| Fri 16 Mar 2012, 9:44 | | CNL - Control Instruments Group Limited - Results for the year ended 31 December |
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CNL
CNL
CNL - Control Instruments Group Limited - Results for the year ended 31 December
2011
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")
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
INTRODUCTION
2011 turned out to be a watershed year for Control Instruments. This was
contrary to our expectations at the beginning of the year. The results for the
year ended 31 December 2010 had shown a return to profitability and we had
strong hopes for both the Aftermarket and OEM segments of our business.
By the beginning of 2011, our international OEM operations had secured a number
of new production programmes. Several of these were due to come on-stream during
2011, but by the middle of the year many of the programmes were being delayed.
This added to the costs of the international OEM operations and placed pressure
on their working capital requirements resulting in their requiring funding from
the Group. The Board decided that the level of investment required and risks
associated with it were not in the Group`s best interests, nor were the Group`s
pockets deep enough to continue to fund the international OEM operations
indefinitely. As a result it was decided to exit the international OEM
operations.
The impact of this action is reflected in the results for the year ended 31
December 2011. While the losses are significant, they are mainly accounting
losses that relate to the write-off of investments made over a number of years.
Most importantly, exiting the international OEM operations has stopped the drain
on the Group`s cash resources as well as the distraction of senior management`s
time.
RESULTS
Group revenue from continuing operations increased 3.7% to R833.9 million for
the year ended 31 December 2011 from R804.2 million in the previous year and
gross profit increased 2.8% to R208.5 million compared with R202.8 million
(restated).
The loss of R147.8 million for the 2011 financial year largely reflects the
direct and indirect consequences of the decisive action taken in placing
Pi Shurlok in the United Kingdom ("Pi Shurlok UK") under administration.
R107.6 million of the loss is attributable to discontinued operations as
follows:
- R79.6 million relates to the net write-off of the investment in
Pi Shurlok UK; the realisation of the accumulated foreign currency gains and
losses; the derecognition of the deferred tax asset; and trading losses in
respect of Pi Shurlok UK.
- R9.4 million can be attributed to the impairment of the investment made by
Pi Shurlok in Pietermaritzburg, South Africa ("Pi Shurlok SA") in the bespoke
development of production and process tooling in preparation for the
introduction of production programmes into its production facility.
- R18.6 million arose from Group obligations relating to the exit of the foreign
OEM operations and from the closure of the head office, which is no longer
required in line with the reduced size of the Group.
Of the R40.2 million loss included in continuing operations, R22.7 million
relates to the net derecognition of the deferred tax asset in Pi Shurlok SA as a
result of the closure of the foreign OEM operations on which it was reliant for
new production programmes.
Despite all of the above, the Group`s cash resources at the end of the year
increased to R57.6 million compared with R41.7 million at the end of 2010.
AFTERMARKET OPERATIONS - CI Automotive
Revenue increased marginally to R487.7 million in the year under review compared
with R472.9 million in the previous year. Despite some difficult trading
conditions the aftermarket business has delivered a solid profitable performance
for the past three years, with normalised EBITDA of R44.5 million, R53.2 million
and R27.9 million in 2011, 2010 and 2009 respectively.
CI Automotive with its strong management team, premium brands and good customer
relationships is well positioned to take advantage of the current growth
opportunities in both the South African and sub-Saharan Africa automotive
aftermarkets. Our brands and the associated premium services offered by
CI Automotive continue to allow us to attract high margins on our products.
OEM OPERATIONS - Pi Shurlok SA
Revenue in the OEM business increased from R334.7 million in the previous year
to R348.4 million in the year under review. However, the reduction in margin is
evident in the decrease in normalised EBITDA from R9.6 million for the previous
year to a loss of R337 000 for the year under review.
The poor financial performance of Pi Shurlok SA had a negative effect on the
results of the Group`s continuing operations. This should be viewed against the
backdrop of the decision to exit Pi Shurlok UK.
In late 2010 and early 2011 Pi Shurlok SA invested extensively in the skills and
capacity required to support the introduction of new production programmes that
had been secured internationally. In the second half of 2011, when the outlook
for these programmes in Europe began to deteriorate and Pi Shurlok UK was placed
under administration, it became imperative that the cost base of
Pi Shurlok SA be addressed. These actions unfortunately included the
retrenchment of staff, particularly from within the new product launch teams.
The associated costs of the retrenchments are reflected in the losses of
Pi Shurlok SA and the continuing operations.
We are satisfied that the restructuring of Pi Shurlok SA will enable it to build
off its new base with minimal risk to the Group, provided there are no material
fall-offs in the forecasted volumes.
AUDITOR`S REPORT
PricewaterhouseCoopers Inc. has audited the results for the year ended
31 December 2011 and their unqualified audit reports on the Group annual
financial statements and the Group abridged financial statements are available
on request at the Company`s registered office.
