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Preliminary summarised audited consolidated results
for the year ended 30 June 2017, dividend and notice of AGM
ARB Holdings Limited
Registration number 1986/002975/06,
Share code: ARH
ISIN: ZAE000109435
("ARB" or "the Company" or "the Group")
Preliminary summarised audited consolidated results
for the year ended 30 June 2017, dividend announcement and notice of Annual General Meeting
Salient points
Earnings per share up 8,1% to 62,38 cents
Dividend per share up 8,2% to 25,0 cents
Special dividend maintained at 10,0 cents a share
Cash on hand of R306,6m
Commentary
Nature of business
ARB Holdings Limited ("ARB") is a property holding and investment company which owns
investments in closely-related trading and distribution businesses, including 74% of ARB
Electrical Wholesalers, a level 3 BEE company which operates 21 electrical wholesale branches
throughout South Africa, and 60% of Eurolux, which imports and distributes light fittings,
lamps and related accessories.
Financial review
The Group has maintained its revenue at R2,5bn in the current year. The Electrical Division's
revenue remains constrained by the limited government infrastructure spend during the year,
and the decline in local mining and manufacturing activities. The Lighting Division was
adversely affected by the decline in retail sales, especially in the second period of the
financial year, when the South African economy entered into a recession.
Despite the static revenue, the Group was able to increase its gross profit by 8,4% through
disciplined trading practices. Overheads increased by 15,5%, due largely to the Electrical
Division's expansion of four new ARB Connect stores, which operated for the full year, and
the expansion of the Lighting Division's warehouse facilities to accommodate the expansion
of its product range, which is not yet fully operational. These increases in overheads were
partly offset by the increase in other income arising from the surplus realised on the sale
of the East London property.
Profit before interest and tax declined 1% to R214m. The Group remains cash generative, and
to manage its cash resources effectively, resulting in an improvement in interest income,
with a concomitant after tax profit improvement of 7,1% to R171,5m. The Group remains
ungeared with R306,6m cash on hand.
Divisional reviews
Electrical Division (Revenue down 0,5% and PBIT down 0,6%)
The Electrical Division continues to operate in a tough and competitive environment, given
the limited infrastructure expenditure as indicated above. Some market share gains were
achieved through existing branches, while the four new ARB Connect branches further assisted the
division to curtail the decline in revenue attributable mainly to the lower level of
project activity.
An improvement in the number of Eskom-related electrification projects has been evident in
the latter part of the financial year.
Whilst the Connect stores added overheads, all existing costs were well managed with profit
before interest and tax marginally down compared to the prior year. However, the prior year
did include a write down of goodwill in Elektro Vroomen of R5,5m.
Working capital continues to be adequately maintained and monitored in a volatile environment.
Lighting Division (Revenue up 0,8% and PBIT down 3,5%)
The Division was adversely impacted by the decline in consumer spending at retail stores
(its primary customers), while the improvement in the ZAR exchange rate against the US$
necessitated a reduction in pricing of its products to its customers.
Trading margins were maintained despite the volatile exchange rate and the competitive trading
environment. The new warehouse for the distribution of an extended product range has resulted
in increased operating costs with a reduction in profit before interest and tax of 3,5% to
R57,8m (2016: R59,9m).
There has been an improvement in the working capital management in the Division during the
second half of the financial year. This trend is expected to continue into the new
financial year.
Corporate Division (Revenue down 2,4% and PBIT up 15,8%)
The division comprises the property portfolio and the ARB IT business.
Given the fixed nature of the property rental income, the results are in line with expectations;
but were enhanced by the sale of the East London property. A new property has been acquired in
East London. This property is in the process of construction and will house the trading
operations of the Electrical Division's East London branch.
ARB IT has continued to show customer gains, but remains a small revenue generator for
the division.
Corporate activity and expansion
No new corporate activity was undertaken during the year but acquisitions remain an integral
part of the Group's growth and expansion strategy.
Prospects
Little change is expected in the outlook for the South African economy during our next financial
year and we are focused on taking advantage of the limited opportunities which exist.
