| Fri 20 May 2011, 17:00 | | ASO - Austro Group Limited - Unaudited condensed consolidated interim financial |
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ASO
ASO
ASO - Austro Group Limited - Unaudited condensed consolidated interim financial
results for the six months ended 28 February 2011
AUSTRO GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
Share code: ASO ISIN: ZAE000090882
("the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2011
SUMMARY
Revenue R202,8 million
Cash generated R29,1 million
Headline earnings per share 1,1 cents
Interim distribution per share 2,0 cents
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
For the six For the six For the twelve
months ended months ended months ended
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Revenue 202 780 192 219 401 943
Cost of sales (128 382) (112 655) (242 655)
Gross profit 74 398 79 564 159 288
Other operating income 1 023 1 426 6 430
Operating expenses (75 523) (61 204) (129 082)
(Loss)/profit from (102) 19 786 36 636
operations
Interest received 4 327 5 008 8 567
Interest paid (2 377) (7 537) (11 546)
Profit before taxation 1 848 17 257 33 657
Taxation income/(expense) 2 727 (4 944) (10 527)
Total comprehensive income 4 575 12 313 23 130
for the period
Number of shares in issue 429 890 361 431 413 384 431 413 384
Weighted average number of 431 321 312 431 413 384 431 413 384
shares
Earnings per share and 1,1 2,9 5,4
diluted earnings per share
(cents)
Headline earnings and 1,1 2,9 5,2
diluted headline earnings
per share (cents)
Dividend per share (cents) 2,0 2,0 4,0
Reconciliation of earnings
to headline earnings:
Total comprehensive income 4 575 12 313 23 130
for the period
Net loss/(profit) on 230 42 (1 047)
disposal of plant and
equipment
Taxation effect thereon (32) (6) 147
Headline earnings 4 773 12 349 22 230
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at As at As at
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Assets
Non-current assets 272 908 277 687 273 403
Property, plant and 39 283 46 823 43 597
equipment
Goodwill and other 229 742 229 742 229 742
intangibles
Deferred taxation 3 883 1 122 64
Current assets 316 793 392 941 372 160
Loans receivable - 31 222 -
Inventories 202 325 285 756 254 053
Trade and other receivables 68 219 71 471 75 160
Taxation receivable 5 2 600 557
Cash and cash equivalents 46 244 1 892 42 390
Total assets 589 701 670 628 645 563
Equity and liabilities
Capital and reserves 540 875 546 492 545 705
Share capital 4 4 4
Share premium 321 326 322 103 322 103
Accumulated profits 219 545 224 385 223 598
Non-current liabilities 607 9 550 3 805
Non-interest bearing - 6 851 3 426
liability
Deferred taxation 607 2 699 379
Current liabilities 48 219 114 586 96 053
Current portion of non- 3 426 3 426 3 426
interest bearing liability
Trade and other payables 44 152 41 079 62 730
Taxation payable 641 1 139 4 629
Bank overdraft - 68 942 25 268
Total equity and 589 701 670 628 645 563
liabilities
Net asset value per share 125,8 126,7 126,5
(cents)
Tangible net asset value 72,4 73,4 73,2
per share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
As at As at As at
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Cash flows from operating 33 662 64 113 120 894
activities
Cash generated by 44 639 80 245 150 392
operations
Interest received 4 327 5 008 8 559
Interest paid (2 377) (7 537) (11 538)
Dividends paid (8 628) (8 628) (17 257)
Taxation paid (4 299) (4 975) (9 262)
Cash utilised in investing (338) (31 780) (965)
activities
Cash utilised in financing (4 202) (1 971) (5 395)
activities
Net increase in cash and 29 122 30 362 114 534
cash equivalents
Cash and cash equivalents 17 122 (97 412) (97 412)
at beginning of period
Cash and cash equivalents 46 244 (67 050) 17 122
at end of period
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
As at As at As at
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Share capital and share 321 330 322 107 322 107
premium
Balance at beginning of 322 107 322 107 322 107
period
Share premium decrease due (777) - -
to share buy back
Accumulated profits 219 545 224 385 223 598
Balance at beginning of 223 598 220 700 217 725
period
Total comprehensive income 4 575 12 313 23 130
for the period
Dividends declared and paid (8 628) (8 628) (17 257)
Total capital and reserves 540 875 546 492 545 705
CONDENSED SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
As at As at As at
28 February 28 February 31 August
2011 2010 2010
R`000 R`000 R`000
Revenue (external)
Power 138 803 121 145 268 426
Gross 139 041 122 056 269 800
Intersegment (238) (911) (1 374)
Wood 63 977 71 074 133 517
Gross 63 977 71 074 133 517
Intersegment - - -
Total 202 780 192 219 401 943
Profit before tax
Power 2 639 12 918 32 102
Gross 2 877 13 829 33 476
Intersegment (238) (911) (1 374)
Wood (791) 4 339 1 555
Gross (791) 4 339 1 555
Intersegment - - -
Total 1 848 17 257 33 657
Capital and reserves
Power 441 828 419 525 439 490
Assets 469 121 496 094 493 991
Liabilities (27 293) (76 569) (54 501)
Wood 99 047 126 967 106 215
Assets 120 579 160 260 151 572
Liabilities (21 532) (33 293) (45 357)
Total 540 875 546 492 545 705
COMMENTARY
INTRODUCTION
Austro Group Limited is listed in the Industrial Engineering sector and
Industrial Machinery subsector of the JSE Limited. The Group supplies
specialised and quality branded industrial equipment to corporate, commercial
and infrastructure markets in South Africa and other African markets. The Group
services clients ranging from heavy industrial, mining and construction groups
to wholesalers, retailers and manufacturers.
