OLI- 2 March 2012- INTERIMS 31 DECEMBER 2011 _3_.pdf - O-line
OLI- 2 March 2012- INTERIMS 31 DECEMBER 2011 _3_.pdf - O-line
OLI- 2 March 2012- INTERIMS 31 DECEMBER 2011 _3_.pdf - O-line
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O-LINE HOLDINGS LIMITED<br />
(Incorporated in the Republic of South Africa)<br />
(Registration number 2006/034685/06)<br />
Share code: <strong>OLI</strong><br />
ISIN: ZAE000110730<br />
("O-<strong>line</strong>" or "the Company" or “the Group”)<br />
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED <strong>31</strong><br />
<strong>DECEMBER</strong> <strong>2011</strong><br />
CONDENSED STATEMENT OF COMPREHENSIVE INCOME<br />
for the six months ended <strong>31</strong> December <strong>2011</strong><br />
Six months<br />
Ended <strong>31</strong><br />
Dec <strong>2011</strong><br />
unaudited<br />
R’000<br />
Six<br />
months<br />
ended <strong>31</strong><br />
Dec 2010<br />
unaudited<br />
R’000<br />
Year ended<br />
30 June<br />
<strong>2011</strong><br />
audited<br />
R’000<br />
Revenue 209,<strong>31</strong>3 213,834 427,358<br />
Cost of Sales (143,456) (147,546) (291,282)<br />
Gross Profit 65,857 66,288 136,076<br />
Other Income 627 578 820<br />
Operating expenses (44,075) (39,686) (87,763)<br />
Operating profit 22,409 27,180 49,133<br />
Investment revenue 862 1,889 2,628<br />
Impairment - - 8,053<br />
Finance costs (2,202) (2,719) (4,933)<br />
Profit before taxation 21,069 26,350 54,881<br />
Taxation (7,076) (7,404) (16,123)<br />
Profit for the period 13,993 18,946 38,758<br />
Other comprehensive income<br />
Exchange difference on<br />
translating foreign<br />
operations (122) 2 (45)<br />
Taxation related to<br />
components of other<br />
comprehensive income 39 - 2<br />
Other comprehensive (loss)<br />
income for the period net of<br />
taxation (83) 2 (43)<br />
Total comprehensive income<br />
for the period 13,910 18,948 38,715<br />
Total comprehensive income
attributable to:<br />
Owners of the parent: 13,910 18,948 38,715<br />
Reconciliation of basic to<br />
head<strong>line</strong> earnings<br />
Head<strong>line</strong> earnings 13,976 18,902 38,942<br />
Basic earnings 13,993 18,946 38,758<br />
Loss / (Profit) on sale of<br />
fixed assets (17) (44) 184<br />
Total shares in issue 213,423,750 238,500,000 213,424,000<br />
Weighted average of shares<br />
in issue 213,423,750 238,500,000 235,339,705<br />
Basic earnings per share<br />
(cents) 6.56 7.94 16.47<br />
Basic head<strong>line</strong> earnings per<br />
share (cents) 6.55 7.93 16.55<br />
Fully diluted earnings per<br />
share (cents) 6.56 7.94 16.47<br />
Fully diluted head<strong>line</strong><br />
earnings per share (cents) 6.55 7.93 16.55<br />
CONDENSED STATEMENT OF CHANGES IN EQUITY<br />
for the six months ended <strong>31</strong> December <strong>2011</strong><br />
Share Share Foreign Retained Total<br />
capital premium Currency income equity<br />
Translation<br />
Reserve<br />
R'000 R'000 R'000 R'000 R'000<br />
Balance at <strong>31</strong><br />
December 2010 * 132,217 40 108,147 240,404<br />
Total<br />
comprehensive<br />
income for the<br />
period (45) 19,812 19,767<br />
Share buy back (26,136) (26,136)<br />
Dividends paid (4,770) (4,770)<br />
Balance at 1<br />
July <strong>2011</strong> * 106,081 (5) 123,189 229,265<br />
Total<br />
comprehensive<br />
income for the<br />
period (83) 13,993 13,910
Dividends paid (10,671) (10,671)<br />
Balance at <strong>31</strong><br />
December <strong>2011</strong> * 106,081 (88) 126,511 232,504<br />
* less than<br />
R1 000<br />
CONDENSED STATEMENT OF FINANCIAL POSITION<br />
at <strong>31</strong> December <strong>2011</strong><br />
<strong>31</strong> December<br />
<strong>2011</strong><br />
Unaudited<br />
R'000<br />
<strong>31</strong> December<br />
2010<br />
Unaudited<br />
R'000<br />
30 June<br />
<strong>2011</strong> Audited<br />
R'000<br />
