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RLF - Rolfes - Abridged audited results for the year ended 30 June 2010 and

Release Date: 15/09/2010 07:05:19      Code(s): RLF
RLF - Rolfes - Abridged audited results for the year ended 30 June 2010 and     
dividend declaration                                                            
ROLFES TECHNOLOGY HOLDINGS LIMITED                                              
(Registration number 2000/002715/06)                                            
Share Code: RLF                                                                 
ISIN: ZAE000096202                                                              
("Rolfes" or "the Group")                                                       
*    Headline earnings per share increased by 123,1%                            
*    Interest paid reduced by 54,4%                                             
*    Cash flow generated from operations is R47,9 million (2009: R34,5 million) 
*    Debt reduced by R32,3 million                                              
*    Net Asset value increased to R140,3 million from R121,6 million in 2009    
ABRIDGED STATEMENT OF FINANCIAL POSITION                                        
as at 30 June                                                                   
                                               2010         2009                
                                              R`000        R`000                
Non-current assets                            98 594      106 302               
Plant and equipment                           38 296       40 787               
Property                                      27 726       27 253               
Investments                                        -          566               
Intangible assets                             32 572       37 696               
Current Assets                               144 616      132 458               
Inventories                                   77 718       71 000               
Trade and other receivables                   60 771       58 858               
Financial asset                                    -          483               
Cash and cash equivalents                      6 127          352               
Tax asset                                          -        1 765               
Total assets                                 243 210      238 760               
EQUITY AND LIABILITIES                                                          
Capital and reserves                         140 320      121 647               
Share capital                                  1 036        1 036               
Treasury shares                                 (868)        (635)              
Share premium                                 28 603       28 603               
Retained income                              109 356       90 450               
Revaluation reserve                            2 193        2 193               
Equity holders of the parent                 140 320      121 647               
Minority interest                                  -            -               
Non-current liabilities                       25 487       43 902               
Interest-bearing liabilities                  15 315       24 357               
Acquisition vendor loan                            -       13 086               
Deferred tax liability                         7 036        3 323               
Provision                                      3 136        3 136               
Current liabilities                           77 403       73 211               
Trade and other payables                      60 617       47 875               
Current portion of interest-bearing                                             
 liabilities                                  8 825       10 685                
Current portion of vendor loan                 5 220       13 600               
Financial liability                              100            -               
Value Added Tax liability                        932          781               
Tax liability                                  1 239            -               
Provisions                                       470          270               
Total equity and liabilities                 243 210      238 760               
ABRIDGED STATEMENT OF COMPREHENIVE INCOME                                       
for the year ended 30 June                                                      
                                               2010         2009                
R`000        R`000                
Revenue                                      369 029      375 512               
Cost of sales                               (291 372)    (308 078)              
Gross profit                                  77 657       67 434               
Other operating income                           907        3 849               
Operating expenses                           (40 289)     (46 829)              
Operating profit before interest              38 275       24 454               
Interest paid and finance charges             (4 861)     (10 663)              
Income from investments                           11        1 277               
Net profit before taxation                    33 425       15 068               
Tax expenses                                  (9 572)      (4 308)              
Profit for the year                           23 853       10 760               
Total comprehensive income for the year       23 853       10 760               
Attributable to:                                                                
Equity holders of the parent                  23 853       10 760               
Minority interest                                  -            -               
Attributable to:                                                                
Continuing operations                         23 853       21 601               
Discontinued operations                            -      (10 841)              
Reconciliation of headline earnings                                             
Attributable profit                           23 853       10 760               
Adjusted for the after-tax effect of:                                           
Loss/ (Gain) from sale of fixed asset              8          (21)              
Headline earnings                             23 861       10 739               
Earnings per share (cents)                                                      
- Basic                                         23,2         10,4               
- Headline                                      23,2         10,4               
- Diluted                                       23,2         10,4               
- Diluted headline                              23,2         10,4               
