| Thu 24 May 2012, 16:00 | | 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 29 February 2012
AUSTRO GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
Share code: ASO ISIN: ZAE000090882
("company" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2012
SUMMARY
Revenue R194,2 million
Headline loss per share(3,4 cents)
Net asset value per share 93,3 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
29 February 2012 28 February 2011 31 August 2011
R`000 R`000 R`000
Revenue 194 205 202 780 387 102
Cost of sales (127 322) (128 382) (258 271)
Gross profit 66 883 74 398 128 831
Other operating income 1 948 1 023 1 877
Net operating expenses (75 437) (75 523) (133 479)
Onerous lease expense (8 976) - -
effect
Operating expenses (66 461) (75 523) (133 479)
excluding onerous
lease effect
Loss from operations (6 606) (102) (2 771)
before impairment of
goodwill
Impairment of goodwill (134 197) - -
Loss from operations (140 803) (102) (2 771)
before interest and
taxation
Net interest received 1 455 1 950 2 862
Interest received 3 224 4 327 6 804
Interest paid (1 769) (2 377) (3 942)
(Loss)/profit before (139 348) 1 848 91
taxation
Taxation (8 250) 2 727 6 348
(expense)/income
Total comprehensive (147 598) 4 575 6 439
(loss)/income for the
period
Attributable to:
Owners of Austro Group (147 437) 4 575 6 439
Limited
Non-controlling (161) - -
interest in subsidiary
Total comprehensive (147 598) 4 575 6 439
(loss)/income for the
period
Unaudited Unaudited Audited
For the six For the six For the twelve
months ended months ended months ended
29 February 2012 28 February 2011 31 August 2011
Numbers of shares in 395 693 678 429 890 361 395 693 678
issue
Weighted average 395 295 125 431 321 312 419 758 013
number of shares
(Loss)/earnings per (37,3) 1,1 1,5
share and diluted
(loss)/earnings per
share (cents)
Headline (3,4) 1,1 1,6
(loss)/earnings per
share and diluted
headline
(loss)/earnings per
share (cents)
Dividend per share - 2,0 2,0
(cents)
Capital distribution - - 2,0
declared out of share
premium (cents)
Reconciliation of
(loss)/income to
headline
(loss)/earnings:
Total comprehensive (147 437) 4 575 6 439
(loss)/income for the
period
Net (profit)/loss on (99) 230 239
disposal of plant and
equipment
Impairment of goodwill 134 197 - -
Tax effect thereof 14 (32) (33)
Headline (13 325) 4 773 6 645
(loss)/earnings
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
As at As at As at
29 February 28 February 31 August 2011
2012 2011 2011
R`000 R`000 R`000
Assets
Non-current assets 138 986 272 908 276 959
Plant and equipment 38 300 39 283 38 018
Loans receivable - - 482
Goodwill 95 544 229 742 229 742
Deferred taxation 5 142 3 883 8 717
Current assets 312 255 316 793 304 347
Inventories 205 905 202 325 177 869
Trade and other receivables 86 101 68 219 76 025
Taxation receivable 591 5 1 465
Cash and cash equivalents 19 658 46 244 48 988
Total assets 451 241 589 701 581 306
Equity and liabilities
Capital and reserves 369 306 540 875 517 110
Share capital 4 4 4
Share premium 295 491 321 326 295 697
Non-controlling interest in (161) - -
subsidiary
Accumulated profits 73 972 219 545 221 409
Non-current liabilities 287 607 -
Deferred taxation 287 607 -
Current liabilities 81 649 48 219 64 196
Current portion of long-term - 3 426 3 426
liabilities - interest free
Trade and other payables 67 504 44 152 60 662
Provision for onerous lease 13 587 - -
Taxation payable 557 641 108
Total equity and liabilities 451 241 589 701 581 306
Net asset value per share 93,3 125,8 130,7
(cents)
Tangible net asset value per 69,2 72,4 72,6
share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
As at As at As at
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Cash (outflows)/inflows from (22 021) 33 662 65 980
operating activities
Cash (utilised)/generated by (20 411) 44 639 79 859
operations
Interest received 3 224 4 327 6 804
Interest paid (1 769) (2 377) (3 942)
Dividends paid - (8 628) (8 628)
Taxation paid (3 065) (4 299) (8 113)
Cash outflows from investing (3 678) (338) (4 282)
activities
Cash outflows from financing (3 631) (4 202) (29 832)
activities
Net (decrease)/increase in cash (29 330) 29 122 31 866
and cash equivalents
Cash and cash equivalents at 48 988 17 122 17 122
beginning of period
Cash and cash equivalents at end 19 658 46 244 48 988
of period
CONDENSED SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
For the six For the six For the twelve
months ended months ended months ended
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Revenue (external)
Power 123 075 138 803 250 904
Gross 123 075 139 041 251 199
