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CNL
CNL
CNL - Control Instruments - Interim Results for the six months ended 30 June
2009
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" or "the Parent")
INTERIM RESULTS for the six months ended 30 June 2009
OVERVIEW
The past nine months will undoubtedly be remembered as one of the most
tumultuous times in business and in the history of the automotive industry.
Decisive action taken by the Group enabled us to weather the storm and
position our business for the future.
The Group`s cash flow turned positive in the second quarter of 2009.
R12.2 million was invested in product development and capex to position
our businesses for the future.
The automotive industry appears to have stabilised and a slow but steady upturn
in demand is expected for the remainder of 2009.
RESULTS
Group revenue decreased by 17% to R416.0 million in the six months to 30 June
2009 compared with R501.1 million in the same period last year.
A reduction of R38.0 million in the expense base during the period limited
the operating loss to R6.2 million compared with an operating profit of
R3.4 million in the six months to 30 June 2008. Further cost reductions were
considered, but were not implemented as they would have impacted the core
competencies of our businesses.
The reduction in expenses and other operating efficiencies implemented
resulted in the loss per share for the six months being reduced by 62% to
8.75 cents compared with 23.21 cents in the same period in 2008. The headline
loss per share reduced 7% to 8.76 cents compared with 9.37 cents.
Our cash resources were under significant pressure until May 2009. The major
contributory factor for this was long lead-time orders for components and
products that could not be cancelled or deferred, despite the significant drop
off in demand. The resultant net cash outflow for the period was R7.8 million,
which was better than our targets.
Cash generation remains an area of intense focus for the Group.
OEM
The global fall off in new vehicles sales led to a decline in demand for
manufacturing and engineering services.
OEM revenue decreased by 31% to R196.5 million for the six months to 30 June
2009 compared with R284.2 million in the comparative period. Normalised EBITDA
decreased by 52% to R11.1 million compared with R23.3 million in the same
period last year.
Pi Shurlok`s OpenECU forms the cornerstone of the Group`s OEM strategy. A new
range of OpenECU products was introduced into the North American market
during the first quarter of the year. The market`s response to these
products has been positive. For more information about Pi Shurlok`s OpenECU
please go to www.pi-shurlok.com.
AFTERMARKET
The aftermarket business traded well below expectations during the first half
of the year. While generally being counter cyclical to the OEM business, the
aftermarket business was affected by the global financial crisis and the
ensuing impact on consumer spending.
At R220.7 million, revenue was essentially flat compared with the same period
in the previous year. Normalised EBITDA increased by 21% to R15.0 million in
the six months under review compared with R12.4 million in the first six
months of the previous year. This is as a result of the strict control over
expenses and the ongoing rationalisation of resources.
The Group`s strategy is to own and distribute strong brand names in the
automotive aftermarket. Brand names owned by the Group include Gabriel,
Echlin, Acsa-Mag, AutoExcel, MAG-Brakes, AutoSave and Autocom. Globally
recognised product brands, for which the Group has the distribution rights,
include VDO and Warn.
MANAGEMENT AND STAFF
Sean Rogers was appointed Chief Operating Officer of the Group`s South African
operations (Pi Shurlok and CI Automotive) and Eckert Giliomee was appointed
Group Financial Director and Financial Director of the Group`s South African
operations in April 2009. They were previously Managing Director and Financial
Director respectively of Pi Shurlok South Africa.
Our staff have played a vital role during these difficult times. The energy and
commitment that they have brought and continue to bring to the business is
invaluable and is greatly appreciated. In particular the Board would like to
thank staff in the Group`s OEM businesses who have made a number of sacrifices,
including salary cuts. At the time of writing this report the majority of the
salary cuts remain in place and one of our priorities is to restore salary
levels as soon as possible.
We would also like to thank our shareholders who have stood by us during these
difficult times.
PROSPECTS
Conditions are expected to remain challenging in the coming months. However it
appears that the automotive market has stabilised and a slow but steady
upturn in demand is expected for the remainder of 2009.
The Group expects to generate cash in the second half of 2009, subject to
no unforeseen circumstances. We will continue to focus on the expansion of
international markets, particularly for our OpenECU platforms; the development
of own IP products; high levels of customer service; and brand strength.
