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Unaudited Consolidated Condensed Interim Results For The Six Months Ended 31 December 2013 And Changes To The Board
ROLFES 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 2013 AND CHANGES TO THE BOARD
Performance summary
• Turnover increased by 26, 2% to R517,6 million
• Export turnover increased by 35.1% to R87,0 million
• Attributable profit from continuing operations increased by 6,4%
• HEPS declined by 5,7%
• Cash generated by operations improved by R17, 0 million over
comparative period
CONDENSED CONSOLIDATED GROUP STATEMENTS OF COMPREHENSIVE INCOME
for the period ended 31 December 2013
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE
2013 2012 2013
R’000 R’000 R’000
Revenue 517 601 410 208 801 716
Cost of sales (407 065) (323 578) (634 406)
Gross profit 110 536 86 630 167 310
Gross profit margin 21,4% 21,1% 20,9%
Other operating income 2 873 2 450 28 463
Operating expenses (71 613) (45 545) (96 851)
Operating profit before
interest 41 796 43 535 98 922
Operating profit margin 8,1% 10,6% 12,3%
Interest paid and finance
charges (6 056) (5 628) (11 450)
Income from investments - - 412
Net profit before taxation 35 740 37 907 87 884
Tax expenses (9 043) (9 682) (23 660)
Profit and total comprehensive income
for the period 26 697 28 225 64 224
Attributable to:
Owners of parent 18 476 21 750 52 379
Non-controlling interest 8 221 6 475 11 845
Attributable to:
Continuing operations 30 028 28 225 64 224
Discontinued operations (3 331) - -
Reconciliation of headline
earnings
Attributable profit 18 476 21 750 52 379
Adjustment for the after-tax
effect of:
Loss/(Gain) from sale of
fixed asset 39 (18) (11 968)
Loss from associate 225 411
Closure cost of resin plant 732 - -
Headline earnings 21 472 21 732 40 822
Weighted average number of
shares in issue (‘000) 107 968 102 968 104 218
Earnings per share (cents)
– Basic 17,1 21,1 50,3
– Headline 19,9 21,1 39,2
CONDENSED CONSOLIDATED GROUP STATEMENTS OF FINANCIAL POSITION
as at 31 December 2013
UNAUDITED UNAUDITED AUDITED
31 DEC 31 DEC 30 JUNE
2013 2012 2013
R’000 R’000 R’000
ASSETS
Non-current assets 230 031 161 363 221 908
Plant and equipment 71 598 59 285 68 347
Property 28 228 32 794 27 512
Intangible assets 130 205 69 284 126 049
Current assets 422 340 320 667 385 703
Inventories 228 080 161 106 210 148
Trade and other receivables 184 828 154 897 166 841
Short term loans 2 645 - 4 975
Value Added Tax asset 6 787 4 664 3 739
Total assets 652 371 482 030 607 611
EQUITY AND LIABILITIES
Capital and reserves 322 441 237 027 301 174
Share capital 1 086 1 036 1 086
Share premium 49 802 28 603 49 802
Treasury shares (868) (868) (868)
Retained income 214 352 175 857 201 306
Non controlling interest 58 069 32 399 49 848
Non-current liabilities 60 528 69 172 72 358
Interest-bearing
liabilities 30 818 42 171 40 656
Contingent consideration 7 048 6 455 6 731
Outside shareholders loans - 1 099 -
Deferred tax liability 19 526 15 988 22 162
Provisions 2 500 3 459 2 398
Loss in associate 636 - 411
Current liabilities 269 402 175 831 234 079
Trade and other payables 158 751 99 607 152 149
Cash and cash equivalents 56 006 33 281 31 916
Current portion of
interest-bearing liabilities 20 153 19 908 22 352
Tax liability 11 851 4 953 9 142
Provisions 1 574 1 203 1 635
Short term loans 21 067 16 879 16 885
Total equity and
liabilities 652 371 482 030 607 611
Number of shares in
issue (‘000) 108 609 103 609 108 609
Net Asset Value per
share (cents) 243,4 197,5 231,4
Net tangible Asset Value
per share (cents) 123,5 130,6 115,3
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 2012 1 036 28 603 159 287 (868) 25 924 213 982
Net profit for the
period – – 21 750 - 6 475 28 225
Dividends paid - - (5 180) - - (5 180)
Balance at
31 December 2012 1 036 28 603 175 857 (868) 32 399 237 027
Recognising of non-
Controlling interest - - - - 12 079 12 079
Net profit for the
period – – 30 629 - 5 370 35 999
Dividends paid - - (5 180) - - (5 180)
Issue of new shares 50 21 199 - - - 21 249
Balance at
30 June 2013 1 086 49 802 201 306 (868) 49 848 301 174
Net profit for the
period – – 18 476 - 8 221 26 697
Dividends paid - - (5 430) - - (5 430)
Balance at
31 December 2013 1 086 49 802 214 352 (868) 58 069 322 441
