A N N U A L R E P O R T
2 0 0 8
EE LL BB GG RR OO UU PP
Page
Chairman's statement 2
Corporate governance 4
Board of directors 6
Eight year review 7
Financial highlights 8
Annual financial statements
Directors' responsibility statement 9
Certificate by the company secretary 9
Independent auditor’s report 10
Directors' report 11
Accounting policies 13
Income statements 18
Balance sheets 19
Statements of changes in equity 20
Cash flow statements 22
Notes to the annual financial statements 23
Subsidiaries and joint venture 64
Analysis of ordinary shareholders 65
Directors' interests in ordinary shares 65
Ordinary share statistics 66
Shareholders' diary 66
Administration 67
Notice of annual general meeting 68
Proxy form Insert
Notes to the proxy form Insert
Contents
1
ELB Group is a total solutions provider to the mining, minerals,
power, port, and construction and industrial sectors in the field of
materials handling and appropriate process plants. This is
achieved through ELB generated innovation and the supply, with
world class partners, of equipment and technology. The Group
operates at present in South Africa and Australia.
ELB is an investment holding company owning 85 per cent of
ELB Engineering Limited (ELB Engineering Group) with the
remaining 15 per cent owned by the ELB Educational Trust
established as the Group's BEE partner promoting the education
of historically disadvantaged South Africans specifically in the
areas of maths and science.
ELB ENGINEERING GROUP
ELB EQUIPMENT has a number of locally designed and
manufactured products and represents internationally renowned
manufacturers whose products are designed to meet industri-
alised first-world standards. Operating in three specialised
divisions, each with responsibility for specific products, it
provides a streamlined and professional service that can offer
the industry a wide selection of products.
Construction Equipment
• Ditch Witch Trenching & Directional Drilling Equipment
• MST Backhoe Loaders
• Mitsubishi Motor Graders
• Sakai Compaction Equipment **
• Mustang Skid Steer Loaders
Earthmoving Equipment
• Furukawa Wheel Loaders
• Kawasaki Wheel Loaders
• Sumitomo Tracked Excavators
Mining / Quarrying Equipment
• Allu-SM Screener-Crusher Buckets
• Furukawa Drill Rigs
• Furukawa Hydraulic Breakers
• Taurus Heavy Duty Rotary Barrel Screens **
• ELB Static & Mobile Conveyors **
• Pegson Mobile & Static Crushing Plants
• Oresizer Vertical Shaft Impact Crushers **
• Powerscreen Mobile & Static Screens
• Tecman Underground and Surface Boom Systems
** Designed and manufactured by ELB Equipment
In order to service its customer base effectively, ELB Equipmentbased in Boksburg has branches in Cape Town, Durban,Kimberley, Brits, George, Middleburg and Wolmaransstad aswell as a well-established dealer network throughout SouthAfrica and other Southern African states. In addition to offeringparts and field service round-the-clock, a large centralised andfully equipped refurbishing facility is available for rebuilding andrefurbishing of ELB Equipment products.
DITCH WITCH AUSTRALIA is an importer and distributor ofUnderground and Utility Construction Equipment.
Product Lines include
• Ditch Witch Trenching and Directional Drilling Equipment,Compact Utility Equipment Vacuums and Electronic Pipeand Cable Locators
• Stanley Hydraulic Power Packs and Tools• Trenchmaster Mini Trencher • Bedmaster Bed Defining Machines• McLaughlin Case Boring Equipment, Augers and Cutter
Heads• Belle Concrete and Mortar Mixers and Compaction
Equipment• Tesmec Rock Trenching Equipment and Bucket Wheel
Trenchers and Rock Milling Equipment
Markets served in Australia are gas, water, sewage, electricity,communications, the Defence Forces, Oil and Gas PipelineIndustry.
Ditch Witch Australia distributes direct through sales and serviceoffices in Sydney, Melbourne, Adelaide, Perth and Brisbane.
ELB ENGINEERING SERVICES has over the past year madesolid advances since its inception early in 2005. The businessfocuses on the supply of a total engineered solution to themining, minerals, industrial, port and power sectors based on itsown in house capability as well as technology agreements withworld class product and know how companies.
Bulk Materials Handling
Augmenting the in house expertise base, ELB EngineeringServices has an exclusive licence with FAM, Germany. Thecapability encompasses the supply of turnkey packages from runof mine tip to ship loading including all conveyor options,stockyard equipment, port equipment and simulation modelling.
KONECRANES, a world leader in the supply of port handlingequipment is serviced via a technology agreement with ELBEngineering Services for a large part of Africa.
KONECRANES not only provides the engineering of itsequipment to ELB Engineering Services but further providesan ongoing service and maintenance ability, with over 250 000cranes under its control globally.
Chairman’s statement
2
THOR mobile and telescopic stackers are provided as
complete units adapted to South African conditions from
Canada.
Pneumatic Conveying
ELB Engineering Services capability for the supply of most types
of pneumatic conveying is supported by the world class
technology from Claudius Peters. Claudius Peters provides the
vast majority of equipment required for the grinding, handling,
cooling, mixing, storing and out loading in the Cement, Lime, Ash
and Gypsum industry.
Coal Beneficiation
ELB Engineering Services provides the materials handling inputs
into the Sedgman coal beneficiation plants. Sedgman is a world
renowned provider of total solutions from project assessment to
operations in the field of coal handling and process plants.
DISCONTINUED OPERATIONS
ELB TIMBERS was, as reported previously, disposed of during
the period.
FINANCIAL RESULTS
Sales of continuing operations increased by 18,9 per cent from
R900 million in 2007 to R1 069 million in 2008 and headline
earnings from continuing operations increased by 33,2 per cent
from R49,3 million in 2007 to R65,7 million in 2008.
These results reflect excellent work done by all concerned to
ensure ELB shares in the growth opportunities currently
available in our sector.
PROSPECTS
The ELB Engineering Group is well positioned to benefit from
both the ongoing infrastructure spend in Southern Africa and
Australia as well as the increase in capacities and efficiencies
being implemented by the global resources and power industry
sectors. This will be enhanced by the continued growth and
development of our know how and skills base.
DIVIDENDS
The final dividend has been increased from 20 cents in 2007 to
40 cents in 2008 reflecting the Board's confidence in the
prospects for the ELB Group going forward.
The total dividend for the year is therefore 60 cents per share
versus 30 cents per share for the 2007 financial year.
SOCIAL RESPONSIBILITY
As mentioned above ELB's empowerment partner is the ELB
Educational Trust established to promote education in maths
and science of historically disadvantaged South Africans. To this
end bursaries were awarded to five students at various South
African universities.
ELB also made substantial donations to the St Vincent School
for the Deaf, the John Wesley Community Centre in Benoni and
the Ligbron Academy of Technology. These institutions have
been identified as worthy of ELB's support and will further assist
the historically disadvantaged in our community.
CONCLUSION
I would like to thank all those who have contributed to the further
improved performance of ELB over the past year.
Each year offers its own challenges which will need dedication
and commitment from all those involved.
A G Fletcher
17 October 2008
Chairman’s statement(continued)
3
4
The Group is committed to the highest standards of businessintegrity, ethical values and professionalism in all its activities. Asan essential part of this commitment the board endorses theprinciples embodied in the King II Report on CorporateGovernance and has materially complied with the King Codethroughout the accounting period under review save forguidelines regarding the composition of the board of directors asindicated below. The key principles underpinning the governanceof the Group are set out in this statement.
BOARD OF DIRECTORS
The Group has a unitary board structure. In line with bestpractice and to meet the Listings Requirements of the JSE, theroles of the chairman and the senior executive directors havebeen separated. The board is chaired by Mr Anthony Fletcher,whilst the executive management of the operations conducted bythe Group is the responsibility of the chief executive officers ofthe operating subsidiaries. This ensures a balance of authorityand precludes any one director from exercising unfetteredpowers of decision-making.
At the date of this report, the board of directors comprised sevenmembers of whom three are independent non-executive directorswhilst the remaining four members are executive directors. Theimbalance between the number of independent non-executivedirectors and executive directors arose as a result of themandatory retirement of Messrs JC Hall and RGH Smith inNovember 2006. Since that date the nominations committeenominated Mr TJ Matsau as a director and his appointment to theboard was confirmed on 8 July 2008. The nominationscommittee continues to review the situation.
Meetings are held at least five times a year, appropriately timedto review quarterly results and the budget for the forthcomingyear. The agenda includes, as necessary, strategic consider-ations; identification, measurement and management of risk;acquisitions of significance; investment policy and areas ofconcern. Additional board meetings may be convened as andwhen necessary.
The board has established a number of committees in which thenon-executive directors play an active role and which operatewithin the defined terms of reference laid down by the board. Allcommittees are chaired by an independent non-executivedirector save for the remuneration committee which is chaired byMr AG Fletcher. All committees have met their responsibilitiesduring the year in compliance with their terms of reference.
THE AUDIT COMMITTEE
The audit committee operates in terms of a mandate from theboard to review the financial statements, the appropriateness ofthe Group's accounting and disclosure policies, compliance withInternational Financial Reporting Standards and theeffectiveness of internal controls.
In keeping with this policy, KPMG Inc (KPMG) has beenappointed as external auditor whilst BDO Spencer StewardServices (Pty) Ltd (BDO) has been appointed to fulfil the role ofinternal auditor within the ELB Equipment Holdings Limitedsubgroup whilst experts in the field of contract management andaccounting are utilised to evaluate the risks inherent in the
business of ELB Engineering Services (Proprietary) Limited andconduct appropriate internal audit tests. Expert advice on non-audit issues is normally obtained from other third party profes-sionals save where the use of either KPMG or BDO is deemedmore appropriate and no conflict with the respective external andinternal audit roles is evident.
The members of the audit committee are the independent nonexecutive directors, Mr T de Bruyn (chairman) and Dr JP Herselman.An executive director in the person of the chairman of the board,Mr AG Fletcher, has resigned from the committee in keeping withthe requirements of the Corporate Laws Amendment Act andattends meetings by invitation. Both the external auditors and theinternal auditors and experts have unrestricted access to thiscommittee and attend meetings whenever necessary to report ontheir findings and to discuss accounting; auditing; risk identifi-cation, measurement and mitigation; internal and contract controlsand financial reporting matters. Executive directors responsible forthe sub-groups and members of the management teams areinvited to attend such meetings whenever their presence isconsidered necessary.
THE REMUNERATION COMMITTEE
The members of the Remuneration Committee are Messrs AGFletcher and T de Bruyn and Dr JP Herselman. The committeedetermines the remuneration strategy of the Group and, morespecifically, the remuneration of the non-executive and executivedirectors and of those executives and managers who reportdirectly to the chief executive officers of the operating subsidiaries.The committee also approves proposals in respect of certainincentive arrangements.
THE NOMINATIONS COMMITTEE
The members of the Nominations Committee are Dr JP Herselman(Chairman) and Mr T de Bruyn. The Nominations Committee isresponsible for the assessment and nomination of potential newdirectors but does not have full authority to appoint such directors assuch authority vests in the board of directors. Following theappointment of new directors to the board, an induction programme,which includes visits to the Group's businesses and meetings withsenior management, is arranged. All directors are subject toretirement and re-election by shareholders every three years. Inaddition, all directors are subject to election by shareholders at thefirst opportunity after their initial appointment.
RISK MANAGEMENT
Operational and financial risk management is the responsibility ofthe boards of directors of the Company and of its subsidiaries.Where appropriate, risk management procedures and relatedcontrols have been implemented and are reported on regularly atboard and management meetings. Further explanation regardingthe identification and management of risk is reflected below underthe heading 'The internal audit function'.
INTERNAL CONTROL
Internal control systems for financial reporting and thesafeguarding of assets have been implemented. These systemsare designed to provide reasonable assurance to managementand the board of directors that Group assets are safeguardedand reliable information is provided in the financial statements.
Corporate governance
RREEMMUUNNEERRAATTIIOONN NNOOMMIINNAATTIIOONNSSNNAAMMEE BBOOAARRDD AAUUDDIITT CCOOMMMMIITTTTEEEE CCOOMMMMIITTTTEEEE CCOOMMMMIITTTTEEEE
2007 2008 2007 2008 2007 2008 2008
July Sept Nov Mar May July Sept Nov Mar May Nov June June
AG Fletcher √ √ √ √ √ √ √ √ o o √ √ o
PJ Blunden √ √ √ √ √ √ N/A N/A N/A N/A N/A N/A N/A
T de Bruyn √ √ √ √ √ √ √ √ √ √ √ √ √
JP Herselman √ √ √ √ √ √ √ √ √ √ √ √ √
TJ Matsau* N/A N/A N/A N/A N/A √ N/A N/A N/A N/A N/A N/A N/A
SJ Meijers √ √ √ √ √ √ N/A N/A N/A N/A N/A N/A N/A
MV Ramollo √ √ √ √ √ √ N/A N/A N/A N/A N/A N/A N/A
DIRECTORATE 1 JULY 2007 - 31 JULY 2008 : ATTENDANCE OF MEETINGS
Corporate governance
5
THE INTERNAL AUDIT FUNCTION
The internal audit function of ELB Engineering Services (Proprietary)Limited is outsourced to experts in the fields of contractmanagement and accounting whilst the internal audit function of theELB Equipment Holdings Limited subgroup is outsourced to BDO.During the course of the June 2008 financial year, the Equipmentsubgroup continued its internal audit programme which integratesthe identification and ranking of risks inherent in the differentoperations with an evaluation of the systems and internal controlsemployed in the operations. This process assists in the mitigation ofmajor risks within the subgroup, wherever possible. Theseintegrated risk identification and internal control audits areconducted on a systematic basis to ensure adequate coverage ofbusiness units and the reports are submitted to management andthe audit committee.
Notwithstanding the application of this internal audit methodologywithin the Equipment subgroup and the use of experts in the case ofELB Engineering Services (Proprietary) Limited, all Groupoperations continue to identify, assess and monitor the risks to whichtheir businesses are exposed.
The results of reports received and tabled to date are considered tobe satisfactory. Where deficiencies have been identified, correctiveaction has been taken and follow up reviews are performed.
HEALTH AND SAFETY
The board of directors and management at all levels regularlyassess and address health and safety issues throughappropriate committees and in accordance with Groupprocedures and the relevant legislation.
CODE OF ETHICS
A Code of Ethics, requiring all employees of the Group tomaintain the highest ethical standards in their dealings with eachother and other stakeholders, in line with the relevant recommen-dations of the King ll Report, has been published and distributedthroughout the Group.
COMPANY SECRETARY
All directors have access to the advice and services of the Companysecretary, who is responsible to the board for ensuring compliancewith procedures and applicable statutes and regulations. All thedirectors have full and timely access to all information that may berelevant to the proper discharge of their duties and obligations, thusenabling the board to function effectively.
INSIDER TRADING
The Company has closed periods prohibiting trade in ELB sharesby directors and staff before the announcement of interim andyear-end results and during any period where the Company istrading under cautionary announcements or where they haveknowledge of price sensitive information.
All share dealings of directors require the prior approval of thechairman, and the Company secretary retains a record of all suchshare dealings and approvals.
COMMUNICATION TO STAKEHOLDERS
ELB is proactive in the distribution of information to relevantparties through the JSE SENS communications system, printedand electronic media releases and the statutory publication of itsfinancial results.
The board encourages all stakeholders to attend theshareholders' meetings as these meetings present the idealopportunity to voice their opinions.
DISCLOSURE
The annual report deals fully with disclosures pertaining to theannual financial statements, auditors' responsibilities, accountingrecords, internal control, risk management, accounting policies,adherence to accounting standards, going concern issues andadherence to codes of governance and the JSE ListingsRequirements.
N/A Not applicable
o Attended meeting by invitation
x Submitted apologies and was granted a leave of absence in terms of the Company’s Articles of Association
* Mr TJ Matsau was appointed to the board on 8 July 2008
EXECUTIVE
Anthony Garth Fletcher (56)‡
BCom, CA(SA)
Appointed chairman of the board in May 2006.
Appointed to the board in 1996.
Served as chairman from 1998 - 2003.
Peter John Blunden (53)
BCom
Chief executive - ELB Equipment.
Appointed to the board in 2002.
Joined the Group in 1978.
Dr Stephen John Meijers (47)
PhD (Mech Eng), BSc (Mech Eng), MAP (Wits),SEP (Wits/Harvard)
Chief executive - ELB Engineering Services.
Appointed to the board in May 2006.
Mollo Victor Ramollo (53)
BSc (Elec Eng)
Appointed to the board in 2003.
Board of directors
6
NON EXECUTIVE
Theunis de Bruyn (40)†‡ø*
BCom, CA(SA)
Appointed to the board in 2005.
Dr John Paul Herselman (65)†‡ø*
Dr Ing, Dipl Ing, BSc (Chem Eng)
Appointed to the board in 1986.
Tiisetso Joseph Matsau (60)*
Dip Transport Economics, Dip Marketing
Appointed to the board in 2008.
† Member of the Audit Committee
‡ Member of the Remuneration Committee
ø Member of the Nominations Committee.
* Independent
FINANCIAL INFORMATION2008 2007 2006 2005 2004 2003 2002 2001
R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Sales 1 096 173 983 361 693 681 574 627 580 332 554 685 2 382 126 2 937 537 Operating costs excluding
depreciation,amortisation and abnormal items (993 579) (915 304) (663 333) (556 770) (548 841) (526 128) (2 345 845) (2 845 959)
Operating profit before depreciation,
amortisation and abnormal items 102 594 68 057 30 348 17 857 31 491 28 557 36 281 91 578 Depreciation and amortisation (4 184) (4 476) (6 495) (7 051) (8 112) (14 684) (35 486) (36 568)
Operating profit before
abnormal items 98 410 63 581 23 853 10 806 23 379 13 873 795 55 010Abnormal items (note 3) 1 206 (3 824) (12 829) 3 631 – 3 159 64 448 (2 143)
Operating profit 99 616 59 757 11 024 14 437 23 379 17 032 65 243 52 867Finance income 21 886 12 198 6 571 8 163 9 465 15 717 29 022 20 200Finance expenses (9 034) (5 687) (4 940) (3 487) (5 352) (7 071) (9 179) (9 192)Translation adjustments of
foreign treasury cash – – – – – (26 248) 27 553 14 539Income / (loss) from associates – – – – – – 1 039 (6 960)
Profit / (loss) before tax 112 468 66 268 12 655 19 113 27 492 (570) 113 678 71 454Income tax expense (34 709) (27 618) (10 776) (3 983) (13 480) (3 451) (50 811) (14 438)
Profit / (loss) for the year 77 759 38 650 1 879 15 130 14 012 (4 021) 62 867 57 016
Attributable to:
Ordinary shareholders of ELB 68 007 30 386 1 871 14 486 11 855 4 400 72 023 40 978Preference shareholders of ELB – – – - - – – 1Minority interest 9 752 8 264 8 644 2 157 (8 421) (9 156) 16 037
77 759 38 650 1 879 15 130 14 012 (4 021) 62 867 57 016
Headline earnings / (loss) 66 757 30 207 12 079 7 558 11 782 (1 494) 11 029 40 806 Dividends paid 10 969 5 455 2 725 6 829 8 507 7 220 19 058 9 959Special dividend – – – – – – 184 560 –
OTHER STATISTICS2008 2007 2006 2005 2004 2003 2002 2001
Shares in issue at the year end (excluding treasury shares) 27 456 862 27 406 133 27 151 554 27 354 649 27 300 534 28 889 889 30 760 000 30 256 984
Net asset value per share (cents) 961 704 597 589 546 509 536 970
Headline earnings / (loss) per share (cents) 243.2 110.9 44.2 27.6 42.1 (5.2) 36.4 135.9
Interim and final dividends for the year per share (cents) 60 30 15 10 30 30 45 50
Special dividend per share (cents) – – – – – – 600 –
Dividend cover (times) (excluding special dividend) (based on headline earnings) 4.1 3.7 2.9 2.8 1.4 (0.2) 0.8 2.7
NOTES
1 The financial information in this review includes both continuing and discontinued operations.
2 Amounts and numbers for the years 2004 to 2008 are in accordance with IFRS. 2003 and earlier years are in accordance with SouthAfrican GAAP.
