Wrap Text
Reviewed condensed consolidated provisional financial results for the year ended 28 February 2019
Afrimat Limited
('Afrimat' or 'the company' or 'the group')
(Incorporated in the Republic of South Africa)
(Registration number: 2006/022534/06)
Share code: AFT ISIN code: ZAE000086302
Reviewed condensed consolidated provisional financial results
for the year ended 28 February 2019
Highlights
- Group revenue up 24,6% to R3,0 billion
- Headline earnings per share ('HEPS') up 29,6% to 234,1 cents
- Operating profit margin 15,9%
- Final dividend per share of 62,0 cents
- Return on net operating assets 25,4%
- Net debt:equity ratio improved from 35,5% to 23,8%
Commentary
Basis of preparation
The condensed consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies
Act of South Africa. The Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards ('IFRS') and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, contain the information required by
IAS 34: Interim Financial Reporting. The accounting policies applied in the preparation of the
condensed consolidated financial statements are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements, except for the implementation of
IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers. Details of the
implementation of these standards are disclosed in note 19.
The financial statements have been prepared under the supervision of the Chief Financial Officer
('CFO'), PGS de Wit CA(SA).
Introduction
The group continues to deliver satisfactory results supported by its diversification strategy
despite very difficult trading conditions experienced by the Construction Materials businesses.
The political uncertainty and economic slowdown experienced during the last quarter of the previous
financial year continued during the current year and impacted the Construction Materials businesses
the most. The Bulk Commodities segment, consisting of the Demaneng iron ore mine, contributed
positively to the group results, which offset the lower performance of the Construction Materials
businesses. The Industrial Minerals segment performance was slightly down after a slow first half of
the year and a better second half.
Financial results
Headline earnings per share grew by 29,6% from 180,7 cents to 234,1 cents per share. Industrial
mineral producing operations across all regions as well as the iron ore business were the main
contributors to the satisfactory results.
Net cash from operating activities increased by 46,4% to R410,5 million (excluding once-off
employee-related accruals of R79,5 million, in relation to the Afrimat BEE Trust, paid in the prior
year), which resulted in a decrease of the net debt:equity ratio from 35,5% in the prior year to
23,8% in the current year. Goodwill in Afrimat Concrete Products Proprietary Limited, in
KwaZulu-Natal/Free State, to the amount of R20,5 million was impaired during the year. Further
changes to goodwill relate to the finalisation of the purchase price allocation of Afrimat Demaneng
Proprietary Limited ('Demaneng').
Operational review
All operating units remain strategically positioned to deliver excellent service to the group's
customers, whilst acting as an efficient hedge against volatile local business conditions. The
product range is well diversified to include aggregates and concrete-based products as
construction materials and limestone, dolomite and silica as industrial minerals as well as iron
ore as bulk commodities.
Labour relations continued to be satisfactory during the period under review, with no labour
action having occurred during the year. The group remains committed to creating and sustaining
harmonious relationships in the workplace and addressing issues proactively.
The Bulk Commodities segment, consisting of the Demaneng iron ore mine, delivered an exceptional
contribution to the group results. The business completed the recommissioning of both its dense
media separation ('DMS') plants during the first half of the year and completed the expansion of
the load-out facility, reaching stable production volumes during the second half of the year.
The business also experienced favourable pricing towards the latter part of the current year.
Industrial Minerals businesses across all regions delivered solid results, although the impact of
the economic slow down in the construction sector was experienced by the Lyttelton mine.
The Construction Materials segment felt the brunt of the slowdown in economic activity, with
the KwaZulu-Natal and Gauteng businesses being impacted the most. The KwaZulu-Natal
business successfully completed a restructuring process during the year in order to improve the
business. The Western Cape aggregates business continued to deliver solid results. In
Mozambique, the business mainly supplied construction materials to a resettlement village in
the north of the country. The Emfuleni Clinker Ash Dump, situated in Vereeniging and close to
Afrimat's customers, will ensure an additional three to four-year lifespan for both Clinker
Supplies Proprietary Limited ('Clinker') and SA Block Proprietary Limited. Clinker continues to
investigate further options in order to secure additional resources for the group.
Business development
New business development remains a key component of the group's growth strategy. The dedicated
business development team continues to successfully identify and pursue opportunities in
existing markets, as well as in anticipated new high growth areas in southern Africa.
Afrimat announced on 8 April 2019 that the company has made a non-binding indicative offer
('NBIO') to purchase the entire issued share capital of Universal Coal plc ('Universal'), a
company listed on the Australian Stock Exchange, with operations in South Africa, for a
maximum purchase price of A$0,40 for each Universal share held. The NBIO is subject to
various conditions precedent, including the completion of a due diligence by the company, the
finalisation of financing arrangements and board and shareholder approval in respect of the
proposed transaction.
The due diligence on Universal is currently in progress.
For further details, refer to the SENS announcement published by the company on 8 April 2019.
B-BBEE
Existing BEE shareholders and the Afrimat BEE Trust in aggregate hold 32,6% of Afrimat's
issued shares.
Notwithstanding the fully empowered ownership platform in line with the Mining Charter
requirements, the group remains dedicated to enhancing all aspects of B-BBEE on an ongoing
basis. Afrimat is committed to a bottom-up approach to transformation and has had a successful
year in terms of sustained training, skills development and all-round employee upliftment.
Dividend
The group's dividend policy is to maintain a 2,75 times dividend cover. A final dividend of 62,0
cents per share (2018: 42,0 cents) for the year was declared on 22 May 2019. The dividend
payable to shareholders who are subject to dividend tax is 49,6 cents per share (2018: 33,6
cents per share). Total dividends for the year amount to 81,0 cents per share (2018: 62,0 cents
per share).
