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Argent Industrial Limited - Audited Results for the year ended 31 March 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
Financial Highlights
* REVENUE UP 24.3%
* ATTRIBUTABLE EARNINGS UP 35.4%
* ATTRIBUTABLE EARNINGS per share UP 25.3%
* HEADLINE EARNINGS UP 28.9%
* HEADLINE EARNINGS per share UP 19.2%
* GEARING 20.5%
Abridged Consolidated Income Statement for the year ended 31 March 2005
Audited Audited
year ended year ended
31 March 31 March
2005 2004
R 000
Revenue 751,858 604,639
Operating profit before financing costs 120,728 96,966
Financing costs 10,731 15,703
Profit before taxation 109,997 81,263
Taxation 26,921 19,926
Earnings attributable to ordinary shareholders 83,076 61,337
Attributable earnings per share (cents) 124.2 99.1
Headline earnings per share (cents) 126.6 106.2
Dividends per share (cents) 21.0 18.0
Supplementary Information
Audited Audited
year ended year ended
31 March 31 March
2005 2004
R 000
Shares in issue (000)
- at end of period 72,296 67,090
- weighted average for the year 66,894 61,867
Interest received (R 000) 2,789 8,375
Cost of sales (R 000) 440,374 359,249
Depreciation & amortisation (R 000) 18,710 14,292
Loss on translation of foreign operation (R 000) 100 1,475
Net profit / (loss) on foreign exchange transaction (R 000) 1,125 (3,959)
Calculation of Headline Earnings (R 000)
Earnings attributable to ordinary shareholders 83,076 61,337
Goodwill amortisation 1,655 1,478
"Profit on disposal of property, plant and equipment (464) (395)
Profit on disposal of subsidiary (147)
"Loss on disposal of property, plant and equipment 579 997
Discontinued operation 2,288
Headline earnings attributable to ordinary shareholders 84,699 65,705
Abridged Consolidated Balance Sheet as at 31 March 2005
Audited at Audited at
31 March 31 March
2005 2004
R 000
ASSETS
Non-current assets
Property, plant and equipment 206,858 158,658
Intangibles 29,686 31,390
236,544 190,048
Current assets
Inventories 199,466 96,481
Trade and other receivables 165,448 134,415
Bank balance and cash 45,191 34,720
410,105 265,616
Total assets 646,649 455,664
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 170,738 117,046
Reserves 24,045 24,045
Retained earnings 194,380 124,390
Total shareholders" funds 389,163 265,481
Non-current liabilities
Interest-bearing borrowings 51,927 47,423
Deferred tax 13,667 10,087
65,594 57,510
Current liabilities
Trade and other payables 152,081 100,270
Taxation 11,906 12,532
Current portion of interest-bearing borrowings 27,905 19,871
191,892 132,673
Total equity and liabilities 646,649 455,664
Net asset value per share (cents) 538.3 395.7
Abridged Consolidated Cash Flow Statement for the year ended 31 March 2005
Audited Audited
year ended year ended
31 March 31 March
2005 2004
R 000
Cash generated from operations 54,410 76,443
Interest received 2,789 8,375
Interest paid (10,731) (15,703)
Dividends paid (13,086) (10,635)
Taxation paid (23,967) (9,380)
Cash flows from operating activities 9,415 49,100
Cash flows from investing activities (65,174) (49,212)
Cash flows from financing activities 66,230 28,233
Net increase in cash and cash equivalents 10,471 28,121
Cash and cash equivalents at beginning of year 34,720 6,599
Cash and cash equivalents at end of year 45,191 34,720
Statement of Changes in Equity for the year ended 31 March 2005
Share Share Treasury Revaluation Reserve on Retained Total
Capital premium shares reserve subsidiary earnings
acquisition
R 000
Balance at 31 March 2003
2,915 103,651 (1,711) 836 23,209 73,688 202,588
Shares issued
439 28,016 (16,679) 11,776
Net treasury movement
415 415
Profit for the year ended 31 March 2004
61,337 61,337
Dividends - interim (11,286) (11,286)
Less treasury shares 651 651
Balance at 31 March 2004
3,354 131,667 (17,975) 836 23,209 124,390 265,481
Shares issued
261 49,714 49,975
Net treasury movement 3,717 3,717
Profit for the year ended 31 March 2005
83,076 83,076
Dividends - current interim and prior final (14,089) (14,089)
Less treasury shares 1,003 1,003
Balance at 31 March 2005
3,615 181,381 (14,258) 836 23,209 194,380 389,163
Segment Report for the year ended 31 March 2005
Revenue Results Revenue
Audited Audited Audited
Business Segments Thurs, Mar 31, 05 Thurs, Mar 31, 05 Wed, Mar 31, 04
R 000
Steel & Steel Related Products 663,494 97,533 482,929
Non Steel Related 88,247 12,383 121,574
Properties 117 81 136
Total 751,858 109,997 604,639
Segment Report for the year ended 31 March 2005
Results
Audited
Business Segments Wed, Mar 31, 04
R 000
Steel & Steel Related Products 72,599
Non Steel Related 8,573
Properties 91
Total 81,263
COMMENTARY
Chief Executive"s Review
On behalf of the board of directors of Argent Industrial Limited, the audited
results for the year ended 31 March 2005 are hereby presented. The Group has had
another impressive year and has both consolidated and expanded its base within
the South African economy and held its own in what has proved to be a very
difficult export market.
