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ISB - Insimbi Refractory and Alloy Supplies Limited - Abridged audited results
for the year ended 29 February 2012, notice of Annual General Meeting and
notice of final dividend declaration
INSIMBI REFRACTORY AND ALLOY SUPPLIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration No: 2002/029821/06)
(Income tax reference no: 9078/488/15/3)
Share code: ISB ISIN code: ZAE000116828
("Insimbi" or "the group" or "the company")
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2012, NOTICE OF ANNUAL
GENERAL MEETING AND NOTICE OF FINAL DIVIDEND DECLARATION
FINANCIAL HIGHLIGHTS
2012 2011 % change
Revenue (Rm) 845 732 15
Operating profit (Rm) 29 25 19
Profit before tax (Rm) 22 17 32
Attributable earnings (Rm) 16 12 30
Headline earnings (Rm) 15 10 52
Earnings per share (cents) 6,07 4,63 31
Headline earnings per share (cents) 6,00 3,90 54
Cash flow from operations (Rm) 41 26 58
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
29 February 28 February
2012 2011
R`000 R`000
Revenue 844 717 732 158
Cost of sales (751 256) (642 665)
Gross profit 93 461 89 493
Other income 305 6 219
Operating expenses (37 533) (38 946)
Administration expenses (27 033) (32 185)
Operating profit 29 200 24 581
Investment revenue 575 1 185
Finance costs (7 314) (8 771)
Profit before taxation 22 461 16 995
Taxation (6 827) (5 000)
Profit for the year 15 634 11 995
Other comprehensive income:
Exchange differences on translating 5 20
foreign operations
Total comprehensive income 15 639 12 015
Total comprehensive income attributable
to:
Owners of the parent 15 639 12 015
EARNINGS AND HEADLINE EARNINGS PER SHARE
Audited Audited
12 months to 12 months to
29 February 28 February
2012 2011
R`000 R`000
Basic attributable earnings per share are
calculated by dividing the net profit
attributable to the shareholders by the
number of shares in issue during the year.
Number of shares in issue at the end of 260 000 260 000
the year
Less: Weighted average number of treasury (2 484) (342)
shares held in a subsidiary at the end of
the year
257 516 259 658
Headline earnings for the group have been
computed as follows:
Profit attributable to ordinary 15 634 12 013
shareholders
- Profit/(loss) on sale of property, plant (199) (91)
and equipment
- Impairment for goodwill - 4 000
- Negative goodwill (gain from bargain - (5 791)
purchase)
Headline earnings for the group 15 435 10 131
Basic and fully diluted:
Earnings per share (cents) 6,07 4,63
Headline earnings per share (cents) 6,00 3,90
No diluted earnings per share is reflected as there is no dilutive impact on
the number of shares in issue.
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
As at 29 As at 28
February February
2012 2011
R`000 R`000
Assets
Non-current assets
Property, plant and equipment 34 672 33 699
Intangible assets 39 606 38 438
Deferred tax 3 914 3 828
78 192 75 965
Current assets
Inventories 72 753 62 982
Other financial assets 495
Current tax receivable 2 291 389
Trade and other receivables 120 864 112 497
Cash and cash equivalents 36 506 37 760
232 414 214 123
Total assets 310 606 290 088
Equity and Liabilities
Equity
Share capital 44 442 44 442
Reserves 159 154
Retained income 45 826 35 392
Treasury shares (2 564) (239)
87 863 79 749
Liabilities
Non-current liabilities
Other financial liabilities 35 608 35 172
35 608 35 172
Current Liabilities
Other financial liabilities 46 204 58 965
Derivative financial instrument 1 551 -
Current tax payable 2 635 1 850
Trade and other payables 136 745 114 352
187 135 175 167
Total liabilities 222 743 210 339
Total equity and liabilities 310 606 290 088
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
29 February 28 February
2012 2011
R`000 R`000
Cash flows from operating activities
Cash generated from (used in) operations 41 217 26 122
Interest income 575 1 185
Finance costs (7 314) (8 771)
Tax paid (8 030) (11 488)
Net cash generated from operating 26 448 7 048
activities
Cash flows from investing activities
Purchase of property, plant and equipment (5 828) (4 352)
Sale of property, plant and equipment 383 486
