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Unaudited group interim report and interim cash dividend declaration for the six months ended 31 December 2016
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 2016
- Solid operating performance in a challenging environment
- Return to profitability across all Group segments
- Strengthened order book due to the award of delayed projects
- Strong cash generation from operations of R286 million
- Profit for the period increased to R46 million from a loss of R23 million
- Headline earnings per share of 142 cents from a loss per share of 51 cents
- Interim cash dividend declared of 32 cents per share
COMMENTS
INTRODUCTION
ELB 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 Board is pleased to be able to report a return to
profitability after a difficult comparative reporting
period and the prior financial year. Many of the
initiatives that have been embarked on and projects
pursued over the past years have achieved a positive
outcome in this period, including the award of the
Gamsberg and Asanko projects announced towards
the end of the period.
Despite the political uncertainty, volatile currency and
improved but still difficult trading conditions, the right-
sizing and positioning of the Group undertaken in the
previous financial year, together with some
strengthening in certain commodity prices and a
firming of our order book, has enabled the Group to
return to profitability.
The Group continues with a number of initiatives to
position itself to achieve sustainable growth, for which
returns will typically only be realised in the future.
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.
These initiatives include the further diversification into
providing biomass, gas and energy from waste power
plants up to 50 MW and the development of 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 these
fields. Further, the Group has increased its knowhow
base significantly in the minerals beneficiation and fine
powder handling sectors, by forming partnerships with
ENFI (China) and Haver & Boecker (Germany)
respectively. This will further allow the Group to
provide a broader service offering to its existing and
future clients in the sub-Saharan African region.
FINANCIAL RESULTS
Due to the project nature of segments of the business
there is no consistent correlation between sales and
profits in reporting periods.
Sales for the period is marginally up on the prior
period to R1 054 million in 2016 from R1 041 million
in 2015.
Profit before tax for the period increased to R66 million
in 2016 from a loss before tax of R30 million in 2015.
The Group has experienced a significant turnaround in
profitability in the current period in the operating
activities of the Group, together with favourable
exchange rate adjustments on the back of the
improvement of the South African rand against the
currencies of most of the Groups major suppliers.
In the prior period the Group experienced severe
margin pressure, substantial foreign exchange related
losses, the costs associated with the closing out of
certain projects, the right-sizing of the business, as
well as having expensed the costs associated with
the delay in the award of new contracts.
Profit for the period attributable to ELB shareholders
increased to R41 million in 2016 from an attributable
loss of R15 million in 2015.
Total comprehensive income for the period attributable
to ELB shareholders increased to R24 million in 2016
from R20 million in 2015, after taking into account the
translation of the Group's foreign operations.
Headline earnings per share for the period increased
to a profit of 142 cents per share in 2016 from a loss
of 51 cents per share in 2015.
The net asset value per share recovered from the
significant reduction in the prior financial year,
increasing to 2 455 cents at 31 December 2016 from
2 374 cents at 30 June 2016.
OPERATIONS
Equipment
Sales increased to R411 million in 2016 from R376
million in 2015 and profit before tax increased to R43
million in 2016 from a loss before tax of R13 million in
2015. The profit before tax for the period includes
foreign currency exchange gains, as a result of the
strengthening rand, compared to material foreign
currency exchange losses in the prior period. The
turnaround in profits is partly due to the
aforementioned movement in foreign currency
exchange adjustments and difficult trading conditions
experienced in the prior period, with improving market
demand and an improvement in margin from sales mix
in the current period. The operation remains well
positioned to benefit from more favourable trading
conditions.
Engineering Services
While sales decreased to R452 million in 2016 from
R532 million in 2015, profit before tax increased to R23
million in 2016 from a loss before tax of R1 million in
2015. Engineering Services has seen a significant
turnaround in profits this period compared to the prior
period which is primarily due to a number of delayed
contracts coming on stream in the current period,
compared to the prior period which incurred the costs
associated with the delay in the award of new contracts.
The instrumentation and electrical component of this
segment has again made a significant positive
contribution to the segment this period.
The segment has been predominantly focussed on the
coal, industrial, FMCG and power sectors over the
past period. The award of the Gamsberg and Asanko
projects announced towards the end of the current
period are significant contracts and will deliver
positive returns to the business over their lifecycle.
Australasia
Sales increased to R191 million in 2016 from R134
million in 2015 while profit before tax increased to
R7 million in 2016 from a loss before tax of R6 million
in 2015.
