Wrap Text
Unreviewed Consolidated Restated Condensed Financial Results For the six months ended 31 August 2014
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”)
UNREVIEWED CONSOLIDATED RESTATED CONDENSED FINANCIAL RESULTS FOR
THE SIX MONTHS ENDED 31 AUGUST 2014 AND INTERIM DIVIDEND DECLARATION
Key Financial Indicators
- Revenue decreased by 3.9% to R 459 million due to the month long
NUMSA strike in July 2014.
- Operating costs decreased by 1.2 % compared to the previous year,
well below CPIX.
- Gross profit decreased by 4.5% to R 49.8 million, due to reduced revenues.
- Finance cost increased by 40 % due to a year-on-year swing in foreign
exchange gains and losses of R 2.7 million.
- Profit before taxation is 24.6% lower when compared to the results for
the same reporting period in the previous year.
- EPS is down by 24.6% when compared to the results for the same reporting
period in the previous year.
- HEPS down by 25.2% compared to last financial year.
- Operating activitives utilised R16.2 million during the period due to the
working capital cycle which included highs stocks and debtors and reduced creditors.
- NAV up by 8.5 % on comparative period and tangible NAV up by 8.1% on
comparative period and up 0.9% on February 2014.
- The group has declared a gross interim dividend of 1.5 cents per share
for the period ending 31 August 2014.
- Trading and operational outlook for the remainder of the financial
year is positive.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated Restated
Unreviewed unreviewed audited
as at as at as at
R'000 31 Aug 2014 31 Aug 2013 28 Feb 2014
Assets
Non-current assets
Property, plant
and equipment 77 147 79 179 78 008
Intangible assets 43 223 40 786 42 154
Deferred taxation 12 047 6 541 12 047
132 417 126 506 132 209
Current assets
Inventories 88 055 81 573 82 713
Trade and
other receivables 125 122 136 395 118 982
Other financial assets 599 - 556
Taxation receivable - - 2 059
Cash and cash equivalents 18 468 45 352 49 090
232 244 263 320 253 400
Total assets 364 661 389 826 385 609
Equity and liabilities
Equity
Share capital 44 442 44 442 44 442
Reserves 21 657 20 589 21 657
Retained income 66 133 58 406 65 061
Non-controlling interest (208) (1 195) (1 030)
Treasury shares (14 295) (11 627) (13 439)
116 742 110 780 116 526
Liabilities
Non-current liabilities
Other financial
liabilities 19 041 19 996 15 621
Deferred taxation 16 554 10 969 15 792
35 595 30 965 31 413
Current liabilities
Other financial
liabilities 52 977 58 126 57 239
Derivative financial
instruments - 585 -
Bank overdraft - - 2 429
Current tax payable 288 - 767
Redeemable preference
shares 3 999 3 749 3 999
Trade payables
and accruals 155 060 185 621 173 236
212 324 248 081 237 670
Total liabilities 247 919 279 046 269 083
Total equity and
liabilities 364 661 389 826 385 609
1. During 2009 the directors entered into a deal so that Insimbi
Refractory and Alloys Supplies Limited would gain BEE credentials (refer SENS dated 5 February 2009). This was completed by TP Hentiq 6040 (Pty) Ltd acquiring shares in IRAS from the shareholders (who are also directors) F Botha, PJ Schutte, EP Liechti and CF Botha and DJ O’Connor.
TP Hentiq is a shell company that was established solely for the purposes of setting up this transaction. IRAS should have consolidated TP Hentiq in 2009 under SIC 12 and IFRS 10. The result of this is that the preference share liability to Nedbank would have been recognised in the consolidated financial statements of IRAS as a financial liability under IAS 32.
The financial statements for the periods ended 30 August 2013, 28 February 2014, as well as 30 August 2014 have been restated to correctly reflect the financial impact of this transaction.
