Wrap Text
Unaudited condensed consolidated interim results for the period ended 31 December 2017
ROLFES HOLDINGS LIMITED
(Registration number 2000/002715/06)
Incorporated in South Africa
Share Code: RLF
ISIN: ZAE000159836
(“Rolfes” or “the Group”)
www.rolfesza.com
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2017
KEY FEATURES
* Legacy issues resolved and group well positioned for the future
* Silica mine in final stage of being sold
* Revenue from continuing operations decreased by 7,8% to R 734,0 million
* Gross margin from continuing operations increased to 22,7% from 21,6% for the comparative period
* Normalised headline earnings per share from continuing operations amounted to 24,3 cents per share for the period
* Interim dividend of 4 cents per share declared
COMMENTARY
STRATEGIC OVERVIEW
Rolfes is a black empowered (45,8%) chemical group targeting the need for food security, clean water and manufacturing
demand through its strategically placed divisions namely agricultural, chemicals, colour, food, and water.
GROUP PRODUCT OFFERING AND DIVISIONAL STRUCTURE
The Agricultural division develops, manufactures and distributes products that promote plant root and foliar health, soil
nutrition, disease prevention and control as well as various other agricultural remedies into the agriculture industry.
The Chemicals division distributes various products and additives including solvents, lacquer thinners, surfactants,
cleaning solvents, water treatment products, creosotes and waxes into the industrial manufacturing, construction and
water industry. The division further develops, manufactures and provides leather chemicals and treatment solutions into
the leather tanning industry.
The Colour division develops, manufactures and distributes various organic and inorganic pigments and dispersion
products including additives, in-plant and point-of-sale dispersions, into the inks and paints industry.
The Food division, Bragan Chemicals, distributes imported and locally manufactured products to the food and beverage,
bakery, dairy and pharmaceutical industries.
The Water division provides specialised water purification solutions and products to the industrial, petrochemical as well
as commercial cooling markets.
The Group focus is on the Southern African market whilst seeking earnings enhancing export opportunities.
FINANCIAL REVIEW
The Group results were negatively impacted by legacy issues, which are considered non-recurring, as well as a poor first
quarter due to inefficient working capital allocation, shipping delays and management focus being on rectifying accounting
errors. The second quarter showed significant improvement and represented a remarkable recovery underscoring the
strength and sustainability of the various business units and their management.
Revenue from continuing operations decreased by 7,8% to R 734,0 million (December 2016: R 796,4 million). Revenue
translation to gross profit across all business units remained solid, despite the tough trading environment, and resulted in
a gross margin of 22,7% reflecting an improvement on the comparative period of 21,6%.
The Food division revenue was negatively impacted by stock shortages resulting in a decrease in revenue of 15,2% to R
336,8m (December 2016: R 397,1m); these issues have been resolved.
The Agricultural division revenue increased by 3,1% to R 160,9m (December 2016: 156,0m) when compared to the
comparative period. The division generates approximately 30% of its revenue from the Western Cape and drought
conditions have had, and will continue to have, an impact on this division.
The Chemicals division performed well in a tough environment and revenue increased by 2,3% to R 167,6m (December
2016: 163,8m) whilst gross profit increased by 11,9% to R 36,0m (December 2016: 32,2m).
The Colour division revenue decreased by R 10,0m (17,5%) to R 47,4m (December 2016: R 57,4m); the Board is
assessing the business unit and considering various options in terms of the way forward.
The Water business, which has a fixed cost base, has rebranded and repositioned itself moving towards being a total
water management solution provider. We have invested in a strong management team and numerous proposals have
been submitted and, despite the long lead time for tender awards, momentum is being gained. The Botswana business
has ceased trading and the assets are being disposed of.
The discontinued Silica operation had two months trading before closure and incurred costs to remain in compliance with
all regulations thereafter. The mine is in the process of being sold; this will put an end to losses being incurred as monthly
operational costs will be borne by the purchaser.
