Wrap Text
Unaudited interim condensed results for the six months ended 31 December 2013
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 INTERIM CONDENSED RESULTS for the six months ended 31 December 2013
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
6 months Unaudited 6 12 months
ended 31 months ended ended 30
December 31 December June
2013 2012 2013
Notes R'000 R'000 R'000
Revenue 157 324 27 797 83 076
Cost of sales (97 585) (14 585) (41 415)
Gross profit 59 739 13 212 41 661
Other income 1 345 4 247 8 273
Operating expenses (41 418) (14 736) (45 836)
Results from operating activities 1 19 666 2 723 4 098
Depreciation and amortisation 3 528 3 624 7 544
EBITDA 23 194 6 347 11 642
Depreciation and amortisation (3 528) (3 624) (7 544)
Finance costs (1 169) (2 795) (5 911)
Acquisition related costs 2 (2 647) - -
Income from equity accounted
investments 1 322 - 30
Investment income 546 137 488
Profit/(Loss) before taxation 17 718 65 (1 295)
Taxation 8 (5 036) (6) 6 294
Profit/(Loss) after taxation 12 682 59 4 999
Other comprehensive income/(loss)
for the period - - -
Total comprehensive income/(loss) for
the period 12 682 59 4 999
Comprehensive income attributable to:
Ordinary shareholders of the
group 12 735 59 5 013
Non-controlling interest (53) - (14)
12 682 59 4 999
Reconciliation of attributable profits
/ (losses) to headline losses
Profits / (Losses) attributable to
ordinary shareholders 12 735 59 5 013
Gains from loan write-offs 3 (238) (1 444) (1 464)
Gain from bargain purchase 4 (923) - -
Gains on recognition of assets - (1 100) -
Creditor settlement gains - (324) -
Loss / (Profit) on the PPE 40 (205) (136)
Taxation Effect 295 - 311
Headline profits / (losses)
attributable to ordinary shareholders 11 909 (3 014) 3 724
Weighted average number of shares in
issue ('000) 180 316 69 308 86 354
Earnings / (Loss) per share (cents) 7.06 0.09 5.80
Headline earnings / (Loss) per share
(cents) 6.60 (4.35) 4.31
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited
Unaudited Unaudited 6 12
6 months months months
ended 31 ended 31 ended 30
December December June
2013 2012 2013
Notes R'000 R'000 R'000
ASSETS
Non-current assets 259 986 127 373 214 961
Property, plant and equipment 5 98 384 118 098 116 202
Goodwill 67 675 6 905 67 675
Deferred tax 8 23 463 2 198 28 531
Other financial assets - 372 -
Operating lease asset 783 - 783
Investment in associate 6 69 681 - 1 770
Current assets 113 824 28 450 117 183
Inventories 46 352 9 096 39 001
Trade and other receivables 38 117 6 994 41 194
Other financial assets 11 472 7 939 12 372
Taxation 91 - -
Operating lease asset 187 - 187
Cash and cash equivalents 17 605 4 421 24 429
TOTAL ASSETS 373 810 156 023 332 144
EQUITY AND LIABILITIES
Total Equity 186 823 89 682 174 157
Non-controlling Interests (67) - ( 14)
Equity Attributable to Owners of the
Company 186 890 89 682 174 171
Share capital 178 123 98 588 178 123
Merger reserve 9 746 9 746 9 746
Revaluation reserve - - -
Foreign currency translation reserve (16) - -
Retained income (963) (18 652) (13 698)
Non-current liabilities 48 972 37 717 94 363
Installment sale agreements 5 4 271 19 147 11 797
Other financial liabilities 5 3 358 6 757 16 820
Deferred tax 21 015 6 500 25 091
Deferred purchase consideration 9 20 328 5 313 40 655
Current liabilities 138 015 28 624 63 624
Installment sale agreements 5 7 632 7 405 10 939
Other financial liabilities 5, 6 77 076 5 068 12 011
Deferred purchase consideration 9 22 055 - 1 532
Trade and other payables 24 350 11 125 33 915
Taxation 1 644 - 1 038
Bank overdraft 5 258 5 026 4 189
TOTAL EQUITIES AND LIABILITIES 373 810 156 023 332 144
Number of shares in issue ('000) 180 316 103 681 180 316
Net asset value per share (cents) 103.61 86.49 96.58
