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Audited group results for the year ended 30 April 2013
Ellies Holdings Limited
Registration number: 2007/007084/06
JSE share code: ELI
ISIN: ZAE000103081
AUDITED GROUP RESULTS
FOR THE YEAR ENDED 30 APRIL 2013
Revenue UP 16,6%
EPS UP to 74,24 cents
NAV per share UP to 315,80 cents
PAT UP 36,8%
HEPS UP to 74,00 cents
Condensed consolidated statement of financial position
Audited Audited
as at as at
30 April 30 April
2013 2012 %
R'000 R'000 change
ASSETS
Non-current assets 409 485 333 245
Property, plant and equipment 163 115 100 376
Land and buildings 86 140 56 546
Other 76 975 43 830
Goodwill and other intangibles 226 182 225 027
Investment in associates 10 491
Deferred taxation 9 697 7 842
Current assets 1 282 644 1 012 356
Inventories 667 983 506 377
Trade and other receivables 392 259 398 490
Amounts due from contract customers 158 651 57 778
Taxation receivable 447 339
Bank and cash balances 63 304 49 372
Total assets 1 692 129 1 345 601
EQUITY AND LIABILITIES
Total shareholders' interests 958 467 760 450
Stated capital 501 494 501 494
Non-distributable reserves (178 316) (178 907)
Accumulated profits 635 289 440 315
Equity attributable to equity
holders of the parent 958 467 762 902
Non-controlling interests (2 452)
Non-current liabilities 260 266 164 714
Interest-bearing liabilities 259 411 163 150
Vendor loan payable 1 171
Deferred taxation 855 393
Current liabilities 473 396 420 437
Interest-bearing liabilities 26 104 11 190
Vendor loan payable 1 278 752
Trade and other payables 343 671 294 012
Amounts due to contract customers 8 246
Provisions 20 787 12 710
Taxation payable 1 060 10 001
Shareholders for dividends 40 188
Bank overdraft 72 210 91 584
Total equity and liabilities 1 692 129 1 345 601
Shares in issue at end of the year
(number of shares) 303 505 691 303 505 691
Net asset value per share (cents) 315,80 251,36 25,6
Tangible net asset value per share (cents) 241,12 177,04 36,2
Condensed consolidated statement of comprehensive income
Audited Audited
year ended year ended
30 April 30 April
2013 2012 %
R'000 R'000 change
Revenue 1 996 053 1 711 252 16,6
Profit before interest, taxation,
depreciation and amortisation ("EBITDA") 348 282 273 371 27,4
Depreciation (11 331) (15 074)
Amortisation of intangibles (557) (557)
Profit before interest and taxation 336 394 257 740
Interest received 5 994 139
Interest paid (27 853) (23 510)
Share of losses from associates (1 666) (4 401)
Net profit before taxation ("PBT") 312 869 229 968
Taxation (88 023) (65 565)
Net profit after taxation 224 846 164 403 36,8
Other comprehensive income:
Foreign currency translation reserve 591 (32)
Total comprehensive income
for the year 225 437 164 371
Attributable to:
Equity holders of the parent 225 325 165 491
Non-controlling interests (479) (1 088)
Net profit after taxation 224 846 164 403
Attributable to:
Equity holders of the parent 225 916 165 459
Non-controlling interests (479) (1 088)
Total comprehensive income
for the year 225 437 164 371
Supplementary information:
Basic earnings per share (cents) 74,24 54,53 36,1
Headline earnings per share (cents) 74,00 54,45 35,9
Shares in issue (number of shares):
At the end of the year 303 505 691 303 505 691
* Ellies has no dilutionary instruments in issue.
