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ART
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ART - Argent - Unaudited Interim Results for the six months ended
30 September 2008 and dividend declaration
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 2008
Financial Highlights
- REVENUE UP 23.7%
- ATTRIBUTABLE EARNINGS UP 12.6%
- ATTRIBUTABLE EARNINGS per share UP 4.8%
- HEADLINE EARNINGS UP 18.0%
- HEADLINE EARNINGS per share UP 9.8%
- GEARING 28.6%
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
INCOME STATEMENT six months six months year ended
for the six months ended 30 Sept 2008 30 Sept 2007 31 Mar 2008
30 September 2008
R 000
Revenue 1,085,427 877,511 1,659,201
--------------------------------------------
Operating profits before
financing costs 166,994 145,066 308,634
Financing costs 32,900 23,110 49,782
--------------------------------------------
Profit before taxation 134,094 121,956 258,852
Taxation 38,038 36,411 70,588
--------------------------------------------
Profit after taxation 96,056 85,545 188,264
Minority interest 983 1,129 2,283
--------------------------------------------
Earnings attributable to
ordinary shareholders 95,073 84,416 185,981
--------------------------------------------
Attributable earnings per
share (cents) 107.1 102.1 218.5
Headline earnings per share (cents) 106.9 97.4 213.5
Dividends per share (cents) 19.0 16.0 33.0
--------------------------------------------
Supplementary information
Shares in issue (000)
- at end of period 88,798 85,156 88,798
- weighted average 88,798 82,654 85,098
Interest received (R 000) 11,425 15,656 30,089
Cost of sales (R 000) 617,213 510,647 879,482
Depreciation (R 000) 15,635 12,508 23,983
Net profit on foreign exchange
transactions (R 000) 712 885 3,753
Calculation of headline
earnings (R 000)
Earnings attributable to
ordinary shareholders 95,073 84,416 185,981
Profit on disposal of property,
plant and equipment (134) (3,949) (7,502)
Loss on disposal of property,
plant and equipment - 16 213
Impairment of property, plant
and equipment - - 2,979
--------------------------------------------
Headline earnings attributable
to ordinary shareholders 94,939 80,483 181,671
--------------------------------------------
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
BALANCE SHEET at at at
as at 30 September 2008 30 Sept 2008 30 Sept 2007 31 Mar 2008
R 000
ASSETS
Non-current assets
Property, plant and equipment 708,492 507,966 645,632
Intangibles 249,765 207,408 249,975
Long term loan - 28,080 29,897
--------------------------------------------
958,257 743,454 925,504
--------------------------------------------
Current assets
Inventories 672,131 438,873 470,138
Trade and other receivables 421,574 311,997 409,138
Bank balance and cash 307 13,969 383
--------------------------------------------
1,094,012 764,839 879,659
--------------------------------------------
TOTAL ASSETS 2,052,269 1,508,293 1,805,163
--------------------------------------------
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 440,106 391,799 437,336
Reserves 61,688 46,084 47,321
Retained earnings 662,248 513,860 602,997
--------------------------------------------
Ordinary shareholders` funds 1,164,042 951,743 1,087,654
Minority interest - 10,801 11,956
--------------------------------------------
Total shareholders` funds 1,164,042 962,544 1,099,610
--------------------------------------------
Non-current liabilities
Interest-bearing borrowings 243,669 138,266 203,050
Deferred tax 67,423 46,048 64,492
--------------------------------------------
311,092 184,314 267,542
--------------------------------------------
Current liabilities
Trade and other payables 343,760 246,423 335,565
Taxation 32,000 34,781 7,583
Bank overdraft 111,937 - 9,912
Current portion of
interest-bearing borrowings 89,438 80,231 84,951
--------------------------------------------
577,135 361,435 438,011
--------------------------------------------
--------------------------------------------
TOTAL EQUITY AND LIABILITIES 2,052,269 1,508,293 1,805,163
--------------------------------------------
Net asset value per share (cents) 1,310.9 1,117.6 1,224.9
ABRIDGED CONSOLIDATED Unaudited Unaudited Audited
CASH FLOW STATEMENT six months six months year ended
for the six months ended 30 Sept 2008 30 Sept 2007 31 Mar 2008
30 September 2008
R 000
Cash generated from operations (32,706) 78,152 220,385
Interest paid (32,900) (23,110) (49,782)
Interest received 11,425 15,656 30,089
Dividends paid (16,872) (13,506) (28,125)
Taxation paid (10,690) (14,335) (43,451)
--------------------------------------------
Cash flows from operating activities (81,743) 42,857 129,116
Cash flows from investing activities (68,234) (210,771) (334,162)
Cash flows from financing activities 47,876 167,611 181,245
--------------------------------------------
Net decrease in cash and cash
equivalents (102,101) (303) (23,801)
Cash and cash equivalents at
beginning of period (9,529) 14,272 14,272
--------------------------------------------
Cash and cash equivalents at end
of period (111,630) 13,969 (9,529)
--------------------------------------------
STATEMENT OF
CHANGES IN EQUITY Share Share Treasury Revaluation Reserve on Retained
for the six capital premium shares reserve translation earnings
months ended of foreign
30 September 2008 operation
R 000
