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Grindrod Limited - 2005 Interim Report and Dividend Announcement
GRINDROD LIMITED
Incorporated in the Republic of South Africa
Registration number 1966/009846/06
Share code: GND ISIN: ZAE000052247
2005 INTERIM REPORT AND DIVIDEND ANNOUNCEMENT
80% INCREASE IN PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
73% INCREASE IN HEADLINE EARNINGS PER SHARE
100% INCREASE IN INTERIM DIVIDEND
GROUP INCOME STATEMENT
Six months ended Year ended
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2005 2004 % 2004
R000 R000 Change R000
Revenue 2 024 941 1 409 446 44 3 012 454
Trading profit 503 633 308 874 694 485
Depreciation (52 412) (32 268) (77 643)
Operating profit before
interest and taxation 451 221 276 606 616 842
Non-trading items 1 139 (2 834) (4 337)
Interest received 23 891 15 983 38 129
Interest paid (72 009) (51 013) (100 106)
Profit before taxation 404 242 238 742 550 528
Taxation (25 950) (26 552) (42 661)
Profit after taxation 378 292 212 190 507 867
Share of associate companies`
profit after taxation 28 617 15 032 42 735
Profit for the period 406 909 227 222 550 602
Attributable to
Shareholders of Grindrod Limited 407 670 226 951 80 549 897
Outside shareholders (761) 271 705
406 909 227 222 550 602
Reconciliation of headline earnings
Profit attributable to
Grindrod shareholders 407 670 226 951 549 897
Adjusted for non-trading items (1 139) 2 834 6 905
Amortisation of goodwill
and intangible assets 1 335 3 240 7 328
Impairment of goodwill 39 - 1 014
Share of associate company`s
impairment of goodwill - - 2 568
Profit on sale of investments (115) - (3 499)
Profit on sale of plant
and equipment (2 398) (406) (506)
Headline earnings 406 531 229 785 556 802
Number of shares in issue (000`s) 91 640 89 266 90 922
Weighted average number of
shares on which earnings
per share are based (000`s) 91 540 89 702 90 044
Diluted weighted average number of
shares on which diluted earnings
per share are based (000`s) 96 060 95 536 94 630
Earnings per share (cents)
Basic 445,3 253,0 610,7
Diluted 424,4 237,6 581,1
Headline earnings per share (cents)
Basic 444,1 256,2 73 618,4
Diluted 423,2 240,5 588,4
Dividends per share (cents)
Interim 100,0 50,0 100 50,0
Final - - 125,0
Dividend cover (times) 4,4 5,1 3,5
Exchange rates (R/US$)
Opening exchange rate 5,65 6,64 6,64
Closing exchange rate 6,67 6,16 5,65
Average exchange rate 6,22 6,70 6,47
GROUP BALANCE SHEET
30 June 30 June 31 Dec
(Unaudited) (Unaudited) (Audited)
2005 2004 2004
R000 R000 R000
Ships, property, plant and equipment 1 984 248 1 344 522 1 529 363
Intangible assets 115 616 33 838 42 355
Investments in associates 150 069 128 872 144 253
Deferred taxation 41 345 3 164 30 456
Other investments and financial assets 52 895 78 910 81 648
Non-current asset held for sale 157 245 - 124 876
Bank balances and cash 456 674 328 702 345 655
Other current assets 878 636 418 282 319 138
Total assets 3 836 728 2 336 290 2 617 744
Ordinary shareholders` equity 1 228 458 646 084 842 800
Outside shareholders` interest 8 983 7 699 8 100
Deferred taxation 12 903 - 8 362
Provision for post-retirement medical aid 57 589 51 266 52 355
Interest-bearing debt 1 537 006 910 047 970 963
Other liabilities 991 789 721 194 735 164
Total equity and liabilities 3 836 728 2 336 290 2 617 744
Net debt: equity ratio 0,70:1 0,77:1 0,49:1
Capital expenditure 234 398 283 206 558 963
Capital commitments
Authorised by directors
and contracted for 1 197 749 1 013 563 813 238
Due within one year 452 659 368 594 249 338
Due thereafter 745 090 644 969 563 900
Authorised by directors not yet
contracted for - 226 663 428 939
DIVISIONAL ANALYSIS OF EARNINGS
Shipping services 379 036 209 173 501 487
Freight and financial services 28 634 17 778 48 410
407 670 226 951 549 897
GROUP CASH FLOW STATEMENT
30 June 30 June 31 Dec
(Unaudited) (Unaudited) (Audited)
2005 2004 2004
R000 R000 R000
Cash generated from operations 469 826 376 702 763 417
Net interest paid (48 118) (35 030) (64 122)
Net dividends paid (112 281) (18 770) (60 616)
Taxation paid (18 569) (1 467) (3 766)
Net cash inflow from operating activities 290 858 321 435 634 913
Acquisition of ships, property, plant,
equipment and investments in
new businesses (681 594) (315 512) (705 738)
Proceeds from disposal of ships, property,
plant, equipment and investments 2 981 87 156 100 898
Intangible assets acquired (10 519) - -
Loans repaid by associate and joint
venture companies 1 074 1 772 1 772
Finance lease receipts - 21 608 18 233
Net cash outflow from investing
Activities (688 058) (204 976) (584 835)
Repurchase of ordinary share capital - (106 146) (106 146)
Proceeds from issue of ordinary
