| Thu 10 May 2007, 15:20 | | RLF - Rolfes Technology Holdings Limited - Abridge |
|
JSE
RLF
RLF - Rolfes Technology Holdings Limited - Abridged Prospectus
Rolfes Technology Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2000/002715/06)
Share code: RLF & ISIN: ZAE000096202
("Rolfes" or "the company")
PRIVATE PLACING AND LISTING OF ROLFES
ON THE ALTERNATIVE EXCHANGE OF THE JSE LIMITED
1. INTRODUCTION AND HISTORY
1.1 PSG Capital (Pty) Limited ("PSG Capital") has been authorised to announce
that, subject to the achievement of the required spread of public
shareholders, the JSE has formally approved the listing of 102 500 000
ordinary shares, with a par value of 1 cent each, in the share capital of
Rolfes on the Alternative Exchange ("AltX") of the JSE from the
commencement of trade on Wednesday, 23 May 2007. The shares will trade
under the abbreviated name "Rolfes", with share code "RLF" and ISIN
ZAE000096202.
1.2 An amount of R25 million will be raised by the private placing of 12 500
000 Rolfes shares at an issue price of 200 cents per share ("the private
placing"). Further details relating to the private placing are contained in
paragraph 9 below.
1.3 Rolfes was incorporated in South Africa under the name "Bhoetan Properties
(Proprietary) Limited" on 11 February 2000. The company converted to a
public company under registration number 2000/002715/06 on 4 April 2007 and
changed its name to "Rolfes Technology Holdings Limited" on 23 March 2007.
1.4 Rolfes is a well established name in South Africa and internationally. The
business dates back to 1925 when the Rolfes family commenced business.
During 1938 the family initiated the manufacturing of lead and chrome
containing inorganic pigments and, by 1970, started producing organic
pigments.
1.5 New investors, under new management with a vision for renewal and growth
acquired the business in 1999 and the Rolfes group was born. The renewal
and turnaround activities were based on business process re-engineering
such as manufacturing process improvements, cost containment, improved
service levels and brand building.
2. OVERVIEW OF ROLFES
2.1 Rolfes is a diversified manufacturing and technology holdings company. The
group has demonstrated continued growth in the colourants and pigments
business unit as well as through the acquisition and subsequent
optimization of Rolfes Chemicals and Rolfes Silica acquired during 2005.
Rolfes is a manufacturer and distributor of the following products:
2.1.1 organic and inorganic colour pigments for the coatings, plastics,
construction and ink markets (through Rolfes Colour Pigments
International (Proprietary) Limited ("Rolfes Colour Pigments"));
2.1.2 synthetic resins and other speciality chemicals for the coatings,
plastics and construction industries (through Rolfes Chemicals
(Proprietary) Limited ("Rolfes Chemicals")); and
2.1.3 pure beneficiated silica for the metallurgical, filtration and
construction industries (through Rolfes Silica (Proprietary)
Limited ("Rolfes Silica")).
2.2 The business is primarily transacted through the subsidiaries Rolfes Colour
Pigments, Rolfes Chemicals and Rolfes Silica. Rolfes Asset Holdings
(Proprietary) Limited ("Rolfes Asset Holdings") owns the majority of the
fixed assets of Rolfes Colour Pigments and Rolfes Chemicals (including a
pigment property in Jet Park, Boksburg) and charges an arm`s length fee for
the use of its assets. A description of the activities conducted by these
subsidiaries follows.
2.3 Rolfes Colour Pigments
2.3.1 Rolfes Colour Pigments currently serves the coatings, plastics,
construction and ink markets and is the sole primary manufacturer
of inorganic and organic colour pigments in Africa and the
largest single supplier of all of the variety of pigment
categories to the paint, plastics, construction and ink
industries within the Southern African region. The company has
become an important player in the world pigment market since
1999, exporting to clients across the globe.
2.3.2 The company has an estimated turnover and profit before tax in
respect of June 2007 of R107 million and R12,2 million
respectively.
2.3.3 The product pigment range manufactured by Rolfes Colour Pigments
can be broken up as follows:
SEE GRAPH IN PRESS ANNOUNCEMENT
2.3.4 The company is ISO9001/2000 accredited and has added various toll
manufactured products (as manufactured throughout the world) to
its product range, bringing it closer to its vision of being the
leading one-stop-colour-shop in South Africa. Rolfes Colour
Pigments also provides new product formulation and application
advice to customers and has the flexibility to accommodate
customer`s specific requirements due to its production and
blending facilities and well equipped laboratory.
