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DTA - Delta EMD Limited - Audited group results for the year ended 27 December
2010
DELTA EMD LIMITED
(Formerly Delta Electrical Industries Limited)
Registration number: 1919/006020/06
Share code: DTA ISIN: ZAE000132817
("Delta EMD" or "the Group")
AUDITED GROUP RESULTS FOR THE YEAR ENDED 27 DECEMBER 2010
- Revenue of R379 million (2009: R478 million)
- Operating profit of R168 million (2009: R218 million), including R133 million
of profit recognised on the sale of property in Australia
- Cash generated by operations of R98 million (2009: R247 million)
- Total dividends of 380 cents per share (2009: 500 cents per share)
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited year Audited year
to December to December
2010 2009
Note R`000 R`000
Revenue 378 661 478 122
Profit before interest, 56 296 154 854
depreciation, closure costs,
impairment and taxation
Depreciation (20 909) (20 915)
Profit on sale of land 80 520 -
Closure costs reversal 52 049 81 748
Impairment (raised)/reversal (13) 7 155
Net foreign exchange gains/(losses) 249 (4 783)
Operating profit 168 192 218 059
Interest received 9 918 17 123
Profit before taxation 178 110 235 182
Taxation (56 739) (67 493)
Normal taxation (16 524) (42 910)
Secondary taxation on companies (18 709) (24 583)
Capital gains taxation on disposal (21 506) -
of land
Profit for the year 121 371 167 689
Other comprehensive income
(Decrease)/increase in foreign (1 228) 1 512
currency translation reserve
Profit on disposal of treasury 181 3 949
shares
Total comprehensive income for the 120 324 173 150
year
Attributable to equity holders of
parent company
Profit for the year 121 371 167 689
Total comprehensive income for the 120 324 173 150
year
Headline earnings attributable to 1 69 046 158 839
ordinary shareholders
Number of shares in issue (`000) 49 166 49 166
Weighted number of shares in issue 49 150 49 083
(`000)
Dilutive number of shares in issue 49 166 49 105
(`000)
Attributable earnings per share
(cents)
- basic 246,9 341,6
- diluted 246,9 341,5
Dividend per share (cents) 80,0 -
Special dividend per share (cents) 300,0 500,0
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Audited year at Audited year at
December December
2010 2009
R`000 R`000
ASSETS
Property, plant and equipment 273 438 282 412
Non-current assets held for sale 9 979 15 957
Non-current asset 5 971 1 051
Current assets
- Inventories 102 251 124 355
- Trade and other receivables 97 522 98 309
- Taxation overpaid 4 097 -
Bank balances and cash 112 964 216 846
Total assets 606 222 738 930
EQUITY AND LIABILITIES
Total shareholders` funds 456 486 522 964
Deferred taxation liabilities 52 263 57 085
Non-current liabilities 7 981 7 229
Current liabilities
- Trade and other payables 62 790 49 572
- Short term provisions 4 882 56 407
- Taxation payable 21 820 45 673
Total equity and liabilities 606 222 738 930
Net asset value per share (cents) 928 1 064
CONDENSED GROUP STATEMENT OF CASH FLOWS
Audited year Audited year
to December to December
2010 2009
R`000 R`000
Cash generated by trading 61 798 140 803
Decrease in working capital 36 066 105 760
Cash generated by operations 97 864 246 563
Net interest received 9 918 17 123
Taxation paid - normal (71 112) (774)
Taxation paid - secondary tax on companies (18 709) (24 583)
Cash inflow from operating activities 17 961 238 329
Replacement capital expenditure (12 405) (13 056)
Increase in non-current asset (4 920) -
Proceeds on disposal of land, property, 80 634 2 313
plant and equipment
Net cash inflow before financing 81 270 227 586
activities
Dividend paid - normal (39 313) -
- special (147 489) (245 586)
Proceeds on disposal of treasury shares 312 1 509
Net (decrease) in cash and cash (105 220) (16 491)
equivalents
Cash and cash equivalents at beginning of 216 846 230 077
year
Currency translation of cash in foreign 1 338 3 260
subsidiary
Cash and cash equivalents at end of year 112 964 216 846
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 4 856 56 254 (1 135) 535 425 595 400
December 2008
Total - 1 512 954 170 684 173 150
comprehensive
income for the
year
Realisation of - (32 208) - 32 208 -
foreign currency
translation
reserve
Dividend paid - - - - (245 586) (245 586)
special
Balance at 27 4 856 25 558 (181) 492 731 522 964
December 2009
Total - (1 228) 181 121 371 120 324
comprehensive
income for the
year
Realisation of - (27 630) - 27 630 -
foreign currency
translation
reserve
Dividend paid - - - - (39 313) (39 313)
normal
Dividend paid - - - - (147 489) (147 489)
special
Balance at 28 4 856 (3 300) - 454 930 456 486
December 2010
NOTES
Audited year Audited year
to December to December
2010 2009
R`000 R`000
1. Reconciliation between attributable
earnings and headline earnings
Attributable earnings after taxation 121 371 167 689
Impairment raised/(overprovided) 13 (7 155)
Profit on disposal of fixed assets (73 844) (1 695)
Taxation effect 21 506 -
Headline earnings attributable to ordinary 69 046 158 839
shareholders
Attributable headline earnings per share
- basic 140,5 323,6
- diluted 140,4 323,5
2. Basis of presentation
The Group is domiciled in South Africa. The audited condensed consolidated
financial results at and for the year ended 27 December 2010 comprise the
company and its subsidiaries (the `Group`).
