| Wed 26 Sep 2007, 8:52 | | CNL - Control Instruments Group - Unaudited Interi |
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CNL
CNL
CNL - Control Instruments Group - Unaudited Interim Results For The Six
Months Ended 30 June 2007 and dividend declaration
Control Instruments Group Limited
(Incorporated in South Africa)
Registration number: 1964/003987/06
Share code: CNL & ISIN: ZAE000001665
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
OVERVIEW
The Group`s major focus over the past three years has been the creation of
shareholder wealth. Part of the strategy to achieve this has been to increase
the size of the Group`s operations through acquisitions and to invest in
product development, thereby creating business units with sufficient critical
mass.
This strategy has enabled the Group to sell its fleet and vehicle management
business to TeliMatrix Limited ("TeliMatrix"). TeliMatrix will list on the JSE
Limited and Control Instruments will unbundle approximately 87% of the shares
it receives in TeliMatrix.
Despite the Group`s fleet management and vehicle telematics business,
CI OmniBridge, continuing to produce excellent results and recording strong
growth and profits, the Group`s results for the six months to 30 June 2007 are
below our expectations. This is due to the poor performance of the automotive
components and products business as a result of very difficult market
conditions in the local and international original equipment manufacture
("OEM") automotive industry.
RESULTS AND BUSINESS OUTLINE
Group turnover increased 69% from R333.6 million to R565.1 million and gross
profit increased 62% from R125.3 million to R202.7 million. Net profit before
interest and tax increased 59% from R25.1 million to R40.0 million and net
profit increased 57% to R19.5 million.
Discontinued operations: Fleet and vehicle management products and systems
Results
The fleet and vehicle management businesses performed well with revenue
increasing 48% from R82.7 million to R122.6 million and operating profit from
operations increasing 116% from R14.1 million to R30.4 million in the six
months under review.
Business
Since 1997, SiemensVDO has acted as the worldwide distributor of Control
Instruments` fleet and vehicle management products. Siemens` decision to
dispose of its automotive businesses enabled Control Instruments to acquire;
with effect from 1 July 2007, the worldwide distribution rights to its own
products, which gives CI OmniBridge direct access to 44 distributors covering
70 countries; and the business of Datatrak in the United Kingdom, with effect
from 1 June 2007.
Datatrak is a vehicle telematics business. It has traditionally focused on high
value and security related vehicle tracking. 80% of cash-in-transit vehicles in
the United Kingdom are fitted with Datatrak. It owns its own network covering
the United Kingdom with 19 000 subscribers and the bulk of its income is
annuity revenue. Datatrak offers an excellent platform to launch the lower cost
Control Instruments and Matrix products into the United Kingdom.
The TeliMatrix transaction
As mentioned above, the Group has agreed to sell its fleet and vehicle
management business, including the worldwide distribution rights and Datatrak
acquired from SiemensVDO to TeliMatrix.
Control Instruments will receive 320 million shares in Telimatrix, of which
approximately 280 million will be unbundled to shareholders in the ratio of two
TeliMatrix shares for every one share held in Control Instruments. The Group
will place the balance of approximately 40 million TeliMatrix shares and use the
proceeds to reduce its borrowings.
TeliMatrix will be a global fleet management business with one of the largest
GSM based vehicle subscriber networks in the world with 60% of its revenue
derived from annuity revenue streams and 40% of its revenue foreign currency
denominated.
TeliMatrix`s strategy is to leverage its profitable and cash generating
businesses into expanding its recurring revenue model into the worldwide
distribution channel that has been built up and operated successfully over the
past ten years by CI OmniBridge.
The estimated value of this transaction to Control Instruments` shareholders is
approximately R750 million, which equates to R5.38 per share.
Full details of this transaction are contained in the circular that was posted
to shareholders on 13 September 2007.
Continuing operations: Automotive components and products
Post the transaction, the Group will be focused on the supply of automotive
components and products to the international automotive industry.
Results
Compared with the six months ended 30 June 2006, revenue increased 76% from
R250.9 million to R442.5 million and gross profit increased 78% to R127.3
million from R71.7 million. However operating profit decreased 12% from R11.0
million to R9.7 million.
