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CHEMICAL SPECIALITIES LIMITED - Condensed consolidated audited results 2013

Release Date: 20/06/2013 07:30
Code(s): CSP     PDF:  
Wrap Text
Condensed consolidated audited results 2013

CHEMSPEC 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 2013

Performance highlights

Revenue up 24% R471 million (2012: R381 million)
Loss for the period R31 million (2012: R14 million)
Basic loss per share up 35% 2,89 cents (2012: 2,13 cents)
Debt/Equity 56% (2012: 22%)
Current ratio 1.57:1 (2012: 2.19:1)
Lead coverage in decorative coatings 0% (2012: 0%)
Employee turnover 11,7% (2012: 12,5%)
Carbon footprint 0,30 (2012: 0,51) tons CO2 equivalent per ton production

Letter from the Chairman

Dear Shareholder

BACKGROUND
Over the last two years we have been busy restoring ChemSpec to a viable business from the absolute mess it was in.

It has been an exhilarating but testing period in the history of this fine 56-year old company and one in which some bold
decisions and actions were required.

Fortune favours the brave, and particularly so if it is combined with a huge amount of effort and commitment and a
return to sound business practice.

Since its low of 30 cents and a rights issue at 40 cents, the share is currently trading at around 50 cents.

For a cost to shareholders of R45 million (5,02 cents per share), the losses over the two-year period, we have been able
to turn ChemSpec into a respectable company with outstanding prospects for the future, although we are still a few
months off completion of the turnaround.

In last year's report I said that shareholders should not expect a one-day wonder but that we were confident of rewarding
patient investors in the medium to long term. I am no less buoyant this year. We look forward to the future, confident that
we will be able to reward stakeholders with ample returns on their investments, sustained over the long term.

I really would like shareholders to see this loss as a base-setter for a prosperous future rather than as a negative, and
also not to expect an immediate turn to profits but rather a near-term full recovery, which will happen.

I have personally taken ChemSpec to heart and with my family's shareholding currently standing at around 17%, I am
certain there are great things yet to come from this company.

CURRENT POSITION
Corporate

-   Corporate governance
    We have now reached a standard of corporate governance that we believe is required of a good public company,
    having moved forward from the previous structures and processes which we came to see as unsatisfactory.

Resources
- Executive team
   It is my belief that we have assembled by far the best executive team in the industry. This has taken quite some effort
   and I know will bear fruit in the short term. I thank my executives for joining a great team and wish them good luck
   into the future.

-   Industry-specific workforce
    Reporting to this executive team is a workforce of dedicated people with good knowledge and experience of the
    industry. Thanks to all you fine people for your loyalty and support.

-   Production facilities
    We have developed an outstanding all-in-one production facility at Canelands, KwaZulu-Natal, with capacity to
    accommodate our growth well into the future. Satellite facilities have been established in Johannesburg and Cape
    Town for decorative paint, to reduce logistic costs.

-   Infrastructure
    We have a web of distribution networks which has been considerably enlarged by acquiring a distribution agreement
    for Jack's Paints with its 80 stores across South Africa. This will continue to grow.

-   Products
    We now have a range of products covering decorative, auto refinish, woodfinish and industrial, stretching over the full
    spectrum of customer needs.

-   Routes to market
    We have a broad route to market presence covering South Africa, Africa, USA and Australasia, some of which
    is embryonic in terms of present penetration and provides room for further expansion both domestically and
    internationally.

-   Brand prominence
    We are bringing new focus to bear on the branding of ChemSpec products in order to ensure that they enjoy greater
    market visibility.

Operations
- Sales
   Sales are up 24% for the past year and we are reasonably certain that we will achieve substantial sales increases
   from our base of just under R500 million in the current year. We thank our customers for their loyal support and will
   continue to look for ways to provide better service to them.

-   Overhead base
    We have taken an aggressive approach in our turnaround programme and have increased our overhead base ahead
    of sales. The rate of increase in overheads should now diminish, having provided us with the base from which to
    reach sales targets and at the same time take further strategic growth decisions.

-   Finance cost
    With the assistance of the IDC, we are borrowing capital for expansion at competitive rates. We have received good
    support from our financiers and thank them for the confidence they have shown in ChemSpec.

Status
-   Financial position
    In light of the expected improvement in performance and limited capital expenditure requirements our current
    financial position should be adequate.

