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AGI
AGI
AGI - Unaudited Interim Results For The Six Months Ended December 2005
AG INDUSTRIES LIMITED
("AGI" or "the Group")
Registration number: 1980/004051/06
www.ag-industries.com
SHARE CODE: AGI & ISIN: ZAE000039467
AGI UNAUDITED RESULTS Dec 05
COMMENTARY
SALIENT FEATURES
Operational Performance
Revenues increase by 22%
Organic volume growth of 19%
Operating margin increases to 10,6% (June 2005: 10,1%)
Financial Performance
Headline earnings increase by 22% (restated: 18%)
Gearing reduced from 50% to 40% due to effective working capital control
Working capital ratio reduced to 22% (December 2004: 29%)
Headline return on equity improves to 24% from 21%
REVIEW
OPERATIONAL PERFORMANCE
The Group has had a successful first half in which it generated a 24% headline
return on equity. Volume growth was almost entirely organic and was achieved
across all sectors of the business. Volumes grew at an average of 19% across
the Group"s product lines, this figure being constrained by raw material
shortages in the industry and by fully utilised production capacity within the
Group. To address this under-capacity the Group is in the advanced stages of
projects to increase capacity in the glass and aluminium manufacturing sites
and to re-engineer processes. The purpose of the re-engineering is to
substantially increase the production capacity of the Group to meet current
demand and to enable the Group to meet growth into the future.
The largest of the manufacturing hubs will house an additional extrusion press,
which is in the process of being commissioned. This should more than double the
capacity to produce extrusions of aluminium in the Group and lead to an
increase in operating margins.
The existing extrusion press will be relocated from the current premises during
the latter part of the 2006 calendar year.
In addition, a new powder-coating plant and tempering furnace, which will both
be used solely for the manufacture of components for glass and aluminium
finished products, will be commissioned during 2006.
Besides alleviating capacity constraints on existing equipment it will also
reduce handling and transport costs and result in manufacturing efficiencies
and productivity improvements.
Additional finished product fabrication lines will increase the capacity of
finished product fabrication lines and enable the Group to service its market
more efficiently.
The Group acquired 100% of the equity of Marvad Distributors (Pty) Ltd and its
100% held subsidiary Showerlux SA (Pty) Ltd as well as the business of Coral
Glass (Pty) Ltd, effective 1 November 2005. The companies" product range
consists of framed and unframed mirrors branded under the "Coral" banner,
"Coral" shower doors aimed at the DIY and deluxe level and "Showerlux" shower
doors aimed at the top end of the market. The acquisition allows the Group to
solidify its position in the retail market and to enjoy product and market
synergies. The acquisition did not have a material effect on the results of the
Group for the period under review.
During the planning and initial implementation of the above mentioned projects
there have been additional costs in the form of salaries, rentals and costs
relating to the design of processes and systems which have been absorbed during
the period under review. It is pleasing to note that these additional costs had
little impact on the operating margins as a result of the strong operating
performances delivered by the trading entities in the Group.
Glass Division
The market in which the Division traded remained robust with good volume growth
and stability in selling prices. The demand for value added glass products was
particularly high and the increased revenues from these products resulted in
improved gross margins in the Division. Commercial project work in the coastal
regions also contributed to the growth.
New processing equipment commissioned in the previous financial year resulted
in additional capacity and much of the organic growth achieved was as a result
of the ability to service this growing market. The toughening furnace
commissioned in Kwa-Zulu Natal, in particular, yielded benefits in the period
under review.
Road haulage costs again increased more than the corresponding increase in
revenue. A number of initiatives aimed at reducing the costs of transport by
in-sourcing in certain of the smaller branches are well under way and should
contain these costs in line with inflation in the future.
The Division maintained its overhead to revenue ratio by ensuring a tight
control over overheads and exceeded expectation by delivering a 13% increase in
the operating margin.
Aluminium Division
Finished Products
The Finished Products Division experienced a 22% volume growth across its
product lines with the largest growth coming from windows and showers. Demand
was particularly robust in the retail sector of the market.
The Group was, however, constrained from meeting full demand by previously
mentioned shortages of raw material in the industry and this impacted the full
volume growth capability. Additional costs, including increased overtime and
costs of transport, as well as the product mix in the period under review,
resulted in a reduction in the operating margin in the Division.
Solutions, Lengths and Hardware
The creation of the Solutions Division has led to an increase in projects, both
residential and commercial.
The number of projects awarded to the Division is encouraging and augurs well
for the future.
