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INSIMBI REFRACTORY & ALLOY SUP LTD - Abridged audited results for the year ended 28 February 2014, notice of annual general meeting and final dividend

Release Date: 28/05/2014 09:30
Code(s): ISB     PDF:  
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Abridged audited results for the year ended 28 February 2014, notice of annual general meeting and final dividend

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 2014, NOTICE OF ANNUAL GENERAL MEETING AND FINAL DIVIDEND DECLARATION.

FINANCIAL INDICATORS

                           2014          2013       % change
Revenue (Rm)               939           828          13
Operating profit (Rm)      35            19           84
Profit before tax (Rm)     29            13           123
Attributable earnings (Rm) 20            8            150
Headline earnings (Rm)     21            8            163
Earnings per 
share (cents)              8,21          3,13         162
Headline earnings 
per share (cents)          8,38          3,15         166
Cash flow from
operations (Rm)            54            39           38
Dividends per 
share (cents)              3.5           2            75


ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                          Audited         Audited 
                          12 months       12 months
                          to 28 February  to 28 February
                          2014            2013
                          R’000           R’000
Revenue                   938 980         828 315
Cost of sales            (837 891)      (744 741)
Gross profit              101 089         83 574
Other income              2 758           2 963
Operating expenses       (68 484)       (67 143)
Operating profit           35 363         19 394
Investment revenue         311            235
Finance costs             (6 684)       (6655)
Profit before taxation     28 990         12 974
Taxation                  (8 680)       (4 065)
Profit for the year 
from continuing operations 20 310         8 909

(Loss) from 
discontinued operations     -           (1 208)
Profit for the year         20 310        7 701
Other comprehensive income:
Items that will be 
reclassfied to profit
and loss:
Exchange differences on 
translating foreign 
operations                 (5)            -

Items that will not be
reclassified to profit
and loss
Gain on property revaluation -            28 375
Taxation related to 
components of other 
comprehensive income         1 073       (7 945)
Total other 
comprehensive income         1 068        20 430
Total comprehensive income   21 378       28 131
Total comprehensive income 
attributable to:
Owners of the parent         21 358       28 359
Non-controlling interest     20          (228)

EARNINGS AND HEADLINE EARNINGS PER SHARE

                             Audited         Audited 
                             12 months       12 months
                             to 28 February  to 28 February
                             2014            2013
                             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 the year           260 000        260 000
Less: Weighted average number 
of treasury shares held in a 
subsidiary at the end of 
the year                      (12 800)       (6 890)
                               247 200        253 110
Headline earnings for 
the group have been computed 
as follows:
Profit attributable to 
ordinary shareholders 
– continuing operations        20 310         9 137
Profit attributable to 
ordinary shareholders 
– discontinued operations      -             (1 208)
Profit attributable to 
ordinary shareholders          20 310         7 929
– Profit/(loss) on sale of 
property, plant and equipment  407           (260)
– Impairment for goodwill      -              300
Headline earnings for 
the group                      20 717         7 969
Basic and fully diluted:
Earnings per share from 
continuing operations          8,21           3,61
Earnings per share from 
discontinued operations        -             (0,48) 
Earnings per share (cents)     8,21           3,13
Headline earnings per 
share (cents)                  8,38           3,15

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    28 February
                               2014           2013
                               R’000          R’000
Assets
Non-current assets
Property, plant and equipment  78 008         79 003
Intangible assets              42 154         40 741
Deferred tax                   12 047         6 460
                               132 209        126 204
Current assets
Inventories                    82 713         66 423
Derivative financial assets    556            - 
Current tax receivable         2 059          2 145
Trade and other receivables    118 982        93 156
Cash and cash equivalents      48 985         33 469
                               253 295        195 193
Total assets                   385 504        321 397
Equity and Liabilities
Equity
Share capital                   44 442        44 442
Reserves                        21 657        20 589
Retained income                 64 011        46 169
Non controlling interest       (208)         (228)
Treasury shares                (9 439)       (4 591)
                                120 463       106 021
Liabilities
Non-current liabilities
Other financial liabilities     15 621        20 283
Deferred taxation               15 792        10 896
                                31 413        31 179
Current Liabilities
Other financial liabilities     57 239        64 839
Derivative financial 
liabilities                     -             19
Current tax payable             767           255
Trade and other payables        173 193       119 061
Bank overdraft                  2 429         23
                                233 628       184 197
Total liabilities               265 041       215 376
Total equity and liabilities    385 504       321 397

ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS

                             Audited         Audited 
                             12 months       12 months
                             to 28 February  to 28 February
                             2014            2013
                             R’000           R’000
Cash flows from 
operating activities
Cash generated from 
operations                   52 567          38 518
Interest income              311             245
Finance costs               (6 684)         (6 662)
Tax paid                    (8 424)         (6 235)
Net cash generated from 
operating activities         37 770          25 866
Cash flows from investing 
activities
Purchase of property, 
plant and equipment         (8 199)         (21 344)
Sale of property, plant 
and equipment                2 755           372
Intangible assets under 
development                 (1 413)         (1 435)
Net cash from/(utilised in) 
investing activities        (6 857)         (22 407)
Cash flows from financing 
activities 
Repayment of other 
financial liabilities       (12 262)         3 477
Repurchase of treasury 
shares                      (4 488)         (2 387)
Dividends paid              (2 448)         (7 586)
Net cash from financing 
activities                  (19 198)        (6 496)
Total cash movement for 
the year                     11 715         (3 037)
Exchange gains / (losses) 
on cash                      1 395           -
Cash at the beginning of 
the year                     33 446          36 483
Total cash at end of 
the year                     46 556          33 446

ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                             Share           Share            Treasury
                             capital         premium          shares
                             R’000           R’000            R’000
Balance at 1 March 2012      –               44 442          (2 564)
Changes in equity
Total comprehensive income 
for the year                 -               -                -
Purchase of own/treasury 
shares                       –               -               (2 387)
Dividends                    –               –                -
Total changes                –               –                –
Balance at 1 March 2013      –               44 442          (4 951)
Changes in equity
Profit for the year          -               -                -
Total comprehensive 
income for the year          –               –                -
Purchase of own/treasury 
shares                       –               –               (4 488)
Dividends                    –               –                -
Total changes                –               –               (4 488)
Balance at 28 February 2014  –               44 442          (9 439)

ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)

                            Foreign 
                            currency 
                            translation      Revaluation      Retained
                            reserves         reserve          income
                            R’000            R’000            R’000
Balance at 1 March 2012     159              20 430           45 826
Changes in equity
Total comprehensive income 
for the year                -                -                7 929
Purchase of own/treasury 
shares                      -                -
Dividends                   –                -               (7 586)
Total changes               -                -                343
Balance at 1 March 2013     159              20 430           46 169
Changes in equity
Profit for the year         -                -                20 290
Total comprehensive income 
for the year               (5)               1 073            -
Purchase of own/treasury 
shares                      -                -                -
Dividends                   –                -               (2 448)
Total changes              (5)               1 073            17 842
Balance at 
28 February 2014            154              21 503           64 011


                            Non-             
                            controlling      Total    
                            Interest         Equity
                            R’000            R’000

Balance at 1 March 2012     -                87 863
Changes in equity 
Profit for the year        (228)             7 701
Total comprehensive 
income for the year         -                20 430
Purchase of own/
treasury shares             -               (2 387)
Dividends                   -               (7 586)
Total changes              (228)             18 158
Balance at 1 March 2013    (228)             106 021
Changes in equity 
Profit for the year         20               20 310
Total comprehensive 
income for the year         -                1 068
Purchase of own/
treasury shares             -               (4 488)
Dividends                   -               (2 448)
Total changes               20               14 442
Balance at 
28 February 2014           (208)             120 463

SEGMENT REPORT

                            Foundry     Steel     Refractory   Total
2014                        R’000       R’000     R’000        R’000
Revenue
Sale of goods               583 289     257 765   94 129       935 123
Commission                  69          -         3 788        3 857

Cost of sales              (511 473)   (237 671) (88 747)     (837 891)
Gross profit                71 825      20 094    9 170        101 089
Other income                2 758       -         -            2 758
Profit before operating 
and administration expenses 74 593      20 084    9 170        103 847
Operating and 
administration expenses
Communication              (1 096)     (65)      (31)         (1 192)
Consulting and 
professional fees           -           -         -            -
Depreciation and 
amortisation               (4 535)     (2 311)    -           (6 846)
Employment costs           (36 694)    (2 250)   (3 974)      (42 918)
Motor vehicle expenses     (1 290)     (294)     (216)        (1 800)
Other expenses             (10 838)    (182)     (209)        (11 229)
Occupancy                  (4 496)     (3)        -           (4 499)
Operating profit before 
finance income              15 634      14 989    4 740        35 363

2013
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 
and administration expenses 57 945      20 793    7 800        86 537
Operating and 
administration expenses
Communication              (1 044)     (67)      (32)         (1 143)
Consulting and 
professional fees          (4 618)     (826)     (52)         (5 496)
Depreciation and 
amortisation               (4 369)      –        (991)        (5 360)
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 
finance income             (1 677)      17 794    3 277        19 394

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 28 February 2014. 

1. Basis of Preparation and Accounting Policies
The results for the year ended 28 February 2014 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 2014 are consistent with those applied in the consolidated financial statements for the year ended 28 February 2013. 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 2014. 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
The year ending February 2014 was a very pleasing one and much more successful than we had originally anticipated after the extremely difficult financial year preceding. Our operating results reflect impressive growth in revenue, gross profit and ultimately, earnings and headline earnings per share

Group revenue increased by 13% (or R111 million) to R 939 million and headline earnings increased by 163% to R21 million, up from R8 million in the previous year, an increase of R13 million

Trading conditions locally were much improved on previous years and we were especially pleased by the performance in the second half of the financial year from September 2013 to February 2014, a period which in previous financial years since 2008, has proved to be extremely slow and challenging. The export market also showed signs of improvement as did growth into the rest of the African continent.

