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Audited Results for the year ended 29 February 2016
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 29 FEBRUARY 2016, NOTICE OF ANNUAL GENERAL MEETING
AND FINAL DIVIDEND DECLARATION
FINANCIAL INDICATORS
2016 2015 % change
Revenue (Rm) 955 958 (0)
Gross Profit (Rm) 125 112 12
Operating profit (Rm) 44 40 10
Profit before tax (Rm) 36 33 9
Attributable earnings (Rm) 29 26 12
Headline earnings (Rm) 29 27 7
Earnings before interest, tax,
depreciation and amortisation (Rm) 53 47 13
Earnings per share (cents) 12,43 10,88 14
Headline earnings per share (cents) 12,42 11,27 10
Dividends per share (cents) 4,50 4 13
NAV per share (cents) 63 57 11
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
29 February 28 February
2016 2015
R'000 R'000
Revenue 955 106 958 016
Cost of sales (830 137) (846 114)
Gross profit 124 969 111 902
Other income 2 638 1 246
Operating expenses (83 219) (72 926)
Operating profit 44 388 40 222
Investment revenue 78 251
Finance costs (8 372) (7 026)
Profit before taxation 36 094 33 447
Taxation (7 264) (7 666)
Profit for the year 28 830 25 781
Profit attributable to:
The owners of the parent 29 391 26 094
Non-controlling interest (561) (313)
Other comprehensive income:
Items that will be reclassified to profit and loss:
Exchange differences on translating foreign operations - (154)
Total other comprehensive income - (154)
Total comprehensive income 28 830 25 627
Total comprehensive income attributable to:
Owners of the parent 29 391 25 940
Non-controlling interest (561) (313)
RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS PER SHARE
Audited Audited
12 months to 12 months to
29 February 28 February
2016 2015
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 (23 611) (22 982)
236 389 237 018
Headline earnings for the group have been
computed as follows:
Profit attributable to ordinary shareholders 29 391 25 781
- Profit/(loss) on sale of property, plant and equipment (30) 941
Headline earnings for the group 29 361 26 722
Earnings per share (cents) 12,43 10,88
Headline earnings per share (cents) 12,42 11,27
No diluted earnings per share are 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
29 February 28 February
2016 2015
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 116 658 78 146
Goodwill 44 560 35 638
Intangible assets 10 613 8 414
Deferred taxation 8 749 12 228
180 580 134 426
Current assets
Inventories 87 927 86 454
Trade and other receivables 148 071 132 356
Derivative financial assets 484 1 137
Current taxation receivable 0 303
Cash and cash equivalents 10 270 27 899
246 752 248 149
Total assets 427 332 382 575
Equity and Liabilities
Equity
Share capital 44 442 44 442
Treasury shares (14 159) (14 766)
Reserves 21 503 21 503
Retained income 100 251 81 492
Non controlling interest (2 248) (1 508)
149 789 131 163
Liabilities
Non-current liabilities
Loans from shareholders 3 364 -
Other financial liabilities 47 887 14 022
Deferred taxation 13 607 13 592
64 858 27 614
Current Liabilities
Other financial liabilities 59 822 58 095
Current tax payable 83 4 677
Trade and other payables 152 730 160 873
Bank overdraft 50 153
212 685 223 798
Total liabilities 277 543 251 412
Total equity and liabilities 427 332 382 575
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
29 February 28 February
2016 2015
R'000 R'000
Cash flows from operating activities
Cash generated from operations 25 545 17 288
Interest income 78 251
Finance costs (8 863) (7 167)
Tax paid (11 027) (4 381)
Net cash generated from operating activities 5 733 5 991
Cash flows from investing activities
Purchase of property, plant and equipment (31 443) (4 682)
Sale of property, plant and equipment 214 217
Intangible assets under development (1 708) (1 757)
Business combination (8 289) -
Net cash from/(utilised in) investing activities (41 226) (6 222)
Cash flows from financing activities
Proceeds from loan funding 108 436 -
Proceeds from shareholders loans 3 364 -
Repayment of loans (85 337) (4 042)
Sale /(repurchase) of treasury shares 607 (1 327)
Dividends paid (10 632) (9 663)
Settlement of preference share liability - (3 999)
Net cash from financing activities 16 438 (19 031)
Total cash movement for the year (19 055) (19 262)
Exchange gains / (losses) on cash 1 529 346
Cash at the beginning of the year 27 746 46 662
Total cash at end of the year 10 220 27 746
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury
capital premium shares
R'000 R'000 R'000
Balance at 1 March 2014 - 44 442 (13 439)
Changes in equity
Profit for the year - - -
Total comprehensive income for the year - - -
Purchase of own/treasury shares - - (1 327)
Dividends - - -
Total changes - - (1 327)
Balance at 28 February 2015 - 44 442 (14 766)
Changes in equity
