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AFT
AFT
AFT - Afrimat Limited - Reviewed condensed consolidated interim financial
results for the six months ended 31 August 2010
Afrimat Limited
(Incorporated in the Republic of South Africa)
("Afrimat" or "the company" or "the group")
(Registration Number: 2006/022534/06)
Share Code: AFT ISIN Code: ZAE000086302
REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS
ENDED 31 AUGUST 2010
Headline earnings up 4,9%
HEPS up 1,0%
NAV of 413 cents per share
Net debt: equity ratio 16,5%
Strong performance from Aggregates division
Condensed consolidated income statement
Reviewed six Reviewed six Change Audited year
months months % ended
ended ended 28 February
31 August 31 August 2010
2010 2009 R`000
R`000 R`000
Revenue 455 874 392 517 16,1 778 016
Cost of sales (347 917) (292 512) (595 852)
Gross profit 107 957 100 005 182 164
Other income 4 041 3 170 3 253
Operating expenses (47 342) (36 587) (76 493)
Operating profit 64 656 66 588 (2,9) 108 924
Investment revenue 4 290 1 968 6 807
Finance costs (5 567) (7 638) (12 959)
Share of profit of associate 7 - 5
Profit before taxation 63 386 60 918 4,1 102 777
Taxation (18 485) (18 804) (1,7) (29 864)
Profit attributable to 44 901 42 114 6,6 72 913
shareholders
Attributable to:
Owners of the parent 44 887 41 866 72 911
Non-controlling interests 14 248 2
44 901 42 114 72 913
Reconciliation of headline
earnings:
Profit attributable to 44 887 41 866 72 911
owners of the parent
Profit on disposal of (3 553) (2 534) (2 052)
property, plant and
equipment
Profit on disposal of (488) - -
trademark
Profit on disposal of - (637) (669)
financial instruments
Negative goodwill included - - (532)
in other income
Total tax effects of 702 908 779
adjustments
Headline earnings 41 548 39 603 4,9 70 437
Shares in issue:
Total shares in issue 143 262 412 143 262 412 143 262 412
Treasury shares (4 796 249) (1 960 867) (3 398 280)
Net shares in issue 138 466 163 141 301 545 139 864 132
Weighted average number of net 138 807 226 133 585 941 137 236 345
shares in issue
Diluted weighted average number 140 022 129 134 453 353 138 290 134
of shares
Earnings per ordinary share 32,3 31,3 3,2 53,1
(cents)
Diluted earnings per ordinary 32,1 31,1 3,2 52,7
share (cents)
Headline earnings per ordinary 29,9 29,6 1,0 51,3
share "HEPS" (cents)
Diluted HEPS (cents) 29,7 29,5 0,7 50,9
Condensed consolidated statement of comprehensive income
Reviewed six Reviewed six Change% Audited
months months year ended
ended ended 31 28 February
31 August August 2010
2010 2009 R`000
R `000 R`000
Profit for the period 44 901 42 114 6,6 72 913
Other comprehensive income
Net change in fair value of 18 138 220
available-for-sale financial
assets
Net change in fair value of - (637) (669)
available-for-sale financial
assets transferred to profit
and loss
Income tax on other (2) 182 177
comprehensive income
16 (317) (272)
Total comprehensive income for 44 917 41 797 7,5 72 641
the period
Attributable to:
Owners of the parent 44 903 41 549 72 639
Non-controlling interests 14 248 2
44 917 41 797 72 641
Condensed consolidated statement of financial position
Reviewed Reviewed Audited
31 August 31 August 28 February
2010 2009 2010
R `000 R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 381 227 380 747 385 261
Intangible assets 14 149 14 867 14 479
Goodwill 101 332 101 332 101 332
Investment in associate 13 - 5
Other financial assets 71 174 66 307 67 012
Deferred tax 5 190 3 227 4 570
Retirement benefit asset 13 052 12 310 12 672
586 137 578 790 585 331
Current assets
Inventories 74 154 82 369 68 862
Current tax receivable 4 386 6 664 5 223
Trade and other receivables 242 865 170 709 130 956
Cash and cash equivalents 29 022 27 661 52 914
350 427 287 403 257 955
Total assets 936 564 866 193 843 286
EQUITY AND LIABILITIES
Equity
Share capital 1 435 1 435 1 435
Share premium 352 150 352 150 352 150
Business combination adjustment (105 788) (105 788) (105 788)
Treasury shares (15 617) (6 439) (11 002)
Net issued share capital 232 180 241 358 236 795
Other reserves 2 154 2 205 1 835
Retained income 356 678 303 387 325 668
Attributable to equity holders of 591 012 546 950 564 298
parent
Non-controlling interests 215 510 201
Total equity 591 227 547 460 564 499
Liabilities
