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RLF - Rolfes Holdings Limited - Unaudited consolidated condensed interim results

Release Date: 22/02/2012 07:13
Code(s): RLF
Wrap Text

RLF - Rolfes Holdings Limited - Unaudited consolidated condensed interim results for the six months ended 31 December 2011 ROLFES HOLDINGS LIMITED (formerly Rolfes Technology Holdings Limited) (Registration number 2000/002715/06) Share Code: RLF ISIN:ZAE000159836 ("Rolfes" or "the Group" or "the Company") www.rolfesza.com UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 Highlights - Turnover increased by 30,2% to R302,8 million - Operating profit increased by 29,0% to R31,0 million - Headline earnings increased by 16,1% to 17,3 cents per share - Net asset value increased by 24,1% to 180,2 cents per share CONDENSED CONSOLIDATED GROUP STATEMENTS OF COMPREHENSIVE INCOME for the period ended 31 December 2011 UNAUDITED UNAUDITED AUDITED SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE 2011 2010 2011 R`000 R`000 R`000 Revenue 302 837 232 680 460 699 Cost of sales (249 966) (190 180) (373 675) Gross profit 52 871 42 500 87 024 Gross profit margin 17,5% 18,3% 18,9% Other operating income 7 864 1 286 4 075 Operating expenses (29 719) (19 747) (41 531) Operating profit before interest 31 016 24 039 49 568 Operating profit percentage 10,2% 10,3% 10,8% Interest paid and finance charges (3 192) (2 173) (3 780) Income from investments - - 40 Net profit before taxation 27 824 21 866 45 828 Tax expenses (8 124) (6 584) (13 497) Profit and total comprehensive income for the period 19 700 15 282 32 331 Attributable to: Owners of parent 17 632 15 282 32 331 Non-controlling interest 2 068 - - Attributable to: Continuing operations 19 700 15 282 32 331 Reconciliation of headline earnings Attributable profit 17 632 15 282 32 331 Adjustment for the after-tax effect of: Loss/(Gain) from sale of fixed asset 191 87 (171) Headline earnings 17 823 15 369 32 160 Weighted average number of shares in issue (`000) 102 968 102 968 102 968 Earnings per share (cents) - Basic 17,1 14,8 31,4 - Headline 17,3 14,9 31,2 - Diluted 17,1 14,8 31,4 - Diluted headline 17,3 14,9 31,2 CONDENSED CONSOLIDATED GROUP STATEMENTS OF FINANCIAL POSITION as at 31 December 2011 UNAUDITED UNAUDITED AUDITED 31 DEC 31 DEC 30 JUNE 2011 2010 2011
R`000 R`000 R`000 ASSETS Non-current assets 140 433 98 426 97 526 Plant and equipment 45 540 38 306 37 352 Property 28 642 27 762 27 816 Intangible assets 66 251 32 358 32 358 Current assets 330 600 157 554 179 582 Inventories 161 554 80 427 94 953 Trade and other receivables 166 762 74 036 74 454 Financial asset - 573 - Cash and cash equivalents 596 - 4 833 Tax asset - - 636 Value Added Tax asset 1 688 2 518 4 706 Total assets 471 033 255 980 277 108 EQUITY AND LIABILITIES Capital and reserves 186 677 150 422 162 291 Share capital 1 036 1 036 1 036 Share premium 28 603 28 603 28 603 Treasury shares (868) (868) (868) Retained income 145 972 121 651 133 520 Non-controlling interest 11 934 - - Non-current liabilities 62 556 25 015 23 830 Interest-bearing liabilities 40 714 12 093 8 688 Acquisition vendor 5 547 - - Outside shareholders loans 1 207 - - Deferred tax liability 11 636 9 691 11 799 Provisions 3 452 3 231 3 343 Current liabilities 221 800 80 543 90 987 Trade and other payables 141 744 59 316 82 947 Cash and cash equivalents - 11 983 - Current portion of interest-bearing liabilities 12 808 7 373 7 213 Financial liability 43 - 184 Value Added Tax liability - - - Tax liability 2 696 1 226 - Provisions 709 645 643 Short term loans 63 800 - - Total equity and liabilities 471 033 255 980 277 108 Number of shares in issue (`000) 103 609 103 609 103 609 Net Asset Value per share (cents) 180,2 145,2 156,6 Net tangible Asset Value per share (cents) 114,4 114,0 125,4 CONDENSED CONSOLIDATED GROUP STATEMENTS OF CHANGES IN EQUITY for the period ended 31 December Ordinary Share Retained Treasury Outside Total shares premium income shares share equity holders R`000 R`000 R`000 R`000 R`000 R`000
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 Net profit for the period - - 17 049 - - 17 049 Dividends paid - - (5 180) - - (5 180) Balance at 30 June 2011 1 036 28 603 133 520 (868) - 162 291 Outside shareholders Obtained from purchase Of subsidiaries - - - - 9 866 9 866 Net profit for the period - - 17 632 - 2 068 19 700 Dividends paid - - (5 180) - - (5 180) Balance at 31 December 2011 1 036 28 603 145 972 (868) 11 934 186 677 CONDENSED CONSOLIDATED GROUP CASH FLOW STATEMENTS for the period ended 31 December 2011 UNAUDITED UNAUDITED AUDITED SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE 2011 2010 2011 R`000 R`000 R`000 Cash and cash equivalents at the beginning of the period 4 833 6 127 6 127 Cash flow (utilised in) / generated from operating activities (1 075) 4 806 40 311 Net interest paid (3 191) (2 173) (3 740) Taxation paid (3 250) (3 971) (10 609) Dividends paid (5 180) (5 180) (10 360) Cash flow utilised in investing activities (62 867) (3 416) (3 437) Cash