Business
The OEM operations had a torrid first six months of the year arising from the
ongoing turmoil in the global and local OEM markets. Significant orders were
cancelled by a number of major OEMs; new model launches were delayed; vehicle
models were phased-out early; and OEMs worldwide are exerting significant
downward price pressure on suppliers. Input costs increased and considerable
disruptions to our operations were incurred as a result of labour disputes in
the industry.
The Group responded rapidly and aggressively to these changing circumstances.
Significant cost reduction programmes have been implemented, including sizeable
staff reductions at all levels, both locally and internationally. The Group has
also declined to take on any new business that does not meet certain minimum
criteria.
These operations are now better positioned to compete in a constantly changing
OEM environment.
The final step in the plan to integrate the business of Gabriel South Africa
into the automotive components and products business will be completed with the
centralisation of all the distribution functions into one new facility situated
in City Deep, Johannesburg. This will consolidate four separate operations into
one and should be fully operational in the first half of 2008.
At a Group level, once the TeliMatrix transaction has been completed and the
40 million TeliMatrix shares have been placed, Control Instruments will have
very low levels of debt. This should see a significant reduction in finance
costs.
Post the transaction, the role of the Group`s head office will be scaled back
considerably and where possible absorbed into the operations.
ISSUE OF SHARES
On 30 May 2007 the directors authorised the issue of 15 000 000 ordinary
shares, with a par value of five cents each, at a price of R6.00 per share in a
vendor placement with third parties and a further 15 000 000 ordinary shares,
with a par value of five cents each, at a price of R6.00 per share under the
general authority granted to directors to issue shares for cash.
The income generated was used to pay for the acquisition of the Datatrak
business and to reduce debt.
PROSPECTS
We have always pointed out to shareholders that the Group operates in niche
sectors of global markets and is therefore subject to local and international
disruptions that are not under its control. This statement has never been more
valid than during the first six months of 2007.
Despite this, the board is positive about the prospects for the Group post
the TeliMatrix transaction. The major focus for the remainder of the year
will be on completing the TeliMatrix transaction and on optimising the
continuing operations and their performance.
Going forward the Group will have little gearing and has the critical mass
necessary to compete efficiently in its selected markets.
DIVIDEND
The board has declared an interim dividend of 3.5 cents per share in respect
of the six months ended 30 June 2007.
In terms of the requirements of STRATE:
Last day to trade cum dividend Friday 12 October 2007
Shares trade ex dividend Monday 15 October 2007
Record date Friday 19 October 2007
Payment date Monday 22 October 2007
Share certificates may not be dematerialised or rematerialised between Monday,
15 October 2007 and Friday, 19 October 2007, both days inclusive.
On behalf of the board
JPS O`Leary R Friedman
Chairman Group Managing Director
26 September 2007
CONSOLIDATED INCOME STATEMENTS
For the six months ended 30 June 2007
Combined income statement
6 months 6 months Year
ended ended ended
30/06/07 30/06/06 31/12/06
Restated
Unaudited Unaudited Variance Audited
R 000 R 000 % R 000
Revenue 565 115 333 595 69.40 772 155
Cost of sales (362 443) (208 339) (511 470)
Gross profit 202 672 125 256 61.81 260 685
Other operating income 36 435 7 308 86 113
Interest income 86 80 -
Administrative expenses (112 674) (59 425) (127 329)
Marketing and selling
expenses (25 786) (17 907) (41 779)
Other operating expenses (60 692) (30 185) (96 327)
Operating profit from
operations 40 041 25 127 59.35 81 363
Finance costs (18 802) (7 462) (19 498)
Net profit from joint
ventures 1 553 1 710 1 939
Profit before tax from
operations 22 792 19 375 63 804
Tax (3 257) (6 933) (7 085)
Profit from ordinary
activities 19 535 12 442 57.00 56 719
The accounting treatment of the Tripmaster and Sagercy acquisitions was
determined provisionally in terms of IFRS 3 in the results for the six months
ended 30 June 2006. This was finalised for the year-end results. As a result,
the 2006 interim figures have been restated accordingly.
The 2006 figures have also been restated to reflect the split between
continuing operations and discontinued operations.
