Wrap Text
Condensed unaudited consolidated interim results for the six months ended 30 June 2015
METAIR INVESTMENTS LIMITED
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("METAIR" OR "THE GROUP" OR "THE COMPANY")
(Reg No. 1948/031013/06)
Share code: MTA
ISIN code: ZAE 000090692
CONDENSED UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2015
Excellent progress on delivery
of the group strategy
Performance against 50x50x50 strategy
Original equipment
61% 49% 50%
June 2013 June 2014 June 2015
Aftermarket & non-auto
39% 51% 50%
June 2013 June 2014 June 2015
Battery
39% 53% 54%
June 2013 June 2014 June 2015
Operating profit
UP 8%
Revenue (million)
3 543 3 235 4 044
2015 H1 2014 H1 2014 H2
EBITDA (million)
502 485 674
2015 H1 2014 H1 2014 H2
HEPS (cents)
111 120 183
2015 H1 2014 H1 2014 H2
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
R'000 R'000 R'000
Unaudited Unaudited Audited
Revenue 3 542 530 3 235 218 7 278 815
Cost of sales (2 804 290) (2 513 659) (5 695 917)
Gross profit 738 240 721 559 1 582 898
Other operating income 57 895 68 181 162 755
Distribution, administrative and other operating expenses (450 311) (471 003) (916 272)
Operating profit 345 824 318 737 829 381
Interest income 16 899 7 801 22 698
Interest expense (68 266) (49 408) (118 935)
Share of results of associates 32 157 32 343 70 006
Profit before taxation 326 614 309 473 803 150
Taxation (90 240) (58 537) (170 845)
Profit for the period 236 374 250 936 632 305
Attributable to:
Equity holders of the company 220 080 234 809 601 460
Non-controlling interests 16 294 16 127 30 845
236 374 250 936 632 305
Depreciation and amortisation (included in the above expenses) (124 097) (133 519) (258 825)
Operating lease rentals (included in the above expenses) (17 700) (11 566) (33 628)
Earnings per share
Basic earnings per share (cents) 112 120 308
Headline earnings per share (cents) 111 120 302
Diluted earnings per share
Diluted earnings per share (cents) 111 119 305
Diluted headline earnings per share (cents) 110 119 301
Number of shares in issue (‘000) 198 986 198 986 198 986
Number of shares in issue excluding treasury shares (‘000) 197 280 195 488 196 878
Weighted average number of shares in issue (‘000) 197 066 195 099 195 434
Adjustment for dilutive shares (‘000) 1 253 2 246 1 549
Number of shares used for diluted earnings calculation (‘000) 198 319 197 345 196 983
Calculation of headline earnings (R'000)
Net profit attributable to ordinary shareholders 220 080 234 809 601 460
Profit on insurance recovery and impairment charges (5 826)
Taxation effect of insurance recovery and impairment charges (1 393)
(Profit)/loss on disposal of property, plant & equipment – net (1 846) 66 (4 473)
Headline earnings 218 234 234 875 589 768
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
R'000 R'000 R'000
Unaudited Unaudited Audited
Profit for the period 236 374 250 936 632 305
Other comprehensive incom
– Actuarial gains/(loss) recognised 2 586 (13 197)
– Exchange (losses)/gains arising on translation of forei
(299 445) 84 139 12 338
operatio
– Taxation on other comprehensive (loss)/income (517) 2 703
Net other comprehensive (loss)/income (297 376) 84 139 1 844
Other comprehensive (loss)/income for the period net of taxation (61 002) 335 075 634 149
Attributable t
Equity holders of the company (77 296) 318 881 603 502
Non-controlling interests 16 294 16 194 30 647
(61 002) 335 075 634 149
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
R'000 R'000 R'000
Unaudited Unaudited Audited
Balance at beginning of the period 4 238 630 3 788 752 3 788 752
Net profit for the period 236 374 250 936 632 305
Other comprehensive (loss)/income for the period (297 376) 84 139 1 844
Total comprehensive (loss)/income for the period (61 002) 335 075 634 149
Employee share plan:
– Value of service provided 946 12 361 17 033
Vesting of share-based payment obligation:
– Estimated taxation effects of utilisation of treasury shares (2 122) (4 785) (12 441)
– Loss on settlement of old scheme (1 263) (1 264)
Shares disposed by the Metair Share Trust 2 583 2 582
Dividend * (188 426) (169 004) (169 323)
Acquisition of non controlling interests (340) (20 857)
Balance at end of the period 3 987 686 3 963 719 4 238 631
* An ordinary dividend of 80 cents per share was declared in 2015 in respect of the year ended 31 December 2014
An ordinary dividend of 70 cents per share was declared in 2014 in respect of the year ended 31 December 2013
CONDENSED CONSOLIDATED SEGMENTAL REVIEW
Revenue Profit before interest and taxation
Six months ended Year ended Six months ended Year ended
30 June 2015 30 June 2014 31 Dec 2014 30 June 2015 30 June 2014 31 Dec 2014
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited Unaudited Audited Unaudited Unaudited Audited
Local
Original equipment 1 893 412 1 737 503 3 636 947 101 771 117 999 232 952
Aftermarket 1 162 365 986 332 2 346 055 155 714 110 111 420 922
Non-auto 376 099 308 153 601 212 42 989 41 072 44 207
3 431 876 3 031 988 6 584 214 300 474 269 182 698 081
