Wrap Text
Reviewed condensed financial results for the year ended 29 February 2016
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 from continuing operations of 5.9%
Reviewed condensed financial results for the year ended 29
February 2016
Reviewed Condensed Consolidated Statement of Financial
Position
Reviewed Audited
12 months 12 months
February 2016 February 2015
R'000 R'000
Assets
Non-Current Assets 305,444 328,504
Property, plant and equipment 294,426 316,931
Other financial assets 6,167 5,864
Deferred taxation asset 4,851 5,709
Current assets 76,470 101,149
Inventories 27,642 37,058
Trade and other receivables 48,195 63,912
Cash and cash equivalents 633 179
Assets in disposal group 21,291 -
classified as held for sale
Total assets 403,205 429,653
Equity and Liabilities
Equity 42,233 54,701
Issued capital 178,357 178,357
Reserves 1,392 1,353
Revaluation reserves 57,326 52,735
Accumulated losses (194,842) (177,744)
Non-current liabilities 148,051 198,296
Borrowings 129,950 178,153
Deferred taxation liability 7,039 8,884
Environmental provision 11,062 11,259
Current liabilities 196,294 176,656
Borrowings 56,681 48,958
Current taxation payable 55 1,119
Trade and other payables 116,066 91,157
Bank overdraft 23,492 35,422
Liabilities directly associated 16,627
with assets in the disposal group
classified as held for sale
Total liabilities 360,972 374,952
Total equity and liabilities 403,205 429,653
Number of shares in issue ('000)
After eliminating treasury shares 273 038 273 038
Net asset value per share (cents) 15.47 20.03
Net tangible asset value per 15.47 20.03
share (cents)
Reviewed Condensed Consolidated Statement of Comprehensive
Income
Reviewed Audited
12 months 12 months
February 2016 February 2015
R'000 R'000
Continuing Operations
Revenue 511,859 483,342
Cost of sales (403,763) (384,130)
Gross profit 108,096 99,212
Other income 4,292 8,270
Operating expenses (107,315) (90,010)
Operating profit 5,073 17,472
Investment income 196 401
Finance costs (26,670) (24,463)
Loss before taxation (21,401) (6,590)
Taxation 2,950 (2,404)
Loss from continuing operations (18,451) (8,994)
Discontinued Operations
Profit from Discontinued 1,502 3,362
operations
Taxation (858) (602)
Loss for the year (17,807) (6,234)
Other comprehensive income:
Items that will be reclassified
subsequently to profit or loss:
Fair value adjustments: 39 461
Available-for-sale
Items that will not be
reclassified subsequently to
profit or loss:
Gain on revaluation of property 5,300 11,564
Total comprehensive (loss)/profit (12,468) 5,791
for the year
39,542 58,300
EBITDA
Weighted average number of shares 273 038 273 038
in issue ('000)*
Continuing operations: Basic loss (6.76) (3.29)
per share (cents)
Discontinued operations: Basic 0.24
profit per share (cents)
Continuing and discontinued (6.52) (2.28)
operations: Basic loss per share
(cents)
*There were no dilutive
instruments in issue during the
year.
Reconciliation of
headline(loss)/earnings:
Loss for the year (17,807) (6,234)
Profit on sale of property, plant (2,904) -
and equipment
Fair value of non-current assets 1,745 (1,481)
held for sale
Headline loss attributable to (18,966) (7,715)
ordinary shareholders
Basic and diluted (6.95) (2.83)
headline loss per share (cents)
Reviewed Condensed Consolidated Statement of Changes in
Equity
Reviewed Audited
12 months 12 months
February 2016 February 2015
R'000 R'000
Balance at beginning of the year 54,701 48,910
Loss for the year (17,807) (6,234)
Other comprehensive income 5,339 12,025
Balance at end of the year 42,233 54,701
Reviewed Condensed Consolidated Statement of Cash Flows (from
continuing and discontinued operations)
Reviewed Audited
12 months 12 months
February 2016 February 2015
R'000 R'000
Cash flows from operating 61,627 20,070
activities
Cash flows from investing (22,027) (329)
activities
Cash flows from financing (27,586) (39,012)
activities
Net increase/(decrease in cash 12,014 (19,271)
and cash equivalents
Cash and cash equivalents at (35,243) (15,972)
beginning of the year
Cash and cash equivalents at end (23,229) (35,243)
of the year
Share Capital Reviewed Audited
12 months 12 months
February 2016 February 2015
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:
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 Reviewed Audited
12 months 12 months
February 2016 February 2015
R'000 R'000
External sales
Aggregates 195,719 219,961
Ready mixed concrete 256,313 228,323
Concrete manufactured products - 23,219
Contracting 59,827 35,058
Total external sales 511,859 506,561
Inter-segment sales
Aggregates 95,780 78,977
Ready mixed concrete 7 33
Concrete manufactured products - -
Contracting 27,847 23,654
Total inter-segment sales 123,634 102,684
Total revenue
Aggregates 291,499 298,958
Ready mixed concrete 256,320 228,355
Concrete manufactured products - 23,219
Contracting 87,674 58,712
Total revenue 635,493 609,244
Operating profit
Aggregates 3,169 29,267
Ready mixed concrete (1,368) (10,308)
Concrete manufactured products - 4,276
Contracting 3,274 (234)
Total Operating Profit 5,075 23,001
Property, plant and equipment
Aggregates 249,157 248,339
Ready mixed concrete 26,608 27,971
Concrete manufactured products - 22,037
Contracting 18,659 18,584
Total property, plant and 294,424 316,931
equipment
Total assets
Aggregates 303,246 301,409
Ready mixed concrete 57,923 64,056
Concrete manufactured products - 25,997
Contracting 20,745 38,191
Total assets 381,914 429,653
*The concrete manufactured products segment was classified as
a discontinued operation in the current year hence revenue and
operating profits have been excluded from the segmental report.
