Wrap Text
Interim Results for the six months ended 30 June 2014
METAIR INVESTMENTS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("METAIR" OR "THE GROUP")
(Reg No. 1948/031013/06)
Share code: MTA
ISIN code: ZAE 000090692
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
Increased Increased Decreased Increased Increased Increased
REVENUE OPERATING PROFIT HEPS (cents) NET ASSET VALUE PER SHARE (cents) EBITDA CASH GENERATED FROM OPERATIONS
32% 16% (16%) 37% R485 million R335 million
Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 Change R'000
Unaudited Unaudited % Audited
Revenue 3 235 218 2 459 831 32% Increased 5 227 426
Operating profit 318 737 274 169 16% Increased 445 614
EBITDA 484 599 375 087 29% Increased 650 799
HEPS (cents) 120 143 (16%) Decreased 219
No. of shares issued (‘000) 198 986 152 532 30% Increased 198 986
Net asset value per share (cents) 1 984 1 450 37% Increased 1 895
Cash generated from operations 334 850 226 791 48% Increased 665 908
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 R'000
Unaudited Unaudited Audited
Revenue 3 235 218 2 459 831 5 227 426
Cost of sales (2 513 659) (1 940 270) (4 177 984)
Gross profit 721 559 519 561 1 049 442
Other operating income 68 181 24 361 98 087
Distribution, administrative and other operating expenses (471 003) (269 753) (701 915)
Operating profit 318 737 274 169 445 614
Interest income 7 801 7 356 15 421
Interest expense (49 408) (12 586) (27 888)
Share of results of associates 32 343 38 109 61 924
Profit before taxation 309 473 307 048 495 071
Taxation (58 537) (77 946) (121 172)
Profit for the period 250 936 229 102 373 899
Attributable to:
Equity holders of the company 234 809 209 457 341 376
Non-controlling interests 16 127 19 645 32 523
250 936 229 102 373 899
Depreciation and amortisation included in the above expenses (133 519) (62 809) (143 261)
Operating lease rentals included in the above expenses (11 566) (10 944) (32 151)
Earnings per share
Basic earnings per share (cents) 120 143 229
Headline earnings per share (cents) 120 143 219
Diluted earnings per share
Diluted earnings per share (cents) 119 140 223
Diluted headline earnings per share (cents) 119 140 214
Number of shares in issue (‘000) 198 986 152 532 198 986
Number of shares in issue excluding treasury shares (‘000) 195 488 146 667 194 566
Weighted average number of shares in issue (‘000) 195 099 146 112 149 271
Adjustment for dilutive shares (‘000) 2 246 3 444 3 585
Number of shares used for diluted earnings calculation (‘000) 197 345 149 556 152 856
Calculation of headline earnings per share (R'000)
Net profit attributable to ordinary shareholders 234 809 209 457 341 376
Profit on insurance recovery and impairment charges (15 342)
Taxation effect of insurance recovery and impairment charges 1 243
Loss/(profit) on disposal of property, plant and equipment – net 66 (2) (34)
Headline earnings 234 875 209 455 327 243
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 R'000
Unaudited Unaudited Audited
Profit for the period 250 936 229 102 373 899
Other comprehensive income:
– Actuarial gains recognised 395
– Exchange gains arising on translation of foreign operations 84 139 73 813 51 881
– Cash flow hedges 110 377
– Taxation on other comprehensive income (157)
Net other comprehensive income 84 139 73 813 162 496
Other comprehensive income for the period net of taxation 335 075 302 915 536 395
Attributable to:
Equity holders of the company 318 881 283 085 503 872
Non-controlling interests 16 194 19 830 32 523
335 075 302 915 536 395
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 R'000
Unaudited Unaudited Audited
Balance at beginning of the period 3 788 752 2 052 730 2 052 730
Net profit for the period 250 936 229 102 373 899
Other comprehensive income for the period 84 139 73 813 162 496
Total comprehensive income for the period 335 075 302 915 536 395
Proceeds from shares issued 1 500 000
Share issue costs (44 945)
Employee share plan:
– Value of service provided 6 670 4 901 9 747
– Deferred taxation 5 691 16 511 15 767
Vesting of share-based payment obligation:
– Estimated taxation effects of utilisation of treasury shares (4 785) (6 482) (15 123)
– Loss on settlement of old scheme (1 263) (586) (586)
Transfer of cashflow hedge to purchase consideration of subsidiary (110 377)
Shares disposed by the Metair Share Trust 2 583 1 094 1 095
Dividend * (169 004) (155 951) (155 951)
Balance at end of the period 3 963 719 2 215 132 3 788 752
* An ordinary dividend of 70 cents per share was declared in respect of the year ended 31 December 2013.
An ordinary dividend of 95 cents per share was declared in respect of the year ended 31 December 2012.
