Announcement

HALFYR: STU: Interim Results to 31 December 2019 08:33a.m. 
STU  
24/02/2020 08:33  
HALFYR  
PRICE SENSITIVE  
REL: 0833 HRS Steel & Tube Holdings Limited  
 
HALFYR: STU: Interim Results to 31 December 2019  
 
Steel & Tube announces its interim financial results for the six months ended  
31 December 2019.  
 
For the six months to 31 December 2019, including NZ IFRS 16 adjustments,  
Steel & Tube has reported a result in line with January 2020 guidance, with  
sales revenue of $232.0m, EBIT (including non-trading adjustments) of  
$(33.4)m and a NPAT of $(37.0)m.  
 
The result includes $39.1m in non-trading adjustments including $2m  
restructuring and relocation costs and a non-cash goodwill impairment of  
$37.1m as previously advised. Excluding non-trading adjustments, normalised  
EBIT was $5.7m.  
 
As previously advised:  
 
o Adverse market conditions continued to impact on sales revenue and volumes,  
with EBIT also impacted by $2m of Project Strive execution costs and $1.8m of  
doubtful debt provisioning and write-offs.  
 
o Progress has been made in controllable areas, including operating cost  
reductions despite a higher cost environment, margin management and working  
capital discipline.  
 
o Cash flow has remained robust despite the decrease in earnings, enabling a  
further reduction in net debt.  
 
o Post balance date on 30 January 2020, Steel & Tube unconditionally agreed  
to sell a surplus Christchurch property for approximately $5.8m.  
 
An improved second half (cf 1H20) is expected with benefits from cost  
efficiencies and overhead reductions, Project Strive initiatives and the  
commencement of significant new contracts.  
 
The Board has declared a fully imputed interim dividend of 1.5 cents per  
share.  
 
Further information is available in Steel & Tube's 1H20 results presentation  
and Interim Financial Statements released to the market on 24 February 2020.  
 
[See attached media release for summary results table.]  
 
Steel & Tube Holdings Limited (NZX: STU) has today announced its results for  
the six months to 31 December 2019 (1H20). The result is in line with the  
guidance provided on 31 January 2020.  
 
Including NZ IFRS 16 adjustments, the company has reported sales revenue of  
$232.0m, EBIT (including non-trading adjustments) of $(33.4)m and a NPAT of  
$(37.0)m. The result includes $39.1m in non-trading adjustments including $2m  
in Project Strive restructuring and relocation costs and a non-cash goodwill  
impairment of $37.1m , as previously advised. Excluding these non-trading  
adjustments, normalised EBIT was $5.7m.  
 
Steel & Tube adopted NZ IFRS 16 Leases with effect from 1 July 2019. The  
impact of this new accounting standard was to increase reported EBIT by $2.6m  
and to reduce NPAT by $0.2m in 1H20. (For more information on the impact of  
NZ IFRS 16, see Steel & Tube's 1H20 Investor Presentation and 1H20 Interim  
Financial Statements).  
 
In line with Steel & Tube's dividend policy, the Board has declared a fully  
imputed interim dividend of 1.5 cents per share.  
 
As previously advised Steel & Tube has maintained market share and margins,  
however reduced vertical construction work and contraction in the stainless  
steel market have impacted on sales revenue and volumes in the first half,  
which were down 10% on the prior comparative period (1H20: $232.0m; 1H19:  
$258.2m).  
 
1H20 EBIT was primarily impacted by lower sales activity, $2m Project Strive  
execution costs and $1.8m of doubtful debt provisions and write-offs (1H19:  
$1.0m write-back) mainly due to the unexpected liquidation of a major  
customer.  
 
The business operating model continues to be reviewed to ensure it is fit for  
purpose, with a focus on ensuring it can fully meet customer needs, whilst  
reducing costs to serve. This work is ongoing, however, actions taken in the  
first half of the financial year are expected to deliver a further reduction  
in operating costs in the second half of the year.  
 
Steel & Tube's balance sheet remains strong, driven by better working capital  
management. The increase in debt write-offs and provisioning related to a  
small number of customers. Stewardship of debt collection has minimised  
credit exposures overall and improved underlying operating cash flow.  
Capital spending has remained in line with depreciation and amortisation and  
has been largely focussed on Steel & Tube's digital ambitions, growth and  
safety initiatives.  
 
Operating cash flow was robust at $10.5m (excluding the impact of NZ IFRS 16)  
(1H19: $11.1m), and helped achieve a further reduction in net debt during the  
period to $10.9m as at 31 December 2019, down from $15.0m as at 30 June 2019.  
On settlement, the proceeds from the sale of the Christchurch property will  
be used to further reduce debt.  
 
Project Strive business transformation initiatives, including ongoing  
investment into digital technologies, continue to drive long term benefits  
for the company. Highlights in the first half include a further reduction in  
the property footprint from 35 to 31 locations, additional cost efficiencies,  
the launch of the first phase of digital initiatives and further development  
of Steel & Tube's network strategy.  
 
CEO of Steel & Tube, Mark Malpass, commented: "While the decline in industry  
activity is beyond Steel & Tube's control, we have focussed on improving  
underlying operating costs, margins and working capital. Cash flow has  
remained robust and we reduced net debt.  
 
"Our priority is on customer service and streamlining the business to deliver  
profitable growth. We are seeing signs of improving business confidence  
including the recent Government announcement to increase infrastructure  
investment, which should lead to increased market activity. An improved  
second half performance is expected as we benefit from Project Strive and  
commencement of significant new contracts."  
 
(1) As previously advised on 31 January 2020, the Board has reviewed the  
carrying value of goodwill as required by accounting standards, including  
consideration of the current difference between Steel & Tube's market  
capitalisation (based on market share price) and the carrying value of its  
assets. Whilst the Board does not consider the adverse trading conditions  
experienced in 1H20 to be indicative of the medium to long term trading  
expectations, the reduced profitability in 1H20 has had an impact on the  
assessment of impairment. At this time and in accordance with accounting  
standards, the Board has concluded that the carrying value of goodwill is  
impaired. The impairment is non-cash in nature.  
 
ENDS  
 
For further information please contact:  
 
Mark Malpass  
Steel & Tube CEO  
Tel: +64 27 777 0327  
Email: mark.malpass@steelandtube.co.nz  
 
Greg Smith  
Steel & Tube CFO  
Tel: +64 21 755 803  
Email: greg.smith@steelandtube.co.nz  
 
For media assistance, please contact: Jackie Ellis, tel: 64 27 246 2505  
Email: jackie@ellisandco.co.nz  
End CA:00348843 For:STU Type:HALFYR Time:2020-02-24 08:33:41  

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