Prospects
The group is well positioned to capitalise on its strategic initiatives. It foresees continued growth
from an excellent asset base, and expects further expansion of its range of unique products.
The continuation of selective acquisitions is expected to deliver good results.
Operational efficiency initiatives aimed at expanding volumes, reducing costs and developing the
required skill levels across all employees, remains a key focus in all operations.
Afrimat expects the current business climate to continue with the group's future growth driven by
the successful execution of its proven strategy, recent acquisitions and a wider product offering
to the market.
Auditor's reports
These condensed consolidated financial statements for the year ended 28 February 2019 have
been reviewed by PricewaterhouseCoopers Inc., who expressed an unmodified review conclusion.
A copy of the auditor's review report is available for inspection at the company's registered office
together with the financial statements identified in the auditor's report.
The auditor's report does not necessarily report on all of the information contained in this
announcement/financial results. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement they should obtain a copy of the
auditor's report together with the accompanying financial information from the issuer's registered
office.
On behalf of the board
MW von Wielligh AJ van Heerden
Chairman Chief Executive Officer
22 May 2019
DIVIDEND DECLARATION
Notice is hereby given that a final gross dividend, No 24 of 62,0 cents per share, in respect of
the year ended 28 February 2019, was declared on Wednesday, 22 May 2019.
There are 143 262 412 shares in issue at reporting date, of which 7 572 503 are held in treasury.
The total dividend payable is R88,8 million (2018: R60,2 million).
The board has confirmed by resolution that the solvency and liquidity test as contemplated by
the Companies Act, No 71 of 2008, as amended, has been duly considered, applied and satisfied.
This is a dividend as defined in the Income Tax Act, 1962, and is payable from income reserves.
The South African dividend tax rate is 20,0%. The dividend payable to shareholders who are subject
to dividend tax and shareholders who are exempt from dividend tax is 49,6 cents and 62,0 cents per
share, respectively. The income tax number of the company is 9568738158.
Relevant dates to the final dividend are as follows:
Last day to trade cum dividend Tuesday, 11 June 2019
Commence trading ex dividend Wednesday, 12 June 2019
Record date Friday, 14 June 2019
Dividend payable Tuesday, 18 June 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 12 June 2019 and
Friday, 14 June 2019, both dates inclusive.
Condensed consolidated statement of profit or loss and other comprehensive income
Restated
Reviewed audited
year ended year ended
28 February 28 February
2019 2018 Change
R'000 R'000* %
Revenue* 2 966 399 2 380 994 24.6
Cost of sales* (2 043 234) (1 623 629)
Gross profit 923 165 757 365 21.9
Operating expenses (451 497) (406 205)
Profit on disposal of plant and equipment 3 538 638
Other income 12 189 -
Other net gains and losses 4 225 -
Impairment of property, plant and equipment (refer to note 2) - (1 399)
Impairment of goodwill (refer to note 3) (20 468) -
Operating profit 471 152 350 399 34.5
Finance income 14 771 32 930
Finance costs (66 706) (59 432)
Share of profit/(loss) of associate and joint venture 2 326 (8)
Profit before tax 421 543 323 889 30.2
Income tax expense (refer to note 5) (117 328) (78 511)
Profit for the year 304 215 245 378 24.0
Profit attributable to:
Owners of the parent 301 363 245 668
Non-controlling interests 2 852 (290)
304 215 245 378
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Net change in fair value of available-for-sale financial assets - 183
Currency translation differences (refer to note 6) (1 430) 961
Income tax effect relating to these items - (41)
Items that will not be reclassified to profit or loss
Net change in fair value of equity instruments at fair value
through other comprehensive income 35
Income tax effect relating to these items (8) -
Other comprehensive income for the year, net of tax (1 403) 1 103
Total comprehensive income for the year 302 812 246 481 22.9
Total comprehensive income attributable to:
Owners of the parent 299 960 246 771
Non-controlling interests 2 852 (290)
302 812 246 481
Earnings per share:
Earnings per ordinary share (cents) 221.0 180.3 22.6
Diluted earnings per ordinary share (cents) 219.5 179.0 22.6
Note to statement of profit or loss and other
comprehensive income
Shares in issue:
Total shares in issue 143 262 412 143 262 412
Treasury shares (refer to note 8) (7 572 503) (6 654 039)
Net shares in issue 135 689 909 136 608 373
Weighted average number of net shares in issue 136 387 043 136 271 264
Diluted weighted average number of shares 137 285 229 137 248 315
* Comparative information has been reclassified. Refer to note 20 for further disclosure.
