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Interim Results for the six months ended 30 September 2012
CHEMICAL SPECIALITIES LIMITED
Country of incorporation and domicile: South Africa
Registration number: 2005/039947/06
Share code: CSP
ISIN: ZAE000109427
(“ChemSpec” or “Group”)
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
PERFORMANCE HIGHLIGHTSFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012
30% REVENUE GROWTH
106% NET PROFIT GROWTH
36% LOCAL REVENUE GROWTH
21% INTERNATIONAL REVENUE GROWTH
2:1 CURRENT RATIO
36% DEBT: EQUITY RATIO
COMMENTARY
INTRODUCTION
ChemSpec’s condensed consolidated interim results for the six
months ended 30 September 2012 (“the period”) reflect that the
group has now completed the turnaround phase of its development
and has moved into the next phase of growth.
Revenue growth is the primary focus of management at present with
a paradigm shift to a sales driven organisation to take back our
rightful place in the market. There will be further cost push
resulting from these endeavours but this will be offset by the
increase in revenue in local and international markets. ChemSpec
will be well poised to take advantage of the economic environment
when it improves.
FINANCIAL PERFORMANCE
Revenue growth continues as the efforts of our sales team bears
fruit. Revenue has increased by 30% when compared to the same
period in the previous year and is expected to continue to grow
going forward as we gain traction in the markets in which we
operate. Margin is down 2% showing the effects of our sales push
and market competitiveness and is carefully managed to ensure that
the group grows profitably.
Revenue in our international businesses grew by 21% when compared
to the same period in the previous year. This indicates the
resilience of our products in light of current economic conditions
in these markets. Our local revenue grew by an impressive 36% as
we continue to capture market share.
All segments of the business grew with our decorative,
woodfinish/industrial and solvent businesses showing the highest
growth when compared to the same period in the previous year at
43%, 30% and 34% respectively. These segments are largely local
and reflect the recovery that ChemSpec has made in the South
African market. Our automotive division which has a large
international component continued to grow by 25% when compared to
the same period in the previous year.
We continue to manage our overheads tightly while we grow by
constantly improving efficiencies. The group has controlled the
increase in overheads to 10% when compared to the same period in
the previous year.
Coupled with this, our capital raising efforts in the latter half
of the last financial year have resulted in a 77% reduction in our
finance charges when compared with the same period in the previous
year.
The profit for the period of R1 million and the basic earnings per
share of 0,09 cents is a 106% and 102% improvement from the losses
for the same period in the previous year respectively.
FINANCIAL POSITION
N0N-CURRENT ASSETS
Strategic capital projects at a cost of R31m were initiated during
the period with the objective of improving efficiency and long
term competitiveness. These projects are all but completed and the
results will be realised in the second half of the year.
The group continues to invest in the development of new and
improved products and incurred R8m during the period in this
regard.
NON-CURRENT LIABILITIES
The group secured R51m of preferential funding from its strategic
partner and shareholder, the IDC, under the Gro-E scheme and a
portion of this facility has been utilised to fund capital
expenditure. The group’s gearing remains low at 36%.
WORKING CAPITAL
Inventories and trade receivables have increased by 23% and 17%
respectively when compared to the same period in the previous
year. This is as a result of improved sales with no material
provisions required. Management of working capital is a management
priority as sales growth continues. Shareholders should be
cautioned that our working capital needs will have an effect on
our finance charges. The group has a healthy current ratio of 2:1.
CASH FLOW
Cash flow was negatively affected by growth in working capital and
capital investment activities. Proceeds from financing activities
to fund capital expenditure offset this. The group continues to
preserve its available facilities which exceeded R100m at the
balance sheet date.
DIRECTORS
There were no changes to the board of directors in the current
period.
PROSPECTS
ChemSpec continues to improve its image, market penetration,
corporate governance and management of the business.
Shareholders are cautioned not to expect too much too soon but are
assured that the company is now on sound foundations.
APPRECIATION
We thank our management team and employees for their good efforts
and loyalty as we continue to make ChemSpec a great business. Our
appreciation also extends to our customers, suppliers, advisors
and stakeholders for their continued support.
