| Mon 31 May 2010, 15:27 | | WEA - WG Wearne Limited - Reviewed condensed consolidated results for the year |
|
WEA
WEA
WEA - WG Wearne Limited - Reviewed condensed consolidated results for the year
ended 28 February 2010
WG WEARNE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005983/06)
JSE code: WEA
ISIN: ZAE000078002
("Wearne" or "the company" or "the Group")
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010
INTRODUCTION
Wearne and its subsidiaries provide a comprehensive range of products to the
building and construction industry in South Africa. The major operating
divisions comprise aggregates, ready mixed concrete and the manufacture of
specialised cast concrete products.
REVIEW OF RESULTS
The Group experienced a particularly difficult year, which is borne out in the
results under review, which reflect a headline loss of R28.7 million for the
year compared to the restated R18.3 million headline loss reported for last
year.
Intense competition in a sector that has been dominated by the collapse in
residential developments and curtailed government infrastructure expenditure
has seen year on year revenue decrease by 10.8%. The hardest hit sector was the
ready mixed concrete division, where revenues declined by 34% year on year -
this division is particularly exposed to the residential market. The aggregates
division experienced a gratifying 10% increase in revenue and the concrete
products division has shown promising revenue growth year on year.
Group profitability was squeezed as margins came under pressure, however there
was some compensation for this as operating expenses were reduced. The
resulting Group EBITDA amounted to R30.4 million vs a restated R66.2 million
for the same period last year.
Depreciation and amortisation and net interest paid have increased year on year
- especially since 2008 - which have impacted negatively on earnings. These
increases arose partly as a result of the acquisition in September 2008 of the
Portland Group in Cape Town, portion of which was funded through increased
debt. These costs were compounded by the losses made by this acquisition as a
consequence of the deep recession in the Western Cape.
In addition, the Group increased its asset base significantly in order to meet
the demands of a growing business, however the unexpected downturn in the
economy resulted in the Group being overcapitalised and certain assets under
finance being underutilised. As a resultcapital expenditure reduced
significantly year on year and, where appropriate, the directors disposed of
unproductive assets, which resulted in cash inflows of R8.2 million during the
financial year.
As a result of the challenges experienced, the directors embarked on a complete
restructure of the Group`s operations and aggressively reviewed costs in order
to achieve permanent reductions, improved margins and enhanced revenues. The
directors anticipate that the following initiatives will significantly reduce
costs:
- the Group`s various legal entities will be rationalised in order to reduce
the associated cost of administration and improve operational efficiencies;
- shared services will be centralised wherever possible in order to achieve
greater purchasing synergies and administrative cost savings;
- staff numbers have been reduced by approximately 15% year-on-year through
retrenchment and natural attrition in order to achieve greater productivity and
reduce payroll costs; and
- finance charges will reduce by an anticipated 20% as a result of a reduction
in long-term debt outstanding.
PROSPECTS
Although the Group`s operating results for the year were poor, the directors
believe that the worst of the downturn is now over. In the past year, the Group
has addressed its exposure to the sluggish residential construction market by
reducing the size of the transport fleet in the ready mix concrete division by
nearly forty percent. The business is now close to being right sized for the
reduced turnover levels currently being experienced. Our aggregates operations
have performed well during the year and this should continue as government
expenditure on roads and infrastructure is set to continue. The cast concrete
products division has performed well year on year. This was a start-up division
last year and has been steadily gaining market share. The directors believe
that the Group`s greater focus on roads and infrastructure combined with the
cost savings resulting from the restructuring embarked upon, will see the
Group`s results improve in the 2011 financial year.
PRIOR PERIOD ERROR
In terms of a SENS announcement, dated 16 February 2010, shareholders were
advised that the company had become aware of a calculation error that occurred
in accounting for the business combination relating to the acquisition of the
Portland Group of companies effective 1 September 2008. The correction of the
error, which is regarded as a prior period error in terms of the accounting
standards, resulted in a decrease of R17.5 million in the profit for the year
ended 28 February 2009. The prior period results have been restated with the
adjusted numbers and the 2008 results are disclosed in accordance with IAS 8:
Accounting policies, changes in estimates and errors. Although earnings per
share, diluted earnings per share and net asset value per share are affected by
these adjustments, headline earnings per share, diluted headline earnings per
share and net tangible asset value per share are not.