CONDENSED CONSOLIDATED GROUP CASH FLOW STATEMENTS
for the period ended 31 December 2013
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
31 DEC 31 DEC 30 JUNE
2013 2012 2013
R’000 R’000 R’000
Cash and cash equivalents
at the beginning of the
period (31 916) (1 833) (1 833)
Cash flow generated from /
(utilised in)
operating activities 16 015 (929) 47 437
Net interest paid (6 056) (5 628) (11 038)
Taxation paid (10 110) (6 817) (14 846)
Dividends paid (5 430) (5 180) (10 360)
Cash flow utilised in
investing activities (17 076) (14 297) (57 317)
Cash flow (utilised in) /
generated from
financing activities (1 433) 1 403 16 041
Cash and cash equivalents
– end of the period (56 006) (33 281) (31 916)
SEGMENTAL ANALYSIS
Gross Operating Liabi-
Revenue Profit Profit Assets lities
R’000 R’000 R’000 R’000 R’000
2013 – for the six months ended
31 December
Industrial Chemicals
- Continuing 259 135 41 549 19 908 315 439 161 632
- Discontinuing 36 320 (2 243) (4 627) - -
Mining and Water
chemicals 66 619 25 660 8 104 121 634 72 721
Agricultural
chemicals 155 297 45 340 24 757 185 569 90 366
Other 230 230 (6 346) 22 979 36 437
Elimination of
Intergroup items - - - 6 750 (31 226)
Total 517 601 110 536 41 796 652 371 329 930
Gross Operating Liabi-
Revenue Profit Profit Assets lities
R’000 R’000 R’000 R’000 R’000
2012 – for the six months ended
31 December
Industrial
Chemicals 250 166 38 444 23 223 247 258 105 529
Mining and Water
chemicals 23 481 4 884 2 594 54 411 27 411
Agricultural
chemicals 135 285 42 026 23 300 134 917 66 023
Other 1 276 1 276 (5 582) 20 373 48 176
Elimination of
intergroup items - - - 25 071 (2 136)
Total 410 208 86 630 43 535 482 030 245 003
Gross Operating Liabi-
Revenue Profit Profit Assets lities
R’000 R’000 R’000 R’000 R’000
2013 – for the twelve months ended
30 June
Industrial
chemicals 502 946 75 745 36 727 280 994 147 630
Mining and water
chemicals 62 227 19 421 13 451 126 750 81 308
Agricultural
chemicals 234 765 76 846 44 439 181 400 136 328
Other 1 778 (4 702) 4 305 42 497 (13 024)
Elimination of intergroup
items and other - - - (24 030)(45 805)
Total 801 716 167 310 98 922 607 611 306 437
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
GROUP OVERVIEW
Revenue increased by 26, 2% to R 517, 6 million (December 2012: R
410, 2 million). Overall gross profit improved by 27.6% while
EBITDA decreased slightly to R 46, 8 million (December 2012: R 47,
6 million). EBITDA is calculated as operating profits plus
depreciation and amortisation of R 5 million for the period under
review. Headline earnings per share decreased by 5,7% to 19, 9
cents (December 2012: 21, 1 cents).
Exports amounted to R 87, 0 million (December 2012: R 64, 4
million) comprising 16,8% of total revenue for the six months to
December 2013 (December 2012: 15, 7% of total revenue). This
amounts to an increase of 35, 1% over the prior year. The increase
is attributed mainly to export growth into the rest of Africa and
Western Europe. The growth is in line with the Group’s strategy to
fast track its exports.
GROUP PRODUCT OFFERING
Rolfes positioned itself strategically in various markets, locally
and internationally, as a provider of industrial, agricultural,
water and mining chemicals.
Group companies manufacture and distribute a wide range of market-
leading, high-quality chemical products to diverse industries
including the coatings, plastics, vinyl, leather tanning, ink,
metallurgical, cleaning, formulators, automotive, general
manufacturing, agricultural, food, construction, home and personal
care, water filtration, water treatment and water purification
industries.
The Group’s international footprint now extends to North America,
Asia, Africa, Eastern and Western Europe. The formation of a company
and the set-up of operations in Romania are now complete.
GROUP FINANCIAL PERFORMANCE
Group revenue for the financial year to 31 December 2013 increased
by 26, 2% to R 517, 6 million (December 2012: R 410, 2 million)
with the PWM acquisitions now fully included for the six months.
Gross profit increased to R 110, 5 million (December 2012: R 86, 6
million) with gross profit margins increasing to 21, 4% (December
2012: 21, 1%).The improvement in gross profit margins is mainly
attributable to the higher margin PWM businesses.
