| Thu 17 Dec 2009, 16:57 | | CSP - Chemical Specialities Limited - Unaudited interim results |
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CSP
CSP
CSP - Chemical Specialities Limited - Unaudited interim results
CHEMICAL SPECIALITIES LIMITED
Country of incorporation and domicile: South Africa
Registration Number: 2005/039947/06
Share Code: CSP
ISIN: ZAE000109427
UNAUDITED INTERIM RESULTS
For the six months ending 30 September 2009
COMMENTARY
Overview
The current financial period has proved to be a challenging time both
financially and logistically.
Firstly, we continued with the relocation of our 4 factories to our new
Canelands facility.
The Canelands facility was commissioned and the group was back in full
production on 2 November 2009. Daily production capacity has now been tripled
and the Group is taking full advantage of this improvement. Turnover has
improved more than 23% over the last 6 weeks when compared with the
corresponding period last year.
Furthermore, the realisation of anticipated cost savings that resulted from the
consolidation of our factories will reflect more strongly in the second half of
the year.
The second hurdle encountered was a static fire at our Jaco Place facility that
destroyed raw materials, finished good and rendered the manufacturing facility
unusable. This has put the group under considerable pressure from both a
financial and timing perspective to get the Canelands facility up and running.
The group was adequately insurered and an insurance claim has been lodged with
the insurers.
In this challenging time management have continued to focus on a reduction in
overall operating expenses and have continued to monitor and improve margins.
As part of our total plan to optimize the company`s size, we have had to reduce
employee numbers. This has been done to save costs and as a result of natural
attrition with the consolidation of many sites in to one.
The building blocks for the group`s success have always been a passion of
innovation, a culture of accountability and a consistent channel for open
communication. A continuing commitment to these factors has given the group
boldness to compete with some of the largest chemical companies in the world.
We continue to develop and produce product ranges which feature innovative use
of latest technologies, and our quality is truly world class. It is a tribute
to team effort that we have emerged from the above challenges with a more
dedicated and focussed strategy for the future.
Financial and trading performance
Turnover decreased by 32% from the comparable interim period, unadjusted for
the effects of the insurance claim for loss of profits.
The strategic direction of the business has been to enhance our product
offering in the automotive refinish market both locally and internationally.
The group gross profit percentage has improved to 43% from 41% mainly as a
result of the change in our product mix to the predominant automotive segment.
This segment continues to be the group`s key area of focus and the success of
this strategy is now reflecting in our results and is particularly highlighted
in this period of recession.
Operating expenses have decreased by 9% when compared with previous interim
period.
These savings are the beginning of the expected efficiencies that will flow
from the move to Canelands.
The group continues to generate strong cash flows from operating activities.
However, the global financial meltdown has in turn reduced local financial
institutions appetite for new business and has resulted in a significant
portion of the development of the Canelands facility being funded out of
working capital. Nevertheless, the group managed to improve its overall cash
flow position by 3,5% which is commendable under the current trading
conditions.
Revenue continues to be driven by our automotive refinish segment. Even under
tough trading conditions the other segments held their markets reasonably well,
considering the reduced production capacity as automotive production took
precedence over these lines at the industrial and wood finish plant.
Trading results show the impact of the group`s strategy to expand its product
offering into the global market and to grow its international presence, with
revenue from external international customers growing from 29% of total group
turnover to 42%.
Jaco Place fire
On the 11 February 2009 there was a fire at our Jaco Place facility. The
details of which were disclosed in the annual report. The group is adequately
insured for all damaged stock and for loss of profits.
Delayed settlement by the insurers has resulted in an escalation in the claim
by a significant amount. The claim stood at R8 815 925 as at 31 March 2009.
The calculation of the loss by our insurance advisers stood at R66 363 717 at
the end of September 2009 with a projected loss of R94 642 238 to the end of
the insured period being 10 February 2010. This includes an amount directly
attributable to operating expenses.
The directors are virtually certain that the claim will be settled by the
insurers.
Canelands
The sale and leaseback of the Canelands property is expected to be completed
shortly with the transfer currently with the conveyancer. All suspensive
conditions of the sale agreement have been fulfilled and the shareholders
approved the transaction at a general meeting on the 5th October 2009.
Prospects
In a time where, globally, markets reposition and consumers alter their
spending habits permanently, we have chosen to strengthen the foundations of
the business to enable it to meet these new challenges from a position of
sustainability and strength.