CONSOLIDATED INCOME STATEMENTS
For the six months ended 30 June 2007
6 months 6 months Variance Year
ended ended ended
30/06/07 30/06/06 31/12/06
Restated Restated
Unaudited Unaudited Unaudited
R 000 R 000 % R 000
Continuing operations
Revenue 442 536 250 919 76.4 634 655
Cost of sales (315 193) (179 232) (456 546)
Gross profit 127 343 71 687 77.6 178 109
Other operating income 23 078 2 113 80 750
Administrative expenses (74 794) (31 089) (82 760)
Marketing and selling
expenses (16 824) (13 057) (30 277)
Other operating expenses (49 124) (18 630) (85 684)
Operating profit from
continuing operations 9 679 11 024 (12.2) 60 138
Finance costs (18 141) (6 233) (17 544)
Net profit from joint
ventures 1 553 1 710 1 939
(Loss)/profit before tax
from continuing
operations (6 909) 6 501 (206.3) 44 533
Tax 5 964 (2 413) 1 323
Net (loss)/profit for
the period from
continuing
operations ( 945) 4 088 45 856
Discontinued operations
Profit for the period
from discontinued
operations 20 480 8 354 10 863
Profit for the period 19 535 12 442 57.0 56 719
Attributable to equity
holders of the company 19 535 12 442 56 719
Total shares in issue
(excluding treasury
shares) (000) 130 434 95 623 100 434
Weighted average number of
shares in issue (000) 106 177 90 190 93 247
Adjustment for share
options (000) 4 156 6 375 6 374
Weighted average number of
shares for diluted
earnings per share (000) 110 333 96 565 99 621
Earnings per share (EPS)
Continuing (loss)/earnings
per share (cents) (0.89) 4.53 49.18
Discontinued earnings per
share (cents) 19.29 9.26 11.65
Total earnings per share
(cents) 18.40 13.79 60.83
Headline earnings (R 000)
Continuing headline loss
(R 000)
(Loss)/earnings (945) 4 088 45 856
Profit of disposal of
property, plant and
equipment (18 990) - (1 280)
Excess of acquirer`s
interest in the net fair
value of the
acquiree over cost - - (59 539)
Impairment of
available-for-sale
financial assets - - 3 208
(19 935) 4 088 (11 755)
Discontinued headline
earnings (R 000)
Earnings per share 20 480 8 354 10 863
(Profit)/loss of disposal
of property, plant and
equipment (2 840) 43 53
Excess of acquirer`s
interest in the net fair
value of the
acquiree over cost (5 145) - -
Impairment of development
costs - 256 282
12 495 8 653 11 198
Total headline
(loss)/earnings (R 000) (7 440) 12 741 (158.4) (557)
Headline (loss)/earnings
per share (cents)
Continuing headline loss
per share (cents) (18.78) 4.53 (12.61)
Discontinued headline
earnings per share (cents) 11.77 9.60 12.01
Headline (loss)/earnings
per share (cents) (7.01) 14.13 (149.6) (0.60)
Diluted earnings per share
(cents)
Continuing diluted
(loss)/earnings per share
(cents) (0.86) 4.23 46.03
Discontinued diluted
earnings per share (cents) 18.56 8.65 10.90
Diluted earnings per share
(cents) 17.70 12.88 56.93
Diluted headline
earnings/(loss) per share
(cents)
Continuing diluted
headline loss per share
(cents) (18.07) 4.23 (11.80)
Discontinued diluted
headline earnings per
share (cents) 11.33 8.96 11.24
Diluted headline
(loss)/earnings per share
(cents) (6.74) 13.19 (0.56)
Dividend per share (cents) - 4.00 7.50
CONSOLIDATED BALANCE SHEETS
At 30 June 2007
30/06/07 30/06/06 31/12/06
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
ASSETS
Non-current assets 411,904 344,053 518,405
Property, plant and equipment 189,814 136,919 229,748
Intangible assets 218,148 198,074 281,119
Investment in joint ventures 2,230 1,871 2,178
Financial assets - 3,208 -
Non-current receivables 368 - 366
Deferred tax assets 1,344 3,981 4,994
Current assets 710,037 269,518 403,601
Inventories 163,877 98,621 176,656
Trade and other receivables 201,999 159,407 212,888
South African Revenue Service 8,517 612 5,675
Cash and cash equivalents 41,567 10,878 8,382
Non-current assets held for sale 294,077 - -
Total assets 1,121,941 613,571 922,006
EQUITY AND LIABILITIES
Capital and reserves 552,192 283,471 350,231
Non-current liabilities 237,354 197,450 304,099
