| Thu 6 Oct 2011, 12:32 | | ISB - Insimbi Refractory and Alloy Supplies Ltd - Unaudited consolidated |
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ISB
ISB
ISB - Insimbi Refractory and Alloy Supplies Ltd - Unaudited consolidated
condensed financial results for the six months ended 31 August 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" or "the group")
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2011
Key Financial Indicators
- Revenue increased by 10% to R 454 million compared to the previous period.
- Operating costs are down by 13 %.
- Profit before taxation is 34% higher when compared to the results for the
same reporting period in the previous year, after adjusting for non
recurring items.
- Gross profit decreased by 6% to R 48 million.
- EPS down by 9.3% when compared to the adjusted results for the same
reporting period in the previous year.
- HEPS up by 20,2%.
- Operations generated R30 million cash in the 6 months to 31 August 2011
compared to R24 million in the previous comparative period, reflecting
continued prudent cash management.
- Tangible NAV up by 10% on comparative period and 24% on February 2011.
- Dividend declaration number five of 2c per share.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited
Unaudited Restated Audited
6 months 6 months Year
to to ended
31 August 31 August 28
February
2011 2010 2011
R`000 R`000 R`000
Revenue 453 592 412 043 732 453
Cost of sales (405 610) (360 954) (642 665)
Gross profit 47 982 51 089 89 788
Negative goodwill - 5 791 5 791
Operating costs (30 492) (35 094) (71 000)
Operating profit 17 490 21 786 24 579
Finance income 257 479 1 186
Finance costs (3 467) (5 818) (8 771)
Profit before taxation 14 280 16 447 16 994
Taxation (3 554) (4 539) (5 001)
Profit for the period/year 10 726 11 908 11 993
Currency translation differences 9 72 20
Total comprehensive income 10 735 11 980 12 013
Attributable to equity holders 10 735 11 980 12 013
Basic and fully diluted
Earnings Per Share (cents) 4.18 4.61 4.63
CONSOLIDATED STATEMENT OF Unaudited
FINANCIAL POSITION
Unaudited Restated Audited
As at As at As at
31 August 31 August 28
February
2011 2010 2011
Assets R`000 R`000 R`000
Non-Current Assets
Property, plant and equipment 34 713 38 604 33 700
Intangible assets 38 438 38 438 38 438
Deferred tax 3 997 3 195 3 827
77 148 80 237 75 965
Current Assets
Inventories 77 349 67 598 62 982
Trade and other receivables 106 792 109 580 113 379
Cash and cash equivalents 21 112 36 540 37 763
205 253 213 718 214 124
Total assets 282 401 293 955 290 089
Equity
Capital and Reserves 88 990 84 844 79 749
Liabilities
Current and Non-current 193 411 209 111 210 340
Total Equity and Liabilities 282 401 293 955 290 089
CONSOLIDATED STATEMENT OF CHANGES Unaudited
IN EQUITY
Unaudited Restated Audited
As at As at As at
31 August 31 August 28
February
2011 2010 2011
R`000 R`000 R`000
Share capital* - - -
Share premium - Issue of shares 44 442 44 442 44 442
Treasury shares
Purchase of shares by subsidiary (1 732) (238) (238)
Foreign Currency Translation 163 62 154
Reserve
Retained earnings at beginning of 35 391 28 598 28 598
year
Net profit for the period/year 10 726 11 980 11 993
Dividends paid - - (5 200)
Retained earnings at end of 46 117 40 578 35 391
period/year
Total Equity 88 990 84 844 79 749
*Share capital equals 260 000 000
shares at 0.000025 cents each =
R65
CONSOLIDATED STATEMENT OF CASH Unaudited
FLOWS
Unaudited Restated Audited
6 months 6 months Year
to to ended
31 August 31 August 28
February
2011 2010 2011
R`000 R`000 R`000
Cash flows from operating
activities
Cash generated from operations 36 096 33 166 26 122
Finance income 257 478 1 186
Finance costs (3 467) (4 482) (8 771)
Taxation paid (2 885) (5 125) (11 488)
Net cash generated from operating
activities
30 001 24 037 7 049
Cash flows from investing
activities
Property, plant and equipment (973) (5 000) (3 864)
Acquisition of businesses - (9 775) (9 775)
Purchase of treasury shares (1 504) -
Net cash utilised in investing
activities
(2 477) (14 775) (13 639)
Cash flows from financing
activities
Increase/(Decrease) in borrowings (40 987) 5 994 19 742
Dividends paid - - (5 200)
Net cash generated from/(utilised
in) financing activities
(40 987) 5 994 14 542
Total cash movement for the (13 463) 15 256 7 952
period/year
Cash at the beginning of the 29 237 21 285 21 285
period/year
Total cash at the end of the 15 774 36 541 29 237
period/year
CONDENSED SEGMENTAL REPORT Unaudited
FOR THE YEAR ENDED 28 FEBRUARY Unaudited Restated Audited
2011
6 months 6 months Year
to to ended
31 August 31 August 28
February
2011 2010 2011
R`000 R`000 R`000
Revenue by segment
Foundry 288 364 229 047 411 703
Steel 123 802 133 875 219 027
Refractory 41 426 49 121 101 723
453 592 412 043 732 453
Gross profit by segment
Foundry 30 714 30 205 56 914
Steel 11 282 11 589 14 269
Refractory 5 986 9 295 18 605
47 982 51 089 89 788
OTHER GROUP SALIENT FEATURES Unaudited
Unaudited Restated Audited
6 months 6 months Year
to to ended
Headline earnings per share: 31 August 31 August 28
February
Basic attributable earnings per 2011 2010 2011
share
are calculated by dividing the R`000 R`000 R`000
net
profit attributable to
shareholders by the number of
shares in issue during the year.
