UNAUDITED CONSOLIDATED
INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
CONDENSED CONSOLIDATED STATEMEN...
ALERT STEEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration Number: 2003/005144/06 JSE Code: AE...
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Alert Steel Holdings Ltd HY 2014 results

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Alert Steel Holdings Ltd HY 2014 results

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Transcript of " Alert Steel Holdings Ltd HY 2014 results"

  1. 1. UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 Continuing operations Revenue 404 930 374 233 Cost of sales (320 085) (298 103) Gross profit 84 845 76 130 Other income 1 826 1 187 Selling, distribution and admin expenses (115 587) (97 100) Results from operating activities (28 916) (19 783) Finance income 3 – Finance costs (6 809) (8 675) Loss before taxation (35 722) (28 458) Taxation – – Loss from continuing operations (35 722) (28 458) Profit from discontinued operations – 484 Loss and total comprehensive income for the period (35 722) (27 974) Loss attributable to: Equity holders of Alert Steel Holdings Ltd (36 011) (27 675) Non-controlling interest 289 (299) Weighted average shares in issue on which earnings are based (‘000) 52 000 44 546 Diluted weighted average shares in issue on which earnings are based (‘000) 52 000 44 622 Basic loss per share (cents) (69,3) (62,1) – Continuing operations (69,3) (62,1) – Discontinued operations – – Diluted loss per share (cents) (69,3) (62,0) – Continuing operations (69,3) (62,0) – Discontinued operations – – HEADLINE EARNINGS Reconciliation of loss and headline loss for the period Loss attributable to equity holders (36 011) (27 675) Impairment of goodwill 5 720 – (Profit)/loss on disposal of property, plant and equipment (1 488) 147 Loss on sale of business – 378 Tax effect – – Headline loss attributable to equity holders (31 779) (27 150) Headline loss per share (cents) (61,1) (60,9) – Continuing operations (61,1) (60,9) – Discontinued operations – – Diluted headline loss per share (cents) (61,1) (60,8) – Continuing operations (61,1) (60,8) – Discontinued operations – – CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the period ended Unaudited Restated December December 2013 2012 Notes R’000 R’000 Cash used in operating activities 3 (3 820) (13 289) Cash (used in)/from investing activities 3 (23 400) 11 677 Cash from financing activities 3 33 873 1 430 Increase/(decrease) in cash and cash equivalents 6 653 (182) Cash and cash equivalents at the beginning of the period 5 636 (19 700) Cash and cash equivalents at the end of the period 12 289 (19 882) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at Unaudited Restated December June 2013 2013 Notes R’000 R’000 ASSETS Non-current assets 71 617 62 130 Property, plant and equipment 71 617 56 410 Goodwill – 5 720 Current assets 189 651 174 544 Inventories 143 612 120 133 Trade and other receivables 33 549 48 569 Taxation receivable 201 201 Cash and cash equivalents 12 289 5 641 Assets held for sale – 294 Total assets 261 268 236 968 EQUITY AND LIABILITIES Total equity (59 382) (23 660) Equity attributable to owners of the company (59 572) (23 561) Non-controlling interest 190 (99) Non-current liabilities 5 601 141 143 Loans and borrowings 2 – 136 810 Straight-lining lease accrual 5 601 4 333 Current liabilities 315 049 119 485 Loans and borrowings 2 177 459 – Provisions – 1 224 Straight-lining lease accrual 562 550 Trade and other payables 137 028 117 711 Total equity and liabilities 261 268 236 968 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 Balance at the beginning of the period (23 660) (2 148) Shares issued – 29 887 Loss and total comprehensive income for the period (35 722) (27 974) Balance at the end of the period (59 382) (235) CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 External revenues Branches 333 860 333 212 Containers and Express Stores 71 070 41 021 404 930 374 233 Reportable segment loss before tax Branches (39 776) (32 313) Containers and Express Stores 4 054 3 855 (35 722) (28 458) As at Unaudited Restated December June 2013 2013 R’000 R’000 Segment assets Branches 227 959 210 717 Containers and Express Stores 33 309 26 251 261 268 236 968 Segment liabilities Branches 320 650 260 628 320 650 260 628 NOTES TO THE CONDENSED consolidated interim FINANCIAL RESULTS 1. Basis of preparation and accounting policies The condensed consolidated unaudited interim financial results for the six months ended 31 December 2013 have been prepared in accordance with IAS34 Interim Financial Reporting, the listing requirements of the JSE Limited, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act. The accounting policies applied are consistent with those applied for the year ended 30 June 2013 and are in terms of International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board except for the change in accounting policy as set out below. The condensed consolidated interim financial results have been prepared on the historic