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Summarised consolidated financial results for the year ended 30 June 2013
ALERT STEEL HOLDINGS LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REGISTRATION NUMBER: 2003/005144/06
JSE CODE: AET
ISIN: ZAE000092847
Summarised consolidated financial results
for the year ended 30 June 2013
These summarised consolidated financial results are a
summary of the audited consolidated financial statements
for the year ended 30 June 2013 which were prepared by
MSI Gani, Chief Financial Officer.
Summarised consolidated statement of financial position
at 30 June 2013
Assets Notes 2013 2012
R R
Non-current assets 60 493 806 139 553 925
Property, plant and equipment 54 773 370 126 886 822
Investment property - 6 446 667
Goodwill 5 720 436 6 220 436
Current assets 176 536 634 262 284 996
Inventories 119 572 890 154 497 457
Trade and other receivables 45 256 837 75 937 668
Amounts owing by associate 5 575 020 -
Taxation receivable 201 392 -
Cash and cash equivalents 5 636 495 17 353 341
Assets held for sale 294 000 14 496 530
Total assets 237 030 440 401 838 921
Equity and liabilities
Equity (23 461 573) (2 147 660)
Share capital 6 269 719 677 239 852 934
Share-based payment reserve 311 921 1 980 024
Accumulated loss (293 493 171) (243 980 618)
Liabilities
Non-current liabilities 141 142 962 70 597 232
Loans and borrowings 5 136 809 704 60 059 887
Provisions - 4 561 458
Straight-lining lease accrual 4 333 258 5 566 321
Deferred tax - 409 566
Current liabilities 119 349 051 333 389 349
Loans and borrowings 5 - 107 817 857
Provisions 1 223 835 1 111 593
Straight-lining lease accrual 550 324 1 475 565
Current tax payable - 30 033
Trade and other payables 117 574 892 159 959 551
Shareholders' loans - 24 223 962
Bank overdraft - 37 052 685
Liabilities associated with assets held for
sale - 1 718 103
Total equity and liabilities 237 030 440 401 838 921
Summarised consolidated statement of comprehensive income
for the year ended 30 June 2013
2013 2012
R R
Continuing operations
Revenue 716 780 430 824 655 746
Cost of sales (561 788 858) (654 762 595)
Gross profit 154 991 572 169 893 151
Other income 3 093 410 4 499 079
Operating expenses (198 018 833) (222 946 331)
Loss from operations (39 933 851) (48 554 101)
Finance income 2 239 718 51 703
Finance costs (13 866 803) (23 902 015)
Loss before taxation (51 560 936) (72 404 413)
Taxation 380 280 (139 605)
Loss from continuing
operations (51 180 656) (72 544 018)
Discontinued operations
Loss from discontinued
operations - (447 154)
Loss and total comprehensive
income (51 180 656) (72 991 172)
Net loss attributable to:
Loss for the year from
continuing operations (51 180 656) (72 544 018)
Loss for the year from
discontinued operations - (447 154)
Loss for the year (51 180 656) (72 991 172)
Attributable to:
Ordinary shareholders (51 180 656) (72 991 172)
Non-controlling interest - -
Weighted average shares in
issue on which earnings are
based 48 238 204 13 435 275
Fully diluted weighted average
shares in issue on which
earnings are based 48 238 204 13 435 275
Basic loss per share (cents) (106.1) (543.3)
- continuing operations (106.1) (540.0)
- discontinued operations - (3.3)
Fully diluted loss per share (cents) (106.1) (543.3)
- continuing operations (106.1) (540.0)
- discontinued operations - (3.3)
Headline loss per share (cents) (132.9) (432.0)
- continuing operations (132.9) (432.0)
- discontinued operations - -
Fully diluted headline loss per share (cents) (132.9) (432.0)
- continuing operations (132.9) (432.0)
- discontinued operations - -
Summarised consolidated statement of changes in equity
for the year ended 30 June 2013
2013 2012
R R
Balance at the beginning of the year (2 147 660) (43 412 309)
Share transactions 29 866 743 112 275 797
Loss and total comprehensive income for the year (51 180 656) (72 991 172)
Additions to share based payment reserve - 1 980 024
Balance at the end of the year (23 461 573) (2 147 660)
Summarised consolidated statement of cash flows
for the year ended 30 June 2013
2013 2012
R R
Net cash utilised in operating activities (23 041 538) (48 576 503)
Net cash used in investing activities (2 305 053) (61 511 668)
