| Wed 24 Nov 2010, 7:25 | | FWD - Freeworld Coatings Limited - Audited results and cash dividend declaration |
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FWD
FWD
FWD - Freeworld Coatings Limited - Audited results and cash dividend declaration
for the year ended 30 September 2010
FREEWORLD COATINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2007/021624/06)
Share code: FWD
ISIN: ZAE000109450
("Freeworld Coatings", "the Group" or "the Company")
AUDITED RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30 SEPTEMBER
2010
HIGHLIGHTS
Revenues of R2 765 million, up 2.3%
Net profit at R156.6m, up 6%
HEPS at 74 cents, up 6%
Cash flows from operations remained strong at R392 million, up
5%
Final dividend of 7 cents per share.
FREEWORLD COATINGS CEO, ANDRE LAMPRECHT, COMMENTED
"These results are pleasing considering the tough economic conditions in which
we continue to operate. Turnover levels and profits have held up well due to our
strong and diverse product offering and the emphasis we have placed on gross
margin performance and efficiencies in the business. Our net profit is up 6% on
last year and 24% up on a normalised basis.
"Next year will continue to be challenging but we remain well positioned for any
economic uptick. We will not hold back from continued investment in our brands
and facilities, or the pursuit of growth opportunities that may arise."
COMMENTARY
TRADING ENVIRONMENT
The trading environment has remained difficult throughout the year and it is
therefore pleasing to report that whilst turnover only showed a modest increase,
overall volumes were up by circa 4%. This is attributable, in part, to our
Plascon democratisation strategy, which is aimed at generating greater access to
our products by more consumers. This succeeded in growing volumes by 11% in the
Retail channel. The commercial market, however, remained depressed with the
reduction in building plans impacting on construction activity. The industrial
market was fairly flat and the automotive refinish market has seen some
recovery. Export markets for Colourant Systems in Australia and Europe remained
depressed.
FINANCIAL RESULTS
The 2009 financial year included a compensation payment from Akzo of
R29 million, and so as to reflect a more comparable trading performance, we have
compared our 2010 result to 2009 on both a reported and a normalised basis.
Income statement
Revenue from operations for the 2010 financial year at R2.8 billion is 2% higher
than that achieved last year, with both the Decorative Coatings and Performance
Coatings segments recording modest increases. Within the Performance Coatings
segment turnover growth is mixed, with firm sales growth of 9% in Automotive
offsetting the weakness in export sales from Colourants which recorded a decline
of 17%, aggravated by the translation impact of a stronger Rand
EBITDA excluding fair value adjustments on financial instruments at
R405 million, whilst 5% below last year, is 2% higher on a normalised basis.
Given the tough economic environment that has prevailed throughout the year,
this is considered a good result. The EBITDA margin at 14.6%, on a normalised
basis is also in line with last year. This is, in part, attributable to raw
material input costs which, whilst remaining relatively firm throughout the
year, benefited from the strength in the Rand. Throughout the year there
remained a continued focus on operational cost reductions.
The continued strength in the Rand, whilst benefiting gross margins, did result
in the Company recording mark to market fair value losses on financial
instruments of R17.2 million as we continue to believe it prudent to pursue a
longstanding policy to purchase forward exchange contracts on raw material
imports. This figure does however compare favourably against last year`s loss of
R26.2 million.
The resultant operating profit at R303 million, whilst being 6% below last year,
is 4% up on a normalised basis.
The net finance cost, as a consequence of reduction in JIBAR and reduced net
debt, is 22% lower than last year.
Income from associates at R16 million is 91% higher than the prior year due
principally to a significant turnaround in DuPont Freeworld, which supplies
product to the motor manufacturers, coupled with creditable performances from
the can coatings and powder coatings businesses.
Net profit at R156.6 million is 6% higher than last year, and 24% up on a
normalised basis.
Headline earnings per share at 74 cents are 6% higher than last year, and 21%
higher than on a normalised basis.
The directors have declared a final dividend of 7 cents per share, the same as
last year. This represents the total dividend for the year, as no interim
dividend was declared due to the corporate action at the time. The directors
consider this level of dividend to be prudent, particularly in the prevailing
economic climate and the Company`s growth aspirations and opportunities in that
regard.
