| Wed 30 Nov 2011, 16:37 | | WEA - WG Wearne Limited - Reviewed financial results for the period ended 31 |
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WEA
WEA
WEA - WG Wearne Limited - Reviewed financial results for the period ended 31
August 2011
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 financial results for the period ended 31 August 2011
Condensed Interim Consolidated Statement of Financial Position
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
ASSETS
Non-current assets 348,275 568,869 371,051
Property, plant and equipment 342,544 525,992 365,466
Intangible assets - 33,465 -
Other financial assets 4,114 3,712 3,968
Deferred taxation asset 1,617 5,700 1,617
Current assets 76,198 100,839 57,433
Inventories 12,608 31,713 14,281
Loans receivable 1,652 385 -
Other financial assets 2,850 5,329 2,953
Current taxation receivable - - 270
Trade and other receivables 43,664 63,131 36,394
Cash and cash equivalents 15,424 281 3,535
Non-current asset held for sale 4,969 - 72,402
Total assets 429,442 669,708 504,886
EQUITY AND LIABILITIES
Equity 39,589 208,396 61,451
Issued capital 178,215 176,446 174,637
Reserves 452 276 374
Accumulated (losses) profits (139,078) 30,486 (114,344)
Non-controlling interest - 1,118 784
Non-current liabilities 277,083 197,204 255,356
Borrowings 248,435 163,984 220,377
Deferred taxation liability 891 18,032 1,369
Trade and other payables 13,410 - 19,620
Environmental provision 14,347 15,188 13,990
Current liabilities 110,872 264,108 150,388
Loans payable 5,523 4,473 5,678
Borrowings 1,973 93,874 2,838
Current taxation payable 2,390 - 1,795
Trade and other payables 70,653 102,927 64,940
Bank overdraft 30,333 62,116 75,137
Non-current liabilities held for sale 1,898 - 37,691
Total liabilities 389,853 461,312 443,435
Total equity and liabilities 429,442 669,708 504,886
Number of shares in issue (`000) 273,017 250,092 246,715
Net asset value per share (cents) 14.5 83.3 24.9
Net tangible asset value per
share (cents) 14.5 83.3 24.9
Condensed Interim Consolidated Statement of Comprehensive Income
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
Continuing Operations
Revenue 175,992 227,209 370,462
Cost of sales (112,545) (133,064) (255,921)
Gross profit 63,447 94,145 114,541
Other income 2,089 2,412 11,394
Operating expenses (53,670) (64,226) (160,516)
Earnings before interest, taxation,
depreciation and amortisation
("EBITDA") 11,866 32,331 (34,581)
Depreciation and amortisation (21,295) (20,921) (42,918)
Earnings/(loss) before
interest and taxation ("EBIT") (9,429) 11,410 (77,499)
Investment income 112 32 -
Finance costs (15,649) (15,860) (36,313)
Loss before taxation (24,956) (4,418) (113,812)
Taxation (563) 5,016 2,007
Loss for the period (25,519) 598 (111,805)
Profit (loss) from
discontinued operations 707 (3,468) (36,795)
Other comprehensive income
for the period 78 - 98
Total comprehensive loss
for the period (24,734) (2,870) (148,502)
Total comprehensive (loss)
attributable to:
Owners of the parent (24,734) (3,355) (148,583)
Non-controlling interests - 485 81
Loss for the period (24,734) (2,870) (148,502)
Reconciliation of headline earnings:
Comprehensive loss attributable
to equity holders (24,734) (3,355) (148,583)
Impairments 4,308 - 42,468
Fair value on non-current
Assets held for sale - - 56,859
Loss(profit) on sale of
property, plant and equipment 1,727 688 (2,804)
Headline loss attributable to
ordinary shareholders (18,699) (2,667) (52,060)
Weighted average number of
shares in issue (`000) 208,001 249,852 246,492
Fully diluted weighted average
number of shares (`000) 208,001 249,852 246,492
Continuing operations
Basic and diluted loss
earnings per share (cents) (12.27) 0.24 (45.36)
Continuing and discontinued operations
Basic and diluted
loss per share (cents) (11.89) (1.34) (60.28)
Basic and diluted
headline loss per share (cents) (8.99) (1.07) (21.12)
Condensed Interim Consolidated Statement of Changes in Equity
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
Balance at beginning of period 61,451 210,246 210,246
Total comprehensive loss
for the period (21,734) (3,355) (148,583)
Other comprehensive income 78 - 98
Issue of share capital
net of expenses 11,638 1,495 1,495
Redemption of share capital (7,926) - -
Movement treasury shares (134) (77) (1,886)
Shareholders equity raised - 9,005 -
Non-controlling interest (785) 485 81
Dividends - (398) (1,094)
Balance at end of period 42,589 208,396 61,451
Condensed Interim Consolidated Statement of Cash Flows
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
Cash flows from operating activities (1,167) 39,562 35,947
Cash flows from investing activities 24,839) (6,025) 10,623
Cash flows from financing activities 33,021 (28,449) (51,249)
Net increase/(decrease) in
cash and cash equivalents 56,693 5,088 (4,679)
Cash and cash equivalents at
beginning of period (71,602) (66,923) (66,923)
Cash and cash equivalents at end
of period (14,909) (61,835) (71,602)
Share Capital
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
Authorized
500,000,000 ordinary par value
Share of 0.1 cent each 500,000 500,000 500,000
Reconciliation of number of shares
Issued: (in millions)
Opening balance 246 246 246
Bought back during period (56) 1 -
Issued during the period 83 (1) -
Closing balance 273 246 246
Issued share capital
