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RLF - Rolfes Ltd - Unaudited interim results for the six months ended 31
December 2007
ROLFES TECHNOLOGY HOLDINGS LIMITED
(Registration number 2000/002715/06)
Share Code: RLF
ISIN: ZAE000096202
("Rolfes" or "the group")
www.rolfesza.com
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
HIGHLIGHTS
- Turnover increased by 35% to R 145 million
- Operating profit increased by 54% to R 21 million
- Headline earnings increased by 65% to R14,3 million
- Headline earnings increased by 44% to 14,0 cents per share
CONSOLIDATED GROUP INCOME STATEMENTS
for the period ended 31 December
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
DEC DEC JUNE
2007 2006 2007
R`000 R`000 R`000
Revenue 145 010 107 173 224 727
Cost of sales (113 179) (81 103) (172 011)
Gross profit 31 831 26 070 52 716
Other operating income 5 076 - 2 035
Operating expenses (15 599) (12 208) (24 185)
Operating profit before
interest 21 308 13 862 30 566
Operating profit percentage 14,7% 12,9% 13,6%
Interest paid and finance
charges (1 533) (1 558) (4 477)
Income from investments 8 - 84
Net profit before taxation 19 783 12 304 26 173
Tax expenses (5 436) (3 582) (7 123)
Profit for the year 14 347 8 722 19 050
Attributable to:
Equity holders of parent 14 347 8 722 19 050
Weighted number of shares
in issue 102 608 535 90 000 000 91 301 000
Earnings per share (cents)
- Basic 14,0 9,7 20,9
- Diluted 14,0 9,7 20,9
- Headline 14,0 9,7 20,9
- Diluted headline 14,0 9,7 20,9
CONSOLIDATED GROUP BALANCE SHEETS
as at 31 December
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
DEC DEC JUNE
2007 2006 2007
R`000 R`000 R`000
ASSETS
Non-current assets 67 846 48 742 54 537
Plant and equipment 36 674 22 638 28 404
Property 16 680 16 680 16 680
Intangible assets 14 092 9 084 9 100
Short-term loans 400 340 353
Current assets 110 921 64 025 86 450
Inventories 52 245 26 382 36 740
Trade and other receivables 58 676 37 491 49 624
Financial asset - - 36
Value Added Tax receivable - 152 50
Total assets 178 767 112 767 140 987
EQUITY AND LIABILITIES
Capital and reserves 98 077 48 099 79 979
Share capital 1 036 900 1 025
Share premium 28 602 1 408 24 864
Retained income 68 439 45 791 54 090
Non-current liabilities 20 330 15 892 6 787
Interest-bearing
liabilities 15 305 14 940 5 512
Deferred tax liability 4 245 213 970
Provisions 780 739 305
Current liabilities 60 360 48 776 54 221
Trade and other payables 38 060 20 564 39 079
Cash and cash equivalents 15 179 23 982 8 116
Current portion of
interest-bearing liabilities 4 908 2 201 4 126
Financial liability 30 - -
Value Added Tax liability 743 - -
Tax liability 1 440 2 029 2 900
Total equity and
liabilities 178 767 112 767 140 987
CONSOLIDATED GROUP STATEMENTS OF CHANGES IN EQUITY
for the period ended 31 December
Ordinary Share Retained Minority Total
shares premium income interest equity
R`000 R`000 R`000 R`000 R`000
Balance at
30 June 2006 - - 37 069 686 37 756
Derecognising of minority
interest - - - (686) (686)
Net profit for the period - - 8 722 - 8 722
Issue of new shares - 2 307 - - 2 307
Capitalisation of share
premium 900 (900) - - -
Balance at
31 December 2006 900 1 408 45 791 - 48 099
Issue of new shares 125 23 456 - - 23 582
Net profit for the
period - - 10 300 - 10 300
Dividend declared - - (2 000) - (2 000)
Balance at
30 June 2007 1 025 24 863 54 091 - 79 980
Issue of new shares 11 3 739 - - 3 750
Net profit for the
period - - 14 347 - 14 347
Balance at
31 December 2007 1 036 28 602 68 439 - 98 077
CONSOLIDATED GROUP CASH FLOW STATEMENTS
for the period ended 31 December
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
DEC DEC JUNE
2007 2006 2007
R`000 R`000 R`000
Cash flow (utilised in)/
generated from operating
activities (2 052) 2 470 9 760
Cash received from
customers 145 786 96 903 204 467
Cash paid to suppliers (142 238) (88 498) (182 053)
Cash generated from
operations 3 548 8 405 22 414
Interest received 7 - 84
Interest paid and
finance charges (1 533) (1 558) (4 477)
Tax paid (4 074) (4 377) (6 261)
Dividends declared and paid - - (2 000)
Cash utilised in
investing activities (19 336) (5 524) (13 026)
Additions to property, plant
and equipment (6 782) (5 524) (13 876)
Additions to intangible
assets - - (16)
Proceeds from disposal 572 - 879
Loan advanced (47) - (13)
Cost with acquisition of
companies (13 079) - -
Cash generated from
financing activities 14 325 812 16 890
