| Wed 19 Nov 2008, 11:40 | | ASO - Austro Group Limited - Reviewed Consolidated Financial Results For The |
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ASO
ASO
ASO - Austro Group Limited - Reviewed Consolidated Financial Results For The
Year Ended 31 August 2008 and dividend declaration
Austro Group Limited
(Incorporated in the Republic of South Africa)
Registration number 2001/029771/06)
Share code: ASO ISIN: ZAE000090882
("the Group")
REVIEWED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2008
- Revenue more than doubled to R715,1 million
- Revenue growth of 156,3% included 128,2% organic revenue growth
- Operating profit doubled to R154,6 million
- Operating profit growth of 111,0% included 98,7% organic growth
- Headline earnings per share increased by 82,2%
CONSOLIDATED INCOME STATEMENT
For the year ended
31 August 31 August
2008 2007
Reviewed Audited
R R
Revenue 715 131 346 279 015 132
Cost of sales (435 037 998) (162 705 535)
Gross profit 280 093 348 116 309 597
Other operating income 6 186 512 9 364 728
Operating expenses (131 681 637) (52 404 991)
Profit from operations 154 598 223 73 269 334
Finance income 6 957 293 2 354 626
Finance expense (7 521 928) (92 000)
Profit before taxation 154 033 588 75 531 960
Taxation expense (42 069 546) (21 593 816)
Net profit for the year 111 964 042 53 938 144
Number of shares in issue 431 413 384 377 500 610
Weighted average number of shares 428 220 774 335 074 120
(Note)
Earnings per share (cents) 26,1 16,1
Headline earnings per share (cents) 25,9 14,2
Reconciliation of earnings to headline
earnings:
Net profit for the year 111 964 042 53 938 144
Profit on disposal of property, plant (1 464 187) (7 856 602)
and equipment
Taxation effect thereon 204 986 1 453 091
Headline earnings 110 704 841 47 534 633
Note: On 16 September 2008, 5 485 893 shares were issued as part of the purchase
price in acquiring Quinlec Power (Pty) Limited and Quad Technical Services (Pty)
Limited.
CONSOLIDATED BALANCE SHEET
As at
31 August 31 August
2008 2007
Reviewed Audited
R R
Assets
Non-current assets 282 281 433 219 843 385
Property, plant and equipment 56 007 881 18 426 324
Deferred taxation 6 304 149 -
Goodwill and other intangibles 219 969 403 201 417 061
Current assets 556 769 695 428 694 874
Inventories 414 415 499 159 983 771
Trade and other receivables 142 354 196 59 949 588
Cash resources - 208 761 515
Total assets 839 051 128 648 538 259
Equity and liabilities
Capital and reserves 508 408 272 387 799 823
Share capital 4 259 3 775
Share premium 308 002 696 174 718 924
Shares to be issued 14 777 899 139 417 748
Accumulated profits 185 623 418 73 659 376
Non-current liabilities 4 448 465 159 788
Interest bearing liabilities 3 453 086 -
Deferred taxation 995 379 159 788
Current liabilities 326 194 391 260 578 648
Trade and other payables 203 438 363 104 543 020
Amount owing for purchase of 13 228 110 127 111 858
subsidiaries
Taxation 38 988 894 28 923 770
Bank overdraft 70 539 024 -
Total equity and liabilities 839 051 128 648 538 259
SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
For the year ended
31 August 31 August
2008 2007
Reviewed Audited
R R
Cash flows from operating activities (109 665 306) (4 863 007)
Cash generated by operations (71 200 967) 29 830 331
Interest received 6 957 574 2 355 815
Interest paid (6 396 988) (92 000)
Dividends paid - (22 000 000)
Taxation paid (39 024 925) (14 957 153)
Cash flows from investing activities (55 477 705) 26 835 159
Cash flows from financing activities (114 157 528) 173 054 749
Net increase in cash resources (279 300 539) 195 026 901
Cash resources at beginning of year 208 761 515 13 734 614
Cash resources at end of year (70 539 024) 208 761 515
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended
31 August 31 August
2008 2007
Reviewed Audited
R R
Share capital and share premium 322 784 854 314 140 447
Balance at beginning of year 314 140 447 10
Share issued during the year 133 284 256 174 722 689
Reversal of shares to be issued reserve (139 417 748) -
Shares to be issued reserve 14 777 899 139 417 748
Accumulated profits 185 623 418 73 659 376
Balance at beginning of year 73 659 376 19 721 232
Net profit for the year 111 964 042 53 938 144
Dividends declared - -
Total capital and reserves 508 408 272 387 799 823
SEGMENTAL ANALYSIS
Revenue (external)
31 August 31 August
2008 2007
R R
Wood 222 637 194 212 585 215
Gross 271 156 235 212 585 215
Intersegment (48 519 039) -
Power 492 494 152 66 429 917
Gross 492 744 314 66 429 917
Intersegment (280 162) -
Total 715 131 346 279 015 132
Profit before tax
31 August 31 August
2008 2007
R R
Wood 26 632 092 59 396 585
Gross 32 416 740 59 396 585
Intersegment (5 784 648) -
Power 127 401 496 16 135 375
Gross 127 462 585 16 135 375
Intersegment (61 089) -
Total 154 033 588 75 531 960
Net asset value
31 August 31 August
2008 2007
R R
Wood 290 650 708 311 995 161
Gross 290 650 708 311 995 161
Intersegment - -
Power 217 757 564 75 804 662
Gross 217 757 564 75 804 662
Intersegment - -
Total 508 408 272 387 799 823
COMMENTARY
INTRODUCTION
Austro Group Limited is listed in the Industrial Suppliers sector of the JSE
Limited. The Group is a supplier of specialised and quality branded industrial
equipment to corporate, commercial and infrastructure markets in South Africa.
