Wrap Text
Audited condensed financial results for the year ended 28 February 2014
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
Increase in Revenue of 16%
Total Comprehensive Profit of R 13,4 million compared to loss
of R17.3 million in 2013
Increase of EBITDA to R53.5 million from R41.2 million
Cash generated from operations of R21,8 million
Increase in net cash of R11.9 million
Headline loss per share improved to 6.07 cents from 6.15
cents in 2013
Audited condensed financial results for the year ended 28
February 2014
Condensed Consolidated Statement of Financial Position
Audited Audited
12 months 12 months
February 2014 February 2013
R'000 R'000
Assets
Non-Current Assets 344,832 355,161
Property, plant and equipment 332,307 339,726
Other financial assets 5,213 4,875
Deferred Taxation Asset 7,312 10,560
Current assets 87,828 73,401
Inventories 26,874 19,848
Other financial assets - 987
Trade and other receivables 60,025 45,519
Cash and cash equivalents 929 7,047
Non-current asset held for sale 8,185 4,500
Total assets 440,845 433,062
Equity and Liabilities
Equity 48,908 35,489
Issued capital 178,357 178,357
Reserves 892 759
Revaluation reserves 45,098 39,296
Accumulated losses (175,439) (182,923)
Non-current liabilities 224,560 244,007
Borrowings 203,658 218,272
Deferred taxation liability 9,152 13,860
Environmental provision 11,750 11,875
Current liabilities 167,377 153,566
Borrowings 62,465 52,467
Current taxation payable 899 647
Trade and other payables 87,112 65,567
Bank overdraft 16,901 34,885
Total liabilities 391,937 397,573
Total equity and liabilities 440,845 433,062
After eliminating treasury shares 273,038 273,038
Net asset value per share (cents) 17.91 13.00
Net tangible asset value per share 17.91 13.00
(cents)
Condensed Consolidated Statement of Comprehensive Income
Audited Audited
12 months 12 months
February 2014 February 2013
R'000 R'000
Continuing Operations
Revenue 463,277 400,001
Cost of sales (371,422) (315,478)
Gross profit 91,855 84,523
Other income 7,147 2,065
Operating expenses (84,876) (79,428)
Operating profit 14,126 7,160
Investment income 322 475
Finance costs (31,980) (27,318)
Fair value adjustment 2 -
Revaluation of Land and Buildings:
Reversal of impairment loss 26,391 -
Profit/(Loss) before taxation 8,861 (19,683)
Taxation 1,208 4,365
Profit/(Loss) from continuing 10,069 (15,318)
operations
Loss from discontinued operations - (2,393)
Profit/(Loss) for the year 10,069 (17,711)
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss:
Fair value adjustments: Available- 133 337
for-sale
Items that will not be
reclassified subsequently to
profit or loss:
Gain on revaluation of property 3,218 -
Total comprehensive profit/(loss) 13,420 (17,374)
for the year
Total comprehensive profit/(loss)
attributable to:
Owners of the parent 13,420 (17,374)
Profit/(loss) for the year 13,420 (17,374)
Weighted average number of shares 273,038 273,038
in issue ('000)
Fully diluted weighted average 273,038 273,038
number of shares ('000)
Continuing operations Basic and 3.69 (5.61)
diluted earnings/(loss) per share
(cents)
Continuing and discontinued 3.69 (6.49)
operations basic and diluted
earnings/(loss) per share (cents)
Reconciliation of headline
earnings/(loss):
Profit/(Loss) for the year 10,069 (17,711)
Reversal of impairment (26,391) -
(Profit)/Loss on sale of property, (241) 258
plant and equipment
(Profit)/Loss on sale of interest - 667
in joint venture
Headline loss attributable to (16,563) (16,786)
ordinary shareholders
Basic and diluted (6.07) (6.15)
headline loss per share (cents)
Condensed Consolidated Statement of Changes in Equity
Audited Audited
12 months 12 months
February 2014 February 2013
R'000 R'000
Balance at beginning of the year 35,489 52,786
Profit/(Loss) for the year 10,068 (17,711)
Other comprehensive income 3,351 414
Balance at end of the year 48,908 35,489
Condensed Consolidated Statement of Cash Flows
Audited Audited
12 months 12 months
February 2014 February 2013
R'000 R'000
Cash flows from operating 21,766 6,661
activities
Cash flows from investing (5,908) (11,713)
activities
Cash flows from financing (3,992) 2,154
activities
Net increase /(decrease) in cash 11,866 (2,898)
and cash equivalents
Net cash flows from discontinued - (803)
operations
Cash movement for the year 11,866 (3,701)
Cash and cash equivalents at (27,838) (24,137)
