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Interim Report For The Six Months Ended 30 June 2013
METAIR INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Reg No. 1948/031013/06)
Share code: MTA
ISIN code: ZAE 000090692
("Metair" or "the Group")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 JUNE 2013
- EBITDA of R375 million
- Cash generated from operations of R227 million
- Net asset value per share increased by 21% to 1 450 cps
Condensed Consolidated Income Statement
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
R'000 R'000 R'000
Unaudited Restated Restated
Revenue 2 459 831 2 218 492 4 603 150
Cost of sales (1 940 270) (1 714 604) (3 542 121)
Gross profit 519 561 503 888 1 061 029
Other operating income 24 361 20 767 67 342
Distribution, administrative and other operating expenses (269 753) (257 511) (558 562)
Operating profit 274 169 267 144 569 809
Interest income 7 356 10 225 19 206
Interest expense (12 586) (11 943) (26 457)
Share of results of associates 38 109 44 638 78 921
Profit before taxation 307 048 310 064 641 479
Taxation (77 946) (87 728) (166 903)
Profit for the period 229 102 222 336 474 576
Attributable to:
Equity holders of the company 209 457 202 438 440 543
Non-controlling interests 19 645 19 898 34 033
229 102 222 336 474 576
Depreciation and amortisation (included in above expenses) (62 809) (50 659) (94 562)
Basic earnings per share (cents) 143 143 310
Headline earnings per share (cents) 143 143 310
Number of shares in issue ('000) 152 532 152 532 152 532
Number of shares in issue excluding treasury shares ('000) 146 667 141 706 145 461
Weighted average number of shares in issue ('000) 146 112 141 624 142 030
Calculation of headline earnings per share (R'000)
Net profit attributable to ordinary shareholders 209 457 202 438 440 543
Profit on insurance recovery and impairment charges 147
Taxation effect of insurance recovery and impairment charges 110
Loss/(profit) on disposal of property, plant & equipment (2) 184 (132)
Headline earnings 209 455 202 622 440 668
Diluted earnings per share
Diluted earnings per share (cents) 140 138 304
Diluted headline earnings per share (cents) 140 139 304
Weighted average number of shares in issue ('000) 146 112 141 624 142 030
Adjustment for dilutive shares ('000) 3 444 4 549 2 933
Number of shares used for diluted earnings calculation ('000) 149 556 146 173 144 963
Condensed Consolidated Statement of Comprehensive Income
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
R'000 R'000 R'000
Unaudited Restated Restated
Profit for the period 229 102 222 336 474 576
Other comprehensive income:
Actuarial losses recognised (1 321)
Exchange gains arising on translation of foreign operations 73 813 (492) 36 845
Cash flow hedges (8 898) (7 548)
Taxation on other comprehensive income (1 054)
Net other comprehensive income 73 813 (9 390) 26 922
Other comprehensive income for the period net of taxation 302 915 212 946 501 498
Attributable to:
Equity holders of the company 282 903 193 048 467 280
Non-controlling interests 20 012 19 898 34 218
302 915 212 946 501 498
Condensed Consolidated Statement of Changes in Equity
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
R'000 R'000 R'000
Unaudited Restated Restated
Balance at beginning of the period 2 052 730 1 661 874 1 661 874
Net profit for the period 229 102 222 336 474 576
Other comprehensive income for the period 73 813 (9 390) 26 922
Total comprehensive income for the period 302 915 212 946 501 498
Non-controlling interest arising on acquisition of subsidiary 3 008 2 055
Employee share plan:
Value of service provided 4 901 2 739 8 574
Deferred taxation 16 511 9 464 11 817
Vesting of share-based payment obligation:
Estimated taxation effects of utilisation of treasury shares (6 482) (16 148)
Loss on settlement of old scheme (586) (1 274) (4 194)
Transfer of hedge reserve to purchase consideration of subsidiary 12 369 12 369
Shares disposed by the Metair Share Trust 1 094 2 200 6 988
Dividend * (155 951) (132 103) (132 103)
Balance at end of the period 2 215 132 1 771 223 2 052 730
* An ordinary dividend of 95 cents per share was declared in respect of the year ended 31 December 2012.
An ordinary dividend of 72 cents per share was declared in respect of the year ended 31 December 2011.
