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OLI
OLI
OLI - O-Line Holdings Limited - Unaudited interim results for the six months
ended 31 December 2011
O-LINE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/034685/06)
Share code: OLI
ISIN: ZAE000110730
("O-line" or "the Company" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31 DECEMBER 2011
Six months Six Year ended
Ended 31 months 30 June
Dec 2011 ended 31 2011
unaudited Dec 2010 audited
R`000 unaudited R`000
R`000
Revenue 209,313 213,834 427,358
Cost of Sales (143,456) (147,546) (291,282)
Gross Profit 65,857 66,288 136,076
Other Income 627 578 820
Operating expenses (44,075) (39,686) (87,763)
Operating profit 22,409 27,180 49,133
Investment revenue 862 1,889 2,628
Impairment - - 8,053
Finance costs (2,202) (2,719) (4,933)
Profit before taxation 21,069 26,350 54,881
Taxation (7,076) (7,404) (16,123)
Profit for the period 13,993 18,946 38,758
Other comprehensive income
Exchange difference on (122) 2 (45)
translating foreign
operations
Taxation related to 39 - 2
components of other
comprehensive income
Other comprehensive (loss) (83) 2 (43)
income for the period net of
taxation
Total comprehensive income 13,910 18,948 38,715
for the period
Total comprehensive income
attributable to:
Owners of the parent: 13,910 18,948 38,715
Reconciliation of basic to
headline earnings
Headline earnings 13,976 18,902 38,942
Basic earnings 13,993 18,946 38,758
Loss / (Profit) on sale of (17) (44) 184
fixed assets
Total shares in issue 213,423,750 238,500,000 213,424,000
Weighted average of shares 213,423,750 238,500,000 235,339,705
in issue
Basic earnings per share 6.56 7.94 16.47
(cents)
Basic headline earnings per 6.55 7.93 16.55
share (cents)
Fully diluted earnings per 6.56 7.94 16.47
share (cents)
Fully diluted headline 6.55 7.93 16.55
earnings per share (cents)
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2011
Share Share Foreign Retained Total
capital premium Currency income equity
Translation
Reserve
R`000 R`000 R`000 R`000 R`000
Balance at 31 * 132,217 40 108,147 240,404
December 2010
Total (45) 19,812 19,767
comprehensive
income for the
period
Share buy back (26,136) (26,136)
Dividends paid (4,770) (4,770)
Balance at 1 * 106,081 (5) 123,189 229,265
July 2011
Total (83) 13,993 13,910
comprehensive
income for the
period
Dividends paid (10,671) (10,671)
Balance at 31 * 106,081 (88) 126,511 232,504
December 2011
* less than
R1 000
CONDENSED STATEMENT OF FINANCIAL POSITION
at 31 December 2011
31 December 31 December 30 June
2011 2010 2011 Audited
Unaudited Unaudited R`000
R`000 R`000
Assets
Non-Current Assets
Property, plant and equipment 96,046 75,831 88,591
Goodwill 64,632 64,632 64,632
Other financial assets - 19,645 -
Deferred tax 3,601 4,478 4,720
164,279 164,586 157,943
Current Assets
Inventories 87,359 72,595 79,332
Other financial assets - 1,009 -
Current tax receivable 1,432 3,766 279
Trade and other receivables 44,759 53,341 60,809
Cash and cash equivalents 44,630 35,210 34,420
178,180 165,921 174,840
Total Assets 342,459 330,507 332,783
Equity and Liabilities
Equity and reserves 232,504 240,404 229,265
Non-Current Liabilities
Borrowings 27,875 36,378 29,500
Finance lease obligation 3,681 2,160 4,296
Deferred tax 9,485 8,570 9,226
41,041 47,108 43,022
Current Liabilities
Borrowings 16,331 14,384 13,957
Current tax payable 521 148 801
Finance lease obligations 2,520 1,786 2,675
Trade and other payables 49,542 26,677 43,063
68,914 42,995 60,496
Total Liabilities 109,955 90,103 103,518
Total Equity and Liabilities 342,459 330,507 332,783
