| Tue 15 Jul 2003, 17:47 | | Bridgestone Firestone Maxiprest Limited Year-end R |
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Bridgestone Firestone Maxiprest Limited Year-end Results - Revised December 2002
Release Date: 15/07/2003 17:15:01 Code(s): BDS
BRIDGESTONE FIRESTONE MAXIPREST LIMITED YEAR-END RESULTS - REVISED DECEMBER 2002
(Incorporated in the Republic of South Africa)
(Registration number 1988/006456/06)
Share code: BDS
ISIN: ZAE000027447
BALANCE SHEET
at 31 December 2002
Audited Audited
Dec 2002 Dec 2001
R "000 R "000
ASSETS
Non-current assets
Property, plant and equipment 114 206 110 431
Goodwill 7 072 6 817
Deferred tax 2 621 -
Investment in associate 13 363 7 112
Unconsolidated subsidiary 5 536 21 714
Share incentive scheme 5 625 9 414
148 423 155 488
Current assets
Inventory 143 269 129 668
Accounts receivable 305 272 230 816
Bank balances and cash 59 323 23 528
507 864 384 012
TOTAL ASSETS 656 287 539 500
EQUITIES AND LIABILITIES
Capital and reserves
Share capital and premium 130 487 130 487
Accumulated profits 118 850 113 459
Shareholders for dividend 7 910 9 492
Other reserves (1 988) -
255 259 253 438
Outside shareholders" interest 4 436 19
Long term liabilities 137 554
Current liabilities
Accounts payable 356 840 244 437
Short term portion of long term liabilities 395 1 199
Taxation payable 34 714 36 758
Bank overdraft 4 506 3 095
396 455 285 489
TOTAL EQUITY AND LIABILITIES 656 287 539 500
Net asset value per share (cents) 161.4 160.2
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2002
Audited Audited
Dec 2002 Dec 2001
R "000 R "000
Share capital and premium
Balance at beginning and end of the year 130 487 130 487
Accumulated profits
Balance at beginning of the year 113 459 84,445
- as previously reported 152 246 120 357
- correction of fundamental error (38 787) (35 912)
Profit for the year 21 211 46 416
- as previously reported 23 959 49 291
- correction of fundamental error (2 748) (2 878)
Distribution to shareholders (15 820) (17 402)
Balance at end of the year 118 850 113 459
Shareholders for dividend
Balance at beginning of the year 9 492 7 910
Distribution to shareholders 15 820 17 402
Paid during the year (17 402) (15 820)
Balance at end of the year 7 910 9 492
Other reserves
Balance at beginning of the year - -
Exchange differences arising on translation
of foreign operations (5 137) -
Arising on consolidation of previously
unconsolidated subsidiaries 3 149 -
Balance at end of the year (1 988) -
Capital and reserves 255 259 253 438
ABRIDGED CASH FLOW STATEMENT
for the year ended 31 December 2002 Audited Audited
Dec 2002 Dec 2001
R "000 R "000
Net cash flows from operating activities 61 116 11 598
Net cash flows from investing activities (24 571) (22 518)
Net cash flows from financing activities (1 607) (2 439)
Net cash generated (utilised) 34 988 (13 359)
Cash and cash equivalents at beginning of year 20 433 33 792
Effect of foreign exchange rate changes (604) -
Cash and cash equivalents at end of year 54 817 20 433
SEGMENTAL ANALYSIS
for the year ended 31 December 2002
Audited Audited
Dec 2002 Dec 2001
R "000 R "000
Revenue
External sales
Wholesale and retail 1 313 980 1 064 739
Tyre leasing 41 749 36 673
Manufacturing 20 010 6 705
Inter-segment sales
Wholesale and retail 501 763 293 239
Manufacturing 229 562 194 459
Property 9 548 9 909
Inter-group elimination (740 873) (497 607)
Revenue 1 375 739 1 108 117
Segmental result
Wholesale and retail 37 426 37 114
Tyre leasing 2 341 13 601
Manufacturing 24 287 17 777
Property 6 234 2 732
Provision for losses in associate (7 771) -
Provision for impairment
in unconsolidated subsidiary (4 102) -
Un-allocated corporate (expenses) income (840) 1 651
Inter-group elimination (10 760) (4 569)
Profit before tax and associate losses 46 815 68 306
Income tax expense (17 292) (21 290)
Share of associate losses (6 111) (581)
Outside shareholder"s interest (2 201) (19)
Profit for the year 21 211 46 416
INCOME STATEMENT
for the year ended 31 December 2002
Audited Audited
Dec 2002 Dec 2001
R "000 R "000
