|
FWD
FWD
FWD - Freeworld Coatings Limited - Reviewed interim results announcement and
cash dividend declaration for the six months ended 31 March 2008
Freeworld Coatings Limited
(formerly Aletris Investment Holdings No. 1 Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2007/021624/06)
Share code: FWD ISIN: ZAE000109450
("Freeworld" or "the Company")
www.freeworldcoatings.com
The journey has begun
REVIEWED INTERIM RESULTS ANNOUNCEMENT AND CASH DIVIDEND DECLARATION FOR THE SIX
MONTHS ENDED 31 MARCH 2008
- Record trading performance for the first 6 months
- Turnover - R1 322 million
- Operating profit - R220 million
(exceeding R200 million for the first time)
- HEPS - 66,5 cents and dividend of 10 cents per share
- Successful negotiation on acquisition of environmental technologies
- Successful unbundling from Barloworld Ltd and listing on the JSE on 3 December
2007
- Andre Lamprecht, CEO, commented: "Given the tightening economic conditions
this is a strong performance for Freeworld Coatings` maiden first half".
With its origin dating back 118 years, Freeworld Coatings is today a leading
manufacturer and marketer of decorative and performance coatings in Southern
Africa. The Company markets its products internationally and is one of the
world`s 35 largest coatings businesses, with operations that meet the highest
global standards.
Previously Barloworld Coatings and now re-established as Freeworld Coatings
Limited, the Company was listed on the JSE Limited on
3 December 2007. In the five years to 2007, under the current management team,
the Company almost doubled its turnover, comfortably doubled its operating
margin and quadrupled its operating profit.
As our journey as a listed company progresses, we remain a freethinking company
not afraid to think and act differently, never for effect but to find a better
way to do things. We look to the road ahead with great excitement.
COMMENTARY
In October 2007, at the beginning of this financial year, we stated for the pre-
listing statement:
"South Africa is experiencing strong economic growth and a sustained programme
of infrastructure investment, which is expected to continue for the next few
years. However, given the persisting levels of inflation above the SARB
inflation targets and the significant rise in interest rates as well as the
current outlook in that regard, Freeworld Coatings has revised its outlook for
2008 to one of rather modest growth. It will also face, in its context,
significant once off costs associated with the corporatisation, unbundling,
listing and necessary rebranding process."
We consider these maiden interim results to be better than consistent with this
outlook in tightening economic circumstances.
Financial Review
As this is our first year as a separately listed company, no strictly
comparative figures are available. However, if we measure our performance
against the segmental results reported for Coatings Southern Africa in the
Barloworld Ltd interim results for 2007, then Freeworld Coatings` turnover for
the six months, at
R1 322 million, is 14% higher.
Operating profit of R220 million, representing an operating profit margin of
16,7% of sales, is up 17% on the reported result for Coatings Southern Africa in
that period. Freeworld Coatings` operating profit includes a fair value
adjustment on financial instruments of R26,5 million, arising from the
devaluation of the Rand, as the bulk of imported raw materials were covered by
favourable forward exchange contracts, and an amortisation charge of R6,9
million on the value attributed to Brands, following the corporatisation of the
business in the prior financial year.
Net finance costs for the period amounted to R53 million. The taxation charge
(before STC) of R41 million translates into an effective tax rate excluding STC
of 24,8%, due to the corporate tax rate reducing by one percent to 28%.
These results translate into headline earnings per share of 66,5 cents.
Cash generated from operations amounted to R80 million. Net cash used in
investing activities totalled R64 million, most of which was used to acquire
property, plant and equipment.
Total assets employed in the business increased by 3,5% in the period to R4 397
million, with total interest-bearing borrowings at R962 million, arising
principally from the Barloworld Ltd corporatisation process. This represents a
total borrowings to equity ratio of 36%.
