| Thu 12 Jun 2003, 10:18 | | Omnia - Reviewed Results For The Financial Year En |
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Omnia - Reviewed results for the financial year ended 31 March 2003
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1967/003680/06)
Share code: OMN ISIN code: ZAE000005153
("Omnia" or the "Group")
50 and forward
- Revenue up 25%
- Headline earnings per share up 122%
- Operating profit up 151%
- Cash flow available from operations 18%
- A new platform for growth established through strategic acquisitions
- Significant increase in the liquidity of the share to a 54% free float
Consolidated Income Statements
For the year ended 31 March 2003
R"000 2003 % 2002
Revenue 2 315 078 25 1 851 947
Cost of sales (1 376 023) 14 (1 201 814)
Gross profit 939 055 44 650 133
Operating costs before depreciation
and net of other income (471 199) 7 (440 549)
EBITDA 467 856 123 209 584
Depreciation (37 481) (1) (38 005)
Operating profit 430 375 151 171 579
Finance costs
- Net interest paid (15 922) (53) (33 608)
- Forward cover costs (25 128) 111 (11 912)
- Net monetary (loss)/gain (8 862) 19 714
Results of associates - (4)
Profit before taxation 380 463 161 145 769
Taxation (139 708) 284 (36 395)
Profit after taxation 240 755 120 109 374
Minority interest (846) 84 (459)
Net profit for the year 239 909 120 108 915
Basic and headline earnings per share (cents) 631,9 122 284,5
Fully diluted basic and headline
earnings per share (cents) 598,3 119 273,2
Dividends per share (cents) 129,0*
Weighted average number of
shares in issue ("000) 37 969 (1) 38 277
Weighted average number of
fully diluted shares in issue ("000) 40 097 1 39 867
Fully diluted earnings (R"000) 239 909 120 108 915
EBITDA interest cover 29,4 371 6,2
* Dividends comprises 81,5 cents iro of 2002 plus 47,5 cents interim in
current year
Consolidated Balance Sheets
As at 31 March 2003
R"000 2003 % 2002
Assets
Fixed assets 451 996 9 416 565
Intangible assets 14 761 -
Unlisted investments and loans 127 127
Current assets 848 513 53 553 725
1 315 397 36 970 417
Equity and liabilities
Ordinary shareholders" equity 578 114 24 465 292
Minority interest 2 366 21 1 959
Deferred taxation 57 499 56 36 888
Long-term liabilities 17 349 (42) 29 963
Current liabilities 660 069 51 436 315
1 315 397 36 970 417
Net interest-bearing funds / (debt) 252 784 (12 884)
Net asset value per share (Rand) 15,32 26 12,20
Directors valuation of unlisted shares 69 69
Capital expenditure
Incurred 86 534 66 818
Authorised and committed 5 524 6 530
Authorised but not contracted for 81 905 53 083
Consolidated Cash Flow Statements
For the year ended 31 March 2003
R"000 2003 % 2002
Operating profit 430 375 151 171 579
Depreciation 37 481 (1) 38 005
Adjustment for non-cash items (77 637) 140 175
Finance costs and taxation (55 924) 19 (46 850)
Generated from working capital 73 833 74 42 339
Available from operations 408 128 18 345 248
Dividends paid (49 743) -
Cash inflow from operating activities 358 385 4 345 248
Cash outflow from investing activities (96 576) 129 (42 152)
Cash outflow from financing activities (47 674) 226 (14 608)
Net increase in cash 214 135 (26) 288 488
Net cash/(overdrafts) at beginning of year 57 097 (167 637)
Effects of exchange rate movements 10 735 (63 754)
Net cash at end of year 281 967 394 57 097
Statements of Changes in Ordinary Shareholders" Equity
Non-
Stated distributable Retained
R"000 capital reserves earnings Total
At 1 April 2001 65 513 48 896 196 350 310 759
Net profit attributable to
ordinary shareholders 108 915 108 915
Increase in foreign currency
translation reserve 47 114 47 114
Transfer to income statement of
post-acquisition retained earnings
and reserves of associates (720) 720
Treasury shares (1 496) (1 496)
At 31 March 2002 64 017 95 290 305 985 465 292
Net profit attributable to
ordinary shareholders 239 909 239 909
Decrease in foreign currency
translation reserve (70 918) (70 918)
Treasury shares (6 865) (6 865)
Ordinary dividends paid (49 304) (49 304)
At 31 March 2003 57 152 24 372 496 590 578 114
Segmental Analysis
For the year ended 31 March 2003
R"000 2003 % 2002
Revenue 2 315 078 25 1 851 947
Fertilizer 1 928 184 28 1 506 268
- Less: Intersegmental sales (128 759) 45 (89 034)
Explosives and Chemicals 515 653 19 434 713
Operating profit 430 375 151 171 579
Fertilizer 373 536 187 129 978
Explosives and Chemicals 56 839 37 41 601
NOTES
These condensed consolidated preliminary financial statements are prepared
in accordance with RSA GAAP and schedule 4 of the South African Companies
Act. The accounting policies used in the preparation of the preliminary
financial statements are consistent with those used in the annual financial
statements for the year ended 31 March 2002.
