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AGI - Reviewed Results for the Year Ended 30 June 2002
AG INDUSTRIES LIMITED
(Formerly Africa Glass Industries Limited)
"AGI"
REVIEWED RESULTS
FOR THE YEAR ENDED 30 JUNE 2002
GROWTH SUSTAINED DURING A YEAR OF INFRASTRUCTURAL DEVELOPMENT
REVENUE UP 53%
HARD CURRENCY REVENUE UP 91%
HEADLINE OPERATING PROFIT UP 30%
HEADLINE EARNINGS UP 18%
CONSOLIDATED INCOME STATEMENT
Reviewed Audited
year ended year ended
30 June 30 June Change
2002 2001
R`000 R`000 %
Revenue 829 956 540 716 53
Operating profit before
depreciation 114 442 85 438 34
- as previously reported 114 442 87 686
- profit on disposal of property,
plant
and equipment (adoption of ED151) - (2 248)
Depreciation (14 878) (8 933)
Other amortisation (1 204) (1 083)
Headline operating profit 98 360 75 422 30
Operating margin 11,9% 13,9%
Profit on disposal of property, plant
and equipment 583 2 248
Cost of investment written down - (3)
Goodwill amortised (7 526) (5 570)
Profit from operations 91 417 72 097 27
Net financing costs (11 445) (2 702)
Income from associates 2 540 3 466
Profit before taxation 82 512 72 861 13
Taxation (24 550) (20 509)
- normal activities (24 375) (19 835)
- headline adjustments (175) (674)
Profit after taxation 57 962 52 352 11
Minority interest 34 (851)
Preference dividends - (112)
Profit for the year 57 996 51 389 13
Profit on disposal of property,
plant and equipment (408) (1 574)
Cost of investment written down - 3
Goodwill amortised 7 526 5 570
Goodwill amortised in associates 51 -
Headline earnings 65 165 55 388 18
- as previously reported 65 165 56 962
- profit on disposal of property,
plant and equipment (adoption of ED151) - (1 574)
STATISTICS
Number of ordinary shares in
issue (`000) 195 478 192 553
Weighted average number of ordinary
shares in issue (`000) 195 478 195 062
Basic earnings per ordinary share
(cents) 29,7 26,3
Headline earnings per ordinary
share (cents) 33,3 28,4 17
- as previously reported 33,3
29,2
- profit on disposal of property,
plant and equipment (adoption of
ED151) - (0,8)
Dividend paid
Dividend per ordinary share
(cents) 6,5* 5,5
*Dividend declared in respect of year ended 30 June 2001.
CONSOLIDATED BALANCE SHEET
Reviewed Audited
year ended year ended
30 June 30 June
2002 2001
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 88 430 47 150
Intangible assets 153 696 118 484
Investments and loans 15 347 13 659
Deferred taxation assets 4 821 2 560
Current assets
Bank balances and cash 31 443 16 752
Other current assets 325 389 235 879
Total assets 619 126 434 484
EQUITY AND LIABILITIES
Shareholders` equity
Ordinary shareholders` equity 312 407 248 348
Minority shareholders` interest
Outside shareholders` interest 1 284 1 754
Non-current liabilities
Shareholders` loans 1 512 667
Amounts due to vendors after
one year - 115
Deferred taxation liabilities 8 399 4 470
Long-term interest bearing debt 44 204 11 393
Other long-term borrowings - 569
Current liabilities
Short-term interest bearing debt 83 536 35 087
Amounts due to vendors within
one year 6 088 12 846
Other current liabilities 161 696 119 235
Total equity and liabilities 619 126 434 484
Net asset value per ordinary share
(cents) 160 129
ADDITIONAL INFORMATION
Capital expenditure for the period 92 100 32 172
Capital expenditure committed or
authorised 18 003 32 514
Directors` valuation of investments
and loans 15 347 13 659
Finance and operating lease
commitments 225 167 157 092
Interest capitalized 309 20
Contingent liabilities 29 332 1 275
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
year ended year ended
30 June 30 June
2002 2001
R`000 R`000
Cash flows from operations 114 442 85 435
Working capital changes (36 127) (33 277)
Net financing costs, dividends
and taxation paid (45 553) (32 623)
Net cash inflow from operating
activities 32 762 19 535
Net capital expenditure (51 570) (12 329)
Dividend received from associate - 720
Decrease/(increase) in
investments and loans 103 (150)
Acquisition of subsidiaries (36 667) (13 715)
Net cash outflow from investing
activities (88 134) (25 474)
Net cash inflow/(outflow) from
financing activities 35 780 (23 724)
Net decrease in cash equivalents (19 592) (29 663)
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 30
June 2000 107 221 6 544 85 494 199 259
Ordinary and
contingency
shares issued 1 555 - - 1 555
Income from
associates - 1 708 (1 708) -
Currency trans-
lation movement - 6 679 - 6 679
Profit for the
year - - 51 389 51 389
Ordinary
dividend - - (10 534) (10 534)
Balance at 30
June 2001 108 776 14 931 124 641 248 348
Income from
associates - 1 791 (1 791) -
Currency trans-
lation movement - 18 769 - 18 769
Profit for the
year - - 57 996 57 996
Ordinary
dividend - - (12 706) (12 706)
Balance at 30
June 2002 108 776 35 491 168 140 312 407
GROUP SEGMENTAL ANALYSIS
Eliminations/
Europe headline
Southern and the earnings
Africa USA adjustments Total
R`000 R`000 R`000 R`000
Geographical
Revenue:
Year ended 30
June 2002 780 591 287 119 (237 754) 829 956
% to total 73 27
Year ended 30
June 2001 541 625 150 227 (151 136) 540 716
% to total 78 22
Result:
Profit from operations
Year ended 30
June 2002 75 967 22 393 (6 943) 91 417
% to total 77 23
Year ended 30
June 2001 57 937 17 485 (3 325) 72 097
