| Tue 19 Mar 2002, 0:00 | | Control Instruments Group Limited - Audited Prelim |
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CONTROL INSTRUMENTS GROUP LIMITED
Registration No: 1964/003987/06
SHARE CODE: CNL ISIN CODE: ZAE000001665
AUDITED PRELIMINARY ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2001
HIGHLIGHTS
- 36% growth in core operations turnover
- Strong cash flow
- Sound balance sheet
- Solid platform established for good growth and profitability in 2002
INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2001
Continuing Discontinuing Total
Operations Operations
2001 2000 2001 2000 2001 2000
R 000 R 000 R 000 R 000 R 000 R 000
Revenue 248,362) 182,356) 12,408 23,021 260,770 205,377
Cost of sales (164,037) (108,561) (5,222) (11,196) (169,259) (119,757)
Gross profit 84,325 73,795 7,186 11,826 91,511 85,621
Other
Operating
income 10,874 7,263 640 1,082 11,514 8,345
95,199 81,058 7,826 12,908 103,025 93,966
Operating
expenses (84,445) (65,154) (9,766) (19,429) (94,211) (84,583)
Earnings before
interest, tax,
depreciation
and amortisation
(EBITDA) 10,754 15,904 (1,940) (6,521) 8,814 9,383
Depreciation
and
amortisation (10,993) (6,960) (419) (1,289) (11,412) (8,249)
(Loss)/profit
from operations (239) 8,944 (2,359) (7,810) (2,598) 1,134
(Loss)/profit
on sale of
investments and
operations (51) 12,234 4,275 773 4,224 13,007
Restructuring
costs (1,253) (5,384) - - (1,253) (5,384)
Impairment of
goodwill - - (3,200) - (3,200) -
Provision against
investments
and loans (2,177) - - - (2,177) -
Net interest (3,120) (1,298) 167 (1,554) (2,953) (2,852)
Income from
associates - - - 975 - 975
(Loss)/profit
before tax (6,840) 14,496 (1,117) (7,616) (7,957) 6,881
Tax (1,408) 998 (39) (14) (1,447) 985
(Loss)/profit
after tax (8,248) 15,494 (1,156) (7,629) (9,404) 7,865
Minority
interest - 6 - (19) - (13)
Net (loss)/profit
from
ordinary
activities (8,248) 15,500 (1,156) (7,648) (9,404) 7,852
Earnings per
share (cents) (9.32) 17.52 (1.31) (8.64) (10.63) 8.87
Headline
earnings per
share (cents) (4.31) 10.01 (2.34) (10.60) (6.66) (0.59)
RECONCILIATION OF EARNINGS PER SHARE
TO HEADLINE EARNINGS PER SHARE
Continuing Discontinuing Total
Operations Operations
2001 2000 2001 2000 2001 2000
cents cents cents cents cents cents
Earnings per
share (9.32) 17.52 (1.31) (8.64) (10.63) 8.87
(Loss)/profit on
sale of investments
and operations 0.06 (13.83) (4.83) (0.87) (4.77) (14.70)
Restructuring costs 1.42 6.08 - - 1.42 6.08
Impairment of goodwill - - 3.62 - 3.62 -
Provision against
investments
and loans 2.46 - - - 2.46 -
Profit/loss on
disposal of fixed
assets 0.02 0.01 - (1.08) 0.03 (1.08)
Goodwill amortised 1.05 0.22 0.18 - 1.23 0.22
Headline earnings
per share (4.31) 10.01 (2.34) (10.60) (6.66) (0.59)
BALANCE SHEET AT 31 DECEMBER 2001
31/12/2001 31/12/2000
R 000 R 000
ASSETS
Non-current assets 69,685 82,093
Property, plant and equipment 33,133 36,085
Intangible assets 13,157 15,373
Investment in associates - 3,200
Other investments and
non-current receivables 23,379 25,772
Deferred tax 16 1,663
Current assets 85,505 87,633
Inventories 25,436 37,005
Receivables and prepayments 44,288 39,276
South African Revenue Services 177 177
Cash and cash equivalents 15,604 11,175
Total assets 155,190 169,726
EQUITY AND LIABILITIES
Capital and reserves 72,058 81,401
Share capital 4,424 4,424
Share premium 47,603 47,603
Retained earnings 19,861 29,269
Reserves 170 105
Minority interest - 24
Non-current liabilities 14,296 18,559
Long-term borrowings 12,702 16,753
Retirement benefit obligations 1,500 1,500
Deferred tax 94 306
Current liabilities 68,836 69,742
Trade and other payables 43,329 42,640
South African Revenue Services - 113
Current borrowings 20,747 24,211
Provision for liabilities
and charges 4,760 2,778
Total equity and liabilities 155,190 169,726
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2001
31/12/2001 31/12/2000
R 000 R 000
Cash flows from investing activities
Operating profit before working
capital changes 6,820 3,045
Working capital changes 8,848 (19,515)
Cash generated from/(utilised in)
operations 15,668 (16,470)
Interest received 1,534 1,875
Interest paid (4,487) (4,727)
Dividends paid - (7,079)
Tax paid (125) (716)
