| Wed 27 May 2009, 13:08 | | ISB - Insimbi - Provisional Financial Results for the year ended 28 February |
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ISB
ISB
ISB - Insimbi - Provisional Financial Results for the year ended 28 February
2009
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 group")
PROVISIONAL FINANCIAL RESULTS
for the year ended 28 February 2009
HIGHLIGHTS
* Revenue up 8% to R969 million
* Operating profit up 62% to R87 million
* Profit before tax up 69% to R76 million
* EPS up 102% to 20,67 cents per share
* HEPS up 143% to 20,94 cents per share
* Net cash up 391% to R34 million
* NAV per share up 2,161% to 35,4 cents per share
* Proposed final dividend of 5 cents per share
Condensed Consolidated Income Statement
Reviewed Audited
2009 2008
R`000 R`000
Revenue 969 041 897 428
Gross profit 140 194 83 432
Other operating income 465 4 395
Other operating expenses (25 239) (21 424)
Administration expenses (28 484) (12 936)
Operating profit 86 936 53 467
Investment revenue 525 190
Finance costs (11 275) (15 670)
Share of associated company`s (225) 1 449
(loss)/profit
Profit on disposal of associate company - 5 469
Profit before taxation 75 961 44 905
Taxation (22 215) (18 346)
Attributable to equity shareholders 53 746 26 559
Reconciliation of headline earnings
Impairment of property, plant and 826 -
equipment
Profit on sale of property, plant and (135) (142)
equipment
Profit on disposal of investment in - (4 019)
associate company
Headline earnings 54 437 22 398
Number of shares (000`s) 260 000 260 000*
Basic and fully diluted:
Earnings per share (cents) 20,67 10,22
Headline earnings per share (cents) 20,94 8,61
* Pro forma EPS and HEPS based on shares in issue on listing.
Condensed Consolidated Balance Sheet
Reviewed Audited
2009 2008
R`000 R`000
Assets
Non-current assets 62 384 41 552
Current assets 175 220 182 759
Cash and cash equivalents 42 196 7 469
Total assets 279 800 231 780
Equity and Liabilities
Share capital and reserves 91 932 4 066
Non-current liabilities 57 238 84 510
Current liabilities 122 282 142 629
Cash and cash equivalents 8 348 575
Total equity and liabilities 279 800 231 780
Condensed Consolidated Cash Flow Statement
Reviewed Audited
2009 2008
R`000 R`000
Cash generated by operations before 91 118 55 209
working capital changes
Decrease/(increase) in working capital 21 243 (45 044)
Cash generated from operations 112 361 10 165
Investment revenue 525 190
Finance costs (11 275) (15 670)
Tax paid (23 799) (11 703)
Dividends paid (10 400) (87 904)
Net cash from operating activities 67 412 (104 922)
Net cash from investing activities (31 915) 7 010
Net cash from financing activities (8 543) 67 091
Total cash movement for the year 26 954 (30 821)
Cash at the beginning of the year 6 894 37 715
Total cash at end of the year 33 848 6 894
Statement of Changes in Equity
Foreign
currency
trans-
Share* Share lation
capital premium reserve
R`000 R`000 R`000
Group
Balance at 1 March 2007 - - -
Changes in equity
Attributable profit for the year - - -
Dividends - - -
Total changes - - -
Balance at 1 March 2008 - - -
Changes in equity
Currency translation differences - - 78
recognised directly in equity
Attributable profit for the year - - -
Issue of shares - 44 442 -
Dividends - - -
Total changes - 44 442 78
Balance at 28 February 2009 - 44 442 78
Accumu-
lated
profit/ Total
(loss) equity
R`000 R`000
Group
Balance at 1 March 2007 65 411 65 411
Changes in equity
Attributable profit for the year 26 559 26 559
Dividends (87 904) (87 904)
Total changes (61 345) (61 345)
Balance at 1 March 2008 4 066 4 066
Changes in equity
Currency translation differences - 78
recognised directly in equity
Attributable profit for the year 53 746 53 746
Issue of shares - 44 442
Dividends (10 400) (10 400)
Total changes 43 346 87 866
Balance at 28 February 2009 47 412 91 932
* Share capital equals 260 000 000 of 0,000025 cents each = R65,00.
Segmental reporting
Revenue by division
Reviewed Audited
2009 2008
R`000` R`000`
Foundry 249 914 226 586
Non Ferrous 120 846 167 122
Refractory 21 971 22 237
Specialty 70 158 171 146
Steel 314 539 198 452
Rotary Kuln 96 912 43 388
Textiles 4 285 6 238
KZN 70 413 62 259
Other 20 003 -
Total 969 041 897 428
Gross margin by division
Reviewed Audited
2009 2008
R`000` R`000`
Foundry 41 875 24 085
Non Ferrous 12 703 11 391
Refractory 3 501 2 697
Specialty 16 162 14 714
Steel 36 796 14 196
Rotary Kuln 11 604 5 999
Textiles (37) 2 040
KZN 13 845 8 310
Other 3 745 -
Total 140 194 83 432
Commentary
The financial year ended 28 February 2009 marked Insimbi`s maiden year of
trading as a listed company. Despite extremely challenging global economic
conditions, the group posted exceptional results for the period, and remains
optimistic for the year that lies ahead.
