GND
GND/GNDP - Grindrod Limited - Audited results for the year ended 31 December
2009
Grindrod Limited
Incorporated in the Republic of South Africa
(Registration number: 1966/0009846/06)
Share code: GND & GNDP
ISIN: ZAE000072328 & ZAE000071106
Audited results for the year ended 31 December 2009
- Attributable income of R873 million
- Headline earnings per share of 190 cents
- Strong balance sheet, minimal debt and good liquidity
- Final ordinary dividend of 30 cents per share
Condensed income statement
31 December 31 December
Audited Audited
2009 Change 2008
R000 % R000
Revenue 27 692 041 (18) 33 736 910
Trading profit 1 434 922 (53) 3 026 017
Depreciation and amortisation (292 400) (240 942)
Operating profit before interest and
taxation 1 142 522 (59) 2 785 075
Non-trading items 13 881 (163 567)
Interest received 161 328 138 711
Interest paid (252 695) (314 071)
Profit before share of associates'
profit 1 065 036 2 446 148
Share of associate companies' profit
before
taxation 76 465 66 076
Profit before taxation 1 141 501 2 512 224
Taxation (188 075) (243 030)
Profit for the year 953 426 2 269 194
Attributable to
Ordinary shareholders 872 763 (60) 2 157 890
Preference shareholders 69 023 90 892
Grindrod Limited shareholders 941 786 2 248 782
Minority interest 11 640 20 412
953 426 2 269 194
Exchange rates (R/US$)
Opening exchange rate 9,45 6,89
Closing exchange rate 7,37 9,45
Average exchange rate 8,46 8,27
Reconciliation of headline earnings
Profit attributable to ordinary
shareholders 872 763 2 157 890
Adjusted for: (15 445) 163 567
IAS 38 Impairment of Goodwill 990 12 987
IAS 38 (Reversal)/Impairment of
Intangible Asset in Respect of Charters (46 886) 62 660
IFRS 3 Negative Goodwill Released (156) (216)
IAS 16 Impairment of Ships, Plant and
Equipment 36 731 93 772
IFRS 3 Net Profit on Disposal of
Investments (2 081) (43 179)
IAS 16 Net (Profit)/Loss on Sale of
Plant and Equipment (1 674) 1 386
IAS 21 FCTR Adjustment on Disposal
of Business (805) 35 912
Total tax effects of adjustments (1 564) 245
Headline earnings 857 318 2 321 457
Ordinary share performance
Number of shares in issue less
treasury shares (000's) 454 203 450 252
Weighted average number of shares
on which earnings per share are
based (000's) 452 278 453 640
Diluted weighted average number of
shares on which diluted earnings
per share are based (000's) 454 436 459 930
Earnings per share (cents)
Basic 193,0 (59) 475,7
Diluted 192,1 (59) 469,2
Headline earnings per share (cents)
Basic 189,6 (63) 511,7
Diluted 188,7 (63) 504,7
Dividends per share (cents) 60,0 (56) 136,0
Interim 30,0 68,0
Final 30,0 68,0
Dividend cover (times) 3,2 3,5
Statement of comprehensive income
31 December 31 December
Audited Audited
2009 2008
R000 R000
Profit for the year 953 426 2 269 194
Other comprehensive income
Exchange differences on translating foreign
operations
Exchange differences arising during the year (1 107 662) 1 373 214
Exchange differences arising on hedging of
foreign operations (7 280) (50 934)
Realisation of foreign operations disposed of
in the year (7 708) -
(1 122 650) 1 322 280
Cash flow hedges
(Losses)/gains arising during the year (316 551) 572 704
Reclassification adjustments for amounts
recognised in profit or loss 455 (2 328)
(316 096) 570 376
Total comprehensive (loss)/income for the year (485 320) 4 161 850
Total comprehensive (loss)/income attributable to:
Grindrod Limited shareholders (499 211) 4 140 799
Minority shareholders 13 891 21 051
(485 320) 4 161 850
Condensed changes in disclosure
31 December 31 December
Audited Audited
2008 IAS 7 2008*
R000 R000 R000
Cash generated from operations 4 312 221 (959 235) 3 352 986
Net proceeds on disposal of ships - 959 235 959 235
Proceeds on disposal of ships - 1 070 101 1 070 101
Cash payments on ship options
exercised - (110 866) (110 866)
Capital expenditure on ships - (1 310 419) (1 310 419)
Net cash flows from operating
activities 3 472 457 (1 310 419) 2 162 038
Acquisition of property,
terminals, vehicles and
equipment and investments (2 158 501) 1 310 419 (848 082)
Net cash flows used in
investing activities (1 834 208) 1 310 419 (523 789)
* Restated due to the requirement of IAS 7 Cash Flow Statements which states
that capital expenditure relating to dual purpose assets should be reallocated
from investing activities to operating activities.
