| Thu 10 Nov 2005, 13:00 | | Results for the six months ended 30 September 2005 |
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Argent - Unaudited Interim Results for the six months ended 30 September 2005
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 Results for the six months ended 30 September 2005
Financial Highlights
REVENUE UP 32.2%
ATTRIBUTABLE EARNINGS UP 24.3%
ATTRIBUTABLE EARNINGS per share UP 18.7%
HEADLINE EARNINGS UP 25.7%
HEADLINE EARNINGS per share UP 20.1%
GEARING 22.5%
Abridged Consolidated Income Statement for the six months ended 30 September
2005
R"000 Unaudited Unaudited Unaudited
six restated restated
months 30 six year
Sept 2005 months 30 ended 31
Sept 2004 March
2005
REVENUE 502 619 380 308 751 858
OPERATING PROFIT
before financing costs 75 992 60 402 123 705
FINANCING COSTS 6 522 4 535 10 731
PROFIT before taxation 69 470 55 867 112 974
TAXATION 17 972 14 422 27 784
EARNINGS ATTRIBUTABLE
to ordinary shareholders 51 498 41 445 85 190
Attributable earnings per share 74.3 62.6 127.4
(cents)
Headline earnings per share (cents) 74.7 62.2 127.3
Dividends per share (cents) 12.0 10.0 21.0
Supplementary Information
Shares in issue (000)
- at end of period 72 296 67 090 72 296
- weighted average 69 301 66 259 66 894
Interest received (R"000) 1 669 1 254 2 789
Cost of sales (R"000) 311 919 222 840 440 374
Depreciation & amortisation (R"000) 6 442 6 884 14 919
Net profit on foreign exchange 507 1 125
transactions (R"000)
Calculation of Headline Earnings
(R"000)
Earnings attributable to ordinary 51 498 41 445 85 190
shareholders
Profit on disposal of property, (53) (418) (461)
plant and equipment
Profit on disposal of subsidiary (147)
Loss on disposal of property, plant 353 184 579
and equipment
Headline earnings attributable to 51 798 41 211 85 161
ordinary shareholders
Abridged Consolidated Balance Sheet for the six months ended 30 September 2005
R"000 Unaudited Unaudited Unaudited
six restated restated
months 30 six year
Sept 2005 months 30 ended 31
Sept 2004 March
2005
ASSETS
Non-current assets
Property, plant and equipment 253 639 187 330 207 970
Intangibles 68 224 31 369 31 341
321 863 218 699 239 311
Current assets
Inventories 200 934 159 026 199 466
Trade and other receivables 176 696 152 569 165 448
Bank balance and cash 147 12 653 45 191
377 777 324 248 410 105
TOTAL ASSETS 699 640 542 947 649 416
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 171 644 118 003 170 738
Reserves 23 721 23 481 23 835
Retained earnings 239 851 159 639 196 494
Total shareholders" funds 435 216 301 123 391 067
Non-current liabilities
Interest-bearing borrowings 66 192 46 929 51 927
Deferred tax 16 525 11 031 14 530
82 717 57 960 66 457
Current liabilities
Trade and other payables 136 776 148 805 152 081
Taxation 12 819 10 320 11 906
Bank overdraft 273
Current portion of interest-bearing 31 839 24 739 27 905
borrowings
181 707 183 864 191 892
TOTAL EQUITY AND LIABILITIES 699 640 542 947 649 416
Net asset value per share (cents) 602.0 448.8 540.9
Abridged Consolidated Cash Flow Statement for the six months ended 30 September
2005
R"000 Unaudited Unaudited Unaudited
six restated restated
months 30 six year
Sept 2005 months 30 ended 31
Sept 2004 March
2005
Cash generated from operations 67 676 33 965 54 556
Interest paid (6 522) (4 535) (10 731)
Interest received 1 669 1 254 2 789
Dividends paid (8 141) (6 196) (13 086)
Taxation paid (15 627) (15 690) (23 967)
Cash flows from operating 39 055 8 798 9 561
activities
Cash flows from investing (94 291) (36 196) (65 320)
