| Mon 1 Mar 2004, 14:46 | | GROUP RESULTS FOR THE YEAR ENDED 27 |
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DELTA ELECRICAL INDUSTRIES LIMITED - AUDITED GROUP RESULTS FOR THE YEAR ENDED 27
DECEMBER 2003
DELTA ELECRICAL 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),
TG Atkinson**, LB Bird, PL Campbell, DJ Gleeson, BG Hitchcock, MPW Robson*, RB
Spoon*British **USA
Audited group results for the year ended 27 December 2003
GROUP INCOME STATEMENT
2003 2002 %
R"000 R"000 Change
Revenue 1 406 061 1 513 406 (7)
Earnings before interest, taxation, 259 192 402 568 (36)
depreciation and amortisation
Depreciation (47 267) (49 637)
Amortisation (2 307) (608)
Net foreign exchange gains/(losses) 60 361 (28 242)
Operating profit 269 979 324 081 (17)
Net interest received 5 971 21 087
Profit before tax 275 950 345 168 (20)
Tax expense 95 846 114 655 (16)
Profit after tax 180 104 230 513 (22)
Minority interests 1 359 1 782
Attributable profits 178 745 228 731 (22)
Number of shares in issue (000) 49 166 49 166
Weighted number of shares in issue 48 523 48 401
(000)
Dilutive number of shares in issue 48 902 48 873
(000)
Earnings per share (cents)
- basic 368.4 472.6 (22)
- diluted 365.5 468.0 (22)
Headline earnings per share (cents)
- basic 369.5 470.0 (21)
- diluted 366.7 465.5 (21)
Dividends per share (cents) 195.0 195.0 -
RECONCILIATION OF HEADLINE EARNINGS
Attributable profits for the period 178 745 228 731
Goodwill amortised 1 717 19
Surplus on disposal of property, plant
& equipment net of tax effect
(1 145) (1 257)
Headline earnings 179 317 227 493 (21)
SEGMENTAL ANALYSIS
2003 2002 %
R"000 R"000 Change
Revenue
Electrolytic Manganese Dioxide 566 874 740 486 (23)
Repairs and Services 648 264 598 860 8
Replacement parts 190 923 174 060 10
1 406 061 1 513 406 (7)
Operating profit
Electrolytic Manganese Dioxide 141 752 206 747 (31)
Repairs and services 118 453 106 685 11
Replacement parts 28 965 30 810 (6)
Corporate and other (19 191) (20 161) (5)
269 979 324 081 (17)
Segmental assets
Electrolytic Manganese Dioxide 830 887 779 604
Repairs and services 256 659 236 816
Replacement Parts 125 721 85 856
Corporate and other 3 360 8 346
1 216 627 1 110 622
Cash and cash equivalents 244 598 185 264
Tax overpaid 7 621 3 055
Total assets 1 468 846 1 298 941
Segmental liabilities
Electrolytic Manganese Dioxide 108 168 126 187
Repairs and services 111 692 109 486
Replacement parts 48 898 33 165
Corporate and other 30 953 35 021
299 711 303 859
Bank overdrafts and short-term 187 356 113 801
borrowings
Tax provision 43 056 54 954
Deferred tax liability 25 783 9 064
Total liabilities 555 906 481 678
GROUP CASH FLOW STATEMENT
2003 2002
R"000 R"000
Cash generated by trading 307 512 390 104
Decrease/(increase) in working capital 18 606 (20 881)
Cash generated by operations 326 118 369 223
Interest received 5 971 4 127
Payments against long-term compensation (8 444) (6 135)
benefits
Tax paid (97 307) (153 618)
Cash available from operating activities 226 338 213 597
Dividends paid (94 717) (86 589)
Cash inflow from operating activities 131 621 127 008
Replacement capital expenditure (59 072) (37 333)
Expansion capital expenditure (49 764) (53 096)
Acquisition of businesses (41 700) (3 662)
Proceeds on disposal of property, plant & 2 579 1 933
equipment
Net cash flow before financing activities (16 336) (35 850)
Proceeds on disposal of treasury shares 4 277 3 564
Net (decrease)/increase in cash and cash (12 059) 38 414
equivalents
Cash and cash equivalents at beginning of year 71 463 24 045
Translation of cash in foreign subsidiary (2 162) 9 004
Cash and cash equivalents at end of year 57 242 71 463
GROUP BALANCE SHEET