Financial Position
Total assets as at 30 September 2010 at R4,6 billion are marginally higher than
last year, with the reduction in trade and other receivables compensating for a
higher investment in property, plant and equipment due to the capex programme,
and higher inventories in advance of a higher demand period.
Total interest bearing debt (net of cash) at R772 million has reduced by R59
million, and translates into a debt to equity ratio of 26%.
Cash flow and capital expenditure
Cash generated from operations amounted to R392 million with the cash inflow
from operating activities of R208 million being used to acquire property, plant
and equipment totalling R131 million and intangibles of R16 million.
Our R131 million investment in capital expenditure includes expenditure on the
new Design Centre in Cape Town (which will facilitate the promotion of the Decor
EffectTrade Mark and the development of a new channel to market which will also
strengthen all our stockists over time), an ERP system for the automotive
business, the ongoing replacement of outdated manufacturing equipment in all our
sites, and the rejuvenation of the Epping site in Cape Town to accommodate the
transfer of the Earthcote and Midas production and offices from leased premises.
The Company will continue with the rejuvenation of its sites in South Africa
over the next few years to support also an exciting new range of product
offerings and export growth.
SEGMENTAL COMMENT
Decorative Coatings
Overall turnover at R2 billion ended slightly higher than last year with EBITDA
excluding fair value adjustments at R288 million being 5% below last year and 5%
up on a normalised basis.
The South and other African businesses performed strongly with the overall
result being affected by Australia during the run out period of the restraint of
trade, which ended in August 2010. The site in Melbourne has commenced supply of
RemovALL to the aviation market, and also supplies RemovALL and Biowash to other
markets in a number of countries. We also managed to secure the Boeing original
equipment approval for the manufacture of our aviation RemovALL product for this
site.
In South Africa, the Retail channel performed particularly well throughout the
year, with volumes up 11%, starting off with pipeline replenishment for the
first few months, but then maintaining growth with product focused promotion
activity and market share improvement at Massmart. The commercial sector
finished off with lower volumes, as a result of the reduction in building plans
passed and subsequent slow down in the construction sector. Tight credit
conditions also held back any significant redecoration of large properties and
the World Cup certainly impacted activity during June and July. There are
however signs of improvement towards the backend of the year. The industrial
business struggled initially with low volumes from Transnet, but thanks to some
good work with the distributors, volumes ended up slightly ahead of last year.
Once again good export volumes helped the business to positive volume growth
overall.
The other African Operations produced a pleasing result with an 11% increase in
sales volumes. This growth is attributable to increased infrastructural spend as
well as improvements in our marketing efforts and service delivery focus. There
are signs of an uptick in trading conditions as a result of the higher commodity
prices. This is still somewhat muted with the strength of the Rand impacting on
margins in the non-rand denominated countries.
The China Project is focused on the construction market and faced a challenging
year due to the tightening loan conditions in the real estate market post April.
Performance Coatings
Turnover for the Performance Coatings segment at R0.9 billion is 2% higher than
last year with EBITDA excluding fair value adjustments at
R119 million, 8% down. Performances within the segment were mixed with
Automotive growing sales by 8% whilst the Colourant Systems business recorded a
decline of 17% due to lower export sales to Australia and Europe and the
translation effect of the strong Rand.
All segments within the Automotive Group experienced some recovery during 2010.
Although activity levels were satisfactory within the context of the tough
economic conditions, volumes have not recovered to levels prior to the slowdown.
The market for refinish products, including body shops, trailer builders and the
refurbishment sector have achieved some recovery, but this market still remains
under some pressure. This is reflected in continued consolidation, closure of
marginal businesses and change in product mix in favour of lower end brands and
products in the industry.
Colourant Systems had a challenging year with the tough trading environment in
its export markets, in particular Australia and Europe resulting in a decline in
sales volumes. In addition to the lower volumes, the impact of a stronger Rand
and the sales product mix all contributed to overall turnover being down on last
year. Reasonable sales levels were recorded in South Africa, with the rest of
Africa continuing to show good growth.