On behalf of the board
Sam O`Leary Richard Friedman
Chairman Group Managing Director
28 August 2009
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2009
Unaudited
Unaudited Restated Audited
6 months 6 months Year
ended ended ended
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
Continuing operations
Revenue 415 943 501 123 1 014 229
Cost of sales (306 014) (343 201) (761 533)
Gross profit 109 929 157 922 252 696
Other operating income 3 262 2 878 12 154
Marketing and selling expenses (16 355) (15 809) (32 370)
Administrative expenses (42 017) (80 956) (133 348)
Other operating expenses (61 050) (60 681) (137 585)
Operating (loss)/profit (6 231) 3 354 (38 453)
Finance income 4 28 585
Finance costs (7 566) (9 329) (16 243)
Share of profit from joint ventures 451 361 418
Loss before tax (13 342) (5 586) (53 693)
Tax 1 315 1 268 3 520
Loss for the period from continuing
operations (12 027) (4 318) (50 173)
Discontinued operations
Loss for the period from discontinued
operations - (24 175) (25 507)
Loss for the period (12 027) (28 493) (75 680)
Attributable to equity holders of the
Parent (12 027) (28 493) (75 680)
Total shares in issue excluding
treasury shares (000) 137 387 117 792 137 387
Weighted average number of shares in
issue (000) 137 387 122 786 137 891
Adjustment for share options (000) - 162 -
Weighted average number of shares for
diluted earnings per share (000) 137 387 122 948 137 891
Loss per share (cents)
Continuing operations (8.75) (3.52) (36.39)
Discontinued operations - (19.69) (18.50)
Loss per share (8.75) (23.21) (54.89)
Headline loss (R 000)
Continuing headline loss
Loss after tax for the period (12 027) (4 318) (50 173)
(Profit)/loss on disposal of property,
plant and equipment (58) 26 7
Impairment of property, plant and
equipment 36 - 1 642
Impairment of other intangible assets - - 489
Tax on the above 8 - (461)
(12 041) (4 292) (48 496)
Discontinued headline loss
Loss after tax for the period - (24 175) (25 507)
Loss on disposal of subsidiaries and
operations - 16 935 12 327
Loss on disposal of property, plant
and equipment - 45 45
Tax on the above - (13) (13)
- (7 208) (13 148)
Total headline loss (12 041) (11 500) (61 644)
Headline loss per share (cents)
Continuing headline loss per share (8.76) (3.50) (35.17)
Discontinued headline loss per share - (5.87) (9.54)
Headline loss per share (8.76) (9.37) (44.71)
Diluted loss per share (cents)
Continuing diluted loss per share (8.75) (3.51) (36.39)
Discontinued diluted loss per share - (19.66) (18.50)
Diluted loss per share (8.75) (23.17) (54.89)
Diluted headline loss per share (cents)
Continuing diluted headline
loss per share (8.76) (3.49) (35.17)
Discontinued diluted headline
loss per share - (5.86) (9.54)
Diluted headline loss per share (8.76) (9.35) (44.71)
Dividends per share (cents)
Cash - 4.5 8.0
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2009
Unaudited
Unaudited Restated Audited
6 months 6 months Year
ended ended ended
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
Loss for the period (12 027) (28 493) (75 680)
Other comprehensive (loss)/income for
the period, net of tax (9 170) 8 095 (5 794)
Fair value adjustments 144 (121) (516)
Cash flow hedges, net of tax (6 199) 4 403 1 524
Foreign currency translation reserve (3 115) 3 813 (6 802)
Total comprehensive loss for the period (21 197) (20 398) (81 474)
Attributable to equity holders of the
Parent (21 197) (20 398) (81 474)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2009
Unaudited Unaudited Audited
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
ASSETS
Non-current assets 296 188 314 913 300 908
Property, plant and equipment 138 337 148 281 139 788
Intangible assets 132 539 147 820 137 247
Investments in joint ventures and
associates 867 2 364 2 421
Available-for-sale financial assets 528 780 384
Deferred income tax assets 23 917 15 668 21 068
Current assets 280 138 371 154 291 003
Inventories 137 366 175 719 152 378
Trade and other receivables 135 128 174 968 124 746
Derivative financial instruments - 6 136 3 986
Financial assets at fair value through
profit or loss 111 3 498 81
Current income tax assets 120 3 485 1 883
Cash and cash equivalents 7 413 7 348 7 929
Total assets 576 326 686 067 591 911
EQUITY AND LIABILITIES
Capital and reserves 308 727 369 020 329 924
Share capital 6 972 6 972 6 972
Share premium 396 996 396 996 396 996
Treasury shares (3 117) (37 534) (3 117)