The Lengths and Hardware Division increased revenues by 36%. The gross margin
was maintained and this, together with a reduction in the overhead, resulted in
a 50% improvement in the operating margin of this Division.
International Division
After the closure of the USA operation, the International Division is
profitable for the period under review.
The discontinued operation in the USA was provided for fully in the previous
financial period, save an amount of approximately R650 000 for legal fees
incurred, which was expensed during the period under review.
The U.K. operation maintained revenues and margins and performed to
expectation for the period under review.
The German operation increased revenues by 22% and increased its gross margin
while maintaining its overhead. The result was another improved performance for
the period under review.
In Mauritius the business operated as anticipated and produced results in line
with expectation for the period under review.
Exports continue to be constrained by Rand strength resulting in an inability
to increase selling prices or volumes into export markets.
FINANCIAL PERFORMANCE
Double digit volume growth in most product categories translated into revenue
growth of 22%. The International Division delivered an improved performance and
added to a sound domestic base. This contributed to an improved operating
margin overall when compared to the year ended 30 June 2005. Financing costs
reduced marginally and gearing reduced from 50% to 40% as a result of better
working capital control. The working capital ratio improved from 29% to 22% in
the current period. Headline return on equity increased to 24% (21%) due to the
improved margins, lower finance costs and a reduction in equity as a result of
the implementation of IFRS.
PROSPECTS
The board is confident in the Group"s ability to sustain momentum in key areas:
Volume growth should be driven by a buoyant domestic economy and further
penetration into key channels to market;
Productivity improvements, driven by the manufacturing hub, should improve
margins and drive volume growth in the 2007 year and beyond;
Increased service levels are expected to positively impact volumes and
profitability;
Key alliances in the value added market are expected to increase sales and
improve mix and gross margins;
Vertical integration by the introduction of a second aluminium extrusion
press in the first quarter of the calendar year should have the effect of
trapping margin, thereby increasing operating profit into the future.
ACCOUNTING POLICIES
The Group is reporting under IFRS for the first time for the six months ended
31 December 2005, and accordingly comparatives have been restated where
required. The unaudited results for the six month period ended 31 December 2005
have been prepared in accordance with the Group"s accounting policies, which
comply with IFRS.
These interim results have not been audited or reviewed by the Group"s
auditors.
The following IFRS statements have impacted the Group"s accounting policies:
Property, plant and equipment
The residual values and useful lives of major property, plant and equipment
have been assessed and where applicable depreciation has been adjusted as
required by IAS16.
Share based payments
The fair value of equity settled share-based payment transactions is charged to
the income statement and the reciprocal credit is shown in liabilities in the
balance sheet as per IFRS 2.
Deferred tax
Deferred tax has been adjusted for the changes made to the carrying value of
assets and liabilities.
Minority interests
Minority interests have been adjusted for the changes made to the carrying
value of assets and liabilities.
DISTRIBUTION TO SHAREHOLDERS
The board has the policy of making one distribution to shareholders at the end
of each financial year. In line with this policy, no interim distribution to
shareholders has been proposed.
For and on behalf of the Board
A A Barrell G F D Twigg J Martingano
Chief Executive Officer Chief Operating Officer Group Financial Director
7 March 2006
Visit our website: www.ag-industries.com
CONSOLIDATED INCOME STATEMENT
for the 6 months ended 31 December 2005
Previously reported
