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AFT - Afrimat Limited - Reviewed condensed consolidated interim financial
statements for the six months ended 31 August 2011 and renewal of cautionary
announcement
Afrimat Limited ("Afrimat" or "the company" or "the group")
(Incorporated in the Republic of South Africa) (Registration Number:
2006/022534/06) Share code: AFT ISIN Code: ZAE000086302
Net cash from operating activities up 54,0%
HEPS 29,8 cents
Net debt : equity ratio 3,5%
Interim dividend 6,0 cents per share
NAV of 443 cents per share
Condensed consolidated income statement
Reviewed six Restated Change Restated
months ended reviewed six % audited
31 August months ended year ended
2011 31 August 28 February
R`000 2010 2011
R`000 R`000
Revenue 506 717 455 874 11,2 854 496
Cost of sales (385 009) (347 917) (648 532)
Gross profit 121 708 107 957 12,7 205 964
Other income 4 714 4 041 3 405
Operating expenses (60 901) (47 669) (99 772)
Operating profit 65 521 64 329 1,9 109 597
Investment revenue 4 462 4 558 9 969
Finance costs (5 533) (5 567) (10 952)
Share of profit of 17 7 18
associate
Profit before taxation 64 467 63 327 1,8 108 632
Taxation (19 584) (18 468) 6,0 (31 870)
Profit attributable to 44 883 44 859 0,1 76 762
shareholders
Attributable to:
Owners of the parent 44 579 44 845 76 294
Non-controlling interests 304 14 468
44 883 44 859 76 762
Shares in issue:
Total shares in issue 143 262 412 143 262 412 143 262 412
Treasury shares (5 806 638) (4 796 249) (5 149 510)
Net shares in issue 137 455 774 138 466 163 138 112 902
Weighted average number of 137 457 107 138 807 226 138 596 357
net shares in issue
Diluted weighted average 139 483 285 140 022 129 139 925 029
number of shares
Earnings per ordinary 32,4 32,3 0,3 55,0
share (cents)
Diluted earnings per 32,0 32,0 - 54,5
ordinary share (cents)
Reconciliation of headline earnings
Reviewed six Restated Change Restated audited
months ended reviewed six % year ended
31 August months ended 28 February 2011
2011 31 August R`000
R`000 2010
R`000
Profit attributable to 44 579 44 845 76 294
owners of the parent
Profit on disposal of (4 714) (3 553) (3 405)
property, plant and
equipment
Profit on disposal of - (488) -
trademark
Impairment of goodwill 337 - 600
Total tax effects of 808 702 592
adjustments
41 010 41 506 (1,2) 74 081
Headline earnings per 29,8 29,9 (0,3) 53,5
ordinary share ("HEPS")
(cents)
Diluted HEPS (cents) 29,4 29,6 (0,7) 52,9
Condensed consolidated statement of comprehensive income
Reviewed six Restated Change Restated
months ended reviewed six % audited
31 August months ended year ended
2011 31 August 28 February
R`000 2010 2011
R`000 R`000
Profit for the period 44 883 44 859 0,1 76 762
Other comprehensive income
Net change in fair value of (14) 18 123
available-for-sale financial
assets
Remeasurements of the net - 228 (5 912)
defined benefit
liability/(asset)
Income tax on other 1 (66) 1 639
comprehensive income
(13) 180 (4 150)
Total comprehensive income 44 870 45 039 (0,4) 72 612
for the period
Attributable to:
Owners of the parent 44 566 45 025 72 144
Non-controlling interests 304 14 468
44 870 45 039 72 612
Condensed consolidated statement of financial position
Reviewed Restated Restated
31 August reviewed audited
2011 31 August 28 February
R`000 2010 2011
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 419 449 381 227 403 980
Intangible assets 13 490 14 149 13 819
Goodwill 101 195 101 332 100 843
Investment in associate 20 13 24
Other financial assets 83 051 71 174 83 578
Deferred tax 6 672 5 190 4 939
Retirement benefit asset - 3 880 -
623 877 576 965 607 183
Current assets
Inventories 84 282 74 154 75 548
