Wrap Text
Provisional reviewed group results for the year ended 30 April 2015
Ellies Holdings Limited
Registration number: 2007/007084/06
JSE Share Code: ELI
ISIN: ZAE000103081
Reviewed Provisional Group Results
for the year ended 30 April 2015
Revenue (Continuing operations) DOWN 41%
Revenue (Discontinued consumer operations) UP 1%
PAT (Continuing operations) DOWN 880%
PAT (Discontinued consumer operations) DOWN 220%
LPS 92.33 cents DOWN 474%
NAV per share 190.76 cents DOWN 44%
HLPS 81.34 cents DOWN 447%
NTAV per share 140.70 cents DOWN 45%
Condensed consolidated statement of financial position
Reviewed as at Audited as at
30 April 2015 30 April 2014 % change
R'000 R'000
ASSETS
Non-current assets 248 631 481 424
Property, plant and equipment 23 254 190 536
– Land and buildings – 96 155
– Other 23 254 94 381
Goodwill and other intangibles 173 407 264 066
Investment in associates – 10 062
Other financial assets 1 144 4 264
Deferred taxation 50 826 12 496
Current assets 484 277 1 607 279
Inventories 15 824 737 412
Trade and other receivables 80 761 395 666
Amounts due from contract customers 348 615 420 497
Taxation receivable 29 267 29 986
Bank and cash balances 9 810 23 718
Group disposals held for sale/distribution 1 000 607 –
Infrastructure segment 49 517 –
Consumer and property segment (Note 1) 951 090 –
Total assets 1 733 515 2 088 703
EQUITY AND LIABILITIES
Total shareholders' interests 855 046 1 031 732
Stated capital 658 334 501 494
Non-distributable reserves (177 763) (177 344)
Accumulated profits 383 666 710 639
Equity attributable to equity holders
of the parent 864 237 1 034 789
Non-controlling interests (9 191) (3 057)
Non-current liabilities 96 210 30 397
Interest-bearing liabilities 95 260 1 034
Vendor loan payable – 855
Minority shareholder loans – 2 033
Deferred taxation 950 26 475
Current liabilities 159 472 1 026 574
Interest-bearing liabilities 210 395 488
– payable after 12 months – 289 393
– payable within 12 months 210 106 095
Vendor loan payable 3 000 4 588
Shareholder loans payable 311 –
Trade and other payables 135 093 467 807
Amounts due to contract customers 13 662 17 368
Provisions 7 116 9 954
Taxation payable 45 146
Shareholders for dividends 35 35
Bank overdrafts – 131 188
Group disposals held for sale/distribution 622 787 –
Infrastructure segment 4 444 –
Consumer and property segment (Note 2) 618 343 –
Total equity and liabilities 1 733 515 2 088 703
Supplementary information:
Shares in issue at end of year
(number of shares) 453 057 398 303 505 691
Net asset value per share (cents) 190.76 340.95 (44.1)
Tangible net asset value per share (cents) 140.70 254.39 (44.7)
Note 1 – Assets: Consumer and property
segment held for sale/distribution
Non-current assets 207 094
Property, plant and equipment 142 061
– Land and buildings 89 201
– Other 52 860
Goodwill and other intangible assets 53 672
Investment in associate 10 011
Deferred taxation 1 350
Current assets 743 996
Inventories 467 080
Trade and other receivables 263 033
Taxation receivable 1 283
Bank and cash balances 12 600
951 090
Note 2 – Liabilities: Consumer and property
segment held for sale/distribution
Non-current liabilities 48 946
Interest-bearing liabilities 46 271
Minority shareholder loans 1 917
Deferred taxation 758
Current liabilities 569 397
Interest-bearing liabilities 154 796
Vendor loans payable 938
Trade and other payables 282 496
Provisions 2 302
Taxation payable 47
Bank overdraft 128 818
618 343
Reconciliation of earnings to headline earnings
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014 % change
R'000 R'000
Net profit for the year attributable to equity
holders of the parent (326 971) 74 840 (536.9)
Adjusted for:
Loss/(profit) on sale of property, plant and
equipment 2 682 (4 541)
