Wrap Text
Unaudited Interim Results
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 Group")
INTERIM RESULTS
for the six months ended 30 June 2012
HIGHLIGHTS FROM CONTINUING OPERATIONS
- Revenue R269.96 million - increase 7.19%
- Operating profit R13.29 million - increase 25.70%
- Profit after tax R6.79 million - up from R1.94 million
- Earnings per share 4.93 cents - up from 1.41 cents
OVERVIEW
Management's focus during the first half of 2012 centred on the execution of the decision to exit the
original equipment manufacturing ("OEM") business, downsize the Head Office and transition the Group
to a focused aftermarket business. The results from continuing operations, for the period under review, are
a satisfactory reflection of the progress that is being made in these areas.
The OEM business has been reflected as a discontinued operation and the financial impact of exiting this
business has been excluded from the highlights.
Revenue from continuing operations for the six months ended 30 June 2012 compared with the same
period last year is up 7.19% from R251.84 million to R269.96 million. Gross profit increased 10.44%
to R82.65 million compared with R74.84 million. The increase in net expenses, which included further
investment in marketing, was well contained at 7.93%. Operating profit of R13.29 million represents a
25.70% increase compared with R10.57 million for the same period in the previous year. Net profit after
tax increased from R1.94 million to R6.79 million.
Earnings per share from continuing operations for the six months ended 30 June 2012 improved to
4.93 cents compared with 1.41 cents (restated) in the corresponding period in the previous year.
Headline earnings per share from continuing operations increased from 2.0 cents (restated) to 6.58 cents.
The impact of the decision taken by the Board of Directors during the first half of 2012 to disinvest from
the remaining non-performing OEM operation, Pi Shurlok (Proprietary) Limited, based in Pietermaritzburg
("Pi Shurlok") is reflected in the results under discontinued operations. The net loss relating to the write-
off of the investment, Group commitments and trading losses for the six months ended 30 June 2012 is
R58.80 million.
The exit from the OEM business will enable the Group to focus on the aftermarket business and dedicate
the necessary resources and management time to building on its solid profitable performance.
CONTINUING OPERATIONS
AFTERMARKET
A continued focus on marketing and distribution in the Aftermarket business has contributed to a
satisfactory performance.
In addition the strengthened management team is implementing a number of initiatives aimed at
(i) strengthening strategic relationships with our primary customers and warehouse distributors;
(ii) focusing on operational efficiencies; (iii) securing new brands; and (iv) expanding the business into
sub-Saharan Africa.
As part of its strategy to secure new brands CI Automotive has concluded a strategic partnership with
TMD to market and distribute the TEXTAR brand in sub-Saharan Africa. TMD is a global leader in the
manufacture of brake friction products supplying an extensive range of aftermarket friction brands into
the global independent aftermarket. CI Automotive has also introduced a range of lighting products under
a newly secured North American brand, VisionX. Both TMD and VisionX complement CI Automotive's
existing basket of branded products.
The company's vision is to be the leading supplier of choice for branded automotive parts in sub-Saharan
Africa. In line with this it will continue to look for brands and companies with a recognised pedigree in the
automotive aftermarket.
The continued investment in product development to meet the demands of the increasingly diverse vehicle
parc in South Africa is seen as essential to the growth of CI Automotive's flagship brand, Gabriel. In the
period under review, new product development contributed approximately 4% towards the growth in sales
of the Gabriel brand.
Improving the operating margin of the business remains a key focus area. Core to achieving this is a
disciplined approach to reducing the 'cost to serve' through operational efficiencies.
The manufacturing operations are engaged in a number of projects which are aimed at reducing material
and input costs over the next twenty four months.
Rigorous cost management, effective selling strategies, focused service delivery and the expansion into sub-
Saharan Africa remain core to all management activities.
HEAD OFFICE
Part of the restructuring process, following the Group's exit from its international OEM operations at the
end of 2011, was the rationalisation of the Head Office. This process realised the anticipated savings. The
normalised EBITDA loss for the Head Office decreased from R6.62 million in the corresponding previous
period to R2.26 million in the period under review.
DISCONTINUED OPERATIONS
OEM
The steps taken to reduce the Group's exposure to the poor performance of Pi Shurlok for the six months
under review, pending the disposal of the business, were successful and the operating losses incurred during
2011 were curtailed. These steps included restructuring the business, discontinuing products that were no
longer profitable and achieving an increased margin on the products that continued to be manufactured.
As shareholders have been advised in the cautionary announcements dated 15 June, 9 July and 20 August
2012 the Group is currently negotiating with PFK Electronics (Pty) Limited regarding the sale of Pi Shurlok.
