Wrap Text
Unaudited condensed consolidated interim financial results for the six months ended 31 August 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
Unaudited condensed consolidated interim financial results
for the six months ended 31 August 2018
Highlights
Revenue up 28,6% to R1,5 billion
Operating profit up 4,3% to R202,7 million
Headline earnings per share ('HEPS') of 93,6 cents
NAV per share of 943 cents
Interim dividend per share of 19,0 cents
Return on net operating assets 20,1%
http://www.afrimat.co.za
Commentary
BASIS OF PREPARATION
The unaudited condensed consolidated interim financial results ('financial statements')
for the six months ended 31 August 2018 ('the period') have been prepared in accordance
with and contain, as a minimum, the information required by IAS 34: Interim Financial
Reporting and have been prepared in accordance with the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, the JSE Listings Requirements and in
the manner required by the South African Companies Act No. 71 of 2008, as amended. The
accounting policies and method of computation applied in preparation of the financial
statements are in accordance with the International Financial Reporting Standards
('IFRS') and are consistent with those applied in the audited annual financial
statements for the year ended 28 February 2018, except for the mandatory adoption
of IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers.
The group has applied both standards retrospectively without restating comparative
figures. Refer to note 17 for further details. The comparative segment information
was restated, refer to note 1 for further details. The above information has not
been audited or reported on by Afrimat's auditors.
The financial statements have been prepared under the supervision of the Chief
Financial Officer ('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 by the construction materials businesses. The political
uncertainty and economic slowdown felt during the last quarter of the
previous financial year continued during this interim period and
impacted the construction materials businesses the most. The bulk
commodities segment, consisting of the Demaneng iron ore mine,
contributed positively to the group results, which offset the
lower performance of the construction materials businesses.
FINANCIAL RESULTS
Headline earnings per share declined by 8,4% from 102,2 cents to
93,6 cents. Industrial mineral producing operations across all
regions as well as the iron ore business were the main contributors
to the satisfactory results.
OPERATIONAL REVIEW
All operating units are strategically positioned to deliver excellent
service to the group's customers, whilst acting as an efficient hedge
against volatile local business conditions. The product range is well
diversified to include aggregates and concrete-based products as
construction materials and limestone, dolomite and silica as industrial
minerals as well as iron ore as bulk commodities.
Labour relations continued to be satisfactory during the period under
review, with no labour action having occurred in the period. The group
is committed to creating and sustaining harmonious relationships in
the workplace and addressing issues proactively.
The Bulk Commodities segment, consisting of the Demaneng iron ore mine,
contributed positively to the group results. The business completed the
recommissioning of both its dense media separation ('DMS') plants and
started with the expansion of its load-out facility, which is expected
to be completed in the second half of the year. After successful
collaboration with the logistical service provider the business
will be in a position to sell its full monthly production.
Industrial Minerals businesses across all regions delivered solid
results, with the biggest impact of the economic slow-down in the
construction sector felt by the Lyttelton mine.
The Construction Materials segment felt the brunt of the slowdown
in economic activity, with the KwaZulu-Natal and Gauteng businesses
being impacted the most. The KwaZulu-Natal business started with
restructuring in order to improve the business. The Western Cape
aggregates business continued to deliver solid results. The Mozambique
business was in a ramp-up phase during the reporting period, after
receiving an order to supply construction materials to a resettlement
village. The Emfuleni Clinker Ash Dump, situated in Vereeniging and
close to Afrimat's customers, will ensure an additional three to
four year lifespan for both Clinker Supplies Proprietary Limited
('Clinker') and SA Block Proprietary Limited. Clinker continues
to investigate further options in order to secure additional
resources for the group.
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.
B-BBEE
Existing BEE shareholders and the Afrimat BEE Trust in aggregate
hold 32,7% of Afrimat's issued shares (excluding treasury shares
and mandated investments). Notwithstanding the fully empowered
ownership platform in line with the Mining Charter requirements,
the group remains dedicated to enhancing all aspects of B-BBEE
on an ongoing basis. Afrimat is committed to a bottom-up approach
to transformation and has had a successful period in terms of
sustained training, skills development and all-round employee
upliftment.
