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Delta Electrical Industries Ltd - Unaudited Group Results
Release Date: 25/08/2003 10:00:03 Code(s): DEL
Delta Electrical Industries Ltd - Unaudited Group Results
Delta Electrical Industries Limited
(Reg. No. 1919/006020/06)
Share code: DEL
ISIN: ZAE000002036
Directors:
PG Joubert (Chairman), EW van Zyl (Joint Managing), BR Wright (Joint Managing),
T Atkinson*, PL Campbell, DJ Gleeson, BG Hitchcock, MPW Robson**, RB Spoon.
*American **British
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
GROUP INCOME STATEMENT
Unaudited Audited
Six months to June Change Year to
Actual Pro-forma Actual Pro- December
2003 2003 2002 Actual forma 2002
R"000 R"000 R"000 % % R"000
Revenue 686,518 712,700 738,950 (7) (4) 1,513,406
Earnings before 126,940 148,737 179,088 (29) (17) 418,741
interest,
taxation,
depreciation and
amortisation
Depreciation (22,407) (22,407) (24,291) (49,637)
Amortisation (375) (375) (294) (608)
Net foreign 38,518 (11,578) (21,423) (28,242)
exchange
gains/(losses)
Operating profit 142,676 114,377 133,080 7 (14) 340,254
Net interest 20,630 20,630 8,790 22,026
received
Profit before 163,306 135,007 141,870 15 (5) 362,280
tax
Tax expense 55,366 46,876 48,776 14 (4) 114,655
Profit after tax 107,940 88,131 93,094 16 (5) 247,625
Minority 2,915 2,417 2,443 6,714
interests
Attributable 105,025 85,714 90,651 16 (5) 240,911
profits
Number of shares 49,166 49,166 49,166 49,166
in issue (000)
Earnings per
share (cents)
- basic and 213.6 174.3 184.4 16 (5) 490.0
diluted
Headline
earnings per
share (cents)
- basic and 213.1 173.8 184.4 16 (6) 487.5
diluted
Dividends per 53.0 53.0 53.0 195.0
share (cents)
Reconciliation
of headline
earnings
Attributable 105,025 85,714 90,651 240,911
profits for the
period
Goodwill 77 77 - 19
amortised
Surplus on (344) (344) (5) (1,257)
disposal of
property, plant
and equipment
Headline 104,758 85,447 90,646 239,673
earnings
SEGMENTAL ANALYSIS
Unaudited Audited
Six months to June Change Year to
Actual Pro-forma Actual Pro- December
2003 2003 2002 Actual forma 2002
R"000 R"000 R"000 % % R"000
Revenue
Electrolytic 283,056 309,238 371,672 (24) (17) 740,486
Manganese
Dioxide
Repairs and 356,960 356,960 329,424 8 8 690,395
Services
Replacement 85,146 85,146 83,753 2 2 174,060
Parts
Intergroup (38,644) (38,644) (45,899) (91,535)
Eliminations
686,518 712,700 738,950 (7) (4) 1,513,406
Operating Profit
Electrolytic 83,457 56,905 77,620 8 (27) 202,759
Manganese
Dioxide
Repairs and 44,991 45,727 41,020 10 11 106,685
Services
Replacement 14,228 11,745 14,440 (1) (19) 30,810
Parts
142,676 114,377 133,080 7 (14) 340,254
Segmental Assets
Electrolytic 844,885 818,333 848,087 779,604
Manganese
Dioxide
Repairs and 268,193 268,929 239,576 236,816
Services
Replacement 92,236 89,753 81,954 85,856
Parts
Corporate and 51,004 51,004 16,936 42,605
Other
1,256,318 1,228,019 1,144,881
1,186,553
Cash and Cash 178,829 178,829 188,459 181,114
Equivalents
Deferred Tax - - 22,418 -
Assets
Total Assets 1,435,147 1,406,848 1,325,995
1,397,430
Segmental
Liabilities
Electrolytic 109,482 109,012 109,683 113,927
Manganese
Dioxide
Repairs and 120,610 120,624 118,404 109,486
Services
Replacement 26,076 26,034 24,623 33,165
Parts
Corporate and 5,814 5,814 6,492 10,155
Other
261,982 261,484 259,202 266,733
Bank Overdrafts 161,143 161,143 215,018 113,258
and Short-Term
Borrowings
Tax provision 65,639 66,163 118,929 51,899
Deferred Tax 14,778 2,919 - 9,064
Liabilities
Total 503,542 491,709 593,149 440,954
Liabilities
GROUP CASH FLOW STATEMENT
Unaudited Audited
Six months to June December
2003 2002 2002
R"000 R"000 R"000
Cash generated by trading 134,614 243,912 393,775
Increase in working capital (21,133) (138,492) (15,831)
Cash generated by operations 113,481 105,420 377,944
Interest received 5,433 1,343 5,066
Tax paid (37,789) (53,274) (153,618)
Cash available from operating 81,125 53,489 229,392
activities
Dividends paid (71,159) (64,854) (91,623)
Cash inflow/(outflow) from 9,966 (11,365) 137,769
operating activities
Expansion capital expenditure (16,425) (31,115) (53,096)
Replacement capital expenditure (27,891) (15,535) (37,333)
Acquisition of businesses (2,063) - (3,662)
Proceeds on disposal of property, 1,016 296 1,933
plant and equipment
Loans to share incentive schemes (11,153) 1,969 (6,508)
Net (decrease)/increase in cash and (46,550) (55,750) 39,103
cash equivalents
Cash and cash equivalents at 67,856 19,749 19,749
beginning of period
Translation of cash in foreign (3,620) 9,442 9,004
subsidiary
Cash and cash equivalents at end of 17,686 (26,559) 67,856
period
Notes
1. Accounting policies
The accounting policies used in the preparation of the interim financial
statements are consistent with those used in the 2002 annual financial
statements, with the exception of the adoption of AC133 (Financial instruments:
Recognition and Measurement). These statements have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice. This
announcement was prepared in accordance with AC127 (Interim Financial
Reporting).
