| Wed 21 Nov 2007, 9:28 | | OLI - O-line Holdings - Private Placing And Listin |
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JSE
OLI
OLI - O-line Holdings - Private Placing And Listing Of O-Line On The
Alternative Exchange Of The JSE Limited
O-line Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/034685/06)
JSE share code: OLI
ISIN Number: ZAE000110730
("O-line" or "the O-line group" or "the company")
PRIVATE PLACING AND LISTING OF O-LINE ON THE ALTERNATIVE EXCHANGE OF THE JSE
LIMITED
This abridged pre-listing statement is not an invitation to the public to
subscribe for shares in O-line. It is issued in compliance with the Listings
Requirements of the JSE Limited for the purpose of providing information to the
public and investors with regard to O-line.
INTRODUCTION AND HISTORY
BDO QuestCo (Proprietary) Limited ("BDO QuestCo") has been authorised to
announce that, subject to the achievement of the required spread of public
shareholders, the JSE Limited ("JSE") has formally approved the listing of 150
000 000 ordinary shares, with a par value of 0.0001 cent each, in the share
capital of O-line on the Alternative Exchange ("Alt x") of the JSE from the
commencement of trade on Monday, 26 November 2007. The shares will trade under
the abbreviated name "O-line", with share code "OLI" and ISIN ZAE000110730.
An amount of up to R48 139 531 before expenses will be raised by O-line in terms
of the subscription for 48 139 531 new O-line shares at an issue price of 100
cents per O-line share ("the offer"). The R48 139 531 will be used by O-line for
capital expenditure and working capital to finance future growth. Further
details relating to the subscription are set out in paragraph 9 and 10 below.
O-line was incorporated as a public company on 7 November 2006 under the name
Silver Meadow Trading 148 Limited with registration number 2006/034685/06. The
name was changed to O-line Holdings Limited on 17 October 2007. O-line remained
dormant until 28 June 2007 when it purchased 100% of the issued share capital of
Hardware Industries (Proprietary) Limited ("Hardware Industries") and its wholly
owned subsidiaries, O-line Support Systems (Proprietary) Limited ("O-line
Support Systems"), O-line Coatings (Proprietary) Limited ("O-line Coatings"), O-
line Support Systems (Pretoria) (Proprietary) Limited ("O-line Support Systems
Pretoria") and Cape Support Systems (Proprietary) Limited ("Cape Support
Systems") in preparation for its listing on the JSE. O-line and Hardware
Industries are both holding companies. The operations of the Group occur in O-
line Support Systems and O-line Coatings.
O-line Support Systems was established in 1982 as a small supplier of standard
wiring channels, cable ladders and trays, mechanical supports, concrete anchor
channels, cable clamps, hangers and a limited range of power skirting with
service outlets and accessories throughout Southern Africa and these
internationally tried and tested products still make up the backbone of the
business. The company has developed into a leading supplier of cable management
and structural support systems in Southern Africa and other parts of the globe,
namely in Algeria, Democratic Republic of Congo, Ghana, Kenya, Nigeria,
Singapore, Hong Kong, Mauritius, Madagascar, Seychelle, Russia (Kazakstan) and
Turkey. When the British GKN Group of companies stopped operation of their
Engineering Services Division at the end of 1984, O-line took the opportunity to
acquire the rights of GKN Sankey`s local patents, thereby adding a number of new
products to its range. During the past three years, O-line Support Systems has
achieved an annual compounded revenue growth rate of 24% and has come to employ
in excess of 300 people. This growth is the result of the current management
team`s inspiration for innovation and constant striving to produce products that
give customers added value.
Rapid but controlled growth necessitated the move from O-line Support Systems
old premises near Johannesburg`s old produce market in Newtown to the O-line
group`s current premises at 14/16 Prop Street, Selby Extension, 11 Johannesburg,
which houses O-line`s administrative headquarters and warehouse. Today, a
sophisticated distribution network, consisting of O-line`s subsidiaries, namely,
O-line Support Systems Pretoria and Cape Support Systems, branch offices and
stockists in all main centres, ensures that O-line brand products are a
household name throughout Southern Africa and in parts of the international
arena. The company focuses on supplying both the commercial and the industrial
markets in these regions.
