| Wed 2 Mar 2005, 14:57 | | Results For The Half-Year Ended 31 December 2004 |
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Grintek - Unaudited Interim Results For The Half-Year Ended 31 December 2004
GRINTEK LIMITED
Reg. No. 1955/000013/06
Share code: GNK
ISIN code: ZAE000003067
UNAUDITED INTERIM RESULTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2004
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December Increase/ 31 December 30 June
2004 (Decrease) 2003 2004
R000 % R000 R000
Revenue from sales 656 427 7 615 768 1 406 419
Cost of sales 511 164 3 497 097 1 093
Gross profit 145 263 22 118 671 313 187
Selling and administration
Expenses 87 978 24 71 075 165 408
Earnings before financing
costs, taxation,
depreciation and
amortisation (`EBITDA`) 57 285 20 47 596 147
Depreciation 11 891 8 10 970 20 945
Amortisation 7 832 1 7 781 14
Profit before investment income 37 562 30 28 845 112 354
Income from investments 5 272) 62 3 263 8 949
Profit from operations 42 834 33 32 108 121
Financing costs (5 381) (59) (13 143) (20 092)
Income from associates 51 (93) 719 317
Exceptional items (4 290) 1 052 (5 176)
Profit before taxation 33 214 60 20 736 96 352
Taxation 13 054 147 5 293 31 008
Profit after taxation 20 160 31 15 443 65 344
Attributable to outside
Shareholders 4 449 44 1 827 17
Earnings 15 711 15 13 616 47 529
GROUP BALANCE SHEET
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R000 R000 R000
ASSETS
Non-current assets 255 688 249 884 272 289
Property, plant and equipment 147 955 159 532 153 838
Development projects 62 711 61 513 61 056
Intangible assets 10 811 6 467 11 874
Unlisted investments 9 664 10 549 10 047
Deferred taxation asset 11 797 11 453 12 779
Loans and long-term receivables 12 750 370 22 695
Current assets 1 020 606 1 076 971 954 379
Inventories 282 660 307 176 269 888
Trade and other receivables 532 097 489 271 422 035
Derivative instruments 50 814 13 995 43 704
Corporate taxation 2 243 5 851 3 864
Advance payments 4 187 11 774 4 897
Deposits and cash 148 605 248 904 209 991
TOTAL ASSETS 1 276 294 1 326 855 1 226
668
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 445 952 368 588 437 837
Minority interest 116 958 94 316 118 225
Total equity 562 910 462 904 556 062
Non-current liabilities
Long-term borrowings 72 745 77 926 74 167
Current liabilities 640 639 786 025 596 439
Overdrafts and short-term borrowings 7 791 122 452 24 034
Trade and other payables 310 370 277 271 239 469
Advance receipts 148 660 250 914 173 717
Derivative instruments 833 5 382 4 768
Provisions 148 796 118 157 137 239
Corporate taxation 24 189 11 849 17 212
TOTAL EQUITY AND LIABILITIES 1 276 294 1 326 855 1 226
668
EARNINGS AND SHARE PERFORMANCE
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December Increase/ 31 December 30 June
2004 (Decrease) 2003 2004
R000 % R000 R000
Earnings 15 711 15 13 616 47 529
Profit on sale of assets (13) (73) (48) (225)
Impairment of intangible assets 1 814) 68 1 078 3 203
Impairment of fixed property 200 - 2 311
Impairment of investments 2 276 - -
Profit on disposal of businesses - (2 130) (6 971)
Loss on subscription of shares
in subsidiary - - 8 114
Share repurchase expenses - - 758
Attributable taxation and
minority share (1 391) 33 (1 829)
Headline earnings 18 597 48 12 549 52 890
Share performance
- headline earnings per ordinary
share (cents) 6.3 36 4.7 18.8
fully diluted headline
earnings per
ordinary share (cents) 6.3 37 4.6 18.7
Total dividend per ordinary
share (cents) 3.0 2.0 3.5
- Interim paid during
current year 1.5
- Final paid for previous year 3.0 50 2.0 2.0
Interim dividend declared 1.5 - 1.5 3.0)
Number of ordinary shares
in issue (thousands)
- at end of period 295 184 269 752 293 760
- weighted average 294 151 269 351 280 753
- fully diluted 297 074 273 833 283 215
Net asset value per ordinary
share (cents) 151.1 11 136.6 149.0
ABRIDGED CASH FLOW STATEMENT
Unaudited Unaudited Audited
half-year half-year y
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R000 R000 R000
Operating activities (36 927) 25 564 90 308
Cash generated by operations 54 655 31 327 110 381
Income from investments 5 272 3 263 8 949
