Wrap Text
Condensed audited consolidated results for the year ended 31 December 2018 and dividend announcement.
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 audited consolidated results for the year ended
31 December 2018 and dividend announcement
Segmental contribution 2018*
- Revenue
Energy storage 56%
Automotive components 44%
* Includes Hesto
- PBIT
Energy storage 58%
Automotive components 42%
Revenue (million)
R8 954 R9 517 R10 277
2016 2017 2018
EBITDA (million)
R1 034 R1 216 R1 330
2016 2017 2018
HEPS (cents)
229c 281c 327c
2016 2017 2018
Consolidated group assessed at B-BBEE Level 3 and most
South African subsidiaries at or above the minimum requirement
of B-BBEE Level 4
Continued strong
performance delivered by
the automotive components
businesses
Continued strong
operational results from
Mutlu Aku in Turkey despite a
challenging operating environment
Invested in a 35% stake in Prime Motors as an incubator
research and development centre for lithium-ion battery development
CONDENSED CONSOLIDATED INCOME STATEMENT
31 December 31 December
2018 2017
R'000 R'000
Revenue 10 276 966 9 516 657
Cost of sales (8 377 612) (7 760 976)
Gross profit 1 899 354 1 755 681
Other operating income 211 965 88 678
Distribution, administrative and other operating expenses (1 102 649) (996 846)
Operating profit 1 008 670 847 513
Interest income 24 208 26 179
Interest expense (210 056) (200 867)
Share of results of associates 76 507 102 989
Profit before taxation 899 329 775 814
Taxation (200 049) (188 242)
Profit for the period 699 280 587 572
Attributable to:
Equity holders of the company 667 377 556 182
Non-controlling interests 31 903 31 390
699 280 587 572
Depreciation and amortisation included in the above
expenses 244 500 265 779
Operating lease rentals included in the above expenses 35 778 37 331
Earnings per share
Basic earnings per share (cents) 338 281
Headline earnings per share (cents) 327 281
Diluted earnings per share
Diluted earnings per share (cents) 336 279
Diluted headline earnings per share (cents) 325 279
Number of shares in issue ('000) 198 986 198 986
Number of shares in issue excluding treasury shares ('000) 192 283 198 003
Weighted average number of shares in issue ('000) 197 284 197 987
Adjustment for dilutive shares ('000) 1 246 1 068
Number of shares used for diluted earnings calculation
('000) 198 530 199 055
Calculation of headline earnings (R'000)
Net profit attributable to ordinary shareholders 667 377 556 182
Gain on insurance recovery on fire - net (23 066)
Loss/(profit) on disposal of property, plant and equipment
- net 534 (595)
Impairment of property, plant and equipment - net 800
Headline earnings 645 645 555 587
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
31 December 31 December
2018 2017
R'000 R'000
Profit for the year 699 280 587 572
Other comprehensive income:
- Actuarial (losses)/gains recognised - net (4 316) 5 570
- Foreign exchange translation movements (313 341) (443 988)
Net other comprehensive loss (317 657) (438 418)
Total comprehensive income for the year 381 623 149 154
Attributable to:
Equity holders of the company 349 066 117 646
Non-controlling interests 32 557 31 508
381 623 149 154
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
31 December 31 December
2018 2017
R'000 R'000
Balance at beginning of the year 4 195 537 4 179 573
Adjustment on initial application of IFRS 15 and IFRS 9 (3 963)
Net profit for the year 699 280 587 572
Other comprehensive loss for the year (317 657) (438 418)
Total comprehensive income for the year 381 623 149 154
Share option scheme 9 859 20 683
Vesting of share-based payment obligation:
- Estimated taxation effects of utilisation of treasury shares (526) (115)
Dividend * (189 936) (153 758)
Treasury shares acquired (104 873)
Balance at end of the year 4 287 721 4 195 537
* An ordinary dividend of 80 cents per share was declared in 2018 in respect of the year ended 31 December
2017.
An ordinary dividend of 70 cents per share was declared in 2017 in respect of the year ended 31 December
2016.