DIVIDEND
The group's dividend policy is to maintain a 2,75 times dividend
cover. An interim gross dividend of 19,0 cents per share (August
2017: 20,0 cents) for the period was declared on 31 October 2018.
The dividend payable to shareholders who are subject to dividend
tax is 15,2 cents per share (August 2017: 16,0 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 requiredskill 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 thesuccessful execution of
its proven strategy, recent acquisitions and a wider product
offering to the market.
On behalf of the board
MW von Wielligh
Chairman
AJ van Heerden
Chief Executive Officer
31 October 2018
DIVIDEND DECLARATION
Notice is hereby given that an interim gross dividend, No. 23 of 19,0
cents per share, in respect of the six months ended 31 August 2018,
was declared on Wednesday, 31 October 2018.
There are 143 262 412 shares in issue at reporting date, of which 6 780 549
are held in treasury. The total dividend payable is R27,2 million (2017:
R28,7 million).
The board has confirmed that the solvency and liquidity test as contemplated
by the Companies Act, No. 71 of 2008, as amended, has been duly considered,
applied and satisfied. This is a dividend as defined in the Income Tax Act,
1962, and is payable from income reserves. The South African dividend tax
rate is 20,0%. The dividend payable to shareholders who are subject to
dividend tax and shareholders who are exempt from dividend tax is 15,2
cents and 19,0 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, 27 November 2018
Commence trading ex dividend Wednesday, 28 November 2018
Record date Friday, 30 November 2018
Dividend payable Monday, 3 December 2018
Share certificates may not be dematerialised or rematerialised between
Wednesday, 28 November and Friday, 30 November 2018, both dates inclusive.
Condensed consolidated statement of profit or loss and other comprehensive income
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 Change 2018
R'000 R'000 % R'000
Revenue 1 522 835 1 184 592 28,6 2 456 782
Cost of sales (1 099 057) (791 563) (1 699 417)
Gross profit 423 778 393 029 7,8 757 365
Operating expenses (224 231) (199 225) (406 205)
Profit on disposal of
plant and equipment 3 122 700 638
Contribution from operations 202 669 194 504 4,2 351 798
Impairment of property, plant
and equipment
(refer to note 2) - (260) (1 399)
Operating profit 202 669 194 244 4,3 350 399
Finance income 6 662 25 612 32 930
Finance costs (32 762) (25 306) (59 432)
Share of profits/(losses) of
associate and
joint venture 25 (20) (8)
Profit before tax 176 594 194 530 (9,2) 323 889
Income tax expense
(refer to note 4) (44 953) (56 048) (78 511)
Profit for the period 131 641 138 482 (4,9) 245 378
Profit attributable to:
Owners of the parent 130 096 139 417 245 668
Non-controlling interests 1 545 (935) (290)
131 641 138 482 245 378
Other comprehensive income
Items that may be subsequently
reclassified to profit or loss
Net change in fair value of
available-for-sale financial
assets (34) 108 183
Income tax effect on
available-for-salefinancial
assets 7 (24) (41)
Currency translation differences
(refer to note 5) (496) 998 961
Income tax effect on currency
translation differences - - -
Other comprehensive (loss)/income
for the period, net of tax (523) 1 082 1 103
Total comprehensive income
for the period 131 118 139 564 (6,1) 246 481
Total comprehensive income
attributable to:
Owners of the parent 129 573 140 499 246 771
Non-controlling interests 1 545 (935) (290)
131 118 139 564 246 481
Earnings per share
Earnings per ordinary
