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Unaudited Condensed Consolidated Interim Financial Results for the six months ended 31 August 2017
W G WEARNE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1994/005983/06)
(Share Code: WEA ISIN Code: ZAE000078002)
(“Wearne” or “the Company”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 31 August 2017
Highlights
Revenue increased by 7.17% to R213,2 million for the period under review
Operating profit increased by 74.11% to R14,3 million for the period under review
Basic earnings per share increased by 175.91% to 1.38 cents per share
HEPS increased by 132.98% to 0.63 cents per share
Commentary
Basis of preparation
The unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
("2017 period") have been prepared in accordance with and contains, as minimum the information required
by IAS 34 : Interim Financial Reporting and have been prepared in accordance with the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the JSE Listing Requirements and in the
manner required by the South African Companies Act No. 71 of 2008, as amended. The accounting policies
and methods of compilation applied in preparation of the consolidated interim financial results are in
accordance with the International Financial Reporting Standards("IFRS") and are consistent with those
applied in the audited annual financial statements for the year ended 28 February 2017. The above
information has not been audited or reported on by WG Wearne's auditors.
The consolidated interim financial results have been prepared under the supervision of the Chief Financial
Officer, JJ Bierman CA (SA).
Introduction
WG Wearne Limited and its subsidiaries (“the Group”) provide a comprehensive range of products to the
building and construction industry in South Africa. The major operating divisions comprise aggregates and
ready mixed concrete products. The group delivered an improved set of results despite very difficult
trading conditions in the construction industry.
Financial results
The improved performance during the 2017 interim period resulted in a headline profit per share of 0.63
cents (2016 period: loss of 1.91 cents). The net asset value per share increased to 5.20 cents for the 2017
period compared to 3.68 cents as at 28 February 2017. The improved profitability was mainly due to an
increase in turnover of 22 % in the ready mixed concrete division specifically related to the Dankocom
concrete supply contract in Upington.
The Group’s revenue from continuing operations, increased by 7% (or R14 million) to R213 million for the
six months ended 31 August 2017 compared to the six months ended 31 August 2016. The Group reflects a
total comprehensive profit (including discontinued operations) of R4 million (2016 period: R10.4 million
loss).
Total liabilities decreased by R42 million to R314 million (2016 period: R356 million). This significant
decrease in liabilities was due to most of the instalment sale agreements coming to the end of their
contract terms and a bigger portion of the instalments going towards capital reduction.
Operational review
Trading conditions during the six month period remained extremely challenging as demand for building
materials remained flat compared to 2016.
The Aggregates division increased its external revenue by R1.1 million to R69.7 million for the 2017 period
(2016 period: R68.6 million). This resulted in an operating profit of R1.2 million for the 2017 period (2016
period: R1.05 million).
The Ready Mix concrete division saw an increase in external revenue of 22% to R143.5 million for the 2017
period (2016 period: R117.5 million). As mentioned this was mainly due to high demand for concrete on the
Ilanga Solar Plant contract with Dankocom. The balance of the operations was flat compared to the
previous financial year with margins still being very competitive. Operating profit improved to R 13.08
million for the 2017 period compared to an operating profit of R 1.5 million for the 2016 period.
Disposals
As disclosed previously in the annual financial statements the board made a decision to dispose of the
Brandvlei Quarry as a going concern. This transaction has not been finalised, hence Brandvlei’s assets and
liabilities were reclassified as a disposal group held for sale in the statement of financial position.
Joint Venture
As previously disclosed in the annual financial statements, the group has entered into a joint venture
agreement with Right Gold Machinery (Pty) Ltd in July 2017. Right Gold will be constructing a new crushing
plant which will double the current production capacity and allow the operation to take full advantage of
the growth in the market in Kwa-Zulu Natal. The transaction still needs to be approved by the shareholders.
B-BBEE
Existing BEE shareholders and the Wearne Workers Trust in aggregate hold 32.59% of Wearne’s issued
shares (excluding treasury shares and mandated investments).
Prospects
Current economic (GDP) growth rate for 2017 is expected to be 0.7 % and forecast to be 1.1 % in 2018. This
low growth forecast will result in a minimal increase in demand for building materials and cement related
products. With all current suppliers sitting with excess capacity this will result in margins in this sector still
remaining very competitive. There are indications in the market of consolidation in the cement industry and
this will hopefully lead to improved pricing in the ready mixed concrete industry. The signing of the 27
renewable energy power purchase agreements by Eskom as announced by Treasury will also lead to
significant activity in this sector and hopefully our ready mixed concrete division can secure some of these
contracts.
