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EXL EXLD
EXL
Excellerate - Unaudited results for the six months ended 31 December 2005
Excellerate Holdings Limited
Registration number 1997/009884/06
JSE code: EXL & ISIN: ZAE000026092
EXLD & ISIN: ZAE000044145
(Incorporated in the Republic of South Africa)
Unaudited results for the six months ended 31 December 2005
Revenue +1,5%
Net tangible assets per share +33,3%
Cash generated by operations +178,5%
Financial Overview
During the six-month period to 31 December 2005, the group performed well,
particularly in the Foodserv and Interpark businesses, apart from losses
incurred in the Food Trading division in which issues arising in the prior year
continued to affect the business.
Revenue for the six months ended 31 December 2005 increased to R301,3 million.
Net profit increased to R9,3 million after taking into account the profit on
disposal of non-core property and a gain on the disposal of the group"s interest
in Securipark in the current financial period. Headline earnings per share
decreased to 4,2 cents per share due to the operating losses incurred in the
Food Trading division. Results for the six months ended 31 December 2004 have
been restated to include adjustments as part of the group"s adoption of the new
International Financial Reporting Standards.
Cash flows generated by operations amounted to R14,0 million before taking into
account R11,2 million utilised to expand the working capital requirement. Cash
flows utilised in investing activities amounted to R7,0 million and were mainly
used for the acquisition of property, plant and equipment to the extent of R7,3
million. The net amount utilised in investing activities was reduced by the
proceeds of R0,3 million from the sale of the Securipark subsidiary and other
assets. The overall effect of these items along with R1,0 million generated by
financing activities and tax and interest payments of R4,2 million and R1,5
million respectively, was a decrease in cash and cash equivalents amounting to
R8,9 million since 30 June 2005.
The matters relating to the business of HS Nuts, where inappropriate expenditure
had been identified in July 2005 and which saw the departure of the former
management of that business, are still in the process of being resolved. The
group is making every attempt to recover amounts identified by external forensic
auditors. The group has obtained provisional judgement in its favour on an
acknowledgement of debt in this regard. In order to further mitigate losses in
this matter and to focus its time and attention on ongoing business, the group
is seeking to settle the matter.
During August 2005, the group disposed of 500 000 treasury shares held in its
subsidiary company for the purpose of meeting share option obligations. The
shares were sold at an average price of 78 cents each and the group received 50
cents per share in terms of the share options that were issued.
Operational Overview
Trading-Distribution
The Trading-Distribution segment of the business increased its revenue
marginally to R242,5 million and its operating profit declined by 43,9% to R6,5
million as a result of losses in the Food Trading division.
Foodserv, the catering equipment trading and manufacturing business, has
performed exceptionally well in this reporting period, seeing record sales in
November 2005 and continuing to enjoy strong demand for its products, which now
also includes Outdoor Cooling"s product range. The Housewares division
comprising the businesses of Goldenmarc, Hypertrade, Louis Smiedt and Ferrengi
also saw record sales in the month of November 2005 and continued to achieve
growth and good results. The business of Travelscene which was acquired in the
prior financial year has been successfully integrated into the division and is
yielding exciting results.
The Food Trading division, comprising the business formerly known as Ibiza
Trading which acquired the HS Nuts business, incurred an accounting loss of
R11,1 million before taxation for the six months to 31 December 2005 after
providing for all identified losses as a result of poor trading practices under
the former management. Changes have been put into place to down-scale and
streamline the business following its relocation to a single warehouse and the
new management team has implemented daily operational performance reporting in
order to improve trading results and working capital management. The outcome of
these efforts is expected to be positive during the second half of the financial
year, although any upside in the second half is likely to be partially offset by
the right-sizing exercise currently underway. The company has been renamed
Sunkist Distributors in recognition of the strength of its main brand.
Services
While revenue in the Services segment of the business decreased marginally to
R58,8 million, operating profits increased by 58,9% to R6,0 million. This is due
mainly to the effective cost controls in the Interpark business and improved
results in the Soft Services business of Sterikleen.
The Parking division comprising Interpark and First Park had steady revenue
before taking into account the revenue from Securipark which was sold effective
1 July 2005. Operating results have continued to improve significantly with
effective cost controls.
The Soft Services division, comprising Sterikleen and Autoclenz, has improved
its results and has successfully rolled out a new contract for a large client in
the latter part of the six-month period, as well as diversifying its product and
service offering in more specialised cleaning applications.
The Consumer Services division, comprising the Levingers Dry Clean and Shoe
Clinic business, has achieved more than 20% revenue growth for the period with
similarly improved results.
