Wrap Text
Unaudited interim results for the six months ended 31 October 2015
Ellies Holdings Limited
Registration number: 2007/007084/06
JSE share code: ELI
ISIN: ZAE000103081
UNAUDITED INTERIM RESULTS
for the six months ended 31 October 2015
Revenue (Continuing operations) Up 27.5%
Revenue (Discontinued consumer operations) Up 3.3%
PAT (Continuing operations) Up 104.3%
PAT (Discontinued consumer operations) Up 193.1%
LPS of (1.56 cents) Improved by 88.1%
HLPS of (1.02 cents) Improved by 92.2%
NAV per share 166.75 cents Down(49.1%)
NTAV per share 130.03 cents Up (49.8%)
Interim consolidated statement of financial position
Unaudited Unaudited Audited
as at 31 October as at 31 October as at 30 April
2015 2014 2015
R’000 R’000 R’000
ASSETS
Non-current assets 319 847 250 274 248 631
Property, plant and equipment 22 625 28 801 23 254
Goodwill and other intangible assets 173 041 207 859 173 407
Other financial assets 1 199 694 1 144
Trade and other receivables 35 196 – –
Amounts due from contract customers 36 350 – –
Deferred taxation 51 436 12 920 50 826
Current assets 473 293 727 629 536 100
Inventories 5 510 100 950 15 824
Trade and other receivables 181 532 156 450 132 584
Amounts due from contract customers 264 925 435 172 348 615
Taxation receivable 162 29 266 29 267
Bank and cash balances 21 164 5 791 9 810
Group disposals held for sale/distribution 964 530 1 041 832 948 784
Infrastructure segment 53 273 – 49 517
Consumer and property segment (Note 1) 911 257 1 041 832 899 267
Total assets 1 757 670 2 019 735 1 733 515
EQUITY AND LIABILITIES
Capital and reserves 1 025 103 988 750 855 047
Stated capital 837 213 501 494 658 334
Non-distributable reserves (177 664) (177 448) (177 763)
Accumulated profits 374 586 670 872 383 667
Equity attributable to equity holders
of the parent 1 034 135 994 918 864 238
Non-controlling interests (9 032) (6 168) (9 191)
Non-current liabilities 100 771 19 035 96 210
Interest-bearing liabilities 99 877 1 001 95 260
Shareholder loans payable – 536 –
Deferred taxation 894 17 498 950
Current liabilities 204 406 519 019 211 294
Interest-bearing liabilities 164 240 711 210
– payable after 12 months – 150 547 –
– payable within 12 months 164 90 164 210
Vendor loans payable 3 000 3 000 3 000
Shareholder loans payable 342 311
Trade and other payables 190 829 167 656 186 915
Amounts due to contract customers 8 171 18 511 13 662
Provisions 1 314 1 414 7 116
Taxation payable 551 26 45
Shareholders for dividends 35 35 35
Bank overdraft – 87 666 –
Group disposals held for sale/distribution 427 390 492 931 570 964
Infrastructure segment 13 029 – 4 444
Consumer and property segment (Note 2) 414 361 492 931 566 520
Total equity and liabilities 1 757 670 2 019 735 1 733 515
Supplementary information:
Net asset value per share (cents) 166,75 327,81 190,76
Net tangible asset value per share (cents) 130,03 258,90 140,70
Number of shares in issue at the end
of period 620 158 235 303 505 691 453 057 398
Note 1 – Assets: Consumer goods and
property segment held for sale/distribution
Non-current assets 204 262 224 219 207 094
Property, plant and equipment 137 519 150 604 142 061
– Land and buildings 88 763 97 887 89 201
– Other 48 756 52 717 52 860
Goodwill and other intangible assets 53 672 55 663 53 672
Investment in associate 10 712 11 271 10 011
Deferred taxation 2 359 6 681 1 350
Current assets 706 995 817 613 692 173
Inventories 493 062 584 457 467 080
Trade and other receivables 202 334 208 588 211 210
Taxation receivable 456 975 1 283
Bank and cash balances 11 143 23 593 12 600
911 257 1 041 832 899 267
Note 2 – Liabilities: Consumer goods and
property segment held for sale/distribution
Non-current liabilities 50 441 3 952 48 946
Interest-bearing liabilities 47 350 1 020 46 271
Vendor loans payable – 896 –
Shareholder loans payable 1 917 2 036 1 917
