Wrap Text
Unaudited Consolidated condensed Financial Results for the six months ended 31 August 2013
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL RESULTS
for the 6 months ended 31 August 2013
INSIMBI REFRACTORY AND ALLOY SUPPLIES LTD
(Incorporated in the Republic of South Africa) (Registration No: 2002/029821/06)
Share code: ISB & ISIN code: ZAE000116828 (Insimbi or the company or the group)
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2013
Revenue decreased by 1.3% to R477.6 million compared to the previous period
Operating costs increased by 2.7%,compared to the previous period
Gross profit increased by 4.1% to R52.1 million, evidencing improved margins for the period under review
Profit before taxation is 0.6% higher when compared to the results for the same reporting period in the previous year
EPS from continuing operations are up by 4.2% when compared to the results for the same reporting period in the previous year
HEPS are down by 5.1% when compared to the results for the same reporting period in the previous year
Net cash from operations increased 33.6% to R24.8 million cash in the 6 months to 31 August 2013 compared to R18.5 million in the previous comparative period
Net asset value per share increased by 21.5% and tangible NAV up by 37.0% on comparative period and 14.5% on February 2013
The group has declared an interim dividend of 1 cent per share for the period ending 31 August 2013
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
Revenue 477 556 483 919 828 315
Cost of sales (425 463) (433 897) (744 741)
Gross profit 52 093 50 022 83 574
Other income 895 135 2 963
Operating expenses (33 945) (30 057) (67 143)
Operating profit 19 043 19 100 19 394
Investment income 148 112 235
Finance costs (3 394) (3 514) (6 655)
Profit before taxation 15 797 15 698 12 974
Taxation (4 057) (4 215) (4 065)
Profit for the year 11 740 11 484 8 909
(Loss) Profit from
discontinued operations (634) 557 (1 208)
Profit for the year 11 106 12 041 7 701
Profit attributable to:
Owners of the parent 11 237 12 041 7 929
Non-controlling interest(131) (228)
11 106 12 041 7 701
Other comprehensive income for the year
Gain on property
revaluation 28 375
Taxation related to
components of other
comprehensive income (7 945)
Other comprehensive income for
the year net of taxation 20 430
Total comprehensive
income for the year 11 106 12 041 28 131
Total comprehensive income attributable to:
Owners of the parent 11 237 12 041 28 359
Non-controlling interest(131) (228)
11 106 12 041 28 131
Basic and fully diluted earnings per share
From continuing
operations 4.71 4.52 3.61
From discontinuing
operations (0.25) 0.22 (0.48)
From profit for the year4.46 4.74 3.13
CONSOLIDATED STATEMENT OF CASH FLOW
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
Cash flow from operating activities
Cash generated
from operations 30 192 27 600 38 518
Investment income 148 111 245
Finance costs (3 394) (3 508) (6 662)
Tax paid (2 166) (5 655) (6 235)
Net cash flow from
operating activities 24 780 18 548 25 866
Cash flow from investing activities
Purchase of property,
plant and equipment (3 909) (4 336) (21 344)
Proceeds on disposal of property,
plant and equipment 625 75 372
Purchase of other
intangible assets (45) (1 569) (1 435)
Settlement of
financial assets (1 551)
Net cash utilised
from investing activities(3 329) (7 381) (22 407)
Cash flow from financing activities
Repayment of other
financial liabilities (7 085) (6 314) 3 477
Dividends paid (2 539) (7 586)
Repurchase of
treasury shares (2 676) (1 351) (2 387)
Net cash outflow from
financing activities (9 761) (10 204) (6 496)
Net movement in cash
for the period/year 11 690 963 (3 037)
Cash and cash
equivalents at the
beginning of the
period/year 33 446 36 483 36 483
Cash and cash
equivalents at the end
of the period/year 45 136 37 446 33 446
CAPITAL COMMITMENTS
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
Capital expenditure authorised and
contracted but not provided for:
Property, plant
and equipment 2 500 13 500 2 500
