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RARE HOLDINGS LIMITED - Condensed Unaudited Abridged Financial Results for the 6 Months Ended 31 December 2015

Release Date: 31/03/2016 13:00
Code(s): RAR     PDF:  
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Condensed Unaudited Abridged Financial Results for the 6 Months Ended 31 December 2015

Rare Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR     ISIN: ZAE000180626
("Rare" or "the Company")

CONDENSED UNAUDITED ABRIDGED FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2015

HIGHLIGHTS

-     Trading division net profit increased to R11.8m (2014: R0.3m)
-     Operating expenses reduced from R36.7m to R23.4m

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                     Unaudited       Unaudited        Audited
                                                      6 Months        6 Months      12 Months
                                                      December        December           June
                                                          2015            2014           2015
                                                         R'000           R'000          R'000
Revenue                                                 98 337         215 928        345 998
Cost of sales                                          (81 496)       (177 662)      (291 727)
Gross profit                                            16 841          38 266         54 271
Other income                                             3 752           1 444          6 083
Operating expenses                                     (23 426)        (36 658)       (64 300)
Operating (loss) / (profit)                             (2 833)          3 052         (3 946)
Investment income                                           63              49            162
Finance costs                                           (3 241)         (2 794)        (5 829)
(Loss) / profit before taxation                         (6 011)            307         (9 613)
Income tax                                                 (50)              -            (53)
(Loss) / profit for the period                          (6 061)            307         (9 666)

Other comprehensive income:
Items that will not be reclassified to profit or loss:

Gain on property revaluation (Kliprivier)                    -               -          2 514
Taxation related to components of other
comprehensive income                                         -               -           (470)
Other comprehensive income net of taxation                   -               -          2 044
Total comprehensive (loss) / profit for the period       (6 061)           307         (7 622)

Net (loss) / profit attributable to:
Equity holders of the parent                             (6 061)           307         (9 666)
Non-controlling interest                                      -              -              -


Weighted average number of ordinary
shares in issue ('000)                                   42 802         42 888         42 802
(Loss) / profit per ordinary share (cents)
(basic and diluted)                                      (14.16)          0.72         (22.58)

Headline earnings reconciliation
(Loss) / profitattributable to equity holders of
the parent                                               (6 061)           307         (9 666)
Profit on sale of subsidiary                                  -             -          (1 232)
Profit on disposal of property,
plant and equipment                                              -          -            (595)
Headline (loss) / profit attributable to ordinary
shareholders                                             (6 061)           307        (11 493)
Headline profit/(loss) per ordinary share (cents)
(basic and diluted)                                      (14.16)          0.72         (26.85)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                   Unaudited           Unaudited       Audited
                                                    6 Months            6 Months     12 Months
                                                    December            December          June
                                                        2015                2014          2015
                                                       R'000               R'000         R'000
Assets
Non-current assets
Property, plant and equipment                        90 562               85 753            89 576
Intangible assets                                       442                  572               516

Current Assets
Inventories                                          82 960              83 071             99 571
Trade and other receivables                          18 321              71 798             53 835
Other financial assets                                    -                 160                  -
Current taxation receivable                               -                 112                  -
Prepayments                                              18                  49              4 458
Cash and cash equivalents                            13 681              20 217             24 129
Total Assets                                        205 984             261 732            272 085

Equity and liabilities
Equity
Share capital                                       390 335             390 335            390 335
Reserves                                              9 788               8 001              9 788
Accumulated loss                                   (268 634)           (252 857)          (262 573)
Equity attributable to equity holders
of parent                                           131 489             145 479            137 550

Liabilities
Non-current liabilities
Other financial liabilities                          61 740               55 814            58 979
Operating lease liability                                 -                   11                 -
Deferred taxation                                     2 651                2 440             2 651

Current liabilities
Trade and other payables                              9 634              57 613             59 369
Other financial liabilities                             382                 375                410
Current taxation payable                                 88                   -                 88
Bank overdraft                                            -                   -                 37
Income received in advance                                -                   -             13 001
Total liabilities                                    74 495             116 253            134 535
Total equity and liabilities                        205 984             261 732            272 085


