| Wed 1 Dec 2004, 8:42 | | RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004 |
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OMNIA - REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2004
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1967 / 003680 / 06)
Share code: OMN ISIN: ZAE000005153
Reviewed interim results
for the six months ended 30 September 2004
- Revenue up 73% to R2,0 billion
- Headline earnings up 116% to R 77 million
- Headline earnings per share up 100% to 187,4 cents per share
www.omnia.co.za
Consolidated Income Statements
Reviewed Reviewed Audited
6 months 6 months 12 months
R`000 30/9/2004 30/9/2003 31/3/2004
Revenue 1 989 954 73% 1 153 072 3 278 590
Cost of sales (1 479 261) 87% (790 292) (2 253 656)
Gross profit 510 693 41% 362 780 1 024 934
Operating costs
before depreciation
and net of other
income (338 199) 28% (264 654) (621 259)
EBITDA 172 494 76% 98 126 403 675
Depreciation and
amortisation of
intangible assets
other than goodwill (34 621) 30% (26 534) (63 130)
Amortisation of
goodwill - (1 203) (8 098)
Operating profit 137 873 96% 70 389 332 447
Finance costs
- Net interest paid (29 205) 130% (12 695) (35 323)
- Fair value profit/
(loss) on derivative
instruments 660 -106% (11 379) (50 609)
- Net monetary
gain/(loss) 6 592 -43% 11 485 (4 077)
Profit before taxation 115 920 101% 57 800 242 438
Taxation (39 180) 68% (23 348) (75 770)
Profit after taxation 76 740 123% 34 452 166 668
Minority interest - (186) (505)
Net profit for
the period 76 740 124% 34 266 166 163
Basic earnings per
share (cents) 187,8 90,4 423,1
Headline earnings
per share (cents) 187,8 93,6 443,7
Fully diluted
basic earnings per
share (cents) 184,1 81,4 393,8
Weighted average
number of shares
in issue (`000) 40 867 37 910 39 277
Dividends per
share (cents) 120,0* 72,5* 72,5*
EBITDA interest cover 5,91 7,73 11,43
* in respect of prior year
Calculation of Headline Earnings
Reviewed Reviewed Audited
6 months 6 months 12 months
R`000 30/9/2004 30/9/2003 31/3/2004
Net profit for the
period 76 740 124% 34 266 166 163
Amortisation of goodwill - 1 203 8 098
Headline earnings 76 740 116% 35 469 380 973
Segmental Analysis
Reviewed Reviewed Audited
6 months 6 months 12 months
R`000 30/9/2004 30/9/2003 31/3/2004
Revenue 1 989 954 73% 1 153 072 3 278 590
Fertilizer 796 621 -1% 803 173 1 778 720
- Less: Intersegmental
sales (105 597) 40% (75 226) (169 085)
Mining 317 965 26% 252 322 577 445
Chemicals 982 491 469% 172 803 1 095 969
- Less: Intersegmental
sales (1 526) - (4 459)
Operating profit 137 873 96% 70 389 332 447
Fertilizer 30 185 31% 23 031 203 690
Mining 46 762 34% 34 945 64 238
Chemicals 60 926 391% 12 413 64 519
Consolidated Balance Sheets
Reviewed Reviewed Audited
6 months 6 months 12 months
R`000 30/9/2004 30/9/2003 31/3/2004
Assets
Property, plant and equipment 573 424 521 024 570 525
Intangible assets 451 803 509 707 460 958
Unlisted investments and loans 60 60 60
Current assets 1 561 829 1 459 523 1 074 300
2 587 116 2 490 314 2 105 843
Equity and liabilities
Ordinary shareholders` equity 793 593 579 158 715 529
Minority interest - 1 686 2 005
Deferred taxation 52 479 59 117 62 935
Non-current interest bearing debt 162 655 232 838 162 595
Current portion of Prochem
purchase consideration - 393 575 -
Current liabilities 1 578 389 1 223 940 1 162 779
2 587 116 2 490 314 2 105 843
Net interest bearing debt 482 687 546 443 227 052
Net asset value per share (Rand) 18,63 15,32 17,97
Directors` valuation of
unlisted shares 60 60 60
Capital expenditure
Incurred 31 977 18 694 116 610
Authorised and committed 11 946 26 545 28 921
Authorised but not contracted for 95 186 55 634 114 722
Consolidated Cash Flow Statements
