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Abridged Audited Condensed Consolidated Results for the Year Ended 31 March 2015 and Notice of Annual General Meetin
Argent Industrial Limited
Registration number 1993/002054/06
(Incorporated in the Republic of South Africa)
Share code : ART ISIN code : ZAE000019188
(“the group” or “the company”)
ABRIDGED AUDITED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH
2015 AND NOTICE OF ANNUAL GENERAL MEETING
Financial Highlights
Revenue R1.79 billion
Operating profit R58.1 million
Net asset value per share (cents) 1 252.8
Gearing 6.8%
Earnings before interest, taxation,
depreciation and amortisation “EBITDA” R92.5 million
The condensed financial statements are presented on a consolidated basis
Consolidated Income Statement Audited Audited
for the year ended 31 March 2015 2015 2014
R 000 R 000
Revenue 1,791,163 1,880,476
Operating profit before finance costs and
restructuring 58,136 79,303
Restructuring adjustments - (263,460)
Operating profit / (loss) before finance
costs 58,136 (184,157)
Finance income 1,529 987
Finance costs (24,340) (27,246)
Profit / (loss) before taxation 35,325 (210,416)
Taxation (8,426) 17,359
Profit / (loss) for the year 26,899 (193,057)
Attributable to equity holders of the
- Parent 26,094 (193,575)
- Non-controlling interest 805 518
26,899 (193,057)
Basic earnings/(loss) per share (cents) 28.5 (211.4)
Diluted earnings/(loss) per share (cents) 28.5 (211.4)
Headline earnings per share (cents) 40.8 14.6
Diluted headline earnings per share (cents) 40.8 14.6
Dividends per share (cents) 15.0 14.0
Supplementary information
Shares in issue (000)
- at end of period 91,808 91,540
- weighted average 91,669 91,561
- diluted weighted average 91,669 91,561
Cost of sales (R 000) 1,398,847 1,464,253
Depreciation and amortisation (R 000) 34,400 38,388
Restructuring adjustments (R 000):
Impairment of property, plant and equipment - 93,221
Impairment of intangible assets - 121,803
Automotive stock losses - 31,524
Retrenchments - 850
Closure of loss generating businesses - 16,062
Impairment of plant and equipment - 3,192
Stock losses - 9,507
Retrenchments - 3,363
Restructuring adjustments 263,460
Calculation of headline earnings (R 000)
Earnings / (loss) attributable to ordinary
shareholders 26,094 (193,575)
Loss on disposal of property, plant and
equipment 8,711 2,532
Impairment of property, plant and equipment 5,014 96,413
Impairment of intangible assets - 121,803
Total tax effects of adjustments (2,439) (13,770)
Headline earnings attributable to ordinary
shareholders 37,380 13,403
Consolidated Statement of other
Audited Audited
Comprehensive Income for the year ended
2015 2014
31 March 2015
R 000 R 000
Profit /(loss) for the period 26,899 (193,057)
Other comprehensive income for the period
Items that may be reclassified subsequently
to profit and loss
Exchange differences on translating foreign
operations 1,182 (529)
Items that will not be reclassified
subsequently to profit and loss
Revaluation of land and buildings (2,961) (6,931)
Tax effect of above transactions 534 1,334
Total other comprehensive income / (loss)
for the year 25,654 (199,183)
Attributable to equity holders of the
- Parent 24,849 (199,701)
- Non-controlling interest 805 518
25,654 (199,183)
Audited Audited
Consolidated Statement of Financial 2015 2014
Position for the year ended 31 March 2015
R 000 R 000
ASSETS
Non-current assets
Property, plant and equipment 641,355 726,018
Intangible assets 172,866 172,866
Long-term loan 14,621 13,477
Deferred taxation 8,082 13,686
836,924 926,047
Current assets
Inventories 489,741 471,353
Trade and other receivables 311,965 338,881
Taxation 596 -
Bank balance and cash 196 234
802,498 810,468
Non-current assets held for sale 41,347 8,500
TOTAL ASSETS 1,680,769 1,745,015
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 452,597 451,366
Reserves 29,705 30,626
Retained earnings 667,847 655,323
Attributable to owners of the parent 1,150,149 1,137,315
Non-controlling interest 10,574 9,769
Total shareholders' funds 1,160,723 1,147,084
Non-current liabilities
Interest-bearing borrowings 33,147 93,197
Deferred taxation 55,127 59,598
88,274 152,795
Current liabilities
Trade and other payables 250,574 236,648
Taxation - 159
Bank overdraft 135,130 162,369
Current portion of interest-bearing
borrowings 46,068 45,960
431,772 445,136
TOTAL EQUITY AND LIABILITIES 1,680,769 1,745,015
Net asset value per share (cents) 1,252.8 1,242.4
Condensed Consolidated Statement of Cash Audited Audited
Flows for the year ended 2015 2014
31 March 2015
R 000 R 000
