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ASO
ASO
ASO - Austro - Unaudited Consolidated Interim Financial Results For The Six
Months Ended 29 February 2008
Austro Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
Share code: ASO
ISIN: ZAE000090882
("Austro" or "the Group")
UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 29
FEBRUARY 2008
HIGHLIGHTS
- Revenue increased 189% to R273,9 million
- Net profit after tax increased by 257,2% to R46,7 million
- Headline earnings per share increased to 10,9 cents which
exceeded the prior year comparative period of 3,9 cents by
181,2%
- Acquisition for the period: Neptune Plant Hire (Proprietary) Limited
INCOME STATEMENT
Unaudited Reviewed Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 2007
R R R
Revenue 273 943 739 94 796 755 279 015 132
Cost of sales (158 004 054) (53 786 165) (162 705 535)
Gross profit 115 939 685 41 010 590 116 309 597
Other operating income 2 788 173 (7 306 733) 9 364 728
Operating expenses (55 185 695) (15 755 400) (52 404 991)
Profit from operations 63 542 163 17 948 457 73 269 334
Interest received 2 866 066 484 053 2 354 626
Interest paid (16 967) - (92 000)
Profit before taxation 66 391 262 18 432 510 75 531 960
Taxation expense 19 645 018 5 345 428 21 593 816
Net profit for the 46 746 244 13 087 082 53 938 144
period
Dividends declared - - -
Number of shares in 425 927 491 328 261 400 377 500 610
issue
Weighted average 425 927 491 309 928 067 335 074 120
number of shares
Diluted weighted 429 631 194 - -
average number of
shares
Earnings per share 11,0 4,2 16,1
(cents)
Diluted earnings per 10,9 - -
share (cents)
Headline earnings per 10,9 3,9 14,2
share (cents)
Diluted headline 10,8 - -
earnings per share
(cents)
Reconciliation of
earnings to headline
earnings:
Net profit for the 46 746 244 13 087 082 53 938 144
period
Net profit on disposal (322 119) (1 075 323) (6 403 511)
of assets
Headline earnings 46 424 126 12 011 759 47 534 633
BALANCE SHEET
Unaudited Reviewed Audited
as at as at as at
29 February 28 February 31 August
2008 2007 2007
R R R
Assets
Non-current assets 237 539 314 24 389 498 219 843 385
Property, plant and 34 954 405 13 489 814 18 426 324
equipment
Goodwill and other 201 889 550 10 899 864 201 417 061
intangibles
Deferred taxation 695 359 - -
Current assets 384 089 985 90 411 088 428 694 874
Inventories 211 431 605 54 000 399 159 983 771
Trade and other 79 139 561 13 255 879 59 949 588
receivables
Cash resources 93 518 819 23 154 810 208 761 515
Total assets 621 629 298 114 800 586 648 538 259
Equity and liabilities
Capital and reserves 431 591 660 53 766 965 387 799 823
Share capital and share 308 006 956 20 958 651 174 722 699
premium
Shares to be issued 3 179 084 - 139 417 748
Accumulated profits 120 405 620 32 808 314 73 659 376
Non-current liabilities 1 925 171 423 351 159 788
Deferred taxation 1 925 171 423 351 159 788
Current liabilities 188 112 468 60 610 270 260 578 648
Trade and other payables 127 940 160 40 873 607 104 543 020
Amount owing for purchase 13 675 976 27 850 127 111 858
of subsidiaries
Shareholders for - - -
dividends
Taxation 46 496 332 19 708 813 28 923 770
Total equity and 621 629 298 114 800 586 648 538 259
liabilities
SUMMARISED CASH FLOW STATEMENT
Unaudited Reviewed Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 2007
R R R
Cash flows from 12 923 621 (11 096 128) (4 863 007)
operating activities
Cash generated by 12 328 048 10 655 743 29 830 331
operations
Interest received 2 866 066 484 053 2 354 626
Interest paid (16 967) - (92 000)
Dividends received - - 1 189
Dividends paid - (22 000 000) (22 000 000)
Taxation paid (2 253 526) (235 924) (14 957 153)
Cash flows from (18 454 494) (169 436) 26 835 159
investing activities
Cash flows from (109 711 20 685 760 173 054 749
financing activities 823)
Net increase in cash (115 242 9 420 196 195 026 901
resources 696)
Cash resources at 208 761 515 13 734 614 13 734 614
beginning of period
Cash resources at end 93 518 819 23 154 810 208 761 515
of period
SUMMARISED STATEMENT OF CHANGES IN EQUITY
Unaudited Reviewed Audited
six months six months year
ended ended ended
29 February 28 February 31 August
