Wrap Text
Unaudited interim results for the six months ended 31 October 2018
Ellies Holdings Limited
(Registration number 2007/007084/06)
JSE share code: ELI
ISIN: ZAE000103081
("Ellies" or "the Company" or "the Group")
UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 OCTOBER 2018
Highlights
- Revenue (continuing operations) decreased (2,7%)
- Profit for the period increased 288,8%
- EPS (cents) 11,57 increased 250,6%
- HEPS (cents) 0,24 decreased (92,1%)
- NAV (cents) 63,22 increased 31,0%
Unaudited interim consolidated statement of financial position
Unaudited Unaudited Audited
as at as at as at
31 October 31 October 30 April
2018 2017 2018
R'000 R'000 R'000
ASSETS
Non-current assets 137 404 138 849 138 814
Property, plant and equipment 73 292 74 771 75 979
Goodwill 51 438 51 438 51 438
Deferred taxation 12 674 12 640 11 397
Current assets 620 388 618 746 632 444
Inventory (Note 3) 398 703 360 153 368 616
Trade and other receivables (Note 4) 191 637 234 288 241 939
Taxation receivable 7 959 233 1 097
Bank and cash balances 22 089 24 072 20 792
Non-current assets held-for-sale/
distribution – 15 040 4 250
Consumer segment (Note 1) – 15 040 4 250
Group disposals held-for-sale/
distribution 17 570 11 131 1 440
Infrastructure segment (Note 1) 17 570 – –
Consumer and Property segment (Note 1) – 11 131 1 440
Total assets 775 362 783 766 776 948
EQUITY AND LIABILITIES
Capital and reserves 378 903 289 439 310 429
Stated capital 837 212 837 212 837 212
Non-distributable reserves (175 858) (175 784) (175 267)
Accumulated loss (269 286) (362 140) (340 173)
Equity attributable to equity holders
of the parent 392 068 299 288 321 772
Non-controlling interests (13 165) (9 849) (11 343)
Non-current liabilities 92 253 20 003 7 490
Interest-bearing liabilities 87 693 17 888 4 847
Deferred taxation 4 560 2 115 2 643
Current liabilities 297 750 466 060 458 115
Interest-bearing liabilities 4 922 6 631 6 804
Vendor loans payable – 3 000 –
Trade and other payables 135 077 186 179 211 634
Provisions 5 248 70 436 67 230
Taxation payable 474 1 406 901
Third-party loan – 74 970 75 350
Bank overdraft 152 029 123 438 96 196
Group disposals held-for-sale/
distribution 6 456 8 264 914
Infrastructure segment (Note 2) 6 456 – –
Trading and Distribution segment (Note 2) – 8 264 914
Total equity and liabilities 775 362 783 766 776 948
Supplementary information:
Net asset value per share (cents) 63,22 48,26 51,89
Net tangible asset value per share (cents) 54,93 39,97 43,59
Number of shares in issue at
the end of the period 620 158 235 620 158 235 620 158 235
Note 1 – Group disposals held-for-sale/
distribution
Non-current assets – 76 42
Property, plant and equipment – 42 42
Deferred taxation – 34 –
Current assets 17 570 11 055 1 398
Inventory – 5 857 739
Trade and other receivables 17 127 250 40
Taxation receivable – 14 14
Bank and cash balances 443 4 934 605
17 570 11 131 1 440
Non-current assets held-for-sale – 15 040 4 250
Chloorkop (Erf 347 Extension 19
Portion 1, 2 and 3) – 9 500 –
Remaining Portion of Erf 195 Selby* – 5 540 4 250
Note 2 – Group disposals held-for-sale/
distribution
Current liabilities 6 456 8 264 914
Shareholder loans payable – 2 000 900
Trade and other payables 6 456 6 264 14
6 456 8 264 914
Note 3 – Inventory
Inventory 398 703 360 153 368 616
Movement in impairment allowance
raised against inventory
Balance at the beginning of the year 48 709 55 358 55 358
Impairment allowances raised/(utilised) 7 591 (36 998) (6 649)
Balance at the end of the period 56 300 18 360 48 709
Note 4 – Trade and other receivables
Gross trade receivables 196 757 255 369 263 346
Allowance for doubtful debts (20 508) (33 667) (36 366)
Net trade receivables 176 249 221 702 226 980
Prepayments 3 017 549 998
Deposits 3 849 1 126 3 979
VAT 7 776 7 223 7 885
Staff loans 217 57 –
Retention debtors – Infrastructure
segment – 1 213 1 213
Financed receivables – – 633
Other receivables 529 2 418 251
191 637 234 288 241 939
* The Selby property was sold after the 2018 reporting period
Unaudited interim consolidated statement of profit or loss and
other comprehensive income
Restated*
Unaudited Unaudited
six months six months
ended ended Restated*
31 October 31 October year ended
2018 2017 30 April 2018
R'000 R'000 R'000
Revenue 677 768 696 687 1 418 324
Cost of sales (481 886) (486 955) (1 015 195)
Gross profit 195 882 209 732 403 129
