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CHEMICAL SPECIALITIES LIMITED - Interim Results for the six months ended 30 September

Release Date: 24/12/2014 12:00
Code(s): CSP     PDF:  
Wrap Text
Interim Results for the six months ended 30 September

Chemical Specialities Limited
Incorporated in the Republic of South Africa
Registration number 2005/039947/06
Share code: CSP
ISIN: ZAE000109427
('ChemSpec' or 'the Company')

Interim Results for the six months ended 30 September 2014

Performance highlights
Revenue up 6% R311 million (2013: R294 million)
Local revenue growth 3% (2013: 33%)
International revenue growth 11% (2013: 14%)
Operating profit/loss improves 130% (2013: 25%)
Loss for the period R15 million (2013: R29 million)
Basic loss per share improves 48% 1.42 cents (2013: 2.72 cents)
Headline loss per share improves 48% 1.43 cents (2013: 2.73 cents)
Debt/equity* 48% (2013: 72%)
Current ratio 1.26 (2013: 1.49)
Broad-based black economic empowerment Level 3 (2013: level 6)

*Net of cash and cash equivalents     and   bank   overdraft.   Equity
includes shareholders’ loans.


Website: The interim results for the six months ended 30 September
2014 can also be found on our website at www.chemspecpaint.com

Commentary
Introduction
ChemSpec’s condensed consolidated interim results for the six
months ended 30 September 2014 (“the period”) reflect the
continued efforts of the group to reach sustainable profits.
ChemSpec continues with its turnaround endeavors achieving further
revenue growth albeit lower than in previous reporting periods.

As explained previously, 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
included a reduction of people and infrastructure globally, the
objective being to reduce overheads to move the business into
profit at the current level of sales. The result of these
endeavors are starting to bear fruit.

The group will now complete its second austerity plan. The first
austerity plan resulted in a reduction of overheads of some R46m
which included the discontinuation of certain operations as well
as restructuring the cost base. In June 2014 a second austerity
plan was commenced which aims to reduce the cost base by a further
R5m per month by the end of the 2015 financial year. The results
of these endeavors as at the end of the period, are reflected as
discontinued operations and restructure costs in the statement of
financial performance.

A further Restructure Plan (see below) will be commenced in the
new calendar year and includes further steps to de-complicate and
rationalise its infrastructure and improve efficiencies to achieve
additional cost savings.

The group will continue to focus primarily on developing its
customer relationships resulting in revenue growth in order to
restore the business to profitability.

Financial performance
Revenue growth continues albeit less aggressively as a result of
the negative sales impact of the branch and depot rationalizations
and the challenge of managing growth while constantly removing
parts of the business infrastructure, especially in South Africa.
Revenue has increased by 6% (2013: 26%) when compared to the same
period in the previous year and is expected to continue to grow
going forward as we gain traction in the markets in which we
operate. Margin is in line with previous periods and, with our
sales push and market competitiveness, is carefully managed to
ensure that the group grows profitably.

Revenue in our international businesses grew by 11% (2013: 14%)
when compared to the same period in the previous year. This
indicates the continued resilience of our products in these
markets and the strong economic hedge that our international
business provides, considering local economic conditions. Our
local revenue grew by 3% (2013:33%), with the previous year’s
growth being as a result of the acquisition of the Jack’s Paint
and Hardware supply contract.

All segments of the business grew, with our decorative coatings
business continuing to outperform the rest as the business
continues to successfully expand in this market. Performance
coatings recorded growth of 3% when compared to the same period in
the previous year. The slower local performance coatings business
growth was hampered by the branch rationalizations but the overall
result was bolstered by the international business.

The growth in sales (up 6%), contribution margin (up 4%) and the
reduction of overheads (down 2%), as a result of the austerity
plans, has resulted in an improvement in the group’s operating
performance. The group reflected an operating profit of R2m for
the period compared with an operating loss of R7m in the previous
comparative period.

Finance costs have decreased by 9% as a result of the injection of
additional capital in the previous year.

The loss for the period of R15m, after discontinued operations of
R2m, resulted in a basic loss per share of 1.22 cents from
continuing operations and a total basic loss per share of 1.42
cents. This is a 48% improvement on the results for the previous
comparative period.

