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ISB
ISB
ISB - Insimbi - Unaudited results for the six months ended 31 August 2010
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 2010
AND DIVIDEND ANNOUNCEMENT
- Revenue of R 412 million
- Gross profit of R 51 million
- Cash generative with good cash management
- Effective working capital management
- Dividend declaration number four of 2c per share
"We are very pleased with the much improved performance in what has proven to be
more buoyant but still very volatile market. The improved market conditions,
including commodity price increases and higher demand, coupled with our
continued focus on effective working capital and cash-flow management has all
contributed to our improved performance.
Indications are that the next six months will continue to be volatile and we
expect some decreases in demand for certain commodities. The strong Rand is
affecting manufacturing in certain sectors and this could slow the economic
recovery in these sectors, so we expect that there are some challenges still
lying ahead. Despite this, the Group remains optimistic about it`s prospects and
we maintain our strong position in our target markets. We are also very excited
by the acquisition of Metlite and Metalloy Fibres and with the continued
economic recovery, we believe we will be able to optimise our full potential,"
said Pieter Schutte (Chief Executive Officer)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 AUGUST
2010
Unaudited
Unaudited Restated Audited
6 months to 6 months to Restated
31 August 31 August 12 months
2010 2009 to
R`000 R`000 28 February
2010
R`000
Revenue 412 043 305 159 611 631
Cost of sales (360 954) (267 144) (534 854)
_________ _________ _________
Gross profit 51 089 38 015 76 777
Other operating income 15 588 535 1 205
Other operating expenses (22 248) (12 175) (30 093)
Administration expenses (15 594) (10 721) (21 092)
_________ _________ _________
Operating profit 28 835 15 654 26 797
Interest received 479 569 1 087
Finance costs (5 818) (4 954) (10 142)
_________ _________ _________
Profit before taxation 23 496 11 269 17 742
Taxation (6 513) (4 475) (7 100)
_________ _________ _________
Profit for the year 16 983 6 794 10 642
Other comprehensive
income:
Currency translation 72 - 56
differences _________ _________ _________
Other comprehensive income 72 - 56
for the year net of tax _________ _________ _________
Total comprehensive income 17 055 6 794 10 698
for the year _________ _________ _________
Attributable to:
Equity holders 17 055 6 794 10 698
Headline earnings for the Unaudited Unaudited Audited
group have been computed as 6 months to Restated Restated
follows: 31 August 6 months to 12 months
2010 31 August to
R`000 2009 28 February
R`000 2010
R`000
Profit attributable to 17 055 6 794 10 698
ordinary shareholders
Adjusted for loss on sale of
property, plant and equipment - 16 22
Adjusted for negative (11 037) - -
goodwill
Adjusted for impairment of 2 880 - -
goodwill
_________ _________ _________
Headline earnings for the 8 898 6 810 10 720
group _________ _________ _________
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
Number of shares in issue at 260 000 260 000 260 000
the end of the year
Less: treasury shares held in (342) (34) (342)
a subsidiary at the end of _________ _________ _________
the year
259 658 259 966 259 658
_________ _________ _________
Basic and fully diluted:
Earnings per share (cents) 6,57 2,61 4,12
Headline earnings per share 3,43 2,62 4,13
(cents)
CONSOLIDATED STATEMENT OF FINANCE POSITION AT 31 AUGUST 2010
Unaudited Unaudited Audited
As at 31 Restated Restated
August 2010 As at 31 As at 28
R`000 August 2009 February
R`000 2010
R`000
Assets
Non-Current Assets
Property, plant and 42 679 24 333 23 277
equipment
Intangible asset 2 500 - -
Goodwill 36 938 39 938 39 938
Investments in - - -
subsidiaries
Deferred tax 3 195 4 126 4 180
_________ _________ _________
85 312 68 397 67 395
_________ _________ _________
Current Assets
Inventories 67 598 61 659 54 883
Other financial assets - - 453
Taxation - - 283
Trade and other 109 580 83 634 101 570
receivables
Cash and cash equivalents 36 540 16 765 27 177
_________ _________ _________
213 718 162 058 184 366
_________ _________ _________
Total Assets 299 030 230 455 251 761
_________ _________ _________
Equity and Liabilities
Equity
Share capital and premium 44 442 44 442 44 442
Reserves 62 78 134
Retained earnings 45 653 29 325 28 598
Treasury shares (238) (31) (238)
_________ _________ _________
89 919 73 814 72 936
_________ _________ _________
Non-Current Liabilities
Borrowings 38 932 57 510 42 222
_________ _________ _________
38 932 57 510 42 222
