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EXL - Excellerate - Unaudited consolidated results for the six months ended 31
December 2010
EXCELLERATE HOLDINGS LIMITED
Registration number 1997/009884/06
JSE code: EXL ISIN: ZAE000026092
(Incorporated in the Republic of South Africa)
("Excellerate" or "the Group")
Unaudited consolidated results
for the six months ended 31 December 2010
HIGHLIGHTS
- Revenue growth of 33,9% over the comparative period
- Attributable profit up 32,3% over the comparative period
- Cash generated from operations up by 334,0% over the comparative period
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Continuing operations
Revenue 484 940 362 189 685 273
Gross profit 136 287 106 679 221 571
Profit before net finance 46 942 31 602 57 842
costs and taxation
Net finance costs (8 109) (1 946) (6 630)
Profit before taxation 38 833 29 656 51 212
Taxation (11 172) (9 224) (17 654)
Profit and total 27 661 20 432 33 558
comprehensive income for the
period from continuing
operations
Discontinued operations
Loss for the period from (1 918) (4 580) (10 390)
discontinued operations
Profit and total 25 743 15 852 23 168
comprehensive income for the
period
Profit attributable to:
Equity holders of the parent 21 268 16 130 22 964
Non-controlling interest 4 475 (278) 204
25 743 15 852 23 168
Shares in issue (000s) 218 350 217 864 217 864
Weighted average number of 217 915 217 436 217 701
shares in issue (000`s)
Fully diluted weighted 221 553 220 744 221 016
average number of shares in
issue (000`s)
Total operations
Earnings per share (cents) 9,8 7,4 10,5
Headline earnings per share 10,3 7,4 10,8
(cents)
Diluted earnings per share 9,6 7,3 10,4
(cents)
Diluted headline earnings 10,1 7,3 10,6
per share (cents)
Continuing operations
Earnings per share (cents) 10,6 9,5 15,3
Headline earnings per share 10,6 9,5 15,3
(cents)
Diluted earnings per share 10,5 9,4 15,1
(cents)
Diluted headline earnings 10,5 9,4 15,1
per share (cents)
Discontinued operations
Earnings per share (cents) (0,8) (2,1) (4,8)
Headline earnings per share (0,3) (2,1) (4,5)
(cents)
Diluted earnings per share (0,9) (2,1) (4,7)
(cents)
Diluted headline earnings (0,4) (2,2) (4,4)
per share (cents)
Reconciliation between
income attributable to
equity holders of the parent
and the headline earnings
attributable to the equity
holders of the parent:
Attributable to ordinary 21 268 16 130 22 964
shareholders
- impairment of intangibles - - 152
- loss on disposal of 1 500 - 621
business/subsidiary
- net loss/(gain) on sale of 8 (28) (331)
property, plant and
equipment
- taxation effect of the (422) 8 93
adjustments
Headline earnings 22 354 16 110 23 499
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at
Unaudited Unaudited Audited
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 315 133 180 801 194 602
Property, plant and equipment 78 125 68 912 74 672
Intangible assets 227 165 103 938 110 639
Investment in associate 631 1 773 631
Interest bearing receivables 1 906 103 2 222
Deferred tax asset 7 306 6 075 6 438
Current assets 354 020 317 204 280 926
Inventories 100 462 81 719 86 345
Trade and other receivables 188 988 173 738 136 739
Interest bearing receivables 5 044 4 297 2 604
Investment in associate 5 435 3 872 4 462
Amounts owing by joint venture 10 247 18 670 11 478
partners
Taxation receivable 7 539 8 697 8 031
Other financial assets 56 642 79
Cash and cash equivalents 36 249 25 569 31 188
Total assets 669 153 498 005 475 528
EQUITY AND LIABILITIES
Equity and reserves 266 215 212 094 219 350
Share capital 2 184 2 179 2 179
Share premium 65 169 64 937 64 939
Share-based payment reserve 1 454 1 595 1 602
Retained earnings 171 267 142 676 149 851
Equity attributable to equity 240 074 211 387 218 571
holders of the parent
Non-controlling interest 26 141 707 779
Non-current liabilities 132 694 32 240 27 827
Interest bearing debt 125 120 25 130 20 897
Deferred tax liability 7 574 7 110 6 930
Current liabilities 270 244 253 671 228 351
Trade and other payables 217 089 177 393 182 096
Amounts owing to joint venture 13 681 15 114 8 868
partners
Taxation payable 8 757 13 506 16 887
Current portion of interest 22 668 7 419 12 401
bearing debt
Other financial liabilities - 50 132
Shareholders for dividend 147 6 147
Bank overdrafts - 27 205 -
Vendors for acquisitions 7 902 12 978 7 820
Total equity and liabilities 669 153 498 005 475 528
Net asset value per share (cents) 109,9 97,0 100,3
Net tangible asset value per 8,0 50,7 51,9
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Cash flows from operating (3 984) (10 779) 44 880