Restated interim Restated audited
results for the six results for the year
months ended ended
31 Aug 2013 28 Feb 2014
R'000 R'000
Condensed consolidated
statement of financial
position
Cash and cash resources
- Previously reported 45 241 48 985
- Restated 45 352 49 090
Treasury shares
- Previously reported 7 627 9 439
- Restated 11 627 13 439
Accumulated Profit/(Loss)
- Previously reported 57 406 64 011
- Restated 58 406 65 061
Non-controlling interest
- Previously reported 359 208
- Restated 1 030 1 195
Trade and other payables
- Previously reported 185 588 173 193
- Restated 185 621 173 236
Redeemable preference shares
- Previously reported nil nil
- Restated 3 749 3 999
Condensed consolidated
statement of other
comprehensive income
Operating expenses
- Previously reported 33 945 68 484
- Restated 33 964 68 503
Investment revenue
- Previously reported 148 311
- Restated 150 314
Finance cost
- Previously reported 3 394
- Restated 3 397
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Restated Restated
Unreviewed unreviewed audited
as at as at as at
R'000 31 Aug 2014 31 Aug 2013 28 Feb 2014
Revenue 458 981 477 556 938 980
Cost of sales (409 214) (425 462) (837 891)
Gross profit 49 767 52 093 101 089
Other income 198 895 2 758
Operating expenses (33 553) (33 964) (68 503)
Operating profit 16 412 19 024 35 344
Investment income 219 150 314
Finance costs (4 739) (3 397) (6 684)
Profit before taxation 11 892 15 777 28 974
Taxation (3 766) (4 056) (8 680)
Profit for the year 8 126 11 721 20 294
(Loss) Profit from
discontinued operations - (634) -
Profit for the year 8 126 11 087 20 294
Profit attributable to:
Owners of the parent 8 120 11 218 20 274
Non-controlling interest 6 (131) 20
8 126 11 087 20 294
Other comprehensive
income for the year
Items that will be
reclassified to profit
and loss:
Exchange differences on
translating foreign
entities - - (5)
Items that will not be
reclassified to profit
and loss:
Gain on property
revaluation - - -
Taxation related to
components of other
comprehensive income
that will not be
reclassified - - 1 073
Other comprehensive
income for the year net
of taxation - - 1 068
Total comprehensive
income for the year 8 126 11 087 21 362
Total comprehensive
income attributable to:
Owners of the parent 8 120 11 218 21 342
Non-controlling interest 6 (131) 20
8 126 11 087 21 362
Basic and fully diluted
earnings per share
From continuing
operations 3.42 4.80 8.38
From discontinuing
operations - (0.26) -
From profit for the year 3.42 4.54 8.38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury Foreign Currency Revaluation Distributable Non controlling Total
capital premium shares translation reserve reserve interest equity
R'000 (restated) reserves (restated) (restated)
Balance at
31 August 2013
(unreviewed) - 44 442 (11 627) 159 20 430 58 406 (1 030) 110 780
Total comprehensive
income - - - (5) 1 073 9 103 (165) 10 006
Share-based payments - - - - - - - -
Dividend paid - - - - - (2 448) - (2 448)
Net movement in
treasury shares - - (1 812) - - - - (1 812)
Balance at
28 February 2014
(audited) - 44 442 (13 439) 154 21 503 65 061 (1 195) 116 526
Total comprehensive
income - - - - - 8 126 - 8 126
Dividend paid - - - - - (7 054) - (7 054)
Net movement in
treasury shares - - (856) - - - - (856)
Balance at
31 August 2014
(unreviewed) - 44 442 (14 295) 154 21 503 66 133 (1 195) 116 742
*Share capital is equal to 246 700 013 shares at 0.000025 cents each = R62
CONSOLIDATED STATEMENT OF CASH FLOWS
Restated Restated
Unreviewed unreviewed audited
as at as at as at
R'000 31 Aug 2014 31 Aug 2013 28 Feb 2014
Cash flow from
operating activities
Cash generated from
operations (10 634) 30 192 49 871
Investment income 219 148 311
Finance costs (3 544) (3 394) (6 684)
Tax paid (2 166) (8 424) (8 424)
Net cash flow from
operating activities (16 145) 24 780 35 074
Cash flow from
investing activities
Purchase of property,
plant and equipment (2 208) (3 909) (8 199)
Proceeds on disposal of
property, plant
and equipment - 625 2 755
Purchase of other
intangible assets (1 069) (45) (1 413)
Net cash utilised from
investing activities (3 277) (3 329) (6 857)
Cash flow from
financing activities
Repayment of other
financial liabilities (1 471) (7 085) (12 262)
Loans from directors 629 - -
Dividends paid (7 053) - (2 448)
Repurchase of
treasury shares (856) (2 460) (1 812)
Net cash outflow from
financing activities (8 751) (9 545) (16 522)
Net movement in cash
for the period/year (28 173) 11 906 11 695
Exchange gains/(losses)