Cash generated from operations 128,699 102,780
Finance income 1,529 987
Finance costs (24,340) (27,246)
Dividends paid (13,576) (13,216)
Normal taxation paid (7,514) (5,690)
Cash flows from operating activities 84,798 57,615
Cash flows from investing activities 1,114 (42,105)
Cash flows from financing activities (58,711) (34,377)
Net increase / (decrease) in cash and cash
equivalents 27,201 (18,867)
Cash and cash equivalents at beginning of
year (162,135) (143,268)
Cash and cash equivalents at end of year (134,934) (162,135)
Employee
Consolidated Statement of Changes in share
Equity for the year ended Stated Treasury incentive
31 March 2015 capital shares reserve
R 000 R 000 R 000
Balance at 31 March 2013 545,643 (94,514) 2,034
Net treasury movement - 237
Share-based payments - - 371
Transfer of reserve to retained
earnings - - (1,889)
Total comprehensive loss - - -
Dividends - current interim and prior
final - - -
Less dividend on treasury shares - - -
Balance at 31 March 2014 545,643 (94,277) 516
Net treasury movement - 1,231 -
Share-based payments - - 330
Transfer of reserve to retained
earnings - - (6)
Total comprehensive income - - -
Dividends – current interim and prior
final - - -
Less dividend on treasury shares - - -
Balance at 31 March 2015 545,643 (93,046) 840
Foreign
Consolidated Statement of Changes in currency
Equity for the year ended Revaluation translation Retained
31 March 2015 (continued) reserve reserve earnings
R 000 R 000 R 000
Balance at 31 March 2013 45,045 (8,809) 860,225
Net treasury movement - - -
Share-based payments - - -
Transfer of reserve to retained
earnings - - 1,889
Total comprehensive loss (5,597) (529) (193,575)
Dividends - current interim and prior
final - - (13,508)
Less dividend on treasury shares - - 292
Balance at 31 March 2014 39,448 (9,338) 655,323
Net treasury movement
Share-based payments
Transfer of reserve to retained
earnings 6
Total comprehensive income (2,427) 1,182 26,094
Dividends – current interim and prior
final - - (14,474)
Less dividend on treasury shares - - 898
Balance at 31 March 2015 37,021 (8,156) 667,847
Consolidated Statement of Changes Total
in Equity for the year ended attributable Non- Total
31 March 2015 to owners of controlling shareholders’
(continued) the parent interest funds
R 000 R 000 R 000
Balance at 31 March 2013 1,349,624 9,251 1,358,875
Net treasury movement 237 - 237
Share-based payments 371 - 371
Transfer of reserve to retained
earnings - - -
Total comprehensive loss (199,701) 518 (199,183)
Dividends - current interim and
prior final (13,508) - (13,508)
Less dividend on treasury shares 292 - 292
Balance at 31 March 2014 1,137,315 9,769 1,147,084
Net treasury movement 1,231 - 1,231
Share-based payments 330 - 330
Transfer of reserve to retained
earnings - - -
Total comprehensive income 24,849 805 25,654
Dividends – current interim and
prior final (14,474) - (14,474)
Less dividend on treasury shares 898 - 898
Balance at 31 March 2015 1,150,149 10,574 1,160,723
Steel
Segmental Review Manufacturing Trading Automotive
R 000 R 000 R 000
Business Segments
for the year ended 31 March 2015
Revenue from external sales 954,443 567,710 202,123
Profit/(loss) before taxation 81,406 11,566 (64,879)
Taxation - - -
Profit for the year - - -
for the year ended 31 March 2014
Revenue from external sales 967,076 657,920 192,255
Loss before taxation 60,655 (2,451) (9,391)
Taxation - - -
Loss for the year - - -
- - -
Segmental Review Watch Restructuring
(continued) List Properties Adjustments Consolidated
R 000 R 000 R 000 R 000
Business Segments
for the year ended 31
March 2015
Revenue from external
sales 65,740 1,147 - 1,791,163
Profit/(loss) before
taxation (4,151) 11,383 - 35,325
Taxation (8,426)
Profit for the year 26,899
for the year ended
31 March 2014
Revenue from external
sales 60,747 2,478 - 1,880,476
Profit / (loss) before
taxation (6,078) 10,309 (263,460) (210,416)
Taxation 17,359
Loss for the year (193,057)
South Rest of the
Africa world Consolidated
R 000 R 000 R 000
Geographical segments
for the year ended 31 March 2015
Revenue from external sales 1,714,948 76,215 1,791,163
Profit before taxation 29,473 5,852 35,325
Taxation (8,426)
Profit for the year 26,899
for the year ended 31 March 2014
Revenue from external sales 1,816,887 63,589 1,880,476
(Loss) / Profit before taxation (216,577) 6,161 (210,416)
Taxation 17,359
Loss for the year (193,057)
FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities measured at fair value in the
statement of financial position are grouped into three levels of a fair
value hierarchy.
