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Abridged Audited Results for the year ended 30 June 2013, 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 2013, DIVIDEND
ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
- Revenue up 24% to R1.94 billion
- Operating profit up 26% to R160 million
- Headline earnings per share up 15% to 39.55 cents
- Ungeared with R203 million cash resources
- Annual dividend up 18% to 16.2 cents per share plus a special
dividend of 10.0 cents per share
- Acquisition of Industrial Cable Suppliers and Elektro Vroomen
BASIS OF PREPARATION
The abridged audited consolidated annual financial statements for the
year ended 30 June 2013 (“the year”) have been prepared in compliance
with International Financial Reporting Standards (“IFRS”), IAS 34, the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, the Financial Pronouncements as issued by the Financial
Reporting Standards Council, 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
2013 2012
% Change R000’s R000’s
Revenue 24% 1 944 541 1 565 294
Cost of sales 1 519 421 1 258 142
Gross profit 38% 425 120 307 152
Other income 5 807 6 282
Operating expenses (270 452) (185 930)
Profit before interest and taxation 26% 160 475 127 504
Interest received 10 418 17 985
Interest paid (971) (710)
Profit before taxation 169 922 144 779
Taxation 46 242 43 799
Profit for the year 22% 123 680 100 980
Revaluation of property, plant and
equipment (net of taxation) 10 928 3 240
Total comprehensive income for the year 29% 134 608 104 220
Profit for the year attributable to: 22% 123 680 100 980
Minority interests 40% 28 550 20 391
Ordinary shareholders 18% 95 130 80 589
Total comprehensive income attributable to: 29% 134 608 104 220
Minority interests 40% 28 550 20 391
Ordinary shareholders 27% 106 058 83 829
Audited Audited
year to year to
30 June 30 June
2013 2012
% Change R000’s R000’s
Reconciliation of Headline Earnings
Profit for the year attributable to
ordinary shareholders 18% 95 130 80 589
Bargain purchase price (net of minorities) (2 171) -
Surplus on disposal of property, plant and
equipment (net of taxation) (23) (109)
Headline earnings 15% 92 936 80 480
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) 235 340 235 460
Basic earnings per share (cents) 18% 40.48 34.29
Diluted earnings per share (cents) 18% 40.42 34.23
Headline earnings per share (cents) 15% 39.55 34.25
Diluted headline earnings per share (cents) 16% 39.49 34.18
ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION
Audited Audited
30 June 30 June
2013 2012
% Change R000’s R000’s
ASSETS
Non-current assets
Property, plant and equipment 193 621 162 871
Intangible assets 84 411 78 471
Deferred taxation 11 859 6 454
Current assets
Inventory 341 664 251 088
Trade and other receivables 311 679 300 073
Taxation overpaid 371 319
Cash resources 202 790 185 283
TOTAL ASSETS 1 146 395 984 559
EQUITY AND LIABILITIES
Equity and reserves
Share capital 24 24
Share premium 116 150 116 150
Revaluation reserve 60 557 49 629
Accumulated profit 479 501 416 566
Attributable to ordinary shareholders 13% 656 232 582 369
Minority interests 172 855 150 805
Total shareholders’ funds 13% 829 087 733 174
Non-current liabilities
Deferred lease payments - 395
Deferred taxation 37 893 40 655
Current liabilities
Interest-bearing debt 2 259 -
Trade and other payables 275 045 200 539
Deferred lease payments 836 109
Taxation payable 1 238 3 774
Bank overdraft 37 5 913
TOTAL EQUITY AND LIABILITIES 1 146 395 984 559
Number of ordinary shares in issue (000’s) 235 000 235 000
Net asset value per share (cents) 13% 279.25 247.82
Net tangible asset value per share (cents) 12% 252.42 225.82
ABRIDGED GROUP STATEMENT OF CASH FLOW
Audited Audited
year to year to
30 June 30 June
2013 2012
R000’s R000’s
Cash generated by operating activities 197 156 95 191
Interest received 10 418 17 985
Interest paid (971) (710)
Dividends paid (38 695) (34 326)
Taxation paid (49 328) (41 306)
Secondary tax on companies paid - (3 433)
Cash flows from operating activities 118 580 33 401
Cash flows from investing activities (79 344) (112 347)
Cash flows from financing activities (15 853) (7 218)
Increase in cash resources 23 383 (86 164)
Cash resources at beginning of year 179 370 265 534
Cash resources at end of year 13% 202 753 179 370
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Share Share Revaluation
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 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
