Wrap Text
Unaudited condensed consolidated interim results for the period ended 31 December 2016
ROLFES HOLDINGS LIMITED
(Registration number 2000/002715/06)
Incorporated in South Africa
Share Code: RLF
ISIN: ZAE000159836
(“Rolfes” or “the Group”)
www.rolfesza.com
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE PERIOD
ENDED 31 DECEMBER 2016
PERFORMANCE SUMMARY
* Revenue increased by 32% to R823 million (Dec 2015: R626 million)
* Operating profit increased by 62% to R97 million (Dec 2015: R60 million)
* Headline earnings increased by 60% to R61 million (Dec 2015: R38 million)
* Headline earnings per share increased by 34% to 37.9 cents per share
(Dec 2015: 28.4 cents per share)
* Net debt to equity (gearing ratio) improved to 38% (Dec 2015: 47%)
* Ordinary dividend of 4 cents per share declared (Dec 2015: nil cents)
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2016
Unaudited Unaudited Audited
as at as at as at
31 Dec 2016 31 Dec 2015 30 Jun 2016
R’000 R’000 R’000
ASSETS
Non-current assets 409 097 425 359 407 857
Property, Plant and Equipment 135 669 159 805 133 661
Intangible assets and goodwill 273 428 265 554 274 196
Current assets 804 806 614 760 691 546
Inventories 373 835 274 098 343 630
Trade and other receivables 374 981 286 741 297 663
Cash and cash equivalents 55 990 53 921 50 253
Total assets 1 213 903 1 040 119 1 099 403
EQUITY AND LIABILITIES
Capital and reserves 601 795 489 531 550 535
Stated capital 208 588 210 888 208 588
Treasury shares (868) (868) (868)
Retained income 382 388 266 762 331 056
Reserves 4 103 5 888 4 662
Non-controlling interest 7 584 6 861 7 097
Non-current liabilities 294 401 280 468 248 668
Interest-bearing loans 265 098 248 653 220 269
Deferred tax liability 26 212 28 837 25 563
Provisions 3 091 2 978 2 836
Current liabilities 317 707 270 120 300 200
Trade and other payables 295 586 233 718 275 239
Interest-bearing loans 19 660 34 987 23 295
Current tax liability 2 461 1 415 1 666
Total equity and liabilities 1 213 903 1 040 119 1 099 403
Information related to the number of
shares in issue as at 31 December 2016
Total shares in issue (‘000) 161 942 161 942 161 942
Treasury shares (‘000) (641) (641) (641)
Shares in issue excluding treasury
shares ('000) 161 301 161 301 161 301
Weighted number of shares in issue
(‘000) * 161 301 134 634 147 967
* The increase in shares relates to the 53.3 million shares issued on 1 October 2015. The shares were
weighted for 6 months and 9 months for the December 2015 and June 2016 periods respectively.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 DECEMBER 2016
Unaudited Unaudited Audited
as at as at as at
31 Dec 2016 31 Dec 2015 30 Jun 2016
R’000 R’000 R’000
Revenue 823 386 625 684 1 363 547
Cost of sales (636 657) (479 566) (1 055 478)
Gross profit 186 729 146 118 308 069
Other Income 6 082 1 153 12 398
Operating expenses (95 434) (87 185) (183 339)
Operating profit 97 377 60 086 137 128
Finance income 1095 266 1 293
Finance costs (15 463) (9 381) (29 208)
Profit before tax 83 009 50 971 109 213
Tax (21 475) (12 305) (29 175)
Profit for the period 61 534 38 666 80 038
Other comprehensive income:
Exchange differences from translating
(559) - (685)
foreign operations
Total comprehensive income for the
period 60 975 38 666 79 353
Profit for the period attributable to:
Equity holders of the parent 61 047 38 113 78 477
Non-controlling interest 487 553 1 561
RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS
Earnings 61 047 38 113 78 477
Adjusted for the after-tax effect of:
Loss from sale of fixed asset - 52 795
Profit on sale of business - - (613)
Headline earnings 61 047 38 165 78 659
Earnings per share (cents)*
- Basic 37.85 28.31 53.04
- Headline 37.85 28.35 53.16
*The entity had no specific items resulting in any dilution of the specific earnings numbers. Therefore no
