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Interim Results for the six months ended 30 June 2013
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" or "the Company")
INTERIM RESULTS
for the six months ended 30 June 2013
HEADLINES - COMPARABLE TO CONTINUING
OPERATIONS IN PREVIOUS PERIOD
- Profit after tax R7.97 million up 17.49% from R6.79 million
- Gross profit R85.43 million up from R82.65 million
- Earnings Per Share 5.80 cents up from 4.93 cents
- Headline Earnings Per Share 5.74 cents down from 6.58 cents
OVERVIEW
The results for the six months ended 30 June 2013 represent the first reporting
period following the repositioning, during 2012, of Control Instruments Group
Limited ("CI" or the "Group") as a focused automotive aftermarket business,
servicing the South African and sub-Saharan Africa markets with branded automotive
aftermarket products.
This period proved to be challenging. Trading conditions in the automotive aftermarket
were negatively impacted by distributors reducing inventory levels and a slowdown
in consumer spending.
The Group continued to invest in its sales and marketing strategies, creating a receptive
market for its primary brands Gabriel, Echlin, VDO and the newly launched Textar
range of brake friction products. This investment has continued to strengthen the
Group's strategic relationships with its primary customers and distributors.
RESULTS
The results for the six months ended 30 June 2013 are comparable to the continuing
operations in the prior period which exclude the Group's OEM operations which
have been reflected as discontinued operations.
Revenue for the period under review was flat at R268.91 million when compared
with R269.96 million for the same period last year. A significant contributor to this
subdued performance is attributed to CI's larger distributors reducing inventory levels
in the supply chain, made possible by CI's improved logistics, increased in-fill rates
and reduced lead times. The launch of the Textar brand was encouraging but was
insufficient to off-set the revenue lost from this. Gabriel's sell-through volumes into
the market increased marginally over the period.
Despite the weakening rate of exchange and the inflationary impact on the cost
of materials, gross profit improved by 3.37% to R85.43 million compared with
R82.65 million in the previous period.
The increase in net expenses, which included an 8.2% increase in the investment in
marketing, was well contained at 3.2%. Increased marketing expenses can in part be
attributed to the launch of the Textar brand and the investment in the expansion
of the sales, marketing and technical teams required to support the brand in the
distribution channel. The focus on operational efficiencies and cost management has
resulted in operating expenses being curtailed.
Operating profit of R13.83 million represents a 4% increase compared with
R13.29 million for the same period in the previous year. The operating profit
margin of 5.14%, while up on the same period last year, is still below the Group's
short-term expectations.
Net profit after tax of R7.97 million was 17.49% higher than the R6.79 million from
continuing operations in the comparable period.
Earnings per share for the six months ended 30 June 2013 improved to 5.80 cents
per share from a total loss per share of 37.81 cents and an earnings per share from
continuing operations of 4.93 cents, in the corresponding period in the previous year.
Headline earnings per share of 5.74 cents is higher than the comparable headline
earnings per share of 3.24 cents in the corresponding period in the previous year, but
less than the comparable headline earnings from continuing operations of 6.58 cents.
TRADING ENVIRONMENT
Despite the slowdown in consumer spending, CI has remained committed to
its investment in marketing and sales within its distribution channel and to the
introduction of new brands to the market. This continued investment will provide
a solid platform for the business, its brands and its route to the market in the
medium- to long-term.
Textar sales are ahead of expectations. As a result TMD, a global leader in the
manufacturing of brake friction products, and CI have entered into strategic discussions
to expand the product range to include the full range of Textar brake discs and drums.
Net working capital for the period increased in part as a consequence of the level of
the investment required in working capital for the Textar product launch.
Gabriel the Group's flagship ride control brand continues to invest in product
development to meet the demands of the increasingly diverse vehicle parc in South
Africa and sub-Saharan Africa. Investment in product development for the sub-
Saharan Africa car parc is seen as essential for the successful growth of the brand
in the region.
CI's expansion into the rest of Africa is showing good growth off a low base.
Distributors have been appointed in eight territories in sub-Saharan Africa with plans
to open further territories before year end. Key to success in this region will be the
coverage and availability of product to service the predominantly Asian imported
vehicle parc.