cost convention, except for certain financial instruments, which are stated at fair value and are presented in Rands rounded to the nearest thousand (R’000). Change in accounting policies Alert Steel has adopted the new suite of consolidation standards: IFRS 10: Consolidated Financial Statements (IFRS 10), IFRS 11: Joint Agreements (IFRS 11), IFRS 12: Disclosure of Interests in Other Entities, IAS 27: Separate Financial Statements and IAS 28: Investment in Associates and Joint Ventures, which all became effective in the interim period ended 31 December 2013. As a result of adopting IFRS 10, Alert Steel has changed its accounting policy for evaluating control over its investees. IFRS 10 introduces a new control model that is applicable to all investees, by focusing on whether Alert Steel has power over an investee, exposure or rights to variable returns from its involvement with the investee and ability to use its power to affect those returns. Alert Steel has re-evaluated its involvement in its joint ventures with Alert Steel Tshwane Proprietary Limited. Alert Steel Tshwane Proprietary Limited has been reclassified from a jointly controlled entity that was previously accounted for using the equity method to a proportionately consolidated subsidiary. As required by IFRS 10, the comparative period has been restated. Please refer to note 5 for more details on the restatement. The condensed consolidated interim financial results for the period ended 31 December 2013 were prepared under the supervision of MSI Gani – CA (SA), Chief Financial Officer. This interim report for the six months ended 31 December 2013 was published on 31 March 2014.
  2. 2. ALERT STEEL HOLDINGS LIMITED Incorporated in the Republic of South Africa Registration Number: 2003/005144/06 JSE Code: AET ISIN: ZAE000092847 OVERVIEW The trading for the six months under review continued to be challenging. The difficult trading conditions experienced in the first half of the calender year in Limpopo Province where the group has a significant presence continued in the second half of the calender year. The group’s split between cash business and credit continues to grow and the cash business has increased to more than 65% of the group’s revenue. We have, however, seen a slowdown in contracting and credit business during the period as a result of tighter credit control. The group changed its focus from rolling out containers to rather concentrating on the opening of express stores. This is to accommodate the re-introduction of hardware and building supplies into the group. The group now comprises of 15 branches, 14 express stores and 31 containers. Selling, distribution and admin costs increased by R18,5 million. Included in this amount are impairment of goodwill (R5,7 million), retrenchments costs (R2,3 million), professional fees relating to corporate actions (R1,6 million), and increased depreciation on property, plant and equipment (R2,3 million). The monthly overhead cost continues to be a key focus area to ensure that Alert becomes the lowest cost supplier in the industry and this will continue to be one of the main focus areas in the next six months. During the period under review, the group introduced hardware and building supplies together with steel and steel-related products to offer customers a complete range of products for the building industry. In line with this decision to expand the product range, the group acquired all the trading stock from BuildKwik Wholesalers Proprietary Limited, a retailer in the building and hardware supplies industry, to the value of R23,6 million during December 2013. The full benefit of these additional stores will come to fruition during the next six months. This resulted in an increase in the group’s inventory holding to R143,6 million. The group also acquired certain fixed assets from BuildKwik amounting to R6,1 million. Other additions to property, plant and equipment included relocating its distribution centre to accommodate the increase in stock holding, refitting most of its major stores with new shelving to accommodate the new product ranges, as well as the opening of new stores. This amounted to R23,0 million. The group’s trade payables have increased as a result of the increase in inventory and also as a result of extended terms negotiated with its suppliers. It is the company’s intention to develop a further 28 stores between now and April 2015, which will be sited in the Greater Johannesburg and Pretoria areas. These areas have an added benefit of limiting the distribution costs as they are very close to the distribution centre in Pretoria. The result of these additional stores will have a positive effect on the financial position of the company. FINANCIAL RESULTS When comparing the results for the six months ended December 2013 to the six months ended December 2012, the following items can be noted: Revenue increased by 8.2% to R404,9 million (December 2012: R374,2 million). The gross profit increased by 11.4% to R84,8 million (December 2012: R76,1 