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OMN - Omnia Holdings Limited - Audited financial results for the year ended 31
March 2011
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967/003680/06
JSE code OMN ISIN ZAE000005153
("Omnia" or "the Group")
Audited financial results for the year ended 31 March 2011
MAJOR FEATURES
Profit for the year up 678% to R451 million
Operating profit margin improves from 3.2% to 7.3%
Lower finance costs
Successful completion of R1 billion Rights Offer
Debt:equity ratio improves to 10%
KEY DRIVERS
Strong demand for mining and agriculture commodities
Strong Rand
Low activity levels SA Manufacturing Sector
CONDENSED CONSOLIDATED INCOME STATEMENTS
For the year ended 31 March 2011
Audited Audited
Rm 2011 % 2010
Continuing operations
Revenue 9 368 6 8 827
Cost of sales (7 403) (0) (7 438)
Gross profit 1 965 41 1 389
Other operating income 85 10 77
Administrative expenses (532) 3 (517)
Distribution expenses (790) 15 (688)
Other expenses (41) 18
Operating profit 687 146 279
Finance cost (122) (44) (217)
Finance income 39 (11) 44
Share of (loss)/profit of associates (2) 3
Profit before taxation 602 452 109
Taxation (151) (51)
Profit for the year 451 678 58
Attributable to:
Owners of Omnia Holdings Limited 448 56
Non-controlling interest 3 2
451 58
Basic earnings per share (cents) 768.2 560 116.4
Fully diluted basic earnings per share 766.8 560 116.1
(cents)
Audited Audited
2011 2010
Final dividend paid per share (cents) in - 150
respect of prior year
Weighted average number of shares in 58 316 48 107
issue (`000)
Weighted average number of fully diluted 58 427 48 236
shares in issue(`000)
Number of shares in issue (`000) 66 307 46 491
CONDENSED CONSOLIDATED BALANCE SHEETS
As at 31 March 2011
Audited Audited
Rm 2011 % 2010
Assets
Non-current assets 2 561 32 1 944
Property, plant and equipment 1 938 50 1 295
Intangible assets 523 (3) 537
Available-for-sale financial assets 16 (16) 19
Investments in associates 78 (7) 84
Deferred income tax assets 6 (33) 9
Current assets 3 743 15 3 243
Inventories 1 488 13 1 315
Trade and other receivables 1 722 26 1 365
Cash and cash equivalents 533 (5) 563
Total assets 6 304 5 187
Equity
Equity attributable to owners of Omnia 3 338 69 1 973
Holdings Limited
Stated capital 1 289 318
Treasury shares (19) (8)
Other reserves 11 54
Retained earnings 2 057 1 609
Non-controlling interest in equity 1 (2)
Total equity 3 339 69 1 971
Liabilities
Non-current liabilities 411 (54) 884
Deferred income tax liabilities 130 63 80
Debt 281 804
Current liabilities 2 554 9 2 332
Trade and other payables 1 953 (10) 2 167
Debt 523 384 108
Current income tax liabilities 7 2
Bank overdrafts 71 29 55
Total liabilities 2 965 3 216
Total equity and liabilities 6 304 5 187
Net debt 342 404
Net asset value per share (Rand) 50.35 42.40
Capital expenditure
Depreciation 127 119
Amortisation 28 23
Incurred 801 385
Authorised and committed 322 9
Authorised but not contracted for 604 420
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
For the year ended 31 March 2011
Audited Audited
Rm 2011 2010
Operating profit 687 279
Depreciation and amortisation 155 142
Adjustment for non-cash items (22) 103
Cash generated from operations 820 524
(Utilised)/generated by working capital (755) 805
Interest paid (119) (217)
Interest received 39 44
Taxation paid (94) (111)
(Utilised)/generated by operating activities (109) 1 045
Dividends paid 0 (40)
Net cash (outflow)/inflow from operating (109) 1 005
activities
Cash outflow from investing activities (783) (466)
Cash inflow from financing activities 852 180
Net (decrease)/increase in cash (40) 719
Net cash/(overdraft) at beginning of year 508 (214)
Effects of exchange rate movements (6) 3
Net cash at end of year 462 508
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Owners of Non- Total
Omnia
Holdings
Limited`s
Equity
controll
ing
Stated Trea Other Retained interest
sury
Rm capital shar reserves earnings
es
At 31 March 2009 201 (11) 286 1 663 (2) 2 137
Recognised
income and
expenses
Profit for the 56 2 58
year ended 31
March 2010
Cash flow hedge (8) (8)
Currency (228) (228)
translation
difference
Ordinary 26 (66) (40)
dividends paid
and
capitalisation
shares issued
Transactions
with
shareholders
Treasury shares 3 3
sold
Share-based 49 49
payment - value
of services
provided
Share-based 91 (45) (44) (2) 0
payment -
ordinary shares
issued
At 31 March 2010 318 (8) 54 1 609 (2) 1 971
Recognised
income and
expenses
Profit for the 448 3 451
year ended 31
March 2011
Currency (67) (67)
translation
difference
Share-based 15 15
payment reserve
Cash flow hedge 9 9
Transactions
with
shareholders
Ordinary shares 971 971
issued
