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OMN - Omnia Holdings - Interim Results For The Six Months Ended

Release Date: 28/11/2007 08:00:02      Code(s): OMN
OMN - Omnia Holdings - Interim Results For The Six Months Ended                 
                        30 September 2007 and dividend declaration              
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
Registration number 1967 / 003680/06                                            
JSE code: OMN                                                                   
ISIN: ZAE000005153                                                              
Balanced business continues to deliver                                          
Interim results for the six months ended 30 September 2007                      
-    Revenue up 26% to R3,1 billion                                             
-    Operating profit up 33% to R192 million                                    
-    Headline earnings per share up 24% to 224.5 cents                          
-    Interim dividend of 83 cents per share declared                            
Condensed Consolidated Income Statements                                        
for the six months ended 30 September 2007                                      
                           Unaudited              Unaudited      Audited        
                           6 months               6 months       12 months      
R million                   30/09/07     %         30/09/06       31/03/07      
Revenue                     3 061        26        2 438          5 537         
Operating profit            192          33        144            422           
Net finance cost            (45)                   (21)           (58)          
Interest paid               (44)         57        (28)           (80)          
Interest received           1                      3              18            
Forex (loss)/gain           (2)                    4              4             
Profit before taxation      147          20        123            364           
Taxation                    (50)         16        (43)           (118)         
Net profit for the period   97           21        80             246           
Attributable to:                                                                
- Equity holders of the     97           21        80             246           
Basic earnings per share    220.3        21        182.2          560.3         
Fully diluted basic         218.3        22        179.2          553.2         
earnings per share (cents)                                                      
Final dividend paid per                                                         
share (cents) in                                                                
respect of prior year       90.0         6         85.0           85.0          
Interim dividend per share                                                      
(cents) declared  in                                                            
respect of the current      83.0                   70.0           70.0          
Weighted average number of                                                      
shares in                                                                       
issue (`000)                44 038                 43 648         43 772        
Weighted average number of                                                      
fully diluted                                                                   
shares in issue (`000)      44 448                 44 385         44 338        
Number of shares in issue   44 189                 43 725         43 943        
Condensed Consolidated Balance Sheets                                           
as at 30 September 2007                                                         
                                       Unaudited     Unaudited     Audited      
                                       6 months      6 months      12           
R million                               30/09/07      30/09/06      31/03/07    
Property, plant and equipment           819           679           760         
Intangible assets                       429           445           436         
Deferred taxation                       3             1             3           
Inventories                             1 446         929           905         
Trade and other receivables             1 373         1 148         969         
Other current assets                    33            58            50          
4 103         3 260         3 123        
Equity and liabilities                                                          
Shareholders` equity                    1 291         1 131         1 250       
Deferred taxation                       91            91            83          
Non-current liabilities                 258           15            33          
Trade and other payables                1 474         1 334         1 417       
Taxation                                 31            4             49         
Other current liabilities               958           685           291         
4 103         3 260         3 123        
Net interest-bearing debt               1 184         637           265         
Net asset value per share (Rand)        29.2          25.9          28.4        
Forex loss included in operating        (5)           (31)          (31)        
Capital expenditure                                                             
Depreciation                            28            28            59          
Amortisation                            10            10            20          
Incurred                                86            65            188         
Authorised and committed                124           47            33          
Authorised but not contracted for       77            98            174         
Condensed Consolidated Cash Flow Statements for the six months                  
ended 30 September 2007                                                         
                                Unaudited   Unaudited  Audited                  
                                6 months    6 months   12 months                
R million                        30/09/07    30/09/06   31/03/07                
Operating profit                 192         144        422                     
Depreciation and amortisation    38          38         79                      
Adjustment for non-cash items    (31)        69         (3)                     
Utilised in working capital      (889)       (399)      (60)                    
(690)       (148)      438                      
Interest paid                    (44)        (28)       (80)                    
Interest received                1           3          18                      
Taxation paid                    (61)        (58)       (100)                   
Dividends paid                   (39)        (39)       (68)                    
(Utilised)/generated by          (833)       (270)      208                     
Cash outflow from investing      (86)        (65)       (175)                   
Cash inflow/(outflow) from       228         (3)        8                       
financing activities                                                            
Net (decrease)/increase in cash  (691)       (338)      41                      
Net overdraft at beginning of    (234)       (275)      (275)                   
Net overdraft at end of period   (925)       (613)      (234)                   
Reconciliation of headline earnings                                             