Reconciliation of earnings to headline earnings
Audited Audited
year ended year ended
30 April 30 April
2013 2012 %
R'000 R'000 change
Net profit for the year attributable
to equity holders of the parent 225 325 165 491 36,2
Adjusted for:
Profit on change of control from
subsidiary to associate (120)
Profit on sale of property, plant
and equipment (857) (322)
Tax effect on adjustments 240 90
Headline earnings attributable
to ordinary shareholders 224 588 165 259 35,9
Condensed consolidated statement of cash flows
Audited Audited
year ended year ended
30 April 30 April
2013 2012
R'000 R'000
Cash flows from operating activities 445 (123 145)
Cash generated from/(utilised by)
operations 153 428 (43 729)
Interest received 5 994 139
Interest paid (in cash) (27 713) (23 416)
Taxation paid (100 765) (56 139)
Dividends paid (30 499)
Cash flows from investing activities (77 529) (45 174)
Cash flows from financing activities 110 390 100 755
Net increase/(decrease) in cash
and cash equivalents 33 306 (67 564)
Cash and cash equivalents at the
beginning of the year (42 212) 25 352
Cash and cash equivalents at the
end of the year (8 906) (42 212)
Condensed statement of changes in equity
Audited Audited
year ended year ended
30 April 30 April
2013 2012
R'000 R'000
Balance at the beginning of the year 760 450 596 079
Total comprehensive income for the year 225 437 164 371
Change of control from subsidiary
to associate 2 931
Dividends declared (30 351)
Balance at the end of the year 958 467 760 450
Segmental analysis
Audited Audited
year ended year ended
30 April 30 April
2013 2012 %
R'000 R'000 change
Revenue 1 996 053 1 711 252
Consumer goods and services 1 301 030 1 140 467 14,1
Total 1 308 065 1 140 467
Inter-segment (7 035)
Infrastructure 687 922 559 240 23,0
Total 688 382 559 240
Inter-segment (460)
Property
Total 8 483 6 342
Inter-segment (8 483) (6 342)
Other 7 101 11 545
Segmental profits/(losses)
from operations
Profit/(loss) before interest and
taxation, after losses from associates 334 728 253 339
Consumer goods and services 249 298 164 607 51,5
Infrastructure 82 112 91 097 (9,9)
Property 6 790 5 271 28,8
Other (2 710) (6 863)
Holding company/consolidation (762) (773)
Net finance costs (21 859) (23 371)
Operating segments (combined) (16 810) (19 557)
Property (4 909) (3 720)
Deemed vendor interest (140) (94)
Profit before taxation 312 869 229 968
Subsequent events post the year-end
1. Business combinations
Subsequent to the year-end, on 1 May 2013, Ellies, through a wholly-owned subsidiary, acquired 100%
of the shares and loans of Botjheng Water Proprietary Limited. The purchase price of R10 million will
be settled via a cash payment of R7 million on this date and the balance over a 12-month period.
A summary of the provisional fair values of assets, liabilities and purchase consideration is as follows:
R'000
Property, plant and equipment 785
Deferred taxation (asset) 12 328
Inventories 100
Trade and other receivables 18 076
Bank and cash 2 630
Shareholder loans acquired (10 000)
Non-current liabilities (2 443)
Current portion of non-current liabilities (143)
Trade and other payables (35 601)
Total net liabilities acquired (14 268)
Purchase consideration discharged as follows: 9 866
Cash payments made on effective date 7 000
Deferred payment due in the future 2 866
Goodwill 24 134
2. Acquisition of property
Subsequent to the year-end, as reported on SENS on 27 June 2013, the group has concluded an
agreement with Vegtu Investments Proprietary Limited, a related party, to purchase for R39 million, a
property that houses the current manufacturing facilities of the consumer goods and services division.
Notes to audited year-end results
Audited results for the year ended 30 April 2013
The results for the year ended 30 April 2013 have been audited by Grant Thornton (Jhb) Inc. and the
audited consolidated financial statements and unqualified audit report is available for inspection at
the company's registered office.
Basis of preparation and accounting policies
These annual financial results have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, the requirements of IAS 34, the Listings Requirements of the JSE Limited
and the Companies Act of South Africa. Except for the adoption of the new and revised accounting
standards, the principal accounting policies of the group are consistent with those applied in the
audited consolidated financial statements for the year ended 30 April 2012. These results have
been compiled under the supervision of the Chief Financial Officer, MF Levitt CA(SA).
