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AET
AET
AET - Alert - Unaudited Condensed Financial Results for the Six Months Ended
31 December 2008
Alert Steel Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET & ISIN: ZAE000092847
("Alert" or "the company" or "the group")
Salient features
- Revenue up 50,2% to R526,5 million
- Headline earnings down 13,2% to R12,8 million
- Headline earnings per share down 16.4% to 5.1 cents
- Net asset value per share up 2.7% to 80.3 cents
- Acquisition of General Steel business
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2008
Condensed Group Income Statements
Unaudited Unaudited
December December
2008 2007
6 months 6 months
R`000 R`000
Revenue 526 482 350 591
Gross profit 125 759 81 025
Other income 3 803 3 281
Operating costs (100 752) (61 636)
Earnings before interest, 28 810 22 670
taxation, depreciation and
amortisation ("EBITDA")
Depreciation (3 246) (2 469)
Profit before interest and 25 564 20 201
taxation
Net finance costs (1) (6 778) 507
Profit before taxation 18 786 20 708
Taxation (6 016) (5 801)
Earnings attributable to 12 770 14 907
ordinary shareholders
Reconciliation of headline
earnings:
Profit attributable to ordinary 12 770 14 907
shareholders
Loss on disposal of non-current - (190)
assets
Headline earnings attributable 12 770 14 717
to ordinary shareholders
Weighted average number of 248 428 245 000
shares in issue 570 000
Fully diluted weighted average 256 028 252 600
number of shares in issue 570 000
Earnings per share (cents) 5.1 6.1
Headline earnings per share 5.1 6.1
(cents)
Fully diluted earnings per share 5.0 6.0
(cents)
Fully diluted headline earnings 5.0 5.8
per share (cents)
Note:
(1). The increase in total borrowings between the two interim reporting periods
resulted in an estimated decrease in earnings per share and headline
earnings per share of 2.1 cents.
Condensed Group Balance Sheets
Unaudited Audited
December June 2008
2008 R`000
R`000
ASSETS
Non-current assets 170 180 102 992
Property, plant and 113 336 51 716
equipment
Goodwill (3) 54 754 48 594
Other financial assets 978 709
Deferred taxation 1 112 1 973
Current assets 330 075 341 008
Inventories 195 777 194 499
Loans to joint ventures 7 139 9 857
Trade and other receivables 119 705 129 285
Cash and cash equivalents 7 454 7 367
Total assets 500 255 444 000
EQUITY AND LIABILITIES
Total shareholders` funds 199 443 194 302
Non-current liabilities 44 719 11 582
Other financial liabilities 43 920 11 582
Deferred taxation 799 -
Current liabilities 256 093 238 116
Loans from joint ventures 358 1 485
Other financial liabilities 9 837 24 278
Current tax payable 19 892 17 977
Trade and other payables 84 181 102 483
Provisions 855 1 737
Bank overdraft 140 970 90 156
Total equity and 500 255 444 000
liabilities
Number of shares in issue 246 714 246 714
(net of treasury and 285 285
transaction shares)
Number of shares including
share based payment 248 428 248 428
shares(1) 570 570
Fully diluted number of 256 028 256 028
shares in issue (2) 570 570
Net asset value per share 80.3 78.2
(cents)
Net tangible asset value 58.2 58.7
per share (cents)
Notes:
(1). Included in the number of shares are 1 714 285 unissued shares which will
be issued in terms of the Steel Giant (Pty) Limited ("Steel Giant")
transaction within seven days after the June 2009 results have been
determined.
(2). The 7 600 000 ordinary shares issued to the Alert Share Incentive Scheme
have been treated as "treasury shares".
(3) Provisional figures were used to determine goodwill acquired for the
business combinations. Fair value of assets will be confirmed during the 12
months preceding the business combinations.
