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GNDE - GND/GNDP - Grindrod Limited - 2007 Interim Results

15/08/2007 12:00:02

GND GNDP
GND
GND/GNDP - Grindrod Limited - 2007 Interim Results and Distribution Announcement
GRINDROD LIMITED
Registration number: 1966/009846/06
Incorporated in the Republic of South Africa
Share code: GND & GNDP
ISIN: ZAE000072328 & ZAE000071106
2007 INTERIM RESULTS AND DISTRIBUTION ANNOUNCEMENT
23% INCREASE IN PROFIT ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
22% INCREASE IN HEADLINE EARNINGS PER SHARE
21% INCREASE IN DISTRIBUTION TO ORDINARY SHAREHOLDERS
CONSOLIDATED INCOME STATEMENT
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
Change 2007 2006 2006
% R000 R000 R000
Revenue 41 7 003 294 4 959 099 12 507 237
Trading profit 22 749 083 615 090 1 279 295
Depreciation (80 232) (73 863) (154 209)
Operating profit before
interest and taxation 668 851 541 227 1 125 086
Non-trading items 6 570 (49 344) (39 434)
Interest received 46 241 31 861 66 377
Interest paid (104 665) (61 596) (137 242)
Profit before share of
associates' profit 616 997 462 148 1 014 787
Share of associates' profit
before taxation 32 663 92 548 127 560
Profit before taxation 649 660 554 696 1 142 347
Taxation (36 739) (61 041) (75 868)
Profit for the year 612 921 493 655 1 066 479
Attributable to
Ordinary shareholders 23 570 507 465 022 1 008 113
Preference shareholders 36 535 28 866 64 238
Equity holders of the parent 607 042 493 888 1 072 351
Minority interest 5 879 (233) (5 872)
612 921 493 655 1 066 479
Exchange rates (R/US$)
Opening exchange rate 7,00 6,31 6,31
Closing exchange rate 7,06 7,17 7,00
Average exchange rate 7,18 6,31 6,78
RECONCILIATION OF HEADLINE
EARNINGS
Profit attributable to ordinary
shareholders 570 507 465 022 1 008 113
Adjusted for: (6 570) 29 (1 945)
Impairment of goodwill - 1 176 932
Negative goodwill released to
the income
statement (144) - -
Impairment of intangible asset - - 3 100
Impairment of plant and
equipment - - 1 752
Net profit on disposal of
investments - (621) (11 428)
Loss on sale of investments 399 - -
(Profit)/loss on sale of plant
and equipment (6 802) (526) 4 213
Other non-trading items (23) - (514)
Headline earnings 21 563 937 465 051 1 006 168
ORDINARY SHARE PERFORMANCE
30 June 30 June 31 December
Change (Unaudited) (Unaudited) (Audited)
% 2007 2006 2006
Number of shares in issue less
treasury shares (000's) 453 449 450 000 449 179
Weighted average number of
shares on which earnings per
share are based (000's) 452 604 455 683 455 719
Diluted weighted average number
of shares on which diluted
earnings per share are based
(000's) 463 546 471 296 468 765
Earnings per share (cents)
Basic 126,1 102,0 221,2
Diluted 123,1 98,7 215,1
Headline earnings per share
(cents)
Basic 22 124,6 102,1 220,8
Diluted 121,7 98,7 214,6
Distribution/dividends per
share (cents)
Interim 21 34,0 28,0 28,0
Final - - 38,0
Distribution/dividend cover
(times) 3,7 3,7 3,4
CONSOLIDATED BALANCE SHEET
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2007 2006 2006
R000 R000 R000
Ships, property, terminals,
vehicles and equipment 2 577 406 1 958 039 2 336 905
Intangible assets 409 860 307 589 350 756
Investments in associates 237 114 103 878 243 370
Deferred taxation 97 485 57 724 70 254
Financial assets and other
investments 190 052 171 106 115 054
Loans and advances to bank
customers 766 313 - 506 434
Liquid assets and short-term
negotiable assets 72 715 - 173 600
Bank balances and cash 1 223 269 756 699 1 065 283
Non-current asset held for sale 179 439 502 339 170 947
Other current assets 2 233 323 2 033 147 2 237 802
Total assets 7 986 976 5 890 521 7 270 405
Shareholders' equity 3 103 526 2 639 660 2 824 543
Minority interest 5 139 1 770 (1 755)
Total equity 3 108 665 2 641 430 2 822 788
