Wrap Text
Unaudited condensed consolidated interim financial results for the six months ended 31 August 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
Unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
http://www.afrimat.co.za
Highlights
- HEPS up 7,4% to 102,2 cents
- Contribution from operations' margin 16,4%
- NAV per share of 809 cents
- Interim dividend 20,0 cents per share
- Return on net operating assets 22,3%
Commentary
Basis of preparation
The unaudited condensed consolidated interim financial results ("financial statements") for the six months
ended 31 August 2017 ("the period") have been prepared in accordance with and contain, as a minimum,
the information required by IAS 34: Interim Financial Reporting and have been prepared in accordance
with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the 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 the International Financial Reporting Standards ("IFRS") and are
consistent with those applied in the audited annual financial statements for the year ended 28 February
2017, except as stated in note 16. The above information has not been audited or reported on by Afrimat's
auditors.
The financial statements have been prepared under the supervision of the Chief Financial Officer, PGS
de Wit CA(SA).
Introduction
The group continues to deliver satisfactory results supported by its diversification strategy despite very
difficult trading conditions during the first quarter of the financial year.
The traditional aggregates business delivered pleasing results for the period and the performance of the
industrial minerals division picked up well during the second quarter. The first quarter was impacted by an
unusually low number of effective trading days in April 2017 and by major political events that severely
impacted business confidence.
The group successfully entered the iron ore industry with the acquisition of a small iron ore mine.
Financial results
Headline earnings per share increased by 7,4% from 95,2 cents to 102,2 cents. Mineral producing
operations across all regions as well as the traditional aggregates businesses were the main contributors
to the satisfactory set of results.
The net debt:equity ratio increased from 24,0 in August 2016 to 42,4 in the current period, mainly due to a
new R300,0 million amortising five-year term facility introduced to purchase the Investec securities, fund
the offer to creditors in terms of the business rescue plan and provide working capital requirements for
Diro Manganese Proprietary Limited and Diro Iron Ore Proprietary Limited ("DIRO").
The net cash from operations was impacted by an increase in working capital as a result of the acquisition
of the Emfuleni Clinker Ash Dump, included in the inventory, and further working capital requirements
relating to the DIRO operations, since acquisition.
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 added bulk commodities to an already diversified
offering, by entering the iron ore industry.
Labour relations continued to be satisfactory during the period under review, with no labour action having
occurred in the period. 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 supported by an
improvement in the contribution from the traditional aggregates businesses and the mineral producing
operations across all regions.
The acquisition of the Emfuleni Clinker Ash Dump, situated in Vereeniging and close to Afrimat's clients,
will ensure an additional three to four years to the lifespan for both Clinker Supplies Proprietary Limited
("Clinker") and SA Block Proprietary Limited. Clinker continues to investigate further options in order to
secure additional clinker resources for the group.
In line with Afrimat's strategy to diversify, an additional greenfield project was initiated in KwaZulu-Natal.
The Concrete Based Products segment was impacted by difficult market conditions. The company's
strategy remains focused on assets with a competitive advantage.
Afrimat created a Commodities segment by entering the iron ore industry. It 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. The acquisition became unconditional following section 11 approval by the Department
of Mineral Resources ("DMR"), effective 30 June 2017.
This segment was impacted by the DIRO acquisition and start-up costs with the DIRO results included as
from 30 June 2017. The operations of DIRO are currently in a ramp-up phase with the first dense medium
separation ("DMS") plant already in production. DIRO concluded a final product sale agreement for its iron
ore product on 16 August 2017 and commenced delivery soon thereafter. Good progress is being made
with the recommissioning of DIRO.
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
Following the finalisation of the agreement to purchase 60% of DIRO from Diro Resources Proprietary
Limited, as well as a cession and delegation agreement with Investec Limited, the company concluded a
sale of shares and claims agreement with the minorities of DIRO to acquire the remaining 40% stake in
DIRO, effective 31 July 2017.
Prior to Afrimat's acquisition, DIRO's operations were halted as a consequence of it being under financial
distress and was accordingly placed into formal business rescue on 7 June 2016. Diro Manganese
Proprietary Limited has filed a notice of substantial implementation of its business rescue plan with the
Companies and Intellectual Property Commission, confirming that it exited business rescue on 16 August
2017 and commenced with delivery, under the ownership of Afrimat.