2. Adoption of AC133 and pro-forma results
AC133 has been adopted for the year ending 27 December 2003. The statement does
not require restatement of comparatives. Adjustments to the carrying value of
financial instruments at 27 December 2002 were recognised as an adjustment to
the opening balance of accumulated profit.
The effect of the adoption of AC133 in the current period is as follows:
Gross Tax effect Minorities Net effect
R"000 R"000 R"000 R"000
Net increase in 7,388 (2,216) (131) 5,041
opening accumulated
profit
Net increase in 28,299 (8,490) (498) 19,311
attributable profits
for the six months
35,687 (10,706) (629) 24,352
The most significant effect of the adoption of this statement on the group
relates to the recognition of forward exchange contracts ("FEC"s") as financial
instruments at fair value on the balance sheet and the revaluation of foreign
currency assets and liabilities to the period end exchange rates. Movements on
the fair value of FEC"s are now shown as foreign exchange gains or losses in the
income statement.
In the income statement sales and cost of sales are stated at the spot rate at
the time that the risks and rewards of ownership changes hands. Previously,
these items were stated at the hedge rate where FEC"s were taken out. The
difference between the spot rate and the hedge rate is now shown as foreign
exchange gains and losses.
In order to provide results that are comparable with those at June and December
2002 (i.e. before the adoption of AC133) pro-forma results have been provided.
June December
Actual Actual Actual
2003 2002 2002
3. Foreign exchange gains/(losses) R"000 R"000 R"000
Realised exchange gains/(losses) 8,165 (13,554) (24,606)
Net unrealised exchange losses on (8,973) (7,869) (3,636)
revaluation of assets and liabilities
Mark to market of forward exchange 39,326 - -
contracts
38,518 (28,242)
(21,423)
4. Commitments
Capital commitments - Authorised but 58,703 93,206 87,312
not contracted
- Contracted 34,422 37,184 30,880
93,125 130,390 118,192
Operating lease commitments 26,534 19,375 26,978
Other 24,685 23,205 25,949
GROUP BALANCE SHEET
Unaudited Audited
June December
2003 2002 2002
R"000 R"000 R"000
ASSETS
Property, plant and equipment 503,483 453,163 463,466
Goodwill and intangible assets 3,174 2,363 2,799
Deferred tax assets - 22,418 -
Loans to share incentive schemes 47,622 27,992 36,469
Current assets 880,868 891,494 823,261
Total assets
1,435,147 1,397,430 1,325,995
EQUITY AND LIABILITIES
Share capital and reserves 905,375 782,236 860,630
Minority interest 26,230 22,045 24,411
Total shareholders" funds 931,605 804,281 885,041
Deferred tax liabilities 14,778 - 9,064
Current liabilities 488,764 593,149 431,890
Total equity and liabilities
1,435,147 1,397,430 1,325,995
Net asset value per share (cents) 1,841 1,591 1,750
Net gearing (%) nil 3 nil
STATEMENT OF CHANGES IN EQUITY
Foreign
Share currency
capital and translation Accumulated
premium reserve profit Total
R"000 R"000 R"000 R"000
Balance at 27 117,445 59,172 523,715 700,332
December 2001
Net profit for the - - 240,911 240,911
year
Dividends paid - - (88,002) (88,002)
Increase in foreign - 7,389 - 7,389
currency
translation reserve
Other reserve - (1,020) 1,020 -
movement
Balance at 27 117,445 65,541 677,644 860,630
December 2002 as
previously stated
Adjustment to - - 5,041 5,041
opening balance on
first time adoption
of AC133
Balance at 27 117,445 65,541 682,685 865,671
December 2002 as
restated
Net profit for the - - 105,025 105,025
six months
Dividends paid - - (69,815) (69,815)
Increase in foreign - 4,494 - 4,494
currency
translation reserve
Balance at 30 June 117,445 70,035 717,895 905,375
2003
Comment on results
Financial
Forward exchange contracts on hand were fair valued at 30 June 2003 and the
resultant profit was brought to account in the period under review. The major
effect of applying AC133 during the period has been to recognise valuation gains
on FEC"s, which gains would previously only have been recognised in the income
statement when the sales were made in the second half of the year.
