| Wed 12 Nov 2008, 17:30 | | MML - Metmar - Unaudited Interim Financial Results For The 6 Months Ended |
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MML
MML - Metmar - Unaudited Interim Financial Results For The 6 Months Ended
31 August 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"
Unaudited Interim Financial Results for the 6 months ended 31 August 2008
- Revenue almost doubles to R2,1 billion
- Operating profit from continuing operations up 147% to R97,0 million
- Headline earnings per share up by 248% to 63,3 cents
CONDENSED CONSOLIDATED GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
six months to six months to year to
31 August 31 August 29 February
Figures in R`000 2008 2007 2008
CONTINUING OPERATIONS
Revenue 2 087 469 1 087 960 2 067 730
Cost of sales (1 952 947) (1 028 003) (1 963 868)
Gross profit 134 522 59 957 103 862
Other income 14 367 4 401 6 636
Operating expenses (51 892) (25 064) (51 484)
Operating profit 96 997 39 294 59 014
Income from equity - 9 021 24 734
accounted investment
Investment revenue 7 225 2 634 23 974
Finance costs (12 258) (8 278) (22 950)
Profit before 91 964 42 671 84 772
taxation
Taxation (27 379) (9 775) (16 441)
Profit from 64 585 32 896 68 331
continuing operations
DISCONTINUED
OPERATIONS
Profit before 69 737 - -
taxation
Taxation (13 736) - -
Profit from 56 001 - -
discontinued
operations
TOTAL
Profit before 161 701 42 671 84 772
taxation
Taxation (41 115) (9 775) (16 441)
Profit for the period 120 586 32 896 68 331
Profit attributable
to:
Owners of parent 118 819 32 896 67 407
Minority interests 1 767 - 924
CONDENSED CONSOLIDATED GROUP BALANCE SHEETS
Unaudited Unaudited Audited
at at at
31 August 31 August 29 February
Figures in R`000 2008 2007 2008
ASSETS
Non-current assets
Property, plant and 15 018 13 550 11 663
equipment
Goodwill 61 719 6 192 6 192
Investment in - 43 743 70 066
associate
Intangible assets 24 065 - -
Financial assets held 21 456 2 101 21 401
to maturity
Deferred tax - 1 032 -
122 258 66 618 109 322
Current assets
Inventories 224 420 101 250 101 481
Financial assets at 5 537 9 297 5 083
fair value through
the income statement
Trade and other 634 042 255 794 226 978
receivables
Cash and cash 75 183 55 885 107 074
equivalents
939 182 422 226 440 616
Non-current assets 103 987 - 1 009
classified as held
for sale
Total assets 1 165 427 488 844 550 947
EQUITY AND
LIABILITIES
Capital and reserves 305 133 142 447 195 882
Non-current
liabilities
Interest-bearing 39 599 847 1 100
borrowings
Deferred tax 6 069 - 12
liabilities
45 668 847 1 112
Current liabilities
Trade and other 605 134 207 566 229 043
payables
Trade finance 173 603 123 389 114 374
facilities
Financial liabilities 15 465 2 748 7 119
Current tax 20 424 11 847 3 417
liabilities
814 626 345 550 353 953
Total liabilities 860 294 346 397 355 065
Total equity and 1 165 427 488 844 550 947
liabilities
Net asset value per 156,77 76,85 103,42
share (cents)
Net tangible asset 112,70 73,51 100,15
value per share
(cents)
Number of shares in 194 637 127 185 362 058 189 407 002
issue
CONDENSED CONSOLIDATED GROUP CASH FLOW STATEMENTS
Unaudited Unaudited Audited
six months to six months to year to
31 August 31 August 29 February
Figures in R`000 2008 2007 2008
Cash inflows from 13 593 49 390 109 285
operating activities
Cash outflows from (85 997) (33 835) (60 327)
investing activities
Cash inflows from 40 513 10 258 28 044
financing activities
Total cash movement (31 891) 25 813 77 002
for the period
Cash at the beginning 107 074 30 072 30 072
of the period
Cash and cash 75 183 55 885 107 074
equivalents at end of
the period
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN GROUP EQUITY
Share
capital Foreign
and currency Retained Minority Total
Figures in premium reserve income interest equity
R`000
Balance at 1 721 (428) 97 975 379 98 647
March 2007
Changes in
equity
Issue of 35 500 - - - 35 500
shares
Disposal of - 183 379 (379) 183
subsidiaries
Movement - 245 - - 245
Profit for - - 32 896 - 32 896
the period
Distribution (25 024) - - - (25 024)
to
shareholders
Balance at 31 11 197 - 131 250 - 142 447
August 2007
Changes in
equity
Issue of 18 000 - - - 18 000
shares
Profit for - - 34 511 924 35 435
the period
Balance at 29 29 197 - 165 761 924 195 882
February 2008
Issue of 25 000 - - - 25 000
shares
Profit for - - 118 819 1 767 120 586
the period
Distributions (35 035) - - (1 300) (36 335)
to
shareholders
Balance at 31 19 162 - 284 580 1 391 305 133
August 2008
COMMENTARY ON INTERIM RESULTS
PROFILE AND STRUCTURE
Metmar Group`s core activity is the physical trading of commodities. The
business is about managing risk and rendering the best service levels. Taking
speculative positions does not form part of Metmar`s operating policy.
