| Mon 29 Sep 2008, 9:00 | | ISB - Insimbi - Unaudited Results For The six months ended 31 August 2008 and |
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ISB
ISB
ISB - Insimbi - Unaudited Results For The six months ended 31 August 2008 and
dividend declaration
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 company")
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2008 AND DIVIDEND
DECLARATION
- Revenue increased by 16.64%
- Gross Profit increased by 122.83%
- Operating Profit increased by 177.01%
- Profit before Taxation increased by 273.09%
- EPS based on proforma 260 million shares increased by 904.00%
- HEPS increased by 910.07%
- Maiden Dividend of 4c per share
CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31 AUGUST 2008
Audited
12 months
Unaudited Reviewed to
6 months to 6 months 29
31 August to February
2008 31 2008
R`000 August R`000
2007
R`000
Revenue 584 110 500 792 897 428
Cost of sales (498 964) (462 581) (813 996)
_________ _________ _________
Gross profit 85 146 38 211 83 432
Other operating income 595 785 4 395
Administration expenses (21 882) (14 324) (21 424)
Other operating expenses (5 002) (3 425) (12 936)
_________ _________ _________
Operating profit 58 857 21 247 53 467
Interest received - - 190
Finance costs (3 962) (7 002) (15 670)
_________ _________ _________
Profit before share of 54 895 14 245 37 987
associated company`s profit
Share of associated (175) 638 1 449
company`s profit
Minority share of subsidiary 807
Profit on disposal of - - 5 469
associate company _________ _________ _________
Profit before taxation 55 527 14 883 44 905
Taxation (16 379) (10 972) (18 346)
_________ _________ _________
Profit for the year 39 148 3 911 26 559
_________ _________ _________
Attributable to:
Equity holders of the parent 39 148 3 911 26 559
Minority interest - - -
_________ _________ _________
Unaudited Reviewed Audited
6 months to 6 months to 12 months to
Headline earnings for the 31 August 31 August 29 February
group have been computed as 2008 2007 2008
follows: R`000 R`000 R`000
Profit attributable to 39 148 3 911 26 559
ordinary shareholders
Adjusted for profit on sale
of property, plant and (21) (47) (142)
equipment
Profit on Disposal of Textile
Division
Profit on Disposal of
Investment in AMETSA (-) (4 019)
_________ _________ _________
Headline earnings 39 127 3 864 22 398
_________ _________ _________
Number of shares on listing 260 000 5 364* 260 000
(000`s)
Pro forma basic and fully
diluted:
Earnings per share (cents) 15,06 72 912,00 10,22
Headline earnings per share 15,05 72 035.79 8,61
(cents)
5 364 total ordinary shares of 1 cents each
CONSOLIDATED BALANCE SHEET
Unaudited Reviewed Audited
As at 31 As at 31 As at 29
August August February
2008 2007 2008
R`000 R`000 R`000
Assets
Non-Current Assets
Property, plant and equipment 18 862 10 445 10 897
4 076
Goodwill 41 438 29 938 29 938
Deferred tax 717 832 717
_________ _________ _________
61 017 45 291 41 552
_________ _________ _________
Current Assets
Inventories 95 026 71 985 74 613
Trade and other receivables 188 178 113 637 105 227
Cash and cash equivalents 26 767 32 935 7 469
Other financial assets 1 990 - 2 781
Amount owing by group company 13 970 31 138
_________ _________ _________
325 931 218 588 190 228
_________ _________ _________
Total Assets 386 948 263 879 231 780
_________ _________ _________
Equity and Liabilities
Equity
Issued capital 45 956 - -
Retained income 43 214 (18 582) 4 066
_________ _________ _________
89 170 (18 582) 4 066
_________ _________ _________
Non-Current Liabilities
Long-term loans - others 56 036 98 257 69 310
Nedbank loan 18 000 18 000 15 200
_________ _________ _________
74 036 116 257 84 510
_________ _________ _________
Current Liabilities
Trade and other payables 202 465 144 380 105 795
Cash and Cash Equivalents - 3 876 575
Provisions - 2 541 -
Current portion of long - term 3 777 11 232 26 322
loan
Taxation 17 500 4 175 10 512
_________ _________ _________
223 742 166 204 143 204
_________ _________ _________
Total Equity and Liabilities 386 948 263 879 231 780
_________ _________ _________
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Reviewed Audited
6 months to 6 months to 12 months to
30 August 30 August 29 February
2008 2007 2008
R`000 R`000 R`000
Cash flow from operating
