Control Instruments (CI) has kept its full-year net profit flat despite an increased tax charge relating to a deferred tax asset in the previous year.
The group, a supplier of electronic hardware and software products to the international and local motor industry and commercial vehicle fleet management market, this morning reported a net profit of R18.12 million. This compares with a prior-year figure of R18.07 million.
"Because of the deferred tax asset last year, our biggest hurdle was going to be to keep the results stationary," says CEO and MD Richard Friedman. "We have managed to do that."
However, operating profit rose by 67.7% to R34.9 million from R20.81 million. Friedman says the improved operating margin was due to increased sales and a higher percentage of products in which the group holds intellectual property rights.
Revenue for the period rose from R355.97 million to R382.45 million. Cash generation also improved, with cash generated from operations rising from R28.28 million to R51.77 million. The group has declared a dividend of 5.5c a share.
The group is to roll-out a broad-based black economic empowerment (BEE) programme this year, which will focus on staff development and the promotion and support of small, medium and micro enterprises, but will not involve an equity deal.
"We don`t see any value in giving away 25% of shareholding but see BEE as essential to a medium- and long-term plan."
Friedman says 2005 will be a year of consolidation. "2005 is going to be quite a challenging year and we won`t see growth on the same level as in the past, but we will still show growth."
He adds that this is a period of change for the automotive industry as it phases out old models, and the company is also likely to see an increase in expenses on its own initiatives.
However, he still expects growth to outstrip inflation and operating costs on a significant level.
With new vehicle lines being introduced, CI expects healthy growth in 2006, which Friedman predicts will be a "blow-out" year. The original equipment manufacturing business is expected to double over the next two years, with most of the improvement in 2006.
The group plans to establish a UK-based sales and support service which will be closer to global decision-making centres of the current and targeted customer base. It is also looking at making acquisitions in line with its strategy to own selected real estate on vehicles.
Friedman says the group has worked out an arrangement with its bankers, in terms of which it can make acquisitions worth R100 million. It is cash generative and is in a good position to be able to service debt, he adds.
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