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Omnia - Reviewed Results For The Financial Year Ended 31 March 2004

Release Date: 21/06/2004 09:17:00      Code(s): OMN
Omnia - Reviewed Results for the financial year ended 31 March 2004             
OMNIA HOLDINGS LIMITED (Incorporated in the Republic of South Africa)           
(Registration number 1967/003680/06) Share code: OMN  ISIN: ZAE000005153        
("Omnia" or the "Group")                                                        
-  Five year earnings target achieved                                           
-  Real growth of 15% over the last five years                                  
-  Turnover, including Prochem, up 42%                                          
-  Headline earnings of R174 million                                            
-  Operating cashflows remain strong                                            
-  Debt:equity after Prochem acquisition at 28%                                 
Commentary                                                                      
Introduction                                                                    
Omnia, a specialist chemical services company providing customised solutions in 
the agriculture, mining and chemical markets, today announced results for the   
year ended 31 March 2004.                                                       
The Group"s strategy is focused on responding to the needs of its customers and 
the commercial challenges they face through the deployment of advanced          
technology solutions and innovative products in the markets which the Group     
services.                                                                       
The Board is pleased with the results for the year, which have reverted to the  
historical earnings growth trend even though the earnings have declined. As     
indicated in the Group"s annual report for the year ended 2003 and again in the 
interim results announcement for the six months ended 30 September 2003, the    
2003 financial year was an exceptional one. This was primarily due to unusually 
high export volumes and margins driven by the weak rand and the R27,4 million   
settlement of an outstanding loss of profits claim for a compressor failure at  
the Group"s Sasolburg plant during 2000.                                        
Financial Review                                                                
Group revenue increased by 42% to R3,3 billion (2003: R2,3 billion), reflecting 
the inclusion of Prochem"s revenue for the seven months to March 2004. The      
inclusion of Prochem"s results also impacted on operating costs before          
depreciation and net of other income, already adversely affected by the non-    
recurrence of the insurance claim proceeds. This resulted in an increase of 32% 
compared to the previous year. The Group"s operating margin, which now includes 
Prochem, amounted to 10,1%, declining from the exceptional 18,6% for the prior  
year ended March 2003. However, this compares favourably with the 9,3% achieved 
for the year ended March 2002, before the inclusion of Prochem.                 
Net interest paid increased to R35,3 million (2003: R15,9 million) due to the   
debt funding to partially finance the acquisition of Prochem. Fair value losses 
of R5,2 million and R16,1 million, incurred during the year and following the   
application of the new accounting standard AC 133: Financial Instruments -      
Recognition and Measurement, have been disclosed.                               
The R5,2 million loss relates to commodity hedging contracts, now required to be
disclosed in terms of AC 133 and previously accounted for within cost of sales. 
The R16,1 million relates to forward exchange contracts in respect of the       
Group"s foreign currency commitments during a phase of the strengthening Rand,  
which were previously accounted for and included within operating profit.       
Earnings have declined in accordance with expectations, but are in line with the
historical earnings growth trend.                                               
The Group"s headline earnings and headline earnings per share declined to R     
174,3 million (2003: R239,9 million) and                                        
R4,44 per share (2003: R6,32 per share), respectively. The allotment of 1,831   
million shares to the management vendors of Prochem as part of the purchase     
price has also had a dilutionary effect of almost 3% on headline earnings per   
share.                                                                          
Compared to the headline earnings per share achieved for the more comparable    
year to March 2002, growth in headline earnings per share, after the inclusion  
of Prochem, has been a pleasing 56%, notwithstanding the dilution referred to   
above.                                                                          
The strengthening of the Rand since March 2003 resulted in a R40 million        
decrease in the foreign currency reserve. This represents the movement in the   
exchange rate as it impacts on the Group"s US Dollar denominated assets held    
offshore.                                                                       
Intangible assets of R461 million include goodwill, trademarks, patents and     
distribution contracts, mainly arising from the acquisition of Prochem. Net     
current assets and liabilities have increased with the addition of the Prochem  
working capital components.                                                     
Cash flow from operating activities of R214 million (2003: R358 million) was    
considerably better than anticipated despite a high taxation payment of R124    
million this year. The strong cash flow allowed the Group to pay down debt,     
resulting in a much  lower than expected debt: equity ratio of 28%, achieved    
despite the R200 million term loan introduced to partly fund the acquisition of 
Prochem in September 2003. This loan is repayable in three equal annual         
installments, with the first one being due in February 2005.                    
