Wrap Text
Condensed unaudited consolidated interim results for the six months ended 30 June 2017
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 2017
AUTOMOTIVE COMPONENTS VERTICAL
Revenue Operating Profit PBIT Margin
Up Up Up
11% 771% 8.1ppt
R2.1 Billion R199.4 Million 9.3%
46% contribution 47% contribution
Total Market Production Volumes Material Customer Production Volumes ROIC (LTM)
Down Up Up
2% 3% 14.8ppt
272 328 units 219 703 units 28.0%
ENERGY STORAGE VERTICAL
Revenue Operating Profit PBIT Margin
Down Down Up
5% 3% 0.1ppt
R2.5 Billion R226.5 Million 9.2%
54% contribution 53% contribution
Sales Volumes Local Currency Operating Profit ROIC (LTM)
Up Up Up
0.1% 18% 0.7ppt
3.55 Million units 14.7%
METAIR BUSINESS STRATEGY
3 X 5 Strategy: Energy Storage Vertical
- Targeting 10% of world mobility battery
supply of the 500 million batteries
- Company believes 50 million battery target
for group companies will equate to relevance
in the market
- 5-year target to achieve world leader position
in mobility energy supply
- Targeting leading technology applications
like lithium-ion across all product ranges in
electrical systems in all forms of mobility
BOARD COMPOSITION - DIVERSITY
2017 2016
Male (White) Male (White)
67% 78%
Female (African) Female (African)
33% 22%
Metair's strategy for our Energy Storage Vertical is to become the world leader in the supply of energy source products used in control
and energy solutions across the full spectrum of mobility options and nurture our Automotive Components Vertical
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
R'000 R'000 R'000
Unaudited Unaudited Audited
Revenue 4 075 750 4 029 723 8 953 710
Cost of sales (3 298 663) (3 316 333) (7 352 251)
Gross profit 777 087 713 390 1 601 459
Other operating income 48 993 47 303 110 777
Distribution, administrative and other operating expenses (471 187) (500 475) (980 800)
Operating profit 354 893 260 218 731 436
Interest income 15 390 20 608 33 296
Interest expense (90 527) (91 316) (187 905)
Share of results of associates 41 777 (17 008) 29 665
Profit before taxation 321 533 172 502 606 492
Taxation (81 685) (56 899) (138 434)
Profit for the period 239 848 115 603 468 058
Attributable to:
Equity holders of the company 223 462 107 501 447 930
Non-controlling interests 16 386 8 102 20 128
239 848 115 603 468 058
Depreciation and amortisation included in the above expenses 130 544 146 720 272 925
Operating lease rentals included in the above expenses 18 660 21 206 44 660
Earnings per share
Basic earnings per share (cents) 113 54 227
Headline earnings per share (cents) 114 54 229
Diluted earnings per share
Diluted earnings per share (cents) 112 54 225
Diluted headline earnings per share (cents) 113 54 228
Number of shares in issue ('000) 198 986 198 986 198 986
Number of shares in issue excluding treasury shares ('000) 197 986 198 620 197 970
Weighted average number of shares in issue ('000) 197 980 198 121 197 784
Adjustment for dilutive shares ('000) 1 137 503 915
Number of shares used for diluted earnings calculation ('000) 199 117 198 624 198 699
Calculation of headline earnings (R'000)
Net profit attributable to ordinary shareholders 223 462 107 501 447 930
Profit on disposal of property, plant & equipment - net 1 503 (769) (1 416)
Impairment of property, plant and equipment 1 089
Impairment of associate 5 000
Headline earnings 224 965 106 732 452 603
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
R'000 R'000 R'000
Unaudited Unaudited Audited
Profit for the period 239 848 115 603 468 058
Other comprehensive income/(loss):
- Actuarial gains/(losses) recognised 2 585 (3 790) (1 108)
- Foreign exchange translation movements (111 668) (164 654) (1 127 532)
- Tax on other comprehensive (income)/loss (517) 758 65
Net other comprehensive loss for the period (109 600) (167 686) (1 128 575)
Total comprehensive income/(loss) for the period 130 248 (52 083) (660 517)
Attributable to:
Equity holders of the company 113 769 (60 059) (680 210)
Non-controlling interests 16 479 7 976 19 693
130 248 (52 083) (660 517)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
R'000 R'000 R'000
Unaudited Unaudited Audited
Balance at beginning of the period 4 179 573 4 974 544 4 974 544
Net profit for the period 239 848 115 603 468 058
Other comprehensive loss for the period (109 600) (167 686) (1 128 575)
Total comprehensive income/(loss) for the period 130 248 (52 083) (660 517)
Share option scheme 7 489 6 280 19 443
Vesting of share-based payment obligation:
- Estimated taxation effects of utilisation of treasury shares (66) (3 105) (1 114)
Dividend * (153 740) (152 676) (152 783)
Balance at end of the period 4 163 504 4 772 960 4 179 573
* An ordinary dividend of 70 cents per share was declared in 2017 in respect of the year ended 31 December 2016.
