| Wed 23 May 2001, 0:00 | | Dorbyl Limited - Group Results |
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DORBYL LIMITED
GROUP RESULTS for the year ended 31 March 2001
Domestic economic activity and conditions in the USA adversely impact
earnings
Net borrowings down from R103 million to R48 million
Group Income Statement
Audited Audited
year
to year to
March
2001 March 2000 %
R000
R000 Change
Revenue 4 641 679
4 695 466 (1)
- continuing operations 4 174 554
3 879 804 8
- discontinued operations 467 125
815 662
Operating income 124 824
207 689 (40)
- continuing operations 154 124
232 628 (34)
- discontinued operations (29 300)
(24 939)
Finance cost (30 273)
(43 653)
Income - associates 11 167
7 319
Profit before exceptional items 105 718
171 355 (38)
Exceptional items (51 911)
(25 363)
Profit before taxation 53 807
145 992 (63)
Taxation (1 809)
(44 741)
Profit after taxation 51 998
101 251 (49)
Minority interest (13 316)
(12 077)
Preference dividends (212)
(212)
Earnings attributable to ordinary shareholders 38 470 88 962
(57)
Earnings per share (cents)
Earnings per share 113.3
262.2 (57)
Headline earnings per share 203.2
315.0 (35)
Dividends per share (cents) 150
140 7
Final - year ended
31 March 2000 (1999) 80
70
Interim - period ended
30 September 2000 (1999) 70
70
Dividend cover - headline earnings 1.4
2.3
Exceptional items before taxation (51 911) (25
363)
Loss on the disposal and
discontinuation of businesses (49 054)
(24 471)
Net loss on disposal of
investments -
(685)
Net loss on disposal of fixed property (2 857)
(207)
Tax relief attributable to
exceptional items 17 339
5 649
Headline earnings reconciliation
Earnings per the income
statement 38 470
88 962
Adjusted for: 30 545
17 908
Exceptional items 51 911
25 363
Surplus on sale of other
fixed assets (2 273)
(2 580)
49
638 22 783
Tax relief attributable to adjustments (16 657) (4
875)
Attributable to minority shareholders (2 436) -
Headline earnings 69 015
106 870
Diluted earnings per share
Dilution shares (000) 2 300
1 972
Earnings adjustment 3 042
2 743
Diluted earnings per share (cents) 114.5
255.5
Diluted headline earnings
per share (cents) 198.7
305.4
Operating income to net
operating assets (%) 12
19
Earnings to ordinary
shareholders' funds (%) 5
10
Additional financial information
Depreciation 79 155
81 623
Finance cost (30 273)
(43 653)
Interest received 12 200
12 808
Interest paid (42 473)
(56 461)
Segmental Analysis
Audited Audited
year to year to
March 2001 March 2000
R000 R000
Revenue
Business Segment
Automotive manufacturing 1 266 315
1 208 502
Midas 914
579 1 030 462
Metals trading 802 389
762 148
Building products 1 036 973
973 185
Engineering and water products 672 387
791 338
Corporate and consolidation (50 964)
(70 169)
Total Revenue 4 641 679
4 695 466
Geographical Location
South African operations
- local 3 337
266 3 468 647
South African operations
- export 401 847
427 397
International operations 902 566
799 422
Total Revenue 4 641 679
4 695 466
Operating income
Business Segment
Automotive manufacturing 17 154
(6 261)
Midas 28 361
37 868
Metals trading 29 024
27 451
Building products 13 990
80 052
Engineering and water products 42 007
67 999
Corporate and consolidation (5 712)
580
Total operating income 124 824
207 689
Geographical Location
South African operations
(including exports) 121 716
144 613
International operations 3 108
63 076
Total operating income 124 824
207 689
Group Abridged Balance Sheet
Audited Audited
March March
2001 2000
R000 R000
EQUITY AND LIABILITIES
Capital and reserves 911 826
925 161
Ordinary shareholders' funds 838 316
857 611
Preference share capital 3 980
3 980
Minority interest 69 530
63 570
Non-current liabilities 283 198
368 666
Deferred tax liabilities 5 028
8 859
Retirement benefit obligation 50 500
50 500
Long-term borrowings 227 670
309 307
Current liabilities 845 842
819 634
Trade and other payables 767 343
812 652
Short-term borrowings 78 499
6 982
Total equity and liabilities 2 040 866
2 113 461
ASSETS
Non-current assets 514 829
538 610
Fixed and intangible assets 442 587
492 787
Investments and advances -
associates (see note below) 30 297
26 735
Deferred tax assets 34 857
13 849
Other non-interest bearing advances 7 088
5 239
Current assets 1 526
037 1 574 851
Inventories 534
737 660 491
Trade and other receivables 733 204