3 During the eight year period the following entities were sold:ELB Timber Products (Pty) Limited (ELB Timber Products) with effect from 31 May 2008 (2008 financial year)ELB Ultrabord (Pty) Limited (ELB Ultrabord) with effect from 29 February 2008 (2008 financial year)ELB McWade Electrical (Pty) Limited (ELB McWade) with effect from 30 September 2004 (2005 financial year)Bateman Project Holdings Limited (Batepro) with effect from 31 December 2001 (2002 financial year).The results of those operations are included to their dates of disposal. Profits and losses on disposal are included in abnormal items.
4 2003 and later years include the effect of consolidating the share trusts.
5 Translation adjustments have been taken directly to the foreign currency translation reserve from the 2004 financial year onwards. Previously they were taken through the income statement.
6 The amounts for dividends paid are the dividends declared and paid during the year.
Eight year review
7
Financial highlights
8
2001 2002 2003 2004 2005 2006 2007 2008
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2001 2002 2003 2004 2005 2006 2007 2008-10
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2001 2002 2003 2004 2005 2006 2007 2008-50
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2001 2002 2003 2004 2005 2006 2007 2008
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Sales (R millions) Headline earnings (R millions)
Net asset value per share (cents)Headline earnings and normal dividends per share (cents)
Headline earnings per shareDividends per share (cents)
The directors are responsible for the preparation and presentation of the Group and Company annual financial statements of ELB GroupLimited, comprising the balance sheets at 30 June 2008, and the directors' report, the income statements, the statements of changes inequity and the cash flow statements for the year then ended, the accounting policies, the explanatory notes to the annual financialstatements and the schedule of subsidiaries and joint venture in accordance with International Financial Reporting Standards (IFRS) andin the manner required by the Companies Act of South Africa, as set out on pages 11 to 64. The Company's independent auditor isresponsible for conducting an audit in accordance with International Standards on Auditing and for examining the annual financialstatements in order to determine whether the financial statements are in accordance with IFRS, the Companies Act of South Africa andfor reporting to shareholders their opinion on the annual financial statements. The auditor's unmodified report appears on page 10.
The directors' responsibility includes maintaining adequate accounting records and an effective system of risk management, selecting andapplying appropriate accounting policies, making accounting estimates that are reasonable in the circumstances and the preparation ofthe supplementary schedules included in these financial statements.
The directors are also responsible for developing and maintaining effective systems of internal control to provide reasonable assuranceas to the reliability of the annual financial statements and to prevent and detect material misstatement and loss. These systems andprocedures are implemented and monitored by suitably trained, skilled personnel. The Group's internal audit function appraisesindependently the Group entities' internal controls and reports to the audit committee. The audit committee reviews matters concerningrisk, risk management, accounting policies, internal control, auditing and financial reporting. Nothing has come to the attention of thedirectors to indicate any material breakdowns of the internal controls, systems and procedures during the year.
The directors have reviewed the budgets and forecasts of the businesses and believe that the Group and Company will continue inbusiness for the foreseeable future and that, accordingly, the going concern basis of accounting remains appropriate.
Approval of the Group and Company annual financial statements
The Group and Company annual financial statements of ELB Group Limited, as identified in the first paragraph, have been approved bythe board of directors and are signed on its behalf by:
AG Fletcher T de Bruyn
Chairman Director
Boksburg17 October 2008
Directors’ responsibility statement
9
I, the undersigned, DG Jones, hereby certify that to the best of my knowledge and belief, arrived at after due and careful enquiry, for theyear ended 30 June 2008, the Company has lodged with the Registrar of Companies all returns as are required of a public company interms of the South African Companies Act of 1973, as amended, and that all such returns are true, correct and up to date, and that alllegal requirements have been fulfilled.
DG Jones
Company secretary
17 October 2008
Certificate by the company secretary
To the members of ELB Group Limited
Independent auditor’s report
We have audited the Group annual financial statements and the annual financial statements of ELB Group Limited, which comprise
the balance sheets at 30 June 2008, and the income statements, the statements of changes in equity and cash flow statements for
the year then ended, and the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory notes, and the directors' report as set out on pages 11 to 64.
Directors’ responsibility for the financial statements
The company's directors are responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditor’s responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the consolidated and separate financial position of ELB
Group Limited at 30 June 2008, and its consolidated and separate financial performance and consolidated and separate cash flows
for the year then ended in accordance with International Financial Reporting Standards, and in the manner required by the Companies
Act of South Africa.
KPMG Inc
Per C Esslemont
Chartered Accountant (SA) Registered AuditorDirector
17 October 2008
Independent auditor’s report
10
To the shareholders
Your directors submit the annual financial statements for the
Company and the Group for the year ended 30 June 2008 with
their report on the results and operations.
NATURE OF THE BUSINESS
The Company operates as an investment holding company
deriving most of its distributable income from dividends. The
major investment at the end of June 2008 is in ELB
Engineering Limited (ELB Engineering Group) which supplies
equipment and technical solutions through two sub-groups,
ELB Equipment Holdings Limited (ELB Equipment Holdings)
and ELB Engineering Services (Proprietary) Limited (ELB
Engineering Services). ELB Equipment Holdings continues to
administer the Group treasury.
ELB ENGINEERING GROUP
ELB owns 85% of the ordinary share capital as well as 100%
of the cumulative convertible redeemable preference shares
issued by ELB Engineering Group. The South African equipment
operations housed in the division ELB Equipment Limited
experienced a most successful year and reported profits in
excess of those budgeted. The Ditch Witch Australia joint
venture operations, in which ELB Equipment Holdings has an
84.2% interest, produced excellent results in the light of
favourable trading conditions, considerably ahead of budget.
During the period under review ELB Engineering Group
acquired the minority interest of 21% in ELB Engineering
Services thus making ELB Engineering Services a wholly
owned subsidiary of ELB Engineering Group. ELB Engineering
Services continued to make great strides in building its team,
securing further orders which increased its healthy order book
and completing the hand over of projects during the financial
year under review.
Headline earnings attributable to the Company's investment in ELB
Engineering Group amounted to R67,6 million (2007 - R49,0 million).
DISCONTINUED OPERATIONS
Further to previous announcements on 18 May 2006 and
15 March 2007 when it was decided to discontinue operations
of the ELB Timber Holdings companies, the Company disposed
of its interests in ELB Ultrabord (Proprietary) Limited and ELB
Timber Products (Proprietary) Limited (ELB Timber Products)
during the year under review for purchase considerations of
R7,0 million and R6,0 million respectively. Prior to the disposal
of ELB Timber Products, the fixed properties in Lydenburg
owned by ELB Timber Products were transferred to the
Company.
Headline earnings attributable to the Company from the discon-
tinued operations of ELB Timbers amounted to R1,0 million
(2007 - (headline loss) R19,1 million).
ACCOUNTING POLICIES
The annual report has been prepared in accordance with the
South African Companies Act and complies with International
Financial Reporting Standards (IFRS). The same accounting
policies outlined in the 2007 Annual Report apply to this
Report.
GENERAL
The Group continues to support the principles of good
corporate governance contained in the first King Report and
the subsequent King II Report. Further details are provided in
the Corporate Governance statement on pages 4 and 5 of this
report.
The operating entities within the Group have complied with the
requirements of the Employment Equity Act and the Skills
Development Act.
DIVIDENDS
An interim dividend of 20 cents (2007 -10 cents) per ordinary share
was paid on 23 April 2008 and a final dividend in respect of the year
of 40 cents (2007 - 20 cents) per ordinary share was declared on 18
September 2008 and is payable on 27 October 2008.
Dividends in respect of the 6 per cent fixed cumulative
preference shares were declared simultaneously with the
interim and final ordinary dividends referred to above.
Directors’ report
11
SHARE CAPITAL
Details of the authorised and issued share capital at 30 June
2008 are set out in note 31 to the annual financial statements.
There was no change in either the authorised ordinary share
capital or the authorised preference share capital during the
year. The issued preference share capital remained at the
level of 3800 6% fixed cumulative preference shares at the end
of June 2007, as no redemption of such shares by the
Company occurred on the open market during the year under
review. Similarly, the issued ordinary share capital of 33 860 000
shares at 30 June 2007 remained unchanged at the end of
June 2008.
On 19 November 2007 shareholders approved a resolution
which placed 5% of the authorised ordinary shares of the
Company under the control of the directors for the purposes of
the Company's Share Incentive Scheme. At the financial year
end options totalling 2 100 000 ordinary shares had been
granted but no ordinary shares have been issued as grantees
had not exercised any options at the date of this report.
ELB shares held by the Group's share trusts and incentive
shares not as yet paid for by participants are regarded as
shares under the control of the trusts and are eliminated on
consolidation as treasury shares.
DIRECTORATE
The names as well as a brief history of the directors of the
Company appear on page 6 whilst the name of the Company
secretary in office at the date of this report, and the Company's
business and postal addresses appear on page 67.
The following appointments, resignations and retirements
occurred during the financial period under review and until the
date of this report.
Appointments
TJ Matsau 8 July 2008
In terms of the Company's Articles of Association, the following
directors retire at the forthcoming Annual General Meeting and,
being eligible, are available for re-election: Messrs TJ Matsau
and PJ Blunden.
Details of directors' remuneration and options in respect of
ordinary shares in the Company are contained in note 7 to the
annual financial statements. Details of directors' interests in
the ordinary shares of the Company are provided on page 65.
POST BALANCE SHEET DATE EVENTS
No material fact or circumstance has occurred after the
financial year end, being 30 June 2008, and the date of this
report.
Directors’ report(continued)
12
ELB Group Limited (the Company) is a company domiciled inSouth Africa. The consolidated annual financial statements of theCompany for the year ended 30 June 2008 comprise theCompany and its subsidiaries and joint venture, together referredto as the Group.
The annual financial statements were authorised for issue by thedirectors on 17 October 2008.
Compliance
The annual financial statements have been prepared inaccordance with International Financial Reporting Standards(IFRS) and the requirements of the Companies Act of South Africa.
Preparation
The annual financial statements are presented in South AfricanRands, which is the functional currency of the Company, roundedto the nearest thousand. They are prepared on the historical costbasis, modified by restatement of certain financial instruments tofair value. The accounting policies set out below have beenapplied consistently to all periods presented in these annualfinancial statements and have also been consistently applied by allGroup entities. Accounting policies are the specific principles,bases, conventions, rules and practices applied in preparing andpresenting the annual financial statements. Changes in accountingpolicies are accounted for in accordance with the transitionalprovisions in the applicable Standard. If no such guidance is given,the change is applied retrospectively as if the accounting policyhad been applied in the past, and comparative amounts arerestated where applicable. Where it is impractical to apply thechange retrospectively, the change is applied prospectively totransactions, other events and conditions occurring after the datethat the policy changed. Certain comparative amounts in headlineearnings for the previous year have been reclassified inaccordance with the classification for the current year.
The preparation of the annual financial statements in accordancewith IFRS requires management to make judgements, estimatesand assumptions that affect the application of accounting policiesand reported amounts of assets and liabilities and income andexpense. The estimates and underlying assumptions are based onhistorical experience and various other factors that are believed tobe reasonable under the circumstances. Actual results may differultimately from these estimates. The estimates and assumptionsare reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate isrevised if the revision affects only that period, or in the period of therevision and future periods if the revision affects both current andfuture periods.
Accounting policies involving a higher degree of complexity andwhere assumptions and estimates are significant to the financialstatements are useful life, residual value and impairment ofproperty, plant and equipment, the recognition of deferred taxassets and construction contracts. Further information is given inthe accounting policies relating to these activities.
There are no key assumptions concerning the future and otherkey sources of estimation uncertainty at the balance sheet datethat management have assessed as having a significant risk ofcausing material adjustment to the carrying amounts of assetsand liabilities in the next financial year.
Prior year errors
Where an error relating to a prior year is sufficiently material so as todistort the presentation of the results or the financial position, thensuch error will be reflected as a prior year correction in the statementof changes in equity, and the comparatives are restated.
Consolidation
Basis
The annual financial statements show the financial position andresults of the Company and the consolidated financial positionand results of the Group. Intra group balances and unrealisedprofits and losses and income and expenses arising from intragroup transactions are eliminated in preparing the Group annualfinancial statements. Unrealised gains arising from transactionswith joint ventures are eliminated to the extent of the Group'sinterest, against the investment in these entities. Unrealisedlosses on transactions with joint ventures are eliminated in thesame way as unrealised gains, but only to the extent that there isno evidence of impairment.
Subsidiaries
Subsidiaries are entities controlled by the Company. Controlexists when the Company has the power, directly or indirectly, togovern the financial and operating policies of an entity so as toobtain benefits from its activities. In assessing control, potentialvoting rights that presently are exercisable or convertible aretaken into account. The financial statements of subsidiaries areincluded in the Group annual financial statements from the datethat control commences until the date that control ceases.
Minority interests in the net assets of consolidated subsidiariesare shown separately from the Group equity therein. Minorityinterests consist of the amounts of those interests at acquisitionplus the minorities subsequent share of changes in equity of thesubsidiaries. On acquisition the minorities interest is measured atthe proportion of the pre acquisition fair values of the identifiableassets and liabilities acquired. Losses applicable to minorities inexcess of their interest in the subsidiaries equity are allocatedagainst the Group's interest except to the extent that theminorities have a binding obligation and the financial ability tocover the losses.
Joint ventures
Joint ventures are entities over which the Group exercises jointcontrol in terms of a contractual agreement. Joint ventures areproportionately consolidated, whereby the Group's share of thejoint venture's assets, liabilities, income, expenses and cashflows are combined with similar items on a line by line basis inthe Group annual financial statements from the date the jointcontrol commences until the date that joint control ceases.
Share trusts
For purposes of the Group financial statements, ordinary shares inthe Company under the control of the Group's share trusts areclassified as treasury shares and reduce the number of ordinaryshares in issue. The dividends on the treasury shares reduce theamounts of the ordinary dividends paid and increase the operatingexpenses. Ordinary shares under the control of the share trustsare included as a deduction from issued ordinary share capital inthe Group annual financial statements.
Accounting policies
13
Foreign currency translation
Transactions in foreign currencies are translated at the rates ofexchange ruling at the dates of the transactions. Gains and losseson settlement, arising from fluctuations in exchange rates, arerecognised in profit or loss. Monetary assets and liabilitiesdenominated in foreign currencies at the end of the reportingperiod are translated to South African Rands at the rates ruling atthat date. Gains or losses on translation are recognised in profit orloss. Non monetary assets and liabilities that are measured athistorical cost in foreign currencies are translated using theexchange rates at the dates of the transactions.
All foreign entities within the Group have functional currenciesdifferent to the presentation currency. The functional currency of anentity is determined based on the currency of the primaryeconomic environment in which the entity operates. The resultsand financial positions of the foreign entities have been includedafter translating the income statements at the weighted averagerates of exchange for the appropriate periods, and the balancesheets at the rates of exchange ruling at the balance sheet date.The gains or losses on translation are taken directly to the foreigncurrency translation reserve through the Group statement ofchanges in equity.
Revenue
Sales
Sales revenue comprises the fair value of the considerationreceived or receivable for the sale of goods, revenue recognisedon construction contracts and for other services rendered in thecourse of the Group's activities. Sales revenue excludes valueadded tax (VAT), goods and services tax (GST), and rebates anddiscounts. Sales within the Group are eliminated. Revenue fromthe sale of goods is recognised when the significant risks andrewards of ownership have transferred to the buyer. Revenue forservices rendered is recognised as services are rendered.Revenue is not recognised when it cannot be measured reliablyor where there are significant uncertainties regarding therecovery of the consideration due, associated costs or thepossible return of goods, or continuing management involvementwith the goods delivered or services rendered.
The recognition of revenue on construction contracts is detailedin the accounting policy note regarding that activity.
Interest received
Interest received is recognised on a time proportion basis usingthe effective interest rate method.
Dividends received
Dividends are recognised when the right to receive payment isestablished, with the exception of dividends on preference shareinvestments which are recognised on a time proportion basis,using the effective interest rate method, in the period to whichthey relate.
Employee benefits
Employee benefits expense
All short term employee benefit expenses such as salaries,bonuses, allowances, leave pay entitlement and medical aid andother contributions are recognised in profit or loss in the period inwhich the employees render the related services. Terminationcosts are recognised in full in profit or loss when the commitment
to the termination plan is made. ELB dividends received by theELB Participants Share Trust and distributed to participants areclassified as employee benefits expense; as are dividends onELB shares allocated to participants by the ELB Share IncentiveTrust, but which are not yet paid up and remain under the controlof the Trust.
Retirement benefits
The Group provides a defined contribution retirement plan and adefined benefit retirement plan (now closed to new entrants), theassets of which are held in separate funds, for the benefit ofemployees. The Group's contributions to the plans are recognisedas an expense in the year in which they arise.
A defined contribution plan is a post employment benefit planunder which an entity pays contributions into a separate entity andwill have no legal or constructive obligation to pay further amounts.
A defined benefit plan is a post employment benefit plan other thana defined contribution plan. The Group applies the corridor methodin respect of the defined benefit plan. There has been no spreadingand the full gain or loss in excess of the corridor is recognised eachyear. The defined benefit plan is in surplus and there has been noneed to recognise costs other than contributions.
