| Tue 9 Nov 2010, 16:24 | | ART - Argent Industrial Limited - Unaudited Interim Results for the six months |
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ART
ART
ART - Argent Industrial Limited - Unaudited Interim Results for the six months
ended 30 September 2010
Argent Industrial Limited
Registration number: 1993/002054/06
(Incorporated in the Republic of South Africa)
("the Group" or "the Company")
Share code: ART ISIN code: ZAE000019188
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Financial Highlights
Interim dividend 4 cents
Revenue Up 16.5%
Headline Earnings per Share 36 cents
Basic Earnings per Share 36.4 cents
Gearing 27.9%
Net Asset Value per Share 397.7 cents
The unaudited financial statements are presented on a consolidated basis.
Unaudited Unaudited Audited
Condensed consolidated income six months six months year ended
statement
for the period ended 30 Sept 30 Sept 31 Mar
2010 2009 2010
R 000
Revenue 869,492 746,099 1,464,494
Operating profit before interest 61,077 21,666 49,447
Finance costs 20,358 20,388 41,061
Profit before taxation 40,719 1,278 8,386
Taxation 7,816 (128) (3,269)
Profit for the year 32,903 1,406 11,655
Attributable to non-controlling (316) (132) 76
interest
Attributable to owners of the parent 33,219 1,538 11,579
Basic earnings per share (cents) 36.4 1.7 12.7
Headline earnings per share (cents) 36.0 1.8 14.4
Dividends per share (cents) 4.0 - 9.0
Supplementary information
Shares in issue (000)
- at end of period 91,350 91,157 91,350
- weighted average 91,350 91,157 91,221
Cost of sales (R 000) 654,637 575,802 1,111,726
Depreciation and amortisation (R 000) 19,845 19,997 37,723
Calculation of headline earnings (R
000)
Earnings attributable to ordinary 33,219 1,538 11,579
shareholders
Profit on disposal of property, plant (487) - (1,264)
and equipment
Impairment of property, plant and - - 3,194
equipment
Loss on disposal of property, plant - 103 461
and equipment
Total tax effects of adjustments 136 - (364)
Headline earnings attributable to 32,868 1,641 13,606
ordinary shareholders
Unaudited Unaudited Audited
Condensed Consolidated Statement of six months six months year ended
Comprehensive Income 30 Sept 30 Sept 31 Mar
for the period ended 2010 2009 2010
R 000
Profit for the year 32,903 1,406 11,655
Other comprehensive income for the
period, net of tax
Exchange differences on translating (1,525) (4,595) (6,060)
foreign operations
Realisation of revaluation of - - (2,175)
properties
Total comprehensive income for the 31,378 (3,189) 3,420
year
Attributable to equity holders of the
- Parent 31,694 (3,057) 3,344
- Non-controlling interest (316) (132) 76
31,378 (3,189) 3,420
Unaudited Unaudited Audited
Condensed Consolidated Statement of at 30 Sept at 30 Sept at 31 Mar
Financial Position 2010 2009 2010
for the period ended
R 000
ASSETS
Non-current assets
Property, plant and equipment 891,677 888,840 888,582
Intangibles 289,676 291,095 291,042
Long term loan 10,265 9,365 9,817
1,191,618 1,189,300 1,189,441
Current assets
Inventories 518,519 445,896 474,230
Trade and other receivables 333,389 308,921 296,985
Taxation - 1,392 1,730
Bank balance and cash 271 276 277
852,179 756,485 773,222
TOTAL ASSETS 2,043,797 1,945,785 1,962,663
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 451,129 451,113 451,129
Reserves 127,911 137,215 127,946
Retained earnings 697,740 652,151 664,521
Ordinary shareholders` funds 1,276,780 1,240,479 1,243,596
Non-controlling interest 8,289 8,397 8,605
Total shareholders` funds 1,285,069 1,248,876 1,252,201
Non-current liabilities
Interest-bearing borrowings 237,632 251,335 199,588
Deferred tax 59,253 58,315 53,666
296,885 309,650 253,254
Current liabilities
Trade and other payables 189,680 195,056 216,056
Taxation 1,952 - -
Bank overdraft 149,818 71,912 126,171
Current portion of interest-bearing 120,393 120,291 114,981
borrowings
461,843 387,259 457,208
TOTAL EQUITY AND LIABILITIES 2,043,797 1,945,785 1,962,663
Net asset value per share (cents) 1,397.7 1,360.8 1361.4
Condensed consolidated statement of Unaudited Unaudited Audited