Net cash from financing activities 50 682 430 200 723 907
Total cash movements for the year 25 335 839 90 635 736
Cash at beginning of year (19 699 344) (110 335 080)
Total cash at end of the year 5 636 495 (19 699 344)
Summarised consolidated segmental analysis
for the year ended 30 June 2013
Restated
For the year ended June 2013 June 2012
R R
External revenues
Branches 621 727 123 796 116 437
Containers & express stores 95 053 307 28 539 309
716 780 430 824 655 746
Reportable segment (loss)/profit before tax
Branches (56 730 911) (73 775 613)
Containers & express stores 5 169 975 1 371 200
(51 560 936) (72 404 413)
As at June 2013 June 2012
R R
Segment assets
Branches 210 779 012 383 242 267
Containers & express stores 26 251 428 18 596 654
237 030 440 401 838 921
Segment liabilities
Branches 260 492 013 403 986 581
Containers & express stores - -
260 492 013 403 986 581
Due to the implementation of the brand restructuring strategy, the group has two operating segments,
namely branches and containers and express stores. The group has restated the summarised
segmental analysis in line with the restructuring.
Notes to the summarised consolidated financial statements
for the year ended 30 June 2013
1. Basis of preparation
(a) Statement of compliance
The summarised consolidated financial results for the year ended 30 June 2013 have been prepared
in accordance with International Financial Reporting Standards (IFRS), the presentation and
disclosure requirements of International Accounting Standard 34, Interim Financial Reporting
applied to year end reporting, SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Listing Requirements, as well as the Companies Act of South Africa.
2. Accounting policies and basis of measurement
The accounting policies applied by the group are consistent with those applied in the previous year
except for changes to reporting segments as indicated above. Amendments to standards that
became effective on 1 July 2012 had no material effect on the results of the year. These financial
statements have been prepared on the historical cost basis and all financial information is presented
in Rands.
3. Going concern
The group incurred a loss for the year ended 30 June 2013 of R51,2 million (2012: R73,0 million
and at that date the total liabilities exceeded the total assets by R23,5 million (2012: R2,1 million).
Notwithstanding the loss for the year there have been considerable improvements in the group's
financial performance, cash flows and its financial position:
- In the current year cash utilised in operating activities improved from R48,5 million to
R23,0 million.
- Net current assets were R57,2 million compared to net current liabilities of R71,1 million in the
previous year.
The directors have assessed the group's cash flows requirements for the next 12 months. At present
even under the current market conditions, the earnings before tax and depreciation is covering the
interest burden. The cash flows indicate that the group has sufficient cash resources to meet its
obligations as they fall due.
Revenue growth for the next year is based on the growth of new product ranges of hardware and
cement from the current branch infrastructure and from the growth attributable to the acquisition of
the Build Kwik stores subsequent to the year end. Expenses have been calculated based on a
variable and fixed cost basis. Variable expenses were based on the historic percentage of revenue
and fixed overheads adjusted for inflation except for areas where cost savings have already been
implemented and verified.
In addition, on 19 August 2013 the major shareholder entered into a specific issue of shares for cash
agreement, subject to the fulfilment of conditions precedent, to issue 48 million shares at 200 cents
per share for cash. The net asset value of the group, had the specific issue of share taken place on
30 June 2013, would have been R72,5 million.
Given the directors' evaluation that the group has sufficient cash resources to meet its obligations as
they fall due, the financial statements have been prepared on the basis of accounting policies
applicable to a going concern.
