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AET
AET
AET - Alert Steel Holdings - Audited Condensed Financial Results For The
Year Ended 30 June 2009
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")
AUDITED CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2009
Condensed Group Income Statements
Audited Audited
30 June 2009 30 June 2008
R`000 R`000
Revenue 981 325 807 095
Gross profit 211 107 219 601
Other income 10 831 6 096
Operating costs (193 748) (143 252)
EBITDA 28 190 82 445
Depreciation (7 952) (5 339)
Profit before interest and 20 238 77 106
taxation
Profit /(loss) on disposal of 15 (82)
non-current assets
Bargain price purchase 1 523 -
Net finance costs (16 094) (4 055)
Profit before taxation 5 682 72 969
Taxation (1 505) (21 535)
Profit for the year 4 177 51 434
4 377 51 434
Attributable to:
Ordinary shareholders
Minority interest (200) -
Reconciliation of headline
earnings:
Profit attributable to ordinary 4 377 51 434
shareholders
Bargain price purchase (1 523) -
(Profit) / Loss on disposal of (11) 59
non-current assets
Headline earnings attributable 2 843 51 493
to ordinary shareholders
Weighted average shares in issue 248 428 570 247 846 183
on which earnings are based
Fully diluted weighted average 256 028 570 255 446 183
shares in issue on which
earnings are based
Earnings per share (cents) 1.8 20.8
Headline earnings per share 1.1 20.8
(cents)
Fully diluted earnings per share 1.5 20.0
(cents)
Fully diluted headline earnings 0.9 20.0
per share (cents)
Condensed Group Balance Sheets
Audited Audited
30 June 30 June 2008
2009 R`000
R`000
ASSETS
Non-current assets 198 420 102 992
Investment property 5 991 -
Property, plant and 134 486 51 716
equipment
Goodwill 54 665 48 594
Other financial assets 204 709
Deferred taxation 3 074 1 973
Current assets 321 838 341 008
Inventories 152 622 194 499
Loans to joint ventures 13 938 9 857
Current tax receivable 3 641 -
Trade and other receivables 142 149 129 285
Cash and cash equivalents 9 488 7 367
Total assets 520 258 444 000
EQUITY AND LIABILITIES
Total shareholders funds 191 050 194 302
Non-current liabilities 64 607 11 582
Other financial liabilities 63 978 11 582
(3)
Deferred taxation 629 -
Current liabilities 264 601 238 116
Loans from joint ventures 3 260 1 485
Other financial liabilities 20 208 24 278
Current tax payable 665 17 977
Trade and other payables 111 867 102 483
Provisions 457 1 737
Bank overdraft 128 144 90 156
Total equity and 520 258 444 000
liabilities
Number of shares in issue 246 714 285 246 714 285
Number of shares including
share based payment 248 428 570 248 428 570
shares(1)
Fully diluted number of 256 028 570 256 028 570
shares in issue (2)
Net asset value per share 76.9 78.2
(cents)
Net tangible asset value 54.9 58.7
per share (cents)
Notes:
1. Included in number of shares, are 1 714 285 unissued shares which
will be issued in terms of the "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. The increase in borrowings, is mainly attributable to the finance of
the new Distribution centre and Head office in East Lynne, Pretoria.
Condensed Group Statements of Changes in Equity
Audited Audited
30 June 30 June 2008
2009 R`000
R`000
Balance at beginning of 194 302 138 194
period
Share issue - 2 366
Total earnings 4 377 51 434
Share issue expenses - (58)
Acquisition share based - 2 366
payment reserve
Dividends paid (7 629) -
Balance at end of period 191 050 194 302
Condensed Group Cash Flow Statements
Audited Audited
30 June 30 June 2008
2009 R`000
R`000
Cash flows from operating 31 926 (86 994)
activities
Cash flow from investing (106 627) (26 622)
activities
Cash flow from financing 38 834 9 730
activities
Net decrease in cash and cash (35 867) (103 886)
equivalents
Cash and cash equivalents at (82 789) 21 097
beginning year
Cash and cash equivalents at (118 656) (82 789)
end year
Condensed Segmental Report
Income Statement Reinforcing Retail Total
2009 Manufacturing
Revenue 72 794 908 531 981 325
Operating profit 2 142 18 096 20 238
2008
Revenue 53 447 753 648 807 095
Operating profit 5 658 71 448 77 106
Balance Sheet
2009
Reportable segment 31 939 397 522 429 461
assets (1)
Reportable segment 23 001 173 509 196 510
liabilities (2)
2008
Reportable segment 26 890 349 319 376 209
assets (1)
Reportable segment 12 100 127 980 140 080
liabilities (2)
Other Information
2009
Depreciation and 200 7 752 7 952 5 339
amortisation
2008
Depreciation and 26 5 313 5 339 2 452
amortisation
(1) Reconciliation of Segmental 2009 2008
Assets
Total assets 520 258 444 000
Goodwill (54 665) (48 594)
Investment property (5 991) -
Deferred taxation (3 074) (1 973)
Current taxation (3 641) -
Loans receivable (13 938) (9 857)
Cash and cash equivalents (9 488) (7 367)
Segmental assets 429 461 376 209
(2) Reconciliation of Segmental
Liabilities
Current liabilities 264 601 238 116
Bank overdrafts (128 144) (90 156)
Current taxation (665) (17 977)
liabilities
Loans payable (3 260) (1 485)
Other - non current 63 978 11 582
liabilities
Segmental 196 510 140 080
liabilities
OVERVIEW
The directors of Alert present the audited results for the year ended 30
June 2009 ("2009 year"). The 2009 year was an extraordinary and
unusually difficult year for the whole industry and the steel industry in
particular. Tremendous pressure was experienced on both general business
margins and volumes.
