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CNL
CNL
Control - Unaudited interim results for the six months ended 30 June 2006
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1964/003987/06
Share code: CNL ISIN: ZAE000001665
Unaudited interim results for the six months ended 30 June 2006
IFRS Normalised
Revenue up 90% 90%
Profit before tax up 140% 70%
COMMENTARY
Overview
The directors are pleased to report that good progress is being made with the
Group"s stated strategic objectives of growing the business substantially,
globalising the business and reducing dependence on any one area of operation.
The results for the six months ended 30 June 2006 show strong underlying
growth in revenue, operating profit and profit before tax.
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS). It should be noted that due to the significant
acquisitions completed during the past nine months and the impact of IFRS,
comparisons with prior year figures are not necessarily meaningful.
Results
In accordance with IFRS
Revenue increased by 90% from R176.0 million in the same period last year to
R333.6 million and profit before tax by 140% to R37.9 million from R15.8
million.
The Group"s effective rate of tax increased from 8% to 22% in the period and
profit after tax increased 105% from R14.5 million to R29.6 million.
Earnings per share increased 49% from 22.0 cents per share to 32.8 cents per
share. Headline earnings per share decreased 22% from 22.2 cents per share to
17.4 cents per share. The major reason for this disparity is the IFRS
requirement with respect to accounting for negative goodwill.
Normalised results
The core metrics the Group uses in managing its businesses are, turnover,
operating profit and profit after interest, but before IFRS adjustments and
tax. It is the opinion of the directors that certain of the requirements of
IFRS distort the results from a business perspective. A normalised income
statement for the six months ended 30 June 2006 is therefore presented
separately.
On a normalised basis, operating profit increased by 85% from R18.9 million to
R35.1 million and normalised profit before tax increased 70% from
R16.2 million to R27.6 million. This relates to a 24% increase in normalised
earnings per share before tax from 24.7 cents to 30.6 cents.
General
In February 2006, 16 667 000 shares were issued at R6.00 per share and in
March 2006 a loan to the value of R50 million was raised to fund the
acquisitions. The Group"s cash flow remained strong and enabled it to fund
working capital growth requirements and service its debt repayment
obligations. R6.2 million of principal debt was repaid during the period under
review.
In June 2006, 8 148 672 treasury shares were cancelled and delisted.
Business overview
Good progress is being made with the integration of the recent acquisitions.
The full effect of this will be felt in 2007.
The Fleet Management business performed well both internationally and locally.
Tripmaster Corporation (USA), acquired with effect from 1 March 2006,
performed better than expected. The Group expects the Fleet Management
business to continue to show strong growth and is actively seeking further
opportunities to expand its international operations.
The Automotive Aftermarket operations were consolidated into the premises
occupied by Dana South Africa, during the first half of the year. Despite the
disruptions a strong performance was recorded. The acquisition of Gabriel
should be completed in the last quarter of the year and this will then add
significantly to the growth of the Automotive Aftermarket business in 2007.
During the past 18 months the Group has been repositioning its OEM businesses
to meet the major changes taking place in the automotive industry in South
Africa. The establishment of a UK based office, the acquisition of the
business of Sagercy and an increased investment in development resources is
starting to have a positive effect.
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.
Prospects for the remainder of 2006 are good.
On behalf of the board of directors
JPS O"Leary R Friedman
Chairman Managing Director 21 August 2006
Declaration of interim dividend
Notice is hereby given that the board has declared an interim dividend of
3.5 cents per share in respect of the six months ended 30 June 2006.
