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Reviewed condensed consolidated provisional financial results for the year ended 28 February 2017
Afrimat Limited
("Afrimat" or "the company" or "the group")
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/022534/06)
Share code: AFT
ISIN Code: ZAE000086302
Reviewed condensed consolidated provisional financial results
for the year ended 28 February 2017
http://www.afrimat.co.za
Growth through diversification
Highlights
- HEPS up 25,4% to 196,4 cents
- Contribution from operations margin 18,2%
- NAV per share of 881 cents
- Final dividend 50,0 cents per share
- Return on net operating assets 32,5%
Commentary
Basis of preparation
The reviewed condensed consolidated provisional financial results ("financial statements")
for the year ended 28 February 2017 ("year") contain, as a minimum, the information required
by IAS 34: Interim Financial Reporting and have been prepared in accordance with the
Frameworks Concepts and measurement and recognition requirements of the International
Financial Reporting Standards ("IFRS"), the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee, JSE Listings Requirements and in the manner
required by the South African Companies Act No. 71 of 2008, as amended. The accounting
policies and method of computation applied in preparation of the financial statements
are in accordance with IFRS and are consistent with those applied in the audited annual
financial statements for the year ended 29 February 2016.
The financial statements have been prepared under the supervision of the Chief
Financial Officer ("CFO"), PGS de Wit CA(SA).
Introduction
The group continues to deliver solid results driven by its diversification strategy
as well as cost reduction and efficiency improvement initiatives.
Afrimat acquired 100% of the issued ordinary shares of lime and associated products
producer, Cape Lime Proprietary Limited ("Cape Lime"). Effective 31 March 2016, the
acquisition became unconditional following regulatory approval. The integration of
Cape Lime is progressing well and exciting new marketing initiatives are under way
to find additional markets for its products.
Financial results
Headline earnings per share increased by 25,4% from 156,6 cents to 196,4 cents per
share. This improvement in earnings resulted from a strong performance of the mineral
producing operations across all regions. The group was successful in increasing its
operating margin to 18,2% from 16,3% and improving cash generated from operations
from R320,3 million to R406,0 million through the efficiency improvement drive.
Improved efficiencies, cost reduction and the disposal of marginal businesses,
including those of the Randfontein and Blue Platinum businesses, contributed
further to the improvement in earnings. Revenue (excluding acquisitions) increased
by 5,5%, whilst volumes remained flat.
Operational review
All operating units are strategically positioned to deliver excellent service to
the group's customers, whilst acting as an efficient hedge against volatile local
business conditions. The product range is well diversified to include aggregates
and concrete based products as construction materials as well as limestone, dolomite
and silica as industrial minerals. The group recently announced the addition of bulk
commodities by entering the iron ore industry.
Labour relations continued to be satisfactory during the year under review. The
group is committed to creating and sustaining harmonious relationships in the
workplace and addressing issues proactively.
The Aggregates and Industrial Minerals segment generated satisfactory results
on the back of an improved contribution from the traditional aggregates businesses.
In the prior year, Infrasors was impacted by the closure of Highveld Steel. New
initiatives were launched, the Lyttelton operations restructured and new market
segments targeted, which in combination, restored the profitability of the
Infrasors business.
Clinker Supplies Proprietary Limited, a subsidiary that focuses on the reclamation
of marketable waste products, such as clinker ash, is making good progress in
expanding its resource base. This subsidiary was referred to the Competition
Tribunal by the Competition Commission. Afrimat believes there is no merit to
the complaint and will vigorously defend itself before the Competition
Tribunal (refer note 17).
In line with Afrimat's strategy to diversify, new greenfield projects were
initiated in Mpumalanga and KwaZulu-Natal. Furthermore, the Bethlehem quarry
and ancillary businesses of WG Wearne Limited ("Wearne") were acquired (see
further details below). The Bethlehem business reported a loss for the year
as a result of additional maintenance in order to improve the reliability of
the acquired plant and to regain lost market share. The profits generated in
the Mozambican operations were eroded with the deterioration of the local
currency. These businesses are well situated to benefit from the planned
infrastructure and industrial projects as soon as these commence.
The Concrete Based Products segment was impacted by difficult market conditions.
Business development
New business development remains a key component of the group's growth strategy.
The dedicated business development team continues to successfully identify and
pursue opportunities in existing markets, as well as in anticipated new high-
growth areas in southern Africa.
Acquisition
Afrimat entered into an agreement with Wearne on 6 July 2016 to purchase the
Bethlehem quarry, Bethlehem property and ancillary businesses as a going concern
for R30,0 million with an effective date of 17 October 2016.
