| Mon 11 Aug 2008, 9:02 | | DEL - Delta Electrical Industries Limited - Unaudited group results for the six |
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DEL
DEL
DEL - Delta Electrical Industries Limited - Unaudited group results for the six
months ended 27 June 2008
Delta Electrical Industries Limited
Registration number: 1919/006020/06
Share code: DEL & ISIN: ZAE000002036
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 27 JUNE 2008
CONDENSED GROUP INCOME STATEMENT
Unaudited Audited
year to
Six months to June December
2008 2007 2007
Note R`000 R`000 R`000
Revenue 308,367 193,769 486,083
Profit/(loss) before interest, 47,256 (16,205) (3,133)
taxation, and depreciation
Depreciation (6,956) (18,191) (36,847)
Closure costs - - (83,352)
Impairment - - (108,136)
Net foreign exchange losses (2,219) (1,175) (3,529)
Operating profit/(loss) 38,081 (35,571) (234,997)
Net interest received 11,335 4,549 12,858
Profit/(loss) before taxation 49,416 (31,022) (222,139)
Taxation (10,352) 1,240 16,867
Normal taxation (13,375) 1,240 (4,550)
Capital gains taxation 3,023 - 21,417
overprovided on disposal of the
industrial services division
Profit/(loss) after taxation for 39,064 (29,782) (205,272)
the period
Attributable to:
Equity holders of parent company 39,064 (29,782) (205,272)
Headline earnings/(loss) 1 36,041 (29,782) (145,945)
attributable to ordinary
shareholders
Number of shares in issue (`000) 49,166 49,166 49,166
Weighted number of shares in 48,989 48,985 48,985
issue (`000)
Dilutive number of shares in 48,989 49,141 48,989
issue (`000)
Attributable earnings/(loss) per
share (cents)
- basic 79.7 (60.8) (419.0)
- diluted 79.7 (60.6) (419.0)
Capital reduction per share 229.0 - -
(cents)
Dividend per share (cents) - - -
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Audited
year to
Six months to June December
2008 2007 2007
R`000 R`000 R`000
Cash generated/(utilised) by 45,037 (15,677) (31,380)
trading
Movement in long and short term (28,905) - (4,341)
provisions
Decrease in working capital 70,810 15,276 45,001
Cash generated by/(utilised by) 86,942 (401) 9,280
operations
Interest received 11,335 4,549 12,858
Taxation paid - normal (758) (2,360) (2,216)
Taxation refund - Capital gains 3,023 2,200 23,617
taxation
Cash available from operating 100,542 3,988 43,539
activities
Replacement capital expenditure (2,884) (4,180) (12,518)
Proceeds on disposal of land, - - 46,824
property, plant and equipment
Net cash inflow/(outflow) before 97,658 (192) 77,845
financing activities
Proceeds on disposal of treasury - 73 73
shares
Net increase/(decrease) in cash 97,658 (119) 77,918
and cash equivalents
Cash and cash equivalents at 218,342 138,196 138,196
beginning of period
Currency translation of cash in 27,327 (1,407) 2,228
foreign subsidiary
Cash and cash equivalents at end 343,327 136,670 218,342
of period
CONDENSED Group balance sheet
Unaudited Audited
year as at
as at June December
2008 2007 2007
R`000 R`000 R`000
ASSETS
Property, plant and equipment 296,947 435,171 318,589
Non-current assets held for sale 22,348 - -
Deferred taxation asset - 6,486 -
Non-current asset 1,051 1,051 1,051
Bank balances and cash 343,327 136,670 218,342
Current assets 326,345 411,128 361,084
Total assets 990,018 990,506 899,066
EQUITY AND LIABILITIES
Total shareholders funds 613,837 831,543 650,501
Deferred taxation liabilities 38,715 28,821 27,677
Non-current liabilities 120,586 48,471 104,315
Capital reduction liability 112,185 - -
Current liabilities 104,695 81,671 116,573
Total equity and liabilities 990,018 990,506 899,066
Net asset value per share (cents) 1,248 1,691 1,323
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Share Foreign
Capital currency Accumu-
and translation Treasury lated
premium reserve shares profit Total
R`000 R`000 R`000 R`000 R`000
Balance at 27 117,445 85,361 (1,995) 633,872 834,683
December 2006
Increase in - 21,017 - - 21,017
Foreign
Currency
Translation
Reserve
117,445 106,378 (1,995) 633,872 855,700
Net loss for - - -
the year (205,272) (205,272)
117,445 106,378 (1,995) 428,600 650,428
Proceeds on - - 73 - 73
disposal of
treasury
shares
Balance at 27 117,445 106,378 (1,922) 428,600 650,501
December 2007
Increase in - 36,457 - - 36,457
Foreign
Currency
Translation
Reserve
117,445 142,835 (1,922) 428,600 686,958
Net profit for - - - 39,064 39,064
the period
