| Fri 22 Jun 2012, 14:38 | | WEA - WG Wearne Limited - Audited financial results for the year ended |
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WEA
WEA
WEA - WG Wearne Limited - Audited financial results for the year ended
29February 2012
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")
Audited financial results for the year ended 29February 2012
Abridged Consolidated Statement of Financial Position
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
ASSETS
Non-current assets 376,026 371,051
Property, plant and equipment 370,803 365,466
Other financial assets 5,223 3,968
Deferred taxation asset - 1,617
Current assets 70,058 57,433
Inventories 17,305 14,281
Other financial assets 4,014 2,953
Current taxation receivable - 270
Trade and other receivables 42,371 36,394
Cash and cash equivalents 6,368 3,535
Non-current asset held for sale 4,500 76,402
Total assets 450,584 504,886
EQUITY AND LIABILITIES
Equity 52,786 61,451
Issued capital 178,357 174,637
Reserves 345 374
Revaluation reserves 43,299 -
Accumulated losses (169,215) (114,344)
Non-controlling interest - 784
Non-current liabilities 278,091 255,356
Borrowings 252,281 220,377
Deferred taxation liability 8,921 1,369
Trade and other payables 2,023 19,620
Environmental provision 14,866 13,990
Current liabilities 119,707 150,388
Loans payable 5,193 5,678
Borrowings 10,751 2,838
Current taxation payable 1,821 1,795
Trade and other payables 71,437 64,940
Bank overdraft 30,505 75,137
Non-current liabilities held for sale - 37,691
Total liabilities 397,798 443,435
Total equity and liabilities 450,584 504,886
Number of shares in issue (`000)
After eliminating treasury shares 273,038 246,715
Net asset value per share (cents) 19.33 24.91
Net tangible asset value per share (cents) 19.33 24.91
Abridged Consolidated Statement of Comprehensive Income
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
Continuing Operations
Revenue 305,870 370,461
Cost of sales (208,851) (295,080)
Gross profit 97,019 75,381
Other income 3,397 11,394
Operating expenses (80,120) (120,781)
Earnings before interest, taxation,
depreciation("EBITDA") 20,296 (34,006)
Depreciation (38,642) (43,493)
Loss before interest and taxation ("EBIT") (18,346) (77,499)
Investment income 1,546 -
Finance costs (35,928) (36,313)
Loss before taxation (52,728) (113,812)
Taxation 425 2,007
Loss from continuing operations (52,303) (111,805)
Loss from discontinued operations (2,650) (36,795)
Loss for the period (54,953) (148,600)
Other comprehensive income
Fair value adjustments: Available-for-sale 213 98
Release of reserves (242) -
Gain on revaluation 54,357 -
Deferred tax on revaluation (11,058) -
Total comprehensive lossfor the year (11,683) (148,502)
Total comprehensive(loss)attributable to:
Owners of the parent (11,683) (148,583)
Non-controlling interests - 81
Loss for the year (11,683) (148,502)
Weighted average number ofshares in issue (`000) 240,334 246,492
Fully diluted weighted average
number of shares (`000) 240,334 246,492
Continuing operationsBasic and diluted loss
per share (cents) (21.76) (45.36)
Continuing and discontinued operationsBasic
and diluted loss per share (cents) (22.86) (60.28)
Reconciliation of headline earnings:
Loss for the year (54,953) (148,600)
Impairments and scrapping loss 3,506 42,468
Loss / (profit) on sale of property,
plant and equipment 735 (2,804)
Profit on sale of interestin joint venture (1,212) -
Fair value on non-current
Assets held for sale 4,139 56,859
Headline loss attributable to
ordinary shareholders (47,785) (52,077)
Basic and diluted
headline loss per share (cents) (19.88) (21.12)
AbridgedConsolidated Statement of Changes in Equity
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
Balance at beginning of the year 61,451 210,246
Loss for the year (54,953) (148,583)
Other comprehensive income 43,270 98
Issue of share capital net of expenses 11,638 1,495
Redemption of share capital (7,926) -
Movement treasury shares 8 (1,886)
Non-controlling interest (702) 81
Balance at end of the year 52,786 61,451
Abridged Consolidated Statement of Cash Flows
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
Cash flows from operating activities (3,711) 35,947
Cash flows from investing activities 25,048 10,623
Cash flows from financing activities 25,137 (51,249)
Net increase/ (decrease) in
cash and cash equivalents 46,474 (4,679)
Net cash flows from discontinued operations 991 -
Cash movement for the year 47,465 (4,679)
Cash and cash equivalents at beginning of the year (71,602) (66,923)
Cash and cash equivalents at end of the year (24,137) (71,602)
Share Capital
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
Authorized
500,000,000 ordinary par value
Share of 0.1 cent each 500,000 500,000
Reconciliation of number of shares