ABRIDGED STATEMENT OF CASH FLOWS                                                
for the year ended 30 June                                                      
                                               2010         2009                
R`000        R`000                
Cash flow generated from                                                        
 operating activities                        47 938       34 510                
Finance income                                    11        1 277               
Finance cost                                  (4 861)     (10 663)              
Tax paid                                      (4 143)     (13 495)              
Dividends paid                                (5 180)           -               
Cash flow generated from / (utilised in)                                        
investing activities                         4 378      (39 104)               
Cash flow (utilised in) / generated from                                        
 financing activities                       (32 368)      32 207                
Cash surplus for the year                      5 775        4 732               
Cash and cash equivalents                                                       
- beginning of the year                          352       (4 380)              
Cash and cash equivalents                                                       
- end of the year                              6 127          352               
ABRIDGED GROUP STATEMENTS OF CHANGES IN EQUITY                                  
for the year ended 30 June                                                      
                                               2010         2009                
                                              R`000        R`000                
Opening balance                              121 647      111 154               
Total comprehensive income for the year       23 853       10 760               
Increase in treasury shares                        -         (267)              
Dividends paid                                 5 180            -               
Balance at the end of the year               140 320      121 647               
SEGMENTAL ANALYSIS                                                              
for the year ended 30 June                                                      
                           Gross       Net             Liabili-                 
Revenue   profit    profit    Assets       ties                 
                  R`000    R`000     R`000     R`000      R`000                 
continuing      99 968   16 324     5 805    61 876     54 490                 
Silica            37 418   10 872     5 348    49 349     27 823                
Pigments         229 558   48 376    19 174   113 569     45 705                
Other              2 085    2 085    (6 474)   42 649       (894)               
Elimination of                                                                  
 and other            -        -         -   (24 233)   (24 234)                
Total            369 029   77 657    23 853   243 210    102 890                
 continuing      50 540    9 120     2 601    78 052     74 158                 
 discontinued    72 960      383   (10 841)        -          -                 
Silica            37 038   13 878     6 483    49 623     28 679                
Pigments         212 947   42 026    12 507   116 846     64 203                
Other              2 027    2 027        10    72 879     25 849                
Elimination of                                                                  
and other            -        -         -   (78 640)   (75 776)                
Total            375 512   67 434    10 760   238 760    117 113                
The basis of preparation of the segmental analysis, include certain intercompany
transactions being eliminated in the respective segmental results in the current
and previous year`s reporting.                                                  
The Group performed well considering unpredictable and difficult market         
conditions experienced during the 2010 financial year. The smooth revenue       
performance was counteracted by improved gross profit margins as a result of the
stabilising of raw material prices, efficiency improvements and successful      
factory cost reduction strategies to support the earnings base. Other           
achievements include a significant reduction in overheads and interest paid,    
excellent cash generated from operations and a large reduction in Group debt,   
all of which supports the Group`s strong financial position with diversity      
remaining key to Group performance. Overall market share was sustained, with    
growth noted in some sectors.                                                   
Strategies are constantly reviewed to ensure relevance and optimum              
capitalisation of opportunities in the variable local and international markets.
The Group continued to streamline its operations in order to give utmost clarity
of responsibility to its business units with efforts and resources remaining    
focused on key opportunities and value drivers entrenching the solid platform   
for growth and development. Various strategic opportunities to complement the   
business model are actively pursued.                                            
Future focus areas include exploiting export opportunities into the African and 
Asian markets, proactive initiatives to further improve cost efficiencies and   
increase cash generation, and strategic acquisitions in the chemicals sphere.   
Group Financial Performance                                                     
The 10,5% growth in profit for the year amounting to R23,9 million (2009: R21,6 
million, excluding discontinued operations), is evidence of a robust business in
a recessionary local and international economic environment. Group revenue      
declined by 1,7% to R369,0 million (2009: R375,5 million), due to the           
discontinuing of loss-making bulk solvent operations countered by positive      
growth in the Rolfes Colour Pigments turnover. Gross profit margins increased to
21,0% (2009: 18,0%) primarily due to the stabilising of raw material prices     
after rapid escalations experienced in the 2009 financial year, proactive       
factory cost reduction strategies including improved raw material cost          
management. Operating profit increased by 56,5% to R38,3 million (2009: R24,5   
million) due to operating expenses being reduced and bad debt provisions being  
significantly lower than in 2009. As a result, headline earnings increased by   
122,2% to R23,9 million (2009: R10,7 million, including discontinued            
operations). Fully diluted headline earnings per share are 23,2 cents per share 
(2009: 10,4 cents per share), an increase of 123,1% over 2009.                  