Unaudited unaudited
six months six months
ended ended
31 December 31 December
2005 2004 Change
R"000 R"000 %
CONTINUING OPERATIONS:
Revenue 586 143 508 986 15
Profit before
depreciation
and amortisation 70 957 62 268 14
Depreciation (8 293) (11 115)
Other amortisation (799) (594)
Profit after
depreciation
and amortisation 61 865 50 559 22
Operating margin 10,6% 9,9%
Profit/(loss) on
disposal of
property, plant
and equipment 111 160
Goodwill impaired - -
Profit from operations 61 976 50 719 22
Net financing costs (7 720) (7 900)
Share of profits
of associates 1 749 1 134
Profit before taxation 56 005 43 953 27
Taxation (15 594) (11 125)
- normal activities (15 562) (11 077)
- headline adjustments (32) (48)
Profit for the
period from continuing
operations 40 411 32 828 23
DISCONTINUED
OPERATIONS:
(Loss)/profit
for the period
from discontinued
operations (648) -
Profit for the period 39 763 32 828 21
Attributable to:
Equity holders of
the holding company 38 601 31 648 22
Minority interest 1 162 1 180
Profit for the period 39 763 32 828
Reconciliation:
Profit for the period
attributable to equity
holders of the
holding company 38 601 31 648
(Profit)/loss on
disposal of
property, plant
and equipment (79) (112)
Impairment of
property, plant
and equipment
and intangible assets - -
Impairment of
investments and loans - -
Loss on disposal
of subsidiary - -
Headline earnings
from continuing
and discontinued
operations 38 522 31 536 22
STATISTICS
Number of ordinary
shares in issue ("000) 197 045 195 478
Weighted average
number of ordinary 195 346 194 178
shares in issue ("000)
Diluted number
of ordinary shares
in issue ("000) 202 978 203 778
Basic earnings
per ordinary
share (cents) 19,8 16,3
Headline earnings
per ordinary share
(cents) 19,7 16,2
Diluted basic
earnings per
ordinary share
(cents) 19,0 15,5
Diluted headline
earnings per ordinary
share (cents) 19,0 15,5
Capital
distribution/
capitalisation
share award
Capital distribution/
capitalisation
share award proposed
per ordinary
share (cents) - -
Restated
unaudited Restated
six months year
ended ended
31 December 30 June
2004 Change 2005
R"000 % R"000
CONTINUING OPERATIONS:
Revenue 478 583 22 924 512
Profit before
depreciation
and amortisation 62 322 14 109 991
Depreciation (7 117) (14 990)
Other amortisation (594) (1 188)
Profit after
depreciation
and amortisation 54 611 13 93 813
Operating margin 11,4% 10,1%
Profit/(loss) on
disposal of
property, plant
and equipment 160 (192)
Goodwill impaired - (284)
Profit from operations 54 771 13 93 337
Net financing costs (7 729) (16 275)
Share of profits
of associates 1 134 1 943
Profit before taxation 48 176 16 79 005
Taxation (14 460) (21 901)
- normal activities (14 412) (21 957)
- headline adjustments (48) 56
Profit for the
period from continuing
operations 33 716 20 57 104
DISCONTINUED
OPERATIONS:
(Loss)/profit
for the period
from discontinued
operations 257 (38 416)
Profit for the period 33 973 17 18 688
Attributable to:
Equity holders of
the holding company 32 687 18 17 025
Minority interest 1 286 1 663
Profit for the period 33 973 18 688
Reconciliation:
Profit for the period
attributable to equity
holders of the
holding company 32 687 17 025
(Profit)/loss on
disposal of
property, plant
and equipment (112) 136
Impairment of
property, plant
and equipment
and intangible assets - 16 419
Impairment of
investments and loans - 1 088
Loss on disposal
of subsidiary - 6 066
Headline earnings
from continuing
and discontinued
operations 32 575 18 40 734
STATISTICS
Number of ordinary
shares in issue ("000) 195 478 195 478
Weighted average
number of ordinary 194 178 194 312
shares in issue ("000)
Diluted number
of ordinary shares
in issue ("000) 203 778 201 688
Basic earnings
per ordinary
share (cents) 16,8 8,8
Headline earnings
per ordinary share
(cents) 16,8 21,0
Diluted basic
earnings per
ordinary share
(cents) 16,0 8,4
Diluted headline
earnings per ordinary
share (cents) 16,0 20,2
Capital
distribution/
capitalisation
share award
Capital distribution/
capitalisation
share award proposed
per ordinary
share (cents) - 6,5*
*Capital distribution/capitalisation share award proposed in respect of year
ended 30 June 2005 - paid/awarded on 17 October 2005.