% to total 77 23
Reviewed Audited
year ended year ended
30 June 30 June
2002 2001
R`000 % R`000 %
Business segment
Revenue:
Unbeneficiated
products 477 453 45 294 960 43
Value added products
- Glass 148 631 14 131 930 19
- Aluminium 441 626 41 264 962 38
1 067 710 100 691 852 100
Inter-segment
sales eliminated (237 754) (151 136)
829 956 540 716
SALIENT FEATURES
* Rebranding of Africa Glass as
AGI
* Record earnings
*
Significant increase in hard currency revenue and
earnings
* Cost of
infrastructural development dilutes
earnings growth
* Efficient working capital
management
* International
growth drive gathers momentum
- New foreign outlets
- Export
manufacturing capacity expanded
- Finished product
export campaign progresses
- 11 September 2001 subdues
markets
- Acqui
outstanding 25% interest in Gulfstar and strengthening of route to USA mark
* Domestic growth continues
- Strong growth in aluminium
division
- Acquisition of
leading edge aluminium design
house and stockist
- Margin
compression in domestic market
- Substantial
increase in productive capacities
- Further contract wins
* Headline ROE maintained above
20%
COMMENTARY
STRATEGIC FOCUS
AGI remains focused on the manufacture and international distribution of
glass and aluminium finished products and components. The Group`s
sustainable growth strategy aims to:
* improv
capturing market share internationally and domestically; and
* raise
focusing on value added and hard currency business, integrating vertically to ex
manufacturing and distribution margins and wherever possible taking advantage o
"low-cost manufacturer" status.
In achieving this strategy, the tactic is followed of first capturing
market share and then integrating into manufacture. The Group`s
development under this strategy over the past few years has seen it
expand from a manufacturer and distributor of glass products to a
manufacturer and international distributor of aluminium and glass doors
and windows and their associated components. The name "Africa Glass" was
therefore no longer representative of the Group`s activities. "AG
Industries Limited", the rebranded name, denotes neither a business
confined geographically to African activities nor one limited in scope
to glass operations.
REVIEW
FINANCIAL PERFORMANCE
The year under review was burdened by poor economic performance.
Internationally, the events of 11 September 2001 and a dull European
economy did little to bolster demand. Domestically, a lacklustre
building sector and a volatile rand exchange rate contributed to tighter
margins and resultant market pressures in glass distribution where
competitive imports featured.
Infrastructural development, in which significant investment was made in
productive capacity, establishing new businesses and expanding
operations generally, characterised the year under review. The result
was a 53% increase in revenue, primarily attributable to an exceptional
performance by the aluminium division and the benefits of the Sheerline
acquisition as well as a 91% increase in hard currency revenue to which
Gulfstar contributed.
Headline operating margins fell owing to trading margin pressure in the
domestic glass distribution market, abnormal overhead absorption
associated with infrastructural development and the dilutionary effect
on trading margins of the Gulfstar acquisition.
However, adjusting for the effects of abnormal overhead absorption
caused by infrastructural development, headline operating profit growth
approached that achieved in the previous financial year. An improvement
in working capital management resulted in working capital (trade
receivables plus inventories less trade payables) falling from 23% to
21% of revenue as both inventory and receivables turnover improved.
Significantly increased finance costs, attributable primarily to
infrastructural development, and an increased effective tax rate arising
from a greater STC impact combined with lower margins and increased
leverage to result in a headline earnings return on equity of 21%
(2001:22%).
INTERNATIONAL OPERATIONS
The prime focus of the division for the year was the bedding down of the
Gulfstar acquisition made during the previous financial year when AGI
increased its` shareholding to a 75% interest to secure a route to
market for its` value added finished products and components. Shower
doors and other value added finished products and components were
introduced to Gulfstar`s product range during the year. The importance
of Gulfstar as AGI`s "route to market" for aluminium and glass value
added products in the USA dictated the acquisition, at the close of the
year, of the outstanding 25% of Gulfstar which is now a wholly-owned
subsidiary and the acquisition of the holder of certain distribution
rights for finished products to a customer base amongst which are
substantial USA home improvement retailers.
The Group`s finished product export campaign progressed during the year
with most products on schedule. The patio door program was, however,
dogged by new standards in the USA, with which few industry players are
familiar, and the restructure of the Group`s research and development
division following the acquisition of Sheerline during the first half of
the year.
