WG Wearne believes it can come right
UNCERTAINTY remains about the continued existence of WG Wearne despite the troubled listed ready-mix concrete and aggregates supplier expressing confidence that a viable and profitable business would emerge once its restructuring plan had been fully implemented.
SJ Wearne, the company’s chief executive, said yesterday that the ability of the group to fund short-term operations in the forseeable future would depend largely on the continued support of the group’s funders, a return to profitable trading and the ability to generate sufficient cash flows to honour commitments made to the South African Revenue Service (Sars) about a deferment agreement concluded after its financial year end.
Wearne said the group was technically solvent, with a net asset value of R10.05 million, while current liabilities of R287.4m exceeded current assets of R80.1m by R207.3m.
He said current liabilities included R40m owed to Sars.
“Subsequent to year end, the group has entered into a deferment agreement with Sars, which resulted in the majority portion becoming long term (R36.4m), as long as the current and deferral payments remain up to date,” he said.
Also included as current liabilities were Industrial Development Corporation (IDC) loans totalling R68.75m and Nedbank loans of R9.2m.
Wearne said the IDC had indicated that it was unlikely that the corporation would call in its loans within the next 12 months.
He said the financial results for the year to February had been prepared on the going-concern basis, because the directors believed the group had adequate resources to continue operating for the foreseeable future.
“While management are aware of the cash-flow pressures and significant liquidity uncertainty at year-end, they continue to assess the situation as one whereby the group is able to service its debts that will become due in the next 12 months and also fund operational losses that may arise,” he said.
Wearne said management would continue to roll out the restructuring plan it had implemented last year.
“The aim of the process is to reduce the cash flow pressures of the group, and to improve the 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,” he said.
Wearne said that the group experienced a tough financial year because of the over-supply of cement and the lack of infrastructure expenditure by the government resulting in intense competition in the markets in which the group operated.
The group yesterday reported a widening in its headline loss a share in the year to February, from 6.95 cents to 16.89c. Net asset value a share decreased from 15.47c to 3.68c.
Group revenue fell 18 percent, from R511.9m to R417.8m.
Operating profit dropped 63 percent, from R5.1m to R1.86m as gross profit margins from continuing operations deteriorated from 21.1 percent to 16.8 percent.
Total liabilities decreased 5.3 percent, from R360m to R341m, with R47m in borrowings settled during the year.
Shares in WG Wearne rose 16.67 percent on the JSE yesterday to close at 7c.