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CHEMICAL SPECIALITIES LIMITED - Condensed consolidated audited results 2014

Release Date: 30/06/2014 16:37
Code(s): CSP     PDF:  
Wrap Text
Condensed consolidated audited results 2014

CHEMICAL SPECIALITIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/039947/06)
("ChemSpec" or "the company")
Share code: CSP
ISIN: ZAE000109427

condensed consolidated audited results 2014 

Performance highlights

revenue up 25%                R579
(2013: R463 million)          million

R41                           loss for the period
million                       (2013: R31 million)

basic loss per share up 33%
(2013: 2,89 cents)            3,83 cents

36%                           debt/equity (2013: 60%)

current ratio
(2013: 1,55)                  1,55

                              broad-based black economic
level 3                       empowerment (2013: level 6)

employee turnover
(2013: 11,7%)                 11%

                              carbon footprint (2013: 0,30)
0,30                          tons CO2 equivalent
                              per ton production

Letter from the chairman

Dear Shareholder

Current year
We again incurred a loss for the year. This is despite having, in my view, the best business leaders in the coatings
industry working for ChemSpec. We are now in a third austerity plan to reduce our overhead costs even further, where
we are planning to take around R5 million per month off our overhead structure and provided we can make sales in line with our
predictions, the business will be able to turn.

Cash
ChemSpec is working on a fairly low debt equity ratio of around 40%. This has made us concentrate on a capital
expenditure moratorium and a reduction in working capital. While we remain in turnaround, maintaining sufficient cash
will always be a significant focus area of the group.

Black industrial consortium
We are currently in negotiations with a black industrialist consortium which, if successful, would result in additional
capital being introduced.

We are currently at level 3 on the B-BBEE scorecard. As a truly South African company we are working hard to improve
that score and are uniquely placed to take advantage of government and parastatal business particularly if the black
industrialist consortium comes on board.

Supply chain
We have made good progress with our supply of decorative paint to the retail market and this progress should continue
in the coming year.

The mix of our business has changed quite considerably with a larger decorative paint share within our business which,
together with our already strong position in the industrial/woodfinish and auto refinish markets, requires us to put even
more emphasis on supply chain distribution.

International operations
Our operations in the United States of America and Australia are now performing satisfactorily.

The coatings market
The international coatings market continues to show interest in South Africa and the rest of Africa.

The coatings industry is in a state of change where some interesting opportunities exist for certain players to consolidate
into a much more powerful combined entity. We would welcome constructive discussion with these players.

Increase sales
We know we have many supporters and friends out there who are doing everything in their power to swing business our
way. We are following up every sales lead that comes our way and working hard to provide our partners with the service
they deserve.

Best of breed
I have been working very closely with the executive team for the best part of the last three years and am convinced we
have the right people to take this business forward. We hope we are but months away from turnaround but this will only
be achieved if our sales performance matches the lower overhead structure.

To a team of wonderful individuals – hang in there, success will follow the brave.

Ivan Clark
Chairman

Chief Executive Officer's review and comments on the results

Overview and highlights
ChemSpec continues to build its status as a new generation coatings company focused on developing strategic
relationships with partners to develop market leading positions for them. Although this year has been tough in many
respects, it has also been encouraging for employees and shareholders alike. Whilst we have not made the financial
progress we had hoped for, we have built new systems, new structures and more importantly new relationships in the
market. These will all stand us in good stead for future growth and sustainability.

To reflect for a moment on what we have accomplished over the last year:

-  We acquired a new business (Jack's Paint and Hardware supply contract) and integrated this into our business
   (completed in February 2014).
-  We have grown sales another 25% year on year.
-  We implemented a significant austerity programme to reduce our total global operating expenses by more than 15%.
-  In the midst of this, we implemented globally, a new ERP system in SYSPRO together with the QLIKVIEW business
   reporting tool and upgraded our wide area network connectivity with Telkom and Internet Solutions.
-  We implemented a very structured sales and operations planning process (S&OP) in South Africa to help institute
   sales forecasting and structured MRP (materials requirement planning) processes into the business to better serve
   our customers and improve the overall balance of our stock.
-  We developed and launched some fantastic new products in Urban woodcare products for Buildit, HealthCoat,
   Paint Fresh, Deco 116 Colour system, new Professional products, new packaging for Deco and Professional, new
   industrial products, including a new multi-chemistry industrial tinting system and a handheld spectrophotometer
   for the automotive market in Australia. 
-  We completed a successful rights issue and recapitalised the business to improve the balance sheet and set us up
   to continue growing into profitability.
-  We registered a level 3 B-BBEE scorecard.