GROUP FINANCIAL REVIEW
The financial year under review can be summarised in four quarters. The first
two quarters showed exceptional revenue, margins and volumes; the third quarter
showed signs of changes in the market as commodity prices came under pressure
and in some sectors, volumes started to shrink. In the last quarter, commodity
prices dropped sharply and demand declined further in these sectors.
Record revenue of R584 million and profit after tax of R39 million were achieved
in the first half of the financial year, resulting in an interim dividend of
four cents per share, declared in September 2009. This exceptional performance
continued into the third quarter before commodity prices started to show signs
of strain.
Despite difficult trading conditions experienced during the final three months
of the financial year, compounded by the traditional shut-downs over the festive
season being extended by many companies, the business adapted to prevailing
market conditions and managed to maintain margins.
The increase in the cash position was attributable to strong working capital
management and solid profitability.
Revenue for the year was up by 8% on the previous year and margins of 14,5% were
well above the 9,3% achieved in the previous financial year.
Working capital is firmly under control. Inventory and receivable levels were
reduced from R75 million to R73 million and from R105 million to R90 million
respectively.
The unexpected severity of the slowdown in the last quarter impacted negatively
on revised forecasts that were announced in September 2008. However, this does
not detract from the fact that Insimbi has had an excellent year and showed
strong EPS, HEPS, NAV and cashflow growth, with the year ending February 2009
producing the best results in the group`s 40 year history.
OPERATIONAL REVIEW
Insimbi operates on a divisional basis, each specialising in specific industries
and target markets. Most of the divisions are targeted at the infrastructure
sector.
High commodity prices coupled with high demand, which was partly as a result of
government`s continued focus on infrastructure upgrades, had a positive impact
on the business in the first nine months of the financial year. Weaker exchange
rates also contributed additional revenues and margin boosts.
The slowdown in the global market has forced Insimbi to become more focused on
skills, efficiency and acquisitive opportunities. During the year the group
continued to seek out new opportunities which led to the incorporation of a new
foreign subsidiary in Zambia and the formation of a new division in Cape Town
which resulted from the purchase of 100% of Global Material South Africa, our
former agent, after year-end. The Zambian subsidiary was launched to focus on
the activities in Zambia and the DRC. Further opportunities have become apparent
in various areas of the business and the company continues to refine its
acquisitive vision and strategy.
Insimbi Aluminium Alloys` newly acquired secondary aluminium smelter which was
acquired for R17,0 million effective 1 March 2008, initially experienced a few
difficulties and only came into operation in June 2008. In terms of IFRS3, the
acquisition of these assets is seen as a business combination. This company
generated revenues of R46,8 million and a loss after tax of R4,4 million. This
was mainly due to the delays in start up as a result of upgrades to the plant
that consisted of a substantial rehabilitation as well as the introduction of
additional furnaces and fuel sources. With these upgrades and improved
processes, the production capacity has increased from 900mt to 1 200mt of
finished product per month. The delays in production will pay dividends in the
medium to long term as the process of rehabilitation has increased the expected
capacity of the plant by 30%.
The increase in non-current assets is as a result of the investment by the
group, in this secondary aluminium smelter. During the process of upgrading the
plant and equipment, one furnace was impaired.
The current global melt down and the dire state of the global automotive
industry has had a severe impact on the performance of this entity but
management are confident that, as a low cost producer of various aluminium
alloys, it is well placed to react to market conditions as they change.
PROSPECTS
Insimbi`s diversified business model, the potential of a political solution in
Zimbabwe, and opportunities that have arisen out of the current economic
situation, gives management confidence that the company will continue to prosper
in the coming financial year. Management is focused on ensuring that volumes and
margins are maintained whilst keeping cost escalation to a minimum.
There are signs of a slow recovery in the market and related commodity prices
although it continues to be very volatile. Management remains positive about the
South African economy, as well as regional markets and opportunities, and is
confident that the government`s continuous infrastructure spend will allow
Insimbi to position itself as an even bigger participant in the future.
PROPOSED DIVIDEND
Notice is hereby given that in line with its dividend policy and cash retention
strategy, the Board has proposed a final dividend for the year of 5,0 cents per
share (2008: nil) which together with the interim dividend of 4,0 cents per
share, will bring total dividends declared in the year under review, to 9,0
cents per share. In terms of the Articles of Association, the dividend is
subject to shareholder approval at the upcoming Annual General Meeting, the date
of which will be announced in due course.
BASIS OF PREPARATION
The condensed financial statements comprise a consolidated balance sheet at 28
February 2009, a consolidated income statement, consolidated statement of
changes in equity and consolidated cash flow statement for the year then ended.
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 and methods of computation adopted are consistently applied
with those in the previous year.
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
PJ Schutte CEO
Wadeville
26 May 2009
Registered office
359 Crocker Road, Wadeville Ext 4,
Germiston, 1422
(PO Box 14676, Wadeville, 1422)
Telephone: 011 902 6930
Directors
Directors at 28 February 2009
*DJ O Connor (Chairman), PJ Schutte (CEO) CF Botha, F Botha, EP Liechti, FB
Abdul Gany LT Tessendorf (alt), *L Mashologu, *GS Mahlati
* Non-executive
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
PO Box 61051, Marshalltown, 2107
Telephone: 011 370 5000
Designated Adviser
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: 27/05/2009 13:08:52 Produced by the JSE SENS Department.
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