INSIMBI REFRACTORY AND ALLOY SUPPLIES LIMITED

Transcription

1 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: ZAE ("Insimbi" or "the group" or the company ) ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 29 FEBRUARY 2016, NOTICE OF ANNUAL GENERAL MEETING AND FINAL DIVIDEND DECLARATION FINANCIAL INDICATORS % change Revenue (Rm) (0) Gross Profit (Rm) Operating profit (Rm) Profit before tax (Rm) Attributable earnings (Rm) Headline earnings (Rm) Earnings before interest, tax, depreciation and amortisation (Rm) Earnings per share (cents) 12,43 10,88 14 Headline earnings per share (cents) 12,42 11,27 10 Dividends per share (cents) 4, NAV per share (cents) ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Audited Audited 12 months to 29 February months to 28 February 2015 R 000 R 000 Revenue Cost of sales ( ) ( ) Gross profit Other income Operating expenses (83 219) (72 926) Operating profit Investment revenue Finance costs (8 372) (7 026) Profit before taxation Taxation (7 264) (7 666) Profit for the year Profit attributable to: The owners of the parent Non-controlling interest (561) (313) Other comprehensive income: Items that will be reclassified to profit and loss: Exchange differences on translating foreign - (154) operations Total other comprehensive income - (154) Total comprehensive income Total comprehensive income attributable to:

2 Owners of the parent Non-controlling interest (561) (313) RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS PER SHARE Audited Audited 12 months 12 months to 29 to 28 February February R 000 R 000 Basic attributable earnings per share are calculated by dividing the net profit attributable to the shareholders by the number of shares in issue during the year. Number of shares in issue at the end of the year Less: Weighted average number of treasury shares held in a subsidiary at the end of the year (23 611) (22 982) Headline earnings for the group have been computed as follows: Profit attributable to ordinary shareholders Profit/(loss) on sale of property, plant and (30) 941 equipment Headline earnings for the group Earnings per share (cents) 12,43 10,88 Headline earnings per share (cents) 12,42 11,27 No diluted earnings per share are reflected as there is no dilutive impact on the number of shares in issue.

3 ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Audited As at 29 February Audited As at 28 February R 000 R 000 Assets Non-current assets Property, plant and equipment Goodwill Intangible assets Deferred taxation Current assets Inventories Trade and other receivables Derivative financial assets Current taxation receivable Cash and cash equivalents Total assets Equity and Liabilities Equity Share capital Treasury shares (14 159) (14 766) Reserves Retained income Non controlling interest (2 248) (1 508) Liabilities Non-current liabilities Loans from shareholders Other financial liabilities Deferred taxation Current Liabilities Other financial liabilities Current tax payable Trade and other payables Bank overdraft Total liabilities Total equity and liabilities

4 ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS Audited Audited 12 months to 12 months to 29 February 28 February R 000 R 000 Cash flows from operating activities Cash generated from operations Interest income Finance costs (8 863) (7 167) Tax paid (11 027) (4 381) Net cash generated from operating activities Cash flows from investing activities Purchase of property, plant and equipment (31 443) (4 682) Sale of property, plant and equipment Intangible assets under development (1 708) (1 757) Business combination (8 289) - Net cash from/(utilised in) investing activities (41 226) (6 222) Cash flows from financing activities Proceeds from loan funding Proceeds from shareholders loans Repayment of loans (85 337) (4 042) Sale /(repurchase) of treasury shares 607 (1 327) Dividends paid (10 632) (9 663) Settlement of preference share liability - (3 999) Net cash from financing activities (19 031) Total cash movement for the year (19 055) (19 262) Exchange gains / (losses) on cash Cash at the beginning of the year Total cash at end of the year ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Treasury capital premium shares R 000 R 000 R 000 Balance at 1 March (13 439) Changes in equity Profit for the year Total comprehensive income for the year Purchase of own/treasury shares - - (1 327) Dividends Total changes - - (1 327) Balance at 28 February (14 766) Changes in equity Profit for the year Total comprehensive income for the year Purchase of own/treasury shares Dividends Total changes Balance at 29 February (14 159)

5 ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont) Foreign Revaluation Retained currency translation reserves reserve income R 000 R 000 R 000 Balance at 1 March Changes in equity Profit for the year Total other comprehensive income for the year (154) - - Purchase of own/treasury shares Dividends - - (9 663) Total changes (154) Balance at 28 February Changes in equity Profit for the year Total comprehensive income for the year Purchase of own/treasury shares Dividends - - (10 632) Total changes Balance at 29 February ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (cont) Non controlling Interest Total Equity R 000 R 000 Balance at 1 March 2014 (1 195) Changes in equity Profit for the year (313) Total other comprehensive income for - (154) the year Purchase of own/treasury shares - (1 327) Dividends - (9 663) Total changes (313) Balance at 28 February 2015 (1 508) Changes in equity Profit for the year (561) Non-controlling interest arising on (179) (179) business combination Purchase of own/treasury shares Dividends - (10 632) Total changes (704) Balance at 29 February 2016 (2 248)

