Wrap Text
Unaudited financial results for the period ended 31 August 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”)
Highlights
Revenue up 14.66%
Operating profit up 19.37%
EBITDA up 7.29%
Increased revenue across all business segments
Unaudited financial results for the period ended 31 August 2013
Condensed Interim Consolidated Statement of Financial Position
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R'000 R'000 R'000
ASSETS
Non-current assets 336,884 362,479 355,161
Property, plant and equipment 321,321 357,815 339,726
Other financial assets 5,003 4,664 4,875
Deferred taxation asset 10,560 - 10,560
Current assets 99,943 87,626 73,401
Inventories 25,539 20,514 19,848
Loans receivable - - -
Other financial assets 539 3,314 987
Trade and other receivables 71,007 59,558 45,519
Cash and cash equivalents 2,858 4,240 7,047
Non-current asset held for sale 4,500 4,500 4,500
Total assets 441,327 454,605 433,062
EQUITY AND LIABILITIES
Equity 34,090 48,659 35,489
Issued capital 178,316 177,857 178,357
Reserves 809 345 759
Revaluation reserve 37,294 43,299 39,296
Accumulated losses (182,329) (172,842) (182,923)
Non-current liabilities 244,897 247,185 244,007
Borrowings 220,069 223,524 218,272
Deferred taxation liability 13,722 8,795 13,860
Environmental provision 11,106 14,866 11,875
Current liabilities 162,340 158,761 153,566
Loans payable - 5,046 -
Borrowings 42,755 39,552 52,467
Current taxation payable 898 1,676 647
Trade and other payables 80,993 64,063 65,567
Bank overdraft 37,694 48,424 34,885
Total liabilities 407,237 405,946 397,573
Total equity and liabilities 441,327 454,605 433,062
Number of shares in issue ('000) 273,038 273,038 273,038
Net asset value per share (cents) 12.49 17.82 13.00
Net tangible asset value per
share (cents) 12.49 17.82 13.00
Condensed Interim Consolidated Statement of Comprehensive Income
Reclassified
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R'000 R'000 R'000
Continuing Operations Revenue 243,917 212,720 400,001
Cost of sales (188,631) (160,354) (315,478)
Gross profit 55,286 52,366 84,523
Other income 2,241 561 2,065
Operating expenses (45,747) (43,060) (79,428)
Earnings before
interest and taxation ("EBIT") 11,780 9,867 7,160
Investment income 985 97 475
Finance costs (14,322) (13,729) (27,318)
Loss before taxation (1,557) (3,765) (19,683)
Taxation 149 138 4,365
Loss from continuing operations (1,408) (3,627) (15,318)
Loss from
discontinued operations - - (2,393)
Loss for the period (1,408) (3,627) (17,711)
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss
Fair value adjustments 60 - 414
Deferred tax on revaluation (10) - (77)
Total other comprehensive income
for the year 50 - 337
Total comprehensive loss
attributable to:
Owners of the parent (1,358) (3,627) (17,374)
Reconciliation of headline loss:
Loss for the year (1,408) (3,627) (17,711)
Loss on sale of
property, plant and equipment 1,239 139 258
Profit on sale of
interest in joint venture - - 667
Headline loss attributable to
ordinary shareholders (169) (3,488) (16,786)
Reconciliation of EBITDA:
Earnings/(loss) before
interest and taxation ("EBIT") 11,780 9,867 7,160
Depreciation – Cost of sales 17,634 17,617 24,680
Depreciation – Operating expenses 459 425 9,334
Earnings/(loss) before
interest, taxation, depreciation
and amortisation ("EBITDA") 29,873 27,909 41,174
Weighted average number
of shares in issue('000) 273,038 273,038 273,038
Fully diluted weighted average
number of shares ('000) 273,038 273,038 273,038
Continuing operations Basic
and diluted loss
per share (cents) (0.52) (1.33) (5.61)
Continuing and discontinued
operations basic and diluted
loss per share (cents) (0.52) (1.33) (6.49)
Basic and diluted
headline loss per share (cents) (0.06) (1.28) (6.15)
Condensed Interim Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R'000 R'000 R'000
Balance at beginning of period 35,489 52,786 52,786
Total comprehensive loss
for the period (1,408) (3,627) (17,711)
Other comprehensive income 49 - 414
Movement treasury shares (40) (500) -
Balance at end of period 34,090 48,659 35,489
Condensed Interim Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R'000 R'000 R'000
Cash flows from operating activities 1,453 (15,481) 6,661
Cash flows from investing activities (428) (4,083) (11,713)
Cash flows from financing activities (8,022) (483) 2,154
Net cash flows from
continuing operations (6,997) (20,047) (2,898)
Net cash flows from
discontinued operations - - (803)
Net change in