SEGMENTAL TRADING UPDATE
Decorative Coatings
This business delivered a solid performance under the current economic
conditions, assisted by good expense control. Demand for the Plascon brand
remains strong in spite of the slowdown in the retail sector. The trade
segment`s performance was buoyed by growing infrastructural spending and
increased mining activity. However, margins are coming under pressure,
particularly in the industrial solvent base product area, as a result of
spiralling oil price increases. Growth in Africa and export sales were better
than expected.
Performance Coatings
In this segment, Automotive posted satisfactory results with a solid improvement
in the OEM business and a satisfactory performance in the refinish and
distribution businesses. We are on track to appoint a number of additional
refinish distribution outlets in the second half of the year.
Colourant Systems achieved another excellent performance improving both profits
and volumes. Prospects are very positive for their environmentally compliant
products which have moved beyond the development phase and have been
successfully launched.
Continued growth in the Midas Earthcote franchise stores resulted in 10 new
stores being added, including one in Mauritius, bringing the total to 63 stores.
Midas Earthcote is the product of choice for the prestigious Ahmed Baba
Institute in Timbuktu, which will house 25 000 restored ancient manuscripts.
Trade sales continue to strengthen.
Our brushware and related application range shows pleasing growth in independent
hardware stores.
INNOVATION
In line with our stated intention to be an innovator and a driver of
environmentally friendly products and systems, we successfully negotiated the
acquisition of a range of technologies to produce environmentally friendly
coating removal products and wood restorers. These will be launched in South
Africa in the near term and at a later stage elsewhere in the world.
OUTLOOK
Economic conditions are constrained in South Africa. High interest rates, with
further rises likely, strongly rising inflation and strongly rising fuel, energy
and food costs are reducing discretionary spending. The slow down in consumer
spending will impact our targets in the Decorative Coatings segment. This will
be offset, at least to some extent, by continued increases in public
infrastructure spending. In this context the Company is cautious about results
for the second half, but expects to continue to do well in these increasingly
challenging circumstances.
RM Godsell AJ Lamprecht
Chairman Chief Executive Officer
CASH DIVIDEND DECLARATION FOR THE SIX MONTHS ENDED 31 MARCH 2008
Cash dividend number 1
Notice is hereby given that the following dividend has been declared in respect
of the six months ended 31 March 2008:
Number 1 (interim dividend) of 10 cents per ordinary share.
Dates of importance:
Last day to trade cum dividend Friday, 6 June 2008
First trading day ex dividend Monday, 9 June 2008
Record date Friday, 13 June 2008
Payment date Tuesday, 17 June 2008
Share certificates may not be dematerialised or rematerialised between Monday, 9
June 2008 and Friday, 13 June 2008, both days inclusive.
On behalf of the board
ELA Chamberlain
Secretary
Directors: RM Godsell (Chairman), AJ Lamprecht (Chief Executive Officer), E
Links, MM Ngoasheng, B Ngonyama, DB Ntsebeza, NDB Orleyn, PM Surgey, DA Thomas*
(Australian)
Company Secretary: ELA Chamberlain
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited.
