| Mon 15 Sep 2003, 9:17 | | Reviewed Results for the year ended 30 |
|
Excellerate Holdings Limited -
EXCELLERATE HOLDINGS LIMITED
Registration number 1997/009884/06
Share code: EXL
ISIN: ZAE000026092
Reviewed Results for the year ended 30 June 2003
- Turnover 49%
- Operating profit 41%
- Operating profit excluding forex differences 60%
- Headline earnings per share 13%
- Headline earnings per share excluding
forex differences 32%
- Cash generated by trading operations 49%
Financial overview
The South African business environment is providing new challenges,
following international developments and an unexpected and sustained
rise in the value of the Rand and declining inflation rates.
Despite relatively tough market conditions, Excellerate delivered good
results under its current executive team for the third year running.
Turnover increased by 49% to R372 million (2002: R249 million) and
operating profit by 41% to R25 million (2002: R18 million).
Headline earnings per share increased by 13% to 7,04 cents
(2002: 6,25 cents). Headline earnings per share has been impacted by:
- foreign exchange currency losses experienced as a result of the
translation effect attributable to the volatility of the Rand.
Excluding the effects of these differences, headline earnings per share
would have increased by 32% to 7,7 cents (2002: 5,9 cents) and
operating profit would have increased by 60% to R27 million (2002:
R16,8 million).
- a significantly higher interest charge as a result of the effects of
four interest rate increases and the increased working capital
requirements during the year. The group also undertook a capital
raising of R26 million by way of the issue of compulsorily convertible
debentures, which are interest bearing instruments until conversion.
The purpose of the capital raising was primarily to assist in the
funding of acquisitions.
Cash generated from trading operations has increased by 49% to
R20,2 million (2002: R13,6 million). This increase, however, has been
impacted by interest charges of R6,4 million (2002: R1,3 million).
Surplus cash was reinvested into fixed assets of existing businesses.
The trend in declining interest rates is expected to improve cash flows
in the year ahead.
Operational review
Excellerate invests in businesses that focus on services, trading and
distribution, with the emphasis on customer-centricity and specialised
markets. The group is focused into two groupings, Services and Trading
- Distribution.
For the last three years the executive team has concentrated on
acquisitive growth to build up critical mass and organic growth based
on a recipe focusing on operational excellence, extracting maximum
value from the group"s business operations and improving service
levels. The results of these endeavours can be clearly seen in the
impressive growth in both turnover and operating profit of the group.
The ExcellTrade Division, which houses the Trading - Distribution
grouping, performed well with management showing its ability to react
quickly and intelligently to volatility in the retail market.
Major swings between the first and last quarter of the past financial
year in Producer Price Inflation brought about trading conditions that
were unprecedented and provided retailers and their suppliers with huge
challenges. Management of margins, inventories and expenses assumed
unprecedented levels of complexity.
Despite tough trading conditions turnover for this division increased
by 54% to R245 million (2002: R160 million) and operating profit by 78%
to R13,1 million (2002: R7,4 million).
In the first half of the year sales growth was enhanced by rising
inflation, higher volumes due to improving consumer confidence and
direct and indirect export opportunities following a weak Rand.
However, as the four interest rate increases took effect around
December 2002, volume growth slowed. The currency curtailed exports and
rendered certain opportunities within this division uncompetitive.
The merged business of Hypertrade-Louis Smiedt contributed positively
to the earnings of this division, whilst Goldenmarc performed well
above expectation.
Ferrengi Household Products ("Ferrengi"), was acquired during the
financial year. Ferrengi is a manufacturer and distributor of kitchen
sponges, textiles, brass and steel scourers and wools to mass merchant
retailers and independents. The Ferrengi business is synergistic with
and complementary to Goldenmarc. The business has been bedded down and
the synergies with Goldenmarc are starting to flow through. The
vendors" profit warranty year has expired with Ferrengi performing
according to expectation. The potential of Ferrengi based on its
manufacturing capability (previously non existent within the group) is
expected to add significant value.
The Alpine food importing and distribution business and the Fruti Flow
frozen confectionary business, were restructured after the group
acquired certain of the assets relating to those businesses from the
liquidators of the Afribrand Group ("Afribrand"). The aim of the
restructuring is to expand the trading offering of this division to
include the manufacture and distribution of fast moving consumable food
products to complement the distribution of branded international and
local non-food products to mass merchant retailers and other customers
of the group.
