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RLF - Rolfes Technology Holdings Limited - Audited results for the twelve months
ended 30 June 2007
ROLFES TECHNOLOGY HOLDINGS LIMITED
(Registration number 2000/002715/06)
Share Code: RLF
ISIN:ZAE000096202
("Rolfes" or "the group")
www.rolfesza.co.za
AUDITED RESULTS FOR THE TWELVE MONTHS ENDED 30 JUNE 2007
HIGHLIGHTS
- Turnover increased by 37% to R225 million
- Operating profit increased by 42% to R31 million
- HEPS increased by 51% to 20,9 cents per share
- Assets increased by R46 million to R141 million
- Debt reduced from R38 million to R18 million
- 2007 Forecast earnings as per prospectus exceeded by 4%
CONSOLIDATED INCOME STATEMENTS
for the year ended 30 June
2007 2006
R`000 R`000
Revenue 224 727 164 003
Cost of sales (172 011) (128 671)
Gross profit 52 716 35 332
Other operating income 2 035 4 534
Operating expenses (24 185) (18 384)
Operating profit before interest 30 566 21 482
Interest paid and finance charges (4 477) (4 193)
Income from investments 84 68
Net profit before taxation 26 173 17 357
Tax expenses (7 123) (2 816)
Profit for the year 19 050 14 541
Attributable to:
Equity holders of parent 19 050 14 554
Minority interest - (13)
19 050 14 541
Earnings per share (cents)
- Basic 20,9 17,1
- Diluted 20,9 17,1
- Headline 20,9 13,8
- Diluted headline 20,9 13,8
Dividend per share - declared
and paid (cents) 2,2 2,8
CONSOLIDATED BALANCE SHEETS
as at 30 June
2007 2006
R`000 R`000
ASSETS
Non-current assets 54 184 43 201
Plant and equipment 28 404 17 656
Property 16 680 16 680
Intangible assets 9 100 7 468
Deferred tax asset - 1 397
Current assets 86 803 51 596
Inventories 36 740 23 884
Trade and other receivables 49 624 27 372
Financial asset 36 -
Short-term loans 353 340
Value Added Tax receivable 50 -
Total assets 140 987 94 797
EQUITY AND LIABILITIES
Capital and reserves 79 979 37 726
Share capital 1 025 -
Share premium 24 864 -
Retained income 51 897 34 847
Revaluation reserve 2 193 2 193
Interest of shareholders 79 979 37 040
Minority interest - 686
Non-current liabilities 6 787 12 747
Interest-bearing liabilities 5 512 12 462
Deferred tax liability 970 -
Provisions 305 285
Current liabilities 54 221 44 324
Trade and other payables 38 658 13 565
Cash and cash equivalents 8 116 21 740
Current portion of interest-bearing
liabilities 4 126 3 867
Value Added Tax liability - 393
Tax liability 2 900 4 405
Provisions 421 354
Total equity and liabilities 140 987 94 797
GROUP STATEMENTS OF CHANGES IN EQUITY
for the year ended 30 June
Reva-
Ordinary Share Retained luation
shares premium income reserve
R`000 R`000 R`000 R`000
Balance at 30 July 2005 - - 22 693 2 193
At acquisition - - - -
Net profit for the year - - 14 554 -
Dividends declared - - (2 400) -
Balance at 30 June 2006 - - 34 847 2 193
Derecognising of minority
interest - - - -
Issue of new shares 125 27 183 - -
Capitalisation of share premium 900 (900) - -
Capitalisation of listing
expenditure - (1 419) - -
Net profit for the year - - 19 050 -
Dividends declared and paid - - (2 000) -
Balance at 30 June 2007 1 025 24 864 51 897 2 193
Minority Total
interest equity
R`000 R`000
Balance at 30 July 2005 - 24 886
At acquisition 699 699
Net profit for the year (13) 14 541
Dividends declared - (2 400)
Balance at 30 June 2006 686 37 726
Derecognising of minority
interest (686) (686)
Issue of new shares - 27 308
Capitalisation of share premium - -
Capitalisation of listing
expenditure - (1 419)
Net profit for the year - 19 050
Dividends declared and paid - (2 000)
Balance at 30 June 2007 - 79 979
CONSOLIDATED CASH FLOW STATEMENTS
for the year ended 30 June
2007 2006
R`000 R`000
Cash flow generated from/(utilised in)
