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Reviewed condensed consolidated provisional financial results for the year ended 28 February 2018
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
http://www.afrimat.co.za
Reviewed condensed consolidated provisional financial results for the year ended 28 February 2018
Highlights
Group revenue of R2,5 billion
Headline earnings per share ("HEPS") of 180,7 cents
Contribution from operations' margin 14,3%
NAV per share of 857 cents
Final dividend per share of 42,0 cents
Return on net operating assets 21,8%
Net debt:equity ratio improved from 42,4% in August 2017 to 37,0%
Commentary
BASIS OF PREPARATION
The reviewed condensed consolidated provisional financial results ("financial statements") for the year
ended 28 February 2018 ("year") contain, as a minimum, the information required by IAS 34: Interim
Financial Reporting and have been prepared in accordance with the Frameworks Concepts and
measurement and recognition requirements of the International Financial Reporting Standards ("IFRS"),
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, JSE Listings
Requirements and in the manner required by the South African Companies Act No. 71 of 2008, as
amended. The accounting policies and method of computation applied in preparation of the financial
statements are in accordance with IFRS and are consistent with those applied in the audited annual
financial statements for the year ended 28 February 2017.
The financial statements have been prepared under the supervision of the Chief Financial Officer ("CFO"),
PGS de Wit CA(SA).
INTRODUCTION
The group continues to deliver satisfactory results supported by its diversification strategy despite very
difficult trading conditions experienced during the financial year.
The group results were impacted by major political events that severely impacted business confidence in
the first half of the year. Political uncertainty prevailed for the remainder of 2017 and an economic slow-
down during the last quarter of 2017 exacerbated the operating climate.
FINANCIAL RESULTS
Headline earnings per share declined by 8,0% from 196,4 cents to 180,7 cents per share. Mineral
producing operations across all regions as well as the Western Cape aggregates business delivered solid
results, while the impact of the slow-down in the last few months of 2017 was felt more strongly in
KwaZulu-Natal and southern Gauteng where the operations of Glen Douglas and Clinker experienced
reduced volumes.
The net debt:equity ratio increased from 19,8% in the prior year to 37,0% in the current year, mainly due
to a new R300,0 million amortising five-year term facility introduced to purchase the Investec securities, to
fund the offer to creditors in terms of the business rescue plan and provide working capital requirements
for Afrimat Demaneng Proprietary Limited (previously Diro Manganese Proprietary Limited) and Diro Iron
Ore Proprietary Limited ("Demaneng").
OPERATIONAL REVIEW
All operating units remain 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 construction materials such as aggregates and concrete based products as well as
industrial minerals such as limestone, dolomite and silica. The group added bulk commodities to an
already diversified offering, by entering the iron ore industry.
The business experienced a year of labour stability as a result of various human resource interventions to
create an amicable, mutually beneficial climate. The group is committed to creating and sustaining
harmonious relationships in the workplace and addressing issues proactively.
The Aggregates and Industrial Minerals segment delivered solid results in particular the mineral producing
operations across all regions as well as the Western Cape aggregates business. The impact of the slow-
down in the last months of 2017 was felt more strongly in KwaZulu-Natal and southern Gauteng where the
operations of Glen Douglas and Clinker experienced reduced volumes in the last quarter of the 2017
calendar year. The start of 2018 saw demand increase, but not sufficiently to compensate for the poor
demand of the last quarter.
The acquisition of the Emfuleni Clinker Ash Dump, situated in Vereeniging and in close proximity 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. The Clinker management team continues
to investigate further options in order to secure additional clinker resources for the group.
The Mozambican operations experienced renewed activity in January 2018 when an order to supply the
construction materials to the resettlement village in Palma was received. Afrimat has reestablished
operations and was at full production during the month of May 2018. The Final Investment Decision for
the main LNG project has not yet been made, but it is expected to be made during 2018 and Afrimat is
well positioned to tender on requirements.
