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AFT
AFT
AFT - Afrimat Limited - Reviewed condensed consolidated financial results
AFRIMAT LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/022534/06)
Share Code: AFT & ZAE000086302
("Afrimat" or "the company")
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS
for the 12 months ended 28 February 2007
Operating margin of 20%
Growth in profit after tax on a `year-on-year` basis of 46%
HEPS of 58,5 cents
NAV per share of R2,40
CONSOLIDATED BALANCE SHEET
as at 28 February 2007
Group
2007 2006
R R
Assets
Non-current assets
Property, plant and equipment 190 531 196 129 915 460
Intangible assets 7 040 269 7 289 901
Goodwill 39 180 494 985 561
Other financial assets 3 501 728 378 000
Retirement benefit asset 11 594 254 -
251 847 941 138 568 922
Current assets
Inventories 35 909 474 10 950 146
Current tax receivable 4 349 343 2 500 407
Trade and other receivables 66 478 220 36 202 677
Other financial assets 44 333 662 766 262
Cash and cash equivalents 41 362 383 15 198 394
192 433 082 65 617 886
Total assets 444 281 023 204 186 808
Equity and liabilities
Equity
Share capital 1 244 995 2 000
Share premium 245 425 754 -
Business combination adjustment (105 788 129) -
Net issued share capital 140 882 620 2 000
Reserves 335 846 -
Minority interest 24 603 4 255 614
Retained income 156 863 201 110 481 663
298 106 270 114 676 277
Liabilities
Non-current liabilities
Other financial liabilities 68 250 131 250
Finance lease obligations 17 483 118 19 162 712
Deferred tax 38 243 493 22 503 260
Provisions 5 949 922 -
61 744 783 41 797 222
Current liabilities
Loans from shareholders - 1 078 618
Other financial liabilities 63 000 670 290
Current tax payable 12 846 506 4 448 496
Finance lease obligations 20 742 622 14 577 509
Trade and other payables 47 185 153 20 888 904
Provisions 2 635 497 5 200 065
Bank overdraft 957 192 849 427
84 429 970 47 713 309
Total liabilities 146 174 753 89 510 531
Total equity and liabilities 444 281 023 204 186 808
CONSOLIDATED INCOME STATEMENT
for the year ended 28 February 2007
Group
2007 2006
R R
Revenue 349 032 479 309 164 706
Cost of sales (249 766 169) (242 029 299)
Gross profit 99 266 310 67 135 407
Other income 3 919 020 1 922 204
Operating expenses (33 412 058) (9 532 952)
Operating profit 69 773 272 59 524 659
Investment revenue 10 906 535 1 285 009
Finance costs (3 623 153) (2 868 104)
Profit before taxation 77 056 654 57 941 564
Taxation (23 668 315) (18 532 755)
Profit for the period 53 388 339 39 408 809
attributable to:
Ordinary shareholders 51 709 520 37 651 149
Minority interest 1 678 819 1 757 660
53 388 339 39 408 809
Reconciliation of headline earnings
Profit attributable to ordinary 51 709 520
shareholders
Profit on disposal of property,
plant and equipment (140 523)
51 568 997
Shares in issue
Eight months to 31/10/06 70 075 959
Four months to 28/02/07 124 299 497
Weighted average number of shares 88 150 472
Earnings per ordinary share (cents) 58,7
Headline earnings per share (cents) 58,5
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 28 February 2007
Group
2007 2006
R R
Cash flows from operating activities
Cash generated from operations 75 857 903 49 728 080
Interest income 10 889 541 1 285 009
Dividends received 16 993 -
Finance costs (3 623 154) (2 868 104)
Tax paid (17 396 047) (14 531 981)
Net cash from operating activities 65 745 236 33 613 004
Cash flows from investing activities
Purchase of property, plant and (32 681 419) (34 499 812)
equipment
Sale of property, plant and 1 899 535 2 450 600
equipment
Acquisition of businesses (cash 3 738 637 (176 559)
acquired)
Intangible assets acquired - (1 525 000)
Loans/(advances) repaid - (1 014 667)
(Purchase)/sale of financial assets (43 719 577) -
Net cash from investing activities (70 762 824) (34 765 438)
Cash flows from financing activities
Proceeds on share issue 150 000 -
Premium on shares issued 69 412 016 -
Proceeds/(repayment) of other (26 394 199) -
financial liabilities
Proceeds from borrowings - 7 595 345
Finance lease payments (5 750 405) (852 783)
