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ELB GROUP LIMITED - Group Summarised Provisional Report and Final Cash Dividend Declaration for the year ended 30 June 2018

Release Date: 19/09/2018 08:26
Code(s): ELR     PDF:  
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Group Summarised Provisional Report and Final Cash Dividend Declaration for the year ended 30 June 2018

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')

GROUP SUMMARISED PROVISIONAL REPORT AND FINAL CASH DIVIDEND DECLARATION
for the year ended 30 June 2018

-   Improved sales and profitability across all Group segments
-   Significant progress made on major engineering projects
-   Order book remains resilient in a tough trading environment
-   Sales increased by 50% to R3 714 million from R2 480 million
-   Profit for the year increased by 35% to R111 million from R82 million
-   Headline earnings per share increased by 40% to 341 cents from 243 cents
-   Net cash outflow from operating activities of R70 million
-   Final cash dividend declared of 50 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,
power solutions and Industry 4.0. 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 of directors of ELB ("the Board") is pleased to
be able to report improved sales and profitability across
all Group segments, in what continues to be a tough
trading environment. Significant progress made on major
engineering projects has had a positive impact on these
results, and continuing improvements in market
penetration within the Equipment and Australasia
segments, have contributed to the Group's improvement
in profitability.

The Group has experienced delays with the
commencement of some new major engineering
projects, but has a resilient order book, despite the
tough trading conditions. The Group continues with a
number of growth initiatives to position itself to maintain
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. Good
progress has been made in this regard, including entering
into a technology partnership with software developer
IoT.nxt, initially to implement technology solutions for
mining clients and in the area of facilities management.

The Group has also signed an agreement with Kymeta for
the supply of satellite antennas. The Kymeta flat-panel antenna 
technology overcomes limitations of data connectivity on remote 
sites and promises to revolutionise communication in various industries, 
including the control and monitoring of process plants, mines and 
other remote infrastructure throughout Africa.

In addition, the Group has signed agreements with Novatec and 
Elwatini to set up joint ventures in the fields of electrical 
control panel supply and rail solutions respectively. These 
opportunities and partnerships 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 years.

Sales for the year improved by 50% to R3 714 million in
2018 from R2 480 million in 2017. The increase has
mainly been in the Engineering Services segment due to
the advanced stage of completion of major engineering
projects, but there were also significant increases in
sales in the Equipment and Australasia segments.

Profit before tax for the year increased by 43% to R171
million in 2018 from a profit of R120 million in 2017.

Profit for the year attributable to ELB shareholders
increased by 37% to R97 million in 2018 from R71 million
in 2017.

Total comprehensive income for the year attributable to
ELB shareholders increased by 79% to R95 million in
2018 from R53 million in 2017, after the translation of
the Group's foreign operations and other comprehensive
income remeasurements.

Headline earnings per share for the year increased by
40% to 341 cents from 243 cents in 2017.

The net asset value per share increased by 9% to 2 754
cents from 2 530 cents at 30 June 2017.

OPERATIONS

Equipment

Sales increased to R971 million in 2018 from R875 million
in 2017, whilst profit before tax increased marginally to
R87 million in 2018 from R86 million in 2017. 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 and price of some
commodities has continued to improve as a result of the
international economic recovery, fuelling equipment
demand. Notwithstanding the improving trading
conditions, profit before tax for the year has improved
marginally owing to the negative impact of the fluctuating
value of the rand on these results.

Engineering Services

Sales increased to R2 230 million in 2018 from R1 151
million in 2017. The increase is primarily due to the
advanced progress made on major engineering projects.
Profit before tax increased to R51 million in 2018 from R15
million in 2017. The profit for the year was positively
impacted by the stage of completion made on major
engineering projects, the close out of successful projects
and foreign exchange gains as a result of the strengthening
of the rand and negatively impacted by the costs
associated with the ongoing delays in the award or
commencement of certain new projects and higher finance
costs as a result of increased working capital requirements.

Australasia

Sales increased to R513 million in 2018 from R454 million
in 2017, while profit before tax increased to R37 million in
2018, from a profit before tax of R30 million in 2017.
Notwithstanding the impact of a stronger rand on the
translation of the Australasia results, this segment has
had an exceptionally good year compared to the prior
year owing to the continued recovery of volumes and
margins and the growth in the green waste management
sector in that region. The successful management of
costs has also contributed to the profitability of the
business in the current year.

