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ART
ART
ART - Argent Industrial Limited - Unaudited interim results for the six months
ended 30 september 2007
Argent Industrial Limited
Reg no 1993/002054/06
(Incorporated in the Republic of South Africa)
("Argent" or "The Group")
Share code : ART ISIN code : ZAE000019188
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007
Financial Highlights
REVENUE UP 39.5%
ATTRIBUTABLE EARNINGS UP 28.9%
ATTRIBUTABLE EARNINGS per share UP 20.2%
HEADLINE EARNINGS UP 23.2%
HEADLINE EARNINGS per share UP 14.8%
GEARING 22.6%
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
INCOME STATEMENT six months six months year ended
for the six months ended 30 30 Sept 2007 30 Sept 2006 31 Mar 2007
September 2007
R 000
Revenue 877 511 629 218 1 296 312
Operating profits before 145 066 97 887 243 386
financing costs
Financing costs 23 110 10 822 25 929
Profit before taxation 121 956 87 065 217 457
Taxation 36 411 21 601 60 236
Profit after taxation 85 545 65 464 157 221
Minority interest 1 129
Earnings attributable to ordinary 84 416 65 464 157 221
shareholders
Attributable earnings per share 100.0 83.2 199.4
(cents)
Headline earnings per share 95.3 83.0 174.0
(cents)
Dividends per share (cents) 16.0 14.0 29.0
Supplementary information
Shares in issue (000)
- at end of period 93 965 80 462 80 462
- weighted average 84 424 78 664 78 844
Interest received 15 656 6 546 15 150
(R 000)
Cost of sales (R 000) 510 647 367 185 718 270
Depreciation (R 000) 12 508 8 962 18 835
Net profit on foreign exchange 885 4 651 4 383
transactions
(R 000)
Calculation of headline earnings
(R 000)
Earnings attributable to ordinary 84 416 65 464 157 221
shareholders
Profit on disposal of property, (3 949) (181) (1 500)
plant and equipment
Profit on disposal of minority (18
share in subsidiary 950)
Loss on disposal of property, 16 28 396
plant and equipment
Headline earnings attributable to 80 483 65 311 137 167
ordinary shareholders
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
BALANCE SHEET at at at
for the six months ended 30 30 Sept 30 Sept 31 Mar 2007
September 2007 2007 2006
R 000
ASSETS
Non-current assets
Property, plant and equipment 507 966 386 793 449 175
Intangibles 207 408 113 863 113 785
Long term loan 28 080 28 623
743 454 500 656 591 583
Current assets
Inventories 438 873 243 273 332 618
Trade and other receivables 311 997 274 149 287 739
Bank balance and cash 13 969 25 789 14 272
764 839 543 211 634 629
TOTAL ASSETS 1 508 293 1 043 867 1 226 212
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 391 799 231 083 235 561
Reserves 69 293 71 799 70 379
Retained earnings 493 416 342 100 422 506
Ordinary shareholders` funds 954 508 644 982 728 446
Minority interest 10 802 9 673
Total shareholders` funds 965 309 644 982 738 119
Non-current liabilities
Interest-bearing borrowings 138 266 97 075 111 442
Deferred tax 46 048 47 039 44 730
184 314 144 114 156 172
Current liabilities
Trade and other payables 243 197 199 168 231 088
Taxation 35 242 13 088 11 972
Current portion of interest- 80 231 42 515 88 861
bearing borrowings
358 670 254 771 331 921
TOTAL EQUITY AND LIABILITIES 1 508 293 1 043 867 1 226 212
Net asset value per share (cents) 1,015.8 801.6 905.3
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
CASH FLOW STATEMENT six months six months year ended
for the six months ended 30 30 Sept 30 Sept 31 Mar 2007
September 2007 2007 2006
R 000
Cash generated from operations 77 691 40 331 96 224
Interest paid (23 110) (10 822) (25 929)
Interest received 15 656 6 546 15 150
Dividends paid (13 506) (10 435) (21 786)
Taxation paid (13 874) (11 308) (52 525)
Cash flows from operating 42 857 14 312 11 134
activities
Cash flows from investing (210 771) (37 695) (111 225)
activities
