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Provisional reviewed condensed financial information and cash dividend declaration for the year ended 30 June 2016
TORRE INDUSTRIES LIMITED
Incorporated in the Republic of South Africa
(Registration number 2012/144604/06)
Share code: TOR ISIN: ZAE000188629
("Torre" or "the Group")
PROVISIONAL REVIEWED CONDENSED FINANCIAL INFORMATION AND CASH DIVIDEND DECLARATION
FOR THE YEAR ENDED 30 JUNE 2016
KEY FEATURES
REVENUE up 52% to R2 billion
NORMALISED EBITDA up 3% to R198 million
NORMALISED HEADLINE EARNINGS stable at R110 million
NORMALISED HEPS down 31% to 21.40c
CONDENSED CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
Reviewed 12 months Audited 12 months
ended 30 June 2016 ended 30 June 2015
R'm R'm
Revenue 2 023 1 332
Cost of sales (1 344) (869)
Gross profit 679 463
Other income 6 27
Operating expenses (553) (335)
Operating profit 132 155
Impairment of assets (72) (13)
Retrenchment, closure and start-up costs (22) -
Net operating profit 38 142
Income from equity accounted investments 2 1
Finance income 8 8
Finance costs (36) (27)
Profit before taxation 12 124
Taxation 25 (22)
Profit after taxation 37 102
Other comprehensive income:
Items that may be reclassified through profit or loss
Foreign currency translation movements 33 8
Total comprehensive income for the year 70 110
Profit attributable to:
Ordinary shareholders of the group 28 98
Non-controlling interest 9 4
37 102
Total comprehensive income attributable to:
Ordinary shareholders of the group 43 106
Non-controlling interest 27 4
70 110
Reconciliation of net operating profit to EBITDA
Net operating profit 38 142
Depreciation and amortisation 66 37
Impairment of property, plant and equipment 28 13
Impairment of intangible assets 27 -
Impairment of goodwill 17 -
EBITDA 176 192
Retrenchment costs 11 -
Closure of operations 3 -
Start-up costs 8 -
Normalised EBITDA 198 192
Reconciliation of attributable earnings to headline
earnings
Profit attributable to ordinary shareholders 28 98
Profit on sale of investment - (1)
Impairment of property, plant and equipment 28 13
Impairment of intangible assets 27 -
Impairment of goodwill 17 -
Taxation (15) (3)
Headline earnings attributable to ordinary shareholders 85 107
Retrenchment costs 9 -
Closure of operations 3 -
Start-up costs 5 -
Amortisation of intangible assets raised on acquisitions 8 2
Normalised headline earnings attributable to ordinary shareholders 110 109
Weighted average number of shares in issue ('m) 512 353
Diluted Weighted average number of shares in issue ('m) 516 357
Earnings per share (cents) 5,58 28,00
Diluted earnings per share (cents) 5,54 27,63
Headline earnings per share (cents) 16,61 30,26
Diluted headline earnings per share (cents) 16,49 29,86
Normalised headline earnings per share (cents) 21,40 30,98
Interim dividend per share (cents) 3,50 3,50
Final dividend per share (cents) 2,00 4,00
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
Non-
Controlling Total
Attributable to Owners of the Company Interests Equity
Non-
Controlling
Stated Other Retained Interests
Capital FCTR Reserves income (NCI) Total
R'm R'm R'm R'm R'm R'm
Balance as at 30 June 2014 465 (3) 10 14 1 487
Shares issued 789 789
Share issue costs (10) (10)
Treasury shares purchased (21) (21)
Share based payment expense 2 2
NCI acquired through business combinations 2 2
Dividends paid (12) (12)
Profit for the year 99 4 103
Transactions with NCI (32) 26 (6)
Movement in FCTR 8 8
Balance as at 30 June 2015 1 223 5 12 69 33 1 342
Shares issued 2 2
Treasury shares sold 23 23
Share based payment expense 4 4
Dividends paid 14 (40) (26)
Profit for the year 28 9 37
Transactions with NCI 57 2 134 193
Movement in FCTR 15 18 33
Balance as at 30 June 2016 1 319 20 16 59 194 1 608
CONDENSED CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Reviewed as at Audited as at
30 June 2016 30 June 2015
R'm R'm
ASSETS
Non-current assets 1 321 1 124
Property, plant and equipment 120 156
Rental assets 296 200
Intangible assets 137 176
Goodwill 599 528
Deferred tax 42 31
Finance leases 62 28
Investment in associates 65 5
Current assets 1 105 848
