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EXL EXLD
EXL
Excell - Audited results for the year ended 30 June 2006 and
further cautionary announcement
Excellerate Holdings Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/009884/06
JSE code EXL EXLD
ISIN: ZAE000026092 ZAE000044145
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2006 AND FURTHER CAUTIONARY
ANNOUNCEMENT
- Cash generated
- by operations R22,2 m
- Net tangible assets
- per share +13,2%
Group income statement
Audited (as
Audited previously
Audited (restated) reported)
year year year
ended ended ended
30 June 30 June 30 June
R"000 2006 2005 2005
Revenue 508 714 535 396 535 923
Cost of sales 295 722 314 522 314 616
Direct expenses 64 885 61 529 61 529
Gross profit 148 107 159 345 159 778
Operating expenditure 137 037 129 982 131 346
Selling and distribution costs 39 871 34 277 34 277
Administrative expenses 74 830 58 825 60 160
Other Expenses 22 336 36 880 36 909
Operating profit 11 070 29 363 28 432
Gain on disposal of subsidiary 1 245 - -
Fair value adjustments on loan (173) (3 271) (3 271)
accounts
Share of undistributed profits of 4 316 1 323 1 323
associates
Impairment of goodwill (150) (445) (445)
Profit before interest and 16 308 26 970 26 039
taxation
Finance revenue 5 301 4 274 4 165
Finance costs (9 396) (8 285) (8 285)
Profit before taxation 12 213 22 959 21 919
Taxation
- current (8 688) (4 143) (4 143)
- deferred 5 725 (3 394) (3 048)
Profit for the year 9 250 15 422 14 728
Attributable to:
Equity holders of the parent 9 147 15 361 14 667
Minority interest 103 61 61
9 250 15 422 14 728
Earnings per share (cents) 5.3 8.7 8.3
Fully diluted basic earnings per 4.2 7.0 6.7
share (cents)
Calculations of earnings per share
Audited (as
Audited previously
Audited (restated) reported)
year year year
ended ended ended
30 June 30 June 30 June
R"000 2006 2005 2005
Weighted average shares in
issue for
the year 173 563 611 175 868 512 175 868 512
Fully diluted weighted
average
shares in issue 224 990 010 227 394 485 227 394 485
Earnings per share (cents) 5.3 8.7 8.3
Fully diluted basic 4.2 7.0 6.7
earnings per share (cents)
Headline earnings per 5.1 8.7 8.3
share (cents)
Fully diluted headline
earnings
per share (cents) 4.1 7.0 6.6
The following adjustments
to
income attributable to
shareholders
were taken into account in
the
calculation of headline
earnings:
Attributable to ordinary 9 147 15 361 14 667
shareholders
- Impairment of 323 444 444
goodwill/investments
- Gain on disposal of (1 245)
subsidiary
- net loss/(profit) on
sale of property,
plant and equipment 976 (728) (728)
- Taxation effect of (326) 168 168
adjustments
Headline earnings 8 875 15 245 14 551
Group balance sheet
Audited previously
Audited (restated) reported)
as at as at as at
30 June 30 June 30 June
R"000 2006 2005 2005
ASSETS
Non-current assets
Property, plant and equipment 24 664 24 412 22 529
Intangible assets 54 898 54 299 53 358
Investments in associates 2 466 3 234 3 234
Other financial assets 681 173 173
Deferred tax assets 17 469 10 197 11 050
100 178 92 315 90 344
Current assets 179 260 179 360 179 781
Inventories 83 224 84 780 84 780
Trade and other receivables 87 443 89 071 89 492
Taxation 4 734 3 994 3 994
Derivative financial instruments 1 344 - -
Cash and cash equivalents 2 515 1 515 1 515
Total assets 279 438 271 675 270 125
EQUITY AND LIABILITIES
Equity attributable to equity
holders of the parent
Issued capital 1 741 1 731 1 731
Share premium 50 224 49 752 49 752
Compulsory convertible debentures - 18 641 18 641 18 641
equity portion
Non-distributable reserves 18 952 18 787 18 787
Retained earnings 53 076 43 929 41 997
142 634 132 840 130 908
Minority interests 768 665 665
Total equity 143 402 133 505 131 573
Non-current liabilities
Compulsory convertible debenture - 2 563 2 563
liability
Deferred tax liabilities 1 001 - -
Interest bearing debt 5 268 6 704 6 704
6 269 9 267 9 267
Current liabilities
Trade and other payables 110 531 108 442 108 824
Compulsory convertible debenture 2 462 2 249 2 249
liability
Taxation 5 874 3 024 3 024
Current portion of interest bearing 3 143 4 896 4 896
long term liabilities
Derivative financial instruments 23 - -
Bank overdrafts 7 734 10 292 10 292
129 767 128 903 129 285
Total equity and liabilities 279 438 271 675 270 125
Group cash flow statement
Audited Audited**
year year
ended ended
30 June 30 June
R"000 2006 2005
Cash flows from operating activities 9 282 10 994
Cash generated by operations 22 168 21 420
Net interest paid (6 308) (6 183)
Taxation paid (6 578) (4 243)