Given Afrimat's track record in turning struggling businesses around and to
supplement diversification and support the growth strategy, Afrimat entered the
iron ore sector. Afrimat concluded an agreement to purchase 60% of Diro Manganese
Proprietary Limited and Diro Iron Ore Proprietary Limited ("DIRO"), as well as a
cession and delegation agreement with Investec Limited to purchase all of its
security. Prior to Afrimat's acquisition, DIRO's operations were halted as a
consequence of it being under financial distress and was accordingly put into
formal business rescue on 7 June 2016. The aggregate purchase consideration
payable for the acquisition of DIRO is R276,0 million. The acquisition will
complement and augment Afrimat's product offering and further expand its
footprint across South Africa. It will further provide Afrimat with wider
currency exposure and a Rand hedge. The section 11 approval of the Department
of Mineral Resources ("DMR") is still outstanding and therefore the current
investment is treated as loan funding as at year-end. Good progress is being
made with the recommissioning of DIRO.
For further details, refer to a SENS announcement published by the company
on 11 October 2016.
B-BBEE
On 9 November 2016, Afrimat announced on SENS that the African Rainbow Capital
Proprietary Limited ("ARC") transaction to acquire 26,3 million shares in
Afrimat from Afrimat Empowerment Investments Proprietary Limited ("AEI"),
became unconditional. The shares comprise approximately 18,36% of the share
capital in Afrimat. ARC agreed to be locked in for at least four years.
ARC is a black owned and controlled investment company focusing on businesses
that deliver exceptional returns on equity. ARC is a strategic long-term investor
with no predefined exit strategy. They invest in businesses able to grow
organically or acquisitively and ARC can enable and accelerate this growth by
providing funding where necessary.
Following the implementation of the ARC Transaction, the employees, through the
Afrimat BEE Trust (indirectly through AEI), are beneficially entitled to 6 653 854
shares representing 4,64% of the issued share capital of the company.
In addition to the fully empowered ownership platform in line with the Mining
Charter requirements, the group remains dedicated to enhancing all aspects of
B-BBEE on an ongoing basis and therefore existing BEE shareholders and the Afrimat
BEE Trust in aggregate hold 27,1% of Afrimat's issued shares.
Dividend
The group's dividend policy is to maintain a 2,75 times dividend cover. A final
dividend of 50,0 cents per share (2016: 41,0 cents) for the year was declared on
17 May 2017. The dividend payable to shareholders who are subject to dividend
tax is 40,0 cents per share (2016: 34,9 cents per share).
Prospects
The group is well positioned to capitalise on its strategic initiatives, foresees
continued growth from an excellent asset base, the further expansion of its range
of unique products and turnaround initiatives of selective acquisitions.
Operational efficiency initiatives aimed at expanding volumes, reducing costs and
developing the required skill levels of all employees remain a key focus in all
operations.
Afrimat expects the current business climate to continue with the group's growth
driven by the successful execution of its proven strategy, recent acquisitions
and a wider product offering to the market.
Auditor's review
This report has been reviewed by the company's auditor, Mazars. Their unmodified
opinion is available for inspection at the company's registered office. Their
review was conducted in accordance with ISRE 2410 "Review of interim financial
information performed by the independent auditor of the entity".
The auditor's report does not necessarily report on all of the information
contained in this report. Shareholders are therefore advised that in order
to obtain a full understanding of the nature of the auditor's engagement
they should obtain a copy of the auditor's report together with the accompanying
financial information, from the issuer's registered office.
On behalf of the board
MW von Wielligh
Chairman
AJ van Heerden
Chief Executive Officer
Dividend declaration
Notice is hereby given that a final gross dividend, No. 20 of 50,0 cents per
share, in respect of the year ended 28 February 2017, was declared on Wednesday,
17 May 2017.
There are 143 262 412 shares in issue at reporting date, of which 7 187 643 are
held in treasury. The total dividend payable is R71,6 million (2016: R58,7 million).
The board has confirmed that the solvency and liquidity test as contemplated by the
Companies Act, No. 71 of 2008, as amended, has been duly considered, applied and
satisfied. This is a dividend as defined in the Income Tax Act, 1962, and is
payable from income reserves. The South African dividend tax rate is 20,0%.
The dividend payable to shareholders who are subject to dividend tax and
shareholders who are exempt from dividend tax is 40,0 cents and 50,0 cents
per share, respectively. The income tax number of the company is 9568738158.