Activity in the aggregates division should also see an uptick in demand as further infrastructure spend is
planned by Government. The growth will however be dependent on the availability of funding to local
municipalities that are mandated to execute a lot of these contracts.
Further positive prospects for the concrete division are the roll out of the Gauteng Mega City Housing
Projects in 2018. The Mega City Projects is an R 100 billion investment that plans to deliver over 800 000
houses in Gauteng over the next 10 years. Our operations are well situated to take advantage of the
Western & Southern corridors. The first of these projects has been launched in the Carletonville and
Randfontein and more than 4000 housing units are planned for 2018 on these two projects.
Material uncertainty related to going concern
The financial results for the six months ending 31 August 2017 have been prepared on the going concern
basis as the directors are of the view that the Group has adequate resources in place to continue in
operation for the foreseeable future. The ability of the Group to fund short term operations in the
foreseeable future is largely dependent on the continued support of the Group’s funders, the return to
profitable trading and the ability to generate sufficient cash flows to honour commitments made.
The aim of the process is to reduce the cash flow pressures of the group and improve liquidity and solvency
of the individual subsidiaries.
These conditions, indicate that a material uncertainty exists that may cast significant doubt on the group’s
ability to continue as a going concern.
The Group incurred a profit from continuing operations for the six months of the 2018 period of R3.8
million (2017: R28.8 million loss). At 31 August 2017 the Group’s Current liabilities of R272 million (2017:
R270 million) exceed current assets of R63 million (2016: R70 million) by R209 million (2017: R200 million).
This highlights a material uncertainty casting significant doubt regarding the Group’s ability to continue as a
going concern.
The Group is currently technically solvent with a net asset value of R14 million (2017: R10 million). As at 31
August 2017 the Group were in breach of the provisions of the following loan arrangement and these long
term liabilities were reclassified from Non-Current to Current in compliance with the International Financial
Reporting Standards (IAS 1):
- IDC;
- Nedbank; and
- ABSA
Despite these breaches the Group still enjoys the support of all three funders.
As mentioned in the Annual Financial Statements as at 28 February 2017 the board has initiated the
following cost cutting processes:
- Reduction in Employment Costs of R500 000 per month, this should be fully implemented by November
2017. The target of R500 000 per month was achieved but the real saving will only come into effect once the
severances packages have been paid in full early in the new year.
- Restructuring the sand supply chain for the Ready Mixed Concrete business which will result in a R200 000 a
month reduction in Raw Material Cost and a further R100 000 a month saving in Transport Costs. This has
been implemented from September 2017.
- relocation of the Group’s Head Office to Randfontein which will result in a R100 000 a month saving.
The Head office will be relocated by January 2018.
- Reduction in vehicle rental of R100 000 a month by reducing the LDV fleet from November 2017. This has
been achieved.
- With the closure of the Mobile Crushing Division non-core mobile crushing equipment will also be sold. This
should result in an inflow of R2 million.
The Group has entered into an Equity Subscription Agreement with Milost Global Inc (“the Investor”) on 20
October 2017 and the first draw down notice was signed on 2 November 2017. The first tranche of R5
million should be received shortly and will be utilised to settle current SARS arrears.
The Group has reached a deferment agreement with Liberty Life to settle the arrear Pension Fund
contributions over three (3) months. The first payment was done in November 2017.
The directors have considered the operational budget and cash flow forecasts for the ensuing year which
are based on the current expected economic and market conditions. The board has adopted the going
concern basis in the preparation of the annual financial statements subject to the following material
uncertainties casting significant doubt about the Group’s ability to continue as a going concern
- The continued support from all of the Group’s funders;
- The successful conclusion of final agreements and the timeous drawdowns on the Milost Facility;
- Receiving the contractual retention from Dankocom in February or March 2018; and
- The successful implementation of the overhead reduction measures implemented by the board.
Dividends
No dividend has been declared for the period.
