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Torre Industrial Holdings Limited HY 2013 results

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Torre Industrial Holdings Limited HY 2013 results

Torre Industrial Holdings Limited HY 2013 results

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  • 1. TORRE INDUSTRIAL HOLDINGS LIMITED Incorporated in the Republic of South Africa (Registration number 2012/144604/06) Share code: TOR ISIN: ZAE000169322 (“Torre” or “the Company” or “the Group”) UNAUDITED CONDENSED CONSOLIDATED MONTHS ENDED 31 DECEMBER 2012 INTERIM RESULTS FOR THE SIX CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Revenue Cost of sales Gross profit Other income Operating expenses Results from operating activities Finance cost Restructuring costs Investment income Profit/(Loss) before taxation Taxation Profit/(Loss) after taxation Other comprehensive income/(loss) for the period Total comprehensive income/(loss) for the period Comprehensive income attributable to: Ordinary shareholders of the group Non-controlling interest Reconciliation of Unaudited 6 months ended 31 December 2012 R'000 27 797 (14 585) 13 212 4 247 (14 736) Unaudited 6 months ended 31 December 2011 R'000 31 513 (17 378) 14 135 3 349 (15 169) Audited 12 months ended 30 June 2012 R'000 52 011 (27 167) 24 844 4 080 (26 164) 2 723 (2 795) 137 2 315 (2 163) 67 2 760 (5 270) (1 129) 10 65 (6) 219 - (3 629) - 59 219 (3 629) - - - 59 219 (3 629) 59 219 ( 3 629) 59 219 (3 629)
  • 2. attributable profits / (losses) to headline losses Profits / (Losses) attributable to ordinary shareholders Restructuring costs Gains from loan write off Gains on recognition of assets (Profit) / Loss on disposal of property, plant and equipment Creditor settlement gains Tax effect Headline profits / (losses) attributable to ordinary shareholders Weighted average number of shares in issue Diluted weighted number of shares Earnings per share (cents) Headline earnings per share (cents) Diluted earnings per share (cents) Diluted headline earnings per share (cents) 59 - 219 - (3 629) 1 129 (1 444) - (496) (1 100) - - (205) - - (324) - (1 135) - (3 161) - (3 014) (916) (6 157) 69 307 984 566 375 689 574 463 415 74 307 984 - - 0.09 0.04 (0.63) (4.35) (0.16) (1.07) 12.19 - - 8.06 - - Reconciliation of attributable profits / (losses) to headline losses Shareholders are reminded that in terms of the mirror listing and scheme of arrangement, details of which were contained in a circular dated 14 September 2012, the newly incorporated Torre was listed after having purchased all of the shares of SA French Limited (“SA French”). 611 791 380 ordinary SA French shares were acquired by Torre on the basis of a swap of 1 (one) Torre share for every 10 (ten) SA French shares. Due to the nature of this transaction there are a significantly lower number of
  • 3. shares in issue for the period ended 31 December 2012 than there were in the prior comparable period. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited 6 months ended 31 December 2012 R'000 ASSETS Non-current assets Property, plant and equipment Goodwill Deferred tax Other financial assets Current assets Inventories Trade and other receivables Other financial assets Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Equity Share capital Merger reserve Revaluation reserve Retained income Non-current liabilities Installment sale agreements Other financial liabilities Deferred tax Deferred purchase consideration Loans from shareholders Current liabilities Installment sale agreements Other financial liabilities Trade and other payables Unaudited 6 months ended 31 December 2011 R'000 Audited 12 months ended 30 June 2012 R'000 127 573 96 270 90 960 118 098 6 905 2 198 372 28 450 9 096 94 222 2 048 23 623 9 120 90 960 15 984 8 792 6 994 7 939 14 423 - 6 828 - 4 421 156 023 80 119 893 364 106 944 89 677 98 588 9 746 (18 657) 37 719 51 297 66 162 162 (15 027) 31 286 52 047 70 763 162 (18 878) 19 978 19148 25 168 19 107 6 758 6 500 - 871 - 5 313 28 627 6 118 37 310 34 919 7 406 9 447 8 060 5 069 11 126 1 650 21 969 7 538 13 727
  • 4. Loan from shareholders Bank overdraft TOTAL EQUITIES AND LIABILITIES 5 026 4 071 1 523 156 023 Number of shares in issue Net asset value per share (cents) Net tangible asset value per share (cents) 1 508 2 736 119 893 106 944 103 681 389 566 375 689 611 791 380 86.49 9.06 8.51 79.83 9.06 8.51 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Revaluation Capital Reserve R'000 R’000 Balance as at 30 June 2011 Rights issue costs Profit for the period Balance as at 31 December 2011 Shares issued Rights issue costs Loss for the period Balance as at 30 June 2012 Shares issued Rights issue costs Reversing revaluation reserve Profit for the period Balance as at 31 December 2012 Merger Reserve R'000 Retained income R'000 Total R'000 56,475 162 12,343 (15,249) 53,731 - - (2,653) - (2,653) - - - 219 219 56,475 4,542 162 - 9,690 - (15,030) - 51,297 4,542 - - 56 - 56 - - - (3,848) (3,848) 61,017 42,502 162 - 9,746 - (18,878) - 52,047 42,502 (4,931) - - - (4,931) (162) - 162 - - - - 59 59 98,588 - 9,746 (18,657) 89,677
