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ELR ELRP
ELR
Elb Group Limited - Unaudited Interim Report And Dividend Announcement
ELB GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number 1930/002553/06
Share codes: ELR & ELRP
ISIN: ZAE000035101 & ZAE000035333
UNAUDITED INTERIM REPORT AND DIVIDEND ANNOUNCEMENT
for the six months ended 31 December 2005
Group Income statement
Unaudited
Unaudited Six months Audited
Six months ended Year
ended 31 Dec 04 ended
31 Dec 05 (restated) 30 June 05
R000 R000 R000
Continuing operations
Sales revenue 318 563 251 393 551 261
Net operating costs excluding
depreciation (303 456) (244 877) (538 492)
Operating profit before depreciation
and abnormal items 15 107 6 516 12 769
Depreciation (3 009) (3 346) (6 484)
Operating profit before abnormal
items 12 098 3 170 6 285
Abnormal items as detailed below (1 054) (1 999) (2 829)
Profit from operations 11 044 1 171 3 456
Treasury income 3 449 3 734 8 155
Interest paid (2 354) (2 117) (3 582)
Profit before tax 12 139 2 788 8 029
Income tax expense (5 143) (3 723) (477)
Net profit/(loss) from continuing
operations 6 996 (935) 7 552
Discontinued operation
Net profit from discontinued
operation - 9 698 9 707
Net profit 6 996 8 763 17 259
Attributable to:
Minority interest
Continuing operations (102) (41) (3)
Discontinued operation - 638 647
(102) 597 644
Ordinary shareholders 7 098 8 166 16 615
6 996 8 763 17 259
ABNORMAL ITEMS
Capital item
Profit on disposal of portion of
interest in subsidiary - 62 63
Trading items
Relocation of operations (925) (966) (1 781)
Interest on revised tax assessments
of subsidiary (113) (661) (697)
Input value added tax (VAT) dispute - (341) (305)
Interest on VAT dispute (16) (93) (109)
Net abnormal items: net expense (1 054) (1 999) (2 829)
NET PROFIT FROM DISCONTINUED
OPERATION
Disposal of ELB McWade
Net profit of ELB McWade for the
three months to the date of disposal - 3 199 3 247
Profit attributable to the ELB Group
on disposal - 6 499 6 460
Net profit from discontinued
operation - 9 698 9 707
GROUP BALANCE SHEET
Unaudited
Unaudited 31 Dec 04 Audited
31 Dec 05 (restated) 30 Jun 05
R000 R000 R000
Assets
Non current assets 56 347 41 779 50 859
Property, plant and equipment 41 935 29 273 36 632
Deferred rent expense 3 459 3 842 3 659
Deferred tax assets 10 953 8 664 10 568
Current assets 322 036 356 153 368 241
Inventories and contracts in progress
193 364 186 161 194 400
Debtors and prepayments 44 339 50 332 48 405
Income tax overpaid 1 067 108 991
Cash and cash equivalents 83 266 119 552 124 445
Total assets 378 383 397 932 419 100
EQUITY AND LIABILITIES
Ordinary shareholders equity 166 059 151 708 163 370
Issued capital 25 192 25 192 25 192
Treasury shares (23 325) (23 377) (23 366)
Reserves (16 803) (18 291) (13 721)
Retained profit 180 995 168 184 175 265
Preference shares 8 8 8
Minority interest 105 170 207
Total equity 166 172 151 886 163 585
Non current liabilities 12 483 8 526 10 145
Interest bearing borrowings 11 432 7 296 9 025
Deferred tax liabilities 1 051 1 230 1 120
Current liabilities 199 728 237 520 245 370
Creditors and accruals 160 884 175 022 179 807
Interest bearing creditors 34 329 32 271 40 903
Income tax payable 4 515 9 564 3 681
Short term borrowings and bank
overdrafts - 20 663 20 979
Total equity and liabilities 378 383 397 932 419 100
Ordinary shares in issue (000"s) 33 860 33 860 33 860
Deduct: Treasury shares in issue
(000"s) 6 494 6 505 6 505
Ordinary shares in issue on which net
asset value
per share is calculated 27 366 27 355 27 355
Net asset value per share (cents) 607 555 597
Capital commitments
At 31 December 2005 there were capital commitments of R36 000
(31 December 2004 - R1 135 000, 30 June 2005 - R4 388 000).