Deferred taxation 49 305 27 147 24 324
Provision for post-retirement
medical aid 65 976 60 792 62 834
Deposits from bank customers 783 856 - 710 904
Interest-bearing debt 2 244 742 1 605 081 1 828 711
6 252 544 4 334 450 5 449 561
Other liabilities 1 734 432 1 556 071 1 820 844
Total funding 7 986 976 5 890 521 7 270 405
Net worth per ordinary share -
at book value (cents) 520 420 461
Net debt:equity ratio 0,25:1 0,10:1 0,19:1
Capital expenditure 737 172 251 551 1 063 483
Capital commitments
Authorised by directors and
contracted for 2 633 364 1 782 723 1 604 066
Due within one year 1 501 695 1 022 630 901 375
Due thereafter 1 131 668 760 093 702 691
Authorised by directors not yet
contracted for 229 358 400 295 172 655
DIVISIONAL ANALYSIS OF EARNINGS
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2007 2006 2006
R000 R000 R000
Revenue
Shipping Services 1 804 836 1 038 314 2 768 831
Trading, Freight and Financial
Services 5 198 458 3 920 785 9 738 406
7 003 294 4 959 099 12 507 237
Earnings
Shipping Services
Local (59 322) 67 388 83 022
International 537 861 359 381 783 701
478 539 426 769 866 723
Trading, Freight and Financial
Services
Trading 29 338 (3 651) 24 614
Freight 61 699 42 972 127 001
Financial Services 13 701 3 481 15 009
104 738 42 802 166 624
Overheads and disposal
adjustments (12 770) (4 549) (25 234)
91 968 38 253 141 390
570 507 465 022 1 008 113
STATEMENT OF CHANGES IN EQUITY
Share capital, Foreign Grindrod
premium currency Bank
and equity Hedging translation general risk
compensation reserve reserve reserve
R000 R000 R000 R000
Balance as at 31 December
2005 498 080 (57 446) (100 005) -
Share options exercised 6 400
Shares repurchased (255 980)
Share-based payments 3 735
Preference share issue 266 049
Share issue expenses (3 272)
Financial instrument hedge (16 868)
Hedge reserve releases 1 394
Foreign currency
translation adjustments (18) 156 392
Foreign currency
translation realised (3 307)
Transfer from accumulated
profit 100
Minority interest acquired
Profit attributable to
shareholders
Dividends paid
Balance as at 31 December
2006 514 994 (72 920) 53 080 100
Share options exercised 3 033
Share-based payments 1 671
Financial instrument hedge (139 036)
Foreign currency
translation adjustments 14 916
Transfer from accumulated
profit 1 955
Minority interest acquired
Profit attributable to
shareholders
Distribution of share
premium (171 908)
Dividends paid
Balance as at 30 June 2007 347 790 (211 956) 67 996 2 055
Attributable
to equity
Accumulated holders of Minority Total
profit Grindrod interest equity
R000 R000 R000 R000
Balance as at 31 December
2005 1 596 570 1 937 199 6 753 1 943 952
Share options exercised 6 400 6 400
Shares repurchased (255 980) (255 980)
Share-based payments 3 735 3 735
Preference share issue 266 049 266 049
Share issue expenses (3 272) (3 272)
Financial instrument hedge (16 868) (16 868)
Hedge reserve releases 1 394 1 394
Foreign currency
translation adjustments 156 374 156 374
Foreign currency
translation realised (3 307) (3 307)
Transfer from accumulated
profit (100) - -
Minority interest acquired - (2 636) (2 636)
Profit attributable to
shareholders 1 072 351 1 072 351 (5 872) 1 066 479
Dividends paid (339 532) (339 532) (339 532)
Balance as at 31 December
2006 2 329 289 2 824 543 (1 755) 2 822 788
Share options exercised 3 033 3 033
Share-based payments 1 671 1 671
Financial instrument hedge (139 036) (139 036)
Foreign currency
translation adjustments 14 916 14 916
Transfer from accumulated
profit (1 955) - -
Minority interest acquired - 1 015 1 015
Profit attributable to
shareholders 607 042 607 042 5 879 612 921
Distribution of share
premium (171 908) (171 908)
Dividends paid (36 735) (36 735) (36 735)
Balance as at
30 June 2007 2 897 641 3 103 526 5 139 3 108 665
CONSOLIDATED CASH FLOW STATEMENT