Salient Features
* Attributable earnings increased by 35,4% to R 83,0 million (2004 - R61,3
million)
* Headline earnings per share increased by 19,2% to 126,6 cents per share (2004
- 106,2 cents per share)
* Revenue increased by 24,3% to R 752 million (2004 - R 605 million)
* Group gearing decreased to 20, 5% (2004 - 25,3%)
Acquisitions
With effect from 1 April 2005, the Group acquired 100% of the shareholding of
Xpanda Security (Pty) Ltd for R 49,3 million. Xpanda is a well-known
manufacturer of custom-made barrier security products sold direct to the public
as well as a supplier of D.I.Y. security products found mostly in the major
chain stores. The acquisition was a strategic move to achieve the following: -
- Securing the supply of steel to Xpanda by the Phoenix Steel group of
operations.
- Enhancing the Group"s export capabilities especially into Canada, New Zealand,
Australia and the United Kingdom.
- Adding another recognised brand into the Argent fold.
- Establishing synergies and cost savings due to Xpanda"s presence in areas
where the Group has existing operations.
- Entering a market where a substantial increase in market coverage is possible.
Divisional Performance
STEEL AND STEEL RELATED PRODUCTS.
The Group"s steel companies had a good year and have made a number of strategic
capital purchases, which will put it in good stead for a number of years going
forward.
Giflo Engineering had another excellent year and has a sufficient order book to
ensure that its growth continues into the next financial year. Giflo
commissioned a R2,2 million fully automated shot blasting system in May 2005.
This process will alleviate a current bottleneck and ensure that our customers
get an improved surface finish on the end product. Giflo has in addition ordered
a new tube end-forming machine and a new tube bending machine from Italy, which
will increase its production capacity in the filler tube market.
Excalibur had an exceptional year. Their new ranges of aluminium side steps have
been a great success. Excalibur has opened branches in Port Elizabeth and Cape
Town and will benefit from this greater market coverage in the new year.
Excalibur is in the process of expanding into the manufacturing of plastic
automotive components and will have two plastic injection moulding machines
operational by December 2005.
Hendor Mining Supplies achieved satisfactory turnover levels for the year,
despite having to provide for a R800 000 bad debt from Durban Roodepoort Deep
due to the closure of its North West operations. The mining supplies market
remained competitive throughout the year and this trend is expected to continue
indefinitely with margins under pressure. Hendor will continue to develop its
manufacturing processes to increase its competitiveness and is confident of
maintaining its profitability level in the 2006 financial year.
Jetmaster had a record year and will go into the 2006 financial year with two
new product lines - a gas fire that simulates a realistic wood burning fire and
a mild steel slow combustion fire- place unit. Jetmaster is currently tooling up
to manufacture its own portable gas barbeques and will start production in
January 2006. This will complement the existing imported range. Jetmaster is in
the process of expanding its existing warehousing facility by 1278 square metres
to facilitate its new product range and the expected increase in turnover
levels.
Phoenix Steel - Gauteng enjoyed another successful year. The 1680 square metre
building extension was completed in November 2004. Phoenix is now set to
significantly increase its turnover for the 2006 financial year. The company
has ordered an OTO 763 tube mill from Italy at a cost of Euro 1,17 million. The
mill is expected to be commissioned in January 2006 and will focus primarily on
supplying Xpanda Security, the Group"s recent acquisition.
Phoenix Steel - East London is now well established and continues to supply
steel and Jetmaster products in the area as well as support Giflo and Excalibur
with its just-in-time supply to Daimler Chrysler. With effect from 1 June 2005,
Phoenix Steel - East London is also supplying Xpanda Security products into the
area.
Phoenix Steel - Mpumalanga continued its dramatic rise as a force in the steel
industry by having an excellent year. It has expanded its operations by
increasing its warehousing facility by 1600 square metres and by acquiring a
high definition plasma cutting machine from Belgium which was commissioned
during the first week of June 2005. Phoenix Steel Mpumalanga currently
distributes Jetmaster in its province and in addition has started distributing
Xpanda"s products from 1 June 2005.
Phoenix Steel - Natal had another successful year and is currently negotiating
to purchase a 12 000 square metre piece of land on which to build a new
warehouse and steel processing centre. The project is expected to be completed
towards the end of the 2006 financial year and will provide the company with a
four-fold increase in capacity.
