Wrap Text
Condensed unaudited consolidated interim results for the six months ended 30 June 2016
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 2016
SEGMENT CONTRIBUTION*
Revenue
Energy storage 57%
Automotive components 43%
PBIT
Energy storage 91%
Automotive components 9%
*Includes Hesto
REVENUE (MILLION)
2015 H1 3543
2015 H2 4189
2016 H1 4030
HEPS (CENTS)
2015 H1 111
2015 H2 137
2016 H1 54
EBITDA (MILLION)
2015 H1 502
2015 H2 590
2016 H1 390
HEAD COUNT
Permanent
2016 H1 6893
2015 H1 7063
2015 H1 & 2016 H1
ZERO FATALITIES
STAFF COMPOSITION
SOUTH AFRICA
African 72%
Coloured 7%
Indian 13%
White 8%
Foreign 0%
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
R'000 R'000 R'000
Unaudited Unaudited Audited
Revenue from sales of goods 4 029 723 3 542 530 7 732 479
Cost of sales (3 316 333) (2 804 290) (6 184 034)
Gross profit 713 390 738 240 1 548 445
Other operating income 47 303 57 895 188 236
Distribution, administrative and other operating expenses (500 475) (450 311) (947 063)
Operating profit 260 218 345 824 789 618
Interest income 20 608 16 899 33 478
Interest expense (91 316) (68 266) (136 277)
Share of results of associates (17 008) 32 157 57 919
Profit before taxation 172 502 326 614 744 738
Taxation (56 899) (90 240) (189 843)
Profit for the period 115 603 236 374 554 895
Attributable to:
Equity holders of the company 107 501 220 080 527 423
Non-controlling interests 8 102 16 294 27 472
115 603 236 374 554 895
Depreciation and amortisation included in the above expenses (146 720) (124 097) (244 681)
Operating lease rentals included in the above expenses (21 206) (17 700) (36 647)
Earnings per share
Basic earnings per share (cents) 54 112 267
Headline earnings per share (cents) 54 111 248
Diluted earnings per share
Diluted earnings per share (cents) 54 111 266
Diluted headline earnings per share (cents) 54 110 247
Number of shares in issue ('000) 198 986 198 986 198 986
Number of shares in issue excluding treasury shares ('000) 198 620 197 280 197 627
Weighted average number of shares in issue ('000) 198 121 197 066 197 216
Adjustment for dilutive shares ('000) 503 1 253 934
Number of shares used for diluted earnings calculation ('000) 198 624 198 319 198 150
Calculation of headline earnings per share (R'000)
Net profit attributable to ordinary shareholders 107 501 220 080 527 423
Profit on insurance recovery from fire (PPE) – net (1 308)
Profit on disposal of property, plant & equipment – net (769) (1 846) (2 818)
Profit on sale of associate – net (6 177)
Gain from bargain purchase (28 695)
Headline earnings 106 732 218 234 488 425
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
R'000 R'000 R'000
Unaudited Unaudited Audited
Profit for the period 115 603 236 374 554 895
Other comprehensive income:
– Actuarial (losses)/gains recognised (3 790) 2 586 6 575
– Foreign exchange translation movements (164 654) (299 445) 366 703
– Taxation on other comprehensive income/(loss) 758 (517) (1 369)
Net other comprehensive (loss)/income (167 686) (297 376) 371 909
Total comprehensive (loss)/income for the period (52 083) (61 002) 926 804
Attributable to:
Equity holders of the company (60 059) (77 296) 898 623
Non-controlling interests 7 976 16 294 28 181
(52 083) (61 002) 926 804
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
R'000 R'000 R'000
Unaudited Unaudited Audited
Balance at beginning of the period 4 974 544 4 238 630 4 238 631
Net profit for the period 115 603 236 374 554 895
Other comprehensive (loss)/income for the period (167 686) (297 376) 371 909
Total comprehensive (loss)/income for the period (52 083) (61 002) 926 804
Share option scheme 6 280 946 1 687
Vesting of share-based payment obligation:
– Estimated taxation effects of utilisation of treasury shares (3 105) (2 122) (3 809)
Dividend* (152 676) (188 426) (188 429)
Acquisition of non-controlling interests (340) (340)
Balance at end of the period 4 772 960 3 987 686 4 974 544
* An ordinary dividend of 70 cents per share was declared in 2016 in respect of the year ended 31 December 2015