CONSOLIDATED BALANCE SHEET
as at 31 December 2005
Restated
Unaudited unaudited Restated
six months ended six months ended year ended
31 December 31 December 30 June
2005 2004 2005
R"000 R"000 R"000
ASSETS
Non-current assets
Property, plant and
equipment 105 918 91 230 102 424
Intangible assets 115 767 107 897 94 089
Investments and loans 18 950 15 251 18 570
Deferred taxation
assets 10 701 18 020 10 063
Current assets
Inventories 167 453 160 399 151 505
Trade and other
receivables 243 107 242 543 203 692
Other current assets 4 259 8 127 6 091
Cash and cash
equivalents 8 709 844 16 882
Total assets 674 864 644 311 603 316
EQUITY AND LIABILITIES
Shareholders" equity
Equity attributable to
equity holders of the
holding company 322 609 303 220 293 381
Minority shareholders"
interest
Outside shareholders"
interest 5 642 4 495 4 480
Non-current liabilities
Interest bearing
shareholder"s loan 9 909 3 605 4 252
Deferred taxation
liabilities 12 067 16 075 12 512
Long-term interest
bearing debt 71 333 70 717 65 689
Long-term deferred
income 21 893 19 877 21 690
Current liabilities
Amounts due to vendors
within one year 176 2 767 176
Trade and other
payables 156 592 129 416 128 722
Other current
liabilities 17 250 15 106 7 366
Short-term interest
bearing debt 57 393 79 033 65 048
Total equity and
liabilities 674 864 644 311 603 316
Net asset value per
ordinary share (cents) 164 155 150
ADDITIONAL INFORMATION
Capital expenditure
for the period 11 065 22 327 45 818
Capital expenditure
committed or authorised 178 263 22 249 53 524
Directors" valuation
of investments and
loans 18 950 15 251 18 570
Finance and operating
lease commitments 229 197 211 383 190 878
Interest capitalised 236 - 198
Contingent liabilities 18 812 18 039 12 363
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
for the 6 months ended 31 December 2005
Restated
Unaudited unaudited Restated
six months six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 R"000 R"000
Cash flows from operations 70 521 62 268 100 996
Working capital changes (46 788) (87 835) (40 314)
Net financing costs
and taxation paid (9 981) (12 319) (36 522)
Net cash inflow/(outflow)
from operating activities 13 752 (37 886) 24 160
Net capital expenditure (9 932) (18 186) (40 337)
Dividend received from associate 780 780 780
Decrease in investments and loans - 2 252 2 260
Increase in investment
in subsidiaries (144) (1 228) (3 819)
Net cash outflow from
investing activities (9 296) (16 382) (41 116)
Capital distribution (8 188) (12 014) (12 606)
Other financing activities (4 060) 4 066 10 401
Net cash outflow from
financing activities (12 248) (7 948) (2 205)
Net decrease in cash equivalents (7 792) (62 216) (19 161)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 6 months ended 31 December 2005
Share Non- Group
capital and distributable retained
premium reserves earnings
R"000 R"000 R"000
Balance at 30 June 2004 96 295 2 905 187 352
- As previously stated 96 295 2 905 207 433
- Prior year adjustments:
- IAS 17 Leases - - (13 195)
- IAS 16 Property,
plant and equipment - - (5 282)
- IFRS 2 Share
based payments - - (1 604)
Capital distribution (12 622) - -
Movement in reserves - (3 619) (14)
Fair value of investments - (233) 469
Minority interest acquired - - -
Dividend paid - - -
Profit for the period - - 32 687
- As previously stated - - 31 648
- Prior year adjustments:
- IAS 17 Leases - - (918)
- IAS 16 Property,
plant and equipment - - 2 334
- IFRS 2 Share
based payments - - (377)
Balance at 31 December 2004 83 673 (947) 220 494
Movement in treasury shares 1 408 - -
Movement in reserves - 2 939 1 397
Fair value of investments - 80 -
Dividend paid - - -
(Loss)/profit for the period - - (15 663)
- As previously stated - - (18 487)
- Prior year adjustments:
- IAS 17 Leases - - 918
- IAS 16 Property,
plant and equipment - - 2 284
- IFRS 2 Share
based payments - - (378)
Balance at 30 June 2005 85 081 2 072 206 228
Capital distribution (12 667) - -
Capitalisation shares
issued in lieu of capital
distribution 4 467 - -
Share allotment costs (11) - -
Movement in treasury shares 6 - -
Movement in reserves - (708) (460)
Profit for the period - - 38 601
Balance at 31 December 2005 76 876 1 364 244 369
Attributable to
equity holders of Minority Total
the holding company interest equity
R"000 R"000 R"000
Balance at 30 June 2004 286 552 4 973 291 525
- As previously stated 306 633 5 109 311 742
- Prior year adjustments:
