| Wed 31 Mar 2004, 9:19 | | YEAR END RESULTS - DECEMBER 2003 |
|
BRIDGESTONE FIRESTONE MAXIPREST LIMITED - RESULTS ANNOUNCEMENT.
BRIDGESTONE FIRESTONE MAXIPREST LIMITED
Registration number: 1988/006456/06
Share Code: BDS ISN: ZAE 0000 27447
YEAR END RESULTS - DECEMBER 2003
THE COMPANY
Bridgestone Firestone Maxiprest Limited, listed on the JSE Securities Exchange
under the 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 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 (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, now holds a strategic 66% (2002 - 53%) stake in the Group through
its local subsidiary Bridgestone SA Holdings (Pty) Ltd. Management,
institutions and the investing public hold the balance of the equity.
OPERATIONAL PERFORMANCE
In summary, for the year ended December 2003, the Group achieved a 10,8%
increase in turnover at R1 525 million (2002: R1 376 million). Headline
earnings decreased to R2,1 million. With the adoption of AC133, the impairment
losses of the associate (R11,2 million) and unconsolidated subsidiary (R1,8
million) are no longer adjusted for in the calculation of headline earnings,
which in part explains the significant decrease from the R35,4 million of the
prior year, while at a loss of R1,759 million (2002: R21,266 million profit),
attributable earnings reflects a decrease of R23,0 million. Had AC133 been
applicable to the prior year, the comparative headline earnings would have
amounted to R22,2 million.
At trading level, margins were maintained at 26%, which was more than
satisfactory given the pressure on pricing in the second half of the year and
trading results from the African operations.
The results have been impacted by charges approximating R24,6 million relating
to, inter alia, the strengthening on the rand of R11,6 million (2002: R5,4
million), the write-down of investments in African operations of R1,8 million
(2002: R4,1 million) and the provision for increased bad debt provisions of
R11,2 million (2002: R7,8 million) in Roadgrip Afrityre Group, which remains
accounted for at 100%.
As in the prior year, the Zimbabwe operation has not been consolidated. Given
the deteriorating situation in the country, a further write-down in the
investment of R1,8 million (2002: R4,1 million) is necessitated, resulting in
the fair value of the investment being reflected at R3,7 million (2002: R5,5
million).
Headline earnings have been further impacted by an increased tax charge at an
effective rate of 117,2% (2002: 39,8%). The increased charge has arisen due to
the impact of the share of associated losses of R7,5 million and estimated tax
losses in certain subsidiaries where it is not deemed prudent to carry a
deferred tax asset. Other non tax deductible charges to the income statement
amounted to R13,4 million (2002: R4,4 million).
Net cash utilised during the year amounted to R132,8 million. Capital investment
accounted for R47,3 million, being mainly attributable to the investment in
fixed assets of R38,4 million, and subsidiaries acquired amounting to R8,1
million. Inventory increased by R21,7 million, mainly due to forward purchasing
to take advantage of pricing. R42 million was utilised to settle prior-period
tax liabilities, with the balance of cash utilised to settle operational and
working capital requirements.
The increase in long term liabilities is mainly attributable to the financing of
the cost of commissioning the new retread factory at Kitwe in Zambia and the
capitalisation of instalment sale agreements relating to the financing of the
Group"s motor vehicle fleet.
DIVIDEND
The Board has elected not to pay a dividend due to the current high level of
borrowings and the unsatisfactory operating performance for the year under
review. The Group"s dividend policy will be reviewed against future cash flow
performance.
COMMENTARY AND OUTLOOK
Notwithstanding the aforegoing, considerable progress has been made in realising
management"s focus on refining and enhancing tyre management services to
transporters, the mining and construction industries, and the strategic
expansion of the distribution of new and retread tyres in sub-Saharan Africa.
To this end the Group"s retail and retread outlets are continuously reviewed to
improve locations and upgrade facilities. Opportunities to acquire operations
in regions currently not serviced by the Group, or where major synergies can be
achieved, are regularly investigated.
The domestic market has shown growth on the back of continued organic growth.
The introduction of an agricultural division has provided entry into a
previously unexploited and lucrative market. The specialist technical services
division established in 2002 to assist the various retail outlets and retread
factories, has resulted in enhanced quality of service delivery. The mining and
earthmover sector continues to prosper with several new supply contracts being
secured.
The introduction of the new Bridgestone retread tread designs, incorporating a
new compound for the truck tyre market, complemented by the Maxiprest Compressed
Tread Retreading Process , was launched successfully in June 2003.
In Zambia, the 30% minority interest was acquired with effect from January 2003.
The new retread factory commissioned in the Kitwe region will ensure that the
retreading service levels provided to the mines will ensure the Group"s
predominance in the region as the new tyre and mining tyre retreader supplier of
choice.
