| Wed 7 Sep 2005, 15:48 | | Tiger Wheels Ltd - Audited group results |
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Tiger Wheels Ltd - Audited group results for the year ended 30 June 2005
Tiger Wheels Ltd
(Incorporated in the Republic of South Africa)
(Registration number 1970/011662/06)
Share code: TIW & ISIN: ZAE000007407
(`Tiwheel` or `the group` or `the company`)
www.tiwheel.co.za
Audited Group Results for the year ended 30 June 2005
Headline earnings per share down 9,4%
Revenue down 2,5%
Free cash flow per share up 20,8%
NATURE OF BUSINESS AND COMMENTS
Tiger Wheels Limited (`Tiwheel`) is a group of companies focused on the
automotive aluminium wheel and passenger car tyre industries. The group operates
internationally, with wheel manufacturing plants in Germany, Poland, South
Africa, and the USA, and wholesale wheel and tyre distribution in the United
Kingdom and South Africa.
The group`s 40 Tiger Wheel & Tyre retail stores in Southern Africa, - 29 owned
and 11 franchised - cover all major centres and hold a significant share of the
replacement passenger tyre and wheel aftermarket business in the region.
Results Overview
The group`s results for year ended 30 June 2005 reflect a slight improvement
over those forecast in the Trading Update issued on 24 April 2005 and are a
contrasting reflection of the buoyant domestic economy and the stagnant
international markets in which the group operates. Revenues and headline
earnings per share declined by 2.5% and 9.4% respectively, mainly due to the
reduced contribution from the group`s 74% held international OEM alloy wheel
manufacturing business - the German- headquartered ATS group. The extent of this
decline was softened by the performance of the domestic tyre and wheel trading
businesses. Throughout the group, continued focus on tight asset management,
cost control and productivity improvements once again resulted in an improvement
in cash generation. Free cash-flow per share improved by 21% and the debt /
equity ratio, net of cash, was down to 11% by year-end.
Weak European automotive markets along with the once-off effects of tax charges
relating to prior periods, the bankruptcy of MG-Rover, higher-than-budgeted
start-up losses in the new Alabama (USA) plant, and exchange rate-related losses
of R6.2m all combined to negate the strong performance of the domestic trading
businesses - to the extent that their results could not totally offset the
reduced earnings of the ATS group. More details are contained in the Divisional
Performance Reviews below.
Strategic Overview
While the financial results for the past year may not conform to the group`s
track record over many years, a number of important strategic milestones made
this a year during which much was achieved.
These include:
Completion of the integration of the South African Babelegi-based wheel plant
into the ATS group. This step has finally resulted in the creation of one
integrated international OEM wheel manufacturing company, with a uniform
shareholding, a shared global vision, and managed from the head office in
Germany.
The conclusion of the consolidation of the group`s businesses into two clearly
defined, separate and independent business units, each with their own focused
management and governance boards and, the Babelegi plant now totally dedicated
to OEM production.
The strengthening and reorganisation of the Tiwheel board.
Agreement in principle of the terms and conditions for an Euro80m syndicated
loan facility for the ATS group in substitution of the many fragmented banking
facilities around the world. The syndication is led by a major German bank -
supported by a number of regional banks - geographically close to the group`s
international operations and covering all the group`s global plants.
The achievement of excellent progress in both businesses on strengthening the
team at the top to cope with growth into the future.
Completion in the ATS group of detailed productivity improvement plans which
are to be implemented over the next 2 to 3 years - in order to cope with the
price pressures from our OEM customers.
The entry of Bidvest as a 20% shareholder into the group.
Investment by Tiger Wheel and Tyre in IT and additional head office support
capacity, which will facilitate a slightly more aggressive rate of new store
development in Southern Africa.
The acquisition from ION Ltd - effective 3 August 2005 - of it`s wheel plant in
Kentucky (USA), which will entrench the group`s position in the US OEM market
and enhance its reputation as a global player in the OEM alloy wheel
manufacturing industry.
These significant strategic steps all bode well for the future development of
the group and lay a foundation for sustainable growth in the years ahead.
Divisional Performance Review
ATS Group
The year under review has been characterised by the weak conditions in the
European automotive markets. This has happened at the same time as new capacity
amongst the group`s competitors has come on stream, much of which was planned
and committed up to 3 years ago. This has resulted in excess capacity - a
situation that has been aggressively exploited by the group`s OEM customers by
putting suppliers, such as our group, under price pressure. In certain cases,
rather than submit to the pressures, orders were surrendered while, in other
cases, price reductions were made.
