 337
Net profit/(loss) for the year 38 475 (69 016)
Net treasury movement (13 266) 74
Share based payment 1 254 1 277
Balance at year end 465 135 438 672
SUPPLEMENTARY INFORMATION
Reviewed Audited
30 June 2010 30 June 2009
Shares in issue (000`s) 212 190 211 190
Shares in issue - weighted (000`s) 205 917 208 469
Diluted number of shares - weighted (000`s) 206 554 208 575
Net asset value per share (cents) 219 208
Cost of sales (R`000) - continuing 517 867 891 233
operations
Cost of sales (R`000) - discontinuing 98 820 26 422
operations
Net inventory raised - continuing 8 562 28 080
operations*
Net inventory raised - discontinuing - 48
operations*
Interest received (R`000) - continuing (13 616) (8 450)
operations
Interest received (R`000) - discontinuing (20) (38)
operations
Interest paid (R`000) - continuing 1 401 11 144
operations
Interest paid (R`000) - discontinuing 90 38
operations
Capital expenditure (R`000) - continuing 2 995 2 583
operations
Capital expenditure (R`000) - discontinuing 63 52
operations
Capital commitments (R`000) - continuing - 892
operations
Depreciation, amortisation and impairment 4 698 10 424
charge (R`000) - continuing operations
Depreciation, amortisation and impairment 2 998 1 668
charge (R`000) - discontinuing operations
Operating lease commitments (R`000) - 29 583 19 004
continuing operations
Profit/(loss) (R`000) - continuing 48 895 (63 395)
operations
Loss/(profit) on disposal of property, plant 549 (83)
and equipment (R`000) - continuing
operations
Impairment of goodwill (R`000) - continuing - 1 170
operations
Impairment of trademarks (R`000) - - 4 596
continuing operations
Total tax effects on adjustments (R`000) - (154) (1 264)
continuing operations
Headline profit/(loss) (R`000) - continuing 49 290 (58 976)
operations
Headline earnings/(loss) per share - (cents) 23,9 (28,3)
- continuing operations
Diluted headline earnings/(loss) per share - 23,9 (28,3)
(cents) - continuing operations
Loss (R`000) - discontinuing operations (10 420) (5 621)
Loss/(profit) on disposal of property, plant 380 (19)
and equipment (R`000) - discontinuing
operations
Impairment of property, plant and equipment - 179
(R`000) - discontinuing operations
Total tax effects on adjustments (R`000) - (106) (45)
discontinuing operations
Headline loss (R`000) - discontinuing (10 146) (5 506)
operations
Headline loss per share - (cents) - (4,9) (2,6)
discontinuing operations
Diluted headline loss per share - (cents) - (4,9) (2,6)
discontinuing operations
Headline earnings/(loss) per share - (cents) 19,0 (30,9)
- continuing and discontinuing operations
Diluted headline earnings/(loss) per share - 19,0 (30,9)
(cents) - continuing and discontinuing
operations
*?Restatement - the statement of comprehensive income has been restated
to correctly reflect the net raised amounts on inventory movement.
Details of the net (raised)/reversed amounts are reflected under the
additional information section and included in the cost of sales
amount.
Discontinuing operations and assets classified as held for sale
Statement of comprehensive income
Reviewed Audited
30 June 2010 30 June 2009
R`000 R`000
Revenue 86 160 18 584
Operating loss (9 265) (7 396)
Fair value adjustments on financial - 885
instruments
Restructuring costs - operations (4 960) (1 296)
Net interest paid (70) -
Loss before tax (14 295) (7 807)
Taxation 3 875 2 186
Loss from discontinuing operations (10 420) (5 621)
The major classes of assets and liabilities classified as held for sale
as follows:
Statement of financial position
Reviewed Audited
as at as at
30 June 2010 30 June 2009
R`000 R`000
Assets classified as held for sale
Property, plant and equipment 11 707 21 878
Deferred taxation - 24
Inventory - 9 038
Trade and other receivables - 10 129
Bank and cash on hand - 1
Assets classified as held for sale 11 707 41 070
Liabilities directly associated with assets
classified as held for sale
Long-term borrowings - (2 780)
Deferred taxation (2 024) (2 499)
Trade, other payables and provisions (9 683) (25 230)
Taxation - (89)
Bank overdraft - (8 760)
Short-term portion of long-term liability - (1 712)
Liabilities directly associated with assets (11 707) (41 070)
classified as held for sale
Notes
1. Basis of preparation
The condensed financial information has been prepared in
accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting
Standards (IFRS), the AC 500 standards as issued by the Accounting
Practices Board and the information as required by IAS 34: Interim
Financial Reporting. The report has been prepared using accounting
policies that comply with IFRS which are consistent with those
applied in the financial statements for the prior year end 30 June
2009, except for IAS 1 Presentation of Financial Statements and
IFRS 8 Operating Segments. The implementation of these standards
required no prior year restatement.