700 961
Cash and cash equivalents 258 096
213 399
Total assets 2 040
866 2 113 461
Additional financial information
Net borrowings 48 073
102 890
Long-term borrowings 227 670
309 307
Short-term borrowings 78 499
6 982
Cash and cash equivalents (258 096)
(213 399)
Net operating assets 1 015 427
1 087 410
Total assets 2 040
866 2 113 461
Trade and other payables (767 343)
(812 652)
Cash and cash equivalents (258 096)
(213 399)
Capital commitments authorised 55 795
9 641
Contracted for 19 741
7 273
Not contracted for 1 332
2 368
Purchase of business
- Stalcor (30% share) 34 722
-
Contingent liabilities 36 102
19 977
Debtors discounted with
recourse 1 533
11 279
Operating lease guarantees 22 813
-
Other 11 756
8 698
Operating lease commitments 468 055
447 087
Investments and advances to
associates at valuation 59 086
57 971
Net asset value per share (cents) 2 467
2 526
Audited Audited
year to year to
March 2001 March 2000
R000 R000
Capital expenditure
Replacement 42 766
33 024
Expansion 40 598
30 152
Ordinary shares (000)
Issued 33 976
33 955
Weighted average 33 964
33 924
Note: Investments and advances to associates include an equity accounted
finance company. Repurchase commitments of that company amounted to R31
million at 31 March 2001 (March 2000 - R31 million).
Statement of Changes in Equity
Audited Audited
year
to year to
March 2001 March 2000
R000 R000
Balance at beginning of year 857 611
833 706
Goodwill written off (13 007)
Movement in translation reserves (7 112)
(5 180)
Attributable earnings for the year 38 470
88 962
Dividends (50
941) (47 483)
Increase in stated capital 288
613
Balance at end of year 838 316
857 611
Group Cash Flow Statement
Audited Audited
year to year to
March 2001 March 2000
R000 R000
Net cash inflow from operating
activities 10
554 144 061
Operating cash flow 141 534
277 841
Movement in working capital 2 310
10 733
Finance cost (30 273)
(43 653)
Taxation paid (51 864)
(53 163)
Dividends paid (51 153)
(47 697)
Net cash effect from investing
activities 92
109 22 141
Capital expenditure (83 364)
(63 176)
Disposals of fixed assets 13 850
14 966
Disposals and acquisitions of businesses 160 901
73 779
Decrease/(Increase) in advances 722
(3 428)
Net cash effect from financing activities (72 654)
(48 107)
Decrease in minority interest (7 267)
(10 019)
Net repayment of long-/short-term
borrowings (65 675)
(38 701)
Increase in stated capital 288
613
Net cash inflow 30 009
118 095
Foreign currency translation effect 14 688
5 836
Increase in cash and cash equivalents 44 697
123 931
Cash and cash equivalents at
beginning of year 213 399
89 468
Cash and cash equivalents at end of year 258 096
213 399
RESULTS
As previously reported in the Interim Profit Statement, the economic growth
anticipated in South Africa at the commencement of the year failed to
improve activity levels in those sectors of the economy served by the Group.
The Group's position during the second half of the year was further affected
by the slow down in the USA economy which had an adverse effect on South
African exports and, in particular, impacted the results of the Group's USA
operation, Alpine Engineered Products, Inc. The worst winter in the USA for
the past hundred years further exacerbated trading conditions, as it led to
much lower house building activity during the final six months of the year.
Although the Group managed to maintain earnings in the first six months,
earnings deteriorated sharply in the second half of the year. Consequently
headline earnings for the year ended at 203 cents per share, well below the
previous year's figure of 315 cents per share. Shareholders were accordingly
cautioned about this development by the issue of a profit warning on 29
January 2001.
A fundamental review of the future of loss making operations was undertaken
and a number of these operations were either sold, discontinued or
restructured. The net effect of these actions was improved management focus
on profitable operations, elimination of the loss making operations' drain
on earnings (earnings were impacted this year by more than 100 cents per
share), and, finally, proceeds realised on the disposals improved the
borrowings position. This borrowings decline resulted in a reduction in the
interest charge to R30m, an improvement of R13m on the previous year.