An ordinary dividend of 70 cents per share was declared in 2016 in respect of the year ended 31 December 2015.
CONDENSED CONSOLIDATED BALANCE SHEET
Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
R'000 R'000 R'000
Unaudited Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 2 763 612 3 279 808 2 857 131
Intangible assets 951 646 1 315 310 1 001 461
Investment in associates 404 184 337 562 387 245
Deferred taxation 14 759 3 636 4 952
4 134 201 4 936 316 4 250 789
Current assets
Inventory 1 975 019 1 777 141 1 608 961
Trade and other receivables 1 498 799 1 547 289 1 394 933
Taxation 14 829 33 863 31 358
Derivative financial assets 9 049 1 128 1 092
Cash and cash equivalents 578 337 669 310 744 017
4 076 033 4 028 731 3 780 361
Total assets 8 210 234 8 965 047 8 031 150
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 497 931 1 497 931 1 497 931
Treasury shares (10 323) (3 942) (10 481)
Share-based payment reserve 102 603 81 951 95 114
Foreign currency translation reserve (772 330) 301 789 (660 569)
Equity accounted earnings reserve 289 053 224 663 271 336
Changes in ownership reserve (21 197) (21 197) (21 197)
Retained earnings 2 973 385 2 600 435 2 904 386
Ordinary shareholders' equity 4 059 122 4 681 630 4 076 520
Non-controlling interests 104 382 91 330 103 053
Total equity 4 163 504 4 772 960 4 179 573
Non-current liabilities
Borrowings 978 947 2 025 874 986 547
Post-employment benefits 87 897 120 775 88 911
Deferred taxation 324 857 386 849 336 395
Deferred grant income 168 650 169 036 147 950
Provisions for liabilities and charges 50 789 56 261 48 150
1 611 140 2 758 795 1 607 953
Current liabilities
Trade and other payables 1 026 343 918 896 1 065 304
Borrowings 1 068 533 119 575 911 018
Taxation 34 258 7 087 16 350
Provisions for liabilities and charges 93 878 113 302 108 445
Derivative financial liabilities 9 571 3 868 15 492
Bank overdrafts 203 007 270 564 127 015
2 435 590 1 433 292 2 243 624
Total liabilities 4 046 730 4 192 087 3 851 577
Total equity and liabilities 8 210 234 8 965 047 8 031 150
Net asset value per share (cents) attributable to ordinary
shareholders calculated on number of shares in issue
excluding treasury shares 2 050 2 357 2 059
Capital expenditure 86 664 185 974 372 946
Capital commitments:
- Contracted 72 824 94 608 46 124
- Authorised but not contracted 81 773 87 453 141 214
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS*
Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
R'000 R'000 R'000
Unaudited Unaudited Audited
Operating activities
Profit before taxation 321 533 172 502 606 492
Net finance costs 75 137 70 708 153 238
Depreciation and amortisation 130 544 146 720 272 925
Other non-cash items (23 105) 39 411 29 202
Working capital changes (539 375) (170 390) (28 390)
Cash (utilised in)/generated from operations (35 266) 258 951 1 033 467
Interest paid (89 968) (89 581) (186 534)
Taxation paid (58 739) (95 055) (133 752)
Dividends paid (153 740) (152 676) (152 783)
Dividend income from associates 24 060
Net cash (outflow)/inflow from operating activities (313 653) (78 361) 560 398
Investing activities
Interest received 15 390 20 608 33 296
Acquisition of property, plant and equipment (73 247) (292 474) (293 995)
Acquisition of associate (121 986)
Net cash utilised in other investing activities (7 185) (44 294)
Net cash outflow from investing activities (65 042) (271 866) (426 979)
Net cash inflow/(outflow) from financing activities 149 543 186 033 (53 589)
Net (decrease)/increase in cash and cash equivalents (229 152) (164 194) 79 830
Cash and cash equivalents at beginning of the period 617 002 566 707 566 707
Exchange losses on cash and cash equivalents (12 520) (3 767) (29 535)
Cash and cash equivalents at end of the period 375 330 398 746 617 002
* The condensed cash flow has been expanded to provide additional information. The comparative period has been aligned for consistency.
