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Rolfes Holdings Limited - Unaudited Condensed Consolidated Interim Results For The Period Ended 31 December 2016

Release Date: 20/02/2017 07:05:00      Code(s): RLF     
ROLFES HOLDINGS LIMITED
(Registration number 2000/002715/06)
Incorporated in South Africa
Share Code: RLF
ISIN: ZAE000159836
(?Rolfes? or ?the Group?)
www.rolfesza.com

UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE PERIOD
ENDED 31 DECEMBER 2016

PERFORMANCE SUMMARY

* Revenue increased by 32% to R823 million (Dec 2015: R626 million)

* Operating profit increased by 62% to R97 million (Dec 2015: R60 million)

* Headline earnings increased by 60% to R61 million (Dec 2015: R38 million)

* Headline earnings per share increased by 34% to 37.9 cents per share
  (Dec 2015: 28.4 cents per share)

* Net debt to equity (gearing ratio) improved to 38% (Dec 2015: 47%)

* Ordinary dividend of 4 cents per share declared (Dec 2015: nil cents)

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2016


                                                  Unaudited          Unaudited          Audited
                                                    as at              as at             as at

                                                31 Dec 2016        31 Dec 2015        30 Jun 2016
                                                   R?000              R?000              R?000
 ASSETS
 Non-current assets                                 409 097            425 359        407 857
 Property, Plant and Equipment                      135 669            159 805        133 661
 Intangible assets and goodwill                     273 428            265 554        274 196
 Current assets                                     804 806            614 760        691 546
 Inventories                                        373 835            274 098        343 630
 Trade and other receivables                        374 981            286 741        297 663
 Cash and cash equivalents                           55 990             53 921         50 253
 Total assets                                     1 213 903          1 040 119      1 099 403
 EQUITY AND LIABILITIES
 Capital and reserves                               601 795            489 531        550 535
 Stated capital                                     208 588            210 888        208 588
 Treasury shares                                      (868)              (868)           (868)
 Retained income                                    382 388            266 762        331 056
 Reserves                                             4 103              5 888          4 662
 Non-controlling interest                             7 584              6 861          7 097
 Non-current liabilities                            294 401            280 468        248 668
 Interest-bearing loans                             265 098            248 653        220 269
 Deferred tax liability                              26 212             28 837         25 563
 Provisions                                           3 091              2 978          2 836
 Current liabilities                                317 707            270 120        300 200
 Trade and other payables                           295 586            233 718        275 239
 Interest-bearing loans                              19 660             34 987         23 295
 Current tax liability                                2 461              1 415          1 666
 Total equity and liabilities                     1 213 903          1 040 119      1 099 403

 Information related to the number of
 shares in issue as at 31 December 2016

 Total shares in issue (?000)                       161 942           161 942            161 942
 Treasury shares (?000)                                (641)             (641)              (641)
 Shares in issue excluding treasury
 shares ('000)                                      161 301           161 301            161 301
 Weighted number of shares in issue
 (?000) *                                           161 301           134 634            147 967
   
* The increase in shares relates to the 53.3 million shares issued on 1 October 2015. The shares were
weighted for 6 months and 9 months for the December 2015 and June 2016 periods respectively.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 DECEMBER 2016

                                                  Unaudited          Unaudited            Audited
                                                     as at             as at                as at
                                                 31 Dec 2016        31 Dec 2015         30 Jun 2016
                                                    R?000              R?000               R?000
    Revenue                                             823 386           625 684          1 363 547
    Cost of sales                                      (636 657)         (479 566)        (1 055 478)
    Gross profit                                        186 729           146 118            308 069
    Other Income                                          6 082             1 153             12 398
    Operating expenses                                  (95 434)          (87 185)          (183 339)
    Operating profit                                     97 377            60 086            137 128
    Finance income                                         1095               266              1 293
    Finance costs                                       (15 463)           (9 381)           (29 208)
    Profit before tax                                    83 009            50 971            109 213
    Tax                                                 (21 475)          (12 305)           (29 175)
    Profit for the period                                61 534            38 666             80 038
    Other comprehensive income:
    Exchange differences from translating
                                                           (559)                -               (685)
    foreign operations
    Total comprehensive income for the
    period                                               60 975             38 666            79 353
    Profit for the period attributable to:
     Equity holders of the parent                        61 047             38 113            78 477
    Non-controlling interest                                487                553             1 561


RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS

    Earnings                                             61 047              38 113             78 477
    Adjusted for the after-tax effect of:
    Loss from sale of fixed asset                             -                  52                795
    Profit on sale of business                                -                   -               (613)
    Headline earnings                                    61 047              38 165             78 659
    Earnings per share (cents)*
    - Basic                                               37.85               28.31              53.04
    - Headline                                            37.85               28.35              53.16


*The entity had no specific items resulting in any dilution of the specific earnings numbers. Therefore no
specific diluted earnings per share are indicated for the various categories.
    