cash flows six months six months year ended
for the period ended 30 Sept 30 Sept 31 Mar
2010 2009 2010
R 000
Cash generated from operations (27,142) 120,228 163,428
Interest paid (20,358) (20,388) (41,061)
Dividends paid - (8,201) (8,201)
Taxation refunded(paid) 1,693 3,697 3,626
Cash flows from operating activities (45,807) 95,336 117,792
Cash flows from investing activities (21,302) (97,861) (114,811)
Cash flows from financing activities 43,456 (5,361) (65,125)
Net decrease in cash and cash (23,653) (7,886) (62,144)
equivalents
Cash and cash equivalents at (25,894) (63,750) (63,750)
beginning of period
Cash and cash equivalents at end of (149,547) (71,636) (125,894)
period
Consoli- Share Share Employee Treasury Revalua-
dated State-ment of capital Pre- share shares tion
Changes in Equity for the mium incen- reserve
year ended 30 September tive
2010 reserve
R 000
Balance at 31 March 2009 4,825 540,818 17,042 (94,530) 126,572
Total comprehensive income - - - - -
for the period
Dividends - - - - -
Less dividend on treasury - - - - -
shares
Balance at 30 September 4,825 540,818 17,042 (94,530) 126,572
2009 - unaudited
Net treasury movement - - - 16 -
Share based payments - - 1,087 - -
Transfer of reserve to - - (6,716) - -
Retained earnings
Total comprehensive income - - - - (2,175)
for the period
Balance at 31 March 2010 4,825 540,818 11,413 (94,514) 124,397
Share based payments - - 1,490 - -
Total comprehensive income - - - - -
for the period
Balance at 30 September 4,825 540,818 12,903 (94,514) 124,397
2010
Consoli- Reserve Retained Minority Total
dated State-ment of on earnings Interest ordinary
Changes in Equity for the Transla- Share-
year ended 30 September tion holders`
2010 (continued) of funds
foreign
opera-
tion
R 000
Balance at 31 March 2009 (1,804) 654,427 8,529 1,255,879
Total comprehensive income 4,595) 1,538 (132) (3,189)
for the period
Dividends - (8,684) - (8,684)
Less dividend on treasury - 483 - 483
shares
Balance at 30 September (6,399) 647,764 8,397 1,244,489
2009 - unaudited
Net treasury movement - - - 16
Share-based payments - - - 1,087
Transfer of reserve to - 6,716 - -
Retained earnings
Total comprehensive income (1,465) 10,041 208 6,609
for the period
Balance at 31 March 2010 (7,864) 664,521 8,605 1,252,201
Share based payments - - - 1,490
Total comprehensive income (1,525) 33,219 (316) 31,378
for the period
Balance at 30 September (9,389) 697,740 8,289 1,285,069
2010
Segmental review
Steel Automotive Manufacture
trading Products of home and
office
products
R 000
Business segments
for the six months ended 30
September 2010 - unaudited
Revenue from external sales 383,965 70,946 275,346
Profit before tax 18,031 (8,516) 12,792
Taxation - - -
Profit for the year - - -
for the six months ended 30
September 2009 - unaudited
Revenue from external sales 222,243 48,619 281,600
Profit before tax 6,863 (12,377) 10,950
Taxation - - -
Profit for the year - - -
for the year ended 31 March 2010 -
audited
Revenue from external sales 594,559 132,667 504,071
Profit before tax 16,627 (26,655) 14,269
Taxation - - -
Profit for the year - - -
Segmental review (continued)
Fabricators Non- Consolidated
steel
related
products
R 000
Business segments
for the six months ended 30
September 2010 - unaudited
Revenue from external sales 64,780 74,455 869,492
Profit before tax 9,019 9,393 40,719
Taxation - - 7,816
Profit for the year - - 32,903
for the six months ended 30
September 2009 - unaudited
Revenue from external sales 60,637 133,000 746,099
Profit before tax 3,790 (7,948) 1,278
Taxation - - (128)
Profit for the year - - 1,406
for the year ended 31 March 2010 -
audited
Revenue from external sales 117,738 115,459 1,464,494
Profit before tax 4,581 (436) 8,386
Taxation - - (3,269)
Profit for the year - - 11,655
Financial Overview
Significantly better results were achieved for the period ended 30 September
2010 compared to the six months ended 30 September 2009, even against the
backdrop of extended recessionary conditions and a strong South African Rand.
