Alert interim results December 2011
Posted Fri, 30 Mar 2012
Revenue declined to R418 million (R421.8 million). EBITDA amounted to R0.7 million (loss of R38.6 million). A net attributable loss of R18.3 million (loss of R85.1 million) was recorded. The headline loss from continued operations was smaller at 2c (loss of 23.7cps).
The directors anticipated that the group may require a further rights offer in order to generate growth of the business. The restricted cash flow post the slow trading period of December and January has expedited the group's need for a further rights offer. Therefore, the directors have proposed a rights offer of R120 million, of which, underwriting agreements from the major shareholders and a black empowerment investor have been signed amounting to R102.5 million subject to the fulfilment of certain suspensive conditions. The rights offer will be utilised to settle the R23 million shareholder's loan from Capital Africa Steel, to acquire the business of Steel Mecca for R7 million from Capital Africa Steel at fair value and to settle R55 million of Nedbank debt. The rights offer will be concluded before 30 June 2012.
Arcellor Mittal is back on full production after the force majeure in July 2011. With the additional cash injection, the group will be able to settle its creditors within terms and will be able to obtain stock in the normal course of business. Due to the above two factors, it is anticipated that the full range of stock products will be back in the branches from April 2012. By the end of June 2012, there will be 31 containers deployed and running at optimal revenue and margin levels. This will set the group up to achieve the target results for the 2013 financial period.
During the six months ended December 2011, the restructure of branches was completed as part of the first restructure phase. Post December 2011, the group has embarked on a second phase of cost restructuring at head office level only. The objective of the second phase is to reduce the fixed cost burden on the group. The cost of the retrenchments is expected to be around R5 million which will be incurred in April and May 2012. However, the restructure is expected to result in a monthly saving in salaries of R1.2 million and other operational cost savings of R500 000 per month going forward. This new cost base will then be at a sustainable level into the future subject to the group achieving the revenue targets. With the introduction of the additional R40 million in cash from the rights offer, it is anticipated that the additional discounts from suppliers will be approximately R750 000 per month and an interest saving of around R700 000 per month is anticipated. The benefits of these savings will only really be felt from the 1st of June 2012 onwards.
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