beginning of the year
Cash and cash equivalents at end (15,972) (27,838)
of the year
Share capital Audited Audited
12 months 12 months
February 2014 February 2013
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 273 273
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 Audited Audited
12 months 12 months
February 2014 February 2013
R'000 R'000
External sales
Aggregates 217,091 197,592
Ready mixed concrete 230,868 191,747
Concrete manufactured products 15,318 10,662
Total external sales 463,277 400,001
Inter-segment sales
Aggregates 65,953 58,832
Ready mixed concrete 78 317
Concrete manufactured products - -
Total inter-segment sales 66,031 59,149
Total revenue
Aggregates 283,045 256,424
Ready mixed concrete 230,947 192,064
Concrete manufactured products 15,318 10,662
Total revenue 529,310 459,150
Operating profit
Aggregates 11,364 6,207
Ready mixed concrete 1,067 364
Concrete manufactured products 1,695 589
Total Profit before taxation 14,126 7,160
Property, plant and equipment
Aggregates 277,789 76,996
Ready mixed concrete 32,780 40,882
Concrete manufactured products 21,738 21,848
Total property, plant and 332,307 39,726
equipment
Total assets
Aggregates 343,402 38,080
Ready mixed concrete 72,388 70,779
Concrete manufactured products 25,055 24,203
Total assets 440,845 33,062
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 as well as contract
crushing and screening services.
CHANGES OF DIRECTORATE
The following changes in the directorate occurred
during the year under review:
1. JJ Bierman resigned as the Chief Financial Officer on
31 December 2013.
2. MJ Ross was appointed as the Chief Financial Officer on
07 March 2014.
3. M Salanje resigned as a non-executive director and
Chairman of the Audit Committee with effect from 10
March 2014 due to ill health.
4. WP van der Merwe was appointed as acting Audit
Committee Chairman effective 10 March 2014.
5. MM Patel was appointed as an interim audit committee
member from 10 March 2014.
REVIEW OF RESULTS
Group revenue increased by 16% (or R63.2 million) to R463
million (2013: R400 million) for the year ended 28 February
2014. The largest contributor to the increase in turnover was
the ready mixed concrete division where turnover increased by
20% (or R39.1 million) to R231 million (2013: R192 million).
The Group's aggregates division has remained a consistent
contributor to the Group's turnover with a 10% or R19.5
million increase in revenue period-on-period (excluding inter-
company sales). The precast division has shown a 44% or R4.7
million increase in revenue.
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 by 30% to R53.5 million (2013:
R41.2 million). During the year the Group disposed of
unproductive assets resulting in proceeds of R9.6 million. In
addition, the Group also improved some of its critical plant
by spending R16.1 million on these assets.
The Group reflects a total comprehensive profit of R13.4
million (2013: loss of R17.4 million) which included the gain
on property revaluations of R29.5 million (net of deferred
tax).
During the 2011 annual financial year the Muldersdrift quarry
was impaired by R 32.8 million through profit and loss.
During the 2014 annual financial year, the quarry was
revalued. As the previous revaluation resulted in an
impairment that was recognised in profit and loss, the
revaluation in the current year of R 26.4 million was
credited to profit and loss to reverse the previous
impairment.
Total liabilities decreased by R5.4 million to R391.9 million
(2013: R397.6 million) and the Group settled R31 million in
short-term borrowings.
The current year performance resulted in a headline loss per
share of 6.07 cents (2013:6.15 cents) and a diluted earnings
per share from continuing operations of 3.69 cents (2013: loss
of 6.49 cents). The net asset value per share increased to
17.91 cents (2013: 13.00 cents).
CHANGE IN ACCOUNTING POLICY
During the current year the directors' have not changed any
accounting policies.
PROSPECTS
The Group's strategy of focusing on key operational areas and
the monitoring of individual business units continues to drive
the business's turnaround initiatives. This constant
monitoring has seen improvements in almost all of the
individual operating units despite high competition, adverse
weather conditions and less than anticipated government spend
on infrastructure.
