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GND GNDP
GND
Grindrod Limited - 2006 Interim report and dividend announcement
Grindrod Limited
Registration number 1966/009846/06
Incorporated in the Republic of South Africa
Share code: GND & GNDP ISIN: ZAE000072328 & ZAE000071106
2006 INTERIM REPORT AND DIVIDEND ANNOUNCEMENT
15,4% INCREASE IN HEADLINE EARNINGS PER SHARE
40,0% INCREASE IN INTERIM DIVIDEND TO ORDINARY SHAREHOLDERS
CONSOLIDATED INCOME STATEMENT
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2006 2005 Change 2005
R000 R000 % R000
Revenue 4 959 099 2 024 941 145 7 449 145
Trading profit 565 746 504 772 12 1 050 793
Depreciation (73 863) (52 412) (121 705)
Operating profit before
interest and taxation 491 883 452 360 929 088
Interest received 31 861 23 891 53 859
Interest paid (61 596) (72 009) (140 639)
Profit before associate
companies and taxation 462 148 404 242 842 308
Share of profits
of associates 92 548 38 769 88 544
Profit before taxation 554 696 443 011 930 852
Taxation (61 041) (36 102) (65 152)
Profit for the period 493 655 406 909 865 700
Attributable to
Ordinary shareholders 465 022 407 670 14 851 224
Preference shareholders 28 866 - 15 206
Equity holders
of the parent 493 888 407 670 866 430
Minority interest (233) (761) (730)
493 655 406 909 865 700
Reconciliation of
headline earnings
Profit attributable to
ordinary shareholders 465 022 407 670 851 224
Adjusted for: 29 (2 474) (1 799)
Impairment of goodwill 1 176 39 39
Share of associate
company"s impairment
of goodwill - - 1 652
Impairment of
vehicles and equipment - - 707
Net profit on disposal
of investments (621) (115) (115)
Profit on sale of
Property, terminals,
vehicles and equipment (526) (2 398) (4 082)
Headline earnings 465 051 405 196 15 849 425
Number of shares in
issue less treasury
shares (000"s) 450 000 458 200 461 626
Weighted average
number of shares on
which earnings per share
are based (000"s) 455 683 457 700 458 490
Diluted weighted average
number of shares
on which
diluted earnings per
share are based (000"s) 471 296 480 300 476 577
Earnings per share (cents)
Basic 102,0 89,1 185,5
Diluted 98,7 84,9 178,6
Headline earnings
per share (cents)
Basic 102,1 88,5 15 185,3
Diluted 98,7 84,4 178,2
Dividends
per share (cents)
Interim 28,0 20,0 40 20,0
Final - - 32,0
Dividend
cover (times) 3,7 4,4 3,5
Exchange rates (R/US$)
Opening exchange rate 6,31 5,65 5,65
Closing exchange rate 7,17 6,67 6,31
Average exchange rate 6,31 6,22 6,38
DIVISIONAL ANALYSIS OF EARNINGS
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2006 2005 2005
R000 R000 R000
Shipping Services 426 769 379 036 762 519
Trading, Freight and
Financial Services 38 253 28 634 88 705
465 022 407 670 851 224
CONSOLIDATED BALANCE SHEET
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2006 2005 2005
R000 R000 R000
Ships, property,
terminals,
vehicles and equipment 1 958 039 1 984 248 2 069 178
Intangible assets 307 589 115 616 250 525
Investments in associates 103 878 150 069 125 339
Deferred taxation 57 724 41 345 69 330
Financial assets and
other investments 171 106 52 895 53 758
Bank balances and cash 756 699 456 674 655 457
Non-current assets held
for sale 502 339 157 245 184 338
Other current assets 2 033 147 878 636 1 570 692
Total assets 5 890 521 3 836 728 4 978 617
Shareholders" equity 2 639 660 1 228 458 1 937 199
Minority interest 1 770 8 983 6 753
Deferred taxation 27 147 12 903 20 340
Provision for post
retirement medical aid 60 792 57 589 64 944
Interest bearing debt 1 605 081 1 537 006 1 533 900
4 334 450 2 844 939 3 563 136
Other liabilities 1 556 071 991 789 1 415 481
Total funding 5 890 521 3 836 728 4 978 617
Net worth per ordinary
share (cents)
Book value 420 268 314
Market value 1 430 1 080 1 299
Net debt : equity ratio 0,10:1 0,70:1 0,33:1
Capital expenditure 251 551 234 398 648 135
Capital commitments
Authorised by directors
and contracted for 1 782 723 1 197 749 1 194 320
Due within one year 1 022 630 452 659 430 644
