W G WEARNE LIMITED - Audited condensed financial results for the year ended 28 February 2015

Release Date: 29/05/2015 10:00
Code(s): WEA
 
Wrap Text
Audited condensed financial results for the year ended 28 February 2015

WG Wearne Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/005983/06)
JSE Code: WEA
ISIN: ZAE000078002
(“Wearne” or “the company” or “the Group”)

Highlights
Increase in Revenue of 9.3%
Increase in operating profit of 62.8% to R23 million
Increase of EBITDA to R58.3 million from R53.5 million
Cash generated from operations of R20.07 million
Headline loss per share improved to 2.83 cents from 6.07
cents in 2014

Audited condensed financial results for the year ended 28
February 2015

Condensed Consolidated Statement of Financial Position

                                          Audited       Audited
                                        12 months     12 months
                                   February 2015 February 2014
                                            R'000         R'000
Assets
Non-Current Assets                          328,504          344,834
Property, plant and equipment               316,931          332,309
Other financial assets                        5,864            5,213
Deferred taxation asset                       5,709            7,312
Current assets                              101,149           87,829
Inventories                                  37,058           26,874
Trade and other receivables                  63,912           60,026
Cash and cash equivalents                       179              929
Non-current asset held for sale                   -            8,185
Total assets                                429,653          440,848
Equity and Liabilities
Equity                                        54,701        48,910
Issued capital                               178,357       178,357
Reserves                                       1,353           892
Revaluation reserves                          52,735        45,098
Accumulated losses                         (177,744)     (175,437)
Non-current liabilities                      198,296       224,560
Borrowings                                   178,153       203,658
Deferred taxation liability                    8,884         9,152
Environmental provision                       11,259        11,750
Current liabilities                          176,656       167,378
Borrowings                                    48,958        62,465
Current taxation payable                       1,119           899
Trade and other payables                      91,157        87,113
Bank overdraft                                35,422        16,901
Total liabilities                            374,952       391,938
Total equity and liabilities                 429,653       440,848
Number of shares in issue ('000)
After eliminating treasury shares         273,038          273,038
Net asset value per share (cents)           20.03            17.91
Net tangible asset value per share          20.03            17.91
(cents)


Condensed Consolidated Statement of Comprehensive Income

                                           Audited         Audited
                                         12 months       12 months
                                     February 2015   February 2014
                                             R'000           R'000

Continuing Operations
Revenue                                    506,561        463,278
Cost of sales                            (395,873)      (371,422)
Gross profit                               110,688         91,856
Other income                                 8,270          7,147
Operating expenses                        (95,957)       (84,876)
Operating profit                            23,001         14,127
Investment income                              401            322
Finance costs                             (26,630)       (31,980)
Fair value adjustment                            -              2
Revaluation of Land and Buildings:
Reversal of impairment loss                     -           26,391
(Loss)/ Profit before taxation            (3,228)            8,862
Taxation                                  (3,006)            1,208
(Loss)/ Profit from continuing            (6,234)           10,070
operations
(Loss) /Profit for the year               (6,234)           10,070

Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss:
Fair value adjustments: Available-             461             133
for-sale
Items that will not be
reclassified subsequently to
profit or loss:
Gain on revaluation of property             11,564           3,218
Total comprehensive profit for the           5,791          13,421
year

Weighted average number of shares         273,038          273,038
in issue ('000)
Fully diluted weighted average            273,038          273,038
number of shares ('000)
Continuing operations: Basic and            (2.28)            3.69
diluted (loss)/earnings per share
(cents)
Continuing and discontinued                 (2.28)            3.69
operations: Basic and diluted
(loss)/ earnings per share (cents)


Reconciliation of headline
(loss)/earnings:
(Loss) Profit for the year                (6,234)           10,069
Reversal of impairment                          -         (26,391)
(Profit)/Loss on sale of property,        (1,481)              241
plant and equipment
Headline loss attributable to             (7,715)         (16,081)
ordinary shareholders