-   Partnerships
    We have developed strong strategic alliances with the best international players in the industry and are extremely
    proud of these alliances.

-   South African
    We are a wholly South African company in which the Industrial Development Corporation is a major shareholder. We
    know how to do business in Africa. We will be improving our BEE rating and empowerment in general so that we can
    truly say we are proudly South African and play a genuine role in transformation in our country. We have the base
    from which to achieve this.

-   International ability
    Our auto refinish brands are well-established in the areas we trade in internationally and provide us with growth
    opportunities in sales and manufacturing, particularly as the value of the Rand weakens against major currencies.

Culture
-  Success
   We have an attitude of winning, being the best, and are developing as an industry leader.

-  'Good goes with good'
   We have a philosophy that 'good goes with good' or more simply put, 'birds of a feather flock together'. As we gain
   the trust of all those associated with ChemSpec in one way or another, we will establish good long-term business
   relationships with all the fine people who have the same high standard approach to business.

CHANGE OF DIRECTORATE
Tim Dykins resigned as an executive director and Tim McClure resigned as an independent non-executive director
during the year. I would like to personally thank both Tim Dykins and Tim McClure for their invaluable assistance while
they were with us. We also welcome Ms Thina Siwendu as an independent non-executive director and look forward to
benefiting from her wealth of experience in corporate governance and black economic empowerment.

THANKS
I thank my fellow board members for their strategic input and support. I thank our Chief Executive Officer, Baron
Schreuder, for the warm spirit in which he has embraced his role at ChemSpec. He is a first-class Chief Executive
Officer. I also thank Bruce Mackinnon, our Chief Operating Officer, for his role as Chief Executive Officer during our
earlier phases of turnaround and for the positive way he has embraced change. I also thank our executive team, the
wonderful people of ChemSpec and our customers, suppliers and financiers for their support and for being part of the
intense effort which is so needed in turning a company around.

CONCLUSION
This exciting journey of success at ChemSpec is only just beginning. We have almost completed setting the platform.
Please be patient.

We know that we will deliver first-class returns for our shareholders but will not be rushed. I hope you stay for the ride.
I am.

Ivan Clark
Chairman

Chief Executive Officer's review and comments on the results

Overview and highlights
It has been an extremely busy yet exciting first three months for me since my appointment in January 2013. The business
has responded positively to the introduction of a new Chief Executive Officer and the executive team has been hard at
work preparing strategies and discussing tactics on how we can continue to grow the sales line at multiple double digit
rates, increase margins and profitability and move the business into a sustainable cash-generating position.

The year to March 2013 must be seen as a year of investment in the future sustainability of this business by putting
together a number of key investment strategies. Among the important steps forward that we managed to accomplish,
we:

-   acquired key leadership capacity in South Africa and Australia to help position the business for future growth and
    increased our sales resource in various territories;

-   launched two new products into the MICA channel, further enhancing our relationship and standing with them;

-   acquired the Jack's Paints supply contract as well as the assets of Turnkey Paint Solutions (Pty) Ltd (a division of
    Kansai Plascon). These acquisitions will add manufacturing capacity in Johannesburg for the decorative business,
    sales turnover and, more importantly, open up new access to the market;

-   bedded down the Sikkens automotive brand and the relationship with AkzoNobel, investing R12 million in the
    business;

-   invested in mixing banks and colour systems for future growth within the automotive business;

-   commissioned a new resin plant and solvent blending capacity which will help to reduce our input costs in future;

-   opened and invested in a new depot in Colorado, USA, in order to open up distribution in the western states;

-   invested in upgrading our global IT platform to allow improved information visibility and supply chain enhancements; and

-   invested in green/eco R&D in both automotive and decorative technology areas.

The business is in good shape, with a positive outlook amongst its employees, great infrastructure in place and beneficial
strategic partnerships with major global players. These factors together set up a sound platform for successful growth.

Results
Regrettably, ChemSpec incurred a loss of R31 million for the year ended March 2013 compared with a loss of
R14 million for the previous year. The second half of the year was tougher than expected, with periods of slower trade
in the USA and Australia businesses and some margin issues in South Africa, against the background of a longer-term
decision taken by the board to increase leadership capability and sales resource capacity in anticipation of stronger
performance. The result was poorer performance than expected for the second half, which momentarily halted our
progress.

