ELLIES : Unaudited interim results for the six months ended 31 October 2015 (ELI)

ELI: ELLIES HOLDINGS LIMITED - Unaudited interim results for the six months ended 31 October 2015

ELI: ELLIES HOLDINGS LIMITED - Unaudited interim results for the six months ended 31 October 2015 Unaudited interim results for the six months ended 31 October 2015 Ellies Holdings Limited Registration number: 2007/007084/06 JSE share code: ELI ISIN: ZAE000103081 UNAUDITED INTERIM RESULTS for the six months ended 31 October 2015 Revenue (Continuing operations) Up 27.5% Revenue (Discontinued consumer operations) Up 3.3% PAT (Continuing operations) Up 104.3% PAT (Discontinued consumer operations) Up 193.1% LPS of (1.56 cents) Improved by 88.1% HLPS of (1.02 cents) Improved by 92.2% NAV per share 166.75 cents Down(49.1%) NTAV per share 130.03 cents Up (49.8%) Interim consolidated statement of financial position Unaudited Unaudited Audited as at 31 October as at 31 October as at 30 April 2015 2014 2015 R´000 R´000 R´000 ASSETS Non-current assets 319 847 250 274 248 631 Property, plant and equipment 22 625 28 801 23 254 Goodwill and other intangible assets 173 041 207 859 173 407 Other financial assets 1 199 694 1 144 Trade and other receivables 35 196 - - Amounts due from contract customers 36 350 - - Deferred taxation 51 436 12 920 50 826 Current assets 473 293 727 629 536 100 Inventories 5 510 100 950 15 824 Trade and other receivables 181 532 156 450 132 584 Amounts due from contract customers 264 925 435 172 348 615 Taxation receivable 162 29 266 29 267 Bank and cash balances 21 164 5 791 9 810 Group disposals held for sale/distribution 964 530 1 041 832 948 784 Infrastructure segment 53 273 - 49 517 Consumer and property segment (Note 1) 911 257 1 041 832 899 267 Total assets 1 757 670 2 019 735 1 733 515 EQUITY AND LIABILITIES Capital and reserves 1 025 103 988 750 855 047 Stated capital 837 213 501 494 658 334 Non-distributable reserves (177 664) (177 448) (177 763) Accumulated profits 374 586 670 872 383 667 Equity attributable to equity holders of the parent 1 034 135 994 918 864 238 Non-controlling interests (9 032) (6 168) (9 191) Non-current liabilities 100 771 19 035 96 210 Interest-bearing liabilities 99 877 1 001 95 260 Shareholder loans payable - 536 - Deferred taxation 894 17 498 950 Current liabilities 204 406 519 019 211 294 Interest-bearing liabilities 164 240 711 210 - payable after 12 months - 150 547 - - payable within 12 months 164 90 164 210 Vendor loans payable 3 000 3 000 3 000 Shareholder loans payable 342 311 Trade and other payables 190 829 167 656 186 915 Amounts due to contract customers 8 171 18 511 13 662 Provisions 1 314 1 414 7 116 Taxation payable 551 26 45 Shareholders for dividends 35 35 35 Bank overdraft - 87 666 - Group disposals held for sale/distribution 427 390 492 931 570 964 Infrastructure segment 13 029 - 4 444 Consumer and property segment (Note 2) 414 361 492 931 566 520 Total equity and liabilities 1 757 670 2 019 735 1 733 515 Supplementary information: Net asset value per share (cents) 166,75 327,81 190,76 Net tangible asset value per share (cents) 130,03 258,90 140,70 Number of shares in issue at the end of period 620 158 235 303 505 691 453 057 398 Note 1 - Assets: Consumer goods and property segment held for sale/distribution Non-current assets 204 262 224 219 207 094 Property, plant and equipment 137 519 150 604 142 061 - Land and buildings 88 763 97 887 89 201 - Other 48 756 52 717 52 860 Goodwill and other intangible assets 53 672 55 663 53 672 Investment in associate 10 712 11 271 10 011 Deferred taxation 2 359 6 681 1 350 Current assets 706 995 817 613 692 173 Inventories 493 062 584 457 467 080 Trade and other receivables 202 334 208 588 211 210 Taxation receivable 456 975 1 283 Bank and cash balances 11 143 23 593 12 600 911 257 1 041 832 899 267 Note 2 - Liabilities: Consumer goods and property segment held for sale/distribution Non-current liabilities 50 441 3 952 48 946 Interest-bearing liabilities 47 350 1 020 46 271 Vendor loans payable - 896 - Shareholder loans payable 1 917 2 036 1 917 Deferred taxation 1 174 - 758 Current liabilities 363 920 488 979 517 574 Interest-bearing liabilities 6 419 140 184 154 796 - payable after 12 months - 87 121 - - payable within 12 months 6 419 53 063 154 796 Vendor loans payable 980 - 938 Trade and other payables 185 835 295 577 230 673 Provisions 2 430 2 129 2 302 Taxation payable 5 404 357 47 Bank overdraft 162 852 50 732 128 818 414 361 492 931 566 520 Interim consolidated statement of comprehensive income Unaudited Restated six months six months Restated ended ended* year ended* 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Revenue 205 112 160 910 201 315 Profit/(loss) before interest, taxation, depreciation and amortisation ('EBITDA') 2 682 (14 241) (221 769) Depreciation (1 360) (1 284) (2 731) Amortisation of intangibles (365) (365) (732) Impairment of goodwill and other intangibles - - (34 428) Profit/(loss) before interest and taxation 957 (15 890) (259 660) Interest received 5 681 3 465 10 198 Interest paid (5 990) (17 014) (36 815) Net profit/(loss) before taxation 648 (29 439) (286 277) Taxation 259 8 219 35 067 Profit/(loss) for the period from continued operations 907 (21 