This segment continues to experience difficult trading
conditions and margin pressures. However the
successful management of costs and favourable
exchange rates have contributed to the profitability of
the business in the current period. The business
remains well positioned in both Australia and New
Zealand to continue to service the growing demand
for its Ditch Witch and Komptech range of products,
particularly in the underground construction segment
and the waste management segment of the business.
CASH FLOW
The Group generated a net cash inflow from operations
of R286 million, with an increase in net cash and cash
equivalents to R534 million from R274 million at the prior
year end. Cash flow management remains a high priority
for the Group and ELB works closely with its bankers,
suppliers and customers to ensure the Group continues
to maintain a strong balance sheet at all times.
PROSPECTS
The Group continues to target a number of
opportunities that if successful should further position
the Group favourably for the next twenty-four to thirty-
six months. The Group is confident that it can harness
the opportunities as they present themselves and
deliver on our strategy.
DIVIDEND
The board has declared an interim dividend of 32 cents
(2015 – 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
13 March 2017
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 2016 31 Dec 2015 30 June 2016
R'000 R'000 R'000
ASSETS
Non-current assets 342 304 332 908 367 178
Property, plant and equipment 165 654 186 553 176 859
Goodwill and intangible assets 20 503 24 038 21 789
Pension fund employer surplus account 40 514 40 515 40 263
Deferred income tax assets 115 633 81 802 128 267
Current assets 1 394 924 1 590 351 1 332 190
Construction contract work not yet billed 82 803 313 762 129 742
Inventories 545 620 623 927 584 718
Receivables and other current assets 232 690 304 744 332 860
Cash and cash equivalents 533 811 347 918 284 870
Total assets 1 737 228 1 923 259 1 699 368
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of ELB 702 100 831 854 677 772
Issued capital 104 479 107 702 107 702
Treasury shares (36 337) (41 772) (40 417)
Reserves 71 396 93 445 81 992
Retained earnings 562 562 672 479 528 495
Non-controlling interests 78 682 120 959 84 764
Total equity 780 782 952 813 762 536
Non-current liabilities 50 729 49 867 55 481
Interest bearing borrowings 32 664 17 970 35 047
Provision for trade back commitments 1 074 2 040 1 224
Deferred income tax liabilities 16 991 29 857 19 210
Current liabilities 905 717 920 579 881 351
Construction contract liabilities 327 366 129 553 186 675
Interest bearing payables 56 279 195 215 139 018
Payables and other current liabilities 522 072 583 143 544 544
Bank overdraft – 12 668 11 114
Total liabilities 956 446 970 446 936 832
Total equity and liabilities 1 737 228 1 923 259 1 699 368
Net asset value per ordinary share (cents) 2 455 2 923 2 374
GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPHREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2016 31 Dec 2015 30 June 2016
R'000 R'000 R'000
Sales 1 053 603 1 040 829 1 782 718
Operating costs excluding depreciation and amortisation
of non-financial assets (977 791) (1 058 390) (2 008 904)
Operating profit/(loss) before depreciation and
amortisation of non-financial assets 75 812 (17 561) (226 186)
Depreciation and amortisation of non-financial assets (10 472) (14 188) (25 000)
Profit/(loss) from operations 65 340 (31 749) (251 186)
Finance income 7 413 9 665 15 661
Finance expenses (6 572) (8 269) (15 369)
Profit/(loss) before income tax 66 181 (30 353) (250 894)
Income tax (expense)/credit (20 161) 7 183 61 944
Profit/(loss) for the period 46 020 (23 170) (188 950)
Profit/(loss) for the period attributable to:
Ordinary shareholders of ELB 41 369 (14 506) (147 584)
Non-controlling interests 4 651 (8 664) (41 366)
46 020 (23 170) (188 950)
Other comprehensive income (20 099) 40 088 24 203
Items that may be reclassified to profit or loss
Foreign currency translation adjustments
attributable to ordinary shareholders of ELB (18 764) 37 648 24 968
Income tax effect of adjustments 2 627 (4 685) (3 818)
Items that will not be reclassified to profit or loss
Non-controlling interests in foreign currency
translation adjustments (3 258) 6 644 4 310
Foreign currency translation adjustments to foreign
non-controlling interests (13) 7 –
Pension fund employer surplus account remeasurements (1 307) (467) (2 196)