The demand for truck, bus and mining tyres in Zimbabwe continues to remain
strong, but the instability of the economic and political situation is still
cause for concern. Albeit that the current trading position has been more
stable, management will continue to monitor the situation, and the business will
be refocused where necessary.
The investment in information technology and the upgrading of the retread
factories bode well for the future, with the Group being well-positioned to
maintain its position as sub-Saharan Africa"s predominant retreader and tyre
management service provide.
CHANGES IN DIRECTORATE
In February 2004, Deputy non-executive Chairman, R S Hislop, and non-executive
directors N O Davies and D H Rabin resigned as directors.
Mr Hislop has subsequently resigned as Chairman of the audit committee.
Mr A J Aaron has been appointed to the board as a non-executive director. Mr A
G Fletcher has agreed to join the Board as an independent non-executive director
with effect from 1 April 2004. Mr Fletcher is the Executive Deputy Chairman of
the ELB Group Limited and a non-executive director of Venfin Limited, also
serving on the audit committees of these companies.
In February 2004, Mr C B M Reeves ceased to be a director and in March 2004, Mr
C E Brown, Chief Executive Director and Messrs R D Boulanger and P
Constantinidis, sales and marketing director and retail sales director,
respectively, resigned as directors with immediate effect. The latter three
executive directors will be available until 30 April 2004 to facilitate the
orderly handover of their responsibilities.
At the request of the company, Bridgestone South Africa Holdings (Proprietary)
Limited has agreed to release Messrs R J Barlow and G P Nel from their employ
with effect from 1 April 2004. On that date, Mr G P Nel will be appointed to
the Board as sales and marketing director and Mr R J Barlow, who already is a
non-executive of the board, will be appointed financial director.
REVIEW BY THE INDEPENDENT AUDITORS
The financial information has been reviewed, but not audited, by Deloitte &
Touche, whose unqualified review report is available for inspection at the
company"s registered office. The report draws attention to the Group"s departure
from AC127/AC115 as described under the heading accounting policies.
ON BEHALF OF THE BOARD - 29 March 2004
T WADA R J BARLOW
INCOME STATEMENT
for the year ended 31 December 2003
Reviewed Audited
31 Dec 2003 31 Dec 2002
R "000 R "000
Revenue 1,524,678 1,375,739
Cost of sales (1,115,222) (990,747)
Gross Profit 409,456 384,992
Other operating expenses (374,226) (334,985)
Operating profit 35,230 50,007
Net finance cost (13,583) (6,403)
Interest received 3,477 2,736
Interest paid (17,060) (9,139)
Share of losses of associated
companies (7,397) (6,111)
Investment income 0 3,266
Profit before tax 14,250 40,759
Income tax expense (16,700) (17,292)
(Loss)/profit after tax (2,450) 23,467
Attributable to outside
shareholders 691 (2,201)
(Loss)/profit for the year (1,759) 21,266
Shares in issue (million) 158.2 158.2
Less: Treasury shares (4.1) (4.2)
154.1 154.0
Weighted shares in issue
(million) - basic 154.1 152.9
Weighted shares in issue
(million) - fully diluted 154.2 153.5
Earnings per share (cents)
Basic (1.1) 13.9
Fully diluted (1.1) 13.9
Headline earnings (R"000)
(Loss)/profit for the year (1,759) 21,266
Goodwill amortisation 4,588 2,557
Profit on sale of fixed assets (1,012) (2,290)
Tax effect of adjusted items 303 687
Provision for impairment
of investment in unconsolidated
subsidiary 0 4,102
Provision for losses
in/impairment of investment
and loan to associate 0 9,141
2,121 35,463
Headline earnings per share
(cents) Basic 1.4 23.2
Fully diluted 1.4 23.2
Dividend per share (cents) 0.0 10.0
Depreciation (R"000) 16,067 15,048
Capital expenditure (R"000)
- incurred 47,368 38,546
- approved 32,030 25,259
BALANCE SHEET
at 31 December 2003
Reviewed Audited
31 Dec 2003 31 Dec 2002
R "000 R "000
ASSETS
Non-current assets
Property, plant and equipment 132,940 114,206
Goodwill 8,403 7,072
Investment in associates 12,239 13,363
Unconsolidated subsidiaries 3,731 5,536
Financial asset 1,151 0
Deferred tax 2,424 2,621
160,888 142,798
Current assets
Inventory 165,018 143,269
Accounts receivable 222,472 305,689
Cash at bank 182,887 59,323
570,377 508,281
TOTAL ASSETS 731,265 651,079
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 123,008 122,961
Accumulated profits 118,786 121,345
Other reserves (2,097) (1,988)
Shareholders for dividend 0 7,702
239,697 250,020
Outside shareholders" interest 378 4,436
Long term liabilities 8,437 137