In terms of the requirements of STRATE:
Last day to trade cum dividend Friday, 8 September 2006
Shares trade ex dividend Monday, 11 September 2006
Record date Friday, 15 September 2006
Payment date Monday, 18 September 2006
Share certificates may not be dematerialised or rematerialised between Monday,
11 September 2006 and Friday, 15 September 2006, both days inclusive.
Normalised consolidated income statements (Unaudited)
for the six months ended 30 June 2006
6 months 6 months Variance Year
ended ended ended
30/06/06 30/06/05 31/12/05
R 000 R 000 % R 000
Revenue 333 595 175 959 89.6 395 060
Cost of sales (203 874) (91 852) 122.0 (233 168)
Normalised gross profit 129 721 84 107 54.2 161 892
Other operating income 7 282 2 886 152.3 11 693
Interest income 80 4 845
Administrative expenses (56 698) (38 322) 48.0 (79 252)
Marketing and
selling expenses (17 872) (4 346) 311.2 (18 704)
Other operating expenses (30 123) (25 385) 18.7 (43 955)
Profit from joint
ventures before tax 2 710 - 3 938
Normalised operating profit 35 100 18 944 85.3 36 457
Loss from discontinuing
operations - (8) -
Finance costs (7 462) (2 708) 175.5 (7 357)
Normalised profit before tax 27 638 16 228 70.3 29 100
Weighted average number
of shares in issue (000) 90 190 65 780 37.1 69 687
Normalised earnings per
share before tax (cents) 30.64 24.67 24.2 41.76
Reconciliation between profit
before tax and normalised
profit before tax
Profit before tax 37 864 15 792 25 455
IFRS 3: Business Combinations
- Negative goodwill (14 213) - (3 098)
IFRS 3: Business Combinations
- Amortisation of intangible
assets created on acquisition 326 - 215
IFRS 2: Share-based Payment
- Share option expense 2 661 436 3 751
IAS 39: (Amendment):
The Fair Value Option
- Impairment of "available-for
-sale" financial asset - - 1 604
Tax on profit from
joint venture 1 000 - 1 173
Normalised profit
before tax 27 638 16 228 29 100
Consolidated income statements
for the six months ended 30 June 2006
6 months 6 months Variance Year
ended ended ended
30/06/06 30/06/05 31/12/05
Unaudited Unaudited Audited
R 000 R 000 % R 000
Revenue 333 595 175 959 89.6 395 060
Cost of sales (204 099) (91 852) (233 168)
Gross profit 129 496 84 107 54.0 161 892
Other operating income 21 495 2 886 14 791
Interest income 80 4 845
Administrative expenses (59 425) (38 758) (83 036)
Marketing and
selling expenses (17 907) (4 346) (18 886)
Other operating expenses (30 123) (25 385) (45 559)
Operating profit 43 616 18 508 135.7 30 047
Loss from discontinuing
operations - (8) -
Finance costs (7 462) (2 708) (7 357)
Net profit from joint ventures 1 710 - 2 765
Profit before tax 37 864 15 792 139.8 25 455
Tax (8 247) (1 319) (4 737)
Net profit 29 617 14 473 104.6 20 718
Additional information
Total shares
in issue (excluding
treasury shares) (000) 95 623 66 600 78 956
Weighted average number of
shares in issue (000) 90 190 65 780 69 687
Adjustment for
share options (000) 6 375 5 617 5 173
Weighted average number
of shares
for diluted earnings
per share (000) 96 565 71 397 74 860
EPS (cents) 32.84 22.00 49.3 29.73
Headline earnings (R000) 15 703 14 615 7.4 19 740
Headline EPS (cents) 17.41 22.22 (21.6) 28.34
Diluted EPS (cents) 30.67 20.27 51.3 27.68
Diluted Headline EPS (cents) 16.26 20.47 (20.6) 26.37
Dividend per share (cents) 4.00 3.00 33.3 6.00
Reconciliation of EPS to
Headline EPS (cents)
EPS 32.84 22.00 29.73
Loss/(profit) on disposal
of property,
plant and equipment 0.05 0.22 (0.09)
Profit on disposal of
joint ventures - - (0.31)
Negative goodwill on
acquisitions (15.76) - (4.45)
Impairment of
"available-for-sale"
financial asset - - 2.31
Impairment of
development cost 0.28 - 1.15
Headline EPS 17.41 22.22 28.34
Statements of changes in equity*
for the six months ended 30 June 2006
Share capital Fair value
Share premium and other Retained
Treasury shares reserves earnings Total
R 000 R 000 R 000 R 000
Balance at 1 January 2005 25 146 2 349 59 328 86 823
As previously reported 25 146 3 953 57 724 86 823
Change in accounting policy (1 604) 1 604 -
Net profit not
recognised in the
