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OMN - Omnia Holdings Limited - Reviewed provisional results for the year ended
31 March 2008
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1967/003680/06
Share code: OMN ISIN: ZAE000005153
"Omnia" or "the Group"
Reviewed provisional results
for the year ended 31 March 2008
Highlights
Revenue increased by 33% to R7.3 billion
Net profit for the year increased by 27% to R313 million
Basic earnings per share increased by 28% to 718.2 cents
Headline earnings per share increased by 30% to
724.5 cents
Final dividend distribution to shareholders of 117 cents
(200 cents for the full year, an increase of 25%)
Condensed Consolidated Income Statement
for the year ended 31 March 2008
Reviewed Audited
Rm 2008 % 2007
Revenue 7 340 33 5 537
Cost of sales (5 841) 33 (4 398)
Gross profit 1 499 32 1 139
Operating expenses (915) 28 (717)
Operating profit 584 38 422
Net finance cost (112) 93 (58)
Interest paid (143) 79 (80)
Interest received 25 39 18
Forex gain 6 50 4
Profit before taxation 472 30 364
Taxation (159) 35 (118)
Net profit for the year 313 27 246
Attributable to:
- Equity holders of the 317 246
Company
- Minority interest (4) -
313 246
Basic earnings per share 718.2 28 560.3
(cents)
Fully diluted basic 687.9 24 553.2
earnings per share
(cents)
Final dividend paid per 90.0 6 85.0
share (cents) in respect
of prior year
Interim dividend per 83.0 19 70.0
share (cents) paid in
respect of current year
Weighted average number 44 132 43 722
of shares in issue (`000)
Weighted average number 46 073 44 338
of fully diluted shares
in issue (`000)
Number of shares in issue 44 263 43 943
(`000)
Condensed Consolidated Balance Sheet
as at 31 March 2008
Reviewed Audited
Rm 2008 % 2007
Assets
Property, plant and 965 27 760
equipment
Intangible assets 517 19 436
Investments 30 -
Deferred taxation 8 167 3
Current assets 2 919 52 1 924
4 439 42 3 123
Equity and liabilities
Shareholders` equity 1 581 26 1 250
Deferred taxation 104 25 83
Non-current liabilities 288 773 33
Current liabilities 2 466 40 1 757
4 439 42 3 123
Net interest-bearing debt 451 70 265
Net asset value per share 35.71 26 28.45
(Rand)
Capital expenditure
Depreciation 71 59
Amortisation 21 20
Incurred 284 188
Authorised and committed - 33
Authorised but not 102 174
contracted for
Condensed Consolidated Cash Flow Statement
for the year ended 31 March 2008
Reviewed Audited
Rm 2008 % 2007
Operating profit 584 422
Depreciation and amortisation 92 79
Adjustment for non-cash items 13 (6)
Utilised by working capital (138) (60)
551 435
Interest paid (143) (80)
Interest received 25 18
Taxation paid (134) (100)
Dividends paid (76) (68)
Generated by operations 223 205
Cash outflow from investing (413) (175)
activities
Cash inflow from financing 323 8
activities
Net increase in cash 133 38
Net overdraft at beginning of (234) (275)
year
Effects of exchange rate (2) 3
movements
Net overdraft at end of year (103) (234)
Statement of Changes in Shareholders` Equity
Ordinary
Share-
holders`
Equity
Stated Treasury Other Retained Minority
Rm capital shares reserves earnings interest Total
At 31 March 201 (20) (12) 849 2 1 020
2006
Net profit
for the
year ended
31 March 246 246
2007
Increase in
foreign
currency
translation 42 42
reserve
Share-based 6 6
payment
Treasury 4 4
shares sold
Ordinary (68) (68)
dividends
paid
At 31 March 201 (16) 36 1 027 2 1 250
2007
Net profit
for the
year ended
31 March 317 (4) 313
2008
Increase in
foreign
currency
translation 65 65
reserve
Share-based 26 26
payment
Treasury 3 3
shares sold
Ordinary (76) (76)
dividends
paid
At 31 March 201 (13) 127 1 268 (2) 1 581
2008
Other Reserves
Rm 2008 2007
Reserves comprise of:
Net discount arising on acquisition of 3 3
shares of subsidiaries
Foreign currency translation reserve 79 14
Share-based payment reserve 45 19
127 36
Condensed Segmental Analysis
for the year ended 31 March 2008
Reviewed Audited
Rm 2008 % 2007
Revenue, net of intersegmental 7 340 33 5 537
sales
?Chemicals 3 334 27 2 624
?Mining 1 281 28 1 001
?Agriculture 2 725 43 1 912
Operating profit 584 38 422
?Chemicals 148 17 127
?Mining 125 (9) 138
?Agriculture 311 98 157
Reconciliation of headline earnings
Reviewed Audited
Rm 2008 % 2007
Net profit for the year 317 246
Loss/(profit) on disposal of 2 (1)
fixed assets
Headline earnings 319 30 245
Headline earnings
Headline earnings are 724.5 cents per share (2007: 558.2 cents per share)
Diluted headline earnings are 694.0 cents per share (2007: 551.1 cents per
share)
Notes
Accounting policies
The Group results are reported in accordance with International Financial
Reporting Standards ("IFRS").
