Wrap Text
Condensed consolidated interim results for the six months ended 31 December 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")
CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Notes Rm Rm Rm
Revenue 802 859 1 608
Cost of sales (514) (558) (1 061)
Gross profit 288 301 547
Other income - 7 6
Operating expenses (244) (237) (480)
Operating profit 44 71 73
Impairment of assets (2) - (72)
Retrenchment, restructuring and closure costs (25) - (14)
Net operating profit/(loss) 17 71 (13)
Income from equity accounted investments - - 2
Finance income 4 4 6
Finance costs (13) (9) (21)
Profit/(loss) before taxation 8 66 (26)
Taxation (5) (17) 7
Profit/(loss) for the period from continuing operations 3 49 (19)
Profit for the period from discontinued operations 3 26 36 56
Profit for the period 29 85 37
Other comprehensive (loss)/income:
Items that may be reclassified through profit or loss
Foreign currency translation movements (70) 64 33
Total comprehensive (loss)/income for the period (41) 149 70
Profit/(loss) attributable to:
Ordinary shareholders of the group 17 76 28
- Continuing operations 3 47 (21)
- Discontinued operations 14 29 49
Non-controlling interest 12 9 9
- Continuing operations - 2 2
- Discontinued operations 12 7 7
29 85 37
Total comprehensive (loss)/income attributable to:
Ordinary shareholders of the group (40) 121 43
Non-controlling interest (1) 28 27
(41) 149 7
Reconciliation of net operating profit to EBITDA
Net operating profit/(loss) 17 71 (13)
Depreciation and amortisation 21 30 58
Impairment of property, plant and equipment 2 - 28
Impairment of intangible assets - - 27
Impairment of goodwill - - 17
EBITDA from continuing operations 40 101 117
Retrenchment and restructuring costs 25 - 11
Closure of operations - - 3
Normalised EBITDA from continuing operations 65 101 131
Discontinued operations 40 41 67
Normalised EBITDA 105 142 198
Reconciliation of attributable earnings to headline earnings
Profit attributable to ordinary shareholders 17 76 28
Impairment of goodwill - - 17
Impairment of property, plant and equipment 2 - 28
Impairment of intangible assets - - 27
Taxation - - (15)
Headline earnings attributable to ordinary shareholders 19 76 85
- Continuing operations 5 47 36
- Discontinued operations 14 29 49
Headline earnings attributable to ordinary shareholders 19 76 85
Retrenchment and restructuring costs 18 - 9
Closure of operations - - 3
Amortisation of intangible assets raised on acquisition 2 4 8
Normalised headline earnings attributable to
ordinary shareholders 39 80 105
- Continuing operations 25 51 51
- Discontinued operations 14 29 54
Weighted average number of shares in issue ('m) 525 503 512
Diluted Weighted average number of shares in issue ('m) 529 508 516
Attributable earnings/(losses) per share (cents)
Aggregate
- Basic 3.27 15.06 5.58
- Diluted 3.25 14.92 5.54
Continuing operations
- Basic 0.59 9.30 (4.15)
- Diluted 0.59 9.21 (4.12)
Discontinued operations
- Basic 2.68 5.75 9.73
- Diluted 2.66 5.71 9.66
Headline earnings per share (cents)
Aggregate
- Basic 3.65 15.12 16.61
- Diluted 3.63 14.97 16.49
Continuing operations
- Basic 0.97 9.28 6.98
- Diluted 0.97 9.18 6.92
Discontinued operations
- Basic 2.68 5.84 9.63
- Diluted 2.66 5.79 9.57
Normalised headline earnings per share (cents)
Aggregate
- Basic 7.46 15.90 21.40
- Diluted 7.41 15.75 20.35
Continuing operations
- Basic 4.75 10.06 9.87
- Diluted 4.75 9.97 9.86
Discontinued operations
- Basic 2.68 5.84 10.56
- Diluted 2.66 5.78 9.57
Dividend per share (cents) - 3.50 7.50
CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Non-
Controlling Total
Attributable to Owners of the Company Interests Equity
Non-
Stated Other Retained Controlling
Capital Reserves FCTR income Interests Total
Rm Rm Rm Rm Rm Rm
Balance as at 30 June 2015 1 223 12 5 69 33 1 342
Treasury shares purchased 23 - - - - 23
Share based payment expense - 3 - - - 3
Dividends paid - - - (20) - (20)
Profit for the period - - - 75 9 84
Movement in FCTR - - 45 - 19 64
Balance as at 31 December 2015 1 246 15 50 124 61 1 496
Shares issued 2 - - - - 2
Share based payment expense - 1 - - - 1
Dividends paid 14 - - (20) - (6)
Profit for the period - - - (47) - (47)
Transactions with NCI 57 - - 2 134 193
