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FWD
FWD
FWD - Freeworld Coatings - Audited Results And Cash Dividend Declaration For
The Year Ended 30 September 2008
FREEWORLD COATINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2007/021624/06)
ISIN: ZAE000109450
Share Code: FWD
Freeworld coatings limited
the first year of our journey
AUDITED RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30
SEPTEMBER 2008
Highlights
- Revenue up 15% to R2 697 million
- Operating profit up 10% to R397 million
- HEPS up 15% to 106 cents per share
- Operating cash flows of R376 million
- Final dividend of 10 cents per share; total dividend of 20 cents per share
- Acquisition of Napier intellectual property
- Plascon awarded Deloitte`s Best Manufacturing Company to Work For
Results have been compared for illustrative purposes to the restated pro-
formas.
Freeworld CEO, Andre Lamprecht, commented
"Against the current economic background, these results represent an
excellent performance. We increased our revenues in all operations and
margins were maintained at high levels. We expect the year ahead will even
be more challenging, but we remain optimistic that we will perform
competitively. A key focus will be on fixed domestic investment where
infrastructure will remain a significant driver in South Africa beyond
2010."
Commentary
Trading environment
Prior to our listing, our prognosis for 2008 was that it would be a year of
modest growth. At the half year the Board commented that "economic
conditions are constrained in South Africa. High interest rates, with
further rises likely, strongly rising inflation and strongly rising fuel,
energy and food costs are reducing discretionary spending. The slow down in
consumer spending will impact our targets in the Decorative Coatings
segment. This will be offset, at least to some extent, by continued
increases in public infrastructure spending. In this context the company is
cautious about results for the second half, but expects to continue to do
well in these increasingly challenging circumstances".
Since then economic conditions have deteriorated further due to the
financial crisis and a far more sanguine outlook for the world economy.
Financial results
Against this economic background, we believe that these results represent an
excellent performance and must express our sincere appreciation to all the
staff for their efforts and dedication.
As this is the first trading year for Freeworld Coatings Limited and its
first year end results as a separately listed company, no comparatives have
been shown on the Income Statement and Cash flow Statement. However, in the
commentary we have compared these results against the restated pro-forma
prior year financial information, which was made available at the time of
announcing our interim results and "prior year" is used in this context.
Profit
Revenue from operations for the financial year to September at R2.7 billion
is 15% higher than the prior year.
EBITDA increased by 10% to R465 million as margins came under pressure,
declining from 18.1% to 17.2% of sales. This is attributable to higher input
costs, compounded by a devaluing currency and pressure from customers to
hold or reduce prices in an environment of slowing economic growth, somewhat
offset by favourable fair value adjustments on foreign exchange contracts.
Operating profit likewise increased by 10% to R397 million.
Net finance costs, as a consequence of increases in JIBAR, are 17% higher
than the prior year.
The tax charge was favourably impacted by reduction in the corporate tax
rate.
Income from associates increased by 51% to R22 million with both the
International Paints and the Du Pont Freeworld joint ventures performing
strongly.
The net profit is R217 million, with headline earnings per share (HEPS)
increasing by 15% to 106 cents against the prior year.
The directors have declared a final dividend of 10 cents per share as
Freeworld Coatings remains positioned as a growth company. Dividends
declared for the year total 20 cents, which the directors consider to be
prudent, particularly in the prevailing economic climate.
Balance Sheet
Total assets grew by 6% to R4.5 billion as a result of the capital
expenditure program and increases in working capital, in particular stock
which is 27% higher than last September. The increase in inventory is due
largely to higher input costs as evidenced by the fact that our raw material
index has increased by more than 20% from last September. Higher inventory
levels were also purposely built to generate stock ahead of the peak period.
Interest bearing debt (net of cash) at R873 million has reduced by R73
million, and translates into a debt to equity ratio of 31%.
Cash flow and capital expenditure
Cash generated from operations amounted to R376 million with the cash inflow
from operating activities of R192 million being used to acquire property,
plant and equipment totalling R126 million and intangibles of R48 million,
the bulk of the latter being attributable to the acquisition of Napier
environmental technologies intellectual property.