Assets<br />
Non-Current Assets<br />
Property, plant and equipment 96,046 75,8<strong>31</strong> 88,591<br />
Goodwill 64,632 64,632 64,632<br />
Other financial assets - 19,645 -<br />
Deferred tax 3,601 4,478 4,720<br />
164,279 164,586 157,943<br />
Current Assets<br />
Inventories 87,359 72,595 79,332<br />
Other financial assets - 1,009 -<br />
Current tax receivable 1,432 3,766 279<br />
Trade and other receivables 44,759 53,341 60,809<br />
Cash and cash equivalents 44,630 35,210 34,420<br />
178,180 165,921 174,840<br />
Total Assets 342,459 330,507 332,783<br />
Equity and Liabilities<br />
Equity and reserves 232,504 240,404 229,265<br />
Non-Current Liabilities<br />
Borrowings 27,875 36,378 29,500<br />
Finance lease obligation 3,681 2,160 4,296<br />
Deferred tax 9,485 8,570 9,226<br />
41,041 47,108 43,022<br />
Current Liabilities<br />
Borrowings 16,3<strong>31</strong> 14,384 13,957<br />
Current tax payable 521 148 801<br />
Finance lease obligations 2,520 1,786 2,675<br />
Trade and other payables 49,542 26,677 43,063<br />
68,914 42,995 60,496<br />
Total Liabilities 109,955 90,103 103,518<br />
Total Equity and Liabilities 342,459 330,507 332,783<br />
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended <strong>31</strong> December <strong>2011</strong><br />
<strong>31</strong> December<br />
<strong>2011</strong><br />
Unaudited<br />
R'000<br />
<strong>31</strong> December<br />
2010<br />
Unaudited<br />
R'000<br />
30 June<br />
<strong>2011</strong><br />
Audited<br />
R'000<br />
Cash flows from operating<br />
activities<br />
Cash generated from<br />
operations 40,463 1,610 28,878<br />
Interest income 862 1,889 2,628<br />
Finance costs (1,919) (2,505) (4,472)<br />
Tax paid (7,033) (8,510) (12,642)<br />
Net cash flows from operating<br />
activities 32,373 (7,516) 14,392<br />
Cash flows from investing<br />
activities<br />
Purchases of property, plant<br />
and equipment (10,498) (1,760) (13,955)<br />
Sale of property, plant and<br />
equipment 28 211 466<br />
Sale of financial assets - 341 -<br />
Repayment of loan - - 2,911<br />
Net cash flows from investing<br />
activities (10,470) (1,208) (10,578)<br />
Cash flows from financing<br />
activities<br />
Repayment of borrowings (7,307) (11,539) (18,844)<br />
Proceeds from borrowings 8,056 - -<br />
Finance lease payments (1,580) (1,292) (2,459)<br />
Dividends paid (10,671) - (4,770)<br />
Net cash flows from financing<br />
activities (11,502) (12,8<strong>31</strong>) (26,073)<br />
Total cash movement for<br />
period 10,401 (21,555) (22,259)<br />
Cash and cash equivalents at<br />
beginning of period 34,420 56,748 56,748<br />
Effect of exchange rate<br />
movement on cash balances (191) 17 (69)<br />
Cash and cash equivalents at<br />
end of period 44,630 35,210 34,420<br />
SEGMENT REPORT<br />
for the six months ended <strong>31</strong> December <strong>2011</strong><br />
<strong>31</strong> December<br />
<strong>2011</strong><br />
Unaudited<br />
<strong>31</strong> December<br />
2010<br />
Unaudited<br />
30 June<br />
<strong>2011</strong><br />
Audited
R'000 R'000 R'000<br />
Revenue<br />
O-Line 86,186 96,906 203,849<br />
Armco 1<strong>31</strong>,934 125,495 240,589<br />
Corporate - - -<br />
South African operations 218,120 222,401 444,438<br />
O-Line Mozambique 2,032 436 1,529<br />
Eliminations (10,839) (9,003) (18,609)<br />
209,<strong>31</strong>3 213,834 427,358<br />
Operating Profit<br />
O-Line 4,194 11,906 20,684<br />
Armco 18,555 16,743 30,258<br />
Corporate (8) (200) (928)<br />
South African operations 22,741 28,449 50,014<br />
O-Line Mozambique 260 (588) (275)<br />
Eliminations (592) (681) (606)<br />
22,409 27,180 49,133<br />
Assets<br />
O-Line 109,816 108,377 115,497<br />
Armco 204,233 168,121 188,629<br />
Corporate 114,946 141,128 123,388<br />
South African operations 428,995 417,626 427,514<br />
O-Line Mozambique 4,418 2,143 3,114<br />
