| Tue 7 Sep 2004, 13:55 | | REPORT FOR THE YEAR ENDED 30 JUNE 2004 |
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GRINTEK LIMITED - AUDITED PRELIMINARY REPORT FOR THE YEAR ENDED 30 JUNE 2004
GRINTEK LIMITED
Reg. No. 1955/000013/06
JSE Share code: GNK
ISIN code: ZAE000003067
AUDITED PRELIMINARY REPORT FOR THE YEAR ENDED 30 JUNE 2004
* HEPS UP FROM 8,5 CPS TO 18,8 CPS
* REVENUE FROM SALES DOWN 4%
* CASH UP FROM R111 MILLION TO R185 MILLION
GROUP INCOME STATEMENT
Audited Increase/ Restated
2004 (Decrease) 2003
R000 % R000
Revenue from sales 1 406 419 (4) 1 467 854
Cost of sales 1 144 759 (5) 1 200 874
Gross profit 261 660 (2) 266 980
Selling and administration expenses 165 408 13 146 666
Earnings before financing costs,
taxation, depreciation and
amortisation (`EBITDA`) 96 252 (20) 120 314
Depreciation 20 945 2 20 452
Amortisation 14 480 (7) 15 609
Operating profit 60 827 (28) 84 253
Interest received 8 949 17 7 633
Profit before financing costs 69 776 (24) 91 886
Financing costs (20 092) (12) (22 778)
Foreign exchange gains (losses) 51 527 295 (26 373)
Share of associated companies` results 317 - 316
Exceptional items (5 176) 31 (7 488)
Profit before taxation 96 352 171 35 563
Taxation 31 008 64 18 880
Profit after taxation 65 344 292 16 683
Attributable to outside shareholders 17 815 308 4 370
Earnings 47 529 286 12 313
GROUP BALANCE SHEET
Audited Restated
2004 2003
R000 R000
ASSETS
Non-current assets 272 289 253 810
Property, plant and equipment 153 838 159 070
Development projects 61 056 54 557
Intangible assets 11 874 7 544
Unlisted investments 10 047 11 493
Deferred taxation asset 12 779 14 667
Loans and long-term receivables 22 695 6 479
Current assets 954 379 983 591
Inventories 269 888 274 456
Trade and other receivables 422 035 485 385
Financial derivative instruments 43 704 10 908
Corporate taxation 3 864 6 506
Advance payments 4 897 10 410
Cash and deposits 209 991 195 926
TOTAL ASSETS 1 226 668 1 237 401
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 437 837 360 464
Minority interest 118 225 93 120
Total equity 556 062 453 584
Non-current liabilities
Long-term borrowings 74 167 74 841
Current liabilities 596 439 708 976
Interest bearing borrowings 24 034 84 374
Trade and other payables 239 469 255 512
Advance receipts 173 717 228 098
Financial derivative instruments 4 768 3 530
Provisions 137 239 116 883
Corporate taxation 17 212 20 579
TOTAL EQUITY AND LIABILITIES 1 226 668 1 237 401
ABRIDGED CASH FLOW STATEMENT
Audited Restated
2004 2003
R000 R000
Operating activities 90 308 53 588
Cash generated by operations 110 381 90 092
Income from investments 8 949 7 633
Working capital requirements 31 493 59 697
Cash generated by operating activities 150 823 157 422
Financing costs (20 092) (22 778)
Taxation paid (29 843) (50 338)
Dividends paid (10 580) (30 718)
Investing activities (56 052) (54 241)
Net investment in property, plant and equipment (22 807) (29 734)
Development projects (21 756) (19 671)
Investments and long-term receivables (11 489) (4 836)
Financing activities 42 427 27 414
Shareholders` funding 39 636 385
Long-term borrowings - net 2 791 27 029
Net change in cash and cash equivalents 76 683 26 761
Cash and cash equivalents 109 274 84 791
- at beginning of year 111 552 113 305
- currency adjustments (2 278) (28 514)
Cash and cash equivalents at end of year 185 957 111 552
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Audited Restated
2004 2003
R000 R000
Stated capital 126 212 115 466
Balance at beginning of year 115 466 115 081
Treasury shares 10 746 385
Non-distributable reserves - -
Balance at beginning of year - 1 893
Revaluation of properties - 108
Realisation on disposal of property - (2 001)
Distributable reserves 311 625 244 998
Balance at beginning of year 244 998 258 700
Employees` share purchase trust reserves - (3 011)
Adjusted balance at beginning of year 244 998 255 689
AC 133 transitional adjustment - 322
Earnings attributable to ordinary shareholders 47 529 12 313
Ordinary dividends (9 792) (25 327)
Realisation on disposal of property - 2 001
Treasury shares 28 890 -