Condensed statement of financial position
31 December 31 December
Audited Audited
2009 2008
R000 R000
Ships, property, terminals, vehicles
and equipment 3 923 378 4 540 514
Intangible assets 830 663 713 046
Investments in associates 283 068 316 746
Deferred taxation 159 088 159 352
Derivative financial assets and other investments 185 376 191 238
Recoverables on cancelled ships 238 589 -
Loans and advances to bank customers 1 483 314 1 049 761
Liquid assets and short-term negotiable
securities 104 092 138 553
Bank balances and cash 1 917 695 2 403 087
Other current assets 3 493 156 4 469 033
Non-current assets held for sale 12 680 2 245
Total assets 12 631 099 13 983 575
Shareholders' equity 5 737 980 6 712 696
Minority interest 98 146 62 315
Total equity 5 836 126 6 775 011
Deferred taxation 22 277 18 527
Provision for post-retirement medical aid 77 868 77 900
Income received in advance 88 441 151 200
Deposits from bank customers 1 756 126 1 507 046
Interest-bearing debt 2 246 462 1 963 564
10 027 300 10 493 248
Non-current liabilities associated with
assets held for sale 5 193 -
Other liabilities 2 598 606 3 490 327
Total funding 12 631 099 13 983 575
Net worth per ordinary share - at book
value (cents) 1 122 1 336
Net debt:equity ratio 0.04:1 (0.05):1
Capital expenditure 1 407 629 2 158 501
Capital commitments
Authorised by directors and contracted for 2 243 062 3 245 998
Due within one year 1 455 328 1 647 309
Due thereafter 787 734 1 598 689
Authorised by directors not yet contracted for 56 434 277 000
Segmental analysis
Revenue
Shipping 4 918 406 7 069 205
Trading 20 335 439 24 022 393
Freight Services 2 302 323 2 551 792
Financial Services 135 695 93 520
Group costs 178 -
27 692 041 33 736 910
Trading profit (earnings before interest,
taxation, depreciation and amortisation)
Shipping 774 174 2 387 638
Trading 255 743 230 429
Freight Services 387 239 378 102
Financial Services 54 193 46 409
Group costs (36 427) (16 561)
1 434 922 3 026 017
Operating profit before interest and
taxation
Shipping 647 292 2 292 301
Trading 249 264 221 938
Freight Services 233 903 242 792
Financial Services 52 192 44 605
Group costs (40 129) (16 561)
1 142 522 2 785 075
Attributable income
Shipping 492 482 1 862 364
Trading 181 233 131 842
Freight Services 221 717 188 654
Financial Services 35 500 34 614
Group costs (58 169) (59 584)
872 763 2 157 890
Condensed statement of cash flows
Cash generated from operations 917 747 3 352 986
Net interest paid (91 367) (175 360)
Net dividends paid (460 868) (604 394)
Taxation paid (240 459) (176 571)
125 053 2 396 661
Net bank advances to customers and other
short-term negotiables (150 013) 116 561
Net cash flows (utilised in)/from operating
activities before ships
sales and purchases (24 960) 2 513 222
Net proceeds on disposal of ships 756 728 959 235
Proceeds on disposal of ships 1 257 467 1 070 101
Cash payments on ship options exercised (500 739) (110 866)
Capital expenditure on ships (793 207) (1 310 419)
Net cash flows (utilised in)/from operating
activities (61 439) 2 162 038
Acquisition of property, terminals, vehicles
and equipment and investments (578 139) (848 082)
Proceeds from disposal of property, terminals,
vehicles and equipment and investments 51 498 340 624
Intangible assets acquired (36 283) (916)
Loans repaid by/(advanced to) joint venture and
associate companies 27 386 (15 415)
Net cash flows used in investing activities (535 538) (523 789)
Repurchase of ordinary share capital - (212 936)
Proceeds from issue of ordinary share capital 13 209 3 045
Minority investment in subsidiary 3 780 -
Loan from minority shareholders 15 853 -
Long-term borrowings raised 591 700 643 071
Payment of capital portion of long-term borrowings (447 341) (637 433)
Short-term loan raised/(repaid) 381 783 (436 589)
Net cash flows from/(utilised in) financing
activities 558 984 (640 842)
Net (decrease)/increase in cash and cash
equivalents (37 993) 997 407
Cash and equivalents at beginning of the year 1 975 106 711 739
Difference arising on translation (267 831) 265 960
Cash and cash equivalents at end of the year 1 669 282 1 975 106
* The 2008 audited figures are restated due to a reallocation in relation to
IAS 7 Cash Flow Statements.