Working capital requirements (75 109) 20 550 31 493
Cash generated by operating activities (15 182) 55 140) 150 823
Financing costs (5 381) (13 143) (20 092)
Taxation paid (1 828) (9 987) (29 843)
Dividends paid (14 536) (6 446) (10 580)
Investing activities (6 648) (16 369) (56 052)
Net investment in property,
plant and equipment (6 356) (11 403) (22 807)
Development projects (9 487) (14 737) (21 756)
Intangible assets (750) (7 533) (7 533)
Investments and long-term receivables 9 945 17 304 (3 956)
Financing activities (198) 3 832) 42 427
Increase in shareholders` funding 1 224 359 39 636
Net long-term borrowings (1 422) 3 473 2 791
Net change in cash and cash equivalents(43 773) 13 027 76 683
Cash and cash equivalents 184 587 113 425 109 274
- at beginning of year 185 957 111 552 111 552
- currency adjustments (1 370) (1 873) (2 278)
Cash and cash equivalents at
end of period 140 814 126 452 185 957
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R000 R000 R000
Stated capital 127 436 115 825 126 212
Balance at beginning of year 126 212 115 466 115 466
Treasury Shares 1 224 359 10 746
Distributable reserves 318 516 252 763 311 625
Balance at beginning of year 311 625 244 998 244 998
Earnings attributable to
ordinary shareholders 15 711 13 616 47 529
Ordinary dividends (8 820) (5 851) (9 792)
Treasury shares - - 28 890
Ordinary shareholders` equity 445 952 368 588 437 837
SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
half-year half-year year
ended ended ended
31 December 31 December 30 June
2004 2003 2004
R000 R000 R000
Revenue from sales 656 427 615 7681 406 419
Technologies 314 284 334 761 684 800
Defence electronics 342 143 281 007 721 619
COMMENTS
BUSINESS REVIEW
Group revenue from sales grew by 7 per cent from R615,8 million to R656,4
million, while a 15 per cent improvement in gross profit margin to 22 per cent
(2003 - 19 per cent) translated into an increase in gross profit from R118,7
million to R 145,3 million. Although selling and administration expenses rose
by 24 per cent, total overhead expenses were contained to a 1 per cent increase.
The higher selling and administration expenses resulted from efforts to broaden
the Group`s export client base as well as a realignment of indirect costs due to
the formation of central service centres.
Unrealised foreign exchange gains decreased from R15,1 million to R6,4 million
and operating profit increased by 30 per cent to R37,6 million (2003 - R28,8
million). A reduction of net finance costs contributed to a 60 per cent growth
in profit before tax to R33,2 million (2003 - R20,7 million).
Headline earnings per share increased by 36 per cent to 6,3 cents per share from
4,7 cents in 2003.
The Group utilised R36,9 million cash at operating level for the six months, as
working capital increased by R75,1 million (2003 - R20,6 million decrease). This
resulted from longer payment terms experienced by the Defence divisions for
export clients. Trade receivables increased by R110,2 million to R532,1 million
(June 2004 - R422,0 million). The reduction of advance receipts from the Defence
business for long-term contracts has further impacted the working capital
requirement. Advance receipts declined by R25,1 million to R148,7 million (June
2004 - R173,7 million). Capital expenditure and long-term assets were reduced by
51 per cent to R16,6 million (2003 - R33,6 million).
OPERATIONS REVIEW
Defence
Export orders were received from clients in the Middle East, Asia, Africa and
Europe for Integrated Defensive Aids Suites, land based communications
monitoring systems, mobile direction finding systems and radio equipment.
Deliveries were made to India, Italy, Finland, Sweden and Switzerland during
this period.
Local deliveries included Electronic Warfare (EW) suites and communications
systems for the Navy`s new patrol corvettes and submarines. The SA Air Force
received EW suites for the new Hawk aircraft and communications management
systems for the Agusta A109 light utility helicopters.
The division focusing on network centric warfare systems (GrIDS) had a difficult
first year, due to local orders being delayed.