IAJ CLARK BR MACKINNON
NON-EXECUTIVE CHAIRMAN CHIEF EXECUTIVE OFFICER
31 October 2012
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL PERFORMANCE
Unaudited Unaudited Audited
six months six months year
% ended ended end
Change 30 September 30 September 31 March
2012 2011 2012
Figures in Notes restated
Rand Thousand
Revenue 30% 236,730 181,943 380,790
Cost of sales (149,572) (111,466) (224,511)
Gross profit 87,158 70,477 156,279
Other income 2 18,938 16,929 27,328
Operating
expenses 10% (101,081) (91,678) (176,716)
Operating
profit/(loss) 217% 5,015 (4,272) 6,891
Finance
income 65 304 4,034
Finance costs (3,074) (13,369) (22,796)
Profit/(loss)
before
taxation 112% 2,006 (17,337) (11,871)
Taxation (467) 5,325 3,991
Profit/(loss)
from
continuing
operations 113% 1,539 (12,012) (7,880)
Discontinued
operations 4 (596) (3,125) (6,250)
Profit/(loss)
for the
period 106% 943 (15,137) (14,130)
Basic
earnings per
share
Continuing
operations
(cents) 3 105% 0.15 (2.87) (1.19)
Discontinued 3 (0.06) (0.75) (0.94)
operations
(cents)
Total basic
earnings per
share (cents) 102% 0.09 (3.62) (2.13)
Diluted
earnings per
share
Continuing
operations
(cents) 3 105% 0.15 (2.87) (1.18)
Discontinued
operations
(cents) 3 (0.06) (0.74) (0.94)
Total diluted
earnings per
share (cents) 102% 0.09 (3.61) (2.12)
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
2012 2011 2012
Figures in Rand Notes restated
Thousand
Profit/(loss)
for the period 943 (15,137) (14,130)
Other
comprehensive
income 5,209 6,506 4,827
Exchange
differences on
translating
foreign
operations 5,209 6,506 4,827
Total
comprehensive
profit / (loss)
for the year 6 152 (8,631) (9,303)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
Figures in Rand Notes 2012 2011 2012
Thousand
Assets
Non-current
assets
Property, plant
and equipment 251,167 212,693 230,828
Intangible
assets 35,119 21,461 29,312
Goodwill 22,368 22,600 22,926
Deferred tax 51,965 47,792 51,291
360,619 304,546 334,357
Current assets
Inventories 151,509 123,326 127,473
Trade and other
receivables 103,328 88,536 77,426
Cash and cash
equivalents 8,974 8,328 14,264
263,811 220,190 219,163
Assets held for
sale 4 - - 3,614
Total assets 624,430 524,736 557,134
Equity and
liabilities
Equity
Stated capital 466,656 207,634 466,656
Translation
reserve 3,856 327 (1,353)
Revaluation
reserve 31,858 31,858 31,858
Share option
reserve 2,187 - 1,187
Retained income (114,054) (116,003) (114,996)
390,503 123,816 383,352
Shareholders
loans - 161,174 -
Non-current
liabilities
Other financial
liabilities 97,086 108,004 69,978
Deferred tax 3,912 - 3,169
100,998 108,004 73,147
Current
liabilities
Other financial
liabilities 20,413 30,379 27,936
Trade and other
payables 78,636 67,552 71,428
Bank overdraft 33,880 33,811 728
132,929 131,742 100,092
Liabilities held
for sale 4 - - 543
Total
liabilities 233,927 400,920 173,782
Total equity and
liabilities 624,430 524,736 557,134
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
Figures in Rand 2012 2011 2012
Thousand
Cash flows from
operating activities
Cash utilised in
operations (16,298) (57,352) (30,388)
Finance income 65 304 4,034
Finance costs (3,074) (13,369) (22,796)
Taxation paid 344 (1,038) (1,380)
Net cash from
operating activities (18,963) (71,455) (50,530)
Cash flows from
investing activities
Acquisition of plant
and equipment (31,193) (6,935) (39,258)
Proceeds on sale of
plant and equipment - 1,516 4,799
Acquisition of
intangible assets (7,870) (2,283) (13,071)
Proceeds on other
financial assets - 8 8
Proceeds on sale of
assets held for sale - 1,050 1,050
Net cash from
investing activities (39,063) (6,644) (46,472)
Cash flows from
financing activities
Proceeds on share
issue - - 59,022
Proceeds/(repayment)
of other financial
liabilities 19,584 81,398 (36,165)
Repayment of
shareholder loans - - (83,537)
Net cash from
financing activities 19,584 81,398 39,320
Total cash movement (38,442) 3,299 42,318
for the period
Cash and cash
equivalents at the
beginning of the
period 13,536 (28,782) (28,782)
Cash and cash
equivalents at the end
of the period (24,906) (25,483) 13,536
Reconciled as follows
Cash and cash
equivalents 8,974 8,328 14,264
Bank overdraft (33,880) (33,811) (728)
Cash and cash
equivalents at the end
of the period (24,906) (25,483) 13,536