Due thereafter 760 093 745 090 763 676
Authorised by directors
not yet contracted for 400 295 - 309 260
CONSOLIDATED CASH FLOW
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2006 2005 2005
R000 R000 R000
Cash generated from
operations 597 153 366 716 1 009 769
Working capital movements (75 756) 103 110 357 708
Net interest paid (33 591) (48 118) (96 056)
Net dividends paid (129 417) (112 281) (201 234)
Taxation paid (58 122) (18 569) (32 251)
Net cash flows from
operating activities 300 267 290 858 1 037 936
Acquisition of ships,
property, terminals,
vehicles and equipment
and investments (482 648) (692 113) (1 704 380)
Proceeds from disposal of
ships, property,
terminals, vehicles and
equipment and investments 220 803 2 981 14 241
Loans repaid by associate
companies 204 1 074 2 378
Net cash flows used in
investing activities (261 641) (688 058) (1 687 761)
Repurchase of ordinary
share capital (183 999) - (2 243)
Proceeds from issue of
ordinary share capital 2 442 2 077 3 454
Proceeds from issue of
preference share capital 262 801 - 487 780
Long-term borrowings raised 49 957 271 729 459 011
Payment of capital
portion of
long-term borrowings (276 749) (91 797) (352 079)
Short-term loans raised 219 538 246 172 129 192
Net cash flows from
financing activities 73 990 428 181 725 115
Net increase in cash and
cash equivalents 112 616 30 981 75 290
Cash and cash equivalents at
beginning of the period 347 571 257 297 257 297
Difference arising on
translation 25 390 40 821 14 984
Cash and cash equivalents
at end of the period 485 577 329 099 347 571
STATEMENT OF CHANGES IN EQUITY
Foreign
Share capital, currency
premium and equity Hedging translation Accumulated
compensation reserve reserve profit
R000 R000 R000 R000
Balance as at 31
December 2004 7 625 (49 725) (91 740) 951 837
Share options exercised 3 454
Shares repurchased and
cancelled (2 243)
Share based payments 1 464
Preference share issue 500 000
Share issue expenses (12 220)
Foreign currency
translation adjustments (8 265)
Financial instrument
hedge (7 721)
Minority interest
acquired
Profit attributable to
shareholders 866 430
Dividends paid (221 697)
Balance as at 31
December 2005 498 080 (57 446) (100 005) 1 596 570
Share options exercised 2 442
Shares repurchased (183 999)
Share based payments 1 859
Preference share issue 266 049
Share issue expenses (3 248)
Financial instrument
hedge 103 976
Foreign currency
translation adjustments 198 973
Minority interest
acquired
Profit attributable to
shareholders 493 888
Dividends paid (177 479)
Balance as at 30 June
2006 581 183 46 530 98 968 1 912 979
Attributable to
equity holders
of Grindrod Minority interest Total
R000 R000 R000
Balance as at 31
December 2004 817 997 8 044 826 041
Share options exercised 3 454 3 454
Shares repurchased and
cancelled (2 243)
(2243)
Share based payments 1 464 1 464
Preference share issue 500 000 500 000
Share issue expenses (12220) (12 220)
Foreign currency
translation adjustments (8 265) 59 (8206)
Financial instrument
hedge (7 721) (7721)
Minority interest
acquired - (620) (620)
Profit attributable to
shareholders 866 430 (730) 865 700
Dividends paid (221 697) (221 697)
Balance as at 31
December 2005 1 937 199 6 753 1 943 952
Share options exercised 2 442 2 442
Shares repurchased (183 999) (183 999)
Share based payments 1 859 1 859
Preference share issue 266 049 266 049
Share issue expenses (3 248) (3 248)
Financial instrument
hedge 103 976 103 976
Foreign currency
translation adjustments 198 973 198 973
Minority interest
acquired - (4 750) (4 750)
Profit attributable to
shareholders 493 888 (233) 493 655
Dividends paid (177 479) (177 479)
Balance as at 30 June
2006 2 639 660 1 770 2 641 430
COMMENTS
The board of directors is pleased to report interim profits of R465 million
for the six months to 30 June 2006. This is a growth of 14,1% over the same
period last year and equates to headline earnings per share of R1,02, a
growth of 15,4%.
