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Grintek Limited - Preliminary Report
Grintek Limited
Reg. No. 1955/000013/06
Share code: GNK
ISIN code: ZAE000003067
PRELIMINARY REPORT
FOR THE YEAR ENDED 30 JUNE 2002
* DIVIDEND UP
* RECORD ORDER BOOK
* REVENUE MAINTAINED
* PROFIT AFTER TAX MAINTAINED
GROUP INCOME STATEMENTS
Reviewed Increase/ Audited
2002 (Decrease) 2001
R000 % R000
Revenue from sales 1 177 301 (1) 1 189 479
Cost of sales 894 735 (1) 901 263
Gross profit 282 566 (2) 288 216
Selling and administration expenses 99 554 4 95 274
Earnings before financing costs,
taxation, depreciation and
amortisation ("EBITDA") 183 012 (5) 192 942
Depreciation 17 302 20 14 406
Amortisation 10 419 24 8 393
Operating profit 155 291 (9) 170 143
Interest received 13 510 (20) 16 983
Profit before financing costs 168 801 (10) 187 126
Financing costs (6 579) 64 (4 019)
Financing costs on capitalised leases (4 466) 8 (4 145)
Share of associated companies` results 2 717 (23) 3 509
Exceptional items 11 246 642 (2 074)
Profit before taxation 171 719 (5) 180 397
Taxation 53 467 (15) 62 595
Profit after taxation 118 252 0 117 802
Attributable to outside shareholders 13 391 198 4 491
Earnings 104 861 (7) 113 311
GROUP BALANCE SHEETS
Reviewed Audited
2002 2001
R000 R000
ASSETS
Non-current assets 255 609 153 967
Fixed assets 149 580 99 555
Development projects 62 425 27 133
Intangible assets 9 700 -
Unlisted investments 14 601 10 862
Deferred taxation asset 9 561 5 828
Loans and long-term receivables 9 742 10 589
Current assets 983 772 910 826
Inventories 248 743 197 601
Trade and other receivables 547 969 495 045
Advance payments 22 828 19 129
Cash and cash equivalents 164 232 199 051
1 239 381 1 064 793
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 378 359 351 320
Minority interest 94 142 25 956
Total equity 472 501 377 276
Non-current liabilities
Long-term borrowings 47 812 31 731
Current liabilities 719 068 655 786
Interest bearing 50 927 32 182
Trade and other payables 246 494 321 350
Advance receipts 301 285 190 717
Provisions 79 965 53 162
Corporate taxation 40 397 58 375
1 239 381 1 064 793
ABRIDGED CASH FLOW STATEMENTS
Reviewed Audited
2002 2001
R000 R000
Operating activities 57 825 3 571
Cash generated by operations 166 686 188 359
Income from investments 13 510 16 983
Working capital requirements (12 406) (143 872)
Cash generated by operating activities 167 790 61 470
Financing costs (11 045) (8 164)
Taxation paid (73 187) (32 926)
Dividends paid (25 733) (16 809)
Investing activities (99 131) (56 284)
Fixed assets - net investment (65 066) (36 272)
Development projects (32 140) (12 077)
Net investments (1 925) (7 935)
Financing activities (8 055) 973
Shares issued and repurchased (51 582) 2 400
Shares issued in subsidiary company 27 445 -
Long-term borrowings 16 082 (1 427)
Net change in cash and cash equivalents (49 361) (51 740)
Cash and cash equivalents 162 666 218 609
- at beginning of year 166 869 214 345
- adjustments (4 203) 4 264
Cash and cash equivalents at end of year 113 305 166 869
EARNINGS AND SHARE PERFORMANCE
Reviewed Increase/ Audited
2002 (Decrease) 2001
R000 % R000
Earnings 104 861 (7) 113 311
Profit on sale of assets (365) 119 (167)
Exceptional items (11 246) 642 2 074
Attributable taxation and
minority share 182 214 58
Headline earnings 93 432 (19) 115 276
Share performance from
continuing operations
- headline earnings per ordinary
share (cents) 31.9 (24) 42.0
- fully diluted headline earnings
per ordinary share (cents) 30.7 (21) 38.7
Total dividend per ordinary share
paid (cents) 8.8 26 7.0
- No 70, declared 4 September 2001
(2000 - No 68) 5.8 4.8
- No 71, declared 21 February 2002
(2001 - No 69) 3.0 2.2
Dividend no 72 declared 3 September 2002,
payable 14 October 2002 6.4 10 5.8
Number of ordinary shares in
issue (thousands)
- at end of year 271 582 291 395
- weighted average 292 703 274 298
- fully diluted 304 107 299 533
Net asset value per ordinary
share (cents) 139.3 16 120.6
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Reviewed Audited
2002 2001
R000 R000
Stated capital 117 766 124 489
Balance at beginning of year 124 489 86 794
Ordinary shares issued 3 169 37 695
Shares repurchased (9 892) -
Non-distributable reserves 1 893 2 400
Balance at beginning of year 2 400 4 304
Reversal of property revaluation (343) (1 700)
Realisation of investment (164) -
Currency translation differences - (204)
Distributable reserves 258 700 224 431
Balance at beginning of year 224 431 127 929
Earnings attributable to ordinary