The market was extremely tough, with a general downturn in all spheres of
the business.
- The year will be remembered for huge volatility in the steel
industry. The market experienced a turnaround from enormous demand
in steel in the third quarter of 2008 to a substantial slow down in
volumes through 2009.
- Growth in the DIY market was hampered by decreased disposable
household income. The lowering of interest rates did not provide
sufficient relief to stimulate spending.
- The residential market showed very slow activity during the entire
financial year. Many housing developments were postponed by
developers as a result of the uncertainties in the market.
- The mining sector came to a virtual standstill in last quarter of
2008. This impacted very negatively on the company`s branches which
are situated in traditional mining areas.
- The non- residential market, which previously counteracted the slow
residential market, was not spared by the consequences of the
economic slump.
- Forced Government spending activities provided for some stimulation
in the market.
Government has in the past year focused on various spending initiatives,
such as low cost housing, RDP developments, building of schools,
upgrading of police stations and hospitals as well as infrastructural
spending with the emphasis on the 2010 Soccer World Cup.
FINANCIAL RESULTS
Revenue increased by 21.6% to R981,3 million (2008:R807,0 million), which
was mainly as a result of the General Steel (Pty) Ltd acquisition and the
opening of the new Wonderboom Build branch. Gross profit decreased from
27,2% to 21,5% which was mainly due to the decline in the price of steel
and the subsequent losses incurred due to stock on hand.
Operating costs increased by 35,2% to R193,7 million (2008: R143,2
million), of which 60% of the increase is attributable to the acquisition
of and opening of new branches and the balance to increases experienced
in the number of employees, transport expenses, property rentals and
marketing expenses. EBITDA decreased 65,8% in the 2009 year to R28,2
million (2008: R82,4 million). Headline earnings for the 2009 year
decreased 94,5% to R2,8 million (2008: R51,5 million).
Capital expenditure were incurred by the group on fixed property (R62
million), investment properties (R6 million), motor vehicles (R9 million)
and plant and machinery (R14 million) to meet existing and future growth
requirements.
PROSPECTS
Although the directors believe that the world economic downturn has
reached its lowest point, they do not anticipate a dramatic recovery in
the company`s business model over the short term. It is expected that
domestic demand will increase due to the drop in interest rates and the
re-entry of the financial institutions into the market.
Alert will therefore focus on the following aspects during the coming
months:
1. To further decrease operating costs.
2. To increase the volume of value added products to the group.
3. To use the integrated IT system to manage branches, prices, stock
and overheads.
4. The growth of the DIY and cash portion of the business by the
implementation of various initiatives.
5. To increase percentage share of the proposed capital spending by
Government over the next three years.
6. To grow organically.
7. Alert is continuously seeking new opportunities and will ensure that
any acquisition complements its footprint in the market.
8. Alert`s new Headquarters will be occupied from the end of October
2009 and the additional 12 000 m2 of warehousing facility will
enable it to make use of import opportunities and offer the market
better service levels.
9. Alert is continuously considering geographic growth.
SUBSEQUENT EVENTS
The outstanding 1,714,285 Alert shares owed to Steel Giant (Proprietary)
Limited will be issued after year end.
BASIS OF PREPARATION OF THE AUDITED RESULTS
Statement of compliance
The audited condensed financial statements comprise a consolidated
balance sheet at 30 June 2009, a consolidated income statement,
consolidated statement of changes in equity, summarised consolidated cash
flow statement and segmental report for the year ended 30 June 2009. 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, JSE Listing Requirements and South African
Companies Act. The accounting policies applied for the year are
consistent with those of the previous year.
Basis of measurement
The financial statements have been prepared on the historic cost basis
except for certain financial instruments measured at fair value.
AUDITED RESULTS
The auditors, RSM Betty & Dickson`s (Tshwane), have audited these results
and their unmodified audit opinion is available for inspection at the
company`s registered office.
BUSINESS COMBINATIONS
Alert acquired the business of General Steel (Proprietary) Limited and
the property owned by Sovereign Park Benrose (Proprietary) Limited .
Competition Commission approval was obtained on 6 August 2008, at which
date the transaction became unconditional. Goodwill acquired on the
acquisition was R6.1 million.
On 1 August 2008 Alert acquired an 80% shareholding in Carlson Machine
Manufacturers (Proprietary) Limited for a purchase consideration of R3,4
million.
Revenue and loss after taxation, included in the results presented above,
was R47 million and (R0.6 million), respectively.
SHARE CAPITAL
No shares were issued during the year.
DIVIDEND POLICY
The maiden dividend of 3.0 cents per share was paid on 24 November 2008.
STATEMENT ON GOING CONCERN
The audited condensed group financial statements 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
29 September 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) Ltd
Designated Adviser: Vunani Corporate Finance
Date: 29/09/2009 16:42:01 Produced by the JSE SENS Department.
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