Organic growth is expected through our automotive refinish products,
specifically our new locally developed water-based system, Hydrolux. The roll
out of Hydrolux was delayed due to the fire at our Jaco Place facility, but is
now expected to make strong gains internationally. The group`s product range is
excellently complemented by our extensive colour system. We are internationally
recognised as having one of the best value brand offerings in the world today.
Of great strategic importance is the consolidation of our factories into one
world class manufacturing facility which is leading to improved efficiencies,
reduced overhead costs and the anticipated quantum leap in production capacity.
Directors
R D Simpson was appointed to the Board on 24 June 2009 as the International
Sales Director.
Dividend
In view of the board`s strategy to retain capital for the completion of the
manufacturing facility at Canelands and grow the business internationally, no
dividend has been declared for this interim period.
Appreciation
The directors would like to thank the management and staff of the group for
their hard work and dedication during the period, as well as shareholders,
customers and suppliers for their continued invaluable support.
SM Wood BR MacKinnon
Chief Executive Officer Financial Director
CONDENSED CONSOLIDATED INCOME STATEMENTS
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
Figures in Rand Note 2009 2008 2009
Revenue 218,032,426 322,533,800 617,460,571
Cost of Sales (122,871,136) (189,072,538) (371,663,534)
Gross Profit 95,161,290 133,461,262 245,797,037
Other Income 2 55,606,488 22,495,053 45,346,818
Operating
expenses 3 (104,843,391) (114,618,084) (220,350,865)
Operating Profit 45,924,387 41,338,231 70,792,990
Investment
Revenue 927,254 3,260,723 6,039,768
Finance costs (15,655,344) (13,855,047) (30,604,113)
Profit before
taxation 31,196,297 30,743,907 46,228,645
Taxation (8,106,886) (3,500,424) (7,776,239)
Profit for the period 23,089,411 27,243,483 38,452,406
Attributable to:
Equity holders
of the parent 23,089,411 27,324,646 39,614,858
Minority interest - (81,163) (1,162,452)
Basic and
diluted earnings 4 7.45 9.05 12.91
per share (cents)
Notes to the
income statements
Basic and
diluted headline 4 7.44 5.75 8.05
earnings per
share (cents)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
2009 2008 2009
Figures in Rand
Profit for the period 23,089,411 27,243,483 38,452,406
Other Comprehensive income (5,859,644) (2,373,217) (1,695,025)
Exchange differences on (5,859,644) (2,373,217) (1,695,025)
translating foreign operations
Total comprehensive income
for the year 17,229,767 24,870,266 36,757,381
Total comprehensive income
attributable to:
Equity holders of the parent 17,229,767 25,733,906 38,126,790
Minority interest - (863,640) (1,369,409)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Foreign currency
translation
Share capital/ reserve
Figures in Rand Note Share premium Retained income (FCTR)
Balance at 1 April 2008 103,554,589 19,582,398 2,430,857
Issue of shares 11,500,000 - -
Share issue expenses (26,393) - -
Acquisition of
subsidiaries - (369,045) -
Total comprehensive income - 27,324,646 (1,590,740)
Balance at 30
September 2008 115,028,196 46,537,999 840,117
Share issue expenses (5,301) - -
Acquisition of subsidiaries - (4,088,210) -
Total comprehensive income - 12,290,212 102,672
Balance at 31 March
2009 115,022,895 54,740,001 942,789
Total comprehensive income - 23,089,411 (5,859,644)
Balance at 30
September 2009 115,022,895 77,829,412 (4,916,855)
Minority
Figures in Rand Total interest Total
Balance at 1 April 2008 125,567,844 3,812,544 129,380,388
Issue of shares 11,500,000 - 11,500,000
Share issue expenses (26,393) - (26,393)
Acqusition of subsidiaries (369,045) (544,750) (913,795)
Total comprehensive income 25,733,906 (863,640) 24,870,266
Balance at 30 September 2008 162,406,312 2,404,154 164,810,466
Share issue expenses (5,301) - (5,301)
Acqusition of subsidiaries (4,088,210) (1,898,385) (5,986,595)
