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DEL
DEL
Delta - Unaudited group results for the six moths ended 27 JUNE 2006
Delta Electrical Industries Limited
Registration number: 1919/006020/06
Share code: DEL & ISIN: ZAE000002036
Unaudited group results for the SIX MONTHS ended 27 JUNE 2006
GROUP INCOME STATEMENT
Unaudited Audited year
Six months to June to December
2006 2005 2005
Note R"000 R"000 R"000
Continuing Operations:
Revenue 181,037 230,130 524,069
Group revenue 181,037 731,284 1,305,345
Less: Disposal Group - 501,154 781,276
(Loss)/earnings before
interest, taxation,
depreciation and (7,822) 26,164 49,248
amortisation
Depreciation (18,261) (17,131) (39,319)
Net foreign exchange 1,769 5,817 10,806
gains
Operating (loss)/profit (24,314) 14,850 20,735
Net interest 19,339 (4,898) 14,562
received/(paid)
(Loss)/profit before (4,975) 9,952 35,297
taxation
Taxation (84,172) (4,190) (49,596)
Normal taxation 1,868 (3,974) (12,823)
Secondary taxation on (86,040) (216) (36,773)
companies
(Loss)/profit after
taxation from
Continuing Operations (89,147) 5,762 (14,299)
Profit after taxation
for the period
from Disposal Group: - 71,347 1,053,682
Operating profit - 95,256 144,939
Profit on disposal of
Repairs and
Services and - - 998,422
Replacement Parts
Divisions
Interest received - 4,857 7,667
Profit before taxation - 100,113 1,151,028
Taxation - (28,766) (97,346)
Profit after taxation - 71,347 1,053,682
from Disposal Group
Total (loss)/profit (89,147) 77,109 1,039,383
after taxation for the
period
Attributable to:
Equity holders of (89,147) 75,605 1,037,602
parent company
Minority interests - 1,504 1,781
(89,147) 77,109 1,039,383
Headline
(loss)/earnings
attributable
to ordinary 1 (89,147) 75,631 97,632
shareholders
Number of shares in 49,166 49,166 49,166
issue (`000)
Weighted number of 49,099 48,794 48,974
shares in issue (`000)
Dilutive number of 49,232 49,109 49,274
shares in issue (`000)
Attributable
(loss)/earnings per
share (cents)
- basic (181.6) 154.9 2,118.7
From continuing (181.6) 11.8 (29.2)
operations
From disposal group - 143.1 2,147.9
- diluted (181.1) 154.0 2,105.8
From continuing (181.1) 11.8 (29.0)
operations
From disposal group - 142.2 2,134.8
Dividend per share - 39.0 39.0
(cents) - Normal
Dividend per share 1,400.0 - 600.0
(cents) - Special
SEGMENTAL ANALYSIS
Unaudited Audited
Six months to June December
2006 2005 2005
R"000 R"000 R"000
Revenue
Electrolytic Manganese 181,037 230,130 524,069
Dioxide
Repairs and Services - 404,452 629,916
Replacement Parts - 96,702 151,360
181,037 731,284 1,305,345
Operating (loss)/profit
Electrolytic Manganese (16,407) 22,810 36,073
Dioxide
Repairs and Services - 88,539 135,182
Replacement Parts - 6,717 8,393
Corporate and other (7,907) (7,960) (13,974)
Disposal of Repairs and
Services and
Replacement Parts Divisions - - 998,422
(24,314) 110,106 1,164,096
Segmental assets
Electrolytic Manganese 865,904 891,293 812,708
Dioxide
Repairs and Services - 383,947 -
Replacement Parts - 117,539 -
Corporate and other 1,634 1,864 4,797
867,538 1,394,643 817,505
Deferred taxation asset 9,663 - 2,779
Cash and cash equivalents 249,788 242,988 1,057,866
Taxation overpaid 4,377 15,132 5,764
Total assets 1,131,366 1,652,763 1,883,914
Segmental liabilities
Electrolytic Manganese 80,934 88,828 56,076
Dioxide
Repairs and Services - 140,756 -
Replacement Parts - 40,566 -
Corporate and other 11,045 20,668 10,573
91,979 290,818 66,649
Bank overdrafts and short- 39,649 264,738 29,790