The three levels are defined based on the observability of significant
inputs to the measurement, as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
- Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly;
- Level 3: unobservable inputs for the asset or liability.
The following table sets out the financial assets and liabilities that are
measured and recognised at fair value:
2015 Level 1 Level 2 Level 3 Total
R 000 R 000 R 000 R 000
Recurring fair value measurements
Financial assets:
Forward exchange contracts - 1,285 - 1,285
Total recurring financial assets - 1,285 - 1,285
2014 Level 1 Level 2 Level 3 Total
R 000 R 000 R 000 R 000
Recurring fair value measurements
Financial liabilities:
Forward exchange contracts - 720 - 720
Total recurring financial liabilities - 720 - 720
There have been no transfers between Levels 1 and Level 2 recurring fair
value measurements during 2014 and 2015.
The group's policy is to recognise transfers into and out of the different
fair value hierarchy levels at the date the event or change in circumstances
that caused the transfer occurred.
MEASUREMENT OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The group’s finance team performs valuations of financial items for
financial reporting purposes, including Level 3 fair values, in consultation
with third party valuation specialists for complex valuations. Valuation
techniques are selected based on the characteristics of each instrument,
with the overall objective of maximising the use of market-based
information. The finance team reports directly to the financial director
(FD) and to the audit and risk committee. Valuation processes and fair value
changes are discussed among the audit and risk committee and the valuation
team at least every year, in line with the group’s reporting dates. The
valuation techniques used for instruments categorised in Levels 2 are
described below.
FOREIGN CURRENCY FORWARD CONTRACTS (LEVEL 2)
The group’s foreign currency forward contracts are not traded in active
markets. These have been fair valued using observable forward exchange rates
and interest rates corresponding to the maturity of the contract. The
effects of non-observable inputs are not significant for foreign currency
forward contracts.
FINANCIAL OVERVIEW
Argent Industrial Limited has had an interesting and positive year.
The group’s core business is manufactured brands with a metal trading and
property investment support base.
OPERATIONS REVIEW
The groups operations were adversely affected by the NUMSA country wide
industrial strike in July 2014, as well as the NUMSA induced closure of
Giflo Engineering (Bophuthatswana) (Pty) Ltd (“Giflo”) a company that
already faced ongoing margin pressures.
The country wide strike is estimated to have cost the group R22.7 million,
while the closure of Giflo cost the group R50.5 million in stock and asset
write downs.
CALCULATION OF NORMALISED EARNINGS R 000 31 March 31 March
2015 2014
Profit/(loss) before taxation as reported 35,325 (210,416)
Loss on disposal of property, plant and
equipment 8,711 2,532
Impairment of property 5,014 38,306
Impairment of plant and equipment - 54,915
Impairment of intangible assets - 121,803
Automotive stock losses 41,057 31,524
Retrenchments (continuing operations) 2,159 850
Closure of loss generating businesses - 16,062
Specialist Steel Profiles foreign exchange loss - 10,469
Effect of country-wide strikes 22,700 15,911
Normalised earnings 114,966 81,956
MANUFACTURING
This sector performed as planned despite performance being severely hampered
by the July strike action, which cost the sector an estimated R15.1 million.
The group prepared the best they could for the expected strike, building up
the required stock levels, however this did not go as planned as the
strikers prevented stock being dispatched. This resulted in the sector
still being stocked to capacity at the end of the strike action forcing it
into post-strike short time and as a result, under-recoveries. NUMSA
prevented all of our operations from opening up during the strike which
included preventing salary-earning staff from entering the various premises
and the intimidation of non-union members. The group is on track with its
planned staff reductions via its automation and product import plans.
