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CNL
CNL
CNL - Control Instruments - Interim results for the six months ended 30 June
2008
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1964/003987/06
Share code: CNL ISIN: ZAE000001665
("Control Instruments" or "the Company" or "the Group")
INTERIM RESULTS
for the six months ended 30 June 2008
Commentary
This is Control Instruments` first set of results since the completion of the
extensive restructuring and repositioning of the business that it initiated at
the end of 2004 ("Strategy 2004"). The sale of the Group`s fleet and vehicle
management businesses to TeliMatrix Limited ("TeliMatrix") in October 2007
marked the end of this restructuring and the last remaining steps were
completed with the sale of businesses outlined in "Discontinued Operations"
below.
Control Instruments` continuing operations are now focused on two areas in the
global automotive market, namely; the international original equipment
automotive market through subsidiary Pi Shurlok and the sub-Saharan
automotive aftermarket through subsidiary CI Automotive.
RESULTS
Continuing operations
Revenue for the six months ended 30 June 2008 increased 22% to R501.1 million,
compared with R411.0 million in the same period in 2007. This exceeds the
Group`s revenue of R395.1 million for the full year ended 31 December 2005, the
first year following the implementation of "Strategy 2004".
EBITDA (earnings before interest, tax, depreciation, amortisation, negative
goodwill and profit/loss on sale of assets) for the period under review
increased 81% to R23.7 million, compared with R13.1 million in the first six
months in 2007.
While operating profit decreased compared with the first six months last year,
the comparison is not strictly meaningful as the operating profit for the six
months to 30 June 2007 included R13.6 million profit on sale of buildings.
Headline earnings per share were 2.2 cents compared with a headline loss per
share of 14.9 cents in the six months ended 30 June 2007.
Borrowings have reduced significantly compared with a year ago. This is
reflected in the finance costs, which have decreased in the period under
review.
Discontinued operations
Discontinued operations comprise Tripmaster Corporation ("Tripmaster"), based
in the USA, and two of the plastics businesses.
Tripmaster was originally part of the fleet and vehicle management businesses
that were sold to TeliMatrix in October last year. However, for a number of
reasons it was excluded from the transaction and has now been sold to
TeliMatrix with effect from 1 April 2008 at a loss of R16.9 million on its book
value. This loss should be seen in the context of the overall profit of
R577.1 million made on the sale of the fleet and vehicle management businesses
to TeliMatrix.
The plastics businesses were sold with effect from 17 March 2008.
BUSINESS OVERVIEW
Original Equipment Manufacture ("OEM")
Despite very tough conditions in all its markets throughout the world, our OEM
business improved its results for the six months ended 30 June 2008 compared
with the same period in 2007. This was primarily achieved as a result of
improved performance by Pi Shurlok`s international engineering services and
cost reduction programmes.
Our strategy is to leverage off our engineering services businesses in the USA
and the UK to win manufacturing orders for our production facility in
Pietermaritzburg. The most notable contract we have received to date has been
the design and manufacture of a new range of integrated radio and
communications systems for a major European motorcycle manufacturer. This will
go into production in early 2009.
The move in November 2007 by Group CEO Richard Friedman to Cambridge in the UK,
where he assumed the additional role as CEO of Pi Shurlok, has been well
received by customers and staff. His focus on this area of the business is
adding impetus to its performance.
The global OEM market is expected to remain extremely difficult for the
foreseeable future. The Group will continue to look for niche opportunities and
other areas of business in which its technologies can be used to gain business.
There are some encouraging signs in this regard.
Aftermarket
CI Automotive is focused on the automotive aftermarket in sub-Saharan Africa
and particularly in southern Africa. This market has also been extremely
difficult during the six months to 30 June 2008.
Poor trading conditions were exacerbated by a number of other factors, most
notably; the problems with electricity, which impacted fitment centres around
the country; the rapid increase in the price of fuel, which has resulted in a
significant reduction in the use of vehicles; the extraordinarily rapid
increase in the cost of raw materials; and an increase in the business`
operating expenses beyond the level originally planned.
Although new vehicle sales have dropped dramatically in the past twelve months,
over time it will result in an increase in replacement parts needed for an
increasing pool of ageing vehicles.
With effect from 1 August 2008, Rob Fraenkel has been appointed as CEO of CI
Automotive, in addition to his role as Group FD.
PURCHASE OF SHARES
In the period under review 20.1 million ordinary shares were purchased by the
Company; either in terms of the permission granted by shareholders at the
annual general meeting or for the Group`s Share Incentive Scheme. It is the
Group`s intention to continue to repurchase shares as and when attractive
opportunities arise.