Cash flow from investing activities (8 177) (26 759)
Additions to property plant and equipment (9 734) (12 654)
Additions to goodwill (1 155) -
Proceeds on disposal of property, plant and 1 972 1 469
equipment
Proceeds on disposal of intangible assets - 517
Proceeds on disposal/(acquisition) of businesses 740 (16 091)
in subsidiaries
Cash flow from financing activities 2 454 (286)
Long term liabilities repaid (3 113) (553)
Long term loan granted - (682)
Shares repurchased - (3 908)
Employee share options exercised 482 -
Loans repaid by associate companies 5 085 2 128
Short term loans raised - 2 729
Net increase/(decrease) in cash equivalents 3 559 (16 051)
Cash and cash equivalents at beginning of year (8 777) 7 274
Cash and cash equivalents at end of year (5 218) (8 777)
** There has been no effect on cash flows for the prior year adjustments
Summarised group segmental report
Audited (as
Audited previously
Audited (restated) reported)
year year year
ended ended ended
30 June 30 June 30 June
R"000 2006 2005 2005
Revenue 508 714 535 396 535 923
Services 121 967 117 543 117 543
Trading-distribution 386 747 417 853 418 380
Operating profit 11 070 29 363 28 432
Services 25 467 14 883 14 202
Trading-distribution (3 799) 14 482 14 230
Corporate (10 598) (2) -
Depreciation 6 433 9 534 7 790
Services 3 319 4 957 3 896
Trading-distribution 2 958 4 579 3 894
Corporate 156 (2) -
Capital expenditure 9 734 15 078 15 078
Services 3 520 5 717 5 717
Trading-distribution 5 483 9 361 9 361
Corporate 731 - -
Segment assets 279 438 271 675 270 125
Services 78 514 74 217 72 707
Trading-distribution 195 847 183 094 183 052
Corporate 152 198 133 319 133 321
Eliminations (147 121) (118 955) (118 955)
Segment liabilities 136 036 138 170 138 552
Services 60 952 68 567 68 949
Trading-distribution 199 490 180 015 180 015
Corporate 22 715 8 543 8 543
Eliminations (147 121) (118 955) (118 955)
Cash flow from operating 9 282 10 994 10 994
activities
Services 26 555 19 935 19 935
Trading-distribution (2 043) (1 462) (1 462)
Corporate (15 230) (7 479) (7 479)
Cash flow from investing (8 177) (26 759) (26 759)
activities
Services (3 368) (5 445) (5 445)
Trading-distribution (6 194) (21 223) (21 223)
Corporate 1 385 (91) (91)
Cash flow from financing 2 454 (286) (286)
activities
Services (20 585) 2 262 2 262
Trading-distribution 47 515 1 360 1 360
Corporate (24 476) (3 908) (3 908)
Reconciliation of net profit
Year
ended
30 June
R"000 2005
As previously reported
Attributable to minority shareholders 61
Attributable to equity holders of the 14 667
parent
14 728*
Adjusted for:
Adoption of IAS16
Property, plant and equipment
Administration expenses 1 291
Deferred tax (374)
Adoption of IAS39
Accounts receivable
Revenue (527)
Deferred tax 110
Accounts payable
Cost of sales 94
Deferred tax (27)
Prior year adjustment
Restatement of leased assets
Administration expenses 44
Other expenses 28
Finance revenue 109
Deferred tax (54)
Profit for the year 15 422
* As published in the 2005 annual report
Reconciliation of equity
Transition
date
30 June 1 July
R"000 2005 2004
As previously reported
Minority shareholders" interest 665 604
Equity holders of the parent 130 908 117 171
131 573* 117 775
Adjusted for:
Adoption of IAS16
Property, plant and equipment 3 841 2 550
Deferred tax (1 118) (744)
Adoption of IAS39
Accounts receivable (1 278) (751)
Deferred tax 327 218
Accounts payable 379 285
Deferred tax (110) (83)
Prior year adjustment
Restatement of leased assets
Property, plant and equipment (1 014) (1 381)
Accounts receivable 858 1 043
Deferred tax 47 101
Reclassification
Property, plant and equipment (941) (941)
Intangibles 941 941
Equity and reserves as reported under IFRS 133 505 119 013
* As published in the 2005 annual report
Group statement of changes in equity
- Compulsory Non-
Issued Share convertible distributable
R000"s capital premium debentures reserves
Balance at 1 1 786 53 605 16 435 18 015
July 2004
Effect of
adopting IFRS
Restatement of
leased assets
As restated 1 786 53 605 16 435 18 015
Profit for the
year
Derivative
portion of
compulsory
convertible
debentures 2 206
Share based 772
payment
transactions
Repurchase of (55) (3 853)
shares
Balance at 1 1 731 49 752 18 641 18 787
July 2005
As previously 1 731 49 752 18 641 18 787
reported
Effect of
adopting IFRS
Restatement of
leased assets
As restated 1 731 49 752 18 641 18 787
Profit for the
year
Share based 165
payment
transactions
Sale of 10 472
treasury shares
Balance at 30 1 741 50 224 18 641 18 952
June 2006
Attributable
