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Abridged Audited Consolidated Results, Notice of Annual General Meeting and Dividend Declaration
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, Notice of Annual General Meeting and
Dividend Declaration
Financial Highlights
HEADLINE EARNINGS per share (cents) 76.8
NET ASSET VALUE per share (cents) 1,144.9
GEARING 4.4%
FINAL DIVIDEND per share (cents) 10
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 2018 2018 2017
R 000
Revenue 1,828,407 1,849,127
Operating (loss) / profit before finance costs (192,069) 105,985
Finance income 1,872 1,183
Finance costs (13,050) (19,678)
(Loss) / profit before taxation (203,247) 87,490
Taxation 20,657 (24,057)
(Loss) / profit for the year (182,590) 63,433
Attributable to equity holders of the
- Parent (184,192) 61,764
- Non-controlling interest 1,602 1,669
(182,590) 63,433
Basic (loss) / earnings per share (cents) (205.2) 68.0
Diluted (loss) / earnings per share (cents) (205.2) 68.0
Headline earnings per share (cents) 76.8 69.6
Diluted headline earnings per share (cents) 76.8 69.6
Dividends per share (cents) 21.0 19.0
Supplementary information
Shares in issue (000)
- at end of period 84,005 90,642
- weighted average 89,784 90,815
- diluted weighted average 89,784 90,815
Cost of sales (R 000) 1,424,962 1,416,572
Depreciation and amortisation (R 000) 25,066 32,635
Calculation of headline earnings (R 000)
(Loss) / earnings attributable to ordinary
shareholders (184,192) 61,764
Adjusted for:
Loss on disposal of property, plant and equipment 69,602 2,040
Impairment of property, plant and equipment 72,674 -
Impairment of intangible assets 130,395 -
Total tax effects of adjustments (19,489) (571)
Headline earnings attributable to ordinary
shareholders 68,990 63,233
Consolidated Statement of Other Comprehensive Audited Audited
Income for the year ended 31 March 2018 2018 2017
R 000
(Loss)/profit for the year (182,590) 63,433
Other comprehensive income for the period
Items that may be reclassified subsequently to
profit and loss
Exchange differences on translating foreign
operations (4,630) (7,483)
Items that will not be reclassified subsequently
to profit and loss
Revaluation of land and buildings (39,903) -
Tax effect of above transactions 11,648 -
Total other comprehensive (loss)/income for the
year (215,475) 55,950
Attributable to equity holders of the
- Parent (217,077) 54,281
- Non-controlling interest 1,602 1,669
(215,475) 55,950
Consolidated Statement of Financial Position as Audited Audited
at 31 March 2018 2018 2017
R 000
ASSETS
Non-current assets
Property, plant and equipment 417,589 631,861
Intangible assets 82,835 213,693
Long-term receivables 29,123 14,971
Deferred taxation 9,532 7,432
539,079 867,957
Current assets
Inventories 374,130 488,641
Trade and other receivables 318,263 339,285
Taxation 14 -
Bank balance and cash 87,918 30,894
780,325 858,820
Non-current assets held for sale 23,288 -
TOTAL ASSETS 1,342,692 1,726,777
EQUITY AND LIABILITIES
Capital and reserves
Stated capital and treasury shares 421,789 447,872
Reserves (1,839) 24,177
Retained earnings 541,795 750,923
Attributable to owners of the parent 961,745 1,222,972
Non-controlling interest 16,782 15,180
Total shareholders' funds 978,527 1,238,152
Non-current liabilities
Interest-bearing borrowings 12,322 36,509
Long-term loans 1,659 -
Deferred taxation 43,364 83,700
57,345 120,209
Current liabilities
Trade and other payables 194,606 235,257
Taxation - 1,673
Bank overdraft 81,063 99,023
Current portion of interest-bearing borrowings 31,151 32,463
306,820 368,416
TOTAL EQUITY AND LIABILITIES 1,342,692 1,726,777
Net asset value per share (cents) 1,144.9 1,349.2
Abridged Consolidated Statement of Cash Flows for Audited Audited
the year ended 31 March 2018 2018 2017
R 000
Cash generated from operations 199,649 122,200
Finance income 1,872 1,183
Finance costs (13,050) (19,678)
Dividends paid (18,588) (17,057)
Normal taxation paid (11,818) (6,468)
Cash flows from operating activities 158,065 80,180
Cash flows from investing activities (32,347) (86,479)
Cash flows from financing activities (49,923) 23,110
