Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 December 2012
TORRE INDUSTRIAL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 2012/144604/06)
Share code: TOR ISIN: ZAE000169322
(“Torre” or “the Company” or “the Group”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX
MONTHS ENDED 31 DECEMBER 2012
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited 6 Unaudited 6 Audited 12
months ended months ended months ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Revenue 27 797 31 513 52 011
Cost of sales (14 585) (17 378) (27 167)
Gross profit 13 212 14 135 24 844
Other income 4 247 3 349 4 080
Operating expenses (14 736) (15 169) (26 164)
Results from operating
activities 2 723 2 315 2 760
Finance cost (2 795) (2 163) (5 270)
Restructuring costs - - (1 129)
Investment income 137 67 10
Profit/(Loss) before
taxation 65 219 (3 629)
Taxation (6) - -
Profit/(Loss) after
taxation 59 219 (3 629)
Other comprehensive
income/(loss) for the
period - - -
Total comprehensive
income/(loss) for the
period 59 219 (3 629)
Comprehensive income
attributable to:
Ordinary shareholders
of the group 59 219 ( 3 629)
Non-controlling
interest - - -
59 219 (3 629)
Reconciliation of
attributable profits /
(losses) to headline
losses
Profits / (Losses)
attributable to
ordinary shareholders 59 219 (3 629)
Restructuring costs - - 1 129
Gains from loan write
off (1 444) - (496)
Gains on recognition of
assets (1 100) - -
(Profit) / Loss on
disposal of property,
plant and equipment (205) - -
Creditor settlement
gains (324) (1 135) (3 161)
Tax effect - - -
Headline profits /
(losses) attributable
to ordinary
shareholders (3 014) (916) (6 157)
Weighted average number
of shares in issue 69 307 984 566 375 689 574 463 415
Diluted weighted number
of shares 74 307 984 - -
Earnings per share
(cents) 0.09 0.04 (0.63)
Headline earnings per
share (cents) (4.35) (0.16) (1.07)
Diluted earnings per
share (cents) 12.19 - -
Diluted headline
earnings per share
(cents) 8.06 - -
Reconciliation of attributable profits / (losses) to headline
losses
Shareholders are reminded that in terms of the mirror listing
and scheme of arrangement, details of which were contained in a
circular dated 14 September 2012, the newly incorporated Torre
was listed after having purchased all of the shares of SA French
Limited (“SA French”). 611 791 380 ordinary SA French shares
were acquired by Torre on the basis of a swap of 1 (one) Torre
share for every 10 (ten) SA French shares. Due to the nature of
this transaction there are a significantly lower number of
shares in issue for the period ended 31 December 2012 than there
were in the prior comparable period.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited 6 Unaudited 6 Audited 12
months ended months ended months
31 December 31 December ended 30
2012 2011 June 2012
R'000 R'000 R'000
ASSETS
Non-current assets 127 573 96 270 90 960
Property, plant and
equipment 118 098 94 222 90 960
Goodwill 6 905 - -
Deferred tax 2 198 - -
Other financial assets 372 2 048 -
Current assets 28 450 23 623 15 984
Inventories 9 096 9 120 8 792
Trade and other
receivables 6 994 14 423 6 828
Other financial assets 7 939 - -
Cash and cash
equivalents 4 421 80 364
TOTAL ASSETS 156 023 119 893 106 944
EQUITY AND LIABILITIES
Equity 89 677 51 297 52 047
Share capital 98 588 66 162 70 763
Merger reserve 9 746 - -
Revaluation reserve - 162 162
Retained income (18 657) (15 027) (18 878)
Non-current liabilities 37 719 31 286 19 978
Installment sale
agreements 19148 25 168 19 107
Other financial
liabilities 6 758 - 871
Deferred tax 6 500 - -
Deferred purchase
consideration 5 313 - -
Loans from shareholders - 6 118 -
Current liabilities 28 627 37 310 34 919
Installment sale
agreements 7 406 9 447 8 060
Other financial
liabilities 5 069 1 650 7 538
Trade and other payables 11 126 21 969 13 727
Loan from shareholders - 1 508 4 071
Bank overdraft 5 026 2 736 1 523
TOTAL EQUITIES AND
LIABILITIES 156 023 119 893 106 944
Number of shares in
issue 103 681 389 566 375 689 611 791 380
Net asset value per
share (cents) 86.49 9.06 8.51
Net tangible asset value
per share (cents) 79.83 9.06 8.51
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Revaluation Merger Retained
Capital Reserve Reserve income Total
R'000 R’000 R'000 R'000 R'000
Balance as at 30
June 2011 56,475 162 12,343 (15,249) 53,731
Rights issue
costs - - (2,653) - (2,653)
Profit for the
period - - - 219 219
Balance as at 31
December 2011 56,475 162 9,690 (15,030) 51,297
Shares issued 4,542 - - - 4,542
Rights issue
costs - - 56 - 56
Loss for the
period - - - (3,848) (3,848)
Balance as at 30
June 2012 61,017 162 9,746 (18,878) 52,047
Shares issued 42,502 - - - 42,502
Rights issue
costs (4,931) - - - (4,931)
Reversing
revaluation
reserve (162) - 162 -
Profit for the
period - - - 59 59
Balance as at 31
December 2012 98,588 - 9,746 (18,657) 89,677
