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RAR
RAR
RAR - RARE - Unaudited Abridged Financial Results For The 6 Months Ended
31 December 2009
RARE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR & ZAE000092714
("RARE" or "the group")
UNAUDITED ABRIDGED FINANCIAL RESULTS
for the 6 months ended 31 December 2009
* Revenue down 28%
* Gross profit down 43%
* Operating expenses down 19%
* Headline earnings per share down 159%
* NAV per share up 9%
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
December December June
2009 2008 2009
R`000 R`000 R`000
Revenue 262 215 362 467 786 949
Cost of sales (208 677) (269 245) (606 331)
Gross profit 53 538 93 222 180 618
Other income 339 1 077 5 754
Operating expenses (51 300) (63 520) (114 708)
EBITDA 2 577 30 779 71 664
Depreciation and amortisation (4 827) (3 738) (8 647)
Investment income 1 080 85 1 410
Finance costs (9 083) (8 463) (23 041)
Profit/(loss) before tax (10 253) 18 663 41 386
Income tax 2 800 (5 422) (12 435)
Profit/(loss) for the period (7 453) 13 241 28 951
Attributable to:
Equity holders of the parent (7 970) 12 646 26 708
Non-controlling interest 517 595 2 243
Weighted average number of ordinary 88 750 88 750 88 750
shares in issue
Earnings/(loss) per ordinary share (8,98) 14,25 30,09
(cents) (basic and diluted)
Reconciliation of headline earnings
Profit/(loss) attributable to (7 970) 12 646 26 708
ordinary shareholders
Profit/(loss) on disposal of fixed (33) 963 787
assets
Headline earnings/(loss) (8 003) 13 609 27 495
attributable to ordinary
shareholders
Headline earnings/(loss) per share (9,02) 15,33 30,98
(cents) (basic and diluted)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
December December June
2009 2008 2009
R`000 R`000 R`000
(Loss)/profit for the period (7 453) 13 241 28 951
Exchange differences on translation 1 331 (4 365) 1 099
of foreign subsidiaries
Gains and losses on property - 9 366 6 690
revaluation
Taxation related to components of (234) (3 278) (2 070)
comprehensive income
Total comprehensive (loss)/income (6 356) 14 964 34 670
for the period
Total comprehensive (loss)/income
attributable to:
Owners of the parent (7 444) 14 434 30 010
Non-controlling interests 1 088 530 4 660
Total comprehensive (loss)/income (6 356) 14 964 34 670
for the period
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
6 months 6 months 12 months
December December June
2009 2008 2009
R`000 R`000 R`000
ASSETS
Non-current assets
Property, plant and 80 934 90 701 82 071
equipment
Goodwill 35 578 35 578 35 578
Intangible assets 13 666 7 949 10 560
Investment in subsidiary 900 - 900
Other financial assets 607 11 235 554
Prepayments 1 350 - 1 050
Deferred taxation 2 941 2 868 1 645
135 976 148 331 132 358
Current assets
Inventories 156 659 154 250 163 486
Loan to associate 2 441 183 1 898
Other financial assets 5 050 1 752 7 405
Trade and other receivables 160 483 177 557 200 609
Current taxation receivable 2 612 172 1 278
Prepayments - - 729
Cash and equivalents 22 002 39 404 73 673
349 247 373 318 449 078
Total assets 485 223 521 649 581 436
EQUITY AND LIABILITIES
EQUITY
Equity attributable to
equity holders of parent
Share capital 72 598 72 598 72 598
Reserves 6 986 4 946 6 460
Retained income 88 349 82 256 96 319
167 933 159 800 175 377
Minority interest 1 861 (3 357) 773
169 794 156 443 176 150
LIABILITIES
Non-current liabilities
Loans from minority 1 391 2 810 1 934
shareholders in subsidiaries
Other financial liabilities 128 999 141 219 128 619
Operating lease liability 102 1 378 102
Deferred tax 779 5 001 3 596
131 271 150 408 134 251
Current liabilities
Trade and other payables 146 052 168 771 223 084
Other financial liabilities 33 004 38 146 38 072
Current tax payable 3 921 6 380 4 851
Operating lease liability 65 - 93
Provisions 305 795 1 237
Bank overdraft 811 706 3 698
184 158 214 798 271 035
Total liabilities 315 429 365 206 405 286
Total equity and liabilities 485 223 521 649 581 436
Net asset value per share 189,2 180,0 197,6
(cents)
Net tangible asset value per 133,8 131,0 145,6
share (cents)
CONDENSED SEGMENTAL INFORMATION
PRIMARY SEGMENT REPORT - BUSINESS SEGMENTS
for the six months ending 31 December 2009
R`000 Energy Water Chemicals
External sales 141 796 45 822 16 923
Inter-segmental sales (15 300) (1 385) -
Total revenue 126 496 44 437 16 923
Segment results 3 821 (6 662) (1 387)
Finance cost
Investment revenue
Income tax
Net loss for the period
for the six months ending
31 December 2008
R`000 Energy Water Chemicals
External sales 164 187 84 755 70 802