For further details, refer to a SENS announcement published by the company on 22 August 2017.
B-BBEE
Existing BEE shareholders and the Afrimat BEE Trust in aggregate hold 30,25% of Afrimat's issued shares
(excluding treasury shares and mandated investments).
Notwithstanding 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. Afrimat is committed
to a bottom-up approach to transformation and has had a successful period in terms of sustained training,
skills development and all-round employee upliftment.
Dividend
The group's dividend policy is to maintain a 2,75 times dividend cover. An interim gross dividend of 20,0
cents per share (August 2016: 20,0 cents) for the period was declared on 1 November 2017. The dividend
payable to shareholders who are subject to dividend tax is 16,0 cents per share (August 2016: 17,0 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 across all employees, remains a key focus in all operations.
Afrimat expects the current business climate to continue with the group's future growth driven by the
successful execution of its proven strategy, recent acquisitions and a wider product offering to the market.
On behalf of the board
MW von Wielligh
Chairman
AJ van Heerden
Chief Executive Officer
2 November 2017
Dividend declaration
Notice is hereby given that an interim gross dividend, No. 21 of 20,0 cents per share, in respect of the six
months ended 31 August 2017, was declared on Wednesday, 1 November 2017.
There are 143 262 412 shares in issue at reporting date, of which 7 044 486 are held in treasury. The total
dividend payable is R28,7 million (August 2016: R28,7 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 16,0 cents and 20,0 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, 28 November 2017
Commence trading ex dividend Wednesday, 29 November 2017
Record date Friday, 1 December 2017
Dividend payable Monday, 4 December 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 November 2017
and Friday, 1 December 2017, both dates inclusive.
Condensed consolidated statement of profit or loss and other comprehensive income
Restated
Unaudited six unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 Change 2017
R'000 R'000 % R'000
Revenue 1 184 592 1 153 258 2,7 2 228 157
Cost of sales (791 563) (765 950) (1 464 494)
Gross profit 393 029 387 308 1,5 763 663
Operating expenses (199 225) (187 451) (357 897)
Profit/(loss) on disposal of plant and equipment 700 2 252 (165)
Contribution from operations 194 504 202 109 (3,8) 405 601
Impairment of property, plant and equipment
(refer note 2) (260) - (3 049)
Profit on disposal of subsidiary - 4 043 4 043
Operating profit 194 244 206 152 (5,8) 406 595
Investment revenue 25 612 14 813 36 073
Finance costs (25 306) (19 929) (41 589)
Share of profits of joint venture - 1 047 1 047
Share of (losses)/profits of associate (20) 27 82
Profit before tax 194 530 202 110 (3,8) 402 208
Income tax expense (refer note 5) (56 048) (62 884) 10,9 (122 814)
Profit for the period 138 482 139 226 (0,5) 279 394
Profit attributable to:
Owners of the parent 139 417 138 571 277 824
Non-controlling interests (935) 655 1 570
138 482 139 226 279 394
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Net change in fair value of available-for-sale
financial assets 108 98 68
Income tax effect on available-for-sale
financial assets (24) (66) (63)
Currency translation differences (refer note 6) 998 (6 964) (7 270)
Income tax effect on currency translation
differences - - -
Other comprehensive income/(loss) for the
period, net of tax 1 082 (6 932) (7 265)
Total comprehensive income for the period 139 564 132 294 5,5 272 129
Total comprehensive income attributable to:
Owners of the parent 140 499 131 639 270 559
Non-controlling interests (935) 655 1 570
139 564 132 294 272 129
Earnings per share
Earnings per ordinary share (cents) 102,4 97,6 4,9 196,0
Diluted earnings per ordinary share (cents) 101,5 96,4 5,3 194,0
Note to statement of profit or loss and other
comprehensive income
Shares in issue
Total shares in issue 143 262 412 143 262 412 143 262 412
Treasury shares (refer note 8) (7 044 486) (998 162) (7 187 643)
Net shares in issue 136 217 926 142 264 250 136 074 769
Weighted average number of net shares in issue 136 112 937 141 976 864 141 712 540
Diluted weighted average number of shares 137 309 432 143 752 950 143 209 240
Reconciliation of headline earnings
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 Change 2017
R'000 R'000 % R'000
Profit attributable to owners of the parent 139 417 138 571 277 824
(Profit)/loss on disposal of plant and equipment
attributable to owners of the parent (700) (2 252) 165
Impairment of property, plant and equipment
(refer note 2) 260 - 3 049
Profit on disposal of subsidiary attributable to
owners of the parent - (4 043) (4 043)
Total income tax effects of adjustments 123 2 831 1 301
139 100 135 107 3,0 278 296
Headline earnings per ordinary share
("HEPS") (cents) 102,2 95,2 7,4 196,4
Diluted HEPS (cents) 101,3 94,0 7,8 194,3
Condensed consolidated statement of financial position
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment* 1 422 590 996 717 1 058 240
Investment property 3 040 3 040 3 040
Intangible assets 13 623 15 576 14 575
Goodwill 133 194 133 194 133 194
Investment in associate 195 213 244
Other financial assets (refer note 7) 57 450 168 754 276 942
Deferred tax 40 405 25 427 30 288
Total non-current assets 1 670 497 1 342 921 1 516 523
Current assets
Inventories 229 760 168 392 162 960
Current tax receivable 11 372 10 627 9 279
Trade and other receivables 405 559 368 886 332 766
Other financial assets (refer note 7) 364 6 316 107
Cash and cash equivalents (refer note 9) 135 594 157 192 244 690
Total current assets 782 649 711 413 749 802
Total assets 2 453 146 2 054 334 2 266 325
Equity and liabilities
Equity
Stated capital 270 925 255 224 285 842
Business combination adjustment (105 788) (105 788) (105 788)
Treasury shares (68 784) (21 214) (70 999)
Net issued stated capital 96 353 128 222 109 055
Other reserves 3 464 2 889 4 525
Retained earnings 1 002 710 973 748 1 085 792
Attributable to equity holders of parent 1 102 527 1 104 859 1 199 372
Non-controlling interests 6 299 6 976 7 547
Total equity 1 108 826 1 111 835 1 206 919
Liabilities
Non-current liabilities
Borrowings (refer note 10) 333 087 241 599 94 999
Deferred tax 113 286 114 404 113 845
Provisions 138 846 89 417 96 190
Total non-current liabilities 585 219 445 420 305 034
Current liabilities
Borrowings (refer note 10) 153 071 90 421 79 090
Other financial liabilities (refer note 11) 59 571 - 38 111
Current tax payable 13 514 11 238 8 997
Trade and other payables 468 264 298 596 352 150
Obligation of share of joint venture's losses 4 481 4 481 4 481
Bank overdraft (refer note 9) 60 200 92 343 271 543
Total current liabilities 759 101 497 079 754 372
Total liabilities 1 344 320 942 499 1 059 406
Total equity and liabilities 2 453 146 2 054 334 2 266 325
Note to the statement of financial position
Net asset value per share (cents) 809 777 881
Net tangible asset value per share (cents) 702 672 773
Total borrowings and other financial liabilities 545 729 332 020 212 200
(Surplus cash)/overdraft less cash and cash equivalents (75 394) (64 849) 26 853
Net debt 470 335 267 171 239 053
Net debt:equity ratio (%) 42,4 24,0 19,8
* Increase due to DIRO acquisition.
