Wrap Text
Year end results and dividend declaration
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")
Salient features
- Revenue down 12.45%
- HEPS increased 152% to 5.3 cents
- NAV per share up to 106 cents
- R56.2m Profit after tax from continued operations
- Cash flows from operations R305m
- Operating profit increased 74.52%
AUDITED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR
ENDED 31 MARCH 2016 AND DIVIDEND DECLARATION
Summarised consolidated statement of profit and loss
Audited Audited
year year
ended ended
Restated
31 March 2016 31 March 2015
R`000 R`000
Revenue 2 668 006 3 047 370
Gross profit 395 741 435 902
Other costs (227 958) (324 057)
Earnings before interest,
taxation, depreciation and
amortisation 167 783 111 845
("EBITDA")
Depreciation and (22 885) (28 820)
amortisation
Operating profit 144 898 83 025
Income from equity accounted
investments (36) (2 669)
Interest received 34 350 8 175
Interest paid (51 476) (59 951)
Impairment of iron ore (*) (39 952) -
Profit before taxation 87 784 28 580
Taxation (31 572) (20 071)
Profit for the year from
Continuing operations 56 212 8 509
Loss from discontinued operations(**)(22 927) (6 259)
Profit for the year 33 285 2 250
Profit attributable to ordinary
shareholders 33 285 2 250
Basic and diluted earnings per share
(cents)- continued operations 8.0 1.2
Basic and diluted earnings per share
(cents) – discontinued operations (3.3) (0.9)
Total basic and diluted earnings per
Share 4.7 0.3
Reconciliation of headline
earnings:
Profit attributable to ordinary
shareholders 33 285 2 250
Loss on disposal of property,
plant and equipment 1 428 4 521
Tax impact on adjustments (400) (1 266)
Realisation of foreign currency
translation reserve on discontinued
operations 2 781 9 090
Headline earnings attributable
to ordinary shareholders(basic
and diluted) 37 094 14 595
Weighted average shares in 700 336 701 810
issue on which earnings are
based („000)
Headline earnings per share 5.3 2.1
(cents) (basic and diluted)
(*) This represents the impairment loss provided for on the
iron ore held by Sentinel Bridge
(**) This represents the result of the discontinuation of the
Mozambique operations (2015: Ghana operation) during the year
and includes R2.8 million loss (2015: R9.1 million) related to
the realisation of the foreign currency translation reserve
Summarised consolidated statement of other comprehensive income
Audited Audited
31 March 31 March
2016 2015
R`000 R`000
Profit for the year 33 285 2 250
Other comprehensive income – items
that may not be reclassified to
profit or loss
Foreign currency translation
Reserve 72 254 51 699
Cash flow hedge (12 342) 6 308
Total comprehensive income 93 197 60 257
Attributable to ordinary shareholders 93 197 60 257
Summarised consolidated statement of financial position
Restated
Audited Audited
31 March 2016 31 March 2015
R`000 R`000
ASSETS
Non-Current Assets
Property, plant and 331 644 364 616
equipment
Goodwill 14 706 14 706
Intangible assets 10 452 12 866
Investment in joint ventures 13 165 10 831
Loans to group companies 182 165 132 587
Other financial assets 5 795 6 986
Deferred taxation 17 172 13 791
575 099 556 383
Current Assets
Inventories 377 998 483 356
Loans to group companies 14 290 127
Other financial assets 827 7 757
Trade and other receivables 528 618 755 840
Current tax receivable 6 658 6 936
Cash and cash equivalents 53 131 55 822
981 522 1 309 838
Non-current assets held for sale 28 698 -
Total assets 1 585 319 1 866 221
EQUITY AND LIABILITIES
Equity
Total shareholders` equity 743 062 665 549
Non-controlling interest (143) (143)
742 919 665 406
Non-Current Liabilities
Other financial liabilities 38 630 71 847
Deferred taxation 21 641 16 463
Other liabilities 85 821 65 748
146 092 154 058
Current Liabilities
Trade and other payables 428 467 609 102
Current tax payable 3 472 10 120
Other financial liabilities 43 967 41 989
Bank overdraft 214 502 385 546
