Unaudited Consolidated Condensed Interim Results For The Six Months Ended 31 December 2013 And Changes To The Board

Transcription

1 Rolfes Holdings Limited - Unaudited Consolidated Condensed Interim Results For The Six Months Ended 31 December 2013 And Changes To The Board - released 25 February 2014 Unaudited Consolidated Condensed Interim Results For The Six Months Ended 31 December 2013 And Changes To The Board ROLFES HOLDINGS LIMITED (Registration number 2000/002715/06) Share Code: RLF ISIN:ZAE ( Rolfes or the Group or the Company ) UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013 AND CHANGES TO THE BOARD Performance summary Turnover increased by 26, 2% to R517,6 million Export turnover increased by 35.1% to R87,0 million Attributable profit from continuing operations increased by 6,4% HEPS declined by 5,7% Cash generated by operations improved by R17, 0 million over comparative period CONDENSED CONSOLIDATED GROUP STATEMENTS OF COMPREHENSIVE INCOME for the period ended 31 December 2013 UNAUDITED UNAUDITED AUDITED SIX MONTHS SIX MONTHS YEAR 31 DEC 31 DEC 30 JUNE R 000 R 000 R 000 Revenue Cost of sales ( ) ( ) ( ) Gross profit Gross profit margin 21,4% 21,1% 20,9% Other operating income Operating expenses (71 613) (45 545) (96 851) Operating profit before interest Operating profit margin 8,1% 10,6% 12,3% Interest paid and finance charges (6 056) (5 628) (11 450) Income from investments Net profit before taxation Tax expenses (9 043) (9 682) (23 660) Profit and total comprehensive income for the period Attributable to: Owners of parent Non-controlling interest Attributable to: Continuing operations Discontinued operations (3 331) - - Reconciliation of headline earnings Attributable profit Adjustment for the after-tax effect of:

2 Loss/(Gain) from sale of fixed asset 39 (18) (11 968) Loss from associate Closure cost of resin plant Headline earnings Weighted average number of shares in issue ( 000) Earnings per share (cents) Basic 17,1 21,1 50,3 Headline 19,9 21,1 39,2 CONDENSED CONSOLIDATED GROUP STATEMENTS OF FINANCIAL POSITION as at 31 December 2013 UNAUDITED UNAUDITED AUDITED 31 DEC 31 DEC 30 JUNE R 000 R 000 R 000 ASSETS Non-current assets Plant and equipment Property Intangible assets Current assets Inventories Trade and other receivables Short term loans Value Added Tax asset Total assets EQUITY AND LIABILITIES Capital and reserves Share capital Share premium Treasury shares (868) (868) (868) Retained income Non controlling interest Non-current liabilities Interest-bearing liabilities Contingent consideration Outside shareholders loans Deferred tax liability Provisions Loss in associate Current liabilities Trade and other payables Cash and cash equivalents Current portion of interest-bearing liabilities Tax liability Provisions Short term loans Total equity and liabilities Number of shares in issue ( 000) Net Asset Value per share (cents) 243,4 197,5 231,4 Net tangible Asset Value per share (cents) 123,5 130,6 115,3

3 CONDENSED CONSOLIDATED GROUP STATEMENTS OF CHANGES IN EQUITY for the period ended 31 December Ordinary Share Retained Treasury Outside Total shares premium income shares share equity holders R 000 R 000 R 000 R 000 R 000 R 000 Balance at 30 June (868) Net profit for the period Dividends paid - - (5 180) - - (5 180) Balance at 31 December (868) Recognising of non - Controlling interest Net profit for the period Dividends paid - - (5 180) - - (5 180) Issue of new shares Balance at 30 June (868) Net profit for the period Dividends paid - - (5 430) - - (5 430) Balance at 31 December (868) CONDENSED CONSOLIDATED GROUP CASH FLOW STATEMENTS for the period ended 31 December 2013 UNAUDITED UNAUDITED AUDITED SIX MONTHS SIX MONTHS YEAR 31 DEC 31 DEC 30 JUNE R 000 R 000 R 000 Cash and cash equivalents at the beginning of the period (31 916) (1 833) (1 833) Cash flow generated from / (utilised in) operating activities (929) Net interest paid (6 056) (5 628) (11 038) Taxation paid (10 110) (6 817) (14 846) Dividends paid (5 430) (5 180) (10 360) Cash flow utilised in investing activities (17 076) (14 297) (57 317) Cash flow (utilised in) / generated from financing activities (1 433) Cash and cash equivalents end of the period (56 006) (33 281) (31 916) SEGMENTAL ANALYSIS Gross Operating Liabi- Revenue Profit Profit Assets lities R 000 R 000 R 000 R 000 R for the six months ended 31 December Industrial Chemicals - Continuing Discontinuing (2 243) (4 627) - -

