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ARB HOLDINGS LIMITED - Unaudited Interim Results for the six months ended 31 December 2012

Release Date: 14/02/2013 07:05
Code(s): ARH     PDF:  
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Unaudited Interim Results for the six months ended 31 December 2012

ARB HOLDINGS LIMITED
(Registration number: 1986/002975/06)
Share code: ARH      ISIN: ZAE000109435
(“ARB” or “the company” or “the group”)

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2012

HIGHLIGHTS
- Revenue up 39% to R965 million
- Operating profit up 27% to R76,5 million
- Headline earnings per share up 17% to 18,43 cents
- Ungeared with R153 million cash on hand
- Acquisitions of Industrial Cable Suppliers and Elektro Vroomen


BASIS OF PREPARATION
The condensed unaudited consolidated interim financial statements for
the six months ended 31 December 2012 have been prepared in compliance
with International Financial Reporting Standards (“IFRS”), IAS34 –
Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, the South African
Companies’ Act and the Listings Requirements of the JSE Limited. The
accounting policies applied are consistent with those applied in the
annual financial statements for the year ended 30 June 2012 and the six
months ended 31 December 2011. The condensed consolidated interim
financial statements have not been audited or reviewed by the group’s
auditors.

The unaudited interim financial statements have been prepared under the
supervision of the Financial Director, WR Neasham, CA(SA).

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
                                          Unaudited Unaudited   Audited
                                           6 months 6 months    year to
                                          to 31 Dec to 31 Dec   30 June
                                               2012      2011      2012
                                             R000’s    R000’s    R000’s
Revenue                                     964 656   693 497 1 565 294
Cost of sales                               768 665   562 939 1 258 142
Gross profit                                195 991   130 558   307 152
Other income                                  5 394     2 812     6 282
Operating expenses                         (124 909)  (73 362) (185 930)
Profit before interest and taxation          76 476    60 008   127 504
Interest received                             4 665     9 238    17 985
Interest paid                                  (846)     (194)     (710)
Profit before taxation                       80 295    69 052   144 779
Taxation                                     21 810    22 812    43 799
Profit for the period                        58 485    46 240   100 980
Revaluation of property, plant and
equipment (net of taxation)                       -         -     3 240
Total comprehensive income for the period    58 485    46 240   104 220
Profit for the period attributable to:       58 485    46 240   100 980
Non-controlling interest                     13 016     9 354    20 391
Ordinary shareholders                        45 469    36 886    80 589

Total comprehensive income attributable to   58 485    46 240   104 220
Non-controlling interest                     13 016     9 354    20 391
Ordinary shareholders                        45 469    36 886    83 829

                                         Unaudited    Unaudited    Audited
                                          6 months     6 months    year to
                                         to 31 Dec       31 Dec    30 June
                                              2012         2011       2012
                                            R000’s       R000’s     R000’s
Reconciliation of headline earnings
Profit for the period attributable to
ordinary shareholders                      45 469        36 886     80 589
Surplus on disposal of property, plant
and equipment (net of taxation)                (2)         (24)       (109)
Bargain purchase price (net of minorities) (2 167)           -           -
Headline earnings                          43 300       36 862      80 480
Number of shares in issue (000’s)         235 000      235 000     235 000
Weighted average number of shares (000’s) 235 000      235 000     235 000
Diluted number of shares (000’s)          235 360      235 480     235 460
Earnings per share (cents)                  19,35        15,70       34,29
Diluted earnings per share (cents)          19,32        15,66       34,23
Headline earnings per share (cents)         18,43        15,69       34,25
Diluted headline earnings per share (cents) 18,40        15,65       34,18


CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
                                        Unaudited     Unaudited    Audited
                                           31 Dec        31 Dec    30 June
                                             2012          2011       2012
                                           R000’s        R000’s     R000’s
ASSETS
Non-current assets
Property, plant and equipment             173 315      153 939     162 871
Intangible assets                          78 471          756      78 471
Deferred taxation                           6 366        2 489       6 454
Current assets
Inventory                                 304 372      189 325     251 088
Trade and other receivables               255 224      171 994     300 073
Taxation                                    1 145           95         319
Cash resources                            153 244      240 348     185 283
TOTAL ASSETS                              972 137      758 946     984 559