30 June 30 June 31 December
(Unaudited) (Unaudited) (Audited)
2007 2006 2006
R000 R000 R000
Cash generated from operations 731 830 597 153 1 286 839
Working capital movements (191 291) (75 756) (295 267)
Net interest paid (40 137) (33 591) (77 204)
Net dividends paid (206 519) (129 417) (104 235)
Taxation paid (26 309) (58 122) (105 045)
267 574 300 267 705 088
Net bank advances to customers
and other
short-term negotiables (125 161) - (154 880)
Net cash flows from operating
activities 142 413 300 267 550 208
Acquisition of ships, property,
terminals,
vehicles and equipment and
investments (737 172) (482 648) (1 063 483)
Proceeds from disposal of
ships, property, terminals,
vehicles and equipment and
investments 441 862 220 803 659 111
Intangible assets acquired (5 141) - (6 168)
Loans repaid by associate
companies 204 (5 071)
Net cash flows used in
investing activities (300 451) (261 641) (415 611)
Repurchase of ordinary share
capital - (183 999) (237 679)
Proceeds from issue of ordinary
share capital 3 033 2 442 6 400
Proceeds from issue of
preference share capital - 262 801 262 777
Long-term borrowings raised 62 203 49 957 276 274
Payment of capital portion of
long-term borrowings (249 799) (276 749) (548 685)
Short-term loans raised 128 467 219 538 459 841
Net cash flows (used in)/from
financing activities (56 096) 73 990 218 928
Net (decrease)/increase in cash
and cash equivalents (214 134) 112 616 353 525
Cash and cash equivalents at
beginning of the year 732 055 347 571 347 571
Difference arising on
translation 3 306 25 390 30 959
Cash and cash equivalents at
end of the year 521 227 485 577 732 055
COMMENTS
The Board of directors is pleased to announce a profit attributable to ordinary
shareholders of R571 million for the six months ended 30 June 2007, a 23%
increase over the prior year comparative period. This represents headline
earnings per share of 125 cents, a growth of 22%.
Shipping Services continue to perform well on the back of continued strong dry
bulk shipping markets which reached all time highs in recent months. The impact
of these high markets did not, however, fully benefit the division due to the
high level of contract cover.
Trading, Freight and Financial Services had a much improved first half of the
year compared to the prior year and is continuing to grow off the base
established in the second half of 2006.
SHIPPING SERVICES
The demand for commodities together with the impact of port delays, changes in
trade patterns and a shortfall in new buildings resulted in the extremely high
markets experienced in the first half of the year. Although record spot rates
were achieved in the dry bulk sector, all markets continued to show a high
level of confidence in their long-term sustainability as new and secondhand
ship prices also reached record highs. Long-term charters are currently being
concluded at rates substantially above their historical highs.
The group continued its policy of maintaining a significant level of contract
cover and concluded a number of contracts during the first six months of the
year. Consequently, as at 30 June 2007, 89% of the fleet (weighted by revenue)
has been contracted for the remainder of the year, 58% of 2008 and 32% of 2009.
There was also significant sale and purchase activity within the operations
which is summarised in the table below:
Ships ordered Ships delivered Ships sold Contracted sales
3 x handysize 2 x handysize bulk 1 x 40 000 dwt 2 x 12 800 dwt
bulk carriers carriers (chartered) product tanker product tankers
2 x 16 500 dwt 1 x 19 900 dwt chemical 1 x 12 800 dwt
product tankers tanker (chartered) product tanker
The net effect of these transactions and those contracted in prior years is
that the group's current core fleet of 40 ships will increase to 54 ships by
the end of 2011.