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
ENDED 31 DECEMBER 2016

                                                         Unaudited         Unaudited              Audited
                                                            as at            as at                  as at
                                                        31 Dec 2016       31 Dec 2015           30 Jun 2016
                                                           R?000             R?000                 R?000
       Cash flow (utilised in)/ generated from:
       Operating activities                                  14 403            (14 239)               104 291
       Finance costs                                        (14 368)             (9 049)              (27 915)
       Tax paid                                             (17 611)            (15 903)              (30 806)
       Cash flow utilised in investing activities            (7 880)           (237 636)             (227 455)
       Cash flow generated from financing
       activities                                            31 194             381 707               291 541
       Cash generated / (deficit) for the
       period                                                 5 738             104 880               109 656
       Cash and cash equivalents:
       - beginning of the period                             49 943             (50 959)              (59 713)
       - end of the period                                   55 681              53 921                49 943


UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
PERIOD ENDED 31 DECEMBER 2016

                                                                                                   Non-
                              Share       Share         Retained    Treasury                                  Total
                                                                                Reserves        controlling
                              Capital    Premium         Income      Shares                                   Equity
                                                                                                 Interest

                              R'000         R'000          R'000       R'000       R'000           R'000      R'000
Balance at 30 June 2015       1 086        49 802        253 677        (868)      5 347          63 260    372 304
Issue of new shares             533       159 467              -           -           -               -    160 000
Movements                         -             -        (25 029)          -         541         (56 952)   (81 440)
Total comprehensive
income for the period             -             -         38 114           -           -             553     38 667
Balance at 31 December
2015                          1 619       209 269        266 762        (868)      5 888           6 861    489 531
Movements                         -        (2 300)        23 931           -        (541)           (772)    20 318
Total comprehensive
income for the period             -             -         40 363           -        (685)          1 008     40 686
Balance at 30 June 2016        1 619      206 969        331 056        (868)      4 662           7 097    550 535
Total comprehensive
income for the period              -            -         61 047           -        (559)            487     60 975
Dividend                           -            -         (9 715)          -           -               -     (9 715)
Balance at 31 December
2016                           1 619      206 969        382 388        (868)      4 103           7 584    601 795


SEGMENT ANALYSIS FOR THE PERIOD ENDED 31 DECEMBER 2016


                                                            Operating
                           Revenue        Gross Profit                         Assets        Liabilities
                                                              Profit

31 December 2016               R'000           R'000            R'000            R'000            R'000
Agricultural                 155 973          51 871           29 128           326239           76 963
Food                         397 102          67 536           50 649          422 335          142 347
Industrial                   221 249*         45 565           21 183          295 149           93 466
Water                         49 062          21 757            4 778          120 038           28 964
Other                              -                          (8 361)           50 142          270 368
                                                   -
Total                        823 386         186 729           97 377        1 213 903          612 108
 31 December 2015
Agricultural                 142 636          43 300           24 767          195 597           84 492
Food                         161 479          24 962           18 877          226 935          109 601
Industrial                   260 117*         48 766           14 200          270 471          119 296
Water                         61 452          29 090            7 049          143 522           88 651
Other                              -                          (4 807)          203 594          148 548
                                                   -
Total                        625 684         146 118           60 086        1 040 119          550 588
30 June 2016
Agricultural                 268 455          80 979           37 330          292 920           66 743
Food                         467 682          75 143           56 428          340 779          123 610
Industrial                   514 629          98 590           42 673          310 081          109 166
Water                        112 781          53 357           12 062          112 246           23 047
Other                              -                          (11 365)          43 377          226 302
                                                   -
Total                      1 363 547         308 069          137 128        1 099 403          548 868


 The segmental report of the Group is based on the information reported to the chief operating decision-
 maker. The analysis is presented after taking certain intercompany and inter-segmental transactions
 into account.

 * Lead Chrome plant closure end March 2016 revenue included to December 2015 amounted to R67m.

