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Abridged Audited Financial Results For The Year Ended 28 February 2013 and Notice of Annual General Meeting
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 28 FEBRUARY 2013 AND NOTICE OF
ANNUAL GENERAL MEETING.
FINANCIAL INDICATORS
2013 2012 % change
Revenue (Rm) 828 835 (1)
Operating profit (Rm) 19 29 (34)
Profit before tax (Rm) 13 22 (41)
Attributable earnings (Rm) 8 16 (50)
Headline earnings (Rm) 8 15 (47)
Earnings per share (cents) 3,13 6,07 (48)
Headline earnings per share (cents) 3,15 5,99 (47)
Cash flow from operations (Rm) 39 41 (5)
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
28 February 29 February
2013 2012
R’000 R’000
Revenue 828 315 835 237
Cost of sales (744 741) (745 173)
Gross profit 83574 90064
Other income 2963 225
Operating expenses (34061) (35407)
Administration expenses (33082) (26182)
Operating profit 19 394 28 700
Investment revenue 235 489
Finance costs (6655) (7314)
Profit before taxation 12 974 21 875
Taxation (4 065) (6 663)
Profit for the year from continuing 8 909 15 212
operations
(Loss)/profit from discontinued operations (1 208) 422
Profit for the year 7 701 15 634
Other comprehensive income:
Exchange differences on translating - 5
foreign operations
Gain on property revaluation 28 375 -
Taxation related to components of other
comprehensive income (7 945) -
Total comprehensive income 28 131 15 639
Total comprehensive income attributable
to:
Owners of the parent 28 359 15 639
Non-controlling interest (228) -
EARNINGS AND HEADLINE EARNINGS PER SHARE
Audited Audited
12 months to 12 months to
28 February 29 February
2013 2012
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 (6 890) (2 484)
shares held in a subsidiary at the end of
the year
253 110 257 516
Headline earnings for the group have been
computed as follows:
Profit attributable to ordinary 9 137 15 212
shareholders – continuing operations
Profit attributable to ordinary
shareholders – discontinued operations (1 208) 422
Profit attributable to ordinary
shareholders 7 929 15 634
– Profit/(loss) on sale of property, plant (260) (199)
and equipment
– Impairment for goodwill 300 -
Headline earnings for the group 7 969 15 435
Basic and fully diluted:
Earnings per share from continuing
operations 3,61 5,91
Earnings per share from discontinued
operations (0,48) 0,16
Earnings per share (cents) 3,13 6,07
Headline earnings per share (cents) 3,15 5,99
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 As at
28 February 29 February
2013 2012
R’000 R’000
Assets
Non-current assets
Property, plant and equipment 79 003 34 672
Intangible assets 40 741 39 606
Deferred tax 6 460 6 905
126 204 81 193
Current assets
Inventories 66 423 72 753
Other financial assets
Current tax receivable 2 145 2 291
Trade and other receivables 93 156 120 864
Cash and cash equivalents 33 469 36 506
195 193 232 414
Total assets 321 397 313 597
Equity and Liabilities
Equity
Share capital 44 442 44 442
Reserves 20 589 159
Retained income 46 169 45 826
Non controlling interest (228) -
Treasury shares (4 591) (2 564)
106 021 87 863
Liabilities
Non-current liabilities
Other financial liabilities 20 283 35 608
Deferred taxation 10 896 2 991
31 179 38 599
Current Liabilities
Other financial liabilities 64 862 46 204
Derivative financial instrument 19 1 551
Current tax payable 255 2 635
Trade and other payables 119 061 136 745
184 197 187 135
Total liabilities 215 376 225 734
Total equity and liabilities 321 397 313 597
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
28 February 29 February
2013 2012
R’000 R’000
Cash flows from operating activities
Cash generated from (used in) operations 38 518 41 217
Interest income 245 575
Finance costs (6 662) (7 314)
Tax paid (6 235) (8 030)
Net cash generated from operating 25 866 26 448
activities
Cash flows from investing activities
Purchase of property, plant and equipment (21 344) (5 828)
Sale of property, plant and equipment 372 383
Intangible assets under development (1 435) (1 168)
Acquisition of business
Settlement of financial assets - 495
Net cash from (utilised) from investing (22 407) (6 118)
activities
Cash flows from financing activities