Infrastructure continuing operations (703) (3 447)
Infrastructure discontinued operations 3 719 –
Consumer and property discontinued
operations (334) (1 094)
Impairment of intangibles - Consumer and
property discontinued operations 2 551 –
Impairment of goodwill - Infrastructure
continuing operations 34 428 –
Tax effect on adjustments (751) 905
Headline earnings attributable to ordinary
shareholders (288 061) 71 204 (504.6)
** Restated – Refer to discontinued operations note
Condensed statement of changes in equity
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014
R'000 R'000
Balance at the beginning of the year 1 031 732 958 467
Total comprehensive (losses)/income for
the year (333 526) 72 493
Increase in stated capital through the issue
of shares 156 840 –
Minority acquired as part of business
combination – 262
Change of shareholding in subsidiary – 510
Balance at the end of the year 855 046 1 031 732
** Restated – Refer to discontinued operations note
Condensed consolidated statement of comprehensive income
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014 % change
R'000 R'000
Revenue 316 366 531 676 (40.5)
(Loss)/profit before interest, taxation,
depreciation and amortisation ("EBITDA") (221 329) 66 285 (433.9)
Depreciation (2 828) (2 374)
Amortisation of intangibles (732) (1 219)
Impairment of goodwill (34 428) –
(Loss)/profit before interest and taxation (259 317) 62 692
Interest received 10 198 7 599
Interest paid (36 815) (25 356)
Share of losses from associates – –
Net (loss)/profit before taxation ("PBT") (285 934) 44 935 (736.3)
Taxation 34 971 (12 756)
(Loss)/profit for the year from continuing
operations (250 963) 32 179 (879.9)
Discontinued operations – Infrastructure
segment (25 016) (8 584)
Discontinued operations – Consumer and
property segment (Note 3) (57 127) 47 926
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014 % change
R'000 R'000
(Loss)/profit for the year (333 106) 71 521
Other comprehensive income:
Items that may be reclassified subsequently
to profit or loss
– Foreign currency translation reserve (419) 972
Total comprehensive (loss)/income
for the year (333 525) 72 493
Attributable to:
Equity holders of the parent (326 971) 74 840
Non-controlling interests (6 135) (3 319)
Net (loss)/profit after tax (333 106) 71 521
Attributable to:
Equity holders of the parent (327 391) 75 812
Non-controlling interests (6 134) (3 319)
Total comprehensive (loss)/income
for the year (333 525) 72 493
Supplementary information:
Basic (loss)/earnings per share (cents) (92.33) 24.66 (474.4)
– Infrastructure continuing operations (69.69) 12.02
– Infrastructure discontinued operations (7.06) (2.83)
– Consumer and property discontinued
operations (15.58) 15.47
Headline (loss)/earnings per share (cents) (81.34) 23.46 (446.7)
– Infrastructure continuing operations (60.11) 11.20
– Infrastructure discontinued operations (6.31) (2.95)
– Consumer and property discontinued
operations (14.92) 15.21
Weighted average number of shares in issue 354 135 067 303 505 691
Shares in issue (number of shares):
– At end of the year 453 057 398 303 505 691
Note 3 – Consumer and property segment
discontinued operations
Revenue 1 388 932 1 379 326
(Loss)/profit before interest, taxation,
depreciation and amortisation ("EBITDA") (33 960) 111 218
Depreciation (13 648) (10 009)
Amortisation of intangibles (134) (134)
Impairment of intangibles (2 551) –
(Loss)/profit before interest and taxation
("PBIT") (50 293) 101 075
Interest received 1 376 1 433
Interest paid (24 306) (31 113)
Share of losses from associate (2 729) (389)
Net (loss)/profit before taxation ("PBT") (75 952) 71 006
Taxation 18 825 (23 080)
Net (loss)/profit after taxation ("PAT") (57 127) 47 926
* Ellies has no dilutionary instruments in issue.