CI increased its sales efforts on its range of lighting products under the newly secured
North American brand, VisionX. However the introduction and adoption of new
products in the specialist mining, military and construction vehicle channel will be
a lengthy process.
The Group continues to look for opportunities to acquire brands and products with
a recognised pedigree in the automotive aftermarket that will support the Group's
vision to be the leading supplier of choice for branded automotive parts in sub-
Saharan Africa.
PROSPECTS
Continued investment in our sales, marketing and brands will enable us to continue to
strengthen our relationships with our primary customers and take advantage of the
opportunities in the market.
Weakening consumer spending may have an impact on the second half of the year
which has traditionally been a stronger period for sales in the automotive aftermarket.
The likelihood of industrial action in the automotive segment seems certain. The
negative impact this will have on the automotive market will depend on the severity
of the disruption to the industry.
On behalf of the Board
JPS O'LEARY SD ROGERS
Chairman Chief Executive Officer
12 August 2013
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The interim report is prepared in accordance with the recognition and
measurement principles of International Financial Reporting Standards (IFRS),
including IAS 34: Interim Financial Reporting, and in accordance with the
requirements of the Companies Act (No. 71 of 2008), as amended, and the Listings
Requirements of the JSE Limited. The interim report has been prepared under the
supervision of the Group Financial Director, FE Giliomee, CA(SA).
These financial statements incorporate accounting policies that are consistent with
those of the previous financial periods, with the exception of the implementation
of the following:
- IFRS 10 Consolidated financial statements
- IFRS 11 Joint arrangements
- IFRS 12 Disclosure of interest in other entities
- IFRS 13 Fair value measurement
- IAS 1 Presentation of items of other comprehensive income (amendment)
- IAS 19 Employee benefits (amendments)
- IAS 27 Separate financial statements (revised)
- IAS 28 Investments in associates and joint ventures (revised)
- IFRS 7 (amendments) Disclosures Offsetting financial assets and financial liabilities
- Improvements to IFRSs 2011
The adoption of the amendments, improvements and new accounting standards only
affected disclosure and had no impact on the results of either the current or prior periods.
STATUTORY MATTERS
During the period under review the Company adopted a new Memorandum of
Incorporation (MOI). The new MOI substituted the existing Memorandum and
Articles of Association of the Company, in compliance with the Companies Act (No.
71 of 2008), as amended.
CONSOLIDATED INCOME STATEMENT
Six months Six months Year
ended ended ended
30/06/13 30/06/12 31/12/12
Unaudited Unaudited Audited
R 000 R 000 R 000
CONTINUING OPERATIONS
Revenue 268 908 269 955 566 367
Cost of sales (183 477) (187 307) (395 015)
Gross profit 85 431 82 648 171 352
Other operating income 3 706 4 914 6 270
Marketing and selling expenses (33 030) (30 520) (66 949)
Administrative expenses (21 477) (20 719) (43 476)
Other operating expenses (20 805) (23 036) (37 550)
Operating profit 13 825 13 287 29 647
Finance income 25 7 789
Finance costs (2 612) (2 092) (5 579)
Profit before taxation 11 238 11 202 24 857
Taxation (3 264) (4 415) (4 934)
Profit for the period from continuing operations 7 974 6 787 19 923
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations (58 804) (53 335)
Profit/(loss) for the period 7 974 (52 017) (33 412)
Attributable to:
Owners of the parent 7 974 (52 017) (33 412)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months Year
ended ended ended
30/06/13 30/06/12 31/12/12
Unaudited Unaudited Audited
R 000 R 000 R 000
Profit/(loss) for the period 7 974 (52 017) (33 412)
Other comprehensive income for the period, net of tax items that
may be reclassified subsequently to the income statement 120 167 397
Fair value adjustment on available-for-sale assets, net of tax 120 210 260
Cash flow hedges, net of tax (43) 137
Total comprehensive profit/(loss) for the period 8 094 (51 850) (33 015)
Attributable to:
Owners of the parent 8 094 (51 850) (33 015)
Net number of shares issued (000)