4 Discontinued operations
During June 2012, the following decisions were taken by the board:
- To dispose of investment properties and other properties that were not in use in order to free-up cash
flow for the company. This includes properties in Arrow Creek Investments 117 Proprietary Limited,
Born Free Investments 661 Proprietary Limited and Xebura Investments Proprietary Limited.
- To close-down its Benrose branch and to dispose of the property (held by Xebura Investments
Proprietary Limited). The branch was not meeting the required performance targets and was not
meeting the company's rural retail strategic objectives.
- To dispose of its Klerksdorp branch. The branch was not meeting the required performance targets
and was not meeting the company's rural retail strategic objectives.
As at 30 June 2013, the above mentioned assets held for sale were disposed, apart from the property held
by Born Free Investments Proprietary Limited. This property was disposed of subsequent to year end.
Arrow
Creek Born Free Xebura
Investments Investments Investments Klerksdorp Total
117 661 Proprietary branch
Proprietary Proprietary Limited
Disposal groups 2012 Limited Limited
R R R R R
Assets held for sale
Investment property 2 930 000 500 000 - - 3 430 000
Property, plant and
equipment - - 3 500 000 - 3 500 000
Inventories - - - 4 255 361 4 255 361
Trade and other
receivables - - - 3 311 169 3 311 169
2 930 000 500 000 3 500 000 7 566 530 14 496 530
Liabilities associated
with assets held for sale
Other financial
liabilities 1 718 103 - - - 1 718 103
Proceeds on sale 1 064 377 - 3 325 173 5 923 861 10 313 411
Loss on disposal of
business 147 520 - 174 827 1 642 669 1 965 016
2013 2012
Cash effects of discontinued operations R R
Cash flows from operating activities (7 041 702) 4 389 192
Cash flows from investing activities 6 495 429 322 999
(546 273) 4 712 191
During the year the discontinued operations generated profit
after taxation of R484 000.
5. Loans and borrowings
Nedbank Limited * - 1 772 606
Nedbank Limited ** - 62 188 043
Instalment sale agreements*** - 10 278 320
Nedbank 5 year loan**** - 73 638 775
Nedbank 2 year loan***** - 20 000 000
Southern Palace Investments 265 Proprietary Limited 127 004 208 -
Cannistraro Investments 282 Proprietary Limited 9 805 496 -
136 809 704 167 877 744
Non-current liabilities 136 809 704 60 059 887
Current liabilities - 107 817 857
136 809 704 167 877 744
* Interest at prime rate plus 1.8 % and repayable in monthly instalments of R109 751
** Interest at 7.75 % and repayable in monthly instalments of R396 129
*** Liabilities under instalment sale agreements bears interest at an average
interest rate of prime less 0.5% per annum repayable in monthly instalments of
R886 096(2011: R871 622).
**** This loan was advanced by Nedbank on 10 October 2011 and is repayable in one instalment
at the end of five years. the loan bears interest at prime less 2% and interest in capitalised
on the loan for the first 12 months, repayable on the maturity date. This loan has been
classified as short term as the company was in breach of its covenants with Nedbank at
30 June 2012.
***** This loan was advanced by Nedbank on 10 October 2011 and is repayable in 24 equal instalments
commencing on 1 October 2012. The loan bears interest at prime less 2%. This loan has been
classified as short term as the company was in breach of its covenants with Nedbank at 30 June 2012.
During February 2013, Nedbank Limited assigned the rights and obligations under its Banking
Facilities, Property Loan Agreement and Securities to Southern Palace Investments 265
Proprietary Limited.
Loans and borrowings from Cannistraro Investments 282 Proprietary Limited and Southern
Palace Investments 265 Proprietary Limited bear interest at the prime lending rate and are
repayable on 31 October 2014. Loans are secured with sessions over all assets.
Southern Palace Investments 265 Proprietary Limited will continue to support Alert Steel.
Should the group not be able to repay the loan on 31 October 2014, the loan can be repaid over
a period of nine months thereafter.
R96 000 000 of the loans and borrowings is to be converted to equity subsequent to year end by
means of a specific issue of shares.