CONDENSED CONSOLIDATED BALANCE SHEET
31 December 31 December
2018 2017
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 2 538 145 2 605 737
Intangible assets 707 481 834 572
Investment in associates 674 296 580 440
Deferred taxation 8 825 12 869
3 928 747 4 033 618
Current assets
Inventory 1 849 091 1 697 663
Trade and other receivables 1 667 541 1 669 985
Contract assets 288 770
Taxation 8 955 32 985
Derivative financial assets 6 944 314
Cash and cash equivalents 671 952 670 653
4 493 253 4 071 600
Total assets 8 422 000 8 105 218
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 1 497 931 1 497 931
Treasury shares (112 510) (10 152)
Reserves (918 246) (687 570)
Retained earnings 3 699 197 3 275 935
Ordinary shareholders' equity 4 166 372 4 076 144
Non-controlling interests 121 349 119 393
Total equity 4 287 721 4 195 537
Non-current liabilities
Borrowings 983 762 1 148 806
Post-employment benefits 76 943 78 724
Deferred taxation 281 456 298 326
Deferred grant income 187 507 175 440
Provisions for liabilities and charges 57 785 52 951
1 587 453 1 754 247
Current liabilities
Trade and other payables 1 444 018 1 235 708
Contract liabilities 846
Borrowings 858 032 652 689
Taxation 42 214 29 260
Provisions for liabilities and charges 106 203 135 567
Derivative financial liabilities 3 171 28 862
Bank overdrafts 92 342 73 348
2 546 826 2 155 434
Total liabilities 4 134 279 3 909 681
Total equity and liabilities 8 422 000 8 105 218
Net asset value per share (cents) 2 167 2 059
Capital expenditure 305 435 220 414
Capital commitments - Contracted 53 458 53 524
- Authorised but
not contracted 427 462 295 949
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS##
31 December 31 December
2018 2017
R'000 R'000
Operating activities
Operating profit 1 008 670 847 513
Depreciation and amortisation 244 500 265 779
Equity earnings 76 507 102 989
Insurance claim receivable (29 582)
Net movement in provisions and similar items (56 956) 49 261
Other items (24 976) (37 583)
Working capital changes (330 415) (322 855)
Cash generated from operations 887 748 905 104
Interest paid (210 140) (207 912)
Taxation paid (148 295) (185 307)
Dividends paid (189 936) (153 758)
Dividend income from associates 6 550 51 937
Net cash inflow from operating activities 345 927 410 064
Investing activities
Interest received 24 208 26 179
Acquisition of property, plant and equipment (269 498) (165 429)
Acquisition of associate (16 061) (144 302)
Net cash utilised in other investing activities (31 765) (15 271)
Net cash outflow from investing activities (293 116) (298 823)
Financing activities
Share buy back (treasury shares acquired) (104 873)
Borrowings raised/(repaid) - net 93 051 (75 933)
Net cash utilised in other financing activities (13 588) (12 571)
Net cash outflow from financing activities (25 410) (88 504)
Net increase in cash and cash equivalents 27 401 22 737
Cash and cash equivalents at beginning of the year 597 305 617 002
Exchange losses on cash and cash equivalents (45 096) (42 434)
Cash and cash equivalents at end of the year 579 610 597 305
## The condensed cash flow has been expanded and adjusted in the current year for better presentation.
Prior year comparative has also been adjusted for consistency. Total cash flows from operating, investing
and financing activities have not changed.
CONSOLIDATED SEGMENT REVIEW
Revenue Profit before interest and taxation
31 December 31 December 31 December 31 December
2018 2017 2018 2017
R'000 R'000 R'000 R'000
Automotive
Local 3 848 580 3 864 239 377 703 336 517
Direct export 1 842 575 1 670 904 232 461 158 350
5 691 155 5 535 143 610 164 494 867
Industrial
Local 660 958 652 211 77 455 92 207
Direct export 31 744 33 160 4 090 4 502
692 702 685 371 81 545 96 709
Total energy storage 6 383 857 6 220 514 691 709 591 576
Automotive components
Local
Original equipment 4 516 489 3 832 194 420 440 357 277
Aftermarket 482 016 458 895 76 535 70 312
Non-auto 29 826 25 895 191 295
5 028 331 4 316 984 497 166 427 884
Direct exports
Original equipment 2 681 5 163 1 245 2 021
Aftermarket 41 607 37 784 10 331 6 966
44 288 42 947 11 576 8 987
Total automotive components 5 072 619 4 359 931 508 742 436 871
Total segment results 11 456 476 10 580 445 1 200 451 1 028 447
Reconciling items:
- Share of results of associates 76 507 102 989
- Managed associate* (1 179 510) (1 063 788) (107 488) (99 015)
Amortisation of intangible assets arising from business
acquisitions (24 661) (30 628)
Other reconciling items** (59 632) (51 291)
Total 10 276 966 9 516 657 1 085 177 950 502
Net interest expense (185 848) (174 688)
Profit before taxation 899 329 775 814
* 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.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounting policies
The condensed consolidated results for the year ended 31 December 2018 have been prepared in accordance with the
requirements of the JSE Limited Listings Requirements (Listings Requirements) for abridged reports and the requirements of the
Companies Act, 71 of 2008, applicable to summary financial statements. The Listings Requirements require abridged reports to
be prepared in accordance with the framework concepts and the measurement and recognition requirements of International
Financial Reporting Standards (IFRS), 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 accounting policies applied in the preparation of the consolidated financial statements, from which the
condensed consolidated results were derived, are in terms of IFRS and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial statements, other than the implementation of IFRS 15 and IFRS 9.
