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Interim Unreviewed Consolidated Condensed Financial Resutls at 31 August 2018 and Interim Dividend Declaration
INSIMBI INDUSTRIAL HOLDINGS LTD
(Formerly Insimbi Refractory and Alloy Supplies Limited)
(Incorporated in the Republic of South Africa)
(Registration No: 2002/029821/06)
Share code: ISB & ISIN code: ZAE000116828
Insimbi Industrial Holdings Limited (Previously "Insimbi Refractory and Alloy Supplies Limited")
("Insimbi" or "the Company" or "the Group")
UNREVIEWED CONSOLIDATED CONDENSED FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2018 AND INTERIM DIVIDEND DECLARATION
Insimbi is a group of companies that provides resource-based supplies to a diversified range of
industrial customers. Insimbi offers ferrous and non-ferrous alloys; refractory and foundry materials;
plastic blowmoulding 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 consolidated financial results for the six months ended 31 August 2018.
Key Financial Highlights when compared to the 6 months ended 31 August 2017:
- Revenue increased by 28% to R2.14 billion.
- Gross profit increased by 1% to R181.66 million
- EPS decreased by 24% to 9.12 cents per share
- HEPS decreased by 29% to 8.47 cents per share
- NAV and tangible NAV increased by 18% and 24% to 103 cps and 74 cps respectively
- Finance costs decreased by 12% to R14.47 million
- Debt: equity ratio has improved from 59% to 56%
- Trading and operational outlook for the remainder of the financial year is positive
- The Group has declared a gross interim dividend of 2 cents per share for the period ended
31 August 2018.
CEO of Insimbi, Fred Botha, commented:
This first half of the financial year proved to be very much one of 2 distinct quarters, the 1st quarter
to end May 2018 was rather disappointing with significant "hangover" from the strong ZAR and resultant
pressure on margins. The 2nd quarter ended August 2018, by contrast has been phenomenal, especially
with regards to revenues which peaked at R487 million in the month of August 2018. Margins have also
shown signs of recovery on the back of a weaker currency and greater focus in all operational units.
Despite our best quarter ever and despite achieving revenue growth of 28% (R2.1 billion vs R1.7 billion)
compared to previous interim period, the downward pressure on margins particularly in the 1st quarter
coupled with an 18% increase in operating expenses for the same period, has resulted in a decline in
earnings for the interim period ended 31 August 2018. These have increased due to professional fees
relating to new acquisitions, the increase in fuel price and the increase in cost of utilities and
are explained in more detail in the Financial Review below.
From an operational perspective, Insimbi Alloy Supplies ("IAS"), Insimbi Aluminium Alloys ("IAA"),
Metlite Alloys ("ML") and Amalgamated Metals Group ("AMGH") are performing very well in a difficult
economic climate and Insimbi Plastics ("IP") which has undergone some fairly drastic restructuring,
I am confident it is now on the path to sustainability.
We welcome the economic stimulus initiatives recently announced by President Ramaphosa, especially
the R400 billion to be spent on infrastructure upgrades which will give our target markets and
customers a well needed and deserved boost which in turn will impact on our full spectrum of
operations. As the saying goes "the devil is in the detail" and I hope that the implementation of
these initiatives is efficient, effective and timeous.
OPERATIONAL OVERVIEW
The aluminium plants ("IAA" and "ML") are performing well operationally and volumes and margins
improved in the 2nd quarter but remain under pressure. The weaker rand has improved export
opportunities and we have been operating consistently at over 80% of production capacity which is
pleasing. Furthermore, we will be commissioning new plant and equipment by end October 2018, this
will enable us to maximise margins.
Our ferro-alloy and refractory operation ("IAS") is having a much improved year and is in fact,
experiencing itsbest year since about 2009. This operation in particular, stands to benefit from
Mr Ramaphosa's recently announced stimulus initiative as it is very dependent on infrastructure
"spend".
The plastics operation ("IP") definitely showed some improvement in the 2nd quarter and revenues and
margins improved as a result. The plastics industry is also negatively impacted by the autumn and
winter period so revenues were lower than budgeted, compounded by the recessionary climate especially
in the agriculture sector. A number of our competitors have closed or downsized and we are experiencing
an increase in demand for our containers.
Despite a difficult 1st quarter, the metals recycling business ("AMGH") rallied strongly in the 2nd
quarter, buoyed by the weaker ZAR and increased volumes. Copper prices have been a bit erratic and
this has kept margins under pressure but there has been a marked improvement.
