| Mon 6 Aug 2007, 8:00 | | DEL - Delta - Unaudited group results for the six |
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DEL
DEL
DEL - Delta - Unaudited group results for the six months ended 27 June 2007
Delta Electrical Industries Limited
Registration number: 1919/006020/06
Share code: DEL
ISIN: ZAE0000002036
Unaudited group results for the six months ended 27 June 2007
Group income statement
Unaudited Audited
year to
Six months to June December
2007 2006 2006
Note R`000 R`000 R`000
Revenue 193,769 181,037 438,246
Losses before interest, taxation,
depreciation and amortisation (16,205) (7,822) (17,275)
Depreciation (18,191) (18,261) (38,570)
Impairment - - (27,025)
Net foreign exchange (losses)/gains (1,175) 1,769 (3,007)
Operating loss (35,571) (24,314) (85,877)
Net interest received 4,549 19,339 23,907
Loss before taxation (31,022) (4,975) (61,970)
Taxation 1,240 (84,172) (92,394)
Normal taxation 1,240 1,868 (6,354)
Secondary taxation on companies - (86,040) (86,040)
Loss after taxation from
Continuing Operations (29,782) (89,147) (154,364)
Profit after taxation for the period
from Disposal Group: - - 2,200
Operating profit - - -
Taxation - - 2,200
Profit after taxation from Disposal - - 2,200
Group
Total loss after taxation for the (29,782) (89,147)
period (152,164)
Attributable to:
Equity holders of parent company (29,782) (89,147) (152,164)
Headline loss attributable
to ordinary shareholders 1 (29,782) (89,147) (127,430)
Number of shares in issue (`000) 49,166 49,166 49,166
Weighted number of shares in issue 48,985 49,099 49,099
(`000)
Dilutive number of shares in issue 49,141 49,232 49,232
(`000)
Attributable (loss)/earnings per
share (cents)
- basic (60.8) (181.6) (309.9)
From continuing operations (60.8) (181.6) (314.4)
From disposal group - - 4.5
- diluted (60.6) (181.1) (309.1)
From continuing operations (60.6) (181.1) (313.6)
From disposal group - - 4.5
Dividend per share (cents) - Normal - - -
Dividend per share (cents) - Special - 1,400.0 1,400.0
Cash flow statement
Unaudited Audited year
Six months to June to December
2007 2006 2006
R`000 R`000 R`000
Cash utilised by trading (15,677) (6,053) (20,284)
Decrease in working capital 15,276 3,288 5,563
Cash utilised by operations (401) (2,765) (14,721)
Interest received 4,549 19,339 23,907
Taxation paid - normal (2,360) (17,032) (19,780)
Taxation received/(paid) - Capital 2,200 - (50,401)
gains taxation
Taxation paid - Secondary taxation
on companies - (121,717) (121,717)
Cash available from/(utilised by)
operating activities 3,988 (122,175) (182,712)
Dividend paid - - -
Cash inflow/(outflow) from
operating activities 3,988 (122,175) (182,712)
From continuing operations 1,788 (103,689) (115,567)
From disposal group 2,200 (18,486) (67,145)
Replacement capital expenditure (4,180) (9,837) (25,647)
Final special dividend paid - (685,174) (685,174)
Proceeds on disposal of property plant
and equipment - 113 153
Net outflow before financing activities (192) (817,073) (893,380)
From continuing operations (2,392) (798,587) (826,235)
From disposal group 2,200 (18,486) (67,145)
Proceeds on disposal of treasury shares 73 2,863 2,863
Net decrease in cash and cash (119) (814,210) (890,517)
equivalents
From continuing operations (2,319) (795,724) (823,372)
From disposal group 2,200 (18,486) (67,145)
Cash and cash equivalents at
beginning of period 138,196 1,028,076 1,028,076
Translation of cash in foreign (1,407) (3,727) 637
subsidiary
Cash and cash equivalents at end of 136,670 210,139 138,196
period
Group Balance Sheet
Unaudited Audited year
Six months to June to December
2007 2006 2006
R`000 R`000 R`000
ASSETS
Property, plant and equipment 435,171 464,378 438,535
Deferred taxation asset 6,486 9,663 6,647
Non-current assets 1,052 - 1,052
Bank balances and cash 136,670 249,788 141,817
Current assets 411,127 407,537 417,318
Total assets 990,506 1,005,369
1,131,366
EQUITY AND LIABILITIES
Share capital and reserves 831,543 881,967 834,683
Deferred tax liabilities 28,821 27,281 30,939
Non-current liabilities 48,471 39,264 43,727
Bank overdraft - 39,649 3,621
Current liabilities 81,671 143,205 92,399
Total equity and liabilities 990,506 1,005,369
1,131,366
Net asset value per share (cents) 1,691 1,794 1,698