Relevant dates to the final dividend are as follows:
Last day to trade cum dividend Tuesday, 6 June 2017
Commence trading ex dividend Wednesday, 7 June 2017
Record date Friday, 9 June 2017
Dividend payable Monday, 12 June 2017
Share certificates may not be dematerialised or rematerialised between Wednesday,
7 June 2017 and Friday, 9 June 2017, both dates inclusive.
Condensed consolidated statement of profit or loss and other comprehensive income
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016 Change
R'000 R'000 %
Revenue 2 228 157 1 969 786 13,1
Cost of sales (1 464 494) (1 349 584)
Gross profit 763 663 620 202 23,1
Operating expenses (357 897) (299 445)
(Loss)/profit on disposal of plant and equipment (165) 931
Contribution from operations 405 601 321 688 26,1
Impairment of property, plant and equipment (note 2) (3 049) -
Impairment of goodwill (note 3) - (1 300)
Profit on disposal of subsidiary (note 4) 4 043 -
Operating profit 406 595 320 388 26,9
Investment revenue 36 073 21 779
Finance costs (41 589) (22 625)
Share of profits/(losses) of joint venture 1 047 (4 487)
Share of profit of associate 82 67
Profit before tax 402 208 315 122 27,6
Income tax expense (note 6) (122 814) (90 930) 35,1
Profit for the year 279 394 224 192 24,6
Profit attributable to:
Owners of the parent 277 824 222 128
Non-controlling interests 1 570 2 064
279 394 224 192
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Net change in fair value of available-for-sale financial assets 68 91
Income tax effect on available-for-sale financial assets (63) (17)
Currency translation differences (note 7) (7 270) 91
Income tax effect on currency translation differences - (7)
Other comprehensive income for the year, net of tax (7 265) 158
Total comprehensive income for the year 272 129 224 350 21,3
Total comprehensive income attributable to:
Owners of the parent 270 559 222 286
Non-controlling interests 1 570 2 064
272 129 224 350
Earnings per share:
Earnings per ordinary share (cents) 196,0 156,2 25,5
Diluted earnings per ordinary share (cents) 194,0 153,8 26,1
Note to statement of profit or loss and other
comprehensive income
Shares in issue:
Total shares in issue 143 262 412 143 262 412
Treasury shares (note 9) (7 187 643) (1 918 751)
Net shares in issue 136 074 769 141 343 661
Weighted average number of net shares in issue 141 712 540 142 239 928
Diluted weighted average number of shares 143 209 240 144 451 506
Reconciliation of headline earnings
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016 Change
R'000 R'000 %
Profit attributable to owners of the parent 277 824 222 128
Loss/(profit) on disposal of plant and equipment
attributable to owners of the parent 165 (935)
Impairment of property, plant and equipment (note 2) 3 049 -
Impairment of goodwill (note 3) - 1 300
Profit on disposal of subsidiary attributable to
owners of the parent (note 4) (4 043) -
Total income tax effects of adjustments 1 301 261
278 296 222 755 24,9
Headline earnings per ordinary share "HEPS" (cents) 196,4 156,6 25,4
Diluted HEPS (cents) 194,3 154,2 26,0
Condensed consolidated statement of financial position
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 1 058 240 763 156
Investment property 3 040 3 040
Intangible assets 14 575 16 550
Goodwill 133 194 133 194
Investment in associate 244 250
Other financial assets (note 8) 276 942 156 424
Deferred tax 30 288 20 754
Total non-current assets 1 516 523 1 093 368
Current assets
Inventories 162 960 132 702
Current tax receivable 9 279 7 968
Trade and other receivables 332 766 295 552
Other financial assets (note 8) 107 875
Cash and cash equivalents (note 10) 244 690 117 241
Total current assets 749 802 554 338
Total assets 2 266 325 1 647 706
Equity and liabilities
Equity
Stated capital 285 842 263 611
Business combination adjustment (105 788) (105 788)
Treasury shares (70 999) (40 181)
Net issued stated capital 109 055 117 642
Other reserves 4 525 8 619
Retained earnings 1 085 792 892 088
Attributable to equity holders of the parent 1 199 372 1 018 349
Non-controlling interests 7 547 6 737
Total equity 1 206 919 1 025 086
Liabilities
Non-current liabilities
Borrowings (note 11) 94 999 47 321
Deferred tax 113 845 108 387
Provisions 96 190 75 565
Total non-current liabilities 305 034 231 273
Current liabilities
Borrowings (note 11) 79 090 65 564
Other financial liabilities (note 12) 38 111 -
Current tax payable 8 997 2 607
Trade and other payables 352 150 277 832
Obligation of share of joint venture's losses 4 481 5 466
Bank overdraft (note 10) 271 543 39 878
Total current liabilities 754 372 391 347
Total liabilities 1 059 406 622 620
Total equity and liabilities 2 266 325 1 647 706
Note to statement of financial position:
Net asset value per share (cents) 881 720
Net tangible asset value per share (cents) 773 615
Total borrowings 212 200 112 885
Overdraft less cash and cash equivalents/(surplus cash) 26 853 (77 363)
Net debt 239 053 35 522
Net debt:equity ratio (%) 19,8 3,5
Condensed consolidated statement of cash flows
