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INSIMBI INDUSTRIAL HOLDINGS LIMITED - Abridged audited results for the year ended 28 February 2019, dividend declaration and notice of AGM

Release Date: 29/05/2019 15:50
Code(s): ISB     PDF:  
 
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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
   

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