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ELI
ELI
ELI - Ellies Holdings Limited - Unaudited interim results for the six months
ended 31 October 2010
Ellies Holdings Limited
(Registration No. 2007/007084/06)
Share code ELI
ISIN code ZAE000103081
www.elliesholdings.com
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2010
Highlights:
- Revenue up 11%
- PBT up 19%
- EPS of 15,16 cents
- NAV per share 180,54 cents
Abridged consolidated statement of financial position
Restated
Unaudited Unaudited Audited
as at as at as at
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
ASSETS
Non-current assets 291 190 265 591 264 159
Property, plant and 60 824 32 812 33 059
equipment
- Land and buildings 25 013 - -
- Other 35 811 32 812 33 059
Goodwill and other 224 684 225 197 225 490
intangible assets
Deferred taxation 5 682 7 582 5 610
Current assets 551 307 498 237 510 029
Inventories 367 449 292 835 297 811
Trade and other 172 460 178 805 193 365
receivables
Taxation receivable 93 825 634
Bank and cash balances 11 305 25 772 18 219
Total assets 842 497 763 828 774 188
EQUITY AND LIABILITIES
Capital and reserves 547 961 424 734 517 254
Share capital and 501 494 440 560 501 494
premium
Non-distributable (178 799) (178 447) (178 667)
reserves
Retained earnings 225 266 162 621 194 427
Non-current 44 967 56 446 33 625
liabilities
Interest-bearing 44 967 42 289 33 625
liabilities
Vendor loans payable - 12 744 -
Deferred taxation - 1 413 -
Current liabilities 249 569 282 648 223 309
Interest-bearing 26 444 24 678 23 380
liabilities
Vendor loans payable - 59 510 13 607
Trade and other 169 775 130 608 147 346
payables
Provisions 1 600 1 412 1 493
Taxation payable 7 847 17 216 6 011
Shareholders for 221 - -
dividend
Bank overdraft 43 682 49 224 31 472
Total equity and 842 497 763 828 774 188
liabilities
Supplementary
information:
Net asset value per 180,54 156,92 170,43
share (cents)
Net tangible asset 106,24 73,72 96,46
value per share
(cents)
Number of shares in 303 505 691 270 674 399 303 505 691
issue
Abridged consolidated statement of comprehensive income
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
Revenue 652 562 590 204 1 156 478
Profit before 78 966 73 945 132 433
depreciation,
amortisation, interest
and taxation
("EBITDA")
Depreciation (6 390) (6 516) (11 904)
Amortisation of (807) (639) (1 428)
intangibles
Profit before interest 71 769 66 790 119 101
and taxation ("PBIT")
Interest received 518 436 948
Interest paid (5 437) (11 131) (19 719)
Net profit before 66 850 56 095 100 330
taxation ("PBT")
Taxation (20 835) (16 934) (29 363)
Net profit after 46 015 39 161 70 967
taxation
Other comprehensive
income:
Foreign currency (132) (112) (332)
translation reserve
Total comprehensive 45 883 39 049 70 635
income for the period
Supplementary
information:
Basic earnings per 15,16 14,47 26,19
share (cents)
Headline earnings per 15,12 14,47 25,96
share (cents)
Core headline earnings 16,06 16,16 29,43
per share (cents)
Diluted earnings per 15,16 14,47 23,38
share (cents)
Diluted headline 15,12 14,47 23,18
earnings per share
(cents)
Diluted core headline 16,06 16,16 26,27
earnings per share
(cents)
Weighted average 303 505 691 270 674 399 270 944 245
number of shares in
issue
Reconciliation of headline earnings and core headline earnings
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
Net profit after 46 015 39 161 70 967
taxation
Adjusted for:
Profit on sale of (172) - (858)
property, plant and
equipment
Tax effect on 48 - 240
adjustments
Headline earnings 45 891 39 161 70 349
attributable to
ordinary shareholders
Adjusted for:
Amortisation of 807 639 1 428
intangibles
IFRS 3 - transactional 383 - -
costs expensed
IFRS implied interest 481 4 113 8 356
on vendor liabilities
Secondary tax on 1 518 - -
dividends ("STC")
Tax effect on (333) (179) (400)
adjustments
Core headline earnings 48 747 43 734 79 733
attributable to
ordinary shareholders
Abridged consolidated statement of cash flows
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
Cash flows from 14 715 35 207 63 268
operating activities
Cash generated from 53 158 47 023 101 805
operations
Net finance costs paid (4 958) (6 582) (10 415)
Taxation paid (18 531) (5 234) (28 122)
Dividends paid (14 954) - -
Cash flow from (34 155) (11 333) (17 388)