COMMENTARY

STRATEGIC OVERVIEW

Rolfes is a black empowered platform chemical group targeting the need for food security, clean water
and manufacturing demand through its four strategically placed divisions being agricultural, food,
industrial and water expanding proactively in domestic, developed and foreign emerging markets.

As part of its core organic growth strategy, the Group concentrates on further diversification of its
specialist non-commodity low volume high margin product ranges and increasing its geographical
footprint into various markets whilst targeting the optimal leveraging of its current cost and distribution
platforms. The Group seeks to acquisitively expand its current four divisions by targeting high barrier to
entry specialist chemical companies.

GROUP PRODUCT OFFERING AND DIVISIONAL STRUCTURE

The Group manufactures and distributes a diverse range of market-leading, high-quality commodity and
specialist chemical and organic products to various industries.

The Agricultural division develops, manufactures and distributes products that promote plant root, and
foliar health, soil nutrition, disease prevention and control and various other agricultural remedies in
high value and wheat and maize crops.

The Food division distributes imported and locally manufactured products to the food and beverage,
bakery, dairy, pharmaceutical and cosmetics industries.

The Industrial division manufactures and distributes industrial chemicals including various organic and
inorganic products including additives, in-plant and point-of-sale dispersions, leather chemicals and
solutions, solvents, lacquer thinners, pigments, surfactants, cleaning solvents, water treatment
products, creosotes and waxes.

The Water division provides specialised water purification solutions and products to the industrial,
mining, home and personal care markets. Additionally, the division manufactures and distributes pure
beneficiated silica to the mining, metallurgical, fertiliser, water-filtration and construction industries.

The Group?s international footprint and customer base extends to Asia, the rest of Africa, Eastern and
Western Europe, with operations currently in Botswana, Zambia, and Romania.

GROUP FINANCIAL PERFORMANCE

Group revenue increased by 32% to R823 million (Dec 2015: R626 million). Exports, including sales
and services rendered in the foreign subsidiaries amounted to R82 million comprising 10% of total
revenue to December 2016 (December 2015: R95 million comprising 13% of total revenue).

Operating profit increased to R97 million (Dec 2015: R.60 million) at a margin of 11.8% of revenue (Dec
2015: 9.6%). EBITDA increased by 58% to R103 million (Dec 2015: R65 million). EBITDA is calculated
as operating profits adjusted for depreciation and amortisation of R5.7 million (Dec 2015: R5 million).

Headline earnings increased by 60% to R61 million (Dec 2015: R38 million). Headline earnings per
share increased by 34% to 37.9 cents (Dec 2015: 28.4 cents). The weighted average number of shares
in issue for the period was 161 301 668 (Dec 2015: 134 634 168).

Net finance costs increased to R14 million (Dec 2015: R9 million) mainly due to higher interest paid
relating to acquisitive long term debt. Interest cover remained constant at 7 times (Dec 2015: 7 times)
with the net debt to equity ratio (gearing) improving to 38% at Dec 2016 (Dec 2015: 47%).

GROUP CASH FLOW PERFORMANCE

Cash generated from operating activities improved by 201% to R14 million (Dec 2015: R14 million
deficit). Net working capital investment of R453 million represents the normal seasonal increase in
inventory of R30 million, increase in accounts receivable of R77 million and an increase in accounts
payable of R20 million. Debtors? days of 74 days (Dec 2015: 74 days). Stock days decreased to 92
days (excluding stock in transit) (Dec 2015: 105 days). Due to seasonality in especially Agricultural and
Food divisions? working capital is realised in cash during the second half of the financial year. The
group is expected to realise this working capital at gross profit margins similar to those achieved up to
December 2016 resulting in cash generation from operations. Creditors? days decreased to 61 days
(excluding stock in transit) (Dec 2015: 79 days). The net investment in working capital increased to 105
days (Dec 2015: 100 days).

Cash flow utilised in investing activities of R7.9 million includes capital expenditure, research and
development and infrastructure expansion capital expenditure. The cash flow generated from financing
activities of R31 million includes facility utilisation and dividends declared during the current dividend
cycle.

OPERATIONAL REVIEW
AGRICULTURAL

The division supplies products mostly into high value specialised permanent and semi-permanent
crops. Its product positioning provides a natural defence against prolonged drought conditions.

Effective procurement and resource restructuring further counteracted the impact of the drought on the
business operating profit performance although the drought conditions improved towards the latter part
of November 2016 resulting in solid growth on operating profit level compared to the July to December
2015 period.

