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RLF - Rolfes Technology Holdings Limited - Audited results for the twelve months

Release Date: 19/09/2007 12:00:02      Code(s): RLF
RLF - Rolfes Technology Holdings Limited - Audited results for the twelve months
                                          ended 30 June 2007                    
ROLFES TECHNOLOGY HOLDINGS LIMITED                                              
(Registration number 2000/002715/06)                                            
Share Code: RLF                                                                 
("Rolfes" or "the group")                                                       
-  Turnover increased by 37% to R225 million                                    
-  Operating profit increased by 42% to R31 million                             
-  HEPS increased by 51% to 20,9 cents per share                                
-  Assets increased by R46 million to R141 million                              
-  Debt reduced from R38 million to R18 million                                 
-  2007 Forecast earnings as per prospectus exceeded by 4%                      
CONSOLIDATED INCOME STATEMENTS                                                  
for the year ended 30 June                                                      
                                                2007        2006                
R`000       R`000                
Revenue                                       224 727     164 003               
Cost of sales                                (172 011)   (128 671)              
Gross profit                                   52 716      35 332               
Other operating income                          2 035       4 534               
Operating expenses                            (24 185)    (18 384)              
Operating profit before interest               30 566      21 482               
Interest paid and finance charges              (4 477)     (4 193)              
Income from investments                            84          68               
Net profit before taxation                     26 173      17 357               
Tax expenses                                   (7 123)     (2 816)              
Profit for the year                            19 050      14 541               
Attributable to:                                                                
Equity holders of parent                       19 050      14 554               
Minority interest                                   -         (13)              
                                              19 050      14 541                
Earnings per share (cents)                                                      
- Basic                                          20,9        17,1               
- Diluted                                        20,9        17,1               
- Headline                                       20,9        13,8               
- Diluted headline                               20,9        13,8               
Dividend per share - declared                                                   
 and paid (cents)                                2,2         2,8                
CONSOLIDATED BALANCE SHEETS                                                     
as at 30 June                                                                   
                                                2007        2006                
                                               R`000       R`000                
Non-current assets                             54 184      43 201               
Plant and equipment                            28 404      17 656               
Property                                       16 680      16 680               
Intangible assets                               9 100       7 468               
Deferred tax asset                                  -       1 397               
Current assets                                 86 803      51 596               
Inventories                                    36 740      23 884               
Trade and other receivables                    49 624      27 372               
Financial asset                                    36           -               
Short-term loans                                  353         340               
Value Added Tax receivable                         50           -               
Total assets                                  140 987      94 797               
EQUITY AND LIABILITIES                                                          
Capital and reserves                           79 979      37 726               
Share capital                                   1 025           -               
Share premium                                  24 864           -               
Retained income                                51 897      34 847               
Revaluation reserve                             2 193       2 193               
Interest of shareholders                       79 979      37 040               
Minority interest                                   -         686               
Non-current liabilities                         6 787      12 747               
Interest-bearing liabilities                    5 512      12 462               
Deferred tax liability                            970           -               
Provisions                                        305         285               
Current liabilities                            54 221      44 324               
Trade and other payables                       38 658      13 565               
Cash and cash equivalents                       8 116      21 740               
Current portion of interest-bearing                                             
liabilities                                   4 126       3 867                
Value Added Tax liability                           -         393               
Tax liability                                   2 900       4 405               
Provisions                                        421         354               
Total equity and liabilities                  140 987      94 797               
GROUP STATEMENTS OF CHANGES IN EQUITY                                           
for the year ended 30 June                                                      
Ordinary   Share  Retained  luation                
                               shares premium    income  reserve                
                                R`000   R`000     R`000    R`000                
Balance at 30 July 2005              -       -    22 693    2 193               
At acquisition                       -       -         -        -               
Net profit for the year              -       -    14 554        -               
Dividends declared                   -       -    (2 400)       -               
Balance at 30 June 2006              -       -    34 847    2 193               
Derecognising of minority                                                       
 interest                           -       -         -        -                
Issue of new shares                125  27 183         -        -               
Capitalisation of share premium    900    (900)        -        -               
Capitalisation of listing                                                       
 expenditure                        -  (1 419)        -        -                
Net profit for the year              -       -    19 050        -               
Dividends declared and paid          -       -    (2 000)       -               
