| Wed 8 Aug 2007, 7:05 | | ABU - abe Construction Chemicals - Private Placing |
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JSE
ABEE
ABU - abe Construction Chemicals - Private Placing And Listing Of abe On The
Alternative Exchange Of The JSE Limited
abe Construction Chemicals Limited
(Incorporated in the Republic of South Africa)
(Registration number 1982/005383/06)
Share code: ABU & ISIN: ZAE000102059
("abe" or "the company")
PRIVATE PLACING AND LISTING OF abe ON THE ALTERNATIVE EXCHANGE OF THE JSE
LIMITED
This abridged prospectus is not an invitation to the public to subscribe for
shares in abe. It is issued in compliance with the Listings Requirements of the
JSE Limited ("JSE") for the purpose of providing information to the public and
investors with regard to abe.
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 100 000 000 ordinary
shares, with a par value of 1 cent each, in the share capital of abe on the
Alternative Exchange ("AltX") of the JSE from the commencement of trade on
Friday, 17 August 2007. The shares will trade under the abbreviated name "abe",
with share code "ABU" and ISIN ZAE000102059.
1.2 An amount of up to R74 million, before expenses, will be raised by abe
vendors in terms of an offer for sale of 37 000 000 abe shares at a sales price
of 200 cents per share ("the private placing"). Further details relating to the
private placing are contained in paragraph 8 below.
1.3 abe was formally established in 1932 in Durban as a supplier of bitumen
to municipalities in KwaZulu-Natal. Since then, the business has grown in both
size and diversity to become a major supplier of high performance products to
the building, civil engineering, maintenance, manufacturing, builders` merchant
and hardware store businesses, with manufacturing plants in Johannesburg
(Boksburg) and Durban.
1.4 abe was incorporated in South Africa under the name "Quontio Investments
(Proprietary) Limited" on 4 June 1982. The company changed its name to "abe
Construction Chemicals (Proprietary) Limited" on 17 June 1997 when it acquired
the abe business from Murray & Roberts Holdings Limited and converted to a
public company under registration number 1982/005383/06 on 23 July 2007.
2.OVERVIEW OF abe
2.1 Over the years abe has acquired technology through its own product
development, strategic acquisitions of businesses and by forming alliances with
international manufacturers of specialised products. Today, abe is a leader in
its field, with many well respected brands representing a number of quality
international manufacturers.
2.2 In addition to local manufacturing, abe is the distributor for leading
multi-national manufacturers of bitumen waterproofing membrane, silicones,
polyurethanes and acrylic products. These products have led to abe becoming a
major role player in the following areas of expertise:
- Waterproofing - Concrete repair
- Flooring - Structural glazing
- Coatings - Roofing
- Specialised adhesives - Construction commodity products
- Silicone and sealants
2.3 abe`s revenue model can be divided into four segments/divisions, with
the following contribution to revenue:
SEE PRESS RELEASE FOR GRAPH
2.3.1 Construction
- Specialist contractor sales
The waterproofing, flooring, sealant, structural glazing, concrete repair and
roofing product categories are generally used by specialist contractors who
specialise in the application of these products.
- General construction sales
This segment consists of general contractors ranging from large construction
companies to the small house builder.
2.3.2 Resellers (retail)
The resellers` customer base comprises hardware and building supply outlets
ranging from the large groups to the small corner hardware store.
Agricultural co-ops are also important customers.
2.3.3 Exports
The export division operates from Durban and provides specialised services and
support to overseas markets. The export customer base consists of licensees,
distributors, local export houses and an established customer base mainly in
sub-Saharan Africa. Currently, abe has distribution agreements with
representatives in Botswana, Namibia, Mozambique, Malawi, Ghana, Kenya and
Tanzania.
2.3.4 Manufacturing
The segment consists of any industrial or automotive manufacturing process
where the abe product range forms a component of the manufactured product.
Products from all categories are sold directly to the manufacturers.
3. BEE PROFILE
Auburn Avenue Trading 31 (Proprietary) Limited ("Auburn"), a BEE company
controlled by Penumbra Investment Holdings (Proprietary) Limited, acquired a
26% shareholding in abe with effect from 12 July 2007. S K Mota represents
Auburn on the board of abe as a non-executive director. Further details of the
BEE transaction are detailed in the prospectus.
4. PROSPECTS
4.1 Supported by a staff complement of 235 people and a network of branches
and distributors throughout South Africa, sub-Saharan Africa and the Indian
Ocean, the directors of abe are of the opinion that abe is ideally positioned
to service its customers and capitalise on growth experienced in the
construction and retail industries, as set out below.
4.2 The consolidation of the building materials industry has resulted in
significant expansion by primary retailers who continue to open new and better
stores to serve the home improvement industry. abe`s major retail customers all
report strong growth in which the resellers division will continue to
participate.
4.3 Furthermore, it is well known that the infrastructure spend is driving
strong growth in the construction industry and abe, as a specialist supplier to
the industry, expects to continue to grow sales on the back of this.
Specific project drivers for abe`s construction products include stadiums,
power stations, airports and general construction.
4.4 abe intends adding further product lines to the current product basket
through product line extensions, acquisitions of established brands and
continuing pursuing strategic technology agreements with current European
partners.
