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SFH
SFH
SFH - S A French - Abridged audited financial results and notice of annual
general meeting
S A FRENCH LIMITED
Incorporated in the Republic of South Africa
(Registration number 1982/009174/06)
Share code: SFH ISIN: ZAE000108890
("SA French" or "the company" or "the group")
ABRIDGED AUDITED FINANCIAL RESULTS AND NOTICE OF ANNUAL GENERAL MEETING
ABRIDGED AUDITED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2009
Audited 12 Audited 12
months months
ended 30 ended 30
June 2009 June 2008
R`000 R`000
Revenue 139 255 150 083
Cost of sales (118 871) (114 872)
Gross profit 20 384 35 211
Other income 9 875 842
Operating costs/expenses (29 526) (22 115)
Operating profit 733 13 938
Investment revenue 1 707 2 947
Finance costs (15 181) (7 250)
(Loss)/Profit before taxation (12 741) 9 635
Taxation 1 783 (2 700)
(Loss)/Profit attributable to ordinary (10 958) 6 935
shareholders
Reconciliation of attributable earnings
to headline earnings
(Loss)/Profit attributable to ordinary (10 958) 6 935
shareholders
Loss/(Gain) on disposal of property, (918) 11
plant and equipment
Tax effect of the disposal of property, 257 (3)
plant and equipment
Headline (loss)/earnings attributable to (11 619) 6 943
ordinary shareholders
Weighted average number of shares in 165 952 148 333
issue 872 333
(Loss)/Earnings per share (cents) (6.60) 4.68
Headline (loss)/earnings per share (7.00) 4.68
(cents)
ABRIDGED AUDITED BALANCE SHEET AT 30 JUNE 2009
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
ASSETS
Non-current assets 88 659 42 649
Property, plant and equipment 85 159 38 353
Other financial assets 2 724 4 296
Deferred tax 776 -
Current assets 124 496 139 039
Inventories 103 656 108 758
Current tax receivable 529 39
Trade and other receivables 20 267 20 113
Cash and cash equivalents 44 10 130
Total assets 213 155 181 688
EQUITY AND LIABILITIES
Capital and reserves 52 743 64 977
Share capital 49 330 48 955
Revaluation reserve 162 162
Retained income 3 251 15 860
Minority interest * *
Non-current liabilities 44 483 31 648
Loans from shareholders 11 118 9 568
Instalment sale agreements 33 365 20 908
Deferred tax - 1 172
Current liabilities 115 929 85 063
Other financial liabilities 4 106 -
Current tax payable 165 -
Instalment sale agreements 19 369 12 509
Operating lease liability 600 -
Trade and other payables 81 536 72 323
Dividend payable 786 -
Bank overdraft 9 367 231
Total equity and liabilities 213 155 181 688
Number of shares in issue 166 375 165 000
689 000
Net asset value per share - (cents) 31.70 39.38
Net tangible asset value per share - 31.70 39.38
(cents)
* Less than R1 000
ABRIDGED AUDITED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE
2009
Audited Audited
30 June 30 June
2009 2008
R`000 R`000
Net cash from operating activities 15 371 (40 816)
Net cash from investing activities (51 893) (19 550)
Net cash from financing activities 17 300 65 598
Total cash movement for the year (19 222) 5 232
Cash at the beginning of the year 9 899 4 667
Total cash at end of the year (9 323) 9 899
ABRIDGED AUDITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR
ENDED 30 JUNE 2009
Shar Share Revalua Retain Minor Total
e Premiu tion ed ity equit
capi m reserve income inter y
tal R`000 R`000 R`000 est R`000
R`00 R`000
0
Balance at 1 July 1 - 162 8 924 * 10
2007 150 236
Profit for the year - - - 6 935 - 6 935
Issue of shares 500 49 500 - - - 50
000
Share issue costs - (2 - - - (2
195) 195)
Total changes 500 47 305 - 6 935 - 54
740
Balance at 1 July 1 47 305 162 15 859 * 64
2008 650 976
Loss for the year - - - (10 - (10
958) 958)
Capitalisation of 14 361 - - - 375
dividend
Dividends - - - (1 - (1
650) 650)
Total changes 14 361 - (12 - (12
608) 233)
Balance at 30 June 1 47 666 162 3 251 * 52
2009 664 743
* less than R1 000
COMMENTARY
Introduction
The board of directors of SA French ("the directors") presents the audited
financial results of SA French for the twelve months ended 30 June 2009 ("the
period") which reflects a net asset value per share of 31.70 cents for the
period. This period has seen the global economy under pressure and in response
thereto, the directors have adhered to the core principle on which the company
was founded, that of providing exemplary service and support to its existing
customers, while winning new customers with innovative lifting solutions and
application engineering.
