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Unaudited group interim report and interim cash dividend declaration
ELB GROUP LIMITED
('ELB', 'the Company' or 'the Group')
Incorporated in the Republic of South Africa
Registration number: 1930/002553/06
Share code: ELR ISIN: ZAE000035101
UNAUDITED GROUP INTERIM REPORT
and interim cash dividend declaration
for the six months ended 31 December 2017
- Growth in sales and profitability across all group segments
- Significant progress made on major projects contributing to improvement in sales
- Sales increased to R1 715 million from R1 054 million
- Profit for the period increased to R52 million from R46 million
- Headline earnings per share increased to 158 cents from 142 cents
- Order book remains resilient in a tough trading environment
- Interim cash dividend declared of 32 cents per share
COMMENTARY
INTRODUCTION
ELB is an internationally recognised know-how solutions
provider and capital equipment supplier 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
of world-class equipment and technology. The Group
operates predominantly in Africa and Australasia.
The Board is pleased to be able to report improvements
across all business segments, in what continues to be a
tough trading environment. Significant progress made on
major projects has had a positive impact on these results,
whilst continuing improvements in market penetration
within the Equipment and Australasia segments,
continues to drive the Group's improvement in
profitability.
Notwithstanding the delayed commencement of certain
new major projects, the Group has a resilient order book
and continues with a number of growth initiatives to
position itself to achieve sustainable long-term growth.
Furthermore, the Group has embarked on a strategy to
further increase its know-how and technology focused
solutions by pursuing exponential technology-focused
opportunities and partnerships. These include the
development and incorporation of new technologies into
the Group such as the Internet of Things, Artificial
Intelligence and other disruptive technologies. This will
further allow the Group to provide a broader service
offering to its existing and future clients.
FINANCIAL RESULTS
Due to the project nature of the Engineering Services
segment of the Group there is no consistent correlation
between sales and profits in reporting periods.
Sales for the period improved by 63% to R1 715 million
in 2017 from R1 054 million in 2016. The increase has
mainly been in the Engineering Services segment due to
the progression of major projects, but there were also
significant increases in sales in the Equipment and
Australasia segments.
Profit before tax for the period increased by 20% to R80
million in 2017 from a profit of R66 million in 2016.
Profit for the period attributable to ELB shareholders
increased to R45 million in 2017 from R41 million in 2016.
Total comprehensive income for the period attributable to
ELB shareholders increased to R38 million in 2017 from
R24 million in 2016, after taking into account the translation
of the Group's foreign operations and other comprehensive
income remeasurements.
Headline earnings per share for the period increased by
11% to 158 cents from 142 cents in 2016.
The net asset value per share increased to 2 613 cents
from 2 530 cents at 30 June 2017.
OPERATIONS
Equipment
Sales increased to R485 million in 2017 from R410 million
in 2016 and profit before tax increased to R47 million in
2017 from R43 million in 2016. The increase in sales is due
to improving market demand and increased market
penetration, particularly in the heavier mining, earthmoving
and crushing and screening equipment. The demand for
some commodities has continued to improve as result of
the international economic recovery, driving equipment
demand. The increase in profit before tax is due to the
aforementioned increase in sales, along with the positive
impact of the strengthening rand.
Engineering Services
Sales increased to R974 million in 2017 from R452 million
in 2016. The increase is primarily due to the progress
made on major projects. Profit before tax increased
marginally to R24 million in 2017 from R23 million in 2016.
The profit for the period was impacted by the stage of
completion achieved on these major projects, the close
out of successful projects, costs associated with the
ongoing delays in the award or commencement of certain
new projects, higher finance costs as a result of increased
working capital requirements and foreign exchange gains
as a result of the strengthening of the rand.
Australasia
Sales increased to R256 million in 2017 from R191 million
in 2016 while profit before tax increased to R16 million in
2017 from a profit before tax of R7 million in 2016.
Notwithstanding the impact of a stronger rand on the
translation of the Australasia results, this segment has had
an exceptionally good period compared to the prior period
owing to the continued recovery of volumes and margins
and the growth in the green waste management segment.
The successful management of costs has contributed to
the profitability of the business in the current period.
