| Tue 2 Dec 2003, 9:15 | | INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER |
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OMNIA HOLDINGS LIMITED - INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2003
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1967/003680/06)
Share code: OMN
ISIN: ZAE000005153
("Omnia" or the "Group")
INTERIM RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2003
50 and forward
CONSOLIDATED INCOME STATEMENTS
Reviewed Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
R"000 30/9/2003 30/9/2002 30/9/2001 31/3/2003
Revenue 1 153 072 1 062 058 729 498 2 315 078
Cost of sales (790 292) (695 966) (514 253) (1 376 023)
Gross profit 362 780 366 092 215 245 939 055
Operating costs before
depreciation and net of
other income (264 654) (218 977) (171 066) (471 199)
EBITDA 98 126 147 115 44 179 467 856
Depreciation and
amortisation of
intangible assets
other than goodwill (26 534) (21 109) (19 471) (37 476)
Amortisation of goodwill (1 203) (5)
Operating profit 70 389 126 006 24 708 430 375
Finance costs
- Net interest paid (12 695) (12 214) (20 529) (15 922)
- Forward cover costs (5 757) (8 584) (8 938) (25 128)
- Fair value losses on
- financial instruments (5 622)
- Net monetary gain/(loss) 11 485 (9 264) 16 716 (8 862)
Profit before taxation 57 800 95 944 11 957 380 463
Taxation (23 348) (27 907) (121) (139 708)
Profit after taxation 34 452 68 037 11 836 240 755
Minority interest (186) (304) (137) (846)
Net profit for the period 34 266 67 733 11 699 239 909
Amortisation of goodwill 1 203 - - 5
Headline earnings 35 469 67 733 11 699 239 914
Basic earnings
per share (cents) 90,4 178,2 30,6 631,9
Headline earnings
per share (cents) 93,6 178,2 30,6 631,9
Fully diluted basic
earnings share (cents) 81,4 169,4 30,6 598,3
Weighted average number
of shares issue ("000) 37 910 38 008 38 292 37 969
Dividends per share (cents) 72,5* 81,5* - 129,0
EBITDA interest cover 7,73 12,04 2,15 29,38
* in respect of prior year
SEGMENTAL ANALYSIS
Reviewed Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
R"000 30/9/2003 30/9/2002 30/9/2001 31/3/2003
Revenue 1 153 072 1 062 058 729 498 2 315 078
Fertilizer 803 173 831 167 571 598 1 928 184
- Less:
Intersegmental sales (75 226) (64 586) (42 663) (128 759)
Net Fertilizer sales 727 947 766 581 528 935 1 799 425
Mining 252 322 245 135 177 851 421 559
Chemicals 172 803 50 342 22 712 94 094
Operating profit 70 389 126 006 24 708 430 375
Fertilizer 23 031 90 478 6 981 373 536
Mining 34 945 28 684 17 357 49 126
Chemicals 12 413 6 844 370 7 713
STATEMENT OF CHANGES IN ORDINARY SHAREHOLDERS" EQUITY
Reviewed Non-
Share capital distributable Retained
R"000 and premium reserves earnings Total
At 31 March 2002 64 017 95 290 305 985 465 292
Net profit for the period 67 733 67 733
Ordinary dividends paid (33 189) (33 189)
Decrease in foreign currency
translation reserve (10 658) (10 658)
Treasury shares (2 670) (2 670)
At 30 September 2002 61 347 84 632 340 529 486 508
Net profit for the period 172 176 172 176
Ordinary dividends paid (16 115) (16 115)
Decrease in foreign currency
translation reserve (60 260) (60 260)
Treasury shares (4 195) (4 195)
At 31 March 2003 57 152 24 372 496 590 578 114
Net impact of adoption
of AC133 1 264 1 264
As restated at 1 April 2003 57 152 24 372 497 854 579 378
Net profit for the period 34 266 34 266
Ordinary dividends paid (27 718) (27 718)
Decrease in foreign currency
translation reserve (45 634) (45 634)
Ordinary shares to be issued
in terms of the Prochem
acquisition 35 632 35 632
Treasury shares 3 234 3 234
At 30 September 2003 96 018 (21 262) 504 402 579 158
CONSOLIDATED BALANCE SHEETS
Reviewed Unaudited Unaudited Audited
R"000 30/9/2003 30/9/2002 30/9/2001 31/3/2003
Assets
Property, plant and
equipment 521 024 423 533 413 888 451 996
Intangible assets 509 707 14 761
