| Thu 28 Jun 2012, 17:00 | | DLV - Dorbyl Limited - Reviewed provisional condensed consolidated results for |
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DLV
DLV
DLV - Dorbyl Limited - Reviewed provisional condensed consolidated results for
the year ended 31 March 2012
DORBYL LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(COMPANY REGISTRATION 1911/001510/06)
SHARE CODE: DLV ISIN CODE: ZAE000002184
("Dorbyl" or "the Company" or "the Group")
REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH
2012
PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited
Year to Year to
March 2012 March 2011
R`000 R`000
Continuing operations:
Revenue 143 461 126 959
Cost of sales (187 271) (126 209)
Gross (loss)/profit (43 810) 750
Other operating income 2 608 6 408
Administrative expenses (24 652) (23 880)
Sales and distribution expenses (4 407) (3 559)
Other operating expenses (8 099) (7 580)
Operating loss (78 360) (27 861)
Net finance income 1 640 5 604
Finance income 2 606 5 989
Finance costs ( 966) ( 385)
Loss before taxation (76 720) (22 257)
Income tax credit/ (expense) 7 397 (4 919)
Loss after taxation from
continuing operations (69 323) (27 176)
Discontinued operations:
Loss from discontinued operations, - (2 530)
net of taxation
Loss for the year (69 323) (29 706)
Other comprehensive income
Revaluation of property 9 773 21 771
Deferred tax on revaluation of (7 532) -
property
Other comprehensive income for the 2 241 21 771
year, net of income tax
Total comprehensive loss for the (67 082) (7 935)
year
Loss attributable to:
Equity holders of the parent (69 071) (29 224)
Non-Controlling interest (252) (482)
Loss for the year (69 323) (29 706)
Total comprehensive loss
attributable to:
Equity holders of the parent (66 830) (7 453)
Non-Controlling interest (252) (482)
Total comprehensive loss
for the year (67 082) (7 935)
Cents Cents
Loss per share (cents)
Basic and diluted loss per share (203.6) (86.1)
Continuing operations (203.6) (78.7)
Discontinued operations - (7.4)
R`000 R`000
Headline loss reconciliation
Loss for the year (69 071) (29 224)
Adjusted for : 1 1 010
Profit on disposal of property, - (1 520)
plant and equipment
Impairment/(reversal) of assets 1 ( 750)
Impairment/(reversal) of investment - 3 280
in equity accounted investees
Headline loss (69 070) (28 214)
Headline and diluted loss per share (203.6) (83.2)
(cents)
Continuing operations (203.6) (83.2)
Discontinued operations - -
Dividends paid per ordinary share
(cents)
Special - 22 November 2010 - 150.0
R`000 R`000
Depreciation and amortisation 1 529 615
Finance income from continuing 2 606 5 989
operations
Interest received 2 176 5 947
Foreign exchange gains 430 42
Finance cost from continuing (772) (385)
operations
Interest paid (66) (117)
Foreign exchange losses (494) (56)
Interest paid - preference shares (212) (212)
PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Reviewed Audited Audited
March March March
2012 2011 2010
Restated Restated
R`000 R`000 R`000
ASSETS
Non-current assets 64 326 56 078 13 886
Property, plant and 54 229 44 221 103
equipment
Investment in PFV fund 10 097 11 857 13 783
Current assets 52 398 136 831 346 195
Inventories 16 796 25 330 -
Taxation receivable - 47 -
Trade and other receivables 20 958 28 886 25 598
Employee benefits - 1 503 2 821
Cash and cash equivalents 14 644 81 065 64 685
Assets classified as held - - 253 091
for sale
Total assets 116 724 192 909 360 081
EQUITY AND LIABILITIES
Total equity 40 111 107 565 166 590
Equity attributable to 40 111 106 941 165 280
equity holders of the parent
Non-controlling interest - 624 1 310
Non-current liabilities 39 905 40 811 41 674
Preference share capital 3 980 3 980 3 980
Employee benefits 35 925 36 831 37 694
Current liabilities 36 708 44 533 151 817
Bank overdraft - - 22 602
Trade and other payables 36 704 44 227 23 829
Provisions - 300 300
Taxation payable 4 6 -
Liabilities classified as - - 105 086
held for sale
Total equity and liabilities 116 724 192 909 360 081
Reviewed Audited