Current tax receivable 3 451 4 386 5 192
Trade and other receivables 200 702 242 865 157 121
Cash and cash equivalents 92 374 29 022 87 316
380 809 350 427 325 177
Non-current asset held-for-sale - - 7 630
380 809 350 427 332 807
Total assets 1 004 686 927 392 939 990
Equity and liabilities
Equity
Share capital 1 435 1 435 1 435
Share premium 352 150 352 150 352 150
Business combination adjustment (105 788) (105 788) (105 788)
Treasury shares (18 988) (15 617) (16 799)
Net issued share capital 228 809 232 180 230 998
Other reserves 3 765 2 154 2 692
Retained income 398 127 350 074 368 668
Attributable to equity holders of 630 701 584 408 602 358
parent
Non-controlling interests 3 511 215 3 207
Total equity 634 212 584 623 605 565
Liabilities
Non-current liabilities
Borrowings long-term 49 716 51 679 52 168
Deferred tax 67 050 58 975 64 365
Provisions 31 089 14 431 28 777
Retirement benefit liability 2 367 - 2 055
150 222 125 085 147 365
Current liabilities
Borrowings short-term 36 048 40 467 38 719
Current tax payable 12 205 4 030 3 431
Trade and other payables 143 378 138 922 116 729
Bank overdraft 28 621 34 265 28 181
220 252 217 684 187 060
Total liabilities 370 474 342 769 334 425
Total equity and liabilities 1 004 686 927 392 939 990
Net asset value per share (cents) 443 408 423
Net tangible asset value per share 363 327 343
(cents)
Condensed consolidated statement of cash flows
Reviewed six Restated Restated
months ended reviewed six audited
31 August months ended year ended
2011 31 August 28 February
R`000 2010 2011
R`000 R`000
Cash flows from operating activities
Cash generated from operations 62 056 49 550 159 987
Interest income 4 974 4 558 9 969
Dividends received 22 - -
Finance costs (5 533) (5 566) (10 952)
Tax paid (8 807) (14 320) (28 424)
Net cash from operating activities 52 712 34 222 130 580
Acquisition of property, plant and (39 601) (18 573) (45 977)
equipment
Proceeds on sale of property, plant 13 939 4 356 6 909
and equipment
Purchase of financial asset - (4 162) (4 763)
Acquisition of businesses - - (33 189)
Deposit on acquisition of business - (35 000) -
Acquisition of non-controlling - - (3 275)
interests
Net cash from investing activities (25 662) (53 379) (80 295)
Purchase of treasury shares (2 189) (4 615) (5 797)
Net movement in borrowings (note 4) (5 123) 276 4 962
Dividends paid (note 1) (15 120) (13 877) (22 445)
Net cash from financing activities (22 432) (18 216) (23 280)
Total cash movement for the period 4 618 (37 373) 27 005
Cash/(overdraft) at the beginning of 59 135 32 130 32 130
period
Total cash/(overdraft) at the end of 63 753 (5 243) 59 135
period
Condensed consolidated statement of changes in equity
R`000 Share Share Treasury Business
capital premium shares combinati
on
adjustmen
t
Previously stated balance at 1 1 435 352 150 (11 002) (105
March 2010 788)
Change from early adopting IAS19 - - - -
Restated balance at 1 March 2010 1 435 352 150 (11 002) (105
788)
Changes:
Employee share option scheme: Share - - - -
based payments
Movement in treasury shares - - (4 615) -
Profit for the period - - - -
Other comprehensive income for the - - - -
period
Dividends paid - - - -
Restated balance at 31 August 2010 1 435 352 150 (15 617) (105
788)
Previously stated balance at 1 1 435 352 150 (11 002) (105
March 2010 788)
Change from early adopting IAS19 - - - -
Restated balance at 1 March 2010 1 435 352 150 (11 002) (105
788)
Changes:
Movements in non-controlling - - - -
interests
Employee share option scheme: Share - - - -
based payments
Movement in treasury shares - - (5 797) -
Profit for the year - - - -
Other comprehensive income for the - - - -
year