Treasury shares (12) (12)
purchased
Treasury shares 1 1
sold
At 31 March 2011 1 289 (19) 11 2 057 1 3 339
OTHER RESERVES 2011 2010
Reserves comprise of:
Share-based payment reserve 96 81
Foreign currency translation reserve (89) (22)
Cash flow hedge 1 (8)
Net discount arising on acquisition of shares of
subsidiaries 3 3
11 54
SEGMENTAL ANALYSIS
For the year ended 31 March 2011
Audited Audited
Rm 2011 % 2010
Revenue, net of intersegmental sales 9 368 6 8 827
Chemicals 3 596 (3) 3 714
Mining 2 092 18 1 776
Agriculture 3 680 10 3 337
Operating profit/(loss) 687 146 279
Chemicals 64 (58) 152
Mining 311 47 212
Agriculture 312 (85)
Segmental revenue for 2010 has been restated as
revenue of R374 million attributable to the Chemicals
division was incorrectly classified as Agriculture
revenue.
RECONCILIATION OF HEADLINE EARNINGS
Audited Audited
Rm 2011 2010
Profit for the year attributable to owners of
Omnia Holdings Limited 448 56
Adjusted for (profit)/loss on disposal of fixed assets (4) 1
Adjusted for profit on businesses contributed to 0 (20)
associate
Adjusted for impairment of intangible assets 3 0
Headline earnings 447 37
Headline earnings
Headline earnings are 766.5 cents per share (2010:76.9
cents per share)
Diluted headline earnings are 765.1 cents per share
(2010:76.7 cents per share)
NOTES
Accounting policies
The condensed consolidated financial statements for the year ended 31 March
2011 were prepared in accordance with International Financial Reporting
Standards (IFRS), IAS 34 - Interim Financial Reporting, the AC500 standards as
issued by the accounting practice board and in compliance with the Listing
Requirements of the JSE Limited. The condensed consolidated financial
statements do not include all of the information required by IFRS for full
annual financial statements.
During the year the company issued shares by way of a renounceable rights
offer. In accordance with IAS 33, prior period basic, headline and diluted
earnings per share have been restated to take into account the bonus element
of the rights offer.
The principal policies used in the preparation of the results for the year
ended 31 March 2011 are consistent with those applied for the year ended 31
March 2010, except for the adoption of IFRS 3 (revised) and IAS 27 (revised)
which have no impact on the results as there were no business combinations in
the current period and no transactions with non-controlling interests.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R18 million (2010: R20 million) within one year and R43 million (2010: R79
million) between two and five years and R0 million (2010: R9 million) beyond
five years, giving a total of R61 million (2010: R108 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed as at
30 September 2010. No impairment loss has occurred.
Audit opinion
The Group`s auditors, PricewaterhouseCoopers Inc., have issued their opinion
on the Group`s financial statements for the year ended 31 March 2011. The
audit was conducted in accordance with International Standards on Auditing.
They have issued an unmodified audit opinion. These summarised financial
statements have been derived from the Group financial statements and are
consistent in all material respects with the Group financial statements. A
copy of the audit report is available for inspection at the Company`s
registered office. Any reference to future financial performance included in
this announcement, has not been reviewed or reported on by the auditors.
INTRODUCTION
Omnia is a diversified, specialist chemical services provider with business
interests balanced across chemical, mining and agricultural markets. The
Group`s model, which leverages its intellectual capital and technology,
differentiates it from commodity chemical companies.
The Group`s three business divisions (chemicals, mining and agriculture)
continue to provide value add customised solutions built on a continually
expanding knowledge base. Omnia`s business model places it at the forefront of
the chemical services industry and involves uniquely matching customer needs
to product innovation and application expertise to add extraordinary value to
its customer`s businesses.
It is with great sadness that we report on a tragic incident in our Mining
division when an explosion at its cartridge manufacturing plant resulted in
the deaths of three employees. This incident is the first of its kind in 25
years of operating our explosives business. Before this, the cartridge
manufacturing plant had operated successfully without incident since it was
commissioned 15 years ago. May Jacob Thekiso, Dikgang Khasu and Zane (Ariel)
Phajane rest in peace. We will not forget you.