Reconciliation of headline earnings
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018 Change
R'000 R'000 %
Profit attributable to owners of the parent 301 363 245 668
Profit on disposal of plant and equipment attributable
to owners of the parent (3 538) (638)
Impairment of property, plant and equipment
(refer to note 2) - 1 399
Impairment of goodwill (refer to note 3) 20 468 -
Total income tax effects of adjustments 991 (213)
319 284 246 216 29.7
Headline earnings per ordinary share ('HEPS') (cents) 234.1 180.7 29.6
Diluted HEPS (cents) 232.6 179.4 29.7
Condensed consolidated statement of financial position
Restated
Reviewed audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000*
Assets
Non-current assets
Property, plant and equipment 1 469 837 1 417 845
Investment property 3 040 3 040
Intangible assets* 221 873 243 970
Investment in associate and joint venture 164 183
Other financial assets (refer to note 7) 56 698 59 446
Deferred tax 33 680 55 115
Total non-current assets 1 785 292 1 779 599
Current assets
Inventories 261 249 242 124
Current tax receivable 13 250 9 181
Trade and other receivables 435 458 391 603
Cash and cash equivalents 191 763 112 208
Total current assets 901 720 755 116
Total assets 2 687 012 2 534 715
Equity and liabilities
Equity
Stated capital 258 292 266 985
Treasury shares (85 822) (59 660)
Net issued stated capital 172 470 207 325
Other reserves (94 391) (99 900)
Retained earnings 1 320 087 1 111 915
Attributable to equity holders of the parent 1 398 166 1 219 340
Non-controlling interests 11 351 9 980
Total equity 1 409 517 1 229 320
Liabilities
Non-current liabilities
Borrowings (refer to note 9) 235 542 271 954
Deferred tax 214 576 207 583
Provisions 141 080 130 288
Total non-current liabilities 591 198 609 825
Current liabilities
Borrowings (refer to note 9) 148 004 165 004
Other financial liabilities (refer to note 10) 9 480 21 856
Current tax payable 4 143 11 485
Trade and other payables* 390 517 407 022
Bank overdraft 134 153 90 203
Total current liabilities 686 297 695 570
Total liabilities 1 277 495 1 305 395
Total equity and liabilities 2 687 012 2 534 715
Note to statement of financial position:
Net asset value per share (cents) 1 030 893
Net tangible asset value per share (cents) 867 714
Total borrowings 393 026 458 814
(Surplus cash)/overdraft less cash and cash equivalents (57 610) (22 005)
Net debt 335 416 436 809
Net debt:equity ratio (%) 23.8 35.5
* Comparative information was amended due to a measurement period adjustment relating to business
combinations, refer to note 12.
Condensed consolidated statement of cash flows
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
Cash flows from operating activities
Cash generated from operations 551 722 344 542
Interest revenue 14 320 31 623
Dividends received 58 54
Finance costs (58 565) (52 752)
Tax paid (97 051) (122 507)
Net cash inflow from operating activities 410 484 200 960
Cash flows from investing activities
Acquisition of property, plant and equipment (93 889) (118 918)
Proceeds on disposal of property, plant and equipment 14 369 22 975
Purchase of financial assets (444) (68 060)
Acquisition of businesses (refer to note 12) - 4 228
Net cash outflow from investing activities (79 964) (159 775)
Cash flows from financing activities
Repurchase of Afrimat shares (30 981) (13 552)
Acquisition of additional non-controlling interest (9 014) (37 521)
Proceeds from borrowings (refer to note 9.2) 144 635 300 000
Repayment of borrowings (refer to note 9.2) (309 847) (119 871)
Repayment of other financial liabilities (3 488) (25 143)
Dividends paid (refer to note 14.2) (86 220) (96 240)
Net cash (outflow)/inflow from financing activities (294 915) 7 673
Net increase in cash and cash equivalents and bank overdrafts 35 605 48 858
Cash, cash equivalents and bank overdrafts at the beginning of the year 22 005 (26 853)
Cash, cash equivalents and bank overdrafts at the end of the year 57 610 22 005
Condensed consolidated statement of changes in equity
Non-
Stated Treasury Other Retained controlling Total
capital shares reserves earnings interests equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 March 2017 285 842 (70 999) (101 263) 1 085 792 7 547 1 206 919
Total comprehensive income
Profit for the year - - - 245 668 (290) 245 378
Other comprehensive income
for the year - - 1 103 - - 1 103
Net change in fair value
of available-for-sale
financial assets - - 183 - - 183
Income tax effect - - (41) - - (41)
Currency translation
differences (refer to note 6) - - 961 - - 961
Total comprehensive income - - 1 103 245 668 (290) 246 481
Transaction with owners
of the parent
Contributions and
distributions
Share-based payments - - 5 456 - - 5 456
Purchase of treasury shares - (13 552) - - - (13 552)
Settlement of employee share
appreciation rights exercised
and reserve transfer, net
of tax (20 357) 11 391 (5 196) 5 196 - (8 966)
Dividends paid (refer to
note 14.2) - - - (95 600) (640) (96 240)
Total contributions and
distributions (20 357) (2 161) 260 (90 404) (640) (113 302)
Changes in ownership
interests
Initial non-controlling
interest acquired
(refer note 12) - - - - (64 257) (64 257)
Additional non-controlling
interest acquired due to:
- Infrasors - - - (104) 83 (21)
- Afrimat Bulk Commodities 1 500 13 500 - (19 268) 1 768 (2 500)
- Afrimat Demaneng - - - (109 769) 65 769 (44 000)
Total changes in ownership
interest 1 500 13 500 - (129 141) 3 363 (110 778)
Total transactions with
owners of parent (18 857) 11 339 260 (219 545) 2 723 (224 080)
Balance at 28 February 2018
as originally presented 266 985 (59 660) (99 900) 1 111 915 9 980 1 229 320
Change in accounting policy
(refer to note 19) - - - (10 812) - (10 812)
Restated balance at
1 March 2018 266 985 (59 660) (99 900) 1 101 103 9 980 1 218 508
Total comprehensive
income
Profit for the year - - - 301 363 2 852 304 215
Other comprehensive income
for the year - - (1 403) - - (1 403)
Net change in fair value of
equity instruments at
fair value
through other comprehensive
income - - 35 - - 35
Income tax effect - - (8) - - (8)
Currency translation
differences (refer to note 6) - - (1 430) - - (1 430)
Total comprehensive income - - (1 403) 301 363 2 852 302 812
Transactions with owners
of the parent
Contributions and
distributions
Share-based payments, net
of tax - - 9 286 - - 9 286
Purchase of treasury shares - (30 981) - - - (30 981)
Settlement of employee Share
Appreciation Rights exercised
and reserve transfer,
net of tax (8 693) 4 819 (2 374) 2 374 - (3 874)
Dividends paid (refer to
note 14.2) - - - (84 745) (1 475) (86 220)
Total contributions and
distributions (8 693) (26 162) 6 912 (82 371) (1 475) (111 789)
Changes in ownership
interests
Additional non-controlling
interest acquired due to:
- Infrasors - - - (8) (6) (14)
Total changes in
ownership interest - - - (8) (6) (14)
Total transactions with
owners of parent (8 693) (26 162) 6 912 (82 379) (1 481) (111 803)
Balance at 28 February 2019 258 292 (85 822) (94 391) 1 320 087 11 351 1 409 517
Notes
1. Segment information
The segments of the group have been identified by business segment. Operating segments are
reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision maker, who is responsible for allocating resources
and assessing performance of the operating segments, has been identified as the executive
directors. Aggregation of segments has been determined on the basis of product outputs with
similar attributes; by considering the nature of products and services, production processes and
the type of class of customer for the products and services.
