Wrap Text
Unreviewed Condensed Consolidated Financial Results
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 Refractory and Alloy Supplies Limited
("Insimbi" or "the Company" or "the Group")
UNREVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2017
AND INTERIM DIVIDEND DECLARATION
Insimbi (JSE:ISB) is a group of companies that together provide resource-based supplies to a
diversified range of industrial customers. Insimbi offers ferrous and non-ferrous alloys; refractory
and foundry materials; plastic blow and rotomoulding production; and alloy recycling processes to
national, regional and international markets. The core business expertise is the ability to source
and provide local, regional and global industrial consumers with the required commodity over the four
distinct segments. The Company herewith announces its unreviewed condensed consolidated financial
results for the six months ended 31 August 2017, and declares an interim dividend of 3.00 cents per
share.
Key Financial Highlights: When compared to the 6 months ended 31 August 2016:
- Revenue increased by 247% to R1,7 billion
- Gross profit increased by 162% to R179,8 million
- EBITDA increased by 273% to R91,3 million
- EPS increased by 142% to 11,97 cents per share
- HEPS increased by 150% to 11,95 cents per share
- Cash generated by operations increased by R93,5 million (401%) to R116,8 million compared to
R23,3 million in comparable interim period ended August 2016
- NAV and tangible NAV increased by 33% and 38% to 87,17 cents per share and 84.30 cents per
share respectively
- Finance costs increased by 150% to R16,4 million
- The Group has declared a gross interim dividend of 3 cents per share for the period ended
31 August 2017
- Trading and operational outlook for the remainder of the financial year is positive
CEO of Insimbi, Fred Botha, commented:
"Start by doing what is necessary; then do what's possible; and suddenly you are doing the impossible"
- Saint Francis of Assissi.
In what will be my first report as CEO of Insimbi Refractory and Alloy Supplies Limited ("Insimbi")
I would like to turn things around a little, by starting with the gratitude element of the report.
I would like to express my gratitude first of all to the team at Insimbi who have assisted in making
my transition to Chief Executive Officer ("CEO") effortless. The team is expanding given the
acquisitions made and the integration thereof has been seamless. We are all striving to achieve the
impossible and it is only possible if we work as a team. To our suppliers and customers who play such
a critical role in our success – we look forward to nurturing long and mutually beneficial
relationships. The board have played their role in creating a strategic environment in order for the
executive to achieve the goals set and stretch the boundaries of what is possible. The board and
executive team are positioning Insimbi to achieve even higher goals than those already reached and
this provides us with the mechanism to deliver on the expectations of our loyal stakeholder base.
What started many years ago as a journey of growing a business in the refractory and alloys industry
has resulted in an Insimbi that today is a diversified business in terms of industry, client base,
presence and revenue. This augurs well for the future and we are well positioned to take advantage of
opportunities as and when they arise. It is our intention to achieve at least a level 4 rating, on the
B-BBEE Amended Codes of Good Practice at all our operations, by the end of 2018 and we are well
positioned to achieve this.
The first half of FY18 has been satisfactory and in particular, the second quarter, was outstanding.
The conclusion of the Amalgamated Metal Group Holdings ("AMGH") transaction at the end of last year is
now contributing positively to all aspects of the business. In the final results for 2017, we were
only able to include two months of the AMGH trading in Insimbi's consolidated results. We are happy
to confirm that this business has met and exceeded our expectations as at the time of making the
acquisition. The integration has been seamless and the synergies are being exploited beyond
anticipation. From a commercial perspective, the AMGH transaction was concluded when Copper was at
$4400pmt while it is approximately $6600pmt at the time of writing. Aluminium, chrome and iron ore
prices have shown a significant upward trend since the last Insimbi report and seem to be recovering
on the back of strong global demand.
OPERATIONAL OVERVIEW
AMGH volumes are up over 10% on the previous year and this, complemented by the increased metal prices,
has resulted in an exceptional 6 months.
Despite a rather lacklustre first quarter, Insimbi Alloy Supplies ("IAS") has exceeded the comparative
period last year after a very strong second quarter. Stock levels are consistently better and a
renewed enthusiasm within this operation is clearly evident. The steel industry is showing signs of
improvement whilst the ferrous and non-ferrous segments are showing significant growth.
The refractory operations are performing well although revenues are down as a result of the loss of
volume but margins are trending higher. The synergies between the secondary aluminium smelters at
Insimbi Aluminium Alloys ("IAA") and Metlite Alloys ("ML") and AMGH are becoming evident and the
management teams are working effectively to benefit the Group.