On behalf of the board
WP van der Merwe SJ Wearne
Chairman Chief Executive Officer
30 November 2017 6
Condensed consolidated statement of financial position
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
ASSETS
Non-Current Assets
Property, plant and equipment 239,753 240,376 250,524
Trade and other receivables 9,431 - 4,395
Other financial assets 6,702 6,535 6,366
Deferred tax 1,851 4,851 1,851
Total Non-Current Assets 257,737 251,762 263,136
Current Assets
Inventories 18,811 19,740 17,967
Trade and other receivables 43,674 58,175 51,684
Cash and cash equivalents 492 672 640
Total Current Assets 62,977 78,587 70,291
Non-current assets held for sale and assets of disposal groups 7,877 58,081 7,877
Total Assets 328,591 388,430 341,304
Equity and Liabilities
Equity
Share capital 178,357 178,357 178,357
Reserves 1,864 1,758 1,567
Revaluation reserves 52,006 51,522 52,006
Accumulated loss (218,042) (199,819) (221,881)
Total Equity 14,185 31,818 10,049
LIABILITIES
Non-Current Liabilities
Other financial liabilities 24,603 107,091 43,741
Deferred tax 9,497 7,040 9,497
Provisions 7,885 7,360 7,885
Total Non-Current Liabilities 41,985 121,491 61,123
CURRENT LIABILITIES
Trade and other payables 135,295 124,530 138,178
Other financial liabilities 114,410 63,394 108,971
Current tax payable - 55 55
Bank overdraft 22,132 27,626 22,344
Total Current Liabilities 271,837 215,605 269,548
Liabilities of disposal groups 584 19,516 584
Total Liabilities 314,406 356,612 331,255
Total Equity and Liabilities 328,591 388,430 341,304
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
7
Condensed consolidated statement of profit or loss and other comprehensive income
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
Revenue 213,226 198,963 389,429
Cost of sales (158,999) (148,690) (347,633)
Gross profit 54,227 50,273 41,796
Other operating income 4,917 1,542 23,026
Other operating expenses (44,825) (43,591) (62,964)
Operating profit 14,319 8,224 1,858
Investment income 88 (29) 182
Finance costs (10,629) (12,434) (25,585)
Profit / (loss) before taxation 3,778 (4,239) (23,545)
Taxation - - (5,268)
Profit / (loss) from continuing operations 3,778 (4,239) (28,813)
Profit / (loss) operations
Discontinuedfrom discontinued operations - (738) 909
Profit / (loss) for the year 3,778 (4,977) (27,904)
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Fair value adjustments: Revaluation of Property, plant and equipment - (5,804) (4,252)
Deferred tax on fair value adjustments - - (204)
Total items that will not be reclassified to profit or loss - (5,804) (4,456)
Items that may be reclassified to profit or loss:
Fair value adjustments: Available-for-sale 297 367 175
Deferred tax on fair value adjustment - - -
Total items that may be reclassified to profit or loss 297 367 175
Other comprehensive income / (loss) for the year net of taxation 297 (5,437) (4,281)
Total comprehensive (loss) income for the year 4,075 (10,414) (32,185)
Earnings per share:
From continuing and discontinued operations
Basic earnings / (loss) per share (c) 1.38 (1.82) (10.22)
From continuing operations
Basic earnings / (loss) per share (c) 1.38 (1.55) (10.55)
From discontinued operations
Basic earnings / (loss) per share (c) - (0.27) 0.33
Headline earnings per share:
From continuing and discontinued operations
Headline earnings / (loss) per share (c) 0.63 (1.91) (16.88)
From continuing operations
Headline earnings / (loss) per share (c) 0.63 (1.64) (17.25)
From discontinued operations
Headline earnings / (loss) per share (c) - (0.27) 0.36
Reconciliation of headline profit / (loss):
Profit / (loss) for the period 3,778 (4,977) (27,904)
Profit on the sale of PPE (2,056) (242) (19,640)
Impairment of PPE - - 1,421
1,722 (5,219) (46,123)
Weighted average number of shares 273,038 273,038 273,038
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
8
Condensed consolidated statement of cash flows
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
Cash flows from operating activities 20,753 23,470 27,949
Interest income - 29 64
Dividend income - 19 -
Finance costs (9,609) (13,360) (9,740)
Cash flows of held for sale / discontinued operations 5,573
Net cash from operating activities 11,145 10,158 23,846
Cash flows from investing activities
