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Unaudited group interim report and interim cash dividend declaration for the six months ended 31 December 2015
ELB GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1930/002553/06
Share code: ELR ISIN: ZAE000035101
('ELB', 'the Company' or 'the Group')
UNAUDITED GROUP INTERIM REPORT and interim cash dividend declaration
for the six months ended 31 December 2015
- Difficult trading conditions exacerbated by weak commodity demand and declining rand
- Net asset value per share up 5% year on year to 2 923 cents
- Strong operating cash generation up 149% to R13 million
- Sales down 20% to R1 041 million
- Profit before tax decreased 142% to a loss of R30 million
- Headline earnings per share down 138% to a loss of 51 cents
- Interim cash dividend per share maintained at 30 cents
COMMENTS
INTRODUCTION
The Group's strategic focus is on being an
internationally recognised holistic engineering
solutions provider to the mining, minerals, power, port,
construction and industrial sectors in the fields of
materials handling, mineral separation, industrial
projects and power solutions. 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 combination of subdued commodity prices, a
global economic slowdown, the deterioration of the
rand, protracted labour strikes, high unemployment, a
downturn in investor confidence and a low growth rate
in South Africa has put the sectors the Group operates
in under severe pressure. This, together with delayed
large infrastructure and capital spend by both public
and private sectors, has resulted in the Group
experiencing difficult trading conditions.
The Group has embarked on a number of initiatives
over the past two years to position itself to achieve
sustainable growth, for which returns are typically only
realised over the next few years. These initiatives are
all in line with the core expertise of the Group and will
enhance its ability to service its markets via horizontal
or vertical diversification and include the following:
- ELB Equipment signed last year a 50/50 joint
venture agreement for the distribution, initially in
South Africa, of the Belaz range of haulage trucks
primarily to the mining sector. Belaz is one of the
leaders in the world of large ore haulage trucks.
This enables the Group to significantly improve its
offering to its customers by being able to offer
vehicles of a payload size up to 400 tonnes.
- ELB Construction was established a few years ago
in order to de-risk the execution model of
Engineering Services Africa, by enabling all ELB
projects to be erected by an in-house company.
This has been successful from a safety, speed of
reaction, commercial and quality point of view.
- The Group acquired B&W Instrumentation and
Electrical Limited ('B&W') in May 2014. B&W has
made very satisfactory progress from a cash
management and profitability point of view and is
adding material value to the Group.
- ELB Engineering Services has signed a cooperation
agreement with KC Cottrell, a world leader in
environmental technology for the last forty years.
This agreement will enable the Group to offer a full
range of air cleaning solutions, including
baghouses, electrostatic precipitators and
desulphurisation systems for large power station
projects and furnace gas cleaning projects,
allowing the Group to provide the necessary
environmental solutions for both refurbishment and
new capital projects.
- ELB Engineering Services has further diversified
into providing total biomass, gas and energy from
waste power plants up to 50 MW. In line with its
diversification strategy, the Group has also
developed expertise in the industrial sector,
specifically in the fast moving consumer goods
('FMCG') field. A number of projects are either
currently ongoing or in the pipeline in both these
fields.
There are a number of projects under negotiation
which could make a material difference to the Group's
order book.
FINANCIAL RESULTS
Due to the project nature of the business, there is no
consistent correlation between sales and profit in
reporting periods.
A 20% decrease in Group sales for the period from
R1 301 million in 2014 to R1 041 million in 2015 primarily
reflects the difficult trading conditions currently being
experienced and the lower activity levels across all of
the Group's operations.
Profit for the period decreased by 148% from a profit
of R48 million in 2014 to a loss of R23 million in 2015.
The loss for the period includes an unrealised foreign
exchange loss adjustment of R28 million (2014: R0.2
million profit). The unrealised foreign exchange loss
adjustments arose as a result of the severe
depreciation of the rand at the end of the financial
period against the currencies of most of the Group's
major suppliers.
Operating profit before depreciation and amortisation
of non-financial assets for the period, excluding
unrealised foreign exchange losses, is R11 million
compared to R87 million in 2014, a decrease of 88%.
This decline is as a result of the poor market
conditions, lower sales and margin pressures
experienced during the period.
Headline earnings decreased by 138% from earnings
of R39 million in 2014 to a loss of R15 million in 2015
and headline earnings per share decreased from 136.8
cents per share in 2014 to a loss of 51.3 cents per
share in 2015.
