| Mon 19 Feb 2007, 17:00 | | DEL - Delta - Audited group results for the year e |
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DEL
DEL
DEL - Delta - Audited group results for the year ended 27 December 2006
DELTA ELECTRICAL INDUSTRIES LIMITED
Registration number: 1919/006020/06
Share code: DEL & ISIN: ZAE000002036
AUDITED GROUP RESULTS FOR THE YEAR ENDED 27 DECEMBER 2006
GROUP INCOME STATEMENT
2006 2005
Note R`000 R`000
Continuing Operations
Revenue 438,246 524,069
Group revenue 438,246 1,305,345
Less: Disposal Group - 781,276
Earnings before interest, (17,275) 49,248
taxation, depreciation and
amortisation
Depreciation (38,570) (39,319)
Impairment (27,025) -
Net foreign exchange (3,007) 10,806
(losses)/gains
Operating (loss)/profit (85,877) 20,735
Net interest received 23,907 14,562
(Loss)/profit before taxation (61,970) 35,297
Taxation (92,394) (49,596)
Normal taxation (6,354) (12,823)
Secondary taxation on companies (86,040) (36,773)
Loss after taxation from (154,364) (14,299)
Continuing Operations
Profit after taxation for the 2,200 1,053,682
period from Disposal Group:
Operating profit - 144,939
Profit on disposal of Repairs and - 998,422
Services and Replacement parts
divisions
Interest received - 7,667
Profit before taxation - 1,151,028
Taxation 2,200 (97,346)
Profit after taxation from 2,200 1,053,682
Disposal Group
Total (loss)/profit after taxation (152,164) 1,039,383
for the period
Attributable to:
Equity holders of parent company (152,164) 1,037,602
Minority interests - 1,781
(152,164) 1,039,383
Headline (loss)/earnings 1 (127,430) 97,632
attributable to ordinary
shareholders
Number of shares in issue (`000) 49,166 49,166
Weighted number of shares in issue 49,099 48,974
(`000)
Dilutive number of shares in issue 49,232 49,274
(`000)
Attributable (loss)/earnings per
share (cents)
- basic (309.9) 2,118.7
From continuing operations (314.4) (29.2)
From disposal group 4.5 2,147.9
- diluted (309.1) 2,105.8
From continuing operations (313.6) (29.0)
From disposal group 4.5 2,134.8
Dividend per share (cents) - - 39.0
Normal
Dividend per share (cents) - 1,400.0 600.0
Special
CASH FLOW STATEMENT
2006 2005
R`000 R`000
Cash (utilised)/generated by trading (20,284) 216,562
Decrease/(increase) in working capital 5,563 (102,449)
Cash (utilised)/generated by operations (14,721) 114,113
Interest received 23,907 22,229
Taxation paid - normal (19,780) (48,155)
Taxation paid - Capital gains taxation (50,401) -
Taxation paid - STC (121,717) (3,082)
Cash (utilised by)/available from (182,712) 85,105
operating activities
Dividend paid - (58,089)
Cash (outflow)/inflow from operating (182,712) 27,016
activities
From continuing operations (115,567) (24,662)
From disposal group (67,145) 51,678
Expansion capital expenditure - (3,333)
Replacement capital expenditure (25,647) (35,521)
Net proceeds on disposal of business - 1,305,887
Final/initial special dividend paid (685,174) (293,133)
Investments in businesses - (56)
Proceeds on disposal of property plant 153 1,639
and equipment
Net cash (outflow)/inflow before (893,380) 1,002,499
financing activities
From continuing operations (826,235) (47,019)
From disposal group (67,145) 1,049,518
Proceeds on disposal of treasury shares 2,863 2,696
Net (decrease)/increase in cash and cash (890,517) 1,005,195
equivalents
From continuing operations (823,372) (44,323)
From disposal group (67,145) 1,049,518
Cash and cash equivalents at beginning of 1,028,076 22,580
period
Translation of cash in foreign subsidiary 637 301
Cash and cash equivalents at end of 138,196 1,028,076
period
CONDENSED GROUP BALANCE SHEET
2006 2005
R`000 R`000
ASSETS
Property, plant and equipment 438,535 457,800
Deferred taxation asset 6,647 2,779
Non-current assets 1,052 -
Bank balances and cash 141,817 1,057,866
Current assets 417,318 365,469
Total assets 1,005,369 1,883,914
EQUITY AND LIABILITIES
Share capital and reserves 834,683 1,617,534
Deferred tax liabilities 30,939 26,973
Non-current liabilities 43,727 34,147
Bank overdraft 3,621 29,790
Current liabilities 92,399 175,470
Total equity and liabilities 1,005,369 1,883,914
Net asset value per share (cents) 1,698 3,290
STATEMENT OF CHANGES IN EQUITY
Share Foreign
Capital currency
and translation Treasury
premium reserve shares
R`000 R`000 R`000
Balance at 27 December 2004 117,445 34,170 (7,554)
Decrease in Foreign Currency - (433) -