2003 2002
R"000 R"000
Assets
Property, plant & equipment 528 834 463 466
Goodwill and intangible assets 8 105 2 796
Current assets 931 907 832 679
Total assets 1 468 846 1 298 941
Equity and liabilities
Share capital and reserves 912 167 815 602
Minority interest 773 1 661
Total shareholders" funds 912 940 817 263
Deferred tax liabilities 25 783 9 064
Provision for long-term compensation 32 263 33 405
benefits
Current liabilities 497 860 439 209
Total equity and liabilities 1 468 846 1 298 941
Net asset value per share (cents) 1 855 1 659
Net gearing (%) nil nil
STATEMENT OF CHANGES IN EQUITY
Foreign
Currency
Translation
Reserve
R"000
Share
Capital
and
Premium
R"000
Treasur Accu-
y mulated
Shares Profit Total
R"000 R"000 R"000
Balance at 27 117 445 59 172 - 523 715 700 332
December 2001 as
previously
stated
Change in - 1 512 (17 (21 580) (38 045)
accounting 977)
policy
Balance at 27 117 445 60 684 (17 502 135 662 287
December 2001 as 977)
restated
Net profit for - - - 228 731 228 731
the year
Dividends paid - - - (86 556) (86 556)
Increase in - 7 576 - - 7 576
foreign currency
translation
reserve
Other reserve - (1 020) - 1 020 -
movements
Proceeds on the - - 3 564 - 3 564
disposal of
treasury shares
Balance at 27 117 445 67 240 (14 645 330 815 602
December 2002 413)
Adjustment to - - - 5 172 5 172
opening balance
on first time
adoption of
AC133
Balance at 27 117 445 67 240 (14 650 502 820 774
December 2002 as 413)
restated
Net profit for - - - 178 745 178 745
the year
Dividends paid - - - (94 507) (94 507)
Increase in - 2 878 - - 2 878
foreign currency
translation
reserve
Proceeds on the - - 4 277 - 4 277
disposal of
treasury shares
Balance at 27 117 445 70 118 (10 734 740 912 167
December 2003 136)
NOTES
1. Audited results
The results for the year ended 27 December 2003 have been audited by Deloitte &
Touche. Their unqualified audit opinion is available for inspection at the
registered office of the company.
2. Accounting policies
The accounting policies used in the preparation of the preliminary 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) and the consolidation of the Share Purchase Trusts
in terms of AC132 (Consolidated financial statements and accounting for
investments in subsidiaries). These statements have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice.
This announcement was prepared in accordance with AC 127 (Interim Financial
reporting).
3. Changes in accounting policies
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 are recognised as an adjustment to the
opening balance of accumulated profit.
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 spot rate at the reporting date.
Movements on the fair value of FEC"s are now shown as foreign exchange gains or
losses.
In the income statement sales and cost of sales are stated at the spot rate at
the time that risk 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.
The effect of the change is as follows:
Gross Tax effect Net effect
R"000 R"000 R"000
Net increase in foreign 2003 26 542 (7 963) 18 579
exchange gains
Transitional exchange gain 2003 7 388 (2 216) 5 172
adjustment to opening
accumulated profit
A recent ruling given by the GAAP Monitoring Panel has provided more clarity
regarding the consolidation of Share Incentive Scheme Trusts. Consequently, the
group has changed its accounting policy in respect of its Executive Share
Incentive Scheme Trusts ("share trusts"). These share trusts are now
consolidated, and to the extent that the group issued share capital is under the
control of the group, these shares are shown as treasury shares. The prior year
comparatives have been appropriately restated.
