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INSIMBI REFRACTORY & ALLOY SUP LIMITED - Abridged Audited Results for the Year Ended 28 February 2018 and Notice of Annual General Meeting

Release Date: 29/05/2018 07:05
Code(s): ISB     PDF:  
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Abridged Audited Results for the Year Ended 
28 February 2018 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 2018 AND NOTICE OF ANNUAL GENERAL MEETING.

FINANCIAL INDICATORS  
                                              2018            2017         % change
Revenue (Rm)                             3 491 803       1 342 526              160
Net  Profit (Rm)                            71 160          29 447              142
Cash generated from operations (Rm)        164 377          88 928               85
Operating profit (Rm)                      127 831          54 433              135
Earnings per share (cents)                   18,47           11,01               68
Headline earnings per share (cents)          18,45           10,87               70


ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                          (Restated)

                                                           Audited          Audited
                                                         12 months        12 months
                                                                to               to
                                                       28 February      28 February
                                                              2018             2017    
                                                             R'000            R'000
Revenue                                                  3 491 803        1 342 526
Cost of sales                                           (3 146 379)      (1 156 693)
Gross profit                                               345 424          185 833
Other operating income                                       1 195              841
Other operating gains/(losses)                              (1 989)             508
Other operating expenses                                  (216 799)        (132 749)
Operating profit                                           127 831           54 433
Investment revenue                                             402              266
Income from equity accounted investments                     2 532              543
Finance costs                                              (30 836)         (16 355)
Profit before taxation                                      99 929           38 887  
Taxation                                                   (28 769)          (9 440)
Profit for the year                                         71 160           29 447
Other comprehensive income                                        
Items that will not be reclassified to profit or loss:                                        
Gains on property revaluations (net of taxation)            23 316                -
Total comprehensive income for the year                     94 476           29 447
Profit attributable to:                                        
The owners of the parent                                    71 467           29 571
Non-controlling interest                                      (307)            (124)
Total comprehensive income attributable to:                                        
Owners of the parent                                        94 783           29 571
Non-controlling interest                                      (307)            (124)


EARNINGS AND HEADLINE EARNINGS PER SHARE
                                                           Audited          Audited
                                                         12 months        12 months
                                                                to               to
                                                       28 February      28 February
                                                              2018             2017    
                                                             R'000            R'000    
Basic attributable earnings per share is
calculated by dividing the net profit attributable
to the ordinary equity holders of the parent by
the weighted number of ordinary shares outstanding
during the year.                                        
Reconciliation of profit or loss for the year
 to 
basic earnings:                                        
Profit for the year                                         71 160           29 447
Loss for the year attributable to
 non-controlling interest                                      307              124
Profit for the year attributable to equity
 holders of the parent                                      71 467           29 571
Reconciliation of weighted average number of shares:                                        
Number of shares in issue at the end of the year           410 000          291 644
Less: Weighted number of treasury shares held
 in a subsidiary                                           (23 112)         (22 962)
                                                           386 888          268 682
Headline earnings for the group have been
 computed as follows:                                         
Profit attributable to equity holders                       71 467           29 571
- Profit on sale of property, plant and equipment              (99)            (365)
Headline earnings                                           71 368           29 206
Earnings per share (cents)                                   18,47            11,01
Headline earnings per share (cents)                          18,45            10,87
Diluted earnings per share (cents)                           17,73            10,37
Diluted headline earnings per share (cents)                  17,71            10,24


ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                          (Restated)