Group liquidity ratios remained stable and solvency improved from 2009 with the 
total net asset value increasing to R140,3 million (2009: R121,6 million). The  
net asset value per share improved to 135,4 cents per share (2009: 117,4 cents  
per share) while net tangible asset value per share increased to 104,0 cents per
share (2009: 81,0 cents per share), based on 103,609,469 shares in issue.       
Interest cover increased to 7,9 times (2009: 2,3 times) with the total debt     
(interest-bearing) equity ratio at 0,2 for 2010 (2009: 0,3). The favourable     
increase in interest cover is due to the Group`s ability to significantly       
increase operating profits and cash generated from operations.                  
The Group incurred capital expenditure of R2,8 million (2009: R16,3 million;    
R11,1 million through an acquisition) spent to support local and export market  
growth and compliance requirements with various legislations.                   
Cash Flow                                                                       
Excellent cash generation enabled the Group to fund the second payment of R13,6 
million in September 2009 for the Triangle Solvent acquisition and a cash       
dividend payment of R5,2 million (excluding STC) to shareholders in March 2010, 
all from working capital. Loan repayments (excluding the vendor loan) for the   
financial year amounted to R 10,9 million.                                      
Cash generated from operations improved to R47,9 million (2009: R34,5 million). 
The decrease in net working capital investment during 2010 of R4,1 million      
represents an increase in inventory and accounts receivable of R6,7 million and 
R1,9 million respectively, offset by an increase in accounts payable of R12,7   
million. Both the inventory and accounts receivable investment supported export 
trading and manufacturing activities with debt collection days on exports       
ranging between 60 and 90 days funded by the increase in accounts payable.      
Debtors` days increased to 53 days (2009: 50 days), while stock and creditor    
days increased to 97 days (2009: 84 days) and 67 days (2009: 50 days)           
The Group is looking forward to paying a final dividend of 5 cents per share to 
shareholders during October 2010 and anticipates funding the final payment of   
R5,2 million for the Triangle Solvent acquisition on 30 September 2010, both    
from working capital.                                                           
Operational Review                                                              
Rolfes Colour Pigments                                                          
Turnover increased by 7,8% to R229,6 million (2009: R212,9 million) due to      
increased trading activities in the resins and dispersion product lines, and the
African and Asian markets. Total market share was equally maintained and        
increased in some areas, with growth in African and Asian export markets        
counteracting the decline in European markets. Major international customer     
sample approvals for the locally manufactured Union Colour organic pigment      
products resulted in increased demand towards the latter part of the financial  
year. Total exports for the year to Europe, Asia and Africa were R58,8 million  
(2009: R42,9 million). Raw material prices have stabilised at lower levels      
enabling stable pricing to the market.                                          
The division`s gross profit margin increased to 21,1% (2009: 19,7%). Effective  
operation of the various manufacturing plants and successful input raw material 
cost management contributed to this increase, which was limited by lower margins
achieved in Europe.                                                             
Operating expenses increased by 7,3% primarily due to a large debtor write-off  
of R2,5 million, with other cost being contained at 2009 levels. Capital        
expenditure incurred amounted to R0,9 million (2009: R0,7 million) to support   
and improve production capability to support export market demand.              
The business unit expects increased export and trading activities in the short  
term, especially into Africa and Asia, supported by stable raw material pricing 
and renewed inventory investment by the local customers. Prospects include      
expansion into new local and international market sectors with the current      
product offering, with further growth expected in the resin and dispersions     
product ranges.                                                                 
Rolfes Chemicals                                                                
Turnover increased by only 1,0% to R99,9 million (12 months 2009: R99,1 million)
primarily as a result of significantly reduced oil prices during the first 8    
months of the financial year which has a direct impact on the pricing of the    
majority of Rolfes Chemicals products. This was however counteracted by an      
increase in volumes of 8,1 % on all major product lines. Imported solvent and   
speciality chemicals product lines, added to the offering during the year, have 
been very well accepted in the market, achieving anticipated volume targets.    
