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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")
www.rolfesza.com
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2010
Highlights
* 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
ASSETS
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
2010
Chemicals
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
intergroup
items
and other - - - (24 233) (24 234)
Total 369 029 77 657 23 853 243 210 102 890
2009
Chemicals
continuing 50 540 9 120 2 601 78 052 74 158
Chemicals
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
intergroup
items
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.
COMMENTARY
Overview
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)
respectively.
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:
17,3%).
Operating expenses increased by 14,2% mainly due to increased employment costs
and in line with new business development initiatives. Capital expenditure was
negligible.
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
customers.
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
2010.
The salient dates of the dividend payment are as follows:
2010
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
Midrand
Registered office:
The Summit, 269 16th Road, Randjespark, Midrand
Transfer Secretaries:
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg
2001
Directors:
BT Ngcuka* (Chairman), E van der Merwe (Chief Executive Officer), L Dyosi*, AJ
Fourie*, L Lynch (Financial Director), KT Nondumo*#, TAM Tshivhase*#
*Non-executive
# 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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