The future minimum lease payments under non-cancellable operating leases are
R4,0m within one year and R7,5 between two and five years, giving a total of
R11,5m.
The hyperinflation adjustments, as required by the accounting standard AC124
"Financial Reporting in Hyperinflationary Economies", result from the
continued devaluation in the Zambian Kwacha and the Zimbabwean Dollar. The
most significant adjustment is that which reduced the gross profit for the
year by R8,2 million. The net monetary loss of R8,9 million for the year is
as a result of a change in the source of funding of the Zimbabwe business,
and is offset by foreign exchange gains of R33,6 million in Zimbabwe and
Zambia. The net impact to the group, including the offsetting foreign
exchange gains, is a net profit of R15,6 million.
Non-cash flow items on the cash flow statement comprise foreign exchange and
FCTR movements and hyperinflation adjustments.
Dividends of 81,5 cents and 47,5 cents per share were declared on 10 June
2002 and 13 January 2003 respectively. These dividends are reflected in the
current year ended 31 March 2003.
On 2 February 2003, the Group acquired the business and assets of HRL
Agriculture (Proprietary) Limited (an Australian company) for a purchase
consideration of approximately R4,1 million. Goodwill of R1,4 million, being
the excess of the purchase consideration over net assets acquired was
recorded and is being amortised on a straight-line basis over 5 years.
On 4 March 2003, the Group acquired the business and certain tangible and
intangible assets of Delta Caps International (a company incorporated in
France), for a purchase consideration of approximately R15 million. The
purchase consideration has been allocated to tangible assets (R0,6 million)
and intangible assets (R13,9 million). The intangible assets will be
amortised over their estimated useful lives.
The preliminary results have been reviewed by the auditors,
PricewaterhouseCoopers Inc, and a review opinion is available for inspection
at the company"s registered office. The review performed by
PricewaterhouseCoopers Inc does not include the pro-forma financial
information for the Prochem acquisition.
Subsequent to the year end, on 3 June 2003, the company acquired 100% of the
business of Prochem as a going concern for a cash consideration of R541,8
million and assumed debt of R76 million. This acquisition will be accounted
for using the purchase method of accounting. This transaction will become
effective after all the suspensive conditions have been met, which is
expected to be 1 September 2003. The intangible assets (including goodwill)
which will be acquired as part of this transaction will be amortised over
their expected useful lives, which is expected to be 20 years.
Commentary
Omnia is a specialist chemical services company providing customised
solutions in the agricultural, mining and industrial chemical markets.
Strategic Review
The year to 31 March 2003, fittingly for Omnia"s 50th year of existence, has
been one of the most exciting and successful in its history. The Group
achieved an exceptional financial performance, with record profits and cash
generated from operations. Given the Group"s positive cash position, and in
line with the strategy of diversifying into new domestic and global markets
to balance the portfolio of businesses, the Board mandated management to
investigate a number of acquisition opportunities in each of the Group"s
areas of expertise.
