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Condensed consolidated financial results for the period ended 31 August 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
Revenue increased by 22% to R298.2 million
Gross profit up R7.4 million to R67.5 million
Loss per share decreased by 40% to a loss of 0.30 cents
EBITDA of R29.4 million
Condensed consolidated financial results for the period ended 31 August 2015
Condensed Interim Consolidated Statement of Financial Position
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R'000 R'000 R'000
ASSETS
Non-current assets 334,128 335,632 328,504
Property, plant and equipment 322,904 322,789 316,931
Other financial assets 5,864 5,531 5,864
Deferred taxation asset 5,360 7,312 5,709
Current assets 133,905 93,698 101,149
Inventories 37,930 34,024 37,058
Trade and other receivables 94,725 58,489 63,912
Cash and cash equivalents 1,250 1,185 179
Non-current asset held for sale - 3,685 -
Total assets 468,033 433,015 429,653
EQUITY AND LIABILITIES
Equity 53,870 47,730 54,701
Issued capital 178,357 178,357 178,357
Reserves 1,353 1,092 1,353
Revaluation reserve 52,380 44,743 52,735
Accumulated losses (178,220) (176,462) (177,744)
Non-current liabilities 189,628 223,960 198,296
Borrowings 169,611 203,895 178,153
Deferred taxation liability 8,758 9,152 8,884
Environmental provision 11,259 10,913 11,259
Current liabilities 224,535 161,325 176,656
Borrowings 51,428 41,729 48,958
Current taxation payable 1,119 899 1,119
Trade and other payables 114,642 87,324 91,157
Bank overdraft 57,346 31,373 35,422
Total liabilities 414,163 385,285 374,952
Total equity and liabilities 468,033 433,015 429,653
Number of shares in issue ('000) 273,038 273,038 273,038
Net asset value per share (cents) 19.73 17.48 20.03
Net tangible asset value per
share (cents) 19.73 17.48 20.03
Condensed Interim Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R'000 R'000 R'000
Revenue 298,165 244,705 506,561
Cost of sales (230,673) (184,629) (395,873)
Gross profit 67,492 60,076 110,688
Other income 3,624 6,668 8,270
Operating expenses (57,676) (52,256) (95,957)
Earnings before
Interest and taxation ("EBIT") 13,440 14,488 23,001
Investment income 77 342 401
Finance costs (14,125) (16,261) (26,630)
(Loss) before taxation (608) (1,431) (3,228)
Taxation (223) 53 (3,006)
(Loss) from operations (831) (1,378) (6,234)
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss
Fair value adjustments: Available-
for-sale - 200 461
Items that will not be reclassified
subsequently to profit or loss:
Gain on revaluation of property - - 11,564
Total comprehensive profit / (loss)
for the year (831) (1,178) 5,791
Reconciliation of headline loss:
Loss for the year (831) (1,378) (6,234)
(Profit) on sale of
property, plant and equipment (609) (449) (1,481)
Headline loss attributable to
ordinary shareholders (1,440) (1,827) (7,715)
Reconciliation of EBITDA:
Earnings before
Interest and taxation ("EBIT") 13,440 14,488 23,001
Depreciation 15,940 17,970 28,245
Earnings before
interest, taxation, depreciation
and amortisation ("EBITDA") 29,380 32,458 51,246
Weighted average number
of shares in issue('000) 273,038 273,038 273,038
Fully diluted weighted average
number of shares ('000) 273,038 273,038 273,038
Basic and diluted loss
per share (cents) (0.30) (0.50) (2.28)
Basic and diluted
headline loss per share (cents) (0.53) (0.67) (2.83)
Condensed Interim Consolidated Statement of Changes in Equity
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R'000 R'000 R'000
Balance at beginning of period 54,701 48,908 48,910
Total comprehensive (loss)
for the period (831) (1,378) (6,234)
Other comprehensive income - 200 12,025
Balance at end of period 53,870 47,730 54,701
Condensed Interim Consolidated Statement of Cash Flows
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R'000 R'000 R'000
Cash flows from operating activities 4,406 8,232 20,070
Cash flows from investing activities (19,189) (3,856) (329)
Cash flows from financing activities (6,071) (18,592) (39,012)
Net cash flows from operations (20,854) (14,216) (19,271)
Cash and cash equivalents
beginning of period (35,243) (15,972) (15,972)
Cash and cash equivalents at end
of period (56,097) (30,188) (35,243)
Segmental reporting
Unaudited Unaudited Audited
6 months 6 months 12 months
August 2015 August 2014 February 2015
R'000 R'000 R'000
Revenue: External sales
Aggregates 110,003 107,254 219,961
Readymix concrete 142,197 124,969 228,323
Concrete manufactured products 11,774 11,114 23,219
Contracting 34,192 1,368 35,058
Total revenue: External sales 298,166 244,705 506,561
Revenue: Inter-segment sales
Aggregates 48,664 29,724 78,997
Readymix concrete 387 28 33
Concrete manufactured products - - -
Contracting 16,485 15,458 23,654
Total revenue: Inter-segment sales 65,536 45,210 102,684
Revenue: Total sales
Aggregates 158,667 136,978 298,958
Readymix concrete 142,584 124,997 228,355
Concrete manufactured products 11,774 11,114 23,219
Contracting 50,677 16,826 58,712
Total revenue: Total sales 363,702 289,915 609,244
Property, plant and equipment
Aggregates 251,072 247,793 248,339
Readymix concrete 30,201 31,304 27,971
Concrete manufactured products 21,595 22,291 22,037
Contracting 20,036 21,402 18,584
Total property, plant and equipment 322,904 322,790 316,931
Total assets
Aggregates 302,295 305,793 301,409
Readymix concrete 86,898 75,402 64,056
Concrete manufactured products 24,938 25,223 25,997
Contracting 53,903 26,597 38,191
Total assets 468,033 433,015 429,653
*the Contracting division was included in the Aggregates figures in the prior
period. Due to the expanding nature of this division it has been disclosed
separately in the current financial period.