Direct exports
Original equipment 83 874 54 587 108 973 12 412 7 715 6 590
Aftermarket 405 293 543 745 1 336 002 26 982 41 133 139 000
Non-auto 26 114 28 380 69 413 2 856 6 139 7 966
515 281 626 712 1 514 388 42 250 54 987 153 556
Property rental 42 467 47 790 95 365 42 493 43 172 93 490
Reconciling items: *
– Share of results of associates 32 157 32 343 70 006
– Managed associates (404 627) (423 482) (819 787) (23 972) (42 520) (73 147)
Other reconciling items ** (42 467) (47 790) (95 365) (15 421) (6 084) (42 599)
Total 3 542 530 3 235 218 7 278 815 377 981 351 080 899 387
Net interest expense (51 367) (41 607) (96 237)
Profit before taxation 326 614 309 473 803 150
* Although the results of Hesto Harnesses Proprietary Limited does not qualify for consolidation, 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.
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 2015 30 June 2014 31 December 2014
R'000 R'000 R'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 2 746 078 2 886 438 2 855 286
Intangible assets 1 147 582 1 262 850 1 269 895
Investment in associates 245 524 215 157 251 684
Deferred taxation 5 532 37 840 16 804
4 144 716 4 402 285 4 393 669
Current assets
Inventory 1 647 562 1 384 863 1 508 012
Trade and other receivables 1 455 167 1 149 150 1 401 928
Derivative financial assets 1 028 1 502 4 365
Taxation 17 373 16 712 24 011
Cash and cash equivalents 441 420 537 099 602 666
3 562 550 3 089 326 3 540 982
Total assets 7 707 266 7 491 611 7 934 651
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 497 931 1 497 931 1 497 931
Treasury shares (17 430) (35 468) (21 475)
Share-based payment reserve 74 928 69 313 73 984
Foreign currency translation reserve (199 060) 171 881 100 229
Equity accounted earnings reserve 236 480 206 107 242 640
Changes in ownership reserve (21 197) (20 857)
Retained earnings 2 330 965 1 968 555 2 266 646
Ordinary shareholders' equity 3 902 617 3 878 319 4 139 098
Non-controlling interests 85 069 85 400 99 533
Total equity 3 987 686 3 963 719 4 238 631
Non-current liabilities
Borrowings 1 752 166 213 616 1 670 577
Post-employment benefits 106 133 104 437 110 031
Deferred taxation 339 274 382 709 374 551
Deferred grant income 102 677 135 534 107 581
Provisions for liabilities and charges 59 936 33 126 60 290
2 360 186 869 422 2 323 030
Current liabilities
Trade and other payables 869 417 753 205 1 026 814
Borrowings 82 840 1 489 890 69 268
Taxation 6 234 18 616 24 636
Provisions for liabilities and charges 107 666 123 650 116 691
Derivative financial liabilities 2 550 1 612 5 388
Bank overdrafts 290 687 271 497 130 193
1 359 394 2 658 470 1 372 990
Total liabilities 3 719 580 3 527 892 3 696 020
Total equity and liabilities 7 707 266 7 491 611 7 934 651
Net asset value per share (cents) attributable to ordinary shareholders
1 978 1 984 2 102
calculated on number of shares in issue excluding treasury shares
Capital expenditure 158 184 121 272 266 567
Capital commitments:
– contracted 159 541 110 895 54 687
– authorised but not contracted 147 731 106 302 407 042
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2015 30 June 2014 31 December 2014
R'000 R'000 R'000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 326 614 309 473 803 150
Non-cash items 166 153 168 899 292 494
Working capital changes (403 379) (143 522) (248 688)
Cash generated from operations 89 388 334 850 846 956
Interest paid (82 901) (49 408) (89 326)
Taxation paid (100 052) (97 734) (196 110)
Dividends paid (188 426) (169 004) (169 323)
Dividend income from associates 38 318 16 976 18 108
Net cash (outflow)/inflow from operating activities (243 673) 35 680 410 305
Investing activities
Interest received 16 899 7 801 22 698
Net cash utilised in other investing activities (152 503) (679 812) (842 767)
Net cash outflow from investing activities (135 604) (672 011) (820 069)
Net cash inflow from financing activities 66 567 493 373 471 807
Net (decrease)/increase in cash and cash equivalents (312 710) (142 958) 62 043
Cash and cash equivalents at beginning of the period 472 473 407 501 407 501
Exchange (losses)/gains on cash and cash equivalents (9 029) 1 059 2 929
Cash and cash equivalents at end of the period 150 734 265 602 472 473
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Accounting policies
These condensed consolidated interim financial statements for the six months ended 30 June 2015 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 2014, 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 applicable to summary financial statements. The accounting policies applied in the
preparation of the condensed consolidated interim financial statements are in terms of IFRS and 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
The obligation under the preference share and revolving credit facilities are guaranteed on a joint and several basis by certain wholly owned
subsidiaries within the group. There has been no material change in the group's contingent liabilities since period-end.
