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ARH - ARB - Abridged audited results for the year ended 30 June 2011, dividend
announcement and notice of annual general meeting
ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH ISIN: ZAE000109435
("ARB" or "the company" or "the group")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2011, DIVIDEND ANNOUNCEMENT
AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
* Successful launch of ARB Connect
* Revenue up 16% to R1 256 million
* Operating profit up 14% to R110.2 million
* Ungeared with R266 million cash resources
* Annual dividend of 12.25 cents per share
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year to year to
30 June 30 June
2011 2010
R000`s R000`s
Revenue 1 256 330 1 086 507
Cost of sales 1 021 499 886 285
Gross profit 234 831 200 222
Other income 1 730 1 435
Operating expenses (126 315) (105 022)
Profit before interest and taxation 110 246 96 635
Investment income - 594
Interest received 16 907 18 004
Interest paid (137) (240)
Profit before taxation 127 016 114 993
Taxation 38 338 31 868
Profit for the year 88 678 83 125
Revaluation of property, plant and
equipment (net of taxation) 2 802 6 437
Total comprehensive income for the year 91 480 89 562
Profit for the year attributable to: 88 678 83 125
Non-controlling interest 16 662 14 433
Ordinary shareholders 72 016 68 692
Total comprehensive income attributable to: 91 480 89 562
Non-controlling interest 16 662 14 433
Ordinary shareholders 74 818 75 129
Audited Audited
year to year to
30 June 30 June
2011 2010
R000`s R000`s
Reconciliation of Headline Earnings
Profit for the year attributable to
ordinary shareholders 72 016 68 692
Surplus on disposal of property, plant and
equipment (net of taxation) (7) (14)
Headline earnings 72 009 68 678
Ordinary number of shares in issue (000`s) 235 000 235 000
Weighted average number of shares (000`s) 235 000 235 000
Diluted number of shares (000`s) 235 480 235 480
Earnings per share (cents) 30.65 29.23
Diluted earnings per share (cents) 30.58 29.17
Headline earnings per share (cents) 30.64 29.22
Diluted headline earnings per share (cents) 30.57 29.16
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
30 June 30 June
2011 2010
R000`s R000`s
ASSETS
Non-current assets
Property, plant and equipment 153 679 138 724
Intangible asset 593 372
Deferred taxation 2 223 3 165
Current assets
Inventory 170 242 181 048
Trade and other receivables 190 448 176 175
Taxation overpaid 617 467
Cash resources 265 534 260 938
TOTAL ASSETS 783 336 760 889
EQUITY AND LIABILTIES
Equity and reserves
Share capital 24 24
Share premium 116 150 147 875
Revaluation reserve 46 389 43 587
Accumulated profits 364 765 319 774
Attributable to ordinary shareholders 527 328 511 260
Non-controlling interest 96 225 83 723
Total shareholders` funds 623 553 594 983
Non-current liabilities
Deferred lease payments 118 94
Deferred taxation 20 657 19 198
Current liabilities
Trade and other payables 135 444 142 519
Provisions 3 137 3 207
Deferred lease payments 37 3
Taxation payable 390 885
TOTAL EQUITY AND LIABILITIES 783 336 760 889
Number of ordinary shares in issue (000`s) 235 000 235 000
Net asset value per share (cents) 224.39 217.56
Net tangible asset value per share (cents) 223.20 216.05
ABRIDGED GROUP STATEMENT OF CASH FLOWS
Audited Audited
year to year to
30 June 30 June
2011 2010
R000`s R000`s
Cash generated by operating activities 104 889 133 359
Interest received 16 907 18 004
Interest paid (137) (240)
Investment income - 594
Dividends paid (31 185) -
Taxation paid (34 653) (35 379)
Secondary tax on companies paid (3 019) -
Cash flows from operating activities 52 802 116 338
Cash flows from investing activities (16 481) (32 415)
Cash flows from financing activities
Capital distribution from share premium (31 725) (23 500)
Net increase in cash resources 4 596 60 423
Cash resources at beginning of year 260 938 200 515
Cash resources at end of year 265 534 260 938
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation
Capital Premium Reserve
R000`s R000`s R000`s
Balance at 30 June 2009 (audited) 24 171 375 37 150
Total comprehensive income for the year - - 6 437
Distribution paid - (23 500) -
Balance at 30 June 2010 (audited) 24 147 875 43 587
Total comprehensive income for the year - - 2 802
Dividends paid - - -
Distribution paid - (31 725) -
Balance at 30 June 2011 (audited) 24 116 150 46 389
Non-
Accumulated Controlling
Profit Interest Total
R000`s R000`s R000`s
Balance at 30 June 2009 (audited) 251 082 69 290 528 921
Total comprehensive income for the year 68 692 14 433 89 562
Distribution paid - - (23 500)
Balance at 30 June 2010 (audited) 319 774 83 723 594 983
Total comprehensive income for the year 72 016 16 662 91 480
Dividends paid (27 025) (4 160) (31 185)
Distribution paid - - (31 725)
Balance at 30 June 2011 364 765 96 225 623 553
ABRIDGED GROUP SEGMENT REPORT
Audited for the year ended 30 June 2011
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 27 423 1 257 648 5 330
