| Tue 26 Aug 2008, 7:05 | | MTA - Metair Investments Limited - Interim report for the six months ended 30 |
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MTA
MTA
MTA - Metair Investments Limited - Interim report for the six months ended 30
June 2008
METAIR INVESTMENTS LIMITED
Reg no: 1948/031013/06
Share code: MTA
ISIN: ZAE 000090692
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2008
Key features
* Group turnover increased by 38% to R2 055 million (2007: R1 494 million)
* Operating profit declined by 28% to R 131 million (2007: R183 million)
* Profit after tax decreased by 34% to R82 million (2007: R125 million)
* Adjusted HEPS decreased by 30% to 52 cents (2007: 74 cents)
* NAV per share increased to 793 cents from 746 cents in 2007
Theo Loock MD of Metair commented: "We are pleased with our growth in revenue,
earned largely on the back of increased vehicle export sales. Margins are under
pressure from lower local vehicle sales and a delayed recovery of cost inflation
from the weakening Rand and appreciating commodity prices.
We are currently engaged in negotiations with customers to amend our exchange
rate and commodity pricing policies to allow for a more responsive adjustment to
selling prices.
We remain volume sensitive and expect volumes to decline in the second half
compared to the first half, as the stock in the vehicle supply chain in the
local market has increased because of the decline in sales.
We have a reasonable expectation that if customers meet their planned vehicle
production volumes during the second half of the year and the Rand doesn`t
devaluate any further, we will recover most of the under recovery during the
second half of the year."
Shareholders and other interested parties are invited to join a conference call
hosted by Metair management at 10am today (26 August 2008).
The dial-in number is 011 535 3600 (ask to join the Metair call).
Enquiries
Metair Investments 011 646 3011
Theo Loock, MD
Callie van der Merwe, FD
College Hill 011 447 3030
Johannes van Niekerk 082 921 9110
METAIR INVESTMENTS LIMITED(Incorporated in the Republic of South Africa)(Reg.
No. 1948/031013/06)JSE code: MTAISIN: ZAE 000090692
Interim Report for the 6 months ended 30 June 2008
Group income statements
Six Year ended
months
ended
30 June 30 June 31 December
2008 2007 2007
R`000 % R`000 R`000
Unaudited Change Unaudited Audited
Revenue 2 055 409 38 1 493 699 2 984 293
Cost of sales ( 1742 303) (48) (1 173 623) (2 391 410)
Gross profit 313 106 (2) 320 076 592 883
Other operating income 12 147 (43) 21 297 33 030
Distribution, (193 927) (23) (158 170) (344 249)
administrative and other
expenses
Operating profit 131 326 (28) 183 203 281 664
Finance (12 132) (626) 2 308 4 319
Interest expense for The (3 139) (31) (2 396) (7 182)
Metair Share Incentive
Trust
Share of results of 5 297 (3) 5 466 8 384
associates
Profit before tax 121 352 (36) 188 581 287 185
Taxation (39 137) 38 (63 498) (92 175)
Profit for the period 82 215 (34) 125 083 195 010
Attributable to:
Equity holders of the 75 102 (32) 110 357 174 509
company
Minority interest 7 113 (52) 14 726 20 501
82 215 (34) 125 083 195 010
Depreciation and (39 971) (19) (33 466) (73 650)
amortisation
Basic earnings per share 53 (32) 78 123
(cents)
Headline earnings per 53 (32) 78 124
share (cents)
Adjusted headline 52 (30) 74 121
earnings per share
(cents)
Diluted headline 52 (30) 74 121
earnings per share
(cents)
Calculation of headline
earnings per share
Net profit attributable 75 102 110 357 174 509
to ordinary shareholders
(R`000)
(Profit)/loss on (39) 288 1 842
disposal of property,
plant and equipment
(R`000)
Headline earnings 75 063 110 645 176 351
(R`000)
Weighted average number 141 707 141 905 142 085
of shares in issue
(`000)
Calculation of adjusted
headline earnings per
share
Headline earnings 75 063 110 645 176 351
(R`000)
Interest expense for The 3 139 2 396 7 182
Metair Share Incentive
Trust (R`000)
Adjusted headline 78 202 113 041 183 533
earnings (R`000)
Number of shares used 151 707 151 905 152 085
for adjusted head line
earnings calculation
(`000)
Calculation of diluted
headline earnings per
share
Headline earnings 75 063 110 645 176 351
(R`000)
Interest income on 461 768 768
proceeds (R`000)
Interest expense for The 3 139 2 396 7 182
Metair Share Incentive
Trust (R`000)
Headline earnings 78 663 113 809 184 301
adjusted for dilutive
share options (R`000)
Number of shares used 152 239 153 502 153 682
for diluted earnings
calculation
(`000)
Group cash flow
statements
Year ended
Six months
ended
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 121 352 188 581 287 185
Non-cash items 74 109 38 853 71 106
Working capital changes (85 873) 255 (118 096)
Cash generated from 109 588 227 689 240 195
operations
Finance charges (18 921) (16 723) (17 038)
Taxation paid (49 419) (37 973) (93 702)
Dividends paid (61 722) (66 703) (68 983)
Dividend income from 6 860
associate
Net cash (20 474) 106 290 67 332
(outflow)/inflow from
operating activities
Investing activities
Investment income 3 651 16 635 14 175
Net cash used in other (100 514) (52 085) (137 343)
investing activities
Net cash outflow from (96 863) (35 450) (123 168)