Total comprehensive income for the year - - 10 928
Dividends paid - - -
Balance at 30 June 2013 (audited) 24 116 150 60 557
Accumulated Minority
Profit Interests Total
R000’s R000’s R000’s
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
Total comprehensive income for the year 95 130 28 550 134 608
Dividends paid (32 195) (6 500) (38 695)
Balance at 30 June 2013 (audited) 479 501 172 855 829 087
ABRIDGED GROUP SEGMENT REPORT
Audited for the year ended 30 June 2013
Electrical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 1 678 576 281 177 38 698
Profit before interest
and taxation 101 301 30 498 30 052
Segment assets 733 653 153 527 352 781
Segment liabilities 253 044 72 467 40 566
Inter-
company
eliminations Total
R000’s R000’s
Segment revenue (53 910) 1 944 541
Profit before interest
and taxation (1 376) 160 475
Segment assets (93 566) 1 146 395
Segment liabilities (48 769) 317 308
Audited for the year ended 30 June 2012
Electrical 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 Total
R000’s R000’s
Segment revenue (37 555) 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 audited
results for the year ended 30 June 2013.
A strong trading performance by the Lighting division coupled with two
further strategic acquisitions by the Electrical division ensured that
the Group once again delivered top and bottom line growth.
Financial review
The Group achieved revenue of R1.94 billion, an increase of 24% over the
prior year. Despite the competitive marketplace, the Group’s overall
gross profit margin improved from 19.6% to 21.9% in the current year
reflecting the inclusion of the higher margin Lighting division for the
full year compared to only six months in the prior year.
Similarly the disproportionate increase in overheads relative to revenue
was due to the inclusion for the full year of the Lighting division,
which has a higher overhead to revenue operating model than the
Electrical division.
The improvement in gross profit more than offset the increase in
overheads resulting in the Group’s operating margin improving to 8.3%
(2012: 8.1%).
Net interest received decreased due to the cash funded acquisitions of
Industrial Cable Suppliers (Pty) Limited (“ICS”) and Elektro Vroomen as
well as the payment of dividends during the year.
The Group’s effective tax rate was lower than in the prior year due to
the introduction of Dividend Withholding Tax resulting in no Secondary
Tax on Companies charge in the current year.
Earnings per share grew by 18% to 40.48 cents (2012: 34.29 cents).
Headline earnings per share, after eliminating the bargain purchase
price in respect of ICS, grew by 15% to 39.55 cents (2012: 34.25 cents).
Working capital continues to be well managed across all operating
divisions with the Group’s net investment in working capital expressed
as a percentage of annualised revenue improving to 19.5% from 20.8% in
the prior year.
Net capital expenditure for the year amounted to R19.3 million, the
majority of which represented the replacement of a significant portion
of the Electrical division’s vehicle fleet.
The increase in intangible assets during the year was primarily as a
result of the Elektro Vroomen acquisition.
The strongly cash generative nature of the Group’s operations resulted
in ARB remaining ungeared with net cash of approximately R200 million at
year-end.
The Group’s after-tax return on average equity improved to 15.4% in the
current year from 14.5% in the prior year.
Divisional review
Electrical
The largest contributor to revenue and profits, the Electrical division,
delivered a disappointing performance for the full year. Divisional
revenue increased by 16% to R1.68 billion, boosted by the acquisitions
of ICS and Elektro Vroomen, while operating profit increased by 5% to
R101 million. Significant progress was made in integrating ICS’ and
Elektro Vroomen’s operations since their respective acquisitions, but
neither are as yet operating at their true potential and improved
performances are expected from both in the coming year.
Lighting
In reporting revenue of R281 million and operating profit of
R30.5 million, the Lighting division produced an excellent set of
results in its first full year of inclusion. These results reflect the
combination of strong market share gains, a focus on margin improvement
and tight cost control. The range of electrical accessories launched
during the year continues to be expanded and good progress was made by
Eurolux in the commercial and project lighting market.