6 SEGMENT REPORT Foundry Steel Refractory Plastics Total 2016 R 000 R 000 R 000 R 000 R 000 Revenue Sale of goods Commission Cost of sales ( ) ( ) ( ) (12 527) ( ) Gross profit Other income Profit before operating and administration expenses Operating and administration expenses Communication (1 191) (71) (84) (112) (1 458) Employment costs (40 414) (2 637) (3 765) (3 496) (50 312) Motor vehicle expenses (1 332) (236) (203) (212) (1 983) Other expenses (16 277) (1 405) (1 149) (1 809) (20 640) Occupancy (4 569) (1 505) (1 324) (1 428) (8 826) Operating profit before finance income (14) Foundry Steel Refractory Total 2015 R 000 R 000 R 000 R 000 Revenue Sale of goods Commission Cost of sales ( ) ( ) (86 305) ( ) Gross profit Other income Profit before operating and administration expenses Operating and administration expenses Communication (1 085) (56) (65) (1 207) Employment costs (40 244) (2 166) (3 497) (45 908) Motor vehicle expenses (1 117) (251) (238) (1 607) Other expenses (11 492) (6 132) (259) (17 883) Occupancy (6 321) - - (6 321) Operating profit before finance income

7 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 has determined the operating segments based on the reports reviewed and this is supported by management reporting disciplines, which include monthly variance reporting. Insimbi s performance is monitored continuously and issues arising are addressed at monthly management meetings that have board representation present. Management considers the business from both a geographical and product management perspective. Management assesses the performance of the operating segments based on measures such as gross and operating profit. COMMENTARY The directors of Insimbi are pleased to announce the audited results for the year ended 29 February Basis of Preparation and Accounting Policies The results for the year ended 29 February 2016 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 29 February 2016 are consistent with those applied in the consolidated financial statements for the year ended 28 February 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 29 February 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. These abridged financial statements have been prepared under the supervision of Frederik Botha (CA) SA (Commercial and Financial Director).

8 2. Review of activities Insimbi continues to operate out of our offices in Johannesburg, Durban, and Cape Town and we are actively represented in the Democratic Republic of the Congo and Zimbabwe via our agents there. In addition, we continue to service most sub-saharan and central African countries, as well as certain north, west and east African countries. We are also active in South America, Eastern Europe, certain Middle East countries and the UAE, Japan and Korea as well as India. 3. Financial Review The year under review was challenging mainly due to the global and particularly, the local steel industry s continued decline. The slowdown in local steel production, the business rescue and subsequent closure of Evraz Highveld Steel coupled with the downturn in commodity prices all contributed to nominal decline in revenue R2.9 million or 0.3%. It is estimated that the above challenges contributed to a loss in revenue of approximately R85 million and considering this and all the negative sentiment in the market, the group still managed to produce a solid set of results. Insimbi has responded proactively to the weaker market conditions and implemented certain operating and cost reduction initiatives that had a positive impact on the total performance of the group and although operating expenses are up by 14% or R10 million on our previous corresponding period, when one excludes non-recurring expenses of approximately R4.0 million (mainly Evraz write off) and the operating expenses associated with the acquisition in August 2015 of Polydrum Proprietary Limited of approximately R 7.0 million, the comparative operating expenses have in fact decreased by R 1 million compared to the previous year. The acquisition and integration of Polydrum in August 2015 has been successful although the effect of the severe drought experienced in the latter part of the financial year, which impacted on the agricultural demand for containers, was not anticipated and as a result, it has not performed as expected. It has also experienced some production losses due to erratic electricity supply. We are working on a solar solution to avoid this in the future. The introduction of the two new production lines which

9 were commissioned in February of this year will have a significant impact on this operation in the new financial year. We are especially encouraged by our strong operating cash flow generated during the period under review and very proud that we have consistently generated cash and profits since listing in March Market and Prospects The potential threat of an economic downgrade to the South African economy together with political turmoil within various political parties towards the run-up to the local elections will have a negative impact on the future market sentiment. Higher inflation and higher interest rate will further contribute towards a very slow economic outlook. The steel industry will continue to look to Government for assistance in helping revive the steel market. The negative view on potential growth within the steel industry is having a negative impact on all other businesses supplying into this industry. Infrastructure spend is still very slow and with new cement production facilities coming online the pressure is on cost-cutting, which may have an impact on the Refractory segment s profits in the future. The import tariff introduction on certain cement products from Pakistan introduced late in our previous financial year, has had a positive effect on the demand for locally produced cement but much more needs to be done to lift the industry. We do not expect significant growth in the Foundry segment in the immediate future but it seems like the industry has stabilised and we anticipate that we will see a slight increase in demand towards second half of this financial year. Opportunities will continue to present themselves and Insimbi is prepared and equipped to embrace these opportunities in order to further diversify and grow the group revenue streams, cash flows and profitability. We are confident that 2017 will be another prosperous financial year for the group and we will continue to keep our focus on maintaining our cost base as low as possible, growing our market for the higher margin products and increasing revenues by providing the best service and quality products in our industry.