The Group services blue-chip clients, ranging from heavy industrial groups and
construction groups to wholesalers and manufacturers.
The Group has two focused business offerings - the distribution of professional
woodworking machinery and tooling and the production, supply and rental of
generators and related components, such as industrial engines, alternators and
switch-gear to the generator manufacture and supply industry.
Group structure:
- Power and Related Industry ("Power")
- New Way Motor and Diesel Engineering (Pty) Limited ("New Way")
- Neptune Plant Hire (Pty) Limited and Neptune Plant (Pty) Limited
(collectively "Neptune") (acquired during period)
- Quad Technical Services (Pty) Limited ("Quad") (acquired during period)
- Quinlec Power (Pty) Limited ("Quinlec") (acquired during period)
- Woodworking Machines and Tools ("Wood")
- Austro Woodworking Machines and Tools ("Austro")
- Gearing Moss Supplies (Pty) Limited ("Gearing Moss")
- 2nd Cut Pre-owned Woodworking Equipment (Pty) Limited ("2nd Cut")
The Group`s two main businesses, New Way and Austro, have been in existence for
almost 30 years.
RESULTS OVERVIEW
FINANCIAL REVIEW
The Group delivered strong results through continued demand for its quality
branded products. It has a balanced portfolio of customers spread across
different sectors, with no one customer representing more than 3% of its
business. During the period, the Group saw a further increase in sales into
infrastructure related activity, leading to strong growth in especially its
largest division, Power.
Although the Group made four acquisitions during the year, it continued to
deliver solid organic growth in its core divisions, with 128,2% organic revenue
growth and 98,7% organic operating profit growth.
Income statement
Revenue more than doubled from R279,0 million to R715,1 million. This was mainly
driven by significant growth in the Group`s Power division due to acquisitions
and demand in the alternative power supply industry, as well as constant demand
in its Wood division for woodworking machinery and tooling in the construction
and infrastructure related sectors.
Although the frequency of power outages reduced towards the latter part of the
year, demand for generators has not declined and there was continued growth from
corporate customers, with several large orders for power products.
Operating profit doubled to R154,6 million (2007: R73,2 million), mainly due to
robust growth from New Way, the Group`s established generator, diesel engine and
related components supplier.
Furthermore, the current year`s Power acquisitions of Neptune and Quinlec
delivered above expectations with their contribution to operating profit of
R11,0 million and R3,0 million respectively. The R2,9 million loss in Quad for
the period was due to a new initiative in residential power generation. Since
year end, this initiative has been terminated, returning the business to a
profitable position.
Neptune`s results were included for the entire financial year, whilst Quinlec
and Quad were only included for the last five months. These businesses performed
in line with expectations and will contribute strongly going forward.
Group operating margins decreased from 26,2% to 21,6%, mainly due to increased
overhead costs, most significantly the implementation of more effective senior
management succession planning, as well as other Group related activities. No
further compression of these margins has been seen since year end and the Group
is confident that it can maintain the historic levels.
Earnings per share increased to 26,1 cents per share (2007: 16,1 cents per
share) while headline earnings per share almost doubled to 25,9 cents per share
(2007:14,2 cents per share).