EQUITY AND LIABILTIES
Equity and reserves
Share capital                                  24           24          24
Share premium                             116 150      116 150     116 150
Revaluation reserve                        49 629       46 389      49 629
Accumulated profit                        429 840      372 863     416 566
Attributable to ordinary shareholders     595 643      535 426     582 369
Non-controlling interest                  157 321      100 041     150 805
Total shareholders’ funds                 752 964      635 467     733 174
Non-current liabilities
Deferred lease payments                       771          296         395
Deferred taxation                          38 843       20 517      40 655
Current liabilities
Trade and other payables                  178 142      101 801     200 539
Deferred lease payments                        69           18         109
Taxation payable                              715          847       3 774
Bank overdraft                                633            -       5 913
TOTAL EQUITY AND LIABILITIES              972 137      758 946     984 559
Number of shares in issue (000’s)         235 000      235 000     235 000
Net asset value per share (cents)          253,47       227,84      247,82
Net tangible asset value per share (cents) 231,50       226,46      225,82


CONDENSED GROUP STATEMENT OF CASH FLOWS
                                          Unaudited Unaudited     Audited
                                           6 months  6 months     year to
                                          to 31 Dec to 31 Dec     30 June
                                               2012      2011        2012
                                             R000’s    R000’s      R000’s
Cash generated by operating activities      110 711    25 223      95 191
Interest received                             4 665     9 238      17 985
Interest paid                                  (846)     (194)       (710)
Dividends paid                              (38 695)  (34 326)    (34 326)
Taxation paid                               (26 839)  (18 807)    (41 306)
Secondary tax on companies paid                   -    (3 432)     (3 433)
Cash flows from operating activities         48 996   (22 298)     33 401
Cash flows from investing activities        (40 377)   (2 888)   (112 347)
Cash flows from financing activities        (35 378)        -      (7 218)
Net decrease in cash resources              (26 759)  (25 186)    (86 164)
Cash resources at beginning of period       179 370   265 534     265 534
Cash resources at end of period             152 611   240 348     179 370


CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
                                                                 Revalu-
                                            Share       Share      ation
                                          Capital     Premium    Reserve
                                           R000’s      R000’s     R000’s
Balance at 30 June 2011 (audited)              24     116 150     46 389
Total comprehensive income for the period       -           -          -
Dividends paid                                  -           -          -
Balance at 31 December 2011 (unaudited)        24     116 150     46 389
Total comprehensive income for the period       -           -      3 240
Pre-acquisition reserves arising from
significant business combination
effected during the period                      -           -          -
Balance at 30 June 2012 (audited)              24     116 150     49 629
Total comprehensive income for the period       -           -          -
Dividends paid                                  -           -          -
Balance at 31 December 2012 (unaudited)        24     116 150     49 629


                                                         Non-
                                          Accumu-    Control-
                                            lated        ling
                                           Profit    Interest      Total
                                           R000’s      R000’s     R000’s
Balance at 30 June 2011 (audited)         364 765      96 225    623 553
Total comprehensive income for the period  36 886       9 354     46 240
Dividends paid                            (28 788)     (5 538)   (34 326)
Balance at 31 December 2011 (unaudited)   372 863      100 041   635 467
Total comprehensive income for the period  43 703       11 037    57 980
Pre-acquisition reserves arising from
significant business combination
effected during the period                      -       39 727    39 727
Balance at 30 June 2012 (audited)         416 566      150 805   733 174
Total comprehensive income for the period  45 469       13 016    58 485
Dividends paid                            (32 195)      (6 500)  (38 695)
Balance at 31 December 2012 (unaudited)   429 840      157 321   752 964



CONDENSED GROUP SEGMENT REPORT

Unaudited for the 6 months ended 31 December 2012
                                            Elec-
                                           trical
                                           Whole-
                                           saling        Lighting     Corporate
                                           R000’s          R000’s        R000’s
Segment revenue                           829 035         139 670        42 869
Profit before interest and taxation        46 419          14 420        34 137
Segment assets                            585 402         139 872       312 513
Segment liabilities                       148 219          70 486        25 695

                                                          Inter-
                                                         company
                                                    eliminations
                                                         and re-
                                                     allocations         Total
                                                          R000’s        R000’s
Segment revenue                                          (46 918)      964 656
Profit before interest and taxation                      (18 500)       76 476
Segment assets                                           (65 650)      972 137
Segment liabilities                                      (25 227)      219 173