Total comprehensive income 12,392,884 (505,769) 11,887,115
Balance at 31 March 2009 170,705,685 - 170,705,685
Total comprehensive income 17,229,767 - 17,229,767
Balance at 30 September 2009 187,935,452 - 187,935,452
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited
Six months
ended
30 September
Note 2009
Figures in Rand
Assets
Non-current assets
Property, plant and equipment 130,132,054
Intangile assets 16,241,158
Goodwill 23,082,219
Other financial assets 671
169,456,102
Current assets
Inventories 93,585,535
Other financial assets 2,456,343
Trade and other receivables 168,754,893
Cash and cash equivalents 4,362,258
269,159,029
Non-curent assets held for sale 5 128,882,154
Total Assets 567,497,285
Equity and liabilities
Equity
Share capital 1,550
Share premium 115,021,345
Reserves (4,916,855)
Retained income 77,829,412
Attributable to equity
holders of the parent 187,935,452
Minority interest -
187,935,452
Liabilities
Non-current liabilities
Other Financial liabilities 55,001,270
Deferred tax 14,418,205
69,419,475
Current liabilities
Other Financial liabilities 134,960,794
Trade and other payables 92,991,056
Bank overdraft 82,190,508
310,142,358
Total liabilities 379,561,833
Total equity and liabilities 567,497,285
Unaudited
Six months
ended Audited
30 September 31 March
2008 2009
Figures in Rand
Assets
Non-current assets
Property, plant and equipment 78,344,531 115,978,065
Intangile assets 11,041,951 14,861,807
Goodwill 22,454,065 21,203,440
Other financial assets 1,310,746 671
113,151,293 152,043,983
Current assets
Inventories 141,441,061 112,417,365
Other financial assets 5,098,900 6,468,769
Trade and other receivables 135,964,521 124,951,710
Cash and cash equivalents 8,527,505 5,249,024
291,031,987 249,086,868
Non-curent assets held for sale 119,979,530 128,769,654
Total Assets 524,162,810 529,900,505
Equity and liabilities
Equity
Share capital 1,550 1,550
Share premium 115,026,646 115,021,345
Reserves 840,117 942,789
Retained income 46,537,999 54,740,001
Attributable to equity
holders of the parent 162,406,312 170,705,685
Minority interest 2,404,154 -
164,810,466 170,705,685
Liabilities
Non-current liabilities
Other Financial liabilities 15,615,772 39,559,901
Deferred tax 2,813,794 6,477,137
18,429,566 46,037,038
Current liabilities
Other Financial liabilities 135,283,771 149,290,122
Trade and other payables 101,829,316 77,906,601
Bank overdraft 103,809,691 85,961,059
340,922,778 313,157,782
Total liabilities 359,352,344 359,194,820
Total equity and liabilities 524,162,810 529,900,505
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
Figures in Rand 2009 2008 2009
Cash flows from operating
activities
Operating cash flows
before movements
in working capital 51,713,820 20,723,532 46,104,344
(Increase)/decrease in
working capital (10,746,880) 21,449,867 37,241,176
Cash generated from
operations 40,966,940 42,173,399 83,345,520
Investment revenue 927,254 3,260,723 2,788,766
Finance costs (15,655,344) (13,855,047) (26,293,001)
Taxation paid (20,700) (150,537) (188,812)
Net cash from operating
activities 26,218,150 31,428,538 59,652,473
Cash flows from investing
activities
Acquisition of property,
plant and equipment (25,915,710) (120,111,588) (171,354,674)
Proceeds on sale/claims
for property, plant
and equipment 85,600 - 10,061,590
Acquisition of intangible
assets (2,628,722) (3,991,873) (8,354,225)
Acquisition of
businesses/subsidiaries - (905,070) (6,900,390)
Proceeds from financial
assets 4,012,426 1,212,152 1,152,358
Net cash from investing
activities (24,446,406) (123,796,379) (175,395,341)
Cash flows from financing
activities
Proceeds on share issue - 11,473,607 11,468,306
Proceeds of other
financial liabilities 1,112,041 98,862,391 136,812,870
Net cash from financing
activities 1,112,041 110,335,998 148,281,176
Total cash movement for
the period 2,883,785 17,968,157 32,538,308
Cash and cash equivalents
at the beginning
of the period (80,712,035) (113,250,343) (113,250,343)
Cash and cash equivalents
at the end of the period (77,828,250) (95,282,186) (80,712,035)
