| Mon 24 Nov 2008, 16:30 | | DLV - Dorbyl - Interim Group Results For The Six Months Ended |
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DLV
DLV
DLV - Dorbyl - Interim Group Results For The Six Months Ended
30 September 2008
DORBYL LIMITED
(Incorporated in the Republic of South Africa)
(Company registration number 1911/001510/06)
Share code: DLV ISIN Code: ZAE000002184
INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008
INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months Year
to Sept to Sept to Mar
2008 2007 2008
R000 R000 R000
Continuing operations:
Revenue 488 743 475 258 944 586
Cost of sales (474 096) (419 968) (883 242)
Gross profit 14 647 55 290 61 344
Other operating income 12 226 6 774 8 165
Administrative expenses (69 742) (85 215) (132 098)
Selling and distribution (2 047) (1 845) (3 939)
expenses
Other operating expenses
Loss on sale of controlling - - (16 717)
interest in subsidiary
Impairment of assets (37 324) - -
Operating loss (82 240) (24 996) (83 245)
Net financial income 6 102 8 716 15 564
Financial income 7 313 10 761 24 017
Financial costs (1 211) (2 045) (8 453)
Share of profit of associate 1 - -
Loss before taxation (76 137) (16 280) (67 681)
Income tax (expense)/relief (158) 3 124 (1 362)
Loss after taxation from (76 295) (13 156) (69 043)
continuing operations
Loss on discontinued operations, (5 317) (172) (1 495)
net of taxation
Loss for the period (81 612) (13 328) (70 538)
Attributable to:
Equity holders of the parent (81 736) (13 455) (66 641)
Minority interest 124 127 (3 897)
Loss for the period (81 612) (13 328) (70 538)
Earnings per share (cents)
Basic (loss)/earnings per share (240.9) (39.7) (196.4)
Continuing operations (225.3) (39.2) (192.0)
Discontinued operations (15.7) (0.5) (4.4)
Headline (loss)/earnings per (115.5) (38.9) (143.9)
share
Continuing operations (115.5) (38.9) (143.9)
Discontinued operations - - -
Dividends paid per ordinary - 10 10
share (cents)
Final - year ended 31 March 2008 - 10 10
(2007)
Interim - period ended 30 - - -
September 2008 (2007)
Dividend cover - headline - (3.9) (14.4)
earnings / normal dividends
(times)
Dividends declared per ordinary - - -
share (cents) subsequent to the
period end
Headline loss reconciliation
Loss for the period (81 736) (13 455) (66 641)
Adjusted for: 42 538 255 17 833
(Profit)/loss on disposal of (103) 83 (379)
plant, vehicles and equipment
Loss on sale of controlling - - 16 717
interest in subsidiary
Loss on discontinuance of 5 317 172 1 495
operations
Impairment of assets 37 324 - -
Income tax expense attributable - - -
to adjustments
Headline loss (39 198) (13 200) (48 808)
Depreciation and amortisation 10 977 11 663 22 586
Financial income 7 313 10 761 24 017
Interest received 3 723 9 970 17 803
Foreign exchange gains 3 590 791 6 214
Financial cost (1 211) (2 045) (8 453)
Interest paid (3) (50) (391)
Foreign exchange losses (1 102) (1 889) (7 850)
Interest paid - other (106) (106) (212)
BALANCE SHEET
Unaudited Unaudited Audited
Sept Sept Mar
2008 2007 2008
R000 R000 R000
ASSETS
Non-current assets 204 670 230 000 238 610
Property, plant and equipment 161 488 220 784 195 429
Investment in associates 43 182 286 43 181
Deferred tax assets - 8 930 -
Current assets 444 012 547 011 445 479
Inventories 210 855 163 592 166 364
Trade and other receivables 157 567 126 694 129 513
Cash and cash equivalents 74 755 256 680 149 602
Taxation receivable 835 45 -
Total assets 648 682 777 011 684 089
EQUITY AND LIABILITIES
Total equity 363 715 502 537 445 327
Equity attributable to equity 319 305 454 229 401 043
holders of the parent
