| Thu 30 Mar 2006, 17:10 | | Pasdec - Reviewed consolidated results for the ye |
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PSC
PSC
Pasdec - Reviewed consolidated results for the year ended 31 December 2005 and
renewal of cautionary announcement
PASDEC RESOURCES SA LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1987/004942/06)
Share code: PSC & ISIN code: ZAE000023552
("Pasdec")
Reviewed consolidated results for the year ended 31 December 2005 and renewal of
cautionary announcement
Consolidated condensed income statement
Audited
Reviewed IFRS
restated
year ended year ended
31 December 31 December
2005 2004
Notes R"000 R"000
CONTINUING OPERATIONS
Revenue 125,608 118,128
Operating profit before 14,365 17,458
exceptional items
Exceptional items 1 (3,645) (2,033)
Profit before interest and 10,720 15,425
taxation
Finance income 3 5,140 237
Finance charges (2,112) (2,279)
Profit before taxation 13,748 13,383
Taxation charge (4,479) (3,495)
Profit for the year from 9,269 9,888
continuing operations
DISCONTINUED OPERATIONS
Revenue 94,929 110,181
Operating loss before exceptional (27,594) (23,175)
items and impairment
Exceptional items 1 (13,730) (53,301)
Impairment 2 (30,182) -
Loss before interest and taxation (71,506) (76,476)
Finance income 4 -
Finance charges (5,677) (8,664)
Loss before taxation (77,179) (85,140)
Taxation charge - impairment of (5,501) -
deferred tax asset
Loss for the year from (82,680) (85,140)
discontinued operations
Loss for the year attributable to (73,411) (75,252)
ordinary shareholders
Loss per share (cents) (131.2) (134.5)
Earnings per share from 16.6 17.7
continuing operations
(cents)
Loss per share from (147.8) (152.2)
discontinued operations
(cents)
Dividend per share (cents) - 2.5
Number of shares in issue (`000) 55,964 55,964
Note: Diluted (loss)/earnings per
share are the same as
(loss)/earnings per share
reflected above and below.
Notes
Audited
Reviewed IFRS restated
year ended year ended
31 December 31 December
2005 2004
R"000 R"000
Note 1 - Exceptional items
Continuing operations
Legal costs and impairment of 3,645 2,681
claims being pursued
Surplus on disposal of property - (648)
and closure of foreign
subsidiary
3,645 2,033
Discontinued operations
Write down of inventories to net 12,547 46,834
realisable value
Retrenchments 1,183 3,307
Provision for disputed indirect - 3,160
taxes
13,730 53,301
17,375 55,334
Note 2 - Impairment
Property, plant and equipment 4,509 -
Inventory 20,141 -
Goodwill 5,532 -
30,182 -
Impairment of assets to fair value less
cost to sell upon reclassification as
discontinued operations.
Note 3 - Finance income
The majority shareholder"s loan account
was previously subject to an interest
charge of 7.5% per annum. The majority
shareholder has waived its claim for such
interest effective from 1 January 2004.
This has resulted in interest accrued in
the prior year amounting to R4 559 645
being credited to finance income from
continuing operations during the year.
Note 4 - Reconciliation of headline
earnings/(loss) and headline
earnings/(loss) per share
Earnings attributable to ordinary 9,269 9,888
shareholders - continuing operations
Surplus on disposal of property - (648)
and closure of foreign
subsidiary
Surplus on disposal of plant (50) -
and equipment
Headline earnings attributable to ordinary
shareholders
- continuing operations 9,219 9,240
Loss attributable to ordinary shareholders (82,680) (85,140)
- discontinued operations
Surplus on disposal of plant (631) -
and equipment
Impairment of goodwill and 10,141 -
property, plant and equipment
Headline loss attributable to ordinary (73,170) (85,140)
shareholders - discontinued operations
Net headline loss for the year (63,951) (75,900)
attributable to ordinary shareholders
Headline loss per share (cents) (114.3) (135.6)
Headline earnings per share 16.5 16.5
(cents) - continuing operations
Headline loss per share (cents) - (130.8) (152.1)
discontinued operations
Consolidated condensed cash flow statement
Audited
Reviewed IFRS restated
year year
ended ended
31 December 31 December
2005 2004
CONTINUING OPERATIONS R"000 R"000
Cash flows from operating activities
Cash generated by operations 14,318 27,207
Finance income 5,140 237
Finance charges (2,112) (2,279)
Dividend paid - (1,397)
Taxation paid - (175)
Net cash generated from operating 17,346 23,593
activities
Cash flows from investing activities
Proceeds from disposal of property, plant 50 -
and equipment
Acquisition of property, plant and (8,405) (4,365)
equipment
Net cash utilised by investing activities (8,355) (4,365)
Cash flows from financing activities
(Decrease)/increase in shareholders" loans (6,808) 4,193
Increase in long-term debt 3,430 1,665
Increase in short-term loans 893 484
Net cash (utilised)/generated by financing (2,485) 6,342
activities
DISCONTINUED OPERATIONS
Cash flows from operating activities (38,331) (17,761)
Cash flows from investing activities (3,570) (2,072)
Cash flows from financing activities 1,746 (168)
(40,155) (20,001)
Net (decrease)/increase in cash and cash (33,649) 5,569
equivalents
Net cash and cash equivalents at beginning (17,013) (22,582)
of year
Net cash and cash equivalents at end of (50,662) (17,013)
year
Notes to the condensed consolidated financial statements
Basis of preparation
The condensed consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), IAS34 - Interim
Financial Reporting and the JSE listing requirements.
