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ART - Argent Industrial Limited - Unaudited Interim Results for the six months

Release Date: 09/11/2010 16:24
Code(s): ART
Wrap Text

ART - Argent Industrial Limited - Unaudited Interim Results for the six months ended 30 September 2010 Argent Industrial Limited Registration number: 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 2010 Financial Highlights Interim dividend 4 cents Revenue Up 16.5% Headline Earnings per Share 36 cents Basic Earnings per Share 36.4 cents Gearing 27.9% Net Asset Value per Share 397.7 cents The unaudited financial statements are presented on a consolidated basis. Unaudited Unaudited Audited Condensed consolidated income six months six months year ended statement for the period ended 30 Sept 30 Sept 31 Mar 2010 2009 2010 R 000
Revenue 869,492 746,099 1,464,494 Operating profit before interest 61,077 21,666 49,447 Finance costs 20,358 20,388 41,061 Profit before taxation 40,719 1,278 8,386 Taxation 7,816 (128) (3,269) Profit for the year 32,903 1,406 11,655 Attributable to non-controlling (316) (132) 76 interest Attributable to owners of the parent 33,219 1,538 11,579 Basic earnings per share (cents) 36.4 1.7 12.7 Headline earnings per share (cents) 36.0 1.8 14.4 Dividends per share (cents) 4.0 - 9.0 Supplementary information Shares in issue (000) - at end of period 91,350 91,157 91,350 - weighted average 91,350 91,157 91,221 Cost of sales (R 000) 654,637 575,802 1,111,726 Depreciation and amortisation (R 000) 19,845 19,997 37,723 Calculation of headline earnings (R 000) Earnings attributable to ordinary 33,219 1,538 11,579 shareholders Profit on disposal of property, plant (487) - (1,264) and equipment Impairment of property, plant and - - 3,194 equipment Loss on disposal of property, plant - 103 461 and equipment Total tax effects of adjustments 136 - (364) Headline earnings attributable to 32,868 1,641 13,606 ordinary shareholders Unaudited Unaudited Audited
Condensed Consolidated Statement of six months six months year ended Comprehensive Income 30 Sept 30 Sept 31 Mar for the period ended 2010 2009 2010
R 000 Profit for the year 32,903 1,406 11,655
Other comprehensive income for the period, net of tax Exchange differences on translating (1,525) (4,595) (6,060) foreign operations Realisation of revaluation of - - (2,175) properties Total comprehensive income for the 31,378 (3,189) 3,420 year Attributable to equity holders of the - Parent 31,694 (3,057) 3,344 - Non-controlling interest (316) (132) 76 31,378 (3,189) 3,420
Unaudited Unaudited Audited Condensed Consolidated Statement of at 30 Sept at 30 Sept at 31 Mar Financial Position 2010 2009 2010 for the period ended R 000 ASSETS Non-current assets Property, plant and equipment 891,677 888,840 888,582 Intangibles 289,676 291,095 291,042 Long term loan 10,265 9,365 9,817 1,191,618 1,189,300 1,189,441
Current assets Inventories 518,519 445,896 474,230 Trade and other receivables 333,389 308,921 296,985 Taxation - 1,392 1,730 Bank balance and cash 271 276 277 852,179 756,485 773,222
TOTAL ASSETS 2,043,797 1,945,785 1,962,663 EQUITY AND LIABILITIES Capital and reserves Share capital and premium 451,129 451,113 451,129 Reserves 127,911 137,215 127,946 Retained earnings 697,740 652,151 664,521 Ordinary shareholders` funds 1,276,780 1,240,479 1,243,596 Non-controlling interest 8,289 8,397 8,605 Total shareholders` funds 1,285,069 1,248,876 1,252,201 Non-current liabilities Interest-bearing borrowings 237,632 251,335 199,588 Deferred tax 59,253 58,315 53,666 296,885 309,650 253,254
Current liabilities Trade and other payables 189,680 195,056 216,056 Taxation 1,952 - - Bank overdraft 149,818 71,912 126,171 Current portion of interest-bearing 120,393 120,291 114,981 borrowings 461,843 387,259 457,208
TOTAL EQUITY AND LIABILITIES 2,043,797 1,945,785 1,962,663 Net asset value per share (cents) 1,397.7 1,360.8 1361.4
Condensed consolidated statement of Unaudited Unaudited Audited cash flows six months six months year ended for the period ended 30 Sept 30 Sept 31 Mar 2010 2009 2010 R 000
Cash generated from operations (27,142) 120,228 163,428 Interest paid (20,358) (20,388) (41,061) Dividends paid - (8,201) (8,201) Taxation refunded(paid) 1,693 3,697 3,626 Cash flows from operating activities (45,807) 95,336 117,792 Cash flows from investing activities (21,302) (97,861) (114,811) Cash flows from financing activities 43,456 (5,361) (65,125) Net decrease in cash and cash (23,653) (7,886) (62,144) equivalents Cash and cash equivalents at (25,894) (63,750) (63,750) beginning of period Cash and cash equivalents at end of (149,547) (71,636) (125,894) period Consoli- Share Share Employee Treasury Revalua- dated State-ment of capital Pre- share shares tion Changes in Equity for the mium incen- reserve year ended 30 September tive 2010 reserve R 000
Balance at 31 March 2009 4,825 540,818 17,042 (94,530) 126,572 Total comprehensive income - - - - - for the period Dividends - - - - - Less dividend on treasury - - - - - shares Balance at 30 September 4,825 540,818 17,042 (94,530) 126,572 2009 - unaudited Net treasury movement - - - 16 - Share based payments - - 1,087 - - Transfer of reserve to - - (6,716) - - Retained earnings Total comprehensive income - - - - (2,175) for the period Balance at 31 March 2010 4,825 540,818 11,413 (94,514) 124,397 Share based payments - - 1,490 - - Total comprehensive income - - - - - for the period Balance at 30 September 4,825 540,818 12,903 (94,514) 124,397 2010 Consoli- Reserve Retained Minority Total dated State-ment of on earnings Interest ordinary Changes in Equity for the Transla- Share- year ended 30 September tion holders` 2010 (continued) of funds foreign opera- tion