Shipping markets performed in line with expectations. The larger fleet,
ship sales, contractual income and the weaker Rand/USD exchange rate
contributed to a 13% earnings growth for Shipping Services. Trading,
Freight and Financial Services had mixed results but still posted a 34%
growth in earnings.
Shipping Services
The group owns, charters and operates a fleet of handysize, panamax and
capesize bulk carriers through its subsidiary, Island View Shipping. The
product tanker, chemical tanker and containership fleet is owned, chartered
and operated by Unicorn Shipping.
The usual northern hemisphere summer market weakness ended earlier than
anticipated with markets improving substantially over recent weeks. The
outlook for the second half of the year is favourable due to stronger than
anticipated demand for both dry bulk and petroleum products.
Shipping Services have had a busy period in respect of ship purchase and
sale activities as summarised in the table below:
Ships ordered Ships delivered
Option to be exercised on 2 x long-term chartered
2 x 14 000 dwt 25 000 dwt
chemical tankers chemical tankers
2 x 16 500 dwt
product/chemical tankers
2 x 4 250 dwt
bunker barges
Ships sold Contracted sales
2 x handysize 2 x 12 800 dwt
bulk carrier (50%) product/chemical tankers
45 000 dwt 2 x 14 000 dwt
product tanker (50%) chemical tankers
1 x long-term chartered 2 x 40 000 dwt
handysize bulk carrier product tankers
(50%) redelivered
1 x 636 teu containership
The contracted sales will become effective over the next year. Trading
profits on these sales will only be recognised on the effective date.
The group continues its strategy to ensure sustainable earnings through
having contracted revenue and appropriate ship sales to lock in profits in
high markets. 66% of the fleet is contracted for the remainder of 2006 and
57% for 2007.
Trading, Freight and Financial Services
The group"s strategy is to increase the profit contribution from freight
operations through the acquisition or development of complementary
businesses aimed at providing a full range of transport, warehousing and
logistics services to our customers.
The bulk product trading operations continue to be developed. Results were
disappointing due to low trading margins in soft commodities (e.g. wheat,
maize, soya) during the period. These markets have, however, normalised and
the outlook for the second half of 2006 is for improved financial results.
Grindrod ships agencies continued to perform well as did Ocean Africa
Container Lines, the group"s seafreight logistics partnership with
Safmarine.
The property and asset management operations held through the group"s 50%
interest in Marriott were disposed of during the period. The group has
agreed to acquire the other 50% share in Marriott Bank, subject to SA
Reserve Bank approval.
The landfreight logistics operations produced satisfactory results for the
period but are still bearing the cost of infrastructure expansion in the
operating profits of certain entities. The outlook for the second half of
the year and for 2007 is favourable.
The following acquisitions were made during the period:
100% of Cross Country Containers (Pty) Limited - Container Logistics
50% interest in LCL Grindrod - Perishable Cargo Logistics
12,4% interest in Maputo Port Development Company
The remaining 50% interest in Auto Carrier Transport (Pty) Limited
The remaining 25% interest in Grindrod Perishable Cargo Agents (Pty)
Limited
100% of Transsure Freight - Distribution
Capital expenditure and commitments
Capital expenditure and commitments of the group are:
Description Capital expenditure Capital commitments
6 months to 6 months to
R000 June 2006 December 2006 2007 Thereafter
Ships 128 844 377 685 791 596 696 504
Property, terminals,
vehicles and equipment 22 707 280 785 36 448 -
251 551 658 470 828 044 696 504
Investment in new
businesses 231 097 283 875 - -
Total 482 648 942 345 828 044 696 504
The capital commitments on owned ships which will deliver over the next
three years are made up as follows:
50% interest in handysize bulk carrier
4 x 40 000 dwt product tankers (one of which is contracted to be sold)
4 x 16 500 dwt product/chemical tankers
2 x 14 000 dwt chemical tankers (both contracted to be sold)
4 x 12 800 dwt product/chemical tankers (two of which are contracted to
be sold)
2 x 4 250 dwt bunker barges
In addition, two product tankers, two chemical tankers, three handysize and
a capesize bulk carrier are still to deliver on long-term charter.
