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ISB - Insimbi Refractory and Alloy Supplies Ltd - Unaudited consolidated

Release Date: 06/10/2011 12:32
Code(s): ISB
Wrap Text

ISB - Insimbi Refractory and Alloy Supplies Ltd - Unaudited consolidated condensed financial results for the six months ended 31 August 2011 INSIMBI REFRACTORY AND ALLOY SUPPLIES LTD (Incorporated in the Republic of South Africa) (Registration No: 2002/029821/06) Share code: ISB & ISIN code: ZAE000116828 ("Insimbi" or "the company" or "the group") UNAUDITED CONSOLIDATED CONDENSED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2011 Key Financial Indicators - Revenue increased by 10% to R 454 million compared to the previous period. - Operating costs are down by 13 %. - Profit before taxation is 34% higher when compared to the results for the same reporting period in the previous year, after adjusting for non recurring items. - Gross profit decreased by 6% to R 48 million. - EPS down by 9.3% when compared to the adjusted results for the same reporting period in the previous year. - HEPS up by 20,2%. - Operations generated R30 million cash in the 6 months to 31 August 2011 compared to R24 million in the previous comparative period, reflecting continued prudent cash management. - Tangible NAV up by 10% on comparative period and 24% on February 2011. - Dividend declaration number five of 2c per share. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited Restated Audited 6 months 6 months Year
to to ended 31 August 31 August 28 February 2011 2010 2011
R`000 R`000 R`000 Revenue 453 592 412 043 732 453 Cost of sales (405 610) (360 954) (642 665) Gross profit 47 982 51 089 89 788 Negative goodwill - 5 791 5 791 Operating costs (30 492) (35 094) (71 000) Operating profit 17 490 21 786 24 579 Finance income 257 479 1 186 Finance costs (3 467) (5 818) (8 771) Profit before taxation 14 280 16 447 16 994 Taxation (3 554) (4 539) (5 001) Profit for the period/year 10 726 11 908 11 993 Currency translation differences 9 72 20 Total comprehensive income 10 735 11 980 12 013
Attributable to equity holders 10 735 11 980 12 013 Basic and fully diluted Earnings Per Share (cents) 4.18 4.61 4.63 CONSOLIDATED STATEMENT OF Unaudited FINANCIAL POSITION Unaudited Restated Audited
As at As at As at 31 August 31 August 28 February 2011 2010 2011
Assets R`000 R`000 R`000 Non-Current Assets Property, plant and equipment 34 713 38 604 33 700 Intangible assets 38 438 38 438 38 438 Deferred tax 3 997 3 195 3 827 77 148 80 237 75 965 Current Assets Inventories 77 349 67 598 62 982 Trade and other receivables 106 792 109 580 113 379 Cash and cash equivalents 21 112 36 540 37 763 205 253 213 718 214 124
Total assets 282 401 293 955 290 089 Equity Capital and Reserves 88 990 84 844 79 749 Liabilities Current and Non-current 193 411 209 111 210 340 Total Equity and Liabilities 282 401 293 955 290 089 CONSOLIDATED STATEMENT OF CHANGES Unaudited IN EQUITY Unaudited Restated Audited As at As at As at
31 August 31 August 28 February 2011 2010 2011 R`000 R`000 R`000
Share capital* - - - Share premium - Issue of shares 44 442 44 442 44 442 Treasury shares Purchase of shares by subsidiary (1 732) (238) (238)
Foreign Currency Translation 163 62 154 Reserve
Retained earnings at beginning of 35 391 28 598 28 598 year Net profit for the period/year 10 726 11 980 11 993 Dividends paid - - (5 200) Retained earnings at end of 46 117 40 578 35 391 period/year Total Equity 88 990 84 844 79 749 *Share capital equals 260 000 000 shares at 0.000025 cents each = R65 CONSOLIDATED STATEMENT OF CASH Unaudited FLOWS Unaudited Restated Audited 6 months 6 months Year
to to ended 31 August 31 August 28 February 2011 2010 2011
R`000 R`000 R`000 Cash flows from operating activities Cash generated from operations 36 096 33 166 26 122 Finance income 257 478 1 186 Finance costs (3 467) (4 482) (8 771) Taxation paid (2 885) (5 125) (11 488) Net cash generated from operating activities 30 001 24 037 7 049 Cash flows from investing activities Property, plant and equipment (973) (5 000) (3 864) Acquisition of businesses - (9 775) (9 775) Purchase of treasury shares (1 504) - Net cash utilised in investing activities (2 477) (14 775) (13 639)
Cash flows from financing activities Increase/(Decrease) in borrowings (40 987) 5 994 19 742 Dividends paid - - (5 200) Net cash generated from/(utilised in) financing activities (40 987) 5 994 14 542
Total cash movement for the (13 463) 15 256 7 952 period/year Cash at the beginning of the 29 237 21 285 21 285 period/year Total cash at the end of the 15 774 36 541 29 237 period/year CONDENSED SEGMENTAL REPORT Unaudited FOR THE YEAR ENDED 28 FEBRUARY Unaudited Restated Audited 2011 6 months 6 months Year to to ended
31 August 31 August 28 February 2011 2010 2011 R`000 R`000 R`000
Revenue by segment Foundry 288 364 229 047 411 703 Steel 123 802 133 875 219 027 Refractory 41 426 49 121 101 723 453 592 412 043 732 453 Gross profit by segment Foundry 30 714 30 205 56 914 Steel 11 282 11 589 14 269 Refractory 5 986 9 295 18 605 47 982 51 089 89 788 OTHER GROUP SALIENT FEATURES Unaudited Unaudited Restated Audited
6 months 6 months Year to to ended Headline earnings per share: 31 August 31 August 28 February
Basic attributable earnings per 2011 2010 2011 share are calculated by dividing the R`000 R`000 R`000 net profit attributable to shareholders by the number of shares in issue during the year.