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
Cash flows from operating activities
Cash generated from operations 531 114 399 373
Interest revenue 35 674 25 429
Dividends received 88 197
Finance costs (36 487) (18 465)
Tax paid (124 343) (86 195)
Net cash inflow from operating activities 406 046 320 339
Acquisition of property, plant and equipment (134 521) (131 264)
Proceeds on disposal of property, plant and equipment 17 688 14 310
Repayments of financial assets (254 916) (2 101)
Advances of financial assets 138 940 -
Proceeds on disposal of business (note 4) 9 083 -
Acquisition of businesses (note 15) (280 263) -
Net cash outflow from investing activities (503 989) (119 055)
Repurchase of Afrimat shares (69 310) (50 100)
Acquisition of additional non-controlling interest (note 14) (66) (3 747)
Infrasors treasury buy back (note 14) - (9 647)
Net movement in borrowings (note 11.2) 61 204 (9 536)
Effect on disposal of treasury shares to ARC 51 454 -
Proceeds from other financial liabilities (note 12) 38 111 -
Dividends paid (note 16) (87 666) (76 141)
Net cash outflow from financing activities (6 273) (149 171)
Net (decrease)/increase in cash and cash equivalents and
bank overdrafts (104 216) 52 113
Cash, cash equivalents and bank overdrafts at the beginning
of the year 77 363 25 250
Cash, cash equivalents and bank overdrafts at the end
of the year (26 853) 77 363
Condensed consolidated statement of changes in equity
Business
combi- Non-
nation control-
Stated adjust- Treasury Other Retained ling Total
capital ment shares reserves earnings interests equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 March 2015 295 328 (105 788) (8 056) 7 506 748 010 12 437 949 437
Changes:
Additional non-controlling
interest acquired due to:
- Infrasors (note 14) - - - - (1 899) (1 848) (3 747)
Increase in effective shareholding
in Infrasors due to:
- Increase in shares held in
treasury by Infrasors (note 14) - - - - (4 331) (5 316) (9 647)
Share-based payments - - - 4 676 - - 4 676
Purchase of treasury shares - - (50 100) - - - (50 100)
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer, net of tax (31 717) - 17 975 (3 721) 3 721 - (13 742)
Profit for the year - - - - 222 128 2 064 224 192
Other comprehensive income
for the year - - - 158 - - 158
Net change in fair value of
available-for-sale financial assets - - - 91 - - 91
Income tax effect - - - (17) - - (17)
Currency translation differences
(note 7) - - - 91 - - 91
Income tax effect - - - (7) - - (7)
Dividends paid (note 16) - - - - (75 541) (600) (76 141)
Balance at 29 February 2016 263 611 (105 788) (40 181) 8 619 892 088 6 737 1 025 086
Changes:
Additional non-controlling
interest acquired due to:
- Infrasors (note 14) - - - - (169) 103 (66)
Share-based payments - - - 6 023 - - 6 023
Purchase of treasury shares - - (69 310) - - - (69 310)
Treasury shares used for
acquisition (note 15) (312) - 23 908 - - - 23 596
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer, net of tax (28 911) - 14 584 (2 852) 2 852 - (14 327)
Effect on disposal of treasury
shares to ARC 51 454 - - - - - 51 454
Profit for the year - - - - 277 824 1 570 279 394
Other comprehensive income
for the year - - - (7 265) - - (7 265)
Net change in fair value of
available-for-sale financial assets - - - 68 - - 68
Income tax effect - - - (63) - - (63)
Currency translation
differences (note 7) - - - (7 270) - - (7 270)
Income tax effect - - - - - - -
Dividends paid (note 16) - - - - (86 803) (863) (87 666)
Balance at 28 February 2017 285 842 (105 788) (70 999) 4 525 1 085 792 7 547 1 206 919
Notes
Reviewed Audited
year ended year ended
28 February 29 February
Change 2017 2016
% R'000 R'000
1. Segment information
Revenue
External sales
Aggregates and Industrial Minerals* 10,2 1 553 285 1 409 937
Concrete Based Products 20,5 674 872 559 849
13,1 2 228 157 1 969 786
Inter-segment sales
Aggregates and Industrial Minerals 2,1 118 818 116 374
Concrete Based Products (13,8) 2 357 2 733
1,7 121 175 119 107
Total revenue
Aggregates and Industrial Minerals 9,6 1 672 103 1 526 311
Concrete Based Products 20,4 677 229 562 582
12,5 2 349 332 2 088 893
Contribution from operations
Aggregates and Industrial Minerals 374 986 281 838
Concrete Based Products 39 238 40 878
Other (8 623) (1 028)
405 601 321 688
Contribution from operations margins
on external revenue (%)
Aggregates and Industrial Minerals 24,1 20,0
Concrete Based Products 5,8 7,3
Overall contribution 18,2 16,3
Other information
Assets
Aggregates and Industrial Minerals 1 319 965 981 224
Concrete Based Products 219 722 219 012
Other** 726 638 447 470
2 266 325 1 647 706
Liabilities
Aggregates and Industrial Minerals 351 907 303 175
Concrete Based Products 46 438 67 375
Other*** 661 061 252 070
1 059 406 622 620
Capital expenditure (excluding acquisitions
through business combinations)
Aggregates and Industrial Minerals 106 234 105 880
Concrete Based Products 17 037 23 411
Other 11 250 1 973
134 521 131 264
* Comprising Industrial Minerals, Contracting Services and Aggregates.
