SENS Note - 31 May 2013

Reviewed Condensed Provisional Consolidated financial Results for the year ended 28 February 2013

 

INFRASORS HOLDINGS LIMITED

(Incorporated in the Republic of South Africa)

(Registration number: 2007/002405/06)

Share Code on the JSE: IRA      ISIN: ZAE000101507

("Infrasors", "the Company" or "the Group")

 

REVIEWED CONDENSED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS

FOR THE YEAR ENDED 28 FEBRUARY 2013

Infrasors is a South African mining resources group

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                                         Reviewed 2013   Audited 2012

                                                                                  Note           R000's         R000's

Revenue                                                                                      290 003        279 261

Gross profit                                                                                    61 172        81 333

Operating costs                                                                            (51 531)       (33 779)

Depreciation and amortisation                                                       (33 594)       (16 986)

(Loss)/contribution from operations                                               (23 953)         30 568

Fair value adjustments                                                                          -          10 015

Impairments                                                                     1       (286 117)              -

Operating (loss)/profit                                                                (310 070)         40 583

Net finance costs                                                                           (6 601)        (6 914)

(Loss)/profit before tax                                                              (316 671)         33 669

Taxation                                                                                       13 952        (6 325)

(Loss)/profit attributable to shareholders                                     (302 719)         27 344

Attributable to :

Equity holders of Infrasors                                                         (302 169)         27 554

Non-controlling interest                                                                   (550)          (210)

Total comprehensive (loss)/income for the year                           (302 719)         27 344

(Loss)/earnings per share (cents) – Basic and diluted           3         (164.5)           15.0

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                                           Reviewed 2013   Audited 2012

                                                                                    Note           R000's         R000's

Non-current assets                                                                         299 763        610 229

Property, plant and equipment                                             1          260 148        340 825

Investment property                                                           1            3 040         98 089

Mineral rights                                                                     1            2 690         92 464

Goodwill                                                                            1                -            129

Held-to-maturity investment                                                1           11 676         49 596

Other financial assets                                                                      21 653         16 569

Deferred tax                                                                   1, 2             556         12 557

Current assets                                                                              76 196         83 096

Inventories                                                                                   16 859         19 962

Trade and other receivables                                                          38 593         46 068

Cash and cash equivalents                                                             20 744         17 066

Total assets                                                                                375 959        693 325

Capital and reserves

Total equity                                                                               153 418        462 287

Share capital                                                                                  927            927

Share premium                                                                         256 959        256 959

Treasury shares                                                                        (2 266)        (2 266)

Net issued share capital                                                            255 620        255 620

Revaluation reserve                                                                         -           6 150

Retained (loss)/income                                                            (103 566)       198 603

Attributable to equity holders of parent                                        152 054        460 373

Non-controlling interest                                                                1 364          1 914

Non-current liabilities                                                                152 714        173 212

Borrowings long-term                                                     6          81 903         80 623

Environmental rehabilitation provision                                          26 747         23 178

Deferred tax                                                              1, 2          44 064         69 411

Current liabilities                                                                        69 827         57 826

Borrowings short-term                                                   6          18 812         22 115

Trade and other payables                                                          40 693         35 452

Bank overdraft                                                              6           9 588              -

Current tax payable                                                                     734            259

Total liabilities                                                                        222 541        231 038

Total equity and liabilities                                                        375 959        693 325

Note to the Statement of Financial Position:

- Net asset value per share (cents)                                              83.5          251.6

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

                                                                                  Reviewed 2013    Audited 2012

                                                                                           R000's          R000's

Cash inflows from operating activities                                     20 229          31 208

Cash outflows from investing activities                                    (16 001)        (38 455)

Cash (outflows)/inflows from financing activities                       (10 138)           7 269

Net increase/(decrease) in cash and cash equivalents               (5 910)              22

Cash and cash equivalents at the beginning of the year             17 066          17 044

Cash and cash equivalents at the end of the year                    11 156            17 066

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

                                                                                 Reviewed 2013    Audited 2012

                                                                                         R000's          R000's

Share capital                                                                        918             918

Share premium                                                                 254 702         254 702

Revaluation reserve                                                                  -           6 150

Balance at beginning of year                                                6 150           6 150

Change in deferred tax rate                                                 (340)               -

Loss on revaluation of land                                                (7 151)               -

Deferred tax on loss on revaluation of land                          1 341               -

Retained (loss)/income                                                  (103 566)         198 603

Balance at the beginning of the year                                 198 603         171 049

Total comprehensive (loss)/income for the year               (302 169)          27 554

Non-controlling interest                                                      1 364           1 914

Balance at the beginning of the year                                    1 914               -

Non-controlling interest arising from business combination           -           2 124

