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AFT
AFT
AFT - Afrimat - Reviewed consolidated interim financial results for the 6
months ended 31 August 2007
Afrimat Limited
("Afrimat" or "the company")
(Incorporated in the Republic of South Africa)
(Registration Number: 2006/022534/06)
Share Code: AFT
ISIN Code: ZAE000086302
REVIEWED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 31 August 2007
Unaudited pro forma HEPS up 23%
Operating margin of 23,9%
NAV of 318 cents per share
Strong organic growth
CONDENSED CONSOLIDATED INCOME STATEMENT
Reviewed Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2007 2006 Change 2007
R`000 R`000 % R`000
Revenue 281 458 153 567 83 349 032
Operating profit 67 381 36 189 86 69 773
Investment revenue 3 458 631 10 906
Finance costs (4 163) (1 646) (3 623)
Profit before 66 676 35 174 90 77 056
taxation
Taxation (20 231) (11 177) 81 (23 668)
Profit 46 445 23 997 94 53 388
attributable to
shareholders
Attributable to:
Ordinary 46 298 22 837 51 709
shareholders
Minority interest 147 1 160 1 679
46 445 23 997 53 388
Reconciliation of
headline earnings:
Profit 46 298 22 837 51 709
attributable to
ordinary
shareholders
Net profit on (111) (163) (141)
disposal of
property, plant
and equipment
Provision for 1 368 - -
impairment losses
47 555 22 674 110 51 568
Shares in issue:
Three months to 31 124 299 497 70 075 959
May
Three months to 31 133 762 738 70 075 959
August
Eight months to 31 70 075 959
October
Four months to 28 124 299 497
February
Weighted average 129 031 118 70 075 959* 84 88 150 472
number of shares
in issue
Earnings per 35,9 32,6 10 58,7
ordinary share
(cents)
Headline earnings 36,9 32,4 14 58,5
per share "HEPS"
(cents)**
* The number of shares in issue for the comparative period in terms of IFRS 3
"Business Combinations" is the number of ordinary shares issued by the legal
parent Afrimat Limited to the owners of the legal subsidiary Prima Quarries
(Proprietary) Limited.
** UNAUDITED PRO FORMA HEADLINE EARNINGS
Unaudited Unaudited
six months six months
ended ended
31 August 31 August
2007 2006 Change
R`000 R`000 %
Pro forma headline earnings 55 631 45 337 23
Pro forma weighted average number 133 762 738 133 762 738
of shares in issue
Pro forma headline earnings per 41,6 33,9 23
share (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
Reviewed Unaudited Audited
31 August 31 August 28 February
2007 2006 2007
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 309 364 137 496 190 531
Intangible assets 15 553 6 874 7 040
Goodwill 93 850 990 39 181
Other financial assets 3 590 - 3 502
Deferred taxation 787 999 -
Retirement benefit asset 11 594 - 11 594
434 738 146 359 251 848
Current assets
Inventories 52 489 20 369 35 909
Current tax receivable 3 333 276 4 349
Trade and other receivables 111 394 50 001 66 479
Other financial assets 2 466 818 44 334
Cash and cash equivalents 71 447 23 706 41 362
241 129 95 170 192 433
Total assets 675 867 241 529 444 281
Equity and Liabilities
Equity
Share capital 1 340 2 1 245
Share premium 326 116 - 245 425
Business combination adjustment (105 788) - (105 788)
Net issued share capital 221 668 2 140 882
Other reserves 336 - 336
Minority interest 320 5 415 25
Retained income 203 161 128 076 156 863
425 485 133 493 298 106
Liabilities
Non-current liabilities
Other financial liabilities 2 051 100 68
Finance lease obligations 33 610 15 931 17 483
Deferred tax 50 636 25 255 38 244
Provisions 7 639 3 654 5 950
93 936 44 940 61 745
Current liabilities
Loans from shareholders - 1 054 -
Other financial liabilities 3 051 112 63
Current tax payable 23 121 10 241 12 847
Finance lease obligations 40 549 16 602 20 743
Trade and other payables 85 580 32 587 47 185
Provisions 3 942 2 500 2 635
Bank overdraft 203 - 957
156 446 63 096 84 430
Total liabilities 250 382 108 036 146 175
Total equity and liabilities 675 867 241 529 444 281
Net asset value per share 3,18 1,90 2,40
CONDENSED CONSOLIDATED CHANGES IN EQUITY
Reviewed Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
R`000 R`000 R`000
Balance at the beginning of 298 106 114 676 114 676
period
Issue of shares 95 1 243
Premium on shares issued 80 690 245 426
IFRS 3 business combination (105 788)
adjustment
Other items 149 (10 839)
Profit for the year 46 445 23 997 53 388
Pre-listing dividend declared (5 180)
Total changes 127 379 18 817 183 430
Balance at the end of period 425 485 133 493 298 106
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from operations 89 220 32 403 75 858
Interest income 3 446 631 10 889
Dividends received 12 17
Finance costs (4 163) (86) (3 623)
Tax paid (11 137) (1 399) (17 396)
Net cash from operating 77 378 31 549 65 745
