Wrap Text
Unaudited interim results for the six months ended 31 December 2015
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 2015
Salient features
Revenue up 12,4% to R1,24 billion
Operating profit up 10,9% to R108,4 million
Headline earnings per share up 12,1% to 27,79 cents
Ungeared with R190,9 million net cash on hand
Condensed group statement of comprehensive income
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
% 2015 2014 2015
Change R000's R000's R000's
Revenue 12 1 235 804 1 099 866 2 150 764
Cost of sales 12 958 790 852 749 1 633 459
Gross profit 12 277 014 247 117 517 305
Other income (7) 2 520 2 724 4 061
Operating expenses 13 171 154 152 079 324 839
Profit before interest and taxation 11 108 380 97 762 196 527
Interest received 20 9 125 7 595 15 175
Interest paid (210) (46) (95)
Profit before taxation 11 117 295 105 311 211 607
Taxation payable 12 32 158 28 710 58 481
Profit for the period 11 85 137 76 601 153 126
Items that will not be recycled into
profit or loss
Revaluation of property (net of taxation) - - 10 202
Total comprehensive income for the
period 11 85 137 76 601 163 328
Profit for the period attributable to: 85 137 76 601 153 126
Minority interests 9 20 041 18 344 35 667
Ordinary shareholders 12 65 096 58 257 117 459
Total comprehensive income
attributable to: 85 137 76 601 163 328
Minority interests 9 20 041 18 344 35 667
Ordinary shareholders 12 65 096 58 257 127 661
Reconciliation between earnings and headline earnings
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
2015 2014 2015
R000's R000's R000's
Profit for the period attributable to ordinary
shareholders 65 096 58 257 117 459
Loss on disposal of property plant and
equipment (net of taxation and minorities) 203 - 12
Headline earnings 65 299 58 257 117 471
Number of ordinary shares in issue (000's) 235 000 235 000 235 000
Weighted average number of ordinary shares
in issue (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) 27,70 24,79 49,98
Headline earnings per share* (cents) 27,79 24,79 49,99
* There are no dilutive instruments in issue.
Condensed group statement of financial position
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
% 2015 2014 2015
Change R000's R000's R000's
ASSETS
Property, plant and equipment 6 222 338 210 696 221 672
Intangible assets 83 581 83 815 83 659
Deferred taxation 9 944 10 680 8 149
Total non-current assets 315 863 305 191 313 480
Current assets 1 011 656 853 167 966 626
Inventory (7) 390 880 422 059 387 973
Trade and other receivables 43 428 500 299 144 351 345
Deferred lease payments - - 328
Taxation 1 399 865 200
Cash resources 46 190 877 131 099 226 780
Total assets 1 327 519 1 158 358 1 280 106
EQUITY AND LIABILITIES
Share capital and premium 116 174 116 174 116 174
Revaluation reserve 70 302 60 100 70 302
Accumulated profit 577 207 523 644 582 846
Attributable to ordinary shareholders 763 683 699 918 769 322
Minority interests 217 330 199 166 216 489
Total shareholder's funds 981 013 899 084 985 811
Non-current liabilities 39 015 35 032 39 607
Deferred lease payments 309 67 981
Deferred taxation 11 38 706 34 965 38 626
Current liabilities 37 307 491 224 242 254 688
Trade and other payables 38 302 125 218 591 252 185
Deferred lease payments - - 11
Taxation payable 42 5 366 3 775 2 492
Bank overdraft - 1 876 -
Total equity and liabilities 1 327 519 1 158 358 1 280 106
Net asset value per share (cents) 324,97 297,84 327,37
Net tangible asset value per share (cents) 299,31 271,77 302,44
Property, plant and equipment
Capital expenditure for the period 7 520 12 173 15 662
Capital commitments - contracted for 1 525 - 3 910
Depreciation 5 683 5 682 11 180
Condensed group statement of cash flows
Unaudited Unaudited Audited
6 months to 6 months to year to
31 December 31 December 30 June
2015 2014 2015
R000's R000's R000's
Cash generated by trading 113 918 103 071 208 271
Increase in net working capital (30 122) (53 458) (37 979)
Cash generated by operating activities 83 796 49 613 170 292
Net interest received 8 915 7 549 15 080
Dividends paid (89 935) (89 751) (89 751)
Taxation paid (32 198) (25 057) (52 470)
Cash flows from operating activities (29 422) (57 646) 43 151
Cash flows from investing activities (6 481) (10 697) (13 937)
Cash flows from financing activities - (18) (18)
(Decrease)/increase in cash resources (35 903) (68 361) 29 196
Cash resources at beginning of period 226 780 197 584 197 584
Cash resources at end of period 190 877 129 223 226 780
Condensed group statement of changes in equity
Share Share Revaluation
capital premium reserve
R000's R000's R000's
Balance at 30 June 2014 (audited) 24 116 150 60 100
Total comprehensive income for the period
Dividends paid
Balance at 31 December 2015 (unaudited) 24 116 150 60 100
