Wrap Text
RAR - Rare Holdings Limited - Unaudited abridged financial results for the
six months ended 31 December 2010
RARE Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR ISIN: ZAE000092714
("RARE" or "the company" or "the group")
Unaudited abridged financial results for the six months ended 31 December
2010
Consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December 2010 December 2009 June
2010
R`000 R`000 R`000
Revenue 215 211 262 215 519 409
Cost of Sales (170 384) (208 677) (414 509)
Gross Profit 44 827 53 538 104 900
Other Income 696 339 3 512
Operating Expenses (52 254) (51 300) (154 350)
EBITDA (6 731) 2 577 (45 938)
Depreciation and (5 804) (4 827) (11 199)
amortisation
Investment Income 344 1 080 2 223
Finance Costs (9 164) (9 083) (20 023)
Loss before tax (21 355) (10 253) (74 937)
Income tax 6 535 2 800 5 773
Loss for the period (14 820) (7 453) (69 164)
Attributable to:
Equity holders of the (10 665) (7 970) (58 070)
parent
Non-controlling interest (4 155) 517 (11 094)
Basic earnings per share -
cents
Loss attributable to (10 665) (7 970) (58 070)
equity holders of RARE
Holdings Limited
Weighted average number of 88 750 88 750 88 750
ordinary shares in issue
Loss per ordinary share (12,02) (8,98) (65,43)
(cents) (basic and
diluted)
Headline earnings per
share - cents
Loss attributable to (10 665) (7 970) (58 070)
ordinary shareholders
Profit/(loss) on disposal - (33) 29 573
of fixed assets
Headline loss attributable (10 665) (8 003) (28 497)
to ordinary shareholders
Headline loss per share (12,02) (9,02) (32,11)
(cents) (basic and
diluted)
Consolidated statement of other comprehensive income
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December 2010 December 2009 June
2010
R`000 R`000 R`000
Loss for the period (14 820) (7 453) (69 164)
Exchange differences on 1 013 1 331 1 415
translation of foreign
subsidiaries
Gains and losses on property - - 15 029
revaluation
Taxation related to components - (234) (4 841)
of comprehensive income
Total comprehensive loss for the (13 807) (6 356) (57 561)
period
Total comprehensive loss
attributable to:
Owners of the parent (13 760) (7 444) (49 733)
Non-controlling interests (47) 1 088 (7 828)
Total comprehensive loss for the (13 807) (6 356) (57 561)
period
Consolidated statement of financial position
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December 2009 June
2010 2010
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 93 283 80 934 96 227
Goodwill 6 089 35 578 6 089
Intangible assets 12 272 13 666 11 850
Investment in associates 900 900 900
Other financial assets 663 607 663
Prepayments - 1 350 243
Deferred taxation 9 811 2 941 4 160
123 018 135 976 120 132
Current Assets
Inventories 160 658 156 659 161 568
Loan to associate 3 841 2 441 3 071
Other financial assets 5 365 5 050 5 224
Trade and other receivables 128 575 160 483 138 606
Construction contracts and - - 14 424
receivables
Current taxation receivable 1 941 2 612 715
Prepayments - - 729
Cash and equivalents 23 750 22 002 36 263
324 130 349 247 360 600
Total Assets 447 148 485 223 480 732
Equity and liabilities
Equity
Share capital 72 598 72 598 72 598
Reserves 11 951 6 986 15 046
Retained income 27 584 88 349 38 249
Equity attributable to equity 112 133 167 933 125 893
holders of parent
Non-controlling interest (9 430) 1 861 (9 312)
102 703 169 794 116 581
Liabilities
Non-current liabilities
Loans from minority - 1 391 2 282
shareholders in subsidiaries
Other financial liabilities 19 254 128 999 110 043
Operating lease liability - 102 102
Deferred tax 2 308 779 3 923
21 562 131 271 116 350
Current liabilities
Trade and other payables 164 693 146 052 198 983
Other financial liabilities 156 928 33 004 48 344
Current tax payable 862 3 921 439
Operating lease liability - 65 13
Provisions - 305 -
Bank overdraft 400 811 22
322 883 184 158 247 801
Total liabilities 344 445 315 429 364 151
Total equity and liabilities 447 148 485 223 480 732
Net Asset Value per Share- 126,3 189,2 141,9
Cents
Net Tangible Asset Value 105,7 133,7 121,6
per Share-Cents
Consolidated statement of changes in equity
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June 2010
2010 2009
Group R`000 R`000 R`000
Opening balance 116 581 176 150 176 399
Changes in equity
Profit/(loss) for the year (10 782) (7 453) (69 165)
Foreign currency revaluation (3 096) 1 097 1 415
reserve
Revaluation of property - - 7 932
Total changes (13 878) (6 356) (59 818)
Closing balance 102 703 169 794 116 581
Comprising of: -
Share capital 885 885 885
Share premium 71 714 71 714 71 714
Foreign currency translation (2 755) 579 341
reserve
Revaluation reserve 14 705 6 406 14 705