EMPOWERMENT
The group"s 49% investment in the Katanga group of companies continues to yield
increasing results with the doubling of profits for the six-month period.
Several new contracts have been secured in the Services segment. The group
continues to enjoy strong relations with its empowerment partner, Ikamva
Labantu.
On 7 September 2005, Excellerate issued a cautionary announcement to the effect
that it had entered into negotiations relating to a black economic empowerment
transaction. These discussions have advanced to a mature stage and further
announcements are expected to be made before the end of the current financial
year. The outcome of these negotiations is expected to have a beneficial impact
on the group as a whole.
PROSPECTS
Given the seasonality of the Trading-Distribution segment with its peak trading
period in the first half of the financial year, but taking into account the
losses incurred in the Food Trading division in the first half to 31 December
2005 and the prospects of eliminating those losses during the second half, this
segment"s results are expected to improve during the second half of the
financial year. The Services segment is expected to provide a steady performance
over the second half of the financial year. The group will continue to focus on
growth both organically and by acquisition. The appointments of a Chief
Financial Officer in November 2005 and a Chief Operating Officer in February
2006 are both expected to provide additional capacity for acquisitive growth and
improved operational performance.
CONTINGENT LIABILITY
As disclosed in the 2005 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 R27 794 000 have
been made over the periods 1999 to 31 December 2005, of which 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, they have objected to SARS and still await a formal
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 R1 843 000 is carried in respect of these allowances.
Accounting Policies
The financial information contained in this announcement for the half year ended
31 December 2005 has been prepared in accordance with International Financial
Reporting Standards ("IFRS") applying IAS34: Interim Financial Reporting. This
is the first time the group has fully adopted IFRS. Results have been restated
to give effect to the changeover from South African Generally Accepted
Accounting Practice to IFRS. Property, Plant and Equipment was the only primary
area impacted by this changeover in the current reporting period and is now
accounted for under IAS16: Property, Plant and Equipment. The main changes
required was the "deemed cost" revaluation of property, plant and equipment at
the date of transition (1 July 2004) and the adjustment of the depreciation
methodology used. In terms of the optional exemption given in IFRS1: First-time
Adoption of IFRS, the fair value of certain property, plant and equipment on the
transition date can be used as the deemed cost, with the depreciation
methodology being adjusted prospectively from that date. All other accounting
policies have remained consistent with those applied in the audited financial
statements for the year ended 30 June 2005. The effect of applying the
measurement criteria of IAS16 has resulted in an increase in property, plant and
equipment to the extent of R3,9 million at 31 December 2005 and R2,9 million at
31 December 2004. This has resulted in corresponding decreases in the deferred
taxation asset of R1,1 million and R0,8 million for the respective dates.
Operating profits have increased by R0,4 million and R0,4 million for the six-
month periods ended 31 December 2005 and 31 December 2004 respectively. Opening
retained income at transition date to IFRS was restated by R1,7 million. The
adoption of IFRS represented an accounting change only and had no effect on cash
flows. Other changes to the results to 31 December 2005 compared to that
previously reported included the discontinuance of the amortisation of
intangible assets and the straight-line recognition of operating lease rental
costs. These two items had been adjusted in the audited results published in the
June 2005 annual report but had not yet been reported on at 31 December. The
comparative information for 31 December 2004 has been restated accordingly.
Dividend
As the group pursues opportunities to grow by acquisition 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
27 March 2006
CONDENSED GROUP INCOME STATEMENT
