Wrap Text
Provisional Condensed Consolidated Financial Results for the year ended 31 August 2014
Austro Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ASO ISIN: ZAE000090882
(“Austro” or “the company” or “the group”)
Provisional Condensed Consolidated Financial Results for the year ended
31 August 2014
Revenue up 16% to R585 million
Adjusted EBITDA up 60% to R49 million
Adjusted headline earnings up 67% to 8,7 cents per share
Improving working capital
Strong cash position and improved group liquidity
Condensed consolidated statements of comprehensive income
Reviewed Audited
for the for the
year ended year ended
31 August 31 August
% 2014 2013
change R’000 R’000
Revenue 16% 585 006 502 709
Cost of sales (410 416) (348 401)
Gross profit 13% 174 590 154 308
Gross profit % 30% 31%
Other operating income 6 025 1 759
Net operating expenses 3% (156 772) (151 486)
Profit from operations before interest
and taxation 23 843 4 581
Net interest received 1 293 142
Interest received 1 719 1 865
Interest paid (426) (1 723)
Profit before taxation 25 136 4 723
Taxation (expense)/income (625) 2 972
Total comprehensive income for the year 219% 24 511 7 695
Attributable to:
Owners of Austro 213% 24 718 7 904
Non-controlling interest (207) (209)
Total comprehensive income for the year 24 511 7 695
Number of shares in issue 395 292 923 395 292 923
Weighted average number of shares 395 292 923 395 292 923
Earnings per share and diluted earnings
per share (cents) 215% 6,3 2,0
Headline earnings per share and diluted
headline earnings per share (cents)1 239% 6,1 1,8
Adjusted headline earnings per share
(cents)1 67% 8,7 5,2*
EBITDA (R’000)2 142% 32 402 13 389
Adjusted EBITDA (R’000)2 60% 49 379 30 909*
* The 2013 comparatives for adjusted headline earnings per share and
adjusted EBITDA are different to what was previously reported as the
company elected to adjust for IFRS2 charges in the current year due to the
materiality of the expense. The 2013 comparative was therefore also
adjusted to ensure that the numbers remain comparable.
Reviewed Audited
for the for the
year ended year ended
31 August 31 August
% 2014 2013
change R’000 R’000
1. Headline earnings reconciliation
Attributable income for the year 24 718 7 904
Net profit on disposal of plant and
equipment (676) (952)
Tax effect of adjustments 189 267
Headline earnings 236% 24 231 7 219
Legal costs relating to Freed
litigation 3 211 –
IFRS2 charge 13 766 1 325
Deferred taxation adjustment (2 946) –
Onerous lease effect – (2 457)
Inventory write-off – 13 231
Obsolete inventory allowance – 5 421
Tax effect of adjustments (3 854) (4 076)
Adjusted headline earnings 67% 34 408 20 663
2. EBITDA reconciliation
Profit from operations before
interest and taxation 23 843 4 581
Depreciation 8 559 8 808
EBITDA 142% 32 402 13 389
Legal costs relating to Freed
litigation 3 211 –
IFRS2 charge 13 766 1 325
Onerous lease effect – (2 457)
Inventory write-off – 13 231
Obsolete inventory allowance – 5 421
Adjusted EBITDA 60% 49 379 30 909
Adjusted EBITDA % 8,4% 6,1%
Condensed consolidated statements of financial position
Reviewed Audited
as at as at
31 August 31 August
2014 2013
R’000 R’000
Assets
Non-current assets 157 152 158 173
Plant and equipment 42 853 40 987
Goodwill 95 544 95 544
Deferred taxation 18 755 21 642
Current assets 356 798 304 489
Inventories 145 467 170 298
Trade and other receivables 128 943 88 662
Taxation receivable 8 744 5 191
Cash and cash equivalents 73 644 40 338
Total assets 513 950 462 662
Equity and liabilities
Capital and reserves 389 614 364 896
Stated capital 295 497 295 497
Accumulated profits 94 117 69 399
Non-controlling interest (417) (210)
Total capital and reserves 389 197 364 686
Non-current liabilities 1 820 8 022
Interest-bearing liabilities 1 820 3 984
Deferred tax liability – 4 038
Current liabilities 122 933 89 954
Trade and other payables 119 368 87 440
Current portion of interest-bearing liabilities 1 785 2 512
Taxation payable 1 780 2
Total equity and liabilities 513 950 462 662
Net asset value per share (cents) 98,56 92,31
Net tangible asset value per share (cents) 74,39 68,14
Average net operating assets (R'000) 327 019 339 251
Average net tangible operating assets (R'000) 231 475 243 707
Average net operating asset turnover 1,8x 1,5x
Average net tangible operating asset turnover 2,5x 2,1x
Adjusted operating profit margin 7,0% 4,4%
Pre-tax return on average net operating assets 12,5% 6,5%
Pre-tax return on average net tangible operating
assets 17,6% 9,1%