PROSPECTS
The Group has now returned to its South African roots and is predominantly
focused on supplying products into the automotive aftermarkets in South Africa
and sub-Saharan Africa. The timing for this renewed focus is good as the South
African economy is showing signs of growth, compared with European markets. In
addition, it is increasingly apparent that South Africa is becoming a
springboard into sub-Saharan Africa as international companies `come to Africa`
to take advantage of the growth that is being experienced on the continent.
CI Automotive has a solid foundation in South Africa. This will provide a base
from which to expand into the growth opportunities in the sub-Saharan African
automotive aftermarket. Sub-Saharan Africa has an ageing car pool, a growing
market for second life vehicles and immature aftermarket distribution channels,
all of which make it an area of good growth for automotive aftermarket products.
Dramatic changes in the world, including the economic situation and competitive
forces in the markets in which our OEM businesses operate, all combined to the
detriment of our OEM businesses. In order to position the Group for a
sustainable future the Board has taken decisive and, we believe, appropriate
action. Control Instruments has been in business in one form or another for over
60 years in South Africa and we have confidence that the steps taken will ensure
that it will grow in this market.
The Group has emerged from the substantial restructuring leaner and more focused
and with renewed vigour and energy. Management now has more time to concentrate
on the remaining businesses and particularly on developing the aftermarket
business.
The automotive industry has not fully recovered and is certainly nowhere near
the levels we saw prior to its collapse at the end of 2008. Although management
still has work to do to increase profitability, the Board is confident of their
ability to deliver.
On behalf of the Board
JPS O`LEARY, Chairman
SD ROGERS, Chief Executive Officer
16 March 2012
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2011
2011 2010
Audited Audited
R 000 R 000
ASSETS
Non-current assets 197 454 280 636
Property, plant and equipment 115 987 123 621
Intangible assets 79 069 123 381
Investments in joint ventures 1 191 980
Available-for-sale financial assets 320 768
Deferred income tax assets 887 31 886
Current assets 247 476 274 131
Inventories 113 459 136 594
Trade and other receivables 71 322 92 322
Financial assets at fair value through profit
or loss 202 162
Current income tax assets - 3
Cash and cash equivalents 62 493 45 050
Total assets 444 930 554 767
EQUITY AND LIABILITIES
Capital and reserves 166 941 291 992
Share capital 6 972 6 972
Share premium 396 996 396 996
Treasury shares (2 813) (3 117)
Foreign currency translation reserve - (19 101)
Other reserves 1 719 (595)
Accumulated loss (235 933) (89 163)
Non-current liabilities 42 711 39 680
Borrowings 11 728 11 064
Deferred income tax liabilities 23 648 26 296
Provisions 7 335 2 320
Current liabilities 235 278 223 095
Trade and other payables 134 623 136 477
Current income tax liabilities 1 657 503
Derivative financial instruments 190 1 411
Borrowings 80 917 79 567
Provisions 17 891 5 137
Total equity and liabilities 444 930 554 767
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
Audited Audited
Restated
R 000 R 000
CONTINUING OPERATIONS
Revenue 833 947 804 158
Cost of sales (625 475) (601 378)
Gross profit 208 472 202 780
Other operating income 6 667 8 902
Marketing and selling expenses (38 123) (40 365)
Administrative expenses (61 556) (56 090)
Other operating expenses (119 683) (94 676)
Operating profit/(loss) (4 223) 20 551
Finance income 93 -
Finance costs (10 650) (11 100)
Share of profit from joint ventures 211 415
Profit/(loss) before taxation (14 569) 9 866
Taxation (25 621) 275
Profit/(loss) for the year from continuing operations (40 190) 10 141
DISCONTINUED OPERATIONS
Loss for the year from discontinued operations (107 593) (7 927)
Profit/(loss) for the year (147 783) 2 214
Profit/(loss) attributable to:
Owners of the parent (147 783) 2 214
Non-controlling interest - -
(147 783) 2 214
Earnings/(loss) per share (cents) - continuing operations
Basic (29.2) 7.4
Diluted (29.2) 7.4
Earnings/(loss) per share (cents) - discontinued operations
Basic (78.3) (5.8)
Diluted (78.3) (5.8)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
Audited Audited
R 000 R 000
Profit/(loss) for the year (147 783) 2 214
Other comprehensive income/(loss) for the year,
net of taxation 20 348 (5 905)
Cash flow hedges
Current year net movement 1 221 952