Our R126 million investment in capital expenditure includes the commencement
of the capital projects at the factory site in Mogale City in the country`s
industrial and commercial heartland of Gauteng. In the first phase, the new
offices which now can accommodate all Plascon staff have recently been
completed. On the site a new raw material and packaging warehouse is being
built, which with the growth in the existing business, will eliminate a
critical logistical bottleneck in manufacturing. The old office site will
also in future house the new finished goods warehouse. The investment also
includes the purchase of a building for our Newcastle depot, the
establishment of our new corporate offices in Paulshof, upgrades to the
Mobeni warehouse and Port Elizabeth administrative offices, as well as
continued expenditure on the upgrade and modernisation of our manufacturing
facilities.
Freeworld Coatings plans to further rejuvenate all its sites in South Africa
in the next few years.
Segmental comment
Decorative Coatings
The Decorative Coatings segment, increased sales by 15% to R2 billion and
EBITDA by over 11% to R322 million in the year despite challenging economic
conditions, in particular in our South African home market where rising
inflation and interest rates weighed on the individual consumer segment.
However, a strong performance in the trade and industrial sector helped
offset this pressure in the individual consumer segment which represents
only about 32% of sales volumes.
The award to Plascon, with our largest manufacturing operations, of the
"Deloitte Best Company to Work for in the Manufacturing Industry" was a
significant accolade after some years of sustained work to embed a culture
which truly creates value for employees who play a significant part in the
commercial success of the business.
Notwithstanding higher global oil and commodity prices and mostly
unfavourable exchange rates, our operations in the rest of southern Africa
also performed well, with exports from our home base to a number of African
countries also increasing by nearly 50%.
Performance Coatings
The segment produced solid results lifting both turnover and profit. Higher
raw material costs and adverse foreign exchange fluctuations pressured
margins in the segment, which includes our Automotive Coatings, Specialised
Coatings, Complementary Products and Colourant System businesses.
Turnover rose 8% to R995 million with EBITDA increasing by 3% to
R149 million assisted by stringent cost control.
During the year the transfer of production in automotive coatings from
solvent borne to waterborne products, which is produced in the joint
venture, continued. This transfer is partly reflected in the 50% increase in
profit from associates. Without this effect, EBITDA in performance coatings
would have been around 8% higher than in the prior year.
Outlook
In an environment of significant uncertainty in global financial markets,
the Decorative Coatings Segment will maintain its firm focus on limiting
input costs and closely managing prices and margins. High fuel and
electricity costs are placing an increasing burden on overall cost
management, reinforcing our approach of strict expense control and continued
increased productivity throughout the organisation. In line with our
approach to be willing to do things differently so as to find a better way,
we continue to look at new ways of improving our overall levels of
productivity.
Pro-active and positive brand management remains a strategic theme for all
our businesses, and in the year ahead we plan to integrate the strong
Plascon brand and its sub-brands with Freeworld Coatings` corporate brand.
The same holds true for the other brands. Product innovation remains a
cornerstone of our strategy to build on our strong brand equity.
While we face an economic outlook of most uncertain circumstances we are
very well positioned in a sector that has somewhat more robust prospects.
Fixed domestic investment with particular focus on infrastructural
investment will remain a significant driver in South Africa and in a number
of African countries in which we have interests. In all these societies the
economies are also now significantly larger than a few years ago and have
reached a level where investment and disposable income can sustain larger
demand despite the current pressure. We believe that this construction
activity will provide good growth opportunities to Freeworld Coatings, even
beyond 2010 when South Africa is scheduled to host the 2010 FIFA World Cup
football tournament, in line with the South African government`s stated and
already budgeted fixed domestic investment programs some of which have
already commenced, of more than R600 billion over the period ahead.
The business will continue to pursue suitable acquisition opportunities that
fit its strategic direction.
The year ahead will be challenging but we remain optimistic that the company
will continue to perform competitively.
RM Godsell AJ Lamprecht
Chairman Chief Executive Officer
Cash Dividend declaration for the year ended 30 September 2008
Cash dividend number 2
Notice is hereby given that the following dividend has been declared in
respect of the year ended 30 September 2008: Number 2 (final dividend) of 10
cents per ordinary share.
In compliance with the requirements of the JSE Limited, the following dates
are applicable.
Last day to trade Friday 9 January 2009
Securities start trading ex-dividend Monday 12 January 2009
Record date to determine who received Friday 16 January 2009
the dividend
Electronic transfer of funds or Monday 19 January 2009
cheques posted/CSDPs and brokers
credited
Share certificates may not be dematerialised or rematerialised between
Monday 12 January 2009 and Friday 16 January 2009 both days inclusive.