2.4 Rolfes Europe (a division)
Rolfes Europe was established in 2001 as a division of Rolfes Colour
Pigments.
It is headed up by an experienced pigment specialist based in France.
Maintaining a presence in this market ensures that the company keeps up-to-
date with the latest trends in pigments and ensures that all Southern
African customers receive pigments which conform to world-class standards.
2.5 Rolfes Chemicals
2.5.1 Rolfes acquired the chemicals business, previously known as
ChemPoint Chemical Technologies (Proprietary) Limited in July
2005. Historically the business belonged to Barloworld Limited
and focused mainly on the production of resins to the coatings
industry. The focus under the Rolfes banner has been to diversify
its range of products to include plastics, adhesives,
construction and other industries.
2.5.2 Rolfes Chemicals is the only significant independent South
African resin manufacturer with no commercial ties to any single
paint manufacturer locally.
The company has an estimated turnover and profit before tax in
respect of June 2007 of R90 million and R5,9 million
respectively.
2.5.3 There are two primary methods of manufacturing resin, locally and
internationally, namely:
* solvent based: Rolfes Chemicals operates in this market, the
smaller of the two markets.
* water based or emulsions: This is the largest sector and
most common method of resin manufacturing (locally and
internationally). Rolfes Chemicals is engaged in exploratory
discussions to acquire an existing emulsions manufacturer.
2.5.4 Rolfes Chemicals currently deals in the following market sectors:
Long Oil Alkyd Resin, Medium Oil Alkyd Resin, Short Oil Alkyd
Resin, Acrylic Resin, Styrenated Resin, UF Resin and UF
Precondensate Resin. Resins comprise 60% of all paint and wood
finish products on the local as well as international markets.
2.6 Rolfes Speciality Chemicals Distribution (a division)
2.6.1 Rolfes Speciality Chemicals Distribution commenced trading with
speciality chemicals and industrial products during June 2006 and
is considered a competitive supplier in respect of certain
products by some of the major chemical supply companies of raw
materials. The business has grown to a turnover level in excess
of R10 million in a short period of time.
2.6.2 The division`s strategy is to be a one stop supplier for all
speciality chemicals and raw material commodities within the
coatings, polymer, plastic, ink and other industries and aims to
become a leader in industrial supplies in South Africa.
2.7 Rolfes Silica
2.7.1 Rolfes acquired the mine and beneficiation plant, previously
known as Eggo Sand (Proprietary) Limited, in August 2005 and
which is known as one of the leading silica suppliers in South
Africa specialising in the manufacturing of a wide variety of
high quality silica products. Rolfes Silica produces a variety of
product grades to meet the demand within the metallurgical,
filtration and construction industries.
2.7.2 The company has a projected turnover and profit before taxation
in respect of June 2007 of R36 million and R6,7 million
respectively.
2.7.3 Rolfes Silica is the owner of the quarry/land as well as the
mining license issued by the Department of Minerals and Energy
Affairs which is valid until 26 January 2010. The company is in
the process of converting its existing mining licence to new
order rights. The quarry has been in operation for almost 30
years and at the forecast production rate, has approximately 20
years of silica reserves. The company is well known for the
quality of the product as well as the expertise in the silica
sector and is in the process of securing new mining rights in
adjacent locations already identified and owned by the company.
Rolfes Silica also is in the process of shifting its product mix
from construction and aggregate materials to the high margin
silica fines which will boost its bottom line profits. In
addition, the company is contemplating a number of downstream
projects such as a tile cement factory, ready mix, and a brick
manufacturing plant in order to expand its product range to the
building and general infrastructure industries.
2.8 Rolfes Asset Holdings
Rolfes Asset Holdings invests in and leases all the plant and equipment
used by Rolfes Colour Pigments and Rolfes Chemicals and charges an arm`s
length fee for the use of its assets. A small portion of income is also
generated by the leasing of its assets to external third parties. The
company has an external turnover and profit before taxation in respect of
June 2007 of R2,0 million and R1,1 million respectively.