CASH FLOW
The Group had a net cash outflow from operating activities
of R48 million, compared to a net cash inflow from
operating activities of R286 million in the prior period, with
a decrease in net cash and cash equivalents to R363
million from R437 million at the prior year end. The net cash
outflow and decrease in cash for the period is primarily as a
result of the increased working capital commitments on
major projects in progress, which are expected to reverse
as project milestones are achieved.
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.
CHANGES TO THE BOARD OF DIRECTORS
With effect from 23 November 2017, Ms Buyisiwe
Makhunga and Ms Refilwe Nkabinde were appointed to
the Board of directors of ELB as independent non-
executive directors.
DIVIDEND
In light of the ongoing tough trading environment, the
Board has declared an interim dividend of 32 cents (2016:
32 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 2018
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 2017 31 Dec 2016 30 Jun 2017
R'000 R'000 R'000
ASSETS
Non-current assets 345 810 342 304 351 422
Property, plant and equipment 166 282 165 654 164 589
Goodwill and intangible assets 17 931 20 503 19 217
Pension fund employer surplus account 40 515 40 514 39 938
Deferred income tax assets 121 082 115 633 127 678
Current assets 1 681 492 1 394 924 1 498 868
Contract work not yet billed 342 861 82 803 93 158
Inventories 594 386 545 620 670 213
Receivables and other current assets 354 354 232 690 298 379
Cash and cash equivalents 389 891 533 811 437 118
Total assets 2 027 302 1 737 228 1 850 290
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of ELB 736 680 702 100 717 821
Issued capital 109 479 104 479 109 479
Treasury shares (51 115) (36 337) (46 737)
Reserves 60 206 71 396 67 685
Retained earnings 618 110 562 562 587 394
Non-controlling interests 90 112 78 682 84 408
Total equity 826 792 780 782 802 229
Non-current liabilities 38 664 50 729 36 176
Interest bearing borrowings 24 237 32 664 20 428
Provision for trade back commitments - 1 074 -
Deferred income tax liabilities 14 427 16 991 15 748
Current liabilities 1 161 846 905 717 1 011 885
Contract liabilities 162 552 327 366 129 589
Interest bearing payables 111 348 56 279 59 523
Payables and other current liabilities 861 170 522 072 822 773
Bank overdraft 26 776 - -
Total liabilities 1 200 510 956 446 1 048 061
Total equity and liabilities 2 027 302 1 737 228 1 850 290
Net asset value per ordinary share (cents) 2 613 2 455 2 530
GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
R'000 R'000 R'000
Sales 1 715 259 1 053 603 2 480 497
Operating costs excluding depreciation and amortisation
of non-financial assets (1 629 398) (977 791) (2 342 364)
Operating profit before depreciation and amortisation
of non-financial assets 85 861 75 812 138 133
Depreciation and amortisation of non-financial assets (10 425) (10 472) (23 368)
Profit from operations 75 436 65 340 114 765
Finance income 10 383 7 413 17 528
Finance expenses (6 161) (6 572) (12 091)
Profit before income tax 79 658 66 181 120 202
Income tax expense (27 670) (20 161) (38 554)
Profit for the period 51 988 46 020 81 648
Profit for the period attributable to:
Ordinary shareholders of ELB 45 089 41 369 70 696
Non-controlling interests 6 899 4 651 10 952
51 988 46 020 81 648
Other comprehensive income (8 734) (20 099) (20 450)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation adjustments attributable
to ordinary shareholders of ELB (7 888) (18 764) (16 753)
Income tax effect of adjustments 898 2 627 2 298
Items that will not be reclassified to profit or loss
Non-controlling interests in foreign currency
translation adjustments (1 353) (3 258) (2 875)
Foreign currency translation adjustments to foreign
non-controlling interests - (13) -
Pension fund employer surplus account remeasurements (923) (1 307) (3 474)
Aeroplane revaluation surplus 161 (296) (1 424)
Income tax effect of items that will not be reclassified
to profit or loss 371 912 1 778
Total comprehensive income for the period 43 254 25 921 61 198
Total comprehensive income attributable to:
Ordinary shareholders of ELB 37 533 24 109 52 869
Non-controlling interests 5 721 1 812 8 329
43 254 25 921 61 198
Earnings per ordinary share
Basic earnings per share (cents) 159,5 144,6 247,3
Diluted basic earnings per share (cents) 159,4 144,6 247,2
Headline earnings per share (cents) 157,6 142,1 243,2
Diluted headline earnings per share (cents) 157,6 142,1 243,1
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
R'000 R'000 R'000
Opening balance 802 229 762 536 762 536
Total comprehensive income for the period 43 254 25 921 61 198
Profit for the period 51 988 46 020 81 648
Other comprehensive income (8 734) (20 099) (20 450)
Total (distributions to)/contributions by owners (18 691) (52) (13 882)
Ordinary dividends paid (14 296) - (9 176)
Distributions to non-controlling interests - (127) (1 207)
Equity settled share options expense - - 1 808
ELB ordinary shares acquired and held as treasury shares (6 321) (1 315) (7 569)
Treasury shares paid up and released to participants 1 926 1 390 2 262
Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests - (7 623) (7 623)
Closing balance 826 792 780 782 802 229
Comprising:
Issued capital 109 479 104 479 109 479
Treasury shares (51 115) (36 337) (46 737)
Reserves 60 206 71 396 67 685
Retained earnings 618 110 562 562 587 394
Equity attributable to ordinary shareholders of ELB 736 680 702 100 717 821
Non-controlling interests 90 112 78 682 84 408
Total equity 826 792 780 782 802 229
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
R'000 R'000 R'000
Net cash flows from operating activities (48 274) 285 561 198 028
Cash generated from operations 90 380 79 078 133 069
Net working capital movements (116 444) 212 932 97 440
Net finance income 4 222 841 5 735
Taxation paid (12 136) (7 163) (27 851)
Dividends and distributions paid (14 296) (127) (10 383)
Net cash flows from investing activities (11 511) (2 368) (12 899)
Purchase of property, plant and equipment (13 806) (4 566) (18 385)
Proceeds from the sale of plant and equipment 2 295 2 198 5 486
Net cash flows from financing activities (4 618) (9 002) (13 921)
Net repayment of interest bearing borrowings (223) (2 181) (1 718)
Acquisition of non-controlling interests - (6 896) (6 896)
ELB ordinary shares acquired and held as treasury shares (6 321) (1 315) (7 569)
Treasury shares paid up and released to participants 1 926 1 390 2 262
(Decrease)/increase in cash and cash equivalents (64 403) 274 191 171 208
Cash and cash equivalents at the beginning of the year 437 118 273 756 273 756
Effect of exchange rate movements on cash balances (9 600) (14 136) (7 846)
Cash and cash equivalents at the end of the period 363 115 533 811 437 118
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 2017
Sales
External sales 1 715 259 485 140 974 245 255 841 33 -
Inter-segment sales - 762 - - 12 266 (13 028)
Total sales 1 715 259 485 902 974 245 255 841 12 299 (13 028)
Profit/(loss) before income tax 79 658 47 430 23 829 16 367 (7 814) (154)
Assets 2 027 302 937 929 818 323 309 859 100 549 (139 358)
Liabilities 1 200 510 484 557 718 294 103 915 19 164 (125 420)
Unaudited
Six months ended 31 December 2016
Sales
External sales 1 053 603 410 464 452 302 190 830 7 -
Inter-segment sales - 225 - - 11 141 (11 366)
Total sales 1 053 603 410 689 452 302 190 830 11 148 (11 366)
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)
Audited
Year ended 30 June 2017
Sales
External sales 2 480 497 875 228 1 151 224 454 022 23 -
Inter-segment sales - 1 633 531 - 22 421 (24 585)
Total sales 2 480 497 876 861 1 151 755 454 022 22 444 (24 585)
Profit/(loss) before income tax 120 202 86 343 15 341 29 599 (3 631) (7 450)
Assets 1 850 290 892 212 568 855 377 910 99 514 (88 201)
Liabilities 1 048 061 470 339 472 185 171 367 19 377 (85 207)
HEADLINE EARNINGS, SHARES IN ISSUE AND PER SHARE MEASUREMENTS
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 Dec 2017 31 Dec 2016 30 Jun 2017
CALCULATION OF HEADLINE EARNINGS (R'000)
Profit attributable to ordinary shareholders of ELB 45 089 41 369 70 696
Less: Items excluded from headline earnings
524 716 1 166