Condensed consolidated statement of cash flows
Restated Restated
Unaudited six unaudited six audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 118 898 180 344 531 114
Interest revenue 6 985 8 823 35 674
Dividends received 29 64 88
Finance costs (22 117) (17 380) (36 487)
Tax paid (63 205) (58 103) (124 343)
Net cash inflow from operating activities 40 590 113 748 406 046
Acquisition of property, plant and equipment (56 501) (21 973) (78 693)
Proceeds on disposal of property, plant
and equipment 8 517 11 804 17 688
Purchase of financial assets (55 615) (7 276) (254 916)
Proceeds on sale of financial assets 5 482 316 138 940
Proceeds on disposal of businesses - 9 083 9 083
Acquisition of businesses (refer note 14) 4 228 (251 263) (280 263)
Net cash outflow from investing activities (93 889) (259 309) (448 161)
Repurchase of Afrimat shares (5 598) (9 656) (9 656)
Acquisition of additional non-controlling interest
(refer note 13) (21) (66) (66)
Net movement in borrowings (refer note 10.2) 250 895 201 565 5 376
Tax paid on disposal of shares to ARC* - - (8 200)
Proceeds from other financial liabilities (refer note 11) - - 38 111
Repayment of other financial liabilities (21 292) - -
Dividends paid (refer note 15.2) (68 438) (58 796) (87 666)
Net cash inflow/(outflow) from financing activities 155 546 133 047 (62 101)
Net increase/(decrease) in cash and cash equivalents
and bank overdrafts 102 247 (12 514) (104 216)
Cash, cash equivalents and bank overdrafts at the
beginning of the period (26 853) 77 363 77 363
Cash, cash equivalents and bank overdrafts at the
end of the period 75 394 64 849 (26 853)
* African Rainbow Capital Proprietary Limited.
Condensed consolidated statement of changes in equity
Business Non-con-
Stated combination Treasury Other Retained trolling Total
capital adjustment shares reserves income interests equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 March 2016 263 611 (105 788) (40 181) 8 619 892 088 6 737 1 025 086
Adjustment to non-controlling
interest due to:
- Infrasors (refer note 13) - - - - (163) 97 (66)
Share-based payments - - - 2 737 - - 2 737
Purchase of treasury shares - - (9 656) - - - (9 656)
Treasury shares used for
acquisition (312) - 23 908 - - - 23 596
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer, net
of taxation (8 075) - 4 715 (1 535) 1 535 - (3 360)
Profit for the period - - - - 138 571 655 139 226
Other comprehensive income
for the period - - - (6 932) - - (6 932)
Net change in fair value of
available-for-sale financial assets - - - 98 - - 98
Income tax effect - - - (66) - - (66)
Currency translation differences
(refer note 6) - - - (6 964) - - (6 964)
Income tax effect - - - - - - -
Dividends paid (refer note 15.2) - - - - (58 283) (513) (58 796)
Balance at 31 August 2016 255 224 (105 788) (21 214) 2 889 973 748 6 976 1 111 835
Balance at 1 March 2016 263 611 (105 788) (40 181) 8 619 892 088 6 737 1 025 086
Changes:
Adjustment to non-controlling
interest due to:
- Infrasors (refer note 13) - - - - (169) 103 (66)
Treasury shares used for acquisition (312) - 23 908 - - - 23 596
Share-based payments - - - 6 023 - - 6 023
Purchase of treasury shares - - (69 310) - - - (69 310)
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
(refer note 6) - - - (7 270) - - (7 270)
Income tax effect - - - - - - -
Dividends paid (refer note 15.2) - - - - (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
Balance at 1 March 2017 285 842 (105 788) (70 999) 4 525 1 085 792 7 547 1 206 919
Changes:
Share-based payments - - - 1 723 - - 1 723
Purchase of treasury shares - - (5 598) - - - (5 598)
Initial non-controlling interest
acquired (refer note 14) - - - - - (114 219) (114 219)
Additional non-controlling
interest acquired due to:
- Infrasors (refer note 13) - - - - (98) 77 (21)
- DIRO (refer note 14) - - - - (158 219) 114 219 (44 000)
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer, net of taxation (14 917) - 7 813 (3 866) 3 866 - (7 104)
Profit for the period - - - - 139 417 (935) 138 482
Other comprehensive income for
the period - - - 1 082 - - 1 082
Net change in fair value of
available-for-sale financial assets - - - 108 - - 108
Income tax effect - - - (24) - - (24)
Currency translation differences
(refer note 6) - - - 998 - - 998
Income tax effect - - - - - - -
Dividends paid (refer note 15.2) - - - - (68 048) (390) (68 438)
Balance at 31 August 2017 270 925 (105 788) (68 784) 3 464 1 002 710 6 299 1 108 826
Notes
Split Unaudited Split Unaudited
six months six months six months six months Split Audited
ended ended ended ended year ended year ended
31 August 31 August 31 August 31 August 28 February 28 February
2017 2017 2016 2016 2017 2017
% R'000 % R'000 % R'000
1. Segment information
Revenue
External sales
Aggregates and
