Wrap Text
Reviewed Condensed Results for the Financial Year ended 30 June 2012
S A FRENCH LIMITED
Incorporated in the Republic of South Africa
(Registration number 1982/009174/06)
Share code: SFH ISIN: ZAE000108890
(“SA French” or “the Group” or “the Company”))
REVIEWED CONDENSED RESULTS FOR THE FINANCIAL YEAR ENDED 30 JUNE
2012
REVIEWED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
12 months 12 months
ended ended
30 June 30 June
2012 2011
Notes R'000 R'000
Revenue 1 52 011 97 414
Cost of sales 1 (27 167) (78 703)
Gross profit 24 844 18 711
Other income 2 4 080 14 347
Operating expenses (26 164) (27 711)
Operating profit 2 760 5 347
Investment revenue 10 7
Finance costs (5 270) (7 528)
Restructuring costs 3 (1 129) (12 375)
Loss before taxation (3 629) (14 549)
Taxation - -
Loss attributable to ordinary
shareholders (3 629) (14 549)
Other comprehensive income - -
Total comprehensive income (3 629) (14 549)
Losses attributable to ordinary
shareholders (3 629) (14 549)
Restructuring costs 1 129 12 375
Gains from loan write-offs (496) (12 021)
Impairment of investment (3 161) 227
Loss / (profit) on property, plant
and equipment - 554
Tax effect - -
(6 157) (13 414)
Weighted average number of shares 574 463 415 170 759 251
Basic and diluted loss per share
(cents) (0.63) (8.52)
Headline loss per share (cents) (1.07) (7.86)
REVIEWED CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed 12 Audited
months 12 months
ended ended
30 June 30 June
2012 2011
R'000 R'000
ASSETS
Non-current assets 90 960 97 938
Property, plant and equipment 90 960 97 938
Current assets 15 984 32 280
Loans to shareholders - 723
Inventories 8 792 9 432
Trade and other receivables 6 858 16 246
Other financial assets - 1 803
Cash and cash equivalents 364 4 076
TOTAL ASSETS 106 944 130 218
CAPITAL AND RESERVES 52 047 53 729
Share capital 70 763 68 816
Revaluation reserve 162 162
Accumulated loss (18 878) (15 249)
Non-current liabilities 19 978 34 175
Loans from shareholders - 6 920
Instalment sale agreements 19 107 27 255
Other financial liabilities 871
Current liabilities 34 919 42 314
Loans from shareholders 4 071 1 508
Other financial liabilities 7 538 496
Instalment sale agreements 8 060 10 398
Operating lease liability - 147
Trade and other payables 13 727 26 848
Bank overdraft 1 523 2 917
TOTAL EQUITIES AND LIABILITIES 106 944 130 218
Number of shares in issue 611 791 380 566 375 689
Net asset value per share (cents) 8.51 9.49
Net tangible asset value per share
(cents) 8.51 9.49
Notes
1 The prior year was affected by the Manitowoc Settlement
Agreement, a unique transaction, resulting in an increase
in revenue of R54.8 million and an increase in cost of
sales of R53.7 million.
2 Other income is affected by items that are adjustable in
headline earnings such as gains on the write off of loans
and the reversal of impairments of investments.
3 The restructuring costs relate to the specific costs
created by the implementation of the Manitowoc Settlement
and are primarily driven by the reversal of forex gains
made in the 2009 and 2010 financial years.
REVIEWED CONDENSED GROUP STATEMENT OF CASH FLOWS
Reviewed Audited
12 months 12 months
ended ended
30 June 30 June
2012 2011
R'000 R'000
Net cashflow from operating
activities (3 058) 447
Net cashflow from investing
activities (80) 4 417
Net cashflow from financing
activities 820 1 668
Total cash movement for the year (2 318) 6 532
Cash at the beginning of the year 1 159 (5 373)
Total cash at the end of the year (1 159) 1 159
REVIEWED CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Reval- Accumu-
Stated Share uation lated Total
capital premium reserve cost equity
R'000 R'000 R'000 R'000 R'000
Audited balance at 1
July 2010 1 664 47 666 162 (1 651) 47 841
Rights issue 20 000 - - - 20 000
Rights issue costs - (514) - - (514)
Absolution of
dividend - - - 951 951
Loss for the year - - - (14 549) (14 549)
Audited balance at 30
June 2011 21 664 47 152 162 (15 249) (53 729)
Shares issued 4 542 - - - 4 542
Rights issue costs - (2 595) - - (2 595)
Loss for the year - - - (3 629) (3 629)
Reviewed balance at
30 June 2012 26 206 44 557 162 (18 878) 52 047
REVIEWED CONDENSED GROUP SEGMENT REPORT
For management purposes the Group is organised into 2 major
operating divisions: Rental and Sale of Cranes. Such structural
organisation is determined by the nature of risks and returns
associated with each business segment and defines the management
structure as well as the internal reporting system. The Group
operates principally in South Africa and therefore does not
present a geographical segment.