Operational Review                                                              
AGRICULTURE                                                                     
Hectares planted to maize in South Africa increased significantly in 2002/03,   
resulting in fertilizer volumes rising in the previous comparable period by     
about 18% above a 14-year average. This fertilizer demand increase was fuelled  
by a relatively high maize price of almost R2 000 per ton during 2003. In       
addition, the weaker Rand during last year facilitated an unprecedented increase
in fertilizer exports at favourable margins.                                    
With the reduction in the maize price to below R1 000 per ton, drier soil       
conditions and the much stronger Rand in the 2004 financial year, fertilizer    
sales volumes returned to their previous levels in the local markets. Given the 
tough adverse weather conditions at the beginning of the season, the return to a
14 year average in annual plant food consumption indicates the resilience of the
industry and demonstrates the strength of Omnia"s value-added offer to its      
resilient farming customers in South Africa.                                    
The volume decrease, coupled with a reduction in prices, resulted in fertilizer 
sales revenues decreasing by 11% from the exceptionally high levels achieved in 
the previous year to R1,6 billion (2003:R1,8 billion).                          
The ratio between the international price of urea, a widely traded fertilizer   
commodity, and that of ammonia, the raw material for the nitrogen component in  
fertilizers, was also less favourable than in the previous comparable period.   
Coupled with the strength of the Rand, operating margins decreased to 13% (2003:
21%).                                                                           
The Group"s production facilities in South Africa performed extremely well,     
making it possible to double the volumes sold into the wholesale market.        
The Group"s speciality fertilizer operations in Australia and New Zealand,      
particularly the humate business in Australia, are progressing well. The joint  
venture with Ravensdown, a large fertilizer distributor in New Zealand,         
commenced operations toward the end of the financial year and progress is on    
track.                                                                          
MINING                                                                          
Revenues have increased by 37% to R577 million (2003: R422 million) following   
the inclusion of Prochem"s existing mining business and the higher production   
levels at South African coal mines. However, sales were negatively impacted by  
the strength of the Rand, particularly in respect of African operations.        
Operating margins declined marginally to 11% (2003: 12%) after absorbing the    
expected losses from the electronic detonator business. An increase in value    
added services and the introduction of a number of innovative cost reduction    
initiatives in the rest of the mining business limited the drop in margin.      
Significant strides have already been made in improving and perfecting the      
detonator technology and the electronic detonator business is on schedule to    
turn profitable by March 2006.                                                  
In line with Omnia"s focus on Responsible Care T, Bulk Mining Explosives        
achieved ISO 9000 accreditation at a number of its key production sites and is  
currently working towards attaining ISO 14 000 and ISO 18 000 accreditation.    
CHEMICALS                                                                       
Omnia acquired Prochem, the leading chemical warehousing and distribution       
company in South Africa, with effect from 1 September 2003. Prochem is strongly 
service-based and trades across a wide range of products in virtually every     
industry in the country. It interfaces with a large customer base, sources its  
requirements from over 100 different suppliers and represents a number of       
leading international principals.                                               
The integration of the Prochem business has been smooth. No unexpected costs    
have arisen, with fees limited to the costs directly related to negotiations and
legal formalities of the acquisition. These costs of R6 million have been       
capitalised to the purchase consideration.                                      
Prochem continues on its historic trend of growing volumes, which, to a large   
extent, off-set the negative impact of the Rand on its results.                 
Due to the inclusion of Prochem for the seven months to March 2004, chemical    
revenues of R1,1 billion are not directly comparable with the R94 million of the
prior year, which relate to the Intaba business only.                           