Unaudited     Unaudited     Audited      
                                       6 months      6 months      12 months    
R million                               30/09/07      30/09/06      31/03/07    
Net profit for the year                 97            80            246         
Profit on disposal of fixed assets      -             -             (1)         
Investment impaired                     2             -             -           
Headline earnings                       99            80            245         
Other Reserves                                                                  
Unaudited     Unaudited     Audited      
                                       6 months      6 months      12 months    
R million                               30/09/07      30/09/06      31/03/07    
Share-based payment reserves            31            17            19          
Foreign currency translation reserve    (16)          38            14          
Net discount arising on acquisition of                                          
shares of subsidiaries                  3             3             3           
                                       18            58            36           
Statement of Changes in Shareholders` Equity                                    
                         Ordinary Shareholders` Equity                          
                         Stated      Treasury   Other     Retained              
R million                 capital     shares     reserves  earnings             
At 31 March 2006          201         (20)       (12)      849                  
Recognised income and                                                           
Net profit for the                                         80                   
Increase in foreign                                                             
translation reserve                              66                             
Share-based payment                              4                              
Transactions with                                                               
Ordinary dividends paid                                    (39)                 
At 30 September 2006      201         (20)       58        890                  
Recognised income and                                                           
Net profit for the                                         166                  
Decrease in foreign                                                             
translation reserve                              (24)                           
Share-based payment                              2                              
Transactions with                                                               
Treasury shares sold                  4                                         
Ordinary dividends paid                                    (29)                 
At 31 March 2007          201         (16)       36        1,027                
Recognised income and                                                           
Net profit for the                                         97                   
Decrease in foreign                                                             
translation reserve                              (30)                           
Share-based payment                              12                             
Transactions with                                                               
Treasury shares sold                  1                                         
Ordinary dividends paid                                    (39)                 
At 30 September 2007      201         (15)       18        1,085                
R million                 interest     Total                                    
At 31 March 2006          2            1,020                                    
Recognised income and                                                           
Net profit for the                     80                                       
Increase in foreign                                                             
translation reserve                    66                                       
Share-based payment                    4                                        
Transactions with                                                               
Ordinary dividends paid                (39)                                     
At 30 September 2006      2            1,131                                    
Recognised income and                                                           
?Net profit for the                    166                                      
?Decrease in foreign                                                            
translation reserve                    (24)                                     
?Share-based payment                   2                                        
Transactions with                                                               
?Treasury shares sold                  4                                        
?Ordinary dividends paid               (29)                                     
At 31 March 2007          2            1,250                                    
Recognised income and                                                           
?Net profit for the                    97                                       
?Decrease in foreign                                                            
translation reserve                    (30)                                     
?Share-based payment                   12                                       
Transactions with                                                               
?Treasury shares sold                  1                                        
?Ordinary dividends paid               (39)                                     
At 30 September 2007      2            1,291                                    
Segmental Analysis                                                              
for the six months ended 30 September 2007                                      
                            Unaudited         Unaudited   Audited               
6 months          6 months    12 months             
R million                    30/09/07    %     30/09/06    31/03/07             
Revenue, net of              3 061       26    2 438       5 537                
intersegmental sales                                                            
?Chemicals                   1 509       30    1 162       2 624                
?Mining                      581         24    470         1 001                
?Agriculture                 971         20    806         1 912                
Operating profit             192         33    144         422                  
?Chemicals                   60          (5)   63          127                  
?Mining                      56          (14)  65          138                  
?Agriculture                 76          375   16          157                  
Accounting policies                                                             
The consolidated condensed financial statements for the six months ended 30     
September 2007 were prepared in accordance with International Financial         
Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting and in         
compliance with the Listing Requirements of the JSE Limited. The consolidated   
condensed interim financial statements do not include all of the information    
required by IFRS for full annual financial statements.                          