Year to Year to
March March
2012 2011
R`000 R`000
Capital commitments - -
authorised
Authorised and contracted - -
for
Authorised but not - -
contracted for
Operating lease commitments 2 482 3 373
Operating lease receivables - 2 049
Net asset value per share 118 315
(cents)
Acquisition of property,
plant and equipment
Replacement 1 764 6 134
Finished goods stated at net 2 765 3 752
realisable value
Ordinary shares (000)
Issued - net of treasury shares 33 924 33 924
Weighted average number of shares
- net of treasury shares 33 924 33 924
PROVISIONAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited
Year to Year to
March 2012 March 2011
R`000 R`000
Cash utilised by operations (72 107) (36 260)
Loss for the year (69 323) (29 706)
Adjustments for:
Depreciation 1 529 615
Reversal of Impairment - (750)
losses on property, plant
and equipment
Impairment losses on 1 3 280
investment in associate
Net interest income (1 898) (5 618)
Profit on sale of property, - (1 520)
plant and equipment
Income tax expense (7 397) 4 919
Operating cash flow (77 088) (28 780)
Changes in inventories 8 534 (11 767)
Changes in trade and other 2 281 6 643
receivables
Changes in trade and other (7 523) 510
payables
Changes in provisions and 2 057 2 381
employee benefits
Cash utilised by operating activities (71 739) (31 013)
Interest paid (278) (329)
Income taxes paid (90) (4 918)
Cash flows from investing 5 686 122 091
activities
Interest received 2 176 5 947
Proceeds on disposal of - 77 608
property, plant and equipment
Acquisition of property, plant
and equipment
(1 764) (6 134)
Disposal of discontinued 5 646 43 479
operations, net of cash disposed of
Changes in advances made to associates (372) 1 191
Cash flows from financing - (50 886)
activities
Dividends paid - (50 886)
Net change in cash and cash equivalents (66 421) 34 945
Cash and cash equivalents at 81 065 42 083
beginning of year
Classified as held for sale at
beginning of year
- 4 037
Cash and cash equivalents at end 14 644 81 065
of year
PROVISIONAL CONDENSED STATEMENT OF CHANGES IN EQUITY
Stated Retained Equity Non-Con- Total
holders trolling
of the
capital Reserves earnings Parent interest equity
R`000 R`000 R`000 R`000 R`000 R`000
Balance 31 March 11 248 74 466 79 566 165 280 1 310 166 590
2010
Total
comprehensive
loss for the
year
Loss for the - - (29 224) (29 224) (482) (29 706)
year
Total other - (48 695) 70 466 21 771 - 21 771
comprehensive
income
Revaluation of - 21 771 - 21 771 - 21 771
property
Transfer of
revaluation
reserve on sale
of property
- (70 466) 70 466 - - -
Transactions - - (50 886) (50 886) (204) (51 090)
with owners,
recorded
directly in
equity
Dividends to - - (50 886) (50 886) - (50 886)
shareholders
Disposal of non- - - - - (204) (204)
controlling
interest
Balance 31 March 11 248 25 771 69 922 106 941 624 107 565
2011
Total
comprehensive
loss for the
year
Loss for the - - (69 071) (69 071) (252) (69 323)
year
Total other - 1 754 487 2 241 - 2 241
comprehensive
income
Revaluation of - 9 773 - 9 773 - 9 773
property
Deferred tax on - (7 532) - (7 532) - (7 532)
revaluation of
property
Depreciation on - ( 487) 487 - - -
revaluation of
property
Transactions - - - - (372) (372)
with owners,
recorded
directly in
equity
Disposal of non- - - - - (372) (372)
controlling
interest
Balance 31 March 11 248 27 525 1 338 40 111 - 40 111
2012
REVIEW OF OPERATIONS
General business review and shareholding
The results for the year ended 31 March 2012 were disappointing and
unsatisfactory. The company incurred a loss before tax amounting to R76.7
million, which can be broken down as follows:
Turnover below expectations R25 million
Under recovery of material costs R13 million
Overtime in the first 8 months of the financial year R7 million
Higher direct factory costs R21 million
Expected costs for winding head office down and site R11 million
rehabilitation costs
Total R77 million
The operating results and steps taken by management are discussed further in
the going concern section below.