Other income 3 551 1 506 7 329
Operating expenses (182 294) (166 028) (326 104)
Profit before interest, taxation,
depreciation and amortisation ("EBITDA") 17 139 45 210 84 354
Depreciation (5 777) (6 245) (9 367)
Reversal of impairments – 1 210 –
Impairment of loans – – (374)
Impairment of assets – – (869)
Impairment of loan to associate (4 781) (1 505) (3 136)
Profit before interest and taxation 6 581 38 670 70 608
Interest received 1 799 1 556 3 268
Interest paid (8 265) (10 327) (18 200)
Net profit before taxation 115 29 899 55 676
Taxation (694) (8 750) (16 415)
(Loss)/profit for the period from
continuing operations (579) 21 149 39 261
Discontinued operations – Infrastructure
segment (Note 5) 69 811 (969) 5 953
Discontinued operations – Trading and
Distribution (Note 5) (78) (2 395) (6 956)
Profit for the period 69 154 17 785 38 258
Other comprehensive income:
Items that may be reclassified
subsequently to profit or loss
– Foreign currency translation reserve 1 112 490 (278)
– Foreign currency translation reserve
as a result of loss of control – – (11)
Total comprehensive profit for the period 70 266 18 275 37 969
Attributable to:
Equity holders of the parent 71 743 20 454 42 421
Non-controlling interests (2 589) (2 669) (4 163)
– Continuing operations (2 449) (1 471) (3 077)
– Discontinued operations (140) (1 198) (1 086)
Net profit after taxation 69 154 17 785 38 258
Attributable to:
Equity holders of the parent 72 855 20 944 42 132
Non-controlling interests (2 589) (2 669) (4 163)
– Continuing operations (2 449) (1 471) (3 077)
– Discontinued operations (140) (1 198) (1 086)
Total comprehensive profit for the period 70 266 18 275 37 969
*Restated due to IFRS 5 – refer to Note 5 –
discontinued operations
Supplementary information:
Basic earnings per share (cents) 11,57 3,30 6,84
– Trading and Distribution – continuing
operations 1,10 4,44 8,47
– Trading and Distribution – discontinued
operations (0,01) (0,39) (1,12)
– Manufacturing – continuing operations (0,78) (0,59) (1,47)
– Infrastructure – discontinued
operations 11,26 (0,16) 0,96
Headline earnings per share (cents) 0,24 3,05 7,89
– Trading and Distribution – continuing
operations 1,02 4,19 8,74
– Trading and Distribution – discontinued
operations (0,01) (0,39) (1,12)
– Manufacturing – continuing operations (0,78) (0,59) (1,46)
– Infrastructure – discontinued
operations 0,01 (0,16) 1,73
Weighted average number of shares
in issue 620 158 235 620 158 235 620 158 235
Ellies has no dilutionary instruments in issue
Note 5 – Discontinued operations
Revenue 611 5 885 11 382
(Loss)/profit before interest, taxation,
depreciation and amortisation ("EBITDA") (72) (3 273) 3 871
Depreciation (6) (8) (8)
Profit/(loss) on loss of control* 69 811 – (4 751)
Profit/(loss) before interest and taxation
("PBIT") 69 733 (3 281) (888)
Interest received – – 2
Interest paid – (83) (83)
Profit/(loss) before taxation ("PBT") 69 733 (3 364) (969)
Taxation – – (34)
Profit/(loss) after taxation ("PAT") 69 733 (3 364) (1 003)
*Loss as a result of loss of control – trading
and distribution (78) (2 395) (6 956)
*Profit as a result of loss of control –
infrastructure 69 811 (969) 5 953
69 733 (3 364) (1 003)
Unaudited interim consolidated statement of cash flows
Restated*
Unaudited Unaudited
six months six months
ended ended Restated*
31 October 31 October year ended
2018 2017 30 April 2018
R'000 R'000 R'000
Cash flows from operating activities (46 183) 13 147 42 317
Cash generated from operations (36 633) 18 320 70 883
Interest received 130 1 556 201
Interest paid (8 265) (10 327) (18 310)
Taxation (paid)/received (7 343) 768 (6 191)
Cash flows – continuing operations (52 111) 10 317 46 583
Cash flows – discontinued operations 5 928 2 830 (4 266)
Cash flows from investing activities (1 233) 10 481 16 152
Additions to property, plant and
equipment (3 348) (5 232) (9 118)
Proceeds on disposal of property,
plant and equipment 935 15 713 613
Proceeds on disposal of non-current
assets held-for-sale 4 250 – 24 734
Loss of control (29) – –
Loan to associate (3 112) – (69)
Cash flows – continuing operations (1 304) 10 481 16 160
Cash flows – discontinued operations 71 – (8)
Cash flows from financing activities (7 242) (12 870) (27 795)
Repayment of interest-bearing
liabilities (6 342) (12 870) (25 738)
Third-party loans paid – – (957)