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 31 March
Reviewed
R`000 Notes 2008
Revenue 1 322 178
Earnings before interest, taxation,
depreciation and amortisation 225 690
Depreciation (22 021)
Amortisation (9 950)
Operating profit before fair value
adjustments 193 719
Fair value adjustments on financial
instruments 26 527
Operating profit 220 246
Finance costs (57 971)
Income from investments 4 251
Profit before taxation 166 526
Taxation (41 289)
Secondary taxation on companies (296)
Profit after taxation 124 941
Income from associates and joint ventures 8 436
Net profit 133 377
Attributable to:
Equity holders of the parent 131 612
Minority shareholder 1 765
133 377
Earnings per share (cents)
- basic 10 66,3
- diluted 66,3
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 March
Reviewed
R`000 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Operating cash flows before movements in working
capital 239 452
Increase in working capital (159 768)
Cash generated from operations 79 684
Finance costs (27 130)
Realised fair value adjustments on financial
instruments 6 268
Dividends received from associates 66
Interest received 4 251
Taxation paid (37 083)
Cash flow from operations 26 056
Dividends paid (including minority shareholders) (1 529)
Cash generated from operating activities 24 527
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of intangible assets (168)
Acquisition of long-term financial assets (4 149)
Acquisition of other property, plant and equipment (62 808)
??Replacement capital expenditure (37 645)
??Expansion capital expenditure (25 163)
Proceeds on disposal of property, plant and 3 344
equipment
Net cash used in investing activities (63 781)
Net cash outflow before financing activities (39 254)
CASH FLOWS FROM FINANCING ACTIVITIES
Costs on share issue (7 852)
Repayment of amount due to Barloworld Capital (Pty) (869 785)
Ltd
Increase in long-term interest-bearing liabilities 610 443
Increase in short-term interest-bearing liabilities 309 171
Net cash inflow from financing activities 41 977
Net increase in cash and cash equivalents 2 723
Cash and cash equivalents at beginning of period 46 672
Cash and cash equivalents at end of period 49 395
SALIENT FEATURES
for the six months ended 31 March
R`000 2008
Number of ordinary shares in issue 203 872
Net asset value per share including investments at
fair value (cents) 1 326
Total borrowings to total shareholders` funds (%)* 36
Interest cover (times) 3,8
Return on net operating assets (%)** 12,2
Return on ordinary shareholders` funds (excluding
exceptional items) (%) 9,9
* Total borrowings represents interest bearing loans
** Net operating assets excludes cash and interest bearing liabilities
CONDENSED CONSOLIDATED BALANCE SHEET
as at 31 March
Restated
Reviewed Audited
March September
R`000 Notes 2008 2007
ASSETS
Non-current assets 3 454 080 3 399 651
Property, plant and equipment 573 201 528 769
Goodwill 2 1 890 208 1 890 208
Intangible assets 4 757 689 767 471
Investment in associates and
joint ventures 185 139 176 864
Finance lease receivables 1 025 536
Long-term financial assets 23 635 10 283
Deferred taxation assets 23 183 25 520
Current assets 942 461 848 539
Inventories 435 985 361 595
Trade and other receivables 456 915 439 758
Taxation 166 514
Cash and cash equivalents 49 395 46 672
Total assets 4 396 541 4 248 190
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 2 584 785 2 418 796
Other reserves (32 676) -
Retained income 131 612 -
Equity holders of the parent 2 683 721 2 418 796
Minority interest 20 380 20 144
Shareholder loans - 22 187
Total equity 2 704 101 2 461 127
Non-current liabilities 947 311 313 513
Interest-bearing liabilities 5 645 633 4 349
Deferred taxation liabilities 257 762 264 881
Provisions 23 436 21 501
Other non-interest-bearing
liabilities 20 480 22 782
Current liabilities 745 129 1 473 550
Trade and other payables 398 283 466 505
Provisions 5 052 6 921
Taxation 25 647 11 593
Amounts due to bankers and 5
short-term loans 316 147 6 976
Amounts due to Barloworld 5
Capital (Pty) Ltd - 981 555
Total equity and liabilities 4 396 541 4 248 190
SEGMENTAL SUMMARY
R`000 External Inter-
Revenue revenue segment Total
Decorative
Coatings 921 265 27 137 948 402
Performance
Coatings 400 913 82 729 483 642
Total of all
segments 1 432 044
Eliminations (109 866)
Consolidated
revenue 1 322 178
Segment
Operating results
profit including
incl.
