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CSP
CSP
CSP - ChemSpec - Condensed consolidated audited results for the year ended 31
March 2012
Chemical Specialities Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/039947/06)
Share code: CSP
ISIN: ZAE000109427
("ChemSpec" or "the Company")
CONDENSED CONSOLIDATED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2012
COMMENTARY & OVERVIEW
Introduction
ChemSpec made a profit of R1m in the six months to 31 March 2012 which reduced
the loss for the full year to R14m compared to a loss of R110m in the last
financial year and which is an improvement of 87%.
The loss from continuing operations significantly reduced to R8m from R100m in
the prior period which represents a 92% improvement.
The improved results were as a result of cost rationalisations, increased sales
and a lower cost of finance.
Financial position
The financial structure of the group was strengthened during the year through
the introduction of additional capital of R260m by way of a specific and rights
issue.
At year-end our borrowed debt to equity ratio was 22% and our current ratio was
3:1.
Available unutilised finance facilities at year-end totalled R115m.
Working capital increased by R60m as a result of increased business.
Trading position
The turnaround process which began in January 2011 is all but complete although
we could do with a little more sale. That will come.
Revenue increased by 24% to R381m as customer confidence returned and the gross
profit percentage improved from 31% to 41%. Overhead costs were down 24% from
the rationalisation process and finance cost down 26% as the benefits of the
rights issue begin to show.
Of significance is the turnaround to an operating profit of R8m in the second
six months of the year from a loss of R1m for the first six months of the year.
The operating profit for the full year totalled R7m against an operating loss of
R111m for the prior year which is an improvement of 106%.
We now have all the right ingredients to develop into a sustainable and
successful coatings company.
We have a first class production facility in South Africa as well as a
production facility in the USA with ample production capacity.
We have developed partnerships with world leaders whose specific product
offerings together with our own products allows us to offer our customers
products to match their requirements.
We have the correct management team in place and have a team of dedicated people
in all our operations. We are currently strengthening our sales and back up
teams.
We are still in the process of developing our routes to market both locally,
into Africa and internationally and have already made good progress. The
potential for growth internationally is still untapped.
We are regaining market share and now have a solid customer base which is
growing as we strengthen our product offering, improve our route to market,
sales and back up teams and further develop customer belief that we are the best
of breed.
Market capitalisation and shareholding
Our market capitalisation has improved from R300m last year to around R600m this
year.
We have attracted a solid base of shareholders during the year including the
Industrial Development Corporation. We have a good mix of core, institutional
and retail shareholders and a healthy free float.
Directorate
During the year under review the board of directors was restructured. Graham
Ferns (Financial director) and Rob Simpson (International sales director)
resigned. We thank these past directors for their contribution to the group.
At the start of the financial year, Ivan Clark stepped into the Chair and Neil
Page moved from Chair to a non-executive role.
During the year the board appointed Jonathan Maehler (Chief operating officer
and financial director), Shane van Niekerk (Sales and marketing director), Tim
Dykins (Technical and sales director) and Darryn Coyle-Dowling (Commercial
director) to complete the makeup of the executive team with Bruce Mackinnon as
Chief executive officer.
Independent non-executive directors were appointed, namely; John Jones as lead
independent non-executive director along with Tim McClure, and Sipho Sono
(Chairman of the audit, risk and compliance committee).
Iain Buchan (Chairman of the remuneration and nominations committee) joined the
board as non-executive director to make up the balance of the board (Zack Buchan
was appointed as Iain`s alternate).
We welcome the new board members and look forward to their contribution to the
success of the group.
Prospects
ChemSpec has a bright future. Shareholders are asked to be patient as we develop
our product offerings, route to market and our African and international
footprint. We have to do this slowly and well. There is still much to do.
ChemSpec is expected to continue to improve its results in the coming year.
Dividend
No dividends were declared or paid during the year (2011: nil).
Annual general meeting
The annual general meeting of the company will be held at 2029 Old Mill Road,
Canelands, Verulam, KwaZulu-Natal, on Friday 28 September 2012 at 11:00.