Share based payment transactions
The fair value of share options granted to Group employees isrecognised as an employee benefits expense with acorresponding increase in equity. The fair value is measured atgrant date and expensed over the period during which theemployee becomes unconditionally entitled to the equityinstruments. The fair value of the instruments granted ismeasured using generally accepted valuation techniques, takinginto account the terms and conditions upon which theinstruments are granted. The amount recognised as an expenseis adjusted to reflect the actual number of share options that vest.
Leases
A distinction is made between finance leases which effectivelytransfer from the lessor to the lessee all the risks and rewards ofownership of the underlying asset, without transferring legalownership, and operating leases under which the lessoreffectively retains substantially all the risks and rewards.
Where an asset is acquired under a finance lease the asset iscapitalised at the beginning of the lease term at the lower of itsfair value or the present value of the minimum lease payments.The corresponding rental obligations, net of finance charges areraised as a non current interest bearing borrowing from thelessor. Each lease payment is allocated between the reduction ofthe borrowing and interest expense.
Expenses under operating leases are recognised in the incomestatement on a straight line basis over the terms of the leases.
Interest paid
Interest paid comprises interest paid on borrowings calculated onthe principal outstanding and using the effective interest ratemethod.
Abnormal items
Abnormal items are items of income and expense whose size,nature or incidence is relevant to explain the performance of theGroup.
Accounting policies(continued)
14
Taxation
Income tax on the profit or loss for the year comprises payable anddeferred tax. Income tax is recognised in the income statementexcept to the extent that it relates to items recognised directly inequity, where such tax is accordingly also so recognised. Payabletax comprises tax calculated on the basis of the expected taxableincome for the period, using the tax rates applicable for that period,and any adjustments of tax payable for previous years. When anadjustment in respect of a previous year arises from an error and issufficiently material so as to misrepresent the results for thereporting period, then such error is treated in accordance with theaccounting policy on prior year errors, described above.
Deferred tax is determined at current income tax rates using thebalance sheet method. Deferred tax is recognised on taxable anddeductible temporary differences, unutilised secondary tax oncompanies (STC) credits and income tax losses carried forward.Temporary differences are differences between the carryingamounts of assets and liabilities for financial reporting purposesand their tax bases. The effect on deferred tax of any changes intax rates is recognised in profit or loss, except where it relates toitems previously charged or credited directly to equity. Deferredtax assets are recognised to the extent that it is probable thatfuture taxable income will be available against which unusedincome tax credits, losses carried forward and deductibletemporary differences can be recovered. Deferred tax assets arereduced to the extent that it is no longer probable that the relatedtax benefits will be realised. Deferred tax liabilities are amountsof income taxes payable in future periods in respect of taxabletemporary differences.
Deferred tax assets and liabilities are offset when there is alegally enforceable right of offset and where the deferred taxrelates to the same fiscal authority on the same taxable entity.
Headline earnings
Headline earnings comprise the net profit attributable to ordinaryshareholders after adjusting for profit or loss on the disposal ofplant and equipment and material income and expense itemsexcluded from headline earnings in accordance with The SouthAfrican Institute of Chartered Accountants' circular 8 of 2007 onheadline earnings.
Dividends paid and payable
Dividends declared to equity holders are included in thestatement of changes in equity in the period in which they aredeclared. STC expenses and STC credits are recognised in profitor loss in the period in which the dividends are declared.
Recognition and derecognition of assetsand liabilities
An asset is a resource controlled by an entity as a result of a pastevent and from which future economic benefits are expected toflow. An asset is recognised when it is probable that futureeconomic benefits associated with it will flow to the Group and itscost or fair value can be measured reliably.
A liability is a present obligation of an entity arising from a pastevent the settlement of which is expected to result in an outflowfrom the entity of resources embodying economic benefits. Aliability is recognised when it is probable that future economicbenefits associated with it will flow from the Group and its cost orfair value can be measured reliably.
A financial asset is any asset that is cash or cash equivalent; acontractual right to receive cash or cash equivalent or anotherfinancial asset; a contractual right to exchange financial instrumentswith another entity on potentially favourable terms; or a contract thatwill or may be settled in the entity's own equity instruments.
A financial liability is any liability that is a contractual obligation todeliver cash or cash equivalent or another financial asset toanother entity, or to exchange financial assets or financialliabilities with another entity under conditions that are potentiallyunfavourable to the entity; or a contract that will or may be settledin the entity's own equity instruments.
A financial instrument is any contract that gives rise to a financialasset of one entity and a financial liability or equity instrument ofanother entity. A financial instrument is recognised when an entitywithin the Group becomes a party to the contractual provisions ofthe instrument. A financial asset and a financial liability as aresult of a firm commitment is recognised only when one of theparties has performed under the contract.
Financial assets or parts thereof are derecognised and removedfrom the balance sheet when the contractual right to receive thecash flows or other financial assets, have been transferred orhave expired or if substantially all the risks and rewards ofownership have passed. Where substantially all the risks andrewards of ownership have not been transferred or retained, thefinancial assets are derecognised if they are no longer controlled.Where control is retained financial assets are recognised only tothe extent of the continuing involvement in those assets.
All other assets are derecognised on disposal or when no futureeconomic benefits are expected from their use.
Financial liabilities are derecognised when the relevant obligationshave either been discharged or cancelled, or have expired.
Property, plant and equipment
Property, plant and equipment comprise tangible items that areheld for use in the production or supply of goods and services, forrental to others, or for administrative purposes and are expectedto be used during more than one reporting period.
Depreciation is the systematic allocation of the depreciableamount of an asset over its useful life. The depreciable amountof an asset is the cost of the asset, or other amount substitutedfor cost, less its residual value. Residual value is the estimatedamount that an entity would currently obtain from disposal of theasset, after deducting the estimated costs of disposal, if the assetwere already of the age and in the condition expected at the endof its useful life. Useful life is the period over which an asset isexpected to be available for use or the number of production orsimilar units expected to be obtained from the asset.
Property, plant and equipment are stated at cost lessaccumulated depreciation and accumulated impairment losses.
Property, plant and equipment, including capitalised leasedassets, are depreciated at rates intended to write them off on astraight line basis over their useful lives to their residual values.Useful lives are usually twenty years for property, five years forplant and equipment and three years for computer equipment.Land has an indefinite useful life and is not depreciated.
Accounting policies(continued)
15
Goodwill
All business combinations are accounted for by applying thepurchase method. Goodwill represents amounts arising onacquisition of businesses. The excess of the cost of investmentin an operation and the fair value of the net identifiable assets(their fair net asset value) at acquisition is capitalised as goodwillin the Group consolidated annual financial statements and isstated at cost less accumulated impairment losses. Goodwill isallocated to cash generating units and is not amortised but istested annually for impairment.
The Group carried no goodwill at the dates of the current andcomparative balance sheets.
Intangible assets
Intangible assets are identifiable non monetary assets withoutphysical substance.
Intangible assets are stated at cost less accumulated amorti-sation and accumulated impairment losses. Capitalisedintangible assets are amortised to their residual values on astraight line basis over their useful lives, which are relativelyshort and usually five years.
The carrying amount of each intangible asset is reviewed at eachreporting date and impairment losses are recognised wherenecessary.
The Group carried no intangible assets at the dates of the currentand comparative balance sheets.
Research costs, arising from original and planned investigationsundertaken with the prospect of gaining new scientific ortechnical knowledge and understanding, are recognised in profitor loss as they are incurred.
Borrowing costs
Borrowing costs that are directly attributable to qualifying assetsare capitalised up to the date that the assets are substantiallyready for their intended use. Qualifying assets are those thatnecessarily take an extended period of time to prepare for theirintended use.
All other borrowing costs are recognised as interest paid in profitor loss in the period in which they are incurred.
Impairment of non financial assets
The carrying amounts of the Group's non financial assets, other thaninventories and deferred tax assets, which are separately assessedand provided against where necessary, are reviewed at eachbalance sheet date to determine whether there are any indicationsof impairment. If any such indication exists for any asset, therecoverable amount of that asset is estimated in order to determinethe extent of any impairment loss for the asset. The recoverableamount is the higher of the asset's fair value less expenses to sell,or the asset's value in use. Value in use is estimated taking intoaccount future cash flows, forecast market conditions and theexpected life of the asset. Such cash flows are discounted using pretax discount rates that reflect current market assessments of thetime value of money and the risks associated with the specific asset.For an asset that does not generate largely independent cash flows,the recoverable amount is determined for the cash generating unit towhich the asset belongs.
Impairment losses are recognised whenever the carrying amount ofan asset or its cash generating unit exceeds the recoverableamount. Impairment losses are recognised in profit or loss.
An impairment loss in respect of goodwill is not reversed or reduced.For other assets, an impairment loss is reversed or reduced if therehas been a change in the estimates used to determine therecoverable amount of any asset and there is an indication that theimpairment loss may no longer exist or may be of reducedmagnitude. An impairment loss is reversed or reduced only to theextent that the asset's carrying amount does not exceed the carryingamount that would have been determined, net of depreciation oramortisation, if no impairment loss had been recognised.
Interest in subsidiaries
The Company’s interest in subsidiaries comprises equityinvestments in the subsidiaries and loans to the subsidiaries.These are carried at cost less impairments. Impairments areassessed with reference to the net equity and projectedprofitability of subsidiaries.
Construction contracts
A construction contract is a contract specifically negotiated for theconstruction of an asset or a combination of assets that are closelyinterrelated or interdependent in terms of their design, technologyand function or their ultimate purpose or use. A fixed price contractis a contract where the contractor agrees to a fixed contract price ora fixed rate per unit of output, and might be subject to cost escalationclauses. Escalation clauses allow amounts payable under suchcontracts to be adjusted for increases in items such as salary andwage rates, amended charges by statutory authorities, marketprices of materials and commodities, currency exchange rates anddelivery charges. A cost plus contract is a contract where thecontractor is reimbursed for allowable or otherwise defined costs,plus a percentage of these costs or a fixed fee.
Revenue from fixed price construction contracts is recognised foreach contract on the stage of completion method, based generallyon the ratio of costs incurred to date to total estimated costs, or oncompleted manhours to date to estimated total manhours, or onthe proportion of physical progress to date to the completedcontract. All possible contingencies requiring additional costs ormanhours, or which impede physical progress, are reviewed indetermining the stage of completion. In management's judgementand from historical experience contracts which are not yet 30%complete are considered to be contracts where the outcomecannot be estimated with reasonable assurance, and revenue onthese contracts is recognised only to the extent of contract costsincurred to date that are considered to be recoverable.
Revenue from cost plus construction contracts is recognised forthe services rendered to date in terms of the contracts.
Terms and conditions negotiated with clients vary from oneconstruction contract to another. These terms and conditionsinfluence contract pricing and are inextricably interwoven withcontract profitability.
When it is probable, for any contract, that total contract costs willexceed total contract revenue the expected loss is recognisedimmediately for all such contracts.
Construction contracts in progress represent costs incurred onconstruction contracts plus profits recognised that have not yetbeen included in billings to clients.
Construction contract liabilities comprise billings to clients inadvance of the stage of completion and provisions for estimatedcosts relevant to the stage of completion. Charges from suppliersfor goods delivered or services rendered to date on contracts,where these are not yet settled, and any additional accrualsrelated thereto, are carried separately as trade payables.
Accounting policies(continued)
16
Inventories
Inventories are assets held for sale in the normal course ofbusiness, or held in the process of production for such sale, orheld in the form of materials or supplies to be consumed in theproduction process or in the rendering of services.
Inventories are valued at the lower of cost, determined on thefirst in first out (fifo) method or weighted average cost basis, andnet realisable value. Production overheads are included in thecost of work in progress and manufactured finished goods.
Financial instruments
Financial instruments at fair value through profit or loss arerecognised initially at fair value. Other financial instruments arerecognised initially at fair value plus transaction costs.Subsequent to initial recognition these instruments are measuredas stated below.
Financial assets at fair value through profitor loss
Financial assets at fair value through profit or loss comprise financialassets classified as held for trading, derivative instruments andthose designated at fair value through profit or loss on initialrecognition. Financial assets at fair value through profit or loss aremeasured at fair value with gains and losses recognised in profit orloss. Fair value for this purpose is market value if listed, or a valuedetermined using appropriate valuation models if unlisted. Additionalinformation on derivative instruments is included separately below inthese accounting policy notes.
Loans and receivables
Loans and receivables are non derivative financial assets withfixed or determinable payments that are not quoted in an activemarket and are stated at amortised cost using the effectiveinterest rate method, less impairments. Impairment is equal tothe difference between the initial carrying amount of a loan orreceivable and the present value of the estimated future cashflows discounted at the original effective interest rate.Impairments are established when there is evidence thatamounts will not be realised in accordance with the original termsof the receivables. Impairments and impairment reversals arerecognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call andterm deposits, and are recognised at amortised cost. Fair valueadjustments are recognised in profit or loss.
Short term borrowings and bank overdrafts form an integral part ofthe Group's cash management and are included as a component ofnet cash and cash equivalents for purposes of the cash flowstatement.
Financial liabilities
Financial liabilities, other than derivative instruments, are measuredat amortised cost using the effective interest rate method.
Derivative instruments
The Group uses derivative financial instruments to manage itsexposure to foreign currency exchange price risks arising fromoperating activities. The Group does not hold or issue derivativeinstruments for dealing purposes.
Derivative instruments used are foreign currency forward exchangecontracts (FECs) which are measured at fair value. Fair valueadjustments are recognised in profit or loss. Fair value is determinedby comparing the contractual forward rate to the current forward rateof an equivalent FEC with the same maturity date.
Offset
A financial asset and financial liability are offset and the netamount reported in the balance sheet only when the Group hasa legally enforceable right to set off the recognised amounts, andintends to settle on a net basis, or to realise the asset and settlethe liability simultaneously.
Non current assets held for sale and discontinued operations
Non current assets (or disposal groups comprising assets andliabilities) that are expected to be recovered primarily through salerather than through continuing use are classified as held for sale.Immediately before classification as held for sale, the assets (orcomponents of a disposal group) are remeasured in accordancewith the Group's accounting policies. Then, on initial classification asheld for sale, non current assets and disposal groups are recognisedat the lower of carrying amount and fair value less costs to sell.Impairment losses on initial classification as held for sale areincluded in profit or loss, even when there is a revaluation. The sameapplies to gains and losses on subsequent remeasurement. Gainsare not recognised in excess of any cumulative impairment loss.
A discontinued operation is a component of the Group's businessthat represents a separate major line of business or geographicalarea of operations. Classification as a discontinued operation occursupon the earlier of disposal or when the operation meets the criteriato be classified as held for sale. Discontinued operations areseparately recognised in the annual financial statements oncemanagement has made a commitment to discontinue the operationwithout a realistic possibility of withdrawal.
Provisions
A provision is recognised in the balance sheet when the Group hasa present legal or constructive obligation as a result of past events,and it is probable that an outflow of economic benefits will berequired to settle the obligation, and a reliable estimate can bemade of the obligation. If the effect is material, a provision isdetermined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time valueof money and the risks specific to the obligation.
Restructuring
A provision for restructuring is recognised when the Group hasapproved a detailed and formal restructuring plan, and therestructuring has either commenced or has been announcedpublicly. Future operating expenses are not provided for.
Onerous contracts
A provision for onerous contracts is recognised when the expectedbenefits to be derived by the Group from a contract are lower thanthe unavoidable cost of meeting the obligations under the contract.
Segment reporting
A segment is a distinguishable component of the Group that isengaged in providing products or services which are subject to risksand returns that are different from those of other segments.Segment information is presented in respect of the Group's businessand geographical segments. The group's primary format forsegment reporting is based on business segments, and is represen-tative of the internal structure used for management reporting.
Segment results include revenue and expenses directly attrib-utable to a segment whether from external transactions or fromtransactions with other Group segments.
Segment assets and liabilities comprise those operating assetsand liabilities that are directly attributable to the segment or thatcan be allocated to the segment on a reasonable basis.