investing activities
Net cash inflow from 38 162 92 965 59 107
financing activities
Net (decrease)/increase (79 175) 163 805 3 271
in cash and cash
equivalents
Cash and cash 41 321 38 050 38 050
equivalents at beginning
of period
Cash and cash (37 854) 201 855 41 321
equivalents at end of
period
STATEMENT OF RECOGNISED
INCOME AND EXPENSE
Year ended
Six months
ended
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Unaudited Unaudited Audited
Actuarial gains and
losses recognised
directly in equity
Gross (745) 19 945
Deferred tax 216 (5 784)
Net (expense)/income (529) 14 161
recognised directly in
equity
Profit for the year 82 215 125 083 195 010
Total recognised income 82 215 124 554 209 171
for the year
Attributable to:
Equity holders of the 75 102 109 853 186 646
company
Minority interest 7 113 14 701 22 525
82 215 124 554 209 171
Notes to the consolidated interim condensed financial statements
Accounting policies
These consolidated condensed interim financial statements are prepared in
accordance with IAS34, Interim Financial Reporting as required by International
Financial Reporting Standards. The accounting policies used in the preparation
of the interim financial statements are consistent with those used in the annual
financial statements for the year ended 31 December 2007.
This interim report has not been reviewed or audited by the auditors.
Adjusted headline earnings The Group has decided to
present "adjusted headline earnings" to assist users of the Group`s financial
statements to better interpret the operating performance of the Group for the
period under review. Adjusted headline earnings exclude certain items of income
or expense so as to enable users to obtain a more meaningful comparison of the
Group`s performance with prior periods. These adjustments include material items
considered to be outside of the normal operating activities of the Group and/or
of a non-recurring nature. Certain aspects of the commentary included in the
chairman and managing director`s review of operating results, as indicated in
these reviews, have been based on the adjusted headline earnings information.
Contingencies The bank and other guarantees given by the
Group to third parties amounted to R80, 7 million as at 30 June 2008 (R80, 7
million as at 30 June 2007).
Borrowings 30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Current 10 083 5 889 11 965
Overdrafts net of cash 37 854 (201 855) (41 321)
Non-current 52 356 2 319 15 161
Total 100 293 (193 647) (14 195)
The movement in the
borrowings can be
analysed as follows:
Six months ended June
2008
Opening amount 14 195
Repayments 8 763
Amounts raised (123 251)
Closing amount (100 293)
Group balance sheets
30 June 30 June 31 December
2008 2007 2007
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 764 077 631 303 702 417
Intangible assets 48 111 15 117 49 093
Investment in associates 27 619 26 264 22 352
Defined benefit asset 19 942 507 21 016
Deferred taxation 43 396 10598 32 526
Other non-current assets 35 000
903 145 718 789 827 404
Current assets
Inventories 668 681 423 795 608 243
Trade and other receivables 600 689 366 686 355 586
Derivative financial assets 540
Cash and cash equivalents 143 543 249 002 114 852
1 412 913 1 039 483 1 079 221
Total assets 2 316 058 1 758 272 1 906 625
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 42 876 42 876 42 876
Treasury shares (124 523) (101 876) (131 813)
Share-based payment reserve (1 550) 2 905 3 074
Non-distributable reserves 24 826 23 929 25 139
Retained earnings 1 181 642 1 090 659 1 161 561
Ordinary shareholders` equity 1 123 271 1 058 493 1 100 837
Minority interest 95 836 83 230 89 295
Total equity 1 219 107 1 141 723 1 190 132
Non current liabilities
Interest bearing borrowings 52 356 2 319 15 161
Cumulative redeemable preference
shares in
respect of The Metair Share 100 000 100 000 100 000
Incentive Trust
Post-employment medical benefits 17 451 15 679 16 758
Deferred taxation 109 621 75 193 110 129
279 428 193 191 242 048
Current liabilities
Trade and other payables 576 731 321 687 357 063
Borrowings 10 083 5 889 11 965
Taxation 5 209 29 907 4 832
Provisions for liabilities and 44 103 18 728 27 054
charges
Bank overdrafts 181 397 47 147 73 531
817 523 423 358 474 445
Total liabilities 1 096 951 616 549 716 493
Total equity and liabilities 2 316 058 1 758 272 1 906 625
Net asset value per share (cents) 793 746 775
attributable to ordinary
shareholders
Capital expenditure 101 157 50 355 131 860
Capital commitments
- contracted 48 128 68 030 31 512
- authorised but not contracted 41 876 18 964 43 735
COMMENTS
Nature of operations
Metair has been listed since 1948. Metair comprises of six operating
subsidiaries and two associate companies that manufacture and distribute
products predominantly for the automotive industry. Products manufactured
include heating and cooling systems, shock absorbers, springs, lead batteries,
lighting and signalling devices, plastic mouldings, and front end modules,
wiring harnesses, electric motors and automotive cables. Products are supplied
to South African assemblers of new vehicles, the replacement market and a
proportion of output is exported.