Metmar`s activities are underpinned by strong and long standing partnerships
with financial institutions, producers, industrial consumers, customers and
logistical service providers. This combination of having an extensive
commodities network together with logistical and shipping experience support
Metmar`s niche activities.
FINANCIAL PERFORMANCE
The Metmar Group is pleased to report a significant growth in revenue during
the first six months of the current financial year which increased by 91,9%
from R1 087,9 million to R2 087,5 million. This increase is due to higher
commodity prices, a weaker Rand and increased volumes.
Gross profit margins reflect an increase from 5,5% to 6,4%. The weakening of
the Rand during the period resulted in a foreign exchange translation gain of
R10,1 million (2007: R1,6 million). The increase in operating expenses from
R26,8 million to R51,9 million is primarily due to the inclusion of the newly
acquired plastics and rubber division, West African Group ("WAG") and the
impairment of trade receivables of R3,0 million.
The record profit for the period of R120,6 million exceeded the previous
comparative period of R32,9 million by R87,7 million (266,6%). Headline
earnings per ordinary share increased by 247,7% from 18,2 cents to 63,3
cents.
As was announced on SENS and in the press on 2 June 2008 and 26 June 2008,
Metmar was informed that Kermas Limited ("Kermas") had made an irrevocable
offer to acquire 100% of the shares in PGR 17 Investments (Pty) Limited ("PGR
17") ("the transaction"). The majority shareholders of PGR 17 have accepted
the offer in respect of their shares in PGR 17. Kermas has successfully
lodged the necessary financial guarantees in respect of the offer. Acceptance
of the offer is subject to obtaining the approval of the Competition
Authorities. Metmar has a 21% interest in PGR 17, which is approximately
R320,0 million of the total purchase price.
A circular containing the information required in terms of the JSE Listings
Requirements and incorporating a notice of a Metmar shareholders` general
meeting to approve the transaction will be posted to Metmar shareholders in
due course.
The profit from PGR 17, "discontinued operations", amounted to R56,0 million
compared to R9,0 million in the previous comparative period.
Following Competition Commission approval during May 2008, WAG became a
division of Metmar. At the vendors` election, the first tranche of R25,0
million of the estimated total purchase consideration amounting to R80,0
million was settled by an issue of 5 230 125 Metmar shares at an issue price
of R4,78 per Metmar share. The net value of the trade and other receivables,
inventory and property, plant and equipment less trade and other payables
totalling R46,2 million has been cash settled to the vendors in equal
instalments over three months.
The fair value of the marketing-related WAG brand of R15,7 million will be
amortised over a period of 10 years and the fair value of non-contractual
customer-related intangible assets of R8,3 million will be amortised over
seven years.
A deferred tax liability of R7,0 million in this respect has been created.
Goodwill of R56,3 million will be annually reviewed for impairment in terms
of IAS 36. The current portion of the deferred purchase consideration of
R12,9 million is included in financial liabilities and the balance of R38,5
million in non-current interest-bearing borrowings.
