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OMN - Omnia Holdings - Interim Results For The Six Months Ended
30 September 2007 and dividend declaration
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967 / 003680/06
JSE code: OMN
ISIN: ZAE000005153
Balanced business continues to deliver
Interim results for the six months ended 30 September 2007
Highlights
- Revenue up 26% to R3,1 billion
- Operating profit up 33% to R192 million
- Headline earnings per share up 24% to 224.5 cents
- Interim dividend of 83 cents per share declared
Condensed Consolidated Income Statements
for the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/07 % 30/09/06 31/03/07
Revenue 3 061 26 2 438 5 537
Operating profit 192 33 144 422
Net finance cost (45) (21) (58)
Interest paid (44) 57 (28) (80)
Interest received 1 3 18
Forex (loss)/gain (2) 4 4
Profit before taxation 147 20 123 364
Taxation (50) 16 (43) (118)
Net profit for the period 97 21 80 246
Attributable to:
- Equity holders of the 97 21 80 246
Company
Basic earnings per share 220.3 21 182.2 560.3
(cents)
Fully diluted basic 218.3 22 179.2 553.2
earnings per share (cents)
Final dividend paid per
share (cents) in
respect of prior year 90.0 6 85.0 85.0
Interim dividend per share
(cents) declared in
respect of the current 83.0 70.0 70.0
year
Weighted average number of
shares in
issue (`000) 44 038 43 648 43 772
Weighted average number of
fully diluted
shares in issue (`000) 44 448 44 385 44 338
Number of shares in issue 44 189 43 725 43 943
(`000)
Condensed Consolidated Balance Sheets
as at 30 September 2007
Unaudited Unaudited Audited
6 months 6 months 12
months
R million 30/09/07 30/09/06 31/03/07
Assets
Property, plant and equipment 819 679 760
Intangible assets 429 445 436
Deferred taxation 3 1 3
Inventories 1 446 929 905
Trade and other receivables 1 373 1 148 969
Other current assets 33 58 50
4 103 3 260 3 123
Equity and liabilities
Shareholders` equity 1 291 1 131 1 250
Deferred taxation 91 91 83
Non-current liabilities 258 15 33
Trade and other payables 1 474 1 334 1 417
Taxation 31 4 49
Other current liabilities 958 685 291
4 103 3 260 3 123
Net interest-bearing debt 1 184 637 265
Net asset value per share (Rand) 29.2 25.9 28.4
Forex loss included in operating (5) (31) (31)
profit
Capital expenditure
Depreciation 28 28 59
Amortisation 10 10 20
Incurred 86 65 188
Authorised and committed 124 47 33
Authorised but not contracted for 77 98 174
Condensed Consolidated Cash Flow Statements for the six months
ended 30 September 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/07 30/09/06 31/03/07
Operating profit 192 144 422
Depreciation and amortisation 38 38 79
Adjustment for non-cash items (31) 69 (3)
Utilised in working capital (889) (399) (60)
(690) (148) 438
Interest paid (44) (28) (80)
Interest received 1 3 18
Taxation paid (61) (58) (100)
Dividends paid (39) (39) (68)
(Utilised)/generated by (833) (270) 208
operations
Cash outflow from investing (86) (65) (175)
activities
Cash inflow/(outflow) from 228 (3) 8
financing activities
Net (decrease)/increase in cash (691) (338) 41
Net overdraft at beginning of (234) (275) (275)
period
Net overdraft at end of period (925) (613) (234)
Reconciliation of headline earnings
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/07 30/09/06 31/03/07
Net profit for the year 97 80 246
Profit on disposal of fixed assets - - (1)
Investment impaired 2 - -
Headline earnings 99 80 245
Other Reserves
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/07 30/09/06 31/03/07
Share-based payment reserves 31 17 19
Foreign currency translation reserve (16) 38 14
Net discount arising on acquisition of
shares of subsidiaries 3 3 3
18 58 36
Statement of Changes in Shareholders` Equity
Ordinary Shareholders` Equity
Stated Treasury Other Retained
R million capital shares reserves earnings
At 31 March 2006 201 (20) (12) 849
(audited)
Recognised income and
expense
Net profit for the 80
period
Increase in foreign
currency
translation reserve 66
Share-based payment 4
Transactions with
shareholders
Ordinary dividends paid (39)
At 30 September 2006 201 (20) 58 890
(unaudited)
Recognised income and
expense
Net profit for the 166
period
Decrease in foreign
currency
translation reserve (24)
Share-based payment 2
Transactions with
shareholders
Treasury shares sold 4
Ordinary dividends paid (29)
At 31 March 2007 201 (16) 36 1,027
(audited)
Recognised income and
expense
Net profit for the 97
period
Decrease in foreign
currency
translation reserve (30)
Share-based payment 12
Transactions with
shareholders
Treasury shares sold 1
Ordinary dividends paid (39)
At 30 September 2007 201 (15) 18 1,085
(unaudited)
Minority
R million interest Total
