Wrap Text
AET - Alert Steel Holdings Limited - The reviewed financial results for the six
months ended 31 December 2010 Restructuring plan Changes to the board
Alert Steel Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET ISIN: ZAE000092847
("Alert" or "the company" or "the group")
ANNOUNCEMENT RELATING TO:
THE REVIEWED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
RESTRUCTURING PLAN
CHANGES TO THE BOARD
REVIEWED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
Condensed Statement of Comprehensive Income
Note Reviewed Unaudited Audited
s December December June
2010 2009 2010
6 months 6 months 12 months
R`000 R`000 R`000
Revenue 520 690 505 234 1 025 884
Gross profit 75 522 115 490 210 734
Other income 4 651 7 486 13 297
Goodwill impairment 1 (17 848) (35 104) (35 324)
Operating costs 2 (126 (116 200) (255 288)
283)
Depreciation (5 587) (4 561) (9 125)
Loss before interest and (69 545) (32 889) (75 706)
taxation
Net finance costs (14 316) (9 223) (21 122)
Loss before taxation (83 861) (42 112) (96 828)
Taxation (367) 1 962 (2 146)
Total comprehensive loss (84 228) (40 150) (98 974)
for the period,
attributable to ordinary
shareholders
Reconciliation of loss:
Loss attributable to (84 228) (40 150) (98 974)
ordinary shareholders
Profit on sale of fixed 76 - 210
assets
Goodwill impairment 17 848 35 104 35 325
Headline loss attributable (66 303) (5 046) (63 439)
to ordinary shareholders
Weighted average number of 248 428 248 428 248 428
shares in issue (`000)
Fully diluted weighted 256 028 256 028 256 028
average number of shares in
issue (`000)
Loss per share (cents) (33,9) (16,2) (39,8)
Headline loss per share (26,7) (2,0) (25,5)
(cents)
Fully diluted loss per (32,9) (15,8) (39,0)
share (cents)
Fully diluted headline loss (25,9) (2,1) (25,1)
per share (cents)
Note:
Goodwill was impaired as per the accounting policies consistent with previous
years.
Operating costs includes a bad debt provision of R17,5 million (2009: 6,9
million) (2010: 40,7 million) and restructuring costs of R4,5 million.
Condensed Group Statement of Financial Position
Notes Reviewe Unaudited Audited
d December June
Decembe 2009 2010
r 2010 6 months 12 months
6 R`000 R`000
months
R`000
ASSETS
Non-current assets 155 098 177 351 177 792
Investment property 5 991 5 991 5 991
Property, plant and 1 148 510 146 113 152 934
equipment
Goodwill 2 - 19 561 17 848
Other financial assets - 644 -
Deferred taxation 597 5 042 1 019
Current assets 246 438 313 061 383 252
Inventories 131 670 163 653 196 680
Loans to joint ventures - 6 692 95
Loans to director 3 6 756 - 5 427
Current tax receivable 1 415 3 839 1 397
Trade and other 99 037 134 372 167 917
receivables
Cash and cash equivalents 7 560 4 505 11 736
Total assets 401 536 490 412 561 044
EQUITY AND LIABILITIES
Total shareholders` funds 8 286 150 900 92 076
Non-current liabilities 67 530 78 782 80 188
Other financial 67 530 78 782 79 858
liabilities
Deferred taxation - - 330
Current liabilities 325 720 260 730 388 780
Loans from joint ventures - 337 16 006
Loans from director 4 55 - 1 419
Other financial 19 213 19 219 16 585
liabilities
Current tax payable 22 591 833 21 414
Trade and other payables 137 563 88 758 189 282
Provisions 745 - 64
Bank overdraft 145 553 151 583 144 010
Total equity and 401 536 490 412 561 044
liabilities
Number of shares in issue
(net of treasury and 248 428 248 428 248 428
transaction shares)
(`000)
Fully diluted number of
shares in issue (`000) 5 256 028 256 028 256 028
Net asset value per share 3,3 60,7 37,1
(cents)
Net tangible asset value 3,3 52,9 29,9
per share (cents)
Notes:
Property, plant and equipment includes an amount of R70,7 million which relates
to the property held through Aquarella Investments 454 (Pty) Ltd, a wholly owned
subsidiary of Alert. Refer to the heading Restructuring Plan, Nedbank Heads of
Agreement for further information.
Goodwill was impaired as per the accounting policies consistent with prior
years.
(3 & 4) Credit was granted to two companies, controlled by Mr. W.F.
Schalekamp, the CEO of the group, without the approval of the board of directors
and shareholders. These accounts have since been reclassified as loans, and
attract interest at market related rates. A payment of R2,8 million was made
after December 2010.
(5) The 7 600 000 ordinary shares issued to the Alert Share Incentive Scheme
are treated as "treasury shares."
Condensed Group Statements of Changes in Equity
Reviewed Unaudited Audited
December December June
2010 2009 2010
6 months 6 months 12 months
R`000 R`000 R`000
Balance at beginning of 92 076 191 050 191 050
period
Shares issued - - 2 366
Loss for the period under (84 228) (40 150) (98 974)
review
Acquisition share based - - (2 366)
payment reserve
Addition to foreign 438 - -
translation reserve
Balance at end of period 8 286 150 900 92 076
Condensed Group Statement of Cash Flows
Reviewe Unaudited Audited
d December June
Decembe 2009 2010
r 2010 6 months 12 months
6 R`000 R`000
months
R`000
Cash inflow/(outflow) from 23 824 (29 932) (19 953)
operating activities
Cash (outflow)from investing (2 568) (12 305) (20 292)
activities
Cash inflow/(outflow) from (26 13 815 26 626
financing activities 974)
Net decrease in cash and cash (5 718) (28 422) (13 619)
equivalents
Cash and cash equivalents at (132 (118 656) (118 656)
beginning of period 275)
Cash and cash equivalents at (137 (147 078) (132 275)
end of period 993)
Condensed Segmental Report
Reviewed Unaudite Audited
December d June
2010 December 2010
6 months 2009 12
R`000 6 months months
R`000 R`000
Comprehensive income
Revenue
Retail 500 289 477 026 987 119
Reinforcing manufacturing 20 401 28 208 38 765
520 690 505 234 1 025
884
(Loss)/Profit before interest,
goodwill impairment and taxation
Retail (49 289) 3 164 (38 230)
Reinforcing manufacturing (2 408) (949) (2 151)
(51 697) 2 215 (40 381)
Depreciation
Retail 5 463 4 441 8 891
Reinforcing manufacturing 124 120 234
5 587 4 561 9 125
Reviewe Unaudite Audited
d d June
Decembe December 2010
r 2010 2009 12
6 6 months months
months R`000 R`000
R`000
Financial position
Reportable segment assets
Retail 368 336 426 977 495 461
Reinforcing manufacturing 10 881 17 805 22 070
379 217 444 782 517 531
Reportable segment liabilities
Retail 221 902 182 393 270 856
Reinforcing manufacturing 3 149 4 366 14 933
225 051 186 759 285 789
Reconciliation of segmental
assets
Total assets 401 536 490 412 561 044
Goodwill - (19 561) (17 848)
Investment property (5 991) (5 991) (5 991)
Deferred taxation (597) (5 042) (1 019)
Current taxation (1 415) (3 839) (1 397)
Loans receivable (6 756) (6 692) (5 522)
Cash and cash equivalents (7 560) (4 505) (11 736)
Segmental assets 379 217 444 782 517 531
Reconciliation of segmental
liabilities
Current liabilities 325 720 260 730 388 780
Bank overdrafts (145 (151 (144
553) 583) 010)
Current taxation liabilities (22 (833) (21 414)
591)
Loans payable (55) (337) (17 425)
Non-current liabilities 67 530 78 782 79 858
Segmental liabilities 225 051 186 759 285 789
OVERVIEW
The directors of Alert are presenting the reviewed financial
results for the six months ended 31 December
2010.
