| Wed 25 Jun 2008, 15:40 | | ART - Argent Industrial - Audited Results For The Year Ended 31 March 2008 and |
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ART
ART
ART - Argent Industrial - Audited Results For The Year Ended 31 March 2008 and
dividend declaration
Argent Industrial Limited
Reg no 1993/002054/06
(Incorporated in the Republic of South Africa)
("The Group" or "The Company")
Share code : ART ISIN code : ZAE000019188
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2008
Financial Highlights
REVENUE UP 28.0%
ATTRIBUTABLE EARNINGS UP 34.5%
ATTRIBUTABLE EARNINGS per share UP 19.2%
HEADLINE EARNINGS UP 32.4%
HEADLINE EARNINGS per share UP 17.4%
GEARING 26.2%
ABRIDGED CONSOLIDATED
INCOME STATEMENT
for the year ended 31 March 2008
Audited Audited
year ended year ended
31 March 31 March
2008 2007
R 000
Revenue 1 659 201 1 296 312
Operating profits before 308 715 224 436
financing costs
Financing costs 49 782 25 929
Profit before taxation 258 933 198 507
Taxation 70 612 60 236
Profit after taxation 188 321 138 271
Minority interest 2 283 -
Earnings attributable to 186 038 138 271
ordinary shareholders
Attributable earnings per share 209.1 175.4
(cents)
Headline earnings per share 204.2 174.0
(cents)
Dividends per share (cents) 33.0 29.0
Supplementary information
Shares in issue (000)
- at end of period 96 490 80 462
- weighted average 88 959 78 844
Interest received 30 089 15 150
(R 000)
Cost of sales (R 000) 879 482 718 270
Depreciation (R 000) 23 984 18 835
Net profit on foreign exchange 3 752 4 383
transactions
(R 000)
Calculation of headline earnings
(R 000)
Earnings attributable to 186 038 138 271
ordinary shareholders
Profit on disposal of property, (7 583)
plant and equipment (1 500)
Loss on disposal of property, 213 396
plant and equipment
Impairment of property, plant 2 979 -
and equipment
Headline earnings attributable 181 647 137 167
to ordinary shareholders
ABRIDGED CONSOLIDATED Audited Audited
BALANCE SHEET at at
for the year ended 31 March 31 March
31 March 2008 2008 2007
R 000
ASSETS
Non-current assets
Property, plant and equipment 645 713 449 175
Intangibles 249 975 113 785
Long term loan 29 897 28 623
925 585 591 583
Current assets
Inventories 470 138 332 618
Trade and other receivables 409 138 287 739
Bank balance and cash 383 14 272
879 659 634 629
TOTAL ASSETS 1 805 244 1 226 212
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 437 336 235 561
Reserves 47 321 47 170
Retained earnings 603 054 442 950
Ordinary shareholders` funds 1 087 711 725 681
Minority interest 11 956 9 673
Total shareholders` funds 1 099 667 735 354
Non-current liabilities
Interest-bearing borrowings 203 050 111 442
Deferred tax 64 492 44 730
267 542 156 172
Current liabilities
Trade and other payables 335 565 231 066
Taxation 7 607 14 759
Bank overdraft 9 912 -
Current portion of interest- 84 951 88 861
bearing borrowings
438 035 334 686
TOTAL EQUITY AND LIABILITIES 1 805 244 1 226 212
Net asset value per share 1 127.3 901.9
(cents)
ABRIDGED CONSOLIDATED Audited Audited
CASH FLOW STATEMENT year ended year ended
for the year ended 31 March 2008 31 March 31 March
2008 2007
R 000
Cash generated from operations 143 951 96 224
Interest paid (49 782) (25 929)
Interest received 30 089 15 150
Dividends paid (28 125) (21 786)
Taxation paid (56 888) (52 525)
Cash flows from operating 39 245 11 134
activities
Cash flows from investing (352 519) (111 225)
activities
Cash flows from financing 289 473 69 827
activities
Net decrease in cash and cash (23 801) (30 264)
equivalents
Cash and cash equivalents at 14 272 44 536
beginning of period
Cash and cash equivalents at end (9 529) 14 272
of period
STATEMENT OF Share Share Treasury Reval- Reserve Retained
CHANGES IN capital premium shares uation on trans- earnings
EQUITY reserve
for the year lation
ended of
31 March foreign
2008 ope-
ration
R 000
Balance at 4 023 271 622 (46 366) 50 143 (156) 307 515
31 March
2006
Net treasury - - 6 282 - - -
movement