For and on behalf of the board
IAJ Clark BR MacKinnon
Chairman Chief Executive Officer
4 June 2011
Condensed consolidated statements of financial position
for the year ended 31 March 2012
Group
Figures in Rand thousand Note 2012 2011
Non-current assets
Property, plant and equipment 230 828 219 853
Intangible assets 29 312 19 467
Goodwill 22 926 23 610
Deferred tax 51 291 42 937
334 357 305 867
Current assets
Inventories 127 473 107 776
Other financial assets - 8
Trade and other receivables 77 426 61 161
Cash and cash equivalents 14 264 10 282
219 163 179 227
Assets held for sale 10 3 614 1 050
Total assets 557 134 486 144
EQUITY AND LIABILITIES
Equity
Stated capital 5 466 656 207 634
Translation reserve (1 353) (6 180)
Revaluation reserve 31 858 31 858
Share option reserve 1 187 -
Accumulated loss (114 996) (100 865)
383 352 132 447
Shareholder loans - 83 536
Non-current liabilities
Other financial liabilities 69 978 109 391
Deferred tax 3 169 2 143
73 147 111 534
Current liabilities
Other financial liabilities 27 936 25 232
Trade and other payables 71 428 94 331
Bank overdraft 728 39 064
100 092 158 627
Liabilities held for sale 10 543 -
Total liabilities 173 782 353 697
Total equity and liabilities 557 134 486 144
Condensed consolidated statements of financial performance
for the year ended 31 March 2012
Group
Restated
Figures in Rand thousand Note 2012 2011
Revenue 6 380 790 306 121
Cost of sales 7 (224 511) (211 429)
Gross profit 156 279 94 692
Other income 8 27 328 26 301
Operating expenses (176 717) (231 565)
Operating profit/(loss) 9 6 890 (110 572)
Finance income 4 034 1 650
Finance costs (22 796) (26 896)
Loss before taxation (11 872) (135 818)
Taxation 3 991 35 351
Loss from continuing operation (7 881) (100 467)
Discontinued operations 10 (6 250) (9 709)
Loss for the period (14 131) (110 176)
Basic loss per share
Continuing operations (cents) 11 (1,19) (26,55)
Discontinued operations (cents) 11 (0,94) (2,57)
Total basic loss per share (cents) (2,13) (29,12)
Diluted loss per share
Continuing operations (cents) 11 (1,18) (26,55)
Discontinued operations (cents) 11 (0,94) (2,57)
Total diluted loss per share (cents) (2,12) (29,12)
Condensed consolidated statements of comprehensive income
for the year ended 31 March 2012
Group
Restated
Figures in Rand thousand Note 2012 2011
Loss for the period (14 131) (110 176)
Other comprehensive income 4 827 (1 388)
Exchange differences on translating foreign
operations 4 827 (1 388)
Total comprehensive loss for the period (9 304) (111 564)
Condensed consolidated statements of changes in equity
for the year ended 31 March 2012
Figures in Rand thousand
Share Share Stated
capital premium capital Retained income/
Group (accumulated loss)
Balance at 1 April
2010 1 115 021 - 9 311
Issue of shares 1 97 671 - -
Share issue expenses - (5 060) - -
Loss for the period - - - (110 176)
Translation reserve - - - -
Balance at 31 March 2011 2 207 632 - (100 865)
Transfer to stated capital(2) (207 632) 207 634 -
Issue of shares - - 261 095 -
Share issue expenses - - (2 073) -
Loss for the period - - - (14 131)
Share options - - - -
Translation reserve - - - -
Balance at 31 March 2012 - - 466 656 (114 996)
Revaluation Translation Share option
Group reserve reserve reserve Total
Balance at 1 April 2010 31 858 (4 792) - 151 399
Issue of shares - - - 97 672
Share issue expenses - - - (5 060)
Loss for the period - - - (110 176)
Translation reserve - (1 388) - (1 388)
Balance at 31 March 2011 31 858 (6 180) - 132 447
Transfer to stated capital - - - -
Issue of shares - - - 261 095
Share issue expenses - - - (2 073)
Loss for the period - - - (14 131)
Share options - - 1 187 1 187
Translation reserve - 4 827 - 4 827
Balance at 31 March 2012 31 858 (1 353) 1 187 383 352
Condensed consolidated statements of cash flows
for the year ended 31 March 2012
Group
Figures in Rand thousand 2012 2011
Cash flows from operating activities
Cash used by operations (30 388) (101 776)
Finance income 4 034 1 650
Finance costs (22 796) (26 896)
Taxation paid (1 380) (931)
Net cash from operating activities (50 530) (127 953)
Cash flows from investing activities
Purchase of plant and equipment (39 258) (38 137)
Proceeds on sale of plant and equipment 4 799 116
Acquisition of intangible assets (13 071) (3 255)
Acquisition of businesses/subsidiaries - (335)
Proceeds of other financial assets 8 -
Proceeds on disposal of assets held for sale 1 050 -
Net cash from investing activities (46 472) (41 611)
Cash flows from financing activities
Proceeds on share issue 259 022 92 611
Proceeds/(repayment) of other financial liabilities (36 166) 114 065
Repayment of shareholder loans (83 536) -
Net cash from financing activities 139 320 206 676
Total cash movement for the period 42 318 37 112
Overdraft at the beginning of the period (28 782) (65 894)
Cash and cash equivalents at the end of the period 13 536 (28 782)
Reconciled as follows:
Cash and cash equivalents 14 264 10 282
Bank overdraft (728) (39 064)
Cash and cash equivalents at the end of the period 13 536 (28 782)
Condensed consolidated segmental analysis
for the year ended 31 March 2012
Group
Restated
Figures in Rand thousand 2012 2011
Segment revenues
Buy-ins 21 957 15 215
Automotive 237 358 214 973
Decorative 47 411 41 396
Industrial/Woodfinish 123 462 118 159
Solvents 25 450 20 368
Total of all segments 455 638 410 111
Discontinued operations (9 232) (12 400)
Eliminations of intercompany (65 616) (91 590)
Consolidated revenue 380 790 306 121
Inter-segment sales are charged at amounts equal to
competitive market prices for external sales of similar
goods.