                                                           Audited          Audited
                                                         12 months        12 months
                                                                to               to
                                                       28 February      28 February
                                                              2018             2017    
                                                             R'000            R'000
Assets                                         
Non-current assets                                         
Property, plant and equipment                              270 514          239 095
Goodwill                                                   107 591          107 591
Intangible assets                                           11 525           11 836
Investments in joint ventures                                  577              670
Deferred taxation                                            3 388            7 609
                                                           393 595          366 801
Current assets                                        
Inventories                                                147 944          152 546 
Trade and other receivables                                293 643          275 792
Current taxation receivable                                  5 312            3 166
Cash and cash resources                                     32 408           29 848
                                                           479 307          461 352
Total assets                                               872 903          828 153
Equity and Liabilities                                         
Equity                                        
Share capital                                              196 704          196 704
Treasury shares                                            (19 399)         (18 215)
Reserves                                                    47 108           22 483
Retained earnings                                          174 454          116 579
Non-controlling interest                                      (565)            (258)
                                                           398 302          317 293
Liabilities                                        
Non-current liabilities                                         
Loans from shareholders                                      2 275            2 491
Other financial liabilities - at amortised cost            166 202          210 811
Deferred taxation                                           28 966           26 083
                                                           197 443          239 385
Current Liabilities                                         
Other financial liabilities - at fair value
 through profit and loss                                     2 697            2 823
Other financial liabilities - at amortised cost             72 295           74 214
Trade and other payables                                   192 055          162 111
Bank overdraft                                              10 110           32 327
                                                           277 157          271 475
Total liabilities                                          474 600          510 860
Total equity and liabilities                               872 902          822 153


 ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                           Audited          Audited
                                                         12 months        12 months
                                                                to               to
                                                       28 February      28 February
                                                              2018             2017    
                                                             R'000            R'000   
Cash flows from operating activities                                        
Cash generated from operations                             164 377           88 928
Interest income                                                402              266
Finance costs                                              (30 836)         (16 355)
Tax paid                                                   (32 064)         (11 244)
Net cash from operating activities                         101 879           61 595
Cash flows from investing activities                                        
Purchase of property, plant and equipment                   (1 613)         (10 373)
Sale of property, plant and equipment                          559            1 430
Purchase of intangible assets                                    -             (922)
Business combination                                             -         (230 546)
Dividends from investment in joint venture                   2 636                -
Net cash from/(utilised in) investing activities             1 582         (240 411)
Cash flows from financing activities                                        
Repurchase of treasury shares                               (1 184)          (4 056)
Proceeds from share issue                                        -           96 262
Proceeds from other financial liabilities                     4 500          95 613
Repayment of other financial liabilities                    (69 772)         (6 672)
Repayment of shareholders loans                                (216)         (1 169)
Proceeds from shareholders loans                                  -             296
Dividends paid                                              (12 283)        (10 149)
Net cash from financing activities                          (78 955)        170 125
Total cash movement for the year                             24 506          (8 691)
Effect of exchange rate movement on cash balances               271          (4 008)
Cash at the beginning of the year                            (2 479)         10 220
Total cash at end of the year                                22 298          (2 479)


ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                            (Restated)         
 
                                                   Share       Share     Treasury
                                                  capital     premium       shares
                                                    R'000       R'000        R'000
Balance at 1 March 2016                                 -      44 442      (14 159)
Changes in equity                                                            
Profit for the year                                     -           -            -
Other comprehensive income for the year                 -           -            -
Transactions with non-controlling interests             -           -            -
Shares issued                                           -     152 262            -
Purchase of own/treasury shares                         -           -       (4 056)
Dividends                                               -           -            -
Total changes                                           -     152 262       (4 056)
Balance at 28 February 2017                             -     196 704      (18 215)
Changes in equity                                                            
Profit for the year                                     -           -            -
Total comprehensive income for the year                 -           -            -
Purchase of own/treasury shares                         -           -       (1 184)
Dividends                                               -           -            -
Total changes                                           -           -       (1 184)
Balance at 28 February 2018                             -     196 704      (19 399)


ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
                                                                Share
                                                                based
                                               Revaluation    payment     Retained

