| Wed 21 May 2008, 8:01 | | WEA - W G Wearne - Reviewed Condensed Financial Re |
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WEA
WEA
WEA - W G Wearne - Reviewed Condensed Financial Results for the year ended
29 February 2008
W G Wearne Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005983/06)
(JSE code: WEA ISIN: ZAE000078002)
("Wearne" or "the company")
Highlights
Revenue up 53% to R539 million
Headline earnings up 51% to R39 million
Earnings per share up 39% to 27.5 cents
Headline earnings per share up 37% to 26.9 cents
Net tangible asset value per share up 26% to 114.9 cents
REVIEWED CONDENSED FINANCIAL RESULTS
FOR THE YEAR ENDED 29 FEBRUARY 2008
Condensed Group Income Statements
Reviewed Audited
February February
2008 2007
R`000 R`000
Revenue 538 805 352 500
Gross profit 170 767 106 367
Other income 2 053 1 789
Administration expenses (62 609) (48 877)
Earnings before interest, tax, 110 211 59 279
depreciation and amortisation
("EBITDA")
Depreciation (31 557) (16 484)
Profit before interest and taxation 78 654 42 795
Net interest paid (23 727) (6 461)
Profit before taxation 54 927 36 334
Taxation (14 998) (10 252)
Profit attributable to ordinary 39 929 26 082
shareholders
Reconciliation of headline earnings:
Profit attributable to ordinary 39 929 26 082
shareholders
Less IAS 16 profit on disposal of (784) (184)
property, plant and equipment
Headline earnings attributable to 39 145 25 898
ordinary shareholders
Weighted average shares in issue on 145 484 131 584
which earnings are based (000)
Shares trust treasury shares (000) 3 569 4 535
Purchase of subsidiary to be settled 1 000 -
by share issue (000)
Fully diluted weighted average 150 053 136 119
shares in issue (000)
Earnings per share (cents) 27.5 19.8
Headline earnings per share (cents) 26.9 19.7
Fully diluted earnings per share 26.6 19.2
(cents)
Fully diluted headline earnings per 26.1 19.0
share (cents)
Condensed Group Balance Sheets
Reviewed Audited
February February
2008 2007
R`000 R`000
ASSETS
Non-current assets 402 120 269 911
Property, plant and equipment 390 201 263 896
Goodwill 6 710 2 419
Investments 5 209 3 596
Current assets 119 051 82 047
Inventories 28 119 13 857
Trade and other receivables 88 226 58 708
Cash and cash equivalents 2 706 9 482
Total assets 521 171 351 958
EQUITY AND LIABILITIES
Equity 179 083 139 312
Issued capital 146 145
Share premium 77 096 77 462
Non-distributable reserves 121 19
Retained earnings 101 720 61 686
Non-current liabilities 217 976 132 111
Environmental obligation 14 664 12 794
Secured loans 29 671 28 117
Instalment sale creditors 152 817 78 031
Deferred taxation 20 824 13 169
Current liabilities 124 112 80 535
Trade and other payables 73 692 51 969
Current portion of non-current 47 436 26 851
liabilities
Taxation 2 984 1 715
Total equity and liabilities 521 171 351 958
Number of shares in issue at year 150 000 150 000
end (000)
Net asset value per share (cents) 119.4 92.9
Net tangible asset value per share 114.9 91.3
(cents)
Condensed Group Statements of Changes in Equity
Share Non- Retained Total
capital distribu earnings R`000
R`000 table R`000
reserves
R`000
Balance 1 March 2006 23 567 - 35 193 58 760
Share capital issued 20 - - 20
Premium on share 54 020 - - 54 020
capital issued
Share-based payment - 19 - 19
reserve
Profit for the year - - 26 082 26 082
Investment fair value - - 411 411
adjustment
Balance 28 February 77 607 19 61 686 139 312
2007
Share capital issued 1 - - 1
Premium on share 984 - - 984
capital issued
Share issue expenses (1 350) - - (1 350)
Share-based payment - 102 - 102
reserve
Profit for the year - - 39 929 39 929
Investment fair value - - 105 105
adjustment
Balance 29 February 77 242 121 101 720 179 083
2008
Condensed Group Cash Flow Statements
Reviewed Audited
February February
2008 2007
R`000 R`000
Cash flows from operating activities 57 348 39 763
Cash generated from operating activities 87 043 49 891
Net interest and dividends paid (23 622) (5 653)
Taxation paid (6 073) (4 475)
Cash flow from investing activities (162 557) (216 939)
Property, plant and equipment acquired (169 530) (217 911)
Proceeds on disposals of property, plant 12 774 1 792
and equipment
Investments acquired (1 510) (820)
Goodwill purchased (4 291) -
Cash flow from financing activities 98 433 166 672
Share capital 1 20
Share premium (366) 54 445
Non-current loans 78 213 102 384
Current loans 20 585 9 823
Net decrease in cash and cash (6 776) (10 504)
equivalents
Cash and cash equivalents at beginning 9 482 19 986
