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Interim results
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
- Decrease in NPAT of 66%
- HEPS 1.6 cents per share
- NTAV 105 cents per share
CONSOLIDATED CONDENSED FINANCIAL RESULTS
FOR THE SIX MONTH PERIOD ENDED 30 SEPTEMBER 2017
Consolidated condensed statement of profit and loss
Reviewed Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 2017 30 September 2016 31 March 2017
R’000 R’000 R'000
Revenue 1 433 615 1 248 044 2 376 821
Gross profit 111 959 168 890 271 372
Other costs (87 323) (100 817) (212 802)
Earnings before interest,
taxation, depreciation and
amortisation (“EBITDA”) 24 636 68 073 58 570
Depreciation and (8 966) (11 380) (17 443)
Amortisation
Profit before interest and 15 670 56 693 41 129
taxation
Profit/(Loss) on disposal of assets 9 (106) (2)
Interest received 9 990 5 991 14 187
Interest paid (14 957) (16 841) (33 849)
Impairment of iron ore - - (13 083)
Profit on disposal of subsidiaries - - 10 127
Profit before taxation 10 712 45 737 18 509
Taxation 275 (8 674) (2 223)
Profit for the period from continuing
operations 10 987 37 063 16 286
(Loss)/Profit from discontinued
operations (*) (1 085) (8 123) 39 926
Profit for the period 9 902 28 940 56 212
Profit attributable to ordinary
shareholders 9 508 28 940 56 212
Earnings attributable to non-controlling
Shareholders 394 - -
Earnings per share (cents) - continued
operations 1.6 5.3 2.4
Earnings per share (cents) – discontinued
operations (0.2) (1.1) 5.7
Total earnings per share (cents) 1.4 4.2 8.1
Reconciliation of headline
earnings:
Earnings attributable to ordinary
shareholders 9 508 28 940 56 212
(Profit)/Loss on disposal of (9) 33 (2)
property, plant and equipment
Impairment of intangible and
Financial assets - - 6 480
Impairment of plant and machinery 1 550 - 3 767
Impairment of goodwill - - 5 716
Tax impact of adjustments (431) (9) (4 469)
Profit on sales of subsidiaries - - (10 127)
Realisation of foreign currency
translation reserve on discontinued
operations - - (47 681)
Headline earnings attributable to
ordinary shareholders(basic and
diluted) 10 618 28 964 9 896
Weighted average shares in 676 362 696 871 695 653
issue on which earnings are
based (000)
Headline earnings per share 1.6 4.2 1.4
(cents) (basic and diluted)
(*) This represents the result of the discontinuation of the Ghanaian operation
during the 2014 year as well as the sale of the DRC operation in 2017.
Consolidated condensed statement of other comprehensive income
Reviewed Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Profit for the period 9 902 28 940 56 212
Other comprehensive income
Foreign currency translation reserve 1 040 (23 079) (83 506)
Cash flow hedge 834 (3 205) 5 200
Total comprehensive income/(loss) 11 776 2 656 (22 094)
Consolidated condensed statement of financial position
Reviewed Unaudited Audited
30 September 2017 30 September 2016 31 March 2017
R’000 R’000 R’000
ASSETS
Non-Current Assets
Property, plant and 262 100 321 352 299 547
equipment
Goodwill 8 990 14 706 8 990
Intangible assets 2 074 7 050 4 095
Investments in joint ventures 11 909 12 362 11 912
Loans to group companies 201 942 223 932 195 257
Deferred taxation 16 786 16 077 16 164
503 801 595 479 535 965
Current Assets
Inventories 278 565 438 056 333 659
Trade and other receivables 600 309 542 026 520 106
Current tax receivable 11 792 8 726 10 077
Other financial assets 9 627 4 250 9 000
Loans to group companies 141 163 24 368
Cash and cash equivalents 19 216 32 804 31 072
919 650 1 026 025 928 282
Non-current assets held for sale 52 686 28 698 29 195
Total assets 1 476 137 1 650 202 1 493 442
EQUITY AND LIABILITIES
Equity
Total shareholders’ equity 716 061 733 021 699 875
Non-controlling interest 251 (143) (143)
716 312 732 878 699 732
Liabilities
Non-Current Liabilities
Other financial liabilities 6 306 32 336 19 120
Deferred taxation 19 152 20 090 21 081
Other liabilities 149 413 119 207 155 612
174 871 171 633 195 813
Current Liabilities
Trade and other payables 330 520 454 200 339 932
Current tax payable 3 368 2 426 469
Other financial liabilities 21 460 38 211 25 370
Bank overdraft 222 411 245 895 228 214
577 759 740 732 593 985