Condensed Group Statements of Changes in Equity
Unaudited Unaudited
December December
2008 2007
6 months 6 months
R`000 R`000
Balance at beginning of period 194 302 138 194
Total earnings 12 770 14 907
Dividends declared (7 629) -
Balance at end of period 199 443 153 101
Condensed Group Cash Flow Statements
Unaudited Unaudited
December December
2008 2007
6 months 6 months
R`000 R`000
Cash flow from operating 8 981 (52 744)
activities
Cash flow from investing (72 553) (18 132)
activities
Cash flow from financing 12 845 3 063
activities
Net increase in cash and cash (50 727) (67 813)
equivalents
Cash and cash equivalents at (82 789) 21 097
beginning of period
Cash and cash equivalents at end (133 516) (46 716)
of period
Condensed Segmental Report
Unaudited Unaudited
December December
2008 2007
6 months 6 months
R`000 R`000
Income Statements
Revenue
Retail 489 414 326 232
Reinforcing manufacturing 37 068 24 359
526 482 350 591
Profit before interest and
taxation
Retail 23 735 18 752
Reinforcing manufacturing 1 829 1 449
25 564 20 201
Depreciation
Retail 3 217 2 457
Reinforcing manufacturing 29 12
3 246 2 469
Unaudited Audited
December June 2008
2008 R`000
R`000
Balance Sheets
Reportable segment assets
Retail 400 523 349 319
Reinforcing manufacturing 29 273 26 890
429 796 376 209
Reportable segment liabilities
Retail 132 151 127 980
Reinforcing manufacturing 6 642 12 100
138 793 140 080
Reconciliation of segmental
assets
Total assets 500 255 444 000
Goodwill (54 754) (48 594)
Deferred taxation (1 112) (1 972)
Loans receivable (7 139) (9 857)
Cash and cash equivalents (7 454) (7 368)
Segmental assets 429 796 376 209
Reconciliation of segmental
liabilities
Current liabilities 256 093 238 116
Bank overdrafts (140 970) (90 156)
Current taxation liabilities (19 892) (17 977)
Loans payable (358) (1 485)
Non-current liabilities 44 719 11 582
Deferred taxation liabilities (799) -
Segmental liabilities 138 793 140 080
OVERVIEW
The directors of Alert present the unaudited interim financial
results for the six months ended 31 December 2008 ("the interim
period"), which were satisfactory considering the circumstances
listed below. During the interim period the company
experienced the intense result of a 100% increase in steel
prices by Mittal SA, compared to the previous interim period.
This together with a severe shortage in steel supplies during
the first part of the interim period, forced the group to
increase its stockholding, from normal turnover of six times
per annum to three times per annum.
Furthermore, the severe global economic downturn during the
latter part of the interim period forced Mittal SA to decrease
steel prices. The effect of the global economic downturn on
emerging markets, coupled with the high interest rates, more
stringent requirements for credit, a dramatic increase in the
fuel price during a portion of the interim period and the
economic uncertainty caused a severe decrease in the
traditional DIY markets, as well as a sharp decline in domestic
building activities.
A new branch was opened in Wonderboom during the interim
period, with a retail area of 7 000 square meters. Retail
sales achieved from the Wonderboom branch were slower than
anticipated due to market conditions. The global financial
crisis has resulted in an overall decline in volumes sold of
approximately 15%, due to the extraordinary unstable markets,
which were destructive and the cause of many delayed projects.
FINANCIAL RESULTS
Revenue increased by 50,2% to R526,5 million (2007: R350,6
million) during the interim period, which was mainly driven by
the significant increases experienced in steel prices in the
first nine months of the 2008 calendar year, the inclusion of
the General Steel acquisition, which became unconditional on 6
August 2008 and the opening of the "Alert Build" Wonderboom
branch in November 2008. Gross profit increased by 55, 2% to
R125,8 million (2007: R81,0 million) and gross profit margins
increased to 23,9% (2007: 23.1%) mainly as a result of the
increase in steel prices and larger rebates.