R2.5 million relates to investment in Nano Milling Technology.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
ASSETS
Non-current assets
Property, plant
and equipment 79 178 35 921 79 003
Intangible assets 40 786 41 175 40 741
Deferred taxation 6 541 4 523 6 460
126 505 81 619 126 204
Current assets
Inventories 81 574 79 514 66 423
Trade and other
receivables 136 395 123 342 93 156
Other financial assets 644
Taxation receivable 495 2 145
Cash and cash
equivalents 45 136 37 446 33 469
263 105 241 441 195 193
Total assets 389 610 323 060 321 397
Equity and liabilities
Equity 114 451 96 014 106 021
Total liabilities 275 159 227 046 215 376
Total equity and
liabilities 389 610 323 060 321 397
CONDENSED SEGMENT REPORT
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
Revenue by segment
Foundry 298 550 304 323 521 587
Steel 132 528 128 632 222 700
Refractory 46 478 50 964 84 028
477 556 483 919 828 315
Gross profit by segment
Foundry 34 740 32 995 55 092
Steel 10 976 12 195 20 793
Refractory 6 377 4 832 7 689
52 093 50 022 83 574
Operating profit by segment
Foundry 10 934 3 659 (1 677)
Steel 4 941 10 843 17 794
Refractory 3 168 4 598 3 277
19 043 19 100 19 394
OTHER GROUP SALIENT FEATURES
Unaudited Unaudited Audited
as at as at as at
31 Aug 31 Aug 28 Feb
2013 2012 2013
R000 R000 R000
Basic earnings per share:
Basic attributable earnings per share are calculated by dividing the
net profit attributable to ordinary equity shareholders by the
weighted average number of ordinary shares outstanding during the year.
Where there is a discontinued operation earnings per share is
determined for both continuing and discontinued operations
Basic earnings (loss) per share
From continuing
operations
(cents per share) 4.71 4.52 3.61
From discontinued
operations
(cents per share) (0.25) 0.22 (0.48)
4.46 4.74 3.13
Number of weighted
shares in issue at the
end of the period/year 260 000 260 000 260 000
Less: treasury shares
held in a subsidiary at
the end of the year (10 612) (5 812) (6 890)
249 388 254 188 253 110
Profit attributable
to owners of the parent 11 237 12 041 7 929
Adjusted for (profit)/
loss on sale of property,
plant and equipment (60) (47) (260)
Impairment of goodwill 300
Headline earnings
for the group 11 177 11 994 7 969
Basic and fully
diluted headline earnings
per share (cents) 4.48 4.72 3.15
Dividends per
share paid 3.00 3.00
Net asset value
per share (cents) 45.89 37.77 41.89
Tangible net asset
value per share (cents) 29.54 21.57 25.79
Depreciation 3 180 3 087 5 377
Capital expenditure 3 909 4 336 21 344
Commitments:
Operating Leases 3 501 6 762 3 216
Related party transactions
Management fees paid to
Insimbi Holdings
Proprietary Limited 4 295 7 621
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency Re- Dis- Non-
Share Share Treasury translation valuation tributable controlling Total
capital premium shares reserves reserve reserve interest equity
R000 R000 R000 R000 R000 R000 R000 R000
Balance at 31
August 2012
(unaudited)* 44 442 (3 915) 159 55 328 96 014
Total comprehensive
income 20 430 (4 112) (228) 16 090
Share-based payments
Dividend paid (5 047) (5 047)
Net movement in
treasury shares (1 036) (1 036)
Balance at 28 February
2013 (audited) 44 442 (4 951) 159 20 430 46 169 (228) 106 021
Total comprehensive
income 11 237 (131) 11 106
Dividend paid
Net movement in
treasury shares (2 676) (2 676)
Balance at 31 August
2013 (unaudited) 44 442 (7 627) 159 20 430 57 406 (359) 114 451
* Share capital is equal to 246 700 013 shares at 0.000025 cents each = R62
Overview
The interim results under review has shown a satisfactory performance in a market with its challenges that remained flat with commodity prices showing a downwards trend and a relative slow demand. These challenges included the lack of government spending on infrastructure, slower activity in the mining and related industries and a very volatile currency. Revenues showed a slight decrease but margins, despite being under pressure, for the period showed an increase of 4.1% from continuing operations.