Basic and diluted                           (2.83)          (6.07)
headline loss per share (cents)


Condensed Consolidated Statement of Changes in Equity

                                           Audited         Audited
                                         12 months       12 months
                                     February 2015   February 2014
                                             R'000           R'000
Balance at beginning of the year            48,910          35,489
(Loss)/Profit for the year                 (6,234)          10,070
Other comprehensive income                  12,025           3,351
Balance at end of the year                  54,701          48,910

Condensed Consolidated Statement of Cash Flows

                                           Audited         Audited
                                         12 months       12 months
                                     February 2015   February 2014
                                             R'000           R'000
Cash flows from operating                   20,070          21,766
activities
Cash flows from investing                    (329)         (5,908)
activities
Cash flows from financing                (39,012)          (3,992)
activities
Net (decrease)/increase in cash          (19,271)           11,866
and cash equivalents

Cash movement for the year               (19,271)           11,866
Cash and cash equivalents at             (15,972)         (27,838)
beginning of the year
Cash and cash equivalents at end         (35,243)         (15,972)
of the year
Share Capital                              Audited         Audited
                                         12 months       12 months
                                     February 2015   February 2014
                                             R'000           R'000
Authorized
500,000,000 ordinary par value
Share of 0.1 cent each                    500,000          500,000
Reconciliation of number of shares
Issued: (in millions)
Opening balance                               273              273
Closing balance                               273              273

Issued share capital
Ordinary share capital                        273              273
Ordinary share premium                    178,084          178,084
                                          178,357          178,357


Segmental reporting                        Audited         Audited
                                         12 months       12 months
                                     February 2015   February 2014
                                             R'000           R'000
External sales
Aggregates                                219,961          217,091
Ready mixed concrete                      228,323          230,868
Concrete manufactured products             23,219           15,318
Contracting                                35,058                -
Total external sales                      506,561          463,277

Inter-segment sales
Aggregates                                 78,997           65,953
Ready mixed concrete                           33               78
Concrete manufactured products                  -                -
Contracting                                23,654                -
Total inter-segment sales                 102,684           66,031

Total revenue
Aggregates                                298,958          283,045
Ready mixed concrete                      228,355          230,947
Concrete manufactured products             23,219           15,318
Contracting                                58,712                -
Total revenue                             609,244          529,310

Operating profit
Aggregates                                 29,267           11,364
Ready mixed concrete                     (10,308)            1,067
Concrete manufactured products              4,276            1,695
Contracting                                 (234)                -
Total Profit before taxation               23,001           14,126

Property, plant and equipment
Aggregates                                248,339         277,789
Ready mixed concrete                       27,971          32,780
Concrete manufactured products             22,037          21,738
Contracting                                18,584               -
Total property, plant and                 316,931         332,307
equipment

Total assets
Aggregates                                303,224         343,402
Ready mixed concrete                       64,056          72,388
Concrete manufactured products             25,997          25,055
Contracting                                38,191               -
Total assets                              431,468         440,845


*the Contracting division was included in the Aggregates
figures in the prior year. Due to the expanding nature of
this division it has been disclosed separately in the current
financial year.

INTRODUCTION

WG Wearne Limited and its subsidiaries (“the Group”) provide
a comprehensive range of products and contracting services to
the building and construction industry in South Africa. The
major operating divisions comprise aggregates, ready mixed
concrete, the manufacture of precast concrete products and
contracting services.


CHANGES OF DIRECTORATE

The following changes in the directorate occurred
during the year under review:

   1. MJ Ross was appointed as the Chief Financial Officer on
      07 March 2014.
   2. M Salanje resigned as a non-executive director and
      Chairman of the Audit Committee with effect from 10
      March 2014 due to ill health.
   3. WP van der Merwe was appointed as Audit Committee
      Chairman effective 10 March 2014.
   4. MM Patel was appointed as an audit committee member
      from 10 March 2014.