Deferred taxation 1 174 – 758
Current liabilities 363 920 488 979 517 574
Interest-bearing liabilities 6 419 140 184 154 796
– payable after 12 months – 87 121 –
– payable within 12 months 6 419 53 063 154 796
Vendor loans payable 980 – 938
Trade and other payables 185 835 295 577 230 673
Provisions 2 430 2 129 2 302
Taxation payable 5 404 357 47
Bank overdraft 162 852 50 732 128 818
414 361 492 931 566 520
Interim consolidated statement of comprehensive income
Unaudited Restated
six months six months Restated
ended ended* year ended*
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Revenue 205 112 160 910 201 315
Profit/(loss) before interest, taxation,
depreciation and amortisation ("EBITDA") 2 682 (14 241) (221 769)
Depreciation (1 360) (1 284) (2 731)
Amortisation of intangibles (365) (365) (732)
Impairment of goodwill and other intangibles – – (34 428)
Profit/(loss) before interest and taxation 957 (15 890) (259 660)
Interest received 5 681 3 465 10 198
Interest paid (5 990) (17 014) (36 815)
Net profit/(loss) before taxation 648 (29 439) (286 277)
Taxation 259 8 219 35 067
Profit/(loss) for the period from continued
operations 907 (21 220) (251 210)
Discontinued operations – Infrastructure
segment (23 054) (7 453) (24 769)
Discontinued operations – Consumer and
property segment (Note 3) 13 225 (14 205) (57 127)
Loss for the period (8 922) (42 878) (333 106)
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss
– Foreign currency translation reserve –
discontinued operations 99 (104) (419)
Total comprehensive loss for the period (8 823) (42 982) (333 525)
Attributable to:
Equity holders of the parent (9 081) (39 767) (326 972)
Non-controlling interests 159 (3 111) (6 134)
– Continued operations (Infrastructure segment) 861 (2 103) (4 101)
– Discontinued operations (Consumer and
property segment) (702) (1 008) (2 033)
Net loss after taxation (8 922) (42 878) (333 106)
Attributable to:
Equity holders of the parent (8 982) (39 871) (327 391)
Non-controlling interests 159 (3 111) (6 134)
– Continued operations (Infrastructure segment) 861 (2 103) (4 101)
– Discontinued operations (Consumer and
property segment) (702) (1 008) (2 033)
Total comprehensive loss for the period (8 823) (42 982) (333 525)
* Restated – Refer to discontinued operations note.
Unaudited Restated
six months six months Restated
ended ended* year ended*
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Supplementary information:
Basic loss per share (cents) (1,56) (13,10) (92,33)
– Infrastructure continued operations 0,01 (5,97) (69,76)
– Infrastructure discontinued operations (3,95) (2,46) (6,99)
– Consumer and property discontinued
operations 2,39 (4,68) (15,58)
Headline loss per share (cents) (1,02) (13,17) (81,34)
– Infrastructure continued operations 0,03 (6,22) (60,22)
– Infrastructure discontinued operations (3,42) (2,46) (6,24)
– Consumer and property discontinued
operations 2,36 (4,50) (14,92)
Weighted average number of shares in issue 583 633 462 303 505 691 354 135 067
Ellies has no dilutionary instruments in issue
Note 3 – Consumer goods and property
segment held for sale/distribution
Revenue 737 102 713 284 1 388 932
Profit/(loss) before interest, taxation,
depreciation and amortisation ("EBITDA") 39 618 2 085 (33 960)
Depreciation (6 811) (6 245) (13 648)
Amortisation of intangibles – (67) (134)
Impairment of intangibles – – (2 551)
Profit/(loss) before interest and taxation
("PBIT") 32 807 (4 227) (50 293)
Interest received 1 287 1 079 1 376
Interest paid (15 180) (15 108) (24 306)
Share of losses from associate (327) (591) (2 729)
Net profit/(loss) before taxation ("PBT") 18 587 (18 847) (75 952)
Taxation (5 362) 4 642 18 825
Net profit/(loss) after taxation ("PAT") 13 225 (14 205) (57 127)
* Restated – Refer to discontinued operations note.
