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Abridged results for the year ended 31 December 2012 and dividend announcement
METAIR INVESTMENTS LIMITED
(Incorporated in the republic of south africa)
(Reg No. 1948/031013/06)
Share code: MTA
ISIN code: ZAE000090692
("Metair" or "the group")
ABRIDGED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012 AND DIVIDEND ANNOUNCEMENT
- HEPS increased 19% to 310cps
- ROE improved to 26%
- EBITDA improved by 19% to R825 million
CONDENSED CONSOLIDATED INCOME STATEMENT
31 December 31 December
2012 2011
R'000 R'000
Revenue 5 273 370 4 294 152
Cost of sales (4 037 654) (3 376 719)
Gross profit 1 235 716 917 433
Other operating income 69 293 166 236
Distribution, administrative and other operating expenses (636 577) (507 446)
Operating profit 668 432 576 223
Interest income 21 065 14 296
Interest expense (26 961) (7 858)
Share of results of associates 27 817 19 339
Profit before taxation 690 353 602 000
Taxation (197 718) (150 906)
Profit for the year 492 635 451 094
Attributable to:
Equity holders of the company 440 543 408 365
Non-controlling interests 52 092 42 729
492 635 451 094
Depreciation and amortisation (127 210) (89 150)
Basic earnings per share (cents) 310 289
Headline earnings per share (cents) 310 260
Number of shares in issue ('000) 152 532 152 532
Number of shares in issue excluding treasury shares ('000) 145 461 141 451
Weighted average number of shares in issue ('000) 142 030 141 217
Calculation of headline earnings per share (R'000)
Net profit attributable to ordinary shareholders 440 543 408 365
Profit on insurance recovery and impairment charges/(reversals) 147 (41 492)
Taxation effect of insurance recovery and impairment (charges)/reversals 110 4 813
Impairment charges attributable to non-controlling shareholders (202)
Profit on disposal of property, plant & equipment after taxation (132) (3 671)
Headline earnings 440 668 367 813
Diluted earnings per share
Diluted earnings per share (cents) 304 283
Diluted headline earnings per share (cents) 304 255
Weighted average number of shares in issue ('000) 142 030 141 217
Adjustment for dilutive share options ('000) 2 933 2 959
Number of shares used for diluted earnings calculation ('000) 144 963 144 176
CONDENSED CONSOLIDATED GROUP STATEMENT OF COMPREHENSIVE INCOME
31 December 31 December
2012 2011
R'000 R'000
Profit for the year 492 635 451 094
Other comprehensive income:
Actuarial losses recognised (1 321) (5 345)
Exchange gains arising on translation of foreign operations 36 845
Cash flow hedges (7 548) (4 821)
Taxation on other comprehensive income (1 054) 2 645
Other comprehensive income for the year net of taxation 26 922 (7 521)
Total comprehensive income for the year 519 557 443 573
Attributable to:
Equity holders of the company 467 280 401 033
Non-controlling interests 52 277 42 540
519 557 443 573
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
31 December 31 December
2012 2011
R'000 R'000
Balance at beginning of the year 1 701 408 1 369 919
Net profit for the year 492 635 451 094
Other comprehensive income for the year 26 922 (7 521)
Total comprehensive income for the year 519 557 443 573
Non-controlling interest arising on acquisition of subsidiary 2 055
Employee share plan:
Value of service provided 8 865 5 129
Deferred taxation 13 265 11 381
Vesting of share-based payment obligation:
Estimated tax effects of utilisation of treasury shares (16 418)
Loss on settlement of old scheme (4 194) (1 067)
Shares disposed by the Metair Share Trust 6 988 2 575
Transfer of hedge reserve to purchase consideration of subsidiary 12 369
Dividend * (144 613) (130 102)
Balance at end of the year 2 099 282 1 701 408
* An ordinary dividend of 72 cents per share was declared in respect of the year ended 31 December 2011.
An ordinary dividend of 65 cents per share was declared in respect of the year ended 31 December 2010.