Results
The board is pleased to announce the results for the first half of 2008 to
shareholders.
Turnover increased by 38% to R2 055,4 million as the Group participated in the
export of new models by Original Equipment Manufacturers (OEM`s). The increase
in the number of vehicles exported to 125 107 from 80 832 compared to the first
six months of 2007 offset the decline in vehicle sales in the local market.
Gross profit declined to R313,1 million (2,2%). Although a decline in gross
margin was expected as business on new high volume export models was won on
lower than historical margins, the decline of 26,56% to 15,73% was higher than
planned. The unforeseen portion of the decline in gross margins can be
attributed to the devaluation of the Rand against major trading currencies and
the rise in commodity prices during the period as explained in the trading
update to shareholders dated 8 July 2008. Current pricing arrangements with
customers only allow for the recovery of foreign exchange losses and commodity
price increases retrospectively. Metair has engaged with its customers to amend
the exchange rate and commodity pricing policies to allow for a more responsive
adjustment to selling prices.
Other income declined from R21,3 million to R12,2 million during the period
compared to the comparable period. The reason being R10,8 million relating to
the recoupment of a model run out which was included in 2007.
Distribution, administrative and other expenses increased to R193,9 million
(22,6%) during the period on the back of increased volumes and the preparation
of full volume ramp up planned for the end of 2008 beginning 2009. As a
percentage of turnover these costs declined to 9,4% from 10,6% in the comparable
period.
Operating profit declined to R131, 3 million (28%) compared to the same period
in 2007 and finance charges increased by R14,4 million to R12,1 million from an
income of R2,3 million.
After tax profit for the period declined by 34% to R82,2 million compared to the
R125,1 million for the same period in 2007.
Profit attributable to equity holders of the company declined to R75,1 million
(31,9%). Adjusted headline earnings per share for the period were 52 cents
compared to 74 cents achieved in the comparable period. This represents a
decline of 29,7%.
Cash generated from operations was R110 million compared to R228 million in the
comparable period as working capital requirements increased by R86 million on
the back of increased volumes, higher commodity prices and devaluation of the
Rand.
Corporate activity
During the period the Competition Commission approved the purchase of Aristons
and Specialised Plastics Engineering by Smiths Plastics from CI Shurlok. The
size of the transaction is less than required for a category 2 transaction as
described in the Listings Requirements of the JSE Limited and therefore requires
no further disclosure.
Corporate activity after 30 June 2008
A wholly owned subsidiary of Metair, Metindustrial (Pty) Limited through its
Supreme Spring Division obtained approval from the Competition Commission in
July to purchase all the shares and loan accounts in Alfred Teves Brake Systems
(Pty) Limited (ATE) from the Public Investments Corporation (PIC) subject to
fulfilment of all suspensive conditions.
The planned effective date is 1 September 2008. ATE is a manufacturer of brake
calipers and brake linings for the OEM and after market in South Africa and has
a license agreement with Conti Teves in Germany for the South African market.
The size of the transaction is less than required for a category 2 transaction
as described in the Listings Requirements of the JSE Limited and therefore
requires no further disclosure.
Directorate
Ms Aziza Galiel CA (SA) was appointed as an Independent Non-Executive Director
to the Metair Board and Audit Committee on 21 July 2008.
Prospects
Commenting on the prospects is extremely challenging under current economic
conditions and is further complicated by Metair`s expectation in regards to the
recovery of the foreign exchange losses incurred in the first half and the
setting of realistic vehicle production targets for the second half of the year.
Metair has a reasonable expectation that if customers meet their planned vehicle
production volumes during the period and the Rand doesn`t devaluate any further
it will recover most of the under recovery during the second half of the year.
Metair remains volume sensitive and expects volumes to decline in the second
half compared to the first half, as the stock in the vehicle supply chain in the
local market has increased because of the decline in sales. As a consequence,
OEM`s could be faced with production cut backs during the period. Export market
vehicle volumes are expected to be maintained in the third quarter but decline
in the fourth quarter. This may result in the full vehicle production volumes
planned for the end of 2008 through 2009 not being reached. Metair will assess
the decline at the end of the period in order to determine the planned
production, capacity and manning levels accordingly for 2009.
It is expected that Government will also announce the detail of the Motor
Industry Development Program (MIDP) at the end of August 2008. Metair continued
to participate in the consultative review process and remains positive that the
revised program will continue to grow the industry and that the proposed
introduction of a production incentive will be positive for the component
manufacturing industry.
Signed on behalf of the Board
O M E Pooe - Chairman C T Loock - Managing Director
Johannesburg, 25 August 2008
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Date: 26/08/2008 07:05:07 Produced by the JSE SENS Department.
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