| Tue 5 Mar 2002, 0:00 | | Africa Glass Industries Limited - Unaudited Interi |
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Ended 31 December 2001
AFRICA GLASS INDUSTRIES LIMITED
Registration No.: 1980/004051/06
("Africa Glass" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2001
CONSOLIDATED INCOME STATEMENT
Unaudited Audited
six months ended year ended
31 December 30 June Change
2001 2000 2001
R'000 R'000 R'000 %
Revenue 386 594 260 185 540 716 49
Operating profit before
depreciation 54 249 36 854 85 438 47
- as previously reported 54 249 37 010 87 686
- adoption of ED151 - (156) (2 248)
Depreciation (6 471) (4 097) (8 933)
Other amortisation (665) (215) (1 083)
Headline operating profit 47 113 32 542 75 422 45
Operating margin 12,2% 12,5% 13,9%
Profit on disposal of property,
plant and equipment 346 156 2 248
Cost of investment written down - - (3)
Goodwill amortised (3 489) (2 496) (5 570)
Profit from operations 43 970 30 202 72 097 46
Net financing costs (3 690) (374) (2 702)
Income from associates 1 741 2 013 3 466
Profit before taxation 42 021 31 841 72 861 32
Taxation (13 268) (10 106) (20 509)
- Normal activities (13 164) (10 059) (19 835)
- Exceptional items (104) (47) (674)
Profit after taxation 28 753 21 735 52 352 32
Minority interest (340) (157) (851)
Preference dividends - (56) (112)
Profit for the period 28 413 21 522 51 389 32
Profit on disposal of property,
plant and equipment (242) (109) (1 574)
Cost of investment written down - - 3
Goodwill amortised 3 489 2 496 5 570
Headline earnings 31 660 23 909 55 388 32
- as previously reported 31 660 24 018 56 962
- adoption of ED151 - (109) (1 574)
Statistics
Number of ordinary shares in
issue ('000) 195 478 192 553 192 553
Weighted average number of
ordinary shares in issue ('000) 195 478 194 978 195 062
Basic earnings per
ordinary share (cents) 14,5 11,0 26,3
Headline earnings per
ordinary share (cents) 16,2 12,3 28,4
- as previously reported 16,2 12,3 29,2
- adoption of ED151 - - (0,8)
Dividend paid
Dividend per ordinary share (cents) 6,5* 5,5 5,5
*Dividend declared in respect of year ended 30 June 2001
CONSOLIDATED BALANCE SHEET
Unaudited Audited
six months ended year ended
31 December 30 June
2001 2000 2001
R'000 R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 67 758 37 021 47 150
Intangible assets 156 513 101 286 118 484
Investments and loans 14 793 13 381 13 659
Deferred taxation assets 5 698 4 113 2 560
Current assets
Bank balances and cash 15 807 17 931 16 752
Other current assets 330 243 201 960 235 879
Total assets 590 812 375 692 434 484
EQUITY AND LIABILITIES
Shareholders' equity
Ordinary shareholders' equity 304 580 214 668 248 348
Minority and preference
shareholders' interest
Outside shareholders' interest 2 795 725 1 754
Preference share capital and premium - 700 -
Non-current liabilities
Shareholders' loans 2 417 1 147 667
Amounts due to vendors after one year - - 115
Deferred taxation liabilities 5 310 5 146 4 470
Long-term interest bearing debt 29 918 6 563 11 393
Other long-term borrowings 407 342 569
Current liabilities
Short-term interest bearing debt 78 703 17 991 35 087
Amounts due to vendors within one year 695 11 465 12 846
Other current liabilities 165 987 116 945 119 235
Total equity and liabilities 590 812 375 692 434 484
Net asset value per ordinary share
(cents) 156 111 129
- as previously reported 156 112 129
- adoption of AC129 - (1) -
ADDITIONAL INFORMATION
Capital expenditure for the period 39 670 10 326 32 172
Capital expenditure committed or
authorised 15 479 1 609 32 514
Directors' valuation of investments
and loans 14 793 13 381 13 659
Finance and operating lease commitments 156 447 130 385 157 092
Interest capitalised 102 - 20
Contingent liabilities 2 924 5 428 1 275
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
six months ended year ended
31 December 30 June
2001 2000 2001
R'000 R'000 R'000
Cash flows from operations 54 248 37 691 86 295
Working capital changes (28 053) (12 963) (33 277)
Net financing costs, dividends
and taxation paid (21 797) (14 230) (32 623)
Net cash inflow from
operating activities 4 398 10 498 20 395
Net capital expenditure (17 977) (6 608) (12 329)
Dividend received from associate - - 720
Decrease/(increase) in investments
and loans 85 - (150)
Acquisition of subsidiaries (18 816) (2 872) (13 715)
Net cash outflow from investing
activities (36 708) (9 480) (25 474)
Net cash inflow/(outflow) from financing
activities 103 (11 376) (23 724)
Net decrease in cash equivalents (32 207) (10 358) (28 803)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Non- Group Total