share (cents) 95,3 102,4 (6,9) 180,3
Diluted earnings per ordinary
share (cents) 94,8 101,5 (6,6) 179,0
Note to statement of profit or
loss and other comprehensive
income
Shares in issue
Total shares in issue 143 262 412 143 262 412 143 262 412
Treasury shares (refer to note 7) (6 780 549) (7 044 486) (6 654 039)
Net shares in issue 136 481 863 136 217 926 136 608 373
Weighted average number of net
shares in issue 136 550 836 136 112 937 136 271 264
Diluted weighted average number
of shares 137 257 328 137 309 432 137 248 315
Reconciliation of headline earnings
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 Change 2018
R'000 R'000 % R'000
Profit attributable to
owners of the parent 130 096 139 417 245 668
Profit on disposal of
plant and equipment
attributable to owners
of the parent (3 122) (700) (638)
Impairment of property,
plant and equipment
(refer to note 2) - 260 1 399
Total income tax effects
of adjustments 874 123 (213)
127 848 139 100 (8,1) 246 216
Headline earnings per
ordinary share
('HEPS') (cents) 93,6 102,2 (8,4) 180,7
Diluted HEPS (cents) 93,1 101,3 (8,1) 179,4
Condensed consolidated statement of financial position
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000* R'000*
Assets
Non-current assets
Property, plant and equipment 1 451 475 1 413 259 1 417 845
Investment property 3 040 3 040 3 040
Intangible assets 12 051 13 623 12 848
Goodwill 231 122 231 122 231 122
Investment in associate 166 195 183
Other financial assets
(refer to note 6) 60 843 57 450 59 446
Deferred tax 45 058 39 200 55 115
Total non-current assets 1 803 755 1 757 889 1 779 599
Current assets
Inventories 289 498 229 760 242 124
Current tax receivable 9 854 11 372 9 181
Trade and other receivables 444 749 405 450 391 603
Other financial assets
(refer to note 6) - 364 -
Cash and cash equivalents 164 945 135 594 112 208
Total current assets 909 046 782 540 755 116
Total assets 2 712 801 2 540 429 2 534 715
Equity and liabilities
Equity
Stated capital 262 800 270 925 266 985
Treasury shares (62 830) (68 784) (59 660)
Net issued stated capital 199 970 202 141 207 325
Reversed acquisition reserve (105 788) (105 788) (105 788)
Other reserves 6 908 3 464 5 888
Retained earnings 1 185 698 1 051 160 1 111 915
Attributable to equity holders
of the parent 1 286 788 1 150 977 1 219 340
Non-controlling interests 10 580 7 811 9 980
Total equity 1 297 368 1 158 788 1 229 320
Liabilities
Non-current liabilities
Borrowings (refer to note 8) 281 348 333 087 271 954
Deferred tax 201 077 224 113 207 583
Provisions 135 782 121 363 130 288
Total non-current liabilities 618 207 678 563 609 825
Current liabilities
Borrowings (refer to note 8) 182 526 153 071 165 004
Other financial liabilities
(refer to note 9) 11 663 59 571 21 856
Current tax payable 9 697 16 748 11 485
Trade and other payables 440 363 409 007 402 541
Obligation of share of joint
venture's losses 4 481 4 481 4 481
Bank overdraft 148 496 60 200 90 203
Total current liabilities 797 226 703 078 695 570
Total liabilities 1 415 433 1 381 641 1 305 395
Total equity and liabilities 2 712 801 2 540 429 2 534 715
Note to statement of financial
position:
Net asset value per
share (cents) 943 846 893
Net tangible asset value per
share (cents) 765 666 716
Total borrowings and other
financial liabilities 475 537 545 729 458 814
Surplus cash (16 449) (75 394) (22 005)
Net debt 459 088 470 335 436 809
Net debt:equity ratio (%) 35,4 40,6 35,5
* Comparative figures were amended due to a measurement period adjustment relating to business
combinations, refer to note 11.
