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INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2012
METAIR INVESTMENTS LIMITED
(Reg No. 1948/031013/06) Share code: MTA ISIN code: ZAE 000090692
(Incorporated in the republic of South Africa)
("Metair" or "the group")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2012
HEPS increased 12% to 143cps
Cash generated from operations of R455 million
EBITDA improved by 11% to R397 million
Group income statements
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
R'000 R'000 R'000
Unaudited Unaudited Audited
Revenue 2 589 466 2 051 834 4 294 152
Cost of sales (2 004 041) (1 584 247) (3 376 719)
Gross profit 585 425 467 587 917 433
Other operating income 21 037 39 645 43 599
Net insurance recovery 28 370 122 637
Impairment charges (7 900)
Distribution, administrative and other expenses (281 047) (227 845) (499 546)
Operating profit 325 415 307 757 576 223
Interest income 11 125 5 436 14 296
Interest expense (12 210) (4 013) (7 858)
Share of results of associates 13 132 8 735 19 339
Profit before taxation 337 462 317 915 602 000
Taxation (104 378) (85 328) (150 906)
Profit for the period 233 084 232 587 451 094
Attributable to:
Equity holders of the company 202 438 207 985 408 365
Non-controlling interests 30 646 24 602 42 729
233 084 232 587 451 094
Depreciation and amortisation (58 424) (42 270) (89 150)
Basic earnings per share (cents) 143 147 289
Headline earnings per share (cents) 143 128 260
Number of shares in issue ('000) 152 532 152 532 152 532
Number of shares in issue excluding treasury shares ('000) 141 706 141 203 141 451
Weighted average number of shares in issue ('000) 141 624 141 159 141 217
Calculation of headline earnings per share (R'000)
Net profit attributable to ordinary shareholders 202 438 207 985 408 365
Profit on insurance recovery and impairment charges (28 370) (41 492)
Taxation effect of insurance recovery and impairment charges 5 663 4 813
Impairment charges attributable to non-controlling shareholders (202)
Loss/(profit) on disposal of property, plant and equipment 184 (4 509) (3 671)
Headline earnings 202 622 180 769 367 813
Diluted earnings per share
Basic earnings per share (cents) 138 144 283
Headline earnings per share (cents) 139 125 255
Weighted average number of shares in issue ('000) 141 624 141 159 141 217
Adjustment for dilutive share options ('000) 4 549 3 248 2 959
Number of shares used for diluted earnings calculation ('000) 146 173 144 407 144 176
Group Statements of Comprehensive Income
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
R'000 R'000 R'000
Unaudited Unaudited Audited
Profit for the period 233 084 232 587 451 094
Other comprehensive income:
Actuarial losses recognised (5 345)
Cash flow hedges (8 898) (4 821)
Currency translation differences (492)
Taxation on other comprehensive income 2 645
Net other comprehensive income (9 390) (7 521)
Total comprehensive income for the period 223 694 232 587 443 573
Attributable to:
Equity holders of the company 193 048 207 985 401 033
Non-controlling interests 30 646 24 602 42 540
223 694 232 587 443 573
Group Balance Sheets
30 June 30 June 31 December
2012 2011 2011
R'000 R'000 R'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 1 061 554 730 453 762 752
Intangible assets 85 583 25 325 22 718
Investment in associates 56 271 41 818 44 582
Defined benefit asset 7 402
Deferred taxation 12 285 11 266
1 215 693 804 998 841 318
Current assets
Inventory 763 131 608 245 693 646
Trade and other receivables 757 637 551 607 518 527
Derivative financial assets 2 261 111 615
Taxation 6 342
