Steel & Tube Shareholder Newsletter and Half Year Review

Dear Shareholder
For the past two years, your Board and
Management team have been focused on
improving Steel & Tube. Our efforts remain
focused on our four strategic pillars.
Commitment to safety and quality
Putting the customer at the heart
of our business
Operational and supply chain
excellence
Supporting a winning team
This work has been carried out in an
environment of declining market activity
and ongoing competitive pricing pressures.
While these difficult market conditions have
been impacting on our financial performance,
we are making good progress in the areas
which we can control and our business is now
stronger and more efficient.
In this Half Year review you can read about
some of the initiatives we have been
undertaking over the past six months.
Half Year Report 2020
Summary

The COVID-19 virus has the potential to impact
on site operations, customer demand and the
timing of projects and some of our suppliers.
To date there has been no significant impact
on the business and we have plans to take
mitigating actions where possible. The situation
will continue to be monitored.
Whilst the potential impact of COVID-19
is unknown, an improved second half
performance is expected as we benefit from
Project Strive and commencement of significant
new contracts.
To view Steel & Tube’s Interim Results
announcement, Financial Statements and
Investor Presentation, please go to
www.steelandtube.co.nz/investor/media
QUALITY
Lloyd’s Register independent steel mill
audits ongoing
Random sampling and independent
testing underway
Automation of test certificate process
underway
ESG framework and Key Performance
Indicators under development
SAFETY
National review of site Standard
Operating Procedures and supporting
Job Safety Analysis
Life Saver Breach compliance and
enforcement
Safety awareness campaign ‘Stand in
the Gap’ attended by employees and
contractors
Critical Risks Panels established, led by
Lead Team
TOTAL RECORDABLE EMPLOYEE INJURY
FREQUENCY RATE
5
4
2
1
0
31 DEC 201831 DEC 2019
4.193.65
3
1H20 PERFORMANCE
PROGRESS HIGHLIGHTS
CONTINUING COMMITMENT TO QUALITY, HEALTH,
SAFETY AND SUSTAINABILITY
STEEL & TUBE HALF YEAR REPORT 2020 SUMMARY
REVENUE
$232.0M
ROBUST OPERATING
CASHFLOW $17.1M
Pre-IFRS 16 $10.5M
2
N PAT $ (3 7. 0)M
Pre-IFRS 16 $(36.8)M
2
E B IT $(3 3 .4)M
NORMALISED EBIT $5.7M
1
Pre-IFRS 16 $3.1M
2
FURTHER REDUCTION
IN NET DEBT TO $10.9M
INTERIM DIVIDEND
1.5 CENTS
The challenging market conditions have
continued to impact on our sales and volumes,
offsetting the gains we are delivering from our
Project Strive initiatives. The primary impact
has come from volume decreases in the vertical
construction sector and the contraction of the
stainless steel market.
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 operational property footprint from 48 in
January 2018 to 31 locations today, additional
cost efficiencies, the launch of the first phase of
digital initiatives and further development of our
network strategy.
Market share has been maintained and, despite
the decrease in revenue, margins have also
been maintained. The continued focus on cost
management has seen underlying operating
costs reduced by $2.8m or 5.7%. We have
improved productivity with our headcount
changed from 1,100 to under 1,000. Property
and freight costs have also reduced with a more
efficient network. These benefits were partially
offset in 1H20 due to restructuring & relocation
costs related to the streamlining of our network;
and an increase in doubtful debt provisioning
and write-offs, predominantly due to the sudden
liquidation of a major customer.
We have also been focused on inventory
management, in particular increasing the levels
of core stock availability and reducing the
number of inventory items by rationalising low
demand or older products.
Ensuring a strong balance sheet remains a
priority for the Board. A disciplined approach to
working capital and improving collection rates
has benefitted underlying operating cashflow,
and this has supported a further reduction in net
debt from $15m to $10.9m.
The Board remains confident in management’s
transformation plans and has maintained the
dividend at 1.5 cents per share.
