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Reviewed group provisional report and final cash dividend declaration for the year ended 30 June 2013
ELB GROUP LIMITED
('ELB', 'the Company' or 'the Group')
Incorporated in the Republic of South Africa
Registration number 1930/002553/06
Share codes: ELR
ISIN: ZAE000035101
REVIEWED GROUP PROVISIONAL REPORT AND FINAL CASH DIVIDEND DECLARATION FOR THE
YEAR ENDED 30 JUNE 2013
HIGHLIGHTS
Turnover up 15% to R1 985m
Profit after tax up 12% to R118m
Headline earnings per share up 16% to 374 cents
Net asset value up 18% to 2 345 cents per share
Final cash dividend declared of 60 cents, an increase of 15%
Internal rate of return to shareholders of 22%
Total comprehensive income before tax return on total equity of 32%
COMMENTS
INTRODUCTION
ELB Group's strategic focus is on being a holistic engineering solutions
provider to the mining, minerals, power, port, construction and industrial
sectors in the field of materials handling and appropriate modular plants.
This is achieved through ELB generated innovation, in-house capability and
the supply, with world class partners, of equipment and technology. The
Group operates predominantly in Africa and Australasia.
The past year has seen ELB invest into a number of initiatives aimed at
sustainable growth, the results of which will emerge over the next three years.
These initiatives include the expansion of its geographic footprint in Africa,
increasing its product and technology range, and subsequent to the year-end,
the formation of ARDBEL (Pty) Ltd, a 50:50 joint venture with DRA Group
Holdings (Pty) Ltd. The joint venture will enable ARDBEL to execute very large
materials handling projects. ELB is also in the process of establishing the ELB
Intelligent Solutions business, a hi-tech data and voice management company.
FINANCIAL RESULTS
The 15% increase in turnover for the year from R1 725 million in 2012 to
R1 985 million in 2013 reflects the consistent demand for the full range of
products and services offered by ELB, even in the current difficult trading
conditions.
ELB's share of comprehensive income increased by 11% from R100 million in 2012
to R111 million in 2013. This increase largely explains the 18% increase in net
asset value per share attributable to ordinary shareholders from 1 989 cents in
2012 to 2 345 cents in 2013.
Headline earnings per share for the year increased by 16% from 321 cents per
share to 374 cents per share.
Due to the project nature of the business there is no consistent correlation
between turnover and profit in accounting periods, as profit recognition
largely increases during the latter stages of projects.
OPERATIONS
Africa
Trading conditions in the region though relatively buoyant remained challenging
during the year and the Group did well to secure a satisfactory level of
business.
ELB Equipment
This operation had a marginal increase in turnover from R757 million in 2012 to
R762 million in 2013 while profit before tax decreased marginally from R72
million in 2012 to R71 million in 2013. This was against the background of a
weaker Rand coupled with tougher trading conditions resulting in reduced
margins. The operation is well positioned to benefit from more favourable
trading conditions.
ELB Engineering Services
This operation has again shown good growth in the year. Although turnover
increased by 30% from R683 million in 2012 to R889 million in 2013, profit
before tax increased by 19% from R65 million in 2012 to R77 million in 2013.
This material increase in profit before tax is attributable to a number of
projects reaching more advanced stages of completion and ELB Construction
producing satisfactory results in its second year of operation.
ELB Engineering Services has been successful in securing a number of new
projects which has positioned this operation well for the coming 24 to 30
months.
Australasia
The Ditch Witch business has had a satisfactory year and the business continues
to grow in spite of the difficult trading conditions it faces. The business
continues to service the growing demand for its Ditch Witch and Komptech range
of products and the New Zealand business unit has proven to be a profitable
contributor to the Ditch Witch operation.
Turnover increased by 26% from R289 million in 2012 to R363 million in 2013
while profit before tax decreased marginally from R27 million in 2012 to R26
million in 2013. This decrease in profit is largely due to a pre-tax
unrealised foreign currency loss of R5 million.
Ditch Witch remains well positioned in both Australia and New Zealand to take
advantage of any increase in infrastructure spend in the region.
CASH FLOW
Cash and cash equivalents declined marginally to R471 million during the year
as cash was used in increasing working capital, in continued capital
expenditure and as a result of fluctuations in up-front customer payments. The
cash and cash equivalent balances remained healthy at the year-end after
absorbing the utilisation. Cash flow management remains a high priority for
the Group.
ELB works closely with its bankers, suppliers and customers to ensure the Group
continues to retain a strong balance sheet at all times.