Change in presentation
In order to improve on the current disclosure in the annual financial statements, the Group
has moved the receivables accounted for under Construction contracts, out of "Trade and
other receivables" and placed it under "Amounts due from Contract customers". The effect on
the 2012 year-end is to reduce "Trade and other receivables" by R57,8 million. There is no effect
on any statements of financial position prior to 2012, as there were no amounts relating to
Construction contracts.
Commentary
Introduction
Ellies Holdings Limited ("Ellies" or the "group") is a leading South African manufacturer, wholesaler,
importer and distributor in diversified sectors servicing the local and African markets. Operational divisions
comprise consumer goods, renewable energy, power management, water and telecommunications
infrastructure.
Overview
The year under review has been a positive but challenging period. The first half reflected the benefits
derived from the Eskom consumer programme and beneficial contract timing in the Infrastructural
division. This contributed substantially to the group's half-year growth, as was reflected by the
comparative movement in earnings from 21 cents to 43 cents for that period. The challenge then
being an unrealistic growth expectation in the second half of the year.
Notwithstanding this, the group still achieved satisfactory growth in earnings with many major future
opportunities, for which substantial capital investments have been made during the period.
The Ellies consumer goods and services segment's PBIT grew by 51,5% against the prior corresponding
period, with 2% points improvement in gross profit margins. This is partly the result of contributions from
the Eskom Phase 1 Project Power Save programme; the "Green shop within a shop" concept; and the
expansion of the domestic and commercial lighting ranges.
The Infrastructure division, while delivering solid earnings for the first half period, increased revenue
by 23% although reflecting a decline in PBIT of 9,9%. The main reasons for this are a 2% decline in
gross margin and a significant increase in resources and staff, particularly in the Andrews Towers,
Telecommunications and compliance departments. All business units were able to conclude numerous
new projects during the period. Infrastructure projects further increased their scope of activity by
collaborating with contractors in the water industry, culminating in the purchase of Botjheng Water,
whose core focus is water and wastewater bulk infrastructure construction, as a subsidiary post the
year-end.
The group's statement of financial position remains solid, with NAV and NTAV per share improving to
316 cents (2012: 251 cents) and 241 cents (2012: 177 cents) respectively.
The interest-bearing bank debt, which includes property term finance of R79,4 million (2012: R57 million),
results in a debt to equity ratio of 31% (2012: 28%). Without the property funding, which replaces rent with
interest, the debt to equity ratio drops to 24% (2012: 21%). The higher inventory holding in anticipation of
Eskom and Digital Terrestrial Television ("DTT") programmes, together with work-in-progress and longer
cycle contract customers, impacted on these ratios.
The group's interest cover to EBITDA is around 16 times (2012: 12 times). Management considers the
gearing to be at a satisfactory level under the current economic climate with the current working capital
levels being held for future prospects.
The group's growth and diversification demands capital input, ongoing investments in property, plant and
equipment and working capital. Additional long-term funding of approximately R110 million was raised.
While the cash flows from operations remained fairly neutral, R29,9 million was invested in property and
R43,5 million in other property, plant and equipment, leaving a net positive cash movement of R33 million
as compared to 30 April 2012 (2012: negative cash movement of R67 million).
These investments increase local production capacity and add the holding of raw materials and inventory.
Delays in the fruition of some of the group's prospects continue to impact on our short-term working
capital demands. We are well positioned to roll out these future projects expected in the year ahead.
Prospects
The group's diversification into new products and ventures together with its alignments with leading
technology partners, enables the group to build on its existing skills, infrastructure and customer base.
The management is under no illusions as to the current difficult trading conditions in our sectors.
We endeavour to continue to leverage off our existing core competencies, our capacity and customer base.
The Consumer goods and services division
Once again, disappointingly, the DTT migration rollout in South Africa, thought to be imminent, was further
delayed due to the failure of the Department of Communications to finalise its strategy. With the latest
departmental changes occurring, management remains optimistic in the DTT implementation in the short
term. Ellies is still well positioned to participate in and benefit from this rollout with new production
machinery being installed for increased local production and employment. In the interim we continue to
export DTT products into Africa.
Over the past few months, additional opportunities have arisen, with additional media and visual
entertainment providers. Amongst them, a new entrant namely OVHD or Openview HD, a free-to-view
satellite broadcaster, is expected to launch in October this year.