activities
Cash flows from financing 9 919 5 331 66 230
activities
Net (decrease)/increase in cash and (45 317) (22 067) 10 471
cash equivalents
Cash and cash equivalents at 45 191 34 720 34 720
beginning of period
Cash and cash equivalents at end of (126) 12 653 45 191
period
STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2005
R"000 Share Share Treasury Revalua Reserve Reserve Retai-
capital premium shares tion on on trans- ned
reserve subsi- lation earnings
diary of
acqui- foreign
sition opera-
tion
Balance at 30 3 354 131 667 (17 018) 836 23 209 158 650
September
2004
Adjustment on (564) 989
adoption of
IFRS
Balance at 30 3 354 131 667 (17 018) 836 23 209 (564) 159 639
September
2004 as
restated
Shares issued 261 49 714
Net treasury 2 760
movement
Net profit 42 620
for the
period
Dividends (7 380)
Less treasury 490
shares
Balance at 31 3 615 181 381 (14 258) 836 23 209 (564) 195 369
March 2005
Adjustment on 354 1 125
adoption of
IFRS
Balance at 31 3 615 181 381 (14 258) 836 23 209 (210) 196 494
March 2005 as
restated
Net treasury 906
movement
Foreign (114)
currency
translation
adjustment
Net profit 51 498
for the
period
Dividends (8 676)
Less treasury 535
shares
Balance at 30 3 615 181 381 (13 352) 836 23 209 (324) 239 851
September
2005
Adjustment to equity on adoption of IFRS for 6 months ended 30 September 2004
Reserve on Retained
translation earnings
of foreign
operation
IFRS 3 business combinations and IAS 36 impairment
of assets
- reversal of goodwill previously amortised 828
IAS 16 property, plant and equipment
- depreciation adjustment due to changes in -15
useful life and residual values
IAS 21 effect of changes in foreign exchange rates
- change in functional currency (564) 580
(564) 1 393
- deferred tax effect of IFRS adjustments (404)
Adjustment to equity on adoption of IFRS for 6 (564) 989
months ended 30 September 2004
Adjustment to equity on adoption of IFRS for 6 months ended 31 March 2005
IFRS 3 business combinations and IAS 36 impairment
of assets
- reversal of goodwill previously amortised 827
IAS 16 property, plant and equipment
- depreciation adjustment due to changes in 1 237
useful life and residual values
IAS 21 effect of changes in foreign exchange rates
- change in functional currency 354 (480)
354 1 584
- deferred tax effect of IFRS adjustments (459)
Adjustment to equity on adoption of IFRS for 6 354 1 125
months ended 31 March 2005
Adjustment to equity on adoption of IFRS as at 31 March 2005
IFRS 3 business combinations and IAS 36 impairment
of assets
- reversal of goodwill previously amortised 1 655
IAS 16 property, plant and equipment
- depreciation adjustment due to changes in 1 222
useful life and residual values
IAS 21 effect of changes in foreign exchange rates
- change in functional currency (210) 100
(210) 2 977
- deferred tax effect of IFRS adjustments (863)
Adjustment to equity on adoption of IFRS as at 31 (210) 2 114
March 2005
Segment Report for the six months ended 30 September 2005
Revenue Results Revenue Results
unaudited unaudited unaudited unaudited
6 months 6 months 6 months 6 months
ended 30 ended 30 ended 30 ended 30
Sept 2005 Sept 2005 Sept 2004 Sept 2004
R"000
Steel and Steel related 451 273 59 610 333 880 49 505
products
Non Steel Related 51 346 9 398 46 365 6 018
Properties 462 63 344
Totals 502 619 69 470 380 308 55 867
COMMENTARY
Chief Executive Officer"s Review
On behalf of the Board of Directors of Argent Industrial Limited, the unaudited
results for the six months ended 30 September 2005 are hereby presented.