220) (251 210) Discontinued operations - Infrastructure segment (23 054) (7 453) (24 769) Discontinued operations - Consumer and property segment (Note 3) 13 225 (14 205) (57 127) Loss for the period (8 922) (42 878) (333 106) Other comprehensive income: Items that may be reclassified subsequently to profit or loss - Foreign currency translation reserve - discontinued operations 99 (104) (419) Total comprehensive loss for the period (8 823) (42 982) (333 525) Attributable to: Equity holders of the parent (9 081) (39 767) (326 972) Non-controlling interests 159 (3 111) (6 134) - Continued operations (Infrastructure segment) 861 (2 103) (4 101) - Discontinued operations (Consumer and property segment) (702) (1 008) (2 033) Net loss after taxation (8 922) (42 878) (333 106) Attributable to: Equity holders of the parent (8 982) (39 871) (327 391) Non-controlling interests 159 (3 111) (6 134) - Continued operations (Infrastructure segment) 861 (2 103) (4 101) - Discontinued operations (Consumer and property segment) (702) (1 008) (2 033) Total comprehensive loss for the period (8 823) (42 982) (333 525) * Restated - Refer to discontinued operations note. Unaudited Restated six months six months Restated ended ended* year ended* 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Supplementary information: Basic loss per share (cents) (1,56) (13,10) (92,33) - Infrastructure continued operations 0,01 (5,97) (69,76) - Infrastructure discontinued operations (3,95) (2,46) (6,99) - Consumer and property discontinued operations 2,39 (4,68) (15,58) Headline loss per share (cents) (1,02) (13,17) (81,34) - Infrastructure continued operations 0,03 (6,22) (60,22) - Infrastructure discontinued operations (3,42) (2,46) (6,24) - Consumer and property discontinued operations 2,36 (4,50) (14,92) Weighted average number of shares in issue 583 633 462 303 505 691 354 135 067 Ellies has no dilutionary instruments in issue Note 3 - Consumer goods and property segment held for sale/distribution Revenue 737 102 713 284 1 388 932 Profit/(loss) before interest, taxation, depreciation and amortisation ('EBITDA') 39 618 2 085 (33 960) Depreciation (6 811) (6 245) (13 648) Amortisation of intangibles - (67) (134) Impairment of intangibles - - (2 551) Profit/(loss) before interest and taxation ('PBIT') 32 807 (4 227) (50 293) Interest received 1 287 1 079 1 376 Interest paid (15 180) (15 108) (24 306) Share of losses from associate (327) (591) (2 729) Net profit/(loss) before taxation ('PBT') 18 587 (18 847) (75 952) Taxation (5 362) 4 642 18 825 Net profit/(loss) after taxation ('PAT') 13 225 (14 205) (57 127) * Restated - Refer to discontinued operations note. Reconciliation of basic earnings and headline earnings Unaudited Restated six months six months Restated ended ended* year ended* 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Net loss for the period attributable to equity holders of the parent (9 081) (39 767) (326 972) Adjusted for: Loss/(profit) on sale of property, plant and equipment 14 (287) 2 682 - Infrastructure continued operations 219 (75) (703) - Infrastructure discontinued operations - - 3 719 - Consumer and property discontinued operations (205) (212) (334) Impairment of goodwill and other intangibles 3 111 - 36 979 - Infrastructure continued operations - - 34 428 - Infrastructure discontinued operations 3 111 - - - Consumer and property discontinued operations - - 2 551 Tax effect on adjustments (4) 80 (751) Headline loss attributable to ordinary shareholders (5 960) (39 974) (288 062) * Restated - Refer to discontinued operations note. Interim consolidated statement of changes in equity Unaudited Unaudited six months six months Audited ended ended year ended 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Balances at beginning of the period 855 047 1 031 732 1 031 732 Increase in stated capital through the issue of shares 178 879 - 156 840 Total comprehensive loss for the period (8 823) (42 982) (333 525) Balances at end of the period 1 025 103 988 750 855 047 Interim consolidated statement of cash flows Unaudited Restated six months six months Restated ended ended* year ended* 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Cash flows from operating activities (59 498) 12 166 (52 067) Cash (utilised by)/generated from operations (15 243) 43 451 (56 054) Interest received 1 843 1 137 1 995 Interest paid (5 949) (32 081) (36 815) Taxation received/(paid) 29 411 (341) (944) Cash flows - continuing operations 10 062 ** (91 818) Cash flows - discontinued operations (69 560) ** 39 751 Cash flows from investing activities (822) 946 (2 333) Cash flows - continuing operations 206 ** 15 085 Cash flows - discontinued operations (1 028) ** (17 418) Cash flows from financing activities 36 183 (14 656) 55 462 Cash flows - continuing operations 183 481 *** *** Cash flows - discontinued operations (147 298) *** *** Net (decrease)/increase in cash and cash equivalents (24 137) (1 544) 1 062 Cash and cash equivalents at the beginning of the period (106 408) (107 470) (107 470) Cash and cash equivalents at the end of the period (130 545) (109 014) (106 408) * Restated - Refer to discontinued operations note. ** The nature of the group structure between continued and discontinued