| Tue 22 Aug 2006, 17:01 | | Amalgamated Appliance Holdings Limited - Reviewed |
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AMA
AMA
Amalgamated Appliance Holdings Limited - Reviewed Consolidated Results For
The Year Ended 30 June 2006
Amalgamated Appliance Holdings Limited
Registration number 1997/004130/06
ISIN: ZAE000012647 - Share code: AMA
("AMAP" or "the Group")
REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2006
- ADJUSTED PROFIT
- AFTER TAX 17,6%
- HEADLINE EARNINGS PER SHARE (DILLUTED)7%
- CASH ON HAND R244,3 MILLION
- REVENUE 21%
CHAIRMAN"S OVERVIEW OF RESULTS
OVERVIEW
In a generally toughening operating environment, Amap"s determination to stick
to its strategic priorities, while simultaneously delivering improved year-on-
year performance, has once again borne fruit. Fully diluted HEPS growth of 7%
was achieved on flat core business sales, with profit after tax, adjusted for
the mobile phone startup and fair value adjustments on financial instruments,
increasing by 17,6%. A number of significant strategic goals were achieved
during the year, giving us confidence that the Group can continue to deliver
performance improvements and long-term value growth to all stakeholders.
THE ENVIRONMENT
The challenges of Amap"s market environment increased over the past year as a
result of several factors: Whilst the national economic climate remained
generally positive throughout the trading year, business conditions in the
durable goods sector (furniture and household appliances) reflected a
discernible dip in the first six months of 2006 (our second-half financial
year), with sales below expectations. Business confidence in this category
declined significantly according to the BER second-quarter review. Furthermore,
deflation in the consumer electronics industry persisted, although at a lower
level, forcing significant unit sales growth simply to maintain static revenues.
AMAP"S STRATEGY
Our senior management team, with an average of more than 20 years" experience in
the industry, remains resolutely committed to our strategy of building
competitive advantage through brand differentiation, deep trade relationships
and operational efficiency, and achieving growth through expansion into related
categories. Our determination not to allow difficult short-term conditions to
divert us from this course is evident in our actions during this financial year:
we expanded marketing spend by more than 11%, launched over 100 new products,
invested at a faster rate in improved technology and operating assets and
committed significant resources to a startup in the high-potential mobile phones
business.
FINANCIAL PERFORMANCE AND 12-MONTH COMPARISON
In the context of the above, Amap delivered another round of solid financial
results. To meaningfully compare year-on-year performance, it is best to remove
two distorting factors: the fair value adjustments on financial instruments,
which are entirely dependent on relative values of the Rand at reporting cutoff
dates, and the startup mobile phone venture which generated high sales revenue
but delivered a modest trading loss.
12 months 12 months
30 June 30 June
2006 2005
% change R"000 R"000
Revenue net of Tedelex Mobile 0,4 1 783 280 1 776 277
Profit attributable
to shareholders 129 548 127 964
Adjusted for Tedelex Mobile
(after tax) 2 129 -
131 677 127 964
Adjusted for fair value
adjustment (after tax) (4 961) (20 197)
17,6 126 716 107 767
Sales revenues in the core businesses were essentially flat (up 0,4%), with the
bulk of the 21% increase in sales attributable to the R367 million of mobile
phone turnover. As at the half-year stage, the limited revenue growth was a
result of some slowing of the rate of growth in several of our core product
categories coupled with ongoing, though somewhat less extreme, deflation in the
home entertainment and personal productivity areas.
In spite of the flat revenues, operating profits in the core businesses were up
by 8,4%. While the mobile phone business was a small positive contributor at the
half-year, stock writedowns and forex losses in that entity led to a R2 million
loss for the full year and tempered the Group operating earnings growth to 7%.
Core business earnings improvements were achieved through more systematic
management of product mix, as well as operating cost growth containment to 6% in
spite of an 11% increase in marketing and higher capital expenditure a
reflection of our ongoing commitment to investing in strategic growth.
Excluding mobile phones, headline earnings would have shown a 8,5% increase,
which was softened to 7% on the results of the new business. However, all of
these profit comparisons include the effects of a R7 million positive pre-tax
fair value adjustment on financial instruments for 2006 versus a R28,5 million
equivalent positive adjustment for the prior year. On an after-tax basis,
excluding the fair value adjustments in both years, profit after tax improved
15,6%, or 17,6% before the startup losses in Tedelex Mobile.