The profit improvement plans initiated a year ago to restore the competitiveness
of both products and services have achieved acceptable results.
The weakness of the US dollar is beginning to impact competitiveness in the
dollar markets of the Middle East and Asia. Cost reduction activities have been
implemented to remain competitive in these markets.
An increased investment in Research and Development (R&D) is necessary to
sustain the Group`s competitive edge. This will continue to put pressure on
working capital management.
Procurement cycles in the defence arena remain long, both locally and
internationally. Order intake remains consistent with that of the previous
period.
The Avitronics division will implement closer operational and technical co-
operation with Saab AB.
Telecommunications
The consolidation of the business activities of the previous Telecommunications
and Industrial Electronics divisions into a single operating division has
progressed well, with all major organisational changes complete. These include
the introduction of more customer focussed business units in the
telecommunications area, consolidation of all shared operational services into a
single service centre and the disposal of non-core business units.
A significant improvement in earnings has been achieved by this process despite
a slight reduction in turnover from R334,8 million to R314,8 million. In
addition, a critical review of the balance sheet was made with an aggressive
review of inventory, which led to the implementation of material adjustments to
certain stock values. These have been accommodated within the improved
earnings.
Business in the local carrier market has remained stable with the effects of the
strengthening rand offset by a moderate growth in demand. The introduction of
new wireless access technologies, which were recently approved, has created
growth opportunities in the deregulated environment, although medium-term impact
will be limited.
Pleasing growth in the GSM market in Africa has been achieved with sales of
R37,8 million for DC power systems.
The recent representative agreement signed with Powerwave AB of Sweden should
improve sales volumes of GSM RF products and antennas and is expected to result
in further growth, particularly to GSM operations in Africa.
Cost reduction objectives set for pre-paid electricity metering solutions were
achieved for the ED-21 meter launched in July 2004. Initial sales targets for
this new product have been met and significant follow on opportunities
identified, subject to the completion of the first major rollout due in March
2005.
Prospects
The continued strengthening of the rand will impact on both the Defence and
Technology divisions` profitability. Management will continue to focus on
improving efficiency both in terms of cost containment and working capital
management.
Whilst revenue is expected to increase in the second half of the year, growth in
earnings is not anticipated for the year end 30 June 2005, bearing in mind the
foreign exchange gains made in the last six months of the previous year.
The benefits of the changes in the Telecoms regulatory environment will have a
limited impact in the medium term.
POST-BALANCE SHEET EVENTS
On 21 February 2005 Saab AB informed the Grintek Board of its firm intention to
make an offer to minority shareholders. Saab South Africa (Proprietary)
Limited, a subsidiary of Saab AB of Sweden, has proposed a scheme of arrangement
to acquire all the ordinary shares in Grintek not already owned by Saab AB or
the Kunene Bros. Holdings Group. The offer is for a cash consideration of R1,90
per Grintek share. Taking into account the fair and reasonable opinion of
Investec Bank Limited and the independent sub-committee, the Grintek Board
recommends that scheme members vote in favour of the scheme at the scheme
meeting. Shareholders are referred to the announcement published on 22 February
2005 for further details.
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.
The comparative figures for December 2003 have been restated in line with the
Accounting Policy change detailed in the previous annual financial statements
whereby the Group`s Employees` Share Purchase Trusts are now consolidated.
DIVIDEND NO. 77
The directors of Grintek Limited have declared dividend no.77 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 1 March 2005
Last day to trade cum the dividend Wednesday 23 March 2005
Date trading commences ex the dividend Thursday 24 March 2005
Record date Friday 1 April 2005
Date of payment Monday 4 April 2005
Share certificates may not be dematerialised between Thursday 24 March 2005 and
Friday 1 April 2005, both dates inclusive.
For and on behalf of the board
NR Kunene Shaun Liebenberg
Chairman Chief Executive Officer
1 March 2005
REGISTERED OFFICE/TRANSFER SECRETARIES
44 Oak Avenue Computershare Investor Services 2004 (Pty)
Ltd
Highveld Technopark 70 Marshall Street
Centurion 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* KAR
Jonsson* JR McAlpine M Msimang GJ Royston AN Saulez KXT Socikwa LG
Wahlund* (Alt)
* Swedish
Date: 02/03/2005 02:52:15 PM
Produced by the JSE SENS Department