Condensed consolidated statement of cash flows
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 211 717 118 898 344 542
Interest received 6 303 6 985 31 623
Dividends received 34 29 54
Finance costs paid (28 692) (22 117) (52 752)
Tax paid (43 857) (63 205) (122 507)
Net cash inflow from operating
activities 145 505 40 590 200 960
Cash flows from investing activities
Acquisition of property, plant and
equipment (51 399) (56 501) (118 918)
Proceeds on disposal of property,
plant and equipment 11 886 8 517 22 975
Purchase of financial assets (76) (55 615) (68 060)
Proceeds on sale of financial assets - 5 482 -
Acquisition of businesses (refer
to note 11) - 4 228 4 228
Net cash outflow from investing
activities (39 589) (93 889) (159 775)
Cash flows from financing activities
Repurchase of Afrimat shares (5 469) (5 598) (13 552)
Acquisition of additional
non-controlling
interest (refer to note 12) - (21) (37 521)
Proceeds from borrowings 60 000 300 000 318 506
Repayment of borrowings (96 517) (49 105) (138 377)
Repayment of other financial
liabilities (10 305) (21 292) (25 143)
Dividends paid (refer to note 13.2) (59 181) (68 438) (96 240)
Net cash (outflow)/inflow from
financing activities (111 472) 155 546 7 673
Net (decrease)/increase in cash,
cash equivalents and bank overdrafts (5 556) 102 247 48 858
Cash, cash equivalents and bank
overdrafts
at the beginning of the period 22 005 (26 853) (26 853)
Cash, cash equivalents and bank
overdrafts at the
end of the period 16 449 75 394 22 005
Condensed consolidated statement of changes in equity
Non-
Reversed control-
Stated Treasury acquisition Other Retained ling Total
capital shares reserve reserves earnings interests equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at
1 March 2017 285 842 (70 999) (105 788) 4 525 1 085 792 7 547 1 206 919
Total comprehensive
income
Profit for the
year - - - - 139 417 (935) 138 482
Other comprehensive
income for the year - - - 1 082 - - 1 082
Net change in fair
value
of available-for-
sale financial
assets - - - 108 - - 108
Income tax effect - - - (24) - - (24)
Currency translation
differences (refer
to note 5) - - - 998 - - 998
Total comprehensive
income - - - 1 082 139 417 (935) 139 564
Transactions with
owners of the parent
Contributions and
distributions
Share-based payments - - - 1 723 - - 1 723
Purchase of treasury
shares - (5 598) - - - - (5 598)
Settlement of
employee share
appreciation
rights exercised
and reserve transfer,
net of tax (14 917) 7 813 - (3 866) 3 866 - (7 104)
Dividends paid
(refer to note 13) - - - - (68 048) (390) (68 438)
Total contributions
and distributions (14 917) 2 215 - (2 143) (64 182) (390) (79 417)
Changes in ownership
interest
Initial non-
controlling
interest acquired
- Afrimat Demaneng - - - - - (64 257) (64 257)
Additional non-
controlling
interest acquired
due to:
- Infrasors
(refer to note 12) - - - - (98) 77 (21)
- Afrimat Demaneng
(refer to note 12) - - - - (109 769) 65 769 (44 000)
Total changes in
ownership interest - - - - (109 867) 1 589 (108 278)
Total transactions
with the owners of
the parents (14 917) 2 215 - (2 143) (174 049) 1 199 (187 695)
Balance at
31 August 2017* 270 925 (68 784) (105 788) 3 464 1 051 160 7 811 1 158 788
Balance at
1 March 2017 285 842 (70 999) (105 788) 4 525 1 085 792 7 547 1 206 919
Total comprehensive
income
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 5) - - - 961 - - 961
Total comprehensive
income - - - 1 103 245 668 (290) 246 481
Transactions with
owners of the parent
Contributions and
distributions
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)
Dividends paid
(refer to note 13) - - - - (95 600) (640) (96 240)
Total contributions
and distributions (20 357) (2 161) - 260 (90 404) (640) (113 302)
Changes in ownership
interest
Initial non-
controlling interest
acquired - Afrimat
Demaneng - - - - - (64 257) (64 257)
Additional non-
controlling interest
acquired due to:
- Infrasors
(refer to note 12) - - - - (104) 83 (21)
- Afrimat Demaneng
(refer to note 12) - - - - (109 769) 65 769 (44 000)
- Afrimat Bulk
Commodities
(refer to note 12) 1 500 13 500 - - (19 268) 1 768 (2 500)
Total changes in
