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Omn - Omnia Holdings Limited - Reviewed Provisional Results For The Year Ended

Release Date: 18/06/2008 08:01:34      Code(s): OMN
OMN - Omnia Holdings Limited - Reviewed provisional results for the year ended  
31 March 2008                                                                   
OMNIA HOLDINGS LIMITED                                                          
(Incorporated in the Republic of South Africa)                                  
Registration number: 1967/003680/06                                             
Share code: OMN  ISIN: ZAE000005153                                             
"Omnia" or "the Group"                                                          
Reviewed provisional results                                                    
for the year ended 31 March 2008                                                
Highlights                                                                      
Revenue increased by 33% to R7.3 billion                                        
Net profit for the year increased by 27% to R313 million                        
Basic earnings per share increased by 28% to 718.2 cents                        
Headline earnings per share increased by 30% to                                 
724.5 cents                                                                     
Final dividend distribution to shareholders of 117 cents                        
(200 cents for the full year, an increase of 25%)                               
Condensed Consolidated Income Statement                                         
for the year ended 31 March 2008                                                
Reviewed                 Audited                      
Rm                         2008         %           2007                        
Revenue                    7 340        33          5 537                       
Cost of sales              (5 841)      33          (4 398)                     
Gross profit               1 499        32          1 139                       
Operating expenses         (915)        28          (717)                       
Operating profit           584          38          422                         
Net finance cost           (112)        93          (58)                        
Interest paid             (143)        79          (80)                         
Interest received         25           39          18                           
Forex gain                6            50          4                            
Profit before taxation     472          30          364                         
Taxation                   (159)        35          (118)                       
Net profit for the year    313          27          246                         
Attributable to:                                                                
- Equity holders of the    317                      246                         
Company                                                                         
- Minority interest        (4)                      -                           
                          313                      246                          
Basic earnings per share   718.2        28          560.3                       
(cents)                                                                         
Fully diluted basic        687.9        24          553.2                       
earnings per share                                                              
(cents)                                                                         
Final dividend paid per    90.0         6           85.0                        
share (cents) in respect                                                        
of prior year                                                                   
Interim dividend per       83.0         19          70.0                        
share (cents) paid in                                                           
respect of current year                                                         
Weighted average number    44 132                   43 722                      
of shares in issue (`000)                                                       
Weighted average number    46 073                   44 338                      
of fully diluted shares                                                         
in issue (`000)                                                                 
Number of shares in issue  44 263                   43 943                      
(`000)                                                                          
Condensed Consolidated Balance Sheet                                            
as at 31 March 2008                                                             
                          Reviewed                 Audited                      
Rm                         2008         %           2007                        
Assets                                                                          
Property, plant and        965          27          760                         
equipment                                                                       
Intangible assets          517          19          436                         
Investments                30                       -                           
Deferred taxation          8            167         3                           
Current assets             2 919        52          1 924                       
4 439        42          3 123                        
Equity and liabilities                                                          
Shareholders` equity       1 581        26          1 250                       
Deferred taxation          104          25          83                          
Non-current liabilities    288          773         33                          
Current liabilities        2 466        40          1 757                       
                          4 439        42          3 123                        
Net interest-bearing debt  451          70          265                         
Net asset value per share  35.71        26          28.45                       
(Rand)                                                                          
Capital expenditure                                                             
Depreciation               71                       59                          
Amortisation               21                       20                          
Incurred                   284                      188                         
Authorised and committed   -                        33                          
Authorised but not         102                      174                         
contracted for                                                                  
Condensed Consolidated Cash Flow Statement                                      
for the year ended 31 March 2008                                                
                              Reviewed             Audited                      
Rm                             2008          %      2007                        
Operating profit               584                  422                         
Depreciation and amortisation  92                   79                          
Adjustment for non-cash items  13                   (6)                         
Utilised by working capital    (138)                (60)                        
                              551                  435                          
Interest paid                  (143)                (80)                        
Interest received              25                   18                          
Taxation paid                  (134)                (100)                       
Dividends paid                 (76)                 (68)                        
Generated by operations        223                  205                         
Cash outflow from investing    (413)                (175)                       
activities                                                                      
Cash inflow from financing     323                  8                           
activities                                                                      
Net increase in cash           133                  38                          
Net overdraft at beginning of  (234)                (275)                       
year                                                                            
Effects of exchange rate       (2)                  3                           
movements                                                                       