share capital 2 077 3 529 6 146
Proceeds from borrowings 271 729 322 836 485 194
Payment of capital portion of long-term
borrowings (91 797) (45 326) (229 079)
Short-term loan raised/(repaid) 246 172 (180 704) (129 711)
Net cash inflow/(outflow) from financing
activities 428 181 (5 811) 26 404
Net increase in cash and cash equivalents 30 981 110 648 76 482
Cash and cash equivalents at beginning
of period 257 297 189 150 189 150
Difference arising on translation 40 821 (6 403) (8 335)
Cash and cash equivalents at
end of period 329 099 293 395 257 297
STATEMENT OF CHANGES IN EQUITY
Share capital, Foreign
premium currency
and equity Hedging translation
compensation reserve reserve
R000 R000 R000
Balance at 31 December 2003 83 527 - (22 271)
Share options exercised 6 146
Shares repurchased and cancelled (83 375)
Foreign currency translation adjustments (84 364)
Financial instrument hedge (49 725)
Minority interest acquired
Profit attributable to ordinary shareholders
Dividends paid
Balance at 31 December 2004 6 298 (49 725) (106 635)
Adjustment on adoption of IFRS 1 327 - 9 342
As restated 7 625 (49 725) (97 293)
Share options exercised 2 077
Foreign currency translation adjustments 72 383
Financial instrument hedge release 19 965
Minority interest acquired
Profit attributable to ordinary shareholders
Dividends paid
Balance as at 30 June 2005 9 702 (29 760) (24 910)
Adjustment to equity on adoption of IFRS
IFRS 2 Share-based payments 1 327
IFRS 3 Business combinations
and IAS36 Impairment of assets
- Impairment of goodwill
- Reversal of goodwill previously
amortised
- Negative goodwill realised
IAS 16 Property, plant and equipment
- Depreciation adjustment due to
changes in useful life and
residual values
- Share of associate company`s
IFRS adjustment
- Capitalistion of dry docking
expenses
IAS 17 Leases
- Reclassification of leases on
land and buildings
- Operating lease rentals
- Interest
- Depreciation on buildings
IAS 21 Effect of changes in foreign
exchange rates
- Change in functional currency 9 342
IAS 39 Financial instruments
1 327 - 9 342
- Outside shareholders` interest
- Deferred tax effect of IFRS
adjustments
1 327 - 9 342
STATEMENT OF CHANGES IN EQUITY (continued)
Attributable
to equity
Accumulated holders of Minority Total
profit Grindrod interest equity
R000 R000 R000 R000
Balance at 31 December 2003 547 696 608 952 7 428 616 380
Share options exercised 6 146 6 146
Shares repurchased
and cancelled (22 771) (106 146) (106 146)
Foreign currency translation
adjustments (84 364) (84 364)
Financial instrument hedge (49 725) (49 725)
Minority interest acquired - (33) (33)
Profit attributable to
ordinary shareholders 549 897 549 897 705 550 602
Dividends paid (81 960) (81 960) (81 960)
Balance at 31 December 2004 992 862 842 800 8 100 850 900
Adjustment on adoption of IFRS (12 797) (2 128) 791 (1 337)
As restated 980 065 840 672 8 891 849 563
Share options exercised 2 077 2 077
Foreign currency translation
adjustments 72 383 72 383
Financial instrument hedge release 19 965 19 965
Minority interest acquired - 853 853
Profit attributable to ordinary
shareholders 407 670 407 670 (761) 406 909
Dividends paid (114 309) (114 309) (114 309)
Balance as at 30 June 2005 1 273 426 1 228 458 8 983 1 237 441
Adjustment to equity on
adoption of IFRS
IFRS 2 Share-based payments (1 327) - -
IFRS 3 Business combinations
and IAS36 Impairment
of assets
- Impairment of goodwill (3 018) (3 018) (3 018)
- Reversal of goodwill
previously amortised 4 669 4 669 4 669
- Negative goodwill realised 5 977 5 977 5 977
IAS 16 Property, plant and equipment
- Depreciation adjustment due
to changes in useful life
and residual values 4 585 4 585 4 585
- Share of associate company`s
IFRS adjustment 831 831 831
- Capitalistion of dry
docking expenses 899 899 899
IAS 17 Leases
- Reclassification of leases
on land and buildings
- Operating lease rentals 2 291 2 291 2 291
- Interest (1 220) (1 220) (1 220)
- Depreciation on
buildings (2 263) (2 263) (2 263)
IAS 21 Effect of changes in
foreign exchange rates
- Change in functional
currency (7 884) 1 458 1 458
IAS 39 Financial instruments (15 472) (15 472) (15 472)
(11 932) (1 263) - (1 263)
- Outside shareholders`
interest (791) (791) 791 -
- Deferred tax effect of
IFRS adjustments (74) (74) - (74)
(12 797) (2 128) 791 (1 337)
COMMENTS
The board of directors is pleased to report an 80% increase in earnings to
R407,7 million for the six months to June 2005. Headline earnings per share were
444,1 cents, 73% higher than the corresponding period of 2004. This is in line
with the trading statement issued on 18 July 2005 which indicated earnings
growth of between 65 - 75%.
