| Mon 19 Mar 2012, 15:38 | | SFH - S A French Limited - Unaudited condensed consolidated interim results |
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SFH
SFH
SFH - S A French Limited - Unaudited condensed consolidated interim results
for the six months ended 31 December 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 company" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2011
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
Revenue 31 513 51 180 97 414
Cost of sales (17 378) (38 677) (78 703)
Gross profit 14 135 12 503 18 711
Other income 3 349 10 646 14 347
Operating expenses (15 169) (19 002) (27 711)
Results from operating 2 315 4 147 5 347
activities
Finance cost (2 163) (2 255) (7 528)
Restructuring costs - (15 477) (12 375)
Investment income 67 277 7
Profit/(Loss) before taxation 219 (13 308) (14 549)
Taxation - - -
Profit/(Loss) after taxation 219 (13 308) (14 549)
Other comprehensive - - -
income/(loss) for the period
Total comprehensive 219 (13 308) (14 549)
income/(loss) for the period
Comprehensive income
attributable to:
Ordinary shareholders of the 219 (13 308) (14 549)
group
Non-controlling interest - - -
219 (13 308) (14 549)
Reconciliation of attributable profits / (losses) to headline
losses
Profits / (Losses) 219 (13 308) (14 549)
attributable to ordinary
shareholders
Restructuring costs - - 12 375
Gains from loan write off - - (12 021)
(Loss)/Profit on disposal of - (197) 554
property, plant and equipment
Fair valuation adjustments (1 135) - 227
Tax effect - - -
Headline profits / (losses) (916) (13 505) (13 414)
attributable to ordinary
shareholders
Weighted average number of 566 375 689 166 375 689 566 375
shares in issue 689
Profit / (Loss) per share 0.04 (8.00) (2.57)
(cents)
Headline Profit / (Loss) per (0.16) (8.12) (2.37)
share (cents)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 96 270 75 404 97 938
Property, plant and 94 222 74 042 97 938
equipment
Other financial assets 2 048 1 362 -
Current assets 23 623 61 668 32 280
Loans to shareholders - - 723
Inventories 9 120 55 295 9 432
Current tax - 529 -
Trade and other 14 423 4 623 16 246
receivables
Other Financial Assets - - 1 803
Cash and cash 80 1 221 4 076
equivalents
TOTAL ASSETS 119 893 137 072 130 218
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2011 2010 2011
R`000 R`000 R`000
EQUITY AND LIABILITIES
Equity 51 297 34 533 53 729
Share capital 66 162 49 330 68 816
Revaluation reserve 162 162 162
Retained income (15 027) (14 959) (15 249)
Minority interest * * *
Non-current liabilities 31 286 11 620 34 172
Installment sales 25 168 - 27 255
agreements
Loans from shareholders 6 118 11 620 6 917
Current liabilities 37 310 90 919 42 317
Current tax payable - 165 -
Installment sales 9 447 32 881 10 398
agreements
Operating lease - 1 510 147
liability
Trade and other payables 21 969 25 099 26 848
Foreign Creditors - 21 193 -
Other financial 1 650 5 621 496
liabilities
Shareholders for - 786 -
dividends
Loan from shareholders 1 508 - 1 511
Bank overdraft 2 736 3 664 2 917
TOTAL EQUITIES AND 119 893 137 072 130 218
LIABILITIES
Number of shares in 566 375 689 166 375 689 566 375 689
issue
Net asset value per 9.06 20.76 9.49
share in cents
Net tangible asset value 9.06 20.76 9.49
per share in cents
*Less than R1,000
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Revalu- Retained Total
capital premium ation income R`000
R`000 R`000 reserve R`000
R`000
Audited Balance as 1 664 47 666 162 (1 651) 47 841
at 1 July 2010
Loss for the period - - - (13 (13 308)
308)
Balance as at 31 1 664 47 666 162 (14 959) 34 533
December 2010
Rights Issue 20 000 - - - 20 000
Rights Issue Costs - (514) - - (514)
Absolution of - - - 951 951
Dividends
Loss for the period - - - (1 242 ) (1 242)
Balance as at 30 21 664 47 152 162 (15 250) 53 728
June 2011
Capitilsed costs - (2 653) - - (2 653)
Profit for the - - - 219 219
