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MML
MML
MML - Metmar Limited - Audited Financial Results For The Year Ended 29 February
2008
Metmar Limited
Incorporated in the Republic of South Africa
Registration Number 1998/007269/06
Share Code: MML
ISIN Code: ZAE000078747
"Metmar" or "the Company"
Audited Financial Results for the year ended 29 February 2008
Revenue up 26,5%
Headline earnings per share up 47,0%
Capital distribution increased by up 33,3%
CONDENSED GROUP INCOME STATEMENTS
29 February 2008 28 February
2007
Audited Audited
(R`000) (R`000)
Revenue 2 067 730 1 634 164
Cost of sales (1 967 572) (1 511 579)
Gross profit 100 158 122 585
Other operating income 6 636 11 514
Operating expenses (47 780) (56 436)
Operating profit 59 014 77 663
Income from equity accounted 24 734 -
investment
Finance income 23 974 3 428
Finance costs (22 950) (14 925)
Profit before taxation 84 772 66 166
Taxation (16 441) (16 747)
Net profit for the year 68 331 49 419
Attributable to:
Equity holders of group 67 407 49 062
Minority interest 924 357
68 331 49 419
CONDENSED GROUP BALANCE SHEETS
29 February 2008 28 February 2007
Audited Audited
(R`000) (R`000)
ASSETS
Non-current assets
Property, plant and equipment 11 663 17 678
Goodwill 6 192 7 269
Investment in associate 70 066 -
Non-current financial assets 21 401 2 048
109 322 26 995
Current assets
Current financial assets 5 083 1 488
Inventory 101 481 96 406
Land and buildings held-for-sale 1 009 -
Trade and other receivables 226 978 186 986
Cash and cash equivalents 107 074 32 880
441 625 317 760
Total assets 550 947 344 755
EQUITY AND LIABILITIES
Total equity 195 882 98 647
Non-current liabilities
Financial liabilities 825 2 736
825 2 736
Current liabilities
Trade and other payables 229 704 132 462
Trade finance 114 374 100 056
Financial liabilities 1 907 22
Taxation payable 3 417 7 778
Derivative financial instruments 4 838 246
Bank overdrafts - 2 808
354 240 243 372
Total equity and liabilities 550 947 344 755
Net asset value per share 103,42 56,25
(cents)
Net tangible asset value per 100,15 52,11
share (cents)
Number of shares in issue 189 407 002 175 362 058
CONDENSED GROUP CASH FLOW STATEMENTS
29 February 2008 28 February 2007
Audited Audited
(R`000) (R`000)
Cash flows from operating
activities
Cash generated from operations 123 818 54 608
Net finance income/(cost) 1 024 (11 497)
Dividend received 4 200 -
Taxation paid (19 757) (16 975)
Net cash from operating 109 285 26 136
activities
Net cash used in investing (60 327) (10 071)
activities
Net cash received (used) in 28 044 (25 078)
financing activities
Total cash movement for the year 77 002 (9 013)
Cash at the beginning of the 30 072 39 085
year
Cash and cash equivalents at the 107 074 30 072
end of the year
CONDENSED GROUP STATEMENTS OF CHANGES IN EQUITY
Share Foreign
capital and currency Retained Minority Total
premium reserve earnings interest equity
(R`000) (R`000) (R`000) (R`000) (R`000)
Balance at 1 721 - 71 606 22 72 349
March 2006
Share issue - - (5 889) - (5 889)
expenses
Net profit for - - 49 062 357 49 419
the year
Distribution to - - (17 535) - (17 535)
shareholders
Goodwill - - 731 - 731
arising on
business
combinations
Revaluation - 44 - - 44
reserve
Currency - (472) - - (472)
translation
differences
Balance at 28 721 (428) 97 975 379 98 647
February 2007
Net profit for - - 67 407 924 68 331
the year
Distribution to (25 024) - - - (25 024)
shareholders
Disposal of - 183 - - 183
subsidiary
New share issue 53 500 - - - 53 500
Currency - 245 - - 245
translation
differences
Balance at 29 29 197 - 165 382 1 303 195 882
February 2008
COMMENTARY
PROFILE AND STRUCTURE
Metmar Trading (Pty) Limited, which comprises the major business of Metmar,
focuses on commodity trading and financial and logistics facilitation. Metmar is
63% owned by its four executive directors who have combined experience of 140
years in the international trading, logistical and trade finance environment.
Their industry experience is enhanced by the highly knowledgeable contingent of
non-executive directors.
Metmar is focused on developing assets and revenues related to the trading and
production of metals, plastics and chemicals.
The Group has an extensive client base supported worldwide through a network of
agents and associates situated in more than 30 countries across the globe. The
Group`s long standing relationships with leading local financial institutions
and its extensive experience in identifying and the managing of associated risks
strengthen the Group`s value proposition to its customers and suppliers.