Balance sheet
Group gearing increased during the financial year due to acquisition activity
and increases in working capital, primarily inventory increases. The year end
gearing level was 17,2%. The Group is confident that it can comfortably service
this debt.
Although the Group`s business model requires adequate inventory levels to ensure
speedy delivery to customers, at the close of the financial year, inventory
levels were unusually high. This was as a result of Austro`s bi-annual trade
show that requires displays and demonstrations of the full range of woodworking
equipment to buyers, including the latest technology and bigger production
machines from Europe. As lead times for delivery from international suppliers
have often been longer than anticipated, Austro had to place significant orders
before the show to ensure the required spectrum of equipment was available.
Also, as the show took place just prior to year end, the full effect of the show
sales on inventory levels has not been seen during the current period.
In addition, the rapid growth in New Way sales and changing demands from
clients, together with a global shortage and long lead times from overseas
suppliers resulted in the company having to build inventory holding to guarantee
supplies to customers.
During the period, management focused on improving the planning of its inventory
ordering and is making good progress in reducing the total inventory position
and in implementing improved systems and procedures relating to inventory
planning, ordering and more detailed forecasting.
The average collection period for trade receivables improved by six days during
the current year.
During the period, investment in property, plant and equipment increased by
R49,4 million. This was partly due to acquisitions, as well as R31,5 million
spent on ongoing operational investment, such as expenditure on increasing the
generator hire fleet to satisfy customer demand.
Cash flow
During the period, the Group operations absorbed cash of R71,2 million. This was
partly due to the growth of new initiatives and the high inventory holding at
the end of the year. The Group has no significant long term debt and has
adequate bank facilities to cover its requirements.
The Group is confident that its current cash position can be turned around
within 12 months due to the Group`s historic strong ability to generate cash.
Cash will be generated by the Group trading through high inventory levels along
with improved inventory purchasing systems.
Changes in equity
The Group issued 48 426 881 shares as part payment for the acquisitions of New
Way, Gearing Moss and Neptune.
OPERATING REVIEW
Power
This division contributed 68,9% to Group revenue (2007: 23,8%) and 81,7% to
Group operating profit (2007: 22,0%).
During the year, revenue increased significantly to R492,5 million (2007: R66,4
million) and operating profit increased to R126,2 million (2007: R16,1 million).
This strong growth can be attributed to the new acquisitions, as well as demand
from corporate, industrial and commercial clients for reliable primary and
standby power.
The largest business in this division, New Way, continued to be the Group`s
biggest contributor to revenue and profit. Supplying manufactured generator
sets, industrial diesel engines and related components allowed the company to
broaden its market coverage, including the supply of equipment to other
generator manufacturers.
During the period, the Group acquired Neptune, Quad and Quinlec. The Neptune
acquisition was effective 1 September 2007 ("Neptune effective date") for a
total investment of R28,7 million. Included in the total cost of the investment
are portions relating to the issuing of 4,2 million shares. The fair value of
the Neptune shares on the date of issue was R2,65 per share. On the Neptune
effective date, Neptune had assets of R13,3 million, liabilities of R1,9 million
and resultant goodwill of R17,3 million.
The Quad and Quinlec acquisitions were effective 1 April 2008 ("Quad and Quinlec
effective date"). Quad was acquired for R15,5 million and Quinlec for R16,6
million. Included in the total cost of the investments are portions relating to
the issuing of shares, 2,7 million relating to Quinlec and 2,8 million relating
to Quad. The fair value of the Quinlec and Quad shares on the Quad and Quinlec
effective date was R2,69 per share. On the Quad and Quinlec effective date, Quad
had assets of R8,8 million, liabilities of R4,9 million and resultant goodwill
of R11,6 million. On the Quad and Quinlec effective date, Quinlec had assets of
R14,5 million, liabilities of R7,5 million and resultant goodwill of R9,6
million. The purchase price allocation in terms of IFRS3 has yet to be finalised
for all of the current year acquisitions.
Had the Group acquired these wholly owned subsidiaries at the beginning of the
current financial year, the Group revenue and profit before tax would have been
R805,6 million and R164,1 million respectively.
These bolt-on acquisitions will reduce currently outsourced input costs and
related production delays, as the Group will no longer be reliant on external
suppliers. The Group is confident that these businesses will contribute strongly
going forward.
Wood
This division contributed 31,1% to Group revenue (2007: 76,2%) and 18,3% to
Group operating profit (2007: 78,0%).
During the period, although revenue was maintained, operating profit decreased.