R 000 Balance at 31 March 2009 (1,804) 654,427 8,529 1,255,879 Total comprehensive income 4,595) 1,538 (132) (3,189) for the period Dividends - (8,684) - (8,684) Less dividend on treasury - 483 - 483 shares Balance at 30 September (6,399) 647,764 8,397 1,244,489 2009 - unaudited Net treasury movement - - - 16 Share-based payments - - - 1,087 Transfer of reserve to - 6,716 - - Retained earnings Total comprehensive income (1,465) 10,041 208 6,609 for the period Balance at 31 March 2010 (7,864) 664,521 8,605 1,252,201 Share based payments - - - 1,490 Total comprehensive income (1,525) 33,219 (316) 31,378 for the period Balance at 30 September (9,389) 697,740 8,289 1,285,069 2010 Segmental review Steel Automotive Manufacture trading Products of home and office products
R 000 Business segments for the six months ended 30 September 2010 - unaudited Revenue from external sales 383,965 70,946 275,346 Profit before tax 18,031 (8,516) 12,792 Taxation - - - Profit for the year - - - for the six months ended 30 September 2009 - unaudited Revenue from external sales 222,243 48,619 281,600 Profit before tax 6,863 (12,377) 10,950 Taxation - - - Profit for the year - - - for the year ended 31 March 2010 - audited Revenue from external sales 594,559 132,667 504,071 Profit before tax 16,627 (26,655) 14,269 Taxation - - - Profit for the year - - - Segmental review (continued) Fabricators Non- Consolidated
steel related products
R 000 Business segments for the six months ended 30 September 2010 - unaudited Revenue from external sales 64,780 74,455 869,492 Profit before tax 9,019 9,393 40,719 Taxation - - 7,816 Profit for the year - - 32,903 for the six months ended 30 September 2009 - unaudited Revenue from external sales 60,637 133,000 746,099 Profit before tax 3,790 (7,948) 1,278 Taxation - - (128) Profit for the year - - 1,406 for the year ended 31 March 2010 - audited Revenue from external sales 117,738 115,459 1,464,494 Profit before tax 4,581 (436) 8,386 Taxation - - (3,269) Profit for the year - - 11,655 Financial Overview Significantly better results were achieved for the period ended 30 September 2010 compared to the six months ended 30 September 2009, even against the backdrop of extended recessionary conditions and a strong South African Rand. The recovery from the global financial crisis has been encouraging, but to date, this has only had a minor effect on Argent`s Steel and Automotive sectors which materially influenced the Group`s financial performance for the period under review. Revenue rose by 16.5%, while margins were still under pressure due to a very competitive environment, depressed steel prices and the impact of the appreciating Rand. Deflation was evident in all sectors as suppressed demand drove product prices down. However, the majority of Argent`s operations achieved gains in market share as they traded aggressively and took advantage of any evidence of market weakness. Operating expenses were well controlled across the Group, reflecting a decline on the prior year. The Group`s balance sheet position remains strong and appropriately capitalised. Argent`s attitude to gearing remains appropriate in the current climate. Herewith a summary of the Group`s results for the six months: - Revenue increased by R123.4 million - Operational profit increased by R39.4 million - Headline earnings up by 1902.9% - Headline earnings per share up 1898.7% - Gearing contained to 27.9% Operational Review The Group delivered a much improved trading performance. Consumer demand for products from the Group`s Home and Office sector held up quite well, particularly in the case of Xpanda Security and Toolroom Services. Exports however, declined particularly on the automotive front. The infrastructure and construction industry remains subdued, impacting demand for steel and concrete products. Concerted efforts by operations management to optimise inventory levels and manage debtor delinquencies ensured an improvement in returns on funds employed across all regions. The 2010 FIFA World Cup, which was a success as a sporting event, did offer Argent an opportunity to host customers from abroad, but did not have a material impact on the reported results. Steel Trading The Group`s steel trading division incorporates both Phoenix Steel and Gammid Trading. Phoenix Steel, which trades and beneficiates mostly mild steel products, experienced a very difficult six months with both market demand and prices being depressed. This resulted in margins remaining under pressure throughout the period under review. While demand and pricing in the local steel market remain uncertain, Phoenix`s overall position has improved with steel margins showing signs of some improvement of late. Stock levels have been reduced to more manageable levels and valued at current market prices. Phoenix`s steel imports have been continuing at very competitive prices and this has alleviated some of the margin pressure experienced during the period under review. The Group has made a decision to close Phoenix Steel East London due to the demand for all products in this area remaining exceedingly poor. Gammid Trading, a specialist aluminium and stainless steel trader, suffered similar market conditions with both demand and pricing under