Reconciliation of basic earnings and headline earnings
Unaudited Restated
six months six months Restated
ended ended* year ended*
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Net loss for the period attributable to equity
holders of the parent (9 081) (39 767) (326 972)
Adjusted for:
Loss/(profit) on sale of property, plant
and equipment 14 (287) 2 682
– Infrastructure continued operations 219 (75) (703)
– Infrastructure discontinued operations – – 3 719
– Consumer and property discontinued
operations (205) (212) (334)
Impairment of goodwill and other intangibles 3 111 – 36 979
– Infrastructure continued operations – – 34 428
– Infrastructure discontinued operations 3 111 – –
– Consumer and property discontinued
operations – – 2 551
Tax effect on adjustments (4) 80 (751)
Headline loss attributable to ordinary
shareholders (5 960) (39 974) (288 062)
* Restated – Refer to discontinued operations note.
Interim consolidated statement of changes in equity
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Balances at beginning of the period 855 047 1 031 732 1 031 732
Increase in stated capital through the
issue of shares 178 879 – 156 840
Total comprehensive loss for the period (8 823) (42 982) (333 525)
Balances at end of the period 1 025 103 988 750 855 047
Interim consolidated statement of cash flows
Unaudited Restated
six months six months Restated
ended ended* year ended*
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Cash flows from operating activities (59 498) 12 166 (52 067)
Cash (utilised by)/generated from operations (15 243) 43 451 (56 054)
Interest received 1 843 1 137 1 995
Interest paid (5 949) (32 081) (36 815)
Taxation received/(paid) 29 411 (341) (944)
Cash flows – continuing operations 10 062 ** (91 818)
Cash flows – discontinued operations (69 560) ** 39 751
Cash flows from investing activities (822) 946 (2 333)
Cash flows – continuing operations 206 ** 15 085
Cash flows – discontinued operations (1 028) ** (17 418)
Cash flows from financing activities 36 183 (14 656) 55 462
Cash flows – continuing operations 183 481 *** ***
Cash flows – discontinued operations (147 298) *** ***
Net (decrease)/increase in cash and
cash equivalents (24 137) (1 544) 1 062
Cash and cash equivalents at the beginning
of the period (106 408) (107 470) (107 470)
Cash and cash equivalents at the end
of the period (130 545) (109 014) (106 408)
* Restated – Refer to discontinued operations note.
** The nature of the group structure between continued and discontinued operations as at 31 October 2014, makes it
impracticable to calculate the split between the continued and discontinued operations at this date.
*** Due to the central treasury function within the group, it is considered impracticable to calculate the cash and cash
equivalents attribution to continued and discontinued operations for the 2015 interim and year-end financial
periods relating to financing activities, as no separation basis existed in the prior periods.