income statement:
Cash flow hedges:
net fair value
gains, net of tax 452 452
Net profit 14 473 14 473
Movement of treasury shares 1 833 (599) 1 234
Employee share option scheme:
- value of
services provided 436 436
Dividends paid (1 971) (1 971)
Balance at 30 June 2005 26 979 3 237 71 231 101 447
Net loss not
recognised in the
income statement:
Cash flow hedges:
net fair value
losses, net of tax (592) (592)
Net profit 6 245 6 245
Impairment of
"available-for-sale"
financial asset 1 604 1 604
Movement of treasury shares 133 (36) 97
Employee share option scheme:
- value of services provided 3 315 3 315
Shares issued 54 908 54 908
Dividends paid (1 997) (1 997)
Balance at 31 December 2005 82 020 7 564 75 443 165 027
Net profit not
recognised in the
income statement: 3 887 3 887
Cash flow hedges:
net fair value
gains, net of tax 1 162 1 162
Creation of currency
translation reserve 2 725 2 725
Net profit 29 617 29 617
Cancellation of treasury shares (97) (97)
Employee share option scheme:
- value of services provided 2 661 2 661
Shares issued 99 947 99 947
Dividends paid (3 826) (3 826)
Balance at 30 June 2006 181 870 14 112 101 234 297 216
* 31 December 2005 audited, 30 June 2006 unaudited
Consolidated balance sheets
at 30 June 2006
30/06/06 30/06/05 31/12/05
Unaudited Unaudited Audited
R 000 R 000 R 000
ASSETS
Non-current assets 348 472 131 688 193 179
Property, plant and equipment 136 919 89 699 124 831
Intangible assets 202 493 31 469 57 727
Investment in joint ventures 1 871 - 2 765
Financial assets 3 208 3 208 3 208
Non-current receivables - 383 -
Deferred tax assets 3 981 6 929 4 648
Current assets 269 518 102 133 175 792
Inventories 98 621 38 860 84 846
Trade and other receivables 159 407 61 852 90 702
South African Revenue Service 612 1 183 -
Cash and cash equivalents 10 878 238 244
Total assets 617 990 233 821 368 971
EQUITY AND LIABILITIES
Capital and reserves 297 216 101 447 165 027
Non-current liabilities 185 001 37 480 111 853
Borrowings 140 605 28 724 96 065
Retirement benefit obligations 600 600 600
Deferred tax liabilities 40 920 8 156 14 356
Provisions 2 876 - 832
Current liabilities 135 773 94 894 92 091
Trade and other payables, provisions
and current borrowings 133 525 81 973 90 394
South African Revenue Service 1 057 3 291 213
Bank overdraft 1 191 9 630 1 484
Total equity and liabilities 617 990 233 821 368 971
Net asset value per share (cents) 311 152 209
Consolidated cash flow statements
for the six months ended 30 June 2006
6 months 6 months Year
ended ended ended
30/06/06 30/06/05 31/12/05
Unaudited Unaudited Audited
R 000 R 000 R 000
Cash flows from operating
activities
Operating profit before working
capital changes 42 080 26 331 49 499
Working capital changes (22 408) (8 569) (42 296)
Cash generated from operations 19 672 17 762 7 203
Interest received 80 4 845
Finance costs (7 462) (2 708) (7 357)
Dividends paid (3 826) (1 971) (3 968)
Tax paid (4 662) (4 398) (7 778)
3 802 8 689 (11 055)
Cash flows from investing activities
Purchase of property, plant and
equipment (4 507) (6 729) (31 701)
Proceeds from disposal of property,
plant and equipment 14 - 2 622
Increase in intangible assets (8 181) (5 832) (13 808)
Movement of investments in joint
ventures 894 250 512
Acquisition of subsidiaries and
operations, net of cash (74 752) (7 126) (8 359)
Increase in non-current receivables - (91) -
(86 532) (19 528) (50 734)
Cash flow from financing activities
Settlement of non-current borrowings (6 193) (4 538) ( 407)
Shares issued 99 947 - 54 908
Shares cancelled (97) - -
Movement of treasury shares - 1 234 1 297
93 657 (3 304) 55 798
Net cash inflow/(outflow) for
the period 10 927 (14 143) (5 991)
Cash and cash equivalents at
the beginning of the period (1 240) 4 751 4 751
Cash and cash equivalents at
the end of the period 9 687 (9 392) (1 240)
Notes
Accounting policies - basis of presentation
The financial statements have been prepared in terms of International
Financial Reporting Standards. These are subject to change and ongoing review
and may change.