Borrowings 178,806 143,729 221,764
Retirement benefit obligations 600 600 600
Deferred tax liabilities 55,935 50,245 81,169
Provisions 2,013 2,876 566
Current liabilities 332,395 132,650 267,676
Trade and other payables, provisions
and current borrowings 199,405 130,402 213,981
Derivative financial liabilities - - 466
South African Revenue Service 4,571 1,057 6,857
Bank overdraft - 1,191 46,372
Liabilities directly associated with
non-current
assets classified as held for sale 128,419 - -
Total equity and liabilities 1,121,941 613,571 922,006
Net asset value per share (cents) 423 296 349
CONSOLIDATED CASH FLOW STATEMENTS
For the six months ended 30 June 2007
6 months 6 months Year
ended ended ended
30/06/07 30/06/06 31/12/06
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
Cash flows from operating activities
Operating profit before working
capital changes 42 180 42 080 78 320
Working capital changes (13 419) (22 408) (37 543)
Cash generated from operations 28 761 19 672 40 777
Interest received 86 80 -
Finance costs paid (18 888) (7 462) (19 498)
Dividends received 1 500 - 2 526
Dividends paid - (3 826) (7 179)
Tax paid ( 44) (4 662) (8 509)
11 415 3 802 8 117
Cash flows from investing activities
Purchase of property, plant and
equipment (9 973) (4 507) (32 240)
Proceeds from disposal of property,
plant and equipment 10 943 14 9 998
Increase in intangible assets (7 422) (8 181) (20 173)
Movement of investments in joint
ventures - 894 -
Acquisition of subsidiaries and
operations, net of cash (7 767) (74 752) (54 371)
Increase in non-current receivables ( 54) - ( 366)
(14 273) (86 532) (97 152)
Cash flow from financing activities
Settlement of non-current borrowings (12 469) (6 193) 25 786
Shares issued 89 892 99 947 24 233
Shares cancelled - ( 97) -
Proceeds on disposal of treasury shares 4 885 - 1 062
82 308 93 657 51 081
Net cash inflow/(outflow) for the
period 79 450 10 927 (37 954)
Forex translation adjustments on cash
and cash
and cash equivalents 107 - 1 204
Cash and cash equivalents at the
beginning of the
period (37 990) (1 240) (1 240)
Cash and cash equivalents at the end
of the period 41 567 9 687 (37 990)
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2007
Share capital Fair value
Share premium and other Retained
Treasury shares reserves earnings Total
R 000 R 000 R 000 R 000
Balance at 1 January 2006 82 020 7 564 75 443 165 027
Net profit not recognised in
the income statement 7 317 7 317
Cash flow hedges: net fair
value gains, net of tax 1 162 1 162
Creation of currency
translation reserve 6 155 6 155
Net profit 12 442 12 442
Cancellation of treasury
shares 9 423 (9 520) ( 97)
Employee share option scheme:
- value of services provided 2 661 2 661
Shares issued 99 947 99 947
Dividends paid (3 826) (3 826)
Balance at 30 June 2006 191 390 17 542 74 539 283 471
Net loss not recognised in
the income statement: (1 852) (1 852)
Cash flow hedges: net fair
value losses, net of tax (1 067) (1 067)
Creation of currency
translation reserve (785) ( 785)
Net profit 44 277 44 277
Movement of treasury shares 483 579 1 062
Employee share option scheme:
- value of services provided 2 243 2 243
Shares issued 24 383 24 383
Dividends paid (3 353) (3 353)
Balance at 31 December 2006 216 256 17 933 116 042 350 231
Net profit not recognised in
the income statement: 1 693 1 693
Cash flow hedges: net fair
value losses, net of tax ( 373) ( 373)
Creation of currency
translation reserve 2 066 2 066
Net profit 19 535 19 535
Movement of treasury shares 2 689 ( 726) 1 963
Employee share option scheme:
- value of services provided 1 340 1 340
Shares issued 177 430 177 430
Balance at 30 June 2007 396 375 20 966 134 851 552 192
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 June 2007
Accounting policies - basis of presentation
The financial statements have been prepared in terms of International Financial
Reporting Standards ("IFRS") and comply with IAS34 - Interim Financial
Reporting.