Number of weighted shares in 260 000 260 000 260 000
issue at the end of the
period/year
Less: treasury shares held in (3 332) (342) (342)
a subsidiary at the end of the
year
256 668 259 658 259 658
Profit attributable to ordinary 10 735 11 980 12 013
shareholders
Adjusted for (profit)/loss on
sale
of property, plant and equipment (48) (91)
Adjusted for impairment of - 2 800 4 000
goodwill
Adjusted for negative goodwill - (5 791) (5 791)
(Gain from bargain purchase)
Headline earnings for the group 10 687 8 989 10 131
Basic and fully diluted headline 4,16 3,46 3,90
earnings per share (cents)
Dividends per share - - 2,00
Net asset value per share (cents) 34,67 32,68 30,71
Tangible net asset value per 19,69 17,87 15,91
share (cents)
Depreciation 2 444 2 466 5 203
Capital expenditure 1 034 5 198 4 350
Commitments: Operating Leases 7 442 6 529 8 646
Overview
The interim period ended 31 August 2011 has shown strong revenue growth although
gross margins have been negatively impacted by the strength of the rand during
this period. Markets continue to be volatile although much improved on the
previous 2 years. It is pleasing to note that the monthly performance of the
group during the 6 months ending 31 August 2011, has been stable and
consistently improved each month during the period, with the exception of July
2011 which was lower as a result of the NUMSA strike action.
The recent weakening of the rand against the USD and Euro is a welcome
development as this makes our exports and our customers` exports more
competitive as well as offering some protection against cheap competing imports.
This bodes well for the rest of the financial year notwithstanding the turmoil
in Europe and the USA and we remain positive with regards to the medium and
longer term growth prospects in our primary markets in South Africa and sub-
Saharan Africa.
Insimbi generated strong cash-flows during the period under review and the board
has approved a 2 cent per share interim dividend distribution after
conservatively assessing all the factors relevant to this decision, including
the macro-economic and business outlook.
Financial Performance
Group revenue for the period was R454 million, 10 % up on the R412 million
achieved in the comparative period ending 31 August 2010 and 49% up on the R305
million achieved in the comparative period ending 31 August 2009. This is
significant as it is clear evidence that the market is showing sustainable
improvement since the beginning of the global economic crisis.
This improved performance can be attributed to improved market conditions and
demand. It is also important to note that this increased revenue has been
achieved notwithstanding the negative impact of the NUMSA strike in July 2011
and the low demand from Mittal as a result of their publicised operational
problems. We anticipate that Mittal will resume normal operations during
November 2011, which is positive for Insimbi.
Gross profit was R48 million, 6% down on the R51 million achieved for the period
ending 31 August 2010 (but 26% up on the period ending 31 August 2009). The main
reason behind the drop in gross profit is attributable to the strength of the
rand during the period under review which has translated into a gross margin of
10.6% when compared to 12.4% in 2010 and 12.5% in 2009. We are hopeful that with
the recent weakening of the rand, margins will improve.
Group operating profit (after adjusting for the non recurring negative goodwill
in the previous comparative period of R5.8 million on the acquisition of Metlite
group), is 9% up on the previous period ending 31 August 2010.
Group operating costs have been well controlled during the period under review
and at R30.4 million are 13% lower than the corresponding period last year.