While this is undoubtedly disappointing for shareholders, I must stress that the business is still in a turnaround phase
where unforeseen market circumstances will inevitably affect short-term performance. On the other hand, there are
a number of very positive opportunities for the business which will ensure improved trading and financial results and
future sustainability.

Trading results
Revenue increased by 24% to R471 million, but margins fell as a result of increased cost push inflation through rand
weakness, together with oil price and general commodity price increases from suppliers. Overhead costs were up by
34%. Finance costs were much improved as the benefit from the rights issue started coming through.

The South African and African operations, which comprise almost 70% of the business, performed well and grew by
more than 30%. Margins were unfortunately adversely affected by the weakening exchange rate, exacerbated by a strong
oil price and further exacerbated by product mix issues in the industrial and decorative businesses. These issues have
been addressed wherever possible and margins are already showing improvement.

The USA business had an excellent first half year in which it grew by more than 30%. This was followed by a
weak second half, resulting from generally poorer trading conditions in the automotive sector (experienced
more significantly by the majors) and the severe impact of super-storm Sandy on our largest customer in the
US (±$450 000 lost sales), leaving us with flat sales on last year. Overhead costs were slightly higher due to strategic
increases in our sales resource.

Australia showed flat sales on last year primarily as a result of some quality-related issues caused by raw material
variations. These have since been resolved and we look forward to better growth opportunities.

Financial position
The financial structure of the group remains healthy.

At year-end our debt to equity ratio was 56% and our current ratio was 1.57:1.

Available unutilised finance facilities at year-end totalled R55 million.

Working capital increased by R31,5 million as a result of increased business.

The business case for Chemspec
We have all the right markers in place to accelerate our continuing development into a sustainable and successful
coatings company.

-   We have a first class production facility at Canelands, KwaZulu-Natal, a new facility in Cleveland, Gauteng (resulting
    from the Jack's Paints supply contract acquisition), as well as a production facility in the USA.

-   We have developed partnerships with world leaders whose specific product offerings together with our own products
    allow us to offer our customers a wider range of products to meet their requirements.

-   We have a good management team in place and teams of dedicated people in all our operations.

-   We have been regaining market share selectively by focusing on economic returns.

-   We are reviewing our product offering, improving our marketing drive and focusing on supply chain excellence to
    ensure a sustainable supply situation.

-   We have a customer base that is supportive of our business strategies.

Dividend
No dividends were declared or paid during the year (2012: nil).

Prospects
ChemSpec is a good, sound business offering a host of opportunities. The Jack's Paint contract acquisition for the
manufacture of its exclusive decorative paint brands has added value in that sector of the business and we will continue
to improve our position in its 80 stores countrywide. We are developing numerous other opportunities in the decorative
sector.

The automotive and industrial businesses in South Africa are growing and partner technology is allowing us to change
the mix of this category to improve margin and price mix.

Opportunities in Africa are being tested with all three technology and brand portfolio platforms. The US business is
stable and self-sustaining, with significant growth prospects in the short to medium term. The Australian business is
poised for growth, though this may take a little longer.

Shareholders are asked to be patient as we develop our business platform. The business requires a strategic and
methodical plan that will take time to implement, but which will allow sustainable growth through building brands and
relationships, both of which are earned through consistency and credibility. We have to approach this in a measured way
and there is still much to do.

ChemSpec has adopted austerity measures on top of its growth plan and is expected to continue to improve its results
in the coming year.

Appreciation
We thank all our customers for their continuing belief in us, allowing us the opportunity to rebuild this business. We
thank our suppliers for their continued support and belief in our ability to meet their requirements. We thank our
shareholders for their patience and continued endorsement of our plans. Last, but certainly not least, we thank our
valued employees for working tirelessly to improve this business for all our stakeholders.

Finally, I thank my executive team for so quickly responding to my leadership and participating fully in devising and
implementing the plans we have laid out for the future.

Annual general meeting
The annual general meeting of the company will be held at 2029 Old Mill Road, Canelands, Verulam, KwaZulu-Natal, on
Friday, 27 September 2013 at 11:00.

Website
A full set of reporting publications, including our 2013 final results presentation, can be found on our website at
www.chemspecpaint.com

Feedback
We invite feedback on our report and its contents and ask that you contact us at annual.report@chemspecpaint.com.

