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ART
ART
ART - Argent Industrial Limited - Unaudited interim condensed
consolidated results for the six month ended 30 September 2011
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
UNAUDITED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTH
ENDED 30 SEPTEMBER 2011
FINANCIAL HIGHLIGHTS
- Revenue up 5.1%
- Headline earnings per share 42.6 cents
- Headline earnings per share up 18.4%
- Basic earnings per share 42.1 cents
- Gearing 20.1%
- Net asset value per share 1441.0 cents
- Interim dividend per share 4 cents
The unaudited financial statements are presented on a consolidated
basis
Unaudited Unaudited Audited
Condensed consolidated six six year
income statement months months ended
for the period ended 30 Sept 30 Sept 31 Mar
2011 2010 2011
R 000
Revenue 913,565 869,492 1,754,867
Operating profit before 66,170 61,077 101,963
finance costs
Finance income 405 515 1,245
Finance costs (18,793) (20,873) (41,183)
Profit before taxation 47,782 40,719 62,025
Taxation 9,104 7,816 7,780
Profit for the period 38,678 32,903 54,245
Attributable to non- 115 (316) 284
controlling interest
Attributable to owners 38,563 33,219 53,961
of the parent
Basic earnings per share 42.1 36.4 59.0
(cents)
Diluted earnings per 40.8 34.5 57.2
share (cents)
Headline earnings per 42.6 36.0 55.3
share (cents)
Diluted headline 41.2 34.2 53.6
earnings per share
(cents)
Dividends per share 4.0 4.0 4.0
(cents) - interim
Dividends per share 3.0
(cents) - final
Dividends per share 4.0 4.0 7.0
(cents) - total
SUPPLEMENTARY INFORMATION
Shares in issue (000)
- at end of period 91,540 91,350 91,540
- weighted average 91,540 91,350 91,413
Cost of sales (R 000) 710,520 661,999 1,357,242
Depreciation and 18,281 19,845 39,541
amortisation (R 000)
CALCULATION OF HEADLINE EARNINGS (R 000)
Earnings attributable to 38,563 33,219 53,961
ordinary shareholders
Profit on disposal of (487) (3,395)
property, plant and
equipment
Loss on disposal of 595
property, plant and
equipment
Total tax effects of (167) 136
adjustments
Headline earnings 38,991 32,868 50,566
attributable to ordinary
shareholders
Unaudited Unaudited Audited
Condensed consolidated six six year
statement of months months ended
comprehensive income
for the period ended 30 Sept 30 Sept 31 Mar
2011 2010 2011
R 000
Profit for the period 38,678 32,903 54,245
Other comprehensive
income for the period,
net of tax
Exchange differences on 1,015 (1,525) (2,056)
translating foreign
operations
Realisation of (8,728) (5,119)
revaluation of
properties
Reversal of revaluation
of properties (782)
Impairment of property (783)
Total comprehensive 30,183 31,378 46,287
income for the period
Attributable to equity
holders of the
- parent 30,068 31,694 46,003
- non-controlling 115 (316) 284
interest
30,183 31,378 46,287
Unaudited Unaudited Audited
Condensed consolidated at at at
statement of financial 30 Sept 30 Sept 31 Mar
position for the period 2011 2010 2011
ended
R 000
ASSETS
Non-current assets
Property, plant and 873,616 891,677 865,177
equipment
Intangibles 296,017 289,676 288,444
Long-term loan 11,125 10,265 10,688
1,180,758 1,191,618 1,164,309
Current assets
Inventories 447,537 516,357 485,180
Trade and other 384,667 332,632 355,008
receivables
Taxation 92
Bank balance and cash 333 271 257
832,537 849,260 840,537
Non-current assets held 25,573
for sale
Total assets 2,013,295 2,040,878 2,030,419
Equity and liabilities
Capital and reserves
Share capital and 451,129 451,129 451,129
premium
Reserves 115,146 127,911 122,720
Retained earnings 752,833 691,866 708,946
Attributable to owners 1,319,108 1,270,906 1,282,795
of company
Non-controlling interest 9,004 8,289 8,889
Total shareholders` 1,328,112 1,279,195 1,291,684
funds
Non-current liabilities
Interest-bearing 182,492 237,632 216,903
borrowings
Deferred tax 62,670 58,648 56,429
245,162 296,280 273,332
Current liabilities
Trade and other payables 202,481 193,240 240,052
Taxation 341 1,952
Bank overdraft 153,071 149,818 136,278
Current portion of
interest-bearing 84,128 120,393 89,073
borrowings
440,021 465,403 465,403
Total equity and 2,013,295 2,040,878 2,030,419
liabilities
Net asset value per 1,441.0 1,391.2 1,401.3
share (cents)
Unaudited Unaudited Audited
Condensed consolidated six six year
statement of cash flows months months ended
for the period ended 30 Sept 30 Sept 31 Mar
2011 2010 2011
R 000
Cash generated from 55,348 (27,142) 88,011
(utilised in) operations
Finance income 405 515 1,245
Finance costs (18,793) (20,873) (41,183)
Dividends paid (2,746) (3,662)
Normal taxation (paid) (342) 1,693 386
refunded
Cash flows from 33,872 (45,807) 44,797
operating activities
Cash flows from (8,812) (21,302) (46,523)
investing activities
Cash flows from (41,777) 43,456 (8,401)
financing activities
Net decrease in cash and (16,717) (23,653) (10,127)
cash equivalents
Cash and cash (136,021) (125,894) (125,894)
