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GNDE - GND/GNDP - Grindrod Limited - 2006 Audited Results

22/02/2007 12:21:01

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GND/GNDP - Grindrod Limited - 2006 Audited Results and Final Distribution
Grindrod Limited
Registration number 1966/009846/06
Incorporated in the Republic of South Africa
Share code: GND & GNDP
ISIN: ZAE000072328 & ZAE000071106
2006 AUDITED RESULTS AND FINAL DISTRIBUTION ANNOUNCEMENT
up 19% INCREASE IN HEADLINE EARNINGS PER SHARE
up 27% INCREASE IN CASH GENERATED FROM OPERATIONS
up 27% INCREASE IN DISTRIBUTION TO ORDINARY SHAREHOLDERS
CONSOLIDATED INCOME STATEMENT
Year ended 31 December
Audited Audited
Change 2006 2005
% R000 R000
Revenue 68 12 507 237 7 449 145
Trading profit 22 1 279 295 1 047 342
Depreciation (154 209) (121 705)
Operating profit before interest and
taxation 1 125 086 925 637
Non-trading items (39 434) 3 451
Interest received 66 377 53 859
Interest paid (137 242) (140 639)
Profit before share of associate profit 1 014 787 842 308
Share of associate profit before
taxation 127 560 88 544
Profit before taxation 1 142 347 930 852
Taxation (75 868) (65 152)
Profit for the year 1 066 479 865 700
Attributable to
Ordinary shareholders 18 1 008 113 851 224
Preference shareholders 64 238 15 206
Equity holders of the parent 1 072 351 866 430
Minority Interest (5 872) (730)
1 066 479 865 700
Exchange rates (R/US$)
Opening exchange rate 6,31 5,65
Closing exchange rate 7,00 6,31
Average exchange rate 6,78 6,38
RECONCILIATION OF HEADLINE EARNINGS
Profit attributable to ordinary
shareholders 1 008 113 851 224
Adjusted for: (1 945) (1 799)
Impairment of goodwill 932 1 691
Impairment of intangible asset 3 100 -
Impairment of property, terminals,
vehicles and equipment 1 752 707
Net profit on disposal of investments (11 428) (115)
Loss/(profit) on sale of property,
terminals, vehicles and equipment 4 213 (4 082)
Other non-trading items (514) -
Headline earnings 18 1 006 168 849 425
ORDINARY SHARE PERFORMANCE
Number of shares in issue less treasury
shares (000's) 449 179 461 626
Weighted average number of shares on
which earnings per share are based
(000's) 455 719 458 490
Diluted weighted average number of
shares on which diluted earnings per
share are based (000's) 468 765 476 577
Earnings per share (cents)
Basic 221,2 185,7
Diluted 215,1 178,6
Headline earnings per share (cents)
Basic 19 220,8 185,3
Diluted 214,6 178,2
Distribution/dividends per share (cents)
Interim 28,0 20,0
Final 38,0 32,0
Distribution/dividend cover (times) 3,4 3,5
DIVISIONAL ANALYSIS OF EARNINGS
Year ended 31 December
Audited Audited
2006 2005
R000 R000
Revenue
Shipping Services 2 768 831 2 867 560
Trading, Freight and Financial Services 9 738 406 4 581 585
12 507 237 7 449 145
Earnings
Shipping Services
- International 783 701 685 834
- Local 83 022 76 685
866 723 762 519
Trading, Freight and Financial Services
- Trading 24 614 21 872
- Freight 127 001 65 469
- Financial Services 15 009 6 426
166 624 93 767
Overheads and disposal adjustments (25 234) (5 062)
141 390 88 705
1 008 113 851 224
CONSOLIDATED BALANCE SHEET
Year ended 31 December
Audited Audited
2006 2005
R000 R000
Ships, property, terminals, vehicles and equipment 2 336 905 2 069 178
Intangible assets 350 756 250 525
Investments in associates 243 370 125 339
Deferred taxation 70 254 69 330
Financial assets, advances and other investments 621 488 53 758
Bank balances and cash 1 065 283 655 457
Non-current asset held for sale 170 947 184 338
Other current assets 2 411 403 1 570 692
Total assets 7 270 406 4 978 617
Shareholders' equity 2 824 543 1 937 199
Minority interest (1 755) 6 753
Total equity 2 822 788 1 943 952
Deferred taxation 24 324 20 340
Provision for post-retirement medical aid 62 834 64 944
Interest bearing debt 1 828 711 1 533 900
4 738 657 3 563 136
Other liabilities 2 531 749 1 415 481
Total funding 7 270 406 4 978 617
Net worth per ordinary share - at book value (cents) 461 314
Net debt:equity ratio 0,19:1 0,33:1
Capital expenditure 1 063 483 648 135
Capital commitments
Authorised by directors and contracted for 1 604 066 1 194 320
Due within one year 901 375 430 644
Due thereafter 702 691 763 676
Authorised by directors not yet contracted for 231 405 309 260
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December
Audited Audited
2006 2005
R000 R000
Cash generated from operations 1 286 839 1 009 769
Working capital movements (295 267) 357 708