Eliminations (90,954) (89,262) (97,845)<br />
342,459 330,507 332,783<br />
Liabilities<br />
O-Line 34,941 39,826 42,874<br />
Armco 163,571 139,565 157,438<br />
Corporate 389 <strong>31</strong>6 439<br />
South African operations 198,901 179,707 200,751<br />
O-Line Mozambique 4,860 2,799 3,611<br />
Eliminations (93,807) (92,403) (100,844)<br />
109,954 90,103 103,518<br />
Capital expenditure<br />
O-Line 1,417 692 4,302<br />
Armco 9,608 1,390 13,920<br />
Corporate - - -<br />
South African operations 11,025 2,082 18,222<br />
O-Line Mozambique - 9 9<br />
Eliminations - - -<br />
11,025 2,091 18,2<strong>31</strong><br />
For management purposes the Group is organised into four<br />
major operating divisions namely, O-<strong>line</strong> Support Systems,<br />
Armco Superlite, Corporate and O-<strong>line</strong> Mozambique. It
epresents the basis on which the Group reports its primary<br />
segment information.<br />
BASIS OF PREPARATION<br />
These interim financial statements have been prepared in<br />
accordance with IAS 34 - Interim Financial Reporting,<br />
International Financial Reporting Standards (IFRS), AS 500<br />
Standards, the Companies Act of South Africa and the JSE<br />
Limited Listings Requirements.<br />
The accounting policies and methods of measurement,<br />
recognition and computation applied in the preparation of<br />
these interim financial statements are consistent with<br />
those applies in the Group's most recent audited annual<br />
financial statements for the year ended 30 June <strong>2011</strong>.<br />
The results for the period are not necessarily indicative<br />
of the results for the entire year, and interim financial<br />
statements should be read in conjunction with the audited<br />
annual financial statements for the year ended 30 June<br />
<strong>2011</strong>.<br />
The interim financial statements have been prepared under<br />
the supervision of the group financial director, Mr. Gary<br />
Driver.<br />
COMMENTARY<br />
Financial performance<br />
Revenue decreased from R213.8 million, for the six months<br />
ended <strong>31</strong> December 2010(“the comparative period”), to R209.3<br />
million, for the six months ended <strong>31</strong> December <strong>2011</strong> (“the<br />
current period”), mainly as a result of trading volume<br />
dec<strong>line</strong> in O-<strong>line</strong> Support Systems (Pty) Limited (“O-<strong>line</strong><br />
Support Systems”) of 11.06%. Armco Superlite (Pty) Limited
(“Armco”) experienced a trading volume increase of 5.13%<br />
and O-Line Holdings (Mocambique) Limitada (“O-<strong>line</strong><br />
Mocambique”) also experienced a trading volume increase.<br />
This represents a net 2.11% decrease in revenue for the<br />
current period compared to the comparative period. Gross<br />
profit decreased from R66.3 million in the comparative<br />
period to R65.9m over the current period.<br />
O-<strong>line</strong> Support Systems and Armco Superlite achieved gross<br />
profit margins for the current period of 32.5% and 28.6%<br />
respectively, while O-<strong>line</strong> Mocambique achieved a gross<br />
profit margin of 14% for the current period, excessive<br />
transportation costs impacting negatively on their gross<br />
margin. The Group’s operating profit for the current period<br />
decreased by 17.6%, from R27.2 million in the comparative<br />
period to R22.4 million in the current period, whilst<br />
operating expenses increased by 11.1% from R39.7 million to<br />
R44.1 million. Finance costs decreased from R2.7 million in<br />
the comparative period to R2.2 million in the current<br />
period, this is mainly attributable to the decrease in<br />
borrowings as Group debt has been settled.<br />
Cash and cash equivalents have increased from R35.2 million<br />
in the<br />
comparative period to R44.6 million in the current period.<br />
