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BSS
BSS
BSS - BSI Steel Limited - Unaudited financial results for the six months
ended 30 September 2010
BSI Steel Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/023164/06)
(JSE code: BSS ISIN: ZAE000125134)
("BSI" or "the company")
Salient features
Revenue up 43.7%
Headline earnings per share 3.08 cents (2009: 0.28 cents)
Net asset value per share 57.3 cents
Maiden dividend per share 2 cents
Return on capital 10,9%
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
Condensed income statements
Unaudited Unaudited Audited
6 months 6 months 12 months
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Revenue 952 095 662 530 1 437 068
Gross profit 137 305 77 628 192 726
Other costs (87 566) (61 560) (135 982)
Earnings before interest, 49 739 16 068 56 798
taxation, depreciation and
amortisation ("EBITDA")
Depreciation (5 033) (4 567) (9 286)
Profit before interest and 44 706 11 501 47 512
taxation
(Loss)/Profit on disposal of (262) (912) 7 868
assets
Interest received 970 499 1 423
Interest paid (19 895) (9 647) (23 808)
Profit before taxation 25 519 1 441 32 995
Taxation (3 975) (232) (7 035)
Profit after taxation 21 544 1 209 25 960
Reconciliation of headline
earnings:
Earnings attributable to 21 544 1 209 25 960
ordinary shareholders
Loss/(Profit) on disposal of 262 912 (7 838)
assets
Tax impact of adjustments (73) (127) (2 195)
Headline earnings 21 733 1 994 20 317
attributable to ordinary
shareholders
Weighted average shares in 706 668 711 321 709 393
issue on which earnings are
based (1)
Earnings per share (cents) 3.05 0.17 3.66
Headline earnings per share 3.08 0.28 2.86
(cents)
Note:
The weighted average number of shares in issue for 30 September 2010 is based
on the weighted number of shares held by the public during the period under
review.
Condensed statements of comprehensive income
Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Profit for the period 21 544 1 209 25 960
Other comprehensive income
Cash flow hedges 2 387 - (2 425)
Realization of revaluation - - (8 783)
on non-current property held
for sale
Foreign currency translation (6 057) (27 988) (28 009)
reserve
Total comprehensive income 17 874 (26 779) (13 257)
Condensed statements of financial position
Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
ASSETS
Non current assets
Property, plant and equipment 255 751 204 527 240 888
Goodwill 13 442 13 442 13 442
Intangible assets 10 911 6 272 9 357
Deferred taxation 1 607 2 486 1 607
281 711 226 727 265 294
Current assets
Current tax receivable 959 5 440
242
Inventories 277 631 189 292 296 320
Other financial assets 1 - 2
Trade and other receivables 363 168 324 946 386 495
Cash and cash equivalents 17 011 52 501 23 294
658 770 572 179 706 353
Total assets 940 481 798 906 971 647
EQUITY AND LIABILITIES
Equity
Total shareholders` equity 404 752 387 415 399 949
Liabilities
Non-current liabilities
Borrowings 111 045 108 742 114 248
Deferred tax 2 170 3 242 2 724
113 215 111 984 116 972
Current liabilities
Current tax payable 7 233 6 989 11 753
Borrowings 19 876 14 182 19 728
Trade and other payables 194 093 121 677 209 791
Finance lease obligation - 432 -
Bank overdraft 201 312 156 227 213 454
422 514 299 507 454 726
Total Liabilities 535 729 411 491 571 698
Total equity and liabilities 940 481 798 906 971 647
Number of shares in issue 706 668 710 207 706 668
Net asset value per share 57.3 54.5 56.6
(cents)
Net tangible asset value per 53.8 51.8 53.4
share (cents)
Notes:
(1) The weighted average number of shares in issue for 30 September 2010 is
based on the weighted number of shares held by the public during the
period under review.
Condensed statements of changes in equity
Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Balance at beginning of 399 949 415 962 415 962
period
Total comprehensive income 17 874 (26 779) (13 257)
Profit for the period 21 544 1 209 25 960
Hedging Instrument Provision 2 387 - (2 425)
Realisation of revaluation on - - (8 783)
non-current property held for
sale
Foreign currency translation (6 057) (27 988) (28 009)
reserve
Share Based Payment Provision 1 062 - 1 366
Dividend Declared (14 133) - -
Treasury shares held - (1 768) (4 122)
Balance at end of period 404 752 387 415 399 949
Condensed cash flow statements
Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Cash flows from operating 30 020 (2 875) (50 830)
activities
Cash flows from 22 811 9 470 (34 268)
operations
Changes in working 7 209 (12 345) (16 562)
capital
Cash flow from investing (23 983) (4 802) (48 923)
activities
Cash flow from financing 297 (8 299) (2 603)
activities
Net increase in cash and 6 334 (15 976) (102 356)
cash equivalents
Cash and cash equivalents at (190 160) (84 649) (84 648)
beginning of period
Effect of exchange rate (475) (3 101) (3 156)
movement on cash balances
Cash and cash equivalents at (184 301) (103 726) (190 160)
end of period
Condensed segment report
Unaudited Unaudited Audited
30 September 30 September 31 March
2010 2009 2010
R`000 R`000 R`000
Gross revenue
Stockists 353 743 236 130 510 466
Bulk Sales 272 208 220 933 451 418
Exporting 329 457 204 940 474 839
Other (3 313) 527 345
952 095 662 530 1 437 068
Profit before interest and
taxation
Stockists 6 275 (9 722) (11 239)
Bulk Sales 11 764 10 454 25 392
Exporting 27 963 8 392 28 609
Other (1 558) 1 465 12 618
44 444 10 589 55 380
OVERVIEW
The directors of BSI Steel are pleased to present the interim
financial results for the six months ended 30 September 2010 ("the
interim period"). The BSI Steel group of companies operates in the
steel and associated industries with strategically located
operations in South Africa, Mozambique, the Democratic Republic of
the Congo, Zimbabwe, Mauritius and Zambia to service the Southern
African markets. BSI Steel markets through three distinct
channels, being Stockists, Bulk sales and Exports; all of these
divisions are supported by its steel processing and value-adding
operations.
