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ABRIDGED AUDITED RESULTSFOR THE YEAR ENDED 30 JUNE 2012, 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 2012,
DIVIDEND ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
Strategic acquisitions of Eurolux and Industrial Cable Suppliers
Revenue up 25% to R1 565 million
Operating profit up 16% to R128 million
Headline Earnings per share up 12% to 34,25 cents
Ungeared with R180 million cash resources
Annual dividend of 13,7 cents per share
BASIS OF PREPARATION
The abridged audited consolidated annual financial statements for the year ended 30 June 2012 ("the year"?) have been prepared in compliance with International Financial Reporting Standards ("IFRS"), IAS 34, 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.
The audited annual financial statements have been prepared under the supervision of the Financial Director, WR Neasham, CA(SA).
ABRIDGED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
year to year to
30 June 30 June
2012 2011
R000's R000's
Revenue 1 565 294 1 256 330
Cost of sales 1 258 142 1 021 499
Gross profit 307 152 234 831
Other income 6 282 1 730
Operating expenses (185 930) (126 315)
Profit before interest and taxation 127 504 110 246
Interest received 17 985 16 907
Interest paid (710) (137)
Profit before taxation 144 779 127 016
Taxation 43 799 38 338
Profit for the year 100 980 88 678
Revaluation of property, plant and
equipment (net of taxation) 3 240 2 802
Total comprehensive income for the year 104 220 91 480
Profit for the year attributable to: 100 980 88 678
Minority interests 20 391 16 662
Ordinary shareholders 80 589 72 016
Total comprehensive income attributable to: 104 220 91 480
Minority interests 20 391 16 662
Ordinary shareholders 83 829 74 818
RECONCILIATION OF HEADLINE EARNINGS
Audited Audited
year to year to
30 June 30 June
2012 2011
R000's R000's
Profit for the year attributable to
ordinary shareholders 80 589 72 016
Surplus on disposal of property, plant and
equipment (net of taxation) (109) (7)
Headline earnings 80 480 72 009
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) 235 460 235 480
Basic earnings per share (cents) 34,29 30,65
Diluted earnings per share (cents) 34,23 30,58
Headline earnings per share (cents) 34,25 30,64
Diluted headline earnings per share (cents) 34,18 30,57
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
30 June 30 June
2012 2011
R000's R000's
ASSETS
Non-current assets
Property, plant and equipment 162 871 153 679
Intangible assets 78 471 593
Deferred taxation 6 454 2 223
Current assets
Inventory 251 088 170 242
Trade and other receivables 300 073 190 448
Taxation overpaid 319 617
Cash resources 185 283 265 534
TOTAL ASSETS 984 559 783 336
EQUITY AND LIABILITIES
Equity and reserves
Share capital 24 24
Share premium 116 150 116 150
Revaluation reserve 49 629 46 389
Accumulated profits 416 566 364 765
Attributable to ordinary shareholders 582 369 527 328
Minority interests 150 805 96 225
Total shareholders' funds 733 174 623 553
Non-current liabilities
Deferred lease payments 395 118
Deferred taxation 40 655 20 657
Current liabilities
Trade and other payables 200 539 135 444
Provisions - 3 137
Deferred lease payments 109 37
Taxation payable 3 774 390
Bank overdraft 5 913 -
TOTAL EQUITY AND LIABILITIES 984 559 783 336
Number of ordinary shares in issue (000's) 235 000 235 000
Net asset value per share (cents) 247,82 224,39
Net tangible asset value per share (cents) 225,82 223,20
ABRIDGED GROUP STATEMENT OF CASH FLOW
Audited Audited
year to year to
30 June 30 June
2012 2011
R000's R000's
Cash generated by operating activities 95 191 104 889
Interest received 17 985 16 907
Interest paid (710) (137)
Dividends paid (34 326) (31 185)
Taxation paid (41 306) (34 653)
Secondary tax on companies paid (3 433) (3 019)
Cash flows from operating activities 33 401 52 802
Cash flows from investing activities (112 347) (16 481)
Cash flows from financing activities (7 218) (31 725)
Decrease in cash resources (86 164) 4 596
Cash resources at the beginning of the year 265 534 260 938
Cash resources at the end of the year 179 370 265 534