Segment result
Buy-ins (30) (5 270)
Automotive (7 279) (69 430)
Decorative (980) (16 393)
Industrial/Woodfinish (3 120) (37 757)
Solvents (463) (6 968)
Total of all segments (11 872) (135 818)
Income tax 3 991 35 351
Discontinued operations (6 250) (9 709)
Loss for the year (14 131) (110 176)
Segment assets
Buy-ins 26 673 18 035
Automotive 288 348 254 828
Decorative 57 596 49 070
Industrial/Woodfinish 149 985 140 065
Solvents 30 918 24 146
Discontinued operations 3 071 -
Total of all segments 556 591 486 144
Geographical segments
The group`s five divisions operate in two principal geographical areas as
follows:
- South Africa: The group manufactures and sells a broad range of its products;
and
- International: The group distributes predominately automotive products.
The group`s revenue from external customers and information about its segment
assets by geographical location are detailed below:
Segment revenues Segment assets
Figures in Rand thousand 2012 2011 2012 2011
South Africa 217 116 167 556 445 517 399 084
International 163 674 138 565 111 074 87 060
380 790 306 121 556 591 486 144
No single external customer contributes more than 10% of the total revenue from
external customers.
Notes to the condensed consolidated annual financial statements
for the year ended 31 March 2012
1. BASIS OF PREPARATION
These condensed consolidated annual financial statements have been prepared in
accordance with IAS 34: Interim Financial Reporting International Financial
Reporting Standards (IFRS), the Companies Act of South Africa, 2008, as amended,
and in compliance with the Listings Requirements of the JSE Limited.
The accounting policies and methods of measurement, recognition and computation
applied in the preparation of these condensed consolidated annual financial
statements are consistent with those applied in the previous annual financial
statements.
These condensed consolidated annual financial statements contain certain forward
looking statements relating to the financial performance and position of the
group. All forward looking statements are solely based on the views and
considerations of the directors. These statements involve risk and uncertainty
as they relate to events and circumstances in the future. Factors that could
cause actual results to differ materially from those in forward looking
statements include, but are not limited to, global and national economic and
market conditions, competitive conditions and regulatory factors. These forward
looking statements have not been reviewed or reported on by the external
auditors.
The board acknowledges its responsibility for the preparation of the condensed
consolidated annual financial statements in accordance with IFRS, the Companies
Act of South Africa and the JSE Limited Listings Requirements.
These condensed consolidated annual financial statements have been prepared
under the supervision of Mr JG Maehler, CA(SA).
These condensed consolidated annual financial statements have been audited by
KPMG Inc., whose unqualified report is available for inspection at the
registered office of the Company.
2. RELATED PARTIES
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.
3. POST BALANCE SHEET EVENTS
The directors are not aware of any material matter or circumstance arising since
the financial year-end that is not disclosed in this report.
Group
Figures in Rand thousand 2012 2011
5. STATED CAPITAL
Authorised
1 500 000 000 Ordinary shares (2011: 1 000 000
000) of no par value - -
- -
The authorised share capital was increased to 1
500 000 000 shares and converted from par
value to no par value shares at a general
meeting of shareholders on 17 October 2011.
