| Wed 28 Sep 2005, 17:42 | | Excellerate Holdings Limited - Audited Results For |
|
Excellerate Holdings Limited - Audited Results For The Year Ended 30 June 2005
EXCELLERATE HOLDINGS LIMITED
Registration number 1997/009884/06
JSE code: EXL ISIN: ZAE000026092
EXLD ISIN: ZAE000044145
(Incorporated in the Republic of South Africa)
Audited results
for the year ended 30 June 2005
Revenue +36%
Operating profit +69%
Earnings per share +93%
Overview
The past financial year has been a mix of good results in the group in general
and an unexpected poor result from the food trading division. There has been
particularly strong performance in the catering equipment business, Foodserv, as
well as the parking business, Interpark. Foodserv has made every effort to
bolster its production capabilities and has a full order book for the remainder
of the year. Interpark has thoroughly applied best practice to reduce
unnecessary costs and streamline the business into an effective and efficient
professional parking management business nationally. The Housewares division
continues to perform well with Goldenmarc achieving good results.
The main disappointment for this past financial year has been Ibiza Trading, the
group`s food trading division comprising the Alpine Importers, Fruti Flow and HS
Nuts businesses. It came to the attention of the group shortly after the
financial year end that certain irregularities had occurred at the Ibiza Trading
division and as a consequence thereof it was decided that a change in the
management team of Ibiza Trading was necessary. Despite these unforeseen events,
the consequences of which will unfold on a legal level over the next few months,
the outlook for the food trading division is positive under the leadership of
the new management team who emanate from within the Excellerate group.
With new management in Ibiza Trading and prospects of a positive result in the
2006 financial year coupled with good performance in the rest of the group, 2006
promises to present more opportunities for good results and continued growth.
Exceptional events
The HS Nuts business of Ibiza Trading appeared to be achieving good results
during the first half of the financial year, but after the end of the financial
year in July 2005 it was discovered that inappropriate expenditure had been
incurred and irregular transactions had been conducted during the course of the
financial year and thereafter up to the date of discovery. These matters have
been subjected to a forensic investigation. Upon being confronted with these
matters, the former senior management resigned. All avenues are being explored
to recover funds that have been inappropriately applied, including perfecting
the securities held by the group and all other avenues available to the group.
The group has suffered the loss of an estimated R8,5 million (of which R1,2
million will impact the 2006 financial year) due to these events. Recovery of
the shortfall between actual losses and a profit warranty of R8,0 million given
by the vendor is still under investigation. The 49,5% shares as well as the loan
accounts that stood to the credit of the vendor company have since been ceded
back to the group whilst the remainder of the claim is being formulated.
Review of operating results
The group`s revenue increased by 36,2% to R535,9 million largely due to the
inclusion of HS Nuts` turnover from 1 July 2004. Operating profits increased by
68,7% to R28,3 million compared to R16,8 million in 2004. This increase was due
largely to the improved trading results and cost-cutting exercises but was
before an impairment for accounting purposes to recognise potential non-recovery
of losses incurred in Ibiza Trading.
The Housewares trading division comprising Goldenmarc, Hypertrade, Louis Smiedt
and Ferrengi, performed well. Goldenmarc acquired the business of Travelscene,
supplying luggage and related products under some powerful brand names including
the AA and the Bad Boy and Bad Girl trademarks. Goldenmarc also acquired the
furniture kits business of Gaflax to add to its range of similar products. The
full benefits of these acquisitions will only be felt for the first time in 2006
as sales orders start to achieve full potential. The manufacturing concern of
Ferrengi producing pot scourers and steel wool products has increased its
production capacity with the acquisition of additional plant and continues to
have a strong demand for its products.
Foodserv continues to grow its manufacturing and import trading activities at an
exceptional rate with several exciting projects in the pipeline to come on
stream in 2006. With the acquisition of new capital equipment during 2005, the
business has seen a rapid expansion of its production capabilities and continues
to experience a very healthy demand for its products. Foodserv acquired the
business of Outdoor Cooling during the second half of the financial year, which
is likely to start yielding financial benefits early in the 2006 financial year.
Interpark has improved its results significantly through cost-cutting and
improving on its service delivery by providing a professional and streamlined
parking management service to its clients. Interpark`s challenge will be to
continue to be the service provider of choice, which it has achieved due to its
sophisticated controls which ensure its clients achieve the best parking
management results in the industry.