Capital commitments of property, terminals, vehicles and equipment include
the expansion of the Auto Carrier Transport fleet, expansion of the Kusasa
Bulk terminal facilities and the acquisition of ten locomotives.
Commitments under new businesses include the cost of restructuring the
shareholders" agreement of Ocean Africa Container Lines and additional
investment in Marriott Bank.
Capital commitments will be funded by cash reserves, cash generated from
operations, preference share capital and bank financing facilities.
Group borrowings and cash flow
Investment of R483 million was made in ship acquisitions and landfreight
expansion and R183 million was utilised to repurchase shares. Due to strong
operating cash flows and the further issue of R263 million in preference
shares, net borrowings reduced from R878 million at 31 December 2005 to
R848 million despite the substantial capital expenditure. The group"s net
debt/equity ratio has reduced from 33% to 10% as a result of good earnings,
the preference share issue discussed under Equity and contracted ship
sales.
The group continues to seek investment expansion opportunities.
Equity
Shareholders" equity increased from R1 937 million at 31 December 2005 to
R2 640 million due to the good earnings, the issue of preference share
capital and the effect of the weaker Rand/USD exchange rate.
During the period, the group repurchased 15,6 million ordinary shares at an
average price of R11,75. The treasury shares are held by a subsidiary,
Grindrod (South Africa) (Pty) Limited. The net asset value of the group, at
market value of assets, is estimated to be R14,30 per ordinary share.
Grindrod shareholders will be requested to approve the creation of an
additional 12 500 000 preference shares, and to place 7 500 000 of these
shares under the control of the board of directors at a general meeting to
be held on 15 August 2006.
Accounting policies and presentation
The report has been prepared in accordance with International Financial
Reporting Standards (IFRS).
Dividends to shareholders
An interim dividend of 28 cents per ordinary share (2005: 20 cents) has
been approved by the directors. The 40% increase over the prior year is
partly to reduce the disparity between interim and final dividends.
Dividends on preference shares amounting to 418,6 cents per share were
declared on 24 May 2006 and have been provided for in the group"s results.
Prospects
The group is confident of achieving earnings growth for the 2006 financial
year.
For and on behalf of the board
W M Grindrod I A J Clark
Chairman Chief Executive Officer
INTERIM DIVIDENDS TO SHAREHOLDERS
Dividend to preference shareholders
Notice is hereby given that an interim preference dividend of 418,6 cents
per share has been declared payable to preference shareholders in
accordance with the undermentioned timetable.
Dividend to ordinary shareholders
Notice is hereby given that an interim dividend, of 28 cents per share
(2005: 20 cents) has been declared payable to ordinary shareholders in
accordance with the undermentioned timetable.
Timetable
Last day to trade cum-dividend Friday, 1 September 2006
Trading ex-dividend commences Monday, 4 September 2006
Record date Friday, 8 September 2006
Dividend payment date Monday, 11 September 2006
No dematerialisation or rematerialisation of shares will be allowed for the
period from 4 September 2006 to 8 September 2006, both days inclusive.
The dividends are declared in the currency of the Republic of South Africa.
By order of the board
C A S Robertson
Secretary 15 August 2006
Directors
W M Grindrod* (Chairman), D R D White* (Deputy Chairman), I A J Clark
(Group CEO), A K Olivier (CEO Designate), H Adams*
Dr S M Gounden*, I M Groves*, J G Jones, T J T McClure, N E Mtshotshisa*,
R A Norton*, D A Rennie, A F Stewart
L R Stuart-Hill, R J H Whitley* *Non-executive
Registered office Postal address
Quadrant House PO Box 1
115 Victoria Embankment Durban
Durban 4001 4000
Transfer secretaries Postal address
Computershare Investor Services 2004 (Pty) Limited PO Box 61051
70 Marshall Street Marshalltown
Johannesburg 2001 2107
Registration number 1966/009846/06
Incorporated in the Republic of South Africa
Share code: GND & GNDP ISIN: ZAE000072328 & ZAE000071106
Date: 15/08/2006 04:56:11 PM Produced by the JSE SENS Department
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