The South African based dry bulk parcel service operation had a difficult start
to the year as a result of the increased cost of ships required to service
freight contracts. Contracted losses relating to the second half of 2007 have
been provided for.
TRADING, FREIGHT AND FINANCIAL SERVICES
The operations continued to improve on the strong performance of the second
half of 2006 and have reported earnings of R92 million which is a growth of
140% over the comparative period.
The trading operations reported improved results despite pressure on margins as
a result of strong competition in the market and changes to its customer base.
The impact of these was offset through improved volumes.
The Freight Services operations improved their performance substantially.
Grindrod Rail's earnings included a profit from the on-sale of newly acquired
Locomotives. Grindrod Intermodal had a very good six months, along with certain
of the terminal operations. The group's logistics operations were materially
impacted by an illegal strike and some loss-making contracts and Grindrod
Terminals was negatively impacted by rail supply issues to Maputo. These
matters are being addressed by management.
The Freight Services operations have been consolidated into more focused
business entities with particular attention being given to operational
efficiencies, the bedding down of new operations and where possible the
acquisition of partners' interests in joint venture operations.
The following significant acquisitions and capital expenditure projects reflect
the high level of business activity in the period:
Acquisition of remaining 50% interest in CMC Grindrod (Pty) Limited
Expansion of bulk transport fleet
Further terminal development in Maputo, Richards Bay and Durban
Acquisition of 100% of Tate & Lyle Molasses South Africa (Pty) Limited
Increased shareholding in Sheltam Grindrod Leasing (Pty) Limited to 75%
(locomotive ownership)
Increased shareholding in Grindrod J&J Holdings (Pty) Limited to 100% (to
facilitate expanded empowerment ownership structure mentioned below)
The group continues to work on finalising its expanded empowerment ownership
structures within these businesses and will look to conclude these transactions
in the second half of the year.
Financial Services performed satisfactorily as a standalone entity within the
group. There have been significant increases in the advances book and the
Bank's advisory and wealth management divisions have also performed well in the
first half of the year. They are favourably positioned for the second half of
the year.
With effect from 1 July 2007 18% of the Bank has been sold to black empowered
entities and a further 6,9% has been sold to certain directors and management
of the Bank.
CAPITAL EXPENDITURE AND COMMITMENTS
Capital expenditure and commitments of the group are:
Description Capital Expenditure Capital Commitments
6 months to 6 months to
R000 June 2007 Dec 2007 2008 2009
Ships 557 889 595 354 762 357 349 781
Property, terminals,
vehicles
and equipment 74 170 445 258 41 195 5 847
632 059 1 040 612 803 552 355 628
Investment in new businesses 105 113 100 218 - -
Total 737 172 1 140 830 803 552 355 628
Description Capital Expenditure Capital Commitments
6 months to
R000 June 2007 Thereafter Total
Ships 557 889 557 817 2 265 309
Property, terminals, vehicles
and equipment 74 170 4 895 497 195
632 059 562 712 2 762 504
Investment in new businesses 105 113 - 100 218
Total 737 172 562 712 2 862 722
The capital commitments on owned ships are made up as follows:
3 x 40 000 dwt product tankers 8 x 16 500 dwt product/chemical tankers
2 x 14 000 dwt chemical tankers 2 x 12 800 dwt product tankers
(both are under contract to sell) (both are under contract to sell)
2 x 4 250 dwt bunker barges 51% interest in a 32 000 dwt handysize
bulk carrier
2 x 33 000 dwt handysize 50% interest in 2 x 28 000 dwt handysize
bulk carriers bulk carriers
In addition, two product tankers, two chemical tankers, a handysize and a
capesize bulk carrier are still to deliver on long-term charter.
The significant capital commitments in the Freight Services division are as
follows:
Acquisition of remaining 50% share in Boltt Grindrod (Pty) Limited
Acquisition of 50% interest in Vanguard Rigging (Pty) Limited (heavy
logistics)
Purchase of a further 10 locomotives in Sheltam Grindrod Leasing (Pty)
Limited
Further terminal development in Maputo, Richards Bay and Durban
Capital commitments will be funded by cash reserves, cash generated from
operations and bank financing facilities.