OVERVIEW OF O-LINE
The O-line group designs, manufactures and supplies quality products that meet
the needs, wants and requirements of the cable management and structural support
systems industry both locally and abroad for the construction, mining and
petroleum industries.
O-line Support Systems has developed into a leading supplier of cable management
and structural support systems in Southern Africa and other parts of the Global
arena. O-line`s (Support Systems) internationally tried and tested products
still make up the backbone of the business.
The key to the company`s success is a passion for innovation, a culture of
accountability and a consistent channel of open communication. O-line prides
itself in the fact that its range features innovative use of the latest
technologies thereby positioning its products as a best choice.
INDUSTRY OVERVIEW
General
The construction boom, led by the economic upturn assisted by South African
infrastructure demands, is gathering momentum and, therefore, the outlook for
the construction industry should remain positive approaching 2010 and for some
years thereafter. As a result of the recent sustained period of economic growth,
fiscal and monetary stability in South Africa and the country`s improved
international profile, together with the concomitant downstream benefits in
respect of spending the country`s ageing infrastructure cannot cope. Adding to
this are the increasing demands of the private sector, specifically heavy
industry. Public sector investment in areas of mining and petrochemicals
together with projects such as the 2010 FIFA World Cup soccer stadiums, span all
major infrastructure sectors, with road, rail, harbours and electricity being
the most predominant. The South African construction market is estimated at R100
billion. In the event that investment targets are achieved, this sector could
double in size over the next decade. This is a significant challenge and the
construction industry has committed itself to provide assistance in alleviating
capacity and skills constraints in every way possible. The national treasury has
forecast that GFCF will climb from its current 18.6% (the highest it has been in
two decades) to 19% in 2008. Government`s long-term target is to have GFCF as
high as 25% of gross domestic product - the benchmark level of first world
countries. In support of its targeted 6% growth as anticipated in the
Accelerated and Shared Growth Initiative for South Africa, Government has
committed itself to increase spending over the next three years.
Over the medium term, which runs until the 2009/2010 fiscal year, infrastructure
expenditure (including maintenance programmes) will total R415.8 billion. This
is R6.1 billion higher than the estimate given in October 2006 and comes from
additional spending being allocated to public transport (largely to support the
hosting of the 2010 FIFA World Cup), water infrastructure and sanitation. A
significant portion of the money to be spent in this period will go to five
services: water (R27.2 billion), municipal and Eskom electricity projects (R71.3
billion), housing (R29.6 billion), roads (R62.1 billion) and ports (R16.5
billion). In addition to South Africa`s astounding growth possibilities there is
the addition of heavy industry expansions taking place throughout Africa, which
is dependant on the utilisation of South African resources and capabilities in
turn increasing the construction industry demands even further. Using the South
African market as a stable base, the O-line group wants to expand its export
business into Southern Africa. Strategic expansion into key markets will be
facilitated by the opening of O-line divisions in Angola, Mozambique and Namibia
and possibly the Democratic Republic of Congo in the future. O-line`s primary
supply into Angola and Mozambique has been industrial and heavy industry related
followed by Namibia consisting of both commercial and industrial activities.
Within the Industrial sector O-line`s highest growth potentials will be achieved
in the Mining, Petrochemical and Power sectors.
O-line reflected substantial growth during the year ended 2007 and is
forecasting this growth to continue during 2008. The company is the leading
supplier to these Industrial sectors and has a solid track of success, although
O-line last supplied products to the South African Power sector in the late
1990`s due to little requirement for maintenance upgrades. O-line has refreshed
its knowledge within this sector and plans on playing an important role in the
refurbishment and establishment of new power stations brought about by
infrastructure demands. The key strength of the Mining, Petrochemical and Power
division is the company`s ability to meet stringent requirements from both local
and international project houses. O-line has strong research and development
capabilities which have resulted in the development of several corrosion
solutions accompanied by improved loading on Ladder Systems for a variety of
customers.
