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RLF - Rolfes - Abridged Audited Consolidated Results for the year ended 30 June

Release Date: 14/09/2011 07:07
Code(s): RLF
Wrap Text

RLF - Rolfes - Abridged Audited Consolidated Results for the year ended 30 June 2011, Dividend Announcement, Proposed Change of Name and Notice of Annual General Meeting ROLFES TECHNOLOGY HOLDINGS LIMITED (Registration number 2000/002715/06) Share Code: RLF ISIN: ZAE000096202 ("Rolfes" or "the Group") www.rolfesza.com ABRIDGED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 JUNE 2011, DIVIDEND ANNOUNCEMENT, PROPOSED CHANGE OF NAME AND NOTICE OF ANNUAL GENERAL MEETING Highlights * Turnover increased by 24, 8% * Headline earnings per share increased by 34, 5% * Interest paid reduced by 22, 2% * Interest bearing debt reduced by R8, 2 million * Net Asset value increased to R162, 3 million from R140, 3 million in 2010 ABRIDGED STATEMENT OF FINANCIAL POSITION as at 30 June 2011 2010
R`000 R`000 ASSETS Non-current assets 97 526 98 594 Plant and equipment 37 352 38 296 Property 27 816 27 726 Intangible assets 32 358 32 357 Current Assets 179 582 144 616 Inventories 94 953 77 718 Trade and other receivables 74 454 60 771 Cash and cash equivalents 4 833 6 127 Tax asset 636 - Value Added Tax asset 4 706 - Total assets 277 108 243 210 EQUITY AND LIABILITIES Capital and reserves 162 291 140 320 Share capital 1 036 1 036 Treasury shares (868) (868) Share premium 28 603 28 603 Retained income 131 327 109 356 Revaluation reserve 2 193 2 193 Equity holders of the parent 162 291 140 320 Non-current liabilities 23 830 25 487 Interest-bearing liabilities 8 688 15 315 Deferred tax liability 11 799 7 036 Provision 3 343 3 136 Current liabilities 90 987 77 403 Trade and other payables 82 947 60 617 Current portion of interest-bearing liabilities 7 213 8 825 Current portion of vendor loan - 5 220 Financial liability 184 100 Value Added Tax liability - 932 Tax liability - 1 239 Provisions 643 470 Total equity and liabilities 277 108 243 210 ABRIDGED STATEMENT OF COMPREHENIVE INCOME for the year ended 30 June 2011 2010 R`000 R`000 Revenue 460 699 369 029 Cost of sales (373 675) (291 372) Gross profit 87 024 77 657 Other operating income 4 075 907 Operating expenses (41 531) (40 289) Operating profit before interest 49 568 38 275 Interest paid and finance charges (3 780) (4 861) Income from investments 40 11 Net profit before taxation 45 828 33 425 Tax expenses (13 497) (9 572) Profit for the year 32 331 23 853 Total comprehensive income for the year 32 331 23 853 Attributable to: Equity holders of the parent 32 331 23 853 Reconciliation of headline earnings Attributable profit 32 331 23 853 Adjusted for the after-tax effect of: (Gain)/Loss from sale of fixed asset (171) 8 Headline earnings 32 160 23 861 Earnings per share (cents) - Basic 31,4 23,2 - Headline 31,2 23,2 - Diluted 31,4 23,2 - Diluted headline 31,2 23,2 ABRIDGED STATEMENT OF CASH FLOWS for the year ended 30 June 2011 2010 R`000 R`000 Cash flow generated from operating activities 40 311 47 938 Finance income 40 11 Finance cost (3 780) (4 861) Tax paid (10 609) (4 143) Dividends paid (10 360) (5 180) Cash flow generated (utilised in) /from investing activities (3 437) 4 378 Cash flow (utilised in) / generated from financing activities (13 459) (32 368) Cash surplus for the year (1 294) 5 775 Cash and cash equivalents - beginning of the year 6 127 352 Cash and cash equivalents - end of the year 4 833 6 127 ABRIDGED GROUP STATEMENTS OF CHANGES IN EQUITY for the year ended 30 June 2011 2010 R`000 R`000 Opening balance 140 320 121 647 Total comprehensive income for the year 32 331 23 853 Dividends paid (10 360) (5 180) Balance at the end of the year 162 291 140 320 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 2011 Chemicals 131 431 21 175 7 761 67 170 49 440 Silica 41 387 11 577 5 358 48 713 23 222 Pigments 285 675 52 214 22 358 130 644 49 502 Other 2 206 2 058 (3 146) 30 776 (7 147) Elimination of intergroup items and other - - - (195) (200) Total 460 699 87 024 32 331 277 108 114 817 2010 Chemicals 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 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 Although the recessionary climate continued for the year under review resulting in market conditions remaining difficult, the Group managed to deliver on its expected targets. The Group weathered the economic recession reasonably well with Group performance enhanced by growth in both the Pigments and Chemicals businesses. Significant energy and other manufacturing cost increases were counteracted by satisfactory performances and achievements in other areas. Achievements include turnover growth of 24,8%; overhead cost being contained, a reduction in interest paid, a significant reduction in Group debt (including settling the final vendor payment for the Triangle Solvent acquisition in cash) and two dividends paid to shareholders from cash resources. Overall market share was sustained, with exports comprising 12,1% of Group turnover. Rolfes exports to mainly Sub-Saharan Africa, Europe and a few countries in Asia. Rolfes` competitive advantage is its high barriers to entry, expensive production plants and laboratories, and extensive in-house technology and intellectual property. The Group`s brand is well established in various markets, both locally and internationally, with constant effort and strategies underway to further expand both its product offering and the markets it serves. Establishing branches in Africa will significantly improve accessibility to the various product offerings in high demand throughout the African continent. Strong, experienced and qualified management along with a proven track record of profitability and