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Abridged audited results for the year ended 28 February 2019, dividend declaration and notice of AGM
INSIMBI INDUSTRIAL HOLDINGS 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 2019,
DIVIDEND DECLARATION AND NOTICE OF ANNUAL GENERAL MEETING.
FINANCIAL INDICATORS
2019 2018 % change
Revenue (Rm) 4 545 214 3 491 803 30
Net profit (Rm) 45 834 71 160 (35)
Operating profit (Rm) 101 071 127 831 (21)
Earnings per share (cents) 11.93 18.47 (35)
Headline earnings per share (cents) 13.52 18.45 (27)
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months 12 months
to to
28 February 28 February
2019 2018
R'000 R'000
Revenue 4 545 214 3 491 803
Cost of sales (4 164 615) (3 146 379)
Gross profit 380 599 345 424
Other operating income 3 392 1 195
Other operating gains/(losses) (7 468) (1 989)
Other operating expenses (275 452) (216 799)
Operating profit 101 071 127 831
Investment revenue 733 402
Finance costs (32 838) (30 836)
Income from equity-accounted investments 2 047 2 532
Profit before taxation 71 013 99 929
Taxation (25 179) (28 769)
Profit for the year 45 834 71 160
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 45 834 94 476
Profit attributable to:
The owners of the parent 46 647 71 467
Non-controlling interest (813) (307)
Total comprehensive income attributable to:
Owners of the parent 46 647 94 783
Non-controlling interest (813) (307)
EARNINGS AND HEADLINE EARNINGS PER SHARE
Audited Audited
12 months 12 months
to to
28 February 28 February
2019 2018
R'000 R'000
Basic earnings per share is determined by dividing
profit or loss attributable to the ordinary equity
holders of the parent by the weighted average number
of ordinary shares outstanding during the year.
Reconciliation of profit or loss for the year
to basic earnings:
Profit for the year 45 834 71 160
Loss for the year attributable to non-controlling interest 813 307
Profit for the year attributable to equity holders 46 647 71 467
Reconciliation of weighted average number of shares:
Weighted number of shares in issue at the end of the year 415 311 410 000
Less: Weighted number of treasury shares held in a
subsidiary at the end of the period (24 388) (23 112)
390 923 368 888
Headline earnings are determined by adjusting basic
earnings by excluding separately identifiable
remeasurement items. Headline earnings are presented after
tax and non-controlling interest.
Reconciliation between earnings and headline earnings:
Basic earnings, adjusted for: 46 647 71 467
- (Profit) or loss on sale/scrapping of assets 96 (99)
- Gain on bargain purchase (2 810) -
- Impairment of goodwill 8 938 -
Headline earnings 52 871 71 368
Earnings per share (cents) 11,93 18,47
Headline earnings per share (cents) 13,52 18,45
Diluted earnings per share (cents) 11,49 17,73
Diluted headline earnings per (cents) 13,03 17,71
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
12 months 12 months
to to
28 February 28 February
2019 2018
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 362 842 270 514
Goodwill 165 048 107 591
Intangible assets 13 220 11 525
Investments in joint ventures 863 577
Lease receivable 3 603 -
Deferred taxation 4 240 3 388
549 816 393 595
Current assets
Inventories 168 006 147 944
Lease receivable 113 -
Trade and other receivables 410 014 293 643
Current taxation receivable 5 326 5 312
Cash and cash equivalents 33 579 32 408
617 038 479 307
Total assets 1 166 854 872 902
Equity and Liabilities
Equity
Share capital 197 871 177 305
Reserves 48 417 47 108
Retained income 199 638 174 454
Non-controlling interest (1 268) (565)
444 658 398 302
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (cont)
Audited Audited
12 months 12 months
to to
28 February 28 February
2019 2018
R'000 R'000
Liabilities
Non-current liabilities
Loans from shareholders - 2 275
Financial liabilities at amortised cost 254 178 166 202
Lease liabilities 21 154 -
Deferred taxation 36 199 28 966
Contingent consideration 5 747 -
317 278 197 443
Current Liabilities
Loans from shareholders 1 682 -
Trade and other payables 247 751 192 055
Financial liabilities at amortised cost 68 278 72 295
Financial liabilities at fair value 945 2 697
Lease liabilities 2 519 -
Bank overdraft 83 743 10 110
404 918 277 157
Total liabilities 722 196 474 600
Total equity and liabilities 1 166 854 872 902
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months 12 months
to to
28 February 28 February
2019 2018
R'000 R'000
Cash flow from operating activities
