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METAIR INVESTMENTS LIMITED - Interim Report For The Six Months Ended 30 June 2013

Release Date: 29/08/2013 07:05
Code(s): MTA     PDF:  
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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
Date: 29/08/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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