operations as at 31 October 2014, makes it impracticable to calculate the split between the continued and discontinued operations at this date. *** Due to the central treasury function within the group, it is considered impracticable to calculate the cash and cash equivalents attribution to continued and discontinued operations for the 2015 interim and year-end financial periods relating to financing activities, as no separation basis existed in the prior periods. Segmental analysis Unaudited Restated six months six months Restated ended ended* year ended* 31 October 2015 31 October 2014 30 April 2015 R´000 R´000 R´000 Revenue 989 089 1 012 364 1 803 150 Infrastructure 251 987 299 080 414 218 - Total - continued operations 205 112 162 290 201 357 - Total - discontinued operations 46 875 138 170 212 903 - Inter-segment - (1 380) (42) Consumer goods - discontinued operation 737 102 713 284 1 388 932 - Total 737 102 713 408 1 388 932 - Inter-segment - (124) - Property division - discontinued operation - - - - Total 5 945 5 831 12 805 - Inter-segment (5 945) (5 831) (12 805) Segmental profits/(losses) from operations Net profit/(loss) before interest and taxation 10 383 (31 059) (347 083) Infrastructure - continued operation 630 (15 553) (259 128) Infrastructure - discontinued operation (23 054) (10 351) (34 401) Consumer goods - discontinued operation 28 692 (8 663) (60 225) Property division - discontinued operation 4 115 4 436 9 932 Other - discontinued operation (327) (591) (2 729) Holding company/consolidation 327 (337) (532) Interest received 6 968 4 544 11 574 Infrastructure - continued operation 5 681 3 465 10 198 Consumer goods - discontinued operation 1 287 1 079 1 376 Interest paid (21 170) (32 122) (61 121) Infrastructure - continued operation (5 990) (17 014) (36 815) Consumer goods - discontinued operation (11 045) (10 827) (15 601) Property division - discontinued operations (4 093) (4 239) (8 622) Deemed vendor interest - discontinued operations (42) (42) (83) Net loss before taxation (3 819) (58 637) (396 630) * Restated - Refer to discontinued operations note. Notes to the unaudited interim results Basis of preparation and accounting policies The unaudited interim results for the six months ended 31 October 2015 have been prepared in accordance with International Financial Reporting Standards ('IFRS'), and comply with IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Board or its successor, the requirements of the Companies Act, No. 71 of 2008 of South Africa and the Listings Requirements of the JSE Limited. The accounting policies used in the preparation of the unaudited interim results for the six months ended 31 October 2015, are consistent with those applied in the audited financial statements for the year ended 30 April 2015. During the current interim period the Group adopted those standards and interpretations in issue and effective for the interim period. The adopting of these new and amended standards and interpretations has not had a significant impact on the Group´s adopted accounting policies. These results have been compiled under the supervision of the Chief Financial Officer, IM Lipworth CA(SA). The interim results have not been reviewed or reported on by the group auditors, Grant Thornton Johannesburg Partnership. Discontinued operations and disposal groups held for sale/distribution The company has applied IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations, in the preparation of these results due to the following: 1. The Group announced last year that it intends to unbundle and list its Consumer goods business and property division separately and thus began disclosing this segment as a discontinued operation. Due to regulatory issues as a result of the April 2015 poor trading performance, the Group has had to delay this action. The board of directors ('the board') will continue to pursue the unbundling as soon as it is possible to do so. The board believes that treating the Consumer goods business and property division as discontinued is still valid and has continued with the IFRS 5 treatment. 2. Within the Infrastructure division, as disclosed in the April 2015 annual financial results, Megatron has scaled down and shut most of its South African operations. In addition to this the Infrastructure division has entered into an agreement for the sale of its Telecoms business. This sale has taken place subsequent to the reporting period and has thus not been disclosed in these results. These two Infrastructure operations have accordingly been reclassified to discontinued operations. Based on the above, the results of the Consumer goods business and property division and the Infrastructure division and Telecoms businesses have been reclassified to discontinued operations in the condensed consolidated statement of profit and loss and other comprehensive income and its assets and liabilities reclassified to disposal groups held for sale/distribution in the statement of financial position. In addition, the prior year interim results for the six months ended 31 October 2014 and the results for the 12 months ended 30 April 2015, numbers have been restated, where applicable, to show the Continuing and Discontinued operations consistent with