Non-current liabilities
Borrowings long-term 51 679 63 841 48 506
Deferred tax 61 543 57 674 61 467
Provisions 14 431 12 535 13 160
127 653 134 050 123 133
Current liabilities
Borrowings short-term 40 467 43 629 43 364
Current tax payable 4 030 14 671 159
Trade and other payables 138 922 99 785 91 347
Bank overdraft 34 265 26 598 20 784
217 684 184 683 155 654
Total liabilities 345 337 318 733 278 787
Total equity and liabilities 936 564 866 193 843 286
Net asset value per share (cents) 413 382 394
Tangible net asset value per share 332 301 313
(cents)
Condensed consolidated statement of cash flows
Reviewed Reviewed Audited
six months six months year ended
ended ended 28 February
31 August 31 August 2010
2010 2009 R`000
R`000 R`000
Cash flows from operating activities
Cash generated from operations 49 818 60 865 166 491
Interest income 4 290 1 968 6 802
Dividends received - 5 5
Finance costs (5 566) (7 638) (12 959)
Tax paid (14 320) (3 895) (25 582)
34 222 51 305 134 757
Cash flows from investing activities
Acquisition of property, plant and (18 573) (12 104) (38 086)
equipment
Proceeds on sale of property, plant 4 356 7 010 10 171
and equipment
Purchase of financial asset (4 162) (35 367) (35 989)
Acquisition of businesses - (14) (14)
Deposit on acquisition of business (35 000) - -
(53 379) (40 475) (63 918)
Cash flows from financing activities
Purchase of treasury shares (4 615) (2 319) (6 882)
Net movement in borrowings 276 (5 184) (20 784)
Dividends paid (13 877) (10 556) (19 335)
Net cash from financing activities (18 216) (18 059) (47 001)
Total cash movement for the period (37 373) (7 229) 23 838
Cash at beginning of period 32 130 8 292 8 292
Total cash at the end of period (5 243) 1 063 32 130
Condensed consolidated segment report
Split Reviewed Split six Reviewed Split Audited
six months six months months six months year year
ended ended ended ended ended ended
31 August 31 August 31 August 31 August 28 28
2010 2010 2009 2009 February February
% R`000 % R`000 2010 2010
% R`000
Revenue
External
sales
Aggregates 69 313 838 63 245 062 63 487 387
Readymix 19 87 256 24 94 590 24 188 295
Concrete
Concrete 12 54 780 13 52 865 13 102 334
Manufactured
Products
100 455 874 100 392 517 100 778 016
Intersegment
sales
Aggregates 86 22 145 84 20 637 83 35 889
Readymix 1 240 1 255 1 554
Concrete
Concrete 13 3 249 15 3 718 16 6 713
Manufactured
Products
100 25 634 100 24 610 100 43 156
Total revenue
Aggregates 70 335 983 63 265 699 64 523 276
Readymix 18 87 496 23 94 845 23 188 849
Concrete
Concrete 12 58 029 14 56 583 13 109 047
Manufactured
Products
100 481 508 100 417 127 100 821 172
Operating
profit
before tax
Aggregates 88 57 090 75 49 866 77 83 633
Readymix 3 1 668 10 6 467 11 11 736
Concrete
Concrete 10 6 715 13 8 793 11 12 347
Manufactured
Products
Other (1) (817) 2 1 462 1 1 208
100 64 656 100 66 588 100 108 924
Operating
profit
margins on
external
revenue (%)
Aggregates 18,2 20,3 17,2
Readymix 1,9 6,8 6,2
Concrete
Concrete 12,3 16,6 12,1
Manufactured
Products
14,2 17,0 14,0
Other
Information
Assets
Aggregates 57 536 412 58 508 307 56 473 695
Readymix 7 67 727 8 67 277 7 58 889
Concrete
Concrete 7 65 924 8 66 814 7 60 528
Manufactured
Products
Other 29 266 501 26 223 795 30 250 174
Consolidated 100 936 564 100 866 193 100 843 286
total assets
Condensed consolidated statement of changes in equity
Share Share Treasury Business
capital premium shares combination
adjustment
Balance at 1 March 2009 1 340 325 170 (4 120) (105 788)
Changes:
Acquisition equity - - - -
adjustments
Issue of share capital 95 26 980 - -
Employee share option - - -
scheme: Value of -
services provided
Movement in treasury - - (2 319) -
shares
Total comprehensive - - - -
income for the period
Dividends paid - - - -
Balance at 31 August 2009 1 435 352 150 (6 439) (105 788)
Balance at 1 March 2009 1 340 325 170 (4 120) (105 788)
Changes:
Acquisition equity - - - -
adjustments
Issue of share capital 95 26 980 - -
Employee share option - - - -
scheme: Value of
services provided
Movement in treasury - - (6 882) -
shares
Total comprehensive - - -
income for the year -
Dividends paid - - - -
Balance at 28 February 1 435 352 150 (11 002) (105 788)
2010
Changes:
Employee share option - - - -
scheme: Value of
services provided
Movement in treasury - - (4 615) -