REDEMPTION OF PREFERENCE SHARES
During the year the Company redeemed all of the 3 800 issued 6% cumulative
redeemable preference shares of R2.00 each at a price of R2.00 per share.
PROSPECTS
Activity levels in the various sectors the ELB Group operates in, though
challenging, remain relatively buoyant and the Group is well positioned to
take advantage thereof. The various strategies for growth that have been
implemented over the past 12 months will stand the group in good stead for
the future.
SOCIAL RESPONSIBILITY
ELB's empowerment partner is the ELB Educational Trust, which was established
to promote the education of historically disadvantaged South Africans in
engineering disciplines. To this end scholarships have been awarded to students
at various South African universities.
In addition to a number of smaller donations ELB has made substantial donations
to the St Vincent School for the Deaf, the Ligbron Academy of Technology and
the Elvis Blue Music Academy in Zandspruit. These institutions have been
identified as worthy of ELB's support and which will further assist the
historically disadvantaged in our community.
Apart from donations ELB has also made significant contributions towards small
business development of the historically disadvantaged in South Africa.
BOARD OF DIRECTORS
Mr Michael Easter joined the Board as Group Financial Director on 1 July 2013.
Mr Graham Jones resigned from the Board as Group Financial Director on 30
June 2013.
DIVIDENDS
It has been decided to declare a final dividend of 60 cents (2012 - 52 cents)
per ordinary share.
The total dividend for the year is therefore 85 cents per share versus 70 cents
per share for the 2012 financial year, representing an increase of 21%.
ACCOUNTING POLICIES
The condensed consolidated provisional financial statements are prepared in
accordance with the framework concepts and recognition and measurement
principles of International Financial Reporting Standards ("IFRS") and
presented in accordance with the minimum content, including disclosures,
prescribed by IAS 34: Interim Financial Reporting applied to year end
reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by Financial
Reporting Standards Council, and the requirements of the Companies Act of
South Africa.
The directors were very recently advised that FSB approval was not
required to establish a right to the employer surplus account of the closed
benefit fund, The ELB Group Limited Pension Fund ("the Fund") in terms of IFRS.
The directors do not regard the employer surplus as an asset for use in the ELB
core operations, because it will be used either to fund future pensioner increases
within the Fund, or to ensure that the Fund remains fully funded. Nevertheless,
under the IAS 19: Employee Benefits standard (the corridor method), ELB is
obliged to recognise an asset for the Fund and a related deferred income tax
liability. ELB is required to apply the revised IAS 19: Employee Benefits
standard (which excludes the corridor method) in the 2014 financial year.
Therefore the directors have decided to early adopt the revised standard (with
a restatement of comparatives) to avoid multiple restatements of comparatives.
The impact of applying the corridor method and the revised IAS 19:
Employee Benefits has been disclosed.
Apart from this change the accounting policies are consistent with those
applied for the financial year ended 30 June 2012.
REVIEW BY THE INDEPENDENT AUDITOR
KPMG Inc, the Company's independent auditor, has reviewed the condensed
consolidated provisional financial statements contained in this provisional
report and has expressed an unmodified conclusion on the condensed
consolidated provisional financial statements. The review report is
available for inspection at the Company's registered office.
On behalf of the Board
Dr Stephen Meijers
Chief Executive Officer
ELB Group and ELB Engineering Services
Peter Blunden
Chief Executive Officer
ELB Equipment
Michael Easter
Group Financial Director
ELB Group
Boksburg
17 September 2013
GROUP BALANCE SHEET
Reviewed
Reviewed Restated
30 Jun 13 30 Jun 12
R 000 R 000
ASSETS
Non current assets 217 717 209 177
Property, plant and equipment 146 730 140 334
Pension fund employer surplus account 49 078 39 949
Non current loans receivable 3 748 3 094
Deferred income tax assets 18 161 25 800
Current assets 1 407 293 1 204 632
Inventories, and construction contract work not
yet billed 623 798 545 822
Receivables and other current assets 312 989 169 420
Cash and cash equivalents 470 506 489 390
Total assets 1 625 010 1 413 809
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of ELB 601 089 503 600
Issued capital 25 192 25 192
Treasury shares (48 565) (52 684)
Reserves 51 770 37 077
Retained earnings 572 692 494 015
Preference shares - 8
Total equity attributable to equity holders of ELB 601 089 503 608
Non controlling interests in consolidated entities 113 526 87 940
Total equity 714 615 591 548
Non current liabilities 58 596 31 695
Interest bearing borrowings 29 726 15 494
Provision for trade back commitments 2 670 3 331
Deferred income tax liabilities 26 200 12 870
Current liabilities 851 799 790 566