Results
Revenue growth continues at double digit growth rates which it has consistently achieved for the last two years. The
growth and positioning strategies, particularly in the decorative and industrial markets, are slowly bearing fruit in an
extremely competitive space. Revenue in the automotive business, specifically in the USA and Australia, has grown at a
slower pace than anticipated but both territories have been restructured to generate profit. Whilst this is encouraging,
the return to profitability is being hampered by the high fixed cost base that the business has historically carried.

In order to speed up the return to profitability, management has embarked on an extensive structural review which
includes a de-complication and rationalisation strategy to substantially reduce fixed costs while at the same time
improving revenue and service delivery to customers. This has continued into the new fiscal year.

The current results show a loss of 3,83 cents per share which includes discontinued operations losses and restructuring
costs that amount to 2,94 cents per share. These restructuring costs have already been eliminated and management
continues to work at further savings in the current year to ensure that the business is returned to profitability.

Trading
Revenue increased by 25% to R579 million, but margins reduced by 1% point as a result of increased cost push inflation
through rand weakness, oil price and general commodity price increases from suppliers. Overhead costs (excluding
restructuring costs and discontinued operations) were up by 10%, leaving an operating loss of R727 thousand versus
R23 427 thousand in the prior year, which is an improvement of nearly 97%.

The South African and African operations which comprise over 70% of the business performed well and grew by close
to 35%, primarily as a result of the Jack's Paint and Hardware supply contract as well as some market share growth in
Mica. 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.

The USA business grew steadily in turnover but performance was masked by underperforming start-up customers
which we had to acquire. On top of this, overhead costs were slightly higher due to strategic increases in resource – this
was dealt with through the austerity programme instituted late in the year.

Australia again showed flat sales on last year as a result of some quality-related issues in 2011/2012 (caused by raw
material variations). These have been resolved. In addition, significant austerity measures were put in place and we look
forward to better growth opportunities and an improved performance from Australia.

Financial position
At year end our borrowed debt to equity ratio was 36% and our current ratio was 1.55:1.

Available unutilised finance facilities at year end totaled R80 million.

Working capital increased by R21,7 million as a result of increased business and cost inflation.

Austerity plan
The executive mapped out a plan to reduce overheads by over R5 million per month and managed to execute 90% by the
end of the financial year. This included a reduction of 102 people out of 764 people globally. A further austerity plan has
been mapped out to reduce overheads even further to breakeven to the current level of sales in which we envisage to
reduce staff by another 50 to 60 positions globally.

Prospects
ChemSpec has been working with various customers on a host of opportunities over the last year. The Jack's Paint and
Hardware supply contract acquisition has added value to the decorative business and we will continue to improve our
position in these stores. A strategic relationship has been entered into with the LRB group (MICA, DIY Depot, House of
Paint) and ChemSpec will roll out its products into a number of its associate brands stores over the next year. There are
numerous other opportunities in the decorative space which are being developed. The industrial business is working
with some significant customers which, if successful, will have a large impact on the business. The African territories
are stable, with a new facility in Zambia recently opened. The US business is self-sustaining with good growth prospects
in the medium term. The Australian business has been restructured and is looking for further growth opportunities.

The key focus areas for the next year are:

1. possible alliance/amalgamation with similar businesses which will improve sales and product range as well as
   possible cost synergies
2. a more defined international growth plan
3. further alliance growth with selected retail groups
4. the development of some significant new customer relationships and
5. building stronger brand awareness.

As I said last year, the business requires a strategic and methodical plan which 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.

Appreciation
We have certainly made progress, albeit slowly, but the business is rebuilding credibility with customers and suppliers
alike. We thank all our customers and suppliers for their belief in us, their continued support and for the opportunity to
rebuild this business. We thank our shareholders for their patience and continued support of our plans. Last but certainly
not least, we thank our valued employees for working tirelessly to improve this business for all our stakeholders.

Annual general meeting
The annual general meeting of the company will be held at 2029 Old Mill Road, Canelands, Verulam, KwaZulu-Natal, on
Friday, 26 September 2014 at 10:00.

