Nov 2006 Financial News

Agostini's Limited Releases Audited Year End Results

Nov 20, 2006

Agostini’s Limited (AGL) reported Earnings Per Share (EPS) of 81.3 cents for the fiscal year ended September 30, 2006. This was 10.56 per cent lower than the 90.9 cents reported in 2005. The fall in EPS was partly as a result of the gain of $1.500 million on revaluation of investment properties in 2006 in accordance with IAS 40, compared to a gain of $5.677 million in 2005. The latter included gains from the sale of a sinking fund investment.

Turnover rose 19.24 per cent to $384.740 million as several of AGL’s businesses benefited from the booming economy. Some units however were faced with severe cost inflation and manpower shortages.

The Trading Sector had reasonable revenue growth with its Pharmaceutical, Building Products and Oilfield/Hydraulics Sales and Service businesses delivering excellent top line and bottom line improvements. The Contracting Business however experienced some challenges.

The Housing sector, though profitable in 2006, produced results below expectations. This unit experienced problems associated with the overheated construction sector in addition to weather delays.

In its Manufacturing Sector, Agos Lighting had another difficult year due primarily to escalating steel prices and labour and productivity shortfalls as a result of high absenteeism, impacting negatively on profit margins.

Overall, Operating Profit increased by a smaller margin (compared to Turnover) of 12.24 per cent to $32.447 million. The Group’s Operating Profit Margin moved from 8.96 per cent in 2005 to 8.43 per cent in 2006.

AGL had an increase in Net Finance Costs of 69.18 per cent to $4.600 million in 2006. After the gains previously mentioned, Profit Before Tax fell 7.91 per cent to $29.347 million. The Effective Tax Rate moved from 23.06 per cent in 2005 to 25.06 per cent in 2006. Profit After Tax ultimately declined 10.30 per cent to $21.992 million.

The Chairman expects the Pharmaceutical, Building Products and Oilfield/Hydraulics Supply & Service business units to continue their strong performance. In addition, other departments in the Trading Division have started the year with good performances and expectations. The Housing Division and Agos Lighting have also strengthened their management teams and systems and are seeing positive results. The Group also plans to optimize its investment properties, office and warehousing facilities and expects the process to gain momentum in the current year.

Over the past 52 weeks AGL has traded as high as $11.25 and as low as $9.00. Given these results we are currently forecasting Earnings Per Share of 90 cents for the year ended September 30, 2007. At this forecast and the current price of $10.99, AGL is trading at a price/earnings ratio of 12.21 times. Given that this share usually trades between 13 to 16 times earnings, we currently recommend a BUY on this share. However, due to the fact that this share is tightly held, there may be some difficulty in acquiring it.

The Board has recommended a final dividend of 25 cents per share to be paid on January 29, 2007 to shareholders whose names appear on the register as at December 22, 2006. This brings the total dividends paid for FY 2006 to 35 cents per share.

Sreshtha Tewari
WISE Research Team