The expansion opportunities that have arisen from this process are as
follows:
The acquisition of a small humate producer in Australia. Humates are an
increasingly important component in speciality fertilizer, particularly as
the demand for organically based fertilizer grows.
The ongoing formalisation of various speciality fertilizer joint ventures in
Western and Eastern Australia, as well as New Zealand.
The Group"s mining business, Bulk Mining Explosives (BME), procured the
global rights to cutting-edge technology from French company Delta Caps
International (DCI). The acquisition positions BME amongst the leading
sources of electronic detonators in the world.
Subsequent to the year-end, the industrial chemicals business acquired the
Prochem Group of companies ("the acquisition"), the leading chemical
distribution company in South Africa. The acquisition of this strong service-
based chemical distribution business, focused on the customer interface,
provides immediate low-risk access to in-depth knowledge of relevant
chemical markets and will provide Omnia with a more diversified portfolio of
businesses, with a better balance between the agricultural and chemical
interests. Finalisation of the acquisition is subject to shareholder
approval and other regulatory issues. The pro forma financial effects of the
Prochem acquisition are set out separately below.
These strategic developments in each of Omnia"s business units represent a
carefully considered and decisive move to position the Group for sustainable
profitable growth into the future. The acquisitions will diversify and
significantly enlarge the Group, resulting in a lower relative exposure to
Southern African agriculture, while retaining the essential Omnia business
model of adding value to customers by leveraging its intellectual capital
and technology.
Financial Review
Revenue increased by 25% to R2,3 billion (2002: R1,9 billion) due to volume
and price increases following the weakening of the Rand prior to last year"s
planting season.
The Group"s success in leveraging its business model across all its markets,
excellent export earnings and the settlement of an insurance claim resulted
in an increase in the operating profit margin from 9% to 19%, giving impetus
to the growth in headline earnings. After the 455% increase achieved last
year (although off a particularly low base), a further 122% increase was
achieved in the year under review to reach 631,9 cents per share (2002:
284,5 cents per share).
The Group ended the year in a net positive funds position of R253 million
(2002: net debt of R13 million) after the set-off of interest bearing debt.
Our substantially improved balance sheet has enabled the Group to negotiate
better payment terms, reducing net working capital levels. The resultant
lower financing costs are now covered 29 times (2002: 6 times).
A number of factors influenced the records achieved.
Relatively high produce prices prevailed last year, mainly due to a weak
Rand and high demand fuelled by a regional maize shortage. This resulted in
improved cash flows and improved debt positions for farmers, which in turn
increased expenditure with input suppliers.
The long outstanding loss of profits claim for a compressor failure at the
Sasolburg plant during 2000 was finally settled with a payment of R27,4
million during the latter half of the year. The claim compensated the Group
for the higher cost incurred in importing alternative raw materials during
the time the plant was not operational.
A toll production contract for a third party was in existence for the major
part of the year, which allowed the Group to maximise the utilisation of
production capacity.
Shareholders were informed in the interim announcement that the South
African Revenue Services (SARS) intended to disallow a portion of the
interest claim in respect of the convertible loan arrangement that was
entered into in December 1997 to fund a new granulation plant in Sasolburg.
SARS has issued the assessment and a provision for the additional tax charge
of R19,5 million for prior years has been included in the tax charge for the
year under review, notwithstanding that an objection to the assessment will
be lodged.
With the strengthening of the Rand, the Foreign Currency Translation Reserve
(the major component of the non-distributable reserves) reduced by an amount
of R71 million. This represents a net reduction of around R24 million in the
Foreign Currency Translation Reserve when offset against the gain recorded
in the previous year.
Capital expenditure totaled R87 million for the year (2002: R67 million).
Notable capital expenditure items were the building of a new solid calcium
nitrate plant in Sasolburg, the building of ammonium nitrate storage dams at
Dryden and the expansion of direct applied ammonia equipment. These items
totaled R18 million, with the balance being ordinary replacement capital.
