| Wed 3 Mar 2004, 15:05 | | Grintek Results For 6 months ended 31 Dec 03 |
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Grintek Limited - Interim Results For Half-Year Ended 31 January 2003
Grintek Limited
Reg. No. 1955/000013/06
Share code: GNK
ISIN code: ZAE000003067
UNAUDITED INTERIM RESULTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2003
GROUP INCOME STATEMENTS
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December Increase/ 31 December 30 June
2003 (Decrease) 2002 2003
R000 % R000 R000
Revenue from sales 615 768 (10) 683 028 1 467 854
Cost of sales 508 690 (8) 555 906 1 200 874
Gross profit 107 078 (16) 127 122 266 980
Selling and administration
expenses 71 075 7 66 188 146 666
Earnings before financing costs,
taxation, depreciation and
amortisation ("EBITDA") 36 003 (41) 60 934 120 314
Depreciation (10 970) 9 (10 075) (20 452)
Amortisation (7 781) (7 799) (15 609)
Operating profit 17 252 (60) 43 060 84 253
Interest received 3 263 (22) 4 183 7 633
Profit before financing costs 20 515 (57) 47 243 91 886
Financing costs (13 143) 51 (8 701) (22 778)
Foreign exchange gains/(losses) 11 593 (15 753) (26 373)
Share of associated companies"
results 719 234 215 316
Exceptional items 1 052 (1 288) (11 233)
Profit before taxation 20 736 (5) 21 716 31 818
Taxation 5 293 (48) 10 253 18 880
Profit after taxation 15 443 35 11 463 12 938
Attributable to outside
shareholders 1 827 351 (729) 4 370
Earnings 13 616 12 12 192 8 568
GROUP BALANCE SHEETS
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
R000 R000 R000
ASSETS
Non-current assets 251 662 248 534 255 753
Property, plant and equipment 159 532 146 042 159 070
Intangible assets 67 980 68 115 62 101
Unlisted investments 10 549 14 148 11 493
Deferred taxation asset 11 453 11 956 14 667
Loans and long-term receivables 2 148 8 273 8 422
Current assets 1 076 971 1 065 993 983 554
Inventories 307 176 293 743 274 456
Trade and other receivables 489 271 619 820 485 348
Derivative assets 13 995 - 10 908
Corporate taxation 5 851 - 6 506
Advance payments 11 774 18 220 10 410
Cash and deposits 248 904 134 210 195 926
TOTAL ASSETS 1 328 633 1 314 527 1 239 307
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" equity 369 556 373 170 361 828
Minority interests 94 316 88 476 93 120
Total equity 463 872 461 646 454 948
Non-current liabilities
Long-term borrowings 77 926 77 381 74 841
Current liabilities 786 835 775 500 709 518
Interest bearing borrowings 122 877 51 212 84 374
Trade and other payables 277 656 368 632 256 054
Advance receipts 250 914 243 572 228 098
Derivative liabilities 5 382 - 3 530
Provisions 118 157 81 492 116 883
Corporate taxation 11 849 30 592 20 579
TOTAL LIABILITIES 1 328 633 1 314 527 1 239 307
STATEMENT OF CHANGES IN SHAREHOLDERS" EQUITY
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
R000 R000 R000
Stated capital 117 766 117 766 117 766
Balance at beginning of year 117 766 117 766 117 766
Non-distributable - 1 893 -
Balance at beginning of year - 1 893 1 893
Revaluation of properties - - 108
Realisation on disposal of property - - (2 001)
Distributable reserves 251 790 253 511 244 062
Balance at beginning of year 244 062 258 700 258 700
AC 133 transitional adjustment - - 322
Earnings attributable to ordinary
shareholders 13 616 12 192 8 568
Ordinary dividends (5 888) (17 381) (25 529)
Realisation on disposal of property - - 2 001
Ordinary shareholders" equity 369 556 373 170 361 828
ABRIDGED CASH FLOW STATEMENTS
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
R000 R000 R000
Operating activities 25 498 (37 938) 53 467
Cash generated by operations 31 327 55 565 90 093
Income from investments 3 263 4 183 7 633
Working capital requirements 20 521 (44 215) 59 779
Cash generated by operating
activities 55 111 15 533 157 505
Financing costs (13 143) (8 701) (22 778)
Taxation paid (9 987) (22 452) (50 339)
Dividends paid (6 483) (22 318) (30 921)
Investing activities (16 369) (9 307) (53 735)
Net investment in property, plant
And equipment (11 403) (6 367) (29 734)
Intangible assets (14 737) (5 077) (19 671)
Investments and long-term
receivables 9 771 2 137 (4 330)
Financing activities 3 473 25 159 27 029
Long-term borrowings - net 3 473 25 159 27 029
Net change in cash and cash
equivalents 12 602 (22 086) 26 761
Cash and cash equivalents 113 425 105 084 84 791
- at beginning of year 111 552 113 305 113 305
- subsidiary disposed and currency
- adjustments 1 873 (8 221) (28 514)
Cash and cash equivalents at
end of period 126 027 82 998 111 552
EARNINGS AND SHARE PERFORMANCE
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December Increase/ 31 December 30 June
2003 (Decrease) 2002 2003
R000 % R000
Earnings 13 616 12 12 192 8 568
Profit on sale of assets (48) 172 (170) (208)
Amortisation of intangible assets 1 078 (16) 1 288 2 156
Impairment of investments - - 5 329
Profit on sale of investments (2 130) - -
