| Wed 29 Nov 2006, 8:00 | | Omnia - Interim Results for the six months ended 3 |
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OMN
OMN
Omnia - Interim Results for the six months ended 30 September 2006
OMNIA HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1967 / 003680 / 06
JSE code: OMN & ISIN: ZAE000005153
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2006
HIGHLIGHTS
Revenue up 18% to R2.4 billion
Headline earnings up 48% to R 80 million
Headline earnings per share up 47% to 182.2 cents
Interim dividend of 70 cents per share declared
Condensed Consolidated Income Statements
for the six months ended 30 September 2006
Restated
Unaudited Reviewed Audited
6 months 6 months 12 months
R million 9/30/06 9/30/05 3/31/06
Revenue 2,438 18% 2,069 4,331
Gross profit 438 13% 386 868
Operating profit 144 30% 111 289
Net finance cost (21) (30) (59)
Interest paid (28) -10% (31) (70)
Interest received 3 -40% 5 13
Forex gain/(loss) 4 -200% (4) (2)
Profit before taxation 123 52% 81 230
Taxation (43) 59% (27) (76)
Net profit for the period 80 48% 54 154
Attributable to:
Equity holders of the company 80 48% 54 154
Basic earnings per share (cents) 182.2 47% 123.8 353.2
Fully diluted basic earnings per 179.2 48% 121.4 347.0
share (cents)
Final dividend paid per share
(cents) in respect of
prior year 85.0 9% 78.0 78.0
Interim dividend per share 70 60.0 60.0
(cents) declared in respect of
current year
Weighted average number of shares 44 43 44
in issue (million)
Weighted average number of fully
diluted shares in
issue (million) 44 44 44
Number of shares in issue 44 1% 43 44
(million)
Condensed Consolidated Balance Sheets
as at 30 September 2006
Restated
Unaudited Reviewed Audited
R million 9/30/06 9/30/05 3/31/06
Assets
Property, plant and equipment 679 634 642
Intangible assets 445 457 455
Deferred taxation 1 3 4
Inventories 929 901 619
Trade and other receivables 1,148 846 746
Other current assets 58 46 32
3,260 2,887 2,498
Equity and liabilities
Shareholders" equity 1,131 942 1,020
Deferred taxation 91 65 88
Non-current liabilities 15 23 29
Trade and other payables 1,334 1,023 1,014
Taxation 4 23 25
Other current liabilities 685 811 322
3,260 2,887 2,498
Net interest-bearing debt 637 788 303
Net asset value per share (Rand) 25.87 21.76 23.38
Forex (loss)/gain net of fair
value and other
adjustments included in operating (31) 4 (1)
profit
Depreciation 28 26 55
Amortisation 10 10 20
Capital expenditure
Incurred 65 43 93
Authorised and committed 47 14 12
Authorised but not contracted for 98 44 197
Condensed Consolidated Cash Flow Statements
for the six months ended 30 September 2006
Restated
Unaudited Reviewed Audited
6 months 6 months 12 months
R million 9/30/06 9/30/05 3/31/06
Operating profit 144 111 289
Depreciation and amortisation 38 36 75
Adjustment for non-cash items 3 - (5)
Finance cost (25) (25) (57)
Taxation paid (58) (57) (83)
(Utilised by)/generated from (399) (398) 1
working capital
(Utilised by)/generated from (297) (333) 220
operations
Dividends paid (39) (35) (60)
Cash (outflow)/inflow from (336) (368) 160
operating activities
Cash outflow from investing (65) (43) (87)
activities
Cash outflow from financing (3) (138) (147)
activities
Net decrease in cash for the (404) (549) (74)
period
Movement in foreign currency 66 (4) (4)
translation reserve
Net overdraft at beginning of (275) (197) (197)
period
Net overdraft at end of period (613) (750) (275)
Condensed Segmental Analysis
for the six months ended 30 September 2006
Restated
Unaudited Reviewed Audited
6 months 6 months 12 months
R million 9/30/06 9/30/05 3/31/06
Revenue, net of intersegmental 2,438 18% 2,069 4,331
sales
Chemicals 1,162 11% 1,050 2,103
Mining 470 15% 409 841
Agriculture 806 32% 610 1,387
Operating profit 144 30% 111 289
Chemicals 63 21% 52 112
Mining 65 3% 63 129
Agriculture 16 (4) 48
Statement of Changes in Shareholders" Equity
Ordinary Shareholders" Equity
Stated Treasury Other Retained Minority
R million Capital Shares Reserves Earnings Interest Total
At 31 March 2005 201 (22) (14) 755 2 922
Net profit for the 54 54
period
Decrease in foreign
currency
translation reserve (4) (4)
Share-based payment 3 3
expense
Treasury shares sold 2 2