Partnership with Management and Employees                                       
The Group is pleased to announce that the Group"s internal five-year performance
target, approved by shareholders in 1999, has been surpassed by 21%. This is the
third consecutive five-year performance target that has been exceeded by the    
Group.                                                                          
In June 1999, two broad based employee share schemes known as the "Partnership  
with Management Scheme" and the "Partnership with Employees Scheme" were put in 
place. The same earnings target was set for both schemes. In terms of the rules 
of the Partnership with Employee Scheme, employees, the majority of which are   
previously disadvantaged persons, will be granted 662 350 share options to be   
exercised at the end of July 2004. In terms of the Partnership with Management  
Scheme, convertible preference shares, which members of management purchased and
paid for five years ago, will convert into 1 424 000 ordinary shares in Omnia.  
The dilutionary effect of both the Partnership with Employee Scheme and the     
Partnership with Management scheme has been taken into account in the weighted  
average number of fully diluted shares in issue.                                
Prospects                                                                       
The Prochem acquisition has bedded down well and the Group is on track to       
exploit the inherent synergies and opportunities across all the businesses.     
Prochem will continue to grow its volumes.                                      
The production of maize has returned to sustainable levels, resulting in more   
stable pricing. It is therefore expected that the national fertilizer market    
will remain in line with the long-term average of two million tons per annum.   
International fertilizer prices, although remaining volatile, are still at a    
high level in US Dollar terms and are expected to remain so for the coming      
season.                                                                         
The continuing strong Rand remains one of the most important considerations     
affecting financial performance of the Group in the near term. Export margins   
will therefore remain depressed as long as these conditions prevail.            
The outlook for mining continues to be positive and with a reduction in the loss
associated with developing the electronic detonator business, it can be expected
that this division"s earnings for the forthcoming year will be stronger than in 
the year under review.                                                          
Group earnings are expected to show an improvement over the results of the year 
ended March 2004.                                                               
Capitalisation Award                                                            
At the time of the release of the interim results, shareholders were advised    
that an interim dividend would not be paid but would instead be considered for  
inclusion in the final dividend. Mindful of the further growth prospects and as 
a consequence the desire to strengthen the balance sheet, the directors have    
resolved to award capitalisation shares, emanating out of distributable         
reserves, to ordinary shareholders recorded in the company"s register at the    
close of business on Friday, 16 July 2004 ("record date"). Shareholders will    
have the right in respect of all or part of their shareholdings to elect to     
receive a cash dividend of 120 cents per ordinary share ("the cash election")   
for the year ended 31 March 2004, which will be declared only on those ordinary 
shares for which capitalisation shares are not allocated.                       
If the cash election is not made, shareholders will be deemed to have elected to
receive capitalisation shares.                                                  
Ratio of capitalisation award                                                   
The rounded number of capitalisation shares to be awarded will be determined by 
multiplying 120 cents by 1,08333 and dividing the result (130 cents) by R29,81  
(i.e. the weighted average traded price of the ordinary shares of the company on
the JSE Securities Exchange South Africa ("JSE") for the three trading days     
ended at the close of business on Thursday, 17 June 2004) multiplied by the     
number of shares held by a shareholder on the record date.                      