activities
Cash generated from operations 23 028 5 308 68 368
Net finance costs (8 078) (1 972) (6 634)
Dividends paid - (7 594) (6 315)
Taxation paid (18 934) (6 521) (10 539)
Cash flows from investing (100 926) (6 769) (35 661)
activities
Net additions to property, plant (9 322) (6 583) (19 293)
and equipment
Additions to intangible assets (140) (186) (2 718)
Cash flows on acquisition of (91 086) - (14 475)
businesses
Cash flow on disposal of business (378) - 825
Cash flows from financing 109 971 (5 933) 124
activities
Net interest bearing debt raised 109 348 419 4 168
Net increase/(decrease) in 715 (4 007) (1 274)
amounts owing by joint venture
partners and associates
Shares repurchased - (10) (10)
Sale of treasury shares 235 267 268
Decrease in interest bearing (327) (2 602) (3 028)
receivables
Net increase/(decrease) in cash 5 061 (23 481) 9 343
and cash equivalents
Cash and cash equivalents at 31 188 21 845 21 845
beginning of period
Cash and cash equivalents at end 36 249 (1 636) 31 188
of period
CONDENSED SEGMENTAL REPORT
Trading
Services distribution Corporate Total
R`000 R`000 R`000 R`000
2010
Revenue (external) 258 522 237 303 567 496 392
Less: Revenue from (11 452) (11 452)
discontinued operation
247 070 237 303 567 484 940
Revenue (internal) 22 463 512 3 984 26 959
269 533 237 815 4 551 511 899
Profit/(loss) before tax 32 554 14 472 (8 193) 38 833
Discontinued operation (2 664) - - (2 664)
(profit before taxation)
2009
Revenue (external) 170 953 198 226 1 392 370 571
Less: Revenue from (7 876) (506) (8 382)
discontinued operation
163 077 197 720 1 392 362 189
Revenue (internal) 20 468 5 283 6 189 31 940
183 545 203 003 7 581 394 129
Profit/(loss) before tax 18 739 15 171 (4 255) 29 655
Discontinued operation (1 197) (5 164) - (6 361)
(profit before taxation)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-
based
Share Share payment Retained
capital premium reserve earnings
R`000 R`000 R`000 R`000
Balance at 30 June 2009 2 173 64 687 1 733 133 929
Total comprehensive income for
the period
Profit for the period 16 130
Transactions with owners,
recorded directly into equity
Dividends declared (7 521)
Movement in share-based payment (138) 138
reserve
Repurchase of shares (10)
Sale of treasury shares 6 260
Balance at 31 December 2009 2 179 64 937 1 595 142 676
Total comprehensive income for
the period
Profit for the period 7 182
Transactions with owners,
recorded directly into equity
Sale of treasury shares 2
Movement in share-based payment 7 (7)
reserve
Balance at 30 June 2010 2 179 64 939 1 602 149 851
Total comprehensive income for
the period
Profit for the period 21 268
Transactions with owners,
recorded directly into equity
Arising on acquisition of
business
Movement in share-based payment (148) 148
reserve
Sale of treasury shares 5 230
Balance at 31 December 2010 2 184 65 169 1 454 171 267
Attributable
to equity Non-
holders controlling
of parent interest Total
R`000 R`000 R`000
Balance at 30 June 2009 202 522 985 203 507
Total comprehensive income for
the period
Profit for the period 16 130 (278) 15 852
Transactions with owners,
recorded directly into equity
Dividends declared (7 521) (7 521)
Movement in share-based payment - -
reserve
Repurchase of shares (10) (10)
Sale of treasury shares 266 266
Balance at 31 December 2009 211 387 707 212 094
Total comprehensive income for
the period
Profit for the period 7 182 72 7 254
Transactions with owners,
recorded directly into equity
Sale of treasury shares 2 2
Movement in share-based payment - - -
reserve
Balance at 30 June 2010 218 571 779 219 350
Total comprehensive income for
the period
Profit for the period 21 268 4 475 25 743
Transactions with owners,
recorded directly into equity
Arising on acquisition of 20 887 20 887
business
Movement in share-based payment - - -
reserve
Sale of treasury shares 235 235
Balance at 31 December 2010 240 074 26 141 266 215
GENERAL OVERVIEW
The Excellerate board of directors ("the Board") is pleased to announce a much
improved performance by the Group during the six months ended December 2010,
with significant increases in revenue and profitability and strong cash flow
management. The improvement in profitability is derived principally from
beneficial acquisitions, improved profitability within our service division, and
a reduced impact of losses from discontinued operations. The underlying
performance within our trading and distribution division also improved, but was
unfortunately affected by provisions against long-outstanding debtors.