Dividends paid - - - -
Restated balance at 28 February 1 435 352 150 (16 799) (105
2011 788)
Changes:
Employee share option scheme: Share - - - -
based payments
Movement in treasury shares - - (2 189) -
Profit for the period - - - -
Other comprehensive income for the - - - -
period
Dividends paid - - - -
Balance at 31 August 2011 1 435 352 150 (18 988) (105
788)
Condensed consolidated statement of changes in equity
R`000 Other Retained Non- Total
reserves income controlling equity
interests
Previously stated balance at 1 835 325 668 201 564 499
1 March 2010
Change from early adopting - (6 726) - (6 726)
IAS19
Restated balance at 1 March 1 835 318 942 201 557 773
2010
Changes:
Employee share option scheme: 303 - - 303
Share based payments
Movement in treasury shares - - - (4 615)
Profit for the period - 44 845 14 44 859
Other comprehensive income 16 164 - 180
for the period
Dividends paid - (13 877) - (13 877)
Restated balance at 31 August 2 154 350 074 215 584 623
2010
Previously stated balance at 1 835 325 668 201 564 499
1 March 2010
Change from early adopting - (6 726) - (6 726)
IAS19
Restated balance at 1 March 1 835 318 942 201 557 773
2010
Changes:
Movements in non-controlling - (127) 2 799 2 672
interests
Employee share option scheme: 750 - - 750
Share based payments
Movement in treasury shares - - - (5 797)
Profit for the year - 76 294 468 76 762
Other comprehensive income 107 (4 257) - (4 150)
for the year
Dividends paid - (22 184) (261) (22 445)
Restated balance at 28 2 692 368 668 3 207 605 565
February 2011
Changes:
Employee share option scheme: 1 086 - - 1 086
Share based payments
Movement in treasury shares - - - (2 189)
Profit for the period - 44 579 304 44 883
Other comprehensive income (13) - - (13)
for the period
Dividends paid - (15 120) - (15 120)
Balance at 31 August 2011 3 765 398 127 3 511 634 212
Condensed consolidated segment report
Split six Reviewed Restated
months six months split six
ended ended months
31 August 31 August ended
2011 2011 31 August
% R`000 2010
%
Revenue
External sales
Mining & Aggregates 71 358 418 69
Readymix 17 88 815 19
Concrete Products 12 59 484 12
100 506 717 100
Intersegment sales
Mining & Aggregates 85 20 853 86
Readymix 1 284 1
Concrete Products 14 3 300 13
100 24 437 100
Total revenue
Mining & Aggregates 71 379 271 70
Readymix 17 89 099 18
Concrete Products 12 62 784 12
100 531 154 100
Operating profit before tax
Mining & Aggregates 89 57 993 88
Readymix 2 1 403 3
Concrete Products 11 7 433 10
Other (2) (1 308) (1)
100 65 521 100
Operating profit margins on external
revenue (%)
Mining & Aggregates 16,2
Readymix 1,6
Concrete Products 12,5
12,9
Other information
Assets
Mining & Aggregates 57 576 991 58
Readymix 7 68 750 7
Concrete Products 7 65 491 7
Other 29 293 454 28
100 1 004 686 100
Condensed consolidated segment report
Restated Restated Restated
reviewed split year audited
six months ended year ended
ended 28 February 28 February
31 August 2011 2011
2010 % R`000
R`000
Revenue
External sales
Mining & Aggregates 313 838 68 581 878
Readymix 87 256 20 166 988
Concrete Products 54 780 12 105 630
455 874 100 854 496
Intersegment sales
Mining & Aggregates 22 145 85 40 212
Readymix 240 3 1 452
Concrete Products 3 249 12 5 906
25 634 100 47 570
Total revenue
Mining & Aggregates 335 983 69 622 090
Readymix 87 496 19 168 440
Concrete Products 58 029 12 111 536
481 508 100 902 066
Operating profit before tax
Mining & Aggregates 56 965 90 98 779
Readymix 1 668 2 2 428
Concrete Products 6 513 10 10 963
Other (817) (2) (2 573)
64 329 100 109 597
Operating profit margins on external
revenue (%)
Mining & Aggregates 18,2 17,0
Readymix 1,9 1,5
Concrete Products 11,9 10,4