Foreign - - - - (750) -
currency
translation
adjustment
Realisation - - - (2 067) - -
of
revaluation
reserve
Profit on - - - - - 18 950
disposal of
minority
share in
subsidiary
Net profit - - - - - 138 271
for the
period
Dividends - - - - - (23 334)
Less - - - - - 1 548
dividend on
treasury
shares
Balance at 4 023 271 622 (40 084) 48 076 442 950
31 March (906)
2007
Shares 802 269 196 - - - -
issued
Net treasury - - (68 223) - - -
movement
Foreign - - - - (374) -
currency
translation
adjustment
Revaluation - - - 1 498 - -
of
properties
Realisation - - - (973) - 2 191
of
revaluation
reserve
Net profit - - - - - 186 038
for the
period
Dividends - - - - - (30 928)
Less - - - - - 2 803
dividend on
treasury
shares
Balance at 4 825 540 818 (108 307) 48 601 (1 280) 603 054
31 March
2008
SEGMENT REPORT Revenue Results Revenue Results
for the year audited audited audited audited
ended 31 March 31 March 31 March 31 March 31 March
2008 2008 2008 2007 2007
Business
Segments
R 000
Steel trading 832 179 99 919 584 241 46 362
Automotive 222 404 36 020 218 668 46 144
products
Home and office 338 616 68 819 287 610 63 120
Fabricators 89 519 21 632 73 420 15 849
Non-steel 176 483 32 543 132 373 27 032
related products
Total 1 659 201 258 933 1 296 312 198 507
COMMENTARY
Financial Overview
In light of the current market conditions, Argent has produced a superlative
set of results. This has resulted from the Group benefiting from the boom in
the construction and infrastructure development sectors, through its steel
trading and manufacturing businesses. These businesses have benefited from
the significant increases in steel prices, resulting in overall higher margins
as seen in the Group`s net margin growing by 5% to 11.2%. It must be noted
that, most of the steel increases in 2008 have occurred from 1 April onwards
which bodes even better for the 2009 financial year.
The financial results reflect the Argent Group`s continued delivery of
sustainable shareholder value:
Revenue growth of 28% to R1 659m
Cash generated by operations increased by R47 727m to R143 951m
Gearing was contained to 26.2%
Operating profit increased by 37.6% to R308.7m
Operating margin was 18.6%
Headline earnings was up by 32.4%, while Headline earnings per share was up
17.4%
Operations Review
Steel trading
This collective of companies includes Phoenix Steel and Gammid Trading who
trade in ferric alloys, aluminium and stainless steel. Phoenix has branches in
Johannesburg, Middelburg, Durban, Richards Bay, Port Elizabeth, and East
London. Gammid has branches in Cape Town, George, Durban and Johannesburg.
Recently Gammid`s products were incorporated into Phoenix East London,
creating additional markets for Gammid and Phoenix. Both Phoenix and Gammid
are the predominant steel suppliers to the Group`s manufacturing businesses at
market related prices and with a just-in-time philosophy. This vertical
integration strategy ensures that the maximum possible margin is contained
within the Group.
The Steel Division had a substantial increase in turnover of over 42% from the
previous year which was mainly driven by higher international steel prices,
higher domestic sales volumes, and an improved sales mix. While earnings also
increased for the past six months, driven by higher steel prices and an
improved sales mixture; this was partially offset by higher costs. As a
whole, this division continued to benefit from heightened levels of activity
in the infrastructure and construction sectors, delivering a solid
performance. The growth is also attributable to the acquisition of Gammid on 1
July 2008.
This sector contributes 50% of the Group`s turnover and 39% of the Group`s
earnings before taxation.
Forecasts for this sector remain bullish due to Government committed
infrastructure spend, the higher steel prices and an environment of higher
demand and lower supply side dynamics. Additional margin from stock held in an
increasing price environment is a reality.
