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OLI
OLI
OLI - O-line Holdings Limited - Unaudited Interim Financial Results for the
six months ended 31 December 2009
O-line Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2006/034685/06)
JSE share code: OLI
ISIN Number: ZAE000110730
("O-line" or "the O-line group" or "the company")
Unaudited Interim Financial Results for the six months ended 31 December
2009
Revenue up 33%
Gross profit for the period up 27%
Profit after taxation from continuing operations down 25%
Headline earnings per share, after discontinued operations, down 62%
Condensed Statement of
Comprehensive Income
for the six months ended
31 December 2009
Six months Six months Year
ended Ended ended
31 Dec 2009 31 Dec 2008 30 June
2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue 157 642 118 213 313 794
Cost of Sales (104 327) (76 215) (199 315)
Gross Profit 53 315 41 998 114 479
Other Income 464 1 055 3 191
Operating expenses (36 627) (24 084) (60 945)
Operating profit 17 152 18 969 56 725
Investment revenue 1 701 1 323 3 568
Finance costs (3 489) (1 562) (6 859)
Profit before taxation 15 364 18 730 53 434
Taxation (5 325) (5 259) (14 900)
Profit for the period from 10 039 13 471 38 534
continuing operations
Loss for the period from (3 799) - -
discontinued operations (Note 1)
Total comprehensive income for 6 240 13 471 38 534
the period
Reconciliation of basic to
headline earnings
Profit for the period 6 240 13 471 38 534
attributable to ordinary
shareholders
Loss / (Profit) on sale of fixed 208 - (14)
assets
Headline earnings 6 448 13 471 38 520
Total shares in issue (`000) 238 500 196 500 150 000
Weighted average of shares in 201 293 157 328 176 753
issue 478 804 000
Basic earnings per share (cents) 3.10 8.56 21.80
Basic earnings per share (cents) 4.99
on continuing operations
Basic headline earnings per 3.20 8.56 21.79
share (cents)
Fully diluted earnings per share 3.10 8.56 21.80
(cents)
Fully diluted earnings per share 4.99
(cents) on continuing operations
Fully diluted headline earnings 3.20 8.56 21.79
per share (cents)
Condensed Statement of
Changes in Equity
for the six months ended
31 December 2009
Share Share Retained Total
capital premium income equity
R`000 R`000 R`000 R`000
Balance at 31 December * 91 783 58 079 149 862
2008
Share issue expenses (116) (116)
Total comprehensive income 25 063 25 063
for the period
Balance at 1 July 2009 * 91 667 83 142 174 809
Total comprehensive income 6 240 6 240
for the period
Issue of shares * 42 000 42 000
Share issue expenses (1 413) (1 413)
Dividends paid (9 825) (9 825)
Balance at 31 December * 132 254 79 557 211 811
2009
* less than R1 000
Condensed Statement of
Financial Position
at 31 December 2009
31 December 31 December 30 June
2009 2008 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Assets
Non-Current Assets
Property, plant and equipment 69 042 71 348 71 331
Goodwill 64 632 62 066 64 632
Loans 12 357 - 13 853
Deferred taxation 2 382 1 689 3 663
148 413 135 103 153 479
Current Assets
Inventories 63 346 65 154 66 547
Current tax receivable 3 348 5 245
Trade and other receivables 27 043 43 378 54 639
Cash and cash equivalents 71 832 55 576 51 924
165 569 164 113 173 355
Non Current Assets Available 3 036 - -
For Sale
Total Assets 317 018 299 216 326 834
Equity and Liabilities
Equity and reserves 211 811 149 862 174 809
Non-Current Liabilities
Other financial liabilities 43 858 67 258 54 490
Finance lease obligation 2 487 2 734 3 129