MARKET CONDITIONS
The macro environment for this year was more stable and was exceptionally good
for our Mining division, extremely difficult for our Chemical division and
somewhat positive for our Agriculture division. At the beginning of the year,
a patchy recovery in global economic activity started as economies began to
respond to the substantial stimulus packages that had been implemented by
various governments, which in turn resulted in mining and agricultural
commodity prices rising and demand for mining commodities in particular
increased. The rand continued to strengthen against the US dollar, negatively
impacting all of our divisions selling prices and margins - this being felt
most acutely in our Chemical division which also suffered the effect of
depressed demand from our customers in the South African manufacturing sector
as they struggled with competition against cheap imports made possible by rand
strength. Inflation remained well under control within the South African
Reserve Bank target inflation band and interest rates remained at historical
lows.
FINANCIAL REVIEW
Group revenue rose 6% to R9 368 million (2010: R8 827 million) on the back of
volume increases in the Mining and Agriculture division and overall commodity
price increases, partially offset by rand strength. No carbon credit revenue
(CER) was generated this year (2010: R50 million) due to a delay in the
certification of the CER`s that were generated.
Gross profit increased 41% to R1 965 million (2010: R1 389 million) and rose
to 21% of revenue (2010: 15.7%) due to improved gross margins in the Mining
division and the avoidance of a repeat of the previous year`s R350 million
abnormal downward valuation of inventory in the Agriculture division.
Adjusting the previous year`s gross profit for the R350 million abnormal
downward valuation of inventory, this year`s gross profit margin of 21 % is a
credible improvement of 1.3% on last year`s pre downward valuation of
inventory adjusted gross profit margin of 19.7%.
Other operating income of R85 million (2010: R77 million) included an
insurance claim receipt of R44 million (2010: R32 million), while other
operating income of the previous year included a profit of R20 million on the
transfer of businesses to our Nalco Associate.
Administration overheads increased by 3% to R532 million. Included in
administration expenses is share based payment charges of R15 million (2010:
R42 million) and a higher level of provision for incentive bonuses. Taking
these into account, administration costs were well controlled. Distribution
overheads increased by 15% to R790 million primarily due to higher volumes in
the Mining and Agriculture divisions. Other expenses comprise mainly foreign
exchange profits and losses on trading - a loss of R30 million (2010: R44
million profit) was incurred due to the continued strength of the rand.
Operating profit increased 146% to R687 million (2010: R279 million). After
adjusting last year`s operating profit for the R350 million abnormal downward
valuation of inventory, operating profit of R687 million increased 9.2% on a
6.1% rise in revenue. This was due to a substantial improvement in the
operating margin in our Mining division as operating leverage kicked in, a
small improvement in operating margin in our Agriculture division on the back
of higher volumes and higher commodity prices and partially offset by a
reduced operating margin in our Chemical division due to a decline in gross
profit whilst overheads were similar to the previous year. There was no
contribution this year to operating profit from sale of CER`s, whereas last
year, sale of CER`s contributed a net R43 million.
Finance costs of R122 million comprise of interest paid and foreign exchange
gains or losses on conversion of foreign bank balances. Finance costs reduced
from R217 million to R122 million due to a reduction in debt following receipt
of the net proceeds of R971 million from the rights offer that was received on
14 September 2010, lower overall cost of debt due to lower interest rates, a
reduction of R29 million in the loss on conversion of foreign bank balances,
partially offset by higher average working capital requirements as a result of
higher commodity prices, and the very late agriculture summer sales season due
to the unusually late start to summer season rains in South Africa. Taxation
increased to R151 million (2010: R51 million) incurring an effective tax rate
of 25% (2010: 47%).
Total assets increased by 21.5% from R5 187 million to R6 304 million due to
increased capex spend on the new Nitric Acid Complex and higher levels of
working capital. Property plant and equipment increased by R643 million to R1
938 million mainly as a result of R546 million spent on the new Nitric Acid
Complex.
Inventory increased 13% from R1 315 million to R1 488 million due to higher
unit costs as a result of higher commodity prices in our Agriculture division,
and a degree of restocking in the Agriculture division off the unusually low
physical stockholding at the end of the previous year. Trade and other
receivables increased 26% from R1 365 million to R1 722 million due to the
very late agriculture summer sales season that resulted in a higher than
normal level of Agriculture division trade debtors, late receipt of US dollar
12 million receivable, and an earlier than normal advance payment of US dollar
22.5 million made to secure supply of product for a fertilizer tender.