Industrial Minerals 69,2 819 563 70,8 816 452 69,7 1 553 285
Commodities 2,5 29 037 - - - -
Concrete Based Products 28,3 335 992 29,2 336 806 30,3 674 872
100,0 1 184 592 100,0 1 153 258 100,0 2 228 157
Inter-segment sales
Aggregates and
Industrial Minerals 98,2 89 823 97,4 57 214 98,1 118 818
Commodities - - - - - -
Concrete Based Products 1,8 1 601 2,6 1 540 1,9 2 357
100,0 91 424 100,0 58 754 100,0 121 175
Total revenue
Aggregates and
Industrial Minerals 71,3 909 386 72,1 873 666 71,2 1 672 103
Commodities 2,3 29 037 - - - -
Concrete Based Products 26,4 337 593 27,9 338 346 28,8 677 229
100,0 1 276 016 100,0 1 212 012 100,0 2 349 332
Contribution from operations
Aggregates and
Industrial Minerals 103,1 200 558 97,2 196 530 92,5 374 986
Commodities (2,8) (5 474) - - - -
Concrete Based Products 1,0 1 927 4,8 9 789 9,7 39 238
Other (1,3) (2 507) (2,0) (4 210) (2,1) (8 623)
100,0 194 504 100,0 202 109 100,0 405 601
Contribution from
operations margins on
external revenue (%)
Aggregates and
Industrial Minerals 24,5 24,1 24,1
Commodities (18,9) - -
Concrete Based Products 0,6 2,9 5,8
Overall contribution 16,4 17,5 18,2
Other information
Assets
Aggregates and
Industrial Minerals 1 409 902 1 305 506 1 319 965
Commodities 361 913 - -
Concrete Based Products 271 368 235 417 219 722
Other 409 963 513 411 726 638
2 453 146 2 054 334 2 266 325
Liabilities
Aggregates and
Industrial Minerals 392 718 395 635 351 907
Commodities 122 731 - -
Concrete Based Products 91 940 78 797 46 438
Other* 736 931 468 067 661 061
1 344 320 942 499 1 059 406
* Includes the R300,0 million amortising five-year facility with SBSA and FNB.
Capital expenditure
(excluding acquisitions
through business
combinations)
Aggregates and Industrial
Minerals 94 213 28 391 106 234
Commodities 6 913 - -
Concrete Based Products 11 637 9 347 17 037
Other 3 031 1 805 11 250
115 794 39 543 134 521
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
2. Impairment of property, plant and equipment
Impairment of property, plant and equipment (260) - (3 049)
An impairment loss was recognised, relating to property, plant and equipment items written off at Afrimat
Aggregates (KZN) Proprietary Limited (F2017: Delf Silica Coastal Proprietary Limited), which had no further
economic value and have been removed from the register.
3. Disposal of subsidiary
During F2017, the group disposed of 100% of its shareholding in AFT Aggregates Proprietary Limited
("AFT Aggregates") 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:
AFT
Aggregates
Total
R'000
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
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
4. Depreciation and amortisation
Depreciation 58 073 48 024 98 628
Amortisation 952 1 002 2 003
59 025 49 026 100 631
5. Income tax expense
The effective tax rate of the group decreased from 31,1% to 28,8% in the current period mainly due to the
income tax deductibility of expenditure actually incurred in settlement of the shares exercised in terms of
the Share Appreciation Rights Scheme, by means of the formalisation of appropriate cost recharge
agreements in the Afrimat group.
6. 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 an average exchange rate 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.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
7. Other financial assets
Funding provided to Afrimat employees
(BEE share purchase scheme) - 145 999 -
Rehabilitation fund trusts and other 57 814 29 071 37 520
Diro Manganese Proprietary Limited - - 239 529
57 814 175 070 277 049
Non-current other financial assets 57 450 168 754 276 942
Current other financial assets 364 6 316 107
57 814 175 070 277 049
Included in the above balance are investments in environmental insurance policies of R47,7 million
(August 2016: R14,7 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. Further investments
in environmental insurance policies were acquired as part of the business combination of DIRO. 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 Afrimat Empowerment Investments Proprietary Limited ("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
During F2017, 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. The effective date of the 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. DIRO was not incorporated into the F2017
financial results, as the company awaited the section 11 approval from the DMR. As at F2017, 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. As
announced on SENS on 13 July 2017, all conditions precedent to the 60% acquisition of DIRO were fulfilled
or waived and the agreement became unconditional and enforceable. DIRO was incorporated from the
effective date of acquisition of 30 June 2017. For further details, refer to the SENS announcement published
on 13 July 2017.
