WISR LIMITED — Annual Report 2012

Aug 30, 2012

Appendix 4E

Preliminary Final Report

Name of Entity:

Berklee Limited

ABN:

80 004 661 205

Reporting Period:

Financial Year ended 30 June 2012

Previous corresponding Period:

Financial Year ended 30 June 2011

Results for Announcement to the market

$A’000

Results for Announcement to the market $A’000	Results for Announcement to the market $A’000	Results for Announcement to the market $A’000
Revenues from ordinary activities down 8% to 5,638 (Loss) from ordinary activities after tax attributable to members improved 2% to (917) Net (Loss) for the period attributable to members improved 4% to (2,149) Other comprehensive income after tax attributable to members down 100% to nil Total comprehensive income attributable to members down 633% to (2,149)
Dividends	Amount per security	Franked amount per security
2012 final dividend	nil	nil
Previous corresponding period	2.00 cents	2.00 cents
Date dividend ispayable	N/A
Record date for determining entitlements to the dividend	N/A

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Berklee Limited Appendix 4E (cont) 30 June 2012

Other Items of importance for the market

In the prior financial year the consolidated entity announced a restructure plan for the distribution business to tackle operating losses. This financial period the distribution business has been designated a discontinued business. At 30 June 2012 the consolidated entity is in the process of exiting this business having closed distribution centres in WA, Queensland and NSW. Distribution in those states is now being undertaken through Mercury Muffler stores (Mercury) pursuant to a distribution agreement. Three states remain to be restructured. Revenue from Continuing operations includes sales to Mercury from January 2012.

Consolidated net operating cash flow has improved significantly on the prior period as the reduction in inventory and accounts receivable has been turned to cash.

Consolidated financial highlights following restructure: Revenue from continuing operations Revenue from discontinued operations Total consolidated revenue (Loss) from continuing operations before tax *** (Loss) from discontinued operations before tax Total consolidated (Loss) before tax Consolidated net operating cash flows inclusive of discontinued operations	FY12 $’000 5,638 3,628 9,266 (917) (1,232) (2,149) 123	FY11 $’000 6,115 3,233 9,348 (564) (1,841) (2,405) (920)

• *** The comparative FY11 financial information contains certain material transactions. Details of their allocation between continuing or discontinued operations is noted below:

• Gains on disposal of land and buildings before tax $527k - continuing operations

• Restructuring expense before tax - $122k is in continuing operations with $1,550k in discontinued operations

• Write off of deferred tax assets relating to prior year tax losses of $135k and non recognition of tax losses of $364k are both in continuing operations.

The prior year Other comprehensive income includes revaluation increments of land and buildings after income tax of $1,935k which are shown in continuing operations.

Net Tangible assets per security

	Current period	Previous corresponding period
Net tangible asset backing per ordinary security	95.3 cents per share	118.8 cents per share

Control gained over entities having material effect

N/A Loss of control of entities having material effect N/A

Details of aggregate share of profits (loss) of associated and joint venture entities

N/A

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Berklee Limited Appendix 4E (cont) 30 June 2012

This report is based on:

The financial report is in the process of being audited.

Signature: Company Secretary BRETT JONES

Date: 31 August 2012

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Appendix 4E Berklee Limited ASX Code: BER ABN: 80 004 661 205

Preliminary Final Report for the Financial Year ended 30 June 2012 (Previous corresponding period: Full Year ended 30 June 2011)

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Berklee Limited ABN: 80 004 661 205

Directors’ Report

Your directors submit their report for the financial year ended 30 June 2012.

DIRECTORS

The names of the company’s directors in office during the financial year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Alan Ian Beckett – Chairman Grantly Martin Anderson – Deputy Chairman Brett Jones (appointed Managing Director and Company Secretary 8 November 2011) Edward John van Berkel (resigned as Managing Director and Company Secretary 7 November 2011)

Rick van Berkel (appointed a Director 1 December 2011) Egon Wolfgang Vetter (retired 30 November 2011)

Changes in Directors

Mr. E. van Berkel retired as Managing Director of the Company following 27 years with the company. Mr. E. Vetter retired following 7 years as a director. The Board thanks them for their contribution.

