| Mon 3 Oct 2011, 7:06 | | SFH - SA French Limited - Reviewed condensed results for the year ended 30 June |
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SFH
SFH
SFH - SA French Limited - Reviewed condensed results for the year ended 30 June
2011
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 Group")
REVIEWED CONDENSED RESULTS FOR THE YEAR ENDED 30 JUNE 2011
REVIEWED CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
12 months 12 months
ended ended
30 June 30 June
2011 2010
R`000 R`000
Revenue 97 414 65 630
Cost of sales (78 703) (50 060)
Gross profit 18 711 15 570
Other income 14 347 13 601
Operating expenses (27 711) (27 655)
Operating profit 5 347 1 516
Investment revenue 7 1 712
Finance costs (7 528) (7 354)
Restructuring costs (12 375) -
Loss before taxation (14 549) (4 126)
Taxation - (776)
Loss attributable to ordinary (14 549) (4 902)
shareholders
Other comprehensive income - -
Total comprehensive income (14 549) (4 902)
Reconciliation of attributable
losses to headline earnings
Losses attributable to ordinary (14 549) (4 902)
shareholders
Restructuring costs 12 375 -
Gains from loan write-offs (12 021) -
Impairment of investment 227 1 362
Loss / (profit) on Property, plant 554 (54)
and Equipment
Tax effect - (366)
(13 414) (3 960)
Weighted average number of shares 170 759 251 166 375 689
Basic and diluted loss per share (8.52) (2.95)
(cents)
Headline loss per share (cents) (7.86) (2.38)
Unweighted number of shares post 586 375 689 166 375 689
rights issue
Adjusted basic and diluted loss per (2.57) (2.95)
share (cents)
Adjusted headline loss per share (2.29) (2.38)
(cents)
Adjusted EPS and HEPS is based on the full inclusion of the rights issue shares
REVIEWED CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Reviewed 12 Audited
months 12 months
ended ended
30 June 30 June
2011 2010
R`000 R`000
ASSETS
Non-current assets 97 938 87 751
Property, plant and equipment 97 938 86 389
Other financial assets - 1 362
Current assets 32 280 99 072
Loans to shareholders 723 -
Inventories 9 432 86 129
Current tax receivable - 529
Trade and other receivables 16 246 12 380
Other financial assets 1 803 -
Cash and cash equivalents 4 076 34
TOTAL ASSETS 130 218 186 823
CAPITAL AND RESERVES 53 729 47 841
Share capital 68 816 49 330
Revaluation reserve 162 162
Accumulated loss (15 249) (1 651)
Non-current liabilities 34 172 17 271
Loans from shareholders 6 917 11 171
Instalment sale agreements 27 255 -
Other financial liabilities - 6 100
Current liabilities 42 317 121 711
Loans from shareholders 1 511 450
Other financial liabilities 496 496
Current tax payable - 165
Instalment sale agreements 10 398 41 359
Operating lease liability 147 1 285
Trade and other payables 26 848 71 763
Dividend payable - 786
Bank overdraft 2 917 5 407
TOTAL EQUITIES AND LIABILITIES 130 218 186 823
Number of shares in issue 566 375 689 166 375 689
Net asset value per share (cents) 9.49 28.75
Net tangible asset value per share 9.49 28.75
(cents)
REVIEWED CONDENSED STATEMENT OF CASH FLOWS
Reviewed Audited
12 months 12 months
ended ended
30 June 30 June
2011 2010
R`000 R`000
(13 280) 26 507
Net cashflow from operating
activities
Net cashflow from investing 4 190 (10 077)
activities
Net cashflow from financing 15 622 (12 480)
activities
Total cash movement for the year 6 532 3 950
Cash at the beginning of the year (5 373) (9 323)
Total cash at the end of the year 1 159 (5 373)
REVIEWED CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Revalu Accumula Total
Share/s premium ation ted loss equity
tated R`000 reserv R`000 R`000
capital e
R`000 R`000
Audited Balance as at 1 664 47 666 162 3 251 52 743
1 July 2009
Loss for the year - - - (4 902) (4 902)
Audited balance at 1 1 664 47 666 162 (1 651) 47 841
July 2010
Rights issue 20 000 - - - 20 000
Rights issue costs - (514) - - (514)
Absolution of - - - 951 951
dividend
Loss for the year - - - (14 549) (14 549)
Reviewed balance as 21 664 47 152 162 (15 249) 53 729
at 30 June 2011
REVIEWED CONDENSED SEGMENT REPORT
For management purposes the group is organised into 2 major operating divisions:
Rental and Sale of Cranes. Such structural organisation is determined by the
nature of risks and returns associated with each business segment and define the
management structure as well as the internal reporting system. The group
operates principally in South Africa and therefore does not present a
geographical segment.