Minority interest 44 410 48 308 44 284
Non-current liabilities 33 500 42 931 27 325
Preference share capital 3 980 3 980 3 980
Employee benefits liability 21 861 27 788 15 819
Deferred tax liabilities 7 659 11 163 7 526
Current liabilities 251 467 231 543 211 437
Bank overdraft - 26 546 34 379
Trade and other payables 250 393 184 091 164 058
Employee benefits liability 304 18 381 11 444
Provisions 770 770 770
Taxation payable - 1 755 786
Total equity and liabilities 648 682 777 011 684 089
Capital commitments authorised 13 611 24 848 17 110
Authorised and contracted for 5 226 24 848 15 526
Authorised but not 8 385 - 1 584
contracted for
Operating lease commitments 15 542 16 542 17 104
Operating lease receivables 30 439 9 362 31 965
Investments in associates 43 182 286 43 181
Net asset value per share 941 1 339 1 182
(cents)
Acquisition of property, plant
and equipment
Expansion 4 256 6 614 15 495
Replacement 10 108 11 199 25 182
Ordinary shares (000)
Issued - net of treasury shares 33 924 33 924 33 924
Weighted average number of 33 924 33 924 33 924
shares - net of treasury shares
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months Year
to Sept to Sept to Mar
2008 2007 2008
R000 R000 R000
Balance at beginning of period 445 327 519 257 519 257
Loss for the period (81 612) (13 328) (70 538)
Dividends to shareholders - (3 392) (3 392)
Balance at end of period 363 715 502 537 445 327
CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months Year
to Sept to Sept to Mar
2008 2007 2008
R000 R000 R000
Cash utilised by operations (29 599) (8 663) (81 143)
Operating cash flow (30 871) (15 140) (65 947)
Movement in working capital (732) (5 980) (34 919)
Interest income 3 723 9 970 17 803
Interest expense (109) (156) (603)
Income tax received/(paid) (1 610) 2 643 2 523
Cash flows from investing (10 869) (17 720) (60 151)
activities
Proceeds on disposal of 107 93 538
property, plant and equipment
Acquisition of property, plant (14 364) (17 813) (40 677)
and equipment
Cash disposed on disposal of - - (20 012)
business and subsidiaries
Advances from associates 3 388 - -
Cash flows from financing - (3 392) (3 392)
activities
Dividends paid to equity holders - (3 392) (3 392)
Dividends paid to minority - - -
interest
Net decrease in cash and cash (40 468) (29 775) (144 686)
equivalents
Cash and cash equivalents at 115 223 259 909 259 909
beginning of the period
Cash and cash equivalents at end 74 755 230 134 115 223
of the period
Review of operations
The Group incurred an earnings loss for the six months ended 30 September 2008
of R81,7 million or 240,9 cents per share, which includes a loss of R5,3 million
or 15,7 cents per share relating to discontinued operations and a R37,3 million
impairment of assets.
Whilst turnover of the continuing operations for the period, increased by 2,8%
from the comparative prior period, it should be noted that pursuant to the
disposal by Dorbyl of a 50% interest in Dorbyl Magnetto Wheels (Pty) Limited
(formally Guestro Wheels (Pty) Limited) on 31 March 2008, this company in the
current reporting period was treated as an associate company ie not
consolidated. If the prior comparative period turnover is adjusted to enable a
like comparison, the turnover increased by 26%.
Net financial income (including forex profits and losses) amounted to R6,1
million compared to R8,7 million for the corresponding prior period, as cash
resources were used to fund operating losses and increased stock levels.
The loss on the sale of discontinued operations of R5,3 million represents the
retrenchment costs associated with the closure of the Rosslyn Wheels operation.
