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DTA - Delta EMD - Unaudited group results for the six months ended 27 june 2009
and declaration of special dividend
Delta EMD Limited
Registration number: 1919/006020/06
Share code: DTA
ISIN: ZAE000132817
("Delta EMD" or "the Group")
(Formerly Delta Electrical Industries Limited)
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 27 JUNE 2009
AND DECLARATION OF SPECIAL DIVIDEND
CONDENSED GROUP INCOME STATEMENT
Unaudited Audited
year
Six months to June to December
2009 2008 2008
Note R`000 R`000 R`000
Revenue 276,702 308,367 648,450
Profit before closure 101,117 47,256 145,897
costs, impairment,
interest, taxation and
depreciation
Depreciation (11,950) (6,956) (12,776)
Closure costs - - (28,934)
Impairment overprovided / 627 - (3,980)
(charged)
Net foreign exchange (3,136) (2,219) 3,777
(losses) / gains
Operating profit 86,658 38,081 103,984
Net interest received 9,835 11,335 22,198
Profit before taxation 96,493 49,416 126,182
Taxation (38,145) (10,352) (36,750)
Normal taxation (28,312) (13,375) (34,608)
Secondary taxation on (9,833) - (5,165)
companies
Capital gains taxation - 3,023 3,023
overprovided on disposal
of the industrial
services division
Profit after taxation for 58,348 39,064 89,432
the period
Attributable to:
Equity holders of parent 58,348 39,064 89,432
company
Headline earnings 1 56,840 36,041 90,389
attributable to ordinary
shareholders
Number of shares in issue 49,166 49,166 49,166
(`000)
Weighted number of shares 49,060 48,989 48,990
in issue (`000)
Dilutive number of shares 49,060 48,989 49,002
in issue (`000)
Attributable earnings per
share (cents)
- basic 118.9 79.7 182.6
- diluted 118.9 79.7 182.5
Capital reduction per - 229.0 229.0
share (cents)
Special dividend per 200.0 - 100.0
share (cents)
CONDENSED GROUP BALANCE SHEET
Unaudited Audited
year
Six months to June to December
2009 2008 2008
R`000 R`000 R`000
ASSETS
Property, plant and equipment 287,079 296,947 293,664
Non-current assets held for sale 9,599 22,348 10,368
Non-current asset 1,051 1,051 1,051
Bank balances and cash 351,254 343,327 230,077
Current assets 211,496 326,345 337,963
Total assets 860,479 990,018 873,123
EQUITY AND LIABILITIES
Total shareholders funds 557,602 613,837 595,400
Deferred taxation liabilities 61,220 38,715 59,865
Non-current liabilities 23,758 120,586 49,307
Capital reduction liability - 112,185 -
Current liabilities
- Trade and other 96,233 86,005 69,031
- Short term provisions 121,666 18,690 99,520
Total equity and liabilities 860,479 990,018 873,123
Net asset value per share 1,134 1,248 1,211
(cents)
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Audited
year
Six months to June to December
2009 2008 2008
R`000 R`000 R`000
Cash generated by trading 96,653 16,132 120,902
Decrease in working capital 119,096 70,810 29,514
Cash generated by operations 215,749 86,942 150,416
Net interest received 9,835 11,335 22,198
Taxation paid - normal (776) (758) (7,352)
Taxation refund - Capital gains - 3,023 3,023
taxation
Cash inflow from operating 224,808 100,542 168,285
activities
Replacement capital expenditure (5,366) (2,884) (5,422)
Proceeds on disposal of land, 2,073 - 8,430
property, plant and equipment
Net cash inflow before 221,515 97,658 171,293
financing activities
Capital reduction - - (112,589)
Dividend paid - special (98,162) - (48,990)
Proceeds on disposal of 701 - 787
treasury shares
Net increase in cash and cash 124,054 97,658 10,501
equivalents
Cash and cash equivalents at 230,077 218,342 218,342
beginning of period
Currency translation of cash in (2,877) 27,327 1,234
foreign subsidiary
Cash and cash equivalents at 351,254 343,327 230,077
end of period
GROUP STATEMENT OF CHANGES IN EQUITY
Share Foreign
Capital currency Accumu-
and translation Treasury lated
premium reserve shares profit Total
R`000 R`000 R`000 R`000 R`000
Balance at 27 117,445 106,378 (1,922) 428,600 650,501
December 2007
Increase in - 16,259 - - 16,259
foreign
currency
translation
reserve
Realisation - (66,383) - 66,383 -
of foreign
currency
translation
reserve
Proceeds on - - 787 - 787
disposal of
treasury
shares
Net income 117,445 56,254 (1,135) 494,983 667,547
recognised
directly in
equity
Net profit - - - 89,432 89,432
for the year
Total 117,445 56,254 (1,135) 584,415 756,979
recognised
income and
expense
Capital - - -
reduction (112,589) (112,589)
Dividend paid - - - (48,990)
- special (48,990)
Balance at 27 4,856 56,254 (1,135) 535,425 595,400
December 2008
Decrease in - (264) - - (264)
foreign
currency
translation
reserve
Proceeds on - - 534 1,746 2,280
disposal of
treasury
shares
Net income 4,856 55,990 (601) 537,171 597,416
recognised
directly in
equity