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June 2012
2012 2011
R'000 R'000 R'000
Net cash flow from
operating activities 87 (1 605) (3 058)
Net cash flow from
investing activities (12 410) (248) (80)
Net cash flow from
financing activities 11 718 (1 961) 820
Total cash movement
for the period (605) (3 814) (2 318)
Cash at the beginning
of the period - 1 159 1 159
Total cash at the end
of the period (605) (2 655) (1 159)
Notes to the Interim Financial Statements
1. Accounting Policies
The unaudited interim financial statements have been prepared in
accordance with the SAICA Financial Reporting Guidelines, IAS
34: Interim Financial Reporting, the Companies Act of South
Africa, 2008 and the Listings Requirements of the JSE. The
accounting policies are consistent with the annual financial
statements for the year ended 30 June 2012, except for the
merger accounting used in the consolidated accounts in relation
to the acquisition by Torre of SA French.
Based on the fact that the mirror listing is scoped out of IFRS
3 and that there is no guidance in IFRS for such transactions,
we have looked to the guidance in UK GAAP which has an
accounting standard to deal with this type of transaction. FRS 6
provides an alternative to the acquisition method of accounting
of the combination of entities as required by IFRS 3. FRS 6
offers the alternative of merger accounting in terms of which no
revaluation of the net assets of the parties takes place, nor is
there any recognition of goodwill as a result of the
transaction. Given the significant commonality of shareholders
between Torre and SA French it is inappropriate to apply
acquisition accounting and recognise goodwill and therefore the
application of IFRS 3, was not considered to be in the interests
of fair presentation.
In light of the above, even though Torre was established and
acquired the businesses of SA French and Forktech with effect
from 26 November 2012 and 1 December 2012 respectively, the
group has consolidated SA French (wholly-owned subsidiary of
Torre) for 6 months, Forktech (wholly-owned subsidiary of Torre)
from 1 December 2012 and Torre from date of inception. IFRS 3
has been used in relation to the acquisition of Forktech by
Torre.
These results have been prepared by Bianca Sommer, the Financial
Manager and which preparation was supervised by Roy Midlane, the
Financial Director. The interim results have not been audited or
reviewed by the Group's auditors, but do support the technical
opinion provided by the JSE’s accredited IFRS advisors and the
Company’s auditors.
2. Seasonality affecting Interim Financial Statements
The Group’s operations are affected by the South African
Construction Industry shutdown (as well as factory closures) for
a part of December and January each year. Customers and third
party service providers conduct limited business over this
period which can affect the volume of sales, initiate rental
interruption and delay debtor receipts.
The Interim Financial Statements are therefore not reflective of
the annual trading performance of the Group and will potentially
not be comparable with future performance due to the strategy of
Torre to build a diversified portfolio of industrial business
via a combination of acquisitive and organic growth.
3. Macroeconomic Challenges
Globally, the economic environment is characterised by a
combination of uncertainty and weak growth rates. Tough business
conditions in Europe and Asia are driving operators to look at
alternative world markets, which draw foreign competitors to
South Africa to seek opportunities. In South Africa, the labour
unrest and on-going delays in the power infrastructure sector
have had a direct effect on operations.
The business environment therefore remains challenging for
capital equipment businesses, although the trend by customers to
keep assets off the balance sheet holds promise for businesses
with large rental fleets such as SA French and Forktech.
Due to the challenges in the business environment management
will accordingly maintain a strict focus on costs and working
capital management for the remainder of the financial year.
4. Unusual amounts affecting Net Income and Equity
Mirror Listing Costs
Certain costs of R4.9 million directly attributable to the
mirror listing and scheme of arrangement, whereby SA French was
delisted, newly incorporated Torre was listed and SA French
became a wholly-owned subsidiary of Torre , were incurred in the
6 month period ended 31 December 2012. These costs were
recognised directly against the Share Capital account as
reflected in the Condensed Statement of Changes in Equity
Taxation
SA French and Forktech have significant assessed tax losses. The
Interim Financial Statements therefore present no tax charge in
the Condensed Statement of Comprehensive Income. In addition,
the Group has only recognised deferred tax relating to Forktech
at this stage.