Net interest paid (77 204) (96 056)
Net dividends paid (104 235) (201 234)
Taxation paid (105 045) (32 251)
705 088 1 037 936
Net bank deposits and other short-term
negotiables (154 880) -
Net cash flows from operating activities 550 208 1 037 936
Acquisition of ships, property, terminals,
vehicles and equipment and investments (1 063 483) (1 704 380)
Proceeds from disposal of ships, property,
terminals, vehicles and equipment and
investments 659 111 14 241
Intangible assets acquired (6 168) -
Loans(advanced to)/ repaid by associates (5 071) 2 378
Net cash flows used in investing activities (415 611) (1 687 761)
Repurchase of ordinary share capital (237 679) (2 243)
Proceeds from issue of ordinary share
capital 6 400 3 454
Proceeds from issue of preference share
capital 262 777 487 780
Long-term borrowings raised 276 274 459 011
Payment of capital portion of long-term
borrowings (548 685) (352 079)
Short-term loan raised 459 841 129 192
Net cash flows from financing activities 218 928 725 115
Net increase in cash and cash equivalents 353 525 75 290
Cash and equivalents at beginning of the year 347 571 257 297
Difference arising on translation 30 959 14 984
Cash and cash equivalents at end of the year 732 055 347 571
STATEMENT OF CHANGES IN EQUITY
Share capital, Foreign currency
premium and equity Hedging translation
compensation reserve reserve
R000 R000 R000
Balance at 31 December
2004 7 625 (49 725) (91 740)
Share options exercised 3 454
Shares repurchased and
cancelled (2 243)
Share-based payments 1 464
Preference share issue 500 000
Share issue expenses (12 220)
Foreign currency
translation
adjustments (8 265)
Financial instrument
hedge (7 721)
Minority interest
acquired
Profit attributable to
shareholders
Dividends paid
Balance 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
Minority interest
acquired
Profit attributable to
shareholders
Dividends paid
Balance at 31 December
2006 514 994 (72 920) 53 080
Attributable to
General risk Accumulated equity holders
reserve profit of Grindrod
R000 R000 R000
Balance at 31 December 2004 - 951 837 817 997
Share options exercised 3 454
Shares repurchased and
cancelled (2 243)
Share-based payments 1 464
Preference share issue 500 000
Share issue expenses (12 220)
Foreign currency
translation
adjustments (8 265)
Financial instrument hedge (7 721)
Minority interest acquired -
Profit attributable to
shareholders 866 430 866 430
Dividends paid (221 697) (221 697)
Balance at 31 December 2005 - 1 596 570 1 937 199
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 156 374
Foreign currency
translation
realised (3 307)
Transfer from accumulated
profit 100 (100) -
Minority interest acquired -
Profit attributable to
shareholders 1 072 351 1 072 351
Dividends paid (339 532) (339 532)
Balance at 31 December 2006 100 2 329 289 2 824 543
Minority Total
interest equity
R000 R000
Balance at 31 December 2004 8 044 826 041
Share options exercised 3 454
Shares repurchased and cancelled (2 243)
Share-based payments 1 464
Preference share issue 500 000
Share issue expenses (12 220)
Foreign currency translation
adjustments 59 (8 206)
Financial instrument hedge (7 721)
Minority interest acquired (620) (620)
Profit attributable to
shareholders (730) 865 700
Dividends paid (221 697)
Balance at 31 December 2005 6 753 1 943 952
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 156 374
Foreign currency translation
realised (3 307)
Transfer from accumulated profit -
Minority interest acquired (2 636) (2 636)
Profit attributable to
shareholders (5 872) 1 066 479
Dividends paid (339 532)
Balance at 31 December 2006 (1 755) 2 822 788
COMMENTS
The Board of Grindrod Limited is pleased to announce an 18% increase in
earnings to R1 008 million for the year ended 31 December 2006. This equates to
headline earnings of R2,21 per share, an increase of 19% over 2005.
Shipping markets in general were in line with expectations during the year.
The markets were strong in the first quarter, weakening in the second quarter
and then recovering through the second half of the year. Shipping markets are
still at high levels, in particular the dry bulk market where the favourable
long-term outlook has ensured high spot and period rates. Consequently, the
strong markets together with the benefits from a growing fleet and a weaker
Rand/US Dollar exchange rate resulted in Shipping Services performing extremely
well in the second half of the year.