The condensed consolidated financial statements for the year ended 31 March 2008
were prepared in accordance with IAS 34 - Interim Financial Reporting and in
compliance with the Listing Requirements of the JSE Limited. The condensed
consolidated 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 year ended
31 March 2008 are consistent with those applied for the year ended 31 March
2007, except for the adoption of IFRS 7 - Financial Instruments Disclosures,
which has no impact on the results but requires additional disclosures.
Dividends
A dividend of 90 cents per share was declared on 20 June 2007 in respect of the
earnings of the previous financial year. This dividend is reflected in the
current year to 31 March 2008. In addition an interim dividend of 83 cents per
share was declared on 28 November 2007 in respect of the current year.
A final dividend of 117 cents per share was declared on 13 June 2008 bringing
the dividend for the year to 200 cents per share compared to 160 cents in
respect of the prior year, an increase of 25%.
Review opinion
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed
consolidated financial information for the year ended 31 March 2008 contained in
this report. The review opinion is available for inspection at the company`s
registered office during normal business hours.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R22.6 million (2007: R21.1 million) within one year, R21.2 million (2007: R46.9
million) between two and five years and R0.9 million (2007: R0.2 million) later
than five years, giving a total of R44.7 million (2007: R68.2 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed at 30
September 2007. No impairment loss has occurred.
Acquisition
In January 2008 the Group acquired the net assets of Zetachem for a purchase
consideration of R212.8 million. This purchase consideration was allocated to
net tangible assets of R120.1 million, intangible assets of R50.4 million and
goodwill of R42.3 million. This interest was consolidated in the current year
financial statements from 1 January 2008.
In October 2007 the Group invested 10% of the equity of ETC Bio Energy Limited
in Zambia for a purchase consideration of R30 million.
Non-current liabilities
During the year under review the Group obtained long-term loans amounting to
R340 million with financial institutions to facilitate the introduction of an
employee owned BEE company and for the acquisition of Zetachem.
Commentary
Introduction
Omnia is a diversified and specialist chemical services company which provides
customised solutions in the chemical, mining and agriculture markets. The
results for the year ended 31 March 2008 reinforce the benefits arising from the
balanced businesses created by the Group`s diversification and the resulting
increased synergy.
The period under review is characterised by extraordinary market conditions,
with dramatic increases in Group key input costs, shortages of vital raw
materials and dramatic changes within agriculture as the demand for biofuels
increases and changes to global food consumption patterns shift to higher
protein use. International food and energy prices are at record levels, thus
creating a macro economic environment which is positive for Omnia, with strong
demand continuing to be experienced in all three of the Group`s major markets.
Omnia is well placed to deal with the changes taking place in the macro economic
environment, evidenced by the effective doubling of earnings in the Agriculture
division as the Group benefited from buoyant conditions. This was in line with
expectations, given the combination of good rains and the improved maize price
which resulted in a favourable maize farming season coupled with increased
international fertilizer prices. Expectations are that the demand for fertilizer
will remain robust as higher maize and wheat prices persist.
The year was again marked by significant increases in the Group`s procurement
costs, not only in nitrogen products, but particularly potash and phosphate raw
materials which continued to increase even more steeply than in the prior year,
reaching record highs in the year under review. This significantly impacted the
working capital required to fund the increase in value of inventory. The steep
nitrogen-based product price increases continued to exert pressure on margins in
the mining business.
Financial review
Revenue for the year increased by 33% to R7,3 billion (2007: R5,5 billion) while
net profit increased by 27% to R313 million (2007: R246 million). Basic earnings
per share rose to 718.2 cents per share (2007: 560.3 cents per share),
reflecting a 28% increase, in line with expectations. Headline earnings per
share increased by 30% to 724.5 cents (2007: 558.2 cents).
Operating expenses net of other income increased by 28% to R915 million (2007:
R717 million). Included in this increase is the share-based payment expense
which has risen fourfold to R26 million of which R13 million relates to the BEE
transaction announced in April 2007. The 28% increase is nevertheless below the
increased level of activity as focus on containing costs remains a priority.