Equity increased by 69% from R1 973 million to R3 338 million as a result of
the net proceeds of R971 million from the rights offer received on 14
September 2010, retained current year earnings of R448 million, which was
partially offset by a R67 million reduction in foreign currency translation
reserve due to the impact of the strong rand on our US dollar denominated
equity.
Cash flow utilised by operations was R109 million compared to cash generated
from operations of R1 045 million in the previous year primarily due to the
changes in cash flow attributable to working capital, partially offset by
better cash generated through operating profits. In the previous year working
capital reduced by R805 million, mainly in inventory reduction, due to lower
unit costs caused by the lower commodity prices and the reduction in the
physical inventory of the Agriculture division from the high levels carried
over from the 2009 financial year to lower than normal levels at the end of
the 2010 financial year. This year working capital increased by R755 million
due to higher inventory and receivables and lower payables. Cash outflow from
investing activities increased by R317 million to R783 million (2010: R466
million) due primarily to capex on the Nitric Acid Complex. After taking into
account the cash inflow from finance activities of R852 million (2010: R180
million) to which the rights offer contributed R971 million, there was a net
cash outflow of R40 million (2010: R719 million inflow).
The year ended with a very strong balance sheet with net debt of R342 million
(2010: R404 million) and a debt:equity ratio of 10% (2010: 20%). In looking at
the net debt of R342 million, it should be borne in mind that capex expended
to date on the Nitric Acid Complex is R621 million out of the R971 million
equity raised for that purpose. The balance of R350 million has been
temporarily used to reduce short term debt, and will be utilised to fund
capital expenditure on the nitric acid complex in 2012.
DIVISIONAL REVIEW
Chemicals
Protea Chemicals, operating throughout southern and eastern Africa, is a well-
established manufacturer and distributor of speciality, functional and effect
chemicals and polymers, with a major presence in every sector of the broader
chemical distribution market. It was recently rated as the 13th largest
chemical distribution company in a global survey by the respected industry
journal, ICIS Chemical Business.
Revenue reduced by 3% to R3 596 million (2010: R3 714 million) as volumes were
stagnant and there was a small decline in selling prices as international
commodity prices increases were insufficient to offset rand strength. The
gross profit declined year on year, and with overheads being contained at the
previous year`s level due to cost reduction measures undertaken, operating
profit declined 58% to R64 million (2010: R152 million). The operating margin
decreased to an unacceptable low 1.8% (2010: 4.1%). Net working capital
decreased marginally to R252 million (2010: R264 million).
Mining
The Mining division offers a broad range of services to the mining industry
through BME and Protea Mining Chemicals. BME, operating throughout Africa, is
a market leader in blended bulk explosives formulations for the open cast
mining industry, produces electronic delay detonators and shocktube initiation
systems and manufactures packaged explosives for underground mining and
specialised surface blasting operations. The company adds value to its
products through its world-class blasting consultancy service using its unique
in-house developed BlastMap software solution, which offers customers support
and advice from industry experts and highly qualified mining engineers. Protea
Mining Chemicals, operating in southern Africa, offers value added services to
complement its wide range of chemical products. These include offerings such
as Protea ProcessTrade Mark, a comprehensive service that covers the handling,
logistics and on site formulation of chemicals for its customers.
Revenue increased 18% to R2 092 million (2010: R1 776 million) on the back of
strong volume growth and a rise in commodity prices. The South African
operation in particular demonstrated strong growth. Costs within the division
were tightly managed such that operational leverage kicked in, resulting in a
47% increase in operating profit to R311 million (2010: R212 million) and
operating margin increasing from 11.9% to 14.9%.
During the last few years, BME has addressed the deficiencies in its overall
product offering - traditionally the business has been weak in terms of the
correct mix of products supplied to the underground mining sector. However,
following the start up last year of the shocktube (an advanced initiation
product) plant, the market has welcomed the product and sales are steadily
increasing. BME has also invested in the research and development of a new
generation of electronic detonators. The product is user-friendly, accurate
and greatly assists in the reduction of mining costs. Product sales are
expected to increase in the next year.
Protea Mining Chemicals achieved higher volume but lower selling prices
resulted in a marginal increase in profit. Anticipated growth continues to be
affected by delays in a number of customers` expansion projects, especially
those in the uranium industry.
Agriculture
Omnia`s Agriculture division, the market leader in southern Africa, comprises
Omnia Fertilizer and Omnia Specialities. The division produces granular,
liquid and speciality fertilizers for a broad customer base of farmers, co-
operatives and wholesalers throughout southern and east Africa, Australasia
and Brazil. Omnia Specialities exports its product to over 30 countries in
Europe, South America and Asia.