PROSPECTS
There are currently well publicised and difficult conditions in all of the
markets in which the Group operates and there is a good probability that these
conditions could worsen during the second half of 2008. This could have a
negative effect on the results for the remainder of the year.
Although conditions in the Group`s markets are not expected to improve in the
foreseeable future, there are encouraging signs emanating from the Group`s
strategy to focus its technologies into niches in its international markets.
Once the economic shocks that have recently affected the aftermarket business
stabilise, the demand for replacement parts should increase.
The Group`s major focus during these difficult times will be on cash
generation, customer service and the international introduction of new products
and technologies.
ACCOUNTING POLICIES
The financial statements have been prepared in terms of International Financial
Reporting Standards ("IFRS") and comply with IAS 34 - Interim Financial
Reporting.
The accounting policies are consistent with those applied in the annual
financial statements for the year ended 31 December 2007.
DIVIDEND
The board has declared an interim dividend of 3.5 cents (2007: 3.5 cents) per
share in respect of the six months ended 30 June 2008.
In terms of the requirements of Strate:
Last day to trade cum dividend Friday 12 September 2008
Shares trade ex dividend Monday 15 September 2008
Record date Friday 19 September 2008
Payment date Monday 22 September 2008
Share certificates may not be dematerialised or rematerialised between Monday,
15 September 2008 and Friday, 19 September 2008, both days inclusive.
On behalf of the board
Sam O`Leary
Chairman
28 August 2008
Consolidated income statements
for the six months ended 30 June 2008
6 months ended 6 months ended Year ended
30/06/08 30/06/07 31/12/07
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
Continuing operations
Revenue 501 123 411 017 840 070
Cost of sales (343 201) (298 018) (629 414)
Gross profit 157 922 112 999 210 656
Other operating income 2 878 17 079 19 825
Marketing and selling expenses (15 809) (16 823) (35 722)
Administrative expenses (80 956) (73 355) (126 576)
Other operating expenses (60 681) (33 765) (101 722)
Operating profit/(loss) 3 354 6 135 (33 539)
Finance income 28 - 24 012
Finance costs (9 329) (16 505) (53 563)
Share of profit from joint ventures 361 1 552 1 325
Loss before tax (5 586) (8 818) (61 765)
Tax 8 258 5 964 13 165
Profit/(loss) for the year from
continuing operations 2 672 (2 854) (48 600)
Discontinued operations
(Loss)/profit for the year from
discontinued operations (31 165) 26 784 509 352
(Loss)/profit for the year (28 493) 23 930 460 752
Attributable to equity holders of the
Company (28 493) 23 930 460 752
Total shares in issue (excluding
treasury shares) (000) 117 792 130 434 137 854
Weighted average number of shares in
issue (000) 122 786 106 177 121 211
Adjustment for share options(000) 162 4 156 4 266
Weighted average number of shares for
diluted earnings
per share(000) 122 948 110 333 125 477
(Loss)/earnings per share (cents)
Continuing operations 2.18 (2.69) (40.10)
Discontinued operations (25.38) 25.23 420.22
(Loss)/earnings per share (23.20) 22.54 380.12
Headline earnings/(loss)(R 000)
Continuing operations
Net profit/(loss) after tax for
the period 2 672 (2 854) (48 600)
Loss/(profit) on disposal of
property, plant and equipment 26 (12 036) (11 574)
Impairment of goodwill - - 2 257
Impairment of other intangible assets - - 9 846
Tax on the above - (954) (1 901)
2 698 (15 844) (49 972)
Discontinued operations
(Loss)/profit after tax for the period (31 165) 26 784 509 352
Loss/(profit) on disposal of
subsidiaries and operations 16 935 - (577 136)
Profit on disposal of property, plant
and equipment (45) (2 840) (2 738)
Excess of acquirer`s interest in the
net fair value of the acquiree over cost - (15 540) (15 540)
Impairment of property, plant and equipment - - 6 456
Impairment of goodwill - - 34 083
Impairment of other intangible assets - - 27 402
Tax on the above - 1 (6 009)
(14 275) 8 405 (24 130)
Headline loss (11 577) (7 439) (74 102)
Headline loss per share (cents)
Continuing operations 2.20 (14.92) (41.23)
Discontinued operations (11.63) 7.91 (19.91)
Headline loss per share (9.43) (7.01) (61.14)
Diluted (loss)/earnings per share(cents)
Continuing operations 2.17 (2.59) (38.73)
Discontinued operations (25.35) 24.28 405.93
Diluted (loss)/earnings per share (23.18) 21.69 367.20