Phoenix Steel Natal has moved into its vastly larger building which has
resulted in significant increased turnover as the company can now carry higher
stock levels and offer a broader range of products and services. The company
has also benefited from increased market prices of stock held, and as a result
margins have been significantly enhanced. In addition, with the national
steel shortages customers are attracted to its extensive inventory holding and
prompt service. Expansion plans include a Fagor multi-strand blanking line to
be commissioned in July 2008, enabling Phoenix Steel Natal to provide a
blanking service to the high tech end of the market, and at the same time
freeing up more of Phoenix Steel Gauteng`s space and infrastructure. The Group
will also utilise this line to process imported coils, especially stainless
steel and aluminium. Additional expansion plans include a tube mill and
slitter to provide mild steel tubing to the Natal region. These initiatives
will provide additional revenue and margin due to the value-added services.
Phoenix Steel Richards Bay had a year beyond our most optimistic projections
with both increased margins and turnover. The company acquired and
commissioned a second high definition plasma machine. Greater access to
increased stock levels from Phoenix Steel Natal also contributed significantly
to the bottom line. Construction is underway to increase the warehouse by
approximately one third in size with an overhead crane.
Argent Port Elizabeth has turned the corner and is providing real returns to
the Group. The company has benefited from the higher steel price and its
diverse product and services offering, allowing it to draw on a wider and more
diversified customer base. The company has acquired a cut to length tube
service centre and will provide a range of high quality products to the
automotive sector and in particular the catalytic converter industry in the
Port Elizabeth area.
Phoenix Steel East London benefited from the increased local infrastructural
and residential/resorts spend in the greater East London area. A 500sqm
extension to the warehouse was completed to allow for increased stock holding
including stainless steel, aluminium as well as Castor and Ladder and Cedar
Paint products. Giflo Engineering has secured the contract to supply styling
items for the new Triton range of vehicles and this contract will be
administered by Phoenix Steel East London due its proximity to the Daimler
Chrysler Plant.
Phoenix Steel Mpumalanga was the company hardest hit by the load shedding
within Argent, losing up to 20 working hours per week at certain times. To
this end a generator has been acquired as a backup in these situations. A new
management team has been put in place and they have changed the focus towards
the Group`s principles of quality and cost efficiency. A new 13m long, high-
definition plasma machine was acquired by the company which will enable it to
enter into new markets.
Gammid Trading had good year with sales up 40% on the previous year and with
profits increasing in line with sales. The price of nickel peaked in the
first half of the year, driving up the price of nickel austenitic stainless
steel. This allowed Gammid to gain significant market share with its 200
Series stainless steel (low nickel austenitic stainless steel) and is now the
main distributor in low nickel austenitic stainless steel. The price of
nickel has since dropped off its highs, resulting in lower stainless steel
prices. Gammid also gained market share in aluminium products to become one of
Hulamin`s largest distributors, as a result of supplying the Group`s aluminium
products; in a market where aluminium prices steadily increased throughout the
year.
The seamless integration of Gammid into the Argent Group has produced many
benefits with Gammid supplying the majority of the Group`s stainless steel and
aluminium requirements. The inter-group business alone increased Gammid`s
turnover by 15%.
Gammid`s growth strategy is to expand on the service centre concept, improving
service levels by supplying exact sizes and profiles to customers to minimise
costs. To this end, a laser cutting machine has been ordered for Gammid in
Johannesburg, while a guillotine and press brake have been ordered for Gammid
Natal. Gammid recently opened an outlet for its products in Port Elizabeth
under the Phoenix banner with others to follow suite using the established
Argent infrastructure. A further significant development for Gammid is that
it has become a country-wide distributor for Columbus Stainless Steel, with
immediate effect and this will grow the stainless steel business by around
15%.
Home and Office
This is a collection of manufacturing companies with well known brands
servicing a broad range of customers from retail through to construction.
These companies are Jetmaster, Xpanda Security, Paint and Ladders, Toolroom
Services, Atomic Office Equipment and the Life `n Leisure outlets. This
sector is highly vertically integrated with the rest of the Group in terms of
raw material supply and the distribution of finished goods.
The distribution channels for these products are similar with the key channels
being retailers and wholesalers, developers and contractors, and direct to the
consumer. The higher interest rates have affected sales volumes in the
direct, retail and wholesale channels and have had a lesser effect in the
developer and contractor channels. The higher steel prices have also affected
sales through increased unit prices, but have also had the positive effect of
increasing profits due to having stock at old prices.
This sector contributes 20% of the Group`s turnover and 27% of the Group`s
earnings before taxation.
Forecasts for this sector are that current levels of sales and margin can be
maintained by containing costs, specifically through careful stock planning by
the Group`s steel trading sector. Exports will be increased as a result of the
depreciating Rand, which will also result in positive foreign exchange gains.
