| Fri 5 Oct 2001, 0:00 | | Power Technologies Limited - Interim Report For Th |
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2001
Power Technologies Limited
share code : POW
ISIN : ZAE000015640
* Further strategic alliances concluded
* Empowerment initiatives broadened
* HEPS up by 4.3%
* Cash on hand R 307 million
* Weakening world economies
Financials
Group revenue, including acquisitions, increased by 32.4%. Organic growth
was 11% over the comparable period in difficult market conditions.
Operating margins were impacted by factory under-recoveries. The group is
now well advanced with several rationalisation programs to meet the lower
levels of demand.
Operating income from continuing operations was maintained at the same level
as the prior period and headline earnings per share increased by 4.3% to
21.6 cents (20.7 cents).
The group's strong cash position of R 307.4 million, achieved primarily
through significant improvement in working capital, provides a solid base to
fund its globalisation strategy.
Corporate Activities
The disposal of a 25% equity interest in Aberdare Fibre Optic Cables (Pty)
Ltd to the world leader in fibre-optics, Corning Inc. of the USA, has been
concluded and a gain of R 38 million is included in exceptional items. This
will provide Aberdare Fibre Optic Cables with full access to Corning's fibre-
optic cable technology, products and accessories coupled with the added
benefit of a guaranteed export offtake of fibre-optic cable. There is a
further commitment to sell Corning an additional 25% on 1 March 2003 on
similar terms and conditions.
In the period under review Powertech has further strengthened its black
empowerment alliances. The Ikwezi Group, a leading black empowerment group
which is actively involved in the telecommunications sector, has purchased a
10% equity interest in Aberdare Cables, Powertech's largest subsidiary.
Ikwezi also purchased a 20% equity interest in Renergy Technologies, which
houses Powertech's solar and renewable energy business. Adv. Dali Mpofu has
been appointed Chairman of this company. These transactions are part of a
core strategy of broadening the empowerment shareholder base of Powertech
and facilitating further telecommunication based skills transfer.
The group, through the black empowered Desta Power Matla, acquired Power
Engineers, the Cape Town based distribution transformer business previously
owned by Northern Engineering Industries Limited. The integration of this
business into the existing distribution transformer operation will enable us
to provide a broader range of products and services to our customers.
As a further step towards focusing Powertech on its core businesses in power
electronics and telecommunications the non-core Aberdare Plastics operation
has been discontinued and Lighting Structures, Powertech's mast
manufacturing business, has been sold.
Business Activities
Aberdare Telecom Networks (ATN) maintained a high level of business
activity, benefiting from Eskom and Transtel's roll out of telecommunication
network infrastructure as part of the Second Network Operator (SNO). A
significant portion of the three-year Telkom contract for the supply of
copper telecommunication cable has been secured, thus assuring an adequate
loading of the Port Elizabeth Markman facility. The Spanish operation Cables
de Comunicaciones, Zaragoza, performed to expectation.
The group has made substantial advances in the field of renewable energy and
added value services enhancing our offering to customers in this field.
In terms of foreign revenues the group is moving closer to the target of one
third of total revenues coming from foreign operations and exports. A number
of substantial export orders across the Powertech businesses have been
booked; a highlight being the award of a contract to supply power cable to
Hong Kong with an estimated value of US$ 15.5 million (R 142.5 million) over
a two year period.
The results for the period were significantly impacted by unreliable copper
rod supply over a two month period as our single largest raw material
supplier experienced strikes in its operations and subsequently quality
problems in its product. The comparative August 2000 period was, however,
also adversely impacted when this same supplier had significant machine
breakdowns.
The results of our transformer joint venture with ABB, ABB Powertech
Transformers, were in line with expectations and matched the exceptional
performance of the prior year period.
The conditions in the building and construction industry showed little
improvement in the six months under review with "building plans passed" and
especially "buildings completed" declining despite the reduction in interest
rates. As a result, the Powertech businesses operating in this industry,
while reporting acceptable business volumes, were affected by the continuing
pressure on margins.
Despite the pressure in the building and construction industry, the group's
investment in Voltex, the country's largest electrical distributor,
continued to deliver satisfactory results. The group is evaluating its
strategic position in respect of this investment.
Worldwide demand for automotive batteries has declined by some 15% over the
past few years, placing pressure on local manufacturers. The difficulties
brought about through this decline have impacted volume and margins of our
local and UK battery operations. Rationalisation programmes have been
initiated to streamline the production and distribution of our products.
Outlook
Over the past few years the group has embarked on significant restructuring
and rightsizing projects which brought greater focus to bear on core
activities. These projects, some of which are still in progress, should
bring positive effects and position the group as a competitive player in the
world market.
Signs of a deterioration in world telecommunication markets were seen some
months ago. These have now become a reality and certain orders for supply to
the USA, Europe and South America have been cancelled or deferred. This
situation has been exacerbated by the recent tragedy in the United States
further impacting global economies, the extent of which will only become
evident in time to come. The rollout of the SNO networks and the third
cellular network provider in South Africa will assist in bringing some
relief to the local operations, but will probably not offset the impact felt
from the loss of international business .