The Group has two distinct and focused business offerings:
- the production, supply, installation and rental of generators and related
components such as industrial engines, marine engines, alternators, switchgear
and components to the market, including the generator manufacture and supply
industry; and
- the distribution of professional woodworking equipment and tooling.
Group structure:
New Way Power (Pty) Limited ("Power") housing the energy and power related
interests of the Group.
Austro Wood (Pty) Limited ("Wood") housing the woodworking and related interests
of the Group.
The core of these businesses has been in existence for over 30 years.
FINANCIAL REVIEW
Summary
While on the face of it the Group`s interim result is disappointing, as
mentioned in the trading update released earlier this month, there are a number
of material incremental and non-recurring costs that have negatively impacted
the result (discussed further in the next section). Revenue for the interim
period ended 28 February 2011 (R202,8 million) is 5,5% greater than the previous
corresponding period (R192,2 million).
Cash generation remains positive, with a net increase in cash resources of R29,1
million in the period in part attributable to a R51,7 million decrease in
inventory in the six months and of R83,4 million over twelve months.
The capital distribution of 2,0 cents is appropriate when the influence of
material non-recurring costs, strong cash generation, virtually no long term
debt, healthy reserves, improved working capital indicators and some early
indications of improving prospects are considered in concert.
Consolidated statements of comprehensive income
The improvement in revenue mentioned above is driven by revenue growth in Power.
While revenue in Wood contracted there are early indications of some improvement
coming out of results subsequent to the period under review.
The major incremental cost is additional rent (primarily resulting from Power`s
occupation of enlarged and improved premises in Alberton) and the impact of rent
straight-lining. The aggregate impact of incremental (over 2010 interim numbers)
rent and straight-lining is R7,4 million in the profit from operations line and
R5,3 million in total comprehensive income for the period. Management is
negotiating an exit from two buildings leased by the Group, together costing
R6,5 million per annum at current rates (this excludes the additional impact of
straight-lining these leases). The Power business in Gauteng will be
consolidated in a modern facility that is well placed to take advantage of
demand improvement and revised accommodation in Wood will be more appropriate to
current revenue levels, but sufficient to take advantage of demand improvement
and to facilitate this division`s emerging strategies.
Net interest income has improved as a result of improved gearing and cash
generation, discussed below. Taxation is affected by the utilisation of an
assessed loss in the holdings company through interest earned on loans
outstanding from the subsidiary companies: the resulting interest expense in the
subsidiary companies has affected deferred tax balances in the subsidiary
companies.
Consolidated statements of financial position
With the Group`s only long-term liability of R3,4 million now current and due
for payment on 1 March 2012 and cash resources of R46,2 million as opposed to
the net overdraft of R67,1 million in the corresponding period, the Group is not
geared. The major contributor to the positive cash flow is the reduction in
inventory levels. Bringing inventory levels down to more realistic levels has
been and remains a priority for management. Group inventory days are down to 288
days from 463 in the corresponding period and 382 for the last financial year.
The decrease in trade and other receivables is primarily a decrease in other
receivables, however debtor days in relation to trade debtors have improved by
2,3 days over the corresponding period.
The trade and other payables balance incorporates R7,1 million more in straight-
lining provisions than in the corresponding period.
SUBSEQUENT EVENTS
Share buy back
The Company bought back 16,685,889 shares in the Company at 48,9 cents per share
from Richard Moss (a former director of the Company) and associated parties on 6
April 2011, pursuant to an authority obtained in a general meeting of
shareholders on 17 March 2011. The effects of this transaction will be accounted
for in the second half of the 2011 financial year.