14,1 12,8
Other information
Assets
Mining & Aggregates 536 412 57 532 830
Readymix 67 727 6 56 558
Concrete Products 65 924 6 60 665
Other 257 329 31 289 937
927 392 100 939 990
Notes
Reviewed Restated Restated
six reviewed audited
months six year ended
ended months 28 February
31 August ended 2011 R`000
2011 31 August
R`000 2010
R`000
1. Dividends
1.1 Afrimat Limited dividends
paid/declared in respect of the
current year profits
- Interim dividend paid 8 596 8 596 8 596
- Final dividend paid 15 759
8 596 8 596 24 355
1.2 Dividends cash flow
- Current year interim - - 8 596
dividend paid
- Previous year final dividend paid 15 759 14 326 14 326
- Dividends received on treasury (639) (449) (738)
shares
- Dividends paid by subsidiaries to - - 261
non-controlling shareholders
15 120 13 877 22 445
2. Capital commitments
- Approved capital expenditure to 35 151 33 378 74 752
be funded from surplus cash and
bank financing
3. Depreciation 22 537 21 803 44 880
4. Net movement in borrowings
- Opening balance 90 887 91 870 91 870
- New borrowings 21 398 23 784 60 160
- Acquired through acquisitions - - (5 947)
- Repayments (26 521) (23 508) (55 196)
- Closing balance 85 764 92 146 90 887
5. Other financial assets
- Funding provided to Afrimat 69 519 69 428 70 032
employees (BEE transaction)
- Rehabilitation fund trusts and 13 532 1 746 13 546
other
83 051 71 174 83 578
6. Effect of early adopting IAS19
(issued in June 2011)
The company decided to early adopt
the amended IAS19, issued in June
2011, retrospectively. According to
the revised IAS 19, actuarial gains
and losses are renamed
"remeasurements" and will be
recognised immediately in other
comprehensive income. The use of
the corridor method, as previously
applied, is no longer permitted.
The revised standard has introduced
the new concept of net interest on
the net defined benefit liability
(assets) and the ways in which the
net interest is determined,
represents a major change to the
existing IAS 19. Under the revised
standard, the return on plan assets
is estimated on the basis of the
discount rate of the liability,
rather than the expected rate of
return of plan assets, as in the
past.
6.1 Effect on income statement
- Profit after tax previously 44 901 76 540
stated
- Profit after tax restated 44 859 76 762
- Difference (42) 222
6.2 Effect on statement of
comprehensive income
- Total comprehensive income 44 917 76 647
previously stated
- Total comprehensive income 45 039 72 612
restated
- Difference 122 (4 035)
6.3 Effect on statement of financial
position
-Retirement benefit 13 052 12 891
asset/(liability) previously stated
- Retirement benefit 3 880 (2 055)
asset/(liability) restated
- Difference (9 172) (14 946)
- Closing retained income 356 678 379 429
previously stated
- Closing retained income restated 350 074 368 668
- Difference (6 604) (10 761)
- Deferred tax liability previously 61 543 68 550
stated
- Deferred tax liability restated 58 975 64 365
- Difference (2 568) (4 185)
6.4 Effect on segment report
- Operating profit previously 64 656 109 826
stated
- Operating profit restated 64 329 109 597
- Difference (327) (229)
- Assets previously stated 936 564 952 881
- Assets restated 927 392 939 990
- Difference (9 172) (12 891)
6.5 Effect on earnings per ordinary
share and HEPS
- Earnings per ordinary share 32,3 54,9
previously stated (cents)
- Earnings per ordinary share 32,3 55,0
restated (cents)
- Difference - 0,1
- HEPS previously stated (cents) 29,9 53,3
- HEPS restated (cents) 29,9 53,5
- Difference - 0,2
7. Events after reporting date
No material events occurred between the reporting date and the date of
this announcement.