CONDENSED CONSOLIDATED SEGMENT 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
2017 2016 2016 2017 2016 2016
R'000 R'000 R'000 R'000 R'000 R'000
Unaudited Unaudited Audited Unaudited Unaudited Audited
Energy storage
Automotive
Local 1 576 071 1 609 581 3 598 149 119 629 153 968 334 096
Direct export 564 978 652 913 1 516 901 59 013 40 043 145 906
2 141 049 2 262 494 5 115 050 178 642 194 011 480 002
Industrial
Local 305 713 291 497 685 764 45 670 36 546 77 733
Direct export 16 679 27 910 50 108 2 211 3 936 489
322 392 319 407 735 872 47 881 40 482 78 222
Total energy storage 2 463 441 2 581 901 5 850 922 226 523 234 493 558 224
Automotive components
Local
Original Equipment 1 860 738 1 630 844 3 580 962 157 196 (8 418) 189 922
Aftermarket 243 599 231 869 470 565 38 617 20 287 48 832
Non-Auto 12 031 20 597 38 090 395 818 1 251
2 116 368 1 883 310 4 089 617 196 208 12 687 240 005
Direct exports
Original Equipment 2 113 15 465 17 879 442 3 000 736
Aftermarket 17 686 23 264 35 303 2 717 7 190 6 198
19 799 38 729 53 182 3 159 10 190 6 934
Total automotive 2 136 167 1 922 039 4 142 799 199 367 22 877 246 939
Total segment results 4 599 608 4 503 940 9 993 721 425 890 257 370 805 163
Reconciling items:
- Share of results of associates 41 777 (17 008) 29 665
- Managed associates * (523 858) (474 217) (1 040 011) (35 833) 53 425 11 699
Amortisation and depreciation on uplift of
assets arising from business acquisitions (15 083) (27 539) (40 308)
Other reconciling items ** (20 081) (23 038) (45 118)
Total 4 075 750 4 029 723 8 953 710 396 670 243 210 761 101
Net interest expense (75 137) (70 708) (154 609)
Profit before taxation 321 533 172 502 606 492
* Although the results of Hesto Harnesses Proprietary Limited ("Hesto") does not qualify for consolidation, the full
results of Hesto 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.
INTERIM RESULTS COMMENTARY
Metair produced a very pleasing result which on the one hand saw the recovery of the Automotive Component
Vertical and on the other hand difficult trading conditions in the Energy Storage Vertical fuelled by socio and
geopolitical challenges.
Metair continues to operate in an exciting and very dynamic environment. Metair remains well positioned to
take advantage of changing technological trends, especially in our Energy Storage Vertical, where the market
conditions and dynamics are subject to technology shifts in the mobility market, particularly the possible
accelerated mass introduction of electric vehicles.
Headline earnings per share of 114 cents is up 111% compared to the previous reporting period when headline
earnings per share was 54 cents.
Results Commentary
The increase in group earnings for the period ended 30 June 2017 was largely driven by a much improved
performance from the Automotive Components Vertical while the Energy Storage Vertical performed well,
operationally, the results were marginally lower due to translation weakness of foreign reported currency
earnings out of Turkey and Romania.
