Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 December 2017
TORRE INDUSTRIES LIMITED
Incorporated in the Republic of South Africa,
(Registration number 2012/144604/06),Share code: TOR
ISIN: ZAE000188629, ("Torre" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS
FOR THE SIX MONTHS ENDED
31 DECEMBER 2017
KEY FEATURES
REVENUE UP 3% TO R778 million
GROSS PROFIT UP 8% TO R298 million
EBITDA UP 61% TO R58 million
OPERATING PROFIT DOWN 2% TO R40 million
GROUP HEPS UP 32% TO 4.83 cents
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Re-presented Audited
6 months unaudited 12 months
ended 6 months ended ended
31 December 31 December 30 June
2017 2016 2017
R'm R'm R'm
CONTINUING OPERATIONS
Revenue 778 759 1 524
Cost of sales (480) (483) (956)
Gross profit 298 276 568
Operating expenses (258) (235) (491)
Operating profit 40 41 77
Impairment of assets and loss on disposal of investments - (2) (458)
Retrenchment, restructuring and closure costs - (25) (25)
Net operating profit/(loss) 40 14 (406)
Share of losses from equity accounted investments - - (1)
Finance income 11 4 13
Finance costs (8) (13) (30)
Profit/(loss) before taxation 43 5 (424)
Taxation (11) (5) 4
Profit/(loss) for the period from continuing operations 32 - (420)
(Loss)/profit for the period from discontinued operations (7) 29 8
Profit/(loss) for the period 25 29 (412)
Other comprehensive (loss):
Items that may be reclassified through profit or loss
Foreign currency translation movements (2) (70) (59)
Total comprehensive income/(loss) for the period 23 (41) (471)
Profit/(loss) attributable to:
Ordinary shareholders of the group 25 17 (437)
- Continuing operations 32 - (420)
- Discontinued operations (7) 17 (17)
Non-controlling interest - 12 25
- Discontinued operations - 12 25
25 29 (412)
Total comprehensive income/(loss) attributable to:
Ordinary shareholders of the group 23 (40) (464)
Non-controlling interest - (1) (7)
23 (41) (471)
Reconciliation of net operating profit/(loss) to EBITDA
Net operating profit/(loss) 40 14 (406)
Depreciation and amortisation 18 20 44
Loss on disposal of investments - 2 2
Impairment of property, plant and equipment - - 27
Impairment of rental assets - - 31
Impairment of investments - - 5
Impairment of intangible investments - - 2
Impairment of goodwill - - 391
EBITDA from continuing operations 58 36 96
EBITDA from discontinued operations (7) 44 93
Total EBITDA 51 80 189
Reconciliation of attributable profit/(loss) to headline earnings
Profit/(loss) attributable to ordinary shareholders 25 17 (437)
Loss on disposal of investments - - 2
Loss on disposal of subsidiaries - - 55
Impairment of property, plant and equipment - 2 27
Impairment of rental assets - - 31
Impairment of investments - - 4
Impairment of intangible assets - - 2
Impairment of goodwill - - 391
Taxation - - (18)
Headline earnings attributable to ordinary shareholders 25 19 57
- Continuing operations 32 2 21
- Discontinued operations (7) 17 36
Weighted average number of shares in issue 514 197 105 525 058 445 524 236 655
Diluted weighted average number of shares in issue 538 296 903 528 911 988 530 209 336
Attributable earnings/(losses) per share: (cents)
Aggregate
- Basic 4.83 3.27 (83.38)
- Diluted 4.61 3.25 (82.44)
Continuing operations
- Basic 6.19 0.59 (80.09)
- Diluted 5.91 0.59 (79.19)
Discontinued operations
- Basic (1.36) 2.68 (3.29)
- Diluted (1.30) 2.66 (3.25)
Headline earnings per share (cents)
Aggregate
- Basic 4.83 3.65 10.81
- Diluted 4.61 3.63 10.69
Continuing operations
- Basic 6.19 0.97 3.99
- Diluted 5.91 0.97 3.95
Discontinued operations
- Basic (1.36) 2.68 6.82
- Diluted (1.30) 2.68 6.74
Final dividend per share (cents) - - 3,00
CONDENSED CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
Non-
Controlling Total
Attributable to Owners of the Company Interests Equity
Non-
Stated Other Retained Controlling
Capital Reserves FCTR income Interests Total
R'm R'm R'm R'm R'm R'm
Balance as at 30 June 2016 1 319 16 20 59 194 1 608
Share based payment expense - (1) - - - (1)
Dividends paid - - - (11) - (11)
Profit for the period - - - 17 12 29
Transactions with NCI - - - 11 24 35