Maintenance reserve utilised (251) -
12,339 (27,117)
Cash flows from investing activities
Fixed assets purchased (11,962) (12,824)
Proceeds from disposal of fixed assets 447 2,668
Increase in intangible assets (5,053) (6,007)
(Increase)/decrease in other
investments and non-current
receivables (10,658) 433
Acquisition of operations (5,250) (10,978)
Proceeds from disposal of investments 31,982 25,770
Acquisition of associate companies - (320)
(494) (1,258)
Cash flows from financing activities
(Settlement of)/proceeds from
long-term borrowings (3,163) 4,367
Net cash inflow/(outflow) for the year 8,682 (24,008)
Cash and cash equivalents at the
beginning of the year (7,528) 16,480
Cash and cash equivalents
at the end of the year 1,154 (7,528)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2001
Share Share Reserves Retained Total
Capital Premium earnings
R 000 R 000 R 000 R 000 R 000
Balance at 1
January 2000 4,424 47,603 362 18,264 70,653
As previously reported 4,424 47,603 362 22,623 75,012
Change in accounting
policy - - - (4,359) (4,359)
Net (losses)/profits
not recognised
in the Income
Statement - - (257) 3,153 2,896
Currency translation
differences
Arising during
the year - - 373 - 373
Disposed of with
subsidiary - - (881) - (881)
Goodwill relating
to associate sold - - - 3,304 3,304
Creation of
maintenance reserve - - 100 - 100
Transfer to
maintenance reserve - - 151 (151) -
Net profit - - - 7,852 7,852
Balance at 31
December 2000 4,424 47,603 105 29,269 81,401
Net profits/(losses)
not recognised
in the Income
Statement - - 65 (4) 61
Currency translation
differences
Arising during
the year - - 316 - 316
Joint venture
previously
not consolidated - - - (4) (4)
Utilisation of
maintenance reserve - - (251) - (251)
Net loss - - - (9,404) (9,404)
Balance at 31
December 2001 4,424 47,603 170 19,861 72,058
These results, the Group's presentation to analysts and links to the Group's
subsidiaries are available at www.ci.co.za
COMPANY NAME ABBREVIATIONS
The registered names of companies/operations referred to in this
announcement are as follows:
CI-AT (previously CI-VDO) The Automotive Trading division of Control
Instruments (Pty) Limited
CI-FMS The Fleet Management Systems division of Control Instruments (Pty)
Limited
Conlog Conlog (Pty) Limited
Data Pro Data Pro Services (Pty) Limited
Emailco The E-mail Corporation (Pty) Limited
Freight Online Cargo Online (Pty) Limited, t/a Freight Online
Matrix Matrix Vehicle Tracking (Pty) Limited
On Track Lexshell 275 Investments (Pty) Limited
Rhomberg Rhomberg (Pty) Limited
SAN People SAN People (Pty) Limited
Shurlok Shurlok International (Pty) Limited
Siemens VDO Part of Siemens AG
OVERVIEW
2001 marked the Group's twentieth year of operation and it proved to be an
extremely challenging and difficult year. The underlying strength in-herent
in the Group and its subsidiaries and the conservative approach which the
Group and its directors have followed allowed it to weather this period posi-
tively.
The Group continued to tighten its focus on its core Electronics operations,
Shurlok, CI-FMS and CI-AT (pre-viously known as CI-VDO). These businesses
operate in specialised niche areas of the Original Equipment Manu-facture
(OEM) motor industry and the commercial and passenger vehicle markets. These
are all market seg-ments that offer excellent growth prospects as well as
export opportunities arising out of South Africa's successful Motor Industry
Development Program (MIDP) and the declared intention of most of the world's
motor manufactur-ers to increase their component supplies from South Africa.
All the core Electronics operations traded profitably during the year, al-
though Shurlok's margins and profitability were adversely affected by
component shortages and exchange rate variances. The national strike in the
automotive industry in the second half of the year also had a major impact
on Shurlok and CI-AT's results.
The Group's operations and activities generated sufficient cash to fund the
investment of R12 million in productive assets, approximately R16.8 million
in development expenditure and R5.25 million in acqui-sitions. A further
R8.6 million of free cash flow was used to reduce debt.