Cash flows – continuing operations (6 342) (12 870) (26 695)
Cash flows – discontinued operations (900) – (1 100)
Net (decrease)/increase in cash and
cash equivalents (54 658) 10 758 30 674
Foreign currency translation reserve –
Net movement on cash and
cash equivalents (40) – (283)
Cash and cash equivalents at the
beginning of the period (74 799) (105 190) (105 190)
Cash and cash equivalents at the
end of the period (129 497) (94 432) (74 799)
*Restated due to IFRS 5 – refer to Note 5 – discontinued operations
Unaudited interim consolidated statement of changes in equity
Restated*
Unaudited Unaudited
six months six months
ended ended Restated*
31 October 31 October year ended
2018 2017 30 April 2018
R'000 R'000 R'000
Balance at beginning of the period 310 429 270 906 270 906
Share-based payment reserve (1 703) 258 1 554
Total comprehensive income
for the period 70 266 18 275 37 969
Changes in control (non-controlling
interest) 767 – –
Changes in control (equity attributable
to equity holders of the parent) (856) – –
Balance at end of the period 378 903 289 439 310 429
*Restated due to IFRS 5 – refer to Note 5 – discontinued operations
Reconciliation of basic earnings and headline earnings
Restated*
Unaudited Unaudited
six months six months
ended ended Restated*
31 October 31 October year ended
2018 2017 30 April 2018
R'000 R'000 R'000
Net profit/(loss) for the period attributable
to equity holders of the parent 71 743 20 454 42 421
Adjusted for:
Profit on sale of property, plant
and equipment (684) (2 544) (3 105)
Reversal of impairments – (1 210) –
(Loss)/profit as a result of loss of control (69 733) – 4 751
Impairment of assets – – 869
Impairment of loan to associate – 1 505 3 136
Tax effect on adjustments 191 712 869
Headline profit attributable to ordinary
shareholders 1 517 18 917 48 941
*Restated due to IFRS 5 – refer to Note 5 – discontinued operations
Segment analysis
Restated*
Unaudited Unaudited
six months six months
ended ended Audited
31 October 31 October year ended
2018 2017 30 April 2018
R'000 R'000 R'000
Revenue – continuing operations 677 768 696 687 1 418 324
– Trading and Distribution 677 488 695 709 1 395 658
– Manufacturing 49 856 64 392 116 935
– Intersegment (49 576) (63 414) (94 269)
Revenue – discontinued operations 611 5 885 11 382
– Trading and Distribution 611 5 885 11 382
Segment profit/(loss) from continuing
operations
Net profit/(loss) before interest
and taxation 6 581 38 670 70 608
– Manufacturing (4 834) (248) (1 223)
– Trading and Distribution 11 415 38 918 71 831
Segment profit/(loss) from discontinued
operations
Net profit/(loss) before interest and
taxation 69 733 (3 281) (888)
– Trading and Distribution (78) (2 395) (6 924)
– Infrastructure 69 811 (886) 6 036
Interest received – continuing operations 1 799 1 556 3 268
– Manufacturing – – –
– Trading and Distribution 6 385 6 968 13 880
Intersegment (4 586) (5 412) (10 612)
Interest received – discontinued
operations – – 2
– Trading and Distribution – – 2
Interest paid – continuing operations (8 265) (10 327) (18 200)
– Manufacturing (4 586) (5 412) (10 612)
– Trading and Distribution (8 265) (10 327) (18 200)
Intersegment 4 586 5 412 10 612
Interest paid – discontinued operations – (83) (83)
– Infrastructure – (83) (83)
Net profit before tax 115 29 899 55 676
*Restated due to IFRS 5 – refer to Note 5 –
discontinued operations
Segment assets
– Trading and Distribution – continuing
operations 667 401 674 557 680 816
– Trading and Distribution –
discontinued operations – 11 131 1 440
– Manufacturing 90 391 98 078 94 692
– Infrastructure discontinued segment 17 570 – –
Total assets 775 362 783 766 776 948
Segment liabilities
– Trading and Distribution – continuing
operations 346 116 372 936 356 494
– Trading and Distribution –
discontinued operations – 8 264 914
– Manufacturing 43 887 113 127 109 111
– Infrastructure discontinued segment 6 456 – –
Total liabilities 396 459 494 327 466 519
Commentary
Nature of Business
Ellies is an investment holding company for businesses involved in the manufacture, trading
and distribution of a diverse range of products and services, inclusive of Digital Terrestrial
Television (DTT), satellite products and related accessories, electrical, signal distribution,
residential and commercial LED lighting solutions, solar PV, sound and AV equipment
distribution and installation.