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 Demaneng, 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.
Furthermore, Afrimat concluded a sale of shares and claims agreement with the minorities
of Demaneng to acquire the remaining 40% stake, effective 31 July 2017 (refer to
note 14 for further information).
As a direct result of much improved commodity prices, it was decided to accelerate the ramp-up of
Demaneng. Expenses relating to the ramp-up increased substantially in line with the accelerated
production. The mine reached its design production capacity of 1 million tonnes per annum at the end of
February 2018. All processing equipment has been commissioned, together with the commissioning of a
new load out facility which enables Afrimat to load trains on the Sishen-Saldanha railway line.
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 Demaneng 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 Demaneng to acquire the
remaining 40% stake in Demaneng, effective 31 July 2017.
Prior to Afrimat's acquisition, Demaneng'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. Afrimat
Demaneng 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 operations and the mining and delivery of iron ore.
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.
DIVIDEND
The group's dividend policy is to maintain a 2,75 times dividend cover. A final dividend of 42,0 cents per
share (2017: 50,0 cents) for the year was declared on 23 May 2018. The dividend payable to shareholders
who are subject to dividend tax is 33,6 cents per share (2017: 40,0 cents per share). Total dividends for the
year amount to 62,0 cents per share (2017: 70,0 cents per share).
PROSPECTS
The group is well positioned to capitalise on its strategic initiatives, foresees continued growth from an
excellent asset base, expects further expansion of its range of unique products and turnaround initiatives
of selective acquisitions to deliver.
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.
AUDITOR'S REVIEW
This report has been reviewed by the company's auditor, PricewaterhouseCoopers Inc. Their unmodified
opinion is available for inspection at the company's registered office. Their review was conducted in
accordance with ISRE 2410: Review of interim financial information performed by the independent auditor
of the entity.
The auditor's report does not necessarily report on all of the information contained in this report.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's
engagement they should obtain a copy of the auditor's report together with the accompanying financial
information, from the issuer's registered office.
On behalf of the board
MW von Wielligh
Chairman
AJ van Heerden
Chief Executive Officer
23 May 2018
DIVIDEND DECLARATION
Notice is hereby given that a final gross dividend, No. 22 of 42,0 cents per share, in respect of the year
ended 28 February 2018, was declared on Wednesday, 23 May 2018.
There are 143 262 412 shares in issue at reporting date, of which 6 654 039 are held in treasury. The total
dividend payable is R60,2 million (2017: R71,6 million).
The board has confirmed by resolution 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 33,6 cents and 42,0 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, 12 June 2018
Commence trading ex dividend Wednesday, 13 June 2018
Record date Friday, 15 June 2018
Dividend payable Monday, 18 June 2018
Share certificates may not be dematerialised or rematerialised between Wednesday, 13 June 2018 and
Friday, 15 June 2018, both dates inclusive.