Increase/ (decrease) in
long-term borrowings 9 793 812 (6 950)
Increase in instalment
sale agreements - short-term
portion 782 - 259
Issue of shares 3 750 - 23 581
Cash (shortfall)/ surplus
for the year (7 063) (2 242) 13 624
Cash and cash equivalents
- beginning of the year (8 116) (21 740) (21 740)
Cash and cash equivalents
- end of the year (15 179) (23 982) (8 116)
SEGMENTAL ANALYSIS
for the six months ended 31 December
Operating
Revenue Profit Net Profit Assets Liabilities
R`000 R`000 R`000 R`000 R`000
2007
Chemicals 49 501 4 354 2 147 36 156 33 892
Silica 20 566 4 866 2 125 36 010 25 773
Pigments 73 990 6 785 5 237 77 047 44 198
Other 953 5 303 4 838 29 554 (23 174)
Total 145 010 21 308 14 347 178 767 80 690
Operating
Revenue Profit Net Profit Assets Liabilities
R`000 R`000 R`000 R`000 R`000
2006
Chemicals 33 167 3 402 1 752 24 359 25 986
Silica 17 078 3 749 2 227 28 034 21 904
Pigments 56 224 3 830 2 928 42 864 18 992
Other 704 2 882 1 815 17 510 (2 213)
Total 107 173 13 863 8 722 112 767 64 669
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 (16 208)
Total 224 727 30 566 19 050 140 987 61 008
COMMENTARY
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 chemical industry
specialists in the silica, resins, solvents, speciality chemicals and pigments
industries.
Rolfes manufactures and distributes the following products:
- Organic and inorganic pigments and pigments pastes and dyes for the coatings,
plastics, construction, leather, vinyl and ink industries (through Rolfes Colour
Pigments);
- Resins, solvents 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 unaudited interim financial statements for the period have been prepared in
compliance with International Accounting Standard (IAS 34) - Interim Financial
Reporting. The accounting policies applied in preparing these unaudited interim
financial statements are consistent with those applied in the annual financial
statements for the year ended 30 June 2007 and comply with the statements of
International Financial Reporting Standards (IFRS) and the South African
Companies Act. IFRS 7 - Financial Instruments: Disclosures - this statement has
not been adopted in the results for the six months period ended 31 December 2007
but will be adopted in the annual financial statements for the year ended 30
June 2008.
Financial and Operational Overview
GROUP
The six months under review to December 2007 has been a period of further growth
and consolidation for the Rolfes Group. Outstanding sales growth is evident in
all operating units as a result of continued capitalisation on strategies
implemented during the past three years. Successful consolidation, increased
productivity, and considerable growth internationally contributed to the group`s
performance. The electricity shortages have had a limited effect on the group`s
operations during the period under review.
Turnover increased by 35% percent to reach R 145 million for the six months to
December 2007. Operating profit improved by 54% to R 21, 3 million and headline
earnings increased by 65% to R 14,3 million. Headline earnings per share for the
period to December 2007 increased by 44% to 14,0 cents per share.
The net asset value per share improved to 94,7 cents per share (December 2006:
53,4 cents per share) with a similar trend in net tangible asset value per
share.
The Group incurred R 6, 8 million of capital expenditure, primarily due to the
upgrading of some of its manufacturing plants and expanding the transport fleet,
particularly at the silica operation, in order to facilitate production
expansion and sales growth.
The Group`s cash generated from operations reduced primarily due to the
following:
- The insurance settlement from the Alberton plant explosion remained, in part,
outstanding as at December 2007, resulting in additional pressure on cash flow
due to costs incurred to bring the plant into full operation. The outstanding
payment of R4,2 million is expected in due course.
- Further investment in stock and debtors due to the exponential growth in the
European business contributed to the decline in available cash resources.
- Strategic investment in certain raw material stock due to spiralling prices
resulted in higher than normal stock levels, which contributed to the lower cash
flow situation.
Management expect the cash flow position to normalise during the period to June
2008.