Other than the abovementioned transaction, there have been no material events
subsequent to the end of the interim period that have not been reflected in the
financial statements for that period.
OPERATING REVIEW
Power
The relative importance of this division to the Group`s revenue has increased to
68,5% of total revenue (2010: 63%).
Within the division Neptune (the generator rental business) contributed 3,4%
less to the division`s revenue (6,4%) than in 2010 (9,8%). This is due to strong
growth coming out of New Way (the supplier and manufacturer of generator sets,
industrial diesel engines and related components) and a 25,5% contraction in
Neptune`s revenue. Neptune faces growing competition in the market.
Consolidation of Quad (which manufactures electrical panels and soundproof
enclosures), Quinlec (which specialises in the installation and maintenance of
generators as well as compliance certifications) and New Way has continued to
the point that Quad and Quinlec have effectively been absorbed into New Way and
one of the property leases that management intends to exit results from this
synergy.
Profit before tax is affected by an inventory write-off and bad debt provision,
as well as an increased rent straight-lining burden and a material warranty
payment. These items together amount to R12,3 million before tax.
Wood
The interim 2011 period has been a difficult period for this division and the
contribution of the division to Group revenue is 5,4% less than 2010.
A material retrenchment cost, a reduction in foreign exchange gains, the impact
of rent straight-lining and increased inventory obsolescence provision together
account for R4 million of the R5,1 million negative variance in the profit
before tax numbers contrasted year-on-year.
During the interim period this division saw a change in its chief executive
officer and a great deal is being done to simplify the business structure and to
secure new markets at the time of writing. Also as mentioned there is some
indication of top line improvement in March 2011. The division expects the
demand for its equipment to increase significantly after the bi-annual
international trade show in June.
PROSPECTS
The Group is well positioned to take advantage of a general recovery in the
economy when it occurs. In November, New Way officially opened new premises in
Alberton. The consolidation of various other premises into the Jacoba Street
premises gives the Power division a good base from which to operate and take
advantage of improving market conditions as the new facility has greater
capacity than previous facilities.
In addition, during the last six months the management team of the Wood division
have focused a great deal of attention on building a meaningful strategy for the
coming three years. This strategy includes expansion into new and complementary
markets as well as expanding product offering into existing markets and
deepening the penetration of the tooling and supply business unit into areas not
previously covered. A number of new key resources have been recruited during
this time.
As mentioned, there are plans to reduce the Group`s rent bill through an exit
from two leased premises, one in each of the divisions. Management will maintain
a focus on the tight control of costs. The wood division has rationalised
various administrative functions in the period under review.
Finally, the variances pointed out in the May 2011 trading update and reiterated
here serve to demonstrate that the performance of the Group has been impacted by
some non-recurring costs and by the application of rent straight-lining. It is
hoped that the second half of the year will more realistically reflect true
trading and be less hampered by other factors.
CAPITAL DISTRIBUTION
Shareholders are advised that a cash distribution of 2,0 cents per share has
been declared and will be paid by way of a capital reduction out of share
premium.
The salient dates in respect of the distribution
are as follows
Last day to trade cum distribution on Friday, 8 July 2011
Trading ex distribution commences on Monday, 11 July 2011
Record date Friday, 15 July 2011
Payment of distribution on Monday, 18 July 2011
Shareholders may not dematerialise or rematerialise their shares between Monday,
11 July 2011 and Friday, 15 July 2011, both dates inclusive
BASIS OF PREPARATION
The unaudited interim results have been prepared in accordance with IAS 34
(Interim Financial Reporting), AC500 series of interpretations. The accounting
policies applied in preparing these interim financial statements are consistent
with those applied in the prior year and are in accordance with International
Financial Reporting Standards. This announcement was prepared in accordance with
the Listings Requirements of the JSE Limited and Companies legislation. These
interim results have not been audited or reviewed by the company`s auditors.
CHANGES TO THE BOARD OF DIRECTORS
Appointments: Philip Sigsworth (24 November 2010) and Charles Jacobs (4 February
2011).
Resignation: Richard Moss (31 December 2010)
By order of the Board
AJ Phillips P Sigsworth
Chairman Group Financial Director
Johannesburg
17 May 2011
Non-executive directors:
AJ Phillips* (Chairman), DS Brouze, GS Nzalo*, U Schackermann* (German), (*
Independent)
Executive directors:
JO Freed, JR Freed (Alt JO Freed), C Jacobs, P Sigsworth
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
Visit our website: www.austrogrouplimited.com
Date: 20/05/2011 17:00:01 Produced by the JSE SENS Department.
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