An ordinary dividend of 80 cents per share was declared in 2015 in respect of the year ended 31 December 2014
CONDENSED CONSOLIDATED BALANCE SHEET
30 June 2016 30 June 2015 31 December 2015
R'000 R'000 R'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 3 279 808 2 746 078 3 327 427
Intangible assets 1 315 310 1 147 582 1 357 091
Investment in associates 337 562 245 524 235 890
Deferred taxation 3 636 5 532 5 353
4 936 316 4 144 716 4 925 761
Current assets
Inventory 1 777 141 1 647 562 1 734 860
Trade and other receivables 1 547 289 1 455 167 1 575 434
Taxation 33 863 17 373 23 969
Derivative financial assets 1 128 1 028 11 250
Cash and cash equivalents 669 310 441 420 769 186
4 028 731 3 562 550 4 114 699
Total assets 8 965 047 7 707 266 9 040 460
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 497 931 1 497 931 1 497 931
Treasury shares (3 942) (17 430) (13 940)
Share-based payment reserve 81 951 74 928 75 671
Foreign currency translation reserve 301 789 (199 060) 466 317
Equity accounted earnings reserve 224 663 236 480 241 671
Changes in ownership reserve (21 197) (21 197) (21 197)
Retained earnings 2 600 435 2 330 965 2 630 982
Ordinary shareholders' equity 4 681 630 3 902 617 4 877 435
Non-controlling interests 91 330 85 069 97 109
Total equity 4 772 960 3 987 686 4 974 544
Non-current liabilities
Borrowings 2 025 874 1 752 166 1 835 635
Post-employment benefits 120 775 106 133 113 617
Deferred taxation 386 849 339 274 401 208
Deferred grant income 169 036 102 677 172 362
Provisions for liabilities and charges 56 261 59 936 55 912
2 758 795 2 360 186 2 578 734
Current liabilities
Trade and other payables 918 896 869 417 1 006 242
Borrowings 119 575 82 840 129 337
Taxation 7 087 6 234 34 264
Provisions for liabilities and charges 113 302 107 666 113 040
Derivative financial liabilities 3 868 2 550 1 820
Bank overdrafts 270 564 290 687 202 479
1 433 292 1 359 394 1 487 182
Total liabilities 4 192 087 3 719 580 4 065 916
Total equity and liabilities 8 965 047 7 707 266 9 040 460
Net asset value per share (cents) attributable to ordinary shareholders
calculated on number of shares in issue excluding treasury shares 2 357 1 978 2 468
Capital expenditure 185 974 158 184 496 956
Capital commitments:
– Contracted 94 608 159 541 122 201
– Authorised but not contracted 87 453 147 731 256 708
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 June 2016 30 June 2015 31 December 2015
R'000 R'000 R'000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 172 502 326 614 744 738
Non-cash items 256 839 166 153 238 047
Working capital changes (170 390) (403 379) (164 201)
Cash generated from operations 258 951 89 388 818 584
Interest paid (89 581) (82 901) (150 255)
Taxation paid (95 055) (100 052) (174 120)
Dividends paid (152 676) (188 426) (188 429)
Dividend income from associates 38 318 58 888
Net cash (outflow)/inflow from operating activities (78 361) (243 673) 364 668
Investing activities
Interest received 20 608 16 899 33 478
Net cash utilised in other investing activities (292 474) (152 503) (477 186)
Net cash outflow from investing activities (271 866) (135 604) (443 708)
Net cash inflow from financing activities 186 033 66 567 176 226
Net (decrease)/increase in cash and cash equivalents (164 194) (312 710) 97 186
Cash and cash equivalents at beginning of the period 566 707 472 473 472 473
Exchange losses on cash and cash equivalents (3 767) (9 029) (2 952)
Cash and cash equivalents at end of the period 398 746 150 734 566 707
CONDENSED CONSOLIDATED SEGMENTAL REVIEW
Revenue Profit before interest and taxation
Six months ended Year ended Six months ended Year ended
30 June 2016 30 June 2015 31 Dec 2015 30 June 2016 30 June 2015 31 Dec 2015
Restated Restated
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited Unaudited Audited Unaudited Unaudited Audited
Energy storage
Automotive
Local 1 609 581 1 315 606 2 946 904 153 968 125 335 340 588
Direct export 652 913 420 366 1 181 398 40 043 35 684 105 118
2 262 494 1 735 972 4 128 302 194 011 161 019 445 706