Accounting policies(continued)
17
Group Company
2008 2007 2008 2007
Note R 000 R 000 R 000 R 000
Continuing operations
Sales 1 1 069 408 899 650 684 708
Operating costs excluding depreciation 2 (968 020) (817 512) (2 910) (1 159)
Operating profit / (loss) before depreciation 101 388 82 138 (2 226) (451)
Depreciation 17 (4 099) (3 499) – –
Profit / (loss) from operations 97 289 78 639 (2 226) (451)
Finance income 8 21 886 12 100 4 185 2 449
Finance expenses 9 (8 814) (5 404) (11) (29)
Dividends received from subsidiary 9 832 7 200
Profit before tax 110 361 85 335 11 780 9 169
Income tax expense 10 (34 709) (27 618) (1 459) (792)
Profit from continuing operations 75 652 57 717 10 321 8 377
Discontinued operations
Profit / (loss) from discontinued operations 11 2 107 (19 067) 11 242 (19 067)
Profit / (loss) for the year 77 759 38 650 21 563 (10 690)
Attributable to:
Ordinary shareholders of ELB Group Limited
Continuing operations 65 900 49 453 10 321 8 377
Discontinued operations 11 2 107 (19 067) 11 242 (19 067)
68 007 30 386 21 563 (10 690)
Minority interest
Continuing operations 9 752 8 264
77 759 38 650 21 563 (10 690)
Earnings per ordinary share (cents)
Basic earnings per share 14 247,7 111,5
Diluted earnings per share 14 247,5 111,5
Basic earnings per share from continuing operations 14 240,0 181,5
Diluted earnings per share from continuing operations 14 239,8 181,5
Details of headline earnings and headline earnings
per share are included in notes 13 and 14
Details of dividends declared and paid on the ordinary shares
are included in note 15
Income statementsfor the year ended 30 June 2008
18
Group Company 2008 2007 2008 2007
Note R 000 R 000 R 000 R 000
ASSETS
Non current assets
Property, plant and equipment 17 41 820 26 662 – –Interest in subsidiaries 18 140 973 144 046Non current loans receivable 20 3 949 – 24 639 23 067Deferred tax assets 23.1 13 656 8 012 109 –
59 425 34 674 165 721 167 113
Current assets
Construction contracts in progress 24 24 975 20 649 – –Inventories 25 356 370 189 449 – –Trade and other receivables 26 73 346 57 007 107 153Income tax recoverable 160 62 – –Other current assets 27 15 177 9 202 1 442 2Non current assets held for sale 28 1 291 – 10 036 –Assets of discontinued operations held for disposal 29 – 31 522 Cash and cash equivalents 30 315 234 209 176 90 113
786 553 517 067 11 675 268
Total assets 845 978 551 741 177 396 167 381
EQUITY AND LIABILITIES
Equity attributable to ordinary shareholders of the Company
Issued capital 31.3 25 192 25 192 25 192 25 192Treasury shares 31.3 (24 758) (23 215)Reserves 33 9 163 (6 208) 1 647 250Retained earnings 254 251 197 213 148 744 140 725
263 848 192 982 175 583 166 167Preference shares 32 8 8 8 8
Total equity attributable to equity holders of the Company 263 856 192 990 175 591 166 175
Minority interests in subsidiaries 21 710 9 830
Total equity 285 566 202 820 175 591 166 175
Non current liabilities
Interest bearing borrowings 34 9 891 5 768 – –Provision 35 7 403 – – –Deferred tax liabilities 23.2 430 1 433 – –
17 724 7 201 – –
Current liabilities
Construction contract liabilities 24 27 791 15 433 – –Trade and other payables - non interest bearing 36 220 846 173 865 576 530Trade and other payables - interest bearing 37 228 719 90 142 – –Derivative financial liabilities 38 2 558 2 211 – –Current provision 35 1 226 – –Income tax payable 27 080 18 478 1 118 576Other current liabilities 39 34 468 30 198 111 100Liabilities of discontinued operations held for disposal 29 – 11 393
542 688 341 720 1 805 1 206
Total equity and liabilities 845 978 551 741 177 396 167 381
Balance sheetsat 30 June 2008
19
Attributable to ordinary shareholders of the Company
Pref- MinorityIssued Treasury Retained erence interests in Total
Note capital shares Reserves earnings Total shares subsidiaries equity
R 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Group
Balance at 30 June 2006 25 192 (24 098) (11 315) 172 282 162 061 8 665 162 734
Foreign currency translation adjustments for foreign operations 5 107 5 107 901 6 008
Profit for the year 30 386 30 386 8 264 38 650
Total recognised income and expense for the year – – 5 107 30 386 35 493 – 9 165 44 658
Ordinary dividends paid 15 (5 455) (5 455) (5 455)
Shares paid up by participants and released by the ELB Share Incentive Trust 31 883 883 883
Total changes for the year – 883 5 107 24 931 30 921 – 9 165 40 086
Balance at 30 June 2007 25 192 (23 215) (6 208) 197 213 192 982 8 9 830 202 820
Foreign currency translation adjustments for foreign operations 15 037 15 037 2 654 17 691
Profit for the year 68 007 68 007 9 752 77 759
Total recognised income and expense for the year – – 15 037 68 007 83 044 – 12 406 95 450
Ordinary dividends paid 15 (10 969) (10 969) (586) (11 555)
Premium on buy out of minorityinterest in subsidiary (853) (853) (150) (1 003)
Share options recognised 5 1 187 1 187 210 1 397
Net increase in treasury shares held by the ELB ShareIncentive Trust 31 (1 543) (1 543) (1 543)
Total changes for the year – (1 543) 15 371 57 038 70 866 – 11 880 82 746
Balance at 30 June 2008 25 192 (24 758) 9 163 254 251 263 848 8 21 710 285 566
Statements of changes in equityfor the year ended 30 June 2008
20
Attributable to ordinary shareholders
Pref-
Issued Retained erence Total
Note capital Reserves earnings Total shares equity
R 000 R 000 R 000 R 000 R 000 R 000
Company
Balance at 30 June 2006 25 192 250 158 187 183 629 8 183 637
Loss for the year (10 690) (10 690) (10 690)
Total recognised income and
expense for the year – – (10 690) (10 690) – (10 690)
Ordinary dividends paid 15 (6 772) (6 772) (6 772)
Total changes for the year – – (17 462) (17 462) – (17 462)
Balance at 30 June 2007 25 192 250 140 725 166 167 8 166 175
Profit for the year 21 563 21 563 21 563
Total recognised income and
expense for the year – – 21 563 21 563 – 21 563
Ordinary dividends paid 15 (13 544) (13 544) (13 544)
Share options recognised 5 1 397 1 397 1 397
Total changes for the year – 1 397 8 019 9 416 – 9 416
Balance at 30 June 2008 25 192 1 647 148 744 175 583 8 175 591
Statements of changes in equityfor the year ended 30 June 2008 (continued)
21
Group Company
2008 2007 2008 2007Note R 000 R 000 R 000 R 000
Continuing operations
Cash flows from operating activities
Operating profit / (loss) before depreciation 101 388 82 138 (2 226) (451)Non cash adjustments 41.1 8 941 (440) 1 547 (2) Changes in working capital 41.2 9 865 (1 170) (1 337) (238)Foreign currency translation adjustments for
foreign operations 17 691 6 008
Cash inflow / (outflow) from operating activities
before interest, dividends received and income tax 137 885 86 536 (2 016) (691)
Interest received 8 21 886 12 100 4 185 2 449Interest paid 9 (7 656) (5 404) (11) (29)Dividends received from subsidiary 9 832 7 200Income tax paid 41.3 (32 042) (15 634) (1 026) 62
Cash inflow from operating activities before
dividends paid 120 073 77 598 10 964 8 991
Dividends paidOrdinary shareholders 41.4 (10 969) (5 455) (13 544) (6 772) Minority shareholders (586) –
Cash inflow / (outflow) from operating activities (A) 108 518 72 143 (2 580) 2 219
Cash flows from investment activities
Additions to property 17 (11 841) (2 746) – – Net purchases of plant and equipment 41.5 (7 141) (3 902) – – Buy out of minority interest in subsidiary (1 003) –Acquisition of non current assets held for sale 28 – – (10 426) –Increase in amounts owing by subsidiaries (10 817) (3 913)Decrease in amounts owing by subsidiaries 25 371 913
Cash (outflow) / inflow from investment activities (B) (19 985) (6 648) 4 128 (3 000)
Cash flows from financing activities
(Advances) / repayments of non current loans to the share trusts (1 571) 793
Increase / (decrease) in non current borrowings on mortgage bonds 4 817 (3 080) – –
Decrease in non current borrowings on finance leases (694) (109) – – (Decrease) / increase in funding by ordinary shareholders 41.6 (1 543) 883 – –
Cash inflow / (outflow) from financing activities (C) 2 580 (2 306) (1 571) 793
Cash inflow / (outflow) from continuing operations (A+B+C) 91 113 63 189 (23) 12
Discontinued operations
Cash inflow / (outflow) from discontinued operations 41.7 14 945 (3 913) – –
Cash inflow / (outflow) for the year 106 058 59 276 (23) 12
Cash and cash equivalents at the beginning of the year 209 176 149 900 113 101
Cash and cash equivalents at the end of the year 315 234 209 176 90 113
Reconciliation to the balance sheet
Current assets - cash and cash equivalents 315 234 209 176 90 113
Cash flow statementsfor the year ended 30 June 2008
22
Group Company
2008 2007 2008 2007R 000 R 000 R 000 R 000
1 Sales
Continuing operations
Sale of goods 898 518 719 240 – –Revenue recognised on construction contracts 170 879 179 758 – –Services – external 11 652 – –
– inter company 684 708
1 069 408 899 650 684 708
2 Operating costs
Continuing operations
Operating costs comprise:Cost of sales 826 525 739 646 – – Other operating costs 141 495 77 866 2 910 1 159
968 020 817 512 2 910 1 159
2008 2007Discon- Discon-
Continuing tinued Continuing tinued operations operations Total operations operations Total
Note R 000 R 000 R 000 R 000 R 000 R 000
Group
Operating costs include the followingitems of expense / (income):
Inventories recognised as an expense 680 047 20 954 701 001 563 958 79 961 643 919Research and development expenditure 104 – 104 – – –Profit on disposal of plant and equipment (275) (77) (352) (202) (60) (262)Auditors remuneration – annual audit 2 120 125 2 245 1 575 10 1 585
– other services 204 – 204 367 – 367Administration and technical services 7 190 303 7 493 9 029 415 9 444Net operating lease expenses – premises 6 007 672 6 679 5 311 570 5 881
– equipment 177 10 187 124 9 133There are no contingent rents payable
under any operating leases
Trade and other receivables adjustments 3 915 (246) 669 3 529 1 896 5 425Foreign currency exchange adjustments
(excluding foreign currency exchange gainson bank deposits disclosed in note 8 andforeign currency translation adjustmentsfor foreign operations, disclosed in the statements of changes in equity) 4 14 891 – 14 891 (97) (11) (108)
Employee benefits expense 5 108 200 6 743 114 943 78 848 28 435 107 283
Future minimum lease expenses / (income) at 30 June 2008 under non cancellable operating leases comprise:
Payments under lease agreements:Not later than one year 7 225 – 7 225 5 078 1 717 6 795Later than one year and not later
than five years 6 628 – 6 628 7 204 1 355 8 559Later than five years – – – – – –Minimum future sub lease receipts – – – – (60) (60)IAS straight line adjustments (390) – (390) (302) – (302)
There are no significant leasing arrangements
Number of employees at the end of the financial year 328 – 328 295 183 478
Notes to the annual financial statementsfor the year ended 30 June 2008
23
2008 2007 Note R 000 R 000
2 Operating costs (continued)
Company
Operating costs include the followingitems of expense / (income):
Auditors remuneration – annual audit 213 21
Administration and technical services – external 55 32
Increase / (decrease) in impairments of non current loans receivable (thesetwo intra group adjustments are eliminated in the Group consolidation)
ELB Share Incentive Trust 20 (1) (2)ELB Timber Holdings (Pty) Limited (subsequent to the
disposal of the discontinued operations) 1 158 –
Non current assets held for sale adjusted to fair value less coststo sell (this item is eliminated in the Group consolidation) 28 390 –
Employee benefits expense – short term benefits 270 384– indirect benefits 3 4
Number of employees at the end of the financial year 2 2
2008 2007 Discon- Discon-
Continuing tinued Continuing tinued operations operations Total operations operations Total
Note R 000 R 000 R 000 R 000 R 000 R 000
3 Trade and other receivables adjustments - expense / (income)
Group
Amounts written off 915 – 915 1 272 367 1 639 (Decrease) /increase in impairments – (246) (246) 2 257 1 529 3 786
Expense 915 (246) 669 3 529 1 896 5 425
4 Foreign currency exchange adjustments - (gain) / loss
Group
Accounts receivable (19) – (19) (120) (11) (131) Accounts payable and foreign currency forward
exchange contracts (FECs) 14 910 – 14 910 23 – 23
(Gain) / loss 14 891 – 14 891 (97) (11) (108)
Foreign currency exchange adjustments on bank deposits is reported in note 8.
5 Employee benefits expense
Group
Short term benefits 99 834 6 507 106 341 73 122 23 067 96 189Post employment benefits
Retirement fund contributions 6 6 077 278 6 355 4 669 1 245 5 914 Other 1 – 1 2 – 2
Termination benefits 70 (173) (103) – 3 824 3 824
Total direct benefits 105 982 6 612 112 594 77 793 28 136 105 929 Indirect benefits 2 218 131 2 349 1 055 299 1 354
Total employee benefits expense 108 200 6 743 114 943 78 848 28 435 107 283
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
24
Group 2008 2007
Note R 000 R 000
5 Employee benefits expense (continued)
Dividends on treasury shares includedin short term employee benefits expense 2 503 1 288
Dividends on treasury shares comprise:Dividends received by the ELB
Participants Share Trust and passed on to participants 21Dividends received by participants on shares allocated
to them and not yet paid for and for which loans have been granted by the ELB Share Incentive Trust 22
In terms of the ELB Share Incentive Trust scheme, the directors may direct the trustees to offer shares or grant options in respectof shares to specified employees and executive directors. The maximum number of shares which may be issued or transferred oroptions that may be granted is limited to 3 500 000 shares, of which 862 512 shares or options were available for issue at 30 June2008 (2007 – 2 904 283).
Share option scheme
Participants are entitled to exercise their options as follows:After one year - up to 20% of the sharesAfter two years - up to 40% of the sharesAfter three years - up to 60% of the sharesAfter four years - up to 80% of the sharesAfter five years - up to 100% of the sharesIf an option is not exercised within ten years from the grant date it will lapse.
If a participant retires on pension, the participant may at the discretion of the directors nevertheless continue to have the same rightsand obligations under the scheme as if the participant had remained in the employ of the Group.
On resignation, retirement other than as described above or death the participant or his estate shall have one year from the date ofresignation, retirement or death to exercise and pay for those options which had vested at the time of resignation, retirement or death.
Details of outstanding share options at 30 June 2008 were:
Exercise Number of options price Out-
Expiry date Date granted (cents) Granted Exercised Lapsed standing
March 2018 March 2008 1,250 2 100 000 – – 2 100 000
Changes in the number of share options held by employees during the year are as follows:Number of options
2008 2007
Outstanding at the beginning of the year – –Granted during the year 2 100 000 –
Outstanding at the end of the year 2 100 000 –
Group 2008 2007
R 000 R 000
Equity settled share option expense recognised in the income statementand included in short term employee benefits expense 1 397 –
The fair value of the share options granted is determined at grant date using the binomial option pricing model. Inputs to the modelinclude the market price of the underlying shares at the grant date, the expected option lifetime, the projected volatility of the shareprice, the anticipated dividend yield, the risk free interest rate and the assumed employee turnover. The grant date fair value of theoptions are:
Options that vest in March 2009 – 554 cents per optionOptions that vest in March 2010 – 593 cents per optionOptions that vest in March 2011 – 618 cents per optionOptions that vest in March 2012 – 631 cents per optionOptions that vest in March 2013 – 635 cents per option
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
25
6 Post employment benefits
Retirement
The Group provides retirement benefits for all its permanent employees. Local group companies contribute to a defined benefitpension fund, a defined contribution pension fund and a defined contribution provident fund, all of which are are subject to the SouthAfrican Pensions Fund Act of 1956 as amended. Certain local employees are required by legislation to contribute to industrialschemes, to which group companies also contribute. Foreign group companies contribute to retirement funds registered in theircountries of operation.
The funds are administered independently of the Group. The local defined benefit pension fund is actuarially valued every three years.The last actuarial valuation was performed in January 2007. The actuaries also perform a valuation at each year end in terms of therequirements of IAS 19. At the last valuation in June 2008 the fund was in a sound financial position.
In respect of the local defined benefit pension fund, which is in a positive funded status, no assets have been recognised by theCompany or its subsidiaries. The disclosure given overleaf of the funded status is for accounting purposes only, and does notnecessarily indicate any assets available to the Company or its subsidiaries.
Group
2008 2007 2006 2005R 000 R 000 R 000 R 000
Valuation of the defined benefit pension fund
Fair value of fund assets (see below) 128 998 137 645 111 489 95 602 Deduct: Present value of funded obligation (see below) 122 672 129 172 88 527 84 858
Surplus 6 326 8 473 22 962 10 744
Fair value of fund assets
Fair value at the beginning of the year 137 645 111 489 95 602 87 026 Contributions 209 213 269 333 Expected return 11 305 9 077 7 663 8 126 Benefit payments (9 505) (9 607) (11 169) (11 864)
Expected fair value at the end of the year 139 654 111 172 92 365 83 621 Actuarial (loss) / gain (10 656) 26 473 19 124 11 981
Actual fair value at the end of the year 128 998 137 645 111 489 95 602
Present value of funded obligation
Present value at the beginning of the year 129 172 88 527 84 858 86 764 Service cost 280 267 302 399 Interest cost 9 965 6 709 6 354 8 103 Benefit payments (9 505) (9 607) (11 169) (11 864)
Expected present value at the end of the year 129 912 85 896 80 345 83 402 Actuarial (gain) / loss (7 240) 43 276 8 182 1 456
Actual present value at the end of the year 122 672 129 172 88 527 84 858
Fund amendments – – – –
Actual return on fund assets 648 35 550 26 787 20 1070,5% 28,9% 23,7% 17,6%
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
26
6 Post employment benefits (continued)
Retirement (continued)
The South African Pension Funds Act of 1956 as amended precludes the Group from accessing a share of the surplus unlessapplication so to do is lodged with the Financial Services Board. The Group has not lodged such an application and the Groupappointed trustees of the fund have indicated that the Group has no intention of accessing any portion of the surplus. Accordingly noamount of the surplus has been recognised in the Group balance sheet.
The defined benefit pension fund consists of pensioner members and a small number of employee members. This fund is closed tonew entrants.
Since the defined benefit pension fund is in surplus there has been no need to recognise any costs other than contributions.
Group
2008 2007 2006 2005
Principal actuarial assumptions used in the valuations
Discount rate 9% 8% 8% 8%Expected return on plan assets 10% 8,5% 8,5% 8,5%
Consideration has been given to the rate of return currentlybeing earned and the rates of return expected to be availablefor reinvestment over the future period until maturity of the pension benefits.
Future salary increases 7,5% 6% 6% 6%Future pension increases 6,5% 3,75% 3,75% 3,75%
Employer contributions recognised in the income statement
R 000 R 000 R 000 R 000
Contributions by group companies on behalf of members:Defined benefit funds 192 189 177 173Defined contribution funds 6 163 5 725 5 035 4 483
6 355 5 914 5 212 4 656
The contributions are the Group contributions on behalf of employees to all the funds described above of which the employees aremembers. These contributions are included in employee benefits expense disclosed in note 5. Contributions by group companies onbehalf of members to defined benefit funds in the financial year ending on 30 June 2009 is expected to be approximately R195 000.
Medical
The Group pays a fixed subsidy of R25 000 per annum in respect of three retired members of the ELB Group Limited Pension Fund. The subsidy, over the life expectancy of the three members, has been fully accrued in the balance sheet. Apart from this subsidy, theGroup carries no obligations in respect of post employment medical expenses.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
27
7 Directors remuneration Retirement Medical DividendsPerformance fund aid on treasury Imputed
Salaries bonuses Allowances contributions contributions shares (a) interest (b) TotalR 000 R 000 R 000 R 000 R 000 R 000 R 000 R 000
Detail for 2008Executive directorsPJ Blunden 1 138 700 192 223 46 270 – 2 569AG Fletcher 1 940 – 139 – 57 180 – 2 316Dr SJ Meijers 1 534 – 195 137 34 184 12 2 096MV Ramollo 611 – – 59 15 – – 685
Total paid by subsidiaries 5 223 700 526 419 152 634 12 7 666
Non executive directorsT de Bruyn 135 – – – – – – 135 Dr JP Herselman 135 – – – – – – 135
Total paid by the Company 270 – – – – – – 270
Total 5 493 700 526 419 152 634 12 7 936
Detail for 2007Executive directorsPJ Blunden 935 300 192 195 42 145 30 1 839 AG Fletcher 1 803 – 139 - 51 87 – 2 080Dr SJ Meijers 1 160 – 200 128 31 88 3 1 610 MV Ramollo 353 – 32 39 – – – 424 Total paid by subsidiaries 4 251 300 563 362 124 320 33 5 953
Non executive directorsT de Bruyn 75 – – – – – – 75 JC Hall (c) 113 – – – – – – 113 Dr JP Herselman 75 – – – – – – 75 RGH Smith (c) 120 – – – – – – 120Total paid by the Company 383 – – – – – – 383Total 4 634 300 563 362 124 320 33 6 336
(a) Dividends on treasury shares comprise participation in ELB dividends through the ELB Participants Share Trust, and dividends onshares allocated but not yet paid for in the ELB Share Incentive Trust.