REVIEW OF RESULTS

Group revenue increased by 9.3% (or R43.3 million) to R507
million (2014: R463 million) for the year ended 28 February
2015. The ready-mixed concrete division sales decreased by
1.1% (or R2.5 million) to R228 million (2014: R231 million).
The Group’s aggregates and contracting divisions performed
admirably with a 17.5% or R37.9 million increase in revenue
period-on-period (excluding inter-company sales) to R255
million. The precast division (concrete manufactured products)
had another successful year with a 51.6% or R7.9 million
increase in revenue.

The Group’s gross profit margins increased to 21.9% (2014:
19.8%) despite margins falling in the ready mixed concrete
division. This was due to higher margins in the contracting
and   aggregate  divisions where   increased  turnover  and
additional cost cutting measures yielded higher margin
percentages.

The Group’s EBITDA improved by 9% to R58.3 million (2014:
R53.5 million). During the year the Group disposed of
unproductive assets resulting in proceeds of R7.6 million. In
addition, the Group also improved some of its critical plant
by spending R16 million on these assets.

The Group reflects a total comprehensive profit of R5.8
million (2014: R13.4 million which included the gain on
property revaluations of R29.5 million, net of deferred tax).
The 2015 comprehensive profit includes the revaluation of
R11.6 million on the Brandvlei Quarry.

Total liabilities decreased by R17 million to R375 million
(2014: R392 million) and the Group settled R39 million in
borrowings.

The current year performance resulted in a headline loss per
share of 2.83 cents (2014: loss of 6.07 cents) and a diluted
loss per share from continuing operations of 2.28 cents (2014:
earnings of 3.69 cents). The net asset value per share
increased to 20.03 cents (2014: 17.91 cents).

CHANGE IN ACCOUNTING POLICY

During the current year the directors’ have not changed any
accounting policies.


PROSPECTS

The Group continued to improve in a difficult economic
environment plagued by the energy crisis, industrial action in
the mining and steel sectors, slow growth, high competition
and less than anticipated government spend on infrastructure.
The Group’s strategy of focusing on key operational areas and
the monitoring of individual business units continues to drive
the   business’s   turnaround   initiatives.   This   constant
monitoring has seen improvements in almost all of the
individual operating units.

The ready mixed concrete division was the most affected by the
tough macro-economic environment which was compounded by the
over-supply of cement in the industry resulting in increased
margin pressures. An intensive sales drive and pricing
strategy has been implemented to gain market share and
increase volumes sold. The residential market has shown
improvement recently which is positive based on our position
in the market.

The aggregates and contracting business improved external
turnover by 17.5% year on year. Margins continued to remain
under pressure due to high energy costs but there was
improvement year on year as further cost cutting measures bore
fruit. The aggregates division’s outlook remains positive as
infrastructure projects have materialised and government
infrastructure should ensure the divisions growth.

The Concrete Manufactured Products division benefited from
the additional capital expansion resulting in new product
lines. The increased competitiveness in the market resulted
in a turnover increase of an admirable 51.6% or R7.9 million.
A greater demand for concrete pipes and culverts are
occurring as increased road building projects materialise in
the Limpopo Province.

Despite the difficult macro-economic environment the Group is
positive for the future. There is continued focus on
strategic initiatives and cost reduction opportunities in
order to continue with the implemented turnaround. Together
with expected industry improvements, our current position in
the market and valued employees we will continue to grow and
improve within the market.

GOING CONCERN

The Group incurred a headline loss for the 2015 financial
period   of  R7.7   million.  This   highlights  a   material
uncertainty regarding the going concern issue which is
emphasised further by the Group`s negative liquidity position
and high gearing.
Solvency and Liquidity
The Group is currently technically solvent with a net asset
value of R54.7 million. Current liabilities of R177 million
exceed current assets of R101 million by R76 million. An
arrangement   was   made   with   the    Industrial  Development
Corporation where the loan repayments have been restructured
in order to better assist the Group with it’s working capital
requirements.   The   Group   has   been    working closely   in
conjunction with its financiers in order to meet all its
obligations.