- IAS 17 Leases (13 195) - (13 195)
- IAS 16 Property,
plant and equipment (5 282) (136) (5 418)
- IFRS 2 Share
based payments (1 604) - (1 604)
Capital distribution (12 622) - (12 622)
Movement in reserves (3 633) - (3 633)
Fair value of investments 236 - 236
Minority interest acquired - (1 376) (1 376)
Dividend paid - (388) (388)
Profit for the period 32 687 1 286 33 973
- As previously stated 31 648 1 180 32 828
- Prior year adjustments:
- IAS 17 Leases (918) - (918)
- IAS 16 Property,
plant and equipment 2 334 106 2 440
- IFRS 2 Share
based payments (377) - (377)
Balance at 31 December 2004 303 220 4 495 307 715
Movement in treasury shares 1 408 - 1 408
Movement in reserves 4 336 - 4 336
Fair value of investments 80 - 80
Dividend paid - (392) (392)
(Loss)/profit for the period (15 663) 377 (15 286)
- As previously stated (18 487) 270 (18 217)
- Prior year adjustments:
- IAS 17 Leases 918 - 918
- IAS 16 Property,
plant and equipment 2 284 107 2 391
- IFRS 2 Share
based payments (378) - (378)
Balance at 30 June 2005 293 381 4 480 297 861
Capital distribution (12 667) - (12 667)
Capitalisation shares
issued in lieu of capital
distribution 4 467 - 4 467
Share allotment costs (11) - (11)
Movement in treasury shares 6 - 6
Movement in reserves (1 168) - (1 168)
Profit for the period 38 601 1 162 39 763
Balance at 31 December 2005 322 609 5 642 328 251
GROUP SEGMENTAL ANALYSIS
for the 6 months ended 31 December 2005
Continuing operations
Eliminations/
headline Total
Southern earnings continuing
Africa Europe adjustments operations
R"000 R"000 R"000 R"000
Geographical
Revenue:
Unaudited
period ended
31 December 2005 685 028 63 860 (162 745) 586 143
% to total 91 9
Restated
unaudited
period ended
31 December 2004 552 282 57 034 (130 733) 478 583
% to total 91 9
Restated
year ended
30 June 2005 1 072 177 116 733 (264 398) 924 512
% to total 90 10
Result:
Profit/(loss)
from operations
Unaudited
period ended
31 December 2005 60 825 1 040 111 61 976
% to total 98 2
Restated
unaudited
period ended
31 December 2004 54 364 247 160 54 771
% to total 100 -
Restated
year ended
30 June 2005 93 061 752 (476) 93 337
% to total 99 1
Discontinued operations
Eliminations/
headline Total
Europe earnings discontinued Total
and the USA adjustments operations group
R"000 R"000 R"000 R"000
Geographical
Revenue:
Unaudited
period ended
31 December 2005 - - - 586 143
% to total
Restated
unaudited
period ended
31 December
2004 30 403 - 30 403 508 986
% to total
Restated
year ended
30 June 2005 64 058 - 64 058 988 570
% to total
Result:
Profit/(loss)
from operations
Unaudited
period ended
31 December
2005 (648) - (648) 61 328
% to total
Restated
unaudited
period ended
31 December
2004 (2 283) - (2 283) 52 488
% to total
Restated
year ended
30 June 2005 (11 999) (23 306) (35 305) 58 032
% to total
Continuing operations
Restated
Unaudited unaudited Restated
six months six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 % R"000 % R"000 %
Business
segment
Revenue:
Unbeneficiated
products 222 094 30 203 159 33 417 137 35
Value added
products
- Glass 120 183 16 86 800 14 149 806 13
- Aluminium 406 611 54 319 357 53 621 967 52
748 888 100 609 316 100 1 188 910 100
Inter-segment
sales
eliminated (162 745) (130 733) (264 398)
586 143 478 583 924 512
Discontinued operations
Restated
Unaudited unaudited Restated
six months six months year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
R"000 % R"000 % R"000 %
Business
segment
Revenue:
Unbeneficiated
products - 30 403 100 64 058 100
Value added
products
- Glass - - -
- Aluminium - - -
- 30 403 100 64 058 100
Inter-segment
sales
eliminated - - -
- 30 403 64 058
AG INDUSTRIES LIMITED ("AGI" or "the Group")
Registration number: 1980/004051/06
www.ag-industries.com
SHARE CODE: AGI ISIN: ZAE000039467
DIRECTORS
A.A. Barrell (C.E.O.), G.F.D. Twigg (C.O.O.), J. Martingano (Financial),
J.C. Saville, M.J.E. Geldenhuys, C.P. Kalil*,
H.R. Levin* (Non-Executive Chairman), B.E. Danoher*#, T.Y. Worthington*#.
*Non-Executive Irish #Independent
REGISTERED OFFICE
Corner Kruger Street and Mimetes Road, Denver Extension 11, Johannesburg 2094
PO Box 40443, Cleveland 2022
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg 2001
P O Box 61051, Marshalltown 2107, South Africa
SPONSOR
Sasfin Capital
(A Division of Sasfin Bank Limited)
Date: 06/03/2006 05:15:15 PM Produced by the JSE SENS Department
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