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RLF - Rolfes - Unaudited consolidated condensed interim results for the six
months ended 31 December 2010 and dividend declaration
ROLFES TECHNOLOGY HOLDINGS LIMITED
(Registration number 2000/002715/06)
Share Code: RLF
ISIN: ZAE000096202
("Rolfes" or "the Group" or "the company")
UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2010 AND DIVIDEND DECLARATION
Highlights
* Turnover increased by 18,2% to R228,7 million
* Headline earnings increased by 8,0% to 14,9 cents per share
* Long term debt reduced by R9,9 million since June 2010
* Dividends of R10,4 million paid to shareholders since December 2009
* Net Asset value per share increased to 145,2 cents per share from 135,4 cents
per share
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 31 December 2010
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE
2010 2009 2010
R`000 R`000 R`000
Revenue 228 680 193 438 369 029
Cost of sales (186 180) (151 142) (291 372)
Gross profit 42 500 42 296 77 657
Gross profit margin 18,6% 21,9% 21,0%
Other operating income 1 286 884 907
Operating expenses (19 747) (21 117) (40 289)
Operating profit before
Interest 24 039 22 063 38 275
Operating profit percentage 10,5% 11,4% 10,4%
Interest paid and finance
Charges (2 173) (2 258) (4 861)
Income from investments - - 11
Net profit before taxation 21 866 19 805 33 425
Tax expenses (6 584) (5 536) (9 572)
Total comprehensive income
for the period 15 282 14 269 23 853
Attributable to:
Equity holders of parent 15 282 14 269 23 853
Attributable to:
Continuing operations 15 282 14 269 23 853
Reconciliation of headline
earnings
Attributable profit 15 282 14 269 23 853
Adjustment for the after-tax
effect of:
Loss/(gain) from sale of
fixed asset 87 (9) 8
Headline earnings 15 369 14 260 23 861
Weighted average number of
shares in issue (`000) 102 968 103 255 102 968
Earnings per share (cents)
- Basic 14,8 13,8 23,2
- Headline 14,9 13,8 23,2
- Diluted 14,8 13,8 23,2
- Diluted headline 14,9 13,8 23,2
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 December 2010
UNAUDITED UNAUDITED AUDITED
31 DEC 31 DEC 30 JUNE
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non-current assets 98 426 105 327 98 594
Plant and equipment 38 306 39 792 38 296
Property 27 762 27 430 27 726
Investments - Current - 411 -
Intangible assets 32 358 37 696 32 572
Current assets 157 554 130 813 144 616
Inventories 80 427 68 639 77 718
Trade and other receivables 74 036 61 470 60 771
Financial asset 573 493 -
Cash and cash equivalents - - 6 127
Tax asset - 211 -
Value Added Tax asset 2 518 - -
Total assets 255 980 236 142 243 210
EQUITY AND LIABILITIES
Capital and reserves 150 422 135 916 140 320
Share capital 1 036 1 036 1 036
Share premium 28 603 28 603 28 603
Treasury shares (868) (635) (868)
Retained income 121 651 106 912 111 549
Non-current liabilities 25 015 32 493 25 487
Interest-bearing
Liabilities 12 093 23 562 15 315
Deferred tax liability 9 691 5 795 7 036
Provisions 3 231 3 136 3 136
Current liabilities 80 543 67 733 77 403
Trade and other payables 59 316 44 652 60 617
Cash and cash equivalents 11 983 3 293 -
Current portion of
interest-bearing liabilities 7 373 6 016 8 825
Current portion of
vendor loan - 13 073 5 220
Financial liability - - 100
Value Added Tax liability - 409 932
Tax liability 1 226 - 1 239
Provisions 645 290 470
Total equity and
Liabilities 255 980 236 142 243 210
Number of shares in
issue (`000) 103 609 103 609 103 609
Net Asset Value per
share (cents) 145,2 131,2 135,4
Net Tangible Asset Value
per share (cents) 114,0 94,8 104,0
CONDENSED CONSOLIDATED GROUP STATEMENTS OF CHANGES IN EQUITY
for the period ended 31 December 2010
Ordinary Share Retained Treasury Total
shares premium income shares equity
R`000 R`000 R`000 R`000 R`000
Balance at
30 June 2009 1 036 28 603 92 643 (635) 121 647
Net profit for the
Period - - 14 269 - 14 269
Balance at
31 December 2009 1 036 28 603 106 912 (635) 135 916
Net profit for the
Period - - 9 584 - 9 584
Reallocation of fair
Value - - 233 (233) -