Aeroplane revaluation surplus (decrease)/increase (296) 2 368 1 385
Income tax effect of items that will not be reclassified
to profit or loss 912 (1 427) (446)
Total comprehensive income for the period 25 921 16 918 (164 747)
Total comprehensive income attributable to:
Ordinary shareholders of ELB 24 109 19 568 (127 167)
Non-controlling interests 1 812 (2 650) (37 580)
25 921 16 918 (164 747)
Earnings per ordinary share
Basic earnings per share (cents) 144,6 (50,6) (516,4)
Diluted basic earnings per share (cents) 144,6 (50,5) (515,9)
Headline earnings per share (cents) 142,1 (51,3) (519,4)
Diluted headline earnings per share (cents) 142,1 (51,2) (518,8)
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2016 31 Dec 2015 30 June 2016
R'000 R'000 R'000
Opening balance 762 536 986 239 986 239
Total comprehensive income for the period 25 921 16 918 (164 747)
Profit/(loss) for the period 46 020 (23 170) (188 950)
Other comprehensive income (20 099) 40 088 24 203
Total (distributions to)/contributions by owners (52) (27 581) (36 032)
Ordinary dividends paid – (19 238) (27 804)
Distributions to non-controlling interests (127) (2 500) (3 695)
Equity settled share options expense – 8 8
ELB ordinary shares acquired and held as treasury shares (1 315) (6 023) (6 023)
Treasury shares paid up and released to participants 1 390 172 1 482
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests (7 623) (22 763) (22 924)
Closing balance 780 782 952 813 762 536
Comprising:
Issued capital 104 479 107 702 107 702
Treasury shares (36 337) (41 772) (40 417)
Reserves 71 396 93 445 81 992
Retained earnings 562 562 672 479 528 495
Equity attributable to ordinary shareholders of ELB 702 100 831 854 677 772
Non-controlling interests 78 682 120 959 84 764
Total equity 780 782 952 813 762 536
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2016 31 Dec 2015 30 June 2016
R'000 R'000 R'000
Operating activities
Net cash inflow/(outflow) from operating activities
before dividends and distributions paid 285 688 12 695 (44 807)
Dividends and distributions paid (127) (21 738) (31 499)
Net cash inflow/(outflow) from operating activities 285 561 (9 043) (76 306)
Net cash outflow from investing activities (2 368) (7 350) (8 421)
Net cash outflow from financing activities (9 002) (26 144) (18 978)
Increase/(decrease) in cash and cash equivalents 274 191 (42 537) (103 705)
Cash and cash equivalents at the beginning of the year 273 756 366 412 366 412
Effect of exchange rate movements on cash balances (14 136) 11 375 11 049
Cash and cash equivalents at the end of the period 533 811 335 250 273 756
SEGMENT INFORMATION
Consolidation
Engineering and
Total Equipment Services Australasia Central elimination
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited
Six months ended 31 December 2016
Sales
External sales 1 053 603 410 464 452 302 190 830 7 –
Inter-segment sales – 225 – – – (225)
As reported in profit or loss 1 053 603 410 689 452 302 190 830 7 (225)
Profit/(loss) before income tax 66 181 42 879 22 629 7 063 (8 336) 1 946
Assets 1 737 228 807 960 631 211 256 505 114 546 (72 994)
Liabilities 956 446 415 323 525 672 69 007 21 922 (75 478)
Unaudited
Six months ended 31 December 2015
Sales
External sales 1 040 829 375 301 531 635 133 886 7 –
Inter-segment sales – 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)
Audited
Year ended 30 June 2016
Sales
External sales 1 782 718 685 868 761 053 335 785 12 –
Inter-segment sales – 921 – – – (921)
As reported in profit or loss 1 782 718 686 789 761 053 335 785 12 (921)
(Loss)/profit before income tax (250 894) 1 576 (235 193) 500 (18 974) 1 197
Assets 1 699 368 747 284 566 931 336 970 120 588 (72 405)
Liabilities 936 832 382 630 467 822 129 714 22 947 (66 281)
HEADLINE EARNINGS, SHARES IN ISSUE AND SHARES MEASUREMENTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2016 31 Dec 2015 30 June 2016
R'000 R'000 R'000
CALCULATION OF HEADLINE EARNINGS
Profit/(loss) attributable to ordinary shareholders of ELB 41 369 (14 506) (147 584)
Items excluded from headline earnings:
Profit on disposal of plant and equipment (1 190) (302) (1 399)
Income tax effect on profit on disposal of plant and equipment 348 87 402
Non-controlling interests in profit on disposal of plant and equipment 126 32 150
Headline earnings 40 653 (14 689) (148 431)
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES IN ISSUE ('000)
Issued ordinary shares at the beginning of the year 35 824 35 824 35 824
Effect of treasury shares in Group entities