Net overdraft at end of year   (103)                (234)                       
Statement of Changes in Shareholders` Equity                                    
           Ordinary                                                             
           Share-                                                               
holders`                                                             
           Equity                                                               
           Stated    Treasury  Other    Retained  Minority                      
Rm          capital   shares    reserves earnings  interest  Total              
At 31 March 201       (20)      (12)     849       2         1 020              
2006                                                                            
Net profit                                                                      
for the                                                                         
year ended                                                                      
31 March                                 246                 246                
2007                                                                            
Increase in                                                                     
foreign                                                                         
currency                                                                        
translation                     42                           42                 
reserve                                                                         
Share-based                     6                            6                  
payment                                                                         
Treasury              4                                      4                  
shares sold                                                                     
Ordinary                                 (68)                (68)               
dividends                                                                       
paid                                                                            
At 31 March 201       (16)      36       1 027     2         1 250              
2007                                                                            
Net profit                                                                      
for the                                                                         
year ended                                                                      
31 March                                 317       (4)       313                
2008                                                                            
Increase in                                                                     
foreign                                                                         
currency                                                                        
translation                     65                           65                 
reserve                                                                         
Share-based                     26                           26                 
payment                                                                         
Treasury              3                                      3                  
shares sold                                                                     
Ordinary                                 (76)                (76)               
dividends                                                                       
paid                                                                            
At 31 March 201       (13)      127      1 268     (2)       1 581              
2008                                                                            
Other Reserves                                                                  
Rm                                        2008        2007                      
Reserves comprise of:                                                           
Net discount arising on acquisition of    3           3                         
shares of subsidiaries                                                          
Foreign currency translation reserve      79          14                        
Share-based payment reserve               45          19                        
                                         127         36                         
Condensed Segmental Analysis                                                    
for the year ended 31 March 2008                                                
                                Reviewed             Audited                    
Rm                               2008         %       2007                      
Revenue, net of intersegmental   7 340        33      5 537                     
sales                                                                           
?Chemicals                       3 334        27      2 624                     
?Mining                          1 281        28      1 001                     
?Agriculture                     2 725        43      1 912                     
Operating profit                 584          38      422                       
?Chemicals                       148          17      127                       
?Mining                          125          (9)     138                       
?Agriculture                     311          98      157                       
Reconciliation of headline earnings                                             
                                Reviewed              Audited                   
Rm                               2008           %      2007                     
Net profit for the year          317                   246                      
Loss/(profit) on disposal of     2                     (1)                      
fixed assets                                                                    
Headline earnings                319            30     245                      
Headline earnings                                                               
Headline earnings are 724.5 cents per share (2007: 558.2 cents per share)       
Diluted headline earnings are 694.0 cents per share (2007: 551.1 cents per      
share)                                                                          
Notes                                                                           
Accounting policies                                                             
The Group results are reported in accordance with International Financial       
Reporting Standards ("IFRS").                                                   
The condensed consolidated financial statements for the year ended 31 March 2008
were prepared in accordance with IAS 34 - Interim Financial Reporting and in    
compliance with the Listing Requirements of the JSE Limited. The condensed      
consolidated 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 year ended
31 March 2008 are consistent with those applied for the year ended 31 March     
2007, except for the adoption of IFRS 7 - Financial Instruments Disclosures,    
which has no impact on the results but requires additional disclosures.         
Dividends                                                                       
A dividend of 90 cents per share was declared on 20 June 2007 in respect of the 
earnings of the previous financial year. This dividend is reflected in the      
current year to 31 March 2008. In addition an interim dividend of 83 cents per  
share was declared on 28 November 2007 in respect of the current year.          
A final dividend of 117 cents per share was declared on 13 June 2008 bringing   
the dividend for the year to 200 cents per share compared to 160 cents in       
respect of the prior year, an increase of 25%.                                  
Review opinion                                                                  
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed  
consolidated financial information for the year ended 31 March 2008 contained in
this report. The review opinion is available for inspection at the company`s    
registered office during normal business hours.                                 
Commitments                                                                     
The future minimum lease payments under non-cancellable operating leases are    
R22.6 million (2007: R21.1 million) within one year, R21.2 million (2007: R46.9 
million) between two and five years and R0.9 million (2007: R0.2 million) later 
than five years, giving a total of R44.7 million (2007: R68.2 million).         
