Wrap Text
Unaudited interim results for the six months ended 31 December 2013
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH ISIN: ZAE000109435
(“ARB” or “the company” or “the group”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
HIGHLIGHTS
• Revenue up 20% to R1.15 billion
• Operating profit up 31% to R100 million
• Headline earnings per share up 35% to 24,88 cents
• Ungeared with R116 million net cash on hand
BASIS OF PREPARATION
The condensed unaudited consolidated interim financial statements for
the six months ended 31 December 2013 have been prepared in compliance
with International Financial Reporting Standards (“IFRS”), IAS34 –
Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council,
the South African Companies’ Act and the Listings Requirements of the
JSE Limited. The accounting policies applied and presentation are
consistent with those applied in the annual financial statements for the
year ended 30 June 2013 and the six months ended 31 December 2012. The
condensed consolidated interim financial statements have not been
audited or reviewed by the group’s auditors.
The unaudited interim financial statements have been prepared under the
supervision of the group’s Financial Director, WR Neasham CA(SA).
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2013 2012 2013
% Change R000’s R000’s R000’s
Revenue 20 1 154 170 964 656 1 944 541
Cost of sales 904 624 768 665 1 519 421
Gross profit 27 249 546 195 991 425 120
Other income 2 198 5 394 5 807
Operating expenses (151 396) (124 909) (270 452)
Profit before interest and
taxation 31 100 348 76 476 160 475
Interest received 6 199 4 665 10 418
Interest paid (97) (846) (971)
Profit before taxation 33 106 450 80 295 169 922
Taxation 29 408 21 810 46 242
Profit for the period 32 77 042 58 485 123 680
Revaluation of property, plant and
equipment (net of taxation) - - 10 928
Total comprehensive income for
the period 32 77 042 58 485 134 608
Profit for the period
attributable to: 32 77 042 58 485 123 680
Minority interests 42 18 531 13 016 28 550
Ordinary shareholders 29 58 511 45 469 95 130
Total comprehensive income
attributable to: 32 77 042 58 485 134 608
Minority interests 42 18 531 13 016 28 550
Ordinary shareholders 29 58 511 45 469 106 058
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec 31 Dec 30 June
2013 2012 2013
% Change R000’s R000’s R000’s
Reconciliation of headline
earnings
Profit for the period
attributable to
ordinary shareholders 29 58 511 45 469 95 130
Surplus on disposal of
property, plant and equipment
(net of taxation and minority
interests) (52) (2) (27)
Bargain purchase price
(net of minorities) - (2 167) (2 167)
Headline earnings 35 58 459 43 300 92 936
Number of ordinary shares in
issue (000’s) 235 000 235 000 235 000
Weighted average number of
ordinary shares (000’s) 235 000 235 000 235 000
Diluted number of ordinary
shares (000’s) 235 000 235 360 235 340
Earnings per share (cents) 29 24,90 19,35 40,48
Diluted earnings per share (cents) 29 24,90 19,32 40,42
Headline earnings per share (cents) 35 24,88 18,43 39,55
Diluted headline earnings
per share (cents) 35 24,88 18,40 39,49
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2013 2012 2013
% Change R000’s R000’s R000’s
ASSETS
Non-current assets
Property, plant and equipment 205 437 173 315 193 621
Intangible assets 83 971 78 471 84 411
Deferred taxation 12 867 6 366 11 859
Current assets
Inventory 392 828 304 372 341 664
Trade and other receivables 300 373 255 224 311 679
Taxation 490 1 145 371
Cash resources 120 229 153 244 202 790
TOTAL ASSETS 1 116 195 972 137 1 146 395
EQUITY AND LIABILTIES
Equity and reserves
Share capital 24 24 24
Share premium 116 150 116 150 116 150
Revaluation reserve 60 557 49 629 60 557
Accumulated profit 476 442 429 840 479 501
Attributable to ordinary
shareholders 10 653 173 595 643 656 232
Minority interests 181 986 157 321 172 855
Total shareholders’ funds 11 835 159 752 964 829 087
Non-current liabilities
Deferred lease payments - 771 -
Deferred taxation 36 484 38 843 37 893
Current liabilities
Vendor loan account 1 468 - 2 259
Trade and other payables 231 792 178 142 275 045
Deferred lease payments 808 69 836
Taxation payable 6 655 715 1 238
Bank overdraft 3 829 633 37
TOTAL EQUITY AND LIABILITIES 1 116 195 972 137 1 146 395
Number of ordinary shares
in issue (000’s) 235 000 235 000 235 000
Net asset value per share (cents) 10 277,95 253,47 279,25
Net tangible asset value
per share (cents) 8 250,88 231,50 252,42
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2013 2012 2013