The Polish and German plants were most affected by the order cutbacks, while the
Alabama (USA) plant continued to be impacted by a major customer`s delayed start
of production of a new model.
Given the combined effects of all these difficult circumstances as well as those
recorded in the Results Overview above, the results of the ATS Group for the
year are viewed as acceptable.
Meanwhile, we are pleased to report that, during the last quarter of the
financial year, the volumes at Alabama were approaching budgeted levels, and the
plant has now turned to profitability.
Although new process and productivity improvements being installed in Germany
experienced start-up difficulties towards the end of the financial year, they
have now started to show much promise and will be rolled out to all group plants
over the next few years.
The Babelegi plant produced a small profit for the year in spite of the effects
of the strong Rand, retrenchment costs incurred in a further head-count
reduction, and a difficult customer environment.
The financial results for the year show an 11% decline in revenues and a 35%
decline in operating profit in European operations, including the once-off
effects referred to in the Results Overview above.
While the long-term strategic benefits and value of the integration of the
Babelegi business will be felt in the years ahead, there has been both a
positive and a negative effect on the intra-group figures arising out of the
negative goodwill adjustment in the ATS accounts and the corresponding loss on
disposal reflected in the Balance of the Group accounts.
As announced to shareholders on 5 August 2005, the Kentucky (USA) plant was
acquired from ION Ltd, effective 3 August 2005. This plant is in advanced start-
up mode which, at this stage, is running according to expectations. An important
aspect of this transaction was the fact that most of the start up losses had
already been absorbed by the previous owners.
Trading Businesses
Buoyant consumer spending in the South African retail environment, particularly
towards the end of 2004, helped post increases of 10% in retail and 21% in
wholesale revenues in the year under review. This resulted in 16% and 38%
increases in operating income respectively. The vibrant economy also generated a
much more competitive environment - especially in the second half of the
financial year - where price pressure from new players and importers of products
from China and other low cost countries had a destabilising effect on pricing in
both the tyre and wheel markets. Our teams, nevertheless, continue to focus on
customer service excellence, tight cost and asset management control, and
intensive training and development of our people.
In the UK, the 50.8% owned Yokohama HPT Ltd produced a small profit in a tough
market, a situation that applied equally to the ATS group`s aftermarket
activities.
During the year, two additional company-owned, and one franchised, Tiger Wheel &
Tyre retail stores were opened, while one franchised operation was cancelled.
Prospects
In line with the ATS objective to place itself in the bottom quartile of global
costs of production, and in response to price pressures from customers, the
group has accelerated the implementation of its new, in-house-developed, process
improvement philosophy, which will be further developed and rolled out
throughout the group as a running change over the next few years. The costs of
this initiative, together with the tough pricing and order book conditions in
the automotive industry, should result in only static to modest growth in
earnings in the short term. However, this programme together with a vigorous
cost and efficiency drive, is envisaged to bring significant benefits to the
group globally in the years ahead. More specifically, for the year ahead, all
plants are budgeting to maintain their current levels of output and
profitability - with exception of the Alabama (USA) plant, which is forecasting
increased production and modest profitability. The new Kentucky (USA) plant is
budgeting to break even during its first year in our group.
Discussions with the possible joint-venture partners in China continue to make
slow but positive progress. If and when a transaction on suitable terms is
concluded, shareholders will be advised
The South African trading businesses anticipate five new retail sites being
established during the forthcoming year. This expansion, along with increased IT
costs, may prove to be a slight drag on the growth of earnings in these
businesses in the short term. The significant upturn in South African car sales
in recent years should result in growth of the overall replacement tyre market
in the years ahead, which is the underlying reason for the slightly more
aggressive planned growth in the number of outlets.
In summary, a small growth in earnings per share is expected in the year ahead.
The growth rate to which the shareholders have been accustomed to in the past
can be expected to resume in the years thereafter, subject to a more emphatic
set of caveats than usual. Increased volatility in currency markets, rising oil
and commodity prices, weak European economies and the ever-present threat of
Chinese invasions into our markets, make forecasting even more hazardous than
ever.
