| Fri 29 Aug 2008, 10:24 | | ISB - Insimbi - Audited Results For The Year Ended 29 February 2008 and Notice |
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ISB
ISB
ISB - Insimbi - Audited Results For The Year Ended 29 February 2008 and Notice
Of Annual General Meeting
INSIMBI REFRACTORY AND ALLOY SUPPLIES LTD
(Incorporated in the Republic of South Africa)
(Registration No: 2002/029821/06)
Share code: ISB & ISIN code: ZAE000116828
("Insimbi" or "the group")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2008 AND NOTICE OF
ANNUAL GENERAL MEETING
The audited results for the year ended 29 February 2008 have been restated from
the reviewed results previously published, on 26 May 2008, due to reallocations
within certain balance sheet categories. However, the attributable earnings for
the period have not changed from the results previously published.
CONSOLIDATED INCOME STATEMENT
Audited Audited
12 months to 12 months to
29 February 28 February
2008 2007
R`000 R`000
Revenue 897 428 737 862
Cost of sales (813 996) (674 053)
_________ _________
Gross profit 83 432 63 809
Other operating income 4 395 1 549
Administration expenses (21 424) (29 570)
Other operating expenses (12 936) (6 117)
_________ _________
Operating profit 53 467 29 671
Interest received 190 158
Finance costs (15 670) (5 832)
_________ _________
Profit before share of associated 37 987 23 997
company`s profit
Share of associated company`s profit 1 449 993
Profit on disposal of associate company 5 469 -
_________ _________
Profit before taxation 44 905 24 990
Taxation (18 346) (7 904)
_________ _________
Profit for the year 26 559 17 086
_________ _________
Attributable to:
Equity holders of the parent 26 559 17 086
Minority interest - -
_________ _________
EARNINGS & HEADLINE EARNINGS PER SHARE
Audited Audited
12 months to 12 months to
Headline earnings for the group have 29 February 28 February
been computed as follows: 2008 2007
R`000 R`000
Profit attributable to ordinary 26 559 17 086
shareholders
Adjusted for profit on sale of
property, plant
and equipment (142) (6)
Adjusted for profit on disposal of
investment
in associate company (4 019) -
_________ _________
Headline earnings 22 398 17 080
_________ _________
Dividend per ordinary share (Rands) 7 374.72 -
Dividend per Class A Convertible or 12 971.83 -
Redeemable preference share (Rands)
Earnings per share (Rands) 4 951.34 3 185.31
Headline earnings per share (Rands) 4 175.62 3 184.18
Basic attributable earnings per share
are calculated by dividing the net
profit attributable to shareholders by
the number of shares in issue during
the year
The calculation of earnings per
ordinary share is based on a profit for
the group of R26 559 (2007 : R17 086)
The calculation of headline earnings
per ordinary share is based on a profit
of R22 398 (2007 : R17 080)
There are no instruments in issue or
other obligations that have a dilutive
effect on earnings
Number of shares on listing (000`s) 260 000 260 000
Pro forma basic and fully diluted:
Earnings per share (cents) 10,22 6,57
Headline earnings per share (cents) 8,61 6,57
CONSOLIDATED BALANCE SHEET
Audited Audited
As at 29 As at 28
February February
2008 2007
R`000 R`000
Assets
Non-Current Assets
Property, plant and equipment 10 897 9 433
Investment in subsidiary - -
Investment in associated company - 3 438
Goodwill 29 938 29 938
Deferred tax 717 896
_________ _________
41 552 43 705
_________ _________
Current Assets
Inventories 74 613 64 086
Trade and other receivables 105 227 130 747
Cash and cash equivalents 7 469 37 715
Other financial assets 2 781 -
Amount owing by group company 138 -
Loan to subsidiary company - -
_________ _________
190 228 232 548
_________ _________
Total Assets 231 780 276 253
_________ _________
Equity and Liabilities
Equity
Issued capital - -
Retained income 4 066 65 411
_________ _________
4 066 65 411
_________ _________
Non-Current Liabilities
Long-term loans - shareholders - 2 863
Long-term loans - others 69 310 7 558
Nedbank loan 15 200 14 000
_________ _________
84 510 24 421
_________ _________
Current Liabilities
Trade and other payables 105 795 163 052
Cash and Cash Equivalents 575 -
Loan from subsidiary company - -
Current portion of long - term loan 26 322 19 321
Taxation 10 512 4 048
_________ _________
143 204 186 421
_________ _________
Total Equity and Liabilities 231 780 276 253
_________ _________
CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
12 months to 12 months to
29 February 28 February
2008 2007
R`000 R`000
Cash flow from operating activities
Cash generated from operations 10 165 41 242
Net interest paid (15 480) (5 674)
Taxation paid (11 703) (10 157)
Dividends paid (87 904) -
_________ _________
Net cash from operating activities (104 922) 25 411
_________ _________
Cash flow from investing activities
Purchase of property, plant and (3 960) (2 329)
equipment
Proceeds from disposal of property, 752 89
plant and equipment
Proceeds from sale of net assets - -
Proceeds from the disposal of the 10 356 -
investment in associate
Movements in group company loans (138) -
Investment in subsidiary company - -
_________ _________
Net cash from investing activities 7 010 (2 240)
_________ _________
Cash flows from financing activities
Current portion of long term loan 7 002 8 098
Long-term loans - shareholders (2 863) (6 724)
Long-term loans - Nedbank and other 62 952 1 116
_________ _________
Net cash financing activities 67 091 2 490
_________ _________
Net increase in cash and cash (30 821) 25 661
equivalents
Cash and cash equivalents at the 37 715 12 054
beginning of the year _________ _________
Total cash at the end of the year 6 894 37 715
_________ _________
STATEMENT OF CHANGES IN EQUITY
Audited Audited
12 months to 12 months to
29 February 28 February
2008 2007
R`000 R`000
Share capital (Ordinary) * - -
_________ _________
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 is 5 364 ordinary shares of one cent each which amounts to R
53.64
SEGMENTAL REPORTING
A business segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments.