Ordinary shareholders` equity 437 837 360 464
EARNINGS AND SHARE PERFORMANCE
Audited Increase/ Restated
2004 (Decrease) 2003
R000 % R000
Earnings 47 529 286 12 313
Profit on sale of assets (225) 8 (208)
Amortisation of intangible assets 3 203 49 2 156
Impairment of investments - 5 329
Net impairment of development projects - 11 930
Loss on subscription of shares
in subsidiary 8 114 -
Impairment of fixed property 2 311 -
Profit on disposal of business (6 971) -
Share repurchase expenses 758 3
Attributable taxation and minority share (1 829) 79 (8 641)
Headline earnings 52 890 131 22 882
Share performance
- headline earnings per
ordinary share (cents 18.8 122 8.5
- fully diluted headline earnings per
ordinary share (cents 18.7 124 8.4
Total dividend per ordinary
share paid (cents) 33.5 (63) 9.4
- interim paid during current year 1.5 3.0
- final paid for previous year 2.0 6.4
Dividend no 76 declared 6 September 2004,
payable 18 October 2004 3.0 50 2.0
Number of ordinary shares in issue (thousands)
- at end of year 293 760 269 691
- weighted average 280 753 269 513
- fully diluted 283 215 274 009
Net asset value per ordinary
share (cents) 149.0 12 133.7
SEGMENTAL ANALYSIS
Revenue from Sales
Audited Audited
2004 2003
R000 R000
Telecommunications 543 294 606 064
Defence electronics 721 619 717 868
Industrial electronics 141 506 132 024
Corporate and other - 11 898
1 406 419 1 467 854
COMMENTS
BUSINESS REVIEW
Notwithstanding a 4 per cent decline in Group revenue, the Board is pleased to
report a satisfactory result for the year under review.
Earnings increased from R12 million to R47 million and headline earnings per
share increased by 122 per cent from 8,5 cents per share to 18,8 cents per
share. The Group`s net cash position increased from R111 million in 2003 to
R186 million at 30 June 2004. Net finance costs decreased by R4 million from
R15,1 million in 2003.
While gross margins remained unchanged at around 18,6 per cent of turnover,
operating profit as a percentage of turnover declined from 5,7 per cent to 4,3
per cent in 2004. This drop in operating margin may largely be attributed to
the loss of export revenue caused by the strengthening of the Rand, which on a
year-on-year average appreciated 24 per cent against the dollar. Export revenue
comprised 39 per cent of the Group`s total revenue.
The strengthening of the Rand against the foreign currencies in which the
company traded resulted in significant erosion of the revenue received on export
contracts, the effect of which has been taken into account in calculating the
operating profit of R60,8 million. These losses have been mitigated to a
certain extent by foreign exchange gains of R51,5 million resulting from the
revaluation of foreign exchange contracts and advance receipts denominated in
foreign currencies in accordance with Generally Accepted Accounting Practice.
These foreign exchange contracts were taken out for the purpose of hedging the
company`s foreign exchange position.
Research, product and market development
The Group remains committed to investing in the development of new solutions in
accordance with customer requirements. Core research and development
programmes, extending over a number of years, are conducted in close association
with our international partners to reduce the risk in market acceptance and to
enhance the joint product offering. Continued investment in the development of
relevant intellectual property is essential for sustainability and long-term
growth.
Grintek Defence
Revenue from sales in the Defence Division increased marginally to R722 million,
despite the fact that the Rand had strengthened by an average of 24 per cent
from the previous year.
As a consequence of exchange rate pressures, all business units initiated profit
improvement plans during the year to restore the competitiveness of both
products and services. These improved efficiencies contributed to a substantial
increase in the division`s profits before tax from R19,5 million in 2003 to R60
million in 2004.
A number of export contracts were successfully concluded during the period.
