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CNL - Control Instruments Group Limited - Results for the year ended 31 December
2010
CONTROL INSTRUMENTS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1964/003987/06)
Share Code: CNL
ISIN: ZAE000001665
("Control Instruments" or "the Company" or "the Group")
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
HIGHLIGHTS
Return to profitability - R2.2 million profit after tax for the year
Record performance by the Aftermarket business
Proprietary OpenECUTrade Mark technology continues to win new international
business
R25.5 million invested in product development and capex. A total of R45.7
million invested over two years
INTRODUCTION
Two years ago the Group reported a loss after tax of R75.7 million. This year
we are pleased to report a return to profitability with a profit after tax of
R2.2 million.
2010 was a productive year for the Group. The Aftermarket business had an
excellent year with profitability at a record high. The benefits of the time
invested over the past few years in improving common efficiencies and service
to customers are coming through to the bottom line. The OEM business continued
to win development and production contracts based on its proprietary
OpenECUTrade Mark
hardware and software platforms. These contracts are long-term in nature and
the effects of their benefits are only expected to come through in the results
towards the latter half of 2011 and at an increasing rate during 2012 and 2013.
Until then OEM margins will remain under pressure.
BUSINESS OVERVIEW
Aftermarket business - CI Automotive
Five years ago CI Automotive was a relatively small distribution business
focused only on VDO products. Today CI Automotive is a powerhouse aftermarket
business that distributes a range of premium branded products to the automotive
aftermarket in sub-Saharan Africa. These include Gabriel, VDO, Warn, Acsa-Mag,
Echlin, Autocom, Shurlok and Mag-Brakes. CI Automotive either owns or has the
exclusive distribution rights for these premium brands.
The strength of these premium brands plus CI Automotive`s strong relationships
with its customers and suppliers allowed it to survive the very difficult
market conditions experienced during and after the collapse of the automotive
industry.
Readers are referred to the CI Automotive website, www.ci-automotive.com for
more information about the Aftermarket business` brands and products.
OEM business - Pi Shurlok
Pi Shurlok develops and manufactures electronics for global automotive,
transportation and defence markets.
Pi Shurlok has undergone a radical transformation. Five years ago Shurlok was a
purely South African business with limited design and development capabilities,
primarily manufacturing electronic products for the South African automotive
industry, while Pi Technology simply offered engineering consulting services to
European and American customers. Today Pi Shurlok is an integrated global
business offering end-to-end solutions based around its OpenECUTrade Mark
technology to
a growing list of major international customers. OpenECUTrade Mark is a unique
offering
in the automotive electronics industry. It provides flexibility and fast
turnaround times that are compelling and competitive. This is well illustrated
by one of Pi Shurlok`s international customers that will shortly introduce a
product that has gone from concept to production in under 15 months, compared
with industry norms of more than three years for similar programs.
Readers are referred to the Pi Shurlok website at www.pi-shurlok.com for more
information about Pi Shurlok`s products.
RESULTS
Aftermarket business - CI Automotive
The upturn in the aftermarket sector, which began towards the end of 2009 and
increased its momentum during 2010, was a major contributory factor to the
excellent results delivered by our Aftermarket business. The business also
benefited from strong leadership, a stable management team and the investment
and hard work that has gone into the rationalisation of the product lines and
the warehouse facilities over the past three years.
The 4.1% increase in revenue from R454.2 million in the year ended 31 December
2009 to R472.9 million in the year under review is not an accurate reflection
of like for like performance as a number of under performing product lines were
discontinued in 2009. The improvement in sales performance is reflected in the
90.6% increase in normalised EBITDA to R53.2 million in the year under review
compared with R27.9 million in the previous year.
OEM business - Pi Shurlok
Revenue increased 12.6% to R436.7 million in the year under review, compared
with R387.8 million in the previous year. Normalised EBITDA decreased to
R7.9 million compared with R15.3 million in the previous year. The decrease in
EBITDA is due to decreasing margins arising out of a combination of the strong
rand, increasing price pressure from certain customers and an increase in
expenses, particularly those over which the business has little or no control,
such as the impact on costs caused by the electronic component shortages. The
industrial unrest in the second half of 2010 and worldwide shortage of
components also disrupted the business. Until such time as the new OpenECUTrade
Mark
products referred to above come into full production Pi Shurlok`s margins will
remain under pressure.
