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SPANJAARD LIMITED - Unaudited Interim Group Results for the Six Months Ended 31 August 2018

Release Date: 18/10/2018 10:47
Code(s): SPA     PDF:  
 
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Unaudited Interim Group Results for the Six Months Ended 31 August 2018

Spanjaard Limited

(Incorporated in the Republic of South Africa) 

Registration number: 1960/004393/06

Share code: SPA ISIN: ZAE000006938 

(“Company” or “Group”)



Unaudited interim Group results for the six months ended 31 August 2018



Condensed consolidated statement of comprehensive income



                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Revenue                                              63 737         56 181

Cost of sales                                       (38 907)       (36 149) 

Gross profit                                         24 830         20 032

Other income                                             76            485

Distribution costs                                   (5 706)        (6 235) 

Administration expenses                             (16 524)       (17 335) 

Finance costs                                          (559)          (432) 

Profit/(loss) before tax                              2 117         (3 485) 

Taxation                                               (863)           684

Profit/(loss) for the period                          1 254         (2 801) 

Other comprehensive income/(loss)

Items that may be subsequently 

reclassified to profit or loss

Movement in foreign currency translation

reserve                                                 (92)            24

Total comprehensive income/(loss) for the

period attributable to ordinary shareholders          1 162         (2 777) 

Profit/(loss) per ordinary share

— basic and diluted (cents)                           15,40         (34,39) 

Headline profit/(loss) per ordinary share

— basic and diluted (cents)                           15,50         (35,48)





Condensed consolidated statement of financial position



                                                        As at        As at

R’000                                             31 Aug 2018  28 Feb 2018

Assets

Non-current assets                                     32 592       30 572

Property, plant and equipment                          31 047       28 994

Intangibles                                             1 108        1 141

Goodwill                                                  437          437

Current assets                                         41 381       33 658

Inventories                                            17 555       16 768

Trade receivables and other receivables                23 365       16 255

Cash and cash equivalents                                 461          635

Non-current assets held for sale                           22          126

Total assets                                           73 995       64 356

Equity and liabilities

Capital and reserves attributable to the

Company's equity holders

Ordinary shares                                           407          407

Share premium                                           6 464        6 464

Reserves                                               35 411       34 065

Foreign currency translation reserve                       94            2

Revaluation reserve                                     7 379        7 621

Share-based payment compensation reserve                    —        1 906

Retained earnings                                      27 938       24 536

Total shareholders' equity                             42 282       40 936

Non-current liabilities                                 7 492        4 553

Deferred tax liabilities                                5 108        4 164

Borrowings                                              2 384          389

Current liabilities                                    24 221       18 867

Trade and other payables                               14 418       11 479

Bank overdraft                                          8 833        7 035

Borrowings                                                962          345

Shareholders for dividends                                  8            8

Total liabilities                                      31 713       23 420

Total equity and liabilities                           73 995       64 356

Net asset value per share                              519,24       502,71



Dividends



                                              Six months to  Six months to

Dividend declared per ordinary share (cents)    31 Aug 2018    31 Aug 2017

— interim                                                 —              —



Supplementary information





                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Capital expenditure                                  (3 121)          (967)





Condensed consolidated statement of cash flows



                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Cash flows from operating activities

Cash receipts from customers                         56 985         54 327

Cash paid to suppliers and employees                (58 164)       (58 239) 

Cash used in operations                              (1 179)        (3 912) 

Interest paid                                          (559)          (432) 

Tax received                                              —            207

Net cash used in operating activities                (1 738)        (4 137) 

Cash flows from investing activities

Purchases of property, plant and equipment           (3 019)          (861) 

Purchases of intangible assets                         (102)          (106) 

Proceeds on sale of property, plant and

equipment                                                 3            270

Proceeds on sale of non-current assets held

for sale                                                 98              — 

Net cash used in investing activities                (3 020)          (697) 

Cash flows from financing activities

Borrowings repaid                                      (344)          (957) 

Proceeds from borrowings                              2 956            680

Loans from holding company — loans received               —            374

Loans from holding company — repayments made              —           (285) 

Net cash generated from/(used in) financing

activities                                            2 612           (188)

Net decrease in cash and cash equivalents            (2 146)        (5 022) 

Cash and cash equivalents at beginning of

period                                               (6 400)        (2 997)