the abovementioned. Subsequent events Other than the sale of the Infrastructure Telecoms business disclosed above, no other matters have occurred between the reporting date and the date of approval of the Interim Financial Statements which would have a material effect on these financial statements. Commentary Introduction Ellies is a leading South African manufacturer, wholesaler, importer and distributor in diversified sectors servicing the local and African markets. The Group comprises two main segments, namely Infrastructure and Consumer goods. Overview During the six months under review the Company successfully completed its capital raises, debt restructure with the Company´s primary lender, The Standard Bank of South Africa Limited ('Standard Bank´) and its corporate restructure. In terms of the Rights Offer which was completed in July 2015, the Company issued a further 167 100 837 shares at a price of R1.10 per share, taking the total issued share capital of the company to 620 158 235 ordinary shares. An amount of R150 million from this capital raise was used to further reduce the company´s debt, with the balance of the money used to fund working capital. With the successful launch of the Rights Offer, the Company was able to complete its corporate and debt restructure as announced on SENS on 4 May 2015, with retrospective effect from 1 May 2015. In the prior period, all interest-bearing liabilities were classified as current liabilities as a result of IFRS requirements, where if an entity breaches a provision of a long-term loan arrangement on or before the end of the reporting period, that liability then becomes payable on demand. At the time, the lender had agreed not to demand immediate payment and the payment terms have since reverted to beyond 12 months at the date of authorisation of those financial statements. The priority within the Group still remains the improvement of its cash position. Within the Infrastructure segment we continue to cut down on overheads and are placing emphasis on completing existing projects where historically significant cash was spent, and collecting on the debtors. Included in the trade debtors are amounts of R35.2 million under non-current assets and R25.5 million under current assets, for a project that was completed in October 2015 with monthly payments due over a three-year period. We are in the process of finalising a discounting arrangement to have these amounts settled early. As these debtors are denominated in foreign currency and with the decline in the rand since the jobs were completed, we do not expect to make any losses from this discounting arrangement. Certain historical projects have been put on hold and have been moved to non-current assets. Management believes that these projects can be completed in the future and thus no impairments were required. In addition to this the Group was able to work closely with the relevant authorities to ensure that the R29 million tax refund was received. Within the Consumer and property segment, the Group continues to push the sale of its overstocked items at lower margins. The segment continues to explore options to unlock further cash through the sale of its property portfolio. To date we have had limited success but continue to pursue this. The Company´s Separation Committee will continue to explore all the options available in order to ensure that the unbundling of the Ellies consumer business and the Megatron Infrastructure business is progressed timeously. The board still believes that the unbundling and simultaneous separate listing of the Ellies consumer business will provide greater investor flexibility, increased focus by the separate businesses and the ability of the businesses to access different sources of funding better suited to their needs and cash flow profiles. The Infrastructure division The continuing operations of the infrastructure division returned a profit of R0.9 million (R21.2 million loss: 31 October 2014) on revenue of R205 million (R160.9 million: 31 October 2014). Improved liquidity as a result of the successful capital raising, was only felt in the second half of the reporting period. Reductions in overhead were also phased in over the period and the full impact will be felt in the second half. The entire fixed cost structure of the Company was reviewed with cost reductions across the board being implemented to reflect the ongoing strategy of matching variable costs to each project. With the closure of the manufacturing business and completion of our South African contracts behind us, the division is now a 100% export focused entity, with all future revenues denominated in foreign currency. The sharp decline in the USD/ZAR exchange rate subsequent to the reporting period is expected to have a positive affect for the division in the following period. The current order book is split across both public and private sector projects in Africa. The collapse in commodity prices has not had an impact on the current order book, but this poses a threat in the future, as most African countries rely heavily on extractive industries to support their economic growth. The variable cost model with reduced fixed costs has been implemented to mitigate these risks in