Intangible assets under development (1 168)
Acquisition of business (9 775)
Settlement of financial assets 495
Net cash from (utilised) from investing (6 118) (13 641)
activities
Cash flows from financing activities
Repayment of other financial liabilities (5 556) 19 742
Repurchase of treasury shares (2 325)
Dividends paid (5 200) (5 200)
Net cash from financing activities (13 081) 14 542
Total cash movement for the year 7 249 7 949
Cash at the beginning of the year 29 234 21 285
Total cash at end of the year 36 483 29 234
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share* Share Treasury
capital premium shares
R`000 R`000 R`000
Balance at 1 March 2010 - 44 442 (239)
Changes in equity
Total comprehensive income for the - - -
year
Dividends - - -
Total changes - - -
Balance at 1 March 2011 - 44 442 (239)
Changes in equity
Total comprehensive income for the - - -
year
Purchase of own/treasury shares (2 325)
Dividends - - -
Total changes - - (2 325)
Balance at 29 February 2012 - 44 442 (2 564)
Foreign Retained Total
currency
translation
reserves income equity
R`000 R`000 R`000
Balance at 1 March 2010 134 28 597 72 934
Changes in equity -
Total comprehensive income for the 20 11 995 12 015
year
Dividends - (5 200) (5 200)
Total changes 20 6 795 6 815
Balance at 1 March 2011 154 35 392 79 749
Changes in equity
Total comprehensive income for the 5 15 634 15 639
year
Purchase of own/treasury shares (2 325)
Dividends - (5 200) (5 200)
Total changes 5 10 434 8 114
Balance at 29 February 2012 159 45 826 87 863
SEGMENT REPORT
Foundry Steel Refractory Total
2012 R`000 R`000 R`000 R`000
Revenue
Sale of goods 540 872 215 738 85 094 841 704
Commission 293 - 2 720 3 013
541 165 215 738 87 814 844 717
Cost of sales (481 692) (193 302) (76 262) (751 256)
Gross profit 59 473 22 436 11 552 93 461
Other income 305 - - 305
Profit before operating 59 778 22 436 11 552 93 766
and administration
expenses
Opererating and
administration expenses
Communication (1 124) (75) (100) (1 299)
Consulting and (2 063) (8) (59) (2 130)
professional fees
Depreciation and (4 077) - (126) (4 203)
amortisation
Employment costs (27 789) (2 032) (4 478) (34 299)
Motor vehicle expenses (1 122) (254) (251) (1 627)
Other expenses (16 379) (263) (389) (17 031)
Occupancy (3 718) - (259) (3 977)
(56 272) (2 632) (5 662) (64 566)
Operating profit before 3 506 19 804 5 890 29 200
finance income
2011
Revenue
Sales 411 430 219 012 98 112 728 554
Commission 273 15 3 316 3 604
411 703 219 027 101 428 732 158
Cost of sales (354 789) (204 758) (83 118) (642 665)
Gross profit 56 914 14 269 18 310 89 493
Other income - - 302 302
Gain on bargain purchase 5 791 5 791
Profit on disposal of 126 126
assets
Profit before operating 62 831 14 269 18 612 95 712
and administration
expenses
Operating and
administration expenses
Communication (824) (150) (263) (1 237)
Consulting and (1 937) (422) (714) (3 073)
professional fees
Impairment (4 000) (4 000)
Depreciation and (4 043) (457) (702) (5 202)
amortisation
Employment costs (24 047) (4 166) (9 487) (37 700)
Motor vehicle expenses (1 004) (172) (486) (1 662)
Other expenses (10 697) (780) (1 684) (13 161)
Occupancy (4 062) (450) (584) (5 096)
(50 614) (6 597) (13 920) (71 131)
Operating profit before 12 217 7 672 4 692 24 581
finance income
There is no disclosure of segment assets and liabilities as it is not possible
to specifically allocate tangible assets and liabilities to specific segments.
Management has determined the operating segments based on the reports reviewed
and this is supported by management reporting disciplines, which include
monthly variance reporting. Insimbi`s performance is monitored continuously
and issues arising are addressed at monthly management meetings that have
board representation present.
Management considers the business from both a geographical and product
management perspective. Management assesses the performance of the operating
segments based on measures such as gross and operating profit.
COMMENTARY
The directors of Insimbi are pleased to announce the audited results for the
year ended 29 February 2012.