Fruti Flow performed well. The Alpine business has taken longer than
originally expected to re-establish itself as a premier supplier to
mass merchant retailers. This was mainly due to the length of time it
has taken to re-list products previously stocked by the mass merchant
retailers due to the loss of shelf space to competitors at the time of
the liquidation of Afribrand. Alpine"s catering division operates in a
challenging and competitive industry, which has negatively impacted on
margins.
The ExcellServ Division continued to perform well, with turnover
growing by 42% to R127 million (2002: R89 million) and operating profit
by 14,3% to R11,9 million (2002: R10,4 million).
The Parking Environment Management (PEM) Division, which houses the
various businesses providing outsourced services within the car park
environment, continued to improve on the management of parking
facilities in South Africa through its new innovative service
offerings. The start-up operations driving these new developments
impacted negatively on the overall margin of the division. However,
these operations are growing and are expected to contribute positively
in the year ahead.
The business of First Park, a small niche market parking management
operation was acquired during the year and has been integrated into
PEM"s Interpark business.
The cleaning, hygiene and pest divisions, housed within the Sterikleen
business, continued to grow steadily by concentrating on gaining market
share and on improving operational efficiencies. Management changes
took place early in the second half of the financial year. New
management members have added value to the business in the form of
management skills and this, together with the adherence to strict
financial disciplines, contributed positively to the performance of
this business.
The business of Levingers Dry Clean and Shoe Clinic ("Levingers") that
operates 22 stores in the Gauteng area focused on dry cleaning, shoe
repair and tailoring services was streamlined and restructured with new
management coming on board. The acquisition was aimed at expanding the
service offering of the ExcellServ Division beyond commercial and
industrial markets to include individual consumers. Levingers
contributed positively to the group results for this financial year.
The acquisition of Autoclenz, which renders vehicle valeting and
ancillary services to motor manufacturers, motor dealers, car hire
companies and other sectors of the transport industry introduced the
group to this new specialised market segment. The group plans to
integrate this business into the Sterikleen business.
With effect from 1 September 2003, (a post balance sheet event) the
business of Greenmachine (Proprietary) Limited ("Greenmachine") was
acquired. Greenmachine is a small niche market plant rental and
landscaping business. The group plans to also integrate the
Greenmachine business into the Sterikleen business.
The acquisitions in the period under review have positioned the group
strongly for organic growth and the diversification into new markets
and new products.
Empowerment and ownership
During the year, Dr David Molapo resigned as a director of Excellerate
and renounced his directorships within the empowerment partner of the
group, Katanga X Holdings. At the end of the financial year, his wife
Mamikie Molapo and their foundation, the ICAN Foundation followed suit
as part of a planned exit. Dr Molapo has advised Excellerate that he
has entered the ministry
on a full-time basis and has renounced all his business interests of a
public nature.
The group is committed to ensuring that there is an appropriate level
of economic empowerment participation in its operations and is
currently engaged in discussions with various potential empowerment
partners to acquire a direct shareholding in Excellerate.
On an operational level, the group is currently involved in joint
ventures and partnerships with various black empowerment entities
throughout South Africa in contracts relating to cleaning, parking and
other services in casinos, shopping centres and other venues around the
country.
In addition, Katanga X Holdings has recently engaged the services of
skilled black management who are employed full time in its service
operations and will in due course participate on an equity basis within
Katanga X Holdings.
The group proposes to establish an employee share trust, which will
hold equity interests in Katanga X Holdings, its underlying operations
and those of the group. It is aimed at benefiting employees other than
management in line with the group"s commitment to transformation.
Strategic reorganisation and management changes
The market in which the ExcellTrade Division operates is expected to
grow in the year ahead as consumers are expected to have more
disposable income as a result of reduced interest rates.
The market in which the ExcellServ Division operates remains one of the
most challenging, with increasing transfer of risk from clients to the
service providers and downward pressure on contract prices and margins.
However, the division is growing off a small to medium base and is
expected to perform adequately in this environment.
The effect and contribution of the new acquisitions have to some extent
been felt in the second half of the year and their contribution to the
group in the year ahead is expected to be positive.
Going forward, the board of directors of Excellerate have determined
that the group will grow organically as opposed to growing by
acquisition and will undergo a period of consolidation and
stabilisation. The group"s acquisitive growth plan relates only to
inexpensive, opportunistic and niche market acquisitions, which can be
merged with and integrated into the various businesses in the group.
To achieve organic growth, the group will continue to operate on a
decentralised basis with a relentless focus on execution and on solid
performance by the various management teams.
The various divisions within the group will be streamlined and
restructured, including Excellerate"s head office, to create more
focused business units that concentrate on different segments of their
respective markets.