The Group`s principal accounting policies have been applied consistently over
the current and prior financial years.
The Group`s condensed consolidated financial results have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS), interpretations issued by the
International Financial Reporting Interpretations Committee (IFRIC),and the
presentation and disclosure requirements of International Accounting Standard
(IAS) 34 "Interim Financial Reporting", the Companies Act of South Africa, as
well as the AC 500 standards as issued by the Accounting Practices Board or its
successor.
The auditors, Deloitte & Touche, have issued an unmodified opinion on the
Group`s financial statements for the year ended 27 December 2010. The audit was
conducted in accordance with International Standards on Auditing. This abridged
report has been derived from the group financial statements and consistent in
all material respects, with the group financial statements. A copy of their
audit report is available for inspection at the Company`s` registered office.
Any reference to future financial performance included in this announcement, has
not been reviewed or reported on by the Company`s auditors.
2.1 New accounting policies adopted
The Group has adopted IAS 1 Presentation of Financial Statements (Revised) (IAS
1). This standard requires amongst other things the preparation of a "Statement
of Comprehensive Income" which replaces the income statement. It had no impact
on the recognition and measurement of assets and liabilities and consequently
had no impact on profit or loss or equity for the period.
2010 2009
R`000 R`000
3. Commitments
Capital commitments - authorised but not contracted 1 959 6 442
Capital commitments - contracted 11 737 5 194
13 696 11 636
Operating lease commitment 4 720 1 207
COMMENTARY
Delta EMD`s full year financial performance was enhanced by the sale of assets
formerly employed by the Group`s Australian operation. The Group`s underlying
financial performance, whilst satisfactory, compared unfavourably to the prior
year, with the second half proving more difficult than the first half. The year
was characterised by weaker global demand for EMD; an erosion of the Group`s
price competitiveness due to the strength of the Rand, and limited sales volumes
as the major battery producers sourced most of their EMD requirements
domestically.
GROUP RESULTS
The Group`s operating profit for the year totalled R168 million (2009: R218
million), and included R133 million of profit recognised upon the sale of the
Group`s Australian residue disposal site.
Net interest received of R10 million was lower than the R17 million received in
2009, due to lower interest rates and reduced cash balances.
The Group`s profit before taxation totalled R178 million (2009: R235 million).
Normal taxation decreased to R17 million (2009: R43 million) due to lower
operating profit, and the dividends paid by the Group during the year required
the payment of R19 million of secondary tax on companies (2009: R25 million).
Recent changes in Australian tax law might prevent the utilisation of prior
year`s assessed losses to offset the capital gains profit realised on the sale
of the Kooragang Island residue site. Consequently the Group`s provision for
taxes includes R22 million related to that sale.
Attributable earnings after taxation totalled R121 million (2009: R168 million).
The Group`s earnings per share for the year were 246, 9 cents (2009: 341, 6
cents), and headline earnings per share, which excluded the Australian capital
gains profit, were 140, 5 cents (2009: 323, 6 cents).
During the year the Group paid an ordinary dividend of 80 cents per share (2009:
nil) as well as a special dividend of 300 cents per share (2009: 500 cents).