Group
Group revenue increased 7.8% to R906.1 million for the year ended 31 December
2010 from R840.4 million in the previous year, while gross profit increased
11.5% to R246.9 million compared with R221.4 million.
The intense focus on expense management resulted in a marginal decrease in
expenses to R244.3 million in the year under review from R246.1 million in the
previous year. This was a notable achievement given the high level of expenses
over which neither of the Group`s businesses has control, such as wage and
salary increases (either as mandated by bargaining council agreements or in
order to retain skilled staff) and increasing electricity and transportation
costs.
Normalised EBITDA increased by 32.1% to R43.0 million in the year under review.
The resultant profit after tax of R2.2 million for the year ended 31 December
2010 is a significant improvement when it is considered that the Group lost
R22.3 million and R75.7 million in the 2009 and 2008 financial years
respectively.
AUDITOR`S REPORT
PricewaterhouseCoopers Inc. has audited the results for the year ended 31
December 2010 and their unqualified audit reports on the Group annual financial
statements and the Group abridged financial statements are available on request
at the Company`s registered office.
PROSPECTS
We continue to remain optimistic about the future of the Group. The automotive
industry is recovering. However, there is still a large degree of uncertainty
and the potential for setbacks in our business can and does exist.
Cash will continue to remain tight during 2011, mainly as a result of the
funding requirements of growth, investment in product development and the
capital expenditure required in our factories.
The ramp up into full production of new OEM programmes is always a stressful
and difficult time. The successful implementation of these programmes is
critical if Pi Shurlok is to achieve an acceptable level of performance. Senior
management changes, particularly the appointment of Sean Rogers as Group COO,
have been made with this in mind.
The Aftermarket business is reaching the critical mass that should enable it to
continue to generate good profits and cash. In due course we will be looking to
acquire additional premium branded products for the Aftermarket business. The
continued investment of both time and money in Pi Shurlok`s OpenECUTrade Mark
technology
should enable it to continue to win additional business internationally.
On behalf of the Board
JPS O`LEARY
Chairman
R FRIEDMAN
Group CEO and Group Managing Director
15 March 2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2010
GROUP
2010 2009
Audited Audited
R 000 R 000
ASSETS
Non-current assets 280 636 286 954
Property, plant and equipment 123 621 127 770
Intangible assets 123 381 129 526
Investments in joint ventures 980 565
Available-for-sale financial assets 768 648
Deferred income tax assets 31 886 28 445
Current assets 274 131 252 129
Inventories 136 594 124 694
Trade and other receivables 92 322 97 108
Derivative financial instruments - -
Financial assets at fair value through profit or loss 162 137
Current income tax assets 3 118
Cash and cash equivalents 45 050 30 072
Total assets 554 767 539 083
EQUITY AND LIABILITIES
Capital and reserves 291 992 295 445
Share capital 6 972 6 972
Share premium 396 996 396 996
Treasury shares (3 117) (3 117)
Foreign currency translation reserve (19 101) (12 382)
Other reserves (595) (1 647)
Accumulated loss (89 163) (91 377)
Non-current liabilities 39 680 35 924
Borrowing 11 064 10 753
Deferred income tax liabilities 26 296 21 532
Provision 2 320 3 639
Current liabilities 223 095 207 714
Trade and other payables 136 477 123 425
Current income tax liabilities 503 2 946
Derivative financial instruments 1 411 2 363
Borrowings 79 567 74 478
Provisions 5 137 4 502
Total equity and liabilities 554 767 539 083
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2010
GROUP
2010 2009
Audited Audited
R 000 R 000
CONTINUING OPERATIONS
Revenue 906 123 840 404
Cost of sales (659 239) (618 989)
Gross profit 246 884 221 415
Other operating income 10 173 6 735
Marketing and selling expense (40 365) (31 767)
Administrative expenses (78 996) (94 210)
Other operating expenses (124 957) (120 164)
Operating profit/(loss) 12 739 (17 991)
Finance income - 303
Finance costs (11 295) (14 151)
Share of profit from joint ventures 415 148
Profit/(loss) before taxation 1 859 (31 691)
Taxation 355 14 803
Profit/(loss) for the year from continuing operations 2 214 (16 888)