Cash flow
In line with strict cash flow management policies the Group
has managed to meet its working capital obligations.


Continued focus
Management continues to review all aspects of the business in
order   to   ensure   that  resources   are  being   utilized
effectively. This ensures that all cost areas are closely
monitored in order to reduce expenditure and release cash
reserves for the Group’s working capital.

In light of the above, the going concern basis has been
adopted in preparing these audited financial statements. The
directors have no reason to believe that the Group or any
company within the Group will not be a going concern in the
foreseeable future.


BASIS OF PREPARATION

The audited condensed consolidated financial results for the
year ended 28 February 2015 have been prepared in accordance
with   the  framework   concepts,   in   accordance    with   and
containing the information required by IAS 34: Interim
Financial   Reporting,    the   recognition    and   measurement
requirements of International Financial Reporting Standards,
the SAICA financial reporting guides as issued by the
Accounting   Practices   Committee   and   the   South    African
Companies Act, No 71 of 2008, as amended, and comply with the
JSE Listings Requirements. The accounting policies and method
of computation applied in preparation of the financial
statements are consistent with those applied in the audited
annual financial statements for the year ended 28 February
2014. There has been no material effect on the results of the
Group as a result of the adoption of new standards and
amendments apart from some additional disclosure.
These condensed consolidated results have been extracted from
the audited annual financial statements.

Fair value of the Group`s main property assets is estimated
based on appraisals performed by independent, professionally-
qualified property valuers. The significant inputs and
assumptions   are  developed  in   close   consultation  with
management. The valuation processes and fair value changes
are reviewed by the board of directors and audit committee at
each reporting date.

The revaluation on the Brandvlei Quarry (Level 3 in terms of
IFRS 13) was conducted by an independent appraiser in April
2014. The appraisal was carried out using a market approach
that reflects observed prices for recent market transactions
for similar properties and incorporates adjustments for
factors specific to the land in question, including plot
size, location, encumbrances, current use and discounted cash
flows.

The condensed consolidated financial results have been
prepared under the supervision of the Chief Financial
Officer, MJ Ross CA (SA).

AUDIT OPINION

Grant Thornton, the Group’s independent auditors, have
audited the consolidated financial statements for the year
ended 28 February 2015 and have issued an unqualified audit
opinion with the following emphasis of matter paragraph which
in summary states the following: Without qualifying our
opinion, we draw attention to the fact that the Group
incurred a headline loss of R7.7 million for the year ended
28 February 2015 and as of that date, the Group’s current
liabilities exceeds its current assets by R75.5 million.
These conditions indicate the existence of a material
uncertainty that may cast doubt about the Group’s ability to
continue as a going concern. The auditor's report does not
necessarily cover all of the information contained in this
announcement. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the
auditor's work they should obtain a copy of that report
together with the accompanying financial information from the
registered office of the company.

DIVIDENDS

In line with the past practice, no dividend has been declared
for the period. By order of the board.
29 May 2015



S J Wearne

Chief Executive Officer

M J Ross

Chief Financial Officer



CORPORATE INFORMATION

Non-executive directors: MM Patel (Chairman); MC Khwinana; WP
van der Merwe
Executive directors: SJ Wearne; MJ Ross
Registration number: 1994/005983/06
Registered address: 3 Kiepersol House; Stone Mill Office
Park; 300 Acacia Road; Cresta; 2195
Postal address: PO Box 1674, Cresta, 2118
Company secretary: Ithemba Governance and Statutory Solutions
(Pty) Ltd
Telephone: (011) 459 4500. Facsimile: (011) 478 5481
Transfer secretaries: Computershare Investor Services (Pty)
Ltd
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
These results and an overview of Wearne are available at
www.wearne.co.za

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