In response to the group`s disappointing performance, especially during the
period June to December 2011, certain changes in the shareholding and
management of Dorbyl took place. On February 24, 2012 it was announced that
Metkor Group Limited has disposed of 34.9% of its 41.4% stake in Dorbyl
Limited to a consortium consisting of The Reef Group (Pty) Ltd (20.1%) and
RE:CM and Calibre Ltd (14.8%).
Subsequent to the change in shareholding, Dorbyl entered into a management
agreement with Reef Switchboard Manufacturers (Pty) Ltd ("Reef"), an affiliate
company of the consortium. The Reef team were sanctioned by the Board of
Directors to take operational control of the Guestro Castings business in
March 2012, which is the only operational business remaining in Dorbyl
Limited, following an extensive period of restructuring and disposals.
Furthermore, as disclosed in SENS announcements, significant changes have
occurred at the Board level. Mr JB Magwaza retired from the Board in April
2012 and Mr PM Bester retired at the end of February 2012. Mr JW Dreyer
resigned effective 31 March 2012. Mr BD Bhikha resigned as Finance Director at
the end of February 2012 and in the interim, Mr J Theron was appointed acting
Financial Director. Mr RF Rohrs is the acting CEO of Dorbyl Limited and will
relinquish this position at the end of September 2012. He was appointed as the
Executive Chairman effective 18 April 2012. Mr JC Badenhorst, a Non-executive
Independent Director was appointed to the Board effective 22 March 2012. These
changes have reduced costs and created a smaller and more decisive and
effective management team that is fully supportive of the new drives.
Going concern
Given that the group incurred a loss for the year ended 31 March 2012 of R76.7
million (2011: R22.3 million), the intent of the Board of directors was,
through the skills and expertise within Reef, to assist in implementing the
turnaround strategy at Guestro Castings, having been successful in
implementing similar strategies elsewhere. Reef`s strategy is to focus on the
turnaround and repositioning of Guestro Castings for future growth and
profitability. The aim is to achieve the following key objectives within the
next twelve months:
- Objective 1: Increase turnover by increasing product sales prices by
25% on average, based on the March 2012 sales mix
- Objective 2: Improve operating efficiency, focusing on the production
line and labour costs
- Objective 3: Improve the sales mix by introducing higher margin
products
- Objective 4: Reduce the scrap rate from a historic 23% to less than
10%
Following the involvement of the consortium, costs have been cut, prices have
been increased and the operation is being run on a more efficient basis to
create a sustainable business. These adjustments include improved plant
management, better cost control and more efficient product runs. This is a
complicated and demanding process and success is still not guaranteed. However
under this experienced team the Board now believes that the Castings business
has the best chance of becoming economically viable. This plant has been under
severe margin pressure for several years and closure has been contemplated at
various points in time. The cost of closure of such a purpose built and
integrated industrial site was however always going to be substantial.