Condensed statement of changes in equity
Equity
Ordinary Preference compen-
share share Share sation
capital capital premium reserve
R000 R000 R000 R000
Balance at 31 December 2007 9 2 189 061 9 868
Share options exercised 3 045
Share-based payments 2 865
Repurchase of shares (192 106)
Minority interest acquired
Minority interest disposed
Profit for the year
Other comprehensive income 84
Total comprehensive income - - - 84
Dividends paid
Balance at 31 December 2008 9 2 - 12 817
Share options exercised 13 209
Share-based payments 22 954
Minority interest acquired
Profit for the year
Other comprehensive income
Total comprehensive income - - - -
Dividends paid
Balance at 31 December 2009 9 2 13 209 35 771
Foreign
General currency Accu-
risk translation Hedging mulated
reserve reserve reserve profit
R000 R000 R000 R000
Balance at
31 December 2007 5 525 20 776 (365 587) 3 518 678
Share options exercised
Share-based payments
Repurchase of shares (20 833)
Minority interest acquired
Minority interest disposed
Profit for the year 2 248 782
Other comprehensive
income (5 525) 1 372 491 519 442 5 525
Total comprehensive
income (5 525) 1 372 491 519 442 2 254 307
Dividends paid (599 406)
Balance at 31 December 2008 - 1 393 267 153 855 5 152 746
Share options exercised
Share-based payments
Minority interest acquired
Profit for the year 941 786
Other comprehensive income (1 117 621) (323 376)
Total comprehensive income - (1 117 621) (323 376) 941 786
Dividends paid (511 668)
Balance at 31 December 2009 - 275 646 (169 521) 5 582 864
Interest of
shareholders Interest
of Grindrod Minority of all
Limited interest shareholders
R000 R000 R000
Balance at 31 December 2007 3 378 332 60 643 3 438 975
Share options exercised 3 045 3 045
Share-based payments 2 865 2 865
Repurchase of shares (212 939) (212 939)
Minority interest acquired - (320) (320)
Minority interest disposed - 532 532
Profit for the year 2 248 782 20 412 2 269 194
Other comprehensive income 1 892 017 639 1 892 656
Total comprehensive income 4 140 799 21 051 4 161 850
Dividends paid (599 406) (19 591) (618 997)
Balance at 31 December 2008 6 712 696 62 315 6 775 011
Share options exercised 13 209 13 209
Share-based payments 22 954 22 954
Minority interest acquired - 29 633 29 633
Profit for the year 941 786 11 640 953 426
Other comprehensive income (1 440 997) 2 251 (1 438 746)
Total comprehensive income (499 211) 13 891 (485 320)
Dividends paid (511 668) (7 693) (519 361)
Balance at 31 December 2009 5 737 980 98 146 5 836 126
Comments
Grindrod Limited generated earnings of R873 million for the year ended 31
December 2009 (2008: R2 157 million), down 60% on the extraordinarily high
prior year earnings. Headline earnings per share decreased by 63% to 190 cents
per share (2008: 512 cents) compared with the prior year including large
headline earnings adjustments. Total ordinary dividends at 50 cents per share
for the year decreased 56% from 136 cents per share. A final dividend of 30
cents per ordinary share (2008: 68 cents) was declared. Dividend cover reduced
to 3,2 times earnings from the 3,5 times cover generally applied in the past
and a preference share dividend of 428 cents per share (2008: 623 cents) was
declared. Return on ordinary shareholders' funds was 15,9% (2008: 50,2%).
These results were recorded against the backdrop of a major global recession
characterised by volatility and uncertainty in financial, commodity and
shipping markets, low trade volumes, softer commodity prices and increased
credit and counterparty risk. This environment brought to an end an extended
period of extraordinarily strong drybulk shipping markets, although there was
an improvement in the second half of the year, mainly due to strong commodity
demand from China.
In reaction to market conditions, Grindrod prepared for a difficult year
focusing efforts on key operational areas by:
protecting the balance sheet and ensuring sufficient liquidity through
maintaining high levels of contract cover, managing counterparty risk,
selectively selling ships to lock-in value and generate cash, and ensuring
adequate finance facilities;
reducing costs and improving efficiencies to support the earnings base; and
protecting customer relationships.