                                                   reserve    reserve       income
                                                     R'000      R'000        R'000
Balance at 1 March 2016                             21 503          -      100 251
Changes in equity                                                            
Profit for the year                                      -        980       28 591
Total other comprehensive income for the year            -          -            -
Transactions with non-controlling interests              -          -       (2 114)
Purchase of own/treasury shares                          -          -            -
Dividends                                                -          -      (10 149)
Total changes                                            -        980       16 328
Balance at 28 February 2017                         21 503        980      116 579
Changes in equity                                                            
Profit for the year                                      -      1 309       70 158
Total comprehensive income for the year             23 316          -            -
Purchase of own/treasury shares                          -          -            -
Dividends                                                -          -      (12 283)
Total changes                                       23 316      1 309       57 875
Balance at 28 February 2018                         44 819      2 289      174 454


ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
                                                                 Non-
                                                          controlling        Total
                                                             interest       equity
                                                                R'000        R'000
Balance at 1 March 2016                                        (2 284)     149 789
Changes in equity                                        
Profit for the year                                              (124)      29 447
Total other comprehensive income for the year                       -            -
Transactions with non-controlling interests                     2 144            -
Shares issued                                                       -      152 262
Purchase of own/treasury shares                                     -       (4 056)
Dividends                                                           -      (10 149)
Total changes                                                   1 990      167 504
Balance at 28 February 2017                                     (258)      317 293
Changes in equity                                        
Profit for the year                                             (307)       71 160
Total comprehensive income for the year                            -        23 316
Purchase of own/treasury shares                                    -        (1 184)
Dividends                                                          -       (12 283)
Total changes                                                   (307)       81 009
Balance at 28 February 2018                                     (565)      398 202


SEGMENT REPORT
                                  Non-                Refrac-
                             
                               ferrous     Ferrous       tory  Plastics        Total
                               
                                 R'000      R'000       R'000     R'000        R'000

2018  
Revenue                                                                                                   
Sale of goods                2 878 575    431 902     104 600     72 533   3 487 610
Rendering of services               65          -       4 128          -       4 193
                             2 878 640    431 902     108 728     72 533   3 491 803
Cost of sales                2 612 114    390 126      94 610     49 529   3 146 379
Gross profit                   266 526     41 776      14 118     23 004     345 424
Other income                     1 195          -           -          -       1 195
Profit before operating
 and 
administration
 expenses                      267 721     41 776      14 118     23 004     346 619
Operating and
 administration expenses                                                                                                    
Communication                    2 178        139          38        126       2 481
Employment costs                94 025      8 958       1 784     11 420     116 187
Motor vehicle expenses          16 848      4 415         147        965      22 375
Other expenses                  45 963      1 834         474      5 217      53 488
Occupancy                       15 870      2 464           -      5 923      24 527
                               174 884     17 810       2 443     23 651     218 788
Operating profit before

 finance income                 92 837     23 966      11 675       (647)    127 831


                                  Non-                Refrac-
                             
                               ferrous     Ferrous       tory  Plastics        Total
                               
                                 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
Rendering of services               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                   134 538     20 915      14 008    16 372      185 833

Other income                     1 349          -           -         -        1 349
Profit before operating 

  and administration 
  
  expenses                     135 887     20 915      14 008    16 372      187 182
Operating and
 
 administration expenses                                                                                                    
Communication                    1 244         93          50       147        1 534
Employment costs                49 925      3 624       2 744     8 144       64 437
Motor vehicle expenses           4 422        578         187       765        5 952
Other expenses                  39 960      1 054         206     2 816       44 036
Occupancy                       12 105        143          19     4 523       16 790
                               107 656      5 492       3 206    16 395      132 749
Operating profit before
 
  finance income               28 231     15 423      10 802       (23)      54 433

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 considered a combination of factors, including geographical, product types 
and managerial structure, to determine the operating and reporting 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. The management 
Executive Committee assesses the performance of the operating 
segments based on sales and 
gross profit margin.

The main industries serviced by the Insimbi group are the foundry, steel, plastics and 

refractory industries. The segments have been aggregated as such, as they operate in 
the 
same economic environment, the products are similar and are governed by the same 

principles in terms of pricing and management structures.


COMMENTARY
The directors have pleasure in presenting their report on the activities of the company 

and the group for the year ended 28 February 2018.