Reviewed Reviewed Audited
6 months 6 months 12 months
R`000 30/9/2004 30/9/2003 31/3/2004
Operating profit 137 873 70 389 332 447
Depreciation and amortisation 34 621 27 737 71 228
Adjustments for non-cash and
other items 29 648 (44 619) (72 639)
Finance costs and taxation (145 184) (97 380) (159 768)
(Utilised by)/generated from
working capital (260 790) (102 329) 82 101
(Utilised by)/available
from operations (203 832) (146 202) 253 368
Dividends paid (17 971) (27 611) (28 584)
Cash (outflow)/inflow from
operating activities (221 803) (173 813) 224 784
Cash outflow from
investing activities (31 977) (18 628) (707 511)
Cash (outflow)/inflow from
financing activities (4 980) (1 099) 219 074
Net decrease in bank balances (258 760) (193 540) (263 653)
Net bank balances at beginning
of period 21 750 281 967 285 403
Net bank balances at end
of period (237 010) 88 427 21 750
Statement of Changes in Ordinary Shareholders` Equity
Reviewed Share Non-
capital and distributable Retained
R`000 premium reserves earnings Total
At 31 March 2003 57 152 24 372 496 590 578 114
Net impact of adoption of AC 133:
Financial Instruments - Recognition
and Measurement 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 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
Net profit for the period 131 897 131 897
Increase in foreign currency
translation reserve 4 287 4 287
Fair value gain on interest rate swap 915 915
Treasury shares (728) (728)
At 31 March 2004 95 290 (16 060) 636 299 715 529
Net profit for the period 76 740 76 740
Capitalisation award and
ordinary dividends paid 35 759 (53 710) (17 951)
Increase in foreign currency
translation reserve 13 789 13 789
Ordinary shares issued 1 500 1 500
Treasury shares 3 986 3 986
At 30 September 2004 136 535 (2 271) 659 329 793 593
Notes
Accounting policies
These condensed consolidated interim financial statements are prepared in
accordance with South African Generally Accepted 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 2004, except for the adoption of IFRS 3 (AC 140):
`Business Combinations`, AC 128: `Impairment of assets (revised)` and AC 129:
`Intangible Assets (revised)` which were adopted on 1 April 2004. In accordance
with IFRS 3 (AC 140), the Group no longer amortises goodwill with effect from 1
April 2004. An annual impairment test on the balance of goodwill has been
performed at 30 September 2004 and will be performed annually on this date. No
impairment loss has occurred.
Review opinion
The Group`s auditors, PricewaterhouseCoopers Inc., have reviewed the condensed
consolidated financial information for the 6 months ended 30 September 2004
contained in this report. The review opinion is available for inspection at the
company`s registered office during normal business hours.
Hyperinflation
The hyperinflation adjustments, as required by the accounting standard AC124:
`Financial Reporting in Hyperinflationary Economies`, result from the continued
devaluation in the Zimbabwean Dollar. The most significant adjustment is that
which reduced the gross profit for the period by R4,5 million. The net monetary
gain of R6,5 million for the period is offset by foreign exchange losses of R2,9
million in Zimbabwe. The net impact to the Group, is a net profit of R1,9
million.
Capitalisation award and dividends
Capitalisation shares were awarded to shareholders emanating from distributable
reserves on 16 July 2004 resulting in 1 199 967 no par value shares been issued
for R35,8 million. Some shareholders elected to receive a cash dividend of 120
cents per share resulting in R17,9 million being paid out in cash. This dividend
is reflected in the current period to 30 September 2004.