Inventories 489 414
Trade and other receivables 343 311
Other financial assets 72 32
Cash and cash equivalents 201 91
TOTAL ASSETS 2 426 1 972
EQUITY AND LIABILITIES
Total Equity 1 608 1 342
Equity Attributable to Owners of the Company 1 414 1 309
Stated capital 1 319 1 223
Foreign currency translation reserve 20 5
Other reserves 16 12
Retained income 59 69
Non-Controlling Interests 194 33
Non-current liabilities 247 103
Interest bearing borrowings 171 12
Deferred purchase consideration 19 22
Deferred tax 50 66
Other financial liabilities 7 3
Current liabilities 571 527
Trade and other payables 410 433
Deferred purchase consideration 20 48
Taxation payable 1 1
Bank overdraft 81 15
Interest bearing borrowings 59 30
TOTAL EQUITIES AND LIABILITIES 2 426 1 972
Number of shares in issue 525 058 445 506 490 226
Net asset value per share (cents) 268,41 264,95
Net tangible asset value per share (cents) 129,09 125,98
CONDENSED CONSOLIDATED STATEMENT
OF CASH FLOWS
Reviewed Audited
12 months ended 12 months ended
30 June 2016 30 June 2015
R'm R'm
Net cash flow from operating activities 5 117
Cash generated from trading 158 177
Net working capital movements (127) (37)
Net finance costs and taxation paid (26) (23)
Net cash flow from investing activities (223) (249)
Capital expenditure on property, plant, equipment and rental assets (116) (119)
Acquisition of business operations (25) (104)
Increase in investments in associates (53) -
Decrease in deferred purchase consideration (35) (28)
Other investing activities 6 2
Net cash flow from financing activities 258 150
Proceeds from shares issued - 352
Treasury shares sold/(purchased) 23 (21)
Transactions with non-controlling interest 193 -
Increase/(decrease) in interest bearing borrowings 143 (125)
Dividends paid (25) (12)
Other financing activities (76) (44)
Total cash movement for the year 40 18
Cash at the beginning of the year 76 57
Effect of exchange rate movement on cash balances 4 1
Net cash at the end of the year 120 76
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The reviewed condensed financial information has been prepared in accordance with the framework concepts, the measurement and
recognition requirements of International Financial Reporting Standards (IFRS), and specifically the disclosure requirements of IAS34, 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") 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 2015, taking into account the various amendments now effective. The adoption of new and amended accounting standards has not
had any material impact on the financial information. The directors take full responsibility for the preparation of this report and for the correct
extraction of the financial information from the underlying financial statements.
2. FINANCIAL PREPARATION AND REVIEW
These results have been prepared by S Mansingh CA (SA), the Chief Financial Officer. The results were approved by the board of directors on
31 August 2016. The reviewed condensed financial information has been reviewed in terms of ISRE 2410 by Deloitte & Touche, the Group's
auditors. An unmodified review conclusion has been issued by Deloitte & Touche. This review conclusion does not necessarily cover all the
information contained in this announcement and shareholders are therefore advised that in order to obtain a full understanding of the nature
of the auditor's work they should obtain a copy of the review conclusion together with the financial information from the registered office of
the Company.
3. SEGMENT INFORMATION
Segmental disclosure has been revised from 1 July 2015 and now consists of Capital Equipment (previously Plant and Equipment), Parts and
Components (previously Services and Supplies), and Analytical Services (previously included in Services and Supplies). Comparative informa-
tion has been restated. Central and eliminations (inclusive of the previous Financial Solutions segment) deal with other businesses not forming
part of a distinct segment. Segment results have largely been impacted by acquisitions concluded in the previous financial year. Operating
profit is the key measure of segmental performance.
