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Rlf - Rolfes - Unaudited Interim Results For The Six Months Ended 31 December

Release Date: 02/03/2009 07:05:02      Code(s): RLF
RLF - Rolfes - Unaudited Interim Results For The Six Months Ended 31 December   
2008                                                                            
ROLFES TECHNOLOGY HOLDINGS LIMITED                                              
(Registration number 2000/002715/06)                                            
Share Code: RLF                                                                 
ISIN:ZAE000096202                                                               
("Rolfes" or "the Group")                                                       
www.rolfesza.com                                                                
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008             
FINANCIAL SUMMARY                                                               
-  Turnover increased by 45,7% to R211,3 million                                
-  Operating profit increased by 6,6% to R22,7 million                          
-  Headline earnings decreased by 7,7% to R13,2 million                         
-  The net current assets increased by R35,7 million                            
-  Net asset value increased by 28,4% to 121,6 cents per share                  
CONSOLIDATED GROUP INCOME STATEMENTS                                            
for the period ended 31 December 2008                                           
                         UNAUDITED      UNAUDITED       AUDITED                 
                        SIX MONTHS     SIX MONTHS          YEAR                 
31 DEC         31 DEC       30 JUNE                 
                              2008           2007          2008                 
                             R`000          R`000         R`000                 
Revenue                     211 305        145 010       314 898                
Cost of sales              (172 843)      (113 761)     (244 050)               
Gross profit                 38 462         31 249        70 848                
Other operating income        2 932          5 076         8 106                
Operating expenses          (18 675)       (15 017)      (33 847)               
Operating profit before                                                         
interest                     22 719         21 308        45 107                
Operating profit percentage    10,8%          14,7%         14,3%               
Interest paid and finance                                                       
charges                      (4 352)        (1 533)       (3 879)               
Income from investments         112              8           164                
Net profit before taxation   18 479         19 783        41 392                
Tax expenses                 (5 237)        (5 434)      (11 740)               
Profit for the year          13 242         14 349        29 652                
Attributable to:                                                                
Equity holders of parent     13 242         14 349        29 652                
Reconciliation of headline                                                      
earnings                                                                        
Attributable profit          13 242         14 349        29 652                
Adjustment for the after-tax                                                    
effect of:                                                                      
Loss from sale of fixed asset    10              -           442                
Headline earnings            13 252         14 349        30 094                
Weighted average number of shares                                               
in issue (`000)             103 348        102 609       103 103                
Earnings per share (cents)                                                      
- Basic                        12,8           14,0          28,8                
- Headline                     12,8           14,0          29,2                
- Diluted                      12,8           14,0          28,8                
- Diluted headline             12,8           14,0          29,2                
CONSOLIDATED GROUP BALANCE SHEETS                                               
as at 31 December 2008                                                          
                         UNAUDITED      UNAUDITED       AUDITED                 
31 DEC         31 DEC       30 JUNE                 
                              2008           2007          2008                 
                             R`000          R`000         R`000                 
ASSETS                                                                          
Non-current assets          110 574         67 446        71 134                
Plant and equipment          40 482         36 674        40 110                
Property                     27 946         16 680        16 805                
Intangible assets            42 146         14 092        14 219                
Current assets              163 067        111 321       159 471                
Inventories                  89 392         52 245        89 267                
Trade and other receivables  73 325         58 676        69 879                
Short-term loans                350            400           325                
Total assets                273 641        178 767       230 605                
EQUITY AND LIABILITIES                                                          
Capital and reserves        126 009         98 078       113 013                
Share capital                 1 036          1 036         1 036                
Share premium                28 603         28 603        28 603                
Treasury shares                (614)             -          (368)               
Retained income              96 984         68 439        83 742                
Non-current liabilities      71 215         20 330        26 102                
Interest-bearing                                                                
liabilities                  21 334         15 305        20 172                
Acquisition vendor           43 925              -             -                
Deferred tax liability        5 711          4 245         5 617                
Provisions                      245            780           313                
Current liabilities          76 417         60 359        91 490                
Trade and other payables     51 381         38 060        71 485                
Cash and cash equivalents    17 673         15 179         4 380                
Current portion of                                                              
interest-bearing liabilities  4 541          4 908         9 082                
Financial liability             193             30           110                
Value Added Tax liability       285            742             -                
Tax liability                 2 344          1 440         5 846                
Provisions                        -              -           587                
Total equity and                                                                