2. Restatement
The operating profit/(loss) in the statement of comprehensive
income has been re-presented to include the net write down of
inventory. The net inventory raised amounts are now disclosed in
the supplementary information section.
The re-presentation noted above has no effect on the statement of
financial position for the current and prior years.
3. Auditors` review
The condensed provisional financial information for the year ended
30 June 2010 has been reviewed by the Group`s auditors, Deloitte &
Touche. The review was conducted in accordance with ISRE 2410
`Review of Interim Financial Information performed by the
Independent Auditor of the Entity`. A copy of their unmodified
review report is available for inspection at the Company`s
registered office. Any reference to future financial performance
included in this announcement, has not been reviewed or reported
on by the Company`s auditors.
4. Diluted basic and diluted headline earnings/(loss) per share
Diluted basic and diluted headline earnings/(loss) per share are
determined by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive ordinary
shares.
5. Contingent liability
As disclosed in the Group`s annual report for the year ended 30
June 2007 and subsequent years, SARS issued a letter of intent in
February 2007 to levy customs and excise on a wholly owned
subsidiary for R28,3 million. The subsidiary has raised a formal
objection, in line with the professional advice of its external
legal customs duty advisers, and remains confident that its
objection will be upheld.
There is no obligation, current or pending, which is considered
likely to have a material adverse effect on the Group.
6. Assets classified as held for sale and discontinuing operations
During the prior year, it was decided to transfer the assets of
Tedelex Manufacturing (Pty) Limited and the Atlantis property to
assets "held for sale" in line with the requirements of IFRS 5 Non-
Current Assets Held for Sale and Discontinued Operations.
As a result of the assets being disposed of in Tedelex
Manufacturing (Pty) Limited in June 2010, the assets are no longer
held for sale. It is still the intention of the Group to dispose
of the Atlantis property. Tedelex Manufacturing (Pty) Limited and
the Atlantis property are reflected as discontinued operations in
line with the requirements of IFRS 5.
Commentary
The Board is pleased to announce the return to profitability for the 12 month
period ended 30 June 2010. The Group continued to focus and invest in its
trusted brands through above and below the line advertising and promotion. This
resulted in the Group increasing its market share in most categories. Revenue
and stock levels were in line with the Group`s targets.
Economic and trading environment
A year ago the economic commentators were calling an end to the deep recession
caused by the sharp collapse in commodity prices in late 2008. Yet the long-
awaited recovery has not materialised and we see no evidence of employment
growth and increased consumer spending. Here and there are snippets of economic
hope: consumer inflation has fallen within the Reserve Bank`s target range of 3%
to 6%; month-on-month consumer spending was uncharacteristically robust leading
up to the World Cup 2010; business confidence surveys point to gentle lifting in
the national business psyche; interest rates are at historically low levels and
likely to remain there for some time. While we take hope from these glimpses of
optimism, our trading experience over the last financial year reminds us that
recessionary conditions still persist.
Operations
We continue to feel the impact of the National Credit Act introduced in 2008, in
that spending patterns have shifted from credit-driven furniture chains, where
the Group has traditionally dominated, to the mass discounters and independent
specialists. We expect consumer demand to remain weak so long as employment
numbers across the economy diminish.
The downturn in the consumer market forced the Group to change its model of
selling consumer electronics products to the retail trade from one where
products are procured and warehoused based on market research or demand, to one
where orders are now placed on a "back-to-back" basis. This change resulted in
substantial staff retrenchments and much reduced inventories and overheads,
leading to a sustained improvement in margins. Sales in the categories of small
domestic appliances and sewing machines continue to be encouraging. While year-
on-year revenue in these categories were marginally higher, we continue to make
market share gains in key product categories, and margins improved somewhat on
the previous year.
The imminent introduction of the Consumer Protection Act poses challenges for
all participants in the consumer markets and the Group is positioned to deal
with it. We fully support the intention to arm consumers with better information
on which to base purchasing decisions, and we believe this Act will be to the
benefit of reputable brand distributors such as AMAP.
Financial performance
Statement of comprehensive income (continuing operations)
Revenue from continuing operations for the year under review decreased by 27% to
R759,1 million, due to the restructuring of our business model. Pre-tax profit
for the year is R68,6 million (2009: loss R89,2 million).
Restructuring costs for the period totalled R0,9 million (2009: R7,8 million).
As a result of stringent working capital management, the Group received net
interest of R12,2 million (2009: interest paid of R2,7 million).
Total comprehensive income for the year for continuing operations amounted to a
profit of R48,9 million (2009: loss of R63,4 million).
Basic earnings per share increased to 23,7 cents (2009: loss per share of 30,4
cents) and HEPS increased to 23,9 cents (2009: HLPS of 28,3 cents).
Statement of financial position (continuing operations)
The statement of financial position shows a marked improvement over two years in
the key areas of gearing, inventories, and cash on hand. Current assets exceed
current liabilities by a factor of more than 3, while the balance sheet is net
ungeared. Cash on hand amounted to R204,4 million (2009: R124,9 million).
