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Delta Electrical Industries Limited - Unaudited group results for the six months
ended 30 June 2004
DELTA ELECTRICAL INDUSTRIES LIMITED
Registration number 1919/006020/06
Share code: DEL ISIN: ZAE000002036
(Incorporated in the Republic of South Africa)
(`the group`)
Executive directors: EW van Zyl (Joint Managing), BR Wright (Joint Managing),
BG Hitchcock, RB Spoon
Independent non-executive directors: PG Joubert, LB Bird, PL Campbell
Non-executive directors: TG Atkinson** (Chairman), MPW Robson*
*British **USA
Unaudited group results for the six months ended 30 June 2004
GROUP INCOME STATEMENT
Unaudited Audited
Six months to June December
2004 2003 Change 2003
R`000 R`000 % R`000
Revenue 649,149 686,518 (6) 1,406,061
Earnings before 103,934 123,666 (16) 259,192
interest, taxation,
depreciation and
amortisation
Depreciation (29,889) (22,407) (47,267)
Amortisation (1,433) (375) (2,307)
Net foreign exchange (13,112) 38,518 60,361
(losses)/gains
Operating profit 59,500 139,402 (57) 269,979
Net interest received 55 5,504 5,971
Profit before tax 59,555 144,906 (59) 275,950
Tax expense 26,163 50,807 (49) 95,846
Profit after tax 33,392 94,099 (65) 180,104
Minority interests 278 396 1,359
Attributable profits 33,114 93,703 (65) 178,745
Number of shares in 49,166 49,166 49,166
issue (`000)
Weighted number of 48,732 48,456 48,523
shares in issue (`000)
Dilutive number of 49,221 48,903 48,902
shares in issue (`000)
Earnings per share
(cents)
- basic 68.0 193.4 (65) 368.4
- diluted 67.3 191.6 (65) 365.5
Headline earnings per
share (cents)
- basic 70.1 192.8 (64) 369.5
- diluted 69.4 191.1 (64) 366.7
Dividends per share 17.5 53.0 (67) 195.0
(cents)
Reconciliation of
headline earnings
Attributable profits 33,114 93,703 178,745
for the period
Goodwill amortised 1,135 77 1,717
Surplus on disposal of
property, plant and
equipment net of tax (80) (344) (1,145)
effect
Headline earnings 34,169 93,436 (63) 179,317
SEGMENTAL ANALYSIS
Unaudited Audited
Six months to June December
2004 2003 Change 2003
R`000 R`000 % R`000
Revenue
Electrolytic 174,243 283,056 (38) 566,874
Manganese Dioxide
Repairs and 365,969 318,316 15 648,264
services
Replacement parts 108,937 85,146 28 190,923
649,149 686,518 (5) 1,406,061
Operating profit
Electrolytic 1,351 87,113 (98) 141,752
Manganese Dioxide
Repairs and 61,586 44,991 37 118,453
services
Replacement parts 5,125 14,228 (64) 28,965
Corporate and other (8,562) (6,930) 24 (19,191)
59,500 139,402 (57) 269,979
Segmental assets
Electrolytic 777,381 829,688 830,887
Manganese Dioxide
Repairs and 316,369 268,193 256,659
services
Replacement parts 119,292 92,236 125,721
Corporate and other 2,165 3,807 3,360
1,215,207 1,193,924 1,216,627
Cash and cash 177,759 184,642 244,598
equivalents
Tax overpaid 14,305 - 7,621
Total assets 1,407,271 1,378,566 1,468,846
Segmental
liabilities
Electrolytic 91,410 117,442 108,168
Manganese Dioxide
Repairs and 133,906 120,610 111,692
services
Replacement parts 46,345 26,076 48,898
Corporate and other 23,384 24,118 30,953
295,045 288,246 299,711
Bank overdrafts and 198,417 161,720 187,356
short-term
borrowings
Tax provision 47,123 61,080 43,056
Deferred tax 23,694 14,778 25,783
liabilities
Total liabilities 564,279 525,824 555,906
GROUP CASH FLOW STATEMENT
Unaudited Audited
Six months to June December
2004 2003 2003
R`000 R`000 R`000
Cash generated by trading 95,626 131,340 307,512
(Increase)/decrease in working (19,499) (23,056) 18,606
capital
Cash generated by operations 76,127 108,284 326,118
Interest received 55 5,504 5,971
Payments against long-term (7,783) (7,154) (8,444)
compensation benefits
Tax paid (32,075) (37,789) (97,307)
Cash available from operating 36,324 68,845 226,338
activities
Dividends paid (69,366) (68,593) (94,717)
Cash (outflow)/inflow from (33,042) 252 131,621
operating activities
Expansion capital expenditure (28,824) (16,425) (59,072)
Replacement capital expenditure (22,350) (27,891) (49,764)
Proceeds on disposal of business 500 - -
Acquisition of businesses - (2,063) (41,700)
Proceeds on disposal of property, 182 1,016 2,579
plant and equipment
Net cash outflow before financing (83,534) (45,111) (16,336)
activities
Proceeds on disposal of treasury 2,537 190 4,277
shares
Net decrease in cash and cash (80,997) (44,921) (12,059)
equivalents
Cash and cash equivalents at 57,242 (3,620) 71,463
beginning of period
Translation of cash in foreign 3,097 71,463 (2,162)
subsidiary
Cash and cash equivalents at end (20,658) 22,922 57,242
of period
GROUP BALANCE SHEET
Unaudited Audited
June December
2004 2003 2003
R`000 R`000 R`000
ASSETS
Property, plant and 533,041 488,286 528,834
equipment