The underlying reasons for the deterioration in the results continue to be the
negative impact of global price pressures from Original Equipment Manufacturers
("OEM") combined with increased input costs which were not fully recoverable
from customers. As stated previously, the Group is overly reliant on the
automotive industry and the inherent exposures and risks in that industry as to
global competition, pricing, input costs and capital expenditure necessary to
keep up with technology. In addition, major OEMs internationally are cutting
production in response to declining demand for passenger vehicles. Various
interventions are in place by the Group and are being given effect to as is set
out in the Review of the Business Units below.
The net cash position at R74,8 million is R40,5 million lower than the position
at 31 March 2008 due mainly to operating losses, increases in net working
capital, retrenchments, payment of the pension fund deficit as provided for at
31 March 2008 and some urgently required capital expenditure.
Administration expenses comprise mainly depreciation on all assets, total
salaries and insurance. Included in the amount is the increase of the employee
benefit liability of R6 million in respect of the post retirement medical aid
liability. The increase was considered prudent given the recent continuing
decline in the JSE equity indices, as a portion of the underlying fund assets in
place to cover the liability are invested in equities.
Net working capital
Inventories have increased mainly due to the significant steel price increases
during the period as well as the increased cost of imported components as a
result of the weakened Rand. This increased inventory value has been partially
off-set by the increase in trade payables. By 2 October 2008, a further R39
million was received from trade debtors that were due on 30 September 2008 and
has not been recorded in the cash balance of R74,8 million. In addition, R44
million was paid to trade creditors during the first week of October 2008.
Impairment of assets
International Financial Reporting Standards (IFRS) requires management to assess
at each reporting date whether there is an indication that an asset or group of
assets should be impaired. The recoverable amount of an asset or cash-generating
unit is the greater of its value in use and its fair value less cost to sell.
Following this assessment process and after considering the interventions set
out below and taking into consideration the current global economic crisis, a
further impairment amounting to R37,3 million has been raised. An important
consideration during the assessment process was the interrelationship of the
properties with operations, which were evaluated as one cash-generating unit,
thus only the net impairment has been recognised. Management are therefore of
the opinion that the shareholders equity per the balance sheet at 30 September
2008 of R325 million represents fair value. The impact of secondary tax on
companies (STC) was not considered as a cost to realise an asset and has
therefore been excluded from the fair value estimate. Such fair value
statements, estimates, targets and projections reflect assumptions and
judgements by the management of the company concerning anticipated results.
These assumptions and judgments may or may not prove to be correct as there is
significant uncertainty in the current economic environment and should
accordingly be viewed with caution.
Review of business units
Each business unit is being evaluated to ascertain its future viability. In
respect of those business activities identified as not being viable, action is
being taken where necessary to restructure, downscale or dispose of such units.
Consideration is being given to the possible closure of certain business
activities.
Dorbyl Automotive Technologies` Central Services in Port Elizabeth have been
drastically downsized.
Dorbyl Automotive Systems (DAS)
As was announced in the press on 21 October 2008, the assets and liabilities of
DAS were disposed of to Red Tape Trading 25 (Proprietary) Limited, effective 2
February 2009, subject to certain conditions precedent. The disposal
consideration comprises an amount of R7,6 million in respect of the Fixed Assets
plus the Net Working Capital of DAS as at 2 February 2009 which is currently
forecast at R16,8 million.
Univel Transmissions
Univel Transmissions situated in Neave, Port Elizabeth, is a joint venture
company between GKN Driveline and Dorbyl Limited. The company supplies constant
velocity driveshaft assemblies, associated componentry and wheel hub flanges to
local and international automotive original equipment manufacturers. The
manufacture of these high technology products is conducted under technology
license from GKN Driveline. The main customers are Toyota, BMW, General Motors,
Ford and Volkswagen. The future of the business is dependent on securing new
business from the major Original Equipment Manufacturers (OEM`s). Recent
indications are that this will not be easily achievable due to global
competition on prices. Management are as a consequence in negotiations with GKN
and the customer base.
Guestro Forging and Machining
As stated in the Group`s 2008 Annual Report, problems of under-utilisation of
capacity and inefficiency at the forging and machining operation in Uitenhage
caused this operation to be the main loss contributor during the 2008 financial
year and that the operation was being restructured. This initiative continued
during the period under review. Negotiations are progressing for the disposal of
the business unit.