Other comprehensive income increased from a loss of
R6 million in 2014 to an income of R40 million,
primarily as a result of foreign currency translation
gains on foreign operations in 2015 compared to
foreign currency translation losses in 2014. Attributable
total comprehensive income decreased by 45% from
R35 million in 2014 to R20 million in 2015.
The Group will from time to time experience
fluctuations in exchange rates and commodity prices,
both of which will affect the timing of any capital or
infrastructure spend being considered by our clients.
The net asset value per share increased by 5% to
2 923 cents per share at 31 December 2015 from
2 794 cents per share at 31 December 2014 and increased
marginally from 2 917 cents per share at 30 June 2015.
OPERATIONS
Equipment Africa
Equipment sales of R376 million for the period were
8% lower than the 2014 comparative period of R411
million. Profit before tax for the period decreased from
R39 million in 2014 to a loss before tax for the period
of R13 million. The loss can partly be attributed to the
material unrealised foreign currency exchange losses
in the current period, compared to unrealised foreign
currency exchange gains in the 2014 period, and partly
due to depressed demand and margin pressures.
Engineering Services Africa
Sales for the period decreased by 29% from R752
million in 2014 to R532 million in 2015. Profit before tax
for the period decreased by 103% from R53 million in
2014 to a loss before tax for the period of R1 million in
2015.
Engineering Services has been predominantly
focussed on the iron ore, coal, FMCG and power
sectors over the past period. The operation has
successfully completed the construction of the world's
longest single-flight overland conveyor, handling coal
for Sasol.
The project work on hand remains at a sustainable
level with on-going projects in Angola, Botswana,
DRC, Gabon, Ghana, Israel, Liberia, Mozambique,
Namibia and South Africa.
Australasia
Sales for the period decreased by 10% from R149
million in 2014 to R134 million in 2015. The results for
the period show a decrease in the loss before tax from
R7 million in 2014 to a loss before tax of R6 million in
2015.
Ditch Witch has traded at slightly lower levels for the
period across both the Ditch Witch and Komptech
ranges of equipment due to the current poor trading
conditions being experienced in Australasia.
CASH FLOW
Cash flow management remains the highest priority
for the Group and the focus remains on cash
optimisation and preservation. Net cash and cash
equivalents decreased marginally by 8% from
R363 million at 31 December 2014 to R335 million at
31 December 2015.
The Group works closely with its bankers, suppliers
and customers to ensure we continue to retain a strong
balance sheet at all times.
PROSPECTS
As the board noted in its review of operations of the
2015 annual results the Group expects another difficult
year for the South African economy. With continuing
pressure on global commodity prices, deterioration of
the rand and the delay or cancellation of capital
expenditure and projects, we expect to see pressure
on cash flows. Further we expect a migration from
large infrastructure projects to refurbishment and
maintenance projects. The board is however confident
that the Group can harness the opportunities as they
present themselves and deliver on our strategy.
The Group is targeting a number of opportunities that if
successful should position the Group favourably for
the next twenty-four to thirty-six months.
DIVIDEND
It has been decided to declare an interim dividend of
30 cents (2014 – 30 cents) per ordinary share.
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 15 March 2016
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 15 31 Dec 14 30 June 15
R'000 R'000 R'000
ASSETS
Non-current assets 332 908 311 993 316 612
Property, plant and equipment 186 553 181 687 180 031
Goodwill and intangible assets 24 038 20 940 26 289
Pension fund employer surplus account 40 515 41 497 39 532
Non-current loans receivable – 1 007 –
Deferred income tax assets 81 802 66 862 70 760
Current assets 1 590 351 1 480 631 1 598 859
Inventories, and construction contract work not yet billed 937 689 746 489 893 769
Receivables and other current assets 304 744 347 279 313 140
Cash and cash equivalents 347 918 386 863 391 950
Total assets 1 923 259 1 792 624 1 915 471
EQUITY AND LIABILITIES
Share capital and reserves 831 854 799 492 837 575
Issued capital 107 702 107 702 107 702
Treasury shares (41 772) (37 396) (36 094)
Reserves 93 445 61 986 60 233
Retained earnings 672 479 667 200 705 734
Non-controlling interests in consolidated entities 120 959 140 794 148 664
Total equity 952 813 940 286 986 239
Non-current liabilities 49 867 42 100 49 421