Condensed consolidated statement of profit or loss and other comprehensive income
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017 Change
R'000 R'000 %
Revenue 2 456 782 2 228 157 10,3
Cost of sales (1 699 417) (1 464 494)
Gross profit 757 365 763 663 (0,8)
Operating expenses (406 205) (357 897)
Profit/(loss) on disposal of plant and equipment 638 (165)
Contribution from operations 351 798 405 601 (13,3)
Impairment of property, plant and equipment
(refer to note 2) (1 399) (3 049)
Profit on disposal of subsidiary (refer to note 3) - 4 043
Operating profit 350 399 406 595 (13,8)
Finance income 32 930 36 073
Finance costs (59 432) (41 589)
Share of profits of joint venture - 1 047
Share of (loss)/profit of associate (8) 82
Profit before tax 323 889 402 208 (19,5)
Income tax expense (refer to note 5) (78 511) (122 814)
Profit for the year 245 378 279 394 (12,2)
Profit attributable to:
Owners of the parent 245 668 277 824
Non-controlling interests (290) 1 570
245 378 279 394
Other comprehensive income
Items that may be subsequently reclassified
to profit or loss
Net change in fair value of available-for-sale
financial assets 183 68
Income tax effect on available-for-sale
financial assets (41) (63)
Currency translation differences (refer to note 6) 961 (7 270)
Other comprehensive income for the year, net of tax 1 103 (7 265)
Total comprehensive income for the year 246 481 272 129 (9,4)
Total comprehensive income attributable to:
Owners of the parent 246 771 270 559
Non-controlling interests (290) 1 570
246 481 272 129
Earnings per share:
Earnings per ordinary share (cents) 180,3 196,0 (8,0)
Diluted earnings per ordinary share (cents) 179,0 194,0 (7,7)
Note to statement of profit or loss and other
comprehensive income
Shares in issue:
Total shares in issue 143 262 412 143 262 412
Treasury shares (refer to note 8) (6 654 039) (7 187 643)
Net shares in issue 136 608 373 136 074 769
Weighted average number of net shares in issue 136 271 264 141 712 540
Diluted weighted average number of shares 137 248 315 143 209 240
Reconciliation of headline earnings
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017 Change
R'000 R'000 %
Profit attributable to owners of the parent 245 668 277 824
(Profit)/loss on disposal of plant and equipment attributable
to owners of the parent (638) 165
Impairment of property, plant and equipment (refer to note 2) 1 399 3 049
Profit on disposal of subsidiary attributable to owners of the
parent (refer to note 3) - (4 043)
Total income tax effects of adjustments (213) 1 301
246 216 278 296 (11,5)
Headline earnings per ordinary share ("HEPS") (cents) 180,7 196,4 (8,0)
Diluted HEPS (cents) 179,4 194,3 (7,7)
Condensed consolidated statement of financial position
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 1 417 845 1 058 240
Investment property 3 040 3 040
Intangible assets 12 848 14 575
Goodwill 133 194 133 194
Investment in associate 183 244
Other financial assets (refer to note 7) 59 446 276 942
Deferred tax 55 115 30 288
Total non-current assets 1 681 671 1 516 523
Current assets
Inventories 242 124 162 960
Current tax receivable 9 181 9 279
Trade and other receivables 391 603 332 766
Other financial assets (refer to note 7) - 107
Cash and cash equivalents (refer to note 9) 112 208 244 690
Total current assets 755 116 749 802
Total assets 2 436 787 2 266 325
Equity and liabilities
Equity
Stated capital 266 985 285 842
Business combination adjustment (105 788) (105 788)
Treasury shares (59 660) (70 999)
Net issued stated capital 101 537 109 055
Other reserves 5 888 4 525
Retained earnings 1 063 043 1 085 792
Attributable to equity holders of the parent 1 170 468 1 199 372
Non-controlling interests 9 980 7 547
Total equity 1 180 448 1 206 919
Liabilities
Non-current liabilities
Borrowings (refer to note 10.1) 271 954 94 999
Deferred tax 102 613 113 845
Provisions 130 288 96 190
Total non-current liabilities 504 855 305 034
Current liabilities
Borrowings (refer to note 10.1) 165 004 79 090
Other financial liabilities (refer to note 11) 21 856 38 111
Current tax payable 11 485 8 997
Trade and other payables 458 455 352 150
Obligation of share of joint venture's losses 4 481 4 481
Bank overdraft (refer to note 9) 90 203 271 543
Total current liabilities 751 484 754 372
