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W G WEARNE LIMITED - Reviewed Provisional financial results for the year ended 28 February 2013

Release Date: 04/06/2013 10:20
Code(s): WEA     PDF:  
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Reviewed Provisional financial results for the year ended 28 February 2013

 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 Provisional financial results for the year ended 28
February 2013

Condensed Consolidated Statement of Financial Position

                                          Reviewed       Audited
                                         12 months     12 months
                                    February 2013 February 2012

                                            R'000              R'000
Assets
Non-Current Assets                        355,161         376,026
Property, plant and equipment             339,726         370,803
Other financial assets                      4,875           5,223
Deferred Taxation Asset                    10,560               -
Current assets                             73,401          70,058
Inventories                                19,848          17,305
Other financial assets                        987           4,014
Trade and other receivables                45,519          42,371
Cash and cash equivalents                   7,047           6,368
Non-current asset held for sale             4,500           4,500
Total assets                              433,062         450,584
Equity and Liabilities
Equity                                     35,489           52,786
Issued capital                            178,357          178,357
Reserves                                      759              345
Revaluation reserves                       39,296           43,299
Accumulated losses                      (182,923)        (169,215)
Non-current liabilities                   244,007          278,091
Borrowings                                218,272          252,281
Deferred taxation liability                13,860            8,921
Trade and other payables                        -            2,023
Environmental provision                    11,875           14,866
Current liabilities                       153,566          119,707
Loans payable                                   -            5,193
Borrowings                                 52,467           10,751
Current taxation payable                      647            1,821
Trade and other payables                   65,567           71,437
Bank overdraft                             34,885           30,505
Total liabilities                         397,573          397,798
Total equity and liabilities              433,062          450,584
Number of shares in issue ('000)
After eliminating treasury shares         273,038         273,038
Net asset value per share (cents)           13.00           19.33
Net tangible asset value per share           13.00          19.33
(cents)


Condensed Consolidated Statement of Comprehensive Income
                                          Reviewed         Audited
                                         12 months       12 months
                                     February 2013 February 2012
                                             R'000           R'000

Continuing Operations
Revenue                                    400,001        305,870
Cost of sales                            (315,478)      (247,798)
Gross profit                                84,523         58,072
Other income                                 2,065          3,397
Operating expenses                        (79,428)       (79,815)
Operating profit / (loss)                    7,160       (18,346)
Investment income                              475          1,546
Finance costs                             (27,318)       (35,928)
Loss before taxation                      (19,683)       (52,728)
Taxation                                     4,365            425
Loss from continuing operations           (15,318)       (52,303)
Loss from discontinued operations          (2,393)        (2,650)
Loss for the period                       (17,711)       (54,953)

Other comprehensive income
Fair value adjustments: Available-             337            213
for-sale
Release of reserves                              -          (242)
Gain on revaluation                              -         54,357
Deferred tax on revaluation                      -       (11,058)
Total comprehensive loss for the          (17,374)       (11,683)
year
Total comprehensive (loss)
attributable to:
Owners of the parent                      (17,374)       (11,683)
Loss for the year                         (17,374)       (11,683)
Weighted average number of shares          273,038        240,344
in issue ('000)
Fully diluted weighted average             273,038        240,344
number of shares ('000)
Continuing operations Basic and             (5.61)        (21.76)
diluted loss per share (cents)
Continuing and discontinued                 (6.49)        (22.86)
operations Basic and diluted loss
per share (cents)


Reconciliation of headline
earnings/(loss):
Loss for the year                         (17,711)       (54,953)
Impairments and scrapping loss                  -           3,506
Loss on sale of property, plant               258             735
and equipment
Loss /(Profit) on sale of interest            667         (1,212)
in joint venture
Fair value on non-current assets                -           4,139
held for sale
Headline loss attributable to            (16,786)        (47,785)
ordinary shareholders

Basic and diluted                          (6.15)         (19.88)
headline loss per share (cents)