equivalents at beginning
of period
Cash and cash (152,738) (149,547) (136,021)
equivalents at end of
period
Consolidated statement Share Share Employee
of changes in equity capital premium share
for the period ended incentive
30 September 2011 reserve
R 000
Balance at 31 March 2010
- restated 4,825 540,818 11,413
Share based payments 1,490
Total comprehensive
income for the period
Balance at 30 September
2010 - unaudited 4,825 540,818 12,903
Share based payments 1,242
Total comprehensive
income for the period
Dividends
Less dividend on
treasury shares
Balance at 31 March 2011 4,825 540,818 14,145
Reversal of revaluation
of properties
Share based payments 921
Transfer of reserve to
retained earnings
Total comprehensive
income for the period
Dividends
Less dividend on
treasury shares
Balance at 30 September
2011 4,825 540,818 15,066
Consolidated Treasury Revaluation Foreign
statement of changes shares reserve currency
in equity translation
for the period ended reserve
30 September 2011
(continued)
R 000
Balance at 31 March
2010 - restated (94,514) 124,397 (7,864)
Share based payments
Total comprehensive
income for the period (1,525)
Balance at 30
September 2010 - (94,514) 124,397 (9,389)
unaudited
Share based payments
Total comprehensive
income for the period (5,902) (531)
Dividends
Less dividend on
treasury shares
Balance at 31 March
2011 (94,514) 118,495 (9,920)
Reversal of
revaluation of (782)
properties
Share based payments
Transfer of reserve 1,015
to retained earnings (8,728)
Total comprehensive
income for the period
Dividends
Less dividend on
treasury shares
Balance at 30
September 2011 (94,514) 108,985 (8,905)
Consolidated Retained Non- Total
statement of changes earnings controlling shareholders
in equity interest funds
for the period ended
30 September 2011
(continued)
R 000
Balance at 31 March
2010 - restated 658,647 8,605 1,246,327
Share based payments 1,490
Total comprehensive
income for the period 33,219 (316) 31,378
Balance at 30
September 2010 - 691,866 8,289 1,279,195
unaudited
Share based payments 1,242
Total comprehensive
income for the period 20,742 600 14,909
Dividends (3,860) (3,860)
Less dividend on
treasury shares 198 198
Balance at 31 March
2011 708,946 8,889 1,291,684
Reversal of
revaluation of (782)
properties
Share based payments 921
Transfer of reserve 8,070 357
to retained earnings
Total comprehensive 115 38,678
income for the period 38,563
Dividends (2,895) (2,895)
Less dividend on 149 149
treasury shares
Balance at 30 752,833 9,004 1,328,112
September 2011
SEGMENTAL REVIEW
Steel Automotive Manufacture
trading products of home and
office
products
R 000
Business segments
for the six months ended 30 September 2011 - unaudited
Revenue from external
sales 346,975 69,386 340,595
Profit before
taxation 18,808 (8,127) 17,989
Taxation
Profit for the period
for the six months ended 30 September 2010 - unaudited
Revenue from external
sales 383,965 70,946 275,346
Profit before
taxation 18,031 (8,516) 12,792
Taxation
Profit for the period
for the year ended 31 March 2011 - audited
Revenue from external
sales 659,335 150,834 662,582
Profit before
taxation 14,197 6,052 (4,363)
Taxation
Profit for the year
SEGMENTAL REVIEW (continued)
Fabricators Non-steel Consolidated
related
products
R 000
Business segments
for the six months ended 30 September 2011 - unaudited
Revenue from external
sales 67,046 89,563 913,565
Profit before
taxation 10,138 8,974 47,782
Taxation 9,104
Profit for the period 38,678
for the six months ended 30 September 2010 - unaudited
Revenue from external
sales 64,780 74,455 869,492
Profit before
taxation 9,019 9,393 40,719
Taxation 7,816
Profit for the period 32,903
for the year ended 31 March 2011 - audited
Revenue from external
sales 130,241 151,875 1,754,867
Profit before
taxation 18,251 27,888 62,025
Taxation 7,780
Profit for the year 54,245
South Rest of Consolidated
Africa the
world
Geographical segments
for the six months ended 30 September 2011 - unaudited
Revenue from external 889,727 23,838 913,565
sales
Profit before 43,460 4,322 47,782
taxation
Taxation 9,104
Profit for the period 38,678
for the six months ended 30 September 2010 - unaudited
Revenue from external 838,576 30,916 869,492
sales
Profit before 39,804 915 40,719
taxation
Taxation 7,816
Profit for the period 32,903
for the year ended 31 March 2011 - audited
Revenue from external 1,706,056 48,811 1,754,867
sales
Profit before 61,085 940 62,025
taxation
Taxation 7,780
Profit for the year 54,245
FINANCIAL OVERVIEW
Argent Industrial Limited (hereafter referred to as "the Group")
produced a significantly better set of results for the six months ended
30 September 2011. The results, although an improvement on the same
period last year, were heavily affected by the July strike action in
the steel, engineering and chemical industries that effectively closed
three quarters of the Group`s operations for a period of three weeks.