The Electrical Division forecasts an increase in Eskom spend on electrification projects, and
will remain focused on improving the performance of the existing, and expanding the number of,
ARB Connect stores. The East London branch will be relocating to new premises in the East
London CBD, which will improve access to a broader customer base to extend the product offering
in that region. New land has been acquired by the Corporate Division which will be developed
over the next 18 months to house a new larger facility for the Electrical Division's Gauteng
operation which has outgrown its current premises.
The Lighting Division continues its strategy to grow market share and to introduce new product
ranges to its existing customer base. Furthermore, the new Euro Nouveau range and project
lighting segment are expected to show growth in the new year.
Summarised Group statement of comprehensive income
Audited Audited
year to year to
30 June 30 June
% 2017 2016
change (R000's) (R000's)
Revenue (0,4) 2 479 418 2 489 791
Cost of sales (2,9) 1 885 006 1 941 677
Gross profit 8,4 594 412 548 114
Other income 58,0 9 848 6 231
Selling, administration and distribution expenses 15,5 (389 805) (337 630)
Profit before Interest and taxation (1,0) 214 455 216 715
Net interest received 81,9 21 665 11 911
Profit before taxation 3,3 236 120 228 626
Taxation (5,6) 64 654 68 455
Profit for the year 7,1 171 466 160 171
Items that will not be recycled into profit or loss
- Revaluation of property, plant and
equipment (net of taxation) 4 945 2 449
Total comprehensive income for the year 8,5 176 411 162 620
Profit for the period attributable to: 171 466 160 171
- Non controlling interests 1,1 24 874 24 594
- Ordinary shareholders 8,1 146 592 135 577
Total comprehensive income attributable to 176 411 162 620
- Non controlling interests 1,1 24 874 24 594
- Ordinary shareholders 9,8 151 537 138 026
Reconciliation between earnings and headline earnings
Audited Audited
year to year to
30 June 30 June
% 2017 2016
change (R000's) (R000's)
Profit for the period attributable to ordinary
shareholders 146 592 135 577
Impairment of goodwill (net of NCI) - 4 070
(Profit)/loss on disposal of property, plant
and equipment (net of tax and NCI) (1 150) 747
Headline earnings 145 442 140 394
Number of ordinary shares in issue (000's) 235 000 235 000
Weighted average number of ordinary
shares in issue(000's) 235 000 235 000
Basic earnings per share (cents)* 8,1 62,38 57,69
Headline earnings per share (cents)* 3,6 61,89 59,74
* There are no dilutive instruments in issue
Summarised Group statement of financial position
Audited at Audited at
30 June 30 June
% 2017 2016
change (R000's) (R000's)
ASSETS
Property, plant and equipment 5,4 237 380 225 313
Intangible assets (0,2) 77 848 78 003
Investment in joint venture 3 233 1 041
Deferred taxation 5 797 6 957
Total non-current assets 324 258 311 314
Current assets 1 198 311 1 122 246
Inventory 7,3 471 992 439 913
Trade and other receivables (4,4) 419 677 439 064
Cash resources 26,1 306 642 243 269
Total assets 1 522 569 1 433 560
EQUITY AND LIABILITIES
Share capital and premium 116 174 116 174
Revaluation reserve 70 480 71 002
Accumulated profits 712 286 638 012
Attributable to ordinary shareholders 898 940 825 188
Non-controlling interests (NCI) 170 868 161 594
Total shareholders' funds 1 069 808 986 782
Non-current liabilities 41 148 126 372
Put option liability - 84 510
Deferred lease payments 677 393
Deferred taxation (2,4) 40 471 41 469
Current liabilities (28,5) 411 613 320 406
Trade and other payables (1,0) 314 295 317 556
Put option liability 91 007 -
Taxation payable (121,4) 6 311 2 850
Total equity and liabilities 1 522 569 1 433 560
Net asset value per share (cents) 382,53 351,14
Net tangible asset value per share (cents) 353,90 321,96
Property, plant and equipment
Capital expenditure for the year 33 894 19 943
Capital commitments - contracted for 53 448 3 308
Capital commitments - not contracted for 64 500 -
Depreciation and amortisation 13 828 11 517
Summarised Group statement of cash flows
Audited at Audited at
30 June 30 June
2017 2016
(R000's) (R000's)
Cash generated by trading activities 226 167 236 058
