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Abridged Audited Consolidated Results for the Year Ended 31 March 2017 and Notice of Annual General Meeting
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" or “Argent”)
ABRIDGED AUDITED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2017 AND
NOTICE OF ANNUAL GENERAL MEETING
Financial Highlights
Revenue R1.85 billion
Operating profit R106 million
Net asset value per share 1,349.2 cents
Gearing 5.6%
Earnings before interest, taxation,
depreciation and amortisation “ebitda” R138.6 million
The abridged audited financial statements are presented on a consolidated
basis
Consolidated Statement of profit or loss for the Audited Audited
year ended 31 March 2017 2017 2016
R 000
Revenue 1,849,127 1,706,923
Operating profit before finance costs 105,985 91,245
Finance income 1,183 1,494
Finance costs (19,678) (17,985)
Profit before taxation 7,490 74,754
Taxation (24,057) (19,017)
Profit for the year 63,433 55,737
Attributable to equity holders of the
- Parent 61,764 55,100
- Non-controlling interest 1,669 637
63,433 55,737
Basic earnings per share (cents) 68.0 60.1
Diluted earnings per share (cents) 68.0 60.1
Headline earnings per share (cents) 69.6 62.8
Diluted headline earnings per share (cents) 69.6 62.8
Dividends per share (cents) 19.0 18.0
Supplementary information
Shares in issue (000)
- at end of period 90,642 91,202
- weighted average 90,815 91,623
- diluted weighted average 90,815 91,623
Cost of sales (R 000) 1,416,572 1,320,083
Depreciation and amortisation (R 000) 32,635 31,476
Calculation of headline earnings (R 000)
Earnings attributable to ordinary shareholders 61,764 55,100
Adjusted for:
Loss on disposal of property, plant and equipment 2,040 1,635
Impairment of property, plant and equipment - 1,250
Total tax effects of adjustments (571) (458)
Headline earnings attributable to ordinary
shareholders 63,233 57,527
Consolidated Statement of Other Comprehensive Audited Audited
Income for the year ended 31 March 2017 2017 2016
R 000
Profit for the year 63,433 55,737
Other comprehensive income for the period
Items that may be reclassified subsequently to
profit and loss
Exchange differences on translating foreign
operations (7,483) 2,192
Items that will not be reclassified subsequently
to profit and loss
Change in tax rate on revaluation reserve - (698)
Total other comprehensive income for the year 55,950 57,231
Attributable to equity holders of the
- Parent 54,281 56,594
- Non-controlling interest 1,669 637
55,950 57,231
Consolidated Statement of Financial Position as Audited Audited
at 31 March 2017 2017 2016
R 000
ASSETS
Non-current assets
Property, plant and equipment 631,861 621,273
Intangible assets (1) 213,693 176,298
Long term loan 14,971 15,931
Deferred taxation 7,432 9,278
867,957 822,780
Current assets
Inventories 488,641 464,081
Trade and other receivables 339,285 298,216
Bank balance and cash 30,894 37,553
858,820 799,850
TOTAL ASSETS 1,726,777 1,622,630
EQUITY AND LIABILITIES
Capital and reserves
Stated capital and treasury shares 447,872 450,147
Reserves 24,177 31,289
Retained earnings 750,923 706,216
Attributable to owners of the parent 1,222,972 1,187,652
Non-controlling interest 15,180 11,211
Total shareholders' funds 1,238,152 1,198,863
Non-current liabilities
Interest-bearing borrowings 36,509 23,818
Deferred taxation 83,700 68,067
120,209 91,885
Current liabilities
Trade and other payables 235,257 188,603
Taxation 1,673 1,606
Bank overdraft 99,023 122,493
Current portion of interest-bearing borrowings 32,463 19,180
368,416 331,882
TOTAL EQUITY AND LIABILITIES 1,726,777 1,622,630
Net asset value per share (cents) 1,349.2 1,302.2
1. The fair value of assets and liabilities assumed were as follows:
OSA Door Pro Crane Lifting
Parts Services Online Total
R 000 R 000 R 000 R 000
Property, plant and equipment 932 874 11 1,817
Inventory 8,344 14,019 2,048 24,411
Trade and other receivables 15,498 11,398 353 27,249
Bank balance and cash 5,813 8,144 106 14,063
Trade and other payables (19,063) (24,645) (2,518) (46,226)
Deferred taxation asset 54 - - 54
Interest-bearing borrowings - (589) - (589)
Outside shareholder - (2,300) - (2,300)
Goodwill / excess of fair
value of assets and
liabilities acquired over
purchase price 37,994 (143) - 37,851
Total purchase price settled
in cash 49,572 6,758 - 56,330
Deduct bank balance on
acquisition (5,813) (8,144) (106) (14,063)
Cash flow on acquisition net
of cash acquired 43,759 (1,386) (106) 42,267
The goodwill arising on the acquisition of these businesses are attributable
to the anticipated profitability of these businesses.