Foreign currency translation reserve (6 300) 8 108 (3 185)
Other reserves (4 717) 4 599 1 338
Accumulated loss (81 107) (10 121) (69 080)
Non-current liabilities 109 110 110 957 109 884
Borrowings 79 601 71 594 76 791
Deferred income tax liabilities 26 131 31 032 27 699
Provisions 3 378 8 331 5 394
Current liabilities 158 489 206 090 152 103
Trade and other payables 104 813 176 704 106 633
Current income tax liabilities 5 210 10 052 9 342
Derivative financial instruments 6 501 - 1 848
Borrowings 37 355 19 334 28 560
Provisions 4 610 - 5 720
Total equity and liabilities 576 326 686 067 591 911
Net asset value per share (cents) 225 313 240
CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2009
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
Cash flows from operating activities
Operating profit before working
capital changes 10 518 13 404 4 171
Working capital changes (2 049) (2 846) (526)
Cash generated from operations 8 469 10 558 3 645
Finance income received 4 36 593
Finance costs paid (7 566) (9 981) (16 889)
Dividends received 2 005 - -
Dividends paid - (5 316) (10 829)
Tax paid (3 772) (362) (3 715)
(860) (5 065) (27 195)
Cash flows from investing activities
Purchase of property, plant
and equipment (8 422) (7 775) (17 813)
Proceeds from disposal of
property, plant and equipment 209 174 5 745
Increase in intangible assets (3 765) (5 010) (9 758)
Proceeds from disposal of
financial assets - - 3 591
Proceeds from disposal of
subsidiaries, net of cash - 25 138 26 046
(11 978) 12 527 7 811
Cash flows from financing activities
Net proceeds from non-current
borrowings 5 034 410 7 214
Net (investment in)/proceeds on
disposal of treasury shares - (11 650) 129
5 034 (11 240) 7 343
Net cash outflow for the period (7 804) (3 778) (12 041)
Forex translation adjustments on cash
and cash equivalents (1 540) 1 742 (2 459)
Cash and cash equivalents at the
beginning of the period (12 110) 2 390 2 390
Cash and cash equivalents at the end of
the period (21 454) 354 (12 110)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the six months ended 30 June 2009
Accounting policies
This interim report complies with IAS 34 - Interim Financial Reporting and
has been prepared using accounting policies that comply with International
Financial Reporting Standards ("IFRS"). The accounting policies are
consistent with those applied in the financial statements for the year ended
31 December 2008, except for the following changes:
Adoption of IFRS 8 - Operating Segments;
Adoption of Annual Improvements to IFRSs; and
Adoption of IAS IR - Presentation of Financial Statements.
1 Discontinued operations
Analysis of the results of discontinued operations and the results recognised
on the remeasurement of assets or asset groups.
Unaudited
Unaudited Restated Audited
6 months 6 months Year
ended ended ended
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
Revenue - 20 206 20 206
Cost of sales - (14 415) (14 415)
Gross profit - 5 791 5 791
Other operating income - - -
Marketing and selling expenses - (1 758) (1 758)
Administrative expenses - (2 428) (3 385)
Other operating expenses - (11 493) (11 986)
Operating loss - (9 888) (11 338)
Net finance costs - (638) (638)
Loss before tax - (10 526) (11 976)
Tax - 3 286 (1 204)
Loss for the period from
discontinued operations - (7 240) (13 180)
Loss on disposal of discontinued
operations - (16 935) (12 327)
Loss for the period from
discontinued operations - (24 175) (25 507)
2 Restatements
The results for the six months ended 30 June 2008 have been restated for the
finalisation of the accounting for the discontinued operations, Fleet
management and OEM.
Previously Re- Restated
stated statement balance
R 000 R 000 R 000
Continuing operations
Tax 8 258 (6 990) 1 268
Discontinued operations
Loss before tax (10 606) 80 (10 526)
Tax (3 624) 6 910 3 286
CONSOLIDATED SEGMENTS
Segment reporting - reportable segments
At 30 June 2009, the Group is organised on a worldwide basis into the
following reportable segments:
OEM - Automotive engineering services and the development and manufacturing of
electronic products for the international original equipment manufacture
("OEM") market.
Aftermarket - The supply of branded products to the sub-Saharan Africa
automotive aftermarket.
Fleet management - Design, development, sale and distribution of fleet
management products and systems (discontinued).
Head office - Service supplier to the Group, including treasury and investment
management.
