Steel & Tube FY20 Trading Update

10 August 2020
STU / NZX ANNOUNCEMENT

STEEL & TUBE FY20 TRADING UPDATE
Steel & Tube Holdings Limited (NZX: STU) has today provided a trading update and forecast for its FY20
results which are due to be announced on Friday 28 August 2020. Details of the FY20 results investor call
will be released shortly.

FY20 normalised EBIT (Earnings Before Interest and Tax)
1
is expected to be approximately break-
even subject to completion of audit work. On a pre-NZ IFRS 16
2
basis, FY20 normalised EBIT is
expected to be a loss of approximately $5m to $7m.

STU expects to report strong operating cash flows of approximately $26m (pre-NZIFRS 16) on the
back of continued working capital discipline, with inventory significantly reduced to
approximately $101m at 30 June 2020.

STU’s balance sheet remains strong with the Group expecting to report net cash of
approximately $7m at 30 June 2020.

Post-balance date, STU has completed the sale of a surplus Gisborne property with net proceeds
of $1.3m to be applied to further reducing borrowings.

In addition to waivers of existing bank covenants for 30 June and 31 December 2020, STU has
also agreed temporary revised covenants with its bank syndicate for the remainder of FY21,
which it expects to comfortably meet.

The COVID-19 Alert level 4 lockdown and then progressive return to more normal business
operations occurred during a traditionally high earning period for the business. Post lockdown,
sales recovered through May and in June were in line with the prior year.

As previously advised, STU expects to report a significant loss for FY20 after including a $37m
non-cash impairment of goodwill recognised in 1H20, and other write-downs due to the
acceleration of branch network changes (including site consolidations), business restructuring
and digitisation in response to anticipated post Covid-19 market conditions.

Steel & Tube’s geographic sales strength, improved customer service functions, recent investment in
digital capabilities and ecommerce options for customers are a key source of competitive advantage for
the company. The previously advised restructuring programme to ensure a cost base that is fit for
purpose and to realign STU’s cost base with the expected economic recession is well underway.
Chief Executive Mark Malpass said “The COVID-19 pandemic and lockdown have had a significant impact
on FY20 results, and has intensified the softening we had seen in vertical construction prior to COVID. In
response we have accelerated restructuring of the company including our branch network and
organisation. Our FY20 result has been impacted by non-cash goodwill and other business restructuring
and digitisation related impairments, however I am pleased at how our company and our people have
come through this challenging period.
“We start the new financial year with a strong balance sheet and a leaner cost structure. Our investment

1
Normalised EBIT excludes non-trading adjustments including non-cash goodwill impairment and other write-
downs due to acceleration of branch network changes, business restructuring and digitisation and the impact
of Covid-19.
2
STU adopted NZIFRS 16 Leases on 1 July 2019. The adoption of this standard results in the reclassification of
operating lease expenses to depreciation and financing costs resulting in an increase to EBIT and operating
cash flow. Pre-NZIFRS16 financial information is provided to assist with comparison to FY19 reported results.

in digital technology has laid a critical platform that is supporting our move to a service model that
combines ease of access and customer service. We are confident Steel & Tube is well positioned to
weather a range of forecast economic scenarios and importantly to take advantage of the opportunities
ahead of us.”
ENDS
For further information please contact:
Greg Smith
Steel & Tube CFO
Tel: +64 21 755 803
Email: greg.smith@steelandtube.co.nz
Mark Malpass
Steel & Tube CEO
Tel: +64 27 777 0327
Email: mark.malpass@steelandtube.co.nz
Jackie Ellis
Media and communications
Tel: +64 27 246 2505
Email: jackie@ellisandco.co.nz