PROJECTS UNDERTAKEN
Petrochemical
The Petrochemical industry has been a high priority of O-line since its
conception and O-line has become an important ingredient in the management of
both Electrical and Instrumentation routing for all projects and day to day
requirements. O-line boasts a well established blue chip clientele with the
largest being Sasol Technology (Proprietary) Limited . O-line believes its
biggest challenge is yet to come in the role the company hopes to play in the
proposed Sasol 4 or known to many as the Mafuta Project. Key clients include
Sasol Technology (Proprietary) Limited, Caltex (Proprietary) Limited and Energem
Nigeria Limited.
The mining industry
Platinum
A significant percentage of O-line`s project revenue has come from the supply of
carrying systems to the Platinum Mining Industry. Platinum has lead the mining
industry with the largest expenditure and O-line expects this growth to
continue. O-line boasts blue chip clients such as Anglo Platinum and Impala
Platinum. The most recent project was the Potgietersrus Platinum 600KTPM project
where O-line assisted with a complex installation. Key customers include Anglo
Platinum Limited, Anglo Platinum Limited and Impala Platinum Mining Limited.
Copper
O-line started it success story in the Copper sector with the Palaborwa Mining
Company for whom the company installed ladder rack which has been standing for
in excess of 25 years. The company also participated in three projects in the
infamous Zambian Copper Belt. The Dual Duplex Process was first introduced a
year ago for the Mopani Copper Mines Project. O-line expects strong growth
within this sector due to high international demand specifically from countries
outside South Africa. O-line awaits the newly proposed DCP Copper Cobalt Project
to be awarded through Bateman Minerals and Metals (Proprietary) Limited which
will allow for expansion into the Democratic Republic of Congo. Key clients
include Konkola Copper Mining (Proprietary) Limited, Mopani Copper Mine
(Proprietary) Limited and Lumwana Copper Mine (Proprietary) Limited.
Other Mineral Sectors
Economic factors have brought about increased demand for various other minerals
such as Iron Ore, Chrome, Illumanite, Zinc, Coal, Diamonds and Gold resulting in
numerous new projects within these sectors. O-line has participated in the
manufacture and supply of management systems and structural supports to various
high profile projects in all these sectors. Growth in these areas is expected to
double bringing with it increased demand for O-line`s products. The company will
endeavour to capitalise on these opportunities in the expansion of the
organization and brand. Key clients include Kumba Resources (Proprietary)
Limited, De Beers Diamond Mining (Proprietary) Limited, Exxaro (Proprietary)
Limited, Rio Tinto (Proprietary) Limited and Xstrata SA (Proprietary) Limited.
Utilities Industry
A lack of infrastructure spending has thrown the Southern African Power Supply
Industry into turmoil. The demand for electricity has reached an all time high
resulting in expansion and proposed projects for existing and new solutions to
the problem. Although this sector has had little movement over the past years
government largest infrastructure expenditure within this sector will lie in
power generation in the next few years. O-line has played a significant role in
the supply of carrying systems during the construction of existing power
stations. The company is currently refreshing its knowledge in order to have the
ability to assist in the supply of Cable Management in the refurbishment of
existing and proposed new power stations. Key clients in this sector include
Eskom (Proprietary) Limited and Pebble Bed Modular Reactor (Proprietary) Limited
SA.
Commercial and general construction
The general construction industry within the Electrical and Instrumentation
division plays an important role for O-line, outside of heavy industry. This
involves the everyday requirements of shopping centres, office blocks as well as
larger projects such as casinos and stadiums, harbours etc. O-line has
participated in this area via supply to various prestigious contracts through
both electrical contractors and consultants. The company has submitted various
bids for the supply of carrying systems to the new soccer stadiums on the
Electrical and Instrumentation portions as well as the Gautrain and more
recently Transnet Limited SA for whom tests of various corrosion coatings are
being conducted.