Revenue increased by 9% to R156 million (Dec 2015: R143 million). Gross profit margins increased to
33.3% (Dec 2015: 30.4%) mainly due to the effective implementation of procurement backward
integration initiatives.

Operating costs increased to R23 million (Dec 2015: R19 million) due to an investment in technical
resources and capabilities. The operating profit margin improved to 18.7% from 17.4% in Dec 2015.

Capital expenditure of R4.2 million includes mainly Research and Development costs incurred during
the current reporting period.

The development of distribution channels for foliar feeds in the rest of Africa and Europe is on-going.
New product registrations are granted continuously both locally and internationally. Formal trials and
testing of the green PGPR (bacterial) products is progressing well.

FOOD

Bragan Chemicals is an importer and distributor of commodity and speciality products in the food and
beverage, bakery, dairy, pharmaceutical and cosmetics industries. Growth drivers include national
market share, rising food prices and increased staple demand.

Revenue increased by 146% to R397 million (Dec 2015: R161 million ? included for 3 months from 1
October 2015). Gross profit margins increased to 17% (Dec 2015: 15.5%) largely driven by pricing
strategies and volume increases.

Operating costs increased to R17 million (Dec 2015: R6 million ? included for 3 months from 1 October
2015). The operating profit margin improved to 12.8% from 11.7% in Dec 2015.
The business is expanding its geographical footprint and product ranges locally and into neighbouring
countries. Group initiatives include the focused and combined export drive of product into southern
African countries leveraging off the existing group infrastructure to ensure low cost increases.

Capital expenditure amounted to R1.5 million, incurred to improve logistics capacity.

INDUSTRIAL

Revenue decreased by 15% to R221 million (Dec 2015: R260 million ? lead chrome pigment product
sales (plant closed) included of R67m). Gross profit margins increased to 20.6% (Dec 2015: 18.7%),
mainly due to the closure of the lower margin lead chrome manufacturing plant in March 2016.
Operating margins improved to 9.6% (Dec 2015: 5.5%).

Operating costs decreased by 30% to R24 million (Dec 2015: R35 million). The operating profit margin
improved to 9.6% from 5.5% in Dec 2015.

The division has benefited from overhead cost and resource consolidation with the Water division.

Increased product volume demand in industrial products and leather, export growth, good cost control
and effective treasury management contributed to the pleasing performance of the business unit.

Capital expenditure of R1.1m included the continued improvement of quality management systems,
investment into testing/laboratory facilities and transport fleet upgrades. The Industrial division will
continue to focus on adding new higher margin specialist product lines and export growth leveraging of
its current cost base.

WATER

The Water divisions? period to date performance was hampered by certain petrochemical tender award
deadline extensions. Revenue decreased by 20% to R49 million (Dec 2015: R61 million) and gross
profit margins decreased to 44.3% (Dec 2015: 47.3%), mostly attributable to a once of tender awarded
and completed in the prior years. Operating costs decreased by 23% to R17 million (Dec 2015: R22
million) due to successful restructuring initiatives and management team changes.

The business, realigned and suitably focussed, will capitalise on opportunities in larger and heavy
industrial industries in South Africa to ensure sustainable growth.

OPERATING ENVIRONMENT AND PROSPECTS

Notwithstanding a challenging economic environment, the Group is performing in line with expectations
and further growth in earnings is expected in the period ahead.

Any forward-looking statements in this announcement have not been reviewed and reported on by the
Company's auditors.

CASH DIVIDEND DECLARATION

In accordance with Board policy to review dividend payments to shareholders at the end of each
reporting period, notice is hereby given that the Board declared a final gross cash dividend of 4 cents
per ordinary share for the 6 months ended 31 December 2016 ("interim dividend"). The interim dividend
will be payable to shareholders recorded in the register of the Company at the close of business on the
record date appearing below.

The number of ordinary shares in issue at the date of this declaration is 161 942 800.
The salient dates applicable to the interim dividend are as follows:

Declaration date:                           Monday, 20 February 2017
Last date to trade cum dividend:            Tuesday, 28 March 2017
Shares commence trading ex-dividend:        Wednesday, 29 March 2017
Record date:                                Friday, 31 March 2017
Payment Date:                               Monday, 3 April 2017

In accordance with paragraphs 11.17(c) (i) to (x) and 11.17(c) of the JSE Listings Requirements, the
following additional information is disclosed:

   -   The local dividends tax rate is 15%;
   -   The dividends will be paid from income reserves;
   -   The gross dividend to be used in determining the Dividends Tax is 4 cents per ordinary share;
   -   The dividend tax to be withheld by the Company is equal to 0.60000 cents per ordinary share;
   -   The gross dividend amount is 4 cents per ordinary share for shareholders exempt from
       dividends tax;
   -   The net dividend amount is 3.40000 cents per ordinary share for shareholders not exempt from
       dividends tax;
   -   Rolfes Holdings Limited has 161 942 800 ordinary shares in issue (which includes 641 332
       treasury shares); and
   -   Rolfes Holdings Limited?s income tax reference number is 9492/089/14/0.