Diluted headline loss per share(cents)
Continuing operations 2.19 (14.36) (39.83)
Discontinued operations (11.61) 7.62 (19.23)
Diluted headline loss per share (9.42) (6.74) (59.06)
Dividend per share(cents)
Cash 4.5 - 3.5
In specie - - 410.0
Consolidated balance sheets
at 30 June 2008
30/06/08 30/06/07 31/12/07
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
ASSETS
Non-current assets 314 913 405 904 316 724
Property, plant and equipment 148 281 183 814 152 206
Intangible assets 147 820 218 148 146 255
Investments in joint ventures 2 364 2 230 2 003
Available-for-sale financial assets 780 - 900
Non-current receivables - 368 -
Deferred income tax assets 15 668 1 344 15 360
Current assets 371 154 415 960 323 751
Inventories 175 719 163 877 159 508
Trade and other receivables 174 968 201 999 140 808
Derivative financial instruments 6 136 - 38
Financial assets at fair value
through profit or loss 3 498 - 4 050
Current income tax assets 3 485 8 517 3 485
Cash and cash equivalents 7 348 41 567 15 862
Non-current assets held for sale - 305 547 69 415
Total assets 686 067 1 127 411 709 890
EQUITY AND LIABILITIES
Capital and reserves 369 020 556 587 416 803
Reserves directly associated with
non-current assets held for sale - - 5 210
Non-current liabilities 110 957 236 754 113 685
Borrowings 71 594 178 806 76 765
Deferred income tax liabilities 31 032 55 935 34 088
Provisions 8 331 2 013 2 832
Current liabilities 206 090 204 576 163 386
Trade and other payables, provisions
and current borrowings 196 038 200 005 154 097
Derivative financial liabilities - - 12
Current income tax liabilities 10 052 4 571 9 277
Liabilities directly associated
with non-current assets classified as
held for sale - 129 494 10 806
Total equity and liabilities 686 067 1 127 411 709 890
Net asset value per share 313 427 306
Consolidated cash flow statements
for the six months ended 30 June 2008
6 months 6 months Year
ended ended ended
30/06/08 30/06/07 31/12/07
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
Cash flows from operating activities
Operating profit before working
capital changes 13 404 42 180 38 511
Working capital changes (2 846) (13 419) (2 494)
Cash generated from operations 10 558 28 761 36 017
Finance income received 36 86 25 382
Finance costs paid (9 981) (18 888) (59 535)
Dividends received - 1 500 1 500
Dividends paid (5 316) - (4 832)
Tax paid (362) (44) (6 205)
(5 065) 11 415 (7 673)
Cash flows from investing activities
Purchase of property,
plant and equipment (7 775) (9 973) (22 666)
Proceeds from disposal of property,
plant and equipment 174 10 943 35 865
Increase in intangible assets (5 010) (7 422) (21 195)
Proceeds from disposal
of financial assets - - 65 600
Proceeds from disposal of
subsidiaries, net of cash 25 138 - 74 419
Acquisition of subsidiaries and
operations, net of cash - (7 767) (8 240)
(Increase)/decrease in non-current
receivables - (54) 43
Additional investments in subsidiaries - - (21 895)
12 527 (14 273) 101 931
Cash flows from financing activities
Net proceeds from/(settlement of)
non-current borrowings 410 (12 469) (141 107)
Net (investment in)/proceeds from
disposal of treasury shares (11 650) 4 885 252
Shares issued - 89 892 87 430
(11 240) 82 308 (53 425)
Net cash (outflow)/inflow for the
period (3 778) 79 450 40 833
Forex translation adjustments on cash
and cash equivalents 1 742 107 (453)
Cash and cash equivalents at the
beginning of the period 2 390 (37 990) (37 990)
Cash and cash equivalents at the end
of the period 354 41 567 2 390
Statement of changes in equity
for the six months ended 30 June 2008
Foreign
Share capital currency
Share premium translation Other
Treasury shares reserve reserves
Balance at 1 January 2007 216 256 5 370 12 563
Losses on cash flow hedges,
net of tax (373)
Creation of foreign currency
translation reserve 2 066
Profit for the period
Employee share option scheme
- Value of services provided 1 340
Movement of treasury shares 2 689
Shares issued 177 430
Balance at 30 June 2007 396 375 7 436 13 530
Gains on cash flow hedges, net
of tax 718
Fair value adjustments (2 309)
Profit for the period
Realised on disposal of
subsidiaries 1 857 1 980
Utilisation of foreign
currency translation reserve (4 998)
Employee share option scheme
- Value of services provided 2 719
- Transferred to retained
earnings (16 393)
Movement of treasury shares (41)
Dividends paid
Classified as held for sale (5 210)
Balance at 31 December 2007 396 334 (915) 245