Non interest bearing payables, other current
liabilities and current provision 672 893 603 602
Interest bearing payables 178 906 186 964
Total equity and liabilities 1 625 010 1 413 809
Ordinary shares in issue (000's) 33 860 33 860
Deduct:Treasury shares in issue (000's) 8 231 8 544
Ordinary shares in issue on which net asset value
per ordinary share is calculated 25 629 25 316
Net asset value per ordinary share (cents) 2 345 1 989
GROUP STATEMENT OF PROFIT OR LOSS
Reviewed
Reviewed Restated
Year Year
Ended Ended
30 Jun 13 30 Jun 12
R 000 R 000
Sales 1 984 597 1 725 479
Operating costs excluding depreciation and
revaluation of property, plant and equipment (1 813 048) (1 579 727)
Operating profit before depreciation and revaluation
of property, plant and equipment 171 549 145 752
Depreciation and revaluation of property, plant
and equipment (14 212) (10 754)
Profit from operations 157 337 134 998
Finance income 17 303 25 973
Finance expenses (11 275) (11 899)
Profit before income tax 163 365 149 072
Income tax expense (45 412) (44 102)
Profit for the year 117 953 104 970
Profit for the year attributable to:
Ordinary shareholders of ELB 95 255 81 579
Non controlling interests in consolidated entities 22 698 23 391
117 953 104 970
CALCULATION OF GROUP HEADLINE EARNINGS
Reviewed
Reviewed Restated
Year Year
Ended Ended
30 Jun 13 30 Jun 12
R 000 R 000
Profit attributable to ordinary shareholders of
ELB from the statement of profit or loss 95 255 81 579
Deduct: Items excluded from headline earnings as
detailed below: 233 737
Plant and equipment:
Profit on disposal 405 744
Revaluation - 504
Income tax effect of items excluded from headline
earnings (110) (343)
Non controlling interests in items excluded from
headline earnings (62) (168)
Headline earnings 95 022 80 842
Weighted average number of ordinary shares
(excluding treasury shares) on which basic
earnings per ordinary share are based (000's) 25 396 25 150
Earnings per ordinary share (cents)
- basic 375.1 324.4
- diluted 365.2 317.0
Headline earnings per ordinary share (cents)
- basic 374.2 321.4
- diluted 364.3 314.1
Dividends declared for the year per ordinary
share (cents) 85 70
GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed
Reviewed Restated
Year Year
Ended Ended
30 Jun 13 30 Jun 12
R 000 R 000
Profit for the year from the statement of profit
or loss 117 953 104 970
Other comprehensive income 19 691 23 223
Items that may be reclassified subsequently to profit or
loss
Foreign currency translation reserve adjustments 13 143 16 573
Income tax effect of foreign currency translation
reserve adjustments (1 592) -
Items that will not be reclassified to profit
or loss
Non controlling interests in foreign currency
translation reserve adjustments 2 320 2 925
Income tax effect on non controlling interests in
foreign currency translation reserve adjustments ( 281) -
Foreign currency translation adjustments to
foreign non controlling interests 1 476 2 019
Pension fund employer surplus account actuarial
adjustments 6 024 1 631
Income tax effect of pension fund actuarial
adjustments (1 687) (457)
Revaluation surplus 401 739
Income tax effect of revaluation surplus (113) (207)
Total comprehensive income for the year 137 644 128 193
Total comprehensive income for the year attributable to:
Ordinary shareholders of ELB 111 388 99 778
Non controlling interests in consolidated entities 26 256 28 415
137 644 128 193
GROUP STATEMENT OF CHANGES IN EQUITY
Attributable to ordinary shareholders of ELB
Restated
Issued Treasury Retained Restated
Capital shares Reserves Earnings Total
R 000 R 000 R 000 R 000 R 000
Balance at 30 June 2011 25 192 (56 129) 18 501 426 319 413 883
Total comprehensive
income for the year 17 025 82 753 99 778
Profit for the year 81 579 81 579
Other comprehensive
income 17 025 1 174 18 199
Ordinary dividends paid (14 575) (14 575)
Non controlling interests
in distributions by
a consolidated group
entity
Increase in share options
reserve 1 069 1 069
Transfer from share
options reserve to
retained earnings for
share options
exercised and
fully paid (533) 533 -
Redundant items in
the foreign currency
translation reserve
transferred to
retained earnings 1 015 (1 015) -
Decrease in the carrying
amount of treasury
shares held by group
entities 3 445 3 445
Capital contributed by
non controlling
interest
Balance at 30 June 2012 25 192 (52 684) 37 077 494 015 503 600
Total comprehensive
income for the year 11 796 99 592 111 388
Profit for the year 95 255 95 255
Other comprehensive 11 796 4 337 16 133
income
Ordinary dividends paid (19 528) (19 528)
Non controlling interests
in distributions by
a consolidated group
entity
Increase in share options
reserve 1 510 1 510
Transfer from share
options reserve to
retained earnings for
share options
exercised and fully
paid, and for share
options lapsed through
attrition (949) 949 -
Redundant items in the
foreign currency
translation reserve
transferred to
retained earnings 2 336 (2 336) -
Decrease in the carrying
amount of treasury
shares held by group
entities 4 119 4 119
Preference shares
redeemed for cash
Balance at 30 June 2013 25 192 (48 565) 51 770 572 692 601 089
GROUP STATEMENT OF CHANGES IN EQUITY cont.
