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Audited group summarised provisional report and final cash dividend declaration for the year ended 30 June 2017
ELB GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1930/002553/06
Share code: ELR ISIN: ZAE000035101
AUDITED GROUP SUMMARISED PROVISIONAL REPORT
and final cash dividend declaration
for the year ended 30 June 2017
- Return to profitability across all group segments
- Profit to the year increased to R82 million from a loss of R189 million
- Headline earnings of 243 cents per share from a loss of 519 cents per share
- Strong cash generation from operations of R198 million
- Pleasing operating performance in a challenging environment
- Strengthened order book and the award of delayed projects
- Final cash dividend declared of 50 cents per share
COMMENTARY
INTRODUCTION
ELB is an internationally recognised holistic
engineering solutions provider and capital equipment
supplier in the fields of materials handling, mineral
separation, industrial projects and power solutions.
This is achieved through ELB-generated innovation,
in-house capability and the supply of world class
equipment and technology. The Group operates
predominantly in Africa and Australasia.
The Board is pleased to be able to report a return to
profitability after a difficult prior financial year. Many
of the initiatives that were embarked on, and projects
pursued over the past years, have achieved a positive
outcome in this period, including the award of the
Vedanta Zinc Gamsberg project announced during
the year. The implementation of the Asanko overland
conveyor project, which was awarded during the
second quarter, has been deferred to the 2018
financial year.
Despite the political uncertainty, volatile currency and
improved but still difficult trading conditions, the
right-sizing and positioning of the Group undertaken
in the previous financial year, together with some
strengthening in certain commodity prices and a
firming of our order book, has enabled the Group to
return to profitability.
The Group continues to drive a number of initiatives to
position itself to achieve sustainable growth, for which
returns will typically only be realised in the future.
These initiatives are all in line with the core expertise of
the Group and will enhance its ability to service its
markets via horizontal or vertical diversification.
These initiatives include the further diversification into
providing alternative energy power plants of up to
50 MW and the leveraging of expertise gained in the
industrial sector, specifically in the fast-moving
consumer goods ('FMCG') field. A number of projects
are either currently ongoing or in the pipeline in these
fields. Furthermore, the Group has increased its
know-how base significantly in the minerals
beneficiation and fine powder handling sectors, by
forming partnerships with ENFI (China) and
Haver & Boecker (Germany) respectively and continues to
pursue other technology focused partnerships. This
will further allow the Group to provide a broader
service offering to its existing and future clients.
FINANCIAL RESULTS
Due to the project nature of segments of the business
there is no consistent correlation between sales and
profits in reporting periods.
Sales for the year improved by 39%, to R2 480 million
in 2017 from R1 783 million in 2016.
Profit for the year increased to R82 million in 2017 from
a loss of R189 million in 2016. The Group experienced
a significant turnaround in profitability in the current
year as a result of the stabilisation of global commodity
prices, an easing in trading environments, delayed
projects commencing, as well as the favourable effects
of a stronger rand.
In the prior year, the Group experienced severe margin
pressure, substantial foreign exchange related losses,
the significant costs associated with the closing out of
certain projects, the right-sizing of the business, as
well as having expensed the costs associated with the
delay in the award of new contracts.
Profit for the year attributable to ELB shareholders
increased to R71 million in 2017 from an attributable
loss of R148 million in 2016.
Total comprehensive income for the year attributable to
ELB shareholders increased to R53 million in 2017
from a total comprehensive loss of R127 million in
2016, after taking into account the translation of the
Group's foreign operations.
Headline earnings per share for the period increased to
243 cents per share from a loss of 519 cents per share
in 2016.
The net asset value per share recovered from the
significant reduction in the prior financial year,
increasing to 2 530 cents per share at 30 June 2017
from 2 374 cents per share at 30 June 2016.
OPERATIONS
Equipment
Sales increased to R875 million in 2017 from R686 million
in 2016 and profit before tax increased to R86 million
in 2017 from R2 million in 2016. The increase in sales
is due to improving market demand and increased
market penetration. The increase in profit before tax
is due to the aforementioned increase in sales and
the impact in the prior year of difficult trading
conditions, reduced market demand, severe margin
pressure and substantial foreign exchange losses.
