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AG INDUSTRIES, formerly African Glass, doesn’t make things easy for analysts. Try to access its website at the address given on its interim results statement, or as published in the Stock Exchange Handbook, and you may end up at IT For Africa, trading as AG Information Systems.
When, thanks to Google, you find the correct site and click on “Latest financial results” you access not the recent interim statement but the 2006 annual report – and only the second half of that. The investor relations section is hardly more helpful: the most recent media release on the slow-toload site is dated 22 May 2002.
That isn’t good enough for “an innovative group that has created a distinctive merger of glass and aluminium systems and fabrication… SA’s leading distributor of glass and aluminium fabrication used in construction as diverse as skyscrapers and modern homes”.
Maybe it’s one reason why the share heavily underperformed the construction materials sector between 2002 and 2006. Another factor may be that headline earnings per share more than halved in the year to June 2003 and only in 2006 got back above 2002 levels.
The interim report to December 2006 showed a modest improvement on the previous year, with revenue up 6% to R621m and similar gains down the line, higher finance costs being cancelled out by a lower tax charge, giving HEPS of 20,8c (19,7c) for the six months and a rolling 12-month 42,2c.
An ambition to diversify internationally has been no great shakes, though a turnaround in European operations, where operating profit rose from R1m a year ago to R4,7m, contributed most of the past six months’ growth. Still, contributions of just 7% to both revenue and operating profit leave Europe as an insignificant part of the group.
The plus factor is that there’s been heavy capital expenditure, which pushed property, plant and equipment up from R103m a year ago to R265m “to create a new and larger platform for local and international growth and to further enhance margins”. Accordingly, AGI is optimistic concerning prospects in all business areas.
Initial reaction to the interim was unfavourable, pushing the price down from 600c to 500c before a rally to 520c/ share. That’s still a good advance on the 360c of last October and gives a historic price:earnings of 25 – demanding, but if earnings are about to show strong growth there could be good scope for medium-term capital appreciation.