Total liabilities 1 256 339 1 059 406
Total equity and liabilities 2 436 787 2 266 325
Note to statement of financial position:
Net asset value per share (cents) 857 881
Net tangible asset value per share (cents) 750 773
Total borrowings 458 814 212 200
(Surplus cash)/overdraft less cash and
cash equivalents (22 005) 26 853
Net debt 436 809 239 053
Net debt:equity ratio (%) 37,0 19,8
Condensed consolidated statement of cash flows
Restated
Reviewed audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
Cash flows from operating activities
Cash generated from operations 344 542 531 114
Interest revenue 31 623 35 674
Dividends received 54 88
Finance costs (52 752) (36 487)
Tax paid (122 507) (124 343)
Net cash inflow from operating activities 200 960 406 046
Cash flows from investing activities
Acquisition of property, plant and equipment (118 918) (78 693)
Proceeds on disposal of property, plant and equipment 22 975 17 688
Purchase of financial assets (68 060) (254 916)
Proceeds on sale of financial assets - 138 940
Proceeds on disposal of subsidiary (refer to note 3) - 9 083
Acquisition of businesses (refer to note 14) (30 772) (280 263)
Net cash outflow from investing activities (194 775) (448 161)
Cash flows from financing activities
Repurchase of Afrimat shares (13 552) (9 656)
Acquisition of additional non-controlling interest
(refer to note 13) (2 521) (66)
Net movement in borrowings (refer to note 10.2) 180 129 5 376
Tax paid on disposal of shares to ARC* - (8 200)
(Repayment of)/proceeds from other financial
liabilities (refer to note 11) (25 143) 38 111
Dividends paid (refer to note 15) (96 240) (87 666)
Net cash inflow/(outflow) from financing activities 42 673 (62 101)
Net increase/(decrease) in cash and cash equivalents
and bank overdrafts 48 858 (104 216)
Cash, cash equivalents and bank overdrafts at the
beginning of the year (26 853) 77 363
Cash, cash equivalents and bank overdrafts at the
end of the year 22 005 (26 853)
* African Rainbow Capital Proprietary Limited ("ARC").
Condensed consolidated statement of changes in equity
Non-
Business control-
Stated combination Treasury Other Retained ling Total
capital adjustment shares reserves earnings 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
Changes:
Additional non-controlling
interest acquired due to:
- Infrasors (refer to note 13) - - - - (169) 103 (66)
Share-based payments - - - 6 023 - - 6 023
Purchase of treasury shares - - (69 310) - - - (69 310)
Treasury shares used for
acquisition (refer to note 14) (312) - 23 908 - - - 23 596
Settlement of employee
Share Appreciation Rights
exercised and reserve transfer,
net of tax (28 911) - 14 584 (2 852) 2 852 - (14 327)
Effect on disposal of treasury
shares to ARC 51 454 - - - - - 51 454
Profit for the year - - - - 277 824 1 570 279 394
Other comprehensive income
for the year - - - (7 265) - - (7 265)
Net change in fair value of
available- for-sale financial
assets - - - 68 - - 68
Income tax effect - - - (63) - - (63)
Currency translation
differences (refer to note 6) - - - (7 270) - - (7 270)
Dividends paid (refer to note 15) - - - - (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
Changes:
Initial non-controlling
interest acquired - - - - - (113 129) (113 129)
Additional non-controlling
interest acquired due to:
- Infrasors (refer to note 13) - - - - (104) 83 (21)
- Afrimat Demaneng - - - - (158 641) 114 641 (44 000)
- Afrimat Bulk Commodities
(refer to note 13) - - - - (19 268) 1 768 (17 500)
Treasury shares used for
purchase of minority shares in
Afrimat Bulk Commodities (refer
to note 13) 1 500 - 13 500 - - - 15 000
Share-based payments - - - 5 456 - - 5 456
Purchase of treasury shares - - (13 552) - - - (13 552)
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer, net of tax (20 357) - 11 391 (5 196) 5 196 - (8 966)
Profit for the year - - - - 245 668 (290) 245 378
Other comprehensive income
for the year - - - 1 103 - - 1 103
Net change in fair value of
available- for-sale financial assets - - - 183 - - 183
Income tax effect - - - (41) - - (41)
Currency translation differences
(refer to note 6) - - - 961 - - 961
Dividends paid (refer to note 15) - - - - (95 600) (640) (96 240)
Balance at 28 February 2018 266 985 (105 788) (59 660) 5 888 1 063 043 9 980 1 180 448
Notes
Reviewed Audited