SEGMENT REPORT Reviewed Restated Reviewed
June 2016 June 2015
R'm R'm
Segment revenue
Capital Equipment 879 480
Parts and Components 859 813
Analytical Services 295 49
Central and Eliminations (10) (10)
2 023 1 332
Segment operating profit/(loss)
Capital Equipment 33 51
Parts and Components (36) 70
Analytical Services 39 9
Central and Eliminations 2 12
38 142
Segment depreciation and amortisation
Capital Equipment 27 16
Parts and Components 17 16
Analytical Services 18 3
Central and Eliminations 4 3
66 38
SEGMENT IMPAIRMENTS
Capital Equipment 19 13
Parts and Components 53 -
Analytical Services - -
Central and Eliminations - -
72 13
Segment assets
Capital Equipment 1 619 1 120
Parts and Components 688 901
Analytical Services 376 344
Central and Eliminations (257) (393)
2 426 1 972
Segment liabilities
Capital Equipment 766 539
Parts and Components 506 484
Analytical Services 162 126
Central and Eliminations (616) (519)
818 630
Revenue generated for the year to June 2016 was R1,332 million from South Africa and R691 million
from the rest of the world.
4. Business Combinations
BUSINESS COMBINATIONS
Equipment Sales Tribology
and Services Services
R'm R'm
Non-current assets 4 1
Current assets 25 2
Non-current liabilities (36) -
Current liabilities (32) (1)
Fair value of net assets acquired (39) 2
Fair value of purchase consideration 35 11
Goodwill 74 9
On 1 November 2015, the group acquired control of 100% of the share capital of Equipment Sales and Services Proprietary Limited for
R35 million which is included in the Capital Equipment segment. The fair value of net assets acquired as well as the purchase consideration
are provisional in terms of IFRS 3 Business Combinations. The acquired business has contributed R159 million of revenue to the group results.
It has also contributed R26 million to the group operating profit for the period from 1 November 2015 to 30 June 2016.
On 1 March 2016, the group acquired control of 100% of the share capital of Tribology Services (Private) Limited for R11 million which is
included in the Analytical Services segment. The fair value of net assets acquired as well as the purchase consideration are provisional in
terms of IFRS 3 Business Combinations. The acquired business has contributed R3 million of revenue to the group results. It has also contributed
R1 million to the group operating profit for the period from 1 March 2016 to 30 June 2016.
On a pro-forma basis, had these acquisitions been included for the full financial year, revenue contribution from these businesses would have
been R241 million, whilst net operating profit contribution would have been R37 million.
5. MATERIAL BALANCE SHEET MOVEMENTS
Stated capital has increased since 30 June 2015 as a result of treasury shares sold for R23 million in October 2015 as well as the issue of
shares mainly related to the acquisition of the non-controlling interests.
Goodwill increased since 30 June 2015 mainly as a result of the acquisition of Equipment Sales and Services. Investments increased mainly
due to the investment in Stellar Equipment Finance.
As part of the annual impairment assessment during the 2016 financial year, impairments of goodwill, intangible assets and property,
plant and equipment were recognised to the value of R72 million (pre-tax). Interest bearing borrowings have increased
due to the funding of the bolt on acquisitions and increased working capital.
Non-controlling interest increased significantly mainly due to the subscription of shares in Kanu Equipment Limited by African Agriculture
Fund, a private equity fund managed by Phatisa Fund Managers Limited and a management consortium. This subscription in June 2016 led to
an inflow of R197 million. Deferred purchased consideration decreased mainly as a result of R35 million payments made during the financial
year as well as R21 million fair value adjustments.
6. SUBSEQUENT EVENTS
There are no adjusting or other material events that have occurred since 30 June 2016 which have a financial impact on the financial
information presented.
7. OTHER
There are no material contingencies, commitments nor legal matters to report. The Group does not have any material items reported at
fair value at year end. Certain financial instruments, being foreign exchange contracts and interest rate swaps are measured at fair value using
Level II inputs. There are no Level I or Level III reported fair value measures.
COMMENTARY
INTRODUCTION
Torre Industries Limited is a JSE-listed industrial group that specialises in:
- the value added distribution of branded capital equipment, either for rental or sale;
- the supply of critical parts and components to the automotive, mining, construction, manufacturing and industrial sectors; and
- the provision of specialised analytical and testing services to exploration and mining companies as well as commercial laboratories.
Torre is headquartered in Modderfontein, Johannesburg and employs over 1 700 staff with a physical presence in 14 African countries,
including South Africa.