flow generated from / (utilised in)financing activities 71 326 (8 176) (13 459) Cash and cash equivalents - end of the period 596 (11 983) 4 833 SEGMENTAL ANALYSIS Gross Operating Net Liabi- Revenue profit Profit Profit Assets lities R`000 R`000 R`000 R`000 R`000 R`000 2011 - for the six months ended 31 December Industrial Chemicals 88 726 12 394 8 541 5 575 81 226 73 650 Silica 22 581 5 227 3 323 2 212 53 240 26 408 Pigments 155 045 22 039 10 655 7 013 204 192 99 233 Agri - Chemicals 35 008 11 734 6 852 4 557 116 000 84 875 Other 1 477 1 477 1 645 343 34 554 53 048 Elimination of intergroup items - - - - (18 775)(53 454) Total 302 837 52 871 31 016 19 700 470 437 283 760 Gross Operating Net Liabi- Revenue profit Profit Profit Assets lities R`000 R`000 R`000 R`000 R`000 R`000 2010 - for the six months ended 31 December Industrial chemicals 66 304 9 376 5 747 3 597 58 479 57 592 Silica 20 799 5 532 3 270 2 245 53 273 30 756 Pigments 144 404 26 419 16 141 11 010 132 136 60 241 Other 1 173 1 173 (1 119) (1 570) 72 647 20 348 Elimination of intergroup items - - - - (60 555)(63 379) Total 232 680 42 500 24 039 15 282 255 980 105 558 Gross Operating Net Liabi- Revenue profit Profit Profit Assets lities R`000 R`000 R`000 R`000 R`000 R`000 2011 - for the twelve months ended 30 June Industrial chemicals 131 431 21 175 12 197 7 761 67 170 49 440 Silica 41 387 11 577 7 901 5 358 48 713 23 222 Pigments 285 675 52 214 31 686 22 358 130 644 49 502 Other 2 206 2 058 (2 216) (3 146) 30 776 (7 147) Elimination of intergroup items and other - - - - (195) (200) Total 460 699 87 024 49 568 32 331 277 108 114 817 The basis of preparation of the segmental analysis includes certain intercompany transactions which are eliminated in the respective segmental results in the current and previous year`s reporting. This is consistent with the presentation in the latest annual financial statements. Acquisition finance interest has been reallocated under line item "other". The basis of measurement of segment profit and loss is discussed in more detail in the following paragraph. COMMENTARY Group product offering and divisional structure The Rolfes Group manufactures and distributes a wide range of market-leading, high-quality chemical products to diverse industries including the coatings, plastics, vinyl, leather, ink, metallurgical, water filtration, cleaning, formulators, automotive, general manufacturers, agricultural and construction industries. The strategic acquisition of a controlling stake, effective 1 November 2011, in Agchem Holdings (Pty) Limited ("Agchem"), a distributor and manufacturer of agri-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, 18 August 2011 and 31 October 2011, respectively, detailing the terms and conditions pertaining to the acquisition of Agchem. The strategic acquisition of a 70% controlling stake, effective 1 November 2011, in Amazon Colours (Pty) Ltd ("Amazon"), a manufacturer and distributor of in-plant and point-of-sale dispersions now enables the Group to offer a complete basket of products in the colourants industry. Shareholders are referred to the SENS announcement released on 2 November 2011, detailing the terms and conditions pertaining to the acquisition of Amazon. In line with strategic objectives, the Group companies are allocated to specific divisions being Pigments, Industrial Chemicals, Silica and Agri-Chemicals. The Pigments division includes the results of Rolfes Colour Pigments International and Amazon who are responsible for the manufacture and distribution of alkyd resins, various organic and inorganic pigments, additives, and in-plant and point-of-sale dispersions. The Industrial Chemicals division comprise the results of Rolfes Chemicals and Acacia Specialty Chemicals. Rolfes Chemicals distributes solvents, lacquer thinners, surfactants, cleaning solvents, creosotes, waxes, and other industrial chemicals while Acacia Specialty Chemicals procures and distributes specialty chemicals for the agricultural, food and certain other sectors. The Agri-Chemical division contains the newly acquired Agchem group of companies, including Introlab. Agchem manufactures and distributes products including herbicides, insecticides, fungicides, adjuvants, foliar feeds and enriched compost pellets, promoting general plant, root, foliage and soil health. Introlab procures certain raw materials and soluble fertilisers for Agchem and also sells these products to other local and export customers. The Group exports products into Europe, Asia, South America, and the rest of Africa which now includes Zambia, Kenya, Uganda, Mauritius, Madagascar, Malawi, Tanzania, Zimbabwe, Botswana, Swaziland and Namibia. Group results overview The Group performed satisfactorily for the six months to December 2011 considering the European financial crises resulting in unstable world-wide economic conditions, and adverse local conditions. Results were bolstered by the inclusion of the Agchem and Amazon results for two months from 1 November 2011. Revenue