5. DIRECTORS
5.1 The full names, ages, business address and occupations of the directors
of abe are set out below:
Full name Age Occupation Business address
William Robert George Post 59 Non-executive 22 Hurlingham Road
Chairman Illovo 2196
Lawrence Frederick Avis 55 Financial Director 7 Wilcox Road
Isipingo 4110
Stephen Kopano Mota 39 Non-executive 1st Floor, Block E
Director Morningside Close
222 Rivonia Road
Morningside 2128
Stephen Rault 49 Retail Director Main Reef Road
Boksburg North 1459
Stanley Patrick Stacey 57 Managing Director Main Reef Road
Boksburg North 1459
5.2 All directors are South African citizens, with the exception of W R G
Post (British).
6. SHARE CAPITAL AND DIVIDENDS
6.1 Authorised and issued share capital
6.1.1 The authorised and issued share capital of abe is set out below:
Number of shares Share capital
(R)
Authorised
Ordinary shares of 1 cent per share 200 000 000 2 000 000
Issued
Ordinary shares of 1 cent per share 100 000 000 1 000 000
6.1.2 The share premium of abe on
listing will be R34 000 074, before the write-off of certain listing expenses
estimated at R500 000 (which write-off shall take place after listing).
6.2 Dividends
abe`s dividend policy, in the absence of unforeseen circumstances (and subject
to future cash requirements), is to declare a dividend, based on a dividend
cover of 2,5 times, payable annually for each financial year ending 31 May and
payable to shareholders in September each year. The first dividend payable to
shareholders of abe after the listing of the company will be the dividend
payable in respect of the financial year ending 31 May 2008, payable in
September 2008.
7. EXTRACTS OF HISTORICAL AND FORECAST FINANCIAL INFORMATION
Set out below is an extract from the forecast income statements for the
financial years ending 31 May 2008 and 31 May 2009, the preparation of which is
the responsibility of the directors.
Audited Forecast(1) Forecast(1)
2007 2008 2009
Year ended/ending 31 May R`000 R`000 R`000
Revenue 191 291 227 721 261 723
Cost of sales (119 252) (141 265) (160 703)
Gross profit 72 039 86 456 101 020
Other income 1 456 441 450
Operating expenses (49 323) (56 263) (63 211)
Operating profit 24 172 30 634 38 259
Depreciation and amortisation (1 656) (1 903) (2 093)
Net interest (paid)/received (272) (365) (366)
Profit before taxation 22 244 28 366 35 800
Taxation (6 422) (7 912) (10 382)
Attributable profit 15 822 20 454 25 418
Number of shares in issue (`000)(2) 100 000 100 000
Earnings per share (cents) 20,5 25,4
Headline earnings per share (cents) 20,5 25,4
Dividend yield at 200 cents per share
sale price (%)(4) 4,1 5,1
Price: earnings ratio at a price of
200 cents per share (times) 9,8 7,9
Notes:
1. Prepared in accordance with ISAE 3400 - The Examination of Prospective
Financial Information and the SAICA Revised Guide on Forecasts.
2. The actual number of ordinary shares in issue at 31 May 2007 was 74.
Subsequent to 31 May 2007, the company sub-divided its 74 ordinary shares of
100 cents each into 7 400 ordinary shares of 1 cent each. The company issued 2
600 ordinary shares of 1 cent each to Auburn resulting in 10 000 ordinary
shares in issue. The company then issued an additional 99 990 000 ordinary
shares in terms of a capitalisation issue resulting in a total of 100 000 000
ordinary shares in issue before the private placing. As the private placing
comprises a sale of shares by existing shareholders to select applicants, there
is no effect on the number of shares in issue after the private placing.
3. As the private placing comprises a sale of shares by existing
shareholders to select applicants, no capital raising proceeds and interest
earned via the private placing have been included in the above forecasts.
4. Based on a 2,5 times dividend cover ratio.
8. THE PRIVATE PLACING
8.1 The salient features of the private placing are as follows:
- Offer price per share (cents) 200
- Number of ordinary shares offered for sale in terms
of the private placing 37 000 000
- Total sale consideration R74 million
- Opening date of the private placing at 09:00 on Wednesday, 8 August 2007
- Closing date of the private placing at 12:00 on Monday, 13 August 2007
8.2 abe generates sufficient cash to facilitate organic growth and to
support working capital requirements. The main purpose of abe`s listing on AltX
is to provide an exit mechanism for those of the abe vendors who are not
directly involved in the operations of abe and for the current management team
to realise a portion of their wealth created over many years.
8.3 The listing will also:
- attract and retain staff in terms of succession planning;
- facilitate a vendor financed BEE transaction;
- raise the company`s profile with its local and international clients,
suppliers and alliance partners; and
- provide a platform for future capital raising to facilitate abe`s
expansion and acquisition prospects.
8.4 No offer will be made to the public in respect of the sale of abe
shares. The private placing is open to select applicants only.
9. COPIES OF THE PROSPECTUS
9.1 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
abe on AltX. It contains the salient features of the prospectus dated 7 August
2007, which should be read in its entirety for a full appreciation thereof.
9.2 Copies of the full prospectus, in English, may be obtained during office
hours at the following addresses:
9.2.1 the registered office of the company: 7 Wilcox Road, Isipingo, KwaZulu-
Natal 4110; and
9.2.2 the office of the designated and corporate adviser of abe, PSG Capital:
Building 8, Woodmead Estate, 1 Woodmead Drive, Woodmead 2198.
Johannesburg
7 August 2007
Designated and corporate adviser
PSG CAPITAL
Legal adviser
Prinsloo, Tindle
& Andropoulos Inc.
Attorneys
Auditors and reporting accountants
BDO Spencer Steward
Chartered Accountants
A relationship at work
Date: 08/08/2007 07:05:11 Produced by the JSE SENS Department.
