| Mon 2 Apr 2001, 0:00 | | Metair - Extract From Annual Report 2000 |
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METAIR INVESTMENTS LIMITED
("METAIR")
(Registration number 1948/031013/06)
(Incorporated in the Republic of South Africa)
EXTRACT FROM ANNUAL REPORT 2000
FINANCIAL HIGHLIGHTS
For the year ended 31 December
2000 1999 1998* 1997* 1996*
R000 R000 R000 R000 R000
Revenue 1 085 882 857 313 787 449 829 586 887 032
Income before taxation 119 740 43 794 59 536 65 914 63 781
Interest paid 6 884 5 903 6 905 7 817 12 725
Income attributable to
ordinary shareholders 91 478 32 815 47 580 47 442 40 850
Ordinary shareholders'
interest 430 809 360 545 364 427 330 848 275 541
Interest-bearing debt 44 036 23 518 32 538 39 380 43 342
Property, plant and
equipment 144 988 131 283 195 676 180 124 183 235
Current assets 433 050 333 076 328 673 322 826 278 317
Total assets 643 113 519 136 524 349 502 950 461 552
Number of shares in issue 5 798 5 798 5 681 5 681 5 665
Weighted average number
of shares in issue 5 798 5 766 5 681 5 674 5 665
Net asset value per
share (cents) 7 430 6 253 6 416 5 824 4 864
Earnings per share (cents) 1 578 569 838 1 386 744
Headline earnings per
share (cents) 1 419 569 838 836 721
Dividend per share (cents) 365 230 230 230 200
Dividend cover (times)
(calculated on headline
earnings) 3,9 2,5 3,6 3,6 3,6
Income before exceptional
items as a % of average
ordinary shareholders'
interest 20,8 9,1 13,7 15,6 15,6
Income before exceptional
items, interest and tax
as a % of average total
assets (excluding cash) 21,5 10,7 12,2 15,6 16,7
Ordinary shareholders'
interest as a % of total
assets 67,0 69,5 69,5 65,8 59,7
Interest cover (times) 18 8 8 9 6
*Note: The years 1996 - 1998 have not been restated to reflect the change in
accounting policy.
MANAGEMENT REPORT
We take great pleasure this year in announcing substantially improved results
to shareholders.
Profit before exceptional items improved from R32,8 million in 1999 to R82,3
million for 2000. Dividends per share increased from 230 cents per share in the
previous year, to 365 cents per share for 2000.
There are several reasons for these record profits: better trading conditions
with an increase in vehicles sales, growing exports, currency changes that
improved margins from exports and very importantly the benefits from earlier
productivity improvements and returns on previously commissioned expansion
projects. Little of this would have been possible without the skill and
dedication of our various management teams. They had become tougher and more
resourceful, rather than discouraged, as a result of the extremely difficult
conditions of the previous year.
In the overview we expand on our operations, results and prospects of our
subsidiaries, associates and the group.
OVERVIEW
The improvement in profitability reflected in the Interim Report was maintained
in the second six months. Headline earnings per share for the full year were
1419 cents compared to 569 cents achieved in the previous year. Headline
earnings for the second six months were 751 cents compared to 451 cents
achieved for the comparable period of 1999. This represented a very positive
turnaround from the disappointing results recorded in 1999.
CHANGES IN GROUP STRUCTURE
As reported in the Interim Report, Metair and Valeo Thermique Moteur
established a new company - Valeo Systems South Africa (Pty) Limited (VSSA),
for the assembly and supply of front end modules (incorporating
cooling/airconditioning modules and headlights) specifically for the VW
Golf/Jetta export programme. Metair holds 49% of the equity in VSSA. Production
was successfully launched by mid year and whilst the investment and profit
impact on the group were not significant, the shareholding has future strategic
implications given Valeo's status as a major international component
manufacturer. A positive contribution is expected in 2001.
As also previously reported, Metair exercised the Put option for the sale of a
further 23,9% of the equity in Tenneco Automotive Holdings SA (Pty) Limited
(TAHSA). Metair retained 25,1% of the equity and continued to provide local
input. The option was exercised on the 1st June and Metair received R28,7
million in July 2000. An exceptional profit of R9,2 million resulted from the
transaction and was reflected under exceptional items. Profitability at TAHSA
declined in the second six months but further export opportunities should
enhance volumes and profitability in 2001.