1. Basis of Preparation and Accounting Policies
The results for the year ended 29 February 2012 have been prepared in
accordance with International Financial Reporting Standards ("IFRS"),
specifically IAS 34 Interim Financial Reporting and AC 500 Statements,
and comply with the requirements of the Companies Act 71 of 2008 and the
Listings Requirements of the JSE Limited. The principle accounting
policies applied by the group in the abridged consolidated financial
results for the year ended 29 February 2012 are consistent with those
applied in the consolidated financial statements for the year ended 28
February 2011. These financial statements do not include all the
information for full annual financial statements and should be read in
conjunction with the consolidated financial statements for the year ended
29 February 2012.The results have been audited by PricewaterhouseCoopers
Inc. Their unqualified audit report and the audited financial statements
are available for inspection at the company`s registered office. These
abridged financial statements have been prepared under the supervision of
Fred Botha(CA)SA (Financial Director).
2. Review of activities
Insimbi continues to operate out of our offices in Johannesburg, Durban,
Atlantis and Kitwe and we are actively represented in the Democratic
Republic of the Congo and Zimbabwe via our agents there. In addition, we
continue to service most sub-Saharan and central African countries, as
well as certain north, west and east African countries. We are also
active in South America, Eastern Europe, certain Middle East countries
and the UAE, Japan and Korea as well as India.
3. Financial Review
The Group achieved improved results for the financial year ending 29th
February 2012 and there were definite signs of an improvement in our
specific target markets with revenues almost back to 2008 levels. The
slightly weaker rand definitely had a positive impact on our client base
and we saw increases in the production at many of our foundry segment
customers in particular. Alloy and resource prices were relatively stable
throughout the period under review and this enabled us to manage our
business more efficiently. This also had a positive impact on the month
to month consistency of our group`s performance compared to the
volatility of the prior years.
Group revenue grew 15% to R845 million and earnings and headline earnings
increased by 30% to reach R15,6 million and 52% respectively.
The group produced a gross profit of R93,5 million compared to R89.5
million in the previous year, an increase of 4,4%. Gross margins were
slightly down at 11,1% compared to 12,2% in the previous year but this
was mainly due to the increase in sales of lower margin products which
boosted our revenues. We did, however, experience improved margins in the
second half of the year as a result of the rand which started to weaken
and an increased focus on this area. Gross margins were 10,6% at 31
August 2011 compared to the full year gross margin of 11,1%.
Group consolidated operating expenses were well controlled throughout the
period under review and were R64,6 million compared to R71,1 million in
the previous year and reduction in overall operating costs of 9,2%.
Group Operating profit for the period was R29,2 million compared to R24,6
million in the previous financial year, an increase of 18,8% and Insimbi
achieved earnings and headline earnings per share of 6,07 cents per share
and 6,00 cents per share compared to 4,63 and 3,9 cents per share for the
previous financial year, increases of 31% and 54% respectively.
Working capital and cash-flow management remained a key focus area for
the group`s management and R40,2 million was generated from operations
compared to R26,1 million in the previous year, an increase of R14,1
million of 58%. Lower borrowings were reflected in decreased finance
costs of R7,3 million compared to R8,8 million in the prior period, a
reduction of R1,5 million in interest (17%).
4. Market and Prospects
The group generated strong cash-flow throughout the period under review
mainly due to tight working capital management, improved revenues and
profitability.
The Foundry Segment has experienced improved trading conditions mainly,
partly due to the stimulus to local manufacturing as a result of the
weaker rand which enabled local product to compete with imported finished
product, mainly from China.
The Steel Segment did initially show signs of improvement in the first
quarter but the NUMSA strike and production challenges at some steel
plants had a negative impact on this segment.
The Refractory Segment continues to experience challenging trading
conditions but in our experience, this segment`s trading cycle tends to
lag behind the other 2 segments by about 6 to 9 months and so we are
confident that there will be improvement in this segment in the current
financial year. Unfortunately the planned infrastructure spend did not
materialise in the year under review and this effected the construction
industry tremendously and had a negative impact on cement demand that in
turn limited cement kiln repairs.
Generally this inability of government to effectively spend budgets
allocated to infrastructure projects on said projects, impacted
negatively on certain product ranges and off-take volumes but we are
optimistic that systems have been put in place by the relevant
authorities in the current financial year to ensure that the R845 billion
budgeted for infrastructure uplift over the next 3 years, is in fact
spent on the planned projects.
Economic conditions in South Africa have improved and although the GDP
growth rate is lower than expected, we remain optimistic on the recent
momentum of business. This despite the ongoing unfolding events in Europe
which do not appear to have had a significant impact on us to date.
