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ERB - Erbacon Investment Holdings Limited - Disposal by Erbacon of its small

Release Date: 14/03/2012 11:11
Code(s): ERB
Wrap Text

ERB - Erbacon Investment Holdings Limited - Disposal by Erbacon of its small plant division Erbacon Investment Holdings Limited (Incorporated in the Republic of South Africa) (Registration number: 2007/014490/06) Share code: ERB ISIN: ZAE000111571 ("Erbacon" or "the Company") DISPOSAL BY ERBACON OF ITS SMALL PLANT DIVISION 1. THE TRANSACTION Shareholders are hereby advised that Erbacon entered into an agreement on 24 February 2012 in terms of which Erbacon disposed of its 85% shareholding in, and claims against BO`s Hire and Sales (Pty) Limited (formerly Erbacon Small Plant (Pty) Ltd) ("the Sale Assets") ("Erbacon Small Plant" or "ESP") to Imbewu SPV4 (Pty) Limited ("Imbewu"), on the terms and conditions set out below ("the Disposal"). 2. BUSINESS OF ERBACON SMALL PLANT ESP is a Durban based company which hires out small plant to construction related entities, including Erbacon, through six branches and four satellite branches across South Africa. 3. RATIONALE FOR THE TRANSACTION Given that the operations of ESP no longer fit with Erbacon`s strategy, the Erbacon board of directors ("the Board") resolved in July 2011 to discontinue its involvement in this business. This decision is in accordance with the Group`s focus on developing further capacity within the civils and industrial building operations which are experiencing strong growth. The disposal has resulted in a reduction in Erbacon`s borrowings amounting to R30 million which will permit Erbacon`s banking facilities to be applied to the core businesses. 4. BACKGROUND INFORMATION ON THE PURCHASERS Imbewu is controlled by Imbewu Capital Partners. Imbewu Capital Partners is a KwaZulu-Natal black owned and controlled private equity and investment holding company. 5. THE EFFECTIVE DATE OF THE TRANSACTION The effective date of the transaction was the close of business 29 February 2012. 6. PURCHASE CONSIDERATION The consideration payable by Imbewu to Erbacon for the Sale Assets in terms of the agreement is R30 million, of which R10 million was paid on 24 February 2012("the Disposal Consideration"), plus the assumption of debt by the purchasers amounting to R20 million. The Disposal Consideration has been applied to reduce current overdraft facilities of the Company. 7. CONDITIONS PRECEDENT There are no outstanding conditions precedent in terms of the agreement. 8. PRO FORMA FINANCIAL EFFECTS The pro forma financial effects of the Disposal are presented for illustrative purposes only and, because of their nature, may not give a fair reflection of the Company`s financial position nor of the effect on future earnings after the Disposal. Set out below are the unaudited pro forma financial effects of the Disposal, based on the unaudited financial results for the six month period ended 31 August 2011. The Board is responsible for the preparation of the unaudited pro forma financial information. Restated Unaudited Restated Unaudited pro Change Financial Results Unaudited forma after for the six month before the the Disposal period ended 31 Disposal (Cents) August 2011 (Cents) Basic loss per share (43.19) (47.33) (9.59%) Diluted loss per (30.60) (33.67) (10.04%) share Basic headline loss (26.74) (16.03) 40.05% per share Diluted headline (18.40) (10.45) 43.22% loss per share Net asset value per 94.63 93.88 (0.79%) share Net tangible asset 25.05 24.30 (2.98) value per share Notes and assumptions: 1. The basic and diluted loss and headline loss per share figures in the "Unaudited pro forma after the Disposal" column have been calculated on the basis that the Disposal was effected on 1 March 2011. The change in the basic headline loss per share of 40.05% is due to certain of the asset impairments at 31 August 2011 not meeting the criteria to be a headline loss adjustment, whereas the total loss on sale of the business of ESP in the pro forma accounts does constitute a headline loss adjustment. 2. The net asset value per share and the net tangible asset value per share figures in the "Unaudited pro forma after the Disposal" column have been calculated on the basis that the Disposal was effected on 31 August 2011. The negligible change in net asset and tangible asset value per share is due to the fact that substantial balance sheet impairments were recognized at 31 August 2011 following the approval of the Board in July 2011 to discontinue the ESP business. 3. The interest saving on the Disposal Consideration received has been calculated based on the average lending rate of Erbacon for the 6 month interim period net of tax effects. Taxation has not been provided for on the loss on sale, due to the utilisation of assessed losses being remote. 4. The basic earnings per share and the basic headline earnings per share figures are calculated based on a weighted average number of shares in issue of 193.8 million shares as at 31 August 2011. 5. The net asset value per share and net tangible asset value per share have been calculated based on 193.8 million shares in issue as at 31 August 2011. 14 March 2012 Durban Designated adviser: PSG Capital (Pty) Limited Date: 14/03/2012 11:11:48 Supplied by www.sharenet.co.za 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 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 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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