Inter-segmental sales (16 930) - (2 786)
Total revenue 147 257 84 755 68 016
Segment results 14 530 1 923 9 895
Finance cost
Investment revenue
Income tax expense
Net profit for the period
for the twelve months
ending 30 June 2009
R`000 Energy Water Chemicals
External sales 382 451 212 247 112 537
Inter-segmental sales (101 120) (7 250) -
Total revenue 281 331 204 997 112 537
Segment results 31 097 16 000 15 010
Finance cost
Investment revenue
Income tax expense
Net profit for the year
for the six months ending 31 December 2009
R`000 Angola Investment Total
External sales 74 359 1 620 280 520
Inter-segmental sales - (1 620) (18 305)
Total revenue 74 359 - 262 215
Segment results 703 1 275 (2 250)
Finance cost (9 083)
Investment revenue 1 080
Income tax 2 800
Net loss for the period (7 453)
for the six months ending 31
December 2008
R`000 Angola Investment Total
External sales 62 439 - 382 183
Inter-segmental sales - - (19 716)
Total revenue 62 439 - 362 467
Segment results 772 (79) 27 041
Finance cost (8 463)
Investment revenue 85
Income tax expense (5 422)
Net profit for the period 13 241
for the twelve months ending 30
June 2009
R`000 Angola Investment Total
External sales 188 084 2 608 897 927
Inter-segmental sales - (2 608) (110 978)
Total revenue 188 084 - 786 949
Segment results 3 532 (2 622) 63 017
Finance cost (23 041)
Investment revenue 1 410
Income tax expense (12 435)
Net profit for the year 28 951
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
December December June
2009 2008 2009
R`000 R`000 R`000
Opening balance 176 150 141 479 141 479
Changes in equity
Profit/(loss) for the period (7 453) 13 241 28 951
Foreign currency revaluation 1 097 (4 365) 1 099
reserve
Revaluation of property - 6 088 4 621
Total changes (6 356) 14 964 34 671
Closing balance 169 794 156 443 176 150
Comprising:
Share capital 885 885 885
Share premium 71 714 71 713 71 714
Foreign currency translation 579 (2 887) 54
reserve
Revaluation reserve 6 406 7 833 6 406
Retained income 88 349 82 256 96 319
Non-controlling interest 1 861 (3 357) 772
Total equity 169 794 156 443 176 150
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
December December June
2009 2008 2009
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from/(used in) (29 186) 2 069 13 850
operations
Interest income 917 85 1 056
Dividends received 163 - 354
Finance costs (9 083) (8 463) (23 041)
Tax paid (3 812) (8 295) (17 521)
Net cash from operating activities (41 001) (14 604) (25 302)
Cash flow from investing
activities
Purchase of property, plant
and equipment (2 705) (30 367) (28 022)
Sale of property, plant and 201 36 638
equipment
Purchase of other intangible (4 269) (35) (3 763)
assets
Loans to group companies repaid 1 381 - -
Loans advanced to group companies (543) - (1 021)
Purchase of financial assets - (10 780) (7 504)
Sale of financial assets 2 302 - -
Net cash from investing activities (3 633) (41 146) (39 672)
Cash flows from financing
activities
Proceeds from other financial - 74 936 116 041
liabilities
Repayment of other financial (3 452) - -
liabilities
Repayment of shareholders` loan (270) (500) (455)
Net cash from financing activities (3 722) 74 436 115 586
Total cash movement for the period (48 356) 18 686 50 612
Cash at the beginning of the 69 976 19 834 19 834
period
Effect of exchange rate movements (429) 178 (470)
Total cash at end of the period 21 191 38 698 69 976
NOTES
ACCOUNTING POLICIES
Basis of preparation
The consolidated interim financial information for the six months ended 31
December 2009, has been prepared in accordance with International Financial
Reporting Standards (IFRS), the interpretations adopted by the International
Accounting Standards Board (IASB), and the requirements of the South African
Companies Act. These condensed interim financial statements are presented in
compliance with IAS 34 - Interim Financial Reporting, and should be read in
conjunction with the annual financial statements for the year ended 30 June
2009.
Accounting policies
The accounting policies adopted in the preparation of the condensed interim
financial information are consistent with those of the annual financial
statements for the year ended 30 June 2009, except for the adoption of the new
standards and interpretations which are now effective. IFRS 3 - Business
Combinations and IAS 1 - Presentation of Financial Statements have impacted the
interim financial information. For a full list of standards and interpretations
which have been adopted we refer you to the 30 June 2009 annual financial
statements.