(b) Imputed interest is on the unpaid balances of interest free loans granted by the ELB Share Incentive Trust in respect of incentive sharesallocated to participants. These amounts are not recorded as expenses of the Company or the Group.
(c) Mr JC Hall and Mr RGH Smith retired from the board on 20 November 2006.
Mr TJ Matsau was appointed to the board on 8 July 2008, after the reporting date of 30 June 2008.
Directors do not have service contracts. All executive directors have employment contracts and receive monthly remuneration. In cases ofresignation or retirement a period of notice would be agreed between the director and management, which, in normal circumstances, couldbe expected to be between six and twelve months.
Directors share options
Included in outstanding share options are the following share options which have been granted to directors:
Exercise Number of options Date price
granted (cents) Granted Exercised Lapsed Outstanding PJ Blunden March 2008 1 250 500 000 – – 500 000 Dr SJ Meijers March 2008 1 250 500 000 – – 500 000 MV Ramollo March 2008 1 250 75 000 – – 75 000
1 075 000 – – 1 075 000
Changes in the number of share options held by directors during the year are as follows:Number of options
2008 2007Outstanding at the beginning of the year – –Granted during the year 1 075 000 –Outstanding at the end of the year 1 075 000 –
Group 2008 2007
R 000 R 000 Portion of the equity settled share option expense recognised in the income statement relating to directors 715 –
Key management personnel
All key management personnel in the Group are directors of the Company, and therefore no additional disclosure to that given above fordirectors is applicable.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
28
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
8 Finance income
Continuing operations
Loans and receivablesInterest received – external 21 886 12 093 – 90
– inter company 4 185 2 359Foreign currency exchange gain on bank deposits – 7 – –
21 886 12 100 4 185 2 449
9 Finance expenses
Continuing operations
Interest paid on financial liabilities (7 656) (5 404) (11) (29)Present value adjustment to non current loan receivable 20 (1 158) – – –
(8 814) (5 404) (11) (29)
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
29
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
10 Income tax (expense) / credit
Continuing operations
South African income taxCurrent year
Normal tax payable (33 898) (20 026) (1 119) (695) Secondary tax on companies (STC) (1 491) (1 328) (449) (423)Penalties – (2) – –Capital gains tax (CGT) – (4) – – Deferred tax
Income tax rate change (102) – – –Other 5 765 (2 069) 109 –
Previous yearsPayable tax 849 20 – 326 Deferred tax (528) (35) – –
Foreign income taxCurrent year
Payable tax (6 016) (5 188) – – Deferred tax 702 997 – –
Previous yearsPayable tax 10 – – –Deferred tax – 17 – –
(34 709) (27 618) (1 459) (792)
Payable tax (40 546) (26 528) (1 568) (792)Deferred tax 5 837 (1 090) 109 –
(34 709) (27 618) (1 459) (792)
Deferred tax for the year is accounted as follows:Increase in deferred assets 23.1 4 834 343 109 –Decrease / (increase) in deferred tax liabilities 23.2 1 003 (1 433) – –
5 837 (1 090) 109 –
Reconciliation of the rate of taxation % % % %
Income tax as a percentage of profit or loss before tax 31.5 32.4 11.3 8.6 (Increase) / decrease in tax rate arising from:
Secondary tax on companies (STC) (1.4) (1.6) (3.5) (4.6)Income tax rate change (0.1) – – – Previous year adjustments
South African income tax 0.3 – – 3.6Other non taxable income, non deductable expenses,
incentives and foreign tax differentials (2.3) (1.3) 20.2 21.4Tax losses, not raised as deferred tax assets, created
or utilised – (0.5) – –
Standard tax rate 28.0 29.0 28.0 29.0
R 000 R 000 R 000 R 000
Estimated tax losses at the year end to be carried 19 607 3 015 – –forward
Amount of the above tax losses that has not not been included in deferred tax assets or deferred tax liabilities 1 296 50 – –
Secondary tax on companies (STC) credit available at the year end for set off against STC on futuredividends of the Company. The STC credit is included in the deferred tax assets of the Group. 23.1 385 477 – –
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
30
ELB Timbers
2008 2007 Note R 000 R 000
11 Profit / (loss) from discontinued operations
Group
Sales
Sale of goods 26 765 83 711
Operating costs excluding depreciation
Cost of sales (21 034) (79 965)Other operating costs (4 525) (17 827)
(25 559) (97 792)
Operating profit / (loss) before depreciation 1 206 (14 081)
Depreciation (85) (977)
Operating profit / (loss) 1 121 (15 058)
Interest received 10 128Interest paid (230) (313)
(220) (185)
Profit / (loss) for the year 901 (15 243)
Items consequent upon the discontinuanceRetrenchment reversal / (accrual) of expenses 200 (3 824)Profit on sale of property 1 647 –Loss on disposal of subsidiaries 41.8 (641) –
1 206 (3 824)
Profit / (loss) from discontinued operations 2 107 (19 067)
Attributable to:
Ordinary shareholders of ELB Group Limited 2 107 (19 067)
Calculation of headline earnings / (loss) of discontinued operations
Profit / (loss) of discontinued operations attributable to ordinaryshareholders of ELB Group Limited as above 2 107 (19 067)
Deduct: Items excluded from headline earnings
Profit on disposal of plant and equipment 77 60Profit on sale of property 1 647 –Loss on disposal of subsidiaries 41.8 (641) –
1 083 60
Headline earnings / (loss) of discontinued operations attributable
to ordinary shareholders of ELB Group Limited 1 024 (19 127)
At 30 June 2008 the discontinued operations had been sold.
Company
Decrease / (increase) in impairment of loan
to ELB Timber Holdings (Pty) Limited up to the date of the
disposal of the discontinued operations 11 242 (19 067)
(this item is eliminated in the Group consolidation)
Refer also to page 64.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
31
Group
2008 2007 Note R 000 R 000
12 Taxed profits and losses of subsidiaries
The interest of the Company for the year ended 30 June 2008 in the aggregateafter tax profits of subsidiaries amounted to R74 708 000 (2007 - R51 317 000) and in the aggregate losses to R5 980 000 (2007 - R21 258 000). The losses comprise losses of continuing operations amounting to R5 339 000 (2007 - R2 191 000) and losses of discontinued operations amounting to R641 000 (2007 - R19 067 000).
13 Headline earnings
Calculation of headline earnings
Profit attributable to ordinary shareholders of ELB Group Limited per the income statement 68 007 30 386
Deduct: Items excluded from headline earnings:
Continuing operations:
Profit on disposal of plant and equipment:Gross amount included in operating profit 2 275 202Income tax effect (79) (61)Minority interest (29) (22)
Net amount 167 119
Discontinued operations
Profit on disposal of plant and equipment 11 77 60Profit on sale of property 11 1 647 –Loss on disposal of subsidiaries 11 (641) –
1 250 179
Headline earnings 66 757 30 207
Deduct: Headline earnings / (loss) of discontinued operations 11 1 024 (19 127)
Headline earnings of continuing operations 65 733 49 334
Refer also to the note on primary segments. 44.1
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
32
Group
Note 2008 2007
14 Earnings per ordinary share
Weighted average number of ordinary shares in issue during the year
Issued ordinary shares at the beginning and end of the year 33 860 000 33 860 000
Effect of treasury shares under the control of the trusts (6 406 168) (6 613 786)
Weighted average number of ordinary shares in issue for basic
earnings per share calculations 27 453 832 27 246 214
Effect of outstanding share options 25 044 –
Weighted average number of ordinary shares in issue for
diluted earnings per share calculations. 27 478 876 27 246 214
Cents Cents
Earnings per share attributable to ordinary shareholders
of the Company
Earnings per share calculated on the profit for the year
attributable to ordinary shareholders of ELB Group Limited
of R68 007 000 (2007 - R30 386 000).
Refer to the income statement.
Basic 247.7 111.5
Diluted 247.5 111.5
Earnings per share from continuing operations, attributable
to ordinary shareholders of the Company
Earnings per share from continuing operations, calculated on
the profit of continuing operations attributable to ordinary shareholders
of ELB Group Limited, of R65 900 000 (2007 - R49 453 000).
Refer to the income statement
Basic 240.0 181.5
Diluted 239.8 181.5
Headline earnings per share
Headline earnings per share calculated on headline earnings of
R66 757 000 (2007 - R30 207 000). 13
Basic 243.2 110.9
Diluted 242.9 110.9
Headline earnings per share from continuing operations
Headline earnings per share from continuing operations,
calculated on earnings of R65 733 000 (2007 - R49 334 000) 13
Basic 239.4 181.1
Diluted 239.2 181.1
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
33
15 Dividends paid on ordinary shares
Previous Previous Previous Current
year final year interim year year
dividend - dividend - final interim
Cents per number of number of dividend dividend Total
share shares shares R 000 R 000 R 000
Year ended 30 June 2007
Previous year final dividend 10 33 860 000 3 386 3 386
Current year interim dividend 10 33 860 000 3 386 3 386
Dividends paid disclosed by the Company 20 33 860 000 33 860 000 3 386 3 386 6 772
Dividends on treasury shares included in operating
costs as administration expense (6 673 146) (6 495 746) (667) (650) (1 317)
Dividends paid disclosed by the Group 27 186 854 27 364 254 2 719 2 736 5 455
Year ended 30 June 2008
Final dividend in respect of the previous year's
earnings paid 22 October 2007 20 33 860 000 6 772 6 772
Interim dividend in respect of the current
year's earnings paid 21 April 2008 20 33 860 000 6 772 6 772
Dividends paid disclosed by the Company 40 33 860 000 33 860 000 6 772 6 772 13 544
Dividends on treasury shares included in
operating costs as employee benefits expense (6 441 467) (6 435 987) (1 288) (1 287) (2 575)
Dividends paid disclosed by the Group 27 418 533 27 424 013 5 484 5 485 10 969
A final dividend of 40 cents per share, amounting to R13 544 000 on the total 33 860 000 shares in issue at the date of
declaration, in respect of the current year's earnings, was declared on 18 September 2008 and is payable on 27 October 2008
(2007 - 20 cents per share on 33 860 000 shares amounting to R6 772 000). Secondary tax on companies (STC) of
R1 354 400 (2007 - R846 500) will be payable on the dividend, against which an STC credit of R385 329 (2007 - R476 722) is
available in respect of dividends paid by a subsidiary. Neither the final dividend nor the tax thereon has been accrued by the
Company in these annual financial statements. The STC credit available is included in the the deferred tax assets of the Group.
Together with the interim dividend of 20 (2007 - 10) cents per share the total dividends in respect of the current financial year
amount to 60 (2007 - 30) cents per share.
16 Dividends on 6% preference shares
The dividends for the year on the 6% preference shares of R2 each amounted to R456 (2007 - R456).
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
34
17 Property, plant and equipment
Group
Office , Plant furniture
and and Computer Property equipment Vehicles equipment equipment Total
R 000 R 000 R 000 R 000 R 000 R 000
2007
Carrying amount at the beginning of the year 17 043 387 4 140 639 1 102 23 311 Additions 2 746 492 2 171 474 966 6 849Depreciation (706) (140) (1 742) (211) (700) (3 499) Disposals – – (299) – (52) (351)Foreign currency translation adjustments – 41 230 19 62 352
Carrying amounts at the end of the year 19 083 780 4 500 921 1 378 26 662
Cost 20 336 2 547 10 142 2 343 5 577 40 945Accumulated depreciation (1 253) (1 767) (5 642) (1 422) (4 199) (14 283)
Carrying amounts as above 19 083 780 4 500 921 1 378 26 662
2008
Carrying amounts at the beginning of the year 19 083 780 4 500 921 1 378 26 662
Additions 11 841 1 587 3 968 359 1 317 19 072
Depreciation (745) (310) (1 906) (239) (899) (4 099)
Disposals – (2) (728) (25) (3) (758)
Foreign currency translation adjustments – 74 731 11 127 943
Carrying amounts at the end of the year 30 179 2 129 6 565 1 027 1 920 41 820
Cost 32 177 4 499 12 842 2 764 7 245 59 527
Accumulated depreciation (1 998) (2 370) (6 277) (1 737) (5 325) (17 707)
Carrying amounts as above 30 179 2 129 6 565 1 027 1 920 41 820
Details of properties owned by the group are recorded in a register which is available for inspection at the registered address of the Company. The approximate cost of land included in the carrying amount of property at 30 June 2008 is R10 759 000 (2007 - R2 944 000).
Property with carrying amounts totalling R27 107 000 (2007 - R15 906 000) has been encumbered as security for mortgage bonds,and vehicles with carrying amounts totalling R1 140 000 (2007 - R2 061 000) have been secured in terms of finance lease and creditinstalment agreements. Refer to note 34.
Capital commitments
Authorised Contracted but not yet
or contracted Total Totalordered or ordered 2008 2007
R 000 R 000 R 000 R 000 New property
Conversion to industrial rights 1 200 1 200 –Walling and site levelling 1 000 1 000 –Purchase and improvements thereto – 10 030
Building additions to existing property – 3 500Vehicles 724 724 850Accounting software – 488
724 2 200 2 924 14 868
The capital commitments will be financed from available mortgage bond facilities and existing cash resources.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
35
Company
2008 2007 R 000 R 000
18 Interest in subsidiaries
Shares at costOrdinary shares 1 399 2 Preference shares 90 000 90 000
91 399 90 002
Receivable from subsidiaries 115 875 130 429Impairment (66 301) (76 385)
Carrying amount 49 574 54 044
Total carrying amount 140 973 144 046
Additional details are given on page 64.Group
2008 2007R 000 R 000
19 Joint venture
The Company's 85% held subsidiary, ELB Engineering Limited, has an 84,21053% (2007 - 84,21053%) interest in the Ditch Witch Australia Pty Limited joint venture.
84,21053% proportionate share of joint venture operations included in
the Group annual financial statements
Sales 149 676 114 439Profit before tax 19 685 13 347
Property, plant and equipment 4 738 3 246Current assets 79 286 61 613
Total assets 84 024 64 859
Long term liabilities 127 821Current liabilities 29 313 26 940
Total liabilities 29 440 27 761
Net assets 54 584 37 098
Cash inflow / (outflow):Operations 9 290 15 344 Distributions paid (11 339) (6 515)Investment activities (1 469) (453)Financing activities 5 130 1 197
1 612 9 573
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
36
Group
2008 2007
Note R 000 R 000
20 Non current loans receivable
Non current loan receivable arising from the
sale of ELB Timber Products (Pty) Limited
Amount receivable (selling price) 41.8 6 000 –
Present value adjustment 9 (1 158) –
Discounted amount receivable 4 842 –
Current portion included in trade and other receivables 26 (893) –
Non current amount receivable 3 949 –
The loan is repayable in six tranches of R1 million each,
commencing on 1 April 2009 and thereafter at six month
intervals ending on 1 October 2011. Interest at 6% per
annum compounded monthly shall accrue from
31 December 2008 on the balance outstanding. The interest
will be payable on the same day as the final tranche.
The shares in and loan receivable from ELB Timber Products
(Pty) Limited (ETP) acquired by the purchaser on the sale of ETP,
have been ceded to a subsidiary of ELB as security for due
performance in terms of the agreement of sale. ELB is also
entitled to representation on the board of ETP.
The ELB name may be retained in the name of ETP and also in
the trading name, ELB Timbers, until the settlement of the
obligations by the purchaser in terms of the agreement of sale,
whereupon the name ELB shall be removed from the names of
ETP and ELB Timbers.
Refer also to note 40.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
37
Company
2008 2007 Note R 000 R 000
20 Non current loans receivable (continued)
ELB Participants Share Trust 21 20 748 20 748 ELB Share Incentive Trust 22 3 991 2 467
Gross amounts 24 739 23 215 Impairment of the ELB Share Incentive Trust – (1)
24 739 23 214 Current portion of the ELB Share Incentive Trust included in trade and other receivables 26 (100) (147)
24 639 23 067
The underlying securities of the loans to the two Trusts are ordinary shares in the Company, which are under the control of the Trusts.
Group
2008 2007 R 000 R 000
Treasury shares
ELB Participants Share TrustGross amount receivable as above, equal to the investment
by the Trust in ordinary shares of ELB 31.3 20 748 20 748
ELB Share Incentive TrustGross amount receivable as above 3 991 2 467 Net amount owing by the Trust to participants 19 –
Amount representing loans by the Trust to participants and thecost of shares held by the Trust and available for issue toparticipants 31.3 4 010 2 467
Treasury shares as reflected for the Group 31.3 24 758 23 215
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
38
21 ELB Participants Share Trust
The Trust was established to enable employees and executive directors (the participants) to acquire a beneficial interest in the
dividends of the Group, thereby ensuring that the Group continues to have the benefit of an identity of interest between its shareholders
and its management.
An interest free loan of R20 747 963 has been made to the Trust which enabled the Trust to acquire 5 870 650 ordinary shares in the
Company to achieve the purpose outlined above.
22 ELB Share Incentive Trust
The Trust was established to enable certain executive directors and staff to acquire shares in the Company. The loan to the Trust is
interest free, and the loans granted by the Trust to executive directors and staff are correspondingly also interest free. The trustees of
the share incentive scheme may not release shares until they are paid for in full.
Number of shares
Note 2008 2007
Scheme share participations
Scheme shares at the beginning of the year 583 217 837 796
Shares purchased in the open market during the year 31.2 150 000 –
Shares paid for in full during the year 31.2 (200 729) (254 579)
Scheme shares at the end of the year 532 488 583 217
Participants are entitled to repay their loans, and thus take full ownership of the shares allocated to them, as follows:
After one year – up to 10% of the loan
After two years – up to 25% of the loan
After three years – up to 45% of the loan
After four years – up to 70% of the loan
After five years – up to 100% of the loan
Shares in respect of any loan, or portion of any loan, unpaid after ten years from the granting of the loan will be forfeited by the
participant and will revert fully to the Trust.
