| Mon 3 Oct 2011, 7:16 | | RAR - Rare - Unaudited Abridged Financial Results for the 12 months ended 30 |
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RAR
RAR
RAR - Rare - Unaudited Abridged Financial Results for the 12 months ended 30
June 2011
RARE Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR ISIN: ZAE000092714
("RARE" or "the company" or "the group")
Unaudited Abridged Financial Results for the 12 months ended 30 June 2011
Consolidated statement of comprehensive income
Unaudited Unaudited
12 Months 12 Months
June 2011 June 2010
R`000 R`000
Revenue 315 165 392 482
Cost of Sales (261 951) (304 189)
Gross Profit 53 214 88 924
Other Income 43 286 -
Operating Expenses (153 304) (116 723)
EBITDA (56 804) (28 430)
Depreciation and amortisation - (10 007)
Investment Income 2 261 2 223
Finance Costs (17 571) (15 704)
(Loss)/profit before tax (72 114) (51 918)
Income tax 2 038 6 233
(Loss)/profit for the year from continuing (70 077) (45 685)
operations
(loss)/profit for the year from discontinuing (58 464) (23 480)
operations
Attributable to:
Equity holders of the parent (91 430) (58 070)
Non-controlling interest (37 110) (11 094)
Weighted average number of ordinary shares in 104 091 88 750
issue
Earnings/(loss) per ordinary share (cents) (87.84) (65.43)
(basic and diluted)
Reconciliation of headline earnings
Loss attributable to ordinary shareholders (91 430) (58 070)
Profit/(loss) on disposal of fixed assets and 31 533 29 573
impairments after taxation
Headline (loss)/earnings attributable to (59 897) (28 497)
ordinary shareholders
Headline (loss)/earnings per share (cents) (57.54) (32.11)
(basic and diluted)
Condensed consolidated statement of comprehensive income
Unaudited Unaudited
12 Months 12 Months
June 2011 June 2010
R`000 R`000
Loss for the year (128 540) (69 164)
Exchange difference on translating foreign 341 1 415
operations
Profits and losses on property revaluation 8 849 15 029
Taxation related to components of other - (4 841)
comprehensive income
Total comprehensive income for the year net of (119 350) (57 561)
taxation
Consolidated statement of financial position
Unaudited Unaudited
12 Months 12 Months
June 2011 June 2010
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 60 444 96 227
Goodwill 457 6 089
Intangible assets 6 093 11 850
Investment in associates 900 900
Other financial assets 285 663
Prepayments - 243
Deferred taxation 5 671 4 160
73 850 120 132
Current Assets
Inventories 115 321 161 568
Loan to associate 3 189 3 071
Other financial assets 10 041 5 224
Trade and other receivables 106 051 138 606
Construction contracts and receivables 7 745 14 424
Current taxation receivable 2 452 715
Prepayments 243 729
Cash and equivalents 10 504 36 263
255 546 360 600
Total Assets 329 396 480 732
Equity and liabilities
Equity
Share capital 112 876 72 598
Reserves 5 856 15 046
Retained income (53 182) 38 249
Equity attributable to equity holders of parent 65 551 53 295
Non-controlling interest - (9 312)
65 551 116 581
Liabilities
Non-current liabilities
Loans from minority shareholders in subsidiaries - 2 282
Other financial liabilities 8 132 110 043
Operating lease liability 115 102
Deferred tax 757 3 923
9 005 116 350
Current liabilities
Trade and other payables 138 214 198 983
Other financial liabilities 113 247 48 344
Current tax payable 439 439
Operating lease liability - 13
Bank overdraft 2 940 22
254 841 247 801
Total liabilities 263 845 364 151
Total equity and liabilities 329 396 480 732
Net Asset Value per Share (cents) 73.86 60.05
Net Tangible Asset Value per Share (cents) 66.48 39.84
Consolidated statement of changes in equity
Unaudited Audited
12 Months 12 Months
June 2011 June 2010
Group R`000 R`000
Opening balance 116 581 176 399
Changes in equity
Profit/(loss) for the year (91 430) (69 165)
Foreign currency revaluation reserve (341) 1 415
Revaluation of property (8 849) 7 932
Purchase of shares 278 -
Disposal of non-controlling interest 9 313 -
Issue of shares 40 000 -
Total changes (51 029) (59 818)
Closing balance 65 552 116 581
Comprising of:
Share capital 2 886 885
Share premium 109 990 71 714
Foreign currency translation reserve - 341
Revaluation reserve 5 856 14 705
Retained income (53 181) 38 249
Non-controlling interest - (9 313)
Total equity 65 551 116 581
Consolidated cash flow statement