DIVIDENDS
No dividends were declared or paid to shareholders during the period under
review.
COMMENTARY
PROFILE
RARE supplies a comprehensive range of products and services to the fluid
conveyance industry. Services include design, manufacture, installation and
maintenance of pipelines and process plants across all sectors of industry
(particularly petrochemicals, mining and water) and local government. Products
include pipes, fittings and valves in materials such as steel, plastic and
ductile iron.
Sixty six percent of business is generated in South Africa and sub-Saharan
Africa contributes the balance; the bulk of which is generated through the
Angolan operation, where RARE has significant supply and logistical operations
serving the oil and gas industries as well as the water and sewerage utilities.
FINANCIAL RESULTS
The six months under review were a case of two halves. The lack of activity in
Q1 accounted for the bulk of the loss reported herein, whilst Q2`s performance
was at break even. This loss arose from delays in and a reduction of public and
private expenditure on infrastructure and project work as well as low margins
through competition for what work that was on offer, falling steel prices and
foreign exchange volatility.
Revenue for the full reporting period declined by 28% to R262 million (2008:
R362 million) with gross profit down 43% at R53,5 million (2008: R93,2 million).
A profit margin of 20,4% (2008: 25,7%) was achieved despite the aggressive
discounting of high cost inventory and competitive market conditions experienced
over the period.
Management cut costs aggressively and leveraged operational efficiencies,
reducing operating expenses by 19% to R51,3 million (2008: R63,5 million).
Rare`s earnings before interest, taxation, depreciation and amortisation
("EBITDA") amounted to R2,6 million, compared to an EBITDA of R30,8 million in
2008.
Headline losses amounted to R8,0 million compared to headline earnings of R13,6
million in 2008.
OPERATIONAL REVIEW
RARE Angola: This division conducts its business in US Dollars. Despite the
appreciation of the Rand and the relatively low oil price, we are pleased to
report an increase in revenue from our Angolan operation. Sales at R74,4 million
(2008: R62,4 million) are up by 19% and we expect this trend to improve as we
enter into Phase 2 of our CABGOC contract. This phase will see the transition of
our business from an offshore supply chain manager into a localised operation,
with an increase in local inventory, direct sales responsibility and higher
margins.
RARE Energy: There was no improvement in the low levels of project activity in
the petrochemical industry in the period. Steel commodity declined whilst Rand
strength increased. Volume increased marginally but overall revenue decreased to
R141,8 million, down 14% (2008: R164,2 million).
RARE Water: Performance has been disappointing during the period under review.
Revenue was down 48% at R45,8 million (2008: R84,8 million). Whilst this
division has also felt the effects of low commodity prices, the virtual total
absence of public expenditure had a negative effect on the division. The effects
of these low levels of activity in this sector and tough trading with high
levels of price cutting made any real recovery in the period difficult.
RARE Chemical: Revenue was down to R16,9 million (2008: R70,8 million). Delays
in the awarding of projects, which have subsequently been secured are expected
to assist this division`s recovery and assist in achieving a positive
performance later in the year.
PROSPECTS
Whilst the development of RARE Park was projected to commence in the latter part
of 2009, with the difficult trading conditions experienced over the period, all
development activity was suspended. We will review this initiative once we are
comfortable that the increased business can support the project.
We have taken the decision to continue with the reorganisation of the management
structure and the development of a new IT platform. The increased efficiencies
that this will provide across all business centres will assist management in
seizing the opportunities offered as the market recovers. The government`s
undertaking to give attention to the maintenance and development of ageing water
infrastructure is a reassuring signal of the potential for growth in our
industry. We will explore different ways to extract value from this commitment,
including interacting with various levels of local and regional government to
develop mechanisms for alleviating the delivery of non-performing municipalities
and supporting skills development programmes.
We remain cautiously optimistic that we will return to a positive performance by
year-end.
On behalf of the board
DMJ Ncube DE Scheepers
Chairman CEO
18 March 2010
CORPORATE INFORMATION
Directors:
DMJ Ncube (Non-executive Chairman), DE Scheepers (CEO), PJ Willemse (FD),MG
Meehan (Independent Non-executive), S Masinga (Independent Non-executive),AZ
Dlamini (Non-executive)
Registered Offices:
22 Old Vereeniging Road, Kliprivier, Midvaal, 1870
Transfer secretaries:
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg,
2001 (PO Box 61763, Marshalltown, 2107)
Designated advisor:
PSG Capital (Pty) Limited
Company secretary:
WR Somerville
Date: 18/03/2010 17:35:49 Produced by the JSE SENS Department.
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