period
Balance as at 31 21 664 44 499 162 (15 031) 51 294
December 2011
Non- Total
controll equity
ing R`000
interest
R`000
Balance as at 1 July 2010 * 47 841
Loss for the period - (13 308)
Balance as at 31 December 2010 * 34 533
Rights Issue - 20 000
Rights Issue costs - (514)
Absolution of Dividends - 951
Loss for the period - (1 242)
Balance as at 30 June 2011 * 53 728
Capitalised costs - (2 653)
Profit for the period - 219
Balance as at 31 December 2011 * 51 294
*Less than R1,000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six six 12 months
months months ended
ended ended 30 June
31 31 2011
December December R`000
2011 2010
R`000 R`000
CASH FLOW FROM OPERATING (1 605) 1 276 447
ACTIVITIES
Cash receipts from customers 32 611 43 846 94 196
Cash paid to suppliers and (32 120) (40 592) (90 850)
employees
Cash utilised in operating 491 3 254 3 346
activities
Interest received 67 277 7
Interest paid (2163) (2 255) (3 434)
Taxation (paid) / received - - 528
CASH FLOW FROM INVESTING (248) 5 132 4 417
ACTIVITIES
CASH FLOW FROM FINANCING (1 961) (3 478) 1 668
ACTIVITIES
Total cash generated for the (3 814) 2 930 6 532
period
Cash at the beginning of the 1 159 (5 373) (5 373)
period
Total cash at the end of the (2 655) (2 443) 1 159
period
Notes to the Interim Financial Statements
1.Accounting Policies
The interim financial statements have been prepared in accordance with
International Financial Reporting Standards, the AC 500 standards as issued
by the Accounting Practice Board and its successor and the Companies Act of
South Africa, 2008 and the JSE Listings Requirements. These accounting
policies are consistent with the annual financial statements for the period
ending 31 June 2011.
The interim results were prepared under the supervision of Mr. Peter van Zyl
and have not been audited or reviewed by the group`s auditors.
2.Seasonality affecting Interim Financial Statements
The group`s operations are affected by the South African construction
industry shutdown in December and January each year. Customers and 3rd party
service providers conduct limited business over this period which can affect
the volume of sales and initiate rental interruption.
3.Unusual amounts affecting Net Income and Equity
Fair Value Adjustment
The reversal of a previously recognised impairment loss affected the net
profit for the 6 month period ended 31 December 2011. The reversal relates to
a loan from the group to the SA French Economic Empowerment Trust. The loan
is collateralised by ordinary shares in SA French Limited. Improvement in the
share price from 5 cents to 10 cents over the last 6 months warranted a
partial reversal of the previously recognised loss.
Rights Issue Costs
Certain costs of R2,65 million directly attributable to the rights issue,
included in the annual financial statements for the period ended 30 June
2011, was only incurred in the 6 month period ended 31 December 2011. These
costs were recognised directly against the share premium account as reflected
in the Condensed Statement of Changes in Equity.
Taxation
SA French has significant assessed tax losses, the interim financial
statements therefore presents a zero tax charge in the Condensed Statement of
Comprehensive Income. In addition, the group has not raised any related
deferred tax on these tax losses at this point in time.
4.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. The group has adopted the 2009 Annual
Improvements Project: Amendments to IFRS 8 Operating Segments for the first
time in the financial statements for the period ending 30 June 2011. The 2010
interim financial statements do not contain information in relation to
segmental reporting, the necessary information is however not available and
the cost to develop such information will be excessive as contemplated in
IFRS 8. The impact of segmental reporting is not material.
