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CULLINAN HOLDINGS LIMITED
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 1998
BALANCE SHEET TRANSFORMED WITH RESULTANT CASH RESERVES
RETURN TO PROFITABILITY
RATIONALISATION OF BUSINESSES EFFECTIVELY COMPLETED
THE COMBRETUM SEED IS PROPAGATED FROM THE MATURE TREE AND SYMBOLISES THE
OPPORTUNITY FOR NEW GROWTH. CULLINAN HOLDINGS IS A 96-YEAR OLD COMPANY WHICH,
HAVING REACHED MATURITY, IS NOW SHEDDING THE SEEDS FOR NEW GROWTH.
GROUP INCOME STATEMENT
UNAUDITED AUDITED
SIX MONTHS 15 MONTHS
ENDED TO
31 MARCH 30 SEPTEMBER
1998 1997
R'000 R'000
TURNOVER 156 008 317 588
OPERATING INCOME/(LOSS)
- CONTINUING OPERATIONS 8 230 (6 511)
- DISCONTINUED OPERATIONS - (17 591)
EXCEPTIONAL ITEMS 1 417 (59 231)
NET OPERATING INCOME/(LOSS) 9 647 (83 333)
INTEREST RECEIVED/(PAID) 411 (15 532)
INCOME/(LOSS) BEFORE TAXATION 10 058 (98 865)
TAXATION - 29
NET INCOME/(LOSS) AFTER TAXATION 10 058 (98 894)
PREFERENCE DIVIDENDS 55 27
NET ATTRIBUTABLE INCOME/(LOSS) 10 003 (98 921)
ORDINARY SHARES (000'S)
- IN ISSUE 620 526 620 526
- USED TO CALCULATE LOSS AND HEADLINE
LOSS PER ORDINARY SHARE
(WEIGHTED AVERAGE) 620 526 32 486
INCOME/(LOSS) PER ORDINARY SHARE
(CENTS) 1,6 (304,5)
HEADLINE INCOME/(LOSS) PER ORDINARY
SHARE (CENTS) 1,4 (122,2)
DETERMINATION OF HEADLINE EARNINGS
HEADLINE INCOME/(LOSS) 8 586 (39 690)
EXCEPTIONAL ITEMS 1 417 (59 231)
NET ATTRIBUTABLE INCOME 10 003 (98 921)
SUMMARISED GROUP CASH FLOW STATEMENT
UNAUDITED AUDITED
SIX MONTHS 15 MONTHS
ENDED TO
31 MARCH 30 SEPTEMBER
1998 1997
R'000 R'000
CASH RETAINED FROM OPERATING ACTIVITIES
OPERATING INCOME 9 647 (83 333)
DEPRECIATION 3 888 8 890
RESTRUCTURING PROVISIONS AND
EXCEPTIONAL ITEMS (1 413) 41 765
OTHER NON-CASH ITEMS (40) 11 494
DECREASE IN WORKING CAPITAL 1 093 8 822
CASH GENERATED FROM OPERATING
ACTIVITIES 13 175 (12 362)
INTEREST RECEIVED 411 -
INTEREST PAID - (15 532)
TAXATION PAID - (61)
DIVIDENDS PAID - (27)
NET CASH RETAINED/(OUTFLOW) 13 586 (27 982)
CASH (UTILISED)/GENERATED IN
INVESTMENT ACTIVITIES
INVESTMENT TO MAINTAIN OPERATIONS
REPLACEMENT OF FIXED ASSETS (1 493) (3 009)
NET PROCEEDS FROM DISPOSALS 1 455 3 658
INVESTMENT TO EXPAND OPERATIONS
NET PROCEEDS FROM DISPOSALS AND
ACQUISITIONS 19 270 3 470
NET CASH GENERATED 19 232 4 119
CASH MOVEMENT ON FINANCING ACTIVITIES
SHAREHOLDERS' FUNDING - 40 025
LONG-TERM LIABILITIES REPAID - (10)
PROCEEDS FROM DISPOSAL OF FIXED ASSETS IN
DISCONTINUED OPERATIONS - 42 678
NET CASH (OUTFLOW)/INFLOW FROM
FINANCING ACTIVITIES - 82 693
INCREASE IN LIQUID RESOURCES 32 818 58 830
GROUP BALANCE SHEET
UNAUDITED AUDITED
31 MARCH 30 SEPTEMBER
1998 1997
R'000 R'000