Retained income 27 584 88 349 38 249
Non-controlling interest (9 430) 1 861 (9 313)
Total equity 102 703 169 794 116 581
Consolidated cash flow statement
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December 2010 December June 2010
2009
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated (used in)/from (14 798) (29 186) 8 321
operations
Interest income 223 917 2 181
Dividends received 120 163 42
Finance costs (9 164) (9 083) (20 023)
Tax paid (1 534) (3 812) (5 057)
Net cash from operating (25 153) (41 001) (14 536)
activities
Cash flow from investing -
activities
Purchase of property, plant
and equipment (594) (2 705) (6 913)
Sale of property, plant and - 201 202
equipment
Purchase of other intangible (2 688) (4 269) (4 589)
assets
Loans to group companies - 1 381 -
repaid
Loans advanced to group (771) (543) (1 173)
companies
Purchase of financial assets (141) - (109)
Sale of financial assets - 2 302 2 181
Net cash from investing (4 194) (3 633) (10 401)
activities
Cash flows from financing
activities
Proceeds from other financial 17 795 - -
liabilities
Repayment of other financial - (3 452) (8 305)
liabilities
Repayment of shareholders` (2 282) (270) 349
loan
Net cash from financing 15 513 (3 722) (7 956)
activities
Total cash movement for the (13 834) (48 356) (32 893)
period
Cash at the beginning of the 36 241 69 976 69 976
period
Effect of exchange rate 943 (429) (842)
movements
Total cash at end of the 23 350 21 191 36 241
period
Condensed segmental information - primary segment report business segments
for the six months ending 31 December 2010
R`000 Energy Water Chemi- Angola Angola Invest- Total
cals Water Energy ment
Total 97 239 11 971 69 129 10 207 47 536 1 716 237 798
revenue
Inter- (20 870) - - - (1 716) (22 586)
segmental
revenue
External 76 369 11 971 69 129 10 207 47 536 - 215 212
revenue
Segment (5 831) (4 024) 2 041 (618) (1 976) (2 127) (12 535)
profit/
(loss)
Finance (9 164)
Cost
Investment 344
revenue
Income tax 6 535
Net loss (14 820)
for the
period
for the six months ending 31 December 2009
R`000 Energy Water Chemi- Angola Angola Invest- Total
cals Water Energy ment
Total 141 796 45 822 16 923 3 452 70 908 1 620 280 521
revenue
Inter- (15 300) (1 385) - - - (1 620) (18 305)
segmental
revenue
External 126 496 44 437 16 923 3 452 70 908 - 262 216
revenue
Segment 3 821 (6 662) (1 387) (2 837) 3 540 1 275 (2 250)
profit/
(loss)
Finance (9 083)
Cost
Investment 1 080
revenue
Income tax 2 800
expense
Net loss (7 453)
for the
period
for the twelve months ending 30 June 2010
R`000 Energy Water Chemi- Angola Angola Invest- Total
cals Water Energy ment
Total 300 056 89 234 52 635 17 978 108 877 2 608 571 388
revenue
Inter- (45 097) (4 275) - - (2 608) (51 980)
segmental
revenue
External 254 959 84 959 52 635 17 978 108 877 - 519 408
revenue
Segment 8 391 (15 026) (1 345) (14 307) (4 535) (825) (27 647)
profit/
(loss)
Impairment (29 490)
of goodwill
Finance (20 023)
Cost
Investment 2 223
revenue
Income tax 5 773
expense
Net loss (69 164)
for the
year
Notes
Accounting policies
Basis of preparation
The consolidated interim financial information for the six months ended 31
December 2010, has been prepared in accordance with International Financial
Reporting Standards (IFRS), the interpretations adopted by the
International Accounting Standards Board (IASB), and the requirements of
the South African Companies Act. These condensed interim financial
statements are presented in compliance with IAS 34 - Interim Financial
Reporting, and should be read in conjunction with the annual financial
statements for the year ended 30 June 2010.
Accounting policies
The accounting policies adopted in the preparation of the condensed interim
financial information are consistent with those of the annual financial
statements for the year ended 30 June 2010. For a full list of standards
and interpretations which have been adopted we refer you to the 30 June
2010 annual financial statements.
Commentary
Dividends
No dividends were declared or paid to shareholders during the period under
review.
Profile
RARE supplies a comprehensive range of services and products to the fluid
conveyance industry. Services include design, manufacture, installation and
maintenance of pipeline and process plants across all sectors of industry
(particularly oil and gas, mining and local government) in Southern and Sub
Saharan Africa.
Financial results
Revenue for the period still reflects the depressed market conditions of
2010, and is down by 17.9% at R215.2m (2009: R262.2m). Operating margin
showed a slight increase to 20.8% (2009: 20.4%) whilst operating expenses
at R52.2m, increased by 1.9% (2009: R51.3m).
