WG WEARNE LIMITED
Wearne annual results show significant growth despite heavy rains, rate hikes and load shedding
- Revenue up 53% to R539 million
- Headline earnings up 51% to R39 million
- Earnings per share up 39% to 27.5 cents
- Headline earnings per share up 37% to 26.9 cents
- Net tangible asset value per share up 26% to 114.9 cents
Wednesday, 21 May 2008: AltX-listed construction industry supplier, WG Wearne Limited, posted excellent growth for the trading year ending 29 February 2008, despite more challenging trading conditions in the second half due to high rainfalls, a rising interest rate environment and severe operational disruptions caused by unscheduled Eskom load shedding in January.
Group revenue increased by 53% to R538.8 million (2007: R352.5 million) and gross profit increased by 61% to R170.7 million (2007: R106.3 million). Earnings before interest, tax, depreciation and amortization (EBITDA) increased significantly, by 85%, to R110 million (2007: R59.2 million) and at this level of reporting, margins were maintained at 20% (2007: 17%).
Wearne CEO, John Wearne, says “The group managed to achieve this through a combination of a moderate increase in gross profit margins, but, more significantly, by better recovery of administrative expenses through higher turnover figures.”
A high level of capital expenditure at R170 million saw depreciation charges increase by 91% to R31.5 million (2007: R16.4 million). Also on the increase was the net interest charge, escalating to R23.7 million (2007: R6.4 million), mainly due to new hire purchase agreements on plant and equipment to the value of R97.2 million, as well as several increases in interest rates during the financial year.
As part of its risk management practices, the Wearne board is continuously reviewing the group’s exposure to long term debt and will ensure that cash flow is sufficient to service all debts.
Profit attributable to ordinary shareholders increased by 53% to R40 million (2007: R26 million). Fully diluted headline earnings per share increased by 37% to 26.1 cents (2007: 19.0 cents).
For the aggregate division, turnover more than doubled due to the acquisition of the De Bruyn Sand business as well as the Tzaneen quarry. The group also acquired three additional mobile crushing plants and three drill rigs to bolster its contract crushing, drill and blast capabilities. Gross profit more than doubled to R100 million (2007: R45.5 million). Gross profit margins however decreased to 30% (2007: 34%) due to the lower margins achieved in the contracting environment.
In the ready mixed concrete division, turnover increased by 39% to R376.9 million, in line with the growth target of 25% increase in volumes. A gross margin of 19% was achieved, compared with 22% in 2007. The reduction in margin was attributable to the VRESAP contract (The Vaal River Eastern Subsystem Augmentation Project, also called the Vaal Pipeline Project, a project of state-owned Trans-Caledon Tunnel Authority), which was concluded at a lower gross profit margin than other contracts. This contract was completed in February 2008.
In the concrete product manufacturing division, the Bethlehem brick plant joint venture was commissioned in June 2007 and achieved break-even within nine months. A gross profit margin of 16% was achieved. The full potential of this operation will only be visible after a full year of trading. A pre-cast concrete pipe plant in Polokwane will be commissioned in June 2008 and will form part of this division.
“We look forward to a less disruptive 2008/09”, says Wearne. “Capital expenditure to the value of R10 million has been approved to ensure that there is uninterrupted power supply to all of Wearne operations. Still to be finalized is the acquisition of the Willowsfountain Quarry in Pietermaritzburg as a new mining lease with the property owners has not been concluded.”
Subsequent to year end the group announced the acquisition of Western Cape Portland Group, a supplier of ready mixed concrete and aggregate products to the construction industry. ENDS
JSE code: “WEA”
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