| Wed 7 Mar 2001, 0:00 | | Rectron Holdings Ltd - Interim Results-6 Months En |
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Rectron Holdings Limited
Incorporated in the Republic of South Africa
Registration number 1998/015355/06
Interim results - six months to 31 December 2000
ORGANIC GROWTH - TURNOVER 21% UP
HEADLINE EARNINGS PER SHARE 20% UP
OPERATING MARGINS 23% UP
CONSOLIDATED INCOME STATEMENT (for the six months ended 31 December 2000)
Total Inter- South Total Total
national Africa
December December December December June
2000 2000 2000 1999 2000
R000 R000 R000 R000 R000
Revenue 316 369 59 496 256 873 261 766 561 144
Cost of sales (277 590) (56 437) (221 153) (235 427 (483 528)
Gross profit 38 779 3 059 35 720 26 339 77 616
Operating expenses (18 677) (5 789) (12 888) (12 638) (48 956)
Profit/(loss)
from operations 20 102 (2 730) 22 832 13 701 28 660
Finance costs (1 898) (996) (902) (274) (1 760)
Profit on disposal
Of interest in
subsidiary - - - - 2 728
Profit before tax 18 204 (3 726) 21 930 13 427 29 628
Income tax expense (6 119) - (6 119) (3 357) (5 355)
Profit after tax 12 085 (3 726) 15 811 10 070 24 273
Minority interest 3 3 - - (3)
Net profit for
the period 12 088 (3 723) 15 811 10 070 24 270
Earnings per share
Basic earnings per
share (cents) 10,07 (3,11) 13,18 8,39 20,23
Headline earnings/(loss)
per share (cents) 17,91
CONSOLIDATED BALANCE SHEET (31 December 2000)
Assets
Non-current assets 10 791 2 104 8 687 4 528 10 078
Plant and equipment 9 417 2 104 7 313 3 514 8 444
Investment - - - 162
Deferred tax asset 1 374 - 1 374 852 1 634
Current assets 215 296 39 821 175 475 127 292 163 601
Inventories 129 317 11 924 117 393 74 284 108 243
Trade and other
receivables 81 395 23 925 57 470 51 314 48 714
Bank balances
and cash 4 584 3 972 612 1 694 6 644
Group - 5 582 3 738 - -
Total assets 226 087 47 507 187 900 131 820 173 679
Equity and
liabilities
Capital and reserves 74 033 (2 200) 76 233 47 143 61 870
Share capital 1 200 - 1 200 1 200 1 200
Share premium 22 777 - 22 777 22 777 22 777
Non-distributable
reserves 40 - 40 - -
Accumulated
profits 50 016 (2 200) 52 216 23 166 37 893
Minority interest 39 39 - - 39
Long-term borrowings 824 225 599 342 588
Current liabilities 151 191 45 705 105 486 84 335 111 182
Trade and other
payables 88 905 20 926 67 979 68 880 91 830
Short-term
borrowings 21 716 - 21 716 87 279
Tax liabilities 5 271 - 5 271 1 481 1 809
Bank overdrafts 35 299 24 779 10 520 13 887 17 264
Group - 3 738 5 582 - -
TOTAL EQUITY
AND LIABILITIES 226 087 47 507 187 900 131 820 173
679
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (for the year ended 31 December
2000)
Non-
distri- Accumu-
Share butable Share lated
Capital reserves premium profits Total
R000 R000 R000 R000 R000
Balance at 30 June 1998 - - - - -
Shares issued 1 200 - 22 777 - 23 977
Net profit for the year - - - 13 062 13 062
Adjustment to retained
income due to change
in accounting policy for
deferred taxation - - - 596 596
Balance at 30 June 1999 1 200 - 22 777 13 658 37 635
Net profit for the period - - - 24 270 24 270
Foreign currency
translation reserve - (35) - - (35)
Reclassification of
Foreign currency
translation reserve - 35 - (35) -
Balance at 30 June 2000 1 200 - 22 777 37 893 61 870
Net profit for the period - - - 12 088 12 088
Foreign currency
translation reserve - 75 - - 75
Reclassification of
Foreign currency
translation reserve - (35) - 35 -
Balance at 31 December
2000 1 200 40 22 777 50 016 74 033
CONSOLIDATED CASH FLOW STATEMENT (31 December 2000)
Total Inter- South Total Total
national Africa
December December December December June
2000 2000 2000 1999 2000
R000 R000 R000 R000 R000
Operating activities
Cash receipts
from customers 283 688 48 404 235 284 236 873 538 851
Cash paid to suppliers
and employees (319 006) (52 007) (266 999) (255 074) (557 504)
Net cash used
in operations (35 318) (3 603) (31 715) (18 201) (18 653)
Interest paid (1 898) (996) (902) (274) (1 760)
Income taxes paid (2 397) - (2 397) (3 979) (6 431)
Net cash used in
operating activities (39 613) (4 599) (35 014) (22 454) (26 844)
Investing activities
Net cash generated
from/(used in)
investing activities (2 157) (431) (1 726) (761) 4 925
Financing activities
Net cash generated from
financing activities 39 710 7 610 32 100 153 17 694
Net (decrease)/increase
In cash and cash
equivalents (2 060) 2 580 (4 640) (23 062) (4 225)
Cash and cash equivalents
at beginning of year 6 644 1 392 5 252 10 869 10 869
Cash and cash equivalents
at end of year 4 584 3 972 612 (12 193) 6 644
Explanatory notes
1 Accounting policies
The accounting policies applied at 31 December 2000 are consistent with those
applied at 30 June 2000.