Hamilton Brands had a constrained year with sales volumes down, mainly because
of depressed market conditions. Brush and rollers sales, the mainstay of the
company, were adversely impacted by the stumbling construction sector. The
introduction of new product lines like Wagner, Soudal, Autoline and Polycell
showed promising growth and this is expected to continue in the following
period.
Midas Earthcote volumes overall were only marginally higher than last year, with
promising growth in Gauteng, up 13%, which augurs well for the coming period.
The later part of the year heralded the birth of their Paint & Place stores,
with a number of these stores being launched in South Africa as well new
Earthcote Franchises in Holland and Zambia.
APPRECIATION
Against the difficult prevailing economic conditions, our overall results are
pleasing. We express our sincere appreciation to all the staff for their efforts
and dedication during the year. This was a particularly demanding year
especially when judged against the further increased workloads occasioned by the
corporate action experienced by the Group.
CORPORATE ACTION
Shareholders are referred to the cautionary announcement of 30 August, which was
renewed on 12 October. Given Kansai Paints` stance that there is no intended
proposed merger, we are still awaiting the decision of the Competition Tribunal
as to whether or not there is a proposed merger, as the approach from Kansai
Paints to the Company and their acquisition of 27.6% of the Company`s shares
engender material competition related concerns. We will be updating the
cautionary announcement shortly.
CHANGES TO THE BOARD
With effect from 22 November 2010, Moss Ngoasheng, an independent non-executive
director on the board, was appointed as a non-executive Deputy Chairman to the
board and Chairman of the Remuneration and Nomination Committee.
OUTLOOK
There are signs of economic recovery. However trading conditions remain
constrained and we are still concerned over global financial markets and the
pace of the economic recovery.
With our strong brands, comprehensive product range, wide distribution network
and growing African business, we are well positioned to benefit from improved
economic activity when it comes. We are confident as before that we will
continue to perform competitively.
Freeworld Coatings remains a growth business and we will continue to pursue
opportunities that are available as well as weighing existing investments that
may not offer optimum performance. We also remain committed to investing in our
brands, and in bringing new and innovative products to the market.
RM Godsell AJ Lamprecht
Chairman Chief Executive Officer
CASH DIVIDEND DECLARATION
for the year ended 30 September 2010
DIVIDEND NUMBER 5
Notice is hereby given that the following cash dividend has been declared for
the year ended 30 September 2010: Number 5 (final dividend) of 7 cents per
ordinary share.
In compliance with the requirements of the JSE Limited, the following dates are
applicable.
Last day to trade cum dividend Friday, 21 January 2011
Securities start trading ex-dividend Monday, 24 January 2011
Record date to determine who receives Friday, 28 January 2011
the dividend
Electronic transfer of funds or cheques Monday, 31 January 2011
posted/CSDPs and brokers credited
Share certificates may not be Monday, 24 January 2011 and Friday, 28
dematerialised or rematerialised January 2011, both days inclusive.