increased by 30,2% notwithstanding a one month long labour strike during July 2011 affecting performance significantly during the first few months of the period under review. Reduced European product demand prompted a decline in exports while certain high volume product demand reduced locally due to weak trading conditions and unfavourable import pricing, resulting in increased competition. Overall market share was sustained for the period under review, and divisions yielded mixed results, very much dependent on the sector in which they operate. Exports into the rest of Africa continued to grow, albeit from a very low base. Total exports now comprise R34,7 million or 11.5% of revenue for the period under review. Group financial performance Group revenue for the six months increased by 30,2% to R302,8 million (December 2010: R232, 7 million). The Agchem acquisition, included from 1 November 2011, contributed R35,0 million to Group turnover and R4,6 million to profit after tax. Amazon, included from the same date contributed R4,2 million to group turnover and R0,2 million to profit after tax. Gross profit increased to R52,9 million (December 2010: R 42,5 million) with gross profit margins decreasing to 17,5% (December 2010: 18,3%). Operating profit increased by 29,0% to R31,0 million (December 2010: R24,0 million), with headline earnings increasing by 16,0% to R17,8 million (December 2010: R15,4 million). Fully diluted headline earnings per share was 17,3 cents (December 2010: 14,9 cents), increasing by 16,1% over the comparative period. The total net asset value increased to R186,7 million (December 2010: R150,4 million). The net asset value per share improved to 180,2 cents (December 2010: 145,2 cents) while net tangible asset value per share remained stable at 114,4 cents ( December 2010: 114,0 cents), based on 103 609 469 shares in issue. Interest cover reduced to 9,7 times (December 2010: 11,0 times) with the total debt (interest-bearing) equity ratio at 0,6 for December 2011 (2010: 0,2). The significant increase in the debt equity ratio is primarily due to the consideration for the acquisition of Agchem and Amazon, totalling R 54 million, financed through a combination of short and long term debt. Management is in the process of restructuring certain of the short term debt to long term debt. The reduction in interest cover is primarily due to the increase in interest paid emanating from the debt incurred on the Agchem and Amazon acquisitions. The Group incurred capital expenditure of R3,1 million (December 2010: R2,6 million) mainly to upgrade current logistics and production capabilities. Group cash flow The Group paid an interim cash dividend of R5,2 million during the financial year (excluding STC) (December 2010: R5,2 million) to shareholders, from current cash resources. The increase in net working capital investment since 30 June 2011 of R35,1 million, represents an increase in inventory and accounts receivable of R19,8 million and R8,1 million respectively, and a decrease in accounts payable and value added tax of R7,2 million. Working capital days were calculated on a proportionate basis, due to turnover and cost of sales, debtors, stock and creditors of the two acquisitions being included since 1 November 2011 only. Debtors` days increased to 62 days (June 2011: 52 days) due to slower debt collection over December, which has since improved within acceptable norms.. Stock days increased to 99 days (June 2011: 93 days) mainly as a result of Agchem and Rolfes Colour Pigments having longer stock cycles at this time of the year, and an investment in imports directly related to the closure of Asian harbours for the Chinese New Year in January. Creditor days decreased to 66 days (June 2010: 71 days). Initiatives are currently underway to align new acquisitions` working capital practices to Group policies. Transaction costs relating to the two acquisitions amounting to R2,0 million were paid through cash resources. Due to the nature of capital expenditure incurred during the year, R2,5 million of the R3,1 million spent was financed through cash resources. Divisional review Pigments Turnover increased by 7,4% to R155,1 million (December 2010: R144,4 million) mainly due to increased sales in certain resin product lines of 45,8% albeit at a breakeven margin due to severely adverse competitive market pricing tactics. Pigments and dispersion turnover performance, displaying marginal growth for the period under review, was hampered by primarily weaker trading conditions in the coatings industry, the labour dispute in July 2011, lower product demand for titanium and a reduction of iron oxide volumes due the weak construction industry and increased competition. Furthermore, the European financial crises directly impacted the export of organic pigment into Europe resulting in significantly lower than expected export volumes. The inclusion of Amazon results from 1 November 2011 contributed marginally to turnover growth. The division`s gross profit