Movement in FCTR - - (57) - (13) (70)
Balance as at 31 December 2016 1 319 15 (37) 76 217 1 590
Shares repurchased (15) - - - - (15)
Share based payment expense - 1 - - - 1
Disposal of discontinued operations - - - - (222) (222)
(Loss)/profit for the period - - - (454) 13 (441)
Transactions with NCI - - - (17) 15 (2)
Movement in FCTR - - 30 - (19) 11
Balance as at 30 June 2017 1 304 16 (7) (395) 4 922
Share based payment expense - 8 - - - 8
Dividends paid - - - (15) - (15)
Profit for the period - - - 25 - 25
Movement in FCTR - - (2) - - (2)
Balance as at 31 December 2017 1 304 24 (9) (385) 4 938
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Unaudited as at Unaudited as at Audited as at
31 December 31 December 30 June
2017 2016 2017
R'm R'm R'm
ASSETS
Non-current assets 442 923 439
Property, plant and equipment 87 101 79
Rental assets 72 110 79
Intangible assets 145 134 146
Goodwill 75 462 73
Deferred tax 48 35 43
Finance leases 14 24 18
Investment in associates - 56 1
Other financial assets 1 1 -
Current assets 851 660 953
Inventories 391 380 344
Trade and other receivables 252 235 247
Loan receivable 155 - 174
Cash and cash equivalents 46 37 182
Other financial assets 7 8 6
Non-current assets held for sale - 798 -
TOTAL ASSETS 1 293 2 381 1 392
EQUITY AND LIABILITIES
Total Equity 938 1 590 922
Equity Attributable to Owners of the Company 934 1 373 918
Stated capital 1 304 1 319 1 304
Foreign currency translation reserve (9) (37) (7)
Other reserves 24 15 16
Retained income (385) 76 (395)
Non-Controlling Interests 4 217 4
Non-current liabilities 112 173 140
Interest bearing borrowings 63 116 92
Deferred purchase consideration 3 - 3
Deferred tax 43 50 40
Other financial liabilities 3 7 5
Current liabilities 243 358 330
Interest bearing borrowings 16 44 45
Trade and other payables 218 248 254
Deferred purchase consideration 2 2 2
Taxation payable 5 3 8
Bank overdraft 2 61 21
Non-current liabilities held-for-sale - 260 -
TOTAL EQUITIES AND LIABILITIES 1 293 2 381 1 392
Number of shares in issue 514 197 105 525 058 445 514 197 105
Net asset value per share (cents) 182 262 179
Net tangible asset value per share (cents) 139 122 136
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 December 31 December 30 June
2017 2016 2017
R'm R'm R'm
Net cash flow from operating activities (36) (31) 27
Cash generated from trading 60 68 188
Net working capital movements (90) (82) (129)
Net finance costs and taxation paid (6) (17) (32)
Net cash flow from investing activities (5) (134) -
Capital expenditure on property, plant, equipment and rental assets (18) (97) (153)
Acquisition of business operations - - (16)
Proceeds on business disposal net of cash 9 - 229
Decrease in deferred purchase consideration - - (28)
Other investing activities 4 (37) (32)
Net cash flow from financing activities (72) 17 13
Decrease in interest bearing borrowings (57) (4) (9)
Dividends paid (15) (11) (11)
Transactions with non-controlling interest - 32 33
Total cash movement for the period (113) (148) 40
Cash at the beginning of the period 161 120 120
Effect of exchange rate movement on cash balances (4) (14) 1
Net cash at the end of the period 44 (42) 161
NOTES TO THE
CONDENSED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The unaudited condensed consolidated interim results has been prepared in accordance with the framework concepts, the measurement and
recognition requirements of International Financial Reporting Standards (IFRS) and specifically the disclosure requirements of IAS 34, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, the listings requirements of the JSE Limited ("JSE") and the requirements of the South African Companies Act
71 of 2008 as amended ("Companies Act"). The accounting policies are consistent with the annual financial statements for the year ended
30 June 2017. The directors take full responsibility for the preparation of this interim results announcement.
2. FINANCIAL PREPARATION AND REVIEW
These results have been prepared under the supervision of S Mansingh CA (SA), the Chief Financial Officer. The results were approved by the
board of directors on 26 February 2018.