A geographic segment is engaged in providing products or services within a
particular economic environment that is subject to risk and rewards that are
different from those of segments operating in other economic environments.
The group`s primary format for segment reporting is based on business segments.
This basis of the segment reporting is representative of the internal structure
used for management reporting.
Set out below is the revenue and gross margin by division.
Audited Audited
12 months to 12 months to
29 February 28 February
2008 2007
R`000 R`000
Revenue by division
Foundry 226 586 181 697
Non Ferrous 167 122 88 929
Refractory 22 237 21 462
Speciality 171 146 -
Steel 198 452 323 999
Rotary Kiln 43 388 64 338
Textiles 6 238 4 746
KZN 62 259 52 691
_________ _________
897 428 737 862
_________ _________
Gross margin by division
Foundry 24 085 16 016
Non Ferrous 11 391 7 286
Refractory 2 697 2 678
Speciality 14 714 -
Steel 14 196 19 791
Rotary Kiln 5 999 11 428
Textiles 2 040 1 101
KZN 8 310 5 509
_________ _________
83 432 63 809
_________ _________
The Speciality division was split into two divisions during the year -
Speciality and Steel. Other operating income, administration expenses and other
operating expenses are not allocated to divisions.
COMMENTARY
The directors of Insimbi are pleased to announce the audited results for the
year ended 29 February 2008. It is important to note that these audited figures
are in respect of the group prior to it`s listing on the JSE Limited`s
Alternative Exchange ("AltX") on 14 March 2008. These results show that Insimbi
is a significant player in the ferrous, non ferrous and refractory supply
industry.
1. Basis of Preparation
The audited abridged results have been presented in accordance with IAS 34 -
Interim Financial Reporting. The accounting policies adopted for purposes of
this report comply, and have been consistently applied in all material respects,
with International Financial Reporting Standards ("IFRS"). The same accounting
policies and methods of computation have been followed as compared to the prior
year ended 28 February 2007. The results have been audited by BDO Spencer
Steward (JHB), whose unqualified audit report is available for inspection at the
company`s registered office.
2. Review of activities
With effect from 1 March 2007 the company became an investment holding company.
As a result of a second management buy out the company known as Insimbi Alloy
Supplies (Proprietary) Limited disposed of the majority of it`s net assets to
Copper Moon Trading 419 (Proprietary) Limited with effect from 1 March 2007.
Copper Moon Trading 419 (Proprietary) Limited changed it`s name to Insimbi Alloy
Supplies (Proprietary) Limited and at the same time Insimbi Alloy Supplies
(Proprietary) Limited changed it`s name to Insimbi Refractory and Alloy Supplies
(Proprietary) Limited. Insimbi Refractory and Alloy Supplies (Proprietary)
Limited became the holding company of Insimbi Alloy Supplies (Proprietary)
Limited and Insimbi Properties (Proprietary) Limited. Both subsidiaries are
owned one hundred percent by Insimbi Refractory and Alloy Supplies (Proprietary)
Limited.
The shares of Insimbi Refractory and Alloy Supplies (Proprietary) Limited are
held by Insimbi Holdings (Proprietary) Limited formerly known as Central Plaza
Investments 66 (Proprietary) Limited. The shares in Insimbi Holdings
(Proprietary) Limited are owned at year end by the majority of the directors.
Insimbi Refractory and Alloy Supplies (Proprietary) Limited became the holding
company of both Insimbi Alloy Supplies (Proprietary) Limited and Insimbi Alloy
Properties (Proprietary) Limited. Both subsidiaries are wholly owned by
Insimbi Refractory and Alloy Supplies (Proprietary) Limited.
