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ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2017 AND NOTICE OF ANNUAL GENERAL MEETING
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 2017 AND NOTICE OF ANNUAL GENERAL MEETING
FINANCIAL INDICATORS
2017 2016 % change
Revenue (Rm) 1 343 955 41
Gross Profit (Rm) 186 125 49
Operating profit (Rm) 54 44 23
Profit before tax (Rm) 39 36 8
Attributable earnings (Rm) 29 29 -
Headline earnings (Rm) 30 29 3
Earnings before interest, tax, depreciation
and amortisation (Rm) 66 53 24
Earnings per share (cents) 11,01 12,43 (11)
Headline earnings per share (cents) 10,87 12,42 (12)
Dividends per share (cents) 1,5 4,5 (67)
NAV per share (cents) 76 63 21
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months to 12 months to
28 February 29 February
2017 2016
Revenue 1 342 526 955 106
Cost of sales (1 156 693) (830 137)
Gross profit 185 833 124 969
Other income 1 349 2 638
Operating expenses (132 749) (83 219)
Operating profit 54 433 44 388
Investment revenue
Income from equity accounted investments 266 78
543 -
Finance costs (16 355) (8 372)
Profit before taxation 38 887 36 094
Taxation (9 440) (7 264)
Profit for the year 29 447 28 830
Profit attributable to:
The owners of the parent 29 571 29 391
Non-controlling interest (124) (561)
Total comprehensive income 29 447 28 830
Total comprehensive income attributable to:
Owners of the parent 29 571 29 391
Non-controlling interest (124) (561)
EARNINGS AND HEADLINE EARNINGS PER SHARE
Audited Audited
12 months to 12 months to
28 February 29 February
2017 2016
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 291 644 260 000
Less: Weighted average number of treasury shares held
in a subsidiary at the end of the year (22 962) (23 611)
268 682 236 389
Headline earnings for the group have been computed as follows:
Profit attributable to equity holders 29 571 29 391
- Profit on sale of property, plant and equipment (366) (30)
Headline earnings for the group 29 206 29 361
Earnings per share (cents) 11,01 12,43
Headline earnings per share (cents) 10,87 12,42
Diluted earnings per share (cents) 10,37 -
Diluted headline earnings per (cents) 10,24 -
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
12 months to 12 months to
28 February 29 February
2017 2016
Assets
Non-current assets
Property, plant and equipment 239 095 116 658
Goodwill 101 591 44 560
Intangible assets 11 836 10 613
Investments in joint ventures 670 -
Deferred taxation 7 609 8 749
360 801 180 580
Current assets
Inventories 152 546 87 927
Trade and other receivables 275 792 148 071
Derivative financial assets - 484
Current taxation receivable 3 166 -
Cash and cash equivalents 29 848 10 270
461 352 246 752
Total assets 822 153 427 332
Equity and Liabilities
Equity
Share capital 190 704 44 442
Treasury shares (18 215) (14 159)
Reserves 22 483 21 503
Retained income 116 579 100 251
Non-controlling interest (258) (2 248)
311 293 149 789
Liabilities
Non-current liabilities
Loans from shareholders 2 491 3 364
Other financial liabilities - at amortised cost 210 811 47 887
Deferred taxation 26 083 13 607
239 385 64 858
Current Liabilities
Other financial liabilities - at fair value through profit and loss 2 823 -
Other financial liabilities - at amortised cost 74 214 59 822
Current tax payable - 83
Trade and other payables 162 111 152 730
Bank overdraft 32 327 50
271 475 212 685
Total liabilities 510 860 277 543
Total equity and liabilities 822 153 427 332
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months to 12 months to
28 February 29 February
2017 2016
Cash flows from operating activities
Cash generated from operations 88 928 25 545
Interest income 266 78
Finance costs (16 355) (8 863)
Tax paid (11 244) (11 027)
Net cash generated from operating activities 61 595 5 733
Cash flows from investing activities
Purchase of property, plant and equipment (10 373) (31 443)
Sale of property, plant and equipment 1 430 214
Intangible assets under development (922) (1 708)
Business combination (230 546) (8 289)
Net cash from/(utilised in) investing activities (240 411) (41 226)
Cash flows from financing activities
Sale / (repurchase) of treasury shares (4 056) 607
Proceeds from share issue 96 262 -
Proceeds from other financial liabilities 95 613 108 436
Repayment of other financial liabilities (6 672) (85 337)
Repayment of shareholders loans (1 169) 3 364
Proceeds from shareholders loans 296 -
Dividends paid (10 149) (10 632)