Adoption of International Financial Reporting Standards
The group has elected to adopt International Financial Reporting Standards
(IFRS) for the year ending 31 December 2005.
The financial statements for the year ended 31 December 2005 are the group"s
first consolidated IFRS - compliant financial statements and hence IFRS 1 -
first time adoption of IFRS has been applied in preparing the financial
statements for the year ended 31 December 2005, the comparative information
presented in this report for the year ended 31 December 2004 and in the
preparation of the IFRS balance sheet at 1 January 2004 (the group"s date of
transition).
The effect of the transition to IFRS has resulted in a change in the value of
goodwill as a result of a write back of the amortisation charge amounting to R
343 000 for the year ended 31 December 2004.
Significant changes to the Group"s accounting policies as a result of the
adoption of IFRS Changes in accounting policies
All business combinations are accounted for by applying the "purchase method".
Goodwill represents amounts arising on acquisition of subsidiaries, associates
and joint ventures. In respect of business combinations that have occurred since
the IFRS transition date, 1 January 2004, goodwill represents the difference
between the cost of the acquisition and the fair value of the net identifiable
assets and contingent liabilities acquired.
The Group made an election in terms of IFRS 1 that in respect of acquisitions
prior to this date, goodwill is included on the basis of its deemed cost, which
represents the amount recorded under SA GAAP. The classification and accounting
treatment of business combinations that occurred prior to 1 January 2004 has not
been reconsidered in preparing the Group"s opening IFRS balance sheet at 1
January 2004.
Goodwill is stated at cost less accumulated impairment losses. Goodwill is
allocated to cash-generating units and is no longer amortised but tested
annually for impairment. Negative goodwill arising on an acquisition is
recognised directly in the income statement.
Previously goodwill arising on each acquisition was amortised over its estimated
useful life on a straight line basis and subjected to annual impairment testing.
Contingent liabilities
The group is defending a claim by a former director for various amounts, the
most significant of which is an amount of R25.5 million, against Pasdec
Resources SA Limited and Pasdec Automotive Technologies. The same former
director is pursuing a claim against the group for R0.8 million plus costs and
interest in the Labour Court of South Africa. The directors consider the claims
to have no substance. However, the ultimate outcome of the matter cannot
presently be determined and no provision for any liability that may result has
been made in the financial statements.
A group company has been incorrectly assessed for indirect taxes amounting to
R0.9 million. The incorrect basis of assessment has been established and
communicated to the tax authorities and the directors are confident the matter
will be resolved amicably.
Review report of the independent auditors
KPMG Inc."s unmodified review opinion, with emphasis of matter relating to the
going concern assumptions referred to in the directors" commentary, on the
condensed consolidated financial statements contained in this report is
available for inspection at the company"s registered office.