OUTLOOK
We are seeing signs of improving business
confidence including the recent Government
announcement to increase infrastructure
investment, which should lead to increased
market activity. We continue to take actions to
improve the business and are well positioned
to benefit from any market uplift or easing in
competitive pressure.
A significant amount of new work has recently
been secured by Steel & Tube, which will
commence in the second half. This includes
additional work on the Metro Sports Centre in
Christchurch; the Napier 6 Wharf; the Mangere
Bridge rebuild in Auckland, and early work on a
large rail project.
1. Normalised EBIT excludes $39.1m in non-trading adjustments being
$(2.0)m restructuring and relocation costs and a non-cash goodwill
impairment of $(37.1)m
2. Adoption of NZ IFRS 16 Leases increased EBIT by $2.6m and Operating
Cashflow by $6.6m and reduced NPAT by $0.2m in 1H20
Susan Paterson
Chair
Mark Malpass
Chief Executive Officer

BUILDING &
CONSTRUCTION
RURAL
MANUFACTURING
& INDUSTRIAL
INTRODUCING STANLEY THE CHATBOT
Digital technologies are behind some of our important transformation
work, helping to enhance our customer experience, streamline the
backend of many of our processes using digital forms and workflows,
and support our quality, health and safety initiatives.
Stanley is Steel & Tube’s new Chatbot, and is now live on our website as
a trainee, learning about our business and providing information 24/7
in response to basic customer queries. For example, customers can ask
Stanley about their order status, or they can find out about opening
hours, branch locations or make general product enquiries. Since first
launching in late December, Stanley has answered more than 1,500
customer enquiries.
PROGRESS HIGHLIGHTS
DELIVER ON CUSTOMER SERVICE PROMISE
Successfully launched Chatbot ‘Stanley’,
allowing customers to query and receive
answers about orders and shipments
Launched “Group Product Guide” to
drive awareness and sales across our
broad range of products
Currently conducting customer trials
with a new range of engagement
technologies that will fundamentally
improve customer experience,
buying and service through digital
technologies.
Continuing to build on customer
delivery performance and satisfaction
SOLUTIONS FOR
BUILDING & CONSTRUCTION
MANUFACTURING &
INDUSTRIAL
RURAL
FROM
THE
GROUND
UP
GROUP PRODUCT GUIDE
CREATION OF GROUP
PRODUCT GUIDE
Steel & Tube has released a new group product
guide – FROM THE GROUND UP – which
provides an introduction into our wide range of
products.
Focused around Steel & Tube’s three
key markets – Building & Construction,
Manufacturing & Industrial, and Rural – the
new guide provides an overview of the range
of products relevant to each sector. It is being
marketed to architects, engineers, specifiers,
builders and others, with the aim of promoting
Steel & Tube’s one-stop-shop for steel
requirements.
STEELANDTUBE.CO.NZ
Mark Malpass
Chief Executive Officer

PROGRESS HIGHLIGHTS
SUPPORTING A WINNING TEAM
Continued investment into training and development
– Launch of S&T Area Leadership programme – focus on sales, commercial
skills and leading digital change
– Offered Workplace Literacy & Numeracy programmes to staff, to support
those with English as a second language, and to provide more advanced
Business English skills for team leaders
Creation of new incentive scheme for sales teams and customer
service employees
Partnership in the MBIE Sector Workforce Engagement
Programme, providing training and employment opportunities
for school leavers and building New Zealand’s construction skills
Improved internal communication tools for all employees
Productivity improving - headcount changed from 1,100 to
under 1,000
LITERACY & NUMERACY PROGRAMME
Twelve staff across three sites in Auckland recently took the opportunity to
take part in a Workplace Literacy programme offered by Steel & Tube.
The programme is for 2 hours each week over 20 weeks during work
time. Staff get to increase their understanding of numeracy and literacy
which is beneficial for them, both in the workplace, in their homes and
communities. This helps staff feel more confident in reading, writing,
following H&S instructions, asking questions to their managers, and being
able to listen, communicate and contribute in team forums.