Cash and cash equivalents 497 717 320 569 421 678
2 020 746 1 480 532 1 640 808
Total assets 3 236 439 2 285 530 2 482 126
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 42 876 42 876 42 876
Treasury shares (111 309) (115 176) (113 509)
Share-based payment reserve 28 482 4 717 17 542
Hedging reserve (3 471)
Foreign currency translation reserve (492)
Non-distributable reserve 50 183 36 730 39 494
Retained earnings 1 689 528 1 405 909 1 599 664
Ordinary shareholders' equity 1 699 268 1 375 056 1 582 596
Non-controlling interests 109 894 134 543 118 812
Total equity 1 809 162 1 509 599 1 701 408
Non-current liabilities
Borrowings 218 542 40 785 27 458
Post-employment medical benefits 25 662 21 579 25 074
Deferred taxation 73 412 52 590 64 118
317 616 114 954 116 650
Current liabilities
Trade and other payables 718 270 551 002 533 374
Borrowings 262 703 20 527 24 627
Taxation 3 789 10 449 7 541
Provisions for liabilities and charges 77 186 63 235 60 651
Dividends payable 12 510
Derivative financial liabilities 755 1 790 12 769
Bank overdrafts 34 448 13 974 25 106
1 109 661 660 977 664 068
Total liabilities 1 427 277 775 931 780 718
Total equity and liabilities 3 236 439 2 285 530 2 482 126
Net asset value per share (cents) attributable to ordinary shareholders
calculated on number of shares in issue excluding treasury shares 1 199 974 1 119
Capital expenditure 87 581 75 589 162 146
Capital commitments:
contracted 201 719 51 839 24 913
authorised but not contracted 147 791 78 127 182 573
Group Statements of Cash Flows
Six months ended Year ended
30 June 30 June 31 December
2012 2011 2011
R'000 R'000 R'000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 337 462 317 915 602 000
Non-cash items 57 737 28 893 26 405
Working capital changes 59 548 (97 600) (178 005)
Cash generated from operations 454 747 249 208 450 400
Finance charges (12 210) (4 013) (7 858)
Taxation paid (97 930) (66 292) (126 833)
Dividends paid (132 104) (95 824) (130 102)
Dividend income from associates 2 443 8 993
Net cash inflow from operating activities 214 946 83 079 194 600
Investing activities
Investment income 11 125 5 436 14 296
Net cash used in other investing activities (529 264) (65 676) (102 472)
Net cash outflow from investing activities (518 139) (60 240) (88 176)
Net cash inflow/(outflow) from financing activities 369 890 (6 068) 324
Net increase in cash and cash equivalents 66 697 16 771 106 748
Cash and cash equivalents at beginning of period 396 572 289 824 289 824
Cash and cash equivalents at end of period 463 269 306 595 396 572
Segmental Review
Revenue Profit before interest and taxation
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 30 June 30 June 31
2012 2011 December 2012 2011 December
R'000 R'000 2011 R'000 R'000 2011
Unaudited Unaudited Audited Unaudited Unaudited Audited
Local
Original equipment* 1 608 915 1 285 011 2 697 984 176 348 149 998 276 631
Aftermarket 519 491 433 776 893 159 84 326 91 486 194 157
Non-auto 244 798 206 134 441 385 32 684 34 993 58 956
2 373 204 1 924 921 4 032 528 293 358 276 477 529 744
Direct exports
Original equipment 50 500 45 789 86 201 9 373 (3 631) (7 941)
Aftermarket 149 508 65 622 139 060 14 325 9 727 20 698
Non-auto 16 254 15 502 36 363 1 116 431 2 782
216 262 126 913 261 624 24 814 6 527 15 539
Property rental 31 833 30 436 60 873 29 106 29 991 59 980
Reconciling items ** (31 833) (30 436) (60 873) (8 731) 3 497 (9 701)
Total 2 589 466 2 051 834 4 294 152 338 547 316 492 595 562
Net interest income (1 085) 1 423 6 438
Profit before taxation 337 462 317 915 602 000
* Included in this number is direct exports done by local OEMs.