The ready mixed concrete division has continued to improve and
has performed admirably, given market conditions, showing
pleasing growth as the turnover increased by 20%. The industry
continues to remain competitive and margins have to be
carefully monitored. An intensive sales drive is to be
implemented to gain market share, increase volumes sold and
improve on gross profit margins. New entrants in the cement
industry could also change the operating environment in this
business.
The aggregates business improved external turnover by 10% year
on year. Margins continued to remain under pressure due to
higher energy costs. The aggregates division's outlook remains
positive as road and railway projects have materialised and
government infrastructure spend together with the improved
business climate should ensure the divisions growth.
The Concrete Manufactured Products division benefited from
the additional capital expansion resulting in new product
lines. The increased competitiveness in the market resulted
in a turnover increase of an admirable 44%. A greater demand
for concrete pipes and culverts is occurring as increased
road building projects materialise.
Together with strategic initiatives, focus on cost reduction,
increased sales, investing in employees and improved industry
conditions, the Group is confident that it can continue to
offer the highest levels of customer satisfaction and grow
within the market.
GOING CONCERN
The Group incurred a headline loss for the 2014 financial
period of R 16.6 million. This highlights a material
uncertainty regarding the going concern issue which is
emphasised further by the Group's negative liquidity position
and high gearing.
Solvency and Liquidity
The Group is currently technically solvent with net asset
value of R48.9 million. Current liabilities of R167.4 million
exceed current assets of R87.8 million by R79.6 million. The
Group's financiers have agreed to extend the repayment terms
of long term borrowings and the Bank Overdraft was converted
into a two year Term Loan in September 2013. 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.
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 audited 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.
BASIS OF PREPARATION
The audited condensed consolidated financial results for the
year ended 28 February 2014 have been prepared in accordance
with the framework concepts, in accordance with and
containing the information required by IAS 34: Interim
Financial Reporting, the recognition and measurement
requirements of International Financial Reporting Standards,
the SAICA financial reporting guides as issued by the
Accounting Practices Committee and the South African
Companies Act, No 71 of 2008, as amended, and comply with the
JSE Listings Requirements. The accounting policies and method
of computation applied in preparation of the financial
statements are consistent with those applied in the audited
annual financial statements for the year ended 28 February
2013, except for necessary changes to accounting policies,
related to the adoption of IFRS 10, which includes a revised
definition of control as well as IFRS 13, which includes a
revised definition of fair value. There has been no material
effect on the results of the Group as a result of the
adoption of new standards and amendments apart from some
additional disclosure.
These condensed consolidated results have been extracted from
the audited annual financial statements.
Fair value of the Group's main property assets is estimated
based on appraisals performed by independent, professionally-
qualified property valuers. The significant inputs and
assumptions are developed in close consultation with
management. The valuation processes and fair value changes
are reviewed by the board of directors and audit committee at
each reporting date.
The revaluation on the Muldersdrift Quarry (Level 3 in terms
of IFRS 13) was conducted by an independent appraiser in
March 2013. The appraisal was carried out using a market
approach that reflects observed prices for recent market
transactions for similar properties and incorporates
adjustments for factors specific to the land in question,
including plot size, location, encumbrances, current use and
discounted cash flows.
The condensed consolidated financial results have been
prepared under the supervision of the Chief Financial
Officer, MJ Ross CA(SA).
AUDIT OPINION
Grant Thornton, the Group's independent auditors, have
audited the consolidated financial statements for the year
ended 28 February 2014 and have issued an unqualified audit
opinion with the following emphasis of matter paragraph which
in summary states the following: Without qualifying our
opinion, we draw attention to the fact that the Group's
current liabilities exceeds its current assets by R80
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 auditor's report
does not necessarily cover all of the information contained
in this announcement. Shareholders are therefore advised that
in order to obtain a full understanding of the nature of the
auditor's work they should obtain a copy of that report
together with the accompanying financial information from the
registered office of the company.
DIVIDENDS
In line with the past practice, no dividend has been declared
for the period. By order of the board.
2 June 2014
S J Wearne
Chief Executive Officer
M J Ross
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: MM Patel (Chairman); MC Khwinana; WP
van der Merwe
Executive directors: SJ Wearne; MJ Ross
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: 02/06/2014 10:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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