An interim dividend of 60 cents per share was declared on 30 November 2004. This
will be reflected in the second six month period together with the
abovementioned 120 cents per share declared in respect of the previous financial
year.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R16,1 million (2003: R14,5 million) within one year and R53,3 million between
two and five years (2003: R56,8 million), and Rnil beyond five years (2003:
R15,833 million), giving a total of R69,4 million (2003: R87,183 million).
Security structure
There is a security structure in place in terms of which an Special Purpose
Vehicle (`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 opposed 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.
Partnership with Management Schemes
In terms of the second partnership with management scheme 1 424 000 shares were
issued to management on 23 July 2004 giving rise to an increase in share capital
of R1,5 million as reflected in the statement of changes in shareholders`
equity.
The third partnership with management scheme was approved by shareholders on 30
September 2004.
Commentary
Introduction
Omnia is a specialist chemical services company providing customised solutions
in the agricultural, mining and chemical markets.
The Group focuses on responding to the needs of its customers and the commercial
challenges they face, through the deployment of advanced technology solutions
and innovative products in its markets.
The interim results for the six-month period ended 30 September 2004 include the
Prochem results for the full six months compared to only one month for the six
months to 30 September 2003.
Financial review
With the inclusion of Prochem for the full period, many income statement items
have substantially increased over the comparable prior period. Group revenue
increased by 73% to R2,0 billion and gross profit increased by 41% to R511
million. Operating profit increased by 96% from the prior comparable period,
primarily as a result of Prochem. Omnia`s other businesses, Agriculture and
Mining - representing 56% of Group operating profit - both grew in operating
profit in excess of 30%.
The Group operating margin improved to 6,9% from the 6,1% in the prior
comparable period. This reflects the improved balance of the Group`s interests,
as there is a smaller contribution from the seasonal agriculture business on the
Group`s results.
Net interest paid more than doubled from the R12,7 million incurred in the
comparable prior period to R29,2 million in the period under review, due to a
R200 million term loan to fund the acquisition of Prochem.
In terms of the new SA GAAP (the precursor to the IFRS accounting standards),
the Group assessed the recoverability of the carrying value of the goodwill
carried on the balance sheet as at 30 September 2004. In terms of this
assessment, no impairment of the goodwill is required. In addition, due to the
change in accounting standards, no amortisation of goodwill has been provided.
Headline earnings of R77 million increased by 116%, also reflecting the
inclusion of the Prochem results for the full period. Besides the impact of the
Prochem results both the Group`s agriculture as well as mining divisions showed
improvements in excess of 30% in their respective operating profits over the
prior comparable period, as reflected in the segmental analysis.
The seasonal nature of Omnia`s agriculture operations causes the Group`s working
capital requirements to peak at or around the September interim stage. Although
net interest-bearing debt was R64 million below the level at the comparable
prior period ended 30 September 2003, it has increased by R256 million to R483
million since the 30 March 2004 year end as a result of this peak. In this
interim period the agriculture division contributed 22% of operating income.
Cash utilised by operations for the period under review increased by R58 million
over the comparable prior period to R204 million. This increase is mainly
attributable to an increase in working capital and tax payments and reflects the
increased level of activity and profitability achieved during the period under
review.
Operational review
Agriculture
Revenue declined by 5% compared with the same period last year. This was due to
the strengthening rand which reduced fertilizer sales prices by a few percentage
points. However the impact of the strengthening rand has been counteracted to an
extent by the record high international fertilizer raw material prices,
effectively limiting the price reduction of fertilizer in the local markets.
Volumes in the bulk product lines were comparable with the prior period while
considerable growth was experienced in both speciality fertilizers and precision
agricultural services.
Aggressive management of costs during the period under review has resulted in
the division achieving an operating margin up from 3,2% in the prior period to
4,4% in the period under review, notwithstanding the reduction in fertilizer
prices. Due to the seasonality of the operations, operating margins in the
agriculture division are traditionally considerably lower in the first six-month
period compared with those in the second six-months of the financial year.
The Group`s speciality fertilizer operations in Australia and New Zealand
continue to progress well, in particular the humate business in Australia which
was acquired 18 months ago. Progress with the joint venture in New Zealand is on
track, while another joint venture in Australia is in the process of being
established.