The difficult trading conditions experienced during the
previous financial year, continued during the first half of
this financial year. Although turnover increased by 3,1%,
margins remained under pressure while operating costs remained
high in comparison to turnover. Many branches continued to make
losses. Although stock levels were reduced, it still remains
high. The collection of debtors became very challenging and
contributed to the company`s cash flow problem. The
unacceptable high debt gives rise to very high finance charges.
The above factors forced the directors to review the group`s
strategy going forward and to agree the restructuring of the
group balance sheet. The board also decided that the group must
refocus on its core business being the retail of steel and
steel related products and services. Every branch was evaluated
and where it was not expected that a branch would return to
profitability in the near future, the branch was closed down.
These steps resulted in the closing down of the Wonderboom
Plumbing and Kya Sands branches and the disposal of the
Plumbing branch in East Lynne as well as the sell of
Randfontein, Klerksdorp and Lichtenburg branches. Closing down
costs, i.e. retrenchment costs, contributed to the increase in
operating expenses over the short term.
FINANCIAL RESULTS
Revenue increased by 3,1 % to R520,7 million (2009: R505,2
million) during the interim period, which was a marginal
increase in comparison with the period ending December 2009.
Gross profit decreased by 34,6 % to R75,5 million (2009: R115,5
million) and gross profit margins decreased to 14,5 % (2009:
22,7 %) mainly as a result of the decrease in steel prices,
more competitive market as a result of most retailers cutting
prices to liquidate stock, as well as the loss of settlement
discount because of cash restraints.
Operating costs increased by 8,7 % to R126,3 million (2009:
R116,2 million) mainly as a result of a large increase in the
bad debt provision of R17,5 million (2009: R6,9 million),
expenses as a result of restructuring of R4,5 million,
increases in property rental expenses of R4,2 million and
transport expenses of R1,6 million.
Headline loss for the interim period increased to -R66,3
million (2009: -R5,0 million) as a result of the decreased
gross profit margin, increased operating expenditure and an
increase in finance costs. Headline loss per share increased
to -26, 7 cents (2009: -2, 0 cents) for the interim period.
PROSPECTS
The Company can continue with rationalization activities as
previously announced.
Alert`s strategic objectives for the next twelve months are:
Sell all non-core properties and assets in Alert.
Exit all non-core product lines and dispose of products by means
of an established project plan and refocus brand back to its
core i.e. to only invest in steel and steel related products.
Develop a marketing plan to underpin the group`s return to
profitability and the roll-out of the new strategy.
Identify areas for establishment of compact type branches as per
the new strategy. (To be implemented as a medium term strategy
action).
Finalise the exit of the Kya Sands branch cost effectively.
Implement the financial and debt restructuring program with
financiers and stakeholders.
Enhance the board of directors and management team to ensure the
success of the business going forward.
RESTRUCTURING PLAN
OVERVIEW
The business environment in which Alert operates has become
extremely challenging due to the volatility in world steel
markets, precipitated by the renewed financial turmoil. Alert`s
business has been affected by these factors and therefore the
board decided to return to the company`s original core business
of selling and supplying steel and steel related products and
services, and to restructure the company`s balance sheet as the
company is presently operating under constrained financial
circumstances.
SALE OF ASSETS
To enable Alert to return to its original core business the
company decided to sell those assets which do not complement the
core business or do not trade profitably.
Therefore Alert has entered into agreements with (i) Taboo
Trading 223 (Pty) Ltd ("Taboo") in terms of which Taboo will
acquire certain inventory and fixed assets of Alert Plumbing, and
with (ii) Socizento (Pty) Ltd (which has been renamed Alert Steel
North West (Pty) Ltd ("ASNW")) in terms of which ASNW will
acquire the sale assets and all the assumed liabilities and
benefits relating to the Klerksdorp business, Lichtenburg
business and Randfontein business. Shareholders are referred to
the SENS announcement dated 8 February 2011 in this regard.
In addition the company identified a further potential
transaction which to date is still subject to negotiation, and
which will be announced as soon as the agreements have been
signed.
FINANCIAL RESTRUCTURING
PROPOSED RIGHTS ISSUE
It is intended that the company shall, by no later than 31 May
2011, endeavour to effect a rights offer ("the Rights Offer") of
new ordinary shares in the company ("the Rights Shares") at 4
cents per share ("the Rights Offer Price"), to be offered to
shareholders in the company pro rata in accordance with their
shareholding in the company as at a date yet to be determined
("the Record Date"), such that, to the extent that the Rights
Offer is fully subscribed, the aggregate subscription price to be
advanced to the company in terms of the Rights Offer shall
comprise an amount of between R40 000 000 (forty million Rand)
and R50 000 000 (fifty million Rand). Once the terms and dates of
such proposed rights offer have been finalised, it will still be
subject to the requisite approvals being obtained.
Two existing shareholders of the company, namely Capital Africa
Steel (Pty) Ltd ("CAS") and the WF and JC Family Trust ("the
Trust") have agreed in principle to underwrite a portion of the
Rights Offer, on terms and conditions yet to be finalised. It is
furthermore intended that a BEE entity will also underwrite a
portion of the proposed Rights Offer. Further details in relation
to the underwriting of the Rights Offer will be announced as soon
as an underwriting agreement between the Company and all of the
underwriters has been concluded.
DEBT RESTRUCTURING
NEDBANK HEADS OF AGREEMENT
Heads of Agreement ("HOA") have been signed between the company,
Nedbank Limited ("Nedbank"), CAS, Wynand Schalekamp, the Trust
and Alert Steel (Pty) Ltd ("Alert Steel) dated 18 March 2011.
An overview of the contents of the HOA is set out below, which
overview records only the material terms and conditions of the
HOA, as the detailed terms and conditions of the matters referred
to in the HOA are yet to be resolved, and will be finalised in
definitive agreements which are yet to be concluded between the
parties referred to above ("the Definitive Agreements").
Prior to the signature date of the HOA, Nedbank had lent and
advanced various amounts to Alert Steel in terms of a facility
agreement. In terms of the HOA, it is proposed that the debt owed
by the company and its subsidiaries to Nedbank, will be
restructured as follows:
First Loan - Nedbank will effect a five-year loan of R70 000 000
(seventy million Rand) to Alert Steel ("the First Loan"). The
proceeds of the First Loan shall be used exclusively towards
permanently discharging a corresponding quantum of Alert Steel`s
current indebtedness to Nedbank. The terms of the First Loan
shall inter alia include the following:
the First Loan will attract interest at the prime rate minus 2%;
interest in respect of the first twelve months of the First Loan
shall become due and payable on the fifth anniversary of the date
of advance of the First Loan ("the Final Maturity Date");
subsequent to the first twelve months of the First Loan, interest
shall be payable monthly in arrears;
the First Loan shall be subject to Nedbank`s standard terms and
conditions (including cross-default provisions and provisions
relating to acceleration in the event of default) as well as any
other special conditions and financial covenants required by
Nedbank`s credit committee that may be agreed to in writing by
Alert Steel;
Alert Steel`s obligations under the First Loan, will be secured
by tangible and intangible security taken or to be taken by
Nedbank over inter alia stock, debtors and fixed assets of the
Company and/or its subsidiaries;
the First Loan shall be capable of early repayment (in whole or
in part) at the instance of Alert Steel, at any time or times
prior to the Final Maturity Date, without penalty;
in the event that the outstanding balance of the First Loan is
not repaid in full by the Final Maturity Date, it shall be
capable of conversion, at the instance of Nedbank, into ordinary
shares in the company (which shares will be listed on the JSE
immediately upon their issue). The number of shares to be so
issued to Nedbank in such circumstances will be arrived at by
dividing the outstanding balance by the Rights Offer Price
referred to above;
the HOA records the intention that any underwriter of the Rights
Offer as well as any other shareholder in the company who
participates in the Rights Offer, shall be entitled, subject to
having obtained the written consent of the board of directors of
the company, to effect repayment to Nedbank of the outstanding
balance and to effect in their own names the conversion
contemplated in the preceding paragraph. The exact mechanism
through which this intention is to be realised is yet to be
finalised;
Nedbank shall, in addition, be granted the right, in each of the
three years subsequent to the date on which the First Loan has
been repaid in full or discharged through any conversion
mechanism agreed upon, to receive 8% of the profit before tax and
dividends of Alert Steel in the form of a restructuring
administration fee, subject to a maximum in such regard of R5 000
000 (five million Rand) in any one year, and R15 000 000 (fifteen
million Rand) in aggregate over such three year period.
