| Wed 22 Jun 2005, 8:15 | | Omnia - Reviewed provisional results for the year |
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Omnia - Reviewed provisional results for the year ended 31 March 2005
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1967/003680/06
Share code: OMN & ISIN: ZAE000005153
(`Omnia` or the `Group`)
Reviewed provisional results for the year ended 31 March 2005
* Revenue increased by 30%
* Net profit for the year increased by 33%
* Basic earnings per share increased by 26%
Extending footprint into Africa with an acquisition in the Chemicals division
Final distribution to shareholders of 78 cents per share
Condensed consolidated income statements
for the year ended 31 March 2005
Reviewed Audited
R`000 2005 % 2004
Revenue 4 263 974 30 3 278 590
Cost of sales (3 067 776) (2 253 656)
Gross profit 1 196 198 17 1 024 934
Operating expenses (801 865) 16 (692 487)
Operating profit 394 333 19 332 447
Finance costs
- Net interest paid (57 734) 63 (35 323)
- Net monetary gain/(loss) 17 186 (4 077)
Fair value loss on financial (21 536) (50 609)
instruments
- Forward contract transactions (27 332) (45 363)
not qualifying as hedges
- Other financial instruments 5 796 (5 246)
Profit before taxation 332 249 37 242 438
Taxation (111 368) (75 770)
Profit after taxation 220 881 33 166 668
Minority interest (417) (505)
Net profit for the year 220 464 33 166 163
Basic earnings per share (cents) 516,3 26 410,5
Headline earnings per share 516,3 20 430,5
(cents)
Fully diluted basic earnings per 486,6 27 382,9
share (cents)
Fully diluted headline earnings 486,6 21 401,6
per share (cents)
Dividend paid per share (cents) in 120,0 72,5
respect of prior year
Interim dividend per share (cents)
declared in respect
of current year 60,0 -
Weighted average number of shares 42 699 5 40 477
in issue (`000)
Weighted average number of
fully diluted shares in issue 45 305 4 43 395
(`000)
Fully diluted earnings (R`000) 220 464 33 166 163
Number of shares in issue 43 424 39 932
Segmental analysis
for the year ended 31 March 2005
Reviewed Audited
R`000 2005 % 2004
Revenue 4 263 974 30 3 278 590
Agriculture, net of intersegmental 1 624 602 1 609 635
sales
Mining, net of intersegmental 715 760 24 577 445
sales
Chemicals, net of intersegmental 1 923 612 76 1 091 510
sales
Operating profit 394 333 19 332 447
Agriculture 152 714 (25) 203 690
Mining 108 531 69 64 238
Chemicals 133 088 106 64 519
Calculation of headline earnings
Reviewed Audited
R`000 2005 2004
Net profit for the year 220 464 33 166 163
Amortisation of goodwill 8 098
Headline earnings 220 464 27 174 261
Condensed consolidated balance sheets
as at 31 March 2005
Reviewed Audited
R`000 2005 % 2004
Assets
Property, plant and equipment 598 352 5 570 525
Intangible assets 450 799 460 958
Unlisted investments and loans 60 60
Current assets 1 453 681 35 1 074 300
2 502 892 2 105 843
Equity and liabilities
Ordinary shareholders` equity 895 164 25 715 529
Minority interest 2 067 2 005
Deferred taxation 70 216 62 935
Non-current interest bearing debt 91 883 162 595
Current liabilities 1 443 562 24 1 162 779
2 502 892 2 105 843
Net interest-bearing debt 372 993 227 052
Net asset value per share (Rand) 20,66 15 17,97
Directors` valuation of unlisted 60 60
shares
Capital expenditure
Incurred 87 798 116 610
Authorised and committed 58 560 28 921
Authorised but not contracted for 76 985 114 722
Condensed consolidated cash flow statements
for the year ended 31 March 2005
Reviewed Audited
R`000 2005 % 2004
Operating profit 394 333 19 332 447
Depreciation and amortisation 71 982 71 228
Adjustment for non-cash items (13 505) (72 640)
Finance costs and taxation (181 082) (159 768)
(Utilised by)/generated from (295 618) 82 101
working capital
(Utilised by)/available from (23 890) 253 368
operations
Dividends paid (44 227) (28 584)
Cash(outflow)/inflow from (68 117) 224 784
operating activities
Cash outflow from investing (85 297) (707 511)
activities
Cash (outflow)/inflow from (64 816) 219 074
financing activities
Net decrease in cash (218 230) (263 653)
Net cash at beginning of year 21 750 281 967
Effects of exchange rate movements (88) 3 436
Net (overdraft)/cash at end of (196 568) 21 750
year
Statements of changes in ordinary shareholders` equity
Non-
Stated distributable Retained
R`000 capital reserves earnings Total