Fred Botha confirmed that the business is poised for a better second half of the year and all of the
underlying businesses that make up Insimbi are in a good position to take advantage of opportunities
as they arise.
FINANCIAL OVERVIEW
Group revenue for the period is R 2.14 billion, an increase of 28% or R472 million on the comparative
period ended 31 August 2017. As a result of the lower margins in AMGH, IAA and ML, overall gross
margins have decreased from 11% to 8.5% however gross profit has increased by 1% from R179.8 million
to R181.7 million.
Group operating profit decreased by 20% to R62.1 million compared to R77.3 million in the comparative
period ended 31 August 2017. This is due to an increase of 18% in Group operating expenses when
compared to the prior period, largely attributable to the following:
- Professional fees relating to acquisitions of approximately R3.0 million;
- Increased fuel prices resulted in additional cost of approximately R1.0 million;
- Increased electricity and water tariffs resulted in additional costs of approximately R1.2 million;
- Increased data and IT costs incurred to improve data security and systems integrity of approximately
R1.0 million including full 3rd Party systems review;
- Provision for Doubtful Debts of R0.7 million versus a write-back in previous period of R0.7 million
resulting in a R1.4 million increase on said provision; and
- Increased Repair and Maintenance costs of approximately R1.3 million related to the relocation and
recommissioning of certain plant and equipment.
All companies within the Group are, however, committed to cutting operating costs where possible.
Group finance costs for the period have decreased from R16.4 million to R14.5 million. This is due to
the fact that the Group is now maximising on a centralised treasury function, whereby funds are
redistributed to minimise the interest paid externally.
Due to a very difficult 1st financial quarter, Insimbi achieved Group EPS of 9.12 and HEPS of 8.47 cents
per share respectively compared to 11.97 and 11.95 cents per share in the previous comparative period.
This equates to a decrease of 24% and 29% EPS and HEPS respectively. It is worth noting that 80% of
our year to date interim operating profit was achieved in the second financial quarter and only 20% in
the first financial quarter.
Net cash flow from operating activities decreased from R88.6 million to R9.1 million, of which
R41.5 million is attributable to an increase in the net working capital of the Group resulting from the
increased activity. Unfortunately, the end of the financial period also fell on a weekend and so many
of our debtors only paid on Monday, 3rd September which has artificially "skewed" our cashflow generated
figure.
Borrowings were reduced by R25 million in the 6 months ended 31 August 2018 and this has resulted in a
net cash decrease of R32 million to R10.0 million net overdraft from R22 million cash on hand at
year-end.
PROSPECTS
As announced in August 2018 we have reached agreement with Group Wreck International Non-Ferrous (Pty)
Ltd ("GW")whereby Insimbi will acquire control of the company which operates in KwaZulu-Natal. The
transaction is subject to certain conditions precedent including Competitions Commission approval.
This transaction will be value accretive and will provide geographic expansion of the recycling
business as well as close proximity to export harbours. We anticipate significant synergies between
AMGH and GW and an improved supply of aluminium to IAA. The initial transaction consideration is an
amount of R120 million. An additional deferred amount ("agterskot") potentially payable in year 3 and
4 post acquisition limited to a maximum of R30 million, based on the achievement of certain profit
targets. The initial consideration of R120 million will be settled as follows:
- Cash: R73 million;
- ISB shares: 18 461 538 shares to be issued at R1.30 per share, to the value of R24 million in total;
and
- Vendor loans: to the value of R23 million, repayable after a period of 3 years, bearing interest at
a rate of prime plus 2%. Repayment of the capital amount may be extended to a maximum of 5 years,
at the option of the Group.
In May 2018 we acquired an operation in Witbank that will enable us to enter the aluminothermic powder
and Ultra Low Ferrochrome (UlCFeCr) market. We are in the process of recommissioning the plant and
anticipate starting production of aluminium powder products in October 2018 which will also increase
volumes of aluminium processed in the existing plants of IAA and ML.
Although the economic and policy environment remains very challenging, we are hopeful that the 3rd
quarter will be a repeat of the second quarter performance. The fourth quarter is usually quieter due
to the festive season shutdowns.
Any forward looking statements included in this announcement have not been reviewed nor reported on by
the Company's auditors.
DIVIDEND DECLARATION
An interim gross dividend of 2 cents per share has been declared on 17 October 2018. There are
410 000 000 ordinary shares in issue at announcement date, of which 1 369 672 are held in treasury
and do not participate in dividends, 23 106 915 shares are held by the ESOP's and are participating
according to the dividend policy. The total dividend amount payable is R 8 172 607 (2017: R 12 285 179).