Segment header renamed with no change to segment composition.
** Includes financial asset owing by Diro Manganese Proprietary Limited and positive
bank balances of the Afrimat BEE Trust.
*** Includes the group overdraft facility and amount owing to SARS by the
Afrimat BEE Trust.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
2. Impairment of property, plant and equipment
Impairment of property, plant and equipment (3 049) -
An impairment loss was recognised, relating to property,
plant and equipment items written off at Delf Silica Coastal
Proprietary Limited, which had no further economic value
and have been removed from the register.
3. Impairment of goodwill
Impairment of goodwill - (1 300)
An impairment was recognised relating to goodwill at
Scottburgh quarry due to declining financial returns.
4. Disposal of subsidiary
The group disposed of 100% of its shareholding in AFT
Aggregates Proprietary Limited (includes the Randfontein
business) to Nityn Proprietary Limited on 1 April 2016. The
company was previously included in the "Aggregates and
Industrial Minerals" segment.
Details of the disposal are as follows:
Carrying amount of net assets over which control was lost:
Property, plant and equipment 12 655 -
Inventories 1 892 -
Trade and other receivables 1 972 -
Tax liability (2 824) -
Trade and other payables (3 553) -
Deferred tax liability (2 553) -
Provisions (2 549) -
Cash and cash equivalents 917 -
Net assets derecognised 5 957 -
Consideration received:
Cash 10 000 -
Total consideration 10 000 -
Profit on disposal of subsidiary:
Consideration received 10 000 -
Net asset derecognised (5 957) -
Profit on disposal of subsidiary 4 043 -
Net cash inflow from disposal of subsidiary:
Cash consideration received 10 000 -
Cash and cash equivalents disposed of (917) -
9 083 -
5. Depreciation and amortisation
Depreciation 98 628 79 585
Amortisation 2 003 2 296
100 631 81 881
6. Income tax expense
The effective tax rate of the group increased from 28,9% to 30,5% in the
current year mainly due to the Mozambique operations (exclusive of foreign
exchange variances) being taxed on 32,0%.
7. Currency translation differences
Foreign currency transactions relating to the Mozambique operations are
translated into the presentation currency (ZAR or R) by means of translating
assets and liabilities at closing rate at the date of the statement of financial
position and income and expenses at average exchange rates for the period and
recognising all resulting exchange differences in other comprehensive income. Exchange
differences arising on monetary items that form part of the group's net investment in
the Mozambique operations are recognised in other comprehensive income, whilst all
other translations including those on short-term receivables are recognised in
profit or loss.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
8. Other financial assets
Funding provided to Afrimat employees
(BEE share purchase scheme) - 137 775
Rehabilitation fund trusts and other 37 520 19 524
Diro Manganese Proprietary Limited 239 529 -
277 049 157 299
Non-current other financial assets 276 942 156 424
Current other financial assets 107 875
277 049 157 299
Included in the above balance are investments in environmental insurance
policies of R24,6 million (2016: R13,2 million) measured at fair value.
The group reinvested previously released unit trusts, resulting in an increase
in the investment in environmental insurance policies as noted. The fair value
of unquoted unit trusts is derived using the adjusted net asset method. The
adjusted net asset method determines the fair value of the investment in the unit
trust by reference to the fair value of the individual assets and liabilities
recognised in a unit trust's statement of financial position. The significant
inputs to the adjusted net asset method are the fair values of the individual
assets and liabilities whose fair value is derived from quoted market prices
in active markets. The fair values are indirectly derived from prices quoted
in Level 1, and therefore included in Level 2 of the fair value hierarchy.