The Other division within the segmental analysis includes the Head Office expenses. The loss for this division amounting
to R 23,2m (December 2016: R 14,3m) and included non-recurring costs of R 8,9m.
Operating profit from continuing operations decreased by 42,0% to R 47,7m from R 82,2m in the prior period as a direct
result of reduced revenue, historical issues and corrective action taken within various business units. Non-recurring costs
relate to site clean-up and obsolete stock in respect of the Colour division, excess audit fees due to the need to restate
results for 2016 and staff incentives and settlements, the details of which are presented under normalised earnings.
Net finance costs reduced by 22,5% partly due to the tighter working capital as at 30 June 2017 which in turn impacted
revenue and gross profit. Management has a solid grasp on the working capital dynamics within the group and is closely
managing it whilst ensuring business units have the resources to be able to grow.
Earnings from continuing operations decreased by 42,4% to R27,7m (December 2016: R48,1m) whilst Headline earnings
from continuing operations decreased by 42,6% to R 27,6m (December 2016: R48,1m). Earnings per share and Headline
earnings per share from continuing operations are 17,2 cents per share (December 2016: 29,8 cents per share) and 17,1
cents per share (December 2016: 29,8 cents per share) respectively. Earnings and Headline earnings were materially
impacted by poor first quarter trading and the impact of resolving historical issues.
The directors believe that normalised headline earnings per share from continuing operations are a meaningful measure
for evaluating the group’s operational performance. Normalised headline earnings amounted to R 35,2m (December 2016:
R 53,6m). Normalised headline earnings per share from continuing operations decreased by 26,6% to 24,3 cents
(December 2016: 33,1 cents). Normalised headline earnings are defined as headline earnings from continuing operations
excluding non-recurring items, once off transaction costs and once off impairments and adjustments. The weighted
average number of shares in issue for the period was 161 301 468 (December 2016: 161 301 468).
Normalised headline earnings
Restated unaudited
Unaudited as at As at
as at
31 December 2017 31 December 2016 30 June 2017
R'000 R'000 R'000
Headline earnings 23 617 48 233 33 171
Adjusted for the pre-tax effect of non-recurring other
costs:
Excess audit fee 3 000 - -
Site clean-up and obsolete stock 6 533 7 454 11 167
Staff incentives & settlements* 9 486 - -
Impairment of third-party loan - - 4 379
Non-recurring group costs - - 5 625
Normalised adjustments 19 019 7 454 21 171
Tax effect of above items (7 396) (2 087) (5 928)
Normalised headline earnings 35 239 53 600 48 414
* Accounted for in the current period but related to legacy issues
Normalised- earnings, headline earnings per share:
Group:
– Earnings (basic & diluted) (cents) 21.91 33.23 16.56
– Headline earnings (basic & diluted) (cents) 21.85 33.23 30.01
Continuing operations:
– Earnings (basic & diluted) (cents) 24.38 33.14 49.73
– Headline earnings (basic & diluted) (cents) 24.32 33.14 50.46
Discontinued operations:
– Earnings (basic & diluted) (cents) (2.47) 0.09 (33.17)
– Headline earnings (basic & diluted) (cents) (2.48) 0.09 (20.45)
GROUP CASH FLOW PERFORMANCE
Cash generated from operating activities, before working capital movements, amounted to R59,9m (December 2016:
R74,8m). The decrease compared to the prior period is a direct result of lower revenues and non-recurring costs referred
to under normalised earnings. An additional investment in net working capital of R46,2m was made to remedy stock
holding to appropriate levels and was partially funded by a drawdown on the working capital facility. The net debt of R
202,1m increased since 30 June 2017 by R 28,4m but reflects a decrease of R 31,6m compared to the prior reporting
period. Dividends paid, of R 6,4m, represents the 4 cents per share paid as a final dividend for 30 June 2017. Cash utilised
in investing activities, amounting to R 6,2m, comprised investment in product development and additions to fixed assets.