Net tangible asset value per share (cents) 66.08 79.83 ` 59.05
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Cont-
rolling
In- Total
Attributable to Owners of the Company terest Equity
Non-
Control
Revalu- Re- ling
ation Merger tained In-
Share Reserve Reserve FCTR income terest Total
Capital R'000 R'000 R'000 R'000 R'000 R'000
R'000
Balance as at 30
June 2012 61 017 162 9 746 - (18 873) - 52 052
Shares issued 42 502 - - - - - 42 502
Share 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 - (18 652) - 89 682
Shares issued 84 316 - - - - - 84 316
Share issue costs (4 781) - - - - - (4 781)
Profit for the
period - - - - 4 954 (14) 4 940
Balance as at 30
June 2013 178 123 - 9 746 - (13 698) (14) 174 157
Profit for the
period - - - - 12 735 (53) 12 682
Movement in FCTR* - - - (16) - - (16)
Balance as at 31
December 2013 178 123 - 9 746 (16) (963) (67) 186 823
*FCTR – Foreign Currency Translation Reserve
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
Unaudited 6 months Audited 12
6 months ended months
ended 31 31 ended
December December 30 June
2013 2012 2013
Notes R'000 R'000 R'000
Net cash flow from operating activities 7 22 299 87 ( 1 328)
Net cash flow from investing activities (71 156) (12 410) (63 579)
Net cash flow from financing activities 40 964 11 718 86 305
Total cash movement for the period (7 893) (605) 21 398
Cash at the beginning of the period 20 240 - (1 159)
Total cash at the end of the period 12 347 ( 605) 20 239
Notes
1 The inclusion of Tractor and Grader Supplies (Pty) Ltd (“TGS”) has had a
material effect on the trading results of the Group.
2 Unwinding of discount factor on deferred purchase consideration and
interest on loan related to acquisition of Control Instruments Group Limited
(“Control Instruments”).
3 Gain on write off of remainder of deferred purchase consideration
relating to Forktech (Pty) Ltd.
4 Gain recognised on assets purchased from E-rent (Pty) Ltd.
5 A significant sale of tower cranes to a major construction company
during the period allowed SA French to repay short and long term debt in
excess of R20m.
6 The 34.54% interest in Control Instruments Group Ltd has been accounted
for as an Investment in associate while the bridging finance raised for this
acquisition is accounted for as a current liability. The bridging finance
will be repaid via the proceeds of a R300m private placement to be completed
in April 2014.
7 Cash flow from operating activities impacted by crane sales to a major
construction company
8 Torre Holdings (Pty) Ltd has assessed tax losses which are expected to
provide a shield against cash taxes for the foreseeable future.
9 Deferred purchase consideration in relation to the TGS acquisition. Only
R10m of the deferred purchase consideration is payable in cash, the balance
is payable via the issue of new Torre shares at a price equivalent to the 30
day VWAP on the date of issue.
Notes to the Financial Statements
1. Accounting Policies
The condensed interim financial statements have been prepared in accordance
with the framework concepts, the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the listings requirements of the JSE Limited (“JSE”), the
information as required by IAS 34: Interim Financial Reporting and the
requirements of the South African Companies Act 71 of 2008 as amended
(“Companies Act”). The accounting policies are consistent with the annual
financial statements for the year ended 30 June 2013,
2. Financial preparation and review
These results have been prepared by Marcel du Plessis, the Group Financial
Manager which preparation was supervised by Roy Midlane, the Group Financial
Director. These results have not been reviewed or reported on by the Group’s
auditors. The results were approved by the board of directors on 12 March
2014.