activities
Cash generated from 51 772 7 104 10 165
operations
Net interest paid (5 540) (7 002) (15 480)
Taxation paid (9 391) (10 781) (11 703)
Dividends paid (-) (-) (87 904)
_________ _________ _________
Net cash from operating 36 841 (10 679) (104 922)
activities _________ _________ _________
Cash flow from investing
activities
Purchase of property, plant (17 557) (2 447) (3 960)
and equipment
Proceeds from disposal of 678 538 752
property, plant and equipment
Dividends Paid - (87 904) -
Proceeds from the disposal of - - 10 356
the investment in associate
Movements in group company (13 025) - (138)
loans
Increase in Share Capital 45 956 - -
_________ _________ _________
Net cash from investing 16 052 (89 813) 7 010
activities _________ _________ _________
Cash flows from financing
activities
Current portion of long term (-) (-) 7 002
loan
Long-term loans - (-) (2 863) (2 863)
shareholders
Long-term loans - Nedbank and (33 020) 94 699 62 952
other _________ _________ _________
Net cash financing activities (33 020) (91 836) 67 091
_________ _________ _________
Net increase/decrease) in 19 873 (8 656) (30 821)
cash and cash equivalents
Cash and cash equivalents at 6 894 37 715 37 715
the beginning of the year _________ _________ _________
Total cash at the end of the 26 767 29 059 6 894
year _________ _________ _________
STATEMENT OF CHANGES IN EQUITY
Unaudited Reviewed Audited
6 months 6 months to 12 months
to 30 August to
30 2007 29
August R`000 February
2008 2008
R`000 R`000
Share capital (Ordinary) 45 956 - -
_________ _________ _________
Retained earnings
At beginning of year 4 066 65 411 65 411
Net profit for the year 39 148 3 911 26 559
Dividends paid (-) (87 904) (87 904)
_________ _________ _________
At end of year 43 214 (18 582) 4 066
_________ _________ _________
Condensed segmental report
Set out below is the revenue and gross margin by division.
Audited
12 months
Unaudited Reviewed to
6 months 6 months 29
to to February
31 31 2008
August August R`000
2008 2007
R`000 R`000
Revenue by division
Foundry 146 712 118 023 226 586
Non Ferrous 84 163 112 198 167 122
Refractory 12 319 9 592 22 237
Speciality 36 434 145 772 171 146
Steel 201 433 58 318 198 452
Rotary Kiln 54 051 22 158 43 388
Textiles 3 644 2 871 6 238
KZN 31 574 31 860 62 259
Aluminium 13 780 - -
_________ _________ _________
584 110 500 792 897 428
_________ _________ _________
Gross margin by division
Foundry 25 446 10 093 24 085
Non Ferrous 9 067 5 606 11 391
Refractory 1 285 1 215 2 697
Speciality 8 520 10 758 14 714
Steel 24 862 3 534 14 196
Rotary Kiln 7 692 3 000 5 999
Textiles (55) 506 2 040
KZN 7 333 3 499 8 310
Aluminium 996 - -
_________ _________ _________
85 146 38 211 83 432
_________ _________ _________
Income tax charge
Interim period income tax charge is accrued based on the estimated average
annual effective income tax rate of 28 per cent (6 months ended 31 August
2007: 29 per cent)
Earnings and Headline Earnings Per Share
If Insimbi had been listed during the prior periods above, the earnings and
headline earnings would be calculated as follows:
Number of shares on listing 260 000 260 000 260 000
(000`s)
Pro forma basic and fully diluted:
Earnings per share (cents) 15,06 1,50 10,22
Headline earnings per share 15,05 1,49 8,61
(cents)
Commentary
Overview
During the 6 months since listing to 31 August 2008, Insimbi has shown solid
performance in all areas of the business. Growth was achieved despite
difficult economic conditions locally and globally and has been mainly
attributed to:
- continued focus and growth of the infrastructure sector
- focus on increasing the company`s margins across the board
- a currency which continues to trade above the R7.00 : US$1.00 mark
- continued efforts to introduce new and innovative product lines
- sustainably higher prices for ferrous and non ferrous alloys globally
due to higher demand mainly in India and China
Financial Performance
Revenue increased on the comparative interim period by 16.64% to R584.1
million. This exceptional performance was achieved despite the unfortunate
production problems experienced by two of our major suppliers of pig iron and
Ferro Manganese due to explosions at their production facilities earlier this
year. These plants are expected to come back on line by the end of the
calendar year.