Even after funding the mobile phone division and a substantial inventory
increase, the Group"s balance sheet remains net ungeared and in a strong
position, with R244 million cash on hand at year-end.
STRATEGIC AND OPERATIONAL DEVELOPMENTS
All of our major brands held or gained share in their respective market
segments. Sansui and Tedelex led the market in the launch and expansion of the
exciting new category of flat screen (Plasma and LCD) television with highly
innovative campaigns around the Soccer World Cup.
Our focus on product innovation was evident in the plethora of new launches,
including a full revamp of our fast-growing Salton Elite and Russell Hobbs
ranges. In this regard, our strong, long-term relationships with our
international suppliers paid dividends. We also had an excellent year in
seasonal appliances (heating and cooling products), supported by strong new
ranges and helped a little by the extremes in weather conditions.
Our commitment to our retail partners was evident in our very aggressive in-
stock position that ensures minimal lost sales during high-demand periods. This
has left us with a somewhat higher stock position than we would have liked, but
that includes Tedelex Mobile and, in addition, much of that holding is goods-in-
transit of the exponentially growing Plasma and LCD TV products. We saw
consistent growth across all key channels and many areas in which our
informational and operational integration with retailers improved planning and
efficiency.
In general, our operating efficiencies improved across the board, in spite of
limited "leverage" from sales growth. Operating margins in the core businesses
broke through the key 10% level to 10,3%, beating last year"s 9,5% through
meaningful reductions in both service and administration costs and below-
inflation increases in sales and distribution expenses. Our manufacturing
facilities continued to drive down the cost curve while maintaining high levels
of flexibility and quality.
We continue to explore opportunities to expand in our areas of strategic focus
via both organic entry and acquisition, on the back of our strong balance sheet.
Our growing association with strategic shareholder, Steinhoff, provides us with
further expertise and support in pursuing these objectives.
The first year of Tedelex Mobile, our cellular phone venture, offered up mixed
fortunes and concluded with a small loss on high volumes. However, we still see
great potential in this category and have fundamentally restructured the
business, acquiring 100%,(albeit after year-end) reducing our funding commitment
from R185 million to R30 million and integrating the management of the business
into our core infrastructure.
DISTRIBUTIONS TO SHAREHOLDERS
The Board has resolved to declare a distribution to shareholders by way of a
capital distribution out of share premium of 20 cents per share. Shareholders
will be asked to consider, and if deemed fit, to approve the capital
distribution at the annual general meeting of AMAP to be held on or about 2
November 2006. Salient dates and times pertaining to the capital distribution
will be announced following the annual general meeting.
BOARD
During the period under review, Salton Inc. disposed of its 52,6% shareholding
in Amap and Steinhoff International purchased a strategic stake of 25,1% in the
Group. As a result, our USA directors L Dreimann and WB Rue resigned from the
Board together with alternate non-executive director, ECW Janssen van den
Doornmalen. Messrs MJ Jooste and DM van der Merwe representing Steinhoff joined
the Board effective 1 November 2005. At the Board Meeting held on 22 June 2006,
Rob Marais, CEO of Appliances, was appointed to the Board.
SOCIAL RESPONSIBILITY AND LABOUR RELATIONS
Sound labour relations remains a priority of the Group, as it is the driving
force which ensures our employee participation in achieving the goals of our
Group. The relevant trade unions also make a valuable contribution in
maintaining our labour harmony.
The focus on employment equity has increased our skills development activities
with many more employees benefiting accordingly. Employee morale is good, which
is reflected in a very low staff turnover.
In terms of nation building, our Social Responsibility efforts continue to make
a difference to the quality of life of the disabled and disadvantaged people.
From a BEE perspective, the issue of broad-based equity ownership is still
pursued. Time is also spent encouraging the growth of SSMEs by outsourcing work,
which they can perform for the Group.
SEGMENTAL REPORTING
The Group predominantly markets and distributes consumer durables and therefore
the directors consider the disclosure of segmental information in terms of IAS
14 not to be meaningful.