operating activities 9 760 (16 404)
Cash received from customers
and subsidiaries 204 467 163 683
Cash paid to suppliers (182 053) (173 780)
Cash generated from/(utilised in)
operations 22 414 (10 097)
Interest received 84 68
Interest paid and finance charges (4 477) (4 193)
Tax (paid)/received (6 261) 218
Dividends declared and paid (2 000) (2 400)
Cash utilised in investing activities (13 026) (11 924)
Additions to property, plant and equipment (13 876) (7 260)
Additions to intangible assets (16) -
Proceeds from disposal 879 180
Loan advanced (13) (336)
Cost with acquisition of companies - (4 508)
Cash generated from financing activities 16 890 4 139
(Decrease)/increase in long-term borrowings (6 950) 272
Increase in instalment sale agreements -
short-term portion 259 3 867
Issue of shares 23 581 -
Cash surplus/(shortfall) for the year 13 624 (24 189)
Cash and cash equivalents - beginning of
the year (21 740) 2 449
Cash and cash equivalents - end of
the year (8 116) (21 740)
SEGMENTAL ANALYSIS
for the twelve months ended 30 June
Operating
Revenue Profit Net Profit Assets Liabilities
R`000 R`000 R`000 R`000 R`000
2007
Chemicals 71 760 6 812 3 496 29 821 29 705
Silica 33 690 7 710 4 126 33 405 25 293
Pigments 117 601 9 822 7 177 49 830 22 218
Other 1 676 6 222 4 251 27 931 (16 209)
Total 224 727 30 566 19 050 140 987 61 007
Operating
Revenue Profit Net Profit Assets Liabilities
R`000 R`000 R`000 R`000 R`000
2006
Chemicals* 55 473 5 340 3 893 15 937 19 318
Silica* 21 584 1 387 544 23 730 19 744
Pigments 99 725 5 961 4 123 35 772 13 337
Other (12 779) 8 794 5 981 19 358 4 672
Total 164 003 21 482 14 541 94 797 57 071
*Results are for a sixteen-month period.
OVERVIEW
Nature of Business
Rolfes is a diversified manufacturing and technology holdings company listed on
the Alternative Exchange of the JSE Limited. The group has demonstrated
continued growth through its subsidiaries, providing a wide range of market-
leading products to customers through dedicated teams of industry specialists in
the silica, chemical and pigments industries.
Rolfes manufactures and distributes the following products:
- Organic and inorganic pigments for the coatings, plastics, construction and
ink industries (through Rolfes Colour Pigments International);
- Resins and other speciality chemicals for the coatings, plastics and
construction industries (through Rolfes Chemicals); and
- Pure beneficiated silica for the metallurgical, filtration and construction
industries (through Rolfes Silica)
Basis of Preparation
The annual financial statements have been prepared in accordance with
International Financial Reporting Standards and IAS 34, the Listings
Requirements of the JSE Limited and the Companies Act in South Africa. The
accounting policies used are consistent with those used in the preparation of
the annual financial statements for the year ended 30 June 2006.
The annual financial statements have been audited by the group`s auditors, BDO
Spencer Steward (Jhb) Incorporated, and their unqualified audit opinion is
available for inspection at the group`s registered office.
Financial Overview
The 2007 financial year has been a year of considerable growth and consolidation
for the Rolfes Group. Strategies implemented during the past two years, inter
alia as a result of the acquisitions of the silica and resins operations during
2005, have come to fruition with exceptional sales growth in all the operating
units.
Turnover increased by 37% to reach R224,7 million. Operating profit was boosted
by 42% to R30,6 million and headline earnings increased by 62% to R19,1 million.
Headline earnings per share for 2007 increased by 51% to 20,9 cents per share.