Metmar was listed on the Industrial Materials sector of the JSE Limited in 2006
to gain access to capital to leverage its strategic objectives of organic growth
from the core business and ensuring long-term growth prospects through minority
equity investments.
With increased access to funding in the equity market, Metmar has made excellent
progress to ensure its long-term economic sustainability by taking up minority
interest in commodity producers.
The Group`s financial results for the year ended 29 February 2008 include those
of the Company, together with all its subsidiaries and associate from their
respective dates of acquisition.
LESLIE BOYD
After a short illness regretfully our founding chairman Leslie Boyd passed away
towards the end of March 2008. His extensive business experience, particularly
in commodities, wisdom and humour will be sorely missed by his board colleagues.
Leslie made a substantial contribution during the startup phase of Metmar. We
extend our deepest sympathies to his family on their sad loss.
FINANCIAL PERFORMANCE
It is pleasing to report an improvement in Metmar`s financial results.
Revenue increased by 26,5% from R1 634,0 million to R2 068,0 million. Operating
profit has decreased by R22,0 million due to:
a decline in gross profit margins of R9,2 million, which is due primarily to
the establishment of alternative longer-term more sustainable sources of supply;
loss on foreign exchange of R3,5 million, compared to a gain of R5,0 million in
2007;
offset by the cancellation of preference shares of R4,3 million (2007).
During the year Metmar acquired 21,0% of PGR 17 Investments (Pty) Limited
("PGR"), giving an indirect 11,8% of Mogale Alloys (Pty) Limited ("Mogale").
Mogale produces chrome nickel alloys, charge chrome and silico manganese. As
these products have been in short supply and prices have touched record levels,
Mogale has produced excellent results. This is reflected in the equity accounted
income from associate PGR of R24,7 million.
Headline earnings per ordinary share increased by 47,0% from 25,3 cents to 37,2
cents, while cash flow from operating activities was R109,2 million compared to
R26,1 million in 2007.
Cash and cash equivalents also increased significantly by 69,3% from R32,8
million to R107,1 million.
OPERATIONAL PERFORMANCE
Core trading activities have exceeded expectations and predominantly due to
higher commodity prices we have achieved record turnover in excess of R2,0
billion. Our trade finance providers, have, through their understanding of our
business, delivered against our additional trade finance requirements and
continue to be supportive partners in the growth of our business.
Washing and extruder facilities have been upgraded at the plastics re-cycling
operation, Owen Plastics, which has resulted in significant improvement in their
results.
The Zimbabwean coke screening project (Gubha Resources) is performing well
irrespective of major Zimbabwean challenges impacting on the operation.
Major markets for saleable product are the Democratic Republic of the Congo and
South Africa. Ever increasing coke prices continue to have a positive impact on
this project.
The demetalisation of char is more successful after major changes to the
process. The main market for saleable product has changed from brick makers to
cement producers. Other changes in the demetalisation process will increase
monthly capacity which should increase earnings.
Metmar disposed of subsidiary Group Matrix and Hornet, which included a
secondary lead production facility and a lead anode production for R6,5 million
to Thutuka Group Limited, a black empowerment company.
STRATEGIC EQUITY STAKES TO SECURE PRODUCT
ArcelorMittal acquired a 50% stake in the Kalagadi Manganese project that valued
the Kalahari Resources and IDC share of the project at R4,2 billion. Based on
feasibility studies, a 320 000 ton per year high carbon ferromanganese smelter
complex subject to electricity supply will be built in the industrial
development zone of the Coega deep-water harbour. Metmar owns directly 10% and
indirectly 4% of Kalahari Resources.
In March 2007 Metmar acquired 9,8% interest in PGR financed by issuing 10
million Metmar shares. Subsequently Metmar acquired a further 5,2% interest in
PGR, which was paid for in cash. These investments give Metmar an effective
11,8% shareholding in Mogale.
Following the investment of 7% in mining and exploration company, Kivu Resources
Limited, Metmar has signed an exclusive marketing agreement for the current and
future production of tin, tantalum, tungsten and niobium from the operations of
their subsidiary companies in the Democratic Republic of the Congo.
POST BALANCE SHEET EVENT
Subsequent to year end Metmar acquired the businesses of West African
International (Pty) Limited and West African Ventures (Pty) Limited, the main
products being plastics, rubber and rubber chemicals. The acquired plastics
business will introduce a strong local market presence as well as a bigger range
of products for the existing plastics export business. The rubber and rubber
chemicals business will complement Metmar`s existing chemical import and
distribution efforts.