** Restated – Refer to discontinued operations note.
Condensed consolidated statement of cash flows
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014
R'000 R'000
Cash flows from operating activities (52 611) (170 071)
Cash generated from/(utilised by)
operations 6 610 (82 757)
Interest received (in cash) 3 349 2 018
Interest paid (in cash) (61 038) (55 443)
Taxation paid (1 532) (33 884)
Dividends paid – (5)
Cash flows from investing activities (1 789) (38 942)
Cash flows from financing activities 55 462 110 449
Net increase/(decrease) in cash and cash
equivalents 1 062 (98 564)
Cash and cash equivalents at the beginning
of the year (107 470) (8 906)
Cash and cash equivalents at the end of
the year (106 408) (107 470)
Segmental analysis
Reviewed Audited
year ended year ended **
30 April 2015 30 April 2014 % change
R'000 R'000
Revenue 1 803 150 2 106 089 (14.4)
Infrastructure 414 218 726 763 (43.0)
– Total – continued operations 316 408 533 488
– Total – discontinued operations 97 852 195 087
– Inter-segment (42) (1 812)
Consumer goods – Discontinued operation 1 388 932 1 379 326 (0.7)
– Total 1 388 932 1 379 829
– Inter-segment – (503)
Property division – Discontinued operation – –
– Total 12 805 10 786
– Inter-segment (12 805) (10 786)
Segmental profits/(losses) from
operations
(Loss)/profit before interest and taxation,
after losses from associates (347 083) 151 456
Infrastructure – Continued operation (258 785) 61 882 (518.2)
Infrastructure – Discontinued operation (34 744) (9 978) (248.2)
Consumer goods – Discontinued operation (60 225) 92 889 (164.8)
Property division – Discontinued operation 9 932 7 789 27.5
Other – Discontinued operation (2 729) (389)
Holding company/consolidation (532) (737)
Interest received 11 574 9 032
– Continuing operations 10 198 7 599
– Discontinued operations 1 376 1 433
Net finance costs (61 121) (56 469)
Operating segments (52 416) (48 376)
– Continuing operations (36 815) (25 356)
– Discontinued operations (15 601) (23 020)
Property division – Discontinued operations (8 622) (7 872)
Deemed vendor interest – Discontinued
operations (83) (221)
(Loss)/profit before taxation (396 630) 104 019
** Restated – Refer to discontinued operations note.
Notes to the reviewed year-end results
Reviewed results for the year ended 30 April 2015
The results for the year ended 30 April 2015 have been reviewed by Grant Thornton Johannesburg
and their unmodified review conclusion is available for inspection at the company's registered
office. The auditor's review report does not necessarily report on all of the information contained
in these provisional condensed financial results. Shareholders are therefore advised that in order
to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy
of the auditor's review report together with the accompanying financial information from the
issuer's registered office. This summarised report is extracted from reviewed information but is not
itself reviewed. The directors take full responsibility for the preparation of the provisional
condensed financial results and for ensuring that the financial information has been correctly extracted
from the underlying reviewed provisional annual financial statements.
Basis of preparation and accounting policies
The condensed consolidated financial statements are prepared in accordance with the requirements
of the JSE Limited Listings Requirements for provisional reports and the requirements of the
Companies Act of South Africa. The JSE Listings Requirements require provisional reports to be prepared
in accordance with the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
Financial Reporting Standards Council and to also, as a minimum, contain the information required
by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the
condensed consolidated financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements.
These results have been compiled under the supervision of the Chief Financial Officer, IM Lipworth
CA (SA).
Discontinued operations and disposal groups held for sale/distribution
Following the group's announcement that it intends to unbundle and list its Consumer goods and
property segments separately, together with the Infrastructure segment having scaled down and
shut most of its South African operation, the results of these two operations have been reclassified
to discontinued operations in the income statement and their assets and liabilities reclassified to
disposal groups held for sale/distribution in the statement of financial position.
The prior year interim and final numbers have been restated to show the Continuing and
Discontinued operations consistent with the above mentioned split.
The disposal groups held for sale/distribution, as disclosed in the statement of financial position,
relate to the assets and liabilities of the group's consumer goods business and property operations.
Commentary
Introduction
Ellies Holdings Limited ("Ellies" or the "Company" or the "Group") is a leading South African
manufacturer, wholesaler, importer and distributor in diversified sectors servicing the local and African
markets. The Group comprises two main segments, namely Infrastructure and Consumer goods.
Shareholders are referred to the numerous SENS announcements released over the past year that
dealt with the Company's various capital raises, debt restructure with the Company's primary lender,
The Standard Bank of South Africa Limited ("Standard Bank") and corporate restructure.
During the past year the company undertook two capital raisings in the form of a general issue
of shares for cash in November 2014 and a fully underwritten rights offer which concluded
in January 2015. The general issue of shares resulted in the Company issuing 45 000 000 Ellies
ordinary shares at 110 cents per share to client funds managed by Mazi Capital Proprietary Limited
("Mazi Capital"). The rights offer was fully subscribed for by existing shareholders which resulted
in the Company issuing a further 104 551 707 Ellies ordinary shares at 110 cents per share. The
number of issued shares at year end as a result of these capital raises was 453 057 398.
R100 million from these capital raises was used to reduce the Company's debt with Standard Bank,
with the balance of the money used to fund working capital.