CONDENSED CONSOLIDATED BALANCE SHEET
31 December 31 December
2012 2011
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 1 237 007 762 752
Intangible assets 85 050 22 718
Investment in associates 47 351 44 582
Deferred taxation 9 697 11 266
1 379 105 841 318
Current assets
Inventory 869 989 693 646
Trade and other receivables 706 862 518 527
Derivative financial assets 162 615
Taxation 424 6 342
Cash and cash equivalents 447 176 421 678
2 024 613 1 640 808
Total assets 3 403 718 2 482 126
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 42 876 42 876
Treasury shares (72 232) (113 509)
Share-based payment reserve 38 428 17 542
Hedging reserve (3 471)
Foreign currency translation reserve 36 660
Non-distributable reserves 43 308 39 494
Retained earnings 1 883 541 1 599 664
Ordinary shareholders' equity 1 972 581 1 582 596
Non-controlling interests 126 701 118 812
Total equity 2 099 282 1 701 408
Non-current liabilities
Borrowings 183 804 27 458
Post-employment medical benefits 28 713 25 074
Deferred taxation 66 415 64 118
278 932 116 650
Current liabilities
Trade and other payables 669 090 533 374
Borrowings 67 398 24 627
Taxation 14 024 7 541
Provisions for liabilities and charges 71 508 60 651
Bank overdrafts 191 928 12 769
Derivative financial liabilities 11 556 25 106
1 025 504 664 068
Total liabilities 1 304 436 780 718
Total equity and liabilities 3 403 718 2 482 126
Net asset value per share (cents) attributable to ordinary shareholders 1 356 1 119
Capital expenditure 300 628 162 146
Capital commitments
contracted 72 925 24 913
authorised but not contracted 231 513 182 573
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
31 December 31 December
2012 2011
R'000 R'000
Operating activities
Profit before taxation 690 353 602 000
Non-cash items 139 702 26 405
Working capital changes (80 304) (178 005)
Cash generated from operations 749 751 450 400
Interest paid (26 961) (7 858)
Taxation paid (181 574) (126 833)
Dividends paid (144 613) (130 102)
Dividend income from associate 24 003 8 993
Net cash inflow from operating activities 420 606 194 600
Investing activities
Interest received 21 065 14 296
Net cash used in other investing activities (737 876) (102 472)
Net cash outflow from investing activities (716 811) (88 176)
Net cash inflow from financing activities 152 064 324
Net (decrease)/increase in cash and cash equivalents (144 141) 106 748
Cash and cash equivalents at beginning of the year 396 572 289 824
Exchange gains on cash and cash equivalents 2 817
Cash and cash equivalents at end of the year 255 248 396 572
CONDENSED SEGMENTAL REVIEW
for the year ended 31 December 2012
Revenue Profit/(loss) before interest and taxation
December December December December
2012 2011 2012 2011
R'000 R'000 R'000 R'000
Local
Original equipment 3 046 190 2 697 984 313 241 276 631
Aftermarket 1 162 136 893 159 202 786 194 157
Non-auto 462 957 441 385 59 141 58 956
4 671 283 4 032 528 575 168 529 744
Direct exports
Original equipment 94 844 86 201 10 415 (7 941)
Aftermarket 471 953 139 060 40 304 20 698
Non-auto 35 290 36 363 2 849 2 782
602 087 261 624 53 568 15 539
Property rental 67 053 60 873 66 124 59 980
Reconciling items * (67 053) (60 873) 1 389 (9 701)
Total 5 273 370 4 294 152 696 249 595 562
Net interest income (5 896) 6 438
Profit before taxation 690 353 602 000
* The reconciling item relates to Metair head-office companies and property rental.
Notes to the consolidated financial statements
Accounting policies
The abridged consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for
abridged reports and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require
abridged reports to be prepared in accordance with the framework concepts, the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and must also,
as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of
the consolidated financial statements, from which the abridged consolidated financial statements were derived, are in terms of IFRS and are
consistent with the accounting policies applied in the preparation of the previous consolidated annual financial statements.