The main operating company of the group is Insimbi Alloy Supplies (Proprietary)
Limited, which has offices in Johannesburg, Durban and Zambia.
Net profit of the group was R26,558,000 (2007: R17,086,000), after taxation.
During the year under review the following companies were incorporated in which
Insimbi Alloy Supplies (Proprietary) Limited, a subsidiary company, purchased
ordinary shares -
Sugar Creek Trading 199 (Proprietary) Limited (percentage of shares held 80%)
Insimbi Refractory and Alloy Supplies Limited (percentage of shares held 99%) -
registered in Zambia.
After year end Sugar Creek Trading 199 (Proprietary) Limited changed it`s name
to Insimbi Aluminium Alloys (Proprietary) Limited
3. Financial Review
The increase in revenue was as a result of increased volumes, product lines and
commodity prices world wide. Margins were slightly improved at 9.2% (2007:8.6%)
and operating costs showed a significant reduction due to excellent cost control
and exemplary credit control practices which resulted in an over provision of
doubtful debts being written back.
Corporate tax charge was R18.3 million for the year (2007: R7.9 million),
significantly higher than the previous year`s charge due to higher profits and a
once off Secondary Tax on Companies (STC) charge of R6 million on the preference
dividend declared to redeem the preference shares in issue as part of the MBO
consideration.
Cash generated from operations was R10.2 million which is down when compared
with the R41.2 million in 2007. As a result of the financial year end falling on
a Friday, debtor`s receipts only flowed in on the Monday. The honouring of our
creditors took place on the Friday.
Our working capital cycle has increased due to the increased growth in the
business but we still operated at a net working capital cycle of between 15 to
20 days during the year under review.
From a balance sheet perspective, the dividends totaling R87.9 million which
were paid out of current profits and reserves to previous institutional
shareholders to facilitate the MBO, provides a "skewed view" of the strength of
our balance sheet.
4. Operational Review
The focus by our government on the upgrade of South Africa`s infrastructure and
the resultant boom in construction across the country has buoyed the steel,
cement and foundry industries to new heights. This has had a tremendously
positive impact on our business as volumes have increased accordingly and this,
coupled with an increase in commodity prices and diversified product lines, has
boosted revenue and profits and far exceeded the expectations of Insimbi.
The growth in the business has necessitated that we focus on our skills base to
ensure that we continue to supply a reliable and reputable service to our
customer base and as a result, we have seen our number of skilled employees
increase from 80 to 105 from 2007 to 2008. Our commitment to uphold these high
standards is tantamount and remains a critical ingredient to our success.
5. Segment Analysis
All divisions performed well during the period under review and are dealt with
below:
Foundry Division had revenues of R 226.6 million, 24.7% up on the R 181.7
million in the previous year. This was due to the fact that the weaker currency
and increased focus on infrastructure and mining buoyed our local customer base
as well as the fact that this division introduced some new product lines to its
range. Margins were also higher than in the previous year and it contributed R
24.1 million gross margin, making it the single biggest contributor.
The Non Ferrous division showed significant growth in revenue and profitability
due to large increases in the price of nickel and copper which traded for a
portion of the year at all times highs.
They generated sales of R 167.1 million, 87.9% up on last year`s R 88.9 million
revenue while gross profit was R 11.4 million, 56.3% up on the previous year.
The Speciality and Steel division was split into two separate divisions in June
2007 and so for comparative purposes, are dealt with together for the last time.
They contributed a combined revenue of R 369.6 million compared to R 324.0
million in the previous year, an increase of 14.1%. These divisions also
benefited from a weaker currency and the infrastructure boom. They contributed a
combined gross profit of R 28.9 million, 46.1% up on the previous year`s R 19.8
million and this was due to focus on higher margin products. As mentioned above,
they were split into two distinct divisions during the course of the year and
will in future, be reported on as separate divisions.
The Rotary division did not fare as well as it did in the previous year and
revenues were 32.6% down on last year at R43.4 million. This was largely due to
the cyclical nature of this division and many of the large cement producers had
their major shutdowns and re-lines in the previous financial year.
Margins were also lower due to the weaker R:Euro exchange rate which put them
under pressure and it finished the year with a gross profit of R 6.0 million,
47.5% down on last year`s R 11.4 million.
The Refractory division also fared poorly in comparison to other divisions; this
was mainly as a result of the ever worsening political and economic climate in
Zimbabwe where most of it`s client base is located as well as a weaker rand
against the Euro. The division achieved revenues of R 22.2 million, marginally
up (3.6%) on the R21.5 million achieved in the previous financial year. Profits
were less than 1% up on last year at R2.7million.