The currency impact also affected group revenue, which increased marginally by c. 1% to R4.08 billion.
Operating profit improved by R95 million, or c. 36% and operating margins improved to 8.71% from 6.46% in
the previous reporting period. Group earnings before interest, tax, depreciation and amortisation ("EBITDA")
improved by R137 million, or 35%, to R527 million.
Net interest charges increased to R75 million from R71 million due to higher interest rates. The effective tax rate
decreased to 25.4%, from 33.0%, as the impact of non-deductible interest on preference shares relative to the
overall reported profit before tax improved. In addition, during 2016 post-tax losses incurred at Hesto, which is
equity accounted, resulted in a higher effective tax rate in prior period.
Net working capital levels have remained fairly constant around R2.4 billion. Cash generated by operating
activities was impacted by seasonal working capital investment in the Energy Storage Vertical, higher OEM
stock build in anticipation of the wage negotiation at Mutlu and higher commodity prices. The net debt/
EBITDA ratio improved to 1.4 from 1.8 and gross group borrowings from third parties declined marginally
to R2.04 billion. The group continues to be in compliance with all of its lenders' covenants and is finalising
the refinancing of R840 million in preference shares, which mature in October 2017, with a combination of
new preference shares for R500 million with a 3 year maturity, and an additional revolving credit facilities of
R350 million, with a 5 year maturity.
Automotive Components Vertical
The 2016 financial year started with a model change in the Automotive Components Vertical and the
company experienced model launch challenges during the first half of the year. The automotive components
businesses have returned to a steady state and eliminated premium support cost, costs associated with
volume ramp-up complexities and variable manufacturing activity associated with securing and launching
the new light commercial vehicle from our major customer.
The business achieved 11.1% turnover growth for the period, as production volumes normalised following
the 2016 ramp-up.
The vertical achieved profit before interest and tax ("PBIT") margins of 9.3% for the period as a result of
manufacturing and volume stability. The stronger South African Rand provided short term currency gains on
imported materials and components which are unlikely to continue in the second half of the 2017 financial
year.
Energy Storage Vertical
The vertical achieved PBIT growth of 18% on a local currency basis. This business showed resilience despite
a weaker Turkish Lira and higher commodity prices which put significant pressure on the business, especially
in Turkey, to successfully recover higher input cost from the market over the short term.
Overall margins showed a slight improvement, despite the impact of increased input costs and a higher
proportion of OEM volumes. This is due to an improved performance from the company's South African
battery business, an increase in higher margin export business from Turkey and Romania, and satisfactory
local operating performance from Turkey where PBIT increased by 11% in local currency terms.
However, in terms of group reporting in South African Rand terms, the Energy Storage Vertical results have
been significantly negatively impacted by foreign currency translation effects. In particular, the Turkish Lira
devalued on average 31% against the South African Rand from the prior comparative reporting period.
Due to the currency translation impact from the Energy Storage Vertical's operating regions, there was a
3.4% decline in PBIT for this vertical when compared to the previous corresponding period.
Operational Environment Commentary
Socio and geopolitical challenges across all operating jurisdictions became more severe.
These developments have a natural tendency to manifest themselves through labour relations, inter-country
trading relations, exchange rate fluctuations and country risk profiles.
Turkey
During the period under review our operations in Turkey experienced labour disruptions in the form of a legal
3-week strike. The settlement which led to the resolution of the strike was at higher than anticipated wage inflation.
Wage inflation expectations seem to pick up in times of escalating socio and geopolitical tensions and
uncertainty, and will remain a challenge going forward.
Trade relations between countries, and in this case between Turkey and Germany, were subject to normal stable
political and trade conditions. These relations are challenging at the moment and could affect future sourcing and
investment decisions as regional tensions increased following the failed coup attempt in Turkey in July 2016.
South Africa
General investor and trade confidence in South Africa is low as political instability and poor governance in state
enterprises depress growth and neglect the poor.
Fortunately the Automotive Manufacturing Sector is benefitting from new vehicle launches and major
expansion drives supported by a well-structured government support program and industry investment.
