Notwithstanding a 4% decline in group revenue, electronics group Grintek increased attributable earnings by 286% from R12,3-million to R47,5-million for the year to the end of June.
Headline earnings for the 12 months rose by 131% from R22,9-million to R52,9-million, resulting in a 122% improvement in headline earnings per share from 8,5 cents to 18,8 cents.
The group’s net cash position increased from R111-million in 2003 to R186-million at June 30 2004. Net finance costs decreased by R4-million from R15,1-million in 2003.
While gross margins remained unchanged at about 18,6% of turnover, operating profit as a percentage of turnover declined from 5,7% to 4,3% in 2004.
“This drop in operating margin may largely be attributed to the loss of export revenue caused by the strengthening of the rand, which on a year-on- year average appreciated 24% against the dollar,” Grintek said.
Export revenue comprised 39% of the group’s total revenue.
“The strengthening of the rand against the foreign currencies in which the company traded resulted in significant erosion of the revenue received on export contracts, the effect of which has been taken into account in calculating the operating profit of R60,8-million.
“These losses have been mitigated to a certain extent by foreign-exchange gains of R51,5-million resulting from the revaluation of foreign-exchange contracts and advance receipts denominated in foreign currencies in accordance with Generally Accepted Accounting Practice. These foreign-exchange contracts were taken out for the purpose of hedging the company’s foreign-exchange position.”
Revenue from sales in the defence division increased marginally to R722-million despite the fact that the rand had strengthened by an average of 24% from the previous year.
“As a consequence of exchange rate pressures, all business units initiated profit improvement plans during the year to restore the competitiveness of both products and services. These improved efficiencies contributed to a substantial increase in the division’s profits before tax from R19,5-million in 2003 to R60-million in 2004.”
A number of export contracts were successfully concluded during the period, Grintek said. Integrated Defensive Aids Suites, land-based radio monitoring systems, mobile direction-finding systems and radio communication systems were successfully delivered to clients in Asia, Africa and Europe.
Progress is being made into new markets including India and China.
Additional offices were opened during the year in the Middle East and North Africa to provide improved market access and customer service.
Local deliveries during the year included the first Integrated Defensive Aids Suites for the new Hawk aircraft acquired by the South African Air Force and Electronic Warfare and Communications Suites for the South African Navy’s new patrol corvettes and submarines.
“Although the demand for defence products is buoyant, procurement cycles locally and internationally remain long.”
Looking ahead, Grintek said that while the overall level of activity is expected to remain the same over the next financial year, the volatility of the rand remains a challenge.
“We are encouraged by the inroads being made into international markets and new prospects in Africa. Focus on organisational efficiencies and building higher levels of synergy with our international partners remain a priority,” it added. — I-Net Bridge