Interest-bearing borrowings 17 970 23 265 19 016
Provision for trade back commitments 2 040 2 847 2 327
Deferred income tax liabilities 29 857 15 988 28 078
Current liabilities 920 579 810 238 879 811
Non-interest bearing payables, other current liabilities
and current provision 712 696 636 615 735 934
Interest-bearing payables 195 215 149 414 118 339
Bank overdrafts 12 668 24 209 25 538
Total liabilities 970 446 852 338 929 232
Total equity and liabilities 1 923 259 1 792 624 1 915 471
Net asset value per ordinary share (cents) 2 923 2 794 2 917
GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 15 31 Dec 14 30 June 15
R'000 R'000 R'000
Sales 1 040 829 1 301 414 2 544 394
Operating costs excluding depreciation and
amortisation of non-financial assets (1 058 390) (1 214 504) (2 359 582)
Operating (loss)/profit before depreciation and
amortisation of non-financial assets (17 561) 86 910 184 812
Depreciation and amortisation of non-financial assets (14 188) (16 652) (28 405)
(Loss)/profit from operations (31 749) 70 258 156 407
Finance income 9 665 8 710 16 598
Finance expenses (8 269) (6 463) (12 540)
(Loss)/profit before income tax (30 353) 72 505 160 465
Income tax credit/(expense) 7 183 (24 016) (47 963)
(Loss)/profit for the period (23 170) 48 489 112 502
(Loss)/profit for the period attributable to:
Ordinary shareholders of ELB (14 506) 39 268 92 237
Non-controlling interests in consolidated entities (8 664) 9 221 20 265
(23 170) 48 489 112 502
Other comprehensive income 40 088 (5 672) (10 220)
Items that may be reclassified to profit or loss
Foreign currency translation reserve adjustments
attributable to ordinary shareholders of ELB 37 648 (5 611) (7 269)
Income tax effect of foreign currency translation reserve
adjustments attributable to ordinary shareholders of ELB (4 685) 1 250 1 430
Items that will not be reclassified to profit or loss
Non-controlling interests in foreign currency translation
reserve adjustments 6 644 (990) (1 282)
Foreign currency translation adjustments to foreign
non-controlling interests 7 (1 207) (1 517)
Pension fund employer surplus account remeasurements (467) 197 (3 490)
Aeroplane revaluation surplus increase 2 368 726 943
Income tax effect of items that will not be reclassified
to profit or loss (1 427) (37) 965
Total comprehensive income for the period 16 918 42 817 102 282
Total comprehensive income attributable to:
Ordinary shareholders of ELB 19 568 35 495 84 462
Non-controlling interests in consolidated entities (2 650) 7 322 17 820
16 918 42 817 102 282
Earnings per ordinary share
Basic earnings per ordinary share (cents) (50,6) 137,4 322,3
Diluted basic earnings per ordinary share (cents) (50,5) 135,8 320,7
Headline earnings per ordinary share (cents) (51,3) 136,8 321,2
Diluted headline earnings per ordinary share (cents) (51,2) 135,2 319,7
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 15 31 Dec 14 30 June 15
R'000 R'000 R'000
Opening balance 986 239 913 180 913 180
Total comprehensive income for the period 16 918 42 817 102 282
(Loss)/profit for the period (23 170) 48 489 112 502
Other comprehensive income 40 088 (5 672) (10 220)
Total(distributions to) and contributions by owners (27 581) (15 711) (29 223)
Ordinary dividends paid (19 238) (16 327) (29 461)
Distributions by a consolidated Group entity to
non-controlling interests (2 500) – (1 612)
Equity settled share options expense 8 26 43
ELB ordinary shares acquired and held as treasury shares (6 023) – –
Treasury shares paid up and released to participants 172 590 1 807
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests (22 763) – –
Closing balance 952 813 940 286 986 239
Comprising:
Issued capital 107 702 107 702 107 702
Treasury shares (41 772) (37 396) (36 094)
Reserves 93 445 61 986 60 233
Retained earnings 672 479 667 200 705 734
Equity attributable to ordinary shareholders of ELB 831 854 799 492 837 575
Non-controlling interests in consolidated entities 120 959 140 794 148 664
Total equity 952 813 940 286 986 239
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 15 31 Dec 14 30 June 15
R'000 R'000 R'000
Operating activities
Cash inflow/(outflow) from operating activities before
dividends and distributions paid 12 695 (26 131) 3 444
Dividends and distributions paid (21 738) (16 327) (31 073)
Cash outflow from operating activities (9 043) (42 458) (27 629)
Cash outflow from investing activities (7 350) (16 183) (23 834)
Cash outflow from financing activities (26 144) (941) (700)
Decrease in cash and cash equivalents (42 537) (59 582) (52 163)
Cash and cash equivalents at the beginning of the year 366 412 422 792 422 792
Effect of exchange rate movements on cash balances 11 375 (556) (4 217)
Cash and cash equivalents at the end of the period 335 250 362 654 366 412