Levingers had a good year, opening three new stores in the Pretoria and
Johannesburg areas. In addition it took over the remaining two franchise stores
and now consists completely of corporate stores. The new accounting
interpretation to amortise lease rentals on a straight-line basis over the term
of the lease has adversely impacted on the accounting result for 2005. There are
a number of interesting projects currently under way for Levingers to grow its
business in 2006.
Sterikleen, together with Autoclenz and working hand-in-hand with Katanga
Property Care and Katanga Autocare, its BEE partners, has managed to stay ahead
despite strong competition. The business has won the award of a contract for a
large client country-wide which is due to be rolled out in October 2005. The
office plant rental business, Greenmachine, has been turned into a
professionally run operation with very promising prospects looking forward.
Ibiza Trading has, as noted above, had its fair share of challenges. The
acquisition of the HS Nuts business effective 1 July 2004 increased the
division`s revenue significantly and has created greater critical mass in the
business, but rationalisation of this business with the Alpine Importers and
Fruti Flow businesses has taken longer than expected and the combined business
has yet to achieve its potential. In October 2005 the entire division will
relocate its various operations into one common warehouse which is expected to
accelerate the integration of the businesses and lead to greater cost reductions
and efficiencies. Prices in the retail sector were kept under pressure resulting
in lower absolute margins. Higher commodity prices adversely affected margins in
the trading of tree nuts during the second half of the financial year. The new
management team is in the process of implementing plans to ensure that trading
results are improved in the division and that the business is properly
positioned for growth.
Other factors affecting results
Earnings per share increased by 93,0% due largely to the new accounting
statements that discontinue the amortisation of certain intangible assets, while
headline earnings only increased marginally. The new interpretation of
accounting for operating lease rentals resulted in an adverse prior year
adjustment to the extent of R0,7 million after deferred tax and current year`s
income was reduced by R0,3 million after deferred tax. These amounts will
reverse out in future years.
Black economic empowerment
In line with the latest draft Code of Good Practice on Broad-Based Black
Economic Empowerment issued by the Department of Trade and Industry, the group
is actively pursuing negotiations with a consortium of very promising black
entrepreneurs. On 7 September 2005, the group published an announcement in this
regard. It is expected that on the successful conclusion of a BEE transaction,
the new partners will provide real economic benefits to the group over the years
to come.
Future prospects
The outlook for the next financial year is positive across the group`s various
divisions and the food trading business` problems that have persisted over the
past two years in various forms still leave some challenge to completely resolve
in the months ahead with the restructuring that is currently under way under the
new management team.
Effective 1 July 2005, the group sold its interests in Securipark, a small part
of the parking business, as it was not considered core to the group and not in
line with the group`s strategy. There are several prospects for acquisitions
looking forward and every opportunity will be rigorously pursued to achieve
sound growth for the group to the benefit of all stakeholders.
Changes to the board
On 5 May 2005, the board appointed Mr. Michael Mohohlo as an independent non-
executive director in line with its objectives to have greater representation by
independent directors. Michael comes with a great wealth of experience and
wisdom and will no doubt contribute to the group through his insight into
business.
Dividends
Congruent with the group`s current strategy, 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 selective acquisitions as well as to
service the current working capital requirements of the group.
For and on behalf of the board
C Hall
Chief Executive Officer
20 September 2005
Basis of preparation of results
The financial information contained in this announcement has been audited by
Grant Thornton. A copy of their unqualified audit opinion is available for
inspection at Excellerate`s registered office.
This profit announcement has been prepared in compliance with the listings
requirements of the JSE Limited (`the JSE`).The accounting policies of the
Excellerate group comply with South African Statements of Generally Accepted
Accounting Practice. Such policies are in all material respects consistent with
those applied in the preparation of unqualified audited financial statements for
the year ended 30 June 2004, except for the adoption of AC129 `Intangible
Assets` and AC140 `Business Combinations`.
AC129 requires that intangible assets with an indefinite life should not be
amortised. The useful life of such an asset should be reviewed at each reporting
period to determine whether events and circumstances continue to support an
indefinite useful life assessment for that asset. Attributable earnings for the
comparative year ended 30 June 2004 includes amortisation of intangible assets.
AC140 requires that goodwill acquired in a business combination be measured,
after initial recognition, at cost less any accumulated impairment losses.