Issued
Share capital: 1 071 261 648 (2011: 418 523 544)
ordinary shares of no par value 480 217 219 122
Less share issue expenses (13 561) (11 488)
466 656 207 634
Reconciliation between opening balance of issued
shares and closing balance:
Opening balance of shares issued 418 523 544 310 000 000
Rights issue: 108 523 544 shares at R0,90 each - 108 523 544
Specific issue: 117 107 280 shares at R0,40 each 117 107 280 -
Rights issue: 535 630 824 shares at R0,40 each 535 630 824 -
Total shares in issue 1 071 261 648 418 523 544
Results of the specific issue 2012
The results of the specific issue of shares for
cash on 19 October 2011 are set out below:
Number of Value at
rights 40 cents
offer shares per share
Figures in Rand thousand
Industrial Development Corporation (IDC) 75 000 000 30 000
Clark Investments 42 107 280 16 843
117 107 280 46 843
Results of the rights offer 2012
The rights offer closed on Friday, 18 November
2011, and the results thereof are set out below:
Number of Value at
rights 40 cents
offer shares per share
Figures in Rand thousand
Total number of rights offer shares available
for subscription 535 630 824 214 252
Rights offer shares subscribed for by ChemSpec
shareholders 521 134 279 208 454
Excess rights offer shares applied for by and
allocated to ChemSpec shareholders 14 496 545 5 798
535 630 824 214 252
Results of the rights offer 2011
The rights offer closed on Friday, 13 August
2010, and the results thereof are set out below:
Number of Value at
rights offer 90 cents
Figures in Rand thousand shares per share
Total number of rights offer shares available
for subscription 111 111 111 100 000
Rights offer shares subscribed for by ChemSpec
shareholders 63 892 879 57 503
Rights offer shares issued to the underwriter in
terms of the Underwriting Agreement 27 777 777 25 000
Excess rights offer shares applied for by and
allocated to ChemSpec shareholders 16 852 888 15 168
108 523 544 97 671
Group
Restated
Figures in Rand thousand 2012 2011
6. REVENUE
Gross sale of goods 396 645 322 526
Less: Discount allowed (4 645) (3 086)
Less: Rebates (1 978) (919)
Less: Discontinued operations (9 232) (12 400)
380 790 306 121
7. COST OF SALES
Gross cost of goods sold 229 344 219 708
Less: Discount received (762) (142)
Less: Rebates (176) (85)
Less: Discontinued operations (3 895) (8 052)
224 511 211 429
8. OTHER INCOME
Foreign exchange gain 343 443
Franchise fees 70 932
Insurance claim 15 677 17 544
Rental income 7 610 6 679
Other sundry income 3 628 703
27 328 26 301
Group
Restated
Figures in Rand thousand 2012 2011
9. OPERATING PROFIT
The analysis of expenses recognised in profit or loss
using the classification based on the function within
the entity comprises:
Operating expenses 176 717 231 565
Administration 92 231 138 809
Distribution 35 191 39 841
Selling 63 313 70 748
Less: Discontinued operations (14 018) (17 833)
Profit for the year has been arrived at after charging:
Operating lease charges:
Premises 22 953 40 213
Motor vehicles 1 797 4 579
Office equipment 872 1 048
25 622 45 840
Auditor`s remuneration:
Fees - current year 1 158 1 260
Fees - prior year - 2 363
Tax and secretarial services 961 880
2 119 4 503
Depreciation and amortisation:
Depreciation of property, plant and equipment 24 117 8 372
Amortisation of intangible assets 3 092 2 520
27 209 10 892
Loss on disposal of assets 628 2 022
Impairment losses:
Aircraft - 1 330
Franchise debtor - 2 022
- 3 352
Staff costs 95 574 103 559
Pension (defined contribution plan) included in staff
costs 5 979 7 402
10. DISCONTINUED OPERATION
During the year the board resolved to discontinue certain of the group`s retail
stores. Of the stores identified to be discontinued, some of these will be
closed and others will be sold. These stores were not a discontinued operation
or classified as an asset held for sale as at 31 March 2011. The comparative
statement of comprehensive income has been re-presented to show the discontinued
operation separately from the continuing operations.