Group profile
SA French was founded by the current Chief Executive Officer, Quentin van
Breda, in 1982 and is the sole distributor of Potain tower cranes in sub-
equatorial Africa. In addition to its extended tenure as an agent for the
largest tower crane manufacturer in the world, the company offers
complementary lifting solutions in the form of Merlo telescopic handlers and
self loading concrete mixers, as well as the Torgar brand of material and
passenger hoists for which it also holds extended distribution agreements for
the sub-equatorial African region. The company`s focus in the turbulent
economic climate is on providing quality service as well as ensuring cost
savings to its existing clients, who in turn will benefit from the company`s
experience navigating numerous financial slowdowns.
Review of operations
Sales within the construction equipment supply industries, of broader
construction equipment, are largely dependent on a blend of business
confidence and order book size of the major players within the mining,
construction and industrial sectors. Notwithstanding the order book size of
any of these firms in the reporting period, the company has, like many of its
compatriots within the industry, felt the full impact of the tightening of
credit by financial institutions. Whether the lack of confidence followed the
retraction of credit or vice versa the result was that the period under
consideration was difficult to navigate. This saw a fundamental shift in many
of the supply chain methods generally employed within the industry.
This change in market dynamic resulted in a change of focus in SA French`s
business. In particular, SA French has experienced an increase in demand for
tower crane rentals as many of its clients seek to keep costs variable until
there is clarity on the direction of the markets and an easing of criteria for
granting credit by financial institutions. An increase in the rental of as
opposed to the sale of tower cranes has had an effect on SA French`s results.
Firstly, from a balance sheet perspective, SA French has made a significant
investment in its rental fleet. Secondly, from a revenue and profitability
perspective short-term profitability has been replaced by longer-term
prospective revenues from rentals.
In spite of the prevailing market sentiment, the period saw a number of
important milestones achieved by SA French on the African continent. These
include a contract for the supply, delivery and commissioning of two tower
cranes to be utilised in the construction of the condenser platform of the
Medupi power station in Lephalale. The larger of the two cranes, an MD1100,
will stand on rail and tower above the site with its 80 meter free standing
hook height and 80 meter reach, lifting 40 tons. The sale and commissioning
and subsequent dismantling of the first "luffing jib" tower crane in Africa to
one of the large listed construction companies, was a first for the company
but by no means the last of these types of crane to be seen in the country. SA
French also boasts the largest, newest rental fleet of tower and self erecting
cranes on the continent.
The branches in Cape Town and Durban have also established themselves as first
rate service centres by ensuring that, rental units and technical expertise
are on hand for construction projects such as the airport upgrades,
complicated high rise projects and rail station upgrades in Kwa-Zulu Natal and
the Eastern and Western Cape. The company`s seamless service to its clients
across the country, irrespective of the time or location, is its trademark and
has resulted in customer satisfaction levels in excess of 90% in all surveys
conducted during the reporting period.