The current order book is strong and testament to the new product development
initiative started last year. A number of substantial corrective pricing
adjustments have been instituted and various new higher margin products have
been introduced. Measures have been taken to fix the pitfalls in the company`s
financial controls as highlighted at the interim stage, assess management
performance and address the bottleneck in the downstream processes. These
changes are born out in improved performance of the last three months, despite
a short April. However, it is much too soon to assume that the restructuring
process will be a success. The manufacturing industry is difficult and
affected by macro-economic factors such as the downgrade in economic growth
forecasts and the debt crisis in Europe. The company`s focus on making product
for the infrastructure projects in Africa will hopefully over time
substantially lessen this dependency to some extent. There is a need by a
large number of parastatals for products in the energy, rail, road, port and
communications spheres.
These conditions indicate the existence of a material uncertainty which may
cast significant doubt on the ability of the company and its subsidiaries to
continue as going concerns. As a result, the performance of the business will
be closely scrutinised and assessed during the months of June, July and August
2012 to determine the sustainability of the restructuring initiatives and
turnaround strategy in general.
The adverse variance of R5.4 million of produced goods revealed in the 30
September 2011 stock take, was investigated in depth by management and the
internal auditors in the period up to January 2012. All possible causes were
investigated. The reason for the large variance was eventually confirmed to be
an over-count of production figures for five months in the period leading up
to September 2011 - caused by the manual under-count of products scrapped and
products not cast because of defective moulds in the automated casting line.
As disclosed at the interim stage, this happened during the intensive period
of testing and developing of new patterns and products - processes which could
only be done on the actual production line in this plant.
Net asset value as at 31 March 2012
The net asset value per share as at 31 March 2012 at 118 cents per share is
197 cents lower than the 315 cents per share as at 31 March 2011.
The net asset value is mainly attributable to Guestro Castings, the Benoni
Property and the historical employee benefit liabilities.
The net asset value at 31 March 2012 can be summarised as follows:
Benoni property R45.9 million or 135 cents per share
Casting business R22.5 million or 66 cents per share
Cash R14.6 million or 43 cents per share
Less:
Net employee fund liabilities R25.8 million or -76 cents per share
Other net corporate liabilities R17.1 million or -50 cents per share
Total net asset value R40.1 million
Due to the assessed tax losses and capital losses within the relevant
corporate entities, the Group is not expected to pay Income Tax or Capital
Gains Tax in the foreseeable future.
Restatement of comparative information
Investments incorrectly classified as planned assets (R10.1 million) and set
off against the Post-Retirement Medical Aid liabilities in prior years, have
been re-classified and are now disclosed in the Statement of Financial
Position as "Investment in PFV Fund". Comparative figures have been restated
accordingly.
Deferred tax
IFRS requires a deferred tax liability to be raised on the revaluation of
buildings at a tax rate reflective of management`s intention at the reporting
date. Deferred tax in respect of revalued land is raised using the effective
CGT rate of 18.6%. The deferred tax liability is raised regardless of any tax
credits available to offset any future tax liabilities. Should there be tax
credits available, a deferred tax asset should be raised but is limited to the
extent that it offsets the aforementioned deferred tax liability.
The above requirements have resulted in the recognition of a deferred tax
liability of R 7.5 million in respect of the revaluation of Land and Buildings
which has been raised through Other Comprehensive Income. A deferred tax asset
of R7.5 million in respect of accumulated losses has been recognised through
profit or loss as this will be realised at the same time as the current tax
obligation arises in respect of the Land and Buildings.
The R 7.5 million deferred tax liability comprises:
- deferred tax on the land revaluation of R2.6 million; and
- deferred tax relating to the buildings of R 4.9 million.
The expected manner of recovery in this case is use and has been provided for
at the current tax rate of 28%. Management has considered the future plans for
the business in determining the appropriate manner of recovery. The manner of
recovery will however be dependent on the future success of the turnaround
plan, and could therefore change should future plans for the business change.
The consequences of these transactions are that there is no effect on Net
Asset Value or the statement of cash flows. These transactions do however
reduce the loss for the year by R 7.5 million and reduce the headline loss per
share by 22c.