Condensed consolidated statements of cash flow
Reviewed Audited
for the for the
year ended year ended
31 August 31 August
2014 2013
R’000 R’000
Profit before taxation 25 136 4 723
Non-cash items and other adjustments 6 590 4 456
31 726 9 179
Decrease in working capital 16 478 18 167
Cash generated by operations 48 204 27 346
Interest received 1 719 1 865
Interest paid (426) (1 723)
Taxation paid (3 551) (597)
Cash inflow from operating activities 45 946 26 891
Additions to plant and equipment (11 920) (13 130)
Proceeds on disposal of plant and equipment 2 171 3 452
Cash outflow from investing activities (9 749) (9 678)
Repayment of interest-bearing liabilities (2 891) (1 290)
Settlement of onerous lease – (10 000)
Cash outflow from financing activities (2 891) (11 290)
Net inflow of cash and cash equivalents 33 306 5 923
Cash and cash equivalents at beginning of year 40 338 34 415
Cash and cash equivalents at end of year 73 644 40 338
Condensed consolidated statements of changes in equity
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Stated capital
Balance at beginning and end of year 295 497 295 497
Accumulated profits 94 117 69 399
Balance at beginning of year 69 399 66 997
Prior year adjustments – (5 502)
Attributable income for the year 24 718 7 904
Dividends declared and paid – –
Non-controlling interest (417) (210)
Total capital and reserves 389 197 364 686
Condensed segmental analysis
Power
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Revenue 389 859 331 123
External 389 859 331 123
Intercompany – –
Profit/(loss) from operations before
interest and taxation 13 133 6 228
EBITDA3 38 095 16 554
Adjusted EBITDA3 42 091 35 206
Capital expenditure 7 539 11 136
Depreciation 3 323 4 088
Taxation expense/(income) 4 329 2 432
Total assets 287 891 256 834
Total liabilities 61 613 52 747
Net tangible operating assets4 175 006 181 073
Number of employees 258 200
Wood
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Revenue 195 147 171 586
External 195 147 171 586
Intercompany – –
Profit/(loss) from operations before
interest and taxation 14 302 9 541
EBITDA3 24 772 15 695
Adjusted EBITDA3 24 831 3 238
Capital expenditure 4 372 1 986
Depreciation 5 191 4 655
Taxation expense/(income) (2 240) (2 100)
Total assets 123 372 106 760
Total liabilities 41 817 45 428
Net tangible operating assets4 68 358 57 462
Number of employees 147 150
Head Office
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Revenue 26 345 9 698
External – –
Intercompany 26 345 9 698
Profit/(loss) from operations before
interest and taxation (3 592) (11 188)
EBITDA3 (3 548) (11 124)
Adjusted EBITDA3 9 374 201
Capital expenditure 9 8
Depreciation 45 65
Taxation expense/(income) (1 464) (3 304)
Total assets 262 693 261 777
Total liabilities 22 417 4 110
Net tangible operating assets4 6 429 7 474
Number of employees 5 5
Consolidation
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Revenue (26 345) (9 698)
External – –
Intercompany (26 345) (9 698)
Profit/(loss) from operations before
interest and taxation – –
EBITDA3 (26 917) (7 736)
Adjusted EBITDA3 (26 917) (7 736)
Capital expenditure – –
Depreciation – –
Taxation expense/(income) – –
Total assets (160 006) (162 709)
Total liabilities (1 094) (4 309)
Net tangible operating assets4 – –
Number of employees
Total
Reviewed Audited
for the for the
year ended year ended
31 August 2014 31 August 2013
R’000 R’000
Revenue 585 006 502 709
External 585 006 502 709
Intercompany – –
Profit/(loss) from operations before
interest and taxation 23 843 4 581
EBITDA3 32 402 13 389
Adjusted EBITDA3 49 379 30 909
Capital expenditure 11 920 13 130
Depreciation 8 559 8 808
Taxation expense/(income) 625 (2 972)
Total assets 513 950 462 662
Total liabilities 124 753 97 976
Net tangible operating assets4 249 793 246 009
Number of employees 410 355
3 All EBITDA figures exclude intercompany management fees
4 Excludes goodwill which is all attributable to the Power segment
Commentary
Austro is an industrial energy and supplies group that provides quality
branded and in some segments locally manufactured capital and consumable
goods and support services to a broad range of economic sectors in South
Africa and sub-Saharan Africa. Clients range from heavy industrial, mining
and construction groups to wholesalers, retailers, technology and
telecommunications companies, banks and manufacturers. Adding value to the
products sold by offering ongoing servicing and customer support is a key
component of Austro’s business model.