Net increase in cash and cash equivalents 75,795 16,811
Cash and cash equivalents at beginning of year (68,129) (82,072)
Difference arising on translation (811) (2,868)
Cash and cash equivalents at end of year 6,855 (68,129)
Consolidated Statement of Changes Stated Treasury Employee
in Equity for the year ended capital shares share
31 March 2018 incentive
reserve
R 000 R 000 R 000
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
Share-based payments - - 521
Share buy-back (26,083) - -
Transfer of reserve to retained
earnings - - (1,382)
Total comprehensive loss - - -
Dividends - current interim and
prior final - - -
Less dividend on treasury shares - - -
Balance at 31 March 2018 514,835 (93,046) 440
Consolidated Statement of Changes Revaluation Foreign Retained
in Equity for the year ended reserve currency earnings
31 March 2018 translation
(continued) reserve
R 000 R 000 R 000
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
Share-based payments - - -
Share buy-back - - -
Transfer of reserve to retained
earnings - 7,730 (6,348)
Total comprehensive loss (28,255) (4,630) (184,192)
Dividends - current interim and
prior final - - (19,375)
Less dividend on treasury shares - - 787
Balance at 31 March 2018 8,068 (10,347) 541,795
Consolidated Statement of Changes Total Non- Total
in Equity for the year ended attributable controlling shareholder’s
31 March 2018 to owners of interest funds
(continued) the parent
R 000 R 000 R 000
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
Share-based payments 521 - 521
Share buy-back (26,083) - (26,083)
Transfer of reserve to retained
earnings - - -
Total comprehensive loss (217,077) 1,602 (215,475)
Dividends - current interim and
prior final (19,375) - (19,375)
Less dividend on treasury shares 787 - 787
Balance at 31 March 2018 961,745 16,782 978,527
Segmental Review
Manufacturing Steel Properties Consolidated
trading
R 000 R 000 R 000 R 000
Business segments
for the year ended
31 March 2018
Revenue from external
sales 1,251,892 575,816 699 1,828,407
Inter-segment sales 111,742 150,641 29,546
Total revenue 1,363,634 726,457 30,245
Loss before taxation (148,311) (40,795) (14,141) (203,247)
Taxation 20,657
Loss for the year (182,590)
Other information
Loss before taxation per
above (148,311) (40,795) (14,141) (203,247)
Impairment of intangible
assets 127,842 2,553 - 130,395
Impairment of property,
plant and equipment 68,049 48,630 27,687 144,366
Profit before taxation
and impairments 47,580 10,388 13,546 71,514
Manufacturing Steel Automotive
trading
R 000 R 000 R 000
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
Loss for the year
Properties Consolidated
R 000 R 000
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
South Africa Rest of the Consolidated
world
R 000 R 000 R 000
Geographical segments
for the year ended 31 March 2018
Revenue from external sales 1,647,685 180,722 1,828,407
(Loss)/profit before taxation (230,507) 27,260 (203,247)
Taxation 20,657
Loss for the year (182,590)
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
Fair value measurement of financial and non-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 2018 Level 1 Level 2 Level 3 Total
R 000 R 000 R 000 R 000
Recurring fair value measurements
Financial liabilities:
Forward exchange contracts - 346 - 346
Total recurring financial liabilities - 346 - 346
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
There have been no transfers between Level 1 and Level 2 recurring fair
value measurements during 2017 and 2018.
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
Overall, Argent Industrial Limited had a difficult year, caused by a
depressed South African economy which resulted in a number of the local
businesses being restructured, closed or impaired.
The restructuring and the expected returns on the group’s overseas
operations, will however, hold the group in good stead in the year ahead.
Operations review
Manufacturing
The group’s three overseas companies have been the major contributor to this
sector, making a combined profit of R27.2 million before taxation, which
includes a R5.7 million unrealised foreign exchange loss.
