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MTA
MTA
MTA - Metair Investments Limited - Interim report for the six months ended 30
June 2009
METAIR INVESTMENTS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("Metair" or "the group")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2009
(Reg No. 1948/031013/06)
Share code: MTA ISIN code: ZAE000090692
Group income statements
Six months ended Year ended
30 June 2009 30 June 2008 31 December
2008
R`000 % R`000 R`000
Unaudited Change Unaudited Audited
Revenue 1 659 433 (19) 2 055 409 4 180 398
Cost of sales (1 438 443) 17 (1 742 303) (3 496 203)
Gross profit 220 990 (29) 313 106 684 195
Other operating income 35 640 193 12 147 45 139
Impairment of assets (30 544) (122 590)
Distribution,
administrative and
other expenses (227 613) (17) (193 927) (512 405)
Operating (loss)/profit (1 527) (101) 131 326 94 339
Finance costs (14 926) 23 (12 132) (28 958)
Interest expense for
The Metair Share
Incentive Trust (3 821) (22) (3 139) (7 660)
Share of results
of associates (216) (104) 5 297 17 056
(Loss)/profit before
tax (20 490) (117) 121 352 74 777
Taxation (7 324) 81 (39 137) (71 859)
(Loss)/profit for
the period (27 814) (134) 82 215 2 918
Attributable to:
Equity holders of
the company (27 283) (136) 75 102 (13 080)
Minority interest (531) (107) 7 113 15 998
(27 814) (134) 82 215 2 918
Depreciation and
amortisation (46 152) (15) (39 971) (109 557)
Basic (loss)/earnings
per share (cents) (19) (136) 53 (9)
Headline (loss)/earnings
per share (cents) (3) (105) 53 74
Diluted headline earnings
per share (cents) 52
Calculation of headline (loss)/earnings per share (R`000)
Net (loss)/profit
attributable to
ordinary shareholders (27 283) 75 102 (13 080)
Impairment charges 30 544 122 590
Tax relief (5 620) (2 051)
Impairment charge
attributable to minority
shareholders (3 627)
Loss/(profit) on disposal
of property, plant and
equipment 2 212 (39) (2 329)
Headline
(loss)/earnings (3 774) 75 063 105 130
Weighted average number
of shares in
issue (`000) 141 707 141 707 141 707
Calculation of diluted headline earnings per share (R`000)
Headline earnings 75 063
Interest income
on proceeds 461
Interest expense for
The Metair Share
Incentive Trust 3 139
Headline earnings
adjusted for dilutive
share options 78 663
Number of shares used
for diluted earnings
calculation (`000) 152 239
No diluted earnings per share is reflected for the year ended 31 December 2008
as well as 30 June 2009 as share options and potential ordinary shares issued or
convertible in terms of the various share incentive schemes are anti-dilutive.
Group statement of changes in equity
Share Share-base Non-distri-
capital & Treasury payment butable
premium shares reserve reserve
R`000 R`000 R`000 R`000
Half-year ended 30 June 2009
Balance at
1 January 2009 42 876 (124 532) 3 389 36 585
Loss for the period
Total comprehensive
income for the period
Employee share option scheme:
- Value of services
provided 80
Transfers (80) (14 916)
Balance at 30 June 2009 42 876 (124 532) 3 389
21 669
Attributable
to equity
Retained holders of Minority Total
earnings the company interest equity
R`000 R`000 R`000 R`000
Half-year ended 30 June 2009
Balance at
1 January 2009 41 061 756 1 020 074 93 590 1 113 664
Loss for the period (27 283) (27 283) (531) (27 814)
Total comprehensive
income for the period (27 283) (27 283) (531) (27 814)
Employee share option scheme:
- Value of services provided 80 80
Transfers 14 996
Balance at 30 June 2009 1 049 469 992 871 93 059 1 085 930
Group statement of changes in equity
Share Share-base Non-distri-
capital & Treasury payment butable
premium shares reserve reserve
R`000 R`000 R`000 R`000
Half-year ended 30 June 2008
Balance at 1 January 2008 42 876 (131 813) 3 074 25 139
Profit for the period
Total comprehensive income
for the period
Employee share option scheme:
- Value of services
provided (4 624)
Net movement in
treasury shares 7 290
Transfers (313)
Dividend
Balance at 30 June 2008 42 876 (124 523) (1 550)
24 826
Year ended 31 December 2008
Balance at
1 January 2008 42 876 (131 813) 3 074 25 139
(Loss)/profit for the year
Actuarial losses
Total comprehensive income for the period
Employee share option scheme:
- Value of services provided 315
Net movement in
treasury shares 7 281
Transfers 11 446
Dividend
Balance at
31 December 2008 42 876 (124 532) 3 389 36 585
Group statement of changes in equity
Attributable
to equity
Retained holders of Minority Total