The condensed financial information has not been reviewed or audited by Deloitte & Touche, the group's auditors.
3. SEGMENT INFORMATION
Segmental disclosure remains consistent with disclosure in prior comparative periods.
Unaudited Unaudited Audited
December 2017 December 2016 June 2017
R'm R'm R'm
Segment revenue
Parts and Components 462 449 907
Analytical Services 159 129 271
Capital Equipment 156 174 340
Central and Eliminations 1 7 6
Continuing operations 778 759 1 524
Discontinued operations - 249 562
Segment operating profit/(loss)
Parts and Components 22 34 63
Analytical Services 34 17 40
Capital Equipment 2 - 2
Central and Eliminations (18) (10) (28)
Continuing operations 40 41 77
Discontinued operations - 38 82
Segment depreciation and amortisation
Parts and Components (3) (4) (9)
Analytical Services (7) (6) (16)
Capital Equipment (6) (7) (15)
Central and Eliminations (2) (3) (4)
Continuing operations (18) (20) (44)
Discontinued operations - (6) (11)
Segment impairments
Parts and Components - - (260)
Analytical Services - (2) (104)
Capital Equipment - - (90)
Central and Eliminations - - (4)
Continuing operations - (2) (458)
Discontinued operations - - (55)
Segment retrenchment, restructuring and closure costs
Parts and Components - (4) (4)
Analytical Services - (13) (13)
Capital Equipment - (2) (2)
Central and Eliminations - (6) (6)
Continuing operations - (25) (25)
Discontinued operations - - -
Segment assets
Parts and Components 559 743 530
Analytical Services 274 361 265
Capital Equipment 292 435 296
Central and Eliminations 168 44 301
Total 1 293 1 583 1 392
Discontinued operations - 798 -
Segment liabilities
Parts and Components (136) (312) (164)
Analytical Services (80) (105) (81)
Capital Equipment (50) (303) (63)
Central and Eliminations (89) 189 (162)
Total (355) (531) (470)
Discontinued operations - (260) -
Revenue streams
Parts sales 490 494 975
Services 184 152 319
Equipment sales 81 87 176
Rentals 23 26 54
Continuing operations 778 759 1 524
Discontinued operations - 249 562
Revenue generated for the six months to December 2017 was R685 million (H1FY17: R716 million) from South Africa and
R93 million (H1FY17: R43 million) from the rest of the world.
NOTES TO THE
CONDENSED FINANCIAL STATEMENTS
4. MATERIAL BALANCE SHEET MOVEMENTS
Interest bearing borrowings have decreased as a result of using available cash to repay term-debt during the period. No other material balance
sheet movements were noted.
5. LOAN RECEIVABLE
The loan receivable as at 31 December 2017 of R155 million consists of the Kanu receivable of R151 million ($12.3 million) and the Reng
receivable of R4 million.
6. SUBSEQUENT EVENTS
There are no adjusting subsequent events that have occurred since 31 December 2017 which have a financial impact on the financial
information presented.
7. GUARANTEE
Torre International has provided a EUR4 million (R59 million) guarantee against the Kanu group's obligations to a supplier until 31 December
2018.
8. DISCONTINUED OPERATIONS
During the period Torre finalised commercial warranty claims from Kanu to the value of R7 million in anticipation of the full and final settlement
of the Kanu receivable.
9. OTHER
During December 2017 Torre Parts and Components completed the purchase of Traxx for R10.5 million. Traxx distributes heavy duty brake
components and supplies brake components to OEM's in South Africa. The acquisition provides Torre Parts and Components with new product
lines as well as an extended new customer base in the commercial segment of the market.