Net cash from financing activities 170 125 16 438
Total cash movement for the year (8 691) (19 055)
Exchange gains / (losses) on cash (4 008) 1 529
Cash at the beginning of the year 10 220 27 746
Total cash at end of the year (2 479) 10 220
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Treasury
capital premium shares
R'000 R'000 R'000
Balance at 1 March 2015 - 44 442 (14 766)
Changes in equity - - -
Profit for the year - - -
Total comprehensive income for the year - - -
Transactions with non-controlling interests - - -
Purchase of own/treasury shares - - 607
Dividends - - -
Total changes - - 607
Balance at 29 February 2016 - 44 442 (14 159)
Changes in equity - - -
Profit for the year - - -
Total comprehensive income for the year - - -
Transactions with non-controlling interests - - -
Shares issued - 146 262 -
Purchase of own/treasury shares - - (4 056)
Dividends - - -
Total changes - 146 262 (4 056)
Balance at 28 February 2017 - 190 704 (18 215)
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
Share based
payment Revaluation Retained
reserve reserve income
R'000 R'000 R'000
Balance at 1 March 2015 - 21 503 81 492
Changes in equity - - -
Profit for the year - - -
Total other comprehensive income for the year - - 29 391
Transactions with non-controlling interests - - -
Purchase of own/treasury shares - - -
Dividends - - (10 632)
Total changes - - 18 759
Balance at 29 February 2016 - 21 503 100 251
Changes in equity - - -
Profit for the year 980 - 28 591
Total comprehensive income for the year - - -
Transactions with non-controlling interests - - -
Shares issued - - -
Purchase of own/treasury shares - - (2 114)
Dividends - - (10 149)
Total changes 980 - 16 328
Balance at 28 February 2017 980 21 503 116 579
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
Non-
controlling Total
interest equity
R'000 R'000
Balance at 1 March 2015 (1 508) 131 163
Changes in equity - -
Profit for the year - -
Total other comprehensive income for the year (561) 28 830
Transactions with non-controlling interests (179) (179)
Purchase of own/treasury shares - 607
Dividends - (10 632)
Total changes (740) 18 626
Balance at 29 February 2016 (2 248) 149 789
Changes in equity - -
Profit for the year (124) 29 447
Total comprehensive income for the year - -
Transactions with non-controlling interests 2 144 -
Shares issued - 146 262
Purchase of own/treasury shares - (4 056)
Dividends - (10 149)
Total changes 1 990 161 504
Balance at 28 February 2017 (258) 311 293
SEGMENT REPORT
Non-ferrous Ferrous
(Previously (Previously
"Foundry") "Steel") Refractory Plastics Total
2017 R'000 R'000 R'000 R'000 R'000
Revenue
Sale of goods 1 002 402 174 818 109 694 50 808 1 337 722
Commission 36 - 4 768 - 4 804
1 002 438 174 818 114 462 50 808 1 342 526
Cost of sales 867 900 153 903 100 454 34 436 1 156 693
Gross profit 134 852 20 915 14 008 16 372 185 833
Other income 3 055 - - - 3 055
Profit before operating
and administration expenses 137 592 20 915 14 008 16 372 188 888
Operating and administration
expenses
Communication 1 244 94 50 147 1 534
Employment costs 49 925 3 623 2 744 8 144 64 437
Motor vehicle expenses 4 422 579 187 765 5 952
Other expenses 41 666 1 054 206 2 816 45 742
Occupancy 12 105 143 19 4 523 16 790
109 362 5 493 3 206 16 395 134 455
Operating profit before
finance income 28 231 15 422 10 802 (23) 54 433
Non-ferrous Ferrous
(Previously (Previously
"Foundry") "Steel") Refractory Plastics Total
2016 R'000 R'000 R'000 R'000 R'000
Revenue
Sale of goods 692 358 127 167 111 899 19 570 950 993
Commission 36 - 4 076 - 4 112
692 394 127 167 115 975 19 570 955 105
Cost of sales 600 017 114 250 103 343 12 527 830 136
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 1 342 1 428 8 826
63 783 5 854 6 525 7 057 83 219
Operating profit before
finance income 31 232 7 063 6 107 (14) 44 388
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 2017.
1. Basis of Preparation and Accounting Policies
The results for the year ended 28 February 2017 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 28 February 2017 are consistent with those applied in the consolidated financial
statements for the year ended 29 February 2016. 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 2017. 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 or on our website,
www.insimbi-iras.co.za. These abridged financial statements have been prepared under the
supervision of Fred Botha (CA)SA (Commercial and Financial Director).