Number of shares
30 August 31 August 28 February
2017 2016 2017
8. Movement in number of treasury shares
Opening balance 7 187 643 1 918 751 1 918 751
Utilised for share appreciation rights scheme (343 250) (221 242) (685 615)
Utilised for Cape Lime acquisition - (1 139 347) (1 139 347)
Shares held by AEI - - 6 653 854
Purchased during the period/year 200 093 440 000 440 000
Closing balance 7 044 486 998 162 7 187 643
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.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
9. Cash and cash equivalents
Current assets 135 594 157 192 244 690
Current liabilities (60 200) (92 343) (271 543)
75 394 64 849 (26 853)
Funding towards the DIRO acquisition (refer note 7) 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 ("FNB"). During the current period, the group refinanced the debt included in the
general bank facilities into a R300,0 million amortising five-year term facility with SBSA and FNB, bearing
interest linked to the three-month Jibar rate and payable in quarterly instalments commencing
30 November 2017.
Included in the prior year's short-term bank deposits was an amount of R110,1 million relating to available
cash in AEI after the disposal of shares to ARC. During the current period, R79,5 million of the available
R110,1 million was paid to the South African Revenue Service ("SARS") in relation to PAYE, SDL and arrear
taxes from participants of Afrimat BEE Trust.
Restated Restated
Unaudited six unaudited six audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
10. Borrowings
10.1 Capital net movement
Opening balance 174 089 112 885 112 885
Acquired through business combinations 2 740 - -
New borrowings 358 434 268 551 306 811
Repayments (49 105) (49 416) (245 607)
Closing balance 486 158 332 020 174 089
Analysis as per statement of financial position
Borrowings non-current 333 087 241 599 94 999
Borrowings current 153 071 90 421 79 090
486 158 332 020 174 089
10.2 Analysis as per statement of cash flows
New borrowings 300 000 250 981 250 983
Repayments (49 105) (49 416) (245 607)
250 895 201 565 5 376
During the current period, the group refinanced the debt included in the general bank facilities into a
R300,0 million amortising five-year term facility with SBSA and FNB, bearing interest linked to the
three-month Jibar rate and payable in quarterly instalments commencing 30 November 2017.
During F2017, 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 the prime rate minus 1,5%, repayable in monthly
instalments of capital and interest was agreed upon for this purpose.
During F2017, SBSA provided funding to AEI 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.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
11. Other financial liabilities
Net capital proceeds owing to Afrimat BEE
Trust participants 21 819 - 38 111
Deferred liability: DIRO 37 752 - -
59 571 - 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 beneficiaries to ensure payment occurs timeously.
On 22 August 2017, the group announced on SENS that Afrimat has concluded a sale of shares and claims
agreement with the minorities of DIRO to acquire the remaining 40% stake in DIRO as from 15 August 2017.
The purchase consideration of R44,0 million is payable in nine tranches as follows: eight monthly instalments
of R5,0 million per month for eight consecutive months commencing 15 August 2017; and R4,0 million in
one final instalment.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
12. Authorised capital expenditure
Not yet contracted for
- Property, plant and equipment 47 832 85 198 140 013
Infrasors
Holdings
Proprietary
Limited Total
R'000 R'000
13. Acquisition of additional non-controlling interest
Infrasors Holdings Proprietary Limited
August 2017
Additional non-controlling interest acquired (77) (77)
Premium paid on additional shares acquired in
subsidiary after initial acquisition 98 98
21 21
August 2016
Adjustment to non-controlling interest acquired (97) (97)
Premium paid on additional shares acquired in
subsidiary after initial acquisition 163 163
66 66
February 2017
Adjustment to non-controlling interest acquired (103) (103)
Premium paid on adjustment to non-controlling
interest after initial acquisition 169 169
66 66
14. Acquisition of businesses
Diro Manganese Proprietary Limited and Diro Iron Ore Proprietary Limited ("DIRO")
The group acquired 60% of the issued shares of DIRO, as well as a cession and delegation agreement
with Investec Limited to purchase all of its security. The aggregate purchase consideration (including
funding provided) for the acquisition of DIRO was R276,0 million. On 13 July 2017 all conditions precedent,
including section 11 approval from the Department of Mineral Resources, were fulfilled and the agreement
became unconditional. On 22 August 2017, the group announced on SENS that Afrimat has concluded a
sale of shares and claims agreement with the minorities of DIRO to acquire the remaining 40% stake in
DIRO, effectively from 31 July 2017, for an aggregate purchase consideration of R44,0 million. The
acquisition will complement and augment Afrimat's product offering and further expand its footprint
across South Africa. Given the nature of DIRO's reserves and the access to infrastructure, together
with Afrimat's existing competencies, the transaction allows the ability to leverage the combined
strengths which will result in developing new revenue opportunities for Afrimat in the iron ore space.