As we have come to expect, certain segments lagged in recovery or very low organic growth but the diversity that exists in our product and service offering has once again served us well and enables us to produce an improved set of results and what I find tremendously comforting after the experience of the past three years, was the monthly consistency of our revenues and profit streams.
I am especially encouraged by our strong operating cash flow generation during the period under review and I am very proud that we have consistently generated cash and profits every year since we listed in March 2008, despite the extremely difficult trading conditions that have prevailed during this period.
Financial Performance
Group revenue for the period was R477.6 million, 1.3 % down on the R483.9 million achieved in the comparative period ending 31 August 2012 and 5.3% up on the R453.6 million achieved in the comparative period ending 31 August 2011. The sales performance was steady considering the extended downturn in global economic conditions and the continued downward pressure in certain market sectors, most notably the foundry and refractory segments.
This steady performance is attributed to improved market conditions in the aluminium smelting business, steel and regional growth in KZN and the Western Cape. The export market has been depressed over the last six months in line with global trends. Gross profit from continuing operations was R52.1 million, 4.1% up on the R50.0 million achieved for the period ending 31 August 2012. Margins have been maintained and even show a slight improvement despite pressure on pricing across the board. The diversity within the groups product range and target markets has again proven to be invaluable in producing sustainable results in what is turning out to be an even more protracted global and local economic downturn than originally anticipated. Competition is fierce and we continue to defend our markets aggressively against competition. This includes implementing flexible pricing policies, introduction of innovative new products and continued high service levels.
Group operating profit is flat compared to the previous period ending 31 August 2012 and 8.9% up on 2011.
Group operating costs have been well controlled during the period under review and at R33.9 million are 2.7% higher than the corresponding period last year but only 2.7% if one excludes the effect of the revaluation of FECs.
Group finance costs are 3.4% lower and group profit before taxation is 0.6% higher than the corresponding period ended 31 August 2012.
Insimbi achieved group EPS of 4.46 (4.71 from continuing operations) and HEPS of 4.48 cents per share respectively compared to 4.52 and 4.74 cents per share in the previous comparative period. This equates to a 1.5% decrease in EPS and a 5.1% decrease in HEPS respectively.
Working capital management and cash-flow have continued to be a key focus area for Insimbi and we have responded to changing market conditions effectively. This has ensured strong cash-flows throughout the period with R30.1 million cash generated from operations. Cash on hand grew to R45.1 million from R37.4 million in 2012. In addition the group will pay the final installment of the R105 million capital raised in 2007 for the initial purchase of the business.
For the two months of trading subsequent to the reporting period, the group has generated revenue of R166.6million which is 14.5% greater than the revenue for the corresponding period last year and gross profit of R18707 which is 39.7% greater than the gross profit for the corresponding period last year.
Operational Review
The Foundry Segment has experienced mixed trading conditions during the period under review mainly, due to the slowdown in demand and lower commodity prices together with low infrastructure spend. Saying all of this the segment did end the period under review slight better than the same period last year. This segment has proven historically to be an accurate indicator for time to come and we are very confident the next six months will be a major improvement compare to the last six months of the year before.
The Steel Segment did have a very encouraging first six months with a 3% increase in revenue although margins were under pressure. The better performance was mainly due to Mittal Vanderbiljpark increased production early this year to offset the stop in production it experienced towards the end of last year and the beginning of 2013 due to the fire in the plant. The volatile exchange rate also assisted in a better performance.
The Refractory Segment had a lower performance than the same period last year but this was mainly as a result of no projects in the cement industry and a lower demand for cement than was expected. 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. However the segment was successful in regaining some business previously lost at some Steel mills which is a very encouraging prospect.