Insimbi has been targeting markets that are considered to be emerging and
the Group will still focus on these markets. We have a diverse range of
products on offering and with the re-opening of the secondary aluminium
smelter in Johannesburg (which was mothballed in 2010); the establishment
of a subsidiary company, Insimbi Nano Milling, which will be focusing on
the micronisation of a completely new range of products for new target
markets; and the addition of certain products to our basket, we are
confident that the group will continue to achieve satisfactory organic
growth in years to come.
As for acquisitive growth opportunities, we continue to look for and
carefully evaluate strategic targets and while we have not achieved the
number of acquisitions we had hoped for, post listing, the few that we
have achieved, have added value to the group`s results and we remain
committed to this acquisition strategy.
5. Special resolutions
At the Annual General Meeting held on 26 August 2011, it was resolved
that the directors be authorised to re-purchase up to 10% of the company
shares subject to certain conditions.
6. Post balance sheet events
It is worth mentioning the following:
a) that the secondary aluminum smelter in Johannesburg which was
mothballed in 2010, is in the process of being recommissioned and is
expected to be in production imminently. The business has been
restructured to emulate our Metlite operations in Cape Town and
whose business model has proven to be very successful.
b) Insimbi board has approved the excerising of it`s option to purchase
the Teakwood property which it currently rents for R155k per month
in Jacobs, Mobeni, KZN, for an amount of R13,5 million. This
property was secured in 2010 via the lease and option to purchase
agreements and a deposit of R2,7 million was paid into the
lessor/sellers attorney escrow account. Application for a mortage
bond of R13,5 million to Nedbank was made and approval has been
granted. The effective date of the acquisition will be 1 August
2012.
7. Directors
The directors of the company, all of whom are South African citizens,
during the year and as at the date of this report are as follows:
J Viera-Perreira (resigned 29 February 2012)
CF Botha
F Botha
EP Liechti
GS Mahlati
LY Mashologu
DJ O`Connor
PJ Schutte
LG Tessendorf (alternate to CF Botha)
8. Authorised and issued share capital
The authorised share capital is 12 billion shares. Currently there are
260 million shares in issue. Shares repurchased by a subsidiary and held
in treasury amounted to 4 855 724 shares at year end, which is disclosed
as a reduction of equity in the statement of changes in equity.
9. Dividends
Interim dividend Number 5 of 2 cents per share was declared on 4 October
2011, payable to shareholders registered on 31 October 2011. The total
payout was R5 200 000,00 (2011: R5 200 000,00).
A final gross dividend of 1 cent per share has been declared on 31 May
2012. There are 260 000 000 ordinary shares in issue at announcement
date; the total dividend amount payable is R2 548 112.66 (2011: Rnil).
This is a dividend as defined in the Income Tax Act, 1962, and is payable
from income reserves. The South African dividend tax (DT) rate is 15% and
no credits in terms of secondary tax on companies have been utilised.
The net amount payable to shareholders who are not exempt from DT is 0,85
cents per share, while it is 1,0 cents per share to those shareholders
who are exempt from DT.
The salient dates are as follows:
Declaration date Thursday, 31 May 2012
Last date to trade to participate Friday, 22 June 2012
Trading commences ex div Monday, 25 June 2012
Record date Friday, 29 June 2012
Payment date Monday, 2 July 2012
Share certificates may not be dematerialised or rematerialised between
Monday, 25 June 2012 and Friday, 29 June 2012, both days inclusive.
10. Litigation
There are no legal or arbitration proceedings, including any proceedings
that are pending or threatened, or which Insimbi or any of its
subsidiaries is aware and that may have or have had, in the 12-month
period preceding the date of issue of this annual report, a material
effect on the financial position of Insimbi or any of its subsidiaries.
11. Notice of Annual General Meeting
Notice is hereby given that the annual general meeting of Insimbi
Refractory and Alloy Supplies Limited will be held at 359 Crocker Road,
Wadeville Ext 4, Germiston on Friday 24 August 2012 at 10:00, to transact
the business as stated in the notice of annual general meeting included
in the Annual Report which has been posted to shareholders today.
By order of the Board
Pieter Jacobus Schutte
Chief Executive Officer
Registered office:
Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary:
K Holtshauzen
Directors:
F Botha (Financial Director)
CF Botha
EP Liechti
PJ Schutte (Chief Executive Officer)
LG Tessendorf
DJ O Connor* (Chairman)
GS Mahlati*
L Mashologu*
(* non-executive)
Sponsor:
Bridge Capital Advisors (Proprietary) Limited
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
31 May 2012
Date: 31/05/2012 08:00:01 Supplied by www.sharenet.co.za
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