Effect of exchange rate changes on cash and

cash equivalents                                        174            (11) 

Cash and cash equivalents at end of period           (8 372)        (8 030)



Condensed consolidated statement of changes in equity



                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Ordinary shares                                         407            407

Share premium                                         6 464          6 464

Share-based payment compensation reserve                  —          1 906

Opening balance                                       1 906          1 906

Transfer to retained earnings                        (1 906)             — 

Foreign currency translation reserve                     94             (7) 

Opening balance                                           2             17

Movement for the period                                  92            (24) 

Revaluation reserve                                   7 379          8 193

Opening balance                                       7 621          8 536

Transfer to retained earnings                          (242)          (343) 

Retained earnings                                    27 938         25 697

Opening balance                                      24 536         28 155

Total profit/(loss) for the period                    1 254         (2 801) 

Transfer from share-based compensation

reserve                                               1 906              —

Transfer from revaluation reserve                       242            343

Total shareholders’ equity                           42 282         42 660



Operating segments



                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Segment revenue

Special lubricants and allied chemicals              62 566         54 496

External foreign customers                           12 072          7 285

External local customers                             50 494         47 211

Anti-friction powders                                    41            965

External foreign customers                                —            435

External local customers                                 41            530

Other                                                 3 953          3 271

External foreign customers                            2 753          2 071

External local customers                              1 200          1 200

Interdivisional transactions                         (2 823)        (2 551) 

Inter-segment sales                                  (2 823)        (2 551)

                                                     63 737         56 181



                                              Six months to  Six months to

R’000                                           31 Aug 2018    31 Aug 2017

Segment earnings/(loss) before interest 

and tax

Special lubricants and allied chemicals               2 496         (3 125) 

Anti-friction powders                                  (562)          (370) 

Other                                                   863            563

Reconciling items                                      (121)          (121)

                                                      2 676         (3 053)

Segment assets

Special lubricants and allied chemicals              62 200         52 967

Anti-friction powders                                 9 133          9 510

Other                                                21 178         20 579

Reconciling items                                   (18 516)       (18 700)

                                                     73 995         64 356

Segment liabilities

Special lubricants and allied chemicals              33 609         25 743

Anti-friction powders                                 2 305          2 078

Other                                                12 520         12 659

Reconciling items                                   (16 721)       (17 060)

                                                     31 713         23 420



Reconciliation of headline earnings

R’000

                                              Six months to  Six months to

                                                31 Aug 2018    31 Aug 2017

R’000

Profit/(loss) attributable to shareholders            1 254         (2 801) 

Loss/(profit) on disposal of property, plant

and equipment                                            12           (123)

Income tax effect on disposal                            (3)            36

Headline earnings/(loss)                              1 263         (2 888) 

Weighted average number of ordinary

Shares in issue (’000)                                8 143          8 143

Headline earnings/(loss) per ordinary share

— basic and diluted (cents)                           15,50         (35,48)





Basis of preparation and accounting policies

The condensed consolidated interim financial statements for the six months 

ended 31 August 2018 have been prepared in accordance with International 

Financial Reporting Standards (IFRS), IAS 34 Interim Financial Reporting, 

the SAICA Financial Reporting Guides as issued by the Accounting Practices 

Committee and the Financial Pronouncements as issued by the Financial 

Reporting Standards Council, as well as the requirements of the South 

African Companies Act and the JSE Listings Requirements.



The condensed consolidated interim financial statements do not include all 

the disclosures required for a full set of financial statements prepared in 

accordance with International Accounting Standards (IFRS) as issued by the 

International Accounting Standards Board.



The condensed consolidated interim financial statements appearing in this 

announcement are the responsibility of the directors and the directors 

take full responsibility for the preparation thereof. Ian Saunders CA(SA), 

Financial Director, is responsible for this set of condensed consolidated 

interim financial statements.



The accounting policies applied in the preparation of these condensed 

consolidated interim financial statements are in terms of IFRS and are 

consistent with those applied in the consolidated annual financial 

statements for the year ended 28 February 2018. The condensed consolidated 

interim financial statements have not been reviewed or audited by the 

group’s auditors.