The most significant improvement in the Group as a whole is the return
of better margins being experienced in a number of the businesses.
The Group`s balance sheet remains strong with gearing now down to
20.1%.
FINANCIAL HIGHLIGHTS
- Revenue up 5.1%
- Headline earnings per share 42.6 cents
- Headline earnings per share up 18.4%
- Basic earnings per share 42.1 cents
- Gearing 20.1%
- Net asset value per share 1441.0 cents
- Interim dividend per share 4 cents
OPERATIONAL REVIEW
The Group`s results were adversely affected by the strike actions
mentioned above. We estimate that this event decreased profit before
taxation by R14 million. A further drain on the results is the
continued loss incurred by the Group`s automotive division, which is a
result of industry overcapacity and clients closing plants.
STEEL TRADING
The Group`s steel trading division incorporates both Phoenix Steel and
Gammid Trading.
Phoenix Steel, which trades and beneficiates mostly carbon steel
products, performed impressively during the period under review with
volumes in many cases restored to historical levels, except for Phoenix
Steel Middelburg and Phoenix Steel Gauteng, which were both under
margin pressure. The Group`s strategy to source steel globally is
proving to be the correct route and we will continue to purchase
according to this policy for the foreseeable future.
Gammid Trading, a specialist aluminium and stainless steel trader,
experienced a difficult six months with both demand and prices still
being under pressure. Gammid`s performance was, however, an improvement
on the previous six months.
Both the aforementioned operations were heavily affected by the strike
which included damage to the Phoenix Steel Gauteng premises as well as
four of the company`s trucks and two staff vehicles.
MANUFACTURING OF HOME AND OFFICE PRODUCTS
This sector performed well with good results achieved by most of the
divisions.
Cedar Paint`s revenue has continued to grow and they have managed to
secure a supply line into Massmart. This company was the hardest hit by
the chemical industry strike action, resulting in a five week closure.
Castor and Ladder once again holds its own and continues to develop new
products and grow its market share.
Jetmaster experienced a difficult six months as a result of the
depressed residential construction industry and the fact the entire
Jetmaster operation was relocated recently. On the positive side,
Jetmaster opened Life `n Leisure shops in Canal Walk in Cape Town and
Clearwater Mall in Gauteng.
Toolroom Services and Atomic Office Equipment are performing according
to expectations and both have full order books. Toolroom Services` new
shelving range is selling well and we are now deep into the planning
phase to extend the range.
Tricks Wrought Iron Services is fortunate enough to have a full order
book and is currently tendering on business which will allow it to
expand its operations into the Cape Town area.
The Group purchased Cannock Gates Ltd in the United Kingdom for GBP400
000. The effective date of the acquisition is 30 September 2011. The
company, which markets its products mainly through the internet,
specialises in the manufacture of steel and wood gates and the
distribution thereof to the end user.
The Group is in the process of merging Burbage Iron Craft (BIC) with
Cannock Gates which will give both companies better manufacturing
economies of scale and will reduce overheads. The assets and certain
staff of Burbage Iron Craft will be moved to Cannock before 31 December
2011. This will result in the retrenchment of 23 staff, the cost of
which has been accrued for in these financial results.
Barrier Angelucci has significantly increased its manufacturing
capabilities and is currently tendering on a number of opportunities in
the South African and African banking environments. The company
produced a satisfactory set of results for the six months and is
expected to improve on this during the balance of the current financial
year.
Xpanda Security performed well in both the local and export markets.
The performance in the local market was enhanced by the launch of the
company`s fully framed DIY aluminium trellis door, which is proving to
be a huge success.
FABRICATORS
Koch`s Cut and Supply continues to perform solidly, while Hendor Mining
has enjoyed an excellent six months and has sufficient orders to see
them through well into 2012.
With the exception of Xpanda Security and BIC, all the companies in the
home, office and fabrication sectors did not operate during the three-
week strike. Seven company-owned delivery vehicles were damaged in the
Durban area, as well as several staff vehicles.
