STU UPDATE FOR FIRST HALF OF FY20 FINANCIAL YEAR

31 January 2020
STU / NZX ANNOUNCEMENT


STU UPDATE FOR FIRST HALF OF FY20 FINANCIAL YEAR

For the six months to 31 December 2019 (1H20), Steel & Tube is expecting unaudited EBIT (including
impairments but before NZ IFRS 16 adjustments), to be a loss of approximately $36m – $37m.

Following a review of the carrying value of goodwill, non-cash impairment charges of approximately
$37m are expected.

As previously advised, adverse market conditions have continued to impact on sales revenue and
volumes, with expected unaudited EBIT also impacted by around $2m of Project Strive execution costs
and $2m of debt write-offs.

Progress is being made on controllable commitments, including operating cost reductions, margin
management and working capital discipline, with strong cashflows further reducing net debt.

Normalised EBIT
1
for the period is expected to be approximately $2m - $3m excluding the impact of
NZ IFRS 16 (1H19: $9.6m) due to the impact of lower revenues and debt-write-offs.

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 performance is expected as benefits from Project Strive, cost efficiencies,
new project successes and other proactive measures take effect.

As part of Project Strive the Board and Management are continuing to review the business operating
model. This may result in further restructuring costs.

The Board intends to pay an interim dividend in line with the Company’s dividend policy.

Steel & Tube Holdings Limited (NZX: STU) is today providing a further update for the six months to 31
December 2019.
In its trading update provided in November 2019, the company advised that first half results were expected to
be lower than the prior year, and would be impacted by adverse trading conditions; Project Strive execution
costs of approximately $2m; and an expected increase in debt write-offs and provisioning of around $2m,
mainly due to an unexpected liquidation of a major customer.
Whilst Steel & Tube has maintained market share and margins, the adverse trading conditions previously noted
have continued, including reduced vertical construction work and a contraction in the stainless steel market.
This has impacted on sales revenue and volumes in the first half, which are expected to be down approximately
10% on the prior comparative period (1H19: $258m). Despite the lower earnings, Steel & Tube’s operating
cashflow has remained robust at approximately $10.5m (excluding the impact of NZ IFRS 16) (1H19: $11.1m),
with net debt reduced further to approximately $11m at 31 December 2019 (30 June 2019: $15m).
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.


1
Normalised EBIT is provisional unaudited EBIT adjusted for non-trading costs, primarily the impairment of goodwill
and Project Strive execution costs.

Including impairment, Project Strive execution costs and debt write-offs and provisioning, Earnings Before
Interest and Tax (“EBIT” before IFRS 16 adjustments) is expected to be a loss of approximately $36m – $37m
(HY19: $9.8m).
The Board continues to support the Project Strive turn-around strategies being executed by Management. As
part of Project Strive the Board and Management continue to review the business operating model, supported
by the ongoing investment in digital technologies. This may result in further restructuring costs.
Steel & Tube will continue to monitor trading conditions and will keep the market updated as required. An
improved second half is expected with some significant project successes post-balance date, coupled with the
Government’s recently announced boost to infrastructure spending and as benefits from Project Strive, cost
efficiencies and other proactive measures take effect.
Steel & Tube expects to report its final half year financial results and a further update on trading on 24
February 2020. As previously advised the adoption of NZ IFRS 16 will result in an improvement to reported
EBIT and a reduction in reported NPAT.

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, T: +64 27 246 2505 E: jackie@ellisandco.co.nz