Commentary

Points of interest

* Group revenue is up by 13,4%

* Operating profit of R2,67 million

* Net asset value increased from 502,71 to 519,24 cents per share



Statement by the CEO

Spanjaard saw somewhat of a recovery during the first half of the financial 

year. Revenue grew by 13,45%, mainly as a result of increasing export sales 

and a recovery in cooking spray sales which was a concern for the group 

during the comparative period. As a result of these increased sales and a 

reduction in costs, we managed to improve from a loss before tax of 

R3,485 million in the comparative period a year ago to a profit before 

tax of R2,117 million for this reporting period.



The resulting headline earnings per share has increased from a loss of

35,48 cents per share to a profit of 15,50 cents per share. Gross profit

margins also improved by 3,3% to 38,95% which is pleasing. Management has 

continued to aggressively interrogate all costs and substantial savings 

have been made in many operational areas.



The closure of the operations of our anti-friction powders subsidiary 

Coppermet (Pty) Ltd was completed in April 2018. Although this had a 

negative effect on revenue during the period, we look forward to the 

anticipated future savings of operational expenses. Although we have 

closed our own manufacturing operations we will still continue to trade 

graphite powders into the foreseeable future. Management will continue 

to look for ways in which we can grow the special lubricants and allied 

chemicals business, where revenue grew by 14,81%, organically through 

the development of new products and entering new markets.



Our special lubricants and allied chemical product exports improved by 

66% as a result of new business and we look forward to strengthening and 

establishing long-term partnerships with our new distributors with the 

support of our dedicated team to ensure their success. Our export pipeline 

looks stable for the remainder of the year. Our European operation out 

of Rotterdam has also shown good growth in revenue and profit.



During the reporting period, our new gassing equipment arrived from 

Europe and was successfully commissioned. This equipment was financed 

through traditional asset finance and has improved the efficiency of 

two of our aerosol lines. We will continue to invest in new machinery 

to replace aging machinery which is proving difficult to maintain as 

replacement parts become harder to source.



The outsourcing of our warehousing and distribution commenced in September

2018. While we acknowledge that, while the transition is taking place, we 

may experience slight teething problems that could impact our sales in the 

short term, we are confident that as a result of this move our service to 

our customers will improve and lead to improved performance and efficiency.



Our negative cash flow for the period, although not ideal, can largely be 

attributed to short-term timing differences. These include the prepayment 

of our learnership program earlier in the year, which only commenced in 

September 2018 and also the slightly delayed receipts from relatively large 

debtors which amounts were due by 31 August 2018. Increased finance charges 

that can be attributed to our higher overdraft levels as well as the 

financing of our new equipment impacted both cash flow and the income 

statement.



As reported in our integrated annual report for the year ended 28 February

2018, we are currently cooperating with the Department of Labour in terms

of an employment equity dispute. We expect the matter to be amicably resolved 

in the near future.



With added costs of learnerships, increased warehousing and distribution costs

as well as the recessionary environment the Country currently finds itself in,

management will continue to work hard to ensure that we have a successful second

half of the year.



Mr Bernard Montgomery, a long-standing independent non-executive director of the

company, resigned as a director and member of the Audit Committee with effect 

from 31 August 2018. 



Interim dividend

The Board has resolved that no interim dividend will be declared for the six 

months ended 31 August 2018 (2017: RNil).



By order of the Board



Prof DP van der Nest

Independent Non-executive Chairman



K Welgemoed

Chief Executive Office



I Saunders

Financial Director



18 October 2018



Company information

Registration number

1960/004393/06



Directors

Prof DP van der Nest* (Independent Non-executive Chairman), K Welgemoed CA(SA) 

(Chief Executive Officer), I Saunders CA(SA) (Financial Director), GF Cort, 

CKT Palmer MSc MBA, TN Stewart, S Hari*

*Independent Non-executive



Registered office

748 - 750 Fifth Street, Wynberg, Sandton, 2090



Company Secretary

Levitt Kirson Business Services (Pty) Ltd, 4th Floor, Aloe Grove, Houghton

Estate Office Park, 2 Osborn Road, Houghton, 2198



Transfer Secretaries

Computershare Investor Services Proprietary Limited Rosebank Towers, 

15 Biermann Avenue, Rosebank, Johannesburg, 2196



Sponsors

Arbor Capital Sponsors Proprietary Limited, 20 Stirrup Lane, Woodmead

Office Park, Corner Woodmead Drive and Van Reenens Avenue, Woodmead 2191



info@spanjaard.biz www.spanjaard.biz
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