Operational Review
Agriculture
The Fertilizer Division saw an increase in revenue of 27% (2002: 23%) over
the year. This was mainly due to strong demand following the increase in
maize plantings and a 23 % increase in the volume of export sales over the
comparable period last year. Good export sales during a period of Rand
weakness, a strong performance from Omnia Speciality Fertilizers and the
payment of the Sasolburg compressor insurance claim were the main
contributors to increasing the operating profit margin from 9% to 21%.
Although the Rand appreciated strongly against the US Dollar over the last
year, this recovery only commenced after the bulk of Fertilizer orders had
been finalised. The Group therefore avoided the impact of the strengthening
Rand on its product prices in the year under review.
Mining and Industrial Chemicals
The Mining Explosives and Industrial Chemicals businesses experienced a 19%
growth in revenue to R515 million (2002: R435 million) and a pleasing 1,5%
improvement in operating margin to 11%.
BME again saw gradual growth in volumes, while continuing its expansion into
Dollar based markets within Africa. BME succeeded in expanding its customer
base, added a new start-up operation to its bulk explosives division and
doubled the monthly volumes of packaged cartridge explosives.
During the year, the Industrial Chemicals business, Intaba, invested in
enhancing its technical support teams and continued to show pleasing growth
in the animal feeds market, with the development of new product ranges.
The acquisition of Prochem will provide an established chemical distribution
network across South Africa, serving to strengthen Omnia"s interface with
customers. Prochem has grown organically over its 40 years in existence and
has consistently delivered strong results, with current turnover in excess
of R1,5 billion, and compounded growth over the last five years in excess of
20% per annum. Through the critical mass the acquisition gives Omnia"s
industrial chemicals business, it has positioned the Group strongly to
benefit from opportunities in this area.
Pro Forma Financial effects of the Prochem Acquisition
In terms of the agreement signed on 3 June 2003, Omnia will acquire the
business of Prochem as a going concern for a cash consideration of R541,77
million and the assumption of an estimated R 76 million in interest-bearing
debt. Details of the Prochem acquisition were set out in an announcement
dated 5 June 2003.
Based on Omnia"s reviewed results as at 31 March 2003, the pro forma effect
of the Prochem acquisition on the headline and basic earnings, fully diluted
headline and basic earnings, net asset value and tangible net asset value
per share would have been as follows:
Note Reviewed Pro forma
before the after the
Prochem Prochem %
acquisition acquisition change
Net asset value
per share (cents) 2 1 532 1 567 2,3
Tangible net asset
value per share (cents) 2 1 493 145
(90,3)
Basic earnings
per share (cents) 3 631,9 613.2 (3,0)
Headline earnings
per share (cents) 3 631,9 675.1 6,8
Fully diluted
basic earnings per share (cents) 4 598,3
581,8 (2,8)
Fully diluted
headline earnings per share (cents) 4 598,3
640,5 7,0
Actual number of
shares in issue (000"s) 37 885 39 310
Weighted average
number of shares in issue (000"s) 37 969 39 394
Weighted average
number of fully diluted shares in issue (000"s) 40 097 41 522
Notes:
The pro forma financial effects in the "After" column are based on the
following assumptions:
The consideration of R 541,77 million was financed by:
R187,97 million cash resources;
R318,17 million borrowings;
R35,63 million by the issue of new Omnia shares;
The effect on net asset value and tangible net asset value per share assumes
that the acquisition had been implemented on 31 March 2003 and is based on
the actual number of shares in issue;
The calculation of the basic earnings and headline earnings per share
assumes that the acquisition was effected on 1 April 2002 and is based on
the actual number of shares in issue and that:
the tax rate was 30%;
the interest expense assumed by the Group in respect of the Prochem
acquisition was calculated as follows:
borrowings at 15% per annum before tax; and
cash at 10% per annum before tax;
The calculation of the fully diluted basic and headline earnings per share
assumes that the acquisition was effected on 1 April 2002 and is based on
the weighted number of shares in issue;
The new Omnia Holdings shares to be issued as part settlement of the
purchase consideration have been based on a price of R25,00 per share;
The intangible assets, comprising goodwill, trademarks, patents and know-how
acquired by Omnia have been amortised over a period of 20 years. The basic
earnings per share is arrived at after the amortisation of the intangible
assets arising from the acquisition. Such amortisation is mandated in
accordance with current accounting standards.
