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BSS - BSI (SA) Limited - Unaudited group condensed interim financial results
for the six months ended 30 September 2008
BSI (SA) Limited
(Name to be changed to BSI Steel Limited on 1 December 2008)
(Incorporated in the Republic of South Africa)
(Registration number 2001/023164/06)
(JSE code: BSS ISIN: ZAE000107371)
("BSI" or "the company")
Highlights
- Revenue up 79%
- Attributable earnings for six months up 223% to R127,5 million
- Earnings per share up 177%
- Headline earnings per share up 177%
- Net tangible asset value per share up 211%
UNAUDITED GROUP CONDENSED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED
30 SEPTEMBER 2008
Condensed Group Income Statements
Unaudited Unaudited Audited
6 months 6 months 12
30 30 months
September September 31 March
2008 2007 2008
R`000 R`000 R`000
Revenue 1 139 886 636 903 1 432
302
Gross Profit 280 076 105 791 297 034
Other income 73 274 1 882
Other costs (96 361) (37 999) (139
448)
Earnings before interest, 183 788 68 066 159 468
taxation, depreciation and
amortisation ("EBITDA")
Depreciation (2 946) (1 904) (6 341)
Profit before interest and 180 842 66 162 153 127
taxation
(Loss)/Profit on disposal of (66) (120) 1 307
assets
Interest received 628 402 1 487
Interest paid (11 804) (12 650) (22 387)
Profit before taxation 169 600 53 794 133 534
Taxation (42 100) (14 320) (34 167)
Earnings attributable to 127 500 39 474 99 367
ordinary shareholders
Reconciliation of headline
earnings:
Earnings attributable to 127 500 39 474 99 367
ordinary shareholders
Loss/(Profit) on disposal of 66 120 (1 307)
assets
Tax impact of profit on (18) - 366
disposal of assets
Headline earnings attributable 127 548 39 594 98 426
to ordinary shareholders
Weighted average shares in 719 788 616 854 660 174
issue on which earnings are 481 996 383
based
Earnings per share (cents) 17.7 6.4 15.0
Headline earnings per share 17.7 6.4 14.9
(cents)
Condensed Group Balance Sheets
Unaudited Unaudited Audited
30 30 31 March
September September 2008
2008 2007 R`000
R`000 R`000
ASSETS
Non current assets
Property, plant and 142 402 69 712 103 082
equipment
Goodwill 13 442 12 305 13 442
Intangible assets 3 106 - 1 528
Deferred taxation 1 236 3 289 2 860
Current assets 858 044 471 019 597 165
Current tax receivable 91 581 1 337
Inventories 389 509 154 024 188 440
Derivative financial 3 039 2 478 838
instruments
Trade and other receivables 456 181 303 681 380 314
Cash and cash equivalents 9 224 10 255 26 236
Total assets 1 018 230 556 325 718 077
EQUITY AND LIABILITIES
Equity
Share capital 123 122 1 124 301
Reserves 6 784 1 474 6 711
Retained income 288 394 99 995 160 405
Liability for the purchase - 24 860 -
of minorities
Foreign currency translation 7 988 (960) 5 662
reserve
Total shareholders` equity 426 288 125 370 297 079
Liabilities
Non-current liabilities
Borrowings 40 151 21 510 46 255
Deferred tax 6 192 2 696 6 101
Current liabilities 545 599 406 749 368 642
Loans from shareholders - 1 584 -
Current tax payable 39 552 18 382 23 669
Borrowings 12 457 1 722 15 702
Derivative financial 3 039 2 552 -
instruments
Trade and other payables 199 099 165 641 189 517
Vendors - 36 253 -
Bank overdraft 291 452 180 615 139 754
Total equity and liabilities 1 018 230 556 325 718 077
Number of shares in issue 718 854 616 854 719 854 996
996 996
Net asset value per share 59.3 20.3 41.3
(cents)
Net tangible asset value per 57.0 18.3 39.2
share (cents)
Condensed Group Statements of Changes in Equity
Unaudited Unaudited Audited
30 30 31 March
September September 2008
2008 2007 R`000
R`000 R`000
Balance at beginning of 297 079 61 996 61 996
period
Total earnings 127 500 39 474 99 367
Issue of shares - - 127 384
Treasury share held (1 179) - (1 920)
Listing expenses - - (1 163)
Revaluation - - 4 651
Purchase of foreign - - 3 397
subsidiary
Purchase of minority - 24 860 533
interests
Currency translation 2 888 (960) 2 834
differences
Balance at end of period 426 288 125 370 297 079
Condensed Group Cash Flow Statements
Unaudited Unaudited Audited
30 30 31 March
September September 2008
2008 2007 R`000
R`000 R`000
Cash flows from (117 772) (51 571) (98 420)