New Joules Engineering North America (“New Joules”) has managed to get its
new static retarder unit listed by Russian Railways. The key to this unit is
that it allows a pull-out speed of 25km/h and has real application in
tippler and industrial railway sidings worldwide. New Joules is now also on
the tender list with Austrian Railways, something which we plan on
participating in from 2019.
OSA Door Parts Limited had a good year and has a steady order book. It was
purchased on a maintainable income of £500 000 before taxation and made a
profit of £730 000 in 2018.
Cannock Gates also had a good year, generating a before taxation profit of
£304 031.
The combined net profit before taxation and before the forex adjustment to
turnover ratio for the three companies is 17% and the return on net assets
including goodwill is 17%.
The group’s restructuring of the local operations has mostly been
implemented and there will be an element of ongoing refinement of this
process to optimise returns.
Both Jetmaster and Gammid Cape have been relocated into smaller premises,
each representing less than half of their former footprint. This has had a
positive effect on the reduction of costs and related overheads.
Jetmaster’s yearly export sales now cover 29% of its overheads, allowing
Jetmaster to concentrate on the higher domestic opulent market.
Gammid Cape is now based in Montague Gardens. The location is far better
suited to the DIY type passing trade and this will improve the exposure of
the business.
Toolroom Services was downsized due to the down turn in steel office
furniture and the ongoing labour issues which cost the group an estimated
R2.6 million in lost margin. It also cost 126 people their employment, due
to a mass dismissal. The company, albeit half its former size has returned
to profitability. The downsizing has allowed us to combine the operation
with Xpanda Jhb, which will relocate in August 2018.
Atomic Office Equipment in Cape Town is going to close in August 2018 and
will operate on a smaller scale as a warehouse outlet for Toolroom Services.
Xpanda Security (“Xpanda”) is currently expanding its product range into
security mesh and has upped its game into the ever-popular higher margin
home invasion sector.
Allan Maskew has taken over all of the CNC machines from the now closed
Sentech Industries and the plastic machines from Jetmaster. This will allow
Allan Maskew to do the New Joules export work and the Castor & Ladder
Jhb/Xpanda Security plastic components.
Castor and Ladder Jhb had a difficult year. The consumer end of the market
is currently dominated by the bigger retailers who are using a combination
of imports and price-pressure, which are an absolute margin depressant for
the manufacturer. The group invested R3.3 million in automating, which is
aimed at lifting our margins and increasing our market share.
Tricks Wrought Iron Services, Pro Crane Services and Hendor Mining Supplies
had a good year, while Megamix and Argent Industrial Engineering have been
and are still hampered by the drought in Cape Town. All of Megamix’s batch
plants are now serviced by our own boreholes which will hold us in a good
stead when the building industry resumes.
Koch’s Cut and Supply Steel Centre had a fantastic year with Parlance
Investments (“Parlance”) only picking up towards the end of the year.
Parlance, the automotive powder and e-coater, will be put up for sale in the
course of the 2019 financial year.
Cedar Paint sold its assets on 28 February 2018 for R51 million. This
includes the property at R24 million.
Steel trading
This is still not the easiest of business sectors in South Africa, however
the sector did manage to make a positive contribution of R10.4 million
before taxation. Phoenix Steel Jhb sold off two tube mills and related
tooling for an amount of R10 million, and in the process has reduced its
operating cost by close to R6 million per year. Gammid Jhb has also reduced
its footprint by 50% and is now under Gammid Kzn management. The group’s
stock levels held in this sector have decreased from R250 million, as of 31
March 2017, to its current R177 million.
Properties
As stated above, the group sold its Jetmaster property (Roodepoort,
Johannesburg) for an amount of R33.5 million and its Cedar Paint property in
Silverton, Pretoria for R24 million (transfer expected August 2018).
Currently, we have the Xpanda Jhb and Klerksdorp properties for sale,
however both properties are proving to be a challenge. We also plan to sell
the Parlance property. The three properties are in our books for R22.8
million.
Impairments
Given the current South African economic climate, the group impaired
goodwill by an amount of R130.4 million. The remaining goodwill in Argent
comprises R35 million for Xpanda and R45 million for OSA Door Parts and
Cannock Gates combined (both United Kingdom based).