Number of weighted shares in 260 000 260 000 260 000 issue at the end of the period/year Less: treasury shares held in (3 332) (342) (342) a subsidiary at the end of the year 256 668 259 658 259 658
Profit attributable to ordinary 10 735 11 980 12 013 shareholders Adjusted for (profit)/loss on sale of property, plant and equipment (48) (91) Adjusted for impairment of - 2 800 4 000 goodwill Adjusted for negative goodwill - (5 791) (5 791) (Gain from bargain purchase) Headline earnings for the group 10 687 8 989 10 131 Basic and fully diluted headline 4,16 3,46 3,90 earnings per share (cents) Dividends per share - - 2,00
Net asset value per share (cents) 34,67 32,68 30,71 Tangible net asset value per 19,69 17,87 15,91 share (cents) Depreciation 2 444 2 466 5 203 Capital expenditure 1 034 5 198 4 350 Commitments: Operating Leases 7 442 6 529 8 646 Overview The interim period ended 31 August 2011 has shown strong revenue growth although gross margins have been negatively impacted by the strength of the rand during this period. Markets continue to be volatile although much improved on the previous 2 years. It is pleasing to note that the monthly performance of the group during the 6 months ending 31 August 2011, has been stable and consistently improved each month during the period, with the exception of July 2011 which was lower as a result of the NUMSA strike action. The recent weakening of the rand against the USD and Euro is a welcome development as this makes our exports and our customers` exports more competitive as well as offering some protection against cheap competing imports. This bodes well for the rest of the financial year notwithstanding the turmoil in Europe and the USA and we remain positive with regards to the medium and longer term growth prospects in our primary markets in South Africa and sub- Saharan Africa. Insimbi generated strong cash-flows during the period under review and the board has approved a 2 cent per share interim dividend distribution after conservatively assessing all the factors relevant to this decision, including the macro-economic and business outlook. Financial Performance Group revenue for the period was R454 million, 10 % up on the R412 million achieved in the comparative period ending 31 August 2010 and 49% up on the R305 million achieved in the comparative period ending 31 August 2009. This is significant as it is clear evidence that the market is showing sustainable improvement since the beginning of the global economic crisis. This improved performance can be attributed to improved market conditions and demand. It is also important to note that this increased revenue has been achieved notwithstanding the negative impact of the NUMSA strike in July 2011 and the low demand from Mittal as a result of their publicised operational problems. We anticipate that Mittal will resume normal operations during November 2011, which is positive for Insimbi. Gross profit was R48 million, 6% down on the R51 million achieved for the period ending 31 August 2010 (but 26% up on the period ending 31 August 2009). The main reason behind the drop in gross profit is attributable to the strength of the rand during the period under review which has translated into a gross margin of 10.6% when compared to 12.4% in 2010 and 12.5% in 2009. We are hopeful that with the recent weakening of the rand, margins will improve. Group operating profit (after adjusting for the non recurring negative goodwill in the previous comparative period of R5.8 million on the acquisition of Metlite group), is 9% up on the previous period ending 31 August 2010. Group operating costs have been well controlled during the period under review and at R30.4 million are 13% lower than the corresponding period last year. Group finance costs are 40% lower and group profit before taxation (after adjusting for the non recurring negative goodwill in the previous comparative period of R5.8 million on the acquisition of Metlite group), is 34% higher than the corresponding period ended 31 August 2010. Insimbi achieved group EPS and HEPS of 4.18 and 4.16 cents per share respectively compared to 4.61 and 3.46 cents per share in the previous comparative period (2009: 2.61 and 2.62 cents per share respectively). This equates to a 9.3% decrease in EPS and a 20.2% increase in HEPS respectively. Working capital management and cash-flow has remained a key focus area for Insimbi and we have responded to changing market conditions effectively. This has ensured strong cash-flows throughout the period with R30.0 million cash generated from operations. Restated results for the prior period As per the Chief Executive Officer`s Review in our 2011 Annual Report, page 7, the results for the comparative period have been adjusted due to the finalisation of the valuation of the tangible assets of Metlite. At the time of the acquisition, the Board estimated the fair value of the tangible assets to be around R12,884 million subject to completion of the valuation required in terms of IFRS 3 (Revised). The required valuations were performed in February 2011 and resulted in two values being obtained as follows: - Fair Value of R5,836 million and - Replacement Value of R13,555 million In terms of IFRS 