earnings the company interest equity
R`000 R`000 R`000 R`000
Half-year ended 30 June 2008
Balance at
1 January 2008 1 161 561 1 100 837 89 295 1 190 132
Profit for the period 75 102 75 102 7 113 82 215
Total comprehensive income
for the period 75 102 75 102 7 113 82 215
Employee share option scheme:
- Value of services provided (4 624) 80 (4 544)
Net movement in treasury shares 7 290 7 290
Transfers 772 459 (459)
Dividend (55 793) (55 793) (193) (55 986)
Balance at 30 June 2008 1 181 642 1 123 271 95 836 1 219 107
Year ended 31 December 2008
Balance at 1 January 2008 1 161 561 1 100 837 89 295 1 190 132
(Loss)/profit for the year (13 080) (13 080) 15 998 2 918
Actuarial losses (19 486) (19 486) (2 336) (21 822)
Total comprehensive income
for the period (32 566) (32 566) 13 662 (18 904)
Employee share option scheme:
- Value of services provided 315 80 395
Net movement in treasury shares 7 281 7 281
Transfers (11 446)
Dividend (55 793) (55 793) (9 447) (65 240)
Balance at
31 December 2008 1 061 756 1 020 074 93 590 1 113 664
Group statement of cash flows
Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Operating activities
(Loss)/profit before tax (20 490) 121 352 74 777
Non-cash items 112 024 74 109 251 762
Working capital changes 23 765 (85 873) 42 267
Cash generated from
operations 115 299 109 588 368 806
Finance charges (22 412) (18 921) (51 385)
Taxation paid (41 508) (49 419) (96 970)
Dividends paid (61 722) (65 089)
Dividend income
from associate 14 700
Net cash inflow/(outflow)
from operating activities 66 079 (20 474) 155 362
Investing activities
Investment income 3 665 3 651 14 767
Net cash used in other
investing activities (27 488) (100 514) (265 742)
Net cash outflow from
investing activities (23 823) (96 863) (250 975)
Net cash (outflow)/inflow
from financing activities (9 551) 38 162 72 642
Net increase/(decrease)
in cash and cash equivalents 32 705 (79 175) (22 971)
Cash and cash equivalents at
beginning of period 18 350 41 321 41 321
Cash and cash equivalents
at end of period 51 055 (37 854) 18 350
Group statement of comprehensive income
(Loss)/profit for the year (27 814) 82 215 2 918
Other comprehensive income:
Gross (30 308)
Deferred tax 8 486
Net other comprehensive income (21 822)
Total comprehensive income
for the period (27 814) 82 215 (18 904)
Attributable to:
Equity holders of
the company (27 283) 75 102 (32 566)
Minority interest (531) 7 113 13 662
(27 814) 82 215 (18 904)
Group balance sheets
30 June 2009 30 June 2008 31 December 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 692 177 764 077
714 001
Intangible assets 29 313 48 111 40 254
Investment in associates 25 507 27 619 40 423
Defined benefit asset 19 942
Deferred taxation 62 305 43 396 47 930
809 302 903 145 842 608
Current assets
Inventories 582 253 668 681 769 013
Trade and other receivables 381 859 600 689 398 181
Derivative financial assets 7 382 274
Taxation 15 274
Cash and cash equivalents 153 137 143 543 123 325
1 139 905 1 412 913 1 290 793
Total assets 1 949 207 2 316 058 2 133 401
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 42 876 42 876 42 876
Treasury shares (124 532) (124 523) (124 532)
Share-based payment reserve 3 389 (1 550) 3 389
Non-distributable reserves 21 669 24 826 36 585
Retained earnings 1 049 469 1 181 642 1 061 756
Ordinary shareholders`
equity 992 871 1 123 271 1 020 074
Minority interest 93 059 95 836 93 590
Total equity 1 085 930 1 219 107 1 113 664
Non-current liabilities
Interest bearing borrowings 69 096 52 356 78 434
Cumulative redeemable
preference shares in
respect of The Metair
Share Incentive Trust 100 000 100 000 100 000
Post-employment
medical benefits 18 274 17 451 17 810
Defined benefit liability 3 594 11 085
Deferred taxation 92 850 109 621 91 216
283 814 279 428 298 545
Current liabilities
Trade and other payables 358 962 576 731 538 279
Borrowings 19 421 10 083 20 817
Taxation 5 209 5 552
Provisions for liabilities
and charges 85 584 44 103 51 418
Dividends payable 151
Derivative financial
liabilities 13 414
Bank overdrafts 102 082 181 397 104 975
579 463 817 523 721 192
Total liabilities 863 277 1 096 951 1 019 737
Total equity and
liabilities 1 949 207 2 316 058 2 133 401
Net asset value per share
(cents) attributable to
ordinary shareholders 701 793 720
Capital expenditure 44 285 101 157 179 619
Capital commitments
- contracted 44 746 48 128 62 283
- authorised but not
contracted 34 412 41 876 49 683
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 2008.