Website
A full set of reporting publications, 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

30 June 2014

Condensed consolidated statements of financial position
as at 31 March 2014
                                                     GROUP

                                                    Restated     Restated
Figures in R'000                Note       2014         2013         2012
Assets
Non-current assets
Property, plant and equipment           242 095      237 454      196 684
Intangible assets                        87 486       46 065       29 312
Goodwill                                 23 869       22 937       22 926
Deferred tax                             94 760       75 081       60 851
                                        448 210      381 537      309 773
Current assets
Inventories                             176 175      147 924      127 473
Trade and other receivables             116 196      102 198       77 426
Cash and cash equivalents                15 534        9 772       14 264
                                        307 905      259 894      219 163
Assets held for sale               8      3 235       10 915        3 614
Total assets                            759 350      652 346      532 550
Equity and liabilities
Equity
Stated capital                          468 055      468 055      466 656
Preference shares                  2    120 851            –            –
Translation reserve                      13 777        9 615      (1 353)
Share option reserve                      5 587        3 187        1 187
Accumulated loss                      (179 712)    (138 664)    (107 721)
                                        428 558      342 193      358 769
Non-current liabilities
Preference share liability         2     21 114            –            –
Other financial liabilities             107 283      137 891       69 978
Deferred tax                              2 711        2 828        3 168
                                        131 108      140 719       73 146
Current liabilities
Preference share liability         2     11 752            –            –
Other financial liabilities              34 906       26 454       27 936
Trade and other payables                111 470       90 997       71 428
Bank overdraft                           40 629       50 331          728
                                        198 757      167 782      100 092
Liabilities held for sale          8        927        1 652          543
Total liabilities                       330 792      310 153      173 781
Total equity and liabilities            759 350      652 346      532 550

Condensed consolidated statements of financial performance
for the year ended 31 March 2014
                                                                GROUP

                                                                 Restated    Restated
Figures in R'000                            Note        2014         2013        2012

Continuing operations
Revenue                                        3     579 378      463 068     380 790
Cost of sales                                  4   (369 530)    (290 789)   (222 427)
Gross profit                                         209 848      172 279     158 363
Other income                                   5      35 310       28 294      27 328
Operating expenses                                 (245 885)    (224 000)   (175 871)
Operating (loss)/profit                        6       (727)     (23 427)       9 820
Restructuring costs                                 (31 735)            –           –
Finance income                                           286          270       4 034
Finance costs                                       (16 820)      (7 802)    (22 796)
Loss before taxation                                (48 996)     (30 959)     (8 942)
Taxation                                       7      16 617       10 394       3 171
Loss from continuing operations                     (32 379)     (20 565)     (5 771)
Discontinued operations                        8     (8 669)     (10 378)     (6 250)
Loss for the period                                 (41 048)     (30 943)    (12 021)
Basic loss per share                           9
Continuing operations             (cents)             (3,02)       (1,92)      (0,87)
Discontinued operations           (cents)             (0,81)       (0,97)      (0,94)
Total basic loss per share        (cents)             (3,83)       (2,89)      (1,81)
Diluted loss per share                         9
Continuing operations             (cents)             (3,02)       (1,92)      (0,86)
Discontinued operations           (cents)             (0,81)       (0,97)      (0,94)
Total diluted loss per share      (cents)             (3,83)       (2,89)      (1,80)

Condensed consolidated statements of comprehensive income
for the year ended 31 March 2014
                                                                      GROUP

                                                                     Restated     Restated
Figures in R'000                                             2014        2013         2012

Loss for the period                                      (41 048)    (30 943)     (12 021)
Other comprehensive income                                  4 162      10 968        4 827
Exchange differences on translating foreign operations      4 162      10 968        4 827
Total comprehensive loss for the period                  (36 886)    (19 975)      (7 194)

Condensed consolidated statement of cash flows
for the year ended 31 March 2014

                                                                       GROUP
                                                                                Restated
Figures in R'000                                                     2014           2013

Cash flows from operating activities
Cash used by operations                                          (61 165)       (31 223)
Interest received                                                     286            270
Interest paid                                                    (16 820)        (7 802)
Taxation paid                                                        (49)          (650)
Net cash utilised by operating activities                        (77 748)       (39 405)
Cash flows from investing activities
Purchase of plant and equipment                                  (16 909)       (61 253)
Proceeds on sale of plant and equipment                             3 300            815
Acquisition of intangible assets                                 (11 509)       (18 982)
Acquisition of business                                          (17 453)        (1 884)
Assets held for sale                                                4 222        (2 867)
Net cash utilised by investing activities                        (38 349)       (84 171)
Cash flows from financing activities
Proceeds on share issue                                           120 851          1 399
Proceeds/(repayment) of other financial liabilities              (22 156)         68 082
Proceeds on preference share liability                             32 866              –
Net cash from financing activities                                131 561         69 481
Net movement for the period                                        15 464       (54 095)
Balance at the beginning of the period                           (40 559)         13 536
(Overdraft)/cash and cash equivalents at the end of the period   (25 095)       (40 559)
Reconciled as follows:
Cash and cash equivalents                                          15 534          9 772
Bank overdraft                                                   (40 629)       (50 331)
(Overdraft)/cash and cash equivalents at the end of the period   (25 095)       (40 559)