operating activities
Cash flows from 147 556 47 576 107 675
operations
Changes in working (265 328) (99 147) (206 095)
capital
Cash flow from investing (43 649) (15 729) (71 183)
activities
Cash flow from financing (7 488) (576) 161 272
activities
Net increase in cash and (168 909) (67 876) (8 331)
cash equivalents
Cash and cash (113 517) (105 322) (105 322)
equivalents at beginning
of period
Effect of exchange rate 198 - 136
movement on cash
balances
Cash and cash (282 228) (173 198) (113 517)
equivalents at end of
period
Segment Report
Unaudited Unaudited Audited
30 30 31 March
September September 2008
2008 2007 R`000
R`000 R`000
Gross revenue
Stockists 403 919 250 047 514 774
Bulk sales 389 814 189 311 440 163
Exporting 358 136 190 535 471 291
Other (11 983) 6 432 6 074
1 139 886 636 325 1 432 302
Profit before interest
and taxation
Stockists 61 622 24 186 41 240
Bulk sales 34 504 15 373 40 724
Exporting 85 437 28 172 67 070
Other (787) (1 689) 5 400
180 776 66 042 154 434
OVERVIEW
The directors of BSI are pleased to present the interim financial results for
the six months ended 30 September 2008 ("the interim period").
The BSI group of companies operates in the steel and associated industries
with strategically located operations in South Africa, Democratic Republic of
the Congo ("DRC") and Zambia to service the Southern African markets. BSI
markets through three distinct channels, being stockists, bulk sales and
exports; all of these divisions are supported by the company`s steel
processing operations.
From January to September 2008, BSI`s South African based operations,
excluding exports, achieved a 39% increase in tonnage attributable to organic
growth and the introduction of new products. The South African Iron & Steel
Institute ("SAISI") reported a 10.2% increase in volumes; both comparable to
the same period in 2007.
FINANCIAL RESULTS
Revenue for the interim period increased by 79% to R1,140 billion (2007:
R636,9 million) with EBITDA increasing by 170% to R183,8m (2007: R68m). The
growth in revenue is a result of the increased volume and higher
international steel prices driving local prices higher.
BSI maximized margin from 16,6% (2007) to 24,6% on the rising up-cycle
experienced in late 2007 and into 2008 by increasing our steel stockholding
by 106%.
The abnormally high steel price has now begun to subside with local pricing
following the international trend. To align BSI to a deflationary steel
environment the Group is de-stocking to minimize the downside. This has
resulted in the September trade payables being low while the trade receivable
remains relatively high.
The Group`s overdraft peaks at month end as the trade payables are paid prior
to month end with the trade receivables being received early in the new
month.
The good management of working capital has allowed interest paid to reduce
even in the cycle of large growth.
Operating costs have been closely managed. Fixed overheads as a percentage of
sales has dropped significantly while the variable costs, which include
transport and commissions, have increased in line with turnover.
BSI operating activities generated R147,6 million cash during the interim
period (2007: R46,6 million) which, together with the increase in overdraft,
funded the growth in working capital of R265,3 million.
Long term financing facilities have been secured to finance the expansion of
the
Group`s infrastructure, including R33 million towards the Klipriver project.
PROSPECTS
The world financial crisis has precipitated a dramatic and unprecedented drop
in steel prices in the order of 40% to 50%. The tightening of credit lines
has directly impacted on steel trading world-wide; steel consumers and
stockists have been reluctant to place orders in anticipation of further
price declines.
The market was heavily stocked early in the third quarter, resulting in real
demand being fulfilled through large inventories. It is therefore difficult
to establish to what extent the mills` low order books are a fair reflection
of true diminishing demand. Nevertheless, it is fair to say that
international demand has dropped significantly; our estimate is in the order
of 5% to 15%.