Corporate
The Corporate division houses the Group’s property portfolio, in-house
IT department and centralised treasury function. Revenue for the year
was boosted by the once-off fees charged within the Group in respect of
the successful deployment of the redeveloped Xact II ERP solution.
During the year, the Group acquired three new properties, increasing its
property portfolio to 15 properties with a fair market value of
R155 million.
Corporate activity and expansion
During the year, the Group made the following acquisitions:
- 100% of ICS with effect from 2 July 2012 for a total purchase
consideration of R35.991 million; and
- 100% of Elektro Vroomen with effect from 1 January 2013 for a total
purchase consideration of R1-00.
The aggregated fair value of the net assets acquired was determined as
follows:
R000’s
Total assets 136 542
Total liabilities (103 123)
Net assets 33 419
Net goodwill 2 572*
Total consideration transferred in cash 35 991
* The acquisition of ICS resulted in a bargain purchase price of
R2.928 million while the acquisition of Elektro Vroomen resulted in
goodwill of R5.500 million.
In aggregate, these acquisitions contributed the following to the
Electrical division’s revenue and profit before interest and tax in the
abridged group segment report:
R000’s
Revenue 197 882
Profit before interest and tax 4 498
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
Electrical
Given the prevailing low levels of construction activity, the dual
challenges of labour unrest and declining commodity prices impacting the
mining sector and lethargic public sector spend, trading conditions are
expected to remain tough for the foreseeable future. The Electrical
division however is well-placed to benefit from a recovery in any of the
above sectors.
Lighting
The recent key customer gains and successful expansion of the product
offering to include electrical accessories as well as commercial and
project lighting should contribute to the continued top and bottom line
growth of the Lighting division in the year ahead despite consumer
spending continuing to be under pressure.
The above prospects statements have not been reviewed or reported on by
the Company’s auditors.
Dividends
In view of the Group’s continued strong cash generation and its ungeared
balance sheet, the Board has resolved to declare a dividend of 16.2
cents per share (2012: 13.7 cents per share) for the year ended
30 June 2013, representing the maximum payout in terms of the Company’s
dividend policy. In addition, the Board has resolved to declare a
further special dividend of 10.0 cents per share in order to address the
Company’s capital structure.
The relevant dates for the dividends are as follows:
Event Date
Last day to trade cum dividend Friday, 30 August 2013
Shares commence trading ex dividend Monday, 2 September 2013
Record date Friday, 6 September 2013
Payment date Monday, 9 September 2013
Share certificates may not be dematerialised or rematerialised between
Monday, 2 September 2013 and Friday, 6 September 2013, both days
inclusive.
In compliance with the JSE Listings Requirements, the following
additional information is disclosed:
1. the dividend and special dividend have 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
dividends;
4. the gross local dividend amount is 16.2 cents per share for
shareholders exempt from paying Dividends Tax;
5. the gross local special dividend amount is 10.0 cents per share for
shareholders exempt from paying Dividends Tax;
6. the net local dividend amount is 13.770 cents per share for
shareholders liable to pay Dividends Tax;
7. the net local special dividend amount is 8.5000 cents per share for
shareholders liable to pay Dividends Tax;
8. the issued share capital of ARB is 235 000 000 ordinary shares of
0.01 cent each; and
9. ARB's income tax reference number is 9010/138/20/5.
Subsequent events
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, 6 September 2013, 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, 23 October 2013, at the Company’s registered office located
at 10 Mack Road, Prospecton, Durban. The notice of Annual General
Meeting is contained in the integrated annual report which will be
posted to shareholders by no later than 17 September 2013.
The last day to trade and the record date, in order for shareholders to
be eligible to participate in and vote at the Annual General Meeting, is
11 October 2013 and 18 October 2013, respectively.
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, advisers and shareholders for their
ongoing support.
For and on behalf of the Board.
Alan R Burke Byron Nichles
Chairman Chief Executive Officer
15 August 2013
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
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
Office Park, No 5 2nd Road, Hyde Park, 2196 (PO Box 653078, Benmore,
2010)
Date: 15/08/2013 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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