Integrated Defensive Aids Suites, land based radio monitoring systems, mobile
direction finding systems and radio communication systems were successfully
delivered to clients in Asia, Africa and Europe. Progress is being made into
new markets including India and China. Additional offices were opened during
the year in the Middle East and North Africa to provide improved market access
and customer service.
Local deliveries during the year included the first Integrated Defensive Aids
Suites for the new Hawk aircraft acquired by the South African Air Force and
Electronic Warfare and Communications Suites for the SA Navy`s new patrol
Corvettes and submarines.
Although the demand for defence products is buoyant, procurement cycles locally
and internationally remain long.
The joint ventures with our partners Saab in Sweden and EADS in Germany continue
to provide increased value with shared research and development costs and joint
marketing of products. These partnerships will continue to grow closer in the
coming year, to the benefit of all stakeholders.
Grintek TCI (Industrial)
The division experienced improved trading conditions and achieved a 7,2 per cent
growth in revenue from sales for the period. Cost and efficiency improvement
programmes implemented in the year contributed to a 240 per cent increase in
operating profit of R11,9 million and profit before tax from a loss of R1,5
million to a profit of R8.7 million.
Working capital management and tighter overhead cost management activities
resulted in improved cash flow for the division.
The revised focus of the Antenna business on GSM RF products and defence
antennas achieved notable success, with some 14,000 of the new GSM products sold
into the African market. In addition, most major networks on the continent have
accepted the new range of GSM Cell Enhancement products with a steady increase
in demand, as their positive effects become visible to operators. Various new
Grintek designed antenna products were introduced to the market resulting in
sales to a number of new customers in Europe and the Pacific Rim. In addition
contracts were concluded with a major customer for the supply of specialised
aircraft antennas, as a second source to established suppliers in Europe and the
USA.
Newly developed DC Power systems achieved sales targets, with significant
breakthroughs in sales to the major new GSM network operators in West Africa.
The successful implementation of new software suites into the leading fixed line
operator in SA, as well as the full backward compatibility with legacy systems,
established a smooth upgrade opportunity for the entire installed base. The
establishment of closer ties with the division`s technology partner achieved
good co-operation in the joint global marketing of the new software products.
An agreement was reached on strategic global multi-sourcing of rectifier
products, which has helped to negate the effects of the stronger Rand on local
manufacturing costs.
Revenue in networked electricity metering was curtailed by local authority
budget uncertainties and regulatory constraints. During this period some
refinement was made to the product range and order flow during the latter part
of the year has indicated market acceptance.
Continued growth into Africa resulted in another year of good performance for
the Aviation Systems business unit. In addition to continued business from the
ATNS and SAAF in South Africa, systems were delivered to Zambia and Botswana.
Safety Critical Instrument Landing Systems were also supplied and commissioned
at major airports in Malaysia and the Seychelles.
Grintek Telecom
Grintek Telecom experienced tough market conditions during the year. Delays
were experienced with the licensing of the Second Network Operator and extended
debates surrounded the implementation of the convergence bill.
However, relationships with major customers remain good and Grintek Telecom is
continuously focusing on strategic initiatives with these customers in various
market segments.
Whilst revenue from sales decreased slightly by 10 per cent year on year,
profitability increased as a result of efficiencies and working capital
management activities.
Activities in the corporate and government sectors are expected to lead to an
increase in revenue in the year ahead, with voice services being the major
contributor. Our efforts in the carrier markets to leverage off an existing
client base and positioning of new products/services will contribute positively.
Efforts in Nigeria, DRC, Namibia, Malawi and Mozambique should realise direct
business to Grintek Telecom in the year ahead.
In the past year, amongst others, Grintek installed and commissioned VoIP
technology and its applications such as prepaid calling cards, prepaid
residential phone cards and PIN generator services. Grintek has been actively
involved in SADC, West Africa and East Africa in both designing and deploying
different technologies such as transmission, synchronisation, VoIP, VSAT, SS7
monitoring, test equipment and IP backbone. Wireless Local Loop networks have
been rolled-out by Grintek in numerous regions of South Africa. Milestones for
the year include expansion of a Carrier of Carriers International Gateway and
implementation of one of the major cellular operator`s national synchronisation
network, which enabled Grintek to further expand its customer base.
The integration of Grintek Industrial and Telecommunications Divisions will be
focussed on achieving better business efficiency to improve margins in the year
ahead. A business structure based on four customer centric business units is
aimed at improving customer and market focus. A critical review has been held
of all aspects of the combined business, which has resulted in the re-
positioning of certain elements of the business to improve focus and the
disposal of a range of non-core assets.