Dividends paid - - (5 180) - (5 180)
Balance at
30 June 2010 1 036 28 603 111 549 (868) 140 320
Net profit for the
Period - - 15 282 - 15 282
Dividends paid - - (5 180) - (5 180)
Balance at
31 December 2010 1 036 28 603 121 651 (868) 150 422
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE
2010 2009 2010
R`000 R`000 R`000
Cash flow generated from
operating activities 4 806 20 509 47 938
Finance income - 4 11
Finance cost (2 173) (2 262) (4 861)
Taxation paid (3 971) (1 464) (4 143)
Dividends paid (5 180) - (5 180)
Cash flow (utilised in)/
generated from
investing activities (3 416) (1 485) 4 378
Cash flow utilised in
financing activities (8 176) (18 947) (32 368)
Cash (shortfall)/ surplus
for the period (18 110) (3 645) 5 775
Cash and cash equivalents
- beginning of the period 6 127 352 352
Cash and cash equivalents
- end of the period (11 983) (3 293) 6 127
SEGMENTAL ANALYSIS
Operating Net Liabi-
Revenue Profit Profit Assets lities
R`000 R`000 R`000 R`000 R`000
2010 - for the
six months ended
31 December
Chemicals 66 304 5 747 3 597 58 479 57 592
Silica 16 799 3 270 2 245 53 273 30 756
Pigments 144 404 16 141 11 010 132 136 60 241
Other 1 173 (1 119) (1570) 72 647 20 348
Elimination
of intergroup
items - - - (59 668) (63379)
Total 228 680 24 039 15 282 255 980 105 558
Operating Net Liabi-
Revenue Profit Profit Assets lities
R`000 R`000 R`000 R`000 R`000
2009 - for the
six months ended
31 December
Chemicals 48 522 4 977 3 710 73 330 76 676
Silica 19 732 4 157 2 989 51 832 32 523
Pigments 123 929 15 849 11 417 138 033 79 314
Other 1 255 (2 920) (3 847) 281 472 38 796
Elimination
of intergroup
items - - - (308 525) (127 083)
Total 193 438 22 063 14 269 236 142 100 226
Operating Net Liabi-
Revenue Profit Profit Assets lities
R`000 R`000 R`000 R`000 R`000
2010 - for the
twelve months ended
30 June
Chemicals 99 968 7 676 5 805 61 876 54 490
Silica 37 418 7 618 5 348 49 349 27 823
Pigments 229 558 25 637 19 174 113 569 45 705
Other 2 085 (2 656) (6 474) 42 649 (894)
Elimination of
intergroup
items and other - - - (24 233) (24 234)
Total 369 029 38 275 23 853 243 210 102 890
The basis of preparation of the segmental analysis includes certain intercompany
transactions (excluding management fees) being eliminated in the respective
segmental results in the current and previous period`s reporting.
COMMENTARY
Nature of business
Rolfes manufactures, buys-in and distributes a wide range of market-leading,
high-quality products through various divisions to diverse industries including
the coatings, plastics, vinyl, leather, ink, metallurgical, water filtration,
fertilizer, cleaning, automotive, general chemicals and construction industries.
Rolfes Colour Pigments is responsible for the distribution of resins,
dispersions, organic and inorganic pigments, pigments pastes, additives and
dyes. Solvents, lacquer thinners, creosotes, waxes and specialty chemicals are
distributed through Rolfes Chemicals, while Rolfes Silica distributes pure
beneficiated silica.
Brief overview
Group performance was enhanced by the excellent performance of the Chemicals
business, supported by significant growth in the resins and dispersions product
groups incorporated in the Pigments business. Although market conditions
remained difficult, the Group managed to excel and deliver on most expected
targets. Group revenue growth of 18,2% was counteracted by increased raw
material prices,significant energy and to a certain extent labour costs, and
lower buy-in margin business, resulting in a 3% reduction in Group gross profit
margins. Achievements include overhead cost reduction, a slight reduction in
interest paid, reduction in Group debt (including settling the final payment for
the Triangle Solvent acquisition in cash) and dividends paid to shareholders
from cash resources, all of which supports the Group`s continued strong
financial position.Overall market share was sustained, with exports growing by
43,0 % if compared to December 2009, now comprising 12,4% of Group turnover.
Rolfes exports mainly to Europe and Africa.