2. Review of activities
Insimbi Refractory and Alloy Supplies Limited provides the steel, aluminium, cement and foundry
industries with resource-based commodities such as ferrous and non-ferrous alloys, as well as
refractory materials, and has recently started manufacturing plastic containers for the chemical,
agricultural, home and food industries using blow- and roto-moulding activities.
Late last year we acquired the Amalgamated Metal Recycling Group (AMR), licensed scrap metal
dealers providing a competitive service locally whilst also exporting a significant quantity of
materials. It collects, sorts, processes and trades in all forms of ferrous metals (iron and steel)
and non-ferrous metals (aluminum, copper, zinc, stainless steel, lead, nickel, brass, tin, bronze,
etc). The AMR business model is such that it is able to provide its customers with highly
competitive pricing while adhering to the myriad of legislative requirements applicable to
second-hand goods, including inspections conducted by South African Police Services, City Power,
Eskom, Health and Emergency Department services. In excess of 65% of revenue is generated by
exports, and products are typically priced against LSE spot prices.
3. Financial Review
The year under review may prove to be a watershed year for the Insimbi group of companies. Changes
in market capitalisation, size and complexity means that the group looks very different at the
end of the reporting period when compared to the beginning of the period. Investment by our B-BBEE
partner, New Seasons Investment Holdings Proprietary Limited, has been completed, two Employee
Share Option Schemes (EmployeeCo and ManCo) have been established and implemented and the
acquisition of the Amalgamated Metals Recycling group of companies (AMR) has been concluded.
The improved results of the Insimbi group was not only the result of the AMR transaction,
but also stemmed from growth in the relatively new plastics segment and some improvement in the
aluminium business. This resulted in an overall increase of 41% in revenue to R1,3 billion
(2016: R955 million), 49% in gross profit to R186 million (2016: R125 million) and 24% in EBITDA
to R68 million (2016: R53 million). Net profit remained flat at R29 million (2016: R29 million)
and operating profit up 23% to R54 million (2016: R44 million).
Overall, there has been a marginal decrease in profitability compared to the prior period as a
result of extraordinary expenses associated with the AMR acquisition and foreign exchange
volatility, and the write off of R10 million bad debt during the period. EPS was down 11% to
11,01 cents per share (2016: 12,43 cents) and HEPS was down 12% to 10,87 cents per share
(2016: 12,42 cents).
The acquisition by Insimbi of AMR group for R284 million, of which R234 million was paid in cash
and the balance by the issue of new shares subject to profit warranties and an NAV underpin, brings
many benefits, including diversification of revenue and customers; maximisation of smelter
capacity; a Rand hedge; and allows for succession planning. The acquisition is value accretive
from a revenue, gross profit, EPS and HEPS perspective. It will also allow us to access markets
that are parallel to its existing markets including the scrap metal recycling market. AMR's
results have been consolidated into the Insimbi group results for the last two and half months of
the financial year, but it is anticipated that the full impact of the transaction on the Insimbi
group will only become evident in the current financial year ending 28 February 2018.
In the process of acquiring AMR, Insimbi embarked on its first capital raising exercise since
listing in March 2008 and successfully raised R100 million from new and existing shareholders.
The offer was not only fully subscribed but saw support from institutional investors. Insimbi's
market capitalisation has more than doubled as a result of this acquisition.
Strong operating cash flow, which was up to R89 million (2016: 26illion), was pleasing and evidence
of our ongoing ability to adapt and survive, notwithstanding difficult economic and market
conditions. During the year, a major customer was liquidated and we have provided in full for the
R10 million owing.
4. Market and Prospects
Instability in South African politics, as well as volatile international markets are likely to
result in a challenging environment in the future. The anticipated downgrade of South Africa's
sovereign debt has been realized, with further downgrades anticipated. This has had a serious
knock-on effect with the inevitable downgrade of all banks and state owned entities.
2017 is likely to continue to be a challenging year on all fronts, with little evidence of a
pick-up in the construction or steel markets, although there seems to be some positive sentiment
in the cement industry. Although the effect of a restructuring of the cement industry, which is
anticipated over the next few months, on our business is not clear, the business is prepared and
well diversified to manage the impact.