Condensed Consolidated Balance Sheet
30 June 30 June 31 December
2013 2012 2012
R'000 R'000 R'000
Unaudited Restated Restated
Assets
Non-current assets
Property, plant and equipment 1 234 127 1 005 815 1 179 179
Intangible assets 84 452 80 874 81 091
Investment in associates 189 353 165 264 175 939
Deferred taxation 12 086 12 285 9 697
1 520 018 1 264 238 1 445 906
Current assets
Inventory 846 094 677 255 755 274
Trade and other receivables 718 058 677 544 667 665
Derivative financial assets 12 039 1 488 162
Taxation 424
Cash and cash equivalents 433 092 454 793 407 909
2 009 283 1 811 080 1 831 434
Total assets 3 529 301 3 075 318 3 277 340
Equity and liabilities
Capital and reserves
Share capital and premium 42 876 42 876 42 876
Treasury shares (60 473) (111 309) (72 232)
Share-based payment reserve 54 113 28 514 33 287
Foreign currency translation reserve 110 106 (492) 36 660
Equity accounted earnings 185 307 159 175 171 895
Retained earnings 1 795 017 1 580 753 1 755 168
Ordinary shareholders' equity 2 126 946 1 699 517 1 967 654
Non-controlling interests 88 186 71 706 85 076
Total equity 2 215 132 1 771 223 2 052 730
Non-current liabilities
Borrowings 163 959 218 542 183 804
Post-employment medical benefits 29 159 25 448 28 499
Deferred taxation 61 805 67 807 60 433
254 923 311 797 272 736
Current liabilities
Trade and other payables 653 160 630 397 602 399
Borrowings 56 298 262 703 67 398
Taxation 7 342 1 593 11 601
Provisions for liabilities and charges 75 718 67 043 71 366
Derivative financial liabilities 755 7 629
Bank overdrafts 266 728 29 807 191 481
1 059 246 992 298 951 874
Total liabilities 1 314 169 1 304 095 1 224 610
Total equity and liabilities 3 529 301 3 075 318 3 277 340
Net asset value per share (cents) attributable to ordinary shareholders
calculated on number of shares in issue excluding treasury shares 1 450 1 199 1 353
Capital expenditure 54 329 81 131 286 163
Capital commitments:
contracted 96 516 193 893 67 504
authorised but not contracted 88 366 117 468 170 200
Condensed Consolidated Statement of Cash Flow
Six months ended Year ended
30 June 30 June 31 December
2013 2012 2012
R'000 R'000 R'000
Unaudited Restated Restated
Operating activities
Profit before taxation 307 048 310 064 641 479
Non-cash items 18 751 33 455 67 585
Working capital changes (99 008) 66 617 (36 619)
Cash generated from operations 226 791 410 136 672 445
Interest paid (12 586) (11 943) (26 457)
Taxation paid (67 824) (83 476) (156 477)
Dividends paid (155 951) (132 103) (132 103)
Dividend income from associates 24 698 39 775 61 335
Net cash inflow from operating activities 15 128 222 389 418 743
Investing activities
Interest received 7 356 10 225 19 206
Net cash used in other investing activities (49 484) (522 983) (723 411)
Net cash outflow from investing activities (42 128) (512 758) (704 205)
Net cash (outflow)/inflow from financing activities (36 778) 368 616 152 334
Net (decrease)/increase in cash and cash equivalents (63 778) 78 247 (133 128)
Cash and cash equivalents at beginning of the period 216 428 346 739 346 739
Exchange gains on cash and cash equivalents 13 714 2 817
Cash and cash equivalents at end of the period 166 364 424 986 216 428
Condensed Segmental Review
Revenue Profit before interest and taxation
Six months ended Year ended Six months ended Year ended
30 June 30 June 31 December 30 June 30 June 31 December
2013 2012 2012 2013 2012 2012
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited Restated Restated Unaudited Restated Restated
Local
Original equipment 1 691 514 1 658 052 3 135 068 156 257 175 307 308 140
Aftermarket 595 812 519 491 1 162 136 92 221 84 306 202 724
Non-auto 233 451 243 437 462 957 12 925 30 421 59 141
2 520 777 2 420 980 4 760 161 261 403 290 034 570 005
Direct exports
Original equipment 54 210 50 500 94 844 6 888 9 373 10 415
Aftermarket 283 135 149 508 471 953 24 750 14 327 40 304
Non-auto 18 363 15 943 35 290 937 1 116 2 849
355 708 215 951 602 087 32 575 24 816 53 568
Property rental 34 503 31 833 67 053 34 013 31 369 66 124
Reconciling items:*
Share of results of associates 38 109 44 638 78 921
Managed associates (416 654) (418 440) (759 098) (46 410) (57 784) (96 243)
Other reconciling items ** (34 503) (31 833) (67 053) (7 412) (21 291) (23 645)
Total 2 459 831 2 218 491 4 603 150 312 278 311 782 648 730
Net interest expense (5 230) (1 718) (7 251)
Profit before taxation 307 048 310 064 641 479
* The operating results of Hesto Harnesses Proprietary Limited have been included in the segmental review as Metair has a
75% equity interest and is responsible for the operational management of this associate that does not qualify for consolidation in
terms of IFRS 10.