FUEL HEDGE
In November 2008 the Group entered into a fuel hedge on 50% of the Group`s
annual usage. The instrument utilised was a zero cost collar with a range
between R6.45 and R7.71 per litre of the ICE Gasoil price. The hedge was
entered into for a twelve month period, which ended on 31 October 2009. The
reasoning was to protect the Group from sharp upward movements in the fuel
price as experienced in the first half of the previous financial year when the
oil price peaked at US$140 per barrel. However, the combination of a sharp
decline in the fuel price coupled with a strengthening rand resulted in a loss
of R5 million before taxation for the 2009 financial year and a further loss of
R11.4 million before taxation in the 2010 financial year. No further losses are
expected from this hedge.
IMPAIRMENTS AND REVAULATIONS
In 2008 and 2009 the Group completed a number of acquisitions as part of its
strategy to increase its geographic footprint. As a consequence of the
recession and resultant decline in the residential building market in
particular, the performance of some of these acquisitions was disappointing. In
light of this, the directors conducted a critical review of all intangibles and
acquired goodwill to determine their fair value and decided to impair a portion
of the intangibles and all of the goodwill.
BANK MORATORIUM AND RIGHTS ISSUE
As a result of the difficult trading conditions experienced by the Group and
the impact thereof on the Group`s cash flow, the Group`s bankers agreed to a
debt repayment moratorium in August 2009, December 2009 and January 2010. The
banks however requested the Group to raise funds through a rights issue which
was successfully concluded in February 2010. Existing shareholders were offered
77 263 879 shares at 40 cents per share - 65 630 002 shares were subscribed for
raising approximately R26.3 million which was used principally to improve the
working capital position of the company.
BASIS OF PREPARATION
The results for the year have been prepared in accordance the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standards ("IFRS"), the AC 500 standards as issued by the
Accounting Practices Board or its successor, IAS 34: Interim Financial
Reporting, the Companies Act (Act 61 of 1973), as amended and the Listings
Requirements of the JSE Limited.
The accounting policies used to prepare these financial statements are also in
accordance with IFRS and are consistent with those applied for the Group`s
annual financial statement in 2009. No new or revised IFRS standards have been
adopted.
REVIEW OPINION
RSM Betty & Dickson (Johannesburg), the Group`s independent auditors, have
reviewed the condensed consolidated financial results for the year ended 28
February 2010 and have expressed an unmodified review opinion. The review
report is available for inspection at the company`s registered office.
STATEMENT OF GOING CONCERN
The reviewed condensed consolidated results have been prepared on the going
concern basis as the directors are of the view that the Group has adequate
resources in place to continue in operation for the foreseeable future.
CHANGES TO THE BOARD
During the year under review Mr Mitesh Patel was appointed as an independent
non-executive director and chairman of the audit committee. Mr Owen Harvey
resigned as the financial director and was replaced by Mr Alan Bruens.
DIVIDENDS
In line with past practice, no dividend has been declared for the year.
APPRECIATION
We thank our management and staff for their efforts and continued commitment
throughout a difficult trading year. We also thank our advisors, customers and
stakeholders for their ongoing support.
By order of the Board
31 May 2010
S J Wearne
Chief Executive Officer
A W Bruens
Chief Financial Officer
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
ASSETS
Non-current assets 596 307 663 175 402 187
Property, plant and equipment 545 440 595 169 390 201
Intangible assets 34 153 40 045 -
Goodwill - 20 713 6 710
Investments in associates - - -
Available-for-sale investments 3 712 5 201 5 209
Deferred tax asset 13 002 2 047 67
Current assets 115 766 119 538 119 051
Inventories 28 658 36 463 28 119
Current tax receivable 1 492 1 471 -
Trade and other receivables 76 696 79 764 88 226
Loans and borrowings 6 075 - -
Cash and cash equivalents 2 845 1 840 2 706
TOTAL ASSETS 712 073 782 713 521 238
EQUITY AND LIABILITIES
Equity 210 246 226 186 179 082
Share capital 246 179 146
Share premium 174 782 142 198 77 096
Non-distributable reserves 276 (100) 121
Retained earnings 34 239 83 164 101 719
Non-controlling interest 703 745 -