Condensed consolidated statement of changes in equity
for the year ended 31 March 2014
                                                          Restated                    Share
                              Stated    Preference     Accumulated   Translation     option
Figures in R'000             capital        shares            loss       reserve    reserve       Total

GROUP
Balance at 31 March 2012     466 656             –       (107 721)       (1 353)      1 187     358 769
Transfer to stated capital         –             –               –             –          –           –
Issue of shares                1 404             –               –             –          –       1 404
Share issue expenses             (5)             –               –             –          –         (5)
Loss for the period                –             –        (30 943)             –          –    (30 943)
Share options                      –             –               –             –      2 000       2 000
Translation reserve                –             –               –        10 968          –      10 968
Balance at 31 March 2013     468 055             –       (138 664)         9 615      3 187     342 193
Transfer to stated capital         –             –               –             –          –           –
Issue of shares                    –       122 893               –             –          –     122 893
Share issue expenses               –       (2 042)               –             –          –     (2 042)
Loss for the period                –             –        (41 048)             –          –    (41 048)
Share options                      –             –               –             –      2 400       2 400
Translation reserve                –             –               –         4 162          –       4 162
Balance at 31 March 2014     468 055       120 851       (179 712)        13 777      5 587     428 558

Condensed consolidated segmental analysis
for the year ended 31 March 2014

                                GROUP

                              2014       Restated
Figures in R'000                             2013

Segment revenues
Automotive                 262 114        238 426
Buy-ins                     19 752         18 076
Decorative                 120 571         52 594
Industrial/Woodfinish      152 608        133 196
Solvents                    31 781         29 277
Total of all segments      586 826        471 569
Discontinued operations    (7 448)        (8 501)
Consolidated revenue       579 378        463 068
Segment result
Automotive                (21 885)       (15 653)
Buy-ins                    (1 649)        (1 187)
Decorative                (10 067)        (3 453)
Industrial/Woodfinish     (12 742)        (8 744)
Solvents                   (2 653)        (1 922)
Total of all segments     (48 996)       (30 959)
Income tax                 16 617          10 394
Discontinued operations    (8 669)       (10 378)
Loss for the year         (41 048)       (30 943)
Segment assets
Automotive                 337 729        324 308
Buy-ins                     25 450         24 587
Decorative                 155 354         71 539
Industrial/Woodfinish      196 633        181 174
Solvents                    40 949         39 823
Discontinued operations      3 235         10 915

Total of all segments      759 350        652 346

                           Revenue from
                        external customers           Segmental assets
Figures in R'000           2014              2013      2014            2013

Geographical segments
South Africa            372 254           279 790   609 587         521 639
International           207 124           183 278   149 763         130 707
                        579 378           463 068   759 350         652 346

Notes to the condensed consolidated audited results
for the year ended 31 March 2014

1.  Accounting policies and basis of preparation
    The condensed consolidated financial results for the year ended 31 March 2014 have been prepared under the 
    supervision of JG Maehler (CA) SA, in accordance with the framework concepts and the measurement and recognition 
    requirements of International Financial Reporting Standards (IFRS), 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). They do not include all the information required for a complete set of 
    IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are 
    significant to understanding the Groups financial position and performance

    The condensed consolidated financial results have been prepared on the historical cost basis excluding financial
    instruments which are fairly valued.