1. Basis of Preparation and Accounting Policies
The results for the year ended 28 February 2018 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 2018 are consistent with those applied in the 

consolidated financial statements for the year ended 28 February 2017. 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 2018. 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, http://www.insimbi-iras.co.za. 

These abridged financial statements have been prepared on a going concern basis, under 

supervision of the Chief Executive Officer, Mr F Botha CA(SA) and the Chief Financial 

Officer, Mr AJ de Wet CA(SA).

2. Review of activities
Insimbi provides the steel, aluminium, cement, foundry, plastics, paper and pulp 

industries with resource-based commodities like ferrous and non-ferrous alloys, as well 

as refractory materials, by integrating the supply, logistics and technical support 

functions. 

Insimbi continues to operate from premises in Johannesburg, Durban and Cape Town, 

including the Amalgamated Metals Recycling ("AMR") group active from sites in Devland, 

Booysens and Roodepoort on the West Rand. Insimbi has exported goods and materials across 

the world, including South America (Argentina and Brazil), Australia, Middle East 

(Bahrain, Israel and UAE), China and Asia (Hong Kong, India, Malaysia, Singapore and 

Taiwan), elsewhere in Africa (Angola, Botswana, DRC, Ghana, Kenya, Malawi, Mozambique, 

Namibia, Nigeria, Swaziland, Tanzania, Uganda, Zambia and Zimbabwe), Europe (Germany, 

Spain, Sweden and Switzerland) and the USA.

3. Financial Review
Insimbi has a had a respectable year, reaching revenue of R3,5 billion in the year 
under 
review with gross profit of R345 million, a margin of 9,9%. AMR delivered 
significantly 
more revenue than forecast, contributing 73% of the overall turnover of 
the group, 56% of 
the gross profit and 72% of the operating profit. 

The "foundation" business of Insimbi, however, experienced a challenging year in the 
steel 
industry with local raw material supply having to be replaced by imports in a weak 
Rand/US 
Dollar exchange rate environment and requiring settlement in advance or on 
delivery. The 
local steel industry was also under pressure from cheaper import of 
finished product from
the east and subdued spend on infrastructure and a sluggish economy.
 
The aluminium smelter business has seen a healthy 20,6% growth in turnover whilst the 

plastics turnover grew by 29,6%. The plastics business expanded into the Western Cape 
and
KwaZulu-Natal; however, it incurred some once-off setup costs.

Revenue increased 160% from R1,3 billion to R3,5 billion. Despite lower margins from the 

recycling business gross profit increased from R185,8 million to R345,4 million. The 

margins were depressed in the fourth quarter by a sharp decrease in the prices of 
affected 
commodities combined with a sudden and dramatic strengthening of the ZAR against 
other 
major currencies and so despite a comparable trading period in the second half of 
the 
year, lower margins impacted on the second half of the year's profitability.

Operating profit rose 135% from R54,4 million to R127,8 million, which reflects the 
impact 
of lower margins in the metal recycling business relative to the revenue growth. 
Operating 
expenses grew by 63,5% from R132,7 million to R216,8 million as a result of 
the lower cost 
base of the recycling operation. Employee costs constitutes 51,2% (2017: 
53,9%) of 
operating expenses and management is constantly reviewing this metric to ensure 
our 
ability to optimally deliver product to our clients.

Finance costs increased in line with expectations as a result of senior debt funding for 

the acquisition of AMR in 2016. The group optimises finance costs through an internal 

treasury function.

The land and buildings were revalued by an independent professional valuer at year-end, 

resulting in an upward adjustment of R31,7 million. Other fixed asset additions amounted 

to R20,4 million, which was mainly to the vehicle fleet. 

4. Market and Prospects
Whilst we are looking forward to the positive impact on the local economy of the 

interventions by government in attracting foreign investment, we expect trading 
conditions
 to remain challenging in the coming year. We will continue to monitor operating 
expenses 
and ensure we are able to maximise efficiencies and scale where appropriate. 
The 
diversification which the group has implemented over recent years combined with hard 
work 
and cost optimisation should ensure another successful financial outcome for 2019.