Deferred taxation 8 728 4 361 8 687
55 073 74 353 66 306
Current Liabilities
Loans from shareholders - 3 000 -
Other financial liabilities 21 001 11 352 33 460
Current taxes payable 941 9 427 12 411
Finance lease obligations 1 741 1 283 1 735
Trade and other payables 26 196 49 939 37 858
Provisions 255 - 255
50 134 75 001 85 719
Total Equity and Liabilities 317 018 299 216 326 834
Condensed Statement of Cash
Flows for the six months
ended 31 December 2009
31 December 31 December 30 June
2009 2008 2009
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash flows from operating 52 470
activities
Cash generated from 32 420 52 424 68 811
operations
Interest income 1 701 1 323 3 568
Finance costs (3 268) (1 246) (6 384)
Taxation paid (17 097) (6 393) (13 525)
Net cash flows from operating 13 756 46 108 52 470
activities
Cash flows from investing (145 614)
activities
Purchases of property, plant (2 030) (5 628) (7 101)
and equipment
Sale of property, plant and 128 5 023 5 151
equipment
Acquisition of businesses - (129 817) (129 811)
Loans (advanced) / repaid 1 496 - (13 853)
Net cash flows from investing (406) (130 422) (145 614)
activities
Cash flows from financing 98 140
activities
Proceeds on shares issued 40 587 44 412 44 296
Repayment of shareholders - (9 181) (12 181)
loans
(Repayments of) / Proceeds (23 090) 58 349 67 531
from other financial
liabilities
Finance lease payments (1 114) (618) (1 506)
Dividends paid (9 825) - -
Net cash flows from financing 6 558 92 962 98 140
activities
Total cash movement for 19 908 8 648 4 996
period
Cash and cash equivalents at 51 924 46 928 46 928
beginning of period
Cash and cash equivalents at 71 832 55 576 51 924
end of period
Segment Report
for the six months ended 31
December 2009
Revenue
O-Line 70 405 105 580 188 236
Armco 94 111 13 178 132 726
Corporate - - -
Eliminations (6 874) (545) (7 168)
157 642 118 213 313 794
Operating Profit
O-Line 3 064 18 438 29 578
Armco 14 819 1 080 27 938
Corporate (212) 7 (6 224)
Eliminations (519) (556) 5 433
17 152 18 969 56 725
Assets
O-Line 82 762 85 137 91 186
Armco 164 074 179 710 190 142
Corporate 139 903 115 611 111 987
Eliminations (69 721) (81 242) (66 481)
317 018 299 216 326 834
Liabilities
O-Line 24 174 26 237 27 551
Armco 153 351 179 419 177 472
Corporate 1 055 20 640 17 316
Eliminations (73 373) (76 942) (70 314)
105 207 149 354 152 025
Capital expenditure
O-Line 1 265 5 888 6 905
Armco 1 022 461 2 561
Corporate - - -
Eliminations - - -
2 287 6 349 9 466
For management purposes the Group is organised into three major
operating divisions : O-line Support Systems, Armco
Superlite and Corporate. It represents the basis on which the Group
reports its primary segment information.
Note 1: Loss for the period from
discontinued operations
Revenue 5277
Cost of Sales 8268
Gross Profit (2 991)
Operating expenses (2285)
Loss before taxation (5 276)
Taxation 1477
Loss for the period from (3 799)
discontinued operations
Basis of preparation
The unaudited and un-reviewed consolidated interim financial results have
been prepared in accordance with International Financial Reporting Standards
("IFRS") and comply with IAS34: Interim Financial Reporting, the South
African Companies Act, as amended, and the JSE Limited Listings Requirements.
The principal accounting policies used in the preparation of the financial
results are consistent with those applied in the annual financial statements
for the year ended 30 June 2009.