term borrowings
Taxation provision 57,126 40,423 108,821
Deferred taxation liabilities 27,281 16,748 26,973
Non current liabilities 33,364 33,961 34,147
Total liabilities 249,399 646,688 266,380
GROUP BALANCE SHEET
Unaudited Audited
June December
2006 2005 2005
R"000 R"000 R"000
ASSETS
Property, plant and equipment 464,378 473,467 457,800
Deferred taxation asset 9,663 - 2,779
Bank balances and cash 249,788 242,988 1,057,866
Current assets 407,537 434,822 365,469
Assets classified as held for - 501,486 -
sale
Total assets 1,131,366 1,652,763 1,883,914
EQUITY AND LIABILITIES
Share capital and reserves 881,967 1,002,778 1,617,534
Minority interest - 3,297 -
Total shareholders" funds 881,967 1,006,075 1,617,534
Deferred taxation liabilities 27,281 16,748 26,973
Non-current liabilities 33,364 33,961 34,147
Bank overdraft 39,649 264,738 29,790
Current liabilities 149,105 131,308 175,470
Liabilities classified as - 199,933 -
held for sale
Total equity and liabilities 1,131,366 1,652,763 1,883,914
Net asset value per share 1,794 2,040 3,290
(cents)
Net gearing (%) - 2.2 -
STATEMENT OF CHANGES IN EQUITY
Share Foreign
Capital currency Accumu-
and translation Treasury lated
premium reserve shares profit
R"000 R"000 R"000 R"000
Balance at 27 117,445 34,170 (7,554) 780,437
December 2004
Net profit for - - - 1,037,602
the year
Dividend paid - - - (346,829)
Decrease in - (433) - -
Foreign Currency
Translation
Reserve
Proceeds on - - 2,696 -
disposal of
treasury shares
Disposal of - - - -
subsidiaries
Balance at 27 117,445 33,737 (4,858) 1,471,210
December 2005
Net loss for the - - - (89,147)
year
Dividend paid - - - (685,174)
Increase in - 35,891 - -
Foreign Currency
Translation
Reserve
Proceeds on - - 2,863 -
disposal of
treasury shares
Balance at 27 117,445 69,628 (1,995) 696,889
June 2006
Minority Total
Total interest equity
R"000 R"000 R"000
Balance at 27 December 2004 924,498 2,207 926,705
Net profit for the year 1,037,602 1,781 1,039,383
Dividend paid (346,829) (4,393) (351,222)
Decrease in Foreign Currency (433) - (433)
Translation Reserve
Proceeds on disposal of 2,696 - 2,696
treasury shares
Disposal of subsidiaries - 405 405
Balance at 27 December 2005 1,617,534 - 1,617,534
Net loss for the year (89,147) - (89,147)
Dividend paid (685,174) - (685,174)
Increase in Foreign Currency 35,891 - 35,891
Translation Reserve
Proceeds on disposal of 2,863 - 2,863
treasury shares
Balance at 27 June 2006 881,967 - 881,967
GROUP CASH FLOW STATEMENT
Unaudited
Six months to Audited
June December
2006 2005 2005
R"000 R"000 R"000
Cash (utilised by)/generated (6,053) 117,531 216,562
by trading
Decrease/(increase) in 3,288 (82,239) (102,449)
working capital
Cash (utilised by)/generated (2,765) 35,292 114,113
by operations
Interest received /(paid) 19,339 (41) 22,229
Taxation paid
- Normal (17,032) (23,757) (48,155)
- STC (121,717) - (3,082)
Cash utilised/available from (122,175) 11,494 85,105
operating activities
Dividend paid - (35,056) (58,089)
Cash (outflow)/inflow from (122,175) (23,562) 27,016
operating activities
From continuing operations (103,689) (9,045) (24,662)
From disposal group (18,486) (14,517) 51,678
Expansion capital - (1,155) (3,333)
expenditure
Replacement capital (9,837) (13,220) (35,521)
expenditure
Net proceeds on disposal of - - 1,305,887
business
Final/initial special (685,174) - (293,133)
dividend paid
Investments in businesses - - (56)
Proceeds on disposal of 113 92 1,639
property plant and equipment