DISCONTINUED OPERATIONS
Loss for the year from discontinued operations - (5 409)
Profit/(loss) for the year 2 214 (22 297)
Profit/(loss) attributable to:
Owners of the parent 2 214 (22 297)
Non-controlling interest - -
2 214 (22 297)
Earnings/(loss) per share (cents) - continuing operations
Basic 1.6 (12.3)
Diluted 1.6 (12.3)
Earnings/(loss) per share (cents) - discontinued operations
Basic - (3.9)
Diluted - (3.9)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2010
GROUP
2010 2009
Audited Audited
R 000 R 000
Profit/(loss) for the year 2 214 (22 297)
Other comprehensive income for the year, net of taxation (5 905) (12 182)
Cash flow hedges
Current year net movement 952 (4 501)
Current year net taxation movement (258) 1 252
Available-for-sale assets
Current year gross movement 120 264
Foreign currency translation reserve
Current year gross movement (7 467) (9 826)
Current year taxation movement 748 629
Total comprehensive income/(loss) for the year (3 691) (34 479)
Attributable to:
Owners of the parent (3 691) (34 479)
Non-controlling interest - -
(3 691) (34 479)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2010
Audited
Share Share Trea- Foreign Other Accumu- Total
capital pre- sury curr- res- lated
mium shares ency- erves loss
trans-
lation
reserve
R 000 R 000 R 000 R 000 R 000 R 000 R 000
GROUP
Balance at
1 Jan 2009 6 972 396 996 (3 117) (3 185) 1 338 (69 080) 329 924
Total compre-
hensive loss
for 2009 (9 197) (2 985) (22 297) (34 479)
Balance at
31 Dec 2009 6 972 396 996 (3 117) (12 382) (1 647) (91 377) 295 445
Total compre-
hensive income
/(loss) for 2010 (6 719) 814 2 214 (3 691)
Transactions
with owners
Employee share
option scheme
Value of
services
provided 238 238
Balance at
31 Dec 2010 6 972 396 996 (3 117) (19 101) (595) (89 163) 291 992
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2010
GROUP
2010 2009
Audited Audited
R 000 R 000
Net cash generated from operating activities 34 484 59 782
Net cash utilised in investing activities (25 342) (19 750)
Net cash generated from/(utilised in) financing activities 3 796 (237)
Net cash inflow for the year 12 938 39 795
Forex translation adjustments on cash and cash equivalents 506 569
Cash and cash equivalents at the beginning of the year 28 254 (12 110)
Cash and cash equivalents at the end of the year 41 698 28 254
NOTES
FOR THE YEAR ENDED 31 DECEMBER 2010
1. Accounting policies and basis of preparation
The Group financial statements for the year ended 31 December 2010 are prepared
in accordance with International Financial Reporting Standards (IFRS), IAS 34 -
Interim Financial Reporting, the South African Companies Act, 1973 and in
compliance with the Listings Requirements of the JSE Limited.
These are the Group`s abridged consolidated financial statements for the year
for which annual financial statements are prepared in terms of IFRS.
The principal accounting policies used in preparing the audited results for the
year ended 31 December 2010 are consistent with those applied in the annual
financial statements for the year ended 31 December 2009 in terms of IFRS,
except for IFRS 8 Operating Segments, where the Board of Directors has re-
evaluated the basis of measuring normalised earnings before interest, tax,
depreciation and amortisation (normalised EBITDA) and has excluded inter-
segment service charges from the measure. Normalised EBITDA for 2009 has been
restated.
2. Reconciliation of EPS to headline EPS (cents)
Audited
2010
Continuing Discontinued
operations operations Total
Weighted average number
of shares in issue (000) 137 387
Profit for the year per share 1.6 - 1.6
Loss on disposal and scrapping
of property, plant and equipment - - -
Impairment of property, plant
and equipment 0.2 - 0.2
Tax effect (0.1) - (0.1)
Headline earnings per share 1.7 - 1.7
2009
Weighted average number
of shares in issue (000) 137 387
Loss for the year per share (12.3) (3.9) (16.2)
Reduction to profit on disposal
of fleet and vehicle management
businesses - 3.6 3.6
Loss on disposal and scrapping
of property, plant and equipment 1.8 - 1.8
Impairment of intangible assets 0.2 - 0.2
Tax effect (0.5) - (0.5)
Headline loss per share (10.8) (0.3) (11.1)
3. Trade receivables securitisation
At the end of March 2010 the CIDF securitisation funding arrangement was
replaced by a debtors finance facility.
4. Segmental information
Management has determined the operating segments based on the reports reviewed
by the Board of Directors and used by it to make strategic decisions.