Profit for the year - - -
Total comprehensive income for the year - - -
Purchase of own/treasury shares - - 607
Dividends - - -
Total changes - - 607
Balance at 29 February 2016 - 44 442 (14 159)
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 2014 154 21 503 65 061
Changes in equity
Profit for the year - - 26 094
Total other comprehensive income for the year (154) - -
Purchase of own/treasury shares - - -
Dividends - - (9 663)
Total changes (154) - 16 431
Balance at 28 February 2015 - 21 503 81 492
Changes in equity
Profit for the year - - 29 391
Total comprehensive income for the year - - -
Purchase of own/treasury shares - - -
Dividends - - (10 632)
Total changes - - 18 759
Balance at 29 February 2016 - 21 503 100 251
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
Non-
controlling Total
interest equity
R'000 R'000
Balance at 1 March 2014 (1 195) 116 526
Changes in equity
Profit for the year (313) 25 781
Total other comprehensive income for the year - (154)
Purchase of own/treasury shares - (1 327)
Dividends - (9 663)
Total changes (313) 14 637
Balance at 28 February 2015 (1 508) 131 163
Changes in equity
Profit for the year (561) 28 830
Non-controlling interest arising on business combination (179) (179)
Purchase of own/treasury shares - 607
Dividends - (10 632)
Total changes (704) 18 626
Balance at 29 February 2016 (2 248) 149 789
SEGMENT REPORT
Refrac-
Foundry Steel tory Plastics Total
R'000 R'000 R'000 R'000 R'000
2016
Revenue
Sale of goods 692 358 127 167 111 899 19 570 950 994
Commission 36 - 4 076 - 4 112
692 394 127 167 115 975 19 570 955 106
Cost of sales 600 017 114 250 103 343 12 527 830 137
Gross profit 92 377 12 917 12 632 7 043 124 969
Other income 2 638 - - - 2 638
Profit before operating and
administration expenses 95 015 12 917 12 632 7 043 127 607
Operating and administration expenses
Communication 1 191 71 84 112 1 458
Employment costs 40 414 2 637 3 765 3 496 50 312
Motor vehicle expenses 1 332 236 203 212 1 983
Other expenses 16 277 1 405 1 149 1 809 20 640
Occupancy 4 569 1 505 1 324 1 428 8 826
Operating profit before finance income 31 232 7 063 6 107 (14) 44 388
Refrac-
Foundry Steel tory Total
R'000 R'000 R'000 R'000
2015
Revenue
Sale of goods 729 128 134 952 90 204 954 284
Commission 77 - 3 655 3 731
729 205 134 952 93 859 958 016
Cost of sales (644 132) (115 677) (86 305) (846 114)
Gross profit 85 072 19 275 7 554 111 902
Other income 1 246 - - 1 246
Profit before operating and
administration expenses 86 318 19 275 7 554 113 148
Operating and administration expenses
Communication (1 085) (56) (65) (1 207)
Employment costs (40 244) (2 166) (3 497) (45 908)
Motor vehicle expenses (1 117) (251) (238) (1 607)
Other expenses (11 492) (6 132) (259) (17 883)
Occupancy (6 321) - - (6 321)
Operating profit before finance income 26 058 10 669 3 494 40 222
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
29 February 2016.
1. Basis of Preparation and Accounting Policies
The results for the year ended 29 February 2016 have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), 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 29 February 2016 are consistent with those applied in the consolidated financial
statements for the year ended 28 February 2015. 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 29 February 2016. 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 Frederik Botha (CA)SA
(Commercial and Financial Director).
2. Review of activities
Insimbi continues to operate out of our offices in Johannesburg, Durban, and Cape Town 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 under review was challenging mainly due to the global and particularly, the local
steel industry's continued decline. The slowdown in local steel production, the business
rescue and subsequent closure of Evraz Highveld Steel coupled with the downturn in commodity
prices all contributed to nominal decline in revenue R2.9 million or 0.3%. It is estimated
that the above challenges contributed to a loss in revenue of approximately R85 million and
considering this and all the negative sentiment in the market, the group still managed to
produce a solid set of results.
Insimbi has responded proactively to the weaker market conditions and implemented certain
operating and cost reduction initiatives that had a positive impact on the total performance
of the group and although operating expenses are up by 14% or R10 million on our previous
corresponding period, when one excludes non-recurring expenses of approximately R4.0 million
(mainly Evraz write off) and the operating expenses associated with the acquisition in
August 2015 of Polydrum Proprietary Limited of approximately R7.0 million, the comparative
operating expenses have in fact decreased by R1.0 million compared to the previous year.