The operation remains well positioned to benefit from
more favourable trading conditions.
Engineering Services
Sales increased to R1 151 million in 2017 from R761 million
in 2016 and profit before tax increased to R15 million
in 2017 from a loss before tax of R235 million in 2016.
The Engineering Services segment delivered a significant
turnaround in profits this year, primarily due to a
number of delayed contracts commencing in the
current year, compared to the prior year, where the
costs associated with the delay in the award of new
contracts and the costs associated with the closing out
of certain projects were incurred.
Despite having to recognise additional costs of R30 million
this year as a result of project closure and associated
claims settlements for projects that were completed in
the prior year, the board can report that these legacy
issues have now been settled and management is able
to direct their focus on the existing projects on hand.
The instrumentation and electrical component of this
segment has again been the major positive profit
contributor to the segment this year.
The segment has been predominantly focussed on the
zinc, coal, industrial, FMCG, ports and power sectors
over the past year. The award of the Gamsberg and
Asanko projects announced towards the end of the
interim period are significant contracts and will deliver
positive returns to the business over their lifecycles.
Australasia
Sales increased to R454 million in 2017 from R336 million
in 2016 while profit before tax increased to R30 million
in 2017 from a profit before tax of R1 million in 2016.
This segment has had an exceptionally good year
compared to the prior year owing to a recovery of
volumes and margin. The successful management of
costs and favourable exchange rates have also
contributed to the profitability of the business in the
current year. The business remains well positioned in
both Australia and New Zealand to continue to service
the growing demand for its Ditch Witch, Komptech and
other ranges of products, particularly in the drilling,
trenching, excavating and waste management
segments of the business.
CASH FLOW
The Group generated net cash inflow from operations
of R198 million, with an increase in net cash and cash
equivalents to R437 million from R274 million at the
prior year end. Cash flow management remains a high
priority for the Group and ELB works closely with its
bankers, suppliers and customers to ensure the
Group continues to maintain a strong balance sheet
at all times.
PROSPECTS
The Group continues to target a number of
opportunities that, if successful, should further position
the Group favourably for the next twenty-four to thirty-
six months. The Group is confident that it can harness
the opportunities as they present themselves and
deliver on its strategy.
DIVIDEND
The board has declared a final dividend of 50 cents
(2016 – nil) per ordinary share, which together with the
interim dividend of 32 cents (2015 – 30) per ordinary
share, amounts to a total dividend for the year of
82 cents (2016 – 30) per ordinary share.
On behalf of the Board
Dr Stephen Meijers
Chief Executive Officer
ELB Group and ELB Engineering Services
Peter Blunden
Chief Executive Officer
ELB Equipment
Michael Easter
Group Financial Director
ELB Group
Boksburg 19 September 2017
GROUP BALANCE SHEET
30 June 2017 30 June 2016
R'000 R'000
ASSETS
Non-current assets 351 422 367 178
Property, plant and equipment 164 589 176 859
Goodwill and intangible assets 19 217 21 789
Pension fund employer surplus account 39 938 40 263
Deferred income tax assets 127 678 128 267
Current assets 1 498 868 1 332 190
Construction contract work not yet billed 93 158 129 742
Inventories 670 213 584 718
Receivables and other current assets 298 379 332 860
Cash and cash equivalents 437 118 284 870
Total assets 1 850 290 1 699 368
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of ELB 717 821 677 772
Issued capital 109 479 107 702
Treasury shares (46 737) (40 417)
Reserves 67 685 81 992
Retained earnings 587 394 528 495