liabilities                 273 641        178 767       230 605                
Number of shares in                                                             
issue (`000)                103 609        103 609       103 609                
Net Asset Value per                                                             
share                         121.6           94.7         109.1                
CONSOLIDATED GROUP STATEMENTS OF CHANGES IN EQUITY                              
for the period ended 31 December                                                
                   Ordinary   Share Retained   Treasury   Total                 
                     shares premium   income     shares  equity                 
R`000   R`000    R`000      R`000   R`000                 
Balance at                                                                      
30 June 2007           1 025  24 864   54 090          -  79 979                
Net profit for the                                                              
period                     -       -   14 349          -  14 349                
Issue of new shares       11   3 739        -          -   3 750                
Balance at                                                                      
31 December 2007       1 036  28 603   68 439          -  98 078                
Net profit for the                                                              
period                     -       -   15 303          -  15 303                
Increase in treasury                                                            
shares                     -       -        -       (368)   (368)               
Balance at                                                                      
30 June 2008           1 036  28 603   83 742       (368)113 013                
Net profit for the                                                              
period                     -       -   13 242          -  13 242                
Increase in treasury                                                            
shares                     -       -        -       (246)   (246)               
Balance at                                                                      
31 December 2008       1 036  28 603   96 984       (614)126 009                
ABRIDGED CONSOLIDATED GROUP CASH FLOW STATEMENTS                                
for the period ended 31 December 2008                                           
                         UNAUDITED      UNAUDITED       AUDITED                 
                        SIX MONTHS     SIX MONTHS          YEAR                 
31 DEC         31 DEC       30 JUNE                 
                              2008           2007          2008                 
                             R`000          R`000         R`000                 
Cash and cash equivalents                                                       
at the beginning of the                                                         
period                       (4 380)        (8 116)         (659)               
Cash flow (utilised in)/                                                        
generated from operating                                                        
activities                   25 580         21 516        45 857                
Cash utilised in working                                                        
Capital                     (28 276)       (19 494)      (38 484)               
Taxation paid                (8 646)        (4 074)       (4 791)               
Cash flow utilised in                                                           
investing activities        (41 571)       (19 336)      (17 726)               
Treasury shares acquired       (246)             -          (368)               
Cash flow generated from                                                        
financing activities         39 866         14 325        11 791                
Cash and cash equivalents                                                       
- end of the period         (17 673)       (15 179)       (4 380)               
SEGMENTAL ANALYSIS for the six months ended 31 December                         
Operating                                                   
             Revenue   Profit   Net Profit   Assets  Liabilities                
               R`000    R`000        R`000    R`000        R`000                
2008                                                                            
Chemicals      72 315   (2 877)      (4 554) 127 497      115 497               
Silica         20 892    6 779        3 882   45 846       28 364               
Pigments      116 978   14 267        9 035  102 993       42 682               
Other           1 258    4 550        4 882  166 966       10 554               
Elimination                                                                     
of intergroup                                                                   
items            (138)      -            -  (169 661)    (49 465)               
Total         211 305   22 719       13 242  273 641      147 632               
Operating                                                                       
             Revenue   Profit   Net Profit   Assets Liabilities                 
               R`000    R`000        R`000    R`000       R`000                 
2007                                                                            
Chemicals      49 501    4 907        2 432   41 567      36 163                
Silica         20 566    4 866        2 125   36 010      25 773                
Pigments       73 990    8 877        6 671   90 717      45 830                
Other           1 549    2 709        3 169  145 312      (9 610)               
Elimination                                                                     
of intergroup                                                                   
items            (596)     (51)           - (134 839     (17 467)               
Total         145 010   21 308       14 349  178 767      80 689                
for the twelve months ended 30 June                                             
                    Operating                                                   
             Revenue   Profit   Net Profit   Assets  Liabilities                
               R`000    R`000        R`000    R`000        R`000                
2008                                                                            
Chemicals     114 231   14 358        5 120   73 934       68 698               
Silica         39 651   13 901        5 489   38 605       25 005               
Pigments      158 852   39 276       15 709  104 084       60 765               
Other           2 164    3 413        5 567  202 059      (14 176)              
Elimination of                                                                  
intergroup                                                                      
items and other     -     (100)      (2 233)(188 077)     (22 700)              
Total         314 898   70 848       29 652  230 605      117 592               
The basis of preparation of the segmental analysis has been changed as certain  
intercompany transactions have been eliminated in the current period and June   
2008 reporting. The financial period to December 2007 was adjusted accordingly. 