Total comprehensive income for the period 10 202
Balance at 30 June 2015 (audited) 24 116 150 70 302
Total comprehensive income for the period
Dividends paid
Balance at 31 December 2015 (unaudited) 24 116 150 70 302
Accumulated Minority
profit interests Total
R000's R000's R000's
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 2015 (unaudited) 523 644 199 166 899 084
Total comprehensive income for the period 59 202 17 323 86 727
Balance at 30 June 2015 (audited) 582 846 216 489 985 811
Total comprehensive income for the period 65 096 20 041 85 137
Dividends paid (70 735) (19 200) (89 935)
Balance at 31 December 2015 (unaudited) 577 207 217 330 981 013
Condensed group segment report
Electrical Lighting Corporate
R000's R000's R000's
Unaudited for 6 months ended 31 December 2015
Segment revenue 999 095 255 917 19 642
Profit before interest and taxation 64 149 29 804 14 427
Segment assets 871 325 279 849 402 700
Segment liabilities 286 191 152 604 88 871
Net segment assets 585 134 127 245 313 829
Unaudited for 6 months ended 31 December 2014
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
Audited for 12 months ended 30 June 2015
Segment revenue 1 740 585 425 499 38 219
Profit before interest and taxation 122 676 43 800 30 051
Segment assets 805 412 239 195 374 101
Segment liabilities 211 318 121 629 56 238
Net segment assets 594 094 117 566 317 863
Inter-
company
eliminations Total
R000's R000's
Unaudited for 6 months ended 31 December 2015
Segment revenue (38 850) 1 235 804
Profit before interest and taxation - 108 380
Segment assets (226 355) 1 327 519
Segment liabilities (181 160) 346 506
Net segment assets (45 195) 981 013
Unaudited for 6 months ended 31 December 2014
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
Audited for 12 months ended 30 June 2015
Segment revenue (53 539) 2 150 764
Profit before interest and taxation - 196 527
Segment assets (138 602) 1 280 106
Segment liabilities (94 890) 294 295
Net segment assets (43 712) 985 811
Basis of consolidation
These condensed unaudited consolidated interim financial statements for the six months ended
31 December 2015 have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards ('IFRS'),
the SAICA Financial Reporting guides as issued by the Accounting Practices Committee, Financial
Pronouncements issued by the Financial Standards Council, the requirements of the Companies
Act, No 71 of 2008, the JSE Listings Requirements and the information required by IAS 34 - Interim
Financial Reporting. This report was compiled under the supervision of Grant Scrutton CA(SA)
(Financial Director). The Board takes full responsibility for the preparation of these financial results.
The accounting policies used in the preparation of these unaudited results are in accordance with
IFRS and are consistent, in all material respects, with those used in the audited annual financial
statements for the year ended 30 June 2015 and for the unaudited results for the six months
ended 31 December 2014.
Nature of business
ARB is an investment and property holding company with investments in closely related trading
and distribution businesses, including 74% of ARB Electrical Wholesalers (Pty) Ltd, a level 3
B-BBEE company which operates 19 electrical wholesale branches throughout South Africa and
60% of the Eurolux (Pty) Ltd which imports and distributes light fittings, lamps and related accessories.
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 2015 ('the period').
Financial review
The group's revenue for the period increased by 12% to R1,24 billion. The Lighting Division continues
to show pleasing market share gains, while the Electrical Division was able to grow its turnover in an
extremely challenging market. Trading disciplines were maintained which ensured that the gross profit
margin remained unchanged relatively at 22,4% (2014: 22,5%). Although the operating profit grew
11% to R108,4 million (2014: R97,8 million), the operating margin remained almost unchanged at
8,8% (2014: 8,9%) of revenue.
The group continues to be cash generative and has maintained its strong focus on the management
of working capital. While debtors grew 43% to R428,5 million, as a result of extended terms to specific
contractors, similar extended terms were negotiated with our suppliers, resulting in a 38% increase
in creditors. Net working capital improved to 20,9% (2014: 22,8%) of annualised turnover. Notwithstanding
the payment of dividends during the period of R89,9 million, net interest received increased by 18%
to R8,9 million.
Gross capital expenditure for the period was R7,5 million which entails predominantly the replacement
of vehicles in the Electrical Division and the costs related to the roll out of the additional Connect
Stores.