The KwaZulu-Natal division impressed with revenue of R 62.2 million, 18.2% up on
the previous year`s revenues of R 52.7 million. Margins showed marvelous growth
and its gross profit was 50.8% up on the previous year at R8.3 million. This
division has capitalized on it`s presence and reputation in the local KZN
foundry and aluminium industries as well as successfully maintaining a strong
presence in Mozambique.
The textile division also showed strong organic growth and posted sales of R 6.2
million, 31.4% up on the previous year. Margins were good and it made a gross
profit of R 2.0 million, 85.3% up on the previous year`s R1.1 million and it has
developed a reputation for high quality fabricated industrial heat resistant
textiles. A decision was made to sell this division to the divisional staff
effective 1 March 2008 as part of our commitment to broad based black
empowerment and they now own 51% of the company while Insimbi Alloy Supplies
(Proprietary) Limited retains a 49% stake. The new company is called Insimbi
Thermal Insulation (Proprietary) Limited and it continues to operate from our
Wadeville premises with the full support of Insimbi management and
administrative team.
6. Market and Prospects
Despite the difficult economic conditions at the moment, we remain very positive
for the future and if we look at the downstream project pipeline in the
infrastructure sector, we believe that we will prosper despite this. It is
public knowledge that the proposed spend on projects in South Africa including
the upgrade of Eskom, national roads, Gautrain, dams, harbours, mining sector
and airports, is between R 600 billion and R 1 000 billion over the next four to
six years and we are well placed to benefit from this.
7. Special resolutions
The following special resolutions were passed during the year ended 29 February
2008:
* Change of name from Insimbi Alloy Supplies (Proprietary) Limited to Insimbi
Refractory and Alloy Supplies (Proprietary) Limited (dated 2 March 2007).
* Amendment to Memorandum of Association (dated 11 April 2007)
* Change of name from Copper Moon 419 (Proprietary) Limited to Insimbi Alloy
Supplies (Proprietary) Limited (dated 2 March 2007).
8. Post balance sheet events
The company was converted from a proprietary limited company to a limited
company in March 2008 and listed on the JSE Limited Alternative Exchange
("AltX") on 14 March 2008.
The textile division of Insimbi Alloy Supplies (Proprietary) Limited, a
subsidiary, was disposed of to Nungu Trading 109 (Proprietary) Limited with
effect from 1 March 2008.
Sugar Creek Trading 199 (Proprietary) Limited, a subsidiary of Insimbi Alloy
Supplies (Proprietary) Limited, purchased plant and machinery from Future Alloys
(Proprietary) Limited during March 2008 for an amount of R17,000,000.
9. Directors
The directors of the company during the year and as at the date of this report
are as follows:
Nationality Date of
appointment
D J O`Connor (Managing Director) South African 11/6/2004
R D Makkink South African 17/6/2004
P J Schutte South African 11/6/2004
E P Liechti South African 11/6/2004
C F Botha South African 11/6/2004
F Botha South African 11/6/2004
L Tessendorf (Alternate to C F Botha) South African 27/7/2005
10. Authorised and issued capital
There were no changes in the authorised share capital during the year under
review. The issued share capital for Class A convertible or redeemable
preference shares were redeemed during the year. There was no change to the
ordinary shares in issue during the year under review.
11. Dividends
A total dividend of R87,904,000 (2007: Nil) was declared on 30 March 2007 to the
shareholders of the company.
A dividend of R48,346,000 was declared payable to the holders of the Class A
convertible or redeemable preference shares and a dividend of R39,558,000 was
declared payable to the holders of the ordinary shares to facilitate group
restructuring.
12. Litigation
There are no legal or arbitration proceedings, including any proceedings that
are pending or threatened, or of which Insimbi or any of it`s subsidiaries is
aware and that may have or have had, in the 12-month period preceding the date
of issue of this annual report, a material effect on the financial position of
Insimbi or any of it`s subsidiaries.
13. Notice of Annual General Meeting
Notice is hereby given that the annual general meeting of Insimbi Refractory and
Alloy Supplies Limited will be held at 359 Crocker Road, Wadeville Ext 4,
Germiston on Tuesday 23 September 2008 at 12:00, to transact the business as
stated in the notice of annual general meeting included in the Annual Report
which has been posted to shareholders today.
By order of the Board
Pieter Jacobus Schutte
Chief Executive Officer
29 August 2008.
Registered office:
Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary:
Roy Makkink
Directors:
F Botha, CF Botha, EP Liechti, PJ Schutte, LG Tessendorf, RD Makkink, DJ O
Connor*, L Mashologu*
(* non executive)
Designated Advisor:
PricewaterhouseCoopers Corporate Finance (Proprietary) Limited
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
Date: 29/08/2008 10:24:01 Produced by the JSE SENS Department.
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