Issued: (in millions)
Opening balance 246 246
Bought back during period (57) -
Issued during the period 83 -
Movement in treasury shares 1 *
Closing balance 273 246
Issued share capital
Ordinary share capital 273 246
Ordinary share premium 178,084 174,391
178,357 174,637
Segmental reporting
Audited Audited
12 months 12 months
February 2012 February 2011
R`000 R`000
External sales
Aggregates 174,361 180,023
Readymix concrete 118,262 179,433
Concrete manufactured products 13,247 11,005
Total external sales 305,870 370,461
Inter-segment sales
Aggregates 41,793 52,183
Readymix concrete 301 5,696
Concrete manufactured products - -
Total inter-segment sales 42,094 57,879
Total revenue
Aggregates 216,154 232,206
Readymix concrete 118,563 185,129
Concrete manufactured products 13,247 11,005
Total revenue 347,964 428,340
Profit (loss) before
taxation (before inter-segment eliminations)
Aggregates 12,548 (45,571)
Readymix concrete (28,424) (30,702)
Concrete manufactured products (2,470) (1,226)
Total profit before taxation (18,346) (77,499)
Property, plant and equipment
Aggregates 289,382 277,692
Readymix concrete 58,641 61,820
Concrete manufactured products 22,780 25,954
Total property, plant and equipment 370,803 365,466
Total assets
Aggregates 354,175 349,037
Readymix concrete 71,917 106,016
Concrete manufactured products 24,492 49,833
Total assets 450,584 504,886
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 precast concrete products.
CHANGES OF DIRECTORATE
The following changes in the directorate occurred during the year under review:
1 Messrs H W P Scholtz and B AMkhonto, both resigned from the board on 26 May
2011.
2 Mr R C Devereux was appointed as Chief Executive Officer on 13 April 2011
and resigned on 07 December 2011.
3 Ms R C Ramushu was appointed as non-executive director on 17 August 2011.
4 Mr A W Bruens, the Chief Financial Officer, resigned on 22 August 2011.
5 Mr J J Bierman CA (SA) was appointed as Chief Financial Officer on 05
December 2011.
6 Mr W P van der Merwe was appointed as non-executive director on 07 December
2011.
7 Mr MM Patel was appointed as Chairman on 29 February 2012.
8 Mr S J Wearne, who assumed the role of Chief Executive Officer since 07
December 2011, was re-appointed as Chief Executive Officer with effect from
29 February 2012.
REVIEW OF RESULTS
Group revenue decreased by 17% (or R64.5 million) to R306 million (2011: R370
million) for the year ended 29 February 2012. The largest contributor to the
decrease in turnover was the ready mixed concrete division where external
turnover dropped by 34% (or R61.2 million) to R118 million (2011: R179 million).
This was the consequence of the closure of non performing operations in
conjunction with continued weaknesses in the residential market. The concrete
products division continued its pleasing growth trend yielding a 20% increase in
turnover.
In accordance with the Groups turnaround strategy, all loss- making operations
were evaluated for economic viability and possible closure. Consequently, four
ready mixed concrete plants, a crushing operation and a sand washing operation
were closed during the year. These closures together with a greater focus on
higher margin contracts allowed the Group to increase its gross profit margin
before depreciation charges by 12% to 32% (2011: 20%).
The Group`s EBITDA improved to a profit of R20.3 million in the current year
from a loss of R34 million in 2011.Current year operating expenditure included
the following non-recurring costs totaling R8.4 million: impairments and
scrapping of tangible assets of R3.5 million; a bad debt write off R3.2 million
relating to Rainbow Construction; losses on sale of property, plant & equipment
of R0.9 million as well as legal fees of R0.8 million for the implementation of
the Section 311 Scheme of Arrangement.
During the year the Group disposed of unproductive assets resulting in proceeds
of R12.6 million. In addition, the Group also improved some of its critical
plant by spending R18.4 million on these assets. These improvements were made
possible by funding received from the Industrial Development Corporation
("IDC"). This resulted in a decrease of R4.8 million in the current year
depreciation charge.
Following its strategy of disposing of non-core assets the Group also sold its
interest in the Portland Group and Wearne Bricks (Proprietary) Limited. The
Portland Group was sold in the beginning of the year with all losses on the sale
being recognised in the prior year in terms of IFRS 5: Non-current Assets Held
for Sale and Discontinued Operations. The Group sold its interest in its brick
manufacturing business on 01 October 2011 for R5 million resulting in a profit
on sale of business of R1.2 million.