** The reconciling items relate to Metair head office companies and property rental.
Notes to the condensed consolidated interim financial statements
Accounting policies
These condensed consolidated interim financial statements for the six months ended 30 June 2013 have been prepared in accordance with IAS
34 Interim Financial Reporting, as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council. The condensed consolidated interim financial statements
should be read in conjunction with the annual consolidated financial statements for the year ended 31 December 2012, which have been
prepared in accordance with International Financial Reporting Standards (IFRS) and comply with the JSE Limited Listings Requirements and
the requirements of the Companies Act, 71 of 2008. The accounting policies applied in the preparation of the condensed consolidated interim
financial statements are consistent with the accounting policies applied in the preparation of the previous consolidated annual financial
statements, except as described below:
The adoption of IFRS 10 (consolidated financial statements) required Metair to re-assess control over its investees as at 1 January 2013. As
a result of this re-assessment, it was concluded that Hesto Harnesses Proprietary Limited, which was previously consolidated, should be
accounted for as an associate under IFRS 11 (Joint Arrangements). The Group has applied IFRS 10 and IFRS 11 retrospectively in accordance
with their transition provisions. The financial effects of accounting for Hesto Harnesses Proprietary Limited as an associate at 1 January 2012
and 31 December 2012 are shown in "Adoption of IFRS 10 Hesto Harnesses Proprietary Limited accounted for as an associate" below.
This interim report has not been reviewed or audited by the Group's auditors.
Contingencies
Bank and other guarantees given by the Group to third parties amounted to R3,7 million as at 30 June 2013 (2012: R3,7 million).
Borrowings
During the year the Group repaid long-term loans of R23,7 million (2012: R30,7 million), raised long-term loans of R0,6 million
(2012: R221,7 million), repaid short-term loans of R7,7 million (2012: Nil) and raised no short-term loans (2012: R176,6 million).
Adoption of IFRS 10 Hesto Harnesses Proprietary Limited accounted for as an associate
Impact on balance sheet 31 December 1 January
2012 2012
Increase/(decrease) R'000 R'000
Assets
Property, plant and equipment (57 828) (55 943)
Intangible assets (3 959) (5 990)
Investment in associates 128 588 114 817
Inventory (114 715) (113 852)
Trade and other receivables (39 197) (40 524)
Taxation (1 473)
Cash and cash equivalents (39 267) (49 833)
Liabilities
Post-employment medical benefits (214) (214)
Deferred taxation (5 982) (5 605)
Trade and other payables (66 691) (102 712)
Taxation (2 423)
Provisions for liabilities and charges (142) (2 045)
Derivative financial liabilities (3 927) (2 708)
Bank overdrafts (447)
Equity
Share-based payment reserve (5 141) 42
Equity accounted earnings 128 587 114 818
Retained earnings (128 373) (114 581)
Non-controlling interests (41 625) (39 793)
Impact on statement of comprehensive income Six months ended Year ended
30 June 31 December
2012 2012
Increase/(decrease) R'000 R'000
Revenue (370 974) (670 220)
Cost of sales 289 437 495 533
Gross profit (81 537) (174 687)
Other operating income (270) (1 951)
Distribution, administrative and other operating expenses 23 536 78 015
Operating profit (58 271) (98 623)
Interest income (900) (1 859)
Interest expense 267 504
Share of results of associates 31 506 51 104
Profit before taxation (27 398) (48 874)
Taxation 16 650 30 815
Profit for the period (10 748) (18 059)
There has been no impact on previously reported earnings per share and attributable earnings to equity holders of the company.
Impact on statement of cash flow Six months ended Year ended
30 June 31 December
2012 2012
Increase/(decrease) R'000 R'000
Cash flow from operating activities 7 443 (331 008)
Cash flow from investing activities 5 381 12 606
Cash flow from financing activities (1 274) 270
Net decrease in cash and cash equivalents (38 283) (38 820)
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 Thursday, 29 August 2013 at 09h00. The audio webcast can be accessed through
http://www.corpcam.com/Metair29082013. Alternatively a telephone conference call facility will be available at 09h00 on
Thursday, 29 August 2013 in SA on 011 535 3600/010 201 6800 or internationally on +27 11 535 3600/+27 10 201 6800.