Goodwill and intangible 6,672 3,174 8,105
assets
Current assets 867,558 887,106 931,907
Total assets 1,407,271 1,378,566 1,468,846
EQUITY AND LIABILITIES
Share capital and reserves 842,131 850,895 912,167
Minority interest 861 1,847 773
Total shareholders` funds 842,992 852,742 912,940
Deferred tax liabilities 23,694 14,778 25,783
Provision for long-term 24,480 26,251 32,263
compensation benefits
Current liabilities 516,105 484,795 497,860
Total equity and 1,407,271 1,378,566 1,468,846
liabilities
Net asset value per share 1,713 1,731 1,855
(cents)
Net gearing (%) 2.5 nil nil
STATEMENT OF CHANGES IN EQUITY
Foreign
Share Currency
Capital Translation Treasury Accumulated
and
Premium Reserve Shares Profit Total
R`000 R`000 R`000 R`000 R`000
Balance at 117,445 67,240 (14,413) 650,502 820,774
27 December
2002
Net profit - - - 178,745 178,745
for the
year
Dividends - - - (94,507) (94,507)
paid
Increase in
foreign
currency
translation
reserve - 2,878 - - 2,878
Proceeds on
the
disposal of
treasury
shares - - 4,277 - 4,277
Balance at 117,445 70,118 (10,136) 734,740 912,167
27 December
2003
Net profit - - - 33,114 33,114
for the
period
Dividends - - - (69,176) (69,176)
paid
Decrease in
foreign
currency
translation
reserve - (36,511) - - (36,511)
Proceeds on
the
disposal of
treasury
shares - - 2,537 - 2,537
Balance at 117,445 33,607 (7,599) 698,678 842,131
30 June
2004
Notes
1. Accounting policies
The accounting policies used in the preparation of the interim financial
statements are consistent with those used in the 2003 annual financial
statements. The financial 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. Restatement of comparatives
The 2003 interim results have been restated to reflect the effects of the
consolidation of the Share Incentive Scheme Trusts as well as the reversal of
interest capitalised at the interim stage.
2.1 Consolidation of Share Incentive Scheme Trusts
With effect from the year ended 27 December 2003, the share trusts in the group
are 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 interim results for 2003 have been appropriately restated to reflect the
change in accounting policy.
The effects are as follows:
Gross Minorities Net effect
R`000 R`000 R`000
Net decrease in operating (2,837) - (2,837)
profit
Net increase in interest 71 - 71
Net decrease in minority - 2,519 2,519
interest
Net effect of consolidation of
share trusts on 2003
interim results (2,766) 2,519 (247)
2.2 Reversal of capitalised interest
At 30 June 2003, interest of R15,2 million incurred on the EMD plant expansion
had been capitalised. In line with a decision taken later that year to reverse
the capitalisation of interest on the plant expansion, interest capitalised as
at June 2003 has been reversed, the effects of which are as follows:
Gross Tax effect Net effect
R`000 R`000 R`000
Net decrease in interest (15,197) 4,559 (10,638)
received
June December
2004 2003 2003
R`000 R`000 R`000
3. Commitments
Capital commitments - 42,729 58,703 74,529
Authorised but not contracted
Capital commitments - 27,888 34,422 34,620
Contracted
70,617 93,125 109,149
Operating lease commitments 41,572 26,534 45,688
Other 10,652 9,973 12,973
COMMENT ON RESULTS
Financial Review:
Headline earnings per share decreased by 64% for the six months to June 2004 to
70,1 cents from 192,8 cents reported for the six months to June 2003. The
results were largely impacted by significantly stronger average rand and
Australian dollar exchange rates to the US dollar and lower sales tonnage in the
EMD business during the period.
The average rand exchange rate to the US dollar strengthened by 17% to R6,67
compared to R8,03 for the same period last year. Similarly, the average
Australian dollar exchange rate to the US dollar was A$1,34 compared to A$1,64
during the first six months of 2003, a strengthening of 18%.
Depreciation during the first half of 2004 increased by 33% compared to the
first half of 2003 due to the commissioning of the EMD plant expansion in
Nelspruit, South Africa, towards the end of 2003.
The group incurred a net foreign exchange loss during the period of R13,1
million compared to a net gain of R38,5 million during the comparable period
last year.
Net interest earned during the period decreased significantly due to the
acquisitions of businesses during 2003 as well as the purchase of the LH
Marthinusen Denver transformer facility property in April 2004 and the
construction of a purpose built facility for LH Marthinusen Cape Town, totalling
R61,4 million.
The effective tax rate for the six months is 43,9% (2003: 35,1%). The high rate
of taxation is due to STC on the final dividend which was paid on 29 March 2004.