The accounting policies are consistent with those applied in the annual
financial statements for the year ended 31 December 2006.
Discontinued operations
Discontinued operations comprise Control Instruments` fleet and vehicle
management businesses, viz. CI OmniBridge, Datatrak and Tripmaster.
6 months
ended
30/06/07
Unaudited
R 000
Non-current assets held for sale and discontinued operations
a) Non-current assets classified as held for sale
Disposal group held for sale - CI OmniBridge and Datatrak
Non-current assets 126 040
Current assets 109 458
Disposal group held for sale - Tripmaster
Non-current assets 41 747
Current assets 16 832
Total 294 077
b) Liabilities directly associated with non-current assets classified
as held for sale
Disposal group held for sale - CI OmniBridge and Datatrak
Non-current liabilities 29 551
Current liabilities 80 420
Disposal group held for sale - Tripmaster
Non-current liabilities 13 932
Current liabilities 4 515
Total 128 419
c) Analysis of the results of discontinued operations, and the results
recognised on the remeasurement of assets or disposal group.
6 months 6 months Variance Year
ended ended ended
30/06/07 30/06/06 31/12/06
Unaudited Unaudited Unaudited
R 000 R 000 % R 000
Revenue 122 579 82 676 137 500
Cost of sales (47 250) (29 107) (54 924)
Gross profit 75 329 53 569 82 576
Other operating income 13 357 5 195 5 363
Interest income 86 80 -
Administrative expenses (37 880) (28 336) (44 569)
Marketing and selling
expenses (8 962) (4 850) (11 502)
Other operating expenses (11 568) (11 555) (10 643)
Operating profit from
operations 30 362 14 103 21 225
Finance costs ( 661) (1 229) (1 954)
Profit before tax from
operations 29 701 12 874 19 271
Tax (9 221) (4 520) (8 408)
Profit for the period 20 480 8 354 10 863
Significant acquisitions
a) Datatrak
The Group acquired 100% interest in the business of Datatrak, including the
worldwide distribution rights to Control Instruments` fleet management products
with effect from 1 June 2007 and 1 July 2007 respectively.
Details of the net assets acquired and the excess of acquirer`s interest in the
net fair value of the acquiree over cost (negative goodwill) are as follows:
Purchase consideration
Paid 90 704
Direct costs relating to the acquisition 7 063
Total purchase consideration 97 767
Less: Fair value of net assets acquired (102 912)
Excess of acquirer`s interest in the net fair value of the
acquiree over cost (5 145)
Acquiree`s
Fair carrying
value amount
R 000 R 000
The assets and liabilities arising from the
acquisition are as follows:
Property, plant and equipment 13 100 8 688
Intangible assets 64 203 -
Other investments and non-current receivables 6 875 6 875
Current assets 58 930 59 273
Current liabilities (44 257) (31 699)
Deferred tax assets 4 061 -
Net assets acquired 102 912 43 137
Purchase consideration 97 767
Purchase consideration settled in issuing shares (90 000)
Cash outflow on acquisition 7 767
The accounting of this business combination has been determined provisionally
in terms of IFRS 3. As a result these figures may change at year-end.
Control Instruments Group Limited
(Incorporated in South Africa)
Registration number: 1964/003987/06
Share code: CNL ISIN: ZAE000001665
Registered office: 28 Wiganthorpe Road, Willowton, Pietermaritzburg 3201
Directors: JPS O`Leary (Irish, Chairman) *, R Friedman (Managing),
EPH Bieber *, SR Bruyns *, TE Buzer, RB Forrester, RJ Fraenkel
* independent, non-executive
www.ci.co.za
Date: 26/09/2007 08:52:07 Produced by the JSE SENS Department.
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