STEEL TRADING
This sector performed well and performance was in line with expectations,
however we have seen a drop in the demand for carbon steel, coupled with
mill price decreases in April and May 2015. The prices decreased by a total
of 17% to the March 2015 cost. The July 2014 strike action cost the sector
an estimated R1.5 million in profit.
AUTOMOTIVE
The sector made an overall loss of R64.9 million, of which R50.5 million is
due to the closure of Giflo and R6.1 million attributable to the July 2014
strike action.
The board have taken the decision to conclude operations at Giflo.
The decision was made on the back of a history of poor margins and the
current labour dispute with NUMSA which resulted in a labour strike starting
on the 12th of January 2015 and is currently on-going.
The strike has been incredibly violent with a number of our working staff
and staff of our suppliers and customers being hospitalised. Our trucks, as
well as those of our suppliers have been damaged, working staff houses have
been set alight and the factory has been brought to a halt as a result of
the strikers stoning all vehicles in the vicinity of the Giflo factory and
cutting off the company’s water supply.
The company has reserved its rights against NUMSA and has obtained a court
interdict to allow it to operate unhindered, something which is easier
documented in theory than it is in reality.
The closure of Giflo resulted in the following write down:
R 000
Automotive stock 41,057
Impairment of property 5,014
Loss on disposal of plant and equipment 4,398
50,469
WATCH LIST
Cedar Paint remains a concern due to ongoing margin pressures. We have
managed to reduce the required overhead recovery rate and thereby reduced
the annual loss from R6 million in the prior year to R4 million in the
current year.
The company will remain on the watch list while the group continues to
search for ways to improve margins or find a suitable solicitor.
PROPERTIES
The group has sold the following properties during the reporting period:
- Gammid JHB in Johannesburg for R5 million to a related party; and
- Atomic Office Equipment in Cape Town for R16 million.
The group sold the following properties after the reporting period:
- Gammid Cape in Cape Town for R31 million on 28 November 2014, transferred
on 27 May 2015; and
- Phoenix Steel Mpumalanga in Middleburg for R10.5 million on
21 April 2015, not transferred yet.
The following properties are currently for sale:
- Giflo Engineering (Bophuthatswana) in Ga-Rankuwa via auction at a reserve
price of R10.5 million. The auction was originally set for the
28th May 2015 but was postponed due to no registered buyers. The property
has a stand size of 63 012 m² and a covered area of 28 583 m². We have
received valuations ranging from R20 million to R35 million. The
property is currently in our books for R13.5 million.
- Gammid George in George, which is currently vacant for R6 Million.
SEGMENT REVIEW
Manufacturing Steel Automotive Watch Properties
Trading List
R 000 R 000 R 000 R 000 R 000
For the year
ended
31 March 2015
Revenue from
external sales 954,443 567,710 202,123 65,740 1,147
Profit/(loss)
before
taxation 81,406 11,566 (64,879) (4,151) 11,383
Net assets 641,685 283,471 68,295 25,157 189,160
For the year
ended
31 March 2014
Revenue from
external sales 967,076 657,920 192,255 60,747 2,478
Profit/(loss)
before
taxation 60,655 (2,451) (9,391) (6,078) 10,309
Net assets 576,228 290,357 109,699 30,425 186,287
REPURCHASE OF ARGENT SHARES
Argent will commence with the repurchasing of the shares issued by the
company in terms of its share buy-back approval given by the shareholders at
the annual general meeting held on 28 October 2014.
In terms of this special resolution, the company will commence repurchasing
its shares in tranches of 3% of the number of shares in issue, pursuant to
which an announcement providing details thereof will be released.
The authority to repurchase shares is limited to a maximum of 20% in
aggregate, of the company’s issued stated capital at the time the authority
was granted.
OUTLOOK
The group has consolidated its core business around its branded
manufacturing companies. Our main focus will be to build these brands
whilst continuing with production automation. A key objective of the Board
of Directors is to increase the number of exports and offshore operations to
further reduce exposure to South African labour issues and currency
fluctuations.
DIVIDEND
The directors have declared and approved a final gross dividend of 9 cents
per share for the year ended 31 March 2015 from income reserves. Total
ordinary dividends per share in respect of the financial year to 31 March
2015 therefore amounts to 17 cents (2014 - 14 cents).
The following dates will apply to the abovementioned final dividend:
Last day to trade cum dividend: Friday, 25 September 2015
Trading ex-dividend commences: Monday, 28 September 2015
Record date: Friday, 2 October 2015
Dividend payment date: Monday, 5 October 2015
Share certificates may not be dematerialised or re-materialised between
Monday, 28 September 2015 and Friday, 2 October 2015, both days inclusive.