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%. The dividend payable to shareholders who are subject to dividend tax and
shareholders who are exempt from dividend tax is 1.6 cents and 2 cents per share, respectively. The
income tax number of the Company is 9078488153.
The salient dates applicable to the interim dividend are as follows:
Last day to trade cum dividend Tuesday, 13 November 2018
First day to trade ex dividend Wednesday, 14 November 2018
Record date Friday, 16 November 2018
Payment date Monday, 19 November 2018
No share certificates will be dematerialised or rematerialised between Wednesday, 14 November 2018
and Friday, 16 November 2018, both days inclusive.
Shares repurchased by a subsidiary since the year end and held in treasury amounted to 371 777
(2017: 356 313), which brings the total number of treasury shares to 24 476 587 (2017: 23 462 048).
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unreviewed Unreviewed Audited
as at as at as at
31 August 31 August 28 February
R'000 2018 2017 2018
Assets
Non-current assets
Property, plant and equipment 298 524 236 526 270 514
Goodwill 107 591 107 591 107 591
Intangible assets 11 211 11 756 11 525
Investments in joint ventures 844 1 190 577
Deferred taxation asset 3 576 6 892 3 388
421 746 363 955 393 595
Current assets
Inventories 142 382 149 187 147 944
Trade and other receivables 305 706 292 594 293 643
Derivative financial assets - at fair value 2 295 1 138 -
Current taxation receivable - - 5 312
Cash and cash resources 25 350 25 629 32 408
475 733 468 548 479 307
Total assets 897 479 832 503 872 902
Equity and liabilities
Equity
Share capital 196 704 196 704 196 704
Treasury shares (19 927) (18 580) (19 399)
Reserves 44 819 21 503 44 819
Share based payment reserve 2 933 1 634 2 289
Retained earnings 198 187 162 251 174 454
Non-controlling interest (1 127) (124) (565)
421 589 363 388 398 302
Liabilities
Non-current liabilities
Loans from shareholders 1 682 1 630 2 275
Other financial liabilities 172 239 172 611 166 202
Deferred taxation 29 377 26 082 28 966
203 298 200 323 197 443
Current liabilities
Other financial liabilities
- through profit or loss 55 212 29 427 72 295
Other financial liabilities
- at fair value - - 2 697
Current taxation payable 2 781 - -
Trade and other payables 179 022 205 714 192 055
Bank overdraft 35 577 33 649 10 110
272 592 268 791 277 157
Total liabilities 475 890 469 114 474 600
Total equity and liabilities 897 479 832 503 872 902
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unreviewed Unreviewed Audited
as at as at as at
31 August 31 August 28 February
R'000 2018 2017 2018
Revenue 2 138 007 1 666 368 3 491 803
Cost of sales (1 956 345) (1 486 617) (3 146 379)
Gross profit 181 662 179 751 345 424
Other income 5 078 3 370 1 195
Operating expenses (124 631) (105 860) (218 788)
Operating profit 62 109 77 261 127 831
Investment revenue 583 162 402
Income from equity accounted investments 1 333 1 282 2 532
Finance cost (14 477) (16 408) (30 836)
Profit before taxation 49 548 62 297 99 929
Taxation (14 809) (15 837) (28 769)
Profit for the year 34 739 46 460 71 160
Other comprehensive income for the year
net of taxation - - 23 316
Total comprehensive income for the year 34 739 46 460 94 476
Total comprehensive income attributable to:
Owners of the parent 35 301 46 326 94 783
Non-controlling interest (562) 134 (307)
34 739 46 460 94 476
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 2017
(unreviewed) - 196 704 (18 580) 21 503 162 251 1 634 (124) 363 388
Total comprehensive
income - - - 23 316 24 486 655 (441) 48 016
Dividend paid - - - - (12 283) - - (12 283)
Net movement in treasury
shares - - (819) - - - - (819)
Balance at
28 February 2018
(audited) - 196 704 (19 399) 44 819 174 454 2 289 (565) 398 302
Total comprehensive income - - - - 35 300 644 (562) 35 482
Dividends paid - - - - (11 567) - - (11 567)
Net movement in treasury
shares - - (528) - - - - (528)
Balance at
31 August 2018
(unreviewed) - 196 704 (19 927) 44 819 198 187 2 933 (1 127) 421 589
CONSOLIDATED STATEMENT OF CASH FLOWS
Unreviewed Unreviewed Audited
as at as at as at
31 August 31 August 28 February
R'000 2018 2017 2018
Cash flow from operating activities
Cash generated from operations 29 509 116 758 164 377
Investment income 583 162 402