Administration                                                                  
The last day to trade in the company"s shares for purposes of entitlement to the
capitalisation award is Friday, 9 July 2004 and dividend cheques and share      
certificates (where required) pursuant thereto will be posted to certificated   
shareholders on or about Monday, 19 July 2004. CSDP and/or broker accounts will 
be credited/updated on or about Monday,                                         
19 July 2004 in respect of dematerialised shareholders. Share certificates may  
not be dematerialised or rematerialised between Monday, 12 July 2004 and Friday,
16 July 2004, both days inclusive.                                              
Application will be made to the JSE for the maximum number of capitalisation    
shares to be listed with effect from the commencement of business on or about   
Monday, 12 July 2004 when the company"s shares will be quoted "ex" the          
capitalisation award.                                                           
A circular relating to the capitalisation award will be posted to shareholders  
on or about Monday, 28 June 2004.                                               
NJ CROSSE                     RB HUMPHRIS                                       
Chairman                      Managing Director                                 
21 June 2004                                                                    
CONDENSED CONSOLIDATED INCOME STATEMENTS                                        
For the year ended 31 March 2004                                                
Reviewed                    Audited                   
R"000                         2004            %          2003                   
Revenue                  3 278 590           42     2 315 078                   
Cost of sales           (2 253 656)                (1 376 023)                  
Gross profit             1 024 934            9       939 055                   
Operating costs                                                                 
before depreciation                                                             
and net of other income    621 259)           32     (471 199)                  
EBITDA                     403 675           (14)     467 856                   
Depreciation and                                                                
amortisation of intangible                                                      
assets other than goodwill   3 120)           68      (37 481)                  
Amortisation of goodwill    (8 108)                                             
Operating profit           332 447           (23)     430 375                   
Finance costs                                                                   
-  Net interest paid       (35 323)          122      (15 922)                  
-  Net monetary loss        (4 077)                    (8 862)                  
Fair value loss on                                                              
financial instruments      (50 609)                                             
-  Forward contract                                                             
transactions not                                                                
qualifying as hedges        (45 363)         81       (25 128)                  
-  Other financial                                                              
instruments                 (5 246)                                             
Profit before taxation     242 438         (36)       380 463                   
Taxation                   (75 770)        (46)      (139 708)                  
Profit after taxation      166 668         (31)       240 755                   
Minority interest             (505)        (40)          (846)                  
Net profit for the year    166 163         (31)       239 909                   
Reconciliation of Headline                                                      
Earnings                                                                        
Net profit for the year    166 163         (31)       239 909                   
Amortisation of goodwill     8 108                                              
Headline earnings          174 271         (27)       239 909                   
Basic earnings per                                                              
share (cents)                423,1         (33)         631,9                   
Headline earnings per                                                           
share (cents)                443,7         (30)         631,9                   
Fully diluted earnings                                                          
per share (cents)            394,7         (33)         587,7                   
Fully diluted headline                                                          
earnings per share (cents)   413,9         (30)         587,7                   
Dividends per share (cents)   72,5 *                    129,0                   
Weighted average number                                                         
of shares in issue ("000)   39 277           3         37 969                   
Weighted average number of                                                      
fully diluted shares                                                            
in issue ("000)             42 102           3         40 820                   
Fully diluted                                                                   
earnings (R"000)           166 163          (31)      239 909                   
EBITDA interest cover         11,4          (61)         29,4                   
* In respect of prior year                                                      
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS                                     
For the year ended 31 March 2004                                                
                           Reviewed                    Audited                  
R"000                          2004          %            2003                  
Operating profit            332 447        (23)        430 375                  
Depreciation and                                                                
amortisation                 71 228         90          37 481                  
Adjustment for non-cash                                                         
and other items             (72 640)                   (77 638)                 
Finance costs and taxation (159 768)       186         (55 923)                 
Generated from                                                                  
working capital              71 101         (4)         73 833                  
Available from operations    42 368        (41)        408 128                  
Dividends paid              (28 584)                   (49 743)                 
Cash inflow from                                                                
operating activities        213 784        (40)        358 385                  
Cash outflow from                                                               
investing activities       (671 226)       595         (96 576)                 
Purchase of business       (593 779)                   (18 126)                 
Other investing                                                                 
activities                  (77 447)        (1)        (78 450)                 
Cash inflow/(outflow) from                                                      
financing activities        193 789                    (47 674)                 
Net (decrease)/increase                                                         
in cash                    (263 653)                   214 135                 
Net cash/(overdrafts)                                                           
at beginning of year        281 967                     57 097                  
Effects of exchange                                                             
rate movements               3 436                      10 735                  
Net cash at end of year     21 750                     281 967                  
CONDENSED CONSOLIDATED BALANCE SHEETS                                           
As at 31 March 2004                                                             
Reviewed                     Audited                   