In consultation with the Group's auditors and in light of current market
conditions and those expected in the foreseeable future, the board of dir-
ectors has decided that it is prudent to adopt a more conservative approach
with respect to the treat-ment of the capitali-sation of development costs
relating to cer-tain new products and all start-up ventures. The major
effect of this change in accounting policy relates to SAN People where all
the capitalised develop-ment expenses have been written off. This and the
inclusion of SAN People's results in Continuing Opera-tions have had a
materially nega-tive effect on the results for 2001. The 2000 results have
been restated accordingly.
During the year the Group continued with the disposal of its non-core
holdings with the sale of the business of Data Pro for R30 million and 61%
of its shareholding in Emailco for R5.8 million.
The Southern Africa distribution rights for the Siemens VDO FMS range of
onboard computers (OBCs), which were sold to Matrix in 1999 were re-acquired
for R5.25 million. In addition, the Group has acquired Siemens VDO's Audio
Navigation (AN) business in sub-Saharan Africa with effect from 1 January
2002. This acquisition will complement the Group's existing Siemens VDO and
Fleet Management (FM) busi-ness and will bring CI-AT in line with Siemens
VDO's worldwide trading structure.
RESULTS
CONTINUING OPERATIONS
Sales grew by 36% to R248.4 million. Operating income increased by 17.5% to
R95 million. This was lower than expected mainly due to the pressure on
margins at Shur-lok.
Expenses increased substantially compared with the previous year and
resulted in a 32.3% reduction in earn-ings before interest, tax, de-pre-
ciation and amortisation (EBITDA) to R10.75 million. These increases were
mainly as a result of:
- the inclusion for the first time of a full year's expenses relating to
the Conlog business (acquired in late 2000);
- a large increase in development expenditure in all the operations;
- the inclusion of SAN People's costs and the expensing of all its
development ex-penses as a result of the change in accounting policy;
- an increase in sales and marketing expenditure, particularly in the
Group's inter-national markets where these expenses were affected by the
depreciation in the value of the Rand and
- non-recurring restructuring costs of R1.25 million that relate to the
integration and relocation of the Conlog business to Pietermaritzburg.
Profitability was further reduced by the following non cash flow items which
were expensed:
- R6.6 million that was written off in respect of the investment in
discontinued South American operations;
- R3.2 million of goodwill that was written off;
- a provision of R2.2 million raised against the value of the Group's
shares held by the Share Incentive Scheme in compliance with the re-
quirements of GAAP;
- a substantial increase in depreciation and
- the reversal of the deferred tax charge of R1.45 million.
The Group's balance sheet remains sound. Net short-term borrowings have been
reduced by 60% to R5.14 mill-ion and long-term borrowings have been reduced
by 24% to R12.7 million.
DISCONTINUING OPERATIONS
Emailco, Freight Online, On Track, and Rhomberg are included under
Discontinuing Opera-tions. The Group is in the process of disposing of its
interests in these businesses. With the exception of Rhomberg, the Group has
pro-vided in full against the value of these businesses in its accounts and
they will therefore have no material effect on the Group's future operating
income.
Nevertheless, the directors are of the opinion that the sale of these
interests will, at the appropriate time, un-lock their inherent value.
ACCOUNTING POLICY
Apart from the change in accounting policy referred to above, the accounting
policies adopted by the Group remain consistent with those applied in the
previous financial year. The financial statements have been prepared in
accordance with GAAP.
PROSPECTS
The Group's prospects are good. The ongoing investments in modern
manufacturing facilities, new product dev-elop-ment and staff have enabled
the Group to build a solid platform from which it is in a posi-tion to
generate acceptable returns. The disposal of non-core busi-nesses and the
acquisition of com-plementary assets have enhanced the Group and added to
its focus.
The Group therefore expects to trade profitably and to continue to generate
cash during 2002.
DIVIDEND
In light of the current circumstances, the directors have decided that it is
prudent not to declare a dividend in re-spect of the 2001 financial year.
On behalf of the Board HV Hefer, R Friedman,
of Directors Cape Town Chairman Group Managing 19 March 2002
Director
REGISTERED OFFICE The Vineyard
Ground Floor, East Wing,
Corner Adam Tas and Devon Valley Roads
Stellenbosch, 7600
PO Box 12377
Die Boord 7613
SHARE TRANSFER SECRETARIES
Mercantile Registrars Limited
11 Diagonal Street
Johannesburg 2001
PO Box 1053
Johannesburg 2000
DIRECTORS HV Hefer (Chairman)* R Friedman (Managing) EPH Bieber* SV
Bromfield* TE Buzer (British) RB Forrester RJ Fraenkel JR Hersov*
*non-executive