R 000
Revenue since acquisition date included in consolidated results
for the year 79,257
Profit after tax since acquisition date included in
consolidated results for the year 8,931
Group revenue had the business combination been included for
the entire period 1,963,263
Group profit after tax had the business combination been
included for the entire year 66,835
On 11 July 2016, Argent Industrial Limited acquired 100% of the business of
OSA Door Parts Limited ("OSA"). The cost of the acquisition amounted to
GBP 2 500 000. OSA is a manufacturer and trade supplier of industrial
sectional insulated warehouse doors.The business is situated in and
predominantly operates in the United Kingdom.
On 1 December 2016, Argent Industrial Limited acquired 75% of the business
of Pro Crane Services ("Pro Crane"). The cost of the acquisition amounted to
R6 750 000. Pro Crane supplies high quality overhead cranes, hoists and
lifting equipment designed and manufactured for high speed and optimum
flexibility. They also carry out servicing, maintenance and mandatory
inspections on all makes of cranes, hoists and lifting equipment. Pro Crane
is the sole distributor and licensee in South Africa and neighbouring
regions for the world renowned crane manufacturer "SWF Krantechnik".
On 1 December 2016, Argent Industrial Limited acquired 75% of the business
of Lifting Online. No consideration was payable due to its link to Pro Crane
Services. They are an ecommerce platform for lifting and rigging equipment
delivered throughout sub-saharan Africa.
Abridged Consolidated Statement of Cash Flows for Audited Audited
the year ended 31 March 2017 2017 2016
R 000
Cash generated from operations 122,200 102,127
Finance income 1,183 1,494
Finance costs (19,678) (17,985)
Dividends paid (17,057) (16,938)
Normal taxation paid (6,468) (5,769)
Cash flows from operating activities 80,180 62,929
Cash flows from investing activities (86,479) 25,732
Cash flows from financing activities 23,110 (38,667)
Net increase in cash and cash equivalents 16,811 49,994
Cash and cash equivalents at beginning of year (84,940) (134,934)
Cash and cash equivalents at end of year (68,129) (84,940)
Consolidated Statement of Changes Stated Treasury Employee
in Equity for the year ended capital shares share
31 March 2017 incentive
reserve
R 000 R 000 R 000
Balance at 31 March 2015 545,643 (93,046) 840
Share-based payments - - 297
Share buy back (2,450) - -
Transfer of reserve to retained
earnings - - (207)
Total comprehensive income - - -
Dividends - current interim and
prior final - - -
Less dividend on treasury shares - - -
Balance at 31 March 2016 543,193 (93,046) 930
Non-controlling interest on
acquisition of subsidiary
Share-based payments - - 371
Share buy back (2,275) - -
Total comprehensive income - - -
Dividends - current interim and
prior final - - -
Less dividend on treasury shares - - -
Balance at 31 March 2017 540,918 (93,046) 1,301
Consolidated Statement of Changes Revaluation Foreign Retained
in Equity for the year ended reserve currency earnings
31 March 2017 translation
(continued) reserve
R 000 R 000 R 000
Balance at 31 March 2015 37,021 (8,156) 667,847
Share-based payments - - -
Share buy back - - -
Transfer of reserve to retained
earnings - - 207
Total comprehensive income (698) 2,192 55,100
Dividends - current interim and
prior final - - (17,296)
Less dividend on treasury shares - - 358
Balance at 31 March 2016 36,323 (5,964) 706,216
Non-controlling interest on
acquisition of subsidiary
Share-based payments - - -
Share buy back - - -
Total comprehensive income - (7,483) 61,764
Dividends - current interim and
prior final - - (18,148)
Less dividend on treasury shares - - 1,091
Balance at 31 March 2017 36,323 (13,447) 750,923
Consolidated Statement of Changes Total Non- Total
in Equity for the year ended attributable controlling shareholder’s
31 March 2017 to owners of interest funds
(continued) the parent
R 000 R 000 R 000
Balance at 31 March 2015 1,150,149 10,574 1,160,723
Share-based payments 297 - 297
Share buy back (2,450) - (2,450)
Transfer of reserve to retained
earnings - - -
Total comprehensive income 56,594 637 57,231
Dividends - current interim and
prior final (17,296) - (17,296)
Less dividend on treasury shares 358 - 358
Balance at 31 March 2016 1,187,652 11,211 1,198,863
Non-controlling interest on
acquisition of subsidiary - 2,300 2,300
Share-based payments 371 - 371
Share buy back (2,275) - (2,275)
Total comprehensive income 54,281 1,669 55,950
Dividends - current interim and
prior final (18,148) - (18,148)