The building and construction industry is not expected to show any
significant improvement in the short to medium term.
Given the deterioration in trading conditions referred to earlier, earnings
for the full year are expected to be lower than those of the prior year.
On behalf of the board
Dr John Maree Norbert Claussen Grant Scrutton
Chairman Chief Executive Financial Director
4 October 2001
The full interim report is available on the company website at
www.powertech.co.za and the JSE news service SENS and will be posted to
shareholders on or about 5 October 2001.
Directors: Dr JB Maree (Non-Executive Chairman), Norbert Claussen (Chief
Executive) (Alt PD Redshaw*), MC Berzack, L Boyd (Alt L Hauptfleisch),
WS McCarroll*, DC Mpofu, GM Rochussen, GM Scrutton, GJ Trollope, RE Venter,
Dr WP Venter, PL Wilmot
(*British)
Business address
PO Box 228, Sloane Park 2152, South Africa
Telephone + 27 11 706 7184
Telefax + 27 11 706 1036
Email: info@powertech.co.za
Website: www.powertech.co.za
Mercantile Registrars Limited
PO Box 1053, Johannesburg 2000
Telephone + 27 11 370 5000
Telefax + 27 11 370 5721
Consolidated interim financial results for the six months ended 31 August
2001
Income statement Figures in R000
Six months Six months Year
ended ended ended
% 31.8.01 31.8.00 28.2.01
Change (unaudited) (unaudited) (audited)
Revenue 1,919,901 1,522,956 3,351,581
Continuing operations 32.4% 1,843,353 1,391,918 3,100,998
Discontinuing operations 76,548 131,038 250,583
Operating income 88,496 88,565 197,051
Continuing operations 101,950 102,514 223,094
Discontinuing operations (13,454 (13,949) (26,043)
Net finance income 4,470 235 5,753
Dividend income (excluding 5,965 828 3,398
associates)
Net interest income (1,495) (593) 2,355
Income from associates 7,965 7,830 20,896
Income before exceptional items 100,931 96,630 223,700
Goodwill amortised
Exceptional items (Note 1) (6,733) (4,766) (23,591)
Income before taxation 2.5% 94,198 91,864 200,109
Taxation 24,796 24,194 46,082
Income after taxation 2.6% 69,402 67,670 154,027
Attributable to outside (20,983) (15,699) (37,284)
shareholders
Attributable earnings -6.8% 48,419 51,971 116,743
Basic earnings per -4.7% 18.2 19.1 43.4
share (cents)
Headline earnings per 4.3% 21.6 20.7 48.4
share (cents)
Proposed dividend per share - - 16.0
(cents) (note 4)
Weighted average number of 266,639 271,626 269,076
shares in issue (000)
Notes:
1. Exceptional items
Net surplus on disposal of 45,790 - -
businesses
Settlement of obligation to
acquire assets at a
premium over market value (38,600) - -
Losses incurred on (6,403) - (12,837)
discontinuance of operations
Impairment of assets (11,275) (2,601) (9,900)
Capital surplus on sale of 3,554 - -
property
Net amortisation of goodwill 2,633 - 5,785
Restructuring costs and other (2,432) (2,165) (6,639)
(6,733) (4,766) (23,591)
2. Reconciliation between
earnings and
headline earnings
Attributable earnings 48,419 51,971 116,743
Exceptional items - gross 6,733 4,766 23,591
55,152 56,737 140,334
Tax effect of
exceptional items (2,811) (419) (7,690)
Outside shareholders'
Interest 5,128 (109) (2,316)
Headline Earnings 57,469 56,209 130,328
3. The accounting policies and methods of computation followed in this
interim report are consistent with the annual financial statements for
the year ended 28 February 2001 with the exception of the change
relating to the recognition of dividends receivable and subsequent
dividends payable and the related STC. The relevant changes have been
processed through these interim results, in accordance with statements
of Generally Accepted Accounting Practice. The dividend per share of 16
cents (Aug 00 and Feb 01 - 15 cents) declared and paid in the current
period was the annual dividend for the previous year. It is group
policy for an annual dividend to be declared after the end of the
financial Year. Dividends are only accounted for once they have been
declared.
4. Diluted earnings per share and diluted headline earnings per share
are not materially different from basic earnings per share and headline
earnings per share respectively.
5. The group is involved in minor litigation for which our legal
advisors have indicated that the potential for losses is remote.