COMMENTARY                                                                      
Brief overview                                                                  
Rolfes manufactures and distributes a wide range of market-leading, high-quality
products through various divisions to diverse industries including the coatings,
plastics, vinyl, leather, ink, metallurgical, water filtration, automotive,     
chemicals and construction industries. The Pigments division is responsible for 
the manufacture and distribution of resins, lacquer thinners, organic and       
inorganic pigments, pigments pastes and dyes. Drummed solvents, creosotes, waxes
and other speciality chemicals are distributed through its Chemicals division,  
while the Silica division manufactures and distributes pure beneficiated silica.
Rolfes continued on its sustainable turnover growth path as demonstrated by its 
results for the six months ended December 2008. Effective pricing strategies,   
some increases in trade volumes and product line enhancements were the main     
contributors with slight market share gains achieved in a difficult economic    
environment. Exceptional losses suffered in the Chemicals division, as discussed
below, have been contained and proactive measures have been implemented to avoid
reoccurrences. Excluding the Chemicals division`s disappointing results, the    
other three divisions all showed significant profit growth.                     
Financial performance                                                           
The Group revenue for the six months increased by 45,7% to R211,3 million       
(December 2007: R145,0 million). Operating profit improved by 6,6 % to R22,7    
million (December 2007: R21,3 million). Headline earnings decreased by 7,7 % to 
R13,2 million (December 2007: R14,3 million). Fully diluted headline earnings   
per share was 12,8 cents per share (December 2007: 14,0 cents per share),       
decreasing by 8,6% over the comparative period.                                 
Group solvency improved from December 2007 with total assets increasing by R94,9
million while Group debt rose by R52,1 million, due to the inclusion of Triangle
Solvents for R43,9 million. No interest is payable to the vendor as per the sale
agreement. The net asset value per share strengthened to 121,6 cents per share  
(December 2007: 94,7 cents per share) while the net tangible asset value per    
share slightly decreased to 80,9 cents (December 2007: 81,1 cents).             
Interest cover reduced to 5,2 times (December 2007: 13,9 times) while the total 
debt: equity ratio (interest-bearing debt, excluding the acquisition vendor)    
decreased from 0,36 for the comparative period to 0,35 in December 2008.        
The Group incurred capital expenditure of R2,7 million (December 2007: R6,8     
million) mainly to maintain, improve and increase current production            
capabilities. The new acquisition`s fixed assets acquired amounted to R11,0     
million.                                                                        
Group cash flow                                                                 
(Excluding the impact of the Triangle Solvents acquisition in December 2008)    
The increase in the net working capital investment for the period to 31 December
2008 of R16,1 million, comprises a reduction in stock of R3,7 million (December 
2007: R9,9 million increase), trade and other receivables reduced by R8,3       
million (December 2007: R4,4 million increase), while trade and other payables  
decreased by R28,1 million (December 2007: R0,1 million increase). The stock    
days as at December 2008 increased by 6,5 days from December 2007 to 90 days,   
while debt collection days improved from December 2007 to December 2008 by 18,1 
days to 47 days, creditor payment days for the same period reduced by 13,5 days 
to 40 days. The working capital balances achieved to date was an improvement on 
budgeted balances as at 31 December 2008, except on stock which was R12,7       
million over budget, primarily as a result of the problems experienced in the   
Chemicals division.                                                             
The net result is that cash generated by operations totalled R8,2 million (34%  
of EBITDA) (2007: R8,8 million).                                                
Operational review                                                              
Rolfes Colour Pigments                                                          
Turnover increased by 58,1% to R117,0 million (December 2007: R74,0 million).   