The plastics business has shown an improved performance year on year and we have increased the
footprint of this segment by expanding the manufacturing facility to include Kwa-Zulu Natal at
present and will soon be established in the Western Cape. The plastics product range has expanded as
well and we are slowly penetrating the rain-water harvesting market.
FINANCIAL OVERVIEW
Group revenue for the period is R1.67 billion, an increase of 247% or R1.19 billion on the comparative
period ended 31 August 2016. The increase in revenue is mainly attributable to the successful
acquisition of AMGH, as well as an increase of around 11% in the revenue of the traditional pre-
acquisition group of companies. As a result of the lower margins in AMGH,overall gross margins have
decreased from 14% to 11% but gross profit has increased by 162% from R68.6 million to R179.8 million,
an increase of R111.2 million for the 6 months ended August 2017.
Group operating profit has increased by 289% to R77.3 million compared to R19.9 million in the
comparative period last year.
Group operating costs have increased by R56.2 million from R49.6 million to R105.9 million when
compared with the period ended August 2016, R51 million as a result of operational costs associated
with the acquisition of AMGH for the period under review. Operating costs in the pre AMGH acquisition
group have increased by R5.3 million and are mainly attributable to an increase in salaries and wages.
All companies within the Group are committed to cutting operating costs where possible.
Group finance costs for the period have increased from R6.6 million to R16.4 million, an increase of
R9.8 million, due to:
- Interest on pre-acquisition funding of R6 million
- Interest on the funding of the AMGH acquisition of R10.4 million
Insimbi achieved Group EPS of 11.97 and HEPS of 11.95 cents per share respectively compared to 4.94
and 4.78 cents per share in the previous comparative period. This equates to an increase of 142% and
150% in respect of EPS and HEPS respectively.
Net cash flow from operating activities increased from R15.3 million to R88.6 million, of which
R30 million is attributable to an improvement in the net working capital of the Group. Borrowings were
reduced significantly by R95.1 million in the 6 months ended 30 August 2017 and this has resulted in
a net cash decrease of R19 million to R8.0 million net overdraft from R11 million cash on hand in the
comparative period. Utilisation of the Group's R111.5 million overdraft facilities was only
R8.0 million as at 31 August 2017.
PROSPECTS
Insimbi is well positioned for the future. Diversified products, revenue, client base and geographic
location allow us to pursue our goals with the required vigour and energy. The expansion of the
Atlantis, Cape Town, site to include the plastics blow-moulding and rotomoulding facilities has been
completed and we will commence production in the third quarter. This follows a successful
implementation of the strategy earlier in the year at our site in Durban. This will allow us to
penetrate these markets cost effectively with a superior product from world class facilities.
Expansion of the AMGH metal recycling footprint into KZN and Western Cape is a key focus and inroads
are already being made to achieve this.
Major inroads have been made regarding our ambition to produce ultra-low carbon alumino-thermic
ferrochrome which will increase production volumes of aluminium in existing plants and provide us
with a high value beneficiated chrome product for the local and export market. We are under cautionary
with another transformative transaction being explored, which we hope to conclude in this financial
year. We believe this transaction will be value accretive and bring further diversification and value
added opportunities to Insimbi.
We are continuously looking at how we are able to achieve the impossible and as such we are focusing
on exploiting under-performing assets, maximising synergies and ensuring appropriate cost management
across all the business segments.
We believe that the Group is well positioned to continue to deliver on the promise reflected in the
above results.
DIVIDEND DECLARATION
An interim gross dividend of 3 cents per share has been declared on 21 September 2017. There are
410 000 000 ordinary shares in issue at announcement date, of which 494 033 are held in treasury and
do not participate in dividends, 22 968 015 shares are held by the ESOP's and are participating in
terms of the dividend policy. The total dividend amount payable is R12 285 179 (2016: R3 898 612).
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 20%. The net amount payable to shareholders who are not exempt
from DT is 2.4 cents per share, while it is 3 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 Tuesday, 31 October 2017
First day to trade ex dividend Wednesday, 1 November 2017
Record date Friday, 3 November 2017
Payment date Monday, 6 November 2017
No share certificates will be dematerialised or rematerialised between Wednesday 1 November 2017 and
Friday, 3 November 2017, both days inclusive.