Prochem operates in the services industry and as such does not utilise a
large asset base. The Prochem acquisition incorporates a number of patents
and trademarks and accordingly the dilutionary impact on Omnia"s tangible
net asset value is significant.
Outlook for the Group
As mentioned, the year under review has been outstanding. A combination of
events and circumstances prevailed that will not necessarily re-occur in the
forthcoming year:
The payment of the loss of profits claim of R27,4 million is a once-off
event.
Market conditions generally have changed dramatically in recent months.
Tighter conditions in all our markets are anticipated in the year ahead,
specifically considering that the world economic recovery after the
recession of 2001 is less than optimistic.
Although the Group largely avoided the impact of the Rand recovery on the
fertilizer business during 2002, the apparent resilience of the Rand can be
expected to have a negative impact on results in the coming year. However,
this impact will be cushioned by an increase in the US Dollar denominated
Fertilizer commodity prices. It is also expected that the low levels of
world grain stocks will lead to an increase in the Dollar price of grain
products. However, until that occurs, the pressure on the cash position of
farmers will remain as grain prices in the country have reduced. We
therefore do not envisage a repeat of early orders and payments as happened
last year.
The relatively high grain prices in the previous year led to an increase in
hectares planted to maize. It is expected, given the current lower grain
prices and degree of over-supply, that the hectares planted in the year
ahead will contract moderately.
The acquisition of Prochem is large relative to Omnia"s market
capitalisation and will increase debt levels in the short term. However,
with the strong cash flow generation of both Omnia and Prochem, the debt is
expected to reduce quickly, aided by expected lower interest rates in the
foreseeable future. With its low need for capital expenditure Prochem"s
utilisation of cash is low, resulting in the rapid enhancement of earnings
as the debt is redeemed.
During the coming year, the Group will focus on identifying the inherent
synergies and opportunities across all the businesses and consolidating
operations for optimal efficiency. Earnings are however not expected to
match those that were achieved in this past exceptional year, although they
can be expected to revert back to the earnings growth trend over the past
few years.
Share Liquidity
The liquidity of the Omnia Holdings" shares on the JSE Securities Exchange
SA has significantly increased. As at the end of March 2002, Omnia Holdings"
share register indicated a free float of only 21%. This free float has grown
to 54% as at 31 March 2003, while the monthly average shares traded
increased by 394% to an average of 589 000 shares per month since the sale
of the 34.5% shareholding held by Alpha.
Dividends
Notwithstanding the exceptional results, taking into account the Prochem
acquisition, the Board has followed a conservative approach regarding a
dividend for the year. The Board declared a final dividend of 72,5 cents per
share. This, together with the interim dividend of 47,5 cents per share paid
in January, amounts to a total dividend for the year of 120 cents per share,
an increase of 47% over the previous year and a dividend cover of 5,3 times
(2002: 3,5 times).
The last day to trade in the company"s shares for purposes of entitlement to
the final dividend is Friday, 27 June 2003. The shares will commence
trading ex dividend on Monday, 30 June 2003 and the record date will be
Friday, 4 July 2003. The dividend will be paid on Monday, 7 July 2003.
Share certificates may not be dematerialised or rematerialised between
Monday, 30 June 2003 and Friday, 4 July 2003, both days inclusive.
NJ Crosse RB Humphris
Chairman Managing Director
Johannesburg 3 December 2002
Directors
NJ Crosse (Chairman), FD Butler, DL Eggers* (Group Finance Director), NKH
Fitz-Gibbon, RB Humphris* (Group Managing Director), Prof SS Loubser, Dr WT
Marais (Alternate to WT Marais), WT Marais (Deputy Chairman), JG Pretorius,
PA Springett
*Executive Directors
Registered office
1st Floor, Omnia House, 13 Sloane Street, Epsom Downs, Bryanston, Sandton
PO Box 69888, Bryanston 2021
Telephone (011) 709-8888
Transfer secretaries
Ultra Registrars (Pty) Ltd
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
Date: 12/06/2003 08:55:41 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
