Insimbi’s voluntary performance update and trading statement looking positive

More acquisitions in the metal recycling industry being negotiated.

The Insimbi Group’s results for the year ended 28 February 2019 will be published on or before 29 May 2019 (too late for this publication). However, management considers it appropriate to provide shareholders with a brief voluntary performance update on the business.

“Economic and political volatility persisted across most of our markets during the 2019 financial year. The US China trade stand-off and Brexit impacted negatively on markets and commodity prices although most of these rebounded in the 4th financial quarter, which bodes well for the financial year ahead. Industrial action also affected output at four of our plants for sustained periods, suppressing profitability at our plastics operation in particular. Inconsistent power supply further hampered operations with the increase in the price of fuel having a significant impact on road transportation costs.”

“Insimbi continued their strategy of growth through acquisition and having considered a number of targets concluded the acquisition of Group Wreck International Non-Ferrous Proprietary in November 2018. The synergies that exist between this operation and the rest of the Group are expected to have a positive and value accretive impact on the Group’s results in the 2020 financial year and beyond.”

“Despite the challenging economic environment, Group revenue for the year under review is expected to be more than 30% up on the comparative period. However, due to the reasons mentioned above, gross margins were negatively impacted and at 8.3% were approximately 1.6% lower when compared to the 9.9% achieved in the previous financial year.”

Normalised earnings
“Notwithstanding the lower margins achieved in 2019, the increased revenue has offset this negative impact and normalised profit before tax for the year is expected to be on a par with that achieved in the previous financial year ended February 2018.”

Trading statement
“Shareholders are advised that both earnings per share (“EPS”) and headline earnings per share (HEPS) are expected to be between 15.10 cents per share and 15.80 cents per share representing a decrease in: EPS of between 14.5% and 18.3% compared to 18.47 cents per share for the period ended 28 February 2018; and HEPS of between 14.4% and 18.2% compared to 18.45 cents per share for the period ended 28 February 2018.”

“If the once off costs associated with acquisitions (including legal fees, additional facility fees and due diligence costs) and other non-recurring expenditure related to IT security upgrades EPS and HEPS would have been approximately 2.0 cents per share higher. The national strike in the plastic industry affected our plastic segment negatively and we may decide to impair goodwill as a result. This has not been incorporated in the above.”

Cautionary announcement
In a cautionary announcement issued by Insimbi on 20 March 2019 and renewed on 18 Apr 2019 shareholders were advised that the Company had entered into negotiations regarding a potential strategic acquisition which, if successfully concluded, may have a material effect on the price of the Company’s securities.

The full impact of the potential strategic acquisition is still being determined and accordingly, Shareholders are advised to continue exercising caution when dealing in the Company’s securities until a full announcement is made.

Shareholders were advised that the strategic intent of the envisaged transaction is to expand the Group’s presence and product base in the metal recycling, beneficiation and trading business. Accordingly, shareholders are advised to exercise caution when dealing in the Company’s securities, until a detailed announcement is made.