COMMENTARY
INTRODUCTION
Torre is a JSE-Listed industrial group that specialises in:
- Supply of quality parts and components to the automotive, mining, construction and industrial sectors;
- Provision of specialised analytical and testing services to exploration and mining companies as well as commercial laboratories; and
- Value added distribution of branded capital equipment, either for rental or sale
Headquartered in Modderfontein, Johannesburg, Torre employs over 1 300 people with a physical presence in 11 African countries including
South Africa. Torre has strong BEE credentials, including 28.5% BEE ownership, a level 4 for the Torre group and a level 3 for the Analytical
Services segment under the new BEE Codes.
SUMMARY
Key features for the period include:
- Revenue increased by 3% to R778 million (H1FY2017: R759 million)
- Gross profit up 8% to R298 million (H1FY2017: R276 million)
- EBITDA higher by 61% to R58 million (H1FY2017: R36 million)
- Operating profit down 2% to R40 million (H1FY2017: R41 million)
- Group HEPS up 32% to 4.83 cents (H1FY2017: 3.65 cents)
FINANCIAL REVIEW
The group's financial results show an improvement to the comparative prior period as the group benefited from the restructuring that was
completed in the prior year. Management was pleased with the performance of Torre Analytical Services and noted required improvements
in Parts and Components and Capital Equipment which were impacted, in part, by the economic and political environment in South Africa.
REVENUE AND EBITDA
The group increased revenue by 3% to R778 million (H1FY2017: R759 million) and increased gross profit by 8% to R298 million
(H1FY2017: R276 million). Higher revenue in the Analytical Services offset a drop in revenue in Capital Equipment.
However, group operating profit decreased by 2% to R40 million (H1FY2017: R41 million). This decrease can be attributed to a forex loss of
R7 million (H1FY2017: loss of R0.1m), R8m share-based payment expense (H1FY2017: R1 million) and additional costs incurred by Torre Parts
and Components in setting up its new branches.
Net operating profit increased by 186% to R40 million (H1FY2017: R14 million) as a result of the impairment of assets, retrenchment and
restructuring costs of R29 million that were incurred in the comparative period.
CASH AND DEBT
Available cash was used to voluntarily repay R50 million of term-debt which contributed to the reduction in gross debt from R158 million at
30 June 2017 to R81 million as at 31 December 2017. The seasonal increase in working capital and dividend payment resulted in net debt
increasing to R35 million from a net cash position as at 30 June 2017 of R24 million. The group's balance sheet remains in a strong position to
finance future acquisitions or any growth strategies.
REVIEW OF OPERATIONS
Parts and Components
The Parts and Components segment comprises the following businesses: Torre Parts and Components ("TPC"), Tractor & Grader Supplies ("TGS")
and Elephant Lifting. TPC, TGS and Elephant Lifting manufacture and/or distribute quality branded parts, components and consumable items in
various markets including automotive, commercial, industrial and mining.
The segment increased revenue by 3% to R462 million (H1FY2017: R449 million) due to an increase in Gabriel sales, however the financial
results were negatively impacted by a R5 million foreign exchange loss and an increase in marketing and distribution expenses. TPC is
expected to benefit from the new branches that were set up around South Africa.
Analytical Services
The Analytical Services segment comprises the following businesses: WearCheck, AMIS and Set Point Laboratories. WearCheck is the leading oil
condition monitoring company in Africa, servicing a large number of markets through the scientific analysis of used oil from mechanical and
electrical systems. AMIS assists mining companies and mineral laboratories to monitor laboratory performance by developing, producing and
supplying a range of quality Matrix Reference Materials. Set Point Laboratories specialises in the analysis of geo-chemical, water,
environmental, industrial and agriculture samples.
The segment increased revenue by 23% to R159 million (H1FY2017: R129 million) due to higher analysis volumes by WearCheck. AMIS's focus
on larger production batches, which reduced the cost of production, contributed to the higher margin.
Capital Equipment
The Capital Equipment segment comprises the following businesses: Letaba Pumps, Manhand and SA French. Letaba Pumps is a leading
distributor and supplier of international pump brands and accessories and also offers pump rentals and repairs. Manhand offers a wide range
of robust, high-performance materials handling solutions for the full spectrum of commercial and industrial applications. SA French is the
exclusive local distributor for Potain and leading distributor of tower cranes and lifting solutions in sub-equatorial Africa.