Net cash (outflow)/inflow (817,073) (37,845) 1,002,499
before financing activities
From continuing operations (798,587) (14,586) (47,019)
From disposal group (18,486) (23,259) 1,049,518
Proceeds on disposal of 2,863 2,646 2,696
treasury shares
Net (decrease)/increase in (814,210) (35,199) 1,005,195
cash and cash equivalents
From continuing operations (795,724) (11,940) (44,323)
From disposal group (18,486) (23,259) 1,049,518
Cash and cash equivalents at 1,028,076 22,580 22,580
beginning of period
Translation of cash in (3,727) (9,131) 301
foreign subsidiary
Cash and cash equivalents at 210,139 (21,750) 1,028,076
end of period
NOTES
1. Reconciliation between attributable (loss)/profit and headline
(loss)/earnings
Unaudited Audited year
Six months to June to December
2006 2005 2005
R"000 R"000 R"000
Attributable (loss)/profit (89,147) 75,605 1,037,602
after taxation
Profit on disposal of
Repairs and Services and
Replacement Parts Divisions - - (948,112)
Loss on disposal of - 26 8,142
property, plant and
equipment net of tax effect
Headline (loss)/earnings
attributable to
ordinary shareholders (89,147) 75,631 97,632
Attributable headline
(loss)/earnings per share
- basic (181.6) 155.0 199.4
From continuing operations (181.6) 11.8 (29.6)
From disposal group - 143.2 229.0
- diluted (181.1) 154.0 198.1
From continuing operations (181.1) 11.8 (29.5)
From disposal group - 142.2 227.6
2. Basis of presentation
The group adopted International Financial Reporting Standards (IFRS) for
the year ended 27 December 2005. The interim results have been prepared in
accordance with the group"s accounting policies which comply with IFRS,
IAS34 - Interim financial reporting,the Listing Requirements of the JSE
Limited and the Companies Act of South Africa.
3. Future Developments under IFRS
Future amendments to the consolidated financial statements may arise due
to one or more of the following reasons:
- The accounting statements are subject to ongoing review and may change;
- The consolidated financial statements have been prepared based on the
outcome expected at this point in time,of the technical issues and
exposure drafts currently being examined by the IASB and IFRIC, which may
be applicable to the 2006 IFRS consolidated financial statements;
- Interpretations may differ as practice develops, and
- Tax legislation and tax related interpretations might develop further.
June December
2006 2005 2005
R"000 R"000 R"000
4. Commitments
Capital commitments - Authorised but 12,205 23,721 6,362
not contracted
Capital commitments - contracted 5,698 28,822 18,845
17,903 52,543 25,207
Operating lease commitment 7,942 35,518 3,825
Other 4,063 4,798 4,096
COMMENT ON RESULTS
INTRODUCTION
Effective 30 September 2005 the Group disposed of its Repairs and Services
and Replacement Parts divisions. The Group now comprises the Electrolytic
Manganese Dioxide (EMD) business, which is a leading producer of high
grade EMD used in the production of alkaline batteries.
HALF YEAR REVIEW
A headline loss per share from the continuing operations of 181,6 cents
was recorded for the six months ended 27 June 2006. This headline loss per
share includes the secondary taxation charge ("STC") of 175,2 cents per
share on the special dividend paid in March 2006. Excluding this STC
charge a headline loss per share from continuing operations of 6,4 cents
was recorded which compares with the headline earnings per share from
continuing operations for the six months ended June 2005 of 11,8 cents.