activities
Cash flows from investing (94 008) (13 945) (70 763)
activities
Net cash from financing 47 469 (8 247) 31 074
activities
Total cash movement for the 30 839 9 357 26 056
period
Cash at the beginning of year 40 405 14 349 14 349
Total cash at the end of 71 244 23 706 40 405
period
CONSOLIDATED SEGMENTAL REPORT
Reviewed Unaudited Audited
six months six months year
ended ended ended
31 August 31 August 28 February
2007 2006 2007
R`000 R`000 R`000
Revenue
External sales
Aggregates 160 777 94 389 198 700
Ready mix concrete 77 402 54 216 118 796
Precast cement products 43 279 4 962 31 536
Total 281 458 153 567 349 032
Intersegment sales
Aggregates 9 939 9 448 25 099
Ready mix concrete 223 - 257
Precast cement products 48 1 12
Total 10 210 9 449 25 368
Total revenue
Aggregates 170 716 103 837 223 799
Ready mix concrete 77 625 54 216 119 053
Precast cement products 43 327 4 963 31 548
Total 291 668 163 016 374 400
Operating profit before tax
Aggregates 54 454 30 647 49 529
Ready mix concrete 7 282 5 296 13 211
Precast cement products 6 571 246 3 612
Other (926) - 3 421
Total 67 381 36 189 69 773
Other information
Assets
Aggregates 454 645 195 659 226 686
Ready mix concrete 56 165 39 651 40 706
Precast cement products 70 589 6 219 31 857
Other 94 468 - 145 032
Consolidated total assets 675 867 241 529 444 281
Liabilities
Aggregates 204 529 84 652 51 566
Ready mix concrete 29 788 21 312 21 916
Precast cement products 39 400 2 072 11 701
Other (23 335) - 60 992
Consolidated total liabilities 250 382 108 036 146 175
Notes
1. Proposed interim dividend 9 363 - -
2. Capital commitments 10 054 32 519
3. Cost of sales, operating 214 077 117 378 279 259
expenses and other income
4. Business combinations included during the period are the Malans/Denver
group, from 1 June 2007, and Scottburgh/Maritzburg group, from 1 July 2007.
Amounts included are as follows:
Malans Denver Scottburgh/
group Quarries Maritzburg
Carrying amount of net assets
- Property 6 857 - 5 037
- Plant and equipment 41 379 31 206 1 900
- Mining rights - 1 368 -
- Other 1 226 (17 606) (457)
49 462 14 968 6 480
Fair value of assets
- Property 20 676 - 5 037
- Plant and equipment 41 379 31 206 1 900
- Mining rights - 1 368 8 513
- Other (777) (17 606) (457)
61 278 14 968 14 993
Goodwill 14 825 37 944 1 900
Purchase consideration 76 103 52 912 16,893
Profit after tax included in 6 837 (1 161) -
results
Pro forma profit after tax assuming 11 846 1 857 303
business combinations for full six
month period
Purchase consideration for Malans/Denver group was partly paid in shares
(30%). Share price was determined at the agreement date and based on the
volume weighted average price on the JSE on 23 November 2006 less 10%
discount. Intangible assets acquired that cannot be measured reliably are
reflected as goodwill.
COMMENTARY
INTRODUCTION
The directors are pleased to present the reviewed consolidated interim results
for the six months ended 31 August 2007 ("the period"). The group`s operations
performed well across the board. Afrimat further successfully concluded two
strategic acquisitions.
FINANCIAL RESULTS
Headline earnings increased by 110% to R47,6 million and headline earnings per
share by 14% to 36,9 cents. Operating margins have improved to an impressive
23,9%. Unaudited pro forma headline earnings per share increased by 23%
assuming Lancaster group and new acquisitions are included for the full six
month period ended 31 August 2007 (41,6 cents) and for the entire comparative
period ended 31 August 2006 (33,9 cents).
The Malans Quarries and Scottburgh acquisitions have been included for three
and two months, respectively, from the effective dates of conclusion of the
respective acquisitions following delays in obtaining Competition Commission
approval.
The comparative results for the six months ended 31 August 2006 only reflect
the results of the Prima group in terms of the requirements of IFRS 3
"Business Combinations". Lancaster group has been included in the results for
the six months ended 31 August 2007.
The weighted number of shares in issue increased to 129 million during the
period as a result of shares issued as part settlement of the purchase
consideration for the Malans Quarries acquisition and to fund future
expansion.
OPERATIONAL REVIEW
"Aggregates" delivered operating profit in line with expectations. Increased
sales volumes and pricing can be attributed to spiralling demand. "Ready mix
concrete" was impacted by intensifying price competition in the Western Cape
as well as exceptionally harsh winter conditions which stunted growth in
supply of all products in the region.