Non-controlling interests 84 408 84 764
Total equity 802 229 762 536
Non-current liabilities 36 176 55 481
Interest bearing borrowings 20 428 35 047
Provision for trade back commitments – 1 224
Deferred income tax liabilities 15 748 19 210
Current liabilities 1 011 885 881 351
Construction contract liabilities 129 589 186 675
Interest bearing borrowings 59 523 139 018
Payables and other current liabilities 822 773 544 544
Bank overdraft – 11 114
Total liabilities 1 048 061 936 832
Total equity and liabilities 1 850 290 1 699 368
Net asset value per ordinary share (cents) 2 530 2 374
GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
30 June 2017 30 June 2016
R'000 R'000
Sales 2 480 497 1 782 718
Operating costs excluding depreciation and amortisation
of non-financial assets (2 342 364) (2 008 904)
Operating profit/(loss) before depreciation and
amortisation of non-financial assets 138 133 (226 186)
Depreciation and amortisation of non-financial assets (23 368) (25 000)
Profit/(loss) from operations 114 765 (251 186)
Finance income 17 528 15 661
Finance expense (12 091) (15 369)
Profit/(loss) before income tax 120 202 (250 894)
Income tax (expense)/credit (38 554) 61 944
Profit/(loss) for the year 81 648 (188 950)
Profit/(loss) for the year attributable to:
Ordinary shareholders of ELB 70 696 (147 584)
Non-controlling interests 10 952 (41 366)
81 648 (188 950)
Other comprehensive income (20 450) 24 203
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve adjustments
attributable to ordinary shareholders of ELB (16 753) 24 968
Income tax effect of adjustments 2 298 (3 818)
Items that will not be reclassified to profit or loss
Non-controlling interests in foreign currency translation adjustments (2 875) 4 310
Pension fund employer surplus account remeasurements (3 474) (2 196)
Aeroplane revaluation surplus increase (1 424) 1 385
Income tax effect of items that will not be reclassified
to profit or loss 1 778 (446)
Total comprehensive income for the year 61 198 (164 747)
Total comprehensive income attributable to:
Ordinary shareholders of ELB 52 869 (127 167)
Non-controlling interests 8 329 (37 580)
61 198 (164 747)
Earnings per share
Basic earnings per share (cents) 247,3 (516,4)
Diluted basic earnings per share (cents) 247,2 (515,9)
Headline earnings per share (cents) 243,2 (519,4)
Diluted headline earnings per share (cents) 243,1 (518,8)
GROUP STATEMENT OF CHANGES IN EQUITY
30 June 2017 30 June 2016
R'000 R'000
Opening balance 762 536 986 239
Total comprehensive income for the year 61 198 (164 747)
Profit/(loss) for the year 81 648 (188 950)
Other comprehensive income (20 450) 24 203
Total (distributions to)/contributions by owners (13 882) (36 032)
Ordinary dividends paid (9 176) (27 804)
Distributions to non-controlling interests (1 207) (3 695)
Equity settled share options expense 1 808 8
ELB ordinary shares acquired and held as treasury shares (7 569) (6 023)
Treasury shares paid up and released to participants 2 262 1 482
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests (7 623) (22 924)
Closing balance 802 229 762 536
Comprising:
Issued capital 109 479 107 702
Treasury shares (46 737) (40 417)
Reserves 67 685 81 992
Retained earnings 587 394 528 495
Equity attributable to ordinary shareholders of ELB 717 821 677 772
Non-controlling interests 84 408 84 764
Total equity 802 229 762 536
GROUP STATEMENT OF CASH FLOWS
30 June 2017 30 June 2016
R'000 R'000
Operating activities
Net cash inflow/(outflow) from operating activities before
dividends and distributions paid 208 411 (44 807)
Dividends and distributions paid (10 383) (31 499)
Cash inflow/(outflow) from operating activities 198 028 (76 306)
Cash outflow from investing activities (12 899) (8 421)
Cash outflow from financing activities (13 921) (18 978)
Increase/(decrease) in cash and cash equivalents 171 208 (103 705)
Cash and cash equivalents at the beginning of the year 273 756 366 412
Effect of exchange rate movements on cash balances (7 846) 11 049
Cash and cash equivalents at the end of the year 437 118 273 756
SEGMENT INFORMATION