This is in line with our stated intention to exit the OEM business and focus primarily on the aftermarket
business.
Shareholders will be kept up to date and advised as soon as there are any further developments.
PROSPECTS
While the automotive aftermarket remains highly competitive, the prevailing market conditions appear to
be supportive of the business's strategic initiatives that are focused on realising the growth opportunities
materialising in the South African and sub-Saharan Africa automotive markets.
JPS O'LEARY SD ROGERS
Chairman Chief Executive Officer
26 September 2012
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
This interim report has been prepared in terms of IAS34 - Interim Financial Reporting, under the supervision
of the Group Financial Director, FE Giliomee CA(SA); the requirements of the South African Companies
Act, No. 71 of 2008; and in compliance with the Listings Requirements of the JSE Limited.
The accounting policies used are consistent with those applied in the financial statements for the year ended
31 December 2011 and IFRS. Certain reallocations were made to the income statement for continued
operations for the prior periods to achieve improved comparability.These reallocations have had no impact
on profit; statement of financial position; statement of changes in equity; or statement of cash flows. The
prior periods have also been restated to account for discontinued operations as reflected in the notes to
the financial results.
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
30/06/12 30/06/11 31/12/11
Restated Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
CONTINUING OPERATIONS
Revenue 269 955 251 839 535 802
Cost of sales (187 307) (177 001) (384 484)
Gross profit 82 648 74 838 151 318
Other operating income 4 914 1 512 2 832
Marketing and selling expenses (30 520) (27 036) (55 143)
Administrative expenses (20 719) (20 833) (43 955)
Other operating expenses (23 036) (17 911) (37 126)
Operating profit 13 287 10 570 17 926
Finance income 7 88
Finance costs (2 092) (6 690) (5 980)
Profit before taxation 11 202 3 880 12 034
Taxation (4 415) (1 943) (2 917)
Profit for the period from continuing
operations 6 787 1 937 9 117
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations (58 804) (9 216) (156 900)
Loss for the period (52 017) (7 279) (147 783)
Attributable to:
Owners of the parent (52 017) (7 279) (147 783)
Non-controlling interests
(52 017) (7 279) (147 783)
Net number of shares issued (000)
Total shares in issue (excluding treasury shares) 137 587 137 587 137 587
Weighted average number of shares in issue 137 587 137 394 137 492
Adjustment for share options
Weighted average number of shares for diluted
earnings per share 137 587 137 394 137 492
Earnings/(loss) per share (cents)
Continuing operations 4.93 1.41 6.63
Discontinued operations (42.74) (6.71) (114.12)
Total (37.81) (5.30) (107.49)
Diluted earnings/(loss) per share (cents)
Continuing operations 4.93 1.41 6.63
Discontinued operations (42.74) (6.71) (114.12)
Total (37.81) (5.30) (107.49)
Calculation of headline earnings/(loss)
Continuing operations
Net profit after tax for the period 6 787 1 937 9 117
(Profit)/loss on disposal and scrapping of property,
plant and equipment (170) (4) 297
Impairment of property, plant and equipment 2 418 1 253
Impairment of intangible assets 225
Disposal of available-for-sale assets 816 816
Tax on the above 25 2 (432)
9 060 2 751 11 276
Headline earnings per share (cents) 6.58 2.00 8.20
Discontinued operations
Net loss after tax for the period (58 804) (9 216) (156 900)
(Profit)/loss on disposal and scrapping of property,
plant and equipment (2 327) (7) (837)
Impairment of property, plant and equipment 2 424
Impairment of intangible assets 50 954
Realisation of foreign currency translation reserve 8 014
Remeasurement loss on discontinued operations 56 195
Tax on the above 337 501
(4 599) (9 223) (95 844)
Headline loss per share (cents) (3.34) (6.71) (69.71)
Total operations
Net loss after tax for the period (52 017) (7 279) (147 783)
(Profit)/loss on disposal and scrapping of property,
plant and equipment (2 497) (11) (540)
Impairment of property, plant and equipment 2 418 3 677
Impairment of intangible assets 51 179
Disposal of available-for-sale assets 816 816
Realisation of foreign currency translation reserve 8 014
Remeasurement loss on discontinued operations 56 195
Tax on the above 362 2 69
4 461 (6 472) (84 568)
Total headline earnings/(loss) per share (cents) 3.24 (4.71) (61.51)
Diluted headline profit/(loss) per share (cents)
Continuing operations 6.58 2.00 8.20
Discontinued operations (3.34) (6.71) (69.71)