Reviewed Audited Adjusted*
2012 2011 2011
R’000 R’000 R’000
SEGMENT REVENUE
Rental 24 653 22 681 22 681
Sale 24 324 72 098 17 301
Other 3 034 2 636 2 636
52 011 97 415 42 618
* The Adjusted Segment report is stated after the removal of the
transactions related to the Manitowoc Settlement Agreement which
was a once off deal relating to the sale of stock back to the
supplier in exchange for settlement of outstanding amounts owed
by the Group to the Supplier. The impact of the adjustment is
to remove R54 795 985 from Sales revenue.
SEGMENT ASSETS
Reviewed Audited
2012 2011
R’000 R’000
Rental 90 234 96 101
Sale 8 762 9 432
Unallocated assets:
Property, plant and equipment 726 1 837
Loans to shareholders - 723
Financial assets - 1 803
Trade and other receivables 6 858 16 246
Cash and cash equivalents 364 4 076
106 944 130 218
SEGMENT LIABILITIES
The Group’s liabilities are not allocated to any particular
segment.
COMMENTARY
Highlights
With the exception of the effects as a result of the settlement
agreement that was entered into with the Group’s major supplier
Manitowoc Crane Group (the Manitowoc Settlement Agreement) the
past twelve months have seen a 22% growth in revenue and
continued reduction in debt. The operational entity, through
management’s commitment to the strategy of developing annuity
income, has improved its efficiency and identified opportunities
and markets to focus on to maximising its future profitability.
Introduction
The board of directors of SA French (“the Directors” or “the
Board”) is pleased to present the reviewed financial results of
SA French for the twelve months ended 30 June 2012 (“the
period”) that reflects an improvement in the operating
performance of the business once one removes the exceptional
(“Other”) income of the prior year. This period has seen the
implementation of the post rights issue strategies in
strengthening the statement of financial position and growing
the revenues of the business while continuing to focus on
reducing its costs base.
Group profile
SA French, which was founded by the current Chief Executive
Officer, Quentin van Breda, is the exclusive distributor in sub-
equatorial Africa of the Potain brand of tower cranes; a
subsidiary of the New York Stock Exchange listed Manitowoc Crane
Group, which is the largest crane manufacturer in the world. In
addition to its 30 year track record as a distributor and renter
of the Potain brand, SA French holds distribution agreements
with Merlo SPA, manufacturers of telescopic handlers and self-
loading concrete mixers, and Saltec, producers of rack and
pinion passenger and material hoists for the sub-equatorial
Africa region. This diversification allows the Company to offer
complementary lifting solutions to its clients. It is the SA
French focus to offer high levels of service, and as such a
rental offering of over 50 units is available to its client
base. The rental business model has been developed over a 36
month period to encompass a wide range of tower crane,
telescopic handler and hoist products.
Basis of preparation
The accounting policies applied in the preparation of these
reviewed condensed group financial results for the year ended 30
June 2012, which are based on reasonable judgments and
estimates, are in accordance with International Financial
Reporting Standards ("IFRS") and are consistent with those
applied in the annual financial statements for the year ended 30
June 2011. These condensed financial statements as set out in
this report have been prepared in terms of IAS 1 Presentation of
Financial Statements, IAS 34 - Interim Financial Reporting, the
Companies Act no 71 of 2008, as amended, the AC 500 standards as
issued by the Accounting Practice Board and its successor, and
the Listings Requirements of The JSE Limited.
The results were prepared under the supervision of Mr. Peter van
Zyl, the Group Financial Director.
Auditor’s report
The Group’s condensed annual financial statements for the year
ended 30 June 2012 have been reviewed by the Group’s auditors,
RSM Betty & Dickson (Johannesburg). The review report on the
Group’s condensed annual financial statements is available for
inspection at the Company’s registered office. The auditors have
not reviewed the prospects for the Group.