FIXED ASSETS 20 944 31 683
INVESTMENTS AND LOANS 180 180
CURRENT ASSETS 132 497 160 448
STOCK 67 646 74 447
ACCOUNTS RECEIVABLE 64 851 86 001
TOTAL ASSETS 153 621 192 311
CURRENT LIABILITIES (76 273) (91 078)
NET TRADING ASSETS 77 348 101 233
CASH RESOURCES/(INTEREST-
BEARING LIABILITIES) 16 321 (16 497)
NET ASSETS 93 669 84 736
FINANCED BY:
ORDINARY SHAREHOLDERS' FUNDS 92 619 82 616
PREFERENCE SHAREHOLDERS' FUNDS 1 050 1 050
OUTSIDE SHAREHOLDERS' INTEREST - 1 070
93 669 84 736
FINANCIAL STATISTICS
GEARING (%) - 21,0
CURRENT RATIO 2,0 1,5
NET ASSET VALUE PER SHARE (CENTS) 15,1 13,3
COMMENTS
CULLINAN HOLDINGS, THE OUTDOOR LIVING AND LIFE-STYLE GROUP, HAS EFFECTIVELY NOW
COMPLETED THE RESTRUCTURE OF THE COMPANY. THE RESULTS REFLECT THE SUBSTANTIAL
TURNAROUND OF CULLINAN HOLDINGS FROM ITS RECENT HISTORY OF MAKING LOSSES AND
HAVING AN OVER- GEARED BALANCE SHEET, TO A GROUP THAT IS NOW BOTH PROFITABLE,
AND HAS CASH RESERVES.
SUMMARY OF RESULTS
ATTRIBUTABLE INCOME FOR THE PAST SIX MONTHS IS R10,003 MILLION, WHICH IS MADE
UP OF EXCEPTIONAL ITEMS OF R1,417 MILLION AND NET OPERATING EARNINGS OF R8,586
MILLION. THE DETAILS OF THE EXCEPTIONAL ITEMS ARE AS FOLLOWS:
PROFIT ON THE SALE OF THE 100% INVESTMENT
IN OUR INTERNET SERVICE PROVIDER
PIX INTERNET R18,368) MILLION
PROVISION TO REORGANISE AND UPGRADE
MANUFACTURING FACILITIES (R16,808) MILLION
OTHER (R0,143) MILLION
R1,417) MILLION
THE FOUR FACTORIES OF THE GROUP ARE UNDERGOING REORGANISATION IN ORDER TO
ATTAIN WORLD CLASS MANUFACTURING STANDARDS AND TO MEET THE GROWING EXPORT
DEMAND FOR CADAC PRODUCTS.
DIVIDENDS
ALTHOUGH THE GROUP NOW HAS CASH ON HAND, THE BOARD HAS DECIDED NOT TO DECLARE
AN INTERIM DIVIDEND AS IT IS EXPECTED THAT THE CASH WILL BE REQUIRED FOR FUTURE
ACQUISITIONS.
DIVISIONAL COMMENTARY
MIDMACOR HONDA
SALES DURING THE PAST SIX MONTHS OF HONDA POWER PRODUCTS (GENERATORS, MARINE
ENGINES, ENGINES AND GARDEN EQUIPMENT) AND MOTORCYCLES HAVE SHOWN SIGNIFICANT
GROWTH WITH A RESULTANT STRONG GROWTH IN PROFITS.
CADAC GROUP
GROWTH IN OUTDOOR LIVING HAS CONTINUED BUT OPERATIONAL INEFFICIENCIES HAVE
RESULTED IN A LOWER CONTRIBUTION TO PROFITABILITY THAN SHOULD HAVE BEEN
GENERATED. THE COMPANY CONTINUES TO INVEST IN THE DEVELOPMENT OF PRODUCTS AND
IN MARKETS FOR EXPORTS.
MITCO DIY TOOLS
IN THIS LOW GROWTH MARKET, RESULTS FOR THE PERIOD HAVE BEEN ADEQUATE.
SUBSEQUENT TO MARCH 1998 VERBAL AGREEMENT HAS BEEN REACHED WITH THE
SHAREHOLDERS OF AFRICA INDUSTRIAL FILE (PTY) LIMITED ("A FILE") TO MERGE MITCO
AND A FILE, AND THIS WILL RESULT IN IMPROVED PROFITABILITY THROUGH
RATIONALISATION BENEFITS. A FILE MANUFACTURES A RANGE OF HAND TOOLS SUCH AS
FILES, RASPS, IRON TOOLS AND CLAMPS.