Phoenix Steel - Port Elizabeth has purchased a 7000 square metre warehouse in
Port Elizabeth to which it will move its operations in August 2005. This will
greatly increase its capacity as well as achieve substantial visibility in the
steel industry in the Eastern Cape. The company also distributes Jetmaster and
Excalibur products in the area and has incorporated the Xpanda Security regional
branch in the area with effect from 1 April 2005.
Koch"s Cut and Supply had a difficult year with the company finding itself under
increasing margin pressure. The company is in the process of upgrading its
machinery. During the period under review it commissioned a new plate rolling
and plasma cutting machine and has upgraded its transport fleet.
Phoenix Steel - Richards Bay has come into its own and is now a constant
contributor to the Group, despite the current low level of new industrial
activity in Northern Kwa Zulu Natal. With effect from 1 July 2005 the company
will also distribute Xpanda Security products in addition to the Jetmaster
products already being distributed on the Group"s behalf.
Bavarian Metal Industries is now primarily an in-house steel fabricator with
Jetmaster and Giflo being their main customers. With effect from 1 July 2005,
BMI will take over the Johannesburg Ironcraft and Rol-A-Door operations of
Xpanda Security. This will enable the Group to dispose of the building that
Xpanda Security Johannesburg utilised in Midrand.
NON STEEL RELATED PRODUCTS
New Joules Engineering North America had a disappointing 2005 financial year.
The company only managed a net profit after tax of USD 45 347. The 2006
financial year has started off well with an order of USD 2.3 million from Kansas
City Southern Railway Company and the company expects further orders for the
year of USD 0.9 million. These orders are in addition to the USD 1.5 million the
company turns per year on routine maintenance. The company acquired its own
factory in Kansas City, Missouri for USD 747 687 and took ownership of it on 1
January 2005.
Megamix and Villiersdorp Quarries had a very good year and started the new
financial year with a full order book. Megamix will increase its capacity by
adding an additional batch plant which should be operational by the end of the
year. Megamix increased its mixer truck fleet and acquired a new Schwing
Concrete Boom Pump during the period under review. Villiersdorp Quarries is in
the process of upgrading their dump truck fleet and will take delivery of a
second Bell B30D dump truck in July 2005.
Prospects
With the Group coming off an extended period of unprecedented growth over the
past three years, some form of consolidation is inevitable during the 2006
financial year.
However, at the same time plans have been implemented to drive the Group towards
its short-term goal of R 1 billion in annual turnover. The purchase of Xpanda
Security will ensure greater visibility for the Group in terms of a recognised
brand, increase the volume of steel traded through the Group, result in
synergies and cost savings in areas where the Group has existing operations and
allow the Group to tap into the lucrative and growing South African security
market.
The purchase of and/or extensions to properties in respect of the Phoenix steel
operations in Durban, Middelburg, Port Elizabeth and Germiston will increase the
Group"s Steel trading and processing capacity.
State of the art machinery acquisitions such as the new tube mill for Phoenix
Steel - Gauteng, the high definition plasma machine for Phoenix Steel Mpumalanga
as well as the funds being spent at Giflo, Xpanda and Megamix will further
enhance the Group"s ability to produce quality products for its customers.
New products and product ranges, especially in terms of Jetmaster"s barbeques,
Excalibur"s after market stainless steel ranges and automotive plastic
components and Giflo"s Toyota project will serve to further widen the Group"s
product base.
The recent weakening of the Rand shows signs of being sustainable to some
degree. This will have a substantial effect on the Group"s export margins and
will also have a positive effect on a wide range of the Group"s customer base.
Dividend
A final dividend of 12 cents per share has been declared, payable on Monday 11
July 2005 to shareholders recorded in the register at close of business on
Friday 8 July 2005, being the record date in order to participate in such a
dividend. The last day to trade cum div is Friday 1 July 2005. The share will
trade ex div on Monday 4 July 2005.
Share certificates may not be dematerialised / rematerialised between Monday 4
July 2005 and Friday 8 July 2005 both dates inclusive.
In accordance with Generally Accepted Accounting Practice Statement AC107, the
dividend of 12 cents per share proposed by the Directors has not been reflected
in the financial statements.
Accounting Policies
The financial statements for the year under review are prepared in accordance
with South African Statements of Generally Accepted Accounting Practice and
incorporates accounting policies which are consistent with those of the previous
year.
Audit Opinion
Our Auditors, BDO Spencer Stewart (KZN). have issued their opinion on the
Group"s financial statements for the year ended 31 March 2005. A copy of their
unqualified report is available for inspection at the company"s registered
office.
On behalf of the board
T.R. HENDRY CA (SA)
Chief Executive Officer
15 June 2005
Maraisburg
Date: 14/06/2005 12:00:22 PM Supplied by www.sharenet.co.za
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