% Change R000’s R000’s R000’s
Cash generated by trading 37 106 011 77 591 165 838
Increase in net working capital (83 111) 33 120 31 318
Cash generated by operating
activities 22 900 110 711 197 156
Interest received 6 199 4 665 10 418
Interest paid (97) (846) (971)
Dividends paid (70 970) (38 695) (38 695)
Taxation paid (26 527) (26 839) (49 328)
Cash flows from operating
activities (68 495) 48 996 118 580
Cash flows from investing
activities (17 067) (40 377) (79 344)
Cash flows from financing
activities (791) (35 378) (15 853)
Net decrease in cash resources (86 353) (26 759) 23 383
Cash resources at beginning
of period 202 753 179 370 179 370
Cash resources at end of period 116 400 152 611 202 753
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Revalu-
Share Share ation
Capital Premium Reserve
R000’s R000’s R000’s
Balance at 30 June 2012 (audited) 24 116 150 49 629
Total comprehensive income for the period - - -
Dividends paid - - -
Balance at 31 December 2012 (unaudited) 24 116 150 49 629
Total comprehensive income for the period - - 10 928
Balance at 30 June 2013 (audited) 24 116 150 60 557
Total comprehensive income for the period - - -
Dividends paid - - -
Balance at 31 December 2013 (unaudited) 24 116 150 60 557
Accumu-
lated Minority
Profit Interests Total
R000’s R000’s R000’s
Balance at 30 June 2012 (audited) 416 566 150 805 733 174
Total comprehensive income for the period 45 469 13 016 58 485
Dividends paid (32 195) (6 500) (38 695)
Balance at 31 December 2012 (unaudited) 429 840 157 321 752 964
Total comprehensive income for the period 49 661 15 534 76 123
Balance at 30 June 2013 (audited) 479 501 172 855 829 087
Total comprehensive income for the period 58 511 18 531 77 042
Dividends paid (61 570) (9 400) (70 970)
Balance at 31 December 2013 (unaudited) 476 442 181 986 835 159
CONDENSED GROUP SEGMENT REPORT
Unaudited for the 6 months ended 31 December 2013
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 984 850 173 536 17 533
Profit before interest and taxation 67 072 20 183 13 076
Segment assets 724 830 178 244 374 164
Segment liabilities 217 429 90 432 89 439
Net segment assets 507 401 87 812 284 725
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (21 749) 1 154 170
Profit before interest and taxation 17 100 348
Segment assets (161 043) 1 116 195
Segment liabilities (116 264) 281 036
Net segment assets (44 779) 835 159
Unaudited for the 6 months ended 31 December 2012
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 829 035 139 670 20 455
Profit before interest and taxation 46 419 14 420 15 637
Segment assets 585 402 139 872 312 513
Segment liabilities 148 219 70 486 25 695
Net segment assets 437 183 69 386 286 818
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (24 504) 964 656
Profit before interest and taxation - 76 476
Segment assets (65 650) 972 137
Segment liabilities (25 227) 219 173
Net segment assets (40 423) 752 964
Audited for the year ended 30 June 2013
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 1 678 576 281 177 38 698
Profit before interest and taxation 101 301 30 498 30 052
Segment assets 733 653 153 527 352 781
Segment liabilities 253 044 72 467 40 566
Net segment assets 480 609 81 060 312 215
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (53 910) 1 944 541
Profit before interest and taxation (1 376) 160 475
Segment assets (93 566) 1 146 395
Segment liabilities (48 769) 317 308
Net segment assets (44 797) 829 087
COMMENTARY
The board of ARB (“the board”) is pleased to present the group’s interim
results for the six months ended 31 December 2013 (“the period”).
Excellent trading performances from both the Electrical and Lighting
divisions delivered robust top and bottom line growth.
Financial review
The group achieved half-year revenue of over R1 billion for the first
time representing growth of 20%. The revenue growth was predominantly
organic reflecting strong market share gains by both the Electrical and
Lighting divisions. Improved trading disciplines saw the group’s
overall gross margin increase from 20.3% to 21.6%. Overheads were well
controlled across the group and increased due to the higher sales
volumes as well as the inclusion of Elektro Vroomen’s overheads
following its acquisition in January 2013. Operating profit increased
by 31% to R100.3 million resulting in an improvement in the group’s
operating margin from 7.9% to 8.7%.
Net interest received increased despite the payment of annual and
special dividends totaling R71.0 million midway through the period.
