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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').
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