The rapid increase in nitrogen-based raw material prices continued to depress
margins in the Mining division. However, the Chemical division had a noteworthy
year, benefiting from the growth in national manufacturing output and the
weakening in the average rand exchange rate. In addition, improved margins in
the Agriculture division contributed to the increase in Group operating margin
to 8.0% (2007: 7.6%) for the year under review. Operating profit rose by 38% to
R584 million (2007: R422 million).
Resulting from the continued increase in raw material prices, working capital
levels were again higher than during the previous financial year. This resulted
in an increase in net interest paid of 90% to R118 million (2007: R62 million).
A foreign currency gain of R6 million (2007: R4 million) mainly in respect of
foreign bank balances was recorded, due to the decline in the rand against most
major currencies.
During the year under review the Group generated R223 million (2007: R205
million) in cash from its operating activities before capital expenditure on
various projects, which included:
the completion and commissioning of an EcoGypsumTrade Mark plant for the
processing and refinement of forced-arising gypsum for subsequent use in the
cement industry;
* the completion and commissioning of a reactor to reduce greenhouse gas
emissions at the Agriculture division`s Sasolburg plant;
* the building and commissioning of a Nitrophos production plant; and
* the building of a shocktube assembly plant to enable the Mining division to
benefit from a renewed focus on safety and resulting market trend away from
the outdated capped fuse product.
In addition to the capital expenditure on its projects, the Group also invested
an aggregate R167 million in the acquisition of Zetachem, a company involved in
the manufacture and marketing of a range of speciality water treatment chemical
products, with a view to synergistic growth of the Group`s established water
care business and in a Jatropha bio-fuel project in Zambia. Capital expenditure
increased to R284 million (2007: R188 million) reflecting the Group`s continued
investment in various expansion projects.
Additional term funding amounting to R340 million was secured during the year
mainly as a result of the introduction of a BEE partner, Sakhile Initiative
Limited.
The Group continues to invest in technology driven improvements across all areas
of the business, which will bring about improved customer service and
productivity. These improvements also include supply chain optimisation,
procurement and the protection of the environment.
These promising investments, together with the continued increase in raw
material prices, led to an increase in net interest bearing debt at year end to
R451 million (2007: R265 million) with a related increase in the debt: equity
ratio to 29% (2007: 21%).
OPERATIONAL REVIEW
Chemicals
The Omnia division, Protea Chemicals, is the leading distributor of speciality,
functional and effect chemicals in Africa with an established presence in every
sector of the chemical distribution market.
As a supplier to the manufacturing industry, Protea Chemicals benefited from the
growth in the South African economy. Volumes increased across almost all
business units while the weakening of the rand contributed further to price
increases. Price increases also occurred as a result of global product
shortages.
Revenue increased by 27% to R3,3 billion (2007: R2,6 billion) with operating
profit increasing by 17% to R148 million (2007: R127 million). A change in
product mix to include notably greater polymer volumes, resulted in a decrease
in operating margin to 4.5% (2007: 4.8%). Towards the end of the year the
potable water care business, Zetachem, was acquired. This acquisition will
enhance margins in the Chemical division.
The division contributed 25% to Group operating profit (2007: 30%), the
reduction in contribution being due to the appreciable increase in the
Agriculture division`s contribution in the financial year.
Subsequent to year end, Protea Chemicals received a summons issued on behalf of
various participants in the Eastern Cape Pineapple Industry. This claim relates
to a consignment of zinc sulphate, imported from China. The summons has been
referred to Protea Chemicals` insurers who, with the assistance of their
attorneys, are dealing with the matter. Protea Chemicals is committed to a
responsible and commercially sustainable business practice. The Department of
Agriculture has conducted an investigation, and Protea Chemicals has cooperated
fully with that department.
Mining
A market leader in blended bulk explosives formulations for surface mines, the
Mining division also manufactures packaged explosives for underground mines and
specialised surface blasting. The division also markets blasting accessories,
and a complete range of mining chemicals.
The division continued its volume growth, particularly in mining chemicals, both
locally and internationally. However while revenue increased by 28% to R1,3
billion (2007: R1 billion), operating profit decreased by 9% to R125 million
(2007: R138 million) explained by the unprecedented rate of increase in the cost
of raw materials, which resulted in the operating margin decreasing further to
9.8 % (2007: 13.8%) as contract pricing did not allow for expeditious
adjustments. The original price adjustment clauses on the majority of Mining
chemical contracts have now been re-negotiated to allow for prompt response to
rapid increases in chemical procurement costs.