of period
Cash and cash equivalents at end of 2 706 9 482
period
Segmental Reporting
Ready Aggregate Concrete Eliminati Consolida
Mixed s products ons ted
Concrete R`000 R`000 R`000 R`000
R`000
2008
Revenue 376 983 333 409 3 094 (174 681) 538 805
Gross 70 036 100 249 482 - 170 767
Profit
2007
Revenue 271 306 133 025 - (51 831) 352 500
Gross 60 874 45 493 - - 106 367
Profit
OVERVIEW
The directors of Wearne present the reviewed annual financial statements
for the year ended 29 February 2008. The group again showed excellent
growth despite the fact that trading conditions were a lot more challenging
in the second part of the year due to high rainfalls and the rising
interest rate environment. Unscheduled load shedding by Eskom in January
also caused severe disruptions to operations. The board has approved
additional capital expenditure to the value of R10 million to ensure that
there is uninterrupted power supply to all operations.
The acquisition of the Willowsfountain Quarry in Pietermaritzburg has still
not been completed due to the fact that a new mining lease with the
property owners has not been concluded. Shareholders will be informed of
any new developments.
FINANCIAL RESULTS
Group revenue increased by 53% to R 538.8 million (2007: R352.5 million).
Gross profit increased by 61% to R170.7 million (2007: R106.3 million).
EBITDA again increased significantly, by 85%, to R110 million (2007: R59.2
million). EBITDA margins were maintained at 20% (2007: 17%) for the full
financial year. This was achieved through a moderate increase in gross
profit margins, but, more significantly, by better recovery of
administrative expenses through higher turnover figures.
Depreciation charges increased by 91% to R31.5 million (2007: R16.4
million) as the group acquired plant and equipment to the value of R170
million during the full financial year.
The net interest charge escalated to R23.7 million (2007: R6.4 million).
This was mainly due to new hire purchase agreements concluded on plant and
equipment to the value of R97.2 million as well as the rise in interest
rates. The board is continuously reviewing the group`s exposure to long
term debt and will ensure that cash flow is sufficient to service all
debts.
Profit attributable to ordinary shareholders increased by 53% to R40.0
million (2007: R26.0 million). Fully diluted headline earnings per share
increased by 37% to 26.1 cents (2007: 19.0 cents).
SEGMENTAL REPORTING
Aggregate division
Aggregate turnover more than doubled due to the acquisition of the De Bruyn
Sand business as well as the Tzaneen quarry. The group also acquired three
additional mobile crushing plants as well as three drill rigs to bolster
Wearne`s contract crushing, drill and blast capabilities. All of these
operations are grouped in the aggregate division. Gross profit more than
doubled to R100 million (2007: R45.5 million). Gross profit margins
however decreased to 30% (2007: 34%) due to the lower margins achieved in
the contracting environment.
Ready mixed concrete ("RMC") division
The RMC division managed to increase turnover by 39% to R376.9 million.
This was in line with the growth target of 25% increase in volumes. A
gross margin of 19% was achieved, compared with 22% in 2007. The reduction
in margin was attributable to the VRESAP contract, which was at a lower
gross profit margin than other contracts. This contract was concluded in
February 2008.
Concrete product manufacturing ("CPM") division
The Bethlehem brick plant joint venture was commissioned in June 2007 and
achieved break-even within nine months. A gross profit margin of 16% was
achieved. The full potential of this operation will only be visible after
a full year of trading.
The pre-cast concrete pipe plant in Polokwane will be commissioned in June
2008 and will form part of the CPM division.
BASIS OF PREPARATION OF THE REVIEWED RESULTS
Statement of compliance
The condensed financial statements comprise a consolidated balance sheet at
29 February 2008, a consolidated income statement, consolidated statement
of changes in equity and summarised consolidated cash flow statement for
the year ended 29 February 2008. The condensed financial statements have
been prepared in accordance with the recognition and measurement criteria
of International Financial Reporting Standards ("IFRS") and the
presentation and disclosure requirements of IAS 34, Interim Financial
Reporting, JSE Listings Requirements and South African Companies Act.