The Board renewal program was completed with the appointment of Mr. B. Jones and Mr. R. van Berkel during the year.

The Board is focussed on ensuring the company strategy is implemented.

REVIEW AND RESULTS OF OPERATIONS

The results presented below summarise the performance of the consolidated entity over the last year restated to reflect the restructuring of the business between continuing and discontinued operations. The restructuring of the business was announced to tackle the substantial operating losses.

Consolidated financial highlights following restructure: Revenue from continuing operations Revenue from discontinued operations Total consolidated revenue (Loss) from continuing operations before tax *** (Loss) from discontinued operations before tax Consolidated (Loss) before tax Consolidated net operating cash flow inclusive of discontinued operations	FY12 $’000 5,638 3,628 9,266 (917) (1,232) (2,149) 123	FY11 $’000 6,115 3,233 9,348 (564) (1,841) (2,405) (920)

*** The comparative FY11 financial information contains certain material transactions. Details of their allocation between continuing or discontinued operations is noted below:

• Gains on disposal of land and buildings before tax $527k - continuing operations

• Restructuring expense before tax - $122k is in continuing operations with $1,550k in discontinued operations

• Write off of deferred tax assets relating to prior year tax losses of $135k and non recognition of tax losses of $364k are both in continuing operations

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Berklee Limited ABN: 80 004 661 205

Directors’ Report (cont.)

Whilst disappointing the result for the year to 30 June 2012 was in line with expectations following the decision to restructure the consolidated entity. Significant improvement has been made on certain key metrics.

Revenue from continuing operations was affected by a number of factors arising from the business restructure. These factors are explained at “Results from continuing operations” below.

Consolidated net operating cash flow has improved significantly on the prior period as the campaign to reduce inventory and accounts receivable has successfully been turned to cash.

Results from continuing operations

Continuing operations	2012 $’000	2011 $’000
Revenue from sales Other revenue Cost of materials Other expenses EBITDA Depreciation EBIT Interest Gain on sale of property Operating (Loss) before tax for statutory purposes from continuing operations	5,501 69 (2,578) (3,351)	5,939 38 (2,889) (3,692)
	(359) (626)	(604) (625)
	(985) 68 -	(1,229) 138 527
	(917)	(564)

Sales revenue from continuing operations declined 7% or $438k to $5,501k. This is due to:

• sales of Berklee designed product to Mercury Mufflers only commencing in January 2012 in preparation for them to assume responsibility for the WA branch in February 2012. Sales to Queensland and NSW followed in March and April 2012 respectively;

• the manufacture and sale of Mercury designed product did not commence as rapidly as originally assumed due to high inventory levels at Mercury;

• reduced production to assist with the inventory reduction campaign; and

• a decline in the overall car fleet requiring after market exhaust product.

Sales of non-aftermarket product were in line with the prior year. Work continues on rationalising the aftermarket product range and pricing structures as well as expanding the non-aftermarket product range and customer base.

The EBITDA loss from continuing operations of $(359)k improved 40% or $245k on the prior year. This is due to significant attention being paid to cost management. Non material operating expenses declined $341k or 9% to $3,351k. Work continues on streamlining these expenses.

The Loss before tax from continuing operations of $(917)k on a like for like basis improved 16% from the prior year loss of $(1,091)k. The prior year loss of $(1,091)k excludes gains from the sale of property of $527k.

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Berklee Limited ABN: 80 004 661 205

Directors’ Report (cont.)

Results from continuing operations (cont.)

Losses after tax from continuing operations were $(917)k which was a 2% improvement on the prior year loss of $(940)k. This was due to there being no income tax expense for this financial year and the inclusion of gains from sale of property in the prior year. The consolidated entity has significant non recognised tax losses.