Unaudited Audited 12 Adjusted *
six months months ended 12 months
ended 30 June ended 30 June
31 December 2011 2011
2011
R`000 R`000 R`000
Segment Revenue
Rental 8 044 22 681 22 681
Sale 18 577 72 097 17 301
Other 4 892 2 636 2 636
31 513 97 414 42 618
Segment cost of
sales
Rental 3 519 9 843 9 843
Sale 12 393 68 397 14 488
Other 1 466 463 463
17 378 78 703 24 794
Segment gross
profit
Rental 4 525 12 838 12 838
Sale 6 184 3 700 2 813
Other 3 426 2 173 2 173
14 135 18 711 17 824
* The Adjusted Segment report is stated after the removal of the transactions
related to the Manitowac Settlement Agreement which was a once off deal
relating to the sale of stock back to the supplier in exchange for settlement
of outstanding amounts owed by the group to the Supplier. The impact of the
adjustment is to remove R54 795 985 from Sales revenue and R53 908 824 from
Cost of Sales from the June 2011 year-end figures. This Agreement impacted
the comparative interim period by adding R29 867 494 in Revenue and R29 476
223 in Cost of Sales. This adjustment is done to provide a more accurate
picture of the comparative information.
Segmented assets
Rental 93 082 96 101
Sale 9 120 9 432
Unallocated assets:
Property, plant and 1 140 1 837
equipment
Loans to shareholders 799 723
Financial assets 2 048 1 803
Trade and other 14 423 16 246
receivables
Current tax receivable - -
Cash and cash 80 4 076
equivalents
120 692 130 218
Segmented liabilities
The groups liabilities are not allocated to any
particular segment
COMMENTARY
Highlights
Group returns to profitability
Introduction
The board of directors of SA French ("the board") hereby presents the interim
financial results of the group for the six months ended 31 December 2011
("the interim period"). These interim financial results reflect the first
positive signs of the implementation of the restructuring of the business
over the past 18 months. The board is encouraged by these results but also is
aware that the performance needs to be consistently improving and thus still
expects some focused hard work in the next few years.
Group profile
SA French, which was founded by the current Chief Executive Officer, Quentin
van Breda, is the exclusive distributor in sub-equatorial Africa of the
Potain brand of tower cranes; a subsidiary of the New York Stock Exchange
listed Manitowoc Crane Group which is the largest crane manufacturer in the
world. In addition to its 29 year track record as a distributor and renter of
the Potain brand, SA French holds distribution agreements with Merlo SPA,
manufacturers of telescopic handlers and self-loading concrete mixers, and
Saltec, producers of rack and pinion passenger and material hoists for the
sub-equatorial Africa region. This diversification allows the company to
offer complementary lifting solutions to its clients. It is the focus of SA
French to offer high levels of service to its clients and as such a rental
offering of over 50 units is available to its client base. The rental
business model has been developed over a 36 month period to encompass a wide
range of tower cranes, telehandlers and hoist products.
Review of operations
The latter half of 2011 saw the demand for rental of high capacity lifting
equipment in Europe and the Middle East increase in spite of the economic
uncertainty in both regions. Africa has received attention as a potential
growth area for established European and American conglomerates, with South
Africa forming a hub and base of operation for many of them.
In South Africa the promised spend on infrustructure by the national
government is positive. The group has secured contracts in the power
generation sector for both new sites as well as routine maintenance of the
existing infrustructure.
The group has strategically focused on a geographic diversification strategy
and has increased its activities in rentals, as well as direct sales to
companies operating in East and Central Africa. The revenue model, with a
greater portion of recurring revenue streams in higher margin opportunities,
is paying off. The group has benefitted from having high capacity units in
its rental fleet, the demands of the South African market following the
European trend toward using heavier precast elements in order to fast track
construction projects.
Reducing overhead costs within the group is a critical component of the
business strategy. Finding the correct balance while not forgoing operational
efficiency is an intricate task and in order to improve the group`s
operations in this regard, two non-executive directors were added to the
Board of Directors, to take up portfolios on the risk, remuneration and audit
committees.
Skills development
SA French continues to prioritise practical skills training for its tower
crane and hoist riggers, operators and technicians. The Engineering Council
of South Africa ("ECSA") reaffirmed the status of Lifting Machinery Entity
("LME") on the group and under the auspices of ECSA, 5 technicians have been
registered as Lifting Machinery Inspectors ("LMI"). As a training provider
the company is recognised throughout the industry as the premier training
school for the certification of tower crane technicians and operators.