Segment Operating Fair value fair value Share of associate
result profit adjustments adjustments associates income
Decorative
Coatings 129 044 24 876 153 920 - 153 920
Performance
Coatings 66 981 1 651 68 632 8 436 77 068
Total of all
segments 230 988
Eliminations (2 306)
Total Group 228 682
Finance
costs (57 971)
Income from
investments 4 251
Taxation (41 585)
Net profit 133 377
Total assets Mar 2008 Sep 2007
Decorative
Coatings 3 535 619 3 372 889
Performance
Coatings 860 922 875 301
Total Group 4 396 541 4 248 190
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March
Share Other Retained
capital
R`000 and reserves income
premium
Balance at 1 October 2007 2 418 796
Changes in equity
recognised during 2008
Movement on foreign
currency translation
reserve 11 934
Movement in shareholder
loans
Listing costs written off
against share premium (7 852)
Current share incentive
scheme (45 000)
Other reserve movements (24)
Net income/(loss)
recognised directly in 2 410 944 (33 090) -
equity
Profit for the period 131 612
Total recognised income and
expense for the period 2 410 944 (33 090) 131 612
Dividends on ordinary
shares
Unbundling restructuring
issue of shares 173 841
Share options in current
period 414
Balance at 31 March 2008 2 584 785 (32 676) 131 612
Equity
holders
of the Minority Equity Total
R`000 parent interest loan equity
Balance at 1
October 2007 2 418 796 20 144 22 187 2 461 127
Changes in
equity
recognised
during 2008
Movement on
foreign
currency
translation
reserve 11 934 11 934
Movement in
shareholder
loans 0 (22 187) (22 187)
Listing costs
written off
against share
premium (7 852) (7 852)
Current share
incentive
scheme (45 000) (45 000)
Other reserve
movements (24) (24)
Net
income/(loss)
recognised
directly in
equity 2 377 854 20 144 - 2 397 998
Profit for the
period 131 612 1 765 133 377
Total
recognised
income and
expense for the
period 2 509 466 21 909 - 2 531 375
Dividends on
ordinary shares
0 (1 529) (1 529)
Unbundling
restructuring
issue of shares
173 841 173 841
Share options
in current
period 414 414
Balance at 31
March 2008 2 683 721 20 380 - 2 704 101
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 31 March
1 Basis of preparation
This abridged report complies with International Accounting
Standard 34 - Interim Financial Reporting as well as with
Schedule 4 of the South African Companies Act and the
disclosure requirements of the JSE Limited`s Listings
Requirements. The abridged report has been prepared using
accounting policies that comply with International Financial
Reporting Standards. The accounting policies are consistent
with those applied in the financial statements for the year
ended 30 September 2007, except for the adoption of IFRS 7
Financial Instruments: Disclosures. This is a disclosure
standard which has no impact on recognition, measurement and
presentation of financial instruments and consequently has no
impact on profit or loss or equity for the period.
As this is the first trading period for Freeworld Coatings, no
comparatives have been shown on the Income Statement and
Cashflow Statement.
2 Goodwill Restated
Reviewed Audited
R`000 2008 2007
COST
At 1 October 1 890 208 30 981
Goodwill created at corporatisation, - 1 690 375
prior to unbundling by Barloworld Ltd
Adjustments to goodwill created at
corporatisation in terms of IFRS 3 and
IAS 12
-?Deferred tax liabilities on property - 260 413
revaluations and brands at fair value
-?Investments in associates at fair - (91 561)
value
At 31 March 1 890 208 1 890 208
CARRYING AMOUNT
At 31 March 1 890 208 1 890 208
The goodwill was created in term of the rules around IFRS 3
and represents the difference between the market value and the
carrying value of the assets and liabilities of each cash
generating unit at date of corporatisation. Further
information around the creation of goodwill is available in
the notes to the historical financial information in the pre
listing statement.
Impairment tests using the HOLT VALUAD methodology are
performed at each cash generating unit, based on the
management approved strategic plans, and no impairments have
been indicated.
3 Effects of restatement
R`000 Original Adjustment Restated
Goodwill 1 721 356 168 852 1 890 208
Deferred taxation (4 468) (260 413) (264 881)
liability
Investment in associates 85 303 91 561 176 864
1 802 191 0 1 802 191
Adjustments were made to goodwill created at corporatisation
in terms of IFRS 3 and IAS 12. These adjustments refer to the
raising of deferred tax on the property revaluations and
deferred tax on brands at fair value, as well as adjusting the
investment in associates to fair value.