between
On behalf of the board
ELA Chamberlain
Group Company Secretary
Contact College Hill
Nicholas Williams
(011) 447-3030
(082) 600 2192
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Transfer Secretaries: Link Market Services South Africa (Proprietary) Limited
CONDENSED CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2010
R`000 Not Audited Restated
e 2010 Audited
2009
Revenue 2 765 009 2 703 164
Earnings before interest, tax, depreciation and 404 950 424 884
amortisation and fair value adjustments
Fair value adjustments (17 236) (26 248)
Earnings before interest, tax, depreciation and 387 714 398 636
amortisation (EBITDA)
Depreciation and amortisation (85 069) (76 685)
Operating profit 302 645 321 951
Finance costs (101 870) (125 259)
Income from investments 12 262 10 358
Profit before taxation 213 037 207 050
Income tax expense (72 774) (68 354)
Profit after taxation 140 263 138 696
Income from associates 16 370 8 566
Profit for the period 156 633 147 262
Attributable to:
Non controlling interest 5 819 4 990
Equity holders of Freeworld Coatings Limited 150 814 142 272
156 633 147 262
Earnings per share (basic and diluted in cents) 8 74 70
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2010
R`000 Audited Restated
2010 Audited
2009
Profit for the period 156 633 147 262
Other comprehensive income
Movement on foreign currency translation reserve (9 298) (18 399)
Net actuarial gains and losses 659 4
Decrease/(increase) in fair value of hedging 8 116 (13 358)
instruments
Other reserve movements - 150
Other comprehensive income for the period before tax (523) (31 603)
Tax on other comprehensive income for the period (2 272) 16 057
Other comprehensive income for the period (2 795) (15 546)
Total comprehensive income for the period 153 838 131 716
Attributable to:
Non controlling interest 5 819 4 990
Equity holders of Freeworld Coatings Limited 148 019 126 726
Total comprehensive income for the period 153 838 131 716
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2010
R`000 Audited Restated Restated
2010 Audited Audited
2009 2008
ASSETS
Non current assets 3 632 318 3 568 671 3 527 594
Property, plant and equipment 709 978 646 733 605 184
Goodwill 1 890 507 1 893 868 1 898 141
Intangible assets 785 432 794 847 795 194
Investment in associates 197 444 181 613 193 009
Finance lease receivables - 98 315
Long term loans and receivables 17 153 9 558 9 906
Deferred taxation assets 31 804 41 954 25 845
Current assets 962 631 908 447 971 844
Inventories 457 213 385 807 446 909
Trade and other receivables 447 278 473 647 451 723
Taxation 5 846 10 538 2 030
Cash and cash equivalents 52 294 38 455 71 182
Total assets 4 594 949 4 477 118 4 499 438
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 2 584 510 2 583 409 2 583 409
Other reserves (35 445) (31 077) (20 579)
Retained income 430 880 292 291 180 600
Equity attributable to shareholders of 2 979 945 2 844 623 2 743 430
Freeworld Coatings Limited
Non controlling interest 24 761 25 140 23 313
Total equity 3 004 706 2 869 763 2 766 743
Non current liabilities 906 183 944 804 907 872
Interest-bearing liabilities 638 308 664 044 624 691
Deferred taxation liabilities 251 709 260 437 261 613
Provisions 16 166 16 237 21 568
Other non interest-bearing liabilities - 4 086 -
Current liabilities 684 060 662 551 824 823
Trade and other payables 471 808 426 833 477 416
Provisions 16 307 17 008 7 800
Current tax payable 9 609 13 353 20 243
Short term loans and bank overdrafts 186 336 205 357 319 364
Total equity and liabilities 4 594 949 4 477 118 4 499 438
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2010
R`000 Audited Restated
2010 Audited
2009
Cash flows from operating activities
Cash receipts from customers 2 791 378 2 681 790
Cash paid to employees and suppliers (2 399 778) (2 307 328)
Cash generated from operations 391 600 374 462
Finance costs (103 646) (136 289)
Dividends received from associates 539 19 962
Interest received 12 262 10 358
Income tax paid (75 087) (84 811)
Cash flow from operations 225 668 183 682
Dividends paid (including non controlling interest (17 628) (33 744)
holders)
Cash inflow from operating activities 208 040 149 938
Cash flow from investing activities
Proceeds on decrease in long term financial assets - 565