Unaudited for the 6 months ended 31 December 2011
                                                           Elec-
                                                          trical
                                                          Whole-
                                                          saling      Corporate
                                                          R000’s         R000’s
Segment revenue                                          693 766         36 125
Profit before interest and taxation                       47 899         27 871
Segment assets                                           491 494        343 612
Segment liabilities                                      105 347         71 156

                                                          Inter-
                                                         company
                                                    eliminations
                                                         and re-
                                                     allocations         Total
                                                          R000’s        R000’s
Segment revenue                                          (36 394)      693 497
Profit before interest and taxation                      (15 762)       60 008
Segment assets                                           (76 160)      758 946
Segment liabilities                                      (53 024)      123 479
Audited for the year ended 30 June 2012
                                       Electrical
                                      Wholesaling      Lighting*     Corporate
                                           R000’s        R000’s         R000’s
Segment revenue                         1 449 098       119 800         33 951
Profit before interest
and taxation                               96 345         5 073         30 307
Segment assets                            625 030       115 203        416 911
Segment liabilities                       198 658        55 416        129 474

                                                          Inter-
                                                         company
                                                    eliminations
                                                         and re-
                                                     allocations         Total
                                                          R000’s        R000’s
Segment revenue                                          (33 555)    1 565 294
Profit before interest
and taxation                                              (4 221)      127 504
Segment assets                                          (172 585)      984 559
Segment liabilities                                     (132 163)      251 385
*for the six months ended 30 June 2012


COMMENTARY
The board of ARB (“the board”) is pleased to present the group’s interim
results for the six months ended 31 December 2012 (“the period”).

The group’s strategy of achieving a level of revenue and profit
diversification through acquiring strategically aligned, related
businesses delivered top and bottom line growth.

Financial review
The group achieved revenue of R965 million representing growth of 39%,
the majority of which was contributed by the recent acquisitions of
Eurolux (Pty) Limited (“Eurolux”) and Industrial Cable Suppliers (Pty)
Limited (“ICS”). The group’s overall gross margin improved from 18.8%
to 20.3% due to the inclusion of the higher margin Eurolux results. The
increase in overheads reflects the inclusion of Eurolux’s and ICS’
overheads for the full period under review. Operating profit increased
by 27% to R76.5 million.

Net interest received decreased due to the cash-settled acquisitions of
Eurolux and ICS. These acquisitions proved to be earnings enhancing as
their contribution to operating profit substantially exceeded the
reduction in interest received.

The group’s effective tax rate was lower than in the prior period due to
the introduction of dividend withholding tax resulting in no STC charge
in the current period.
Headline earnings per share grew by 17,5% to 18,43 cents (2011: 15,69
cents).

The group’s statement of financial position remains robust reflecting a
net asset value per share of 253,47 cents (2011: 227.84 cents) and a net
ungeared cash position of R153 million.

Net working capital as a percentage of annualised revenue was maintained
at below 20% reflecting management’s disciplined approach to cash
management. Inventory days increased, as anticipated, due to increased
stock orders ahead of the Chinese New Year factory shutdowns. Despite
the major retail chains taking extended payment terms over the peak
Festive Season, trade receivable days (net of VAT) increased only
marginally to 42 days.

Net capital expenditure for the period amounted to approximately
R4,4 million. The ICS purchase consideration amounted to R36 million,
while a further amount of R35 million was used to settle ICS’ external
interest-bearing debt.

Segmental review
Electrical Wholesaling
The Electrical Wholesaling segment produced disappointing results for
the period as revenue growth, boosted by the acquisition of ICS, was
offset by a decline in gross margins during the period. The segment’s
results were further impacted by the costs associated with the
implementation of its new ERP software as well as the ICS integration
costs, the full benefits of which will only be realised in the second
half of the financial year.

Lighting
The Lighting segment produced very pleasing results for the period.
Strong revenue growth reflects market share gains and the combination of
improved margins and tight cost control produced an excellent trading
result for the period.

Corporate
The Corporate segment represents the group’s ungeared property
portfolio, comprising 17 properties valued at R140 million, the
centralised treasury function and ARB IT Solutions (Pty) Limited.
Results for the period were in line with expectations and better than
the prior period due to the non-recurrence of the Eurolux transaction
costs incurred in the prior period.