Restated
Attributable Non
to ordinary Controlling Reviewed
Shareholders interests in Restated
of ELB Preference consolidated Total
Total shares entities equity
R 000 R 000 R 000 R 000
Balance at 30 June 2011 413 883 8 61 530 475 421
Total comprehensive income
for the year 99 778 28 415 128 193
Profit for the year 81 579 23 391 104 970
Other comprehensive income 18 199 5 024 23 223
Ordinary dividends paid (14 575) (2 436) (17 011)
Non controlling interests
in distributions by
a consolidated group
entity (1 233) (1 233)
Increase in share options
reserve 1 069 189 1 258
Transfer from share
options reserve to
retained earnings for
share options
exercised and fully paid - - -
Redundant items in the
foreign currency
translation reserve
transferred to
retained earnings - - -
Decrease in the carrying
amount of treasury
shares held by group
entities 3 445 3 445
Capital contributed by non
controlling interest 1 475 1 475
Balance at 30 June 2012 503 600 8 87 940 591 548
Total comprehensive income
for the year 111 388 26 256 137 644
Profit for the year 95 255 22 698 117 953
Other comprehensive income 16 133 3 558 19 691
Ordinary dividends paid (19 528) (861) (20 389)
Non controlling interests
in distributions by
a consolidated group
entity (75) (75)
Increase in share options
reserve 1 510 266 1 776
Transfer from share
options reserve to
retained earnings for
share options
exercised and fully
paid, and for share
options lapsed through
attrition - - -
Redundant items in the
foreign currency
translation reserve
transferred to
retained earnings - - -
Decrease in the carrying
amount of treasury
shares held by group
entities 4 119 4 119
Preference shares redeemed
for cash (8) (8)
Balance at 30 June 2013 601 089 - 113 526 714 615
Effects of accounting for the pension fund employer surplus account: debit/(credit)
Line item affected 2011 2012
R000
Change as a result of Change as a result of
Previous New Previous New
policy standard policy standard
Balance sheet
Pension fund employer surplus
account 29 450 5 951 4 378 170
Deferred income tax liabilities (8 246) (1 666) (1 226) (48)
Retained earnings (21 204) (4 285) (3 152) (122)
Statement of profit or loss
Operating costs excluding
depreciation and revaluation
of PPE (4 378) 1 461
Profit before income tax (4 378) 1 461
Income tax expense 1 226 (409)
Profit for the year (3 152) 1 052
Statement of comprehensive
income - items that will not
be reclassified to profit
or loss
Pension fund employer surplus
account - (1 631)
Income tax effect - 457
Other comprehensive income - (1 174)
Total comprehensive income (3 152) (122)
Increase/(decrease) in earnings
per ordinary share (cents)
- Basic 13 (4)
- Diluted 12 (4)
Increase/(decrease) in headline earnings
per ordinary share (cents)
- Basic 13 (4)
- Diluted 12 (4)
GROUP CASH FLOW STATEMENT
Reviewed
Reviewed Restated
Year Year
ended ended
30 Jun 13 30 Jun 12
R 000 R 000
Cash outflow from operating activities before
dividends and distributions paid (15 154) (95 921)
Dividends and distributions paid (20 464) (18 244)
Cash outflow from operating activities (35 618) (114 165)
Cash outflow from investment activities (17 111) (44 643)
Cash inflow / (outflow) from financing activities 18 666 (371)
Cash outflow for the year (34 063) (159 179)
Foreign currency exchange and translation adjustments
to cash and cash equivalents 15 179 15 828
Decrease in cash and cash equivalents (18 884) (143 351)
Cash and cash equivalents at the beginning of the
year 489 390 632 741
Cash and cash equivalents at the end of the year 470 506 489 390
Reconciliation to the balance sheet
Current assets - cash and cash equivalents 470 506 489 390
NOTES
Capital expenditure commitments
At 30 June 2013 there was a capital expenditure commitment of R4 200 000 for
the acquisition of an additional property. At 30 June 2012 there were capital
expenditure commitments of R3 051 000.