Commentary
BASIS OF PREPARATION
The reviewed condensed consolidated interim financial statements for the six
months ended 31 August 2011 ("the period") have been prepared in accordance with
the recognition and measurement criteria of the International Financial
Reporting Standards (IFRS), the disclosure and presentation requirements of IAS
34: Interim Financial Reporting, the AC 500 standards as issued by the
Accounting Practice Board, the Listings Requirements of the JSE Limited and in
the manner required by the Companies Act of South Africa. The accounting
policies and methods of computation applied in preparation of these reviewed
condensed consolidated interim financial statements are consistent with those
applied in the audited annual financial statements for the year ended 28
February 2011, save for the early adoption of the amended IAS19: Employee
benefits, issued in June 2011. The retrospective effect of the early adoption of
the amended IAS19 is disclosed in note 6. The reviewed condensed consolidated
interim financial statements have been prepared under the supervision of the
Financial Director, HP Verreynne CA(SA).
INTRODUCTION
As anticipated, the reviewed condensed consolidated interim financial results
for the period reflect the slow-paced recovery of the general business
environment. The group`s performance was, however, supported by the ongoing
benefits of strategic initiatives in previous years being growth from
diversification. Results were therefore maintained largely on a par with the
comparative period (see `Financial Results` below).
FINANCIAL RESULTS
Revenue for the period increased by 11,2% to R506,7 million from R455,9 million.
Headline earnings declined marginally by 1,2%, translating into HEPS of 29,8
cents (Aug 2010: 29,9 cents).
OPERATIONAL REVIEW
Afrimat`s key division, `Mining & Aggregates`, benefited from increased volumes
in the KwaZulu-Natal and Gauteng markets as well as from various road projects
in the Western Cape. Glen Douglas Dolomite contributed well in line with
expectations, and good progress has been made in terms of its efficiency
optimisation strategy. In contrast, the Eastern Cape region suffered lower
volumes due to funding constraints of the Nelson Mandela Metropole. Contracting
activities also declined as a result of strikes at Eskom`s Medupi and Kusile
project sites and generally waning demand for contracting services.
The division has successfully secured a number of new road contracts in various
regions, boding well for future growth. The Western Cape specifically is showing
the first signs of improvement with the slowdown in private residential and
commercial spend seeming to have bottomed-out. The award by SANRAL of the
preferred bidder for the N1/N2 Winelands Toll Road project (the Protea Parkways
Consortium) offers an exciting opportunity for the division - supply and
construction should start during 2012 barring any delays.
All processing plants are fully commissioned and well placed to supply large
projects, which should boost revenue going forward. Afrimat`s flexible service
delivery model utilising mobile equipment continues to position the group to
take advantage of any upswing in demand for contracting services in the future.
`Readymix` in KwaZulu-Natal benefited from higher volumes in light of government
housing projects. The Western Cape operation continued to underperform due to
ongoing and intensifying price competition in the region`s embattled economy
during the period.
`Concrete Products` performed well, enjoying higher volumes and pricing
resulting from supply to a growing number of government housing projects.
BUSINESS EXPANSION AND ACQUISITIONS
New business development remains a key component of the group`s growth strategy.
The dedicated business development team continues to successfully identify and
pursue opportunities in existing markets as well as in areas where high growth
is projected.