The acquisition of 60% of JHI was finalised on 14 September 2010, and their
results have been consolidated from 1 October 2010. It is particularly pleasing
that JHI`s results at this stage have comfortably exceeded our pre-acquisition
expectations.
During the period under review, Excellerate acquired a controlling interest in a
new venture called Excellerate Commodities (Pty) Limited ("Excellerate
Commodities"), a procurement and logistics business servicing the need for the
flow of commodities into and out of other African countries. This investment was
facilitated by way of advancing working capital loans. Excellerate Commodities
was established in September 2010, and has returned a small profit for its first
trading period.
With effect from 24 November 2010, Excellerate disposed of its 50% share in
Delawood Designs (Pty) Limited ("Delawood") which had incurred losses in the
prior financial year. Given the industry outlook, Delawood was expected to
continue to contribute losses for the foreseeable future. The associated loss
from both the operations for the period under review, and on disposal amounted
to R1,9 million (2009: R0,9 million).
As stated in the 2010 Annual Report, management has continued to drive growth
plans around outsourced services with a key focus on property related services,
and procurement and logistics services.
Excellerate remains both operationally and financially sound and, provided that
trading conditions remain favourable, is well placed to continue to improve
performance in the second half of the financial year.
FINANCIAL OVERVIEW
Key features of the Group financial performance for the six month period ended
December 2010 include:
- Group revenue for the period increased by 33,9% to R484,9 million (2009:
R362,2 million).
- Profit from continuing operations before interest and tax rose by 48,4% to
R46,9 million (2009: R31,6 million).
- Despite increased finance costs associated primarily with acquisition and
expansion activities, interest cover remains comfortable at 5,8 times.
- Profit attributable to ordinary shareholders was up 32,3% to R21,3 million
(2009: R16,1 million).
- Losses from discontinued operations declined by 58,7% to R1,9 million (2009:
R4,6 million).
- Cash generated from operations increased by 334,0% to R23,0 million (2009:
R5,3 million), once again highlighting the cash generative ability of the Group.
- Cash and cash equivalents at the end of the period was R36,2 million (2009:
(R1,6 million)).
- Headline earnings per share and diluted headline earnings per share increased
by 39,2% to 10,3 cents (2009: 7,4 cents) and by 38,4% to 10,1 cents (2009: 7,3
cents) respectively.
- Earnings per share and diluted earnings per share increased by 32,4% to 9,8
cents (2009: 7,4 cents) and by 31,5% to 9,6 cents (2009: 7,3 cents)
respectively.
During the period under review, cash flows generated by operating activities
improved to R23,0 million (2009: R5,3 million), notwithstanding the impact of
R10,3 million invested by Excellerate Commodities into working capital as a
start-up operation. Net cash finance costs increased to R8,1 million (2009: R2,0
million), largely as a result of acquisition and expansion activities. Cash tax
paid increased to R18,9 million (2009: R7,6 million). No dividends were paid
during the period resulting in total cash flow consumption from operating
activities for the period decreasing to R4,0 million from R10,8 million.
Cash flows from investing activities amounted to R100,9 million (2009: R6,7
million), reflecting a net cash outflow of R91,1 million (2009: R0 million)
resulting from the acquisition of JHI, net additions to property, plant and
equipment of R9,3 million (2009: R6,6 million), and other items of R0,5 million
(2009: R0,2 million).