Less dividend on treasury shares 1,091 - 1,091
Balance at 31 March 2017 1,222,972 15,180 1,238,152
Segmental Review
Manufacturing Steel Automotive
trading
R 000 R 000 R 000
Business segments
for the year ended 31 March 2017
Revenue from external sales 1,096,052 636,653 115,308
Inter-segment sales 97,289 216,614 24,774
Total revenue 1,193,341 853,267 140,082
Profit / (loss) before taxation 59,810 21,794 (6,480)
Taxation
Profit for the year
for the year ended 31 March 2016
Revenue from external sales 1,015,193 545,981 94,204
Inter-segment sales 208,879 242,752 22,471
Total revenue 1,224,072 788,733 116,675
Profit / (loss) before taxation 89,185 (16,097) (3,454)
Taxation
Profit for the year
Watch list Properties Consolidated
R 000 R 000 R 000
Business segments
for the year ended 31 March 2017
Revenue from external sales - 1,114 1,849,127
Inter-segment sales - 29,422
Total revenue - 30,536
Profit / (loss) before taxation - 12,366 87,490
Taxation (24,057)
Profit for the year 63,433
for the year ended 31 March 2016
Revenue from external sales 50,627 918 1,706,923
Inter-segment sales 22,313 27,558
Total revenue 72,940 28,476
Profit / (loss) before taxation (5,381) 10,501 74,754
Taxation (19,017)
Profit for the year 55,737
Segmental Review (continued)
South Africa Rest of the Consolidated
world
R 000 R 000 R 000
Geographical segments
for the year ended 31 March 2017
Revenue from external sales 1,677,103 172,024 1,849,127
Profit before taxation 59,079 28,411 87,490
Taxation (24,057)
Profit for the year 63,433
for the year ended 31 March 2016
Revenue from external sales 1,604,276 102,647 1,706,923
Profit before taxation 57,544 17,210 74,754
Taxation (19,017)
Profit for the year 55,737
Fair value measurement of financial instruments
Assets and 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; and
- Level 3: unobservable inputs for the asset or liability.
The following table sets out the group’s assets and liabilities that are
measured and recognised at fair value:
31 March 2017 Level 1 Level 2 Level 3 Total
R 000 R 000 R 000 R 000
Recurring fair value measurements
Financial liabilities:
Forward exchange contracts - 341 - 341
Total recurring financial liabilities - 341 - 341
31 March 2016 Level 1 Level 2 Level 3 Total
R 000 R 000 R 000 R 000
Recurring fair value measurements
Financial liabilities:
Forward exchange contracts - 308 - 308
Total recurring financial liabilities - 308 - 308
There have been no transfers between Level 1 and Level 2 recurring fair
value measurements during 2016 and 2017.
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 Level 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 has had a successful year despite a difficult South African economy.
The group continues to focus on brands both locally and internationally.
Operations Review
Manufacturing
The division was adversely affected by the down turn in the South African
economy and the improvement in the South African exchange rates. Hendor
Mining was also handed an unexpected court ruling by the Constitutional
Court relating to 2007 for which we have provided R4.5 million in the
current financial year, details are disclosed in note 25.7 of the annual
report. The manufacturing brand division is the group’s core focus and to
this end the group purchased both OSA Door Parts Limited, a UK manufacturer
and supplier of industrial sectional insulated warehouse doors as well as
75% of Pro Crane Services (Pty) Ltd, a Johannesburg based manufacturer and
importer of overhead cranes. Details of the acquisitions can be found on
note 21.5 of the annual report. The acquisition of Pro Crane Services was
cash neutral.
The group’s main brands performed to expectations whilst the steel furniture
and the Jetmaster divisions showed negative returns. Cedar Paint being
profitable, has now been included in the manufacturing sector and is no
longer on the watch list.
Cedar Paint is in the process of closing its Bloemfontein branch, as well as
downsizing its Klerksdorp branch. We have also consolidated the control of
the Durban operation into the Pretoria factory which has had the effect of
reducing the administrative costs along with improving the financial control
and customer service levels.
Steel Trading
The steel trading operations continued to trade positively whilst total
emphasis has been on the reduction of stock holding. To this end Phoenix
Steel Gauteng, to date has managed to reduce its year end stock by R16
million. In addition, we are in the process of reducing our steel exposure
in Cape Town which will provide a further R15 million in stock relief.