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 R'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 2 886 438 1 234 127 2 844 929
Intangible assets 1 262 850 84 452 1 243 531
Investment in associates 215 157 189 353 199 786
Deferred taxation 37 840 12 086 10 838
4 402 285 1 520 018 4 299 084
Current assets
Inventory 1 384 863 846 094 1 264 241
Trade and other receivables 1 149 150 718 058 1 274 387
Derivative financial assets 1 502 12 039 15 870
Taxation 16 712 21 002
Cash and cash equivalents 537 099 433 092 574 742
3 089 326 2 009 283 3 150 242
Total assets 7 491 611 3 529 301 7 449 326
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 497 931 42 876 1 497 931
Treasury shares (35 468) (60 473) (45 241)
Share-based payment reserve 69 313 54 113 58 215
Foreign currency translation reserve 171 881 110 106 87 809
Equity accounted earnings 206 107 185 307 190 742
Retained earnings 1 968 555 1 795 017 1 897 909
Ordinary shareholders' equity 3 878 319 2 126 946 3 687 365
Non-controlling interests 85 400 88 186 101 387
Total equity 3 963 719 2 215 132 3 788 752
Non-current liabilities
Borrowings 213 616 163 959 1 021 976
Post-employment benefits 104 437 29 159 107 685
Deferred taxation 382 709 61 805 378 954
Deferred grant income 135 534 125 313
Provisions for liabilities and charges 33 126 21 080
869 422 254 923 1 655 008
Current liabilities
Trade and other payables 753 205 653 160 1 472 949
Borrowings 1 489 890 56 298 180 796
Taxation 18 616 7 342 41 682
Provisions for liabilities and charges 123 650 75 718 141 406
Derivative financial liabilities 1 612 1 492
Bank overdrafts 271 497 266 728 167 241
2 658 470 1 059 246 2 005 566
Total liabilities 3 527 892 1 314 169 3 660 574
Total equity and liabilities 7 491 611 3 529 301 7 449 326
Net asset value per share (cents) attributable to ordinary
shareholders calculated on number of shares in issue excluding
treasury shares 1 984 1 450 1 895
Capital expenditure 121 272 54 329 135 027
Capital commitments:
– contracted 110 895 96 516 68 605
– authorised but not contracted 106 302 88 366 287 923
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2014 30 June 2013 31 December 2013
R'000 R'000 R'000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 309 473 307 048 495 071
Non-cash items 168 899 18 751 211 434
Working capital changes (143 522) (99 008) (40 597)
Cash generated from operations 334 850 226 791 665 908
Interest paid (49 408) (12 586) (27 888)
Taxation paid (97 734) (67 824) (88 814)
Dividends paid (169 004) (155 951) (155 951)
Dividend income from associates 16 976 24 698 43 077
Net cash inflow from operating activities 35 680 15 128 436 332
Investing activities
Interest received 7 801 7 356 15 421
Net cash utilised in other investing activities (679 812) (49 484) (2 318 046)
Net cash outflow from investing activities (672 011) (42 128) (2 302 625)
Net cash inflow/(outflow) from financing activities 493 373 (36 778) 2 099 626
Net (decrease)/increase in cash and cash equivalents (142 958) (63 778) 233 333
Cash and cash equivalents at beginning of the period 407 501 216 428 216 428
Exchange gains/(loss) on cash and cash equivalents 1 059 13 714 (42 260)
Cash and cash equivalents at end of the period 265 602 166 364 407 501
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
2014 2013 2013 2014 2013 2013
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited Unaudited Audited Unaudited Unaudited Audited
Local
Original equipment 1 737 503 1 691 514 3 143 576 117 999 156 257 221 968
Aftermarket 986 332 595 812 1 440 130 110 111 92 221 224 263
Non-auto 308 153 233 451 486 399 41 072 12 925 18 162
3 031 988 2 520 777 5 070 105 269 182 261 403 464 393
Direct exports
Original equipment 54 587 54 210 105 307 7 715 6 888 (3 638)
Aftermarket 543 745 283 135 772 275 41 133 24 750 60 901
Non-auto 28 380 18 363 44 810 6 139 937 1 494
626 712 355 708 922 392 54 987 32 575 58 757
Property rental 47 790 34 503 90 671 43 172 34 013 90 026
Reconciling items: *
– Share of results of associates 32 343 38 109 61 924
– Managed associates (423 482) (416 654) (765 071) (42 520) (46 410) (62 486)
Other reconciling items ** (47 790) (34 503) (90 671) (6 084) (7 412) (105 076)
Total 3 235 218 2 459 831 5 227 426 351 080 312 278 507 538
Net interest expense (41 607) (5 230) (12 467)
Profit before taxation 309 473 307 048 495 071
* Although the results of Hesto Harnesses Proprietary Limited does not qualify for consolidation due to the application
of IFRS 10 and IAS 28, the results of Hesto Harnesses Proprietary Limited have been included in the segmental review
as Metair has a 74,9% equity interest and is responsible for the operational management of this associate.