Shares repurchased by a subsidiary since the year end and held in treasury amounted to 356 313
(2016: 92 500), which brings the total number of treasury shares to 23,462,048 (2016: 22 970 515).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unreviewed Unreviewed Audited
as at as at as at
R'000 31 August 2017 31 August 2016 28 February 2017
Assets
Non-current assets
Property, plant and equipment 236 526 118 087 239 095
Goodwill 101 591 44 560 101 591
Intangible assets 11 756 10 613 11 836
Investments in joint ventures 1 190 – 670
Deferred taxation asset 6 892 9 288 7 609
357 955 182 548 360 801
Current assets
Inventories 149 187 97 671 152 546
Trade and other receivables 292 594 118 380 275 792
Derivative financial assets – at fair value 1 138 1 766 –
Current taxation receivable – – 3 166
Cash and cash resources 25 629 18 412 29 848
468 548 236 229 461 352
Total assets 826 503 418 777 822 153
Equity and liabilities
Equity
Share capital 190 704 47 230 190 704
Treasury shares (18 580) (16 947) (18 215)
Reserves 21 503 21 503 21 503
Share based payment reserve 1 634 597 980
Retained earnings 162 251 106 042 116 579
Non-controlling interest (124) (2 728) (258)
357 388 155 697 311 293
Liabilities
Non-current liabilities
Loans from shareholders 1 630 3 364 2 491
Other financial liabilities 172 611 45 934 210 811
Deferred taxation 26 082 13 607 26 083
200 323 62 905 239 385
Current liabilities
Other financial liabilities
– through profit or loss 29 427 59 333 74 214
Other financial liabilities – at fair value – – 2 823
Current taxation payable – 1 288 –
Trade and other payables 205 714 132 455 162 111
Bank overdraft 33 649 7 099 32 327
268 791 200 175 271 475
Total liabilities 469 114 263 080 510 860
Total equity and liabilities 826 503 418 777 822 153
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unreviewed Unreviewed Audited
as at as at as at
R'000 31 August 2017 31 August 2016 28 February 2017
Revenue 1 666 368 480 312 1 342 526
Cost of sales (1 486 617) (411 746) (1 156 693)
Gross profit 179 751 68 566 185 833
Other income 3 370 940 1 349
Operating expenses (105 860) (49 645) (132 749)
Operating profit 77 261 19 861 54 433
Investment revenue 162 17 266
Income from equity accounted investments 1 282 – 543
Finance cost (16 408) (6 566) (16 355)
Profit before taxation 62 297 13 312 38 887
Taxation (15 837) (2 075) (9 440)
Profit for the year 46 460 11 237 29 447
Other comprehensive income for the
year net of taxation – – –
Total comprehensive income for the year 46 460 11 237 29 447
Total comprehensive income attributable to:
Owners of the parent 46 326 11 717 29 571
Non-controlling interest 134 (480) (124)
46 460 11 237 29 447
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Share
Re- based Non-
Share Trea- valua- Distri- pay- control-
Share pre- sury tion butable ment ling Total
R'000 Capital mium shares reserve reserve reserve interest Equity
Balance at
31 August 2016
(unreviewed) - 47 230 (16 947) 21 503 106 042 597 (2 728) 155 697
Total comprehensive income - - - - 16 874 383 356 17 613
Transactions with
non-controlling interest - - - - (2 114) - 2 114 -
Shares issued - 143 474 - - - - - 143 474
Dividend paid - - - - (4 223) - - (4 223)
Net movement in
treasury shares - - (1 268) - - - - (1 268)
Balance at
28 February 2017 (audited) - 190 704 (18 215) 21 503 116 579 980 (258) 311 293
Total comprehensive income - - - - 45 672 654 134 46,460
Net movement in treasury
shares - - (365) - - - - (365)
Balance at
31 August 2017 (unreviewed) - 190 704 (18 580) 21 503 162 251 1 634 (124) 357 388
CONSOLIDATED STATEMENT OF CASH FLOWS
Unreviewed Unreviewed Audited
as at as at as at
R'000 31 August 2017 31 August 2016 28 February 2017
Cash flow from operating activities
Cash generated from operations 116 758 23 282 88 928
Investment income 162 17 266
Finance costs (16 408) (6 566) (16 355)
Taxation paid (11 954) (1 408) (11 244)
Net cash flow from operating activities 88 558 15 325 61 595
Cash flow from investing activities
Purchase of property, plant and equipment (6 115) (6 063) (10 373)
Proceeds on disposal of property,
plant and equipment 1 446 537 1 430
Purchase of other intangible assets - - (922)
Business combinations - - (230 546)
Cash received from joint venture 762 - -
Net cash from investing activities (3 907) (5 526) (240 411)
Cash flow from financing activities
Proceeds from loan funding 5,334 2 059 95 613