Revenue 1 375 739 1 108 117
Cost of sales (990 747) (788 465)
Gross Profit 384 992 319 652
Provision for losses in associate (7 771) -
Provision for impairment in
unconsolidated subsidiairy (4 102) -
Operating expenses (323 161) (249 493)
Profit from operations 49 958 70 159
Net finance cost (6 409) (3 504)
Share of associate losses and
impairment of investment (6 111) (581)
Income from investments 3 266 1 651
Profit before tax 40 704 67 725
Income tax expense (17 292) (21 290)
Profit after tax 23 412 46 435
Outside shareholders" interest (2 201) (19)
Profit for the year 21 211 46 416
Shares in issue (million) 158.2 158.2
Earnings per share (cents) 13.4 29.3
Headline earnings (R"000)
Per SAICA Circular 7/2002 pre amendments of 27 March 2003
Profit for the period 21 211 46 416
Exceptional items after tax 954 1 400
Headline earnings (R"000) pre amendments of 27 March 2003 22 165 47 816
Per SAICA Circular 7/2002 per amendments of 27 March 2003
Provision for impairment of unconsolidated subsidiary 4 102 -
Provision for losses in/impairment of associate 9 141 -
Headline earnings (R"000) per amendments of 27 March 2003 35 408 47 816
Headline earnings per share (cents)
(basis pre amendments 27 March 2003) 14.0 30.2
(basis per amendments 27 March 2003) 22.4 30.2
Dividend per share 10.0 11.0
Capital expenditure (R"000)
- incurred 38 546 26 105
- approved 25 259 12 511
Depreciation (R"000) 15 048 14 292
Accounting policies: The financial statements have been prepared in
accordance with South African Statements of Generally Accepted Accounting
Practice.
Audited results: The revised results for the year ended 31 December 2002 have
been audited by Deloitte & Touche. Their unqualified audit opinion is available
for inspection at the registered office of the company. The report emphasises
the fact that the previously issued financial statements dated 3 March 2003 have
been withdrawn, as taxation irregularities were identified in the period after 3
March 2003. A liability of R41,535,009 has been raised in respect of the
outstanding taxes, interest and additional taxes payable to the South African
Revenue Services. The remainder of the liability represents interest of
R1,086,741 incurred in the 2003 financial year to the date that the liability
had been settled and will be accounted for in that period.
* THE COMPANY
Bridgestone Firestone Maxiprest Limited, listed on the JSE Securities Exchange
under "Cyclical Consumer Goods - Automobiles and Parts" Sector, is sub-Saharan
Africa"s predominant retreader, multi-brand new tyre distributor and tyre
management service provider. Its activities in the region are conducted through
25 retread plants and 116 retail and service outlets, also providing support for
its 24-hour transporter tyre breakdown service.
In SA, operations are conducted through wholly - and majority-owned
subsidiaries; Maxiprest Tyres (passenger, truck, bus and agriculture), Quality
Tyres (mining and earthmover), and Maxiprest Africa Operations, formerly
Pentamax (regional development and distribution). In the balance of sub-Saharan
Africa, operations exist in Botswana, Mozambique, Namibia, Swaziland, Zambia and
Zimbabwe. All operating entities in these areas are also classified as approved
Bridgestone Firestone agents.
Bridgestone Corporation (Japan), the world"s leading new tyre and rubber
manufacturer, holds a strategic 53% stake in the Group through its local
subsidiary Bridgestone Firestone SA Holdings (Pty) Ltd. Management, institutions
and the investing public hold the balance of the equity.
* REVISED YEAR END RESULTS FOR DECEMBER 2002
On 3 April the Board of directors of the company announced that they noted
the arrest of Mr. Grant Ramsay, who had during the 1990"s and prior to the
listing of the Group, had a close association with the Group and the firm, which
Mr. Ramsay was associated with, served as the Group"s auditors. Mr. Ramsay
subsequently served as a director of the Group. In addition, the Group entered
into certain transactions with Mr. Ramsay, where he acted as a consultant to the
Group.