5. Special resolutions
No special resolutions were passed in the year under review.

6. Post balance sheet events
There have been no material post balance sheet events.

7. Directors
There have been a number of changes to the board of directors during the year under 

review:
-  Mr PJ Schutte resigned on 31 May 2017 and Mr F Botha was appointed the Chief Executive 
  
   Officer with effect from 1 June 2017;
-  Mr CF Botha and EP Liechti resigned as directors on 31 May 2017;
-  Mr B Craig resigned as chairperson on 8 December 2017 and as director on 
   15 December 2017;
-  Mr RI Dickerson was appointed as chairperson on 8 December 2017; and
-  Mr AJ de Wet was appointed on 16 October 2017.

8. Company secretary
Ms SK Saunders resigned with effect from 1 November 2017. Mr AJ de Wet performed the 

function as interim Company Secretary until Mr TN Kgari was subsequently appointed on 

1 April 2018. The Company Secretary fulfils no executive management function and is not 
a 
director. Mr. Kgari holds a BA Law and LLB degree, and is an admitted attorney. He was 

previously employed in the role of company secretary by Land Bank, Industrial Development 

Corporation, Legal Aid South Africa and MTN and has more than 12 years' experience in 
that 
role.

9. Authorised and issued share capital
There were no ordinary shares issued in the period under review.

10. Dividends
An interim dividend number 15 of 3 cents per share (2017: 1,5 cents) or R12 283 079 

(2017: R3 898 384) was declared on 21 September 2017 for the half year ended 
31 August 
2017. The board has elected to retain this conservative approach and has opted 
to declare
a final dividend number 16 of 3 cents per share (2017: nil cents) or 
R12 265 896 
(2017: R nil).
  
The board has confirmed by resolution that the solvency and liquidity test as contemplated 
by the Companies Act, No. 71 of 2008, as amended, has been duly considered, applied and 
satisfied. This is a dividend as defined in the Income Tax Act, 1962, and is payable from 
income reserves. The South African dividend tax rate is 20,0%. The dividend payable to 
shareholders who are subject to dividend tax and shareholders who are exempt from dividend 
tax is 2,4 cents and 3,0 cents per share, respectively. The income tax number of the company 
is 9078488153.

The total dividend payable in the year under review was therefore 6 cents per share or 

R24 548 975 (2017: 1,5 cents per share or R 3 898 384). 

11. Dividend dates
Last day to trade cum dividend              Tuesday, 12 June 2018
Commence trading ex dividend                Wednesday, 13 June 2018
Record date                                 Friday, 15 June 2018
Payment date                                Monday, 18 June 2018
                    
Shares certificates may not be dematerialised or rematerialised between Wednesday, 

13 June and Friday, 15 June 2018, both dates inclusive.

12. Notice of Annual General Meeting
Notice is hereby given that the eleventh annual general meeting of Insimbi will be held 

at Insimbi' s offices at Stand 359 Crocker Road, Wadeville, Extension 4, Germiston on 

Tuesday, 3 July 2018 at 10:00, to transact the business as stated in the notice of 
annual 
general meeting included in the Integrated Annual Report which will be posted to 

shareholders and on the Company's website today. 

Lastly I would like to extend my gratitude to all our stakeholders, including our 

shareholders, our customers, our suppliers and most importantly the Insimbi family 

without all of whom we would not have achieved everything that we needed to achieve. 

I would also like to thank my Exco and board members for their unwavering support since 

I have taken over as CEO and I hope we are able to build on our relationships going 

forward.

By order of the Board

Frederick Botha
Chief Executive Officer



Directors:              F Botha (Chief Executive Officer)                     
                        AJ de Wet (Chief Financial Officer)
                        C Coombs
                        RI Dickerson* (Chairperson)
                        IP Mogotlane*
                        N Mwale*
                        CS Ntshingila*
                        (*non-executive)
Company Secretary:      TN Kgari
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 2018
                    

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