specific diluted earnings per share are indicated for the various categories.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD
ENDED 31 DECEMBER 2016
Unaudited Unaudited Audited
as at as at as at
31 Dec 2016 31 Dec 2015 30 Jun 2016
R’000 R’000 R’000
Cash flow (utilised in)/ generated from:
Operating activities 14 403 (14 239) 104 291
Finance costs (14 368) (9 049) (27 915)
Tax paid (17 611) (15 903) (30 806)
Cash flow utilised in investing activities (7 880) (237 636) (227 455)
Cash flow generated from financing
activities 31 194 381 707 291 541
Cash generated / (deficit) for the
period 5 738 104 880 109 656
Cash and cash equivalents:
- beginning of the period 49 943 (50 959) (59 713)
- end of the period 55 681 53 921 49 943
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE
PERIOD ENDED 31 DECEMBER 2016
Non-
Share Share Retained Treasury Total
Reserves controlling
Capital Premium Income Shares Equity
Interest
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2015 1 086 49 802 253 677 (868) 5 347 63 260 372 304
Issue of new shares 533 159 467 - - - - 160 000
Movements - - (25 029) - 541 (56 952) (81 440)
Total comprehensive
income for the period - - 38 114 - - 553 38 667
Balance at 31 December
2015 1 619 209 269 266 762 (868) 5 888 6 861 489 531
Movements - (2 300) 23 931 - (541) (772) 20 318
Total comprehensive
income for the period - - 40 363 - (685) 1 008 40 686
Balance at 30 June 2016 1 619 206 969 331 056 (868) 4 662 7 097 550 535
Total comprehensive
income for the period - - 61 047 - (559) 487 60 975
Dividend - - (9 715) - - - (9 715)
Balance at 31 December
2016 1 619 206 969 382 388 (868) 4 103 7 584 601 795
SEGMENT ANALYSIS FOR THE PERIOD ENDED 31 DECEMBER 2016
Operating
Revenue Gross Profit Assets Liabilities
Profit
31 December 2016 R'000 R'000 R'000 R'000 R'000
Agricultural 155 973 51 871 29 128 326239 76 963
Food 397 102 67 536 50 649 422 335 142 347
Industrial 221 249* 45 565 21 183 295 149 93 466
Water 49 062 21 757 4 778 120 038 28 964
Other - (8 361) 50 142 270 368
-
Total 823 386 186 729 97 377 1 213 903 612 108
31 December 2015
Agricultural 142 636 43 300 24 767 195 597 84 492
Food 161 479 24 962 18 877 226 935 109 601
Industrial 260 117* 48 766 14 200 270 471 119 296
Water 61 452 29 090 7 049 143 522 88 651
Other - (4 807) 203 594 148 548
-
Total 625 684 146 118 60 086 1 040 119 550 588
30 June 2016
Agricultural 268 455 80 979 37 330 292 920 66 743
Food 467 682 75 143 56 428 340 779 123 610
Industrial 514 629 98 590 42 673 310 081 109 166
Water 112 781 53 357 12 062 112 246 23 047
Other - (11 365) 43 377 226 302
-
Total 1 363 547 308 069 137 128 1 099 403 548 868
The segmental report of the Group is based on the information reported to the chief operating decision-
maker. The analysis is presented after taking certain intercompany and inter-segmental transactions
into account.
* Lead Chrome plant closure end March 2016 revenue included to December 2015 amounted to R67m.
COMMENTARY
STRATEGIC OVERVIEW
Rolfes is a black empowered platform chemical group targeting the need for food security, clean water
and manufacturing demand through its four strategically placed divisions being agricultural, food,
industrial and water expanding proactively in domestic, developed and foreign emerging markets.
As part of its core organic growth strategy, the Group concentrates on further diversification of its
specialist non-commodity low volume high margin product ranges and increasing its geographical
footprint into various markets whilst targeting the optimal leveraging of its current cost and distribution
platforms. The Group seeks to acquisitively expand its current four divisions by targeting high barrier to
entry specialist chemical companies.
GROUP PRODUCT OFFERING AND DIVISIONAL STRUCTURE
The Group manufactures and distributes a diverse range of market-leading, high-quality commodity and
specialist chemical and organic products to various industries.