Purchase of additional share in subsidiary (4 076) -
Acquisition of long-term financial assets (7 497) -
Acquisition of property, plant and equipment (131 180) (100 950)
Replacement capital expenditure (62 379) (68 082)
Expansion capital expenditure (68 801) (32 868)
Acquisition of intangible assets (15 691) (21 979)
Proceeds on disposal of property, plant and 7 899 3 323
equipment
Net cash used in investing activities (150 545) (119 041)
Net cash inflow before financing activities 57 495 30 897
Cash flows from financing activities
VAT recovered on incorporation costs originally 1 101 -
utilised against share premium
(Decrease)/increase in long term interest-bearing (25 736) 85 042
borrowings
Decrease in short term interest-bearing liabilities (19 021) (148 666)
Net cash used in financing activities (43 656) (63 624)
Net increase/(decrease) increase in cash and cash 13 839 (32 727)
equivalents
Cash and cash equivalents at beginning of year 38 455 71 182
Cash and cash equivalents at end of year 52 294 38 455
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2010
R`000 Share Total Non Interest of
capital retained controlling all
and premium income and interest shareholders
other
reserves
Balance at 1 October 2 418 796 - 20 144 2 438 940
2007
Restatement (refer - (9 837) - (9 837)
note 2)
Restated balance at 2 418 796 (9 837) 20 144 2 429 103
1 October 2007
Total comprehensive - 185 459 4 697 190 156
income for the period
Barloworld Limited Share - 2 002 - 2 002
Option/Rights expense
recognised in equity
Freeworld Coatings - 2 784 - 2 784
Limited SARs expense
recognised in equity
New shares issued during 164 613 - - 164 613
the year
Dividends on ordinary - (20 387) (1 528) (21 915)
shares
Restated balance at 2 583 409 160 021 23 313 2 766 743
30 September 2008
Restated balance at 2 583 409 160 021 23 313 2 766 743
1 October 2008
Total comprehensive - 126 726 4 990 131 716
income for the period
Barloworld Limited Share - 1 426 - 1 426
Option/Rights expense
recognised in equity
Freeworld Coatings - 3 622 - 3 622
Limited SARs expense
recognised in equity
New shares issued during - - - -
the period
Dividends on ordinary - (30 581) (3 163) (33 744)
shares
Restated balance at 2 583 409 261 214 25 140 2 869 763
30 September 2009
Restated balance at 2 583 409 261 214 25 140 2 869 763
1 October 2009
Total comprehensive - 148 019 5 819 153 838
income for the period
Barloworld Limited Share - (1 840) - (1 840)
Option/Rights expense
recognised in equity
Freeworld Coatings - 3 935 - 3 935
Limited SARs expense
recognised in equity
Purchase of additional - (1 622) (2 841) (4 463)
share in subsidiary
VAT recovered on 1 101 - - 1 101
incorporation costs
originally utilised
against share premium
Dividends on ordinary - (14 271) (3 357) (17 628)
shares
Balance at 30 September 2 584 510 395 435 24 761 3 004 706
2010
SEGMENT REPORTING
for the year ended 30 September
Segment information is reported for the purposes of resource allocation and
assessment of performance into two major operating divisions, namely Decorative
Coatings and Performance Coatings.
Decorative coatings covers the architectural and decorative customer and product
segments describing products used primarily in the do it yourself (`DIY`) and
building/construction sectors of the coatings market. It covers interior and
exterior broad wall.
Performance coatings describing high technology products used for applications
primarily in the construction, industrial and automotive industries. Performance
coatings are typically utilised to safeguard against:
- chronic exposure to corrosive, caustic or acidic agents, chemical mixtures or
solutions;
- repeated exposure to high temperatures;
- exterior exposure of steel and non ferrous metal structures;
- repeated heavy abrasion, including mechanical wear and repeated scrubbing with
industrial grade solvents, cleansers or scouring agents.
The accounting policies of the reportable segments are the same as the group`s
accounting policies. Segment profit represents the profit earned by each segment
without allocation of finance costs, income from investments, income tax
expense, income from associates and profit attributable to non controlling
interest holders.
Information regarding the group`s reportable segments is presented below.