Non-current liabilities 237 564 318 586 218 043
Environmental provision 14 833 17 898 14 664
Loans and borrowings 193 882 265 727 182 487
Deferred tax liability 28 849 34 961 20 892
Current liabilities 264 263 237 941 124 113
Loans and borrowings 100 796 95 341 47 437
Taxation payable 2 782 1 129 2 984
Trade and other payables 90 918 79 561 73 692
Bank overdraft 69 767 61 910 -
Total liabilities 501 827 556 527 342 156
TOTAL EQUITY AND LIABILITIES 712 073 782 713 521 238
Number of shares in issue at year-end
(`000) 245 913 182 962 150 000
Weighted average number of shares (`000) 184 661 162 978 145 484
Fully diluted weighted average number of
shares (`000) 184 661 168 097 150 053
Net asset value per share (cents) 85.5 123.6 119.4
Net tangible asset value per share (cents) 78.1 108.4 128.8
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Revenue 534 354 599 128 538 804
Cost of sales (347 535) (393 206) (322 413)
Gross profit 186 819 205 922 216 391
Other income 5 134 2 920 2 053
Operating expenses (132 132) (137 617) (107 608)
Earnings before depreciation,
amortisation, impairments and
revaluations, hedging, interest
and taxation 59 821 71 225 110 836
Depreciation (47 270) (43 694) (31 557)
Amortisation (2 238) (1 119) (626)
Hedging loss (11 433) (4 996) -
Impairments and revaluations (17 969) - -
(Loss)/earnings before interest and
taxation (19 089) 21 416 78 653
Investment income 1 424 1 653 870
Finance costs (45 855) (45 617) (24 596)
(Loss)/earnings before taxation (63 520) (22 548) 54 927
Income tax expense 14 096 4 233 (14 999)
(Loss)/profit attributable to
shareholders (49 424) (18 315) 39 928
Other comprehensive (loss)/income - - -
Total comprehensive (loss)/profit for
the period (49 424) (18 315) 39 928
(Loss)/profit attributable to:
Owners of the company (49 382) (18 235) 39 928
Non-controlling interest (42) (80) -
(49 424) (18 315) 39 928
Total comprehensive (loss)/income
attributable to:
Owners of the company (49 382) (18 235) 39 928
Non-controlling interest (42) (80) -
(49 424) (18 315) 39 928
Reconciliation of headline earnings:
(Loss)/profit attributable to
shareholders (49 382) (18 235) 39 928
Impairments and revaluations 17 969 - -
Loss/(profit) on disposal of property,
plant and equipment 2 755 (928) (784)
Profit on acquisition of subsidiary - 825 -
Headline (loss)/earnings attributable
to owners (28 658) (18 338) 39 144
(Loss)/earnings per share (cents) (26.74) (11.19) 27.45
Headline (loss)/earnings per share (cents)(15.52) (11.25) 26.91
Fully diluted (loss)/earnings per
share (cents) (26.74) (10.85) 26.61
Fully diluted headline (loss)/earnings
per share (cents) (15.52) (10.91) 26.09
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Balance as at 1 March 179 082 139 313 58 760
Reclassification of fair value adjustment 2 - -
Fair value adjustments on
available-for-sale investments (665) 104 412
Total comprehensive (loss)/income for
the period (18 235) 39 928 26 081
Share capital issued during the year 65 409 985 54 041
Share issue expenses (58) (1 350) -
Acquisition of treasury shares (216) - -
Share-based payments 122 102 19
Non-controlling interest (80) - -
Non-controlling interest aquired in
business 825 - -
Balance as at 28 February 226 186 179 082 139 313
Reclassification of fair value adjustment - 2 -
Fair value adjustments on
available-for-sale 179 (665) 104
Release of fair valuing on disposal 197 - -
Total comprehensive (loss)/income for
the period (49 382) (18 235) 39 928
Share capital issued during the year 30 252 65 409 985
Share issue expenses (580) (58) (1 350)
Movement on treasury shares 4 530 (216) -
Share-based payments - 122 102
Dividends paid (1 094) - -
Non-controlling interest (42) (80) -
Non-controlling interest acquired
in business - 825 -
Balance as at 28 February 210 246 226 186 179 082
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Cash flows from operating activities
(Loss)/profit attributable to
shareholders (49 424) (18 315) 39 928
Non-cash flow adjustments 115 178 79 312 69 178
Cash flow adjustments (11 433) (4 996) -
Operating profit before working capital
movements 54 321 56 001 109 106
Decrease/(increase) in inventories 7 805 (8 344) (14 262)
Decrease/(increase) in trade and other
receivables 2 409 8 462 (29 518)
Increase in trade and other payables 11 357 5 870 21 722
Decrease in current portion of loans and
borrowings (1 596) - -
Cash flows from operations 74 296 61 989 87 048
Investment income 1 424 1 653 870
Finance costs (45 855) (45 617) (24 597)
Dividends received 65 143 105
Taxation paid (717) (5 530) (6 074)
Net cash from operating activities 29 213 12 638 57 352