For and on behalf of the board

IAJ Clark                                                                                     BC Schreuder
Chairman                                                                                      Chief Executive Officer


Condensed consolidated statements of financial position
as at 31 March 2013
                                                   GROUP
Figures in R'000               Notes         2013          2012
ASSETS
Non-current assets
Property, plant and equipment             276 625       230 828
Intangible assets                          46 065        29 312
Goodwill                                   22 937        22 926
Deferred tax                               65 507        51 291
                                          411 134       334 357
Current assets
Inventories                               153 196       127 473
Trade and other receivables               102 864        77 426
Cash and cash equivalents                   9 772        14 264
                                          265 832       219 163
Assets held for sale              11            –         3 614
Total assets                              676 966       557 134
EQUITY AND LIABILITIES
Equity
Stated capital                    10      468 055       466 656
Translation reserve                         9 615       (1 353)
Revaluation reserve                        31 858        31 858
Share option reserve                        3 187         1 187
Accumulated loss                        (145 903)     (114 996)
                                          366 812       383 352
Non-current liabilities
Other financial liabilities               137 891        69 978
Deferred tax                                2 828         3 169
                                          140 719        73 147
Current liabilities
Other financial liabilities                28 106        27 936
Trade and other payables                   90 998        71 428
Bank overdraft                             50 331           728
                                          169 435       100 092
Liabilities held for sale         11            –           543
Total liabilities                         310 154       173 782
Total equity and liabilities              676 966       557 134

Condensed consolidated statements of financial performance
for the year ended 31 March 2013
                                                        GROUP
Figures in R'000                      Notes        2013          2012

Revenue                                   5     470 945       380 790
Cost of sales                             6   (298 534)     (224 511)
Gross profit                                    172 411       156 279
Other income                              7      28 294        27 328
Operating expenses                            (237 530)     (176 717)
Operating (loss)/profit                   8    (36 825)         6 890
Finance income                                      270         4 034
Finance costs                                   (7 802)      (22 796)
Loss before taxation                           (44 357)      (11 872)
Taxation                                         14 046         3 991
Loss from continuing operations                (30 311)       (7 881)
Discontinued operations                  11       (596)       (6 250)
Loss for the period                            (30 907)      (14 131)
Basic loss per share                      9
Continuing operations (cents)                    (2,83)        (1,19)
Discontinued operations (cents)                  (0,06)        (0,94)
Total basic loss per share (cents)               (2,89)        (2,13)
Diluted loss per share                    9
Continuing operations (cents)                    (2,81)        (1,18)
Discontinued operations (cents)                  (0,06)        (0,94)
Total diluted loss per share (cents)             (2,87)        (2,12)

Condensed consolidated statements of comprehensive income
for the year ended 31 March 2013
                                                                      GROUP
Figures in R'000                                                2013          2012

Loss for the period                                         (30 907)      (14 131)
Other comprehensive income                                    10 968         4 827
Exchange differences on translating foreign operations        10 968         4 827
Total comprehensive loss for the period                     (19 939)       (9 304)

Condensed consolidated statements of cash flows
for the year ended 31 March 2013
                                                                GROUP
Figures in R'000                                            2013           2012

Cash flows from operating activities
Cash used by operations                                   (37 160)     (30 388)
Finance income                                                 270        4 034
Finance costs                                              (7 802)     (22 796)
Taxation paid                                                (650)      (1 380)
Net cash from operating activities                        (45 342)     (50 530)
Cash flows from investing activities
Purchase of plant and equipment                           (61 254)     (39 258)
Proceeds on sale of plant and equipment                        815        4 799
Acquisition of intangible assets                          (18 982)     (13 071)
Acquisition of business                                    (1 884)            –
Proceeds of other financial assets                               –            8
Proceeds on disposal of assets held for sale                 3 071        1 050
Net cash from investing activities                        (78 234)     (46 472)
Cash flows from financing activities
Proceeds on share issue                                      1 399      259 022
Proceeds/(repayment) of other financial liabilities         68 082     (36 166)
Repayment of shareholder loans                                   –     (83 536)
Net cash from financing activities                          69 481      139 320
Total cash movement for the period                        (54 095)       42 318
Cash/(overdraft) at the beginning of the period             13 536     (28 782)
Cash and cash equivalents at the end of the period        (40 559)       13 536
Reconciled as follows:
Cash and cash equivalents                                    9 772       14 264
Bank overdraft                                            (50 331)        (728)
Cash and cash equivalents at the end of the period        (40 559)       13 536

Condensed consolidated statements of changes in equity
for the year ended 31 March 2013