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Share Stated Retained
Figures in Rand capital premium capital income
Thousand
Balance at 31
March 2011 2 207,632 - (100,866)
Loss for the
period - - - (15,137)
Translation
reserve - - - -
Balance at 30
September 2011 2 207,632 - (116,003)
Transfer to
stated capital (2) (207,632) 207,634 -
Issue of shares - - 261,095 -
Share issue
expenses - - (2,073) -
Share options - - - -
Profit for the
period - - - 1,006
Translation
reserve - - - -
Balance at 31
March 2012 - - 466,656 (114,997)
Share options - - - -
Profit for the
period - - - 943
Translation
reserve - - - -
Balance at 30
September 2012 - - 466,656 (114,054)
Share
Revaluation Translation option Total
Figures in Rand reserve reserve reserve
Thousand
Balance at 31
March 2011 31,858 (6,180) - 132,446
Loss for the
period - - - (15,137)
Translation - 6,507 - 6,507
reserve
Balance at 30
September 2011 31,858 327 - 123,816
Transfer to
stated capital - - - -
Issue of shares - - - 261,095
Share issue
expenses - - - (2,073)
Share options - - 1,187 1,187
Profit for the
period - - - 1,006
Translation
reserve - (1,680) - (1,680)
Balance at 31
March 2012 31,858 (1,353) 1,187 383,351
Share options - - 1,000 1,000
Profit for the
period - - - 943
Translation
reserve - 5,209 - 5,209
Balance at 30
September 2012 31,858 3,856 2,187 390,503
CONDENSED CONSOLIDATED SEGMENT REPORT
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
Figures in Rand
Thousand 2012 2011 2012
Segment revenues
Automotive 123,045 98,725 203,540
Buy-ins 6,868 7,263 14,115
Decorative 26,006 18,236 39,200
Solvents 14,471 10,770 22,780
Woodfinish/Industrial 66,964 51,565 110,387
Total of all segments 237,354 186,559 390,022
Discontinued operations (624) (4,616) (9,232)
Consolidated revenue 236,730 181,943 380,790
Geographical segments
South Africa 162,264 155,496 282,732
International 93,613 75,022 163,674
Eliminations of
intercompany revenue (19,147) (48,575) (65,616)
236,730 181,943 380,790
Segment result
Automotive 1,258 (8,771) (7,279)
Buy-ins 6 (1,062) (30)
Decorative 172 (1,901) (980)
Solvents 68 (962) (462)
Woodfinish/Industrial 502 (4,641) (3,120)
Loss before taxation 2,006 (17,337) (11,871)
Taxation (467) 5,325 3,991
Discontinued operation (596) (3,125) (6,250)
Loss for the year 943 (15,137) (14,130)
Segment asset
Automotive 323,707 265,486 288,348
Buy-ins 18,068 32,151 26,673
Decorative 68,417 57,527 57,596
Solvents 38,069 29,140 30,918
Woodfinish/Industrial 176,169 140,432 149,985
Discontinued operations - - 3,614
Total of all segments 624,430 524,736 557,134
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1.Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with IAS34 - Interim Financial
Reporting, International Financial Reporting Standards (IFRS),
the Companies Act of South Africa and the JSE Limited Listing
Requirements.
The accounting policies and methods of measurement, recognition
and computation applied in the preparation of these condensed
consolidated interim financial statements are consistent with
those applied in the group’s most recent audited annual
financial statements for the year ended 31 March 2012.
The results for the period are not necessarily indicative of the
results for the entire year, and these condensed consolidated
interim financial statements should be read in conjunction with
the audited annual financial statements for the year ended 31
March 2012.
The preparation of these condensed consolidated interim
financial statements requires the use of estimates and
assumptions that affect the values of assets and liabilities at
the reporting date, as well as the determination of income and
expenses during the reporting period. Although these estimates
are based on managements best knowledge of current events and
actions that the group may undertake in the future, actual
results may differ from these estimates.
The board acknowledges its responsibility for the preparation of
these condensed consolidated interim financial statements in
accordance with IFRS, the Companies Act of South Africa and the
JSE Limited Listing Requirements.
Mr JG Maehler, the group financial director is responsible for
this set of financial results and has supervised the preparation
thereof.