Total 3.24 (4.71) (61.51)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
30/06/12 30/06/11 31/12/11
Restated Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
Loss for the period (52 017) (7 279) (147 783)
Other comprehensive income for the period,
net of tax
167 4 547 20 348
Fair value adjustment on available-for-sale assets,
net of tax 210 318 368
Cash flow hedges, net of tax (43) 799 879
Foreign currency translation reserve, net of tax 3 430 19 101
Total comprehensive loss for the period (51 850) (2 732) (127 435)
Attributable to:
Owners of the parent (51 850) (2 732) (127 435)
Non-controlling interests
(51 850) (2 732) (127 435)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30/06/12 30/06/11 31/12/11
Unaudited Unaudited Audited
R 000 R 000 R 000
ASSETS
Non-current assets 138 133 280 888 197 454
Property, plant and equipment 59 712 120 072 115 987
Intangible assets 77 004 124 051 79 069
Investments in joint ventures 1 224 1 191
Available-for-sale financial assets 530 270 320
Deferred income tax assets 887 35 271 887
Current assets 187 078 306 026 247 476
Inventories 100 975 150 706 113 459
Trade and other receivables 64 790 150 892 71 322
Derivative financial instruments 1
Financial assets at fair value through profit
or loss 335 171 202
Current income tax assets
Cash and cash equivalents 20 978 4 256 62 493
Total assets 325 211 586 914 444 930
EQUITY AND LIABILITIES
Capital and reserves 115 887 290 400 166 941
Share capital 6 972 6 972 6 972
Share premium 396 996 396 996 396 996
Treasury shares (2 813) (2 813) (2 813)
Foreign currency translation reserve (15 671)
Other reserves 2 214 711 1 719
Accumulated loss (287 482) (95 795) (235 933)
Non-current liabilities 30 680 39 346 42 711
Borrowings 4 691 9 888 11 728
Deferred income tax liabilities 23 863 25 844 23 648
Provisions 2 126 3 614 7 335
Current liabilities 178 644 257 168 235 278
Trade and other payables 85 277 165 315 134 623
Current income tax liabilities 2 824 2 877 1 657
Derivative financial instruments 167 303 190
Borrowings 60 790 85 109 80 917
Provisions 29 586 3 564 17 891
Total equity and liabilities 325 211 586 914 444 930
Net asset value per share (cents) 84 211 121
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
30/06/12 30/06/11 31/12/11
Unaudited Unaudited Audited
R 000 R 000 R 000
Net cash generated from/(utilised in) operating activities (47 553) (37 190) 35 482
Net cash utilised in investing activities (4 443) (7 875) (19 380)
Net cash generated from/(utilised in) financing activities (370) 206 632
Net cash inflow/(outflow) for the period (52 366) (44 859) 16 734
Forex translation adjustments on cash and cash
equivalents (274) (811)
Cash and cash equivalents at the beginning of the
period 57 621 41 698 41 698
Cash and cash equivalents at the end of the period 5 255 (3 435) 57 621
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency Accumu-
Share Share Treasury translation Other lated
capital premium shares reserve reserves loss Total
R 000 R 000 R 000 R 000 R 000 R 000 R 000
Balance at 1 January
2011 (audited) 6 972 396 996 (3 117) (19 101) (595) (89 163) 291 992
Total comprehensive
income/(loss)
for the period 3 430 1 117 (7 279) (2 732)
Loss for the period (7 279) (7 279)
Other comprehensive
income for the period 3 430 1 117 4 547
Transactions with
owners
Employee share
option scheme
Value of services
provided 740 740
Transferred to
accumulated loss (551) 551 -
Movement of treasury
shares 304 96 400
Balance at 30 June
2011 (unaudited) 6 972 396 996 (2 813) (15 671) 711 (95 795) 290 400
Total comprehensive
income/(loss)
for the period 15 671 130 (140 504) (124 703)
Loss for the period (140 504) (140 504)
Other comprehensive
income for the period 15 671 130 15 801
Transactions with
owners
Employee share
option scheme
Value of services
provided 1 244 1 244
Transferred to
accumulated loss (366) 366 -
Balance at 31
December 2011
(audited) 6 972 396 996 (2 813) - 1 719 (235 933) 166 941
Total comprehensive
income for the period 167 (52 017) (51 850)
Profit for the period (52 017) (52 017)
Other comprehensive
income for the period 167 167
Transactions with
owners
Employee share
option scheme
Value of services
provided 796 796
Transferred to
accumulated loss (468) 468
Balance at 30 June
2012 (unaudited) 6 972 396 996 (2 813) 2 214 (287 482) 115 887
SEGMENTAL INFORMATION
Primary reporting format business segments
At 30 June 2012, the Group is based in South Africa and operates in the South African and
sub-Saharan African markets. It is organised in the following business segments:
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.