At 1 March 2018, the executive committee, being the chief decision-making body, amended the basis
upon which the various businesses within the group are reported as a result of changes to the
executive management of the group. This aligned into three main operational pillars with five
segments being allocated to these pillars, based on the market use of products.
Industrial Minerals, previously reflected within the Aggregates segment, is separately disclosed.
The rationale for the change was that over the years the Industrial Minerals business has become
an integral contributor to the group and serves a different market to Construction Materials.
The principal services and products of each of these segments are as follows:
- Construction Materials: Comprises Aggregates, Concrete-Based Products and Contracting
operations;
- Industrial Minerals: Comprises limestone, dolomite and industrial sand (previously included
within the Aggregates segment); and
- Bulk Commodities: Iron Ore.
Restated
Reviewed audited
year ended year ended
28 February 28 February
Change 2019 2018
% R'000 R'000*
Revenue
External sales
Construction Materials 5.7 1 739 496 1 645 252
Industrial Minerals (2.7) 544 705 559 757
Bulk Commodities 287.6 682 198 175 985
24.6 2 966 399 2 380 994
Intersegment sales
Construction Materials 126 316 100 237
Industrial Minerals 18 462 -
Bulk Commodities - -
144 778 100 237
Total revenue
Construction Materials 1 865 812 1 745 489
Industrial Minerals 563 167 559 757
Bulk Commodities 682 198 175 985
3 111 177 2 481 231
Operating profit
Construction Materials 190 182 274 580
Industrial Minerals 78 012 88 393
Bulk Commodities 201 329 (33 443)
Services 1 629 20 869
471 152 350 399
Operating profit margin on external revenue (%)
Construction Materials** 10.9 16.7
Industrial Minerals 14.3 15.8
Bulk Commodities 29.5 (19.0)
Overall operating profit 15.9 14.7
Other information
Assets
Construction Materials 1 080 543 1 072 080
Industrial Minerals 610 521 582 634
Bulk Commodities 467 230 382 777
Services 528 718 497 224
2 687 012 2 534 715
Liabilities
Construction Materials 358 604 324 707
Industrial Minerals 131 860 88 224
Bulk Commodities 56 370 81 989
Services*** 730 661 810 475
1 277 495 1 305 395
Depreciation and amortisation
Construction Materials 81 478 73 105
Industrial Minerals 28 233 27 504
Bulk Commodities 32 656 20 042
Services 3 974 3 642
146 341 124 293
Capital expenditure (excluding acquisitions
through business combinations)
Construction Materials 110 643 114 080
Industrial Minerals 63 593 40 707
Bulk Commodities 25 975 41 633
Services 7 332 5 800
207 543 202 220
* Prior year figures were restated to reflect the amended basis in which various businesses
within the group are reported. A classification misstatement between revenue and cost of sales
of R75,8 million has been corrected in FY2018 (refer to note 20 for further disclosure).
** Excluding goodwill impairment, 12,1%.
*** Includes the R300,0 million amortising five-year facility with SBSA and FNB.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
2. Impairment of property, plant and equipment
Impairment of property, plant and equipment - 1 399
In the prior year an impairment loss was recognised, relating to property, plant and equipment
items written off at Afrimat Aggregates (KZN) Proprietary Limited and Afrimat Contracting
International Proprietary Limited.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
3. Impairment of goodwill 20 468 -
After performing the annual goodwill impairment test of Afrimat Concrete Products Proprietary
Limited, it was determined that the carrying value of the reporting unit exceeded its fair value,
resulting in a R20,5 million goodwill impairment. This is mainly due to the reduction in sales
volumes as a result of small medium enterprises entering the market adding to the level of
competition.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
4. Depreciation and amortisation
Depreciation 144 712 122 566
Amortisation 1 629 1 727
146 341 124 293
5. Income tax expense
The effective tax rate of the group increased from 24,2% to 27,8% in the current year. This was
mainly due to the quantum of income tax deducted from expenditure actually incurred in settlement
of the shares exercised in the Share Appreciation Rights Scheme as well as the reversal of
previously raised deferred tax assets in Delf Sand Proprietary Limited and Afrimat Silica
Proprietary Limited. Included in the available income tax losses of R531,1 million
(2018: R522,1 million) are tax losses of R73,9 million (2018: R32,8 million), which are available
for set-off against future taxable income but not raised due to the improbability of the
realisation of related tax benefits. Furthermore, the available income tax losses include a tax
loss of R345,3 million (2018: R340,5 million) relating to Afrimat Demaneng Proprietary Limited,
also not raised due to pre-acquisition tax losses not acknowledged.