The results indicate that further work is required to return the consolidated entity to profitability however significant progress has been made on:

• Tackling supply chain issues such as sourcing, inventory management, and distribution with inventory declining net of provisions by 49% year on year (44% since 31 December 2011) to $1,984k with reductions continuing post 30 June 2012. Management are optimistic of reaching target inventory levels by December 2012.

• Streamlining the work force with a continued focus on ensuring the optimal work force structure and flexibility. Head count in the continuing operations has been reduced by 22% to 32 at 30 June 2012 to better reflect the restructured operations needs.

• Operating leases surplus to requirements have been terminated.

• Reviewing pricing arrangements with key customers to improve competitiveness and profitability of the product range.

• Progress made on research and development of new products.

• Improving working capital management with Consolidated net operating cash flow for the year positive at $123k (FY11 $(920)k outflow) notwithstanding the operating loss. Non cash items such as depreciation contribute 62% or $626k to the current year loss (FY11 76% or $625k).

Subject to no unforeseen adverse economic conditions beyond the company’s control occurring, the Directors expect Berklee to return to profitability after the restructure is completed.

Discontinued operations and restructuring

As outlined above the distribution business has been designated a discontinued business for reporting purposes.

Sales from discontinued operations were $3,628k compared with $3,233k in the prior year. This increase is attributable to the significant campaign to exit excess inventory during the year and the one off sale to Mercury of an initial inventory range for the branches they assumed responsibility for in WA, Queensland and NSW. The distribution operations continue in Victoria, South Australia and Tasmania for the time being however management are in the process of finalising options to exit these businesses. These states are included in Revenue from discontinued operations and they continue to face significant competitor pressure. This supports the Board’s decision to restructure the distribution model and focus on expanding the non-aftermarket product range and customer base.

The loss after tax for this business was $(1,232)k compared with FY11 $(1,108)k notwithstanding the closure of WA, Queensland and NSW. The ability to exit premises and sub let was impacted heavily by the current economic climate resulting in additional cash costs being incurred although for reporting purposes these were applied to the restructuring provision. Losses in those three states have now ceased.

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Berklee Limited ABN: 80 004 661 205

Directors’ Report (cont.)

Dividend

The Directors have resolved not to pay a final dividend at this time given the discussion’s (which were announced to the market on 23 August 2012) with certain parties which may lead to an offer for all the shares in the company or which may result in an alternative transaction.

ROUNDING

The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to which the Class Order applies.

Signed in accordance with a resolution of the directors.

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A. I. Beckett Director Melbourne, 31 August 2012

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Berklee Limited ABN: 80 004 661 205

Statement of Comprehensive Income Year Ended 30 June 2012

Note CONTINUING OPERATIONS Revenues Revenue from sale of goods Other revenue Revenue from ordinary activities Gain on sale of property, plant and equipment Total revenues Expenses Changes in inventories of finished goods and work in progress Raw materials and consumables used Depreciation and amortisation expenses Finance costs Salaries and employee benefits expense Freight expense Restructuring provision and impairment charges 5(a) Operating lease rental expense Auditors - audit fee Sales and marketing expense Insurance expense Doubtful debt provision Inventories diminution provision Utilities, rates and taxes Other expenses from ordinary activities Total expenses (Loss)before tax from continuing operations Income tax expense/(benefit) 1 (Loss) after tax from continuing operations (Loss) after tax from discontinuing operations 10 (Loss) for the year Other comprehensive income: Income from Revaluation of land and buildings Income tax expense/(benefit) attributable Other comprehensive income for the year Total comprehensive income for the year (Loss) for the year attributable to: Members of the parent entity Total comprehensive income for the year attributable to: Members of the parent entity Earnings per share (cents per share) (Loss) after tax from continuing operations - Basic earnings per share - Diluted earnings per share (Loss) for the year - Basic earnings per share - Diluted earnings per share	Consolidated 2012 $’000 2011 $’000 5,501 5,939 137 176
	5,638 6,115 - 527
	5,638 6,642 (39) 30 2,617 2,859 626 625 6 6 2,373 2,570 301 345 (62) 122 53 70 63 65 46 65 103 94 - - 57 - 116 113 295 242
	6,555 7,206
	(917) (564) - 376
	(917) (940) (1,232) (1,288)
	(2,149) (2,228)
	- 2,764 - 829
	- 1,935
	(2,149) (293)
	(2,149) (2,228)
	(2,149) (2,228)
	(2,149) (293)
	(2,149) (293)
	(9.2) (9.4) (9.2) (9.4) (21.5) (22.3) (21.5) (22.3)