Austro currently comprises two business segments:
• Power segment (“Power”) incorporates:
– Private Power Sales: The manufacture, supply, installation and
maintenance of diesel generators and related components
– Power Product Distribution: The distribution of industrial engines,
marine engines and components
– Temporary Power: Rental of temporary power in the form of diesel
generators
• Wood segment (“Wood”) encompasses the distribution of professional
woodworking equipment, tooling and edging and provision of associated
services such as blade sharpening and equipment maintenance.
Group subsidiaries currently include:
• New Way Power Proprietary Limited (incorporating Neptune Plant Hire)
• PowerO2 Proprietary Limited
• Austro Proprietary Limited
In line with management’s intention to introduce new energy platforms into
the group, Austro announced on 13 August 2014 the proposed acquisition of
an effective 100% shareholding in Centlube Holdings Proprietary Limited
(“Centlube”), a business involved in the production and marketing of oil
lubricants in sub-Saharan Africa. Based in Germiston, Johannesburg,
Centlube has a production capacity in excess of 12 million litres per
annum and will form the foundation of a Fuel segment to be developed by
Austro. Centlube has recently been appointed as a distributor of Mobil
lubricants for its Automotive and Industrial lines of business and in
respect of certain Strategic Global Accounts. The transaction is expected
to be completed in the first half of the 2015 financial year.
Results
The board is pleased to present the results of Austro for the financial
year ended 31 August 2014. Despite a subdued macroeconomic environment,
each of the group companies delivered strong performances. Revenue for the
year increased 16% to R585,0 million (2013: R502,7 million) with group
wide gross margins remaining stable. Operating expenses increased 3% on
the prior year. If non-recurring expenses (as set out in the headline
earnings reconciliation) are excluded, operating expenses increased 4%,
below inflation and highlighting management’s commitment to controlling
costs and improving efficiencies across the group.
Earnings before interest, taxation, depreciation and amortisation
(“EBITDA”) increased 142% to R32,4 million (2013: R13,4 million). The
group’s trading was largely uneffected by the NUMSA strike action that
took place during July this year. This was as a result of building
relationships and constant communication with our staff as well as
contingency planning ahead of the work stoppages.
Consistent with prior year disclosure, management has elected to disclose
an adjusted EBITDA which provides a more meaningful reflection of
sustainable earnings. Adjusted EBITDA increased 60% to R49,4 million
(2013: R30,9 million) at an adjusted EBITDA margin relative to revenue of
8,4% (2013: 6,1%). The adjustments to EBITDA arise from:
• legal fees of R3,2 million incurred to interdict and restrain former New
Way executive directors from breaching restraint of trade undertakings,
common law and other legal duties owed to the group (refer to a SENS
announcement released on 5 November 2013). The group was successful in
enforcing this restraint (refer to update below); and
• an IFRS2 charge of R13,8 million (2013: R1,3 million) relating to the
provision for long-term share-related incentives awarded to JFN Management
Proprietary Limited and Austro staff. Due to the magnitude of the charge
in the current reporting period and the extent to which it distorts
the trading performance of the group, we have separately identified and
reported this charge in a voluntary adjusted headline earnings per share
calculation and accordingly we have included an adjustment in the
comparative for the year ended 31 August 2013.
• Improved controls over inventory resulted in no unusual allowances being
raised or write-off’s this year (2013: R18,7 million).
Headline earnings increased 239% to R24,2 million (2013: R7,2 million).
This translates into headline earnings per share of 6,1 cents (2013: 1,8
cents). Adjusted headline earnings of R34,4 million (2013: R20,7 million)
represents an improvement of 3,5 cents per share (67%) to 8,7 cents per
share (2013: 5,2 cents per share).
Net working capital decreased during the year under review following a
significant focus on reducing inventory balances on a sustainable basis.
The comparative for trade and other receivables was abnormally low as the
balance included significant prepayments received from customers. The
company took advantage of generous credit terms extended by certain suppliers
which lead to the increase in trade and other payables. Debtors collections
are being closely monitored and suppliers are paid within credit terms.
The group improved its financial and liquidity position with cash balances
at 31 August 2014 increasing to R73,6 million (2013: R40,3 million).
External borrowings remain low at R3,6 million (2013: R6,5 million)
resulting in a net cash position of R70,0 million (2013: R33,8 million).
