AFRIMAT LIMITED - Abridged Audited Consolidated Financial Statements and Notice of AGM

Release Date: 28/06/2018 07:05
Code(s): AFT
 
Wrap Text
Abridged Audited Consolidated Financial Statements and Notice of AGM

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

www.afrimat.co.za

ABRIDGED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 28 FEBRUARY 2018 AND NOTICE OF THE ANNUAL GENERAL MEETING

INTRODUCTION
Afrimat today published its 2018 Integrated Annual Report including its Audited Consolidated Annual
Financial Statements for the year ended 28 February 2018, a copy of which is available on the
company's website www.afrimat.co.za.

MEASUREMENT PERIOD ADJUSTMENTS TO BUSINESS COMBINATIONS
Since the publication of the Condensed Consolidated Provisional Financial Statements for the year
ended 28 February 2018 ('provisional results') released on the Stock Exchange News Service ('SENS')
of the JSE Limited ('JSE') on 24 May 2018, measurement period adjustments relating to deferred tax
were made in finalising the accounting for certain business combinations within the measurement
period and in accordance with the Group's accounting policy.

These updates had no impact on the Statement of Profit or Loss and Other Comprehensive Income,
Earnings per Share ('EPS') or Headline Earnings per Share ('HEPS').

In the Statement of Financial Position at 28 February 2018 comparative information was updated to
reflect the finalisation in the accounting of the Cape Lime Proprietary Limited ('Cape Lime') business
combination. The update resulted in an increase in the fair value of the deferred tax liability,
at the acquisition date of Cape Lime, of R57,4 million which was offset by an increase to goodwill of
R57,4 million.

Further in the Statement of Financial Position, the current year figures were adjusted to reflect an
updated version of the preliminary accounting for the Afrimat Demaneng Proprietary Limited and Diro
Iron Ore Proprietary Limited ('Demaneng') business combination. The adjustment resulted in an
increase in the fair value of the deferred tax liability, at the acquisition date of Demaneng, of
R47,5 million which was offset by an increase in goodwill of R96,4 million and an increase in retained
earnings of R48,9 million.

The retained earnings in the Statement of Changes in Equity was increased with R48,9 million. The
non-controlling interest in the mining asset, which resulted from the Demaneng business combination,
is now recognised and included in the non-controlling interest acquired in the Statement of Changes
in Equity. For further details relating business combinations, refer note 14 below.

STATEMENT OF CASH FLOWS
In the Statement of Cash Flows an amount of R35,0 million was reclassified from 'cash flows from
investing activities' to 'cash flows from financing activities' as the amount was paid to acquire
non-controlling interest in Demaneng after the initial business combination.

NOTICE OF ANNUAL GENERAL MEETING
Shareholders are hereby advised that the Integrated Annual Report will be distributed to shareholders
on 28 June 2018. In addition, the full Integrated Annual Report and Notice of Annual General Meeting
('AGM') are available on Afrimat's website www.afrimat.co.za.

BASIS OF PREPARATION
The Abridged Audited Consolidated Financial Statements ('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 2018.

The financial statements for the year ended 28 February 2018 have been prepared under the
supervision of the Chief Financial Officer ('CFO'), PGS de Wit CA(SA).

AUDITOR'S REPORT
The Abridged Audited Consolidated Financial Statements are extracted from audited information but
is not itself audited. The directors take full responsibility for the preparation of the Abridged Audited
Consolidated Financial Statements and the correct extraction of the financial information included
herein from the Audited Annual Financial Statements. The Annual Financial Statements were audited
by the company's auditor, PricewaterhouseCoopers Inc. Their unmodified opinion is included in the
Annual Financial Statements and also available for inspection at the company's registered office.

On behalf of the board

MW von Wielligh
Chairman

AJ van Heerden
Chief Executive Officer

28 June 2018

ABRIDGED AUDITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
                                                                    Audited       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
                                                                    Audited       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)

ABRIDGED AUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                    Audited       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                                                            287 036       190 650
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                                          1 835 513     1 573 979
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                                                      2 590 629     2 323 781
Equity and liabilities                                         
Equity                                                         
Stated capital                                                      266 985       285 842
Treasury shares                                                     (59 660)      (70 999)
Net issued stated capital                                           207 325       214 843
Reversed acquisition reserve                                       (105 788)     (105 788)
Other reserves                                                        5 888         4 525
Retained earnings                                                 1 111 915     1 085 792
Attributable to equity holders of parent                          1 219 340     1 199 372
Non-controlling interests                                             9 980         7 547
Total equity                                                      1 229 320     1 206 919
Liabilities                                                    
Non-current liabilities                                        
Borrowings (refer to note 10.1)                                     271 954        94 999
Deferred tax                                                        207 583       171 301
Provisions                                                          130 288        96 190
Total non-current liabilities                                       609 825       362 490
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                                                 1 361 309     1 116 862
Total equity and liabilities                                      2 590 629     2 323 781
Note to Statement of Financial Position:                       
Net asset value per share (cents)                                       893           881
Net tangible asset value per share (cents)                              673           731
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 (%)                                              35,5          19,8
* Comparative figures were amended due to a measurement period adjustment relating to business
combinations, refer note 14.

ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                    Audited       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 received                                                    31 623        35 674
Dividends received                                                       54            88
Finance costs paid                                                  (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)                          4 228      (280 263)
Net cash outflow from investing activities                         (159 775)     (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)                                                  (37 521)          (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                   7 673       (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')

ABRIDGED AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                           Reversed                                       Non-
                                Stated  acquisition Treasury     Other   Retained  controlling      Total
                               capital      reserve   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                    -            -        -         -          -      (64 257)   (64 257)
Additional non-controlling                
interest acquired due to:                 
- Infrasors (refer to note 13)       -            -        -         -       (104)          83        (21)
- Demaneng (refer to note 13)        -            -        -         -   (109 769)      65 769    (44 000)
- Afrimat Bulk Commodities                
(refer to note 13)               1 500            -   13 500         -    (19 268)       1 768     (2 500)
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  1 111 915        9 980  1 229 320
                                                     
                                                                    Audited       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                                                            553 138       784 094
                                                                  2 590 629     2 323 781
   Liabilities                                       
   Aggregates and Industrial Minerals                               353 605       351 907
   Commodities                                                      137 903             -
   Concrete Based Products                                           59 326        46 438
   Other*                                                           810 475       718 517
                                                                  1 361 309     1 116 862
   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.

                                                                    Audited       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

                                                                    Audited       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.

                                                                    Audited       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.

                                                                    Audited       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.
                                                                    Audited       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.

                                                                    Audited       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.

                                                                    Audited       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

13. Acquisition of additional non-controlling interest
    Infrasors Holdings Proprietary Limited
                                                                  Infrasors
                                                                   Holdings
                                                                Proprietary
                                                                    Limited         Total
                                                                      R'000         R'000
    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                                             
    Additional 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
                                                                    Limited         Total
                                                                      R'000         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
                                                              
    Afrimat Demaneng Proprietary Limited                      
                                                                    Afrimat
                                                                   Demaneng
                                                                Proprietary
                                                                    Limited         Total
                                                                      R'000         R'000
    February 2018                                             
    Additional non-controlling interest acquired                     65 769        65 769
    Premium paid on additional shares acquired in             
    subsidiary after initial acquisition                           (109 769)     (109 769)
                                                                    (44 000)      (44 000)
                                                              
14. Acquisition of businesses
    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. 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. 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.
    
    The accounting for this business combination is still within the measurement period and information
    pertaining to the fair value of current and deferred tax assets and liabilities have not yet been received.
    
    Provisional details of the acquisition are as follows:
    
                                                                                    Total
                                                                                    R'000
    Carrying amount/fair value of net assets acquired:
    Property, plant and equipment*                                                304 374
    Other financial assets                                                         17 557
    Inventories                                                                    12 446
    Trade and other receivables                                                     8 804
    Borrowings                                                                   (307 852)
    Trade and other payables                                                     (122 910)
    Provisions                                                                    (20 294)
    Deferred tax liability                                                        (53 454)
    Current tax payable                                                            (4 542)
    Cash and cash equivalents                                                       5 228
    Non-controlling interest acquired                                              64 257
    Goodwill                                                                       96 386
    Net assets                                                                          -
    Net cash inflow from acquisition of subsidiary:                           
    Cash consideration paid                                                             -
    Cash and cash equivalents acquired                                              5 228
                                                                                    5 228
    * Property, plant and equipment includes the fair value of mining assets of R169,7 million acquired.

    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.

                                                                                    Total
                                                                                    R'000
    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

    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
    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 2,0% 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.

    Measurement period adjustment
    During the 2018 financial year, the 2017 comparative information is adjusted retrospectively to
    increase the fair value of the deferred tax liability at the acquisition date by R57,4 million offset by an
    increase to goodwill of R57,4 million in finalising of the accounting for this business combination.

    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                                                        (64 209)
    Provisions                                                                    (13 783)
    Cash and cash equivalents                                                       7 792
    Goodwill                                                                       57 456
    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 of R205,2 million 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 Readymix Concrete Proprietary Limited, both
    wholly-owned subsidiaries of Wearne, entered into an agreement with Afrimat Aggregates (KZN)
    Proprietary Limited and Afrimat Concrete Products Proprietary Limited, both wholly-owned
    subsidiaries of Afrimat, on 6 July 2016 to dispose of the Bethlehem quarry and ancillary businesses
    as a going concern for R28,0 million. Furthermore Wearne also agreed to dispose of Erf 4038,
    Bethlehem, Free State to Rodag Holdings Proprietary Limited, a wholly-owned subsidiary of Afrimat,
    for R2,0 million. The effective date of the transaction was 17 October 2016.

                                                                    Audited       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 of R1,0 million acquired.
    ** An amount of R1,0 million was payable on the approval of section 11 by the DMR.

                                                                    Audited        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.
    
    Abridged Audited 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 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
                                                                    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 (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.

                                                                    Audited        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: 28/06/2018 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.

Email this JSE Sens Item to a Friend.

Share This Story