At 31 March 2003 57 152 24 372 496 590 578 114
Net impact on
opening balance of
adoption of AC 133:
Financial 1 264 1 264
Instruments -
Recognition and
Measurement
As restated at 1 57 152 24 372 497 854 579 378
April 2003
Net profit 166 163 166 163
attributable to
ordinary
shareholders
Decrease in foreign
currency
translation reserve (41 347) (41 347)
Fair value gain on 915 915
interest rate swap
Ordinary shares 35 632 35 632
issued
Treasury shares 2 506 2 506
Ordinary dividends (27 718) (27 718)
paid
At 31 March 2004 95 290 (16 060) 636 299 715 529
Net profit 220 464 220 464
attributable to
ordinary
shareholders
Decrease in foreign (3 208) (3 208)
currency
translation reserve
Fair value loss on (1 305) (1 305)
interest rate swap
Ordinary shares 41 652 (40 152) 1 500
issued
Treasury shares 5 906 5 906
Capitalisation 35 771 (35 771)
award
Ordinary dividends (43 722) (43 722)
paid
At 31 March 2005 178 619 (20 573) 737 118 895 164
Notes
Accounting policies
These condensed consolidated provisional financial statements are prepared in
accordance with Generally Accepted Accounting Practice in South Africa,
including AC 127: `Interim Financial Statements`, which is relevant for
provisional financial information, and Schedule 4 of the South African Companies
Act. The accounting policies used in the preparation of the provisional
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.
Hyperinflation
The hyperinflation adjustments, as required by the accounting standard AC 124
`Financial Reporting in Hyperinflationary Economies`, result from the continued
devaluation in the Zimbabwean Dollar. The most significant adjustment is a
reduction in gross profit for the year by R16,6 million (2004: R13,1 million).
The net impact of these hyperinflation adjustments to the group is a net loss of
R13,4 million (2004: R17,8 million).
Cashflow statement
Non-cash flow items on the cash flow statement comprise foreign exchange, FCTR
movements and hyperinflation adjustments.
Security Structure for banking facilities
There is a security structure in place in terms of which a 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
collateral bond respectively in favour of the SPV.
Additionally, receivables arising only out of the South African operations of
the Group have been ceded in favour of the SPV.
These securities have been put in place in respect of the net interest-bearing
debt comprising the R133 million loan facility and other short-term facilities.
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 being issued
at R29,25 per share. Some shareholders elected to receive a cash dividend of 120
cents per share resulting in R17,9 million being paid out in cash.
Prior year basic earnings and headline earnings per share and fully diluted
earnings and headline earnings per share have been restated as follows to adjust
for the capitalisation issue in line with the requirements of AC 104, Earnings
per Share:
As restated As previously stated
Basic earnings per share 410,5 423,1
(cents)
Headline earnings per 430,5 443,7
share (cents)
Fully diluted basic 382,9 393,8
earnings per share
(cents)
Fully diluted headline 401,6 413,0
earnings per share
(cents)
An interim dividend of 60 cents per share was declared on 30 November 2004 and
R27,1 million was paid out in cash. These dividends are reflected in the current
year ended 31 March 2005.
Commitments
The future minimum lease payments under non-cancelable operating leases are
R17,6 million (2004: R10,9 million) within one year, R48,9 million (2004:
R51,5million) between two and five years and R2,9 million (2004: R6,5 million)
later than five years, giving a total of R69,4 million (2004: R69,1 million).
Headline earnings per share
The headline earnings per share is calculated by dividing the headline earnings
by the weighted average number of ordinary shares in issue, which excludes
shares held as treasury shares.
Partnership with Management Scheme
In terms of the second partnership with management scheme 1 424 000 shares were
issued to management on 23 July 2004, when the market price of Omnia shares was
R29,25, giving rise to a net increase in share capital of R1,5 million as
reflected in the statement of changes in shareholders` equity. (Being R41,6
million representing the market price of Omnia shares issued less the R40,1
million reflected as transactions with minorities).