HIGHLIGHTS
Key achievements for the year include, inter alia:
- revenue and normalised EBITDA growth of 52% and 3% respectively;
- headline profits stable at R 110 million despite tough trading conditions and 31% decline in normalised HEPS to 21.4 cents per share;
- final cash dividend of 2 cents per share and full year dividend of 5.5 cents per share;
- acquisitions of Equipment Sales and Services and Tribology Services;
- the sale of a 40% interest in subsidiary Kanu Equipment to the African Agriculture Fund ("AAF") for US$16 million; and
- achieved certification as a level 4 Broad-Based Black Economic Empowerment (B-BBEE) contributor under the new codes for B-BBEE.
FINANCIAL REVIEW
The Group delivered reasonable results in a difficult market. The second half of the financial year was particularly challenging, with low
levels of activity from customers across most areas of the Group's operations. The results were also negatively affected by once off
integration costs at both Elephant Lifting and Set Point Group as well as lost revenue during the integration process which is now complete.
REVENUE AND EBITDA
Group revenue grew by R691 million to R2 billion, predominantly driven by the full year inclusion of acquisitions completed in the prior year.
In particular, Elephant Lifting was included for 6 months in the prior year and Set Point Group was included for 2 months in the prior year.
Other income was mainly as a result of once-off adjustments to the TGS deferred purchase consideration liability.
EBITDA grew by R6 million to R198 million after adjusting for exceptional items such as retrenchment costs, start-up costs, and closure costs.
The increase in EBITDA was aided by the full year inclusion of acquisitions completed in the prior year.
CASH AND DEBT
During the year R200m was drawn down against the R400m of available term facilities in South Africa and was used to finance the acquisitions and
working capital. New overdraft and term facilities were put in place in Botswana to fund their working capital requirements. The group ended
the period with R311m (2015:R57m) of interest bearing borrowings (including overdraft balances) and cash and cash equivalents increased
to R201m (2015:R90m) mainly due to the issue of additional shares in Kanu Equipment to AAF. Net debt (interest bearing borrowings less
net cash and cash equivalents) of R110m represents a net debt-to-equity ratio of 7% (2015:3%). As at 30 June 2016 the Group had undrawn
available credit facilities of R365m.
REVIEW OF OPERATIONS
Torre
Capital Equipment
The Capital Equipment segment comprised the following businesses in the 2016 financial year: Kanu Equipment, Elephant Lifting Equipment,
SA French, Manhand and Letaba. These businesses are collectively involved in the rental and sale of mining and construction equipment across
Africa; the distribution and rental of a comprehensive range of pumps; and the distribution and rental of a wide range of lifting equipment
ranging from tower cranes to forklifts to wire rope.
This segment experienced mixed results in the period under review, with the African business performing well on aggregate and the South
African focussed units trading behind expectation. The focus in this segment in the new financial year will be to contain costs in those units
facing subdued trading conditions but to continue to invest in order to ensure that customers are well supported through the cycle. A number
of growth opportunities exist for Kanu Equipment and these will continue to be pursued as this business seeks to roll out its proven model of
bolt on acquisitions in order to broaden its geographic coverage of the key markets in Africa.
Torre
Parts and Components
The Parts and Components segment comprised 2 key business units in the 2016 financial year, namely Torre Parts & Components ("TPC") and
Tractor & Grader Supplies ("TGS"). Pneumax and Meters and Reng and Gopro, businesses that were previously part of the Set Point Group,
have been consolidated into TPC and TGS respectively. TPC and TGS manufacture and / or distribute quality branded parts and components into
various markets including the automotive, commercial, industrial and mining industries.
This segment had a difficult year, with various headwinds in all of the key markets in which TPC and TGS trade. Significant focus has been
applied to strengthening and broadening our customer relationships and distribution channels across these businesses, while costs have been
rationalised to align the businesses to the current trading environment. We expect a far better performance from this segment in the new
financial year.
Torre
Analytical Services
The Analytical Services segment comprised the following businesses, all of which were added as a result of the Set Point acquisition in the
prior financial year, Wearcheck, AMIS and Set Point Laboratories. Wearcheck is the leading oil condition monitoring company in Africa, servicing
a large number of markets through the scientific analysis of used oil from mechanical and electrical systems. AMIS is a leading international
manufacturer and supplier of a wide range of matrix Certified Reference Materials. Set Point Laboratories is an ISO 17025 accredited analytical
chemistry lab.
On aggregate the Analytical Services segment performed satisfactorily in the period under review, although depressed levels of mining
exploration activity will continue to impact on the performance of Set Point Laboratories going forward. The prospects for Wearcheck and AMIS
are positive for the new financial year.