Market share increased in both Gauteng and the Western Cape with Rolfes         
Chemicals remaining a leading player in the Gauteng market.                     
Effective pricing strategies and cost control assisted with margin maintenance  
resulting in a slight reduction in gross profit margins by 1,0% to 16,3 % (2009:
Operating expenses increased by 14,2% mainly due to increased employment costs  
and in line with new business development initiatives. Capital expenditure was  
Future prospects include expected increases in solvent prices along with        
expected volume increases as the economy improves. Aggressive pursuit of African
export opportunities, expected growth in the Western Cape, expansion into       
KwaZulu-Natal, entering the mining solvents sector and continued expansion of   
the product offering (speciality chemicals), all provide certain prospects for  
future growth. Capital expenditure to increase storage and mixing facilities    
were undertaken during July 2010.                                               
Rolfes Silica                                                                   
Turnover increased by 1,0% to R37,4 million (2009:                              
R37,0 million). Business performance was hampered by the recessionary           
environment and reduced product demand in the run up and during the 2010 World  
Cup soccer event. Fines volumes supplied for the financial year decreased by 5% 
while aggregates volume growth amounted to 2%. Market share was maintained with 
a wider customer base growth compensating for lower product demand by larger    
Gross profit margins at 29,1% (2009: 37,5%) declined mainly as a result of      
change in production and sales mix, with manufacturing and transport costs      
contained at 2009 levels. The 17,9% reduction in operating expenses resulted    
from lower management incentives and consulting fees incurred.                  
Capital expenditure incurred amounted to R1,2 million (2009: R4,1 million) to   
ensure mainly compliance to safety, security and DMR regulations.               
The 2011 financial year is expected to be an interesting year for the business  
with opportunities in a number of African countries in particular related to the
metallurgical sector. Local market conditions will be challenging with the      
anticipated oversupply of aggregates due to the expected reduction of government
spending on infrastructure.                                                     
Market Conditions and Prospects                                                 
The Group expects general local market conditions to remain strained, with no   
significant improvement expected during the 2011 financial year. The same is    
expected of the European market. However, special effort is being made to grow  
our African and Asian business which remains buoyant, and to increase our       
business in the KwaZulu-Natal and Cape regions which is in its infancy.         
We will endeavour to sustain our existing local and European business through   
continuing to expand the Group`s product offering and maintaining effective     
pricing strategies.                                                             
The Group is also actively pursuing new acquisition opportunities in the        
chemicals sphere, especially in the agriculture chemicals, fertilizer and mining
solvents/chemicals sectors.                                                     
None of the market conditions and prospects information contained in this       
announcement have been reviewed or reported on by Rolfes` auditors.             
Dividends and share liquidity                                                   
The Group paid an interim dividend to shareholders of 5 cents per share on 23   
March 2010 and will pay a final dividend of 5 cents per share on 25 October     
The salient dates of the dividend payment are as follows:                       
Last date to trade "cum" the dividend           Friday, 15 October              
Shares to commence trading "ex" the dividend    Monday, 18 October              
Record date                                     Friday, 22 October              
Payment date                                    Monday, 25 October              
Share certificates may not be dematerialised or rematerialised between Monday,  
18 October 2010 and Friday, 22 October 2010, both days inclusive.               
Continued efforts to improve share liquidity will remain a focus. Regular       
investor and stockbroker visits as well as continued creation of communication  
platforms will keep the investment community informed on corporate activity and 
developments within the Group.                                                  
Corporate governance and sustainability                                         
The Group recognises the recommendations of King III and remains committed to   
sound corporate governance and sustainability practices.                        
Basis of preparation                                                            
The Board acknowledges its responsibility for the preparation of the abridged   
consolidated annual financial statements. The abridged consolidated annual      
financial statements for the year ended 30 June 2010 have been prepared in      
accordance with the framework concepts and the measurement and recognition      
requirements of International Financial Reporting Standards (IFRS) and the AC500
Standards; the interpretations adopted by the International Accounting Standards
Board (IASB), the JSE Listings Requirements and the South African Companies Act 
and are presented and disclosed in compliance with International Accounting     
Standard 34 (IAS 34).                                                           
Accounting policies                                                             
The abridged consolidated annual financial statements do not include all the    
information required by IFRS for full financial statements.                     