On behalf of the Board
ELA Chamberlain
Secretary
Contact Number: 0861 252 846 / (011) 208-5900
Contact College Hill
Nicholas Williams
Contact Number: (011) 447-3030/Mobile: 082 600 2192
Directors: RM?Godsell (Chairman), AJ Lamprecht (Chief Executive Officer), E
Links, MM Ngoasheng, B Ngonyama,
DB Ntsebeza, NDB Orleyn, PM Surgey, DA Thomas* (Australian)
Company Secretary: ELA Chamberlain
Transfer secretaries: Link Market Services South Africa (Proprietary)
Limited.
Directors` responsibilities and approval
for the year ended 30 September
The directors of Freeworld Coatings Limited ("Freeworld") have pleasure in
presenting the annual financial statements for the year ended 30 September
2008.
In terms of the South African Companies Act, 1973, as amended, the directors
are required to prepare annual financial statements that fairly present the
state of affairs and business of the company and of the group at the end of
the financial year and of the profit or loss for that year. To achieve the
highest standards of financial reporting, these annual financial statements
have been drawn up to comply with International Financial Reporting
Standards.
The annual financial statements comprise:
- the balance sheets;
- the income statements;
- the cash flow statements;
- segmental analyses.
The reviews by the chairman, the chief executive officer, chief financial
officer and the detailed segmental reviews discuss the results of operations
for the year and those matters which are material for an appreciation of the
state of affairs and business of the company and of the Freeworld group.
Supported by the audit committee, the directors are satisfied that the
internal controls, systems and procedures in operation provide reasonable
assurance that all assets are safeguarded, that transactions are properly
executed and recorded, and that the possibility of material loss or
misstatement is minimised. The directors have reviewed the appropriateness
of the accounting policies, and concluded that estimates and judgements are
prudent. They are of the opinion that the annual financial statements fairly
present the state of affairs and business of the company at 30 September
2008 and of the profit for the year to that date.
In addition, the directors have also reviewed the cash flow forecast for the
year to 30 September 2009 and believe that the Freeword group has adequate
resources to continue in operation for the foreseeable future. Accordingly,
the annual financial statements have been prepared on a going-concern basis
and the external auditors concur.
The annual financial statements were approved by the board of directors and
were signed on their behalf by:
RM Godsell. AJ Lamprecht
Chairman Chief Executive Officer
DA Thomas
Chief Financial Officer
Sandton
18 November 2008
Certificate by secretary
for the year ended 30 September
In terms of section 268G(d) of the South African Companies Act, 1973, as
amended (the Act), I certify that Freeworld Coatings Limited has lodged with
the Registrar of Companies all such returns as are required of a public
company in terms of the Act. Further, that such returns are true, correct
and up to date.
ELA Chamberlain
Secretary
Sandton
18 November 2008
consolidated income statement
for the year ended 30 September
Audited
2008
Note R`000
CONTINUING OPERATIONS
Revenue 2 696 744
EBITDA 464 577
Depreciation and amortisation (67 655)
Operating profit 396 922
Finance costs (141 808)
Income from investments 21 381
Profit before taxation 276 495
Taxation (81 944)
Profit after taxation 194 551
Income from associates 22 359
Net profit 216 910
Attributable to:
Minority shareholders 4 931
Freeworld Coatings Limited shareholders 211 979
216 910
Earnings per share 11 105
(basic and diluted in cents)
consolidated balance sheet
at 30 September
Restated
Audited
Audited
2008 2007
Notes R`000 R`000
ASSETS
Non-current assets 3 527 3 399 651
594
Property, plant and equipment 605 528 769
184
Goodwill 6 1 898 1 890 208
141
Intangible assets 7 795 767 471
194
Investment in associates 193 176 864
009
Finance lease receivables 315 536
Long term loans and receivables 9 906 10 283
Deferred taxation assets 25 845 25 520
Current assets 985 848 539
064
Inventories 460 361 595
129
Trade and other receivables 451 439 758
723
Taxation 2 030 514
Cash and cash equivalents 71 182 46 672