_________ _________ _________
Current Liabilities
Current portion of 35 566 1 163 32 174
borrowings
Taxation 6 497 7 425 6 094
Trade and other payables 128 116 90 543 98 335
_________ _________ _________
170 179 99 131 136 603
_________ _________ _________
Total Equity and 299 030 230 455 251 761
Liabilities _________ _________ _________
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited
Unaudited Restated Restated
6 months 6 months 12 months
to to to
30 August 30 August 28
2010 2009 February
R`000 R`000 2010
R`000
Cash flows from
operating activities
Cash generated from 30 373 16 401 24 907
operations
Investment revenue 478 567 1 087
Finance costs (4 482) (4 952) (10 142)
Taxation paid (5 125) (9 609) (12 898)
_________ _________ _________
Net cash generated from 21 244 2 407 2 954
operating activities _________ _________ _________
Cash flow from investing
activities
Purchase of property, (5 000) (7 439) (8 060)
plant and equipment
Sale of property, plant - 72 240
and equipment
Purchase of businesses (6 982) - -
Purchase of treasury - (23) (230)
shares _________ _________ _________
Net cash utilized in (11 982) (7 390) (8 050)
investing activities _________ _________ _________
Cash flows from
financing activities
Decrease in long term (3 290) 517 (13 771)
borrowings
Increase in current 9 284 383 24 504
portion of borrowings
Dividends paid - (13 000) (18 200)
_________ _________ _________
Net cash generated 5 994 (12 100) (7 467)
from/(utilized in) _________ _________ _________
financing activities
Net increase/(decrease) 15 256 (17 083) (12 563)
in cash and cash
equivalents
Cash and cash 21 285 33 848 33 848
equivalents at the _________ _________ _________
beginning of the year
Total cash at the end of 36 541 16 765 21 285
the year _________ _________ _________
STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months to 6 months to 12 months
30 August 30 August to
2010 2009 28
R`000 R`000 February
2010
R`000
Share capital* - - -
_________ _________ _________
Share premium
Issue of shares 44 442 44 442 44 442
_________ _________ _________
Treasury shares
Purchase of (238) (31) (238)
shares by _________ _________ _________
subsidiary
(Note 2)
Reserves
Currency
translation 62 78 134
differences _________ _________ _________
Retained
earnings
At beginning of 28 598 47 412 36 156
year as
previously
reported
Prior year - (9 100) -
adjustment - _________ _________ _________
equity
Restated 28 598 38 312 36 156
balance at
beginning of
year
Net profit for 17 055 6 794 10 642
the year
Dividends paid - (13 000) (18 200)
_________ _________ _________
At end of year 45 653 32 106 28 598
_________ _________ _________
Total Equity 89 919 76 595 72 936
_________ _________ _________
* Share capital equals 260 000 000 of 0.000025cents each = R65
CONDENSED SEGMENT REPORT
Set out below is the revenue and gross margin by division.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 August 31 August 28 February
2010 2009 2010
R`000 R`000 R`000
Revenue by division
Foundry 83 984 59 648 122 670
Steel 100 439 59 449 153 530
Non Ferrous 45 372 36 574 63 941
Rotary Kiln 24 956 47 745 74 789
Refractory 6 640 8 678 15 562
Textiles 6 583 793 7 708
Speciality 30 808 33 068 50 914
KZN 23 161 24 146 47 722
Cape Town 26 304 - 43 688
Mechanical 9 978 - 16 735
Aluminium 45 728 - 13 271
Other 8 089 35 058 1 101
_________ _________ _________
412 043 305 159 611 631
_________ _________ _________
Gross margin by
division
Foundry 9 684 5 696 12 476
Steel 6 494 4 718 10 992
Non Ferrous 4 156 3 037 12 481
Rotary Kiln 3 699 9 263 10 150
Refractory 1 006 1 557 1 519
Textiles 1 624 35 1 638
Speciality 4 734 5 325 8 289
KZN 4 596 3 548 7 003
Cape Town 4 204 - 4 240
Mechanical 2 677 - 3 681
Aluminium 6 625 - 4 310
Other 1 589 4 836 (2)
_________ _________ _________
51 090 38 015 76 777
_________ _________ _________
EFFECT OF THE RESTATEMENTS ON THE PRIOR YEAR RESTATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 AUGUST
2010
Unaudited
Previously Unaudited
Reported Restated
6 months to 6 months to
31 August 31 August
2009 Restatements 2009
R`000 R`000 R`000
Other operating expenses (12 100) (75) (12 175)
Share of associated (75) 75 -
company`s profit
CONSOLIDATED STATEMENT OF FINANCE POSITION AT 31 AUGUST 2010
Un audited
Previously Un
Reported audited
As at 31 Restated
August 2009 Restatements As at 31
R`000 R`000 August
2009
R`000
Trade and other receivables 80 815 2 850 83 634
Amount owing by group company 14 731 (14 731) -
Retained earnings (41 206) 11 881 (29 325)
IMPACT OF THE RESTATEMENTS (UNAUDITED)
Insimbi Thermal Insulations (Proprietary) Limited was incorrectly recognized as
an associate and is adjusted to be consolidated as a wholly owned subsidiary.