Group finance costs are 40% lower and group profit before taxation (after
adjusting for the non recurring negative goodwill in the previous comparative
period of R5.8 million on the acquisition of Metlite group), is 34% higher than
the corresponding period ended 31 August 2010.
Insimbi achieved group EPS and HEPS of 4.18 and 4.16 cents per share
respectively compared to 4.61 and 3.46 cents per share in the previous
comparative period (2009: 2.61 and 2.62 cents per share respectively). This
equates to a 9.3% decrease in EPS and a 20.2% increase in HEPS respectively.
Working capital management and cash-flow has remained 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 R30.0 million cash
generated from operations.
Restated results for the prior period
As per the Chief Executive Officer`s Review in our 2011 Annual Report, page 7,
the results for the comparative period have been adjusted due to the
finalisation of the valuation of the tangible assets of Metlite.
At the time of the acquisition, the Board estimated the fair value of the
tangible assets to be around R12,884 million subject to completion of the
valuation required in terms of IFRS 3 (Revised).
The required valuations were performed in February 2011 and resulted in two
values being obtained as follows:
- Fair Value of R5,836 million and
- Replacement Value of R13,555 million
In terms of IFRS 3 para 18 and IAS 16 para 33,
the required valuation resulted in the Fair Value Assessment of R5,836
million.
As a result, this reduction had a direct impact on the after tax attributable
earnings of R5,075 million for the comparative period.
Operational Review
Insimbi has remained strongly cash generative throughout the period under review
due to the Group`s diverse product offering, continued profitability and
attention to working capital management.
The foundry segment has shown pleasing signs of recovery and growth compared to
the very difficult comparative period that this segment experienced in the
previous year. The foundry industry is often referred to as the "barometer" of
the South African economy and the fact that is has shown such positive growth in
the face of a strong rand, is cause for optimism.
The steel segment was showing strong signs of recovery but the effect of
Mittal`s operational problems, definitely detracted from this during the 6
months under review. However, we remain confident that Mittal will successfully
overcome their challenges later this quarter and that this segment will continue
to show sustainable recovery.
The refractory segment continues to experience difficult trading conditions but
this segment does traditionally lag behind the steel and foundry segment "cycle"
and we remain optimistic of a recovery. Our major concern here is that despite
large 2011/2012 Budget allocations by the Minister of Finance to the various
infrastructure upgrade initiatives of government, that these budgets do not in
fact get spent, as has happened in the previous years. However, we are confident
that the various ministries responsible for this infrastructure upliftment, are
committed to spending their budget allocations effectively.
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.
Prospects
Despite the current uncertainty in Europe and the USA, Insimbi has experienced
definite signs of what we believe to be, sustainable improvements in our
traditional target markets, most of which are considered to be "emerging". It is
unclear at this stage what effects the unfolding events in Europe and USA will
have on the local, regional and other emerging market economies but we remain
confident that Insimbi is well prepared to deal with them. We have a diverse
range of product offerings that have proven to be resilient throughout the
global crisis. The fact that Insimbi has remained profitable throughout this
crisis period, is proof of this.
We are also optimistic and confident that the consistent and improved revenues
experienced during the first 6 months of our financial year, are sustainable.
Our experience during the comparative period last year, was of massive
volatility with monthly revenues varying greatly from one month to the next.
This consistency combined with the recent weakening of the rand against major
currencies, is positive for Insimbi.
We continue to prudently evaluate strategic acquisitions and we remain focused
on expanding our "basket" of products to strengthen our position as a market
leader in the ferro-alloy and refractory market
Accounting policies
The condensed consolidated financial statements for the interim period ended 31
August 2011 have been prepared in accordance with International Financial
Reporting Standards (IFRS), IAS 34, 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.
Dividends
Notice is hereby given that Insimbi has declared an interim dividend (dividend
declaration 5) for the six months ended 31 August 2011 of 2 cents per share.
The salient dates applicable to the interim dividend are as follows:
Last day to trade cum dividend Friday, 21 October 2011
First day to trade ex dividend Monday, 24 October 2011
Record date Friday, 28 October 2011
Payment date Monday, 31 October 2011
No share certificates will be dematerialised or rematerialised between Monday,
24 October 2011 and Friday, 28 October 2011, both days inclusive.
DJ O Connor P Schutte
Chairman Chief Executive Officer
06 October 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: Bridge Capital Advisors (Proprietary) Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 06/10/2011 12:32:57 Produced by the JSE SENS Department.
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