Revenue increased 10% to R3 680 million (2010: R3 337 million) on the back of
higher commodity prices and higher volumes. Operating profit was R312 million
(2010: R85 million loss). Adjusting last year`s operating loss for the
abnormal R350 million downward valuation of inventory, this year`s operating
profit of R312 million still reflects an 18% increase on last year`s adjusted
operating profit of R265 million. This was achieved through the combination of
higher commodity prices, higher volumes and strong overhead control offset by
some margin compression. Margin compression was largely caused by additional
input cost attributable to the purchase of more expensive nitrogen materials,
as internal nitric acid production capacity was increasingly utilized to
supply BME`s volume growth.
Major players within the African fertilizer industry have restructured their
operations, resulting in the sector undergoing fundamental changes in this
year. Fortunately, these changes were anticipated, and the division was thus
well placed to capitalize on the restructuring process, which contributed to
the improved volumes and operating profit.
Construction of the new Nitric Acid Complex is proceeding according to plan.
The Phosphate plant at Phokeng has been placed on care and maintenance.
The charges of collusion brought against Omnia Fertilizer by the Competition
Commission, that have been reported on in prior annual reports, have been
dismissed in a judgment handed down by the Competition Appeal Court. The
Competition Commission has lodged an application with the Competition Appeal
Court for leave to appeal against the judgment.
PROSPECTS
The macro environment for next year appears more promising but it will be
strongly influenced by the direction of the rand. Interest rates are expected
to remain at current levels for most of next year whilst inflation is expected
to start rising which will affect our overheads. The increase in the fuel
price is of particular concern given our substantial expenditure on transport.
The Chemicals division is expecting to improve their performance in the year
ahead by a renewed focus on growing revenue through volume growth and the
expected increase in manufacturing activity in South Africa. The division will
also benefit from the overhead restructuring undertaken in the 2011 year,
which will continue in the 2012 year. The Mining division is expected to
continue to benefit from the buoyant global demand for mining commodities with
further volume growth anticipated across the divisions entire product range.
The Agriculture division anticipates favourable conditions as agriculture
product price rises will probably lead to increased plantings which combined
with rising commodity prices and the changed dynamics in the fertilizer supply
landscape in southern Africa bode well for next year.
The information contained in this paragraph has not been reviewed or reported
on by the Group`s auditors.
DIRECTORATE
In the year under review, Mr JJ Dique and Mr S Mncwango were appointed as
independent non-executive directors with effect from 11 August 2010. Mr D
Eggers retired as an executive director with effect from 31 August 2010. Mr HP
Marais was appointed as a non-executive director in his capacity as an
alternate director to Dr WT Marais with effect from 3 December 2010. Ms DC
Radley resigned and Mr TR Scott retired as independent non-executive directors
with effect from 3 December 2010. Mr JJ Dique resigned as an independent non-
executive director with effect from 9 February 2011.Ms D Naidoo was appointed
as an independent non-executive director with effect from 31 March 2011.
DIVIDENDS
Shareholders were advised in the 2010 annual report that a dividend was not
likely to be declared this year in the light of the equity that was raised to
fund the Nitric Acid Complex. The Board is of the opinion that it would be
prudent to preserve capital, and utilise this to fund the large capital
expansions currently in progress, and have therefore elected not to pay a
dividend this year. The Board will positively review the resumption of a
dividend for the 2012 financial year.
NJ CROSSE RB HUMPHRIS NKH FITZ-GIBBON
Chairman Group managing director Group finance director
Bryanston
22 June 2011
Directors:
NJ Crosse (Non-executive chairman), FD Butler, NKH Fitz-Gibbon* (Group finance
director), R Havenstein (Lead independent director), HH Hickey, RB Humphris*
(Group managing director), Prof SS Loubser, Dr WT Marais,
SW Mncwango, D Naidoo
*Executive Directors
Company secretary:
CD Appollis
Registered office
1st Floor, Omnia House,
13 Sloane Street, Epsom Downs,
Bryanston, Sandton
PO Box 69888,
Bryanston 2021
Telephone (011) 709 8888
Auditor:
PricewaterhouseCoopers Inc
2 Eglin Road, Sunninghill
Private Bag X36, Sunninghill, 2157
Transfer secretaries:
Link Market Services South Africa (Pty) Ltd
13th Floor, Rennies House, 19 Ameshoff Street, Braamfontien
PO Box 4844, Johannesburg 2000
Sponsor:
One Capital
17 Fricker Road, Illovo, 2196
PO Box 784573, Sandton, 2146
www.omnia.co.za
Bryanston
28 June 2011
Date: 28/06/2011 07:05:01 Supplied by www.sharenet.co.za
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