Second Loan - in addition to the First Loan, Nedbank shall effect
a three-year loan of R20 000 000 (twenty million Rand) to Alert
Steel ("the Second Loan"). The proceeds of the Second Loan shall
also be used exclusively towards permanently discharging a
corresponding quantum of Alert Steel`s current indebtedness to
Nedbank. The terms of the Second Loan shall inter alia include
the following:
the Second Loan shall attract interest at the prime rate;
accrued interest on the Second Loan will be payable monthly in
arrears, with the first such interest payment to be effected on
the first month succeeding the date of advance of the Second
Loan;
the capital portion of the Second Loan shall be paid on an
amortising profile, in 24 equal installments, the first such
installment to be paid on the 13th month succeeding the date of
advance of the Second Loan, and each subsequent installment each
month thereafter, on the basis that the Second Loan together
with all accrued interest thereon shall be fully and finally
discharged on or before the third anniversary of the date of
advance of the Second Loan;
Alert Steel`s obligations under the Second Loan, will be secured
by tangible and intangible security taken or to be taken by
Nedbank over inter alia stock, debtors and fixed assets of the
company and/or its subsidiaries;
the Second Loan shall be capable of early repayment (in whole or
in part) at the instance of Alert Steel, at any time or times
prior to the third anniversary of the date of its advance,
without penalty.
Headroom Facility - Nedbank has further agreed to provide Alert
Steel with a facility in an amount of R30 000 000 (thirty million
Rand) ("the Headroom Facility"). The Headroom Facility will be
subject to a credit intervention at the time of the request.
Nedbank shall have sole discretion to grant (subject to any terms
and conditions that Nedbank may require and which may be agreed
to in writing by Alert Steel) or decline the request. Nedbank
will not unreasonably withhold its consent to a request made by
Alert Steel to utilise the Headroom Facility. The interest rate
applicable to any utilisation of the Headroom Facility shall be
determined by Nedbank during its credit intervention at the time
of the request.
Proposed Restructure of the Aquarella loan - Aquarella
Investments 454 (Proprietary) Limited ("Aquarella"), a wholly-
owned subsidiary of the company, has already granted a mortgage
bond ("the Mortgage Bond") in favour of Nedbank in respect of
Stand 227, East Lynn Township ("the East Lynne Property"). The
Mortgage Bond and terms of repayment of the Nedbank loan in
relation thereto ("the Aquarella Loan"), are to be renegotiated
with Nedbank, including the following terms and conditions:
the fixed interest rate applicable to the Aquarella Loan shall be
unwound at a cost of approximately R2 500 000 (two million five
hundred thousand Rand) ("the Breakage Cost"), such amount being
subject to change depending on the date that the fixed interest
rate is unwound;
the Breakage Cost shall be capitalised as part of the Aquarella
Loan;
no interest shall be payable in respect of the Aquarella Loan for
a period of six months, however, interest shall accrue and be
capitalised at the prime rate;
Aquarella and Nedbank shall endeavour to sell the East Lynn
Property (free of any lease) by mutual consent for a sum of not
less than R50 000 000 (fifty million Rand) within six months
("the Sale Period"), and the remaining outstanding capital
portion of the Aquarella Loan shall be converted into a five-year
term loan, amortised into equal monthly instalments accruing
interest at the prime rate;
in the event that the East Lynn Property is not sold within the
Sale Period, the Aquarella Loan shall become an eleven-year loan,
finally repayable by no later than the 11th anniversary of the
end of the Sale Period ("the Aquarella End Date"). Subsequent to
the end of the Sale Period, interest shall accrue on the
Aquarella Loan at the prime rate. For a period of twelve months
from the end of the Sale Period, only interest shall be payable,
and subsequently monthly payments of interest and capital shall
be made by Aquarella, provided that the capital portion of the
Aquarella Loan outstanding as at the end of the period of twelve
months referred to shall be repaid on an amortising profile
calculated over fifteen years, with a final bullet payment of the
outstanding balance to be effected on the Aquarella End Date.
All of the provisions of the HOA (including the matters described
above) are subject to the fulfillment or waiver of the suspensive
conditions referred to below, as well as the successful
completion of the Proposed Rights Issue and Sales of Assets
described above.
SUSPENSIVE CONDITIONS -
The HOA is subject to the fulfillment of a number of suspensive
conditions on or before 29 April 2011 (or such later date as
agreed to by the parties in writing), as follows:
the conclusion of the Definitive Agreements in relation to each
of the matters recorded in the HOA;
the obtaining of all regulatory and statutory approvals required
to effect the transactions contemplated in the HOA;
the approval of the board of directors of each of the company and
CAS;
the implementation of the proposed restructuring of the board of
directors and executive management team of the company;
Nedbank confirming that it is satisfied that the company has
sufficient authorised share capital to give effect to the
transactions contemplated in the HOA;
conclusion of the contemplated underwriting agreement in terms of
which the proposed rights issue will be partially underwritten
and Nedbank being satisfied with the amounts of such underwriting
and the identity of the underwriters; and
CAS, Alert and the Trust confirming that they are satisfied with
the provisions agreed with Nedbank in relation to the release of
the Trust from all securities previously given by the Trust to
Nedbank in relation to the funding previously extended by Nedbank
to Alert Steel.
CHANGES AND FUTURE STRUCTURE OF THE BOARD OF DIRECTORS
Name Age Position
Vacant(New appointment) Non-executive Chairman
Wynand Schalekamp 62 Executive Deputy
Chairman
Johan du Toit 45 Chief Executive Officer
Vacant(new appointment) Chief Financial Officer
Vacant(BEE shareholder) Independent Non-
executive Director
Owen Jevon 55 Independent Non-
executive Director
Rynhardt van Rooyen 62 Independent Non-
executive Director
Vacant: Chairman
As part of the restructuring plan Alert will, subsequent to the conditions
precedent to the restructuring having been fulfilled and all of the statutory
requirements to the restructuring having been met, appoint a Non-executive
Chairman who is still to be identified.
Wynand Schalekamp: Executive Deputy Chairman B Com Marketing
(62)
As from 1 April 2011 Wynand Schalekamp shall assume the role as
Executive Deputy Chairman of Alert. Wynand Schalekamp, an
entrepreneur, established Alert 31 years ago as a small one-man
business operating from a garage providing a variety of steel
products to the building industry and grew the one-man business
to a R1,1 billion revenue business. The Alert group listed on
the JSE AltX on 1 March 2007. Thereafter several acquisitions
were made increasing Alert`s national footprint to 16 retail
branches / subsidiaries situated in Gauteng, North West,
Mpumalanga and Limpopo.