6. Share capital
On 28 November 2012, 1 108 840 297 shares were issued to Capital Africa Steel (894 554 583 shares) and
Nedbank (214 285 714 shares) in a debt to equity conversion at 2.8 cents per share.
On 10 December 2012 the company consolidated its shares at a ratio of 100:1. The issued share capital
was reduced with 5 149 376 948 shares due to the impact of the consolidation.
On 14 January 2013 a total of 14 279 shares, which resulted from the fractional shareholders were bought
back and cancelled.
2013 2012
Reconciliation of number of shares issued
Opening balance 4 092 550 566 256 028 570
Share issue 1 108 840 297 3 836 521 996
Share consolidation (5 149 376 948) -
Odd lot offer (14 279) -
Total before treasury shares 51 999 636 4 092 550 566
Treasury shares (76 000) (7 600 000)
51 923 636 4 084 950 566
7 Loss per share
Reconciliation between loss and fully diluted loss
Attributable earnings per statement of
comprehensive income (51 180 656) (72 991 172)
Fully diluted loss (51 180 656) (72 991 172)
Reconciliation of headline loss
Attributable loss per statement of comprehensive
income (51 180 656) (72 991 172)
Loss on disposal of property, plant and equipment (135 600) 1 651 070
Loss arising on discontinuance of operations 1 965 016 1 427 582
Profit on sale of business (15 456 306) (4 055 518)
Losses arising from the impairment of goodwill 500 000 2 049 948
Loss arising from the impairment of property, plant
and equipment - 13 784 395
Losses arising from the impairment of investment
property 206 000 518 810
Bargain purchase price gain on acquisition of -
business (430 100)
Headline loss / fully diluted headline loss (64 101 546) (58 044 985)
Reconciliation of diluted weighted average
number of shares Shares Shares
Weighted average shares in issue on which earnings
are based 48 238 204 13 435 275
Fully diluted weighted average shares in issue on
which earnings are based 48 238 204 13 435 275
In accordance with IAS 33.28 the number of ordinary shares outstanding has been adjusted
proportionately for the share consolidation as if this event occurred at 1 July 2011. The prior
year earnings per share and diluted earnings per share figures have been restated accordingly.
8. Cash utilised in operations
2013 2012
R R
Loss before taxation - continuing operations (51 560 936) (72 404 413)
Loss before taxation - discontinued operations - (447 154)
Loss before taxation (51 560 936) (72 851 567)
Adjusted for:
Depreciation 19 209 203 12 062 943
(Profit)/Loss on disposal of property, plant and
equipment (135 600) 1 651 070
Profit on disposal of subsidiaries (15 456 306) (4 055 518)
Bargain purchase price gain on acquisition of
business - (430 100)
Loss on disposal of businesses 1 965 016 1 427 582
Interest received (2 239 718) (51 703)
Interest paid 13 866 803 23 902 015
Impairments 706 000 16 353 153
Goodwill 500 000 2 049 948
Property plant and equipment - 13 784 395
Investment property 206 000 518 810
Movements in provisions (4 449 216) -
Lease accrual adjustment (2 158 304) 2 136 540
Share-based payment expense - 1 980 024
Changes in working capital:
Inventories 34 924 567 (7 979 552)
Trade and other receivables 30 568 757 60 079 916
Trade and other payables (42 118 015) (50 940 152)
Cash utilised in operations (16 877 749) (16 715 349)
Interest received 2 239 718 51 703
Interest paid (8 282 532) (23 902 015)
Taxation paid (120 975) (8 010 842)
Net cash utilised in operating activities (23 041 538) (48 576 503)
2013 2012
R R
Cash flows from investing activities
Acquisition of property, plant and equipment (18 362 226) (27 951 002)
Proceeds on disposal of property, plant and equipment 11 318 782 6 140 035
Proceeds on disposal of businesses 10 313 411 -
Loans repaid/(advanced) to associates (5 575 020) 2 434
Consideration paid on acquisition of business - (44 696 744)
Proceeds on sale of subsidiaries - 4 993 609
Net cash (used in) investing activities (2 305 053) (61 511 668)