6. Currency translation differences
Foreign currency transactions relating to the Mozambique operations are translated into the
presentation currency (ZAR or R) by means of translating assets and liabilities at the closing
rate at the date of the statement of financial position and income and expenses at average
exchange rates for the year and recognising all resulting exchange differences in other
comprehensive income. Exchange differences arising on monetary items that form part of the
group's net investment in the Mozambique operations are recognised in other comprehensive income,
whilst all other translations including those on short-term receivables, are recognised in
profit or loss.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
7. Other financial assets
Financial assets at fair value through other comprehensive income 2 734 -
Available-for-sale financial assets - 20 684
Financial assets at fair value through profit or loss 50 025 30 573
Financial assets at amortised cost 3 939 8 189
56 698 59 446
Non-current other financial assets 56 698 59 446
Current other financial assets - -
56 698 59 446
Refer to note 13 for fair value disclosure of other financial assets.
Number of shares
28 February 28 February
2019 2018
8. Movement in number of treasury shares
Opening balance 6 654 039 7 187 643
Utilised for Share Appreciation Rights Scheme (183 036) (473 106)
Utilised to purchase minority shares in Afrimat Bulk Commodities - (535 714)
Purchased during the year
Afrimat Aggregates Operations Proprietary Limited ('AAO') 209 000 475 216
Afrimat Management Services Proprietary Limited ('AMS') 892 500 -
Closing balance 7 572 503 6 654 039
The Afrimat BEE Trust (indirectly through Afrimat Empowerment Investments Proprietary Limited)
holds, on an unencumbered basis, 6 653 854 shares representing 4,64% of the issued share capital
of the company.
AMS holds 397 700 shares, as nominee for the absolute benefit of the participants of the
company's Forfeitable Share Plan ('FSP').
The remaining 494 800 shares held in AMS are held for the purposes of the company's Share
Appreciation Rights Scheme.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
9. Borrowings
9.1 Capital net movement
Opening balance 436 958 174 089
Acquired through business combination - 2 895
New borrowings 256 435 379 845
Repayments (309 847) (119 871)
Closing balance 383 546 436 958
Analysis as per statement of financial position
Borrowings non-current 235 542 271 954
Borrowings current 148 004 165 004
383 546 436 958
9.2 Analysis as per statement of cash flows
New borrowings 144 635 300 000
Repayments (309 847) (119 871)
(165 212) 180 129
In the prior year, the group financed debt included in the general bank facilities into a
R300,0 million amortising five-year term facility with SBSA and FNB, bearing interest
linked to the three-month Jibar rate and payable in quarterly instalments commencing
30 November 2017.
During the current year an amount equal to R60,0 million of the original R300,0 million
facility commitment, which had previously been repaid by the company, was redrawn. On the
last repayment date of the year, the group prepaid an amount of R100,0 million to the
five-year term facility, from internally generated cash flows.
During the current year, the group financed plant and machinery with SBSA to fund capital
expenditure and working capital requirements to support the growth and expansion of the
group. The financed plant and machinery was purchased in preceding years and would have
been included in the 'additions' of those respective years. A vehicle asset facility of
R109,6 million over 36 months at prime rate minus 1,15% repayable in monthly instalments
of capital and interest, was agreed upon for this purpose.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
10. Other financial liabilities
Net capital proceeds owing to Afrimat BEE Trust participants 9 480 12 968
Deferred liability: Demaneng minorities - 8 888
9 480 21 856
Upon implementation of the Afrimat Rainbow Capital ('ARC') transaction, the beneficiaries of the
trust received their respective consideration net of liabilities and ceased to be participants
under the current BEE scheme. This liability exists due to an amount owing to beneficiaries whom
could not be traced, mostly deceased individuals. Afrimat is in the process of tracking these
beneficiaries to ensure payment occurs timeously.
On 22 August 2017, the group announced on SENS that Afrimat had concluded a sale of shares and
claims agreement with the minorities of Afrimat Demaneng Proprietary Limited and Diro Iron Ore
Proprietary Limited ('Demaneng') to acquire the remaining 40% stake in Demaneng as from
15 August 2017. The purchase consideration of R44,0 million was payable in nine tranches as
follows: eight monthly instalments of R5,0 million per month for eight consecutive months
commencing 15 August 2017; and R4,0 million in one final instalment. The deferred liability was
repaid during the current year.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
11. Authorised capital expenditure
Contracted after year-end, but not provided for
Property, plant and equipment 2 928 6 771
Not yet contracted for
Property, plant and equipment 194 697 177 144
Total authorised capital expenditure 197 625 183 915
Authorised capital expenditure is to be funded from surplus cash and bank financing.
12. Acquisition of businesses
Afrimat Demaneng Proprietary Limited and Diro Iron Ore Proprietary Limited ('Demaneng')
In the prior year, the group acquired 60% of the issued shares of Demaneng, as well as a cession
and delegation agreement with Investec Limited to purchase all of its security. On 13 July 2017,
all conditions precedent, including section 11 approval from the Department of Mineral Resources
('DMR'), were fulfilled and the agreement became unconditional. On 22 August 2017, the group
announced on SENS that Afrimat had concluded a sale of shares and claims agreement with the
minorities of Demaneng to acquire the remaining 40% stake in Demaneng from 15 August 2017 for an
aggregate purchase consideration of R44,0 million. The acquisition complemented and augmented
Afrimat's product offering and further expanded its footprint across South Africa. Given the
nature of Demaneng's reserves and the access to infrastructure, together with Afrimat's existing
competencies, the transaction allows the ability to leverage the combined strengths which
resulted in developing new revenue opportunities for Afrimat in the iron ore space.