South African prices have not dropped as significantly as world prices, due
to the Rand depreciation. Local prices have dropped approximately R2500/t
from October to December 2008. This equates to an overall price decrease of
25% on September levels. Given the current international pricing trend and
Rand/USD exchange rate, further steel price decreases for 2009 are not
anticipated at this stage, although it is possible if the world slips into a
sustained recession. Mills world-wide have cut production by 35%, which
should stabilize prices to some extent.
BSI has taken dramatic steps to reduce inventory as quickly as possible and
expects tough trading conditions until the end of January 2009. Our stock
levels are significantly lower than the industry average. On the positive
side, local industry inventories are expected to be at an all time low by
February/March 2009, which will present some good trading opportunities.
In light of a tighter economic environment and weaker pricing and demand for
steel, cost control and expense containment will be management`s core focus
for the second-half of this financial year. Gross margins are likely to
decrease, however we expect to still trade profitably at these levels.
The international demand and price for commodities has dropped significantly,
which may negatively affect our exports to certain mining regions.
Nevertheless, ongoing demand is expected from existing mines and projects
that are under construction.
Local demand is expected to fall for the first half of 2009, although
infrastructural projects will provide some relief. Demand for the third and
fourth quarter is expected to increase and probably exceed 2008 levels for
the same period.
In the second half and into 2009 the Group may consider some complementary
acquisitions to enhance the Group`s profile and business platform. In a
tougher environment, smaller competitors, who lack BSI`s financial strength
and market profile, may be persuaded to sell at very attractive levels.
The Klipriver project is on time and on budget, with a phased occupation
taking place from December 2008 to March 2009. This new facility promises a
considerable improvement in general efficiencies, service levels and an
increased steel processing capacity.
HUMAN CAPITAL
BSI is a people orientated company and has made a significant investment in
staff. The goal is to become the employer of choice in our industry. BSI`s
strong HR department and philosophy has resulted in a committed, dedicated
team, which will stand us in good stead through the tough months ahead.
BSI provides employment for 407 people.
POST BALANCE SHEET EVENTS
There have been no significant events subsequent to 30 September 2008 and up
to the date of this report.
SHARE CAPITAL
BSI continues with the repurchase of its securities. The repurchase of the
shares is effected through the order book operated by the JSE trading system
and done without any prior understanding or arrangement between the company
and the counter party. The shares will be repurchased by a subsidiary and
held as treasury stock.
At the end of the interim period 1,000,000 shares were repurchased.
BSI remains fully committed to our BBBEE program in the interests of the
country. Discussions are ongoing with potential black investors although a
transaction is not imminent. BSI is planning a BBBEE audit for January 2009.
DIVIDEND POLICY
The group has provided to either pay its maiden dividend or enhance the share
repurchase program.
BASIS OF PREPARATION
The condensed consolidated interim financial results statements for the six
months ended 30 September 2008 have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS) and the presentation and disclosure requirements of
International Accounting Standards 34, Interim Financial Reporting, the
Listings Requirements of the JSE Limited and the Companies Act, 61 of 1973 as
amended.
The accounting policies used to prepare these interim financial statements
are consistent with those applied in the prior interim period and at previous
year-end, except where the group has adopted new or revised IFRS standards.
BASIS OF MEASUREMENT
The condensed interim financial statements have been prepared on the
historical cost basis except for certain financial instruments measured at
fair value.
These results have not been audited nor reviewed by the company`s auditors.
These consolidated interim financial statements incorporate the financial
statements of the company and its subsidiaries. All significant transactions
and balances between group enterprises are eliminated on consolidation.
STATEMENT ON GOING CONCERN
The condensed 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.
By order of the Board
21 November 2008
W L Battershill
Joint Chief Executive Officer
J R Waller
Chief Financial Officer
CORPORATE INFORMATION
Non executive directors: N G Payne, B M Khoza, N M Anderson (Alt), R G Lewis
(Alt)
Executive directors: W L Battershill, G D G Mackenzie, J R Waller, C Parry, W
R Teichmann
Registration number: 2001/023164/06
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: 21/11/2008 17:51:01 Supplied by www.sharenet.co.za
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