Balance at 30 June 2007          1 025  24 864    51 897    2 193               
                                                Minority   Total                
                                                interest  equity                
                                                   R`000   R`000                
Balance at 30 July 2005                                -   24 886               
At acquisition                                        699     699               
Net profit for the year                               (13) 14 541               
Dividends declared                                      -  (2 400)              
Balance at 30 June 2006                               686  37 726               
Derecognising of minority                                                       
 interest                                           (686)   (686)               
Issue of new shares                                     -  27 308               
Capitalisation of share premium                         -       -               
Capitalisation of listing                                                       
 expenditure                                           -  (1 419)               
Net profit for the year                                 -  19 050               
Dividends declared and paid                             -  (2 000)              
Balance at 30 June 2007                                 -  79 979               
CONSOLIDATED CASH FLOW STATEMENTS                                               
for the year ended 30 June                                                      
2007        2006                
                                               R`000       R`000                
Cash flow generated from/(utilised in)                                          
 operating activities                          9 760     (16 404)               
Cash received from customers                                                    
 and subsidiaries                            204 467     163 683                
Cash paid to suppliers                       (182 053)   (173 780)              
Cash generated from/(utilised in)                                               
operations                                   22 414     (10 097)               
Interest received                                  84          68               
Interest paid and finance charges              (4 477)     (4 193)              
Tax (paid)/received                            (6 261)        218               
Dividends declared and paid                    (2 000)     (2 400)              
Cash utilised in investing activities         (13 026)    (11 924)              
Additions to property, plant and equipment    (13 876)     (7 260)              
Additions to intangible assets                    (16)          -               
Proceeds from disposal                            879         180               
Loan advanced                                     (13)       (336)              
Cost with acquisition of companies                  -      (4 508)              
Cash generated from financing activities       16 890       4 139               
(Decrease)/increase in long-term borrowings    (6 950)        272               
Increase in instalment sale agreements -                                        
 short-term portion                              259       3 867                
Issue of shares                                23 581           -               
Cash surplus/(shortfall) for the year          13 624     (24 189)              
Cash and cash equivalents - beginning of                                        
 the year                                    (21 740)      2 449                
Cash and cash equivalents - end of                                              
the year                                     (8 116)    (21 740)               
SEGMENTAL ANALYSIS                                                              
for the twelve months ended 30 June                                             
Revenue   Profit   Net Profit   Assets  Liabilities                
               R`000    R`000        R`000    R`000        R`000                
Chemicals      71 760    6 812        3 496   29 821       29 705               
Silica         33 690    7 710        4 126   33 405       25 293               
Pigments      117 601    9 822        7 177   49 830       22 218               
Other           1 676    6 222        4 251   27 931      (16 209)              
Total         224 727   30 566       19 050  140 987       61 007               
             Revenue   Profit   Net Profit   Assets  Liabilities                
               R`000    R`000        R`000    R`000        R`000                
Chemicals*     55 473    5 340        3 893   15 937       19 318               
Silica*        21 584    1 387          544   23 730       19 744               
Pigments       99 725    5 961        4 123   35 772       13 337               
Other         (12 779)   8 794        5 981   19 358        4 672               
Total         164 003   21 482       14 541   94 797       57 071               
*Results are for a sixteen-month period.                                        
Nature of Business                                                              
Rolfes is a diversified manufacturing and technology holdings company listed on 
the Alternative Exchange of the JSE Limited. The group has demonstrated         
continued growth through its subsidiaries, providing a wide range of market-    
leading products to customers through dedicated teams of industry specialists in
the silica, chemical and pigments industries.                                   
Rolfes manufactures and distributes the following products:                     
-  Organic and inorganic pigments for the coatings, plastics, construction and  
ink industries (through Rolfes Colour Pigments International);                  
-  Resins and other speciality chemicals for the coatings, plastics and         
construction industries (through Rolfes Chemicals); and                         
-  Pure beneficiated silica for the metallurgical, filtration and construction  
industries (through Rolfes Silica)                                              
Basis of Preparation                                                            
The annual financial statements have been prepared in accordance with           
International Financial Reporting Standards and IAS 34, the Listings            
Requirements of the JSE Limited and the Companies Act in South Africa. The      
accounting policies used are consistent with those used in the preparation of   
the annual financial statements for the year ended 30 June 2006.                
The annual financial statements have been audited by the group`s auditors, BDO  
Spencer Steward (Jhb) Incorporated, and their unqualified audit opinion is      
available for inspection at the group`s registered office.                      
Financial Overview                                                              
The 2007 financial year has been a year of considerable growth and consolidation
for the Rolfes Group. Strategies implemented during the past two years, inter   
alia as a result of the acquisitions of the silica and resins operations during 
2005, have come to fruition with exceptional sales growth in all the operating  
Turnover increased by 37% to reach R224,7 million. Operating profit was boosted 
by 42% to R30,6 million and headline earnings increased by 62% to R19,1 million.