million). Selling, distribution and admin expenses increased by 19.0% to R115,6 million (December 2012: R97,1 million). The loss after tax increased by 27.7% to R35,7 million (December 2012: R28 million). Headline loss increased by 14.7% to R31,8 million (December 2012: R27,4 million). Headline loss per share decreased by 0.27% to 61,1 cents per share (December 2012: 60,9 cents). Loss per share increased by 11.6% to 69.3 cents per share (December 2012: 62.1 cents). SUBSEQUENT EVENTS Subsequent to 31 December 2013, the following events occurred: During 2013, an underwriting agreement was concluded between Cannistraro Investments 282 Proprietary Limited and the company where Cannistraro Investments 282 Proprietary Limited agreed to underwrite an amount of R96 million of a rights issue to be undertaken by the company, subject to the fullfilment of various suspensive conditions. As a result, a renounceable claw-back offer of 48 million claw-back shares of no-par value at a subscription price of 200 cents per claw-back share were offered to the shareholders on 17 February 2014. On 10 March 2014 R96 million of the loans and borrowings were converted to equity as a result of this claw-back offer. In March 2014 , Alert Steel entered into agreement with Mercantile Bank Limited to take over the Southern Palace Investments 265 Proprietary Limited loan of R104 million, which was repayable in October 2014, on the following terms and conditions: – Interest will be charged at prime overdraft lending rate less 2% and will be serviced monthly. – Repayment terms of R45 million in February 2018 and R59 million in February 2020. – The loan is secured by a notarial special and general covering bond. STATEMENT OF GOING CONCERN The group incurred a loss for the period ended 31 December 2013 of R35,7 million (31 December 2012: R28 million) and at that date, the group’s liabilities exceeded its assets by R59,3 million (30 June 2013: R23,5 million). However, had the claw- back offer taken place on 31 December 2013, the net asset value of the group would have been R36,7 million. Notwithstanding the loss for the period, there have been considerable improvements in the group’s cash flow with the cash used in operating activities improving from R13,3 million to R3,8 million. Southern Palace Investments 265 Proprietary Limited provided a letter of support to Alert Steel Proprietary Limited and confirmed that if the loan cannot be repaid on the repayment date, the loan can then be repaid over an extended period of nine months. Subsequent to the reporting period, Mercantile Bank Limited entered into an agreement to take over the Southern Palace Investments 265 Proprietary Limited loan of R104 million. The effect of the new negotiated terms with Mercantile Bank Limited would be to reclassify this loan as a non-current liability. As stated in the overview, the group is operating in a very difficult trading environment. These financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The directors have assessed the group’s cashflow requirements for the next twelve months. It is the directors’view that the group has sufficient cash resources to meet its obligations as they fall due. CHANGES TO THE BOARD OF DIRECTORS The following changes to the Board of Directors occurred during the period and afterwards: – MJ Gani was appointed as chief operations officer on 10 December 2013. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS Compliance with legislation For the period under review, there were no matters of non-compliance with legislation of which the directors were aware. DATE OF PUBLICATION OF THIS REPORT 31 March 2014. ANNUAL FINANCIAL STATEMENTS The previous signed and audited annual financial statements of the group for the period ended 30 June 2013 are available for inspection at the registered address found below. CORPORATE INFORMATION Non-executive directors M Patel (Chairman), AE Loonat, BS Mahuma, WP van der Merwe Executive directors PN Dodson, MSI Gani, MJ Gani Registration number 2003/005144/06 Registered address Cnr Engelbrecht and Lanham Streets, East Lynne, Pretoria Postal address PO Box 29607, Sunnyside 0132 Company secretary M Pretorius Telephone (012) 800 0000 Facsimile (012) 800 4661 Transfer secretaries Computershare Investor Services Proprietary Limited Designated adviser Exchange Sponsors (2008) Proprietary Limited Auditors KPMG Inc. NOTES TO THE CONDENSED consolidated interim FINANCIAL RESULTS continued rifedesigns14008 2. Loans and borrowings For the period ended Unaudited Restated December June 2013 2013 R’000 R’000 Southern Palace Investments 265 Proprietary Limited 153 114 127 004 Cannistraro Investments 282 Proprietary Limited 24 345 9 806 Total loans and borrowings 177 459 136 810 Reflected as: Non-current liabilities – 136 810 Current liabilities 177 459 – Loans and borrowings from Cannistraro Investments 282 Proprietary Limited and Southern Palace 265 Proprietary Limited bear interest at the prime lending rate and are repayable on 31 October 2014. Loans are secured with a cession over all