The full integration and optimisation of the Paint and Ladder business also
presents significant opportunities for both turnover and profits, especially
with the Governments planned infrastructure spend.
Jetmaster
The first few months of the year delivered very good sales and production
capacity was exhausted by strong demand. This demand dropped off as the
higher interest rates took effect. The start of the 2008 winter was
particularly cold and this has brought volumes back to normal and additionally
exports are up by 40% on the weaker Rand. Overall sales are up on last year,
and profits are higher on the back of the steel price increases. A new
product range of slow combustion stoves has been developed, aimed at the lower
and middle price brackets to compete with European imported brands. Further
developments are in progress to develop a range of vent-free gas units, as
well as upmarket gas units for export.
Xpanda Security
Locally, for the D.I.Y market where products are distributed through the chain
stores sales dropped slightly, while sales in the purpose made environment
have remained increased. It has been a longstanding trend that Xpanda
Security performs better when economic conditions deteriorate due to increased
crime. Xpanda has been successful in the tender for the roller shutter doors
at the new soccer stadium in Durban for the 2010 World Cup. The value of this
order is around R4 million, and it is likely that additional business from the
other stadium will be supplied by Xpanda.
Xpanda now has a wider reach through its distributor network than ever before
and new local distributors are continuously being signed up; attracted by the
vast range of products supplied by Xpanda. Exports are performing better than
ever with Spain and Greece becoming major customers. Portugal and Italy are
also looking very promising while the existing export markets continue to
perform well. A 1000sqm building extension has been completed to allow for
additional capacity requirements. Further expansion capital included a C.N.C.
machining facility, a shot blast and thermal zinc spray facility and a robotic
welding line. These initiatives have contributed to vastly improved
turnaround times, especially for coastal customers seeking high quality
rustproof products.
Toolroom Services had an exceptional year with significant increases in sales
and profits. The company benefited greatly from increased government spending
and renewed vigour in the mining industry. Production capacity and
distribution efficiency were increased significantly through the acquisition
of additional new plant and delivery vehicles. Although steel prices increased
dramatically towards the end of the financial year, Toolroom were still able
to provide cost effective products to a far reaching customer base, due to
Phoenix`s buying power and stock planning. New business into neighbouring
countries increased significantly this year and is expected to continue into
the 2009 financial year. Product and production synergies between Toolroom and
Atomic Office Equipment in Cape Town contributed significantly to both
companies results. Toolroom will be moving to its new premises towards the
end of the 2008, resulting in increased capacity and reduced unit production
cost.
Atomic Office Equipment was acquired from Bidvest in June 2007. Within a short
period of time turnover was increased by some 50% allowing the company to turn
a profit. Synergy with Toolroom Services has resulted in Atomic being able to
offer an increased product range and it has been possible to focus production
on higher contribution products. Finished goods from Atomic are sent to
Johannesburg on the otherwise empty steel delivery truck from Phoenix Steel
Gauteng; these return loads supplement Toolroom production and give both
companies the benefits of economies of scale. Expansion capital has included
a cut to length line for coil and upgrades to the two powder coating lines to
increase capacity. Three new delivery trucks have been purchased, one
dedicated to run between Cape Town and Port Elizabeth.
Paint and Ladders is a new addition to the Argent Group and the acquisition
was effective as from 1 March 2008. The company is essentially made up of two
separate businesses being Castor & Ladder and Cedar Paint. The Castor &
Ladder and paint businesses were acquired at after tax PE multiples of 6 and 3
respectively, which include its Silverton Property. The business has strong
brands that include Colour Co, the house brand for the Mica Stores. Synergies
with the Group lie in the aluminium supply from Gammid as well as the
manufacture of the castors by Argent companies such as Allan Maskew, Giflo and
Excalibur. There is a huge opportunity to increase the market penetration of
both businesses significantly through investment in additional capacity and by
increasing the market awareness of the Brands. Both businesses are
experiencing the benefits of the increased activity in the construction and
infrastructure development sectors, particularly in the still new range of
scaffolding products.
There are now eleven Life `n Leisure outlets in the country with the newest
addition being Margate. These outlets have experienced the effect of lower
disposable incomes via drop in volume and lower average selling price. This
has been further exacerbated by higher unit prices as the increased steel
prices filter through to end products. It must be noted that margins remain
high as these outlets only sell Argent`s manufactured products, thus
maximising profits through the whole value chain. Turnover is up around 10% on
last year; while prices have increased by around 15%.
