Grintek interims may be the last

By Iain Scott, ITWeb group consulting editor

Johannesburg, 03 Mar 2005

Grintek`s board is asking the company`s shareholders to vote in favour of a scheme that will see Swedish group Saab buy out minorities.

Grintek announced last week that Saab had stated its firm intention to make an offer to buy the company at 190c a share.

The Grintek board is recommending that shareholders vote in favour of the deal when they meet on 25 April.

Should the deal go ahead, Grintek`s interim results, published yesterday afternoon, will be its last as a listed company.

The results for the six months to December show a 7% increase in revenue to R656.43 million (2003: R615.77 million), with earnings of R57.29 million (R47.6 million) before interest, tax, depreciation and amortisation.

Pretax profit rose by 60% to R33.21 million (R20.74 million), while profit after tax was R20.16 million (R15.44 million).

CEO Shaun Liebenberg says the group used R36.9 million cash at operating level for the six months, as working capital increased by R75.1 million as a result of longer payment terms experience by the defence divisions for export clients.

He says the weakness of the dollar is beginning to affect competitiveness in the dollar markets of the Middle East and Asia, and Grintek is taking steps to reduce costs to remain competitive in those markets.

"An increased investment in research and development is necessary to sustain the group`s competitive edge. This will continue to put pressure on working capital management."

He adds that the continued strengthening of the rand will affect profitability in both the defence and technology divisions.

"While revenue is expected to increase in the second half of the year, growth in earnings is not anticipated for the year-end 30 June 2005, bearing in mid the foreign exchange gains made in the last six months of the previous year.

"The benefits of the changes in the telecoms regulatory environment will have a limited impact in the medium term."