Total assets 4 512 4 248 190
658
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 2 583 2 418 796
409
Other reserves (20 0
579)
Retained income 190 0
119
Interest of shareholders of Freeworld 2 752 2 418 796
Coatings Limited 949
Minority interest 23 313 20 144
Shareholder loans - 22 187
Interest of all shareholders 2 776 2 461 127
262
Non-current liabilities 911 313 513
573
Interest-bearing liabilities 8 624 4 349
691
Deferred taxation liabilities 265 264 881
314
Provisions 21 568 21 501
Other non-interest-bearing liabilities - 22 782
Current liabilities 824 1 473 550
823
Trade and other payables 477 466 505
416
Provisions 7 800 6 921
Taxation 20 243 11 593
Short-term loans and bank overdrafts 8 319 988 531
364
Total equity and liabilities 4 512 4 248 190
658
consolidated statement of changes in equity
for the year ended 30 September
Net
actuarial
gains/
Share Foreign (losses)
capital currency on post-
and translation retirement
premium reserves benefits
R`000 R`000 R`000
Balance acquired at 2 418 796 - -
corporatisation
Changes in equity recognised
during 2008
Movement on foreign currency
translation reserve - 17 789 -
Net income/(loss) recognised - - -
directly in equity
Net actuarial gains and - 843
losses
Profit for the year - - -
Total recognised income and - 17 789 843
expense for the year
New shares issued during the 173 840 - -
year
Costs written off against (9 227) - -
share premium
Share holder loans repaid - - -
during the year
Increase in fair value of - - -
hedging instruments
Transfer to initial carrying - - -
amount of non-financial
hedged item on cash flow
hedge
Barloworld Share Option - - -
reserve
Freeworld Coatings Limited - - -
SARs expense recognised in
equity
Barloworld Limited Share - - -
Options/Rights expense
recognised in equity
Transfer of cash-settled - - -
liability not needed to
equity
Other reserve movements - - -
Dividends on ordinary shares - - -
Balance at 30 September 2008 2 583 409 17 789 843
Cash flow Equity Total Total
hedge compensation other retained
reserve reserves reserves income
R`000 R`000 R`000 R`000
Balance acquired at - - - -
corporatisation
Changes in equity
recognised during
2008
Movement on foreign
currency
translation reserve - - 17 789 -
Net income/(loss) - - - (1 473)
recognised directly
in equity
Net actuarial gains - - 843 -
and losses
Profit for the year - - - 211 979
Total recognised
income and expense
for the year - - 18 632 210 506
New shares issued - - - -
during the year
Costs written off - - - -
against share
premium
Share holder loans - - - -
repaid during the
year
Increase in fair 2 179 - - -
value of hedging
instruments
Transfer to initial
carrying amount of
non-financial hedged (2 179) - - -
item on cash flow
hedge
Barloworld Share - (44 999) (44 999) -
Option reserve
Freeworld Coatings
Limited SARs expense
recognised in equity - 2 784 2 784 -
Barloworld Limited - 2 002 2 002 -
Share Options/Rights
expense recognised
in equity
Transfer of cash- - 1 002 1 002 -
settled liability
not needed to equity
Other reserve - - - -
movements
Dividends on - - - (20 387)
ordinary shares
Balance at 30 - (39 211) (20 579) 190 119
September 2008
Attributable
to
Freeworld
Coatings Interest
Limited Share- of all
share- Minority holder share-
holders interest loans holders
R`000 R`000 R`000 R`000
Balance acquired at 2 418 796 20 144 22 187 2 461 127
corporatisation
Changes in equity
recognised during
2008
Movement on foreign
currency
translation reserve 17 789 - - 17 789
Net income/(loss) (1 473) - - (1 473)
recognised directly
in equity
Net actuarial gains 843 - - 843
and losses
Profit for the year 211 979 4 931 - 216 910
Total recognised
income and expense
for the year 229 138 4 931 - 234 069
New shares issued 173 840 - - 173 840
during the year
Costs written off (9 227) - - (9 227)
against share
premium
Share holder loans - - (22 187) (22 187)
repaid during the
year
Increase in fair - - - -
value of hedging
instruments
Transfer to initial
carrying amount of
non-financial hedged - - - -
item on cash flow
hedge
Barloworld Share (44 999) - - (44 999)
Option reserve
Freeworld Coatings
Limited SARs expense
recognised in equity 2 784 - - 2 784
Barloworld Limited 2 002 - - 2 002
Share Options/Rights
expense recognised
in equity
Transfer of cash- 1 002 - - 1 002
settled liability
not needed to equity
Other reserve - (234) - (234)