                               Share         Share    Stated       Accumulated
Figures in R'000             capital       premium   capital              loss
GROUP
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)
Issue of shares                    –           –       1 404                 –
Share issue expenses               –           –         (5)                 –
Loss for the period                –           –           –          (30 907)
Share options                      –           –           –                 –
Translation reserve                –           –           –                 –
Balance at 31 March 2013           –           –     468 055         (145 903)


                            Revaluation     Translation        Share option
Figures in R'000                reserve         reserve             reserve         Total

GROUP
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

Issue of shares                       –                –                  –         1 404
Share issue expenses                  –                –                  –           (5)
Loss for the period                   –                –                  –      (30 907)
Share options                         –                –              2 000         2 000
Translation reserve                   –           10 968                  –        10 968

Balance at 31 March 2013         31 858            9 615              3 187       366 812


Condensed consolidated segmental analysis
for the year ended 31 March 2013

                                   GROUP
Figures in R'000                2013        2012

Segment revenues
Automotive                   238 426     203 540
Buy-ins                       18 076      14 115
Decorative                    52 594      39 200
Industrial/Woodfinish        133 196     110 387
Solvents                      29 277      22 780
Total of all segments        471 569     390 022
Discontinued operations        (624)     (9 232)
Consolidated revenue         470 945     380 790
Segment result
Automotive                  (26 994)     (7 279)
Buy-ins                      (1 034)        (30)
Decorative                   (3 958)       (980)
Industrial/Woodfinish       (10 880)     (3 120)
Solvents                     (1 491)       (463)
Total of all segments       (44 357)    (11 872)
Income tax                    14 046       3 991
Discontinued operations        (596)     (6 250)
Loss for the year           (30 907)    (14 131)
Segment assets
Automotive                   342 276     288 348
Buy-ins                       25 949      26 673
Decorative                    75 501      57 596
Industrial/Woodfinish        191 211     149 985
Solvents                      42 029      30 918
Discontinued operations            –       3 614
Total of all segments        676 966     557 134

                          Revenue    Revenue      Assets        Assets
Figures in R'000             2013       2012        2013          2012
Geographical segments
South Africa              285 011    217 116     546 259       446 061
International             185 934    163 674     130 707       111 073
                          470 945    380 790     676 966       557 134

Notes to the condensed consolidated audited results
for the year ended 31 March 2013

1.   Accounting policies and basis of preparation
     The condensed consolidated annual financial results for the year ended 31 March 2013 have been prepared
     under the supervision of JG Maehler (CA)SA, in accordance with International Accounting Standards (IAS) 34
     Interim Financial Reporting, the requirements of the South African Companies Act, 71 of 2008, as amended,
     the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the
     Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
     Standards Council and in compliance with the Listings Requirements of the JSE Limited (JSE). These condensed
     consolidated annual financial statements have also been prepared in accordance with the framework concepts,
     measurement and recognition requirements of the International Financial Reporting Standards (IFRS) as
     required by the JSE.

     The condensed consolidated annual financial statements have been prepared on the historical cost basis
     excluding financial instruments and property, plant and equipment which are fairly valued and conform to IFRS
     as issued by the International Accounting Standards Board (IASB).

     The relevant Standards and Interpretations which are not yet effective and which should be disclosed for March
     2013 year-ends are identified in the table below, together with the dates on which these were issued by the IASB:

                                                                             Date issued
Standard/Interpretation                                                      by the IASB       Effective date

IAS 1 amendment   Presentation of Financial Statements: Presentation           June 2011          1 July 2012
                  of items of Other Comprehensive Income
IFRS 10           Consolidated Financial Statements                             May 2011       1 January 2013
IFRS 12           Disclosure of Interests in Other Entities                     May 2011       1 January 2013
IFRS 13           Fair Value Measurement                                        May 2011       1 January 2013
IFRS 10,          Consolidated Financial Statements, Joint                     June 2012       1 January 2013
IFRS 11 and       Arrangements and Disclosure of Interests in Other
IFRS 12 amendment Entities: Transition Guidance
IAS 19 amendments Employee Benefits: Defined Benefit Plans                     June 2011       1 January 2013
IAS 27            Separate Financial Statements (2011)                          May 2011       1 January 2013
IFRS 7 amendment  Disclosures – Offsetting Financial Assets and            December 2011       1 January 2013
                  Financial Liabilities
IAS 32            Offsetting Financial Assets and Financial Liabilities    December 2011       1 January 2014
IFRS 9 (2009)     Financial Instruments                                    November 2009       1 January 2015
IFRS 9 (2010)     Financial Instruments                                     October 2010       1 January 2015

     These pronouncements had no material impact on the accounting transactions or the disclosure thereof.