RECONCILIATION OF GROUP HEADLINE EARNINGS
Unaudited
Unaudited Six months Audited
Six months ended Year
ended 31 Dec 04 ended
31 Dec 05 (restated) 30 June 05
R000 R000 R000
Net profit attributable to ordinary
shareholders
per the income statement 7 098 8 166 16 615
Deduct: Capital items as below: 128 6 671 6 928
Capital items detailed in the income
statement:
Profit on disposal of portion of
interest in subsidiary - 62 63
Profit on disposal of interest in ELB
McWade - 6 499 6 460
Profit on disposal of plant and
equipment:
Included in operating profit before
abnormal items 181 138 592
Included in net profit of
discontinued operation - 37 37
Income tax effect of capital items (53) (52) (207)
Minority interest in capital items - (13) (17)
Headline earnings 6 970 1 495 9 687
Weighted average number of shares
(excluding treasury shares) on which
basic earnings per share are
based (000"s) 27 356 27 319 27 337
Earnings per ordinary share (cents)
- basic 25,9 29,9 60,8
- fully diluted 25,9 29,8 60,7
Headline earnings per ordinary share
(cents)
- basic 25,5 5,5 35,4
- fully diluted 25,5 5,5 35,4
Dividends declared in respect of the
current period, per ordinary share
(cents) 5 5 10
GROUP CASH FLOW STATEMENT
Unaudited
Unaudited Six months Audited
Six months ended Year
ended 31 Dec 04 ended
31 Dec 05 (restated) 30 June 05
R000 R000 R000
Continuing operations
Cash outflow from operating
activities
before dividends paid (10 067) (15 300) (5 622)
Dividends paid (1 368) (5 461) (6 829)
Cash outflow from operating
activities (11 435) (20 761) (12 451)
Cash (outflow)/inflow from investment
activities (8 131) 19 976 9 933
Cash (outflow)/inflow from financing
activities (634) 6 724 13 034
Net cash (outflow)/inflow from
continuing operations (20 200) 5 939 10 516
Discontinued operation
Net cash inflow of discontinued
operation - 3 772 3 772
(Decrease)/increase in net cash and
cash equivalents (20 200) 9 711 14 288
Net cash and cash equivalents at the
beginning of the period 103 466 97 368 97 368
Cash and cash equivalents of
subsidiary on disposal - (8 190) (8 190)
Net cash and cash equivalents at the
end of the period 83 266 98 889 103 466
The net proceeds from the disposal of the interest in subsidiary ELB
McWade of R29 509 000 is included in the cash flow from investment
activities of the continuing operations in the six months ended 31
December 2004 and the year ended 30 June 2005.
SEGMENT ANALYSIS
Unaudited
Unaudited Six months Audited
Six months ended Year
ended 31 Dec 04 ended
31 Dec 05 (restated) 30 June 05
R000 R000 R000
Sales revenue
Continuing operations
ELB Equipment Holdings 268 119 209 540 464 338
ELB Timbers 50 444 41 853 86 923
Total continuing operations 318 563 251 393 551 261
Discontinued operation
ELB McWade - 23 366 23 366
Total 318 563 274 759 574 627
HEADLINE EARNINGS/(LOSS)
Continuing operations
ELB Equipment Holdings 12 012 4 531 16 824
ELB Timbers (3 988) (3 515) (6 824)
Continuing operations before
adjustments below 8 024 1 016 10 000
ELB Equipment Holdings (1 054) (1 095) (1 111)
Abnormal trading items:
Relocation of operation (925) - -
Interest on revised tax assessments
of subsidiary (113) (661) (697)
Input value added tax (VAT) dispute - (341) (305)
Interest on VAT dispute (16) (93) (109)
ELB Timbers
Abnormal trading item:
Relocation of factory - (966) (1 781)
Total continuing operations 6 970 (1 045) 7 108
Discontinued operation
ELB McWade - 2 540 2 579
Headline earnings 6 970 1 495 9 687
Capital items
Continuing operations 128 151 447
Profit on disposal of interest in ELB
McWade - 6 499 6 460
Discontinued operation - 21 21
Net profit attributable to ordinary
shareholders 7 098 8 166 16 615
GROUP STATEMENT OF CHANGES IN EQUITY
Total
ordinary
Issued Treasury Retained shareholders
capital shares Reserves profit equity
R000 R000 R000 R000 R000
Balance at the
beginning of the period
25 192 (23 366) (13 721) 175 265 163 370
Changes in treasury
shares
Decrease in share
incentive trusts loan
accounts 41 41
Changes in reserves
Translation adjustments
(3 082) (3 082)
Changes in retained
profit
Net profit for the
period attributable to
ordinary shareholders 7 098 7 098
Final ordinary dividend
for the previous year
(1 368) (1 368)