Fabricators
This sector is made up of Koch`s Cut and Supply and Hendor Mining Supplies.
These companies use large volumes of steel from Phoenix and then fabricate
either standard or custom-made products. Margins have been bolstered by the
higher steel prices, and volumes have increased partially due to these
companies being able to source stock from Phoenix as well as their focus on
service delivery.
This sector contributes 5% of the Group`s turnover and 8% of the Group`s
earnings before taxation.
Forecasts for this sector remain strong in light of the improved resources
market and weakening Rand for exports; though much will depend on a stable
electricity supply to the mines, sugar mills, paper mills, etc.
An insatiable global appetite for commodities keeps driving infrastructure
investment by mining companies, though unfortunate electricity shortages
affected the mines and had an impact on volumes this year. Hendor Mining
Supplies is still gaining market share and not losing any existing business to
competitors. This is illustrated by it being awarded the Lonmin contract in
June 2008 which will boost turnover by 12% with immediate effect. Hendor have
on an ongoing basis managed to secure vast tonnages of steel before each price
increase, which has resulted in margin levels being maintained, while
increases have been passed on to all customers without exception.
Koch`s Cut and Supply had a very good year, which surpassed expectations,
mainly attributable to high service levels and industry leading turnaround
times, resulting in customers returning for more. This service reputation has
also resulted in new and larger jobs being undertaken for new customers.
Margins have been maintained in the higher steel price environment as each job
is unique and priced on an individual basis. Expansion capital has included a
second high definition plasma machine as well as additional high-tech bending
and steel rolling equipment to enable Koch`s to enter into the lucrative thick
gauge market.
Automotive products
The automotive sector has cooled off since record sales in September 2007 and
automotive manufacturers are on reduced working hours, resulting in reduced
volumes in the OE market. The aftermarket has also experienced a drop in
sales, though not as noticeable as OE. Margins have come under pressure as
the manufacturers refuse the price increases resulting from the higher steel
prices. Stock has also built up as OE customers put the brakes on orders.
This sector contributes 13% of the Group`s turnover and 14% of the Group`s
earnings before taxation.
The outlook for this sector remains depressed relative to the past few years
of record growth. The revised proposed MIDP incentives should energise this
sector in the medium term. Higher steel prices and inflationary pressures will
affect sales, as will the higher fuel prices. The trend towards smaller, more
economical vehicles will be enhanced and our businesses will pre-empt this in
their service offerings.
Giflo Engineering`s performance for the first half was up on the previous
year, while the second half was lower than the previous year and the overall
the business ended 9% down on 2007; keeping in mind that 2007 was boom year
for the automotive sector. Stock volumes are also higher than the current
sales levels would predict due to the reduced OE orders. The production
process has been reorganised to create dedicated production lines and this has
had a positive effect on production efficiency. New supply contracts include
the new Renault roll bar, the rear bumper for the Colt Triton and the 60th
anniversary makeover for the Land Rover Defender. New aftermarket and P&A
sales include the Triton nudge bar and roll bar in stainless steel, the Hummer
H3-4 inch side runner in stainless steel and the Toyota Raider stainless steel
accessories. Giflo is also tendering for the OE supply for the new Ford T6 one
tonner vehicle which includes side runners, roll bar, nudge bar and rear
bumper with volumes expected to be 180 vehicles per day for both the local and
export markets. Additionally, Giflo has started supplying products into the
trucking market and this is expected to be a growth area going forward.
Exports opportunities to Bestop, Putco and Land Rover are increasing on the
back of the weaker Rand, with current exports exceeding 10% of total sales.
Sentech Industries sales performance followed the trend of Giflo, with the
exception that Sentech ended up marginally higher than 2007 due to the
infrastructure investment and quality controls that have been introduced into
Sentech since Argent acquired the assets in November 2006. Sentech managed to
obtain their TS16949 accreditation which has resulted in reduced quality
deviations and Sentech is now one of the top OE suppliers. Sentech did manage
to secure additional automotive contracts in an otherwise sluggish market.
Expansion capital has included two powder coating plants and an e-coating
plant which will not only improve the current margins, but will open new
markets as well as enabling the company to provide a one stop shop concept.