2011 2010R`000
R`000
SEGMENT REVENUE
Rental 22 681 33 057
Sale 72 097 28 076
Other 2 636 4 497
97 414 65 630
SEGMENT GROSS PROFIT
Rental 12 838 10 552
Sale 3 700 3 201
Other 2 173 1 817
18 711 15 570
COMMENTARY
HIGHLIGHTS
The past twelve months have been characterised by a number of successes that
have been achieved through finding innovative solutions to challenges, bolstered
by high-quality corporate advice and an unwavering commitment from management.
The highlights in this period include a successfully implemented statement of
financial position restructure resulting in a significant reduction in group
liabilities from in excess of R138 million to less than R77 million. The group
had an increase in revenue and improved its operating profits in the year under
review.
INTRODUCTION
The board of directors of SA French ("the directors" or "the Board") is pleased
to present the reviewed financial results of SA French for the twelve months
ended 30 June 2011 ("the period") which reflect an improvement in the operating
performance of the business. This period has seen a restructuring of the
statement of financial position through a successful rights issue, the completed
implementation of the Manitowoc settlement agreement and the rationalization of
instalment sale agreements to term out the debt over a more sustainable period.
The business has also embarked on a process of retiring its remaining short term
liabilities. The setting and achieving of these milestones have significantly
improved the solvency and liquidity of the business. The restructure of the
statement of financial position has been completed against the backdrop of an
improvement in the operating environment as SA French has focused on its core
business, cut costs and on the mining and infrastructure sectors in Africa.
Management are cautiously optimistic on the outlook for the business.
GROUP PROFILE
SA French was incorporated in 1982 with its main objective being the sale,
rental and service of tower cranes in South Africa. The decision to list on the
AltX board of the JSE was made in 2007, following which the group entrenched
itself as the distributor in sub-equatorial Africa of NYSE listed Manitowoc
Crane Group`s Potain brand of tower cranes, the world`s largest crane
manufacturer. In addition to 29 years as an expert in the field of tower cranes,
the group has diversified into the supply of telescopic handlers and rack and
pinion passenger and materials hoists and working platforms from leading
European suppliers. This diversification allows the company to offer
complementary lifting solutions to its client base. The focus of the company is
to offer the best possible solution to a lifting requirement with a high level
of service and customer satisfaction.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these reviewed condensed
group financial results for the year ended 30 June 2011, 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 2010. These condensed
financial statements as set out in this report have been prepared in terms of
IAS 1 Presentation of Financial Statements, IAS 34 - Interim Financial
Reporting, the Companies Act, 2008 as amended, the AC 500 standards as issued by
the Accounting Practice Board and its successor, and the Listings Requirements
of the JSE. The financial results have been prepared under the supervision of
Peter van Zyl, financial director.
AUDITOR`S REPORT
The group`s condensed annual financial statements for the year ended 30 June
2011 have been reviewed by the group`s auditors, RSM Betty & Dickson
(Johannesburg). The review report on the group`s condensed annual financial
statements is available for inspection at the company`s registered office. The
auditors have not reviewed the prospects of the group.
REVIEW OF OPERATIONS
Maintaining solid relationships with existing clients and leveraging these
relationships, built on the commitment to service, to expand its geographic
footprint and client base was the prevailing strategy for this period. The
ability to adapt and provide expert technical advice has been a distinguishing
factor in the award of a number of orders to the group. Operational teams and
equipment have been utilized in Mali, Rwanda, Mozambique and Botswana while
within South Africa there is no corner of the country where lifting is required
that has not been visited by this team.
