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BSI STEEL LIMITED - Unaudited Interim results for the six months ended 30 September 2013

Release Date: 07/11/2013 14:45
Code(s): BSS     PDF:  
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Unaudited Interim results for the six months ended  30 September 2013

BSI Steel Limited
(Incorporated in the Republic of South Africa)
(Registration number 2001/023164/06)
(JSE code: BSS     ISIN: ZAE000125134)
("BSI" or "the Company" or "the Group")

UNAUDITED CONDENSED FINANCIAL RESULTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2013

Salient features
- Revenue up 29%
- EBITDA up 109%
- HEPS up 208%
- NTAV 83 cents per share



Condensed income statement
                                 Unaudited           Unaudited           Audited
                                 6 months            6 months           12 months
                                 ended               ended               ended
                             30 September 2013    30 September 2012   31 March 2013
                                 R`000                 R`000              R’000
Revenue                                1 773 284     1 370 378         2 804 940
Gross profit                              316 977      220 163           468 014
Other costs                            (221 017)     (174 196)         (375 233)
Earnings before interest,
taxation,
depreciation and amortisation             95 960       45 967             92 781
("EBITDA")

Depreciation and                        (13 451)      (9 219)           (20 974)
amortisation
Profit before interest and                82 509       36 748             71 807
taxation

(Loss)/Profit on disposal of assets        (369)        (112)             (364)
Interest received                          2 074          775             2 112
Interest paid                           (31 432)     (24 250)          (46 490)
Profit before taxation                    52 782       13 161            27 065
Taxation                                   8 487        1 186           (2 041)
Profit for the year                       44 295       14 347            29 106
Profit attributable to ordinary
shareholders                              44 297       14 491             29 081
Profit attributable to minority
shareholders                                 (2)        (144)                 25
                                          44 295       14 347             29 106
Earnings per share (cents)                  6.3        2.1               4.1

Reconciliation of headline
earnings:
Earnings attributable to ordinary
shareholders                              44 297       14 491             29 081
(Profit)/Loss on disposal of                 368          112                364
property, plant & equipment
Tax impact of adjustments                  (103)         (31)              (102)
Headline earnings attributable to
ordinary shareholders(basic and
diluted)                                  44 562       14 572             29 343
Weighted average shares in               702 020       706 668           706 447
issue on which earnings are
based (000) (1)
Headline earnings per share               6.4            2.1             4.2
(cents) (basic and diluted)
    Note:
    1) The weighted average number of shares in issue for 30 September 2013 is
         based on the weighted number of shares held by the public during the period
         under review
Condensed statement of comprehensive income
                                   Unaudited          Unaudited          Audited
                                 30 September       30 September         31 March
                                     2013               2012               2013
                                     R`000               R`000               R’000
Profit for the period                  44 295             14 347           29 106
Other comprehensive income
Foreign currency translation reserve   24 012             12 947           39 655
Total comprehensive income             68 307             27 294           68 761

Condensed statement of financial position
                                   Unaudited           Unaudited         Audited
                              30 September 2013   30 September 2012   31 March 2013
                                       R`000               R`000          R’000
ASSETS
Non-Current Assets
Property, plant and                   377 303             350 437         366 116
equipment
Goodwill                               14 706              14 706          14 706
Intangible assets                      16 412              18 473          17 805
Investments in joint ventures               3                   -               -
Deferred taxation                      16 940               9 936          18 342
                                      425 364             393 552         416 969
Current Assets
Inventories                           452 788             349 606         429 640
Trade and other receivables           689 366             619 540         671 173
Current tax receivable                  3 127               2 970           3 354
Other financial assets                  6 978                   -               -
Cash and cash equivalents              80 597              93 464          47 902
                                    1 232 856           1 065 580       1 152 069
Total assets                        1 658 220           1 459 132       1 569 038