This interim report has not been reviewed or audited by the auditors.
Contingencies
The bank and other guarantees given by the Group to third parties amounted to
R6,2 million as at 30 June 2009 (R5,6 million as at 30 June 2008). Financing
provided to The Metair Share Incentive Trust was guaranteed by Metair at R75
million. This liability has been included in the consolidated balance sheet.
Borrowings 30 June 2009 30 June 2008 31 December 2008
R`000 R`000 R`000
Current 19 421 10 083 20 817
Overdrafts net of cash (51 055) 37 854 (18 350)
Non-current 169 096 152 356 178 434
Total 137 462 200 293 180 901
The movement in the borrowings can be analysed as follows:
Six months ended June 2009
Opening amount (180 901)
Repayments 43 604
Amounts raised (165)
Closing amount (137 462)
Segmental review
for the six months ended 30 June 2009
Local Direct exports
Original After Original
equipment market Non-auto equipment
Revenue from external customers 1 019 167 368 220 166
872 30 150
(Loss)/profit before interest and tax (40 286) 31 195 17
292 (687)
Finance costs
Loss before tax
Included in the above:
- Depreciation and amortisation
- Impairment charges
for the six months ended 30 June 2008
Revenue from external customers 1 312 029 323 253 276 830
54 294
Profit/(loss) before interest and tax 38 963 31 965 49
993 12 133
Finance costs
Profit before tax
Included in the above:
- Depreciation and amortisation
for the year ended 31 December 2008
Revenue from external customers 2 762 614 687 344 426 875
99 996
Profit/(loss) before interest and tax (5 347) 49 535 53
294 17 206
Finance costs
Profit before tax
Included in the above:
- Depreciation and amortisation
- Impairment charges
Segmental review
for the six months ended 30 June 2009
Direct exports
After Reconciling
Market Non-auto items Total
Revenue from external customers 55 884 19 140
1 659 433
(Loss)/profit before interest and tax 4 091 2 090
(15 438) (1 743)
Finance costs (18 747)
Loss before tax (20 490)
Included in the above:
- Depreciation and amortisation (46 152)
- Impairment charges (30 544)
for the six months ended 30 June 2008
Revenue from external customers 58 460 30 543
2 055 409
Profit/(loss) before interest and tax (1 130) 5 069
(370) 136 623
Finance costs (15 271)
Profit before tax 121 352
Included in the above:
- Depreciation and amortisation (39 971)
for the year ended 31 December 2008
Revenue from external customers 141 140 62 429
4 180 398
Profit/(loss) before interest and tax (2 973) 5 188
(5 508) 111 395
Finance costs (36 618)
Profit before tax 74 777
Included in the above:
- Depreciation and amortisation (109 557)
- Impairment charges (122 590)
OPERATING RESULTS
NATURE OF OPERATIONS
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 acid batteries, lighting and signaling devices, plastic mouldings,
wiring harnesses, front-end modules and brake pads. Products are supplied to
South African assemblers of new vehicles and the replacement market, while a
proportion of output is exported.
RESULTS
Trading during the period was extremely difficult as the automotive market, both
locally and internationally, continued to be adversely affected by the global
economic turmoil experienced during the last quarter of 2008. During this
trading period, sales of motor vehicles in the local market saw its worst
decline in 30 years. The export market declined by more than 38% compared to the
first six months in 2008 to 2006 levels.
The effect can be seen in the 19% decline in turnover from R2 055 million to R1
659 million during the period.
In line with the latest reporting requirements and accounting standards, the
Group has complied with segmental reporting requirements for the first time. The
segments which have been reported on are the local and export markets, each with
sub-classifications for Original Equipment Manufacturers (OEMs), Automotive
After Market and Non-Automotive Market.