SEGMENT REPORT
Unaudited 6 Unaudited 6 Audited 12
months ended months ended months ended
31 December 31 December 30 June
2013 2012 2013
R'000 R'000 R'000
Segment Revenue
Sales: Equipment 36 831 11 077 23 132
Sales: Parts 96 526 - 21 313
Rental 13 858 8 766 25 474
Service and Recoveries 10 109 7 954 3 157
157 324 27 797 83 076
Segmented assets
Rental 92 537 114 214 109 588
Sale 46 352 9 096 39 001
Unallocated assets: -
Property, plant and equipment 5 847 3 884 6 614
Trade and other receivables 38 117 6 994 41 194
Goodwill 67 675 6 905 67 675
Cash and cash equivalents 17 605 4 421 24 429
Investment in associate 69 681 - 1 770
Deferred tax 23 463 2 198 28 531
Loans to shareholders 8 004 - 8 710
Other 4 529 8 311 4 632
373 810 156 023 332 144
SEGMENT LIABILITIES
The Group’s liabilities are not allocated to any particular segment.
COMMENTARY
Torre was incorporated in August 2012 and, by way of a Mirror Listing, was
introduced to the JSE on 26 November 2012. Torre was established as a
platform to build a scalable industrial group focused on the provision of
equipment, engineering and financing solutions to its customers in selected
markets.
Torre’s primary business is the value added distribution of capital equipment
and industrial consumable products into the mining, construction,
infrastructure, agricultural, automotive and logistics sectors. The Group
operates in 3 segments which, as at 31 December 2013, incorporated the
following business units. (1) Plant and Equipment segment, consisting of SA
French and Forktech; (2) Services and Supplies segment, consisting of TGS and
an associate interest in Control Instruments; and (3) the Financial Solutions
segment which was not yet operational.
Torre is committed to optimising and organically growing these existing
business units, as well as to on-going, controlled growth via acquisitive
expansion in its targeted markets.
Highlights
In the period under review, Torre continued to build the group off the
platform established. Key achievements include, inter alia:
- the successful integration of TGS;
- the repayment of term debt in excess of R20 million and completion of
the SA French turnaround; and
- a material acquisition in the Services and Supplies segment, namely an
associate interest in Control Instruments.
Financial Review
The Group has delivered good results in markets characterised by labour
unrest in South Africa and a material depreciation in the Rand exchange rate.
Labour unrest was particularly severe in the mining and automotive sectors in
the period under review.
However a strengthened balance sheet and a focus on aftermarket sales and
spare parts via TGS have allowed Torre to grow profitably despite this
challenging trading environment.
The acquisitions made by the Group during the past 14 months underpinned
performance and provide a solid platform for future growth. All business
units have been positioned for expansion into Africa in order to capitalise
on the opportunities that exist on the continent and in order to reduce
dependence on the South African market.
Revenue
Group revenue grew by R129 million, to R157 million. R93 million is from
acquisitions and R36 million is from existing operations.
Operating profit increased by R17 million, to R20 million. R15 million of the
increase came from acquisitions and R2 million from existing operations.
Profit for the period increased significantly from R0.06 million to R12.7
million, with an increase in earnings per share from 0.09 cents to 7.06
cents. Working capital management was good, resulting in cash generated from
operations of R22.3 million, R22.2 million up from the comparable period last
year.
Operating costs
Eliminating unnecessary overhead costs is a critical component of the Group’s
strategy to deliver margin improvement and cash flows. Every effort is made
to share infrastructure and combine resources in order to reduce costs in
line with the owner-manager culture of the Group.
Review of Operations
Plant and Equipment
SA French
An increase in tower crane sales and improved utilisation of the rental fleet
has allowed SA French to deliver a profitable performance in the first half
of this financial period compared to a loss in the comparable period last
year. SA French has strategically focussed on geographic diversification and
has won profitable contracts across the border. The prospects for the
remainder of the year remain strong.
Forktech
Forktech has struggled with both machine sales and rental utilisation in the
period under review. Fierce competition, aggressive competitor funding
structures and a strong Yen also impacted on the price competitiveness of the
Nissan product range in the period under review. A number of activities are
underway in relation to this business unit and some positive developments in
this regard are expected before the end of the financial year.
Supplies and Services
TGS
TGS has contributed strongly to the performance of the Group in the period
under review, trading in line with its warranted earnings targets. The
aftermarket parts sector is performing well as customers seek cost effective
solutions to maintain their equipment. Prospects are good for this business
unit and additional growth is expected to come from the core business as well
as from an enhanced distribution network and more diversified product range.