pressure. The Company has, however, experienced a marked improvement in both margins and demand over the past few months and is expecting a much improved result for the final six months of the 2011 financial year. The importing of stainless steel has opened up many new markets for Gammid and this is expected to continue going forward, while the price of aluminium is also beginning to climb, which will have a positive effect on the top line. Manufacturing of Home and Office products The sector performed well with good results achieved by most of its divisions. Cedar Paints achieved a more than satisfactory set of results and the Company`s management is confident that Cedar Paints` growth pattern will continue. The Company successfully launched the new branding for its complete range of domestic and industrial paints. This, together with a drive to recruit experienced professionals from within the industry, has led the Company to make significant inroads into the local market, substantially increasing its market share. Castor and Ladder held its own through the financial crisis and while retail sales trended upwards, the industrial access market was under some pressure. Aluminium prices have increased over recent months and this is leading to increased sales of aluminium-based products as customers are moving quickly to take advantage of the lower prices while stocks last. Jetmaster`s local sales were disappointing, but in line with consumer spending patterns. However, exports to Australia and New Zealand remained buoyant. A new and innovative "go-green" product that is a world leader in heat output with low emission levels has been developed and is showing strong acceptance in the local and international market. Overall sales are showing a positive trend and the second half year is expected to be far better than the first half. At Toolroom Services and Atomic Office Equipment the impact of slower consumer demand has eased and revenue is showing a return to previous levels. The order books for both companies are strong heading into the festive season. Toolroom Services is developing a new range of racking to be launched in January 2011 which will offer a lucrative new revenue stream. Argent is also in the process of purchasing the building that Atomic Office Equipment currently leases for a purchase price of R12.7 million. Tricks Wrought Iron Services has proven to be the star performer of the sector and is proving to be a very valuable acquisition for the Group. The Company continues to be very active in its various areas of expertise with exports to the United Kingdom also still at satisfactory levels. Tricks has a full order book for both its fabricated and palisade fencing products, and have been very involved in the New Multi-Product Pipeline Project and the Dube Trade Zone near the new King Shaka International Airport. In addition, the Company has grown its market share in the manufacturing of pallets and associated items used in the transportation of goods, while still performing extremely strongly in its traditional markets including the supply of structures for the sanitation industry and the manufacture and supply of fencing and gates for cellular communication installations. Burbage Iron Craft has started experiencing an increase in consumer demand and sales are certainly improving. It is expected that the Company`s performance during second half will outperform the first six months. Barrier Angelucci, a company that specialises in the manufacture and distribution of roller shutter doors and the modification and installation of automatic teller machines, has proven to be a great fit for Argent and is now fully integrated into the Group. The Company contributed positively to the Group`s results for the six months and has also now penetrated new markets in southern Africa with new and innovative products, which will ensure even better future results. Xpanda Security performed very well in the local market through the economic downturn and has a satisfactory order book going forward. This can partly be attributed to the fact that security barriers have become a basic necessity, even in an economic downturn. Export sales have been somewhat disappointing but there are definite signs that volumes will soon revert to the levels experienced a few years back. Xpanda`s performance going forward will be underpinned by its ability to keep developing new, innovative and cost effective products, while at the same time being the only security barrier company in South Africa able to secure just about any opening with just about any type of product. Fabricators Koch`s Cut & Supply Steel Centre continues to perform solidly in what has become a very competitive market segment while Hendor Mining Supplies has enjoyed an excellent set of results in line with the reasonably strong level of local mining activity. In addition, Hendor has managed to enhance its operating margins through better working capital management, improved purchasing policies and enhanced production efficiencies. The outlook for both companies indicates an even stronger second half, with improving margins. Automotive Sector This sector is still the worst affected by the financial crisis. Cumulatively the automotive businesses produced a net loss of R8.5 million for the period under review all due to a poor order book and industry strikes. In light of this reality it has been decided to amalgamate Giflo Engineering and Excalibur Vehicle Accessories