Insimbi Industrial Holdings Limited · JSE:ISB
Insimbi Industrial — Merger or Acquisition (August 2016)
26 slides from Insimbi Industrial's merger presentation, August 2016
Slide 1: Proposed Acquisition of the AMR Group
Proposed Acquisition of the AMR Group STRICTLY PRIVATE AND CONFIDENTIAL
Slide 2: Disclaimer
Disclaimer FORECASTS This transaction summary includes forecasts, projections and other predictive statements that represent assumptions and expectations in light of currently available information. These forecasts, etc., are based on industry trends, circumstances involving clients and other factor
Slide 3: Amalgamated Metals Recycling Group
Amalgamated Metals Recycling Group The Amalgamated Metal Recycling Group are licensed scrap metal dealers who provide a competitive service locally whilst also exporting a significant amount of materials. The group comprises of three companies: Amalgamated Metals Recycling Proprietary Limited, Amalg
Slide 4: AMR Group Structure
AMR Group Structure Controlled by: Amalgamated Metals Chris Coombs 33.34% Recycling Group Christiaan Combrink 33.33% Herman Steenkamp 33.33% Amalgamated Metals Amalgamated Metals Amalgamated Metals Recycling Proprietary Recycling West Rand Properties Recycling SA Limited Limited Limited Devland Booy
Slide 5: AMR Group - Audited Income Statement (aggregated)
AMR Group- Audited Income Statement (aggregated) R’000 Feb 2014 Feb 2015 Feb 2016 Revenue 1 854 907 2 097 437 1 921 465 Gross profit 126 725 169 509 204 170 Gross profit margin 6.83% 8.08% 10.63% Operating profit (EBIT) 52 755 70 104 85 920 Operating Profit Margin 2.84% 3.34% 4.47% Net profit 39 476
Slide 6: AMR – Copper Price
AMR – Copper Price Copper Price (2016) Copper Price ( 5 year trend) • Copper prices have been volatile historically, but has also trended in a relatively ZAR/pound range around R32.50 $ price per pound ZAR per pound ZAR per ton To Aug 2016 2.20 R 32.58 R 71 665 FTY Feb 2016 2.36 R 31.87 R 70 122 FTY
Slide 7: The Deal – Project Copper
The Deal – Project Copper Insimbi Refractory and Alloy Supplies Limited (“Insimbi” or “the Purchaser”) will acquire 100% of the issued shares in the Amalgamated Metals Recycling Proprietary Limited, Amalgamated Metals Recycling SA Proprietary Limited and Amalgamated Metals Recycling West Rand Propri
Slide 8: Project Copper – Key Risks
Project Copper – Key Risks In contemplation of the transaction the following risks were considered: • Industry regulation and government intervention; • Management succession; • Management’s long term commitment; • Commodity pricing cycle; • Insimbi’s competitors’ “buying” behaviour post acquisition
Slide 9: Project Copper – Vendor Commitment
Project Copper – Vendor Commitment The key terms to address vendors’ commitment to the new Group include: • R50 million of purchase price is settled in Insimbi shares • Profit warranties. An aggregate of R 90 million net profit after tax needs to be achieved over three years • NAV warranted at R152
Slide 10: Project Copper – Rationale
Project Copper – Rationale OPERATIONAL ASPECTS • Diversified group further with additional revenue streams and client base; • Insimbi will enter and become a significant player in the scrap metal recycling space; • Operational leeway; • Smelter capacity utilisation will be increased; and • Backward
Slide 11: Project Copper – Salient terms
Project Copper – Salient terms Key terms of Project Copper comprise the following: • Commitments by the AMR vendors (“the Vendors”, “the Sellers”) regarding the continuing obligation of the AMR Group and its operations; • The purchase of the properties; • The aggregate purchase consideration of R 28
Slide 12: Project Copper – Purchase consideration and funding the Acquisition
Project Copper – Purchase consideration and funding the Acquisition Funding of the Acquisition • R200 million will be payable in cash to the Sellers in the following prescribed forms: R 100 million is intended to be funded by senior debt and the balance of R 100 million will be funded by a placement
Slide 13: Post Acquisition Structure
Post Acquisition Structure Current shareholders : 63.4% INSIMBI REFRACTORY & ALLOY SUPPLIES LIMITED AMR Vendors : 12.2% New Issue : 24.4% Polydrum (Pty) Ltd Insimbi Alloy Supplies (Pty) Insimbi Refractory & Alloy Insimbi Alloy Properties Ltd Supplies Ltd Zambia (Pty) Ltd Insimbi Bulk Metlite Alloy A
Slide 14: Project Copper – Pro-forma Financial Indicators Income Statement