Balance sheet Figures in R000
As at As at As at
31.8.01 31.8.00 28.2.01
(unaudited) (unaudited) (audited)
Assets
Non-current assets 640,836 596,514 642,288
Fixed assets 416,493 367,827 426,892
Goodwill - 3,039 -
Negative goodwill (21,503) - (24,136)
Investments and loans 220,111 207,788 215,628
Deferred recoverable taxation 25,735 17,860 23,904
Current assets 1,809,010 1,405,465 1,729,204
Inventories 632,161 631,028 712,583
Accounts receivable 869,480 610,244 822,507
Net cash and cash equivalents 307,369 164,193 194,114
Total assets 2,449,846 2,001,979 2,371,492
Equity and liabilities
Ordinary shareholders' interest 1,253,003 1,159,554 1,248,753
Outside shareholders' interest 204,853 156,447 170,893
Non-current liabilities 177,681 110,739 107,558
Long-term liabilities 82,640 78,591 13,824
Long-term provisions 80,603 13,071 80,617
Deferred taxation 14,438 19,077 13,117
Current liabilities 814,309 575,239 844,288
Total equity and liabilities 2,449,846 2,001,979 2,371,492
Net asset value per share (cents) 469.8 435.0 468.4
Net shares in issue at end of 266,737 266,570 266,592
period (000)
CBS2
Statement of changes in equity
Figures in R000
Six months Six months Year
ended ended ended
31.8.01 31.8.00 28.2.01
(unaudited) (unaudited) (audited)
Balance at start of period 1,201,825 1,127,654 1,127,654
Prior year adjustment ( Note 3 ) 46,928 44,937 44,937
1,248,753 1,172,591 1,172,59
New share issues movement, net of
goodwill written off 473 32 421
Reduction in equity as result of
Own shares acquired by subsidiary - (23,154) (23,813)
company
Attributable earnings 48,419 51,971 116,743
Dividend (42,665) (41,194) (41,194)
Foreign currency translation (1,977) (692) 24,005
Revaluation of property and
investments
Foreign currency translation (1,977)
Goodwill on acquisition
Other movements (692) 24,005
Balance at end of period 1,253,003 1,159,554 1,248,753
Cash flow statement Figures in R000
Six months Six months Year
ended ended ended
31.8.01 31.8.00 28.2.01
(unaudited) (unaudited) (audited)
Operating activities 182,854 46,155 33,092
Cash generated by operations 144,821 124,254 256,173
Investment income 6,618 9,069 20,156
Cash effect of exceptional items 4,341 (1,398) (8,073)
Changes in working capital 139,201 (3,716) (106,384)
Finance costs (8,113) (3,877) (8,006)
Taxation paid (43,812) (25,166) (67,763)
Cash available from operating 243,056 99,166
activities 86,103
Dividends paid, including to outside (60,202) (53,011) (53,011)
shareholders
Investing activities (12,721) (28,615) (125,565)
Acquisition / Disposal of operations (2,017) (6,930) (52,731)
and investments
Other net investing activities (10,704) (21,685) (72,834)
Financing activities (56,878) (20,474) 25,782
Net funds generated / (utilised) 113,255 (2,934) (66,691)
Cash and cash equivalents in
acquisitions
and disposals - (360) 93,318
Cash and cash equivalents net of
overdrafts
- at beginning of period 194,114 167,487 167,487
- at end of period 307,369 164,193 194,114
Operational contribution
Figures in R000
Six months Six months
ended ended Year
Operating income: 31.8.01 31.8.00 28.2.0
Telecommunications 63,235 33,578 87,909
Power Electronics 38,715 68,936 135,18
Total continuing operations 101,950 102,514 223,094
Discontinuing operations (13,454) (13,949) (26,043
88,496 88,565 197,0
Revenue:
Telecommunications 606,971 280,612 856,90
Power Electronics 1,236,382 1,111,306 2,244,
Total continuing operations 1,843,353 1,391,918 3,100,9
Discontinuing operations 76,548 131,038 250,583
1,919,901 1,522,956 3,351
Other disclosure
Figures in R000
Six months Six months
ended ended Year
Revenue: 31.8.01 31.8.00 28.2.
Cables 1,243,822 788,256 1,918
Transformers 230,007 242,410 465,63
Batteries and solar power 287,679 297,526 631,327
Electrical accessories 127,160 95,768 190,233
Other 31,233 98,996 145,6
1,919,901 1,522,956 3,351
Supplementary information
Figures in R000
Six months Six months Year
ended ended ended
31.8.01 31.8.00 28.2.01
(unaudited) (unaudited) (audited)
Amortisation (2,459) 119 (5,414)
- net negative and positive (2,633) - (5,785)
goodwill
- intangible assets 174 119 371
Borrowings 103,699 98,291 162,913
- interest bearing 91,379 72,541 134,593
- non-interest bearing 12,320 25,750 28,320
Capital commitments 22,461 20,416 40,039
Capital expenditure 35,396 24,507 79,668
Contingent liabilities - 24,408 30,633
Depreciation 32,706 30,707 62,746
Impairment losses 4,259 2,601 9,900
Lease commitments 51,312 34,552 43,115
Listed investments
- carrying amount 148,718 143,595 150,201
- market valuation 107,15 112,493 112,493
Unlisted investments
- carrying amount 71,393 64,193 65,427
- directors' valuation 71,393 64,193 65,427
