A subdued local construction market, paired with the R59-million closing out of its construction services business, has seen WG Wearne widen its loss from continuing operations from R18.4-million in 2016, to R28.8-million for the year ended February 28.
In a copy of its financial statements, published on the JSE’s Sens, on Monday, the company stated that while it was undergoing a restructuring process, material uncertainty existed that cast significant doubt on the group’s ability to continue as a going concern.
It added that while it was still technically solvent, with a net asset value of R10.05-million, its current liabilities of R287.4-million exceeded current assets of R80.1-million by R207.3-million.
In a breakdown of its results, the JSE-listed company noted that revenue in its aggregates division had decreased by R33-million to R163-million, which resulted in an operating profit of R3.3-million.
“The reduced revenue was due to the sale of the Bethlehem quarry, as well as an increase in competition in certain areas,” it said.
The ready-mix concrete division also saw a decrease in revenue of 14% to R220-million; however, it achieved an operating profit of R7.7-million compared with an operating loss of R1.3-million in 2016, owing to a R126-million contract secured for the supply of concrete to a solar farm project, in the Northern Cape.
WG Wearne’s contracting division also saw a decrease in revenue from R59.8-million in 2016 to R34.3-million in the current year. “This was mainly as a result of closing-out contracts that were awarded to the group for construction services on the solar farm projects,” it said.
The group’s gross profit margins from continuing operations also decreased to 16.8%, while the total proceeds on disposal of assets were R50-million. The group expanded its plant and equipment by R12-million.
The current year’s performance resulted in a headline loss a share of 16.89c and a loss a share from continuing and discontinued operations of 10.22c, while the net asset value a share decreased to 3.68c.
“We, again, experienced a tough financial year as the ongoing oversupply of cement and lack of infrastructure spend by government caused intense competition in the markets that we are involved in.
“Current conditions are set to continue for the foreseeable future as growth in cement sales is forecast to be minimal for the 2017 calendar year. We will, however, seek to secure further contracts outside the urban areas where competition is less fierce,” WG Wearne noted.