Cash flows from financing 167 611 4 636 69 827
activities
Net decrease in cash and cash (303) (18 747) (30 264)
equivalents
Cash and cash equivalents at 14 272 44 536 44 536
beginning of period
Cash and cash equivalents at end 13 969 25 789 14 272
of period
STATEMENT Share Share Treasury Reval- Reserve Reserve Retained
OF CHANGES uation on on
IN EQUITY
for the six capital premium shares reserve Sub- Trans- earnings
months sidiary lation
ended
30 Acqui- of
September sition foreign
2007
Ope-
ration
R 000
Balance at 4 023 271 622 (44 562) 49 650 23 209 (1 060) 342 100
30
September
2006
Net - - 4 478 - - - -
treasury
movement
Foreign - - - - - 154 -
currency
translation
adjustment
Revaluation - - - (1 574) - - -
of
properties
Net profit - - - - - - 91 757
for the
period
Dividends - - - - - - (12 070)
Less - - - - - - 719
treasury
shares
Balance at 4 023 271 622 (40 084) 48 076 23 209 (906) 422 506
31 March
2007
Shares 675 228 488 - - - - -
issued
Net - - (72 925) - - - -
treasury
movement
Foreign - - - - - 213 -
currency
translation
adjustment
Reversal of - - - (1 299) - - -
revaluation
of
properties
Net profit - - - - - - 84 416
for the
period
Dividends - - - - - - (14 954)
Less - - - - - - 1 448
treasury
shares
Balance at 4 698 500 110 (113 009) 46 777 23 209 (693) 493 416
30
September
2007
SEGMENT REPORT Revenue Results Revenue Results
for the six months unaudited unaudited unaudited unaudited
ended 30 September
2007
Business Segments 6 months 6 months 6 months 6 months ended
ended ended ended
30 Sept 30 Sept 30 Sept 30 Sept 2006
2007 2007 2006
R 000
Steel and steel 645 825 87 749 453 291 55 811
related products
Automotive products 147 410 20 222 130 888 21 604
Non steel related 83 658 9 867 45 039 9 566
products
Properties 618 4 118 84
Total 877 511 121 956 629 218 87 065
COMMENTARY
Chief executive officer`s review
On behalf of the board of directors of Argent Industrial Limited, the
unaudited results for the six months ended 30 September 2007 are hereby
presented.
Salient features
* Revenue increased by 39.5% to R877.5 million (2006 - R629.2 million)
* Attributable earnings increased by 28.9% to R84.4 million (2006 - R65.5
million)
* Attributable earnings per share increased by 20.2% to 100.0 cents per
share (2006 - 83.2 cents per share)
* Headline earnings increased by 23.2% to R80.5 million (2006 - R65.3
million)
* Headline earnings per share increased by 14.8% to 95.3 cents per share
(2006 - 83.0 cents per share)
* Group gearing increased to 22.6% (2006 - 21.6%)
The overall performance of the Group for the six months ended 30 September
2007 has been pleasing especially in light of the fact that the Group was
directly affected by the national steel, engineering and automotive industrial
action which occurred in July and September, as well as indirectly by the
public sector strike.
Divisional performance
STEEL AND STEEL RELATED PRODUCTS
The national Phoenix Steel operations experienced a relatively buoyant start
to the financial year, despite the aforementioned industrial action and the
existence of variable steel prices. Phoenix nevertheless managed to grow its
overall market share and has embarked on a number of capital projects which,
amongst others, include the following:
* Phoenix Steel Gauteng has completed the upgrade of one of its two older
tube mills and is fifty percent complete with the upgrade of another.
Apart from this, only the commissioning of the new cut-to-length/blanking
line is outstanding. This will be fully commissioned in December 2007
during the shutdown period.
* Phoenix Steel East London`s warehouse size has been substantially
increased which has facilitated a more diverse stock holding. This has in
turn enabled the company to enter markets previously unavailable to them.
