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ELB Group Limited - Reviewed provisional report and dividend announcement
ELB GROUP LIMITED
(ELB)
Incorporated in the Republic of South Africa
Registration number 1930/002553/06
Share codes: ELR & ELRP
ISIN: ZAE000035101 & ZAE000035333
REVIEWED PROVISIONAL REPORT AND DIVIDEND ANNOUNCEMENT
for the year ended 30 June 2005
Group Income statement
Audited
Audited Year ended
Reviewed Year ended 30 June 04
Year 30 June 04 (as previously
ended
30 June (restated) reported)
05
Continuing operations R000 R000 R000
Sales revenue 551 261 508 233 580 332
Net operating costs excluding
depreciation and amortisation (538 492) (495 183) (548 648)
Operating profit before
depreciation
and amortisation 12 769 13 050 31 684
Depreciation and amortisation (6 484) (5 764) (8 524)
Operating profit before
abnormal items 6 285 7 286 23 160
Abnormal items as detailed
below: net expense (2 829) - -
Profit from operations 3 456 7 286 23 160
Net treasury income 4 573 4 612 4 113
Translation loss of foreign
treasury cash - - (13 622)
Profit before tax 8 029 11 898 13 651
Income tax expense (477) (8 446) (9 393)
Deferred tax reversal on
foreign treasury reserves - - 14 071
Net profit attributable to
continuing operations 7 552 3 452 18 329
Net profit attributable to
discontinued operation
as detailed below 9 707 10 560 -
Net profit for the year 17 259 14 012 18 329
Attributable to:
Minority interest
Continuing operations (3) 35 35
Discontinued operation 647 2 122 2 122
644 2 157 2 157
Ordinary shareholders 16 615 11 855 16 172
17 259 14 012 18 329
ABNORMAL ITEMS
Capital item
Profit on sale of portion of
interest in subsidiary 63 - -
Trading items
Relocation of factory (1 781) - -
Interest on revised tax
assessments of subsidiary (697) - -
Input value added tax (VAT)
dispute (305) - -
Interest on VAT dispute (109) - -
Net abnormal items: net expense (2 829) - -
NET PROFIT ATTRIBUTABLE TO
DISCONTINUED OPERATION
Disposal of ELB McWade - -
Net profit of ELB McWade for
the three months to
the date of disposal (2004 -
full year`s operations) 3 247 10 560
Profit attributable to the ELB
Group on disposal 6 460 - -
Net profit attributable to
discontinued operation 9 707 10 560 -
RECONCILIATION OF GROUP HEADLINE EARNINGS
Audited
Audited Year ended
Reviewed Year ended 30 June 04
Year 30 June 04 (as previously
ended
30 June (restated) reported)
05
R000 R000 R000
Net profit attributable to
ordinary shareholders
per the income statement 16 615 11 855 16 172
Deduct: Capital items as
detailed below: 6 928 73 (361)
Capital items detailed in the
income statement
Profit on sale of portion of
interest in subsidiary 63 - -
Profit on disposal of ELB
McWade 6 460 - -
Profit on disposal of plant and
equipment
Included in operating profit
before abnormal items 592 86 114
Included in net profit of
discontinued operation 37 28 -
Goodwill amortisation - - (543)
Income tax effect of capital
items (207) (34) (34)
Minority interest in capital
items (17) (7) 102
Headline earnings 9 687 11 782 16 533
Weighted average number of
shares (excluding
treasury shares) on which basic
earnings per
share are based (000`s) 27 337 27 974 27 974
Headline earnings per ordinary
share (cents)
- basic 35,4 42,1 59,1
- fully diluted 35,4 41,9 58,8
Earnings per ordinary share
(cents)
- basic 60,8 42,4 57,8
- fully diluted 60,7 42,2 57,5
Dividends declared for the year
per ordinary share (cents) 10 30 30
GROUP STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS EQUITY
Audited
Total
Audited 30 June
Reviewed Total 2004
Total 30 June (as
Issued Treasury Retained 30 June 2004 previously
capital shares Reserves profit 2005 (restated) reported)
R000 R000 R000 R000 R000 R000 R000
Balance at
the
beginning
of the
year
As
previously
stated 25 192 (23 563) 750 146 667 149 046 147 124 147 124
Changes in
accounting
policies
Change in
operating
lease
expenses
on applica-
tion of
the
straight
line basis (190) (190) (24) -
Change in
useful
lives and
residual
values of
property,
plant and
equipment 401 401 (11) -
Accrual of
ordinary
share
options (67) (67) (40) -
Trans-
lation (18 668) 18 668 - -
adjust-
ments
As 25 192 (23 563) (17 918) 165 479 149 190 147 049 147 124
restated
Movement
in issued
capital
Shares -
issued for
cash 15 000 15 000
Listing -
fees and
securities
tax (61) (61)
Movement
in
treasury
shares
Loan to
The ELB
Partici-
pants
Share (19 742) (19 742)
Trust
Decrease
in share
incentive
trusts
loan 197 197 4 106 4 106
accounts
Movement
in
reserves
Trans-
lation 4 197 4 197 (18 668) -
adjust-
ments
Movement
in accumu-
lated
profit
Net profit
for the