Borrowings
During the period the group repaid long-term loans of R4.4 million (2014: R0.3 million), raised long-term loans of R119.1 million
(2014: R13.8 million), raised short-term loans of R4.2 million (2014: R576.9 million) and repaid short-term loans of R14.8 million
(2014: R93.6 million).
Change of directors
Mr Mpueleng Pooe resigned as chairman of the board with effect from 30 June 2015, Mr Brand Pretorius assumed the chairmanship of the board with
effect from 1 July 2015.
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 Wednesday, 19 August 2015 at 09h30. The audio webcast can be accessed through http://www.corpcam.com/Metair19082015.
Alternatively a telephone conference call facility will be available at 09h30 on Wednesday, 19 August 2015 in SA on 011 535 3600 / 010 201 6800
or internationally on +27 11 535 3600 / +27 10 201 6800.
INTERIM RESULTS COMMENTARY
Metair is pleased to report encouraging interim results for the six months ended 30 June 2015.
Operating profit increased to R345.8 million compared to R318.7 million in the previous period. The increase in operating profit of 8% is in line
with the 9% increase in revenue to R3 543 million compared to R3 235 million in the previous period.
During this period the group increased its shareholding in Mutlu Akü, the leading lead acid battery manufacturer in Turkey, to 100% and effectively
de-listed the company from the Istanbul Security Exchange.
The increased shareholding in Mutlu Akü from 96,7% in the previous period resulted in an increase in group debt by c. R92.7 million.
In the comparative period the group was restructured to secure the long-term debt structure required for the acquisition of the shareholding in
Mutlu Akü. The restructuring resulted in a lower than normal tax rate which has now normalised. The combination of tax normalisation and increased
interest charges resulted in a decrease in profit after tax attributable to equity holders to R220.0 million from R234.8 million in the previous period.
The tax charge increased to R90.2 million from R58.5 million and net interest expenses to R51.4 million from R41.6 million.
Mutlu Akü acquisition
Mutlu Akü produced an excellent result for the period under very challenging market conditions in the region and volatile currencies in our major
export markets like Russia. The Ruble devalued dramatically in this period and exports to Russia almost came to a halt, however, Mutlu Akü's position
in the local aftermarket improved. The increase in demand in the local aftermarket was supported by a strong increase in local vehicle production in
Turkey.
The integration of Mutlu Akü is progressing according to the plans and objectives set by Metair.
The final acquisition cost of R2.9 billion was funded by a combination of internal cash resources, equity of R1.5 billion and preference shares of
R1.4 billion at 69% of the prime interest rate. R45.5 million of preference dividends were accrued for the six months to 30 June 2015.
During this period the group, for the first time had to negotiate a new wage agreement as a foreign owner, as the previous two-year wage agreement
had come to an end. We successfully concluded the new two-year wage agreement with virutally no disruptions, although in preparation for potential
disruptions we increased contingency stock by R121 million and incurred supply disruption mitigation costs of c. R5 million.
Labour environment in South Africa
The labour environment in South Africa was stable during this period as we prepare for model changes planned for the second half of the year.
Financial commentary
Group revenue increased to R3 543 million (2014: R3 235 million), operating profit increased to R345.8 million (2014: R318.7 million) and profit
after tax decreased to R236.4 million (2014: R250.9 million). The group's operating performance improved by R27.1 million due to a stronger
aftermarket result in South Africa, Romania and Turkey. In Turkey aftermarket volumes increased by 7% and margins improved to 13,4% from 11,1% in
2014. This was offset by a decline in export operating profit as volumes declined by 179 780 units, or 18%, which was primarily due to the loss of
the Russia aftermarket sales. Excluding Russia, and intercompany sales, export volumes were largely flat. Original equipment segmental results
retracted by R16.2 million during the period as a result of a 6% decline in a major customer's volumes combined with project costs of c. R20 million
associated with new model launch preparation.