Cash flows from investing activities
Acquisition of property, plant and equipment
- Replacement (6 498) (29 610) (62 899)
- Expansion (3 316) (207 867) (106 631)
Proceeds on disposal of property, plant
and equipment 8 201 12 675 12 774
Acquisition of intangible assets
(including goodwill) (1 128) (24 706) (4 291)
Investments in subsidiaries and joint
ventures - 9 (1 510)
Investments in non-controlling interest - 745 -
Proceeds on disposal of
available-for-sale assets 1 489 - -
Movement on external loans 8 454 - -
Net cash from/(cash used) in investing
activities 7 202 (248 754) (162 557)
Cash flows from financing activities
Proceeds from the issue of share capital 67 1 834 (365)
Proceeds from shareholders` contributions 29 605 - -
Dividend paid (1 094) - -
Net (repayment)/raising of loans and
borrowings (71 845) 164 824 98 794
Net cash (used in)/from financing
activities (43 267) 166 658 98 429
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Decrease in cash and cash equivalents (6,852) (69,458) (6,776)
Cash acquired on business combination - 6,682 -
Opening cash and cash equivalents (60,070) 2,706 9,482
Closing cash and cash equivalents (66,922) (60,070) 2,706
CONDENSED CONSOLIDATED SEGMENTAL REPORT
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Revenues
External sales
Aggregates 308 284 280 416 289 642
Readymix concrete 208 143 313 115 246 068
Concrete manufactured products 17 927 5 597 3 094
534 354 599 128 538 804
Internal sales
Aggregates 37 926 25 257 21 451
Readymix concrete 2 153 1 300 1 104
Concrete manufactured products 110 5 163 4 385
40 189 31 720 26 940
Total revenue
Aggregates 346 210 305 673 311 093
Readymix concrete 210 296 314 415 247 172
Concrete manufactured products 18 037 10 760 7 479
574 543 630 848 565 744
Earnings before depreciation,
amortisation, impairments and
revaluations, hedging, interest
and taxation Aggregates 64 099 47 644 72 685
Readymix concrete (6 398) 24 375 38 331
Concrete manufactured products 2 120 (794) (180)
59 821 71 225 110 836
2010 2009 2008
Reviewed Restated Reported
R`000 R`000 R`000
Property, plant and equipment
Aggregates 389 991 398 894 286 440
Readymix concrete 105 399 142 917 98 471
Concrete manufactured products 50 050 53 358 5 290
545 440 595 169 390 201
Note 1: Reclassifications have been made to various revenue items, cost of
sales, operating expenses, investment income and finance costs in the prior
periods. These reclassifications were made so as to reflect the nature of the
underlying transactions in a more meaningful manner. The reclassifications have
no impact on the (loss)/profit of the Group. The tables below sets out the
relevant items reclassified and the quantum thereof:
2009
2009 Reclassi- Reclassi-
Restated fications fied
Revenue 587 002 12 126 599 128
Cost of sales (431 499) 38 293 (393 206)
Gross profit 155 503 50 419 205 922
Other income 2 920 - 2 920
Operating expenses (90 122) (47 495) (137 617)
Earnings before depreciation,
amortisation, impairments and
revaluations, hedging, interest
and taxation 68 301 2 9 24 71 225
Depreciation (43 694) - (43 694)
Amortisation (1 119) - (1 119)
Hedging loss (4 996) - (4 996)
Impairments and revaluations - - -
Earnings before interest and taxation 18 492 2 9 24 21 416
Investment income - 1 6 53 1 653
Finance costs (41 040) (4 577) (45 617)
Loss before taxation (22 548) - (22 548)
Income tax expense 4 233 - 4 233
Loss attributable to shareholders (18 315) - (18 315)
2008
2008 Reclassi- Reclassi-
Reported fications fied
Revenue 532 689 6 115 538 804
Cost of sales (352 033) 29 620 (322 413)
Gross profit 180 656 35 735 216 391
Other income 2 053 - 2 053
Operating expenses (74 915) (32 693) (107 608)
Earnings before depreciation,
amortisation, impairments and
revaluations, hedging, interest
and taxation 107 794 3 042 110 836
Depreciation (31 557) - (31 557)
Amortisation - (626) (626)
Hedging loss - - -
Impairments and revaluations - - -
Earnings before interest and taxation 76 237 2 416 78 653
Investment income - 870 870
Finance costs (21 310) (3 286) (24 596)
Earnings before taxation 54 927 - 54 927
Income tax expense (14 999) - (14 999)
Profit attributable to shareholders 39 928 - 39 928
CORPORATE INFORMATION
Non-executive directors: B Mkhonto, E Moloi, MM Patel, H W P Scholtz
Executive directors: S J Wearne (Chairman and CEO); J C Wearne; A W
Bruens (CFO); N Heyns
Registration number: 1994/005983/06
Registered address: 3 Kiepersol House, Stone Mill 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: 31/05/2010 15:27:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