Balance at 30
September 2007 4,698 500,110 (113,009) 46,777 (693) 513,860
Shares issued 127 40,708 - - - -
Net treasury
movement - - 4,702 - - -
Foreign currency
translation
adjustment - - - - (587) -
Revaluation of
properties - - - 2,986 - -
Realisation of
revaluation reserve - - - (1,162) - 2,191
Net profit for the
period - - - - - 101,565
Dividends - - - - - (15,974)
Less dividend on
treasury shares - - - - - 1,355
------------------------------------------------------------
Balance at
31 March 2008 4,825 540,818 (108,307) 48,601 (1,280) 602,997
Net treasury
movement - - 2,770 - - -
Foreign currency
translation
adjustment - - - - 29 -
Revaluation of
properties - - - 15,019 - -
Realisation of
revaluation reserve - - - (681) - -
Buy-back of minority
share in subsidiary - - - - - (18,950)
Net profit for the
period - - - - - 95,073
Dividends - - - - - (18,333)
Less dividend on
treasury shares - - - - - 1,461
------------------------------------------------------------
Balance at
30 September 2008 4,825 540,818 (105,537) 62,939 (1,251) 662,248
------------------------------------------------------------
SEGMENT REPORT Revenue Results Revenue Results
for the six months unaudited unaudited unaudited unaudited
ended 30 September 2008 6 months 6 months 6 months 6 months
Business Segments ended ended ended ended
30 Sept 2008 30 Sept 2008 30 Sept 2007 30 Sept 2007
R 000
Steel trading 472,431 69,816 390,537 43,553
Automotive products 119,871 (1,162) 147,410 10,222
Home and office 309,320 37,966 202,201 26,050
Fabricators 101,615 7,762 84,276 34,517
Non-steel related products 82,190 19,712 53,087 7,614
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Total 1,085,427 134,094 877,511 121,956
----------------------------------------------------
Financial Overview
Argent has again produced a solid set of results. While the automotive market
and to a lesser extent the retail market pulled the results down, this was more
than adequately compensated for by the strong performance of the steel trading
and steel manufacturing businesses. The automotive businesses are expected to
recover in the second half of the year due to new business being secured,
particularly exports. Argent will also benefit from increased export margins
due to the weaker Rand in the second half of the year.
The financial results reflect Argent`s continued delivery of sustainable
shareholder value:
- Revenue growth of 23.7% to R1.085 billion
- Gearing contained to 28.6%
- Operating profit increased by 15.1% to R167 million
- Operating margin reduced to 15.4% from 16.5%
- Headline earnings up by 18%
- Headline earnings per share up by 9.8%
Operations Review
Steel trading
The steel division increased turnover by 21% mainly due to higher local steel
prices. Earnings also increased substantially, partly due to an improved product
sales mix. Sustainable benefits derived from heightened levels of activity in
the infrastructure and construction sectors are being experienced. Forecasts for
the steel sector remain relatively bullish especially in the medium to long
term.
Phoenix Steel Natal commissioned the Fagor multi-strand blanking line, enabling
it to provide a blanking service to the high tech end of the market which at the
same time frees 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. The warehouse extension at Richards Bay is
nearing completion, increasing its size by one third. The integration of Paint
and Ladders into Argent Port Elizabeth and Phoenix Steel East London has been
concluded successfully, boosting both businesses.
Gammid Trading performed steadily with sales up 10% while earnings were under
pressure due to lower austenitic stainless steel prices as a result of lower
nickel prices. Gammid gained market share in aluminium products to become one
of Hulamin`s largest distributors partly as a result of supplying the Group`s
aluminium products. Gammid`s growth strategy is to expand on the service centre
concept by supplying exact sizes and profiles to customers, allowing them to
minimise costs as a result. A further significant development for Gammid is
that it has become a national distributor for Columbus Stainless Steel with
immediate effect.
Home and Office
This sector performed strongly mostly due to higher margins being driven through
increased prices and operational efficiencies. Turnover through the building and
contractors channels were superior to retail and this trend appears to be
continuing into the second half of the financial year. Exports are being
promoted aggressively and products are being developed exclusively for these
markets, securing long term supply. Current levels of profitability can be
maintained by containing costs, specifically through careful stock planning by
the Group`s in-house steel suppliers.
The integration and optimisation of the Paint and Ladders business has
proceeded well and synergies have been maximised through better purchasing,
manufacturing and distribution. Jetmaster benefited from increased exports as
well as R8.5 million additional revenue being realised through the release of
the new range of slow combustion stoves. Xpanda Security has similarly increased
exports and has launched the new `X` range of security doors and burglar
proofing aimed at the lower end of the market, while still offering ease of
installation and high security levels.