Funding provided to Afrimat employees
On 9 November 2016, Afrimat announced on SENS that the ARC Transaction, to
acquire 26,3 million shares in Afrimat from AEI, became unconditional. The
shares comprise approximately 18,36% of the total issued Afrimat ordinary
shares. The transaction became unconditional as the participants of the Afrimat
BEE Trust voted in favour of the offer and all other conditions were met. ARC
agreed to be locked in for at least four years. Following the implementation of
the ARC Transaction, the beneficiaries received their respective consideration
net of any liabilities, and ceased to be participants under the Current Scheme.
All the funding associated with the Afrimat shares was settled on 8 December 2016.
DIRO
As announced on SENS on 11 October 2016, Afrimat concluded an agreement to
purchase 60% of DIRO, as well as a cession and delegation agreement with
Investec Limited to purchase all of its security. DIRO's operations were
halted as a consequence of it being under financial distress and was
accordingly put into formal business rescue on 7 June 2016. The aggregate
purchase consideration payable (including funding provided) for the
acquisition of DIRO is R276,0 million. The effective date of acquisition
is the first business day following the date on which the conditions
precedent are fulfilled or waived and the agreement becomes unconditional
and enforceable in all respects. The conditions precedent included the
approval of the competition authorities, section 11 approval from the
Department of Mineral Resources ("DMR") and all other regulatory approvals
as may be required. For further details, refer to the SENS announcement
published on 11 October 2016.
DIRO has not been incorporated into the financial results of the group, as
the company awaits the section 11 approval from the DMR. At year-end, an amount
of R239,5 million was contributed towards the purchase consideration payable
and has therefore been classified as a loan and receivable until all conditions
precedent are met and the results of DIRO incorporated.
The loan is secured by notarial bonds over moveable property and mortgage bonds
over land and buildings.
Number of shares
28 February 29 February
2017 2016
9. Movement in number of treasury shares
Opening balance 1 918 751 505 829
Utilised for share appreciation rights scheme (685 615) (1 069 171)
Utilised for Cape Lime acquisition (note 15 ) (1 139 347) -
Shares held by Afrimat Empowerment Investments
Proprietary Limited 6 653 854 -
Purchased during the year 440 000 2 482 093
Closing balance 7 187 643 1 918 751
Following the implementation of the ARC Transaction, the Afrimat BEE Trust
(indirectly through AEI) holds, on an unencumbered basis, 6 653 854 shares
representing 4,64% of the issued share capital of the company.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
10. Cash and cash equivalents
Current assets 244 690 117 241
Current liabilities (271 543) (39 878)
(26 853) 77 363
Funding towards the DIRO acquisition (note 8) was obtained by means
of utilising the company's current general banking facilities with
The Standard Bank of South Africa Limited ("SBSA") as well as
FirstRand Bank Limited. The current general banking facilities may
not be called upon before 30 June 2017 and 31 October 2017 as agreed
to by the company and SBSA as well as FirstRand Bank Limited,
respectively. Refer to note 17 for further information regarding
debt refinancing.
Included in short-term bank deposits is an amount of R110,1 million
relating to available cash in AEI after the disposal of shares to ARC.
R79,5 million of the available R110,1 million is payable to SARS in
relation to PAYE, SDL and arrear taxes from participants of Afrimat BEE Trust.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
11. Borrowings
11.1 Capital net movement
Opening balance 112 885 122 421
New borrowings 306 811 68 754
Repayments (245 607) (78 290)
Closing balance 174 089 112 885
Analysis as per statement of financial position
Borrowings non-current 94 999 47 321
Borrowings current 79 090 65 564
174 089 112 885
11.2 Analysis as per statement of cash flows
New borrowings 306 811 68 754
Repayments (245 607) (78 290)
61 204 (9 536)
During the year, the group financed plant and machinery with
SBSA, to fund capital expenditure and working capital requirements
to support the growth and expansion of the group. A vehicle asset
finance facility of R109,6 million over 36 months at prime rate
minus 1,5%, repayable in monthly instalments of capital and interest,
was agreed upon for this purpose.
During the year, SBSA provided funding to Afrimat Empowerment
Investments Proprietary Limited in the amount of R141,3 million
for the redemption by AEI of all of its existing preference shares
in issue and to pay the existing preference share aggregate
redemption quantum to Afrimat Limited. The company's shares held by
AEI/Afrimat BEE Trust served as security for the preference share
funding provided by SBSA. On 8 December 2016, AEI repaid the debt from
SBSA and was subsequently released from the company pledge and cession
agreement as set out in the subscription agreement with SBSA.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
12. Other financial liabilities
Net capital proceeds owing to Afrimat BEE Trust participants 38 111 -
Upon implementation of the ARC Transaction, the beneficiaries
of the Trust received their respective consideration net of
liabilities and ceased to be participants under the current
BEE scheme. This liability exists due to an amount owing to
beneficiaries whom could not be traced, mostly deceased individuals.