  • 5. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited 6 months ended 31 December 2012 R'000 Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Total cash movement for the period Cash at the beginning of the period Total cash at the end of the period Unaudited 6 months ended 31 December 2011 R'000 Audited 12 months ended 30 June 2012 87 (1 605) (3 058) (12 410) (248) (80) 11 718 (1 961) 820 (605) (3 814) (2 318) - 1 159 1 159 (605) (2 655) (1 159) R'000 Notes to the Interim Financial Statements 1. Accounting Policies The unaudited interim financial statements have been prepared in accordance with the SAICA Financial Reporting Guidelines, IAS 34: Interim Financial Reporting, the Companies Act of South Africa, 2008 and the Listings Requirements of the JSE. The accounting policies are consistent with the annual financial statements for the year ended 30 June 2012, except for the merger accounting used in the consolidated accounts in relation to the acquisition by Torre of SA French. Based on the fact that the mirror listing is scoped out of IFRS 3 and that there is no guidance in IFRS for such transactions, we have looked to the guidance in UK GAAP which has an accounting standard to deal with this type of transaction. FRS 6 provides an alternative to the acquisition method of accounting of the combination of entities as required by IFRS 3. FRS 6 offers the alternative of merger accounting in terms of which no revaluation of the net assets of the parties takes place, nor is there any recognition of goodwill as a result of the transaction. Given the significant commonality of shareholders between Torre and SA French it is inappropriate to apply acquisition accounting and recognise goodwill and therefore the
  • 6. application of IFRS 3, was not considered to be in the interests of fair presentation. In light of the above, even though Torre was established and acquired the businesses of SA French and Forktech with effect from 26 November 2012 and 1 December 2012 respectively, the group has consolidated SA French (wholly-owned subsidiary of Torre) for 6 months, Forktech (wholly-owned subsidiary of Torre) from 1 December 2012 and Torre from date of inception. IFRS 3 has been used in relation to the acquisition of Forktech by Torre. These results have been prepared by Bianca Sommer, the Financial Manager and which preparation was supervised by Roy Midlane, the Financial Director. The interim results have not been audited or reviewed by the Group's auditors, but do support the technical opinion provided by the JSE’s accredited IFRS advisors and the Company’s auditors. 2. Seasonality affecting Interim Financial Statements The Group’s operations are affected by the South African Construction Industry shutdown (as well as factory closures) for a part of December and January each year. Customers and third party service providers conduct limited business over this period which can affect the volume of sales, initiate rental interruption and delay debtor receipts. The Interim Financial Statements are therefore not reflective of the annual trading performance of the Group and will potentially not be comparable with future performance due to the strategy of Torre to build a diversified portfolio of industrial business via a combination of acquisitive and organic growth. 3. Macroeconomic Challenges Globally, the economic environment is characterised by a combination of uncertainty and weak growth rates. Tough business conditions in Europe and Asia are driving operators to look at alternative world markets, which draw foreign competitors to South Africa to seek opportunities. In South Africa, the labour unrest and on-going delays in the power infrastructure sector have had a direct effect on operations. The business environment therefore remains challenging for capital equipment businesses, although the trend by customers to
  • 7. keep assets off the balance sheet holds promise for businesses with large rental fleets such as SA French and Forktech. Due to the challenges in the business environment management will accordingly maintain a strict focus on costs and working capital management for the remainder of the financial year. 4. Unusual amounts affecting Net Income and Equity Mirror Listing Costs Certain costs of R4.9 million directly attributable to the mirror listing and scheme of arrangement, whereby SA French was delisted, newly incorporated Torre was listed and SA French became a wholly-owned subsidiary of Torre , were incurred in the 6 month period ended 31 December 2012. These costs were recognised directly against the Share Capital account as reflected in the Condensed Statement of Changes in Equity Taxation SA French and Forktech have significant assessed tax losses. The Interim Financial Statements therefore present no tax charge in the Condensed Statement of Comprehensive Income. In addition, the Group has only recognised deferred tax relating to Forktech at this stage. 5. Segment Report Unaudited 6 months ended 31 December 2012 R'000 Segment Revenue Rental Sale Other Segmented assets Rental Inventory Property, plant and equipment Other financial assets Trade and other receivables 8 11 7 27 766 077 954 797 Unaudited 6 months ended 31 December 2011 R'000 8 18 4 31 044 577 892 513 Audited 12 months ended 30 June 2012 R'000 24 24 3 52 653 324 034 011 114 214 9 096 93 082 9 120 90 234 8 762 3 884 7 939 1 140 2 048 726 - 6 994 14 423 6 858