The vendors have warranted that the net profit after taxation of the division
for each of the financial years ending 28 February 2009 (10 month period),
2010 and 2011 will not be less than R16,0 million. If this target is not met,
the percentage purchase consideration will be reduced. The decrease of R35,8
million in cash flows from operating activities to R13,6 million (2007: R49,4
million) is largely due to changes in working capital following the
acquisition of the new division, WAG. Trade and other receivables, trade
finance facilities and trade and other payables have also increased
dramatically as a result of the increased trade activity during the first six
months to 31 August 2008.
Cash and cash equivalents at the end of the period decreased by R31,9 million
to R75,2 million from R107,1 million at 29 February 2008.
This was mainly due to the capital distribution of R35,0 million, payment for
the net assets acquired in the purchase of WAG amounting to R46,2 million and
the financing of a VAT input claim of R31,2 million.
Due to increased trading activity there has been a substantial increase in
the usage of trade finance facilities of R59,2 million to R173,6 million from
R114,4 million at 29 February 2008.
OPERATIONAL PERFORMANCE AND PROSPECTS
Metmar has achieved a record performance in revenue and operating profit,
benefiting from strong demand, higher sales volumes, a weaker Rand and high
commodity prices in the first half of the year.
Metmar has observed nervousness by the South African and International banks
to the funding of commodities following massive price volatility and their
predominant downward movement. Metmar`s banking and trade finance facilities
remain in place. In fact, notwithstanding the current lack of liquidity,
Metmar is being approached by new and existing banking partners with offers
to explore additional credit for new projects and businesses.
Several developments have progressed in the first half of the current
financial year.
* WAG supplies a range of imported virgin polymers and chemicals and has
strong relationships with offshore manufacturers and suppliers. There are
strong synergies between WAG and the existing established plastics division
of Metmar. The newly acquired division is performing well and on target to
achieve the warranted earnings to 28 February 2009.
Trading conditions have been favourable due to increased volumes of product
sold. Through support from one of its major international principals, WAG
looks set to increase its market share.
* The coke screening project at Hwange Colliery in Zimbabwe is progressing
well and proving to be extremely successful. Despite the challenges, there
are ongoing sales and deliveries of the processed material to consumers in
South Africa, and Democratic Republic of Congo. There are prospects for a new
coke screening stockpile project using the same plant and machinery and all
indications are that this should go ahead when the current operations at
Hwange cease.
* The plastics re-cycling operation Owen Plastics (Pty) Limited continues to
improve steadily. The value added plastic rail sleeper and wooden plank
division has now received the approval of a number of underground mines and
pallet and decking users nationally and we remain very optimistic about the
future of this business.
* Metmar is participating in a number of projects involving the recycling of
waste streams, e.g. re-screening of metallurgical coke stockpiles, char
demetalisation and recovery of slurry coal.
* The KIVU Resources project is progressing steadily from an exploration
viewpoint. KIVU owns tin, tantalum and tungsten deposits in both Rwanda and
eastern Democratic Republic of Congo. Metmar owns 7% of KIVU Resources and
Metmar has an exclusive marketing agreement for the current and future
production of the operations. As most of the exploration is currently in
Rwanda, the current military unrest in eastern Democratic Republic of Congo
has had no material effect on KIVU`S geological operation.
* Metmar is deriving substantial benefits from its 11,6% investment in
Kalahari Resources (Pty) Limited ("Kalahari"), which has a shareholding in
Kalagadi Manganese (Pty) Limited ("Kalagadi"). Kalagadi is in the early
stages of developing the Kalagadi Manganese Project ("the project") located
near Kuruman, Northern Cape as well as a smelter complex in Coega.
On 20 August 2008 $432,5 million was paid by ArcelorMittal SA for the
acquisition of 50% of Kalagadi.
The Industrial Development Corporation has a 10% stake in Kalagadi with
Kalahari owning the remaining 40%.
Metmar`s long-term strategy of taking minority equity stakes in mineral
production projects is paying off. Metmar invested at the outset of this
project, and in September 2008 received a dividend of R26,0 million.
* After 31 August 2008 Metmar acquired 20% of Minero Zinc (Pty) Limited
("Minero Zinc") for a maximum cash consideration of R80,0 million. Minero
Zinc exercised the right to purchase Pering Mine in September 2008.