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended 31 December 2011
31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from 40,463 1,610 28,878
operations
Interest income 862 1,889 2,628
Finance costs (1,919) (2,505) (4,472)
Tax paid (7,033) (8,510) (12,642)
Net cash flows from operating 32,373 (7,516) 14,392
activities
Cash flows from investing
activities
Purchases of property, plant (10,498) (1,760) (13,955)
and equipment
Sale of property, plant and 28 211 466
equipment
Sale of financial assets - 341 -
Repayment of loan - - 2,911
Net cash flows from investing (10,470) (1,208) (10,578)
activities
Cash flows from financing
activities
Repayment of borrowings (7,307) (11,539) (18,844)
Proceeds from borrowings 8,056 - -
Finance lease payments (1,580) (1,292) (2,459)
Dividends paid (10,671) - (4,770)
Net cash flows from financing (11,502) (12,831) (26,073)
activities
Total cash movement for 10,401 (21,555) (22,259)
period
Cash and cash equivalents at 34,420 56,748 56,748
beginning of period
Effect of exchange rate (191) 17 (69)
movement on cash balances
Cash and cash equivalents at 44,630 35,210 34,420
end of period
SEGMENT REPORT
for the six months ended 31 December 2011
31 December 31 December 30 June
2011 2010 2011
Unaudited Unaudited Audited
R`000 R`000 R`000
Revenue
O-Line 86,186 96,906 203,849
Armco 131,934 125,495 240,589
Corporate - - -
South African operations 218,120 222,401 444,438
O-Line Mozambique 2,032 436 1,529
Eliminations (10,839) (9,003) (18,609)
209,313 213,834 427,358
Operating Profit
O-Line 4,194 11,906 20,684
Armco 18,555 16,743 30,258
Corporate (8) (200) (928)
South African operations 22,741 28,449 50,014
O-Line Mozambique 260 (588) (275)
Eliminations (592) (681) (606)
22,409 27,180 49,133
Assets
O-Line 109,816 108,377 115,497
Armco 204,233 168,121 188,629
Corporate 114,946 141,128 123,388
South African operations 428,995 417,626 427,514
O-Line Mozambique 4,418 2,143 3,114
Eliminations (90,954) (89,262) (97,845)
342,459 330,507 332,783
Liabilities
O-Line 34,941 39,826 42,874
Armco 163,571 139,565 157,438
Corporate 389 316 439
South African operations 198,901 179,707 200,751
O-Line Mozambique 4,860 2,799 3,611
Eliminations (93,807) (92,403) (100,844)
109,954 90,103 103,518
Capital expenditure
O-Line 1,417 692 4,302
Armco 9,608 1,390 13,920
Corporate - - -
South African operations 11,025 2,082 18,222
O-Line Mozambique - 9 9
Eliminations - - -
11,025 2,091 18,231
For management purposes the Group is organised into four major operating
divisions namely, O-line Support Systems, Armco Superlite, Corporate and O-
line Mozambique. It represents the basis on which the Group reports its
primary segment information.
BASIS OF PREPARATION
These interim financial statements have been prepared in accordance with IAS
34 - Interim Financial Reporting, International Financial Reporting
Standards (IFRS), AS 500 Standards, the Companies Act of South Africa and
the JSE Limited Listings Requirements.
The accounting policies and methods of measurement, recognition and
computation applied in the preparation of these interim financial statements
are consistent with those applies in the Group`s most recent audited annual
financial statements for the year ended 30 June 2011.
The results for the period are not necessarily indicative of the results for
the entire year, and interim financial statements should be read in
conjunction with the audited annual financial statements for the year ended
30 June 2011.
The interim financial statements have been prepared under
the supervision of the group financial director, Mr. Gary
Driver.