EQUITY AND LIABILITIES
Equity
Total shareholders` equity            613 470             511 449         545 799
Non-controlling interest                  251                  84             253
                                      613 721             511 533         546 052
Liabilities
Non-Current Liabilities
Other financial liabilities            97   332           106   798       107   648
Deferred taxation                       8   094             4   795         5   092
Provisions                              6   755             6   829         5   511
                                      112   181           118   422       118   251
Current Liabilities
Trade and other payables              552 785             358 254         409 843
Current tax payable                    12 525               1 250           8 689
Other financial liabilities            40 612              47 007          39 101
Loans from shareholders                   100                 100             100
Bank overdraft                        326 296             422 566         447 002
                                      932 318             829 177         904 735
Total Liabilities                   1 044 499             947 599       1 022 986
Total equity and liabilities       1 658 220           1 459 132       1 569 038
Number of shares in issue             701 810            706 668         703 544
(000) (1)
Net asset value per share                 87.4               72.4        77.6
(cents)
Net tangible asset value per              83.0               67.7        73.0
share (cents)
Condensed statement of changes in equity
                              Unaudited                  Unaudited           Audited
                             30 September               30 September         31 March
                                 2013                       2012               2013
                                R`000                      R`000              R’000
Equity holders’ interest
Balance at beginning of year          545 799                   483 650           483 650

Profit for the period                     44 297                 14 491            29 081
Foreign currency translation              24 012                 12 947            39 655
reserve
Purchase of treasury shares              (1 115)                      -           (1 617)
Share based payment provision                477                    361           (4 970)
Balance at end of period                 613 470                511 449           545 799

Non-controlling interest
Balance at beginning of period               253                    228               228
Profit for the period                        (2)                  (144)                25
Balance at end of period                    251                      84               253
Total equity                            613 721                 511 533           546 052
Condensed cash flow statement
                                 Unaudited               Unaudited           Audited
                               30 September            30 September          31 March
                                   2013                    2012                2013
                                  R`000                   R`000               R’000
Operating activity cash                  188 409                111 948             73 579
flows
Cash flows from                          216 312                139 730           121 451
operations
Interest and taxation                   (27 903)               (27 782)          (47 872)

Investing activity cash                 (26 954)               (64 067)          (86 835)
flows
Financing activity cash                 (11 395)                (2 216)          (11 903)
flows

Total cash movement for the              150 060                 45 665          (25 159)
period
Cash at beginning of period            (399 100)              (374 148)         (374 148)
Effect of exchange rate                   3 341                  (619)               207
movement on cash balances
Total cash at end of period            (245 699)              (329 102)         (399 100)
Condensed segment report
                                Unaudited               Unaudited              Audited
                              30 September            30 September            31 March
                                   2013                   2012                  2013
                                  R`000                  R`000                 R’000
Gross revenue
Stockists                                511    757             427    305        846    582
Bulk Sales                               504    674             360    233        775    906
Exporting                                686    068             508    640      1 035    495
Other                                     70    785              74    200        146    957
                                       1 773    284           1 370    378      2 804    940
Profit before interest and
taxation
Stockists                                    18 338               6 113            11 764
Bulk Sales                                   20 295              15 369            31 134
Exporting                              42 273            37 368           63 666
Other                                   1 234          (22 214)         (35 121)
                                       82 140            36 636           71 443
Assets
Stockists                             299 182            226 021          248 376
Bulk Sales                            208 935            178 126          240 371
Exporting                             525 368            488 683          464 180
Other                                 630 612            602 491          617 673
Eliminations                          (5 877)           (36 189)          (1 562)
                                    1 658 220          1 459 132        1 569 038


OVERVIEW

The interim financial results are presented for the six months ended 30 September
2013.

The Group operates in the steel and associated industries with strategically
located operations in South Africa, the Democratic Republic of the Congo, Ghana,
Mauritius, Mozambique, Switzerland, Zimbabwe and Zambia. BSI markets through three
distinct channels, being Stockists, Bulk sales and Exports; all of these divisions
are supported by our steel processing operations.

The six months under review reflects the continued roll out of the Group's growth
strategy focusing on improving gross margins and managing operating costs – this
has borne fruit in the first half of the current financial year.

FINANCIAL RESULTS

The directors are pleased to report that the group’s strategy to consolidate around
investments made over the last 18 months has resulted in a 29% increase in
turnover, and an improved gross margin. This increased growth continues to right
size the business as it takes advantage of the economies of scale provided by the
infrastructure investment of the previous few years. There were no acquisitions
during the period under review with all growth being organic.