A R60 million trading facility is in place which provides the group with
scope to manage exchange control fluctuations, credit terms with foreign
suppliers and take advantage of attractive trading opportunities.
The group’s effective tax rate is distorted by the recognition of deferred
tax assets not previously recognised, arising from assessed losses
primarily at Wood and at group level, to be utilised in the future. The
recognition of the deferred tax asset was a result of Wood’s return to
profitability which in turn resulted in a net taxation income for Wood in
the current year.
Operational review
Power
The Private Power Sales segment performed well in a sluggish environment,
supported by ongoing demand in the retail, construction and data
infrastructure markets.
Revenue increased 18% to R354,3 million (2013: R300,6 million) and
adjusted EBITDA increased 23% to R26,9 million (2013: R21,8 million),
representing a margin relative to revenue of 7,3% (2013: 6,9%). Staff
headcount increased by 58 people, primarily due to the employment of
previously outsourced manufacturing staff, which resulted in material
cost savings.
The Temporary Power segment continues to grow. Revenue was up 16% to R35,5
million (2013: R30,5 million). Adjusted EBITDA increased 14% to R15,2
million (2013: R13,4 million), representing a margin relative to revenue
of 43% (2013: 44%).
During the year Austro launched a new company under the Power segment
called PowerO2. This company houses the distributorship business that
formerly existed within New Way Power, distributing diesel engines and
spare parts to the fire pump, water pump, industrial, generator and marine
industries. It was established to create a clear separation from the OEM
business and focus on distribution. PowerO2 represents John Deere, Mitusbishi
and Doosan industrial engines. The business is expected to be a material
contributor to the Power segment going forward.
Hyram Serretta was appointed as the CEO of the Power segment with effect
from January 2014.
Wood
The restructuring implemented at Wood in 2013 continues to yield benefits
as the company enjoyed a marked increase in profitability in the current
year. Revenue increased 15% to R195,1 million (2013: R171,6 million) and
adjusted EBITDA increased to R24,8 million (2013: R3,2 million) due
primarily to the additional gross profit contribution from higher revenues
and gross margins and a substantial decrease in operating expenses. This
represents a margin relative to revenue of 12,7% (2013: 1,9%).
Changes to directorate
Austro was pleased to announce the following appointments to its board
with effect from 12 February 2014:
• Mpho Makwana as an independent non-executive director;
• Paul Baloyi as an independent non-executive director;
• Nopasika Lila as an independent non-executive director; and
• Paul O’Flaherty as a non-executive director.
After many years of service, Tony Phillips has resigned as Chairman of the
board with effect from 18 November 2014. He will remain on the board as an
independent non-executive director. The board wishes to thank Tony for the
outstanding leadership and guidance he has provided to Austro and looks
forward to his continued contribution. Steven Joffe, who was appointed to
the board as a non-executive director on 14 May 2014, will replace Tony as
Chairman with effect from 18 November 2014. Mpho Makwana will serve as Lead
Independent Director from the same date.
The appointments are aligned with Austro’s strategy to transform and focus
the company’s growth in the expanding energy sector in Southern Africa by
bringing extensive energy and public sector expertise to the Company in
order to further develop and oversee the implementation of this strategy.
The following directors resigned from the board with effect from 14 May
2014:
• Gordon Nzalo;
• David Brouze; and
• Ulrich Schackermann.
The board thanks the outgoing directors for their years of service and
wishes them well in their future endeavours.
Change to company secretary
Following the acquisition of Probity Business Services Proprietary Limited
by Computershare Investor Services Proprietary Limited (“Computershare”),
CIS Company Secretaries Proprietary Limited, a subsidiary of
Computershare, was appointed as company secretary of Austro with effect
from 24 June 2014.
Update on litigation and distributorship
Shareholders are referred to the announcement released on SENS on 3
December 2013. Austro has concluded a settlement agreement with former
directors, Jonathan Freed and Justin Freed, in terms of which it has been
agreed between the parties that the former directors are bound by and are
interdicted and restrained, for a period of two years from 17 April 2014,
from conducting themselves contrary to the restraint of trade provisions
contained in their restraint of trade agreements. Austro continues to
represent and trade with John Deere.
Prospects and risks
Economic growth prospects for South Africa are muted in the near term,
with no imminent catalysts to spur growth. Austro’s response to this
environment is to focus on increasing the contribution to revenue of
higher margin, recurring sales of parts and services, retaining existing
customers through improved products and services, continually seek out
attractive acquisition opportunities and increasing our emphasis on sales
into other African markets.