The third partnership with management scheme was approved by the shareholders on
30 September 2004.
Business Combinations
Acquisition of African Polymers
In January 2005, the Group acquired the net assets of African Polymers for a
purchase consideration of
R9,3 million, which has been allocated mainly to intangible assets (distribution
contracts) which will be amortised over a period of ten years.
Review opinion
The condensed consolidated financial information for the year ended 31 March
2005 included in this report has been reviewed by the auditors,
PricewaterhouseCoopers Inc. A review opinion is available for inspection at the
company`s registered office during normal business hours.
Commentary
Introduction
Omnia, a specialist chemical services company providing customised solutions in
the agriculture, mining and chemical markets, produced pleasing results for the
year ended 31 March 2005.
The acquisition of Prochem took effect on 1 September 2003, therefore the
results for the prior year include Prochem for only seven months. As a
consequence and as expected, the reported interim increase in net profit of 124%
for the first six months ended 30 September 2004 was not sustainable for the
full year.
Omnia continues to deliver on its strategy to diversify the Group and achieve a
better balance between its interest in the agricultural, mining and chemical
businesses. This is demonstrated by the increased contribution made to operating
profit by the mining and chemicals sectors, which collectively increased to 61%
(2004: 39%).
In line with the strategy of diversifying into new markets, both domestic and
international, the Group made a small acquisition during the year to expand its
polymer interests in East Africa. This acquisition fits into the Omnia strategy
of becoming a significant player in the sub-Saharan chemical markets, while
retaining the essential Omnia business model of adding value to customers by
leveraging its intellectual capital and technology.
Financial review
Net profit for the year increased by 33% to R220 million (2004: R166 million)
while basic earnings per share increased by 26% to 516 cents (2004: 411 cents).
During the year, the weighted average number of shares in issue increased by 5%
to 42,699 million.
A focused strategy and diversified business model have positioned Omnia well for
profitable growth. With the inclusion of Prochem for the full year, revenue
increased by 30% to R4,3 billion (2004: R3,3 billion). The impact of the lower
margin business model of Prochem reduced the gross margin to 28% (2004: 31%) and
impacted on the operating profit margin, reducing it to 9% (2004: 10%).
Operating expenses net of other income increased by 16% to R802 million (2004:
R692 million) principally as a result of the inclusion of Prochem for a full
year. The debt incurred to acquire Prochem has also been in place for the full
year, and this, together with higher levels of working capital, has resulted in
the interest charge increasing by 63% for the year to R58 million (2004: R35
million).
The cost of forward contract transactions not qualifying as hedges in terms of
the requirements of AC 133: Financial Instruments - Recognition and Measurement
- has reduced to R27 million (2004: R45 million). On the other hand, hedging
contracts entered into during the course of the year resulted in a profit of R6
million compared to a loss of R5 million for the comparable prior period.
Due to steeply increasing international commodity prices, particularly nitrogen
and petro-chemical products, a decision was taken by management in January 2005
to increase the Group`s inventory in anticipation of further raw material
commodity price increases. This action was taken in the knowledge that it would
have a negative impact on cash and as such is the main contributing factor to
the R296 million cash utilised in respect of working capital for the year ended
31 March 2005.
As a result of the above-mentioned early investment in inventory and the
inclusion of Prochem for the full year, net interest bearing debt, increased by
64% to R373 million (2004: R227 million) at year end, resulting in the debt:
equity ratio increasing to 42% (2004: 32%). However, the debt: net tangible
worth improved from 89% at the end of last year to 84% this year.
Operational review
Chemicals
The Chemicals division, comprising the Prochem Group, is the leading distributor
of speciality and other chemicals in Southern Africa. It has a presence in
almost every sector of the chemical distribution market.
During the year the division introduced new products into the market, expanded
into new market segments and penetrated new geographical markets into Africa.
The Group acquired African Polymers, a polymer business operating in East
Africa, which will augment the Group`s chemical exports into these markets.
This year`s results reflect Prochem for the full 12 months while the comparative
year includes seven months of Prochem`s results. The division posted a strong
financial performance for the year with revenue of R1,9 billion (2004: R1,1
billion (7 months)) and operating profits of R133 million (2004: R64 million (7
months)). Despite the strength of the Rand and its negative impact on Rand
margins, this division produced a solid performance for the year.