The accounting policies adopted in the preparation of the abridged consolidated 
annual financial statements are consistent with those applied in the preparation
of the annual financial statements for the year ended 30 June 2009. However, the
following Standards and amendments to standards have been adopted in the current
financial year in accordance with the transitional provisions of the standards: 
*    IFRS5 - Non-current Assets Held for Sale and Discontinued Operations       
*    IFRS 8- Operating segments                                                 
*    IAS 1 - Presentation of Annual Financial Statements                        
*    IAS 7 - Statement of Cash Flows                                            
*    IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors    
*    IAS 10 - Events after the Reporting period                                 
*    IAS 16 - Property, Plant and Equipment                                     
*    IAS 23 - Borrowing Cost                                                    
*    IAS 27 - Consolidated and Separate Financial Statements                    
*    IAS 36 - Impairment of Assets                                              
*    IAS 38 - Intangible Assets                                                 
*    IAS 40 - Investment property                                               
*    IFRIC 10 - Interim Financial Reporting and Impairment                      
There is no material effect on the financial results as a result of the adoption
of the above standards.                                                         
Goodwill and intangible assets                                                  
An annual impairment test on the balance of goodwill and intangible assets at   
the beginning of the reporting year has been performed at 30 June 2010. No      
impairment loss has occurred.                                                   
Goodwill decreased during the year due to the profit warranties not being met as
per the purchase agreement of New Heights 390 (Pty) Limited (Triangle Solvents).
Business combinations                                                           
New Heights 390 (Pty) Limited                                                   
New Heights 390 (Pty) Limited trading as Triangle Solvents was acquired in the  
prior year with effect from 1 December 2008. The business now trades under the  
Rolfes Chemicals name.                                                          
The initial cost of the acquisition was R45 million, payable in cash. The amount
paid at year-end was R27,6 million and an amount of R5,2 million is due on 30   
September 2010. Due to the profit warranties as per the purchase agreement not  
being met, the cost of the acquisition was adjusted down to R32,8 million.      
Related party transactions                                                      
The Group companies entered into various related party transactions. These      
transactions are no less favourable than those entered into with third parties  
and occur on an arm`s length and commercial basis.                              
Audit opinion                                                                   
These abridged consolidated annual financial statements have been audited by the
Group`s auditors, BDO South Africa Inc, (previously BDO Spencer Steward (Jhb)   
Inc), Registered Auditors, and their unmodified report is available for         
inspection at the Company`s registered office.                                  
Notice of annual general meeting and mailing of annual report                   
Shareholders are advised that the annual report for the financial year ended 30 
June 2010 will be mailed in due course. This report will contain the notice and 
related details of the annual general meeting of shareholders to be held at The 
Summit, 269 16th Road, Randjespark, Midrand at 12h00 on Friday, 29 October 2010.
Proposed Change of Name                                                         
The notice of the annual general meeting will contain a proposed special        
resolution to change the name of the Company from "Rolfes Technology Holdings   
Limited" to "Rolfes Group Limited", subject to shareholder and regulatory       
approvals. Further details and salient dates of the proposed name change will be
contained in the annual report to be mailed to shareholders in due course.      
On behalf of the Board                                                          
BT Ngcuka                                E van der Merwe                        
Chairman                                 Chief Executive Officer                
15 September 2010                                                               
Registered office:                                                              
The Summit, 269 16th Road, Randjespark, Midrand                                 
Transfer Secretaries:                                                           
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg 
BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), L Dyosi*, AJ  
Fourie*, L Lynch (Financial Director), KT Nondumo*#, TAM Tshivhase*#            
# Independent                                                                   
Designated adviser: Grindrod Bank Limited                                       
Registered auditors: BDO South Africa Incorporated                              
Date: 15/09/2010 07:05:17 Supplied by www.sharenet.co.za                     
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