OPERATING ENVIRONMENT AND PROSPECTS
The performance of the second quarter has continued in January, however the environment across Southern Africa is
expected to remain challenging. The ongoing drought conditions, in the Western Cape, create an uncertain environment
for the agricultural division due to the long lead times in manufacturing appropriate stock levels. Management is focusing
on the core businesses and related opportunities whilst assessing the underperforming assets. A review of all business
units and appropriate action plans implemented are in the process of being performed to ensure the group delivers
sustainable growth and an attractive return on assets. Management continues to seek new product ranges and
opportunities to add to its portfolio. The stabilisation of Rolfes and South African environment bodes well for the future.
Any forward-looking statements in this announcement have not been reviewed and reported on by the Company's
auditors.
CHANGES TO THE BOARD
Ms L Lynch resigned, with immediate effect, as Chief Executive Officer on 16 October 2017 and Mr RM Buttle was
appointed as her replacement. Mr RM Buttle, with JSE approval, retained the role of Acting Chief Financial Officer until
the appointment of Mr AP Broodryk as Chief Financial Officer on 6 November 2017. The Board is comfortable with the
new leadership team and is pleased with the progress being made both at the Group and business unit levels.
On behalf of the Board
MS Teke RM Buttle
Chairman Chief Executive Officer
19 February 2018
Unaudited condensed consolidated interim statements of financial position as at
Unaudited as at Restated unaudited as Audited as at
at
31 December 2017 31 December 2016 30 June 2017
R'000 R'000 R'000
ASSETS
Non-current assets 398 853 398 735 393 725
Property, plant and equipment 103 443 123 602 104 307
Intangible assets and goodwill 269 985 263 880 269 172
Deferred tax assets 25 425 11 253 20 246
Current assets 737 606 759 971 591 402
Inventories 351 361 351 957 275 582
Trade and other receivables 304 162 348 923 237 817
Current tax assets 5 283 3 101 6 033
Cash and cash equivalents 76 800 55 990 71 970
Total assets 1 136 459 1 158 706 985 127
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 208 588 208 588 208 588
Treasury shares (868) (868) (868)
Retained earnings 299 057 327 291 281 778
Reserves (423) (2 616) (697)
Owners of the parent 506 354 532 395 488 801
Non-controlling interests (5 327) (2 430) (3 169)
Total equity 501 027 529 965 485 632
Non-current liabilities 283 771 293 393 262 900
Interest-bearing liabilities 244 389 268 189 221 652
Deferred tax liabilities 25 676 17 401 27 526
Provisions 13 706 7 803 13 722
Current liabilities 351 661 335 349 236 595
Trade and other payables 313 703 313 780 209 663
Interest-bearing liabilities 34 547 19 716 24 040
Bank overdraft - 1 853 -
Current tax liabilities 3 411 - 2 892
Total equity and liabilities 1 136 459 1 158 707 985 127
Information related to the number of shares in issue as at
Total shares in issue (‘000) 161 942 161 942 161 942
Treasury shares (‘000) (641) (641) (641)
Shares in issue excluding treasury shares (‘000) 161 301 161 301 161 301
Weighted average number of shares used in basic earnings per
share, diluted earnings per share, headline earnings per share, 161 301 161 301 161 301
and diluted headline earnings per share (‘000)
Unaudited condensed consolidated interim statements of profit or loss and other comprehensive income for the periods ended
Continuing operations: Unaudited as at Restated unaudited as Audited as at
at
31 December 2017 31 December 2016 30 June 2017
R'000 R'000 R'000
Revenue 734 015 796 397 1 437 409
Cost of sales (567 068) (624 655) (1 138 140)
Gross profit 166 947 171 742 299 269
Other income 5 789 6 082 13 675
Operating expenses (125 046) (95 609) (197 762)
Operating profit before interest 47 690 82 215 115 182
Finance income 430 1 025 4 914
Finance cost (13 476) (17 856) (30 772)
Profit before taxation 34 644 65 384 89 324
Income tax (expense) (9 092) (17 230) (25 533)
Profit from continuing operations 25 552 48 154 63 791
Discontinued operations
(Loss)/profit from discontinued operations, net of tax (3 990) 151 (53 500)
Profit 21 562 48 305 10 291
Other comprehensive income, net of taxation
(continuing operations) *
Items that may be reclassified subsequently to profit or
loss:
Exchange differences on translating of foreign operations 274 (559) 1 360
Total comprehensive income (continuing operations) * 25 826 47 595 65 151
Profit for the year attributable to:
Owners of the parent 23 720 48 233 11 467
Non-controlling interest (2 158) 72 (1 176)
21 562 48 305 10 291
Other comprehensive income for the year attributable to
(continuing operations)*:
Owners of the parent 27 984 47 523 66 327
Non-controlling interest (2 158) 72 (1 176)
25 826 47 595 65 151
* Note that the Discontinued operations did not have any transactions that affected the "Other comprehensive income" section, therefore the results
are only presented for the continuing operations.