OPERATING RESULTS
Total group turnover increased by 26,7% to R1085,9 million compared to R857,3
million in 1999.
Whilst the growth in the South African economy in the second six months was
muted, it did contribute to a sustained improvement in sales of new vehicles.
As will be seen later, the Group was still dependent on this sector, and sales
to manufacturers of new vehicles continued to constitute a significant
percentage of total turnover.
Imports and exports of built up vehicles (CBU's) both increased and as this
trend is likely to accelerate, a more detailed analysis of the vehicle market
is necessary to explain the impact on the Group.
Sales of passenger vehicles in the domestic market (as reported by NAAMSA)
increased from 214,000 in 1999 to 234,000 (9,2% increase). However, imports of
CBU's increased at a faster rate and sales of locally produced cars for the
domestic market increased by slightly less - 7,8% from 160,000 to 172,000.
Sales of light commercial vehicles (LCV's) increased by the same percentage.
The vehicle market growth, introduction of new OE contracts and recovery of
exchange rate driven cost increases resulted in the higher OE turnover. Overall
sales of components to OE customers increased by 33% compared to 1999 and
constituted 40,7% of turnover (1999 38,8%). Gross margins improved mainly as a
result of increased capacity utilization but margins on new contracts were
constrained by requirements to meet globally competitive pricing.
The positive trend in exports of CBU's recorded in 1999 continued and total
exports of cars and LCV's increased from 59,000 in 1999 to 67,000 units. More
local components were incorporated into these vehicles and the group benefited
from increased participation in this sector.
Component exports showed impressive growth increasing by 82,6% and constituted
20,1 % of total group turnover (1999 - 14,0 %). These figures included
components sold to OEM's for incorporation into vehicles destined for export
markets.
Conditions in the aftermarket were not as positive as OE with the impact of
cell phones, gambling and petrol price increases depressing demands for
replacement parts and accessories. Aftermarket sales were flat and constituted
26,0% of turnover, down from the 32,7% achieved in 1999.
Non automotive turnover comprised sales of industrial batteries for the mining
industry and stand-by markets. Both markets were surprisingly resilient and
sales to this sector grew by 14,9%. Attention was focused on export markets for
these products with some success in 2000 and greater expectations in 2001.
The problems associated with the restructuring of Supreme Spring were far
deeper seated than expected and a further loss was recorded. This is addressed
in more detail in the Supreme Spring commentary.
Cost reduction initiatives continued throughout the year and the Rand/Euro
exchange rate was favourable, but the main contributor to improved
profitability was the increase in volume throughput. Further attention was
given to quality systems and general improvements in delivered quality to
customers were recorded. Training of all employees remained a priority and
equity employment plans were submitted by all subsidiaries. The Group is
committed to the development and upliftment of all employees, but the technical
and operational demands of the component industry will pose real challenges in
ensuring that sufficient skills can be developed in time to meet the global
challenge.
Head count levels at year end were 3929 compared to 3651 in December 1999.
Efficiency improvements were recorded but additional people were employed as a
result of the higher activity.
Capital expenditure was higher than normal and approximately R60 million was
approved during the year for facility replacement and improvement and the
purchase of existing or additional manufacturing premises.
Inventory levels increased, partially as the result of higher volumes, but some
companies were adversely affected by cut backs from customers in December.
Debtors, whilst well controlled generally, were influenced by the tight cash
flow conditions still affecting customers and the higher activity level
achieved. The increase in export sales also had an adverse affect on debtors
days outstanding.
The balance sheet remained strong with Shareholders funds representing 67,0% of
total assets at year end (1999: 69,5%).
PROSPECTS
INDUSTRY
GDP growth in excess of 3% is expected to result in further growth in sales of
new vehicles in 2001. However, the market penetration of imported vehicles is
likely to increase and little of this growth will generate additional volumes
for the component industry. Exports of vehicles incorporating more local
components, will further increase component demand but most of these vehicles
are of European design and require European designed components facilitated by
technical or equity relationships with European component manufacturers.