Gains on cash flow hedges, net
of tax 4 403
Fair value adjustments (121)
Loss for the period
Creation of foreign currency
translation reserve 9 023
Realised on disposal of
subsidiaries - -
Employee share option scheme
- Value of services provided 72
Movement of treasury shares (29 900)
Dividends paid
Balance at 30 June 2008 366 434 8 108 4 599
Retained
earnings/
(Accumulated
Loss) TOTAL
Balance at 1 January 2007 116 042 350 231
Losses on cash flow hedges, net of tax (373)
Creation of foreign currency translation reserve 2 066
Profit for the period 23 930 23 930
Employee share option scheme
- Value of services provided 1 340
Movement of treasury shares (726) 1 963
Shares issued 177 430
Balance at 30 June 2007 139 246 556 587
Gains on cash flow hedges, net of tax 718
Fair value adjustments (2 309)
Profit for the period 436 822 436 822
Realised on disposal of subsidiaries 3 837
Utilisation of foreign currency translation reserve (4 998)
Employee share option scheme
- Value of services provided 2 719
- Transferred to retained earnings 16 393 -
Movement of treasury shares (1 670) (1 711)
Dividends paid (569 652) (569 652)
Classified as held for sale (5 210)
Balance at 31 December 2007 21 139 416 803
Gains on cash flow hedges, net of tax 4 403
Fair value adjustments 2 550 2 429
Loss for the period (28 493) (28 493)
Creation of foreign currency translation reserve 9 023
Realised on disposal of subsidiaries -
Employee share option scheme
- Value of services provided 72
Movement of treasury shares (29 900)
Dividends paid (5 317) (5 317)
Balance at 30 June 2008 (10 121) 369 020
Reserves directly
associated with
non-current assets
held for sale TOTAL
Balance at 1 January 2007 - 350 231
Losses on cash flow hedges, net of tax (373)
Creation of foreign currency translation reserve 2 066
Profit for the period 23 930
Employee share option scheme
- Value of services provided 1 340
Movement of treasury shares 1 963
Shares issued 177 430
Balance at 30 June 2007 - 556 587
Gains on cash flow hedges, net of tax 718
Fair value adjustments (2 309)
Profit for the period 436 822
Realised on disposal of subsidiaries 3 837
Utilisation of foreign currency
translation reserve (4 998)
Employee share option scheme
- Value of services provided 2 719
- Transferred to retained earnings -
Movement of treasury shares (1 711)
Dividends paid (569 652)
Classified as held for sale 5 210 -
Balance at 31 December 2007 5 210 422 013
Gains on cash flow hedges, net of tax 4 403
Fair value adjustments 2 429
Loss for the period (28 493)
Creation of foreign currency translation
reserve 1 930 10 953
Realised on disposal of subsidiaries (7 140) (7 140)
Employee share option scheme
- Value of services provided 72
Movement of treasury shares (29 900)
Dividends paid (5 317)
Balance at 30 June 2008 - 369 020
Segment information
for the six months ended 30 June
Primary reporting format - business segments
OEM: Engineering services and the development and manufacturing of electronic
products for the international automotive OEM market
Aftermarket: The supply of branded products to the sub-Saharan Africa
automotive aftermarket
Revenue
30/06/08 30/06/07
Restated
Unaudited Unaudited
R 000 R 000
Aftermarket 218 868 229 517
OEM 284 150 202 393
Head Office - -
Eliminations (1 895) (20 893)
TOTAL CONTINUING OPERATIONS 501 123 411 017
Discontinued OEM 14 973 31 519
Discontinued fleet management 6 633 139 681
Eliminations - (17 101)
TOTAL GROUP 522 729 565 115
EBITDA*
30/06/08 30/06/07
Restated
Unaudited Unaudited
R 000 R 000
Aftermarket 12 399 21 755
OEM 23 333 7 044
Head Office (12 061) (15 714)
Eliminations - -
TOTAL CONTINUING OPERATIONS 23 671 13 085
Discontinued OEM (5 495) (1 083)
Discontinued fleet management (4 324) 41 291
Eliminations - -
TOTAL GROUP 13 852 53 293
Operating profit
30/06/08 30/06/07
Restated
Unaudited Unaudited
R 000 R 000
Aftermarket 5 439 28 533
OEM 10 297 (6 673)
Head Office (12 382) (15 725)
Eliminations - -
TOTAL CONTINUING OPERATIONS 3 354 6 135
Discontinued OEM (5 495) (2 454)
Discontinued fleet management (4 467) 40 669
Eliminations - -
TOTAL GROUP (6 608) 50 350
* EBITDA = Earnings before interest, tax, depreciation, amortisation, negative
goodwill and profit/loss on sale of assets
Notes
1. Non-current assets held for sale and discontinued operations
a) OmniBridge and Datatrak, sold to TeliMatrix on 1 October 2007;
b) Tripmaster, sold to TeliMatrix on 1 April 2008;
c) OEM plastics businesses sold to Smiths Plastics (Pty) Limited
on 17 March 2008.