Gross margins have almost doubled when compared to the comparative 2007
interim period. A consolidated margin of 14.58% was achieved vs 7.63% for the
same period last year. This is an increase in gross profit of R46.9 million
(122.8%) to R85.1 million for the first half of the financial year. The
increase in gross margins occurred predominantly in the steel and foundry
divisions. The steel division reported a gross margin of 12.34% compared to
6.06% in the prior year. This was as a result of very good margins achieved
on some strategic stocks which were purchased prior to major price hikes in
2008 and the introduction of new higher margin product lines. The foundry
division reported an increase in gross margin of R 15.4m, an increase of 152%
over that of the prior year and was the largest contributor to the group
gross margin during the period. This was also as a result of higher margins
on stocks across the board achieved due to sales of these stocks at higher
margins. The Refractory division was the only division that showed a marginal
decline in the gross margin compared to that of the prior year. This was due
to weaker Rand against the Euro and increased competition from local
producers
The Steel and Speciality division were split into 2 separate divisions in
June 2007 and so the comparatives do not accurately reflect the respective
changes in these divisions. The combined results show an increase in gross
profit of R19.1 million with the combined margin increasing from 7.01% in
2007 to 14.03 % in 2008.
Consolidated operating and administration costs have shown a large increase
of R9.1 million compared to the corresponding 2007 interim period. A large
portion of this increase is attributable to the costs associated with the
newly acquired aluminum plant. Occupancy, depreciation and staff costs
attributable to this plant accounted for approximately R3.5 million of the
increase. Other notable amounts include a conservative increase in the
provision for doubtful debts of R1.3 million and R 1.2m relating to
professional fees incurred as a result of the listing.
Operating profit increased by 177.01% over the 2007 interim period to R58.9
million and profit after tax increased by 901.0% to R39.1 million, an
increase of R35.2 million on the same period last year. It is worth noting
that this is an increase of R12.9 million over that achieved in the full
financial year ended 29 February 2008.
Insimbi has achieved earnings and headline earnings per share of 15.06 cents
and 15.05 cents per share respectively. This is an increase of 904% and
910.1% respectively on the 2007 interim earnings. As stated in our trading
update on 16 July 2008, our interim earnings are 3.6% higher than our
forecast of 14.54 cents per share as presented in our prelisting statement
prior to our March IPO. We emphasise that the trading update was based on the
pro forma`s and not the actuals that are reflected in this report.
A re-stated forecast for the year ended 28 February 2009, will be published
today.
Our working capital cycle has averaged a net 22 days during the 6 months to
31 August 2008 and is slightly higher than the targeted 20 days due to
increased stocks and debtors. These have increased primarily due to the
increased revenues experienced and the increased prices of our basic
products. Cashflow remains strong, however, and Insimbi generated cash from
operating activities of R36.8 million compared to a net outflow at 31 August
2007 of R10.7 million ie an improvement as a result of effective working
capital management and profitability on interim period last year of R47.5
million.