CORPORATE GOVERNANCE
Operations at all levels subscribe to the spirit of good corporate governance as
set out in the King Report and Amap accepts the need to conduct the enterprise
with integrity, transparency and equal opportunity.
PROSPECTS
Although economic activity is expected to cool as a result of the two recent
interest rate hikes, Government expenditure on 2010 projects, the ever-growing
emerging middle class and the broad acceptance of Amap"s popular brands across
all segments of the population should ensure operating earnings growth for the
forthcoming period.
For and behalf of the Board
J Cohen BG Drummond
Chairman Company Secretary
Johannesburg
22 August 2006
CONDENSED GROUP INCOME STATEMENT
for the year ended 30 June 2006
Reviewed Restated
12 months 12 months
30 June 2006 30 June 2005
% change R"000 R"000
Revenue 21 2 150 771 1 776 277
Operating profit 7 180 764 169 131
Fair value adjustments on
financial instruments 6 988 28 446
Net interest paid (4 211) (9 666)
Profit before tax (2) 183 541 187 911
Taxation (53 993) (59 947)
Net profit 129 548 127 964
Attributable to equity
holders of the parent 1 129 548 127 964
Attributable to minority
interest - -
Earnings per share
(cents) 1 62,7 62,3
Diluted basic earnings per
share (cents) 1 62,0 61,2
Dividends declared (cents) - 17,0
Capital distribution (cents) 20,0 -
CONDENSED GROUP BALANCE SHEET
as at 30 June 2006
Reviewed Restated
30 June 2006 30 June 2005
R"000 R"000
ASSETS
Non-current assets 56 153 69 382
Property, plant and equipment 36 050 36 996
Goodwill 1 170 1 170
Trademarks 5 539 8 888
Other financial assets 10 211 16 256
Deferred tax 3 183 6 072
Current assets 885 690 739 944
Inventory 366 904 261 536
Trade and other receivables 249 730 186 136
Derivative financial asset 24 789 12 513
Bank and cash on hand 244 267 279 759
Total assets 941 843 809 326
EQUITY AND LIABILITIES
TOTAL EQUITY 517 002 420 737
Capital and reserves 517 002 420 737
Minority interest - -
Long-term borrowings 6 433 9 973
Current liabilities 418 408 378 616
Trade and other payables 366 637 323 749
Derivative financial liability - -
Dividends payable 77 37
Taxation 47 592 51 412
Short-term portion of
long-term liability 4 102 3 418
Total equity and liabilities 941 843 809 326
STATEMENT OF CHANGES IN EQUITY
for the period ended 30 June 2006
Share Share Trea- Fair Accum-
capital premium sury value ulated
shares adjust- profits
ment
reserve
REVIEWED R"000 R"000 R"000 R"000 R"000
Balance at 1 July 2 122 162 741 (7 285) 2 194 132 396
2004 (audited)
IFRS adjustments - - - - 5 472
Restated balance 2 122 162 741 (7 285) 2 194 137 868
at 1 July 2004
Net profit for the - - - - 73 712
period
Net profit as - - - - 73 343
previously reported
IFRS adjustments - - - - 369
Dividend settled - - - - -
- cash election
Net treasury - - (2 782) - -
movement
IFRS adjustment: - - - - -
Share-based payment
Fair value movement - - - 491 -
Balance at 2 122 162 741 (10 067) 2 685 211 580
31-Dec-04
Net profit for the - - - - 54 252
period
Net profit as - - - - 54 082
previously reported
IFRS adjustments - - - - 170
Dividends adjustment - - - - -64
to share incentive
trust
Dividend proposed - - - - - (36 072)
gross
Dividend proposed - - - - - 1 112
share incentive
trust
Net treasury - - -848 - -
movement
IFRS adjustment: - - - - -
Share based payment
Fair value movement - - - (2 685) -
Balance at 30 June 2 122 162 741 (10 915) - 230 808
2005
Net profit for the - - - - 71 711
period
Dividend settled - - - - -
- cash election
Net treasury - - -66 - -
movement
Share-based payment - - - - -
Balance at 2 122 162 741 (10 981) - 302 519
31-Dec-05
Net profit for the - - - - 57 837
period
Net treasury - - 1 036 - -
movement
Share-based payment - - - - -
Balance at 30 June 2 122 162 741 (9 945) - 360 356
2006
Share Share- Mino- Total
rity
holder based Inte-
rest
for compen-
dividend sation
reserve
REVIEWED R_f000 R_f000 R_f000 R_f000
Balance at 1 July 30 767 - - 322 935
2004 (audited)