Cash flows from financing activities
Repayment of other financial liabilities - (1 427 817)
Repayments of bonds on properties (932 314) (2 914 474)
Advances of bonds and loans - 1 597 955
Repayments of instalment sale agreements (6 043 037) (3 638 770)
Loans (repaid to)/received from bank (2 500 000) 93 638 775
Loans received from shareholders 54 515 000 1 192 441
Share issue costs (1 178 715) -
Proceeds from shares issued 6 821 496 112 275 797
Net cash from financing activities 50 682 430 200 723 907
9 Related parties
Relationships
Entities controlled by directors: Mahuma Investment Holdings Proprietary Limited
Cannistraro Investments 282 Proprietary Limited
Dual Intake Investments 24 Proprietary Limited
BBD Steel Suppliers Proprietary Limited
Shareholders with
significant influence Cannistraro Investments 282 Proprietary Limited
Directors MM Patel
WP van der Merwe
BS Mahuma
AE Loonat
PN Dodson
MSI Gani
The following related party transactions were identified during the year:
Rent paid to / (received from) related parties 2013 2012
R R
These transactions were done at arms-length
and are settled on 30 day payment terms.
Schallies Beleggings Proprietary Limited 4 485 575 3 360 022
Paul Kruger Straat Beleggings 390 Proprietary
Limited 580 425 430 310
Zeranza 26 Proprietary Limited 1 768 091 1 709 377
Icon Suppliers Proprietary Limited - 22 800
Aquarella Investments 454 Proprietary Limited 8 682 473 -
Dual Intake Investments 24 Proprietary Limited 346 253 -
Purchase from/(sales to) related parties
These transactions were done at arms-length and are
settled on 30 day payment terms.
Capital Africa Steel Proprietary Limited 4 210 8 249 6382
Reinforcing & Mesh Solutions, a division of Capital
Africa Steel Proprietary Limited 2 515 272 8 215 868
Capital Star Steel Proprietary Limited - 326 684
Novator Proprietary Limited 70 192 1 463 441
Steel Mecca Proprietary Limited - (3 935 781)
Gondwana Marketing Proprietary Limited - (82 087)
Buffelskom Boerdery Proprietary Limited 258 688 (1 005 778)
WG Wearne Limited 381 517 -
2013 2012
R R
Business combinations transactions
Consideration paid on acquisition of Alert Steel
North West Proprietary Limited - 21 643 758
Consideration paid on acquisition of the
business of Steel Mecca Proprietary Limited - 4 265 869
Consideration received on disposal of
subsidiaries 1 424 965 -
10 Salient features
- Actual number of shares 51 999 636 40 925 506
- Net asset value per share (cents) (45.1) (5.2)
- Net tangible asset value per share (cents) (56.1) (20.4)
Net asset value per share is determined by the
actual number of shares in issue at reporting date
Net tangible asset value per share is determined
by dividing the total shareholders' funds less
goodwill by the actual number of shares in issue
at reporting date
- Write down of inventory to net realisable value (4 306 660) (4 488 803)
- Settlement of onerous lease 5 553 894 -
- Significant items in loss before taxation
- Directors' emoluments 3 929 079 6 179 102
- Employee cost 92 437 365 105 587 702
- Impairments 706 000 16 353 153
- Goodwill 500 000 2 049 948
- Investment property 206 000 518 810
- Property, plant and equipment - 13 784 395
Financial results
Revenue decreased by 13.0 % to R716,8 million (2012: R824,6 million). The main reasons for the decrease in
revenue were the difficult trading conditions that prevailed during the year, particularly in the Limpopo
Province where the company has significant presence. The difficult trading conditions are mainly due to the
central government freezing the awarding of public works contracts in that Province and the strike action at
the Medupi construction site.
Accordingly gross profit decreased by 8.82 % to R155 million (2012: R170 million). However, the gross
profit percentage increased from 20.6 % to 21.6 %, mainly as a result of an increase in cash sales in the rural
areas in both the branches and express stores.