Skills development
SA French is committed to the ongoing training and development of its staff
and the reporting period saw the company focusing on practical skills training
for its tower crane and hoist riggers as well as holding several safety
seminars for those working at height. In 2006 the Engineering Council of South
Africa conferred the status of Lifting Machinery Entity ("LME") on the company
and it has in turn under its auspices assisted its technicians to become
registered as Lifting Machinery Inspectors. SA French is the only LME working
within the industry and as such takes the lead in tower crane and hoist
safety. In addition its Chief Executive Officer is an active member of the
steering committee tasked with establishing a South African standard for the
lifting industry. The number of registered lifting machinery inspectors at SA
French was raised by a further five candidates during the period under review,
making us one of the most proficient lifting experts in the country.
Due to the industry demand for competent and reliable machine operators, a
decision was taken in 2008 to establish a Transport Education and Training
Authority ("TETA") accredited training facility that will enable the company
to provide training and certification requirements for its clients and third
parties. This certification was awarded to SA French by TETA during this
reporting period and we are proud to add yet another dimension to our list of
competencies and service offerings. This strategy will create another income
stream for the group, while assuring that the level and competence of the
operators passing through the training division is creditable in terms of the
requirements of current and future legislation covering the safe operation of
lifting machinery.
Auditor`s report
The group`s annual financial statements for the year ended 30 June 2009 have
been audited by the group`s auditors, RSM Betty & Dickson (Johannesburg). The
auditors` modified audit report on the group`s annual financial statements is
available for inspection at the company`s registered office.
Extract of auditor`s report
"Emphasis of matter
We draw attention to the directors report and which indicates that the group
incurred a net loss of R10 958 431 for the year ended 30 June 2009. The
directors` report indicates that these conditions, along with other matters,
indicate the existence of a material uncertainty which may cast significant
doubt on the group`s ability to continue as a going concern.
Reportable Irregularity
In accordance with our responsibilities in terms of sections 44(2) and 44(3)
of the Auditing Profession Act 2005, (Act 25 of 2005) ("Auditing Profession
Act"), we report that in the current year, certain matters as described in the
directors` report resulted in our reporting a reportable irregularity in terms
of the Auditing Profession Act."
Extract of directors` report
"Statement of going concern
The audited condensed financial statements for the year ended 30 June 2009,
have been prepared on the going concern basis.
The shift in SA French`s business towards a more capital intensive rental
business, together with the financial crisis has placed immense strain on the
group`s balance sheet. Capital reserves are limited and the board is
addressing this constraint by renegotiating credit arrangements with Potain
and reducing overheads. The directors are confident that these steps will
enable the group to manage its cash flows through this turbulence without
resorting to the sale of assets or the raising of fresh equity based funding.
Reportable Irregularity
In August 2009 the directors of SA French were made aware of an inconsistency
between the amount outstanding in the VAT control account and the amount
outstanding on a reconciliation provided by the South African Revenue Service
("SARS"), after the initial visit by the audit team. The auditors reported to
management that in terms of the VAT Act, 1991(Act 89 of 1991), a vatable
supply arises on the earlier of the issue of an invoice or the receipt of
payment. A VAT 201 form was submitted to SARS via the e-filing system that did
not disclose the vatable supply for the sale of two tower cranes, which
constituted a reportable irregularity. The directors requested that this
inconsistency be investigated and an additional VAT reconciliation be
conducted in order for this matter to be clarified. This matter has been
reported on by the auditors as a reportable irregularity to the Independent
Regulatory Board for Auditors. After an investigation as well as a meeting
held between the directors and SARS we can report that according to SARS, a
VAT 201 submission was received by SARS for December 2008. A second
submission, necessitated by the early settlement of a large invoice in
December 2008, was subsequently submitted to SARS for the same period. This
second submission was not captured on the SARS system. Subsequent to the
meeting, this situation was brought to SARS`s attention and the VAT return has
been loaded onto the e-filing system. SA French is following guidelines set
out by SARS with regards to repayment procedures for the outstanding VAT which
has resulted from these submissions."
Financial results
Increase in borrowings
Non-current liabilities increased from R31.6 million in June 2008 to R44.5
million in June 2009. This is largely attributed to the property, plant and
equipment used in the group`s rental business which is largely financed by
instalment sales agreements. In turn this has resulted in increased finance
costs which have reduced earnings and headline earnings.