Audit report
These summarised consolidated results and the annual financial statements for
the year to June 2005, from which they have been extracted, have been audited by
the company`s auditors, PKF (Jhb) Inc. Their audit report is available for
inspection at the company`s registered office.
Declaration of distribution
Notice is hereby given that the board of directors (`the board`) has resolved to
distribute to ordinary shareholders a portion of the share premium account in
lieu of a dividend to ordinary shareholders (`the distribution`). The
distribution will amount to 73 cents per ordinary share (2004: cash dividend of
71 cents per ordinary share), returning the payout to the 40% of attributable
earnings traditionally paid to Tiwheel`s shareholders.
In terms of the company`s Articles of Association and the JSE Limited`s Listings
Requirements, any such distribution is subject to the passing of an ordinary
resolution by the company`s shareholders. It is accordingly proposed that the
appropriate resolution will be put to shareholders at the Annual General Meeting
of the company (`AGM`) which will take place on 30 November 2005. Should such
resolution be approved by the shareholders, the following salient dates to the
distribution will apply:
Last date to trade `cum` the distribution Thursday, 8 December 2005
Trading commences `ex` the distribution Friday, 9 December 2005
Record date Thursday, 15 December 2005
Date of payment Monday, 19 December 2005
A further announcement will be published on SENS on 30 November 2005 confirming
the above salient dates.
On behalf of the board
Eddie Keizan Josh Loots
Executive chairman Group financial director
Johannesburg
7 September 2005
Abridged Income statement
Year ended Year ended
30 June 30 June
Change 2005 *2004
% R`000 R`000
Revenue (2,5) 3 102 644 3 181 580
Operating income (7,7) 208 457 225 967
Interest received 14 998 23 953
Interest paid (35 747) (31 998)
Profit before taxation (13,9) 187 708 217 922
Taxation (41 457) (43 490)
Profit after taxation 146 251 174 432
Attributable to:
Equity holders of the parent 109 570 138 644
Minority interest 36 681 35 788
146 251 174 432
Reconciliation of headline
earnings per share (cents)
Attributable earnings per share 182,4 233,3
Adjusted for:
- Goodwill amortised 0,4
- Writedown of investments / loans 0,9
- Impairment of fixed assets 1,4
- Sale of investments 29,4 2,6
Headline earnings per
share (cents) (9,4) 214,1 236,3
Diluted attributable earnings per share 178,5
229,4
Diluted headline
earnings per share 209,5 232,3
Number of shares in issue (`000)
- At end of year (net of
treasury shares) 61 441 59 787
- Weighted average 60 076 59 423
Abridged Statement of changes in equity
Year ended Year ended
30 June 30 June
2005 *2004
R`000 R`000
Equity at beginning of year as previously
reported 681 555 602 351
Change in accounting policy
- operating leases (6 907)
Restated equity at beginning of year 681 555 595 444
Changes in
Share capital 6 8
Share premium 4 801 6 065
Share election reserve 829 -
Non-distributable reserves 45 775 (28 284)
Movement in foreign currency
translation reserve 36 689 (32 837)
Movement in hedging reserve 17 519 (1 951)
Transfer to accumulated profit (7 908) -
Other (525) 6 504
Accumulated profit 74 866 108 322
Earnings attributable to ordinary
shareholders 109 570 138 644
Transfer from non-distributable reserves 7 908 -
Dividend paid (42 612) (30 322)
Equity at end of year 807 832 681 555
Foreign exchange rates
Closing rate Average rate
2005 2004 2005 2004
Euro/Rand 8,03 7,38 7,88 7,92
Euro/Pound 1,49 1,49 1,46 1,46
Euro/Dollar 1,21 1,21 1,27 1,19
Euro/Zloty (Polis 4,05 4,52 4,21 4,65
USD/Rand 6,66 6,09 6,20 6,64
GBP/Rand 11,94 10,98 11,50 11,56
Abridged Balance sheet
30 June 30 June
2005 *2004
R`000 R`000
ASSETS
Property, plant and equipment 949 456 801 973
Trademarks - 85
Goodwill 13 105 12 050
Other investments 51 43
Financial assets 8 053 11 425
Investment tax credit 70,050 -
