VENTURES: Portland's Pain For Wearne
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BUILDING supplies group WG Wearne looks like it’s paying dearly for its 2008 acquisition of the Cape Town-based Portland Group.
While the deal was aimed at giving Wearne a meaningful presence in the Western Cape, Portland has certainly made its presence felt – in all the wrong ways – on Wearne’s income statement.
In the year to end February 2010 Wearne’s depreciation and net interest paid remained high - impacting negatively on earnings.
Depreciation increased to R47 million (2008:R44 million), while impairments of R18 million were also put through the income statement. Finance charges remained at around R46 million – which was not a comfortable position considering operating profits were only R60 million.
Wearne directors say the depreciation and interest bill arose partly as a result of the acquisition of the Portland Group (which was funded through increased debt.)
The directors say these costs were compounded by the losses made by Portland because of the deep recession in the Western Cape.
No divisional breakdown was provided in the results, but Portland’s performance should be disclosed in the up coming annual report.
As a whole Wearne finished the financial year almost R50 million in the red. The tough trading conditions have understandably staunched Wearne’s cash flow, and the company’s bankers agreed to a debt repayment moratorium in August 2009, December 2009 and January 2010.
Wearne, though, has alleviated some pressure by concluding a rights issue in February this year to raise R26 million.
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