Goodwill                                                                        
An annual impairment test on the balance of goodwill has been performed at 30   
September 2007. No impairment loss has occurred.                                
Acquisition                                                                     
In January 2008 the Group acquired the net assets of Zetachem for a purchase    
consideration of R212.8 million. This purchase consideration was allocated to   
net tangible assets of R120.1 million, intangible assets of R50.4 million and   
goodwill of R42.3 million. This interest was consolidated in the current year   
financial statements from 1 January 2008.                                       
In October 2007 the Group invested 10% of the equity of ETC Bio Energy Limited  
in Zambia for a purchase consideration of R30 million.                          
Non-current liabilities                                                         
During the year under review the Group obtained long-term loans amounting to    
R340 million with financial institutions to facilitate the introduction of an   
employee owned BEE company and for the acquisition of Zetachem.                 
Commentary                                                                      
Introduction                                                                    
Omnia is a diversified and specialist chemical services company which provides  
customised solutions in the chemical, mining and agriculture markets. The       
results for the year ended 31 March 2008 reinforce the benefits arising from the
balanced businesses created by the Group`s diversification and the resulting    
increased synergy.                                                              
The period under review is characterised by extraordinary market conditions,    
with dramatic increases in Group key input costs, shortages of vital raw        
materials and dramatic changes within agriculture as the demand for biofuels    
increases and changes to global food consumption patterns shift to higher       
protein use. International food and energy prices are at record levels, thus    
creating a macro economic environment which is positive for Omnia, with strong  
demand continuing to be experienced in all three of the Group`s major markets.  
Omnia is well placed to deal with the changes taking place in the macro economic
environment, evidenced by the effective doubling of earnings in the Agriculture 
division as the Group benefited from buoyant conditions. This was in line with  
expectations, given the combination of good rains and the improved maize price  
which resulted in a favourable maize farming season coupled with increased      
international fertilizer prices. Expectations are that the demand for fertilizer
will remain robust as higher maize and wheat prices persist.                    
The year was again marked by significant increases in the Group`s procurement   
costs, not only in nitrogen products, but particularly potash and phosphate raw 
materials which continued to increase even more steeply than in the prior year, 
reaching record highs in the year under review. This significantly impacted the 
working capital required to fund the increase in value of inventory. The steep  
nitrogen-based product price increases continued to exert pressure on margins in
the mining business.                                                            
Financial review                                                                
Revenue for the year increased by 33% to R7,3 billion (2007: R5,5 billion) while
net profit increased by 27% to R313 million (2007: R246 million). Basic earnings
per share rose to 718.2 cents per share (2007: 560.3 cents per share),          
reflecting a 28% increase, in line with expectations. Headline earnings per     
share increased by 30% to 724.5 cents (2007: 558.2 cents).                      
Operating expenses net of other income increased by 28% to R915 million (2007:  
R717 million). Included in this increase is the share-based payment expense     
which has risen fourfold to R26 million of which R13 million relates to the BEE 
transaction announced in April 2007. The 28% increase is nevertheless below the 
increased level of activity as focus on containing costs remains a priority.    
The rapid increase in nitrogen-based raw material prices continued to depress   
margins in the Mining division. However, the Chemical division had a noteworthy 
year, benefiting from the growth in national manufacturing output and the       
weakening in the average rand exchange rate. In addition, improved margins in   
the Agriculture division contributed to the increase in Group operating margin  
to 8.0% (2007: 7.6%) for the year under review. Operating profit rose by 38% to 
R584 million (2007: R422 million).                                              
Resulting from the continued increase in raw material prices, working capital   
levels were again higher than during the previous financial year. This resulted 
in an increase in net interest paid of 90% to R118 million (2007: R62 million). 