We have impaired four of the Johannesburg properties by an amount of R27.7
million, three of them due to receiving lower offers/indicative offers (one
being Jetmaster, which has been sold). The Phoenix Steel Gauteng property
was revalued along with the balance of the steel sector assets.
The closure of Sentech and the downsizing/relocation of the companies in the
2018 financial year, has resulted in write-downs of plant and equipment,
including a full valuation of the groups steel trading assets of R116.7
million. The total write-down amounted to R274.8 million, which will reduce
the group yearly depreciation expense by R8.2 million.
Headline earnings
The groups earnings were adversely affected by an unrealised foreign
exchange loss of R5.6 million, labour unrest at Toolroom of R2.6 million,
retrenchments of R5.1 million and an increase in the Hendor/NUMSA accrual of
R869 000.
Share buy-back programme
During the course of the year, Argent repurchased and cancelled
6 636 685 shares at a cost of R26 082 792, and an average price of R3.93 per
share.
The authority to repurchase is limited to 20% in aggregate of the company’s
issued share capital at the time the authority was granted, being at the
annual general meeting held on 30 August 2017.
Outlook
The outlook remains positive, especially with the favourable result of the
ANC Elective Conference at Nasrec in December 2017. It appears that spending
by Government and the SOE’s will be better controlled and this will result
in more funds flowing into our industry.
The groups overseas operations have performed to expectation and it is the
groups intention to purchase additional operations in the United Kingdom.
Excess funds held in South Africa will be utilised by the group to continue
with the share buy-back programme. To this end, the group, as at 31 March
2018, was owed R48 million on operations, assets and properties that have
already been sold. We expect to receive these funds by August 2018.
Dividend
The directors have declared and approved a final gross dividend of 10 cents
per share for the year ended 31 March 2018 from income reserves. Total
ordinary dividends per share in respect of the financial year to 31 March
2018 therefore amounts to 21 cents (2017 - 19 cents).
The following dates will apply to the abovementioned final dividend:
Last day to trade cum dividend: Tuesday, 24 July 2018
Trading ex-dividend commences: Wednesday, 25 July 2018
Record date: Friday, 27 July 2018
Dividend payment date: Monday, 30 July 2018
Share certificates may not be dematerialised or re-materialised between
Wednesday, 25 July 2018 and Friday, 27 July 2018, 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 8.00 cents per share net of DT.
The company has 88 688 115 ordinary shares in issue as at 28 June 2018 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, 30 July 2018.
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 2018 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
The group has purchased 100% of the share capital of Roll-Tec Safety Limited
and Fuel Proof Limited for an amount of £4.6 million. In terms of the
transaction agreement, the purchase consideration will be recalculated
twenty-four months after the effective date in that it will either reduce to
a minimum of £4.08 million or increase to a maximum of £6 million.
The transaction is a cash deal and is based on an after-taxation price
earnings ratio of 5.92 times. The companies’ expected before taxation
earnings are £960 000 per year.
Going concern
Shareholders are advised that the audited results for the year ended 31
March 2018 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 2018, is expected to be posted to shareholders on or
about the 29 June 2018 (“the Abridged Audited Financial Statements”). The
annual report will be available on the company’s website, www.argent.co.za
on 29 June 2018.
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, 28 November 2018 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, 23 November
2018, with the last day to trade being Tuesday, 20 November 2018.
Audit opinion
The auditors, Grant Thornton (EY Lakhi as designated auditor), have audited
the group`s financial statements for the year ended 31 March 2018 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. Khathutshelo Mapasa resigned as independent non-executive director on
23 February 2018.
On behalf of the board
TR Hendry CA (SA) Umhlanga Rocks
Chief Executive Officer 28 June 2018
Registered Office: First floor
Ridge 63
8 Sinembe Crescent
La Lucia Ridge Office Estate
4019
Tel: +27 (0) 31 791 0061
Auditors: Grant Thornton (EY Lakhi as designated auditor)
Sponsors: PSG Capital
Second floor, Building 3
11 Alice Lane
Sandhurst
Sandton
2196
Transfer Secretaries: Link Market Services South Africa
13th floor
Rennie 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, T Scharrighuisen (Non-executive
Chairman).
Date: 28/06/2018 12:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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