at the beginning of the year (7 270) (7 112) (7 112)
Basic number of shares in issue at the beginning of the year 28 554 28 712 28 712
Weighted average effect of changes during the period
Treasury shares acquired during the period (7) (53) (156)
Treasury shares released to incentive scheme participants 60 1 22
Weighted average number of shares in issue 28 607 28 660 28 578
Effect of outstanding share options 12 46 31
Diluted weighted average number of shares in issue 28 619 28 706 28 609
BASIC NUMBER OF SHARES IN ISSUE AT THE END OF THE PERIOD
Ordinary shares in issue ('000's) 32 279 35 824 35 824
Deduct: Treasury shares in issue ('000's) 3 676 7 370 7 270
Ordinary shares in issue on which net asset value
per ordinary share is calculated 28 603 28 454 28 554
PER SHARE MEASURES
Earnings per ordinary share (cents)
- basic 144,6 (50,6) (516,4)
- diluted 144,6 (50,5) (515,9)
Headline earnings per ordinary share (cents)
- basic 142,1 (51,3) (519,4)
- diluted 142,1 (51,2) (518,8)
Net asset value per ordinary share (cents) 2 455 2 923 2 374
Dividends declared for the period per ordinary share (cents) 32 30 30
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, the nature of which was consistent with those previously reported. All transactions
and balances with these related parties have been eliminated in the consolidated results.
During the period, ELB Engineering Services Proprietary Limited, a subsidiary in the Group, acquired the non-
controlling interests in its subsidiary, ELBCON Proprietary Limited for R8 million, effective from 1 July 2016.
FAIR VALUES
The ELB Group measures foreign currency forward exchange contracts at fair value using inputs as described in
Level 2 of the fair value hierarchy. The fair values for foreign currency 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 R5 million (2015: R9 million) was incurred during the period on plant and equipment.
Capital expenditure of R12 million was incurred during the year ended 30 June 2016 on plant and equipment.
Capital expenditure commitments at 31 December 2016 amounted to R2 million (31 December 2015: nil,
30 June 2016: R3 million) for the acquisition of office and computer equipment.
CONTINGENCIES
The Group 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 need be, litigation. These risks are managed on the basis of limited liability and appropriate
insurances.
A subsidiary is currently involved in negotiations with a client over project claims, the outcome of which and the
financial impact cannot be reliably determined at this stage.
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 arising between the end of the financial reporting period and the date of the
group interim report which materially affect the financial position or results of the Group.
INTERIM CASH DIVIDEND DECLARATION
ORDINARY DIVIDEND NUMBER 137
The directors have declared an interim cash dividend of 32 cents per share on the Company's ordinary shares for
the six months ended 31 December 2016. The following additional information is given in respect of the dividend:
- The dividend has been declared out of income reserves
- The South African dividend withholding tax rate is 20%
- ELB Group Limited's registration number is: 1930/002553/06
- ELB Group Limited's income tax reference number is: 9275151711
- The gross dividend is 32 cents per ordinary share for ordinary shareholders exempt from the dividend tax
- The net dividend is 25,60 cents per ordinary share for ordinary shareholders not exempt from the dividend
withholding tax
- ELB Group Limited has 32 278 541 ordinary shares in issue, of which 3 675 660 were treasury shares at
31 December 2016.
Last day to trade cum dividend on the JSE Tuesday, 18 April 2017
First trading day ex dividend on the JSE Wednesday, 19 April 2017
Record date Friday, 21 April 2017
Payment date Monday, 24 April 2017
In accordance with the requirements of Strate Limited, shares may not be dematerialised or rematerialised
between Wednesday, 19 April 2017, and Friday, 21 April 2017, both days inclusive.
By order of the Board
Elbex Proprietary Limited Boksburg
Company secretary 13 March 2017
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
Email
admin@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 14 March 2017.
Date: 14/03/2017 10:34:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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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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