The forecast headline earnings for 2007 of R18,4 million as per the company
prospectus issued on 9 May 2007, were exceeded by 4%.
The total assets of the group increased by R46,2 million and the group`s debt
reduced by R20,3 million, primarily as a result of the net cash raised on
listing of R23,6 million. The net asset value per share improved to 78 cents per
share (2006: 44,2 cents per share) with a similar trend in net tangible asset
value per share. As a result of the above, the group`s solvability and
liquidity ratios improved satisfactorily.
The group incurred R13,9 million of capital expenditure, primarily in the silica
operations, to expand production capacity and provide cost effective transport
solutions to customers. The group produced R9,7 million cash from operating
activities which were mainly utilised for capital expenditure.
Operational Review
Rolfes Colour Pigments
Turnover grew by 18% to R117,6 million. The increase in turnover was as a result
of increased sales across the board on most product lines, with a modest
contribution by the new pigment dispersion and trading units. The company
achieved a gross profit margin of 19,6% (2006: 18,6%). The company`s operating
costs increased by 9%. The company has also experienced a steep growth in the
pigment product offtake from Europe.
Improved product formulations, new product innovations and good service levels
will continue to position the company as a leading supplier of a large range of
colour pigment products in the local market, and should result in increased
export volumes. Its leading position and cost effective and reliable
manufacturing have entrenched the company`s brand with local and foreign
customers.
Rolfes Chemicals
Turnover grew by 72% to R R71,7 million (2006: R41,6 million annualised). The
company achieved a gross profit margin of 14,7% (2006: 17.1%). The explosion at
the Alberton plant during April 2007 has put a damper on the year-end profits,
as a result of gross margin loss experienced due to increased costs. However, no
major customers were lost as a result of the set-back, and the plant was back
into full production during August 2007.
The year-on-year increase in turnover was as a result of increased sales across
the board on all products manufactured, but specifically gaining Dulux as a new
customer with large volume offtake -
together with a modest contribution by the new speciality chemicals distribution
unit. The company reduced its operating costs by 45% if compared to 2006
(annualised). The reduction in costs was primarily as a result of change in
ownership during 2005 and focused management efforts.
The company continues to experience stiff competition from local manufacturers,
but has not lost any large client as a result thereof. In fact, the company
managed to grow the number of blue-chip clients it services. Improved product
formulations, new product innovations and service levels will continue to
position the company as one of the leading suppliers of alkyd and acrylic resins
to the local market. The company is continuing to expand its product range to
customers through selected imports of complementary resin products.
Rolfes Silica
Turnover grew by 108% to R33,7 million (2006: R16,2 million annualised). The
company achieved a gross profit margin of 32% (2006: 17.4%). As a result of the
increase in turnover, a better understanding of the silica mining and
beneficiation processes and the buoyant local silica market, the company
contributed handsomely to the profits of the group for 2007 (breakeven in 2006).
A number of blue-chip clients were gained during the year and should be retained
in the future. The group has continued to spend on capital expenditure on the
silica mine, for instance, the crushing and screening plants were significantly
upgraded to ensure a constant supply of construction, aggregate and silica fine
materials at all times. As a result of the steep increase in activities, the
company`s operating costs grew by 81%.
The company is currently selling all products mined and beneficiated and are
permanently on backorder on some of the higher margin silica fine products. The
company has experienced very little competition from other silica operations due
to its location and a countrywide shortage of supply of good quality product.
Management will continue to focus on shifting the product mix more towards
silica fine products which sell at significantly higher margins, if compared to
construction material.
Corporate Activity
Whilst our primary growth this year has been organic, Rolfes listed on AltX
during May 2007 and raised a net R23,6 million. The listing was successful and
the private placing substantially over subscribed. The company was well received
by the investor community. The company also concluded an empowerment transaction
with Vuwa Investments (Pty) Limited, in terms of which Vuwa acquired a 25,1%
shareholding in the group. Vuwa is headed up by prominent public figure and
businessman, Bulelani Ngcuka.
Human Resources
We believe that the listing of the company has improved employment security for
all members of staff and we have maintained our low staff turnover this year.