Ordinary share capital 273 246 246
Ordinary share premium 177,942 176,200 174,391
178,215 176,446 174,637
Segmental reporting
Reviewed Unaudited Audited
6 months 6 months 12 months
August 2011 August 2010 February 2011
R`000 R`000 R`000
Revenue
Aggregates 110,636 113,708 188,472
Readymix concrete 56,954 107,195 170,984
Concrete manufactured products 8,402 6,306 11,006
Total revenue 175,992 227,209 370,462
EBIT
Aggregates 5,747 18,279 (56,488)
Readymix concrete (13,024) (7,471) (22,307)
Concrete manufactured products 926 602 1,296
Total EBIT (6,351) 11,410 (77,499)
(Loss) profit for the period
Aggregates (10,549) 7,068 (83,602)
Readymix concrete (14,718) (6,766) (28,516)
Concrete manufactured products (252) 296 313
Total (Loss) profit for the period (25,519) 598 (111,805)
Property, plant and equipment
Aggregates 270,504 367,786 274,626
Readymix concrete 48,915 82,188 61,820
Concrete manufactured products 23,125 26,436 25,954
Total property, plant and equipment 342,544 476,410 362,400
Total assets
Aggregates 331,394 493,808 349,037
Readymix concrete 65,206 127,551 106,016
Concrete manufactured products 32,842 48,349 49,833
Total assets 429,442 669,708 504,886
INTRODUCTION
WG Wearne Limited and its subsidiaries ("the Group") 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
Group revenue decreased by 22.54% to R175.9 million (2010 period: R227.2
million) for the six months ended 31 August 2011 ("2011 period"). The largest
contributor to this decline was the readymix concrete division which contributed
a 46.87% or a R50.2 million decline when compared to the six months ended 31
August 2010 ("2010 period").
This decline in revenue resulted in a gross profit of R63.4 million (2010
period: R94.1) which is a 32.61% or a R30.6 million decrease from the 2010
period. Included in cost of sales is repairs and maintenance expenditure of R7.4
million on plant and R2.6 million on vehicles, a significant portion of which
represents repair work which has been postponed from the prior year. In addition
to this R10 million, the Group spent R13.8 million on capital replacement of
property, plant and equipment, which has resulted in the Group spending R2.5
million on external plant hire to ensure that operations continued during the
repair process.
Operating expenses decreased by 21.11% to R50.6 million (2010 period: R64.2
million) compared to the 2010 period. This decrease is a result of the Group
streamlining overhead structures in order to reduce expenditure and implementing
cost monitoring processes to ensure that these are aligned with revenue.
Operating expenses include the following non-recurring items, among others: R3.5
million loss on scrapping of property, plant and equipment, R4.9 million debtors
impairment and legal fees of R0.8 million relating to the implementation of the
Group`s Section 311 creditors` arrangement.
The Group`s R13.8 million asset capitalisation project was made possible through
funding received from the Industrial Development Corporation ("IDC"). The
project was aimed at improving the Group`s assets, and allows it to meet its
customers` expectations. In conjunction with this project the Group has also
been engaged in an asset optimisation project which is aimed at identifying
excess assets in order to maximise effectiveness through streamlining the
operations. As a result of the replacement of property, plant and equipment the
Group`s depreciation has remained fairly constant when compared to the 2010
period.
Finance costs have remained predominately unchanged from the 2010 period. This
resulted from the Group receiving R10 million from its financiers in April 2011
and R34 million from the IDC in April 2011 in order to recapitalise the
business.
The Group`s net asset value per share declined by 81.28% to 15.6 cents per share
(2010 period: 83.3 cents per share) as a result of the loss on the sale of the
Portland Group and the introduction of the IDC as a shareholder. The sale of the
Portland Group was settled though the cancellation of 56,646,370 ordinary shares
on 15 April 2011 and the receipt of R30 million in cash for the transfer of the
Portland Group property on 22 June 2011. The conclusion of the sale resulted in
the Group derecognising R76.4 million in assets and R37.6 million in
liabilities. On 22 August 2011 the IDC concluded its investment in the Group
through the acquisition of 82,917,964 ordinary shares (or 30%) for R11.7
million. This investment was in conjunction with the initial IDC term loan of
R34 million granted to the Group.
PROSPECTS
Over and above the asset realisation program, resources have been deployed in
the enhancement of systems and processes. These include, among others, the
following: The implementation of ISO 9001 accredited procedures with regards to
the supply of aggregate and readymix products; the establishment of an effective
human resources function; and the implementation of procedures focused on
generating operational efficiencies.
The realisation of these processes will enable the Group to provide quality
services to customers through the provision of quality products and an on time
service. In addition, the Group has entered into a number of strategic alliances
which the directors expect will enable it to gain market share and as a result
grow sales.