117,445 142,835 (1,922) 467,664 726,022
Capital - 404 -
reduction (112,589) (112,185)
Balance at 27 4,856 142,835 (1,518) 467,664 613,837
June 2008
NOTES
1. Reconciliation between attributable earnings/(loss) and headline
earnings/(loss)
Unaudited Audited
year to
Six months to June December
2008 2007 2007
R`000 R`000 R`000
Attributable earnings/(loss) after 39,064 (205,272)
taxation (29,782)
Impairment - - 108,136
Over provision prior year CGT (3,023) - (21,417)
Consumable stores - - (2,674)
Profit on disposal of fixed assets - - (24,718)
Headline earnings/(loss) 36,041 (145,945)
attributable to ordinary (29,782)
shareholders
Attributable headline
earnings/(loss) per share
- basic 73.5 (60.8) (297.9)
- diluted 73.5 (60.6) (297.9)
2. Basis of presentation
This interim report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act and the disclosure requirements of the JSE Limited`s listings
requirements. These condensed financial statements have been extracted from
the group`s annual financial statements and has been prepared using
accounting policies that comply with International Financial Reporting
Standards. The accounting policies are consistent with those applied in the
financial statements for the year ended 27 December 2007, except for the
changes which are described below.
2.1 New accounting policies adopted
On 28 December 2007, the Group adopted the disclosure requirements for
financial instruments under IFRS 7. This standard has no impact on
recognition, measurement and presentation of financial instruments and
consequently has no impact on profit or loss or equity for the period. The
primary objective of IFRS 7 is to provide risk management and financial
instrument disclosures that enable users to evaluate the nature and
significance of financial instruments on an entity`s financial performance
and position. These new disclosure requirements will mainly impact the
annual financial statements rather than the interim financial report.
The Group adopted the amendment to IAS 1. IAS 1 was amended in conjunction
with the issue of IFRS 7. The amendments require additional disclosure of
the entity`s capital management objectives, policies and processes, some
quantitative data around the composition of capital and compliance with any
capital requirements. Due to the nature of the capital disclosures, this
will effect the disclosure in the annual financial statements.
2008 2007 2007
R`000 R`000 R`000
3. Commitments
Capital commitments - Authorised but not 6,795 3,075 4,853
contracted
Capital commitments - contracted 360 86 853
7,155 3,161 5,706
Operating lease commitment 797 2,535 1,623
Other 1,156 1,830 909
COMMENT ON RESULTS
HALF YEAR RESULTS
Earnings per share of 79.7 cents and headline earnings per share of 73.5 cents
were recorded for the six months ended 27 June 2008, compared with a loss and
headline loss per share of 60.8 cents for the same period last year.
Revenue increased by 59% from R193.8 million to R308.4 million. Operating profit
of R38.1 million was recorded for the half year compared with an operating loss
of R35.6 million. Higher sales volumes, increased selling prices and improved
margins, partly related to stock profits, contributed to the improved result.
A pre tax profit of R49.4 million was recorded for the half year compared with a
pre tax loss of R31.0 million. Interest income for the half year improved to
R11.3 million compared with R4.5 million for the same period last year.
A profit after taxation of R39.1 million resulted for the half year compares
with a loss of R29.8 million for the same period last year.
Cash inflow of R97.7 million for the half year compared with a cash outflow of
R0.1 million for the same period last year. Improved cash inflow resulted from
higher operating profit, reduced debtors and a reduction of remaining Australian
EMD stocks.
Cash balances improved from R218.3 million as at 27 December 2007 to R343.3
million as at 27 June 2008. Cash balances as at 27 June 2008 were subsequently
reduced by the R112.2 million capital reduction payment made on 14 July 2008.
PERFORMANCE OF THE DELTA EMD BUSINESS
The global EMD market continues to evolve with significant changes resulting
from anti-dumping investigations, manganese ore and energy cost increases, and
reduced supply following the March 2008 closure of Delta EMD`s Australian plant.