Rolfes has a solid reputation and positive brand perception locally and
internationally.Opportunities in both the local and international markets are
still available. Regular strategy review ensures relevance and assists with
maximising growth and expansion prospects. Proactive measures ensure that we
remain competitive in light of fierce competition from China and India in the
buoyant African market with the Group consistently focussing on increasing
market share and expanding the product basket. We look forward to the European
economic recovery already noted in Germany. Chinese market input costs are
increasing due to economic pressures experienced from labour, energy and
environmental factors which bodes well for the Group`s manufacturing operations
in terms of exports to Europe and the rest of Africa.
We are dedicated to growing our business through expansion of product offerings
to the local and international markets as well as through the pursuit of new
acquisitions in the agricultural chemicals, mining chemicals and other chemicals
sectors.
Group financial performance
Profit growth for the six months under review amounted to 7,1% to R15,3 million
(Dec 2009: R14,3 million). The business operated in a recessionary local and
international economic environment. Group revenue increased by 18,2% to R228,7
million (Dec 2009: R193,4 million) with top line growth in both the Pigments
(16,5%) and the Chemicals (36,7%) businesses. Gross profit margins were under
pressure and declined to 18,6% (2009: 21,9%) primarily for reasons mentioned
above. Operating profit increased by 9,0% to R24,0 million (2009: R22,1 million)
with operating expenses reducing by 6,5% primarily due to the bad debt
provisions for December 2010 being significantly lower than in December 2009. As
a result, headline earnings increased by 7,8% to R15,4 million (2009: R14,3
million). Fully diluted headline earnings per share are 14,9 cents per share
(2009: 13,8 cents per share), an increase of 8,0% over December 2009.
Group liquidity and solvency ratios improved from June 2010 with the total net
asset value increasing to R150,4 million (June 2010: R140.3 million). The net
asset value per share improved to 145,2 cents per share (June 2010: 135,4 cents
per share) while net tangible asset value per share increased to 114,0 cents per
share (June 2010: 104,0 cents per share).
Interest cover increased to 11,1 times (Dec 2009: 9,8 times) with the total debt
(interest-bearing) equity ratio at 0,23 for December 2010. The favourable
increase in interest cover is due to the Group`s ability to increase operating
profits.
The Group incurred capital expenditure of R2,6 million (Dec 2009: R1,5 million),
spent mainly to expand manufacturing and distribution capability at the
Chemicals business to support local and export market growth and upgrading of
facilities at the Silica business.
Group cash flow
The Group settled the final cash payment for the Triangle Solvent acquisition of
R5,2 million as well as paying cash dividends of R5,2 million during October
2010 (excluding STC) to shareholders, all from current cash resources.
Cash generated from operations amounted to a disappointing R4,8 million (Dec
2009: R20,5 million) for the period. The increase in net working capital
investment during the six months to December 2010 of R20,8 million, represents
an increase in inventory and accounts receivable of R2,7 million and R13,3
million respectively, and a decrease in accounts payable and value added tax of
R4,8 million.The main reason for the reduction in creditors finance was due to a
temporary reduction in credit terms of certain key overseas Pigments suppliers
to facilitate market demand of a certain key imported product. Debt collection
for December 2010 was also slower than anticipated, however the quality of the
debtors book remains strong. Both the inventory and accounts receivable
investment supported export trading and manufacturing activities with debt
collection days on exports ranging between 90 and 120 days. Debtors` days
reduced to 51 days (June 2010: 53 days), while stock days reduced to 78 days
(June 2010: 97 days) and creditor days reduced to 50 days (June 2010: 67 days).
The lower than expected cash flow position as at the end of December 2010 due to
slow debtors collections and shortened creditor terms, was temporarily in nature
and has since been normalised.
Operational review
Rolfes Colour Pigments
Increased activities on certain imported and manufactured product lines resulted
in turnover growth of 16,5% to R144,4 million (Dec 2009: R123,9 million).Resins
turnover growth of 28,4% was mostly market share growth while dispersions
turnover growth of 34,2% was attributable to volume demand and market share
gain. Other areas of significant growth include titanium dioxide, organic
pigments, offset by an expected decline in lead chrome pigment sales. African
exports also showed significant growth, albeit from a low base.
The division`s gross profit margin decreased to 18,3% (2009: 22,4%) due to
increased activities on buy-in products at lower margins, influenced further by
increased prices on certain metals and crude product raw materials, and very
high energy cost increases placed additional pressure on gross profit
performance. The resins margins remained low as a result of increased raw
material costs and market price pressure.