SEGMENT REVENUES AND RESULTS
R`000 Decorative Performance Eliminations
Coatings Coatings Total Group
2010
Consolidated segment 1 942 346 911 097 (88 434) 2 765 009
revenue
Segment result
Earnings before 288 090 118 976 (2 116) 404 950
interest, tax,
depreciation and
amortisation (EBITDA)
Fair value adjustments (13 565) (3 671) (17 236)
EBITDA after fair value 274 525 115 305 (2 116) 387 714
adjustments
Depreciation and (61 482) (23 587) (85 069)
amortisation
Segmental operating 213 043 91 718 (2 116) 302 645
profit
Finance costs (101 870)
Income from investments 12 262
Income tax expense (72 774)
Profit after tax 140 263
Income from associates 16 370
Attributable to non (5 819)
controlling interest
holders
Attributable to 150 814
Freeworld Coatings
Limited shareholders
Consolidated segment 1 888 192 893 148 (78 176) 2 703 164
revenue
Segment result
Earnings before 302 676 129 405 (7 197) 424 884
interest, tax,
depreciation and
amortisation (EBITDA)
Fair value adjustments (23 963) (2 285) (26 248)
EBITDA after fair value 278 713 127 120 (7 197) 398 636
adjustments
Depreciation and (55 138) (21 547) (76 685)
Amortisation
Segmental operating 223 575 105 573 (7 197) 321 951
profit
Finance costs (125 259)
Income from investments 10 358
Income tax expense (68 354)
Profit after tax 138 696
Income from associates 8 566
Attributable to non (4 990)
controlling interest
holders
Attributable to 142 272
Freeworld Coatings
Limited shareholders
Revenue reported above represents revenue generated both from external
customers and inter-segment revenue.
Inter segment revenue is priced on an arms length basis.
SEGMENT STATEMENT OF FINANCIAL POSITION
R`000 Decorative Performance Eliminations
Coatings Coatings Total Group
2010
Segmental total assets 3 738 743 883 441 (276 973) 4 345 211
Segmental non interest (566 845) (401 329) 202 575 (765 599)
bearing liabilities
Segmental net operating 3 171 898 482 112 (74 398) 3 579 612
assets
Segmental interest (832 532) (66 510) 74 398 (824 644)
bearing liabilities
Segmental cash and cash 49 967 2 327 - 52 294
equivalents
Segmental net assets 2 389 333 417 929 - 2 807 262
Investment in associates 197 444
Net assets 3 004 706
Restated
2009
Segmental total assets 3 679 682 878 544 (301 176) 4 257 050
Segmental non interest (622 564) (315 840) 200 450 (737 954)
bearing liabilities
Segmental net operating 3 057 118 562 704 (100 726) 3 519 096
assets
Segmental interest bearing (847 186) (122 941) 100 726 (869 401)
liabilities
Segmental cash and cash 32 121 6 334 - 38 455
equivalents
Segmental net assets 2 242 053 446 097 - 2 688 150
Investment in associates 181 613
Net assets 2 869 763
Restated
2008
Segmental total assets 3 503 790 870 158 (138 701) 4 235 247
Segmental non interest (562 050) (265 483) 38 893 (788 640)
bearing liabilities
Segmental net operating 2 941 740 604 675 (99 808) 3 446 607
assets
Segmental interest bearing (919 340) (124 523) 99 808 (944 055)
liabilities
Segmental cash and cash 54 081 17 101 - 71 182
equivalents
Segmental net assets 2 076 481 497 253 - 2 573 734
Investment in associates 193 009
Net assets 2 766 743
For the purposes of monitoring segment performance and allocating resources
between segments, the chief operating decision maker monitors the tangible,
intangible and financial assets attributable to each segment. All assets are
allocated to reportable segments.
R`000 Decorative Performance
Coatings Coatings Total Group
Capital expenditure
2010
Property, plant and 105 168 26 011 131 179
equipment
2009 76 074 24 876 100 950
Property, plant and
equipment
2008 104 936 21 060 125 996
Property, plant and
equipment
Other segment information
2010
Impairment losses on property, plant and - (372) (372)
equipment
2009 - (222) (222)
Impairment losses on property, plant and
equipment
2008 - - -
Impairment losses on property, plant and
equipment
The group does not report to senior management based on a split by
geographical location of customers and this has therefore not been disclosed.
Prior period figures have been restated for the following items:
- Segment revenue and results: The eliminations column only relates to
intercompany transactions between companies from different segments.
Previously all intercompany sales between companies within the group were
shown in the eliminations column.
- Segment statement of financial position: Eliminations for balances between
segments are shown separately in the eliminations column. Previously balances
were eliminated within the segment.
