Good afternoon ladies and gentlemen.
Performance
Steel & Tube continues to perform well despite the relatively flat economic conditions. At the same time, significant changes have been implemented as part of the One Company reinvigoration.
The first half of the financial year saw subdued demand in our key sectors of manufacturing and rural. However, activity levels increased in the construction sector, led by both residential, and to a lesser extent commercial activity in Christchurch. We expected momentum to continue in the second half year. This proved true for residential construction, but in most other sectors, activity levels eased for the majority of the period.
The Group after tax profit for the year is $15.6 million which represents a 19 percent improvement on the previous year. Steel & Tube’s sales of $393 million slipped 3 percent on the previous year, which was entirely due to lower steel prices as the global steel industry continued to grapple with subdued demand and excess production. Operating cash flow remained strong at $27.5 million. That’s an increase of $8.7 million or 47 percent over the previous year. Management remained focussed on working capital and with the strong cash flow, Steel & Tube borrowings reduced to $23.6 million, further strengthening the balance sheet, now with a gearing of 13 percent.
The Board is committed to providing shareholders with a consistent dividend stream. We declared a final dividend of 8.5 cents per share, which lifted the full–year dividend to 15 cents per share, an 84 percent pay-out ratio.
The health and safety of all of our employees, contractors and site visitors continues to be a key priority for the Company. I am very pleased to report that organisational changes to health and safety, and greater engagement with operating staff, saw a significant reduction in the number of Lost Time and Medical Treatment Incidents.
Similarly, there’s positive news on a number of initiatives that build capability, and strengthen company values and culture. A recent employee survey showed a significant increase in employee engagement in these important programmes.
All these achievements continue to be brought about by a Leadership Team that is fully committed to the One Company journey, under the leadership of Company Chief Executive Officer, Dave Taylor. We both remain very supportive of the transformational change across all aspects of the business.
The Reinvigoration
A huge amount has been achieved under the One Company reinvigoration. Key building blocks are very clearly now in place across many parts of the business. This is leading to business efficiency improvements and also appears to be increasingly visible to our customers, as evidenced by more partnerships.
I should note that completion of some aspects of the refreshment will take time. For example, facility or property consolidations and upgrades depend on existing lease terms, some of which extend for several years. Equally, talent management, succession planning and people development initiatives tend not to be short term. Successful implementation requires longer term thinking, approaches and solutions.
Another key focus is IT infrastructure and IT platforms. These reviews take considerable resource — but once they are complete they will be a key enabler for the business.
I now wish to talk briefly on the divesture by Australian-based Arrium. Clearly, this was a significant milestone in our 60 years of business. Arrium, which was formerly known as OneSteel, sold their 50.3 percent majority shareholding in Steel & Tube on October 9th 2012. As expected, Arrium continue to be a key supplier to S&T.
At last year’s Annual Meeting I commented that the Board believed the divestiture was a positive development and in the best interests for Steel & Tube. As anticipated, there is now far greater interest in Steel & Tube from the investment community, including greater share liquidity. That is arguably reflected in the current share price. Management have embraced the independence and the Board approved a refreshed strategy earlier this year, centred more on developing sustainable earning opportunities.
Board of Directors
Following the Arrium divestiture, Steve Hamer, Chief Executive of OneSteel Distribution and an Arrium-appointed director, stepped down on October 9th 2012. So in May this year, I was pleased to announce the appointment of Anne Urlwin as a new independent Director. Anne is currently Chair of Naylor Love Enterprises Ltd and holds directorships with Chorus Ltd, Southern Response Earthquake Ltd, One Path Life (NZ) Ltd. Anne brings great knowledge and experience to the Board and is before you today. In line with our constitution, Dean Pritchard is due for retirement by rotation.
Our CEO and non-independent managing director, Dave Taylor will reach his 5th anniversary prior to next year’s annual meeting and under NZX listing rules must stand for re-election. I am pleased to confirm that both Dean and Dave have made themselves available for re-election as independent and non-independent directors. They are before you today. This will be addressed later in the proceedings.
Outlook
Finally the outlook - despite some on-going global uncertainties, the New Zealand economy appears to be tracking relatively well, compared to others. This is underscored by latest business confidence indices.
Certainly the construction sector is looking positive. Numbers of consents continue to improve. The Government has indicated substantial expenditure, both in conjunction with Christchurch City Council on anchor projects, and for other key infrastructure projects across New Zealand.
Other sectors may not appear to be as bullish as the construction sector, and manufacturing looks flat, but we do expect to see improvements in volumes. This is confirmed by the first 4 months of trading of the current financial year.
The industry remains intensively competitive and Steel & Tube does need to find a way to improve margins, therefore making re-investment more attractive.
The Company’s now diverse shareholding allows greater freedom to pursue opportunities in this regard.
Internally, as you have already heard, the company continues to transform, building a solid platform for growth and improved performance.
It is in very good shape and remains well positioned for the future.
Before handing over to Dave Taylor, for his presentation, on behalf of the directors I would like to extend our sincere thanks to Dave and all of Steel & Tube’s employees for their continued commitment to the Company and supporting the changes required for the reinvigoration.
Thank you.
PLEASE NOTE: This Address was given in conjunction with the Annual Meeting Presentation 2013. You can download a PDF of this presentation, by clicking on this link