Even though one OEM namely General Motors announced its withdrawal from South Africa, it has paved the
way for the conversion of Isuzu as a licensed General Motors manufacturer to a dedicated Isuzu owned light
commercial vehicle manufacturer.
The effect of General Motors leaving South Africa on Metair is minimal as less than 2% of group revenue related
to them directly. Metair is also fortunate that its historical business emanated from Isuzu branded products.
Romania, Kenya and UK
These regions also experienced changes in the operating environment due to ongoing political repositioning.
In-country trading in all of these regions continued to be strong despite the challenges.
Strategy
Constant changes in the group macro-economic trading environment, especially in world mobility solutions,
require refinement of the group strategy.
Metair's strategy for its Energy Storage Vertical is to become the world leader in the supply of energy source
products used in control and energy solutions across the full spectrum of mobility options. Metair's second
strategic objective is to nurture its Automotive Components Vertical to its full potential.
Prospects
The prospect statement as contained in the Integrated Annual Report of Metair for 2016 indicated that the
group will only feel the real effect of the Turkish Lira devaluation in 2017 as the currency settles at a lower
level.
The improvement in first half results should support a sustained performance for the full year when
compared to 2016 as the seasonally stronger half in the Energy Storage Vertical is muted by the full year
impact of the Turkish Lira devaluation.
Automotive Components Vertical
This business vertical managed to successfully renew most of its business associated with the new model
launches, underpinning the next business cycle linked to the 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 the newly secured business.
The margins achieved for the period are higher than the guidance provided previously of between 6% and
8%, as well as the targeted 8% for full year 2017 as mentioned during our 2016 year-end presentation.
However, new model launches over time are always associated with lower margins, and therefore the
company maintains its guidance that the achievement of targeted production volumes and efficiencies
associated with the new technology and continued stabilization of manufacturing processes should result in
sustainable medium term PBIT margins on new business of between 6% and 8%.
Energy Storage Vertical
The second half of the financial year traditionally benefits from seasonal demand brought about by the
winter period associated with the market served by Rombat and Mutlu in Europe and the Middle East.
In the South African markets we expect moderately improved trading conditions.
Strong seasonal demand in our winter markets supported by achievement of some geopolitical stability
in Turkey should support a continued good local currency performance in the second half. The challenge
continues to be the devaluation of the Turkish Lira as it affects the South African Rand translated results.
Conclusion
Results will depend on inter-alia, exchange rates, long term volumes, commodity price movements, seasonal
winter higher demand, geopolitical conditions and margin progress in the Automotive Components Vertical
during the second half of the financial year. Any forward looking statements in this announcement have not
been reviewed or reported on by the company's auditors.
NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED INTERIM RESULTS
Accounting policies
The condensed consolidated interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 Interim Financial Report-
ing, 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 2016, 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.
Contingencies
There has been no material change in the group's contingent liabilities since period-end.
Borrowings
During the period the group repaid borrowings of R48.8 million (2016: R60 million) and raised borrowings of R198.4 million (2016: R249.2 million).
Post-Balance sheet events
In July 2017, the group acquired a 25.1% equity shareholding in MOLL Group (MOLL Manufacturing and MOLL Property) in Germany, for a total consideration of
R138 million (EUR9.2 million).
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, 17 August 2017 at 10h00 (SAST). The audio webcast can be accessed through http://www.corpcam.com/Metair17082017. Alternatively a
telephone conference call facility will be available at 10h00 (SAST) on Thursday, 17 August 2017 on +27 (0) 11 535 3600 / +27 (0) 10 201 6800.
REGISTRARS SPONSOR INVESTOR RELATIONS
Computershare Investor Services (Pty) Limited One Capital Instinctif Partners
Rosebank Towers, 15 Bierman Avenue,
Rosebank, 2196
Signed on behalf of the board in Johannesburg on 16 August 2017
SG Pretorius - Chairman C T Loock - Managing Director
The condensed consolidated interim results were 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; TN Mgoduso; PPJ Derby; HG Motau
COMPANY SECRETARY: SM Vermaak *British
Date: 17/08/2017 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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