2009
R`000
Other operating expenses 75
Share of associated company`s profit (75)
Trade and other receivables 5 631
Amount owing by group company (5 631)
During the 2008 financial year, a dividend paid and declared was incorrectly
recognized as a loan and is not recorded within retained earnings
2009
R`000
Amount owing by group company (9 100)
Retained earnings 9 100
An FEC asset created for the year ended February 2008 was not subsequently
reversed as it had matured.
2009
R`000
Trade and other receivables (2 781)
Retained earnings 2 781
Overview
While our trading environment has definitely improved, it is still very volatile
and challenging but Insimbi produced a solid performance for the six months
ended 31 August 2010. This can be mainly attributed to:
Price increases on some commodities
Improved market conditions and demand
Effective management of working capital
It is worth noting that the unusual market conditions of the preceding 2 years,
have subsided and while certain commodities are still under pressure with regard
to pricing and demand, markets have stabilized in certain sectors and this has
contributed to our improved performance.
Financial Performance
Group revenue for the period was R412 million compared to R305 million for the
corresponding period last year, a 35.1% increase in revenues. This improved
performance was achieved on the back of recovering markets and commodity prices.
The group has also continued to diversify our portfolio and product offering and
focus on our continued high quality service offering, to our client base.
Demand for our products has increased when compared to the corresponding period
ended 31 August 2009, with the exception of our Rotary and Refractory divisions
which have historically lagged the steel and foundry cycles by up to 6 months.
A consolidated gross margin of R51 million for the period was achieved compared
to R38 million during the same period last year. This is a 34.3% increase in
gross margin and margins have remained resilient at 12.4% when compared to 12.5%
for the same period last year. This is very pleasing when one considers the
comparative strength of the rand during the period under review when compared to
the same period last year.
Consolidated operations and administration costs have increased by R15.5 million
to R37.8 million as a result of the following:
- Overheads associated with the acquisition of Metlite and Metalloy Fibres
- Goodwill impairment
- Consolidation of Insimbi Thermal Insulation (Pty)Ltd previously equity
accounted
- Professional Fees
- Lower overhead recoveries
Other than items highlighted above operating costs have in general, been well
controlled. Staff costs remain consistent with the previous period.
Group operating profit for the period was R28.8 million compared to R15.7
million for the corresponding period, an 84.2% increase in operating profit on
the previous corresponding period.
Insimbi achieved earnings and headline earnings per share of 6.57 cents and 3.43
cents per share respectively compared to 2.61 cents and 2.62 cents per share
respectively, in the previous comparative period. This is a 151.7% and 30.9%
increase on the previous comparative period, respectively.
Working capital management and cash-flow has remained a key focus for Insimbi
and we have responded to changing market conditions effectively. This has
ensured strong cash-flows throughout the period with cash generated from
operations of R11.5 million compared to R2.4 million in the previous interim
period. No Dividends were declared or paid during the 6 months ending 31 August
2010. Finance costs have reduced from R4.95 million to R4.48 million for the
interim periods ended 31 August 2009 and 2010, respectively.
Cash and cash equivalents at 31 August 2010 were R36.5 million compared to R16.8
million at 31 August 2009, an improvement in cash position of R19.7 million.
As a consequence of effective working capital management, there were no
provisions for doubtful debt during the period under review. Long term Group
debt was reduced by R18.6 million to R38.9 million at 31 August 2010.
Operational Review
Insimbi has remained cash generative throughout the volatile period under review
due to the Group`s diverse product offering, continued profitability and
attention to working capital.
