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Reviewed consolidated results for the year ended 30 June 2009

29 September 2009

Full SENS announcement (PDF – 28KB)

HIGHLIGHTS

• Revenue growth of 15.4% over prior year
• Operating cash flow up 12.1% to R44.0 million
• Earnings per share stable for the year
• Major acquisitions implemented, with positive contribution to the Group

REVIEW OF THE YEAR

In the context of a difficult prevailing economic environment, the Excellerate Board is pleased to report a sound performance by the Group, with stable profitability supported by a strong operating cash flow performance.

The 2009 financial year has been both challenging and rewarding for the Group. Whilst the current economic environment has had an impact on the Group's operations, management has focused on the integration of recent acquisitions into the Group and on the streamlining and rationalisation of existing operations. As in the past, the Group has continued to aggressively drive working capital management and target healthy operating cash flow generation.

In this environment, we have adopted an appropriately prudent approach to business valuations, and, consequently, acquisition activity has been limited.

Maintaining profit margins within our trading division has been a significant challenge due to its heavy reliance on the retail environment. This has been

most evident for Goldenmarc which primarily trades in the general merchandise category within the retail division which has experienced significant volume decreases within the year. The situation has however afforded opportunity for our trading businesses to critically analyse their operations, rationalise fixed costs, and improve procurement and sales processes. In this regard, significant progress has been made in ensuring that these business units are adequately equipped to deal with either a protracted slow down or rapid market rebound.

In terms of size, the most material acquisition that has been implemented during the year has been that of an interest in Vital Distribution Solutions and related businesses consisting of Vital Fleet and Staffing Logistics. These businesses have been consolidated into the Group results with effect from 1 October 2008. The integration process has gone well, and the underlying financial performance of these businesses has made a significant positive impact for the Group.

The Group remains both operationally and financially sound and is well placed to improve performance in the year ahead.

FINANCIAL OVERVIEW

Results for the year ended 30 June 2009 are stable, but have been significantly affected by the prevailing market conditions which have had particular impact on the trading division within the Group. However, notwithstanding pressure on operating margins and net profits, the Group achieved exceptional cash generation from operations.

Group revenue for the year increased by 15.4% to R678 million (2008: R587 million), despite the impact of lower volumes experienced within the trading division. Gross and operating profit margins have come under pressure, a consequence of the more challenging trading environment, resulting in a nominal increase in profit before interest and taxation of 2.6% to R45.2 million (2008: R44.0 million).

Net finance costs increased by R3.4 million to R5.0 million as a result of higher average interest rates, finance costs within businesses acquired and non-cash interest on acquisitions and working capital, calculated in accordance with IFRS. Net cash finance costs increased by only R1.5 million, this increase being primarily related to asset-based finance. Profit before taxation declined by 5.2% to R40.2 million (2008: R42.4 million).

Profit after taxation for the year showed a decline of R0.6 million to R28.8 million (2008: R29.4 million), a decrease of 1.9% over the comparative period.

Earnings per share and diluted earnings per share remained practically unchanged at 13.0 cents (2008: 13.2 cents), and 12.8 cents (2008: 12.9 cents), respectively.

Once again, cash generation has been a highlight of the Group's results, with cash generated by operations increasing by 16.2% to R65.3 million (2008: R56.2 million).

Cash flows from operating activities after net finance costs and taxation paid but before dividend paid rose by 27.5% to R50.8 million (2008: R39.8 million), representing 176.2% of profit after taxation.

After paying dividends of R6.7 million, cash flows from investing activities of R66.9 million, and financing activities of R5.3 million, the Group still retained cash and cash equivalents at the end of the year amounting to R21.8 million (2008: R50.0 million).

Excellerate's balance sheet remains strong, with limited gearing. Total assets have increased by 14.7% to R467.8 million (2008: R407.7 million), whilst interest bearing debt rose by R7.2 million to R32.1 million (2008: R24.9 million).

Consequently the Group is well-placed to access any funding required to fulfil further growth ambitions.

REVIEW OF OPERATIONS

Trading division, including Goldenmarc, Foodserv, Ferrengi, Nu-Africa Comm Trading and Sunkist

Divisional revenue for the period declined by R42.9 million to R356.7 million for the year.

Particularly hard hit was Goldenmarc, a significant contributor to this division, whose revenues reduced by R14.4 million to R153.4 million for the year, whilst Foodserv and Ferrengi remained relatively flat on the prior year. Operations and product lines at Sunkist were further rationalised with a view to a disposal or part disposal in the new financial year. Revenue at Sunkist consequently declined by R21.1 million to R23.6 million.

In addition to the reduction in revenues, the trading division also experienced margin pressures, primarily at Goldenmarc, which negatively affected operating profits for the year. Net profit before taxation for the division reduced from R24.7 million to R12.4 million, a disappointing drop of 50%.

Goldenmarc suffered a reduction in profitability for the period amounting to R11.4 million in comparison to 2008.

The management of Goldenmarc have been extremely pro-active in addressing the current challenges. A number of significant cost saving measures have been undertaken, including outsourcing of the primary distribution and merchandising functions, as well as rationalisation of stock levels and staffing overheads. This, in conjunction with emphasis on increasing volumes and an improving retail environment, should result in an improved performance in 2010. It is also pleasing to note that management's aggressive attention to working capital levels has resulted in the company generating positive cash flows during this period.