Subsequent events
R8 million of the R10.1 million investment asset mentioned above, which has
been previously shown as a plan asset, has been utilised to be used for
operating cash flow.
To ensure the business does not unexpectedly run out of cash to finance
working capital throughout the restructuring period, Dorbyl has arranged a R10
million overdraft facility.
Other relevant comments have been included in the Business Review section
above. There have been no other matters which are material to the financial
affairs of the Company or the Group which have occurred between the balance
sheet date and the date of the approval of these provisional results.
Segmental reporting
The primary segment during the period was transport and general engineering.
The results from the transport and general engineering segment are reviewed as
one segment by the Group`s Chief Operating Decision Maker. In terms of the
geographical segment, transport and general engineering is considered to be a
South African operation. As the entire business is considered to be one
segment, no segmental reporting has been provided.
Basis of preparation
These provisional condensed consolidated financial statements for the year
ended 31 March 2012 have been prepared in accordance with the recognition and
measurement criteria of IFRS, the AC 500 series as issued by the Accounting
Practices Board, the presentation as well as the disclosure requirements of
IAS 34:
- Interim Financial Reporting, the Listings Requirements of the JSE Limited
and the requirements of the South African Companies Act 71 of 2008.
The accounting policies as set out in the audited financial statements for the
year ended 31 March 2011 have been consistently applied for the year ended 31
March 2012. These provisional condensed consolidated financial statements are
presented in Rand, rounded to the nearest thousand, which is the Group`s
functional and presentation currency.
These provisional condensed consolidated financial statements of the Company,
its subsidiaries, in substance, are controlled by the Group and the Group`s
interest in associates. Results of the subsidiaries and associates are
included from effective date of acquisition up to the effective date of
disposal. All significant transactions and balances between Group enterprises
are eliminated on consolidation.
Independent review
The provisional condensed consolidated statement of financial position at 31
March 2012 and the related provisional condensed consolidated statements of
comprehensive income, changes in equity and cash flows for the year then ended
have been reviewed by the Group`s auditor, KPMG Inc. In their review report
dated 28 June 2012, which is available for inspection at the company`s
registered office, KPMG Inc. state that their review was conducted in
accordance with the International Standards on Review Engagements 2410, Review
of Interim Information performed by the Independent Auditor of the Entity,
which applies to a review of provisional financial information, and have
issued an unmodified conclusion on the provisional condensed consolidated
financial statements with an emphasis of matter as follows: "We draw attention
to the going concern paragraph in the Dorbyl business review which indicates
that the group incurred a loss for the year of R76.7 million and that these
conditions, along with other matters set forth in the paragraph, indicate the
existence of a material uncertainty that may cast significant doubt on the
ability of the company and its subsidiaries to continue as going concerns. In
addition, we draw attention to the restatement of comparative information
paragraph which explains why the comparatives presented in the provisional
financial statements have been restated. Our opinion is not qualified in
respect of these matters."
Preparer of Financial Statements
These condensed consolidated financial statements have been prepared by Mr. J
Theron (BCompt Hons - Accounting Sciences)
Directorate
The changes in the directorate have been reported on in the Business Review
above.
Dividend
In view of the adverse results for the year under review, no ordinary dividend
has been declared.
On behalf of the Board
RF Rohrs (Chairman and acting Chief Executive)
TA Morkel (Independent Non-executive Director)
28 June 2012
Registered Office:
13 Lincoln Road, Industrial Sites, Benoni South, 1501
Directors: RF Rohrs (Chairman and acting Chief Executive)*, J Theron*, JC
Badenhorst**, TA Morkel **
* Executive director ** Independent non-executive director
Company Secretary: P Wentzel
Auditors: KPMG Inc
Transfer Secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor: PSG Capital (Pty) Ltd
Date: 28/06/2012 17:00:01 Produced by the JSE SENS Department.
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