to equity
Retained holders of Minority
R000"s earnings parent interest Total
Balance at 1 July 27 330 117 171 604 117 775
2004
Effect of adopting 1 475 1 475 1 475
IFRS
Restatement of (237) (237) (237)
leased assets
As restated 28 568 118 409 604 119 013
Profit for the year 15 361 15 361 61 15 422
Derivative portion
of compulsory
convertible
debentures 2 206 2 206
Share based payment 772 772
transactions
Repurchase of (3 908) (3 908)
shares
Balance at 1 July 43 929 132 840 665 133 505
2005
As previously 41 997 130 908 665 131 573
reported
Effect of adopting 2 041 2 041 2 041
IFRS
Restatement of (109) (109) (109)
leased assets
As restated 43 929 132 840 665 133 505
Profit for the year 9 147 9 147 103 9 250
Share based payment 165 165
transactions
Sale of treasury 482 482
shares
Balance at 30 June 53 076 142 634 768 143 402
2006
Overview
The overall results for the year under review are disappointing compared to
the normal potential of the group. All but one of the group"s business units
have performed satisfactorily and continue to grow organically into new
products and markets. The food trading division which saw a change of
management in July 2005 incurred a R27,5 million loss before tax largely due
to poor trading decisions which had an effect through to the latter half of
the current 2006 financial year and also due to costs incurred in
rationalising the business and moving it into a single location. A
tremendous amount of energy has been put into turning the food trading
division around with the result that the business has been significantly
rationalised to a much smaller operation that is near break-even point. As a
result, the group expects its results for 2007 to improve significantly.
Review of operating results
Aside from the food trading division, revenue in the group increased by 9,8%
to R391,9 million and operating profits increased by 11,4% to R36,2 million
compared to R32,4 million in 2005. The food trading division"s revenue
declined by 34,8% to R116,8 million and its operating losses before interest
and capital losses climbed from R4,1 million in 2005 to R24,0 million in
2006, leaving the group with an overall reduction in revenue of 5,1% to
R508,7 million and a decline in group profits by 37,2% to R9,3 million.
The Housewares trading division comprising Goldenmarc, Hypertrade, Louis
Smiedt and Ferrengi, showed continued growth for the year. The Goldenmarc
management also took on the responsibility of managing the groceries business
of Sunkist Distributors since March 2006, which started to contribute
positively by the end of the year and shows good promise for the year ahead.
Foodserv achieved excellent organic growth with revenue increasing by 26,2%
and operating results increasing by 46,9% compared to 2005.
Interpark has shown very good results, increasing revenue by 18,3%, excluding
Securipark which was disposed of at the beginning of the financial year.
Operating profits, including the results of associate Katanga, increased by
24,3%.
Levingers had a very good year increasing its operating profits by 82,4%.
Levingers was awarded the best dry cleaner award recently and continues to
seek to open new stores to grow operations and provide new customer services.
Sterikleen, including Autoclenz, together with the Katanga cleaning division,
has done well over the past year with operating profits increasing by an
overall 21,8%.
Sunkist Distributors has received the full attention of the group in an
effort to reverse its poor performance. During the past year a large team
effort was made to install strict discipline over trading and the company has
managed to eliminate most of the fixed costs that were excessive to the
business" needs. A large retrenchment exercise was carried out and new
reporting systems implemented to manage the individual profit centres in the
business. Orders that were placed as far back as early 2005 for the purchase
of nut stock in advance had to be traded out at much lower commodity prices,
resulting in insufficient margin to sustain the high level of fixed costs.
These are now fully cleared through the system and the business is slowly
starting to make a recovery in the market place. Cash flow consumed in
operations for the year amounted to R14,5 million. The performance of this
business is under constant review to ensure the losses of the past are not
repeated. In order to focus attention on ongoing business, the group has
recently settled the matter relating to the claim against the former
management of the business.