** The reconciling items relate to Metair head office companies as well as property rental.
Group Statements of Changes in Equity
Share Share- Foreign Non- Attributable Non-
capital based currency distri- to equity control-
and Treasury payment Hedging translation butable Retained holders of ling Total
R'000 premium shares reserve reserve reserve reserve earnings the company interests equity
Balance at 1 January 2011 42 876 (116 084) 2 813 29 148 1 297 256 1 256 009 113 910 1 369 919
Net profit for the period 207 985 207 985 24 602 232 587
Total comprehensive income for
the period 207 985 207 985 24 602 232 587
Employee share option scheme:
Value of services provided 2 270 2 270 105 2 375
Loss on settlement (366) (366) (366)
Net movement in treasury shares 908 908 908
Transfer of associate profit and
dividend 7 582 (7 582)
Dividend ** (91 750) (91 750) (4 074) (95 824)
Balance at 30 June 2011 42 876 (115 176) 4 717 36 730 1 405 909 1 375 056 134 543 1 509 599
Net profit for the period 200 380 200 380 18 127 218 507
Other comprehensive income (3 471) (3 861) (7 332) (189) (7 521)
Total comprehensive income for
the period (3 471) 196 519 193 048 17 938 210 986
Employee share option scheme:
Value of services provided 2 145 2 145 609 2 754
Loss on settlement (701) (701) (701)
Deferred taxation 11 381 11 381 11 381
Net movement in treasury shares 1 667 1 667 1 667
Transfer of associate profit and
dividend 2 764 (2 764)
Dividend (34 278) (34 278)
Balance at 31 December 2011 42 876 (113 509) 17 542 (3 471) 39 494 1 599 664 1 582 596 118 812 1 701 408
Net profit for the period 202 438 202 438 30 646 233 084
Other comprehensive income (8 898) (492) (9 390) (9 390)
Total comprehensive income for
the period (8 898) (492) 202 438 193 048 30 646 223 694
Employee share option scheme:
Value of services provided 3 688 3 688 157 3 845
Loss on settlement (1 274) (1 274) (1 274)
Deferred taxation 8 526 8 526 8 526
Net movement in treasury shares 2 200 2 200 2 200
Acquisition of non-controlling
interest in Rombat SA 3 008 3 008
Rombat acquisition
currency hedging 12 369 12 369 12 369
Transfer of associate profit and
dividend 10 689 (10 689)
Dividend * (101 885) (101 885) (42 729) (144 614)
Balance at 30 June 2012 42 876 (111 309) 28 482 (492) 50 183 1 689 528 1 699 268 109 894 1 809 162
* An ordinary dividend of 72 cents per share has been declared in respect of the year ended 31 December 2011.
** An ordinary dividend of 65 cents per share has been declared in respect of the year ended 31 December 2010.
Notes to the Group Interim Condensed Financial Statements
Accounting policies
These condensed interim financial statements have
been prepared in accordance with the recognition and
measurement criteria of all applicable statements and
interpretations of International Financial Reporting
Standards ("IFRS") in issue and effective for the
Group at 30 June 2012 and is presented in terms of
the disclosure requirements set out in IAS34 Interim
Financial Reporting and AC 500 standards as issued
by the Accounting Practices Board, or its successor,
and comply with the Listings Requirements of the
JSE Limited. The accounting policies applied to the
condensed abridged financial statements are consistent
with those used in the annual financial statements for
the year ended 31 December 2011.
This interim report has not been reviewed or audited
by the auditors.
Fair value adjustments 30 June 30 June 31 December
on financial instruments 2012 2011 2011
Assets Liabilities Assets Liabilities Assets Liabilities
Forward exchange contracts
fair value hedges 2 261 755 111 1 790 615 12 769
Business combinations
On 14 March 2012, the Group acquired 99,16% of the issued shares of Rombat SA ("Rombat").
Rombat is a joint stock company incorporated under Romanian law and is a manufacturer
of "lead-acid batteries" for the original equipment manufacturers (OEM), aftermarket, non-
automotive and export segments. Rombat was acquired to complement the Group's existing
battery operations and to deliver strategic and financial benefits.
Total consideration transferred amounted to R449 million in cash. The provisional goodwill of
R33 million arising from the acquisition is attributable to the anticipated profitability arising
from the Group's access to new geographic markets, increased supply and the anticipated future
operating synergies from the combination.
The following table summarises the consideration paid for Rombat and the amounts of the assets
acquired and liabilities assumed recognised at the acquisition date.
Recognised amounts of identifiable assets R'000 Provisional
acquired and liabilities assumed: fair value
Assets
Trademark and other intangible assets 30 003
Property, plant and equipment 271 186
Inventory 97 368
Trade and other receivables 185 473
Cash and cash equivalents 111 386
695 416
Liabilities
Borrowings (61 542)
Provisions (2 363)
Trade and other payables (103 408)
Bank overdraft (96 755)
Net deferred taxation (11 594)
(275 662)
Total identifiable net assets 419 754
Less: Non-controlling interest (3 008)
Goodwill 32 608
Purchase consideration (including currency hedging) 449 354
Acquisition-related costs included in administration expenses in the Group consolidated income
statement for the period ended 30 June 2012 amounted to R7,4 million.