Movement in FCTR - - (30) - (1) (31)
Balance as at 30 June 2016 1 319 16 20 59 194 1 608
Share based payment expense - (1) - - - (1)
Dividends paid - - - (11) - (11)
Profit for the period - - - 17 12 29
Transactions with NCI - - - 11 24 35
Movement in FCTR - - (57) - (13) (70)
Balance as at 31 December 2016 1 319 15 (37) 76 217 1 590
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
As at As at As at
31 December 31 December 30 June
2016 2015 2016
Notes Rm Rm Rm
ASSETS
Non-current assets 923 949 917
Property, plant and equipment 101 131 96
Rental assets 110 85 114
Intangible assets 134 170 137
Goodwill 462 470 462
Deferred tax 35 22 22
Finance leases 24 23 33
Investment in associates 56 46 51
Other financial assets 1 2 2
Current assets 660 687 685
Inventories 380 387 380
Trade and other receivables 235 222 234
Cash and cash equivalents 37 54 48
Other financial assets 8 24 23
Non-current assets held for sale 3 798 634 824
TOTAL ASSETS 2 381 2 270 2 426
EQUITY AND LIABILITIES
Total Equity 1 590 1 496 1 608
Equity Attributable to Owners of the Company 1 373 1 435 1 414
Stated capital 1 319 1 246 1 319
Foreign currency translation reserve (37) 50 20
Other reserves 15 15 16
Retained income 76 124 59
Non-Controlling Interests 217 61 194
Non-current liabilities 173 161 192
Interest bearing borrowings 116 87 136
Deferred tax 50 67 49
Other financial liabilities 7 7 5
Current liabilities 358 397 344
Trade and other payables 248 234 250
Deferred purchase consideration 2 45 2
Taxation payable 3 3 1
Bank overdraft 61 113 44
Interest bearing borrowings 44 2 46
Non-current liabilities held-for-sale 3 260 216 282
TOTAL EQUITIES AND LIABILITIES 2 381 2 270 2 426
Number of shares in issue 525 058 445 506 490 226 525 058 445
Net asset value per share (cents) 262 295 268
Net tangible asset value per share (cents) 122 143 129
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Rm Rm Rm
Net cash flow from operating activities (31) 10 5
Cash generated from trading 68 119 158
Net working capital movements (82) (99) (127)
Net finance costs and taxation paid (17) (10) (26)
Net cash flow from investing activities (104) (221) (223)
Capital expenditure (97) (76) (116)
Acquisition of business operations - (16) (25)
Increase in investments and associates - (87) (53)
Other investing activities (7) (42) (29)
Net cash flow from financing activities (13) 85 258
Treasury shares sold - 23 23
(Decrease)/increase in interest bearing borrowings (4) 74 143
Dividends paid (11) (20) (25)
Transactions with non-controlling interest 32 - 193
Other financing activities (30) 8 (76)
Total cash movement for the period (148) (126) 40
Cash at the beginning of the period 120 76 76
Effect of exchange rate movement on cash balances (14) (1) 4
Net cash at the end of the period (42) (51) 120
NOTES TO THE
FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The condensed consolidated financial information has 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"), 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 2016, 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 interim results announcement.
2. FINANCIAL PREPARATION AND REVIEW
These results have been prepared by M Du Plessis CA(SA), Group Financial Manager, which preparation was supervised by S Mansingh CA(SA),
Chief Financial Officer. The results were approved by the board of directors on 27 February 2017.
The condensed consolidated financial information has not been reviewed or audited by Deloitte & Touche, the Group's auditors.
3. DISCONTINUED OPERATIONS
Torre entered into a sale of shares agreement for the sale of the remaining interest in the Kanu Equipment Limited Group subject to the
fulfilment of conditions precedent. The disposal group met the relevant recognition criteria to be classified as a non-current asset held-for-sale,
as well as a discontinued operation on 31 December 2016. This disposal group formed part of the Capital Equipment segment of the Group.
The assets and liabilities of the Kanu Equipment Limited disposal group have been disclosed as non-current assets and liabilities held-for-sale
on the statement of financial position and includes both current and non-current assets and liabilities respectively.