Both secondary aluminium smelters operated for the six months with positive revenue. The purchasing of good quality aluminium scrap is still a major challenge. At this stage it is too early to comment on what the impact will be on the directive by the government on preferential pricing for non ferrous scrap. The company did complete some capital investment projects on equipment in both plants and it is anticipated that the plants will benefit from these investments going forward.
The development on micronised water based PVA paints based on nano technology took longer than anticipated but Insimbi Nano Milling is now in a position to supply a white contractors and super acrylic white paint to the market. The plant has been relocated to our Wadeville premises which will benefit the plant on increased production and improved internal control systems. Initial indications are looking very promising.
Generally the continued inability of government to effectively spend budgets allocated to infrastructure on said projects together with limited labour unrest impacted negatively on certain product ranges and off-take volumes but we are optimistic that the next six months will be an improvement.
Prospects
Economic conditions in South Africa are still under pressure and the GDP growth rate being was lower than expected. I believe that balance of 2013/14 financial year will have some challenges and market conditions will stay relatively flat with commodity prices under pressure. Having said that trading conditions for two months after the interim reporting have all ready shown an improvement.
Some good news is that the World Steel Association predict a global steel use increase of 3,1% for this year and a further 3,3% for next year. Steel demand in developed economies will return to positive growth next year, although the pickup in the EU is likely to remain flat. Chinese markets will grow more slowly and emerging economies will continue to struggle with structural issues, political instability and volatile financial markets. Underlying steel demand in South Africa will remain weak with local steel producers facing strong competition from imports.
At this stage it looks like labour unrest will have a lesser impact on our business for the next six months compared to last year in the last six months. Initial indications for the third quarter are much improved revenue and profits compare to last years performance and we are confident it will continue until end of financial year.
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 both secondary aluminium smelters running to full capacity and with a very healthy order book the prospects are looking good for the balance of 2013/14 financial year. Insimbi Nano Milling is now finally in a position to supply some quality products to the market and generate sustainable revenue and profits streams.
With a number of new products and exciting projects I am confident that the group will continue to achieve satisfactory organic growth in years to come.
We remain cautiously optimistic about the outlook for the balance of this financial year as we actively look for acquisitive growth opportunities.
Accounting policies
The condensed consolidated financial statements for the interim period ended 31 August 2013 have been prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34, the AC 500 series of accounting standards, JSE listing Requirements and the Companies Act of South Africa, and prepared under the supervision of the Financial Director, Graham Ferns CA (SA). The accounting policies are consistent with those applied in the annual financial statements for the previous year.
Contingencies
The company does not have any material contingencies.
Post balance sheet event
No material fact or circumstance existed post balance sheet date that affects the results being reported.
Dividends
An interim gross dividend of 1 cent per share has been declared on 8 November 2013. There are 260 000 000 ordinary shares in issue at announcement date, of which 14 375 343 are held in treasury and the total dividend amount payable is R2 456 247 (2012: R5 051 210).
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 income tax reference number of the company is 9078488153.
The salient dates applicable to the interim dividend are as follows:
Last day to trade cum dividend Friday, 29 November 2013
First day to trade ex dividend Monday, 2 December 2013
Record date Friday, 6 December 2013
Payment date Monday, 9 December 2013
No share certificates will be dematerialised or rematerialised between Monday, 2 December 2012 and Friday, 6 December 2013, both days inclusive.
Shares repurchased by a subsidiary since the year end and held in treasury amounted to 5 632 012 (2012: 2 253 783), which brings the total number of treasury shares to 14 375 343 (2012: 7 439 507).
Approval:
DJ O Connor P Schutte
Chairman Chief Executive Officer
8 November 2013
Registered Office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: Kristell Holtzhausen
Directors: CF Botha, F Botha, G Ferns(Financial Director), EP Liechti, GS Mahlati*, LY Mashologu*, DJ O Connor*, PJ Schutte (Chief Executive Officer)
(* indicates non executive)
Sponsor: Bridge Capital Advisors (Proprietary) Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 08/11/2013 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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