5. Segment Report
Unaudited 6 Unaudited 6 Audited 12
months ended months ended months ended
31 December 31 December 30 June 2012
2012 2011
R'000 R'000 R'000
Segment Revenue
Rental 8 766 8 044 24 653
Sale 11 077 18 577 24 324
Other 7 954 4 892 3 034
27 797 31 513 52 011
Segmented assets
Rental 114 214 93 082 90 234
Inventory 9 096 9 120 8 762
Property, plant and
equipment 3 884 1 140 726
Other financial assets 7 939 2 048 -
Trade and other
receivables 6 994 14 423 6 858
Cash and cash
equivalents 4 421 80 364
146 978 119 893 106 944
Segmented liabilities
The Groups liabilities are not allocated to any particular
segment
COMMENTARY
Group takes first steps forward
Highlights
In the period under review, Torre was established as a platform
to build a scalable industrial group. The Group has drawn
together a dynamic team of entrepreneurs, who collectively have
extensive industry specific experience as well as financial
acumen and turnaround credentials. The directors and management
team are materially invested in the business and a number of
blue chip institutional investors have also invested in the
Company to back this team and the Torre business plan.
Introduction
The board of directors of Torre (the “Board”) hereby presents
the Interim Financial Results of the Group for the six months
ended 31 December 2012 (the “Interim Period”). These Interim
Financial Results reflect the consolidated results of SA French
for 6 months from 1 July 2012, Forktech from 1 December 2012 and
Torre from date of inception.
Group Profile
Torre is a listed industrial holding company that provides a
diverse range of capital equipment and engineering solutions to
its customers in selected markets in Africa. Torre provides a
platform to build a scalable industrial group with the intention
to operate in 3 segments, namely Plant and Equipment,
Engineering Services and Trade and Asset Finance. The present
operations comprise two businesses in the Plant and Equipment
segment, namely SA French and Forktech. Diversification of the
portfolio via the acquisition of Tractor and Grader Supplies
(Pty) Ltd (“TGS”) is already in advanced stages with the final
terms of the proposed acquisition to be announced imminently.
SA French is the exclusive distributor in Sub-equatorial Africa
of the Potain brand of tower cranes; a subsidiary of the NYSE
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, being
manufacturers of telescopic handlers and self-loading concrete
mixers, and Saltec, who are 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. In addition to
its sales and service offering, SA French has a rental fleet of
over 50 units. The rental business model has been developed over
a 36 month period to encompass a wide range of tower crane,
telescopic handlers and hoist products. The trend of moving away
from end user ownership towards rental provides opportunity for
the utilisation of this significant fleet.
Forktech is a Cape Town based company engaged in forklift
rentals, sales and repairs. The company principally operates in
the coastal regions of South Africa providing light lifting
solutions to the agricultural, infrastructure, construction and
logistics sectors. Forktech has strong relationships with a
broad client base in the coastal and key agricultural regions in
South Africa. Forktech holds a distributor license for Nissan in
the Western Cape and is the exclusive distributor for Nexen
forklifts nationally. Forktech is in the process of expanding
its presence to the greater Gauteng region through existing and
established entities and nationally to other areas, where it has
already established relationships with operators in Nelspruit,
Upington, Durban and Port Elizabeth. This expansion will include
not only branches, but additional products as well, and is
expected to be achieved through a combination of both organic
and acquisitive growth.
Review of Operations
The business environment continued to be tough over the period
under review, but economic indicators now suggest that an
increase in activity in the construction and infrastructure
industries is imminent.
A marked increase in enquiries for tower crane hire in late 2012
supports the positive indicators that are emerging and bodes
well for the balance of 2013. Torre has made substantial
progress in finalising the acquisition of TGS to diversify
industry exposure. This transaction presents the opportunity to
tap into the growing expenditure on maintenance capital in
Contract Mining and related Plant Hire Industries. The
combination of improving leading indicators and the substantial
progress made in terms of acquisitive growth reaffirms the Torre
strategy subsequent to listing on the AltX on 26 November 2012.
In South Africa, the promised commitment at all levels of
government to budget for and implement large scale
infrastructural development programs is positive, and if
implemented in the time periods committed, will have a material
and positive impact on all levels of the construction industry.
The Group has secured contracts in the power generation sector
for both new sites, as well as for routine maintenance on
existing infrastructure. This includes the alternative energy
sector, which is receiving attention and funding from the
international community.
The Group has strategically focused on geographic
diversification and has increased its activities in rentals, as
well as direct sales to companies operating in Central Africa.
The Group has benefitted from having high capacity units in its
tower crane rental fleet, as the demands of the South African
lifting industry have thus far followed the European trend
toward using heavier precast elements in order to fast track
construction and infrastructure projects.
The forklift business has also seen an increase in enquiries,
which supports a positive outlook for 2013. Securing the Nexen
distributorship, amongst other products, and the opening
branches in other major centres, provides Forktech with the
opportunity to not only expand its national footprint, but also
to increase its product offering.