Trading, Freight and Financial Services increased earnings in the second half
of the year through improved performances in the trading division and certain
terminal and logistics operations. These improved results have increased the
contribution by the division to 14% of group earnings.
SHIPPING SERVICES
The continued high demand for commodities from China and the effect of an
improving world economy maintained the favourable dry bulk market fundamentals
in spite of the significant delivery of new ships during the year. Product and
chemical tanker markets followed a similar pattern with pressure on fleet
capacity due to regulatory changes and increased demand for long haul product
deliveries. There was however, still some volatility in spot rates during the
year in both sectors. Long-term charter rates, newbuildings and second hand
prices of vessels remained firm and are currently close to their all time
highs.
The following ship acquisitions and disposal activities reflect the high level
of business activity within shipping services during the past year.
Ships ordered Ships delivered Ships sold Contracted sales
2 x 47 350 dwt 1 x 12 800 dwt 1 x 12 800 dwt 1 x 12 800 dwt
product tankers products tanker products tanker products tanker
(chartered)
1 x 25 000 dwt 2 x 25 000 dwt 1 x 40 000 dwt 1 x 40 000 dwt
chemical tanker chemical tankers products tanker products tanker
(chartered) (chartered)
4 x 16 500 dwt 1 x 45 000 dwt 2 x 14 000 dwt
product tankers products tanker chemical tankers
1 x 32 000 dwt 1 x 636 teu
bulk carrier (51%) containership
2 x 4 250 dwt 1 x handysize
bunker barges bulk carrier
Subsequent to year end, the division disposed of the 40 000 dwt products tanker
and the 12 800 dwt products tanker referred to above as contracted sales.
Ships ordered in the current year, in addition to those already on order, will
result in a further 20 ships being added to the current fleet of 37 owned and
long-term chartered ships. In addition, 74% of the fleet by deadweight tonnes
is fixed out for 2007 with 54% in 2008 and 36% in 2009. Contracted profits from
these fixtures and from contracted ship sales amount to US$84,2 million in
2007, US$40,2 million in 2008 and US$18,9 million in 2009.
TRADING, FREIGHT AND FINANCIAL SERVICES
As anticipated the division experienced a positive second half of 2006.
Earnings for the year increased by 59% over the previous year.
As a result of a solid performance in the second half of the year by Atlas
Trading and Shipping due to improved margins and continued positive results
from Cockett Marine and Oreport. Trading Services contributed significantly to
non-shipping profit. Earnings were up 12,5% over the prior year.
Similarly, the Grindrod Freight Services division showed a favourable
turnaround in the second half of the year. In particular, the group's terminal
operations and certain of the more established logistics operations performed
well. Grindrod Ships Agencies grew its market share and expanded its operations
to achieve record profits. Grindrod Freight Services' contribution was 94% up
over last year.
Grindrod Freight Services division had an active year with the following
significant acquisitions and major capital expenditure projects being
concluded:
The restructure of the Ocean Africa Container Lines (Pty) Limited
shareholding
The business of Transsure Freight CC by PicPack Grindrod (Pty) Limited
The remaining 50% interest in Auto Carrier Transport (Pty) Limited, the
expansion of the fleet and the acquisition of car storage facilities
A 50% interest in Lauritzen Cool Logistics SA
100% of Cross Country Containers (Pty) Limited
A 12,25% interest in Maputo Port Development Company
10 locomotives for Sheltam Grindrod Leasing (Pty) Limited
Expansion of terminal/warehousing facilities
The Star Biomass Pellet manufacturing operation was discontinued during the
year under review and has been fully provided for.
In the latter half of the year, in conjunction with the consolidation of
certain operations, the group also commenced a restructure of its Grindrod
Freight Services division into distinct operations namely:
Grindrod Terminals
Grindrod Intermodal
Grindrod Logistics
Grindrod Rail
Grindrod Port Holdings
Grindrod Seafreight
Grindrod Ships Agencies
It is anticipated that these focused operating businesses will, as a result of
improved efficiencies, contribute significantly to the growth of the division.
There were significant changes in the Financial Services division during the
year. The property and asset management operations of Marriott were sold and
the remaining 50% of Marriott Corporate Property Bank was acquired. The latter
transaction was approved by the South African Reserve Bank on 16 October 2006
and the Bank has been re-branded as Grindrod Bank and recapitalised with the
introduction of additional equity. The Bank performed favourably in the latter
part of the year growing its advances book and expanding its operations. The
Bank acquired a wealth management business and in early 2007 entered into an
agreement with Net 1 to provide a card based payment system to the retail
market.