The Group`s net cash inflow before dividend payments totalled R81 million for
the year (2009: R228 million). Working capital reduced by R36 million during the
year, compared with a reduction of R106 million during 2009. Capital
expenditures totalled R12 million (2009: R13 million), and cash on hand reduced
by R104 million to R113 million after payment of R205 million of dividends and
secondary tax on companies.
PERFORMANCE OF DELTA EMD BUSINESS
Global demand for EMD did not increase during the year as earlier anticipated.
Market prices remained under pressure with major battery producers sourcing most
of their EMD requirements from domestic EMD suppliers, whose capacities were
adequate to meet current demand, and who were not subject to foreign exchange
exposure or anti-dumping duties. The strength of the Rand continued to erode the
Group`s price competitiveness and consequently the Group`s higher margin EMD
sales volumes and market share reduced during the year. The Group`s sales
volumes reduced 16% year on year, and sales revenue reduced 21%.
Operating profit excluding the profit recognised on the sale of the Kooragang
Island residue disposal site totalled R38 million (2009: R141 million), mainly
due to lower sales volumes and lower average selling prices, as well as the
resulting poor recovery of manufacturing overheads. Sales mix and average
selling price were adversely affected by a reduction in high grade EMD sales
volumes compared to 2009. Zinc carbon grade EMD sales, although at similar
levels to 2009, produced lower revenues and lower contribution margin per unit
due to the strong Rand and the adverse translation of those US dollar
denominated sales.
The Group`s contribution margin percentage reduced to 33% (2009: 44%) as result
of lower average sales revenue per unit as well as increases in manufacturing
costs which could not be passed into the market. Energy and other direct costs
increased, and reduced production volumes adversely affected manufacturing
indirect costs per unit.
Overhead costs reduced to R31 million (2009: R33 million), resulting from the
completion of group management restructuring and relocation of head office.
Operating cash flows remained favourable with effective management of working
capital and capital expenditures.
Efforts to improve the plant`s production capability and quality continued
during the year and the development of a new premium grade material continues
with trial material tested at a leading battery manufacturer.
DISPOSAL OF THE GROUP`S AUSTRALIAN PLANT SITE AND RESIDUE DISPOSAL SITE
During the year the Group`s Kooragang Island residue disposal site, located in
Newcastle, Australia, was sold, benefitting the Group`s financial results as
detailed above.
Also during the year, production equipment and most structures on the Newcastle
plant site were demolished and removed, and the Newcastle site`s operating
license was cancelled. An environmental audit clearance was also received
confirming that no remediation is required.
The Newcastle plant site is the remaining asset to be sold as part of the final
closure of the Group`s Australian operation. Market demand and prices for
industrial property in New South Wales remain low. The carrying value of the
plant site at year end in the Group Statement of Financial Position was R9,9
million.
PROSPECTS
Current market information suggests that total demand for alkaline grade EMD
will not increase substantially during 2011. Price competition is likely to
remain vigorous, and the Group`s Rand denominated selling prices will remain
unattractive should the Rand remain strong. Consequently the Group`s share of
the global EMD market, particularly the higher margin EMD market segment, is
likely to reduce, and the Group`s sales volume and sales mix are likely to be
less favourable. Efforts to source additional sales volumes, to reduce operating
costs and to manage working capital closely continue.
DIVIDEND
The board has determined not to declare a final dividend.
COMPANY SECRETARY
As announced on 13 December 2010, Statucor (Pty) Ltd resigned as company
secretary and Mr. Johan Seymore was appointed as company secretary with effect
from 10 December 2010.
TG Atkinson (Chairman) P Baijnath (Chief Executive Officer)
14 February 2011
Johannesburg
Registered Office Transfer Secretaries
15 Heyneke Street Computershare Investor
Industrial Site Services (Proprietary) Limited
Nelspruit 1200 70 Marshall Street, Johannesburg 2001,
Marshalltown 2107
Directors:
Independent non executive:
LB Bird
AC Hicks
BR Wright
Non executive:
TG Atkinson* (Chairman)
Executive:
P Baijnath (Chief Executive Officer)
JS Seymore (CA)SA (Finance Director)
*USA
Sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 14/02/2011 15:12:01 Supplied by www.sharenet.co.za
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