Total shares in issue (excluding treasury shares) (000) 137 587 137 587 137 587
Weighted average number of shares in issue (000) 137 587 137 587 137 587
Adjustment for share options (000) 1 574
Weighted average number of shares for diluted earnings per share (000) 139 161 137 587 137 587
Earnings/(loss) per share (cents)
Continuing operations 5.80 4.93 14.48
Discontinued operations (42.74) (38.76)
Total 5.80 (37.81) (24.28)
Diluted earnings/(loss) per share (cents)
Continuing operations 5.73 4.93 14.48
Discontinued operations (42.74) (38.76)
Total 5.73 (37.81) (24.28)
Calculation of headline earnings/(loss)
Continuing operations
Net profit after tax for the period 7 974 6 787 19 923
Profit on disposal and scrapping of property, plant and equipment (84) (170) (218)
Impairment of property, plant and equipment 2 418 3 276
Impairment of intangible assets 159
Tax on the above 12 25 (901)
7 902 9 060 22 239
Continuing operations Headline earnings per share (cents) 5.74 6.58 16.16
Discontinued operations
Net loss after tax for the period (58 804) (53 335)
Profit on disposal and scrapping of property, plant and equipment (2 327) (6 365)
Impairment of property, plant and equipment 40 395 40 395
Impairment of intangible assets 800 800
Loss on disposal of subsidiary 5 322
Remeasurement loss on discontinued operations 15 000
Tax on the above 337
(4 599) (13 183)
Discontinued operations Headline loss per share (cents) (3.34) (9.58)
Total operations
Net profit/(loss) after tax for the period 7 974 (52 017) (33 412)
Profit on disposal and scrapping of property, plant and equipment (84) (2 497) (6 583)
Impairment of property, plant and equipment 42 813 43 671
Impairment of intangible assets 800 959
Loss on disposal of subsidiary 5 322
Remeasurement loss on discontinued operations 15 000
Tax on the above 12 362 (901)
7 902 4 461 9 056
Total headline earnings per share (cents) 5.74 3.24 6.58
Diluted headline profit/(loss) per share (cents)
Continuing operations 5.68 6.58 16.16
Discontinued operations (3.34) (9.58)
Total 5.68 3.24 6.58
Dividends per share (cents)
Cash 1.50
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30/06/13 30/06/12 31/12/12
Unaudited Unaudited Audited
R 000 R 000 R 000
ASSETS
Non-current assets 129 655 138 133 132 510
Property, plant and equipment 56 178 59 712 56 202
Intangible assets 71 922 77 004 74 873
Available-for-sale financial assets 700 530 580
Deferred income tax assets 855 887 855
Current assets 215 595 187 078 196 409
Inventories 122 552 100 975 96 033
Trade and other receivables 76 153 64 790 29 570
Derivative financial instruments 115 5
Financial assets at fair value through profit or loss 443 335 367
Cash and cash equivalents 16 332 20 978 70 434
Total assets 345 250 325 211 328 919
EQUITY AND LIABILITIES
Capital and reserves 142 261 115 887 135 330
Share capital 6 972 6 972 6 972
Share premium 396 996 396 996 396 996
Treasury shares (2 813) (2 813) (2 813)
Other reserves 3 566 2 214 3 045
Accumulated loss (262 460) (287 482) (268 870)
Non-current liabilities 24 705 30 680 27 065
Borrowings 3 295 4 691 3 962
Deferred income tax liabilities 18 710 23 863 20 386
Provisions 2 700 2 126 2 717
Current liabilities 178 284 178 644 166 524
Trade and other payables 86 639 85 277 89 673
Current income tax liabilities 2 116 2 824 273
Derivative financial instruments 167 490
Borrowings 86 209 60 790 72 827
Provisions 3 320 29 586 3 261
Total equity and liabilities 345 250 325 211 328 919
Net asset value per share (cents) 103 84 98
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months Year
ended ended ended
30/06/13 30/06/12 31/12/12
Unaudited Unaudited Audited
R 000 R 000 R 000
Net cash generated from/(utilised in) operating activities (61 429) (47 553) 2 069
Net cash generated from/(utilised in) investing activities (5 334) (4 443) 13 656
Net cash generated from/(utilised in) financing activities 28 (370) (2 912)
Net cash inflow/(outflow) for the period (66 735) (52 366) 12 813
Cash and cash equivalents at the beginning of the period 70 434 57 621 57 621
Cash and cash equivalents at the end of the period 3 699 5 255 70 434
SEGMENTAL INFORMATION
Primary reporting format business segments
At 30 June 2013, the Group is based in South Africa and operates in South Africa and sub-Saharan Africa 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.
