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.
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
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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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
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
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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
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.
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
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.
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.
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.
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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