The group will therefore be streamlined into five business divisions
within ExcellTrade and ExcellServ:
- the Housewares Division consisting of Goldenmarc, Louis Smiedt,
Hypertrade and Ferrengi to be managed by the Goldenmarc management
team;
- the Food Division, which will consist of the merged businesses of
Alpine Importers and Fruti Flow to be managed by the management team of
Alpine Importers;
- the Parking Environment Management (PEM) Division to be managed by
the executive chairman of the ExcellTrade Division;
- the Cleaning and Services Rental Division, incorporating all the
businesses currently within the Sterikleen business, to be managed by
the chairman of the ExcellServ Division;
- the Consumer Services Division, currently consisting of the
Levingers business, to be managed by the current managing director;
In view of the decision to focus on organic growth, consolidation and
stabilisation going forward and the restructuring of its current head
office structure, the divisional chairmen of ExcellServ and ExcellTrade
have been deployed within the group.
Changes to the Board
The executive chairman, Lou Rottanburg, will terminate his employment
by mutual consent with effect from 17 September 2003, subject to
certain terms and conditions, including a restraint undertaking and a
gratuity granted to him by the board in recognition inter alia of past
services for fulfilling his said mandate to accomplish certain set
strategic operational objectives set in April 2000, combined amounts,
which on an after tax basis amounts to
R1 million. In the last three years, he has effectively taken the
necessary remedial action to turn around non-performance and to embark
on a programme of strategic acquisitions to create new divisions and a
critical mass for the group. A dynamic executive team was appointed to
assist the chairman in fulfilling his mandate, which has been achieved
in a successful manner and ahead of the anticipated schedule.
Bruce Bernstein, the current financial director, resigned with effect
from 12 September 2003 to pursue a private investment and Christopher
Michael Hall ("Chris Hall") has been appointed as financial director in
his place and stead. Chris Hall has extensive experience both locally
and internationally and the board and major shareholders have expressed
confidence in his appointment. The board will in due course consider
the appointment of a chief executive officer. In the interim,
Excellerate will be run by a management committee consisting of senior
executive directors.
With effect from 12 September 2003 two representatives of Nedbank
Limited, Excellerate"s institutional investor, Graham Davel and Clive
Howell, have been appointed as non executive directors. Clive Howell
will act as alternate director to Graham Davel.
The board of directors and major shareholders are grateful to the
executive chairman and his executive team for the successful and
exemplary manner in which they have completed their strategic mandate
ahead of time and wish them well in their respective future endeavours.
Dividend
Congruent with the group"s current policy, no dividend has been
declared in light of the group"s desire to utilise its resources to
achieve the operational objectives of organic growth, to finance small
selective acquisitions and to further growth within the existing
divisions as well as to service the current gearing of the group.
Accounting policies
The financial information contained in this announcement has been
prepared in accordance with polices, which are consistent with
Statements of
South African Generally Accepted Accounting Practice and those of the
previous year.
The group"s auditors, KPMG Inc, have reviewed the financial information
for the period ended 30th June 2003. Their report is available for
inspection at the registered office of the company.
For and on behalf of the Board
L Rottanburg B Bernstein
Executive Chairman Financial Director
Sandton
12 September 2003
Consolidated Income Statement
Reviewed Audited
year ended year ended
30 June 30 June
2003 2002
R"000 R"000
Turnover 371 778 249 097
Operating profit before foreign
exchange (loss)/profit 26 766 16 754
Foreign exchange (loss)/profit (1 724) 1 058
Operating profit 25 042 17 812
Capital items - disposal of fixed assets 92 140
Amortisation of trademarks (106) (106)
Impairment of goodwill/investments (305) (177)
Amortisation of goodwill (4 105) (3 131)
Net income before interest and taxation 20 618 14 538
Net interest paid (6 402) (1 332)