assets. Southern Palace Investments 265 Proprietary Limited will continue to support Alert Steel. Should the group not be able to repay the loan on 31 October 2014, the loan can be repaid over a period of nine months thereafter. Subsequent to the reporting period, Mercantile Bank Limited entered into an agreement to take over the Southern Palace Investments 265 Proprietary Limited loan, which increased to R104 million. Please refer to the subsequent events note for more information. R96 million of the loans and borrowings were converted to equity on 10 March 2014 as a result of the claw-back offer. Southern Palace Investments 265 Proprietary Limited has assigned an amount of R71,3 million to Cannistraro Investments 282 Proprietary Limited to enable it to exercise its rights in terms of the claw-back offer. 3. Notes to cash flow statement For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 Cash effects of operating activities Loss before taxation (35 722) (27 974) Adjustment for: Depreciation 9 980 7 675 (Profit)/loss on disposal of property, plant and equipment (1 488) 147 Impairment of goodwill 5 720 – Loss on disposal of businesses – 378 Interest received (3) – Interest paid 6 809 8 675 Movement in provisions (1 224) – Lease accrual adjustment 1 280 (8 266) Working capital changes: Inventories (23 479) 46 596 Trade and other receivables 15 020 19 142 Trade and other payables 19 317 (50 957) Cash used in operations (3 790) (4 584) Interest received 3 – Interest paid (33) (8 675) Taxation paid – (30) Cash used in operating activities (3 820) (13 289) Cash effects of investing activities Purchase of property, plant and equipment (29 137) (3 235) Proceeds on disposal of property, plant and equipment 5 443 3 806 Proceeds from disposal of non-current assets held for sale 294 – Proceeds on disposal of business 11 106 Cash (used in)/from investing activities (23 400) 11 677 Cash effects of financing activities Repayment of bonds on properties – (579) Advances of bonds on properties – 330 Repayments of instalment sale agreements – (3 493) Loans received from bank – 1 176 Loans repaid to bank – (1 667) Loans received from shareholders 33 873 – Loans repaid to shareholders – (24 224) Proceeds from shares issued – 29 887 Cash flows from financing activities 33 873 1 430 4. Related parties The group, in the ordinary course of business entered into various transactions on an arm’s-length basis with related parties. Significant items are: For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 Purchases from/(sales to) related parties BuildKwik Wholesalers Proprietary Limited (5 100) – BuildKwik Trading Proprietary Limited 14 147 – Aucor (Sandton) Proprietary Limited (4 224) – Capital Africa Steel Proprietary Limited – 3 500 Reinforcing Mesh Solutions, a division of Capital Africa Steel Proprietary Limited – 2 515 Transactions with key management personnel Directors’emoluments 2 526 1 808 5. CHANGE IN ACCOUNTING POLICIES Prior period adjustments relate to the adoption of IFRS 10. Please refer to note 1 for more information. CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at Notes Audited Adjustments Restated June 2013 June 2013 June 2013 R’000 R’000 R’000 ASSETS Non-current assets 60 494 1 636 62 130 Property, plant and equipment 54 774 1 636 56 410 Goodwill 5 720 – 5 720 Current assets 176 242 (1 698) 174 544 Inventories 119 573 560 120 133 Trade and other receivables 45 257 3 312 48 569 Amount owing by equity 5 575 (5 575) – accounted investee Taxation receivable 201 – 201 Cash and cash equivalents 5 636 5 5 641 Assets held for sale 294 – 294 Total assets 237 030 (62) 236 968 EQUITY AND LIABILITIES Total equity (23 462) (198) (23 660) Equity attributable to owners (23 462) (99) (23 561) of the company Non-controlling interest – (99) (99) Non-current liabilities 141 143 – 141 143 Loans and borrowings 2 136 810 – 136 810 Straight-lining lease accrual 4 333 – 4 333 Current liabilities 119 349 136 119 485 Loans and borrowings 2 – – – Provisions 1 124 – 1 124 Straight-lining lease accrual 550 – 550 Trade and other payables 117 575 136 117 711 Total equity and liabilities 237 030 (62) 236 968 6. Salient features For the period ended Unaudited Restated December December 2013 2012 R’000 R’000 Actual number of shares in issue (‘000) 52 000 52 014 Net asset value per share (cents) (114,2) (45,5) Net tangible asset value per share (cents) (114,2) (56,5) Net asset value per share is determined by dividing the total shareholders’funds by the actual number of shares in issue at reporting date. Net tangible asset value per share is determined by dividing the total shareholders’funds less goodwill by the actual number of shares in issue at reporting date. Write down of inventory to net realisable value – 3 700 Settlement of onerous lease – 5 554 Significant items in loss before taxation – Depreciation 9 980 7 675 – Directors’emoluments 2 562 1 808 – Employee costs 44 667 45 108 – Retrenchment costs 2 315 1 621 – Professional fees 2 872 1 650

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