Translation Reserve
Net income recognised 117,445 33,737 (7,554)
directly in equity
Net profit for the year - - - -
restated
Total recognised income and 117,445 33,737 (7,554)
expense for the year
Dividend paid - - -
Proceeds on disposal of - - 2,696
treasury shares
Disposal of subsidiaries - - -
Balance at 27 December 2005 117,445 33,737 (4,858)
Increase in Foreign Currency - 51,624 -
Translation Reserve
Net income recognised 117,445 85,361 (4,858)
directly in equity
Net loss for the year - - -
Total recognised income and 117,445 85,361 (4,858)
expense for the year
Dividend paid - - -
Proceeds on disposal of - - 2,863
treasury shares
Balance at 27 December 2006 117,445 85,361 (1,995)
Accumu-
lated Minority Total
profit Total interest equity
R`000 R`000 R`000 R`000
Balance at 27 780,437 924,498 2,207 926,705
December 2004
Decrease in - (433) - (433)
Foreign Currency
Translation
Reserve
Net income 780,437 924,065 2,207 926,272
recognised
directly in
equity
Net profit for 1,037,602 1,037,602 1,781 1,039,383
the year -
restated
Total recognised 1,818,039 1,961,667 3,988 1,965,655
income and
expense for the
year
Dividend paid (346,829) (346,829) (4,393) (351,222)
Proceeds on - 2,696 - 2,696
disposal of
treasury shares
Disposal of - - 405 405
subsidiaries
Balance at 27 1,617,534 - 1,617,534
December 2005 1,471,210
Increase in - 51,624 - 51,624
Foreign Currency
Translation
Reserve
Net income 1,471,210 1,669,158 - 1,669,158
recognised
directly in
equity
Net loss for the (152,164) (152,164) - (152,164)
year
Total recognised 1,319,046 1,516,994 - 1,516,994
income and
expense for the
year
Dividend paid (685,174) (685,174) - (685,174)
Proceeds on - 2,863 - 2,863
disposal of
treasury shares
Balance at 27 633,872 834,683 - 834,683
December 2006
NOTES
1. Reconciliation between attributable (loss)/profit and headline (loss)/
earnings
2006 2005
R`000 R`000
Attributable (loss)/profit after taxation (152,164) 1,037,602
Impairment 27,025 -
Over provision prior year Capital Gains (2,200) -
Taxation
Profit on disposal of Repairs and - (948,112)
Services and Replacement Parts Divisions
(Profit)/loss on disposal of fixed assets (91) 8,142
Headline (loss)/earnings attributable to (127,430) 97,632
ordinary shareholders
Attributable headline (loss)/earnings per
share
- basic (259.5) 199.4
From continuing operations (259.5) (29.6)
From disposal group - 229.0
- diluted (258.8) 198.1
From continuing operations (258.8) (29.5)
From disposal group - 227.6
2. Basis of presentation
The group adopted International Financial Reporting Standards (IFRS) for the
year ended 27 December 2005. The audited results have been prepared in
accordance with the group`s accounting policies which comply with IFRS, the
Listing Requirements of the JSE Limited and the Companies Act of South
Africa. These condensed financial statements have been extracted from the
group financial statements and have been prepared in accordance with IAS 34
- interim reporting.
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.
2006 2005
R`000 R`000
4. Commitments
Capital commitments - Authorised but not 2,473 6,362
contracted
Capital commitments - contracted 1,215 18,845
3,688 25,207
Operating lease commitment 2,497 3,825
Other 738 4,096
COMMENT ON RESULTS
YEAR REVIEW
A headline loss per share from the continuing operations of 259.5 cents was
recorded for the year ended 27 December 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 84.3 cents was
recorded which compares with 2005`s headline earnings per share from
continuing operations of 43.6 cents.
Revenue from continuing operations decreased by 16% from R524.1 million in
2005 to R438.2 million. The decrease in revenue was attributable to changes
in demand by geography and customer as well as by de-stocking within
customers` sales channels. Sales to the United States reduced with the
increasing importation of both batteries and EMD from China and hurricane
activity in the United States was limited, reducing United States demand for
batteries and EMD during the second half of the year. Whilst sales to Europe
were good, sales to Asia reduced during the year as Delta EMD elected not to
compete with local selling prices in certain markets and some Asian sales
volumes were lost to a competitor that discontinued the production of EMD
and sold off its remaining stock at lower prices.