The strong shipping markets of the second half of 2004 continued into the
current year although the dry bulk sector weakened towards the end of the
period. The combined effect of the earnings in favourable markets, the high
level of contracted income, the increased fleet size and low fleet cost all
helped contribute to the improved earnings. In addition, translation gains from
the weakening Rand/Dollar exchange rate since year-end and improved earnings
from the freight and financial services division contributed further to the
strong earnings growth.
Shipping services
Shipping services continued to perform strongly in the first half of 2005 with
earnings growth of 81% over the prior year.
Island View Shipping (IVS), the group`s dry bulk owner and operator, has a
substantial fleet of capesize, panamax and handysize bulk carriers purchased or
chartered in at favourable rates. IVS continued to perform well through the
contracted earnings of its capesize and panamax vessels and good earnings from
the handysize ships employed in the Lauritzen/IVS pool and the IVS parcel
service. Two chartered panamax and two handysize bulk carriers (one owned and
one chartered) were added to the fleet during the period while seven chartered
handysize ships and one chartered capesize ship will deliver in the future, all
of which are at low contracted costs.
Unicorn Shipping, the group`s product and chemical tanker, container ship owner
and operator, achieved excellent results from both contracted and spot earnings
in strong tanker markets and the translation gain from the weakening Rand
against the Dollar since 31 December 2004. The product and chemical tanker
markets have remained at good levels in spite of the seasonal slowdown for the
northern hemisphere summer and the lower dry bulk markets, and the prognosis of
continued firm markets is likely. During the period, Unicorn Shipping took
delivery of a container ship and ordered two 12 800 dwt product/chemical
tankers. It contracted the sale of a 50% interest in a product tanker for
delivery in 2006 while the sale of another product tanker, contracted during the
prior year, will be concluded in the second half of the year on delivery of the
newbuilding vessel from the shipyard. It has seven newbuilding ships on order at
favourable prices and four chartered ships contracted at good rates, all of
which will deliver over the next three years.
The group`s strategy to diversify risk through having a mix of ships out on long
term charter or with contracted revenue, and employed in the spot market remains
a key focus and continued to be implemented during the period. Further
diversification is also realised through the mix of dry bulk ships, tankers and
containerships which make up the group`s fleet. In addition, the group will look
to lock in further profits by selling ships in certain circumstances.
Freight and financial services
The group`s freight and financial services division performed satisfactorily and
reported earnings growth of 65% over the prior year from a low base.
Grindrod ships agencies continued to increase volumes which flowed through to
good earnings growth in spite of the strong Rand.
The group`s landfreight businesses performed satisfactorily while Ocean Africa
Container Lines, our seafreight logistics partnership with Safmarine servicing
sub-Saharan shipping and logistics requirements, continued to perform well. The
group`s investment in Marriott showed good returns in the period as it continued
to grow fee income from its property bank, property management and asset
management divisions.
Significant progress was made in the acquisition and expansion of freight
businesses during the period, which are detailed as follows:
* Acquired African Portland Industries, a bulk terminal operator in Namibia
and Mocambique.
* Acquired 50% of Sheltam Rail, a locomotive operator.
* Expanded Grindrod J&J Logistics through the takeover of warehousing
facilities previously operated by Uniroute.
* Acquired Sea Munye`s bulk product warehousing operations in Richards Bay.