SEGMENT INFORMATION
Engineering Consolidation
Equipment Services and
Total Africa Africa Australasia Central elimination
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited
Six months ended 31 December 2015
Sales
Segment sales 1 040 829 375 301 531 635 133 886 7 –
Inter segment – 1 084 – – – (1 084)
As reported in profit or loss 1 040 829 376 385 531 635 133 886 7 (1 084)
Loss before income tax (30 353) (13 458) (1 416) (6 044) (9 371) (64)
Assets 1 923 259 847 736 680 164 346 124 126 048 (76 813)
Liabilities 970 446 478 211 403 590 139 015 27 819 (78 189)
Unaudited
Six months ended 31 December 2014 - reclassified
Sales
Segment sales 1 301 414 400 169 751 752 149 487 6 –
Inter segment – 10 493 – – – (10 493)
As reported in profit or loss 1 301 414 410 662 751 752 149 487 6 (10 493)
Profit/(loss) before income tax 72 505 38 672 52 778 (7 427) (12 331) 813
Assets 1 792 624 738 015 690 714 300 377 119 312 (55 794)
Liabilities 852 338 351 062 417 714 102 887 23 640 (42 965)
Audited
Year ended 30 June 2015 - reclassified
Sales
Segment sales 2 544 394 751 831 1 442 731 349 807 25 –
Inter segment – 13 216 1 600 - – (14 816)
As reported in profit or loss 2 544 394 765 047 1 444 331 349 807 25 (14 816)
Profit/(loss) before income tax 160 465 74 868 105 434 1 682 (21 636) 117
Assets 1 915 471 811 028 725 642 345 248 129 951 (96 398)
Liabilities 929 232 399 095 429 378 143 799 21 064 (64 104)
Reclassification
During the period, the Group amended the composition of its reportable segments to align it with the information now
provided to the chief operating decision maker. Group investment entities and administrative functions are now grouped
together in a segment called Central in order to better present these activities.
An investment company, previously reported within the Australasian segment, has been reclassified and is now reported
within the Central segment. Accordingly, the Group has reclassified the operating segment information for the six months
ended 31 December 2014 and for the year ended 30 June 2015.
HEADLINE EARNINGS, SHARES IN ISSUE AND PER SHARE MEASUREMENTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 15 31 Dec 14 30 June 15
R'000 R'000 R'000
(Loss)/profit attributable to ordinary shareholders of ELB (14 506) 39 268 92 237
Deduct: Items excluded from headline earnings
as detailed below: 183 175 288
Profit on disposal of plant and equipment 302 295 544
Income tax effect on profit on disposal of plant
and equipment (87) (78) (144)
Non-controlling interests in profit on disposal of plant
and equipment (32) (42) (112)
Headline earnings (14 689) 39 093 91 949
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES IN ISSUE ('000)
Number of ordinary shares in issue at the beginning of the year 35 824 35 824 35 824
Less effect of treasury shares in Group entities
at the beginning of the year (7 112) (7 254) (7 254)
Basic number of ordinary shares in issue at the beginning
of the year 28 712 28 570 28 570
Weighted average effect of changes during the year
ELB ordinary shares acquired and held as treasury shares (53) – –
Treasury shares in Group entities 1 11 52
Weighted average number of ordinary shares in issue 28 660 28 581 28 622
Effect of outstanding share options 46 333 139
Diluted weighted average number of ordinary shares in issue 28 706 28 914 28 761
BASIC NUMBER OF ORDINARY SHARES IN ISSUE AT THE
END OF THE PERIOD
Ordinary shares in issue ('000's) 35 824 35 824 35 824
Deduct: Treasury shares in issue ('000's) 7 370 7 209 7 112
Ordinary shares in issue on which net asset value
per ordinary share is calculated 28 454 28 615 28 712
Earnings per ordinary share (cents)
- basic (50,6) 137,4 322,3
- diluted (50,5) 135,8 320,7
Headline earnings per ordinary share (cents)
- basic (51,3) 136,8 321,2
- diluted (51,2) 135,2 319,7
Net asset value per ordinary share (cents) 2 923 2 794 2 917
Dividends declared for the period per ordinary share (cents) 30 30 97
NOTES
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed group interim financial statements are prepared in accordance with International Financial Reporting
Standard IAS 34 Interim Financial 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 accounting policies applied in the preparation of the condensed group interim financial statements are in terms
of International Financial Reporting Standards and are consistent with those applied in the previous consolidated
financial statements. During the current interim period the Group adopted those standards and interpretations in
issue and effective for the interim period. The impact of adopting these new and amended standards and
interpretations has not had a significant impact on the Group's adopted accounting policies.