Ellies Electronics (Pty) Ltd, the Trading and Distribution segment, which is the heartbeat of our
organisation, operates out of 13 branches and trade counters in South Africa, with a presence in
all nine provinces and wholly-owned branches in Namibia, Botswana and Swaziland.
Ellies Industries (Pty) Ltd, the Manufacturing segment, manufactures, sells and distributes
various products related to markets we serve, including satellite dishes, terrestrial aerials,
TV brackets, mounts and shelving solutions, whilst offering bespoke industry solutions and
custom-made products.
The Group changed its operating segments during the period under review and restated
the comparative figures. It now reports on two segments, namely Trading and Distribution
and Manufacturing. These segments leverage off common pools of expertise, allowing each
segment to focus on its core competencies. The Trading and Distribution segment markets
a comprehensive range of products, sourced from the Group's manufacturing segment as
well as other manufacturers both, locally and internationally. The Manufacturing segment
manufactures primarily for the Trading and Distribution segment.
Financial review
The Group experienced a challenging six months to 31 October 2018 and reported earnings
per share of 11,57 cents for the period under review (H1 F2018: earnings of 3,30 cents) and
headline earnings per share of 0,24 cents (H1 F2018: headline earnings of 3,05 cents).
Growth in the economy remained subdued in the reporting period against a back drop of a
difficult global economic environment.
Statement of comprehensive income
EBITDA of R17,1 million ( HI F2018: R45,2 million) was as a result of a 2,7% decrease in revenue
and a 9,8% increase in operating expenses. Gross margin was maintained at similar percentage
as in the comparable period.
The main drivers of operating expenses (employment costs, delivery expenses and store
occupancy costs) remained under pressure.
Operational difficulties at In-toto Solutions (Pty) Ltd, an associate, led to the impairment of the
R4,8 million loan to them.
As a result of lower average borrowings, net finance charges amounted to R6,5 million,
compared to R8,8 million in the H1 F2018.
A profit on the deconsolidation of Botijheng Water (Pty) Ltd of R75 million was realised on the
finalisation of the dispute with Cooperative Muratori Cementisi Ravenna ("CMC"). Legal fees and
other expenses were set off against this profit.
The statement of profit and loss and other comprehensive income and statement of cash flows
were restated in terms of IFRS 5 to account for the deconsolidation of African Solar Power
(Pty) Ltd.
Statement of financial position
The statement of financial position remained strong, ending the half year with capital and
reserves of R378,9 million compared to R289,4 million at 31 October 2017. The main contributor
to this increase was the profit on deconsolidation. Net asset value per share was 63,2 cents
(H1 F2018: 48,3 cents).
Inventory in monetary terms and days showed a significant increase compared to the year-end,
owing to the contraction in revenue and the delay in the roll-out of DTT. South African television
is currently broadcast in an analogue format, with the country in the process of switching over
to DTT. Accounts receivable days showed a pleasing improvement over that of the previous
year owing to much improved collections. Creditor funding decreased in monetary terms, also
reducing creditors' days, owing to creditors paid on time to take full advantage of settlement
discounts.
The guarantee issued to Standard Bank in respect of Megatron (Pty) Ltd , previously a subsidiary
of the Group, included in provisions in the comparative periods' reporting, was replaced with
an interest-bearing liability of R87,7 million at 31 October 2018. Refer to notes 20 and 39 in the
2018 Integrated Report.
Prospects
Ellies is in the process of adjusting to difficult trading conditions in a very competitive
environment and various key strategic initiatives have been implemented to ensure that the
Group is well positioned to capitalise on opportunities when growth returns to the market.
These initiatives include enablement of live streaming devices and associated technologies,
which will usher in new products and services as part of the Ellies offering. The Group will
continue to drive operational efficiencies within the existing business and adopt digitisation
of processes by leveraging technology. The overall focus remains on returning the Group to
sustainable profitability, but this is hampered by the deteriorating economy and the severely
affected consumer sector, which has a direct impact on the activities of the Group.