6 months 6 months Year
ended ended ended
30/06/08 30/06/07 31/12/07
Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
i) Non-current assets classified
as held for sale
OmniBridge and Datatrak
Non-current assets - 137 510 -
Current assets - 109 458 -
Tripmaster
Non-current assets - 41 747 22 746
Current assets - 16 832 11 174
OEM plastics
Non-current assets - - 19 500
Current assets - - 15 995
Total - 305 547 69 415
ii) Non-current liabilities classified
as held for sale
OmniBridge and Datatrak
Non-current liabilities - 29 551 -
Current liabilities - 81 495 -
Tripmaster
Non-current liabilities - 13 932 4 842
Current liabilities - 4 516 5 112
OEM plastics
Current liabilities - - 852
Total - 129 494 10 806
iii)Analysis of the results
Revenue 21 606 154 099 284 414
Cost of sales (14 234) (64 425) (128 864)
Gross profit 7 372 89 674 155 550
Other operating income - 23 751 23 861
Marketing and selling expenses (1 803) (8 963) (20 829)
Administrative expenses (6 286) (43 615) (95 178)
Other operating expenses (9 245) (22 632) (126 861)
Operating (loss)/profit (9 962) 38 215 (63 457)
Net finance costs (644) (2 210) (4 602)
(Loss)/profit before tax (10 606) 36 005 (68 059)
Tax (3 624) (9 221) 275
(Loss)/profit for the period from
discontinued operations (14 230) 26 784 (67 784)
(Loss)/profit on disposal of
discontinued operations (16 935) - 577 136
(Loss)/profit for the period from
discontinued operations (31 165) 26 784 509 352
2. Restatements
2.1 The results for the six months ended 30 June 2007 have been restated due
to the finalisation of the purchase accounting for the Datatrak acquisition.
The impact on the results is as follows:
Previously Restated
stated Restatement balance
R 000 R 000 R 000
Income statement
Other income 5 145 10 395 15 540
Balance sheet
Non-current assets classified as
held for sale (Intangible assets) 294 077 11 470 305 547
Capital and reserves (552 192) (4 395) (556 587)
Non-current liabilities
classified as held for
sale (Deferred tax liabilities) (128 419) (1 075) (129 494)
2.2 The profit on sale of buildings included in the six months to 30 June 2007
has been restated.
3. Notes to the cash flow statement
Disposal of subsidiaries and operations
i) OEM plastics businesses
With effect from 17 March 2008 the Group sold its OEM plastics automotive
operations, Ariston and SPE, to Smiths Plastics (Pty) Limited, a subsidiary of
Metair Investments Limited.
Details of the net assets disposed and related cash flows are as follows:
R 000
Property, plant and equipment 19 378
Intangible assets 122
Inventories 8 486
Trade and other receivables 14 917
Trade and other payables (600)
42 303
Purchase consideration received (42 303)
-
Purchase consideration received 42 303
Settlement of long-term loans (9 354)
Settlement of creditors (7 614)
Net cash inflow from disposal 25 335
ii) Tripmaster
With effect from 1 April 2008 the Group sold its
remaining fleet management business, Tripmaster,
to TeliMatrix.
Details of the net assets disposed and
related cash flows are as follows:
Property, plant and equipment 844
Intangible assets 21 654
Non-current receivables 360
Deferred tax assets 4 851
Inventories 4 023
Trade and other receivables 8 817
Current tax assets 1 704
Cash and cash equivalents 197
Borrowings (98)
Deferred tax liabilities (7 152)
Trade and other payables (11 125)
24 075
Purchase consideration received -
Reserve realised on the disposal of subsidiary (7 140)
Loss on disposal of business (16 935)
-
Purchase consideration received -
Cash and cash equivalents in business disposed (197)
Net cash outflow from disposal (197)
www.ci.co.za
Control Instruments Group Limited
(Incorporated in the Republic of 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),
SV Bromfield*, RJ Fraenkel * independent, non-executive
Sponsor: Investec Bank Limited
Date: 28/08/2008 16:18:01 Produced by the JSE SENS Department.
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