into one business and premises. This will directly result in a reduction of overall cost and an optimisation of synergies and resources. All Lite Steel Products has similarly been affected by the depressed automotive sector while Sentech Industries has managed to increase revenue to the point that they are now in a profitable position. Due to the aforementioned substantial overhead reductions and the enhanced allocation of resources, Argent is expecting far better results from all of these operations over the balance of the 2011 financial year, while significant improvement will continue into the first quarter of the 2012 financial year. Non-Steel Related Products Megamix and Villiersdorp Quarries have experienced a steady decline in margin over the period under review. This, together with the sluggish construction industry, has naturally negatively affected operating profitability. The Company has repositioned itself back into the low cost housing market which has improved the order book. Allan Maskew has enjoyed a strong recovery in both sales and profitability due to the recovery in the transport and heavy earthmoving industries, and more specifically as a result of the Company`s diversification into the mining industry through the manufacture of the rubber and polyurethane screen panels. The outlook for the remainder of the year is also positive especially in light of the increased range of panels being introduced. New Joules Engineering has seen a decline in capital tenders due to a number of new railroad projects being placed on the backburner, but has a more than a sufficient work load due to maintenance and replacement work. Retrenchments There were no further retrenchments during the reporting period and the Group is now correctly staffed. The Group is committed to retrench 14 employees in East London at a cost of R104 000 due to the closure of this branch. Subsequent events No significant events have occurred in the period between the reporting date and the date of this report. Outlook Both the local and international economies are showing signs of recovery, and this is reflected in the overall performance of Argent when comparing the period under review to the same period during the previous financial year. Argent has taken this opportunity to reduce inventory levels and trim away inefficiencies in the businesses to ensure a strong and sustained recovery as market conditions continue to improve to any degree. With the reduction in stock levels being evident at the end of October, it is fair to say that Argent has never before been so well positioned and prepared to benefit from an upturn in the South African and international economies. The overall outlook for the Group is very positive, particularly now that a more focused strategy for the automotive sector is being implemented. Lagging steel prices remain a concern for Argent and the industry as a whole. Traditionally the second half of the financial year is better than the first half and this is again evident in the latest financial reports being received from the various operations as this report is being written, so overall the Group expects a significantly better full year compared to last year. Dividend An interim dividend of 4 cents has been declared, subsequent to 30 September 2010, payable on Monday, 17 January 2011 to shareholders recorded in the register at close of business on Friday, 14 January 1011, being the record date in order to participate in such dividend. The last day to trade cum-div is Friday, 7 January 2011. The shares will trade ex-div on Monday, 10 January 2011. Share certificates may not be dematerialised or rematerialised between Monday, 10 January 2011 and Friday, 14 January 2011, both days inclusive. Basis of presentation The condensed financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34 - Interim Financial Reporting, AC 500 standards as issued by the Accounting Practices Board and in compliance with the South African Companies Act, 1973 (Act No. 61 of 1973) and the Listings Requirements of the JSE Limited. The accounting policies are consistent with those of the previous financial period, with the exception of the adoption of the following new and amended standards and interpretations, in response to changes to IFRS. These amendments had no significant impact on these results. - IAS 7 - (revised) Statement of Cash flows - IAS 38 - (revised) Intangible Assets - IAS 27 - (revised) Consolidated and Separate Financial Statements - IFRS 3 - (revised) Business Combinations The condensed interim financial statements, including any reference to future financial performance included herein, have not been reviewed or audited by the Group`s auditors. On behalf of the Board T.R. Hendry CA(SA) Umlanga Rocks Chief Executive Officer 9 November 2010 Registered Office: First floor, Ridge 63, 8 Sinembe Crescent, La Lucia Ridge, 4019 Tel: +27 31 5847702 Auditors: Grant Thornton Sponsors: PSG Capital (Pty) Ltd Transfer secretaries: Link Market Services South Africa, 5th floor, 11 Diagonal Street, Johannesburg, 2000
Directors: MP Allen, MJ Antonic, Ms SJ Cox, PA Day (Non-executive), JA Etchells (Financial Director), TR Hendry (Chief Executive Officer), PH Lawson (Non- executive), AF Litschka, K Mapasa (Non-executive), T Scharrighuisen (Non- executive Chairman),D Smith, GK Youngman (Alternate) Date: 09/11/2010 16:24:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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