This was partly due to Austro carrying the costs of the Group`s expenses, which
include listing costs and normal head office costs associated with a listed
entity, as well as all costs associated with acquisitions. As Austro was the
originally listed entity, costs were not spread throughout the Group.
Start-up costs were also incurred during the year for several new initiatives
that complement and support existing operations and will lead to increased
market share. These include a dedicated export resource, a larger, more pro-
active local sales force, a more dynamic and focused marketing strategy, a
revamped showroom and service facility in KwaZulu-Natal and a strengthened
Finance & Insurance offering.
The Finance & Insurance offering dovetails with the division`s new used
machinery operation, known as 2nd Cut. Austro buys back older machines through
2nd Cut, by way of a trade-in that gets offset against the purchase price of new
equipment. At the same time, Finance & Insurance provides a finance package for
the end user through registered financial institutions. Austro outsources the
risk to these institutions on a non-recourse basis and is therefore not exposed
to bad debts.
PROSPECTS
The Group has managed to develop its business to that of a leading provider of
professional and branded equipment to fast-growing corporate, industrial and
infrastructure sectors.
In the new year, it is the intention to consolidate its acquisitions and to grow
its organic base.
Over the next few months, the Power division will consolidate its four New Way
operations into one operation to increase efficiencies in manufacturing,
warehousing and handling. It will also focus on continuing to expand its rental
power business on a national basis to increase applications that are unrelated
to power cuts, such as generators for the construction and entertainment
industry, refrigeration and farming.
Power will serve the KwaZulu-Natal region through Quinlec, which manufactures
generators using internally supplied components for both local sales and
rentals. Synergies within Power will further be improved by Quad, which will
manufacture panels and canopies for the division.
Wood is confident of growth, as the sectors it services continue to show
robustness, especially the infrastructure sector where many of the current
projects such as hotels, Gautrain related infrastructure, offices, airports and
stadiums will near completion. The division`s products are mainly used in the
last phase of construction when joinery, office furniture, kitchens, shopfitting
and finishing work take place.
In the coming year, Wood will continue to focus on growing the Tooling division,
strengthening the Finance & Insurance offering and the continuation of strong
marketing activities - all of which will focus on gaining market share at solid
margins.
Management is confident of continued strong Group earnings growth in the next
year, as well as over the long term.
DIVIDEND DISTRIBUTION
Shareholders are advised that a maiden dividend of 2 cents per share has been
declared.
The salient dates in respect of the dividend are as follows:
2009
Last day to trade cum dividend on Friday, 20 February
Shares will trade ex dividend from Monday, 23 February
Record date Friday, 27 February
Payment of dividend on Monday, 2 March
Shareholders may not de-materialise or re-materialise their shares between
Monday, 23 February 2009 and Friday, 27 February 2009, both days inclusive.
BASIS OF PREPARATION
The annual results have been prepared in accordance with IAS 34 (Interim
Financial Reporting). The accounting policies applied in preparing these annual
financial statements are consistent with those applied in the prior year and are
in accordance with International Financial Reporting Standards. This
announcement has been prepared in accordance with the Listings Requirements of
the JSE Limited. These reviewed results have been reviewed by Austro Group
Limited`s auditors PKF (Jhb) Inc. Their unqualified review opinion is available
for inspection at the company`s registered office.
CHANGES TO THE BOARD OF DIRECTORS
During the year, five additional directors were added to the Board of Directors
as part of strengthening the Board to support a listed entity.
The executive directors appointed were:
- JO Freed as Executive Director;
- RJ Friese as Chief Executive Officer; and
- MR Petzer as Financial Director.
The non-executive directors appointed were:
- AJ Phillips as a independent Non-executive Chairman; and
- N Davies as a independent Non-executive Director and Chairman of the Audit
committee.
The previous Chairperson, DS Brouze, stood down as Chairman at his own request,
but will stay on the Board as a Non-executive Director.
During the period, D Rothlisberger resigned as Executive Director and R Jonah
resigned as Non-executive Director.
Subsequent to year end and with immediate effect JR Freed is appointed as an
alternate Executive Director to JO Freed.
By order of the Board
Anthony John Phillips Robert Jurgen Friese
Chairman Chief Executive Officer
Johannesburg
19 November 2008
Non-executive directors:
AJ Phillips* (Chairman), DS Brouze, N Davies*, W Hauser*
(* Independent)
Executive directors:
BD Downs, JO Freed, RJ Friese, MR Petzer
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: 19/11/2008 11:40:30 Produced by the JSE SENS Department.
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