capital and distributable retained shareholders'
premium reserves earnings equity
R'000 R'000 R'000 R'000
Balance at 31 December
2000 107 221 12 374 95 073 214 668
- as previously
reported 107 221 12 374 96 703 216 298
- adoption of AC129 - - (1 630) (1 630)
Ordinary and contingency
shares issued 1 555 - - 1 555
Movement in reserves - 2 557 (299) 2 258
Profit for the period - - 29 867 29 867
Balance at 30 June 2001 108 776 14 931 124 641 248 348
Movement in reserves - 41 745 (1 220) 40 525
Profit for the period - - 28 413 28 413
Ordinary dividend - - (12 706) (12 706)
Balance at 31 December
2001 108 776 56 676 139 128 304 580
GROUP SEGMENTAL ANALYSIS
Eliminations/
headline
Southern Europe and earnings
Africa the USA adjustments Total
R'000 R'000 R'000 R'000
Geographical
Revenue:
Six months ended 31 Dec 2001 360 130 128 654 (102 190) 386 594
% to total 74 26
Six months ended 31 Dec 2000 263 290 64 527 (67 632) 260 185
% to total 80 20
Year ended 30 June 2001 541 625 150 227 (151 136) 540 716
% to total 78 22
Result:
Profit from operations
Six months ended 31 Dec 2001 34 488 12 625 (3 143) 43 970
% to total 73 27
Six months ended 31 Dec 2000 26 220 6 322 (2 340) 30 202
% to total 81 19
Year ended 30 June 2001 57 937 17 485 (3 325) 72 097
% to total 77 23
Unaudited Audited
six months ended year ended
31 December 30 June
2001 2000 2001
R'000 % R'000 % R'000 %
Business segment
Revenue:
Unbeneficiated products 209 620 43 139 620 43 294 960 43
Value added products
- Glass 81 157 17 63 643 19 131 930 19
- Aluminium 198 007 40 124 554 38 264 962 38
488 784 100 327 817 100 691 852 100
Inter-segment sales
eliminated (102 190) (67 632) (151 136)
386 594 260 185 540 716
Growth continues
Revenue up 49%
Headline Operating Profit up 45%
Headline Earnings Per Share up 32%
SALIENT FEATURES
* International growth campaign gathers momentum
* Significant increase in hard currency revenue and earnings
* New foreign outlets
* Finished product export growth continues
* Export manufacturing capacities expanded
* Domestic growth continues
* Price compression contains domestic unbeneficiated product margins
* Leading edge aluminium design house and stockist acquired
* Substantial increase in productive capacities
* Further contract wins
* Headline ROE maintained above 20%
COMMENTARY
STRATEGIC FOCUS
Africa Glass continues to focus on the secondary market where:
* value is added to primary glass and aluminium raw materials by the
manufacture of aluminium doors and windows, architectural products and
safety and security products;
* value added and unbeneficiated glass and aluminium products are
distributed to the tertiary
retail/fitment market.
The strategy of first capturing market share and then integrating into
manufacture, thereby "trapping" manufacturing and distribution margins
alike, continues.
International growth is emphasised by the Group's international growth
campaign which exploits the benefit of the Rand based manufacturing cost of
product destined for sale in hard currency through owned foreign channels.
REVIEW
FINANCIAL PERFORMANCE
The period under review was characterised by subdued economic activity
domestically and particularly in the Group's foreign markets where the
events of September 2001, had a pronounced effect. Despite this, revenue
growth of almost 50% and a slightly lower average operating margin
contributed to a 45% increase in headline operating profit to R47 million
from R33 million. This resulted in headline earnings per share growth of 32%
to 16,2 cents from 12,3 cents for the comparative period. Headline earnings
return on equity remains above 20%.
The increased level of gearing, which arose in part from the substantial
expansion of productive capacity during the period under review, was
compounded by the acquisition of the undertaking of Sheerline Aluminium
Systems ("Sheerline") and the settlement of amounts owing to vendors in
respect of acquisitions in prior periods. The level of gearing which
resulted, nonetheless, falls within the Group's self-imposed gearing
constraint.
In addition to recurring exchange gains, the volatility experienced in the
Rand exchange rate contributed approximately R2,9 million after tax to
headline earnings for the period of which approximately R1,4 million has
reversed subsequent to 31 December 2001. Because the major deterioration in
the exchange rate occurred toward the end of the period, trading margins
were largely unaffected.
If account is taken of translation gains included in inventory and
receivables on the balance sheet, the turnover of both of these assets
improved compared with the prior six months.