IFRS 15 and IFRS 9
The group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative
information has not been restated. The impact of adoption is fully discussed in the annual financial statements. The impact
of changes in the new accounting rules were not material for the group's results.
Contingencies
There has been no material change in the group's contingent liabilities since period-end.
Borrowings
During the year the group repaid borrowings of R126.3 million (2017: R616.5 million) and raised borrowings of R219.3 million
(2017: R540.6 million).
Change of directors
Mr S Pretorius, chairman of the board, was appointed to the social and ethics committee with effect from 14 June 2018 and on
27 September 2018, Mr J Best, Mr S Pretorius and Ms T Mgoduso were appointed to the newly constituted nominations
committee. On 31 December 2018, Messrs R Broadley and L Soanes, independent non-executive directors, retired from the
board and its respective committees, Mr S Douwenga, an executive director, resigned from the social and ethics committee,
Mr B Mawasha and Ms P Derby were appointed to the remuneration committee. Mr J Best will be retiring from the board,
in accordance with the provisions of the company's memorandum of incorporation and will not offer himself for re-election
and will accordingly retire as a director and the respective committees at the annual general meeting (AGM) on 2 May 2019.
Messrs S Sithole, P Moeketsi and M Flemming were appointed as independent non-executive directors with effect from 1 March
2019. Furthermore, with effect from 2 May 2019, Mr S Sithole will serve on the remuneration and nominations committees,
Mr P Moeketsi will serve on the investment committee, Mr M Flemming will serve as chairman of the audit and risk committee,
subject to shareholder approval at the AGM and Mr B Mawasha will serve as chairman of the investment committee, member of
the nominations committee and will resign from the remuneration committee.
Auditors' report
This summarised report is extracted from audited information, but is not itself audited. The annual financial statements were
audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.
The audited annual financial statements and auditors' report thereon are available for inspection at the company's registered office.
The directors take full responsibility for the preparation of the condensed consolidated results and that the financial information
has been correctly extracted from the underlying annual financial statements. Any reference to future financial performance has
not been reviewed or reported on by the auditors.
Declaration of Ordinary Dividends No 68
Notice is hereby given that a gross cash dividend of 100 cents per
share has been declared by the board in respect of the year ended
31 December 2018.
The dividend has been declared out of income reserves.
The salient dates for the payment of the dividend are detailed below:
Last day of trade Monday, 15 April 2019
Shares to commence trading ex-dividend Tuesday, 16 April 2019
Record date Thursday, 18 April 2019
Payment of dividend Tuesday, 23 April 2019
The following additional information is disclosed with regard to the dividend:
- the local dividend tax rate is 20%;
- the gross local dividend amount is 100 cents per
share for shareholders exempt from dividends tax;
- the net local dividend amount is 80 cents per share
for shareholders liable to pay a dividend tax;
- Metair's issued share capital is 198 985 886 (which
includes 6 702 399 treasury shares); and
- Metair's income tax reference number is 9300198711.
Shareholders will not be permitted to dematerialise or rematerialise their shares between Tuesday, 16 April 2019 and Thursday,
18 April 2019, both days inclusive.
Annual general meeting
The annual report will be mailed to shareholders along with the notice of annual general meeting. The annual general meeting will be
held on 2 May 2019 at 14h00 at the JSE Limited, One Exchange Square, Gwen Lane, Sandown, Johannesburg.