Financial information relating to the discontinued operations for the reporting period is set out below
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2016 2015 2016
Rm Rm Rm
Revenue 206 165 415
Gross profit 70 59 132
Operating expenses (35) (20) (81)
Net finance costs (5) (2) (13)
Profit before tax 30 37 38
Tax (4) (1) 18
Profit after tax from discontinued operations 26 36 56
Cash flows attributable to operating activities (57) (13) (18)
Cash flows attributable to investing activities (90) (118) (106)
Cash flows attributable to financing activities 18 16 158
Cash flow for the period from discontinued operations (128) (115) 34
The carrying value of non-controlling interest attributable to the Kanu Equipment Limited disposal group as at 31 December 2016 was
R212 million (2015: R56 million).
4. SEGMENT REPORT
Segmental disclosure has been revised from 1 July 2016 in order to comply with the requirements of IFRS 5: Non-current assets held for
sale and discontinued operations. The segmental information below has been expanded to incorporate the decision to dispose of the Kanu
Equipment Limited group, which is now disclosed as discontinued operations. The segmental disclosure of Elephant Lifting as part of the
Capital Equipment segment in prior periods, is now included as part of the Parts and Components segment. Comparative information has been
restated accordingly.
Unaudited Restated Restated
December December June
2016 2015 2016
Rm Rm Rm
Segment revenue
Capital Equipment 380 351 772
- Continuing operations 174 186 357
- Discontinued operations 206 165 415
Parts and Components 491 504 966
Analytical Services 129 174 295
Central and Eliminations (2) (5) (10)
1 008 1 024 2 023
Segment net operating profit/(loss)
Capital Equipment 33 44 23
- Continuing operations (2) 6 (28)
- Discontinued operations 35 38 51
Parts and Components 31 37 (26)
Analytical Services 6 27 39
Central and Eliminations (15) (1) 2
55 107 38
Segment depreciation and amortisation
Capital Equipment 12 13 26
- Continuing operations 7 10 18
- Discontinued operations 5 3 8
Parts and Components 5 9 18
Analytical Services 6 9 18
Central and Eliminations 3 2 4
26 33 66
Segment impairments
Capital Equipment - - 19
- Continuing operations - - 19
- Discontinued operations - - -
Parts and Components - - 53
Analytical Services 2 - -
Central and Eliminations - - -
2 - 72
Segment assets
Capital Equipment 1 233 1 204 1 258
- Continuing operations 435 617 434
- Discontinued operations 798 587 824
Parts and Components 1 008 1 025 1 049
Analytical Services 361 356 376
Central and Eliminations (221) (315) (257)
2 381 2 270 2 426
Segment liabilities
Capital Equipment 563 682 570
- Continuing operations 303 466 288
- Discontinued operations 260 216 282
Parts and Components 312 481 702
Analytical Services 105 134 162
Central and Eliminations (189) (523) (616)
791 774 818
Revenue generated for the year to June 2016 was R720 million (2015: R737 million) from South Africa and R288 million (2015: R287 million)
from the rest of the world.
5. MATERIAL BALANCE SHEET MOVEMENTS
The assets and liabilities of the Kanu Equipment Limited group have been reclassified to non-current assets and liabilities held-for-sale as a
result of the decision to dispose of this group.
Goodwill and intangible assets are lower than the comparative period following the impairments recorded at the end of the 2016 financial
year.
6. SUBSEQUENT EVENTS
There are no adjusting events that have occurred since 31 December 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 1 600 staff with a physical presence in 14 African countries,
including South Africa.
HIGHLIGHTS
Key achievements for the period, inter alia:
- revenue and normalised EBITDA from continuing operations grew by 7% and 117% respectively when compared to 2HFY16;
- despite tough trading conditions, normalised headline earnings per share increased by 36% to 7.46c when compared to 2HFY16;
- successful relocation of 4 business units in one premises, expected to lead to efficiencies going forward; and
- the finalisation of the agreement to sell the remaining 55% interest in subsidiary Kanu Equipment to the African Agriculture Fund
("AAF") for US$27.2 million, including loans owing to Torre, subject to the fulfilment of certain conditions precedent. It is expected that
US$13.5 million will be received by no later than 30 April 2017 and the balance will be received over a period of 14 months thereafter.
FINANCIAL REVIEW
The Group delivered disappointing results in a difficult market. However, following a challenging second half of the 2016 financial year that was
characterised by low levels of activity from customers across most areas of the Group's operations, a focus on improving operational
efficiencies resulted in a significant improvement when compared to 2HFY16.
REVENUE AND EBITDA
Revenue from continuing operations decreased by R57 million to R802 million (2015: R859 million), mainly as a result of a once-off sale
related to a contract in Namibia in the prior period in the Analytical Services segment.