movements
Dividends on (20 387) (1 528) - (21 915)
ordinary shares
Balance at 30 2 752 949 23 313 - 2 776 262
September 2008
consolidated cash flow statement
for the year ended 30 September
2008
Note R`000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers 2 684 779
Cash paid to employees and suppliers (2 309 005)
Cash generated from operations 375 774
Finance costs (107 180)
Dividends received from associates 6 215
Interest received 21 381
Taxation paid (82 136)
Cash flow from operations 214 054
Dividends paid (including minority (21 915)
shareholders)
Cash inflow from operating activities 192 139
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on decrease in long term financial 3 614
assets
Acquisition of property, plant and (125 997)
equipment
Replacement capital expenditure (80 130)
Expansion capital expenditure (45 867)
Acquisition of intangible assets (48 027)
Proceeds on disposal of property, plant and 4 507
equipment
Net cash used in investing activities (165 903)
Net cash inflow before financing activities 26 236
CASH FLOWS FROM FINANCING ACTIVITIES
Share issue costs (9 227)
Repayment of amount due to Barloworld (868 769)
Capital (Pty) Ltd
Increase in long-term interest bearing 563 880
borrowings
Increase in short-term interest-bearing 312 390
liabilities
Net cash from financing activities (1 726)
Net increase in cash and cash equivalents 24 510
Cash and cash equivalents 46 672
at beginning of year
Cash and cash equivalents at end of year 71 182
segment reporting
for the year ended 30 September
For management purposes, the group is organised into two major operating
divisions, namely Decorative Coatings and Performance Coatings. These
divisions are the basis on which the group reports its primary segmental
information.
2008
Decorative Performance Total
Coatings Coatings Eliminations Group
R`000 R`000 R`000 R`000
BUSINESS SEGMENTS
Consolidated 1 967 704 994 796 (265 756) 2 696 744
segment revenue
Segment result
Earnings before
interest, tax,
depreciation and
amortisation
(EBITDA) 321 743 148 734 (5 900) 464 577
Depreciation and (48 065) (19 590) (67 655)
amortisation
Operating profit 273 678 129 144 (5 900) 396 922
Finance costs (141 808)
Income from 21 381
investments
Taxation (81 944)
Profit after tax 194 551
Income from 22 359
associates
Attributable to 4 931
minority
shareholders
Attributable to
Freeworld
Coatings
Limited 211 979
shareholders
Segment balance
sheet
Segmental total 3 403 254 845 212 4 248 466
assets
Segmental non (540 804) (251 536) (792 340)
interest bearing
liabilities
Segmental net 2 862 450 593 676 3 456 126
operating assets
Segmental (919 340) (24 715) (944 055)
interest bearing
liabilities
Segmental cash 54 081 17 101 71 182
and cash
equivalents
Segmental net 1 997 191 586 092 2 583 283
assets
Investment in 193 009
associates
Net assets 2 776 292
2007
Decorative Performance Total
Coatings Coatings Group
R`000 R`000 R`000
Segmental total assets 3 240 919 783 734 4 024 653
Segmental non interest (649 955) (144 227) (794 182)
bearing liabilities
Segmental net operating 2 590 964 639 507 3 230 471
assets
Segmental interest bearing (897 347) (95 533) (992 880)
liabilities
Segmental cash and cash 25 445 21 227 46 672
equivalents
Segmental net assets 1 719 062 565 201 2 284 263
Investment in associates 176 864
Net assets 2 461 127
2008
Decorative Performance Total
Coatings Coatings Group
R`000 R`000 R`000
Segmental capital 104 936 21 061 125 997
expenditure
Inter segment revenue is priced on an arms length basis.
GEOGRAPHICAL SEGMENTS
The group`s two segments operate mainly in Southern Africa at present and
therefore a geographical split is not meaningful.
notes to the consolidated financial statements
for the year ended 30 September
1 Basis of preparation
This abridged report complies with International Accounting Standard 34 -
Interim Financial Reporting as well as with Schedule 4 of the South African
Companies Act and the disclosure requirements of the JSE Limited`s Listings
Requirements. The abridged report has been prepared using accounting
policies that comply with International Financial Reporting Standards. The
accounting policies are consistent with those applied in the financial
statements for the year ended 30 September 2007, except for the adoption of
those IFRS statements noted in the Accounting Policies below.