The financial year F2011 started well for the South African
operations, with buoyant steel demand from the manufacturing and
construction sectors. This was supported by steel price increases
in the first half of the period with the prospect of shortages
fueling demand further. We increased stocks to mitigate these
anticipated shortages and pre-empt a continuation of demand into
the second half of the period.
However the FIFA World Cup acted as a watershed as steel demand in
the construction and manufacturing sectors weakened and steel
prices decreased significantly. An over-stocked position developed
in the market, causing severe margin erosion in the latter three
months of the period.
Notwithstanding these extremely tough trading conditions, the local
business units traded profitably for the interim period and managed
to de-stock sufficiently to align with new market conditions.
Steel demand in the African market was initially slow, but grew
consistently over the interim period. A marked increase in
competition and the establishment of new steel mills in all of the
countries BSI Steel operates in created both threats and
opportunities for BSI Steel`s growing footprint in the overland
African market. However the directors of the company are confident
that the company`s established infrastructure and first mover
advantage will give the company a distinct competitive edge going
forward. BSI Steel aligns itself to the mining and infrastructure
sectors in Africa with an increasingly diversified product
offering.
FINANCIAL RESULTS
The interim period under review showed an increase in revenue of
43.7% to R952 million against that of the corresponding period.
Other costs remained consistent tracking the increase in revenue.
The volatility in steel prices continued to have a detrimental
effect on the group`s margin. Although the margin improved slightly
against that of the comparable period it remained under pressure.
The increase in interest paid during the interim period resulted
from the slow winding back of working capital which had been
engaged in the buoyant times leading up to the FIFA world cup. By
the end of the interim period stockholding was reduced to
appropriate levels. Although there was a slowdown in Debtor
receipts during the interim period, adequate provisions have been
made and the Trade debtors remain closely managed.
The group continues to enjoy good relationships with its bankers
and has been afforded adequate banking facilities to support its
continued growth plan.
PROSPECTS
Having right-sized stockholding, BSI Steel anticipates improved
margins across all segments, which along with a significant
reduction in finance costs should translate into improved overall
profitability.
We are however ever-vigilant of further steel price drops as a
result of a strengthening rand and are concerned about trading
conditions in South Africa particularly in the construction sector,
and the apparent absence of the government infrastructural spend on
which many of our customers are depending.
The African markets conversely remain buoyant and we expect this to
continue. The strong rand will however temper our regional results,
where we operate in US Dollars and report in Rands.
In line with BSI Steel`s strategy to diversify itself
geographically the company will continue rolling out branches into
South Africa and Africa. This along with ongoing product
diversification will allow continued organic growth despite the
market conditions. Our recent investment in our distribution centre
and coil processing capacity in Gauteng will support this strategy.
During the last two years BSI Steel`s results have been negatively
affected by appalling market conditions which have been exacerbated
by the deployment of considerable resources in developing the
company`s operating platform. BSI Steel is now very well placed to
capitalize when the market conditions improve; in the interim, the
company continues to grow and expand its operation cautiously, with
emphasis on controlling costs and managing risk carefully.
DIVIDEND POLICY
The group is committed to paying dividends annually provided market
conditions are reasonably stable. At the end of September 2010, the
board declared the group`s maiden dividend of two cents per share.
This dividend was announced on SENS, and paid in October 2010.
SUBSEQUENT EVENTS
No material change has taken place in the affairs of the group
between the end of the interim period and the date of this report.
DIRECTORATE
There were no changes to the Board during the interim period.
STATEMENT ON GOING CONCERN
The 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.
BASIS OF PREPARATION
This condensed report has been prepared in accordance with IAS 34 -
Interim Financial Reporting, the South African Companies Act and
the JSE Listing Requirements. The condensed report has been
prepared in accordance with the framework concepts and the
measurements and recognition requirements of IFRS and the AC500
standards as issued by the Accounting Practice Board or its
successors.
The accounting policies and methods of computation are consistent
with those applied in the financial statements for the year ended
31 March 2010.
By order of the Board
12 November 2010
W L Battershill J R Waller
Chairman Financial Director
CORPORATE INFORMATION
Non executive directors: B M Khoza (Alternate - N M Anderson),
N G Payne, R G Lewis
Executive directors: W L Battershill, G D G Mackenzie, C Parry, W R
Teichmann, J R Waller
Registered address: Murrayfield Park, Mkondeni,
Pietermaritzburg 3201
Postal address: P O Box 101096, Scottsville, 3209
Company secretary: S J Hackett
Telephone: (033) 846 2208
Facsimile: (033) 346 0870
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Vunani Corporate Finance
Date: 12/11/2010 17:15:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
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