Operating costs increased by 63,5% to R100,8 million (2007:
R61,6 million) as a result of the abovementioned acquisition
(R6,0 million), the opening of the new "Alert Build" Wonderboom
branch (R4,6 million), additional staff employed, abnormal
increase in the price of diesel and general inflationary
pressures experienced in South Africa. EBITDA increased by
27,1% in the interim period to R28,8 million (2007: R22,7
million) off the higher revenue base.
Headline earnings for the interim period decreased by 13,2% to
R12,8 million (2007: R14,7 million) mainly as a result of
higher finance charges. Headline earnings per share decreased
by 16.4% to 5.1 cents (2007: 6.1 cents) for the interim period.
PROSPECTS
The group will focus, during the second half of the financial
year, on reducing costs, collecting outstanding debtors and
rebalancing the stockholding.
The anticipated decrease in steel prices during the second half
of the financial year will have a negative impact on the group.
It is however anticipated that the reduction in interest rates
as well as the current activity experienced in infrastructure
developments will make a positive contribution to the business
during the second half of 2009.
With this in mind, the directors are investigating new
opportunities regarding product ranges, services, new sites and
the relocations of existing branches, where necessary, to take
advantage of the next upswing in the market.
SUBSEQUENT EVENTS
The Klerksdorp branch was relocated in March 2009 to a larger
and more superior located site.
The development of the new Distribution Centre and Head Office
in Pretoria is on schedule. Total development costs will be
approximately R45 million, of which half were incurred by 31
December 2008.
BUSINESS COMBINATIONS
Shareholders are referred to the announcement, dated 16 April
2008, relating to the acquisition of the business of General
Steel and the property owned by Sovereign Park Benrose (Pty)
Limited for a cash purchase consideration of R14.7 million.
The General Steel transaction became unconditional during
August 2008 when Competition Commission approval was obtained.
General Steel`s revenue and profit after tax, included in the
results presented above, were R25,6 million and R0,2 million,
respectively. Goodwill acquired on the acquisition was R6,2
million.
SHARE CAPITAL
No shares were issued during the period.
BASIS OF PREPARATION OF THE UNAUDITED RESULTS
Statement of compliance
The condensed unaudited interim financial statements comprise a
consolidated balance sheet at 31 December 2008, a consolidated
income statement, consolidated statement of changes in equity,
summarised consolidated cash flow statement and segmental
report for the six months ended 31 December 2008. The
condensed financial statements have been prepared in accordance
with the recognition and measurement criteria of International
Financial Reporting Standards and the presentation and
disclosure requirements of IAS 34, Interim Financial Reporting,
the JSE Listings Requirements and the South African Companies
Act. The accounting policies applied for the interim period are
consistent with those of the previous year with the exception
of the adoption of IFRS 7.
Basis of measurement
The financial statements have been prepared on the historic
cost basis except for certain financial instruments measured at
fair value.
DIVIDEND POLICY
A maiden dividend of 3,0 cents per share was declared and paid
during the period.
STATEMENT ON GOING CONCERN
The condensed unaudited group financial statements for the six months ended 31
December 2008 have been prepared on the going-concern basis since the directors
have every reason to believe that the company has adequate resources in place to
continue in operation for the foreseeable future.
On behalf of the Board
WF Schalekamp WW Mentz
Managing Director Financial Director
31 March 2009
CORPORATE INFORMATION
Non executive directors: E Dube (Chairman), OV Jevon
Executive directors: WF Schalekamp, WW Mentz
Registration number: 2003/005144/06
Registered address: 12 Gompou Street, East Lynne, 0186
Postal address: PO Box 29607, Sunnyside, 0132
Company secretary: M Pretorius
Telephone: (012) 800 0004
Facsimile: (012) 800 4661
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Designated Adviser: Vunani Corporate Finance
Date: 31/03/2009 12:37:01 Produced by the JSE SENS Department.
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