The segment's revenue decreased by 10% to R156 million (H1FY2017: R174 million) due to lower tower crane sales due to a trend which
saw customers move from outright purchases to rentals. The financial results were also impacted by a R2 million foreign exchange loss.
FINANCIAL ASSISTANCE
Notice is hereby given in terms of section 45 (5) (a) of the Companies Act that the Board of Directors of the Company at a meeting held on
26 February 2018 authorised and ratified the Company to provide financial assistance to its subsidiary companies in terms of section 45 of
the Companies Act, pursuant to the authority granted to the Board by shareholders on 06 December 2017. The approved financial assistance
included guarantees on behalf of group companies and general facilities and loans to group companies already provided totalling R750 million.
CHANGES TO THE BOARD
- Mr Jon Hillary was appointed as full-time Executive Deputy Chairman of Torre effective 1 July 2017 to work with the existing executive team
in building the group, with a specific focus on strategic growth initiatives.
- Mr Charles Pettit resigned as a non-executive director and member of the Board effective 24 October 2017. Charles was the founder of
Torre and the Board thanks Charles for his contribution to the Company since its inception in 2012 and wished him all the best in his future
endeavours.
- Ms Mary Bomela also resigned as a non-executive director and member of the Board effective 24 October 2017. The Board thanks Mary
for her contribution to Torre since May 2015.
- Ms Sandiswa Ziphethe-Makola was appointed as a non-executive director and member of the Board with effect from 24 October 2017.
- Mr Nchaupe Khaole resigned as a non-executive director on 24 October 2017 and was appointed as an alternate director to
Ms Sandiswa Ziphethe-Makola.
- Mr Moss Ngoasheng replaced Mr Peter van Zyl as Chairman of the Remuneration Committee on 26 February 2018.
There were no other changes to the Board in the interim period ended 31 December 2017 or up to date of this report.
OUTLOOK
Trading conditions remain challenging although the group is beginning to see improved sentiment for the mining sector whilst the
construction sector remains under pressure. The recent political and economic developments in South Africa bode well for Torre to benefit from
any improvement in the sectors it services
Torre is continuing to work on its geographic expansion strategy with, TPC, Letaba, AMIS and WearCheck reporting higher revenue from Africa.
Technology disruption remains a key strategic focus for Torre and M&A activity in this area is at an advanced stage for certain of its
businesses. Torre is also currently working on partnerships in new areas of business.
The Kanu receivable of R151 million ($12.3 million) is on track for settlement in the coming months and this will further enhance group
liquidity.
DIVIDEND
Torre's current dividend policy is to pay a dividend once a year. The board will consider a dividend at year-end in accordance with the policy of
having dividends covered 4 times by headline earnings per share.
RESULTS PRESENTATION
Torre will host a conference call on the financial results at 11h00 CAT on 27 February 2018.
Anyone who wishes to listen to the presentation of the group's interim results can pre-register on the home page of the company's website:
http://www.torreindustries.com
The presentation will also be available on the company's website on the morning of the conference call
(www.torreindustries.com/investor-presentations).
Any forward-looking statements in this announcement have not been reviewed nor audited by the Company's Auditors.
On behalf of the Board
CS Seabrooke
Chairman of the Board
26 February 2018
DIRECTORS
Directors: CS Seabrooke (Chairman)#, JW Hillary (Executive Deputy Chairman), JT Botes (Chief Executive Officer),
S Mansingh (Chief Financial Officer), PJ Van Zyl*, MM Ngoasheng#, LE Mthimunye-Bakoro+, SM Ziphethe-Makola*, N Khaole*^
* Non-executive + Lead independent non-executive # Independent non-executive ^Alternate
COMPANY SECRETARY
Sean Graham
REGISTERED OFFICE
11 Avalon Road, Westlake View Ext 11, Modderfontein, 1609, South Africa
SPONSOR
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Ltd
A: 11 Avalon Road, Westlake View Ext. 11, Modderfontein, 1609, South Africa
P: PO Box 856, Isando,1600, South Africa
T: +27 (0) 11 923 7000
www.torreindustries.com
Date: 27/02/2018 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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