In determining the dividends tax (DT) of 15% to withhold in terms of the
Income Tax Act (No. 58 of 1962) for those shareholders who are not exempt
from the DT, no secondary tax on companies (STC) credits have been utilised.
Shareholders who are not exempt from the DT will therefore receive a
dividend of 7.65 cents per share net of DT. The company has 96 490 604
ordinary shares in issue as at 30 June 2015 and its income tax reference
number is 9096/002/71/3.
The above dates are subject to change. Any changes will be released on
SENS. Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on the payment
date. In the absence of specific mandates, dividend cheques will be posted
to shareholders. Ordinary shareholders who hold dematerialised shares will
have their accounts at their CSDP or broker credited/updated on Monday, 5
October 2015.
BASIS OF PREPARATION
The condensed financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), the presentation and
disclosure requirements of IAS 34 - Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee,
the Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council and in compliance with the Companies Act of South Africa
(No. 71 of 2008) and the Listing Requirements of the JSE Limited. The
accounting policies are consistent with those of the previous financial
period, except for the adoption of improved, revised or new standards and
interpretations. The aggregate effect of these changes in respect of the
year ended 31 March 2015 is nil. The condensed financial statements have
been prepared under the supervision of the Financial Director, Ms SJ Cox CA
(SA). Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the company's
auditors.
EVENTS AFTER THE REPORTING PERIOD
Subsequent to year end, the board have taken the decision to conclude
operations at Giflo Engineering (Bophuthatswana) (Pty) Ltd (“Giflo”), and
decided to dispose of the Giflo property via auction.
GOING CONCERN
Shareholders are advised that the audited results for the year ended 31
March 2015 have been prepared on the going concern concept. This basis
presumes that funds will be available to finance future operations and that
the realisation of assets and settlement of liabilities, contingent
obligations and commitments will occur in the ordinary course of business.
CONDENSED ANNUAL FINANCIAL STATEMENTS AND NOTICE OF ANNUAL GENERAL MEETING
The condensed annual financial statements for the financial year ended
31 March 2015, is expected to be posted to shareholders on or about the 30
June 2015 (“the Condensed Annual Financial Statements”). The annual report
will be available on the company’s website, www.argent.co.za on 30 June
2015.
Notice is hereby given that Argent’s Annual General Meeting (AGM) of
shareholders will be held in the company’s boardroom at First floor, Ridge
63, 8 Sinembe Crescent, La Lucia Ridge Office Estate, Umhlanga, on Thursday,
20 August 2015 at 10:00 to transact the business as stated in the notice of
AGM circulated together with the condensed annual financial statements. The
date on which shareholders must be recorded as such in the share register to
be eligible to vote at the AGM is Friday, 14 August 2015, with the last day
to trade being Thursday, 6 August 2015.
AUDIT OPINION
The auditors, Grant Thornton (D Nagar as designated auditor), have audited
the group`s financial statements for the year ended 31 March 2015 and their
unqualified audit report is available for inspection at the company`s
registered office.
These condensed results are extracted from audited information, but are not
in itself audited. The directors therefore take full responsibility for the
preparation of the condensed results and that the financial information has
been correctly extracted from the underlying financial statements.
The auditor’s report does not necessarily cover all of the information
contained in this announcement/ financial report. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the
auditor’s work they should obtain a copy of that report together with the
accompanying financial information from the registered office of the
company.
On behalf of the board
TR Hendry CA (SA) Umhlanga Rocks
Chief executive officer 30 June 2015
REGISTERED OFFICE:
First floor, Ridge 63, 8 Sinembe Crescent, La Lucia Ridge Office Estate,
4019
Tel: +27 31 791 0061
AUDITORS
Grant Thornton (D Nagar as designated auditor)
SPONSORS
PSG Capital (Pty) Ltd
TRANSFER SECRETARIES
Link Market Services South Africa (Pty) Ltd, 13th floor, Rennies House, 19
Ameshoff Street, Johannesburg, 2001
COMPANY SECRETARY
Jaco Dauth
DIRECTORS
CD Angus (Independent Non-executive), Ms SJ Cox (Financial Director), PA Day
(Independent Non-executive), TR Hendry (Chief Executive Officer), Mrs JA
Etchells (Independent Non-executive), AF Litschka, K Mapasa (Independent
Non-executive) and T Scharrighuisen (Non-executive Chairman).
Date: 30/06/2015 09:00:00 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
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information disseminated through SENS.
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