Trade receivables with a fair value of R183 million is included within trade and other receivables
and R10 million is considered doubtful. None of the goodwill recognised is expected to be
deductible for income tax purposes.
In respect of this acquistion, the cash consideration of 42,8 million has been translated at an
effective closing rate of R10,50 and includes the impact of hedging. The purchase price, assets
acquired and liabilities assumed are still provisional pending the final valuation for intangible
assets and certain tangible assets, liabilities and contingent liabilities. This will be finalised before
31 December 2012. This may impact the purchase price over the net assets acquired. Intangible
assets will be considered for amortisation over their useful lives.
Non-controlling interest has been calculated based on their proportionate share in net assets.
Impact of the acquisition on the results of the Group R'000
From the dates of acquisition, the acquired businesses contributed:
Revenue 147 864
Attributable profit 6 891
Had the acquisition been consolidated from 1 January 2012 the income statement would have
included:
Revenue 284 848
Attributable profit 12 617
Borrowings
During the year the Group repaid borrowings of R30,7 million (2011: R11,4 million) and raised long-
term loans of R221,7 million (2011: R18,4 million) and short-term loans of R176,6 million.
Borrowings of R61,5 million were acquired through the acquisition of Rombat SA.
Contingencies
The bank and other guarantees given by the Group to third parties amounted to R3,7 million as at
30 June 2012 (2011: R4,4 million).
COMMENTARY
Interim Result
Metair has produced a satisfactory set of financial results for the half-year ended 30 June 2012.
Headline earnings per share increased by 12% to 143 cents per share (cps) (2011: 128 cps).
The Group generated EBITDA of R397 million and cash from operations remained strong at
R455 million. During the period we continued to deliver on our stated strategy and in March we
acquired the Romanian battery manufacturer Rombat. The Rombat acquisition forms part of the
Group's Start/Stop Battery Development and Commercialisation Programme.
Group Operating Performance
Revenue increased by 26% to R2 589 million from R2 052 million in the comparable period and
gross profit increased by 25% to R585 million from R468 million.
Distribution, administration and other expenses increased to R281 million from R228 million.
Distribution expenses of R75 million (2011: R65 million) represented 2,9% of revenue
(2011: 3,2%). Administration and other expenses include R7,4 million of acquisition costs and
R9 million of Rombat expenses.
The effective tax rate for the period after adjusting for associate income was 32,2% (2011: 27,6%).
STC contributed 3% (2011: 3%) to the effective rate and exempt and non-deductible expenditure
contributed 1% (2011: (4%)).
The comparable period included a once-off net insurance recovery of R28 million. Thus, although
headline earnings per share increased by 12%, earnings per share decreased by 3% to 143 cps.
Total assets increased to R3 236 million from R2 482 million at the 2011 year-end. The acquisition
of Rombat contributed R695 million of the increase, of which R63 million was allocated to
intangible assets (R30 million relates to trademarks and R33 million relates to goodwill). Net asset
value increased to R11,99 per share from R11,19 at year-end.
Cash and cash equivalents net of debt and overdrafts was negative R18 million at the end of
the period compared to a positive R345 million at year-end. During the reporting period capital
expenditure of R88 million was incurred, tax payments of R98 million were made and a dividend
of R132 million was paid. The R449 million acquisition of Rombat was funded from cash resources
and debt.
Review of Operations
Original Equipment (OE)
Local vehicle production declined by 2,1% to 235 557 vehicles from the 240 721 vehicles produced
in the comparable period. The National Association of Automobile Manufacturers is forecasting
production of 555 000 vehicles for 2012. During the period the Ford Ranger export programme
was launched.
Metair will continue to support and invest in the OE segment and will focus intently on delivering
internationally benchmarked cost-competitive, quality products to its customers. Our strategy of
bringing balance to the OE segment by diversifying our customer and product base, combined with
new vehicle launches, contributed to the 25% revenue growth in this segment, notwithstanding the
lower local production volumes. We expect healthy demand from our OE customers for the balance
of the year.