Reconciliation of earnings, headline earnings and dividends proposed/paid for the periods ended
Restated unaudited as
Unaudited as at Audited as at
at
31 December 2017 31 December 2016 30 June 2017
R'000 R'000 R'000
Group:
Earnings 23 720 48 233 11 467
Adjusted for the after-tax effect of:
(Gain) from sale of property, plant and equipment (103) - (434)
Loss from sale of property, plant and equipment - - 962
Impairment property, plant and equipment - - 19 560
Impairment goodwill - - 1 616
Headline earnings 23 617 48 233 33 171
– Earnings (basic & diluted) (cents) 14.71 29.90 7.11
– Headline earnings (basic & diluted) (cents) 14.64 29.90 20.56
Continuing operations:
Earnings 27 710 48 082 64 967
Adjusted for the after-tax effect of:
(Gain) from sale of property, plant and equipment (99) - (434)
Loss from sale of property, plant and equipment - - 8
Impairment goodwill - - 1 616
Headline earnings 27 611 48 082 66 157
– Earnings (basic & diluted) (cents) 17.18 29.81 40.28
– Headline earnings (basic & diluted) (cents) 17.12 29.81 41.01
Discontinued operations:
Earnings (3 990) 151 (53 500)
Adjusted for the after-tax effect of:
(Gain) from sale of property, plant and equipment (4) - -
Loss from sale of property, plant and equipment - - 954
Impairment property, plant and equipment - - 19 560
Headline earnings (3 994) 151 (32 986)
– (Loss)/earnings (basic & diluted) (cents) (2.47) 0.09 (33.17)
– (Loss)/headline earnings (basic & diluted) (cents) (2.48) 0.09 (20.45)
Dividends
– Interim proposed/paid (cents) 4 4 4
– Final proposed/paid (cents) - - 6
Unaudited condensed consolidated interim statement of changes in equity
Stated capital Reserves
Foreign
Non-
Share Share Treasury currency
Retained earnings controlling Total equity
capital premium shares translation
interest
reserve
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2016
1 619 206 969 288 736 (868) (2 057) (2 502) 491 897
(restated)
Total comprehensive
- - 48 233 - (559) 72 47 746
income for the period
Dividend - - (9 678) - - - (9 678)
Balance at 31 December
1 619 206 969 327 291 (868) (2 616) (2 430) 529 965
2016 (restated)
Total comprehensive
- - (36 766) - 1 919 (1 248) (36 095)
income for the period
Dividend - - (6 514) - - - (6 514)
Acquisition of non-
- - (2 233) - - 509 (1 724)
controlling interest
Balance at 30 June 2017
1 619 206 969 281 778 (868) (697) (3 169) 485 632
(audited)
Total comprehensive
- - 23 720 - 274 (2 158) 21 836
income for the period
Dividend - - (6 441) - - - (6 441)
Balance at 31 December
1 619 206 969 299 057 (868) (423) (5 327) 501 027
2017 (unaudited)
Unaudited condensed consolidated interim statements of cash flows for the periods ended
Restated unaudited as
Unaudited as at Audited as at
at
31 December 2017 31 December 2016 30 June 2017
R'000 R'000 R'000
Cash generated from operations 59 883 74 796 132 514
Net working capital movement (46 215) (61 688) (8 262)
Cash generated from operations 13 668 13 108 124 252
Net finance cost paid (13 115) (16 862) (28 396)