     The accounting standards and amendments issued to accounting standards and interpretations which are
     relevant to the group, but not yet effective at 31 March 2013, have not been adopted. It is expected that where
     applicable, these standards and amendments will be adopted on each respective effective date, except where
     specifically identified.

     The accounting policies, methods of measurement, recognition, computation and presentation adopted in the
     preparation of the condensed consolidated annual financial statements are consistent with those applied in the
     annual financial statements for the year ended 31 March 2012 and for the year ended 31 March 2013.
     The report of the independent auditor, on the condensed consolidated financial statements which were derived
     from the audited consolidated financial statements, on which an unmodified opinion was expressed, is available
     for inspection at the company's registered office together with the condensed consolidated financial statements
     identified in the auditor's report.

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.

4.   Dividends
     No dividends were declared or paid during the year (2012: nil).

                                          GROUP
Figures in R'000                    2013        2012
5.   Revenue
Gross sale of goods              483 071     396 645
Less: Discount allowed           (6 875)     (4 645)
Less: Rebates                    (4 627)     (1 978)
Less: Discontinued operations      (624)     (9 232)
                                 470 945     380 790
6.   Cost of sales
Gross cost of goods sold         300 993     229 344
Less: Discount received          (1 973)       (762)
Less: Rebates                      (387)       (176)
Less: Discontinued operations       (99)     (3 895)
                                 298 534     224 511
7.   Other income
Profit on disposal of assets         167           –
Foreign exchange gain              1 438         343
Franchise fees                         –          70
Insurance claim                   15 000      15 677
Rental income                      7 520       7 610
Other sundry income                4 169       3 628
                                  28 294      27 328

Rental income is received from the sub-leasing of certain portions of property leased by the company.

                                                                                 GROUP
Figures in R'000                                                          2013         2012
8.   Operating (loss)/profit
The analysis of expenses recognised in profit or loss using the
classification based on the function within the entity comprises:
Operating expenses                                                     237 530      176 717
Administration                                                         107 178       92 231
Distribution                                                            48 490       35 191
Selling                                                                 83 214       63 313
Less: Discontinued operations                                          (1 352)     (14 018)
Profit for the year has been arrived at after charging:
Operating lease charges:
Premises                                                                31 873       22 953
Motor vehicles                                                             302        1 797
Office equipment                                                           981          872
                                                                        33 156       25 622
Auditors' remuneration:
Fees – current year                                                      1 129        1 158
Tax and secretarial services                                             1 518          961
                                                                         2 647        2 119
Depreciation and amortisation:
Depreciation of property, plant and equipment                           21 836       24 138
Amortisation of intangible assets                                        4 477        3 092
                                                                        26 313       27 230
Profit/(loss) on disposal of assets                                      (167)          628
Staff costs                                                            148 096      114 170


                                                                                                     Group
     Figures in R'000                                                                        2013               2012

9.   Basic and diluted loss and headline loss per share
     Basic loss per share
     Continuing operations                                                 (cents)         (2,83)             (1,19)
     Discontinued operations                                               (cents)         (0,06)             (0,94)
     Total basic loss per share                                            (cents)         (2,89)             (2,13)
     Basic headline loss per share
     Continuing operations                                                 (cents)         (2,84)             (1,12)
     Discontinued operations                                               (cents)         (0,06)             (0,94)
     Total basic headline loss per share                                   (cents)         (2,90)             (2,06)
     Diluted loss per share
     Continuing operations                                                 (cents)         (2,81)             (1,18)
     Discontinued operations                                               (cents)         (0,06)             (0,94)
     Total diluted loss per share                                          (cents)         (2,87)             (2,12)
     Diluted headline loss per share
     Continuing operations                                                 (cents)         (2,82)             (1,12)
     Discontinued operations                                               (cents)         (0,06)             (0,94)
     Total diluted headline loss per share                                 (cents)         (2,88)             (2,06)
     Basic loss per share
     The loss used in the calculation of basic loss per share are as follows:
     Loss for the year (continuing operations)                                           (30 311)            (7 881)
     Loss for the year (discontinued operations)                                            (596)            (6 250)
     Total loss attributable to equity holders of the parent                             (30 907)           (14 131)
     Reconciliation of total loss to headline loss attributable to equity holders
     of the parent
     Total loss attributable to equity holders of the parent                             (30 311)            (7 881)
     Non-headline adjustments
     Loss/(profit) on disposal of assets                                                    (167)                628
     Total tax effect of adjustments                                                           47              (176)
     Headline loss (continuing operations)                                               (30 431)            (7 429)
     Headline loss (discontinued operations)                                                (596)            (6 250)
     Total headline loss                                                                 (31 027)           (13 679)
     Weighted average shares
     The weighted average number of ordinary shares used in the calculation
     of loss per share
     Opening shares                                                                 1 071 261 648        418 523 544
     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
     Specific issue on 1 October 2012 of 2 600 000 shares                               1 300 000                  –
     Weighted average number of ordinary shares (basic)                             1 072 561 648        663 032 668
     Share options                                                                      5 810 000          2 194 714
     Weighted average number of ordinary shares (diluted)                           1 078 371 648        665 227 382
     Actual number of ordinary shares                                               1 073 861 648      1 071 261 648