Operating costs
Reducing overhead costs within the Group is a critical component
of the on-going business strategy. Finding the correct balance,
while not forgoing operational efficiency, is an intricate task.
In order to improve the Group’s operational capacity, subsidiary
companies will be able to benchmark each other as well as
benefit from the shared services that the Group will offer.
Skills development
As one of its values the Group has decided to prioritise
practical skills training for its operators and technicians.
From a lifting perspective the Engineering Council of South
Africa (“ECSA”) reaffirmed the status of Lifting Machinery
Entity ("LME") on the Group and under its auspices three
apprentice technicians have been registered as Candidate Lifting
Machinery Inspectors (“LMI”). As a training provider, the Group
strives to be recognised throughout the industry as the premier
training school for the certification of tower crane, forklift
and telescopic handler operators and under its Transport
Education Training Authority accreditation (“TETA”), it offers
both novice and recertification courses on all of the capital
equipment that it sells and rents out.
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 Group strategy and targeted
operational results. A performance management system that was
implemented at SA French in 2010, which is to be mirrored across
the Group, gives each employee the opportunity to identify and
work toward competencies that will assist them to move into more
senior positions within the organisation, or alternatively, to
provide them with a solid platform to pursue other opportunities
within the industry.
Financial results
Revenue
In addition to the challenges of trading in a weak economic
environment, turnover for SA French for the six months came
under pressure due to labour unrest, together with the on-going
delays at Medupi and Kusile. The labour disputes in the
agricultural sector have also caused customers in this industry
to delay their capex and spending decisions.
Operating costs
The Group continues to reduce its operating costs while ensuring
that operating efficiencies are increased. It is expected that
further operational efficiencies will be gained as the full
impact of the cost cutting focus filters through to the income
statement and hence the operating cash flows.
Borrowings
Torre is continuing to reduce debt to ensure that appropriate
levels of debt are held in the businesses on an on-going basis.
The restructuring of SA French’s operations over the last 12
month period necessitated temporary reliance on expensive bridge
finance facilities, which resulted in increased financing costs.
These facilities, however, have either been refinanced with more
favourable facilities or been repaid and the interest burden on
this business unit will therefore reduce going forward.
Prospects
A sign of an improvement in the lifting and materials handling
industries bodes well for 2013, but challenges will remain in
the short term with key customers delaying capex decisions due
to the uncertainty in the global economy. A much anticipated
increase in demand in key industries has translated into
increased enquiries for new sales and rental contracts that are
expected to materialise in the next period under review. The
Torre team has been strengthened by adding key staff to monitor
performance and enhance efficiency at both group and subsidiary
level. Highly productive group and subsidiary strategy sessions
have further assisted to refine the group strategy and good
progress has been made on the TGS acquisition, which will
significantly enhance the group profile. The board of directors
is confident and excited about Torre’s future and in achieving
key strategic and financial targets.
Subsequent events
In February 2013, the board approved a new 4 year, R15 million
term loan to refinance and re-term existing facilities, and to
provide the funding required to SA French for the purchase of a
100 ton mobile crane for approximately R7m. The acquisition of a
mobile crane had been identified as a key priority to reduce
costs and improve service delivery at SA French.
Dividend policy
No interim dividend has been declared for the period.
Directorate
Torre welcomes the new directorate (appointed in 2012) to serve
on the board: P van Zyl, C Pettit, R Midlane, Q van Breda and C
Lyons. On 25 February 2013, the board appointed Alan Keschner.
No other changes to the directorate have been made.
Company Secretary
Neil Esterhuysen Attorneys were appointed as Torre’s company
secretary with effect from 1 February 2013.
Appreciation
We thank the employees of the business units for their continued
loyalty, hard work and commitment to the vision of the Group.
Furthermore, we thank our shareholders for their support and
backing of Torre.
On behalf of the board
CE Pettit SR Midlane
Chief Executive Officer Financial Director
5 April 2013
Directors
PJ van Zyl (Chairman)*, CE Pettit (Chief Executive Officer), SR
Midlane (Financial Director), QCA van Breda (Business
Development & Technical Director), S Swana^, JWLM Fizelle#, CWJ
Lyons#, Alan Keschner#
* Non-executive
^ Lead independent non-executive
# Independent non-executive
Company Secretary
Neil Esterhuysen & Associates Inc.
Registered Office
Office 202, Cape Quarter, The Square, 27 Somerset Road, Green
Point, Cape Town, South Africa
Corporate Adviser
AfrAsia Corporate Finance (Pty) Limited
Designated Adviser
PSG Capital (Pty) Limited
Transfer secretaries
Link Market Services South Africa (Pty) Limited
Date: 05/04/2013 04:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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