Purchase of property, plant and equipment (1,625) (1,017) (12,230)
Proceeds on sale of property, plant and equipment 5,270 2,281 30,887
Loans repaid by subsidiaries - - -
Increase in other financial assets - - -
Net cash flows of discontinued operations - - -
Net cash from investing activities 3,645 1,264 18,657
Cash flows from financing activities
Repayment of other financial liabilities (14,725) (14,965) (41,348)
Net cash flows of discontinued operations - - -
Net cash from financing activities (14,725) (14,965) (41,348)
Total cash movement for the year 64 (3,543) 1,155
Cash at the beginning of the year (21,704) (23,229) (22,859)
Total cash at end of the year (21,640) (26,772) (21,704)
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
9
Condensed consolidated statement of changes in equity
Total Share Revaluation Available-for-sale
Share Capital Share Premium Capital Reserve Reserve Total Reserves Accumulated Loss Total Equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 01 March 2016 273 178,084 178,357 57,326 1,392 58,718 (194,842) 42,233
Profit /(Loss) for the year - - - - - - (27,904) (27,904)
Other comprehensive income - - - (4,455) 175 (4,280) - (4,280)
Total comprehensive Profit / (Loss) for the year - - - (4,455) 175 (4,280) (27,904) (32,184)
Transfer between reserves - - - (865) - (865) 865 -
Total contributions by and distributions to owners of company recognised directly in equity - - - (865) - (865) 865 -
Balance at 28 February 2017 273 178,084 178,357 52,006 1,567 53,573 (221,881) 10,049
Profit /(Loss) for the year - - - - - - 3,778 3,778
Other comprehensive income - - - - 297 297 - 297
Total comprehensive Profit / (Loss) for the year - - - - 297 297 3,778 4,075
Transfer between reserves - - - - - (61) 61 -
Total contributions by and distributions to owners of company recognised directly in equity - - - - - 61 61
Balance at 31 August 2017 273 178,084 178,357 52,006 1,864 53,870 (218,042) 14,185
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 2017
10
Notes
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
1 Segment information
Revenue : External sales
Aggregates 69,661 68,561 142,396
Readymix concrete 143,565 117,539 212,646
Contracting - 12,864 34,387
Total revenue : External Sales 213,226 198,964 389,429
Revenue : Inter-segment sales
Aggregates 25,534 51,501 69,529
Readymix concrete 53,279 308 34,883
Contracting 184 8,485 44,081
Total revenue : Inter-segment sales 78,997 60,294 148,493
Revenue : Total sales
Aggregates 95,195 120,062 232,325
Readymix concrete 196,844 117,847 255,529
Contracting 184 21,348 78,469
Total revenue : Inter-segment sales 292,223 259,257 566,323
Operating Profit/(Loss)
Aggregates 1,236 1,050 3,319
Readymix concrete 13,083 1,521 7,725
Contracting - 5,653 (9,186)
Total Operating Profit/(Loss) 14,319 8,224 1,858
Total Assets
Aggregates 256,036 244,301 229,518
Readymix concrete 41,470 53,052 57,475
Contracting 31,085 32,996 54,311
Total Assets 328,591 330,349 341,304
The movement in Contracting sales decreasing to R0 when compared to previous reporting periods. This was due to the closure of the
mobile contract crushing operations.
2 Property, plant and equipment
Opening Balance 250,524 308,311 294,426
Additions 1,625 1,017 12,230
Disposals (3,213) (2,281) (13,840)
Classified as held for sale - (53,613) (7,817)
Revaluations - (4,252)
Depreciation (9,182) (13,058) (28,802)
Impairment loss - (1,421)
Total 239,754 240,376 250,524
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 20177
11
Notes
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
3 Trade and other receivables
Trade receivables - Current 37,839 49,253 42,189
Trade receivables - Non-current 9,431 - 4,395
Prepayments 2,726 1,825 1,579
Deposits 2,189 1,251 1,871
Other Receivables 920 5,846 6,045
53,105 58,175 56,079
Non-current receivables relates to the Dancokom retention, all indications show that this amount will become due in March 2018.
4 Other financial assets
Available for sale
Held by the Wearne Rehabilitation Trust: Stanlib Wealth
Management Limited 6,702 6,535 6,366
The investments are not available for use by the Group other than for the intended use of site rehabilitation in
accordance with the directives of the Department of Minerals and Energy.