The above consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes .

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Berklee Limited ABN: 80 004 661 205

Statement of Financial Position Notes Year Ended 30 June 2012 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment 3 Deferred tax assets 1 Total non-current assets Total assets LIABILITIES Current Liabilities Trade and other payables Borrowings Provisions 5 Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Issued Capital Reserves Retained earnings Total equity Equity attributable to owners of Berklee Limited	Consolidated As at 30 June 2012 $’000 As at 30 June 2011 $’000 2,156 2,298 1,384 1,563 1,984 3,921 248 80
	5,772 7,862
	- 189 5,668 6,254 - -
	5,668 6,443
	11,440 14,305
	1,072 1,277 44 29 756 1,068
	1,872 2,374
	39 53
	39 53
	1,911 2,427
	9,529 11,878
	8,700 8,700 2,214 2,214 (1,385) 964
	9,529 11,878
	9,529 11,878

The above consolidatedStatement of Financial Position should be read in conjunction with the accompanying notes .

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Berklee Limited ABN: 80 004 661 205

Statement of Changes in Equity Year Ended 30 June 2012

Consolidated

Note Balance at 1 July 2010 Profit/(loss) for the period Revaluation of land and buildings Total comprehensive income for the period Transfer of realised gains from Asset Revaluation Reserve Payment of dividends 2 Balance at 30 June 2011 Balance at 1 July 2011 Profit/(loss) for the period Other comprehensive income Total comprehensive income for the period Payment of dividends 2 Balance at 30 June 2012	Issued Capital Asset Revaluation Reserve Retained Earnings Attributable to owners of the parent Total equity $’000 $’000 $’000 $’000 $’000 8,700 698 2,973 12,371 12,371
	- - (2,228) (2,228) (2,228) - 1,935 - 1,935 1,935
	- 1,935 (2,228) (293) (293)
	- (419) 419 - - - - (200) (200) (200)
	8,700 2,214 964 11,878 11,878
	8,700 2,214 964 11,878 11,878
	- - (2,149) (2,149) (2,149) - - - - -
	- - (2,149) (2,149) (2,149) - - (200) (200) (200)
	8,700 2,214 (1,385) 9,529 9,529

The above consolidatedStatement of Changes in Equity should be read in conjunction with the accompanying notes .

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Berklee Limited ABN: 80 004 661 205

Statement of Cash Flows Year Ended 30 June 2012

Note Cash flows from operating activities Receipts from customers (Inclusive of GST) Payments to suppliers and employees (Inclusive of GST) Interest received Finance costs Income taxes (paid)/received Net cash provided by/(used in) operating activities Cash flows from investing activities Payment for property, plant and equipment Proceeds from sale of property, plant and equipment Disposal costs of property, plant and equipment sold Net cash provided by/(used in) investing activities Cash flows from financing activities Dividends paid Proceeds from borrowings Repayment of borrowings Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period Cash and cash equivalents at the end of the financial period 8	Consolidated 2012 $’000 Inflows (Outflows) 2011 $’000 Inflows (Outflows) 10,316 10,085 (10,255) (11,137) 68 138 (6) (6) - -
	123 (920)
	(105) (168) 25 910 - (30)
	(80) 712
	(200) (200) 117 117 (102) (117)
	(185) (200)
	(142) (408) 2,298 2,706
	2,156 2,298

The above consolidatedStatement of Cash Flows should be read in conjunction with the accompanying notes .