Repayment of other financial liabilities 3 477 (5 556)
Repurchase of treasury shares (2 387) (2 325)
Dividends paid (7 586) (5 200)
Net cash from financing activities (6 496) (13 081)
Total cash movement for the year (3 037) 7 249
Cash at the beginning of the year 36 483 29 234
Total cash at end of the year 33 446 36 483
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share* Share Treasury
capital premium shares
R’000 R’000 R’000
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 – – –
Balance at 1 March 2012 – 44 442 (2 564)
Changes in equity
Profit for the year - - -
Total comprehensive income for the – – -
year
Purchase of own/treasury shares (2 387)
Dividends – – -
Total changes – – (2 387)
Balance at 28 February 2013 – 44 442 (4 951)
Foreign
currency
translation Revaluation Retained
reserves reserve income
R’000 R’000 R’000
Balance at 1 March 2011 154 - 35 392
Changes in equity
Total comprehensive income for the 5 - 15 634
year
Purchase of own/treasury shares - -
Dividends – - (5 200)
Total changes 5 - 10 434
Balance at 1 March 2012 159 - 45 826
Changes in equity
Profit for the year - - 7 929
Total comprehensive income for the - 20 430 -
year
Purchase of own/treasury shares - - -
Dividends – - (7 586)
Total changes - 20 430 343
Balance at 28 February 2013 159 20 430 46 169
Non Total
controlling Equity
Interest R’000
R’000
Balance at 1 March 2011 79 749
-
Changes in equity
Total comprehensive income for the - 12 015
year
Purchase of own/treasury shares - (2 325)
Dividends - (5 200)
Total changes - 8 114
Balance at 1 March 2012 - 87 863
Changes in equity
Profit for the year (228) 7 701
Total comprehensive income for the - 20 430
year
Purchase of own/treasury shares - (2 387)
Dividends - (7 586)
Total changes (228) 18 158
Balance at 28 February 2013 (228) 106 021
SEGMENT REPORT
Foundry Steel Refractory Total
2013 R’000 R’000 R’000 R’000
Revenue
Sale of goods 521 330 222 700 81 106 825 136
Commission 257 – 2 922 3 179
521 587 222 700 84 028 828 315
Cost of sales (466 494) (201 908) (76 340) (744 741)
Gross profit 55 092 20 793 7 689 83 574
Other income 2 852 – 111 2 963
Profit before operating 57 945 20 793 7 800 86 537
and administration
expenses
Opererating and
administration expenses
Communication (1 044) (67) (32) (1 143)
Consulting and (4 618) (826) (52) (5 496)
professional fees
Depreciation and (4 369) – (991) (5 360)
amortisation
Employment costs (29 616) (1 504) (2 941) (34 061)
Motor vehicle expenses (1 585) (294) (173) (2 051)
Other expenses (12 863) (308) (335) (13 326)
Occupancy (5 706) – - (5 706)
(59 621) (2 999) (4 523) (67 143)
Operating profit before (1 677) 17 794 3 277 19 394
finance income
2012
Revenue
Sale of goods 540 872 215 738 75 614 832 224
Commission 293 – 2 720 3 013
541 165 215 738 78 334 835 237
Cost of sales (481 692) (193 302) (70 179) (745 173)
Gross profit 59 473 22 436 8 155 90 064
Other income 305 – (80) 225
Profit before operating 59 778 22 436 8 075 90 289
and administration
expenses
Operating and
administration expenses
Communication (1 124) (75) (65) (1 264)
Consulting and (2 063) (8) - (2 071)
professional fees
Depreciation and (4 077) – - (4 077)
amortisation
Employment costs (27 789) (2 032) (2 339) (32 160)
Motor vehicle expenses (1 122) (254) (179) (1 555)
Other expenses (16 379) (263) (102) (16 744)
Occupancy (3 718) – - (3 718)
(56 272) (2 632) (2 685) (61 589)
Operating profit before 3 506 19 804 5 390 28 700
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 28 February 2013 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 28 February 2013 are consistent with those
applied in the consolidated financial statements for the year ended 29
February 2012. 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
28 February 2013.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 (Commercial and 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
Due to the poor economic conditions experienced in the second half
of the financial year and while the qroup results remained in the
black for the year, our operating results for the year ending
February 2013, were well below our results for the immediately
preceding year-ending February 2012.
