- Eliminated exposure to the OEM business
- Repositioned the business as an automotive aftermarket business
- Operating profit from continuing operations R29,65-million – up from R17,93-million
- Profit after tax from continuing operations R19,92-million – up from R9,12-million
- Earnings per share from continuing operations 14,48 cents– up from 6,63 cents
- Resumption of dividends
For the year to December 2012, Control Instruments increased revenue to R566,37-million up from R535,80-million in 2011. Gross profit increased 13,24% to R171,35-million (2011 – R151,32-million) and net profit after tax increased from R9,12-million to R19,92-million.
Improved expense control resulted in a 65,37% increase in operating profit up from R17,93-million to R29,65-million. Earnings per share from continuing operations improved to 14,48 cents compared with 6,63 cents (restated) in the previous financial year. Headline earnings per share from continuing operations increased from 8,2 cents (restated) to 16,20 cents.
Control Instruments CEO Sean Rogers said the group has completed its repositioning and restructuring into a fully-focused automotive aftermarket business. “The satisfactory results produced by the continuing operations positively confirms the decision taken to focus on this sector, servicing the South African and sub-Saharan Africa markets,” he said.
Mr Rogers said the Group is now a focused automotive aftermarket business with a clear vision. “We will be the leading supplier of choice for branded automotive parts in sub-Saharan Africa.”
“Rigorous cost management, effective selling strategies, focused service delivery and the expansion into sub-Saharan Africa will remain core to all management activities going forward.”
“Whilst the automotive aftermarket remains highly competitive and consumer debt levels are increasing due to the pressures being placed on disposable incomes from higher food, fuel and electricity prices, we are confident that the marketing strategies we have deployed will create a receptive market for the three major brands; Gabriel, Echlin and Textar,” he said.
The Group eliminated its exposure to the original equipment manufacturing (“OEM”) businesses when, following the closure of the two OEM businesses based in the UK and the US towards the end of 2011, it disposed of Pi Shurlok, based in Pietermaritzburg, in November 2012.
The OEM business has accordingly been reflected as a discontinued operation in the results. The financial impact of exiting this business has been excluded from the financial highlights. The net loss relating to the write-off of the investment, Group commitments and trading losses for the year ended 31 December 2012 was R53,34-million.
NEW BRANDS AND PRODUCTS
As part of its strategy to secure new brands, CI-Automotive has concluded a strategic partnership with a German manufacturer TMD to market and distribute the Textar brand in sub-Saharan Africa. TMD is a global leader in the manufacture of brake friction products supplying an extensive range of aftermarket friction brands into the global independent aftermarket.
Textar offers a comprehensive range of brake pads, brake discs, callipers, brake shoes, brake linings and braking components for the automotive aftermarket. The Textar brand will be launched at the end of the first quarter of 2013.
CI-Automotive also introduced a range of lighting products under a newly secured North American brand, VisionX. The VisionX product range catering for off-highway equipment lighting and specialised lighting systems for the mining, military, construction and industrial markets will complement our other North American lighting brand, Trucklite. Investment in the expansion of the existing product ranges to meet the demands of the increasingly diverse vehicle parc in South Africa will continue.
The improvement in the operating margin to 5,23% in the 2012 financial year up from 3,35% in the previous year, while still not aligned with medium-term expectations, met the Group’s short-term target. There are a number of ongoing initiatives aimed at improving the operating margin.
The results produced by the continuing operations during 2012 were achieved on the back of an increased focus on the development of the Group’s brands.
Each brand is being activated through a bespoke marketing strategy developed to achieve either a “push” or a “pull” effect in the distribution channel, a key component of which is the focus on owning the relationship at each level in the channel. This investment resulted in marketing and selling costs increasing by R11,8-million to R66,95-million.
Particularly satisfying this year was the introduction of a number of new and innovative marketing concepts into the distribution channel. These included the introduction of a programme which allows the consumer to purchase a five year extended warranty for the Gabriel product range; the successful rollout of the Gabriel shock tester, designed and developed over the course of the past two years, for fitment centres.
This included the introduction of a mobile shock tester for use in promotional call-to-action campaigns and a successful micro-marketing programme which allowed the brand ambassadors to tailor campaigns to suit the requirements of the retailers and workshops.
Control Instruments Automotive, the Group’s automotive aftermarket business’ value proposition focuses on bringing to its customers a premium branded product, recognisable by the consumer, supported by the requisite level of technical service and back-up together with application and installation training expected from a premium branded. This differentiates and strengthens the position of the brands in an ever increasingly competitive market.
The threat of imports from globally competitive and low-cost manufacturing countries remains the driving force behind the initiatives on which we have embarked to improve our global competitiveness. The manufacturing operations are engaged in projects which are aimed at improving manufacturing efficiencies and reducing the material input costs over the next twenty four months.
A number of programmes are being undertaken to extract value from and improve on the efficiencies in the supply chain. Focus is being placed on internal logistics, on-shelf availability, improved in-fill rates, prompt and accurate order completion, supplier quality management and best cost pricing.
A final dividend of 1,5 cents per share for the full year ended 31 December 2012 has been declared.
Control Instruments Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1964/003987/06
Share code: CNL • ISIN: ZAE000001665
(“Control Instruments” or “the Group”)