The Group is organised on a worldwide basis in the following operating
segments:
OEM - Development and manufacture of electronic products for international
automotive, transportation and defence markets.
Aftermarket - The supply of premium branded products to the automotive
aftermarket in sub-Saharan Africa.
Head office - Service supplier to the Group including treasury and investment
management.
The Board of Directors assesses the performance of the operating segments based
on a measure of normalised earnings before interest, tax, depreciation and
amortisation (normalised EBITDA). This measurement basis excludes the effects
of non-recurring expenditure from operating segments, such as restructuring
costs; write-down of inventories (exited and discontinued product lines); and
impairments, which are a result of isolated, non-recurring events. The
measurement basis also excludes the effects of equity-settled share-based
payments; profits and losses on disposal and scrapping of property, plant,
equipment and intangible assets; inter-segment service charges; and the results
of discontinued operations.
Segmental information for the year ended 31 December 2010
GROUP
Audited
OEM After- Head Unallocated / Total
market office eliminations
R 000 R 000 R 000 R 000 R 000
External revenue 433 188 472 935 - - 906 123
Inter-segment revenue 3 478 - 19 314 (22 792) -
Total segment revenue 436 666 472 935 19 314 (22 792) 906 123
Normalised EBITDA 7 911 53 153 (16 734) (1 357) 42 973
Depreciation and
amortisation (16 558) (13 141) (78) 6 (29 771)
Finance income 770 1 227 2 770 (4 767) -
Finance costs (7 215) (8 890) (3 982) 8 792 (11 295)
Share of profit from
joint ventures 415 - - - 415
Taxation 4 287 (3 176) (8) (748) 355
Total assets 292 882 287 981 219 812 (246 888) 553 787
Investments in
joint ventures 980 - - - 980
Segmental information for the year ended 31 December 2009
GROUP
Audited
OEM After- Head Unallocated / Total
market office eliminations
R 000 R 000 R 000 R 000 R 000
External revenue 386 225 454 179 - - 840 404
Inter-segment revenue 1 582 - 27 406 (28 988) -
Total segment revenue 387 807 454 179 27 406 (28 988) 840 404
Normalised EBITDA 15 251 27 893 4 331 (14 954) 32 521
Depreciation and
amortisation (15 914) (14 688) (284) - (30 886)
Finance income 4 518 6 569 1 514 (12 298) 303
Finance costs (9 582) (11 452) (23 268) 30 151 (14 151)
Share of profit
from joint venture 148 - - - 148
Taxation 4 462 9 362 1 608 (629) 14 803
Total assets 298 904 350 135 354 968 (465 489) 538 518
Investments in
joint ventures 565 - - - 565
Inter-segment transfers or transactions are entered into under the normal
commercial terms and conditions that would also be available to unrelated
parties.
Segmental assets consist primarily of property, plant and equipment, intangible
assets, inventories, trade and other receivables, deferred income tax assets,
available-for-sale financial assets, cash and cash equivalents, financial
assets at fair value through profit or loss, current income tax assets and
derivatives designated as hedges of future commercial transactions.
Reconciliation of normalised EBITDA to the profit/(loss)
for the year from continuing operations
GROUP
2010 2009
Audited Audited
R 000 R 000
Normalised EBITDA 42 973 32 521
Depreciation and
amortisation (29 771) (30 886)
Impairment of intangible assets and
property, plant and equipment (222) (288)
Write-down of inventories - (14 551)
Restructuring costs - (2 264)
Loss on disposal and scrapping of property,
plant and equipment (3) (2 523)
Share based payments expense (238) -
Operating profit/(loss) 12 739 (17 991)
Net finance costs (11 295) (13 848)
Share of profit from joint ventures 415 148
Profit/(loss) before taxation 1 859 (31 691)
Taxation 355 14 803
Profit/(loss) for the year 2 214 (16 888)
Registered office: 28 Wiganthorpe Road, Willowton, Pietermaritzburg 3201
Directors: JPS O`Leary* (Irish, Chairman), R Friedman (Managing),
SV Bromfield*, FE Giliomee (Financial), SD Rogers, IH Scott-Gall* (British),
PM Surgey*, A Watson*
* independent, non-executive
www.ci.co.za
Sponsor
Investec Bank Limited
15 March 2011
Date: 15/03/2011 09:52:00 Supplied by www.sharenet.co.za
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