CAPITAL EXPENDITURE AND COMMITMENTS
Capital expenditure and commitments of the group are:
Description Capital expenditure Capital commitments
R000 2006 2007 2008 Thereafter
Ships 518 467 854 532 566 482 136 209
Property, terminals, vehicles
and equipment 356 888 186 810 2 375 2 813
875 355 1 041 342 568 857 139 022
Investment in new businesses 188 128 86 250 - -
Total 1 063 483 1 127 592 568 857 139 022
The capital commitments on owned ships are made up as follows:
4 x 40 000 dwt product tankers (1 of which is under contract to sell)
6 x 16 500 dwt product/chemical tankers
2 x 14 000 dwt chemical tankers (both are under contract to sell)
3 x 12 800 dwt product/chemical tankers (1 of which has been sold in 2007)
2 x 4 250 dwt bunker barges
51% interest in a 32 000 dwt bulk carrier
In addition, two product tankers, three chemical tankers, three handysize and a
capesize bulk carrier are still to deliver on long-term charter.
The significant capital commitments in the Grindrod Freight Services division
are as
follows:
The remaining 50% interest in CMC Grindrod (Pty) Limited
The construction of a fertiliser terminal in Durban
Further terminal development in Maputo and Richards Bay
A further 10 locomotives for Sheltam Grindrod Leasing (Pty) Limited
Capital commitments will be funded by cash reserves, cash generated from
operations and bank financing facilities.
GROUP BORROWINGS AND CASH FLOW
Investment of R1 063 million was made in ship acquisitions and expansion of
Freight and Financial Services operations. Furthermore there were increased
working capital requirements in the bulk product trading business which was due
to higher commodity prices in conjunction with a significantly improved trading
environment towards the end of the year. However, due to strong operating cash
flows and the further issue of R263 million in preference shares, net
borrowings reduced from R878 million at 31 December 2005 to R848 million. The
group's debt:equity ratio has reduced from 33% to 19% as a result of strong
earnings, the preference share issue and ship sales. The group continues to
seek investment expansion opportunities.
EQUITY
Shareholders' equity increased from R1 937 million at 31 December 2005 to R2
825 million due to the strong earnings, the issue of preference share capital
and the effect of the weaker Rand/US Dollar exchange rate.
During the year, the group repurchased 19,4 million ordinary shares at an
average price of R12,22. The treasury shares are held by a subsidiary company,
Grindrod (South Africa) (Pty) Limited.
At a general meeting held on 15 August 2006 Grindrod shareholders approved the
creation of an additional 12,5 million cumulative, non-redeemable, non-
participating, non-convertible preference shares.
AUDITED RESULTS
The group financial statements for the year ended 31 December 2006, from which
these results have been derived, have been audited by Deloitte & Touche. Their
unmodified audit opinion is available for inspection at the registered office
of the company.
BASIS OF PREPARATION
These condensed 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 38 cents per ordinary
share, in terms of the resolution approved by shareholders at the Annual General
Meeting held on 24 May 2006, (2005: 32 cents) has been approved by the directors
in lieu of a final dividend. A dividend of 470,3 cents per preference share was
declared on 1 December 2006 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 in the foreseeable future. The
group also has a significant level of 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.
Further improvement is expected in the performance of Trading, Freight and
Financial Services which are being expanded further through acquisition and
infrastructural development opportunities.
Consequently the group is expected to achieve growth in earnings for the 2007
financial year.
For and on behalf of the Board
W M Grindrod A K Olivier
ChairmanChief Executive Officer
FINAL DISTRIBUTIONS TO SHAREHOLDERS
PREFERENCE DIVIDEND
Notice is hereby given that a dividend of 470,3 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 out of share premium, in lieu of a
final dividend of 38 cents per ordinary share (2005: 32 cents) has been declared
payable to ordinary shareholders in accordance with the undermentioned
timetable.
TIMETABLE
Last day to trade cum-dividend/distribution Friday, 9 March 2007
Trading ex-dividend/distribution commences Monday,12 March 2007
Record date Friday, 16 March 2007
Dividend/distribution payment date Monday, 19 March 2007
No dematerialisation or rematerialisation of shares will be allowed for the
period from 12 March 2007 to 16 March 2007, both days inclusive.
The dividend and distribution out of share premium are declared in the currency
of the Republic of South Africa.
By order of the Board
C A S Robertson
Secretary
22 February 2007
REGISTERED OFFICE POSTAL ADDRESS
Quadrant House PO Box 1
115 Victoria Durban
Embankment 4000
Durban 4001
TRANSFER SECRETARIES POSTAL ADDRESS
Computershare Investor PO Box 61051
Services 2004 (Pty) Limited Marshalltown
70 Marshall Street 2107
Johannesburg 2001
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, D R D
White*, R J H Whitley* *Non-executive
www.grindrod.co.za
Date: 22/02/2007 12:21:00 Produced by the JSE SENS Department.

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