    The relevant Standards and Interpretations which are not yet effective and which should be disclosed for March
    2014 year ends are identified in the table below, together with the dates on which these were issued by the IASB:

                                                                                                 Effective date
                                                                                                        Periods
                                                                                 Date issued          beginning
    Standard/Interpretation                                                      by IASB (1)        on or after

    IFRS 10, IFRS 12 and        Investment Entities                             October 2012     1 January 2014
    IAS 27 amendment
    
    IAS 32                      Offsetting Financial Assets and                December 2011     1 January 2014
                                Financial Liabilities
    
    IAS 36                      Recoverable amount disclosures for                  May 2013     1 January 2014
                                Non-financial Assets
    
    IAS 39                      Novation of Derivatives and Continuation of        June 2013     1 January 2014
                                Hedge Accounting
    
    IFRIC 21                    Levies                                              May 2013     1 January 2014
    
    IAS 19                      Defined Benefit Plans: Employee                November 2013        1 July 2014
                                Contributions
    
    Amendments to 6 standards   Improvements to IFRSs 2010-2012 Cycle          December 2013        1 July 2014

    Amendments to 4 standards   Improvements to IFRSs 2011-2013 Cycle          December 2013        1 July 2014

    IFRS 14                     Regulatory Deferral Accounts                    January 2014     1 January 2016

    IFRS 9 (2009)               Financial Instruments                          November 2009      To be decided

    IFRS 9 (2010)               Financial Instruments                           October 2010      To be decided

    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 2014, 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 financial results are consistent with those applied in the annual fi-
    nancial statements for the year ended 31 March 2013, except for the accounting policy for property, plant and
    equipment which has changed from the revaluation method to the cost method.

    The report of the independent auditor, on the condensed consolidated financial results which were derived from
    the audited annual 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 results identified in the
    auditor's report.

    1.1    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.
    1.2    Post balance sheet events      
           A gross dividend of 1,6 cents per compulsory convertible preference shares was declared and paid after year
           end. The directors are not aware of any other material matter or circumstance arising since the financial
           year end that is not disclosed in this report.
    1.3    Dividends
           No dividends were declared or paid during the year (2013: nil)

                                                                                   GROUP

    Figures in R'000                                                            2014       2013

2.  Preference shares
    Authorised
    536 930 824 (2013: nil) Compulory Convertible Preference Shares (CCPS)
    Issued
    389 006 238 (2013: nil) CCPS                                             155 602          –
    Less share issue expenses                                                (2 042)          –
    Less preference share liability                                         (32 709)          –
                                                                             120 851          –
    Preference share liability                                                32 709          –
    Finance costs capitalised                                                    157          –
                                                                              32 866          –
    Non-current liabilities
    At amortised cost                                                         21 114          –
    Current liabilities
    At amortised cost                                                         11 752          –

    Preference shareholders are entitled to a dividend over three years paid in six-monthly periods. A dividend of
    R6,224 million is payable every six months.

    Results of the rights issue
    The results of the rights issue of shares for cash on 22 November 2013 are set out below:

                                                                         Value at
                                                           Number of     40 cents
                                                        rights offer    per share
                                                              shares        R'000

    Total rights offer CCPs available for subscription   535 930 824      214 372

    Total of rights offer CCPs exercised                 378 420 238      151 368
    Excess rights offer CCPs applied for and allocated       586 000          234
    Rights offer CCPs taken up by the underwriter         10 000 000        4 000

                                                         389 006 238      155 602

                                          GROUP
                                                  Restated
    Figures in R'000                   2014           2013

3.  Revenue
    Gross sale of goods             614 235        483 071
    Less: Discount allowed         (14 946)        (6 875)
    Less: Rebates                  (12 463)        (4 627)
    Less: Discontinued operations   (7 448)        (8 501)

                                    579 378        463 068
4.  Cost of sales
    Gross cost of goods sold        377 429        299 641
    Less: Discount received         (1 218)        (1 973)
    Less: Rebates                     (703)          (387)
    Less: Discontinued operations   (5 978)        (6 492)

                                    369 530        290 789
5.  Other income
    Profit on disposal of assets          –            167
    Foreign exchange gain             2 239          1 438
    Insurance claim                       –         15 000
    Rental income                    10 008          7 520
    Other sundry income                  63          4 169
    Negative goodwill                23 000              –

                                     35 310         28 294

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

    Negative goodwill arose from the acquisition of the business of Turnkey Paint Solutions and the related Jacks Paint
    and Hardware supply contract.
                                                                                           GROUP
                                                                                                   Restated
    Figures in R'000                                                                    2014           2013

6.  Operating loss
    The analysis of expenses recognised in profit or loss using the classification
    based on the function within the entity comprises:

    Operating expenses                                                               245 885        224 000

    Administration                                                                   136 072        107 176
    Distribution                                                                      55 401         48 490
    Selling                                                                           99 434         84 618
    Less: Restructuring costs                                                       (31 735)              –
    Less: Discontinued operations                                                   (13 287)       (16 284)