Details of the acquisition are as follows:
F2018
Total
R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 304 374
Other financial assets 17 557
Inventories 12 446
Trade and other receivables 8 804
Borrowings (307 852)
Trade and other payables** (66 996)
Provisions (20 294)
Deferred tax liability (53 454)
Current tax payable (4 542)
Cash and cash equivalents 5 228
Net assets (104 729)
Additional non-controlling interest acquired 64 257
Goodwill** 40 472
Consideration paid -
Net cash inflow from acquisition of subsidiary:
Cash and cash equivalents acquired 5 228
5 228
Pro forma revenue assuming the business combination for the full period
ended 28 February 2018 274 647
Pro forma loss after tax assuming the business combination for the full period
ended 28 February 2018 (103 836)
Revenue included in results 251 773
Loss after taxation included in results (38 790)
Acquisition costs (including business rescue costs) included in operating
expenses for the period ended 28 February 2018 5 782
* Property, plant and equipment includes the fair value of mining assets of R169,7 million
acquired.
** Measurement period adjustment - during the reporting period, the comparative information was
retrospectively adjusted to decrease trade and other payables offset by a decrease in goodwill,
at the acquisition date, by R55,9 million in the process of finalising the accounting for this
business combination.
At acquisition, the fair value of trade and other receivables was R8,8 million and includes trade
receivables of R8,0 million. An amount of R8,8 million is reflected as neither impaired nor
past due.
Bethlehem Quarry and ancillary businesses from WG Wearne Limited ('Wearne')
Wearne Aggregates Proprietary Limited and Wearne Readymix Concrete Proprietary Limited, both wholly
owned subsidiaries of Wearne, entered into an agreement with Afrimat Aggregates (KZN) Proprietary
Limited and Afrimat Concrete Products Proprietary Limited, both wholly owned subsidiaries of
Afrimat, on 6 July 2016 to dispose of the Bethlehem quarry and ancillary businesses as a going
concern for R28,0 million. Furthermore, Wearne also agreed to dispose of Erf 4038, Bethlehem,
Free State to Rodag Holdings Proprietary Limited, a wholly owned subsidiary of Afrimat, for
R2,0 million. The effective date of the transaction was 17 October 2016.
Details of the acquisition are as follows:
F2018
Wearne
- additional
acquisition Total
R'000 R'000
Carrying amount/fair value of net assets acquired:
Property, plant and equipment* 1 000 1 000
Net assets* 1 000 1 000
Consideration paid
Cash 1 000 1 000
Total consideration 1 000 1 000
Net cash outflow from acquisition of subsidiary:
Cash consideration paid** (1 000) (1 000)
(1 000) (1 000)
* Property, plant and equipment includes the fair value of R1,0 million mining assets acquired.
** An amount of R1,0 million was payable on the approval of section 11 by the Department of
Mineral Resources.
13. Fair value estimation
Fair value determination
The following table presents the financial assets that are measured at fair value:
Level 1 Level 2 Level 3
R'000 R'000 R'000
At 28 February 2019
Assets
Investment property* - - 3 040
At fair value through other comprehensive income
Equity securities** 71 - -
Environmental funds*** - 2 663 -
At fair value through profit or loss
Unit trusts*** - 50 025 -
Trade receivables**** - 52 522 -
Total assets 71 105 210 3 040
At 28 February 2018
Assets
Investment property* - - 3 040
Available-for-sale financial assets
Equity securities** 128 - -
Environmental funds*** - 20 556 -
At fair value through profit or loss
Unit trusts*** - 30 573 -
Total assets 128 51 129 3 040
* The fair value was determined based on the price per square metre for similar properties
derived from observable market data.
** This fair value was based on quoted market prices at the end of the reporting period.
*** The fair value was derived using the adjusted net asset method. The adjusted net asset method
determines the fair value of the investment by reference to the fair value of the individual
assets and liabilities recognised in the unit trust's/environmental fund's statement of
financial position.
**** The fair value was determined using the three-month forward looking commodity prices and
foreign exchange rates as at the end of the reporting period.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
14. Dividends
14.1 Afrimat Limited dividends paid/declared in respect of
the current year profits
Interim dividend paid 27 220 28 652
Final dividend declared/paid 88 823 60 170
116 043 88 822
14.2 Dividends cash flow
Current year interim dividend paid 27 220 28 652
Previous year final dividend paid 60 170 71 631
Dividends received on treasury shares (2 645) (4 683)
84 745 95 600
Dividends paid by subsidiaries to
non-controlling shareholders 1 475 640
86 220 96 240
The company has declared the following
cash distributions to shareholders:
Interim dividend paid (cents) 19.0 20.0
Final dividend declared/paid (cents) 62.0 42.0
Distributions paid (cents) 81.0 62.0
15. Events after reporting date
Subsequent to the reporting date, the company made a non-binding indicative offer ('NBIO') to
purchase the entire issued share capital of Universal Coal plc ('Universal'), a company listed
on the Australian Stock Exchange, with operations in South Africa, for a maximum purchase price
of A$0,40 for each Universal share held. The NBIO is subject to various conditions precedent,
including the completion of a due diligence by the company, the finalisation of financing
arrangements and board and shareholder approval in respect of the proposed transaction.
16. Contingencies
Guarantees to the value of R73,7 million (2018: R87,5 million) were supplied by SBSA to various
parties, including the DMR and Eskom, respectively during the year under review.
Guarantees to the value of R25,1 million (2018: R73,9 million) were supplied by FNB to various
parties, including the DMR and Eskom, respectively during the year under review.
Guarantees to the value of R1,6 million (2018: R1,6 million) by Lombard's Insurance Group,
R0,9 million (2018: R0,5 million) by ABSA, R116,6 million (2018: R94,2 million) by Centriq
Insurance Innovation and R2,7 million (2018: R2,7 million) by SIG Guarantee Acceptances
Proprietary Limited were supplied to various parties, including the DMR, Eskom and Chevron
South Africa Proprietary Limited.
The majority of these guarantees are in respect of environmental rehabilitation and will only
be payable in the event of default by the group.