margin decreased to 14,2% (December 2010: 18,3%) due to competitors pricing strategies in the resin market, placing margins under severe pressure, as well as slightly higher raw material input costs in the pigments business and depressed margins in the iron oxide business. Net operating expenses increased by 10,8 % due to extending the sales force and the addition of Amazon Colours operating costs from 1 November 2011 to the division. Strategies are underway to synergise and optimise cost structures between the two companies. Capital expenditure amounted to R0,8 million (December 2010: R0,3 million) incurred to expand and improve production and logistics capabilities. The division is constantly exploring opportunities to optimise and increase its product basket, expecting further increases in local market and export activities, especially into Africa and South America. Industrial chemicals The wider product offering and expanded national presence resulted in the significant increase in turnover of 33,8% to R88,7 million (December 2010: R66,3 million). Gross profit margins was maintained at 14,0% (December 2010: 14,1%). The inclusion of Acacia Specialty Chemicals for the period from 1 November 2011 contributed marginally to the divisions` results. The divisions` achievement was notwithstanding the month long labour strike in July 2011 and untimely refinery shut downs for routine maintenance and safety reasons resulting in key product shortages for a prolonged period, hampering delivery to market. Increased market share, assisted by strategic pricing in both Kwa Zulu Natal and the Western Cape compensated for key product shortages. Rolfes Chemicals remains a key player in the Gauteng solvents market, supplying from small to large customers. Net operating expenses increased by 6,1% mainly due to expansion costs into the Western Cape and Kwa Zulu Natal with a further investment in sales representatives, in line with new business development initiatives. Net operating costs were reduced by R 0.9 million due to the successful arbitration outcome of a long standing legal case. Capital expenditure amounted to R0,7 million (December 2010: R1,1 million) spent on safety requirements, upgrading of logistics and manufacturing facilities. With its on-going expanding product basket, increasing exports into Africa and national footprint being extended, the division looks forward to stimulating further volume growth in all areas by further extending its product basket to include a wider range of specialty and commodity chemicals. Agri-chemicals The newly acquired Agchem group companies have contributed R35,0 million to the Group turnover and R11,7 million to gross profit (gross profit margin 33.5%) and R6,8 million to operating profit. The business was acquired on 1 November 2011 during its high season. Late rainfalls have resulted in a better than expected performance since acquisition. New product development initiatives and efforts to increase export opportunities to European and African countries are already underway to compensate and assist with counteracting lessor performance during low season. Capital expenditure to improve and expand production facilities to a world class standard, meeting future local and export product demands will be undertaken during the next six months. Silica Turnover increased by 8,6% to R22,6 million (December 2010: R20,8 million). Volume demands for silica fines increased by 2,0% while the demand for aggregates reduced by 10,7%. Market share was maintained with the lower demand by larger aggregate customers continuing to influence the results. Gross profit margins at 23,2% (December 2010: 26,6%) declined as a result of changes in production and sales mix adjusted to match market demands. Manufacturing and transport costs were contained at 2010 levels with operating expenses decreasing by 15,8% due to a reduction in consulting fees related to the mining licence application finalised during the previous financial year. Capital expenditure incurred to build sleep over facilities and increase safety standards, amounted to R0,5 million (December 2010: R1,2 million). Government infrastructure spending remained on hold during the period under review, influencing aggregate demand. Opportunities for increased supply into the metallurgical and fertiliser industries continue to present themselves, locally and in the rest of Africa, promising improved prospects for business growth. Market conditions Conditions for the Group improved slightly during last few months of the period under review partly due to the African, Cape Town and Durban markets responding very well to the Rolfes branches and products. However, local trading conditions remain strained, especially in the coatings industry, but with some optimism in other sectors. Efforts to grow the African market have paid off with the fully operational Rolfes Africa`s Zambian branch with product available at an outsourced distribution facility in Lusaka. The Kenya branch is in the setting up phase with Ghana to follow in March. The physical presence in Africa has already, stimulated much interest in the Group`s product offering. Furthermore the Group has also entered into various agency and distribution type agreements to sell more products into more African countries. The European economic crises peaked during the last quarter of the period under review and the outlook remains difficult influencing European exports negatively. 