FUTURE PROSPECTS
While the overall level of activity is expected to remain the same over the next
financial year, the volatility of the Rand remains a challenge. We are
encouraged by the inroads being made into international markets and new
prospects in Africa. Focus on organisational efficiencies and building higher
levels of synergy with our international partners, remains a priority.
ACCOUNTING POLICIES
These consolidated abridged financial statements for the year ended 30 June 2004
are prepared in accordance with South African Statements of Generally Accepted
Accounting Practice and Schedule 4 of the South African Companies Act. The
accounting policies used are consistent in all material respects with those used
in the annual financial statements for the year ended 30 June 2003, except for
the early adoption of IAS32 (AC125) and IAS39 (AC133) in terms of the IFRS
improvement project and consolidation of the Grintek Employees Share Purchase
Trust and the GEL Employees Share Purchase Trust in terms of the latest rules of
the JSE Securities Exchange South Africa. The comparatives have been
appropriately restated. The net effect on earnings previously reported was an
improvement of R3,7 million.
Earnings per share is calculated by dividing earnings by the weighted average
number of ordinary shares in issue during the year of 280,753,000 (2003 -
269,513,000). Headline earnings per share is calculated by dividing headline
earnings by the weighted average number of ordinary shares in issue during the
year. In both calculations, treasury and share trust shares are excluded.
Fully diluted earnings per share take into account the dilutive effect of share
options granted by the share trusts.
AUDITORS` REVIEW
The Company`s auditors, Ernst & Young, have issued their opinion on the Group`s
annual financial statements for the year ended 30 June 2004. The audit was
conducted in accordance with South African Auditing Standards. An unqualified
audit opinion has been issued which is available for inspection at the Company`s
registered office.
These summarised annual financial statements have been derived from the Group`s
annual financial statements and are consistent in all material aspects with the
Group`s annual financial statements.
JSE SECURITIES EXCHANGE REQUIREMENTS
This announcement has been prepared in accordance with the listing requirements
of the JSE Securities Exchange South Africa.
COMPOSITION OF THE BOARD
Mr SA Grobbelaar retired as managing director on 29 February 2004 and Mr S
Liebenberg was appointed Group chief executive officer with effect from 1 March
2004. Messrs P Moholi, EE Strauss and Dr EW Schumann resigned from the board.
During the year Messrs PKE Erlandsson and KAR Jonsson were appointed as
directors by Saab AB and Mr LG Wahlund as an alternate director. On 6 September
2004 Ms NPP Chocho and Mr KXT Socikwa were appointed as non-executive directors.
WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the trading statement and cautionary announcement
published on SENS on 6 August 2004, which expires with the publication of these
results.
DECLARATION OF DIVIDEND NO. 76
The directors of Grintek Limited have declared dividend no. 76 of 3,0 cents per
share to all shareholders. In compliance with the requirements of STRATE, the
following dates are applicable:
Last day to trade cum the dividend 8 October 2004
Date trading commences ex the dividend 11 October 2004
Record date 15 October 2004
Date of payment 18 October 2004
Share certificates may not be dematerialised or rematerialised between Monday 11
October 2004 and Friday 15 October 2004, both dates inclusive.
For and on behalf of the board
NR Kunene S Liebenberg
Chairman Group Chief Executive Officer
7 September 2004
REGISTERED OFFICE TRANSFER SECRETARIES
44 Oak Avenue Computershare Investor Services
Highveld Technopark 2004 (Pty) Ltd
Centurion 70 Marshall Street
Johannesburg 2001
E-mail: info@grintek.com PO Box 61051
www.grintek.com Marshalltown 2107
Sponsor: Investec Bank Limited
100 Grayston Drive
Sandown Sandton 2196
Auditors: Ernst & Young
Company secretary: ML Lephadi
DIRECTORS
NR Kunene (Chairman) S Liebenberg (CEO) NPP Chocho PKE Erlandsson*
SA Grobbelaar KAR Jonsson* JR McAlpine M Msimang GJ Royston AN Saulez
KXT Socikwa GE Swanepoel LG Wahlund* (Alt)
* Swedish
Date: 07/09/2004 01:46:15 PM
Produced by the JSE SENS Department