Net profit - - - 58,348 58,348
for the
period
Total 4,856 55,990 (601) 595,519 655,764
recognised
income and
expense
Dividend paid - - - (98,162)
- special (98,162)
Balance at 27 4,856 55,990 (601) 497,357 557,602
June 2009
NOTES
1. Reconciliation between attributable earnings and headline earnings
Unaudited Audited year
Six months to June to December
2009 2008 2008
R`000 R`000 R`000
Attributable earnings after 58,348 39,064 89,432
taxation
Impairment (overprovided)/charged (627) - 3,980
Over provision prior year CGT - (3,023)
(3,023)
Profit on disposal of fixed assets (881) - -
Headline earnings attributable to 56,840 36,041 90,389
ordinary shareholders
Attributable headline earnings per
share
- basic 115.9 73.5 184.5
- diluted 115.9 73.5 184.5
2. Basis of presentation
The interim report has been prepared in accordance with the Group`s accounting
policies which are consistent with those of the previous financial statements
and comply with IFRS, the Listing Requirements of the JSE Limited and the
Companies Act of South Africa (Act 61 of 1973), as amended. These condensed
financial statements have been prepared in accordance with IAS 34 - interim
reporting.
Unaudited Audited year
Six months to June to December
2009 2008 2008
R`000 R`000 R`000
3. Commitments
Capital commitments
- Authorised but not 1,705 6,795 11,058
contracted
Capital commitments
- contracted 10,827 360 1,456
12,532 7,155 12,514
Operating lease commitment 1,200 797 1,262
Other - 1,156 980
COMMENT ON RESULTS
HALF YEAR RESULTS
The Group recorded a substantial improvement in earnings for the half year ended
June 2009. Earnings per share increased by 49% to 118.9 cents (2008: 79.7
cents), and headline earnings per share increased to 115.9 cents (2008: 73.5
cents).
Sales of the EMD produced at the Group`s former Australian plant concluded
during 2008, and consequently the Group`s revenue for the half year decreased to
R276.7 million (2008: R308.4 million). Revenues from the Group`s South African
plant compared favourably with the same period last year with improved selling
prices and similar volumes sold.
Operating profit of R86.7 million was recorded for the half year compared with
an operating profit of R38.1 million for the same period last year, an increase
of 128%. Increased selling prices and reduced overhead costs contributed to the
improved result.
Net interest income for the half year totalled R9.8 million (2008: R11.3
million), and a profit before taxation of R96.5 million was recorded compared
with R49.4 million for the same period last year.
Taxation totalled R38.1 million (2008: R10.4 million) and included a R9.8
million Secondary Taxation Charge in respect of the Group`s June 2009 special
dividend. The Group`s 2008 taxation charge benefited from the recovery of a R3
million overpayment in respect of the Group`s disposed Industrial Services
businesses. Profit after taxation totalled R58.3 million for the half year and
compared with R39.1 million for the same period last year.
Cash inflow during the period totalled R221.5 million (2008: R97.7 million).
Improved cash inflow resulted from higher operating profit and substantial
reductions in working capital.
The Group ended the half year with cash balances of R351.3 million after payment
of the R98.2 million special dividend, a significant increase from the 2008 year
end balance of R230.1 million.
PERFORMANCE OF THE DELTA EMD BUSINESS
Changed global economic conditions resulted in reduced demand for disposable
batteries and a contraction of the global EMD market during the period. EMD
producers` market positions remained relatively stable, and Delta EMD`s market
share met our expectations and tracked total market demand. Delta EMD enjoyed
additional one-off sales during the period, as EMD inventories formerly held in
offshore warehouses were sold to customers and Delta EMD`s terms of sale were
changed to provide that sales are completed at the port of loading.
Margins during the period benefited from improved selling prices and from cost
of goods sold that reflected the lower input costs evident prior to recent cost
increases. Delta EMD`s rand denominated selling prices compared favourably
during most of the period with competitors` US dollar and Euro denominated
selling prices, but the more recent strengthening of the rand has reduced that
competitiveness.
The Group`s management is now based at the Group`s plant and is better
positioned to drive improvements across the business. Efforts are underway to
realise further operational efficiencies and to reduce overhead costs.
Operating profit during the period reflected some of these improvements as well
as additional investment in the business.