COMMENTARY
Financial performance
Revenue decreased from R213.8 million, for the six months
ended 31 December 2010("the comparative period"), to R209.3
million, for the six months ended 31 December 2011 ("the current period"),
mainly as a result of trading volume decline in O-line Support Systems
(Pty) Limited ("O-line Support Systems") of 11.06%. Armco Superlite (Pty)
Limited ("Armco") experienced a trading volume increase of 5.13% and O-Line
Holdings (Mocambique) Limitada ("O-line Mocambique") also experienced a
trading volume increase. This represents a net 2.11% decrease in revenue for
the current period compared to the comparative period. Gross profit
decreased from R66.3 million in the comparative period to R65.9m over the
current period.
O-line Support Systems and Armco Superlite achieved gross
profit margins for the current period of 32.5% and 28.6%
respectively, while O-line Mocambique achieved a gross
profit margin of 14% for the current period, excessive transportation costs
impacting negatively on their gross margin. The Group`s operating profit for
the current period decreased by 17.6%, from R27.2 million in the comparative
period to R22.4 million in the current period, whilst operating expenses
increased by 11.1% from R39.7 million to R44.1 million. Finance costs
decreased from R2.7 million in the comparative period to R2.2 million in the
current period, this is mainly attributable to the decrease in borrowings as
Group debt has been settled.
Cash and cash equivalents have increased from R35.2 million in the
comparative period to R44.6 million in the current period.
The Group will continue to utilise its available cash to
finance operations, for expansion and to settle debt. The
Group also experienced the following decreases / increases,
compared to the comparative period:
* Borrowings reflect a net decrease of R6.6 million from R50.8
million to R44.2 million, this is in line with repayments in terms
of loan agreements entered into by the Group. A new medium term
loan of R8 million was drawn down to purchase the property for the
Randfontein galvanising facility;
* Trade and other payables increased by R22.8 million to R49.5
million, a substantial portion of the increase being attributable
to advance payments received by Armco;
* Trade and other receivables decreased by R8.6 million to R44.8
million following the overall downward trend in sales volumes for
the period and better debtors collections;
* Cash generated from operations increased from R1.6 million to
R40.5 million mainly as a result of a decreased cash investment in
working capital as reflected in the decrease in trade receivables
and an increase in trade payables and inventory at the current
period end compared to the corresponding period. While the timing
of the period end resulted in a negative impact on trade payables
and receivables, working capital management remains a key area of
focus for the Group;
* Inventory also increased from R72.6 million to R87.4 million to
support the increase in trading activities at Armco and O-line
Mocambique; and
* Capital expenditure increased from R2.1 million in the comparative
period to R11 million mainly as a result of the acquisition of the
Randfontein property for the new galvanising facility.
Operational Performance and Prospects
Operational performance of the Group pertaining to the
period were heavily subdued as a result of diminishing
margins relating to continuous increases in Power, Gas and
labour. Further aggravation came in the form of the Metal
Workers Union strikes forcing the Group to evacuate
manufacturing premises for a period due to the violence and
intimidation. O-line Support Systems was severely affected
due to the extended time lines of materials flow from order
to expediting resulting in increased inventory levels.
Armco`s ability of quick recovery helped lessen the affect
and fared well in providing a fair set of results. The
first quarter resulted in some divisional losses relating
to the above, this left the Group with a mere three months
of proper operations considering taking into play December
is construction close down. In order to manage the deficit
the Group will focus around savings and efficiencies
through the reduction of overtime and downsizing of the
work force, although this will not allow for total recovery
it will assist in reducing operating costs of which in turn
will provide for some relief. Looking ahead to the third
and fourth quarters both Armco and O-line will continue the
strategic approach of cost saving through mechanisations
and will focus on the start of supply of goods and services
to the Kusile Power Stations accompanied by the future
Renewable Energy Projects and Roads Infrastructure
Development in Africa.
Directors
Mr David Adomakoh resigned as a director of the Company on 18 August 2011.
Mr William ("Bill") Cosby was appointed as a non-executive director of the
Company on 23 August 2011.
02 March 2012
Designated Advisor
Sasfin Capital
(a division of Sasfin Bank Limited)
Date: 02/03/2012 15:07:01 Produced by the JSE SENS Department.
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