Operating costs increased due to inclusion of the PWM companies
for the full six months, set up costs of the leather chemicals
business, and expansion into Africa. Operating profit decreased to
R 41, 8 million (December 2012: R 43, 5 million) at a margin of 8,
1% of turnover to December 2013 (December 2012: 10, 6%). The main
reason for the decline is the weak performance of the pigment
business for the period under review (part of industrial
chemicals).
Headline earnings per share and fully diluted headline earnings
per share decreased by 5,7 % to 19, 9 cents (December 2012: 21, 1
cents). The total net asset value increased to R 322, 4 million
(June 2013: R 301, 2 million). Earnings per share decreased by
19,0 % to 17, 1 cents (December 2012: 21, 1 cents). The movement
between the earnings per share and headline earnings per share is
mainly attributable to the closure cost of the resin plant. The
net asset value per share increased to 243, 4 cents (June 2013:
231,4 cents) while net tangible asset value per share increased to
123,5 cents (June 2013: 115,3 cents), based on 108 609 469 (June
2013: 108 609 469) shares in issue.
Finance costs increased slightly to R 6, 1 million (December 2012:
R 5, 6 million) mainly due to higher interest paid on the Agchem
Group overdraft and short term debtors’ funding facilities.
Interest cover reduced to 6, 9 times (December 2012: 7, 7 times)
with the total debt (interest-bearing) equity ratio increasing to
0, 40 for December 2013 (June 2013: 0, 35).
GROUP CASH FLOW PERFORMANCE
The increase in net working capital investment since 30 June 2013
of R 32, 3 million includes an increase in inventory of R 17, 9
million and an increase in accounts receivable of R 18, 0 million.
Accounts payable and value added tax represents an increase of R
3, 6 million. Debtors’ days decreased to 54, 2 days (June 2013:
61,9 days) due to improved debt collection management. Stock days
excluding stock in transit increased to 100, 6 days (June 2013: 98
days) mainly as a result of the Agri-chemicals season, being
extended by approximately six weeks due to late rains. Creditor
days excluding stock in transit, decreased to 61, 4 days (June
2013: 69,3 days).
The Group incurred capital expenditure of R 13, 0 million
(December 2012: R 14, 3 million) mainly to improve, upgrade and
increase the capacity of the agricultural and industrial
production and logistics facilities, and further investment in
agricultural product development. Agricultural product development
costs capitalised for the period amounted to R 5, 3 million.
Investment incurred in the upgrading of the Waltloo factory
amounted to R1, 2 million and the Jet Park factory amounted to R 4
million.
OPERATIONAL REVIEW
Industrial Chemicals
Turnover increased by 3, 6% to R 259, 1 million (December 2012: R
250, 2 million). Gross profit margins increased to 16, 0%
(December 2012: 15, 4%), as a result of improved buying and
product mix changes.
The division’s achievements were negatively influenced by the
weaker pigments results, due to previous production
inefficiencies, now corrected. Local trading suffered due to the
slow upturn of the economy and short and late supply of certain
key raw materials and traded products.
The Group decided to discontinue certain operations by exiting the
negative margin resin business and closed the plant during the six
months under review.
Operating costs increased to R 22, 6 million (December 2012: R 17,
7 million) mainly due to continued investment in the new leather
chemicals division.
The division aims to continue its future growth and restoration of
its operating margins to accepted levels.
The planning phase is well underway for the proposed expansion of
the current organic pigment manufacturing, increasing capacity from
50 tons to 200 tons per month. The completion of the new plant is
expected during 2015. This project will require substantial capital,
currently estimated at R 65 million and should yield lucrative
future returns.
Agricultural Chemicals
Turnover increase by 14, 8% to R 155, 3 million (December 2012: R
135, 3 million).Gross profit margins remained constant at 29, 2%
(December 2012: 31, 1%).The divisions results were negatively
influenced by the agri-chemicals season being extended by
approximately six weeks due to late and interrupted rain patterns
in certain areas. The extended season should result in improved
future results for the division.
Operating costs increased to R 21, 7 million (December 2012: R 18,
6 million) due to increased investment in human capital, marketing
and expansion costs into Romania and Africa.
Focus for the next six months remains on new product development and
increasing exports to North America, Africa and Eastern Europe.
The construction of a pilot plant for the production of Organic
Plant Growth Promoting Rhizobacteria (PGPR), is still in its
planning phase and is expected to be completed and in production
during 2015. The capital cost of this project is currently
estimated to be in excess of R20 million. The PGPR’s biological
product developments are in line with world sustainable
agricultural trends to supply greener agricultural products.
Registrations on these products have been submitted and are
awaiting approval. The licensing agreement with the University of
Pretoria, the development partner, is in the process of being
finalised. It is expected that these products will yield
attractive future returns.