Pering Mine is located in the North West Province of South Africa. Minero
Zinc plans to reopen Pering Mine (closed in 2002) and commission a new 5
million tons per annum DMS plant and 1,5 million tons per annum concentrator
plant late in 2009. Production is expected to start at an annual rate of
about 16 000 tons of zinc and 1 500 tons of lead, in concentrate.
Despite the current turmoil in metal prices, we believe Metmar`s 20% interest
in Minero Zinc is an excellent investment which will add value to our
existing zinc and lead businesses. The purchase is in line with Metmar`s
strategy to acquire strategic stakes in mining and related projects and
simultaneously acquire rights to market all or part of their production.
General business remains strong notwithstanding the downturn in global
economic activity. However, with the sudden decline in commodity prices, the
outlook for the future is not as exciting as it has been for the past couple
of years.
PROSPECTS
Current depressed economic conditions and volatile commodity prices will
impact on prospects and performance for the second half of the year. Due to
market uncertainty and currency volatility in the world, trading conditions
for the remaining part of the year will undoubtedly be more challenging and
difficult.
DISTRIBUTION TO SHAREHOLDERS
A distribution of 18,0 cents per ordinary share was made in June 2008 in
respect of the Metmar Group`s 2008 financial year. A further distribution
will be made after the end of the 2009 financial year.
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
The unaudited consolidated interim financial results have been prepared in
accordance with, and containing the information required by IAS34: "Interim
Financial Reporting", 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 period ended 31 August 2008 are consistent with
those applied for the year ended 29 February 2008.
2. Other income
Includes: Unaudited Unaudited Audited
six months to six months to year to
31 August 31 August 29 February
Figures in R`000 2008 2007 2008
Gain on disposal of - 1 518 2 195
operations
Profit on exchange 10 122 1 600 3 052
differences
Other 4 245 1 283 1 389
14 367 4 401 6 636
3. Reconciliation of
headline earnings
Profit for the 118 819 32 896 67 407
period/year
Adjustments for:
- gain on disposal of (3) (48) (17)
property, plant and
equipment
- gain on disposal of - (930) (1 517)
operations
- fair value 2 722 1 246 2 791
adjustments
Headline earnings 121 538 33 164 68 664
Earnings per share
(cents)
- Headline 63,3 18,2 37,2
- Attributable 61,9 18,1 36,5
Weighted average 191 908 366 182 028 725 184 740 703
number of shares in
issue*
*The calculation of
basic and diluted
earnings and headline
earnings per share is
based on the weighted
average of ordinary
shares in issue as
follows:
- as at 29 February 189 407 002
2008
- new issue 4 June
2008 (5 230 125)
- weighted 5 230 125* 2 501 364
88/184
Weighted average 191 908 366
number of shares in
issue @31 August 2008
4. Cash and cash equivalents
Cash and cash equivalents comprise cash balances with banks, less bank
overdrafts.
Trade finance facilities are accounted for separately.
5. 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 are no less favourable than those
arranged with third parties.
6. Corporate governance
The Metmar group complies with the Code of Good Corporate Practice and
Conduct published in the King II report on Corporate Governance.
7. The Board
On 20 August 2008 Mrs Molleen Fiona de Wet was appointed as executive
financial director of the Company. Mrs De Wet was previously an alternate
director of the Company.
8. Post-balance sheet events
On 30 September 2008 Metmar entered into an agreement with Minero Mining
Company (Pty) Limited and Minero Zinc to acquire up to 20% of the issued
share capital of Minero Zinc for a cash consideration of up to R80,0 million.
Zinc is currently a large part of Metmar`s business and if Metmar subscribes
for the full 20% of Minero Zinc, Metmar will have exclusive marketing rights
for the concentrates for an initial period of five years.
CB Brayshaw DJ Ellwood
Non-executive Chairman Chief Executive Officer
12 November 2008
Directors:
CB Brayshaw* (Chairman), DJ Ellwood (Chief Executive Officer), PP Boshoff, MF
de Wet, L Matteucci*, GR Forsdyke, GP Lotis, D Mashile-Nkosi*, AP Ruiters*
* 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.metmar.com
Date: 12/11/2008 17:30:01 Produced by the JSE SENS Department.
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