The restructuring mentioned above resulted in significant exceptional
losses, in particular those relating to the sale of the Smiths Alloy Wheel
business, the closure of the Busaf Cape trailer business and the
sale/closure of the Midas Commercial Vehicle workshops. This was offset by a
profit on the sale of Lear JIT (Pty) Ltd. As a result, exceptional items at
R51,9m (R34,6m after tax) were R26,5m higher than the previous year. Though
some benefit was derived from a R42,9m decline in taxation, earnings
nevertheless declined by 57% to R38,5m.
Borrowings
The group's net borrowings decreased to R48m from R103m at 31 March 2000 and
R121m at 30 September 2000, despite a R22m increase in the offshore
borrowings of Alpine. The increase in Alpine's borrowings was entirely due
to the weakening of the Rand, as in US Dollar terms Alpine's borrowings
declined by $3,3m, due to an injection of funds from South Africa of $4,6m
which was facilitated by a further relaxation in Exchange Control.
Acquisitions and Disposals
A significant number of disposals took place during the year, the largest of
which was the sale of the Rosslyn, Port Elizabeth and Durban branches of
Baldwins. Other major disposals were: -
1. Smiths Alloy Wheels
2. Midas Commercial Vehicle workshops
3. Cutmaster Steel (Pty) Limited and 8 Baldwins Steel trading operations
which were franchised
4. Lear JIT (Pty) Ltd (49% interest).
In addition to the above, the Cape based trailer manufacturing operation of
Busaf was closed as was the Structural Products Division of Dorbyl
Engineering and the jack manufacturing operation of Dorbyl Automotive
Technologies.
Major restructuring occurred at the equipment manufacturing division of
Alpine in Dallas USA, which was halved in size due to a significant downturn
of orders for equipment, which fell by up to 80% in some months in the
second half of the year.
The Durban branch of Dorbyl Marine (Pty) Ltd was merged with Imac Ship
Repair, another ship repair operation in Durban, to form Dormac, a joint
venture in which the Group holds a 42,5% interest.
The Group's 49% joint venture interest in Lear JIT (Pty) Ltd, an automotive
seat covering operation, was sold to the remaining joint venture partner for
a consideration of R40m effective 31 March 2001. Subsequent to the year end,
the Group acquired the 30% minority interest in Stalcor, in terms of the
original joint venture agreement, on 1 April 2001 for a consideration of
R35m.
The effect of the disposals recently undertaken by the Group together with
the subsequent events mentioned above resulted in a net cumulative
consideration received of R126m.
The table below sets out the pro-forma financial effects of the acquisition
of the 30% minority interest in Stalcor and the disposal of the 49% interest
in Lear JIT (Pty) Ltd, on the earnings and net asset value per Dorbyl share
on the assumption that the transactions were effective for the year ended 31
March 2001 and were implemented on 1 April 2000. The effects have been
calculated based on the audited results for the year ended 31 March 2001
(the net interest effect being calculated at 11% pre-tax on the net proceeds
of R5m):
Before - Audited
After - Pro-forma %
Results (cents)
(cents) Change
Earnings per share 113,3
122,6 8
Headline earnings per share 203,2 213,7
5
Net asset value per share 2467 2476
-
Accounting Policies
The abridged financial statements have been prepared using accounting
policies which are in accordance with South African Statements of Generally
Accepted Accounting Practice. Other than as detailed below such policies are
consistent with those applied in prior years:
- the Group changed its accounting policy with regard to leave pay to one
of full provision;
- Dividends and the related Secondary Tax on Companies are now accounted
for in the period in which dividends are declared, and not in the period in
which the dividend is recommended.
o Full provision is now made for any unfunded post retirement liabilities
the Group may have for current retirees of the Group and existing active
members.
