Wrap Text
Unaudited interim results for the six months ended 31 December 2014
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 2014
SALIENT POINTS
- Revenue down 5% to R1.1 billion
- Operating profit down 3% to R98 million
- Headline earnings per share down 0.4% to 24.79 cents
- Ungeared, with R129 million net cash on hand
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed unaudited consolidated interim financial statements for
the six months ended 31 December 2014 have been prepared in compliance
with International Financial Reporting Standards (“IFRS”), the
requirements of International Accounting Standards (IAS)34 – Interim
Financial Reporting, the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee, the Financial Pronouncements as
issued by the Financial Reporting Standards Council, the Companies’ Act
No. 71 of 2008 and the Listings Requirements of the JSE Limited. The
accounting policies used in the preparation of these results are in
accordance with IFRS and are consistent with those applied in the annual
financial statements for the year ended 30 June 2014 and the six months
ended 31 December 2013 with the exception of the adoption of Amendment
to IFRS 8 – Operating Segments, Amendment to IFRS 9 – Financial
Instruments, Amendment to IFRS 13 - Fair Value Measurement, and
Amendment to IAS 16 – Property, Plant and Equipment. There was no
material impact on the interim financial statements identified based on
management’s assessment of these standards. 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 group’s 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
2014 2013 2014
% Change+(-) R000’s R000’s R000’s
Revenue (5) 1 099 866 1 154 170 2 216 659
Cost of sales 852 749 904 624 1 689 709
Gross profit (1) 247 117 249 546 526 950
Other income 2 724 2 198 4 878
Operating expenses - (152 079) (151 396) (328 798)
Profit before interest and
taxation (3) 97 762 100 348 203 030
Interest received 7 595 6 199 11 442
Interest paid (46) (97) (190)
Profit before taxation (1) 105 311 106 450 214 282
Taxation 28 710 29 408 59 708
Profit for the period (1) 76 601 77 042 154 574
Items that will not be reclassified
into profit or loss
Revaluation of property, plant and
equipment (net of taxation) - - (457)
Total comprehensive income for
the period (1) 76 601 77 042 154 117
Profit for the period
attributable to: (1) 76 601 77 042 154 574
Minority interests (1) 18 344 18 531 36 383
Ordinary shareholders - 58 257 58 511 118 191
Total comprehensive income
attributable to: (1) 76 601 77 042 154 117
Minority interests (1) 18 344 18 531 36 383
Ordinary shareholders - 58 257 58 511 117 734
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec 31 Dec 30 June
2014 2013 2014
% Change R000’s R000’s R000’s
Reconciliation of headline
earnings
Profit for the period
attributable to
ordinary shareholders - 58 257 58 511 118 191
Surplus on disposal of
property, plant and equipment
(net of taxation and minority
interests) - (52) (31)
Headline earnings - 58 257 58 459 118 160
Number of ordinary shares in
issue (000’s) 235 000 235 000 235 000
Weighted average number of
ordinary shares (000’s) 235 000 235 000 235 000
Diluted number of ordinary
shares (000’s) 235 000 235 000 235 000
Earnings per share (cents) - 24.79 24,90 50.29
Diluted earnings per share (cents) - 24.79 24,90 50.29
Headline earnings per share (cents) - 24.79 24,88 50.28
Diluted headline earnings
per share (cents) - 24.79 24,88 50.28
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2014 2013 2014
% Change R000’s R000’s R000’s
ASSETS
Non-current assets
Property, plant and equipment 210 696 205 437 205 525
Intangible assets 83 815 83 971 83 971
Deferred taxation 10 680 12 867 13 188
Current assets
Inventory 422 059 392 828 391 348
Trade and other receivables 299 144 300 373 341 924
Taxation 865 490 122
Cash resources 131 099 120 229 197 584
TOTAL ASSETS 1 158 358 1 116 195 1 233 662
EQUITY AND LIABILTIES
Equity and reserves
Share capital 24 24 24
Share premium 116 150 116 150 116 150
Revaluation reserve 60 100 60 557 60 100
Accumulated profit 523 644 476 442 536 122
Attributable to ordinary
shareholders 7 699 918 653 173 712 396
Minority interests 199 166 181 986 199 838
Total shareholders’ funds 899 084 835 159 912 234
Non-current liabilities
Deferred lease payments 67 - -
Deferred taxation 34 965 36 484 34 127
Current liabilities
Vendor loan account - 1 468 18
Trade and other payables 218 591 231 792 284 118
Deferred lease payments - 808 440
Taxation payable 3 775 6 655 2 725
Bank overdraft 1 876 3 829 -
TOTAL EQUITY AND LIABILITIES 1 158 358 1 116 195 1 233 662
Number of ordinary shares
in issue (000’s) 235 000 235 000 235 000
Net asset value per share (cents) 7 297.84 277.95 303.15
Net tangible asset value
per share (cents) 8 271.77 250.88 275.94