Johan du Toit: Chief Executive Officer CA (SA) (45)
Johan du Toit, currently a non-executive director will be
appointed as Chief Executive Officer of Alert as from 31 March
2011. Johan formed part of the restructuring team in
implementing the turnaround strategy at The Kelly Group Limited
and listing of the group in April 2007 on the JSE main board
(April 2001 to December 2007). He recently assisted with the
debt and business restructuring of RTT Group (Pty) Ltd
previously known as The Fuel Logistics Group (Pty) Ltd
(August 2009 to December 2010).
Vacant: Chief Financial Officer
The Chief Financial Officer`s position becomes vacant with the
resignation of Willie Mentz with effect from 31 March 2011.
Willie has acquired the Alert Plumbing business from Alert
(refer sale of assets). The group is in the process of
interviewing candidates for the position and is confident that
the position will be filled within the next three months. Johan
du Toit will oversee the duties of the Chief Financial Officer
until such time as a suitable replacement has been identified.
Owen Jevon (Independent Non-executive Director) BSC Eng (55)
Owen in his own right is a very successful entrepreneur and
business man. He founded his own construction business, DNO
Projects CC, in 1986. Owen has more than 20 years` experience
in the building and construction industries.
Rynhardt van Rooyen (Independent Non-executive Director) CA
(SA) (62)
Rynhardt van Rooyen will be appointed Acting Chairman with
effect 1 April 2011 until such time as the new chairman will be
appointed. Rynhardt retired in November 2008 after 32 years`
service at Sasol. During the last eight years at Sasol he was
responsible, inter alia, for Group Accounting, Group Taxation,
Mergers & Acquisitions, Group Treasury, Group Financing and
Sarbanes Oxley. He was also involved in Sasol (Inzalo) BEE
transactions. He currently acts as a director of various
companies.
Executive Committee members and responsibilities
Alert will be managed by an Executive Committee after the
restructuring. The Executive Committee`s duties will be the
management of the restructuring process and ensuring the
restructuring plans and turnaround strategy is implemented. The
proposed Executive Committee, will be as follows:
Chairman
Deputy Executive Chairman
Chief Executive Officer
Chief Financial Officer
The Executive Committee will be enhanced in the future by
including the following members:
Marketing Executive
Credit Executive
Operational Executive
Finance Executive
SHARE CAPITAL
No share capital was issued during the 6 months reported.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of compliance
The condensed reviewed interim financial statements comprise a
consolidated statement of financial position at 31 December
2010, a consolidated statement of comprehensive income,
consolidated statement of changes in equity, summarised
consolidated cash flow statement and segmental report for the
six months ended 31 December 2010. The condensed financial
statements have been prepared in accordance with the
recognition and measurement criteria of International Financial
Reporting Standards and the presentation and disclosure
requirements of IAS 34, Interim Financial Reporting, AC500
Standards as issued by the Accounting Practices Board or its
successor, the JSE Listings Requirements and the Companies Act
of South Africa. The accounting policies applied for the
interim period are consistent with those of the previous year.
Basis of measurement
The financial statements have been prepared on the accrual
basis except for certain financial instruments measured at fair
value.
DIVIDEND POLICY
No dividend was issued during the period.
REVIEWED REPORT
The condensed financial results have been reviewed by Alert`s independent
auditors, RSM Betty & Dickson (Tshwane). The Auditor`s Review Report concluded
that, based on their review, nothing has come to their attention that caused
them to believe that the condensed financial results are not prepared, in all
material respects in accordance with International Financial Reporting Standards
and the AC 500 standards as issued by the Accounting Standards Board or its
successor, the JSE Listing Requirements and in the manner required by the
Companies Act of South Africa.
The Auditor`s review report also includes an emphasis of matter whereby the
auditors, without qualifying their report, draw attention to the total
comprehensive loss of R84,2 million incurred during the six months ended 31
December 2010 and that this indicate a material uncertainty that may cast
significant doubt on the Group`s ability to continue as a going concern. The
ability of the group to continue as a going concern is dependent on several
factors which inter alia include those profitable operations can be resumed and
the successful conclusion of the restructure as set out by the directors as part
of the "Restructuring Plan".
On the group`s compliance with laws and regulations the Auditors reported that
in accordance with their responsibilities in terms of sections 44(2) and 44(3)
of the Auditing Profession Act that they have identified a certain unlawful act
or omission committed by persons responsible for the management of Alert which
constitute a Reportable Irregularity in terms of the Auditing Profession Act,
2005 (No. 26 of 2005), and have reported such matter to the Independent
Regulatory Board for Auditors. The matter pertaining to the Reportable
Irregularity has been described in note 3 to the condensed group statement of
financial position.
A copy of the auditor`s review report is available for inspection at the
company`s registered office.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
COMPLIANCE WITH LEGISLATION
The following matter was reported to the Independent Regulatory Board for
Auditors on 16 March 2011 by the group`s external auditors, in terms of section
45(1) of the Auditing Professions Act, 2005 (No.26 of 2005).
According to the report, credit was extended by the group to entities controlled
by a director of the group, Mr. WF Schalekamp, which was not repaid in
accordance with normal business practices. Credit extended on 30 June 2010
amounted to R5 427 427. Additional credit of R1 328 666 was rewarded. Credit
rewarded on 31 December 2010 amounted to R6 756,093. This credit may constitute
a loan granted in contravention of section 226 (1)(b) of the Companies Act,
1973, (No.61 of 1973), as no consent was given as prescribed in section 226(2)
of the Act.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the basis of accounting policies
applicable to a going concern. This basis presumes that the funds will be
available to finance future operations and that the realisation of assets and
settlement of liabilities, contingent obligations and commitments will occur in
the ordinary course of business. The statement of comprehensive income indicates
that the company has incurred a loss of R84,2 million for the six months ended
31 December 2010 which includes non-cash flow impairments of R17,8 million. The
ability of the group to continue as a going concern is dependent on several
factors which inter alia include, that profitable operations can be restored
and the conclusion of the restructure as set out above as part of the
"Restructuring Plan".
STATEMENT I.R.O. LOAN TO DIRECTOR
Shareholders are referred to note 3 on the balance sheet
regarding the unauthorized loan to companies` controlled by W F
Schalekamp. The balance outstanding of such loans as at the
date of this announcement is R4.3m, all of which is due and
payable. The company has consulted with its attorneys in this
regard and, in addition, on 16 March 2011, the companies`
auditors referred this matter to the JSE and to the Independent
Regulatory Board of Auditors. W F Schalekamp has undertaken to
effect repayment of the outstanding balance of such loans on or
before 15 April 2011. Notwithstanding such undertaking, all of
the company`s rights against W F Schalekamp under the
provisions of the Companies Act in relation to such
unauthorised loans remain fully reserved.