With the success of the "Green shop within a shop" concept, expansion is anticipated into media, visual
entertainment and internet connectivity through this proven successful route to market. This new concept
"Ellies Connect" should provide customers with easy access to these services.
The group's initiatives in energy conservation continue to attract new and innovative renewable energy
products and ideas. The expansion into commercial energy efficient lighting is attracting much interest
amongst existing and new commercial customers. Management anticipates that this business-to-
business sector will be a significant future opportunity.
Infrastructure division
The contribution of the Infrastructure division remains important to the group, consistently contributing
around a third of the group's profits. This ratio is expected to continue.
Megatron acts as a preferred equipment supplier for several solar and wind projects within the South
African Renewable Energy Independent Power Producer's ("REIPP") programme. Products have
successfully been tested to SABS specifications and as a result it is expected that new projects will be
contracted in this space.
With the improvement and current relative strength in the residential building sector, a number of power
distribution projects have been secured.
Within its Telecommunications business unit, the "proof-of-concept" testing for the Diesel Generator
Optimisation ("DGO") product has recently been completed. Performance has been particularly well
received in Nigeria, which is expected to be the largest market in the future. This is expected to be a
substantial contributor to future revenue. The Towers business unit is experiencing a significant increase
in its order intake across the continent. This increase is driven by the co-location of carriers, which
requires specialist equipment.
Within its Infrastructure Projects sector, Megatron has strengthened its offering in the water
infrastructure sector through the acquisition of Botjheng Water. This acquisition is expected to leverage
greater advantage within its current customer base and entry into new markets.
With the current pressure on the resources sector and the relative weakness of the mining industry,
Megatron has increased its emphasis on public sector and IPP type projects for the coming period.
The existing order book, including tenders won, in both new diversified and traditional sectors, remains at
record levels. Exports into Africa remain a large portion of the infrastructure division's revenue and are
expected to contribute between 70% and 80% of revenue in the coming period.
Strategic investments
With additional service providers entering the satellite broadband sector, SkyeVine's future opportunities
are reinforced. Ellies management continues to adopt a conservative approach towards this investment.
With the investment in property now reaching approximately R86,1 million, management is satisfied
with the strategy implemented and benefits being derived. This year the group acquired in excess of
14 000 square metres, which is being fully utilised. Since year-end, as reported, the current manufacturing
facilities of the consumer goods and services division, on land of approximately 29 000 square metres,
has been secured for R39 million. Together with the prior property investments, this property is
considered by Ellies to be a strategic asset which will result in future declining occupational costs.
The group is always engaged in exciting prospects for organic growth, new ventures and product
opportunities.
Dividend policy
The dividend policy will be reviewed periodically taking into account prevailing circumstances and
future cash requirements. At present and in view of the immediate prospects, all cash generated by the
company will be utilised to fund these opportunities. Accordingly, no dividend has been recommended
for the year.
Appreciation
Once again, the directors and management continue to recognise and appreciate the focused efforts and
hard work of the group's staff and also continue to appreciate its customers, business partners, advisors,
suppliers and, most importantly, shareholders.
By order of the board
ER Salkow WMG Samson
Chairman CEO
23 July 2013
Directors:
Executive Directors
ER Salkow (Chairman)
WMG Samson (Chief executive officer)
MF Levitt (Chief financial officer)
RH Berkman
RE Otto
Non-executive Directors
AC Brooking
MR Goodford
Lead independent non-executive Director
OD Fortuin
Independent non-executive Directors
FS Mkhize
M Moodley
* There have been no changes to the Ellies board
since the last reporting period.
Registered office: 94 Eloff Street Ext, Village Deep, Johannesburg, 2001. (PO Box 57076, Springfield, 2137)
Sponsor: Java Capital
Auditors: Grant Thornton (Jhb) Inc. (PKF (Jhb) Inc. changed its name to Grant Thornton (Jhb) Inc.)
Company secretary: Probity Business Services (Pty) Limited
Transfer secretaries: Link Market Services South Africa (Pty) Limited
www.elliesholdings.com
Date: 23/07/2013 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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