The accounting policies are consistent with those applied in the annual
financial statements for the year ended 31 December 2005 except for the
adoption of the amendment of IAS 39 - The Fair Value Option, which became
effective from 1 January 2006. This reclassified the preference shares of
Multenet Technologies (Pty) Limited as an "Available-for-sale" financial
asset. Changes in the fair value have been recognised directly in the
statement of changes in equity and impairment has been recognised in the
income statement. As a result an impairment of R1.6 million was recognised
in the income statement in 2005.
Significant acquisitions
Tripmaster
With effect from 1 March 2006, the Group acquired a 100% interest in
Tripmaster.
Details of the net assets acquired and negative goodwill are as follows:
R 000
Purchase consideration:
Paid 36 544
Direct costs relating to the acquisition 894
Total purchase consideration 37 438
Less: Fair value of net assets acquired 51 651
Negative goodwill on acquisition (14 213)
The assets and liabilities arising from the acquisition are as follows
Acquiree"s
Fair carrying
value amount
R 000 R 000
Property, plant and equipment 886 886
Intangible assets 57 450 4 318
Current assets 20 606 20 606
Current liabilities (8 531) (8 531)
Deferred tax liabilities (18 760) (695)
Net assets acquired 51 651 16 584
R 000
Purchase consideration 37 438
Deferred purchase consideration included in borrowings (14 824)
Cash and cash equivalents in subsidiary acquired (7 744)
Cash outflow on acquisition 14 870
Business of Sagercy
With effect from 1 March 2006, the Group acquired a 100% interest in the
business of Sagercy.
Details of the net assets acquired and goodwill are as follows:
R 000
Purchase consideration:
Paid 109 062
Direct costs relating to the acquisition 1 228
Total purchase consideration 110 290
Less: Fair value of net assets acquired 31 392
Goodwill on acquisition 78 898
The assets and liabilities arising from the acquisition are as follows:
Acquiree"s
Fair carrying
value amount
R 000 R 000
Property, plant and equipment 16 432 6 360
Current assets 18 754 18 754
Current liabilities (873) (873)
Deferred tax liabilities (2 921) -
Net assets acquired 31 392 24 241
R 000
Purchase consideration 110 290
Purchase consideration settled in long-term borrowings (50 000)
Cash outflow on acquisition 60 290
The accounting for all current year business combinations has been determined
provisionally in terms of IFRS 3. As a result those figures may change at
year-end.
Post balance sheet event
Gabriel
Agreement was reached on 20 June 2006 between Control Instruments and
ArvinMeritor Incorporated ("ArvinMeritor") and its wholly owned subsidiary,
Maremont Corporation, whereby, subject to the fulfilment of certain
conditions precedent, Control Instruments, through a wholly owned subsidiary,
will acquire the business of Gabriel South Africa (Proprietary) Limited, the
Gabriel trademark for designated territories in Africa (including South
Africa) and certain intellectual property from an ArvinMeritor group company,
for R82 091 881 to be settled in cash.
The acquisition is subject to, inter alia, the unconditional approval of the
relevant Competition Authorities. This is expected to be on or around
18 October 2006.
Further information is available on the Group"s website: www.ci.co.za
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1964/003987/06
Share code: CNL ISIN: ZAE000001665
Registered office: 9 Electron Street, Linbro Business Park, Sandton 2196
Directors: JPS O"Leary (Irish, Chairman)*, R Friedman (Managing), EPH Bieber*,
SR Bruyns*, TE Buzer, RB Forrester, RJ Fraenkel, HV Hefer* *non-executive,
independent
Date: 23/08/2006 03:11:12 PM Produced by the JSE SENS Department
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