Where applicable, payment in respect of certificated shareholders will be transferred electronically to
shareholders? bank accounts on the payment date. In the absence of specific mandates, payment
cheques will be posted to certificated shareholders at their risk on the payment date. Shareholders who
have dematerialised their shares will have their accounts at their Central Securities Depository
Participant or broker credited on the payment date.

No share certificates may be dematerialised between Wednesday, 29 March 2017 and Friday, 31
March 2017 both days inclusive.

BASIS OF PREPARATION

The unaudited condensed consolidated interim financial statements are prepared as a going concern
on a historical cost basis except for the measurement of the financial assets and liabilities at fair value
through profit and loss and at fair value through comprehensive income in accordance with accounting
policies. The Board acknowledges its responsibility for the preparation of the unaudited condensed
consolidated interim financial results which were prepared by JJT Ferreira, the Group Financial Director
of Rolfes Holdings Limited. The unaudited condensed consolidated interim financial results for the
period ended 31 December 2016 have been prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards (?IFRS?)
and the International Accounting Standard 34 (IAS 34 Interim Financial Reporting), the South African
Institute of Chartered Accountants (SAICA) Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Committee, the interpretations adopted by the International Accounting
Standards Board (IASB), the JSE Listing Requirements and the Companies Act, No 71 of 2008.

The unaudited condensed consolidated interim financial statements comprise the summarised
statement of financial position at 31 December 2016 and the summarised statements of profit or loss
and other comprehensive income, changes in equity and cash flows for the period ended then.

ACCOUNTING POLICIES

The unaudited condensed consolidated interim financial results do not include all the information
required by IFRS for a full set of consolidated financial statements. The accounting policies adopted in
the preparation of the unaudited condensed consolidated interim financial results for the period ended
31 December 2016 are consistent with those applied in the preparation of the annual financial
statements for the year ended 30 June 2016. All new interpretations and standards were assessed and
adopted with no material impact.

FINANCIAL INSTRUMENTS INFORMATION

The Group has not disclosed the fair values of financial instruments measured at amortised cost as
their carrying amounts closely approximate their fair values. There were no financial instruments
measured at fair value that were individually material at the end of the current reporting period.

CORPORATE ACTIONS

No actions noted that should be brought under the attention of the investors.

RELATED PARTY TRANSACTIONS

The Group companies entered into various operational sale and purchase transactions with related
parties. These transactions occurred under terms that are not any different than those arranged with
third parties and occurred on an arm?s length and commercial basis.

CHANGES TO THE BOARD

There were no changes to the Board in the interim period ended 31 December 2016 or up to date of
this report.

SUBSEQUENT EVENTS

There are no adjusting or other material events that have occurred between 31 December 2016 and the
date of this report which may have a material impact on the understanding of this report and the
financial information presented.

On behalf of the Board
MS Teke                               L Lynch
Chairman                              Chief Executive Officer
20 February 2017
REGISTERED OFFICE
First floor, The Oval West, Wanderers Office Park, 52 Corlett Drive, Illovo, 2196

TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited

DIRECTORS
MS Teke* (Chairman), L Lynch (Chief Executive Officer), JJT Ferreira (Group Financial Director), E van
der Merwe*, SS Mafoyane *# (Lead Independent Director), MM Dyasi*#, DM Mncube*#, JR Winer*, MG
Mokoka*#
* Non-executive # Independent

COMPANY SECRETARY
CorpStat Governance Services Proprietary Limited

PREPARED BY
Commentary: L Lynch and JJT Ferreira
Financial results: JJT Ferreira
SPONSORS
Grindrod Bank Limited

REGISTERED AUDITORS
SizweNtsalubaGobodo Incorporated

INVESTOR RELATIONS
Singular Systems Proprietary Limited

Date: 20/02/2017 07:05:00 Supplied by www.sharenet.co.za                     
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