The new lines are expected to be fully commissioned by the end of August 2008.
Excalibur Vehicle Accessories moved into its new premises and the additional
space has allowed for the investment into additional capacity and process
equipment that will not only assist in the current automotive market, but will
also facilitate diversification into non-automotive business. The growth in
the plastic component business at Excalibur has been significant and new
business includes all of the plastic storage bins and ladder components for
Castor & Ladder amounting to R2 million per annum. Expansion capital included
a new laser cutting machine and press brake to take advantage of the Group`s
profile cutting and bending requirements. Excalibur ended the year 10% up on
last year. Expansion capital in the next financial year will include
equipment to focus on manufacturing aluminium accessories which are lighter
and cheaper than stainless steel ones.
All Lite Steel Products has now secured over 80% of Giflo`s powder coating
business, while also securing work from Paint & Ladder and Jetmaster. All Lite
is also pursuing work from non-Argent companies and to this end has secured a
significant contract from Praga, an automotive manufacturer for amongst
others, Toyota. Future expansion capital will include a new e-coating line
that will double throughput.
Non-Steel Related Products
This sector includes businesses that are not significant users of steel. This
sector is diversified ranging from concrete supply, rubber component
manufacture, railway retarder manufacture in the USA and the property
holdings.
This sector contributes 11% of the Group`s turnover and 13% of the Group`s
earnings before taxation.
Forecasts for the sector are positive due to the continued supply into local
and USA infrastructure and construction industries.
Megamix had a slow start in the first half of the year and while the second
half improved remarkably, overall the year`s turnover ended slightly below
2007. New contracts have been secured, which include the supply contract with
WBHO for the supply of concrete for the Cape Town harbour berth deepening
project over the next three years and Concrete Units for the supply of
concrete for precast seating for the Cape Town World Cup stadium. Expansion
capital included one new mixer to increase the fleet size and four new mixer
trucks as part of the fleet renewal process. Also, a new concrete batch plant
has been commissioned at the Airport site that will add to capacity for the
greater Cape Town area. A new batch plant has also been ordered for a prime
location at the harbour, which besides the WBHO project will be able to supply
concrete to the developments in the city bowl area.
Both crushing plants at Villiersdorp have been operating at 100% capacity to
meet demand for supply to Megamix, with limited outside supply contracts as a
result. Forward planning includes a design to move the access to the pit to
incorporate growth projections for the next 10 years.
Since the acquisition of Allan Maskew by Argent, sales have increased steadily
on the back of investment into four additional rubber injection machines,
resulting in improved margins. New products have been designed for new
markets which have been opened in the mining industry and this will result in
good growth over the next few years. Allan Maskew has also broken into the
automotive market through Giflo Engineering, and will be supplying 4000 rubber
steps for the 60th anniversary Land Rover Defender.
New Joules Engineering North America have done well in 2008 with new contracts
and turnkey projects being a new feature of their business offering. The
order book contains current work for the Memphis rail yard where USD1 million
still needs to be invoiced for a new retarder system and a number of
maintenance and upgrade contracts for the likes of the BNFS Argentine yard and
Roseville yard. A huge number of enquiries for new work include new turnkey
projects for the likes of Redrock Arizona Yard, Dallas Texas yard and the
Colton yard in Ontario California; and upgrades for Strang Houston, Lincoln
and Livonia. Turnover has nearly doubled compared with 2007, and profits are
also up.
Argent Industrial Investments, the Argent property division, continues to grow
from strength to strength. The property division now owns 25 properties and is
currently building the new Toolroom factory, which will be 13 200sqm under
roof, on 20 000sqm`s of land. The following projects were completed during
the year:
Jetmaster, 1 000sqm factory extension
Phoenix Steel East London, 500sqm warehouse extension, and 200sqm mezzanine
extension
Phoenix Steel Natal, factory modification to fit the new cut-to-length line
and a 32ton overhead crane
Argent Port Elizabeth, 400sqm mezzanine extension
Excalibur, the 11 000sqm factory was renovated and with new services
installed. The office complex was also renovated and modernised
Xpanda Durban, a 1 000sqm extension was added to the warehouse
The following projects are currently underway:
Phoenix Steel Richards Bay, 850sqm factory extension
The building of the new Toolroom factory
Load Shedding has affected each of the businesses to a different degree, and
while the overall effect on sales is difficult to determine, the direct cost
to Argent amounted to R1.1 million, excluding the cost of damaged equipment
that amounted to R0.47 million. In an effort to mitigate these power
interruptions, initially four generators have been ordered at a cost of R3.2
million and will be allocated to the worst hit businesses.