These actions, together with the fact that the group did not materially expand
its fleet at the top of the market, culminated in a strong balance sheet with
minimal debt, more than adequate liquidity through cash resources and access to
financing facilities, a low cost fleet with options to extend or purchase and
contracts with reliable counterparties.
The strategy to diversify the group from shipping to a broader based freight
and logistics business supported group earnings during the year.
Shipping earnings declined by 74% from R1 862 million to R492 million on the
back of the decline in shipping rates, triggered by the lack of credit to
support international trade and the slowdown in major economies and lower
profits from ship sales. The division was further impacted by foreign exchange
losses due to a strong closing Rand/US Dollar exchange rate compared to a large
gain in the prior year. The group has put in place measures to reduce its
exposure to shipping market volatility.
The Trading division's earnings grew from R132 million to R181 million in 2009,
an increase of 37% due to increased volumes, good operating margins and reduced
funding costs.
Despite the impact of tough trading conditions particularly within the
logistics operations, Freight Services reported growth in earnings of 18% with
profits of R222 million compared to R189 million in the previous years
Strong performances from Ports and Terminals, as a result of investment in
terminal capacity in prior years, Seafreight, Intermodal and Ships Agencies
were key in achieving this result.
Financial Services experienced growth in earnings of 3% from R35 million to R36
million with commendable performance across key portfolios and improved fee
income in a challenging environment.
As previously reported, the majority of Grindrod Freight Services' South
African based businesses, operating through the subsidiary company Grindrod
(South Africa) (Pty) Limited, became black economic empowered in the first
quarter of 2009. The finalisation of the empowerment transaction, combined with
other BEE initiatives, resulted in Grindrod (South Africa) (Pty) Limited
achieving a level 3 BEE rating.
Included in the group costs above is a once-off R21 million (or 5 cents per
share) IFRS 2 charge against headline earnings for the BEE transaction.
CAPITAL EXPENDITURE AND COMMITMENTS
Capital Capital
Description expenditure commitments
R millions 2009 2010
Ships 794 858
Property and terminals 236 436
Vehicles, equipment and software 159 34
1 189 1 328
Acquisition of businesses 219 176
Total 1 408 1 504
Description Capital commitments Total
R millions 2011 2012 commitments
Ships 635 85 1 578
Property and terminals 63 - 499
Vehicles, equipment and software 5 1 40
703 86 2 117
Acquisition of businesses 6 - 182
Total 709 86 2 299
Major items of capital expenditure for the year included instalments paid under
the group's ship newbuilding orders, the expansion of Freight Services drybulk
terminal capacities in Richards Bay and Maputo, expansion of automotive storage
facilities in Rosslyn, Pretoria, the re-entry into the rail sector through the
establishment of RRL Grindrod and the acquisition of a locomotive maintenance
and refurbishment operation.
Ship newbuilding contracts make up the bulk of the capital commitments. In
addition to the capital commitments of R2,3 billion the group has budgeted for
further capital expenditure of R2,7 billion over the next three years, mainly
in Freight Services and has the balance sheet capacity for a further
R4 billion over the same period.
Subsequent to year end, orders of a further three small product tankers,
included in commitments above, were cancelled. Management are, however, in
discussions with the shipyard on the possible renegotiation of these contracts.
CASH FLOW AND BORROWINGS
Cash generated from operations was R918 million (2008: R3 353 million). Cash
outflows included capital expenditure of R1 408 million and dividends of R540
million during the year. This resulted in the net cash position of R325 million
at 31 December 2008 becoming a net debt position of R258 million at 31 December
2009 and a net debt:equity ratio of 4%. Net interest costs at R91 million,
although decreasing by 48% from R175 million, remain material due to low
interest earned on substantial US Dollar cash resources, while high interest
costs were incurred on Rand debt. This position was prudent to ensure
availability of US Dollar capital to fund expansion opportunities and is likely
to reduce during the current year.
The group is confident that it has adequate funding available for all capital
commitments through its cash resources, cash generated from operations and
existing committed bank facilities.
SHAREHOLDERS' EQUITY
Shareholders' equity decreased from R6,7 billion at 31 December 2008 to R5,7
billion at 31 December 2009 due to the effect of the stronger Rand/US Dollar
exchange rate and the revaluation of hedging instruments.