* The investment in new premises for Phoenix Steel Natal in the previous
financial year has paid off and the company has grown from strength to
strength. Phoenix Steel Natal will become the logistics base for the
Group`s future stainless steel and mild steel coil imports. To this end,
the company`s new cut-to-length/blanking line (to be commissioned in
March 2008) will convert imported coil into sheets and blanks, which will
then be consigned to the rest of the Group for either resale or the
manufacture of end products.
The acquisition of Gammid Trading represented a significant milestone for
Argent as the same proven philosophies used by the Group in its mild steel
operations can now be replicated in the stainless steel and aluminium
industry. Gammid is situated in Gauteng, Durban, George and Cape Town. The
company has recently entered the Port Elizabeth market and both stainless
steel and aluminium are sold by Phoenix Steel Port Elizabeth. The next area to
be entered will be Richards Bay, where the facilities of the existing Phoenix
Steel Richards Bay operation will be used.
Jetmaster and Xpanda Security have both experienced very good starts to the
financial year. Although interest rate hikes and the introduction of the
National Credit Act have definitely led to a slowdown in consumer spending
over the past 6 months, both companies have experienced significant growth
within the commercial sectors. Jetmaster is becoming increasingly successful
in securing contracts for developments while Xpanda is experiencing a huge
upswing in retail and made-to-order exports. Additional capacity is being
created at the Jetmaster factory through a 1,000 square metre extension which
will be completed by the end of December 2007. These changes will contribute
to greater efficiency and improved throughput which will alleviate the current
production pressures. Jetmaster has recently launched a range of affordable
slow combustion stoves and fireplaces which will offer a greater product range
and lead to increased market share. These new units will be released into the
market in early 2008.
Koch`s Cut and Supply has experienced an extraordinary start to the financial
year with turnover exceeding all expectations. Due to the ongoing expansion of
industrial operations such as sugar mills both within South Africa and in
Africa, the company has benefited directly in terms of the business
opportunities presented. The increased development and construction spending
leading up to 2010 has also seen a lot of business coming the way of Koch`s
Cut and Supply.
Construction of the new 13,400 square metre premises for Toolroom Services is
progressing smoothly, with the company set to move in June 2008. The company
continues to grow and remains the leading manufacturer of steel furniture,
steel kitchen units and allied products in South Africa. The purchase of a
number of new manufacturing machines as well as the upgrading of its vehicle
fleet has assisted the company to achieve and surpass its targets.
Atomic Office Equipment, a steel office furniture manufacturer situated in
Cape Town, was acquired by the Group from Bidvest in June 2007. Investment in
new and technologically advanced machinery, as well as the acquisition of 3
new commercial vehicles, has assisted the company in increasing its turnover
by approximately thirty five percent year on year.
With the mining industry gaining momentum and commodity prices continuing to
climb rapidly, Hendor Mining Supplies has experienced a fantastic start to the
financial year, with market share steadily increasing and monthly turnover
records having been broken twice. The order book is currently at an all time
high and, due to Hendor utilising the old B.M.I. building in Benoni, capacity
is available for further growth and expansion going forward. The company is
looking forward to another strong six months.
AUTOMOTIVE PRODUCTS
Giflo Engineering, Sentech Industries and Excalibur Vehicle Accessories all
experienced a challenging start to the financial year in terms of maintaining
production levels in the face of nationwide motor industry industrial action.
However, a number of plans were timeously put into place to partially
alleviate the strain on production while at the same time continuing to
satisfy customer requirements. August 2007 saw Excalibur move to its new
premises which boasts a factory area of 11,000 square metres and an additional
platform area of 35,000 square metres for future factory extension.
Excalibur`s new laser machine, wire-forming machine and jig welder have been
commissioned which will increase Excalibur`s production capacity and scope.
All Lite Steel Products, a company which specialises in anti-corrosion
processes as well as powder coating applications, was acquired by Argent in
June 2007. The acquisition was positively received and supported by the
company`s existing clients, workforce and trade unions. All Lite has benefited
from business sourced through the Group`s other companies and as a result
achieved an 18 year record high turnover in October 2007. By the end of March
2008, business from the companies within Argent will make up the majority of
All Lite`s turnover.