    Profit for the year has been arrived at after charging:
    Operating lease charges:
    Premises                                                                          20 547         31 873
    Motor vehicles                                                                       116            302
    Office equipment                                                                   1 344            981

                                                                                      22 007         33 156
    Auditors' remuneration:
    Fees – Current year                                                                1 104          1 355

    Depreciation and amortisation:
    Depreciation of property, plant and equipment                                     21 812         21 881
    Amortisation of intangible assets                                                  4 557          4 477
                                                                                      26 369         26 358

    Loss on disposal of assets                                                         2 683              –
    Staff costs                                                                      154 997        148 096
    Pension (defined contribution plan) included in staff costs                        7 288          6 137

7.  Taxation
    Income tax
    Current taxation                                                                   (487)          (343)
    Deferred tax
    Taxable and deductible temporary differences:                                     20 252         14 634

    Capital allowances                                                               (6 520)        (8 725)
    Provisions                                                                         1 793            841
    Prepayments                                                                          227          (249)
    Assessed losses                                                                   24 752         22 767

    Less: Discontinued operation                                                     (3 148)        (3 897)

                                                                                      16 617         10 394

                                                                                          GROUP

                                                                                                 Restated
    Figures in R'000                                                                  2014           2013

8.  Discontinued operations
    During the 2012 financial year the board decided to discontinue certain of
    the groups retail stores. Of the stores identified to be discontinued, some
    of these will be closed and others will be sold. During the current financial
    year, the board identified additional retail stores to be discontinued. The
    results of the discontinued operations as well as the effects on the
    statement of financial position are detailed below:

    Results of the discontinued operations
    Revenue                                                                          7 448          8 501
    Cost of sales                                                                  (5 978)        (6 492)
    Operating expenses                                                            (13 287)       (16 284)
    Operating loss                                                                (11 817)       (14 275)
    Taxation                                                                         3 148          3 897

    Net loss from discontinued operations                                          (8 669)       (10 378)

    Basic loss per share                                                (cents)     (0,81)         (0,97)
    Basic headline loss per share                                       (cents)     (0,81)         (0,97)
    Diluted loss per share                                              (cents)     (0,81)         (0,97)
    Diluted headline loss per share                                     (cents)     (0,81)         (0,97)

    Cash flows from (used in) discontinued operations
    Net cash from (used in) operating activities                                  (11 817)       (14 275)
    Net cash from (used in) investing activities                                         –              –
    Net cash from (used in) financing activities                                         –              –

    Net cash outflows for the year                                                (11 817)       (14 275)

    Effect on the statement of financial position
    Plant and equipment                                                              1 519          4 977
    Inventory                                                                        1 716          5 272
    Trade receivables                                                                    –            666
    Instalment sale liabilities                                                      (927)        (1 652)

    Net assets and liabilities                                                       2 308          9 263

    Assets held for sale                                                             3 235         10 915

    Liabilities held for sale                                                        (927)        (1 652)

                                                                                               GROUP
                                                                                                         Restated
    Figures in R'000                                                                        2014             2013

9.  Basic and diluted loss and headline loss per share
    Basic loss per share
    Continuing operations                                                (cents)          (3,02)           (1,92)
    Discontinued operations                                              (cents)          (0,81)           (0,97)
    Total basic loss per share                                           (cents)          (3,83)           (2,89)
    Basic headline loss per share
    Continuing operations                                                (cents)          (4,58)           (1,93)
    Discontinued operations                                              (cents)          (0,81)           (0,97)
    Total basic headline loss per share                                  (cents)          (5,39)           (2,90)
    Diluted loss per share
    Continuing operations                                                (cents)          (3,02)           (1,92)
    Discontinued operations                                              (cents)          (0,81)           (0,97)
    Total diluted loss per share                                         (cents)          (3,83)           (2,89)
    Diluted headline loss per share
    Continuing operations                                                (cents)          (4,58)           (1,93)
    Discontinued operations                                              (cents)          (0,81)           (0,97)
    Total diluted headline loss per share                                (cents)          (5,39)           (2,90)
    Basic loss per share
    The loss used in the calculation of basic loss per share is as follows:
    Loss for the year (continuing operations)                                           (32 379)         (20 565)
    Loss for the year (discontinued operations)                                          (8 669)         (10 378)
    Total loss attributable to equity holders of the parent                             (41 048)         (30 943)
    Reconciliation of total loss to headline loss attributable to
    equity holders of the parent
    Total loss attributable to equity holders of the parent                             (32 379)         (20 565)
    Non-headline earnings
    Negative goodwll                                                                    (23 000)                –
    Loss/(profit) on disposal of assets                                                    2 683            (167)
    Total tax effect of adjustments                                                        3 538               47
    Headline loss (continuing operations)                                               (49 158)         (20 685)
    Headline loss (discontinued operations)                                              (8 669)         (10 378)
    Total headline loss                                                                 (57 827)         (31 063)
    Weighted average shares
    The weighted average number of ordinary shares used in the
    calculation of loss per share is as follows:
    Opening shares                                                                 1 073 861 648    1 071 261 648
    Specific issue: 1 October 2012 of 2 600 000 shares                                         –        1 300 000
    Weighted average number of ordinary shares (basic)                             1 073 861 648    1 072 561 648
    Preference shares *                                                                        –                –
    Share options *                                                                            –                –
    Weighted average number of ordinary shares (diluted)                           1 073 861 648    1 072 561 648
    Actual number of ordinary shares                                               1 073 861 648    1 073 861 648