Headline losses attributable to ordinary shareholders amounted to R10.6m
(2009: R8.0m) with headline loss per share of 12.02c (2009: 9.02c)
Operational review
RARE`s restructuring programme was fully integrated during the latter part
of the period under review, with the Energy, Water and Chemical divisions
consolidated into Trading and Construction business units. However, for
continuity we report as per the original segmental layout. In future RARE
will be reporting on these business units. Activity levels both within
Southern Africa and sub Sahara Africa reflect increased Capex in resource
driven markets, although at moderate levels from a low base. Changes in
environmental legislation are now providing increased opportunity for the
company`s energy efficient technology.
RARE Angola continued to under perform. Various barriers and administrative
complications lead management with no other option, but to implement a
strategy to `stop the bleeding`. Revenue was down by 22% at R57.7m (2009:
R74.4m) however due to the strengthening of the rand, normalised Revenue in
US Dollar terms reflected a 15% decrease in Revenue. The expected progress
with the implementation of CABGOC Phase 2 has not been realised and the
expected increase in contribution from Angola has not been achieved. This
is disappointing and management is well advanced in reaching agreement in
reducing its equity participation in this business and monetising its
investment in the country. We believe this move, which will result in
increased local equity participation, will provide the growth that RARE has
always expected from this business. This will release RARE from the
attention necessary in managing this business and allow management to focus
on business opportunities closer to home.
The Energy Division did not realise the growth anticipated, with revenue
down 40% at R76.4m (2009: R126.5m). Whilst RARE was well placed to
participate in Eskom`s Capex programme, procurement was largely seen going
offshore. This trend is disappointing despite Governments commitment to
optimise local procurement. Private sector spend remained depressed during
the reporting period.
The performance of the Water Division continues to remains depressed, with
Government expenditure the main driver for this business. Revenue at R12.0m
(2009: R44.4m) reflects the decline of activity in this sector; however,
the expected infrastructure growth programme as committed by Government
will provide future opportunity to leverage this business up to the
expected growth of this unit.
Growth in RARE Chemical Revenue in excess of 400% at R69.1m (2009: R16.9m)
provides confidence in the roll-out of RARE`s Life Extending Technologies.
The significant increase in the development of resource-based exploration
within the African market has allowed this business to position itself as a
strategic player within the market. In addition, the leverage of RARE`s
annuity income contracts with the Department of Water Affairs has allowed
additional income streams from emergency programmes as a result of both the
recent floods and of infrastructure collapse.
During the latter part of the reporting period, the Board secured the
services of independent external expertise to assess the company`s business
model. In addition, opinion of the company`s management capacity,
inventory, creditor/debtor management, process and operational efficiencies
was given. The strategic direction of the business was found to be aligned
with the company`s short and long term objectives. Recommendations on
leveraging operational efficiencies confirmed the board`s directive to
management in addressing stock reduction, operating cost efficiencies and
debtor performance objectives. Through the aggressive attention to these
objectives, management has achieved significant success in both operating
cost and stock reduction post balance sheet. Management capacity is still
under review, and appropriate appointments are expected to be made in the
near future. The implementation of the new ERP programme is now in its 6
month and is now providing a stable platform to accommodate all necessary
requirements.
Senior debentures to the value of R100 million expires during the course of
the next 12 months and have been reclassified as current other financial
liabilities accordingly. The company is in advance stages of negotiations
with various institutions relating to the refinancing of the obligation.
Management is confident to finalise the process and once again secure long
term funding on the back of a quality debtors book.
Prospects
Execution of orders secured post FY2010 has been frustrated through delays
in project execution by a number of customers, resulting in a low
conversion rate of orders booked. Tender activity has seen a significant
increase with the value of bids submitted post the reporting period in
excess of 80% of the total bid value for the 2010 calendar year. This trend
is indicative of Governments commitment to address the roll out of its
Infrastructure and Development Programme, and RARE has seen a serious
commitment in the execution these objectives.
With the recent announcements through SENS regarding the recapitalisation
of the business, we refer to the SENS announcement, dated 20 and 21
December 2010 relating to the specific issue of shares for cash as well as
the Mayfair Speculators loan agreement to raise R40 million. It should be
noted that the parties are in the process of finalising the
recapitalisation proposal to the benefit of all shareholders. Further
detail will be provided shortly as per SENS and shareholders are therefore
advised to remain cautious when dealing in the securities of the company
until such further announcement is made.
On behalf of the board
DMJ Ncube DE Scheepers
Chairman CEO
31 March 2011
Corporate information
Directors:
DMJ Ncube (Non-executive Chairman), DE Scheepers (CEO), PJ Willemse (FD),H
Odendaal (Non-executive), P du Plessis (Independent Non-executive)
Registered Offices:
22 Old Vereeniging Road, Kliprivier, Midvaal, 1870
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg 2001
(PO Box 61051, Marshalltown, 2107)
Designated Advisor:
PSG Capital (Proprietary) Limited
Company Secretary:
PJ Willemse
Date: 31/03/2011 16:29:01 Supplied by www.sharenet.co.za
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