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Argent - Unaudited Interim Results for the six months ended 30 September 20
Argent Industrial Limited
Registration number 1993/002054/06
(Incorporated in the Republic of South Africa)
Share code: ART ISIN: ZAE000019188
("Argent" or "the Group")
Unaudited Interim Results for the six months ended 30 September 2006
Financial Highlights
Revenue up 25.2%
Attributable earnings up 27.1%
Attributable earnings per share up 12.0%
Headline earnings up 33.6%
Headline earnings per share up 17.7%
Gearing 21.6%
Abridged consolidated income statement
for the six months ended Unaudited Unaudited Audited
30 September 2006 six months six months year ended
30 Sept 2006 30 Sept 2005 31 Mar 2006
R000
Continuing operations
Revenue 629 218 502 619 1 000 002
Operating profits before
financing costs 101 950 75 844 162 159
Financing costs 10 822 6 522 17 608
Profit before taxation 91 128 69 322 144 551
Taxation 21 601 17 972 37 186
Net profit for continuing
operations 69 527 51 350 107 365
Discontinued operation
Net (loss)/profit for
discontinued operation (4 063) 148 327
Total Group
Net profit attributable to
Ordinary shareholders 65 464 51 498 107 692
Attributable earnings
per share (cents) 83.2 74.3 147.4
Headline earnings
per share (cents) 88.2 75.0 148.3
Dividends per share (cents) 14.0 12.0 25.0
Supplementary information
Shares in issue (000)
- at end of period 80 462 72 296 80 462
- weighted average 78 664 69 301 73 074
Interest received (R000) 6 546 1 669 7 542
Cost of sales (R000) 367 185 311 919 572 524
Depreciation (R000) 8 962 6 442 13 635
Net profit/(loss) on
foreign exchange
transactions (R000) 4 651 507 (445)
Calculation of headline
earnings (R000)
Net profit attributable
to ordinary shareholders 65 464 51 498 107 692
Profit on disposal of
property, plant and equipment (181) (53) (137)
Loss on disposal of
property, plant and equipment 28 353 461
Discontinued operation 4 063 148 327
Headline earnings attributable
to ordinary shareholders 69 374 51 946 108 343
Abridged consolidated cash flow statement
for the six months ended Unaudited Unaudited Audited
30 September 2006 six months six months year ended
30 Sept 2006 30 Sept 2005 31 Mar 2006
R000
Cash generated from operations 40 331 67 676 140 847
Interest paid (10 822) (6 522) (17 608)
Interest received 6 546 1 669 7 542
Dividends paid (10 435) (8 141) (17 115)
Taxation paid (11 308) (15 627) (37 422)
Cash flows from operating
activities 14 312 39 055 76 244
Cash flows from investing
activities (37 695) (94 291) (182 634)
Cash flows from financing
activities 4 636 9 919 105 735
Net decrease in cash and cash
equivalents (18 747) (45 317) (655)
Cash and cash equivalents at
Beginning of period 44 536 45 191 45 191
Cash and cash equivalents at
end of period 25 789 (126) 44 536
Abridged consolidated balance sheet
for the six months ended Unaudited Unaudited Audited
30 September 2006 at at at
30 Sept 2006 30 Sept 2005 31 Mar 2006
R000
ASSETS
Non-current assets
Property, plant and equipment 386 793 253 639 357 351
Intangibles 113 863 68 224 113 940
500 656 321 863 471 291
Current assets
Inventories 243 273 200 934 233 324
Trade and other receivables 274 149 176 696 210 964
Bank balance and cash 25 789 147 44 536
543 211 377 777 488 824
Total assets 1 043 867 699 640 960 115
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 231 083 171 644 229 279
Reserves 71 799 23 721 73 196
Retained earnings 342 100 239 851 287 071
Total shareholders" funds 644 982 435 216 589 546
Non-current liabilities
Interest-bearing borrowings 97 075 66 192 91 677
Deferred tax 47 039 16 525 42 652
144 114 82 717 134 329
Current liabilities
Trade and other payables 199 168 136 776 183 977
Taxation 13 088 12 819 7 182
Bank overdraft 273
Current portion of
interest-bearing
borrowings 42 515 31 839 45 081
254 771 181 707 236 240
Total equity and liabilities 1 043 867 699 640 960 115
Net asset value per share
(cents) 801.6 602.0 732.7
Segment report for the six months ended 30 September 2006
Business Segments
Revenue Results Revenue Results
unaudited unaudited unaudited unaudited
six months six months six months six months
ended ended ended ended
30 Sept 2006 30 Sept 2006 30 Sept 2005 30 Sept 2005
R000
Steel and
Steel related
products 578 316 77 281 451 273 59 610
Non steel
related 50 902 9 700 51 346 9 398
Properties 84 462
Total 629 218 87 065 502 619 69 470
Statement of changes in equity for the six months ended 30 September 2006
Share Share Treasury Revaluation
capital premium shares reserve
R000
Balance at
30 September 2005 3 615 181 381 (13 352) 836
Shares issued 408 90 241
Net treasury movement (33 014)
Foreign currency
translation adjustment
Revaluation of properties 49 307
Net profit for the period
Dividends
Less: Treasury shares
Balance at 31 March 2006 4 023 271 622 (46 366) 50 143
Net treasury movement 1 804
Foreign currency
translation adjustment
Reversal of revaluation
of properties (493)
Net profit for the period
Dividends
Less: Treasury shares
Balance at
30 September 2006 4 023 271 622 (44 562) 49 650
Reserve on Reserve on Retained
subsidiary translation earnings
acquisition of foreign
operation
R000
Balance at
30 September 2005 23 209 (324) 239 851
Shares issued
Net treasury movement
Foreign currency
translation adjustment 168
Revaluation of properties
Net profit for the period 56 194
Dividends (9 853)
Less: Treasury shares 879
Balance at 31 March 2006 23 209 (156) 287 071
Net treasury movement
Foreign currency
translation adjustment (904)
Reversal of revaluation
of properties
Net profit for the period 65 464
Dividends (11 264)
Less: Treasury shares 829
Balance at
30 September 2006 23 209 (1 060) 342 100
Commentary
Chief executive officer"s review
On behalf of the board of directors of Argent, the unaudited results for the
six months ended 30 September 2006 are hereby presented.