shares
Total comprehensive - - - -
income for the period
Dividends paid - - - -
Balance at 31 August 2010 1 435 352 150 (15 617) (105 788)
Other Retained Non- Total
reserves income controlling equity
interests
Balance at 1 March 2009 2 260 272 077 2 830 493 769
Changes:
Acquisition equity - - (2 568) (2 568)
adjustments
Issue of share capital - - - 27 075
Employee share option 262 - - 262
scheme: Value of services
provided
Movement in treasury - - - (2 319)
shares
Total comprehensive income (317) 41 866 248 41 797
for the period
Dividends paid - (10 556) - (10 556)
Balance at 31 August 2009 2 205 303 387 510 547 460
Balance at 1 March 2009 2 260 272 077 2 830 493 769
Changes:
Acquisition equity - 14 (2 631) (2 617)
adjustments
Issue of share capital - - - 27 075
Employee share option - - (153)
scheme: Value of services (153)
provided
Movement in treasury - - - (6 882)
shares
Total comprehensive income (272) 72 911 2 72 641
for the year
Dividends paid - (19 334) - (19 334)
Balance at 28 February 2010 1 835 325 668 201 564 499
Changes:
Employee share option 303 - - 303
scheme: Value of services
provided
Movement in treasury shares - - - (4 615)
Total comprehensive income 16 44 887 14 44 917
for the period
Dividends paid - (13 877) - (13 877)
Balance at 31 August 2010 2 154 356 678 215 591 227
Notes
Reviewed Reviewed Audited
six months six months year ended
ended ended 28 February
31 August 31 August 2010
2010 2009 R`000
R`000 R`000
1. Dividends
1.1 Afrimat Limited dividends
paid/declared in respect of the
current year profits
- Interim dividend 8 596 8 596 8 596
declared/paid
- Final dividend paid 14 326
8 596 8 596 22 922
1.2 Dividends cash flow
- Current year interim - - 8 596
dividend paid
- Previous year final dividend 14 326 10 701 10 701
paid
- Dividends received on (449) (145) (262)
treasury shares
- Dividends paid by - - 300
subsidiaries to non-
controlling shareholders
13 877 10 556 19 335
2. Capital commitments
- Approved capital expenditure 33 378 24 723 51 951
to be funded from surplus
cash and bank financing
3. Depreciation 21 803 20 817 38 642
4. Net movement in borrowings
- Opening balance 91 870 101 121 101 121
- New borrowings 23 784 25 162 30 509
- Acquired through - 11 532 11 532
acquisitions
- Repayments (23 508) (30 345) (51 292)
- Closing balance 92 146 107 470 91 870
5. Other financial assets
- Funding provided to Afrimat 69 428 64 205 65 284
employees (BEE transaction)
- Other 1 746 2 102 1 728
71 174 66 307 67 012
6. Events after the reporting date
No material events have occurred
from the reporting date to the date
of this report.
Commentary
Basis of preparation
The reviewed condensed consolidated interim financial statements for the
period have been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards (IFRS) and the
disclosure and presentation requirements of IAS 34: Interim Financial
Reporting,the AC 500 standards as issued by the Accounting Practice Board
and in compliance with the Listing Requirements of the JSE Limited and the
South African Companies Act (1973). The accounting policies and method of
measurement and recognition applied in preparation of these reviewed
condensed consolidated interim financial statements are consistent with
those applied in the audited annual financial statements for the year ended
28 February 2010.
Introduction
As anticipated, the condensed consolidated interim financial results for the
six months ended 31 August 2010 ("the period") reflect an improvement on the
comparative period. The financial results were driven in part by an upturn
in the business sector towards the end of the period.
Acquisition Of Glen Douglas Dolomite (Pty) Ltd ("the acquisition")
The Department of Mineral Resources ("DMR") approved the transfer of
ownership of the mining licence of Glen Douglas Dolomite (Pty) Limited.
Submission of the necessary environmental rehabilitation guarantees to the
satisfaction of the DMR and procuring an undertaking from the DMR that
Exxaro Resources Limited will be released from all guarantees provided to
the DMR are now the only outstanding conditions precedent to conclusion of
the acquisition. The acquisition price is subject to the movement in working
capital and capital expenditure between the contract date and the effective
date.