Ordinary dividends (35) (35)
paid
At 30 September 2005 201 (20) (15) 774 2 942
Net profit for the 100 100
period
Share-based payment 3 3
expense
Ordinary dividends (25) (25)
paid
At 31 March 2006 201 (20) (12) 849 2 1,020
Net profit for the 80 80
period
Increase in foreign
currency
translation reserve 66 66
Share-based payment 4 4
expense
Ordinary dividends (39) (39)
paid
At 30 September 2006 201 (20) 58 890 2 1,131
Other Reserves
Unaudited Reviewed Audited
6 months 6 months 12 months
R million 9/30/06 9/30/05 3/31/06
Other reserves comprise of:
Share-based payment reserves 17 10 13
Foreign currency translation reserve 38 (27) (28)
Hedging reserve (1)
Net discount arising on acquisition
of
shares of subsidiaries 3 3 3
58 (15) (12)
Notes
Accounting policies
The consolidated condensed financial statements for the six months ended 30
September 2006 were prepared in accordance with International Financial
Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting and in
compliance with the Listing Requirements of the JSE Limited. The consolidated
condensed interim financial statements do not include all of the information
required by IFRS for full annual financial statements.
The principal policies used in the preparation of the results for the period
ended 30 September 2006 are consistent with those applied in the annual
financial statements for the year ended 31 March 2006.
Headline earnings
Headline earnings equates to basic earnings.
Restatement of comparative numbers
Comparatives for the six months ended 30 September 2005 have been amended to
ensure a more relevant presentation of results as per the requirements of IAS 1.
These adjustments have been set out in detail in the Transition Report (note 1)
to the annual financial statements for the year ended 31 March 2006 and had no
significant impact on the reported results. These adjustments relate to the
reclassification of forex losses, forward cover cost, fair value gains and net
monetary gain to sales, cost of sales and operating expenses. In addition the
opening balance sheet at 1 April 2004 has been adjusted by R 6 million following
a more detailed review of the estimated useful lives of fixed assets.
Hyperinflation
The hyperinflation adjustments, as required by the accounting standard IAS 29 -
Financial Reporting in Hyperinflationary Economies, result from the devaluation
in the Zimbabwean Dollar. The most significant adjustment is a decrease in
gross profit for the period by R3,8 million (2005: R6,8 million increase). The
net impact of these hyperinflation adjustments to the group, is a net loss of
R2,2 million (2005: R5,1 million profit).
Dividends
A final dividend of 85 cents per share was declared on 19 June 2006 in respect
of the earnings of the previous financial year. This dividend is reflected in
the current period to 30 September 2006.
An interim dividend of 70 cents per share has been declared in respect of the
current period.
Commitments
The future minimum lease payments under non-cancellable operating leases are
R17,2 million (2005: R13,1 million) within one year and R51,4 million (2005:
R44,7 million) between two and five years and Rnil million (2005: Rnil) beyond
five years, giving a total of R68,6 million (2005: R57,9 million).
Goodwill
An annual impairment test on the balance of goodwill has been performed at 30
September 2006. No impairment loss has occurred.
Basic and diluted earnings per share
Earnings of R79,532 million were used in calculating basic and diluted earnings
per share. The weighted average number of shares in issue was 43,648 million
while the weighted average number of fully diluted shares in issue was 44,385
million.
Comments
INTRODUCTION
Omnia is a diversified, specialist chemical services provider with its business
interests balanced across chemical, mining and agricultural markets.
The Group is fundamentally a knowledge business, which leverages its leading
intellectual capital and world-class production assets to differentiate its
product and service offerings. Omnia"s unique business model creates
extraordinary value for its customers, thus allowing the Group to earn a premium
in its markets and build long-term customer relationships.