* Acquired the external grain and soya trading and logistics business from
Seaboard Corporation through a new operation, Atlas Trading and Shipping.
* Acquired 50% of Cockett Marine Oil, an international bunker fuel supplier.
* Acquired 50% of Oreport, which trades in, and provides logistical services
for mining products.
* Increased share in Rohlig-Grindrod from 42,5% to 50%.
The group`s strategy is to increase the profit contribution from freight
operations through the acquisition or development of complementary businesses to
ensure that a full range of services is provided to our customers. To this end
the group has employed a number of senior managers to ensure it has adequate
skills to manage this expansion.
Capital expenditure and commitments
Capital expenditure and commitments of the group are:
Description
Capital expenditure Capital commitments
6 months to 6 months to
R000 30 June 2005 31 Dec 2005 2006 Thereafter
Ships 181 488 222 606 256 664 572 147
Property, plant and equipment 52 910 6 089 137 393 2 850
234 398 228 695 394 057 574 997
Investment in new businesses 447 196 202 579 - -
Total 681 594 431 274 394 057 574 997
The Durban Bulker, a handysize bulk carrier and Range, a containership, were
delivered during the period. The orders placed for the additional two product
tankers bring the total number of newbuildings on order and still to deliver to
seven.
Subsequent to the half year, the group contracted for the purchase of 10
locomotives through its 50% interest in Sheltam Grindrod.
The group has contracted to sell a 40 000 dwt product tanker, as discussed above
and a 50% interest in a 45 000 dwt tanker for delivery in 2006.
Capital commitments will be funded by cash generated from operations, bank
financing facilities and from the proceeds of the issue of preference shares
discussed below.
Group borrowings and cash flow
There have been strong operating cash flows during the period under review.
However, group net borrowings increased from R971 million at 31 December 2004 to
R1 537 million at 30 June 2005 as a result of the progress made in the group`s
expansion process. Consequently the debt: equity ratio increased from 49% to 70%
which is still well within the 100% guideline set by the group.
Equity
Ordinary shareholders` equity increased from R843 million at 31 December 2004 to
R1 228 million due to the good earnings and the impact of the weaker Rand/Dollar
exchange rate on US Dollar-denominated assets.
Subsequent to 30 June 2005, the group raised R500 million through a preference
share issue which will be utilised to accelerate the group`s expansion process.
The shares will be listed on Monday, 22 August 2005.
Accounting policies and presentation
The report has been prepared in accordance with Generally Accepted Accounting
Practice. International Financial Reporting Standards (IFRS) and the revised
IAS39, Accounting for Financial Instruments, were adopted with effect from 1
January 2005. The effect of the adoption of IFRS and IAS39 is set out in the
Statement of Changes in Equity included in this report.
Dividend
An interim dividend of 100 cents per ordinary share (2004: 50 cents) has been
declared.
Prospects
The group is confident of achieving good earnings growth for the year ending 31
December 2005 due to its low fleet cost and increased fleet size, the current
favourable tanker markets, the high level of contracted income and the
contribution from newly acquired freight operations.
For and on behalf of the Board
WM Grindrod IAJ Clark
Chairman Chief Executive Officer
17 August 2005
DECLARATION OF INTERIM DIVIDEND
Notice is hereby given that an interim dividend of 100 cents per ordinary share
(2004: 50 cents per share) has been declared payable to shareholders in
accordance with the undermentioned timetable. The dividend is declared in the
currency of the Republic of South Africa.
Last day to trade cum-dividend Friday, 2 September 2005
Trading ex-dividend commences Monday, 5 September 2005
Record date Friday, 9 September 2005
Dividend payment date Monday, 12 September 2005
No dematerialisation or rematerialisation of shares will be allowed for the
period from 5 September 2005 to 9 September 2005, both days inclusive.
By order of the Board
CAS Robertson
Secretary
17 August 2005
Registered office
Quadrant House
115 Victoria
Embankment
Durban 4001
Postal address
PO Box 1
Durban
4000
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown
2107
Directors
WM Grindrod* (Chairman), DRD White* (Deputy Chairman), IAJ Clark (Chief
Executive Officer), H Adams*,
Dr SM Gounden*, IM Groves*, JG Jones, TJT McClure, N Mtshotshisa*, RA Norton*,
AK Olivier, DA Rennie, AF Stewart, LR Stuart-Hill, RJH Whitley*
*Non-executive
Registration number 1966/009846/06
Incorporated in the Republic of South Africa
Share code: GND ISIN: ZAE000052247
Date: 17/08/2005 01:31:33
Produced by the JSE SENS Department