The current Steel Trading environment is very difficult with the Government
hell bent on creating an inefficient singular carbon steel supply monopoly,
whilst nullifying the local manufacturer via the higher input costs. We will
continue downsizing our carbon steel merchants until we have correctly
matched our operational returns.
Automotive
The recent price increases did manage to turn this sector around however the
sudden announcement from General Motors that they are disinvesting from
South Africa, will result in our automotive plant being closed before 30
September 2017. The group has provided an additional R2 million in the form
of stock provisions but has not provided for the cost of retrenchments and
the capital losses on the equipment, which will be market dependant.
Properties
There are no changes or expected changes in this division.
Outlook
The outlook remains positive as the group is well positioned to take
advantage of any up-swing in the South African Economy as well as being in a
position where it can rely on its overseas operations for positive growth
and as a hedge against the Rand. One would need to take heed of South
Africa’s current macro-economics and the unpredictability of the local
political environment and the consequent economic implications.
The current year’s results should also be seen in light of abnormal
provisions of R4.5 million for Hendor and R2 million for Sentech, which
would have improved the current year’s earnings to R94 million before tax.
The groups offshore profit will be, where possible, used to make further
investments into offshore brand operations whilst the local profits and cash
generating restructures will be used to reduce the overdraft and buy back
the companies’ shares.
Dividend
The directors have declared and approved a final gross dividend of 11 cents
per share for the year ended 31 March 2017 from income reserves. Total
ordinary dividends per share in respect of the financial year to 31 March
2017 therefore amounts to 19 cents (2016 - 18 cents).
The following dates will apply to the abovementioned final dividend:
Last day to trade cum dividend: Tuesday, 25 July 2017
Trading ex-dividend commences: Wednesday, 26 July 2017
Record date: Friday, 28 July 2017
Dividend payment date: Monday, 31 July 2017
Share certificates may not be dematerialised or re-materialised between
Wednesday, 26 July 2017 and Friday, 28 July 2017, both days inclusive.
In determining the dividends tax (DT) of 20% to withhold in terms of the
Income Tax Act (No 58 of 1962), those shareholders who are not exempt from
the DT will therefore receive a dividend of 8.80 cents per share net of DT.
The company has 95 324 800 ordinary shares in issue as at 29 June 2017 and
its income tax reference number is 9096/002/71/3.
Ordinary shareholders who hold dematerialised shares will have their
accounts at their CSDP or broker credited/updated on Monday, 31 July 2017.
Basis of preparation
The abridged audited consolidated 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
annual financial statements, 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 2017 is nil. The abridged audited
consolidated 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
No material facts or circumstances have occurred between the accounting date
and the date of this report.
Going concern
Shareholders are advised that the audited results for the year ended 31
March 2017 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.
Abridged Audited Financial Statements and Notice of Annual General Meeting
The abridged audited consolidated financial statements for the financial
year ended 31 March 2017, is expected to be posted to shareholders on or
about the 29 June 2017 (“the Abridged Audited Financial Statements”). The
annual report will be available on the company’s website, www.argent.co.za
on 29 June 2017.
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
Wednesday, 30 August 2017 at 10:00 to transact the business as stated in the
notice of AGM circulated together with the abridged audited 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, 18 August 2017,
with the last day to trade being Tuesday, 15 August 2017.
Audit opinion
The auditors, Grant Thornton (A Timol as designated auditor), have audited
the group`s financial statements for the year ended 31 March 2017 and their
unqualified audit report is available for inspection at the company`s
registered office.
These abridged results are extracted from audited information, but are not
in itself audited. The directors therefore take full responsibility for the
preparation of the abridged 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. 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.
Changes to the board
During the reporting period changes to the board of directors were:
- Mr. Patrick Day resigned as independent non-executive director on
24 August 2016;
- Mr. Panagiotis Christofides was appointed as independent non-executive
director on 24 August 2016.
On behalf of the board
TR Hendry CA (SA) Umhlanga Rocks
Chief Executive Officer 29 June 2017
Registered Office: First floor
Ridge 63
8 Sinembe Crescent
La Lucia Ridge Office Estate
4019
Tel: +27 (0) 31 791 0061
Auditors: Grant Thornton (A Timol as designated auditor)
Sponsors: PSG Capital(Pty)Ltd
Second floor, Building 3
11 Alice Lane
Sandhurst
Sandton
2196
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),PA Christofides(Independent
Non-executive), Ms SJ Cox (Financial Director),TR Hendry (Chief Executive
Officer),AF Litschka,K Mapasa (Independent Non-executive),
T Scharrighuisen (Non-executive Chairman).
Date: 29/06/2017 11:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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