Current liabilities
Accounts payable 207,096 356,871
Short term portion of
long term liabilities 1,965 395
Taxation payable 12,029 34,714
Bank overdraft 261,663 4,506
482,753 396,486
TOTAL EQUITY AND LIABILITIES 731,265 651,079
Net asset value per share
(cents) 151.5 158.0
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2003
Reviewed Audited
31 Dec 2003 31 Dec 2002
R "000 R "000
Share capital and premium
Balance at beginning of year -
shares in issue 129,884 130,487
- Consolidation of share
incentive trust (18) (603)
Balance at end of year - shares
in issue 129,866 129,884
Treasury shares (6,858) (6,923)
Balance at end of year,
excl. treasury shares 123,008 122,961
Accumulated profits
Balance at beginning of year,
restated 120,545 115,426
- Adjusted balance at
beginning of year 121,345 113,459
- Adjustment on adoption of AC133 (800) 0
- Consolidation of share
incentive trust 0 1,967
(Loss)/profit for the year (1,759) 21,266
- (Loss)/profit (1,759) 21,211
- Consolidation of share
incentive trust 0 55
Distribution to shareholders 0 (15,347)
- As previously reported 0 (15,820)
- Consolidation of share
incentive trust 0 473
Balance at end of year 118,786 121,345
Shareholders for dividend
Balance at beginning of year,
restated 7,702 9,099
- Balance at beginning of year 7,702 9,492
- Consolidation of share
incentive trust 0 (393)
Distribution to shareholders 0 15,347
- As previously reported 0 15,820
- Consolidation of share
incentive trust 0 (473)
Paid during the year, restated (7,702) (16,744)
- Dividend paid (7,702) (17,402)
- Consolidation of share
incentive trust 0 658
Balance at end of year 0 7,702
Other reserves
Balance at beginning of year (1,988) 0
Exchange difference arising
on translation
of foreign operations (109) (5,137)
Arising on consolidation of
previously
unconsolidated subsidiaries 0 3,149
Balance at end of year (2,097) (1,988)
Capital and reserves 239,697 250,020
ABRIDGED CASH FLOW STATEMENT
for the year ended 31 December 2003
Reviewed Audited
31 Dec 2003 31 Dec 2002
R "000 R "000
Net cash flows from operating
activities (93,227) 61,166
Net cash flows from investing
activities (49,453) (24,571)
Net cash flows from financing
activities 9,870 (1,607)
Net cash utilised (132,810) 34,988
Cash and cash equivalents
at beginning of year 54,817 20,433
Effect of foreign exchange rate
changes (782) (604)
Cash and cash equivalents at
end of year (78,775) 54,817
RESTATEMENT OF COMPARATIVES
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 Share Incentive Scheme
Trust ("share trust"). The share trust is now consolidated, and to the extent
that the group issued share capital is under control of the group, these shares
are shown as treasury shares.The prior year comparatives, other than those
disclosed in the statement of changes in equity, have been restated as follows:
As Adjustment Restated
previously
stated
Balance sheet R"000 R"000 R"000
Accounts receivable 305,272 417 305,689
Accounts payable 356,840 31 356,871
Share incentive scheme
loan receivable 5,625 (5,625) 0
Income statement
Net finance (costs) income (6,409) 6 (6,403)
Operating expenses (335,034) 49 (334,985)
The above adjustments do not impact the tax line.
CHANGE IN ACCOUNTING POLICY
During the year the Group changed its accounting policy with regards to forward
exchange contracts (FEC"s) to comply with AC133 which became effective for year
ends commencing on or after 1 July 2002. An adjustment to the opening retained
income has been made for the fair value of outstanding FEC"s at
31 December 2002 as follows:
R"000
Fair value adjustments for FEC"s 1,143.0
Tax (343.0)
Reduction in accumulated profits
at beginning of year 800.0
Accounting policies: 1. The financial statements have been prepared in
accordance with the South African Statement of Generally Accepted Accounting
Practice applicable to interim financial reporting, with the exception of a
segmental analysis which will be provided in the annual financial statements.
The principal accounting policies applied in the preparation of these financial
statements are consistent with those applied in the prior year with the
exception of the adoption of AC133 and the consolidation of the share incentive
trust. 2. See "Restatement of comparatives" above. 3. See "Change in accounting
policy" above.
Directors - Non Executive: T Wada (Chairman)(Japanese) A J Aaron R J Barlow
S Hashimoto (Japanese) S Wustmann
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
Transfer Secretaries: Computershare Limited 70 Marshall Street Johannesburg
2001
Date: 31/03/2004 08:12:43 AM Produced by the JSE SENS Department