The related assets and liabilities of the segment are accounted
for under “Assets in disposal group classified as held for
sale” and “Liabilities directly associated with assets in the
disposal group classified as held for sale” in the statement
of financial position.
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 resigned as the Chief Financial Officer on 31
January 2016.
2. MC Milazi was appointed as Chief Financial Officer on 1
February 2016.
REVIEW OF RESULTS
The Group revenue from continuing operations, yielded an
increase of 5.9% (or R28 million) to R511 million for the year
ended 29 February 2016. Increase in revenue was below inflation
and was largely caused by a very competitive construction
industry as well as slow economic growth.
Revenue in the Aggregates division decreased by R24 million to
R196 million (R220 million in 2015), this resulted in lower
operating profits of R3.1 million (R29.3 million in 2015) being
achieved in the division. The reduced revenue was due to an
increase in competition in certain areas as well as a slowdown
in road construction projects especially in the Limpopo
province. Operating profit was further negatively affected by
the high increase in energy costs that could not be passed on
to customers. The Ready Mix concrete division saw an improvement
in revenue of 12.3% to R256 million (R228 million in 2015).
Margins in this division however remained very low due to the
over-supply of cement in the industry. The contracting division
saw a significant improvement in revenue of 71% with revenue
of R59.8 million in the current year (R35 million in 2015)
being achieved. This was mainly due to the contracts that were
awarded to the group for construction services on the solar
farm projects in the Northern Cape. The Precast division
(concrete manufactured products) saw a reduction in revenue of
11% or R2.6 million and has been disclosed as a discontinued
operation.
The Group’s gross profit margins from continuing operations
increased to 21.1% (2015: 20.5%) The slight improvement in
margins was in part due to efficiencies achieved in the Readymix
Concrete division.
The Group’s EBITDA declined by 32% to R39.5 million (2015:
R58.3 million). During the year the Group disposed of
unproductive assets resulting in proceeds of R6.1 million. The
Group expanded its plant and equipment by R15.1 million. In
addition, R12.8 million was spent on improving plant and
equipment.
The Group reflects a total comprehensive loss (including
discontinued operations) of R12.5 million (2015: R5.8 million
profit). The 2016 comprehensive loss includes an increase in
the property valuation of the Brandvlei Quarry of R5.3 million.
Total liabilities decreased by R14 million to R361 million
(2015: R375 million) and R27 million in borrowings were settled
in the current year.
The current year performance resulted in a headline loss per
share of 6.95 cents (2015: loss of 2.83 cents) and a diluted
loss per share from continuing and discontinued operations of
6.52 cents (2015: earnings of 2.28 cents). The net asset value
per share decreased to 15.47 cents (2015: 20.03 cents).
DISCONTINUED OPERATIONS
Following the decision to dispose of the Precast division as a
going concern as announced on SENS on 10 May 2016, the results
of this operation were reclassified to discontinued operations
in the statement of comprehensive income and its assets and
liabilities reclassified as a disposal group held for sale in
the statement of financial position. The property, plant and
equipment of the division were re-stated to their fair value
less costs to sell of R19.6 million. The resulting impairment
loss of R1.7 million is included in the results of discontinued
operations in the statement of comprehensive income.
CHANGE IN ACCOUNTING POLICY
During the current year the directors’ have not changed any
accounting policies.
CHANGE IN COMPARATIVES
The results of discontinued operations have been separately
disclosed on the face of the statement of comprehensive income.
PROSPECTS
The group experienced a decline in performance contributed by
slow economic growth, high competition and less than anticipated
government infrastructure spend.
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. The board has taken a
decision to sell all non-core assets and focus on areas where
synergies can be achieved between the aggregate and ready mixes
concrete divisions.