The Agricultural division develops, manufactures and distributes products that promote plant root, and
foliar health, soil nutrition, disease prevention and control and various other agricultural remedies in
high value and wheat and maize crops.
The Food division distributes imported and locally manufactured products to the food and beverage,
bakery, dairy, pharmaceutical and cosmetics industries.
The Industrial division manufactures and distributes industrial chemicals including various organic and
inorganic products including additives, in-plant and point-of-sale dispersions, leather chemicals and
solutions, solvents, lacquer thinners, pigments, surfactants, cleaning solvents, water treatment
products, creosotes and waxes.
The Water division provides specialised water purification solutions and products to the industrial,
mining, home and personal care markets. Additionally, the division manufactures and distributes pure
beneficiated silica to the mining, metallurgical, fertiliser, water-filtration and construction industries.
The Group’s international footprint and customer base extends to Asia, the rest of Africa, Eastern and
Western Europe, with operations currently in Botswana, Zambia, and Romania.
GROUP FINANCIAL PERFORMANCE
Group revenue increased by 32% to R823 million (Dec 2015: R626 million). Exports, including sales
and services rendered in the foreign subsidiaries amounted to R82 million comprising 10% of total
revenue to December 2016 (December 2015: R95 million comprising 13% of total revenue).
Operating profit increased to R97 million (Dec 2015: R.60 million) at a margin of 11.8% of revenue (Dec
2015: 9.6%). EBITDA increased by 58% to R103 million (Dec 2015: R65 million). EBITDA is calculated
as operating profits adjusted for depreciation and amortisation of R5.7 million (Dec 2015: R5 million).
Headline earnings increased by 60% to R61 million (Dec 2015: R38 million). Headline earnings per
share increased by 34% to 37.9 cents (Dec 2015: 28.4 cents). The weighted average number of shares
in issue for the period was 161 301 668 (Dec 2015: 134 634 168).
Net finance costs increased to R14 million (Dec 2015: R9 million) mainly due to higher interest paid
relating to acquisitive long term debt. Interest cover remained constant at 7 times (Dec 2015: 7 times)
with the net debt to equity ratio (gearing) improving to 38% at Dec 2016 (Dec 2015: 47%).
GROUP CASH FLOW PERFORMANCE
Cash generated from operating activities improved by 201% to R14 million (Dec 2015: R14 million
deficit). Net working capital investment of R453 million represents the normal seasonal increase in
inventory of R30 million, increase in accounts receivable of R77 million and an increase in accounts
payable of R20 million. Debtors’ days of 74 days (Dec 2015: 74 days). Stock days decreased to 92
days (excluding stock in transit) (Dec 2015: 105 days). Due to seasonality in especially Agricultural and
Food divisions’ working capital is realised in cash during the second half of the financial year. The
group is expected to realise this working capital at gross profit margins similar to those achieved up to
December 2016 resulting in cash generation from operations. Creditors’ days decreased to 61 days
(excluding stock in transit) (Dec 2015: 79 days). The net investment in working capital increased to 105
days (Dec 2015: 100 days).
Cash flow utilised in investing activities of R7.9 million includes capital expenditure, research and
development and infrastructure expansion capital expenditure. The cash flow generated from financing
activities of R31 million includes facility utilisation and dividends declared during the current dividend
cycle.
OPERATIONAL REVIEW
AGRICULTURAL
The division supplies products mostly into high value specialised permanent and semi-permanent
crops. Its product positioning provides a natural defence against prolonged drought conditions.
Effective procurement and resource restructuring further counteracted the impact of the drought on the
business operating profit performance although the drought conditions improved towards the latter part
of November 2016 resulting in solid growth on operating profit level compared to the July to December
2015 period.
Revenue increased by 9% to R156 million (Dec 2015: R143 million). Gross profit margins increased to
33.3% (Dec 2015: 30.4%) mainly due to the effective implementation of procurement backward
integration initiatives.
Operating costs increased to R23 million (Dec 2015: R19 million) due to an investment in technical
resources and capabilities. The operating profit margin improved to 18.7% from 17.4% in Dec 2015.
Capital expenditure of R4.2 million includes mainly Research and Development costs incurred during
the current reporting period.