cash and cash equivalents (6,997) (20,047) (3,701)
Cash and cash equivalents
beginning of period (27,838) (24,137) (24,137)
Cash and cash equivalents at end
of period (34,835) (44,184) (27,838)
Segmental reporting
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2013 August 2012 February 2013
R'000 R'000 R'000
Revenue: External sales
Aggregates 123,634 111,054 197,592
Readymix concrete 113,290 95,092 191,747
Concrete manufactured products 6,993 6,574 10,662
Total revenue: External sales 243,917 212,720 400,001
Revenue: Inter-segment sales
Aggregates 34,195 27,134 58,832
Readymix concrete - - 317
Concrete manufactured products - - -
Total revenue: Inter-segment sales 34,195 27,134 59,149
Revenue: Total sales
Aggregates 157,829 138,188 256,424
Readymix concrete 113,290 95,092 192,064
Concrete manufactured products 6,993 6,574 10,662
Total revenue: Total sales 278,112 239,854 459,150
Property, plant and equipment
Aggregates 261,977 292,116 276,996
Readymix concrete 37,145 43,414 40,882
Concrete manufactured products 22,199 22,285 21,848
Total property, plant and equipment 321,321 357,815 339,726
Total assets
Aggregates 336,408 354,751 338,080
Readymix concrete 80,863 75,386 70,779
Concrete manufactured products 24,056 24,468 24,203
Total assets 441,327 454,605 433,062
NOTES
Property, Plant and Equipment
The following classes of property, plant and equipment are carried according
to the revaluation model;
• Land and buildings
• Specific plant and machinery
The revaluation was conducted by an independent appraiser, Fredrick Senekal (a
Sworn Appraiser to the Master of the Supreme Court, duly appointed by the
Minister of justice in terms of section 6(1) of the Administration of
Estates Act, 1965 (Act 66 of 1965), effective 29th February 2012. The fair
values were determined by the appraiser based on the current market values for
similarly traded items of property, plant and equipment.
Had the assets continued to been carried according to the cost model the
carrying values would be as follows:
Cost Revaluation Surplus
R `000 R `000 R `000 Model Model
Group 2013
Land 113,793 152,230 38,437
Plant and Machinery 118,400 126,774 8,374
232,193 279,004 46,811
BASIS OF PREPARATION
These interim 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
International Accounting Standards (IAS 34 : Interim Financial Reporting), the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards and in compliance with the Listings Requirements of the
JSE Limited.
Except for the new standards adopted as set out below, all accounting policies
applied by the Group in the preparation of these condensed consolidated
interim financial statements are consistent with those applied by the Group in
its consolidated financial statements as at and for the year ended 28 February
2013. The Group has adopted the following new standards:
• Amendment to IFRS 7 – Disclosures – Offsetting Financial Assets and
Financial Liabilities
• IFRS 10 – Consolidated Financial Statements
• IFRS 11 – Joint Arrangements
• IFRS 12 – Disclosure of Interests in Other Entities
• IFRS 13 – Fair Value Measurement
• Amendments to IAS 1 – Presentation of Items of Other Comprehensive Income
• Revised IAS 27 and 28 – Investments in Associates and Joint Ventures
There was no material impact on the interim financial statements identified
based on management’s assessment of these standards.
These condensed interim 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.
COMPARITIVE FIGURES
Certain items of salaries, indirect overheads and depreciation for the 2012
period have been reclassified from cost of sales to operating expenses to be
comparative with the Audited results ending 28 February 2013 and Unaudited
interim results as at 31 August 2013.
Previous Reclassified
Unaudited Unaudited Net
6 months 6 months Change
August 2012 August 2012
R'000 R'000 R'000
Continuing Operations Revenue 212,720 212,720 -
Cost of sales (181,161) (160,354) 20,807
Gross profit 31,559 52,366 20,807
Other income 561 561 -
Operating expenses (22,253) (43,060) (20,807)
Earnings before
interest and taxation ("EBIT") 9,867 9,867 -
Investment income 97 97 -
Finance costs (13,729) (13,729) -
Loss before taxation (3,765) (3,765) -
Taxation 138 138 -
Loss from continuing operations (3,627) (3,627) -
Loss from
discontinued operations - - -
Loss for the period (3,627) (3,627) -
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, the
manufacture of precast concrete products, premix as well as contract crushing
and screening services.