3. BEE PROFILE
Vuwa Investments (Pty) Limited ("Vuwa") acquired a 25,1% shareholding in
Rolfes by way of a sale of 22 590 000 Rolfes shares from existing
shareholders for a purchase price of R33 885 000. Vuwa is headed by
Bulelani Ngcuka and other investments by Vuwa include Basil Read Holdings
Limited, Top Fix Holdings Limited and SAIL Group Limited.
4. PROSPECTS
4.1 The Rolfes group has demonstrated continued growth in the colourants
and pigments business unit as well as through the consolidation and
optimization of Rolfes Chemicals and Rolfes Silica since acquisition
in 2005. Rolfes is actively seeking quality manufacturers of pigments
world-wide that will contribute to its growing product range and
enhance Rolfes reach into new areas.
4.2 Since 2005/6 the market in which Rolfes operates in has trended
upwards mainly due to the property boom and increased consumer
expenditure. This trend is expected to continue to 2010 and possibly
beyond.
4.3 Lead chrome pigments in decorative coating applications have recently
attracted negative publicity due to potential environmental hazards
associated with their use. Rolfes Colour Pigments has developed an
innovative solution to manufacture a range of pigments that will
replace pigments containing lead, which pigments will also be
available in a dispersed form. This range is cost effective with
excellent light fastness and weather durability when compared to the
current lead containing pigments being produced.
4.4 In line with its philosophy of continuously adding value to existing
products, Rolfes Colour Pigments has developed a range of pigment
dispersions to the coatings industry for both the in-plant and
decorative applications where it has until now been absent. Rolfes
will soon be visible to the household and decorative market in the
form of liquid tinters under the name "African Moods".
4.5 Rolfes Silica is in the process of shifting its product mix from
construction and aggregate materials to higher margin silica fines
which will boost bottom line profits. In addition, Rolfes Silica is
contemplating a number of downstream projects such as a tile cement
factory, ready mix and a brick manufacturing plant in order to expand
its product range to the building and general infrastructure
industries.
4.6 Rolfes Chemicals has acquired the technology to produce oil-based
long, medium, short and styrenated resins in addition to its existing
Tall Oil Fatty Acid based resins, offering an additional product range
which is competitively priced and has opened a whole new market
(previously not in reach due to pricing considerations).
4.7 In addition, Rolfes Chemicals` product range has been recently
expanded to include speciality chemicals, providing the company with
the opportunity to organically grow into a market leader.
5. MAJOR SHAREHOLDERS
The following shareholders are interested in more than 5% of the issued
share capital of Rolfes on listing:
Number of Percentage
shares held held
Name of shareholder (`000) (%)
Vuwa(1) 25 727 500 25,1
Carmen Fourie Family Trust 21 561 099 21,0
Louis Fourie Trust 14 288 823 13,9
Elandre Fourie Trust 12 147 098 11,9
Flouride Place 601 Trust 6 459 219 6,3
Badenhorst Family Trust 6 073 549 5,9
Note:
(1) Based on the assumption that Vuwa follows their rights to subscribe
for shares on listing.
6. DIRECTORS
6.1 The full names, ages, occupations and business address of the
directors of Rolfes are outlined below:
Full name Age Occupation Business address
Bulelani Thandabantu 52 Non-executive Ground Floor, Building 2
Ngcuka chairman 21 Impala Road
Chistlehurston
Sandton 2196
Erhard van der Merwe 44 Chief executive The Summit
officer Number 269, 16th Street
Randjiespark
Midrand 1685
Andries Johannes Greeff 52 Financial 12 Jet Park Road
director Jet Park
Boksburg 1459
Arnoldus Johannes 44 Non-executive The Summit
Fourie director Number 269, 16th Street
Randjiespark
Midrand 1685
Lungisa Dyosi 36 Non-executive Ground Floor, Building 2
director 21 Impala Road
Chistlehurston
Sandton 2196
6.2 All directors are South African citizens.
6.3 The directors of Rolfes:
* have considered all statements of fact and opinion in the
prospectus;
* accept, collectively and individually, full responsibility for
the accuracy of such statements; and
* certify that, to the best of their knowledge and belief, there
are no omissions of facts or considerations which would make any
statements of fact or opinion contained in the prospectus false
or misleading and that all reasonable enquiries to ascertain such
facts have been made and that the prospectus contains all
information required by law and the Listings Requirements.