690 408 1 046 757
Liabilities of disposal group 5 900 -
Total Liabilities 842 400 1 200 815
Total equity and liabilities 1 585 319 1 866 221
Capital commitments 13 786 -
Number of shares in issue 700 336 701 810
(000)
Net asset value per share 106.1 94.8
(cents)
Net tangible asset value per 102.5 90.9
share (cents)
Summarised consolidated statement of changes in equity
Audited Audited
31 March 31 March
2016 2015
R`000 R`000
Balance at beginning of year 665 549 620 044
Share based payment 418 (662)
Dividends paid (14 090) (14 090)
Purchase of treasury shares (2 012) -
Total comprehensive income 93 197 60 257
Profit for the year 33 285 2 250
Foreign currency translation reserve 72 254 51 699
Cash flow hedge (12 342) 6 308
Attributable to ordinary 743 062 665 549
shareholders at end of year
Attributable to non-controlling
interest (143) (143)
Total equity 742 919 665 406
Summarised consolidated statement of cash flows
Restated
Audited Audited
31 March 31 March
2016 2015
R`000 R`000
Operating activity cash 252 456 111 653
flows
Cash flows from operations 304 842 174 820
Interest and taxation (52 386) (63 167)
Investing activity cash (65 180) (73 015)
flows
Financing activity cash (23 242) 16 031
flows
Total cash movement for the 164 034 54 669
year
Cash at beginning of year (329 724) (387 306)
Effect of exchange rate 4 319 2 913
movement on cash balances
Total cash at end of year (161 371) (329 724)
Summarised consolidated segment report
Restated
Audited Audited
31 March 31 March
2016 2015
R`000 R`000
Net revenue
SA Trading 1 608 050 2 035 036
Exporting 1 020 373 990 651
Other 39 583 21 683
2 668 006 3 047 370
Operating profit
SA Trading 44 110 58 403
Exporting 87 281 23 472
Other 13 507 1 150
144 898 83 025
Total assets
SA Trading 425 411 640 706
Exporting 662 843 653 869
Other 518 308 591 304
Eliminations (21 243) (19 658)
1 585 319 1 866 221
OVERVIEW
The directors of BSI are pleased to present the financial
results for the year ended 31 March 2016 ("the 2016 year").
The group operates in the steel and associated industries with
strategically located operations in South Africa, Mauritius, the
Democratic Republic of the Congo ("DRC") and Zambia. BSI
markets through two distinct channels, being SA Trading and
Exports; all of these divisions are supported by a steel
distribution and processing centre in Gauteng. Due to the
recent business restructure the Stockists and Bulk sales
segments were merged into SA Trading.
BSI has done well to deliver a reasonable profit despite
extremely difficult market conditions in South Africa and other
African markets. This has been achieved as a result of the F2015
restructuring process, along with an on-going drive for
increased efficiency in every facet of the business.
The restructuring process was aimed at reducing overheads,
eliminating all loss-making operations and cutting out non-
profitable business. As a consequence, our current monthly
overheads are more than 40% below prior levels, with relatively
modest drop of 11% in tonnage sold. The reduction in tonnage can
also be attributed to lower steel consumption in the Southern
African region.
The unforeseen rapid depreciation of the Kwacha and Meticais in
Zambia and Mozambique respectively materially reduced our
profits. This risk has been largely eliminated going forward.
Having completed the restructure, we move into an era of
continual improvement of our traditional core business, which
continues to bear fruit.
FINANCIAL RESULTS
Poor trading conditions gave rise to a 12% drop in Revenue but
steel price increases towards the end of the financial year
resulted in a 0.5% increase in Gross profit margin in comparison
to the 2015 financial year.
A 30% drop in operating expenses allowed for a 74% increase in
operating profit in 2016 in relation to the prior year. The
restructure of our operations in the DRC resulted in once off
costs of R5.2 million.