If a participant retires on pension, the participant may at the discretion of the directors nevertheless continue to have the same rights
and obligations under the Scheme as if the participant had remained in the employ of the Group
On resignation, retirement other than as described above or death the participant or his estate shall have one year from the date of
resignation, retirement or death to exercise and pay for those shares to which the participant had become entitled to pay for and take
full ownership of at the time of resignation, retirement or death.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
39
Group Company2008 2007 2008 2007
Note R 000 R 000 R 000 R 000
23 Deferred tax
Tax rates used in the determination of deferred tax assets and deferred tax liabilities are:
South African income tax – 28% (2007 - 29%)South African secondary tax on companies
(STC) – 10% (2007 - 12,5%)Australian income tax – 30% (2007 - 30%)
Amount of estimated tax losses at the year end that has not been included in deferred tax assets or deferred tax liabilities 10 1 296 50 – –
23.1 Deferred tax assets
Analysis
Temporary differencesPlant and equipment (68) (86) – –Inventories 3 930 2 061 – –Receivables and other assets 1 280 905 – –Non current assets held for sale – – 109 –Provision 2 416 – – –Leave pay accrued 1 662 1 321 – –Warranties 1 913 1 534 – –Other payables and liabilities 2 136 1 800 – –
Secondary tax on companies (STC) credit 385 477 – –Tax losses carried forward 2 – – –
13 656 8 012 109 –
Movement for the year
Balance at the beginning of the year 8 012 7 431 – –Income statement credit in respect of
continuing operations 10 4 834 343 109 –Foreign currency translation adjustments 810 238 – –
Balance at the end of the year 13 656 8 012 109 –
23.2 Deferred tax liabilities
Analysis
Temporary differencesProperty 955 931 Client retentions on construction contracts 1 860 1 926Prepaid expenses 145 180 Construction contract liabilities (537) (557) Leave pay accrued (318) (187) Revenue not yet recognisable in taxable income 3 450 –
Tax losses carried forward (5 125) (860)
430 1 433
Movement for the year
Balance at the beginning of year 1 433 – Income statement (credit) / expense in respect of
continuing operations 10 (1 003) 1 433
Balance at the end of the year 430 1 433
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
40
Group Company
Note 2008 2007 2008 2007 R 000 R 000 R 000 R 000
24 Construction contracts
Construction contract liabilities
The amount shown separately under current liabilities in the balance sheet comprises:
Provisions relevant to completion to date 2 117 1 554 – –Billings to clients in advance of completion to date 25 674 13 879 – –
27 791 15 433 – –
Construction contracts additional information
Revenue recognised for the year on construction contracts 1 170 879 179 758 – –At the year end, for construction contracts not yet complete,
the aggregate amount of costs incurred and recognisedprofits, less recognised losses, amounted to 342 914 228 212 – –
Costs incurred on construction contracts plus profitsrecognised and not yet included in billings to clients atthe year end, recorded separately under current assetsin the balance sheet as construction contracts inprogress, totalled 24 975 20 649 – –
Amount receivable from construction contract clients at the year end 26 49 847 36 113 – –
Retentions held by clients at the year end and included in theamount receivable from construction contract clients 6 641 6 641 – –
25 Inventories
Merchandise and components 58 329 39 403 – – Work in progress 15 802 7 388 – –Finished goods 282 239 142 658 – –
356 370 189 449 – –
Inventories recognised as an expense in the year 2 680 047 563 958 – –
Inventories recognised as an expense includes:Write downs of inventories 5 549 884 – –
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
41
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
26 Trade and other receivables
Amounts receivable from construction contract clients 49 847 36 113 – – Impairment of construction contract receivables – (2 347) – –Other trade receivables 22 511 24 268 – – Impairment of other trade receivables (2 723) (2 959) – –
Total trade receivables 69 635 55 075 – –Current portion of non current loan receivables 20 893 – – –Other current receivables 3 438 2 542 – – Impairment of other current receivables (620) (610) – –Amounts receivable from the Group share trusts
Current portion of non current loans receivable 20 100 147Current account 7 6
73 346 57 007 107 153
Trade receivables
Amounts receivable 72 358 60 381 Impairment (2 723) (5 306)
Total trade receivables as above 69 635 55 075
Currency analysisSouth African Rands 62 415 48 592 Australian Dollars 7 220 5 367 United States Dollars – 1 116
69 635 55 075
AgeingNot past due 37 106 27 638 Past due 0 - 30 days 10 780 15 368 Past due 30 - 60 days 4 410 2 255 Past due 60 - 90 days 4 964 12 062 Past due more than 90 days 15 098 3 058
72 358 60 381
Receipts since the year end have materiallyreduced the past due more than 90 days amount.
ImpairmentBalance at the beginning of the year (5 306) (2 408)Additional impairments
Specific customers and clients (1 866) (4 150)Non specific – (53)
Reversals of impairmentsSpecific customers and clients 4 150 987 Non specific 18 –
Impairments applied to irrecoverable amounts 316 335 Foreign currency translation adjustments (35) (17)
Balance at the end of the year (2 723) (5 306)
Impairments to specific customers and clients (2 299) (4 932)Non specific impairments (424) (374)
(2 723) (5 306)
The management of credit risk is outlined in thenotes on financial risk management. 43.5
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
42
Group Company
2008 2007 2008 2007 R 000 R 000 R 000 R 000
27 Other current assets
Taxes recoverable (excluding income tax) 14 290 7 359 1 442 2 Interest receivable on income tax and other taxes recoverable – 4 – – Prepaid expenses 812 1 810 – –Other 75 29 – –
15 177 9 202 1 442 2
28 Non current assets held for sale
Property
Cost 1 291 – 10 426 –Adjustment to fair value less costs to sell – – (390) –
Carrying amount 1 291 – 10 036 –
The property held for sale comprises four erven in Lydenburg,Mpumalanga, described collectively as the Lydenburg factory.One erf consists of vacant land, while the other three erveninclude buildings and other structures. The Lydenburg factoryremains over from the disposal of the ELB Timbers segmentof the Group, and is currently unoccupied. The property waspreviously owned by an ELB Timbers subsidiary which hasnow been sold. The property was transferred, before disposalof the subsidiary, at market value to ELB Group Limited. It iscarried by the Group at its original cost and by ELB GroupLimited at fair value less costs to sell.
At the year end, 30 June 2008, it was anticipated that theproperty would be sold within a reasonably short period ata value close to its fair value less costs to sell, as carriedby the Company. Since the year end there has been aslackening in the property market, and the sale will takelonger although this is still expected to occur before the nextfinancial year end. There is no evidence of a marked declinein the price.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
43
Group
2008 2007
R 000 R 000
29 Discontinued operations held for disposal
ELB Timbers segment
The Malelane board plant of the ELB Timbers segment operations was
classified as discontinued with effect from 30 June 2006, and was sold
on 29 February 2008. The remainder of the ELB Timbers segment
operations were classified as discontinued with effect from
31 December 2006 and were sold on 31 May 2008.
Assets of discontinued operations held for disposal
Non current assets
Property, plant and equipment – 10 259
Current assets
Inventories – 5 529
Trade receivables – 12 950
Other current receivables – 575
Other current assets – 112
Cash and cash equivalents – 2 097
– 21 263
Total assets – 31 522
Liabilities of discontinued operations held for disposal
Non current liabilities
Interest bearing borrowings
Mortgage bond – 1 523
Finance lease and credit instalment agreements – 635
– 2 158
Current liabilities
Trade payables – 3 598
Current portion of interest bearing borrowings – 302
Other current financial liabilities – 2 009
Other current liabilities – 3 326
– 9 235
Total liabilities – 11 393
30 Cession and pledge of particular cash and cash equivalents
Call and term deposits totalling R25 million (2007 - R25 million) with a South African bank have been ceded and pledged to that bankto cover import letters of credit issued on behalf of the South African equipment operation.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
44
Group Company
2008 2007 2008 2007Note R 000 R 000 R 000 R 000
31 Ordinary share capital and premium
31.1 Authorised ordinary share capital
50 000 000 ordinary shares of 4 cents each 2 000 2 000 2 000 2 000
Group Company
2008 2007 2008 2007 Number Number Number Number
31.2 Number of ordinary shares in issue
Number of shares in issue at the beginning of the year 27 406 133 27 151 554 33 860 000 33 860 000
Transactions of the ELB Share Incentive Trust Shares purchased by the Trust in the open market 22 (150 000) –Incentive scheme shares paid up by participants
and released by the Trust 22 200 729 254 579
Number of shares in issue at the end of the year 27 456 862 27 406 133 33 860 000 33 860 000
Group Company
2008 2007 2008 2007 R 000 R 000 R 000 R 000
31.3 Issued ordinary shares and premium
33 860 000 (2007 – 33 860 000) shares of 4 cents each 1 354 1 354 1 354 1 354 Share premium account 23 838 23 838 23 838 23 838
25 192 25 192 25 192 25 192
Treasury shares
Shares under the control of:ELB Participants Share Trust 20 (20 748) (20 748)ELB Share Incentive Trust 20 (4 010) (2 467)
(24 758) (23 215)
Issued ordinary shares and premium 434 1 977 25 192 25 192
Treasury shares (increase) / decrease during the year 41.6 (1 543) 883
31.4 Capital management
The Group's policy is to maintain a strong capital baseso as to maintain investor and market confidence andto sustain future development of the business. Theboard of directors monitors the spread of shareholders,the level of dividends to shareholders and return oncapital. The Group defines return on capital as theratio of headline earnings to the average equityattributable to the ordinary shareholders of ELB,expressed as a percentage. The Group's target is toachieve a return on capital of 20 percent. In 2008 thereturn was 29,2 percent (2007 - 17,0 percent).
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
45
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
32 Preference shares
Authorised
150 000 (2007 - 150 000) 6% fixed cumulativeredeemable preference shares of 200 cents each 300 300 300 300
Issued
3 800 (2007 - 3 800) 6% fixed cumulative redeemable preference shares of 200 cents each 8 8 8 8
The preference shares are redeemable by purchase on the open market out of a redemption reserve set aside by the appropriation of earnings of the Companywhich would otherwise have been available for distribution as dividends to the ordinary shareholders. 33
33 Reserves
Capital redemption reserves 742 742 242 242 Reserve for redemption of preference shares 32 8 8 8 8Share option reserve 1 187 – 1 397 –Premium on buy out of minority interest in subsidiary (853) –Foreign currency translation reserve 8 079 (6 958) – –
9 163 (6 208) 1 647 250
34 Non current borrowings
Interest bearing
Mortgage bonds secured over property with carrying amounts totalling R27 107 000 (2007 - R15 906 000) 12 780 5 526 – –
Finance lease and credit instalment agreementssecured over vehicles with carrying amountstotalling R1 140 000 (2007 - R2 061 000) 729 1 548 – –
13 509 7 074 – – Current portion included in trade and other payables
– interest bearing (3 618) (1 306) – –
Non current portion 9 891 5 768 – –
The interest rates, terms and maturity profiles ofthe interest bearing borrowings are indicated in the note on liquidity risk. 43.4
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
46
Group Company
2008 2007 2008 2007Note R 000 R 000 R 000 R 000
35 Provision
Provision for trade back commitments
Balance at the beginning of the year – – – – Amount provided during the year 8 629 – – –
Balance at the end of the year 8 629 – – – Current portion included in current liabilities (1 226) – – –
Non current portion included in non current liabilities 7 403 – – –
ELB Equipment offers trade back agreements tocertain customers, allowing a trade back ofequipment purchased from ELB Equipment, atprices based on usage or time since initial sale.
The amounts provided are present values of thesales revenue deferred on such agreements.
36 Trade and other payables - non interest bearing
Trade payables 156 762 122 136 – –Other payables 64 084 51 729 576 530
220 846 173 865 576 530
37 Trade and other payables - interest bearing
Interest bearing trade payables 225 101 88 836 – –Current portion of interest bearing non
current borrowings 34 3 618 1 306 – –
228 719 90 142 – –
The interest rates, terms and maturity profiles of the interest bearing trade and other payables are indicated in the note on liqudity risk. 43.4
38 Derivative financial liabilities
Foreign currency exchange contracts (FECs) marked to market by comparing with year end contractvalues of FECs with similar maturity dates 2 558 2 211 – –
39 Other current liabilities
Taxes payable (excluding income tax) 2 297 1 702 111 100 Amounts payable under employee benefit plans 17 144 15 367 – –Insurance premiums and insurance claims excess accrued 382 453 – –Other accruals 14 645 12 676 – –
34 468 30 198 111 100
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
47
40 Contingent liabilities
A Group entity has issued a guarantee of R830 000 in favour of a raw material supplier to ELB Timber Products (Pty) Limited, a formerindirect subsidiary which has now been sold. The guarantee is cancellable by three calendar months notice. The guarantee has beenassessed in terms of the requirements of IAS 37 and management opines that any action under the guarantee is remote andimprobable. Accordingly any accrual in respect of the guarantee would not be material, and no accrual has been made. Refer also tonote 20.
The Company's indirect subsidiary, ELB Engineering Services (Pty) Limited, operates in the engineering contracting business and isexposed to the risks associated with engineering contracts. These risks are managed on the basis of limited liability.
All known liabilities of the Group have been accrued. However a contractual dispute has arisen that the directors believe will beunlikely to result in a material loss.
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
41 Notes to the cash flow statements
41.1 Non cash adjustments
Continuing operations
Profit on disposal of plant and equipment 2 (275) (202) – –Increase / (decrease) in impairments of loans
ELB Share Incentive Trust 2 (1) (2)ELB Timber Holdings (Pty) Limited 2 1 158 –
Foreign currency translation adjustments todeferred tax assets 23.1 (810) (238) – –
Non current assets held for sale - adjustmentto fair value less costs to sell 2 – – 390 –
Increase in provision for trade back commitments 35 8 629 – – –
Share options recognised 1 397 – – –
8 941 (440) 1 547 (2)
41.2 Changes in working capital
Continuing operations
Increase in construction contracts in progress (4 326) (19 726) – –(Increase) / decrease in inventories (166 921) 23 418 – –(Increase) / decrease in trade and other
receivables (15 446) 109 46 87Decrease in derivative financial assets _ 16 241 – – (Increase) / decrease in other current assets (5 975) (6 391) (1 440) 111Increase / (decrease) in construction contract
liabilities 12 358 (14 584) – – Increase / (decrease) in trade and other
payables - non interest bearing 46 981 (3 512) 46 (2) Increase / (decrease) in trade and other
payables - interest bearing 138 577 (4 641) – – Increase in derivative financial liabilities 347 2 211 – – Increase / (decrease) in other current liabilities 4 270 5 705 11 (434)
9 865 (1 170) (1 337) (238)
Notes to the annual financial statementsfor the year ended 30 June 2007 (continued)
48
Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
41 Notes to the cash flow statements (continued)
41.3 Income tax paid
Continuing operations
Balances at the beginning of the yearIncome tax recoverable 62 382 – 278 Income tax payable (18 478) (7 904) (576) –
Income tax expense for the year 10 (40 546) (26 528) (1 568) (792)Balances at the end of the year
Income tax recoverable (160) (62) – –Income tax payable 27 080 18 478 1 118 576
(32 042) (15 634) (1 026) 62
41.4 Dividends paid to ordinary shareholders
Dividends declared and paid in the yearFinal for the previous year 15 (5 484) (2 719) (6 772) (3 386)Interim for the current year 15 (5 485) (2 736) (6 772) (3 386)
(10 969) (5 455) (13 544) (6 772)
41.5 Purchases of plant and equipment
Continuing operations
Purchases at costPlant and equipment 17 (1 587) (492) – –Vehicles 17 (3 968) (2 171) – –Office furniture and equipment 17 (359) (474) – –Computer equipment 17 (1 317) (966) – –
Proceeds on disposals 1 033 553 – – Foreign currency translation adjustments 17 (943) (352) – –
(7 141) (3 902) – –
41.6 Funding by ordinary shareholders
Treasury shares
ELB Share Incentive Trust
ELB shares purchased by the Trust in the open market (2 326) –
ELB shares paid up by participants and released by the Trust 783 883
(Decrease) / increase in funding by ordinary shareholders 31.3 (1 543) 883
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
49
Group
2008 2007 Note R 000 R 000
41 Notes to the cash flow statements (continued)
41.7 Cash flow from discontinued operations
Cash flow from operating activities
Operating loss before depreciation and abnormal item 11 1 206 (14 081)Non cash adjustments
Profit on disposal of plant and equipment 2 (77) (60)Abnormal item consequent upon the discontinuance
Retrenchment reversal / (accrual) of expenses 11 200 (3 824)Interest received 11 10 128Interest paid 11 (230) (313)Changes in working capital 7 670 15 812
Cash inflow / (outflow) from operating activities (A) 8 779 (2 338)
Cash flow from investment activities
Net sales / (purchases) of plant and equipment 34 (460)Proceeds on sale of property 1 955 –Proceeds on disposal of subsidiaries 41.8 13 000 –
Cash inflow / (outflow) from investment activities (B) 14 989 (460)
Cash flow from financing activities
Increase / (decrease) in long term borrowingsInter company (14 945) 3 913 External (1 827) (656)
Increase in long term loan (6 000) –Change in inter company loan after fixing
the amount ceded by the holding company to the purchaser, to the date of sale 41.8 (1 371) –
Cash (outflow) / inflow from financing activities (C) (24 143) 3 257
Cash (outflow) / inflow for the year (A+B+C) (375) 459Cash and cash equivalents at the beginning of the year 2 097 1 638Cash and cash equivalents of subsidiaries on disposal 41.8 (1 722) –
Cash and cash equivalents at the end of the year – 2 097Cash and cash equivalents included in assets of
discontinued operations held for disposal 29 – (2 097)
Included in Group cash and cash equivalents
at the end of the year – –
Group cash flow effect
Cash (outflow) / inflow for the year as above (375) 459Cash and cash equivalents included in assets of
discontinued operations held for disposalOpening balance 2 097 1 638 Closing balance – (2 097)
Cash and cash equivalents of discontinued operations on disposal 41.8 (1 722)
Cash flow before changes in financing by the Group – –Decrease / (increase) in financing by the Group as above 14 945 (3 913)
Group cash inflow / (outflow) from discontinued operations 14 945 (3 913)
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
50
Group
ELBELB Timber
Ultrabord Products(Pty) (Pty)
Total Limited LimitedR 000 R 000 R 000
41 Notes to the cash flow statements (continued)
41.8 Disposal of subsidiaries
Discontinued operations
Year ended 30 June 2008
Property, plant and equipment 8 618 4 486 4 132 Inventories 4 919 125 4 794 Trade receivables 5 619 5 619 Other current loans and receivables 95 95 Other current assets 183 13 170 Cash and cash equivalents 1 722 1 722 Non current loan payable to the holding company,
ELB Timber Holdings (Pty) Limited:Amount fixed in the agreement (54 764) (21 997) (32 767)Change from the amount fixed in the agreement
to the date of sale 1 371 1 371 Interest bearing non current liabilities (331) (331)Trade payables (2 380) (2 380)Interest bearing current liabilities (286) (286)Other current financial liabilities (1 965) (1 965)Other current liabilities (3 924) (3 924)
Net assets of subsidiaries on disposal (41 123) (17 373) (23 750)
Loans receivable by the holding company, ELB TimberHoldings (Pty) Limited, ceded to the purchasers 54 764 21 997 32 767
(Loss) / profit on disposal (641) 2 376 (3 017)
Proceeds on disposal 13 000 7 000 6 000
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued
51
42 Related party transactions
Related party relationships exist between group companies. All buying and selling transactions are concluded at arm's length and areeliminated upon consolidation.