Borrowings
Torre has materially reduced its historic debt levels as cash flows improve
in the business units. The acquisition of an initial 34.54% of Control
Instruments Group Limited has necessitated a temporary increase in borrowings
via a bridge loan which will be refinanced via the equity raise of R300
million (refer to the ‘Subsequent Events’ paragraph below), details of which
were published on SENS on 3 February 2014.
Torre is committed to maintaining a conservative balance sheet while also
ensuring that an appropriate level of debt is utilised to gear returns from
the investments that are made into both new and existing operations.
Financial Assistance
Notice is hereby given in terms of section 45 (5) (a) of the Companies Act
that the Board of the Company at a meeting held on 12 March 2014, authorised
and ratified the Company to provide financial assistance to its subsidiary
companies in terms of section 45 of the Companies Act, pursuant to the
authority granted to the Board by shareholders on 10 December 2013. The
approved financial assistance included guarantees on behalf of Group
companies and general facilities and loans to Group companies already
provided totaling R39 million. Further approval was authorised to provide
financial assistance in a maximum aggregate amount of R20 million, on terms
and conditions approved by the Board, as determined by any executive director
of the Company from time to time under delegated authority, until the Board
meeting scheduled for September 2014.
Prospects
The economic conditions remain subdued and no change is expected in these
conditions in the second half of the year. Organic revenue growth
expectations in the group will therefore continue to remain modest with
earnings growth driven by cost savings and acquisitions. Under these
circumstances, management has increased its focus on controllable factors
such as costs, productivity and the retention and growth of market share.
The Board remains confident and excited about Torre’s future and its ability
to achieve the key strategic and financial targets that have been established
for the Group.
Any forward-looking statements in this announcement have not been reviewed
nor audited by the Company’s Auditors.
Subsequent events
Events that have occurred in the period between 31 December 2013 and the date
of this report include:
- establishment of Torre International Holdings Ltd (Mauritius) in order
to hold Torre’s African operations, as detailed in a SENS announcement
dated 13 January 2014.
- a bolt-on acquisition in the Services and Supplies segment, namely
Power Parts (Namibia) which will form part of the TGS business and was
announced on SENS on 13 January 2014;
- subscription agreements signed with a combination of strategic and
institutional investors to raise R300 million via a private placement
of new Torre shares at R2.20 per share;
- announcement of firm intention by Torre to acquire up to 100% of the
total issued ordinary shares in Control Instruments not already owned
by Torre;
- a material acquisition in the Plant and Equipment segment, namely Kanu
Equipment, which transaction was completed and announced on SENS on 28
February 2014;
- the award, in March 2014, of the Liebherr and Bell distribution
agencies to Kanu Equipment for Ghana, Liberia and Sierra Leone;
- the award, in March 2014, of the Bell distribution agency to Kanu
Equipment for Cameroon and Equatorial Guinea; and
- the appointment of Henk Maree as Group Chief Operating Officer
Dividend policy
In line with its stated policy, the group has not declared a dividend.
Directorate
Mr Sandile Swana resigned as an independent non-executive director of Torre
with effect from 22 July 2013. The Board thanks Mr Swana for his contribution
as a director of Torre and previously of SA French. There were no other
changes to the board of directors during the period under review.
Appreciation
Torre is making progress towards delivering on its strategic goal of becoming
a scalable emerging market industrial group. We are grateful to our dedicated
and talented team of managers and employees, as well as to our shareholders,
customers and suppliers for their continued support as we move the Group
forward together.
On behalf of the Board
CE Pettit SR Midlane
Chief Executive Officer Financial Director
12 March 2014
Directors
PJ van Zyl (Chairman)*, CE Pettit (Chief Executive Officer), SR Midlane
(Financial Director), QCA van Breda, JWLM Fizelle^, CWJ Lyons#, Alan
Keschner#
* Non-executive
^ Lead independent
# 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) Ltd
Designated Adviser
PSG Capital (Pty) Ltd
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
Date: 12/03/2014 05:30:00 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,
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