year
attribu-
table
to
ordinary 16 615 16 615 11 855 16 172
share-
holders
Trans-
lation - - - (5 046)
adjust-
ments
Deferred
tax
reduction
on trans-
lation
loss of
foreign
treasury
cash - - 4 087 -
Deferred
tax
reversal
on foreign
treasury
reserves - - 14 071 -
Final
dividend
for the
previous
year (5 461) (5 461) (5 778) (5 778)
Interim
dividend
for the
current (1 368) (1 368) (2 729) (2 729)
year
Balance at
the end of
the period 25 192 (23 366) (13 721) 175 265 163 370 149 190 149 046
GROUP BALANCE SHEET
Audited
30 June 04
Audited (as
Reviewed 30 June 04 previously
30 June 05 (restated) reported)
R000 R000 R000
Assets
Non current assets 50 859 38 454 34 152
Property, plant and equipment 36 632 26 876 24 848
Intangible assets - 2 584 4 211
Deferred rent expense 3 659 3 901 -
Deferred tax assets 10 568 5 093 5 093
Current assets 368 295 342 910 346 811
Inventories 194 400 164 209 164 209
Debtors and prepayments 49 450 50 649 54 550
Cash and cash equivalents 124 445 128 052 128 052
Total assets 419 154 381 364 380 963
EQUITY AND LIABILITIES
Ordinary shareholders equity 163 370 149 190 149 046
Issued capital 25 192 25 192 25 192
Treasury shares (23 366) (23 563) (23 563)
Reserves (13 721) (17 918) 750
Retained profit 175 265 165 479 146 667
Preference shares 8 8 8
Minority interest 207 3 478 3 478
Total equity 163 585 152 676 152 532
Non current liabilities 10 145 1 686 1 686
Interest bearing borrowings 9 025 385 385
Deferred tax liabilities 1 120 1 301 1 301
Current liabilities 245 424 227 002 226 745
Non interest bearing creditors
and accruals 183 542 148 424 148 167
Interest bearing creditors 40 903 47 894 47 894
Short term borrowings and bank
overdrafts 20 979 30 684 30 684
Total equity and liabilities 419 154 381 364 380 963
Ordinary shares in issue (000`s) 33 860 33 860 33 860
Deduct: Treasury shares in issue
(000`s) 6 505 6 559 6 559
Ordinary shares in issue on
which net asset value
per share is calculated 27 355 27 301 27 301
Net asset value per share
(cents) 597 546 546
Note
At 30 June 2005 there were capital commitments of R4 388 000 (30 June 2004: R170
000).
GROUP CASH FLOW STATEMENT
Audited
Audited Year ended
Reviewed Year ended 30 June 04
Year ended 30 June 04 (as previously
30 June 05 (restated) reported)
R000 R000 R000
Cash outflow from operating
activities before
dividends paid (6 022) (49 435) (55 921)
Dividends paid (6 829) (8 507) (8 707)
Cash outflow from operating
activities (12 851) (57 942) (64 628)
Cash inflow/(outflow) from
investment activities 10 091 (10 822) (11 517)
Cash inflow/(outflow) from
financing activities 13 276 (23 545) (6 022)
Net cash inflow/(outflow)
from continuing operation 10 516 (92 309) (82 167)
Net cash inflow of
discontinued operations 3 772 10 142 -
Increase/(decrease) in net
cash and cash equivalents 14 288 (82 167) (82 167)
Net cash and cash equivalents
at the beginning of
the year 97 368 179 535 179 535
Cash and cash equivalents of
subsidiary on disposal (8 190) - -
Net cash and cash equivalents
at the end of the year 103 466 97 368 97 368
SEGMENT ANALYSIS
Audited
Audited Year ended
Reviewed Year ended 30 June 04
Year ended 30 June 04 (as previously
30 June 05 (restated) reported)
R000 R000 R000
Sales revenue
Continuing operations
ELB Equipment Holdings 464 338 453 253 453 253
ELB Timbers 86 923 54 980 54 980
Total continuing operations 551 261 508 233 508 233
Discontinued operation
ELB McWade 23 366 72 099 72 099
Total 574 627 580 332 580 332
HEADLINE EARNINGS/(LOSS)
Continuing operations
ELB Equipment Holdings 16 824 15 754 15 842
ELB Timbers (6 824) (11 241) (11 548)
Continuing operations before
adjustments below 10 000 4 513 4 294
ELB Equipment Holdings (1 111) - 4 536
Interest on revised tax
assessments of subsidiary (697) - -
VAT dispute and interest
thereon (414) - -
Translation loss of foreign
treasury cash - - (13 622)
Deferred tax reduction on
translation loss of
foreign treasury cash - - 4 087
Deferred tax reversal on
foreign treasury reserves - - 14 071
ELB Timbers (1 781) (1 153) (1 153)
Relocation of factory (1 781) - -
Prior year tax adjustment - (1 153) (1 153)
Total continuing operations 7 108 3 360 7 677
Discontinued operation
ELB McWade 2 579 8 422 8 856
Headline earnings 9 687 11 782 16 533
Capital items
Continuing operations 447 57 57
Profit on disposal of ELB
McWade 6 460 - -
Discontinued operation 21 16 (418)
Net profit attributable to
ordinary shareholders 16 615 11 855 16 172
COMMENTS
INTRODUCTION
Following the disposal by ELB of its 80 per cent interest in ELB McWade there
are now two trading segments namely ELB Equipment Holdings and ELB Timbers.