Lastly, the Group is considering additional cost projects that will create
additional positive contributions to the bottom line.
With effect from 01 October 2011 the Group sold its 50% interest in its bricks
manufacturing division. The sale was concluded after the reporting date. However
the Group was in negotiations with the buyers with the intention of selling at
the end of the reporting period, therefore the business was classified as a non-
current asset held for sale in terms of IFRS 5: Non-current Assets Held for Sale
and Discontinued Operations. In line with this standard, the Group has
accordingly restated comparable numbers for the prior periods.
GOING CONCERN
The Group incurred a total comprehensive loss for the 2011 period of R21.7
million. This highlights a going concern issue which is emphasised further by
the Group`s negative liquidity position, high gearing and depleted net asset
value. Furthermore, as a result of a weakened performance period on period, the
Group has remained under considerable strain to fund its working capital
requirements.
Solvency and Liquidity
The Group is currently solvent with a net asset value of R43.8 million or 16.1
cents per share. However it is currently experiencing liquidity difficulties
emphasised through its current liabilities (R110.8 million) exceeding its
current assets (R79.2 million).
Cash Flow
In addressing its cash flow demands, the holding company WG Wearne Limited and
its subsidiary Wearne Aggregates (Proprietary) Limited entered into a scheme of
arrangement in terms of section 311 of the Companies Act. In terms of the scheme
of arrangement: The secured creditors granted the companies a moratorium period
from 01 February 2011 to 31 January 2013 under which the companies are only
required to service the monthly interest arising from the loans owing to them,
and the concurrent creditors granted the companies a moratorium from 01 January
2011 to 31 August 2011 under which the companies are not obliged to make any
payment in respect to any claims outstanding. Thereafter, the concurrent
creditors` outstanding balance will be paid over twenty instalments including
interest raised at 3% per annum.
Further to the moratorium the companies are required to settle any concurrent
creditors` debt, incurred after the moratorium period began, by the seventh
working day of the month immediately following the month in which the claim
arose.
The companies under the scheme of arrangement made their first payment in
September 2011 and are continuing to service those claims on a monthly basis.
Cash Management
In response to its cash requirements the Group has entered into a cash
management program with its financiers, which has resulted in a more even
distribution of cash. The effective utilisation of this cash has, in turn,
allowed the Group to meets its obligations under its current moratorium state.
Continued Focus
All facets of the Group are under scrutiny in an effort to further streamline
processes and reduce costs. These measures include the restructure of human
capital; the identification and evaluation of unencumbered assets; and the
effective distribution and utilisation of resources.
The outcome of these processes should result in the Group incurring less
expenditure in underproductive areas thereby releasing cash and enabling the
Group to meet its debts as they fall due.
In light of the above, the going concern basis has been adopted in preparing
these interim financial statements. The directors have no reason to believe that
the Group or any company within the Group will not be a going concern in the
foreseeable future.
BASIS OF PREPARATION
These interim results have been prepared in accordance with and contain the
information required in terms of International Financial Reporting Standards
("IFRS"), the Companies Act of South Africa(Act 71 of 2008), as amended, and
International Accounting Standards (IAS 34 : Interim Financial Reporting), AC
500 standards as issued by the Accounting Practices Board and in compliance with
the Listings Requirements of the JSE Limited. The accounting policies and
standards used to prepare these interim financial statements are in terms of
IFRS and are consistent with those applied in the prior interim period and at
year-end 28 February 2011, except for the application of IAS 1 (revised):
Presentation of Financial Statements.
These condensed interim consolidated financial statements incorporate the
financial information of the company, its subsidiaries and special purpose
entities that, in substance, are controlled by the Group. Results of
subsidiaries are included from the effective date of acquisition or up to the
effective date of disposal. All significant transactions and balances between
group enterprises are eliminated on consolidation.
REVIEW OPINION
Grant Thornton, the Group`s independent auditors, have reviewed the consolidated
financial results for the six months ended 31 August 2011 and have expressed a
modified review opinion which contains the following emphasis of matter:
"Without qualifying our conclusion, we draw attention to the reviewed condensed
results which indicate that the group incurred a total comprehensive loss of
R21.7 million during the period under review and as of that date the group`s
current liabilities exceeded its current assets by R31.6 million. These
conditions along with other matters as set out in the results commentary,
indicated the existence of a material uncertainty that may cast significant
doubt about the group`s ability to continue as a going concern." The review
report is available for inspection at the company`s registered office.
The preparation of the condensed interim consolidated financial results was
supervised by RC Devereux (CA) SA.
DIVIDENDS
In line with past practice, no dividend has been declared for the period.
By order of the board
30 November 2011
S J Wearne
Chairman
RC Devereux
Chief Executive Officer
CORPORATE INFORMATION
Non-executive directors: S J Wearne (Chairman); C Ramushu; M Salanje; M M Patel
Executive directors: R C Devereux
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: Ithemba Governance and Statutory Solutions (Pty) Ltd
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: 30/11/2011 16:37:03 Produced by the JSE SENS Department.
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