Condensed Consolidated Statement of Changes in Equity
                                          Reviewed       Audited
                                         12 months     12 months
                                     February 2013 February 2012
                                             R'000         R'000
Balance at beginning of the year            52,786        61,451
Loss for the year                         (17,711)      (54,953)
Other comprehensive income                     414        43,270
Issue of share capital net of                    -        11,638
expenses
Redemption of share capital                      -       (7,926)
Movement treasury shares                         -             8
Non-controlling interest                         -         (702)
Balance at end of the year                  35,489        52,786

Condensed Consolidated Statement of Cash Flows
                                          Reviewed         Audited
                                         12 months       12 months
                                     February 2013   February 2012
                                             R'000           R'000
Cash flows from operating                    6,661         (3,711)
activities
Cash flows from investing                 (11,713)         25,048
activities
Cash flows from financing                    2,154         25,137
activities
Net(decrease)/increase in cash and         (2,898)         46,474
cash equivalents

Net cash flows from discontinued            (803)             991
operations
Cash movement for the year                (3,701)          47,465
Cash and cash equivalents at             (24,137)        (71,602)
beginning of the year
Cash and cash equivalents at end         (27,838)        (24,137)
of the year
 Share Capital                            Reviewed         Audited
                                         12 months       12 months
                                     February 2013   February 2012
                                             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                                273            246
Bought back during period                        -           (57)
Issued during the period                         -             83
Movement in treasury shares                      -              1
Closing balance                                273            273

Issued share capital
Ordinary share capital                         273            273
Ordinary share premium                     178,084        178,084
                                           178,357        178,357


Segmental reporting                       Reviewed         Audited
                                         12 months       12 months
                                     February 2013   February 2012
                                             R'000           R'000
External sales
Aggregates                                 197,592        174,361
Readymix concrete                          191,747        118,262
Concrete manufactured products              10,662         13,247
Total external sales                       400,001        305,870

Inter-segment sales
Aggregates                                  58,832         41,793
Readymix concrete                              317            301
Concrete manufactured products                   -              -
Total inter-segment sales                   59,149         42,094

Total revenue
Aggregates                                 256,424        216,154
Readymix concrete                          192,064        118,563
Concrete manufactured products              10,662         13,247
Total revenue                              459,150        347,964

Profit before interest and
taxation (before inter-segment
adjustments)
Aggregates                                   6,207         12,548
Readymix concrete                              364       (28,424)
Concrete manufactured products                 589        (2,470)
Total Profit/(Loss) before                   7,160       (18,346)
taxation

Property, plant and equipment
Aggregates                                276,996          289,382
Readymix concrete                          40,882           58,641
Concrete manufactured products             21,848           22,780
Total property, plant and                 339,726          370,803
equipment

Total assets
Aggregates                                338,080          354,175
Readymix concrete                          70,779           71,917
Concrete manufactured products             24,203           24,492
Total assets                              433,062          450,584


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. RC Ramashu, a non-executive director, passed away in
      August 2012.
   2. M C Khwinana was appointed in place of RC Ramashu on 05
      September 2012.

REVIEW OF RESULTS
Group revenue increased by 31% (or R94.1 million) to R400
million (2012: R305 million) for the year ended 28 February
2013. The largest contributor to the increase in turnover was
the ready mixed concrete division where turnover increased by
62% (or R73.4 million) to R191 million (2012: R118 million).

The Group’s gross profit margins were maintained at around 20%
even though the Group increased its market share
significantly.
The Group’s EBITDA improved to R41.2 million in the current
year from R20.3 million in 2012. During the year the Group
disposed of unproductive assets resulting in proceeds of R1.3
million. In addition, the Group also improved some of its
critical plant by spending R8.9 million on these assets.

The Group sold its interest in Wearne Drilling and Blasting
(Proprietary) Limited. The Group sold its interest in this
business on 28 February 2013 for R4.7 million resulting in a
loss on sale of business of R0.667 million.

Total liabilities reduced by R0.225 million to R 397.6
million (2012:R397.8 million excluding non-current
liabilities held for sale). The Group settled R36 million
in short-term borrowings. The last Section 311 payment to
Concurrent Creditors was made in March 2013.