Profit on disposal of plant and equipment 858 1 190 1 942
Income tax effect on profit on disposal of plant and equipment (242) (348) (571)
Non-controlling interests in profit on disposal of plant and equipment (92) (126) (205)
Headline earnings 44 565 40 653 69 530
WEIGHTED AVERAGE NUMBER OF ORDINARY
SHARES IN ISSUE (R'000)
Issued ordinary shares at the beginning of the year 32 519 35 824 35 824
Effect of treasury shares in Group entities
at the beginning of the year (4 151) (7 270) (7 270)
Basic number of shares in issue at the beginning of the year 28 368 28 554 28 554
Weighted average effect of changes during the period
Treasury shares acquired during the period (115) (7) (61)
Treasury shares released to incentive scheme participants 22 60 94
Weighted average number of shares in issue 28 275 28 607 28 587
Effect of outstanding share options 7 12 13
Diluted weighted average number of shares in issue 28 282 28 619 28 600
BASIC NUMBER OF SHARES IN ISSUE AT
THE END OF THE PERIOD (R'000)
Ordinary shares in issue 32 519 32 279 32 519
Less: Treasury shares in issue (4 326) (3 676) (4 151)
Ordinary shares in issue on which net asset value
per ordinary share is calculated 28 193 28 603 28 368
PER SHARE MEASURES (CENTS)
Earnings per ordinary share
- basic 159,5 144,6 247,3
- diluted 159,4 144,6 247,2
Headline earnings per ordinary share
- basic 157,6 142,1 243,2
- diluted 157,6 142,1 243,1
Net asset value per ordinary share 2 613 2 455 2 530
Dividends declared for the period per ordinary share 32 32 82
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.
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 R14 million (2016: R5 million) was incurred during the period on plant and equipment.
Capital expenditure of R18 million was incurred during the year ended 30 June 2017 on property, plant and
equipment.
There were no material capital expenditure commitments at 31 December 2017 (31 December 2016: R2 million
for the acquisition of office and computer equipment; 30 June 2017: Rnil).
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.
CHANGES TO THE BOARD OF DIRECTORS
With effect from 23 November 2017, Ms Buyisiwe Makhunga and Ms Refilwe Nkabinde were appointed to the
Board of directors of ELB as independent non-executive directors.
FINANCIAL PREPARATION AND INDEPENDENT AUDIT
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 139
The directors have declared a final cash dividend of 32 cents per share on the Company's ordinary shares for the
six months ended 31 December 2017. 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
withholding tax
- The net dividend is 25,60 cents for ordinary share for ordinary shareholders not exempt from the dividend
withholding tax
- Shareholders are advised to contact their regulated intermediary, as they may qualify for a reduced dividend
withholding tax rate or exemption
- ELB Group Limited has 32 518 579 ordinary shares in issue, of which 4 326 041 were treasury shares at
31 December 2017.
Last day to trade cum dividend on the JSE Tuesday, 17 April 2018
First trading day ex dividend on the JSE Wednesday, 18 April 2018
Record date Friday, 20 April 2018
Payment date Monday, 23 April 2018
In accordance with the requirements of Strate Limited, shares may not be dematerialised or rematerialised
between Wednesday, 18 April 2018, and Friday, 20 April 2018, both days inclusive.
By order of the Board
Elbex Proprietary Limited Boksburg
Company secretary 13 March 2018
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
2nd Floor, Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Sponsor
Questco Corporate Advisory Proprietary Limited
1st Floor, Yellowwood House, Ballywoods Office Park
33 Ballyclare Drive, Bryanston, 2191
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*, B Makhunga*, R Nkabinde*, MV Ramollo, CJ Smith (alternate),
IAR Thomson*, JC van Zyl*.
*Independent non-executive
Company secretary
Elbex Proprietary Limited
Release date
The unaudited group interim report was released on 14 March 2018.
Date: 14/03/2018 07:05:00 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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