  • 8. Cash and cash equivalents 4 421 146 978 80 119 893 364 106 944 Segmented liabilities The Groups segment liabilities are not allocated to any particular COMMENTARY Group takes first steps forward Highlights In the period under review, Torre was established as a platform to build a scalable industrial group. The Group has drawn together a dynamic team of entrepreneurs, who collectively have extensive industry specific experience as well as financial acumen and turnaround credentials. The directors and management team are materially invested in the business and a number of blue chip institutional investors have also invested in the Company to back this team and the Torre business plan. Introduction The board of directors of Torre (the “Board”) hereby presents the Interim Financial Results of the Group for the six months ended 31 December 2012 (the “Interim Period”). These Interim Financial Results reflect the consolidated results of SA French for 6 months from 1 July 2012, Forktech from 1 December 2012 and Torre from date of inception. Group Profile Torre is a listed industrial holding company that provides a diverse range of capital equipment and engineering solutions to its customers in selected markets in Africa. Torre provides a platform to build a scalable industrial group with the intention to operate in 3 segments, namely Plant and Equipment, Engineering Services and Trade and Asset Finance. The present operations comprise two businesses in the Plant and Equipment segment, namely SA French and Forktech. Diversification of the portfolio via the acquisition of Tractor and Grader Supplies (Pty) Ltd (“TGS”) is already in advanced stages with the final terms of the proposed acquisition to be announced imminently. SA French is the exclusive distributor in Sub-equatorial Africa of the Potain brand of tower cranes; a subsidiary of the NYSE listed Manitowoc Crane Group, which is the largest crane
  • 9. manufacturer in the world. In addition to its 30 year track record as a distributor and renter of the Potain brand, SA French holds distribution agreements with Merlo SPA, being manufacturers of telescopic handlers and self-loading concrete mixers, and Saltec, who are producers of rack and pinion passenger and material hoists for the sub-equatorial Africa region. This diversification allows the company to offer complementary lifting solutions to its clients. In addition to its sales and service offering, SA French has a rental fleet of over 50 units. The rental business model has been developed over a 36 month period to encompass a wide range of tower crane, telescopic handlers and hoist products. The trend of moving away from end user ownership towards rental provides opportunity for the utilisation of this significant fleet. Forktech is a Cape Town based company engaged in forklift rentals, sales and repairs. The company principally operates in the coastal regions of South Africa providing light lifting solutions to the agricultural, infrastructure, construction and logistics sectors. Forktech has strong relationships with a broad client base in the coastal and key agricultural regions in South Africa. Forktech holds a distributor license for Nissan in the Western Cape and is the exclusive distributor for Nexen forklifts nationally. Forktech is in the process of expanding its presence to the greater Gauteng region through existing and established entities and nationally to other areas, where it has already established relationships with operators in Nelspruit, Upington, Durban and Port Elizabeth. This expansion will include not only branches, but additional products as well, and is expected to be achieved through a combination of both organic and acquisitive growth. Review of Operations The business environment continued to be tough over the period under review, but economic indicators now suggest that an increase in activity in the construction and infrastructure industries is imminent. A marked increase in enquiries for tower crane hire in late 2012 supports the positive indicators that are emerging and bodes well for the balance of 2013. Torre has made substantial progress in finalising the acquisition of TGS to diversify industry exposure. This transaction presents the opportunity to tap into the growing expenditure on maintenance capital in Contract Mining and related Plant Hire Industries. The combination of improving leading indicators and the substantial
  • 10. progress made in terms of acquisitive growth reaffirms the Torre strategy subsequent to listing on the AltX on 26 November 2012. In South Africa, the promised commitment at all levels of government to budget for and implement large scale infrastructural development programs is positive, and if implemented in the time periods committed, will have a material and positive impact on all levels of the construction industry. The Group has secured contracts in the power generation sector for both new sites, as well as for routine maintenance on existing infrastructure. This includes the alternative energy sector, which is receiving attention and funding from the international community. The Group has strategically focused on geographic diversification and has increased its activities in rentals, as well as direct sales to companies operating in Central Africa. The Group has benefitted from having high capacity units in its tower crane rental fleet, as the demands of the South African lifting industry have thus far followed the European trend toward using heavier precast elements in order to fast track construction and infrastructure projects. The forklift business has also seen an increase in enquiries, which supports a positive outlook for 2013. Securing the Nexen distributorship, amongst other products, and the opening branches in other major centres, provides Forktech with the opportunity to not only expand its national footprint, but also to increase its product offering. Operating costs Reducing overhead costs within the Group is a critical component of the on-going business strategy. Finding the correct balance, while not forgoing operational efficiency, is an intricate task. In order to improve the Group’s operational capacity, subsidiary companies will be able to benchmark each other as well as benefit from the shared services that the Group will offer. Skills development As one of its values the Group has decided to prioritise practical skills training for its operators and technicians. From a lifting perspective the Engineering Council of South Africa (“ECSA”) reaffirmed the status of Lifting Machinery Entity ("LME") on the Group and under its auspices three apprentice technicians have been registered as Candidate Lifting Machinery Inspectors (“LMI”). As a training provider, the Group strives to be recognised throughout the industry as the premier