Repayment of shareholders loan (1 078 618) (1 593 122)
Dividends paid (5 264 982) (4 316 834)
Net cash from financing activities 31 073 812 832 606
Total cash movement for the period 26 056 224 (319 828)
Cash at the beginning of the period 14 348 967 14 668 795
Total cash at end of the period 40 405 191 14 348 967
CONSOLIDATED CHANGES IN EQUITY
for the year ended 28 February 2007
Business
Share Share combination
capital premium adjustment
R R R
Group
Balance at 1 March 2005 2,000
Adjustments - prior period
Environmental
rehabilitation provision
Deferred taxation
Decommissioning and quarry
rehabilitation assets
raised
Restated balance at 1 March 2 000 -
2005
Changes
Share options granted -
Transfers - statutory
Profit for the year
Dividends
Total changes - - -
Balance at 28 February 2006 2 000 - -
Changes
Dividends paid before
business combination
Acquisition equity
adjustments
Derecognition of negative
goodwill
Net income (expenses)
recognised directly in
equity
Fair value adjustment on
available-for-sale
financial assets
Fair value adjustment on
available-for-sale
financial assets
Profit for the year
Issue of shares 1 242 995
Premium on shares issued 245 425 754
IFRS 3 Business combination (105 788 129)
adjustment
Total changes 1 242 995 245 425 754 (105 788 129)
Balance at 28 February 2007 1 244 995 245 425 754 (105 788 129)
Revaluation Retained
reserve income
R R
Group
Balance at 1 March 2005 222 222 74 622 302
Adjustments - prior period
Environmental (50 000)
rehabilitation provision
Deferred taxation (1 052 449)
Decommissioning and quarry 2 059 661
rehabilitation assets
raised
Restated balance at 1 March 222 222 75 579 414
2005
Changes
Share options granted 577 778
Transfers - statutory (800 000) 800 000
Profit for the year 37 651 149
Dividends (3 612 000)
Total changes (222 222) 34 839 149
Balance at 28 February 2006 - 110 418 663
Changes
Dividends paid before (5 264 982)
business combination
Acquisition equity
adjustments
Derecognition of negative
goodwill
Net income (expenses) 335 846
recognised directly in
equity
Fair value adjustment on 392 802
available-for-sale
financial assets
Fair value adjustment on (56 956)
available-for-sale
financial assets
Profit for the year 51 709 520
Issue of shares
Premium on shares issued
IFRS 3 Business combination
adjustment
Total changes 335 846 46 444 538
Balance at 28 February 2007 335 846 156 863 201
Minority Total
interest equity
R R
Group
Balance at 1 March 2005 3 202 788 78 049 312
Adjustments - prior period
Environmental (50 000)
rehabilitation provision
Deferred taxation (1 052 449)
Decommissioning and quarry 2 059 661
rehabilitation assets
raised
Restated balance at 1 March 3 202 788 79 006 524
2005
Changes
Share options granted 577 778
Transfers - statutory -
Profit for the year 1 757 660 39 408 809
Dividends (704 834) (4 316 834)
Total changes 1 052 826 35 669 753
Balance at 28 February 2006 4 255 614 114 676 277
Changes
Dividends paid before (5 264 982)
business combination
Acquisition equity (5 909 830) (5 909 830)
adjustments
Derecognition of negative -
goodwill
Net income (expenses) 335 846
recognised directly in
equity
Fair value adjustment on
available-for-sale
financial assets
Fair value adjustment on
available-for-sale
financial assets
Profit for the year 1 678 819 53 388 339
Issue of shares 1 242 995
Premium on shares issued 245 425 754
IFRS 3 Business combination (105 788 129)
adjustment
Total changes (4 232 196) 183 429 993
Balance at 28 February 2007 24 603 298 106 270
COMMENTARY
Introduction
The directors are pleased to present the maiden financial results of the group
for the year ended 28 February 2007 ("the year"), which reflect profitability
ahead of pre-listing forecasts and increased from the previous year. On a pro
forma basis, assuming the listing and business combinations had been effected at
the beginning of the comparative financial year, profit after tax for 2007 of
R67,6 million was up 46,6% from R46,1 million in the comparative year and
exceeded forecasts of R63,6 million by 6,3% (see `Basis of preparation` for the
impact of IFRS 3: Business Combinations on the reported results).