2008 2007 2007
R R R
Share capital and share 311 186 040 20 958 651 314 140 447
premium
Balance at beginning of 314 140 447 10 10
period
Issued during period 133 284 257 24 953 024 174 722 689
Share issue expenses - (3 994 383) -
written-off
Movement in shares to be (139 417 - -
issued reserve 748)
Shares to be issued 3 179 084 - 139 417 748
Accumulated profits 120 405 620 32 808 314 73 659 376
Balance at beginning of 73 659 376 19 721 232 19 721 232
period
Net profit for the period 46 746 244 13 087 082 53 938 144
Dividends declared - - -
Total capital and 431 591 660 53 766 965 387 799 823
reserves
SEGMENTAL ANALYSIS
Revenue (external)
29 February 28 February
2008 2007
Woodworking 101 465 261 94 796 755
Generators 172 478 478 -
Total 273 943 739 94 796 755
Profit before taxation
29 February 28 February
2008 2007
Woodworking 21 009 691 18 432 510
Generators 45 381 571 -
Total 66 391 262 18 432 510
Net asset value
29 February 28 February
2008 2007
Woodworking 388 236 022 53 766 965
Generators 43 355 637 -
Total 431 591 660 53 766 965
COMMENTARY
OPERATIONAL UPDATE
Since listing just over a year ago the Austro Group has made significant
progress towards its goal of becoming the foremost player in strategic,
complementary niche markets in the industrial supplies and construction-related
sectors. This set of results is evidence of this progress.
The Austro Group has two distinct lines of business, namely the distribution of
woodworking machinery and tooling and the production, supply and rental of
generators as well as related components, such as industrial engines,
alternators and switch-gear to the generator manufacture and supply industry.
The current power supply crisis has provided unprecedented opportunities for
the generator side of the business. Both New Way Motor & Diesel (Pty) Limited
("New Way") and Neptune Plant Hire (Pty) Limited ("Neptune") have thrived under
these market conditions. New Way in particular has performed exceptionally well
as it has benefited not only from direct sales of generators but also by
embedding itself as a key supplier of industrial engines and other components to
the rapidly expanding alternative power supply industry. New Way provides heavy
machinery for the commercial, industrial, mining and public sectors. Its primary
focus being the sale of industrial engines as well as the manufacturing,
servicing and sale of generators. New Way has the sole distribution rights for
John Deere Industrial and Marine Diesel Engines, Funk Axles and Transmissions in
sub-Saharan Africa, other agencies include, amongst others, Mitsubishi Diesel,
Doosan Infacore (formerly Daewoo Industrial) and Marathon Electric.
During the period Austro acquired Neptune. The effective date of the acquisition
was 1 September 2007 and thus the results of this wholly owned subsidiary have
been included for the entire six month period. Neptune predominantly hires out
large industrial generators to the commercial and industrial sectors, as well as
to the private sector, primarily in the Western Cape, but also worldwide through
the marine business. The bullish demand for short-term power supply has provided
a great launch-pad for Neptune to expand its business nationally, and it has
recently started trading from a newly founded branch in Johannesburg. Neptune`s
rental business, which is run extremely efficiently, has strong margins and is
very profitable.
The woodworking side of the business consists of Austro Woodworking Machines &
Tools ("Austro Woodworking"), Gearing Moss Supplies (Pty) Limited ("Gearing
Moss") and 2nd Cut Pre-Owned Woodworking Equipment (Pty) Limited ("2nd Cut").
Established in the 1980s, Austro Woodworking is a distributor of premium quality
woodworking equipment, having a broad customer base ranging from the DIY
hobbyist to large scale manufacturers. In addition Austro Woodworking
manufactures, sells and maintains tooling, such as saw blades and cutters for
this and other woodworking equipment. The Austro Woodworking portfolio includes
leading European equipment manufacturers such as Biesse, Felder, Weinig,
Striebig, Fravol, Casolin and Boere, to name only a few.