FINANCIAL RESULTS
The ELB Group recorded a net profit attributable to ordinary shareholders of
R16,6 million for the year to 30 June 2005 (2004 restated - R11,9 million) and
headline earnings of R9,7 million (2004 restated - R11,8 million).
The results include headline earnings for three months to the end of September
2004 from ELB McWade of R2,6 million, and an abnormal capital profit of R6,5
million realised by the ELB Group on the disposal of its 80% interest in ELB
McWade.
ELB Equipment Holdings made headline earnings, before the adjustments detailed
in the segment analysis, of R16,8 million, versus R15,8 million restated in
2004.
ELB Timbers on the other hand made a headline loss, before the adjustments
detailed in the segment analysis, of R6,8 million versus R11,2 million restated
in 2004. This reduced loss is largely a result of turnover having increased from
R55,0 million in 2004 to
R87,0 million in 2005.
PROSPECTS
ELB Equipment Holdings has budgeted for an improved performance for the year
ended June 2006.
ELB Timbers has recently increased its plywood production capacity, relocated
its furniture components factory and improved sales of its particle board
products. As a result ELB Timbers has budgeted for a further increase in
turnover.
ELB Group has budgeted for an increase in headline earnings for the coming
financial year.
DIRECTORATE
Mr T de Bruyn was appointed to the board of directors on 15 July 2005.
ACCOUNTING POLICIES
The Group has implemented International Financial Reporting Standards (IFRS)
retrospective to 1 July 2003 and the comparatives for 2004 have been restated
accordingly. Details of the changes resulting from the adoption are set out in a
separate statement included in this provisional results announcement.
Except for the implementation of IFRS the accounting policies are consistent
with those applied in 2004 and comply with IFRS and the South African Companies
Act, Act 61 of 1973, as amended.
REVIEW BY THE INDEPENDENT AUDITORS
The financial statements set out in this provisional report have been reviewed,
but not audited, by the Group`s auditors, KPMG Inc. Their unqualified review
report is available for inspection at the Group`s registered office.
DIVIDENDS
The final dividend, as previously indicated, has been reduced from 20 cents in
2004 to 5 cents in 2005 reflecting the rebuild phase the ELB Group has entered.
The total dividend for the year is therefore 10 cents per share versus 30 cents
per share for the 2004 financial year.
On behalf of the Board
WGL Bateman AG Fletcher
Chairman Executive Deputy Chairman
Boksburg
22 September 2005
DIVIDENDS
The directors have declared the following final dividends for the year ended 30
June 2005.
PREFERENCE DIVIDEND NUMBER 109
A final dividend has been declared at the rate of 6% per annum for the six month
period on the 6% fixed cumulative redeemable preference shares of R2 each,
equivalent to 6 cents per share.
ORDINARY DIVIDEND NUMBER 115
A final dividend of 5 cents per share has been declared on the ordinary shares.
The salient dates in respect of both dividends are:
Date of declaration Friday, 23 September 2005
Last day to trade cum dividend Friday, 14 October 2005
Shares commence trading ex dividend Monday, 17 October 2005
Record date Friday, 21 October 2005
Date of payment Monday, 24 October 2005
Shares may not be dematerialised or rematerialised between Monday, 17
October 2005, and Friday, 21 October 2005, both dates inclusive.