Increase in net working capital (19 146) (68 139)
Cash generated by operating activities 207 021 167 919
Net interest received 25 998 19 631
Dividends paid (93 385) (86 335)
Taxation paid (62 486) (67 092)
Cash flows from operating activities 77 148 34 123
Cash flows from investing activities (13 775) (10 345)
Cash flows from financing activities - (7 289)
Increase in cash resources 63 373 16 489
Cash resources at the beginning of the year 243 269 226 780
Cash resources at the end of the year 306 642 243 269
Summarised Group statement of changes in equity
Non-
Share Revalu- Accumu- control-
capital ation lated ling
and premium reserve profit interests Total
(R000's) (R000's) (R000's) (R000's) (R000's)
Balance at 30 June 2015 116 174 70 302 571 421 152 600 910 497
Total comprehensive income - 2 449 135 577 24 594 162 620
Transfer of reserve realised
on sale of property - (1 749) 1 749 - -
Dividends paid - - (70 735) (15 600) (86 335)
Balance at 30 June 2016 116 174 71 002 638 012 161 594 986 782
Total comprehensive income - 4 945 146 592 24 874 176 411
Transfer of reserve realised
on sale of property - (5 467) 5 467 - -
Dividends paid - - (77 785) (15 600) (93 385)
Balance at 30 June 2017 (audited) 116 174 70 480 712 286 170 868 1 069 808
Summarised Group segment report
Inter-
Electrical Lighting Corporate company Total
(R000's) R000's) (R000's) (R000's) (R000's)
Audited year to 30 June 2017
- Segment revenue 1 996 374 510 802 38 379 (66 137) 2 479 418
- Profit before interest
and taxation 134 199 57 822 29 723 (7 289) 214 455
- Profit before taxation 154 275 48 238 112 427 (78 820) 236 120
- Segment assets 976 043 284 690 603 927 (342 091) 1 522 569
- Segment liabilities 298 071 114 277 244 459 (204 046) 452 761
- Net segment assets 677 972 170 413 359 468 (138 045) 1 069 808
Audited year to 30 June 2016
- Segment revenue 2 006 038 506 954 39 311 (62 512) 2 489 791
- Profit before interest
and taxation 134 991 59 946 26 854 (5 076) 216 715
- Profit before taxation 152 472 50 791 95 996 (70 633) 228 626
- Segment assets 931 305 316 836 539 187 (353 768) 1 433 560
- Segment liabilities 290 553 170 318 209 733 (223 826) 446 778
- Net segment assets 640 752 146 518 329 454 (129 942) 986 782
Basis of preparation
The summarised audited consolidated annual financial statements for the year ended 30 June 2017
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 Reporting
Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the
South African Companies Act, and the JSE Listings Requirements. These summarised condensed
financial results do not include all the disclosures required by IFRS, but contain the minimum
information required by IAS 34 Interim financial reporting.
The accounting policies used in the preparation of these results are in accordance with IFRS and
are consistent, in all material respects, with those applied in the prior year.
These summarised financial statements have been extracted from the consolidated financial
statements for the year ended 30 June 2017 which have been audited by PKF Durban, whose
unqualified audit opinion on these consolidated financial statements is available for inspection
at the Company's registered office, together with the financial statements which will be utilised
in preparation of the integrated report for circulation to the shareholders together with the
notice for the Annual General Meeting. This summarised report is extracted from audited
information, but is not itself audited.
The auditor's report does not necessarily cover all the information included in this announcement.
The Board of Directors of ARB takes full responsibility for the preparation of these summarised
audited consolidated financial results for the year ended 30 June 2017 and for ensuring that the
summarised financial information has been correctly extracted from the underlying audited annual
financial statements. Statements contained in this announcement, regarding the prospects of the
Group, have not been reviewed or audited by the Group's external auditors.
This report and the summarised audited consolidated financial statements have been prepared and
compiled under the supervision of Grant Scrutton CA(SA) (Chief Financial Officer).