Looking forward the 2009 financial year is expected to show substantial growth
on these results should the Argent businesses maintain their current
performance. Further, the steel trading division is expected to more than
make up for a drop in performance of the home and office businesses in both
sales and margins for 2009. The Group will comfortable turn R2 billion in
2009, one year ahead of projections. Growth in the mining and construction
sectors in Southern Africa is expected to ensure continued high levels of
demand for the steel trading and fabrications businesses. Profits on
inventories due to increased steel prices are expected to be significant.
Steel price increases from January to March 2007 were 21%; while price
increases post March to date has been 47%. Additional steel price increases
are on the cards for this year based on projections by ArcelorMittal and
international trends, taking into account the weaker Rand. Growth in Megamix
is also expected to be above average due to the infrastructure spend and the
harbour development in Cape Town. The manufacturing businesses are expected
to benefit from the higher steel prices and make better profits, while sales
are expected to drop off slightly. The incorporation of the Paint and Ladder
business into Argent will further boost the 2009 results. Current
investigations into new acquisitions include a business that could open up
export markets into the UK and Europe with a steel manufactured range of
products. Also, an opportunity exists to acquire a business manufacturing
moulded concrete products that will develop vertical integration synergies for
Megamix and Villiersdorp Quarries, and puts Argent closer to achieving a
separate listing for this group of businesses. Overall we believe that
Argent`s proactive and quick response to market conditions will ensure that we
will perform well even in these trying times. This environment has
historically been very conducive to making valuable acquisitions at fair
market values.
Acknowledgements
My heartfelt thanks to all our employees for their industrious commitment to
the Argent Group over the past financial year, and in advance for the year
ahead. The global competition for scarce skills has taken its toll on South
African businesses and we are proud that our staff have chosen to stay with
the Group and we honour their commitment to us. To the new employees that
have joined us through acquisition and personal choice we welcome you to the
fold. Argent now employs 3 623 members and we are proud of our growing
family.
We would like to thank Peter Lawson who retired from the Group as an executive
director of the Argent Board for his services over the years and we wish him
all the best for his well deserved rest.
Conclusion
With the Group`s Turnover exceeding the two billion Rand mark in 2009, it has
been resolved by the Argent Board to appoint Grant Thornton as the Group`s
Auditors as of the 2009 financial year. The current auditors will remain
involved with the audit of certain of the smaller subsidiaries and will
facilitate the changeover.
Dividend
A final dividend of 19 cents per share has been declared, subsequent to
31 March 2008, payable on Monday 21 July 2008 to shareholders recorded in the
register at close of business on Friday 18 July 2008, being the record date in
order to participate in such dividend. The last day to trade cum-div is Friday
11 July 2008. The share will trade ex-div on Monday 14 July 2008.
Share certificates may not be dematerialized / rematerialised between Monday
14 July 2008 and Friday 18 July 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.
Audit opinion
Our auditors, Siyabala Inc, have issued their opinion on Argent`s statements
for the year ended 31 March 2008. A copy of their unmodified report is
available for inspection at the company`s registered office. These summarised
financial statements have been derived from Argent`s financial statements and
are consistent in all material respects with Argent`s financial statements.
On behalf of the Board
T.R. Hendry CA (SA) Maraisburg, Roodepoort
Chief Executive Officer 25 June 2008
Registered office: 1316 Clubhouse Street, Maraisburg, Roodepoort 1724
Tel +27 11 661 5900
Auditors: Siyabala Inc.
Sponsor: Arcay Moela Sponsors (Pty) Ltd
Transfer secretaries: Link Market Services South Africa, 5th floor, 11
Diagonal Street, Johannesburg 2001 (PO Box 4844, Johannesburg 2000)
Directors: MP Allen, MJ Antonic, Ms SJ Cox (Financial Director), PA Day (Non
Executive), TR Hendry (Chief Executive Officer), PH Lawson (Non Executive), AF
Litschka, K Mapasa (Non Executive), T Scharrighuisen (Non Executive Chairman),
D Smith, GK Youngman (Alternate).
Date: 25/06/2008 15:40:02 Produced by the JSE SENS Department.
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JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
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employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