future. The Consumer goods division While trading conditions remain strained with the consumer under pressure, Ellies Electronics has been trading positively in the six months ended to 30 October 2015. The main factors that have contributed towards this positive trading are the reduced costs in overhead with a lower staff count together with increased efficiencies implemented. The segment has had a hard look at reducing handling costs and making products more competitive, without compromising on the quality of our products, in an environment where the consumer is more price conscious. We remain focused on maximising gain with our distribution network and wide base of customers. We have reduced our inventory levels significantly although this may not be apparent in monetary terms as it is disguised by the major change in exchange rate where the same quantum of goods is on average 20% higher in cost relative to the same period in the last financial year. We have cleared all OpenView HD ('OVHD') inventory and have significantly reduced our corporate lighting inventory. Load-shedding had a positive impact on the business during the period, with our locally produced inverter trolleys in great demand. Inverter and battery kits are married in a convenient DIY unit that is locally manufactured and assembled in our engineering department. With the lack of load-shedding in South Africa since September 2015, we have seen the demand taper off, but continue to sell these items, albeit at a slower rate, within other African countries who continue to experience load-shedding. The sale of MultiChoice and related products has been slower in the first half compared to previous years. This is due to numerous factors; some being the general slowdown in consumer spend and increased competition from the likes of OVHD. MultiChoice remains an important partner to Ellies and we believe that with their promotions and technology advances made in new products, we will see growth in the future. We have seen a positive movement in the drive to digital migration. Ellies has been approved for the manufacture and supply of satellite dishes and terrestrial antennas as well as the installations of these items. During the period, we received an order for in excess of 400 000 satellite dish kits and had started to manufacture these at 31 October 2015. Included in the consumer segment´s inventory number is an amount of R18 million of raw materials and work in progress for this project. The delivery of completed kits only began post October and any income from these sales is not reflected in these figures. Ellies has also had antennas approved for MultiChoice´s Digital Terrestrial Television programme for South Africa and Africa. We are now becoming more vigilant in promoting the product and have manufactured and delivered product that will only reflect in the next financial period. The lighting division continues to find momentum albeit at a slower pace than first envisaged. We have partnered with new technology partners and have launched a new range of domestic lighting called 'Lamp for Life´ that is both technologically advanced and price competitive. The products have so far been well received. Ellies remains dedicated to the training and upskilling of our independent customer base with training in various disciplines happening weekly. We hope to arm SMME´s in skills that will help them grow their businesses and ready them for the digital migration and convergence. The Company will continue to reshape itself in line with market demands and trends, and continues to remain relevant and ahead of the technology curve. We pride ourselves on our product, service and brand. With our increased efficiencies, lower cost and motivated staff we will continue to be a significant brand and company in South Africa. Dividend policy The dividend policy will be reviewed periodically taking into account prevailing circumstances and future cash requirements. In view of the Company´s financial position, no dividend is proposed at this stage. Appreciation The directors and management would like to thank our dedicated staff for their hard work during these challenging times and recognise and appreciate their efforts. We continue to appreciate our customers, business partners, advisors, suppliers and most importantly shareholders. By order of the board: ER Salkow WMG Samson Chairman CEO 25 January 2016 Directors Executive Directors Lead independent non-executive Director ER Salkow (Chairman) OD Fortuin WMG Samson (Chief executive officer) IM Lipworth (Chief financial officer) Independent non-executive Directors RH Berkman FS Mkhize RE Otto (will resign on 15 February 2016) S Goldberg RAM Broadhead (appointment effective on 15 February 2016) Non-executive Directors MR Goodford MJ Kuscus (appointed 1 June 2015) Registered office 94 Eloff Street Ext, Village Deep, Johannesburg, 2001 (PO Box 57076, Springfield, 2137) Sponsor: Java Capital Auditors: Grant Thornton Johannesburg Partnership Company secretary: CIS Company Secretaries (Pty) Ltd Transfer secretaries: Link Market Services South Africa (Pty) Ltd Date: 25/01/2016 10:30:00 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.

2016-01-25 10:30:00 Source: JSE News Service (SENS)