Due to the fact that it can boast the youngest and largest fleet of tower cranes
in Africa, the group has been able to provide tailor made lifting solutions to
various operators within the industry. Most notably the power generation, mining
and water infrastructure projects have benefitted from the advice on positioning
and execution of lifting equipment as well as the guaranteed 90% availability
that is assured when using the products and operators supplied by SA French.
SA French has concluded sales with a value in excess of R20m in the Democratic
Republic of Congo (DRC) for multinational mining companies and has completed and
submitted several tenders for the sale and service of tower cranes throughout
sub-Saharan Africa. The Continent of Africa represents a growth opportunity for
the Group with significant investment in commodities and the need for
infrastructure. This market is vast and SA French has the necessary blend of
expertise and experience to provide the lifting solutions that are required to
complete these projects. Risk is always mitigated in cross border transactions
by partnering with South African based clients or seeking the advice of well
placed industry operators.
STATEMENT OF GOING CONCERN
The reviewed condensed group financial statements for the year ended 30 June
2011 have been prepared on the going concern basis.
All reportable irregularities occurring in previous periods have been addressed
by management and have been resolved. The auditors have provided an unmodified
review report.
On a review of the group`s statement of financial position there are three
significant issues that should be brought to the attention of the users of these
results. The company currently has a computed loss for taxation purposes of
R51.1 million. Given the current circumstances of the company, consideration has
been made to the provisions of IAS 12 Income Taxes and no deferred taxation
asset has been raised on this computed loss in the current period. Secondly the
Instalment Sale Agreements have been restructured with the various banks to
ensure they are brought back in line with the provisions of the new agreements.
A number of the agreements have been amended to include extended repayment
periods which result in a lower monthly cash outflows. The Statement of
Financial Position therefore now reflects a non-current portion which reflects
the implementation of the restructured Instalment Sale Agreements. Finally the
settlement arrangement with Manitowoc Crane Group has been implemented during
the period resulting in a significant reduction in inventory and trade payables
thus reducing the overall risk in the company.
SKILLS DEVELOPMENT
The Engineering Council of South Africa ("ECSA") has conferred the status of
Lifting Machinery Entity ("LME") on SA French and it continues to, under the
auspices of ECSA, assist its technicians to register as candidate Lifting
Machinery Inspectors ("LMI") while boasting the largest number of inspectors in
a single lifting entity. It is an active member of the steering committee tasked
with establishing a South African National Standard for the crane industry.
In order to maintain the high standard of service and quality that it has set
within the industry SA French has appointed a full time quality audit manager to
audit the work that has been done by its technicians. This audit is available,
unedited, to its clients. There has also been the successful completion, by two
candidates, of the TUV ISO9000 external audit accreditation which has given the
group the additional ability to audit its suppliers to ensure the quality of the
products that are supplied.
The training facility established under the auspices of the Transport Education
and Training Authority ("TETA") enables the group to provide operator training
and certification for clients, third parties as well as internally. This
accreditation has been audited and confirmed by TETA during the reporting
period.
A permanent position of Health and Safety Officer within the group has been
advertised and filled within this period and the values added to clients and
internal operations have been immediately apparent with the creation of this
position as well as providing a number of opportunities with the additional
training of staff.
FINANCIAL RESULTS
REVENUE
The revenue grew during the period primarily as a result of the Manitowoc
settlement agreement which required the sale of inventory back to the supplier.
The group`s core focus on tower crane sales, service and rental has seen it
survive the economic downturn and absorb the costs associated with the
importation and storage of this additional stock.
OPERATING COSTS
SA French has managed its operating costs, reducing them wherever possible,
while ensuring that operating efficiencies have been increased. There were a
number of once off costs during the current period which resulted from the
restructure of the debt, the Manitowoc settlement agreement and the raising of
fresh capital. The management continues to review the operating cost base of the
business to ensure that maximum value is extracted from its operational efforts.
MANITOWOC SETTLEMENT
In the current reporting period, SA French concluded a settlement agreement with
its major supplier, Manitowoc Crane Group ("Manitowoc"), in which it agreed to
return a significant number of unutilized and unsold inventory which it had held
due to the cancellation of orders at the height of the economic downturn. The
full settlement agreement was implemented during the current period. This has
resulted in a material impact on the financial results. Firstly and most
importantly approximately R53m worth of inventory has been returned to the
supplier in exchange for the settlement of the debt owed to that supplier. The
deal removed significant financial risk from the Group through the reduction of
both its inventory holdings and its current liabilities. As a consequence, and
as a result of the material strengthening of the Rand against the Euro, the
offset agreement has resulted in non-cash restructuring costs in excess R12.3m.
