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ISB - Insimbi Refractory and Alloy Supplies Limited - Reviewed financial results

Release Date: 26/05/2008 12:55
Code(s): ISB
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ISB - Insimbi Refractory and Alloy Supplies Limited - Reviewed financial results for the year ended 29 February 2008 Insimbi Refractory and Alloy Supplies Limited Formerly Insimbi Alloy Supplies (Proprietary) Limited (Registration number 2002/029821/06) JSE share code: ISB ISIN Number: ZAE000116828 ("Insimbi" or "the company") REVIEWED FINANCIAL RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2008 HIGHLIGHTS - Revenue of R897,4 million up by 21,6% - Operating Profit of R53,5 million up by 80,2% - Profit before tax of R44,9 million up by 79,6% - Attributable earnings R26,6 million up by 55,4% - Headline Earnings of R22,4 million up by 31,1% - The listing of Insimbi on AltX post year end Condensed consolidated income statement Reviewed Audited 12 months 12 months 29 February 28 February 2008 2007
R`000 R`000 Revenue 897 428 737 862 Gross profit 83 432 63 809 Net administration and other operating (29 965) (34 138) costs Operating profit 53 467 29 671 Share of associate company`s profit 1 449 993 Profit on disposal of associate company 5 469 - Finance costs (15 670) (5 832) Interest received 190 158 Profit before taxation 44 905 24 990 Taxation (18 346) (7 904) Attributable to equity shareholders 26 559 17 086 Reconciliation of headline earnings Profit on disposal of property and (142) (6) equipment Profit on disposal of investment in (4 019) - associate company Headline earnings 22 398 17 080
Number of shares in issue (Pre-Listing) 5 364 5 364 Basic and fully diluted: Earnings per share (Rands) 4 951,34 3 185,31 Headline earnings per share (Rands) 4 175,62 3 184,19 Number of shares on listing (000`s) 260 000 260 000 Proforma basic and fully diluted: Earnings per share (cents) 10,22 6,57 Headline earnings per share(cents) 8,61 6,57 Condensed consolidated balance sheet Reviewed Audited 12 months 12 months
29 February 2008 28 February 2007 R`000 R`000 ASSETS Non-current assets 41 690 43 705 Current assets 182 621 194 833 Cash and cash equivalents 6 894 37 715 Total assets 231 205 276 253 EQUITY AND LIABILITIES Capital and reserves 4 066 65 411 Non-current liabilities 84 510 24 421 Current liabilities 142 629 186 421 Total equity and liabilities 231 205 276 253 Condensed consolidated cash flow statement Reviewed Audited 12 months 12 months
29 February 2008 28 February 2007 R`000 R`000 Cash generated by operations 55 210 31 330 before working capital changes (Increase) decrease in working (45 045) 18 010 capital Cash generated by operations 10 165 49 340 Net financing costs (15 480) (5 674) Dividends paid (87 904) - Taxation paid (11 703) (10 157) Cash flows from operating (104 922) 33 509 activities Cash flows from investing 7 010 (2 240) activities Cash flows from financing 67 091 (5 608) activities Net (decrease) increase in cash (30 821) 25 661 and cash equivalents Net cash and cash equivalents at 37 715 12 054 the beginning of the period Net cash and cash equivalents at 6 894 37 715 the end of the period Statement of changes in equity Reviewed Audited
12 months 12 months 29 February 28 February 2008 2007 R`000 R`000
Share capital (Ordinary) At beginning & end of year * * Retained earnings At beginning of year 65 411 48 325 Net profit for the year 26 559 17 086 Dividends paid (87 904) - At end of year 4 066 65 411 *Share capital equals 5 364 shares of 1 cent each = R53,64 SEGMENTAL REPORTING - REVENUE AND GROSS PROFIT Reviewed Audited
12 months 12 months 29 February 2008 28 February 2007 `000s `000s REVENUE BY DIVISION Foundry 226,586 181,697 Non Ferrous 167,122 88,929 Refractory 22,237 21,462 Speciality 171,146 323,999 Steel 198,452 - Rotary Kiln 43,388 64,338 Textiles 6,238 4,746 KwaZulu-Natal 62,259 52,691 897,428 737,862 GROSS PROFIT BY DIVISION Foundry 24,085 16,016 Non Ferrous 11,391 7,286 Refractory 2,697 2,678 Speciality 14,714 19,791 Steel 14,196 - Rotary Kiln 5,999 11,428 Textiles 2,040 1,101 KwaZulu-Natal 8,310 5,509 83,432 63,809
Commentary Insimbi was listed on the Alternative Exchange("AltX") of the JSE Limited ("JSE")on 14 March 2008. Shareholders are reminded that the financial results presented are for the unlisted group for the year ended 29 February 2008. Insimbi has posted pleasing financial results for the year ended 29 February 2008, in its 38th year of operation and third month as a listed company on the JSE. Group review Insimbi is principally a supplier of ferrous and non ferrous alloys, as well as refractory products, integrating the full supply, logistics and technical support function, primarily to the steel, cement and foundry industries. The company operates on a divisional basis, each specialising in specific industries and target markets. Most of the divisions are targeted at the infrastructure sector. The divisions are managed by divisional Directors who have in excess of 100 years combined experience in their specific target markets. Insimbi listed on AltX to primarily place it in a position to access capital markets, with a view to facilitate future strategic acquisitions, which will ensure long term sustainable growth. To this end a secondary aluminium smelting facility was acquired and some of the debt raised to fund a successful management buyout ("MBO"), which was concluded in April 2007, was settled. The increase in revenue and operating profit by R159,6 million and R23,8million respectively can be attributed to increased demand for Insimbi products and an improvement in gross margins from 8,7% in 2007 to 9,3% in 2008. The enhanced gross margins were achieved as a result of increased focus on strategic stock holdings, a weaker currency; and strong operating cost control which saw net administration and other operating expenses decreasing by 12,2% in 2008. Finance costs increased from R5,8 million to R15,7 million as a result of increased borrowings to fund the MBO. A summary of the interest bearing borrowings is reflected below: 2008 2007 Interest bearing borrowings Nedbank loans 88 512 27 090 Nedbank instalment leases 1 769 1 131 Nedbank overnight loan 15 200 Shareholders Loans 5 352 15 521 110 833 43 742