ownership interest 1 500 13 500 - - (129 141) 3 363 (110 778)
Total transactions
with the owners
of the parents (18 857) 11 339 - 260 (219 545) 2 723 (224 080)
Balance at
28 February 2018 266 985 (59 660) (105 788) 5 888 1 111 915 9 980 1 229 320
Balance at
1 March 2018 266 985 (59 660) (105 788) 5 888 1 111 915 9 980 1 229 320
Total comprehensive
income
Profit for the year - - - - 130 096 1 545 131 641
Other comprehensive
income for the year - - - (523) - - (523)
Net change in
fair value
of available-for-sale
financial assets - - - (34) - - (34)
Income tax effect - - - 7 - - 7
Currency translation
differences
(refer to note 5) - - - (496) - - (496)
Total comprehensive
income - - - (523) 130 096 1 545 131 118
Transactions
with owners
of the parent
Contributions and
distributions
Purchase of treasury
shares - (5 469) - - - - (5 469)
Share-based payments - - - 3 466 - - 3 466
Settlement of
employee share
appreciation rights
exercised and reserve
transfer, net of tax (4 185) 2 299 - (1 923) 1 923 - (1 886)
Dividends paid
(refer to note 13) - - - - (58 236) (945) (59 181)
Total contributions
and distributions (4 185) (3 170) - 1 543 (56 313) (945) (63 070)
Total transactions
with the owners of
the parents (4 185) (3 170) - 1 543 (56 313) (945) (63 070)
Balance at
31 August 2018 262 800 (62 830) (105 788) 6 908 1 185 698 10 580 1 297 368
* Comparative figures were amended due to a measurement period adjustment relating to business
combinations, refer note 11.
Notes
1. Segment information
At 1 March 2018, the executive committee, being the chief decision-making body, amended the
basis in which the various businesses within the group are being reported as a result of the
changes to the executive management of the group. This has been aligned in three main
operational pillars with five segments being allocated to these pillars, based on the market
use of products.
Industrial Minerals, previously reflected within the Aggregates segment, is separately
disclosed. The rationale for the change was that over the years the Industrial Minerals business
has become an integral contributor to the group and serves a different market to
Construction Materials.
The principal services and products of each of these segments are as follows:
- Construction Materials: Comprises Aggregates, Concrete-Based Products and
Contracting operations;
- Bulk Commodities: Iron Ore;
- Industrial Minerals: Separate segment, previously included within the Aggregates segment.
Split Restated
Split six Unaudited six unaudited Split
months six months months six months year Restated
ended ended ended ended ended year ended
31 August 31 August 31 August 31 August 28 February 28 February
2018 2018 2017 2017 2018 2018
% R'000 % R'000 % R'000*
Revenue
External sales
Construction Materials 57,1 870 149 73,9 874 855 67,0 1 645 252
Bulk Commodities 24,2 368 363 2,4 29 037 10,2 251 773
Industrial Minerals 18,7 284 323 23,7 280 700 22,8 559 757
1 522 835 1 184 592 2 456 782
Intersegment sales
Construction Materials 100,0 63 674 100.0 42 746 100,0 100 237
Bulk Commodities - - - - - -
Industrial Minerals - - - - - -
63 674 42 746 100 237
Total revenue
Construction Materials 58,9 933 823 74,8 917 601 68,3 1 745 489
Bulk Commodities 23,2 368 363 2,3 29 037 9,8 251 773
Industrial Minerals 17,9 284 323 22,9 280 700 21,9 559 757
1 586 509 1 227 338 2 557 019
Contribution from
operations
Construction Materials 56,6 114 748 76,1 147 966 78,4 275 979
Bulk Commodities 24,7 50 035 (2,8) (5 474) (9,5) (33 443)
Industrial Minerals 20,5 41 477 28,0 54 519 25,1 88 393
Services (1,8) (3 591) (1,3) (2 507) 5,9 20 869
202 669 194 504 351 798
Contribution from
operations margins on
external revenue (%)
Construction Materials 13,2 16,9 16,8
Bulk Commodities 13,6 (18,9) (13,3)
Industrial Minerals 14,6 19,4 15,8
Overall contribution 13,3 16,4 14,3
Other information
Assets
Construction Materials 1 145 144 1 068 171 1 072 080
Bulk Commodities 416 741 352 473 382 777
Industrial Minerals 616 047 613 099 582 634
Services 534 869 506 686 497 224
2 712 801 2 540 429 2 534 715
Liabilities
Construction Materials 359 420 386 863 324 707
Bulk Commodities 80 852 63 475 81 989