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months year to
to 31 Dec to 31 Dec 30 June
2014 2013 2014
% Change R000’s R000’s R000’s
Cash generated by trading (3) 103 071 106 011 214 511
Increase in net working capital (53 458) (83 111) (70 855)
Cash generated by operating
activities 49 613 22 900 143 656
Interest received 7 595 6 199 11 442
Interest paid (46) (97) (190)
Dividends paid (89 751) (70 970) (70 970)
Taxation paid (25 057) (26 527) (62 176)
Cash flows from operating
activities (57 646) (68 495) 21 762
Cash flows from investing
activities (10 697) (17 067) (24 690)
Cash flows from financing
activities (18) (791) (2 241)
Net decrease in cash resources (68 361) (86 353) (5 169)
Cash resources at beginning
of period 197 584 202 753 202 753
Cash resources at end of period 129 223 116 400 197 584
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Revalu-
Share Share ation
Capital Premium Reserve
R000’s R000’s R000’s
Balance at 30 June 2013 (audited) 24 116 150 60 557
Total comprehensive income for the period - - -
Dividends paid - - -
Balance at 31 December 2013 (unaudited) 24 116 150 60 557
Total comprehensive income for the period - - (457)
Balance at 30 June 2014 (audited) 24 116 150 60 100
Total comprehensive income for the period - - -
Dividends paid - - -
Balance at 31 December 2014 (unaudited) 24 116 150 60 100
Accumu-
lated Minority
Profit Interests Total
R000’s R000’s R000’s
Balance at 30 June 2013 (audited) 479 501 172 855 829 087
Total comprehensive income for the period 58 511 18 531 77 042
Dividends paid (61 570) (9 400) (70 970)
Balance at 31 December 2013 (unaudited) 476 442 181 986 835 159
Total comprehensive income for the period 59 680 17 852 77 075
Balance at 30 June 2014 (audited) 536 122 199 838 912 234
Total comprehensive income for the period 58 257 18 344 76 601
Dividends paid (70 735) (19 016) (89 751)
Balance at 31 December 2014 (unaudited) 523 644 199 166 899 084
CONDENSED GROUP SEGMENT REPORT
Unaudited for the 6 months ended 31 December 2014
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 890 226 213 555 18 850
Profit before interest and taxation 59 172 23 372 15 218
Segment assets 753 639 224 145 376 920
Segment liabilities 210 847 117 561 80 510
Net segment assets 542 792 106 584 296 410
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (22 765) 1 099 866
Profit before interest and taxation - 97 762
Segment assets (196 346) 1 158 358
Segment liabilities (149 644) 259 274
Net segment assets (46 702) 899 084
Unaudited for the 6 months ended 31 December 2013
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 984 850 173 536 17 533
Profit before interest and taxation 67 072 20 183 13 076
Segment assets 724 830 178 244 374 164
Segment liabilities 217 429 90 432 89 439
Net segment assets 507 401 87 812 284 725
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (21 749) 1 154 170
Profit before interest and taxation 17 100 348
Segment assets (161 043) 1 116 195
Segment liabilities (116 264) 281 036
Net segment assets (44 779) 835 159
Audited for the year ended 30 June 2014
Elec-
trical Lighting Corporate
R000’s R000’s R000’s
Segment revenue 1 875 877 350 815 35 058
Profit before interest
and taxation 138 632 39 511 26 732
Segment assets 827 199 183 788 324 890
Segment liabilities 268 172 84 728 27 031
Net segment assets 559 027 99 060 297 859
Inter-
company
elimina-
tions Total
R000’s R000’s
Segment revenue (45 091) 2 216 659
Profit before interest
and taxation (1 845) 203 030
Segment assets (102 215) 1 233 662
Segment liabilities (58 503) 321 428
Net segment assets (43 712) 912 234
COMMENTARY
The board of directors of ARB (“the Board”) is pleased to present the
group’s interim results for the six months ended 31 December 2014 (“the
period”).
Financial review
The group’s half-year revenue declined by 5% to R1.1 billion. This was
mainly due to a decrease in activity in the Electrical Division while
the Lighting Division continued to show market share gains. The
Electrical Division’s turnover was hampered by the decline in ESKOM’s
reticulation projects and the NUMSA strike in July 2014. The group
continued to maintain its trading disciplines ensuring that the group’s
overall gross margin increased from 21.6% to 22.5%. While trading
conditions remain challenging, the Group has focused on matters it can
control resulting in overheads remaining virtually unchanged at R152
million. Although the Operating profit decreased by 3% to R98 million,
the group’s operating margin improved marginally to 8.9% (Dec 2013:
8.7%).
Net interest received increased despite the payment of annual and
special dividends totaling R89.7 million midway through the period.
Headline earnings per share declined marginally by 0.4% to 24.79 cents
(Dec 2013: 24.88 cents).
The group’s operations remain cash generative.