less current portion 26 323 19 321 84 510 24 421 The impact on EPS and HEPS as a result of the increased borrowings is R1 834,41 per share based on 5 364 shares in issue at year-end and 3,78 cents per share based on 260 million shares issued on listing. With the settlement of some of these borrowings, from the funds raised by the listing, the remaining debt bears interest at a fixed rate of 12,05%, which in the current interest rate climate is very positive for the company. Cash generated by operations was R10,2 million which was down from R49,3 million in the previous year mainly as a result of an increase in working capital requirements due to higher stock holdings and a reduction in creditors balances. Insimbi continues to generate positive cash flows which are a result of increased profitability and strong working capital management as well as increased sales volumes and commodity prices. Prospects It is anticipated that production will commence at the recently acquired secondary aluminium smelter by the end of May 2008. The capacity of the plant was increased from an expected 900 tons to approximately 1 300 tons of finished aluminium alloy per month, due to the reconfiguration and streamlining of the plant. The environment in which Insimbi operates remains extremely favourable and the continued focus in South Africa on the improvement and rehabilitation of local infrastructure, the demand driven escalation in commodity prices and weaker currency, should lead to increased organic growth in volumes, revenues and margins for Insimbi in the new financial year. Subsequent to the year end, trading conditions have continued to improve and so further improvement is anticipated for the 2009 financial results. Insimbi is committed to using its new capital raising platform to identify strategic acquisitions and stakes in producers of ferrous and non-ferrous alloys which are key to the operations. With a view to securing its long-term supply "pipe-line" Insimbi has embarked upon an aggressive strategy to identify suitable investment opportunities. Pre-Listing Statement ("PLS") Subsequent to the successful listing of Insimbi on the AltX in March 2008 and during the course of the February 2008 year end audit, it was identified that STC of R6 million, payable on the declaration of the preference dividend, pursuant to the redemption of the preference shares, was inadvertently excluded from the taxation charge in the Year Ending February 2008 Forecast (pages 6 and 44 of the PLS). This had an effect of reducing the EPS calculated on the 29 February 2008 forecast by 2,31 cents per share i.e. the forecast taxation charge of R8,8 million should have been R14,8 million and EPS of 10,94 cents per share should have been 8,61 cents per share. The STC, which was paid to SARS in May 2007 was however correctly disclosed in the Report of Consolidated Historical Financial Information for the Insimbi Group for the Six Months Ended 31 August 2007 (note 11 page 96 of Annexure 4). Notwithstanding this disclosure, a pro- forma EPS of 10,22 and HEPS of 8,61 cents per share, respectively was achieved. It should be noted that the above has no impact on the Year Ending 28 February 2009 forecast. Dividend policy Going forward, Insimbi intends to adopt a competitive dividend policy, which should reflect the growth, long-term earnings and cash flow of Insimbi, while maintaining an appropriate dividend cover. The directors are of the opinion that the dividend policy proposed in the PLS is achievable. Basis of preparation of the reviewed results The condensed financial statements comprise a consolidated balance sheet at 29 February 2008, a consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year ended 29 February 2008. The condensed financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") and the presentation and disclosure requirements of IAS 34, Interim Financial Reporting, JSE Listings Requirements and South African Companies Act. The condensed financial statements have been prepared on the historical cost basis except for certain financial instruments measured at fair value. The accounting policies adopted have been consistently applied. Reviewed results The auditors, BDO Spencer Steward (JHB) Inc have reviewed these results and their unmodified review opinion is available for inspection at the company`s registered office. These results and an overview of Insimbi are available at www.insimbi- alloys.co.za. By order of the Board DJ O Connor MD Wadeville 26 May 2008 Registered office 359 Crocker Road, Wadeville Ext 4, Germiston, 1422 (PO Box 14676, Wadeville, 1422) Telephone: 011 902 6930 Directors Directors at 29 February 2008 DJ O Connor (MD), PJ Schutte, CF Botha, F Botha R Makkink, LT Tessendorf (alt), EP Liechti Subsequent to year end, the following changes have been made to the Board: DJ O Connor appointed non-executive chairman PJ Schutte appointed CEO L Mashologu appointed as an independant non-executive director Company Secretary: Roy Makkink Transfer secretaries Computershare Investor Services (Proprietary) Limited PO Box 61051, Marshalltown 2107 Telephone: 011 370 5000 Sponsor PricewaterhouseCoopers Corporate Finance (Proprietary) Limited 2 Eglin Road, Sunninghill, 2157 Private Bag X36, Sunninghill, 2157 Telephone: 011 797 4440 Website address www.insimbi-alloys.co.za Date: 26/05/2008 12:55:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. 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