At 31 March 2006 2 1,020
(audited)
Recognised income and
expense
Net profit for the 80
period
Increase in foreign
currency
translation reserve 66
Share-based payment 4
Transactions with
shareholders
Ordinary dividends paid (39)
At 30 September 2006 2 1,131
(unaudited)
Recognised income and
expense
?Net profit for the 166
period
?Decrease in foreign
currency
translation reserve (24)
?Share-based payment 2
Transactions with
shareholders
?Treasury shares sold 4
?Ordinary dividends paid (29)
At 31 March 2007 2 1,250
(audited)
Recognised income and
expense
?Net profit for the 97
period
?Decrease in foreign
currency
translation reserve (30)
?Share-based payment 12
Transactions with
shareholders
?Treasury shares sold 1
?Ordinary dividends paid (39)
At 30 September 2007 2 1,291
(unaudited)
Segmental Analysis
for the six months ended 30 September 2007
Unaudited Unaudited Audited
6 months 6 months 12 months
R million 30/09/07 % 30/09/06 31/03/07
Revenue, net of 3 061 26 2 438 5 537
intersegmental sales
?Chemicals 1 509 30 1 162 2 624
?Mining 581 24 470 1 001
?Agriculture 971 20 806 1 912
Operating profit 192 33 144 422
?Chemicals 60 (5) 63 127
?Mining 56 (14) 65 138
?Agriculture 76 375 16 157
Notes
Accounting policies
The consolidated condensed financial statements for the six months ended 30
September 2007 were prepared in accordance with International Financial
Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting and in
compliance with the Listing Requirements of the JSE Limited. The consolidated
condensed interim financial statements do not include all of the information
required by IFRS for full annual financial statements.
The principal policies used in the preparation of the results for the six months
ended 30 September 2007 are consistent with those applied in the annual
financial statements for the year ended 31 March 2007.
Headline earnings
Headline earnings are 224.5 cents per share (2006: 181.4 cents per share).
Diluted headline earnings are 222.4 cents per share (2006: 178.4 cents per
share).
Dividends
A final dividend of 90 cents per share was declared on 18 June 2007 in respect
of the earnings of the previous financial year. This dividend is reflected in
the current period to 30 September 2007.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R23.9 million (2006: R17.2 million) within one year and R38.0 million (2006:
R51.4 million) between two and five years and R1.5 million (2006: Rnil) beyond
five years, giving a total of R63.4 million (2006: R68.6 million).
Commentary
Introduction
Omnia is a diversified, specialist chemical services provider with business
interests balanced across chemical, mining and agricultural markets. It is
fundamentally a knowledge business, which leverages its leading intellectual
capital and world-class production assets to differentiate its product and
service offerings. Omnia`s unique business model creates extraordinary value for
its customers, allowing the Group to earn a premium in its markets and build
long-term customer relationships.
All three of Omnia`s business segments achieved revenue growth in excess of 20%,
the largest being in the Chemicals division where revenue grew 30%, albeit at
considerably lower margins than in the past. The Mining division showed revenue
growth of 24% as strong global demand for metals continued to support sales. In
the Agriculture division, notwithstanding the fact that its major activities
customarily occur in the second six-month period which is the main planting
season, revenue growth of 20% was achieved at considerably improved margins when
compared to the prior period. This is a reflection of higher fertilizer prices
combined with positive planting conditions, driven mainly by prevailing higher
maize prices.
Financial review
Group revenue increased by 26% to R3.1 billion (2006: R2.4 billion), as sales
increased across all businesses. Operating profit increased by 33% to
R192 million (2006: R144 million), with the margin increasing to 6.3% from the
5.9% achieved in the prior period as a result of improved performance from the
Agricultural division. As indicated in previous communications, the Group has
embarked on a number of projects that will bear fruit in two or three years
time. The cost of these projects is being allocated to the operating divisions,
impacting negatively on their operating margins in the short term. In addition,
the respective operating divisions now carry a proportionate percentage of the
share-based payments charge arising from the BEE employee ownership scheme,
Sakhile Initiative, described below. These share-based payments for the six
months amount to R12 million (2006: R4 million).