This is essentially the reversal of the foreign exchange gains that were made in
the previous 2 years on the outstanding amount to the creditor as the Rand
strengthened. In addition, it must be highlighted that the structure of the
settlement agreement has driven the growth in the revenue and the costs of sales
and has resulted in a significant reduction in the margin of the business.
MOVEMENT IN BORROWINGS
The company`s non-current liabilities increased from R17 million at 30 June 2010
to R34 million as at 30 June 2011. This is due to the reclassification of the
Instalment Sale Agreements from current back to non-current as a result of the
restructure of these agreements.
Current liabilities have decreased from R121 million as at 30 June 2010 to R42
million as at 30 June 2011. This is due to the settlement of trade payables
under the Manitowoc deal, the reclassification of the current portion of the
Instalment Sale Agreements and general reduction in current liabilities through
the restructure and settlement of debt. The business has been supported by its
trade creditors over the past 24 months and the understanding and flexibility of
these partners has been, and continues to be, greatly appreciated by the board.
In addition to the above, SA French has been systematically reducing its bank
overdraft in keeping with its policy of financial discipline.
PROSPECTS
Within the Southern African Development Community ("SADC") there are a number of
opportunities for the supply of all forms of lifting machinery. SA French has
tendered on numerous jobs in this region and is confident of its prospects as
well as the opportunity to regionally diversify. The company continues to
leverage its long-term relationships with its blue chip clients in the mining
sector in order to take advantage of infrastructural and development projects in
the region. Within South Africa, the company`s national footprint, services
capabilities and competitive pricing makes it the tower crane supplier of
choice.
Projects that had stalled due to lack of funding in 2008 and 2009 are being
revisited and there is opportunity to advise and supply lifting solutions in
this area. This source of revenue is dependent on the private sector and takes
issues such as business and consumer confidence, interest rates and the
availability of funding into account.
Power generation remains an anticipated source of revenue and the group looks to
the award of a number of tenders that have been delayed from as far back as
March 2008 where it had worked closely with the winning tenderers and is now in
a position to directly benefit from work on these projects, consists of new
builds or maintenance of facilities.
The government allocation that has been earmarked for infrastructural
development between 2010 and 2014 of R800 billion is an incentive to stay
positive. The group will continue to invest in and retain skilled staff in order
to be in a position to take maximum benefit from any future infrastructure
spending both directly as well as through its clients. There are also
opportunities that are being investigated in wind farms and discussions with key
role players in the alternative energy sector are ongoing.
SUBSEQUENT EVENTS
The business concluded a number of restructuring deals with lenders and
creditors to ensure a sustainable ongoing reduction of its debt. Most notable of
these agreements was the settlement of the outstanding liability to the South
African Revenue Service ("SARS") as well as the restructure and regularizing of
the Instalment Sale Agreements with the various banks that have provided asset
backed finance to the Company.
DIVIDEND POLICY
No dividend has been declared for the period.
DIRECTORATE
Mr Peter van Zyl was appointed as financial director of SA French with effect
from 22 March 2011.
APPRECIATION
We thank our employees for their continued loyalty, hard work and commitment to
the vision of the group. Furthermore, we thank our non-executive directors and
designated advisers for their wise counsel and our stakeholders for their
consistent faith in the group. The board is confident in the company`s inherent
value, as well as its future prospects.
Quentin van Breda
CEO
Peter van Zyl
Financial Director
30 September 2011
Directors
QCA van Breda (Chief Executive Officer), W van Breda (Commercial Director), P
van Zyl (Financial Director), MW Mashaba, JM Poluta*, J Fizelle*. *non-executive
Company secretary
Warwick van Breda (LLB)
Registered office
461 Flower Close (off Sam Green)
Tunney ext.
Germiston
1400
PO Box 2144 Kempton Park 1620
Designated Adviser
PSG Capital (Pty) Limited
Corporate Adviser
AfrAsia Corporate Finance (Pty) Limited
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 03/10/2011 07:06:50 Produced by the JSE SENS Department.
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