The Company is in final negotiations to acquire 100% of the equity
of Agchem Properties (Pty) Ltd, which owns the Waltloo land and
buildings and adjacent vacant land in Pretoria, for approximately
R17 million. A full announcement on the acquisition will be made
in due course.
The adjacent vacant land will be developed to expand the current
manufacturing and storage facilities as well as housing the new
PGPR plant. The cost of this development is currently being
calculated, but is estimated to be in excess R25 million
(excluding the PGPR plant).
Mining and Water Chemicals
Turnover increased by 183, 7% to R 66, 6 million (December 2012: R
23,5 million), mostly attributable to the PWM acquisition which is
now included for the full six month.
Gross profit margins at 38, 5% (December 2012: 20, 8%) increased
as a result of the inclusion of the PWM acquisition which operates
at higher margins.
Operating costs increased by 642, 7% due to the inclusion of the
acquisition with overhead costs now amounting to R 17, 7 million
(December 2012: R 2, 4 million).
Growth opportunities in this division are constantly explored with
excellent prospects in Botswana and the rest of Africa. A large
water purification contract in excess of R30 million has been
secured in Botswana with a local construction company and the
water utilities department.
The silica operation has yielded satisfactory results for the
period under review. The operation continued to implement plant
upgrades to comply with DMR and other relevant legislation.
FORWARD LOOKING
The Group continues to pursue the large projects mentioned above. To
implement these projects in full, will require capital estimated to
be in excess of R110 million (excluding the acquisition of Agchem
Properties which will be funded by long term debt). These projects
will be funded by way of a combination of long term debt and share
capital. Shareholders will be advised of these future capital
requirements as and when these projects are bedded down and come to
fruition.
New and extended product development in all the divisions will
continue to present growth prospects and we look forward to
extending our market share in the USA, Africa and Western and
Eastern Europe with current or new long-term partners. The Group
currently has operational offices outside South Africa, in Botswana,
Nigeria, Zambia and Romania. New operations in East Africa and the
USA are being planned for 2014.
Also, as mentioned in our 2013 report to shareholders, management
will focus in 2014 on an operational level to optimise and improve
our working capital investment, consolidate/reduce overheads, as
well as improving on the Group’s safety, health and environmental
programmes and initiatives. Management also constantly review
operations to identify restructuring opportunities ensuring the
rightsizing of our cost base. Progress has been made but these
financial and operational efforts are continuing.
Statements contained throughout this announcement regarding the
prospects of the Group have not been reviewed or reported on by the
Group’s external auditors.
DIVIDENDS
The Group paid a final dividend to shareholders of 5 cents per
share on 21 October 2013. To accommodate the Group’s planned
capital and footprint expansions, the Board decided to invest its
current capital in these projects and will therefore not declare
an interim dividend for the six months to 31 December 2013 and
revert to an annual dividend payment policy. The Board will
evaluate the merits of the final dividend during its September
2014 board meeting.
CORPORATE GOVERNANCE
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 unaudited condensed consolidated interim financial statements.
The unaudited condensed consolidated interim financial statements
for the six months ending 31 December 2013 have been prepared in
accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as
Issued by the Accounting Practices Committee, Financial
Pronouncements as issued by the Financial Reporting Standards
Council, the International Accounting Standard 34 (IAS 34), the
JSE Listings Requirements and the South African Companies Act.
ACCOUNTING POLICIES
Accounting policies
The unaudited condensed consolidated interim financial statements
do not include all the information required by IFRS for full
financial statements. The accounting policies adopted in the
preparation of the unaudited condensed consolidated interim
financial statements are in terms of IFRS and consistent with
those applied in the preparation of the annual financial
statements for the year ended 30 June 2013.
Related party transactions
The Group companies entered into various related party
transactions in the ordinary course of their business. These
transactions are no less favourable than those entered into with
third parties and occur on an arm’s length and commercial basis.
CHANGES TO THE BOARD OF DIRECTORS
In compliance with section 3.59(b) of the Listings Requirements of
the JSE Limited, the Board announces that Mr Lungisa Dyosi has
resigned as non-executive director.
The Group would like to thank Lungisa for his valuable contribution
during his tenure and wishes him well in his future endeavours.
For and on behalf of the Board
BT Ngcuka E van der Merwe
Chairman Chief Executive Officer
25 February 2014
Jetpark
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), AJ Fourie*, L Lynch (Financial Director),
KT Nondumo*#, T Tshivhase*#, S Mafoyane*#, M Teke*
*Non-executive
#Independent
Sponsor: Grindrod Bank Limited
Registered auditors: SizweNtsalubaGobodo Incorporated
Preparer: L Lynch
www.rolfesza.com
Date: 25/02/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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