FNB fire and related insurance proceeds
Included in other operating income are insurance proceeds of R24,7 million (2011: R 122,6 million) in respect of the fire at First National
Battery (FNB) on 5 May 2011. The total profit recognised for the year amounted to R23,7 million (2011: R90 million) after recognising
expenses and related costs of R1 million (2011: R32,2 million).
Contingencies
The bank and other guarantees given by the group to third parties amounted to R3,7 million as at 31 December 2012 (R3,7 million as at
31 December 2011).
Borrowings
During the year the group repaid borrowings of R69 million (2011: R14,2 million), raised long-term loans of R199,8 million
(2011: R9,8 million), raised short-term loans of R144,9 million (2011: R2,2 million) and repaid short-term loans of R110,1 million.
Borrowings of R33,4 million were acquired through the acquisition of Rombat S.A.
Fair value adjustments on financial instruments
31 December 2012 31 December 2011
R'000 Assets Liabilities Assets Liabilities
Forward exchange contracts fair value hedges 162 11 556 615 12 769
Business combinations
On 14 March 2012, the group acquired 99,426% of the issued shares of Rombat S.A. ("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 a total of R449,8 million of which R437,4 million is cash and capitalisation of the currency
hedging of R12,4 million. 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.
Provisional
Recognised amounts of identifiable assets acquired and liabilities assumed: R'000 Fair value
Assets
Trademark and other intangible assets 31 264
Property, plant & equipment 269 928
Inventory 98 131
Trade and other receivables 188 062
Cash and cash equivalents 111 177
698 562
Liabilities
Borrowings (33 429)
Provisions (2 363)
Trade and other payables (135 417)
Overdraft (96 756)
Net deferred taxation (11 594)
(279 559)
Total identifiable net assets 419 003
Less: Non-controlling interest (2 055)
Goodwill 32 814
Purchase consideration (including currency hedging) 449 762
Acquisition-related costs included in administration expenses in the group consolidated income statement for the period ended
31 December 2012 amounted to R7,8 million.
Trade receivables with a fair value of R183 million is included within trade and other receivables and R11 million is considered doubtful.
None of the goodwill recognised is expected to be deductible for income taxation purposes.
In respect of this acquisition, the cash consideration of EUR42,86 million has been translated at an effective closing rate of R10,21.
Non-controlling interest has been calculated based on the 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 576 190
Attributable profit 39 813
Had the acquisition been consolidated from 1 January 2012 the income statement would have included:
Revenue 713 174
Attributable profit 45 539
Fire at Supreme Spring leaf spring manufacturing facility
Subsequent to year-end, on 31 January 2013, a fire damaged the leaf spring manufacturing facility at Supreme
Spring. The total effect of the insurance claim is estimated at R35 million. Supreme Spring expects all insurance
claims to be finalised during the first half of 2013. The facility has recommenced operations.
Declaration of Ordinary Dividend No 62
Notice is hereby given that a gross cash dividend of 95 cents per share has been declared by the board in respect of the year ended
31 December 2012. The dividend has been declared out of income reserves.
The salient dates for the payment of the dividend are detailed below:
2013
Last day to trade cum dividend Friday, 5 April
Shares to commence trading ex dividend Monday, 8 April
Record date Friday, 12 April
Payment of dividend Monday, 15 April
Shareholders will not be permitted to dematerialise or rematerialise their share certificates between Monday, 8 April 2013 and
Friday, 12 April 2013, both days inclusive.
The following additional information is disclosed with regard to the dividend:
the local dividend tax rate is 15%;
no STC credits were utilised;
the gross local dividend amount is 95 cents per share for shareholders exempt from Dividends Tax;
the net local dividend amount is 80,75 cents per share for shareholders liable to pay Dividends Tax;
Metair's issued share capital is 152 531 875 ordinary shares (which includes 7 071 015 treasury shares); and
Metair's income tax reference number is 9300198711.