Afrimat is in the process of tracking these individuals to
ensure payment occurs timeously.
13. Authorised capital expenditure
Not yet contracted for:
- Property, plant and equipment 140 013 123 996
14. Acquisition of additional non-controlling interest
Infrasors Holdings Proprietary Limited
On 31 March 2016, a special shareholders' meeting was held and the following
special resolutions were passed without modification: conversion of the
company to a private company; conversion of ordinary shares to no par value
shares; cancellation of 7 333 011 treasury shares held by Infrasors Management
Services Proprietary Limited; and replacing the company's memorandum of
incorporation.
Infrasors
Holdings
Proprietary
Infrasors Limited*
Holdings - treasury
Proprietary buy back Total
Limited* R'000 R'000
2017
Adjustment to non-controlling interest acquired (103) - (103)
Premium paid on adjustment to non-controlling
interest after initial acquisition 169 - 169
66 - 66
2016
Additional non-controlling interest acquired 1 848 5 316 7 164
Premium paid on additional shares acquired in
subsidiary after initial acquisition 1 899 4 331 6 230
3 747 9 647 13 394
* Infrasors Holdings Limited was converted to a private company,
Infrasors Holdings Proprietary Limited.
15. Acquisition of businesses
Cape Lime Proprietary Limited ("Cape Lime")
The group acquired 100% of the issued ordinary shares of lime and associated
products producer, Cape Lime on 31 March 2016. The aggregate purchase
consideration paid for the acquisition of Cape Lime was R282,6 million
and was settled in cash amounting to R259,0 million and reissuing of
treasury shares of R23,6 million. Included in the purchase consideration
was an interest amount of R6,6 million. The original cash consideration
of R252,4 million bore interest at SBSA's prime overdraft rate less 2% from
10 December 2015, or from such earlier date in the event that all approvals
were received from the authorities. The acquisition will complement and
augment Afrimat's industrial mineral product offering and further expand
its footprint across South Africa.
The parties to the acquisition recognise the scale of potential
business opportunities that such a relationship presents, as Afrimat
and Cape Lime have different and complementary strengths. Leverage
from the combined strengths will result in developing new revenue
opportunities for Afrimat and Cape Lime.
Details of the acquisition are as follows:
Reviewed
year ended
28 February
2017
R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 264 248
Intangible assets 28
Other financial assets 3 695
Inventories 16 467
Trade and other receivables 29 054
Tax liability (1 093)
Trade and other payables (17 004)
Deferred tax liability (6 753)
Provisions (13 783)
Cash and cash equivalents 7 792
Net assets 282 651
* Property, plant and equipment includes the fair
valuation of mining assets acquired.
Consideration paid:
Cash 259 055
Treasury shares issued (issued at R20,71 per share) 23 596
Total consideration 282 651
Net cash outflow from acquisition of subsidiary:
Cash consideration paid 259 055
Cash and cash equivalents acquired (7 792)
251 263
Pro forma revenue assuming the business combination for the full year 166 920
Pro forma profit after tax assuming the business combination for the full year 27 560
Revenue included in results 149 533
Profit after taxation included in results 24 104
Acquisition costs included in operating expenses for
the year ended 28 February 2017 736
The property, plant and equipment was revalued as at 31 March 2016
based on the replacement value or market value of current assets.
At year-end, the fair value of trade and other receivables is
R23,0 million and includes trade receivables of R21,1 million.
An amount of R18,8 million is reflected as neither impaired nor
past due.
Bethlehem quarry and ancillary businesses from WG Wearne Limited ("Wearne")
Wearne Aggregates Proprietary Limited and Wearne Readymix Concrete
Proprietary Limited, both wholly owned subsidiaries of Wearne, entered
into an agreement with Afrimat Aggregates (KZN) Proprietary Limited and
Afrimat Concrete Products Proprietary Limited, both wholly owned subsidiaries
of Afrimat on 6 July 2016 to dispose of the Bethlehem quarry and ancillary
businesses as a going concern for R28,0 million. Furthermore, Wearne also
agreed to dispose of Erf 4038, Bethlehem, Free State to Rodag Holdings
Proprietary Limited, a wholly owned subsidiary of Afrimat, for R2,0 million.
The effective date of the transaction was 17 October 2016.
Reviewed
year ended
28 February
2017
R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 28 500
Inventories 2 536
Provisions (2 036)
Net assets 29 000
* Property, plant and equipment includes the fair
valuation of mining assets acquired.
