Most NZX-listed companies faced with reporting a loss will shimmy their way round the bald fact. This year there has been plenty of shimmying, because the good-time revaluation gains have turned into bad-time reductions, courtesy of Covid-19.
Steel & Tube Holdings Ltd was in an altogether different spot: It had lost control of its business and headed into large losses as it righted its structure. From late 2018, the company reported improvements to its business and to its finances. Then came the effects from Covid-19 combined with restructuring costs.
On 10 August, Steel & Tube warned that it expected normalised earnings before interest & tax (ebit) to be about break-even and normalised ebit on a pre-NZ IFRS 16 basis to be a loss of about $5-7 million.
The actual outcome:
- Normalised ebit $400,000 excluding non-trading adjustments
- Non-trading adjustments $58.1 million
- Net loss after tax $60 million.
Chief executive Mark Malpass said Steel & Tube was positioned for the new trading environment with a leaner cost structure, a strong balance sheet & a clear strategic plan.
And company chair Susan Paterson commented: “We are starting the new financial year with a strong balance sheet, a leaner cost structure & a clear strategy. We are confident that Steel & Tube is well positioned to weather a range of forecast economic scenarios and, importantly, to take advantage of the opportunities ahead of us.”
Mr Malpass attributed the $80 million fall in revenue primarily to Covid-19 lockdown & restrictions in the second half, contraction in vertical construction activity, softening in the stainless steel market & competitive pricing pressures.
While the accelerated organisational restructure was well underway with network & workforce reduction, creating a leaner & more efficient organisation, the economic environment remained uncertain and the company expects reduced activity.
The company has accelerated its organisation change programme, closing 11 branches or consolidating. 150-200 staff would lose their jobs and 93 of them had already left.
In addition to waivers of existing bank covenants for 30 June & 31 December 2020, Steel & Tube has agreed temporary revised covenants with its bank syndicate for the rest of the 2021 financial year, which it expects to meet comfortably.
Key financial points (June 2019 year in brackets):
Total revenue, down 16.1% to $417.9 million ($498.1 million)
Net earnings, down 676.2% to $60 million loss ($10.4 million profit)
Ebit, down 443.5% to $57.7 million loss ($16.8 million profit)
Non-trading adjustments, $58.1 million cost ($800,000 gain), including $51.9 million in non-cash goodwill & other impairments and $5.5 million in restructuring & rationalisation costs and the impact of Covid-19
Normalised ebit excluding non-trading adjustments, $393,000 ($16 million)
Normalised ebit re-NZ IFRS 16, down 133% to $5.25 million loss ($16 million profit)
Shareholder equity, down 28.6% to $181.3 million ($253.9 million)
Borrowings, down 58% to $10 million ($24 million)
Net debt, 149% improvement to $7.4 million cash surplus ($15 million debt)
Net operating cashflow, up 86% to $39.6 million ($21.3 million)
Pre-IFRS 16 operating cashflow, up 25% to $26.6 million ($21.3 million)
Net tangible assets/security, down 13.5% to $1.03 ($1.19)
Basic earnings/share, 36.4c loss(6.8c profit)
Equity:total assets, 52.4% (77.8%)
Gearing, 5.2% (5.6%)
12 August 2020: Steel & Tube foreshadows full-year loss
29 April 2020: Steel & Tube starts redundancies in business restructure
24 March 2020: Steel & Tube cans dividend
26 February 2020: Steel & Tube confirms half-year loss
28 August 2019: Market contraction offsets Steel & Tube turnaround gains
18 February 2019: Steel & Tube confirms turnaround from 2018 loss
12 September 2018: Steel & Tube completes books-clearing, future already brighter
Attribution: Company release, annual report.