Two programmes have been run, one focused at a supervisor/ team leader
level, and the other for those for whom English is their second language.
These are proving very popular and beneficial for our staff.
www.steelandtube.co.nz
PROGRESS HIGHLIGHTS
OPERATIONS AND SUPPLY CHAIN EXCELLENCE
Focussed on Distribution division
turnaround:
– Improved freight, procurement, direct labour
efficiency, maintained product margins
– Redefined branch product footprints ensuring
right inventory in the right locations
– Successful trial of barcode scanning
technology, leveraging the investment in the
ERP IT system
Continued property footprint reduction
by exiting / consolidating a further
four operational sites in 1H20, whilst
maintaining regional presence (31 sites
vs 48 in January 2018)
STORE REVAMPS A WIN-WIN
FOR CUSTOMERS & STAFF
One of the STRIVE initiatives this year is to
increase store-in-store sales of fortress fasteners
within the S&T Distribution network. In line
with this, several stores, including our Napier
and Rotorua stores, have been revamped with
updated signage and a new retail layout. In
particular, the Fortress range has been expanded
and been given increased brand presence inside
and outside the trade shops. Customer feedback
has been great and these stores are already
starting to see a lift in fastenings and other
tradeshop sales.
1DUNEDIN
1TIMARU
2PALMERSTON NORTH
1
BLENHEIM
2NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
2NELSON
5WELLINGTON
6
9AUCKLAND
4
11CHRISTCHURCH
48 SITES
NATIONWIDE
31 SITES
NATIONWIDE
28 SITES
NATIONWIDE
JANUARY
2018
DECEMBER
2019
1DUNEDIN
1TIMARU
2
PALMERSTON NORTH
1NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
5
7AUCKLAND
4HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
1DUNEDIN
1TIMARU
1PALMERSTON NORTH
1NEW PLYMOUTH
INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
4
7AUCKLAND
3HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
UPCOMING
2
HAWKES BAY
(Includes Gisborne)
1DUNEDIN
1TIMARU
2PALMERSTON NORTH
1
BLENHEIM
2NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
2NELSON
5WELLINGTON
6
9AUCKLAND
4
11CHRISTCHURCH
48 SITES
NATIONWIDE
31 SITES
NATIONWIDE
28 SITES
NATIONWIDE
JANUARY
2018
DECEMBER
2019
1DUNEDIN
1TIMARU
2
PALMERSTON NORTH
1NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
5
7AUCKLAND
4HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
1DUNEDIN
1TIMARU
1PALMERSTON NORTH
1NEW PLYMOUTH
INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
4
7AUCKLAND
3HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
UPCOMING
2
HAWKES BAY
(Includes Gisborne)
1DUNEDIN
1TIMARU
2PALMERSTON NORTH
1
BLENHEIM
2NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
2NELSON
5WELLINGTON
6
9AUCKLAND
4
11CHRISTCHURCH
48 SITES
NATIONWIDE
31 SITES
NATIONWIDE
28 SITES
NATIONWIDE
JANUARY
2018
DECEMBER
2019
1DUNEDIN
1TIMARU
2
PALMERSTON NORTH
1NEW PLYMOUTH
2INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
5
7AUCKLAND
4HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
1DUNEDIN
1TIMARU
1PALMERSTON NORTH
1NEW PLYMOUTH
INVERCARGILL
2WHANGAREI
1NELSON
3WELLINGTON
4
7AUCKLAND
3HAWKES BAY
(Includes Gisborne)
2CHRISTCHURCH
UPCOMING
2
HAWKES BAY
(Includes Gisborne)
STEEL & TUBE
NETWORK
OPTIMISATION
HEAD OFFICE
Level 7, 25 Victoria Street, Petone, Lower Hutt 5012, New Zealand
PO Box 30543, Lower Hutt 5040, New Zealand
Ph: +64 4 570 5000 Fax: +64 4 569 2453 Email: info@steelandtube.co.nz