Salient Review
* Revenue increased by 32,2% to R 502,6 million (2004 - R380,3 million)
* Attributable earnings increased by 24,3% to R51,5 million
* Attributable earnings per share increased by 18,7% to 74,3 cents per share
(2004 - 62,6 cents per share)
* Headline earnings increased by 25,7% to R51,8 million (2004 - R41,2 million)
* Headline earnings per share increased by 20,1% to 74,7 cents per share (2004 -
62,2 cents per share)
* Gearing decreased to 22.5% (2004 - 23,8%)
GROUP PERFORMANCE
The Group had an excellent first six months which met expectations and there is
every reason to believe that this will continue for the rest of the financial
year.
DIVISIONAL PERFORMANCE
Steel and Steel Related Products
The Group"s steel merchants, operating under the Phoenix Steel banner, have been
adversely affected by the decrease in steel prices and on the whole contributed
11% less than the previous financial year to the Group"s attributable earnings.
Phoenix Steel - Gauteng had a difficult six months but will be in a position to
materially increase turnover when it commissions its new Otto tube mill in
January 2006. The new mill will also give Phoenix the ability to supply Xpanda
Security with all its tubing requirements.
Phoenix Steel - Natal had a more than acceptable first six months and has
benefited from the supply to Xpanda Security of its steel requirements, other
than cold-rolled and galvanised tubing. This business is continuing to excel and
record turnover levels were achieved during October 2005.
Phoenix Steel - Mpumalanga had an excellent six months and has increased its
capacity and ability to supply better quality products by installing a new high
definition plasma machine. Apart from Jetmaster products which it already
distributes in its province, it is now actively involved in the sale of Xpanda
products to both the final consumer as well as to distributors in Mpumalanga.
Phoenix Steel - Richards Bay is a now a well established company in its area.
The first six months have been well above expectations. The company is in the
process of commissioning its first high definition plasma unit which will be
fully operational by the end of November 2005. This will be the first such unit
in northern Kwa Zulu Natal.
Phoenix Steel - Port Elizabeth has taken occupation of its new building and will
aim to double its volumes by April 2006. The company will take delivery of its
first high definition plasma cutting machine in December 2005.
Phoenix Steel - East London had a difficult period under review and has been
adversely affected by the decrease in steel prices and depressed steel
consumption in the area. The company is concentrating more on the supply of
Excalibur and Xpanda products in its area which will widen the scope of the
company and ensure that it performs solidly during the rest of the financial
year.
Hendor Mining Supplies contribution for the period has been more than
satisfactory and it is expected to have an even better second half of the
financial year. The mining scraper market is generally still under margin
pressure, but volumes have improved of late due to the slight weakening of the
Rand and the much-improved Dollar gold price. Most importantly, the company
continues to be very competitive from both a price and quality perspective and
this has led to an increase in market share. All applicable mining houses should
be clients by June 2006.
Ironcraft, previously a division of Xpanda Security, has been incorporated into
the Bavarian Metal Industries operation, which in future will trade under the
Xpanda "banner" as Xpanda Steel Works. Bavarian Metal Industries has always been
a steel fabricator and it made economical sense to amalgamate the two
operations. The company"s contribution for the first six months has been
satisfactory and this is expected to improve in the short term, especially with
in an increase in focus on roller shutter doors.
Koch"s Cut and Supply Steel Centre had to reduce its average margin to fall in
line with its competitors due to the steel price decreases. Given that Koch"s
broke its twenty-six year turnover record in October 2005 and the indication
that volumes show signs of stabilising at a higher level than recently, the
company should improve its earnings levels during the balance of the financial
year.
Giflo Engineering has benefited from the growth in the local automotive
industry. Along with a continued increase in export volumes, it achieved
admirable results for the period under review. Giflo managed to beat its all
time turnover record in October 2005 and will do so again in November 2005.
Excalibur Vehicle Accessories continues to perform exceptionally well and beyond
all projections. Moreover, there is no reason to expect this trend to change.
The company has launched its after-market stainless steel automotive accessories
range, and has commissioned its three plastic injection moulding machines.
Despite an almost non-existent winter on the Highveld, Jetmaster performed
exceptionally during the first six months and will continue to grow in line with
the current trend. The Group is currently building its own Jetmaster outlet in
Umhlanga Rocks in Durban while Jetmaster"s current warehousing facility in
Johannesburg is being increased by an additional 1300 square metres.