Insimbi has repaid a total of R49.7 million of interest bearing debt since 31
August 2007 of which R29.5 million was paid out of listing proceeds and R20.2
million has been repaid out of operating cashflows.
AltX Listing and Capital Expenditure
Insimbi listed on the Alternatvie Exchange on 14 March 2008. R46.5 million
was raised during a private placement. Of this, R 17.0 million was spent on
acquiring a new aluminum plant and the balance went to company settle debts.
Board of directors
Mr Roy Makkink has resigned as director and company secretary of Insimbi
Refractory and Alloy Supplies Ltd and will be taking up another post within
the group effective 10 September 2008. On this date the company appointed
Rene de Villiers as its company secretary.
Operational Review
As mentioned above, the business has prospered in a difficult market and
global economy despite some setbacks experienced by 2 of our suppliers. The
aluminium plant(Insimbi Aluminium Alloys (Pty) Ltd) has experienced some
teething problems but we are confident that these have now been effectively
addressed and we look forward to increased production during the second half
of the financial year. The new industrial heat resistant textile company
(Insimbi Thermal Insulation (Pty) Ltd), has performed better than
expectations and we look forward to exciting growth in the second half of the
financial year. This growth will primarily be driven from new contracts with
new and existing customers and the focus by Eskom on upgrading it`s
facilities country-wide.
Insimbi Thermal Insulation is currently a level 4 contributor in terms of the
revised BBEEE codes and this places the company in a favourable position to
secure supply contracts into various upgrades currently being undertaken at
Eskom.
The operational divisions with the exception of the Refractory division have
all outperformed their gross profit from the same period last year. The
refractory division continues to face challenges as a result of its main
customers being located in Zimbabwe. Recent developments in the country are
encouraging and Insimbi remains hopeful that Zimbabwe will return to
prosperity in the short to medium term.
Post balance sheet event
No material fact or circumstance existed post balance sheet date that affects
the results being reported.
Prospects
Prospects for Insimbi remain excellent and recently economists have predicted
that the infrastructure "boom" will continue for at least 25 years with
others predicting that the infrastructure sector will actually accelerate.
Despite some softening of commodity prices generally, the prices of many
ferrous and non ferrous alloys are still trading near their highs of earlier
this year and the opinion of many of the large resource producers is that
these prices are sustainable for the foreseeable future particularly with the
growth in many of the emerging market countries eg China and India.
The aluminum plant is looking very positive despite some unexpected delays in
the commissioning thereof. With its capacity increased to 1,300 tons of
output per month, we are confident that this plant will perform beyond our
initial expectations and forecasts.
Insimbi continues to evaluate strategic acquisitions in various associated
industries which will bring synergies and added value to the group and we are
confident that suitable target(s) will be identified in due course.
Basis of preparation of the unaudited results
The interim consolidated financial results consist of an income statement,
balance sheet, statement of changes in equity, condensed cash flow and
condensed segment report for the period ended 31 August 2008. The interim
financial statements have been prepared in accordance with the Group`s
accounting policies what are consistent with the previous period. These
comply with accounting policies consistent with International Financial
Reporting Standards and in accordance with International Accounting Standard
(IAS) 34 Interim Financial Reporting.
Dividends
Notice is hereby given that Insimbi has declared an maiden interim dividend
(dividend declaration 1) for the six months ended 31 August 2008 of 4 cents
per share.
The salient dates applicable to the interim dividend are as follows:
Last day to trade "CUM" dividend 17 October 2008
First day to trade "EX" dividend 20 October 2008
Record date 24 October 2008
Payment date 27 October 2008
No share certificates will be dematerialised or rematerialised between
Monday, 20 October 2008 and Friday, 24 October 2008, both days inclusive.
DJ O Connor P Schutte
Chairman Chief Executive Officer
29 September 2008
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: Rene de Villiers
Directors: F Botha, CF Botha, EP Liechti, PJ Schutte, LG Tessendorf, DJ O
Connor*, L Mashologu*
(* non executive)
Designated Advisor: PricewaterhouseCoopers Corporate Finance (Proprietary)
Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
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