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation
capital premium reserve
R000's R000's R000's
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
Total comprehensive income for the year - - 3 240
Dividends paid - - -
Pre-acquisition reserves arising from
significant business combination
effected during the year - - -
Balance at 30 June 2012 (audited) 24 116 150 49 629
Accumulated Minority
profit interests Total
R000's R000's R000's
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 (audited) 364 765 96 225 623 553
Total comprehensive income for the year 80 589 20 391 104 220
Dividends paid (28 788) (5 538) (34 326)
Pre-acquisition reserves arising from
significant business combination
effected during the year - 39 727 39 727
Balance at 30 June 2012 (audited) 416 566 150 805 733 174
ABRIDGED GROUP SEGMENT REPORT
Audited for the year ended 30 June 2012
Electrical IT
Wholesaling Lighting* services
R000's R000's R000's
Segment revenue 1 449 098 119 800 5 269
Profit before interest
and taxation 96 345 5 073 784
Net interest received 12 300 (1 568) 67
Profit before taxation 108 645 3 505 851
Segment assets 625 030 115 203 4 049
Segment liabilities 198 658 55 416 747
Corporate
and inter-
company
eliminations Total
R000's R000's
Segment revenue (8 873) 1 565 294
Profit before interest
and taxation 25 302 127 504
Net interest received 6 476 17 275
Profit before taxation 31 778 144 779
Segment assets 240 277 984 559
Segment liabilities (3 436) 251 385
*for the six months ended 30 June 2012
Audited for the year ended 30 June 2011
Corporate
and inter-
Electrical IT company
Wholesaling services eliminations
R000's R000's R000's
Segment revenue 1 257 648 5 330 (6 648)
Profit before interest
and taxation 84 814 1 101 24 331
Net interest received 7 401 43 9 326
Profit before taxation 92 215 1 144 33 657
Segment assets 513 960 3 166 266 210
Segment liabilities 142 748 560 16 475
Total
R000's
Segment revenue 1 256 330
Profit before interest and taxation 110 246
Net interest received 16 770
Profit before taxation 127 016
Segment assets 783 336
Segment liabilities 159 783
COMMENTARY
The board of ARB ("the board") is pleased to present the group's audited results for the year ended 30 June 2012. A strong trading performance combined with the announcement of two strategic acquisitions highlighted another successful year.
Financial and operational review
Results
Revenue and operating profit for the year increased by 25% to R1,57 billion and 16% to R128 million respectively. ARB Electrical Wholesalers (Pty) Limited ("ARB Electrical") continued to grow its market share and the consolidation of Eurolux (Pty) Limited's ("Eurolux's") results for the second half of the year further improved the results. Despite a competitive marketplace, the inclusion of Eurolux's higher margin business improved the group's overall gross profit margin from 18,7% in 2011 to 19,6% in the current year.
Given its higher gross margins, Eurolux's overheads as a percentage of revenue are proportionately higher than ARB Electrical's. This together with the continued investment in broadening the organisational capacity of the group and the transaction costs pertaining to the acquisitions of Eurolux and Industrial Cable Suppliers (Pty) Limited ("ICS") resulted in total overheads growing at a faster rate than revenue for the year.
Net interest received increased by 3%. Effective management of working capital more than offset the R81 million cash payment in respect of the Eurolux acquisition in January 2012.
The effective tax rate of 30% was due to the secondary tax on dividends of R3,4 million incurred in the first half of the year.
The additional investment in net working capital during the year reflects the increase in ARB Electrical's revenue as well as the consolidation of Eurolux's working capital for the first time following its acquisition.
The increase in intangible assets during the year is as a result of the intangible assets acquired as part of the Eurolux acquisition, of which the Eurolux brand accounts for the greatest portion.
The group's balance sheet remains ungeared with net cash of approximately R180 million at year-end.