5 Cash and cash equivalents
Current assets 492 672 640
Current liabilities (22,132) (27,626) (22,344)
(21,640) (26,954) (21,704)
The Group has a loan covenant on its facilities with Nedbank which measure the debt service cover. The Group
was in breach of these loan covenants during the year. Although Nedbank has not waived the breach they were made
aware of it and the situation is monitored on a monthly basis.
6 Non-current assets held for sale
Assets
Property, plant and equipment 7,817 53,613 7,817
Trade and other receivables - (285) -
Inventories 60 4,569 60
Cash and cash equivalents - 185 -
7,877 58,081 7,877
Liabilities
Provisions 584 3,702 584
Other financial liabilities - 14,073 -
Trade and other payables - 1,737 -
Bank overdraft - 3 -
584 19,516 584
WG Wearne Limited Unaudited condensed consolidated interim financial results for the six months ended 31 August 20177
12
Notes
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
7 Reserves
Non-distributable reserves
Fair value adjustment to available-for-sale investments 1,864 1,758 1,567
8 Provisions
Environmental rehabilitation 7,885 7,360 7,885
Group companies are required to restore quarry and processing sites at the end of their useful lives to a
condition acceptable to relevant authorities. A rehabilitation trust fund has been established at request of the
regulatory authorities and annual contributions have been made to the trust as required, in order for the
ultimate rehabilitation cost to be provided for at the end of the useful life of site.
9 Other financial liabilities
Opening Balance 152,712 183,331 170,485
New borrowings 1,026 2,119 23,575
Repayments (14,725) (14,965) (41,348)
Closing Balance 139,013 170,485 152,712
Non-current borrowings 24,603 107,091 43,741
Current borrowings 114,410 63,394 108,971
139,013 170,485 152,712
As at 31 August 2017 the following Non-Current Liabilities were reclassified as Current:
· IDC loans in the amount of R68.75 million;
· Nedbank Installment Sale loans of R9.2 million; and
· ABSA Term loan of R30 million.
These long term liabilities were reclassified from Non-Current to Current in compliance with the International Financial Reporting
Standards (IAS 1) which requires an entity to classify a liability as current when the entity is in breach of a provision of a loan
arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand even if the lender
agreed, after the reporting period and before the authorisation of the financial statements for issue, not to demand payment as a
consequence of the breach.
Notes
Unaudited six Unaudited six Audited year
months ended 31 months ended 31 ended
August 2017 August 2016 28 February 2017
R'000 R'000 R'000
10 Cash generated from operations
No material events occurred between the reporting date and the date of this announcement.
Profit / (Loss) before taxation 3,778 (4,239) (23,545)
Adjustments for:
Depreciation and amortisation 9,182 13,058 28,802
Gains on disposals, scrappings and settlements of assets and (2,056) (90) (19,640)
liabilities
Dividend income (35) (19) (53)
Interest income (53) (29) (129)
Finance costs 10,635 12,434 25,586
Impairment losses and reversals - - 1,421
Other non-cash items 49 - 95
Changes in working capital: - -
Inventories 2,974 5,887 9,614
Trade and other receivables (838) (9,980) (7,884)
Trade and other payables (2,883) 6,449 13,682
20,753 23,470 27,949
11 Events after the reporting date
No material events occurred between the reporting date and the date of this announcement.
Corporate details
REGISTERED OFFICE COMMERCIAL BANKERS
WG Wearne Limited Nedbank Limited
(Registration Number 1994/005983/06) (Registration number 1951/000009/06)
Stonemill Office Park Nedbank House
3 Kiepersol House 12 Fredman Drive
300 Acacia Road Sandown
PO Box 1674 PO Box 784088
Cresta, 2118 Sandton, 2146
Tel: 011 459 4500 Tel: 011 775 2600
Fax: 011 459 5481 Fax: 011 783 4882
Email: info@wearne.co.za
TRANSFER SECRETARY COMPANY SECRETARY
Terbium Financial Services (Pty) Ltd iThemba Governance and Statutory
Solutions Proprietary Ltd
Beacon House (Registration number 2008/008745/07)
31 Beacon Road
Florida North, 1709 Route 21 Corporate Park
Tel: 086 010 4191 72 Regency Drive
Email: info@terbium.global Block A
Irene
0157
DESIGNATED ADVISER
Exchange Sponsors
44A Boundary Road
Inanda Sandton, 2196
PO Box 411216
Craighall, 2024
Tel: 011 880 2113
Fax: 011 447 4824
Date: 30/11/2017 05:43:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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