We maintain a cautious outlook for the upcoming year. Private Power Sales,
Power Product Distribution and Temporary Power’s fortunes are closely
linked to growth in the real economy and Eskom’s ability to supply
reliable grid power. The roll out of government’s planned infrastructure
programme and extended power outages should have a positive impact on
revenue. The Wood business has returned to profitability and
is expected to continue contributing materially to group profits. The
group looks forward to incorporating Centlube into the group. The company
is in an exciting growth phase, particularly with the introduction of the
Mobil distributorship, with volumes expected to show good growth.
Management continues to seek out acquisitions and business opportunities
in the power and fuel sectors that we believe will deliver appropriate
returns on capital and have good growth prospects throughout sub-Saharan
Africa.
Dividend
In line with the group policy to reinvest for growth, no dividend has been
declared for the year.
Subsequent events
As stated in the SENS announcement on 13 August 2014 which detailed
Austro’s proposed acquisition of Centlube, a component of the purchase
consideration for Centlube was dependent on the conclusion of the
distribution arrangement with a certain global oil major and significant
player in the lubricants industry. Centlube has since concluded a
Lubricants Distributor Agreement with ExxonMobil Petroleum and Chemical
BVBA which, with effect from 1 January 2015, has appointed Centlube as a
distributor of Mobil lubricants for its Automotive and Industrial line of
business in South Africa, Lesotho and Swaziland as well as in respect of
certain Strategic Global Accounts in selected Sub-Saharan African
countries. Accordingly, the purchase consideration for Centlube
will increase by an additional R16,0 million upon implementation of the
transaction. Centlube will also continue as a licensee and distributor of
ENI lubricants and produce steel rolling fluids on behalf of Houghton plc.
The Centlube acquisition is also an acquisition from a related party as
Ricophase Proprietary Limited is an indirect shareholder of Centlube and
Ricophase Proprietary Limited is also a material shareholder of Austro.
As per the SENS announcement on 30 October 2014, the board has proposed
changing the name of the company from Austro Group Limited to enX Group
Limited to better reflect the strategic intent of the group.
A circular detailing the proposed acquisition of Centlube and the proposed
name change was posted to shareholders on 30 October 2014. Shareholders
will be required to vote in order to effect the above two courses of
action at the general meeting scheduled for 1 December 2014.
Basis of presentation
The accounting policies and method of measurement and recognition applied
in the preparation of these condensed consolidated provisional financial
results are in terms of International Financial Reporting Standards
(“IFRS”) and are consistent with those applied in the audited annual
financial statements for the previous year ended 31 August 2013. The
condensed consolidated financial statements are prepared in accordance
with the requirements of the JSE Listings Requirements for provisional
reports and the requirements of the Companies Act of South Africa. The
condensed consolidated provisional financial results have been prepared in
accordance with IFRS and are presented in terms of the minimum disclosure
requirements set out in International Accounting Standards (“IAS”) 34 –
Interim Financial Reporting, as well the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Standards Council,
The Financial Director, Jarrod Friedman CA (SA), was responsible for the
preparation of the condensed consolidated provisional financial results.
Any reference to future financial performance included in this announcement
has not been reviewed or reported on by the group’s external auditors.
The group has adopted the following new standards:
i) IFRS 10: Consolidated Financial Statements.
ii) IFRS 11: Joint Arrangements.
iii) IFRS 12: Disclosure of Interests in Other Entities.
iv) IFRS 13: Fair Value Measurement.
There was no material impact on the financial statements identified based
on management’s assessment of these standards.
These provisional condensed consolidated financial statements for the year
ended 31 August 2014 have been reviewed by Grant Thornton (Jhb) Inc., who
expressed an unmodified review conclusion. A copy of the auditor’s review
report is available for inspection at the company’s registered office.
For and on behalf of the board
PD Mansour JS Friedman
Chief Executive Officer Financial Director
19 November 2014
Non-executive directors: SB Joffe (Chairman), PC Baloyi*, NV Lila*,
PM Makwana (Lead Independent)*, PS O’Flaherty, AJ Phillips*
*Independent
Executive directors: PD Mansour (Chief Executive Officer), JS Friedman
(Financial Director)
Business address: 30 – 38 Jacoba Street, Alberton North, 1456
Registered address: 1125 Leader Avenue, Stormill Ext 4, Roodepoort, 1724
Business postal address: PO Box 1914, Florida, 1710
Company secretary: CIS Company Secretaries Proprietary Limited Transfer
secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Java Capital Trustees and Sponsors Proprietary Limited
www.austrogrouplimited.com
Date: 19/11/2014 08:45:00 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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