Net working capital increased from 20.0% to 22.8% of annualised revenue,
an increase of R53.5 million. Inventory levels increased predominantly
in the Lighting Division due to improved sales volumes and stock orders
ahead of the upcoming Chinese New Year factory shutdowns. The trade
receivables in the Electrical Division book continue to be well-managed
in an increasingly challenging credit environment.
Net capital expenditure for the period amounted to R10.7 million,
approximately R5.1 million of which related to the construction of ARB
Electrical’s new Rustenburg premises which were completed on schedule in
September 2014.
The group’s statement of financial position remains robust reflecting a
net asset value per share of 297.84 cents (Dec 2013: 277.95 cents) and a
net ungeared cash position of R129.2 million.
Segmental review
Electrical (revenue down 9.6% and operating profit down 11.8%)
The Electrical Division’s revenue declined by 9.6% to R890.2 million,
due to the lack of reticulation spend by ESKOM and the paucity of major
infrastructure projects. Gross margins improved marginally to 18.9%,
while overheads were well controlled and declined by 7%, but increased
as a percentage of turnover from 11.1% to 11.7%.
Lighting (revenue up 23.1% and operating profit up 15.8%)
The Lighting Division again produced very pleasing results with the
momentum created by the introduction of new product categories and key
customer gains in prior periods. Revenue grew by 23.1% to R213.5 million
(Dec 2013: R173.5 million). Although gross margins were slightly lower,
overheads rose 20% resulting in the operating margin decreasing to 10.9%
(Dec 2013: 11.6%).
Corporate (revenue increased 7.5% and operating profit up 16.4%)
The Corporate Division represents the group’s ungeared property
portfolio, comprising 15 properties valued at R168.4 million, the
centralised treasury function and ARB IT Solutions (Pty) Limited. Given
the largely fixed nature of its revenue and overheads, the Corporate
Division’s results for the period were in line with expectations.
Corporate activity and expansion
Acquisitions continue to form an integral component of the group’s
growth and expansion strategy despite no new corporate activity being
undertaken during the period.
Acquisitions are considered of businesses which are aligned with the
group’s long-term strategy of diversification through the acquisition of
trading and distribution businesses in related industrial products.
Prospects
Although market conditions are expected to remain challenging for the
foreseeable future, the Lighting Division is well-placed to carry its
positive momentum into the second half of the financial year and steps
have been taken in the Electrical Division to improve its market
competitiveness and profitability.
The ongoing power load shedding envisaged by ESKOM presents significant
challenges to all South African businesses. The group has taken measures
to ensure that it has alternative back up power to facilitate trading
during any future outages.
The above prospects statements have not been reviewed or reported on by
the company’s auditors.
Changes to the Board
As previously announced, Byron Nichles resigned as Chief Executive
Officer of the company effective 31 October 2014. Billy Neasham
(Financial Director) will continue in the role as Acting Chief Executive
Officer until a suitable replacement is appointed.
Subsequent events
No significant events have occurred in the period between the reporting
date and the date of this announcement.
Pro-Active Monitoring of Annual Financial Statements
Arising from the JSE Limited’s pro-active monitoring of financial
statements, the directors informed shareholders that corrective
disclosure was required in respect of other comprehensive income
relating to the revaluation of property plant and equipment and the
deferred taxation thereon. Other comprehensive income for the year ended
30 June 2014 has been amended to reflect the revaluation of land and the
revaluation of buildings separately, the details as disclosed in the
announcement released on SENS on 12 December 2014 were:
30 June 30 June
2014 2013
R000’s R000’s
Revaluation of land 5 498 4 661
Revaluation of buildings (6 846) 3 997
Total revaluation (1 348) 8 658
Taxation
On revaluation of land (1 025) (870)
On revaluation of buildings 1 916 (1 119)
Correction of error in
deferred tax balance - 4 259
Total tax reversal (charge) 891 2 270
Revaluation of property, plant and
equipment (net of taxation) (457) 10 928
The 2013 annual financial statements reflected a correction to the
deferred taxation rate from the marginal tax rate of 28% to the capital
gains tax rate of 16.66% on the revaluation portion of land. This
correction reduced the deferred tax charge by R4.259 million.
The correction was applied from the 2013 financial period and does not
affect the interim results or the comparatives published in this notice,
nor does it have any effect on reported Earnings per Share or Headline
Earnings per Share.
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 W(Billy) Neasham
Chairman Acting CEO
12 February 2015
Directors: AR Burke (Chairman)*; ST Downes*>; JR Modise*; WR Neasham
(Acting CEO & 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: M Louw, 11 Larch Nook, Zwartkop Ext 4, Centurion,
0046 (PO Box 23305, Gezina, 0031)
Auditors: PKF Durban, 12 on Palm Boulevard, Gateway, 4319 (PO Box 1858,
Durban, 4000)
Sponsor: Grindrod Bank Limited, 4th Floor, Grindrod Tower, 8A Protea
Place, Sandton, 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: 12/02/2015 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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