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                              Unaudited        Unaudited            Audited
                                               6 Months         6 Months          12 Months
                                               December         December               June
                                                   2015             2014               2015
                                                  R'000            R'000              R'000
Opening balance                                 137 550          146 172            146 172
(Loss)/ profit for the period                    (6 061)             307             (9 666)
Adjustments
Revaluation reserve                                   -               -               2    044
Underwriting fee                                      -           (1 000)            (1    000)
Total changes                                    (6 061)            (693)            (8    622)
Closing balance                                 131 489          145 479            137    550
Comprising of:
Share capital                                   390 335          390   335          390    335
Revaluation reserve                               9 788            8   001            9    788
Retained income                                (268 634)        (252   857)        (262    573)
Total equity                                    131 489          145   479          137    550

CONDENSED CONSOLIDATED CASH FLOW STATEMENT
                                                 Unaudited              Unaudited           Audited
                                                  6 Months               6 Months         12 Months
                                                  December               December              June
                                                      2015                   2014              2015
                                                     R'000                 R'000             R'000
Cash flows from operating activities
Cash (used in) / generated from operations        (4 480)                  17 260            28 031
Interest income                                       63                       49               163
Finance costs                                       (400)                   (444)             (880)
Net cash from operating activities                (4 817)                  16 865            27 314

Cash flow from investing activities
Purchase of property, plant
and equipment                                     (5 417)                (3 044)           (12 230)
Sale of property, plant and equipment                  -                      -              1 801
Sale of subsidiary                                     -                      -                114
Purchase of other intangible assets                    -                     (5)                (5)
Proceeds from other financial assets                   -                    240                400
Net cash from investing activities                (5 417)                (2 809)            (9 920)

Cash flows from financing activities
Underwriting fees paid                                  -                (1 000)            (1 000)
Proceeds from financial liabilities                     -                 4 000              9 200
Repayment of financial liabilities                   (177)               (1 681)            (6 344)
Net cash from financing activities                   (177)                1 319              1 856

Total cash movement for the period                (10 411)               15 375             19 250
Cash at the beginning of the period                 24 092                4 842              4 842
Total cash at end of the period                     13 681               20 217             24 092


CONDENSED SEGMENTAL INFORMATION - PRIMARY SEGMENT REPORT BUSINESS SEGMENTS

For the 6 months ending 31 December 2015

The performance of the various segments is measured based on segment gross profit less
segment operating expenses directly attributable to each segment with an allocation of
indirect operating expenses to the reporting segments. All transactions between
reportable segments are accounted for at arm’s length so as to objectively evaluate the
performance of the various segments.


                                 Water    Pipeline                                               Total
R'000            Trading     Treatment    services        Plastics         Investment
Total
revenue           53 382            -         2 362            42 589           1 500            99 833
Inter-
segmental
revenue                -            -             -                           (1 500)            (1 500)
External
revenue           53 382            -         2 362            42 593                 -          98 337
Segment
Results
before
separately
disclosable
items              8 224         (616)       (1 133)           (8 605)                -          (2 130)
Other income       3 697            -            56                -                  -           3 753
Investment income      -            -             -                -                 63              63
Depreciation and
Amortisation        (98)       (214)         (1 484)           (1 906)          (804)        (4 506)
Finance cost           -           -              -                -          (3 241)        (3 241)
Net profit/(loss)
for the period      11 823        (830)       (2 561)           (10 511)        (3 982)            (6
061)

CONDENSED SEGMENTAL INFORMATION - PRIMARY SEGMENT REPORT BUSINESS SEGMENTS
For the 6 months ending 31 December 2014

                                Water    Pipeline                                   Total
R'000            Trading    Treatment    services    Plastics      Investment
Total
revenue           50 348           -      34 792      130 788         2 396       218 324
Inter-
segmental
revenue                -           -           -               -      (2 396)      (2 396)
External-
revenue           50 348           -      34 792      130 788             -       215 928
Segment
results
before
separately
disclosable
items              1 639      (1 106)      3 271        3 558             -         7 362
Other income           -           -           -           -             954          954
Profit on sale
of assets              -           -                      490             -           490
Investment income      -           -           -           -              49           49
Termination
Benefits          (1 249)          -        (673)          -              -        (1 922)
Depreciation
and amortisation     (86)       (203)     (1 365)      (1 376)           (802)     (3 832)
Finance cost           -           -           -           -           (2 794)     (2 794)
Net profit/(loss)
for the period       304      (1 309)      1 233        2 672          (2 593)        307



