| Fri 18 Feb 2005, 14:02 | | Results for the six months ended 31 December 2004 |
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Excellerate - Unaudited results for the six months ended 31 December 2004
Excellerate Holdings Limited
Registration number 1997/009884/06
Share code: EXL ISIN: ZAE000026092
EXLD ISIN: ZAE000044145
(Incorporated in the Republic of South Africa)
Unaudited results for the six months ended 31 December 2004
FINANCIAL OVERVIEW
On 25 January 2005, Excellerate issued a trading update indicating that the
group`s net profit and headline earnings for the six months ended 31 December
2004 would be between 131% to 151% higher and 67% to 87% higher respectively
than that of the prior comparative period. During this period to 31 December
2004, the group generated good results despite the continued impact of the
strong rand and its effect on prices.
Revenue for the six months ended 31 December 2004 increased by 47,4% to R296,7
million. Operating profit increased by 49,9% to R15,5 million. Headline
earnings per share increased by 92,9% to 5,4 cents per share.
The cash flow requirement for operating activities increased by a further R3,2
million resulting in R5,6 million utilised to expand the working capital
requirement. Cash flows utilised in investing activities were mainly used for
the acquisition of the HS Nuts business to the extent of R14,6 million,
additions to fixed assets of R4,3 million and other sundry investments of R0,8
million. The overall effect of these items along with R5,3 million absorbed by
financing activities, was a decrease in cash and cash equivalents amounting to
R30,5 million since 30 June 2004.
The acquisition of the business of HS Nuts has had a favourable impact on the
revenue and profits of the Trading-Distribution segment results exceeding
expectations. The business of Alpine Importers has not yet achieved the desired
level of performance. The liabilities resulting from the acquisition of the HS
Nuts business as well as a greater working capital requirement to meet the
higher level of trade, impacted on the borrowing position of the group.
At 31 December 2004, Excellerate acquired 5 547 300 of its ordinary shares,
being equivalent to 3% of the total issued share capital of Excellerate, for a
total consideration of R3 883 110 plus brokerage. Each of the 5 547 300 ordinary
shares were acquired at 70 cents.
OPERATIONAL OVERVIEW
Trading - Distribution
The Trading-Distribution segment of the business increased its revenue by 64,9%
to R236,4 million and its operating profit by 36,9% to R11,2 million. Foodserv,
the catering equipment trading and manufacturing business, has performed
exceptionally well in this reporting period. Despite the stronger rand and price
deflation in the retail market, the Housewares division comprising the
businesses of Goldenmarc, Hypertrade, Louis Smiedt and Ferrengi continued to
achieve growth and excellent results due to highly effective trading.
The acquisition of the HS Nuts business, comprising Sweetland, Saftrade,
Hovennuts and Trojan Foods, in the Food trading division, has curbed the losses
previously experienced in that division. The new management have focused on
turning around the Alpine Importers and Fruti Flow businesses while
significantly improving the turnover of the businesses acquired from HS Nuts. It
will take some time before the Alpine business is fully rationalised with the HS
Nuts business and the combined business achieves its full potential.
Services
Revenue in the services segment of the business increased by 4,0% to R60,3
million in line with inflation. Operating profits increased by 100,5% to R4,2
million due mainly to the improved cost controls and other operational
efficiencies in the Interpark business.
The efforts of right-sizing and rationalising the Interpark business have been
successful and the business is experiencing steady growth.
The Soft Services division, comprising Sterikleen, Autoclenz and Greenmachine,
continues to face the challenges of increased competition and declining margins
in its cleaning, hygiene, pest control and office plant rental businesses.
During this reporting period the new specialised service, REACT, for trauma and
crime-scene cleaning, was started.
The Consumer Services division, comprising the Levingers Dry Clean and Shoe
Clinic business, has achieved good results for the period. Additional stores
have recently been opened in the Pretoria area.
EMPOWERMENT
The group`s 49% investment in the Katanga group of companies has proven to be
beneficial to all concerned. Several new contracts have been secured in Katanga
particularly in the Services segment. The group enjoys strong relations with
Ikamva Labantu, the majority shareholder which has added value to Katanga in
facilitating several business opportunities. It creates employment opportunities
for historically disadvantaged individuals and benefits social development
projects.