Further growth in the export of components is also expected given the Rand's
continued depreciation, but access to export credits from such component
exports reduces pressure on vehicle manufacturers to localise. This is
particularly the case with exports of catalytic converters where the value of
exports has increased exponentially due to the high precious metal prices and
Rand/Dollar exchange rate.
Replacement markets should show some recovery off a low base.
The changes to the Motor Industry Development Programme were on balance
favourable to the component industry and redress some of the imbalances evident
in the programme. The local industry does however face major challenges from
global competition and a world market which is contracting.
GROUP
The Group has developed a more balanced customer profile with greater turnover
to European sourced OEM's, increased exports and stable aftermarket and non
automotive exposure.
We have pursued relationships with global component manufacturers and will
continue to do so whilst retaining our expertise in the local environment. We
are committed to invest in people and facilities to continually improve
quality, productivity and technology.
The higher volumes and favourable Rand/Euro exchange rate, contributed to the
greatly improved performance in 2000. The latter is unlikely to recur in 2001,
and additional operating costs resulting from expansion projects may result in
further profit growth being deferred until 2002.
BALANCE SHEETS
As at 31 December 2000
Notes Group Company
2000 1999 2000 1999
R000 R000 R000 R000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 1 144 988 131 283 - -
Intangible assets 2 3 359 4 239 - -
Investments and loans 3 37 666 12 975 25 000 -
Investment in subsidiaries 4 - - 134 451 152 496
Investment in associate
companies 5 24 050 37 563 5 052 4 410
Total non-current assets 210 063 186 060 164 503 156 906
CURRENT ASSETS
Inventory 6 197 178 157 772 - -
Receivables and prepayments 7 180 383 137 090 37 400 19 065
Short-term loans - subsidiaries - - 103 152 90 266
Short-term loans - associates - 4 348 - -
Cash and cash equivalents 55 489 33 866 - -
Total current assets 433 050 333 076 140 552 109 331
Total assets 643 113 519 136 305 055 266 237
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
Share capital 8 30 430 30 430 30 430 30 430
Non-distributable reserves 9 22 021 36 176 - -
Distributable reserves 378 358 293 889 251 190 221 251
Ordinary shareholders interest 430 809 360 495 281 620 251 681
Preference share capital 8 - 50 - 50
Total capital and reserves 430 809 360 545 281 620 251 731
NON-CURRENT LIABILITIES
Interest-bearing borrowings 10 39 256 19 616 - -
Deferred tax 11 6 827 6 877 - -
46 083 26 493 - -
CURRENT LIABILITIES
Trade and other payables 12 105 747 93 942 173 135
Current portion of borrowings 10 4 780 3 902 - -
Current tax liabilities 18 203 3 474 2 099 1 035
Provisions for liabilities
and charges 13 16 328 17 444 - -
Shareholders for dividends 21 163 13 336 21 163 13 336
166 221 132 098 23 435 14 506
Total liabilities 212 304 158 591 23 435 14 506
Total equity and liabilities 643 113 519 136 305 055 266 237
INCOME STATEMENTS
For the year ended 31 December 2000
Notes Group Company
2000 1999 2000 1999
R000 R000 R000 R000
REVENUE 1 085 882 857 313 - -
Cost of Sales (809 232) (667 060) - -
GROSS PROFIT 276 650 190 253 - -
Other operating income 10 947 10 232 - -
Distribution costs (37 631) (36 236) - -
Administrative expenses (126 950) (113 775) - -
Other operating expenses (14 666) (6 065) (101) (130)
OPERATING PROFIT 108 350 44 409 (101) (130)
Net finance 14 2 177 (615) 43 715 58 880
Exceptional items 15 9 213 - 9 658 -
PROFIT BEFORE TAX 16 119 740 43 794 53 272 58 750
Taxation 17 (35 085) (17 719) (2 169) (573)
NET PROFIT AFTER TAX 84 655 26 075 51 103 58 177
Share of current year retained
earnings of associates 6 823 6 740 - -
NET PROFIT 91 478 32 815 51 103 58 177
Earnings per share (cents) 1 578 569
Adjustment for headline
earnings per share
- exceptional items (cents) (159) -
Headline earnings per share (cents) 1 419 569
Dividend per share (cents) 365 230