year ended year ended
28 February 28 February
Change 2018 2017
% R'000 R'000
1. Segment information
Revenue
External sales
Aggregates and Industrial Minerals 1,9 1 582 671 1 553 285
Commodities - 251 773 -
Concrete Based Products (7,8) 622 338 674 872
10,3 2 456 782 2 228 157
Intersegment sales
Aggregates and Industrial Minerals 185 367 118 818
Commodities - -
Concrete Based Products 8 838 2 357
194 205 121 175
Total revenue
Aggregates and Industrial Minerals 1 768 038 1 672 103
Commodities 251 773 -
Concrete Based Products 631 176 677 229
2 650 987 2 349 332
Contribution from operations
Aggregates and Industrial Minerals 343 651 374 986
Commodities (33 443) -
Concrete Based Products 20 721 39 238
Other 20 869 (8 623)
351 798 405 601
Contribution from operations margins on
external revenue (%)
Aggregates and Industrial Minerals 21,7 24,1
Commodities (13,3) -
Concrete Based Products 3,3 5,8
Overall contribution 14,3 18,2
Other information
Assets
Aggregates and Industrial Minerals 1 406 136 1 319 965
Commodities 382 777 -
Concrete Based Products 248 578 219 722
Other 399 296 726 638
2 436 787 2 266 325
Liabilities
Aggregates and Industrial Minerals 353 605 351 907
Commodities 137 903 -
Concrete Based Products 59 326 46 438
Other* 705 505 661 061
1 256 339 1 059 406
Capital expenditure (excluding acquisitions through
business combinations)
Aggregates and Industrial Minerals 140 177 106 234
Commodities 41 633 -
Concrete Based Products 14 610 17 037
Other 5 800 11 250
202 220 134 521
* Includes the R300,0 million amortising five-year facility with SBSA and FNB.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
2. Impairment of property, plant and equipment
Impairment of property, plant and equipment (1 399) (3 049)
An impairment loss was recognised, relating to property, plant and equipment items written
off at Afrimat Aggregates (KZN) Proprietary Limited and Afrimat Contracting International
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
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
4. Depreciation and amortisation
Depreciation 122 567 98 628
Amortisation 1 728 2 003
124 295 100 631
5. Income tax expense
The effective tax rate of the group decreased from 30,5% to 24,2% in the current year 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 the closing
rate at the date of the statement of financial position and income and expenses at average
exchange rates for the year and recognising all resulting exchange differences in other
comprehensive income. Exchange differences arising on monetary items that form part of
the group's net investment in the Mozambique operations are recognised in other comprehensive
income, whilst all other translations including those on short-term receivables, are recognised
in profit or loss.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
7. Other financial assets
Rehabilitation fund trusts and other 59 446 37 520
Afrimat Demaneng Proprietary Limited* - 239 529
59 446 277 049
Non-current other financial assets 59 446 276 942
Current other financial assets - 107
59 446 277 049
* Previously Diro Manganese Proprietary Limited.
The group reinvested previously released unit trusts, resulting in an increase in the investment
in environmental insurance policies. Further investments in environmental insurance policies
were acquired as part of the business combination of Demaneng (refer to note 14). 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.
Number of shares
28 February 28 February
2018 2017
8. Movement in number of treasury shares
Opening balance 7 187 643 1 918 751
Utilised for Share Appreciation Rights Scheme (473 106) (685 615)
Utilised to purchase minority shares in
Afrimat Bulk Commodities (535 714) -
Utilised for Cape Lime acquisition - (1 139 347)
Shares held by AEI - 6 653 854
Purchased during the year 475 216 440 000
Closing balance 6 654 039 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.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
9. Cash and cash equivalents
Current assets 112 208 244 690
Current liabilities (90 203) (271 543)
22 005 (26 853)
In the prior year funding for the Demaneng acquisition (refer to note 14), 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 year, 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 on