The effect of the change is as follows:
Gross Minorities Net
effect
R"000 R"000 R"000
Net decrease in profit before 2003 (13 4 014 (9 864)
tax due to the consolidation of 878)
share trusts
Net decrease in profit before 2002 (17 4 932 (12
tax due to the consolidation of 112) 180)
share trusts
Net effect on opening 2002 (21 10 940 (10
accumulated profit 580) 640)
2003 2002
4. Foreign exchange gains/(losses) R"000 R"000
Realised exchange gains/(losses) 34 376 (24
606)
Net unrealised exchange losses on revaluation of (12 620) (3 636)
assets and liabilities
Mark to market of forward exchange contracts 38 605 -
60 361 (28
242)
5. Commitments 2003 2002
R"000 R"000
Capital commitments - Authorised but not 74 529 87 312
contracted
Capital commitments - Contracted 34 620 30 880
109 149 118 192
Operating lease commitments 45 688 26 978
Other contingent liabilities 12 973 3 544
COMMENT ON RESULTS
Financial Review:
Headline earnings per share for the year decreased by 21% to
369,5 cents (2002 restated: 470,0 cents). This was largely due to the adverse
effect of the strengthening of the Rand and the Australian dollar against the US
dollar during2003 by 28% and 19% respectively.
Headline earnings are inclusive of a profit on the fair value of forward
exchange contracts on hand at the year end ofR39 million and an unrealised loss
on the revaluation of foreign currency assets and liabilities of R13 million to
the spot rate at the year end.
Group revenue decreased by 7% to R1 406 million (2002: R1 513 million). Revenue
from exports was affected by the strength of the Rand and Australian dollar
against the US dollar as well as by a decline in the average US dollar selling
prices.In addition, the adoption of S.A. GAAP Statement, AC133 resulted in
revenue being recorded at the spot rate at the time of sale rather than at the
hedged rate further reducing revenue. Local operations increased revenue
satisfactorily.
Operating profit decreased by 17% to R270 million (2002: R324 million restated).
The operating margin of 19,2% was 2,2 percentage points below the previous year.
This was mainly due to currency and lower US dollar selling prices.
Net interest earned for the year was R6 million, well below the R21 million
earned in 2002. Interest was not capitalised on the EMD plant expansion during
2003 whereas R17 million was capitalised on the EMD plant expansion in 2002.
The group continued to produce strong cash flows with "Cash available from
operating activities" of R226 million, being in line with the R214 million
recorded in 2002. The group invested R59 million in replacement capital to
maintain the business and R50 million on expansion activities. In addition, R42
million was invested during the year on a number of acquisitions. These
included:
The AMT Services Group, a business involved in the distribution of
undercarriage and ground engaging tools in the heavy earthmoving equipment
market, effective 1 September 2003;
Seal King, a specialised bag sealing tape business effective 26 March 2003; and
The remaining 40% minority shareholding in Temso (Pty) Ltd (Temso), a motor
repair company servicing the platinum mining industry
The above investments, together with the dividends paid, reduced the company"s
net cash position by R245 million. The group ended the year in an ungeared
position with net cash of R57 million.
OPERATIONS
Electrolytic Manganese Dioxide (EMD)
The EMD business increased its sales volumes and its market share in all the
major markets it serves, selling more than it produced. However, revenue
decreased by 23% to R567 million (2002: R741 million) due to the 28% and 19%
strengthening of the Rand and Australian dollar against the US dollar
respectively, the decrease in averageUS dollar selling prices during the year
and the application of AC133. The currency and decreased selling prices resulted
in a decline in operating profit of 31% to R142 million (2002: R207 million). As
a result of this the operation has been restructured to reduce costs.
As mentioned in the interim profit announcement, Kerr McGee, a major competitor
in the US, announced in May 2003 that they had ceased production for an
unspecified period of time. In July 2003, a Japanese competitor, Mitsui Mining &
Smelting Ltd., announced that they would close their plant in Ireland in
September 2003 which has since taken place.
The anti-dumping duty petition which was filed by Kerr McGee against the import
of electrolytic manganese dioxide from Australia, China, Greece, Ireland, Japan
and South Africa in August 2003 was vigorously defended and R12 million in legal
costs was expensed in this regard during 2003. On 20 February 2004, the US
Department of Commerce at the request of Kerr McGee, were requested to withdraw
their anti-dumping duty petition.
Repairs and Services
The Repairs and Services Division, comprising Electrical Repair Engineering
(ERE), Transwire and Wire Electric, performed well in a difficult market. The
Division achieved a growth in revenue of 8% to R648 million(2002: R599 million)
and an 11% increase in operating profit of R119 million (2002: R107 million).
ERE performed well given difficult market conditions.