Total comprehensive loss for the year                                (550)           (210)

Balance at end of the year                                              153 418         462 287

 

CONDENSED CONSOLIDATED SEGMENT REPORT

 

The business segment reporting format reflects the Group's management and internal reporting structure. The segments are reported to the Group's management in terms of the nature of the minerals mined. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

                                                                                   Dolomite &

                                                                    Silica          limestone             Other                Total

                                                                    R000's             R000's            R000's               R000's

 

 

2013

Turnover from external customers                                     89 806            198 641            1 359              289 806

Inter-segment revenues                                                           -                  -                22 425               22 425

(Loss)/contribution from operations                                  (11 556)             13 991         (26 388)             (23 953)

(Loss) / profit before tax                                                (141 085)              8 067        (183 653)            (316 671)

Total assets                                                                      92 028            255 676           28 255              375 959

Total liabilities                                                                (53 248)           (85 308)         (83 985)            (222 541)

2012

Turnover from external customers                                     85 661            185 205            3 314              274 180

Inter-segment revenues                                                            -                  -               16 845               16 845

Contribution/(loss) from operations                                    13 100             27 914         (10 446)               30 568

Profit before tax                                                                12 155             27 711          (6 197)               33 669

Total assets                                                                    108 855            263 002          321 468              693 325

Total liabilities                                                                (46 905)           (88 665)         (95 468)            (231 038)

 

COMMENTARY

Basis of preparation

 

The reviewed condensed provisional consolidated financial statements for the year ended 28 February 2013 ("year") have been prepared in accordance with the recognition and measurement criteria of the International Financial Reporting Standards (IFRS), the disclosure and presentation requirements of IAS 34: Interim Financial Reporting, SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the JSE Limited and in the manner required by the South African Companies Act, Act no 71 of 2008, as amended. The reviewed condensed consolidated financial statements have not been reviewed or audited in terms of the Companies Act, 71 of 2008, as amended. The accounting policies and method of computation applied in preparation of the financial statements are consistent with those applied in the audited annual financial statements for the year ended 29 February 2012, apart from reduced useful lives and residual amounts used in the calculation of the net carrying value of property, plant and equipment.

The reviewed condensed provisional consolidated financial statements for the year were authorised for issue by the directors on 30 May 2013 for publication on 31 May 2013. The reviewed condensed provisional consolidated financial statements for the year have been prepared under the supervision of the Financial Director, M. Potgieter CA(SA).

 Introduction

The reviewed condensed provisional consolidated financial results for the year ended 28 February 2013 reflect the tough local trading conditions. The impact of the steel and transport industry strikes and scheduled shutdowns at certain customers due to electricity shortages contributed to reduced sales volumes for the year. Additional costs were incurred throughout the Group, including increased depreciation and amortisation as well as impairment of assets, which had a material impact on the profitability of the Company.

A majority shareholding of 50.7% of the Company was acquired by Afrimat Limited ("Afrimat"), effective 1 March 2013.

 

Financial review

Revenue for the year increased by 3.8% to R290.0 million despite lower sales volumes. Gross profit reduced by 24.8% to R61.2 million mainly as a result of increased repair and maintenance costs at Lyttelton Dolomite and reduced mining yields at Delf Sand.

 

The loss attributable to shareholders amounted to R302.7 million mainly due to additional costs incurred, as follows:

    Accelerated depreciation and amortisation >

    - Depreciation and amortisation increased from R16.9 million in F2012 to R33.6 million in F2013 as a result of accelerateddepreciation recognised on old plant and equipment items due to its reduced economic life and lower realisable values, alongwith increased amortisation recognised on mine development and mineral right assets.

 

    Impairment of assets >

    - Delf Sand silica mine is nearing the end of its economic live - impaired plant, equipment, mine development and minerehabilitation assets (R20.3 million);

    - Pienaarspoort silica quartz mine project is suspended due to difficulties in obtaining environmental and other regulatoryapprovals and the uncertainty of a viable market - impaired mineral rights and mine development assets (R97.3 million);

    - Pienaarspoort township development project is suspended due to the rejection of the urban edge extension application bythe Tshwane municipality. An independent valuer now values the property as non-specialist agricultural land at R3.0 million.The value of the property is further impaired by the suspension of the Pienaarspoort silica quartz mining project -impaired investment property (R88.1 million);

    - Delay in the Delf Cullinan silica mine project due to difficulty in obtaining regulatory approval, and the reduction in theexpected realisable value from the proposed mine - impaired mine development and mineral right assets associated with theproject (R33.1 million);

    - Marble Hall mine expansion project is delayed due to difficulties in obtaining regulatory approvals and the reduced expectedrealisable value from the proposed expansion - impaired mineral rights (R2.6 million);

    - Held-to-maturity investment - Loan to Infrasors Empowerment Trust is reduced to the market value of the underlying sharesas the loan's recovery is doubtful due to reduced financial assistance to the trust (R43.4 million). The financial assets valuehierarchy thus moved from a level 3 to a level 1; and

    - Obsolete plant and equipment items – impaired plant and equipment R1.3 million.