** 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 2014 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 2013, 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.
This interim report has not been reviewed or audited by the Group's auditors.
Contingencies
At 30 June 2014, bank and other guarantees given by the group to third parties amounted to R3.7 million (2013: R3.7 million).
The company provided guarantees for funding provided by Absa Bank Limited to Metindustrial and Inalex and no material liabilities
are likely to arise and the financial guarantee cost is insignificant.
Borrowings
During the period the group repaid long-term loans of R0.3 million (2013: R23.7 million), raised long-term loans of R13.8 million
(2013: R0.6 million), raised short-term loans of R576.9 million (2013: Nil) and repaid short-term loans of R93.6 million
(2013: R7.7 million).
Change of directors
With effect from 25 March 2014 Mr Sjoerd Douwenga was appointed as finance director, in place of Mr Brian Jacobs.
With effect from 1 January 2014 Mr Brand Pretorius was appointed to the board as an independent non-executive director
and Mr David Wilson as non-executive director.
The interim results presentation will be available on Metair's website (www.metair.co.za) and an investor and analyst audio
webcast of the presentation will be broadcast on Monday, 18 August 2014 at 09:30. The audio webcast can be accessed through
http://www.corpcam.com/Metair18082014. Alternatively a telephone conference call facility will be available at 09:30 on
Monday, 18 August 2014 in SA on 011 535 3600 / 010 201 6800 or internationally on +27 11 535 3600 / +27 10 201 6800.
REGISTRARS SPONSOR INVESTOR RELATIONS
Computershare Investor Services (Pty) Limited One Capital Instinctif Partners
70 Marshall Street
JOHANNESBURG 2001
Signed on behalf of the board in Johannesburg on 15 August 2014
O M E Pooe – Chairman C T Loock – Managing Director
The interim report was produced under the supervision of Mr S Douwenga (Finance Director) B Comm (Hons), CA (SA).
EXECUTIVE DIRECTORS: CT Loock (Managing); S Douwenga (Finance)
NON-EXECUTIVE DIRECTORS: OME Pooe (Chairman); A Joffe; DR Wilson
INDEPENDENT NON-EXECUTIVE DIRECTORS: RS Broadley; L Soanes*; A Galiel; JG Best; SG Pretorius
COMPANY SECRETARY: SM Vermaak
*British
INTERIM RESULTS COMMENTARY
Metair is pleased to report interim results for the six months ended 30 June 2014 to the market.
Profit after tax attributable to equity holders of the company increased to R234.8 million compared to R209.5 million in the
previous period. Although Mutlu Akü's performance was excellent, the contribution from the Original Equipment Manufacturer
(OEM) businesses was disappointing. Continued labour disruptions destabilised the manufacturing environment.
This is the first time that the results of Metair's latest acquisition, Mutlu Akü in Turkey, are included for a full reporting period.
The result is further distorted in that Mutlu Akü has traditionally earned the majority of its earnings in the second half of the
year. As a consequence, notwithstanding Mutlu group's (Mutlu) outstanding first half performance, the dilutionary effect of the
additional 46.4 million shares issued to acquire Mutlu and the acquisition debt of R1.35 billion has resulted in HEPS for the period
of 120 cents per share compared to 143 cents in the comparable period.
Mutlu Akü acquisition
Mutlu Akü produced excellent results for the period. Profit before interest and tax increased from R15 million to R90 million. This
was achieved as a consequence of, inter alia, reduced hard currency debt levels, excellent cost management and group synergies.
The integration of Mutlu Akü is progressing according to the plans and objectives set by Metair.
The acquisition cost of R2.9 billion was funded by a combination of internal cash resources, equity of R1.5 billion and a bridge
finance facility of R1.35 billion at JIBAR plus 150 basis points. R40.2 million of interest was incurred on the bridge funding for the
six months to 30 June 2014. In addition, R17.9 million of additional depreciation and amortisation relating to the Mutlu Akü fair
value allocation was expensed at a Metair level.
During the reporting period the group increased its shareholding in Mutlu Akü from 75% to 96,7% and in July Metair initiated
the minority squeeze-out process available under the Turkish Capital Market Board's Regulations. Our intention is to increase our
shareholding to 100% and delist Mutlu Akü.
Labour disruptions
The effect of continued labour disruptions in South Africa resulted in the destabilisation of the manufacturing environment with
resultant pressure on manufacturing excellence and efficiency.
The group was fortunate that local vehicle production was not directly negatively affected by any labour action, nor did we
experience any major production allocation shifts as a result of current and previous labour disruptions.