CASH FLOW

The Group had a net cash outflow from operating
activities of R70 million compared to a net cash inflow
from operating activities of R198 million in the prior year,
with a decrease in net cash and cash equivalents to R318
million from R437 million at the prior year end. The net
cash outflow and decrease in cash for the year is primarily
as a result of the increased working capital
commitments on major engineering projects in progress,
which commitments are expected to reverse as project
milestones are achieved in due course.

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 exploit the
opportunities as they present themselves and continue to
deliver on its 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, as independent non-executive directors.

DIVIDEND

The Board has declared a final dividend of 50 cents
(2017: 50 cents) per ordinary share, which together with
the interim dividend of 32 cents (2017: 32 cents) per
ordinary share, amounts to a total dividend for the year 
of 82 cents (2017: 82 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
18 September 2018

GROUP BALANCE SHEET
                                                                                     Audited         Audited
                                                                                30 June 2018    30 June 2017
                                                                                       R'000           R'000
ASSETS
Non-current assets                                                                   346 761         351 422
Property, plant and equipment                                                        181 555         164 589
Goodwill and intangible assets                                                        16 644          19 217
Pension fund employer surplus account                                                 39 650          39 938
Deferred tax assets                                                                  108 912         127 678
Current assets                                                                     2 079 691       1 498 868
Contract work not yet billed                                                         667 806          93 158
Inventories                                                                          727 830         670 213
Receivables and other current assets                                                 349 514         298 379
Cash and cash equivalents                                                            334 541         437 118

Total assets                                                                       2 426 452       1 850 290

EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of the Company                          780 165         717 821
Issued capital                                                                       109 178         109 479
Treasury shares                                                                     (74 587)        (46 737)
Reserves                                                                              64 152          67 685
Retained earnings                                                                    681 422         587 394
Non-controlling interests                                                             98 301          84 408

Total equity                                                                         878 466         802 229

Non-current liabilities                                                               37 807          36 176
Interest-bearing borrowings                                                           22 554          20 428
Deferred tax liabilities                                                              15 253          15 748
Current liabilities                                                                1 510 179       1 011 885
Contract liabilities                                                                 176 404         129 589
Interest-bearing payables                                                            108 407          59 523
Payables and other current liabilities                                             1 208 956         822 773
Bank overdraft                                                                        16 412               -

Total liabilities                                                                  1 547 986       1 048 061

Total equity and liabilities                                                       2 426 452       1 850 290


Net asset value per ordinary share (cents)                                             2 754           2 530

GROUP STATEMENT OF COMPREHENSIVE INCOME
                                                                                     Audited         Audited
                                                                                30 June 2018    30 June 2017
                                                                                       R'000           R'000
Sales                                                                              3 714 238       2 480 497
Operating costs excluding depreciation and amortisation
  of non-financial assets                                                        (3 530 690)     (2 342 364)
Operating profit before depreciation and amortisation
of non-financial assets                                                              183 548         138 133
Depreciation and amortisation of non-financial assets                               (20 076)        (23 368)
Profit from operations                                                               163 472         114 765
Finance income                                                                        19 765          17 528
Finance expenses                                                                    (12 310)        (12 091)
Profit before income tax                                                             170 927         120 202
Income tax expense                                                                  (59 662)        (38 554)
Profit for the year                                                                  111 265          81 648

Other comprehensive income                                                           (1 673)        (20 450)
Items that will not be reclassified to profit or loss
Non-controlling interests in foreign currency
   translation adjustments                                                               113         (2 875)
Pension fund employer surplus account remeasurements                                 (3 733)         (3 474)
Aeroplane revaluation surplus increase/(decrease)                                        173         (1 424)
Income tax effect of items that will not be reclassified
   to profit or loss                                                                     941           1 778
Items that may be reclassified subsequently to profit or loss
Foreign currency translation reserve adjustments attributable
   to ordinary shareholders of the Company                                             1 149        (16 753)
Income tax effect of adjustments                                                       (316)           2 298

Total comprehensive income for the year                                              109 592          61 198
Profit for the year attributable to:
  Ordinary shareholders of the Company                                                96 821          70 696
  Non-controlling interests                                                           14 444          10 952
                                                                                     111 265          81 648
Total comprehensive income attributable to:
  Ordinary shareholders of the Company                                                95 073          52 869
  Non-controlling interests                                                           14 519           8 329
                                                                                     109 592          61 198