Project Copper – Pro-forma Financial Indicators Income Statement Insimbi AMR Group Aggregated Group NAV R'000 2016 2016 Pre acquisition: 0.63 Sales 955 106 1 921 465 2 876 571 Post acquisition: 0.78 Cost of sales -830 137 -1 717 294 -2 547 431 Gross profit 124 969 204 170 329 139 EPS Operating expen
Slide 15: Project Copper – Pro-forma Financial Indicators Balance Sheet
Project Copper – Pro-forma Financial Indicators Balance Sheet R'000 Insimbi Alloy Supplies AMR Group Consolidated Assets Non-current Assets Property, plant and equipment 9 815 65 183 74 998 NAV (R’000): Intangible Assets 8 414 103 706 Associates; group loans 67 445 739 68 184 Pre acquisition: 128 86
Slide 16: The Insimbi Business
The Insimbi Business Insimbi Refractory and Alloy Supplies Limited (“Insimbi” or “the Company”) provides the steel, aluminium, cement and foundry industries with resource-based commodities like ferrous and non-ferrous alloys, as well as refractory materials, by integrating the supply, logistics and
Slide 17: Insimbi - Key Financials (2016 FY)
Insimbi- Key Financials (2016 FY) SHARE PRICE: R 1.14 (as at 26 August 2016) DIVIDEND YIELD: 3.95 % ISSUED SHARES: 260,000,000 LAST DIVIDEND: 3 cps MARKET CAP: R 296.4 million RETURN ON EQUITY: 19.25 % EPS: 12.42 cents GROSS PROFIT MARGIN: 13.08 % P/E RATIO: 9.18 NET PROFIT MARGIN: 3.02 % NET ASSET
Slide 18: Insimbi - Share Performance
Insimbi - Share Performance Insimbi volume weighted average price (VWAP) – INSIMBI 5 YEAR PERFORMANCE as of 20 July 2016 140 30 Day VWAP 102.66 120 100 60 Day VWAP 105.87 80 90 Day VWAP 116.04 60 40 20 0 1-Apr-16 1-Apr-12 1-Oct-12 1-Apr-13 1-Apr-14 1-Apr-15 1-Oct-11 1-Oct-13 1-Oct-14 1-Oct-15 1-Jan-
Slide 19: Insimbi - Company and Shareholding Structure
Insimbi- Company and Shareholding Structure Beneficial Shareholding: New Seasons – 20% Mr. PJ Schutte – 12.38% Board of INSIMBI REFRACTORY Mr. F Botha – 12.36% Directors & ALLOY SUPPLIES LIMITED Mr. E Liecthi – 12.33% Mr. CF Botha – 12.33% ESOP & Manco – 8.75% Pruta Securities – 6.65% Lerato Yvonne
Slide 20: Insimbi - Business Segments
Insimbi - Business Segments Insimbi’s business model has four distinct segments which complement each other while providing Insimbi’s business model with an inherent diversification. This has proven to be resilient and sustainable through various commodity and trading cycles experienced over Insimbi
Slide 21: Insimbi - Business Segments
Insimbi - Business Segments The company has ten separate divisions that operate from its Wadeville, Germiston head office, as well as branches in Cape town and Durban. In addition the group also has three independent manufacturing companies. The details of which are as follows: Branches: • KwaZulu-N
Slide 22: Insimbi – Historic Financial Performance
Insimbi – Historic Financial Performance FY 2014 FY 2015 FY 2016 R’000 (Audited) (Audited) (Audited) Revenue 938 980 958 016 955 106 Gross profit 101 089 111 902 124 969 Gross profit margin 10.77% 11.68% 13.08% Other Income 2 758 1 246 2 638 Operating expense -68 503 -72 926 -83 219 Operating profit
Slide 23: Insimbi - BEE Profile
Insimbi - BEE Profile ESOP and ManCo Insimbi recently embarked on a share repurchase of 13 000 000 shares to facilitate the implementation of an employee share ownership program (“ESOP”) and management share participation plan (“ManCo”) in which eligible employees of Insimbi collectively obtained an
Slide 24: Shareholder Base (pre and post transaction)
Shareholder Base (pre and post transaction) Insimbi Shareholding Insimbi Exco 128 424 300 ESOP & ManCo 22 835 887 New Seasons 52 000 000 Minority Shareholders 56 739 813 Insimbi Pre-transaction total shares outstanding 260 000 000 Newly issued shares ex Project Copper Newly placed shares 100 000 000
Slide 25: Next Steps
Next Steps Project Copper represents an opportunity to invest in: • A share that should re-rate on conclusion of the transaction. • An industry with direct exposure to the recycling space where there is sufficient supply of materials to export. • A diversified non-ferrous metals player which provide
Slide 26: Contact
Contact WEBSITE www.bridgecapital.co.za ADDRESS JOHANNESBURG OFFICE 27 Fricker Road Illovo Johannesburg 2196 +27 11 268 6231 TELEPHONE +27 11 268 6538 FACSIMILE EMAIL pventer@bridgecapital.co.za ckingsley@bridgecapital.co.za johan@bridgecapital.co.za 26
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