Headline earnings per share for 2007 increased by 51% to 20,9 cents per share.  
The forecast headline earnings for 2007 of R18,4 million as per the company     
prospectus issued on 9 May 2007, were exceeded by 4%.                           
The total assets of the group increased by R46,2 million and the group`s debt   
reduced by R20,3 million, primarily as a result of the net cash raised on       
listing of R23,6 million. The net asset value per share improved to 78 cents per
share (2006: 44,2 cents per share) with a similar trend in net tangible asset   
value per share.  As a result of the above, the group`s solvability and         
liquidity ratios improved satisfactorily.                                       
The group incurred R13,9 million of capital expenditure, primarily in the silica
operations, to expand production capacity and provide cost effective transport  
solutions to customers. The group produced R9,7 million cash from operating     
activities which were mainly utilised for capital expenditure.                  
Operational Review                                                              
Rolfes Colour Pigments                                                          
Turnover grew by 18% to R117,6 million. The increase in turnover was as a result
of increased sales across the board on most product lines, with a modest        
contribution by the new pigment dispersion and trading units. The company       
achieved a gross profit margin of 19,6% (2006: 18,6%). The company`s operating  
costs increased by 9%. The company has also experienced a steep growth in the   
pigment product offtake from Europe.                                            
Improved product formulations, new product innovations and good service levels  
will continue to position the company as a leading supplier of a large range of 
colour pigment products in the local market, and should result in increased     
export volumes. Its leading position and cost effective and reliable            
manufacturing have entrenched the company`s brand with local and foreign        
Rolfes Chemicals                                                                
Turnover grew by 72% to R R71,7 million (2006: R41,6 million annualised). The   
company achieved a gross profit margin of 14,7% (2006: 17.1%). The explosion at 
the Alberton plant during April 2007 has put a damper on the year-end profits,  
as a result of gross margin loss experienced due to increased costs. However, no
major customers were lost as a result of the set-back, and the plant was back   
into full production during August 2007.                                        
The year-on-year increase in turnover was as a result of increased sales across 
the board on all products manufactured, but specifically gaining Dulux as a new 
customer with large volume offtake -                                            
together with a modest contribution by the new speciality chemicals distribution
unit. The company reduced its operating costs by 45% if compared to 2006        
(annualised). The reduction in costs was primarily as a result of change in     
ownership during 2005 and focused management efforts.                           
The company continues to experience stiff competition from local manufacturers, 
but has not lost any large client as a result thereof. In fact, the company     
managed to grow the number of blue-chip clients it services. Improved product   
formulations, new product innovations and service levels will continue to       
position the company as one of the leading suppliers of alkyd and acrylic resins
to the local market.  The company is continuing to expand its product range to  
customers through selected imports of complementary resin products.             
Rolfes Silica                                                                   
Turnover grew by 108% to R33,7 million (2006: R16,2 million annualised). The    
company achieved a gross profit margin of 32% (2006: 17.4%). As a result of the 
increase in turnover, a better understanding of the silica mining and           
beneficiation processes and the buoyant local silica market, the company        
contributed handsomely to the profits of the group for 2007 (breakeven in 2006).
A number of blue-chip clients were gained during the year and should be retained
in the future. The group has continued to spend on capital expenditure on the   
silica mine, for instance, the crushing and screening plants were significantly 
upgraded to ensure a constant supply of construction, aggregate and silica fine 
materials at all times. As a result of the steep increase in activities, the    
company`s operating costs grew by 81%.                                          
The company is currently selling all products mined and beneficiated and are    
permanently on backorder on some of the higher margin silica fine products. The 
company has experienced very little competition from other silica operations due
to its location and a countrywide shortage of supply of good quality product.   
Management will continue to focus on shifting the product mix more towards      
silica fine products which sell at significantly higher margins, if compared to 
construction material.                                                          
Corporate Activity                                                              
Whilst our primary growth this year has been organic, Rolfes listed on AltX     
during May 2007 and raised a net R23,6 million. The listing was successful and  
the private placing substantially over subscribed. The company was well received
by the investor community. The company also concluded an empowerment transaction
with Vuwa Investments (Pty) Limited, in terms of which Vuwa acquired a 25,1%    
shareholding in the group. Vuwa is headed up by prominent public figure and     
businessman, Bulelani Ngcuka.                                                   
Human Resources                                                                 
We believe that the listing of the company has improved employment security for 
all members of staff and we have maintained our low staff turnover this year.   