Mining
The Group`s explosives operations received the benefit from the higher levels of
activity that prevailed, particularly in coal mining. This resulted in a
pleasing growth in bulk explosives volumes. The international price of ammonia
has increased over the period under review in line with the increase in oil and
energy prices, and since the majority of the Group`s bulk explosives contracts
are linked to the international price of ammonia, these price increases have
been passed on.
A significant reduction in underground gold production resulted in volume
declines in this segment of the business. However, the Group`s market share of
underground gold production is fairly small and thus the impact of this volume
reduction is minimal. The reduction in local underground explosives volumes has
to some extent been off-set by an increase in export volumes, albeit at lower
prices and margins.
Numerous technical improvements and cost reductions are being applied in the
development of the Deltadet electronic detonator. The Group`s explosives experts
have integrated the Group`s advanced electronic detonator software into its
unique blasting software, resulting in the integrated blasting software becoming
a world leader. Full commercialisation will only begin within the next 12 months
once the technical changes are fully implemented.
The mining division achieved a 26% growth in sales and a 34% growth in operating
profit over the comparable prior period. This was mainly due to the combined
impact of increased bulk explosives volumes, Prochem`s mining service activities
and ammonia linked price increases. The division has continued its aggressive
cost optimisation programme which has resulted in a small increase in operating
margin to 14,7%.
Chemicals
The Prochem activities now reflect a full six months trading as opposed to the
prior period in which only one month was included. Sales have therefore
increased to R981 million for the period under review compared to the R173
million achieved in the previous comparable period.
The strength of the rand caused chemical prices in the local market to reduce by
12%. However, Prochem responded by increasing its volumes and adding new
products and customers to its business. In particular the restructuring of the
Polymer unit into a single integrated business has gone exceptionally well.
The acquisition of Prochem gave rise to goodwill of R281 million in September
2003. In terms of previous accounting standards, this goodwill was amortised
over a 20 year period and resulted in a charge of R8,1 million in the income
statement for the year ended 30 March 2004. In terms of the new SA GAAP
accounting standards, goodwill has to be assessed and if necessary impaired. The
Group has undertaken this assessment and no impairment is necessary.
Operating profit from the chemicals division has grown from R12 million in the
prior period to R61 million in the current period. Due to a new business that
Prochem brings with it, operating margins are, as expected, below those achieved
for the full year to 30 March 2004.
Prospects
In the Agriculture business, the excellent late summer rain of the last season
has resulted in good soil moisture levels. Hectares planted to this year`s
summer crops, such as maize, are therefore expected to be up on last year`s
plantings.
In the Mining business, buoyant mineral commodity prices are expected to result
in a similar trend to that achieved in the period under review, but with growth
prospects coming from new projects in Africa.
In the Chemicals business, an element of optimism prevails for the remainder of
the financial year. There are signs that the manufacturing sector of the South
African economy is improving, which will in turn drive demand for chemicals. It
is foreseen that the high oil price will drive price increases in the downstream
petrochemical products and their derivatives. International chemical prices are
also increasing, in sympathy with the improvement in the global economic
environment.
With the addition of the Prochem business and the balance this brings, the
impact of the agricultural season on the first and second half of the financial
year will not be as pronounced as in the past. The Group also continues to
benefit from the reduction in local interest rates.
The Group therefore expects to show an improvement over the results achieved for
the year ended March 2004.
Dividends
The board is pleased to announce that an interim dividend of 60 cents per share
has been declared in respect of shareholders recorded in the register on Friday
7 January 2005. The last day to trade cum dividend will be Friday 31 December
2004. The shares will commence trading ex dividend on Monday,
3 January 2005 and the record date will be Friday, 7 January 2005. The payment
date will be Monday, 10 January 2005. Share certificates may not be
dematerialised or rematerialised between Monday, 3 January 2005 and Friday, 7
January 2005, both dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
Johannesburg 1 December 2004