Net impairment of development
projects - - 11 930
Share repurchase expenses - - 3
Attributable taxation and
minority share 33 (67) 99 (8 641)
Headline earnings 12 549 (6) 13 409 19 137
Share performance
- headline earnings per
ordinary share (cents) 4.6 (6) 4.9 7.0
- fully diluted headline earnings
per ordinary share (cents) 4.5 (6) 4.8 6.9
Total dividend per ordinary
share (cents) 2.0 6.4 9.4
- Interim paid 3.0
- Final paid for previous year 2.0 6.4 6.4
Interim dividend declared 1.5 (50) 3.0 3.0
Number of ordinary shares in
issue (thousands)
- at end of period 271 582 271 582 271 582
- weighted average 271 582 271 582 271 582
- fully diluted 276 065 277 838 276 078
Net asset value per
ordinary share 136.1 (1) 137.4 133.2
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2003 2002 2003
R000 R000 R000
Revenue from sales 615 768 683 028 1 467 854
Telecommunications 259 532 323 349 606 064
Defence electronics 281 007 277 195 717 868
Industrial electronics 68 629 76 790 132 024
Corporate and other 6 600 5 694 11 898
COMMENTS
BUSINESS REVIEW
Group revenue from sales decreased 10 per cent from R683,0 million to R615,8
million. Gross profit shows a reduction of 16 per cent, primarily attributed to
declining sales revenues in telecommunications, an additional contract overrun
of R5,3 million on the airborne communications system contract, as well as the
impact of trading under a volatile currency. Selling and administration
expenses increased by 7 per cent which, together with the reduced gross profit,
translates into a 60 per cent reduction in operating profit. The reduction in
operating profit has been offset by a net gain of R11,6 million (2002 - loss
R15,8) million from foreign currency transactions, resulting in a reduction of 5
per cent in profit before taxation of R20,7 million (2002 - R21,7) million.
While earnings increased by 12 per cent from R12,2 million to R13,6 million,
headline earnings per share reduced by 6 per cent from 4,9 cents per share to
4,6 cents per share. The directors will maintain a dividend cover of three
times and have declared a dividend of 1,5 cents per share.
The Group generated positive cash flow from operating activities of R25,5
million (2002 - outflow R37,9) million. Working capital showed a positive cash
flow of R20,5 million (2002 - outflow R44,2) million. Working capital
requirements for receivables and inventories on long-term defence contracts have
longer turnaround periods than in the telecommunications and industrial
divisions. This longer trading period is partially funded by advance receipts,
which increased by R22,9 million during the reporting period. An additional
long-term borrowing of R6,0 million was raised to finance fixed property during
the period. Finance charges have also increased in respect of short-term
borrowings to fund defence contracts. These borrowings have been reduced
subsequent to the reporting period with the inflow of foreign contract
receivables.
Capital expenditure relating to equipment and information technology systems
amounted to R11,4 million (2002 - R12,9) million. Capital expenditure amounting
to a further R10,8 million (2002 - R16,8) million has been authorised of which
R8,8 million (2002 - R15,2) million has not been contractually committed.
At 31 December 2003, contingent liabilities amounted to R3,5 million (2002 -
R6,1) million. The Group has, in addition, issued performance guarantees
amounting to R21,0 million (2002 - R33,8) million.
OPERATIONS REVIEW
Telecommunications
Turnover decreased by 19,7 per cent from R323,3 million to R259,5 million. To
counter pressure in the telecommunications market, management aimed to maximise
efficiencies and to generate a steady decrease in the operational costs of the
division.
During the period, a number of contracts for the local carrier market were
concluded. This included the delivery of an international carrier-to-carrier
gateway, expansion of mobile cellular transmission systems, continued rollout of
voice and data wireless local loop systems, transmission and access network
expansions and the initial deployment of a 200 terminal satellite system.
Demand from the African region increased for enterprise voice system upgrades,
and a prepaid voice-over-IP calling card system was successfully delivered to a
regional public operator.
Development in power line carrier communications and lawful intercept continued,
the latter resulting in the conclusion of a partnership agreement with a leading
international supplier.
The testing and certification of a new Internet Protocol (IP) broadband solution
opens up new opportunities for deployment by public carriers.
Defence
Revenue from sales in the defence division increased by 1,4 per cent over the
comparable period notwithstanding the strengthening of the rand.
The defence divisions successfully concluded a number of export contracts.