Repayment of other financial liabilities (94 305) (4 501) (6 672)
Proceeds from share issue - - 96 262
Proceeds from shareholder's loan - - 296
Repayment of shareholder's loan (861) - (1,169)
Dividends paid - (5 926) (10 149)
Sale/(repurchase) of treasury shares (365) - (4 056)
Net cash outflow from financing activities (90 197) (8 368) 170 125
Net movement in cash for the period/year (5 547) 1 431 (8 691)
Effect of exchange rate movement on cash 6 (338) 10 220
Cash and cash equivalents at the beginning
of the period/year (2 479) 10 220 (4 008)
Cash and cash equivalents at the end
of the period/year (8 020) 11 313 (2 479)
CONDENSED SEGMENT REPORT
Unreviewed Unreviewed Audited
as at as at as at
R'000 31 August 2017 31 August 2016 28 February 2017
Revenue by segment
Non-Ferrous (Previously "Foundry") 1 405 227 333 576 1 002 438
Ferrous (Previously "Steel") 171 450 68 922 174 818
Refractory 54 422 55 494 114 462
Plastics 35 268 22 320 50 808
1 666 368 480 312 1 342 526
Gross profit by segment
Non-Ferrous (Previously "Foundry") 140 839 47 388 134 852
Ferrous (Previously "Steel") 17 980 7 821 20 915
Refractory 6 977 6 376 14 008
Plastics 13 955 6 981 16 372
179 751 68 565 185 833
Operating profit by segment
Non-Ferrous (Previously "Foundry") 57 393 11 034 28 231
Ferrous (Previously "Steel") 11 861 6 062 15 422
Refractory 6 067 4 397 10 802
Plastics 1 940 (1 632) (23)
77 261 19 862 54 433
SALIENT FEAUTURES
Unreviewed Unreviewed Audited
as at as at as at
R'000 31 August 2017 31 August 2016 28 February 2017
Basic earnings (loss) per share
From continuing operations
(cents per share) 11.97 4.94 11.01
Number of weighted shares in issue at
the end of the period/year ('000) 410 000 260 000 291 644
Less: treasury shares held in a
subsidiary at the end of the year ('000) (23 108) (22 715) (22 962)
386 892 237 285 268 682
Reconciliation of headline earnings (loss)
and diluted headlines earnings (loss)
Profit attributable to owners of the
parent (R'000) 46 326 11 717 29 571
Adjusted for (profit)/loss on sale of
property, plant and equipment, net of
tax (R'000) (111) (378) (366)
Headline earnings for the group (R'000) 46 216 11 340 29 206
Headline earnings per share (cents) 11.95 4.78 10.87
Reconciliation of number of shares for
diluted earnings (loss) per share
Weighted average number of ordinary shares
in issue ('000) 386 892 237 285 268 682
Adjusted for: Share options ('000) 17 511 16 406 16 406
Weighted average number of ordinary shares for
diluted earnings per share ('000) 404 404 253 691 285 087
Basic earnings per share (cents) 11.97 4.94 11.01
Headline earnings per share (cents) 11.95 4.78 10.87
Diluted earnings per share (cents) 11.46 4.62 10.37
Diluted headlines earnings per share (cents) 11.43 4.47 10.24
Dividends per share 3.00 1.50 1.50
Net asset value per share (cents) 87.17 65.69 75.93
Tangible net asset value per share (cents) 84.30 61.21 73.04
EBITDA 91 276 24 482 66 013
Depreciation 12 733 4 621 11 580
CHANGES TO THE BOARD
The following changes to the board have taken place
- PJ Schutte stood down as CEO of Insimbi with effect from 31 May 2017;
- F Botha was appointed as CEO from 1 June 2017;
- CF Botha, EP Liechti and PJ Schutte resigned as directors of Insimbi with effect from 31 May 2017;
and
- A de Wet has been appointed as Chief Financial Officer with effect from 9 October 2017.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements for the interim period ended 31 August 2017
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 acting Financial Director, Frederik Botha CA (SA). The
accounting policies are consistent with those applied in the annual financial statements for the
previous year. The above information has not been audited or reported on by Insimbi's auditors.
CONTINGENCIES
The Company does not have any material contingencies.
Approval:
B Craig F Botha
Chairman Chief Executive Officer
26 September 2017
Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422
Company Secretary: SK Saunders
Directors: B Craig* (Chairman), F Botha (Chief Executive Officer), C Coombs,
RI Dickerson*, P Mogotlane*, N Mwale*, C Ntshingila (previously Shiceka)*
*non-executive
Sponsor: Bridge Capital Advisors Proprietary Limited
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Date: 26/09/2017 08:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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