asset growth will ensure business growth. The recent acquisition of Agchem Holdings Limited ("Agchem"), expands the Group`s current product offering now also into agro-chemicals. Group Financial Performance The 35,5% growth in profit for the year amounting to R32,3 million (2010: R23,9 million) suggests a healthy business in a recessionary local and international economic environment. Group revenue increased by 24,8% to R460,7 million (2010: R369,0 million), due to increased growth in both the Chemicals and Pigments operations. Gross profit margins decreased to 18,9% (2010: 21,0%) due to increased trading activities at lower margins in the Chemicals business as well as a competitive pricing environment. Operating profit increased by 29,5% to R49,6 million (2010: R38,3 million) primarily due to an increase in gross profit and other income, and overhead cost containment, also resulting in an increase in the operating profit margin to 10,8% (2010: 10,4%). As a result, headline earnings increased by 34,8% to R32,2 million (2010: R23,9 million). Fully diluted headline earnings per share is 31,2 cents (2010: 23,2 cents), an increase of 34,5% from 2010. Group liquidity ratios remained stable and solvency improved from 2010 with the total net asset value increasing to R162,3 million (2010: R140,3 million). The net asset value per share improved to 156, 6 cents (2010: 135,4 cents) while net tangible asset value per share increased to 125,4 cents (2010: 104,0 cents), based on 103 609 469 shares in issue. Interest cover increased to 13,1 times (2010: 7,9 times) with the total debt (interest-bearing) equity ratio at 0,1 for 2011 (2010: 0,2). The favourable increase in interest cover is due to the Group`s ability to significantly increase operating profits, with improved cash management and a significant reduction in long-term debt, all resulting in a lower interest bill. The Group incurred capital expenditure of R4,1 million (2010: R2,8 million) spent to improve local production and distribution facilities and compliance requirements with various legislations. 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 R10,4 million during the financial year (excluding STC) (2010: R5,2 million) to shareholders, all from current cash resources. Loan repayments (excluding the vendor loan) for the financial year amounted to R8,2 million. Cash generated from operations amounted to R40,3 million (2010: R47,9 million) for the period. The increase in net working capital investment during the financial year of R6,9 million, represents an increase in inventory and accounts receivable of R17,2 million and R6,5 million respectively, and an increase in accounts payable and value added tax of R16,8 million. Both the inventory and accounts receivable investment supported increased export trading and related manufacturing activities with debt collection days on exports ranging between 90 and 120 days. Negotiation of credit terms from certain key overseas suppliers provided the Group with favourable long-term credit terms. Debtors` days increased slightly to 52 days (2010: 53 days), while stock days reduced to 93 days (2010: 98 days) and creditor days increased to 71 days (2010: 67 days). Due to the nature of capital expenditure incurred during the year, R3,0 million of the R4,1m spent was financed through cash resources. Operational Review Rolfes Colour Pigments Turnover increased by 24,4% to R285,7 million (2010: R229,6 million) due to increased activities on certain imported and manufactured product lines. The Pigments business` performance was supported by significant growth in organic pigments sales, lead chromes into Africa, iron oxides, resins and dispersions product groups. Excellent growth in resins` turnover was mostly due to market share increase while growth in dispersions` turnover was attributable to increased volume demand and also market share gain. The pigments` turnover growth was due to significant increases in organic pigment sales and titanium dioxide. Raw material input prices levelled during the year under review enabling stable pricing to the market. The division`s gross profit margin decreased to 18,3% (2010: 21,1%) due to increased activities on buy-in products at lower margins, and very high energy cost increases and other manufacturing costs placed additional pressure on gross profit performance. The resins` margins remained low as a result of mainly market price pressures. Operating expenses were contained with a slight decrease of 0,7 % (2010: 7,3 % increase) primarily due to the large debtor write-off in the 2010 financial year in combination with well-managed overhead cost control. Capital expenditure incurred amounted to R0,8 million (2010: R0,9 million) to maintain and improve production capability to primarily support export market demand. The business unit is constantly increasing its product offering and range, expecting further increases in export activities, especially into Europe and Africa. Local and international market penetration with the new organic and other product offerings have already commenced to allow for growth in both the resin and dispersions product ranges. Rolfes Chemicals The wider product offering and expanded national presence contributed to the increase in turnover of 31,5% to R 131,4 million (2010: R99,9 million). Oil prices remained relatively stable for the year under review; hence limited selling price increases were implemented. Market share increased in both Gauteng and the Western Cape with Rolfes Chemicals remaining a principal player in the Gauteng solvents market, supplying from small to large customers. Exports into Africa increased significantly during the period under review, albeit from a low base. Pricing strategies accommodated