4 Intangible
assets
Product Company Other Distri-
bution
R`000 Total Trade brands software channel
marks
Cost at 1 767 471 38 857 686 100 4 740 37 774
October 2007
Other additions 168 - - 168 -
Amortisation for (9 950) (824) (6 861) (1 204) (1 061)
the year
Carrying amount 757 689 38 033 679 239 3 704 36 713
Weighted average 31,2 49,5 1,6 12,7
remaining useful
lives (in years)
5 Loans - long-term, short-term and Restated
overdraft facilities
Reviewed Audited
R`000 2008 2007
Long-term loan 645 633 4 389
Long-term loan with Nedbank, interest rate 630 841 0
at JIBAR + 1,8%, unsecured and repayable
over 7 years with year 1 and 2 having a
capital holiday
Various other small long-term loans with 14 792 4 389
First National Bank, Standard Bank and
Nedbank with interest rates between 13% to
21,5% and terms ranging from 2 years to 5
years
Amounts due to bankers and short-term 316 147 6 976
loans
Short-term loan
Short-term loan with Nedbank, interest 306 300 0
rate at 1 month JIBAR +1,2%, unsecured and
repayable on demand
Current portion of long-term borrowings - 3 320
Overdrafts 9 847 3 656
Previously the treasury function was
performed by Barloworld Capital (Pty) Ltd.
Post corporatisation, as indicated in the
Pro Forma Financial Information in the pre
listing statements, this was taken over by
Freeworld Coatings and an appropriate mix
of overdraft facility, short-term loans
and long-term loans was set up and the
intercompany balance with Barloworld
Capital (Pty) Ltd repaid.
- 981 555
961 780 992 920
6 Contingent liabilities
The back to back guarantee of R50 million to Barloworld Ltd as
security for our overdraft was cancelled on arranging
unsecured financing through Nedbank.
In terms of the Unbundling Agreement, Freeworld Coatings has
guaranteed the first A$5 million of any environmental claim
made on Barloworld Ltd by the purchaser of the Australian
business for a maximum period of 8 years. An environmental
insurance policy is in place in this regard.
7 Commitments Restated
Reviewed Audited
R`000 2008 2007
Contracted 14 257 29 123
Approved but not yet contracted 9 502 14 590
23 759 43 713
Operating lease commitments 25 959 20 892
Finance lease commitments 868 1 008
8 Accounting policies
Except for IFRS 7 Financial Instruments: Disclosures and IAS 1
(Revised): Presentation of Financial Statements, of which more
detail will be given in the year end financial statements, all
IFRS statements have been adopted. There are no standards that
are currently in issue but not yet effective which would
result in a change in accounting policy.
The impact of adopting the above was not significant.
9 Related party transactions
There has been no significant change in related party
relationships since the previous year.
Other than in the normal course of business, there have been
no significant transactions during the year with associate
companies, joint ventures and other related parties.
10 Earnings per share and headline earnings per
share
R`000 2008
Reconciliation of net profit to headline
earnings
Net profit attributable to equity holders of 131 612
the parent
Impairment of investment in associates 83
Loss on sale of plant and equipment (excluding 540
rental assets) and intangible assets
Tax effect of above (151)
Headline earnings 132 084
Weighted average number of ordinary shares in
issue during the year (`000)
-?basic 198 399
-?diluted 198 399
Headline earnings per share (cents)
-?basic 66,5
-?diluted 66,5
11 Post Balance Sheet events
Subsequent to the six months ended 31 March 2008 the following
material event has occurred:
Freeworld Coatings announced on the 20 March 2008 that it has
agreed to buy the worldwide rights outside of North America
(Canada, USA and Mexico) to the intellectual property of
Napier Environmental Technologies Inc. ("Napier"), a provider
of coating removal and wood restoration products using
environmentally advanced technology. The agreed purchase price
is CAN$5.25 million cash. As there is a condition precedent in
the agreement to obtain South African Reserve Bank approval,
this acquisition has been excluded from the interim results.