Salient features
Revenue increased by 25.2% to R629.2 million (2005 - R502.6 million)
Attributable earnings increased by 27.1% to R65.5 million (2005 - R 51.5
million)
Attributable earnings increased by 12.0% to 83.2 cents per share (2005 - 74.3
cents per share)
Headline earnings increased by 33.6% to R69.3 million (2005 - R51.9 million)
Headline earnings increased by 17.7% to 88.2 cents per share (2005 - 75.0
cents per share)
Group gearing decreased to 21.6% (2005 - 22.5%)
Divisional performance
Argent"s good performance, as well as its projected performance is largely
affected by the significant increase in infrastructural spending that has
already started and which is expected to escalate in the coming years. The
companies that will benefit most by this expenditure are Phoenix Steel, Megamix
and Villiersdorp Quarries. Consumer spending and confidence is still high as
can be seen by the excellent performance of Xpanda, Jetmaster and Toolroom
Services which have had no decline in their sales and order book growth. The
automotive companies are also performing exceptionally well and there has been
no slowdown in sales and contracts for Giflo, Excalibur and the Group"s new
addition, Sentech Industries.
STEEL AND STEEL RELATED PRODUCTS
Phoenix Steel Gauteng has rebounded strongly from a disappointing previous
financial year, but could not source sufficient steel in light of a national
shortage. Thus, the company"s performance could have been even better. The
Group is currently following up on several steel importing options. The new
R16 million cut-to-length/blanking line will be commissioned in December 2006,
while the company is currently negotiating the purchase of a new slitting line
as well as the upgrade of one of its older tube mills.
Phoenix Steel East London"s performance continues to improve steadily and is
currently doubling the size of its building which will lead to an increase in
stock holding capacity.
On the back of substantially higher local steel prices and an increase
emphasis on margin delivery, Phoenix Steel Mpumalanga delivered excellent
results for the period under review. This trend has continued into October and
November 2006.
Phoenix Steel Natal"s growth has once again surpassed expectations even though
its current premises are far too small and unsuitable for its requirements.
However, the company has been successful in having an offer for a much larger
premises accepted. Only a few formalities need to be completed before transfer
takes place. This centrally situated, fit for purpose, 44 225 square metres
property with a total of 11 563 square metres under roof would increase the
company"s stocking capability six-fold.
Phoenix Steel Port Elizabeth, in its first year as a fully fledged company,
experienced a slower than expected first six months of the 2007 financial year
and has only started achieving its targets from October 2006. The Group is
confident that the company will continue to improve its performance and that
it is currently operating at a level of just over half of its medium-term
potential.
The recent solid results obtained by Phoenix Steel Richards Bay have continued
during the period under review and management is confident that the company
will further benefit from the planned high level of industrial activity in the
area.
Giflo Engineering enjoyed a very solid start to the 2007 financial year and
boasts an excellent contractually secured order book. The recent weakening of
the Rand against the US Dollar will enhance the value of Giflo"s exports which
represents 20% of the company"s turnover.
A new subsidiary of Argent is Sentech Industries. This company, which the
Group started in Port Elizabeth, was born out of the Group"s purchase of the
operational assets from a company that was in serious financial distress.
Sentech specialises in tube manipulation, steel fabrication and steel
pressings for the automotive industry. A total of R22 million has been
invested in the assets for this operation and a further R12 million has been
committed by way of ordering new machinery from overseas. This operation
started trading in September 2006. The Group will manage Sentech on the same
lines as Giflo Engineering and the growth strategies for the two companies
will be jointly formulated.
On the back of its wider product range, Excalibur Vehicle Accessories enjoyed
a satisfactory six months. To further expand its range of aluminium products,
a 57 000 square metre piece of land with an existing 7 000 square metre
production facility has been purchased. Excalibur will take occupation of
these premises in February 2007.