Integrated defensive aids suites, terrestrial RF monitoring systems, mobile
direction finding systems and radio systems were delivered to clients in Asia,
Africa and Europe.
Local deliveries included the first EW suite for the navy"s new patrol corvette,
and partial deliveries of EW suites for the new submarine.
Owing to increased export demands in the airborne and terrestrial EW product
ranges, minor limitations in development capacity were experienced. These have
been attended to, although capacities in airborne EW may remain under pressure
for a while.
Development on the communications management systems at GCS progressed well,
although the delivery of some products is still behind schedule. This is
considered to be an area of risk for the division.
The formation of the new division focusing on network centric warfare systems
(GrIDS) was concluded during this period.
As a result of exchange rate pressures, all business units have initiated profit
improvement plans to restore the competitiveness of both products and services.
Industrial
Revenue from sales in the Industrial division has decreased 10,6 per cent to
R68,6 million. The division has, however, been successful in reallocating
resources and improving its cost base resulting in an overall improvement in
profitability.
The most significant contribution was delivered by DC power systems, generating
R31,5 million in sales revenue. Considerable success has been achieved locally
as well as in Nigeria where DC power systems and antennas have been delivered to
cellular operators. The antennas business unit delivered more than 10 000 GSM
components to customers in Africa, as well as a number of new systems to local
and international navies.
The aviation business unit successfully delivered and commissioned direction-
finding systems and instrument landing systems for the Air Traffic and
Navigations Services company at a number of airports.
In energy management, a 3500 residential user system was commissioned in the
Johannesburg area. In parallel, work continued on the cost improvement of this
product to bring it line with customer demands.
Prospects
Overall, Group performance in the second half is expected to be stronger than
that of the first half of the year. The volatility of the rand/dollar exchange
rate continues to hamper efficient operational planning. A more aggressive
approach to efficiency improvement is currently being implemented.
The demand for defence products remains high, although procurement cycles are
long. Logtronics has positioned itself well to participate in the global trend
towards contractor logistic support (CLS). The division has invested in state-
of-the-art maintenance facilities and has adopted a new approach towards more
cost-effective support concepts. Additional offices in certain key territories
for the defence division have recently been opened.
Telecommunication systems demand remains steady, although a significant increase
in the immediate future is not anticipated. The recent licensing of the second
network operator is seen as positive, and opportunities in Africa are still
promising.
The industrial electronics division experienced an increase in demand for
aviation systems, which should result in a significant improvement in the medium
term order book. Short-term prospects for energy management systems on the
other hand remain disappointing, as continued discussions related to the
regionalisation of electricity distribution hamper decision-making.
POST-BALANCE SHEET EVENTS
At a shareholders" meeting held on 14 January 2004, the agreement for Saab AB to
purchase 22 813 005 treasury shares held by the company"s subsidiary, Grintek
Group Limited, was approved. This transaction will result in a positive cash
flow of R36,5 million.
Mr S Liebenberg has been appointed as group chief executive officer, and Messrs
KAR Jonsson and K Moller of SAAB AB as non-executive directors. Mr Shaun
Liebenberg succeeds Mr Sybrand Grobbelaar, who retired on 29 February 2004. The
board members would like to express their gratitude to Sybrand for his 27 years
of service and are pleased to announce that he will remain on the board as a non
executive director.
FINANCIAL POLICY STATEMENT
The interim 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 financial year.
DIVIDEND NO. 75
The directors of Grintek Limited have declared dividend no. 75 of 1,5 cents per
share to all shareholders. In compliance with the requirements of STRATE, the
following dates are applicable:
Date dividend declared Tuesday 2 March 2004
Last day to trade cum the dividend Friday 26 March 2004
Date trading commences ex the dividend Monday 29 March 2004
Record date Friday 2 April 2004
Date of payment Monday 5 April 2004
Share certificates may not be dematerialised or rematerialised between Monday,
29 March 2004 and Friday, 2 April 2004, both days inclusive.
For and on behalf of the board
NR Kunene S Liebenberg
Chairman Chief executive officer
2 March 2004
REGISTERED OFFICE/TRANSFER SECRETARIES
44 Oak Avenue Computershare Limited
Highveld Technopark Registration number 2000/0060/82/06
Centurion 70 Marshall Street
E-mail: info@grintek.com Johannesburg 2001
www.grintek.com PO Box 61051
Auditors: Ernst & Young Marshalltown 2107
Company secretary: A van der Merwe
Register for electronic updates at www.grintek.com/investor
DIRECTORS
NR Kunene* (Chairman) S Liebenberg (Chief executive officer)
SA Grobbelaar* KAR Jonsson*# JR McAlpine* P Moholi K Moller*#
M Msimang* GJ Royston* AN Saulez* Dr EW Schumann EE Strauss GE Swanepoel
* Non-executive # Swedish
Sponsoring broker: Investec
Date: 03/03/2004 03:00:11 PM Produced by the JSE SENS Department