Excellerate continues to explore the possibilities of a further BEE transaction
at the level of the holding company. It is hoped that an appropriate transaction
that meets the new criteria laid out by the Department of Trade and Industry
(`DTI`) could be achieved in the near future. The new guidelines of good
practice proposed by the DTI impose challenging requirements in their current
form and it is hoped the recommendations will be achievable once the process of
public comment is finalised.
PROSPECTS
In considering the prospects for the second half of the financial year
cognisance must be taken of the seasonality of the Trading-Distribution segment
with its peak trading period in the first half of the financial year.
Nevertheless, its trading results for the second half of the year are expected
to be good. The Services segment is less seasonal and is expected to provide a
steady performance over the second half of the financial year. The food trading
division is only expected to achieve its full potential once the business has
been fully integrated into one location which is not expected to occur before
the end of 2005. The group will continue to focus its acquisitive growth in the
Trading-Distribution segment at a prudent pace within the group`s financial
capability while the Services segment will pursue all opportunities to grow
organically.
CONTINGENT LIABILITY
As disclosed in the 2004 annual financial statements, during the 2004 financial
year the South African Revenue Service (`SARS`) issued revised assessments to
two subsidiaries disallowing the deduction of certain trademarks against taxable
income in the two subsidiaries. Deductions in the amount of R26 061 000 have
been made over the periods 1999 to 31 December 2004, of which the SARS has
disputed the deduction in respect of the periods 1999 to 2001 amounting to R12
160 770 representing taxation of R3 648 231. While the subsidiaries have paid
the revised assessments (R2 106 000 was paid during the current reporting
period), they have objected to the SARS and now await a response to their
objection. Based on the opinion of Senior Counsel the directors believe that the
deductions will ultimately be allowed. A deferred tax asset of R2 920 000 is
carried in respect of these allowances.
The outcome of this query is uncertain. However, in the opinion of the group`s
tax advisors, the amounts have been correctly deducted.
ACCOUNTING POLICIES
The financial information contained in this announcement for the half year ended
31 December 2004 has been prepared in accordance with South African Statements
of Generally Accepted Accounting Practice. The accounting policies are
consistent with those applied in the financial statements for the year ended 30
June 2004. In order to be consistent with the restatement of amounts in the 2004
annual financial statements, the comparative information for 31 December 2003
has been restated from that previously reported, primarily due to an adjustment
to the fair value of goodwill in prior years and at that date, and for the
effect of adopting AC139 Share Based Payment transactions in the 2004 annual
financial statements.
DIVIDEND
With the available opportunities to grow organically, pursue potential
acquisitions and reduce interest-bearing borrowings, the directors have decided
not to declare a dividend at this time.
For and on behalf of the Board
C Hall
Chief Executive Officer
Sandton
17 February 2005
Condensed Group Income Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Revenue 296 706 201 321 393 370
Operating profit 15 458 10 312 21 509
Impairment of goodwill (258) (2 270) (3 436)
Amortisation of intangible asset (1 786) (2 121) (3 182)
Net interest expense (1 812) (1 721) (4 357)
Net income before taxation 11 602 4 200 10 534
Taxation (3 873) (3 353) (2 411)
Net income after taxation 7 729 847 8 123
Attributable to minority shareholders (43) (71) (105)
Income attributable to ordinary
shareholders 7 686 776 8 018
Reconciliation of headline earnings:
Income attributable to ordinary 7 686 776 8 018