12 Restated 2007 historical information and pro forma financial
information adjustments
The historical financial information, as disclosed in the pre-
listing statement ("PLS") dated 8 November 2007, has been
adjusted to reflect the investment in associates at fair value
and to raise a deferred tax liability on the value attributed
to the brands and the property revaluations. The pro forma
financial information has also been adjusted to account for
the above changes, as well as the omission of corporatisation
costs being the amortisation of the Plascon Brand over 50
years.
12.1 Omission of corporatisation costs
a. Due to an initial interpretation error by all
parties involved in the unbundling process by
Barloworld Ltd on the definition of corporatisation
costs to be included in the pro forma financial
information, the annual effect of amortising the newly
created Plascon Brand of R686 million over its stated
useful life of 50 years was not included in the pro
forma financial information.
The impact of this omission is shown below:
Measurement Per PLS Adjusted % change
Earnings per share 99 94 (5,05)
(cents)
Headline earnings per 97 92 (5,15)
share (cents)
12.2 Corrections in terms of IFRS 3
a. Due to a delay in Barloworld Ltd obtaining
assignment consents from the associates during the
corporatisation process by it, the associates could not
be transferred at the time. This meant that the
carrying values remained at their equity accounted
value with a note indicating the directors` valuation
in the historical financial information. It should have
been shown at fair value per IFRS3. The result of now
showing the investments in associates at fair value is
a movement from goodwill (intangible assets) to
investments in associates (tangible assets) of R91
million.
b. During the preparation and review of the Interim
Results we have obtained a further interpretation in
terms of IFRS 3 read in conjunction with IAS 12, that a
deferred tax liability was required to have been raised
by Barloworld Ltd as part of the corporatisation
process as a result of there being temporary tax
differences on the property revaluations and the brands
sold at market value in September 2007. The result of
creating these deferred tax liabilities is a debit of
R260 million to goodwill and a credit of R260 million
to deferred tax liability. As R199 million of this
deferred tax liability relates to the brands (an
intangible asset), only R61 million thereof is a
reduction of the tangible assets.
c. The net effect of these adjustments above is that
whilst there is a reduction of R30 million in net
intangible assets, there is a concomitant increase of
R30 million in net tangible assets. As a result the net
asset value of the business remains unchanged as
reflected in the tables below.
Net Net
intangible tangible
R millions assets assets Net assets
Goodwill (91) (91)
Investment in 91 91
associates
Goodwill 260 260
Deferred Tax (199) (61) (260)
Net Effect (30) 30 0
Measurement Per PLS Adjusted % Change
Net asset value per 1,223 1,223 Nil
share (cents)
Net tangible asset 2 17 750
value per share
(cents)
12.3 The restated pro forma financial information, and the
Reporting Accountant`s Report, will be open for inspection at
our registered offices during normal working hours for a
period of 10 working days from the date of this Press and SENS
announcement.
13 Approval and review of the interim financial statements
The interim financial statements for the six months ended
31 March 2008 were reviewed by Deloitte & Touche and their
unmodified review opinion is available for inspection at
Freeworld Coatings Limited`s registered office.
Freeworld Coatings Limited (formerly Aletris Investment Holdings No. 1
Limited)
The registered office of Freeworld Coatings
180 Katherine Street, Sandton, 2196 (PO Box 1227, Johannesburg, 2000)
Plascon Logo
International Protective Coatings Logo
Standox Logo
Du Pont Logo
ICC International Colour Corporation Logo
Crown Logo
Hamilton`s Logo
Earthcote Logo
MIDAS logo
Acryline Logo
Spies Hecker Logo
Date: 22/05/2008 07:06:39 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