Gearing Moss supplies mobile sawmills and small log-processing equipment, as
well as related machinery and tooling, to the sawmilling and industrial
woodworking industries. Gearing Moss has agencies for a number of leading
brands, including Wood-Mizer which is the world leader in portable sawmilling
machinery, as well as its own range of sawmilling equipment.
2nd Cut is a newly established business that provides a trading platform for
second hand equipment, enabling Austro to offer customers trade-in options for
new machinery, as well as opening the door to a very large second hand market.
The Johannesburg branch is up and running, with Durban soon to follow. 2nd Cut
starting trading in March 2008 and has not been included in these interim
results.
The directors are delighted to present the unaudited financial results of the
company for the six months ended February 2008 ("the current period").
FINANCIAL RESULTS
Austro has managed to maintain a high level of revenue and profit generation,
despite the challenging economic conditions underpinned by rising interest
rates, power shortages and exchange rate volatility, and there has been
significant organic growth within Austro`s subsidiaries. The acquisitions made
during 2007 have for the first time been included in Austro`s results for the
full period, and the growth over the period has been exceptional, exceeding
expectations. The key to further growth will be to unlock current capacity
constraints and to further develop the synergies within the Group. Since listing
on the JSE in February 2007 management has adapted well to the new corporate
reporting environment and has tackled the challenges associated with new
acquisitions in a controlled and responsible manner.
The 189,0% growth in revenue from R94,8 million to R273,9 million was driven by
unparalleled demand in the alternative power supply industry as well as constant
demand in the construction and allied sectors.
Net profit after taxation for the current period increased by 257,2%, from R13,1
million to R46,7 million. New Way, the most significant contributor, has
continued to embed itself as a key link in the generator, diesel engine and
related components supply chain.
Earnings per share of 11,0 cents exceeded the prior year comparative period of
4,2 cents by 159,9%, while headline earnings per share of 10,9 cents exceeded
prior year comparative period of 3,9 cents by 181,2%.
High stock levels during the period have provided Austro with a competitive
advantage, as it has been able to supply its customers without having to pay the
premium that is currently demanded due to limited availability of generators.
Furthermore, the Group has benefited from competitive pricing from overseas
suppliers on favourable terms and exchange rates.
The Group continues to generate strong cash flows, and even after paying for all
its acquisitions it is still very cash positive with no long-term debt.
Share capital and share premium increased as a result of share issues totalling
48 426 881 shares as part of the purchase price for the acquisitions of New Way,
Gearing Moss and Neptune.
ACQUISITION ACTIVITY
In order for the Austro Group to meet its objective, of becoming the foremost
player in the complementary industrial supplies and construction-related
sectors, subsequent to the Interim period the Group acquired two relatively
small businesses. The major purpose of these acquisitions is to enhance the
generator and industrial engine side of the business, by providing a platform
for increased growth in the KwaZulu Natal region, as well as freeing up any
potential bottlenecks in production by acquiring a key supplier of sheet metal
and other components.
Quinlec Electrical manufacture, sell and lease generators in the KwaZulu Natal
region. It has been a customer of New Way for a number of years, buying almost
exclusively from New Way. This acquisition will present the Group with vital
skills and expertise in KwaZulu Natal, which will expedite the expansion of
Neptune, the Group`s generator rental business, as well as New Way`s coverage of
the region. Although at this stage the business is not a significant contributor
of revenue, it is very profitable and ensures broader national coverage.
Quad Technical Services currently supplies sheet metal and other components to
New Way. These are used in the manufacture of the generators, primarily the
diesel tanks, electrical cabinets and soundproof housings. As the name Quad
suggests, the company is made up of four divisions, all of which have strong
synergies with the existing generator and related supplies business. The
divisions are metal sheet fabrication, generator and power related sales and
services, design and manufacture of electrical cabinets, and the wholesale of
electrical components. The Group expects to grow Quad into a significant
contributor to Group revenue and profitability.
PROSPECTS
The environment in which the Austro Group operates remains extremely favourable.