CULLINAN PRECISION ENGINEERING
THE SUBSTANTIAL RESTRUCTURING IN THE PRIOR PERIOD RESULTED IN A POOR FIRST
QUARTER, BUT THE BUSINESS IS NOW PROFITABLE AND HAS FULL ORDER BOOKS FOR BOTH
LOCAL AND EXPORT CUSTOMERS.
DENGE POWER PRODUCTS (UK)
IT WAS DECIDED TO PUT THE COMPANY INTO LIQUIDATION IN FEBRUARY 1998, AND WE
WILL RECEIVE A SMALL DIVIDEND IN EXCESS OF THE PROVISIONS WHICH HAD PREVIOUSLY
BEEN MADE.
REDEEMABLE PREFERENCE SHARES
IN SEPTEMBER 1997 THE HOLDERS OF ORDINARY SHARES IN CULLINAN HOLDINGS LIMITED,
AT THAT DATE, WERE ELIGIBLE TO PARTICIPATE IN A POTENTIAL CAPITALISATION AWARD.
TO THIS END NEW REDEEMABLE PREFERENCE SHARES WERE ISSUED TO THESE SHAREHOLDERS
AS A VEHICLE FOR THE CAPITALISATION AWARD.
THE AMOUNT OF CAPITALISATION AWARD WAS TO BE BASED ON THE NET ASSET VALUE OF
CULLINAN HOLDINGS LIMITED AT 31 DECEMBER 1997. AN AUDIT WAS PERFORMED DURING
FEBRUARY 1998 WHICH INDICATED THAT THE REQUIRED TARGET HAD NOT BEEN MET.
ACCORDINGLY NO CAPITALISATION AWARD WAS MADE AND THE NEW REDEEMABLE PREFERENCE
SHARES WILL BE REDEEMED AT THEIR PAR VALUE OF 0,01 CENTS PER SHARE ON 1 JUNE
1998.
SHAREHOLDERS' SPREAD
OVER THE PAST SIX MONTHS, PRESENTATIONS ON CULLINAN WERE MADE TO VARIOUS
INSTITUTIONS WITH THE RESULT THAT CULLINAN NOW HAS SIX LARGE INSTITUTIONAL
SHAREHOLDERS WHO EACH OWN BETWEEN 4% AND 6% OF THE TOTAL EQUITY.
FUTURE PROSPECTS
ALTHOUGH THE SOUTH AFRICAN ECONOMY IS FLAT, WE EXPECT TO ACHIEVE IMPROVED
RESULTS IN THE SECOND HALF OF THE YEAR. THESE IMPROVED RESULTS WILL BE
GENERATED BY IMPROVING OPERATING EFFICIENCIES, AS THERE IS STILL CONSIDERABLE
SCOPE FOR IMPROVEMENT IN OUR OPERATING RETURNS.
THE BALANCE SHEET IS NOW CAPABLE OF FUNDING SIGNIFICANT ACQUISITIONS AND
THEREFORE CULLINAN IS ACTIVELY PURSUING VARIOUS ACQUISITIONS. WE WOULD BE
DISAPPOINTED IF NOTHING MATERIALISED PRIOR TO YEAR-END.
INTERIM DIVIDEND
NO DIVIDEND HAS BEEN DECLARED.
ON BEHALF OF THE BOARD
SJ NASH (EXECUTIVE CHAIRMAN)
QA SOUTHEY (FINANCIAL DIRECTOR)
19 MAY 1998
DIRECTORS
SJ NASH (EXECUTIVE CHAIRMAN), QA SOUTHEY (FINANCIAL DIRECTOR), DN CARSTENS, NO
DAVIES, PRA FERGUSON
REGISTERED OFFICE AND REGISTRATION NUMBER: HONDA BUILDING, 104 NORTH REEF ROAD,
SUNNYROCK EXTENSION 4, GERMISTON 1401 (REGISTRATION NUMBER 01/01808/06)
TRANSFER SECRETARIES: MERCANTILE REGISTRARS LIMITED, PO BOX 1053, JOHANNESBURG
2000
FOR FURTHER INFORMATION ON GROUP ACTIVITIES, PLEASE WRITE TO: THE GROUP
SECRETARY, CULLINAN HOLDINGS LIMITED, PRIVATE BAG X1, OLIFANTSFONTEIN 1665
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