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AET - Alert Steel's loss narrows
ALERT STEEL HOLDINGS LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REGISTRATION NUMBER: 2003/005144/06
JSE CODE: AET
ISIN: ZAE000092847
ALERT STEELS LOSS NARROWS
Pretoria, 30 October 2012 AltX-listed steel retailer Alert Steel today reported a decrease of 90% in its basic loss per share to -5.4 cents (2011: -54.5 cents) and a decrease of 91% in its headline loss per share to -4.4 cents (2011: -47.3 cents) in its results for the year ended 30 June 2012.
Revenue increased by 12% to R825 million (2011: R735 million), while gross profit increased by 23% to R171 million (2011: R139 million). Operating expenses decreased by 7% to R195 million (2011: R210 million).
Chief executive Johan du Toit said the remedial measures implemented over the last year had had a positive impact on Alert Steels performance but that progress with the three-year turnaround plan continued to be hampered by a number of external factors including a deteriorating operating environment, industrial action and supply shortages.
In addition to the two strike actions during the course of the year as well as Mittal stock shortages from September to December 2011, slow trading during December and January negatively impacted our cash flows, which affected our ability to obtain stock. As a result, stock supply was intermittent until the rights offer underwriters advanced their funds to the company, du Toit said. He noted that these issues had mostly been resolved by May this year and that the company had since returned to normal trading terms with the majority of its suppliers.
Finance costs were also higher than anticipated, primarily due to the raising of a R1.5 million cash-back guarantee to Arcellor Mittal and shareholder loans bearing high interest ahead of the rights offers of October 2011 and June 2012.
He said the first three months of trading of the new financial year had remained very challenging and that he did not expect an improvement in the market conditions for the rest of the year. In light of these conditions, the board reviewed Alert Steels business plans and based its forecast of the companys results to June 2013 on the assumption that there will be no improvement in the operating environment. However, we are positive that the three-year restructuring plan is on track and we will continue to improve efficiencies to ensure the long-term sustainability of the company. Even under this worse-case scenario, we still expect to improve on the 2012 years results and we will continue on the recovery plan for the company as set out in our three year strategic plan.
The new business plan entailed a further reduction in costs and improvement in efficiencies as well as an aggressive expansion of its Alert Express mobile retail units to offset the lost revenue from the non-profitable discontinued branches. The retail units, which are part of our strategy of penetrating the growing rural market, are quick to deploy, cheap to operate and generate attractive profit margins, du Toit said. These additional express stores would be funded by a planned reduction in stock levels in the company.
The company had also raised a further R30 million in capital in the form of a special issue of shares to shareholders, which will be concluded on 31 October 2012. This had been done to ensure that the company had enough equity to carry it through the remainder of the recovery plan.
Du Toit said the directors had also looked at the companys cash flow position and requirements for the next six months and had expressed their satisfaction that the companys forecast cash flows would be sufficient to meet its obligations, even under the current trading conditions. Our view is that we have enough cash resources to meet our obligations as they fall due. Trade payables are being paid throughout the month and no compromises have been made with any suppliers.
He says the board had concluded that the company would continue as a going concern provided that a number of critical objectives are met. These consist of the successful implementation of various cost-cutting measures, the expansion of its express store network, and a significant reduction in stock levels to free up cash. All of these initiatives are on the advanced stages of planning.
For further information call Johan du Toit, CEO Alert Steel, on 082 416 8888
Issued by du Plessis Associates on behalf of Alert Steel Holdings Limited.
dPA contact Helen McKane Tel : +27 11 728 4701, Fax: +27 11 728 2547, Mobile: 082 330 2034 or e-mail: alertsteel@dpapr.com
website: www.alertsteel.co.za
DESIGNATED ADVISER: Exchange Sponsors (2008) (Pty) Ltd
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