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Berklee Limited ABN: 80 004 661 205

Notes to the Financial Statements for the Financial Year Ended 30 June 2012

1. INCOME TAX (a) Income tax expense/(benefit) Current tax Deferred tax - continuing operations Deferred tax – discontinued operations (b) Numerical reconciliation of income tax expense/(benefit) to prima facie tax payable Profit/(loss) from continuing operations before income tax Profit/(loss) from discontinued operations before income tax Accounting profit before income tax Prima facie tax expense/(benefit)at the Australian tax rate of 30% (2011: 30%) Tax effect amounts which are not deductible (taxable) in calculating taxable income: Other items De recognition of prior year tax losses Non recognition of current year tax losses Temporary difference valuation allowance Total income tax expense/(benefit) Income tax expense from continuing operations Income tax expense/(benefit) from discontinued operations (c) Deferred tax assets movements: The overall movement in the deferred tax account is as follows: Opening balance (Debited)/Credited to the income statement (Debited) to other comprehensive income Closing balance	Consolidated 2012 $’000 2011 $’000 - - - 376 (553)
	- (177)
	(917) (564) (1,232) (1,841)
	(2,149) (2,405) (645) (722) 1 11 - 135 679 364 (35) 35
	- (177)
	- 376 - (553)
	- (177)
	- 516 - 313 - (829)
	- -

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Berklee Limited ABN: 80 004 661 205

Notes to the Financial Statements (cont.) for the Financial Year Ended 30 June 2012

1. INCOME TAX(cont.) (d) Deferred tax asset components: Tax assets and liabilities recognised in the balance sheet comprise: - Deferred tax assets attributable to temporary differences - Deferred tax liabilities attributable to temporary differences Net deferred tax balance The composition of temporary differences is as follows: Amounts recognised in profit or loss: Provision for doubtful debts Provision for leave entitlements Provision for diminution of inventory Accruals Provision for restructure Operating lease settlement Excess property, plant and equipment WDV (tax) over WDV (book) Tax amortisation of deferred costs Prepayments Tax losses Amounts recognised in Equity: Revaluation of property Other The deferred tax asset/liability is expected to be recovered/settled over the following timeframe: Within 12 months After 12 months (e) Tax losses Current tax losses recognised in the Statement of Financial Position: Tax losses not recognised in the Statement of Financial Position: These tax losses will be available to the consolidated entity should sufficient taxable income be earned in future periods and statutory conditions for deductibility remain.	Consolidated 2012 $’000 2011 $’000 858 902 (858) (902)
	- -
	3 2 132 196 128 229 24 23 159 216 (11) (15) 212 212 12 24 (18) (23) 188 - (829) (829) - (35)
	- -
	418 676 (418) (676)
	- -
	188 -
	1,187 499

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Berklee Limited ABN: 80 004 661 205

Notes to the Financial Statements (cont.) for the Financial Year Ended 30 June 2012

2. DIVIDENDS PAID ON ORDINARY SHARES	Consolidated	Consolidated
	2012	2011
	$’000	$’000
Dividends paid during the year
Fully franked (2.00 c per share) (2011: 2.00 c fully franked special per share)		200	200

3. LAND AND BUILDINGS

Land and buildings solely comprise the Wendouree property (manufacturing plant and head office). At 30 June 2011 the property was formally valued and the amount of $4.39 million recognised in the financial statements. There has been no material movement in the land and buildings value since that date other than for depreciation of $43k.

4. EARNINGS PER SHARE	Consolidated	Consolidated
	2012	2011
	$’000	$’000
Basic earnings per share
(Loss) after tax from continuing operations	(917)	(940)
(Loss) after tax attributable to ordinary shareholders	(2,149)	(2,228)
Weighted average number of ordinary shares	10,000,443	10,000,443
Diluted earnings per share
There are no instruments on issue that are dilutive in nature.