Financial position
Non-current assets
Net   capital   expenditure   including   capitalised development
expenditure has decreased by R5m and was limited to necessary
replacement capital expenditure in the six months to 30 September
2014. The group will continue to limit capital expenditure to a
minimum in the remaining six months of the year and has no
committed expansionary capital expenditure.

The group continues to invest in the development of new and
improved products and spent a net R2m during the period in this
regard.

Non-current liabilities
The group restructured its facilities with FirstRand Bank whereby
it converted its long term facilities of R25m at 31 March 2014 to
an overdraft facility during the period.

Working capital
Inventories and trade payables decreased by 1% and trade
receivables increased by 11% during the period. Net working
capital as a percentage of revenue has remained at 31% for the
period which has required an additional R12m in cash. Management
of working capital remains a key focus area of management as sales
growth continues.

Cash flow
Cash flow was negatively affected by losses and growth in working
capital. Financing activities included the restructuring of the
group’s FirstRand Bank long term facilities referred to above and
the payment of the compulsory convertible preference share
liability. The group currently has total maximum overdraft
facilities of R155m.

Directors
Mr William Waller and Mr Rob Simpson were appointed as directors
on 10 April 2014.

Mr Rob Simpson resigned as an executive director at the end of
November 2014 and Mr Neil Page resigned as a non-executive
director on 4 December 2014. The board extends its thanks to both
Mr Simpson and Mr Page for their invaluable contribution to the
company over the years.

There were no other changes to the board of directors in the
current period.

ChemSpec group restructure and cautionary announcement
Shareholders are referred to the group restructure and cautionary
announcement released on SENS on 19 November 2014 in which
ChemSpec announced that it has entered into negotiations which, if
successful would result in the restructuring of the group which
would have long term benefits for its shareholders (the
“Restructure Plan”) and that in anticipation of the approval of
the Restructure Plan by the relevant shareholders, the Company did
not declare and pay a dividend on the CCPs for the six months
ending 25 November 2014.

The Restructure Plan includes further measures by management to
reduce overhead costs (refer note above). The business will
require an injection of capital in the new calendar year and as a
result has entered into negotiations with its major shareholders
to raise additional capital.

Simultaneously   the  group   wishes   to   repurchase  its   main
manufacturing facility at Canelands in Durban and proposes to
convert the CCPs to ordinary shares as set out in the announcement
referred to above.

These negotiations are ongoing and will only be concluded in the
first quarter of the next calendar year.

Shareholders will be kept informed of further developments.

Prospects
The turnaround of ChemSpec remains challenging but we are making
steady progress. Rebuilding credibility in a fiercely competitive
market takes time and does not happen overnight or as quickly as
we would all like. We are, however, seeing steady and growing
support from the market for us to succeed.

Building sustainable long term relationships with our customers
and striving to meet and exceed their expectations, while we
manage our margin, contain our costs and capital expenses and work
at reducing our working capital levels, is our everyday mission.

It has been a long and tough journey to this point but we are
confident that with the support of our stakeholders, we will
succeed.
Appreciation
We thank our management team and employees for their efforts and
loyalty as we continue to make ChemSpec a great business. Our
appreciation also extends to our customers, suppliers, advisors
and stakeholders for their continued support. We appreciate the
loyal and patient support of our shareholders.

For and on behalf of the board.

IAJ Clark                         BC Schreuder
Non-executive chairman            Chief executive officer

24 December 2014

Condensed consolidated statements of financial performance

                                     Unaudited   Unaudited     Audited
                                           six         six
                                        months      months       year
                                         ended       ended      ended
                                            30          30
                                     September   September    31 March
Figures                                   2014        2013        2014
in R’000          Notes   % Change                Restated
Continuing
operations
Revenue                         6%     310,562     293,557     578,682
Cost of sales                        (198,827)   (186,242)   (369,206)
Gross profit                    4%     111,735     107,315     209,476
Other income          3                  6,910       4,711      35,310
Operating
expenses                        2%   (116,487)   (119,137)   (244,853)
Operating
profit/(loss)                 130%       2,158     (7,111)       (67)
Restructure
costs                                 (12,750)    (17,466)    (31,735)
Finance
income                                     191         120         286
Finance costs                   9%     (9,845)    (10,862)    (16,820)
Loss before
taxation                       43%    (20,246)    (35,319)    (48,336)
Taxation                                 7,113      10,235      16,433
Loss from
continuing
operations                     48%    (13,133)    (25,084)    (31,903)
Discontinued
operations            5                (2,105)     (4,116)     (9,145)
Loss for the
period                         48%    (15,238)    (29,200)    (41,048)
Loss
attributable
to:
Owners of the
company                        50%    (14,703)    (29,200)    (41,048)
Non-
controlling
interest                                 (535)           -           -
                                      (15,238)    (29,200)    (41,048)
Basic and
diluted loss
per share
Continuing
operations
(cents)               4                 (1.22)       (2.34)      (2.97)
Discontinued
operations
(cents)               4                 (0.20)       (0.38)      (0.85)
Total basic
and diluted
loss per
share (cents)                           (1.42)       (2.72)      (3.82)

