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ELR ELRP
ELR
ELB - Reviewed provisional report and dividend for the year ended 30 June 2006
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
2006
GROUP INCOME STATEMENT
Reviewed Audited
Year Year
ended ended
30 Jun 06 30 Jun 05
R000 R000
Continuing operations
Sales revenue 664 970 527 024
Net operating costs excluding depreciation (632 976) (509 862)
Operating profit before depreciation and 31 994 17 162
abnormal items
Depreciation (5 187) (5 035)
Operating profit before abnormal items 26 807 12 127
Abnormal items as detailed below: net (5 313) (2 829)
expense
Profit from operations 21 494 9 298
Interest received and other treasury income 6 525 8 155
Interest paid (4 632) (3 474)
Profit before tax 23 387 13 979
Income tax expense (11 896) (2 787)
Net profit attributable to continuing 11 491 11 192
operations
Net (loss)/profit attributable to (9 612) 3 938
discontinued operations, as detailed below
Net profit for the year 1 879 15 130
Attributable to:
Ordinary shareholders 1 871 14 486
Minority interest
Continuing operations 8 (3)
Discontinued operations - 647
1 879 15 130
ABNORMAL ITEMS (continuing operations)
Capital items
Restructure of ELB operations incorporating (850) -
the introduction of BEE partners
Impairment of plant and equipment (3 000) -
Profit on sale of portion of interest in - 63
subsidiary
Trading abnormal capital items: (3 850) 63
(expense)/income
Trading items
Relocation of operations (1 331) (1 781)
Interest on revised tax assessments of (92) (697)
subsidiary
Input value added tax (VAT) dispute - (305)
Interest on VAT dispute (40) (109)
Net abnormal items: total expense (5 313) (2 829)
NET (LOSS) PROFIT ATTRIBUTABLE TO
DISCONTINUED OPERATIONS
Loss from operations before items listed (2 947) (2 522)
below
Retrenchment costs (700) -
Other discontinuance costs (300) -
Impairment of deferred rent expense (3 259) -
Impairment of plant (3 389) -
Impairment of plant - reduction in deferred 983 -
tax liability
Profit attributable to the ELB Group on
disposal
Net (loss)/profit attributable to - 6 460
discontinued operations
(9 612) 3 938
GROUP BALANCE SHEET
Reviewed Audited
30 Jun 06 30 Jun 05
R000 R000
ASSETS
Non current assets 37 118 48 012
Property, plant and equipment 29 687 36 632
Deferred rent expense - 3 659
Deferred tax assets 7 431 7 721
Current assets 486 766 368 115
Inventories and construction contracts in 231 382 194 400
progress
Debtors and prepayments 98 127 48 279
Non current assets of discontinued operation 5 337 -
held for disposal
Income tax overpaid 382 991
Cash and cash equivalents 151 538 124 445
Total assets 523 884 416 127
EQUITY AND LIABILITIES
Ordinary shareholders equity 162 061 161 241
Issued capital 25 192 25 192
Treasury shares (24 098) (23 366)
Reserves (11 315) (13 721)
Retained profit 172 282 173 136
Preference shares 8 8
Minority interest 665 207
Total equity 162 734 161 456
Non current liabilities 9 613 10 145
Interest bearing borrowings 9 613 9 025
Deferred tax liabilities - 1 120
Current liabilities 351 537 244 526
Non interest bearing creditors and accruals 246 851 179 681
Interest bearing creditors 95 048 40 903
Non current liabilities of discontinued 1 734 -
operation held for disposal
Income tax payable 7 904 2 963
Short term borrowings and bank overdrafts - 20 979
Total equity and liabilities 523 884 416 127
Ordinary shares in issue (000"s) 33 860 33 860
Deduct: Treasury shares in issue (000"s) 6 708 6 505
Ordinary shares in issue on which net asset 27 152 27 355
value per share is calculated
Net asset value per share (cents) 597 589
Capital commitments
At 30 June 2006 there were capital commitments of R649 000 (30 June 2005 - R4
388 000).
Contingent liabilities
ELB Engineering Services operates in the engineering contracting business and is
exposed to the risks associated with engineering contracts. These risks are
managed on the basis of limited liability. All known liabilities of the group
have been accrued and the directors were not aware of any contingent liabilities
requiring possible additional accruals.