5. PROVISIONS

Restructuring Employee entitlements 5(a) At 30 June 2011 the consolidated entity recognised certain restructuring charges relating predominantly to the discontinued operation. In FY12 those provisions have been utilised as follows: Provisions for restructuring	5(a) Opening balance $’000 Utilised $’000 721 (261)		531 721 225 348
			756 1,069
			Charged (credited) to income statement $’000 Closing balance $’000 71** 531

**Amounts credited to the income statement from continuing operations $62k (FY11 charged $122k).

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Berklee Limited ABN: 80 004 661 205

Notes to the Financial Statements (cont.) for the Financial Year Ended 30 June 2012

6. EVENTS OCCURING AFTER THE BALANCE SHEET DATE

Subsequent to the 30 June 2012 reporting date, the consolidated entity announced on 23 August 2012 that it is in discussion’s with certain parties which may lead to an offer for all the shares in the company or which may result in an alternative transaction. At this stage it is not possible to provide any meaningful detail or to comment on the probability of the successful outcome of these discussions.

Apart from that there have been no events that have significantly affected, or are likely to affect, the operations or financial position of the consolidated entity.

7. CONTINGENT ASSETS AND LIABILITIES

Since the last annual reporting date, there has been no material change of any contingent liabilities or contingent assets.

8. NOTES TO THE STATEMENT OF CASH FLOWS Reconciliation of cash Cash at the end of the period as shown in the Statement of Cash Flows is reconciled to the related items in the Balance Sheet as follows: Cash is made up of: Cash Bank overdraft	Consolidated As at 30 June 2012 $’000 As at 30 June 2011 $’000 2,156 2,298 - -
	2,156 2,298

9. FINANCIAL REPORTING BY SEGMENTS

The consolidated entity operates in one industry and one geographic segment, being the Australian specialist engineering industry.

Additional supplementary segment information:

Customers

The continuing operations of the consolidated entity have two customers whose individual revenue exceeds 10% of consolidated revenue. The totals of their revenue is for Customer A $1.446m (FY11 nil) and Customer B $1.476m (FY11 revenue $0.768m).The consolidated entity has supply agreements with both parties.

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Berklee Limited ABN: 80 004 661 205

Notes to the Financial Statements (cont.) for the Financial Year Ended 30 June 2012

10. DISCONTINUED OPERATIONS

(a) Description

As reported at 30 June 2011 the consolidated entity has undertaken a restructuring program and consequently it has designated its distribution arm Undacar Parts as a discontinued operation. As at 30 June 2012 three of the six state branches have been closed and distribution taken over by third party. It is the consolidated entity’s expectation that the remaining three branches are transitioned to third party arrangements by 30 June 2013.

Berklee Limited (the continuing operation) has replaced sales to the branches in WA, Queensland and NSW with sales to Mercury Mufflers the new distributor in those states. Berklee Limited currently sells product to the remaining Undacar Parts branches in Victoria, South Australia and Tasmania and will replace those revenue streams with direct sales to the proposed third party distributors who will replace Undacar in those states. Revenue from continuing operations reflects sales revenue as it would have been had the discontinued operations been exited at the commencement of the year. Revenue from discontinued operations reflects the portion of consolidated sales revenue which will not continue after the closure of both the exited and remaining branches.

(b) Financial performance and cash flow information

Revenue from discontinued operations – refer note 10(a) Expenses Profit (Loss) before income tax Income tax expense (benefit) Profit (loss) after income tax for discontinued operation Net cash inflow (outflow) from operating activities Net cash inflow (outflow) from investing activities Net cash inflow (outflow) from financing activities Net cash increase (decrease) generated by the division	2012 $’000 2011 $’000 3,628 3,233 (4,860) (5,074)
	(1,232) (1,841) - (553)
	(1,232) (1,288)
	46 (334) - - - -
	46 (334)

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