Improved fertilizer sales contributed to a solid performance in the first half
of 2006 following the previous season when a significant maize stock overhang in
South Africa resulted in prices being driven down to export parity levels,
making it uneconomical for farmers to plant.
The major activities of the Agriculture division customarily occur in the second
six-month period which is the main planting season.
In line with expectations, the Chemical division"s polymer business also
returned to normality during this period with the overstocked position of the
plastics industry at the beginning of the previous year having been eliminated.
FINANCIAL REVIEW
The Group results are reported in accordance with International Financial
Reporting Standards (IFRS). All comparatives have been restated in compliance
with IFRS.
Group revenue increased by 18% to R 2.4 billion (2005: R 2.1 billion), due to
increased sales across all businesses, the largest increase being attributable
to the agriculture business. Operating profit increased by 30% to R 144 million
(2005: R 111 million), with the margin increasing to 5.9% from the 5.3% achieved
in the prior period mainly due to improved performance"s from the chemical and
agricultural divisions.
Interest paid reduced by 10 % to R 28 million (2005: R 31 million). Net finance
cost was positively influenced by a R 4 million foreign exchange gain compared
with a R 4 million foreign exchange loss in the prior period.
Net profit increased by 48% to R 80 million (2005: R 54 million).
The seasonal nature of Omnia"s agriculture operations causes the Group"s working
capital requirements to peak at or around September each year. Although raw
material prices remained at high levels, net interest bearing debt reduced to R
637 million (2005: R 788 million). Cash utilised by operations for the period
under review reduced by R 36 million to R 297 million (2005: R 333 million),
mainly due to the increase in operating profit of R 33 million. With the
weakening of the rand there was a R 66 million positive movement in the foreign
currency translation reserve for the period (2005 : -R 4 million).
OPERATIONAL REVIEW
CHEMICALS
The Protea Chemicals division is the leading speciality, functional and effect
chemicals distributor in southern Africa. It has a significant presence in every
sector of the chemical distribution market and contributed 44% to Group
operating profit (2005: 47%).
Revenue increased by 11% to R 1 162 million (2005: R 1 050 million). The bulk of
this increase came from the lower margin polymer business. Modest price
increases have recently been recorded on other product lines following the
weakening of the rand.
In accordance with previous expectations international polymer prices increased
during the period, and with the optimisation of stock levels operating margins
in the Polymer division returned to acceptable levels.
The increased revenue resulted in operating profit increasing by 21% to R 63
million (2005: R 52 million). Operating margins improved marginally from 5 % to
5.4%.
MINING
The Mining division is the market leader in blended bulk explosives formulations
for surface mines, and in addition manufactures packaged explosives for
underground mines and specialised surface blasting applications. It also
supplies a diverse range of mining chemicals as well as blasting accessories,
and is currently commercialising a state-of-the-art electronic detonator system.
The Mining division contributed 45% to Group operating profit (2005: 57%).
The Mining division benefited from the continued high level of mining activity
that prevailed during the period, particularly in coal, copper and iron ore.
This resulted in another period of noteworthy growth in BME"s bulk explosives
volumes. With the volume growth experienced in the recent past, and in
anticipation of further growth in the near future, additional resources have
been allocated to the mining business. The expected growth, however, has been
slow in materialising, in line with the pace of mining licence approvals being
experienced in the industry. This impacted the operating margin which declined
from 15.4% to 13.8%.
Technical improvements and cost reductions continue to be applied to the
development of the Deltadet electronic detonator. Full commercialisation of the
next generation detonator system is expected shortly.
The Mining division achieved a 15% growth in revenue to R 470 million (2005: R
409 million) but the reduction in operating margin to 13.8% saw operating profit
increase by 3% to R 65 million (2005: R 63 million).
AGRICULTURE
The Agriculture division manufactures and supplies granular, liquid and
speciality fertilizers to individual farmers, co-operatives and wholesalers
across southern Africa. In addition, it supplies speciality fertilizers to
farmers in Australia and New Zealand. Agriculture contributed 11% to Group
operating profit (2005: -4%).