The year was marked by a number of strategic milestones. On 7 November 2006
black-empowered Afrimat listed on the JSE Limited with a market capitalisation
of R1 billion. This followed the earlier merger of industry leaders Lancaster
Group (Pty) Limited ("Lancaster") and Prima Quarries (Pty) Limited ("Prima"),
which today form the group`s key operations. In February 2007 Afrimat announced
its acquisition of Cape-based Malans Group and Denver Quarries ("Malans
acquisition") as a first step to further national expansion.
Basis of preparation
These condensed financial results incorporate extracts from the unaudited group
annual financial statements. The group annual financial statements have been
prepared in accordance with International Financial Reporting Standards ("IFRS")
and the Companies Act of South Africa, 1973. The accounting policies used to
prepare the annual financial statements of the group`s two subsidiaries
Lancaster and Prima are consistent with those applied in the reporting
accountant`s report published in the pre-listing prospectus dated 30 October
2006.
In applying IFRS 3: Business Combinations, Prima has been identified as the
acquirer and, consequently, the group annual financial statements are presented
as a continuation of the group annual financial statements of Prima. Under this
method, the financial statements include the results of Prima for the full
twelve months for both the 2007 and 2006 financial years and the results of
Lancaster for only a four-month period from the date of listing to 28 February
2007.
The pre-listing prospectus set out aggregated annualised forecasts for the 2007
financial year equating to the sum of the results of Prima and Lancaster for the
full twelve months. As a result, as per the statement in the pre-listing
prospectus, the forecasts set out in the pre-listing prospectus do not provide a
meaningful comparison to the reported group results.
Group profile
Afrimat is a construction materials supplier specialising in crushed aggregates,
sand, ready-mix concrete, concrete blocks and bricks and mobile crushing
services. The group boasts 18 quarries, 12 ready-mix concrete plants and 8
precast factories with its own fleet of 120 ready-mix tipper and delivery
trucks.
Prima and Lancaster are leaders in their regions of operation spanning KwaZulu-
Natal, Free State, Eastern Cape, Western Cape and Namibia.
Review of operations
South Africa`s current construction boom, feeding off infrastructure spend from
government and state-owned enterprises to a large extent, positively impacted on
the group`s results.
Afrimat is a major supplier to the civil engineering and commercial/non-
residential building sectors and through Lancaster has a significant market
share of the low-cost housing market in Northern KwaZulu-Natal and the Eastern
Free State. Growth in this market, which is largely government funded, has not
slowed as in the private residential market.
The strategic proximity of Afrimat`s quarries to major construction projects was
a key driver of new contract work during the year, evidenced by the three-year
contract to supply ballast for the Richards Bay coal line.
Afrimat was also awarded a new mining licence for a quarry in Saldanha, ideally
positioning the group to supply aggregate to the Sishen-Saldanha iron-ore rail
line.
Limited supply of cement and scarcity of skilled labour continued to present a
challenge during the year. However, capacity expansions at cement suppliers
together with import programmes are expected to alleviate the cement shortage.
Afrimat has embarked on an intensive training programme with a view to
accelerating the promotion of select employees to middle management positions.