Condensed consolidated statements of comprehensive income

                                Unaudited      Unaudited       Audited
                               six months     six months          year
                                    ended          ended         ended
                             30 September   30 September      31 March
                                     2014           2013          2014
Figures in R’000                                Restated
Loss for the period              (15,238)       (29,200)      (41,048)
Other comprehensive income          (919)          2,216         4,162
Exchange differences on
translating foreign
operations                          (919)           2,216        4,162
Total comprehensive loss
for the period                   (16,157)        (26,984)     (36,886)
Total comprehensive loss
attributable to:
Owners of the company            (15,622)        (26,984)     (36,886)
Non-controlling interest            (535)               -            -
                                 (16,157)        (26,984)     (36,886)
Condensed consolidated statements of financial position

                                     Unaudited   Unaudited    Audited
                                           six         six       year
                                        months      months
                                         ended       ended      ended
                                            30          30         31
                                     September   September      March
                                          2014        2013       2014
Figures in R’000             Notes                Restated
Assets
Non-current assets
Property, plant and                    234,746     241,256    241,818
equipment
Intangible assets                       89,778      60,361     87,486
Goodwill                                23,912      23,577     23,869
Deferred tax                           104,866      86,682     94,760
                                       453,302     411,876    447,933
Current assets
Inventories                            173,404     184,287    175,668
Trade and other                        128,963     116,960    116,196
receivables
Cash and cash equivalents                7,976       9,492     15,534
                                       310,343     310,739    307,398
Assets held for sale             5       3,120       4,644      4,019
Total assets                           766,765     727,259    759,350
Equity and liabilities
Equity
Stated capital                         468,055     468,055     468,055
Preference shares                      120,851           -     120,851
Other reserves                          12,857      16,218      19,364
Accumulated loss                     (194,415)   (167,866)   (179,712)
Non-controlling interest                 (535)           -           -
                                       406,813     316,407     428,558
Shareholders loans                           -      38,479           -
Non-current liabilities
Preference share liability              15,719           -     21,114
Other financial                  6      92,836     160,049    107,283
liabilities
Deferred tax                             4,711       3,078      2,711
                                       113,266     163,127    131,108
Current liabilities
Preference share liability              11,309           -     11,752
Other financial                  6      15,851      34,129     34,739
liabilities
Trade and other payables               109,858     102,251    111,470
Bank overdraft                 6       108,916      71,594     40,629
                                       245,934     207,974    198,590
Liabilities held for sale      5           752       1,272      1,094
Total liabilities                      359,952     410,852    330,792
Total equity and                       766,765     727,259    759,350
liabilities

Condensed consolidated statements of changes in equity



                                    Stated   Preference    Accumulated
Figures in R’000                   capital       Shares           loss
Balance at 31 March 2013           468,055            -      (138,666)
Loss for the period                      -            -       (29,200)
Movement for the period                  -            -              -
Balance at 30 September 2013       468,055            -      (167,866)
Issue of shares                          -      122,893              -
Share issue expenses                     -      (2,042)              -
Loss for the period                      -            -       (11,846)
Movement for the period                  -            -              -
Balance at 31 March 2014           468,055      120,851      (179,712)
Loss for the period                      -            -       (14,703)
Movement for the period                  -            -              -
Balance at 30 September 2014       468,055      120,851      (194,415)
                                                    Non-
                         Other               controlling
Figures in R’000      reserves   Sub-total      interest     Total
Balance at 31 March
2013                    12,802    342,191              -    342,191
Loss for the period          -   (29,200)              -   (29,200)
Movement for the
period                   3,416       3,416             -     3,416
Balance at 30
September 2013          16,218    316,407              -   316,407
Issue of shares              -    122,893              -   122,893
Share issue
expenses                     -    (2,042)              -    (2,042)
Loss for the period          -   (11,846)              -   (11,846)
Movement for the
period                   3,146       3,146             -     3,146
Balance at 31 March
2014                    19,364    428,558              -    428,558
Loss for the period          -   (14,703)          (535)   (15,238)
Movement for the
period                (6,507)     (6,507)              -   (6,507)
Balance at 30
September 2014          12,857    407,348          (535)   406,813
Condensed consolidated statements of cash flows