Auditors' report
The auditors, PricewaterhouseCoopers Inc, have issued their opinion on the group's financial statements for the year ended 31 December
2012. The audit was conducted in accordance with International Standards on Auditing. They have issued an unmodified audit opinion. These
condensed consolidated annual financial statements have been derived from the group financial statements and are 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.
The auditors' report does not necessarily cover all of the information contained in this announcement. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the auditors' work, they should obtain a copy of that report
together with the accompanying financial information from the registered office of the company.
Annual general meeting
The annual report will be mailed to shareholders by 22 March 2013 along with the notice of annual general meeting.
The annual general meeting will be held on 2 May 2013 at 14:00 at Metair Investments Limited's registered office,
10 Anerley Road, Parktown, Johannesburg.
OPERATING RESULTS
Metair has produced an excellent set of financial results for the year ended 31 December 2012 and during the year we continued to deliver
on our strategic goals.
The group achieved a normalised return on equity of 26% (2011: 27%) and generated earnings before interest, tax, depreciation and
amortisation of R825 million (R693 million), a 19% year-on-year increase off a high base. Turnover increased by 23% to R5 273 million
(2011: R4 294 million) and headline earnings per share increased by 19% to 310 cents compared to the 260 cents per share in 2011.
Acquisition of Rombat
We are confident that we are on track to achieve the financial, operational and strategic objectives we set ourselves when we acquired
Rombat, the leading lead-acid battery manufacturer in Romania. Rombat will be the platform from which to launch the group's key
technology and aftermarket products into Europe.
Shortly after we acquired Rombat capital expenditure of EUR16 million was approved to build a new state-of-the-art Start/Stop battery facility.
We are very pleased that the facility was successfully commissioned in December 2012 on time and within budget. State grants of EUR8 million
that were secured by Rombat for this facility are expected to be received during the course of 2013.
Rombat had a pleasing financial result for the nine-and-a-half months for which it was consolidated. EBITDA for the nine-and-a-half months
was L27 million (R64 million), profit after tax was L17 million (R40 million) and turnover was L240 million (R576 million).
The Rombat acquisition was particularly complex in nature, structure and execution. The skill set, acquisition technology and process the
group developed in acquiring Rombat will assist us in future acquisitions.
Balanced Business
As recently as 2007 the vast majority of our business was with one OE customer. In order to improve the sustainability of our business we
have followed a deliberate strategy of bringing more balance to our client base, product lines and geographical diversity. We now supply
all seven OE customers in South Africa as well as Renault Dacia in Romania. While the OE business remains core to the group's strategy we
will continue to focus on aggressively growing the aftermarket and non-automotive areas of the business and on improving the group's
geographical diversity. We will also strive to increase the proportion of our business that is derived from our battery businesses.
Aftermarket, non-automotive, export and property turnover increased by 40%, increasing the contribution for this segment to 42% (2011:
37%) of group turnover. The earnings contribution from these markets increased to 55% (2011: 54%), delivering on our objective of
equalising our earnings from these segments with the Original Equipment (OE) market segment.
The OE segment remained the major contributor to group turnover with 58% (2011: 63%) coming from this segment. Earnings from this
segment decreased to 45% (2011: 46%) of the total.
Turnover generated from our battery businesses was R2 000 million.
Marikana and Human Capital
It would be very difficult to report on 2012 and not mention the tragedy that took place in Marikana in August 2012. The terrible
events at Marikana taught us that there has never been a more important time to focus on our human capital and transformation. Marikana
emphasised to us the importance of understanding employee expectations, communicating effectively with our employees
and on maintaining a working environment where employees are treated with dignity in a well-defined, structured, safe and
healthy environment.