Financial results
The group generated revenue of R349,0 million. Profit attributable to
shareholders of R51,7 million equated to headline earnings per share ("HEPS") of
58,5 cents per share and earnings per share of 58,7 cents. The group reported
net cash from operating activities of R65,7 million with total cash on hand of
R40,4 million.
Malans acquisition
As previously announced on 7 February 2007 Afrimat acquired the Malans Group for
R125 million. This will add strategically located quarries and sand mines to
Afrimat`s portfolio and further boost Prima`s entrenched 45 year presence in the
Western Cape. The new operations complement Afrimat`s existing product ranges
particularly in sand and rubble crushing, providing clear synergies to boost
future organic growth. Sand, in which Malans holds strong market share in the
Western Cape, accounts for 40% of turnover of the Malans Group with quarries and
mobile crushing accounting for around 26% and 19%, respectively. The Malans
acquisition will also significantly increase Afrimat`s equipment and machinery
inventory.
The Competition Commission approval for the transaction is due by the close of
business today. The Malans acquisition has no impact on the current year`s
reported results.
Prospects
Outlook for the industry and the company remain buoyant. Planned government
infrastructure spend of over R400 billion coupled with parastatal and private
expenditure should boost activity in the civil engineering and non-
residential/commercial sectors of the construction market. It is anticipated
that R32,4 billion of government`s budget will be spent on low-cost housing, an
area in which Lancaster is a regionally strong player and where the group sees
significant organic growth opportunity. The value of Afrimat`s future orders for
the supply of building materials to low-cost housing projects in these regions
currently exceeds R30 million.
Parastatals such as Eskom and Transnet have embarked on significant capital
expenditure programmes. Transnet`s commitment of R64,5 billion over the next
five years includes the allocation of R31,5 billion to Spoornet for the Iron Ore
Corridor expansion (rail and Saldanha infrastructure) and the Richards Bay coal
line and infrastructure expansion, where Lancaster is the major supplier of
ballast and product. Further the group has already secured a number of large
scale contracts worth approximately R87 million for the supply of aggregate in
the year ahead.
Once approval for the Malans acquisition has been received and integration is
completed, the group expects synergies to impact positively on revenue and
earnings.
Afrimat is also currently investigating further acquisitions and expansions to
boost capacity and enable the group to meet increasing industry demands.
Significant volume growth is expected.
Dividend policy
In line with policy disclosed in the pre-listing prospectus, no dividend has
been declared. The group`s targeted dividend policy will be to distribute semi-
annually, an interim and final dividend, up to a maximum of one-third of net
profit after tax, taking distributable reserves and cash available for
distribution into account.
Review opinion
The group`s condensed consolidated financial results for the year ended 28
February 2007 have been reviewed by Moores Rowland. Their unqualified review
report is available for inspection at the company`s registered office.
Appreciation
The group thanks its employees for their loyalty, hard work and commitment which
have contributed to the successful listing on the JSE and a good performance.
The board also thanks its stakeholders, business partners, suppliers and
customers for their ongoing support and faith in the group.
On behalf of the board
MW von Wielligh AJ van Heerden
Chairman CEO
29 May 2007
Directors: MW von Wielligh*# (Chairman), AJ van Heerden (CEO), HJE van Wyk
(Financial Director), PG Corbin, L Dotwana*, F du Toit*, M Kaplan*#, GN Jiyane*
*Non-executive director #Independent
Registered office: 1 Bryanston Drive, Bryanston, 2191 (PO Box 67056, Bryanston,
2120)
Sponsor: Bridge Capital Advisors (Pty) Limited
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001
(PO Box 61763, Marshalltown, 2107)
Company secretary: Routledge Modise Attorneys, 2nd Floor Wanderers Building, The
Campus, 57 Sloane Street, Bryanston, 2021
(PO Box 78333, Sandton City, 2146)
Date: 29/05/2007 13:00:01 Produced by the JSE SENS Department.
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