Normalised EBITDA from continued operations decreased by R36 million to R65 million (2015: R101 million) following benefits derived in the
prior period from the once-off sale and an adjustment to deferred purchase consideration liabilities.
Revenue and normalised EBITDA from continuing operations however increased by R53 million to R802 million (2HFY16: R749 million) and R35 million
to R65 million (2HFY16: R30 million) respectively as the Group benefited from operational improvements that were initiated at the end of the
2016 financial year.
CASH AND DEBT
The Group's debt levels remained at similar levels to June 2016 as operations managed their working capital effectively during the period.
Cash generated from continuing operating activities increased by 13% to R26 million (2015: R23 million).
REVIEW OF OPERATIONS
Torre Capital Equipment
The Capital Equipment segment comprises the following businesses: SA French, Manhand, Letaba and Kanu Equipment (classified as a discon-
tinued operation pending its disposal). These businesses are collectively involved in the rental and sale of mining and construction equipment
across Africa, including pumps, construction equipment, tower cranes and forklifts.
Despite a challenging economic environment this segment managed to increase revenue with Letaba posting favourable results and exceed-
ing expectation following higher than anticipated rainfall in the latter part of the period under review. Additional restructuring costs were
incurred in SA French and Manhand as a result of moving to their new premises and further reductions in head count. The focus in this segment
is to contain costs but to continue to invest strategically in order to ensure that we protect and gain market share and also to ensure that our
customers are well supported through the cycle.
Torre Parts and Components
The Parts and Components segment comprises the following businesses: Torre Parts and Components ("TPC"), Tractor & Grader Supplies ("TGS")
and Elephant Lifting. TPC, TGS and Elephant Lifting manufacture and / or distribute quality branded parts, components and consumable items
in various markets including automotive, commercial, industrial and mining.
Despite this segment yielding slightly lower results than the corresponding prior period, they benefited significantly following operational
improvements that were initiated towards the end of the 2016 financial year. Following the focus that was applied to strengthening and
broadening our customer relationships and distribution channels across these businesses, costs have been rationalised to align the businesses
to the current trading environment. We expect the improvement to continue for the remainder of the financial year.
Torre Analytical Services
The Analytical Services segment comprises the following businesses: 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 CRM's. Set Point Laboratories
is an ISO 17025 accredited analytical chemistry lab.
This segment performed below expectation mainly as a result of depressed levels of mining exploration that has significantly impacted Set
Point Laboratories. As a result of the state of the mining exploration industry, Set Point Laboratories has been restructured during the period
under review to ensure this business remains financially viable. Both AMIS and WearCheck performed satisfactorily during the period under
review as the prospects for these business remain positive for the remainder of the 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 27 February
2017 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 7 December 2016. The approved financial assistance included
guarantees on behalf of Group companies and general facilities and loans to Group companies already provided totalling R750 million.
CHANGES TO THE BOARD
Mr Roy Midlane resigned as Chief Financial Officer on 25 August 2016. Roy remained on the Board as a non-executive director until the
conclusion of the Mandatory Offer process by Stellar Capital Partners Ltd to Torre Shareholders. 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 interim period ended 31 December 2016 or up to date of this report.
OUTLOOK
Torre is cautiously optimistic that improvements seen in the first half of the financial year will continue in the second half of the year, although
trading conditions remain tough.
The Group's focus will be on organic growth and increasing its market share of its existing operations while continuing to reduce costs. Various
cost cutting initiatives have been implemented throughout the Group and are expected to start bearing fruits over the next 12 to 24 months.
DIVIDEND
Based on the trading performance of the interim period, the board has decided not to declare a dividend for the six months ended
31 December 2016.
RESULTS PRESENTATION CONFERENCE CALL
Torre will host a conference call on the financial results on Tuesday 28th February 2017 at 15h00 (South African time).
Anyone who wishes to participate in the conference call can dial the following numbers:
CALL/DIAL-IN DETAILS
South Africa (Toll Free) : 0 800 200 648
Johannesburg : 011 535 3600
USA and Canada (Toll Free) : 1 855 481 5362
Other Countries : +27 11 535 3600
UK (Toll Free) : 0 808 162 4061
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 nor audited by the Company's Auditors.
On behalf of the Board
CS Seabrooke
Chairman of the Board
28 February 2017
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*,
* 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
Torre Industries
A: 11 Avalon Road, Westlake View Ext 11, Modderfontein, 1609, South Africa
T: +27 11 627 2500 F: +27 11 627 2600
W: www.torreindustries.com
Date: 28/02/2017 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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