A foreign currency gain of R6 million (2007: R4 million) mainly in respect of   
foreign bank balances was recorded, due to the decline in the rand against most 
major currencies.                                                               
During the year under review the Group generated R223 million (2007: R205       
million) in cash from its operating activities before capital expenditure on    
various projects, which included:                                               
the completion and commissioning of an EcoGypsumTrade Mark plant for the        
processing and refinement of forced-arising gypsum for subsequent use in the    
cement industry;                                                                
*    the completion and commissioning of a reactor to reduce greenhouse gas     
    emissions at the Agriculture division`s Sasolburg plant;                    
*    the building and commissioning of a Nitrophos production plant; and        
*    the building of a shocktube assembly plant to enable the Mining division to
benefit from a renewed focus on safety and resulting market trend away from 
    the outdated capped fuse product.                                           
In addition to the capital expenditure on its projects, the Group also invested 
an aggregate R167 million in the acquisition of Zetachem, a company involved in 
the manufacture and marketing of a range of speciality water treatment chemical 
products, with a view to synergistic growth of the Group`s established water    
care business and in a Jatropha bio-fuel project in Zambia. Capital expenditure 
increased to R284 million (2007: R188 million) reflecting the Group`s continued 
investment in various expansion projects.                                       
Additional term funding amounting to R340 million was secured during the year   
mainly as a result of the introduction of a BEE partner, Sakhile Initiative     
Limited.                                                                        
The Group continues to invest in technology driven improvements across all areas
of the business, which will bring about improved customer service and           
productivity. These improvements also include supply chain optimisation,        
procurement and the protection of the environment.                              
These promising investments, together with the continued increase in raw        
material prices, led to an increase in net interest bearing debt at year end to 
R451 million (2007: R265 million) with a related increase in the debt: equity   
ratio to 29% (2007: 21%).                                                       
OPERATIONAL REVIEW                                                              
Chemicals                                                                       
The Omnia division, Protea Chemicals, is the leading distributor of speciality, 
functional and effect chemicals in Africa with an established presence in every 
sector of the chemical distribution market.                                     
As a supplier to the manufacturing industry, Protea Chemicals benefited from the
growth in the South African economy. Volumes increased across almost all        
business units while the weakening of the rand contributed further to price     
increases. Price increases also occurred as a result of global product          
shortages.                                                                      
Revenue increased by 27% to R3,3 billion (2007: R2,6 billion) with operating    
profit increasing by 17% to R148 million (2007: R127 million). A change in      
product mix to include notably greater polymer volumes, resulted in a decrease  
in operating margin to 4.5% (2007: 4.8%). Towards the end of the year the       
potable water care business, Zetachem, was acquired. This acquisition will      
enhance margins in the Chemical division.                                       
The division contributed 25% to Group operating profit (2007: 30%), the         
reduction in contribution being due to the appreciable increase in the          
Agriculture division`s contribution in the financial year.                      
Subsequent to year end, Protea Chemicals received a summons issued on behalf of 
various participants in the Eastern Cape Pineapple Industry. This claim relates 
to a consignment of zinc sulphate, imported from China. The summons has been    
referred to Protea Chemicals` insurers who, with the assistance of their        
attorneys, are dealing with the matter. Protea Chemicals is committed to a      
responsible and commercially sustainable business practice. The Department of   
Agriculture has conducted an investigation, and Protea Chemicals has cooperated 
fully with that department.                                                     
Mining                                                                          
A market leader in blended bulk explosives formulations for surface mines, the  
Mining division also manufactures packaged explosives for underground mines and 
specialised surface blasting. The division also markets blasting accessories,   
and a complete range of mining chemicals.                                       
The division continued its volume growth, particularly in mining chemicals, both
locally and internationally. However while revenue increased by 28% to R1,3     
billion (2007: R1 billion), operating profit decreased by 9% to R125 million    
(2007: R138 million) explained by the unprecedented rate of increase in the cost
of raw materials, which resulted in the operating margin decreasing further to  
9.8 % (2007: 13.8%) as contract pricing did not allow for expeditious           
adjustments. The original price adjustment clauses on the majority of Mining    
chemical contracts have now been re-negotiated to allow for prompt response to  
rapid increases in chemical procurement costs.                                  
In the case of explosives contracts, following the disappointing margins in the 
2007 financial year, contracts were renegotiated in the early part of the year  
under review. However, the rapid and steep increases in raw material prices     
necessitated yet another series of negotiations in terms of which prices are now
adjusted on a monthly, rather than a quarterly, basis. These re-negotiated price
increases were only completed in the last quarter of the year and should reverse
the decline in margins relating to the explosives component of the business.    
The Mining division contributed 21% to Group operating profits (2007: 33%).     
The division`s shocktube assembly plant will be commissioned shortly.           