Segmental analysis
Unaudited Restated
six months six months Restated
ended ended* year ended*
31 October 2015 31 October 2014 30 April 2015
R’000 R’000 R’000
Revenue 989 089 1 012 364 1 803 150
Infrastructure 251 987 299 080 414 218
– Total – continued operations 205 112 162 290 201 357
– Total – discontinued operations 46 875 138 170 212 903
– Inter-segment – (1 380) (42)
Consumer goods – discontinued operation 737 102 713 284 1 388 932
– Total 737 102 713 408 1 388 932
– Inter-segment – (124) –
Property division – discontinued operation – – –
– Total 5 945 5 831 12 805
– Inter-segment (5 945) (5 831) (12 805)
Segmental profits/(losses) from operations
Net profit/(loss) before interest and taxation 10 383 (31 059) (347 083)
Infrastructure – continued operation 630 (15 553) (259 128)
Infrastructure – discontinued operation (23 054) (10 351) (34 401)
Consumer goods – discontinued operation 28 692 (8 663) (60 225)
Property division – discontinued
operation 4 115 4 436 9 932
Other – discontinued operation (327) (591) (2 729)
Holding company/consolidation 327 (337) (532)
Interest received 6 968 4 544 11 574
Infrastructure – continued operation 5 681 3 465 10 198
Consumer goods – discontinued operation 1 287 1 079 1 376
Interest paid (21 170) (32 122) (61 121)
Infrastructure – continued operation (5 990) (17 014) (36 815)
Consumer goods – discontinued operation (11 045) (10 827) (15 601)
Property division – discontinued operations (4 093) (4 239) (8 622)
Deemed vendor interest – discontinued
operations (42) (42) (83)
Net loss before taxation (3 819) (58 637) (396 630)
* Restated – Refer to discontinued operations note.
Notes to the unaudited interim results
Basis of preparation and accounting policies
The unaudited interim results for the six months ended 31 October 2015 have been prepared in
accordance with International Financial Reporting Standards ("IFRS"), and comply with IAS 34 –
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Board or its successor, the requirements of the Companies Act, No. 71 of 2008 of
South Africa and the Listings Requirements of the JSE Limited. The accounting policies used in
the preparation of the unaudited interim results for the six months ended 31 October 2015, are
consistent with those applied in the audited financial statements for the year ended 30 April 2015.
During the current interim period the Group adopted those standards and interpretations in issue
and effective for the interim period. The adopting of these new and amended standards and
interpretations has not had a significant impact on the Group’s adopted accounting policies.
These results have been compiled under the supervision of the Chief Financial Officer, IM Lipworth
CA(SA). The interim results have not been reviewed or reported on by the group auditors, Grant
Thornton Johannesburg Partnership.
Discontinued operations and disposal groups held for sale/distribution
The company has applied IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, in
the preparation of these results due to the following:
1. The Group announced last year that it intends to unbundle and list its Consumer goods
business and property division separately and thus began disclosing this segment as a
discontinued operation. Due to regulatory issues as a result of the April 2015 poor trading
performance, the Group has had to delay this action. The board of directors ("the board") will
continue to pursue the unbundling as soon as it is possible to do so. The board believes that
treating the Consumer goods business and property division as discontinued is still valid and
has continued with the IFRS 5 treatment.
2. Within the Infrastructure division, as disclosed in the April 2015 annual financial results,
Megatron has scaled down and shut most of its South African operations. In addition to this the
Infrastructure division has entered into an agreement for the sale of its Telecoms business.
This sale has taken place subsequent to the reporting period and has thus not been disclosed
in these results.
These two Infrastructure operations have accordingly been reclassified to discontinued
operations.
Based on the above, the results of the Consumer goods business and property division and the
Infrastructure division and Telecoms businesses have been reclassified to discontinued operations
in the condensed consolidated statement of profit and loss and other comprehensive income and
its assets and liabilities reclassified to disposal groups held for sale/distribution in the statement
of financial position. In addition, the prior year interim results for the six months ended 31 October
2014 and the results for the 12 months ended 30 April 2015, numbers have been restated, where
applicable, to show the Continuing and Discontinued operations consistent with the abovementioned.
Subsequent events
Other than the sale of the Infrastructure Telecoms business disclosed above, no other matters have
occurred between the reporting date and the date of approval of the Interim Financial Statements
which would have a material effect on these financial statements.