3 para 18 and IAS 16 para 33, the required valuation resulted in the Fair Value Assessment of R5,836 million. As a result, this reduction had a direct impact on the after tax attributable earnings of R5,075 million for the comparative period. Operational Review Insimbi has remained strongly cash generative throughout the period under review due to the Group`s diverse product offering, continued profitability and attention to working capital management. The foundry segment has shown pleasing signs of recovery and growth compared to the very difficult comparative period that this segment experienced in the previous year. The foundry industry is often referred to as the "barometer" of the South African economy and the fact that is has shown such positive growth in the face of a strong rand, is cause for optimism. The steel segment was showing strong signs of recovery but the effect of Mittal`s operational problems, definitely detracted from this during the 6 months under review. However, we remain confident that Mittal will successfully overcome their challenges later this quarter and that this segment will continue to show sustainable recovery. The refractory segment continues to experience difficult trading conditions but this segment does traditionally lag behind the steel and foundry segment "cycle" and we remain optimistic of a recovery. Our major concern here is that despite large 2011/2012 Budget allocations by the Minister of Finance to the various infrastructure upgrade initiatives of government, that these budgets do not in fact get spent, as has happened in the previous years. However, we are confident that the various ministries responsible for this infrastructure upliftment, are committed to spending their budget allocations effectively. The Insimbi Group remains committed to BBEEE and have maintained its rating as a Level 7 contributor. We continue to strive for a higher rating but are largely dependent on our large suppliers themselves, being officially rated which will enable us to improve our rating, unfortunately many of these suppliers are not able to provide us with rating certificates and this negatively impacts on our procurement scorecard. Prospects Despite the current uncertainty in Europe and the USA, Insimbi has experienced definite signs of what we believe to be, sustainable improvements in our traditional target markets, most of which are considered to be "emerging". It is unclear at this stage what effects the unfolding events in Europe and USA will have on the local, regional and other emerging market economies but we remain confident that Insimbi is well prepared to deal with them. We have a diverse range of product offerings that have proven to be resilient throughout the global crisis. The fact that Insimbi has remained profitable throughout this crisis period, is proof of this. We are also optimistic and confident that the consistent and improved revenues experienced during the first 6 months of our financial year, are sustainable. Our experience during the comparative period last year, was of massive volatility with monthly revenues varying greatly from one month to the next. This consistency combined with the recent weakening of the rand against major currencies, is positive for Insimbi. We continue to prudently evaluate strategic acquisitions and we remain focused on expanding our "basket" of products to strengthen our position as a market leader in the ferro-alloy and refractory market Accounting policies The condensed consolidated financial statements for the interim period ended 31 August 2011 have been prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34, the AC 500 series of accounting standards, JSE listing Requirements and the Companies Act of South Africa. The accounting policies are consistent with those applied in the annual financial statements for the previous year. Contingencies The company does not have any material contingencies. Post balance sheet event No material fact or circumstance existed post balance sheet date that affects the results being reported. Dividends Notice is hereby given that Insimbi has declared an interim dividend (dividend declaration 5) for the six months ended 31 August 2011 of 2 cents per share. The salient dates applicable to the interim dividend are as follows: Last day to trade cum dividend Friday, 21 October 2011 First day to trade ex dividend Monday, 24 October 2011 Record date Friday, 28 October 2011 Payment date Monday, 31 October 2011 No share certificates will be dematerialised or rematerialised between Monday, 24 October 2011 and Friday, 28 October 2011, both days inclusive. DJ O Connor P Schutte Chairman Chief Executive Officer 06 October 2011 Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422 Company Secretary: Kristell Holtzhausen Directors: CF Botha, F Botha, EP Liechti, GS Mahlati*, LY Mashologu*, DJ O Connor*, PJ Schutte, LG Tessendorf, J Vieira-Pereira. (* indicates non executive) Designated Advisor: Bridge Capital Advisors (Proprietary) Limited Transfer Secretaries: Computershare Investor Services (Proprietary) Limited Date: 06/10/2011 12:32:57 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.

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