Operating expenses were reduced by 11.2 % to R198,0 million (2012: R223,0 million). This decrease was a
result of the restructuring measures implemented by management, including branch closures and
retrenchments. Management implemented further restructuring measures and the full impact of this will only
be seen in the 2014 financial year.
As a result of the increase in the gross profit margin and the decrease in operating expenses, the net loss from
operations reduced to R40,0 million from R48,5 million.
Included in operating expenses are depreciation, amortisation and impairments, which accounted for 2.7 % of
revenue (2012: 3.4 %).
During the year investments held in Aquarella Investments 454 Proprietary Limited, Anchor Park Investments
114 Proprietary Limited and Dual Intake Investments 24 Proprietary Limited were sold to Cannistraro
Investments 282 Proprietary Limited.
Changes to the board of directors
The directors of the company during the year and to the date of this report are as follows:
Name Position Changes
MW McCulloch Non-Executive Director (Chairman) Resigned 9 February 2013
J du Toit* Executive Director (CEO) Resigned 8 July 2013
N Cresswell Executive Director (CFO) Resigned 9 January 2013
WF Schalekamp** Executive Director Resigned 27 June 2013
E Hewitt Executive Director Resigned 12 November 2012
PN Dodson Executive Director (CEO) Appointed 11 February 2013
MSI Gani Executive Director (CFO) Appointed 30 July 2013
AE Loonat Non-Executive Director Appointed 11 February 2013
MM Patel Non-Executive Director (Chairman)
BS Mahuma Non-Executive Director
WP van der Merwe Non-Executive Director
* J du Toit resigned as CEO on 6 February 2013, he was reappointed as CFO on 20 February 2013 and then
resigned as CFO on 8 July 2013.
** WF Schalekamp resigned as non-executive director on 18 December 2012, he was reappointed as
executive director on 11 February 2013 and resigned on 27 June 2013.
Events after the reporting period
The following events have taken place subsequent to the year-end:
- On 19 August 2013 the major shareholder entered into a specific issue of shares for cash agreement,
subject to the fulfilment of the conditions precedent, to issue 48 million shares at 200 cents per share for
cash. The net asset value of the group, had the specific issue of shares taken place on 30 June 2013,
would have been R72,5 million.
- The group has entered into an agreement to purchase the business including certain specified assets and
liabilities as defined in the agreement, of Build Kwik Wholesalers Proprietary Limited as a going
concern, from Kwik Property Holdings Proprietary Limited, subject to certain suspensive conditions for
R58,1 million.
Independent audit by the auditors
These summarised consolidated financial results for the year ended 30 June 2013 have been derived from the
audited consolidated annual financial statements of Alert Steel Holdings Limited for the year ended 30 June
2013, on which the auditors, KPMG Inc., have expressed an unmodified audit opinion. These summarised
consolidated financial results are in itself not audited. The auditor's report and the audited consolidated
annual financial statements, which have been summarised in this report, are available for inspection at the
registered office of the company.
Directors' responsibility
The directors take full responsibility for the preparation of the summarised consolidated financial results and
the information has been correctly extracted from the underlying annual financial statements.
Compliance with legislation
For the period under review, there were no matters of non-compliance with legislation of which the directors
were aware.
Corporate information
Non-executive directors: M Patel (Chairman), A Loonat, G Mahuma, W van der Merwe
Executive directors: PN Dodson, MSI Gani
Registration number: 2003/005144/06
Registered address: Corner Engelbrecht and Lanham Streets, East Lynne, Pretoria
Postal address: PO Box 29607, Sunnyside, 0132
Company secretary: M Pretorius
Telephone: (012) 800 0000
Facsimile: (012) 800 4661
Transfer secretaries: Computershare Investor Services Proprietary Limited
JSE sponsor: Exchange Sponsors (2008) Proprietary Limited
Auditors: KPMG Inc
Publication date: 30 September 2013
Date: 30/09/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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