Included in the income statement is a significant impairment of
iron ore of R39.95 million held by Sentinel Bridge. The iron
ore was sold to the liquidator of the Chilean mine in order to
realise maximum value from it. The operation does not qualify
as a discontinued operation in terms of IFRS5 but the intention
is for the operation to be closed as soon as it has been wound
up.
Included in investment income is an amount of R33 million being
interest received from the joint venture, Tower Trade Group Ltd,
in line with the terms of the loan agreement.
A weaker South African Rand to the US Dollar at R14.88 at year
end resulted in an increase of R72 million in equity during the
year after the loss realisation adjustment of R2.8 million to
Profit and Loss relating to discontinued operations.
Improved stock and credit management resulted in further
decreased inventory levels as well as a much improved debtors
book. This resulted in lowered cash borrowings and improved
finance costs.
Non current assets held for sale comprise of the business
property held in Richards Bay previously occupied by our
Richards Bay operation which was closed down during 2015. The
disposal liability consists of the associated Nedbank bond and
Hire Purchase agreement balances.
RESTATEMENT
The prior year figures have been restated due to:
the reversal of an offset applied to Trade and other payables
and Loans to group companies as the offset agreement with the
Tower Trade Group proved to be legally unenforceable;
and the reclassification of Trade Finance from Bank overdraft to
Trade and other payables.
The effects of the reclassifications are as follow:
Statement of financial position (Corrected) 2015
Loans to group companies – Non current 132 714
Other liabilities – Non current (65 748)
Bank overdraft (385 546)
Trade and other payables (609 102)
Statement of financial position (Prior)
Loans to group companies – Current 127
Bank overdraft (431 546)
Trade and other payables (496 263)
The prior year figures were also restated due to the following:
the reclassification of losses incurred due to discontinued
operations in terms of IFRS5;
a change in the operating segments as a result of the business
restructure and the way in which financial results are reported
to the CEO;
and the reversal of the revaluation to land and buildings due to
a change in accounting policy. The effect of the restatement was
as follow:
2015
Property, plant and equipment (14 263)
Deferred tax 4 992
Revaluation reserve 9 271
DIVIDEND
A dividend of 2 cents per share (1.7 cents per share net of
dividends tax) was paid in July 2015.
The Board of Directors has pleasure in announcing that a
dividend of 2 cents per ordinary share (gross) has been declared
for the year ended 31 March 2016. Dividends are subject to
Dividends Withholding Tax. In accordance with the provisions of
the JSE Listings Requirements, the following additional
information is disclosed.
the Dividend has been declared out of income reserves;
the local dividend tax rate is 15%;
the gross local dividend amount is 2 cents per ordinary share
for shareholders exempt from dividend tax;
the net local dividend amount is 1.7 cents per ordinary share
for shareholders liable to pay dividend tax;
The issued number of ordinary shares as at declaration date is
719 854 996; and
the Company?s income tax reference number is 9150236215.
The final dividend will be paid on Monday, 15 August 2016, to
shareholders recorded in the register of the Company at the
close of business on the record date being Friday, 12 August
2016.
The salient dates relating to the Dividend are as follows:
Declaration announcement Thursday, 23 June
2016
Last day to trade cum dividend Monday, 8 August
2016
Shares commence trading ex-dividend Wednesday, 10
August 2016
Record date Friday, 12 August
2016
Payment date of the Dividend Monday, 15 August
2016
Share certificates may not be dematerialised or rematerialised
between Wednesday, 10 August 2016 and Friday, 12 August 2016,
both days inclusive.
DIVIDEND GUIDELINE
The Board is pleased to advise we are in a position to adopt and
publish a dividend guideline as follows.
BSI aims to pay out 33% of NPAT as an annual dividend subject to
the Board?s evaluation of certain key drivers, including, inter
alia, cash-flow, business outlook and investment opportunities.