Inter-segment - (238) (295)
Wood 71 130 63 977 136 198
Gross 71 130 63 977 136 198
Total 194 205 202 780 387 102
(Loss)/profit before tax
Power (79 049) 2 639 9 175
Gross (79 049) 2 877 9 470
Inter-segment - (238) (295)
Wood (60 299) (791) (9 084)
Gross (60 299) (791) (9 084)
Total (139 348) 1 848 91
Depreciation 3 977 4 648 9 140
Power 2 096 2 694 5 372
Wood 1 881 1 954 3 768
Profit/(loss) on disposal 99 (230) (239)
of plant and equipment
Power 61 (282) (284)
Wood 38 52 45
Onerous lease expense (8 976) - -
effect
Wood (8 976) - -
Impairment of goodwill (134 197) - -
Power (97 075) - -
Wood (37 122) - -
Interest received 3 224 4 327 6 804
Power 1 628 2 966 3 919
Wood 1 596 1 361 2 885
Interest paid (1 769) (2 377) (3 942)
Power (338) (636) (857)
Wood (1 431) (1 741) (3 085)
Taxation (expense)/income (8 250) 2 727 6 348
Power (5 311) 730 620
Wood (2 939) 1 997 5 728
Capital and reserves
Power 340 329 441 828 427 171
Assets 383 879 469 121 463 749
Liabilities (43 550) (27 293) (36 578)
Wood 28 977 99 047 89 939
Assets 67 362 120 579 117 557
Liabilities (38 385) (21 532) (27 618)
Total 369 306 540 875 517 110
Additions to non-current 4 662 1 450 5 140
assets
Power 1 560 1 226 3 997
Wood 3 102 224 1 143
Goodwill 95 544 229 742 229 742
Power 95 544 192 620 192 620
Wood - 37 122 37 122
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Unaudited Audited
As at As at As at
29 February 28 February 31 August
2012 2011 2011
R`000 R`000 R`000
Share capital and share premium 295 495 321 330 295 701
Balance at beginning of period 295 701 322 107 322 107
Share premium reduction due to (206) (777) (18 492)
share buy back
Share premium reduction due to - - (7 914)
capital distribution declared
out of share premium
Accumulated profits 73 811 219 545 221 409
Balance at beginning of period 221 409 223 598 223 598
Total comprehensive (147 437) 4 575 6 439
(loss)/income for period
Non-controlling interest in (161) - -
subsidiary
Dividends declared and paid - (8 628) (8 628)
Total capital and reserves 369 306 540 875 517 110
COMMENTARY
INTRODUCTION
Austro Group Limited is listed in the "Industrial Engineering" sector and
"Industrial Machinery" sub-sector 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, including the generator manufacture and supply industry; and
- the distribution of professional woodworking equipment and tooling.
Group structure (wholly-owned subsidiaries):
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
Revenue for the interim period ended 29 February 2012 of R194,2 million
decreased by 4,2% compared to the previous corresponding period of R202,8
million and the gross profit percentage decreased by 2,3 percentage points to
34,4% (2011: 36,7%).
The Group`s interim results have been impacted negatively by the following
items:
The Wood division provided for an onerous lease for one of its premises, the
division moved out of the building and the premises has been sub-let. The pre-
tax impact of the onerous lease provision is a net present value of R13,6
million and has been softened by the reversal of the lease smoothing accrual of
R4,6 million relating to the premises, with a net pre-tax expense effect of R9
million.
In accordance with IAS 36 (Impairment of Assets), the Group tests goodwill for
impairment. This is based on cash forecasts for the next five years which are
based on the cash-generating units` results and on management forecasts. The
forecasted revenue growth decreased due to lower actual results and the
economic outlook. The valuation resulted in the impairment of R134,2 million
(58,4%) of the Group`s goodwill of R229,7 million.
The goodwill valuation for the Power cash-generating unit resulted in an
impairment of R97,1 million (50,4%) of the goodwill balance of R192,6 million
as at 28 February 2011, and 100% of the Wood goodwill balance of R37,1 million
as at 28 February 2011 was impaired.
The Group made a profit of R2,4 million before tax, interest, goodwill
impairment and the onerous lease expense effect, which is an improvement
compared to the last comparable period`s loss of R0,1 million.
Consolidated statements of comprehensive income
The decrease in revenue of 4,2% is due to Power`s revenue contracting because
of challenging market conditions. The division is targeting markets in Africa
to improve this situation, but the planned growth has not yet materialised. The
Wood division`s increase in revenue is as a result of an increase in market
share in Southern Africa and the division`s initiated expansion into Africa.
The Power division`s revenue is now 63,4% of total revenue (2011: 68,5%).
