Afrimat's Group revenue up 24.6%
Afrimat Limited released its reviewed condensed consolidated provisional financial results for the year ended 28 February 2019.
- 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%
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.
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').
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.
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.
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.
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).
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.