Stringent working capital management had a considerable impact on strengthening
the Group`s balance sheet. In a particularly challenging trading environment,
inventory decreased to R146,0 million from R154,3 million a year ago, and from
R365,2 million in 2008. This was primarily attributable to the action of
changing the method of sale of consumer electronics products as well as improved
management control over the categories of seasonal small domestic appliances and
electrical accessories.
Trade and other receivables at year end was R181,7 million, compared with R187,3
million a year ago. This is an improvement on historical practice, and is due
largely to the better collection of over-dues, and stricter control on credit
approvals.
Management is confident that the business will continue to generate cash through
inventory control, overhead savings and the benefits of improved product
category selection that has been implemented.
Changes to the Board
The following changes to the Board have taken place for the year under review:
* Dumisani Dumekhaya Tabata was appointed as an independent non-executive
director with effect from July 2009;
* Myron Cyril Berzack was appointed in December 2009 as a non-executive
director;
* David Edward Cleasby was appointed in April 2010 as a non-executive
director;
* Steven Karele, formerly the Group chief financial officer and executive
director, resigned from the Board in June 2010;
* Steven Levitt, who joined the Board in 2001 as an independent and non-
executive director, resigned from the Board in June 2010;
* Rian du Plessis, who joined the Board in 2007 as an independent non-
executive director, resigned from the Board in June 2010;
* Colin Scott was appointed to the Board as an independent non-executive
director in July 2010.
Corporate governance
The Group subscribes to the spirit of good corporate governance as set out in
the King II Report and accepts the need to conduct the enterprise with
integrity, transparency and equal opportunity. The Board has further embraced
the principles of the King III Report, which further raises the corporate
governance bar in light of the new Companies Act and changing trends in
international governance. King III places emphasis on the requirement to report
on how companies enhance those positive aspects and address any possible
negative impacts on the economic life of the community in which it will operate
in the year ahead. Amap will report on the application of King III and if any
principles and practices are found to be inappropriate for the Group, the reason
for not implementing or not complying with King III recommendations, will be
disclosed.
Prospects
We expect retail sales to remain flat in the categories in which we trade for
the coming financial year, with hopes of improvement now deferred till 2012.
Bottom line profit improvement must therefore come from a relentless pursuit of
cost savings, efficiency gains and excellent management of our brand portfolio.
The restructuring exercise now largely complete has resulted in a lower overhead
base, positive cash generation and a virtually ungeared balance sheet. This is
an excellent foundation going forward, as we can now grow the business without
substantially increasing overheads. We continue to make inroads into new product
categories. Given the strong statement of financial position we are currently
investigating a number of suitable acquisitions, but only if they follow our
overall business vision to be Africa`s top distributor of branded consumer
merchandise. Our Africa growth strategy is on track and we are excited by the
opportunities that await us to the north.
In light of the above, the Group expects to improve operational performance in
the new financial year.
Segmental reporting
The Group predominantly markets and distributes consumer durables from a single
business unit. Information regarding aggregated customer and geographical
information will be disclosed in the annual report in line with the requirements
of IFRS 8 Operating Segments.
Introduction of strategic partner
We are pleased to welcome The Bidvest Group Limited (Bidvest) as a 27,6%
shareholder in AMAP. Bidvest acquired this shareholding from Steinhoff Africa
Holdings Limited (Steinhoff) in November 2009 and while this is a minority
shareholding for Bidvest, we believe this acquisition imparts an important
strategic and reputational benefit to the Group (as did the Steinhoff
association).
Subsequent events
No events material to the understanding of the report have occurred during the
period between 30 June 2010 and the date of this report.
Distribution to shareholders
The Board recommends that the shareholders approve a distribution to
shareholders by way of a capital distribution out of share premium of 8 cents
per share (2009: nil). Shareholders will be asked to consider, and if deemed
fit, to approve the capital distribution at the annual general meeting of AMAP
to be held on or about 5 November 2010. Salient dates and times pertaining to
the capital distribution will be announced in due course.
Acknowledgements
We would like to extend our sincere thanks to our non-executive directors for
their sage advice and counsel. We also want to thank each and every staff member
for their dedication and commitment and to our suppliers, customers and
shareholders for their support over the past year.
Leon Campher Alan Coward
Non-executive chairman Chief executive officer
Johannesburg
3 September 2010
Directors
*PL Campher (Chairman), *MC Berzack, *DE Cleasby, AS Coward, MG Crow, *SH
Muller, DB Oliver, *DD Tabata, *CKL Scott
*Non-executive
Secretary BG Drummond
Transfer secretaries
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg
2001, PO Box 61051, Marshalltown 2107
Registered office
29 Heronmere Road, Reuven 2091
PO Box 39186, Booysens 2016
Telephone (011) 490 9000
Sponsor
Bridge Capital Advisors (Pty) Limited
2nd Floor, 27 Fricker Road, Illovo Boulevard, Illovo 2196
Date: 06/09/2010 07:05:08 Produced by the JSE SENS Department.
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