Review of operations
The period saw the demand for rental of high capacity lifting
equipment in Europe and the Middle East increase in spite of the
economic uncertainty in both regions. Africa has received
attention as a potential growth area for established European
and American conglomerates, with South Africa forming a hub and
base of operation for many of them.
In South Africa the promised spend on infrastructure by the
national government is positive. The Group has secured contracts
in the power generation sector for both new sites as well as
routine maintenance of the existing infrastructure.
The Group has strategically focused on a geographic
diversification and has increased its activities in rentals, as
well as direct sales to companies operating in East and Central
Africa. The revenue model, with a greater portion of recurring
revenue streams in higher margin opportunities, is paying off.
The Group has benefitted from having high capacity units in its
rental fleet, with the demands of the South African construction
industry following the European trend toward using heavier
precast elements on projects in order to fast track the
completion of the construction.
Reducing overhead costs within the Group is a critical component
of the business strategy. Finding the correct balance while not
forgoing operational efficiency is an intricate task and in
order to improve the Group’s operations in this regard, two non-
executive directors were added to the Board of Directors, to
take up portfolios on the risk, remuneration and audit
committees.
Statement of going concern
The reviewed condensed group financial statements for the year
ended 30 June 2012 have been prepared on the going concern basis
and the auditors have provided an unmodified review report.
On a review of the Group's Statement of Financial Position there
are three significant issues that should be brought to the
attention of the users of these results.
Impairment
The reversal of a previously recognised impairment loss affected
the net profit for the year ended 30 June 2012. The reversal
relates to a loan from the Group to the SA French Economic
Empowerment Trust. This loan had been settled at year-end.
Rights Issue Costs
Certain costs of R2,6 million directly attributable to the
rights issue, included in the annual financial statements for
the period ended 30 June 2011, was only incurred in the current
year. These costs were recognised directly against the share
premium account as reflected in the Condensed Statement of
Changes in Equity.
Taxation
SA French has significant assessed tax losses. The interim
financial statements therefore presents a zero tax charge in the
Condensed Statement of Comprehensive Income. In addition, the
Group has not raised any related deferred tax on these tax
losses at this point in time.
Skills development
SA French continues to prioritise practical skills training for
its tower crane and hoist riggers, operators and technicians.
The Engineering Council of South Africa (“ECSA”) reaffirmed the
status of Lifting Machinery Entity ("LME") on the Group and
under the auspices of ECSA, 5 technicians have been registered
as Lifting Machinery Inspectors (“LMI”). As a registered
Transport Education and Training Authority (“TETA”) training
provider the Company is recognised throughout the industry as
the premier training school for the certification of tower crane
technicians and operators.
Due to the success of its apprenticeship programs the Group has
received numerous applications from top quality graduates for
junior positions within the organisation. The investment and
development of our human capital is in no small way a
contributing factor to the improved operational results that
have been reported in this interim period. A performance
management system that was implemented in 2010 gives each
employee the opportunity to identify and work toward
competencies that will see them graduate to a more senior
position within the organisation, alternatively provide them
with a solid platform to pursue other opportunities within the
industry.
Financial results
Revenue
The revenue for the period under review exceeded R52 million
which is a growth of more than 22% of the adjusted revenues,
excluding the Manitowoc related revenues of R54.8 million, for
the 2011 year end. It is also encouraging that all revenue areas
reflected growth in the last year. The business continues to
sell equipment and find rental opportunities as the market,
based on tender activities, is improving and this should lead to
improved sales revenues.
Operating costs
SA French continues to reduce its operating costs while ensuring
that operating efficiencies are increased. The Group expects
further operational gains in the year to come as the full impact
of the cost cutting filters through to the income statement and
operating cash flows.
Manitowoc Settlement in the prior year
In the prior reporting period, SA French concluded the Manitowoc
Settlement Agreement with its major supplier, Manitowoc Crane
Group (“Manitowoc”), in which it agreed to return a significant
number of unutilized and unsold inventory which it had held due
to the cancellation of orders at the height of the economic
downturn. The full settlement agreement was implemented during
the prior period. However on conclusion of the Manitowoc
Settlement Agreement a further R1.1 million of costs were
incurred in the current year due to the damage sustained in
containerising and reshipping the stock. There are no further
costs in respect of this settlement agreement for the Group. The
Manitowoc Settlement Agreement has resulted in a material impact
on the comparative financial results. Firstly approximately R53m
worth of inventory was returned to the supplier in exchange for
the settlement of the debt owed to that supplier. The deal
removed significant financial risk from the Group through the
reduction of its inventory holdings, ancillary storage and
handling costs and its current liabilities. As a consequence,
and as a result of the material strengthening of the Rand
against the Euro, the offset agreement has resulted in non-cash
restructuring costs in excess R12.3m in the prior year. In
addition, it must be highlighted that the prior year’s results
were affected by the structure of the Manitowoc Settlement
Agreement by materially increasing the revenue by some R54.8
million and respective costs of sales by R53.9 million and
therefore resulted in a greatly reduced margin in the
comparative results.