Consolidated condensed balance sheet
Discontinued
Operations - Audited
Group Continuing assets/ IFRS
liabilities
Reviewed Operations held for sale restated
year ended year ended year ended year ended
31 December 31 31 December 31 December
December
2005 2005 2005 2004
R"000 R"000 R"000 R"000
ASSETS
Non-current
assets
Property, plant 17,427 17,427 - 29,434
and equipment
Intangibles - - - 5,532
Deferred taxation 27,784 27,784 - 37,764
45,211 45,211 - 72,730
Current assets
Inventories 42,765 31,765 11,000 68,504
Trade and other 25,385 11,897 13,488 27,156
receivables
Cash and cash 440 378 62 681
equivalents
Non-current
assets held for
sale - property,
plant and 15,754 - 15,754 -
equipment
84,344 44,040 40,304 96,341
Total assets 129,555 169,071
EQUITY AND
LIABILITIES
Capital and
reserves
Share capital 37,642 37,642
Share premium 80,982 80,982
Accumulated loss (179,324) (105,913)
Non-distributable 9,593 9,593
reserve
Total (51,107) 22,304
shareholders"
equity
Non-current
liabilities
Subordinated 62,007 62,007 - 68,815
shareholder"s
loans
10,900 91,119
Long-term 6,975 6,975 - 5,450
interest bearing
debt
Current
liabilities
Trade and other 53,920 26,502 27,418 52,693
payables
Current portion 6,658 2,051 4,607 2,115
of long-term
interest bearing
debt
Bank borrowings 51,102 15,481 35,621 17,694
111,680 44,034 67,646 72,502
Total equity and 129,555 169,071
liabilities
Segmental analysis
Group Continuing Discontinued Audited
Reviewed Operations Operations IFRS
restated*
year ended year ended year ended year ended
31 December 31 December 31 December 31 December
2005 2005 2005 2004
R"000 R"000 R"000 R"000
Revenue
Automotive 125,608 125,608 - 118,128
Electrical motors 94,929 - 94,929 110,181
Corporate - - - -
220,537 125,608 94,929 228,309
Operating
profit/(loss)
before
exceptional items
and impairment
Automotive 17,796 17,796 - 20,096
Electrical motors (27,594) - (27,594) (23,175)
Corporate (3,431) (3,431) - (2,638)
(13,229) 14,365 (27,594) (5,717)
Profit/(loss)
before interest
and taxation
Automotive 14,151 14,151 - 17,938
Electrical motors (71,506) - (71,506) (76,476)
Corporate (3,431) (3,431) - (2,513)
(60,786) 10,720 (71,506) (61,051)
* Comparative segmental analysis has been restated to allocate owner occupied
properties from corporate to the operational segments to which they relate to.
Consolidated condensed statement of changes in equity
Non- Accum-
Share Share Distri- ulated
butable
Capital Premium reserves loss Total
Balance at 1 37,642 80,982 9,092 (29,264) 98,452
January 2004
Movement in
foreign currency
translation 501 501
reserve
Loss for the year (75,252)
(75,252)
Dividend declared (1,397) (1,397)
Balance at 1 37,642 80,982 9,593 22,304
January 2005 (105,913)
Loss for the year - - - (73,411)
(73,411)
Balance at 31 37,642 80,982 9,593
December 2005 (179,324) (51,107)
Commentary on the reviewed consolidated results and renewal of cautionary
announcement
Group overview
The group"s principal business activities are the manufacture of electric wiring
harnesses, manufacture and distribution of specialised industrial electric
motors and flameproof electric motors for the mining industry.
The electric harness business delivered satisfactory results despite a temporary
slow-down in sales volumes during the second half of 2005. The restructuring
programme in the electrical motor divisions was inadequate to combat the ever
increasing competition from imported electric motors from China at extremely low
prices, exacerbated by the continued strength of the Rand, resulting in
significant price deflation, which has continued to negatively impact operating
results in this segment.
Group turnover for the year amounted to R220.5 million, compared with R228.3
million in the prior year, representing a decrease of 3.4% mainly due to lower
sales in the electrical motor divisions.
Operating loss before exceptional items and impairment adjustments for the year
amounted to R13.2 million (2004: R5.7 million). The loss for the year was R73.4
million (2004: R75.3 million).
Review of operations
Automotive - Pasdec Automotive Technologies
Turnover increased by only 6% following a temporary decrease in volumes in the
third quarter coupled with an under-recovery of fixed overheads in this period
contributing to reduced operating profits for the year of R17.8 million (2004:
R20.1 million).
The capital expenditure program was completed during the last quarter of 2005
resulting in increased production capacity of approximately 22%. The increased
capacity will allow the operation to grow in line with the export and local
initiatives scheduled for the first and third quarters respectively.
The buoyant conditions prevailing in the local automotive industry remains sound
notwithstanding indications that the growth may stabilize through this calendar
year. In view of this more focus is currently being emphasized on direct export
of electrical wiring harnesses. The company has managed to secure its first
export customer, based in Europe which will help to leverage its reference base
for future potential exports.