Details of the acquisition are as follows:
DIRO -
DIRO - Additional
Initial shares
acquisition acquired Total
R'000 R'000 R'000
Carrying amount/fair value of net assets acquired
Property, plant and equipment* 313 705 - 313 705
Deferred tax assets 1 119 - 1 119
Other financial assets 17 557 - 17 557
Inventories 12 446 - 12 446
Trade and other receivables 8 912 - 8 912
Borrowings (2 741) - (2 741)
Trade and other payables (127 557) - (127 557)
Loans from Afrimat group (305 111) - (305 111)
Provisions (37 777) - (37 777)
Cash and cash equivalents 5 228 - 5 228
Additional non-controlling interest acquired 114 219 (114 219) -
Premium paid on additional shares acquired in
subsidiary after initial acquisition - 158 219 158 219
Net assets** - 44 000 44 000
Net cash inflow from acquisition of subsidiary
Cash consideration paid - - -
Cash and cash equivalents acquired 5 228 - 5 228
5 228 - 5 228
Unaudited pro forma revenue assuming the business
combination for the full period ended 31 August 2017 51 910
Unaudited pro forma loss after tax assuming the business
combination for the full period ended 31 August 2017 (80 495)
Revenue included in results 29 037
Loss after taxation included in results (8 281)
Acquisition costs (including business rescue costs) included
in operating expenses for the period ended 31 August 2017 5 782
* Property, plant and equipment includes the fair valuation of mining assets acquired.
** The purchase consideration of R44,0 million is payable in nine tranches as follows: eight monthly
instalments of R5,0 million per month for eight consecutive months commencing 15 August 2017; and
R4,0 million in one final instalment (refer note 11).
At acquisition, the fair value of trade and other receivables was R8,9 million and includes trade receivables
of R8,0 million. An amount of R8,0 million is reflected as neither impaired nor past due.
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 the Standard Bank of South Africa Limited'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:
Cape Lime
Total
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
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
* Property, plant and equipment includes the fair valuation of mining assets acquired.
At acquisition, the fair value of trade and other receivables is R29,1 million and includes trade receivables
of R26,9 million. An amount of R25,1 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 Ready-Mix 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.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
Carrying amount/fair value of net assets acquired
Property, plant and equipment* 1 000 28 500
Inventories - 2 536
Provisions - (2 036)
Net assets 1 000 29 000
Consideration paid
Cash 1 000 - 29 000
Total consideration 1 000 - 29 000
Net cash outflow from acquisition of subsidiary
Cash consideration paid** 1 000 - 29 000
Cash and cash equivalents acquired - - -
1 000 - 29 000
* Property, plant and equipment includes the fair valuation of mining assets acquired.
** An amount of R1,0 million was payable on the approval of section 11 by the DMR.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
15. Dividends
15.1 Afrimat Limited dividends declared/paid in
respect of the current period profits
Interim dividend declared/paid 28 652 28 652 28 652
Final dividend declared - - 71 631
28 652 28 652 100 283
15.2 Dividends cash flow
Current year interim dividend paid - - 28 652
Previous year final dividend paid 71 631 58 738 58 738
Dividends received on treasury shares (3 583) (455) (587)
68 048 58 283 86 803
Dividends paid by subsidiaries to
non-controlling shareholders 390 513 863
68 438 58 796 87 666
16. Comparative figures
Certain comparative figures have been reclassified to enhance disclosure. These changes have no impact
on the overall profitability.