The acquisition and integration of Polydrum in August 2015 has been successful although the
effect of the severe drought experienced in the latter part of the financial year, which
impacted on the agricultural demand for containers, was not anticipated and as a result,
it has not performed as expected. It has also experienced some production losses due to
erratic electricity supply. We are working on a solar solution to avoid this in the future.
The introduction of the two new production lines which were commissioned in February of this
year will have a significant impact on this operation in the new financial year.
We are especially encouraged by our strong operating cash flow generated during the period
under review and very proud that we have consistently generated cash and profits since
listing in March 2008.
4. Market and Prospects
The potential threat of an economic downgrade to the South African economy together with
political turmoil within various political parties towards the run-up to the local elections
will have a negative impact on the future market sentiment. Higher inflation and higher
interest rate will further contribute towards a very slow economic outlook.
The steel industry will continue to look to Government for assistance in helping revive the
steel market. The negative view on potential growth within the steel industry is having a
negative impact on all other businesses supplying into this industry.
Infrastructure spend is still very slow and with new cement production facilities coming
online the pressure is on cost-cutting, which may have an impact on the Refractory segment's
profits in the future. The import tariff introduction on certain cement products from Pakistan
introduced late in our previous financial year, has had a positive effect on the demand for
locally produced cement but much more needs to be done to lift the industry.
We do not expect significant growth in the Foundry segment in the immediate future but it
seems like the industry has stabilised and we anticipate that we will see a slight increase
in demand towards second half of this financial year. Opportunities will continue to present
themselves and Insimbi is prepared and equipped to embrace these opportunities in order to
further diversify and grow the group revenue streams, cash flows and profitability. We are
confident that 2017 will be another prosperous financial year for the group and we will
continue to keep our focus on maintaining our cost base as low as possible, growing our
market for the higher margin products and increasing revenues by providing the best service
and quality products in our industry.
Insimbi expects growth in the short term from the acquisition of Polydrum and its new range
of products and we will continue to look for other potential acquisitions that make strategic
sense in our goal to further diversify the group in line with our strategy plan. Cash flow
and working capital will need to be managed strictly to continue to adapt to the difficulties
faced by our customers and suppliers alike but we have been doing this a long time and we
have the necessary skills in place to ensure that we optimise this cycle.
5. Post balance sheet events
In negotiations before year-end an offer to purchase Erf 453 Meyerton, Ext 3 Township
Registration Division IR, The Province of Gauteng in extent 7 003m2 (seven thousand and
three square metres) for a consideration of R2.4 million excluding VAT was submitted and
accepted. The transfer is expected to be completed within the first three months of the
new financial year.
At the general meeting held on 3 May 2016, Insimbi shareholders approved the implementation
of an employee share participation transaction and a management share participation
transaction in terms of which eligible employees will, collectively, obtain an approximate
8.78% indirect shareholding interest in Insimbi.
6. 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
EP Liechti
LY Okeyo
PJ Schutte
C Shiceka
GS Mahlati (resigned effective 31 March 2016)
7. 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 22 713 500 shares
at year end, which is disclosed as a reduction of equity in the statement of changes in equity.
8. Dividends
Interim dividend number 12 of 2 cents per share was declared on 29 September 2015, payable on
26 October 2015 to shareholders registered on 23 October 2015. The total payout was R4 725 814
(2015: R3 622 482).
A final gross dividend of 2.5 cents per share has been declared on 19 May 2016 for the year ended
29 February 2016. There are 260 000 000 ordinary shares in issue at announcement date, of which
22 828 369 are held in treasury and the total dividend amount payable is R5 929 290 (2015 Final
Dividend: R5 906 881).
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%. 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, 9 June 2016
First day to trade ex dividend Friday, 10 June 2016
Record date Friday, 17 June 2016
Payment date Monday, 20 June 2016
No share certificates will be dematerialised or rematerialised between Friday, 10 June 2016
and Friday, 17 June 2016, both days inclusive.
9. Litigation
The Directors are aware of one possible legal matter whereby a shareholder requested a sale
of shares agreement being declared invalid. No provision in relation to this claim has been
recognised in these consolidated financial statements, as it is premature to indicate whether
a significant liability will arise.
10. 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 24 June 2016
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, 19 May 2016. The record date
on which shareholders of the company must be registered as such in the company's securities
register in order to attend and vote at the annual general meeting is Friday, 17 June 2016,
being the voting record date set by the Board of the company used to determine which shareholders
are entitled to attend and vote at the annual general meeting.
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 (Financial and Commercial Director)
CF Botha
EP Liechti
PJ Schutte (Chief Executive Officer)
LY Okeyo* (Chairperson)
C Shiceka*
(*non-executive)
Sponsor: Bridge Capital Advisors Proprietary Limited
Transfer Secretaries: Computershare Investor Services Proprietary Limited
19 May 2016
Date: 19/05/2016 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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