Toolroom Services had an exceptional six months with a significant increase in
sales and earnings. The company benefited greatly from its entry into new
products and markets, such as significant orders for library equipment, beds for
the Angolan army and desks for the Mozambique Government. Its new building is
nearing completion and is only being held up by the delay in supply of municipal
services. Atomic Office Equipment achieved a 60% increase in turnover and is
now performing near its full potential.
Paint and Ladders exceeded expected budgeted revenue and earnings projections.
Cedar Paint`s decorative product range continues to produce buoyant results
while the company is also busy with a rebranding initiative which is already
opening doors into additional retail chains. Castor & Ladder`s turnover of
products to the construction industry, primarily scaffolding, remains strong,
while sales volumes to the heavy industry and retail (primarily ladders and
curtain tracks) are under pressure.
Fabricators
Both Koch`s Cut and Supply and Hendor Mining Supplies achieved substantial
improvements in both revenue and earnings and continue to perform strongly in
markets that seem to have a tremendous appetite for their products.
Automotive products
Automotive manufacturers have implemented reduced working hours, resulting in
reduced volumes for Argent in the OE market. Margins have come under pressure as
some manufacturers have rejected proposed price increases resulting from higher
steel prices.
On the upside, new contracts have been secured by Giflo Engineering including
the supply of the Triton rear step and side steps for Daimler Chrysler. Sentech
Industries has commissioned two powder coating plants and an e-coating plant
which will not only improve current margins, but will open new markets. Sentech
has recently quoted on five new contracts for Toyota and thirty-two for
Volkswagen. Excalibur Vehicle Accessories has successfully diversified into
non-automotive products, for example screening equipment for the mining
industry.
The outlook for this sector remains relatively conservative compared to the past
few years of record growth. The proposed revised MIDP incentives should
energise this sector in the medium term. Every effort is being made to secure as
many lucrative export contracts as possible.
Non-Steel Related Products
Megamix enjoyed a strong start to the year but margins came under pressure due
to increased competition for construction work in the Western Cape. As at 30
September 2008, the Group terminated its BEE deal which resulted in Argent
buying back its 30% stake in Megamix. The transaction resulted in a loss of
R2.4 million which is reflected in the above results. This is not an adjustment
to headline earnings as it is a reversal of interest previously earned. Allan
Maskew showed substantial growth in both revenue and earnings due to new
business being secured. New Joules North America`s revenue remained flat while
margins and earnings improved markedly. Argent`s property portfolio remains
unchanged but it is looking to secure a property in Bloemfontein to house Paint
and Ladders and Phoenix Steel. In addition, a property has been purchased in
George to house a branch of Gammid.
Looking forward to the second half of the 2009 financial year, it can be assumed
that the volatility in key market forces will continue. Argent believes that the
vast majority of its businesses have the correct strategies in place to ward off
the worst of the effects of this volatility. The companies also have the ability
to make proactive and inventive decisions to counter changing market conditions.
Argent should achieve positive headline earnings growth and exceed its
R2 billion turnover target. The incorporation of the Paint and Ladders business
into Argent is expected to continue to have a favourable impact on the 2009
results. An agreement has also been concluded for the acquisition of a company
that will open up additional export markets into the UK and Europe with a range
of manufactured steel products. Only Competition Commission approval is
outstanding.
Acknowledgements
My heartfelt thanks to all our employees for their industrious commitment to the
Argent Group over the past half year and in advance for the rest of the year
ahead. To the new employees that have joined us through Argent`s acquisitions
and through personal choice, we welcome you to the fold. Argent now employs
3,640 staff members and we are proud of our growing family.
Conclusion
We would like to welcome Investec Bank who has been appointed as the Group`s
Corporate Sponsors from 1 October 2008 and we would like to take this
opportunity to thank Arcay Moela for their valuable service in the past.
Dividend
A final dividend of 19 cents per share in respect of the year ended 31 March
2008 was paid during the period.
An interim dividend of 19 cents has been declared, subsequent to 30 September
2008, payable on Monday 19 January 2009 to shareholders recorded in the register
at close of business on Friday 16 January 2009, being the record date in order
to participate in such dividend. The last day to trade cum-div is Friday 9
January 2009. The share will trade ex-div on Monday 12 January 2009.
Share certificates may not be dematerialised / rematerialised between Monday
12 January 2009 and Friday 16 January 2009, 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 30 October 2008
Registered office: 1316 Clubhouse Street, Maraisburg, Roodepoort 1724
Tel +27 11 661 5900
Auditors: Grant Thornton
Sponsor: Investec Bank 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).
29 October 2008
Sponsor: Investec Bank Limited
Date: 29/10/2008 13:11:01 Produced by the JSE SENS Department.
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