Delta EMD`s average selling price increased from year to year but not as
much as expected due to a geographic sales mix that included less volumes to
the United States. Variable margins reduced from year to year with the use
of higher cost manganese ore purchased before recent ore cost decreases and
with the under-recovery of manufacturing overheads following reduced
production. Consequently, and together with the additional costs incurred
reshaping the business, an operating loss of R85.9 million was recorded for
the year ended 2006, which compares with the operating profit from
continuing operations in 2005 of R20.7 million. The operating loss in 2006
has been negatively affected by the impairment of the partially completed
expansion in Nelspruit as the board has decided not to complete this
expansion in the foreseeable future. The impairment charge included in the
operating loss amounts to R27 million. Operating profit in 2005 was
positively affected by a R13.6 million environmental provision write back
and foreign exchange gains of R10.8 million. A foreign exchange loss of R3
million was recorded in 2006.
A pre tax loss of R62 million was recorded for the year (2005: pre tax
profit R35.3 million), which includes the impairment charge of R27 million.
The pre tax loss result benefited from interest earned on the sale proceeds
before the final special dividend payment in March 2006. Interest earned for
the year was R23.9 million (2005: R14.6 million)
An income taxation charge of R90.2 million was recorded for the year and was
negatively affected by the STC charge of R86 million on the final special
dividend.
As a result a loss after tax for the year of R152.2 million occurred.
A loss per share of 314,4 cents from continuing operations was recorded for
the year ended 27 December 2006, which compares with the loss per share of
29.2 cents for the year ended 2005.
Lower sales volumes in 2006 resulted in higher stock levels as both plants
continued to operate at full capacity during the year.
The group ended the year with net cash balances of R138.2 million (2005:
R1,028.1 million). A net funds outflow of R890.5 million was recorded,
R857.3 million of which related to taxes and dividends in respect of the
disposal group.
Market Conditions
The global EMD market remains unsettled with global battery producers` EMD
requirements changing and EMD production capacity in China increasing.
Whilst further growth in demand for alkaline primary batteries is expected,
the mix amongst cell sizes, branded and private labelled products and
products produced in the United States, Europe and Asia is expected to
evolve. The possibilities of long-standing competitors exiting the market
and further increases in production capacity in China remain and both could
disrupt market pricing and demand.
Whilst 2007 sales volumes remain uncertain because supply arrangements with
some customers are not yet finalised, some improvement over 2006 is
expected. The efforts made during 2006 to strengthen customer relations and
improve Delta EMD`s presence in the Asian market are expected in time to
improve Delta EMD`s global market share.
Prospects
The board has decided for the time being to reduce production in Australia
in order to liquidate excess stocks and working capital. When excess stocks
are reduced and demand requires, production in Australia will be increased
to existing capacity.
Delta EMD`s cost competitiveness and profitability remain partly determined
by foreign exchange rates and the Australian dollar and South African rand
remain strong relative to the currencies that affect competitors.
Consequently the actions underway to reduce Delta EMD`s operating costs and
overheads remain most important and the reduced cost of manganese ore should
assist.
Reduced production at the group`s Australian operation is expected to reduce
working capital and generate cash, however manufacturing overheads will not
be recovered in full and an operating loss is expected at the group`s
Australian operation during 2007. Provided foreign exchange rates do not
deteriorate the group`s South African operation is expected to remain
profitable and overheads are expected to reduce both at Delta EMD and Delta
Electrical Industries, however the group is expected to incur a headline
loss for the first half of 2007.
An EMD producer located in Greece and controlled by Tosoh Corporation of
Japan requested the European Commission initiate an anti-dumping
investigation concerning EMD produced by Delta EMD South Africa. The
European Commission elected during December 2006 to do so, and Delta EMD
will provide information in response to that investigation.
DIVIDEND
A final dividend for the 2006 financial year has not been declared.
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the twelve month period ended 27 December 2006. The
audit was conducted in accordance with International Standards on Auditing.
They have issued an unqualified audit opinion. A copy of their audit report
is available for inspection at the company`s registered office. These
summarised financial statements have been derived from the group annual
financial statements and are consistent in all material respects, with the
group annual financial statements.
T G Atkinson (Chairman) 19 February 2007
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:
TG Atkinson* (Chairman), LB Bird, PL Campbell, AC Hicks, CJ Jacobs, MJ
Renehan+, BR Wright.
*USA +Australian
SPONSOR
NEDBANK CAPITAL
AUDITORS
DELOITTE
Date: 19/02/2007 17:00:01 Produced by the JSE SENS Department.