During the period quarries were commissioned in Kommetjie and Saldanha Bay in
the Western Cape and a non-profitable quarry in Oudtshoorn was closed.
Constrained cement supply in KwaZulu-Natal and the Free State during the first
three months of the period has now been alleviated by the commissioning of new
capacity by Natal Portland Cement.
ACQUISITIONS
Malans/Denver Quarries ("Malans Quarries")
As announced on 7 February 2007, Afrimat acquired the Malans group and Denver
Quarries (Pty) Limited, together comprising a number of quarry operations and
sand mines in the Western Cape peninsula, Jeffrey`s Bay area and in Port
Elizabeth, as well as mobile crushing operations, for R129 million. The
acquisition added strategically located quarries and sand mines to Afrimat`s
portfolio, further boosting the group`s entrenched 44 year presence in the
region.
Scottburgh/Maritzburg ("Scottburgh")
As announced on 16 July 2007, Afrimat acquired certain quarrying operations
and concrete block manufacturing and land holding businesses ("Scottburgh
quarries"). The two quarries, strategically located in Scottburgh and
Pietermaritzburg, and a concrete block and brick factory in KwaZulu-Natal
boosted Afrimat`s total quarry portfolio to 22 and block and brick factories
to eight. The quarry in Pietermaritzburg which was dormant when acquired, has
been brought onstream with production commencing successfully using state-of-
the-art mobile equipment. The acquisition of the Scottburgh quarries was key
to the group`s strategy of strengthening its position in metropolitan areas to
drive growth. The new block plant has augmented the group`s existing
operations in the region and enabled Afrimat to escalate its supply of
concrete blocks and bricks to the lucrative low-cost housing market south of
Durban.
Integration of the Malans Quarries and Scottburgh acquisitions and upgrading
of production capabilities are progressing well in line with strategy. Strong
growth is expected from the acquisitions due to their respective strategic
positioning close to major markets.
BASIS OF PREPARATION
The reviewed consolidated interim financial statements for the six months
ended 31 August 2007 have been prepared in compliance with International
Accounting Standard (IAS 34) "Interim Financial Reporting". The accounting
policies and method of measurement and recognition applied in preparation of
the consolidated interim financial statements are consistent with those
applied in the group`s annual financial statements for the year ended 28
February 2007, which comply with International Financial Reporting Standards
(IFRS).
DIVIDEND
A dividend of 7,0 cents per share has been declared for the period in line
with the group`s dividend policy (2007: Nil) (see `Dividend declaration`
below).
AUDITOR`S REVIEW
The consolidated interim financial statements for the six months ended 31
August 2007 have been reviewed by the company`s auditors, Mazars Moores
Rowland. Their unmodified review opinion is available for inspection at the
company`s registered office. The comparative interim financial information for
the six month period ended 31 August 2006 has not been audited or reviewed.
DIRECTORATE
Hennie van Wyk retired as Financial Director effective 1 October 2007 and will
remain a non-executive director on Afrimat`s board. Effective 1 October 2007
Hendrik Verreynne was appointed as Afrimat`s Financial Director.
PROSPECTS
Government`s and private sector`s commitment to infrastructure, housing and
construction continues to drive significant industry growth, stimulating
ongoing demand for Afrimat`s products.
Earnings in the second half of the year to February 2008 are expected to
reflect the benefits of continually increasing demand and the inclusion for
the full six months of the Malans Quarries and Scottburgh acquisitions.
Notwithstanding that the second half of the year is traditionally adversely
impacted by the month period of "builders` holidays", the directors are
confident that Afrimat will deliver growth in earnings for the full year to 28
February 2008.
On behalf of the board
MW von Wielligh AJ van Heerden
Chairman Chief Executive Officer
30 October 2007
Dividend declaration
Notice is hereby given that an interim dividend, No. 1 of 7,0 cents per share,
in respect of the six months ended 31 August 2007, was declared on Monday, 29
October 2007. Relevant dates are as follows:
Last day to trade cum dividend Friday, 16 November 2007
Commence trading ex dividend Monday, 19 November 2007
Record date Friday, 23 November 2007
Dividend payable Monday, 26 November 2007
Share certificates may not be dematerialised or rematerialised between Monday,
19 November 2007 and Friday, 23 November 2007, both dates inclusive.
By order of the board
Company secretary: Routledge Modise Attorneys
30 October 2007
Directors:
MW von Wielligh* (Chairman), AJ van Heerden (CEO), HP Verreynne (Financial
Director), PG Corbin, L Dotwana*, F du Toit*, M Kaplan*, GN Jiyane*, HJE van
Wyk* *Non-executive director Independent
Registered office:
Tyger Valley Office Park No. 2, Corner Willie van Schoor Avenue and Old Oak
Road Tyger Valley, 7530
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: 30/10/2007 09:30:01 Produced by the JSE SENS Department.
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