Electrical Wholesaling
The group's largest contributor to revenue and profits, the Electrical Wholesaling segment, delivered a pleasing performance for the full year. Revenue increased by 15% to R1,45 billion and operating profit increased by 14% to R96,3 million.
Lighting
The Eurolux acquisition was earnings-enhancing despite the combination of mark-to-market losses incurred on forward cover due to the sudden and unexpected recovery of the Rand in January 2012, and the transaction costs related to the acquisition.
Corporate activity and expansion
With effect from 2 January 2012, ARB acquired 60% of Eurolux. The fair value of Eurolux's net assets as at the effective date of the acquisition was determined as follows:
R000's
Total assets 196 893
Total liabilities (97 576)
Net assets 99 317
Minority interests (39 727)
Goodwill 18 410
Total consideration transferred in cash 78 000
Eurolux's revenue and profit included in the group statement of comprehensive income are shown under the "Lighting" column in the abridged group segment report. If Eurolux was included from the beginning of their financial year its revenue would have been R193 528 836 and the impact on profit after tax R16 082 066. A 10-month period is reported on as Eurolux changed its financial year-end from 31 August to 30 June.
The acquisition of 100% of ICS took effect from 2 July 2012. This acquisition further broadens the group's national distribution network and provides the group with an established presence in the fast-growing mining and industrial nodes surrounding Rustenburg. The purchase price is based on ICS's net tangible asset value to be determined by the auditors. The initial payment, based on ICS's approved management accounts, was R30,7 million based on a net tangible asset value of R26,4 million. The purchase price allocation in terms of IFRS 3 will be finalised once the audit certificate referred to above is received.
The group continues to evaluate several acquisition opportunities although these 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.
Prospects
Although trading conditions are expected to remain tough for the foreseeable future with continued margin pressure being experienced, the group will benefit once the public sector's significantly increased and accelerated infrastructure roll-out commences.
The consolidation of Eurolux's and ICS's results for the full year should contribute to the group's continued growth in revenue and profitability for the years 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
Craig Robertson resigned as a director of the company with effect from 1 July 2012, but will continue as CEO of ARB Electrical until 31 December 2012.
The board would like to record its sincere appreciation to Craig for his leadership and valuable contribution to ARB during his 20-year tenure with the group, and wishes him well in his future endeavours.
Consistent with good corporate governance and international best practice, the board now comprises two executive directors the group chief executive and the group financial director - 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 13,7 cents per share (2011: 12,25 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, 31 August 2012
Shares commence trading ex dividend Monday, 3 September 2012
Record date Friday, 7 September 2012
Payment date Monday, 10 September 2012
Share certificates may not be dematerialised or rematerialised between Monday, 3 September 2012 and Friday, 7 September 2012, both days inclusive.
In compliance with the JSE Listings Requirements, the following additional information is disclosed:
1. The dividend has been declared out of income reserves;
2. The local dividend tax rate is 15%;
3. There are no Secondary Tax on Companies credits utilised against the dividend;
4. The gross local dividend amount is 13,7 cents per share for shareholders exempt from paying the new Dividends Tax;
5. The net local dividend amount is 11,645 cents per share for shareholders liable to pay the new Dividends Tax;
6. The issued share capital of ARB is 235 000 000 shares of 0,01 cent each; and
7. ARB's income tax reference number is 9010/138/20/5.
Subsequent events
Save for the acquisition of 100% of ICS becoming effective on 2 July 2012, and the initial payment of the purchase price on 30 July 2012, no significant events have occurred during the period between the reporting date and the date of this announcement.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of shareholders of ARB as at Friday, 14 September 2012, 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 Wednesday, 24 October 2012 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 20 September 2012.
Appreciation
We thank our management teams and staff for their 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
Chairman Chief Executive Officer
16 August 2012
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; B Nichles
(Chief Executive Officer); WR Neasham (Financial Director); RB Patmore*>#;
G Pretorius*>
*non-executive >independent #lead independent director
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) Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Investor relations: Keyter Rech Investor Solutions CC, Fountain Grove, 5 2nd Road, Hyde Park, 2196 (PO Box 653078, Benmore, 2010)
Date: 16/08/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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