Operating expenses reduced by 10,2% primarily due to a large debtor write-off in
December 2009.
Capital expenditure incurred amounted to R0,3 million (2009: R0,4 million) to
improve production capability to support export market demand.
The business unit expects further increases in export and buy-in sales
activities, especially into Europe and Africa. Prospects include expansion into
local and international market sectors with the new organic and other buy-in
product offerings, with further growth expected in the resin and dispersions
product ranges.
Rolfes Chemicals
Turnover increased by 36,7% to R66,3 million (2009: R48,5 million) primarily as
a result of increased volumes on most product lines and a positive market
response to a wider product offering. Oil prices somewhat increased over the
period under review, but had little impact on pricing. Imported solvent and
speciality chemicals product lines contributed to the performance with
anticipated volume targets being met and in some cases exceeded. Market share
increased in both Gauteng and the Western Cape with Rolfes Chemicals remaining a
leading player in the Gauteng solvents market.Exports into Africa increased
exponentially during the period under review, albeit from a low base.
Increasing market share in Gauteng, Africa and the Western Cape resulted in the
slight reduction of 1,0% in gross profit margins from 15,1% in December 2009 to
14,1% in December 2010.
Operating expenses increased by 56,8 % mainly due to increased employment costs,
and expansion costs into the Western Cape.
Capital expenditure amounted to R1,1 million (2009: R0,01 million), the majority
spend being on expanding and improvement of both logistics capacity and
manufacturing facilities as well as IT system upgrades.
Volumes are expected to increase with the new expansion into Kwa-Zulu Natal,
further African export growth and the Western Cape performing to expectation
while new product offerings in particular speciality chemicals, providing firm
prospects for upcoming growth. As the crude oil price increases, solvent
purchasing and selling prices will increase.
Rolfes Silica
Turnover declined by 14,9% to R16,8 million (2009: R19,7 million). Volume demand
for fines increased by 5,9% while the demand for aggregates reduced by 13,5%
undoubtedly due to the recessionary environment resulting in reduced product
demand by the government infrastructural, construction and building industry.
Market share was maintained with a wider customer base growth but lower demand
by larger aggregate customers negatively influenced the results to date.
Gross profit margins at 32,9 % (2009: 30,0%) increased as a result of increased
production efficiencies by matching production levels to demand. Capital
expenditure incurred amounted to R1,2 million (2009: R0,8 million) and remains
high due to the nature of the business, and is incurred to ensure mainly
compliance to safety, security and DMR regulations, and upgrading certain
equipment and housing.
The economy is expected to improve in the 2011 financial year in particular the
building and construction markets. Strategic emphasis remains on local
opportunities with particular focus on the metallurgical sector.
Dividends
The Group paid dividends to shareholders of 5 cents per share in both March and
October 2010. The Group will continue rewarding shareholders and the directors
have therefore declared an interim dividend for the six months ended 31 December
2010, of 5 cents per share payable to shareholders on 22 March 2011.
The salient dates of the dividend payment are as follows:
2011
Last date to trade "cum" the dividend Friday, 11 March
Shares to commence trading "ex" the dividend Monday, 14 March
Record date Friday, 18 March
Payment date Tuesday, 22 March
Share certificates may not be dematerialised or rematerialised between Monday,
14 March 2011 and Friday, 18 March 2011, both days inclusive.
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 interim
condensed consolidated financial statements. The interim condensed consolidated
financial statements for the six months ended 31 December 2010 has been prepared
in accordance with and containing the information required by IAS 34: Interim
Financial Reporting, as well as the AC 500 standards as issued by the Accounting
Practices Board or its successor.
Market Conditions and Prospects
None of the market conditions and prospects information contained in this
announcement have been reviewed or reported on by Rolfes` auditors.
Accounting policies
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements comply with IFRS and is consistent with those
applied in the preparation of the annual financial statements for the year ended
30 June 2010.
For and on behalf of the Board
BT Ngcuka E van der Merwe
Chairman Chief Executive Officer
23 February 2011
Midrand
Company secretary:
J Schlebusch
Registered office:
The Summit, 269 16th Road, Randjespark, Midrand
Transfer Secretaries:
Computershare Investor Services (Proprietary) 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**, T Tshivhase**
*Non-executive
** Independent non-executive
Designated advisor:
Grindrod Bank Limited
Registered auditors:
BDO South Africa Inc.
www.rolfesza.com
Date: 23/02/2011 07:05:43 Supplied by www.sharenet.co.za
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