For the 12 months ending 30 June 2015


                            Water         Pipeline                                  Total
R’000           Trading     Treatment     services    Plastics      Investment
Total
revenue          97 202            -      77 988      202 917          3 652      381 759
Inter-
segmental
revenue               -            -     (25 531)      (6 578)        (3 652)     (35 761)
External
revenue          97 202            -      52 457      196 339                 -   345 998
Segment
results
before
separately
disclosable
items             6 917       (1 554)      7 213       (1 465)            -        11 111
Interest
received             81            -          76               -          6           163
Termination
benefits         (1 715)           -        (925)              -          -        (2 640)
Legal
Settlement
costs              (702)           -        (379)      (1 419)            -        (2 500)
Inventory
Impairment         (160)           -           -          (68)            -          (228)
Depreciation
And amor-
tisation           (195)        (428)     (3 378)      (4 075)       (1 613)       (9 689)
Finance cost        (92)           -        (151)           -        (5 586)       (5 829)
Income tax            -            -        (312)           -           258           (54)
Net profit/(loss)
for the
year                 4 134   (1 982)        2 144       (7 027)    (6 935)       (9 666)

NOTES

BASIS OF PREPARATION
The condensed consolidated interim financial information for the six months ended 31
December 2015 from which these financial statements have been derived has been prepared
in accordance with International Financial Reporting Standards (IFRS), the SAICA
financial reporting guides as issued by the Accounting Practices Committee, the
interpretations adopted by the International Accounting Standards Board (IASB), the
Financial Reporting Pronouncements as issued by the Financial Reporting Standards
Council, the Listings Requirements of the JSE Limited and the requirements of the South
African Companies Act 71 of 2008, as amended.

These condensed interim financial results are presented in compliance with IAS 34 -
Interim Financial Reporting and should be read in conjunction with the annual financial
statements for the year ended 30 June 2015.

These financial results were internally compiled by R Viljoen CA(SA) and have not been
reviewed or audited by the Company’s auditors.

ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the abridged interim financial
information are consistent with those of the annual financial statements for the year
ended 30 June 2015. For a full list of standards and interpretations which have been
adopted we refer you to the 30 June 2015 annual financial statements.

COMMENTARY

FINANCIAL RESULTS
Revenue for the financial period decreased by 54.4% to R98.3m (2014: R215.9m) as further
explained under the Operational Review below.

The gross profit margin showed a small decrease to 17.1% (2014: 17.7%). The trading
division showed an increase in profit margins, this was however eroded by under
recoveries due to low volumes in the Rare Plastics factory.

Operating expenses decreased by 36.2% to R23.4m (2014: R36.7m) for the period under
review. This was as a result of savings in employee costs following the rationalisation
of operations in the 2015 financial year. There was also a concerted effort by
management to reduce operating expenses in light of the tough market conditions during
the period.

Even though there were significant savings in operating expenses, this was not enough to
offset the loss in Gross Profit due to reduced volumes. EBITDA of R1.7m was realized
during the period (2014: R6.9m). Headline loss for the period was R6m (2014 profit:
R0.3m).

OPERATIONAL REVIEW

The mining sector remains under pressure, this had a direct negative effect on the
market activity experienced by both Rare Plastics and Pipeline Services.

A significant decline in the HDPE piping market negatively affected Rare Plastics. Rare
Plastics contributed R42.6m towards turnover whereas it contributed R130.8m to the
comparative figure for the six months ended 31 December 2014.

The Pipeline Services division also experienced a decrease in activity which resulted in
turnover decreasing to R2.4m (2014: 34.8m).

The trading division performed well in a tough market and recorded a 6% increase in
turnover to R53.4m (2014: R50.3m). The division also delivered a strong improvement in
operating margin.

PROSPECTS
Rare will continue to grow its core trading business organically. The Company had
started to reap the rewards of managements’ efforts during the period under review.

The South African HDPE market for large bore pipe remains under severe pressure given
the slump in SA mining sector and global commodity prices.

Mining spend in Africa, excluding South Africa, remains an opportunity for Rare.

DIVIDENDS

No dividend was declared for the period.

On behalf of the board
W. van Coller                R. Viljoen
CEO                          CFO

Kliprivier
31 March 2016

Designated Advisor: PSG Capital (Pty) Limited

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