Dorbyl Magnetto Wheels (DMW)
Dorbyl holds a 50% interest in DMW, with the other 50% owned by Magnetto Wheels
S.p.A. of Italy. DMW is engaged in the production and distribution of steel
wheels for passenger cars and light and heavy commercial vehicles. Magnetto
Wheels S.p.A. is engaged in a similar but much bigger business of manufacturing
and marketing steel wheels for the automotive industry throughout the world. The
results of DMW for the period under review were not satisfactory as the business
is faced with pricing pressures from its major customers. Dorbyl intends to
dispose of a further portion of its holding in DMW to an Asian wheel
manufacturer who is linked to an OEM, whereby Dorbyl will then hold a 44%
interest in DMW. It is envisaged that this strategic alliance will make the
business more competitive with satisfactory returns.
Guestro Castings and Machining
This facility is situated in the industrial area of Benoni in Gauteng. Guestro
Casting and Machining is a ferrous foundry and specialises in the manufacture of
castings from both grey and ductile irons. The product range is balanced between
the automotive aftermarket, axle builders and general engineering customers.
Compared to the aforementioned business units, this operation is not overly
reliant on the South African automotive OEMs. The financial results of this
operation are however not satisfactory. Based on an in depth examination of the
capacity output, product mix and pricing, it has been revealed that substantial
price increases combined with a restructured business would need to be
implemented in order for the business to become economically viable.
Properties
There are five properties owned by the Group, all of which are fully or partly
occupied by Group operations. As stated in the cautionary announcement in the
press on 28 August 2008, those properties or portions thereof which are surplus
to the requirements of the Group, will either be rented out at market related
rentals or disposed of at market related prices. These initiatives continue to
be pursued. The current status of each of the properties is set out below.
Uitenhage property
As announced in the press on 25 September 2008, this property was disposed of to
Store-World cc for a consideration of R43,5 million. The consideration is
expected to be received during end of the latter half of the financial year,
provided that all of the suspensive conditions are fulfilled.
Neave property
Negotiations are in progress with certain interested parties for the disposal of
this property.
Rosslyn property
The property is currently vacant and purchase offers received are being
evaluated.
Struandale property
This property is predominantly occupied by DMW, with the remainder of the
property being vacant land. During March 2008, Dorbyl attempted to dispose of
the vacant area. However due to problems associated with the sub-division of the
property, electricity reticulation and access roads, the disposal did not
eventuate. Renewed attempts are being made for the disposal of the whole of the
property, or portions there-of with appropriate servitudes.
Benoni property
The nature of this property, due to the infrastructure, is directly linked to
the castings and machining operation. The disposal or otherwise of the property
will be decided upon once the future of the underlying operation has been
determined.
Basis of preparation
The results for the six months ended 30 September 2008 have been prepared in
accordance with International Financial Reporting Standards (IFRS). The
accounting policies are consistent to those applied in the prior comparative
period and comply with IAS 34 - Interim Financial Reporting.
DIVIDEND
In view of the adverse results for the period under review, no dividend has been
declared.
On behalf of the board
J E Newbury (Chairman)
R F R?hrs (Chief Executive)
24 November 2008
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg 2001
(P O Box 61051, Marshalltown, 2107).
Company secretary and registered office:
BD Bhikha,
Lincoln Road, Industrial Sites,
Benoni South, 1501.
PO Box 5500, Benoni South, 1502
Directors: JE Newbury (Chairman)**,
RF Rohrs (Group Chief Executive)*,
JB Magwaza**, TA Morkel***, T van Wyk***, PM Bester**.
- Executive director ** Independent non-executive directors
- *** Non-executive director
Sponsor: PSG Capital (Proprietary) Limited
Building 8, Woodmead Office Park, 1 Woodmead Drive, Woodmead
PO Box 987, Parklands, 2121
Date: 24/11/2008 16:30:01 Produced by the JSE SENS Department.
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