Industrial Minerals 113 300 97 795 88 224
Services** 861 861 833 508 810 475
1 415 433 1 381 641 1 305 395
Capital expenditure
(excluding acquisitions
through business
combinations)
Construction Materials 49 895 76 951 114 080
Bulk Commodities 18 554 6 913 41 633
Industrial Minerals 46 184 28 899 40 707
Services 1 127 3 031 5 800
115 760 115 794 202 220
* This information has not been audited or reviewed.
** Includes the R300,0 million amortising five-year facility with SBSA and FNB.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
2. Impairment of property, plant
and equipment
Impairment of property, plant
and equipment - (260) (1 399)
In the prior year, 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.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
3. Depreciation and amortisation
Depreciation 73 367 58 073 122 566
Amortisation 797 952 1 727
74 164 59 025 124 293
4. Income tax expense
The effective tax rate of the group decreased from 28,8% to 25,5% in the current period, mainly
due adjustments made to the fair value of deferred tax liabilities in finalising business combinations.
Included in the available income tax losses of R517,5 million (August 2017: R502,3 million) are tax
losses of R347,9 million (August 2017: R400,3 million), which are available for set-off against
future taxable income but not raised. The amount not raised includes a tax loss of R340,9 million
(August 2017: R340,9 million) relating to Afrimat Demaneng Proprietary Limited, due to tax
losses not yet assessed.
5. 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.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
6. Other financial assets
Rehabilitation fund trusts and other 60 843 57 814 59 446
60 843 57 814 59 446
Non-current other financial assets 60 843 57 450 59 446
Current other financial assets - 364 -
60 843 57 814 59 446
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
30 August 31 August 28 February
2018 2017 2018
7. Movement in number of treasury shares
Opening balance 6 654 039 7 187 643 7 187 643
Utilised for share appreciation
rights scheme (82 490) (343 250) (473 106)
Utilised to purchase minority shares
in Afrimat Bulk Commodities - - (535 714)
Purchased during the period/year 209 000 200 093 475 216
Closing balance 6 780 549 7 044 486 6 654 039
The Afrimat BEE Trust (indirectly through AEI) holds, on an unencumbered basis,
6 653 854 shares representing 4,64% of the issued share capital of the company.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
8. Borrowings
Capital net movement
Opening balance 436 958 174 089 174 089
Acquired through business
combination - 2 740 2 740
New borrowings 123 433 358 434 398 506
Repayments (96 517) (49 105) (138 377)
Closing balance 463 874 486 158 436 958
Analysis as per statement of
financial position
Borrowings non-current 281 348 333 087 271 954
Borrowings current 182 526 153 071 165 004
463 874 486 158 436 958
In the prior 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 the current year an amount equal to R60,0 million of the original R300,0 million facility
commitment which had previously been repaid by the company, was redrawn.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
9. Other financial liabilities
Net capital proceeds owing to Afrimat
BEE Trust participants 11 663 21 819 12 968
Deferred liability: Demaneng minorities - 37 752 8 888
11 663 59 571 21 856
Upon implementation of the Afrimat Rainbow Capital ('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 Afrimat Demaneng Proprietary Limited
and Diro Iron Ore Proprietary Limited ('Demaneng') to acquire the remaining 40% stake in
Demaneng as from 15 August 2017. The purchase consideration of R44,0 million was payable
in nine tranches as follows: eight monthly instalments of R5,0 million per month for eight
consecutive months commencing 15 August 2017; and R4,0 million in one final instalment.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
10. Authorised capital expenditure
Not yet contracted for
- Property, plant and equipment 68 155 47 832 183 915
11. 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. 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.