Sheerline is a leading edge aluminium door and window design house and
component distributor. Sheerline has enhanced the Group`s ability to
research, design and develop new products which meet the clearly
identified needs of demanding new markets including the USA. With focus
on the introduction of finished products to the Group`s USA and UK
markets, further European development including the establishment of a
manufacturing operation in the Czech Republic was deferred.
SOUTH AFRICAN OPERATIONS
Toughened glass productive capacity was trebled during the year to meet
internal Group demand both domestically and internationally from the
export campaign. Currently toughened glass production is operating at
100% of single shift capacity. Other expansions include improvements to
the Group`s mirror manufacturing facility and the re-installation with
enhancements of the autoclave vinyl laminating facility acquired at the
close of the previous year. High-tech customised processing equipment
was also added. While additional productive capacity improved quality
and manufacturing efficiency, it resulted in abnormal overhead
absorption during commissioning and the early months of operation.
The glass distribution market suffered margin pressure through an
inability to pass on the last of several successive raw glass price
increases. Although margins opened briefly during the early months of
the second half, significant strengthening of the rand exchange rate
later in the period led to more competitive imports, once again
compressing margins. Project work was, however, vibrant with supplies
to major projects leading to a buoyant performance.
The aluminium division enjoyed increased domestic and international
volumes which led to healthy market share growth and improved
profitability from the standardisation of products and the
rationalisation of glass inputs which improved margins.
PROSPECTS
AGI has a virtually unrestricted growth opportunity in a market itself
enjoying natural growth because of the strategic advantage of combined
glass and aluminium fabrication, a low manufacturing cost base and
ownership of foreign distribution channels. Exploiting this opportunity
requires ongoing expansion of AGI`s value added and hard currency
business.
INTERNATIONAL PROSPECTS
To capitalise on AGI`s strategic advantage:
* finish
and component ranges distributed through owned foreign outlets are to be expande
* the vo
aluminium doors sold in international markets is to be increased; and
* additi
international outlets in economies where positive growth is projected and where
exist for AGI`s finished products and components are to be established, includin
where an initiative is currently under way.
SOUTH AFRICAN PROSPECTS
Value added business is to be expanded by:
*
increased throughput of toughened glass production;
* a prog
finished product export campaign from which improved manufacturing profitability
* introduction of new products;
* increased volumes to African
markets;
* additi
from the enhanced customised order processing equipment installed and to be inst
* a significant project order
book; and
* the up
aluminium division`s unique Kal-Kote decorative finish plant following the succe
products domestically and internationally.
Having installed significant additional productive capacity, AGI now has
further improved prospects for capitalising on its strategic advantage.
Sustained earnings and return on equity growth is, accordingly,
expected.
ACCOUNTING POLICIES AND REVIEW
The accounting policies have been consistently applied and comply with
the South African Statements of Generally Accepted Accounting Practice.
In the current year, statement AC135 - Investment Properties, was
adopted for the first time. No adjustments to comparative amounts were
necessary.
The year end financial results have been reviewed in terms of Rule 3.23
of the Listing Requirements of the JSE Securities Exchange SA by the
Group`s auditors, Deloitte & Touche. This review opinion is available
for inspection at AGI`s registered office.
DIVIDEND DECLARATION
The Board intends retaining a policy of paying one dividend at the end
of each financial year while maintaining a dividend cover of between 4
and 5 times. The Board has declared a dividend of 7,5 cents per share
(2001:6,5 cents) for the year ended 30 June 2002. The last day to trade
("cum" dividend) in AGI shares in order to participate in the dividend
will be Friday, 4 October 2002. From Monday, 7 October 2002 AGI shares
will commence trading "ex" dividend. The record date will be Friday, 11
October 2002. Dividend payments will be made on Monday, 14 October
2002.
Share certificates may not be dematerialised or rematerialised between
Monday, 7 October 2002 and Friday, 11 October 2002, both days inclusive.
For and on behalf of the Board
A.A. Barrell
Executive Chairman
J.B. Rosenberg
Group Financial Director
J. Martingano
Group Commercial Director
16 September 2002
DIRECTORS: A.A. Barrell (Chairman), J.B. Rosenberg #(Financial),
J. Martingano, J.C. Saville, M.J.E. Geldenhuys, C.P. Kalil, H.R. Levin*,
B.E. Danoher*x, G.F.D. Twigg*x, T.Y. Worthington* *Non-Executive, x
Irish, #Company Secretary
REGISTERED OFFICE: Corner Kruger Street and Mimetes Road, Denver,
Extension 11, Johannesburg 2094 (P.O. Box 40443, Cleveland 2022)
TRANSFER SECRETARIES: Computershare Investor Services Limited,
11 Diagonal Street, Johannesburg 2001 (P.O. Box 1053, Johannesburg 2000)
AG INDUSTRIES LIMITED
(Formerly Africa Glass Industries Limited)
Registration No. 1980/004051/06
("AGI" or "the Group")
Share Code: AGI
ISIN: ZAE000039467
Date: 17/09/2002 07:30:00 AM Produced by the JSE SENS Department
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