Deferred taxation 17 352 6 730
Non-current assets 1 058 067 832 306
Inventories 455 155 404 781
Trade and other receivables 420 247 483 339
Financial assets held for trade 53 526 -
Taxation 67 887
Bank and cash balances 201 537 241 134
Current assets 1 130 531 1 130 141
Total assets 2 188 598 1 962 447
EQUITY AND LIABILTIES
Capital and reserves 807 832 681 555
Minority interest 221 166 171 018
Total equity 1 028 998 852 573
Interest-bearing liabilities 195 112 317 347
Financial liabilities 5 382 10 355
Operating lease liabilities 12 123 4 390
Deferred income 70,050 -
Deferred taxation 2 920 4 582
Non-current liabilities 285 587 336 674
Trade and other payables 577 071 587 054
Provisions 95 908 51 494
Interest-bearing liabilities 150 208 97 820
Short-term borrowings 22 255 19 421
Taxation 28 572 17 411
Current liabilities 874 013 773 200
Total liabilities 1 159 600 1 109 873
Total equity and liabilities 2 188 598 1 962 447
Net tangible asset value per share (cents) 1 315 1 120
Abridged Cash flow statement
Year ended Year ended
30 June 30 June
2005 *2004
R`000 R`000
Cash flows from
Operating activities 321 672 307 544
Investing activities (177 669) (189 606)
Financing activities (132 450) 59 886
Movement in cash resources 11 553 177 824
Foreign entities translation adjustment (458) (2 659)
Cash resources at beginning of year 221 713 46 548
Cash resources at end of year 232 808 221 713
Comprising:
Bank and cash balances 255 063 241 134
Short-term borrowings (22 255) (19 421)
232 808 221 713
Free cash flow per share (cents) 239,7 198,5
Segmental Analysis
Revenue
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 1 689 59 - (39) 1 709
SA 434 - - (1) 433
USA 155 - - (5) 150
total 2 278 - - (45) 2 292
Balance of group
SA - 287 439 (137) 589
Europe - 222 - - 222
total - 509 439 (137) 811
TOTAL 2 278 568 439 (182) 3 103
*2004
ATS Group
Europe 1 904 62 - - 1 966
SA - - - - -
USA 97 - - (23) 74
total 2 001 62 - (23) 2 040
Balance of group
SA 437 236 397 (136) 934
Europe - 208 - - 208
total 437 444 397 (136) 1 142
TOTAL 2 438 506 397 (159) 3 182
Segmental Analysis (continued)
Operating income
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 142 5 - 59 206
SA 7 - - - 7
USA (26) - - - (26)
total 123 5 - 59 187
Balance of group
SA - 36 44 (61) 19
Europe - 2 - - 2
total - 38 44 (61) 21
TOTAL 123 43 44 (2) 208
*2004
ATS Group
Europe 218 4 - (23) 199
SA - - - - -
USA (40) - - 5 (35)
total 178 4 - (18) 164
Balance of group
SA 18 26 35 (9) 70
Europe - (8) - - (8)
total 18 18 35 (9) 62
TOTAL 196 22 35 (27) 226
Segmental Analysis (continued)
Capital expenditure
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 126 1 - - 127
SA 17 - - - 17
USA 25 - - - 25
total 168 1 - - 169
Balance of group
SA - - 6 7 13
Europe - - - - -
total - - 6 7 13
TOTAL 168 1 6 7 182
*2004
ATS Group
Europe 177 - - 2 179
SA - - - - -
USA 41 - - - 41
Total 218 - - 2 220
Balance of group
SA 18 4 5 7 34
Europe - 1 - - 1
total 18 5 5 7 35
TOTAL 236 5 5 9 255
Segmental Analysis (continued)
Depreciation
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 55 1 - 7 63
SA 30 - - - 30
USA 16 - - - 16
total 101 1 - 7 109
Balance of group
SA - 2 6 2 10
Europe - 1 - - 1
total - 3 6 2 11
TOTAL 101 4 6 9 120
*2004
ATS Group
Europe 49 1 - 4 54
SA - - - - -
USA 10 - - - 10
total 59 1 - 4 64
Balance of group
SA 30 2 5 - 37
Europe - 1 - - 1
total 30 3 5 - 38
TOTAL 89 4 5 4 102
Segmental Analysis (continued)
Segment assets
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 1 402 35 - (63) 1 374
SA 257 - - - 257
USA 227 - - - 227
total 1 886 35 - (63) 1 858
Balance of group
SA - 93 157 (326) (76)
Europe - 120 - 287 407
total - 213 157 (39) 331
TOTAL 1 886 248 157 (102) 2 189
*2004
ATS Group
Europe 1 112 60 - (439) 733
SA - - - - -
USA 185 - - - 185
total 1 297 60 - (439) 918
Balance of group
SA 423 85 138 (46) 600
Europe - 110 - 331 441
total 423 195 138 285 1 041
TOTAL 1 720 255 138 (154) 1 959
Segmental Analysis (continued)