                                    Unaudited    Unaudited   Audited
                                   six months   six months      year
                                        ended        ended     ended
                                           30           30
                                    September    September   31 March
                                         2014         2013       2014
Figures in R’000           Notes                  Restated
Cash flows from
operating activities
Cash used by operations             (14,515)      (46,672)   (61,165)
Finance income                           191           120        286
Finance costs                        (9,845)      (10,862)   (16,820)
Taxation paid                          (289)         (754)       (49)
Net cash utilised by
operating activities                (24,458)      (58,168)   (77,748)
Cash flows from
investing activities
Purchase of plant and
equipment                             (8,622)      (8,527)   (16,909)
Proceeds on sale of
plant and equipment                     1,913            -     3,300
Acquisition of
intangible assets                     (4,777)      (6,574)   (11,509)
Acquisition of
businesses/subsidiaries                     -     (16,199)   (17,453)
Assets held for sale                        -            -     4,222
Net cash utilised by
investing activities                (11,486)      (31,300)   (38,349)
Cash flows from
financing activities
Proceeds on share issue                     -            -   120,851
Proceeds/(Repayment) of
other financial
liabilities                    6    (33,677)        29,446   (22,156)
Proceeds from
shareholder loans                           -       38,479         -
Proceeds/(Repayment) of
preference share
liability                             (6,224)            -    32,866
Net cash from financing
activities                          (39,901)        67,925   131,561
Net movement for the
period                              (75,845)      (21,543)    15,464
Balance at the
beginning of the period             (25,095)     (40,559)    (40,559)
(Overdraft)/Cash and
cash equivalents at the
end of the period                  (100,940)     (62,102)    (25,095)
Reconciled as follows
Cash and cash
equivalents                            7,976        9,492      15,534
Bank overdraft                     (108,916)     (71,594)    (40,629)
(Overdraft)/Cash and
cash equivalents at the
end of the period                  (100,940)     (62,102)    (25,095)

Condensed consolidated segment report

                              Unaudited      Unaudited       Audited
                             six months     six months          year
                                  ended          ended         ended
                           30 September   30 September      31 March
                                   2014           2013          2014
Figures in R’000                              Restated
Segment revenues
Performance coatings            245,294         237,201      466,255
Decorative coatings              66,940          60,351      120,571
Total of all segments           312,234         297,552      586,826
Discontinued operations         (1,672)         (3,995)      (8,144)
Consolidated revenue            310,562         293,557      578,682
Geographical segments
South Africa                    198,697         192,389      371,558
International                   111,865         101,168      207,124
                                310,562         293,557      578,682
Segment result
Performance coatings           (14,785)        (26,863)     (38,269)
Decorative coatings             (5,461)         (8,456)     (10,067)
Total of all segments          (20,246)        (35,319)     (48,336)
Taxation                          7,113          10,235       16,433
Discontinued operations         (2,105)         (4,116)      (9,145)
Loss for the year              (15,238)        (29,200)     (41,048)
Segment asset
Performance coatings            589,077         549,608      598,017
Decorative coatings             174,568         173,007      157,314
Discontinued operations           3,120           4,644        4,019
Total of all segments           766,765         727,259      759,350

The group has changed its presentation of segments to its two main
operating segments, namely Performance coatings and Decorative
coatings. Performance coatings include product ranges previously
reported under Automotive, Solvent, Industrial/Woodfinish and Buy-
ins.

Notes to the condensed consolidated interim financial statements

1. Corporate information
Chemical Specialities Limited (ChemSpec), a public company
incorporated in South Africa, is one of Africa’s largest coatings
companies, manufacturing and distributing a comprehensive range of
high technology industrial, decorative and automotive paint
systems. These condensed consolidated interim financial statements
as at and for the six months ended 30 September 2014 comprise the
results of the company and its subsidiaries (together referred to
as the group).

2. Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with IAS34 - Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the Listings Requirements of the
JSE Limited (JSE), Pronouncements as issued by the Financial
Reporting Standards Council and the requirements of the South
African Companies Act No 71 of 2008.

The accounting policies and methods of measurement, recognition
and computation applied in the preparation of these condensed
consolidated interim financial statements are consistent with
those applied in the group’s most recent audited annual financial
statements for the year ended 31 March 2014, which have been
prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).

The results for the period are not necessarily indicative of the
results for the entire year, and these condensed consolidated
interim financial statements should be read in conjunction with
the audited annual financial statements for the year ended 31
March 2014.

The preparation of these condensed consolidated interim financial
statements requires the use of estimates and assumptions that
affect the values of assets and liabilities at the reporting date,
as well as the determination of income and expenses during the
reporting   period.  Although   these  estimates   are  based   on
management’s best knowledge of current events and actions that the
group may undertake in the future, actual results may differ from
these estimates.

The board acknowledges its responsibility for the preparation of
these condensed consolidated interim financial statements in
accordance with IFRS, the Companies Act of South Africa and the
Listings Requirements of the JSE.

Mr JG Maehler CA(SA), the group financial director is responsible
for this set of financial results and has supervised the
preparation thereof.

3. Other income
                             Unaudited      Unaudited    Audited
                            six months     six months       year
                                 ended          ended      ended
                          30 September   30 September   31 March
                                  2014           2013       2014
Figures in R’000                             Restated
Other income comprises:
Foreign exchange gain              777            452      2,239
Rental income                    6,097          4,217     10,008
Other sundry income                 36             42         63
Negative goodwill                    -              -     23,000
                                 6,910          4,711     35,310
4. Basic and diluted earnings and headline earnings per share
                                   Unaudited   Unaudited  Audited
                                  six months six months       year
                                       ended       ended    ended
                                          30          30        31
                                   September   September    March
                                        2014        2013      2014
Figures in R’000                                Restated
Basic and diluted loss
per share
Continuing operations   (cents)       (1.22)      (2.34)   (2.97)
Discontinued
operations              (cents)       (0.20)      (0.38)   (0.85)
Total basic and
diluted loss per share (cents)        (1.42)      (2.72)   (3.82)
Basic and diluted
headline loss per
share
Continuing operations   (cents)       (1.23)      (2.35)   (4.53)
Discontinued
operations              (cents)       (0.20)      (0.38)   (0.85)
Total basic and
diluted headline loss
per share               (cents)       (1.43)      (2.73)   (5.38)
Basic loss per share
The loss used in the
calculation of
basic loss per share
is as follows:
Loss for the period
(continuing
operations)                         (13,133)    (25,084) (31,903)
Loss for the period
(discontinued
operations)                          (2,105)     (4,116)  (9,145)
Loss attributable to
equity holders of the
parent                              (15,238)    (29,200) (41,048)
Reconciliation of
total loss to headline
loss
attributable to equity
holders of the parent:
Total loss
attributable to equity              (13,133)    (25,084) (31,903)
holders of the parent
Non-headline earnings
Negative goodwill                         -            -   (23,000)
(Profit)/loss on
disposal of assets                    (130)        (172)      2,683
Total tax effect of
adjustments                              36           48      3,538
Headline loss
(continuing
operations)                        (13,227)     (25,208)   (48,682)
Headline loss
(discontinued
operations)                         (2,105)      (4,116)  (9,145)
Total headline loss                (15,332)     (29,324) (57,827)

Weighted average
number of ordinary              1,073,861,6   1,073,861,   1,073,86
shares (basic)                           48          648      1,648
Preference shares*                        -            -          -
Share options*                            -            -          -
Weighted average
number of ordinary              1,073,861,6   1,073,861,   1,073,86
shares (diluted)                         48          648      1,648

* Due to the loss incurred, potential shares are not included in
the weighted average number of shares as they are anti-dilutive