on cash - - 1 395
Cash and cash equivalents
at the beginning of
the period/year 46 641 33 446 33 551
Cash and cash equivalents
at the end of the
period/year 18 468 45 352 46 641
CONDENSED SEGMENT REPORT
Restated Restated
Unreviewed unreviewed audited
as at as at as at
R'000 31 Aug 2014 31 Aug 2013 28 Feb 2014
Revenue by segment
Foundry 351 131 318 501 583 298
Steel 66 346 109 472 257 765
Refractory 41 504 49 583 97 917
458 981 477 556 938 980
Gross profit by segment
Foundry 35 907 34 741 71 825
Steel 9 424 10 976 20 094
Refractory 4 436 6 377 9 170
49 767 52 093 101 089
Operating profit by segment
Foundry 6 939 10 914 15 615
Steel 7 124 4 941 14 989
Refractory 2 349 2 349 3 168
16 412 19 024 35 344
OTHER GROUP SALIENT FEATURES
Restated Restated
Unreviewed unreviewed audited
as at as at as at
R'000 31 Aug 2014 31 Aug 2013 28 Feb 2014
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) 3.42 4.80 8.38
From discontinued
operations
(cents per share) - (0.26) -
3.42 4.54 8.38
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 (22 614) (15 612) (17 800)
237 386 244 388 242 200
Profit attributable to
owners of the parent 8 120 11 218 20 294
Adjusted for
(profit)/loss on sale
of property, plant
and equipment (16) (60) 407
Impairment of goodwill
Headline earnings for
the group 8 104 11 158 20 701
Basic and fully diluted
headline earnings per
share (cents) 3.41 4.57 8.55
Dividends per share 2.94 0.00 1.01
Net asset value per
share (cents) 49.18 45.33 48.11
Tangible net asset
value per share (cents) 30.97 28.64 30.71
Depreciation 3 069 3 180 5 377
Capital expenditure 2 212 3 909 8 199
Financial Performance
Group revenue for the period was R458.9 million, 3.9% down on the R477.5 million achieved in the comparative period ending 31 August 2013. The sales performance is lower compared to the same reporting period in 2013 due to the industrial action by NUMSA, which interrupted operations in July 2014, and the continued downward pressure in certain market sectors, most notably the steel segments as a result of the global steel market downturn
The export market has seen exceptional growth and we have expanded our global and regional footprint significantly although the Ebola crisis in West Africa has led to subdued growth in that region. Gross profit from continuing operations was R49.8 million, 4.4% down on the R52.1 million achieved for the period ending 31 August 2013. Margins have maintained favourably to the previous financial period, however. The diversity within the group’s product range and target markets has again proven to be invaluable in producing sustainable results in what has been a challenging first half and we continue to defend our markets aggressively against foreign and local competition. This includes implementing flexible pricing policies, introduction of innovative new products and continued high service levels.
Group operating profit is 14% below the previous comparative period ending 31 August 2013.
Group operating costs have been well controlled during the period under review and at R33.5 million are 1.2% lower than the corresponding period last.
Group finance costs are 40 % higher due to loss on foreign exchange contracts of R 1.2 million compared to a gain of R 1.5 million for the corresponding period last year. Group profit before taxation is 24.9% lower than the corresponding period ended 31 August 2013.
Insimbi achieved group EPS of 3.42 and HEPS of 3.41 cents per share respectively compared to 4.54 and 4.57 cents per share in the previous comparative period. This equates to a 24.6% decrease in EPS and a 25.2% 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. However, there was an increase in debtors at the end of August due to improving market conditions late in the reporting period as well as a large build up of stock in anticipation of improved sales continuing into the second half of the year. This was a strategic decision taken by the executive, but it did lead to a R10.6 million cash outflow from operations which will reverse in the second half of the year. Cash on hand reduced to R 18.4 million from R45.2 million during the same period in 2013 as a result of this decision.
For the two months of trading subsequent to the reporting period, the group has generated revenue of R199.41million which is 19.70% greater than the revenue for the corresponding period in 2013 and gross profit of R24.45 which is 30.7% greater than the gross profit for the corresponding period in 2013.