By order of the Board
DG Jones Boksburg
Secretary 22 September 2005
IMPLEMENTATION OF IFRS
The ELB Group has implemented IFRS retrospective to 1 July 2003. The changes
occurring with the adoption are noted below. Retrospective adjustments to the
Group`s deferred tax assets were not made; as such changes would have been
minor. There was no effect on the Group cash flow.
Property, plant and equipment
Useful lives and residual values of certain items of property, plant and
equipment were revised, following the criteria of IAS 16.
The result was to reduce equity and reduce the carrying amount of property,
plant and equipment by R11 000 at 1 July 2003, and to increase equity and
increase the carrying amount of the assets by R401 000 at 30 June 2004. The
effect in the 2004 financial year was a reduction of R412 000 in the
depreciation expense.
Impairment tests were performed on those items of property, plant and equipment
evidencing impairment indicators, but no impairment recognitions were necessary.
Goodwill
The Group previously reported an amount of R1 627 000 as goodwill in the balance
sheet at 30 June 2004, being the amount carried by the Group`s 80% held
subsidiary, ELB McWade Electrical (Pty) Limited (McWade) at that time. It is
considered that the goodwill is more accurately allocable to the plant and
equipment in the business acquired by McWade and to which business the goodwill
was attributed. The useful lives of the goodwill and the said plant and
equipment were both five years with no residual value. Accordingly a
reallocation from intangible assets to property, plant and equipment of R1 627
000 has been made to the 2004 balance sheet amounts previously reported. An
amortisation expense of R543 000 in 2004 is now included in the depreciation
expense for that year. There is no change to the equity. The 80% interest in
McWade was sold with effect from 30 September 2004.
No impairment indicators were manifest in the plant and equipment under
discussion and no impairment losses were recognised.
Operating lease expenses
In accordance with the requirements of IAS 17 operating lease expenses are now
accounted for on a straight line basis over the tenure of the leases. The effect
was to reduce equity and increase other current liabilities by R24 000 at 1 July
2003, and reduce equity and increase other current liabilities by R190 000 at 30
June 2004, as compared to amounts previously reported. The effect in the 2004
financial year was an additional expense of R166 000.
Share based payments
Share options were granted to several employees on 15 November 2002 under the
employee share incentive schemes. In accordance with IFRS 2 the Group now
recognizes an expense in the income statement over the vesting period of the
options. The share incentive schemes have sufficient shares in stock, which are
included in treasury shares on consolidation, to cover the vested portion of the
unexercised options and therefore the options do not change the components of
equity. The accrual of the expense in respect of the vested portion of
unexercised options is carried in other current liabilities. The result of the
implementation was to reduce equity and increase other current liabilities by
R40 000 at
1 July 2003, and reduce equity and increase other current liabilities by R67 000
at 30 June 2004, as compared to amounts previously reported. The effect in 2004
was an additional expense of R27 000.
Translation adjustments
The Revised IAS 21 has introduced functional currency as the determinant for
reflecting translation adjustments through the income statement. All the Group`s
foreign operations have foreign functional currencies and therefore all
translation adjustments are now recorded as direct changes in reserves. Last
year`s translation loss of R13 622 000 on the foreign treasury cash, previously
reported in the income statement, has been restated as a direct change in
reserves in the statement of changes in ordinary shareholders equity.
Deferred tax on foreign treasury reserves
As disclosed in the 2004 annual financial statements, management had prudently
in the past raised a deferred tax liability on the foreign treasury reserves.
The deferred tax was reversed at 30 June 2004 following the enactment of
legislation regarding the tax exemption of foreign dividends. The fluctuating
exchange rate was the major influence on these reserves and consequently on the
amount of the deferred tax liability. With the translation adjustments on the
reserves now restated as direct changes in reserves, the deferred tax changes
have been similarly reflected. The 2004 reduction in deferred tax liability of
R4 087 000 on the foreign treasury reserves has been restated as a direct change
in retained profit in the statement of changes in ordinary shareholders equity.
The reversal of R14 071 000 at 30 June 2004, of the deferred tax liability on
the foreign treasury reserves, has been treated in the same way.
Discontinued Operations
In accordance with the requirements of IFRS 5, the net profit attributable to
discontinued operations is reported as a line item in the income statement.
Directors
WGL Bateman (Chairman)*, AG Fletcher (Executive Deputy Chairman), PJ Blunden, T
de Bruyn*, JC Hall*, Dr JP Herselman*, MV Ramollo, RGH Smith*
*Non executive
REGISTERED OFFICE
ELB Equipment
14 Atlas Road, Boksburg North, 1459
SHARE TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107
SPONSOR
Rand Merchant Bank
(a division of FirstRand Bank Limited)
1 Merchant Place, Cnr Fredman Drive & Rivonia Road
Sandton, 2196
Date: 23/09/2005 11:03:44 AM
Produced by the JSE SENS Department
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