The operating cost-base of the Group continues to reduce as a percentage of
turnover, notwithstanding significant increases in transport costs and electricity.
We expect further improvements in this area as management continues to focus on
reducing cost, without compromising customer satisfaction.

Managing working capital remains an area of focus. The Group’s policy of insuring
aspects of its debtors book has continued through the period under review. Trading
conditions have required that the Group remains vigilant and our immediate goal is
to reduce the number of debtor days below 65.

During the period, the Group increased its stockholding to protect customers from
the erratic supply from the steel mills. As we look forward to a more stable supply
regime over the next six months, current stock levels will reduce and will result
in corresponding savings in handling and finance costs.

The Group continues to enjoy good relationships with its bankers who are integral
to our working capital management.


PROSPECTS

BSI will continue its strategy of reducing operating costs per tonne, while growing
in a more measured and controlled manner. In addition, working capital management
will remain a priority, to ensure an improved balance sheet and to further reduce
finance costs. Whilst the Arcelor Mittal furnace breakdown caused huge distortions
in supply and demand in the market this year, we are seeing a slow normalisation
and the market will stabilise over the next 6 months. This will enable BSI to
pursue growth in the bottom-line through improved efficiencies off a higher
turnover.

The next 6 months up until the SA Elections may be volatile; however there is a
growing confidence that the world economy will continue improving through 2014 and
2015. Steel demand and steel prices are expected to firm continually over this
period. The African markets to which BSI is exposed will grow their GDPs 5-10%, and
the construction sector in South Africa is showing strong signs of a cyclical
upswing after 3 years of low growth. BSI is confident that after many years of
market-outperformance from a volume and market share point of view, it can use its
position to exploit these opportunities in South Africa and Africa to improve
returns for shareholders. This exercise will be conducted in a prudent manner in
order to ensure that all our operations deliver strong returns on investment while
continuing to grow organically.

Market conditions for the steel industry have been extremely challenging over the
last 12 months, and it is a reflection on the BSI Group that it has been able to
maintain profitability through these trying times. There is growing confidence that
the lessons learnt within this recessionary environment will be invaluable for the
Group, when conditions inevitably improve, going into the next 2-3 years.

The Group has extensive knowledge of global commodity markets and supply chains. We
are exploring ways to exploit this knowledge on a low risk, non capital-intensive
basis.

DIVIDEND POLICY

At the half year, no dividend is declared or proposed.

SUBSEQUENT EVENTS

No material change has taken place in the affairs of the group between the end of
the financial period and the date of this report.

DIRECTORATE

There were no changes to the Board during the interim period. Mr W R Teichmann
resigned as a director of the Company on 30 October 2013.

STATEMENT ON GOING CONCERN

The financial statements have been prepared on the going-concern basis since the
directors have every reason to believe that the company has adequate resources in
place to continue in operation for the foreseeable future.

BASIS OF PREPARATION

The results have been prepared containing the information required by IAS 34
Interim Financial Reporting, SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the
Financial Reporting Standards Council and are in accordance with the Group’s
accounting policies, which comply with International Financial Reporting Standards,
the Companies Act, 71 of 2008 as amended and the JSE Limited Listings Requirements.
The basis of preparation is consistent with that in the prior year.

The unaudited condensed consolidated financial statements were authorised for issue
by the directors on 7 November 2013 for publication on 7 November 2013. The
condensed consolidated financial statements for the six month period ended 30
September 2013 have been prepared by the Financial Director, Mr J R Waller.
By order of the Board
7 November 2013

G D G Mackenzie               J R Waller
CEO                           FD

CORPORATE INFORMATION
Chairman : WL Battershill
Non-executive directors: I A J Clark, B M Khoza (Alternate - N M Anderson),
N G Payne; R G Lewis
Executive directors: G D G Mackenzie, J Govender, C Parry*, J R Waller*,
* British
Registered address: 46 Eden Park Drive, Murrayfield Park, Mkondeni,
Pietermaritzburg 3201
Postal address: P O Box 101096, Scottsville, 3209
Company secretary: S J Hackett
Telephone: (033) 846 2208
Facsimile: (033) 846 2233
Transfer secretaries: Computershare Investor Services(Pty) Limited
Designated Adviser: Sasfin Capital (A division of Sasfin Bank Limited)

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