Cash generated from operations 45 198 164 377
Interest income 733 402
Finance costs (32 838) (30 836)
Tax paid (27 860) (32 064)
Net cash from operating activities (14 767) 101 879
Cash flow from investing activities
Purchase of property, plant and equipment (9 555) (1 613)
Sale of property, plant and equipment 130 559
Expenditure on intangible assets under development (2 166) -
Business combinations (net of cash acquired) (66 662) -
Dividend from investment in joint venture 1 760 2 636
Net cash from investing activities (76 493) 1 582
Cash flow from financing activities
Purchase of treasury shares (665) (1 184)
Proceeds from other financial liabilities 135 000 4 500
Repayment of other financial liabilities (94 051) (69 772)
Repayment of shareholder's loan (593) (216)
Dividends paid (20 044) (12 283)
Principal elements of lease payments (848) -
Net cash from financing activities 18 799 (78 955)
Total cash movement for the year (72 462) 24 506
Cash at the beginning of the year 22 298 (2 479)
Effect of exchange rate movement on cash balances - 271
Total cash at end of the year (50 164) 22 298
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Total
capital and Treasury share
premium shares capital
R'000 R'000 R'000
Balance at 1 March 2017 196 704 (18 215) 178 489
Profit for the year - - -
Total other comprehensive income for the year - - -
Shares issued - - -
Purchase of own/ treasury shares - (1 184) (1 184)
Dividends - - -
Total changes - (1 184) (1 184)
Balance at 28 February 2018 196 704 (19 399) 177 305
Profit for the year - - -
Transactions with non-controlling interests - - -
Shares issued* 21 231 - 21 231
Purchase of own/ treasury shares - (665) (665)
Dividends - - -
Total changes 21 231 (665) 20 566
Balance at 28 February 2019 217 935 (20 064) 197 871
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 2017 21 503 980 116 579
Profit for the year - 1 309 70 158
Total other comprehensive income for the year 23 316 - -
Shares issued - - -
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
Profit for the year - 1 309 45 338
Transactions with non-controlling interests - - (110)
Shares issued* - - -
Purchase of own/ treasury shares - - -
Dividends - - (20 044)
Total changes - 1 309 25 184
Balance at 28 February 2019 44 819 3 598 199 638
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont)
Non-
controlling Total
Interest Equity
R'000 R'000
Balance at 1 March 2017 (258) 317 293
Profit for the year (307) 71 160
Total other comprehensive income for the year - 23 316
Shares issued - -
Purchase of own/ treasury shares - (1 184)
Dividends - (12 283)
Total changes (307) 81 009
Balance at 28 February 2018 (565) 398 302
Profit for the year (813) 45 834
Transactions with non-controlling interests 110 -
Shares issued* - 21 231
Purchase of own/ treasury shares - (665)
Dividends - (20 044)
Total changes (703) 46 356
Balance at 28 February 2019 (1 268) 444 658
SEGMENT REPORT
Non-
ferrous Ferrous Refractory Plastics Total
2019 R'000 R'000 R'000 R'000 R'000
Revenue
Sale of goods - Local 3 122 163 539 297 115 526 51 248 3 828 234
Sale of goods - Exports 675 824 141 8 039 - 684 004
Rendering of services
- transport and insurance 32 023 672 256 25 32 976
3 830 010 540 110 123 821 51 273 4 545 214
Cost of sales 3 532 677 490 062 106 631 35 245 4 164 615
Gross profit 297 333 50 048 17 190 16 028 380 599
Other income 3 096 291 - 5 3 392
Profit before operating
and administration expenses 300 429 50 339 17 190 16 033 383 991
Operating and administration
expenses and operating losses
Communication 2 658 93 44 288 3 083
Employment costs 121 293 8 191 2 314 10 162 141 960
Motor vehicle expenses 25 282 2 984 197 825 29 288
Occupancy 22 309 1 314 - 6 364 29 987
Other expenses 57 546 2 817 742 17 496 78 601
229 088 15 399 3 297 35 136 282 919
Operating profit 71 341 34 940 13 893 (19 103) 101 071
SEGMENT REPORT (cont)
Non-
ferrous Ferrous Refractory Plastics Total
2018 R'000 R'000 R'000 R'000 R'000
Revenue
Sale of goods - Local 2 416 178 431 761 100 689 72 533 3 021 161
Sale of goods - Exports 462 462 141 8 039 - 470 642
Rendering of services
- transport and insurance - - - - -
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 and operating losses
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
Occupancy 15 870 2 464 - 5 923 24 257
Other expenses 45 963 1 834 474 5 217 53 488
174 884 17 810 2 443 23 651 218 788
Operating profit 92 837 23 966 11 675 (647) 127 831
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 2019.