Earnings per ordinary share (cents)
Basic earnings per share                                                               343,9           247,3
Diluted basic earnings per share                                                       343,8           247,2
Headline earnings per share                                                            341,0           243,2
Diluted headline earnings per share                                                    340,9           243,1

GROUP STATEMENT OF CHANGES IN EQUITY
                                                                                     Audited         Audited
                                                                                30 June 2018    30 June 2017
                                                                                       R'000           R'000

Opening balance                                                                      802 229         762 536

Total comprehensive income for the year                                              109 592          61 198
Profit for the year                                                                  111 265          81 648
Other comprehensive income                                                           (1 673)        (20 450)

Total (distributions to)/contributions by owners                                    (33 355)        (13 882)

Ordinary dividends paid                                                             (23 493)         (9 176)
Distributions to non-controlling interests                                             (820)         (1 207)
Ordinary shares repurchased and cancelled                                              (301)              -
Equity-settled share options expense                                                   1 171           1 808
Ordinary shares acquired and held as treasury shares                                (28 371)         (7 569)
Treasury shares paid up and released to participants                                  18 459           2 262

Changes in ownership interests in subsidiaries
Acquisition of non-controlling interests                                                   -         (7 623)

Closing balance                                                                      878 466         802 229

Comprising:
Issued capital                                                                       109 178         109 479
Treasury shares                                                                     (74 587)        (46 737)
Reserves                                                                              64 152          67 685
Retained earnings                                                                    681 422         587 394

Equity attributable to ordinary shareholders of the Company                          780 165         717 821
Non-controlling interests                                                             98 301          84 408

Total equity                                                                         878 466         802 229

GROUP STATEMENT OF CASH FLOWS
                                                                                     Audited         Audited
                                                                                30 June 2018    30 June 2017
                                                                                       R'000           R'000

Net cash flows from operating activities                                            (69 922)         198 028

Cash generated from operations                                                       184 350         133 069
Net working capital movements                                                      (206 583)          97 440
Net finance income                                                                     7 455           5 735
Taxation paid                                                                       (30 831)        (27 851)
Dividends and distributions paid                                                    (24 313)        (10 383)

Net cash flows from investing activities                                            (32 224)        (12 899)

Purchase of property, plant and equipment                                           (32 505)        (18 385)
Purchase of additional interest in joint operation                                   (3 393)               -
Proceeds from the sale of plant and equipment                                          3 674           5 486

Net cash flows from financing activities                                            (15 264)        (13 921)

Net repayment of interest-bearing borrowings                                         (5 051)         (1 718)
Acquisition of non-controlling interests                                                   -         (6 896)
Ordinary shares repurchased and cancelled                                              (301)               -
Ordinary shares acquired and held as treasury shares                                (28 371)         (7 569)
Treasury shares paid up and released to participants                                  18 459           2 262

(Decrease)/increase in cash and cash equivalents                                   (117 410)         171 208
Cash and cash equivalents at the beginning of the year                               437 118         273 756
Effect of foreign exchange rate movements on cash balances                           (1 579)         (7 846)

Cash and cash equivalents at the end of the year                                     318 129         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

Year ended 30 June 2018
Audited
Sales
   External sales                 3 714 238     970 918     2 230 270       512 970         80             -
   Inter-segment sales                    -       5 864            59             -     20 692      (26 615)

As reported in profit or loss     3 714 238     976 782     2 230 329       512 970     20 772      (26 615)



Profit/(loss) before income tax     170 927      87 220        51 219        37 041    (4 912)           359
Assets                            2 426 452     929 977     1 054 336       523 189     96 241     (177 291)
Liabilities                       1 547 986     445 549       936 580       291 311     23 439     (148 893)



Year ended 30 June 2017
Audited
Sales
   External sales                 2 480 497     875 228     1 151 224       454 022        23              -
   Inter-segment sales                    -       1 633           531             -    22 421       (24 585)

As reported in profit or loss     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
                                                                                    Audited          Audited
                                                                               30 June 2018     30 June 2017

CALCULATION OF HEADLINE EARNINGS (R'000)
Profit attributable to ordinary shareholders of the Company                          96 821           70 696
Less: Items excluded from headline earnings
                                                                                        811            1 166
  Profit on disposal of plant and equipment                                           1 338            1 942
  Income tax effect on profit on disposal of plant and equipment                      (385)            (571)
  Non-controlling interests in profit on disposal of plant and equipment              (142)            (205)