    Derecognition of deferred tax assets >

    - In certain unprofitable and dormant Group companies, deferred tax assets have been derecognised due to the unlikelihood ofsufficient future taxable profit in the short- to medium-term (R39.3 million).

Cash generated from operating activities decreased to R20.2 million (2012: R31.2 million) as a result of the reduced profitability during the period. The cash outflow from investing activities reduced to R16.0 million (2012: R38.5 million) as a result of reduced capital spending during the year. The net outflow of financing activities of R10.1 million (2012: R7.3 million inflow) was a consequence of reduced borrowings at year-end due to payments of capital instalments to the amount of R15.6 million, and new borrowings to the amount of R5.5 million to fund the Delf Cullinan mine.

Property, plant and equipment of R260.1 million (2012: R340.8 million) reduced as a result of significant impairments of land, mine development assets, mine rehabilitation assets and equipment items and increased depreciation and amortisation. Additions to the amount of R26.9 million (2012: R42.9 million) were incurred on land, equipment and mine development assets. Plant and equipment at the end of its useful life were disposed and proceeds to the amount of R1.9 million were received.

Lower production volumes and stock write-downs on unsellable inventory to the extent of R1.4 million contributed to a lower inventory balance to the amount of R16.9 million (2012: R19.9 million) at year-end.

Other financial assets of R21.6 million (2012: R16.6 million) increased due to the investment of R2.3 million in environment rehabilitation insurance policies and the investment of R2.7 million in guaranteed endowment policies, to be used to settle Wesbank installment sale liabilities.

The environment rehabilitation provision increased by R3.5 million to R26.7 million (2012: R23.2 million) as a result of cost inflation. During the year Property, Plant and Equipment ("PPE") – Land, relating to the Lyttelton Dolomite mining area was reclassified and transferred to PPE - Mining Assets in order to reflect a more accurate classification of assets. PPE – Land was reduced by R95.1 million and Mining Assets increased by a similar amount. The Mining Assets will be amortised over the expected life of the mine.

Operational review

Sales of industrial minerals were negatively influenced by the steel industry strike, client furnace shutdowns during the winter months due to electricity shortages and an industry wide transport strike resulting in volumes sold into metallurgical sector being lower for the year. Also, agreements between Eskom and smelter clients to shut down furnaces during the last quarter of the year have reduced metallurgical sales and this is expected to continue into the first quarter of F2014. Abnormal repair and maintenance costs incurred during the 1st half of the year affected Lyttelton Centurion operations. The Group was able to increase volumes sold into the construction sector despite tighter trading conditions.

Sales of alluvial silica reduced as a result of the mining constraints experienced at the Delf Sand mine due to declining mining yields from the depleting mineral reserve.

 

Auditors' review

Mazars, the Group's auditors, have reviewed the condensed provisional consolidated financial statements for the year. Their unqualified review opinion is available for inspection at the Company's registered office. Their review was conducted in accordance with the International Standard on Review Engagements 2410 – "Review of Interim Financial Information performed by the independent auditor of the entity".

 

Appreciation

Mr. Trevor Robinson, the Group's CEO, announced his resignation effective 31 May 2013. The board wishes to thank him for his contribution to Infrasors and wish him every success for his future endeavours.

 

Prospects

The Group is expected to remain a key supplier to the local construction and metallurgical markets and should in future also benefit from current costs reduction initiatives and a renewed focus on marketing.

On behalf of the board

 

Mochele Noge                                                               Trevor Robinson

Chairman                                                                     CEO

NOTES

 

1. Impairment of assets

                                                                      Reviewed 2013    Audited 2012

                                                                             R000's          R000's

PPE - Land                                                            (22 279)               -

PPE - Plant and equipment                                       (8 645)               -

PPE - Mining and mine development assets              (29 369)               -

PPE - Mine rehabilitation assets                                (5 253)               -

Mineral rights                                                       (88 969)               -

Investment property                                             (88 108)               -

Held-to-maturity investment                                  (43 365)               -

Goodwill                                                                   (129)               -

Total impairments                                               (286 117)               -

 

 

2. Deferred tax assets

In certain unprofitable and dormant Group companies, deferred tax assets to the amount of R39.3 million have been reversed due to the unlikelihood of sufficient future taxable profit in the short- to medium-term.