The principal policies used in the preparation of the results for the six months
ended 30 September 2007 are consistent with those applied in the annual         
financial statements for the year ended 31 March 2007.                          
Headline earnings                                                               
Headline earnings are 224.5 cents per share (2006: 181.4 cents per share).      
Diluted headline earnings are 222.4 cents per share (2006: 178.4 cents per      
A final dividend of 90 cents per share was declared on 18 June 2007 in respect  
of the earnings of the previous financial year. This dividend is reflected in   
the current period to 30 September 2007.                                        
The future minimum lease payments under non-cancellable operating leases are    
R23.9 million (2006: R17.2 million) within one year and R38.0 million (2006:    
R51.4 million) between two and five years and R1.5 million (2006: Rnil) beyond  
five years, giving a total of R63.4 million (2006: R68.6 million).              
Omnia is a diversified, specialist chemical services provider with business     
interests balanced across chemical, mining and agricultural markets. It is      
fundamentally a knowledge business, which leverages its leading intellectual    
capital and world-class production assets to differentiate its product and      
service offerings. Omnia`s unique business model creates extraordinary value for
its customers, allowing the Group to earn a premium in its markets and build    
long-term customer relationships.                                               
All three of Omnia`s business segments achieved revenue growth in excess of 20%,
the largest being in the Chemicals division where revenue grew 30%, albeit at   
considerably lower margins than in the past. The Mining division showed revenue 
growth of 24% as strong global demand for metals continued to support sales. In 
the Agriculture division, notwithstanding the fact that its major activities    
customarily occur in the second six-month period which is the main planting     
season, revenue growth of 20% was achieved at considerably improved margins when
compared to the prior period. This is a reflection of higher fertilizer prices  
combined with positive planting conditions, driven mainly by prevailing higher  
maize prices.                                                                   
Financial review                                                                
Group revenue increased by 26% to R3.1 billion (2006: R2.4 billion), as sales   
increased across all businesses. Operating profit increased by 33% to           
R192 million (2006: R144 million), with the margin increasing to 6.3% from the  
5.9% achieved in the prior period as a result of improved performance from the  
Agricultural division. As indicated in previous communications, the Group has   
embarked on a number of projects that will bear fruit in two or three years     
time. The cost of these projects is being allocated to the operating divisions, 
impacting negatively on their operating margins in the short term. In addition, 
the respective operating divisions now carry a proportionate percentage of the  
share-based payments charge arising from the BEE employee ownership scheme,     
Sakhile Initiative, described below. These share-based payments for the six     
months amount to R12 million (2006: R4 million).                                
Interest paid increased by 57 % to R44 million (2006: R28 million) due to higher
interest rates being applied to a substantially higher level of debt. Net       
finance costs were negatively influenced by a R2 million foreign exchange loss  
compared with a R4 million foreign exchange gain in the prior period.           
Net profit increased by 21% to R97 million (2006: R80 million) led by a solid   
contribution from Agriculture.                                                  
The seasonal nature of Omnia`s agriculture operations causes the Group`s working
capital requirements to peak in about September of each year. Raw material      
prices - notably ammonia, urea, potash and phosphates - driven by surging       
worldwide biofuel demand - continued their upward spiral. Given these continued 
raw material price increases a strategic decision was taken to acquire raw      
material stock in advance. This has resulted in net interest bearing debt       
increasing by 86% off last year`s low base to R1 184 million (2006:             
R637 million). Cash utilised by operations for the period under review increased
by R563 million to R833 million (2006: R270 million), mainly resulting from an  
increase in working capital of R490 million when compared with the prior period.
The strengthening of the rand saw a R30 million negative movement in the foreign
currency translation reserve for the period (2006: positive R66 million).       