    * Due to the loss incurred, potential shares are not included in the weighted average number of shares as they
      are anti-dilutive.
                                           GROUP
    Figures in R'000                  2014        2013

10. Acquisition of businesses
    Property, plant and equipment    7 640         650
    Intangible assets               33 000           –
    Inventory                       12 616         684
    Goodwill                         2 035       1 327
    Accounts receivable                439           –
    Accounts payable               (3 170)           –
    Liabilities                      (720)           –
    Negative goodwill             (23 000)           –

                                    28 840       2 661

    Cash paid                       17 453       1 884
    Franchise debtor                     –         777
    Loan                            11 387           –

                                    28 840       2 661
    Acquisitions 2014
    On 1 April 2013 ChemSpec acquired the manufacturing contract for Jack's Paint and Hardware exclusive decorative
    paint brands: Panache, Coverkote and Artisan. In addition to this supply agreement, ChemSpec have acquired
    the business of TPS (Turnkey Paint Solutions), a Gauteng-based manufacturing facility from Kansai Plascon for
    R26 million. Negative goodwill in the amount of R23 million was recognised as a result of the valuation of intangible
    assets.

    On 1 October 2013 ChemSpec USA Inc acquired the business operations of JCL Holdings LLC, a paint retailer and
    distributor in California, USA. The purchase price of $250 000 included a premium (goodwill) for the acquisition
    for the whole business.

    Acquisitions 2013
    The group acquired the business operations of its Umgeni franchise store. The acquisition was paid in part with
    cash and a release of the outstanding franchise debtor.

11. Change in accounting policy
    During the year, the company changed its accounting policy from the revaluation model to the cost model for plant
    and equipment. Plant and equipment is a depreciating asset and is not acquired with the intention of enjoying any
    capital appreciation. Any appreciation in value is therefore incidental to the main purpose of this asset class and,
    while there may be a difference between the carrying value using the revaluation model and the carrying value
    using the cost model from time to time, this difference is incidental to and not indicative of the performance of the
    group. Furthermore, the useful life and residual value of this asset class is reviewed by management on an annual
    basis in terms of IAS 16, Property Plant and Equipment. Over time the gap between the adjustments following
    sworn property revaluations and the carrying values assessed internally will narrow. Based on the reasons above
    the relevance to users of the financial statements of a revaluation of plant and equipment is reduced and therefore
    it has become necessary to change the accounting policy and rely on the annual assessments that are done
    internally.The comparative statement of financial position and statement of financial performance have been
    restated.

    The effects of the change are as follows:

                                                  Previously
    Figures in R'000                                  stated    Adjustment    Restated

    Plant and equipment
    Balance as at 31 March 2012                      230 828      (34 144)     196 684
    Balance as at 31 March 2013                      276 625      (34 194)     242 431
    Deferred taxation (Asset)
    Balance as at 31 March 2012                       51 291         9 560      60 851
    Balance as at 31 March 2013                       65 507         9 574      75 081
    Revaluation reserve
    Balance as at 31 March 2012                       31 858      (31 858)           –
    Balance as at 31 March 2013                       31 858      (31 858)           –
    Accumulated loss
    Balance as at 31 March 2012                    (114 996)         7 275    (107 721)
    Balance as at 31 March 2013                    (145 903)         7 239    (138 664)
    Loss for the period
    For the year ended 31 March 2012                (14 131)         2 110     (12 021)
    For the year ended 31 March 2013                (30 907)          (36)     (30 943)
    Basic loss per share
    For the year ended 31 March 2012   (cents)        (2,13)          0,32       (1,81)
    For the year ended 31 March 2013   (cents)        (2,89)        (0,00)       (2,89)
    Diluted loss per share
    For the year ended 31 March 2012   (cents)        (2,12)          0,32       (1,80)
    For the year ended 31 March 2013   (cents)        (2,87)        (0,00)       (2,87)