MAJOR AND CONTROLLING SHAREHOLDERS AND SHAREHOLDER SPREAD
The current major shareholders of O-line are as follows:
Name Number of Percentage
shares Number of shareholding
beneficially shares of O-line
held - beneficially
Direct held -
Indirect
R.I. Jay 30 000 000 15 000 000 45%
E.A. Jay 10 000 000 5 000 000 15%
G.S. 20 000 000 - 20%
Smart
E.A.C. 1 000 000 19 000 000 20%
Verseput
R.I. Jay, E.A. Jay, G.S. Smart, E.A.C. Verseput are, directly or indirectly,
beneficially interested in 5% or more of the issued ordinary share capital of O-
line at the last practicable date.
R.I. Jay, E.A. Jay, G.S. Smart, E.A.C. Verseput will be directly or indirectly
beneficially interested in 5% or more of the issued share capital of O-line
following the private placement. The company will have a public shareholding of
at least 100 shareholders who will hold a minimum of 10% of the issued ordinary
shares on the day of listing.
R.I Jay is currently a controlling shareholder of O-line. R.I Jay will no longer
be a controlling shareholder of O-line following the private placement.
DIRECTORS
The full names, ages, business address and occupations of the directors of O-
line are set out below:
Full name Age Occupation Business address
Graeme Shaw Smart 38 Managing 14/16 Prop Street
Director Selby Ext 11
Johannesburg
2001
Edzard Adolf Carl 50 Manufacturing 14/16 Prop Street
Verseput Director Selby Ext 11
Johannesburg
2001
Gary Alfred Driver 55 Financial 14/16 Prop Street
Director Selby Ext 11
Johannesburg
2001
Edwin Andrew Jay 48 Independent 7 Edridge Road
Chairman Forest Town
Richard Ian Jay 46 Non-executive 4 Edridge Road
director Forest Town
All of the directors are South African citizens.
The directors of O-line:
- have considered all statements of fact and opinion in the pre-listing
statement;
- 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 this abridged pre-listing statement false or misleading and
that all reasonable enquiries to ascertain such facts have been made and that
this abridged pre-listing statement contains all information required in terms
of the JSE Listings Requirements.
SHARE CAPITAL AND DIVIDENDS
Authorised and issued share capital
O-line`s authorised and issued share capital and share premium, taking into
account the private placement at an issue price of 100 cents per share and the
listing costs, which are to be offset against the share premium, are set out
below:
Share capital R
Authorised:
Ordinary share capital
1 000 000 000 ordinary shares of 0.0001 1 000
cent each
Total authorised share capital 1 000
Issued:
150 000 000 ordinary shares of 0.0001 cent 150
each
Share premium 149 999 950
150 000 100
Less share issue expenses 2 860 469
Total issued share capital and premium 147 139 631
All the authorised and issued shares are of the same class and rank pari passu
in every respect. Subject to the minimum capital amount of R48 139 531 being
raised and the shareholder spread requirements of the JSE Listings Requirements
being achieved, the entire share capital of O-line will be listed on the JSE on
Monday, 26 November 2007. The shares will be issued in dematerialised form.
Dividends
O-line intends to adopt a competitive dividend policy, which should reflect the
growth, long-term earnings and cash flow of O-line, while maintaining an
appropriate dividend cover. The Board intends to adopt a target dividend cover
of approximately 4 times. There is, however, no assurance that a dividend will
be paid out and any dividend proposed by the Board in respect of any financial
period will be dependent upon the operating results, financial position,
investment strategy, capital requirements and other factors. It is currently
anticipated that most of the cash available and cash generated by the business
will be invested in the continued growth of its activities.
EXTRACTS OF FINANCIAL INFORMATION
The pro forma consolidated historical income statement of the Group for the year
ended 30 June 2007 and the consolidated profit forecasts of the Group for the
years ending 30 June 2008 and 2009, the preparation of which is the
responsibility of the directors, are set out below. The financial information
should be read with the assumptions and the reporting accountants reports as set
out in the detailed O-line pre-listing statement.