A contingent liability exists due to the uncertain timing of cash flows with regards to future
local economic development ('LED') commitments made to the DMR in respect of companies with
mining rights. These commitments are dependent on the realisation of the future agreed upon
LED projects. Future commitments amount to R8,3 million (2018: R10,3 million). An accrual has
been raised in respect of commitments made up to the end of the year.
The company received notice on 31 March 2017 from the Competition Commissioner that it had
referred a complaint to the Competition Tribunal ('Tribunal'), alleging that the company,
through its wholly owned subsidiary, Clinker Supplies Proprietary Limited ('Clinker'), has
engaged in an abuse of dominance by allegedly charging excessive prices. After taking legal
advice and considering the complaint, the company is of the opinion that
there is no merit to the complaint and will therefore vigorously defend itself before the
Tribunal. The Competition Commission is ordering an administrative penalty equal to 10% of
affected turnover for F2016 which equates to R16,3 million. The company awaits a final hearing
date to be set by the Tribunal.
The company received notice on 27 February 2019 from the South African Revenue Service ('SARS'),
in terms of which SARS demands payment of R74,3 million from Afrimat Demaneng Proprietary Limited
('Demaneng'). The company submits that the debts owed to SARS prior to the commencement of
business rescue proceedings have been settled in full as envisaged in the business rescue plan.
On 13 March 2019, the company requested SARS to permanently write off the outstanding balance,
in accordance with the provisions of section 197 and section 198 of the Tax Administration Act.
After taking legal advice and considering the claim, the company is of the opinion that there is
no merit to the claim and will therefore vigorously defend itself against SARS. The probability
of outflow is remote and no liability has been raised.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
17. Commitments
Operating leases - as lessee (expenses)
Minimum lease payments due
No later than one year 11 604 7 847
Later than one year and no later than five years 21 918 18 428
33 522 26 275
Operating lease payments represent rentals payable by the group for quarries, other premises,
motor vehicles and equipment. Certain leases carry standard escalation clauses in line with
inflation. The lease terms are between one and five years, and the majority of lease agreements
are renewable at the end of the lease period at market rates. All rental agreements exceeding
five years have a notice period of six months and therefore not disclosed above.
Reviewed Audited
year ended year ended
28 February 28 February
2019 2018
R'000 R'000
18. Related parties
Loan balance owing by associate 7 777 10 151
Loan balance owing by joint venture 11 884 31 011
Interest received from associate 574 484
Interest received from joint venture 1 971 887
The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all receivables. This resulted in an increase of the loss
allowance on 1 March 2018 by R10,8 million for the loan owing by joint venture. The loss allowance
increased by a further R8,9 million during the current year.
19. New and amended accounting standards
New and amended standards adopted by the group
A number of new or amended standards became applicable for the current reporting period and the
group changed its accounting policies. The group applied the modified retrospective approach in
adopting the following standards:
- IFRS 9: Financial Instruments; and
- IFRS 15: Revenue from Contracts with Customers.
The impact of the adoption of IFRS 15 and IFRS 9 is presented below.
Standard Subject
IFRS 15 Revenue from Contracts with Customers
The group adopted IFRS 15 from 1 March 2018 using the modified retrospective transition method and
has therefore not restated the comparatives for FY2018. In terms of IFRS 15 revenue is recognised
based on the satisfaction of specifically identified performance obligations, when control of goods
or services transfers to a customer.
Presentation of assets and revenue related to bulk commodities sales:
- The group's sales of bulk commodities are provisionally priced. At the point of recognition of
revenue, Afrimat Demaneng Proprietary Limited, a wholly owned subsidiary of Afrimat Limited,
estimates the amount and recognises the revenue at the best estimate (three-month forward looking
rate is considered to be the best estimate) of the amount expected to be received. In terms of
the agreement with Kumba International Trading S.A.R.L, the commodity prices used in the
calculation of the revenue of bulk commodities are based on the average daily prices during the
month prior to the relevant month of delivery.
- Previously the receivable was fair valued when the price was fixed at the end of the third month.
The fair value adjustment was recognised in the statement of comprehensive income as an
adjustment to revenue.
- The fair value changes due to market variability (that is changes in the commodity prices and
exchange rates) are not in the scope of IFRS 15 and can therefore not be
presented as revenue from contracts with customers. These movements are accounted for as other
revenue and disclosed separately from revenue from contracts with customers.
- Although there has been a change in the presentation and disclosure of other revenue within the
revenue note, no measurement change is relevant and therefore no impact on opening retained income.
Standard Subject
IFRS 9 Financial Instruments
IFRS 9 replaces the multiple classification and measurement models in IAS 39: Financial
Instruments: Recognition and measurement with a single model that has initially only two
classification categories: amortised cost and fair value and introduces new rules for hedge
accounting and a new impairment model for financial assets.
The group adopted IFRS 9 from 1 March 2018 using the modified retrospective transition method
and therefore comparative figures have not been restated.
(i) Classification and measurement
The classification of financial assets under IFRS 9 is based on the business model in which
a financial asset is managed and its contractual cash flow characteristics. On 1 March 2018,
management assessed which business models applied to each of the financial assets held by the
group and has classified these financial instruments in the appropriate IFRS 9 categories.
- A component of the group's equity instruments that were previously classified as available-
for-sale satisfied the conditions for classification as at fair value through other
comprehensive income ('FVOCI');
- Equity instruments previously measured at fair value through profit or loss ('FVPL') will
continue to be measured on the same basis under IFRS 9; and
- The majority of the group's debt instruments that were previously classified as loans and
receivables at amortised cost satisfied the conditions for classification as financial
assets measured at amortised cost.