3. Headline earnings per share ("HEPS") reconciliation - Basic and diluted

 

                                                   Reviewed 2013                                Audited 2012

                                           Net      Weighted ave      Earnings         Net      Weighted ave    Earnings

                                        profit   shares in issue     per share      profit   shares in issue   per share

                                        R000's             000's         Cents      R000's             000's       Cents

Earnings per share                   (302 169)           183 709       (164.5)      27 554           183 709        15.0

Loss/(profit) on sale of assets          2 987                                       (122)

Impairments/(fair value                286 117                                    (10 015)

adjustments)

Tax effect on headline adjustments    (70 668)                                       1 436

Headline earnings per share           (83 733)             183 709      (45.6)      18 853           183 709        10.3

4. Dividends

The directors have elected not to declare a dividend for the year ended 28 February 2013 (2012: R nil).

5. Capital commitments

Approved capital expenditure to be funded from surplus cash and bank funding amounts to R6.0 million in order to replace and maintain the existing beneficiation capacity.

6. Funding

As a result of the Group's reduced profitability during the year under review the Group breached covenants as stipulated by the existing funding agreement with ABSA. ABSA have, on request of the majority shareholder Afrimat, agreed to continue with the current funding arrangements for borrowings and overdraft facilities utilised to the amount of R9.6 million at year end, for a further 12-month period from 1 March 2013. The classification of long-term and short-term borrowings assumes that the current terms of funding from ABSA will remain unchanged.

7. Related party transactions

                

                                                                                                                       Reviewed 2013   Audited 2012

                                                                                                                                  R000's         R000's

Contributions made to the Infrasors Environmental Rehabilitation Trust                              1 072          1 038

Rent and fees paid to director managed company Whirlprops 35 Proprietary Limited           2 108          2 885

Rent recoveries received from director managed company Gioberti Investments 1                192            252

Proprietary Limited

 

8. Subsequent events

 

The following corporate event and changes to the board of directors occurred subsequent to 28 February 2013:

-   On 1 March 2013 a majority shareholding of 50.7% of the issued shares of the Company was acquired by Afrimat Limited. Asa result, its respective CEO and financial director, Andries van Heerden and Hendrik Verreynne, were appointed as non-executive directors on 4 March 2013;

-   On 4 March 2013 Stephen Courtney, along with his alternate Hugh Courtney, resigned as non-executive directors;

-   On 12 March 2013 Chris Boulle resigned as independent non-executive director and Kobie Bekker was appointed asindependent non-execuitive director and chairman of the Audit & Risk Committee;

-   On 12 March 2013 Kerry Colley resigned as company secretary effective 31 May 2013. Pieter De Wit, the Afrimat companysecretary, was appointed as replacement;

-   On 10 April 2013 Theunis de Bruyn, being a representative of a shareholder RE:CM and Calibre Limited, was appointed asnon-executive director; and

-   On 16 May 2013 Trevor Robinson, the Group's CEO, announced his resignation effective 31 May 2013.

Directors

M Noge# (Chairman), TR Robinson (Chief Executive Officer) (resignation effective 31 May 2013), M Potgieter (Financial Director), JCP Bekker# (appointed 12 March 2013), T de Bruyn* (appointed 10 April 2013, AJ van Heerden* (appointed 4 March 2013), HP Verreynne* (appointed 4 March 2013), PFC Ying#

 

All of the above directors are South African and resident in South Africa.

* Non-executive directors                              # Independent non-executive directors

Company secretary

KA Colley (Company secretary) (resignation effective 31 May 2013),

[PGS de Wit (Company secretary) (appointment effective 1 June 2013)].

 

Registered office

Lyttelton Dolomite Mine,

Botha Avenue, Lyttelton, Centurion, 0157

(P.O. Box 14014, Lyttelton, 0140)

Sponsor                                                                      Auditors

Sasfin Capital                                                               Mazars

A division of Sasfin Bank Limited                                    2nd Floor, Mazars House,

29 Scott Street, Waverley, 2000                                     5 St Davids Place, Parktown 2193

(P.O. Box 95104, Grand Park, 2051)                               (P.O. Box 6697, Johannesburg, 2000)

 

Legal Advisers and Attorney                                                  Transfer Secretaries

TG Fine Attorney                                                                  Link Market Services South Africa Proprietary Limited

39 The Avenue, Gardens                                                       13th Floor, Rennies House,

Norwood, Johannesburg, 2117                                               19 Ameshoff Street, Braamfontein, 2001

(P.O. Box 92047, Norwood, 2117)                                         (P.O. Box 4844, Johannesburg, 2000)

 

VISIT US AT www.infrasors.co.za

 

31 May 2013

Johannesburg

 

Sponsor

Sasfin Capital (a division of Sasfin Bank Limited)

Date: 31/05/2013 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').

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