1. Basis of Preparation and Accounting Policies
The results for the year ended 28 February 2019 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, the Companies Act, No. 71 of 2008, and the JSE Listings
Requirements. The principle accounting policies applied by the group in the abridged
consolidated financial results for the year ended 28 February 2019 are consistent with
those applied in the consolidated financial statements for the year ended 28 February 2019.
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 2019. The results have been audited by
PricewaterhouseCoopers Inc. and 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.
The group acquired Minerals2Metals Proprietary Limited, an aluminothermic powder and ultra-
low Ferro Chrome production plant in Emalahleni in May 2018. Group Wreck International
Non-Ferrous Proprietary Limited, a metal recycling business in KwaZulu-Natal was acquired
in November 2018.
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 and Group Wreck International Non-Ferrous ("Group Wreck") in
Phoenix and Queensburgh in KwaZulu-Natal. 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, Democratic Republic of Congo, Ghana, Kenya, Malawi,
Mozambique, Namibia, Nigeria, Republic of the Congo, Rwanda, Swaziland, Tanzania, Uganda,
Zambia and Zimbabwe), Europe (Germany, Spain, Sweden and Switzerland) and the USA.
3. Financial Review
When measured against the economic and political volatility which persisted across most of
our markets the group delivered a satisfactory financial performance in an economy which
failed to record any meaningful growth.
Group Revenue increased by 30,1% from R3,5 billion to R4,5 billion. Gross profit however
only increased by 10.1% to R380.6 million from R345,4 million as a result of subdued
margins in the metal recycling and aluminium smelter businesses. The international trade
stand-off between the United States and China had a negative effect on metals pricing on
the London Metals Exchange and together with the push into ferrous metals saw margins down
by 1,9% at AMR. Aluminium margins were down by 0,5% for the much the same reason.
Operating profit of R101,1 million was achieved compared to R127,8 million in the previous
year. Operating expenses increased by 27,1% of which 7,9% is attributable to the
incorporation of Group Wreck. The above inflationary increase is due to, amongst others,
the following:
- A number of acquisition targets were pursued incurring due diligence costs.
- We changed bankers and raised acquisition funding with once-off facility fees.
- The petrol price increases had a major impact on road transportation costs.
- Increased electricity and water tariffs.
- Improving our computer networks to avert cyber-attacks.
Finance costs increased from R30,8 million to R32.8 mainly as a result of finance raised
for the acquisition of Group Wreck. The acquired company is servicing the loan from income
generated in the business. The group minimizes interest paid externally by redistributing
funds through a centralized treasury function.
Group Wreck was acquired at a Goodwill of R66,4 million. The vendors have warranted
aggregate Profit before Taxation of R75 million in the first three years post acquisition.
A further consideration will become payable should this be exceeded and if this is not met
a proportion of the purchase price will be recouped.