The group's earnings before interest, tax, depreciation and amortisation (EBITDA) generation improved to R502.1 million (2014: R484.6 million), in
line with the improvement in operating profit. Cash generated from operations decreased to R89.4 million from R334.9 million in 2014 largely due to
increased working capital investment. The majority of the increase relates to a temporary tooling investment of c. R135 million, associated with new
model launches as well as contingency stock accumulated in Turkey of c. R121 million, in anticipation of a potential strike at Mutlu. Trade debtors
also increased due to mix change with higher aftermarket sales revenue combined with the reduced Russian exports. Russian exports are typically on a
cash basis where aftermarket sales are made on credit terms. Our expectation is that working capital will normalise by year-end.
Despite higher operating profits, increased interest charges and higher taxation expenses resulted in attributable profit after tax declining by
R14.6 million to R236.4 million. The net interest charge increased by R9.8 million due to a higher average net debt position in 2015 as the
comparative period did not fully include facility utilisation of the Mutlu Akü minority squeeze-out payments and higher revolving credit facilities.
Although the group continues to benefit from operating in lower tax rate jurisdictions, as disclosed in the 2014 interim results, the 2014 interim
results included the accounting benefit associated with the raising of a previously unrecognised deferred tax asset as part of the refinancing and
associated internal restructuring.
Cash and cash equivalents decreased to R150.7 million at 30 June 2015 from R265.6 million for the comparative period. Net debt was R1 684.3 million
as at the end of the period compared to R1 267.4 million as at year-end.
Operational commentary
Original equipment manufacturing (OEM) segment
Overall demand in the OE sector was stable during this period with an increase in demand for OEM's in Turkey. The South African operations are
preparing for planned model changes in the second half.
Aftermarket segment
Aftermarket demand in South Africa and Turkey was strong during the period with the larger growth experienced in Turkey. Romania aftermarket
demand improved slightly as Rombat increased its market share in a very competitive market.
Non-automotive and export segment
The export markets were steady during this period except for exports to the Russian aftermarket which collapsed on the back of a dramatically
weakened Russian Ruble.
Start/Stop Battery Technology
During this period the group managed to successfully launch its Metair International Battery (MIB) brand and established the group Battery Technology
Centre in Turkey.
The group's second generation Start/Stop AGM battery product range successfully passed all the new higher specification testing requirements and is
one of the first battery companies worldwide to achieve this objective.
The group has managed to secure future business linked to new vehicle launches planned for 2016 to 2018 requiring Start/Stop battery
technology in Turkey and Europe that could utilise at least one third of the group's spare capacity depending on final vehicle volume demand
and technology requirements.
Prospects
OEM segment
In South Africa the group is focused on supporting one of our major customers in achieving a flawless launch of a new model. In the short-term new
model launches result in lower production volumes but in the long-term, depending on market acceptance and penetration, it could offer growth
opportunities.
As new model components in South Africa are across all operating companies, the group remains sensitive to model changes in South Africa.
Local OE production in Turkey and Romania remains positive.
Aftermarket segment
Aftermarket demand in Romania and South Africa should remain stable and second half seasonal winter demand in Turkey depends on climatic
conditions in the forthcoming period.
Aftermarket exports to Russia will depend on demand returning for imported products.
Non-automotive sector
Demand for standby and other energy storage systems and solutions should maintain itself and build on the improved level displayed during the
first half.
Conclusion
The second half of the year tends to reflect the seasonal increase in aftermarket battery demand from the northern hemisphere but in the light of
the anticipated impact of major vehicle model changes in South Africa, the second half is expected to be challenging.
Results will depend upon inter alia, model change effect, exchange rates, volumes, commodity price movements, seasonal winter demand and
geopolitical conditions.
Signed on behalf of the board in Johannesburg on 18 August 2015
SG Pretorius – Chairman CT Loock – Managing Director
REGISTRARS
Computershare Investor Services (Pty) Limited
70 Marshall Street
JOHANNESBURG 2001
INVESTOR RELATIONS
Instinctif Partners
SPONSOR
One Capital
The condensed consolidated 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: A Joffe
INDEPENDENT NON-EXECUTIVE DIRECTORS: SG Pretorius (Chairman); RS Broadley; L Soanes*; JG Best; DR Wilson
COMPANY SECRETARY: SM Vermaak *British
Date: 19/08/2015 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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