The Group will continue to utilise its available cash to<br />
finance operations, for expansion and to settle debt. The<br />
Group also experienced the following decreases / increases,<br />
compared to the comparative period:<br />
• Borrowings reflect a net decrease of R6.6 million from<br />
R50.8 million to R44.2 million, this is in <strong>line</strong> with<br />
repayments in terms of loan agreements entered into by<br />
the Group. A new medium term loan of R8 million was
drawn down to purchase the property for the<br />
Randfontein galvanising facility;<br />
• Trade and other payables increased by R22.8 million to<br />
R49.5 million, a substantial portion of the increase<br />
being attributable to advance payments received by<br />
Armco;<br />
• Trade and other receivables decreased by R8.6 million<br />
to R44.8 million following the overall downward trend<br />
in sales volumes for the period and better debtors<br />
collections;<br />
• Cash generated from operations increased from R1.6<br />
million to R40.5 million mainly as a result of a<br />
decreased cash investment in working capital as<br />
reflected in the decrease in trade receivables and an<br />
increase in trade payables and inventory at the<br />
current period end compared to the corresponding<br />
period. While the timing of the period end resulted in<br />
a negative impact on trade payables and receivables,<br />
working capital management remains a key area of focus<br />
for the Group;<br />
• Inventory also increased from R72.6 million to R87.4<br />
million to support the increase in trading activities<br />
at Armco and O-<strong>line</strong> Mocambique; and<br />
• Capital expenditure increased from R2.1 million in the<br />
comparative period to R11 million mainly as a result<br />
of the acquisition of the Randfontein property for the<br />
new galvanising facility.<br />
Operational Performance and Prospects<br />
Operational performance of the Group pertaining to the<br />
period were heavily subdued as a result of diminishing<br />
margins relating to continuous increases in Power, Gas and<br />
labour. Further aggravation came in the form of the Metal
Workers Union strikes forcing the Group to evacuate<br />
manufacturing premises for a period due to the violence and<br />
intimidation. O-<strong>line</strong> Support Systems was severely affected<br />
due to the extended time <strong>line</strong>s of materials flow from order<br />
to expediting resulting in increased inventory levels.<br />
Armco’s ability of quick recovery helped lessen the affect<br />
and fared well in providing a fair set of results. The<br />
first quarter resulted in some divisional losses relating<br />
to the above, this left the Group with a mere three months<br />
of proper operations considering taking into play December<br />
is construction close down. In order to manage the deficit<br />
the Group will focus around savings and efficiencies<br />
through the reduction of overtime and downsizing of the<br />
work force, although this will not allow for total recovery<br />
it will assist in reducing operating costs of which in turn<br />
will provide for some relief. Looking ahead to the third<br />
and fourth quarters both Armco and O-<strong>line</strong> will continue the<br />
strategic approach of cost saving through mechanisations<br />
and will focus on the start of supply of goods and services<br />
to the Kusile Power Stations accompanied by the future<br />
Renewable Energy Projects and Roads Infrastructure<br />
Development in Africa.<br />
Directors<br />
Mr David Adomakoh resigned as a director of the Company on<br />
18 August <strong>2011</strong>.<br />
Mr William ("Bill") Cosby was appointed as a non-executive<br />
director of the Company on 23 August <strong>2011</strong>.<br />
02 <strong>March</strong> <strong>2012</strong><br />
Designated Advisor<br />
Sasfin Capital
(a division of Sasfin Bank Limited)