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. 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. Trade and other receivables Certain trade and other receivables are ceded to the Nedbank Limited under a debtor financing agreement with recourse. Short term loans The loan represents the Nedbank Limited loan and is secured by debtors. Corporate governance and sustainability The Group recognises the recommendations of King III and remains committed to sound corporate governance and sustainability practices. Dividends and share liquidity The Group declared an interim dividend to shareholders of 5 cents per share payable on 19 March 2012. The salient dates of the dividend payment are as follows: 2012 Last date to trade "cum" the dividend Friday, 9 March Shares to commence trading "ex" the dividend Monday, 12 March Record date Friday, 16 March Payment date Monday, 19 March Share certificates may not be dematerialised or rematerialised between Monday, 12 March 2012 and Friday, 16 March 2012, both days inclusive. Investor relationship strategies continued to focus on improving share liquidity. Regular investor and stockbroker visits and creation of communication platforms will keep the investment community informed on corporate activity and developments within the Group. Business combinations and corporate actions Acquisitions during the period Purchase of interest in Agchem On 1 November 2011 the Group acquired 70% of the voting equity instruments of Agchem, a company whose principal activities compromise the manufacturing and distribution of products including herbicides, insecticides, fungicides, adjuvants, foliar feeds and enriched compost pellets. Rolfes acquired 70% of Agchem`s share capital via a cash transaction. In accordance with IFRS 3 disclosure requirements, Agchem`s contribution to group revenue and profit before tax from 1 July 2011 would have been R 135, 6 million and R 13, 6 million respectively. Detail of the provisional fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill at the acquisition date are as follows: Book value Fair value Provisional Adjustment fair value
R`000 R`000 R`000 Property, plant and Equipment 7 823 - 7 823 Trade and other Receivables 74 509 - 74 509 Inventory 42 775 - 42 775 Cash and cash equivalents (280) - (280) Long term loans (12 499) - (12 499) Trade and other payables (62 992) - (62 992) Short term loans (22 624) - (22 624) Deferred taxation 2 170 - 2 170 28 882 28 882
Non-controlling interest (8 665) Consideration settled in cash (47 392) Acquisition Vendor (5 511) Goodwill (32 686) The identifiable net assets of Agchem acquired on 1 November 2011 have been determined on a provisional basis due to an independent valuation being carried out on the fair value of property, plant and equipment, intangible assets not previously recognised and inventory. Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree. The acquiree`s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Goodwill Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired. Basis of preparation The Board acknowledges its responsibility for the preparation of the unaudited consolidated interim condensed financial results. The unaudited consolidated interim condensed financial results for the six months ended 31 December 2011 have been prepared in accordance with and contains the information required by International Accounting Standard 34 (IAS 34) as well as AC 500 standards. Accounting policies The unaudited consolidated interim condensed financial results do not include all the information required by IFRS for full financial statements. The accounting policies adopted in the preparation of the unaudited consolidated interim condensed financial results are in terms of IFRS and consistent with those applied in the preparation of the annual financial statements for the year ended 30 June 2011. 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 unaudited consolidated interim condensed financial results as a result of the adoption of the above standards. For and on behalf of the Board BT Ngcuka E van der Merwe Chairman Chief Executive Officer 22 February 2012 Midrand Company secretary: J Schlebusch Registered office: 12 Jet Park Road, Jet Park, 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*#, NN Mthombeni*# *Non-executive #Independent Sponsor: Grindrod Bank Limited Registered auditors: BDO South Africa Incorporated Preparer: L Lynch www.rolfesza.com Date: 22/02/2012 07:13:21 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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