The impact of these changes from prior periods were as follows:
SEGMENT REVENUE AND RESULTS
R`000 Decorative Performance Eliminations
Coatings Coatings Total Group
Restated
September 2009
Consolidated segment (85 801) (111 182) 196 983 -
revenue
Segment result
*EBITDA before fair 6 112 (81) (6 031) -
value adjustments
Fair value adjustments - - - -
*EBITDA after fair value 6 112 (81) (6 031) -
adjustments
Depreciation and - - -
Amortisation
Segmental operating 6 112 (81) (6 031) -
profit
SEGMENT STATEMENT OF FINANCIAL POSITION
R`000 Decorative Performance
Coatings Coatings Eliminations Total Group
September 2009
Segmental total assets 255 992 45 184 (301 176) -
Segmental non interest (155 266) (45 184) 200 450 -
bearing liabilities
Segmental net operating 100 726 - (100 726) -
assets
Segmental interest - (100 726) 100 726 -
bearing liabilities
Segmental cash and cash - - - -
equivalents
Segmental net assets 100 726 (100 726) - -
September 2008
Segmental total assets 113 755 24 946 (138 701) -
Segmental non interest (24 946) (13 947) 38 893 -
bearing liabilities
Segmental net operating 88 809 10 999 (99 808) -
assets
Segmental interest - (99 808) 99 808 -
bearing liabilities
Segmental cash and cash - - - -
equivalents
Segmental net assets 88 809 (88 809) - -
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September
1 STATEMENT OF COMPLIANCE
The abridged report has been prepared in accordance with IAS 34, Interim
Financial Reporting, Schedule 4 of the Companies Act 61 of 1973, as amended, and
the JSE Limited`s Listing disclosure requirements.
2 ACCOUNTING POLICIES
The abridged report has been prepared in accordance with the framework concepts
and measurement and recognition requirements of International Financial
Reporting Standards and AC500 standards as issued by the Accounting Practices
Board. The accounting policies are consistent with those applied in the annual
financial statements for the year ended September 2009, with the exception of
the implementation of the following new accounting standards, amendments and
circulars.
IFRS 8: Operating Segments (effective 1 January 2009)
- IAS 1 (revised): Presentation of Financial Statements (effective 1 January
2009)
IAS 23 (revised): Borrowing Costs (effective 1 January 2009)
IAS 38 (amended): Intangible assets (effective 1 January 2009)
The application of IFRS 8 and IAS 1 (revised) has introduced certain changes to
the presentation of the financial statements and segment information. No
adjustments were necessary on the adoption of IFRS 8.
The application of IAS 23 has removed the policy election to either capitalise
or expense borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset. All such borrowing costs are
now required to be capitalised. This application is prospective.
Comparative financial statements have been restated to account for the amendment
to IAS 38: Intangible assets. Previously, merchandising and promotional stock
items were included in inventory and expensed to the income statement when
utilised. In accordance with the amendment in IAS 38, the group must expense all
merchandising and promotional items, when having access to such items,
regardless of when these items are utilised by the group. The effect of the
restatement can be found in note 6.
3 RELATED PARTY TRANSACTIONS
There has been no significant change in related party relationships since the
previous periods. Other than in the normal course of business, there have been
no significant transactions during the period.
4 SUPPLEMENTARY STATEMENT OF FINANCIAL POSITION AND INCOME STATEMENT INFORMATION
R`000 2010 Restated Restated
2009 2008
Net asset value per share (cents) 1 474 1 408 1 376
Weighted average number of shares in 203 872 203 872 201 136
issue (000`s)
Headline earnings per share (basic and 74 69 106
diluted in cents)
5 AUDIT OF FINANCIAL STATEMENTS
The auditors, Deloitte & Touche, have issued their unmodified opinion on the
Group`s financial statements for the year ended 30 September 2010. The audit
was conducted in accordance with International Standards on Auditing. These
summarised provisional financial statements have been derived from the Group
financial statements and are consistent in all material respects, with the
Group financial statements. A copy of their audit report is available for
inspection at Freeworld Coatings Limited`s registered office. Any reference to
future financial performance included in this announcement, has not been
reviewed or reported on by the group`s auditors.
6 RESTATEMENTS
The effect of the IAS 38 restatements on the comparative financial statements
is summarised below.
Refer to note 2 for further background.