Other factors affecting results
The profit on disposal of the Securipark business of R1,2 million is included
in earnings before tax. The full adoption of International Financial
Reporting Standards ("IFRS") for the first time has led to a restatement of
prior year figures, with property, plant and equipment being the main item
that was affected. The net result of the adoption of IFRS and prior year
adjustments was to increase 2005 results by R0,7 million and to increase
prior years" retained income by R1,2 million. Property, plant and equipment
scrapped and disposed of, mainly in Sunkist, resulted in a loss on disposal
of R1,0 million.
During the year, the group disposed of 1 000 000 treasury shares held in its
subsidiary company for the purpose of meeting share option obligations. The
shares were sold at an average price of 69 cents each and the group received
an average of 40 cents per share in terms of the share options that were
issued.
Black economic empowerment
On 19 May 2006 the group announced the conclusion of an agreement with
Akenton Services as a BEE partner to take up a 25% shareholding in the
operating subsidiaries of the group. The deal had been valued on information
available to the directors at the time. Subsequent to that date, the group
concluded its budgets and forecasts for 2007 and beyond and decided to revise
significantly upwards the terms and conditions of the deal it had signed with
Akenton Services. On 11 August 2006 the group published a cautionary
announcement in this regard and all indications are that revised contracts
will be signed in early October 2006. Akenton Services represents an
important step for the group in securing its markets, particularly in the
Services segment in the immediate future but also in the Trading-Distribution
segment in the years ahead. The board is of the view that Akenton Services
will add significant value, not only as a BEE partner but also for their
innovative and dynamic outlook on business.
Future prospects
Notwithstanding a more challenging economic outlook for 2007, the group is
well placed to continue its organic growth into new products and markets, and
to selectively identify acquisitions to enhance group earnings. This, along
with the stemming of losses in the food trading division, creates a positive
outlook for the group in 2007.
In addition, the group is pursuing various projects to improve its
operational efficiencies including introducing new internal reporting formats
and the possible merger of various legal entities to reduce costs.
Changes to senior management
In November 2005 the group appointed Rob Owens as the group"s Chief Financial
Officer. Rob is a Chartered Accountant with many years" experience in
financial management and has added significantly to strengthening the team at
head office. On 23 February 2006, the board appointed Gordon Hulley as Chief
Operating Officer of the group. Gordon has, in the short span of time he has
been with the group, made a valuable contribution in stemming the losses at
the food trading division as well as introducing various new initiatives.
He will utilise his extensive experience to improve the overall efficiency of
the group"s operations. On 21 July 2006, Chris Hall announced his resignation
as Chief Executive Officer of the group in order to pursue personal
interests. His resignation is to take effect on 31 December 2006. A
replacement for the Chief Executive Officer has not yet been identified by
the board and an announcement in that regard will follow in due course.
Dividends
The board has decided not to declare any dividend at this time as the group
continues to plan expansion by acquisition to the overall economic benefit of
shareholders and will utilise its cash resources for that purpose and for
meeting the working capital requirements of the group.
For and on behalf of the board
C Hall Sandton
Chief Executive Officer 5 October 2006
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 International Financial Reporting Standards
("IFRS"). This is the first time the group has fully adopted IFRS. Results
have been restated to give effect to the changeover to IFRS. Property, Plant
and Equipment was the primary area impacted by this changeover in the current
reporting period and is now accounted for under IAS16: Property, Plant and
Equipment.
The main change was the restatement of property, plant and equipment at the
date of transition (1 July 2004) and the adjustment of the depreciation
methodology used. All other accounting policies have remained consistent
with those applied in the audited financial statements for the year ended 30
June 2005. The financial effects are set out in the reconciliation of net
profit and of equity for applying the measurement criteria of IAS16 together
with other minor adjustments in line with IFRS and a correction of a prior
year error in the results of Interpark where owned assets that had been
rented out had been classified as fixed assets. The adoption of IFRS
represented an accounting change only and had no effect on cash flows. The
comparative information for 30 June 2005 has been restated accordingly.
FURTHER CAUTIONARY ANNOUNCEMENT REGARDING THE INTRODUCTION OF AKENTON
SERVICES (PROPRIETARY) LIMITED ("AKENTON") AS A BLACK ECONOMIC EMPOWERMENT
("BEE") SHAREHOLDER IN EXCELLERATE
Shareholders are referred to the cautionary announcement dated 11 August 2006
in which they were advised that the terms and conditions of the two
transactions entered into with Akenton, in terms of which Akenton would be
introduced as a 25% BEE shareholder in the Excellerate group ("the
transactions"), were to be re-negotiated with Akenton.
The terms and conditions of the transactions are still being re-negotiated
with Akenton and accordingly, shareholders are advised to continue to
exercise caution when dealing in the company"s securities until a further
announcement is made.
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: 06/10/2006 05:11:54 PM Produced by the JSE SENS Department
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