Consolidation
Engineering and
Total Equipment Services Australasia Central elimination
R'000 R'000 R'000 R'000 R'000 R'000
Year ended 30 June 2017
Sales
External sales 2 480 497 875 228 1 151 224 454 022 23 –
Inter-segment sales – 1 633 531 – 22 421 (24 585)
As reported in profit or loss 2 480 497 876 861 1 151 755 454 022 22 444 (24 585)
Profit/(loss) before income tax 120 202 86 343 15 341 29 599 (3 631) (7 450)
Assets 1 850 290 892 212 568 855 377 910 99 514 (88 201)
Liabilities 1 048 061 470 339 472 185 171 367 19 377 (85 207)
Year ended 30 June 2016
Sales
External sales 1 782 718 685 868 761 053 335 785 12 –
Inter-segment sales – 921 – – 21 444 (22 365)
As reported in profit or loss 1 782 718 686 789 761 053 335 785 21 456 (22 365)
(Loss)/profit before income tax (250 894) 1 576 (235 193) 500 (9 561) (8 216)
Assets 1 699 368 759 185 566 931 336 970 108 687 (72 405)
Liabilities 936 832 382 630 467 822 129 714 22 947 (66 281)
HEADLINE EARNINGS, SHARES IN ISSUE AND PER SHARE MEASUREMENTS
30 June 2017 30 June 2016
R'000 R'000
CALCULATION OF HEADLINE EARNINGS
Profit/(loss) attributable to ordinary shareholders of ELB 70 696 (147 584)
Less: Items excluded from headline earnings as detailed below:
1 166 847
Profit on disposal of plant and equipment 1 942 1 399
Income tax effect on profit on disposal of plant and equipment (571) (402)
Non-controlling interests in profit on disposal of plant and equipment (205) (150)
Headline earnings 69 530 (148 431)
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES IN ISSUE ('000)
Number of shares in issue at the beginning of the year 35 824 35 824
Less: Effect of treasury shares in Group entities
at the beginning of the year (7 270) (7 112)
Basic number of shares in issue at the beginning of the year 28 554 28 712
Weighted average effect of changes during the year
ELB ordinary shares acquired and held as treasury shares (61) (156)
Treasury shares released to incentive scheme participants 94 22
Weighted average number of shares in issue 28 587 28 578
Effect of outstanding share options 13 31
Diluted weighted average number of shares in issue 28 600 28 609
BASIC NUMBER OF SHARES IN ISSUE AT THE END OF THE YEAR
Ordinary shares in issue ('000's) 32 519 35 824
Less: Treasury shares in issue ('000's) (4 151) (7 270)
Ordinary shares in issue on which net asset value
per ordinary share is calculated 28 368 28 554
Earnings per ordinary share (cents)
- basic 247,3 (516,4)
- diluted 247,2 (515,9)
Headline earnings per ordinary share (cents)
- basic 243,2 (519,4)
- diluted 243,1 (518,8)
Net asset value per ordinary share (cents) 2 530 2 374
Dividends declared for the year per ordinary share (cents) 82 30
NOTES
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The summarised Group financial statements are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports, and the requirements of the Companies Act applicable to summary
financial statements. The Listings Requirements require provisional reports to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum,
contain the information required by IAS 34: Interim Financial Reporting.
The accounting policies applied in the preparation of the Group financial statements from which the summarised
financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in
the preparation of the previous Group financial statements.
No new, revised or amended accounting standards or interpretations were adopted in the current year that had a
material impact on the financial statements.
RELATED PARTY TRANSACTIONS
Group entities entered into various sale and purchase transactions with related parties in the Group in the ordinary
course of business, the nature of which was consistent with those previously reported. All transactions and
balances with these related parties have been eliminated in the consolidated results.
ELB Engineering Services Proprietary Limited, a subsidiary in the Group, acquired the non-controlling interests in its
subsidiary, ELBCON Proprietary Limited for an amount of R8 million, effective from 1 July 2016.