    Ordinary shareholder profile

    Register date: 28 March 2014
    Issued share capital: 1 073 861 648 ordinary shares (2013: 1 073 861 648)

                                                       2014                               2013
                                           Number                              Number
                                               of                                  of
                                           share-          Number              share-          Number
                                          holders       of shares         %   holders       of shares         %
Public/non-public shareholders
Directors less than 10%                         5      71 905 340      6,70         5      71 405 340      6,65
Employees less than 10%                         5      10 472 000      0,98         5      12 958 580      1,21
Shareholding greater than 10%                   3     689 163 191     64,18         3     683 103 183     63,61

Public shareholders                         1 510     232 508 930     21,65     1 629     236 487 358     22,02
Non-public shareholders                        15     841 352 718     78,35        21     837 374 290     77,98

                                            1 525   1 073 861 648    100,00     1 650   1 073 861 648    100,00
Shareholding spread
1 - 1 000 shares                               66          32 069      0,00        69          35 367      0,00
1 001 - 10 000 shares                         343       2 021 793      0,19       365       2 153 403      0,20
10,001 - 100 000 shares                       777      35 762 901      3,33       849      37 808 307      3,52
100 001 - 1 000 000 shares                    298      94 031 748      8,76       319      97 696 289      9,10
1 000 001 shares and above                     41     942 013 137     87,72        48     936 168 282     87,18

                                            1 525   1 073 861 648    100,00     1 650   1 073 861 648    100,00
Beneficial shareholders holding 5% or more
IBB Buchan                                             55 949 695      5,21                55 949 695      5,21
Shalamuka Capital (Pty) Ltd                            69 812 187      6,50                69 812 187      6,50
Industrial Development Corporation                    150 000 000     13,97               150 000 000     13,97
IAJ Clark                                             183 488 915     17,09               177 428 907     16,52
Corvest 6 (Pty) Ltd                                   355 674 276     33,12               355 674 276     33,12

                                                      814 925 073     75,89               808 865 065     75,32
Beneficial shareholding of directors
JG Jones                                                1 000 000      0,09                   500 000      0,05
BR Mackinnon                                            4 954 634      0,46                 4 954 634      0,46
JG Maehler                                              5 000 000      0,47                 5 000 000      0,47
NA Page                                                 5 001 011      0,47                 5 001 011      0,47
IBB Buchan                                             55 949 695      5,21                55 949 695      5,21
IAJ Clark                                             183 488 915     17,09               177 428 907     16,52

                                                      255 394 255     23,78               248 834 247     23,18
Preference shareholder profile

Register date: 28 March 2014
Issued preference shares: 389 006 238 ordinary shares (2013: nil)

                                                              2014

                                               Number of      Number of
                                            shareholders         shares         %

Public/non-public shareholders
Directors less than 10%                                2      5 000 506      1,29
Shareholding greater than 10%                          3    354 630 710     91,16

Public shareholders                                  244     29 375 022      7,55
Non-public shareholders                                5    359 631 216     92,45

                                                     249    389 006 238    100,00
Shareholding spread
1 – 1 000 shares                                      17         11 192      0,00
1 001 – 10 000 shares                                 86        517 234      0,13
10 001 – 100 000 shares                              112      4 265 693      1,10
100 001 – 1 000 000 shares                            25      6 694 572      1,72
1 000 001 shares and above                             9    377 517 547     97,05

                                                     249    389 006 238    100,00
Beneficial shareholders holding 5% or more
Industrial Development Corporation                           75 000 000     19,28
IAJ Clark                                                   101 793 572     26,17
Corvest 6 (Pty) Ltd                                         177 837 138     45,72

                                                            354 630 710     91,17
Beneficial shareholding of directors
JG Maehler                                                    2 500 000      0,64
NA Page                                                       2 500 506      0,64
IAJ Clark                                                   101 793 572     26,17

                                                            106 794 078     27,45
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)
                                              RD Simpson (Global automative director)
                                              WA Waller (Industrial sales 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
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