Financial Results
Revenue for the period increased by 16,1% to R455,9 million from R392,5
million. Operating profit decreased by 2,9% due to increased aggregates
competition in specific urban markets, price competition in Readymix
Concrete and Concrete Manufactured Products as well as the impact of the new
Mineral and Petroleum Resources Royalty Act effective from 1 March 2010.
Headline earnings grew by 4,9% translating into 1,0% higher headline
earnings per share of 29,9 cents (2009: 29,6 cents). The Black Economic
Empowerment transaction announced on 31 August 2009 had a negative effect on
HEPS of 4,3%.
Statement of financial position
Trade and other receivables increased during the period due to a deposit
paid of R35,0 million in respect of the acquisition, as well as the
increased activities towards the end of the period.
Operational Review
"Aggregates" benefitted from both increased volumes towards the end of the
period and increased contracting activities throughout. Afrimat`s flexible
service model utilising mobile equipment is positioning the group to become
the established leader in contract crushing. Although certain major projects
have concluded, or will shortly conclude, the division has successfully
secured a number of new major roads contracts in various regions. The
slowdown in private residential and commercial spend, including the Western
Cape, would appear to have bottomed-out and marginal improvement is
currently being enjoyed.
Processing plants are all fully-commissioned and well-placed to supply large
projects and boost the division`s revenue going forward.
"Readymix Concrete" underperformed due to a fall in volumes and intensified
price competition resulting from the generally poor economy during the
period.
"Concrete Manufactured Products" experienced increased volumes. However,
sales prices remain under pressure.
Business expansion and acquisitions
New business development is a key component of the group`s growth strategy.
The dedicated business development team continues to explore opportunities
in existing markets as well as in provinces where high growth is projected.
Dividend
An interim dividend of 6,0 cents per share (2009: 6,0 cents) has been
declared for the period. This is in line with the group`s dividend policy of
3 times cover. See `Dividend declaration` below.
BEE status
Existing BEE shareholders and Afrimat`s black employees hold in aggregate
26,12% of Afrimat`s issued shares.
Prospects
The enhanced business environment is expected to continue. However, price
competition will remain an adverse factor in Readymix Concrete and Concrete
Manufactured Products.
Business improvement initiatives aimed at expanding volumes and reducing
costs remain a key focus in all operations. These, supported by further
product diversification into attractive growth sectors such as industrial
minerals, including Glen Douglas, should see volumes increase further.
Auditor`s review
The condensed consolidated interim financial statements for the period have
been reviewed by the company`s auditors, Mazars. Their unmodified review
opinion is available for inspection at the company`s registered office.
Their review was conducted in accordance with ISRE 2410 "Review of interim
financial information performed by the independent auditor of the entity".
On behalf of the board
MW von Wielligh AJ van Heerden
Chairman Chief Executive Officer
8 November 2010
Dividend declaration
Notice is hereby given that interim dividend, No. 7 of 6,0 cents per share,
in respect of the six months ended 31 August 2010, was declared on Thursday,
4 November 2010. Relevant dates are as follows:
Last day to trade cum dividend Friday, 26 November 2010
Commence trading ex dividend Monday, 29 November 2010
Record date Friday, 3 December 2010
Dividend payable Monday, 6 December 2010
Share certificates may not be dematerialised or rematerialised between
Monday, 29 November 2010 and Friday, 3 December 2010, both dates inclusive.
By order of the board
Company secretary:
PGS de Wit
8 November 2010
Directors: MW von Wielligh* (Chairman), AJ van Heerden (CEO), HP Verreynne
(Financial Director), GJ Coffee, PG Corbin, L Dotwana*, F du Toit*, LP
Korsten*, PRE Tsukudu*, HJE van Wyk* *Non-executive director
Independent
Registered office: Tyger Valley Office Park No. 2, Corner Willie van Schoor
Avenue and Old Oak Road, Tyger Valley, 7530 (PO Box 5278, Tyger Valley,
7536)
Auditors: Mazars, Mazars Building, Rialto Road, Grand Moorings Precinct,
Century City, 7441 (PO Box 2785, Cape Town, 8000)
Sponsor: Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, Illovo,
2196 (PO Box 651010, Benmore, 2010)
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107)
Company secretary: PGS de Wit, Tyger Valley Office Park No. 2, Corner Willie
van Schoor Avenue and Old Oak Road Tyger Valley, 7530 (PO Box 5278, Tyger
Valley, 7536)
Date: 08/11/2010 07:05:03 Produced by the JSE SENS Department.
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