On behalf of the Board
WF Schalekamp WW Mentz
Managing Director Financial Director
31 March 2011
CORPORATE INFORMATION
Non executive directors: OV Jevon, R van Rooyen, J du
Toit
Executive directors: WF Schalekamp(acting chairman), WW Mentz
Registration number: 2003/005144/06
Registered address: 12 Gompou Street, East Lynne, 0186
Postal address: PO Box 29607, Sunnyside, 0132
Company secretary: M Pretorius
Telephone: (012) 800 0000
Facsimile: (012) 800 4661
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Designated Adviser: Vunani Corporate Finance
Auditors: RSM Betty & Dickson (Tshwane)
Date: 31/03/2011 11:00:04 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
AET
AET - Alert Steel Holdings Limited - The reviewed financial results for the six
months ended 31 December 2010 Restructuring plan Changes to the board
Alert Steel Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/005144/06)
JSE code: AET ISIN: ZAE000092847
("Alert" or "the company" or "the group")
ANNOUNCEMENT RELATING TO:
THE REVIEWED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
RESTRUCTURING PLAN
CHANGES TO THE BOARD
REVIEWED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
Condensed Statement of Comprehensive Income
Note Reviewed Unaudited Audited
s December December June
2010 2009 2010
6 months 6 months 12 months
R`000 R`000 R`000
Revenue 520 690 505 234 1 025 884
Gross profit 75 522 115 490 210 734
Other income 4 651 7 486 13 297
Goodwill impairment 1 (17 848) (35 104) (35 324)
Operating costs 2 (126 (116 200) (255 288)
283)
Depreciation (5 587) (4 561) (9 125)
Loss before interest and (69 545) (32 889) (75 706)
taxation
Net finance costs (14 316) (9 223) (21 122)
Loss before taxation (83 861) (42 112) (96 828)
Taxation (367) 1 962 (2 146)
Total comprehensive loss (84 228) (40 150) (98 974)
for the period,
attributable to ordinary
shareholders
Reconciliation of loss:
Loss attributable to (84 228) (40 150) (98 974)
ordinary shareholders
Profit on sale of fixed 76 - 210
assets
Goodwill impairment 17 848 35 104 35 325
Headline loss attributable (66 303) (5 046) (63 439)
to ordinary shareholders
Weighted average number of 248 428 248 428 248 428
shares in issue (`000)
Fully diluted weighted 256 028 256 028 256 028
average number of shares in
issue (`000)
Loss per share (cents) (33,9) (16,2) (39,8)
Headline loss per share (26,7) (2,0) (25,5)
(cents)
Fully diluted loss per (32,9) (15,8) (39,0)
share (cents)
Fully diluted headline loss (25,9) (2,1) (25,1)
per share (cents)
Note:
Goodwill was impaired as per the accounting policies consistent with previous
years.
Operating costs includes a bad debt provision of R17,5 million (2009: 6,9
million) (2010: 40,7 million) and restructuring costs of R4,5 million.
Condensed Group Statement of Financial Position
Notes Reviewe Unaudited Audited
d December June
Decembe 2009 2010
r 2010 6 months 12 months
6 R`000 R`000
months
R`000
ASSETS
Non-current assets 155 098 177 351 177 792
Investment property 5 991 5 991 5 991
Property, plant and 1 148 510 146 113 152 934
equipment
Goodwill 2 - 19 561 17 848
Other financial assets - 644 -
Deferred taxation 597 5 042 1 019
Current assets 246 438 313 061 383 252
Inventories 131 670 163 653 196 680
Loans to joint ventures - 6 692 95
Loans to director 3 6 756 - 5 427
Current tax receivable 1 415 3 839 1 397
Trade and other 99 037 134 372 167 917
receivables
Cash and cash equivalents 7 560 4 505 11 736
Total assets 401 536 490 412 561 044
EQUITY AND LIABILITIES
Total shareholders` funds 8 286 150 900 92 076
Non-current liabilities 67 530 78 782 80 188
Other financial 67 530 78 782 79 858
liabilities
Deferred taxation - - 330
Current liabilities 325 720 260 730 388 780
Loans from joint ventures - 337 16 006
Loans from director 4 55 - 1 419
Other financial 19 213 19 219 16 585
liabilities
Current tax payable 22 591 833 21 414
Trade and other payables 137 563 88 758 189 282
Provisions 745 - 64
Bank overdraft 145 553 151 583 144 010
Total equity and 401 536 490 412 561 044
liabilities
Number of shares in issue
(net of treasury and 248 428 248 428 248 428
transaction shares)
(`000)
Fully diluted number of
shares in issue (`000) 5 256 028 256 028 256 028
Net asset value per share 3,3 60,7 37,1
(cents)
Net tangible asset value 3,3 52,9 29,9
per share (cents)
Notes:
Property, plant and equipment includes an amount of R70,7 million which relates
to the property held through Aquarella Investments 454 (Pty) Ltd, a wholly owned
subsidiary of Alert. Refer to the heading Restructuring Plan, Nedbank Heads of
Agreement for further information.
Goodwill was impaired as per the accounting policies consistent with prior
years.
(3 & 4) Credit was granted to two companies, controlled by Mr. W.F.
Schalekamp, the CEO of the group, without the approval of the board of directors
and shareholders. These accounts have since been reclassified as loans, and
attract interest at market related rates. A payment of R2,8 million was made
after December 2010.
(5) The 7 600 000 ordinary shares issued to the Alert Share Incentive Scheme
are treated as "treasury shares."
Condensed Group Statements of Changes in Equity
Reviewed Unaudited Audited
December December June
2010 2009 2010
6 months 6 months 12 months
R`000 R`000 R`000
Balance at beginning of 92 076 191 050 191 050
period
Shares issued - - 2 366
Loss for the period under (84 228) (40 150) (98 974)
review
Acquisition share based - - (2 366)
payment reserve
Addition to foreign 438 - -
translation reserve
Balance at end of period 8 286 150 900 92 076
Condensed Group Statement of Cash Flows
Reviewe Unaudited Audited
d December June
Decembe 2009 2010
r 2010 6 months 12 months
6 R`000 R`000
months
R`000
Cash inflow/(outflow) from 23 824 (29 932) (19 953)
operating activities
Cash (outflow)from investing (2 568) (12 305) (20 292)
activities
Cash inflow/(outflow) from (26 13 815 26 626
financing activities 974)
Net decrease in cash and cash (5 718) (28 422) (13 619)
equivalents
Cash and cash equivalents at (132 (118 656) (118 656)
beginning of period 275)
Cash and cash equivalents at (137 (147 078) (132 275)
end of period 993)
Condensed Segmental Report
Reviewed Unaudite Audited
December d June
2010 December 2010
6 months 2009 12
R`000 6 months months
R`000 R`000
Comprehensive income
Revenue
Retail 500 289 477 026 987 119
Reinforcing manufacturing 20 401 28 208 38 765
520 690 505 234 1 025
884
(Loss)/Profit before interest,
goodwill impairment and taxation
Retail (49 289) 3 164 (38 230)
Reinforcing manufacturing (2 408) (949) (2 151)
(51 697) 2 215 (40 381)
Depreciation
Retail 5 463 4 441 8 891
Reinforcing manufacturing 124 120 234
5 587 4 561 9 125
Reviewe Unaudite Audited
d d June
Decembe December 2010
r 2010 2009 12
6 6 months months
months R`000 R`000
R`000
Financial position
Reportable segment assets
Retail 368 336 426 977 495 461
Reinforcing manufacturing 10 881 17 805 22 070
379 217 444 782 517 531
Reportable segment liabilities
Retail 221 902 182 393 270 856
Reinforcing manufacturing 3 149 4 366 14 933
225 051 186 759 285 789
Reconciliation of segmental
assets
Total assets 401 536 490 412 561 044
Goodwill - (19 561) (17 848)
Investment property (5 991) (5 991) (5 991)
Deferred taxation (597) (5 042) (1 019)
Current taxation (1 415) (3 839) (1 397)
Loans receivable (6 756) (6 692) (5 522)
Cash and cash equivalents (7 560) (4 505) (11 736)
Segmental assets 379 217 444 782 517 531
Reconciliation of segmental
liabilities
Current liabilities 325 720 260 730 388 780
Bank overdrafts (145 (151 (144
553) 583) 010)
Current taxation liabilities (22 (833) (21 414)
591)
Loans payable (55) (337) (17 425)
Non-current liabilities 67 530 78 782 79 858
Segmental liabilities 225 051 186 759 285 789
OVERVIEW
The directors of Alert are presenting the reviewed financial
results for the six months ended 31 December
2010.