Unaudited Audited
Unaudited as Unaudited as
previously previously
Unaudited restated stated restated stated
6 months 6 months 6 months 12 months 12 months
ended ended ended ended ended
31 31 31 December 30 June 30 June
December December
R"000 2005 2004 2004 2005 2005
Revenue 301 263 296 706 296 706 535 923 535 923
Operating profit 12 480 15 129 15 458 29 148 28 309
Income from 2 042 1 044 1 323 1 323
associates*
Impairment of - (258) (258) (445) (445)
goodwill
Amortisation of
intangible - - (1 786) - -
assets**
Fair value
adjustment
on loan accounts (173) - - (3 271) (3 271)
Revaluation of
compulsory
convertible
debentures 116 (360) - 123 123
liability*
Profit before
interest
and taxation 14 465 15 555 13 414 26 878 26 039
Net interest (1 972) (1 812) (1 812) (4 120) (4 120)
expense
Profit before 12 493 13 743 11 602 22 758 21 919
taxation
Taxation (3 168) (3 977) (3 873) (7 435) (7 191)
Profit after 9 325 9 766 7 729 15 323 14 728
taxation
Income
attributable to
minority 55 43 43 61 61
shareholders
Income
attributable to
ordinary 9 270 9 723 7 686 15 262 14 667
shareholders
9 325 9 766 7 729 15 323 14 728
Shares in issue 173 595 173 095 173 095 173 095 173 095
(000"s)
Weighted average
number of shares
in
issue (000"s) 173 485 178 642 178 642 175 869 175 869
Fully diluted
weighted
average number of
shares in issue 225 795 229 431 229 431 227 395 227 395
(000"s)
Earnings per share 5,3 5,4 4,3 8,7 8,3
(cents)
Fully diluted
basic
earnings per share 4,2 4,6 3,7 7,0 6,7
(cents)
Reconciliation
between income
attributable to
ordinary
shareholders and
headline earnings
attributable to
ordinary
shareholders:
Income
attributable to
ordinary
shareholders
adjusted for: 9 270 9 723 7 686 15 262 14 667
- Amortisation of
goodwill - - 1 733 - -
- Impairment of - 258 258 445 445
goodwill
- (Profit)/loss on
disposal of
property,
plant and
equipment
and investment in
subsdiaries (2 358) 164 29 (639) (727)
- Tax thereon 335 (49) (9) 141 166
Headline earnings
attributable to
ordinary
shareholders 7 247 10 096 9 697 15 209 14 551
Headline earnings
per
share (cents) 4,2 5,7 5,4 8,6 8,3
Fully diluted
headline
earnings per share 3,3 4,7 4,6 6,9 6,6
(cents)
* Reclassified -
previously
included in
operating profit
** Intangible
assets no longer
amortised in terms
of IFRS
CONDENSED SEGMENTAL REPORT
Unaudited Audited
Unaudited as Unaudited as
previously previously
Unaudited restated stated restated stated
6 months 6 months 6 months 12 months 12 months
ended ended ended ended ended
31 31 31 30 June 30 June
December December December
R"000 2005 2004 2004 2005 2005
Turnover 301 263 296 706 296 706 535 923 535 923
Trading - 242 466 236 389 236 389 418 380 418 380
Distribution
Services 58 797 60 317 60 317 117 543 117 543
Operating Profit 12 480 15 129 15 458 29 148 28 309
Trading - 6 462 11 402 11 231 14 804 14 230
Distribution
Services 6 018 3 727 4 227 14 344 14 079
Profit before
interest
and taxation 14 465 15 555 13 414 26 878 26 039
Trading - 6 669 10 964 10 493 11 150 10 576
Distribution
Services 7 796 4 591 2 921 15 728 15 463
CONDENSED GROUP BALANCE SHEET
Unaudited Audited
Unaudited as Unaudited as
previously previously
Unaudited restated stated restated stated
31 31 31 December 30 June 30 June
December December
R"000 2005 2004 2004 2005 2005
ASSETS
Non current assets 95 401 100 089 96 180 92 640 90 344
Property, plant
and equipment 28 917 21 809 18 888 25 763 22 529
Long term loan 760 - - 173 173
Investments 942 5 083 5 083 3 234 3 234
Intangible assets 52 952 59 975 58 189 53 358 53 358
Deferred taxation 11 830 13 222 14 020 10 112 11 050
Current assets 193 644 206 094 206 094 179 781 179 781
Bank balances
and cash 12 075 1 415 1 415 1 515 1 515
Other current 181 569 204 679 204 679 178 266 178 266
assets
Total assets 289 045 306 183 302 274 272 421 270 125
EQUITY AND
LIABILITIES
Equity and 143 630 127 929 124 829 133 869 131 573
reserves
Ordinary
shareholders"
interest 142 910 127 282 124 182 133 204 130 908
Minority
shareholders"
interest 720 647 647 665 665
Non current 7 303 17 191 17 191 9 267 9 267
liabilities
Long term loans 5 980 13 131 13 131 6 704 6 704
Compulsory
convertible
debenture 1 323 4 060 4 060 2 563 2 563
liability
Current 138 112 161 063 160 254 129 285 129 285
liabilities
Other current 106 006 134 118 133 309 116 744 116 744
liabilities
Bank overdrafts 29 705 24 675 24 675 10 292 10 292
Compulsory
convertible
debenture 2 401 2 270 2 270 2 249 2 249
liability