30 November 2017.
Included in the prior year's short-term bank deposits is an amount of R110,1 million
relating to available cash in AEI after the disposal of shares to ARC. During the current year,
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.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
10. Borrowings
10.1 Capital net movement
Opening balance 174 089 112 885
Acquired through business combination 2 740 -
New borrowings 398 506 306 811
Repayments (138 377) (245 607)
Closing balance 436 958 174 089
Analysis as per statement of financial position
Borrowings non-current 271 954 94 999
Borrowings current 165 004 79 090
436 958 174 089
10.2 Analysis as per statement of cash flows
New borrowings 318 506 250 983
Repayments (138 377) (245 607)
180 129 5 376
During the year, 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 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.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
11. Other financial liabilities
Net capital proceeds owing to Afrimat BEE Trust participants 12 968 38 111
Deferred liability: Demaneng minorities 8 888 -
21 856 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 had concluded a sale of
shares and claims agreement with the minorities of Demaneng to acquire the remaining 40%
stake in Demaneng 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.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
12. Authorised capital expenditure
Not yet contracted for
- Property, plant and equipment 183 915 140 013
Infrasors
Holdings
Proprietary
Limited Total
R'000 R'000
13. Acquisition of additional non-controlling interest
Infrasors Holdings Proprietary Limited
February 2018
Additional non-controlling interest acquired (83) (83)
Premium paid on additional shares acquired in subsidiary
after initial acquisition 104 104
21 21
February 2017
Adjustment to non-controlling interest acquired (103) (103)
Premium paid on additional shares acquired in subsidiary
after initial acquisition 169 169
66 66
Afrimat Bulk Commodities Proprietary Limited
Afrimat Bulk
Commodities
Proprietary Total
Limited R'000
February 2018
Additional non-controlling interest acquired (1 768) (1 768)
Premium paid on additional shares acquired in subsidiary
after initial acquisition 19 268 19 268
Treasury shares issued (issued at R28,00 per share) (15 000) (15 000)
2 500 2 500
14. Acquisition of businesses
Afrimat Demaneng Proprietary Limited and Diro Iron Ore Proprietary Limited ("Demaneng")
The group acquired 60% of the issued shares of Demaneng, 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 Demaneng was R276,0 million.
On 13 July 2017, all conditions precedent, including section 11 approval from the Department
of Mineral Resources ("DMR"), were fulfilled and the agreement became unconditional. On
22 August 2017, the group announced on SENS that Afrimat had concluded a sale of shares
and claims agreement with the minorities of Demaneng to acquire the remaining 40% stake in
Demaneng from 15 August 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 Demaneng'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.
Preliminary details of the acquisition are as follows:
Demaneng
Demaneng - Additional
- Initial shares
acquisition acquired Total
R'000 R'000 R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 304 374 - 304 374
Other financial assets 17 557 - 17 557
Inventories 12 446 - 12 446
Trade and other receivables 8 804 - 8 804
Borrowings (307 852) - (307 852)
Trade and other payables (122 910) - (122 910)
Provisions (20 294) - (20 294)
Deferred tax liability (5 940) - (5 940)
Current tax payable (4 542) - (4 542)
Cash and cash equivalents 5 228 - 5 228
Additional non-controlling interest acquired 113 129 (113 129) -
Premium paid on additional shares acquired in
subsidiary after initial acquisition - 157 129 157 129
Net assets** - 44 000 44 000
Net cash inflow from acquisition of subsidiary:
Cash consideration paid** - (35 000) (35 000)
Cash and cash equivalents acquired 5 228 - 5 228
5 228 (35 000) (29 772)
Pro forma revenue assuming the business combination for the full
period ended 28 February 2018 274 647
Pro forma loss after tax assuming the business combination for
the full period ended 28 February 2018 (103 836)
Revenue included in results 251 773
Loss after taxation included in results (38 790)
Acquisition costs (including business rescue costs) included in
operating expenses for the period ended 28 February 2018 5 782
* Property, plant and equipment includes the fair value 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 instalment (refer to note 11).