NON STEEL RELATED PRODUCTS
New Joules Engineering North America had an excellent first six months and has
an order book in excess of US$ 4 million. The company is now the market leader
in the United States of America and has expanded its services to include the
design of new rail yards as well as the installation and commissioning of the
automated New Joules Retarder system.
Megamix and Villiersdorp Quarries have not performed as expected, due mainly
to the new batch plant not coming on line as previously anticipated. The
location of the new batch plant was opposed by the Cape Town City Council and
as a result was moved to an existing Megamix facility, situated adjacent to
Cape Town International Airport. With a satisfactory value of orders on hand,
as well as a large number of tenders submitted, performance will improve
during the balance of the financial year.
Prior to the acquisition of Allan Maskew by Argent, the company had 19
compression moulding machines and 3 state-of-the-art injection machines. Since
the acquisition, a further 5 injection machines have been purchased. Three of
these are in operation and the other two are due to arrive in November 2007.
These injection machines have enabled the company to increase production
capacity, reduce lead times and reduce scrap levels which has resulted in
increased margins. One of the new machines will be the biggest in the country
and will allow the company to manufacture the side step rubbers for the new
Defender 110 for Land Rover in the U.K. as well as other larger mass items.
Group synergies have also improved Allan Maskew`s margins via improved steel
purchasing and logistics. The loss of production in September, due to
industrial action, was regained in October.
Prospects
While the Group is somewhat concerned about the short term impact of the
latest inflation figures, the recent interest rate hikes and the introduction
of the National Credit Act on consumer spending, the long term outlook is
still very positive as a whole. The level of government infrastructure
spending, the level of construction activity in the run up to 2010, the vastly
improved prices of precious minerals, as well as the emergence of a huge
number of new middle class citizens in the country, can only lead to a mass of
new opportunities for a group such as Argent. The Group is especially excited
about the level of infrastructure and logistics capabilities that it now has
in place throughout
South Africa. This makes the exploiting of opportunities far easier and cost-
effective.
In particular, substantial growth and improvements in results can be expected
from operations such as Hendor Mining, Phoenix Steel East London and Natal,
Sentech Industries, Excalibur, Gammid Trading and New Joules North America.
Argent will continue to deliver strong growth (both organic and via
acquisitions) and impressive shareholder value. The Group`s medium term goal
of R2 billion in turnover for the 2009 financial year is well within reach.
Dividend
A final dividend of 16 cents per share in respect of the year ended 31 March
2007 was paid during the period.
An interim dividend of 17 cents per share has been declared, subsequent to 30
September 2007, payable on Monday 21 January 2008 to shareholders recorded in
the register at close of business on Friday 18 January 2008, being the record
date in order to participate in such dividend. The last day to trade cum-div
is Friday 11 January 2008. The share will trade ex-div on Monday
14 January 2008.
Share certificates may not be dematerialised / rematerialised between Monday
14 January 2008 and Friday 18 January 2008, both days inclusive.
Accounting policies and presentation
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), IAS 34 (Interim Financial Reporting) and
in compliance with the Companies Act of South Africa of 1973 and the Listing
Requirements of the JSE Limited. The accounting policies are consistent with
those of the previous financial period.
On behalf of the board
T.R. Hendry CA (SA) Maraisburg, Roodepoort
Chief Executive Officer 15 November 2007
Transfer secretaries:
Link Market Services South Africa
5th floor
11 Diagonal Street
Johannesburg
2001
(P O Box 4844, Johannesburg 2000)
Registered office:
1316 Clubhouse Street
Maraisburg
Roodepoort
1724
Tel +27 11 661 5900
Auditors:
Siyabala Inc.
Sponsor:
Arcay Moela Sponsors (Pty) Ltd
Directors: MP Allen, MJ Antonic, Ms SJ Cox (Financial Director), PA Day
(Non Executive), TR Hendry (Chief Executive Officer), PH Lawson, AF Litschka,
K Mapasa (Non Executive), T Scharrighuisen (Non Executive Chairman), D Smith,
GK Youngman (Alternate).
Date: 14/11/2007 11:03:51 Produced by the JSE SENS Department.
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