The prospects for the ready mixed concrete division remains
subdued due to the over-supply of cement in the industry
resulting in increased margin pressures. The division is however
focusing on the solar and wind farm market in the Northern Cape
and expect to receive further contract awards in the coming
financial year. The intensive sales drive and pricing strategy
implemented in the prior year to gain market share and increase
volumes sold will be continued to ensure improved operational
results.
The Aggregates business experienced tough trading conditions in
the current year contributed by increased levels of competition
in various regions. Margins remained under pressure due to high
energy costs and high fixed costs. The aggregates division’s
outlook remains optimistic with the governments increased focus
on infrastructure spend expected in the coming year along with
additional road projects being anticipated. The growth rate of
the division and group is however expected to be limited by the
low economic growth currently experienced.
The contracting division saw improved results in the current
year due to the tenders awarded for construction services in
the division. Turnover in this division will decline in the
coming year as most of these contracts will be coming to an
end. The group will not seek to increase further contracts for
construction services as it will seek to focus on its core
business of the production and selling of ready mixed concrete
and aggregates.
GOING CONCERN
The Group incurred a headline loss on continuing and
discontinued operations for the 2016 financial period of R18.9
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.
Due to the high gearing and negative liquidity position of the
group, the group is currently in the process of re-structuring
its operations. The first phase of the re-structuring process
was implemented with the planned sale of the Precast Division.
The aim of the process is to reduce the cash flow pressures of
the group and improve liquidity and solvency of the individual
subsidiaries. The group is optimistic that once the re-
structure plan has been implemented in full, a viable and
profitable business will emerge.
Solvency and Liquidity
The Group is currently technically solvent with a net asset
value of R42.2 million. Current liabilities of R213 million
exceed current assets of R97.7 million by R115 million. The
group encountered significant cash flow pressures in the current
year. Hence a restructure plan has been developed to sell off
non -core assets to improve liquidity and solvency.
Cash flow
The group generated cash flows from operations of R61.6
million which in part is contributed by an increase in trade
and other payables. The group maintained its strict cash flow
management policy, however due to cash flow pressures delays
were encountered in meeting working capital obligations. Cash
flow management remains key in this challenging period. Cash
resources are expected to improve as the restructure plan
which, includes the sale of non- core and underperforming
assets, is expected to be in full swing in the coming
financial year.
Continued focus
In addition to the re-structuring plan, 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 relieve cash reserves for the Group’s working capital.
In light of the above, the going concern basis has been adopted
in preparing these 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 condensed consolidated financial results for the year ended
29 February 2016 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 financial reporting
pronouncements as issued by the Financial Reporting Standards
Council, 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 2015. 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.
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
2016. 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 fair value less costs to sell of the Wearne Precast Property
plant and equipment (Level 1 in terms of IFRS 13) was based on
quoted market prices being the agreed purchase price of the
assets.
Fair value of available for sale financial instruments is
considered level 1 in terms of IFRS 13. The investments are
held in various funds to spread the risk related to returns and
maximise the return to the Group for the purposes of
rehabilitating the land upon which quarrying operations are
performed.
The condensed reviewed consolidated financial results have been
prepared under the supervision of the Chief Financial Officer,
MC Milazi CA (SA).
REVIEW CONCLUSION
This report was compiled under the supervision of Ms, MC Milazi
CA(SA). The modified review report, issued by Grant Thornton
Johannesburg Partnership, which included an emphasis of matter
paragraph regarding the entities ability to continue as a going
concern, has been done so based on the underlying annual
financial statements from which these condensed financial
results have been derived and is available for inspection at
the registered office of the Company. This summarised report
is extracted from the reviewed financial information, but is
itself not reviewed. The directors take full responsibility for
the preparation of these condensed financial results and any
accompanying notes and commentaries.
The reviewed results have been prepared on a going-concern
basis, as the directors believe that the group will be a
continuing operation in the foreseeable future and these were
approved by the board of directors on 31 May 2016.
DIVIDENDS
In line with the past practice, no dividend has been declared
for the period. By order of the board.
09 June 2016
S J Wearne
Chief Executive Officer
MC Milazi
Chief Financial Officer
CORPORATE INFORMATION
Non-executive directors: MM Patel (Chairman); MC Khwinana; WP
van der Merwe
Executive directors: SJ Wearne; MC Milazi
Registration number: 1994/005983/06
Registered address: 3 Kiepersol House; Stone Mill Office Park;
300 Acacia Road; Cresta; 2195
Postal address: PO Box 1674, Cresta, 2118
Company secretary: Ithemba Governance and Statutory Solutions
(Pty) Ltd
Telephone: (011) 459 4500. Facsimile: (011) 478 5481
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
These results and an overview of Wearne are available at
www.wearne.co.za
Date: 09/06/2016 05:37:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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