A pro-forma income statement has also been presented for a more meaningful
comparison of the group"s performance with the prior period. The pro-forma
income statement has been prepared on the same basis as the published income
statements for the six months ended 30 June 2002 and the year ended 27 December
2002.
Headline earnings per share increased by 16% for the six months to June 2003 to
213,1 cents from 184,4 cents reported for the six month period to June 2002. The
results were affected by AC133 which was adopted during the current period.
Pro-forma headline earnings per share for the six months to June 2003 of 173,8
cents were 6% lower than for the comparable period last year.
Pro-forma revenue decreased by 4% due to the stronger Rand/US dollar exchange
rate as well as a decline in the average US dollar selling prices of EMD. The
average Rand/US dollar exchange rate for the period was R8,05 compared to R10,98
for the same period last year. As a result, the pro-forma operating margin
decreased by 1,9 percentage points to 16,1%. Repairs and Services was able to
maintain its margins, however the stronger Rand and resultant pricing pressure
by competitors negatively affected the Replacement Parts business.
Interest of R15,2 million was capitalised on the EMD plant expansion during the
period (June 2002: R7,4 million).
Operations
EMD
The EMD business increased volumes during the period and continued to gain
market share. Markets, however, remained uncertain with continued pressure on US
dollar selling prices. The strengthening of the Rand by 27% against the US
dollar in the current period compared to the same period in 2002, impacted
significantly on revenue.
On 28 May 2003 a US competitor announced that production would cease for an
unspecified period at their EMD plant. On 3 July 2003 a Japanese competitor
announced the closure of their EMD plant in Ireland effective September 2003.
These events should assist in restoring the balance between demand and supply of
EMD globally.
On 31 July 2003, a US competitor in the EMD market initiated an anti-dumping
duty investigation of imports of EMD from Australia, Greece, Ireland, Japan,
South Africa and China. Expert legal advice is currently being taken and the
case will be defended.
The plant expansion at Nelspruit in South Africa has been completed within the
capital budget. The commissioning of the plant will only take place when market
conditions permit.
Repairs and Services
The Repairs and Services division delivered a satisfactory increase in both
revenue and operating profit. This was an excellent achievement in a difficult
local market affected by a stronger Rand. Electrical Repair Engineering
increased sales in the transformer repair market which was assisted by the
increased exposure to transformer customers as a result of the acquisition of
the transformer oil purification business late last year. Growth in the traction
repair market was also buoyant.
During the period Transwire commissioned its rectangular copper flat mill. This
will assist the company to grow its rectangular covered conductor business as
well as improve the quality of its products.
On 26 March 2003 Wire Electric acquired the business and assets of Seal King, a
business involved in the distribution of specialised tapes. The acquisition will
complement Wire Electric"s existing tapes business by expanding the range of
specialised tapes which it is able to offer.
Replacement Parts
Revenue for the Replacement Parts division grew by 2%, although the stronger
Rand and the forward cover position which the company maintains affected
operating margins.
The division acquired the business and assets of the A.M.T. Services group of
companies, effective 1 September 2003. The acquisition will strengthen the
division"s distribution of replacement parts for ground engaging tools and
undercarriage on heavy earthmoving equipment.
Prospects
The group"s earnings are heavily dependent on the Rand and Australian Dollar
exchange rates. Assuming trading conditions both locally and internationally
remain similar for the remainder of the year, the group expects earnings for the
year to be materially lower than those achieved in 2002 both in pro-forma and
actual terms. This is based on the expectation of the continued stronger Rand
and the lower EMD dollar selling prices this year.
DIVIDENDS
Dividend No. 63
Notice is hereby given that an unchanged interim dividend of 53,0 cents per
share has been declared by the directors in respect of the six months ended 30
June 2003. The last date to trade in order to receive the dividend will be
Friday 12 September 2003 and Delta Electrical Industries Limited shares will
trade ex-dividend from start of trade on Monday 15 September 2003. The record
date will be Friday 19 September 2003 and the date of payment of the dividend
will be Monday 22 September 2003. The dividend is declared in the currency of
the Republic of South Africa. Share certificates may not be dematerialised or
rematerialised between Monday 15 September 2003 and Friday 19 September 2003
both days inclusive.
P G Joubert E W van Zyl B R Wright
(Chairman) (Joint Managing) (Joint Managing)
26 August 2003
Registered Office Transfer Secretaries
11th Floor, Office Tower Computershare Limited
Sandton City 70 Marshall Street
Rivonia Road Johannesburg
Sandown 2146 2001
website: www.dei.co.za
Date: 25/08/2003 10:00:18 AM
Produced by the JSE SENS Department
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