The group has maintained its robust balance sheet, which remains ungeared with net cash on hand
of R190,9 million (2014: R129,2 million).
Divisional review
Electrical Division (revenue up 12,2% and operating profit up 8,4%)
This division continues to operate in an extremely challenging environment with a dearth of any
significant infrastructure projects and Eskom's lack of electrification projects. The division's revenue
growth has been achieved from an increase in municipal electrification projects, ahead of the municipal
elections, and persistence in securing orders in some of the limited project opportunities available
in the market. With the limited trading opportunities, the gross margin continues to be under pressure.
Operating profit increased 8,4% to R64,1 million (2014: R59,2 million), with operating margin of
6,4% (2014: 6,6%).
Lighting Division (revenue up 19,8% and operating profit up 27,5%)
Despite the competitive environment in which this division operates, it continues to show pleasing
market share gains and an expanded product range. Revenue is up 19,8% to R255,9 million (2014:
R213,6 million). The volatility in the exchange rate has put pressure on gross margins however,
through the management of overheads, the operating profit increased 27,5% to R29,8 million
(2014: R23,4 million), and operating margin improved to 11,6% (2014: 10,9%). The new joint venture
with Crabtree Electrical Products to distribute their products to our retail customers has had little
effect on the current earnings, but is starting to show potential for future growth.
Prospects
While there are short-term opportunities for the Electrical Division in the run up to the municipal
elections, there remain a number of structural challenges in the South African economy, including
but not limited to, low growth prospects, a decline in mining and manufacturing activities, an abnormally
volatile exchange rate and very limited infrastructure spending.
The Lighting Division is expected to continue its growth with further market share gains and the
introduction of additional products to its existing customer base, while the Electrical Division is
expected to continue 'mining' the limited project opportunities. On this basis it is essential that the
group maintains its disciplined approach to working capital management and optimisation of the
operational efficiencies of the existing businesses, while it continues to evaluate acquisition
opportunities at the corporate level.
The interim statements, including these 'Prospects' have neither been reviewed nor reported on
by the auditors.
Changes to the Board
Mr James Dixon was appointed as an independent non-executive director on 18 January 2016 to
replace Mr Gerrit ('Boel') Pretorius who retired at the AGM on 12 November 2015. As previously
announced, Grant Scrutton was appointed as Financial Director on 1 October 2015.
Financial assistance to related or inter-related companies and corporations (section 45)
The holding company has provided financial guarantees and cessions of loan accounts to the
group's bankers on behalf of the subsidiary companies as security for facilities granted to the
subsidiary companies.
Contingent liabilities and subsequent events
A major subsidiary, ARB Electrical Wholesalers (Pty) Ltd, received a summons in December 2015
as third defendant from a major listed construction company totalling R78 million. The claim is
primarily against the construction company's insurer in terms of a professional indemnity policy
with the claim on ARB Electrical being an alternative claim. Attorneys have been appointed to
defend the matter as management believe that there is no reasonable justification for this claim.
Subsequent to 31 December 2015 the company has concluded an agreement to sell its Reuven
property for a net consideration of R8,2 million. There is no effect on headline earnings per share
and the transaction is uncategorised in terms of the JSE Listings Requirements.
No other significant events have occurred in the period between the reporting date and the date
of this announcement.
Dividends
ARB's policy is to distribute a single annual dividend for the full year up to a maximum of 40% of
net profit after taxation attributable to ordinary shareholders. In line with this policy, no interim
dividend has been declared.
Appreciation
We would like to acknowledge and thank our customers, suppliers, business partners, advisors,
shareholders, management and staff for their continued support.
For and on behalf of the Board
Alan R Burke
Chairman
W (Billy) Neasham
Chief Executive Officer
17 February 2016
Directors
AR Burke* (Chairman)
ST Downes#*
J Dixon#*
WR Neasham (CEO)
RB Patmore^#*
GM Scrutton (Financial)
* Non-executive
# Independent
^ Lead independent
Registered office and telephone numbers
10 Mack Road
Prospecton
Durban
4133
PO Box 26426
Isipingo Beach 4115
Tel +27 31 9100 100
Fax +27 31 900 257
Auditors
PKF Durban
12 on Palm Boulevard
Gateway
4319
Sponsor
Grindrod Bank
Grindrod Tower
8A Protea Place
Sandton
2196
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001
Investor relations
Keyter Rech Investor Solutions CC
Number 5
2nd Road
Hyde Park
2196
Company secretary
M Louw
11 Larch Close
Zwartkop Ext. 4
Centurion 0046
Date: 17/02/2016 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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