Interest paid increased by 57 % to R44 million (2006: R28 million) due to higher
interest rates being applied to a substantially higher level of debt. Net
finance costs were negatively influenced by a R2 million foreign exchange loss
compared with a R4 million foreign exchange gain in the prior period.
Net profit increased by 21% to R97 million (2006: R80 million) led by a solid
contribution from Agriculture.
The seasonal nature of Omnia`s agriculture operations causes the Group`s working
capital requirements to peak in about September of each year. Raw material
prices - notably ammonia, urea, potash and phosphates - driven by surging
worldwide biofuel demand - continued their upward spiral. Given these continued
raw material price increases a strategic decision was taken to acquire raw
material stock in advance. This has resulted in net interest bearing debt
increasing by 86% off last year`s low base to R1 184 million (2006:
R637 million). Cash utilised by operations for the period under review increased
by R563 million to R833 million (2006: R270 million), mainly resulting from an
increase in working capital of R490 million when compared with the prior period.
The strengthening of the rand saw a R30 million negative movement in the foreign
currency translation reserve for the period (2006: positive R66 million).
Operational review
Chemicals
The Protea Chemicals division is the leading speciality, functional and effect
chemicals distributor in southern Africa. It has a significant presence in every
sector of the chemical distribution market and contributed 31% to Group
operating profit (2006: 44%).
Revenue increased by 30% to R1 509 million (2006: R1 162 million). This increase
reflects both the full impact of the previously reported change in a large
contract, from a pure commission based business to a sale of goods business, and
the increased revenue arising from the lower margin polymer businesses. Because
of the volatility in rand exchange rates, selling margins were lower in some
instances. Added costs such as the division`s allocation of Group project costs
and the increased share-based payment charge, further reduced the operating
margin to 4% (2006: 5%). This saw the operating profit decline to R60 million
(2006: R63 million).
Mining
Omnia`s Mining division is the market leader in blended bulk explosives
formulations for surface mines, and also manufactures packaged explosives for
underground mines and specialised surface blasting applications. In addition,
the division supplies a diverse range of mining chemicals and blasting
accessories. The Mining division contributed 29% to Group operating profit
(2006: 45%).
The Mining division continued to benefit from increased mining activity during
the period, particularly in coal, copper, uranium and iron ore. This resulted in
further growth, particularly in mining chemicals, but at lower margins than in
prior periods. The explosives market has become intensely competitive, with
rapidly rising raw material costs pressurising margins and causing the division
to withdraw from unprofitable contracts. In addition considerable costs for
additional resources have been incurred in respect of new contracts where these
contracts have yet to deliver volume. The division also carried an allocation of
the Group project costs and share-based payments. The stronger rand had a
negative impact on exported product. These factors combined to cause a decline
in operating margin from 14% to 10%.
The Mining division achieved 24% growth in revenue to R581 million (2006:
R470 million) but the operating margin fell to 10%. This was as a result of lost
business in Zimbabwe and the division`s inability to secure a continuous supply
of shocktube initiating systems, as previously reported. These factors meant
that operating profit declined by 14% to R56 million (2006: R65 million). The
division`s own new shocktube assembly plant, which will overcome the supply
difficulties experienced, is on track to be commissioned before the end of the
financial year.
Agriculture
The Agriculture division manufactures and supplies granular, liquid and
speciality fertilizers to individual farmers, co-operatives and wholesalers
across southern Africa. In addition, it supplies speciality fertilizers to
farmers in Australia and New Zealand. Agriculture contributed 40% to Group
operating profit (2006: 11%).
Revenue increased by 20% to R971 million (2006: R806 million). Increased
international demand for maize, driven by the need for alternative sustainable
fuel sources, has seen the maize price remain relatively high at R1 800 per ton,
from R1 300 per ton a year ago. This has led to a shortage of fertilizer raw
materials in international markets and rapid concomitant price increases. It is
also likely to persuade farmers to plant more hectares to maize than in the
past.
Although operating margins in the Agriculture division are traditionally
considerably lower in the first half of the financial year than those in the
second, operating margins increased to 8% in the period (2006: 2%), due largely
to the advance purchase of raw materials at favourable prices. This improvement
has helped shield the Group from the negative impact of declining operating
profits in the Chemical and Mining divisions.