The commitment will be funded from a combination of planned and existing
mortgage bond facilities available to the Group and from the Group's cash
and cash equivalents.
Contingent liabilities
A Group entity has issued a guarantee of R830 000 in favour of a raw
material supplier to a company which was previously part of the Group and has
now been sold. The guarantee is cancellable by three calendar months notice. A
financial guarantee liability with a carrying amount of R36 000 at 30 June
2013 is carried in respect of the guarantee.
ELB Engineering Services operates in the engineering contracting business and
is exposed to the risks associated with engineering contracts. These risks
are managed on the basis of limited liability.
All known liabilities of the Group at the balance sheet date have been accrued.
SEGMENT INFORMATION
Equipment Engineering
Total Africa Africa Australasia Other
R 000 R 000 R 000 R 000 R 000
Reviewed
Year ended 30 June
2013
Sales 1 984 597 761 540 889 093 362 942 (28 978)
Profit before income
tax 163 365 71 050 77 063 26 317 (11 065)
Profit for the year 117 953 51 022 55 315 20 791 (9 175)
Profit attributable
to ordinary
shareholders of
ELB 95 255 43 369 43 503 14 297 (5 914)
Assets 1 625 010 773 757 533 801 329 083 (11 631)
Liabilities 910 395 415 730 399 105 117 502 (21 942)
Reviewed
Restated
Year ended 30 June
2012
Sales 1 725 479 756 573 682 747 288 520 (2 361)
Profit before income
tax 149 072 71 669 64 628 27 242 (14 467)
Profit for the year 104 970 51 462 46 984 21 004 (14 480)
Profit attributable to
ordinary
shareholders of ELB 81 579 43 743 34 778 14 373 (11 315)
Assets 1 413 809 736 962 424 036 272 634 (19 823)
Liabilities 822 261 412 910 331 463 98 334 (20 446)
FINAL CASH DIVIDEND DECLARATION
ORDINARY DIVIDEND NUMBER 131
The directors have declared a final cash dividend of 60 cents per share on the
Company's ordinary shares for the year ended 30 June 2013. The following
additional information is given in respect of the dividend.
- the dividend has been declared out of income reserves
- the South African dividend tax rate is 15%
- there are no secondary tax on companies (STC) credits utilised
- ELB Group Limited's income tax reference number is: 9275151711
- The gross dividend is 60 cents per ordinary share for ordinary shareholders
exempt from the dividend tax
- The net dividend is 51 cents per ordinary share for ordinary shareholders
liable to pay the dividend tax
- ELB Group Limited has 33 860 000 ordinary shares in issue, of which 8 230 531
were treasury shares at the year end
The salient dates in respect of the dividend are:
Last day to trade cum dividend Friday, 18 October 2013
Shares commence trading ex dividend Monday, 21 October 2013
Record date Friday, 25 October 2013
Date of payment Monday, 28 October 2013
Shares may not be dematerialised or rematerialised between Monday, 21 October
2013, and Friday, 25 October 2013, both dates inclusive.
By order of the Board
Elbex (Pty) Limited
Company secretary
Boksburg
17 September 2013
Preparation of the reviewed group provisional report
The preparation of the reviewed group provisional report was supervised
by the group financial director, Michael Easter CA(SA).
Release date
The reviewed group provisional report was released on 18 September 2013.
Directors
AG Fletcher (chairman), Dr SJ Meijers (group chief executive and chief
executive - ELB Engineering Services), MC Easter (group financial director),
PJ Blunden (chief executive - ELB Equipment), T de Bruyn,* Dr JP Herselman,*
MV Ramollo, CJ Smith (alternate), IAR Thomson*
*Non executive
Company secretary
Elbex (Pty) Limited
Website
www.elb.co.za
Telephone
+27 11 306 0700
Postal address:
PO Box 565, Boksburg 1460
Registered office
ELB Equipment Limited
14 Atlas Road
Anderbolt
Boksburg
1459
Share transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
Sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
1 Merchant Place
cnr Fredman Drive and Rivonia Road
Sandton
2196
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