Industrial
Local 291 497 371 468 741 739 36 546 50 715 92 657
Direct export 27 910 26 114 57 501 3 936 3 294 7 224
319 407 397 582 799 240 40 482 54 009 99 881
Total energy storage 2 581 901 2 133 554 4 927 542 234 493 215 028 545 587
Automotive components
Local
Original Equipment 1 630 844 1 519 737 3 000 767 (8 418) 156 997 266 077
Aftermarket 231 869 220 434 446 252 20 287 25 391 54 098
Non-Auto 20 597 4 631 31 739 818 (1 276) 1 936
1 883 310 1 744 802 3 478 758 12 687 181 112 322 111
Direct exports
Original Equipment 15 465 60 433 121 819 3 000 12 352 20 912
Aftermarket 23 264 8 368 24 131 7 190 159 1 985
38 729 68 801 145 950 10 190 12 511 22 897
Total automotive 1 922 039 1 813 603 3 624 708 22 877 193 623 345 008
Total segment results 4 503 940 3 947 157 8 552 250 257 370 408 651 890 595
Reconciling items:
– Share of results of
associates (17 008) 32 157 57 919
– Managed associates* (474 217) (404 627) (819 771) 53 425 (23 972) (48 151)
– Profit on sale of associate 10 705
Amortisation of intangible
assets arising from business
acquisitions (27 539) (23 434) (47 995)
Bargain purchase from
Dynamic acquisition 28 695
Other reconciling items** (23 038) (15 421) (44 231)
Total 4 029 723 3 542 530 7 732 479 243 210 377 981 847 537
Net interest expense (70 708) (51 367) (102 799)
Profit before taxation 172 502 326 614 744 738
* Although the results of Hesto Harnesses Proprietary Limited do not qualify for consolidation, the full results of Hesto Harnesses Proprietary Limited
have been included in the segmental review. 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.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies
The condensed consolidated interim financial statements for the six months ended 30 June 2016 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 2015, 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. The interim report has not been
reviewed or audited by the group's auditors.
Restatement of segment review
The group has changed the basis of its segment report during the previous financial year end. The resultant impact on the business of the
group following the acquisition of Rombat and Mutlu, together with the continued strategic redesign of the business now places focus on
energy storage and automotive components business. The comparative period has been restated to show the historical information on the
basis of the segment report in the current period.
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 borrowings of R60 million (2015: R19.2 million) and raised borrowings of R249.2 million (2015: R123.3 million).
Change of directors
Mr A Joffe resigned as non-executive director of the board with effect from 1 January 2016. Ms TN Mgoduso and Ms PPJ Molefe were appointed
as independent non-executive directors of the board with effect from 1 March 2016.
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, 18 August 2016 at 10h00. The audio webcast can be accessed through
http://www.corpcam.com/Metair18082016. Alternatively a telephone conference call facility will be available at 10h00 on Thursday, 18 August 2016 in SA on
011 535 3600/ 010 201 6800 or internationally on +27 11 535 3600/+27 10 201 6800.
INTERIM RESULTS COMMENTARY
The results for the period January to June 2016 are the first interim results presented to the market using the newly redesigned Energy Storage and
Automotive Components verticals.
The redesign of Metair and the establishment of the Energy Storage vertical was built on the premise of lessening our dependency on the traditional
automotive components business with its characteristic cyclicality linked to new vehicle launches.
A solid performance from the Energy Storage vertical during this period, combined with the award of a multi-year contract from a German OEM
(orginal equipment manufacturer) for the future supply of its complete EFB (enhanced flooded battery) start/stop business finalises the major redesign of
Metair and lays the foundation for the two verticals to build on.