Liabilities of disposal group 7 195 4 959 3 912
Total Liabilities 759 825 917 324 793 710
Total equity and liabilities 1 476 137 1 650 202 1 493 442
Number of shares in issue 674 872 696 871 681 495
(000)
Net asset value per share 106.1 105.2 102.7
(cents)
Net tangible asset value per 104.5 102.1 100.8
share (cents)
Consolidated condensed statement of changes in equity
Reviewed Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Equity holders’ interest
Balance at beginning of period 699 875 743 062 743 062
Profit for the period 9 508 28 940 56 212
Foreign currency translation 1 040 (23 079) (83 506)
reserve
Cash flow hedge 834 (3 205) 5 200
Share based payment provision 7 576 1 309 (1 079)
Dividends paid - (14 006) (14 006)
Purchase of treasury shares (2 772) - (6 008)
Balance at end of period 716 061 733 021 699 875
Non-controlling interest
Balance at beginning of period (143) (143) (143)
Profit for the period 394 - -
Balance at end of period 251 (143) (143)
Total equity 716 312 732 878 699 732
Consolidated condensed statement of cash flows
Reviewed Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Cash flow from operations (5 347) (63 203) (24,900)
Cash flows from trade and other
receivables (79 638) (13 408) 16 689
Cash flows from trade and other
payables (9 412) 25 733 (83 469)
Cash flows from inventories 55 094 (60 058) 13 380
Other cash flows from 34 665 11 377 60,960
operations
Interest and taxation (6 056) (26 847) (32 460)
Investing activity cash 21 826 7 306 (33 378)
flows
Financing activity cash (22 412) 5 935 24 795
flows
Total cash movement for the (5 933) (49 962) (33 483)
period
Cash at beginning of period (197 142) (161 371) (161 371)
Effect of exchange rate (120) (1 758) (2 288)
movement on cash balances
Total cash at end of period (203 195) (213 091) (197 142)
Consolidated condensed segment report
Reviewed Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
R’000 R’000 R’000
Net revenue
SA Trading 791 372 808 344 1 573 065
Exporting 411 769 472 350 626 490
Other 230 474 35 677 177 266
1 433 615 1 316 371 2 376 821
Profit before interest and
taxation
SA Trading 5 694 38 018 33 134
Exporting 11 763 13 634 4 553
Other (1 778) 1 019 (9 653)
15 679 52 671 28 044
Assets
SA Trading 408 619 491 858 398 810
Exporting 544 363 707 816 609 732
Other 529 669 467 501 491 434
Eliminations (6 514) (16 973) (6 534)
1 476 137 1 650 202 1 493 442
OVERVIEW
The interim financial results are presented for the six months ended 30 September
2017.
The Group operates in the steel and associated industries with strategically
located operations in South Africa, Mauritius, and Zambia. BSI markets through two
distinct channels, being Bulk Sales and Exporting.
The six months under review reflects the Group’s strategy of focusing on generating
a reasonable return on capital employed.
FINANCIAL RESULTS
The pressure on gross margins continued since year end and saw a slight improvement
in September, reflective of a very flat South African economy. Low margin business
by Isilo Steel exerted further pressure on the group’s gross margin, seeing it drop
from 14% in the comparative period to 8%. Overall revenue increased by 14% despite
Qinisa Steel Solutions no longer forming part of the group results, also as a
result of Isilo Steel revenue added thereto.
The marked decrease in operating costs are mostly due to our continuous drive to
lower costs in line with the market, along with the effect of excluding the Qinisa
Steel Solutions operation. The substantial decrease in operating costs allowed for
a respectable return within very tough market conditions.
Included in operating costs is a share based payment provision to the value of R8.7
million as a result of the Isilo Steel transaction referred to below.
The substantial drop in Interest paid is a direct result of a vast improvement in
working capital, more specifically inventory levels dropping by 36%.
The loss of R1.1 million from discontinued operations relates to Trade receivables
in Ghana provided for in full, thereby clearing the operation’s balance sheet.
Comparative period Profit and loss figures were restated in line with IFRS5 as the
shareholding in the Democratic Republic of the Congo operations was disposed of
during March.
