| Mon 30 May 2011, 17:45 | | ISB - Insimbi - Reviewed consolidated condensed financial results for the twelve |
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ISB
ISB
ISB - Insimbi - Reviewed consolidated condensed financial results for the twelve
months ended 28 February 2011
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")
REVIEWED RESULTS FOR THE TWELVE MONTHS ENDED 28 FEBRUARY 2011
- Revenue of R 732 million
- Gross profit of R 90 million
- EPS up by 12.1%
- HEPS down by 5.6 %
- Metlite acquisition
- Cash generative with improved cash management
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 28 FEBRUARY 2011 Reviewed Audited
12 months to 12 months to
28-Feb-11 28-Feb-10
R`000 R`000
Revenue 732 453 611 631
Cost of sales (642 665) (534 854)
Gross profit 89 788 76 777
Operating profit 24 579 26 797
Finance Income 1 186 1 087
Finance costs (8 771) (10 142)
Profit before 16 994 17 742
taxation
Taxation (5 001) (7 100)
Profit for the year 11 993 10 642
Other comprehensive income:
Currency translation differences 20 56
Total comprehensive income for 12 013 10 698
the year
Attributable to equity holders 12 013 10 698
Basic and fully
diluted
Earnings Per Share (cents) 4.63 4.12
CONSOLIDATED STATEMENT OF FINANCIAL Reviewed Audited
POSITION
AT 28 FEBRUARY 2011 as at as at
28-Feb- 28-Feb-
11 10
R`000 R`000
Assets
Non-Current Assets
Property, plant and equipment 33 700 23 277
Intangible assets 38 438 39 938
Deferred tax 3 827 4 180
75 965 67 395
Current Assets
Inventories 62 982 54 883
Trade and other receivables 113 379 102 306
Cash and cash equivalents 37 763 27 177
214 124 184 366
Total assets 290 089 251 761
Equity
Capital and Reserves 79 749 72 936
Liabilities
Total Liabilities 210 340 178 825
Total Equity and Liabilities 290 089 251 761
CONSOLIDATED STATEMENT OF CHANGES IN Reviewed Audited
EQUITY
FOR THE YEAR ENDED 28 FEBRUARY 2011 as at as at
28-Feb- 28-Feb-
11 10
R`000 R`000
Share capital* - -
Share premium - Issue of 44 442 44 442
shares
Treasury shares
Purchase of shares by subsidiary (238) (238)
Foreign Currency Translation Reserve 154 134
Retained earnings at beginning of year 28 598 36 156
Net profit for the 11 993 10 642
year
Dividends paid (5 200) (18
200)
Retained earnings at end of year 35 391 28 598
Total Equity 79 749 72 936
*Share capital equals 260 000 000 shares at 0.000025 cents each
= R65
CONSOLIDATED STATEMENT OF CASH FLOWS Reviewed Audited
FOR THE YEAR ENDED 28 FEBRUARY 2011 12 months to 12 months
to
28-Feb-11 28-Feb-10
R`000 R`000
Cash flows from operating activities
Cash generated from 26 295 24 907
operations
Finance income 1 186 1 087
Finance costs (8 771) (10 142)
Taxation paid (11 488) (12 898)
Net cash generated from operating 7 222 2 954
activities
Cash flow from investing
activities
Net cash utilised for property, plant (4 037) (7 820)
and equipment
Purchase of business (9 775)
Purchase of treasury shares (230)
Net cash utilized in investing (13 812) (8 050)
activities
Cash flows from financing activities
Net increase in borrowings 19 742 10 733
Dividends paid (5 200) (18 200)
Net cash generated from/(utilized in)
financing activities
14 542 (7 467)
Net increase/(decrease) in 7 952 (12 563)
cash
in cash and cash equivalents
Cash and cash equivalents at the 21 285 33 848
beginning of the
year
Total cash at the end of the 29 237 21 285
year
CONDENSED SEGMENTAL REPORT Reviewed Audited
FOR THE YEAR ENDED 28 FEBRUARY 2011 12 months to 12 months
to
28-Feb-11 28-Feb-10
R`000 R`000
Revenue by segment
Foundry 411 703 291 292
Steel 219 027 204 444
Refractory 101 723 115 895
732 453 611 631
Gross profit by segment
Foundry 56 914 40 510
Steel 14 269 19 281
Refractory 18 605 16 986
89 788 76 777
The group`s reportable segments have changed as a result of changes in
reporting structures and accordingly the segment reporting now
reflects these changes.