The weakened rand and all time high raw material prices necessitated timeous    
sales price increases that successfully reduced and counteracted the impact of  
these adverse market conditions. Trading volumes increased in comparison to the 
six months to December 2007 with trading activities in African, European and    
Asian markets contributing to the division`s performance, comprising 16,8%      
(December 2007: 17,7%) of turnover.                                             
Continued trust in the Rolfes brand assisted with customer loyalty and support  
through difficult economic conditions. Proactive investment during 2008 in      
crucial raw material stock assisted with buffering against the adverse economic 
and market conditions experienced during this period. Operating profit increased
by 60,7% largely due to the increase in turnover.                               
Capital expenditure incurred to maintain production capacity amounted to R0,3   
million (December 2007: R0,5 million).                                          
Growth expectations for 2009 include the Union Colours project embarked on      
during the year to come to fruition during 2009, and an increase in the         
dispersion unit`s business. The division also continues to pursue various       
international trading opportunities, including facilitating trade between local 
suppliers and international customers. The business is focussing aggressively on
margin management, proactive procurement strategies and implementation of       
various cost reduction initiatives.                                             
Rolfes Chemicals                                                                
Turnover increased by 46,1% to R72,3 million (December 2007: R49,5 million) for 
the six months to December 2008. Despite the increase in turnover, the business 
suffered an operating loss of R2,9 million (December 2007: R4,9 million profit).
The write-offs include the following:                                           
-  Stock losses written off of R1,5 million.                                    
-  Foreign exchange losses incurred of R1,1 million.                            
-  Gross profit budgets were not achieved by R4,1 million due to low sales      
volumes and margins.                                                            
-  A pending DTI claim was declined and the write-off amounted to R0,9 million. 
Senior Rolfes Chemicals management has since resigned and left the business,    
some retrenchments have taken place and the resins and lacquer thinners business
has been restructured (refer to corporate actions below) and incorporated as a  
division under the successful Rolfes Colour Pigments management.                
Capital expenditure amounted to R0,1 million (December 2007: R1,5 million).     
The new acquisition, Triangle Solvents, has been incorporated into Rolfes       
Chemicals with effect from 12 December 2008, presenting and offering some       
excellent future prospects for the division.                                    
Rolfes Silica                                                                   
Contributing factors to the marginal turnover growth of 1,6% to R20,9 million   
(December 2007: R20,6 million) were the challenging economic environment and    
high rainfalls experienced during the six months under review, which negatively 
influenced production and sales volumes.                                        
Gross profit margins increased to 41,6% (December 2007: 37,6%) due to a change  
in sales mix, improved production processes and efficient transport cost        
management.                                                                     
Operating profit increased by 39% to R6,8 million largely due to positive growth
in gross profit and a 30% reduction in overheads.                               
Capital expenditure incurred to increase production capacity and maintain safety
standards, amounted to R2,3 million (December 2007: R4,6 million).              
Management expects the existing demand for both aggregate and silica fines to   
remain as is until year-end. Aggregate material demand may however increase due 
to some large construction projects being planned in the area. A continuous     
drive to reduce unit costs, with possible volume increases in both silica fines 
and aggregates, will assist in meeting budgets to June 2009.                    
Market conditions and prospects                                                 
Since December 2008, Rolfes has seen a decline in demand for certain of its     
products, especially demand from the construction industries and Europe.        
Management is also experiencing more aggressive tactics from its competitors on 
most fronts, and is fully aware of the macro-economic factors weighing          
negatively on the South African and global economies. To maintain sales to June 
2009, Rolfes will be adding more products to the basket, exploring new local    
territories and trying to at least maintain, if not increase, market share where
it can. Lowering raw material prices will continue to put a squeeze on gross    
profits. However, the Group will endeavour to maintain gross profit margins     
through additional internal buying and manufacturing efficiencies. Rolfes       
continually monitors all production and administrative overhead cost structures 
to improve operating profits and margins, and has already implemented a number  
of costs reduction and saving plans, including:                                 
-  the merging of the dispersion plants in Cape Town and Jet Park, with all     
dispersions and leather finishing products now being manufactured in Cape Town; 
-  closure of the resin plant in Durban and related retrenchments;              
-  retrenchment of the administration staff in Alberton with the functions being
centralised in Jet Park; and                                                    
-  reduction in certain overhead and production expenditure throughout the      
Group.                                                                          
Business combinations and other corporate actions                               
As per our SENS announcement dated 14 January 2009, the Group acquired a 100%   
shareholding in New Heights 390 (Pty) Limited trading as Triangle Solvents with 
effect from 12 December 2008 for R43,8 million (provisional present value)      
resulting in provisional goodwill of R27,9 million.                             