Group revenue dropped by only 0,8% (or R7 million) to R828 million
and earnings decreased by 49% to R7,9 million, down from R 15,6
million in the previous year. Headline earnings decreased by 48,3% to
R7,9 million.
In addition to the difficult trading conditions locally, which
exhibited themselves mainly in the second half of the financial
year, the Euro zone continued to suffer from retarded and even
negative growth and this had a negative impact on our exports. Trade
to our traditional emerging market partners, was promising but the
expected recovery in Europe did not occur as Portugal, Italy, Greece
and Spain as well as Cyprus continued to implode.
The group produced a gross profit of R83,5 million compared to R90,0
million in the previous year, a decrease of 7,3%. Gross
margins were slightly down at 10,0% compared to 10,8% in the prev1ous
year and is evidence of the difficult market conditions and low
commodity prices experienced during the year. Gross margins were 10,6%
at 31 August 2012 compared to the full year gross margin of 10,0%.
Group consolidated net operating expenses were again well
controlled throughout the period under review and were R67,1
million compared to R61,1 million in the previous year, an
increase of only 8,9%. I am very pleased with this, especially in
light of the increases experienced in fuel and electricity during the
year. Staff costs were increased 1n line with CPIX during the period.
Group net profit before taxation for the period was R13,0 million
compared to R21,9 million in the prev1ous financial year, a decrease of
40,6%.
As always, our ability to manage our working capital and cash flow
remained a key focus area for the group's management and proved
1nvaluable in trading through the d1fficul: second holt of the yea1 and
R38,5 million was generated from operations compared to R4 1.2 million
in the previous year, a decrease of only R3.7 million or 6,6%. Lower
borrowings were reflected in decreased finance costs of R6.7 million
compared to R7,3 million in the prior period, a reduction of R0,6
million in interest (9%,).
4. Market and Prospects
The Foundry Segment has experienced mixed trading conditions
during the period under review mainly, due to the labour unrest
particular during the second half of the financial year.
The Steel Segment did initially show signs of improvement in the first half
of the year but the strike action in various industries together with the
Mittal Vanderbiljpark fire that stopped production for some months did have
a negative impact on this segment.
The Refractory Segment had the most stable trading conditions of all
segments and performed better than the previous year mainly due to the PPC
De Hoek upgrade project. Unfortunately the planned infrastructure spend
did not materialised 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 on said projects together with labour unrest
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 three years, is in fact
spent on the planned projects.
This will have a very positive impact on our business.
Economic conditions in South Africa is under pressure and with the GDP
growth rate being lower than expected, I believe the 2014 financial year,
will be one with some challenges and market conditions will stay relative
flat until such time the infrastructure spend kicks in and the ongoing
events in Europe show signs of stabilization.
Insimbi will continue targeting markets that are considered to be emerging
and the group will 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, I am 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 24 August 2012, 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:
the Insimbi Thermal Insulation business was closed on 31 March 2013. The
business was loss making and was accounted for as a discontinued operation
at year end. Certain products have been retained from this business and
will be sold through other group companies.
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:
CF Botha
F Botha
GE Ferns
EP Liechti
GS Mahlati
LY Mashologu
DJ O’Connor
PJ Schutte
LG Tessendorf (alternate to CF Botha) – resigned 8 October 2012
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 8 743 331 shares at year end, which is disclosed
as a reduction of equity in the statement of changes in equity.
9. Dividends
Interim dividend Number 7 of 2 cents per share was declared on 5 October
2012, payable to shareholders registered on 9 November 2012. The total
payout was R5 047 109 (2012: R5 200 000,00).
No final gross dividend will be declared (2012: R2 539 036).
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 23 August 2013 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
CF Botha
GE Ferns (Financial Director)
EP Liechti
PJ Schutte (Chief Executive Officer)
DJ O Connor* (Chairman)
GS Mahlati*
L Moshologu*
(* non-executive)
Sponsor:
Bridge Capital Advisors (Proprietary) Limited
Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited
31 May 2013
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