Interim ordinary
dividend for the
current year - -
Changes in minority
interest
Net (loss)/profit
attributable to
minority interest
Disposal by the ELB
Group of portion of
interest in subsidiary
Disposal by the ELB
Group of interest
in subsidiary
Balance at the end of
the period 25 192 (23 325) (16 803) 180 995 166 059
GROUP STATEMENT OF CHANGES IN EQUITY (continued)
Unaudited
Unaudited total Audited
total equity total
Preference Minority equity (restated) equity
shares interest 31 Dec 05 31 Dec 04 30 Jun 05
R000 R000 R000 R000 R000
Balance at the
beginning of the period
8 207 163 585 152 676 152 676
Changes in treasury
shares
Decrease in share
incentive trusts loan
accounts 41 186 197
Changes in reserves
Translation adjustments
(3 082) (373) 4 197
Changes in retained
profit
Net profit for the
period attributable to
ordinary shareholders
7 098 8 166 16 615
Final ordinary dividend
for the previous year
(1 368) (5 461) (5 461)
Interim ordinary
dividend for the
current year - - (1 368)
Changes in minority
interest
Net (loss)/profit
attributable to
minority interest (102) (102) 597 644
Disposal by the ELB
Group of portion of
interest in subsidiary
49 48
Disposal by the ELB
Group of interest
in subsidiary (3 954) (3 963)
Balance at the end of
the period 8 105 166 172 151 886 163 585
COMMENTS
INTRODUCTION
ELB is an investment holding company with two investments namely ELB Equipment
Holdings and ELB Timbers.
FINANCIAL RESULTS
The results for the six months to 31 December 2005 reflect headline earnings of
R7,0 million (2004 - R1,5 million).
ELB Equipment Holdings traded satisfactorily for the period reporting headline
earnings of R11,0 million (2004 - R 3,4 million). Turnover for the period was
R268,1 million (2004 - R209,5 million). The ELB Equipment division had a good
six months, achieving budget. Ditch Witch Australia is currently trading ahead
of budget while ELB Engineering Services made excellent progress in obtaining
new business during the period.
ELB Timbers reported a headline loss of R4,0 million (2004 - loss R4,5 million).
During the period the price of timber increased by more than 30 per cent and the
Rand remained strong. Turnover increased from R41,9 million in the comparative
six months to R50,4 million.
PROSPECTS
ELB Equipment Holdings is expected to have a good second six months with ELB
Equipment and Ditch Witch Australia maintaining current levels of profitability,
while ELB Engineering Services is expected to further increase its order book
and begin to contribute to profitability.
ELB Timbers should start to see the benefit of its increased veneer and plywood
capacity with a commensurate improvement in turnover. The strong Rand has
necessitated a rationalisation of the furniture components division so as to
eliminate losses. The board plant in Malelane is exploring an alternate feed
stock to sugar cane bagasse in order to secure its long term future. The future
of ELB Timbers is dependent on it being able to show an acceptable level of
profitability within a reasonable period of time.
DIVIDENDS
An interim dividend of 5 cents (2004 - 5 cents) per ordinary share has been
declared.
ACCOUNTING POLICIES
Accounting policies accord with the South African Companies Act and
International Financial Reporting Standards (IFRS), and are consistent with
those applied in the financial year ended 30 June 2005. The previous interim
report for the six months ended 31 December 2004 was prepared in accordance with
South African Statements of Generally Accepted Accounting Practice (GAAP). The
previously reported amounts have been restated in accordance with IFRS, and
explanations of the changes are contained in this report.
On behalf of the Board
WGL Bateman AG Fletcher
Chairman Executive Deputy Chairman
Boksburg
16 March 2006
IMPLEMENTATION OF IFRS - EFFECTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004
As announced in the 2005 annual report, the ELB Group implemented IFRS
retrospective to 1 July 2003. The changes occurring with the adoption to the
balance sheets at 1 July 2003 and 30 June 2004 and to the income statement for
the year ended 30 June 2004 were noted in that report. There was no effect on
the Group cash flow.