The development of distribution channels for foliar feeds in the rest of Africa and Europe is on-going.
New product registrations are granted continuously both locally and internationally. Formal trials and
testing of the green PGPR (bacterial) products is progressing well.
FOOD
Bragan Chemicals is an importer and distributor of commodity and speciality products in the food and
beverage, bakery, dairy, pharmaceutical and cosmetics industries. Growth drivers include national
market share, rising food prices and increased staple demand.
Revenue increased by 146% to R397 million (Dec 2015: R161 million – included for 3 months from 1
October 2015). Gross profit margins increased to 17% (Dec 2015: 15.5%) largely driven by pricing
strategies and volume increases.
Operating costs increased to R17 million (Dec 2015: R6 million – included for 3 months from 1 October
2015). The operating profit margin improved to 12.8% from 11.7% in Dec 2015.
The business is expanding its geographical footprint and product ranges locally and into neighbouring
countries. Group initiatives include the focused and combined export drive of product into southern
African countries leveraging off the existing group infrastructure to ensure low cost increases.
Capital expenditure amounted to R1.5 million, incurred to improve logistics capacity.
INDUSTRIAL
Revenue decreased by 15% to R221 million (Dec 2015: R260 million – lead chrome pigment product
sales (plant closed) included of R67m). Gross profit margins increased to 20.6% (Dec 2015: 18.7%),
mainly due to the closure of the lower margin lead chrome manufacturing plant in March 2016.
Operating margins improved to 9.6% (Dec 2015: 5.5%).
Operating costs decreased by 30% to R24 million (Dec 2015: R35 million). The operating profit margin
improved to 9.6% from 5.5% in Dec 2015.
The division has benefited from overhead cost and resource consolidation with the Water division.
Increased product volume demand in industrial products and leather, export growth, good cost control
and effective treasury management contributed to the pleasing performance of the business unit.
Capital expenditure of R1.1m included the continued improvement of quality management systems,
investment into testing/laboratory facilities and transport fleet upgrades. The Industrial division will
continue to focus on adding new higher margin specialist product lines and export growth leveraging of
its current cost base.
WATER
The Water divisions’ period to date performance was hampered by certain petrochemical tender award
deadline extensions. Revenue decreased by 20% to R49 million (Dec 2015: R61 million) and gross
profit margins decreased to 44.3% (Dec 2015: 47.3%), mostly attributable to a once of tender awarded
and completed in the prior years. Operating costs decreased by 23% to R17 million (Dec 2015: R22
million) due to successful restructuring initiatives and management team changes.
The business, realigned and suitably focussed, will capitalise on opportunities in larger and heavy
industrial industries in South Africa to ensure sustainable growth.
OPERATING ENVIRONMENT AND PROSPECTS
Notwithstanding a challenging economic environment, the Group is performing in line with expectations
and further growth in earnings is expected in the period ahead.
Any forward-looking statements in this announcement have not been reviewed and reported on by the
Company's auditors.
CASH DIVIDEND DECLARATION
In accordance with Board policy to review dividend payments to shareholders at the end of each
reporting period, notice is hereby given that the Board declared a final gross cash dividend of 4 cents
per ordinary share for the 6 months ended 31 December 2016 ("interim dividend"). The interim dividend
will be payable to shareholders recorded in the register of the Company at the close of business on the
record date appearing below.
The number of ordinary shares in issue at the date of this declaration is 161 942 800.
The salient dates applicable to the interim dividend are as follows:
Declaration date: Monday, 20 February 2017
Last date to trade cum dividend: Tuesday, 28 March 2017
Shares commence trading ex-dividend: Wednesday, 29 March 2017
Record date: Friday, 31 March 2017
Payment Date: Monday, 3 April 2017
In accordance with paragraphs 11.17(c) (i) to (x) and 11.17(c) of the JSE Listings Requirements, the
following additional information is disclosed:
- The local dividends tax rate is 15%;
- The dividends will be paid from income reserves;
- The gross dividend to be used in determining the Dividends Tax is 4 cents per ordinary share;
- The dividend tax to be withheld by the Company is equal to 0.60000 cents per ordinary share;
- The gross dividend amount is 4 cents per ordinary share for shareholders exempt from
dividends tax;
- The net dividend amount is 3.40000 cents per ordinary share for shareholders not exempt from
dividends tax;
- Rolfes Holdings Limited has 161 942 800 ordinary shares in issue (which includes 641 332
treasury shares); and
- Rolfes Holdings Limited’s income tax reference number is 9492/089/14/0.