Statement of changes in equity
Share Foreign
Capital currency Accumu-
and translation Treasury lated Total
premium reserve shares profit equity
R`000 R`000 R`000 R`000 R`000
Balance at
27 December 2005 117,445 33,737 (4,858) 1,471,210 1,617,534
Increase in Foreign
Currency
Translation 51,624 - - 51,624
Reserve
Net income
recognised
directly in equity 117,445 85,361 (4,858) 1,471,210 1,669,158
Net loss for the - - - (152,164) (152,164)
year
Total recognised
income
and expense for 85,361 (4,858) 1,516,994
the year 117,445 1,319,046
Dividend paid - - - (685,174) (685,174)
Proceeds on disposal
of treasury shares - - 2,863 - 2,863
Balance at
27 December 2006 117,445 85,361 (1,995) 633,872 834,683
Increase in Foreign
Currency
Translation - 26,569 - - 26,569
Reserve
Net income
recognised
directly in equity 117,445 111,930 (1,995) 633,872 861,252
Net loss for the - - - (29,782) (29,782)
year
Total recognised
income
and expense for 111,930 (1,995) 604,090 831,470
the year 117,445
Proceeds on disposal
of treasury shares - - 73 - 73
Balance at
27 June 2007 117,445 111,930 (1,922) 604,090 831,543
Notes
1. Reconciliation between attributable
loss and headline loss
Unaudited Audited
year to
Six months to June December
2007 2006 2006
R`000 R`000 R`000
Attributable loss after taxation (29,782) (89,147) (152,164)
Impairment - - 27,025
Over provision prior year Capital Gains - - (2,200)
Taxation
Profit on disposal of fixed assets - - (91)
Headline loss attributable to ordinary (29,782)
shareholders (89,147) (127,430)
Attributable headline loss per share
- basic (60.8) (181.6) (259.5)
- diluted (60.6) (181.1) (258.8)
2. Basis of presentation
The unaudited results have been prepared in accordance with the group`s
accounting policies which comply with IFRS, the Listing Requirements of
the JSE Limited and the Companies Act of South Africa.
3. Future Developments under IFRS
Future amendments to the consolidated financial statements may arise
due to one or more of the following reasons:
- The accounting statements are subject to ongoing review and may
change;
- The consolidated financial statements have been prepared based on the
outcome expected at this point in time, of the technical issues and
exposure drafts currently being examined by the IASB and IFRIC, which
may be applicable to the 2007 IFRS consolidated financial statements;
- Interpretations may differ as practice develops, and
- Tax legislation and tax related interpretations might develop
further.
2007 2006 2006
R`000 R`000 R`000
4. Commitments
Capital commitments - Authorised but 3,075 12,205 2,473
not contracted
Capital commitments - contracted 86 5,698 1,215
3,161 17,903 3,688
Operating lease commitment 2,535 7,942 2,497
Other 1,830 4,063 738
Comment on results
Half year review
A loss and headline loss per share of 60.8 cents were recorded for the six
months to 27 June 2007, which compare with the loss and headline loss per share
of 181.6 cents for the six months ended June 2006. The loss and headline loss
per share for the six months ended 27 June 2006 included the Secondary Taxation
on Companies ("STC") charge of R86 million (175 cents per share) paid in respect
of the special dividend paid to shareholders in March 2006. The results for the
first six months of 2006 were improved by interest earned on the Industrial
Services Division disposal proceeds before the payment of the March 2006 special
dividend, which contributed R8.5 million or 17.4 cents per share to the 2006
half year result. Excluding the STC charge and interest earned on the disposal
proceeds before the payment of the special dividend, the loss and headline loss
per share for the six month period ended June 2006 would have been 23.8 cents,
compared to 60.8 cents for the same period this year.
First half revenue increased by 7% to R193.8 million from the R181.0 million
recorded in the first half of 2006, with volumes sold during the first half
being similar to the volumes sold during the first half of 2006. The weakening
of the average Rand / US dollar and Rand / Australian dollar exchange rates off
set the negative effects of the strengthening average Australian / US dollar
exchange rate and resulted in the increased revenue for the period.