Net cash generated from financing activities for the period under review was
R110,0 million (2009: R5,9 million), reflecting primarily term debt raised to
fund the acquisition of JHI and the initial investment into Excellerate
Commodities.
As stated in the announcement to shareholders regarding the JHI transaction, the
Group`s balance sheet has been significantly impacted by the acquisition and
consolidation thereof. Intangibles associated with the transaction have been
carried in the consolidated balance sheets at R117,8 million. Term debt raised
by Excellerate to fund this acquisition is carried in the consolidated balance
sheet at R28,7 million, whilst term debt ring-fenced within JHI raised for the
purposes of the acquisition amounted to R74,3 million.
REVIEW OF OPERATIONS
Trading and Distribution segment
Revenue in the trading and distribution segment grew by 20,0% to R237,3 million
(2009: R197,7 million). This growth was largely due to the establishment of
Excellerate Commodities, together with good revenue performances from Foodserv
and Nu Africa Comm Trading.
Pleasingly, margins have been maintained at business unit level. However overall
margins have decreased in this division owing to the growth in lower margin
revenue generated by Nu Africa Comm Trading and Excellerate Commodities, in line
with their respective business models.
Although overhead costs within the segment have been well managed, additional
once-off increases in provisions against long-outstanding debtors of R3,1
million has resulted in profit before tax for this division decreasing by 4,6%
to R14,5 million (2009: R15,2 million). Excluding the additional doubtful debt
provision, ongoing segmental profit before tax increased by 15,8% to R17,6
million.
Services segment
Revenue in the services segment grew by 51,4% to R247,0 million (2009: R163,1
million), largely as a result of the inclusion of JHI in this segment from 1
October 2010. Vital Fleet and Vital Distribution Services also experienced good
revenue growth as these companies continued to expand their distribution
footprint.
Margins in this segment have, for the most part, been maintained in spite of
increased market pressures. In addition, overheads have been tightly controlled.
One notable exception has been at Staffing Logistics where market pressures and
lower demand resulted in reduced margins and profitability. Management has
implemented changes which are expected to improve revenue, reduce overheads, and
restore previous levels of profitability going forward. Management will
continue to monitor the proposed changes to relevant legislation closely and
will adapt the business model accordingly should any significant changes occur.
Segmental profit before tax increased by 74,3% to R32,6 million (2009: R18,7
million). It is however important to note that the segment benefitted from the
inclusion of JHI`s results during their most profitable quarter in the calendar
year.
The investment in Delawood was disposed of during the period under review and is
consequently being disclosed as a discontinued operation.
ACQUISITIONS AND DISPOSALS
As previously noted, the acquisition of 60% of JHI was implemented and
consolidated into the financial results from 1 October 2010. The balance of the
40% shareholding was acquired by JHI management. In order to fund its
investment, Excellerate raised term funding of R30,0 million on commercial terms
normally associated with such a transaction. The balance of the purchase price
was funded by way of a R20,0 million subscription for shares by management, and
a R76,6 million senior term loan raised directly by JHI. Once again, at this
stage it is pleasing to note that for the period under review, JHI`s results
have comfortably exceeded pre-acquisition expectations.
Pre-tax transaction costs incurred to implement the JHI transaction amounted to
R1,0 million. This has been expensed in the current period.
Also during the period under review, and as noted earlier in this report,
Excellerate acquired a controlling interest in a new venture called Excellerate
Commodities (Pty) Limited, a procurement and logistics business servicing the
need for the flow of commodities into and out of other African countries.
Excellerate`s beneficial shareholding in Excellerate Commodities amounts to 46%,
and was facilitated by way of advancing working capital loans to the extent of
R14,7 million. These working capital loans were partly funded through term
funding of R10,0 million raised on commercial terms normally associated with
such a transaction, with the balance being funded by cash reserves. At reporting
date, Excellerate still had a commitment to advance a further R3,1 million in
working capital loans to Excellerate Commodities, which commitment will be
similarly funded by cash reserves.
Excellerate Commodities was established in September 2010, and has returned a
small profit for its first trading period.
As stated in the 2010 Annual Report, in October 2010, Excellerate and management
of Delawood reached the decision that as a result of differing strategic and
operating strategies, management would re-acquire their 50% share from
Excellerate for R3,0 million. On 24 November 2010, the Board approved the sale
and the transaction was implemented. The associated loss from both the
operations for the period under review, and on disposal amounted to R1,9 million
(2009: R0,9 million).