In view of the circumstances of Mr. Ramsay"s arrest, the Board appointed its
legal advisors, to engage the forensic division of KPMG Inc. to conduct a
forensic investigation of all transactions which had taken place between the
Bridgestone Firestone Maxiprest Group of Companies and Mr. Ramsay and entities
associated with him. The mandate also covered payments made by the Group to
certain directors and employees through structures set up by Mr. Ramsay. The
majority of the transactions under investigation took place between 1990 and
1998, prior to the Group"s listing.
The Group approached the South African Revenue Services ("SARS") when the
forensic audit revealed that certain tax irregularities had in fact occurred
within the Group. After extensive negotiations with SARS the board has managed
to regularise the Group"s tax affairs. The directors announce the following in
this regard:
* The Group acknowledges that certain companies with flawed assessed tax losses
were purchased by Maxiprest Tyres (Pty) Ltd and these losses utilised to reduce
its tax liability. The acquisition of companies with assessed tax losses
occurred prior to the listing of the Group and prior to the appointment of the
current non-executive directors.
* There is an ongoing investigation into payments made to certain executive
directors who were directors of the company when the tax losses were utilised.
The Group acknowledges that payments made to certain of the directors did not
comply with the provisions of the Income Tax Act taking into account that the
directors were provisional taxpayers during that period. The Group has taken all
necessary steps to avoid such a situation occurring in the future.
* The Group has taken all the relevant steps to regularise its tax affairs with
SARS.
* The Group has undertaken to assist SARS where possible with its
investigations of alleged tax irregularities in respect of payments made to
certain of the former directors.
* The Group acknowledges that there are indications that certain of the
executive directors did not comply with their corporate governance
responsibilities and obligations towards SARS during the period covered by the
investigations.
* The outstanding tax liability of the Group has been settled in full on the
basis that, to the best of the knowledge of the Board of directors, a full and
frank disclosure has occurred relating to the issues as set out above.
In June 2003, it was confirmed that the assessed tax losses, which had in the
past been utilised against other taxable income, were fraudulently created in
certain companies prior to those companies being acquired by the Group. Due
further to irregular tax structuring, employees" tax was not deducted from
certain employees of certain companies within the Maxiprest Group.
The SARS was approached and a settlement was reached in June 2003 at
R42,621,751. This amount has been financed by means of facilities provided by
the Group"s bankers. As a result of this post balance sheet event the 2002
annual financial statements, which were approved for issue on 3 March 2003 have
been withdrawn and have been replaced by these revised annual financial
statements which were approved for issue on 10 July 2003.
R41,535,009 of the total amount of R42,621,751 has been raised as a liability
at 31 December 2002. The balance of R1,086,741 related to the interest charged
for the 2003 financial year and will be recognised in the income statement for
the period ending 31 December 2003.
Feb 1998
Group Dec 2002 Dec 2001 Dec 2000 Dec 1999* Feb 1999 and prior
R"000 R"000 R"000 R"000 R"000 R"000
Operating expenses - - - 534 1,354 6,179
Interest expense 2,748 2,875 2,722 2,227 2,383 5,387
Profit before tax (2,748) (2,875) (2,722) (2,761) (3,737) (11,566)
Income tax expense - - - 796 3,809 10,521
Profit after tax (2,748) (2,875) (2,722) (3,557) (7,546) (22,087)
*10 month period
The impact of the restatement on retained earnings is summarised as follows:
Dec 2002 Dec 2001
R"000 R"000
Profit after tax
-for the 2002 year (2,748) -
-for the 2001 year (2,875) (2,875)
-years prior to 2001 (35,912) (35,912)
(41,535) (38,787)
The accounts payable and taxation payable have been impacted by the restatement
as follows:
Dec 2002 Dec 2001
R"000 R"000
Accounts payable
- as previously reported 330,431 220,776
- adjustment 26,409 23,661
356,840 244,437
Taxation payable
- as previously reported 19,588 21,632
- adjustment 15,126 15,126
34,714 36,758
* REVISION TO THE CALCULATION OF HEADLINE EARNINGS
Subsequent to the previous publication of our results (3 March 2003), a
retrospective amendment to Circular 7/2002 regarding the calculation of headline
earnings was published by the South African Institute of Chartered Accountants
on 27 March 2003. The effect of this amendment is reflected in these restated
results and increases the headline earnings per share to 22.4 cents from 14.0
cents on the previous basis.
