| Thu 30 Sep 2010, 17:00 | | RAR - Rare Holdings Limited - Audited financial results for the 12 months |
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RAR
RAR
RAR - Rare Holdings Limited - Audited financial results for the 12 months
ended 30 June 2010
RARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR ZAE000092714
("RARE" or "the company" or "the group")
AUDITED FINANCIAL RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2010
CONSOLIDATED INCOME STATEMENT
Audited Audited
12 Months 12 Months
June 2010 June 2009
R`000 R`000
Revenue 519 409 786 949
Cost of sales (414 509) (606 331)
Gross profit 104 900 180 618
Other income 3 512 5 754
Operating expenses (154 350) (114 708)
EBITDA (45 938) 71 664
Depreciation and amortisation (11 199) (8 647)
Investment income 2 223 1 410
Finance costs (20 023) (23 041)
(Loss)/profit before tax (74 937) 41 386
Income tax 5 773 (12 435)
(Loss)/profit for the year (69 164) 28 951
Attributable to:
Equity holders of the parent (58 070) 26 708
Non-controlling interest (11 094) 2 243
Weighted average number of ordinary shares in 88 750 88 750
issue
(Loss)/earnings per ordinary share (cents) (65,43) 30,09
(basic and diluted)
Reconciliation of headline earnings
(Loss)/profit attributable to ordinary (58 070) 26 708
shareholders
Profit on disposal of fixed assets and 29 573 787
impairment of goodwill after taxation
Headline (loss)/earnings attributable to (28 497) 27 495
ordinary shareholders
Headline (loss)/earnings per share (cents) (32,11) 30,98
(basic and diluted)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 Months 12 Months
June 2010 June 2009
R`000 R`000
(Loss)/profit for the year (69 164) 28 951
Exchange differences on translation of 1 415 1 099
foreign subsidiaries
Gains and losses on property revaluation 15 029 7 036
Taxation related to components of (4 841) (2 166)
comprehensive income
Total comprehensive (loss)/income for the (57 561) 34 920
year
Total comprehensive (loss)/income
attributable to:
Owners of the parent (49 733) 30 260
Non-controlling interest (7 828) 4 660
Total comprehensive (loss)/income for the (57 561) 34 920
year
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
12 Months 12 Months
June 2010 June 2009
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 96 227 82 417
Goodwill 6 089 35 578
Intangible assets 11 850 10 560
Investment in associates 900 900
Other financial assets 663 554
Prepayments 243 1 548
Deferred taxation 4 160 1 050
120 132 132 607
Current assets
Inventories 161 568 163 486
Loan to associate 3 071 1 898
Other financial assets 5 224 7 405
Trade and other receivables 153 238 189 480
Construction contracts and receivables 14 424 11 129
Current taxation receivable 715 1 278
Prepayments 729 729
Cash and equivalents 36 263 73 673
375 232 449 078
Total assets 495 364 581 685
EQUITY AND LIABILITIES
EQUITY
Share capital 72 598 72 598
Reserves 15 046 6 709
Retained income 38 249 96 319
Equity attributable to equity holders of parent 125 893 175 626
Non-controlling interest (9 312) 773
116 581 176 399
LIABILITIES
Non-current liabilities
Loans from minority shareholders in 2,282 1 934
subsidiaries
Other financial liabilities 110 043 128 619
Operating lease liability 102 102
Deferred tax 3 923 3 596
116 350 134 251
Current liabilities
Trade and other payables 213 615 224 321
Other financial liabilities 48 344 38 072
Current tax payable 439 4 851
Operating lease liability 13 93
Bank overdraft 22 3 698
262 433 271 035
Total liabilities 378 783 405 286
Total equity and liabilities 495 364 581 685
Net asset value per share (cents) 141,9 197,9
Net tangible asset value per share (cents) 121,6 145,9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 Months 12 Months
June 2010 June 2009
Group R`000 R`000
Opening balance 176 399 141 479
Changes in equity
(Loss)/profit for the year (69 165) 28 951
Foreign currency revaluation reserve 1 415 1 099
Revaluation of property 7 932 4 870
Total changes (59 818) 34 920
Closing balance 116 581 176 399
Comprising of:
Share capital 885 885
Share premium 71 714 71 714
Foreign currency translation reserve 341 54
Revaluation reserve 14 705 6 655
Retained income 38 249 96 319
Non-controlling interest (9 313) 772
Total equity 116 581 176 399
CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
12 Months 12 Months
June 2010 June 2009
R`000 R`000
Cash flows from operating activities
Cash generated from operations 8 321 13 850
Interest income 2 181 1 056
Dividends received 42 354
Finance costs (20 023) (23 041)
Tax paid (5 057) (17 521)
Net cash from operating activities (14 536) (25 302)
Cash flow from investing activities
Purchase of property, plant and equipment (6 913) (28 022)
Sale of property, plant and equipment 202 638