10 Insimbi expects growth in the short term from the acquisition of Polydrum and its new range of products and we will continue to look for other potential acquisitions that make strategic sense in our goal to further diversify the group in line with our strategy plan. Cash flow and working capital will need to be managed strictly to continue to adapt to the difficulties faced by our customers and suppliers alike but we have been doing this a long time and we have the necessary skills in place to ensure that we optimize this cycle. 5. Post balance sheet events In negotiations before year-end an offer to purchase Erf 453 Meyerton, Ext 3 Township Registration Division IR, The Province of Gauteng in extent 7 003m2 (seven thousand and three square metres) for a consideration of R2.4 million excluding VAT was submitted and accepted. The transfer is expected to be completed within the first three months of the new financial year. At the general meeting held on 3 May 2016, Insimbi shareholders approved the implementation of an employee share participation transaction and a management share participation transaction in terms of which eligible employees will, collectively, obtain an approximate 8.78% indirect shareholding interest in Insimbi. Insimbi are in the process of completing the conditions precedent to implement the transaction. 6. Directors The directors of the company, all of whom are South African citizens, during the year and as at the date of this report are as follows: CF Botha F Botha EP Liechti LY Okeyo PJ Schutte C Shiceka GS Mahlati (resigned effective 31 March 2016) 7. Authorised and issued share capital The authorised share capital is 12 billion shares. Currently there are 260 million shares in issue. Shares repurchased by a subsidiary and held

11 in treasury amounted to shares at year end, which is disclosed as a reduction of equity in the statement of changes in equity. 8. Dividends Interim dividend number 12 of 2 cents per share was declared on 29 September 2015, payable on 26 October 2015 to shareholders registered on 23 October The total payout was R (2015: R ). A final gross dividend of 2.5 cents per share has been declared on 19 May 2016 for the year ended 29 February There are ordinary shares in issue at announcement date, of which are held in treasury and the total dividend amount payable is R (2015 Final Dividend: R ). This is a dividend as defined in the Income Tax Act, 1962, and is payable from income reserves. The South African dividend tax (DT) rate is 15%. The net amount payable to shareholders who are not exempt from DT is cents per share, while it is 2.5 cents per share to those shareholders who are exempt from DT. The income tax reference number of the company is The salient dates applicable to the interim dividend are as follows: Last day to trade cum dividend Thursday, 9 June 2016 First day to trade ex dividend Friday, 10 June 2016 Record date Friday, 17 June 2016 Payment date Monday, 20 June 2016 No share certificates will be dematerialised or rematerialised between Friday, 10 June 2016 and Friday, 17 June 2016, both days inclusive. 9. Litigation The Directors are aware of one possible legal matter whereby a shareholder requested a sale of shares agreement being declared invalid. No provision in relation to this claim has been recognised in these consolidated financial statements, as it is premature to indicate whether a significant liability will arise.

12 10. Notice of Annual General Meeting Notice is hereby given that the annual general meeting of Insimbi Refractory and Alloy Supplies Limited will be held at 359 Crocker Road, Wadeville Ext 4, Germiston on Friday 24 June 2016 at 10:00, to transact the business as stated in the notice of annual general meeting included in the Annual Report which has been posted to shareholders today, 19 May The record date on which shareholders of the company must be registered as such in the company s securities register in order to attend and vote at the annual general meeting is Friday, 17 June 2016, being the voting record date set by the Board of the company used to determine which shareholders are entitled to attend and vote at the annual general meeting. By order of the Board. Pieter Jacobus Schutte Chief Executive Officer Registered office: Stand 359 Crocker Road, Wadeville, Germiston, 1422 Company Secretary: K Holtzhausen Directors: F Botha (Financial and Commercial Director) CF Botha EP Liechti PJ Schutte (Chief Executive Officer) L Okeyo* (Chairperson) C Shiceka* (* non-executive) Sponsor: Bridge Capital Advisors Proprietary Limited

13 Transfer Secretaries: Computershare Investor Services Proprietary Limited 19 May 2016