INTRODUCTION
The Group provides 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.
REVIEW OF RESULTS
Group revenue increased by 21.85% (or R53.5 million) to R298.2 million (2014:
R244.7 million) for the six months ended 31 August 2015 (“2015 period”). The
ready-mixed concrete division sales increased by 13.8% (or R17.2 million) to
R142.2 million (2014: R125 million). The Group’s aggregates and contracting
divisions contributed a 32.7% or R35.6 million increase in revenue period-on-
period (excluding inter-company sales) to R144.2 million (2014: R108.6
million). The precast division (concrete manufactured products) performed
consistently with a 6% or R0.6 million increase in revenue.
The Group’s gross profit margins decreased slightly to 22.3% (2014: 24.6%) due
to margins falling in the ready mixed concrete division. This was due to a
change in pricing strategy in order to gain market share in a competitive
environment. Margins remained fairly consistent in the aggregates, contracting
and precast divisions.
The Group’s EBITDA decreased by 9.5% or R3.1 million to R29.4 million (2014:
R32.5 million).
The current period performance resulted in a headline loss per share of 0.53
cents (2014: loss of 0.67 cents) and a diluted loss per share from continuing
operations of 0.30 cents (2014: earnings of 0.50 cents). The net asset value
per share increased to 19.73 cents (2014: 17.48 cents).
PROSPECTS
The Group continues to focus on key strategic areas and monitor individual
business operating units at an executive level. With relatively low gross
margin levels at certain business units constant monitoring and early
management intervention mitigates the risk of losses.
An intensive sales drive and pricing strategy implemented to gain market share
and increase volumes sold in the ready-mixed concrete division continues to
drive improvement. Tough market conditions ensure the environment remains
competitive which is compounded by the oversupply in the cement industry.
Gross profit margins are expected to remain under pressure but the growth
prospects are positive with market conditions showing improvement in key focus
areas such as the residential market. Customer service and product quality
will continue to remain the priority for the division.
The aggregates division showed lower than expected growth during the six
months under review. The expected South African Government’s planned
infrastructure development has not materialized as budgeted. However, the
division’s prospects are positive and the order book is at planned targets for
the upcoming months.
The Concrete Manufactured Products division showed consistent growth in
revenue period-on-period. Closer management attention, improved product
capability, increased product range and less competitive pricing have all
contributed to the divisions improved performance.
The contracting division continues to improve and grow from strength to
strength. This division continues to remain a strategic growth area and the
company is tendering on numerous other contracts in the renewable energy
sector and is confident that further contracts will be awarded.
GOING CONCERN
The Group incurred a headline loss for the financial period of R1.4 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 R53.9
million. Current liabilities of R224.5 million exceed current assets of R134
million by R90.5 million. 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 although liquidity continues to remain
under pressure.
Continued Focus
Management continues to review all aspects of the business in order to ensure
that resources are being utilized effectively. This ensures that all cost
areas are closely monitored in order to reduce expenditure and release cash
reserves for the Group’s working capital.
In light of the above, the going concern basis has been adopted in preparing
these interim financial statements. The directors have no reason to believe
that the Group or any company within the Group will not be a going concern in
the foreseeable future.
BASIS OF PREPARATION
These interim results have been prepared in accordance with and contain the
information required in terms of International Financial Reporting Standards
(“IFRS”), the Companies Act of South Africa(Act 71 of 2008), as amended, and
International Accounting Standards (IAS 34 : Interim Financial Reporting), the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial
Reporting Standards ,the requirements of the Companies Act of South Africa and
in compliance with the Listings Requirements of the JSE Limited.
All accounting policies applied by the Group in the preparation of these
condensed consolidated interim financial statements are consistent with those
applied by the Group in its consolidated financial statements as at and for
the year ended 28 February 2015.
These condensed interim consolidated financial statements incorporate the
financial information of the company and its subsidiaries that, in substance,
are controlled by the Group. Results of subsidiaries are included from the
effective date of acquisition or up to the effective date of disposal. All
significant transactions and balances between group enterprises are eliminated
on consolidation.
The directors take full responsibility for the preparation of the provisional
report.
The interim financial results have been prepared under the supervision of the
Group Financial Director, Mr M Ross (CA) SA. These condensed consolidated
interim financial results have not been audited or reviewed by the Group’s
auditors.
DIVIDENDS
In line with past practice, no dividend has been declared for the period.
By order of the board
5 November 2015
S J Wearne
Chief Executive Officer
M J Ross
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: M M Patel (Chairman); M C Khwinana; WP van der Merwe
Executive directors: S J Wearne; M J 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) Limited
Designated Adviser: Exchange Sponsors
These results and an overview of Wearne are available at www.wearne.co.za
Date: 05/11/2015 01:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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