Measurement period adjustment
During the reporting period, the FY2018 comparative information was adjusted retrospectively
to decrease trade and other payables at the acquisition date by R55,9 million offset by an
increase to goodwill of R55,9 million in finalisation of the accounting for this business
combination.
Details of the acquisition are as follows:
F2018
Demaneng
- initial
acquisition Total
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 (66 996) (66 996)
Provisions (20 294) (20 294)
Deferred tax liability (53 454) (53 454)
Current tax payable (4 542) (4 542)
Cash and cash equivalents 5 228 5 228
Net assets* (104 729) (104 729)
Additional non-controlling interest acquired 64 257 64 257
Goodwill 40 472 40 472
Consideration paid - -
Net cash inflow from acquisition of subsidiary:
Cash and cash equivalents acquired 5 228 5 228
5 228 5 228
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.
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.
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.
Details of the acquisition are as follows:
F2018
Wearne
- additional
acquisition Total
R'000 R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 1 000 1 000
Net assets* 1 000 1 000
Consideration paid
Cash 1 000 1 000
Total consideration 1 000 1 000
Net cash outflow from acquisition of subsidiary:
Cash consideration paid** (1 000) (1 000)
(1 000) (1 000)
* Property, plant and equipment includes the fair value of R1,0 million mining assets acquired.
** An amount of R1,0 million was payable on the approval of section 11 by the DMR.
F2018
Infrasors
Holdings
Proprietary
Limited Total
R'000 R'000
12. Acquisition of additional non-controlling interest
Infrasors Holdings Proprietary Limited
August 2018
No movements during the current period.
February 2018
Additional non-controlling interest acquired (83) (83)
Premium paid on additional shares acquired in
subsidiary after initial acquisition 104 104
21 21
August 2017
Adjustment to non-controlling interest acquired (77) (77)
Premium paid on additional shares acquired in
subsidiary after initial acquisition 98 98
21 21
F2018
Afrimat Bulk
Commodities
Proprietary Total
Limited R'000
Afrimat Bulk Commodities Proprietary Limited
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
In the prior year, Afrimat acquired a further 5,0% of the issued shares in Afrimat Bulk
Commodities Proprietary Limited for R17,5 million, settled in shares of R15,0 million and cash of R2,5 million.
F2018
Afrimat
Demaneng
Proprietary Total
Limited R'000
Afrimat Demaneng Proprietary Limited
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
Refer to note 9 for further details.
Unaudited six Unaudited six Audited
months ended months ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
13. Dividends
13.1 Afrimat Limited
dividends paid/declared
in respect of the
current year profits
Interim dividend paid 27 220 28 652 28 652
Final dividend declared/paid - - 60 170
27 220 28 652 88 822
13.2 Dividends cash flow
Current year interim dividend paid - - 28 652
Previous year final dividend paid 60 170 71 631 71 631
Dividends received on treasury shares (1 934) (3 583) (4 683)
58 236 68 048 95 600
Dividends paid by subsidiaries to
non-controlling shareholders 945 390 640
59 181 68 438 96 240
14. Events after reporting date
Subsequent to the reporting date, the company settled the original vehicle asset finance facility
entered into during F2017 and refinanced plant and machinery to fund capital expenditure and
working capital requirements to support the growth and expansion of the group. The vehicle
asset finance facility of R109,6 million was financed over 36 months at prime rate minus 1,15%,
repayable in monthly instalments of capital and interest with SBSA.
15. Contingencies
Guarantees to the value of R87,5 million (August 2017: R85,3 million) were supplied by SBSA
to various parties, including the DMR and Eskom, respectively during the year under review.