Current year net taxation movement (342) (258)
Available-for-sale assets
Current year gross movement 92 120
Realised on disposal 276 -
Foreign currency translation reserve
Current year gross movement 12 306 (7 467)
Current year taxation movement (1 219) 748
Realised on disposal of subsidiaries 8 014 -
Total comprehensive income/(loss) for the year (127 435) (3 691)
Attributable to:
Owners of the parent (127 435) (3 691)
Non-controlling interest - -
(127 435) (3 691)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2011
Audited
Share Share Trea- Foreign Other Accumu- Total
capital pre- sury curr- res- lated
mium shares ency- erves loss
trans-
lation
reserve
R 000 R 000 R 000 R 000 R 000 R 000 R 000
Balance at
1 January 2010 6 972 396 996 (3 117) (12 382) (1 647) (91 377) 295 445
Profit for the
year 2 214 2 214
Other comprehen-
sive income/
(loss)for the
year (6 719) 814 (5 905)
Total comprehen-
sive income/
(loss)for the
year (6 719) 814 2 214 (3 691)
Transactions
with owners
Employee share
option scheme
Value of servi-
ces provided 238 238
Balance at
31 December
2010 6 972 396 996 (3 117) (19 101) (595) (89 163) 291 992
Loss for the
year (147 783)(147 783)
Other comprehen-
sive income/
(loss) for the
year 19 101 1 247 20 348
Total comprehen-
sive income/
(loss) for the
year 19 101 1 247 (147 783)(127 435)
Transactions
with owners
Employee share
option scheme
Value of servi-
ces provided 1 984 1 984
Transferred to
retained earnings (917) 917 -
Movement of
treasury shares 304 96 400
Balance at
31 December 2011 6 972 396 996 (2 813) - 1 719 (235 933) 166 941
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2011
2011 2010
Audited Audited
R 000 R 000
Net cash generated from operating activities 35 482 34 484
Net cash utilised in investing activities (19 380) (25 342)
Net cash generated from financing activities 632 3 796
Net cash inflow for the year 16 734 12 938
Forex translation adjustments on cash and cash equivalents (811) 506
Cash and cash equivalents at the beginning of the year 41 698 28 254
Cash and cash equivalents at the end of the year 57 621 41 698
NOTES
FOR THE YEAR ENDED 31 DECEMBER 2011
1. Accounting policies and basis of preparation
The consolidated financial statements for the year ended 31 December 2011 have
been prepared under the supervision of the Group Financial Director,
FE Giliomee CA(SA), in accordance with International Financial Reporting
Standards ("IFRS"), including IAS 34 - Interim Financial Reporting, and in
compliance with the South African Companies Act and the Listings Requirements of
the JSE Limited.
These are the Group`s abridged consolidated financial statements for the year
for which annual financial statements are prepared in terms of IFRS.
The principle accounting policies used in preparing the audited results for the
year ended 31 December 2011 are consistent with those applied in the prior
financial year in terms of IFRS. The Group`s presentation of comparative figures
in the income statement; the reconciliation of EPS to headline EPS; and the
segmental information was adjusted for presentation of the discontinued
operations, as required by IFRS 5. The discontinued operations arose as a result
of the Group`s decision in October 2011 to exit its foreign OEM operations.
2. Reconciliation of EPS to headline EPS (cents)
2011
Audited
Weighted average number of shares in issue (000) 137 492
Continuing Discontinued
operations operations Total
Loss per share for the year (29.2) (78.3) (107.5)
Loss/(profit) on disposal and scrapping
of property, plant and equipment (0.4) - (0.4)
Impairment of property, plant
and equipment 0.9 1.8 2.7
Impairment of intangible assets 0.2 37.0 37.2
Disposal of available-for-sale
financial assets 0.6 - 0.6
Realisation of foreign currency
translation reserve - 5.8 5.8
Tax effect 0.1 - 0.1
Headline loss per share (27.8) (33.7) (61.5)
2010
Audited
Restated
Weighted average number of shares in issue (000) 137 387
Continuing Discontinued
operations operations Total
Profit/(loss) per share for the year 7.4 (5.8) 1.6
Loss/(profit) on disposal and scrapping
of property, plant and equipment - - -
Impairment of property, plant
and equipment 0.2 - 0.2
Tax effect (0.1) - (0.1)
Headline earnings/(loss) per share 7.5 (5.8) 1.7
3. Segmental information
Management has determined the operating segments based on the reports reviewed
by the Board of Directors and used by it to make strategic decisions. Following
the Group`s decision in October 2011 to exit its foreign OEM operations, the
Pi Shurlok - Foreign operations CGU has been removed from the OEM segment. The
2010 figures have been restated accordingly.