The accounting policies applied for the year are consistent with those of
the prior year with the exception of the adoption of IFRS 7 and 8.
Basis of measurement
The condensed financial statements have been prepared on the historical
cost basis except for certain financial instruments measured at fair value.
REVIEWED RESULTS
The auditors, RSM Betty & Dickson (Johannesburg), have reviewed these
results and their unmodified review opinion is available for inspection at
the company`s registered office.
BUSINESS COMBINATIONS
The acquisition of the quarry in Tzaneen, Wearne Quarries Limpopo (Pty)
Limited, became effective on 1 August 2007. That entity`s revenue,
included in the results presented was R7 986 000, and it generated a loss
after tax of R458 000. The goodwill acquired on the acquisition, after an
adjustment for the finance cost portion on the deferred payment, was
R4 290 000.
PROSPECTS
Even though the there has been a significant downturn in the residential
building market, Wearne is confident that it will realize its growth
prospects for the short to medium term. The slowdown in the residential
market will specifically affect the RMC division, but the division will
move its focus to the RDP housing market to increase its exposure to that
side of the market which is still growing.
The RMC division is also tendering on various major civil engineering
projects, including the Gauteng Freeway Improvement Project. The growth in
the civil engineering sector is continuing, and is set to do so for the
foreseeable future. This growth is also simultaneously creating many
opportunities for growth in the aggregate division, as the building of
roads and infrastructure consumes larger quantities of aggregate than the
residential housing sector.
The Board has approved further capital expenditure of R50 million to
replace existing plant and equipment as well as for new plant for projects
tendered on.
SUBSEQUENT EVENTS
Shareholders are referred to the announcement dated 19 May 2008 and are
advised that Wearne has, subject to certain conditions precedent, acquired
Portland Holdings (Pty) Limited ("Portland Holdings") and the minority
interest in certain subsidiaries of Portland Holdings ("Portland Group")
for a purchase consideration of R122,6 million from Portland Readymix
Trust, Anco Besigheids Trust, Willchrest Besigheids Trust ("the vendors").
The related property (Portion 8 of Farm 1098 Hooggekraal) on which the
stone quarry is located has been acquired for R40,5 million from Visserhok
Investments (Pty) Limited ("Visserhok"). An additional amount which shall
not exceed R60 million will also be paid to the vendors for Portland
Hollowcare Slabs (Pty) Limited, a new company recently established, after
the 31 August 2010 profit after tax has been finally agreed.
The Portland Group was established 20 years ago, in the Durbanville area,
in the Western Cape and is a supplier of ready mixed concrete and aggregate
(sand and stone used in the making of concrete) as well as road building
material to the construction industry.
The Portland Group provides a strategic geographical expansion opportunity
to Wearne into the lucrative Western Cape market.
The purchase consideration is subject to certain profit warranties and will
be discharged on the effective date by the issue and allotment by Wearne to
the vendors of 35 033 046 Wearne ordinary shares at an issue price of R3,50
per share. The portion of the purchase consideration that is subject to
the profit warranties will be discharged by the issue and allotment of
Wearne shares at an issue price equal to the greater of R3,50 or the 30 day
volume weighted average share price per Wearne ordinary share preceding the
payment date. The purchase price for the property will be settled in cash
to Visserhok against registration of transfer of Portion 8 of Farm 1098
Hooggekraal into the name of Wearne.
DIVIDEND POLICY
In line with group policy no dividend has been declared for the period.
STATEMENT ON GOING CONCERN
The condensed financial statements have been prepared on the going-concern
basis since the directors have every reason to believe that the company has
adequate resources in place to continue in operation for the foreseeable
future.
By order of the Board
21 May 2008
S J Wearne
O J G Harvey
Chief Executive Officer
Chief Financial Officer
CORPORATE INFORMATION
Non executive directors: B Mkhonto, E Moloi
Executive directors: S J Wearne (Chairman and CEO); J C Wearne; B J du
Toit; O J G Harvey
Registration number: 1994/005983/06
Registered address: 3 Kiepersol House, Stonemill Office Park, 300 Acacia
Road, Cresta,2195
Postal address: PO Box 1674, Cresta, 2118
Company secretary: O J Le Roux
Telephone: (011) 459 4500
Facsimile: (011) 478 5481
Transfer secretaries: Computershare Investor Services (Pty) Limited
Designated Adviser: Vunani Corporate Finance
These results and an overview of Wearne are available at www.wearne.co.za.
Date: 21/05/2008 08:01:20 Produced by the JSE SENS Department.
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