The Wood division`s revenue is now 36,6% of total revenue (2011: 31,5%).
The increase in other operating income of 90,4% is mainly due to the increase
in agency commission generated from the Wood division.
Consolidated statements of financial position
The Group`s interest free long-term liability of R3,4 million has been paid,
and the Group has R19,7 million cash and cash equivalents on hand.
The major contributor to the decrease in cash and cash equivalents of R26,5
million to R19,7 million (2011: R46,2 million) is the increase in inventory
levels of R3,6 million mainly due to the edging businesses acquired and due to
the Group buying back its own shares and the capital distribution paid to
shareholders in July 2011.
Group inventory days increased from 288 to 295 days from the last comparable
period and will improve again when the order book is converted to turnover.
POST-STATEMENT OF FINANCIAL POSITION
Restraint of trade application
A competitor of Wood filed an urgent restraint of trade application against the
company, and management is confident that the application will not succeed.
Other than the abovementioned event, there have been no material events
subsequent to the end of the interim period that have not been taken account of
in the financial statements for the period.
ACQUISITION OF BUSINESSES
The Group acquired the businesses of Edgepro (Pty) Limited and EdgePro Natal
(Pty) Limited, effective 1 September 2011. The JSE issued a ruling that these
acquisitions did not need to be aggregated in terms of Section 9 of the
Listings Requirements and, accordingly, no announcement was released on SENS.
The principal assets acquired were inventory and no goodwill arose from these
acquisitions. The total purchase consideration for these businesses was R10,03
million settled in cash. These acquisitions were made in support of Austro
Wood`s strategy, allowing the Wood division to supply edging to existing and
new customers.
These acquisitions contributed R6,8 million in revenue from acquisition date up
to 29 February 2012 for Wood and made a loss before taxation of R1 million.
OPERATING REVIEW
Power
The Power division`s revenue has decreased by 11,3% to R123,07 million compared
to the previous corresponding period (2011: R138,8 million) due to the planned
growth in revenue to Africa not yet materialising.
Operating expenses decreased by 27,8% to R32,54 million compared to the
previous corresponding period (2011: R45,07 million) and this is mainly due to
the related cost-savings after relocating and integrating the Quad business
into Power.
The higher tax expense for Power is due to a higher taxable income compared to
the previous corresponding period.
Wood
The Wood division`s revenue increased by 11,2% to R71,13 million compared to
the previous corresponding period (2011: R63,98 million). This is due to an
increase of market share. Management anticipates that Wood will continue to
increase its market share in Southern Africa and has initiated expansion into
Africa.
Operating expenses increased by 40,9% to R42,89 million (2011: R30,45 million),
this is mainly due to the effect of the onerous lease expense and an increase
in employee costs.
A deferred tax asset has not been raised on the taxable loss of the Wood
division and this contributes to the higher tax expense compared to the
previous corresponding period. The goodwill impairment is a non-taxable item
and the onerous lease provision has been added back as a timing difference.
The inter-company loan of R55,5 million owed by Austro Wood (Pty) Limited to
its holding company, Austro Group Limited as at 29 February 2012 has been
subordinated in favour of all its other creditors.
PROSPECTS
The Southern African economic outlook for the industrial sector remains weak
and poses a challenge for the Group. The management teams of the two divisions
remain focused to grow revenue out of new African markets, to increase market
share and deliver unrivalled customer service in the sectors in which the Group
operates.
The management team of the Wood division has focused on expanding product
offering into existing markets and deepening the penetration of the tooling and
supply business unit into areas not previously covered.
CASH DISTRIBUTION
Shareholders are advised that no cash distribution has been declared.
BASIS OF PREPARATION
These unaudited condensed consolidated interim results were released on SENS on
24 May 2012 and published on 25 May 2012 and have been prepared by Tania le
Roux (CA)SA, Acting Group Financial Director under the supervision of the
Austro Group Limited Board.
The unaudited condensed consolidated interim results have been prepared in
accordance with IAS 34 (Interim Financial Reporting), AC 500 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 with the requirements of the Companies Act of South Africa.
CHANGES TO THE BOARD OF DIRECTORS
Appointments: Tania le Roux (Acting, 1 January 2012).
Resignation: Philip Sigsworth (29 November 2011).
By order of the Board
AJ Phillips T le Roux
Chairman Acting Group Financial Director
Johannesburg
24 May 2012
Non-executive directors:
AJ Phillips* (Chairman)
DS Brouze
GS Nzalo*
U Schackermann* (German)
(* Independent)
Executive directors:
JO Freed
JR Freed (Alternate to JO Freed)
C Jacobs
T le Roux (Acting)
Registration number:
2001/029771/06
Business/Registered address:
1125 Leader Avenue, 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: 24/05/2012 16:00:04 Produced by the JSE SENS Department.
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