At acquisition, the fair value of trade and other receivables was R8,8 million and includes
trade receivables of R8,0 million. An amount of R8,8 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 SBSA's prime overdraft rate less 2% from 10 December 2015, or from such
earlier date in the event that all approvals were received from the authorities. The acquisition
will complement and augment Afrimat's industrial mineral product offering and further
expand its footprint across South Africa.
The parties to the acquisition recognise the scale of potential business opportunities that
such a relationship presents, as Afrimat and Cape Lime have different and complementary
strengths. Leverage from the combined strengths will result in developing new revenue
opportunities for Afrimat and Cape Lime.
Details of the acquisition are as follows:
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
Current tax payable (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 value 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.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
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 value of mining assets acquired.
** An amount of R1,0 million was payable on the approval of section 11 by the DMR.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
15. Dividends
15.1 Afrimat Limited dividends paid/declared in respect of the current year profits
Interim dividend paid 28 652 28 652
Final dividend declared/paid 60 170 71 631
88 822 100 283
15.2 Dividends cash flow
Current year interim dividend paid 28 652 28 652
Previous year final dividend paid 71 631 58 738
Dividends received on treasury shares (4 683) (587)
95 600 86 803
Dividends paid by subsidiaries to
non-controlling shareholders 640 863
96 240 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 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 Cash Flows.
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 netted-off 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
Audited Audited
year ended year ended
28 February 28 February
2017 2017
R'000 R'000
Cash flows from investing activities
Acquisition of property, plant and equipment (78 693) (134 521)
Net cash outflow from investing activities (448 161) (503 989)
Cash flows from financing activities
Repurchase of Afrimat shares (9 656) (69 310)
Net movement in borrowings (refer to note 10.2) 5 376 61 204
Tax paid on disposal of shares to ARC (8 200) 51 454
Net cash outflow from financing activities (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 R87,5 million (2017: R87,2 million) were supplied by SBSA to
various parties, including the DMR and Eskom, respectively during the year under review.
Guarantees to the value of R73,9 million (2017: R9,3 million) were supplied by FNB to various
parties, including the DMR and Eskom, respectively during the year under review. The increase
in amount with FNB relates to guarantees of R50,0 million provided to the business rescue
practitioner and compromised creditors in terms of the Demaneng acquisition.
Guarantees to the value of R1,6 million (2017: R23,5 million) by Lombard's Insurance Group,
R0,5 million (2017: R1,4 million) by ABSA Bank Limited, R94,2 million (2017: R10,9 million)
by Centriq Insurance Innovation and R2,7 million (2017: R2,7 million) by SIG Guarantee
Acceptances Proprietary Limited were supplied to various parties, including the DMR,
Eskom and Chevron South Africa Proprietary Limited. The increase in amount with Centriq
Insurance Innovation mainly relates to the acquisition of Demaneng and restructuring of
the environmental rehabilitation guarantees of Infrasors.
The majority of 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 DMR 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 R10,3 million
(2017: R4,8 million). An accrual has been raised in respect of commitments made up
to the end of the year.
The company received notice on 31 March 2017 from the Competition Commissioner
that it had 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 case is still ongoing. The Competition Commission is ordering
an administrative penalty equal to 10% of affected turnover for F2016 which equates
to R16,3 million.
Reviewed Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
19. Related parties
Loan balance owing by associate 10 151 11 591
Loan balance owing by joint venture 31 011 14 099
Obligation of share of joint venture's losses (4 481) (4 481)
Interest received from associate 484 806
Interest received from joint venture 887 420
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*#
JH van der Merwe*#
HN Pool*#
FM Louw*#
* 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
50 Smits Road, Dunkeld, 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: 24/05/2018 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.
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