2. Other income
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
Figures in Rand Thousand 2012 2011 2012
Other income comprises:
Insurance claim 15,000 12,000 15,677
Franchise fees - 3 70
Foreign exchange gain 656 - 343
Rental income 3,049 3,507 7,610
Other sundry income 233 1,419 3,628
18,938 16,929 27,328
3. Basic and diluted earnings and headline earnings per share
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
2012 2011 2012
Basic earnings per share
Continuing operations
(cents) 0.15 (2.87) (1.19)
Discontinued operations
(cents) (0.06) (0.75) (0.94)
Total basic earnings per
share (cents) 0.09 (3.62) (2.13)
Basic headline earnings
per share
Continuing operations
(cents) 0.15 (2.85) (1.12)
Discontinued operations
(cents) (0.06) (0.74) (0.94)
Total basic headline
earnings per share
(cents) 0.09 (3.59) (2.06)
Diluted earnings per
share
Continuing operations
(cents) 0.15 (2.87) (1.18)
Discontinued operations
(cents) (0.06) (0.74) (0.94)
Total diluted earnings
per share (cents) 0.09 (3.61) (2.12)
Diluted headline
earnings per share
Continuing operations
(cents) 0.15 (2.85) (1.12)
Discontinued operations
(cents) (0.06) (0.74) (0.94)
Total diluted headline
earnings per share
(cents) 0.09 (3.59) (2.06)
Figures in Rand Thousand
Profit / (loss) for the
period (continuing
operations) 1,539 (12,012) (7,880)
Profit / (loss) for the
period (discontinued
operations) (596) (3,125) (6,250)
Total profit / (loss)
attributable to equity
holders of the parent 943 (15,137) (14,130)
Non-headline earnings
Loss on disposal of
assets - 128 628
Total tax effect of
adjustments - (36) (176)
Headline earnings
(continuing operations) 1,539 (11,920) (7,428)
Headline earnings
(discontinued
operations) (596) (3,125) (6,250)
Total headline earnings 943 (15,045) (13,678)
Weighted average number
of ordinary shares in
issue (basic) 1,071,261,648 418,523,544 663,032,668
Share options 8,509,091 - 2,194,714
Weighted average number
of ordinary shares in
issue (diluted) 1,079,770,739 418,523,544 665,227,382
4. Discontinued operation
Unaudited Unaudited Audited
six months six months Year
ended ended end
30 September 30 September 31 March
Figures in Rand Thousand 2012 2011 2012
Revenue 624 4,616 9,232
Cost of sales (99) (1,947) (3,895)
Operating expenses (1,352) (7,009) (14,018)
Operating loss (827) (4,340) (8,681)
Taxation 231 1,215 2,431
Net loss from
discontinued operation (596) (3,125) (6,250)
Cash flow utilised by
discontinued operation (827) (4,340) (8,681)
Effect on the statement
of financial position
Plant and equipment - - 1,781
Inventory - - 1,833
Instalment sale
liabilities - - (543)
Net assets and
liabilities - - 3,071
During the 2012 financial year the board decided to discontinue
certain of the groups retail stores. Of the stores identified to
be discontinued, some of these were closed and others were sold.
These stores were not a discontinued operation or classified as an
asset held for sale as at 30 September 2011. The comparative
statement of comprehensive income has been re-presented to show
the discontinued operation from the continuing operations.
5. Related party transactions
There have been no significant changes in related party
relationships since the previous year or significant
transactions during the interim period, other than in the normal
course of business.
6. Post balance sheet events
The directors are not aware of any material matter or
circumstance arising since the end of the interim period.
7. Dividends
No dividends were declared or paid during the interim period.
Corporate information
Country of incorporation South Africa
and domicile
Registration number 2005/039947/06
Share code CSP
ISIN ZAE000109427
Nature of business and Manufacture, distribution and
principal activities 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
(Executive director)
DJ Coyle-Dowling
(Executive director)
TP Dykins
(Executive 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 and 2029 Old Mill Road
business address Canelands
Verulam 4339
Postal address P O Box 2359
Canelands
Verulam 4340
Auditors KPMG Incorporated
Transfer secretaries Computershare Investor Services
(Pty) Ltd
Company secretary Statucor (Pty) Ltd
Designated Advisor Grindrod Bank Limited
Website www.chemspecpaint.com
Telephone +27 32 541 8600
Fax +27 32 541 8653
Date: 31/10/2012 04:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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