Number of shares in issue ('000) 5 798 5 798
Weighted average number of shares
in issue ('000) 5 798 5 766
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2000
2000 GROUP
Non-
Pref- distri-
Share capital erence Retained butable
and premium shares earnings reserves Total
R000 R000 R000 R000 R000
At beginning of year 30 430 50 293 889 36 176 360 545
Preference shares redeemed - (50) - - (50)
Net profit for the year - - 91 478 - 91 478
Share of Associates - - - (14 155) (14 155)
Transfer from reserves - - 14 155 - 14 155
Dividends - - (21 164) - (21 164)
At end of year 30 430 - 378 358 22 021 430 809
1999 GROUP
At beginning of year
As previously reported 29 183 50 290 069 45 175 364 477
Effect of change in
accounting policy - - (18 895) (11 842) (30 737)
29 183 50 271 174 33 333 333 740
Ordinary shares issued 58 - - - 58
Share premium on issued
shares 1 189 - - - 1 189
Net profit for the year - - 32 815 - 32 815
Share of Associate - - - 2 843 2 843
Write back of excess
revaluation depreciation
realised - - 6 286 - 6 286
Transfer to reserves - - (2 843) - (2 843)
Dividends - - (13 543) - (13 543)
At end of year 30 430 50 293 889 36 176 360 545
CASH FLOW STATEMENTS
For the year ended 31 December 2000
Notes Group Company
2000 1999 2000 1999
R000 R000 R000 R000
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash receipts from customers 1 042 589 833 414 - -
Cash paid to suppliers and
employees (982 473) (769 260) - -
Cash generated from/
(utilised in) operations 19.1 60 116 64 154 (18 398) (1 566)
Finance charges (6 884) (5 903) - -
Investment income 9 061 5 288 40 095 54 984
Taxation paid 19.2 (20 406) (25 344) (1 105) (942)
Dividends paid 19.3 (13 337) (13 273) (13 337) (13 273)
Dividend income from
associate 3 620 3 897 3 620 3 896
Net cash inflow from
operating activities 32 170 28 819 10 875 43 099
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property,
plant and equipment (40 599) (38 320) - -
Acquisitions of licences (713) - - -
Increase in other investments (24 691) (1 073) (25 000) -
Decrease/(increase) in loans
to associate 4 348 (4 348) - -
Increase in loans to
subsidiaries - - (12 886) (32 996)
Proceeds on disposal of share
in associate 28 738 - 28 738 -
Proceeds on disposal of
property, plant and equipment 4 069 5 083 - -
Proceeds on disposal of
intangible assets 626 - - -
Acquisition of subsidiary 19.4 - (1 257) - -
Acquisition of associate (2 793) - (2 793) -
Net cash outflow from
investing activities (31 015) (39 915) (11 941) (32 996)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of
ordinary shares - 1 247 - 1 247
Preference shares redeemed (50) - (50) -
Long-term loan raised/(repaid) 19 640 (3 714) - -
Short-term loan raised/(repaid) 878 (5 306) 1 116 (11 350)
Net cash inflow/(outflow) from
financing activities 20 468 (7 773) 1 066 (10 103)
Net increase/(decrease) in cash
and cash equivalents 21 623 (18 869) - -
Cash and cash equivalents at
beginning of period 33 866 52 735 - -
Cash and cash equivalents at end
of period 55 489 33 866 - -
NOTES TO THE FINANCIAL STATEMENTS
As at 31 December 2000
COMPARATIVES
Comparatives have been amended where necessary to reflect the changes in
accounting policy and to provide a better appreciation of the financial
position, results and cash flows of the Group.
CHANGE IN ACCOUNTING POLICY
In prior years the Group has reported plant with a useful life of more than 10
years at cost or valuation less depreciation. The Group now reports all plant
at historical cost less depreciation. This change in accounting policy will
result in a more appropriate presentation of property, plant and equipment in
the Group annual financial statements.
The comparative amounts have been appropriately restated.
The effect of this change on the distributable reserves at 31 December 1999 is
presented below:
R000
Distributable reserves at 31 December 1999
as previously reported 312 784
Write-off of goodwill arising on reversal of
at-acquisition non-distributable reserves (18 895)
Restated distributable reserves at 31 December 1999 293 889
E Bradley A D Plummer
Chairman Managing Director
12 March 2001
