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ISB
ISB
ISB - Insimbi Refractory and Alloy Supplies Limited - Reviewed financial results
for the year ended 29 February 2008
Insimbi Refractory and Alloy Supplies Limited
Formerly Insimbi Alloy Supplies (Proprietary) Limited
(Registration number 2002/029821/06)
JSE share code: ISB ISIN Number: ZAE000116828
("Insimbi" or "the company")
REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2008
HIGHLIGHTS
- Revenue of R897,4 million up by 21,6%
- Operating Profit of R53,5 million up by 80,2%
- Profit before tax of R44,9 million up by 79,6%
- Attributable earnings R26,6 million up by 55,4%
- Headline Earnings of R22,4 million up by 31,1%
- The listing of Insimbi on AltX post year end
Condensed consolidated income statement
Reviewed Audited
12 months 12 months
29 February 28 February
2008 2007
R`000 R`000
Revenue 897 428 737 862
Gross profit 83 432 63 809
Net administration and other operating (29 965) (34 138)
costs
Operating profit 53 467 29 671
Share of associate company`s profit 1 449 993
Profit on disposal of associate company 5 469 -
Finance costs (15 670) (5 832)
Interest received 190 158
Profit before taxation 44 905 24 990
Taxation (18 346) (7 904)
Attributable to equity shareholders 26 559 17 086
Reconciliation of headline earnings
Profit on disposal of property and (142) (6)
equipment
Profit on disposal of investment in (4 019) -
associate company
Headline earnings 22 398 17 080
Number of shares in issue (Pre-Listing) 5 364 5 364
Basic and fully diluted:
Earnings per share (Rands) 4 951,34 3 185,31
Headline earnings per share (Rands) 4 175,62 3 184,19
Number of shares on listing (000`s) 260 000 260 000
Proforma basic and fully diluted:
Earnings per share (cents) 10,22 6,57
Headline earnings per share(cents) 8,61 6,57
Condensed consolidated balance sheet
Reviewed Audited
12 months 12 months
29 February 2008 28 February 2007
R`000 R`000
ASSETS
Non-current assets 41 690 43 705
Current assets 182 621 194 833
Cash and cash equivalents 6 894 37 715
Total assets 231 205 276 253
EQUITY AND LIABILITIES
Capital and reserves 4 066 65 411
Non-current liabilities 84 510 24 421
Current liabilities 142 629 186 421
Total equity and liabilities 231 205 276 253
Condensed consolidated cash flow statement
Reviewed Audited
12 months 12 months
29 February 2008 28 February 2007
R`000 R`000
Cash generated by operations 55 210 31 330
before working capital changes
(Increase) decrease in working (45 045) 18 010
capital
Cash generated by operations 10 165 49 340
Net financing costs (15 480) (5 674)
Dividends paid (87 904) -
Taxation paid (11 703) (10 157)
Cash flows from operating (104 922) 33 509
activities
Cash flows from investing 7 010 (2 240)
activities
Cash flows from financing 67 091 (5 608)
activities
Net (decrease) increase in cash (30 821) 25 661
and cash equivalents
Net cash and cash equivalents at 37 715 12 054
the beginning of the period
Net cash and cash equivalents at 6 894 37 715
the end of the period
Statement of changes in equity
Reviewed Audited
12 months 12 months
29 February 28 February
2008 2007
R`000 R`000
Share capital (Ordinary)
At beginning & end of year * *
Retained earnings
At beginning of year 65 411 48 325
Net profit for the year 26 559 17 086
Dividends paid (87 904) -
At end of year 4 066 65 411
*Share capital equals 5 364
shares of 1 cent each = R53,64
SEGMENTAL REPORTING - REVENUE AND GROSS PROFIT
Reviewed Audited
12 months 12 months
29 February 2008 28 February 2007
`000s `000s
REVENUE BY DIVISION
Foundry 226,586 181,697
Non Ferrous 167,122 88,929
Refractory 22,237 21,462
Speciality 171,146 323,999
Steel 198,452 -
Rotary Kiln 43,388 64,338
Textiles 6,238 4,746
KwaZulu-Natal 62,259 52,691
897,428 737,862
GROSS PROFIT BY
DIVISION
Foundry 24,085 16,016
Non Ferrous 11,391 7,286
Refractory 2,697 2,678
Speciality 14,714 19,791
Steel 14,196 -
Rotary Kiln 5,999 11,428
Textiles 2,040 1,101
KwaZulu-Natal 8,310 5,509
83,432 63,809
Commentary
Insimbi was listed on the Alternative Exchange("AltX") of the JSE Limited
("JSE")on 14 March 2008. Shareholders are reminded that the financial results
presented are for the unlisted group for the year ended 29 February 2008.
Insimbi has posted pleasing financial results for the year ended 29 February
2008, in its 38th year of operation and third month as a listed company on the
JSE.
Group review
Insimbi is principally a supplier of ferrous and non ferrous alloys, as well as
refractory products, integrating the full supply, logistics and technical
support function, primarily to the steel, cement and foundry industries. The
company operates on a divisional basis, each specialising in specific industries
and target markets. Most of the divisions are targeted at the infrastructure
sector. The divisions are managed by divisional Directors who have in excess of
100 years combined experience in their specific target markets.
Insimbi listed on AltX to primarily place it in a position to access capital
markets, with a view to facilitate future strategic acquisitions, which will
ensure long term sustainable growth. To this end a secondary aluminium smelting
facility was acquired and some of the debt raised to fund a successful
management buyout ("MBO"), which was concluded in April 2007, was settled.