shareholders adjusted for:
- Amortisation of goodwill 1 733 2 068 3 073
- Impairment of goodwill 258 2 270 3 436
- Loss/(profit) on disposal
of fixed assets 29 (182) 20
- Tax thereon (9) 55 (6)
Headline earnings 9 697 4 987 14 541
Condensed Group Cash Flow Statements
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Cash flows from operating activities (5 577) (2 374) 14 917
Cash flows from investing activities (19 684) (9 463) (12 505)
Cash flows from financing activities (5 273) (1 215) (942)
Net (decrease)/increase in cash and
cash equivalents (30 534) (13 052) 1 470
Cash and cash equivalents at
beginning of period 7 274 5 804 5 804
Cash and cash equivalents at
end of period (23 260) (7 248) 7 274
Condensed Group Balance Sheet
Unaudited Unaudited Audited
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
ASSETS
Non current assets 96 180 84 274 85 235
Fixed assets 18 888 16 571 16 292
Investments 5 083 1 131 4 034
Intangible assets 58 189 53 147 51 066
Deferred taxation 14 020 13 425 13 843
Current assets 206 094 113 281 133 403
Bank balances and cash 1 415 1 449 8 125
Other current assets 204 679 111 832 125 278
Total assets 302 274 197 555 218 638
EQUITY AND LIABILITIES
Equity and reserves 124 829 113 104 118 414
Ordinary shareholders` interest 124 182 112 617 117 810
Outside shareholders` interest 647 487 604
Non current liabilities 17 191 11 466 9 478
Long term loans 13 131 2 735 2 289
Compulsory convertible debenture
liability 4 060 8 731 7 189
Current liabilities 160 254 72 985 90 746
Other current liabilities 133 309 62 510 87 880
Bank overdrafts 24 675 8 697 851
Compulsory convertible debenture
liability 2 270 1 778 2 015
Total equity and liabilities 302 274 197 555 218 638
Condensed Segmental Report
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Turnover 296 706 201 321 393 370
Trading - Distribution 236 389 143 339 268 476
Services 60 317 57 982 124 894
Operating Profit 15 458 10 312 21 509
Trading - Distribution 11 231 8 204 12 179
Services 4 227 2 108 9 330
Condensed Statement of Changes in Equity
Non-
Compulsory distri-
Ordinary Share convertible butable Retained
share capital premium debentures reserve earnings Total
R000`s R000`s R000`s R000`s R000`s R000`s
Balance at
30 June 2003 1 786 53 605 18 641 17 700 19 951 111 683
Share based
payment
transactions 158 158
Net profit
for the period 776 776
Balance at
31 December 2003 1 786 53 605 18 641 17 858 20 727 112 617
Balance at
30 June 2004 1 786 53 605 16 435 18 015 27 969 117 810
Repurchase
of shares (55) (3 853) (3 908)
Derivative
portion of
compulsory
convertible
debenture no
longer
required 2 206 2 206
Share based payment
transactions 388 388
Net profit for the period 7 686 7 686
Balance at
31 December 2004 1 731 49 752 18 641 18 403 35 655 124 182
Statistics
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R`000 R`000 R`000
Ordinary shares in issue 173 095 178 642 178 642
Weighted average number of
ordinary shares 178 642 178 642 179 300
Share options 3 516 - -
Compulsory convertible debentures 47 273 54 167 53 509
Fully diluted weighted average number
of shares in issue 229 431 232 809 232 809
Earnings per share (cents) 4,3 0,4 4,5
Fully diluted basic earnings per
share (cents) 3,7 0,7 3,1
Headline earnings per share (cents) 5,4 2,8 8,1
Fully diluted headline earnings
per share (cents) 4,6 2,5 5,9
Net asset value per share (cents) 72,1 63,3 66,3
Net tangible asset value per
share (cents) 38,5 33,6 37,7
REGISTERED OFFICE: 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: Christopher Hall ( CEO), Harold Bloch, Peter Kramer, Alan Lipchin,
Athol Stewart, Rudi Stumpf*, Clive Howell*, Graham Davel* (*Non-executive
directors)
COMPANY SECRETARY: ER Goodman Secretarial Services CC (represented by E
Goodman). 2nd Floor North Wing Building, Thrupps Centre, 204 Oxford Road, Illovo
2196. Tel: (+27 11) 268-0562. Fax: (+27 11) 268-0564
TRANSFER SECRETARIES: Computershare Investor Services 2004 (Pty) Ltd, 70
Marshall Street, Johannesburg 2001. PO Box 61051, Marshalltown, 2107. Tel: (+27
11) 370 5000. Fax: (+27 11) 688 7721