Performance from the Automotive Components vertical was challenged during this period as it experienced the launch of a new model from our
major OEM customer. Launch support costs put this business vertical into a loss position for the period.
The combined result for Metair was still positive with R107.5 million attributable profit as the Energy Storage vertical managed to limit the decline in
profitability to 51%.
RESULTS COMMENTARY
Improved Energy Storage vertical revenue, benefiting from a weaker ZAR and a 7% increase in overall automotive volumes, resulted in group revenue
increasing to R4 030 million (2015: R3 543 million). Automotive Component vertical revenue was largely flat, with reduced automotive production
volumes from our major dominant customer during ramp-up being offset by price increases to recover higher imported material cost due to ZAR weakness.
The group's operating result declined to R260 million (2015: R346 million) due to a significant decline in profit from the Automotive Component
vertical related to the new vehicle launch and associated inefficiencies. Similarly, profit after tax of R116 million is R120 million behind the prior
period. This resulted in HEPS (headline earnings per share) of 54cps (cents per share) compared to 111cps for the prior period. Current year share of
results of associates (which include Hesto, Tenneco and Valeo) was significantly impacted by Hesto's production ramp-up inefficiencies and associated
costs of overtime, training and airfreight for imported harnesses.
The group's EBITDA (earnings before interest, tax, depreciation and amortisation) generation decreased to R390 million (2015: R502 million), in
line with the reduced operating profit. Cash generated from operations, however, increased to R259 million from R89.4 million in 2015 as further
investment in working capital was limited to R170 million, from R403 million in 2015. The majority of the R170 million relates to higher revenues, as
working capital days remained flat reducing marginally from 114 days at 30 June 2015 to 108 days at 30 June 2016.
Interest charges increased to R91 million from R68 million in 2015 due to higher interest rates as well as higher overall average net debt levels.
Although the group continues to benefit from operating in lower tax rate jurisdictions, the effective tax rate increased to 33% for this interim period
due to the impact of non-deductible interest on our preference shares relative to the overall reported profit before tax, as well as post-tax losses
incurred at Hesto, which is equity accounted.
Net cash and cash equivalents increased to R398.7 million at 30 June 2016 from R150.7 million for the comparative period. Net debt was
R1 747 million as at the end of the period compared to R1 684 million as at year-end.
SEGMENTAL COMMENTARY
Energy Storage Vertical
The most significant achievement during this period was the award of a multi-year supply agreement from Daimler AG in Germany. With this contract
Metair delivered on its desire to complement the acquisitions with technical support to leverage the sale of spare battery manufacturing capacity.
Further strategic progress was made with the acquisition of a 25% shareholding in Associated Battery Manufacturers Limited (ABM) Kenya.
The Energy Storage businesses of Rombat in Romania and Mutlu Akü in Turkey both performed well.
Segmental analysis of the industrial business indicated a reduction of current opportunity in the market for Mutlu Akü in Turkey as well as for First National
Battery in South Africa.
The South African aftermarket business environment experienced some margin pressure and local market competition. Although there was some
aftermarket share growth it required the extension of the product warranty period to two years which slightly reduced margins in the South African
aftermarket.
The Energy Storage vertical operating profit improved to R234 million, at a 9.1% margin, from R215 million in the comparative period, at a 10.1%
margin. While local automotive margins improved slightly by 0.1% to 9.6%, automotive export margins reduced to 6.1% from 8.5%. This was due to
increased Romanian exports for OES (original equipment spares) products, as well as increased Russian exports from Mutlu but at reduced margins to
compensate for the currency effect and maintain our brand presence. Volumes into Russia increased to c. 84 000 from c. 17 000 during 2015.
Industrial operating profit reduced to R40 million, at a 12.7% margin, from R54 million, at a 13.6% margin. More stable electricity supply from Eskom
reduced demand for stand-by product in SA, while Turkish demand was weak and impacted by the cyclical nature of contractual business.
Automotive Components Vertical
This business vertical experienced a major model change event during the period as our major customer launched a new model that saw the renewal
of 70% of our business. The securing of the new business is of great importance and came with a total customer support focus. The new business was
supported with substantial investment in new technology.