Due to the success of its apprenticeship programs the group has received
numerous applications from top quality graduates for junior positions within
the organisation. The investment and development of our human capital is in
no small way a contributing factor to the improved operational results that
have been reported in this interim period. A performance management system
that was implemented in 2010 gives each emlpoyee the opportunity to identify
and work toward competancies that will see them graduate to a more senior
position within the organisation, alternatively provide them with a solid
platform to persue other opportunities within the industry.
Financial results
Revenue
The strategies implemented over the last two years are beginning to pay off.
The revenue for the period under review exceeded R31 million, which is a
growth of more than 47.8% of the adjusted revenues, excluding the Manitowac
related revenues of R29.867 million, for the 2011 interim period. The
business continues to sell equipment as the market, based on tender
activities is improving which should lead to improved sales revenues.
Operating costs
SA French continues to reduce its operating costs while ensuring that
operating efficiencies are increased. The group expects further operational
gains as the full impact of the cost cutting filters through to the income
statement and hence the operating cash flows.
Manitowoc Settlement in the prior year
The group concluded a settlement agreement with its major suppliers in which
it agreed to sell back a significant amount of stock it held. The full
settlement agreement was implemented during the prior financial year. The
effect of the Settlement Agreement on the comparative interim period was to
increase revenue by c R30 million and the corresponding cost of sales by a
similar amount as well as reduce the inventory levels and settle the foreign
trade creditors. The deal removed significant risk from the group in reducing
its stock holdings as well as debt levels. Unfortunately, as a consequence of
a material strengthening of the Rand against the Euro, the offset agreement
lead to paper settlement losses of R10 million essentially reversing the
foreign exchange gains made in the previous 2 years.
Borrowings
The business is continuing to find ways of reducing debt to ensure that
appropriate levels of debt are held in the business on an ongoing basis. The
restructuring of SA French`s operations over the last 12 month period,
necessitated temporary reliance on expensive bridging finance facilities.
These have resulted in increased finance costs. This is not expected to
persist much beyond the end of the financial year.
Prospects
The promised government allocation that has been earmarked for
infrastructural development between 2010 and 2014 of R 800 billion, although
delayed, is an incentive to stay positive. SA French has continued to train
and retain skilled staff in order to be in a position to obtain maximum
benefit from this infrastructure spending, both directly as well as through
its clients. There are also opportunities in the alternative energy sector
that is in advance stages of negotiation. Should these be awarded, further
communication to shareholders will be forthcoming.
Subsequent events
No material events have occurred since the reporting date.
Dividend policy
No interim dividend has been declared for the period.
Directorate
Mr Sandile Swana was appointed as an independent non-executive director of SA
French with effect from 2 March 2012. He will join the Remuneration
Committee.
Ms Janine De Bruyn was appointed as an independent non-executive director of
SA French with effect from 2 March 2012. She will join the Audit Committee.
The directors have been added to the group to improve the governance of the
Board by increasing the number of Non-executive directors on the Board and
providing board committees with further experience in order to assist the
company.
Appreciation
We thank our employees for their continued loyalty, hard work and commitment
to the vision of the group. Furthermore, we thank our corporate and
designated advisors for their wise counsel and our stakeholders for their
consistent faith in the group.
On behalf of the board
Quentin van Breda Warwick van Breda
Chief Operating Officer Commercial Director
19 March 2012
Directors
QCA van Breda (Chief Executive Officer), W van Breda (Commercial Director), P
van Zyl (Financial Director), MW Mashaba, JM Poluta*, J Fizelle*, S Swana*, J
de Bruyn *
*non-executive
Company secretary
Warwick van Breda (LLB)
Registered office
461 Flower Close, off Sam Green Road
Tunney Ext.
Germiston
1420
Designated Adviser PSG Capital (Pty) Limited
Corporate Adviser: Afrasia Corporate Finance (Pty) Limited
Transfer secretaries
Computershare Investor Services (Pty) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Date: 19/03/2012 15:38:01 Produced by the JSE SENS Department.
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