Segmental reporting on turnover shows a 22% decline (to R1 019 million) on
products to local OEMs. Non-Automotive turnover declined by 33% to R166 million
as take off for products sold into the mining, telecommunications and utility
sectors also came under pressure during the period. Direct exports declined by
16% to R74 million. Automotive After Market sales enjoyed a growth of 3% to R368
million.
Earnings per share declined to a loss of 19 cents per share compared to a profit
of 53 cents per share for the comparative period.
Earnings were negatively affected by impairment testing that resulted in the
further write-off of R20,54 million in investment in property, plant and
equipment and R10 million in goodwill. The write-off occurred in the wire
harness and plastics businesses. There were no impairment charges in the
comparative period but at year-end the impairment charges totalled R122,59
million. Total impairment charges brought about by the decline in economic
activity to date, amounts to R153 million.
Headline earnings per share declined to a loss of 3 cents per share compared to
a profit of 53 cents per share for the comparative period. The most significant
adjustment in the calculation of headline earnings per share is the exclusion of
the impairment charges.
The focus during the period was to resize the business to what Metair believes
is a structural long-term reset in the demand for locally manufactured vehicles.
Although Metair responded swiftly to start manning the business to the new
levels of activity, the natural delay in reaction time resulted in an increase
in distribution, administration and other cost of 17% to R227 million compared
to R193 million in the comparative period. Compared to the second half of 2008
this expense is 30% less (from R319 million).
The positive effect of the resizing can also be seen in the balance sheet as the
cash flow during this period was positive to the value of R32 million compared
to an outflow of R79,2 million in the comparative period. Net cash increased to
R51 million.
On the balance sheet the Group managed to reduce the inventory levels by R187
million to R582 million compared to the year-end level of R769 million.
Segmental reporting indicates the significant change in profitability in the
local OEM market from a profit before tax of R39,0 million in the previous
period to a R40,3 million loss in the current period. Similarly, profitability
in the export market to OEMs was eroded to reflect a loss of R0,6 million.
Contributions from the other sectors were still all positive but declined in
line with reduction in demand and pricing pressure in the local after market
sector.
DIRECTORATE AND CORPORATE GOVERNANCE
Jonathan Best was appointed as Independent Non-Executive Director during the
period and is the Chairman of the Audit Committee. In compliance with King III
Metair has decided to structure the board around a lead Independent Non-
Executive Director.
PROSPECTS
At year-end Metair was of the opinion that the projected decline in the
production of vehicles in South Africa will be 28% to 375 000 vehicles. The
current view is that a full year-on-year decline of closer to 37% to 331 000
vehicles is more realistic. Metair is currently busy with a long-term strategic
planning process using the revised production volume as the base.
As mentioned in the full year reported period, the profitability of the medium-
sized companies was challenged during this period especially in the plastics
group of companies. The strategic planning process will particularly focus on
the correct strategy for the plastics group.
Relationships with customers were stabilised during this period and the Group
managed to negotiate more reactive pricing mechanisms and in regard to foreign
currency fluctuation the company has reduced the risks relating to exchange rate
volatility by making use of forward cover contracts.
The Group managed to deliver on the undertaking to focus on cash generation and
preservation and will continue to do so as we react to the new level of
activity.
Under the current labour environment the ongoing streamlining of the business
will be challenging, but necessary, as Metair does not expect a major change in
the volume outlook for 2010 compared to 2009.
The strategic planning processes and cost-saving programmes are all aimed at
improving negative contributions from the plastics, wire harnesses and lighting
businesses.
REGISTRARS Computershare Investor Services (Pty) Limited 70 Marshall
Street JOHANNESBURG
2001
SPONSOR Barnard Jacobs Mellet Corporate Finance (Pty) Limited
Signed on behalf of the Board
O M E Pooe C T Loock
Chairman Managing Director
JOHANNESBURG, 24 August 2009
EXECUTIVE DIRECTORS: CT Loock (Managing); BM Jacobs (Finance) NON-EXECUTIVE
DIRECTORS: OME Pooe (Chairman); A Joffe; B Molotlegi (Alternate: LM Ndala);
AD Plummer*; GMC Ryan INDEPENDENT NON-EXECUTIVE DIRECTORS: RS Broadley; L
Soanes*; A Galiel; JG Best COMPANY SECRETARY: SM Vermaak *British
Date: 27/08/2009 17:15:01 Produced by the JSE SENS Department.
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