Consequently goodwill is not amortised but instead must be tested for impairment
annually, or more frequently, if events or changes in circumstances indicate
that it might be impaired. Attributable earnings for the comparative year ended
30 June 2004 includes amortisation and impairment of goodwill.
Group income statement
Audited (as
Audited previously
for the year ended 30 June Audited (restated) reported)
R`000 2005 2004 2004
Revenue 535 923 393 370 393 370
Cost of revenue (376 145) (268 066) (268 066)
Gross profit 159 778 125 304 125 304
Other operating costs (131 469) (108 522) (108 297)
selling and distribution (34 277) (30 254) (30 254)
administration (97 192) (78 268) (78 043)
Operating profit before 28 309 16 782 17 007
foreign exchange profit
Foreign exchange profit 348
Operating profit 28 309 16 782 17 355
Income from associates 1 323 1 181 1 181
Impairment of goodwill (445) (3 436) (3 436)
Amortisation of goodwill - (3 073) (3 073)
Fair value adjustment on loan (3 271) - -
accounts
Revaluation of compulsory 123 2 864 2 864
convertible debentures
liability
Profit from operations 26 039 14 318 14 891
Net interest paid (4 120) (4 357) (4 357)
Profit before taxation 21 919 9 961 10 534
Taxation (7 191) (2 245) (2 411)
Profit after taxation 14 728 7 716 8 123
Attributable to minority (61) (105) (105)
shareholders
Profit attributable to 14 667 7 611 8 018
ordinary shareholders
Earnings per share (cents) 8,3 4,3 4,5
Fully diluted basic earnings 6,7 2,9 3,1
per share (cents)
Group statement of changes in equity
for the year ended 30 June Share Share convertible
R`000 capital premium debentures
Balance at 30 June 2003 (audited)
as previously reported 1 786 53 605 18 641
Prior year adjustment**
Restated balance at 30 June 2003
(audited) 1 786 53 605 18 641
Derivative portion of compulsory
convertible debentures - 0 (2 206)
Share based payment transactions - - -
Net profit for the year - - -
Balance at 30 June 2004 (audited)* 1 786 53 605 16 435
Repurchase of shares (55) (3 853) -
Derivative portion of compulsory
convertible debentures - - 2 206
Share based payment transactions - - -
Net profit for the year - - -
Balance at 30 June 2005 (audited) 1 731 49 752 18 641
* The balances for retained income
at 30 June 2004 are reconciled
as follows:
Balance as previously reported 1 786 53 605 16 435
Prior year adjustments**
Restated balance at 30 June 2004
(audited) 1 786 53 605 16 435
Compulsory Non-
for the year ended 30 June distributable Retained
R`000 reserves earnings Total
Balance at 30 June 2003
(audited)
as previously reported 17 700 19 951 111 683
Prior year adjustment** (232) (232)
Restated balance at 30 June 2003
(audited) 17 700 19 719 11 1451
Derivative portion of compulsory
convertible debentures - - (2 206)
Share based payment transactions 315 - 315
Net profit for the year - 7 611 7 611
Balance at 30 June 2004 18 015 27 330 117 171
(audited)*
Repurchase of shares - - (3 908)
Derivative portion of compulsory
convertible debentures - - 2 206
Share based payment transactions 772 - 772
Net profit for the year - 14 667 14 667
Balance at 30 June 2005 18 787 41 997 130 908
(audited)
* The balances for retained
income
at 30 June 2004 are reconciled
as follows:
Balance as previously reported 18 015 27 969 117 810
Prior year adjustments** (639) (639)
Restated balance at 30 June 2004
(audited) 18 015 27 330 117 171
** Prior year adjustment due to accounting for operating leases on a straight-
line basis.