5. Special resolutions
The company passed a number of special resolutions during the year under review. This included
resolutions authorising specific repurchases of shares to enable the establishment of the
EmployeeCo and ManCo share ownership arrangements, the repurchase of shares and issue of an
additional 150 000 000 shares to enable the AMR transaction. Standard resolutions authorising
the fees to be paid to non-executive directors and authorising the board to provide financial
assistance to directors and related and inter-related companies were also passed
6. Post balance sheet events
Subsequent to the year end, the announcement of my retirement on 30 November 2017 and the
appointment of Fred Botha (currently Group Financial and Commercial Director) as CEO with effect
from 1 June 2017 was announced. Fred and I have worked together for many years, particularly
since the 2008 IPO, and the transition is expected to be seamless. Fred's appointment will
enable me to focus on ensuring that there are suitable, skilled and technical staff to continue
building on existing customer relationships. I have offered my services in a consulting capacity
even after my retirement, and do not expect to be severing all ties with the group.
A review of the board of directors, which changed substantially during the year following the
New Seasons investment and AMR transaction, led to my colleagues (Eddie Liechti and Colin Botha)
and I stepping down as executive directors from the holding company board to allow for a better
balance between executive and non-executive directors at that level. This change will have no
impact on our executive roles or directorships of subsidiary companies within the group (other
than my retirement in November). Fred Botha will continue to oversee the financial function
until a more long term decision has been made regarding the role of the financial director.
7. Directors
There have been a number of changes to the board of directors during the year under review:
- CF Botha (will resign on 31 May 2017)
- F Botha (will assume the role of CEO on 1 June 2017)
- B Craig (appointed independent non-executive director on 1 August 2016 and
chairperson on 16 January 2017)
- C Coombs (appointed executive director on 16 January 2017)
- RI Dickerson (appointed non-executive director on 16 January 2017)
- EP Liechti (will resign on 31 May 2017)
- GS Mahlati (resigned 31 March 2016)
- N Mwale (appointed non-executive director on 9 June 2016)
- IP Mogotlane (appointed non-executive director on 9 June 2016)
- LY Okeyo (resigned as chairperson on 8 December 2016 and as a director on
31 January 2017)
- PJ Schutte (will resign as CEO and director on 31 May 2017 and retire on
30 November 2017)
- CS Ntshingila (previously CS Shiceka)
8. Authorised and issued share capital
The number of shares in issue increased during the year under review with the issue of an
additional 150 000 000 ordinary shares as part of the funding of the AMR transaction.
Number of shares authorised at 28 February 2017 12 000 000 000
Number of shares in issue at 29 February 2016 260 000 000
Number of shares in issue at 28 February 2017 410 000 000
The issued share capital includes 23 105 735 treasury shares at year end, which is disclosed as a
reduction of equity in the statement of changes in equity.
9. Dividends
An interim dividend number 14 of 1,5 cents per share was declared on 10 November 2016 in respect
of the period ending 31 August 2016. The total amount paid was R3 898 612 (2016: R4 725 814).
The board has elected to adopt a conservative approach at year-end and, in light of the
significant debt incurred to conclude the AMR transaction has not declared a dividend for the
full year, but decided to conserve cash and focus on reducing gearing in the business to a more
appropriate level.
The total dividend payable in the year under review was therefore 1,5 cents per share or
R3 898 216 (2016: 4,5 cents per share or R10 655 104).
10. Litigation
Insimbi has provided in full for a potential R10 million loss following the liquidation of one of
our customers. Fortunately, we have a diverse range of customers and the impact of this loss will
be minimal. We will, in any event, consider what steps may be taken to recover a portion of the
amount due.
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 Monday 26 June 2017 at
10:00, to transact the business as stated in the notice of annual general meeting included in
the Integrated Annual Report which has been posted to shareholders today.
In closing, I would like to thank my colleagues on the board, the members of my management team
and all the employees of Insimbi, for entrusting me with this position of leadership over the
past years. While Insimbi has been my family, my customers and suppliers have become my friends.
I know that you will all afford Fred Botha the same support as you have given me. As I start on
the next leg of my journey, I hope the legacy instilled prevails.
By order of the Board
Pieter Jacobus Schutte
Chief Executive Officer
Directors: CF Botha
F Botha (Financial Director)
B Craig* (Chairperson)
C Coombs
RI Dickerson*
EP Liechti
IP Mogotlane*
N Mwale*
CS Ntshingila (previously Shiceka)*
PJ Schutte (Chief Executive Officer)
(*non-executive)
Company Secretary: SK Saunders
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Website: www.insimbi-iras.co.za
Sponsor: Bridge Capital Advisors Proprietary Limited
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Auditors: PricewaterhouseCoopers Inc.
29 May 2017
Date: 29/05/2017 02:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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