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  Provisional Results 2001     E-mail

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COMMENTS ON RESULTS

Trading | Finance | Tax Queries | Dividends | Mobile | Directorate

Holders of securities in Trencor and Mobile are reminded that, following a change in the financial year-end from 30 June to 31 December, the current reporting period is for the eighteen months ended 31 December 2001. The previous financial period was for the 12 months to 30 June 2000.

TRENCOR

Our businesses generally experienced difficult trading conditions. However, due to the effect of the exceptionally weak rand/US dollar exchange rate at 31 December 2001, income before tax and abnormal items for the eighteen months ended on that date was R1 075 million (twelve months to 30 June 2000: loss R66 million) and headline earnings were R721 million (undiluted: 471,9 cents per share) compared to R252 million for the twelve months to 30 June 2000 (undiluted: 165 cents per share). Cognisance must be taken of the effect of the decline in the exchange rate, as discussed below. It is important to note that, at the present time, every one cent change in the R/$ exchange rate translates into an approximate one cent change in earnings per share.

The period under review was characterised by a significant decline in the value of the rand against the US dollar. In accordance with the requirements of Generally Accepted Accounting Practice ("GAAP"), all monetary assets and liabilities have been translated at the spot rate of exchange prevailing at the end of the financial period: US$1=R12,06 at 31 December 2001 (30 June 2000: US$1=R6,78). This represented a 44% decline in the value of the rand over the period, with much of that occurring in November and December 2001. This gave rise to a foreign exchange gain on the revaluation of the net present value of the long-term receivables amounting to R2,1 billion. In compliance with GAAP, this gain has been included in income before tax.

The container leasing industry is currently experiencing very difficult trading conditions. It was therefore deemed prudent to take into account the effect that this may have on the collectibility and timing of receipt of the long-term receivables. The aggregate increase in the net present value of the provision, net of amounts attributable to third parties, was R1,1 billion of which approximately R200 million is attributable to the increase in the dollar provision and R900 million to the decline in the exchange rate.

The portion of the long-term receivables which is attributable to our export partners is denominated in rand and payable to them as and when such receivables are collected. The amounts so owing are stated at their net present value. During the period under review, the rate at which these rand amounts were discounted was reduced from 15% pa to 12% pa, resulting in an additional charge against current income before tax amounting to R88 million.

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TRADING

Textainer traded well in very difficult conditions and contributed R166 million to headline earnings.

Utilisation of Textainer's fleet of dry freight marine containers remains low, albeit stable, at about 71% and currently shows little sign of improvement. During 2001, Textainer completed three successful financings totalling US$595 million. These funds will be used to retire existing debt and finance further additions to its container fleet. By 31 December 2001, Textainer's fleet under management amounted to 940 000 TEU (twenty foot equivalent units) of which 45% were leased out under long-term leases. 68% of Textainer's owned fleet of 403 000 TEU are in long-term leases, which provide a buffer against short-term fluctuations in utilisation.

The stainless steel tank container factory at Parow, near Cape Town, continues to produce at very low volumes, due to the continuing weak worldwide demand for these units. This facility traded below break-even during the period under review.

The trailer manufacturing division of Henred-Fruehauf Trailers (Pty) Ltd was merged with the businesses of SA Truck Bodies Group, effective 1 December 2001. Trencor holds a 40% interest in the merged operation.

TrenStar Inc, our US based 61% subsidiary, created during August 2001 through the merger of the intellectual property and fledgling offshore subsidiaries of Trencor Solutions (South Africa) with the MicroStar Group in Colorado, has been firmly established with the appointment of a US chief executive and other senior executives. During December 2001, TrenStar acquired 100% of KTP Ltd in the UK. TrenStar Group (including KTP), now active in the USA, UK and Australia, is engaged in providing asset-based financing, management services, information technology and technology integration for the returnable assets of the supply chain (such as beer kegs, intermediate bulk containers and other portable assets primarily for the beverage, food, chemical and automotive industries).

Trencor Solutions in South Africa, after focusing on expanding its activities internationally (which led to the creation of TrenStar), turned its attention back to its domestic operations where it is enhancing its position in South Africa as a leader in the provision of packaging solutions and services to various industries. Its activities are similar to those of TrenStar described above.

During this period, Trencor Solutions and TrenStar incurred losses due to the start up stage of their businesses, but are expected to start contributing to group earnings this year.

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FINANCE


As announced on 7 December 2001, Trencor effectively refinanced its South African bank facilities on more favourable terms than it previously enjoyed, by providing the SA banks with security in the form of a letter of credit issued by two foreign banks. Further details will be provided in the annual report. The one-time costs incurred in procuring the letter of credit amounted to R30 million and has been charged against current income.

The group's gearing has increased by 4% since June 2000; the ratio of consolidated interest-bearing debt to permanent capital, being the sum of total shareholders' funds and the convertible debentures, increased from 169% to 173% at 31 December 2001. The increase is largely as a result of the decline in the exchange rate and the effect that this has on the translation of Textainer's debt into rands. With Textainer notionally accounted for on the equity method, this ratio declined from 64% in June 2000 to 40% at 31 December 2001. Textainer's liabilities are secured by its own balance sheet and without any recourse to Trencor.

TAX QUERIES

The enquiry by the South African Revenue Service ("SARS") into the tax treatment of the group's export partners' participation in the export of cargo containers (in respect of transactions entered into in prior years) continues. It is not possible to anticipate when it will be concluded. We remain confident that the supportive legal advice we have received will prevail should SARS seek to challenge the tax treatment.

As previously reported, a successful challenge by SARS, which we believe is unlikely, may result in the acceleration of the payment of a portion of the amounts attributable to third parties (i.e. our export partners) which are carried at their net present values, and which would otherwise be paid over periods of up to fourteen years.


DIVIDEND

The board of directors has decided not to declare a dividend at this time because a large proportion of earnings (relating to the revaluation of the long-term receivables which made an exceptionally large contribution to income) will only be realised over a period of some years. Furthermore, in the present difficult times being experienced in the container industry, we believe it is in the group's interest to conserve cash and reduce borrowings.


MOBILE

Following the merger of Henred-Fruehauf's trailer division with the businesses of SA Truck Bodies Group, Mobile Acceptances and Transport Acceptances ceased writing new business and the collection of the debtors is now being carried out by Wesbank.

As Mobile's net income is almost entirely dependent upon the receipt of dividends from Trencor, the non-declaration of a dividend by Trencor at this stage has, in turn, caused the board of Mobile to not declare a dividend.


DIRECTORATE

Mr Gavan Ryan, who joined the boards of Trencor and Mobile on 8 November 1996, after Coronation Holdings Limited acquired a strategic shareholding in Mobile (which was subsequently distributed in specie to Coronation shareholders), resigned from those boards effective 6 March 2002.

ON BEHALF OF THE BOARDS

NI JOWELL CHAIRMAN TRENCOR LIMITED
C JOWELL CHAIRMAN MOBILE INDUSTRIES LIMITED

6 MARCH 2002

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