* OPERATIONAL PERFORMANCE
In summary, for the year ended December 2002, the Group achieved a 24%
increase in turnover at R1 376 million (2001: R1 108 million). Headline earnings
decreased to R35 million (2001: R48 million) - while, at R21 million (2001: R46
million) attributable earnings reflect a decrease of 54%.
The results have been impacted by charges approximating R27 million, relating
to, inter alia, the strengthening of the Rand, the economic and political
position in Zimbabwe and the provisions made for losses incurred by our
associate company Roadgrip Afrityre Holdings (Pty) Ltd (RGA). Furthermore, the
revised results bore the impact of additional interest on the tax irregularities
more fully detailed above.
The appreciation of the Rand at the end of 2002 necessitated a revision of
the value of mainly US dollar based receivables from foreign operations which
required a write-down of R5,4 million (2001: R7,7 million profit).
The Zimbabwe operation, which became a wholly owned subsidiary effective from
1 January 2002 (2001: 56,7% owned), has not been consolidated due to current
uncertainty surrounding the political and economic situation in the country, as
well as the anticipated restrictions on remitability of funds. The carrying
value of the Zimbabwe investment was reduced from R15,5 million at 31 December
2001 to R9,6 million as a result of a capital reduction scheme. It is, however,
considered prudent to make a provision of R4,1 million (2001: Nil) against the
investment to bring the carrying value in line with the hyperinflationary
adjusted net asset value of R5,5 million (2001: R11,3 million restated). The non
consolidated hyper-inflationary loss of the Zimbabwe operation amounted to R4,1
million (2001: R8,5 million profit as restated). Dividends received by the group
from Zimbabwe in 2002 amounted to R3,3 million (2001: R1,7 million).
The Zimbabwean Dollar has continued to deteriorate in the period subsequent
to the year-end. The directors are comfortable with the carrying value of the
investment in Zimbabwe.
The Group"s associate company, RGA, and its subsidiary companies, in which
the Group has a 40% holding, showed an accumulated loss at the end of the year
of R13 million (2001: R1,3 million). The Group is the major supplier to RGA and
has supported it financially by way of extended trade finance and subordination
of its loan account. The Group has accounted for the losses in the associate by
charging R6,1 million (2001: R0,6 million) against earnings as a "share of
associate losses" being R4,7 million (2001: R0,6 million) relating to the share
of trading losses and a provision of R1,4 million (2001: Nil) for the impairment
of its investment in RGA. A further provision of R7,8 million (2001: Nil) was
raised against the possible non-recovery of receivables. Maxiprest has assisted
with considerable resources, which are designed to supplement the management of
current contracts and effect cost reductions. These steps, together with the
successful conclusion of current tenders should ensure that this associate will
not incur losses in the current year.
The property division, managing buildings solely for use by the Group"s
manufacturing, wholesale and retail operations, has a carrying value of R69,3
million (2001: R64,2 million). In terms of capital gains tax requirements, the
properties were valued during the year, and although, individually, certain
properties showed impairments, the overall portfolio valuation exceeded its
carrying value. The board has considered the valuation, and is of the opinion
that no permanent impairment exists and consequently considers the carrying
value to be fair.
Headline earnings have been impacted by an increased tax charge at an
effective rate of 42,5% (2001: 31,4%). The increased charge has arisen as
assessed losses in the Group having been fully utilised in 2001, the impact of
the share of associated losses and non-tax deductible charges to the income
statement amounting to R7,2 million (2001: R7,4 million), including the interest
on the tax liability as detailed above.
The net asset value of the company has been impacted by the payment to the
South African Revenue Services of an amount of R43 million as detailed above.
* COMMENTARY AND OUTLOOK
Management focus remains the ongoing refinement and enhancement of tyre
management services to tranporters and mining operators, and the strategic
expansion of the distribution of new and retread tyres in sub-Saharan Africa.