The interest free purchase consideration of R80,0 million is payable in tranches
at the end of June 2008, 2009, 2010 and 2011 subject to the Sellers` profit
warranty that the profit after taxation of the acquired businesses for each of
the financial years ending February 2009 (a ten month period), 2010 and 2011
will not be less than R16,0 million. The proposed acquisition is subject to,
inter alia, the fulfilment of conditions precedent: namely, obtaining the
approval of the Competition Authorities; and the necessary consents and
approvals from the South African Reserve Bank.
BLACK ECONOMIC EMPOWERMENT
Through major shareholders making available part of their personal shareholdings
in Metmar, the Company successfully concluded a black empowerment transaction
during November 2007 with two of its long standing business partners,
representing a total of 10% of Metmar Limited equity.
Progress has been made in addressing the other related aspects of the
Empowerment Code.
PROSPECTS
Mogale are in the process of constructing a new DC plasma arc furnace. Another
strong year of earnings from our associate is expected to February 2009.
The economies of the USA and other developed countries are weak and could even
worsen, however the global demand for commodities remains strong. This is
reflected by the high prices of most commodities. We anticipate this level of
demand will continue in the year ahead, driven mainly by China but supported by
other fast developing economies. We also do not believe the current
supply/demand position will change significantly in 2009 as generally no new
large producers are due to enter the markets. However, while currencies remain
extremely volatile in the still unsettled financial markets, so will prices of
commodities.
Under the above economic scenario, and with a current forward order book at
levels higher than in the previous year, the volume of commodities likely to be
traded by Metmar should increase with a corresponding growth in profits.
CAPITAL REDUCTION
The directors are pleased to advise that the Company will be making a
distribution out of the share premium account of 18,0 cents per ordinary share
("the distribution") compared to a distribution of 13,5 cents per ordinary share
in July 2007.
Further details are set out below.
The distribution is being implemented in terms of the general authority to make
payments to shareholders granted to directors at the annual general meeting held
on 23 August 2007.
The important dates relating to the distribution are set out below:
Last day to trade in order to participate in Friday, 20 June 2008
the distribution
Metmar shares commence trading "ex" the Monday, 23 June 2008
distribution
Record date for the distribution Friday, 27 June 2008
Payment date for the distribution Monday, 30 June 2008
Metmar share certificates may not be dematerialised or rematerialised between
Monday, 23 June 2008 and Friday, 27 June 2008, both dates inclusive.
NOTES TO THE AUDITED FINANCIAL RESULTS
1. Basis of preparation
The audited consolidated financial results have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), the South African
Companies Act, as amended and the JSE Listings Requirements. The principal
accounting policies used in the preparation of the financial results for the
year ended 29 February 2008 are consistent with those applied for the year ended
28 February 2007. The audited financial results of Metmar represent the
continuation of the financial statements of the legal subsidiary, Metmar
Trading, per Appendix B of IFRS 3 - Business Combinations.
2. Reconciliation between earnings and headline earnings
Metmar Limited Metmar Limited
29 February 2008 28 February 2007
Audited Audited
(R`000) (R`000)
Profit for the period 67 407 49 062
Adjustments for:
- Profit on disposal of (17) (8)
property, plant and equipment
- Gain on disposal of subsidiary (1 517) -
- Fair value adjustments 2 791 (381)
- Redeemable preference shares - (4 387)
cancelled
Headline earnings 68 664 44 286
Earnings per share (cents)
- Headline 37,2 25,3
- Basic 36,5 28,0
Weighted average number of 184 740 703 175 362 058
shares in issue
3. Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash.
4. Related party transactions
During the period, the Company and its subsidiaries, in the ordinary course of
business, entered into various transactions with their associates. These
transactions were subject to terms that were no less favourable than those
arranged with third parties.
5. Corporate governance
The Metmar group complies with the code of Corporate Practice and Conduct
published in the King II Report on Corporate Governance.
6. Annual general meeting
The Company`s annual general meeting of shareholders will be held at Metmar`s
registered office, 24 Sloane Street, Bryanston, on Wednesday, 20 August 2008 at
09h30.
Colin B Brayshaw David J Ellwood
Non-executive Chairman Chief Executive Officer
9 May 2008
Directors
CB Brayshaw* (Chairman), DJ Ellwood (Chief Executive Officer),
PP Boshoff, L Matteucci*, GR Forsdyke, GP Lotis,
D Mashile-Nkosi*, AP Ruiters*, MF de Wet (Alt)
* Non-executive
Company Secretary
MRD Boyns (British)
Registered office
24 Sloane Street, Bryanston, 2191
(PO Box 98549, Sloane Park, 2152)
Transfer Secretaries
Computershare Investor Services (Pty) Limited
(PO Box 61051, Marshalltown, 2107)
Sponsor
QuestCo Sponsor (Proprietary) Limited
Auditors
Grant Thornton
These results may be viewed on the internet on http://www.metmarlimited.com
Date: 09/05/2008 15:55:01 Produced by the JSE SENS Department.
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