Commentary
Introduction
Ellies is a leading South African manufacturer, wholesaler, importer and distributor in diversified
sectors servicing the local and African markets. The Group comprises two main segments, namely
Infrastructure and Consumer goods.
Overview
During the six months under review the Company successfully completed its capital raises,
debt restructure with the Company’s primary lender, The Standard Bank of South Africa Limited
('Standard Bank’) and its corporate restructure.
In terms of the Rights Offer which was completed in July 2015, the Company issued a further
167 100 837 shares at a price of R1.10 per share, taking the total issued share capital of the company
to 620 158 235 ordinary shares. An amount of R150 million from this capital raise was used to
further reduce the company’s debt, with the balance of the money used to fund working capital.
With the successful launch of the Rights Offer, the Company was able to complete its corporate and
debt restructure as announced on SENS on 4 May 2015, with retrospective effect from 1 May 2015.
In the prior period, all interest-bearing liabilities were classified as current liabilities as a result
of IFRS requirements, where if an entity breaches a provision of a long-term loan arrangement on
or before the end of the reporting period, that liability then becomes payable on demand. At the
time, the lender had agreed not to demand immediate payment and the payment terms have since
reverted to beyond 12 months at the date of authorisation of those financial statements.
The priority within the Group still remains the improvement of its cash position.
Within the Infrastructure segment we continue to cut down on overheads and are placing emphasis
on completing existing projects where historically significant cash was spent, and collecting on
the debtors. Included in the trade debtors are amounts of R35.2 million under non-current assets
and R25.5 million under current assets, for a project that was completed in October 2015 with
monthly payments due over a three-year period. We are in the process of finalising a discounting
arrangement to have these amounts settled early. As these debtors are denominated in foreign
currency and with the decline in the rand since the jobs were completed, we do not expect to make
any losses from this discounting arrangement. Certain historical projects have been put on hold and
have been moved to non-current assets. Management believes that these projects can be completed
in the future and thus no impairments were required. In addition to this the Group was able to work
closely with the relevant authorities to ensure that the R29 million tax refund was received.
Within the Consumer and property segment, the Group continues to push the sale of its overstocked
items at lower margins. The segment continues to explore options to unlock further cash through
the sale of its property portfolio. To date we have had limited success but continue to pursue this.
The Company’s Separation Committee will continue to explore all the options available in order
to ensure that the unbundling of the Ellies consumer business and the Megatron Infrastructure
business is progressed timeously. The board still believes that the unbundling and simultaneous
separate listing of the Ellies consumer business will provide greater investor flexibility, increased
focus by the separate businesses and the ability of the businesses to access different sources of
funding better suited to their needs and cash flow profiles.
The Infrastructure division
The continuing operations of the infrastructure division returned a profit of R0.9 million
(R21.2 million loss: 31 October 2014) on revenue of R205 million (R160.9 million: 31 October 2014).
Improved liquidity as a result of the successful capital raising, was only felt in the second half of the
reporting period. Reductions in overhead were also phased in over the period and the full impact
will be felt in the second half. The entire fixed cost structure of the Company was reviewed with cost
reductions across the board being implemented to reflect the ongoing strategy of matching variable
costs to each project.
With the closure of the manufacturing business and completion of our South African contracts
behind us, the division is now a 100% export focused entity, with all future revenues denominated
in foreign currency. The sharp decline in the USD/ZAR exchange rate subsequent to the reporting
period is expected to have a positive affect for the division in the following period.
The current order book is split across both public and private sector projects in Africa. The collapse
in commodity prices has not had an impact on the current order book, but this poses a threat in the
future, as most African countries rely heavily on extractive industries to support their economic
growth. The variable cost model with reduced fixed costs has been implemented to mitigate these
risks in future.