Prior to the finalising of the January 2015 rights offer, the Company together with its advisors had
embarked on numerous other short-term initiatives to further reduce the Standard Bank debt. Due
to circumstance that were not within the Company's control, these initiatives failed and the Company
was required to implement a further rights offer in order to enter into an arrangement with
Standard Bank, in terms of which the Company would be restructured into its two main segments,
being Consumer goods and Infrastructure and thereafter to be funded and operated separately.
Subsequent to the year-end, the Company launched a second rights offer of R200 million, which was
partially underwritten to the extent of R185 million (gross of underwriting costs). This second rights
offer concluded with the Company issuing 167 100 837 shares at 110 cents per share. The number
of issued shares post the second rights offer will be 620 158 235. An amount of R150 million from
this capital raise was used to further reduce the company's debts, with the balance of the money
used to fund working capital.
With the successful launch of the rights offer, the Company was able to complete its corporate and
debt restructure as announced on SENS on 4 May 2015, with retrospective effect from 1 May 2015.
The Company together with its advisors have set up a Separation Committee, comprising an equal
number of non-executives and executives directors, with the view that a separate listing of the Ellies
consumer business and the Megatron infrastructure business will allow for increased focus on
their respective core operations. It will also enable the Ellies consumer business and the Megatron
infrastructure business to access different sources of funding, better suited to their respective needs
and cash flow profiles. The unbundling and simultaneous separate listing of Ellies consumer will also
provide greater investor flexibility. The committee will explore all the options available in order to ensure
that a separate listing is done timeously and in a manner that in maximises value for shareholders.
As a result of the proposed separate listing that is in process, the company has applied IFRS 5 –
Non-current Assets Held for Sale and Discontinued Operations. As a consequence of the application of this
standard, the results of the Ellies consumer goods business and property division have been reclassified
as discontinued operations in the statement of comprehensive income and its assets and liabilities
reclassified as disposal groups held for sale/distribution in the statement of financial position.
Overview
The past year has been extremely challenging for the Company. Ellies' financial performance has
been negatively affected by difficult trading conditions, severe liquidity constraints and higher
interest charges.
With the various capital raising exercises completed, the Company will continue to focus on
improving its liquidity by disposing of its property portfolio and further reductions of its consumer
inventory holdings. In addition the infrastructure segment is anticipating that the outstanding tax
refund and certain large outstanding debtors will be recovered in the short term.
The financial results of the current year include the following items (pre-tax) that are not in the
course of normal business operations:
Infrastructure division:
1. Impairment of goodwill of R34.4 million relating to Botjheng Water;
2. Deferred tax assets from the prior year reversed of approximately R9.1 million and current year
losses of approximately R27.5 million not raised;
3. Losses of approximately R25 million, including retrenchment costs of R3.1 million, from the
scaled down South African operations;
4. Impairments to accounts and construction receivables of approximately R84.2 million, including
an onerous provision raised of R4.1 million; and
5. Other retrenchment costs paid of approximately R1.6 million.
Consumer division:
1. Inventory impairments mainly resulting from cancelled projects of R63.8 million;
2. Impairment of intangibles of R2.6 million relating to the Carbon Credit Programme;
Were it not for these items, the Loss per share and Headline loss per share for the current financial year would be 36 cents and
35 cents respectively.
The Infrastructure division
The continuing operations of the infrastructure division performed poorly in the current period,
which resulted in a loss of R258.8 million (2014 profit: R61.9 million) on Revenue of R316.4 million
(2014: R533.5 million). Revenue was severely impacted by the ability to execute in a timely manner
due to liquidity constraints, resulting in both the increase of time-related costs as well as the
imposition of delay damages. Due to the fixed cost structure of the company, operating profit was
severely impacted by the reduced revenue. A number of once off and non-cash items as detailed
below had a further negative impact on the final results.
In the period ending 30 April 2015, the infrastructure division implemented its strategy of reducing
its exposure to manufacturing in South Africa. The operations earmarked for discontinuation had
their employees retrenched and a sale of assets and inventory was undertaken. The impact of this
exercise resulted in a once off cost of R25 million including retrenchment costs of R 3.1 million.
This exercise has reduced the fixed cost structure of the infrastructure division by approximately
R30 million per annum going forward.
The operating structure of Botjheng Water was brought in line with the philosophy of the
infrastructure division going forward, being a reduction in overhead and an increased focus on
outsourcing. The company made a loss before tax of R10.6 million, including retrenchment costs of
R1.6 million. Due to the continued losses, the goodwill was fully impaired and both past and current
deferred tax assets reversed.