Headline earnings                                                                    96 010           69 530

WEIGHTED AVERAGE NUMBER OF ORDINARY
 SHARES IN ISSUE ('000)
Number of shares at the beginning of the year                                        32 519           35 824
Less: Effect of treasury shares in Group entities
  at the beginning of the year                                                      (4 151)          (7 270)
Basic number of shares in issue at the beginning of the year                         28 368           28 554
Weighted average effect of changes during the year
 ELB ordinary shares acquired and held as treasury shares                             (570)             (61)
 Treasury shares released to incentive scheme participants                              357               94
Weighted average number of shares in issue                                           28 155           28 587
Effect of outstanding share options                                                       7               13

Diluted weighted average number of shares in issue                                   28 162           28 600

BASIC NUMBER OF SHARES IN ISSUE AT
THE END OF THE YEAR ('000)
Ordinary shares in issue                                                             32 503           32 519
Less: Treasury shares in issue                                                      (4 171)          (4 151)
Ordinary shares in issue on which net asset value
  per ordinary share is calculated                                                   28 332           28 368

PER SHARE MEASURES (CENTS)
Earnings per ordinary share
  - basic                                                                             343,9            247,3
  - diluted                                                                           343,8            247,2
Headline earnings per ordinary share
  - basic                                                                             341,0            243,2
  - diluted                                                                           340,9            243,1
Net asset value per ordinary share                                                    2 754            2 530
Dividends declared for the year per ordinary share                                       82               82

NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES

The summarised Group financial statements are prepared in accordance with the requirements of the JSE
Listings Requirements for provisional reports, and the requirements of the Companies Act applicable to summary
financial statements. The JSE Listings Requirements require provisional reports to be prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also,
as a minimum, contain the information required by IAS 34: Interim Financial Reporting.

The accounting policies applied in the preparation of the Group annual financial statements from which the
summarised financial statements were derived are in terms of IFRS and are consistent with those accounting
policies applied in the preparation of the previous Group financial statements.

No new, revised or amended accounting standards or interpretations were adopted in the current year that had a
material impact on the financial statements.

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 VALUE CLASSIFICATION AND MEASUREMENT

The 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.

CAPITAL EXPENDITURE INCURRED AND FUTURE CAPITAL EXPENDITURE COMMITMENTS

Capital expenditure of R32.5 million (2017: R18.4 million) was incurred during the year on property, plant and
equipment. There were no material capital expenditure commitments at each reporting date.

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 summarised Group financial statements are extracted from audited information, but are not themselves audited. 
The Group financial statements were audited by KPMG Inc., who expressed an unmodified opinion thereon. The
audited Group financial statements and the auditor's report thereon are available for inspection at the
Company's registered office. The directors take full responsibility for the preparation of the provisional report
and the financial information has been correctly extracted from the underlying financial statements. The
preparation of the Group financial statements from which the summarised Group financial statements were
derived was supervised by the group financial director, Michael Easter CA(SA).

POST BALANCE SHEET EVENTS

There were no significant events arising between the end of the financial year and the date of these financial
statements which materially affect the financial position or results of the Group or Company.

FINAL CASH DIVIDEND DECLARATION

ORDINARY DIVIDEND NUMBER 140

The directors have declared a final cash dividend of 50 cents per share on the Company's ordinary shares for the
year ended 30 June 2018. 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 50 cents per ordinary share for ordinary shareholders exempt from the dividend
    withholding tax
-   The net dividend is 40 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 32 502 894 ordinary shares in issue, of which 4 170 765 were treasury shares at
    30 June 2018.

Last day to trade cum dividend on the JSE                                       Tuesday, 16 October 2018
First trading day ex dividend on the JSE                                      Wednesday, 17 October 2018
Record date                                                                      Friday, 19 October 2018
Payment date                                                                     Monday, 22 October 2018

In accordance with the requirements of Strate Proprietary Limited, shares may not be dematerialised or
rematerialised between Wednesday, 17 October 2018, and Friday, 19 October 2018, both days inclusive.

By order of the Board
Elbex Proprietary Limited                                                                       Boksburg
Company secretary                                                                      18 September 2018


ELB GROUP LIMITED
Incorporated in the Republic of South Africa
Registration number: 1930/002553/06
Share code: ELR   ISIN: ZAE000035101

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 Group summarised provisional report was released on 19 September 2018.

Date: 19/09/2018 08:26:00 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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