Profit before taxation 47 711 92 215 1 144
Depreciation 2 342 2 812 52
Capital expenditure 13 190 4 326 27
Segment assets 331 020 513 960 3 166
Segment liabilities 58 131 142 748 560
Inter-
company
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (34 071) 1 256 330
Profit before taxation (14 054) 127 016
Depreciation - 5 206
Capital expenditure - 17 543
Segment assets (64 810) 783 336
Segment liabilities (41 656) 159 783
Audited for the year ended 30 June 2010
Investment
and rental Electrical IT
income Wholesaling Services
R000`s R000`s R000`s
Segment revenue 24 654 1 087 571 5 373
Profit before taxation 41 868 77 284 1 686
Depreciation 2 226 2 471 35
Capital expenditure 20 261 3 192 29
Segment assets 346 998 474 332 2 149
Segment liabilities 51 508 152 232 394
Inter-
company
eliminations
and re-
allocations Total
R000`s R000`s
Segment revenue (31 091) 1 086 507
Profit before taxation (5 845) 114 993
Depreciation - 4 732
Capital expenditure - 23 482
Segment assets (62 590) 760 889
Segment liabilities (38 228) 165 906
BASIS OF PREPARATION
The abridged audited consolidated annual financial statements for the year ended
30 June 2011 ("the year") have been prepared in compliance with International
Financial Reporting Standards ("IFRS"), IAS34, the AC500 series of
interpretations, the South African Companies` Act and the Listings Requirements
of the JSE Limited. The accounting policies applied are consistent with those
applied in the prior year. The annual financial statements have been audited by
PKF Durban, whose unqualified audit opinion is available for inspection at the
company`s registered office.
COMMENTARY
The board of ARB ("the board") is pleased to present the group`s audited results
for the year ended 30 June 2011. The past year was highlighted by the
advancement of a number of our strategic initiatives including the successful
launch of ARB Connect; the expansion of our national footprint to fifteen
branches; further investment in building our organisational capacity and a
pleasing set of results.
Financial and Operational Review
Revenue for the year increased by 16% to R1.26 billion, largely due to the
inclusion, for the full year under review, of Paragon Electrical, acquired in
March 2010, and the Polokwane branch, which opened in July 2010. Despite the
highly competitive trading environment, the group`s gross profit margin improved
from 18.4% in 2010 to 18.7% in the current year.
The increase in total overheads year-on-year was due to the inclusion of Paragon
Electrical and the Polokwane branch for the full year under review whereas in
the prior year Paragon Electrical was only included for the last four months.
Overheads continue to be well managed.
Consequently, operating profit increased by 14% over the prior year.
Tight management of working capital resulted in strong cash generation. Despite
cash distributions of R63m to shareholders and lower interest rates, net
interest received decreased by only 6%.
The group`s effective tax rate of 30% was higher than the standard rate of 28%
due to the STC charge of R3 million incurred in the first half of the current
year on dividends paid.
Pleasingly, after being down by 1% at the interim stage, headline earnings per
share for the full year of 30.6 cents reflects growth of 5% compared to the
prior year.
Notwithstanding the 16% growth in revenue, inventory levels decreased by R11
million reflecting the success of the considerable efforts made in refining the
group`s procurement and inventory management practices. The increase in the
trade receivables is consistent with the growth in revenue. Inventory days
reduced from 75 days in the prior year to 61 days in the current year and
receivable days decreased from 52 days to 49 days. The working capital days for
the prior year are however distorted by the inclusion of Paragon Electrical for
only the last four months of that year. The decrease in accounts payable and
payable days stems from the efforts to take advantage of the group`s strong cash
position by maximising early settlement discounts received from suppliers.
Notwithstanding the payment of shareholder distributions amounting to R63
million; net capital expenditure of R16.5 million and tax and STC payments of
R38 million during the year, the group still managed to increase its net cash
resources to almost R266 million as at 30 June 2011.
The group`s balance sheet remains ungeared.
Launch of ARB Connect
In line with the group`s strategy of expanding its national branch network, ARB
Connect was launched. As a chain of smaller, more centrally located retail
stores, ARB Connect is predominantly aimed at servicing the smaller electrical
contracting and domestic market segments.
The first two ARB Connect stores, in Belville in the Western Cape and in Durban
North, opened in the second quarter of 2011 bringing to fifteen the total number
of ARB branches countrywide.
The group has earmarked several other regions for future ARB Connect store
rollouts once suitable premises have been secured.