Isilo Steel introduced external shareholders in June, being the reason for the R394
thousand in non-controlling interest in profits for the period. Notwithstanding
the fact that the majority of the shares and the majority of the board director
positions are held outside of the group, the business is being consolidated in line
with IFRS. This is in light of the significant sureties put forward by BSI Steel
in order to allow for credit limits to be extended by vendors in the absence of
sufficient trade history. The value of the sureties are very substantial compared
to the group’s statement of financial position. The situation will be reassessed
as the business matures in future years as the reliance on the sureties are
expected to decline.
The non-current assets held for sale represents both the fixed properties held in
Richards Bay and Pietermaritzburg. The Richards Bay property is actively being
marketed at the moment whilst the Pietermaritzburg property was sold during
November.
Tower Trade Group has been restructured to reduce costs to meet tough business
conditions in the UK & Europe. Performance for the H1 has been below expectations,
however, the cost savings of the restructure will only be apparent in the H2. The
business has developed some good products and has an excellent in-house software
program to support trading transactions.
PROSPECTS
The company has continued with a cost reduction program to meet ongoing difficult
market conditions. One of the key components of this restructure includes the
probable closure of the Pietermaritzburg distribution facility. We are confident
the reduced cost base will give BSI the best possible platform to deal with these
difficult conditions.
Steel consumption is driven largely by manufacturing, construction and mining. Any
meaningful uptick in the industry can only be driven by improved business
confidence and resultant investment in these sectors.
DELISTING
Shareholders were advised on 29 November 2017 that the board will propose a scheme
of arrangement (“Scheme”), which is subject to certain conditions, between BSI and
its shareholders in terms of which, if implemented, BSI will re-acquire some of its
ordinary shares for a cash consideration of 50 cents per share. Upon the Scheme
becoming unconditional and being implemented, BSI will apply to the JSE to
terminate the listing of BSI’s share on the Alternative Exchange. A circular
regarding the Scheme will be made available to shareholders in due course.
DIVIDEND DECLARATION
The policy of the company is to seek to pay dividends once a year based on year end
results.
SUBSEQUENT EVENTS
No material change has taken place in the affairs of the group between the end of
the financial period and the date of this report.
DIRECTORATE
Mr C Parry resigned as Chief Executive Officer on 20 October 2017 and Mr WL
Battershill stepped into the role of Chief Executive Officer whilst remaining on as
Chairperson.
STATEMENT ON GOING CONCERN
The 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.
BASIS OF PREPARATION
The results have been prepared in accordance with and containing the information
required by IAS 34 Interim Financial Reporting, SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued
by the Financial Reporting Standards Council. The results are in accordance with
the Group’s accounting policies set out in the Integrated Annual Report for the
year ended 31 March 2017, which comply with International Financial Reporting
Standards, the Companies Act, 71 of 2008 of South Africa as amended and the JSE
Limited Listings Requirements. The basis of preparation is consistent with that of
the prior period.
QUALIFIED REVIEW OPINION
These condensed consolidated financial statements for the period ended 30 September
2017 have been reviewed by Deloitte & Touche, who have expressed a modified review
conclusion. An extract from the “Basis for Qualified Opinion” section of the review
opinion is set out below.
“The group’s condensed statement of financial position reflects a loan receivable
of R201.9 million from an associate company, Tower Trade Group, for the period
ended 30 September 2017. We were unable to obtain sufficient and appropriate
evidence regarding the recoverability of this loan receivable as at 30 September
2017, because we were unable to independently corroborate the assumptions and
estimates used by management in their recoverability assessment of this loan
receivable. Consequently, we were unable to determine whether any impairment to
this amount was necessary”.
A copy of the auditor’s ISRE 2410 review report is available for inspection at the
company’s registered.
The reviewed condensed consolidated financial statements were authorised for issue
by the directors on 13 December 2017 for publication on 14 December 2017. The
condensed consolidated financial statements for the six month period ended 30
September 2017 have been prepared by the Financial Manager, Mr JB McGrath.
Any reference to the future financial performance of the Group has not been
reviewed or reported on by the Group’s auditors.
By order of the Board
14 December 2017
WL Battershill
CEO
E Vermaak
CFO
CORPORATE INFORMATION
Chairman: WL Battershill
Non-executive directors: B M Khoza (Alternate - N M Anderson), N G Payne, R G Lewis
Executive directors: K Paxton, E Vermaak
Registered address: 46 Eden Park Drive, Murrayfield Park, 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
Designated Adviser: Sasfin Capital (a member of the Sasfin group)
Johannesburg
15 December 2017
Date: 14/12/2017 10:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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