REVIEW OF RESULTS
For the six months ended 31 August 2013 (“2013 period”)the Group generated
revenue of R243.9 million (2012: R212.7 million) which represents a growth of
14.66% when compared to the six months ended 31 August 2012 (“2012 period”).
The growth in revenue was realised in the Group’s ready mixed concrete
division which yielded a 19.13% or R18.2 million increase in revenue period-
on-period. The Group’s aggregates division has remained a consistent
contributor to the Group’s turnover with a 11.32% or R12.6 million increase in
revenue period-on-period whilst the precast division has shown a 6.37% or R0.4
million increase in revenue.
The increased revenues in conjunction with the Group’s focus on efficiencies
have resulted in a 19.37% increase in the operating profit. This is a direct
result of streamlining overhead structures and the implementation of cost
monitoring processes. The Group’s gross profit margin has increased to 22.67%
compared to the 21.13% for the year ended 28 February 2013.
The Group’s EBITDA also increased by 7.29% to R29.9 million (2012 period:
R27.8 million) for the 2013 period. Consequently the Group reduced its total
comprehensive loss by 61.18% or R2.22 million to R1.4 million (2012: R3.6
million). This resulted in the basic and diluted headline loss per share
decreasing from 1.28 cents to 0.06 cents per share.
The 2013 period saw a R7 million net cash outflow compared to the net cash
outflow of R20 million in the 2012 period. The primary outflows have arisen
from operating activities caused by the Group’s sales growth of 15.95% period
on period and consequently its trade and other receivables increased by 19% or
R25.5 million from its financial year end.
PROSPECTS
The Group continues to focus on key strategic areas and monitor individual
business operating units at a management level. With relatively low gross
margin levels at certain business units constant monitoring and early
management intervention mitigates the risk of losses.
The ready-mixed concrete division showed continuous growth during the
financial year and performance is expected to improve further. Market
conditions are expected to remain competitive 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. A supplier agreement with a cement
provider was concluded in the current financial year which resulted in lower
cement costs and higher gross profit margins.
The outlook for the aggregate business remains positive as the South African
Government’s planned infrastructure development starts to materialize. The
increased demand for road building material and railway ballast that was seen
towards the end of the 2013 financial year is expected to continue. The order
book for aggregates indicates that revenue targets set at the beginning of the
financial year will be met.
The Concrete Manufactured Products division showed a growth of 6.37% period-
on-period. The issuing of very few tenders by the Limpopo Roads Agency still
negatively affects the market for concrete pipes and culverts in the Limpopo
area. Greater plant efficiencies however resulted in improved profitability on
slightly lower revenue. The plant capacity was expanded further with an
investment of R 700 000 in new product lines. The additional products lines
have expanded the product offering and made the business more competitive in
the concrete pipe market.
The Group continues to emphasize the importance of customer relations and an
exceptionally strong focus has been placed on the constructive engagement with
our customers in order to provide the highest levels of service.
GOING CONCERN
Solvency and Liquidity
The Group incurred a total comprehensive loss of R1.4 million for the 2013
period and continues to remain in a loss making position. This coupled with
the negative liquidity position highlights a possible going concern issue.
Under the Bank Overdraft included in Current Liabilities is an Overdraft with
Nedbank of R12.87 million as well as an Invoice Discounting facility of R24.82
million. The Bank Overdraft was converted into a two year Term Loan in
September 2013 and negotiations are underway to sell further properties in the
portfolio to reduce the Term Loan. All debt outstanding in terms of the
Creditors’ scheme of arrangement was settled in March 2013. In response to
this position the Group has been working closely in conjunction with its
financiers in order to meet all its working capital requirements.
The Group continues to maintain a solvent position with a net asset value of
R34.1 million or 12.49 cents per share.
Cash Flow
In line with strict cash flow management policies the Group has managed to
meet its working capital obligations.
Continued Focus
Management continues to review all aspects of the business in order to ensure
that resources are being utilized effectively. This ensures that all cost
areas are closely monitored in order to reduce expenditure and release cash
reserves for the Group’s working capital.
In light of the above, the going concern basis has been adopted in preparing
these interim financial statements. The directors have no reason to believe
that the Group or any company within the Group will not be a going concern in
the foreseeable future.
DIVIDENDS
In line with past practice, no dividend has been declared for the period.
The preparation of the condensed interim consolidated financial results was
supervised by JJ Bierman (CA) SA.
By order of the board
13 November 2013
S J Wearne
Chief Executive Officer
J J Bierman
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: M M Patel (Chairman); M C Khwinana; 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: 13/11/2013 01:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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