Foodserv and Ferrengi have maintained profitability levels despite a difficult trading environment, and with the anticipated improvement in performance at Goldenmarc, results should be restored in the coming year.

Cash generated from operating activities within the trading division amounted to R16.0 million (2008: R22.9 million), a pleasing result in light of the reduced profitability.

Nu-Africa Comm Trading is a new joint venture initiative established with a view to taking advantage of trading with neighbouring countries. This JV was only established shortly before year end, and consequently the results thereof whilst profitable, are not material to the current year's results.

Services division, including Interpark, Sterikleen, Levingers, Chattels, Vital Distribution, Vital Fleet, Staffing Logistics and Delawood

The divisional revenue for the year increased by 77.0% to R348.7 million (2008: R196.7 million). Although the increase was largely as a result of the new acquisitions, the existing companies all performed positively.

Profit before taxation for the division increased by 42% to R40.6 million (2008: R28.6 million). New acquisitions contributed R14.5 million.

Interpark and Sterikleen once again turned in robust performances, growing in revenue and in so demonstrating their ability to withstand varied market conditions. Notwithstanding this performance, both companies continue to explore ways to expand into new markets, to improve operating efficiencies and to be acquisitive.

Levingers experienced a difficult year as volumes and operating profits came under considerable pressure in the current price sensitive dry-cleaning market. Management are however focused on closing non-performing stores and rationalising factory and head office costs, which should restore results in the coming year.

Looking ahead, the division will benefit from the inclusion of the full year results for the acquisitions, and Chattels, an event infrastructure management company, is expected to benefit from the 2010 FIFA World Cup.

Cash generated from operating activities within the services division amounted to R42.1 million, an increase of 64.9% (2008: R25.5 million).

PROSPECTS

While it is anticipated that the prevailing economic environment will continue to have an impact on the Group's trading division, rationalisation measures implemented during the year under review are expected to have a positive effect in the year ahead, and consequently an improved performance is expected from this division. An improved economic environment would further enhance this effect.

The services division of the Group has proved to be more robust, and consequently the impact of the prevailing economic environment, while meaningful, is less dramatic when compared with the trading division. We expect continued growth in this division in the year ahead.

Of additional prospective interest is the potential trading opportunities that have opened up due to the dollarisation of the Zimbabwean economy.

Excellerate's newly formed joint venture, Nu-Africa Comm Trading, is well- positioned to explore these opportunities.

The Group will continue to drive a culture of cash generation from existing businesses, and will seek value enhancing opportunities to exploit synergies and growth. To this end, it is expected that business vendors having experienced the impact of the current environment will be more realistic with value expectations, and that consequently acquisition activity may be more likely going forward.

Excellerate is well placed to deliver value for shareholders in the year ahead in terms of earnings growth and cash generation.

DIVIDEND

The Board is pleased to declare a final dividend of 3 cents per share.
Last day for trading and to qualify for and participate in the final dividend (cum dividend)	Friday, 23 October 2009
Trading ex dividend commences	Monday, 26 October 2009
Record date	Friday, 30 October 2009
Dividend payment date	Monday, 2 November 2009

Share certificates may not be dematerialised or rematerialised between a Friday, 23 October 2009 and Friday, 30 October 2009, both days included.

BASIS OF PREPARATION OF RESULTS

The provisional condensed consolidated financial results for the year ended 30 June 2009 have been prepared in accordance with the recognition and measurement criteria of IFRS, its interpretations adopted by the International Accounting Standards Board (IASB), the presentation as well as the disclosure requirements of IAS 34 - Interim Financial Reporting, the Listings Requirements of the JSE Limited and in the manner required by the South African Companies Act.

The accounting policies applied in the presentation of the provisionl condensed consolidated financial results are consistent with those applied for the year ended 30 June 2008.

RELATED PARTY TRANSACTIONS

The Group, in the ordinary course of business and similar to last year, entered into various sale and purchase transactions on an arms length basis at market rates with related parties.

INDEPENDENT REVIEW

The provisional condensed consolidated balance sheet at 30 June 2009 and the related provisional condensed consolidated income statement, statement of changes in equity and cash flow statement for the year then ended have been reviewed by our auditors, KPMG Inc. Their unmodified review report is available for inspection at the registered office of Excellerate.

On behalf of the Board

Gordon Hulley (CEO)

Sandton
29 September 2009

Administration

Registered office

1st Floor Atholl Square
Corner Katherine Street and Wierda Road East
Sandown, 2196

PO Box 785448, Sandton, 2146

Tel: (+27 11) 523 2980, Fax: (+27 11) 523 2990
E-mail: info@excellerate.co.za

Share transfer secretary

Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg, 2001

PO Box 61051, Marshalltown, 2107

Tel: (+27 11) 370 5000
Fax: (+27 11) 688 7721

Company secretary

ER Goodman Secretarial Services CC (represented by E Goodman)
2nd Floor, Palm Grove, Grove City
196 Louis Botha Avenue
Houghton, 2198

Tel: (+27 11) 728 0742, Fax: (+27 11) 728 4226
e-mail: ergoodmn@netactive.co.za

Directors

Gordon Hulley (Chief executive officer), Harold Bloch (Executive director), Peter Kramer (Executive director), Alan Lipchin (Executive director), Athol Stewart (Executive director), James Wellsted (Executive director), Rudi Stumpf (Non-executive director), Graham Davel (Non-executive director), Clive Howell (Non-executive director) (alternate to Graham Davel), Michael Mohohlo (Non-executive director)