OTHER GROUP SALIENT FEATURES Reviewed Audited
12 months to 12 months
to
Headline earnings for the 28-Feb-11 28-Feb-10
group have been computed as
follows:
R`000 R`000
Profit attributable to ordinary 12 013 10 698
shareholders
Adjusted for (profit)/loss on
sale
of property, plant and (91) 22
equipment
Adjusted for negative
goodwill (Gain from bargain
purchase)
(5 791) -
Adjusted for impairment of 4 000 -
goodwill
Headline earnings for the 10 131 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 weighted shares in 260 000 260 000
issue at the end of the year
Less: treasury shares held in (342) (342)
a subsidiary at the end of
the year 259 658 259 658
Basic and fully diluted headline 3,90 4,13
earnings per share (cents)
Dividends per share 2,00 7,00
Net asset value per share (cents) 30,71 28,09
Tangible net asset value per share 15,91 12,71
(cents)
Depreciation 5 203 3 907
Impairment of goodwill 4 000 -
Capital expenditure 4 524 8 060
Commitments
Capital - Authorised and contracted 10 800 1 000
Operating Leases 5 091 5 609
Overview
The year ended February 2011 proved to be a very volatile and sometimes
challenging period for the Insimbi group. This was especially true for the
second half of the financial year from 1st September 2010 to 28 February 2011,
where we experienced one of our worst November to January periods that current
management can recall. Much of the optimism that was experienced in the first
half of the year to 31 August 2010 was replaced with more conservative and
realistic expectations as a result of conditions prevailing during this period.
These included a strong currency, increased competition from relatively cheaper
imports and general uncertainty within much of our economy. Despite this
challenging environment, Insimbi remained profitable and cash-flow positive
throughout the year under review and while the full year`s results were
disappointing based on what we experienced in the first six months, we are
satisfied that we have yet again proven the resilience of our unique and diverse
business in difficult circumstances.
Financial Performance
Group revenue for the period was R732.4 million compared to R611.6 million for
the corresponding period last year, a 19.8% increase in revenues. This improved
performance was achieved on the back of recovering markets and commodity prices
although the increasingly prevalent imported products from the East, have
certainly impacted on our margins. The group`s focus remains on providing a
superior service offering to our diverse client base as well as increasing our
product range in all of our target markets i.e. steel, foundry and refractory
based industries.
Demand for our products has generally increased although the Refractory segment
is still lagging in recovery. The Foundry segment was faced with widespread
closures of individual foundries during the period under review and this was
mainly as a result of the strong rand and the impact of cheap imports of Asian
origin. The Steel segment fared much better than in the previous year but it was
still a very volatile sector subject to month to month unpredictability. A
consolidated gross margin of R89.8 million for the period was achieved compared
to R76.8 million during the same period last year. This is a 16.9% increase in
gross margin and despite the impact of the strong rand, margins have remained
resilient at 12.3% when compared to 12.6 % 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 and can be
attributed to increased focus on margins and the inclusion of some higher margin
products into our product "basket".
Most cost increases have been acceptable, around CPIX. Legal fees increased as a
result of a reckless trading action that we have instituted. This is against the
directors of a company in liquidation which debt of R1.0 million, was written
off in Insimbi`s results in the year ending 2009. Over and above these, the
large increase in expenditure when compared with the previous period can be
attributed mainly to the overheads relating to the acquisition of Metlite Alloys
(Pty) Ltd.
Group operating profit for the period was R24.6 million compared to R26.7
million for the corresponding period, a 8.2 % decrease.
Insimbi achieved earnings and headline earnings per share of 4.62 cents and 3.90
cents per share respectively compared to 4.12 cents and 4.13 cents per share in
the previous comparative period. This is a 12.1% increase in earnings per share
on the previous year. Headline earnings per share dropped by 5.6%.
Working capital management and cash-flow has continued to be a key focus area
for Insimbi and we have responded to changing market conditions effectively.
This has ensured strong cash-flows throughout the period with R26.3 million cash
generated from operations. An interim dividend of 2 cents per share was declared
and paid in October 2010. Finance costs have reduced from R10.1 million in the
prior year to R8.8 million this year.
Cash at 28 February 2011 was R29.2 million compared to R21.3 million as at 28
February 2010, an improvement in the cash position of R7.9 million. This is
after funding the acquisition of Metlite Alloys and the payment of a R2.7
million deposit relating to the purchase of a warehouse in Durban.
Long term debt was reduced by R5.6 million to R36.6 million at 28 February 2011.
Operational Review
Insimbi has remained cash generative throughout the volatile period under review
due to the Group`s diverse product offering, continued profitability, prudent
acquisition strategy and attention to working capital.
The steel segment has shown strong signs of recovery although there is still
some uncertainty in these markets. However we remain confident that the recovery
will be sustainable.