R`000 Previously Currently Difference
reported reported
Income statement
30 September 2008
EBITDA 464 577 465 019 442
Taxation (81 944) (82 068) (124)
Profit for the year 216 910 217 228 318
Headline earnings 201 136 201 454 318
30 September 2009
EBITDA 398 335 398 636 301
Taxation (68 270) (68 354) (84)
Profit for the year 147 045 147 262 217
Headline earnings 139 675 139 892 217
Statement of financial position
30 September 2008
Inventories 460 129 446 909 (13 220)
Interest of shareholders of Freeworld 2 752 949 2 743 430 (9 519)
Coatings Limited
Non controlling interest 23 313 23 313 -
Deferred taxations assets 25 845 25 845 -
Deferred taxations liabilities 265 314 261 613 (3 701)
30 September 2009
Inventories 398 725 385 807 (12 918)
Interest of shareholders of Freeworld 2 853 924 2 844 623 (9 301)
Coatings Limited
Non controlling interest 25 140 25 140 -
Deferred taxations assets 41 954 41 954 -
Deferred taxations liabilities 264 054 260 437 (3 617)
7 OTHER DISCLOSABLE ITEMS
R`000 Audited Restated
2010 Audited
2009
Inventory written down to net realisable value 4 983 3 142
during the period
Impairment losses recognised on items of property, 372 222
plant and equipment
Acquisitions of items of property, plant and 131 180 100 950
equipment
Disposals of items of property, plant and equipment (7 824) (3 788)
R`000 Audited Restated
2010 Audited
2009
8 EARNINGS PER SHARE
8.1 Fully converted weighted average number of
shares
Weighted average number of ordinary shares 203 872 203 872
Fully converted weighted average number of shares 203 872 203 872
8.2 Earnings
Profit for the period from continued operations 150 814 142 272
attributable to equity holders of Freeworld Coatings
Limited
Total earnings 150 814 142 272
Earnings per share (cents) 74 70
Basic
Weighted average number of ordinary shares 203 872 203 872
Earnings per share (cents) 74 70
Diluted
Weighted average number of ordinary shares 204 186 203 872
Earnings per share (cents) 74 70
8.3 Headline earnings per share
Profit for the period from continued operations 150 814 142 272
attributable to Freeworld Coatings Limited
shareholders
Adjusted for the following - (4 000)
- Share of profit on sale of associate`s assets
- Impairment of property, plant and equipment 372 222
- Loss on disposal of intangible assets 12 -
- (Profit)/Loss on disposal of plant and (75) 465
equipment and intangible assets
- Other - 7
Tax effect of above (86) 926
Headline earnings 151 037 139 892
Weighted average number of shares in issue for the 203 872 203 872
period
Headline earnings per share - basic (cents) 74 69
Headline earnings per share - diluted (cents) 74 69
R`000 Audited Restated
2010 Audited
2009
10 CONTINGENT LIABILITIES
Guarantees to third parties 22 119 11 536
Freeworld Coatings Ltd has and its subsidiaries
have the following guarantees in place:
Customs and services 1 536 1 536
Bank overdrafts 6 000 6 000
Payment guarantees 14 583 4 000
22 119 11 536
In terms of the Unbundling Agreement, Freeworld Coatings Limited has
guaranteed the first A$5 million of any environmental claim made on Barloworld
Limited by the purchaser of the Australian business for a maximum period of 8
years. An environmental insurance policy is in place in this regard. This
would give rise to a contingent asset and contingent liability.
A decision from the Medical Schemes Appeal Board, upholding a decision by the
Registrar of Medical Schemes not to allow a change in the definition of
Employer to extend to "unbundled" employers within the rules of the Barloworld
Medical Scheme, may have an impact on the Freeworld Coatings employees
remaining as members of that fund. Consideration is being given whether to
challenge this ruling in the High Court, while at the same time establishing
the potential withdrawal costs and future contribution adjustments of moving
the Freeworld Coatings employees off the Barloworld Medical Scheme.
11 EVENTS AFTER THE REPORTING PERIOD
There are no events after the reporting period in terms of IAS 10.
Date: 24/11/2010 07:25:25 Produced by the JSE SENS Department.
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