entry into the Western Cape market while cost control assisted with margin maintenance resulting in a slight reduction in gross profit margins to 16,1% (2010: 16,3%). Operating expenses increased by 7,4% mainly due to expansion costs into the Western Cape and a further investment in human resources, in line with new business development initiatives. Capital expenditure amounted to R1,4 million (2010: R0,1 million) spent on expanding and upgrading logistics and manufacturing facilities and information technology system upgrades. Further volumes, African export growth and the current expansion of Rolfes Chemicals` national footprint into KwaZulu-Natal and the Western Cape, along with new product offerings in particular specialty chemicals, provide strong prospects for upcoming growth. As the crude oil price increases, solvent purchasing and selling prices will increase. Rolfes Silica Turnover increased by 10,6% to R41,4 million (2010: R37,4 million). Slow market conditions in the government infrastructural, construction, building and fertiliser industries continued to hamper business performance. Volume demands for silica fines increased by 5,3% while the demand for aggregates reduced by 12,1%. Market share was maintained with wider customer base growth, but lower demand by larger aggregate customers negatively influencing the results. Gross profit margins at 28,0% (2010: 29,1%) declined mainly as a result of a change in production and sales mix to match market demands, with manufacturing and transport costs contained at 2010 levels. Operating expenses increased by 25, 0% (2010: 17,9% reduction) resulting from increased salary costs and mining licence application fees. Capital expenditure incurred of R1,8 million (2010: R1,2 million) remains high due to the nature of the business, and is incurred to ensure mainly compliance to safety, security and other Department of Mineral Resources regulations, and upgrading certain equipment and housing. Promised take off in the metallurgical and fertiliser sector bodes well for the business in the year to come. Aggregate products` market conditions will remain challenging with the anticipated oversupply, due to the expected reduction of government spending on infrastructure. Market Conditions and Prospects Local market conditions improved slightly during the 2011 financial year with both the Cape Town and Durban markets responding well to the expanded Rolfes branches. The European economic climate remained difficult; however, the exports of newly developed organic pigments for the ink industry will continue to grow exports to Europe. Efforts to grow the African market have paid off while trading in Asia remained limited due to fierce local competition. Rolfes Africa, starting with a regional branch established in Zambia and two other regional branches in Kenya and Ghana in the planning will enhance growth in a market with opportunities for the Group`s products on offer. The current strategic acquisition of a controlling stake in Agchem, a distributor and manufacturer of agro-chemical products, will allow Rolfes to realise its strategy of being able to offer a complete range of chemicals to diverse markets and industries. Shareholders are referred to the SENS announcements released on 12 July 2011 and 18 August 2011, respectively, detailing the terms and conditions pertaining to the acquisition of Agchem. The Group will continue to actively pursue new acquisition opportunities in the chemicals sphere, especially in the mining and specialty chemicals sectors. None of the market conditions and prospects information in this report 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 22 March 2011 and will pay a final dividend of 5 cents per share on 24 October 2011. The salient dates of the dividend payment are as follows: 2011 Last date to trade "cum" the dividend Friday, 14 October Shares to commence trading "ex" the dividend Monday, 17 October Record date Friday, 21 October Payment date Monday, 24 October Share certificates may not be dematerialised or rematerialised between Monday, 17 October 2011 and Friday, 21 October 2011, 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 2011 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 2010. 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: * IFRS 3 - Business combinations * IAS 12 - Income taxes * IAS 24 - Related party disclosure * IAS 34 - Interim financial reporting 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 2011. 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). 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, Registered Auditors, and their unmodified report is available for inspection at the Company`s registered office. Notice of annual general meeting and mailing of Integrated Report Shareholders are advised that the Integrated Report for the financial year ended 30 June 2011 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 12 Jetpark Road, Jetpark, Boksburg at 12h00 on Friday, 28 October 2011. A further announcement will be released on SENS confirming the posting of the Integrated Report and notice of annual general meeting. 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 Holdings Limited", subject to shareholder and regulatory approvals. Further details and salient dates of the proposed name change will be contained in the Integrated Report to be mailed to shareholders in due course. On behalf of the Board BT Ngcuka E van der Merwe Chairman Chief Executive Officer 14 September 2011 Jetpark Registered office: 12 Jetpark Road, Jetpark, Boksburg, 1459 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: 14/09/2011 07:07:21 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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