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Results for the six months ended 31 December 2002

6 March 2003

Financial overview

Excellerate has delivered good results with turnover increasing by 58% to R191 million (2001: R121 million) and operating profit by 47% to R11,9 million (2001: R8,1 million).

Headline earnings per share increased by 9,4% to 3,5 cents (2001:3,2 cents). Headline earnings per share has been impacted by:

• Unrealised foreign exchange differences resulting from changes in the Rand exchange rate. Excluding the effects of these unrealised differences, headline earnings per share would have increased by 54%.
• A significantly higher interest charge due to the funding of acquisitions by way of a short–term loan from the Rooibos Trust prior to the advent of an institutional investor (BoE) and the issue of Compulsorily Convertible Debentures (CCD) to raise capital of R26 million and the increased working capital requirements of the group.

Cash generated from trading operations is higher than that of prior periods. However, cash flow was affected by:

• A substantial export order for which payment was received shortly after the half year ended 31 December, 2002.
• The strong growth and working capital requirements of the ExcellTrade Division due mainly to an excellent Christmas trading season and substantial export orders.

Operational review

Excellerate invests in businesses that focus on services, trading and distribution, with the emphasis on customer–centricity and specialised markets. We are focused into two groupings, Services and Trading–Distribution. Our unique business recipe focuses on operational excellence and the extraction of maximum value from our business operations. This is amply demonstrated by the impressive growth in the operating profit of the group.

The ExcellTrade Division, which houses the Trading–Distribution grouping, performed well. Growth was mainly organic with turnover growing by 67% to R134 million (2001: R80 million) and operating profit in this division 78% to R7,7 million (2001: R4,3 million).The merged business of Hypertrade–Louis Smiedt contributed positively to the earnings of this division, whilst Goldenmarc performed well above expectation. Ferrengi Household Products (“Ferrengi”) was acquired during the period under review. Ferrengi is a manufacturer and distributor of kitchen sponges, textiles and brass and steel scourers and wools to mass merchant retailers and independents. The Ferrengi business is synergistic with and complimentary to Goldenmarc. The bedding down process has been completed and it is expected that the manufacturing capability of Ferrengi will add another dimension to Goldenmarc’s trading capabilities.

The ExcellServ Division continued to perform well with turnover growing by 40% to R57,2 million (2001: R40,9 million) and operating profit by 12% to R4,2 million (2001: R3,7 million). The PEM (Parking Environment Management) Division which houses the various businesses providing outsourced services within the car park environment, continued to improve on the mangement of parking facilities in South Africa through its new innovative service offerings. The businesses driving these new developments constituted start–up operations which have affected the operating profit of the division in the short term but are expected to contribute positively in the future.

The cleaning, hygiene and pest divisions housed within the Sterikleen business continued to grow steadily by concentrating on gaining market share and on improving efficiencies within the business, improving management skills and adhering to strict financial disciplines. The acquisition of the Levingers dry clean shoe repair and tailoring business has been bedded down. New branches have been opened at Eastgate and Dainfern shopping centres with further expansion on a national level planned for the future.

Prospects

The effect and contribution of new acquisitions have to some extent been felt in the period under review and their contribution to the group at year end is expected to be significant.These results have been achieved against a backdrop of difficult market conditions and changing environments within both the ExcellTrade and ExcellServ divisions.

The group will continue to rely on strong organic growth, small niche acquisitions and sound business practices which employ methods that motivate, empower and encourage our management teams to express dynamic entrepreneurial skills in a decentralised environment. The group remains optimistic about its prospects.

Accounting policies

The financial information contained in this announcement has been prepared in accordance with policies, which are consistent with Statements of South African Generally Accepted Accounting Practice and those of the previous year. The group’s auditors KPMG Inc have reviewed the financial information for the period ended 31 December 2002. Their report is available for inspection at the registered office of the company.

Dividend

Consistent with the group’s current policy, no dividend has been declared in light of the group’s desire to grow existing businesses organically and to finance selective acquisitions.

For and on behalf of the Board
L Rottanburg, Executive Chairman
B Bernstein, Financial Director
Sandton,
5 March 2003

For more information, please see Results for the six months ended 31 December 2002 (PDF – 78KB)