The recovery from the global financial crisis has been encouraging, but to
date, this has only had a minor effect on Argent`s Steel and Automotive
sectors which materially influenced the Group`s financial performance for the
period under review.
Revenue rose by 16.5%, while margins were still under pressure due to a very
competitive environment, depressed steel prices and the impact of the
appreciating Rand. Deflation was evident in all sectors as suppressed demand
drove product prices down. However, the majority of Argent`s operations
achieved gains in market share as they traded aggressively and took advantage
of any evidence of market weakness. Operating expenses were well controlled
across the Group, reflecting a decline on the prior year.
The Group`s balance sheet position remains strong and appropriately
capitalised.
Argent`s attitude to gearing remains appropriate in the current climate.
Herewith a summary of the Group`s results for the six months:
- Revenue increased by R123.4 million
- Operational profit increased by R39.4 million
- Headline earnings up by 1902.9%
- Headline earnings per share up 1898.7%
- Gearing contained to 27.9%
Operational Review
The Group delivered a much improved trading performance. Consumer demand for
products from the Group`s Home and Office sector held up quite well,
particularly in the case of Xpanda Security and Toolroom Services. Exports
however, declined particularly on the automotive front. The infrastructure and
construction industry remains subdued, impacting demand for steel and concrete
products. Concerted efforts by operations management to optimise inventory
levels and manage debtor delinquencies ensured an improvement in returns on
funds employed across all regions. The 2010 FIFA World Cup, which was a
success as a sporting event, did offer Argent an opportunity to host customers
from abroad, but did not have a material impact on the reported results.
Steel Trading
The Group`s steel trading division incorporates both Phoenix Steel and Gammid
Trading.
Phoenix Steel, which trades and beneficiates mostly mild steel products,
experienced a very difficult six months with both market demand and prices
being depressed. This resulted in margins remaining under pressure throughout
the period under review. While demand and pricing in the local steel market
remain uncertain, Phoenix`s overall position has improved with steel margins
showing signs of some improvement of late. Stock levels have been reduced to
more manageable levels and valued at current market prices. Phoenix`s steel
imports have been continuing at very competitive prices and this has
alleviated some of the margin pressure experienced during the period under
review. The Group has made a decision to close Phoenix Steel East London due
to the demand for all products in this area remaining exceedingly poor.
Gammid Trading, a specialist aluminium and stainless steel trader, suffered
similar market conditions with both demand and pricing under pressure. The
Company has, however, experienced a marked improvement in both margins and
demand over the past few months and is expecting a much improved result for
the final six months of the 2011 financial year. The importing of stainless
steel has opened up many new markets for Gammid and this is expected to
continue going forward, while the price of aluminium is also beginning to
climb, which will have a positive effect on the top line.
Manufacturing of Home and Office products
The sector performed well with good results achieved by most of its divisions.