Operational Review
The Foundry segment has experienced some mixed trading conditions in certain sectors but ended on R351 million revenue, 10.2% up on the previous period under review. The improvement in revenue can be attributed to improved exports and our secondary aluminium smelters performing much better due to operational changes. This segment is historically the first indicator of improved market conditions and we are confident the next six months will be a major improvement compare to the last six months.
The Steel segment had a very disappointing six months on revenue due to the NUMSA strike and the scheduled reline of no. 5 Blast furnace at Mittal Newcastle. Revenue ended on R66,3 million compare to R109, 4 million the previous period under review. Profitability has improved due to changes in our basket of products and product mix.
The refractory segment is also behind the previous period under review but experience has shown that this segment can be cyclical and we are confident that this segment will show improvement in the second half of the financial year ending 28 February 2015. The promised infrastructure spend has still not materialized and all cement producers are under pressure due to relatively low demand. The six months under review ended 16% lower than previous period on R41,5 million. All forecasts point towards an improved second half.
The secondary aluminium smelters have been streamlined and despite some operational challenges in the period under review, at the time of release of our interim report ending 31 August 2014, were both operating at optimum levels and profitability and together with capital investment on plant equipment we are very confident that these two units will generate the required revenue and profits that will contribute to the success of Insimbi.
Insimbi Nano Milling paint based products have been expanded to include over 40 colours in various qualities and applications Based on market research Insimbi is very upbeat on the future now that we have an experienced marketing team and the products to support.
PROSPECTS
Economic conditions in South Africa are still challenging due to the ongoing labour issues and more recently, the volatile scenario faced by Eskom.
Having said that we have noticed some upturn in trading conditions with certain segments and all indications are that the next six months will have opportunities and Insimbi is well placed and prepared to benefit from these.
The steel segment is going through a very challenging period with low demand and price competition from Far East on final steel products. We have all seen the press release with Mittal requesting import tariffs on certain Chinese origin steel.
The foundry segment, however, based on the first 2 months of the second half of the financial year, is looking positive and we remain optimistic about this segments performance in the second half. Some divisions within this segment are already showing increase demand and much improved trading conditions. Some foundries and other operations are having shorter closing periods over December which is a positive.
The refractory segment has also shown some improvements in the market and Insimbi has negotiated a R10 million contract with a key customer. The cement industry is under pressure with competition from imported cement but a number of projects are currently in place in which Insimbi will benefit in the short to medium term.
Insimbi is very upbeat about the new product range on our PVA paints and already seen an interest from contractors and traders. We are confident that the next six months will show a huge improvement compare to the previous reporting period.
The secondary aluminium smelters are running optimally and our investment in new furnace technology will hopefully improve our recoveries, although this will only be commissioned early in the new calendar year. Scrap metal supply continues to be a challenge but we are confident that we will be able to procure good quality at market prices.
We remain cautiously optimistic about the outlook for the balance of this financial year as we are actively looking for new products or acquisitions that will ensure a satisfactory organic growth in years to come.
Accounting policies
The condensed consolidated financial statements for the interim period ended 31 August 2014 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, Frederick Botha 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 1.5 cent per share has been declared on 21 November 2014 for the six month period ending 31 August 2014. There are 260 000 000 ordinary shares in issue at announcement date, of which 23 421 245 are held in treasury and the total dividend amount payable is R 3 548 681 (2013: R2 456 247).
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 1.275 cents per share, while it is 1.5 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 Friday, 5 December 2014
First day to trade ex dividend Monday, 8 December 2014
Record date Friday, 12 December 2014
Payment date Monday, 15 December 2014
No share certificates will be dematerialised or rematerialised between Monday, 8 December 2014 and Friday, 12 December 2014, both days inclusive.
Shares repurchased by a subsidiary since the year end and held in treasury amounted to 1 437 000 (2013: 5 632 012), which brings the total number of treasury shares to 23 421 245 (2013: 14 375 343).
Approval:
DJ O Connor P Schutte
Chairman Chief Executive Officer
20 November 2013
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: Kristell Holtzhausen
Directors: CF Botha, F Botha (Financial Director), EP Liechti, GS Mahlati*, LY Mashologu*, DJ O Connor*, PJ Schutte (Chief Executive Officer)
*non-executive
Sponsor: Bridge Capital Advisors (Proprietary) Limited
Transfer Secretaries: Computershare Investor Services (Proprietary) Limited
Date: 20/11/2014 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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