2 Seasonal cycle
Rectron9s revenue and earnings are generated in a ratio of approximately
45%/55% between the first and second half of the financial year.
3 Website
Rectron's website at www.rectron.co.za will provide more information regarding
the Group and its products.
COMMENTS
Review of trading results
The directors have pleasure in presenting the interim results of Rectron, which
cover the six-month period ended 31 December 2000.
Both headline and attributable earnings for the period increased by 20% over
the corresponding period in 1999 and amount to R12,088 million from R10,070
million.
Headline earnings per share reflect organic growth of 20% to 10,1 cents from
8,4 cents for the corresponding period in 1999.
Turnover increased by 21% to R316,4 million from R261,8 million for the
corresponding period in 1999. The split of local to international operations
turnover for the period was 80%/20% respectively unchanged from the previous
year.
The growth in turnover and earnings has resulted from solid demand for
Rectron's products, which was at a slower pace as experienced by the IT
industry generally. The expanding operations in Midrand, Cape Town, Durban and
internationally contributed equally to this growth.
Local operating margins increased by 33% to R22,8 million from R14,4 million
the previous year, while international operations recorded an operating loss of
R3,7 million. The source of this loss, the Netherlands operation, has been
discontinued. The other international locations are operating profitably.
Working capital levels were substantially up at the period end. Inventory in
transit by sea over the period end, increased to abnormal levels. This was in
anticipation of the strong demand during the six months to June 2001.
Trade receivables receipts were slow in December 2000 while pleasing sales in
December resulted in an abnormally large book at the period end.
Subsequent to the period end the position is returning to normal.Finance costs
have increased along with the expansion of operations both locally and
internationally. Borrowings have been raised in the respective locations thus
matching liabilities to working capital.
The effective rate of taxation rose to 33,6% from 25% for the corresponding
period in 1999. This is due to the unbundling of a procurement structure, which
was previously in place and no longer effective.
Business activities
Rectron maintains focus on its core competency, as a global computer components
solution company. This competency continues to be further strengthened by
relationships and alliances that it establishes and nurtures both locally and
internationally. Rectron continues to identify and secure exclusive
distribution rights for high profile products that can be sold through its
expanding national dealer base.
Local operations
Rectron's component distribution business enjoys a significant share of the
local market with strong demand for its product offering. Business is conducted
through three branches, one each in Midrand/Johannesburg, Cape Town and Durban,
all of which have required expansion. The Memory Manufacturing Laboratory is
now fully operational and is highly successful in reducing the risk of
fluctuating prices and availability shortages while reducing the memory failure
rate to all but zero. The Peripheral Repair and Service Centre is improving
customer satisfaction and turnaround time as well as reducing costs. A new
product training facility will improve the level of product knowledge to the
dealer base.
International operations
Operations initially comprised subsidiaries trading in the Netherlands, United
Kingdom and Australia, which subsidiaries were established during the previous
year. The international subsidiaries gained market share, but in the short term
have sacrificed profitability in an industry where volume growth slipped to an
all-time low. This was largely due to flat demand for PC9s and peripheral
products following the accelerated demand in 1998 and 1999 ahead of Y2K. During
the current period, logistics and administration for Europe were centralised in
the United Kingdom with closure of operations in the Netherlands where a loss
was incurred for the period under review.The international operations are
expected to contribute positively to earnings during the next six-month period.
Prospects
Rectron continues to strengthen its product offering, increasing market share
while improving operating efficiencies and effective overhead control, thus
improving operating margins. Additional sales resources will be engaged to
realise this potential.
Significant alliances established during the past year continue to play a major
role in Rectron9s growth initiatives. These alliances include Rectron9s
appointment as distributor of the Handspring Visor range of hand-held PDA9s and
the appointment by Canon to distribute its products in South Africa. The
association with AMD and its exciting Q3 and Q4 market share penetration has
proved highly successful. Gigabyte, Viewsonic, CTX, Fujitsu, A-Open and
TwinMos, among others, continue to make up the product range.
The Handspring and add-on SpringBoard modules, such as the GSM VisorPhone,
Digital Camera, GPS and MP3 Player, will allow Rectron to expand into new
channels that present many exciting opportunities in the years ahead.
Rectron is also poised to enter the server and services market through the new
range of Gigabyte servers, which cater for the SME market.
The first half of the financial year covered by this interim announcement is
traditionally the slower six months in the annual sales and earnings cycle.
We are confident that the growth trends shown in this period can be maintained
and that future growth in both turnover and earnings is assured.
Dividends
No dividends are declared at this interim date.
By order of the Board
Alex Nugent (Secretary)
7 March 2001
Registered office
Rectron House 152 15th Road Randjespark Midrand 1685
PO Box 76494 Wendywood 2148
www.rectron.net
Transfer secretaries
Computershare Services Limited
PO Box 61051 Marshalltown 2107
Directorate
MH Lu** (Chairman & CEO) PM Otham CH Kan* SJ Easton MC Nahon* MF
Hennessy*
** Republic of China
* Non-executive