The Directors are currently seeking a prospective Black Economic Empowerment
(BEE) majority equity partner, which was the subject of the Cautionary
Announcement issued during February 2006. The introduction of an appropriate BEE
partner in the business will enhance the strategic position of the business in
the Automotive component sector. The funds generated from the disposal of the
equity interests will be utilised by Pasdec Resources SA Ltd to partially settle
liabilities of the Group as referred to under the going concern principal
assumptions below. Accordingly, Pasdec shareholders are advised to continue
exercising caution when dealing in the company"s securities until a full
announcement is made.
Electrical Motors - Femco Group
Turnover reduced to R94.9 million (2004: R110.2 million) and the operating loss
before exceptional items and impairment adjustments was R27.6 million (2004:
R23.2 million), due to lower turnover and continued pressure on margins.
Exceptional items included a write down of inventory due to lower prices in the
market and continued retrenchment costs in the year.
Continued imports of electric motors by local users and distributors, placed
tremendous pressure on the operation to reduce local manufacturing costs and
selling prices to retain existing market share. The current local manufacturing
costs could not compete with low cost base countries and subsidised imported
electrical motors, exacerbated by the continued strength of the Rand.
The contemplated restructuring plan was not fully implemented by management due
to the depressed outlook for the "specialised motor market" sector. The lack of
viability of the business in its current scale or form led the Board to resolve
in December 2005 to dispose of and/or close the electrical motor businesses
which includes Femco (Pty) Ltd and Femco Mining Motors (Pty) Ltd in accordance
with a formalised plan.
The Directors have actively sought buyers for the businesses, and are in receipt
of an offer for Femco Mining division. The lack of acceptable offers for the
Femco Motors business has led to a structured process of disposal of the assets
of the business on a piecemeal basis in accordance with the approved business
plan. In terms of the structured plan the disposal of assets could take until
December 2006 to complete, and in this process the Directors intend to settle
all liabilities of the businesses including retrenchment and closure costs to be
incurred.
In accordance with the disposal and closure plan the assets of the electrical
motor businesses were impaired to the lower of cost and estimated realisable
fair values less cost to sell at year end and the businesses have been
classified as discontinued operations of the group. The estimates and associated
assumptions were based on historical experience and various other factors that
were considered reasonable under the circumstances. The values realised upon
ultimate disposal may differ to those estimated and considered reasonable by the
Directors.
Going concern
The group incurred a loss for the year ended 31 December 2005 of R73.4 million
(2004: R75.3 million) and as of that date, its total liabilities exceeded its
total assets by R51.1 million (2004: Assets exceed liabilities by R22.3
million).
The ability of the Group to continue as a going concern, taking into account the
disposal and closure plans outlined above, and its ability to realise its assets
and discharge its liabilities in the ordinary course of business is dependent on
the following principal assumptions:
* The realisation of the assets of the electrical motors businesses at their
estimated fair values reflected in the financial statements in accordance with
the disposal and closure plan, principally inventories and properties.
* The continued agreed support of the plan by major creditors, including the
Group"s bankers.
* The continued support of the majority shareholder in the form of subordinated
interest-free shareholder"s loans and partial guarantees provided on the Group"s
banking facilities.
* The funds generated from the contemplated introduction of the BEE partner in
the Pasdec Automotive Technology business.
* The contingent liabilities referred in the notes not giving rise to subsequent
liabilities.
The Directors believe that in the current circumstances these assumptions are
valid and achievable. Accordingly, the financial statements are prepared on the
basis of accounting policies applicable to a going concern. In the event of one
or more of these principal assumptions not being achieved or sustained this
would give rise to a material uncertainty which may cast significant doubt on
the ability of the group to continue as a going concern and, therefore its
ability to realise its assets and discharge its liabilities in the ordinary
course of business.
Outlook
The introduction of a BEE partner to the automotive business, the capacity
enhancement program and the prospects for the local automotive sector coupled
with export initiative drives should ensure the continued success of the
automotive business. The Directors are committed to successfully completing the
closure and disposal plan of the electrical motors businesses to ensure that all
liabilities of the Group are settled in an orderly manner.
After the successful introduction of a BEE partner and the closure/disposal of
the electrical motor businesses the restructured Group"s activities will be
limited to a partial investment in the Automotive business.
For and behalf of the Board
P Pather (Chief Executive Officer)
30 March 2006
Registered office:
33 Piet Pretorius Street, Brits 0250
(P.O.Box 1575, Brits 0250)
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Ltd, 70 Marshall Street, Johannesburg
2001
Directors:
Non-executive: Dato" Rahim Mohd Ali* (Chairman), S.H.Goh*, M.Mohamad*
(*Malaysian)
Executive: P.Pather (Chief Executive Officer)
Date: 30/03/2006 05:10:16 PM Produced by the JSE SENS Department