Revenue from continuing operations decreased by 21% to R181 million (2005:
R230,1 million). Improved average foreign currency selling prices and
weaker average rand and Australian dollar exchange rates to the US dollar
provided improved local currency selling prices, but were negated by lower
sales volumes into the USA and Asia. Whereas lower sales volumes into the
USA was the result of lower demand, lower sales volumes into Asia was the
result of foregoing lower priced sales in that market. The average rand
and Australian dollar weakening against the US dollar year on year was 3%
and 4% respectively.
An operational loss of R24,3 million was recorded for the six months ended
27 June 2006. This result compares with an operating profit of R14,9
million for the comparable six months in 2005. Lower sales volumes and
higher manganese ore costs, which did not affect the business in the first
six months of 2005, affected profitability during the period. Operating
profit for the six months ended June 2005 was positively affected by a
R13,6 million environmental provision write back which did not re-occur in
2006 as well as a net foreign exchange gain of R5,8 million compared with
R1,8 million for the six months to June 2006.
A pre tax loss for the period of R5 million was recorded (2005: R10
million pre tax profit), which was positively affected by net interest
earned of R19,3 million (2005: Net interest expense of R4,9 million). The
group benefited from interest earned on the sale proceeds up to the
payment of the March special dividend and resultant STC charge paid in
April 2006.
The Group ended the period with net cash balances of R210 million (2005:
Net borrowings R22 million). This was prior to the payment of R67 million
in provisional and capital gains tax which were made after 27 June 2006.
Lower sales volumes have resulted in an increased stock holding as both
plants operated at full capacity during the period.
MARKET CONDITIONS
The global EMD market continues to evolve. In the USA and Europe, although
there have been minimal increases of Chinese EMD supplied to these
markets, demand for EMD continues to be influenced by the import of
Chinese produced batteries.
Global demand for alkaline grade EMD continues to improve with the
increased demand and production of disposable batteries. Whilst the exit
of long-established alkaline grade EMD producers remains possible, the
increased global demand for EMD continues to be satisfied with additional
production capacity in China. Consequently market pricing remains
competitive.
PROSPECTS
Sales volumes are expected to be higher in the second half of the year
compared to the first six months. Manganese ore prices reduced in the
second quarter of the year which will benefit the business towards the end
of 2006. Trading profits for the second six months still continue to
depend on exchange rates and are expected to be lower than those achieved
during the second half of last year.
Given the changing market conditions, the direction and structure of the
business is being realigned to meet the growth opportunities in Asia as
well as restore profitability. Absent a substantial increase in demand in
the foreseeable future, an impairment review of the partially completed
expansion in South Africa will be undertaken at year end.
DIVIDEND
A special dividend of R14 per share was declared by the directors on 23
February 2006 to shareholders registered on 10 March 2006 and paid on 20
March 2006. This dividend was paid from the sale proceeds realised on the
sale of the Repairs and Services and Replacement Parts divisions which was
effective 30 September 2005.
An interim dividend for the 2006 financial year has not been declared.
T G Atkinson (Chairman)
28 August 2006
Registered Office Transfer Secretaries
11th Floor, Office Tower Computershare Investor
Sandton City Services 2004 (Proprietary) Limited
Rivonia Road 70 Marshall Street, Johannesburg 2001
Sandown 2146 Marshalltown 2107
DIRECTORS:
Independent non executive:
LB Bird, PL Campbell, AC Hicks
Non executive: TG Atkinson* (Chairman), BR Wright
Executive: CJ Jacobs, ME Renehan+
+Australia, *USA
Sponsor
Nedbank
Date: 28/08/2006 05:02:23 PM Produced by the JSE SENS Department
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