R"000                        2004            %           2003                   
Assets                                                                          
Property, plant                                                                 
and equipment              534 240           18       451 996                   
Intangible assets          460 958                     14 761                   
Unlisted investments                                                            
and loans                       60                        127                   
Current assets           1 074 300           27       848 513                   
                         2 069 558           57     1 315 397                   
Equity and liabilities                                                          
Ordinary shareholders"                                                          
equity                     715 529           24       578 114                   
Minority interest            2 005          (15)        2 366                   
Deferred taxation           62 935            9        57 499                   
Non-current interest                                                            
bearing debt               142 637          722        17 349                   
Current liabilities      1 146 452           74       660 069                   
                         2 069 558           57     1 315 397                   
Net interest-bearing                                                            
debt (funds)               201 767                   (252 784)                  
Net asset value per                                                             
share (Rand)                 17,97           17         15,32                   
Directors" valuation of                                                         
unlisted shares                                            69                   
Capital expenditure                                                             
Incurred                    80 325                     86 534                   
Authorised and committed    28 921                      5 524                   
Authorised but not                                                              
contracted for             114 722                     81 905                   
SEGMENTAL ANALYSIS                                                              
For the year ended 31 March 2004                                                
Reviewed                    Audited                   
R"000                         2004            %          2003                   
Revenue                  3 278 590           42     2 315 078                   
Agriculture              1 778 720           (8)    1 928 184                   
-  Less: Intersegmental                                                         
sales                     (169 085)          31      (128 759)                  
Mining                     577 445           37       421 559                   
Chemical                 1 095 969        1 065        94 094                   
-  Less: Intersegmental                                                         
sales                       (4 459)                                             
Operating profit           332 447          (23)      430 375                   
Agriculture                203 690          (45)      373 536                   
Mining                      64 238           31        49 126                   
Chemicals                   64 519          736        7 713                    
Statements of Changes in Ordinary Shareholders" Equity                          
                                   Non-                                         
Stated distributable   Retained                              
R"000             capital      reserves   earnings      Total                   
At 1 April 2002    64 017        95 290    305 985    465 292                   
Net profit                                                                      
attributable to                                                                 
ordinary                                                                        
shareholders                               239 909    239 909                   
Decrease in                                                                     
foreign currency                                                                
translation reserve             (70 918)              (70 918)                  
Treasury shares    (6 865)                             (6 865)                  
Ordinary dividends                                                              
paid                                       (49 304)   (49 304)                  
At 31 March 2003   57 152        24 372    496 590    578 114                   
Net impact of                                                                   
adoption of AC133                            1 264      1 264                   
At 1 April 2003                                                                 
restated           57 152        24 372    497 854    579 378                   
Net profit                                                                      
attributable to                                                                 
ordinary                                                                        
shareholders                               166 163    166 163                   
Decrease in foreign                                                             
currency                                                                        
translation reserve             (40 432)              (40 432)                  
Ordinary shares                                                                 
issued             35 632                              35 632                   
Treasury shares     2 506                               2 506                   
Ordinary dividends paid                    (27 718)   (27 718)                  
At 31 March 2004   95 290       (16 060)   636 299    715 529                   
NOTES                                                                           
Accounting policies                                                             
These condensed consolidated preliminary financial statements are prepared in   
accordance with Generally Accepted Accounting Practice in South Africa,         
including AC127: "Interim Financial Statements", which is relevant for          
preliminary financial information, and Schedule 4 of the South African Companies
Act. The accounting policies used in the preparation of the preliminary         
financial statements are consistent with those used in the annual financial     
statements for the year ended 31 March 2003, except for the adoption of AC133:  
"Financial Instruments - Recognition and Measurement" ("AC133") on 1 April 2003.
In accordance with AC133, the comparative financial information for the year    
ended 31 March 2003 and 2002 have not been restated. The impact of the adoption 
of this standard is as follows:                                                 
Opening retained earnings have been restated to record a fair value profit of   
R1,3 million in respect of commodity contracts at 1 April 2003.                 
A fair value loss of R5,2 million in respect of commodity contracts was recorded
in the income statement during the year.                                        
-  The company has historically recorded its foreign exchange contracts ("FEC") 
in accordance with the requirements of AC133, and therefore no opening retained 
earnings adjustments was required in respect of these contracts. The fair value 
loss on FEC contracts recorded in the income statement during the year is R16,1 
million.                                                                        
Acquisition of Prochem business                                                 
On 1 September 2003, the Group acquired the business and assets of Prochem      
(Proprietary) Limited for a purchase consideration of approximately R629,4      
million. Goodwill of R280,9 million, being the excess of the purchase           
consideration over net assets acquired was recorded and is being amortised on a 
straight-line basis over 20 years, being its estimated useful life.             