Total equity and
liabilities 289 045 306 183 302 274 272 421 270 125
STATISTICS
Unaudited Audited
Unaudited as Unaudited as
previously previously
Unaudited restated stated restated stated
6 months 6 months 6 months 12 months 12 months
ended ended ended ended ended
31 31 31 December 30 June 30 June
December December
000"s 2005 2004 2004 2005 2005
Ordinary shares in 173 595 173 095 173 095 173 095 173 095
issue
Weighted average
number of ordinary
shares 173 485 178 642 178 642 175 869 175 869
Share options 5 037 3 516 3 516 4 253 4 253
Compulsory
convertible
debentures 47 273 47 273 47 273 47 273 47 273
Fully diluted
weighted
average number of
shares in issue 225 795 229 431 229 431 227 395 227 395
Earnings per share
(cents) 5,3 5,4 4,3 8,7 8,3
Fully diluted
basic
earnings per share
(cents) 4,2 4,6 3,7 7,0 6,7
Headline earnings
per
share (cents) 4,2 5,7 5,4 8,6 8,3
Fully diluted
headline
earnings per share
(cents) 3,3 4,7 4,6 6,9 6,6
Net asset value
per
share (cents) 82,3 73,5 72,1 77,0 74,4
Net tangible asset
value
per share (cents) 51,8 38,9 38,5 46,1 44,5
CONDENSED STATEMENT OF CHANGES IN EQUITY
Compulsory Non-
Ordinary convertible distri-
share Share deben- butable Retained
R000"s capital premium tures reserve earnings Total
Balance at 1 786 53 605 16 435 18 015 27 330 117 171
30 June 2004
Prior year 1 702 1 702
adjustment *
Restated 1 786 53 605 16 435 18 015 29 032 118 873
balance at
30 June 2004
Repurchase (55) (3 853) (3 908)
of shares
Derivative
portion of
compulsory
convertible 2 206 2 206
debenture no
longer
required
Share based 388 388
payment
transactions
Net profit 9 723 9 723
for the
period
Balance at 1 731 49 752 18 641 18 403 38 755 127 282
31 December
2004
Balance at 1 731 49 752 18 641 18 787 41 997 130 908
30 June 2005
Prior year 2 296 2 296
adjustment *
Restated 1 731 49 752 18 641 18 787 44 293 133 204
balance at
30 June 2005
Disposal of 5 236 241
shares
Share based 195 195
payment
transactions
Net profit 9 270 9 270
for the
period
Balance at 1 736 49 988 18 641 18 982 53 563 142 910
31 December
2005
* This represents the effect of the restatement of the carrying values of
property, plant and equipment to take into account revised estimations of
their residual values and remaining useful lives in terms of IAS 16.
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 30 June
December
R"000 2005 2004 2005
Cash flows from operating activities (2 856) (5 577) 10 994
Cash generated/(utilised) by operations 2 787 (3 551) 21 420
Net interest paid (1 484) (1 812) (6 183)
Taxation paid (4 159) (214) (4 243)
Cash flows from investing activities (6 996) (19 684) (26 759)
Cash flows from financing activities 999 (5 273) (286)
Net decrease in cash and cash equivalents (8 853) (30 534) (16 051)
Cash and cash equivalents at beginning of (8 777) 7 274 7 274
period
Cash and cash equivalents at end of (17 630) (23 260) (8 777)
period
RECONCILIATION OF NET PROFIT
Unaudited
6 months 12 months
ended ended
31 30 June
December
R"000 2004 2005
As previously reported under SA GAAP
Attributable to minority shareholders 43 61
Attributable to ordinary shareholders 7 686 14 667
7 729 14 728*
Adjusted for:
Property, plant and equipment 372 595
Amortisation of intangible assets 1 786 -
As reported under IFRS 9 887 15 323
Other adjustments:
Operating leases (121) -
Profit after taxation 9 766 15 323
Reconciliation of equity
Transition
Unaudited date
31 30 June 1 July
December
R"000 2004 2005 2004
As previously reported under SA GAAP
Minority shareholders" interest 647 665 604
Ordinary shareholders" interest 124 182 130 908 117 171
124 829 131 573* 117 775
Adjusted for:
Property, plant and equipment 2 074 2 296 1 702
Amortisation of intangible assets 1 786 - -
As reported under IFRS 128 689 133 869 119 477
Other adjustments:
Operating leases (760) - -
Equity and reserves 127 929 133 869 119 477
* As published in the 2005 annual report
REGISTERED OFFICE:
1st Floor, Atholl Square, Cnr Katherine Street and Wierda Road East, Sandown,
2196.
PO Box 785448, Sandton 2146.
Tel: (+27 11) 523 2980.
Fax: (+27 11) 523 2990.
E-mail: kim@excellerate.co.za
DIRECTORS:
Christopher Hall (CEO), Harold Bloch, Gordon Hulley, Peter Kramer, Alan Lipchin,
Athol Stewart, Rudi Stumpf*, Clive Howell*, Graham Davel* , Michael Mohohlo*
(*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
Date: 28/03/2006 04:46:26 PM Produced by the JSE SENS Department
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