The difficult trading conditions experienced during the
previous financial year, continued during the first half of
this financial year. Although turnover increased by 3,1%,
margins remained under pressure while operating costs remained
high in comparison to turnover. Many branches continued to make
losses. Although stock levels were reduced, it still remains
high. The collection of debtors became very challenging and
contributed to the company`s cash flow problem. The
unacceptable high debt gives rise to very high finance charges.
The above factors forced the directors to review the group`s
strategy going forward and to agree the restructuring of the
group balance sheet. The board also decided that the group must
refocus on its core business being the retail of steel and
steel related products and services. Every branch was evaluated
and where it was not expected that a branch would return to
profitability in the near future, the branch was closed down.
These steps resulted in the closing down of the Wonderboom
Plumbing and Kya Sands branches and the disposal of the
Plumbing branch in East Lynne as well as the sell of
Randfontein, Klerksdorp and Lichtenburg branches. Closing down
costs, i.e. retrenchment costs, contributed to the increase in
operating expenses over the short term.
FINANCIAL RESULTS
Revenue increased by 3,1 % to R520,7 million (2009: R505,2
million) during the interim period, which was a marginal
increase in comparison with the period ending December 2009.
Gross profit decreased by 34,6 % to R75,5 million (2009: R115,5
million) and gross profit margins decreased to 14,5 % (2009:
22,7 %) mainly as a result of the decrease in steel prices,
more competitive market as a result of most retailers cutting
prices to liquidate stock, as well as the loss of settlement
discount because of cash restraints.
Operating costs increased by 8,7 % to R126,3 million (2009:
R116,2 million) mainly as a result of a large increase in the
bad debt provision of R17,5 million (2009: R6,9 million),
expenses as a result of restructuring of R4,5 million,
increases in property rental expenses of R4,2 million and
transport expenses of R1,6 million.
Headline loss for the interim period increased to -R66,3
million (2009: -R5,0 million) as a result of the decreased
gross profit margin, increased operating expenditure and an
increase in finance costs. Headline loss per share increased
to -26, 7 cents (2009: -2, 0 cents) for the interim period.
PROSPECTS
The Company can continue with rationalization activities as
previously announced.
Alert`s strategic objectives for the next twelve months are:
Sell all non-core properties and assets in Alert.
Exit all non-core product lines and dispose of products by means
of an established project plan and refocus brand back to its
core i.e. to only invest in steel and steel related products.
Develop a marketing plan to underpin the group`s return to
profitability and the roll-out of the new strategy.
Identify areas for establishment of compact type branches as per
the new strategy. (To be implemented as a medium term strategy
action).
Finalise the exit of the Kya Sands branch cost effectively.
Implement the financial and debt restructuring program with
financiers and stakeholders.
Enhance the board of directors and management team to ensure the
success of the business going forward.
RESTRUCTURING PLAN
OVERVIEW
The business environment in which Alert operates has become
extremely challenging due to the volatility in world steel
markets, precipitated by the renewed financial turmoil. Alert`s
business has been affected by these factors and therefore the
board decided to return to the company`s original core business
of selling and supplying steel and steel related products and
services, and to restructure the company`s balance sheet as the
company is presently operating under constrained financial
circumstances.
SALE OF ASSETS
To enable Alert to return to its original core business the
company decided to sell those assets which do not complement the
core business or do not trade profitably.
Therefore Alert has entered into agreements with (i) Taboo
Trading 223 (Pty) Ltd ("Taboo") in terms of which Taboo will
acquire certain inventory and fixed assets of Alert Plumbing, and
with (ii) Socizento (Pty) Ltd (which has been renamed Alert Steel
North West (Pty) Ltd ("ASNW")) in terms of which ASNW will
acquire the sale assets and all the assumed liabilities and
benefits relating to the Klerksdorp business, Lichtenburg
business and Randfontein business. Shareholders are referred to
the SENS announcement dated 8 February 2011 in this regard.
In addition the company identified a further potential
transaction which to date is still subject to negotiation, and
which will be announced as soon as the agreements have been
signed.
FINANCIAL RESTRUCTURING
PROPOSED RIGHTS ISSUE
It is intended that the company shall, by no later than 31 May
2011, endeavour to effect a rights offer ("the Rights Offer") of
new ordinary shares in the company ("the Rights Shares") at 4
cents per share ("the Rights Offer Price"), to be offered to
shareholders in the company pro rata in accordance with their
shareholding in the company as at a date yet to be determined
("the Record Date"), such that, to the extent that the Rights
Offer is fully subscribed, the aggregate subscription price to be
advanced to the company in terms of the Rights Offer shall
comprise an amount of between R40 000 000 (forty million Rand)
and R50 000 000 (fifty million Rand). Once the terms and dates of
such proposed rights offer have been finalised, it will still be
subject to the requisite approvals being obtained.
Two existing shareholders of the company, namely Capital Africa
Steel (Pty) Ltd ("CAS") and the WF and JC Family Trust ("the
Trust") have agreed in principle to underwrite a portion of the
Rights Offer, on terms and conditions yet to be finalised. It is
furthermore intended that a BEE entity will also underwrite a
portion of the proposed Rights Offer. Further details in relation
to the underwriting of the Rights Offer will be announced as soon
as an underwriting agreement between the Company and all of the
underwriters has been concluded.
DEBT RESTRUCTURING
NEDBANK HEADS OF AGREEMENT
Heads of Agreement ("HOA") have been signed between the company,
Nedbank Limited ("Nedbank"), CAS, Wynand Schalekamp, the Trust
and Alert Steel (Pty) Ltd ("Alert Steel) dated 18 March 2011.
An overview of the contents of the HOA is set out below, which
overview records only the material terms and conditions of the
HOA, as the detailed terms and conditions of the matters referred
to in the HOA are yet to be resolved, and will be finalised in
definitive agreements which are yet to be concluded between the
parties referred to above ("the Definitive Agreements").
Prior to the signature date of the HOA, Nedbank had lent and
advanced various amounts to Alert Steel in terms of a facility
agreement. In terms of the HOA, it is proposed that the debt owed
by the company and its subsidiaries to Nedbank, will be
restructured as follows:
First Loan - Nedbank will effect a five-year loan of R70 000 000
(seventy million Rand) to Alert Steel ("the First Loan"). The
proceeds of the First Loan shall be used exclusively towards
permanently discharging a corresponding quantum of Alert Steel`s
current indebtedness to Nedbank. The terms of the First Loan
shall inter alia include the following:
the First Loan will attract interest at the prime rate minus 2%;
interest in respect of the first twelve months of the First Loan
shall become due and payable on the fifth anniversary of the date
of advance of the First Loan ("the Final Maturity Date");
subsequent to the first twelve months of the First Loan, interest
shall be payable monthly in arrears;
the First Loan shall be subject to Nedbank`s standard terms and
conditions (including cross-default provisions and provisions
relating to acceleration in the event of default) as well as any
other special conditions and financial covenants required by
Nedbank`s credit committee that may be agreed to in writing by
Alert Steel;
Alert Steel`s obligations under the First Loan, will be secured
by tangible and intangible security taken or to be taken by
Nedbank over inter alia stock, debtors and fixed assets of the
Company and/or its subsidiaries;
the First Loan shall be capable of early repayment (in whole or
in part) at the instance of Alert Steel, at any time or times
prior to the Final Maturity Date, without penalty;
in the event that the outstanding balance of the First Loan is
not repaid in full by the Final Maturity Date, it shall be
capable of conversion, at the instance of Nedbank, into ordinary
shares in the company (which shares will be listed on the JSE
immediately upon their issue). The number of shares to be so
issued to Nedbank in such circumstances will be arrived at by
dividing the outstanding balance by the Rights Offer Price
referred to above;
the HOA records the intention that any underwriter of the Rights
Offer as well as any other shareholder in the company who
participates in the Rights Offer, shall be entitled, subject to
having obtained the written consent of the board of directors of
the company, to effect repayment to Nedbank of the outstanding
balance and to effect in their own names the conversion
contemplated in the preceding paragraph. The exact mechanism
through which this intention is to be realised is yet to be
finalised;
Nedbank shall, in addition, be granted the right, in each of the
three years subsequent to the date on which the First Loan has
been repaid in full or discharged through any conversion
mechanism agreed upon, to receive 8% of the profit before tax and
dividends of Alert Steel in the form of a restructuring
administration fee, subject to a maximum in such regard of R5 000
000 (five million Rand) in any one year, and R15 000 000 (fifteen
million Rand) in aggregate over such three year period.