Operational review                                                              
The Protea Chemicals division is the leading speciality, functional and effect  
chemicals distributor in southern Africa. It has a significant presence in every
sector of the chemical distribution market and contributed 31% to Group         
operating profit (2006: 44%).                                                   
Revenue increased by 30% to R1 509 million (2006: R1 162 million). This increase
reflects both the full impact of the previously reported change in a large      
contract, from a pure commission based business to a sale of goods business, and
the increased revenue arising from the lower margin polymer businesses. Because 
of the volatility in rand exchange rates, selling margins were lower in some    
instances. Added costs such as the division`s allocation of Group project costs 
and the increased share-based payment charge, further reduced the operating     
margin to 4% (2006: 5%). This saw the operating profit decline to R60 million   
(2006: R63 million).                                                            
Omnia`s Mining division is the market leader in blended bulk explosives         
formulations for surface mines, and also manufactures packaged explosives for   
underground mines and specialised surface blasting applications. In addition,   
the division supplies a diverse range of mining chemicals and blasting          
accessories. The Mining division contributed 29% to Group operating profit      
(2006: 45%).                                                                    
The Mining division continued to benefit from increased mining activity during  
the period, particularly in coal, copper, uranium and iron ore. This resulted in
further growth, particularly in mining chemicals, but at lower margins than in  
prior periods. The explosives market has become intensely competitive, with     
rapidly rising raw material costs pressurising margins and causing the division 
to withdraw from unprofitable contracts. In addition considerable costs for     
additional resources have been incurred in respect of new contracts where these 
contracts have yet to deliver volume. The division also carried an allocation of
the Group project costs and share-based payments. The stronger rand had a       
negative impact on exported product. These factors combined to cause a decline  
in operating margin from 14% to 10%.                                            
The Mining division achieved 24% growth in revenue to R581 million (2006:       
R470 million) but the operating margin fell to 10%. This was as a result of lost
business in Zimbabwe and the division`s inability to secure a continuous supply 
of shocktube initiating systems, as previously reported. These factors meant    
that operating profit declined by 14% to R56 million (2006: R65 million). The   
division`s own new shocktube assembly plant, which will overcome the supply     
difficulties experienced, is on track to be commissioned before the end of the  
financial year.                                                                 
The Agriculture division manufactures and supplies granular, liquid and         
speciality fertilizers to individual farmers, co-operatives and wholesalers     
across southern Africa. In addition, it supplies speciality fertilizers to      
farmers in Australia and New Zealand. Agriculture contributed 40% to Group      
operating profit (2006: 11%).                                                   
Revenue increased by 20% to R971 million (2006: R806 million). Increased        
international demand for maize, driven by the need for alternative sustainable  
fuel sources, has seen the maize price remain relatively high at R1 800 per ton,
from R1 300 per ton a year ago. This has led to a shortage of fertilizer raw    
materials in international markets and rapid concomitant price increases. It is 
also likely to persuade farmers to plant more hectares to maize than in the     
Although operating margins in the Agriculture division are traditionally        
considerably lower in the first half of the financial year than those in the    
second, operating margins increased to 8% in the period (2006: 2%), due largely 
to the advance purchase of raw materials at favourable prices. This improvement 
has helped shield the Group from the negative impact of declining operating     
profits in the Chemical and Mining divisions.                                   
Demand for the Group`s chemical products will be influenced by the environment  
within South Africa`s manufacturing sector. The recent strengthening of the rand
will have an adverse effect on manufacturing, as exports become uncompetitive   
and companies are encouraged to import cheaper manufactured components. Oil     
prices approaching record highs will ensure price increases for downstream      
petrochemical products and their derivatives. International chemical prices are 
increasing in line with an improvement in the global economic environment, and  
supply shortages are becoming increasingly evident. Furthermore action has been 
taken to improve margins in the short term.                                     
The continued strong demand for world metals and minerals will benefit both the 
explosives and mining chemical markets. However, the Mining division intends to 
be circumspect in its growth aspirations given the current competitive nature of
the market that will render some contracts simply uneconomical to service. Omnia
is committed to operating at acceptable margins and will not endeavour to hold  
on to uneconomic business. Continued growth is however expected, with margins   
returning to more acceptable levels. The Mining division is focused on taking   
advantage of the opportunities that arise from its growing presence in Africa   
and there remains significant potential for its future growth in the rest of    
The latest crop estimate forecasts that 2.8 million hectares will be planted to 
maize, up from the 2.5 million hectares achieved in the previous season.        