Dividends paid (6 441) (9 678) (16 192)
Tax paid (16 643) (13 822) (32 450)
Cash (utilised in)/generated from investing activities (6 157) (7 880) (22 816)
Cash generated from/(utilised in) financing activities 33 244 41 431 (2 768)
Cash surplus for the period 4 556 6 297 21 630
Effects of exchange rate fluctuation on translation of foreign
274 (559) 1 941
operations
Cash and cash equivalents – beginning of the period 71 970 48 399 48 399
Cash and cash equivalents – end of the period 76 800 54 137 71 970
Unaudited condensed consolidated interim segmental report for the periods ended
Gross Operating
Revenue Assets Liabilities
profit/(loss) profit/(loss)
R’000 R’000 R’000 R’000 R’000
31 December 2017 (unaudited)
Agricultural 160 859 51 756 24 564 323 769 169 732
Food 336 761 60 842 37 348 350 589 139 413
Chemicals 167 582 35 976 18 574 224 432 99 502
Colour* 47 394 6 309 (4 714) 120 382 30 009
Water 21 419 12 063 (5 343) 54 931 72 550
RSA 19 389 11 328 (3 556) 46 590 37 933
Botswana 2 030 735 (1 787) 8 341 34 617
Discontinued (Silica) 1 263 (2 327) (4 329) 16 583 46 304
Other - - (23 201) 45 773 77 922
Total 735 278 164 619 42 899 1 136 459 635 432
* Includes R4.8m of site clean-up costs and obsolete stock write-offs.
Gross Operating
Revenue Assets Liabilities
profit/(loss) profit/(loss)
R’000 R’000 R’000 R’000 R’000
31 December 2016 (restated)
Agricultural 155 973 51 871 29 128 348 828 150 267
Food 397 102 67 536 50 649 315 013 142 093
Chemicals 163 834 32 155 15 201 190 594 89 986
Colour 57 415 3 359 (2 619) 123 389 20 319
Water 22 073 16 821 4 140 43 226 62 779
RSA 18 150 13 826 3 215 36 731 32 368
Botswana 3 923 2 995 925 6 495 30 411
Discontinued (Silica) 26 989 4 936 638 69 391 38 950
Other - - (14 283) 68 266 124 348
Total 823 386 176 678 82 854 1 158 707 628 742
Gross Operating
Revenue Assets Liabilities
profit/(loss) profit/(loss)
R’000 R’000 R’000 R’000 R’000
30 June 2017 (audited)
Agricultural 280 206 79 095 26 262 273 468 132 324
Food 700 026 125 040 80 217 280 051 91 047
Chemicals 322 675 59 003 30 531 200 341 89 226
Colour 85 599 8 328 (7 291) 110 433 15 815
Water 48 907 28 219 5 833 58 187 69 883
RSA 42 125 27 007 4 171 48 716 35 578
Botswana 6 782 1 212 1 662 9 471 34 305
Discontinued (Silica) 47 623 (14 309) (50 645) 29 313 51 096
Other - (415) (21 089) 33 334 50 104
Total 1 485 036 284 961 63 818 985 127 499 495
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
1. BASIS OF ACCOUNTING AND PREPARATION
The unaudited condensed consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for interim reports and the requirements of the Companies Act of South
Africa. The Listings Requirements require reports to be prepared in accordance with the framework concepts and
the measurement and recognition requirements of the International Financial Reporting Standards (IFRS) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of
these financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated
financial statements.