RELATED PARTY TRANSACTIONS
Group entities entered into various sale and purchase transactions with related parties in the Group in the ordinary
course of business on an arm's length basis, the nature of which was consistent with those previously reported. All
transactions and balances with these related parties have been eliminated appropriately in the consolidated results.
Elbquip Holdings Pty Limited, a subsidiary in the Group, acquired for cash, the non-controlling interests in its
Australasia operations for an amount of R23 million, effective from 1 July 2015.
FAIR VALUES
The ELB Group measures forward exchange contracts at fair value using inputs as described in Level 2 of the fair
value hierarchy. The fair values for forward exchange contracts are based on quotes from brokers. Similar contracts
are traded in an active market and the quotes reflect the actual transactions on similar instruments. All other
financial assets or liabilities carrying values approximate their fair values based on the nature or maturity period of
the financial instrument. There were no transfers between Levels 1, 2 or 3 of the fair value hierarchy during the
period.
CAPITAL EXPENDITURE INCURRED AND FUTURE CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure of R9 million (2014: R16 million) was incurred during the period primarily on property, plant
and equipment. Capital expenditure of R28 million was incurred during the year ended 30 June 2015.
There were no material capital expenditure commitments at each of the reporting periods.
CONTINGENT LIABILITIES
Engineering Services Africa operates in the engineering contracting business and is exposed to the risks associated
with engineering contracts which does from time to time include the need to resolve disputes by way of mediation,
arbitration and if needs be, litigation. These risks are managed on the basis of limited liability and appropriate
insurances. All known liabilities of the Group at the balance sheet date have been accrued.
FINANCIAL PREPARATION AND REVIEW
The preparation of the condensed group interim financial statements was supervised by the group financial director,
Michael Easter CA(SA). These condensed group interim financial statements have not been reviewed or audited by
the Group's independent external auditors.
POST BALANCE SHEET EVENTS
There were no significant events outside the ordinary course of business that have occurred since the balance sheet
date.
Interim cash dividend declaration
ORDINARY DIVIDEND NUMBER 136
The directors have declared an interim cash dividend of 30 cents per share on the Company's ordinary shares for
the six months ended 31 December 2015. The following additional information is given in respect of the dividend:
- The dividend has been declared out of income reserves
- The South African dividend witholding tax rate is 15%
- ELB Group Limited's registration number is: 1930/002553/06
- ELB Group Limited's income tax reference number is: 9275151711
- The gross dividend is 30 cents per ordinary share for ordinary shareholders exempt from the dividend tax
- The net dividend is 25,5 cents per ordinary share for ordinary shareholders not exempt from the dividend
witholding tax
- ELB Group Limited has 35 824 527 ordinary shares in issue, of which 7 370 469 were treasury shares at
31 December 2015
Last day to trade cum dividend on the JSE Friday, 15 April 2016
First trading day ex dividend on the JSE Monday, 18 April 2016
Record date Friday, 22 April 2016
Payment date Monday, 25 April 2016
In accordance with the requirements of Strate Limited, shares may not be dematerialised or rematerialised
between Monday, 18 April 2016, and Friday, 22 April 2016, both days inclusive.
By order of the Board
Elbex Proprietary Limited Boksburg
Company secretary 15 March 2016
Registered office
14 Atlas Road, Anderbolt, Boksburg 1459
Postal address
PO Box 565, Boksburg, 1460
Telephone
+27 11 306 0700
Website:
www.elb.co.za
Share Transfer Secretaries
Computershare Investor Services Proprietary Limited
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 & Rivonia Road, Sandton, 2196
Directors
AG Fletcher (chairman),
Dr SJ Meijers (group chief executive and chief executive - ELB Engineering Services),
PJ Blunden (chief executive - ELB Equipment), MC Easter (financial director), T de Bruyn,*
Dr JP Herselman,* MV Ramollo, CJ Smith (alternate), IAR Thomson,* JC van Zyl.*
*Non executive
Company secretary
Elbex Proprietary Limited
Release date
The unaudited group interim report was released on 16 March 2016.
Date: 16/03/2016 10:54:00 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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