The above accounting policy changes have been accounted for retroactively
and accordingly a prior year adjustment has been raised and comparative
figures restated. The effects are as follows:
R000
Effect on prior years
Retained surplus at 31 March 1999 as previously shown 538
401
Net effect on earnings in respect of prior years
(48 704)
Effect of change in dividend policy
23 735
Restated retained surplus as at 31 March 1999
513 432
Retained surplus at 31 March 2000 as previously shown 568 665
Net effect prior to 1 April 1999
(24 969)
Net effect on earnings for the year ended 31 March 2000 374
Effect of change in dividend policy 3 430
Restated retained surplus as at 31 March 2000
547 500
Net increase in earnings for current year
352
DIVISIONAL COMMENTS
1. Automotive Manufacturing
Dorbyl Automotive Technologies, which comprises the major portion of
Automotive Manufacturing, experienced improved activity levels during the
year, mainly due to increased exports, both direct and indirect, especially
in the first half of the year. As a result, profitability was well above
that of the previous year. Profits also improved at the Bus operations of
Dorbyl Transport Products as a number of significant bus orders were
received during the latter half of the year. The Trailer division however,
incurred losses. The rationalisation of the Trailer business which
incorporated the closure of Busaf Cape, occurred too late to provide any
benefit by the end of the financial year.
2. Midas
Midas experienced very competitive conditions in a fairly flat market and
margins deteriorated as a result. The cost base has however been reduced and
operations not providing an adequate return were either sold or closed.
Having completed its rationalisation phase, Midas should now be in a
position to capitalise on its lower cost base and the improved productivity
as a result of upgraded IT related systems.
3. Metals Trading
The steel trading operations of Baldwins and the stainless steel and
aluminium operations of Stalcor constitute this Division. Baldwins was
significantly rationalised during the year and will in future operate out of
two major processing plants serving the needs of a franchise base of 35
outlets. Stalcor has continued to perform well, improving its results.
4. Building Products
The Building Products segment includes Roofing Solutions and the US
subsidiary, Alpine Engineered Products, Inc. The local Roofing Solutions
operations had a reasonable year, despite erratic demand and a lack of major
projects. Operating results were slightly below those of the previous year.
The marked decline in Group profitability can be attributed to the
performance of Alpine, particularly in the final six months of the year.
This high margin business is sensitive to turnover mix and volume movements.
Consequently the slow-down of the USA economy, compounded by extreme weather
conditions in the past six months, resulted in a significant deterioration
in the operation's profitability. However, the recent upgrade of the Alpine
software, VIEW, which was released in December 2000, is expected to improve
market share and augers well for when the conditions return to normal.
5. Engineering and Water Products
Dorbyl Engineering Products and Services experienced a significant slow-down
in activity levels due to a lack of orders and/or delayed projects such as
the third cellular network licence. Accordingly, relative to last year's
excellent results, there has been a fairly significant decline in
profitability this year. Nevertheless the division provided a good return on
capital employed. Encouragingly, the order book has improved recently and
the position should improve, provided there are no further postponements of
major projects. The Water Solutions division produced improved results in a
very flat local market, while exports increased marginally.
PROSPECTS
The world economy has entered a period of uncertainty, where international
forecasters are generally down-grading growth expectations. The key issue is
the USA economy and the ability of the Federal Reserve to engineer a soft
landing. The general expectation is for lower growth in the USA, with only
some recovery late in 2001 or early in 2002. Despite this, an improvement in
profitability is expected in the next financial year as a result of
stringent actions taken this year to eliminate loss making operations and to
downsize operations in line with current activity levels.
STRATE
The company, as part of the JSE Securities Exchange South Africa initiative
to move to an electronic settlement environment for share transactions, went
onto the STRATE system effective 26 March 2001. A circular in this regard
was sent to all shareholders on 23 February 2001.
Final Dividend No. 102
A final dividend of 70 cents per ordinary share has been declared payable to
shareholders registered at the close of business on 15 June 2001. The
dividend is payable on or about 29 June 2001.
Last date to trade to be entitled to the dividend will be Friday 8 June
2001.
On behalf of the board
N Phillips (Chairman) W W Cooper (Group Chief Executive)
22 May 2001
Transfer secretaries:
Mercantile Registrars Limited
11 Diagonal Street, Johannesburg, 2001
P O Box 1053, Johannesburg, 2000
Company secretary and registered office:
B D Bhikha
Dorbyl Ridge, 16 Jan Smuts Avenue
Parktown, 2193
Dorbyl Limited
Incorporated in the Republic of South Africa
Company registration number 1911/001510/06
For more information visit our website: www.dorbyl.co.za
Directors:
N Phillips (Chairman), W W Cooper (Group Chief Executive), W E B hrmann, D D
Coffey, MJ Gouws, J B Magwaza, D Orwin, E J Vorster, T van Wyk.