Unlisted investments and
loans 60 315 1 284 127
Current assets 1 459 523 981 468 764 986 848 513
2 490 314 1 405 316 1 180 158 1 315 397
Equity and liabilities
Ordinary shareholders"
equity 579 158 486 508 327 038 578 114
Minority interest 1 686 1 804 1 637 2 366
Deferred taxation 59 117 58 872 4 407 57 499
Non-current interest
bearing debt 232 838 15 570 55 616 17 349
Current portion of Prochem
purchase consideration 393 575
Current liabilities 1 223 940 842 562 791 460 660 069
2 490 314 1 405 316 1 180 158 1 315 397
Net interest-bearing
(debt)/funds (546 443) (150 019) (342 869) 252 784
Net asset value
per share (Rand) 15,32 12,84 8,58 15,32
Directors" valuation of
unlisted shares 60 69 69 69
Capital expenditure
Incurred 18 694 28 078 15 833 86 534
Authorised and committed 26 545 21 088 22 342 5 524
Authorised but not
contracted for 55 634 38 496 9 773 81 905
CONSOLIDATED CASH FLOW STATEMENTS
Reviewed Unaudited Unaudited Audited
6 months 6 months 6 months 12 months
R"000 30/9/2003 30/9/2002 30/9/2001 31/3/2003
Cash generated from
operations 53 507 112 743 56 793 390 219
Finance costs and
taxation (97 380) (16 141) (29 235) (55 924)
(Utilised by)/generated
from working capital (102 329) (172 349) (99 149) 73 833
(Utilised by)/available
from operations (146 202) (75 747) (71 591) 408 128
Dividends paid (27 611) (33 121) - (49 743)
Cash (outflow)/inflow from
operating activities (173 813) (108 868) (71 591) 358 385
Cash outflow from
investing activities (18 628) (28 266) (20 674) (96 576)
Cash outflow from
financing activities (1 099) (24 020) (2 027) (47 674)
Net (increase)/decrease in
bank overdrafts (193 540) (161 154) (94 292) 214 135
Net bank balances/
(overdrafts)
at beginning of period 281 967 57 097 (167 637) 67 832
Net bank balances/
(overdrafts)
at end of period 88 427 (104 057) (261 929) 281 967
NOTES
These condensed consolidated interim financial statements are prepared in
accordance with South African Generally Accepted Accounting Practices including
AC127 - "Interim Financial Reporting" - and schedule 4 of the South African
Companies Act. The accounting policies used in the preparation of the interim
financial statements are consistent with those used in the annual financial
statements for the year ended 31 March 2003, except as described below.
The company adopted AC133: Financial Instruments - Recognition and Measurement
on 1 April 2003. In accordance with AC133, the comparative financial information
for the year ended 31 March 2003 and for the six months ended 30 September 2002
and 2001 has not been restated. The impact of the adoption of this standard is
as follows:
* Opening retained earnings have been restated to record a fair value profit
of R1,3 million in respect of open commodity contracts at 1 April 2003.
* A fair value loss of R5,6 million in respect of commodity contracts was
recorded during the six-month period ended 30 September 2003.
The company has historically recorded its foreign exchange contracts in
accordance with the requirements of AC133, and therefore no opening retained
earnings adjustment is required in respect of these contracts. The fair value
loss on foreign exchange contracts during the six months ended 30 September 2003
was R20,4 million, which is largely offset by the related revaluation of foreign
receivables and payables aggregating R15,8 million.
The future minimum lease payments under non-cancelable operating leases are
R14,511 million (2002: R4,0 million) within one year and R56,839 million between
two and five years (2002: R7,5 million), and R15,833 million beyond five years
(2002: R0 million), giving a total of R87,183 million (2002: R11,5 million).
A dividend of 72,5 cents per share was declared on 7 July 2003 in respect of the
earnings of the previous financial year. This dividend is reflected in the
current period to 30 September 2003.