  • 11. training school for the certification of tower crane, forklift and telescopic handler operators and under its Transport Education Training Authority accreditation (“TETA”), it offers both novice and recertification courses on all of the capital equipment that it sells and rents out. Due to the success of its apprenticeship programs, the Group has received numerous applications from top quality graduates for junior positions within the organisation. The investment and development of our human capital is in no small way a contributing factor to the Group strategy and targeted operational results. A performance management system that was implemented at SA French in 2010, which is to be mirrored across the Group, gives each employee the opportunity to identify and work toward competencies that will assist them to move into more senior positions within the organisation, or alternatively, to provide them with a solid platform to pursue other opportunities within the industry. Financial results Revenue In addition to the challenges of trading in a weak economic environment, turnover for SA French for the six months came under pressure due to labour unrest, together with the on-going delays at Medupi and Kusile. The labour disputes in the agricultural sector have also caused customers in this industry to delay their capex and spending decisions. Operating costs The Group continues to reduce its operating costs while ensuring that operating efficiencies are increased. It is expected that further operational efficiencies will be gained as the full impact of the cost cutting focus filters through to the income statement and hence the operating cash flows. Borrowings Torre is continuing to reduce debt to ensure that appropriate levels of debt are held in the businesses on an on-going basis. The restructuring of SA French’s operations over the last 12 month period necessitated temporary reliance on expensive bridge finance facilities, which resulted in increased financing costs. These facilities, however, have either been refinanced with more favourable facilities or been repaid and the interest burden on this business unit will therefore reduce going forward.
  • 12. Prospects A sign of an improvement in the lifting and materials handling industries bodes well for 2013, but challenges will remain in the short term with key customers delaying capex decisions due to the uncertainty in the global economy. A much anticipated increase in demand in key industries has translated into increased enquiries for new sales and rental contracts that are expected to materialise in the next period under review. The Torre team has been strengthened by adding key staff to monitor performance and enhance efficiency at both group and subsidiary level. Highly productive group and subsidiary strategy sessions have further assisted to refine the group strategy and good progress has been made on the TGS acquisition, which will significantly enhance the group profile. The board of directors is confident and excited about Torre’s future and in achieving key strategic and financial targets. Subsequent events In February 2013, the board approved a new 4 year, R15 million term loan to refinance and re-term existing facilities, and to provide the funding required to SA French for the purchase of a 100 ton mobile crane for approximately R7m. The acquisition of a mobile crane had been identified as a key priority to reduce costs and improve service delivery at SA French. Dividend policy No interim dividend has been declared for the period. Directorate Torre welcomes the new directorate (appointed in 2012) to serve on the board: P van Zyl, C Pettit, R Midlane, Q van Breda and C Lyons. On 25 February 2013, the board appointed Alan Keschner. No other changes to the directorate have been made. Company Secretary Neil Esterhuysen Attorneys were appointed secretary with effect from 1 February 2013. as Torre’s company Appreciation We thank the employees of the business units for their continued loyalty, hard work and commitment to the vision of the Group. Furthermore, we thank our shareholders for their support and backing of Torre. On behalf of the board CE Pettit SR Midlane
  • 13. Chief Executive Officer Financial Director 5 April 2013 Directors PJ van Zyl (Chairman)*, CE Pettit (Chief Executive Officer), SR Midlane (Financial Director), QCA van Breda (Business Development & Technical Director), S Swana^, JWLM Fizelle#, CWJ Lyons#, Alan Keschner# * Non-executive ^ Lead independent non-executive # Independent non-executive Company Secretary Neil Esterhuysen & Associates Inc. Registered Office Office 202, Cape Quarter, The Square, 27 Somerset Road, Green Point, Cape Town, South Africa Corporate Adviser AfrAsia Corporate Finance (Pty) Limited Designated Adviser PSG Capital (Pty) Limited Transfer secretaries Link Market Services South Africa (Pty) Limited