Shareholders 104 861 113 311
Ordinary dividends declared (25 733) (16 809)
Shares repurchased (44 859) -
Ordinary shareholders` equity 378 359 351 320
SEGMENTAL ANALYSIS
Revenue from sales
2002 2001
R000 R000
Telecommunications 517 619 648 689
Defence electronics 519 710 408 946
Industrial electronics 128 626 120 709
Corporate and other 11 346 11 135
1 177 301 1 189 479
COMMENTS
Improved exports of defence electronic products and systems have contributed
significantly towards the Group`s results for the year ended 30 June 2002. This
positive medium- to long-term recovery in the defence-related business units
was, however, tempered by challenging trading conditions experienced in the
telecommunications sector.
Defence revenue from sales increased by 27 per cent whilst industrial revenue
showed a 6,6 per cent increase. In line with market trends, telecommunications
revenue experienced a 20 per cent decline. The combination of these factors
resulted in Group turnover showing a one per cent decline. The export component
of revenue showed a marked increase of 39,8 per cent, following on from an 80,8
per cent increase in the previous year.
Profit after taxation was maintained and earnings of R104,9 (2001 - R113,3)
million are seven per cent lower. The share of profits attributable to outside
shareholders has increased to R13,4 million from R4,5 million as a result of the
equity partnerships and increased contribution by the defence sector.
The changing composition of revenue from sales, with an increasing component
derived from hard-currency exports, has had a positive impact on earnings for
the year. The foreign exchange gains amounted to R73,4 (2001 - R27,0) million
gross, which excludes the additional costs incurred as a result of the
devaluation of the SA Rand included in cost of sales and in overheads.
Cash generation in a long-term contracting environment remains paramount and the
Group has adopted a specific contracting model which strives to maximise
positive cash flow throughout the contract execution period. The effects of
this model can be seen in the resultant advance receipts under current
liabilities utilised to fund work in progress. Cash generated by operations
amounted to R166,7 (2001 - R188,4) million.
During the year the shareholders approved a specific share repurchase equivalent
to 8,5 per cent of the shares in issue. Shareholders tendered a total of 7,75
per cent of their shares which were successfully repurchased by a subsidiary
company prior to year-end. As the repurchase was only effective from 18 June
2002, the full impact on the weighted shares in issue is not reflected in this
year`s calculation of earnings per share. Headline earnings per share were 31,9
cents compared to 42,0 cents for the previous year. The final dividend has been
increased to 6,4 (2001 - 5,8) cents.
BUSINESS REVIEW
Telecommunications
A general slowdown in the telecommunications market contributed to the difficult
trading conditions experienced by this division. This was seen in the general
hesitancy on the part of enterprise and service providers to invest in new
communications infrastructure. Nevertheless, the division made significant
progress in deploying new technologies in South Africa and other African
countries. Enterprise sales in call centre and general communications
infrastructure remain stable. Annuity sales from services and long-term
maintenance contracts have increased. This product and customer diversification
has strengthened the business.
Industrial Electronics
Continued investment in R&D, combined with our enviable position in the
industrial electronics market, has enabled this division to exploit exciting
business opportunities.
A new rectifier introduced to the local telecommunications market during the
year, has become the standard power product for use in all new GSM networks
throughout southern Africa. Electricity load management systems are now
operational and have demonstrated their potential to satisfy the need for demand
side load management which, in turn, will allow investment in new power
generation capacity to be deferred.
Following the successful internationalisation of the defence and technologies
division, the antenna business unit has now concluded an equity-based joint
venture with Germany`s Kathrein Werke KG, a world leader in the field of
antennas and commercial electronics. The joint venture is well-placed to
satisfy all the telecommunications antenna requirements of sub-Saharan Africa.