RECONCILITION OF GROUP HEADLINE EARNINGS
Reviewed Audited
Year Year
ended ended
30 Jun 06 30 Jun 05
R000 R000
Net profit attributable to ordinary 1 871 14 486
shareholders per the income statement
Deduct: Capital items as detailed below: (10 208) 6 928
Capital items detailed in the income
statement:
Restructure incorporating the introduction (850) -
of BEE partners
Impairment of plant and equipment (3 000) -
Profit on sale of portion of interest in - 63
subsidiary
Profit on disposal of ELB McWade - 6 460
Profit on disposal of plant and equipment:
Included in operating profit of continuing 416 592
operations before abnormal items
Included in operating profit of discontinued - 37
operations
Discontinued operations impairments and (7 648) -
costs of discontinuance
Discontinued operations - reduction in 983 -
deferred tax liability
Other income tax effects of capital items (109) (207)
Minority interest in capital items - (17)
Headline earnings 12 079 7 558
Weighted average number of shares (excluding 27 315 27 337
treasury shares) on which basic earnings per
share are based (000"s)
Headline earnings per ordinary share (cents)
- basic 44,2 27,6
- fully diluted 44,2 27,6
Earnings per ordinary share (cents)
- basic 6,8 53,0
- fully diluted 6,8 52,9
Dividends declared for the year per ordinary 15 10
share (cents)
GROUP CASH FLOW STATEMENT
Reviewed Audited
Year Year
ended ended
30 Jun 06 30 Jun 05
R000 R000
Cash inflow/(outflow) from operating 54 661 (1 346)
activities before dividends paid
Dividends paid (2 725) (6 829)
Cash inflow/(outflow) from operating 51 936 (8 175)
activities
Cash (outflow)/inflow from investment (10 860) 9 429
activities
Cash inflow from financing activities 6 996 13 034
Increase in net cash and cash equivalents 48 072 14 288
Net cash and cash equivalents at the 103 466 97 368
beginning of the year
Cash and cash equivalents of subsidiary on - (8 190)
disposal
Net cash and cash equivalents at the end of 151 538 103 466
the year
SEGMENT ANALYSIS
Reviewed Reviewed
Year Year
ended ended
30 Jun 06 30 Jun 05
R000 R000
sales revenue
Continuing operations
ELB Engineering 590 717 464 338
ELB Timbers 74 253 62 686
Total continuing operations 664 970 527 024
Discontinued operations
ELB Timbers - Malelane Board Plant 28 711 24 237
ELB McWade - 23 366
Total 693 681 574 627
HEADLINE EARNINGS/(LOSS)
Continuing operations
ELB Engineering 27 751 16 404
ELB Timbers (9 516) (1 055)
ELB Group overheads borne by the holding (1 746) (1 709)
company
Continuing operations before adjustments 16 489 13 640
below
ELB Engineering (1 023) (697)
Relocation of operation (931) -
Interest on revised tax assessments (92) (697)
of subsidiary
ELB Timbers (400) (1 781)
Relocation of operation (400) (1 781)
ELB Group overheads borne by the holding (40) (414)
company
VAT dispute and interest thereon (40) (414)
Total continuing operations 15 026 10 748
Discontinued operations
ELB Timbers - Malelane Board Plant (2 947) (5 769)
ELB McWade (after minority interest) - 2 579
Headline earnings 12 079 7 558
Capital items
Continuing operations (3 543) 447
Discontinued operations (6 665) 21
Profit on disposal of ELB McWade - 6 460
Net profit attributable to ordinary 1 871 14 486
shareholders
GROUP STATEMENT OF
CHANGES IN EQUITY
Total
ordinary
Issued Treasury Retained Share-
holders
capital shares Reserves profit equity
R000 R000 R000 R000 R000
Balance at the
beginning of the year
As previously stated 25 192 (23 366) (13 721) 175 265 163 370
Adjustment arising from (2 129) (2 129)
the recalculation of
income tax expense in
the previous financial
year
As restated 25 192 (23 366) (13 721) 173 136 161 241
Changes in treasury
shares
Increase in loan to the (1 006) (1 006)
ELB Participants Share
Trust
Decrease in share 274 274
incentive trusts loan
accounts
Changes in reserves
Translation adjustments 2 406 2 406
Changes in retained
profit
Net profit for the year 1 871 1 871
attributable to
ordinary shareholders
Final dividend for the (1 368) (1 368)
previous year
Interim dividend for (1 357) (1 357)
the current year
Changes in minority
interest
Interest in net profit
for the year
Acquisition of 15%
interest in ELB
Engineering Limited
by the ELB Educational
Trust
for Historically
Disadvantaged South
Africans
Disposal by ELB of
portion of interest in
subsidiary
Disposal by ELB of
interest in subsidiary
Balance at the end of 25 192 (24 098) (11 315) 172 282 162 061
the year
GROUP STATEMENT OF
CHANGES IN EQUITY
CONTINUED
Reviewed Audited
Total Total
Preference Minority equity equity
shares interest 30 Jun 06 30 Jun 05
R000 R000 R000 R000
Balance at the
beginning of the year
As previously stated 8 207 163 585 152 676
Adjustment arising from (2 129) -
the recalculation of
income tax expense in
the previous financial
year
As restated 8 207 161 456 152 676
Changes in treasury
shares
Increase in loan to the (1 006) -
ELB Participants Share
Trust
Decrease in share 274 197
incentive trusts loan
accounts
Changes in reserves
Translation adjustments 2 406 4 197
Changes in retained
profit
Net profit for the year 1 871 14 486
attributable to
ordinary shareholders
Final dividend for the (1 368) (5 461)
previous year
Interim dividend for (1 357) (1 368)
the current year
Changes in minority
interest
Interest in net profit 8 8 644
for the year
Acquisition of 15%
interest in ELB
Engineering Limited
by the ELB Educational
Trust
for Historically 450 450 -
Disadvantaged South
Africans
Disposal by ELB of - - 48
portion of interest in
subsidiary
Disposal by ELB of - - (3 963)
interest in subsidiary
Balance at the end of 8 665 162 734 161 456
the year
COMMENTS
INTRODUCTION
Following the recent restructure ELB is an investment holding company owning 85
per cent of ELB Engineering Limited ("ELB Engineering") and 100 per cent of ELB
Timber Holdings Limited ("ELB Timbers").