Condensed consolidated statement of profit or loss
Certain expenses have been reclassified from "cost of sales" to "operating expenses" to better reflect the
nature of the expense.
The effects of the reclassification is as follows:
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
Cost of sales - 21 007 -
Operating expenses - (21 007) -
Condensed consolidated statement of cash flows
Non-cash transactions relating to instalment sale agreements have been excluded from "Acquisition of
property, plant and equipment" and "Proceeds from borrowings" in terms of paragraph 43 to 44 of IAS 7:
Statement of Cashflows.
As at year-end 28 February 2017, R69,3 million was reflected as "Repurchase of Afrimat shares" in the
cash flow statement and included a non-cash flow item of R59,7 million. The only cash flow item that
should have been reflected was for 440 000 of the company's own shares purchased on the JSE Limited
via Afrimat Aggregates (Operations) Proprietary Limited. The total amount paid to acquire the shares was
R9,7 million. The company identified that R59,7 million was a non-cash transaction and should have been
offset against the R51,5 million "Effect on disposal of treasury shares to ARC" to reflect the only cash flow
in the amount of R8,2 million which directly related to the CGT payable by AEI on the disposal of shares
to ARC.
The effects of reclassification is as follows:
Restated Previous Restated Previous
unaudited six unaudited six audited audited
months ended months ended year ended year ended
31 August 31 August 28 February 28 February
2016 2016 2017 2017
R'000 R'000 R'000 R'000
Cash flows from investing activities
Acquisition of property, plant
and equipment (21 973) (39 543) (78 693) (134 521)
Net cash outflow from investing
activities (259 309) (276 879) (448 161) (503 989)
Cash flows from financing activities
Repurchase of Afrimat shares (9 656) (9 656) (9 656) (69 310)
Net movement in borrowings
(refer note 10.2) 201 565 219 135 5 376 61 204
Tax paid on disposal of shares to ARC - - (8 200) 51 454
Net cash inflow/(outflow) from
financing activities 133 047 150 617 (62 101) (6 273)
17. Events after reporting date
No material events occurred between the reporting date and the date of this announcement.
18. Contingencies
Guarantees to the value of R85,3 million (August 2016: R79,5 million) were supplied by SBSA to various
parties, including the Department of Mineral Resources and Eskom, respectively during the period
under review.
Guarantees to the value of R61,2 million (August 2016: R9,8 million) were supplied by FNB to various
parties, including the Department of Mineral Resources and Eskom, respectively during the period under
review. The increase in amount with FNB relates to guarantees provided to the business rescue practitioner
and compromised creditors in terms of the DIRO acquisition.
Guarantees to the value of R2,9 million (August 2016: R23,5 million) by Lombard's Insurance Group,
R0,6 million (August 2016: R1,4 million) by ABSA Bank Limited, R88,1 million (August 2016: R9,8 million)
by Centriq Insurance Innovation and R2,7 million (August 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 R5,0 million (August 2016: R6,1 million). An accrual has been
raised in respect of commitments made up to the end of the period.
The company received notice on 31 March 2017 from the Competition Commissioner 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 F2016 which equates to R16,3 million.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2017 2016 2017
R'000 R'000 R'000
19. Related parties
Loan balance owing by associate 12 773 8 117 11 591
Loan balance owing by joint venture 24 437 12 612 14 099
Obligation of share of joint venture's losses (4 481) (4 481) (4 481)
Interest received from associate 252 404 806
Interest received from joint venture 435 66 420
Directors
MW von Wielligh*# (Chairman)
AJ van Heerden (CEO)
PGS de Wit (CFO)
GJ Coffee
L Dotwana*
PRE Tsukudu*#
JF van der Merwe*#
HJE van Wyk*#
JHP van der Merwe*#
HN Pool*#
* Non-executive director
# Independent
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
PricewaterhouseCoopers Inc.
PWC Building - Capital Place 15 - 21 Neutron Avenue, Technopark
Stellenbosch, 7600
(PO Box 57, Stellenbosch, 7599)
Transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196
(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: 02/11/2017 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