investing activities
Cash flows from 316 6 241 (5 566)
financing activities
Net (19 124) 30 115 40 314
(decrease)/increase in
cash and cash
equivalents
Cash and cash (13 253) (53 567) (53 567)
equivalents at the
beginning of the
period
Cash and cash (32 377) (23 452) (13 253)
equivalents at the end
of the period
Abridged consolidated statement of changes in equity
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
Balances at beginning 517 254 385 685 385 685
of the period
Shares issued at a - - 60 934
premium
Total comprehensive 45 883 39 049 70 635
income for the period
Dividends declared (15 176) - -
Balances at end of the 547 961 424 734 517 254
period
Segmental analysis
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2010 31 October 2009 30 April 2010
R`000 R`000 R`000
Revenue 652 562 590 204 1 156 478
Wholesale distribution 567 036 472 152 985 311
of consumer goods and
services
Infrastructural 85 526 118 052 171 167
electrification
Property division 711 - -
Holding (711) - -
company/consolidation
Segmental profits from
operations
Profit before interest 71 769 66 790 119 101
and taxation
Wholesale distribution 63 204 53 956 100 627
of consumer goods and
services
Infrastructural 8 270 13 059 18 916
electrification
Property division 573 - -
Holding (278) (225) (442)
company/consolidation
Net finance costs (4 919) (10 695) (18 771)
Operating segments (4 485) (10 695) (18 771)
(combined)
Property division (434) - -
Profit before taxation 66 850 56 095 100 330
Notes to the unaudited interim results
Basis of preparation and accounting policies
The results for the six months ended 31 October 2010 have been prepared in
accordance with International Financial Reporting Standards ("IFRS"), and comply
with IAS 34 - Interim Financial Reporting, the AC500 series of interpretations,
the requirements of the South African Companies Act, 1973 and the Listing
Requirements of the JSE Limited. The accounting policies used in the abridged
consolidated financial results for the six months ended 31 October 2010, are
consistent with those applied in the audited financial statements for the year
ended 30 April 2010. The interim results have not been reviewed or audited by
the group auditors, PKF (Jhb) Inc.
Comparatives
The previous reported interim results for the six months ended 31 October 2009
were restated due to the misclassification of a portion of the warranty
provision. Full details were included in the group`s audited financial
statements for the year ended 30 April 2010. The effect of the reclassification
on the prior period figures is to reduce both Provisions and Inventories by
R13,5 million.
Commentary
Introduction
With effect from 26 November 2010, Ellies Holdings Limited ("Ellies" or "the
group") transferred its listing from the Alternative Exchange to the Main Board
- "Electronic and Electrical Sector" of the JSE Limited.
Financial overview
With overall revenue up 11% on the comparative period and profit before tax
("PBT") up by 19% to R66,8 million, the group achieved strong growth during the
period under review. The divisional overview below provides more detail on where
this growth was achieved.
The growth evident in revenue and PBT was diluted at the level of earnings per
share, as an additional 32,8 million shares were issued in April 2010 pursuant
to a rights offer. By underwriting the rights offer, at a premium to the market
price, the senior management and vendors of Megatron converted the balance of
the purchase price payable in cash, in order to increase their shareholding in
Ellies. The result is that EPS was only up 4,8% to 15,16 cents per share, and
core HEPS was marginally down by 0,6%, largely due to IFRS implied interest.
The group`s balance sheet is strong, with NAV and NTAV improving to 181 cents
and 106 cents respectively.
At the start of the period, the group began implementing a strategy to own and,
where appropriate to enhance efficiencies, by upgrading its operating premises
country-wide. This resulted in the start of a new "Property division" which has
acquired and/or refurbished some existing and new premises. The group
anticipates that, over time, the resultant capitalisation of property value
growth will deliver a sound return on investment.