Inter company current accounts do not bear interest. Short and long term inter company loans bear interest at market rates. The loanby ELB Group Limited (ELB) to its wholly owned subsidiary, ELB Timber Holdings (Pty) Limited (ELB Timber Holdings), is interest free.The latter company was the holding company for the operations in the discontinued ELB Timbers segment, which operations havenow been sold.
ELB Timber Products (Pty) Limited, a subsidiary in the discontinued ELB Timbers segment, was sold to the chief executive officer ofthat company with effect from 31 May 2008. Further details are reported in note 20.
Directors remuneration is reported in note 7.
Material transactions of ELB with its subsidiaries are:Management and administration services rendered - reported in note 1. Loans to subsidiaries - reported on page 64.
43 Financial risk management
Exposure to currency, interest rate and credit risk arises in the normal course of the Group's business. Derivative instruments are usedas a means of reducing exposure to fluctuations in foreign currency exchange rates. While these derivatives are subject to the risk ofmarket rates changing subsequent to acquisition, such changes should generally be offset by opposite effects on the hedged items.
Potential risks to which the Group might be exposed are identified, and existing risks to which the Group is exposed are monitored onan ongoing basis. Attention is given continuously to market and analysts forecasts for foreign currency exchange rates, interest ratesand commodity prices.
43.1 Financial instruments
At 30 June 2008 the following financial instruments were held:Group Company
2008 2007 2008 2007 Note R 000 R 000 R 000 R 000
Financial assets
Loans and receivablesNon current loans receivable 20 3 949 – 24 639 23 067Trade and other receivables 26 73 346 57 007 107 153
Cash and cash equivalents 315 234 209 176 90 113
Total financial assets 392 529 266 183 24 836 23 333
Financial liabilities
Financial liabilities at amortised costNon current interest bearing borrowings 34 9 891 5 768 – –Trade and other payables
Non interest bearing 36 220 846 173 865 576 530Interest bearing 37 228 719 90 142 – –
Financial liabilities held for tradingDerivative financial liabilities 38 2 558 2 211 – –
Total financial liabilities 462 014 271 986 576 530
Net exposure (69 485) (5 803) 24 260 22 803
Fair value of financial instruments
The carrying amounts of financial instruments are either at fair value based on the methods and assumptions for determiningfair value as stated in the accounting policies or at values which approximate fair value based on the nature or maturity periodof the financial instrument.
The fair value of non current loans and receivables is estimated as the present value of future cash flows discounted at themarket rate of interest at the balance sheet date. Trade and other receivables have not been discounted on account of their shortterm nature.
Non current interest bearing borrowings comprise mainly mortgage bonds at market related floating rates of interest, andtherefore the fair value is insignificantly different to the carrying amount. Trade and other payables have not been discountedbecause of their short term nature. Derivative financial liabilities consist of foreign currency forward exchange contracts (FECs)where the fair value is established by comparing with year end contract values of FECs with similar maturity dates.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
52
43 Financial risk management (continued)
43.2 Foreign currency management
The Group incurs currency risk as a result of purchases, sales and borrowings that are denominated in a currency other thanthe Group's functional currency. The currencies in which the Group deals primarily are Australian Dollars, British Pounds,Euros, Japanese Yen, Singapore Dollars and United States Dollars.
In the South African equipment operation, unless the customer has accepted the currency risk, all imports into South Africaof equipment relating to specific customer orders are covered by foreign currency forward exchange contracts (FECs).Equipment imports not yet paid for are covered by FECs as soon as customer orders are obtained except, as before, wherethe customer is carrying the currency risk. When exchange rates are considered to be particularly favourable, managementmay cover by FECs certain equipment imports not yet paid for and not yet subject to customer orders.
Significant other trading transactions are usually covered by FECs.
At 30 June 2008 the Group had the following uncovered foreign currency denominated amounts in the balance sheets of itsSouth African operations.
2008 2007 R 000 R 000
Current liabilitiesTrade payables - non interest bearing
United States Dollars 139 1 131 Euros 9 524 1 118 Japanese Yen 25 987 3 453 British Pounds 2 819 3 799 Australian Dollars 1 082 – Singapore Dollars – 83
Trade payables - interest bearingJapanese Yen 49 854 2 538 British Pounds 55 501 22 094
144 906 34 216
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued
53
43 Financial risk management (continued)
43.2 Foreign currency management (continued)
The contract values of FECs of South African operations at 30 June 2008 are summarised below.No FECs are designated as cash flow hedges.
FEC FEC FEC
foreign amounts Rand amounts fair value amounts
2008 2007 2008 2007 2008 2007 000 000 R 000 R 000 R 000 R 000
Trade imports - specificEuros 1 122 20 14 525 191 14 126 191 Japanese Yen 1 094 847 900 023 85 715 56 062 83 168 52 951 British Pounds 5 246 3 676 83 096 52 147 83 096 52 786 Australian Dollars – 35 – 211 – 211
183 336 108 611 180 390 106 139
Trade imports - generalUnited States Dollars – 120 – 904 – 904 Euros – 307 – 3 006 – 3 028 Japanese Yen – 134 599 – 8 373 – 8 168 British Pounds – 1 040 – 14 708 – 15 152
– 26 991 – 27 252
Total trade imports 183 336 135 602 180 390 133 391
Trade exports - specificUnited States Dollars – 147 – 1 116 – 1 116
Trade exports - generalUnited States Dollars – 120 – 913 – 913
Total trade exports – 2 029 – 2 029
The differences between FEC contract values and fair values at 30 June 2008 have been accrued as FEC assets in current financialassets or FEC liabilities in current financial liabilities in respect of net gain adjustments or net loss adjustments respectively in theoperating entities. The gains and losses are taken through operating costs in the income statement.
The following significant exchange rates applied during the year:Closing rate Average rate
2008 2007 2008 2007 Number of South African Rands to one:
United States Dollar 7.86769 7.04275 7.27386 7.20317 Euro 12.31453 9.52430 10.75026 9.44730 British Pound 15.68268 14.14647 14.61874 13.93930 Australian Dollar 7.56599 5.98149 6.55885 5.66754 Singapore Dollar 5.78143 4.60199 5.08480 4.65347
Number of Japanese Yen to one South African Rand 13.467 17.489 15.293 16.452
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
54
43 Financial risk management (continued)
43.2 Foreign currency management (continued)
Exposure to currency risk
United
States Japanese British Australian Singapore
Dollar Euro Yen Pound Dollar Dollar
USD 000 EUR 000 JPY 000 GBP 000 AUD 000 SGD 000
The Group's exposure to foreigncurrency risk was:
At 30 June 2008
Trade and other receivables 1 065
Cash and cash equivalents 749 6 7 023
Non current borrowings (17)
Trade and other payablesNon interest bearing (476) (1 899) (933 823) (180) (2 682)
Interest bearing (1 179 430) (8 769) (80)
Gross balance sheet exposure 273 (1 893) (2 113 253) (8 949) 5 309 –
FECs 1 122 1 094 847 5 246
Net exposure 273 (771) (1 018 406) (3 703) 5 309 –
At 30 June 2007
Trade and other receivables 147 982 Cash and cash equivalents 482 1 6 976 Non current borrowings (137)Trade and other payables
Non interest bearing (167) (141) (599 402) (904) (3 557) (18)Interest bearing (410 101) (4 622) (122)
Gross balance sheet exposure 462 (140) (1 009 503) (5 526) 4 142 (18)FECs (147) 327 1 034 622 4 716
Net exposure 315 187 25 119 (810) 4 142 (18)
Sensitivity analysis
Based on the net exposure of the Group's South African operations to currency risk at 30 June 2008, a 10% weaker Rand atthis date would have reduced profit for the year by the amount shown below, assuming all other variables remained constant.
Group
2008 2007 R 000 R 000
Decrease in profit for the year before tax (14 444) (944)
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
55
42 Financial risk management (continued)
43.3 Interest rate management
Financial instruments that are sensitive to interest rate risk are term and call cash deposits, bank accounts, interest bearing noncurrent liabilities, short term borrowings and bank overdrafts. The interest rates applicable to these financial instrumentscompare favourably with those available in the market. The interest rate risk is moderate and is mitigated by the substantialsurplus of funds within the Group, and by arrangement with financial institutions for borrowing facilities to be available at marketrates in the cases of short term cash shortages.
The Group uses the cash management system provided by its principal local banker, whereby most of the Group's local bankbalances and overdrafts are pooled each day, with the bank charging or crediting interest on the net balance. This facility affordsa considerable advantage in controlling interest charged and received.
Interest rate profile of interest bearing financial instruments
Estimatedweightedaverage
rate at theCarrying Fixed or year endamount floating % per
Note R 000 rate annumAt 30 June 2008
Interest bearing financial assetsNon current loan receivable (refer comments below) 20 4 842 Fixed 6,0Cash and cash equivalents
South Africa 256 129 Floating 10,9Australia 53 135 Floating 7,4Other 5 970 Floating 2,0
320 076
Interest bearing financial liabilitiesMortgage bonds 34 12 780 Floating 14,5Finance lease and credit instalment agreements
Australia 34 729 Fixed 7,6Trade payables 37 225 101 Fixed 6,2
238 610
At 30 June 2007
Financial assetsCash and cash equivalents
South Africa 164 041 Floating 8,7Australia 41 727 Floating 6,6
Other 3 408 Floating 4,7
209 176
Financial liabilitiesMortgage bonds 34 5 526 Floating 12,0Finance lease and credit instalment agreements
Australia 34 1 548 Fixed 7,6 Trade payables 37 88 836 Fixed 7,9
95 910
Interest on the non current loan receivable starts accruing on 31 December 2008.
Group
2008 2007R 000 R 000
Should interest rates have been 1% lower during the year, andassuming all other variables remained constant, it is estmated thatafter tax profit of the Group would have been lower by approximately 1 637 1 112
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
56
43 Financial risk management (continued)
43.4 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. These obligations areassociated with trading activities which includes the Group's ability to achieve and maintain the necessary inventory turns.
The Group manages liquidity risk by compiling and monitoring cash flow forecasts and by arranging appropriate repaymentterms with suppliers. The risk is reduced by the Group's substantial cash and cash equivalents as well as bank facilitiesavailable to the Group.
The Company's articles of association restrict the amount that the Group may borrow on the authority of the directors.At 30 June 2008 the maximum permissible Group borrowings amounted to R285,6 million (2007 - R202,8 million).
Maturities of financial liabilities
Maturities
Carrying Within One to Beyond amount one year five years five years
Note R 000 R 000 R 000 R 000
Maturity profile at 30 June 2008
Non current borrowingsMortgage bonds 34 12 780 3 016 6 052 3 712
Finance lease and credit instalment agreements 34 729 602 127
Trade payablesNon interest bearing 36 156 762 156 762
Interest bearing 37 225 101 225 101
Other current payables 36 64 084 64 084
Derivative financial liabilities 38 2 558 2 558
462 014 452 123 6 179 3 712
Maturity profile at 30 June 2007
Non current borrowingsMortgage bonds 34 5 526 579 4 947 Finance lease and credit
instalment agreements 34 1 548 727 821 Trade payables
Non interest bearing 36 122 136 122 136 Interest bearing 37 88 836 88 836
Other current payables 36 51 729 51 729 Other current financial liabilities 38 2 211 2 211
271 986 266 218 5 768 –
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
57
43 Financial risk management (continued)
43.4 Liquidity risk (continued)
The profiles of the Group's interest bearing financial liabilities are summarised below.
Mortgage bonds
Two mortgage bonds with a carrying amount of R12 780 000 at 30 June 2008 (2007 - R5 526 000) are with a registered SouthAfrican bank, and are secured over property with a carrying amount at the year end of R27 107 000 (2007 - R15 906 000).
The interest rate at 30 June 2008 on the mortgage bonds was 14.5% per annum (2007 - 12% per annum). The interest rate is afloating rate.
The estimated portion of the principal that will be repaid by 30 June 2009 is R3 016 000 (estimate at 30 June 2008 - R579 000),resulting in a non current portion of the bonds of R9 764 000 (2007 - R4 947 000).
Monthly repayments of the first bond, including interest, currently amounts to R282 768 with a remaining repayment period at30 June 2008 of twenty seven months. Any residual amount thereafter still owing, up to 60% of the maximum amount drawn down,will be repayable over a further sixty months.
Monthly repayments of the second bond, including interest, currently amounts to R102 064 with a remaining repayment period at30 June 2008 of fifty four months. Any residual amount thereafter still owing, up to 62% of the maximum amount drawn down,will be repayable over a further sixty months.
Finance lease and credit instalment agreements
Finance lease and credit instalment agreements with a carrying amount of R729 000 at 30 June 2008 (2007 - R1 548 000)are with Australian financial institutions, and are secured over vehicles with a carrying amount of R1 140 000 at the year end(2007 - R2 061 000).
The agreements bear interest at rates ranging between 6,99% per annum and 7,95% per annum (2007 - 6,99% and 7,95% perannum), with a weighted average rate of 7,74% per annum (2007 - 7,61% per annum).
Further information is given below.
2008 2007 R 000 R 000
Repayments not later than one year 635 821 Repayments later than one year but not later than five years 131 861
Total repayments 766 1 682 Future finance charges included in repayments (37) (134)
Carrying amount at 30 June 2008 729 1 548 Principal to be repaid by 30 June 2009 (602) (727)
Non current portion 127 821
Trade payables - interest bearing
Use is made of the extended credit facilities offered by foreign suppliers. The carrying amount of R225 101 000 at 30 June 2008 (2007- R88 836 000) is repayable in monthly amounts from July 2008 with final repayments due in December 2008. The interest ratesrange between 4% per annum and 8,12% per annum (2007 - 4% per annum and 10% per annum), with a weighted average rate of6,21% per annum (2007 - 7,90% per annum). The interest rates compare very favourably with those for borrowings in South Africa.
43.5 Credit risk
Financial assets are tabled in note 43.1 .
Credit policies are in operation and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed onall customers requiring credit above certain amounts. Ageing analyses are used and special credit allowances are monitored ona regular basis. Reputable financial institutions are used where necessary for effecting cash transfers. At the balance sheet datethere were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amountof each financial asset in the balance sheet.
The Group has a diverse number of clients and customers. The Group also has customers in Africa and Australia. There is nosignificant exposure to any individual client or customer. Accordingly the Group has no significant concentration of credit risk.
43.6 Price risk
The Group's exposure to commodity prices is minimal. Where any commodity is a significant cost in a fixed price constructioncontract undertaken by the Group, the possibility of inserting a cost escalation clause relating to such commodity, in such contract,would be carefully researched and assessed.
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
58
44 Segment information
44.1 Primary segments
The group is structured into two segments.
Continuing operations
ELB Engineering supplies equipment and technical solutions and administers the Group treasury.
Discontinued operations
ELB Timbers manufactures and supplies peeled and sliced veneers, plywood products, furniture components and specialisedpackaging solutions. The ELB Timbers operations have now been sold.
Certain Group income and expenses are non segmental and are not credited or charged to the segments.ELB
ELB Group EliminateEngin- ELB non seg- intereering Timbers mental company Total R 000 R 000 R 000 R 000 R 000
Segment revenue and segment resultsfor the year ended 30 June 2008
Segment revenue - external 1 069 408 26 765 – – 1 096 173
Operating costs excluding depreciation andabnormal items:
Cost of sales (826 525) (21 034) – (847 559)Other operating costs (138 260) (4 525) (3 235) (146 020)
(964 785) (25 559) (3 235) – (993 579)
Operating profit / (loss) before depreciation and abnormal items 104 623 1 206 (3 235) – 102 594
Depreciation (4 099) (85) – – (4 184)
Operating profit / (loss) before abnormal items 100 524 1 121 (3 235) – 98 410Abnormal items as detailed below – 1 206 – – 1 206
Operating profit / (loss) 100 524 2 327 (3 235) – 99 616Finance income 21 878 10 4 193 (4 195) 21 886 Finance expenses (11 830) (230) (1 169) 4 195 (9 034)
Segment results 110 572 2 107 (211) – 112 468Income tax expense (33 046) – (1 663) – (34 709)
Profit / (loss) for the year 77 526 2 107 (1 874) – 77 759
Attributable to:
Ordinary shareholders of ELB Group Limited 67 774 2 107 (1 874) – 68 007Minority interest 9 752 – – – 9 752
77 526 2 107 (1 874) – 77 759
Calculation of headline earnings
Profit / (loss) attributable to ordinary shareholdersof ELB Group Limited as above 67 774 2 107 (1 874) – 68 007
Deduct: Items excluded from headline earningsas detailed below 167 1 083 – – 1 250
Headline earnings / (loss) 67 607 1 024 (1 874) – 66 757
Abnormal items
Retrenchment reversal of expense – 200 – – 200Profit on sale of property – 1 647 – – 1 647Loss on sale of subsidiaries – (641) – – (641)
Total abnormal items – 1 206 – – 1 206
Items excluded from headline earnings
Profit on disposal of plant and equipment 275 77 – – 352Profit on sale of property – 1 647 – – 1 647Loss on disposal of subsidiaries – (641) – – (641)Income tax effect of excluded items (79) – – – (79)Minority interest in excluded items (29) – – – (29)
167 1 083 – – 1 250
Notes to the annual financial statementsfor the year ended 30 June 2007 (continued)
59
44 Segment information (continued)
44.1 Primary segments (continued)
ELB ELB Group Eliminate
Engin- ELB non seg- intereering Timbers mental company Total R 000 R 000 R 000 R 000 R 000
Segment revenue and segment results
for the year ended 30 June 2007
Segment revenue – external 899 650 83 711 – – 983 361
Operating costs excluding depreciation and abnormal items:
Cost of sales (739 646) (79 965) – – (819 611)Other operating costs (76 086) (17 827) (1,780) – (95 693)
(815 732) (97 792) (1 780) – (915 304)
Operating profit / (loss) before depreciation
and abnormal item 83 918 (14 081) (1 780) – 68 057 Depreciation (3 499) ( 977) – – (4 476)
Operating profit / (loss) before abnormal item 80 419 (15 058) (1 780) – 63 581 Abnormal item - retrenchment accrual – (3 824) – – (3 824)
Operating profit / (loss) 80 419 (18 882) (1,780) – 59 757 Finance income 12 006 128 2,449 (2 385) 12 198 Finance expenses (7 734) ( 313) (25) 2 385 (5 687)
Segment results 84 691 (19 067) 644 – 66 268 Income tax expense (27 301) – (317) – (27 618)
Profit / (loss) for the year 57 390 (19 067) 327 – 38 650
Attributable to:
Ordinary shareholders of ELB Group Limited 49 126 (19 067) 327 – 30 386 Minority interest 8 264 – – – 8 264
57 390 (19 067) 327 – 38 650
Calculation of headline earnings
Profit / (loss) attributable to ordinary
shareholders of ELB Group Limited as above 49 126 (19 067) 327 – 30 386 Deduct: Items excluded from headline earnings
as detailed below 119 60 – – 179
Headline earnings / (loss) 49 007 (19 127) 327 – 30 207
Items excluded from headline earnings
Profit on disposal of plant and equipment 202 60 – – 262 Income tax effect of excluded items (61) –- – – (61)Minority interest in excluded items (22) – – – (22)
119 60 – – 179
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
60
44 Segment information (continued)
44.1 Primary segments (continued)
Segment assets and liabilities
ELBELB Group Eliminate
Engin- ELB non- inter eering Timbers segmental company Total
R 000 R 000 R 000 R 000 R 000
30 June 2008
Non current assets 41 820 – 17 605 – 59 425
Current assetsNon current assets held for sale – – 1 291 – 1 291
Other current assets 782 660 – 2 602 – 785 262
Total assets 824 480 – 21 498 – 845 978
Minority interests in subsidiaries 21 710 – – – 21 710
Non current liabilitiesExternal 17 294 – 430 – 17 724
Inter company 44 732 – – (44 732) –
Current liabilities 514 887 – 27 801 – 542 688
Total liabilities 576 913 – 28 231 (44 732) 560 412
30 June 2007
Non current assets 26 662 – 8 012 – 34 674 Current assets
Assets of discontinued operations held for disposal – 31 522 – – 31 522
Other current assets 485 359 – 186 – 485 545
Total assets 512 021 31 522 8 198 – 551 741
Minority interests in subsidiaries 9 830 – – – 9 830
Non current liabilitiesExternal 5 768 – 1 433 – 7 201 Inter company 33 915 96 514 – (130 429) –
Current liabilitiesLiabilities of discontinued operations
held for disposal – 11 393 – – 11 393 Other current liabilities 311 186 – 19 141 – 330 327
Total liabilities 350 869 107 907 20 574 (130 429) 348 921
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
61
44 Segment information (continued)
44.2 Geographic segments
2008 2007 R 000 R 000
Segment sales revenue – external
South AfricaContinuing operations 919 732 785 211 Discontinued operations 26 765 83 711
International 149 676 114 439
1 096 173 983 361
Non current assets
South AfricaContinuing operations 37 082 23 416 Discontinued operations – –
International 4 738 3 246
41 820 26 662
Current assets
South AfricaContinuing operations 666 767 399 146 Discontinued operations – 31 522
International 115 893 86 213
782 660 516 881
Segment assets 824 480 543 543
Non curent loan receivable 3 949 –Deferred tax assets 13 656 8 012 Income tax recoverable 160 62Other non segment assets 3 733 124
Total Group assets 845 978 551 741
Capital expenditure during the year
South AfricaContinuing operations 18 516 6 195 Discontinued operations (34) 460
International 1 469 453
19 951 7 108
Non current liabilities
South AfricaContinuing operations 17 167 4 947 Discontinued operations – –
International 127 821
17 294 5 768
Current liabilities
South AfricaContinuing operations 485 292 283 667 Discontinued operations – 11 393
International 29 595 27 519
514 887 322 579
Segment liabilities 532 181 328 347
Deferred tax liabilities 430 1 433 Income tax payable 27 080 18 478 Other non segment liabilities 721 663
Total Group liabilities 560 412 348 921
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
62
45 Accounting standards, amendments and interpretations in issue but not yet effective
Certain new standards and amendments and interpretations to existing standards have been published that are manadatory for theGroup's accounting periods beginning on or after 1 January 2008, or later periods, but which the Group has not early adopted. Thesestandards will not have a material effect on the Group's financial results, financial position and cash flows when implemented. Thestandards are listed below.