During the period, 19 044 230 ordinary shares and 100 000 preference shares,
held by a subsidiary company, were delisted. The balance of 9 179 348 ordinary
shares repurchased in prior years continue to be held in treasury.
BASIS OF PREPARATION
The results have been prepared in terms of IAS 34 Interim Financial Reporting
and are in accordance with the group's accounting policies which fully comply
with International Financial Reporting Standards (IFRS), the Companies Act, as
amended, and the JSE Listings Requirements. They are consistent with those
applied in the previous year with the exception of the revised IAS 1
Presentation of Financial Statements and IFRS 8 Operating Segments which were
adopted in the current year. The condensed cash flow for 2008 has been restated
due to reallocation in relation to IAS 7 Cash Flow Statements. The adoption of
these new standards has resulted in certain disclosure reclassification, but
has not resulted in any changes in accounting policy.
SUBSEQUENT EVENTS
No material change has taken place in the affairs of the group between the end
of the financial year and the date of this report
PROSPECTS
The global and local economies are in the process of recovering from the severe
recession which was at its worst in the first half of 2009. The improved
economic activity, mainly driven by growth in China and India, has led to
increasing commodity demand, generally higher commodity prices and a
substantial rise in trade volumes. It is anticipated that all divisions will
benefit from the improving cycle.
There is some concern that the large number of new drybulk ships due for
delivery in the short-term could adversely affect the drybulk shipping market
and consequently the results of the Shipping division notwithstanding the
benefit of improved demand for commodities.
The outlook for the Freight Services operations is favourable, with the
business expected to benefit from an increase in volumes handled at the
recently expanded drybulk terminals. Trading and Financial Services should at
least maintain their performances.
The group results are extremely sensitive to the Rand/US Dollar exchange rate
and continued strength of the local currency will impact negatively on
earnings.
No ship sales are planned for 2010 at this time. However, the group could
benefit from well timed use of its strong balance sheet to expand operations.
In spite of the uncertainties above, management expects to achieve continued
acceptable returns on shareholder funds for 2010.
Audit Opinion
The auditors, Deloitte & Touche, have issued their opinion of the group's
financial statements for the year ended 31 December 2009. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is
available for inspection at the company's registered office. The condensed
financial statements have been derived from the group financial statements and
are consistent in all material respects with the group financial statements.
For and on behalf of the board
I A J Clark A K Olivier
Chairman Chief Executive Officer
Declaration of final dividends
Preference dividend
Notice is hereby given that a final dividend of 428 cents per cumulative,
non-redeemable, non-participating and non-convertible preference share (2008:
623 cents) has been declared, payable to preference shareholders in accordance
with the timetable below.
Ordinary dividend
Notice is hereby given that a final dividend of 30 cents per ordinary share
(2008: 68 cents) has been declared, payable to ordinary shareholders in
accordance with the timetable below.
Timetable
Last day to trade cum-dividend Friday, 5 March 2010
Shares commence trading ex-dividend Monday, 8 March 2010
Record date Friday, 12 March 2010
Dividend payment date Monday, 15 March 2010
No dematerialisation or rematerialisation of shares will be allowed for the
period from Monday, 8 March 2010 to Friday, 12 March 2010, both days inclusive.
The dividends are declared in the currency of the Republic of South Africa.
By order of the board
C A S Robertson
Secretary
18 February 2010
DIRECTORS
I A J Clark* (Chairman), A K Olivier (Group CEO), H Adams*, M R Faku*, W D
Geach*, I M Groves*, M J Hankinson*, J G Jones, T J T McClure, R A Norton*,
D A Polkinghorne, D A Rennie, A F Stewart, L R Stuart-Hill, S D M Zungu*
*Non-executive
Grindrod Limited
Incorporated in the Republic of South Africa
Registration number: 1966/009846/06
Share code: GND & GNDP
ISIN: ZAE000072328 & ZAE000071106
Registered office
Quadrant House
115 Margaret Mncadi Avenue
Durban
4001
PO Box 1
Durban
4000
Sponsor
Grindrod Bank Limited
First Floor, Building 3, North Wing, Commerce Square
39 Rivonia Road
Sandhurst
Sandton
Po Box 78011
Sandton
2146
Transfer secretaries
Computershare Investor Services (Pty) Limited
70 Marshall Street
Johannesburg
2001
PO Box 61051
Marshalltown
2107
For more information, please refer to our website at www.grindrod.co.za
Date: 18/02/2010 07:14:05 Produced by the JSE SENS Department.
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