Agriculture                                                                     
The Agriculture division produces and supplies granular, liquid and speciality  
fertilizers to individual farmers, co-operatives and wholesalers throughout     
South Africa and, increasingly, to sub-Saharan Africa, as well as to Madagascar,
Australia and New Zealand.                                                      
The favourable operating environment for the Agriculture division, with the     
maize price remaining at levels above R1 800 per ton for most of the period     
under review encouraged maize production. In addition the global shortage of    
fertilizer raw materials drove the price of fertilizer to record highs. Revenue 
increased by 43% to R2,7 billion (2007: R1.9 billion). Operating profit         
increased by 98% to R311 million (2007: R157 million), while operating margin   
improved to 11.4 % (2007: 8.2%).                                                
Prospects                                                                       
Although it is anticipated that the South African economy will continue to slow 
down, the weakening rand should enable the manufacturing sector to become       
internationally more competitive. Protea Chemicals, as a major supplier to the  
manufacturing sector, will continue to find new applications thereby growing    
volumes. With the commissioning of Sasol`s Turbo project, increased polymer     
volumes are expected to become available to the Group. The division is therefore
well positioned to embrace further growth opportunities and to deliver greater  
value.                                                                          
Ongoing strong growth in world metal and mineral demand has benefited the       
explosives and mining chemical markets and, following the correction to the     
depressed margins of the past year, the Group anticipates good growth in its    
Mining division.                                                                
The re-negotiated explosives contracts will result in improved margins and there
is significant potential for the Mining division`s future growth into Africa.   
Against this backdrop, renewed focus will be directed at taking advantage of the
opportunities arising from the Group`s increasing presence in South Africa and  
beyond. The Group remains confident particularly on prospects for coal and      
uranium mining as new projects are commissioned to support global energy demand.
The current Agriculture environment, arising from the substantially higher      
prevailing international grain prices, and the related focus on biofuels, should
continue to favour the fertilizer business and the Group as a whole. Increasing 
Nitrophos production should also give the Agriculture division the opportunity  
to further optimise raw material costs. In addition, the division`s strong      
position in Africa is a growth opportunity, with the prospect of more tonnage   
being sold.                                                                     
The Group is on target to meet its five year management plan, set at 10% real   
growth in earnings per annum, implemented four years ago. The Group has embarked
on a number of innovative projects that will impact significantly on improved   
logistical and raw material cost efficiencies, as well as environmental control 
improvements. One such project is Omnia`s award winning Clean Development       
Mechanism (CDM) project which was commissioned in the second half of the 2008   
financial year as anticipated.                                                  
In terms of this greenhouse gas reduction project, Omnia Fertilizer will        
generate approximately 500,000 Certified Emission Reduction (CER) units per     
annum at its Sasolburg plant. Based on current price levels Omnia could         
potentially earn approximately R60 million per annum in revenue from calendar   
year 2008, over the next five year period. As CER units are traded              
internationally as commodities, future price movements will depend on supply and
demand factors.                                                                 
As previously announced, Omnia underwent an internal restructuring effective 1  
April 2007 to simplify its structure and facilitate the introduction of an      
employee-owned Black Economic Empowerment (BEE) company, known as Sakhile       
Initiative Ltd, as a 10% equity partner in the Group.                           
Dividend                                                                        
The Board is pleased to announce that it has declared a final dividend of 117   
cents in respect of shareholders recorded in the register on Friday 11 July     
2008. This final dividend brings the dividend for the full year ended 31 March  
2008 to 200 cents (after inclusion of the interim dividend of 83 cents per      
share) compared with the 160 cents paid in respect of the prior full year.      
The last day for trading in the company`s shares cum dividend will be Friday 4  
July 2008. The shares will commence trading ex dividend on Monday 7 July 2008   
and the record date will be Friday 11 July 2008. The payment date will be Monday
14 July 2008. Share certificates may not be dematerialised or rematerialised    
between Monday 7 July and Friday 11 July 2008, both dates inclusive.            
NJ CROSSE                   RB HUMPHRIS                                         
Chairman                    Managing Director                                   
Bryanston                   18 June 2008                                        
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, 
RR Masebelanga*, R Havenstein, JG Pretorius, DC Radley, TR Scott    *Executive  
Directors                                                                       
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                                                  
www.omnia.co.za                                                                 
Date: 18/06/2008 08:00:30 Supplied by www.sharenet.co.za                     
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