The Control Instruments Group says the substantial write-offs in its OEM business pave the way for it to focus on its automotive aftermarket business, which is where the future of the Group lies.
While Control Instruments’ decision to exit its foreign OEM operation and downsize its local OEM operation has resulted in significant once-off costs, the decision has eliminated the cash drain from the OEM operations on the Group. It has also reduced the Group’s risk profile.
Control Instruments is now primarily focused on the automotive aftermarket. This means that management and cash resources can be focused on growing the aftermarket business off the back of the profitable and solid performance it has delivered over the past three years.
In addition, the smaller size of the Group has meant that the Group no longer requires a separate head office.
In the announcement, the Group advised shareholders that net write-off of the investment in its foreign OEM operation; the realisation of accumulated foreign currency gains and losses; and the trading losses in respect of foreign OEM operation, amount to approximately R80 million.
Exiting the foreign OEM operation and closing the head office have resulted in once-off costs of approximately R28 million in the results for the year ended 31 December 2011. The 2011 results have also been negatively affected by the restructuring of local OEM operation and trading losses in that business. Consequently the deferred tax asset in the local OEM operation of approximately R23 million has been de-recognised.