IFRS adjustments - 318 - 5 790
Restated balance 30 767 318 - 328 725
at 1 July 2004
Net profit for the - - - 73 712
period
Net profit as - - - 73 343
previously reported
IFRS adjustments - - - 369
Dividend settled (30 767) - - (30 767)
- cash election
Net treasury - - - (2 782)
movement
IFRS adjustment: - 340 - 340
Share-based payment
Fair value movement - - - 491
Balance at - 658 - 369 719
31-Dec-04
Net profit for the - - - 54 252
period
Net profit as - - - 54 082
previously reported
IFRS adjustments - - 170
Dividends adjustment - - - -64
to share incentive
trust
Dividend proposed - 36 072 - - -
gross
Dividend proposed - (1 112) - - -
share incentive
trust
Net treasury - - - -848
movement
IFRS adjustment: - 363 - 363
Share based payment
Fair value movement - - - (2 685)
Balance at 30 June 34 960 1 021 - 420 737
2005
Net profit for the - - 783 72 494
period
Dividend settled (34 960) - - (34 960)
- cash election
Net treasury - - - -66
movement
Share-based payment - 355 - 355
Balance at - 1 376 783 458 560
31-Dec-05
Net profit for the - - -783 57 054
period
Net treasury - - - 1 036
movement
Share-based payment - 352 - 352
Balance at 30 June - 1 728 - 517 002
2006
CONDENSED GROUP CASH FLOW STATEMENT
For the year ended 30 June 2006
Reviewed Restated
12 months 12 months
30 June 2006 30 June 2005
R"000 R"000
Cash flow from operating activities (26 553) 77 417
Cash generated by trading 194 542 162 650
Working capital changes (127 041) 5 697
Cash generated by operations 67 501 168 347
Net interest paid (4 211) (9 666)
Taxation paid (54 923) (50 470)
Dividends paid (34 920) (30 794)
Cash flow from investing activities (7 053) 4 130
Additions property, plant
and equipment (7 917) (7 435)
Proceeds on disposal of property,
plant and equipment 587 470
Proceeds on disposal of investments - 10 873
Decrease in other financial assets 277 222
Cash flow from financing activities (1 886) 5 386
Net movement in treasury shares 970 (3 630)
(Decrease)/increase in long-term
borrowings (2 856) 9 016
Net (decrease)/increase in cash (35 492) 86 933
Cash surplus at the beginning
of the year 279 759 192 826
Cash resources at the end of
the year 244 267 279 759
SUPPLEMENTARY INFORMATION
for the year ended 30 June 2006
Reviewed Restated
12 months 12 months
30 June 2006 30 June 2005
Shares in issue (000"s) 212 190 212 190
Shares in issue weighted (000"s) 206 561 205 486
Diluted number of shares
weighted (000"s) 208 974 209 127
Net assets value per share (cents) 244 198
Cost of sales (R"000) 1 712 659 1 359 088
Interest received (R"000) 4 948 4 513
Interest paid (R"000) (9 159) (14 179)
Capital expenditure (R"000) 7 917 7 435
Capital commitments (R"000) 1 450 906
Depreciation, amortisation and
impairmentcharge (R"000) 11 512 9 760
Finance and operating lease
commitments (R"000) 49 440 30 457
Profit attributable to ordinary
shareholders (R"000) 129 548 127 964
Loss/(profit) on disposal of property,
plant and equipment
(net of tax) (R"000) 168 (60)
Profit on disposal of
subsidiary (R"000) - (663)
Profit on disposal of investment
(net of tax) (R"000) - (4 318)
Impairment of property, plant and
equipment and trade marks (R"000) 2 199 714
Headline earnings (R"000) 131 915 123 637
Headline earnings per share (cents) 63,9 60,2
Diluted headline earnings
per share (cents) 63,1 59,1
RECONCILIATION OF INCOME STATEMENT
Reviewed
12 months 12 months
30 June 2006 30 June 2005
R"000 R"000
Profit attributable to shareholders
As previously reported under SA GAAP - 127 425
IFRS adjustments - 539
Property, plant and equipment
(net of tax) - 1 242
Share-based payments - (703)
As reported under IFRS - 127 964
RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY
Property, Net Accum- Share-based
plant and deferred ulated compensation
equipment tax profit reserve
R"000 R"000 R"000 R"000
1 July 2004
As previously reported 31 077 10 243 132 396 -
IFRS adjustments 8 044 (2 254) 5 472 318
Share-based payments - - (318) 318
Property, plant and