The group continues to employ historically disadvantaged individuals with the
specific aim to train them into skilled positions.
During 2007 the group has employed an aggressive management bonus incentive
scheme to retain and incentivise senior management for optimal performance. This
scheme will continue into the future.
Black Economic Empowerment
25,1% of Rolfes` shareholding is black-controlled and 77% of all staff members
are black. We will continue to improve our employment equity ratios, especially
in the middle to top management levels. The company is in the process of
obtaining a formal BEE rating as measured in accordance with the BEE Act.
Market Conditions
The sustained local (specifically as a result of the large spend on local
infrastructure, buildings and housing) and international economic growth
continue to contribute to Rolfes` development, setting a stable platform that
mitigates business risk and boosts consumer confidence.
During 2007 we experienced a continuation of large increases in the prices of
all raw materials (imported and local) across the board. The various operations
were in the main able to continue to increase selling prices to the customers as
a result of spiralling raw material costs, and thereby maintaining gross
margins. With the global spiralling metal, crude oil and other raw material
prices, the lower local product conversion costs of the group should not only
improve our competitiveness in the local market against the importers of
finished goods, but also in the European market.
We have seen a significant increase in our export business into Europe as a
result of the brand awareness established. Furthermore, the environmental
problems currently experienced in China and the phasing out of their export
incentives should put Rolfes in a more competitive position in the future.
As a group we will continue to benefit from the governments investment into
infrastructural development and the construction boom, but are not totally
reliant thereon for our future growth.
Prospects
As mentioned above, the continued government spend on infrastructural
development, which also fuels the construction industry and the economy in
general, will continue to assist the group on all fronts to grow each division.
Coupled with a constant focus on expanding our product basket, new product
innovations, improved production efficiencies and strict cost control,
management is confident that it will achieve as a minimum the 2008 forecast
turnover and profit after taxation of R289,2 million and R25,5 million,
respectively, as per the company prospectus, dated 9 May 2007.
The group has an aggressive acquisition policy. Management is constantly in the
process of screening and evaluating a number of acquisition targets. The targets
focused on, are operations with intellectual capital, high barriers to entry,
and which are complementary to the existing operations of the group.
Management is also in the process of evaluating a number of projects to expand
existing manufacturing capacity in the group through the lease, acquisition
and/or building of existing and/or new production facilities. We are of the
opinion that with the increasing reliance by the Western economies for products
from countries in the East, the group will continue to provide an affordable and
quality alternative, which will improve our competitive position in the local
and international markets in the years to come.
Corporate Governance
The group recognises the need to conduct its business with integrity,
transparency and equal opportunity and subscribes to the spirit of good
corporate governance as set out in the King II Report.
Board of Directors
Messrs BT Ngcuka and L Dyosi were appointed as non-executive directors and Mr E
van der Merwe as an executive director during the year. Messrs WA Badenhorst and
RTH Thomas resigned as directors on 1 February 2007.
Subsequent Events
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.
Dividends
Given the growth prospects and strategy of Rolfes, it is anticipated that
earnings generated by the group will be re-invested to fund future growth and
development. Therefore, the Board does not propose a dividend in respect of the
2007 financial year. It is the intention of the company to periodically consider
the dividend policy and to take account of prevailing circumstances and future
cash requirements in determining whether it would be appropriate to pay a
dividend in respect of a particular financial reporting period.
Annual Report
The company`s 2007 annual report, incorporating a notice of the annual general
meeting to be held on Thursday, 25 October 2007, will be posted to shareholders
on or before Friday, 28 September 2007.
For and on behalf of the Board
BT Ngcuka E van der Merwe
Chairman Chief Executive Officer
Midrand
19 September 2007
Registered office:
The Summit,269 16th Road, Randjespark, Midrand
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg 2001
Directors: BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), L
Dyosi*, AJ Fourie*, AJ Greeff (Financial Director) *Non-executive
Designated advisor: PSG Capital (Pty) Limited
Registered auditors: BDO Spencer Steward (Jhb) Incorporated
Date: 19/09/2007 12:00:01 Supplied by www.sharenet.co.za
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