Purchase of other intangible assets (4 589) (3 763)
Loans advanced to group companies (1 173) (1 021)
Purchase of financial assets (109) (7 504)
Sale of financial assets 2 182 -
Net cash from investing activities (10 400) (39 672)
Cash flows from financing activities
Proceeds from other financial liabilities - 116 041
Repayment of other financial liabilities (8 305) -
Proceeds from loans from minority 349 -
shareholders
Repayment of loans from minority shareholders - (455)
Net cash from financing activities (7 956) 115 586
Total cash movement for the period (32 892) 50 612
Cash at the beginning of the period 69 976 19 834
Effect of exchange rate movements (842) (470)
Total cash at end of the period 36 242 69 976
CONDENSED SEGMENTAL INFORMATION
PRIMARY SEGMENT REPORT - BUSINESS SEGMENTS
for the twelve months ending 30 June 2010
R`000 Energy Water Chemicals Angola
Total revenue 300 056 89 234 75 263 126 855
Inter-segmental revenue (45 097) (4 275) (22 628) -
External revenue 254 959 84 959 52 635 126 855
Segment profit/(loss) 8 391 (15 026) (1 345) (18 842)
Impairment of goodwill
Finance cost
Investment revenue
Income tax
Net loss for the year
R`000 Investment Total
Total revenue 3 608 595 016
Inter-segmental revenue (3 608) (75 608)
External revenue - 519 408
Segment profit/(loss) (825) (27 647)
Impairment of goodwill (29 490)
Finance cost (20 023)
Investment revenue 2 223
Income tax 5 773
Net loss for the year (69 164)
CONDENSED SEGMENTAL INFORMATION
PRIMARY SEGMENT REPORT - BUSINESS SEGMENTS
for the twelve months ending 30 June 2009
R`000 Energy Water Chemicals Angola
Total revenue 382 451 212 247 112 537 188 084
Inter-segmental revenue (101 120) (7 250) - -
External revenue 281 331 204 997 112 537 188 084
Segment profit/(loss) 31 097 16 000 15 010 3 532
Finance cost
Investment revenue
Income tax expense
Net profit for the year
R`000 Investment Total
Total revenue 2 608 897 927
Inter-segmental revenue (2 608) (110 978)
External revenue - 786 949
Segment profit/(loss) (2 622) 63 017
Finance cost (23 041)
Investment revenue 1 410
Income tax expense (12 435)
Net profit for the year 28 951
ACCOUNTING POLICIES
Basis of preparation
The consolidated financial information for the twelve months ended 30 June
2010 from which these condensed financial statements have been derived, has
been prepared in accordance with International Financial Standards (IFRS),
the AC 500 standards as issued by the Accounting Practices Board, the
interpretations adopted by the International Accounting Standards Board
(IASB), the Listings Requirements of the JSE Limited and the requirements of
the South African Companies Act. These condensed financial statements are
presented in compliance with IAS 34 - Interim Financial Reporting, and
should be read in conjunction with the annual financial statements for the
year ended 30 June 2010.
ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the condensed
financial information have been applied consistently in the periods
presented in the consolidated financial statements, except for the adoption
of various new standards and interpretations as well as revisions to
standards and interpretations which are now effective, including, amongst
others, IFRS 3 - Business Combinations and IAS 1 - Presentation of Financial
Statements. The adoption of the improvements affected certain disclosures to
the consolidated financial statements. Details of the implementation and
adoption of the various IFRS`s and IFRIC`s are reflected in the consolidated
financial statements as included in RARE`s 2010 annual report, which will be
posted to shareholders in due course.
PROFILE
RARE supplies a comprehensive range of services and products to the fluid
conveyance industry. Services include design, manufacture, installation and
maintenance of pipeline and process plants across all sectors of industry
(particularly oil and gas, mining and local government).
FINANCIAL RESULTS
It has been a disappointing year for RARE, shown by the poor financial
results with revenue down by 34% at R519.4m (2009: R786.9m). Operating
margin decreased to 20.2% (2009: 22.9%). Operating expenses at R135,7m,
excluding the goodwill impairment, increased by 9.8% (2009: R123.4m).
However, this does not adequately reflect the efforts made in the control of
costs, which benefits are expected to be realised in the current financial
year. Controllable expenses at R118.6m (2009: R109.5m) include lease rental
and costs of R11.5m (2009: R2.7m) incurred in preparation for the required
ramp-up of Phase 2 of our Angolan operation. Non-controllable expenses of
R23,1m (2009: R13.9m) have been impacted by increasing bad debt provision to
R4.6m (2009: R1.5m).