The hyperinflation adjustments, as required by the accounting standard AC124,
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 period by R2,757 million. The net monetary gain of R11,485 million for
the period is offset by foreign exchange losses of R5,771 million in Zimbabwe
and Zambia. The net impact to the Group, including the offsetting foreign
exchange losses, is a net loss of R1,920 million.
With effect from 1 September 2003, the company acquired the business of Prochem
for a net purchase consideration of R632,150 million (including the assumed debt
of R94,992 million and costs directly relating to the acquisition of R2,934
million).
The purchase consideration was allocated to net assets of R132,009 million,
intangible assets other than goodwill of R208,590 million, with the balance of
R291,551 million being allocated to goodwill. The goodwill will be amortised
over 20 years, being its estimated useful life.
The purchase consideration will be funded by a R200 million long-term facility
(included in non-current interest bearing liabilities), R35,632 million through
the issue of Omnia Holdings Ltd ordinary shares (which have been included as
part of shareholders" equity in the balance sheet) and the balance of R393,575
million will be financed out of cash and short-term facilities.
Subsequent to the period end, in October 2003 the company paid R129,368 million
to the sellers. In addition, on 7 November 2003, 1 831 019 ordinary shares with
a no par value of R19,46 per share were issued in settlement of the R35,632
million due. The balance will be paid in January 2004. The cash flow statement
does not include any cash flow in respect of the Prochem purchase consideration
as this was only paid after the period end.
There is a security structure in place in terms of which an SPV has provided
guarantees to the Group"s banking facility providers. The main operating
companies as well as various other Group companies have in turn provided the SPV
with indemnities and guarantees. Furthermore, as security for the loans that
have been entered into, some fixed assets and moveable assets at the company"s
plant at Sasolburg (as oppposed to other plants) have been encumbered by a
mortgage and a general notarial bond respectively in favour of the SPV.
Furthermore, receivables arising only out of the South African operations of the
Group have also been ceded in favour of the SPV.
COMMENTARY
Introduction
Omnia is a specialist chemical services company providing customised solutions
in the agricultural, mining and industrial chemical markets.
As indicated in Omnia"s year-end results announced in June this year, the 2003
financial year was an exceptional year for the Group. This resulted from two
primary factors: In the first instance, the Group experienced unusually high
export volumes and margins driven by the weak Rand. In the second instance, 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.
Earnings for the current half and full year were therefore not expected to match
those of last year. To ensure appropriate comparison and to provide shareholders
with a better understanding of the historical earnings trend, the interim
results for the half-year ended September 2001 have been included.
During the period under review, the Group acquired the Prochem Group of
companies ("Prochem"), the leading chemical distribution company in South
Africa. The acquisition has been finalised and has provided Omnia with a more
diversified portfolio of businesses, with a better balance between the
agricultural and chemical interests.
The results of Prochem, acquired with effect from 1 September 2003, have been
included for the month of September only.
Financial Review
Revenue for the period under review of R1,153 million was, in respect of Omnia"s
traditional business excluding Prochem, at a similar level to the September 2002
interim period and about 58% ahead of the September 2001 interim period.
The strengthening Rand during the period under review impacted the Group
results, but was also largely negated by the rise in the international
fertilizer commodity prices. The Group operating margin of 6% is lower than the
12% in the previous comparable period, although the margin is still ahead of the
3% achieved in September 2001.
As expected, headline earnings per share reduced from 178,2 cents per share to
93,6 cents per share. This is 47% below the 2002 interim result, but 206% higher
than the headline earnings achieved in the six months to September 2001.
Maintenance costs were higher than in the comparative period due to the timing
of various routine maintenance shutdowns and the addition of the Prochem
business impacting on operating costs before depreciation.
The Group has a policy of hedging its net foreign currency exposures against
volatility. This has led to a currency exchange loss of R6 millon during the
period under review compared to the six-month period in 2002 where an exchange
gain of R10 million was realised due to the weakening of the Rand. As a result,
operating costs before depreciation and net of other income increased at a
higher rate than inflation.