Changes to the Board of Directors of Ellies ("Board")
During the period under review, Shaun Prithivirajh was appointed as CEO on 1 August 2018,
Reshoketswe Veronica Ralebepa ("Shoki") was appointed as non-executive director on
1 September 2018 and Ian Russell was appointed as a non-executive director on 1 October
2018. Adrian Bock (CFO) resigned effective 28 September 2018, Stephen Goldberg (non-
executive director) resigned effective 13 August 2018 and Oliver Fortuin (non-executive
director) resigned effective 30 June 2018.
Changes to the board after the period under review
Elliot Salkow retired as executive chairman of the Board with effect from 15 November 2018
and remains as an executive director until 30 April 2019.
Fikile Mkhize was appointed as acting chairperson on 15 November 2018.
At the annual general meeting held on 7 December 2018, the shareholders voted against the
appointment of Shaun Prithivirajh as an executive director and CEO of the Company. Shaun
remains the CEO of the Company by virtue of his employment contract with the Company. The
Board and Shaun are currently in discussions pertaining to his continued employment as CEO.
On 14 January 2019, Shoki Ralebepa resigned as a director and on 18 January 2019 Ian Russell
and Fikile Mkhize resigned as directors.
On 11 December 2018, Andrew Hannington was appointed as an alternate director to Elliot
Salkow.
The Board extended the contract with the interim CFO, Chris Booyens, to 30 April 2019, while
the board finalises the appointment of an executive financial director.
Basis of preparation
The unaudited interim condensed consolidated financial statements for the first six months
ended 31 October 2018, included in this announcement, have been prepared in accordance
with the framework concepts, the measurement and recognition criteria of International
Financial Reporting Standards (IFRS) and its interpretations adopted by the International
Accounting Standards Board in issue and effective for the Group at 30 April 2018, SAICA
Financial Reporting Standards Council as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council.
The results are presented in terms of IAS 34, Interim Financial Reporting and comply with the
Listing Requirements of the JSE Limited and the Companies Act 2008. The Board of Directors
approved these unaudited condensed interim results on 31 January 2019.
The Group's unaudited consolidated financial results for the six months ended 31 October
2018 was prepared by Jayme Burgers CA (SA) under the supervision of Chris Booyens CA (SA),
interim CFO.
The directors take full responsibility for the preparation of the unaudited interim condensed
consolidated financial statements.
Accounting policies
The accounting policies adopted in the preparation of unaudited interim condensed consolidated
financial results for the six months ended 31 October 2018 are in terms of IFRS and are
consistent with those applied in the Group annual financial statements for the year ended
30 April 2018, except for the adoption of new or revised accounting standards and interpretations
that became applicable during the current period. None of these have had a significant impact
on the Group's accounting policies and methods of computation, nor have they resulted in a
restatement or presentation of the 30 April 2018 statement of financial position and related
notes.
Events after the reporting date
After the reporting date, CMC settled the balance of R16,7 million relating to the damages claim
instituted by Botjheng Water.
The Company Secretary, CIS Company Secretaries Proprietary Limited ("CIS"), resigned
effective from 1 December 2018 and Lindie Lankalebalelo was appointed as the Company
Secretary of Ellies, effective 1 December 2018.
Contingent liability
Contingent liabilities remain as per note 38 in the 2018 Integrated Report, with the exception of
the finalisation of the Botjheng/CMC matter.
Audit opinion
The Group's external auditors, BDO South Africa, have not reviewed the unaudited interim
results.
Any reference to future financial performance included in this announcement, has neither been
reviewed nor is it reported on by the Group's external auditors.
Dividend
No dividend has been proposed or declared for the period under review.
For and on behalf of the Board of Directors
Martin Kuscus Andrew Hannington
Non-executive director Alternate director
31 January 2019
Corporate information
Ellies Holdings Limited
(Registration number 2007/007084/06)
JSE share code: ELI
ISIN: ZAE000103081
("Ellies" or "the Company" or "the Group")
Executive director
EL Salkow
A Hannington (EL Salkow's Alternate)
Non-executive director
MJ Kuscus
Registered office
94 Eloff Street Ext, Village Deep, Johannesburg, 2001
(PO Box 57076, Springfield, 2137)
Sponsor
Java Capital (Pty) Ltd
Auditors
BDO South Africa Inc.
Company Secretary
Lindie Lankalebalelo
(Appointed 1 December 2018)
Transfer secretaries
Computershare Investor Services
Proprietary Limited
www.elliesholdings.com
Date: 31/01/2019 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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