Insimbi Plastics had a difficult trading year which was exacerbated by the extended strike
in the plastics industry, the goodwill of R8,9 million attributed to Insimbi Plastics has
been impaired during the current year.
Inventories and Trade Receivables have increased in line with the higher revenue. Trade
receivables remain well managed and an impairment of only 1.1% (2018: 1,3%) was provided
for.
Cash generated from operations decreased from R164,4 million in 2018 to R45,2 million due
to an increase in working capital and the lower profit before taxation. A number of trade
receivables were only collected after year end. The net bank overdraft at year end was
R50,2 million compared to R22,3 million cash in bank for the comparative period.
The debt to equity ratio at year end was 84% (2018: 55%). Borrowings were increased to
finance the Group Wreck and Minerals2Metals acquisitions.
4. Market and Prospects
We look forward to political and economic stability once various global uncertainties,
including Brexit and the US:China trade impasse have been resolved. Against this uncertain
background, our new acquisitions are being consolidated and should contribute to another
successful year.
Lastly, despite the perceived success of the 2019 elections and the cautious optimism that
is gradually gathering momentum, it is not going to miraculously solve our socio-economic
challenges and Mr. Ramaphosa and his new cabinet have their work cut out for them to ensure
that sustainable and acceptable economic growth occurs as soon as possible to ensure that
our country returns to prosperity, which will in turn, encourage the local and foreign
investment we so desperately need.
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 no changes to the board during the year under review:
? In accordance with the company's memorandum of incorporation Mr. N Mwale retires by
rotation at the forthcoming annual general meeting but, being eligible, offers himself for
re-election.
8. Company secretary
Mr. TN Kgari was appointed on 1 April 2018.
9. Authorised and issued share capital
The issued share capital is 428 461 538 shares. 18 461 538 shares were issued in part
settlement of the Group Wreck acquisition.
10. Dividends
An interim dividend number 17 of 2,0 cents per share (2018: 3,0 cents) or R8 172 607
(2018: R12 283 079) was declared on 27 September 2018 for the half-year ended
31 August 2018. The board has elected to retain this conservative approach and has opted
to declare a final dividend of 2,0 cents per share (2018: 3,0 cents).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 1.6 cents and
2 cents per share, respectively. The Income tax number of the company is: 9078488153. There
are 428 461 538 million ordinary shares (excluding 1 616 572 Treasury shares) in issue; the
total dividend amount payable is R8 496 899.
11. Dividend dates
Last day to trade cum dividend Tuesday, 9 July 2019
Commence trading ex dividend Wednesday, 10 July 2019
Record date Friday, 12 July 2019
Payment date Monday, 15 July 2019
Shares certificates may not be dematerialised or rematerialised between Wednesday, 10 July
and Friday, 12 July 2019, both dates inclusive.
12. Notice of Annual General Meeting
Notice is hereby given that the twelfth annual general meeting of Insimbi Industrial
Holdings Limited will be held at Insimbi's offices at Stand 359 Crocker Road, Wadeville,
Extension 4, Germiston on Thursday, 4 July 2019 at 10:00.
In conclusion, I would like to thank all our stakeholders including our shareholders, our
customers, our suppliers and our employees without whom, we would not exist. I would also
like to thank my Exco and Board members for their continued support and guidance in a very
difficult financial year, I am extremely optimistic about what lies ahead for us in the
2020 financial year, not just from an Insimbi perspective but as a South African. As
Insimbi, we have set a very strong platform over the last 3 years from which to prosper and
grow. I can think of no better place to be, despite the massive challenges we face, and we
remain committed to playing our part as a corporate citizen of this country. This includes
our commitment to good corporate and fiscal governance but equally importantly,
transformation and we will continue to strive to reach a minimum B-BBEE Level 4 at each
entity.
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: http://www.insimbi-group.co.za
Sponsor: Bridge Capital Advisors Proprietary Limited
Transfer Secretaries: Computershare Investor Services Proprietary Limited
Auditors: PricewaterhouseCoopers Inc.
29 May 2019
Date: 29/05/2019 03:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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