Defence Electronics
The equity-based joint venture with Saab AB of Sweden has been extended to
include the business activities of Grintek Communication Systems. Concurrently,
Grintek and the European Aeronautic, Defence and Space Company (EADS) of Germany
entered into a new equity-based joint venture for the business activities of
Grintek Ewation.
This concludes the implementation of the internationalisation programme
initiated by the defence and technologies sector some years ago. The benefits
of this programme are evidenced by the excellent growth in the sales revenue,
profitability and order book of the defence sector. The division`s medium- to
long-term order book now exceeds R1,5 billion, a large proportion of which is
hard-currency based exports.
Research and Development
Investment in R&D continues to strengthen the Group`s international
competitiveness. Current R&D programmes are conducted in close association with
our international partners, reducing our risk and providing additional insight
into global market and technology trends.
Prospects
Product and market diversification undertaken over recent years have proven
their value. The contraction of the telecommunications market has, to a large
degree, been countered by growth in defence electronics business. The strong
growth posted in the defence electronics market is expected to continue to
influence our future earnings based on a record long-term order book and
excellent international partnerships. The recent deregulation of the
electricity and water utilities enabled the industrial electronics division to
secure its first order in the large, yet undeveloped energy management market,
which is now expected to enter a growth phase.
Changes in Shareholding Structure
On 18 April 2002, shareholders of Kunene Technology Limited (KTL) approved the
unbundling of its shareholding in Grintek. The result of this restructuring is
that Grintek`s shareholder spread is now wider and Kunene Bros. Holdings (Pty)
Limited (KBH) has a 32,5 per cent interest in Grintek. KBH remains the
Company`s principal shareholder.
Personnel
Continued human resource development is the key to a stable, enabled and
diversified workforce. The Company therefore continues to increase its
investment in internal skills development programmes and study grants offered to
suitable recruits.
Financial policy statements
The preliminary information has been prepared in accordance with and complies
with the Statements of Generally Accepted Accounting Practice in South Africa.
The accounting policies of the Group are consistent in all material respects
with those applied in the previous year. The comparative figures have been
restated to reflect a reclassification of certain leased assets.
Auditors` review
The Company`s auditors, Ernst & Young, have reviewed the preliminary financial
information. Their unqualified review opinion is available for inspection at
the Company`s registered office.
STRATE ELECTRONIC SETTLEMENT
Shareholders were advised last year that the Company had moved to the STRATE
electronic settlement system for shares on the JSE Securities Exchange South
Africa "JSE". All share certificates now have to be converted into an electronic
format (dematerialised) before they can be traded on the JSE and settled in
STRATE.
The insurance cover which was provided to the Dispossessed Member`s Fund "DMF"
to cover loss or claims arising from any tainted share certificates that may
exist in the market will terminate on 29 September 2002. Shareholders are
advised to dematerialise their shares and surrender all share certificates to
their Central Securities Depository Participant "CSDP" bank or broker prior to
29 September 2002.
Should you not have a CSDP or broker, please contact the STRATE Share Care Line
on 0800 200 797 for advice and assistance.
DECLARATION OF DIVIDEND NO. 72
The directors of Grintek Limited have declared dividend no. 72 of 6,4 cents per
share to all shareholders. In compliance with the requirements of STRATE, the
following dates are applicable:
Date dividend declared Tuesday 3 September 2002
Last day to trade "CUM" the dividend Friday 4 October 2002
Date trading commences "EX" the dividend Monday 7 October 2002
Record date Friday 11 October 2002
Date of payment Monday 14 October 2002
Share Certificates may not be dematerialised or rematerialised between Monday 7
October 2002 and Friday 11 October 2002, both dates inclusive.
JSE Share code GNK
ISIN Number ZAE000003067
For and on behalf of the board
NR Kunene SA Grobbelaar
Chairman Managing Director
3 September 2002
REGISTERED OFFICE/TRANSFER SECRETARIES
44 Oak Avenue Computershare Investor Services Limited
Highveld Technopark 11 Diagonal Street
Centurion Johannesburg 2001
E-mail: info@grintek.com PO Box 1053
www.grintek.com Johannesburg 2000
Auditors: Ernst & Young
Company secretary: A van der Merwe
Directors
NR Kunene (Chairman) SA Grobbelaar (Managing Director) JR McAlpine
P Moholi M Msimang GJ Royston AN Saulez Dr EW Schumann EE Strauss
GE Swanepoel
Sponsoring broker: Investec
Date: 04/09/2002 01:15:00 PM Produced by the JSE SENS Department