4 Mining and Water chemicals Agricultural chemicals Other (6 346) Elimination of Intergroup items (31 226) Total Gross Operating Liabi- Revenue Profit Profit Assets lities R 000 R 000 R 000 R 000 R for the six months ended 31 December Industrial Chemicals Mining and Water chemicals Agricultural chemicals Other (5 582) Elimination of intergroup items (2 136) Total Gross Operating Liabi- Revenue Profit Profit Assets lities R 000 R 000 R 000 R 000 R for the twelve months ended 30 June Industrial chemicals Mining and water chemicals Agricultural chemicals Other (4 702) (13 024) Elimination of intergroup items and other (24 030)(45 805) Total The basis of preparation of the segmental analysis, include certain intercompany transactions being eliminated in the respective segmental results in the current and previous year s reporting. COMMENTARY GROUP OVERVIEW Revenue increased by 26, 2% to R 517, 6 million (December 2012: R 410, 2 million). Overall gross profit improved by 27.6% while EBITDA decreased slightly to R 46, 8 million (December 2012: R 47, 6 million). EBITDA is calculated as operating profits plus depreciation and amortisation of R 5 million for the period under review. Headline earnings per share decreased by 5,7% to 19, 9 cents (December 2012: 21, 1 cents). Exports amounted to R 87, 0 million (December 2012: R 64, 4 million) comprising 16,8% of total revenue for the six months to December 2013 (December 2012: 15, 7% of total revenue). This amounts to an increase of 35, 1% over the prior year. The increase is attributed mainly to export growth into the rest of Africa and Western Europe. The growth is in line with the Group s strategy to fast track its exports.

5 GROUP PRODUCT OFFERING Rolfes positioned itself strategically in various markets, locally and internationally, as a provider of industrial, agricultural, water and mining chemicals. Group companies manufacture and distribute a wide range of marketleading, high-quality chemical products to diverse industries including the coatings, plastics, vinyl, leather tanning, ink, metallurgical, cleaning, formulators, automotive, general manufacturing, agricultural, food, construction, home and personal care, water filtration, water treatment and water purification industries. The Group s international footprint now extends to North America, Asia, Africa, Eastern and Western Europe. The formation of a company and the set-up of operations in Romania are now complete. GROUP FINANCIAL PERFORMANCE Group revenue for the financial year to 31 December 2013 increased by 26, 2% to R 517, 6 million (December 2012: R 410, 2 million) with the PWM acquisitions now fully included for the six months. Gross profit increased to R 110, 5 million (December 2012: R 86, 6 million) with gross profit margins increasing to 21, 4% (December 2012: 21, 1%).The improvement in gross profit margins is mainly attributable to the higher margin PWM businesses. Operating costs increased due to inclusion of the PWM companies for the full six months, set up costs of the leather chemicals business, and expansion into Africa. Operating profit decreased to R 41, 8 million (December 2012: R 43, 5 million) at a margin of 8, 1% of turnover to December 2013 (December 2012: 10, 6%). The main reason for the decline is the weak performance of the pigment business for the period under review (part of industrial chemicals). Headline earnings per share and fully diluted headline earnings per share decreased by 5,7 % to 19, 9 cents (December 2012: 21, 1 cents). The total net asset value increased to R 322, 4 million (June 2013: R 301, 2 million). Earnings per share decreased by 19,0 % to 17, 1 cents (December 2012: 21, 1 cents). The movement between the earnings per share and headline earnings per share is mainly attributable to the closure cost of the resin plant. The net asset value per share increased to 243, 4 cents (June 2013: 231,4 cents) while net tangible asset value per share increased to 123,5 cents (June 2013: 115,3 cents), based on (June 2013: ) shares in issue. Finance costs increased slightly to R 6, 1 million (December 2012: R 5, 6 million) mainly due to higher interest paid on the Agchem Group overdraft and short term debtors funding facilities. Interest cover reduced to 6, 9 times (December 2012: 7, 7 times) with the total debt (interest-bearing) equity ratio increasing to 0, 40 for December 2013 (June 2013: 0, 35). GROUP CASH FLOW PERFORMANCE The increase in net working capital investment since 30 June 2013 of R 32, 3 million includes an increase in inventory of R 17, 9 million and an increase in accounts receivable of R 18, 0 million. Accounts payable and value added tax represents an increase of R