Finance costs remained relatively unchanged at approximately R36 million. Total
liabilities reduced by R8 million to R397.8 million (2011: R405.7million
excluding non-current liabilities held for sale). The Group settled R30 million
in short-term borrowings utilising the proceeds generated from the Portland
Group disposal which were offset by R43 million in long-term borrowing received
from the IDC. This borrowing conversion improved the Group`s liquidity position.
The current year performance resulted in a headline loss per share of 19.88
cents (2011: 21.12 cents) and a diluted loss per share from continuing
operations of 21.76 cents (2011: 45.36 cents).The net asset value per share
reduced to 19.33 cents (2011: 24.91) attributable to the decline in earnings in
addition to the issue of 82.9 million new ordinary shares to IDC and the Wearne
Workers Trust.
CHANGE IN ACCOUNTING POLICY
During the current year the directors` changed the accounting policy regarding
land and plant and machinery from the cost model to the revaluation model. The
purpose of change in accounting policy is to more accurately represent the value
of the Groups assets. This adjustment resulted in a revaluation surplus of R44.5
million on land and R9.8 million on plant and machinery.
The fair values of land, plant and equipment were determined by an independent
appraiser based on the current market values.
PROSPECTS
Although the current year headline loss of R47.8 million (2011: R52 million)
does not reflect a turnaround, a majority of the turnaround initiatives have
been completed or otherwise are nearing completion. This has resulted in nearly
all of the loss making operations either having been disposed of or closed down.
As part of its continuing turnaround objectives the Group is investigating the
outsourcing of non-core activities. These initiatives will aid in the reduction
of borrowings, reduce fixed operating costs and allow it to more rapidly react
to changes in its operating environment.
In addition the Group is exploring avenues which would see it expand its
drilling and blasting operation within the aggregate division. Although this
will require further investment in plant and equipment,this investment would see
the expansion of one of the Groups best performing operations.
Lastly, general market conditions have begun to improve towards the end of the
financial year, indicated by cement sales increasing for the first time in three
years. Unfortunately current data is no longer available but general market
consensus seems to indicate that the year-on-year monthly increase in volumes is
between 5% and 8%. This, together with an improvement in the civil engineering
industry should see the Group`s fortunes improve significantly.
GOING CONCERN
The Group incurred a total comprehensive loss for the 2012 period of R11.7
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.
SOLVENCY AND LIQUIDITY
The Group is currently technically solvent with net asset value of R52.8 million
or 19.33 cents per share. Current liabilities of R119.7 million exceed current
assets of R70 million by R49.7 million. Negotiations are currently underway to
either sell further properties in the portfolio or extend the repayment terms of
the current overdraft of R30 million.In addition, the Group has undrawn loans
totaling R20 million from the IDC at 29 February 2012 which further ensures that
the going concern statement is still applicable.
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 February 2011. In
terms of the scheme of arrangement,the secured creditors granted the companies a
moratorium period from 1 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 1 January 2011 to 31 August 2011 under which the companies were
not obliged to make any payment in respect to any claims outstanding.
Thereafter, the concurrent creditors` outstanding balance is beingrepaid over
twenty installments including interest raised at 3% per annum. 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.
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.
During the current year the Group entered into a cash management program with
its financiers which granted the Group better access to its working capital. The
effective application of these cash reserves allowed the Group to meet its
obligations under the moratorium state.
BASIS OF PREPARATION
These 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 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 financial statements are in terms of IFRS and are consistent with
those applied for the prior year-end 28 February 2011, except for the
application of IAS 1: Presentation of Financial Statements, the measurement of
property, plant and equipment in terms of IAS 16: Property, Plant and Equipment
and the classification of cost of sales in terms of IAS 1 (revised):
Presentation of Financial Statements.
These abridged 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.
AUDIT OPINION
Grant Thornton, the Group`s independent auditors, have audited the consolidated
financial results for year ended 29 February 2012 and have issued an unqualified
audit opinionwith the following emphasis of matter paragraph: "Without
qualifying our opinion, we draw attention to Note 41 in the consolidated
financial statements which indicates that the Group incurred a net total
comprehensive loss of R11.7 million for the year ended 29 February 2012 and, as
of that date; the group`s current liabilities exceeded its current assets by
R49.7 million. These conditions, along with other matters as set forth in Note
41, indicate the existence of a material uncertainty that may cast significant
doubt about the Group`s ability to continue as a going concern." The report is
available for inspection at the company`s registered office.
DIVIDENDS
In line with past practice, no dividend has been declared for the period.
By order of the board
22 JUNE 2012
S J Wearne
Chief Executive Officer
J J Bierman
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: M M Patel (Chairman); C Ramushu; M Salanje; WP van der
Merwe
Executive directors: S J Wearne; J J Bierman
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: Exchange Sponsors
These results and an overview of Wearne are available at www.wearne.co.za
Date: 22/06/2012 14:38:01 Produced by the JSE SENS Department.
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