Prospects
Chemicals
Demand for the Group`s chemical products will be influenced by the environment
within South Africa`s manufacturing sector. The recent strengthening of the rand
will have an adverse effect on manufacturing, as exports become uncompetitive
and companies are encouraged to import cheaper manufactured components. Oil
prices approaching record highs will ensure price increases for downstream
petrochemical products and their derivatives. International chemical prices are
increasing in line with an improvement in the global economic environment, and
supply shortages are becoming increasingly evident. Furthermore action has been
taken to improve margins in the short term.
Mining
The continued strong demand for world metals and minerals will benefit both the
explosives and mining chemical markets. However, the Mining division intends to
be circumspect in its growth aspirations given the current competitive nature of
the market that will render some contracts simply uneconomical to service. Omnia
is committed to operating at acceptable margins and will not endeavour to hold
on to uneconomic business. Continued growth is however expected, with margins
returning to more acceptable levels. The Mining division is focused on taking
advantage of the opportunities that arise from its growing presence in Africa
and there remains significant potential for its future growth in the rest of
Africa.
Agriculture
The latest crop estimate forecasts that 2.8 million hectares will be planted to
maize, up from the 2.5 million hectares achieved in the previous season.
Domestic fertilizer volumes for the full year should therefore revert to, if not
exceed, normal volumes, positively impacting this aspect of Group activities.
Excellent rainfall in the recent past has resulted in high underground water,
soil moisture and dam levels. This environment should impact favourably on the
fertilizer business and the Group as a whole in the period going forward.
Omnia Group
The Group expects an improvement in earnings for the year ended March 2008
compared with those achieved in the financial year ended March 2007.
The project for the Clean Development Mechanism that was announced a year ago is
on track, with the Envinox plant in the first phase of installation at the
Sasolburg production site.
Omnia remains focused on diversifying its risk profile and pursuing new growth
opportunities, while maintaining a firm focus on the Group`s core competencies.
Within this context Omnia announced the acquisition of speciality chemical and
water treatment business, Zetachem in August 2007 for a net R133 million,
subject to the approval of the Competition Commission.
Omnia is well positioned to benefit from demand for biofuels which will
positively impact on the need for fertilizer products. The Group`s position in
this market will underpin growth in the Agriculture market in future years.
Mr Ralph Havenstein was appointed as a non-executive director of the Board with
effect from 6 November 2007. Ralph brings with him, high level business
expertise coupled with a strong chemical engineering and mining background. His
experience will contribute significantly to the board.
Black economic empowerment shareholding
The Group`s simplified structure became effective on 1 April 2007. In the
restructuring a new company, Sakhile Initiative Ltd, was formed which will have
as its shareholders Omnia`s South Africa-based employees. To achieve this Omnia
effectively sold 10% of its shares and claims in Omnia Group (Pty) Ltd to
Sakhile for R278 million, entitling this employee-owned company to 10% of the
economic interest and full voting rights in Omnia Group (Pty) Ltd. Sakhile
funded the transaction by:
- borrowing R218 million from a bank to pay for interest bearing loan
accounts in Omnia Group (Pty) Ltd, and
- issuing a Preference Share of R60 million to Omnia Holdings Ltd to pay for
interest free loans in Omnia Group (Pty) Ltd.
Further details of the BEE empowerment shareholding arrangement can be obtained
from the Omnia Holdings Ltd annual report dated 2 August 2007.
Dividends
The board is pleased to announce that an interim dividend of 83 cents per share
has been declared in respect of shareholders recorded in the register on Friday
4 January 2008. The last day to trade cum dividend will be Thursday 27 December
2007. The shares will commence trading ex dividend on Friday 28 December 2007
and the record date will be Friday 4 January 2008. The payment date will be
Monday 7 January 2008. Share certificates may not be dematerialised or
rematerialised between Friday 28 December 2007 and Friday
4 January 2008, both dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
28 November 2007
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz-
Gibbon*, R Havenstein, RB Humphris* (Group Managing Director), Prof SS Loubser,
Dr WT Marais, RR Masebelanga, JG Pretorius, DC Radley, TR Scott *Executive
Registered office
1st Floor, Omnia House,
13 Sloane Street, Epsom Downs,
Bryanston, Sandton
PO Box 69888,
Bryanston 2021
Telephone (011) 709 8888
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
www.omnia.co.za
Date: 28/11/2007 08:00:01 Produced by the JSE SENS Department.
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