The property investment by the group, included in "Property, plant and
equipment", at 31 October 2010 was R25 million. This is expected to increase to
approximately R43 million by year end, as registration of certain transfers is
still pending. This investment will be financed through a new ten year facility
of R40 million.
Cash generation from operations during the period was healthy. At the period
end, the cash position had declined by R19 million, from the 2010 year end,
mainly as a result of the final vendor loan repayments of R14 million, interest
bearing debt repayments of R11 million, dividends paid (including related taxes)
of R16 million, additional operational capital assets acquired of R9 million and
increases in net working capital of R24 million.
Divisional overview
Pleasing growth in the Ellies and Elsat divisions has been the result of an
increased market in consumer demand for both electrical goods and satellite
equipment, while gross margins have been stable.
The performance of the "Infrastructural division" (formerly Megatron Federal)
has reflected the depressed conditions in the building and mining sectors, with
the result that the contribution of this division has been reduced in the period
under review. In spite of this the board believes that the conversion of the
amounts payable to the Megatron vendors was a vote of confidence in Ellies by
the management of the largest acquisition in the group.
Prospects
Ellies will continue to grow and diversify its current operations, by investing
in new ventures.
With the recent approval of a digital standard by both the South African
Government and SADC, we are now closer to the implementation of the Digital
Terrestrial Television ("DTT") migration. Through the strategic alliance between
Ellies and Altech UEC, DTT will materially benefit the group.
The group continues to explore and develop its participation in energy
conservation and the reduction of green house effects, with renewable energy
sector products including solar power, solar heating and energy efficient
lighting, a sector which has great potential. This includes consumer products,
corporate solutions and infrastructural and housing solutions. A newly formed
empowered subsidiary of Ellies, In-Toto Solution, has been established to focus
and spearhead both government and large private sector projects. Ellies has
established a "Green office" environment to showcase its service and product
offerings.
The group intends to utilise the different forms of carbon financing, including
the generation of carbon credits under the Clean Development Mechanism, to bring
its renewable energy sector products to market in a sustainable manner.
Ellies is currently exploring internet satellite connectivity by investing and
co-developing with SkyeVine (Pty) Limited. This venture not only utilises our
established national and African logistic infrastructure but also adds a new
dimension to the satellite division. SkyeVine`s Internet services reach where
terrestrial broadband providers cannot and is an all-inclusive Internet via
satellite solution covering the whole of the Sub-Sahara African region. SkyeVine
is focused on growing the broadband subscriber base in Africa by providing a
unique product offering that targets the home user and small enterprise markets.
The Infrastructural division`s contribution is expected to improve dramatically
in the short term. The mining sector is showing material improvement in
infrastructural investment, but the building and electrification sectors are
expected to turn at a slower rate. Megatron`s diversification into associated
power products, renewable power and the manufacture of transformers is beginning
to show positive results, with growth in the current order book.
The board remains positive with regard to the group`s continued organic growth,
current ventures and new opportunities which continue to present themselves.
Dividend policy
The payment of dividends is reviewed periodically, taking into account
prevailing circumstances and future cash requirements. No dividend is proposed
at this interim stage.
Appreciation
The directors and management recognise and appreciate the focused efforts and
hard work of the group`s staff over the past few months and also thank
customers, business partners, advisors, suppliers and most importantly
shareholders for their continued support of and faith in the group.
By order of the board
ER Salkow WMG Samson
Chairman CEO
20 January 2011
Directors:
Executive Directors:
ER Salkow (Chairman)
WMG Samson (Chief executive officer)
MF Levitt (Chief financial officer)
RH Berkman
RE Otto
Non-executive Directors:
AC Brooking
MR Goodford (Independent)
MS Mazwi
Registered office:
94 Eloff Street Ext, Village Deep, Johannesburg, 2001
(PO Box 57076, Springfield, 2137)
Sponsor:
Java Capital
Company secretary:
Probity Business Services (Pty) Limited
Transfer secretaries:
Link Market Services South Africa (Pty) Limited
Date: 20/01/2011 09:32:01 Produced by the JSE SENS Department.
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