Mining
The Mining division is a market leader in blended bulk explosives formulations
for surface mines and manufactures packaged explosives for underground mines and
specialised surface blasting. It also supplies blasting accessories and is
currently commercialising a state-of-the-art electronic detonator system.
The division showed an outstanding financial performance both locally and
internationally. The exceptional results were primarily due to volume growth,
particularly in the surface explosives business. Revenue increased by 24% to
R716 million (2004: R577 million) and operating profits increased by 69% to R109
million (2004: R64 million), contributing 28% to Group operating profits. This
was mainly due to sound working capital management, improved productivity and
the implementation of operational efficiencies. However, the relatively strong
Rand during the period adversely affected South African mining operations
resulting in a loss of explosives sales to underground gold mines in particular.
The Deltadets operation achieved the successful development of Deltadet 3
miniaturisation to meet market requirements. This product is a miniaturised
Electronic Delayed Detonator used to initiate commercial explosives. It is
extremely accurate and programmable to allow for optimised blasting efficiency.
Development costs, which are written off as incurred, are currently still
exceeding revenues but this situation is expected to reverse in the 2006
financial year.
Agriculture
The Agricultural division produces and supplies granular, liquid and speciality
fertilizers to individual farmers, co-operatives and wholesalers throughout
South Africa, Swaziland, Zimbabwe, Zambia, Namibia, Botswana, Tanzania, Malawi,
Angola, Madagascar, Australia and New Zealand.
Revenue remained constant at R1,6 billion (2004: R1,6 billion) while operating
profit decreased by 25% to
R153 million (2004: R204 million). Operating margins decreased to 9,4% (2004:
12,7%). Two main factors influenced the operating performance of the division:
* an environment of increasing commodity prices resulted in a squeeze on Rand
margins; and
* the effect of the strong Rand led to reduced margins in the export market.
The Speciality Fertilizer business has shown positive growth particularly in
Australasia. The business experienced a robust year with profitability more than
doubling as a consequence of higher volumes, but primarily due to increased
efficiency through lower operational costs. The precision farming operations
have also expanded considerably with major successes being achieved with
perennial crops. The Group remains convinced that this venture has the potential
to become a significant part of the agricultural business.
Prospects
We are pleased with the performance of Prochem for the first full year with the
Group. This acquisition has bedded down well following the division`s
restructuring and is well positioned for growth and expansion in the year ahead.
The continued strong growth in world mineral demand is positive for the Mining
Division`s markets and even after taking into account the continued costs of
further detonator development, a substantial improvement in earnings is
anticipated for the coming year.
In the short term, the low maize price and high inventory will lead to crop
finance for farmers to be significantly tighter leading to a reduction in maize
plantings in the coming summer season. This will result in a reduction in
fertilizer consumption and, in all likelihood, lower fertilizer margins as
competitive pressures increase. Fortunately, Omnia`s strategy of firstly
focusing its fertilizer operations on the commercial farmer who demands high
levels of agronomic service and secondly, the development of significant
infrastructure in the Southern African countries will enable the volume risk to
be mitigated to some extent. Nevertheless, a tough year can be anticipated for
the fertilizer division.
The Group has largely adapted to operating at an exchange rate of R6 to the US
dollar, however should the Rand move to weaker levels, a positive impact on the
group`s earnings can be expected. Although the significant growth in earnings
per share over the last few years will be difficult to match in the coming year,
the Group remains positive that earnings will continue to grow in line with the
Group`s five-year target.
Dividend
The Board is pleased to announce that it has declared a final dividend of 78
cents in respect of shareholders recorded in the register on Friday 15 July
2005. This final dividend brings the dividend for the full year ended
31 March 2005 to 138 cents (after inclusion of the interim dividend of 60 cents
per share) compared to the 120 cents paid in respect of the prior period.
The last day to trade in the company`s shares cum dividend will be Friday 8 July
2005. The shares will commence trading ex dividend on Monday 11 July 2005 and
the record date will be Friday 15 July 2005. The payment date will be Monday 18
July 2005. Share certificates may not be dematerialised or rematerialised
between Monday 11 July and Friday 15 July 2005, both dates inclusive.
NJ Crosse RB Humphris
Chairman Managing Director
Bryanston 22 June 2005
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
www.omnia.co.za
Date: 22/06/2005 08:00:12 AM
Produced by the JSE SENS Department