Xpanda Security has now completed its first six months under Argent ownership.
Although the Group initially underestimated the logistical implications of
absorbing Xpanda into Argent, important lessons have been learnt and the vast
majority of the changes required have now been implemented and successfully so.
Xpanda"s turnover levels are consistently up from those ever experienced before
and September 2005 was the company"s most successful month ever. Xpanda has
benefited from the Argent infrastructure countrywide and it is fair to say that
these benefits will continue to flow as the Group continues to optimise this
network. The D.I.Y. security market continues to show signs of strength and
Xpanda has thus benefited. The company"s roller shutter door division has never
experienced the current level of orders while the company"s share of the trellis
door and specialised domestic security barrier market continues to grow, albeit
slowly. Many opportunities, both locally and overseas, still exist for Xpanda
and along with the vast cost-savings that are being exploited by the Group in
terms of steel purchasing and other input costs, will ensure that Xpanda will
fulfil its potential in all respects.
Non Steel Related
New Joules Engineering North America, in contrast to the 2005 financial period,
achieved outstanding results for first six months of the 2006 financial year. In
addition, current turnover levels are assured for the next fourteen months. New
Joules has substantially increased its client base and will further benefit from
this diversification in the way of turnover due to required on-going maintenance
on the railway retarders supplied.
Megamix and Villiersdorp enjoyed a very successful first half of the 2006
financial year and has a full order book which will ensure that the second half
of the year runs at the same turnover and earnings levels. Megamix has purchased
land in Killarney Gardens, Cape Town on which it will commission its fourth
batch plant. This batch plant will be fully operational by April 2006.
Prospects
The successful first half of the 2006 financial year experienced by the Group is
expected to continue through the balance of the year. There are no indicators,
economic or otherwise, to suggest that this will not be the case. The Group is
confident that it will maintain an overall growth in headline earnings per share
of around 20% for the full financial year.
Dividend
A final dividend of 12 cents per share in respect of the year ended 31 March
2005 was paid during the period.
An interim dividend of 13 cents per share has been declared, subsequent to 30
September 2005, payable on Monday 23 January 2006 to shareholders recorded in
the register at close of business on Friday 20 January 2006, being the record
date in order to participate in such dividend. The last day to trade cum-div is
Friday 13 January 2006. The share will trade ex-div on Monday 16 January 2006.
Share certificates may not be dematerialised/rematerialised between Monday 16
January 2006 and Friday 20 January 2006, both days inclusive.
Accounting Policies and Presentation
Financial Reporting Standards (IFRS) were adopted with effect 1 January 2005.
The financial statements for the period under review incorporate Accounting
Policies which are consistent with those applied in the preparation of the
audited financial results for the previous period except for changes as a result
of the adoption of IFRS. These changes are set out in the Statement of Changes
in Equity. Comparative figures have been restated where applicable as required
by IFRS and are reflected as "unaudited" as the adjustments have not been
audited by the Company"s external auditors.
IFRS Adjustments
The basis of adjustments, net of the taxation effect, as shown in the
reconciliation of equity and the income statement, are as follows:
IAS 36/IFRS 3 - Goodwill
Following the adoption of IAS 36/IFRS 3 - Business combination, goodwill is not
amortised but is subject to annual impairment reviews. The 2005 goodwill
amortisation previously recognised in the income statement has been reversed.
IAS 16 - Property, plant and equipment
Following the adoption of IAS 16 - Property, plant and equipment, the useful
lives of property, plant and equipment have been re-assessed resulting in an
increase in retained income with a corresponding increase in property, plant and
equipment.
IAS 21 - Foreign Operation
Following the adoption of IAS 21 - Foreign Operation, monetary assets and
liabilities designated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date. Differences arising on monetary
assets and liabilities are taken to equity as reserves on translation of foreign
operation and not recognised in the income statement.
On behalf of the Board
T.R. Hendry CA (SA) Maraisburg, Roodepoort
Chief Executive Officer 10 November 2005
Date: 10/11/2005 01:00:20 PM Produced by the JSE SENS Department