To this end, the Group"s retail, service and retread manufacturing footprints
have been substantially augmented. In South Africa, branches now total 93 (2001:
87) and factories, 18 (2001: 16). This expansion is in line with the
requirements necessary to support our on-site tyre management facilities and the
24-hour transporter tyre breakdown service, as well as the expansion of our
newly introduced specialist agricultural tyre division.
In the balance of sub-Saharan Africa, 51% of Quality Tyres Namibia (Pty) Ltd
has been acquired, supplying new and retread brands and services through a
network of 8 outlets and 1 factory - supported by a new wholly-owned
distribution warehouse in Windhoek.
The agreement concluded by Pentamax SA (Pty) Ltd (now known as Maxiprest
Africa Operations to more clearly define its activity) with the Entreposto Group
in Mozambique for a 60% stake in a distribution warehouse and retail operation
in Maputo, will be expanded to include operations in the northern agricultural
areas during 2003. Management is optimistic that the Mozambican operation will
benefit from the momentum of the reconstruction currently underway in that
country.
In Zambia, Maxiprest Tyres and Quality Tyres outlets, supporting the mining
operations in the Kitwe area, are fully on stream. The minority shareholders
investment was acquired effective 1 January 2003.
The demand for truck, bus and mining tyres in Zimbabwe remains strong, but
the instability of the economic and political situation is of concern.
Management is closely monitoring the situation and the business will be
refocused when necessary.
The corporate identity re-imaging for the Group is now in place, ensuring
greater visibility for the brand as a whole. This will continue to improve as
strategic acquisitions or agreements enlarge the service network across sub-
Saharan Africa.
The new year will also see the launch of an entirely new range of Bridgestone
Retread Tread Designs to suit local highway, dual-purpose and drive axle
positions, complemented by the Maxiprest Compressed Tread Retreading Process.
Substantial investment in a centralised processing and information system
will add considerable value from both a service and reporting point of view, and
should provide the Group with improved distribution co-ordination and management
information.
New plant and equipment for the manufacture of earthmover retread tyres was
installed during 2002. The appearance and performance of the retread product is
superior to any currently available on the market. This will further entrench
the Group"s position as sub-Saharan Africa"s predominant retreader and tyre
management service provider.
* CORPORATE GOVERNANCE
In compliance with good corporate governance the Group has appointed two
independent non-executive directors, Messrs N.O. Davies and R.S. Hislop, who are
members of the remuneration and audit committees and chair them respectively.
In November the Board was reconstituted in terms of which the following
changes were made: C.E. Brown - managing director, M.E. Davison - finance
director, P. Constantinidis - director - domestic retail sales. S. Wustmann of
Bridgestone Firestone SA Holdings (Pty) Ltd was appointed a non-executive
director.
K. Yamamoto retired on 31 March 2003 and M.E. Davison resigned on 10 April
2003. On 25 May 2003, T. Wada and R.S. Hislop were appointed as non-executive
Chairman and non-executive Deputy Chairman respectively.
G.M. Sinclair and H.J. Wessels resigned from the Board, but remain as senior
executives of the company, responsible for Group Finance and OTR divisions
respectively. G.M. Sinclair retains the portfolio of company secretary.
ON BEHALF OF THE BOARD - 10 July 2003
C. E. BROWN R.S. Hislop
Managing Director Non-Executive Director
Directors - Executive: K Yamamoto (Chairman)(Japanese)(Retired 30 March 2003)
C E Brown (Managing) R D Boulanger P Constantinidis
(Greek) M E Davison (Resigned 10 April 2003)
Non Executive: T Wada (Japanese) (Appointed Non-Executive Chairman on
25 May 2003) R J Barlow S Hashimoto (Japanese) D H Rabin
S Wustmann
Independent Non Executive: N O Davies R S Hislop (Appointed Non-Executive
Deputy Chairman on 25 May 2003)
Company Secretary: G M Sinclair CA (SA)
Registered Office: 65 Chadwick Avenue Wynberg 2090 (PO Box 543 Bergvlei 2012)
Auditors: Deloitte & Touche
Private Bag X6
Gallo Manor 2052