The competitive position of Delta EMD`s South African plant has improved with
many of these changes, and selling price increases have allowed recovery of
manganese ore and energy cost increases. The competitive position of Chinese EMD
producers also appears to have weakened with cost increases, exchange rate
movements and changes to Chinese export tax rebates.
For the time being EMD exports from South Africa to Europe will be subject to a
17.1% anti-dumping duty. Exports from South Africa to Japan are now subject to a
provisional duty of 14.5%. Whilst the provisional duty imposed upon South Africa
by Japan compares favourably with the duties imposed upon China (34.3% to
42.7%), efforts to demonstrate that the duties are not warranted, and to agree
price undertakings, continue. Final determinations are expected before the year
end.
The US Department of Commerce and US International Trade Commission continue to
consider the final imposition of duties on EMD imported to the US from China
(provisionally 236.8%) and from Australia (provisionally 120.5%). They also
continue to consider whether to impose retrospective duties of 120.5% on EMD
imported from Australia within 90 days prior to the March 2008 notification of
provisional duties. The petitioner on 17 July 2008 formally withdrew its
allegation seeking the imposition of retrospective duties, so the matter is
expected to be concluded satisfactorily during the third quarter.
Against this backdrop of market conditions, sales volumes for the half year from
South Africa improved and provided reasonable plant utilisation, and sales
volumes for the half year from Australia also improved and resulted in the sale
of more than half of the Australian EMD stocks remaining at 2007 year end and
produced through March 2008. Selling price increases agreed at the beginning of
the year to provide acceptable margins, as well as those increases subsequently
agreed to cover the higher cost of manganese ore, provided necessary margin
improvement. Whilst sales during the half year of EMD produced in South Africa
prior to manganese ore cost increases provided some stock profits, all EMD
produced in Australia was produced before manganese ore cost increases and was
sold at prices reflecting lower cost manganese ore.
EMD production in Australia ceased during March 2008 and volumes produced and
costs of production were in line with expectations. Production in South Africa
was hampered by electrical power load shedding as well as operational
inefficiencies, and volumes produced fell short of expectations and costs of
production exceeded expectations with substantially higher input costs. The
incidence of load shedding reduced considerably toward the end of the half year
and operational efficiencies have improved substantially.
The closure of the Australian plant and consolidation of management in South
Africa reduced overhead costs during the half year and further savings are
expected. The search for a Chief Executive, who will be based in Nelspruit with
the Delta EMD management team, continues.
Cash inflows during the half year reflect the reduction of Australian EMD stocks
as well as the payment of substantial redundancy and de-commissioning costs.
Whilst the half year cash inflows do not include significant proceeds from the
sale of Delta EMD`s land, plant or equipment in Australia, opportunities for
realising value from those assets continue to be developed with favourable
prospects. Interest in the purchase of the Group`s nine hectare Australian plant
site has been expressed by several parties, and the potential, amongst other
uses, for additional coal loading capacity on Kooragang Island has prompted
additional interest in the Group`s twenty-five hectare residue disposal site on
Kooragang Island. Provisions remain for the de-commissioning of the Australian
plant and the restoration and rehabilitation of the plant and residue disposal
sites.
PROSPECTS
Future market conditions will be shaped in part by the final outcomes of the
Japanese and US anti-dumping investigations, which should be concluded during
the second half. Sales volumes are expected to reduce during the second half as
Australian EMD stocks are depleted and South African sales to Europe reduce,
whilst the average selling price is expected to improve with a more favourable
sales mix. Improved operational efficiencies and reduced overhead costs are
expected to afford a favourable operating profit during the second half.
CAPITAL REDUCTIONS
On 14 July 2008 the Group made a 229 cents per share payment to all shareholders
out of the Group`s total share premium of R113 million. The board anticipates
making further payments to shareholders during the year from existing cash
balances as well as from cash inflows realised through trading, the sale of
Australian EMD stocks and the eventual disposal of Australian assets.
T G Atkinson (Chairman) 11 August 2008
Registered Office Transfer Secretaries
11th Floor, Office Tower Computershare Investor
Sandton City Services (Proprietary) Limited
Rivonia Road 70 Marshall Street, Johannesburg 2001
Sandown 2146 Marshalltown 2107
Sponsor
Rand Merchant Bank
A division of FirstRand Bank Limited
Directors:
Independent non executive:
LB Bird, PL Campbell, AC Hicks
Non executive:
TG Atkinson* (Chairman), BR Wright
Executive:
CJ Jacobs
*USA
Date: 11/08/2008 09:02:01 Produced by the JSE SENS Department.
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