The group continues to employ historically disadvantaged individuals with the   
specific aim to train them into skilled positions.                              
During 2007 the group has employed an aggressive management bonus incentive     
scheme to retain and incentivise senior management for optimal performance. This
scheme will continue into the future.                                           
Black Economic Empowerment                                                      
25,1% of Rolfes` shareholding is black-controlled and 77% of all staff members  
are black. We will continue to improve our employment equity ratios, especially 
in the middle to top management levels. The company is in the process of        
obtaining a formal BEE rating as measured in accordance with the BEE Act.       
Market Conditions                                                               
The sustained local (specifically as a result of the large spend on local       
infrastructure, buildings and housing) and international economic growth        
continue to contribute to Rolfes` development, setting a stable platform that   
mitigates business risk and boosts consumer confidence.                         
During 2007 we experienced a continuation of large increases in the prices of   
all raw materials (imported and local) across the board. The various operations 
were in the main able to continue to increase selling prices to the customers as
a result of spiralling raw material costs, and thereby maintaining gross        
margins. With the global spiralling metal, crude oil and other raw material     
prices, the lower local product conversion costs of the group should not only   
improve our competitiveness in the local market against the importers of        
finished goods, but also in the European market.                                
We have seen a significant increase in our export business into Europe as a     
result of the brand awareness established. Furthermore, the environmental       
problems currently experienced in China and the phasing out of their export     
incentives should put Rolfes in a more competitive position in the future.      
As a group we will continue to benefit from the governments investment into     
infrastructural development and the construction boom, but are not totally      
reliant thereon for our future growth.                                          
As mentioned above, the continued government spend on infrastructural           
development, which also fuels the construction industry and the economy in      
general, will continue to assist the group on all fronts to grow each division. 
Coupled with a constant focus on expanding our product basket, new product      
innovations, improved production efficiencies and strict cost control,          
management is confident that it will achieve as a minimum the 2008 forecast     
turnover and profit after taxation of R289,2 million and R25,5 million,         
respectively, as per the company prospectus, dated 9 May 2007.                  
The group has an aggressive acquisition policy. Management is constantly in the 
process of screening and evaluating a number of acquisition targets. The targets
focused on, are operations with intellectual capital, high barriers to entry,   
and which are complementary to the existing operations of the group.            
Management is also in the process of evaluating a number of projects to expand  
existing manufacturing capacity in the group through the lease, acquisition     
and/or building of existing and/or new production facilities. We are of the     
opinion that with the increasing reliance by the Western economies for products 
from countries in the East, the group will continue to provide an affordable and
quality alternative, which will improve our competitive position in the local   
and international markets in the years to come.                                 
Corporate Governance                                                            
The group recognises the need to conduct its business with integrity,           
transparency and equal opportunity and subscribes to the spirit of good         
corporate governance as set out in the King II Report.                          
Board of Directors                                                              
Messrs BT Ngcuka and L Dyosi were appointed as non-executive directors and Mr E 
van der Merwe as an executive director during the year. Messrs WA Badenhorst and
RTH Thomas resigned as directors on 1 February 2007.                            
Subsequent Events                                                               
No events material to the understanding of the report have occurred in the      
period between the period-end date and the date of the report.                  
Given the growth prospects and strategy of Rolfes, it is anticipated that       
earnings generated by the group will be re-invested to fund future growth and   
development. Therefore, the Board does not propose a dividend in respect of the 
2007 financial year. It is the intention of the company to periodically consider
the dividend policy and to take account of prevailing circumstances and future  
cash requirements in determining whether it would be appropriate to pay a       
dividend in respect of a particular financial reporting period.                 
Annual Report                                                                   
The company`s 2007 annual report, incorporating a notice of the annual general  
meeting to be held on Thursday, 25 October 2007, will be posted to shareholders 
on or before Friday, 28 September 2007.                                         
For and on behalf of the Board                                                  
BT Ngcuka                     E van der Merwe                                   
Chairman                      Chief Executive Officer                           
19 September 2007                                                               
Registered office:                                                              
The Summit,269 16th Road, Randjespark, Midrand                                  
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, 70    
Marshall Street, Johannesburg 2001                                              
Directors: BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), L  
Dyosi*, AJ Fourie*, AJ Greeff (Financial Director) *Non-executive               
Designated advisor: PSG Capital (Pty) Limited                                   
Registered auditors: BDO Spencer Steward (Jhb) Incorporated                     
Date: 19/09/2007 12:00:01 Supplied by www.sharenet.co.za                     
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