BASIS OF PREPARATION
The provisional summarised consolidated financial statements
have been prepared in accordance with the JSE Limited Listings
Requirements (“Listings Requirements”) for provisional reports
and the requirements of the Companies Act applicable to summary
financial statements. In terms of the Listings Requirements the
provisional summarised consolidated financial statements are to
be prepared in accordance with the conceptual framework and the
measurement and recognition requirements of International
Financial Reporting Standards (IFRS), the SAICA Financial
Reporting Guides as issued by the Accounting Practices
Committee, and also, as a minimum, to contain the information
required by IAS 34 Interim Financial Reporting. The accounting
policies applied in the preparation of the consolidated
financial statements from which these summary consolidated
annual financial statements were derived are in terms of IFRS
and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial
statements except for the change in accounting policy relating
to Land and buildings. The adoption of these revised standards
has had no impact on the financial statements. The provisional
consolidated financial results have been prepared by JB McGrath
(CA(SA)) under the supervision of E Vermaak (CA(SA)), the group
Financial Director.
FINANCIAL INSTRUMENTS
The fair values of financial instruments are determined by using
quoted prices in active markets for identical assets or
liabilities and therefore fall into the level 1 fair value
category as per IFRS 13.
2016 2015
Level 1 Level 1
Loan and receivables 784 826 952 236
Financial assets, fair value through
profit and loss - 6 883
Financial liabilities at amortised
Cost 799 876 1 174 232
Financial liabilities, fair value
Through profit and loss 11 511 -
There have been no transfers between levels during the financial
year. The fair values approximate their carrying values.
CHANGES TO THE BOARD
JR Waller resigned from the board with effect from 8 June 2015.
GDG MacKenzie and JS Govender resigned as directors on 30 June
2015 and 17 July 2015 respectively.
WL Battershill stepped down as Chief Executive Officer with
effect from 16 May 2016, C Parry was appointed Chief Executive
Officer and K Paxton was appointed Chief Operating Officer on
the same day.
SUBSEQUENT EVENTS
No material change has taken place in the affairs of the group
between the end of the financial year and the date of this
report.
PROSPECTS
The company will continue with our current „steady as she goes?
low-risk, modest growth strategy. We anticipate on-going
increases in efficiency on the back of a much simplified
business model. As our cost per ton reduces, so our
competitiveness and market share will increase.
Every operation in BSI has a business plan strongly orientated
towards Return on Capital Employed (ROCE). All incentives,
marketing programs and cost structures are geared to achieve
maximum returns, with low tolerance on any operations not
achieving a prescribed ROCE.
The appointment of Craig Parry as CEO and Kevin Paxton as COO
promises to inject new energy and ideas into BSI. Both Craig and
Kevin are strong proponents of keeping it simple and driving for
maximum returns. This philosophy will underpin sustainable
growth with minimal risk.
For many years the core business units within BSI have
consistently delivered good returns, only to be undermined by
loss-making operations and other losses often associated with
the complicated nature of the business prior to the restructure.
Whilst one cannot eliminate risk completely, we can state with
certainty that our risk profile is much lower and the chances of
unforeseen or uncontrolled losses in the future are much
reduced.
STATEMENT ON GOING CONCERN
The summarised consolidated 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.
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their unmodified
audit opinion on the consolidated annual financial statements
for the year ended 31 March 2016. The audit was conducted in
accordance with International Standards on Auditing. A copy of
their ISA 700 audit report and the consolidated annual financial
statements are available for inspection at the company?s
registered office. Deloitte & Touche have also issued an ISA
810 audit report confirming that these audited provisional
summarised consolidated financial statements have been derived
from the consolidated financial statements and are consistent in
all material respects, with the audited consolidated annual
financial statements. A copy of their ISA 810 audit report is
available for inspection at the company`s registered office.
Any reference to future financial performance included in this
announcement, has not been reviewed or reported on by the
company?s auditors.
By order of the Board
22 June 2016
WL Battershill E Vermaak
Chairman Financial Director
CORPORATE INFORMATION
Chairman W L Battershill
Non executive directors: B M Khoza (Alternate - N M Anderson), N
G Payne; R G Lewis
Executive directors: C Parry, K Paxton, E Vermaak
Registered address: 46 Eden Park Drive, 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
Pietermaritzburg
23 June 2016
Designated Advisor
Sasfin Capital (A division of Sasfin Bank Limited)
Date: 23/06/2016 11:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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