For the six months ended 30 June 2009: Head
Continuing operations OEM Aftermarket office
Total segment revenue 195 263 220 680 -
Inter-segment revenue 1 200 - 7 527
Revenue 196 463 220 680 7 527
Normalised EBITDA 11 100 14 986 (8 355)
For the six months ended 30 June 2008:
Continuing operations
Total segment revenue 282 255 218 868 -
Inter-segment revenue 1 895 - -
Revenue 284 150 218 868 -
Normalised EBITDA 23 333 12 424 (12 060)
Fleet
Discontinued operations management OEM
Total segment revenue 6 633 13 573
Inter-segment revenue - -
Revenue 6 633 13 573
Normalised EBITDA (4 387) (5 501)
For the year ended 31 December 2008:
Head
Continuing operations OEM Aftermarket office
Total segment revenue 563 668 450 561 -
Inter-segment revenue 9 030 - 34 444
Revenue 572 698 450 561 34 444
Normalised EBITDA 27 456 15 472 11 678
Discontinued operations
Total segment revenue 6 633 13 573
Inter-segment revenue - -
Revenue 6 633 13 573
Normalised EBITDA (5 344) (5 994)
For the six months ended 30 June 2009:
Unallocated/
Continuing operations eliminations Total
Total segment revenue - 415 943
Inter-segment revenue (8 727) -
Revenue (8 727) 415 943
Normalised EBITDA - 17 731
For the six months ended 30 June 2008:
Continuing operations
Total segment revenue - 501 123
Inter-segment revenue (1 895) -
Revenue (1 895) 501 123
Normalised EBITDA - 23 697
Unallocated/
Discontinued operations eliminations Total
Total segment revenue - 20 206
Inter-segment revenue - -
Revenue - 20 206
Normalised EBITDA - (9 888)
For the year ended 31 December 2008:
Unallocated/
Continuing operations eliminations Total
Total segment revenue - 1 014 229
Inter-segment revenue (43 474) -
Revenue (43 474) 1 014 229
Normalised EBITDA (25 466) 29 140
Discontinued operations
Total segment revenue - 20 206
Inter-segment revenue - -
Revenue - 20 206
Normalised EBITDA - (11 338)
A reconciliation of total normalised EBITDA to the total loss after income tax
and discontinued operations is provided as follows:
Unaudited
Unaudited Restated Audited
30/06/09 30/06/08 31/12/08
R 000 R 000 R 000
Normalised EBITDA from continuing and
discontinued operations 17 731 13 809 17 802
Depreciation (10 143) (11 537) (22 563)
Amortisation (6 628) (8 806) (17 961)
Impairment of intangible assets - - (489)
Impairment of property, plant
and equipment (36) - (1 642)
Impairment of inventories (5 298) - -
Restructuring costs (1 857) - (6 674)
Loss (Dealstream) - - (11 650)
Impairment of related party debtor - - (6 614)
Operating loss from continuing and
discontinued operations (6 231) (6 534) (49 791)
Net finance costs (7 562) (9 939) (16 296)
Share of profit from joint ventures 451 361 418
Loss before tax from continuing and
discontinued operations (13 342) (16 112) (65 669)
Tax 1 315 4 554 2 316
Loss for the period from continuing
and discontinued operations (12 027) (11 558) (63 353)
Loss on disposal of the fleet
management businesses - (16 935) (12 327)
Loss for the period from continuing
and discontinued operations (12 027) (28 493) (75 680)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2009
Share
capital; Retained
share Foreign earnings/
premium; currency (Accumu-
treasury translation Other lated
shares reserve reserves loss)
R 000 R 000 R 000 R 000
Balance at
1 January 2008 396 334 (915) 245 21 139
Total comprehensive
income/(losses) for
the period - 9 023 4 282 (28 493)
Employee share
option scheme
- Value of services
provided 72
Movement of
treasury shares (29 900) 2 550
Dividends paid (5 317)
Balance at 30 June 2008 366 434 8 108 4 599 (10 121)
Total comprehensive
income/(losses) for
the period (11 293) (3 274) (46 509)
Employee share
option scheme
- Value of
services provided 13
Movement of
treasury shares 34 417 (6 938)
Dividends paid (5 512)
Balance at
31 December 2008 400 851 (3 185) 1 338 (69 080)
Total comprehensive
income/(losses) for
the period - (3 115) (6 055) (12 027)
Balance at 30 June 2009 400 851 (6 300) (4 717) (81 107)
Reserves
directly
associated
with non-
current
assets held
Total for sale Total
R 000 R 000 R 000
Balance at 1 January 2008 416 803 5 210 422 013
Total comprehensive income/(losses)
for the period (15 188) (5 210) (20 398)
Employee share option scheme
- Value of services provided 72 72
Movement of treasury shares (27 350) (27 350)
Dividends paid (5 317) (5 317)
Balance at 30 June 2008 369 020 - 369 020
Total comprehensive income/(losses)
for the period (61 076) (61 076)
Employee share option scheme
- Value of services provided 13 13
Movement of treasury shares 27 479 27 479
Dividends paid (5 512) (5 512)
Balance at 31 December 2008 329 924 - 329 924
Total comprehensive income/(losses)
for the period (21 197) (21 197)
Balance at 30 June 2009 308 727 - 308 727
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" or "the Parent")
Registered office: 28 Wiganthorpe Road, Willowton, Pietermaritzburg 3201
Directors: JPS O`Leary* (Irish, Chairman), R Friedman (Managing),
EPH Bieber*, SV Bromfield*, FE Giliomee (Financial), SD Rogers
* independent, non-executive
www.ci.co.za
28 August 2009
Sponsor: Investec Bank Limited
Date: 28/08/2009 15:53:01 Produced by the JSE SENS Department.
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