equipment 8 044 (2 254) 5 790 -
As reported under IFRS 39 121 7 989 137 868 318
31 December 2004
As previously reported 29 188 9 475 205 739 -
IFRS adjustments 8 937 (2 438) 5 841 658
Share-based payments - - (658) 658
Property, plant and
equipment 8 937 (2 438) 6 499 -
As reported under IFRS 38 125 7 037 211 580 658
30 June 2005
As previously reported 27 308 8 728 224 797 -
IFRS adjustments 9 688 (2 656) 6 011 1 021
Share-based payments - - (1 021) 1 021
Property, plant and
equipment 9 688 (2 656) 7 032
As reported under IFRS 36 996 6 072 230 808 1 021
Accounting policies
The Group previously recorded discount to customers as an expense in terms of
Circular 09/2006 issued by the South African Institute of Chartered Accountants.
The Group now accounts discount given to customers as part of revenue to give
effect to this. The prior year revenue has been restated to reflect a change of
R21,897 million.
The report is prepared on the historical cost basis except for financial
instruments and certain property, plant and equipment which have been fair
valued. This is in accordance with the recognition and measurement principles of
International Financial Reporting Standrds (IFRS) expected to be applicable at
30 June 2006, IAS 34: Interim financial reporting, the requirements of the South
African Companies Act and the Listings Requirements of the JSE. The results are
presented in terms of IFRS statements and interpretations applicable at the date
of publication.
The Group has adopted and applied IFRS for the first-time for the year ended
2006.
The transition date is 1 July 2004 ("the transition date"). The Group"s opening
IFRS balance sheet at the transition date has therefore been restated to reflect
all statements expected to be applicable at 30 June 2006. Certain accounting
policy changes and reclassifications were applied to comply with IFRS 1 and the
comparative figures in respect of 2005 have been adjusted to reflect these
changes.
The following new accounting policies were adopted:
Property, plant and equipment
In terms of IFRS 1, a first-time adoptor may elect to use the fair value of
individual items of property, plant and equipment at transition date as the
deemed cost. Alternatively, a first-time adoptor may elect to measure individual
items of property, plant and equipment at depreciated cost, determined in
accordance with IFRS.
These elections are available to each individual asset. Amap has made this
transitional election on individual asset levels, as the circumstances of each
asset required.
Share-based payments
The Group has applied IFRS 2: Share-based Payments. In accordance with the
transitional provisions, IFRS 2 has been applied to all grants of equity-settled
awards granted after 7 November 2002, which were unvested as of 1 July 2004.
Review report
The results for the year ended 30 June 2006 have been reviewed, but not audited,
by the Group"s auditors, Deloitte & Touche, and their unmodified review report
is available at the company"s registered office for inspection.
Related-party transactions
The company entered into various related-party transactions. These transactions
are no less favourable than those arranged with third parties.
Subsequent events
No material events have occurred in the period between the year-end date and the
date of this report.
Directors
J Cohen (Chairman), S G Bernhardt (CEO - Manufacturing), *MC Berzack, S Cohen
(CEO - Corporate Services), *M Jooste, *J M Kahn, *J P Kieser, *S A Levitt, R D
Marais (CEO - Appliances), A Nossel (CEO Electronics), S Scafidas, *D van der
Merwe
Alternate S Green* *Non-executive
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Registered office:
29 Heronmere Road, Reuven 2091
PO Box 39186, Booysens 2016,
Telephone (011) 490 9000
Sponsor: Bridge Capital Services (Pty) Limited,
1st Floor, Building 22A, The Woodlands, Woodlands Drive, Woodmead
www.amapholdings.co.za
Date: 22/08/2006 05:01:56 PM Produced by the JSE SENS Department