Hendor Mining Supplies has continued to benefit from the high levels of demand
experienced late in the 2006 financial year and currently boasts an order book
far in excess of any levels ever previously experienced. Hendor"s management
has now also taken over the premises previously occupied by B.M.I./Xpanda
Steel Centre in Benoni. Hendor will use these premises to satisfy the current
demand while further business is expected to be secured from Goldfields and
Anglo Platinum. In addition, Hendor"s extensive fabrication expertise will
ensure that it also satisfies a sizeable portion of Jetmaster"s barbeque and
fireplace requirements.
Jetmaster delivered record results for the period under review and is in a
position to ensure that its current impressive turnover levels will be
maintained going forward. Jetmaster is also increasing the size of its
production facility to further improve its capacity.
After a below-par 2006 financial year, Koch"s Cut and Supply has delivered
results far in excess of expectations for the six months under review. The
investment made in terms of new and improved machinery has paid dividends in
terms of increased turnover and margin levels.
Toolroom Services, the manufacturer of steel office furniture has had an
excellent first six months and has an order book which is 38% up from the
previous six months. The Group has purchased a 24 000 square metre property
and will commence the building of a 15 000 square metre factory on 1 February
2007. The current factory is rented and not ideal for expanding the company"s
manufacturing capacity and benefitting from the resultant economies of scale.
Xpanda Security has taken advantage of its market leading product range as
well as the Group"s increasingly settled infrastructure to post an excellent
set of results for the six months ended 30 September 2006. Turnover levels are
substantially ahead of expectations while margins have been very successfully
managed in a period of rapidly increasing input costs.
Life "n Leisure Cape Town did not perform to expectations with turnover below
budget. A change in management, tighter system controls, as well as an
aggressive marketing plan has been implemented to get the company back on
track.
Life "n Leisure Centre Umhlanga opened its doors in early August 2006. Public
response has been excellent and management is confident that an average of R2
million in monthly turnover will be achieved by June 2007 on the back of
increased exposure in the Durban area.
Xpanda Steel Centre, the steel fabricator supplying both internal and external
clients, was closed down over the three months ended 30 September 2006. The
Group incurred a loss of R4 million which related to retrenchment costs and
the writing down of truck body components and load cell stock items.
NON-STEEL RELATED PRODUCTS
New Joules Engineering North America had an excellent first six months and
expects the trend to continue for the remainder of the year. The company still
has tenders awaiting adjudication of US$4.2 million which it believes it will
be successful in securing. The client has however indicated that adjudication
will only take place in the first quarter of the 2007 calendar year.
Both Megamix and Villiersdorp Quarries performed in line with budgetary
expectations despite the wet Cape winter period experienced. Megamix currently
has a satisfactory order book with many large contracts starting in the new
year. Access to the land for the fourth batch plant has been delayed further
by the developer not completing services on time. The new plant will now only
be commissioned early 2007.
NWN Automotive Engineering, whilst not a major contributor to the Group,
continues to perform satisfactorily and expects its turnover to be up by 20%
on the 2006 financial year.
Prospects
Notwithstanding the local steel shortages that negatively impacted on the
Group"s steel trading performance, Argent"s results are in line with the
expectations as outlined in its audited financials for the 2006 financial
year. The increase in steel prices and the enhancement of export automotive
component margins are just two of the reasons that Argent is extremely
confident about the future. Shareholders can expect more good news from Argent
for the last six months of the 2007 financial year and beyond.
Dividend
A final dividend of 14 cents per share in respect of the year ended 31 March
2006 was paid during the period.
An interim dividend of 15 cents per share has been declared, subsequent to 30
September 2006, payable on Monday, 22 January 2007 to shareholders recorded in
the register at close of business on Friday, 19 January 2007, being the record
date in order to participate in such dividend. The last day to trade cum
dividend is Friday, 12 January 2007. The share will trade ex dividend on
Monday, 15 January 2007.
Share certificates may not be dematerialised/rematerialised between Monday, 15
January 2007 and Friday, 19 January 2007, both days inclusive.
Accounting policies and presentation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), IAS 34 (Interim Financial Reporting)
and in compliance with the Companies Act of South Africa of 1973 and the
Listings Requirements of the JSE Limited. The accounting policies are
consistent with those of the previous financial period.
On behalf of the board
T R Hendry, CA(SA) Maraisburg, Roodepoort
Chief executive officer 22 November 2006
Registered office: 1316 Clubhouse Street, Maraisburg, Roodepoort 1724
Tel: +27 11 661 5900
Auditor: Siyabala Inc.
Sponsor: Vunani Corporate Finance
Transfer Secretaries:
Link Market Services South Africa (Pty) Limited, 5th floor, 11 Diagonal Street,
Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
Directors: T. Scharrighuisen (Non-executive chairman), TR Hendry (Chief
Executive Officer), Ms SJ Cox (Financial Director), PA Day (Non-Executive),
K Mapasa (Non-Executive), MJ Antonic, PH Lawson, GK Youngman (Alternate),
D Smith, MP Allen, F Litschka
Company Secretary: Ms Lindsay Grobler
Date: 21/11/2006 04:58:14 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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