The Board of Directors assesses the performance of the operating segments based
on a measure of normalised earnings before interest, tax, depreciation and
amortisation (normalised EBITDA). This measurement basis excludes the effects of
non-recurring expenditure from operating segments, such as restructuring costs;
write-down of inventories (exited and discontinued product lines); and
impairments, which are a result of an isolated, non-recurring event. The
measurement basis also excludes the effects of equity-settled share-based
payments; profits and losses on disposal and scrapping of property, plant,
equipment and intangible assets, inter-segment service charges, dividends,
royalties, and impairment of loans and the results of discontinued operations.
The Group is based in South Africa and operates in the South African and sub-
Saharan Africa markets. It is organised in the following business segments:
- OEM: World-class electronics manufacturing and plastics injection moulding.
Core areas of focus comprise instrument clusters, vehicle security, electronic
control units and telematics.
- Aftermarket: The supply of premium branded products to the automotive
aftermarket in sub-Saharan Africa.
- Head office: Service supplier to the Group including treasury and investment
management.
Segmental information for the year ended 31 December 2011
Audited
Continuing operations OEM After- Head Unallocated / Total
market office eliminations
R 000 R 000 R 000 R 000 R 000
External revenue 346 292 487 655 - - 833 947
Inter-segment revenue 2 062 - 15 732 (17 794) -
Total segment revenue 348 354 487 655 15 732 (17 794) 833 947
Normalised EBITDA (337) 44 458 (17 618) 1 688 28 191
Depreciation and
amortisation (10 130) (13 031) (71) 134 (23 098)
Finance income 75 4 879 13 096 (17 957) 93
Finance costs (7 339) (16 944) (3 302) 16 935 (10 650)
Share of profit
from joint ventures 211 - - - 211
Taxation (23 824) (1 701) (96) - (25 621)
Total Assets 166 331 258 850 262 700 (244 142) 443 739
Investments in joint
ventures 1 191 - - - 1 191
Segmental information for the year ended 31 December 2010
Audited
Restated
Continuing operations OEM After- Head Unallocated / Total
market office eliminations
R 000 R 000 R 000 R 000 R 000
External revenue 331 223 472 935 - - 804 158
Inter-segment revenue 3 478 - 19 314 (22 792) -
Total segment revenue 334 701 472 935 19 314 (22 792) 804 158
Normalised EBITDA 9 605 53 153 (16 734) (1 199) 44 825
Depreciation and
amortisation (10 689) (13 141) (78) 6 (23 902)
Finance income 770 1 227 2 770 (4 767) -
Finance costs (5 672) (8 890) (3 982) 7 444 (11 100)
Share of profit
from joint ventures 415 - - - 415
Taxation 3 459 (3 176) (8) - 275
Total assets 292 882 287 981 219 812 (246 888) 553 787
Investments in joint
Ventures 980 - - - 980
Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would also be available to unrelated
parties.
Segmental assets consist primarily of property, plant and equipment, intangible
assets, inventories, trade and other receivables, deferred income tax assets,
available-for-sale financial assets, cash and cash equivalents, financial assets
at fair value through profit or loss, current income tax assets and derivatives
designated as hedges of future commercial transactions.
A reconciliation of normalised EBITDA to the total profit/(loss) before income
tax and discontinued operations is provided as follows:
Continuing Continuing
operations operations
2011 2010
R 000 R 000
Audited Audited
Restated
Normalised EBITDA 28 191 44 825
Depreciation and amortisation (23 098) (23 902)
Impairment of intangible assets and
property, plant and equipment (1 621) (222)
Restructuring costs (5 605) -
Profit/(loss) on disposal and scrapping of
property, plant and equipment 540 (3)
Share-based payments expense (1 814) (147)
Loss on disposal of available-for-sale
financial assets (816) -
Operating profit/(loss) (4 223) 20 551
Net finance costs (10 557) (11 100)
Share of profit from joint ventures 211 415
Profit/(loss) before taxation from
continuing operations (14 569) 9 866
Taxation (25 621) 275
Profit/(loss) for the year from
continuing operations (40 190) 10 141
4. Property, plant and equipment acquired during the year under review was
R13.6 million (2010: R14.2 million).
The Group`s integrated annual report, including the complete annual financial
statements of the Group and the Company for the year ended 31 December 2011,
will be mailed to shareholders on or before 31 March 2012. A copy of this report
will be available on the Company`s website, www.ci.co.za on or before
31 March 2012.
Registered office: 28 Wiganthorpe Road, Willowton, Pietermaritzburg 3201
Directors: JPS O`Leary* (Irish, Chairman), SV Bromfield*, R Friedman,
FE Giliomee (Financial Director), SD Rogers (Chief Executive Officer),
IH Scott-Gall* (British), PM Surgey*, A Watson*
* independent, non-executive
Company Secretary: JC Jeffery
www.ci.co.za
Sponsor
Investec Bank Limited
16 March 2012
Date: 16/03/2012 09:44:01 Produced by the JSE SENS Department.
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