Where applicable, payment in respect of certificated shareholders will be transferred electronically to
shareholders’ bank accounts on the payment date. In the absence of specific mandates, payment
cheques will be posted to certificated shareholders at their risk on the payment date. Shareholders who
have dematerialised their shares will have their accounts at their Central Securities Depository
Participant or broker credited on the payment date.
No share certificates may be dematerialised between Wednesday, 29 March 2017 and Friday, 31
March 2017 both days inclusive.
BASIS OF PREPARATION
The unaudited condensed consolidated interim financial statements are prepared as a going concern
on a historical cost basis except for the measurement of the financial assets and liabilities at fair value
through profit and loss and at fair value through comprehensive income in accordance with accounting
policies. The Board acknowledges its responsibility for the preparation of the unaudited condensed
consolidated interim financial results which were prepared by JJT Ferreira, the Group Financial Director
of Rolfes Holdings Limited. The unaudited condensed consolidated interim financial results for the
period ended 31 December 2016 have been prepared in accordance with the framework concepts and
the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”)
and the International Accounting Standard 34 (IAS 34 Interim Financial Reporting), the South African
Institute of Chartered Accountants (SAICA) Financial Reporting Pronouncements as issued by the
Financial Reporting Standards Committee, the interpretations adopted by the International Accounting
Standards Board (IASB), the JSE Listing Requirements and the Companies Act, No 71 of 2008.
The unaudited condensed consolidated interim financial statements comprise the summarised
statement of financial position at 31 December 2016 and the summarised statements of profit or loss
and other comprehensive income, changes in equity and cash flows for the period ended then.
ACCOUNTING POLICIES
The unaudited condensed consolidated interim financial results do not include all the information
required by IFRS for a full set of consolidated financial statements. The accounting policies adopted in
the preparation of the unaudited condensed consolidated interim financial results for the period ended
31 December 2016 are consistent with those applied in the preparation of the annual financial
statements for the year ended 30 June 2016. All new interpretations and standards were assessed and
adopted with no material impact.
FINANCIAL INSTRUMENTS INFORMATION
The Group has not disclosed the fair values of financial instruments measured at amortised cost as
their carrying amounts closely approximate their fair values. There were no financial instruments
measured at fair value that were individually material at the end of the current reporting period.
CORPORATE ACTIONS
No actions noted that should be brought under the attention of the investors.
RELATED PARTY TRANSACTIONS
The Group companies entered into various operational sale and purchase transactions with related
parties. These transactions occurred under terms that are not any different than those arranged with
third parties and occurred on an arm’s length and commercial basis.
CHANGES TO THE BOARD
There were no changes to the Board in the interim period ended 31 December 2016 or up to date of
this report.
SUBSEQUENT EVENTS
There are no adjusting or other material events that have occurred between 31 December 2016 and the
date of this report which may have a material impact on the understanding of this report and the
financial information presented.
On behalf of the Board
MS Teke L Lynch
Chairman Chief Executive Officer
20 February 2017
REGISTERED OFFICE
First floor, The Oval West, Wanderers Office Park, 52 Corlett Drive, Illovo, 2196
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
DIRECTORS
MS Teke* (Chairman), L Lynch (Chief Executive Officer), JJT Ferreira (Group Financial Director), E van
der Merwe*, SS Mafoyane *# (Lead Independent Director), MM Dyasi*#, DM Mncube*#, JR Winer*, MG
Mokoka*#
* Non-executive # Independent
COMPANY SECRETARY
CorpStat Governance Services Proprietary Limited
PREPARED BY
Commentary: L Lynch and JJT Ferreira
Financial results: JJT Ferreira
SPONSORS
Grindrod Bank Limited
REGISTERED AUDITORS
SizweNtsalubaGobodo Incorporated
INVESTOR RELATIONS
Singular Systems Proprietary Limited
Date: 20/02/2017 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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