The steel, foundry and non-ferrous divisions have showed strong signs of
recovery although there is still some uncertainty in these markets. However we
remain confident that the recovery will be sustainable.
The cement industry has experienced difficult trading conditions but we did
anticipate this and budgeted accordingly for the current financial year.
Infrastructure spend continues to be disappointing but expectations in the
market are that this will accelerate in the short term. Commodity prices in
general are showing strong recovery although this has been offset to a small
degree, by the strength of the Rand.
The Insimbi Group is committed to BBEEE and is currently rated as a Level 7
contributor. We continue to strive for a higher rating and believe this is
achievable in time.
Post balance sheet event
No material fact or circumstance existed post balance sheet date that affects
the results being reported.
Prospects
Although market conditions have improved in the first half of 2010, indications
are that the next six months will continue to be volatile and challenging in
certain market sectors. The strong rand is having a negative effect on certain
industries and we have seen some reduction in demand for certain commodities, as
a result. Notwithstanding this, Insimbi remains focused on expanding it`s
"basket" of products and remaining as the market leader in the ferro-alloys,
refractories and mechanical maintenance arenas. Cost and working capital
management, remain a priority as well.
As a group, we will continue to evaluate strategic acquisitions in various
industries like the recent Metlite and Metalloy Fibres acquisitions which will
bring synergies and added value to the group.
Business combinations
Insimbi Alloy Supplies (Proprietary) Limited ("Insimbi Alloys") and Insimbi
Alloy Properties (Proprietary) Limited ("Insimbi Properties"), both wholly owned
subsidiary companies of Insimbi, have concluded separate agreements whereby,
with effect from 13 July 2010, they respectively acquired, the entire issued
share capitals of and claims on loan accounts against Metlite Alloys and
Metlite Properties.
The acquired businesses contributed revenues of R 14,2 million and net profit
after tax of R 742 000 to the group for the period from acquisition to 31 August
2010.
Details of net assets acquired and goodwill are as follows:
Total purchase consideration 10 892
Fair value of net identifiable assets acquired (26 222)
Negative goodwill (15 330)
The assets and liabilities arising from the acquisition are as follows:
Fair
Value
Property, plant and equipment 18 684
Intangible asset 2 500
Inventories 3 557
Trade and other receivables 7 392
Cash and cash equivalents 1 207
Trade and other payables (7 027)
Identifiable assets acquired 26 313
Outflow of cash to acquire business, net of cash acquired
- cash consideration 10 892
- cash and cash equivalents in subsidiary acquired (1 207)
Cash outflow on acquisition 9 685
Basis of preparation of the unaudited results
The interim consolidated financial results consist of a statement of
comprehensive income, statement of financial position, statement of changes in
equity, condensed statement of cash flows and condensed segment report for the
period ended 31 August 2010. The interim financial results have been prepared in
accordance with International Financial Reporting Standards (IFRS), IAS 34
Interim Financial Reporting, JSE Listing Requirements and the Companies Act of
South Africa, incorporating the AC 500 series of Accounting Standards. The
accounting policies are consistent with those applied in the prior year.
The company`s auditors, PricewaterhouseCoopers Inc, have not reviewed or audited
these results for the six month ended 31 August 2010, nor the results and
restatements to 31 August 2009.
Secretary
R de Villiers resigned on 22 April 2010. K Holtzhausen was appointed in this
position effective 7 June 2010.
Dividends
Notice is hereby given that Insimbi has declared an interim dividend (dividend
declaration 4) for the six months ended 31 August 2010 of 2 cents per share.
The salient dates applicable to the interim dividend are as follows:
Last day to trade "CUM" dividend 22 October 2010
First day to trade "EX" dividend 25 October 2010
Record date 29 October 2010
Payment date 1 November 2010
No share certificates will be dematerialised or rematerialised between Monday,
25 October 2010 and Friday, 29 October 2010, both days inclusive.
DJ O Connor P Schutte
Chairman Chief Executive Officer
8 October 2010
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: Kristell Holtzhausen
Directors: FBB Abdul Gany, CF Botha, F Botha, EP Liechti, GS Mahlati*, LY
Mashologu*, PJ Schutte, LG Tessendorf, DJ O Connor* * non executive
Designated Advisor: PricewaterhouseCoopers Corporate Finance (Proprietary)
Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 08/10/2010 12:30:01 Produced by the JSE SENS Department.
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