Second Loan - in addition to the First Loan, Nedbank shall effect
a three-year loan of R20 000 000 (twenty million Rand) to Alert
Steel ("the Second Loan"). The proceeds of the Second Loan shall
also be used exclusively towards permanently discharging a
corresponding quantum of Alert Steel`s current indebtedness to
Nedbank. The terms of the Second Loan shall inter alia include
the following:
the Second Loan shall attract interest at the prime rate;
accrued interest on the Second Loan will be payable monthly in
arrears, with the first such interest payment to be effected on
the first month succeeding the date of advance of the Second
Loan;
the capital portion of the Second Loan shall be paid on an
amortising profile, in 24 equal installments, the first such
installment to be paid on the 13th month succeeding the date of
advance of the Second Loan, and each subsequent installment each
month thereafter, on the basis that the Second Loan together
with all accrued interest thereon shall be fully and finally
discharged on or before the third anniversary of the date of
advance of the Second Loan;
Alert Steel`s obligations under the Second Loan, will be secured
by tangible and intangible security taken or to be taken by
Nedbank over inter alia stock, debtors and fixed assets of the
company and/or its subsidiaries;
the Second Loan shall be capable of early repayment (in whole or
in part) at the instance of Alert Steel, at any time or times
prior to the third anniversary of the date of its advance,
without penalty.
Headroom Facility - Nedbank has further agreed to provide Alert
Steel with a facility in an amount of R30 000 000 (thirty million
Rand) ("the Headroom Facility"). The Headroom Facility will be
subject to a credit intervention at the time of the request.
Nedbank shall have sole discretion to grant (subject to any terms
and conditions that Nedbank may require and which may be agreed
to in writing by Alert Steel) or decline the request. Nedbank
will not unreasonably withhold its consent to a request made by
Alert Steel to utilise the Headroom Facility. The interest rate
applicable to any utilisation of the Headroom Facility shall be
determined by Nedbank during its credit intervention at the time
of the request.
Proposed Restructure of the Aquarella loan - Aquarella
Investments 454 (Proprietary) Limited ("Aquarella"), a wholly-
owned subsidiary of the company, has already granted a mortgage
bond ("the Mortgage Bond") in favour of Nedbank in respect of
Stand 227, East Lynn Township ("the East Lynne Property"). The
Mortgage Bond and terms of repayment of the Nedbank loan in
relation thereto ("the Aquarella Loan"), are to be renegotiated
with Nedbank, including the following terms and conditions:
the fixed interest rate applicable to the Aquarella Loan shall be
unwound at a cost of approximately R2 500 000 (two million five
hundred thousand Rand) ("the Breakage Cost"), such amount being
subject to change depending on the date that the fixed interest
rate is unwound;
the Breakage Cost shall be capitalised as part of the Aquarella
Loan;
no interest shall be payable in respect of the Aquarella Loan for
a period of six months, however, interest shall accrue and be
capitalised at the prime rate;
Aquarella and Nedbank shall endeavour to sell the East Lynn
Property (free of any lease) by mutual consent for a sum of not
less than R50 000 000 (fifty million Rand) within six months
("the Sale Period"), and the remaining outstanding capital
portion of the Aquarella Loan shall be converted into a five-year
term loan, amortised into equal monthly instalments accruing
interest at the prime rate;
in the event that the East Lynn Property is not sold within the
Sale Period, the Aquarella Loan shall become an eleven-year loan,
finally repayable by no later than the 11th anniversary of the
end of the Sale Period ("the Aquarella End Date"). Subsequent to
the end of the Sale Period, interest shall accrue on the
Aquarella Loan at the prime rate. For a period of twelve months
from the end of the Sale Period, only interest shall be payable,
and subsequently monthly payments of interest and capital shall
be made by Aquarella, provided that the capital portion of the
Aquarella Loan outstanding as at the end of the period of twelve
months referred to shall be repaid on an amortising profile
calculated over fifteen years, with a final bullet payment of the
outstanding balance to be effected on the Aquarella End Date.
All of the provisions of the HOA (including the matters described
above) are subject to the fulfillment or waiver of the suspensive
conditions referred to below, as well as the successful
completion of the Proposed Rights Issue and Sales of Assets
described above.
SUSPENSIVE CONDITIONS -
The HOA is subject to the fulfillment of a number of suspensive
conditions on or before 29 April 2011 (or such later date as
agreed to by the parties in writing), as follows:
the conclusion of the Definitive Agreements in relation to each
of the matters recorded in the HOA;
the obtaining of all regulatory and statutory approvals required
to effect the transactions contemplated in the HOA;
the approval of the board of directors of each of the company and
CAS;
the implementation of the proposed restructuring of the board of
directors and executive management team of the company;
Nedbank confirming that it is satisfied that the company has
sufficient authorised share capital to give effect to the
transactions contemplated in the HOA;
conclusion of the contemplated underwriting agreement in terms of
which the proposed rights issue will be partially underwritten
and Nedbank being satisfied with the amounts of such underwriting
and the identity of the underwriters; and
CAS, Alert and the Trust confirming that they are satisfied with
the provisions agreed with Nedbank in relation to the release of
the Trust from all securities previously given by the Trust to
Nedbank in relation to the funding previously extended by Nedbank
to Alert Steel.
CHANGES AND FUTURE STRUCTURE OF THE BOARD OF DIRECTORS
Name Age Position
Vacant(New appointment) Non-executive Chairman
Wynand Schalekamp 62 Executive Deputy
Chairman
Johan du Toit 45 Chief Executive Officer
Vacant(new appointment) Chief Financial Officer
Vacant(BEE shareholder) Independent Non-
executive Director
Owen Jevon 55 Independent Non-
executive Director
Rynhardt van Rooyen 62 Independent Non-
executive Director
Vacant: Chairman
As part of the restructuring plan Alert will, subsequent to the conditions
precedent to the restructuring having been fulfilled and all of the statutory
requirements to the restructuring having been met, appoint a Non-executive
Chairman who is still to be identified.
Wynand Schalekamp: Executive Deputy Chairman B Com Marketing
(62)
As from 1 April 2011 Wynand Schalekamp shall assume the role as
Executive Deputy Chairman of Alert. Wynand Schalekamp, an
entrepreneur, established Alert 31 years ago as a small one-man
business operating from a garage providing a variety of steel
products to the building industry and grew the one-man business
to a R1,1 billion revenue business. The Alert group listed on
the JSE AltX on 1 March 2007. Thereafter several acquisitions
were made increasing Alert`s national footprint to 16 retail
branches / subsidiaries situated in Gauteng, North West,
Mpumalanga and Limpopo.