Consideration paid:
Cash 29 000
Total consideration 29 000
Net cash outflow from acquisition of subsidiary:
Cash consideration paid** 29 000
Cash and cash equivalents acquired -
29 000
** An amount of R1,0 million is payable on the approval of
section 11 by the DMR.
Pro forma revenue assuming the business combination for the full year 13 417
Pro forma profit after tax assuming the business combination for the full year (3 842)
Revenue included in results 2 499
Loss after taxation included in results (2 796)
Acquisition costs included in operating expenses for the
year ended 28 February 2017 52
The property, plant and equipment was revalued as at 17 October 2016
based on the replacement value or market value of current assets.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
16. Dividends
16.1 Afrimat Limited dividends paid/declared in respect
of the current year profits
Interim dividend paid 28 652 22 922
Final dividend declared/paid 71 631 58 738
100 283 81 660
16.2 Dividends cash flow
Current year interim dividend paid 28 652 22 922
Previous year final dividend paid 58 738 53 007
Dividends received on treasury shares (587) (388)
86 803 75 541
Dividends paid by subsidiaries to non-controlling shareholders 863 600
87 666 76 141
17. Events after reporting date
Clinker Group
The company received notice on 31 March 2017 from the Competition Commission
that it has referred a complaint to the Competition Tribunal, alleging that
the company, through its wholly owned subsidiary, Clinker Supplies Proprietary
Limited ("Clinker") has engaged in an abuse of dominance by allegedly charging
excessive prices. After taking legal advice and considering the complaint, the
company is of the opinion that there is no merit to the complaint and will
therefore vigorously defend itself before the Competition Tribunal. The Competition
Commission is ordering an administrative penalty equal to 10% of affected
turnover for the preceding year which equates to R16,3 million.
Debt refinancing
The company is in the process of refinancing the debt currently included
in the general banking facilities into a R200,0 million amortising term
facility with SBSA and FirstRand Bank Limited, bearing interest linked to
the three-month Jibar rate and payable in quarterly instalments.
18. Contingencies
Guarantees to the value of R87,2 million (2016: R80,9 million) were supplied
by SBSA to various parties, including the Department of Mineral Resources and
Eskom.
Guarantees to the value of R9,3 million (2016: R9,8 million) were supplied by
FirstRand Bank Limited to parties, including the Department of Mineral Resources
and Eskom.
Guarantees to the value of R23,5 million (2016: R23,5 million) by Lombard's
Insurance Group, R1,4 million (2016: R1,4 million) by ABSA Bank Limited,
R10,9 million (2016: R8,2 million) by Centriq Insurance Innovation and
R2,7 million (2016: R2,7 million) by SIG Guarantee Acceptances Proprietary
Limited were supplied to various parties, including the Department of Mineral
Resources, Eskom and Chevron South Africa Proprietary Limited.
These guarantees are in respect of environmental rehabilitation and will only
be payable in the event of default by the group.
A contingent liability exists due to the uncertain timing of cash flows with
regards to future local economic development ("LED") commitments made to the
Department of Mineral Resources in respect of companies with mining rights.
These commitments are dependent on the realisation of the future agreed upon
LED projects. Future commitments amount to R4,8 million (2016: R5,3 million).
An accrual has been raised in respect of commitments made up to the end of
the period.
Reviewed Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
19. Related parties
Loan balance owing by associate 11 591 8 811
Loan balance owing by joint venture 14 099 19 565
Obligation of share of joint venture's losses (4 481) (5 466)
Interest received from associate 806 588
Interest received from joint venture 420 -
Directors
MW von Wielligh*# (Chairman)
AJ van Heerden (CEO)
PGS de Wit (CFO)
GJ Coffee
L Dotwana*
F du Toit*
PRE Tsukudu*#
JF van der Merwe*#
HJE van Wyk*#
JH van der Merwe*#
HN Pool*#
* Non-executive director
# Independent
18 May 2017
Registered office
Tyger Valley Office Park No. 2
Cnr. Willie van Schoor Avenue and Old Oak Road
Tyger Valley, 7530
(PO Box 5278, Tyger Valley, 7536)
Sponsor
Bridge Capital Advisors Proprietary Limited
2nd Floor, 27 Fricker Road, Illovo, 2196
(PO Box 651010, Benmore, 2010)
Auditor
Mazars
Mazars House, Rialto Road, Grand Moorings Precinct
Century City, 7441
(PO Box 134, Century City, 7446)
Transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Ground Floor, 70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Company secretary
M Swart
Tyger Valley Office Park No. 2
Cnr. Willie van Schoor Avenue and Old Oak Road
Tyger Valley, 7530
(PO Box 5278, Tyger Valley, 7536)
Date: 18/05/2017 07:05:00 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
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