IFRIC 12 - Service concession arrangementsEffective fom 1 January 2008This standard is not relevant to the Group's operations
IFRIC 13 - Customer loyalty programmesEffective from 1 January 2008This standard is not relevant to the Group's operations
IFRIC 14 - The limit on a defined benefit asset, minimum funding requirements and their interactionEffective from 1 January 2008
IFRIC 16 - Hedges of a net investment in a foreign operationEffective from 1 October 2008
Amendments to IAS 1 - Presentation of financial statementsEffective from 1 January 2009
Amendment to IAS 23 - Borrowing costsEffective from 1 January 2009
Amendments to IAS 27 - Consolidated and separate financial statementsEffective from 1 January 2009
Amendments to IAS 31 - Interest in joint venturesEffective from 1 January 2009
Amendments to IAS 32 - Financial instruments: presentationEffective from 1 January 2009
Amendments to IFRS 2 - Share based payment: vesting conditions and cancellationsEffective from 1 January 2009
IFRS 8 - Reporting of operating segmentsEffective from 1 January 2009
IFRIC 15 - Agreements for the construction of real estateEffective from 1 January 2009This standard is not relevant to the Group's operations
Amendments to IFRS 3 - Business combinationsEffective from 1 July 2009
46 Special resolution of indirect subsidiary
ELB Power Systems Limited
Name changed from ELB Flying Services LimitedChange to objects clause in memorandum of association
Notes to the annual financial statementsfor the year ended 30 June 2008 (continued)
63
Details of holding company's interest Issued
ordinary Effective interest Equity investment Loans to subsdiariesCurrency capital
2008 2007 2008 2007 2008 2007 NAME 000's % % R 000 R 000 R 000 R 000
Direct interest in
South African subsidiaries
ELB Engineering Limited ZAR 2 85 85 91 399 90 002 44 732 33 915 ELB Timber Holdings (Pty) Limited ZAR – 100 100 – – 71 143 96 514
Indirect interest in South African
subsidiaries (principal subsidiaries only)
Batmon Nominees (Pty) Limited ZAR 1 85 85 BEP (Pty) Limited ZAR – 85 85 BRI Pipelines (Pty) Limited ZAR – 85 85 ELB Capital Investments (Pty) Limited ZAR – 85 85 Elbcon (Pty) Limited ZAR – 85 85 ELB Engineering Services (Pty) Limited ZAR – 85 67 ELB Equipment Holdings Limited ZAR 30 000 85 85 ELB Equipment Limited ZAR – 85 85 Elbex (Pty) Limited ZAR – 85 85 ELB Investments (Pty) Limited ZAR – 85 85ELB Power Systems Limited ZAR 4 85 85Equipment Industrial Supplies (Pty) Limited ZAR – 63 63
Sold during the yearELB Timber Products (Pty) Limited ZAR – 100 ELB Ultrabord (Pty) Limited ZAR – 100
Indirect interest in foreign subsidiaries
(only principal operating subsidiaries
and the joint venture)
Incorporated in the Cayman Islands:Bel Finance Limited USD 4 85 85
Incorporated in Australia:Ditch Witch Australia Pty Limited
(joint venture) AUD – 72 72Elbquip Holdings Pty Limited AUD 3 000 85 85 Metquip Pty Limited AUD 2 650 85 85
Carrying amounts before impairment 91 399 90 002 115 875 130 429 Impairment of loan to ELB Timber Holdings (Pty) Limited – – (66 301) (76 385)
Carrying amounts after impairment 91 399 90 002 49 574 54 044
The equity investment of ELB Group Limited in ELB Engineering Limited comprises R1 700 in the issued ordinary shares of ELB EngineeringLimited, being 85% thereof, and R1 397 200 equity contribution in respect of share options, totalling R1 398 900; and R90 000 000 in the issuedpreference shares, being 100% thereof. The minority 15% interest in the issued ordinary shares of ELB Engineering Limited is held by the ELBEducational Trust for Historically Disadvantaged South Africans.
The equity investment of ELB Group Limited in ELB Timber Holdings (Pty) Limited is an amount R100 in the issued ordinary shares of ELBTimber Holdings (Pty) Limited. The investment has been fully impaired.
The amount of R44 732 000 (2007 - R33 915 000) owing by ELB Engineering Limited to ELB Group Limited bears interest at market rates.
The amount of R71 143 000 (2007 - R96 514 000) owing by ELB Timber Holdings (Pty) Limited (ELB Timber Holdings) to ELB Group Limited(ELB) is a long term loan and is interest free. The loan has been subordinated by ELB for the benefit of the other creditors of ELB Timber Holdings.
The currencies listed above are:AUD - Australian Dollars, USD - United States Dollars, ZAR - South African Rands
All the subsidiaries and the joint venture have 30 June financial year ends.
Subsidiaries and joint venture
64
Number of Number % of sharesshareholders of shares issued
Public shareholders 782 22 813 932 67,4 Non public shareholders 8 4 642 930 13,7 Holders of treasury shares 2 6 403 138 18,9
792 33 860 000 100,0
Directors (direct and indirect holdings) 6 4 642 930 13,7 ELB share trusts 2 6 403 138 18,9
Beneficial shareholders holding 5% or more
of the issued ordinary shares of the Company
ELB Participants Share Trust 5 870 650 17,3 Blandford Estates (Pty) Limited 4 294 612 12,7 Golden Hind Fund 3 653 281 10,8 RMB Unit Trusts 3 431 961 10,1
Analysis of ordinary shareholdersat 30 June 2008
Directors’ interests in ordinary shares
65
Beneficial holdings at 30 June 2008 Beneficial holdings at 30 June 2007
Name Total Direct Indirect Total Direct Indirect
PJ Blunden 179 418 179 418 – 180 118 180 118 –
T de Bruyn 100 100 – 100 100 –
AG Fletcher 4 294 712 100 4 294 612 4 294 712 100 4 294 612
Dr JP Herselman 158 600 – 158 600 158 600 – 158 600
Dr SJ Meijers 10 000 10 000 – 10 000 100 9 900
MV Ramollo 100 100 – 100 100 –
4 642 930 189 718 4 453 212 4 643 630 180 518 4 463 112
No director had any interests in ordinary shares through associates in the current or the previous financial year.
No change occurred in directors' interests between 30 June 2008 and 18 September 2008.
2008 2007
Listed on the JSE in 1951
Market price (cents per share)
High 2 210 1 750
Low 1 300 610
Closing at 30 June 2008 1 600 1 750
Total number of shares traded 9 950 914 12 252 385
Total value of shares traded (Rands) 174 659 750 140 636 845
Number of shares traded as a percentage of total shares issued 29,4 36,2
Ordinary share statisticsfor the year ended 30 June 2008
Shareholders diary
66
Financial year end 30 June
Annual general meeting November
Financial reports
Interim report for the half year March
Provisional report for the year September
Annual report October
Dividends Declared Paid
Ordinary dividends
Interim March April
Final September October
6% fixed cumulative redeemable preference shares
Six months ending 31 December March April
Six months ending 30 June September October
ELB Group Limited
Incorporated in the Republic of South Africa
Registration number: 1930/002553/06
Ordinary shares
Share code: ELR
ISIN: ZAE000035101
Preference shares
Share code: ELRP
ISIN: ZAE000035333
Company secretary
DG Jones
HDipTax, MBA, CA(SA), FCIS
Registered office
ELB Equipment
14 Atlas Road
Anderbolt
Boksburg
1459
Postal address
PO Box 565
Boksburg
1460
Telephone
011 306 0700
Fax
011 918 7285
Administration
67
Share transfer secretaries
Computershare Investor Services (Pty) Limited
Registration number: 2004/003647/07
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
Independent auditor
KPMG Inc
KPMG Crescent
85 Empire Road
Parktown
Johannesburg
2193
Private Bag 9
Parkview
2122
Banker
First National Bank
(a division of FirstRand Bank Limited)
4 First Place
Bank City
corner Simmonds and Pritchard Streets
Johannesburg
2001
Sponsor
Rand Merchant Bank
(a division of FirstRand Bank Limited)
1 Merchant Place
corner Fredman Drive and Rivonia Road
Sandton
2196
Notice is hereby given that the seventy eighth Annual GeneralMeeting of shareholders of ELB Group Limited (the Company)will be held in the Board Room, ELB Equipment Limited, 14Atlas Road, Anderbolt, Boksburg, on Monday, 17 November2008 at noon for the following purposes:
1. ORDINARY BUSINESS
1.1 To consider the annual financial statements of theCompany for the year ended 30 June 2008 togetherwith the reports of the directors and auditors containedtherein.
1.2 To re-appoint KPMG Inc as the independent auditors ofthe Company and Mr Colin Esslemont as the individualdesignated auditor of the Company for the ensuingfinancial year.
1.3 To elect a director in place of Mr TJ Matsau who retiresin accordance with the Company’s Articles ofAssociation, but, being eligible, offers himself for re-election.
1.4 To elect a director in place of Mr PJ Blunden who retiresin accordance with the Company’s Articles ofAssociation, but, being eligible, offers himself for re-election.
Biographical details of all directors of the Company areset out on page 6.
1.5 To ratify the directors’ fees and bonuses as set out onpage 28 of the annual report.
1.6 To transact any other business that may be transactedat an annual general meeting.
2. SPECIAL BUSINESS
No special business is scheduled for this meeting.
Voting and proxies
Shareholders of the Company who have not dematerialisedtheir shares in the Company (shares), or who have demateri-alised their shares with “own name” registration, are entitled toattend and vote at the meeting and are entitled to appoint aproxy or proxies to attend, speak and vote in their stead at themeeting. The person so appointed need not be a shareholder.Proxy forms must be forwarded, to reach the registered office ofthe Company, or the transfer secretaries, ComputershareInvestor Services (Proprietary) Limited, at the address givenbelow no later than noon on Thursday, 13 November 2008.
On a show of hands, every shareholder of the Company presentin person or represented by proxy shall have one vote only. Ona poll, every shareholder of the Company shall have one vote forevery share held in the Company by such shareholder.
Shareholders who have dematerialised their shares, other thanthose shareholders who have dematerialised their shares with“own name” registration, should contact their CSDP or broker inthe manner and time stipulated in their agreements in order tofurnish them with their voting instructions and to obtain thenecessary authority to attend the meeting should suchshareholder wish to do so.
By order of the Board
DG Jones
Company SecretaryBoksburg
Computershare Investor Services
(Proprietary) Limited
70 Marshall StreetJohannesburg 2001PO Box 61051Marshalltown 2107Johannesburg
17 October 2008
Notice of annual general meeting
68
ELB GROUP LIMITED
(Incorporated in the Republic of South Africa)Registration No. 1930/002553/06
ISIN : ZAE000035101 Share Code ELR("the Company")
For completion by shareholders who have not dematerialsed their shares or who have dematerialised their shares butwith "own name" registration.
Proxy form
For use by certificated shareholders and “own name registered” dematerialised shareholders, at the general meeting of the companyto be held at noon on Monday, 17 November 2008, at the premises of ELB Equipment Limited which are located at 14 Atlas Road,Anderbolt, Boksburg.
Dematerialised shareholders (other than “own name registered” dematerialised shareholders) who wish to attend the annual generalmeeting should obtain from their CSDP or broker the necessary authorisation to attend the annual general meeting or advise their CSDPor broker as to what action they wish to take in respect of voting at the annual general meeting.
FORM OF PROXY FOR THE SEVENTY EIGHTH ANNUAL GENERAL MEETING OF ELB GROUP LIMITED
I/We (please print) ...........................................................................................................................................................................................
of address (please print) ..................................................................................................................................................................................
being the holder/s of ................................................................................................................... shares in the Company, do hereby appoint
1. .......................................................................................................................................................................................... or failing him/her
2. .......................................................................................................................................................................................... or failing him/her
3. the chairman of the meeting
as my/our proxy to act for me/us and on my/our behalf at the annual general meeting which will be held for the purposes of consideringand, if deemed fit, for the passing, with or without modification, the resolutions to be proposed thereat and at any adjournment thereof,and to vote for and/or against such resolutions and/or abstain from voting in respect of the shares registered in my/our name(s), inaccordance with the following (see note 3):
In Favour Against Abstain
1. Approval of annual financial statements
2. Re-appoint KPMG Inc as auditorsRe-appoint Mr C Esslemont as individual designated auditor
3. Election of director Mr TJ Matsau
4. Election of director Mr PJ Blunden
5. Approval of director’s emoluments
Signed at ................................................................................................................. on ...................................................................... 2008
Signature (see note 5) ....................................................................................................................................................................................
Assisted by me where applicable (see note 8) ...............................................................................................................................................
Please read the notes on the reverse side hereof.
1. A form of proxy is only to be completed by those
shareholders who hold shares in certificated form or are
recorded on sub-register electronic form in "own name". All
other beneficial owners who have dematerialised their
shares through a Central Securities Depository Participant
("CSDP") or broker and wish to attend the meeting must
provide the CSDP or broker with their voting instructions in
terms of the relevant custody agreement entered into
between them and the CSDP or broker.
2. A shareholder may insert the name of a proxy or the names
of two alternative proxies of his/her choice in the spaces
provided, with or without deleting "the chairman of the
meeting", but any such deletion must be initialed by the
shareholder. The person whose name is first on this form of
proxy and who is present at the meeting will be entitled to act
as proxy to the exclusion of those whose names follow.
3. Please insert an "X" in the relevant spaces indicating how
you wish your votes to be cast. However, if you wish to cast
your votes in respect of a lesser number of shares than you
own in the Company, insert the number of shares held in
respect of which you wish to vote. Failure to comply with the
above will be deemed to authorise the proxy to vote or
abstain from voting at the meeting as he/she deems fit in
respect of all the shareholders’ votes exercisable thereat. A
shareholder or his/her proxy is not obliged to use all the
votes exercisable by the shareholder or by his/her proxy, but
the total of the votes cast in respect of which abstention is
recorded may not exceed the total of the votes exercisable
by the shareholder or by his/her proxy.
4. The form of proxy appointing a proxy must reach the
registered office of the Company or the transfer secretaries,
Computershare Investor Services (Proprietary) Limited,
70 Marshall Street Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107 Johannesburg)
by no later than noon on Thursday 13 November 2008.
5. The completion and lodging of this form of proxy will not
preclude the relevant shareholder from attending the
meeting and speaking and voting in person thereat to the
exclusion of any proxy appointed in terms hereof.
6. Documentary evidence establishing the authority of a person
signing this form of proxy in a representative capacity must
be attached to this form of proxy, unless recorded by the
Company or waived by the chairman of the meeting.
7. Any alteration or correction made to this form of proxy must
be initialed by the signatory/ies.
8. A minor must be assisted by his/her parents or guardian
unless the relevant documents establishing his/her capacity
are produced or have been registered by the Company.
9. The chairman of the meeting may accept any form of proxy
which is completed, other than in accordance with these
notes, if the chairman is satisfied as to the manner in which
the shareholder wishes to vote.
Notes to the form of proxy
E L B G R O U P L I M I T E DELB Equipment, 14 Atlas Road, Anderbolt, Boksburg, 1459
PO Box 565, Boksburg, 1460Tel +27 11 306 0700Fax +27 11 918 7285
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