COMMENTARY ON INTERIM RESULTS
Profile
O-line provides a basket of offerings to infrastructure development
consisting of Cable Management and Structural Support Systems, Galvanizing,
Construction Products and Road Safety Products under the well known Brands of
O-line and Armco. The Group boasts a sophisticated distribution network with
branches in all major cities and agents and stockists having been appointed
internationally throughout Southern Africa
Financial performance
The O-line group experienced an increase in revenue during the first six
months of the current financial year in the amount of 33% from R118.2 million
to R157.6 million largely due to the inclusion of a full six months of Armco
Superlite`s trading as opposed to only 1 months trading in the corresponding
6 months ended December 2008. Gross profit has increased from R41.9m to
R53.3m which reflects Armco Superlite`s contribution. Gross profit
percentages have otherwise been maintained at 36% and 25% for O-line and
Armco respectively. Finance costs increased from R1.5m to R3.4m comparative
to the preceding six month period, mainly attributable to additional
financing costs incurred in servicing the interest bearing debt incurred in
acquiring the assets of Armco. An amount of R12.3m in loans was incurred as
a result of loans made to the Armco management paid in terms of a guarantee
by the company to Steelwood Africa (Pty) Limited. The loans are secured by
the pledge of 25 916 250 shares in O-line and bears interest at the prime
bank overdraft rate. Cash and cash equivalents increased with 29% from R55.5m
to R71.8m. The Group also experienced the following decreases:
- Other financial liabilities decreased from R78.6m to R64.8m in line
with repayments in terms of loan agreements entered into by the
company;
- Trade and other payables decreased from R49.9m to R26.1m as a result of
the amounts owing to trade creditors being R9m down from corresponding
6 months period and an amount of R14.5m paid to Steelwood Africa (Pty)
Limited for the property in Isando, the liability being raised in the
prior period;
- Trade and other receivables are down from R43.3m to R27m following the
downward trend in sales and better debtors collections which is
reflected in receivables balances at month end. An amount of R3.2m owing
by Steelwood Africa (Pty) Limited was also received;
- Cash generated from operations decreased from R52.4m to R32.4m following
the trend indicative of difficult trading conditions. Fixed overhead
expenses in relation to turnover has increased and the discontinued
operations pre tax loss of R5.3m had an adverse effect on cash
generation; and
- Inventory decreased from R65.1m to R63.3m as a result of the Group`s
policy of maintaining the lowest possible investment in inventories.
- Capex decreased from R5.8m to R1.2m the reason being that there was no
major capital expenditure in the first six months of the year.
In addition to the above, the Group also incurred repayment of other
financial liabilities in the amount of R23m. These include Nedbank Mortgage
Bonds repayments of R1.3m ; Nedbank Medium Term Loan repayments of R4.7m;
Steelwood Africa (Pty) Limited loan repayment of R3.2m and the Steelwood
Africa (Pty) Limited Guarantee payment of R13.8m.
Operational performance and prospects
As predicted demand for the full spectrum of O-lines products experienced a
decline within the first and second quarters due to economic factors
associated to the recession. A drop in revenue accompanied by discontinued
operations resulted in an immediate effect on the bottom line. Gross profits
within continued operations remained firm however the economic standstill and
approaching construction holidays had little to offer in revenue.
Looking forward the Group remains bullish as clear evidence shows the
approach of the next influx and as of the New Year there has been increasing
demands across the spectrum of products, with emphasis on the project sectors
as well as road infrastructure. The Group to date has grown the order book
and forward strategies are paying dividend as foreign interest for the
utilisation of O-line commodities grows. National branches are underway as
usual with the newly opened Bloemfontein branch showing profitability
followed by the establishment of O-line Mozambique Limitada of which is sure
to play a vital role within the fourth quarter. Projects tendered as of
January 2010 amount to R270 Million with the following projects underway-
Ambatovy Nickel (Madagascar), Unki Platinum mine (Zimbabwe), Sishen South
Iron Ore (SA), Gauteng Freeway Improvement Project (SA), Wessel`s Manganese
Mine (SA), Forensic laboratories CPT (SA), Tonkolili mine (Sierra Leone), GTZ
Construction (South Sudan), Tonato / Ngoma roads(Botswana), Northern Corridor
Roads(Botswana).
General operations remain constant with the exception of the discontinuation
of the Signage division due to diminished profits as a result of easy market
entrance and fierce competition. Expansions of the O-line powder coating
facility were carried out through the purchase of new property and additional
production lines. This has been done with the intentions of making the
service available to the outside market but more so to accommodate an
increase in the demand for Duplex coated steel structures.
Effects pertaining to raw material variables of Steel and Zinc were minimal
and the manufacturing concerns have once again geared themselves for future
demand. Indications give rise to the start of procurement for the long
awaited power stations which will provide a boost to income streams, focus
being on galvanizing and electrical carrying systems.
Capex and forecast
Contracts have been entered into for the purchase of a fixed property
consisting of land and buildings and certain plant and equipment for the
expansion of the O-line powder coating facility. This expenditure will be
financed by the raising of medium term loans.
For and on behalf of the board
G.S. Smart (Chief Executive Officer)
E.A. Jay (Chairman)
G.A. Driver (Financial Director)
Selby, Johannesburg
03 March 2010
Designated Advisor:
QuestCo Sponsors (Proprietary) Limited
Date: 03/03/2010 17:04:02 Produced by the JSE SENS Department.
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