As this is the first trading year for Freeworld Coatings Ltd, no
comparatives have been shown on the Income Statement and Cashflow Statement.
2 Accounting policies
The group adopted the following amended Standard and new Interpretations
during the current year:
-?IFRS 7 Financial Instruments Disclosures
-?IAS 1 (Revised Presentation of Financial Statements
-?IFRIC Interpretation 4 Determining Whether an Arrangement Contains a Lease
-?IFRIC Interpretation 12 Service Concession Arrangements
There are no standards that are currently in issue but not yet effective
which would result in a change in accounting policy.
The impact of adopting the above was not significant.
3 Related party transactions
There has been no significant change in related party relationships since
the previous year.
Other than in the normal course of business, there have been no significant
transactions during the year with associate companies, joint ventures and
other related parties.
2008 2007
4 Supplementary balance sheet and income
statement information
Net asset value per share (cents) 1 362 1 345
Weighted average number of shares
in issue (000`s)
Shares in issue at date of 181 320 181 320
unbundling (28 September 2008)
Shares issued as part of the corporatisation 13 024 -
process on 2 November 2007
29 November 2007 9 528 -
Weighted average number of shares in issue 201 136 181 320
Headline earnings per share 106 92
(basic and diluted in cents)
5 Audit of financial statements
The financial statements for the year ended 30 September 2008 were audited
by Deloitte & Touche and their unmodified audit opinion is available for
inspection at Freeworld Coatings Limited`s registered office.
Restated
Audited
2008 2007
R`000 R`000
6 Goodwill
COST
At 1 October 1 890 208 -
Goodwill created at corporatisation, - 1 721 356
prior to unbundling by Barloworld
Limited
- Deferred tax liabilities on property
revaluations and brands
at fair value - 260 413
- Investments in associates at fair - (91 561)
value
Translation differences 7 933 -
At 30 September 1 898 141 1 890 208
CARRYING AMOUNT
At 30 September 1 898 141 1 890 208
The goodwill was created in terms of the rules around IFRS 3 and represents
the difference between the market value and the carrying value of the assets
and liabilities of each cash-generating unit at date of corporatisation.
Adjustments were made to goodwill created at corporatisation in terms of
IFRS 3 and IAS 12. These adjustments refer to the raising of deferred
taxation on the property revaluations and deferred tax on brands at fair
value, as well as adjusting the investment in associates to fair value. (See
effect of restatements below).
R`000 Original Adjustment Restated
Goodwill 1 721 356 168 852 1 890 208
Deferred taxation liability (4 468) (260 413) (264 881)
Investment in associates 85 303 91 561 176 864
1 802 191 - 1 802 191
6 Goodwill continued
Goodwill has been allocated for impairment testing purposes to the following
groups of cash-generating units:
2008
R`000
Decorative segments 1 282 391
Freeworld Plascon Namibia (Pty) Limited 12 689
Freeworld Plascon Botswana (Pty) Limited 17 264
Freeworld Plascon Zambia Limited 23 608
Freeworld Plascon Malawi Limited 1 500
Freeworld Coatings SA (Pty) Limited 1 219 397
Translation differences 7 933
Performance segments 615 750
International Colour Corporation (Pty) Limited 290 500
Automotive Coatings Group 246 750
Midas Paints (Pty) Limited 46 000
Blajohn Properties Limited 32 500
Total Group 1 898 141
Goodwill is allocated to groups of cash-generating units based on the two
business segments
During the current year, all significant recoverable amounts were based on
value in use. A discounted cash flow valuation model as well as a Holt
valuation model is applied using five year strategic plans as approved by
The Board. The financial plans are the quantification of strategies derived
from the use of a common strategic planning process followed across the
group. The process ensures that all significant risks and sensitivities are
appropriately considered and factored into strategic plans. Key assumptions
are based on industry specific performance levels as well as economic
indicators approved by the executive. These assumptions are generally
consistent with external sources of information.
Cash flows for the terminal value beyond the explicit forecast period of
five years are estimated by using economic returns (CFROI)r, asset base,
growth rate and fade principles. Growth rates are aligned to the long term
sustainable level of growth in the economic region in which cash-generating
units operate.
Discount rates applied to cash flow projections are based on a country or
region specific real cost of capital, dependent upon the location of cash-
generating segment operations. The cost of capital is adjusted for size and
leverage and other known risks.