The effects of this reclassification is presented below:
IAS 39 categories IFRS 9 categories
Available
Loans and for sale Amortised
receivables FVPL ('AFS') cost FVPL FVOCI
Notes R'000 R'000 R'000 R'000 R'000 R'000
Opening balances
Other financial assets
Loans and receivables 8 189 - - 8 189 - -
AFS 1 - - 20 684 - 18 008 2 676
FVPL 1 - 30 573 - - 30 573 -
Trade receivables* 2 368 318 - - 336 888 31 430 -
Cash and cash equivalents 112 208 - - 112 208 - -
* Excluding prepayments and value-added taxation.
1. Reclassification from available-for-sale to FVPL
Investments in insurance policies of R18,0 million were reclassified from available-for-sale
assets to financial assets at FVPL. No related fair value gains were transferred from other
reserves to retained earnings.
2. Reclassification from loans and receivables to FVPL
Provisionally priced receivables related to the sale of bulk commodities were measured at
FVPL from the date of recognition up until date of settlement, as it fails the amortised cost
requirement of cash flows representing solely payment of principal and interest. Previously
these receivables were disclosed as loans and receivables.
(ii) Impairment of financial assets
IFRS 9 replaced the incurred credit losses model in IAS 39 with a forward-looking expected
credit loss ('ECL') model to calculate impairments of financial assets. It was applied to
financial assets classified at amortised cost, lease receivables and loan commitments. In
assessing the impairment that should be raised under the ECL model on these financial assets,
credit enhancements such as insurance held against loans and receivables were taken into
account in the ECL model.
(a) Trade and other receivables
The increase in the impairment provision from the incurred loss model to ECL amounted to
R10,8 million (net of taxation) relating to loans to the group's joint venture on
1 March 2018 upon adoption of IFRS 9.
The adjustment of the loss allowance for trade and other receivables
on transition to IFRS 9 was found to be immaterial.
(b) Cash and cash equivalents
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9,
the identified impairment loss was immaterial.
28 February
2018 1 March
As originally IFRS 9 2018
presented ECL Restated
R'000 R'000 R'000
Opening balances
Current assets
Trade and other receivables (measured
at amortised cost
368 318 (12 042) 356 276
Equity
Retained earnings
(1 111 915) 10 812 (1 101 103)
Non-current liabilities
Deferred tax
(207 583) (1 230) (208 813)
(iii) Financial liabilities
There was no impact on the group's accounting for financial liabilities, as the new
requirements only affected the accounting for financial liabilities that are designated at
fair value through profit or loss and the group does not have any such liabilities.
Impact of standards issued but not yet applied by the group
Standard Subject
IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on
the balance sheet, as the distinction between operating and finance leases is removed. Under
the new standard, an asset (the right to use the leased item) and a financial liability to
pay rentals are recognised. The only exceptions are short-term and low-value leases.
The accounting of lessors will not significantly change.
The standard will affect primarily the accounting for the group's operating leases. As at
the reporting date, the group has non-cancellable operating lease commitments of
R33,5 million, refer to note 17. The group estimates that approximately 20% to 22% of these
relate to payments for short-term and low-value leases which will be recognised on a
straight-line basis as an expense in profit or loss.
The group has assessed the affect of the difference in treatment of variable lease payments
and the extension and termination options. The estimate of the effect of the adoption of the
new standard is as follows:
R'000
Property, plant and equipment 16 885
Lease liability (21 150)
Retained earnings (opening balance) 4 265
Mandatory for financial years commencing on or after 1 January 2019. The group will apply
the new standard on 1 March 2019. The group intends to apply the simplified approach which
means that the cumulative impact of the adoption will be recognised in retained earnings as
of 1 March 2019 and that the comparatives will not be restated.
There are no other standards that are not yet effective that would be expected to have a
material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
20. Comparative information
Certain comparative figures were inaccurately reflected and have been reclassified. The
classification error had no impact on the profit for the year, neither the statement of
financial position.
Statement of profit or loss and other comprehensive income
The misstatement related to the recording of freight and shipping for all foreign sales in
Demaneng to the landing port. Foreign sales in Demaneng are made on a free-on-board basis and
risks and rewards pass at the loading port. The company has however previously recorded freight
and shipping to the landing port and recorded a corresponding amount in cost of sales. The
company had no obligation to deliver to the landing port.
The effect of the reclassification is as follows:
28 February 2018
As originally Reclassi-
presented fication Restated
R'000 R'000 R'000
Revenue 2 456 782 (75 788) 2 380 994
Cost of sales (1 699 417) 75 788 (1 623 629)
-
General information
Directors
MW von Wielligh*# (Chairman)
AJ van Heerden (CEO)
PGS de Wit (CFO)
GJ Coffee*
L Dotwana*
PRE Tsukudu*#
JF van der Merwe*#
HJE van Wyk*#
JH van der Merwe*#
HN Pool*#
FM Louw*#
* Non-executive director
# Independent
Registered office
Tyger Valley Office Park No. 2
Cnr. Willie van Schoor Avenue and Old Oak Road
Tyger Valley, 7530
(PO Box 5278, Tyger Valley, 7536)
Sponsor
Bridge Capital Advisors Proprietary Limited
50 Smits Road, Dunkeld, 2196
(PO Box 651010, Benmore, 2010)
Auditor
PricewaterhouseCoopers Inc.
PWC Building
Capital Place, 15 - 21 Neutron Avenue
Technopark
Stellenbosch, 7600
(PO Box 57, Stellenbosch, 7599)
Transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647/07)
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Company secretary
M Swart
Tyger Valley Office Park No. 2
Cnr. Willie van Schoor Avenue and Old Oak Road
Tyger Valley, 7530
(PO Box 5278, Tyger Valley, 7536)
http://www.afrimat.co.za
Date: 23/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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