The purchase consideration of R629,4 million was allocated to net assets of     
R163,2 million, intangible assets other than goodwill of R185,3 million with the
balance of R280,9 million being allocated to goodwill. Intangible assets other  
than goodwill are being amortised on a straight-line basis over periods between 
10 and 20 years, based on their estimated useful lives. Goodwill is being       
amortised over 20 years.                                                        
The purchase consideration has been funded by:                                  
-  a R200m term facility (R66,7 million has been included in current liabilities
with the balance of R133,3 million included in non-current liabilities);        
-  R35,6m through an issue of 1 831 019 Omnia shares with a no par value of     
R19,46 per share; and                                                           
-  the balance of R393,8m was financed out of cash.                             
There is a security structure in place in terms of which a special purpose      
vehicle ("SPV")  has provided guarantees to the Group"s banking facility        
providers. The main operating companies as well as various other Group companies
have in turn provided the SPV with indemnities and guarantees.                  
Furthermore, as security for the loans that have been entered into, some fixed  
assets and moveable assets at the company"s plant at Sasolburg (as opposed to   
other plants) have been encumbered by a mortgage and a general notarial bond    
respectively in favour of the SPV.                                              
Additionally, receivables arising only out of the South African operations of   
the Group have also been ceded in favour of the SPV.                            
These securities have been put in place in respect of the net interest-bearing  
debt comprising the R200 million loan facility and other short-term facilities. 
Hyperinflation                                                                  
The hyperinflation adjustments, as required by the accounting standard AC124    
"Financial Reporting in Hyperinflationary Economies", result from the continued 
devaluation in the Zimbabwean Dollar. The most significant adjustment is a      
reduction in gross profit for the year by R13,1 million. The net impact to the  
group, is a net loss of R17,8 million.                                          
Dividends                                                                       
A dividend of 72,5 cents per share was declared on 10 June 2003 in respect of   
the previous year. The dividend is reflected in the current year ended 31 March 
2004.                                                                           
Cash flow statement                                                             
Non-cash flow items on the cash flow statement comprise foreign exchange and    
FCTR movements and hyperinflation adjustments.                                  
Commitments                                                                     
The future minimum lease payments under non-cancelable operating leases are R5,2
million within one year and R3,9 between two and five years, giving a total of  
R9,1 million.                                                                   
Forward contract transactions                                                   
Forward cover costs of R45,4 million include an amount of R6,5 million in       
respect of forward exchange contracts entered into in respect of foreign        
denominated loans from group companies.                                         
Headline earnings per share                                                     
The headline earnings per share is calculated by dividing the headline earnings 
by the weighted average number of ordinary shares in issue, which excludes      
shares held as treasury shares. The headline earnings is adjusted for R8,1      
million in respect of goodwill amortised.                                       
Review opinion                                                                  
The condensed consolidated financial information for the year ended 31 March    
2004 included in this report has been reviewed by the auditors,                 
PricewaterhouseCoopers Inc. A review opinion is available for inspection at the 
company"s registered office during normal business hours.                       
Directors                                                                       
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz- 
Gibbon, RB Humphris* (Group Managing Director), Prof SS Loubser, Dr WT Marais   
(Alternate to WT Marais), WT Marais (Deputy Chairman), JG Pretorius, TR Scott*, 
PA Springett                                                                    
*Executive Directors                                                            
Registered office                                                               
1st Floor, Omnia House,                                                         
13 Sloane Street, Epsom Downs,                                                  
Bryanston, Sandton                                                              
PO Box 69888, Bryanston 2021,                                                   
Tel: (011) 709-8888                                                             
Transfer secretaries                                                            
Ultra Registrars (Pty) Ltd                                                      
11 Diagonal Street, Johannesburg 2001                                           
PO Box 4844, Johannesburg 2000                                                  
Date: 21/06/2004 09:17:17 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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