The changes to the financial statements for the six months ended 31 December
2004 and the balance sheet at that date, in respect of the implementation of
IFRS, are summarised below.
Property, plant and equipment
Following the revision of useful lives and residual values of certain items of
property, plant and equipment, depreciation expense was reduced by R202 000 for
the six months ended 31 December 2004 and the carrying amount of property, plant
and equipment at 31 December 2004 was increased by R603 000.
Goodwill
Goodwill carried in the discontinued operation was reallocated to the plant and
equipment in the business acquired by the discontinued operation, and to which
business the goodwill had been attributed. In the results of the discontinued
operation an amount of R135 000 in the six months ended 31 December 2004,
previously reported as goodwill amortisation, is now reported as depreciation.
This change affects the previously reported headline earnings but does not
affect the net profit. There was a 20% minority interest in the discontinued
operation.
Deferred rent expense
Expenses incurred at the commencement of an operating lease are being written
off on a straight line basis over the period of the lease, which is ten years.
The carrying amount of the expense at 31 December 2004 of R3 842 000 was
previously included in debtors and prepayments under current assets, but is now
more appropriately reflected as a separate non current asset. The additional
deferred rent cash outlay in the six months ended 31 December 2004 of R158 000
was previously included in the cash flow from operating activities but is now
restated in the cash flow from investment activities in the cash flow statement,
to be consistent with the treatment in the 2005 financial statements.
Operating lease expenses
The straight line accounting for operating lease expenses resulted in an
increase in operating costs of R53 000 in the six months ended 31 December 2004
and an increase in current liabilities of R243 000 at 31 December 2004.
Share based payments
Share options granted to employees are expensed over the vesting period of the
options. In the six months ended 31 December 2004 an expense of R3 000 was
recognised and a reversal to income was made of R60 000 in respect of options
exercised where the expense had been accrued previously. Current liabilities at
31 December 2004 were increased by R10 000 in respect of the vested portion of
unexercised options.
Translation adjustments
With the introduction of functional currency as the determinant for the
treatment of translation adjustments, the translation loss of R1 266 000 on
foreign treasury cash in the six months ended 31 December 2004, previously
reflected in the income statement, is now reported in the statement of changes
in equity as a change in reserves. In addition a separate translation gain of
R893 000 in the same period, previously disclosed as a change in retained profit
in the statement of changes in equity, is now included with the translation loss
mentioned above as a change in reserves in the same statement. At 31 December
2004 retained profit was increased by R19 041 000 and reserves were decreased by
the same amount in respect of net translation losses since 1 July 2003. In the
cash flow statement for the six months ended 31 December 2004 the translation
loss of R1 266 000 on foreign treasury cash was previously included as a cash
outflow from operating activities, but is now included as a cash outflow from
financing activities in line with the treatment of other translation
adjustments.
Discontinued operations
The results of continuing and discontinued operations are now separated in the
income statement, with the net profit or loss from discontinued operations being
reported as a line item therein. The comparatives in the income statement for
the six months ended 31 December 2004 have been adjusted accordingly. In the
cash flow statement the continuing and discontinued operations are now also
separated.
DIVIDENDS
The directors have declared the following interim dividends for the six month
period ended 31 December 2005.
PREFERENCE DIVIDEND NUMBER 110
An interim dividend at the rate of 6% per annum has been declared on the 6%
fixed cumulative redeemable preference shares of R2 each, equivalent to 6 cents
per share.
ORDINARY DIVIDEND NUMBER 116
An interim 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 Thursday, 16 March 2006
Last day to trade cum dividend Wednesday, 12 April 2006
Shares commence trading ex dividend Thursday, 13 April 2006
Record date Friday, 21 April 2006
Date of payment Monday, 24 April 2006
Shares may not be dematerialised or rematerialised between Thursday, 13 April
2006 and Friday, 21 April 2006, both dates inclusive.
By order of the Board
DG Jones
Secretary
Boksburg
16 March 2006
REGISTERED OFFICE
ELB Equipment,
14 Atlas Road,
Anderbolt,
Boksburg,
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
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
Date: 16/03/2006 05:01:09 PM Produced by the JSE SENS Department
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