INTEGRATED REPORT
The group's sustainability reporting included in the annual report for 2018 and the results presentation will be available on the
company's website (www.metair.co.za).
The 2018 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, 14 March 2019 at 14h00. The audio webcast can be accessed
through http://www.corpcam.com/Metair14032019. Alternatively a telephone conference call facility will be available at 14h00
on Thursday, 14 March 2019 in SA on 011 535 3600/010 201 6800 or internationally on +27 11 535 3600/+27 10 201 6800.
REGISTRARS INVESTOR RELATIONS
Computershare Investor Services (Pty) Limited Instinctif Partners
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
Signed on behalf of the board in Johannesburg on 13 March 2019.
SG Pretorius - Chairman CT Loock - Managing Director
The condensed consolidated results were produced under the supervision of Mr S Douwenga (Finance Director) BComm (Hons), CA(SA).
EXECUTIVE DIRECTORS: CT Loock (Managing); S Douwenga (Finance) INDEPENDENT NON-EXECUTIVE DIRECTORS: SG Pretorius (Chairman);
JG Best; TN Mgoduso; PPJ Derby; G Motau; B Mawasha; CMB Flemming; S Sithole; TP Moeketsi COMPANY SECRETARY: SM Vermaak
ABRIDGED RESULTS COMMENTARY
2018 will be remembered in corporate South Africa as a particularly turbulent,
challenging and transformative year. Within this context, Metair faced its own
challenges, but was nevertheless able to achieve a good trading result with a
16% growth in headline earnings per share to 327 cents. The year saw a strong
contribution from our overseas acquisitions in the energy storage vertical,
particularly Mutlu Aku in Turkey, which managed to outperform the Turkish Lira
currency weakness for a fifth year in a row, and Rombat in Romania, which
operated at full capacity in the second half. Metair's automotive component
business in South Africa supported the result with good volume throughput.
Group revenue increased 8% to R10.28 billion, operating profit grew 19% and
group margin expanded to 9.8% (2017: 8.9%) supported by a 16% improvement
in operating profit from the Automotive Components Vertical and a 17%
improvement in the Energy Storage Vertical. Group earnings before interest, tax,
depreciation and amortisation (EBITDA) increased 9.4% to R1.33 billion and
headline earnings rose 16% to R646 million. Metair's net debt/equity ratio of 30%
is appropriately conservative and group borrowings decreased to R1.8 billion.
ENERGY STORAGE VERTICAL
While much of corporate South Africa reported poor performances from their
overseas operations, Metair was fortunate that the in-country performance of Mutlu
Aku continued to be resilient with a 27% increase in turnover and 55% increase in
profitability. During the trading period, the Turkish Lira was very volatile with a low of
2.07 and a high of 3.13 to the Rand. The currency returned to some stability at the
end of the year, but still ended the year 17% weaker than at the end of 2017.
The 55% growth in Turkey managed to offset this currency weakness and
Mutlu Aku consequently sustained its performance despite the challenging global
political and trade conditions.
The continued pressure on performance did however take its toll on human
capital and Metair secured a highly capable new CEO for our Turkish operations
when the incumbent CEO took early retirement. We are very pleased with the support
we got from our independent board members in Turkey as well as the good performance
and focus of our new CEO.
Rombat performed well, with an in-country increase in profit of 29% translating
into a profit contribution in Rand that increased 31% to R87 million. The turnaround at
First National Battery is according to plan and the business delivered improvements
in manufacturing and marketing efficiencies, while investing in promoting the
First National Battery brand and retail network, combined with customer focused
improvement plans to increase localisation. First National Battery delivered a good
financial performance in the first half of the year, but the second half was negatively
impacted by labour instability brought about by the bi-annual wage negotiations.
The energy vertical reported a combined growth in revenue of 3% to
R6 384 million, increased PBIT by 17% to R692 million and sold nine Gigawatt-
hours of our 12.4 Gigawatt-hours capacity. Exports improved significantly, in line
with our long-term strategy, through two automotive supply contracts with strategic
aftermarket customers.
AUTOMOTIVE COMPONENTS VERTICAL (INCLUDING HESTO)
Turnover from the automotive components businesses increased 16.3% to R5.07
billion as volumes improved, supported by positive sentiment and increased
exports, especially in the light commercial vehicle market, combined with some
customer passenger vehicle export programmes. Volumes were also supported by
the continued expansion and deepening of localisation, and efficiencies improved at
all of our businesses, leading to an increased PBIT contribution from R437 million to
R509 million.