Group
Figures in Rand thousand 2012 2011
Results of the discontinued operations
Revenue 9 232 12 400
Cost of sales (3 895) (8 052)
Operating expenses (14 018) (17 833)
Operating loss (8 681) (13 485)
Taxation 2 431 3 776
Net loss from discontinued operation (6 250) (9 709)
Basic loss per share (cents) (0,94) (2,57)
Basic headline loss per share (cents) (0,94) (2,56)
Diluted loss per share (cents) (0,94) (2,57)
Diluted headline loss per share (cents) (0,94) (2,56)
Cash flows from/(used in) discontinued
operations
Net cash from/(used in) operating activities (8 681) (13 485)
Net cash from/(used in) investing activities - -
Net cash from/(used in) financing activities - -
Net cash outflows for the year (8 681) (13 485)
Effect on the statement of financial position
Plant and equipment 1 782 -
Inventory 1 832 -
Instalment sale liabilities (543) -
Net assets and liabilities 3 071 -
Group
Restated
Figures in Rand thousand 2012 2011
11. BASIC AND DILUTED LOSS AND HEADLINE LOSS PER SHARE
Basic loss per share
Continuing operations (cents) (1,19) (26,55)
Discontinued operations (cents) (0,94) (2,57)
Total basic loss per share (cents) (2,13) (29,12)
Basic headline loss per share
Continuing operations (cents) (1,12) (25,43)
Discontinued operations (cents) (0,94) (2,56)
Total basic headline loss per share (cents) (2,06) (27,99)
Diluted loss per share
Continuing operations (cents) (1,18) (26,55)
Discontinued operations (cents) (0,94) (2,57)
Total diluted loss per share (cents) (2,12) (29,12)
Diluted headline loss per share
Continuing operations (cents) (1,12) (25,43)
Discontinued operations (cents) (0,94) (2,56)
Total diluted headline loss per share (cents) (2,06) (27,99)
Basic loss per share
The earnings used in the calculation
of basic loss per share are as follows:
Loss for the year (continuing operations) (7 881) (100 467)
Loss for the year (discontinued operations) (6 250) (9 709)
Total loss attributable to equity holders
of the parent (14 131) (110 176)
Reconciliation of total loss to
headline loss attributable to
equity holders of the parent
Total loss attributable to equity
holders of the parent (7 881) (100 467)
Non-headline earnings
Impairments - 3 352
Loss on disposal of assets 628 2 022
Total tax effect of adjustments (176) (1 115)
Headline loss (continuing operations) (7 429) (96 208)
Headline loss (discontinued operations) (6 250) (9 709)
Total headline loss (13 679) (105 917)
Weighted average shares
The weighted average number of
ordinary shares used in the
calculation of loss per share are as follows:
Opening shares 418 523 544 310 000 000
Rights issue on 16 August 2010 of
108 523 544 shares - 68 384 699
Specific issue on 19 October 2011 of
117 107 280 shares 52 794 266 -
Rights issue on 21 November 2011 of
535 630 824 shares 191 714 858 -
Weighted average number of ordinary
shares (basic) 663 032 668 378 384 699
Share options 2 194 714 -
Weighted average number of ordinary
shares (diluted) 665 227 382 378 384 699
Actual number of ordinary shares 1 071 261 648 418 523 544
General information
Country of incorporation and domicile South Africa
Registration number 2005/039947/06
Share code CSP
ISIN ZAE000109427
Nature of business and principal activities Manufacture, distribution and
supply of paint and ancillary
products
Directors IAJ Clark
(Non-executive chairman)
BR Mackinnon (Chief executive
officer)
JG Maehler (Chief operating
officer and financial director)
S van Niekerk (Sales and
marketing director)
DJ Coyle-Dowling (Commercial
director)
TP Dykins (Technical and sales
director)
JG Jones (Lead independent
non-executive director)
TJT McClure (Independent
non-executive director)
SE Sono (Independent
non-executive director)
IBB Buchan (Non-executive
director)
NA Page (Non-executive director)
ZM Buchan (Alternate
non-executive director)
Registered office 2029 Old Mill Road
Canelands
Verulam, 4339
Business address 2029 Old Mill Road
Canelands
Verulam, 4339
Postal address PO Box 2359
Canelands
Verulam, 4340
Auditors KPMG Incorporated
20 Kingsmead Boulevard
Kingsmead Office Park
Durban, 4001
Transfer secretaries Computershare Investor Services
(Pty) Limited
70 Marshall Street
Johannesburg, 2001
Company secretary Statucor (Pty) Limited
BDO House
Richefond Circle
Ridgeside Office Park
Umhlanga, 4319
Designated advisor Grindrod Bank Limited
1st Floor, Building 3
Commerce Square
39 Rivonia Road
Sandton, 2196
Website www.chemspecpaint.com
Telephone +27 32 541 8600
Fax +27 32 541 8653
Date: 05/06/2012 12:00:01 Produced by the JSE SENS Department.
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