Cedar Paints achieved a more than satisfactory set of results and the
Company`s management is confident that Cedar Paints` growth pattern will
continue. The Company successfully launched the new branding for its complete
range of domestic and industrial paints. This, together with a drive to
recruit experienced professionals from within the industry, has led the
Company to make significant inroads into the local market, substantially
increasing its market share.
Castor and Ladder held its own through the financial crisis and while retail
sales trended upwards, the industrial access market was under some pressure.
Aluminium prices have increased over recent months and this is leading to
increased sales of aluminium-based products as customers are moving quickly to
take advantage of the lower prices while stocks last.
Jetmaster`s local sales were disappointing, but in line with consumer spending
patterns. However, exports to Australia and New Zealand remained buoyant. A
new and innovative "go-green" product that is a world leader in heat output
with low emission levels has been developed and is showing strong acceptance
in the local and international market. Overall sales are showing a positive
trend and the second half year is expected to be far better than the first
half.
At Toolroom Services and Atomic Office Equipment the impact of slower consumer
demand has eased and revenue is showing a return to previous levels. The order
books for both companies are strong heading into the festive season. Toolroom
Services is developing a new range of racking to be launched in January 2011
which will offer a lucrative new revenue stream. Argent is also in the process
of purchasing the building that Atomic Office Equipment currently leases for a
purchase price of R12.7 million.
Tricks Wrought Iron Services has proven to be the star performer of the sector
and is proving to be a very valuable acquisition for the Group. The Company
continues to be very active in its various areas of expertise with exports to
the United Kingdom also still at satisfactory levels. Tricks has a full order
book for both its fabricated and palisade fencing products, and have been very
involved in the New Multi-Product Pipeline Project and the Dube Trade Zone
near the new King Shaka International Airport. In addition, the Company has
grown its market share in the manufacturing of pallets and associated items
used in the transportation of goods, while still performing extremely strongly
in its traditional markets including the supply of structures for the
sanitation industry and the manufacture and supply of fencing and gates for
cellular communication installations.
Burbage Iron Craft has started experiencing an increase in consumer demand and
sales are certainly improving. It is expected that the Company`s performance
during second half will outperform the first six months.
Barrier Angelucci, a company that specialises in the manufacture and
distribution of roller shutter doors and the modification and installation of
automatic teller machines, has proven to be a great fit for Argent and is now
fully integrated into the Group. The Company contributed positively to the
Group`s results for the six months and has also now penetrated new markets in
southern Africa with new and innovative products, which will ensure even
better future results.
Xpanda Security performed very well in the local market through the economic
downturn and has a satisfactory order book going forward. This can partly be
attributed to the fact that security barriers have become a basic necessity,
even in an economic downturn. Export sales have been somewhat disappointing
but there are definite signs that volumes will soon revert to the levels
experienced a few years back. Xpanda`s performance going forward will be
underpinned by its ability to keep developing new, innovative and cost
effective products, while at the same time being the only security barrier
company in South Africa able to secure just about any opening with just about
any type of product.
Fabricators
Koch`s Cut & Supply Steel Centre continues to perform solidly in what has
become a very competitive market segment while Hendor Mining Supplies has
enjoyed an excellent set of results in line with the reasonably strong level
of local mining activity. In addition, Hendor has managed to enhance its
operating margins through better working capital management, improved
purchasing policies and enhanced production efficiencies. The outlook for both
companies indicates an even stronger second half, with improving margins.
Automotive Sector
This sector is still the worst affected by the financial crisis. Cumulatively
the automotive businesses produced a net loss of R8.5 million for the period
under review all due to a poor order book and industry strikes. In light of
this reality it has been decided to amalgamate Giflo Engineering and Excalibur
Vehicle Accessories into one business and premises. This will directly result
in a reduction of overall cost and an optimisation of synergies and resources.
All Lite Steel Products has similarly been affected by the depressed
automotive sector while Sentech Industries has managed to increase revenue to
the point that they are now in a profitable position. Due to the
aforementioned substantial overhead reductions and the enhanced allocation of
resources, Argent is expecting far better results from all of these operations
over the balance of the 2011 financial year, while significant improvement
will continue into the first quarter of the 2012 financial year.