In the case of explosives contracts, following the disappointing margins in the
2007 financial year, contracts were renegotiated in the early part of the year
under review. However, the rapid and steep increases in raw material prices
necessitated yet another series of negotiations in terms of which prices are now
adjusted on a monthly, rather than a quarterly, basis. These re-negotiated price
increases were only completed in the last quarter of the year and should reverse
the decline in margins relating to the explosives component of the business.
The Mining division contributed 21% to Group operating profits (2007: 33%).
The division`s shocktube assembly plant will be commissioned shortly.
Agriculture
The Agriculture division produces and supplies granular, liquid and speciality
fertilizers to individual farmers, co-operatives and wholesalers throughout
South Africa and, increasingly, to sub-Saharan Africa, as well as to Madagascar,
Australia and New Zealand.
The favourable operating environment for the Agriculture division, with the
maize price remaining at levels above R1 800 per ton for most of the period
under review encouraged maize production. In addition the global shortage of
fertilizer raw materials drove the price of fertilizer to record highs. Revenue
increased by 43% to R2,7 billion (2007: R1.9 billion). Operating profit
increased by 98% to R311 million (2007: R157 million), while operating margin
improved to 11.4 % (2007: 8.2%).
Prospects
Although it is anticipated that the South African economy will continue to slow
down, the weakening rand should enable the manufacturing sector to become
internationally more competitive. Protea Chemicals, as a major supplier to the
manufacturing sector, will continue to find new applications thereby growing
volumes. With the commissioning of Sasol`s Turbo project, increased polymer
volumes are expected to become available to the Group. The division is therefore
well positioned to embrace further growth opportunities and to deliver greater
value.
Ongoing strong growth in world metal and mineral demand has benefited the
explosives and mining chemical markets and, following the correction to the
depressed margins of the past year, the Group anticipates good growth in its
Mining division.
The re-negotiated explosives contracts will result in improved margins and there
is significant potential for the Mining division`s future growth into Africa.
Against this backdrop, renewed focus will be directed at taking advantage of the
opportunities arising from the Group`s increasing presence in South Africa and
beyond. The Group remains confident particularly on prospects for coal and
uranium mining as new projects are commissioned to support global energy demand.
The current Agriculture environment, arising from the substantially higher
prevailing international grain prices, and the related focus on biofuels, should
continue to favour the fertilizer business and the Group as a whole. Increasing
Nitrophos production should also give the Agriculture division the opportunity
to further optimise raw material costs. In addition, the division`s strong
position in Africa is a growth opportunity, with the prospect of more tonnage
being sold.
The Group is on target to meet its five year management plan, set at 10% real
growth in earnings per annum, implemented four years ago. The Group has embarked
on a number of innovative projects that will impact significantly on improved
logistical and raw material cost efficiencies, as well as environmental control
improvements. One such project is Omnia`s award winning Clean Development
Mechanism (CDM) project which was commissioned in the second half of the 2008
financial year as anticipated.
In terms of this greenhouse gas reduction project, Omnia Fertilizer will
generate approximately 500,000 Certified Emission Reduction (CER) units per
annum at its Sasolburg plant. Based on current price levels Omnia could
potentially earn approximately R60 million per annum in revenue from calendar
year 2008, over the next five year period. As CER units are traded
internationally as commodities, future price movements will depend on supply and
demand factors.
As previously announced, Omnia underwent an internal restructuring effective 1
April 2007 to simplify its structure and facilitate the introduction of an
employee-owned Black Economic Empowerment (BEE) company, known as Sakhile
Initiative Ltd, as a 10% equity partner in the Group.
Dividend
The Board is pleased to announce that it has declared a final dividend of 117
cents in respect of shareholders recorded in the register on Friday 11 July
2008. This final dividend brings the dividend for the full year ended 31 March
2008 to 200 cents (after inclusion of the interim dividend of 83 cents per
share) compared with the 160 cents paid in respect of the prior full year.
The last day for trading in the company`s shares cum dividend will be Friday 4
July 2008. The shares will commence trading ex dividend on Monday 7 July 2008
and the record date will be Friday 11 July 2008. The payment date will be Monday
14 July 2008. Share certificates may not be dematerialised or rematerialised
between Monday 7 July and Friday 11 July 2008, both dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
Bryanston 18 June 2008
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH Fitz-
Gibbon*, RB Humphris* (Group Managing Director), Prof SS Loubser, Dr WT Marais,
RR Masebelanga*, R Havenstein, JG Pretorius, DC Radley, TR Scott *Executive
Directors
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: 18/06/2008 08:00:30 Produced by the JSE SENS Department.
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