Year ended 30 Year ending 30 Year ending 30
June 2007 June 2008 June 2009
R R R
Pro forma Forecast Forecast
Revenue growth 21.3% 35.7%
year on year
Sales 146 355 930 178 200 000 241 900 000
Cost of sales (94 772 239) (117 433 000) (163 746 000)
Gross profit 51 583 691 60 767 000 78 154 000
Other income 30 013 858 1 842 000 1 900 000
Operating (33 175 291) (37 215 000) (45 047 000)
expenses
EBIT 48 422 258 25 394 000 35 007 000
Finance costs (876 523) (840 000) (1 008 000)
Profit before 47 545 735 24 555 000 33 999 000
taxation
Taxation (5 269 706) (7 121 000) (9 860 000)
Profit after 42 276 029 17 434 000 24 139 000
taxation
Illustrative 150 000 000 150 000 000 150 000 000
shares in issue
on listing
Basic and 28.18 11.62 16.09
diluted
earnings per
share (cents)
Headline and 8.29 11.62 16.09
diluted
headline
earnings per
share (cents)
Reconciliation
of earnings and
headline
earnings
Profit after 42 276 029 17 434 000 24 139 000
taxation
Less: Negative
goodwill
arising on the (29 590 187) - -
acquisition of
Hardware
Industries
Less: Profit on
sale of fixed (256 178) - -
assets
Headline 12 429 664 17 434 000 24 139 000
earnings
*Once off negative goodwill amounting to R29.59 million is included in other
income in the financial year ended 30 June 2007. The goodwill was created and
recognised on the restructuring of the group for listings purposes. The holding
company purchased the underlying entities at less than the fair market value of
the assets owned by the subsidiaries.
THE PRIVATE PLACEMENT
An amount of R48 139 531, based on an offer price of 100 cents per O-line
ordinary share, before share issue and listing expenses, will be raised by the
company by the issue of 48 139 531 ordinary shares for cash to selected private
individuals, corporations and institutions.
The purpose of the placement and the listing are to:
- enhance investor and general public awareness of the O-line group, its
activities and specialised skills;
- raise additional working capital for the improvement of manufacturing and
associated processes;
- raise capital to grow its existing business;
- provide the Group with capital to expand the On-line brand into Africa
alongside existing partners in Angola, Namibia and Mozambique and possibly the -
- Democratic Republic of Congo in the future;
- have the flexibility of listed shares in order to allow the company to take
advantage of potential acquisition opportunities;
- broaden O-line`s shareholder base and to obtain the spread of shareholders
required for the listing of O-line`s ordinary shares on the Altx; and
- afford members of the investing public, clients and business associates of
- O-line the opportunity to participate directly in the income stream
derived by O-line, as well as in the future capital growth of its assets.
RESULTS OF THE PRIVATE PLACEMENT AND LISTING DATE
Applications in excess of R450 000 000 were received during the private
placement process. The 48 139 531 O-line shares have been placed with strategic
institutional shareholders and private client portfolios.
150 000 000 O-line shares will be listed on the Altx at 9:00 on Monday, 26
November 2007.
COPIES OF THE PRE-LISTING STATEMENT
This abridged pre-listing statement is a summary of the full pre-listing
statement and has been prepared and issued in relation to the private placing
and the listing of O-line on the Alt x. It contains the salient features of the
pre-listing statement dated 16 November 2007, which should be read in its
entirety for a full appreciation thereof.
Copies of the full pre-listing statement, in English, may be obtained during
office hours at the following addresses:
the registered office of the company: 14/16 Prop Street, Selby Ext 11,
Johannesburg;
the office of the designated and corporate advisor to O-line, BDO QuestCo: 13
Wellington Road, Parktown; and
the office of the transfer secretary, Computershare Investor Services 2004
(Proprietary) Limited: Ground Floor, 70 Marshall Street, Johannesburg.
Johannesburg
21 November 2007
Designated advisor to Attorneys
O-line
BDO QuestCo Edwin Jay
Attorneys
Date: 21/11/2007 09:28:23 Produced by the JSE SENS Department.
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