B-BBEE
Existing BEE shareholders and Afrimat`s black employees together hold in
aggregate 26,12% of Afrimat`s issued shares. Notwithstanding a fully empowered
ownership platform, the group remains dedicated to enhancing all aspects of B-
BBEE on an ongoing basis.
DIVIDEND
An interim dividend of 6,0 cents per share (2010: 6,0 cents) has been declared
for the period. This is in line with the group`s dividend policy of three times
cover. (See `Dividend Declaration` below.)
PROSPECTS
The slow recovery of the business environment is expected to continue. In
addition Afrimat is well placed to benefit further from its investment in
industrial minerals through the Glen Douglas Dolomite operation and other new
initiatives in the pipeline, details of which will be disclosed in due course.
`Mining & Aggregates` activities are therefore expected to remain the dominant
driver of group results.
Price competition and margin squeeze will undoubtedly remain adverse factors for
the `Readymix` division going forward. Initiatives aimed at expanding volumes,
reducing costs and improving efficiencies will be a key focus in all operations.
These, supported by an ongoing strategy of growth from diversification in
attractive growth sectors such as industrial minerals and open cast mining,
should see volumes increase.
DIRECTORATE
As previously announced on 12 August 2011, executive director Peter Corbin sadly
passed away. He had held the position of Chief Operating Officer until 2009 and
thereafter participated on a part-time basis in the group`s new business
development initiatives. He played an important role in founding and growing
Afrimat and will be dearly missed by his colleagues.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement published on 7 October 2011 shareholders
are advised that the company has entered into negotiations, which if
successfully concluded, may have a material effect on the price of the company`s
securities. Accordingly, shareholders are advised to exercise caution when
dealing in the company`s securities until a further announcement is released.
AUDITOR`S REVIEW
The condensed consolidated interim financial statements for the period have been
reviewed by the company`s auditors, Mazars. Their unmodified review opinion is
available for inspection at the company`s registered office. Their review was
conducted in accordance with ISRE 2410 "Review of interim financial information
performed by the independent auditor of the entity".
On behalf of the board
MW von Wielligh
Chairman
AJ van Heerden
Chief Executive Officer
3 November 2011
DIVIDEND DECLARATION
Notice is hereby given that final dividend, No. 9 of 6,0 cents per share, in
respect of the six months ended 31 August 2011, was declared on Wednesday, 2
November 2011. Relevant dates are as follows:
Last day to trade cum dividend Friday, 25 November 2011
Commence trading ex dividend Monday, 28 November 2011
Record date Friday, 2 December 2011
Dividend payable Monday, 5 December 2011
Share certificates may not be dematerialised or rematerialised between Monday,
28 November 2011 and Friday, 2 December 2011, both dates inclusive.
By order of the board
Company secretary: PGS de Wit
3 November 2011
Directors: MW von Wielligh* (Chairman), AJ van Heerden (CEO), HP Verreynne
(Financial Director), GJ Coffee, L Dotwana*, F du Toit*, LP Korsten*,
PRE Tsukudu*, HJE van Wyk*
*Non-executive director Independent
Registered office: Tyger Valley Office Park No. 2, Corner Willie van Schoor
Avenue and Old Oak Road, Tyger Valley, 7530 (PO Box 5278, Tyger Valley, 7536)
Sponsor: Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Auditors: Mazars, Mazars House, Rialto Road, Grand Moorings Precinct, Century
City, 7441 (PO Box 134, Century City, 7446)
Transfer secretaries: Computershare Investor Services (Pty) Limited,
70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Company secretary: PGS de Wit, Tyger Valley Office Park No. 2, Corner Willie van
Schoor Avenue and Old Oak Road, Tyger Valley, 7530 (PO Box 5278, Tyger Valley,
7536)
Date: 03/11/2011 07:05:31 Supplied by www.sharenet.co.za
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