Finance costs (14 477) (16 408) (30 836)
Taxation paid (6 493) (11 954) (32 064)
Net cash flow from operating activities 9 122 88 558 101 879
Cash flow from investing activities
Purchase of property, plant and equipment (5 553) (6 115) (1 613)
Proceeds on disposal of property,
plant and equipment 496 1 446 559
Cash received from joint venture 1 067 762 2 636
Net cash from investing activities (3 990) (3 907) 1 582
Cash flow from financing activities
Proceeds from loan funding - 5 334 4 500
Repayment of other financial liabilities (24 970) (94 305) (69 772)
Repayment of shareholder's loan (593) (861) (216)
Dividends paid (11 567) - (12 283)
Sale/(repurchase) of treasury shares (527) (365) (1 184)
Net cash outflow from financing activities (37 657) (90 197) (78 955)
Net movement in cash for the period/year (32 525) (5 547) 24 506
Effect of exchange rate movement on cash - 6 (2 479)
Cash and cash equivalents at the beginning
of the period/year 22 298 (2 479) 271
Cash and cash equivalents at the end of
the period/year (10 227) (8 020) 22 298
CONDENSED SEGMENT REPORT
Unreviewed Unreviewed Audited
as at as at as at
31 August 31 August 28 February
R'000 2018 2017 2018
Revenue by segment
Non-Ferrous 1 750 082 1 405 227 2 878 640
Ferrous 302 195 171 450 431 902
Refractory 56 006 54 422 108 728
Plastics 29 724 35 268 72 533
2 138 007 1 666 368 3 491 803
Gross profit by segment
Non-Ferrous 134 716 140 839 266 526
Ferrous 28 194 17 980 41 776
Refractory 8 263 6 977 14 118
Plastics 10 489 13 955 23 004
181 662 179 751 345 424
Operating profit by segment
Non-Ferrous 40 349 57 393 92 837
Ferrous 18 399 11 861 23 966
Refractory 6 574 6 067 11 675
Plastics (3 213) 1 940 (647)
62 109 77 261 127 831
SALIENT FEATURES
Unreviewed Unreviewed Audited
as at as at as at
31 August 31 August 28 February
R'000 2018 2017 2018
Basic earnings per share
From continuing operations (cents per share) 9.12 11.97 18.47
Number of weighted shares in issue at
the end of the period/year ('000) 410 000 410 000 410 000
Less: treasury shares held in a subsidiary
at the end of the year ('000) (23 113) (23 108) (23 112)
386 887 386 892 386 888
Reconciliation of headline earnings and
diluted headlines earnings
Profit attributable to owners of
the parent (R'000) 35 301 46 326 71 467
Adjusted for profit on sale of property,
plant and equipment, net of tax (R'000) (234) (111) (99)
Gain on bargain purchase (R'000) (2 316) - -
Headline earnings for the Group (R'000) 32 751 46 216 71 368
Headline earnings per share (cents) 8.47 11.95 18.45
Reconciliation of number of shares for
diluted earnings per share
Weighted average number of ordinary shares
in issue ('000) 386 887 386 892 386 888
Adjusted for: Share options ('000) 14 246 17 511 16 173
Weighted average number of ordinary shares
for diluted earnings per share ('000) 401 133 404 404 403 061
Basic earnings per share (cents) 9.12 11.97 18.47
Headline earnings per share (cents) 8.47 11.95 18.45
Diluted earnings per share (cents) 8.80 11.46 17.73
Diluted headlines earnings per share (cents) 8.16 11.43 17.71
Dividends per share 2.00 3.00 6.00
Net asset value per share (cents) 102.83 87.17 97.15
Tangible net asset value per share (cents) 73.85 59.52 68.09
EBITDA 74 274 91 276 151 237
Depreciation 10 832 12 733 20 874
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements for the interim period ended 31 August 2018
have been prepared in accordance with the framework concepts 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 Financial Pronouncements as issued by the
Financial Reporting Standards Council and as a minimum, contain the information required by IAS 34
Interim Financial Reporting, JSE Listings Requirements and the Companies Act of South Africa. The
unaudited condensed consolidated financial statements have been prepared under the supervision of
the Chief Financial Officer, Andre de Wet 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
RI Dickerson F Botha
Chairman Chief Executive Officer
17 October 2018
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: http://www.insimbi-iras.co.za
Sponsor: Bridge Capital Advisors Proprietary Limited
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Auditors: PricewaterhouseCoopers Inc.
Date: 17/10/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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