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Control Instruments - Audited Annual Results For The Year Ended 31 December 2004
CONTROL INSTRUMENTS GROUP LIMITED
(INCORPORATED IN SOUTH AFRICA)
REGISTRATION NO: 1964/003987/06
SHARE CODE: CNL * ISIN: ZAE000001665
GROUP LIMITED
AUDITED ANNUAL RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2004
OVERVIEW
The Group`s strong growth continued in 2004. All operations performed well. The
increases in gross profit and operating margins are attributable to improved
efficiencies and new products developed by the Group.
RESULTS
Revenue grew 7.4% from R356 million to R382 million. Earnings before interest,
tax, depreciation and amortisation (EBITDA) increased 46.9% from R35.5 million
to R52.1 million. Profit from operations increased 67.7% from R20.8 million to
R34.9 million.
Profit before tax increased 114.0% from R13.8 million to R29.6 million. This
substantial increase in profitability enabled the Group to maintain its profit
after tax and earnings per share at unchanged levels, despite the
disproportionate increase in the total taxation charge arising from the deferred
tax credit in 2003.
The Group`s operations generated R55.1 million in cash before working capital
changes, an increase of 43.7% compared with 2003. R45.0 million was invested in
capital projects and R7.8 million was used to repurchase shares and pay
dividends.
ACQUISITION OF SHARES
During the year a subsidiary purchased 858 422 shares in the open market. Shares
will continue to be purchased in the market at prices deemed to be attractive,
as and when opportunities arise. A further 2 498 751 shares were purchased by
The Control Instruments Share Incentive Scheme. This is in line with the Group`s
policy to acquire shares in the open market to match any share options that have
been granted to employees, thereby ensuring that shareholders` interests are not
diluted by the issuing of new shares.
POST YEAR-END ACQUISITION
Subsequent to the year-end the Group acquired the business of Autocom (Pty)
Limited and Transport Lighting and Fleet Products (Pty) Limited to complement
the business of CIAutomotive. These businesses supply specialised lighting
equipment, suspension components and safety equipment to the automotive
industry.
ACCOUNTING POLICIES
The accounting policies used are in accordance with South African Statements of
Generally Accepted Accounting Practice. The Group`s accounting policies are
consistent with those applied in the previous financial year, except that (i)
the method of valuing inventories has been changed from weighted average to
first-in, first-out (FIFO) and (ii) The Control Instruments Share Incentive
Scheme has been consolidated as a subsidiary.
International Financial Reporting Standards (IFRS) was adopted in the Group with
effect from 1 January 2005 and will therefore be presented in results for 2005.
AUDIT OPINION
The Group financial statements for the year ended 31 December 2004 have been
audited by PricewaterhouseCoopers Incorporated. A copy of their unqualified
audit report is available for inspection at the Company`s registered office.
PROSPECTS
The Group continues to operate in niche sectors of global markets and is
therefore subject to local and international disruptions that are not under its
control.
Notwithstanding, the Group has enjoyed an extended period of significant growth
and its objectives remain:
above average annual rates of growth when measured at PBIT level on a compounded
basis over the next five years;
the introduction of an increasing percentage of products that incorporate the
Group`s Intellectual Property (IP) into niche sectors of the global OEM
automotive industry;
at least 50% of sales and earnings derived from direct international sales; and
a broad-based BEE programme.
In order to achieve this, the Group will continue to invest heavily in the
development of new products and, during the course of this year, it will be
establishing a significant European based sales and engineering presence that
will enable it to be closer to the global decision making centres of its current
and targeted customer base.
The Group has embarked on a comprehensive review of its BEE strategy and plans
to introduce a broadbased programme during 2005. This will focus on staff
development and the promotion and support of SMMEs, which we believe will add
value to the Group and all others concerned.
As a result of: the additional expenses arising out of the above initiatives;
the fact that the South African automotive industry is undergoing a period of
major change as local OEM operations are incorporated into the worldwide supply
chains of their international owners; and the timing of model phase-outs and new
model introductions, it is likely that the growth for 2005 will be at a lower
rate than that of the past few years.
The Group already has significant customer commitments for 2006 onwards. We
believe that this plus the effects of the investments outlined above will result
in significantly enhanced rates of growth and cash flow generation from 2006.
The Group is also actively pursuing acquisitions to complement its African
distribution operations and its offshore ambitions and is well positioned to
take full advantage of these and other opportunities that may arise.
DECLARATION OF DIVIDEND
The board has declared a final dividend of 3.0 cents per share in respect of the
year ended 31 December 2004.