Excluding STC results in an effective tax rate of 30,0% (2003: 30,4%).
The group incurred a net decrease in cash and cash equivalents of R81,0 million
(2003: R44,9 million). This included R22,4 million spent on replacement capital
and R28,8 million spent on expansion capital. The final dividend for the 2003
financial year, being maintained at the 2002 amount resulted in a cash outflow
of R69,4 million. In addition, cash generated from trading activities of R76,2
million was R32,2 million lower than for the same period last year.
As a result of the net cash outflow for the period the group had net interest
bearing debt of R20,7 million, a gearing of 2,5% whereas at June 2003 there was
no gearing.
OPERATIONS
Electrolytic Manganese Dioxide (EMD)
Revenue for the six months to June 2004 was 38% lower than for the same period
last year. This was due to a 24% decline in sales tonnage and stronger average
exchange rates for the rand and Australian dollar compared to the US dollar. The
decrease in sales volume was a result of US battery producers sourcing more of
their EMD requirements for 2004 from sources not subject to the uncertainty of
the dumping action instituted by Kerr McGee. This mainly affected sales from
Australia whereas sales from South Africa continued to improve. The withdrawal
of the dumping action removed the uncertainty surrounding trading in the US
market. Costs have been reduced at both plants. With South African sales for
2004 expected to exceed 2003 production capacity, 8000 tonnes of production
capacity was commissioned towards the end of 2003. Construction of the final
phase of the current plant expansion project will be completed in 2005 and is
expected to be commissioned in 2006.
Repairs and Services
Revenue increased by 15% to R366,0 million (2003: R318,3 million) and operation
profit increased by 37% to R61,6 million (2003: R45,0 million) with all
operations contributing to the improvement.
Electrical Repair Engineering (ERE)
ERE produced strong growth during the period benefiting from continued growth in
volumes from the traction repair market as well as growth in large transformer
repairs. During the period transfer of the LH Marthinusen transfomer repair
facility in Denver was completed. This will allow the company to upgrade the
facility to improve the quality and throughput of repairs carried out on large
transformers. In addition, it will enable the company to expand its transformer
repair operations when required. The new repair facility in Cape Town was
completed during June 2004. The larger and improved facility will enable the
business to operate more efficiently and benefit from the opportunities which
exist in the Western Cape and West African regions.
Transwire
Transwire`s revenues increased during the period with a 33% increase in the
average copper price not-withstanding decreased volumes. Volume growth was
achieved in the sale of bare and covered rectagular copper conductor. Bukubuhle
Wire (Pty) Ltd, the company`s BEE initiative in which the group has a 70% stake,
started operating in February 2004 and is performing according to expectation.
Wire Electric
Wire Electric`s revenue also benefited from increased copper prices and improved
slightly during the period notwithstanding difficult trading conditions. The
industrial tapes business performed well and continued to benefit from the
purchase of Seal King`s specialised tapes business during March 2003.
Replacement Parts
Equipment Spare Parts Africa`s (ESP) margins were reduced by the strong rand and
the resulting reductions in selling prices. Demand from the construction and
mining sectors was also weak during the first half. Consequently, operating
profit for the six month period was 64% lower than the same period last year.
Reported revenue increased by 28% to R108,9 million (2003: R85.1 million) and
includes the results of AMT Services, which was aquired effective 1 September
2003.
Prospects
Although new sales opportunities are expected to partially compensate for lost
sales volumes in the US, the emd business` full year revenue is expected to be
lower than last year. The Repairs and Services division is expected to produce
growth in earnings for the year despite delivering a strong performance in the
second half of 2003. While some improvement in the ESP margin is expected in the
second half of the year, trading conditions are forecast to remain depressed and
earnings are still expected to be below those of the previous year. The group`s
earnings remain dependant upon the emd business` sales volumes and the rand and
Australian Dollar exchange rates. At current exchange rates, headline earnings
per share for the year ending 27 December 2004 are expected to be substantially
lower than in 2003, as was communicated to shareholders in the trading update on
21 May 2004.
DIVIDENDS
Dividend No. 65
Notice is hereby given that an interim dividend of 17,5 cents per share has been
declared by the directors in respect of the six months ended 30 June 2004. The
following are the salient dates for the payment of the interim dividend:
Friday, 10 September 2004
Last day to trade to qualify for the dividend
Monday, 13 September 2004
Shares commence trading ex-dividend on the JSE Securities Exchange South Africa
Friday, 17 September 2004
Record date
Monday, 20 September 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 Monday, 13
September 2004 and Friday, 17 September 2004 both days inclusive.
T G Atkinson EW van Zyl BR Wright
(Chairman) (Joint Managing) (Joint Managing)
24 August 2004
Registered Office Transfer Secretaries
11th Floor, Office Tower Computershare Investor Sandton City
Services 2004 (Pty) Limited
Rivonia Road 70 Marshall Street
Sandown 2146 Johannesburg 2001
website: www.dei.co.za
Sponsor
Nedbank Capital
Date: 24/08/2004 04:00:52 PM Produced by the JSE SENS Department
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