Unallocated/
Aftermarket Head office eliminations Total
For the period ended
30 June 2013 (Unaudited)
External revenue 268 908 268 908
Inter-segment revenue
Total segment revenue 268 908 268 908
Normalised EBITDA 25 280 (2 100) 23 180
For the period ended
30 June 2012 (Unaudited)
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 year ended
31 December 2012 (Audited)
External revenue 566 367 566 367
Inter-segment revenue 4 218 (4 218)
Total segment revenue 566 367 4 218 (4 218) 566 367
Normalised EBITDA 54 808 (3 093) (132) 51 583
Reconciliation of normalised EBITDA to operating profit for continuing operations
30/06/13 30/06/12 31/12/12
R 000 R 000 R 000
Unaudited Unaudited Audited
Normalised EBITDA from continuing operations 23 180 23 980 51 583
Depreciation and amortisation (8 150) (7 782) (16 261)
Impairment of intangible assets and of property, plant and equipment (2 418) (3 435)
Restructuring costs (388) (1 174)
Profit on disposal and scrapping of property, plant and equipment 84 170 218
Share-based payments expense (901) (663) (1 271)
Bad debts (13)
Operating profit 13 825 13 287 29 647
Note: For a reconciliation of operating profit to total profit before taxation refer to the "Consolidated Income Statement".
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Other Accumu-
capital premium shares reserves lated loss Total
R 000 R 000 R 000 R 000 R 000 R 000
Balance at 1 January 2012 (Audited) 6 972 396 996 (2 813) 1 719 (235 933) 166 941
Total comprehensive income/(loss) for the
period 167 (52 017) (51 850)
Loss 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
Total comprehensive income for the period 230 18 605 18 835
Profit for the period 18 605 18 605
Other comprehensive income for the period 230 230
Transactions with owners
Employee share option scheme
Value of services provided 608 608
Transferred to accumulated loss (7) 7
Balance at 31 December 2012 (Audited) 6 972 396 996 (2 813) 3 045 (268 870) 135 330
Total comprehensive income for the period 120 7 974 8 094
Profit for the period 7 974 7 974
Other comprehensive income for the period 120 120
Transactions with owners
Employee share option scheme
Value of services provided 901 901
Transferred to accumulated loss ( 500) 500
Dividends paid (2 064) (2 064)
Balance at 30 June 2013 (Unaudited) 6 972 396 996 (2 813) 3 566 (262 460) 142 261
NOTES
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 in June 2012 to dispose of the local operations.This local operation was disposed to PFK Electronics (Pty) Limited
on 7 November 2012.
The following financial results relate to the foreign and local OEM operations:
Six months Six months Year
ended ended ended
30/06/13 30/06/12 31/12/12
Unaudited Unaudited Audited
R 000 R 000 R 000
Revenue 102 729 162 432
Cost of sales (70 320) (107 693)
Gross profit 32 409 54 739
Other operating income 2 686 8 644
Marketing and selling expenses (2 185) (3 432)
Administrative expenses (5 707) (12 279)
Other operating expenses (83 436) (92 021)
Operating loss (56 233) (44 349)
Finance costs (2 571) (3 664)
Loss before taxation (58 804) (48 013)
Taxation
Net loss of discontinued operations (58 804) (48 013)
Loss on disposal of subsidiary (5 322)
Loss for the period from discontinued operations (58 804) (53 335)
Cash flows from discontinued operations
Cash flows from operating activities (4 309) (11 470)
Cash flows from investing activities 1 427 5 963
Cash flows from financing activities (5 563) (20 955)
Effect on cash flows (8 445) (26 462)
Registered office: 59 Merino Avenue, City Deep, Johannesburg 2197
Directors: SD Rogers (CEO), FE Giliomee (Financial), JPS O'Leary*# (Chairman, Irish), SV Bromfield*#,
HJ Coetzee#, PM Surgey*#, A Watson*#, SJ Smithyman#~ * Independent # Non-executive ~ Alternate
Company Secretary: S Graham
Sponsor: Investec Bank Limited
www.ci.co.za
Date: 12/08/2013 10:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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