Corporate activity and expansion
The acquisition of 100% of both ICS, effective from 2 July 2012, and
Elektro Vroomen (Pty) Limited (“Elektro Vroomen”), effective from 1
January 2013, ensured that the period was a busy one from a corporate
activity perspective.

Through these acquisitions, ARB continued to expand its geographic reach
by adding 4 new branches across 4 provinces increasing ARB’s national
branch network to 19 branches across all nine provinces.

Acquisition of 100% of ICS
With effect from 2 July 2012, ARB acquired 100% of ICS. The fair value
of ICS’s net assets as at the effective date of the acquisition was
determined as follows:

                                        R000’s
Total assets                           124 794
Total liabilities                      (85 875)
Net assets                              38 919
Bargain purchase price                  (2 928)
Total consideration settled in cash     35 991

For the period, ICS reported the following revenue and profit after tax:

                                        R000’s
Revenue                                103 970
Profit after tax                         1 187

ICS’s revenue and profit included in the group statement of
comprehensive income form part of the “Electrical Wholesaling” segment
in the condensed group segment report.

Acquisition of 100% of Elektro Vroomen
The acquisition of 100% of Elektro Vroomen was announced on SENS on 11
December 2012 and became effective on 1 January 2013.

Established in 1959, Elektro Vroomen is an electrical wholesaling
operation with branches in Bloemfontein and Kathu. The acquisition
provides ARB Electrical with an established presence and customer base
in the Free State as well as in the fast-growing mining node of Kathu,
Northern Cape. Furthermore, the acquisition provides ARB with an
opportunity to expand Elektro Vroomen’s product offering to include a
full range of cable and overhead line products to complement its current
range of low voltage electrical products.

Although still subject to finalisation, the fair value of Elektro
Vroomen’s net assets as at the effective date of the acquisition was
determined as follows:

                                        R000’s
Total assets                            11 426
Total liabilities                      (16 926)
Net liabilities                         (5 500)
Goodwill                                 5 500
Total consideration settled in cash      R1-00

Exclusive international distribution agreements
Consistent with its strategy to secure higher margin, proprietary
products, the group secured the exclusive distribution rights to several
international electrical products including ACCC® (a technologically
advanced, high performance transmission conductor), Copperweld (a range
of bimetallic wire products with significant anti-theft properties) and
the full range of Zhejiang CHINT Electrics Co., Ltd’s (the largest
manufacturer of electrical products in China) low voltage products. The
contribution from these agencies will only be evident in future periods.

With an ungeared balance sheet and significant cash resources,
management continues to explore acquisition opportunities aligned to its
long-term strategy of offering a diversified range of electrical and
related industrial products to a broad spectrum of industries and market
segments.

Prospects
While the group remains well positioned to benefit from any improvement
in public sector infrastructure spending, all indications point to a
continuation of the tough market conditions experienced over the past
few years. The recent corporate activity and more diversified revenue
and profit base should positively influence the group’s results for the
remainder of the financial year.

The above prospects statements have not been reviewed or reported on by
the company’s auditors.

Changes to the board
As previously announced, Craig Robertson resigned as an executive
director of the company on 1 July 2012 and as chief executive officer of
ARB Electrical on 31 December 2012 following the successful handover of
his duties to Blayne Burke.

Subsequent events
Save for the Elektro Vroomen acquisition becoming effective on 1 January
2013, no significant events have occurred in the period between the
reporting date and the date of this announcement.

Dividends
ARB’s policy is to distribute a single, annual dividend for the full
year of up to a maximum of 40% of net profit after taxation. In line
with this policy, no interim dividend has been declared.

Appreciation
We would like to acknowledge our management and staff, our fellow
directors as well as our valued customers, suppliers, business partners,
advisors and shareholders for their continued support.

For and on behalf of the Board.

Alan R Burke                                   Byron Nichles
Chairman                                       Chief Executive Officer


14 February 2013
Directors:   AR Burke (Chairman)*; ST Downes*>; JR Modise*; WR Neasham
(Financial   Director);   B  Nichles  (Chief  Executive  Officer);  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) Ltd,
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: 14/02/2013 07:05:00 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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