REGISTRARS Signed on behalf of the board
Computershare Investor
Services (Pty) Limited
70 Marshall Street
JOHANNESBURG 2001
SPONSOR
One Capital
O M E Pooe Chairman C T Loock Managing Director
Investor Relations JOHANNESBURG
College Hill 28 August 2013
INTERIM RESULTS COMMENTARY
Metair has produced a satisfactory result for the half-year ended 30 June 2013 ("the period"). Headline earnings per share was unchanged at
143 cents per share (cps) (2012: 143cps), EBITDA of R375 million was generated and cash and cash equivalents amounted to R166 million as
at the end of the period.
During the period the Group was pleased to receive approval from a second OEM customer to supply Start/Stop batteries to their local
operations from 2014.
Accounting change
During the period the Group adopted the amendments to International Financial Reporting Standards 10, 11 and 12 ("new IFRS") which
govern consolidated financial statements, joint arrangements and disclosure of interests in other entities. Metair has four affected entities,
Tenneco Automotive Holdings SA (Tenneco) (25,1% shareholding), Valeo Systems South Africa (Pty) Ltd (Valeo) (49% shareholding), Hesto
Harnesses (Pty) Ltd (Hesto) (75% shareholding) and Smiths Manufacturing (Pty) Ltd (Smiths) (75% shareholding). Previously equity
interests of less than 50% were equity accounted and those in excess of 50% consolidated. The amendment to IFRS 10 now focuses more
intently on the assessment of control. Consequently, because of Hesto's arrangement with its minority shareholder, Hesto is no longer
consolidated into the Group but equity accounted. As Metair is responsible for the operational management of Hesto their results have been
included in the segmental analysis and then eliminated. The treatment of all other investments remains unchanged.
The adoption of the new IFRS did not impact the Group's headline earnings, however, the Group's reported revenue and operating profit are
impacted by the new accounting standards. Furthermore, the new IFRS have been adopted retrospectively and prior period results have
therefore been adjusted to account for the effect of the new IFRS where applicable.
Group operating performance
Group revenue, excluding Hesto revenue, increased to R2 460 million (2012: R2 218 million). The increase in turnover was achieved through
the inclusion of the full half-year contribution from Rombat SA ("Rombat"), which was acquired by the Group on 15 March 2012, compared
to the comparative period which did not include the period January to 15 March 2012 for Rombat.
Distribution, administration and other expenses increased to R270 million from R258 million. Distribution expenses of R99 million
(2012: R74 million) represented 4% of revenue and administration and other expenses were R171 million (2012: R183 million).
Total assets increased to R3 529 million from R3 277 million as at 31 December 2012 ("year-end"). Net asset value increased to R14,50 per
share from R13,53 as at year-end.
Cash and cash equivalents net of debt and overdrafts was negative R54 million as at the end of the period compared to negative R35 million
as at year-end. During the period capital expenditure of R54 million was incurred, tax payments of R68 million were made and a dividend of
R156 million was paid.
Working capital increased from R821 million at year-end to R911 million primarily as a consequence of an increase in inventory levels of
imported components by one week to counter the effects of delays caused by the South African ports.
REVIEW OF OPERATIONS
Original equipment (OE)
Local vehicle production during the period was not directly affected by any labour action and increased to 272 718 vehicles produced
compared to 235 557 in the comparable period. The increase in production is on the back of increased exports of 147 007 vehicles.
Metair will continue to support and invest in the OE segment and will focus intently on delivering internationally benchmarked, cost-
competitive and quality products to its customers.
Aftermarket, non-automotive and exports
Aftermarket domestic and export turnover increased by 31% to R879 million from R669 million during the comparative period. Earnings from
this segment grew by only 19% as a result of increases in commodity prices coupled with SA Rand and Romanian Lei weakness impacting
margins negatively. The non-auto segment (mining) had experienced an extremely disappointing six months as demand from the mining
and standby battery segment was significantly below expectations.
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. 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 located in Romania. We remain optimistic about the future of the Start/Stop battery market and our
positioning in this market from 2016.
Prospects
As the automotive industry approaches the end of its three-year wage agreement, Metair and the industry as a whole, enters a critical phase
regarding labour relations. The industry participants are currently engaged in negotiations and we hope that in the absence of prolonged
industrial unrest, production levels could be maintained at the 2012 level.
Metair remains committed to executing its strategy and achieving key performance criteria for 2013. The Group will continue to actively
pursue both local and international acquisition opportunities which meet the criteria established in accordance with such strategy and key
performance measures.
Metair's performance is dependent upon, inter alia, the successful execution of its strategy, OE volumes, a peaceful labour environment and
the exchange rate. Subject to such factors, the outlook for the remainder of the Group's financial year lies within management's expectations.
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
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