GROUP
The group showed good progress in our environmental, social and governance
(ESG) focus areas, although I am disappointed that safety performance declined,
with the lost-time injury frequency rate increasing to 1.11.
Metair regards transformation as a moral, strategic and business imperative,
which is becoming even more significant as local content requirements increase in
the South African automotive environment. Our commitment in this area is evident
in the fact that most of the operations are at a B-BBEE Level 4 or better. While
identifying and retaining candidates with the required skills and experience to
meaningfully advance transformation in management continues to be a challenge,
manufacturing remains one of the rare areas in which a motivated and talented
candidate can rise from the shop floor to top management with few impediments.
Metair's strategy over the last 10 years has always been customer, market and
technology centred, but the pace and scale of execution is determined by the
status of the six capitals of the <IR> Framework, as well as shareholder support
and preference. Our operations in Romania, Turkey and Germany align with our
customers' geographic requirements and supply their current technology need for
lead acid Start/Stop batteries.
The third and final stage of Metair's strategy was to target 10% of global battery
production, or 50 million equivalent automotive lead acid battery manufacturing
capacity, and was based on entrenching relevance in our current technology lead
acid based energy vertical business.
Metair was fortunate during 2018 to consider a major foreign acquisition that
would have materially seen the conclusion of the strategy. Unfortunately the
opportunity presented itself in difficult market conditions and Metair failed to gain
broad-based shareholder support for the transaction.
Metair's strategy of gaining relevance in our current lead acid technology
base has to date been through acquisitions and technology transfers in largely
developing markets that will continue to use this technology the longest. The
focus on these markets has however added significant currency volatility to our
earnings base, especially in Turkey and South Africa. Even our South African
automotive components business struggled to maintain forex neutrality in 2018.
The strong growth in our Turkish operations over the last four years has largely
been used to offset currency weakness rather than achieving strong Rand
earnings growth.
In the absence of shareholder appetite and support for large overseas
acquisitions, Metair's strategy is best served by fully utilising our current lead acid
base energy storage businesses while engineering a cost-efficient way of gaining
relevance with alternative lithium-ion technology product solutions. The benefit
of such a technology-focused strategy is that it is possible to gain customer take
off and investment support agreements prior to any major capital commitments
in new technology manufacturing facilities. It also aligns with our European
customers' call for dual technology solution providers.
OUTLOOK
The current high levels of geo-political uncertainty and labour volatility in South
Africa and Turkey are likely to continue until after the general and local elections
in May 2019. The wage negotiation process that Metair will enter into in South
Africa and Turkey this year could be challenging under these circumstances. We
expect conditions for our automotive component business to be favourable in the
short to medium term, based on the increased stability and certainty created by
the extension of the APDP. Vehicle exports are expected to reach record levels.
However, low levels of consumer confidence and labour volatility remain concerns in
the short term. Some of our businesses are well positioned to benefit from the shift
towards increased connectivity, innovation and full electric vehicles.
In the prevailing market conditions where world trade dynamics and technology
choices are constantly shifting, selling the group's spare lead acid battery capacity
has proved to be a continuous process. In this environment OEM customers required
flexibility and demand shifts have become unpredictable. The group will therefore
focus more on expanding our aftermarket lead acid battery export customer base
including production of customer branded aftermarket product requirements.
We will continue to focus on improving the performance of First National Battery in
the South African market. Should conditions in Turkey remain stable and exchange rate
volatility stabilises, another strong performance by Mutlu Aku would deliver real growth
in Rands, rather than offsetting depreciation in the currency as it has to date.
APPRECIATION
We would like to thank our Chairman and the board for their direction and
diligence in applying their minds to the oversight of the business. A special word
of thanks to Ralph Broadley and Les Soanes who have served the Metair board
with distinction for nearly two decades. Their experience and technical insight has
been much appreciated.
We are grateful to our workforce for their resilience in handling the rapid changes
and disruption of the past year, and commend the new talent identified in the group
who rose to the challenges presented to them and met them with distinction. The
small Metair management team has once again excelled, particularly in the areas of
financial reporting and business intelligence, and we thank them for their efforts.
SPONSOR
One Capital
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