Efforts to reduce working capital were successful during the period. The sale
of offshore inventories and change in terms of sale reduced inventory levels,
and production was reduced in line with demand. Inventories will be
consolidated further by year end to ensure optimal stock levels. Substantial
year end trade receivables, including those associated with the sale of
Australian produced product, were collected during the period, as well as those
from a substantial customer which sought protection under the US bankruptcy
code.
PROSPECTS
Delta EMD`s second half sales volumes are expected to reflect lower global
demand similar to the first half and will not benefit from the same additional
one-off sales. Market prices are likely to reduce as some EMD producers benefit
from reduced manganese ore costs, and consequently Delta EMD`s sales volumes
could be under pressure. Trading profit is expected to reduce from the first
half`s levels with lower sales volumes and higher cost of goods sold.
Opportunities for improvement include the penetration of new market segments,
improved operational efficiencies and reduced overheads, and any additional
sales volumes and resulting increases in production would improve recovery of
the Group`s substantial manufacturing overheads. Cash inflows are expected to
remain strong.
TRADING STATEMENT FOR THE 2009 FINANCIAL YEAR
The development and possible disposals described immediately below are expected
to result in earnings (and headline earnings) for the financial year ending 27
December 2009 that will be more than 20% higher than those for the financial
year ended 27 December 2008. However due to the uncertainty surrounding the
anticipated disposals, as well as with respect to trading, it is not possible
with reasonable certainty to quantify earnings (and headline earnings) for the
financial year ending 27 December 2009 within a 20% range as required by the JSE
Limited Listing Requirements.
- An amendment to the Environmental Protection Licence governing the
rehabilitation of the Kooragang Island residue disposal site was agreed with the
New South Wales Department of Environment and Climate Change on 23 July 2009.
The amended licence allows a more cost effective rehabilitation of the site, and
on the basis of quotes received for the required rehabilitation, the closure
provision previously established for the site will be reduced by A$10 million.
The adjustment will substantially enhance the Group`s second half result, and
the certainty afforded by the amended licence affords an appropriate basis to
negotiate the sale of the Kooragang Island site.
- Environmental assessments undertaken at the Australian plant site have
provided greater certainty with respect to the limited remediation that might be
required at the former plant site, and we anticipate shortly the issuance of the
environmental clearances desired by prospective purchasers.
- Prospects for realising appropriate value for the Kooragang Island site and
for the former plant site have improved as a consequence of the foregoing. As
the sites are carried at nominal book values, the Group`s full year results
would be enhanced further by the gains realised on those sales should they be
completed before year end. The resulting tax liabilities are expected to be
reduced by earlier tax losses.
It is expected that a more detailed trading statement for the year to December
2009 will be issued later in the reporting period.
The forecast financial information on which this trading statement is based has
not been reviewed and reported on by the Group`s external auditors.
SPECIAL DIVIDEND
The Group is pleased to announce a further special dividend of 300 cents per
share, which shall be paid from cash accumulated from operating activities. The
salient dates for the payment of the special dividend will be as follows:
Last date to trade to qualify for the Friday 28 August 2009
dividend
Shares to commence trading ex-dividend on Monday 31 August 2009
the JSE Limited
Record date Friday 4 September 2009
Payment date Monday 7 September 2009
The dividend is declared in the currency of the Republic of South Africa. Share
certificates may not be dematerialised or rematerialised between Monday, 31
August 2009 and Friday, 4 September 2009, both days inclusive.
The Group anticipates paying further special dividends when value is realised
from the Group`s surplus Australian assets, and thereafter to resume payment of
ordinary dividends from future earnings.
CHANGE OF NAME
Shareholders approved the change of the Group`s name from Delta Electrical
Industries Limited to Delta EMD Limited. Trade under the name Delta EMD Limited,
share code: DTA and ISIN number: ZAE000132817, commenced on 18 May 2009.
CHANGE IN JSE LISTING SECTOR
Application was made to the JSE Limited requesting that the Group be included in
the "Chemicals" listing sector instead of the "Electronics and Electrical"
listing sector. The request was approved and the change will be effected on 21
September 2009.
T G Atkinson (Chairman)
P Baijnath (Chief Executive Officer)
7 August 2009
Johannesburg
Registered Office Transfer Secretaries
15 Heyneke Street Computershare Investor
Industrial Site Services (Proprietary) Limited
Nelspruit 70 Marshall Street, Johannesburg 2001
1200 Marshalltown 2107
Directors:
Independent non executive:
LB Bird, AC Hicks, BR Wright
Non executive:
TG Atkinson* (Chairman)
Executive:
P Baijnath (Chief Executive Officer), CJ Jacobs
*USA
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 07/08/2009 11:00:01 Supplied by www.sharenet.co.za
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