Building organisational capacity
In order to ensure that the group has both the necessary management skills and
capacity to successfully undertake its planned expansion activities, the group
has invested significantly in enhancing its organisational capacity. Areas of
focus include improved corporate governance; enhancing the group`s management
information system; formalising the group`s succession plan and implementing
improved retention and incentive schemes. From an operational perspective, the
group has, amongst others, established a dedicated internal audit function,
appointed a specialist group human resources manager, launched a new training
programme and created a centralized group procurement function. The training
programme is designed to ensure the availability of an adequate pool of skills
and expertise to cater for future demands.
Corporate Activity and Expansion
With an ungeared balance sheet and significant cash resources, the group is well
placed to capitalise on the acquisition opportunities which the current economic
climate is expected to yield. Whilst forming a key component of our growth
strategy, acquisitions will only be concluded if the board is convinced of the
strategic fit and merits of such acquisitions and provided that the terms and
structure of such acquisitions are value accretive to ARB shareholders.
In this regard, several acquisition opportunities were evaluated during the
year, but declined. Management continues to evaluate numerous strategic growth
initiatives, both organic and acquisitive.
Prospects
Despite the disruptive impact of the recent labour strikes; protracted delays in
the government`s roll out of infrastructure projects and the subdued economic
climate, the group`s recent and planned growth initiatives are expected to
provide further impetus to its performance in the year ahead.
The group remains committed to delivering sustainable earnings growth and value
to its shareholders.
The above prospects statements have not been reviewed or reported on by the
company`s auditors.
Board of Directors
In order to align the composition of the board with the recommendations set out
in King III, the following changes to the board were made during the year:
* Dumisani Muhlwa, CEO of Batsomi Investments Holdings (Pty) Limited
("Batsomi"), resigned as a non-independent, non-executive director on 7
February 2011 but remained on the board of the group`s main trading
subsidiary, ARB Electrical Wholesalers (Pty) Limited, wherein Batsomi has a
26% shareholding; and
* Gerrit "Boel" Pretorius was appointed as an independent non-executive
director on 9 June 2011.
Following these changes, the board comprises three executive directors and five
non-executive directors, three of whom are independent.
Dividend
In view of the group`s continued strong cash generation and its ungeared balance
sheet, the board has resolved to declare a dividend of 12.25 cents per share
(2010:11,5 cents per share) representing the maximum payout in terms of the
company`s dividend policy.
The relevant dates for the dividend are as follows:
Event Date
Last day to trade cum dividend Friday, 26 August 2011
Shares commence trading ex dividend Monday, 29 August 2011
Record date Friday, 2 September 2011
Payment date Monday, 5 September 2011
Share certificates may not be dematerialised or rematerialised between Monday,
29 August 2011 and Friday, 2 September 2011, both days inclusive.
Following the payment of the dividend, the group will still hold cash reserves
of over R220 million, which the board believes are sufficient to fund the
anticipated organic and acquisitive growth opportunities.
Subsequent events
No significant events have occurred in the period between the reporting date and
the date of this announcement.
Shareholders are however referred to the cautionary announcement released by the
company on 12 August 2011.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of shareholders of ARB as
at Friday, 2 September 2011, being the record date set by the board for purposes
of determining which shareholders are entitled to receive the Notice of Annual
General Meeting, will be held at 11:00 on Tuesday, 11 October 2011 at the
company`s registered office located at 10 Mack Road, Prospecton, Durban to
transact the business as stated in the notice of the Annual General Meeting
contained in the Integrated Report, which is in the process of being prepared
and which will be posted to shareholders by no later than 9 September 2011.
Appreciation
We thank our management teams and staff for their outstanding commitment and
hard work in a trying economic environment. We also express our gratitude to our
fellow directors for their valued contribution and wise counsel. Last but
certainly not least, we extend our thanks to our valued customers, suppliers,
business partners, advisors and shareholders for their ongoing support.
For and on behalf of the Board.
Alan R Burke Byron Nichles William Neasham
Chairman Chief Executive Officer Financial Director
12 August 2011
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; B Nichles (Chief
Executive Officer); WR Neasham (Financial Director); RB Patmore*#; G
Pretorius*>; CC Robertson
*non-executive >independent #lead independent
Registered office: 10 Mack Road, Prospecton, Durban, 4110 (PO Box 26426,
Isipingo Beach, 4115)
Company secretary: WR Neasham CA(SA), 10 Mack Road, Prospecton, Durban, 4110 (PO
Box 26426, Isipingo Beach, 4115)
Auditors: PKF Durban, 12 on Palm Boulevard, Gateway, 4319 (PO Box 1858, Durban,
4000)
Sponsor: Grindrod Bank Limited, 1st Floor, Building Three, Commerce Square, 39
Rivonia Road, Sandhurst, 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: ChilliBush Investor Relations, Chilli House, 58 Jan Smuts
Avenue, Forest Town, 2000 (PO Box 1432, Cramerview, 2060)
Date: 12/08/2011 07:10:00 Supplied by www.sharenet.co.za
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