The competitiveness challenge in the OEM sector can only be met under a stable production environment and is paramount in
achieving overall efficiency targets.
Bridge finance facility refinancing and revolving credit facility
On 13 August 2014 we announced that Metair refinanced the bridge finance facility with R1.4 billion of five-year preference shares
at a dividend rate of 69% of the South African prime rate. Metair also raised a five-year R750 million group revolving credit facility
at JIBAR plus 205 basis points which can be utilised for working capital and capital expenditure requirements.
Financial commentary
Group revenue increased to R3 235 million (2013: R2 460 million), operating profit increased to R318.7 million
(2013: R274.2 million) and profit after tax increased to R250.9 million (2013: R229.1 million). The improvement in operating
performance was mainly due to the inclusion of the full half-year contribution from Mutlu.
Although operating profit and profit before tax was negatively impacted by the additional interest and depreciation associated
with the Mutlu acquisition, we are very pleased with the group's earnings before interest, tax, depreciation and amortisation
(EBITDA) generation, which improved to R485 million (2013: R375 million).
The group also continues to benefit from operating in lower tax rate jurisdictions. In addition, as part of our refinancing and associated
internal restructuring, we have also been able to account for previously unrecognised deferred tax assets during the current reporting period.
Cash and cash equivalents increased to R266 million from R166 million at year-end. Net debt (borrowings less cash and cash
equivalents) was R1 438 million as at the end of the period compared to R795 million as at year-end. The increase in net debt from
year-end is due to draw-downs made to buy out minorities of Mutlu Akü during the mandatory tender offer process.
Operational commentary
Original equipment manufacturing (OEM) segment
The overall trend in the OEM segment was a general decline in production volumes, as manufacturers launch new models. Model
launches are necessary to meet the latest carbon emission standards taking effect in 2016.
Emerging African economies with largely improved economies and increased motorisation have introduced higher import duties on
vehicles. Vehicle exports to these markets have reduced slightly.
Aftermarket segment
Aftermarket demand for the group's products varied across the different regions and export markets during the period. The major
local markets in Romania and Turkey were softer during the period mostly on the back of a warmer than normal winter period. In
South Africa the aftermarket demand remained strong.
Non-automotive and export segment
The group is now exporting to approximately 46 countries. Demand in major export markets like Middle East, Africa and Russia
remained strong during the period.
The mining sector demand continued to be depressed as result of the protracted mining sector labour dispute.
Start/Stop battery technology
The group's Start/Stop battery strategy has evolved to centre around Mutlu Akü's Technical Centre in Turkey. The acquisition of Mutlu
Akü has assisted the group in its technical progress in becoming a leading international Start/Stop lead acid battery supplier. Mutlu Akü
have expanded and refocused the group's Start/Stop technology path to include the enhanced flooded battery (EFB) to our advanced
glass matt (AGM) product range. Mutlu Akü is already supplying three OEM customers with Start/Stop batteries from this technology.
Centralising our technology base in Turkey should enable the group to meet the ever-increasing focus on the affordability of this technology.
The group proved to be uncompetitive on enquiries received at the onset of the acquisition of Mutlu Akü. Fortunately, the group has received
further enquires that could benefit from the integration, cost savings and synergy extraction targeted from the Mutlu Akü acquisition.
Prospects
Original equipment (OE) segment
Post-June 2014 the South African automotive industry experienced a four-week strike in the steel and engineering industry.
Although well-executed contingency plans by the automotive industry limited the loss of production in the OE sector to only two
weeks, the long-term effects of continued labour disruption remain to be seen as the effects of labour disruptions both current and
previous years continue to play out.
Barring any other structural resets or labour-related changes we believe that the SA automotive industry has now prematurely
settled at current production levels. Newly launched models could reach higher production levels if international criteria for a
successful launch are met. The group will have to remain diligent and focus on stabilisation of the manufacturing environment.
The outlook in other markets remains stable at this stage.
Aftermarket segment
The second half of this year will be the first second half that the group will experience in Mutlu Akü and its markets. We remain
positive in regard to our expectation and outlook in these markets although these target markets have some geopolitical
challenges. Aftermarket demand in South Africa should be stable.
Building on the first-half performance of Mutlu Akü is an imperative.
Non-automotive segment
With the stabilisation of the mining sector labour disputes and the global focus on green and renewable energy and energy storage
solutions, we are hopeful for a return to normality in this sector.
Conclusion
Metair remains committed to executing its strategy and achieving the key performance criteria for 2014. Our financial performance
is dependent upon, inter alia, OE volumes, a stable environment, internal inflation and the exchange rate. Subject to these factors,
we expect the financial performance in 2014 to be satisfactory.
Date: 18/08/2014 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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