The acquired business contributed revenue of R5,1 million and net profit of R0,4
million for the period to 31 December 2008, and its assets and liabilities at 31
December 2008 were R31,6 million and R15,3 million, respectively.               
If the acquisition had occurred on 1 July 2008, the acquired business would have
contributed revenue of R49,1 million, and net profit of R4,3 million. The       
acquisition consideration will be settled in cash, of which R14 million has     
already been paid.                                                              
As part of an internal Group restructuring, with effect from 1 February 2009,   
the resins and lacquer solvents business of Rolfes Chemicals (Pty) Limited was  
disposed of to Rolfes Colour Pigments International (Pty) Limited as a going    
concern at book value, and the entire Triangle Solvents business of New Heights 
(Pty) Limited (excluding the Germiston property) was disposed of to Rolfes      
Chemicals (Pty) Limited as a going concern at book value. Rolfes Chemicals now  
only comprises the Triangle Solvents business.                                  
As part of the restructuring of the chemicals business, Rolfes and Paintchem    
(Pty) Limited have entered into a Consensual Cancellation of Comprehensive Lease
and Manufacturing Agreement with effect from 1 February 2009, effectively       
cancelling the original long-term lease and manufacturing agreement dated 26    
September 2007 in respect of the resin plant in Durban.                         
Corporate governance and sustainability                                         
The Group is committed to the principles and practices of sound corporate       
governance, including sustainable development and social responsibility.        
Human resources                                                                 
Rolfes recognises employees as important contributors to its sustained growth.  
Historically disadvantaged individuals are employed to train into skilled       
positions. Structured remuneration and performance bonus schemes reward         
management and staff for exceptional achievements.                              
Accounting policies - Basis of preparation                                      
The Board acknowledges its responsibility for the preparation of the condensed  
unaudited consolidated interim financial statements in accordance with          
International Accounting Standard 34 (IAS 34 - Interim Financial Reporting) and 
the JSE Limited Listings Requirements. These condensed consolidated interim     
financial statements are unaudited and prepared in accordance with International
Financial Reporting Standards (IFRS) and in compliance with the Listings        
Requirements of the JSE Limited and the South African Companies Act. The        
unaudited condensed consolidated interim financial statements do not include all
the information required by IFRS for full financial statements. The accounting  
policies are consistent with those used in the prior year.                      
Board of Directors                                                              
Two new independent non-executive directors have been appointed to the Board of 
Directors on 25 February 2009. They are Karabo Nondumo, CEO of AWCA Investment  
Holdings, and Takalani Tshivhase, executive director of Pinnacle Technology     
Holdings. These two directors will constitute the Audit and Risk Committee.     
Subsequent events                                                               
Other than as reported above, 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.                                                                     
For and on behalf of the Board                                                  
BT Ngcuka                                E van der Merwe                        
Chairman                                 Chief Executive Officer                
2 March 2009                                                                    
Midrand                                                                         
Registered office: The Summit, 269 16th Road, Randjespark, Midrand              
Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg 2001                                                       
Directors: BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), L  
Dyosi*, AJ Fourie*, L Lynch (Financial Director), KT Nondumo**, T Tshivhase**   
*Non-executive                                                                  
** Independent non-executive                                                    
Designated adviser: PSG Capital (Pty) Limited                                   
Registered auditors: BDO Spencer Steward (Jhb) Incorporated                     
www.rolfesza.com                                                                
Date: 02/03/2009 07:05:02 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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implicitly, represent, warrant or in any way guarantee the truth, accuracy or   
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employees and agents accept no liability for (or in respect of) any direct,     
indirect, incidental or consequential loss or damage of any kind or nature,     
howsoever arising, from the use of SENS or the use of, or reliance on,          
information disseminated through SENS.                                          



                                        
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