Non-Steel Related Products
Megamix and Villiersdorp Quarries have experienced a steady decline in margin
over the period under review. This, together with the sluggish construction
industry, has naturally negatively affected operating profitability. The
Company has repositioned itself back into the low cost housing market which
has improved the order book.
Allan Maskew has enjoyed a strong recovery in both sales and profitability due
to the recovery in the transport and heavy earthmoving industries, and more
specifically as a result of the Company`s diversification into the mining
industry through the manufacture of the rubber and polyurethane screen panels.
The outlook for the remainder of the year is also positive especially in light
of the increased range of panels being introduced.
New Joules Engineering has seen a decline in capital tenders due to a number
of new railroad projects being placed on the backburner, but has a more than a
sufficient work load due to maintenance and replacement work.
Retrenchments
There were no further retrenchments during the reporting period and the Group
is now correctly staffed. The Group is committed to retrench 14 employees in
East London at a cost of R104 000 due to the closure of this branch.
Subsequent events
No significant events have occurred in the period between the reporting date
and the date of this report.
Outlook
Both the local and international economies are showing signs of recovery, and
this is reflected in the overall performance of Argent when comparing the
period under review to the same period during the previous financial year.
Argent has taken this opportunity to reduce inventory levels and trim away
inefficiencies in the businesses to ensure a strong and sustained recovery as
market conditions continue to improve to any degree. With the reduction in
stock levels being evident at the end of October, it is fair to say that
Argent has never before been so well positioned and prepared to benefit from
an upturn in the South African and international economies. The overall
outlook for the Group is very positive, particularly now that a more focused
strategy for the automotive sector is being implemented. Lagging steel prices
remain a concern for Argent and the industry as a whole.
Traditionally the second half of the financial year is better than the first
half and this is again evident in the latest financial reports being received
from the various operations as this report is being written, so overall the
Group expects a significantly better full year compared to last year.
Dividend
An interim dividend of 4 cents has been declared, subsequent to 30 September
2010, payable on Monday, 17 January 2011 to shareholders recorded in the
register at close of business on Friday, 14 January 1011, being the record
date in order to participate in such dividend. The last day to trade cum-div
is Friday, 7 January 2011. The shares will trade ex-div on Monday, 10 January
2011.
Share certificates may not be dematerialised or rematerialised between Monday,
10 January 2011 and Friday, 14 January 2011, both days inclusive.
Basis of presentation
The condensed financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), IAS 34 - Interim Financial
Reporting, AC 500 standards as issued by the Accounting Practices Board and in
compliance with the South African Companies Act, 1973 (Act No. 61 of 1973) and
the Listings Requirements of the JSE Limited. The accounting policies are
consistent with those of the previous financial period, with the exception of
the adoption of the following new and amended standards and interpretations,
in response to changes to IFRS. These amendments had no significant impact on
these results.
- IAS 7 - (revised) Statement of Cash flows
- IAS 38 - (revised) Intangible Assets
- IAS 27 - (revised) Consolidated and Separate Financial Statements
- IFRS 3 - (revised) Business Combinations
The condensed interim financial statements, including any reference to future
financial performance included herein, have not been reviewed or audited by
the Group`s auditors.
On behalf of the Board
T.R. Hendry CA(SA) Umlanga Rocks
Chief Executive Officer 9 November 2010
Registered Office: First floor, Ridge 63, 8 Sinembe Crescent,
La Lucia Ridge, 4019
Tel: +27 31 5847702
Auditors: Grant Thornton
Sponsors: PSG Capital (Pty) Ltd
Transfer secretaries: Link Market Services South Africa,
5th floor, 11 Diagonal Street,
Johannesburg, 2000
Directors:
MP Allen, MJ Antonic, Ms SJ Cox, PA Day (Non-executive), JA Etchells
(Financial Director), 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: 09/11/2010 16:24:02 Produced by the JSE SENS Department.
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