The Group adopted the accounting standard AC133 relating to financial
instruments, necessitating a net adverse adjustment of R5,6 million in the
Income Statement and a net favourable adjustment of R1,3 million to the opening
equity in respect of instruments in place at the end of the previous financial
year. Net interest paid is virtually the same as that paid in the comparable
previous period, as it includes the interest payable in respect of the Prochem
business acquisition for the month of September.
Cash utilised by operations for the period under review has been negatively
impacted by the larger tax payments during the period under review. This
resulted in a negative cash outflow of R146 million, about R70 million more than
the previous comparable period and R75 million more than the interim period to
September 2001.
The Prochem assets and liabilities have now been consolidated into the Group.
The new shares issued to the management vendors after the transaction closure
date have been included as equity to correctly reflect the investment at the
period end. Non-current interest bearing debt reflects R200 million of the
purchase consideration, which will be funded through a term loan as part of the
financing arrangement. The balance of the purchase consideration is shown
separately. The goodwill component of the acquisition will be amortised over a
twenty-year period.
Both the current assets and the current liabilities have increased substantially
over the period due to the consolidation of the Prochem working capital
components.
Shareholders" equity has not increased during the period. This was due to the
net profit and the new share issue being offset by the impact of the R46 million
negative movement in the foreign currency reserve account due to the strong Rand
and the final dividend distribution of R28 million applicable to the previous
year.
Following the debt incurred through the acquisition of the Prochem business, the
debt equity ratio at 94% is substantially higher than the 2002 interim period,
but below the level of 105% as at September 2001. The gearing is accentuated at
the interim stage due to the higher working capital requirements of the seasonal
fertilizer business.
Agriculture
As indicated in the Group"s 2003 Annual Report, Omnia anticipated a drop in the
price of maize due to a surplus of grain stocks and the stronger Rand. The price
of maize dropped by almost 50% since last year, which, as anticipated, will have
a negative impact on the area planted to maize.
For the period under review, net fertilizer sales were lower than the comparable
period to September 2002. This was mainly as a result of the grain market
conditions, the late rains and the considerably lower levels of exports due to
the stronger Rand.
Operating margins were 3% of net revenue compared to the 12% achieved in 2002.
With the bulk of the fertilizer sales taking place after September, these
margins will improve, as has been the trend in the past.
Mining
Sales of explosives and related products and services, which now include the
mining related products and services of Prochem, were 3% ahead of the comparable
period, with a small increase in operating margin from 12% of sales to 14% of
sales. The development of electronic detonators following the acquisition of
Delta Caps International in the previous period is progressing steadily, with a
number of sales opportunities being pursued.
Industrial Chemicals
The results of Prochem are included for the month of September only. As a result
of this inclusion, turnover was boosted by 243% when compared to the September
2002 interim period. However, the operating margin of 7% of sales halved from
the previous period, as a result of the different sales mix of Prochem.
Prospects
The continued strengthening of the Rand relative to the US Dollar will
negatively impact margins, in particular export margins and volumes. The low
price of grains will result in lower maize plantings this summer, leading to a
reduction in fertilizer sales.
As planned, Omnia took control of the Prochem chemical distribution operation in
September. The rapid fall in interest rates has made the timing around this
acquisition very favourable. The integration of the Prochem team has proceeded
smoothly and all key activities are firmly on track.
As previously stated, Omnia"s full-year earnings are not expected to match those
achieved in the past exceptional year. However, earnings and cash flows for the
second six-month period are, as usual, expected to be much stronger than for the
first six months. These earnings and cash flows will now be enhanced by the
fertilizer sales shifting from the first six-month period into the second six-
month period, as well as by a strong contribution from Prochem, which will be
incorporated for a full six-month period for the first time.
The Prochem acquisition has led to higher gearing. As the level is reduced over
the next few years, the growth in earnings is expected to accelerate.
Dividends
In view of the abnormally late planting season and the resulting delayed cash
flow, the board has elected not to pay an interim dividend, but to consider its
incorporation with the final dividend at the year-end.
Review Opinion
The Group"s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed
consolidated financial information for the six months ended 30 September 2003
contained in this report. The review opinion is available for inspection at the
company"s registered office during normal business hours.
NJ Crosse RB Humphris
Chairman Managing Director
Johannesburg
2 December 2003
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, TR Scott*,
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: 02/12/2003 08:30:12 AM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