Movement in borrowings
The Company's non-current liabilities decreased from R34 million
at 31 June 2011 to R20 million as at 30 June 2012. This R14
million reduction is primarily driven through the repayment of
R10 million of instalment sale agreement debt with the various
banks. Other financial liabilities, totalling in excess of R7
million, have been reclassified as current as they will be
settled as part of the Mirror Listing transaction as announced
on the 28th June 2012 (refer to subsequent events).
Current liabilities have also decreased from R42.3 million as at
30 June 2011 to R34.9 million as at 30 June 2012. The R6.5
million reduction, which includes the R7 million movement from
non-current liabilities, has been financed through improved
collections in the trade receivables of the Group.
In addition to the above, SA French continues to systematically
reduce its bank overdraft in keeping with its policy of
financial discipline.
Prospects
The promised government budget allocation that has been
earmarked for infrastructural development between 2010 and 2014
of R800 billion, although delayed, is an incentive to remain
positive. SA French has continued to train and retain skilled
staff in order to be in a position to obtain maximum benefit
from this promised spend on infrastructure, both directly as
well as through its clients. There are also opportunities in the
alternative energy sector that are in an advanced stage of
negotiation.
Within the Southern African Development Community (“SADC”) there
are a number of opportunities for the supply of all forms of
lifting machinery. SA French has submitted tenders on numerous
projects in this region and is confident of its prospects as
well as the opportunity to regionally diversify. The Company
continues to leverage its long-term relationships with its blue
chip clients in the mining sector in order to take advantage of
infrastructural and development projects in the region. Within
South Africa, the Company's national footprint, services
capabilities and competitive pricing make it the tower crane
supplier of choice.
Power generation remains an anticipated source of revenue and
the Group looks to the award of a number of tenders that have
been delayed from as far back as March 2008 where it had worked
closely with the winning contractors and is now in a position to
directly benefit from work on these projects, be they new
projects or maintenance of existing power generation
infrastructure.
Subsequent events
The business in currently involved in the “Mirror Listing” as
detailed in the announcements made on the 28th June 2012, 21st
August 2012 and 14th September 2012. The Directors draw
shareholders’ attention to this transaction as it is a material
event that, if approved by shareholders, will result in the
delisting of SA French and the listing of Torre Industrial
Holdings Limited (“Torre” or “the Torre Group”). Torre will
subsequently own 100% of the issued shares of SA French.
Dividend policy
No dividend has been declared for the period.
Directorate
Mr Sandile Swana and Ms Janine De Bruyn were appointed as
Independent Non-executive Directors to the Board as announced on
the 6th March 2012. Mr Swana serves on the Remuneration Committee
and Ms De Bruyn serves on the Audit Committee.
Appreciation
We thank our employees for their continued loyalty, hard work
and commitment to the vision of the Group. Furthermore, we thank
our non-executive directors and designated advisers for their
wise counsel and our stakeholders for their consistent faith in
the Group. The Board is confident in the Company's inherent
value, as well as its future prospects and is excited at the
imminent inclusion into the Torre Group.
Quentin van Breda Peter van Zyl
CEO CFO
27 September 2012
Directors
QCA van Breda (Chief Executive Officer), W van Breda (Commercial
Director), P van Zyl (Financial Director), MW Mashaba, JM
Poluta*, J Fizelle*, J De Bruyn*,S Swana* . *non-executive
Company secretary
Russell Turner
Registered office
461 Flower Close (off Sam Green)
Tunney ext.
Germiston
1400
PO Box 2144 Kempton Park 1620
Designated Adviser
PSG Capital (Pty) Limited
Corporate Adviser
AfrAsia Corporate Finance (Pty) Ltd
Transfer secretaries
Computershare Investor Services (Pty) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 27/09/2012 10:27:00 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.
Sharenet Sites 