Reconciled as follows
Cash and cash equivalents 4,362,258 8,527,505 5,249,024
Bank overdraft (82,190,508) (103,809,691) (85,961,059)
Cash and cash equivalents
at the end of the period (77,828,250) (95,282,186) (80,712,035)
CONDENSED CONSOLIDATED SEGEMENT REPORT
Unaudited
Six months
ended
30 September
Figures in Rand Note 2009
Segment revenues
Buy-ins 15,433,375
Automotive 127,110,804
Decorative 21,040,001
Industrial/Woodfinish 65,229,964
Solvents 13,283,034
Adhesives and Sealants -
Total of all segments 242,097,178
Eliminations of
intercompany revenue (24,064,752)
Consolidated revenue 218,032,426
External Customers
South Africa 126,968,725
International 91,063,701
218,032,426
Segment result
Buy-ins 637,912
Automotive 13,477,238
Decorative 3,684,188
Industrial/Woodfinish 11,582,604
Solvents 1,857,848
Adhesives and Sealants -
Other 2 (43,493)
Profit before taxation 31,196,297
Taxation (8,106,886)
Profit for the year 23,089,411
Segment asset
Buy-ins 36,177,201
Automotive 297,959,012
Decorative 49,319,631
Industrial/Woodfinish 152,904,829
Solvents 31,136,611
Adhensives and Sealants -
Total of all segments 567,497,284
Unaudited
Six months
ended Audited
30 September 31 March
Figures in Rand 2008 2009
Segment revenues
Buy-ins 23,485,567 42,728,925
Automotive 147,601,893 296,604,487
Decorative 40,095,195 57,560,068
Industrial/Woodfinish 97,174,822 202,076,950
Solvents 34,118,960 58,310,668
Adhesives and Sealants 4,069,030 5,901,252
Total of all segments 346,545,467 663,182,350
Eliminations of
intercompany revenue (24,011,667) (45,721,780)
Consolidated revenue 322,533,800 617,460,570
External Customers
South Africa 229,865,069 456,608,523
International 92,668,731 160,852,047
322,533,800 617,460,570
Segment result
Buy-ins 887,512 1,751,300
Automotive 4,855,360 11,755,748
Decorative 1,168,114 2,429,043
Industrial/Woodfinish 2,086,414 7,603,583
Solvents 476,871 1,368,871
Adhesives and Sealants 28,092 78,556
Other 21,241,544 21,241,544
Profit before taxation 30,743,907 46,228,645
Taxation (3,500,424) (7,776,239)
Profit for the year 27,243,483 38,452,406
Segment asset
Buy-ins 35,522,786 34,141,558
Automotive 223,253,312 236,994,950
Decorative 60,645,462 45,992,040
Industrial/Woodfinish 146,980,505 161,464,909
Solvents 51,606,185 46,591,789
Adhensives and Sealants 6,154,560 4,715,259
Total of all segments 524,162,810 529,900,505
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. Basis of preparation
These condensed consolidated interim finanacial statements have been prepared
in accordance with IAS 34 - Interim Financial Reporting, International
Financial Reporting Standard ("IFRS"), the Companies Act of South Africa and
the JSE Limited Listings Requirements.
The accounting policies and method of measurement, recognition and computation
applied in the preparation of the condensed consolidated interim financial
statements are consistent with those applied in the group`s most recent audited
financial statements for the year ended 31 March 2009 and will be applied to
the annual financial statements for the current year ended 31 March 2010.
The results for the period are not necessarily indicative of the results for
the entire year, and these financial statements should be read in conjunction
with the audited financial statements for the year ended 31 March 2009.
The preparation of the condensed consolidated interim financial statements
requires the use of estimates and assumptions that affect the values of assets
and liabilities at the reporting date, as well as the determination of revenue
and expenses during the reporting periods. Although these estimates are based
on management`s best knowledge of current events and actions that the group may
undertake in the future, actual results may differ from these estimates.
The board acknowledges its responsibility for the preparation of the condensed
consolidated interim finanacial statements in accordance with IFRS, the
Companies Act of South Africa and the JSE Limited Listings Requirements.