ROLFES COLOUR PIGMENTS
Turnover increased by 31,6% to R 73.9 million (December 2006: R 56,2 million).
The growth in turnover is attributed to increased sales across the board on most
product lines, with a significant improved contribution by the European trading
unit. The company achieved a gross profit margin of 20, 1% (December 2006:
23,9%, June 2007: 19, 6%). The decline is largely due to sharp increases in
local and international raw material prices. Improved contribution in the
European trading unit at a lower GP% resulted in a lower average GP % for the
comparative period to December 2006.
As announced on 28 November 2007 on SENS, the group acquired a 100% share in
Leather-Chem (Pty) Ltd effective 1 July 2007 for R 15 million, payable as to
R3,75 million in Rolfes shares and R11,25 million in cash. The acquisition will
improve the technology base and production capacity, adding specialised product
lines and new customers, and should result in an increased market share for the
pigment division.
ROLFES CHEMICALS
Turnover increased by 49,2% to R 49,5 million (December 2006: R 33, 2 million).
The company achieved a gross profit margin of 9, 8% (December 2006: 20, 3%; June
2007: 14, 7%). If the proceeds from the loss of profit insurance claim is
accounted for as part of gross profit and not under other income, the gross
profit margin will be 13,7%. The effect of the explosion in the Alberton plant
during April 2007 continued its effect on gross profits during the period under
review due to lower than expected business, increased costs of manufacturing and
products bought-in at higher costs. The plant was back into full production
during August 2007. Management expects the gross profit margin to increase above
15% during the period to June 2008. The increase in turnover was as a result of
increased sales across the board on all products manufactured, together with a
modest contribution by the solvents and speciality chemicals distribution unit.
As announced on 26 September 2007 on SENS, the resin manufacturing activities
has been expanded to Kwazulu Natal. The new facilities are rented on a five year
lease basis with the option to extend for a further five years. Minimal capital
investment was required to bring the plant into full operation. It is expected
that full production capacity at this facility will be achieved by April 2008.
Hence, the full financial contribution from the new plant will only be visible
during the financial year ending 30 June 2009.
ROLFES SILICA
Turnover increased by 20.4% to R 20, 6 million (December 2006: R 17, 1 million).
The company achieved a gross profit margin of 37, 6% (December 2006: 23, 4 %;
June 2007: 32, 0%). The increase in turnover is as a result of an increase in
production and a change in the product mix, with more higher value silica fine
products being sold. The change in product mix, certain capital expenditure and
improved cost management during the period under review, have increased
efficiencies significantly, resulting in vastly improved GP%. However, equipment
breakdowns and unfavourable weather conditions have had some negative effect on
the operations results.
Human Resources
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
for this financial year and into the future.
Black Economic Empowerment
25, 1% of Rolfes` shareholding is black-controlled and 70% 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 Broad Based
Black Economic Empowerment Act.
Market Conditions and Prospects
During the period under review we experienced a continuation of large increases
in the prices of all raw materials (imported and local) across the board. The
various operations were predominantly able to increase selling prices to
customers due to spiralling raw material costs, and therefore maintaining gross
margins. The performance of Rolfes Europe for the six months to December 2007
displayed a further significant increase in export business into Europe as a
result of continued brand awareness initiatives.
With the global spiralling metal, crude oil and other raw material prices,
increased through-put in our manufacturing plants resulting in lower local
product conversion costs for the group, and the weakening rand, should not only
improve our competitiveness in the local market against the importers of
finished goods, but also in the European market. Furthermore, the change in and
enforcement of labour and environmental laws in China and India, and therefore
increasing their manufacturing costs, should in the long term benefit the local
manufacturers competitiveness.
The slow-down in the residential and commercial development construction market
due to interest rate hikes and the National Credit Act as well as electricity
shortages may have some effect on future growth. However, government`s continued
investment into the economy as is evident from the recent budget speech, and the
group`s existing product and market diversification within its product range,
will ensure future growth. As a group we will continue to benefit from
governments investment into infrastructural development but are not totally
reliant thereon.
Management is confident that it will achieve as a minimum the 2008 forecast
profit after taxation of R25,5 million, as per the company prospectus, dated 9
May 2007.
Corporate Activity
Following on the acquisitions as mentioned above, the group will continue to
have 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.
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.
Board of Directors
There has been no change to the Board of Directors for the period under review.
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.
For and on behalf of the Board
BT Ngcuka E van der Merwe
Chairman Chief Executive Officer
Midrand
26 February 2008
Registered office:
The Summit, 269 16th Road, Randjiespark, 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: 26/02/2008 07:05:02 Supplied by www.sharenet.co.za
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