The refractory segment has experienced difficult trading conditions and although
this was anticipated and budgeted, the severity of these conditions, was not
anticipated, especially in the second half of the financial year. National
infrastructure spend continues to disappoint but we remain optimistic that this
will accelerate in the current financial year. Commodity prices have recovered
since the lows of 2009 and many seem to have settled at sustainable and
manageable levels. The strength of the Rand continues to be a concern and it has
had a severe impact on our customer`s base, most noticeably within the Foundry
segment.
The Insimbi Group remains committed to BBEEE and have maintained its rating as a
Level 7 contributor. We continue to strive for a higher rating but are largely
dependent on our large suppliers themselves, being officially rated which will
enable us to improve our rating, unfortunately many of these suppliers are not
able to provide us with rating certificates and this negatively impacts on our
procurement scorecard.
Business combinations
With effect from 13 July 2010, the group acquired 100% of the issued share
capital of Metlite Alloys (Pty) Ltd and Metlite Alloys Properties (Pty) Ltd. The
business was acquired for a total purchase consideration of R11.0m. The fair
value of assets and liabilities acquired amounted to R16.8m and a gain of R5.8m
recognized from the bargain purchase (negative goodwill).
The acquired businesses contributed revenues of R54.4 million and net profit
before tax of R3.8 million to the group for the period from acquisition to 28
February 2011. It`s assets and liabilities were R27.1m and R8.1m respectively as
at 28 February 2011. If the acquisition had occurred on 01 March 2010, group
revenue would have been R23.4 million more and profit before tax would have been
R226.9k more.
Accounting policies
The condensed consolidated financial statements for the year ended 28 February
2011 have been prepared in accordance with International Financial Reporting
Standards (IFRS), the AC 500 series of accounting standards, JSE listing
Requirements and the Companies Act of South Africa. The accounting policies are
consistent with those applied in the annual financial statements for the
previous year.
Contingencies
The company does not have any material contingencies.
Post balance sheet event
No material fact or circumstance existed post balance sheet date that affects
the results being reported.
Reviewed results
PricewaterhouseCoopers Inc, the Group`s independent auditors, have reviewed
these condensed consolidated financial statements for the year ended 28 February
2011 that comprise the condensed consolidated statement of financial position as
at 28 February 2011 and the condensed consolidated statement of comprehensive
income, changes in equity and cash flows for the year then ended and have
expressed an unqualified opinion on these reviewed condensed consolidated
financial statements. The review report is available at the Company`s registered
office.
Prospects
Market conditions remain volatile and difficult to predict. The strong Rand is
hampering our ability to achieve organic growth and any weakening of the
currency against the USD and Euro, has a positive impact on our revenues and
margins. The impact of the tragic tsunami in Japan in March 2011 has resulted in
a shortage of certain components to the South African Original Equipment
Manufacturers (OEM) industry and this has had a knock on effect on the demand
for certain of our alloys, especially aluminum. We expect this to reverse within
this year as Japan rehabilitates itself and we are well positioned with our
aluminium plants in Cape Town and Johannesburg, to capitalize on this when it
happens.
We are seeing evidence of growth in most of our target industries and even
growth in our export opportunities, notwithstanding the challenge of the
currency strength. We are a still a little "reserved" in our expectations after
the humbling experiences of the previous two or three years. We are optimistic
that the year ending February 2012 will be a better one for the local and
regional economies and therefore, a better year for us as well.
As a group, we will continue to evaluate strategic acquisitions, such as
Metlite, in various industries which will bring synergies and added value to the
group.
However, our focus remains on:
- our core business segments and the addition of new products to compliment our
existing product lines
- cost cutting and control
- working capital discipline and
- the motivation and upliftment of our employees
Company Secretary
R de Villiers resigned on 22 April 2010.
K Holtzhausen was appointed in this position effective 07 June 2010.
Changes to the Board
F Abdul Gany resigned on 24 December 2010, effective 01 January 2011.
J Vieira-Pereira was appointed as Financial Director on 03 May 2011.
DJ O Connor was appointed to the Audit Committee on 17 May 2011.
Dividends
The board does not recommend paying a final dividend to shareholders as it feels
it is prudent to preserve available cash in light of the market volatility and
opportunities that may be presented.
Appreciation
We would like to take this opportunity to thank all our employees for all their
efforts during the past financial year.
DJ O Connor P Schutte
Chairman Chief Executive Officer
30 May 2011
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: Kristell Holtzhausen
Directors:
CF Botha, F Botha, EP Liechti, GS Mahlati*, LY Mashologu*, DJ O Connor*,
PJ Schutte, LG Tessendorf, J Vieira-Pereira. (* indicates non executive)
Designated Advisor: PricewaterhouseCoopers Corporate Finance (Proprietary)
Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 30/05/2011 17:45:01 Produced by the JSE SENS Department.
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