Domestic fertilizer volumes for the full year should therefore revert to, if not
exceed, normal volumes, positively impacting this aspect of Group activities.   
Excellent rainfall in the recent past has resulted in high underground water,   
soil moisture and dam levels. This environment should impact favourably on the  
fertilizer business and the Group as a whole in the period going forward.       
Omnia Group                                                                     
The Group expects an improvement in earnings for the year ended March 2008      
compared with those achieved in the financial year ended March 2007.            
The project for the Clean Development Mechanism that was announced a year ago is
on track, with the Envinox plant in the first phase of installation at the      
Sasolburg production site.                                                      
Omnia remains focused on diversifying its risk profile and pursuing new growth  
opportunities, while maintaining a firm focus on the Group`s core competencies. 
Within this context Omnia announced the acquisition of speciality chemical and  
water treatment business, Zetachem in August 2007 for a net R133 million,       
subject to the approval of the Competition Commission.                          
Omnia is well positioned to benefit from demand for biofuels which will         
positively impact on the need for fertilizer products. The Group`s position in  
this market will underpin growth in the Agriculture market in future years.     
Mr Ralph Havenstein was appointed as a non-executive director of the Board with 
effect from 6 November 2007. Ralph brings with him, high level business         
expertise coupled with a strong chemical engineering and mining background. His 
experience will contribute significantly to the board.                          
Black economic empowerment shareholding                                         
The Group`s simplified structure became effective on 1 April 2007. In the       
restructuring a new company, Sakhile Initiative Ltd, was formed which will have 
as its shareholders Omnia`s South Africa-based employees. To achieve this Omnia 
effectively sold 10% of its shares and claims in Omnia Group (Pty) Ltd to       
Sakhile for R278 million, entitling this employee-owned company to 10% of the   
economic interest and full voting rights in Omnia Group (Pty) Ltd. Sakhile      
funded the transaction by:                                                      
-    borrowing R218 million from a bank to pay for interest bearing loan        
    accounts in Omnia Group (Pty) Ltd, and                                      
-    issuing a Preference Share of R60 million to Omnia Holdings Ltd to pay for 
interest free loans in Omnia Group (Pty) Ltd.                               
Further details of the BEE empowerment shareholding arrangement can be obtained 
from the Omnia Holdings Ltd annual report dated 2 August 2007.                  
The board is pleased to announce that an interim dividend of 83 cents per share 
has been declared in respect of shareholders recorded in the register on Friday 
4 January 2008. The last day to trade cum dividend will be Thursday 27 December 
2007. The shares will commence trading ex dividend on Friday 28 December 2007   
and the record date will be Friday 4 January 2008. The payment date will be     
Monday 7 January 2008. Share certificates may not be dematerialised or          
rematerialised between Friday 28 December 2007 and Friday                       
4 January 2008, both dates inclusive.                                           
NJ CROSSE            RB HUMPHRIS                                                
Chairman             Managing Director                                          
28 November 2007                                                                
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz- 
Gibbon*, R Havenstein, RB Humphris* (Group Managing Director), Prof SS Loubser, 
Dr WT Marais, RR Masebelanga, JG Pretorius, DC Radley, TR Scott *Executive      
Registered office                                                               
1st Floor, Omnia House,                                                         
13 Sloane Street, Epsom Downs,                                                  
Bryanston, Sandton                                                              
PO Box 69888,                                                                   
Bryanston 2021                                                                  
Telephone (011) 709 8888                                                        
Transfer secretaries                                                            
Link Market Services South Africa (Pty) Ltd                                     
11 Diagonal Street, Johannesburg 2001                                           
PO Box 4844, Johannesburg 2000                                                  
Date: 28/11/2007 08:00:01 Supplied by www.sharenet.co.za                     
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