7. SHARE CAPITAL AND DIVIDENDS
7.1 Authorised and issued share capital
7.1.1 The authorised and issued share capital of Rolfes is set out
below:
Number Share
of shares capital
Authorised
Ordinary shares of 1 cent per share 500 000 000 R5 000 000
Issued before the private placing
Ordinary shares of 1 cent per share 90 000 000 R900 000
Issued after the private placing
Ordinary shares of 1 cent per share 102 500 000 R1 025 000
7.1.2 The share premium of Rolfes prior to listing was R2 307 489
and on listing will be R24 827 700.
7.2 Dividends
Given the growth profile and strategy of Rolfes, it is anticipated that
earnings generated by the group will be re-invested to fund future growth
and development. It is the intention of the company to periodically
consider this dividend policy and to take account of prevailing
circumstances and future cash requirements in determining whether it would
be appropriate to pay a dividend in respect of a particular financial
reporting period. It is intended that once a more predictable and
sustainable cash flow trend is evident, dividends will become payable. In
the interim, surplus cash may be applied by the company to repurchase
shares if appropriate.
8. EXTRACTS OF HISTORICAL, PRO FORMA AND FORECAST FINANCIAL INFORMATION
8.1 Historic and forecast income statements
Set out below is an extract from the historic income statement of
Rolfes for the financial year ended 30 June 2006 and the forecast
income statements for the financial periods ending 30 June 2007 and
2008, the preparation of which is the responsibility of the directors.
Audited Forecast Forecast
2006 2007 2008
Year ended/ending 30 June R`000 R`000 R`000
Revenue 164 003 235 131 289 242
Cost of sales (111 262) (159 889) (196 106)
Gross profit 52 741 75 242 93 136
Operating expenses (31 259) (45 573) (52 913)
Operating profit 21 482 29 669 40 223
Net interest paid (4 125) (3 775) (4 341)
Profit before taxation 17 357 25 894 35 882
Taxation (2 816) (7 509) (10 406)
Attributable profit 14 541 18 385 25 476
Negative goodwill recognised(1) (2 798) - -
Attributable profit 11 743 18 385 25 476
Number of shares in issue (`000) 90 000(2) 90 000(2)
Earnings per share (cents) 20,4 28,3
Headline earnings per share (cents) 20,4 28,3
Earnings yield at 200 cents per share
issue price (%) 10,2 14,2
Price: Earnings ratio at 200 cents
per share issue price (times) 9,8 7,1
Notes:
(1) Negative goodwill arose on the acquisition of Rolfes Silica (purchase
price paid was R80 based on a net asset value of R3 497 487 in terms
of an 80% shareholding).
(2) The actual number of ordinary shares in issue at 30 June 2006 was 20
000.
Subsequent to 30 June 2006, the company issued an additional 89 980
000 ordinary shares to the existing shareholders.
(3) No capital raising proceeds and interest earned via the private
placing have been included in the above forecasts.
8.2 Post balance sheet events
8.2.1 On Tuesday, 24 April 2007, an explosion occurred at the resin
plant of Rolfes Chemicals. The plant and building was damaged and
the exact cause of the explosion is still unknown at this stage,
but no foul play or human negligence is expected. Four members of
staff were injured and there were no fatalities. As a result of
the explosion, the production of resins products at the Alberton
plant is curtailed. It is anticipated that the plant will be in
full production before the end of June 2007. The company is
insured against such events and the loss of profits as a result
thereof.
8.2.2 The directors are in the process of securing third party
production facilities and, coupled with stock on hand and the
outsourcing of certain product lines, no immediate shortage of
stock for sale is foreseen at this stage. Based on the
information available as at the last practical date, the
directors do not foresee that the abovementioned event will have
any material effect on the 2007 forecasts provided.
8.3 Interim and pro forma balance sheets at 31 December 2006
Set out below is an extract from the historic interim balance sheet of
Rolfes and pro forma balance sheet of Rolfes which illustrates the effects
of the private placing on the financial position of Rolfes at 31 December
2006 (being Rolfes` interim financial reporting date), based on the
assumption that the private placing had been effective at that date, the
preparation of which is the responsibility of the directors.