In terms of the requirements of STRATE:
Last day to trade cum dividend Friday 1 April 2005
Shares trade ex dividend Monday 4 April 2005
Record date Friday 8 April 2005
Payment date Monday 11 April 2005
Share certificates may not be dematerialised or rematerialised between Monday, 4
April 2005 and Friday, 8 April 2005, both days inclusive.
An interim dividend of 2.5 cents per share was paid on 30 August 2004. The total
dividend declared in respect of the 2004 financial year is therefore 5.5 cents
per share (2003: 3.5 cents).
On behalf of the board
HV Hefer R Friedman
Chairman CEO & Group Managing Director 9 March 2005
PROFIT FROM OPERATIONS R35m UP BY 68% PROFIT BEFORE TAX R30m UP BY 114%
TOTAL DIVIDEND DECLARED 5.5 CENTS PER SHARE UP BY 57%
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2004
31/12/04 31/12/03
R000 R000
ASSETS
Noncurrent assets 116 039 88 373
Property, plant and equipment 86 180 60 283
Intangible assets 19 989 16 088
Investments in joint ventures 292 964
Availableforsale investments 3 208 3 208
Noncurrent receivables 250 392
Deferred tax assets 6 120 7 438
Current assets 84 306 80 368
Inventories 32 783 27 962
Receivables and prepayments 45 589 52 171
South African Revenue Service 1 183 -
Cash and cash equivalents 4 751 235
Total assets 200 345 168 741
EQUITY AND LIABILITIES
Capital and reserves 83 303 75 292
Share capital 4 213 4 213
Share premium 43 591 43 591
Treasury shares (22 658) (18 602)
Fair value and other reserves (1 889) 375
Retained earnings 60 046 45 715
Noncurrent liabilities 41 627 25 797
Noncurrent borrowings 32 395 20 417
Retirement benefit obligations 1 100 1 100
Deferred tax liabilities 7 039 4 280
Provisions 1 093 -
Current liabilities 75 415 67 652
Trade and other payables 51 714 54 295
South African Revenue Service 5 348 -
Current borrowings 14 311 10 017
Provisions 4 042 3 340
Total equity and liabilities 200 345 168 741
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2004
31/12/04 31/12/03
R000 R000
Cash flows from operating activities
Operating profit before working
capital changes 55 146 38 368
Working capital changes (3 373) (10 085)
Cash generated from operations 51 773 28 283
Interest received 184 40
Interest paid (4 892) (5 082)
Dividends paid (2 915) (1 692)
Tax paid (2 238) (1 506)
41 912 20 043
Cash flows from investing activities
Purchase of property, plant and equipment (41 705) (27 227)
Proceeds from disposal of
property, plant and equipment 5 850 47
Increase in intangible assets (9 404) (8 323)
Decrease in investments in joint ventures 124 317
Disposal of operations, net of cash - (149)
Proceeds from disposal of investments
and associates - 2 500
Decrease/(increase) in investments
and noncurrent receivables 142 (294)
(44 993) (33 129)
Cash flows from financing activities
Proceeds from noncurrent borrowings 16 060 4 992
Movement of treasury shares (4 928) (8 087)
Shares cancelled - (211)
Share premium on cancelled shares - (4 012)
Direct cost of share buyback - (188)
11 132 (7 506)
Net cash inflow/(outflow) for the year 8 051 (20 592)
Cash and cash equivalents at the
beginning of the year (3 300) 17 292
Cash and cash equivalents at the
end of the year 4 751 (3 300)
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2004
Total Continuing Discontinuing
31/12/04 31/12/03 31/12/04 31/12/03 31/12/04 31/12/03
R000 R000 R000 R000 R000 R000
Revenue 382 446 355 970 382 446 355 970 - -
Cost of sales (210 893)(220 988)(210 893)(220 976)- (12)
Gross profit/
(loss) 171 553 134 982 71 553 134 994 - (12)
Other operating
income 14 024 8 540 14 016 8 534 8 6
Operating
expenses (133 449)(108 040)(133 441)(107 457)(8) (583)
Administrative
expenses (79 787) (54 689) (79 779) (54 106) (8) (583)
Marketing and
selling
expenses (12 174) (11 949) (12 174) (11 949) - -