The cost of capital real rate applied 7,85%
as at September 2008 is:
Total
Capital- Brands Trade- Distri- Intan-
ised marks bution gible
software channels assets
2008 2008 2008 2008 2008
R`000 R`000 R`000 R`000 R`000
7 Intangible assets
COST
Balance 18 109 686 100 10 000 73 068 787 277
acquired at
corporatisation
Additions 805 - 47 222 - 48 027
Disposals (953) - - - (953)
At 30 September 17 961 686 100 57 222 73 068 834 351
ACCUMULATED
AMORTISATION AND
IMPAIRMENT
Balance 13 369 - - 6 437 19 806
acquired at
corporatisation
Charge for the year 2 413 13 722 392 3 777 20 304
Disposals (953) - - (953)
At 30 September 14 829 13 722 392 10 214 39 157
CARRYING AMOUNT
At 30 September 3 132 672 378 56 830 62 854 795 194
Intangible assets were acquired at corporatisation as well as during the
year.
Capitalised software has a finite life of two years and is amortised on a
straight-line basis.
Brands consist of the various brand names the Group is supplying consumers
and commercial enterprises and includes: Plascon, Plascon Professional,
Crown, Polycell, Midas and Midas Earthcote. Brands are amortised over 50
years.
Trademarks, which include Napier and Weathermaster, are amortised over 20
years.
Distribution channels are maintained to attract and keep a loyal customer
base, and are amortised over periods of between 10 - 15 years.
The group has not recognised any significant intangible assets with
indefinite useful lives.
Restated
Audited
2008 2007
8 Loans-long term, short term and overdraft
facilities
Interest Bearing Long Term Liabilities 624 691 4 349
Long-term loan with Nedbank, interest rate 624 691 -
at JIBAR + 1,8%, unsecured and repayable
over 7 years with year 1 and 2 having a
capital holiday
Various other small long-term loans with 4 349
First National Bank, Standard Bank and
Nedbank with interest rates between 13% to
21,5% and terms ranging from 2 years to 5
years
Short term Loans and Bank Overdrafts 319 364 988 531
Short-term loan with Nedbank, interest rate 268 300 -
at 1 month JIBAR +1,2%, unsecured and
repayable on demand
Barloworld Capital (Pty) Ltd* - 981 555
Current portion of long-term borrowings 42 945 3 320
Overdrafts 8 119 3 656
* Prior to unbundling and listing as
Freeworld Coatings Limited the treasury
function was performed by Barloworld Capital
(Pty) Ltd.
This "treasury" loan has been replaced by an
appropriate mix of long-term and short term
bank loans, coupled with an overdraft
facility.
944 055 992 880
9 Contingent liabilities
The back to back guarantee of R50 million to Barloworld as security for our
overdraft was cancelled on arranging unsecured financing through Nedbank.
In terms of the Unbundling Agreement, Freeworld Coatings has guaranteed the
first A$5 million of any environmental claim made on Barloworld by the
purchaser of the Australian business for a maximum period of 8 years. An
environmental insurance policy has been procured to mitigate against any
losses.
Restated
Audited
2008 2007
R`000 R`000
10 Commitments
Contracted 51 913 29 123
Approved but not yet contracted 24 504 14 590
76 417 43 713
Operating lease commitments 22 346 20 892
Finance lease commitments 805 1 008
23 151 21 900
2008
R`000
11 Earnings per share
Earnings per share (cents) 105
BASIC
Weighted average number of ordinary shares (000`s) 201 136
Earnings per share (cents) 105
DILUTED
Weighted average number of ordinary shares (000`s) 201 136
Earnings per share (cents) 105
The share appreciation rights are anti-dilutive as -
they do not result in a decrease of earnings per
share.
Headline earnings per share
Profit for the year from continued operations
attributable to
Freeworld Limited shareholders (000`s) 211 979
Adjusted for the following
- Impairment of investments (000`s) 83
- Loss on disposal of plant and equipment and 1 204
intangible assets (000`s)
Tax effect of above (000`s) (360)
Headline earnings (000`s) 212 906
Weighted number of shares in issue for the year 201 136
(000`s)
Headline earnings per share - 106
(basic and diluted in cents)
Date: 18/11/2008 07:55:35 Produced by the JSE SENS Department.
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