Unaudited Audited
12 Months 12 Months
June 2011 June 2010
R`000 R`000
Cash flows from operating activities
Cash generated from/(used in)operations (721) 8 321
Interest income 6 346 2 181
Dividends received - 42
Finance costs (13 314) (20 023)
Tax paid 1 749 (5 057)
Net cash from operating activities (5 940) (14 536)
Cash flow from investing activities
Purchase of property, plant
and equipment (537) (6 913)
Sale of property, plant and equipment 295 202
Purchase of other intangible assets (4 547) (4 589)
Other (8 031) -
Loans to group companies repaid (19 242) -
Loans advanced to group companies - (1 173)
Proceeds of financial assets 13 151
Repayment from other financial assets (39 992) (109)
Sale of financial assets - 2 182
Net cash from investing activities (58 903) (10 400)
Cash flows from financing activities
Proceeds from share issue 40 000 -
Proceeds from other financial liabilities 3 496 -
Repayment of other financial liabilities (7 513) (8 305)
Repayment of shareholders` loan - 349
Net cash from financing activities 35 983 (7 956)
Total cash movement for the period (28 861) (32 892)
Cash at the beginning of the period 36 242 69 976
Effect of exchange rate movements - (842)
Total cash at end of the period 7 563 36 242
Condensed segmental information - primary segment report business segments
For the twelve months ending 30 June 2011 (Previous format)
R`000 Energy Water Chemi- Invest- Total Discon-
cals ment tinued
operations
Angola
Total 224 163 31 166 60 962 4 061 320 351 51 327
revenue
Inter- (1 083) - - (4 061) (5 143) -
segmental
sales
External 223 080 31 166 60 962 - 315 208 51 327
sales
Segment (24 014) (4 255) (130) (18 698) (47 096) (58 737)
results
Impairment - - - - (5 632) -
of goodwill
Finance Cost - - - - (17 571) -
Investment - - - - 2 261 -
income
Income tax - - - - (2 038) -
Impair-ments - - - - - -
Net profit/ - - - - (70 076) (58 737)
(loss) after
tax for the
year
For the twelve months ending 30 June 2011 (New Format)
R`000 Trading Water Pipeline Invest- Total Discon-
Utili- services ment tinued
ties operations
Angola
Total 239 001 16 328 60 962 4 061 320 352 51 327
revenue
Inter- (1 083) - - (4 061) (5 143) -
segmental
sales
External 237 918 16 328 60 962 - 315 208 51 327
sales
Segment (24 992) (3 277) (130) (18 698) (47 096) (58 737)
results
Finance Cost - - - - (5 632) -
Investment - - - - (17 571) -
income
Income tax - - - - 2 261 -
Impair-ments - - - - (2 038) -
Net profit/ - - - - (70 076) (58 737)
(loss) after
tax for the
year
For the twelve months ending 30 June 2010
R`000 Trading Water Pipeline Invest- Total Discon-
Utili- services ment tinued
ties operation
s
Angola
Total 382 451 212 247 112 537 2 608 709 843 188 084
revenue
Inter- (101 120) (7 250) - (2 608) (110 978)_ -
segmental
sales
External 281 331 204 997 112 537 - 598 865 188 084
sales
Segment 31 097 16 000 15 010 (2 622) 59 485 3 532
results
Finance Cost - - - - (23 041) -
Investment - - - - 1 410 -
income
Income tax - - - - (12 435) -
Impair-ments - - - - - -
Net profit/ - - - - 25 419 3 532
(loss) after
tax for the
year
BASIS OF PREPARATION
The consolidated financial information for the twelve months ended 30 June 2011
from which these abridged 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 results 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 2011. The principal
accounting policies used in the preparation of the audited results for the year
ended 30 June 2011 are consistent with those applied for the year ended 30 June
2010. The financial results have been prepared under the supervision of the
Financial Director Mr. P. Willemse CA (SA).
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 plant across all sectors of industry
(particularly oil and gas, mining and local government).
FINANCIAL RESULTS
It has been another disappointing year for RARE, shown by the poor financial
results with revenue from continued operations down by 19.7% at R315m (2010:
R392m). Gross margin from continued operations declined to 16.9% (2010 -
22.5%).Liquidation of old stock purchased when the Rand was weaker and a very
competitive market contributed to the decline in margin.
Operating expenses from continued operations, excluding impairments, decreased
by 7.6% to R86.74m (2010: R93.829m) due to concerted efforts to reduce these.