Other operating
expenses (41 488) (41 402) (41 488) (41 402) - -
Earnings/(loss)
before
interest, tax,
depreciation
and
amortisation 52 128 35 482 52 128 36 071 - (589)
Amortisation of
goodwill (850) (1 738) (850) (1 738) - -
Depreciation,
amortisation
of other
intangible
assets and
impairment of
development
costs (16 375) (12 934) (16 375) (12 934) - -
Profit/(loss)
from
operations 34 903 20 810 34 903 21 399 - (589)
Profit/(loss)
on disposal of
investments and
operations - 70 - 159 - (89)
(Creation)/
reversal of
provision
against
investments
and loans (147) 49 (92) (83) (55) 132
Net finance
(costs)/income (4 708) (5 042) (4 706) (5 051) (2) 9
Net loss from
joint ventures (456) (2 060) - - (456) (2 060)
Profit/(loss)
before tax 29 592 13 827 30 105 16 424 (513) (2 597)
Tax (11 474) 4 241 (11 497) 4 246 23 (5)
Current tax (6 403) (133) (6 426) (128) 23 (5)
Deferred tax (5 071) 4 374 (5 071) 4 374 - -
Net profit/
(loss) 18 118 18 068 18 608 20 670 (490) (2 602)
Weighted
average number
of shares 65 357 67 936 65 357 67 936 65 357 67 936
Earnings/
(loss) per
share (cents)
Basic 27.7 26.6 28.5 30.4 (0.8) (3.8)
Diluted 25.5 25.5 26.2 29.2 (0.7) (3.7)
Headline
earnings/(loss)
per share
(cents)
Basic 29.1 32.1 29.0 32.9 0.1 (0.8)
Diluted 26.8 30.8 26.7 31.5 0.1 (0.7)
Dividends paid
per share
(cents) 4.5 2.5
RECONCILIATION OF EPS TO HEADLINE EPS
Total Continuing Discontinuing
31/12/04 31/12/03 31/12/04 31/12/03 31/12/04 31/12/03
Earnings/(loss)
per share
(cents) 27.7 26.6 28.5 30.4 (0.8) (3.8)
(Profit)/loss
on disposal of
investments
and operations - (0.1) - (0.2) - 0.1
Profit on
disposal of
property,
plant and
equipment (2.7) - (2.7) - - -
Creation/
(reversal) of
provision
against loans
and
investments 0.2 (0.1) 0.1 0.1 0.1 (0.2)
Impairment of
development
costs 1.8 - 1.8 - - -
Amortisation
and impairment
of goodwill 2.1 5.7 1.3 2.6 0.8 3.1
Headline
earnings/(loss)
per share
(cents) 29.1 32.1 29.0 32.9 0.1 (0.8)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2004
Fair Total
Share Share Treasury value Retained
capital premium shares & other earnings
reserves
R 000 R 000 R 000 R 000 R 000 R 000
Balance at
1 January 2003 4 424 47 603 (10 378) (1 531) 29 681 69 799
As previously
reported 4 424 47 603 - (1 531) 27 414 77 910
Change in
accounting
policy (10 378) 2 267 (8 111)
Net profit not
recognised in
the income
statement 1 906 1 906
Utilisation of
currency
translation
reserve (128) (128)
Cash flow
hedges - net
fair value
gains, net
of tax 2 034 2 034
Net profit 18 068 18 068
Shares bought
back and
cancelled (211) (4 012) (188) (4 411)
Movement of
treasury
shares (8 224) (154) (8 378)
Dividends paid (1 692) (1 692)
Balance at
31 December
2003 4 213 43 591 (18 602) 375 45 715 75 292
As previously
reported 4 213 43 591 (8 097) 375 43 938 84 020
Change in
accounting
policy (10 505) 1 777 (8 728)
Net losses not
recognised in
the income
statement (2 264) (2 264)
Release of
currency
translation
reserve 103 103
Utilisation of
general
reserve (48) (48)
Cash flow
hedges net
fair
value losses,
net of tax (2 319) (2 319)
Net profit 18 118 18 118
Movement of
treasury
shares (4 056) (872) (4 928)
Dividends paid (2 915) (2 915)
Balance at
31 December
2004 4 213 43 591 (22 658) (1 889) 60 046 83 303
CONTROL INSTRUMENTS GROUP LIMITED
(INCORPORATED IN SOUTH AFRICA)
REGISTRATION NO: 1964/003987/06
SHARE CODE: CNL * ISIN: ZAE000001665
REGISTERED OFFICE: 9 ELECTRON STREET,
LINBRO BUSINESS PARK, SANDTON 2196
DIRECTORS:
HV Hefer (Chairman)* * R Friedman (Managing) * EPH Bieber*
JPS O`Leary (Irish)* * TE Buzer * RB Forrester * RJ Fraenkel
*independent, nonexecutive
www.ci.co.za
Date: 15/03/2005 07:00:15 AM
Produced by the JSE SENS Department
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