Regular power outages and the demand for alternative and standby power continue
to drive the generator business, with daily increases in sales and rapidly
growing order books throughout the divisions. Uncertainty relating to the future
supply of power has resulted in most of corporate South Africa taking the
necessary precautions of investing in standby power. Scope of supply remains
broad based, from up-market residential to some of the largest industrial
groups. Although the largest market remains the industrial and corporate
sectors, standby power for many establishments, including hospitals, hotels,
shopping centres, airports, manufacturers, food processing plants, IT providers
and banks, to mention just a few, has become non-negotiable.
New Way has consistently exceeded expectations, and has increased its capacity,
in both manufacturing and engine stock, in order to supply current demand.
Through dedication and personal sacrifice, New Way`s management team has
successfully exceeded all targets and is well equipped to ensure continued
growth. At a recent event held at John Deere`s head quarters in France, the
international manufacturer recognised New Way`s results by presenting them with
an award, John Deere`s commemorative two millionth production diesel engine. New
Way is one of the top five independent purchasers of John Deere engines
worldwide.
Strong demand for the rental of standby power sets continues, with Neptune
having to increase fleet size on a regular basis and doubling it over the last
two months. Production facilities, general industry, public and private events,
and the commercial sector continue driving the growth of the generator rental
business. Being able to offer reliable alternative power solutions at short
notice has been a key factor in Neptune`s success. Expectations and prospects
for the Johannesburg branch look promising.
Related services, such as maintenance and servicing, for generator sets and
related equipment will become an even greater contributor to revenue in the
future, as the demand for these services grows with regular use and greater
supply.
Due to the current economic environment, maintaining the exceptional historical
growth rates in some of the Austro Woodworking divisions has been challenging.
However, Government`s massive infrastructure spending, as well as continued
upgrading of facilities and new developments, is expected to provide a stable
operating platform for this sector. A boost in revenue and profitability is
expected over the next few months due to exhibition activity. Austro`s in-house
finance and insurance offering has been implemented and is expected to
contribute to the company`s profitability in the near future.
2nd Cut Pre-owned Woodworking equipment is expected to grow rapidly due to the
increased demand for a more economical alternative to new machinery. The trading
platform that 2nd Cut provides also enables the woodworking machinery divisions
to make use of effective marketing tools such as trade-in deals and upgrades.
Gearing Moss continues to perform well, selling its portable sawmilling
solutions both locally and into greater Africa. The Group has made good progress
in optimising the synergies between the woodworking machines and tools
divisions, and has broadened its customer base.
DIVIDEND POLICY
The dividend policy will be reviewed periodically taking into account prevailing
circumstances and future cash requirements.
Accordingly, in line with company policy, no dividend has been declared for the
current period.
BASIS OF PREPARATION
The interim results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies applied in preparing these interim
financial statements are consistent with those applied in the prior interim
period and at previous year-end and are in accordance with International
Financial Reporting Standards. This announcement has been prepared in accordance
with the Listings Requirements of the JSE Limited. The interim results have not
been audited or reviewed by the Group`s auditors, PKF (Jhb) Inc.
CHANGES TO THE BOARD OF DIRECTORS
During the current period two directors were added to the Board of Directors,
namely JO Freed as Executive Director and RJ Friese as Chief Executive Officer,
with effect 22 November 2007.
APPRECIATION
We extend our sincere thanks to our staff, customers, business partners,
suppliers and shareholders.
By order of the Board
David Solomon Brouze Robert Jurgen Friese
Chairman Chief Executive Officer
Johannesburg
14 May 2008
Non-executive directors:
DS Brouze (Chairman), R Jonah, W Hauser
Executive directors:
D Rothlisberger, BD Downs, RJ Friese, JO Freed
Registration number:
2001/029771/06
Business/registered address:
1125 Leader Road, Stormill Ext 4, Roodepoort, Johannesburg
Business postal address:
PO Box 1914, Florida, Johannesburg
Company secretary:
Probity Business Services (Proprietary) Limited
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
Sponsor:
Java Capital (Proprietary) Limited
Visit our website: www.austrogrouplimited.com
Date: 14/05/2008 10:30:02 Produced by the JSE SENS Department.
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