2. Other income
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
2009 2008 2009
Figures in Rand
Other income comprises
(Loss)/profit on sale of
property, plant and equipment (43,493) (4,445,818) 2,425,063
Gain on appreciation in
investment property - 15,291,446 15,291,446
Deferred income - 10,395,916 10,395,916
Insurance claim 52,848,814 1,170,356 8,815,295
Franchise fees 1,728,353 1,072,913 3,408,949
Foreign exchange (loss)/gain (1,469,340) (989,760) 1,874,539
Rental income 2,466,741 - 2,832,000
Other Sundry income 75,413 - 303,610
55,606,488 22,495,053 45,346,818
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The "other" amount disclosed in the "segment results" of the "condensed
consolidated segment report"includes (loss)/profit on sale of property, plant
and equipment; gain on appreciation of investment property and deferred income.
Insurance claim relates to an increase in the claim for the fire at Jaco Place.
The group has submitted their claim to the insurers and the directors are
virtually certain that the claim will be paid out. Refer to commentary for
further details.
3. Operating expenses
Included in operating expenses for the six months ended 30 September 2009 are
the following expenses.
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
Figures in Rand 2009 2008 2009
Canelands moving costs - 1,329,210 2,127,079
Retrenchment costs 474,101 - -
474,101 1,329,210 2,127,079
4. Basic and diluted earnings and headline earnings per share
The earnings and weighted average number of ordinary shares used in the
calculation of basic and diluted earnings and headline earnings per share are
as follows:
Reconciliation of total earnings to headline earnings attributable to equity
holders of the parent.
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
Figures in Rand 2009 2008 2009
Total earnings attributable
to equity holders 23,089,411 27,324,646 39,614,858
Non-headline earnings
Less appreciation/profit on
sale of property - (15,291,446) (15,291,446)
Add/(less) loss/(profit) on
sale of plant and equipment (43,493) 4,445,818 (2,425,063)
Total tax effect of
adjustments 12,613 895,973 2,819,820
Headline earnings 23,058,531 17,374,991 24,718,169
Weighted average number of
ordinary share in issue 310,000,000 301,945,206 306,931,507
5. Non current assets held for sale
On the 5th October 2009 the Shareholders in a general meeting approved the
disposal of the Canelands property.
Unaudited Unaudited
Six months Six months
ended ended Audited
30 September 30 September 31 March
Figures in Rand 2009 2008 2009
40 New Glasgow Road,
Canelands 128,882,154 119,979,530 128,769,654
Properties sold consist of:
Ervin 105, 106, 108, 109 & 205 Canelands Extension 6 KwaZulu Natal, all held
under Title Deed No. T23011/2008; and the remaining Extent of Portion 1171 and
the remaining Extent of Portion 1199 of the Farm Cotton Lands No. 1575, all
held under Title Deed No. T23012/2008, in total measuring approximately 202,025
hectares.
All suspensive conditions of the sale agreement have been met. Transfer is
expected to take place before the financial year end.
The sale price is R130,000,000 (excluding VAT).
6. Related party transactions
The property sale in note 5, Non Current Asset
Held for Sale, is a related party transaction as disclosed in the Circular
release to shareholders.
There have been no significant changes in related party relationships since the
previous year or significant transactions during the year other than in the
normal course of business.
7. Commitments and post balance sheet events
Authorised capital expenditure
The group has estimated it will incur R6,500,000 on moving the remaining plant
and developing the Canelands factory, which is expected to be completed before
the end of the financial year.
There are no other material post balance sheet events.
CORPORATE INFORMATION
CHEMICAL SPECIALITIES LIMITED
Country of incorporation and domicile: South Africa
Registration Number: 2005/039947/06
Share Code CSP
ISIN ZAE000109427
Website www.chemspecpaint.com
Telephone +27 32 541 8600
Fax +27 32 541 8653
Directors S M Wood (Chief Executive Officer)
B R MacKinnon (Financial Director)
R D Simpson (Executive Director)
M C Oldham (Non executive)
A Moodley (Non executive)
Company secretary Brian Desmond Drury (BA, LLB)
2029 Old Mill Road
Canelands
Verulam
Registered Office 2029 Old Mill Road
Canelands
Verulam
4339
Postal Address P.O. Box 41177
Rossburgh
4072
Auditors KPMG Inc.
Transfer Secretary Computer Share Investor Services (Pty) Ltd
Designated Advisor QuestCo (Pty) Ltd
Date: 17/12/2009 16:57:02 Produced by the JSE SENS Department.
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