Guarantees to the value of R76,7 million (August 2017: R61,2 million) were supplied by FNB to
various parties, including the DMR and Eskom, respectively during the year under review.
Guarantees to the value of R1,6 million (August 2017: R2,9 million) by Lombard's Insurance
Group, R0,5 million (August 2017: R0,6 million) by ABSA Bank Limited, R98,2 million (August
2017: R88,1 million) by Centriq Insurance Innovation and R2,7 million (August 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 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 R9,3 million (August 2017: R5,0 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
Competition Commission is ordering an administrative penalty equal to 10% of affected
turnover for F2016 which equates to R16,3 million. The company awaits a final hearing
date to be set by the Tribunal.
Unaudited Unaudited
six months six months Audited
ended ended year ended
31 August 31 August 28 February
2018 2017 2018
R'000 R'000 R'000
16. Related parties
Loan balance owing by associate 6 334 12 773 10 151
Loan balance owing by joint venture 32 060 24 437 31 011
Obligation of share of joint venture's
losses (4 481) (4 481) (4 481)
Interest received from associate 317 252 484
Interest received from joint venture 420 435 887
17. New and amended accounting standards
New and amended standards adopted by the group
A number of new or amended standards became applicable for the current reporting period
and the group had to change its accounting policies and make retrospective adjustments as
a result of adopting the following standards:
- IFRS 9: Financial Instruments; and
- IFRS 15: Revenue from contracts with customers.
The impact of the adoption of IFRS 9 and IFRS 15 was immaterial and no adjustment is
therefore presented.
Adoption of IFRS 9
The impact on the classification and measurement of financial assets will be as follows
for the group:
- Majority of the group's debt instruments that are currently classified as available-for-sale
will satisfy the conditions for classification as at fair value through other comprehensive
income ('FVOCI') and hence no change to the accounting for these assets;
- Equity instruments currently measured at FVPL which will continue to be measured on the
same basis under IFRS 9; and
- Debt instruments currently measured at amortised cost which meet the conditions for
classification at amortised cost under IFRS 9.
IFRS 9 replaces the incurred credit losses model in IAS 39 with a forward-looking expected
credit loss ('ECL') model to calculate impairments of financial assets. It applies to financial
assets classified at amortised cost, lease receivables and loan commitments. In assessing
the impairment that should be raised under the ECL model on these financial assets, credit
enhancements such as insurance held against loans and receivables are taken into account
in the ECL model. The impact on the ECL provision was substantially impacted by the credit
enhancements, and the increase in the impairment provision from the incurred loss model
to the ECL was found to be immaterial.
There will be no impact on the group's accounting for financial liabilities, as the new
requirements only affect the accounting for financial liabilities that are designated at fair
value through profit or loss and the group does not have any such liabilities.
There was no material change in the classification and measurement after tax.
Consequently, there was no financial impact to the consolidated group on 1 March
2018 upon adoption of IFRS 9.
Adoption of IFRS 15
This new standard provides a single, principles-based five-step model to be applied to
all contracts with customers. Guidance is provided on topics such as the point at which
revenue is recognised, accounting for variable consideration, costs of fulfilling and
obtaining a contract and various related matters. New disclosures about revenue are
also introduced.
The new standard is based on the principle that revenue is recognised when control
of a good or service transfers to a customer.
There are no material changes to the revenue recognition for revenue from the sale
goods and rendering of services which are recognised under IFRS 15. Consequently,
there was no financial impact to the consolidated group on 1 March 2018 upon
adoption of IFRS 15.
Impact of standards issued but not yet applied by the group
IFRS 16 Leases
IFRS 16 requires lessees to recognise assets and liabilities arising from all leases (with
limited exceptions) on the statement of financial position. Lessor accounting has not
substantially changed in the new standard. Based on management's current assessment,
the impact is not expected to be material.
The standard is mandatory for first interim periods within annual reporting periods
beginning on or after 1 January 2019. The group does not intend to adopt the standard
before its effective date.
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: 01/11/2018 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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