Johan du Toit: Chief Executive Officer CA (SA) (45)
Johan du Toit, currently a non-executive director will be
appointed as Chief Executive Officer of Alert as from 31 March
2011. Johan formed part of the restructuring team in
implementing the turnaround strategy at The Kelly Group Limited
and listing of the group in April 2007 on the JSE main board
(April 2001 to December 2007). He recently assisted with the
debt and business restructuring of RTT Group (Pty) Ltd
previously known as The Fuel Logistics Group (Pty) Ltd
(August 2009 to December 2010).
Vacant: Chief Financial Officer
The Chief Financial Officer`s position becomes vacant with the
resignation of Willie Mentz with effect from 31 March 2011.
Willie has acquired the Alert Plumbing business from Alert
(refer sale of assets). The group is in the process of
interviewing candidates for the position and is confident that
the position will be filled within the next three months. Johan
du Toit will oversee the duties of the Chief Financial Officer
until such time as a suitable replacement has been identified.
Owen Jevon (Independent Non-executive Director) BSC Eng (55)
Owen in his own right is a very successful entrepreneur and
business man. He founded his own construction business, DNO
Projects CC, in 1986. Owen has more than 20 years` experience
in the building and construction industries.
Rynhardt van Rooyen (Independent Non-executive Director) CA
(SA) (62)
Rynhardt van Rooyen will be appointed Acting Chairman with
effect 1 April 2011 until such time as the new chairman will be
appointed. Rynhardt retired in November 2008 after 32 years`
service at Sasol. During the last eight years at Sasol he was
responsible, inter alia, for Group Accounting, Group Taxation,
Mergers & Acquisitions, Group Treasury, Group Financing and
Sarbanes Oxley. He was also involved in Sasol (Inzalo) BEE
transactions. He currently acts as a director of various
companies.
Executive Committee members and responsibilities
Alert will be managed by an Executive Committee after the
restructuring. The Executive Committee`s duties will be the
management of the restructuring process and ensuring the
restructuring plans and turnaround strategy is implemented. The
proposed Executive Committee, will be as follows:
Chairman
Deputy Executive Chairman
Chief Executive Officer
Chief Financial Officer
The Executive Committee will be enhanced in the future by
including the following members:
Marketing Executive
Credit Executive
Operational Executive
Finance Executive
SHARE CAPITAL
No share capital was issued during the 6 months reported.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of compliance
The condensed reviewed interim financial statements comprise a
consolidated statement of financial position at 31 December
2010, a consolidated statement of comprehensive income,
consolidated statement of changes in equity, summarised
consolidated cash flow statement and segmental report for the
six months ended 31 December 2010. The condensed financial
statements have been prepared in accordance with the
recognition and measurement criteria of International Financial
Reporting Standards and the presentation and disclosure
requirements of IAS 34, Interim Financial Reporting, AC500
Standards as issued by the Accounting Practices Board or its
successor, the JSE Listings Requirements and the Companies Act
of South Africa. The accounting policies applied for the
interim period are consistent with those of the previous year.
Basis of measurement
The financial statements have been prepared on the accrual
basis except for certain financial instruments measured at fair
value.
DIVIDEND POLICY
No dividend was issued during the period.
REVIEWED REPORT
The condensed financial results have been reviewed by Alert`s independent
auditors, RSM Betty & Dickson (Tshwane). The Auditor`s Review Report concluded
that, based on their review, nothing has come to their attention that caused
them to believe that the condensed financial results are not prepared, in all
material respects in accordance with International Financial Reporting Standards
and the AC 500 standards as issued by the Accounting Standards Board or its
successor, the JSE Listing Requirements and in the manner required by the
Companies Act of South Africa.
The Auditor`s review report also includes an emphasis of matter whereby the
auditors, without qualifying their report, draw attention to the total
comprehensive loss of R84,2 million incurred during the six months ended 31
December 2010 and that this indicate a material uncertainty that may cast
significant doubt on the Group`s ability to continue as a going concern. The
ability of the group to continue as a going concern is dependent on several
factors which inter alia include those profitable operations can be resumed and
the successful conclusion of the restructure as set out by the directors as part
of the "Restructuring Plan".
On the group`s compliance with laws and regulations the Auditors reported that
in accordance with their responsibilities in terms of sections 44(2) and 44(3)
of the Auditing Profession Act that they have identified a certain unlawful act
or omission committed by persons responsible for the management of Alert which
constitute a Reportable Irregularity in terms of the Auditing Profession Act,
2005 (No. 26 of 2005), and have reported such matter to the Independent
Regulatory Board for Auditors. The matter pertaining to the Reportable
Irregularity has been described in note 3 to the condensed group statement of
financial position.
A copy of the auditor`s review report is available for inspection at the
company`s registered office.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
COMPLIANCE WITH LEGISLATION
The following matter was reported to the Independent Regulatory Board for
Auditors on 16 March 2011 by the group`s external auditors, in terms of section
45(1) of the Auditing Professions Act, 2005 (No.26 of 2005).
According to the report, credit was extended by the group to entities controlled
by a director of the group, Mr. WF Schalekamp, which was not repaid in
accordance with normal business practices. Credit extended on 30 June 2010
amounted to R5 427 427. Additional credit of R1 328 666 was rewarded. Credit
rewarded on 31 December 2010 amounted to R6 756,093. This credit may constitute
a loan granted in contravention of section 226 (1)(b) of the Companies Act,
1973, (No.61 of 1973), as no consent was given as prescribed in section 226(2)
of the Act.
STATEMENT ON GOING CONCERN
The financial statements have been prepared on the basis of accounting policies
applicable to a going concern. This basis presumes that the funds will be
available to finance future operations and that the realisation of assets and
settlement of liabilities, contingent obligations and commitments will occur in
the ordinary course of business. The statement of comprehensive income indicates
that the company has incurred a loss of R84,2 million for the six months ended
31 December 2010 which includes non-cash flow impairments of R17,8 million. The
ability of the group to continue as a going concern is dependent on several
factors which inter alia include, that profitable operations can be restored
and the conclusion of the restructure as set out above as part of the
"Restructuring Plan".
STATEMENT I.R.O. LOAN TO DIRECTOR
Shareholders are referred to note 3 on the balance sheet
regarding the unauthorized loan to companies` controlled by W F
Schalekamp. The balance outstanding of such loans as at the
date of this announcement is R4.3m, all of which is due and
payable. The company has consulted with its attorneys in this
regard and, in addition, on 16 March 2011, the companies`
auditors referred this matter to the JSE and to the Independent
Regulatory Board of Auditors. W F Schalekamp has undertaken to
effect repayment of the outstanding balance of such loans on or
before 15 April 2011. Notwithstanding such undertaking, all of
the company`s rights against W F Schalekamp under the
provisions of the Companies Act in relation to such
unauthorised loans remain fully reserved.
On behalf of the Board
WF Schalekamp WW Mentz
Managing Director Financial Director
31 March 2011
CORPORATE INFORMATION
Non executive directors: OV Jevon, R van Rooyen, J du
Toit
Executive directors: WF Schalekamp(acting chairman), WW Mentz
Registration number: 2003/005144/06
Registered address: 12 Gompou Street, East Lynne, 0186
Postal address: PO Box 29607, Sunnyside, 0132
Company secretary: M Pretorius
Telephone: (012) 800 0000
Facsimile: (012) 800 4661
Transfer secretaries: Computershare Investor Services
(Pty) Limited
Designated Adviser: Vunani Corporate Finance
Auditors: RSM Betty & Dickson (Tshwane)
Date: 31/03/2011 11:00:04 Supplied by www.sharenet.co.za
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