Segment liabilities
Manu- Whole- Group
facturing sale Retail services Total
2005
ATS Group
Europe 871 53 - (198) 726
SA 123 - - - 123
USA 133 - - - 133
total 1 127 53 - (198) 982
Balance of group
SA - 70 81 (52) 99
Europe - 74 - 5 79
total - 144 81 (47) 178
TOTAL 1 127 197 81 (245) 1 160
*2004
ATS Group
Europe 407 69 - 5 481
SA - - - - -
USA 178 - - - 178
total 585 69 - 5 659
Balance of group
SA 212 73 88 (35) 338
Europe - 89 - 24 113
total 212 162 88 (11) 451
TOTAL 797 231 88 (6) 1 110
*Restated
NOTES
Accounting policies and prior year adjustment
The results for the year have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice. The accounting policies
used are consistent with those used in the financial statements for the year
ended 30 June 2004, except for the following:
The group has adopted IAS 1: Presentation of financial statements.
The group has adopted IFRS 2: Share based payment. Earnings for the year under
review have accordingly been reduced by R 0.8 million.
The group adopted IFRS 3: Business Combinations during the year. The adoption
of this statement has resulted in a change in the accounting policy for
goodwill. In accordance with the provisions of AC 140, the group has ceased the
amortisation of goodwill with effect from 1 July 2004. Goodwill is tested for
impairment on an annual basis and when indications of impairment exist.
With Poland being integrated into the European Union, the tax holiday system
in Poland has been replaced by an investment tax credit from the Polish
government. None of the South African Statements of Generally Accepted
Accounting Practice covers the circumstances surrounding this allowance and, as
such, the group applied the principles of AC 000: Framework for the preparation
and presentation of financial statements. Accordingly, an asset with its
corresponding deferred income liability was raised on the balance sheet for the
present value of the benefits receivable in the future, which will be credited
to the income statement over the expected life of the asset. The investment tax
credit is assessed on an annual basis for its recoverability and impaired when
indications thereof exists.
In compliance with circular 7/2005 issued by The South African Institute
of Chartered Accountants, the group now accounts for its fixed escalation
operating leases on a straight line basis over the period of the lease. The
effect of this is that the rental accounted for in the income statement is the
same over the period of the lease. Previously reported amounts have been
restated from the inception of all current operating leases.
The impact of this adjustment to the current year`s results is a R1.6 million
reduction in profits and a resultant reduction of 2.7 cents in headline earnings
per share.
The application of circular 7/2005 reduced the group`s 2004 reported
attributable earnings by R2.1 million, with headline earnings per share for 2004
decreasing by 1.5 % from 239.9 cents to 236.3 cents. The effect of this
treatment is a R 6.9 million reduction of accumulated profit in the group`s 2004
opening reserves.
DIRECTORS: Eddie Keizan (Executive Chairman), Phillip Vallet* (Deputy Chairman
and chairman of the board), Martin Glatt*, Rainer Hagemann** (German), Josh
Loots, Mike Groves**, Keith Rivers, Siegfried Teichert (German), Brian Joffe*,
Brand Pretorius (Alternate tp Brian Joffe)
*Non-executive **Independent non-executive
COMPANY SECRETARY: Marco Nel (marco@tiw.co.za)
REGISTERED OFFICE: Cnr Old Pretoria Road and K101, Midrand 1685
Telephone (011) 256 4500, Fax (011) 256 4515
TRANSFER SECRETARIES: Computershare Investor Services 2004 (Pty) Limited
Registration number 2004/003647/07, 70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107,
Telephone (011) 370 5000
SPONSOR: Sasfin Corporate Finance, a division of Sasfin Bank Limited
Registration number 1951/002280/06
Date: 07/09/2005 03:00:33 PM
Produced by the JSE SENS Department