The strengthening of the Rand resulted in a broad base of customers reducing
their expenditure on repairs and maintenance. As a result there was a noticeable
reduction in the volume of repairs on high and low voltage-rotating equipment.
However, excellent growth was achieved in the rail transportation industry
following major refurbishment programs by Spoornet aimed at upgrading their
ageing fleet of locomotives. Reasonable growth was achieved in the heavy
transformer market boosted by the manufacture of several new furnace
transformers.
The Black Economic Empowerment joint venture company, Loco Coil Technologies,
commenced business at the beginning of 2003. The business has performed very
well and has benefited from the manufacture of components used by the rail
transportation sector.
Further opportunities are being pursued in the rail transportation market as
well as in power generation, which should provide ongoing earnings growth for
the division.
Transwire was affected by the strengthening of the Rand resulting in key
customers facing reduced export volumes. Excellent growth was achieved in
products relating to the refurbishment of motors for the rail transportation
industry and some export growth was achieved in the Middle East and Australia.
A BEE joint venture company, Bukubuhle Wire, has been established and it will
focus on products relating to the transformer repair and manufacturing industry.
A new three stand flat-mill was commissioned during the year which has more than
doubled Transwire"s copper strip manufacturing capacity. Utilisation of this
additional capacity as well as a continued focus on exports should provide the
company with some growth potential. Future earnings will however be impacted by
the relative strength of the Rand and the effect it has on Transwire"s export
oriented customers.
Wire Electric achieved satisfactory growth in a market which exhibited
significant pressure on pricing as a result of the strengthening of the Rand.
Excellent growth was achieved in products relating to the manufacture of
distribution transformers with the establishment of a section which prepares
kits of all required parts for the customer. Good growth was also achieved in
industrial tapes with the acquisition of Seal King.
Continued strength of the Rand in 2004 will affect market price levels which
could have an effect on earnings in the future. Continued growth is expected in
transformer materials and industrial tapes.
Replacement Parts
Equipment Spare Parts (ESP) recorded reduced earnings for the year as a result
of the significant strengthening of the Rand against foreign currencies and a
downturn in the mining and rebuild sectors of the market.
The acquisition of the AMT Services group of companies, effective 1 September
2003, strengthened ESP"s position in the undercarriage and ground engaging tool
sector of the market. The benefits of the AMT Services acquisition will
contribute to earnings growth in 2004, however overall results will be affected
by the relative strength of the Rand and the effect it has on the South African
economy.
Prospects
Repairs and Services and Replacements Parts are expected to perform in line with
the economy although market conditions remain tough. The acquisition of the AMT
Services group should provide growth in the replacement parts business and the
joint venture companies established within repairs and services are expected to
contribute to business volumes. The EMD business is affected by the Rand and
Australian dollar and their relative strength against the US dollar. Given the
uncertainties in the EMD market and assuming current exchange rates, the groups
interim earnings for 2004 are expected to be substantially lower than for the
same period in 2003. The forecast results for the six month period ending 30
June 2004 have been reviewed by Delta"s auditors and they have reported thereon
without qualification. Deloitte & Touche"s report regarding the forecast is
available for inspection at Delta"s registered office.
DIVIDENDS
Dividend No. 64
Notice is hereby given that an unchanged final dividend of 142,0 cents per share
has been declared by the directors in respect of the twelve months ended 27
December 2003. The following are the salient dates for the payment of the final
dividend:
Thursday, 18 March Last day to trade to qualify for the
2004 dividend
Friday, 19 March 2004 Ex-dividend on the JSE Securities Exchange
South Africa
Friday, 26 March 2004 Record date
Monday, 29 March 2004 Payment date
The dividend is declared in the currency of the Republic of South Africa. Share
certificates may not be dematerialised or rematerialised between Friday, 19
March 2004 and Friday 26 March 2004 both days inclusive.
PG Joubert (Chairman)
EW van Zyl (Joint Managing)
BR Wright (Joint Managing)
1 March 2004
Registered Office
11th Floor, Office Tower
Sandton City
Rivonia Road
Sandown 2146
Transfer Secretaries
Computershare Limited
70 Marshall Street
Marshalltown
2001
Sponsor: Nedbank Corporate
website: www.dei.co.za
website: www.dei.co.za
Date: 01/03/2004 02:30:12 PM Produced by the JSE SENS Department