The increase in revenue and operating profit by R159,6 million and R23,8million
respectively can be attributed to increased demand for Insimbi products and an
improvement in gross margins from 8,7% in 2007 to 9,3% in 2008. The enhanced
gross margins were achieved as a result of increased focus on strategic stock
holdings, a weaker currency; and strong operating cost control which saw net
administration and other operating expenses decreasing by 12,2% in 2008.
Finance costs increased from R5,8 million to R15,7 million as a result of
increased borrowings to fund the MBO. A summary of the interest bearing
borrowings is reflected below:
2008 2007
Interest bearing borrowings
Nedbank loans 88 512 27 090
Nedbank instalment leases 1 769 1 131
Nedbank overnight loan 15 200
Shareholders Loans 5 352 15 521
110 833 43 742
less current portion 26 323 19 321
84 510 24 421
The impact on EPS and HEPS as a result of the increased borrowings is R1 834,41
per share based on 5 364 shares in issue at year-end and 3,78 cents per share
based on 260 million shares issued on listing.
With the settlement of some of these borrowings, from the funds raised by the
listing, the remaining debt bears interest at a fixed rate of 12,05%, which in
the current interest rate climate is very positive for the company.
Cash generated by operations was R10,2 million which was down from R49,3 million
in the previous year mainly as a result of an increase in working capital
requirements due to higher stock holdings and a reduction in creditors balances.
Insimbi continues to generate positive cash flows which are a result of
increased profitability and strong working capital management as well as
increased sales volumes and commodity prices.
Prospects
It is anticipated that production will commence at the recently acquired
secondary aluminium smelter by the end of May 2008. The capacity of the plant
was increased from an expected 900 tons to approximately 1 300 tons of finished
aluminium alloy per month, due to the reconfiguration and streamlining of the
plant.
The environment in which Insimbi operates remains extremely favourable and the
continued focus in South Africa on the improvement and rehabilitation of local
infrastructure, the demand driven escalation in commodity prices and weaker
currency, should lead to increased organic growth in volumes, revenues and
margins for Insimbi in the new financial year.
Subsequent to the year end, trading conditions have continued to improve and so
further improvement is anticipated for the 2009 financial results.
Insimbi is committed to using its new capital raising platform to identify
strategic acquisitions and stakes in producers of ferrous and non-ferrous alloys
which are key to the operations. With a view to securing its long-term supply
"pipe-line" Insimbi has embarked upon an aggressive strategy to identify
suitable investment opportunities.
Pre-Listing Statement ("PLS")
Subsequent to the successful listing of Insimbi on the AltX in March 2008 and
during the course of the February 2008 year end audit, it was identified that
STC of R6 million, payable on the declaration of the preference dividend,
pursuant to the redemption of the preference shares, was inadvertently excluded
from the taxation charge in the Year Ending February 2008 Forecast (pages 6 and
44 of the PLS). This had an effect of reducing the EPS calculated on the 29
February 2008 forecast by 2,31 cents per share i.e. the forecast taxation charge
of R8,8 million should have been R14,8 million and EPS of 10,94 cents per share
should have been 8,61 cents per share. The STC, which was paid to SARS in May
2007 was however correctly disclosed in the Report of Consolidated Historical
Financial Information for the Insimbi Group for the Six Months Ended 31 August
2007 (note 11 page 96 of Annexure 4). Notwithstanding this disclosure, a pro-
forma EPS of 10,22 and HEPS of 8,61 cents per share, respectively was achieved.
It should be noted that the above has no impact on the Year Ending 28 February
2009 forecast.
Dividend policy
Going forward, Insimbi intends to adopt a competitive dividend policy, which
should reflect the growth, long-term earnings and cash flow of Insimbi, while
maintaining an appropriate dividend cover. The directors are of the opinion that
the dividend policy proposed in the PLS is achievable.
Basis of preparation of the reviewed results
The condensed financial statements comprise a consolidated balance sheet at 29
February 2008, a consolidated income statement, consolidated statement of
changes in equity and consolidated cash flow statement for the year ended 29
February 2008. The condensed financial statements have been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") and the presentation and disclosure
requirements of IAS 34, Interim Financial Reporting, JSE Listings Requirements
and South African Companies Act.
The condensed financial statements have been prepared on the historical cost
basis except for certain financial instruments measured at fair value. The
accounting policies adopted have been consistently applied.
Reviewed results
The auditors, BDO Spencer Steward (JHB) Inc have reviewed these results and
their unmodified review opinion is available for inspection at the company`s
registered office.
These results and an overview of Insimbi are available at www.insimbi-
alloys.co.za.
By order of the Board
DJ O Connor MD
Wadeville
26 May 2008
Registered office
359 Crocker Road, Wadeville Ext 4,
Germiston, 1422
(PO Box 14676, Wadeville, 1422)
Telephone: 011 902 6930
Directors
Directors at 29 February 2008
DJ O Connor (MD), PJ Schutte, CF Botha, F Botha
R Makkink, LT Tessendorf (alt), EP Liechti
Subsequent to year end, the following changes
have been made to the Board:
DJ O Connor appointed non-executive chairman
PJ Schutte appointed CEO
L Mashologu appointed as an independant
non-executive director
Company Secretary:
Roy Makkink
Transfer secretaries
Computershare Investor Services
(Proprietary) Limited
PO Box 61051, Marshalltown 2107
Telephone: 011 370 5000
Sponsor
PricewaterhouseCoopers
Corporate Finance (Proprietary) Limited
2 Eglin Road, Sunninghill, 2157
Private Bag X36, Sunninghill, 2157
Telephone: 011 797 4440
Website address
www.insimbi-alloys.co.za
Date: 26/05/2008 12:55:01 Produced by the JSE SENS Department.
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