Headline earnings per share increased by 35% to 24.88 cents (Dec 2012:
18.43 cents).
The group’s operations remained cash generative although at a lower
level than in the prior period due to an R83.1 million investment in
working capital in line with the increase in revenue, while in the prior
year cash generated from operating activities was enhanced by the
unwinding of Industrial Cable Suppliers’ overstocked position inherited
on acquisition of that business.
Despite the additional investment referred to above, net working capital
was maintained at 20% of annualised revenue. Inventory levels increased
due to improved sales volumes and stock orders ahead of the upcoming
Chinese New Year factory shutdowns. The trade receivables book
continues to be well managed in an increasingly challenging credit
environment.
Net capital expenditure for the period amounted to R17.1 million,
approximately R7.0 million of which related to the construction of ARB
Electrical’s new Nelspruit premises which were completed in January
2014. The construction of new premises in Rustenburg will commence
shortly and is expected to be completed during the third quarter of
2014.
The group’s statement of financial position remains robust reflecting a
net asset value per share of 277.95 cents (Dec 2012: 253.47 cents) and a
net ungeared cash position of R116.4 million.
Segmental review
Electrical (revenue up 19% and operating profit up 44%)
Boosted by strong revenue growth of 19% to R984.9 million and improved
gross margins, the Electrical segment produced better than expected
results for the period. Overheads were well controlled resulting in
operating profits increasing to R67.1 million (Dec 2012: R46.4 million)
and the operating margin improving to 6.8% (Dec 2012: 5.6%).
Lighting (revenue up 24% and operating profit up 40%)
The Lighting segment again produced very pleasing results. Buoyed by
the introduction of new product categories and key customer gains,
revenue grew by 24% to R173.5 million (Dec 2012: R139.7 million).
Although gross margins were slightly lower, tight cost control resulted
in the operating margin improving to 11.6% (Dec 2012: 10.3%).
Corporate (revenue down 14% and operating profit down 16%)
The Corporate segment represents the group’s ungeared property
portfolio, comprising 15 properties valued at R162.6 million, the
centralised treasury function and ARB IT Solutions (Pty) Limited. Given
the largely fixed nature of its revenue and overheads (save for the non-
recurring revenue related to the implementation of the Xact II ERP
solution earned in the prior period), the Corporate division’s results
for the period were in line with expectations.
Corporate activity and expansion
Although acquisitions continue to form an integral component of the
group’s growth and expansion strategy, no new corporate activity was
undertaken during the period as management focused on leveraging
operational efficiencies and capitalizing on existing market
opportunities.
Acquisitions which are aligned with the group’s long-term strategy of
offering a diversified range of industrial products to a broad spectrum
of industries and market segments continue to be evaluated.
Prospects
Although market conditions are expected to remain challenging for the
foreseeable future, both the Electrical and Lighting divisions are well
placed to carry their positive momentum into the second half of the
financial year.
The above prospects statements have not been reviewed or reported on by
the company’s auditors.
Subsequent events
No significant events have occurred in the period between the reporting
date and the date of this announcement.
Dividends
ARB’s policy is to distribute a single, annual dividend for the full
year of up to a maximum of 40% of net profit after taxation. In line
with this policy, no interim dividend has been declared.
Appreciation
We would like to acknowledge our management and staff, our fellow
directors as well as our valued customers, suppliers, business partners,
advisors and shareholders for their continued support.
For and on behalf of the Board.
Alan R Burke Byron Nichles
Chairman Chief Executive Officer
13 February 2014
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; WR Neasham
(Financial Director); B Nichles (Chief Executive Officer); RB
Patmore*>#; G Pretorius*>
*non-executive >independent #lead independent director
Registered office: 10 Mack Road, Prospecton, Durban, 4110 (PO Box 26426,
Isipingo Beach, 4115)
Company secretary: M Louw, 11 Larch Nook, Zwartkop Ext 4, Centurion,
0046 (PO Box 23305, Gezina, 0031)
Auditors: PKF Durban, 12 on Palm Boulevard, Gateway, 4319 (PO Box 1858,
Durban, 4000)
Sponsor: Grindrod Bank Limited, 3rd Floor, Grindrod Tower, 8A Protea
Place, Sandton, 2196 (PO Box 78011, Sandton, 2146)
Transfer secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown,
2107)
Investor relations: Keyter Rech Investor Solutions CC, Fountain Grove,
5 2nd Road, Hyde Park, 2196 (PO Box 653078, Benmore, 2010)
Date: 13/02/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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