This decline in margin is of concern, and whilst the difficult trading
conditions over the last 18 months have contributed to this, the value of
RARE`s product offering has not been adequately leveraged, an aspect of the
business that will be given due attention going forward.
The Board of Directors has secured independent external expertise to review
our business model, management capacity, inventory, creditor and debtor
management, processes and operational efficiencies.
OPERATIONAL REVIEW
Government`s lack of capacity to execute the substantial backlog of
infrastructure development and rehabilitation of existing services has added
significantly to RARE`s poor performance. This was exacerbated by the
activities and subsequent dismissal of two senior executives, as announced
on SENS on 27 September 2010, which added to the non-delivery of expected
results.
The Energy Division revenue at R254.9m (2009: R281.3m) has not reflected the
opportunities in this market, and management has been strengthened to ensure
consolidation as the premier supplier within the industry.
The performance of the Water Division has been disappointing. Revenue at
R84.9m (2009: R204.9m) reflects significant loss of ground in our growth.
Whilst we accept that market conditions have contributed to the decline in
revenue, the activities and subsequent dismissal of the two top executives
who were responsible for managing this business compounded the dismal
performance of the Water Division. Attention to the recovery of this
business is a priority.
The Chemical Division revenue of R52.6m (2009: R112.5m) demonstrates the
difficulties encountered through delays in the awarding of projects. However
our Life Extending Technologies has now gained momentum, with future
prospects boding well for this business.
The falloff in revenue of the Angolan Division to R126.8m (2009: R188.1m)
proved disastrous for this investment. Whilst operations were upgraded for
the expected implementation of Phase 2 of the CABGOC contract, a delay in
the processing of orders due to external administrative and legislative
procedures resulted in poor sales execution in the second half of the year.
Revenue of R52.4m was realised in the second half of the year (First half;
R74.4m). However the reasons for the decline in revenue to R126.8m (2009:
R188.1m) have been remedied and a resumption of historic activity levels has
commenced.
The company`s poor performance remains the focus of attention for our Board
of Directors. The Board is currently reviewing the company`s commercial
competencies and is making the required adjustments to position RARE for
profitable and sustainable growth.
POST YEAR END EVENTS
The only post year-end event, which is significant is the action surrounding
the termination of employment of the two senior employees who attempted to
use the company`s intellectual property, time and resources to establish a
competitive business for their own account. Investigations have concluded
that these actions have not caused any direct loss of the company`s assets
but may have led to loss of opportunity and business. Steps are being taken
to restructure the organisation and regain business activity, especially in
the Water Division.
APPOINTMENT OF ACTING CEO
As announced on SENS on 27 September 2010, the Board has resolved to utilize
the skills of David Scheepers in the role of Commercial Director in order to
regain momentum and restructure the organisation following on the
aforementioned post year-end event. This is a role which requires momentum,
source skills and experience and the Board feels that David will provide all
of these. Consequently, David will step down as CEO with effect from 30
September 2010. A suitable replacement is being sourced. In the interim the
Chairman, Don Ncube, will act as CEO.
The Board expresses its gratitude and appreciation to David for his
contribution to the affairs of the Group and looks forward to his ongoing
commitment and involvement.
PROSPECTS
In support of a confident outlook for the future of RARE, recent projects
secured provide a positive respite to the downturn of the last 18 months .
The order book of projects secured for 2011 in comparison to 1st and 2nd
Half 2010 indicates a resumption of our expected performance of the
business.
Finally, RARE will function more effectively with the injection of
additional capital and this is under serious consideration by the Board.
AUDITORS` OPINION
The auditors, Greenwoods, have issued their unqualified audit opinion on the
group`s financial statements for the year ended 30 June 2010. The audit was
conducted in accordance with International Standards on Auditing. A copy of
their audit report is available for inspection at the company`s registered
office. Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the company`s auditors.
On behalf of the Board
DMJ Ncube
Chairman and Acting CEO
30 September 2010
CORPORATE INFORMATION
Directors:
DMJ Ncube (Chairman and Acting CEO)
PJ Willemse (Financial Director)
MG Meehan (Independent Non-executive and Lead Independent Director)
S Masinga (Independent Non-executive)
AZ Dlamini (Independent Non-executive)
DE Scheepers (Commercial Director)
Registered Office:
22 Old Vereeniging Road, Kliprivier, Midvaal, 1870
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street,
Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Designated Advisor:
PSG Capital (Proprietary) Limited
Company Secretary:
WR Somerville
Date: 30/09/2010 17:00:04 Produced by the JSE SENS Department.
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