The combination of new technology and vehicle launch complexity affected internal manufacturing efficiencies. Customer build support required
extraordinary counter measures that resulted in premium freight and man hour costs.
The Automotive Component vertical operating profit declined to R23 million, at a 1.2% margin, from R194 million in the comparative period, at
10.7% margin. The major impact during the current period was at Hesto Harnesses, a 74.9% associate. Hesto's results were R77 million behind prior
year operating profit, with a loss of R53 million recorded for the 2016 interim period. This was caused by a model mix change in the newly launched
vehicle, which required higher volume production of models with higher content and complexity. Excluding Hesto, the remaining component
businesses local operating margin decreased to 4.2% in 2016, from a 12% local margin at interim 2015. This was due to the initial launch period
where production volumes were well below capacity, followed by a period of production in the latter part of the six months in excess of capacity
which necessitated significant overtime.
Turkey Operational Environment
Mutlu Akü in Turkey performed well and played a key role in securing the multi-year supply agreement with a major German OEM.
Exports from Turkey to Russia resumed during the period although still at a low level.
Metair was fortunate that none of our employees or our business were directly negatively impacted during the failed coup. From an international
perspective the country risk profile of Turkey changed and the long-term effects will have to be determined. Fortunately the Turkish Government
showed great sensitivity in this regard and opened direct communication channels with the Presidency soon after the event. The President and his
office remain committed to support foreign investments in Turkey.
Prospects
The prospect statement as contained in the Integrated Annual Report of Metair for 2015 indicated that the group will be challenged to improve on
the 2015 results during 2016. The group further indicated that the first half of the year will be particularly difficult as we participate in a new model
launch. The results achieved in the first half of the year are going to make it very difficult to maintain the results achieved in 2015 as the Automotive
Components vertical produced an operating profit of R23 million 2016 H1 compared to R194 million in 2015 H1.
Energy Storage Vertical
The second half of the year traditionally experiences seasonal demand brought about by the winter period associated with the market served by
Rombat and Mutlu Akü in Europe and the Middle East.
In the South African market we expect the local market competition to continue as we aim to increase our market share.
Strong seasonal demand in our winter markets supported by achievement of some geo-political stability in Turkey could support a continued good
performance in the second half.
Automotive Components Vertical
This business vertical managed to renew most of the business associated with the new model launch in support of the next business cycle linked to
new model launches.
The major challenges related to the next five- to seven-year cycle for this vertical in South Africa relates to the production volume and margins
outlook for newly secured business.
Under current business conditions Metair expects to achieve single digit turnover growth in the short- to medium-term as technology advancements
and product offering expansion counter an anticipated 10% overall volume reduction link to our product demand exposure associated with new models.
Conclusion
As Metair finalised the redesign of the business with the establishment of the dominant Energy Storage vertical we aim to achieve a good
performance from this vertical in the second half.
With the renewal of business required for long-term maintenance of the Automotive Components vertical, complete focus remains on achieving
manufacturing efficiency and production stability during the next period. A major contributing factor to performance in the South African market
during the second half will be labour stability as our existing wage agreement expires in this period.
We expect to carry forward some of the efficiency challenges experienced in the first half as we aim to balance our production capacities and manning
levels to that required by the market in the second half. Achievement of targeted production efficiencies associated with the new technology and
stabilisation of manufacturing processes should restrict margin retraction on new business to a 6% – 8% PBIT (profit before interest and tax) margin
compared to previous business with 10% – 12% margin levels in the long term.
Results will depend on inter-alia, model change effect, exchange rates, long term volumes, commodity price movements, seasonal winter demand,
geopolitical conditions and margin progress in the Automotive Components vertical during the second half of the year. Any forward looking
statements in this announcement have not been reviewed or reported on by the Company's auditors.
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 17 August 2016.
SG Pretorius – Chairman CT Loock – Managing Director
The condensed consolidated 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)
INDEPENDENT NON-EXECUTIVE DIRECTORS: SG Pretorius (Chairman); RS Broadley; L Soanes*; JG Best; DR Wilson; TN Mgoduso; PPJ Molefe
COMPANY SECRETARY: SM Vermaak
*British
Date: 18/08/2016 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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