AUTOMOTIVE SECTOR
The automotive sector continues to hamper the Group. Sentech Industries
is now breaking even, however Excalibur Vehicle Accessories and All
Lite remain a challenge with an overhead structure (although vastly
reduced) still not in line with revenue achievement.
The current order level is more than sufficient, but local vehicle
manufacturers have recently reduced volumes due to supply problems from
flood hit Thailand.
Excalibur Vehicle Accessories is in the process of retrenching 38 staff
members by 30 November 2011.
NON-STEEL PRODUCTS
Megamix and Argent Industrial Engineering performed surprisingly well
on the revenue front, but with reduced margins that were under
substantial pressure. These margins have shown recent signs of
improvement, but the outlook for the construction industry in the
Western Cape market remains conservative.
Allan Maskew`s revenue has picked up significantly through its new
products. However the real tangible benefits from its new cost-
effective production techniques are expected to materialise during the
next six months via a vast improvement in gross margin.
New Joules Engineering North America has performed in line with
expectations and although there are no new capital projects on the
immediate horizon, maintenance work and parcel jobs are ensuring that
the company`s results are strong.
OUTLOOK
The Group`s future outlook continues to be very positive, and all
efforts are being concentrated on improving its overall trading margins
as well as ensuring the profitability of its automotive division.
BASIS OF PRESENTATION
The condensed financial statements have been prepared in accordance
with the International Financial Reporting Standards (IFRS), IAS 34 -
Interim Financial Reporting, AC 500 and in compliance with the
Companies Act of South Africa (No. 71 of 2008) and the Listings
Requirements of the JSE Securities Exchange. The financial statements
have been prepared under the supervision of the Financial Director, Ms.
SJ Cox (CA)SA. The accounting policies are consistent with those of the
previous financial period, with the exception of the following new and
amended standards and interpretations in response to changes in IFRS:
- IAS 24 - Related party disclosure
- IAS 34 - (amendment) interim financial reporting
- IFRS 7 - (amendment) disclosures - transfer of financial assets
- IFRS 7 - (amendment) disclosures - financial instruments.
These condensed interim financial statements, including any reference
to future financial performance incorporated herein, have not been
reviewed or audited by the Group`s auditors.
These financial statements incorporate the financial statements of the
company and all its subsidiaries over which it has operational and
financial control.
SUBSEQUENT EVENTS
No matters that are material to the financial affairs of the Group have
occurred between the statement of financial position date and the date
of this report.
BUSINESS COMBINATIONS
The Group acquired Cannock Gates Limited on 30 September 2011. The fair
value of assets and liabilities acquired were as follows:
R 000
Property, plant and equipment 785
Inventory 4,735
Trade and other receivables 5,479
Deferred taxation asset 209
Trade and other payables (10,428)
Interest-bearing borrowings (2,421)
Bank overdraft (964)
Goodwill/excess of fair value of assets and
liabilities acquired over purchase price 7,605
---------------------------------------------------------
Total purchase price and acquisition costs 5,000
Deduct bank balance on acquisition 964
---------------------------------------------------------
Cash flow on acquisition net of cash acquired 5,964
---------------------------------------------------------
The goodwill arising on the acquisition of this business is
attributable to the anticipated profitability of this business.
DIVIDEND
An interim dividend of 4 cents per share has been declared, subsequent
to 30 September 2011.
The following dates will apply to the above-mentioned interim dividend:
Last day to trade cum dividend Friday, 2 December 2011
Trading ex dividend commences Monday, 5 December 2011
Record date Friday, 9 December 2011
Dividend payment date Monday, 12 December 2011
Share certificates may not be dematerialised or re-materialised between
Monday, 5 December 2011 and Friday, 9 December 2011, both days
inclusive.
ON BEHALF OF THE BOARD
T.R. Hendry CA (SA)
Chief executive officer
Umhlanga Rocks
10 November 2011
REGISTERED OFFICE:
First floor, Ridge 63, 8 Sinembe Crescent, La Lucia Ridge Office Estate
4019
Tel: +27 (0) 31 791 0061
AUDITORS: Grant Thornton
SPONSORS: PSG Capital (Pty) Ltd
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Ltd, 13th floor, 19 Ameshoff
Street, Johannesburg 2001
COMPANY SECRETARY: Ms Lindsay Grobler
DIRECTORS:
MP Allen, MJ Antonic, Ms SJ Cox (Financial Director), PA Day
(Independent Non-executive), TR Hendry (Chief Executive Officer), PH
Lawson (Independent Non-executive), AF Litschka, K Mapasa (Independent
Non-executive), T Scharrighuisen (Non-executive Chairman), D Smith, GK
Youngman (Alternate)
Date: 10/11/2011 11:31:18 Produced by the JSE SENS Department.
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