The operating loss in the first six months of 2007 of R35.6 million (2006: R24.3
million) was adversely impacted by the under recovery of production overheads
totaling R15.2 million at the Group`s Australian operation following the
decision to limit production in order to reduce excess stocks. The strength of
the Australian dollar against the US dollar and the Rand further contributed to
the Group`s operating loss, together with the one off costs associated with
retrenchments and responding to anti dumping investigations.
A loss before taxation of R31.0 million resulted for the six month period ended
June 2007, which compares with the loss of R5.0 million incurred for the six
months period ended June 2006. The results for the first six months of 2006 were
enhanced by the additional interest earned of R12.0 million described above.
The Group`s cash balance of R136.7 million reduced slightly from the 2006 year
end cash balance of R138.2 million, as a result of careful management of working
capital and limited capital expenditures.
MARKET CONDITIONS
Global demand for alkaline grade EMD continues to be more than satisfied by
existing production capacity, particularly with additional capacity in China.
Consequently, pricing remains very competitive, and market selling prices have
not afforded the recovery of higher ore costs and other cost increases.
Whilst the performance, quality and reliability of supply of EMD remain
important, battery producers continue to seek cost savings to offset other
increased production costs, and EMD supplied from China remains a lower priced
alternative for use in most batteries.
The majority of EMD sales continue to be made in US dollars, with some sales
transacted in Euro and Japanese yen. The weakening of the US dollar continues to
reduce most EMD producers` local currency selling price, and we believe other
EMD producers are experiencing difficult trading conditions.
The Chinese government recently announced the withdrawal of the 13% value added
tax rebate attaching to EMD exported from China, effective 1 July 2007. This
should increase the selling price of EMD exported from China.
The European Commission anti-dumping investigation has progressed and we expect
a preliminary determination in September 2007 that will impose an anti-dumping
duty. The Group has six months to object to the preliminary determination and
will continue to cooperate with the Commission to demonstrate that an anti-
dumping duty is not warranted.
On 27 April 2007 a producer located in Japan and also controlled by Tosoh
Corporation of Japan requested the Japanese Commission to initiate an anti-
dumping investigation concerning EMD produced in South Africa, Australia, China
and Spain. That investigation continues and the Group anticipates the imposition
of anti-dumping duties. A conclusion on the investigation is expected April
2008.
As noted above, an over-supplied market and lower priced EMD from China have
resulted in vigorous price competition. The competitive prices offered by Delta
EMD have been eroded through cost increases and adverse exchange rate movements,
resulting in exposure to anti-dumping duties.
PROSPECTS
The Group`s EMD production plants in South Africa and Australia continue to
benefit from access to quality ore as well as relatively low production costs,
and they remain relatively well positioned to supply EMD to the global battery
market over the longer term.
The Board`s decision to limit production in Australia in order to reduce excess
stocks will continue for the remainder of the year and will result in the
continued under-recovery of manufacturing overheads in Australia.
As demonstrated by the trading losses suffered in the first half, the cost
increases experienced over the past three years do not permit the Group to trade
profitably at current EMD selling prices and exchange rates. The Group also
anticipates substantial ore cost increases during the next year.
EMD selling prices will be increased to levels that allow the Group to absorb
cost increases, trade profitably and continue production. If customers elect to
source lower priced EMD from China for so long as Chinese imports are not
subject to anti-dumping duties, the Group is likely to lose sales volumes and
will take the steps necessary to preserve shareholder value.
Anticipated sales during the second half together with limited production are
expected to reduce stocks and provide additional cash flow and improved cash
balances.
DIVIDEND
No interim dividend for the 2007 financial half year has been declared.
T G Atkinson (Chairman) 6 August 2007
Registered Office Transfer Secretaries
11th Floor, Office Tower Computershare Investor
Sandton City Services 2004 (Proprietary) Limited
Rivonia Road 70 Marshall Street, Johannesburg 2001
Sandown 2146 Marshalltown 2107
Directors: Independent non executive:
LB Bird, PL Campbell, AC Hicks
Non executive:
TG Atkinson* (Chairman), BR Wright
Executive:
CJ Jacobs, MJ Renehan+
*USA +Australian
Sponsor
Nedbank Capital
Date: 06/08/2007 08:00:07 Produced by the JSE SENS Department.