GROUP BORROWINGS AND CASH FLOW
Investment of R737 million was made in ship acquisitions and expansion of
Freight and Financial Services operations. Furthermore there were increased
working capital requirements in the trading business which was due to increased
trading levels and prices. This resulted in net borrowings increasing from R763
million at 31 December 2006 to R1 022 million at 30 June 2007. The group's net
debt:equity ratio has increased from 19% to 25%. The group continues to seek
investment opportunities.
EQUITY
Shareholders' equity increased from R2 823 million at 31 December 2006 to
R3 109 million. The adjustment to the hedging reserves was mainly as a result
of the mark-to-market valuations on hedges of shipping rates taken on certain
handysize and capesize ships. The increase in the value of the vessel being
hedged is however not recognised in the group's balance sheet.
BASIS OF PREPARATION
The results have been prepared in terms of IAS34 Interim Financial Reporting
and are in accordance with the group's accounting policies which fully comply
with International Financial Reporting Standards (IFRS) and are consistent with
those applied in the previous year.
DISTRIBUTIONS TO SHAREHOLDERS
A distribution out of share premium in the amount of 34 cents per ordinary
share, in terms of the resolution approved by shareholders at the annual
general meeting held on 23 May 2007, (2006: 28 cent dividend) has been approved
by the directors in lieu of an interim dividend. This equates to a 21% growth
in interim distribution. A dividend of 498 cents per preference share was
declared on 23 May 2007 and has been provided for in the group's results.
PROSPECTS
The current high level of ship values and long-term charter rates indicate an
expectation of continued firm shipping markets. The group has significant
contracted income in its Shipping division and continues to grow its fleet at
favourable contracted costs. In addition, the anticipated moderate weakening of
the Rand/US Dollar exchange rate will further benefit the Shipping division.
Improvement is expected in the performance of Trading, Freight and Financial
Services which are being expanded through acquisition and investment in
infrastructural development opportunities.
Consequently, the group expects to achieve growth in earnings for the 2007
financial year.
For and on behalf of the Board
W M Grindrod A K Olivier
Chairman Chief Executive Officer
INTERIM DISTRIBUTIONS TO SHAREHOLDERS
PREFERENCE DIVIDEND
Notice is hereby given that a dividend of 498 cents per preference share has
been declared payable to preference shareholders in accordance with the
undermentioned timetable.
DISTRIBUTION TO ORDINARY SHAREHOLDERS
Notice is hereby given that a distribution of share premium, in lieu of an
interim dividend of 34 cents per ordinary share (2006: 28 cent dividend) has
been declared payable to ordinary shareholders in accordance with the
undermentioned timetable.
TIMETABLE
Last day to trade cum-dividend/distribution Friday, 31 August 2007
Trading ex-dividend/distribution commences Monday, 3 September 2007
Record date Friday, 7 September 2007
Dividend/distribution payment date Monday, 10 September 2007
No dematerialisation or rematerialisation of shares will be allowed for the
period from 3 September 2007 to 7 September 2007, both days inclusive.
The dividends and distribution of share premium are declared in the currency of
the Republic of South Africa.
By order of the Board
C A S Robertson
Secretary
15 August 2007
Directors
W M Grindrod* (Chairman), I A J Clark* (Deputy Chairman), A K Olivier (Group
CEO), H Adams*, Dr S M Gounden*, I M Groves*, J G Jones, T J T McClure,
N E Mtshotshisa*, R A Norton*, D A Polkinghorne, D A Rennie, A F Stewart,
L R Stuart-Hill. *Non-executive
Registered office Postal address
Quadrant House PO Box 1
115 Victoria Embankment Durban
Durban 4000
4001
Transfer secretaries Postal address
Computershare Investor Services 2004 (Pty) Limited PO Box 61051
70 Marshall Street Marshalltown
Johannesburg 2107
2001
Registration number: 1966/009846/06 Incorporated in the Republic of South
Africa
Share code: GND & GNDP ISIN: ZAE000072328 & ZAE000071106
www.grindrod.co.za
Date: 15/08/2007 12:00:01 Produced by the JSE SENS Department.
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