Net income before taxation 14 216 13 206
Taxation (5 774) (4 872)
Net income after taxation 8 442 8 334
Attributable to minority shareholders (162) (168)
Attributable to ordinary shareholders 8 280 8 166
Shares in issue (000"s) 178 642 181 068
Weighted average number of shares in issue (000"s) 179 300 181 942
Fully diluted weighted average number
of shares in issue (000"s) 204 677 200 730
Earnings per share (cents) 4,6 4,5
Headline earnings per share (cents) 7,0 6,3
Fully diluted headline earnings per share (cents) 6,6 6,0
Reconciliation of headline earnings:
Attributable to ordinary shareholders 8 280 8 166
adjust for:
- Amortisation of goodwill 4 105 3 131
- Impairment of goodwill/investments 305 177
- Net profit on sale of fixed assets (92) (140)
- Taxation thereon 28 42
Headline earnings 12 626 11 376
Consolidated Balance Sheet
Reviewed Audited
30 June 30 June
2003 2002
R"000 R"000
Assets
Non current assets 103 080 90 342
Fixed assets 16 719 12 264
Investments 762 1 526
Intangibles 75 056 64 935
Deferred taxation 10 543 11 617
Current assets 115 984 101 426
Liquid funds 5 804 3 014
Other current assets 110 180 98 412
Total assets 219 064 191 768
Equity and liabilities
Equity and reserves 127 096 105 107
Ordinary shareholders" interest 126 607 104 780
Outside shareholders" interest 489 327
Non current liabilities 11 477 2 160
Long term liabilities 2 511 1 455
Deferred taxation - 705
Compulsory convertible debenture liability 8 966 -
Current liabilities 80 491 84 501
Other current liabilities 73 356 70 577
Compulsory convertible debenture liability 2 017 -
Amounts due to vendors 5 118 13 924
Total equity and liabilities 219 064 191 768
Shares in issue (000"s) 178 642 181 068
Net asset value per share (cents) 71,1 58,0
Net tangible asset value per share (cents) 29,1 22,2
Segmental Report
Reviewed Audited
year ended year ended
30 June 30 June Period on
2003 2002 period
R"000 R"000 % Growth
Turnover 371 778 249 097 49,3%
Service 126 710 89 492 41,6%
Trading 245 068 159 605 53,5%
Operating Profit 25 042 17 812 40,6%
Service 11 934 10 444 14,3%
Trading 13 108 7 368 77,9%
Depreciation 5 403 3 519 53,5%
Service 3 061 2 316 32,2%
Trading 2 342 1 203 94,7%
Capital Expenditure 7 651 5 068 51,0%
Service 3 663 2 891 26,7%
Trading 3 988 2 177 83,2%
Transactions between segments are
conducted on an arm"s length
market - related basis
Consolidated Cash Flow Statement
Reviewed Audited
year ended year ended
30 June 30 June
2003 2002
R"000 R"000
Cash generated by trading operations 20 244 13 604
Net interest paid (6 402) (1 332)
Taxation paid (4 887) (2 101)
Cash generated from operating activities 8 955 10 171
Cash utilised for investing activities (33 142) (28 909)
Cash generated/(utilised) by financing activities 26 977 (3 723)
Increase/(decrease) in net cash resources
for the year 2 790 (22 461)
Foreign exchange gain - (290)
Net cash resources at beginning of the year 3 014 25 765
Net cash resources at end of the year 5 804 3 014
Statement of Changes in Ordinary
Shareholders" Interest
Ordinary Non distri- Compulsory
share Share butable Retained convertible
capital premium reserve earnings debentures Total
R000"s R000"s R000"s R000"s R000"s R000"s
Balance at
30 June 2001 1 848 57 206 17 167 22 876 99 097
Repurchase of
shares (37) (2 156) (2 193)
Foreign currency
translation
reversal for
the year (290) (290)
Attributable
profit for
the year 8 166 8 166
Balance at
30 June 2002 1 811 55 050 16 877 31 042 104 780
Repurchase of
shares (25) (735) (760)
Attributable
profit for
the year 8 280 8 280
Compulsory
convertible
debentures
issued ( net ) 15 017 15 017
Compulsory
convertible
debentures
issue expenses (710) (710)
Balance at
30 June 2003 1 786 53 605 16 877 39 322 15 017 126 607
REGISTERED OFFICE:
Block F, Ground Floor, Pin Mill Farm, 164 Katherine Street, Sandown
2169. PO Box 785448, Sandton 2146.
Tel: (+27 11) 444-0474. Fax: (+27 11) 262-0360.
E-mail: kim@excellerate.co.za
DIRECTORS:
L Rottanburg (Executive Chairman), B Bernstein, H Bloch, A Stewart, S
Lewis*, P Kramer, A Lipchin, R Stumpf* (*Non-executive Director)
COMPANY SECRETARY:
ER Goodman Secretarial Services CC (represented by E Goodman). Ground
Floor, 25 Rudd Road, Illovo 2196.
Tel: (+27 11) 268-0562. Fax: (+27 11) 268-0564
SHARE TRANSFER SECRETARIES: Computershare Limited, 70 Marshall Street,
Johannesburg 2001. PO Box 1053, Johannesburg 2000.
Tel: (+27 11) 370-5000. Fax: (+27 11) 668-7721
Date: 15/09/2003 08:00:18 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