Included in operating expenses for the year is an impairment of the Angolan
investment and loan account of R59,8m (2010: R0m) as well is an impairment of
goodwill of R5,6m (2010: R29.5m).
The Angolan investment was exited during the year as explained under Corporate
Activities. The financial results were prepared on the basis that the Angolan
business was discontinued during March 2011 and the prior year results have been
restated for comparative purposes. The loss from the discontinued Angolan
operations amounted to R58,5m (2010: R23,5m).
Efforts during the year under review to revise the business model and to improve
management capacity, working capital management, processes and operational
efficiencies have clearly not yet materialised as envisaged. Adverse trading
conditions contributed to the underperformance, but an internal focus and
limited working capital resources contributed to the decline. As discussed under
the section dealing with RARE`s funding and restructuring plan these and other
matters will be given due attention by the Board of Directors and Management to
reposition RARE for profitable and sustainable growth.
OPERATIONAL REVIEW
Trading conditions remained tough during the year with no significant increase
in private or public sector spend realised. RARE`s restructuring program
undertaken in 2010 to bring synergies between the Water, Energy and Chemical
businesses now sees the company operating under three divisions, namely Trading,
Pipeline Services and Water Utilities Services.
The new restructured trading division covers our Kliprivier, Durban and
Polokwane sales outlets with revenue of R237,9m .
The Pipeline Services division operates out of our Centurion premises. Revenue
of R60,9m (2010: R52,6m) was realised despite the business operating with no
dedicated executive for the period. This unit supplies, installs and
commissioning pipe systems and pipelines. We operate within RSA with cross
border activities in Botswana, Zambia, DRC and Ghana. Our client base is
primarily from the private sector, with our pipe rehabilitation offerings making
inroads into the RSA public sector.
The Water Utilities Services division also operates out of our Centurion
premises with revenue amounting to R16,3m (2010: R10,8m). This division operates
primarily in the public sector and has secured long-term contracts with the
Department of Water Affairs (DWA). Project work to both regional and local
municipalities also forms part of the division`s activities. This work is
secured through leveraging our existing contract with DWA and through the
government tender process.
CORPORATE ACTIVITIES
R40m Capital Raising
The company was recapitalised during June 2011 by raising equity of R40 million
by way of a subscription by Stafric Investment and Management Services (Pty)
Ltd. Shareholders were offered the opportunity to participate by way of a claw-
back offer. 200 million shares were issued at a consideration of 20 cents each.
Angolan investment
Efforts to revive the profitability of our Angolan business were not successful
and as a result a decision to exit this market was taken. RARE`s 61%
shareholding was reduced during March 2011 to a 10% effective shareholding in
the Angolan Group, through the sale to an Angolan investor. The new shareholder
provided a $5m cash injection to secure the continuation of the business and
although we will use our best endeavours to recover our investment, the board
deemed it prudent to impair the investment in full.
POST YEAR END REVIEW
Refer `Funding and restructuring plan` below.
FUNDING AND RESTRUCTURING PLAN
After careful analysis of the budgets and the cash flow forecasts a funding plan
was devised which involves the following:
Debtors financing
RARE`s three year securitisation term loan which matures in October 2011 is in
the final stages of being refinanced by a major banking institution. The board
reasonably expects the transaction to be concluded in the coming weeks.
Stock financing
The company reduced the utilisation of its stock finance facility post year-end
by R29m creating capacity for the continued funding of stock purchases.
Short term loan financing
The company is in the final stages of securing a increase in it`s short term
secured facility with Mayfair Speculators (Pty) Ltd to R50 million to fund
working capital shortfalls during the remainder of the financial year.
Additional capital raising
Taking into account the group`s financial position and results, the current
economic climate and the more stringent terms on the refinancing of the debtors`
facility, RARE requires an additional permanent capital injection. The Board of
Directors is in the process of negotiating the underwriting of a permanent
equity raising amounting to approximately R30m with Stafric Investment and
Management Services (Pty) Ltd. The terms and method of the capital raising will
be announced in due course and relevant resolutions to execute the capital
raising will be tabled and voted on at the forthcoming Annual General meeting.
The restructuring programme includes, inter alia:
Termination of unprofitable business units
During the year under review a number of operations were right sized and/or
closed. The Bloemfontein sales outlet was closed whereas the re-engineering of
the Kliprivier operation resulted in a 35% reduction of the workforce. We will
continue to review our business model and take decisive action to ensure that
unprofitable activities are terminated or sold.
Overheads
A concerted effort was made to reduce overheads during the year under review.