The entrance of international low-cost manufacturers during the period will increase the
competitiveness of this segment of our business.
Aftermarket, non-automotive and exports
The local and export aftermarket and non-automotive segment's performance was satisfactory.
During the period First National Battery returned to operational normality. However, its margins
remained under pressure as it recovered the market share it lost as a consequence of the fire in
April last year and warranty claims were slightly higher than expected. We expect growth from this
segment as the acquisition of Rombat adds balance to the Group's segmental mix.
Notwithstanding the decline in South African vehicle production referred to above, South African
vehicles sales increased by 9% from 272 946 in the comparable period to 298 883. The growing
South African vehicle parc bodes well for the aftermarket segment.
Rombat acquisition
The acquisition of Rombat was successfully concluded on 14 March 2012 with Metair purchasing
99,16% of Rombat.
The integration of Rombat is progressing well and included in the results for this period is a
positive contribution of R6,9 million. Rombat's management and staff remain highly motivated and
enthused by having Metair as a shareholder. Technical aid has been transferred both to and from
Rombat. Yields at Rombat's lead smelter have improved and are now almost comparable to those at
First National Battery, when the right volume and mix of recycled bullion is available. Management
and reporting structures are in place and functioning efficiently. Rombat, First National Battery and
Metair management are working hard at extracting cost savings and synergies.
In March of this year capital expenditure of 16 million (R168 million) was approved at Rombat for
the addition of a state-of-the-art Start/Stop battery production facility. Rombat has secured state
grants of 8 million (R84 million) for this production facility. The facility is on schedule and the
intention is that it will be commissioned by mid-December 2012.
Historically, Rombat's trading in the second half of the year is better than the first half as demand
peaks in the change of season from summer to winter. This may introduce some cyclicality into Metair's
earnings. Management is formulating strategies to utilise Rombat's capacity throughout the year.
Start/Stop Battery Development and Commercialisation Programme
The development and marketing of the Group's Start/Stop battery product range is proceeding
according to plan and expectations. Since February, First National Battery has been supplying an
OE customer with all its local Start/Stop requirements. Discussions are ongoing with our other
OE customers for both local and export contracts. These customers will in future be supplied by
First National Battery and from the new Rombat production facility referred to above. We remain
optimistic about the future of the Start/Stop battery market and our positioning in this market.
Prospects
Metair is entering a critical phase as we target the full integration of Rombat into the Group and
compete for major business relating to future vehicle launches in South Africa. These planned vehicle
launches will lay the foundation for the local vehicle production volumes under the new Automotive
Production and Development Programme that takes effect from January 2013. The new programme
will operate from 2013 to 2020.
A number of local vehicle manufacturers are currently studying the feasibility of increasing their
local production volumes over the next two years.
Although Metair's performance is dependent on, inter alia, the successful execution of our strategy,
OE volumes and the exchange rate, we expect performance for the full year to be satisfactory.
Signed on behalf of the Board
O M E Pooe Chairman C T Loock Managing Director
JOHANNESBURG
16 August 2012
The interim results presentation will be available on the Company's website (www.metair.co.za)
and an investor and analyst audio webcast of the presentation will be broadcast on
Monday 20 August 2012 at 10h00. The audio webcast can be accessed through
http://www.corpcam.com/Metair20082012.
Alternatively a telephone conference call facility will be available at 10h00 on
Monday 20 August 2012 in SA on 011 535 3600 / 010 201 6616
or internationally on +27 11 535 3600 / +27 10 201 6616.
REGISTRARS SPONSOR INVESTOR RELATIONS
Computershare Investor One Capital College Hill
Services (Pty) Limited
70 Marshall Street
JOHANNESBURG 2001
The interim report was produced by Mr BM Jacobs (Finance Director) B Comm B Acc CA(SA).
EXECUTIVE DIRECTORS: CT Loock (Managing); BM Jacobs (Finance)
NON-EXECUTIVE DIRECTORS: OME Pooe (Chairman); A Joffe
INDEPENDENT NON-EXECUTIVE DIRECTORS: RS Broadley; L Soanes*; A Galiel; JG Best
COMPANY SECRETARY: SM Vermaak *British
Date: 17/08/2012 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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