INTERNATIONAL OPERATIONS
In line with the Group's international growth campaign, the focus on
development of international operations continued during the period under
review with revenues double those achieved in the comparative period and 50%
higher than those achieved during the second half of the previous financial
year. The development of recently established operations in Scandinavia and
Florida (USA) entailed investment in working capital and fixed assets alike.
Contribution to revenue growth and operating margins, however, are only
expected to manifest in the second half of this financial year. The momentum
of finished product and component exports continued with additional product
being distributed through owned foreign operations. A higher level of
finished product was also exported to third parties. Productive capacity to
support further expansion of finished product exports was increased.
SOUTH AFRICAN OPERATIONS
In South Africa, margins on unbeneficiated product and certain value added
product were contained by a lag in the acceptance by the market of the last
of several raw glass price increases. Margins have, however, been restored
permitting a reversal of the price compression effect of this lag. This
notwithstanding, revenues rose 37% against the comparative period and 29%
against the second half of the previous financial year due, in part, to the
acquisition of Sheerline. Sheerline is a leading edge aluminium fenestration
design house and stockist performing a function equivalent to the Group's
existing project marketing division. Sheerline enhances the Group's ability
to service customised design projects domestically and abroad. The aluminium
export product factory established in Kwa-Zulu Natal at the close of the
previous financial year was commissioned. An investment was made in a second
glass tempering facility to supply the needs of the aluminium export
factory. Domestic supply constraints were addressed by the commissioning of
the Group's third glass tempering facility and the installation of new edge-
working equipment.
PROSPECTS
It is anticipated that growth will continue to be sustained both by the
Group's international strategy and the significantly increased domestic
capacities.
INTERNATIONAL PROSPECTS
Benefits anticipated from foundations laid in prior periods include:
* further market penetration with certain finished products introduced over
the past year;
* the commissioning of new operations of which the Czech Republic, the
Benelux countries and an additional outlet in Germany are possible locations
currently under consideration;
* successful completion in the USA and Europe of tests which have been
underway for some time on certain of the Group's aluminium products which
should lead to significant exports and high revenue growth at favourable
margins.
Factors which continue to combine uniquely to support the Group's
international growth campaign include:
* the enormous but fragmented secondary glass market in which Africa Glass
operates but in which there are no dominant players;
* Africa Glass' unusual combination of glass and aluminium fabrication in
one organisation;
* the benefit of low manufacturing costs which are amplified by a weak
exchange rate and constitute Africa Glass as an exceptionally low cost
international door and window producer;
* the direct access to international markets afforded Africa Glass by
ownership of its European and USA distribution channels which permits
exceptional hard currency margins;
* the well established growth trend in the value added product upon which
Africa Glass' expansion is focused.
SOUTH AFRICAN PROSPECTS
Continued domestic growth is expected based on the following factors:
* Aluminium division growth is projected to be sustained by:
* the Sheerline acquisition which raises the Group's throughput of extruded
product and enhances the Group's ability to service customised design
opportunities globally;
* increased throughput flowing from capacity expansion in Kwa-Zulu Natal
and the Western Cape allowing the division to better service the domestic
market and to meet the requirements for export product projected to flow
from the Group's international growth campaign.
* Glass division performance is projected to improve with:
* increased margins now that the price compression effects of the lag which
affected the period under review have passed;
* increased throughput of value added glass components following the recent
commissioning of two glass tempering facilities allowing the Group to
service the aluminium division's growing glass needs both for domestic
product and for export product emanating from the Group's international
growth campaign.
CHANGE IN ACCOUNTING POLICIES
The accounting policies have been consistently applied and comply with the
South African Statements of Generally Accepted Accounting Practice. During
the current period, Exposure Draft ED151 - Headline Earnings was adopted for
the first time and the appropriate adjustments have been made to comparative
amounts.
DIVIDEND POLICY
The Board maintains a policy of paying one dividend at the end of each
financial year. Accordingly, no dividend has been declared.
For and on behalf of the Board:
A.A. Barrell J.B. Rosenberg J. Martingano
Executive Chairman Group Financial Director Group Commercial Director
4 March 2002
DIRECTORS: A.A. Barrell (Executive Chairman), J.B. Rosenberg (Financial)+,
J. Martingano, M.J.E. Geldenhuys, J.C. Saville, T.Y. Worthington*, H.R.
Levin*, B. Danoher* * Non-Executive + Company Secretary
REGISTERED OFFICE: Cnr. Kruger Street and Mimetes Road, Denver Extension 11,
Johannesburg, 2094 (P.O. Box 40443, Cleveland, 2022)
TRANSFER SECRETARIES: Mercantile Registrars Limited, 11 Diagonal Street,
Johannesburg, 2001 (P.O. Box 1053, Johannesburg, 2000)
Clearing House Code: AGS ISIN No. : ZAE000018545
Visit our website: www.afglass.co.za