2. FINANCIAL PREPARATION AND REVIEW
The Unaudited Condensed Consolidated Interim Financial Statements for the period ended 31 December 2017
have been prepared by Rolfes Holding Limited’s group financial reporting team; this process was supervised by
the Group’s Chief Financial Officer, Mr AP Broodryk, and approved by the Rolfes Holdings Limited board of
directors on 16 February 2018.
3. CONTINGENT LIABILITIES
The Group is involved in various legal proceedings and is in consultation with its legal counsel, assessing the
outcome of these proceedings on an ongoing basis. A particular case relates to a fidelity and assignment
agreement. In the opinion of the directors and legal counsel the possible liability will not exceed R 2,0 million.
4. FAIR VALUE DISCLOSURE
The Group does not have any material items reported at fair value at the year end. Certain financial instruments,
being forward exchange contracts are measured using level 2 inputs, and presented under trade and other
receivables and trade and other payables. The impairments and provisions accounted for in relation to discontinued
operations are measured using level 3 inputs.
5. SUBSEQUENT EVENTS
CASH DIVIDEND DECLARATION
In accordance with Board policy to review dividend payments to shareholders at the end of each reporting period,
notice is hereby given that the Board declared an interim gross cash dividend of 4 cents per ordinary share for the
six months ended 31 December 2017. The dividend will be payable to shareholders recorded in the register of the
company at the close of business on the record date appearing below.
The number of ordinary shares in issue at the date of this declaration is 161 942 800.
The salient dates applicable to the Interim Dividend are as follows:
Declaration date: Monday, 19 February 2018
Last date to trade cum dividend: Monday, 19 March 2018
Shares commence trading ex-dividend: Tuesday, 20 March 2018
Record date: Friday, 23 March 2018
Payment Date: Monday, 26 March 2018
In accordance with paragraphs 11.17(c)(i) to (x) and 11.17(c) of the JSE Listings Requirements, the following
additional information is disclosed:
- The local Dividends Tax rate is 20%;
- The dividends will be paid from income reserves;
- The gross dividend to be used in determining the Dividends Tax is 4 cents per ordinary share;
- The Dividend Tax to be withheld by the Company is equal to 0.8 cents per ordinary share;
- The gross dividend amount is 4 cents per ordinary share for shareholders exempt from Dividends Tax;
- The net dividend amount is 3.2 cents per ordinary share for shareholders not exempt from Dividends Tax;
- Rolfes Holdings Limited has 161 942 800 ordinary shares in issue (which includes 641 332 treasury
shares); and
- Rolfes Holdings Limited’s income tax reference number is 9492/089/14/0.
Where applicable, payment in respect of certificated shareholders will be transferred electronically to shareholders’
bank accounts on the payment date. In the absence of specific mandates, payment cheques will be posted to
certificated shareholders at their risk on the payment date. Shareholders who have dematerialised their shares will
have their accounts at their Central Securities Depository Participant or broker credited on the payment date.
No share certificates may be dematerialised or rematerialised between Tuesday, 20 March 2018 and Friday, 23
March 2018 both days inclusive.
There are no additional material events, other than those reported in this announcement, that have occurred
between 31 December 2017 and the date of this report which may have a material impact on the understanding of
this report and the financial information presented.
REGISTERED OFFICE
First floor, The Oval West, Wanderers Office Park, 52 Corlett Drive, Illovo, 2196
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
DIRECTORS
MS Teke*, (Chairman), RM Buttle (Chief Executive Officer), AP Broodryk (Chief Financial Officer), SS Mafoyane
*# (Lead Independent Director), MM Dyasi*#, DM Mncube*#, MG Mokoka*#, CS Seabrooke*, JR Winer*
* Non-executive # Independent
COMPANY SECRETARY
CorpStat Governance Services Proprietary Limited
PREPARED BY
Commentary: RM Buttle
Financial results: AP Broodryk
SPONSORS
Grindrod Bank Limited
REGISTERED AUDITORS
KPMG Inc.
INVESTOR RELATIONS
Singular Systems Proprietary Limited
JDebie@singular.co.za
Date: 19/02/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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