PROSPECTS
Notwithstanding the considerable investment in JHI, the Group will continue to
look for opportunities to expand its presence in the outsourced services sector,
particularly in the areas of procurement and logistics services and property
related services, either by acquisition, or by organic growth. Conversely the
Group is assessing investments that are not at present delivering the required
returns to shareholders, with a view to either re-engineering the business
models or disposing of on favourable terms.
Management will continue to drive the core disciplines of revenue growth, cash
management and cost containment.
REPORTING ENTITY
Excellerate Holdings Limited is a company domiciled in South Africa. The
condensed consolidated interim financial statements as at and for the period
ended 31 December 2010 comprise the company, its subsidiaries, joint ventures
and interest in associates.
BASIS OF PREPARATION
These condensed consolidated interim financial statements for the six months
ended 31 December 2010 have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the AC 500 standards as issued by the
Accounting Practices Board or its successor, Schedule 4 of the Companies Act, No
61 of 1973 (as amended) and comply with the disclosure requirements of IAS 34:
Interim Financial Reporting. The condensed consolidated financial statements
have been prepared under the historical cost convention.
The accounting policies used in the preparation of these results are in
accordance with IFRS and consistent in all material respects with those used in
the audited annual financial statements for the year ended 30 June 2010.
The condensed consolidated interim financial statements are presented in Rand
rounded to the nearest thousand (`000).
The condensed consolidated statement of financial position at 31 December 2010
and the related condensed statement of comprehensive income, statement of
changes in equity and cash flow for the six months then ended have not been
reviewed or reported on by the Group`s auditors.
SUBSEQUENT EVENTS
There have been no significant subsequent events that have had a material impact
on the interim financial statements.
RECLASSIFICATION OF COMPARATIVE INFORMATION
As at 31 December 2009, the Investment in associate, including loans to the
Associate, amounting to R5,6 million, was classified as a Non-current asset.
Subsequently, a loan to the Associate was re-assessed, and correctly classified
as Current. This classification was audited at 30 June 2010. The R5,6 million
previously disclosed under non-current assets, has now been reclassified as
follows:
R`m
Non-current assets: 1,8
Current assets: 3,8
DIVIDEND
As reported at June 2010, the Board considered it prudent not to declare a full
year dividend, and committed to review this decision at the interim reporting
stage. The Board is still of the view that in light of outstanding financial
commitments relating to the acquisition of Vital Distribution, Vital Fleet and
Staffing Logistics, it would not be appropriate at this time to declare an
interim dividend.
For and on behalf of the Board
GG Hulley
Chief Executive Officer
Sandton
23 March 2010
DIRECTORS
Gordon Hulley Chief Executive Officer
Athol Stewart Executive Director
James Wellsted Executive Director
Rudi Stumpf Non-Executive Director
Clive Howell Non-Executive Director (alternate to Graham Davel)
Graham Davel Non-Executive Director
Michael Mohohlo Non-Executive Director
Arnold Meyer Non-Executive Director
SHARE TRANSFER SECRETARY
Computershare Investor Services (Proprietary) Limited
70 Marshall Street
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Tel: (+27 11) 370 5000
Fax: (+27 11) 688 7721
COMPANY SECRETARY
ER Goodman Secretarial Services CC
(represented by E Goodman)
2nd Floor, Palm Grove, Grove City
196 Louis Botha Avenue
Houghton
Tel: (+27 11) 728 0742
Fax: (+27 11) 728 4226
email: ergoodmn@netactive.co.za
REGISTERED OFFICE
1st Floor
Atholl Square
Corner Katherine Street and Wierda Road East
Sandown, 2196
PO Box 785448, Sandton, 2146
Tel: (+27 11) 523 2980
Fax: (+27 11) 523 2990
email: info@excellerate.co.za
AUDITORS
KPMG Inc.
CORPORATE ADVISORS AND SPONSOR
One Capital
SECTOR
Cyclical Services Sector
Under sub-sector: Business Support Services
BANKERS
Nedbank Limited
The Standard Bank of South Africa Limited
FirstRand Bank Limited
Website: www.excellerate.co.za
Date: 23/03/2011 10:02:02 Supplied by www.sharenet.co.za
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