The Consumer goods division
While trading conditions remain strained with the consumer under pressure, Ellies Electronics has
been trading positively in the six months ended to 30 October 2015. The main factors that have
contributed towards this positive trading are the reduced costs in overhead with a lower staff count
together with increased efficiencies implemented. The segment has had a hard look at reducing
handling costs and making products more competitive, without compromising on the quality of our
products, in an environment where the consumer is more price conscious. We remain focused on
maximising gain with our distribution network and wide base of customers.
We have reduced our inventory levels significantly although this may not be apparent in monetary
terms as it is disguised by the major change in exchange rate where the same quantum of goods is
on average 20% higher in cost relative to the same period in the last financial year. We have cleared
all OpenView HD ("OVHD") inventory and have significantly reduced our corporate lighting inventory.
Load-shedding had a positive impact on the business during the period, with our locally produced
inverter trolleys in great demand. Inverter and battery kits are married in a convenient DIY unit
that is locally manufactured and assembled in our engineering department. With the lack of
load-shedding in South Africa since September 2015, we have seen the demand taper off, but
continue to sell these items, albeit at a slower rate, within other African countries who continue to
experience load-shedding.
The sale of MultiChoice and related products has been slower in the first half compared to previous
years. This is due to numerous factors; some being the general slowdown in consumer spend and
increased competition from the likes of OVHD. MultiChoice remains an important partner to Ellies
and we believe that with their promotions and technology advances made in new products, we will
see growth in the future.
We have seen a positive movement in the drive to digital migration. Ellies has been approved for
the manufacture and supply of satellite dishes and terrestrial antennas as well as the installations
of these items. During the period, we received an order for in excess of 400 000 satellite dish kits
and had started to manufacture these at 31 October 2015. Included in the consumer segment’s
inventory number is an amount of R18 million of raw materials and work in progress for this
project. The delivery of completed kits only began post October and any income from these sales
is not reflected in these figures. Ellies has also had antennas approved for MultiChoice’s Digital
Terrestrial Television programme for South Africa and Africa. We are now becoming more vigilant
in promoting the product and have manufactured and delivered product that will only reflect in the
next financial period.
The lighting division continues to find momentum albeit at a slower pace than first envisaged.
We have partnered with new technology partners and have launched a new range of domestic
lighting called 'Lamp for Life’ that is both technologically advanced and price competitive.
The products have so far been well received.
Ellies remains dedicated to the training and upskilling of our independent customer base with
training in various disciplines happening weekly. We hope to arm SMME’s in skills that will help
them grow their businesses and ready them for the digital migration and convergence.
The Company will continue to reshape itself in line with market demands and trends, and continues
to remain relevant and ahead of the technology curve. We pride ourselves on our product, service
and brand. With our increased efficiencies, lower cost and motivated staff we will continue to be
a significant brand and company in South Africa.
Dividend policy
The dividend policy will be reviewed periodically taking into account prevailing circumstances and
future cash requirements. In view of the Company’s financial position, no dividend is proposed at
this stage.
Appreciation
The directors and management would like to thank our dedicated staff for their hard work during
these challenging times and recognise and appreciate their efforts. We continue to appreciate our
customers, business partners, advisors, suppliers and most importantly shareholders.
By order of the board:
ER Salkow WMG Samson
Chairman CEO
25 January 2016
Directors
Executive Directors Lead independent non-executive Director
ER Salkow (Chairman) OD Fortuin
WMG Samson (Chief executive officer)
IM Lipworth (Chief financial officer) Independent non-executive Directors
RH Berkman FS Mkhize
RE Otto (will resign on 15 February 2016) S Goldberg
RAM Broadhead (appointment effective on 15 February 2016)
Non-executive Directors
MR Goodford
MJ Kuscus (appointed 1 June 2015)
Registered office
94 Eloff Street Ext, Village Deep, Johannesburg, 2001
(PO Box 57076, Springfield, 2137)
Sponsor: Java Capital
Auditors: Grant Thornton Johannesburg Partnership
Company secretary: CIS Company Secretaries (Pty) Ltd
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
Date: 25/01/2016 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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