Reviewed Adjust- Unaudited
ments Pro forma
After the
Capitalisa- capitalisa-
tion tion
issue issue
31 December 31 December
2006 2006 2006
R R R
ASSETS
Non-current assets 48 528 625 - 48 528 625
Current assets 64 025 267 - 64 025 267
Total assets 112 553 892 - 112 553 892
EQUITY AND LIABILITIES
Capital and reserves 48 098 837 - 48 098 837
Non-current liabilities 17 426 280 - 17 426 280
Current liabilities 47 028 775 - 47 028 775
Total equity and
liabilities 112 553 892 - 112 553 892
Shares in issue(1) 21 088 89 978 912 90 000 000
Net asset value per
share (cents)(1) 228 086(1) 53,4
Net tangible asset value
per share (cents)(1) 186 022(1) 43,6
Adjust- Unaudited
ments Pro forma
After the
capitalisa-
The tion issue
private and private
placing placing
31 December
2006 2006
R R
ASSETS
Non-current assets - 48 528 625
Current assets - 64 025 267
Total assets - 112 553 892
EQUITY AND LIABILITIES
Capital and reserves 23 545 000 71 643 837
Non-current liabilities - 17 426 280
Current liabilities (23 545 000) 23 483 775
Total equity and
liabilities - 112 553 892
Shares in issue(1) 12 500 000 102 500 000
Net asset value per
share (cents)(1) 69,9
Net tangible asset value
per share (cents)(1) 61,2
Notes:
(1) The actual number of ordinary shares in issue at 31 December 2006 was
21 088. Subsequent to 31 December 2006, the company issued an
additional 89 978 912 ordinary shares resulting in 90 000 000 ordinary
shares in issue. An additional 12 500 000 shares were issued in terms
of the private placing resulting in a total of 102 500 000 ordinary
shares in issue after the private placing.
(2) The adjustments pertaining to bank overdraft comprise the R25 million
proceeds received from the private placing and R1 455 000 listing
expenses.
(3) The adjustments pertaining to issued capital comprise the
capitalization issue out of share premium of 89 978 912 shares at 1
cent per share to the prior shareholders and the issue of 12 500 000
shares at 1 cent per share in terms of the private placing.
(4) The adjustments pertaining to share premium comprise the
capitalization issue of 89 978 912 shares to the prior shareholders at
1 cent per share and, in terms of the private placing, comprises, the
write-off of listing costs amounting to R1 455 000 and the issue of 12
500 000 shares at a premium of 199 cents per share in terms of the
private placing.
9. THE PRIVATE PLACING
9.1 The salient features of the private placing are as follows:
Offer price per share (cents) 200
Number of ordinary shares offered in terms of the private placing 12 500 000
Issue consideration R25 million
Opening date of the private placing at 09:00 on Monday, 14 May 2007
Closing date of the private placing at 12:00 on Thursday, 17 May 2007
9.2 The main purpose of the private placing is to enlarge Rolfes` capital base
to facilitate planned diversification and expansion. The private placing
will be applied as follows:
9.2.1 debt repayment - R7 million (recapitalising the balance sheet of
Rolfes in respect of the Rolfes Chemicals and Rolfes Silica
acquisitions which were paid for by utilising shareholders loans
and bank overdraft facilities);
9.2.2 expansion capital - R10 million (expanding the production
capacity and product ranges within Rolfes Silica and Rolfes
Chemicals through capital projects); and
9.2.3 acquisitions - R8 million (to assist in funding new acquisitions
together with bank debt and the issue of new shares).
9.3 No offer will be made to the public in respect of the private placing. The
private placing is open to select applicants only.
10. COPIES OF THE PROSPECTUS
10.1 This abridged prospectus is a summary of the full prospectus and
has been prepared and issued in relation to the private placing
and the listing of Rolfes on AltX. It contains the salient
features of the prospectus dated 9 May 2007, which should be read
in its entirety for a full appreciation thereof.
10.2 Copies of the full prospectus, in English, may be obtained during
office hours at the following addresses:
10.2.1 the registered office of the company: The Summit, Number
269, 16th Street, Randjiespark Midrand 1685; and
10.2.2 the office of the designated and corporate adviser of
Rolfes, PSG Capital: Building 8, Woodmead Estate, 1 Woodmead
Drive, Woodmead 2198.
Johannesburg
10 May 2007
Designated and Corporate Adviser
PSG Capital
Auditors and Reporting Accountants
BDO Spencer Steward (CT) Inc
Chartered Accountants (SA)
Registered Accountants and Auditors
Attorneys
VDT
Attorneys
Constitutum 1932
Date: 10/05/2007 15:20:01 Produced by the JSE SENS Department.