At year-end management elected not to raise various deferred tax assets of R44.2 million. The
provisional tax losses remain intact and the recognition of these assets will be subject to positive
future trading results.
With reduced fixed costs and improved liquidity, the division will be focused on improving operating
margin in the future. The Democratic Republic of Congo, Nigeria and Ivory Coast will continue to be
significant revenue drivers in the next period, as the previously reported order book remains intact.
The Consumer goods division
Even though trading conditions remain strained with the consumer under pressure, Ellies Electronics has
been trading positively in the new financial year. The main factors that have contributed towards the
positive trading are the reduced overhead costs with a lower staff count and increased efficiencies
within the organisation. The division has looked hard at reducing handling costs and making
products more competitive in an environment where the consumer is more price conscious. Having
said this, the division will not compromise on the quality of our products. We remain focused on
maximising gain with our distribution network and wide customer base.
Load shedding has had a positive impact on the division, with our locally produced inverter
trolley in great demand. The inverter and batteries are married in a convenient DIY unit that is
manufactured and assembled in our engineering division. These trollies together with other backup
power and lighting products are selling well. These include small generators and larger inverter
units. Ellies has embarked on a marketing campaign through TV, radio social and digital media in
order to promote these products and help educate the consumer.
The sale of MultiChoice equipment and related products has been slower in the first quarter compared to
previous years but are confident on an increase in sales with the rugby world cup around the corner and
MultiChoice's drive to promote this event having already began. MultiChoice remains an important
partner to Ellies and we believe that with their promotion and technology advances made in new
products, there will be growth in the future.
In December, Platco resolved to subsidise the OVHD set top boxes and saw a dramatic increase in
sales. This has helped in reducing our inventory to more acceptable levels.
We have seen a positive movement in the drive to digital migration. In December Universal Service and
Access Agency of South Africa ("USAASA") issued tenders for the supply and installation of product for
the digital migration. At present, Ellies has been approved for two of the tenders being the manufacture
and supply of satellite dishes, terrestrial antennas and accessories. We however do not know neither
the quantum, nor the timing of the start of supply but remain positive with the progress seen in the
last seven months. Ellies has also had product approved for MultiChoice's DTT programme for both
South Africa and Africa. We are becoming more proactive in promoting the product.
Our lighting division continues to find momentum albeit at a slower pace than first envisaged. We
have partnered with new technology players in the market and hope to be releasing product that is
both technologically advanced and competitive in the near future.
Ellies remains dedicated to the training and upskilling of our independent customer base with
training in various disciplines happening weekly. We hope to arm these SMMEs with skills that will
help them grow their businesses and ready them for the digital migration and convergence.
The consumer division will continue to reshape itself in line with market demands and trends, and
continues to remain relevant and ahead of the technology curve. We pride ourselves on our product,
service and brand. With our increased efficiencies, lower cost and motivated staff we will continue
to be a significant brand and company in South Africa.
Dividend policy
The dividend policy will be reviewed periodically taking into account prevailing circumstances and future
cash requirements. In view of the Company's financial position, no dividend is proposed at this stage.
Appreciation
The directors and management would like to thank our dedicated staff for their hard work during
these challenging times and recognise and appreciate their efforts. We continue to appreciate our
customers, business partners, advisors, suppliers and most importantly shareholders.
By order of the board
ER Salkow WMG Samson
Chairman CEO
31 July 2015
Ellies Holdings Limited
(Registration no. 2007/007084/06)
JSE Share Code: ELI
ISIN: ZAE000103081
Directors:
Executive Directors
ER Salkow (Chairman)
WMG Samson (Chief executive officer)
IM Lipworth (Chief financial officer)
(Appointed 1 August 2014)
RH Berkman
RE Otto
Non-executive Director
MR Goodford
MJ Kuscus (Appointed 1 June 2015)
Registered office:
94 Eloff Street Ext, Village Deep, Johannesburg 2001
(PO Box 57076, Springfield 2137)
Lead independent non-executive Director
OD Fortuin
Independent non-executive Directors
FS Mkhize
S Goldberg (Appointed 21 November 2014)
The following directors resigned during the period —
MF Levitt (1 August 2014);
AC Brooking (31 August 2014);
M Moodley (31 October 2014).
Sponsor: Java Capital
Auditors: Grant Thornton Johannesburg
Company secretary: CIS Company Secretaries (Pty) Ltd
Transfer secretaries: Link Market Services South Africa (Pty) Ltd
www.elliesholdings.com
www.ellies.co.za
www.megatronfederal.com
Date: 31/07/2015 05:35:00 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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