The current year performance resulted in a headline loss
per share of 6.15 cents (2012:19.88 cents) and a diluted
loss per share from continuing operations of 5.61 cents
(2012:21.76 cents). The net asset value per share reduced
to 13.00 cents (2012:19.33 cents).

CHANGE IN ACCOUNTING POLICY
During the current year the directors’ have not changed any
accounting policies.

PROSPECTS
The Group prospects continued to improve as the implemented
turnaround strategy continued to bear fruit. The Readymix
concrete division especially showed good growth as turnover
increased by more than 60% while margins were maintained.
Market conditions remain competitive though as there is still
spare capacity in the cement industry. New entrants in the
cement industry could also change the operating environment in
this business.

The Aggregates business managed to increase turnover by 18%.
Margins came under pressure however due to higher energy costs
and a lower average selling price. There was also a lower
profit contribution of R 4.9 million from the Drilling &
Blasting business for the year. The outlook for the aggregate
business remains positive as Government’s infrastructure roll
out starts to materialize. The demand for Road building
material as well as railway ballast especially started to
increase towards the end of the financial year.
The Concrete Manufactured Products division performed
admirably in a very tough environment. The issuing of very few
tenders by the Limpopo Roads Agency during the 2013 financial
year still negatively affected the market for concrete pipes
and culverts in the Limpopo area. Greater plant efficiencies
however resulted in improved profitability on slightly lower
turnover. Market conditions should improve for the 2014 year
and the board decided to expand the plant capacity further
with an investment of R 700 000 in new product lines. The
additional products lines will expand the product offering and
make the business more competitive in the concrete pipe
market.

Our Contracting business that has always been classified under
the Aggregates division received a major boost when it was
awarded an R 32 million contract after year end. The contract
was awarded by Abeinsa EPC for the supply of earthworks and
concrete services at the KHI Solar One power plant in
Upington. This project will be executed in a joint venture
with a Spanish engineering firm IDD Global. The joint venture
will also focus on securing additional work in the booming
renewable energy sector.

The continuing market improvements mentioned above as well as
further initiates to reduce operating costs should see the
company return to profitability for the February 2014 year
end.

GOING CONCERN
The Group incurred a total comprehensive loss for the 2013
period of R17.37 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 R35.4 million. Current liabilities of R153.6 million
exceed current assets of R73.4 million by R80.16 million. The
Group’s financiers have agreed to extend the repayment terms
of long term borrowings and the current overdraft of R19
million will be converted into a 2 year term loan. In
addition, the Group has undrawn loans totalling R10 million
from the IDC at 28 February 2013 which further ensures that
the going concern statement is still applicable.
CASH FLOW
The Cash Flow forecast for 2014 reflects a cumulative cash
surplus. The Group has a cash management program with its
financier which grants it better access to its working
capital. The effective application of these cash reserves will
allow the Group to meet its obligations.

BASIS OF PREPARATION
These results have been prepared in accordance with and
contain the information required in terms of IAS 34 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.

These condensed provisional 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 Conclusion
Grant Thornton , the Group’s independent auditors, have
reviewed the condensed provisional consolidated financial
results for the year ended 28 February 2013 and have issued an
unqualified review conclusion with the following emphasis of
matter paragraph: “Without qualifying our conclusion, we draw
attention to the fact that the Group incurred a total
comprehensive loss of R17.4 million for the period ended 28
February 2013 and as of that date, the Group’s current
liabilities exceeds its current assets by R80.1 million. These
conditions indicate the existence of a material uncertainty
that may cast 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 the past practice, no dividend has been declared
for the period. By order of the board.

4 June 2013
S J Wearne

Chief Executive Officer

J J Bierman

Chief Financial Officer

CORPORATE INFORMATION

Non-executive directors: MM Patel (Chairman); MC Khwinana; M
Salanje; WP van der Merwe
Executive directors: SJ Wearne; JJ 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)
Ltd
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
These results and an overview of Wearne are available at
www.wearne.co.za

Date: 04/06/2013 10:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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