Group balance sheet
Audited (as
Audited previously
at 30 June Audited (restated) reported)
R`000 2005 2004 2004
ASSETS
Non-current assets 90 344 85 496 85 235
Property, plant and equipment 22 529 16 292 16 292
Long-term loan 173 - -
Investment in associates 3 234 4 034 4 034
Intangible assets 53 358 51 066 51 066
Deferred taxation 11 050 14 104 13 843
Current assets 179 781 133 403 133 403
Inventories 84 780 50 511 50 511
Accounts receivable 89 492 71 343 71 343
Taxation 3 994 3 424 3 424
Bank and cash 1 515 8 125 8 125
Total assets 270 125 218 899 218 638
EQUITY AND LIABILITIES
Capital and reserves
Share capital 1 731 1 786 1 786
Share premium 49 752 53 605 53 605
Compulsory convertible 18 641 16 435 16 435
debentures
Non-distributable reserves 18 787 18 015 18 015
Retained earnings 41 997 27 330 27 969
Ordinary shareholders` interest 130 908 117 171 117 810
Outside shareholders` interest 665 604 604
Total shareholders` interest 131 573 117 775 118 414
Non-current liabilities 9 267 9 478 9 478
Current liabilities 129 285 91 646 90 746
Accounts payable 108 824 84 059 83 159
Current portion of long-term 7 145 4 182 4 182
liabilities
Taxation 3 024 2 554 2 554
Bank overdrafts 10 292 851 851
Total equity and liabilities 270 125 218 899 218 638
Summarised group cash flow statement
for the year ended 30 June Audited Audited**
R`000 2005 2004
Cash flows from operating activities 10 994 14 917
Cash generated by operations 21 420 29 198
Net interest paid (6 183) (6 576)
Taxation paid (4 243) (7 705)
Cash flows from investing activities (26 759) (12 505)
Cash flows from financing activities (286) (942)
Net (decrease)/increase in cash and cash (16 051) 1 470
equivalents
Cash and cash equivalents at beginning of 7 274 5 804
year
Cash and cash equivalents at end of year (8 777) 7 274
** There has been no effect on cash flows for the prior year adjustment.
Calculation of earnings per share
Audited (as
for the year ended 30 June Audited Audited previously
(restated) reported)
R`000 2005 2004 2004
Weighted average shares in 175 868 512 178 642 162 178 642 162
issue for the year
Fully diluted weighted 227 394 485 232 808 829 232 808 829
average shares in issue
Earnings per share (cents) 8,3 4,3 4,5
Fully diluted basic 6,7 2,9 3,1
earnings per share (cents)
Headline earnings per share 8,3 7,9 8,1
(cents)
Fully diluted headline 6,6 5,7 5,9
earnings per share (cents)
The following adjustments
to income attributable to
shareholders were taken
into account in the
calculation of headline
earnings:
Attributable to ordinary 14 667 7 611 8 018
shareholders
- amortisation of goodwill - 3 073 3 073
- Impairment of 445 3 436 3 436
goodwill/investments
- net (profit)/loss on sale (728) 20 20
of property, plant and
equipment and intangibles
- Taxation effect of 167 (6) (6)
adjustments
Headline earnings 14 551 14 134 14 541
The calculation of earnings per share is based on earnings of R14 667 000 (2004:
R7 611 000 ) for the year.
The calculation of headline earnings per share is based on headline earnings of
R14 551 000 (2004: R14 134 000) for the year.
Summarised group segmental report
for the year ended 30 June Audited Audited
(restated)
R`000 2005 2004 % change
Turnover 535 923 393 370 36,2
Services 117 544 124 894 (5,9)
Trading - Distribution 418 379 268 476 55,8
Operating profit 28 309 16 782 68,7
Services 14 079 6 831 106,1
Trading - Distribution 14 230 9 951 43,0
Depreciation 7 790 6 616 17,7
Services 3 896 4 264 (8,6)
Trading - Distribution 3 894 2 352 65,5
Capital expenditure 15 078 6 835 120,6
Services 5 717 4 115 38,9
Trading - Distribution 9 361 2 720 244,2
Cash flow from operating 10 994 14 917 (26,3)
activities
Services 19 935 11 117 79,3
Trading - Distribution (1 462) 2 542 (157,5)
Corporate (7 479) 1 258 (694,5)
Cash flow from investment (26 759) (12 505) 114,0
activities
Services (5 445) (4 990) 9,1
Trading - Distribution (21 223) (7 474) 184,0
Corporate (91) (41) 122,0
Cash flow from financing (286) (942) (69,6)
activities
Services 2 262 (66) (3 527,3)
Trading - Distribution 1 360 37 3 575,7
Corporate (3 908) (913) 328,0
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* , Michael Mohohlo* (*Non-executive
directors)
COMPANY SECRETARY:
ERGoodman 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 Limited, 70 Marshall Street, Johannesburg 2001.
PO Box 61051, Marshalltown, 2107. Tel: (+27 11) 370 5000.
Fax: (+27 11) 688 7721
Date: 28/09/2005 05:41:09 PM
Produced by the JSE SENS Department