Revenue increased by 32% to R 806 million (2005: R 610 million). As experienced
in the previous years, the summer rainfall which heralds the onset of the main
planting season had not yet materialised. Some of the increase in revenue that
materialised in the period under review, when compared with the previous period,
is from low margin trade in Africa that normally only materialises in the second
six month period. That said, operating margins in the Agriculture division are
traditionally considerably lower in the first half of the financial year
compared with those in the second half. The Agriculture division"s operating
margin was 2% in the period (2005: -1%).
While the Group"s speciality fertilizer operations in both Australia and New
Zealand continue to progress, in particular the Australian humate business, the
Group"s agriculture activities in Africa generated lower margins than those
achieved in the comparable first half of the previous year.
PROSPECTS
SHORT TERM
It is expected that conditions for the Chemicals division will remain positive
for the remainder of the financial year. Demand for the Group"s chemical product
offering will be driven by the expected improvements in the manufacturing sector
of the South African economy, while the relatively high oil price will ensure
price increases for the downstream petrochemical products and their derivatives.
International chemical prices are increasing in line with the improvement in the
global economic environment, and coupled with the recent depreciation of the
rand, will undoubtedly impact on local prices in South Africa.
The continued strong demand for world metals and minerals will benefit both the
explosives and mining chemical markets, and even after taking into account the
continued costs of ongoing detonator development, continued real growth should
be achieved. There remains significant potential for the Mining division"s
future growth into Africa and renewed focus and energy is being directed at
taking advantage of the opportunities that arise from the division"s presence in
Africa.
Insofar as the Agriculture division"s short-term prospects are concerned, the
oversupply of maize that led farmers to limit their planting in the previous
comparable period has now turned into a considerable maize shortage. As a
consequence the hectares planted to maize is expected to revert to previous
levels. The latest crop estimate forecasts that 2.8 million hectares will be
planted to maize, up from the 1.6 million hectares achieved in the previous
season. Therefore domestic fertilizer volumes for the full year should revert to
normal, thus positively impacting this aspect of Group activities.
The excellent rainfall in the recent past has resulted in high underground
water, soil moisture and dam levels. This environment should impact favourably
on the fertilizer business and the Group as a whole in the period going forward.
The Group therefore expects a pleasing improvement in earnings for the year
ended March 2007 compared with those achieved in the prior financial year ended
March 2006.
LONG TERM
The Group remains well positioned, and is regularly being presented with
opportunities to grow its chemical manufacturing and distribution activities,
both nationally and internationally.
In the Mining division, continued buoyant metals and mineral resource prices are
expected to result in a similar trend to that achieved in the period under
review, with further growth prospects coming from new projects in Africa.
The need for fertilizers is a long-term reality. The South African fertilizer
market is showing every sign of recovery and will be complemented by continued
sales to other African countries. The trend towards speciality fertilizer sales
and services continues to grow.
The Group progressed its application to utilise the Clean Development Mechanism
("CDM"), created by the Kyoto Accord, to reduce greenhouse gas emissions. If
Omnia"s plans come to fruition, these efforts may lead to a substantial
financial benefit. A Project Development Document ("PDD") has been approved by
the Designated National Authority in South Africa and is now awaiting
registration by the CDM executive board in Bonn, Germany. It is anticipated that
commissioning of the project will occur in the 2008 financial year.
Omnia remains focused on diversifying its risk profile and pursuing new growth
opportunities, while maintaining a firm focus on the Group"s core competencies.
DIVIDENDS
The board is pleased to announce that an interim dividend of 70 cents per share
has been declared in respect of shareholders recorded in the register on Friday
5 January 2007. The last day to trade cum dividend will be Thursday, 28 December
2006. The shares will commence trading ex dividend on Friday, 29 December 2006
and the record date will be Friday, 5 January 2007. The payment date will be
Monday, 8 January 2007. Share certificates may not be dematerialised or
rematerialised between Friday, 29 December 2006 and Friday, 5 January 2007, both
dates inclusive.
NJ CROSSE RB HUMPHRIS
Chairman Managing Director
29 November 2006.
Date: 29/11/2006 08:00:11 AM Produced by the JSE SENS Department