6 3, 6 million. Debtors days decreased to 54, 2 days (June 2013: 61,9 days) due to improved debt collection management. Stock days excluding stock in transit increased to 100, 6 days (June 2013: 98 days) mainly as a result of the Agri-chemicals season, being extended by approximately six weeks due to late rains. Creditor days excluding stock in transit, decreased to 61, 4 days (June 2013: 69,3 days). The Group incurred capital expenditure of R 13, 0 million (December 2012: R 14, 3 million) mainly to improve, upgrade and increase the capacity of the agricultural and industrial production and logistics facilities, and further investment in agricultural product development. Agricultural product development costs capitalised for the period amounted to R 5, 3 million. Investment incurred in the upgrading of the Waltloo factory amounted to R1, 2 million and the Jet Park factory amounted to R 4 million. OPERATIONAL REVIEW Industrial Chemicals Turnover increased by 3, 6% to R 259, 1 million (December 2012: R 250, 2 million). Gross profit margins increased to 16, 0% (December 2012: 15, 4%), as a result of improved buying and product mix changes. The division s achievements were negatively influenced by the weaker pigments results, due to previous production inefficiencies, now corrected. Local trading suffered due to the slow upturn of the economy and short and late supply of certain key raw materials and traded products. The Group decided to discontinue certain operations by exiting the negative margin resin business and closed the plant during the six months under review. Operating costs increased to R 22, 6 million (December 2012: R 17, 7 million) mainly due to continued investment in the new leather chemicals division. The division aims to continue its future growth and restoration of its operating margins to accepted levels. The planning phase is well underway for the proposed expansion of the current organic pigment manufacturing, increasing capacity from 50 tons to 200 tons per month. The completion of the new plant is expected during This project will require substantial capital, currently estimated at R 65 million and should yield lucrative future returns. Agricultural Chemicals Turnover increase by 14, 8% to R 155, 3 million (December 2012: R 135, 3 million).gross profit margins remained constant at 29, 2% (December 2012: 31, 1%).The divisions results were negatively influenced by the agri-chemicals season being extended by approximately six weeks due to late and interrupted rain patterns in certain areas. The extended season should result in improved future results for the division. Operating costs increased to R 21, 7 million (December 2012: R 18, 6 million) due to increased investment in human capital, marketing