Segmental reporting
IAS 8 has not been early adopted. Management has not presented segment
reporting during the year under review as the company has only one operating
segment.
Prospects
There are early indications that the regional stability within the SADC will
provide opportunities in both rental and sale of equipment in the Southern
African region particularly Mozambique and Botswana. The company will continue
to leverage its long term relationships with the listed construction and
mining entities in order to take advantage of upcoming infrastructural and
development projects. Within South Africa the company`s national footprint and
seamless service capabilities make it the supplier of choice to those that
require lifting machinery. This can be seen on the skyline of all major cities
across South Africa. Recent examples include hotel projects in and around OR
Tambo, Sandton, the Cape peninsula and on infrastructural projects like
railway station upgrades throughout the country.
Subsequent events
The directors report that in the interim period, subsequent to this reporting
period, an average total sales level inclusive of rentals of between R5
million and R6 million has been achieved. This is in spite of a number of
uncertainties that we do not expect to be present in the first quarter of
2010, and should, in our opinion, provide SA French with more opportunities
for both sales as well as long-term rental contracts.
Dividend policy
No dividend has been declared for the period.
Basis of preparation
The accounting policies applied in the preparation of these audited financial
statements, which are based on reasonable judgments and estimates, are in
accordance with International Financial Reporting Standards ("IFRS") and are
consistent with those applied in the annual financial statements for the year
ended 30 June 2008. These condensed financial statements as set out in this
report have been prepared in terms of IAS 34 - Interim Financial Reporting,
the Companies Act, 1973 (Act 61 of 1973), as amended, and the Listings
Requirements of JSE Limited. Certain prior year numbers have been reclassified
to enhance comparability.
Directorate
LB Mophatlane and JC Prinsloo have tendered their resignations in this period.
LB Mophatlane has been replaced by J Fizelle as a non-executive director and
JC Prinsloo has been replaced by R Erasmus as the financial director. The
company wishes to thank Mr Mophatlane and Mr Prinsloo for their contribution
to the board of directors of the company for the past period and wishes them
well in the future. We welcome Mr Fizelle and Mr Erasmus and look forward to
their positive contribution in the period to come. JD Xaba sadly passed away
on 21 February 2009.
Appreciation
We thank our employees for their continued loyalty, hard work and commitment
which are much needed in the current global economic climate. Furthermore, we
thank our non-executive directors for their wise counsel and our stakeholders
for their consistent faith in the group.
Posting of annual report
Shareholders are advised that the Annual Report for the year ended 30 June
2009 was posted on 28 January 2010.
Notice of Annual General Meeting
Notice is hereby given that the annual general meeting of shareholders of SA
French will be held on Friday, 19 February 2010 at 12:00 at the offices of SA
French, 56 - 58 Rigger Road, Spartan, Kempton Park, to conduct the business
stated in the notice of annual general meeting, which is contained in the
Annual Report.
On behalf of the board
Quentin van Breda Warwick van Breda
Chief Executive Officer Operations Director
Johannesburg
28 January 2010
Directors:
QCA van Breda (Chief Executive Officer), W van Breda (Operations Director), R
Erasmus (Financial Director), MW Mashaba, JM Poluta* J Fizelle*
*Independent non-executive
Company secretary
Warwick van Breda
131 Fitter Road, Spartan
Kempton Park, 1619
(PO Box 2144, Kempton Park, 1620)
Registered office
131 Fitter Road, Spartan
Kempton Park, 1619
(PO Box 2144, Kempton Park, 1620)
Designated Adviser
Merchantec Capital
2nd Floor, North Block
Hyde Park Office Towers
Corner Sixth Road & Jan Smuts Avenue
Hyde Park, Johannesburg, 2196
(PO Box 41480, Craighall, 2024)
Auditor
RSM Betty & Dickson (Johannesburg)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 28/01/2010 17:28:01 Produced by the JSE SENS Department.
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