FAIR VALUES
The ELB Group measures foreign currency forward exchange contracts at fair value using inputs as described in
Level 2 of the fair value hierarchy. The fair values for foreign currency forward exchange contracts are based on
quotes from brokers. Similar contracts are traded in an active market and the quotes reflect the actual transactions
on similar instruments. All other financial assets or liabilities carrying values approximate their fair values based on
the nature or maturity period of the financial instrument. There were no transfers between Levels 1, 2 or 3 of the fair
value hierarchy during the period.
CAPITAL EXPENDITURE INCURRED AND FUTURE CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure of R18.4 million (2016: R11.8 million) was incurred during the year on property, plant and
equipment. There were no material capital expenditure commitments at 30 June 2017. At 30 June 2016, there were
capital expenditure commitments amounting to R2.7 million for the acquisition of office and computer equipment.
CONTINGENCIES
The Group operates in the engineering contracting business and is exposed to the risks associated with engineering
contracts which does from time to time include the need to resolve disputes by way of mediation, arbitration and if
need be, litigation. These risks are managed on the basis of limited liability and appropriate insurances.
FINANCIAL PREPARATION AND INDEPENDENT AUDIT
This summary report is extracted from audited information, but is not itself audited. The financial statements were
audited by KPMG Inc., who expressed an unmodified opinion thereon. The audited financial statements and the
auditor's report thereon are available for inspection at the Company's registered office. The directors take full
responsibility for the preparation of the provisional report and the financial information has been correctly extracted
from the underlying financial statements. The preparation of the Group financial statements from which the
summarised financial statements were derived was supervised by the group financial director, Michael Easter CA(SA).
POST BALANCE SHEET EVENTS
There were no significant events arising between the end of the financial year and the date of these financial
statements which materially affect the financial position or results of the Group or Company.
FINAL CASH DIVIDEND DECLARATION
ORDINARY DIVIDEND NUMBER 138
The directors have declared a final cash dividend of 50 cents per share on the Company's ordinary shares for the
year ended 30 June 2017. The following additional information is given in respect of the dividend.
- The dividend has been declared out of income reserves
- The South African dividend withholding tax rate is 20%
- ELB Group Limited's registration number is: 1930/002553/06
- ELB Group Limited's income tax reference number is: 9275151711
- The gross dividend is 50 cents per ordinary share for ordinary shareholders exempt from the dividend tax
- The net dividend is 40,00 cents per ordinary share for ordinary shareholders not exempt from the dividend
withholding tax
- ELB Group Limited has 32 518 579 ordinary shares in issue, of which 4 151 152 were treasury shares at
30 June 2017.
Last day to trade cum dividend on the JSE Tuesday, 17 October 2017
First trading day ex dividend on the JSE Wednesday, 18 October 2017
Record date Friday, 20 October 2017
Payment date Monday, 23 October 2017
In accordance with the requirements of Strate Limited, shares may not be dematerialised or rematerialised
between Wednesday, 18 October 2017 and Friday, 20 October 2017, both days inclusive.
By order of the Board
Elbex Proprietary Limited Boksburg
Company secretary 19 September 2017
Registered office
14 Atlas Road, Anderbolt, Boksburg 1459
Postal Address
PO Box 565, Boksburg, 1460
Telephone
+27 11 306 0700
Website
www.elb.co.za
Email
admin@elb.co.za
Share Transfer Secretaries
Computershare Investor Services Proprietary Limited
2nd Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Sponsor
Questco Corporate Advisory Proprietary Limited
1st Floor, Yellowwood House, Ballywoods Office Park
33 Ballyclare Drive, Bryanston, 2191
Directors
AG Fletcher (chairman),
Dr SJ Meijers (group chief executive and chief executive - ELB Engineering Services),
PJ Blunden (chief executive - ELB Equipment), MC Easter (financial director), T de Bruyn,*
Dr JP Herselman,* MV Ramollo, CJ Smith (alternate), IAR Thomson,* JC van Zyl.*
*Non executive
Company secretary
Elbex Proprietary Limited
Release date
The audited group summarised provisional report was released on 20 September 2017.
Date: 20/09/2017 08:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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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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