Commitments and contingencies
As previously reported, ARB Electrical Wholesalers (Pty) Ltd received a summons from a major
listed construction company, as third respondent (after their insurance company and insurance
broker), in terms of a professional indemnity claim totalling R76,4m "as a result of the incorrect
cable being procured or incorrect cables being installed incorrectly". The Board believes that
the cable specified on their order was correctly supplied and delivered. Attorneys have been
appointed to defend the matter. No provision has been made as the Board believes that there is
no justification for this claim.
Dividends
In view of the Group's continued strong cash generation and its ungeared balance sheet, the Board
has resolved to declare a dividend of 25,0 cents per share (2016: 23,1 cents per share) for the
year ended 30 June 2017, representing the maximum pay-out in terms of the Company's dividend
policy. In addition, the Board has resolved to again declare a special dividend of 10,0 cents
per share (2016: 10,0 cents) in order to return excess cash to shareholders.
The relevant dates for the dividends are as follows:
Event Date
Declaration date Friday, 18 August 2017
Last day to trade cum dividend Tuesday, 12 September 2017
Shares commence trading ex dividend Wednesday, 13 September 2017
Record date Friday, 15 September 2017
Payment date Monday, 18 September 2017
Share certificates may not be dematerialised or rematerialised between Wednesday,
13 September 2017 and Friday, 15 September 2017, both days inclusive.
In compliance with the JSE Listings Requirements, the following additional information
is disclosed:
1. the dividend and special dividend have been declared out of income reserves;
2. the local Dividend Withholding Tax rate is 20%;
3. the gross local dividend amount is 25,00000 cents per share for shareholders exempt from paying
Dividend Withholding Tax;
4. the gross local special dividend amount is 10,00000 cents per share for shareholders exempt
from paying Dividend Withholding Tax;
5. the net local dividend amount is 20,00000 cents per share for shareholders liable to pay
Dividend Withholding Tax;
6. the net local special dividend amount is 8,00000 cents per share for shareholders liable to
pay Dividend Withholding Tax;
7. the issued share capital of ARB is 235 000 000 ordinary shares of 0,01 cent each; and
8. ARB's income tax reference number is 9010/138/20/5.
Exchange control approval has been applied for from the South African Reserve Bank to give
effect to the payment of the special dividend noted above. Payment of the special dividend
to foreign holders can only be made once this approval has been given.
Financial assistance to related or inter-related companies and corporations (s45)
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.
Changes to the Board
There have been no changes to the Board during the period under review.
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of shareholders of ARB will be held at
10:00 on Wednesday, 8 November 2017, at the Company's registered office located at 10 Mack Road,
Prospecton, Durban. The notice of Annual General Meeting will be contained in the integrated
report which will be posted to shareholders by no later than 30 September 2017.
The record date, for purposes of determining which shareholders are entitled to receive the
notice of Annual General Meeting, will be 16 September 2017.
The last day to trade and the record date, in order for shareholders to be eligible to
participate in and vote at the Annual General Meeting, will be 1 November 2017 and
8 November 2017, respectively.
Appreciation
We would like to acknowledge and thank our customers, suppliers, business partners, advisors,
shareholders, management and staff for their continued support.
Alan R Burke
Chairman
William R Neasham
Chief Executive Officer
17 August 2017
Directors
AR Burke (Chairman)*
JS Dixon#*
ST Downes#*
WR Neasham (CEO)
RB Patmore^#*
GM Scrutton (CFO)
* Non-executive
# Independent
^ Lead independent)
Registered office and telephone numbers
10 Mack Road
Prospecton
Durban
PO Box 26426
Isipingo
Beach
4115
Tel: +27 31 9100 100
Auditors
PKF Durban
12 on Palm Boulevard
Gateway
4319
Tel: +27 31 573 5000
Sponsor
Grindrod Bank
Grindrod Tower
8a Protea Place
Sandton
Tel: +27 11 459 1873
Transfer secretaries
Computershare Investor Services
15 Biermann Avenue
Rosebank
Johannesburg
2001
Investor relations
Keyter Rech Investor Solutions
Number 5, 2nd Road
Hyde Park
2196
Company Secretary
M Louw
11 Larch Close
Centurion
0046
Tel: +27 12 663 7989
www.arbhold.co.za
Date: 18/08/2017 07:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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