                                                                                                       GROUP
Figures in R'000                                                                                2013            2012
10.   Stated capital
Authorised
1 500 000 000 (2012: 1 500 000 000) ordinary shares of no par value                                –               –
                                                                                                   –               –
Issued
Share capital: 1 073 861 648 (2012: 1 071 261 648) ordinary shares
of no par value                                                                              481 621         480 217
Less share issue expenses                                                                   (13 566)        (13 561)
                                                                                             468 055         466 656
Reconciliation between opening balance of issued shares and closing
balance:
Opening balance of shares issued                                                     1 071 261 648       418 523 544
Specific issue: 2 600 000 shares at R0,54 each                                           2 600 000                 –
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                                                                1 073 861 648     1 071 261 648

Results of the specific issue – 2013
The results of the specific issue of shares for cash on 1 October 2012 are set out below:

                               Value at
                 Number of     54 cents
                    shares    per share

Specific issue    2 600 000       1 404
                  2 600 000       1 404

Results of the specific issue – 2012
The results of the specific issue of shares for cash on 19 October 2011 are set out below:
                                                                                                Value at
                                                                                Number of       40 cents
                                                                                   shares      per share

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 18 November 2011, and the results thereof are
set out below:

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
11.    DISCONTINUED OPERATIONS
       During the 2012 financial year the board resolved to discontinue certain of the group's retail stores. Of the stores
       identified to be discontinued, some of these were to be closed and others sold.

                                                                          GROUP
Figures in R'000                                                   2013         2012
Results of the discontinued operations
Revenue                                                             624        9 232
Cost of sales                                                      (99)      (3 895)
Operating expenses                                              (1 352)     (14 018)
Operating loss                                                    (827)      (8 681)
Taxation                                                            231        2 431
Net loss from discontinued operation                              (596)      (6 250)
Basic loss per share                                 (cents)     (0,06)       (0,94)
Basic headline loss per share                        (cents)     (0,06)       (0,94)
Diluted loss per share                               (cents)     (0,06)       (0,94)
Diluted headline loss per share                      (cents)     (0,06)       (0,94)
Cash flows from (used in) discontinued operations
Net cash from (used in) operating activities                        827      (8 681)
Net cash from (used in) investing activities                          –            –
Net cash from (used in) financing activities                          –            –
Net cash outflows for the year                                      827      (8 681)
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

Corporate 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)
                                               BC Schreuder (Chief executive officer)
                                               BR Mackinnon (Chief operations officer)
                                               JG Maehler (Financial director)
                                               GV Metzer (Marketing and sales director)
                                               S van Niekerk (International sales director)
                                               DJ Coyle-Dowling (Commercial director)
                                               JG Jones (Lead independent non-executive director)
                                               NTY Siwendu (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) Ltd
                                               70 Marshall Street
                                               Johannesburg, 2001

Company secretary                              Statucor (Pty) Ltd
                                               BDO House
                                               Richefond Circle
                                               Ridgeside Office Park
                                               Umhlanga, 4319

Designated Advisor                             Grindrod Bank Limited

Website                                        www.chemspecpaint.com
Telephone                                      +27 32 541 8600
Fax                                            +27 32 541 8653

20 June 2013

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