There is room for further reduction and we will interrogate each and every cost
item to ensure that our overheads structure is aligned to the level of income
generation.
Human Resources and Manpower
During the year a number of key positions became vacant due to performance
related retrenchments and/or resignations. A number of these positions were
filled after addressing the qualities necessary to manage the changing
environment of both the business and its markets. Key positions filled include
heads of Business Development and the Pipeline Services & Water Utilities
divisions. The financial team was also bolstered. The resultant upgraded skills
levels and experience would allow for the refocus and development of the
business going forward. Remaining vacancies will only be filled where those
positions generate additional income and all existing positions will be reviewed
and redeployed where applicable. Key performance targets have been set for
management and will be monitored on a month to month basis
Sales
A critical review of our market and client base is being undertaken. We will
review our sales strategy, plan and capacity with the view to generate the most
appropriate sales volumes for the business
Working capital management
Cash flow management is critical to the success of the business. We have
increased our focus on debtors` collection and are reviewing all our existing
product lines to reduce and/or discontinue stock levels to match our marketing
objectives as closely as possible.
Logistics
The execution of our business activities is critical to the success of the
business. Our current logistical costs are too high and we will interrogate
the entire supply chain to improve efficiencies. Non core activities will be
outsourced where relevant and remaining in house activities will be closely
monitored.
Project Management
Project management, particularly in our Pipeline Services division, is another
critical component for the successful execution of our business. All related
systems and procedures will be reviewed to ensure that our objectives, including
cash flow management, are achieved. The planning and deployment of available and
required resources will be managed in line with best practices to optimise
efficiencies.
Systems and processes
The implementation of our ERP system during the year under review was not
without teething problems and disruption to the business. However the system
integrated all our businesses on a single platform and we believe that RARE will
benefit from this in the future. Additional development will be undertaken to
optimise operational, reporting and sales efficiencies.
GOING CONCERN
Subject to the refinancing of the debtors book, the increased short term
facility referred to above, and based on RARE`s funding and restructuring plans,
operational budget and cash flow forecasts for the ensuing year, (which are
based on the current expected economic and market conditions), the directors
believe that RARE and its subsidiaries have adequate financial resources to
continue as a going concern during the ensuing year. Accordingly, the
directors have adopted the going concern basis in preparing the annual financial
statements.
PROSPECTS
Difficult trading conditions, compounded by a slower than expected roll out of
Government rehabilitation programs, as well as increased competition will
challenge sales and margin expectations. On a more positive note our Pipeline
Services division is experiencing buoyant trading conditions in Africa which are
expected to contribute to our financial results.
Although it will take some time to bed down RARE`s funding and restructuring
plans the board believes that the benefit thereof will start flowing through to
the bottom line during the second half of the financial year.
CHANGES TO THE BOARD OF DIRECTORS AND BOARD COMMITTEES
Messrs. MG Meehan and AZ Dlamini and Mrs. S Masinga resigned as non-executive
directors from the board with effect from 11 November 2011.
Don Ncube resigned as non executive director and chairman of the board with
effect from 23 August 2011 after serving in the position for 7 years and playing
a prominent role in growing the group during this time. He remains a
shareholder of the company and has offered his continued support to the group.
The board of directors would like to thank him for his contributions during all
these years and wish him well in his future endeavours.
Messrs. P du Plessis and H Odendaal (9 November 2011), T Siyolo, MT Lategan and
SJDT Potgieter (24 August 2011) were appointed as non executive directors to the
board.
Theunie Lategan has succeeded DonNcube as chairman of the board.
The board has decided to reconstitute its sub-committees as follows:
Audit Committee
Mr. P du Plessis (chairman)
Mr. H Odendaal
Mr. SJDT Potgieter
Remuneration, Transformation and Sustainability Committee
Dr. MT Lategan (chairman)
Mr. T Siyolo
Mr. P du Plessis
Mr. WR Somerville resigned as company secretary, PJ Willemse was appointed
temporarily as the company secretary and Mr. R Viljoen was appointed with effect
from 24 August 2011.
On behalf of the board
Dr MT Lategan DE Scheepers
Chairman CEO
30 September 2011
Corporate information
Directors:
Dr MT Lategan (Chairman), DE Scheepers (CEO), PJ Willemse (FD),H Odendaal (Non-
executive), SJ du Toit Potgieter (Non-executive), T Siyolo (Independent Non-
executive) P du Plessis (Independent Non-executive)
Registered Offices:
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:
R Viljoen
Date: 03/10/2011 07:16:08 Produced by the JSE SENS Department.
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