Start/Stop Battery Technology
The group's Start/Stop battery technology was developed in 1981 when we launched an Absorbed Glass Mat (AGM) mining cap lamp for the
mining sector. Since then we have sold more than 5 million mining cap lamps utilising this AGM technology. Over the past seven years we have
developed a Start/Stop battery range for the automotive sector and during the financial year this battery product range was approved for OEM
Start/Stop vehicles. During the period the group received its first orders from BMW SA for our Start/Stop battery product.
As referred to above, Rombat also managed to produce its first Start/Stop battery as we successfully commissioned a state-of-the-art Start/
Stop production facility at our Bistrita facility.
Review of operations
Original Equipment
New vehicle manufacturing volumes were 511 000 units (2011: 505 000 units) as government's new incentive programme, the Automotive
Production and Development Programme (APDP) brought stability to this segment. Although industry volume growth during the period
was small, the group managed to increase turnover from this segment by 9% as we produced products for a new customer, Ford SA, who is
targeting increased exports through the production of a light commercial vehicle platform. The balance of the increased turnover from the OE
segment was due to product diversification from our traditional customer base and the weakening Rand.
Rand volatility and customer reaction to this re-emerged as a challenge in this segment as a large customer revised its forex policy, which
may result in the group having to manage more foreign exchange risk.
The decline in overall vehicle demand and subsequent vehicle manufacturing in Europe shifted demand focus to more affordable and basic
entry-level vehicles. This shift bode well for the Romanian OE industry as Renault (with the Dacia brand, which is manufactured in Romania)
increased market share and brand preference in Europe.
Romanian vehicle production volumes increased slightly and were on par with volumes produced in South Africa.
Aftermarket, non-automotive and export segments
The size of the overall vehicle parc continues to grow and group turnover increased accordingly. Our product offering, especially batteries,
improved as we launched an Enhanced Flooded Battery (EFB) range and expanded on our Absorbed Glass Mat (AGM) battery products. With
this product offering the group has two different solutions for the Automotive Start/Stop and heavy-duty battery applications. First National
Battery's (FNB) margins were under pressure in the first half of the year as it recovered the market share it lost as a consequence of the
disruptions cause by the fire in 2011. FNB's margins normalised during the second half of the year and warranty claims that were higher than
expected in the first half of the year normalised in the second half.
The group managed in difficult market conditions to maintain our market share in Romania and sustain our European market penetration.
Prospects
The dominant automotive markets that the group operates in seem to have stabilised, with vehicle production volumes set to continue at the
current levels with a potential for a slight increase in volumes from American-based vehicle manufacturers. The challenges with regard to
our base currencies (South African Rand and Romanian Lei) will remain as currency volatility increases and we battle inflationary pressures.
The expansion of the product approval for our Start/Stop battery will be a major drive in 2013 as we target moderate market penetration by
2016.
The group will continue to target strategic acquisitions in the aftermarket and non-automotive business where we can take advantage of our
technological expertise and balance sheets at the holding company and/or subsidiary company level.
Maintaining ourselves in the coming period is going to be challenging and would require continued demand for local vehicle production and
aftermarket products supported by our increased product offering and market penetration. A stable and non-disruptive labour environment
combined with reasonable currency stability will be desirable.
We thank all our stakeholders for their commitment and support over the 2012 financial year and look forward to their continued support
during 2013.
We would also like to thank Prince Bothata Molotlegi who served on the board from 2007 to 2012 for his valuable input and enthusiastic
participation. We wish him well with his new role at the Royal Bafokeng Nation.
The interim report was produced by Mr BM Jacobs (Finance Director) BComm BAcc 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
The annual 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 today at 09:00 through http://www.corpcam.com/Metair18032013.
Additional conference call facilities are available in SA on 011 535 3600/010 201 6616 or internationally on
+27 11 535 3600/+27 10 201 6616.
REGISTRARS
Computershare Investor
Services (Pty) Limited
70 Marshall Street
JOHANNESBURG 2001 Signed on behalf of the board on 15 March 2013
SPONSOR
One Capital O M E Pooe Chairman C T Loock Managing Director
Investor relations JOHANNESBURG
College Hill 18 March 2013
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