7 and expansion costs into Romania and Africa. Focus for the next six months remains on new product development and increasing exports to North America, Africa and Eastern Europe. The construction of a pilot plant for the production of Organic Plant Growth Promoting Rhizobacteria (PGPR), is still in its planning phase and is expected to be completed and in production during The capital cost of this project is currently estimated to be in excess of R20 million. The PGPR s biological product developments are in line with world sustainable agricultural trends to supply greener agricultural products. Registrations on these products have been submitted and are awaiting approval. The licensing agreement with the University of Pretoria, the development partner, is in the process of being finalised. It is expected that these products will yield attractive future returns. The Company is in final negotiations to acquire 100% of the equity of Agchem Properties (Pty) Ltd, which owns the Waltloo land and buildings and adjacent vacant land in Pretoria, for approximately R17 million. A full announcement on the acquisition will be made in due course. The adjacent vacant land will be developed to expand the current manufacturing and storage facilities as well as housing the new PGPR plant. The cost of this development is currently being calculated, but is estimated to be in excess R25 million (excluding the PGPR plant). Mining and Water Chemicals Turnover increased by 183, 7% to R 66, 6 million (December 2012: R 23,5 million), mostly attributable to the PWM acquisition which is now included for the full six month. Gross profit margins at 38, 5% (December 2012: 20, 8%) increased as a result of the inclusion of the PWM acquisition which operates at higher margins. Operating costs increased by 642, 7% due to the inclusion of the acquisition with overhead costs now amounting to R 17, 7 million (December 2012: R 2, 4 million). Growth opportunities in this division are constantly explored with excellent prospects in Botswana and the rest of Africa. A large water purification contract in excess of R30 million has been secured in Botswana with a local construction company and the water utilities department. The silica operation has yielded satisfactory results for the period under review. The operation continued to implement plant upgrades to comply with DMR and other relevant legislation. FORWARD LOOKING The Group continues to pursue the large projects mentioned above. To implement these projects in full, will require capital estimated to be in excess of R110 million (excluding the acquisition of Agchem Properties which will be funded by long term debt). These projects will be funded by way of a combination of long term debt and share

8 capital. Shareholders will be advised of these future capital requirements as and when these projects are bedded down and come to fruition. New and extended product development in all the divisions will continue to present growth prospects and we look forward to extending our market share in the USA, Africa and Western and Eastern Europe with current or new long-term partners. The Group currently has operational offices outside South Africa, in Botswana, Nigeria, Zambia and Romania. New operations in East Africa and the USA are being planned for Also, as mentioned in our 2013 report to shareholders, management will focus in 2014 on an operational level to optimise and improve our working capital investment, consolidate/reduce overheads, as well as improving on the Group s safety, health and environmental programmes and initiatives. Management also constantly review operations to identify restructuring opportunities ensuring the rightsizing of our cost base. Progress has been made but these financial and operational efforts are continuing. Statements contained throughout this announcement regarding the prospects of the Group have not been reviewed or reported on by the Group s external auditors. DIVIDENDS The Group paid a final dividend to shareholders of 5 cents per share on 21 October To accommodate the Group s planned capital and footprint expansions, the Board decided to invest its current capital in these projects and will therefore not declare an interim dividend for the six months to 31 December 2013 and revert to an annual dividend payment policy. The Board will evaluate the merits of the final dividend during its September 2014 board meeting. CORPORATE GOVERNANCE The Group recognises the recommendations of King III and remains committed to sound corporate governance and sustainability practices. BASIS OF PREPARATION The Board acknowledges its responsibility for the preparation of the unaudited condensed consolidated interim financial statements. The unaudited condensed consolidated interim financial statements for the six months ending 31 December 2013 have been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as Issued by the Accounting Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards Council, the International Accounting Standard 34 (IAS 34), the JSE Listings Requirements and the South African Companies Act. ACCOUNTING POLICIES Accounting policies The unaudited condensed consolidated interim financial statements do not include all the information required by IFRS for full financial statements. The accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are in terms of IFRS and consistent with

9 those applied in the preparation of the annual financial statements for the year ended 30 June Related party transactions The Group companies entered into various related party transactions in the ordinary course of their business. These transactions are no less favourable than those entered into with third parties and occur on an arm s length and commercial basis. CHANGES TO THE BOARD OF DIRECTORS In compliance with section 3.59(b) of the Listings Requirements of the JSE Limited, the Board announces that Mr Lungisa Dyosi has resigned as non-executive director. The Group would like to thank Lungisa for his valuable contribution during his tenure and wishes him well in his future endeavours. For and on behalf of the Board BT Ngcuka E van der Merwe Chairman Chief Executive Officer 25 February 2014 Jetpark Company secretary: J Schlebusch Registered office: 12 Jet Park Road, Jet Park, Boksburg, 1459 Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg 2001 Directors: BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), AJ Fourie*, L Lynch (Financial Director), KT Nondumo*#, T Tshivhase*#, S Mafoyane*#, M Teke* *Non-executive #Independent Sponsor: Grindrod Bank Limited Registered auditors: SizweNtsalubaGobodo Incorporated Preparer: L Lynch Date: 25/02/ :05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.