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 31 August 2016
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 8 December 2015. The approved financial assistance included guarantees on
behalf of Group companies and general facilities and loans to Group companies already provided totalling R750 million. Further approval was
authorised to provide financial assistance in a maximum aggregate amount of R299 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
7 December 2016.
CASH DIVIDEND DECLARATION
In accordance with the policy of having dividends covered 4 times by headline earnings per share, notice is hereby given that the Board
declared a final gross cash dividend of 2 cents per share (1.7 cents net of dividend withholding tax at 15% if applicable) for the 12 months'
period ended 30 June 2016 ("Final Dividend"). No scrip dividend is offered as the share price is materially below the board's assessment of intrinsic value.
The final dividend will be payable to shareholders recorded in the register of the company at the close of business on the record date
appearing below. This dividend has been declared from income reserves of the company.
The number of ordinary shares in issue at the date of this declaration is 525,058,445.
The salient dates applicable to the Final Dividend are as follows:
Declaration date: Wednesday, 31 August 2016
Last date to trade cum dividend: Tuesday, 20 September 2016
Shares commence trading ex-dividend: Wednesday, 21 September 2016
Record date: Friday, 23 September 2016
Payment Date: Monday, 26 September 2016
No share certificates may be dematerialised or rematerialised between Wednesday, 21 September 2016 and Friday, 23 September 2016
both days inclusive. Dividend cheques will be posted and electronic payments made, where applicable, to certificated shareholders on the
payment date.
Dematerialised shareholders will have their accounts with their Central Securities Depository Participant or broker credited on the payment
date. The company`s income tax reference number is 9698735157.
CHANGES TO THE BOARD
Mr Roy Midlane resigned as Chief Financial Officer on 25 August 2016. Roy will remain on the Board as a non-executive director until the
conclusion of the Mandatory Offer process by Stellar Capital Partners Ltd to Torre Shareholders, and thereafter Roy has agreed to provide con-
sulting and advisory services to Torre. The Board expressed its gratitude and appreciation to Roy for his valuable contributions to Torre as Chief
Financial Officer since its inception in 2012.
Mr Charles Pettit accepted the position of Executive Deputy Chairman dedicated to the execution of the growth strategies in Torre as a
member of the Board. Charles relinquished the position of Chief Executive Officer on 25 August 2016 in order to focus on this new strategic role.
The Board announced that Mr Johan Botes (previously the Group Chief Operating Officer) was appointed as Chief Executive Officer of Torre
on 25 August 2016. The Board also announced that Mr Shivan Mansingh (previously the Group Financial Manager) was appointed as Chief
Financial Officer on 25 August 2016.
There were no other changes to the Board in the year ended 30 June 2016 or up to date of this report.
PROSPECTS
We are cautiously optimistic looking forward as we believe that the quality of our businesses, and the various initiatives that have been
targeted to improve performance, will position us to continue to trade profitably regardless of market conditions. In addition, our strong
Group balance sheet will allow us to take advantage of acquisition opportunities at this low point in the cycle.
RESULTS PRESENTATION CONFERENCE CALL
Torre will host a conference call on the financial results on Friday 2nd September at 11am (South African time). Anyone who wishes to
participate in the conference call can dial the following numbers:
- Neotel 011 535 -3600
- Telkom 010 201 -6800
The presentation will be available on the company's website on the morning of the conference call
(www.torreindustries.com/investor-presentations).
Any forward-looking statements in this announcement have not been reviewed and reported on by the Company's auditors.
On behalf of the Board
CS Seabrooke
Chairman of the Board
31 August 2016
Directors
CS Seabrooke (Chairman)#, CE Pettit (Executive Deputy Chairman), JT Botes (Chief Executive Officer), S Mansingh (Chief Financial Officer),
PJ Van Zyl#, MM Ngoasheng#, LE Bakoro#, MS Bomela*, N Khaole*, SR Midlane*
* Non-executive
# Independent non-executive
Company Secretary
Sean Graham
Registered Office
11 Avalon Road, Westlake View Ext. 11, Modderfontein, 1609, South Africa
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
A: 11 Avalon Road, Westlake View Ext. 11, Modderfontein, 1609, South Africa
P: PO Box 856, Isando, 1600, South Africa
T: +27 (0) 11 923 7000
www.torreindustries.com
Date: 31/08/2016 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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