The group produced a gross profit of R101.1 million compared to R83.5 million in the previous year, an increase of 21%. Gross margins were also improved at 10,8% compared to 10,0% in the prev1ous year and is evidence of the improved  market conditions and improving commodity prices experienced during the year. 

Group consolidated net operating expenses were again well controlled throughout the period under review and were R68,5 million compared to 
R67,1 million in the previous year, an increase of only 1.9%. I am very pleased with this, especially in light of the increases experienced in fuel and electricity during the year, it is evidence that increased revenues and gross profit do not necessarily imply a related increase in running costs of the group. Staff costs were increased in line with CPIX during the period.

Group operating profit for the period was R35.4 million compared to R19.4 million in the prev1ous financial year, an increase of 82.3% and profit for the year after tax was R20.3 million versus R7.7 million in the previous year, an increase of 163.7%.

Working capital and cash flow management remained a key focus area for the group's management and R52.9 million was generated from operations compared to R38.5 million in the previous year, an increase of R 14.4 million or 37%. Borrowings were in line with the previous year and finance costs of R6.7 million were incurred compared to R6.7 million in the prior period.

4. Market and Prospects
The Foundry Segment experienced more stable and sustainable trading conditions during the period under review mainly due to improved market conditions, less labour unrest in its sector and improved commodity prices. Revenues increased by 12% to R583 million in the year under review.

The Steel Segment also showed signs of improvement but it remains subdued although we are optimistic about the outlook for the next financial year. Revenues increased by 16% to R258 million during the period under review

The Refractory Segment also performed exceptionally well and revenues increased by 16% to R94 million during the year under review. Our reputation continues to grow and we had the privilege of being nominated as Afrisam Limited’s supplier of the year for 2013/14. We are still anxiously awaiting the roll-out of the  planned infrastructure spend which has been spoken so much about over the last 3 to 4 years but we have still not seen any significant evidence of it. This inability of government  to  effectively spend budgets allocated to infrastructure on said projects, continues to dampen our results. This being said, we had a very pleasing year due to improved focus and market conditions generally. And we wait in anticipation of the promised and wide ranging infrastructure uplift.

This will have a very positive impact on our business.

Economic conditions in South Africa are still under pressure BUT we enter the 2015 financial year on a far stronger and more optimistic note than we approached the 2014 year with, last year.

Insimbi will continue to target All markets but with a special focus on Africa and emerging markets We have a diverse range of products on offering and with the operations and upgrades at both our secondary  aluminium smelters in Johannesburg and Capet Town, the slow but potentially highly profitable product ranges developed by our subsidiary company, Insimbi Nano Milling, which will is focused on the micronisation of a completely new range of products for new target markets, and  the constant addition  of  new  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 23 August 2013, 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
Subsequent to year end Nedbank Limited increased our Multi optional Facility by R10 million to R65 million, this amount has not been drawn down at date of this report. Nedbank Limited also approved the release of a first mortgage bond of R15 million registered over Stand 359 Crocker road, Wadeville ext 4.

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 – resigned 31 March 2014
EP Liechti
GS Mahlati
LY Mashologu
DJ O’Connor
PJ Schutte

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 16 452 943 shares at year end, which is disclosed as a reduction of equity in the statement of changes in equity.

9. Dividends
Interim dividend number 8 of 1 cent per share was declared on 
8 November 2013, payable on 9 December 2013 to shareholders registered on 6 December 2013. The total payout was R2 447 746 (2013: R5 047 109).

A final gross dividend of 2.5 cents per share has been approved and declared (2013: Rnil). A final gross dividend of 2.5 cents per share has been declared on 27 May 2014. There are 260 000 000 ordinary shares in issue at announcement date, of which 17 584 943 are held in treasury and the total dividend amount payable is R6 112 376 (2014 Interim Dividend: R2 455 746). 

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 2.125 cents per share, while it is 2.5 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            Thursday, 12 June 2014
First day to trade ex dividend            Friday, 13 June 2014
Record date                               Friday, 20 June 2014
Payment date                              Monday, 23 June 2014

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 22 August 2014 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 Holtzhausen

Directors:  
F Botha 
CF Botha
GE Ferns (Financial Director)
EP Liechti
PJ Schutte (Chief Executive Officer)
DJ O Connor* (Chairman)
GS Mahlati*
L Mashologu*
(* non-executive)

Sponsor:
Bridge Capital Advisors (Proprietary) Limited

Transfer Secretaries:
Computershare Investor Services (Proprietary) Limited

28 May 2014






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