5. 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 were closed and others were 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:
                             Unaudited      Unaudited     Audited
                            six months     six months        year
                                 ended          ended       ended
                          30 September   30 September    31 March
                                  2014           2013        2014
Figures in R’000                             Restated
Revenue                          1,672          3,995       8,144
Cost of sales                  (1,014)        (2,201)     (6,302)
Operating expenses             (3,514)        (7,591)    (14,319)
Operating loss                 (2,856)        (5,797)    (12,477)
Taxation                           751          1,681       3,332
Net loss from
discontinued operation         (2,105)        (4,116)     (9,145)
Cash flow utilised by
discontinued operation         (2,856)        (5,797)    (12,477)
Effect on the statement
of financial position
Plant and equipment              1,366          1,810       1,796
Inventory                        1,754          2,834       2,223
Instalment sale
liabilities                      (752)        (1,272)     (1,094)
Net assets and
liabilities                      2,368          3,372       2,925

6. FirstRand Bank Limited loan restructure
During the current period the group restructured its funding with
FirstRand Bank Limited whereby it converted a loan, which was
previously reported under other financial liabilities, to a bank
overdraft facility. FirstRand Bank further agreed to a repayment
of the medium term loan which stood at R9m via an increase in the
overdraft facility by R10m.
7. Acquisition of businesses
Figures in R’000
Property, plant and equipment          -       4,991       7,640
Intangible assets                      -      10,000      33,000
Inventory                              -      11,528      12,616
Goodwill                               -           -       2,035
Accounts receivable                    -           -         439
Accounts payable                       -       (320)     (3,170)
Liabilities                            -           -       (720)
Negative goodwill                      -           -    (23,000)
                                       -      26,199      28,840
Cash Paid                              -      16,199      17,453
Loan                                   -      10,000      11,387
                                       -      26,199      28,840

Acquisitions 2014 financial year
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.

8. Formation of subsidiary
                 Country of      % Equity    Principal
Name             incorporation   interest    activities
ChemSpec Zambia Zambia           51%         Sole distributor

On 1 April 2014 the group formed a subsidiary and acquired 51% of
the shares and voting interest in ChemSpec Zambia. IFRS 3 has not
been applied as ChemSpec Zambia is a newly formed company with no
trading history. ChemSpec Zambia is a sole distributor of ChemSpec
products in Zambia.
9. Change in accounting policy
During the 2014 financial year, the group 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:
Figures in R’000              Previously
                                  stated    Adjustment   Restated
Plant and equipment
Balance as at 30
September 2013                   275,465      (34,195)     241,270
Deferred taxation
(Asset)
Balance as at 30
September 2013                    77,108         9,574      86,682
Revaluation reserve
Balance as at 30
September 2013                    31,858      (31,858)          -
Accumulated loss
Balance as at 30
September 2013                 (175,103)         7,237   (167,866)
10. Change in estimate
During the 2014 financial year the group changed the total useful
lives from 10 years to 15 years for its internally generated
development costs. The board have increased the useful life of the
group’s products from 10 to 15 years to more accurately reflect
the utilisation of our growing intellectual property base as we
continually develop and improve each of our brands and products
within those brands in line with our business strategy. This
change will be applied prospectively.

The effects of the change in estimate are as follows:
                              Unaudited      Unaudited     Audited
                             six months     six months        year
                                  ended          ended       ended
                           30 September   30 September    31 March
                                   2014           2013        2014
Figures in R’000                              Restated
Amortisation (Intangible
assets) decrease                  1,243          1,033       2,066

11. Related party transactions
There have been no significant changes in related party
relationships since the previous year or significant transactions
during the interim period, other than in the normal course of
business.

12. Post balance sheet events
The directors are not aware of any material matter or circumstance
arising since the end of the interim period.

13. Preference share dividends
A gross dividend of 1.6 cents per compulsory             convertible
preference share was paid on 23 June 2014.

14. Going concern
The Restructure Plan negotiations referred to in the commentary
above have not yet been concluded. While the board is of the
opinion that there is a very good prospect that these negotiations
will be successful, the final outcome of these negotiations may
impact the ability of the entity to continue as a going concern.
The interim results have therefore been released on the basis that
these negotiations are successful and that the company will be
able to continue as a going concern for the foreseeable future.
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)
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)
ZM Buchan (Alternate non-executive director)

Registered office and business address
2029 Old Mill Road
Canelands
Verulam 4339

Postal address
P O 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 8698

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