The ELB Engineering Group currently comprises ELB Equipment, ELB Engineering
Services and Ditch Witch (Australia).
ELB Timbers concentrates on producing veneer and plywood as well as furniture
components and reusable box styled packaging.
FINANCIAL RESULTS
The ELB Group saw sales increase from R575 million in 2005 to R694 million in
2006 and headline earnings from R7,6 million in 2005 to R12,1 million in 2006.
The ELB Engineering Group had another good year with sales increasing from R464
million in 2005 to R591 million in 2006 and headline earnings increasing from
R15,7 million in 2005 to R26,7 million in 2006.
ELB Timbers on the other hand was not profitable. Sales increased from R87
million in 2005 to R103 million in 2006. The loss from continuing operations in
2006, including a R3 million impairment of plant and equipment, was R12,9
million compared to R2,8 million loss in 2005. The losses for discontinued
operations, after closing the board plant in Malelane, were R9,6 million in 2006
compared to R5,8 million in 2005. The losses from continuing operations were
attributable largely to costs associated with commissioning a new dryer,
rationalising business units, as well as a significant increase in raw material
costs, the strong Rand and cheap imports making it difficult to achieve the
gross margins necessary to be profitable. The losses of R9,6 million for
discontinued operations include shut down costs and asset impairments of R7,6
million.
PROSPECTS
The ELB Engineering Group is well positioned to benefit from both the ongoing
infrastructure spend in Southern Africa and Australia as well as the increase in
capacities and efficiencies being implemented by the global resources and power
industry sectors. Turnover is expected to grow substantially in real terms.
Though the recent restructure and introduction of a BEE Trust which now owns 15
per cent of the ELB Engineering Group will dilute earnings for the coming year
ELB Engineering Services is expected to start to make a meaningful contribution
for the first time.
The prospects for ELB Timbers becoming profitable in the near future are not
encouraging due to further significant increases expected in timber input costs
while at the same time cheaper imports are expected to further reduce the
selling price of plywood products to even less profitable levels. A decision has
therefore been made to further rationalise the business such that timber losses
will have ceased by no later than June 2007.
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.
COMPARATIVES
As a result of revised tax calculations the ELB Group tax charge for the year
ended 30 June 2005 has been increased by R2,1 million. The comparatives have
been restated accordingly.
DIRECTORATE
During the year and after 46 years of distinguished service to the ELB Group Mr.
Bill Bateman retired as an ELB director. The Board thanks him for his
outstanding contribution and wishes him well in his retirement.
Dr. Stephen Meijers the Chief Executive of ELB Engineering Services is welcomed
to the Board.
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 has been increased from 5 cents in 2005 to 10 cents in 2006
reflecting the Boards confidence in the prospects for the ELB Engineering Group
going forward.
The total dividend for the year is therefore 15 cents per share versus 10 cents
per share for the 2005 financial year.
On behalf of the Board
AG Fletcher
Chairman
Boksburg
21 September 2006
DIVIDENDS
Shareholders are referred to the dividend announcement published on the
Securities Exchange News Service (SENS) on 21 September 2006. The content of the
announcement is republished below for information.
The directors have declared the following final dividends for the year ended 30
June 2006.
PREFERENCE DIVIDEND NUMBER 111
A final dividend has been declared at the rate of 6% per annum for the second
six month period on the 6% fixed cumulative redeemable preference shares of R2
each, equivalent to 6 cents per share.
ORDINARY DIVIDEND NUMBER 117
A final dividend of 10 cents per share has been declared on the ordinary shares.
The salient dates in respect of both dividends are:
Date of declaration Thursday, 21 September 2006
Last day to trade "cum" dividend Friday, 13 October 2006
Shares commence trading "ex" dividend Monday, 16 October 2006
Record date Friday, 20 October 2006
Date of payment Monday, 23 October 2006
Share certificates may not be dematerialised or rematerialised between Monday,
16 October 2006 and Friday, 20 October 2006, both dates inclusive.
By order of the Board
DG Jones
Secretary
Boksburg
21 September 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
Date: 26/09/2006 05:00:13 PM Produced by the JSE SENS Department
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