For the 6 months ended 30 June 2012 (unaudited)
After- Head Unallocated/
market Office eliminations Total
External revenue 269 955 269 955
Inter-segment revenue 6 960 (6 960)
Total segment revenue 269 955 6 960 (6 960) 269 955
Normalised EBITDA 26 443 (2 264) (199) 23 980
For the 6 months ended 30 June 2011 (restated and unaudited)
External revenue 251 839 251 839
Inter-segment revenue 6 840 (6 840)
Total segment revenue 251 839 6 840 (6 840) 251 839
Normalised EBITDA 25 085 (6 623) 1 214 19 676
For the year ended 31 December 2011 (restated and audited)
External revenue 535 802 535 802
Inter-segment revenue 15 732 (15 732)
Total segment revenue 535 802 15 732 (15 732) 535 802
Normalised EBITDA 50 392 (10 652) 308 40 048
Reconciliation of normalised EBITDA to operating profit for
continuing operations:
Six months Six months Year
ended ended ended
30/06/12 30/06/11 31/12/11
Restated Restated
Unaudited Unaudited Audited
Normalised EBITDA from continuing
operations 23 980 19 676 40 048
Depreciation and amortisation (7 782) (7 836) (15 846)
Impairment of intangible assets and of
property, plant and equipment (2 418) (1 478)
Restructuring costs (2 181)
Profit/(loss) on disposal and scrapping of
property, plant and equipment 170 4 (297)
Loss on disposal of financial assets for
available-for-sale (816) (816)
Share-based payments expense (663) (458) (1 504)
Operating profit 13 287 10 570 17 926
Note: For a reconciliation of operating profit/(loss) to the total profit/(loss) before
taxation refer to the "Consolidated Income Statement".
NOTES
1) Discontinued operations - OEM segment
The discontinued operations relate to the Group's foreign and local OEM operations,
which comprised Pi Shurlok in the United Kingdom, the United States of America and
South Africa. The Group made a decision in October 2011 to exit the foreign operations
and is still in negotiations to dispose of the local OEM business.
The following financial results relate to the foreign and local OEM operations:
Six months Six months Year
ended ended ended
30/06/12 30/06/11 31/12/11
Restated Restated
Unaudited Unaudited Audited
R 000 R 000 R 000
Revenue 102 729 199 358 390 228
Cost of sales (70 320) (142 303) (280 403)
Gross profit 32 409 57 055 109 825
Other operating income 2 686 1 068 4 230
Marketing and selling expenses (2 185) (3 414) (6 602)
Administrative expenses (5 707) (22 525) (42 947)
Other operating expenses (83 436) (46 372) (179 467)
Operating loss (56 233) (14 188) (114 961)
Finance costs (2 571) 1 203 (4 808)
Share of profit from joint ventures 244 211
Loss before taxation (58 804) (12 741) (119 558)
Taxation 3 525 (29 328)
Net loss of discontinued operations (58 804) (9 216) (148 886)
Realisation of translation reserve (8 014)
Loss for the period from discontinued
operations (58 804) (9 216) (156 900)
Cash flows from discontinued operations
Cash flows from operating activities (4 309) (10 552) (10 799)
Cash flows from investing activities 1 427 (5 564) (11 817)
Cash flows from financing activities (5 563) (1 301) (1 027)
Effect on cash flows (8 445) (17 417) (23 643)
2) Reallocations
The following reallocations were made on the continuing operations income statement
for the previous periods to achieve improved comparability:
For the period ended 30 June 2011 (unaudited)
Previously
stated Restated Difference
Cost of sales 182 710 177 001 (5 709)
Marketing and selling expenses 19 576 27 036 7 460
Administrative expenses 22 110 20 833 (1 277)
Other operating expenses 18 385 17 911 (474)
242 781 242 781 -
For the year ended 31 December 2011 (audited)
Cost of sales 400 458 384 484 (15 974)
Marketing and selling expenses 31 521 55 143 23 622
Administrative expenses 44 733 43 955 (778)
Other operating expenses 43 996 37 126 (6 870)
520 708 520 708 -
Registered office: 59 Merino Avenue, City Deep, Johannesburg, 2197
Directors: SD Rogers (CEO),FE Giliomee (Financial Director), JPS O'Leary*# (Chairman, Irish), SV Bromfield*#, HJ Coetze#, PM Surgey*#, A Watson*#, SJ Smithyman#^
* independent #non-executive ^Alternate
Company Secretary: JC Jeffery Sponsor: Investec Bank Limited www.ci.co.za
Date: 26/09/2012 04:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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