| Mon 21 Apr 2008, 14:48 | | BEE - Beget Holdings Limited - Audited report for |
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BEE
BEE
BEE - Beget Holdings Limited - Audited report for the nine months ended 31
January 2008 Prospects of the company, withdrawal of cautionary announcement and
profit forecasts
BEGET HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(registration number 2002/011635/06)
Share code: BEE ISIN no: ZAE000044111
("Beget" or "the company")
AUDITED REPORT FOR THE NINE MONTHS ENDED 31 JANUARY 2008
PROSPECTS OF THE COMPANY, WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT AND PROFIT
FORECASTS
Background
Shareholders are referred to the results announcements of Beget in respect of
the financial year ended 30 April 2007 and the interim results for the 6 months
ended 31 October 2007, particularly with regard to the qualifications of those
results by the auditors of Beget. At the heart of the matter was a cash flow
problem caused by longer than expected technical delays in the launch of a major
product by Beget. As a result, Beget fell behind in payments to the tax
authorities and a major lender. However, Beget has since entered into phased
repayment agreements with these creditors and to date has met all its payment
obligations to them.
Another consequence of the delay in the product finalisation was that the
auditors required the write off of all goodwill and intangibles which arose as a
result of the original acquisition of the associated intellectual property
rights from Excellular Systems (Pty) Ltd in terms of an agreement dated 2
September 2005, on the basis that no positive cash flow had been generated from
those assets. Those write offs resulted in the technical insolvency of the
company and the resultant audit qualifications referred to above.
Prospects of the company
In an announcement on Sens on 19 March 2008, shareholders were advised that
Beget had entered into a contract that was expected to have a significant effect
on the trading performance of Beget. Although that contract is still under an
embargo, Beget has obtained permission to make the following announcement:
"Beget has been appointed as a sub-contractor of SMMT Online (Pty) Ltd ("SMMT")
which was awarded the Gauteng on-line tender. The scope of work involves the
supply to in excess of 2 000 schools in Gauteng with a private
telecommunications network to facilitate e-learning. Beget`s obligation as sub-
contractor of SMMT in respect of the tender is to supply the following:
biometric log-on systems for all computers to secure scholars privacy when
accessing personal information;
AC to DC power supply units for all computer equipment; and
alarm systems with monitoring software linked to various control rooms.
SMMT is also responsible for maintaining the computer laboratories for the next
5 years at all the schools which may lead to additional supply opportunities for
Beget."
Withdrawal of cautionary
Shareholders are referred to the cautionary announcement dated 19 March 2008,
and are advised that, given the information provided in this announcement,
caution is no longer required to be exercised by shareholders when dealing in
their securities.
New financial management expertise
The company has appointed a chartered accountant as financial manager with a
view to improving the quality of financial management and reporting. The board
of directors has also resolved to implement a more active audit committee and to
that end the corporate adviser of the company has agreed to nominate a chartered
accountant to help staff the audit committee.
AUDITED RESULTS FOR THE 9 MONTHS ENDED 31 JANUARY 2008
Balance sheets at:
Audited Reviewed Audited
9 months 6 months 12 months
31 Jan 08 31 Oct 07 30 Apr 07
R`000 R`000 R`000
ASSETS
Non-current assets 17,841 1,632 1,862
Investments 0 0 0
Deferred taxation 5,012 0 0
Intangible assets 12,153 1,007 1,190
Shareholders loans 77 74 74
Property, plant & equipment 599 550 597
Current assets 7,824 4,643 2,000
Inventories 1,295 620 1,027
Trade and other receivables 6,529 3,624 973
Cash and cash equivalents 0 399 1
TOTAL ASSETS 25,666 6,275 3,862
EQUITY and LIABILITIES
Capital and reserves 5,396 -11,671 -15,026
Share capital 35,717 27,625 27,625
Distributable reserve -30,321 -39,296 -42,651
Non-current liabilities 8,753 13,167 4,867
Shareholders loans 2,238 2,428 2,824
Deferred income 3,387 3,269 1,808
Long-term liabilities 189 267 235
Other financial liabilities 2,939 7,203 0
Current liabilities 11,517 4,779 14,021
Trade and other payables 6,322 2,333 7,845
Other financial liabilities 3,634 1,190 3,576
Current portion of borrowings 55 0 53
Tax 12 0 12
Deferred revenue 929 866 929
Bank overdraft 428 253 734
Provisions 138 138 873
TOTAL LIABILITIES 25,666 17,813 3,862
Number of shares in issue 762,880 556,959 556,959
Net asset value per share
(cents) 0,07 -0,27 -0,27
Net tangible asset value per
share (cents) -0,09 -0,21 -0,29
INCOME STATEMENT
for the periods ended:
Audited Reviewed Audited
9 months 6 months 12 months
31 Jan 08 30 Oct 07 30 Apr 07
R`000 R`000 R`000
Gross revenue 17,732 12,738 13,277
Cost of sales -7,320 -5,442 -5,880
Gross profit 10,412 7,295 7,397
Operating expenses -4,832 -3,197 -12,345
EBITDA 5,580 4,099 -4,948
Depreciation and amortisation 2,780 -248 -12,707
Operating profit /(loss) 8,360 3,851 -17,654
Net finance costs -1,146 -761 -2,247
Profit/ (loss) before taxation 7,214 3,090 -19,901
Taxation 5,012 0 0
Profit/ (loss) after taxation 12,227 3,090 -19,901
Minority interest 0 0 0
Earnings attributable to
ordinary shareholders 12,227 3,090 -19,901
Weighted average number of 556,959 556,959
shares in issue (`000) 435,576
Earnings per share (cents) 2,81 0,55 -3,91
Headline earnings per share 1,45 0,55 -1,68
(cents)
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Earnings 12,227 3,090 -19,901
Impairment -5,923 0 11,353
Headline earnings 6,304 3,090 -8,548
STATEMENT OF CHANGES IN EQUITY
Share Share Cumulative Total
capital premium profit/loss
Balance at 1 May 2006 964 24,343,421 -22,749,703 1,594,682
Net loss for the period -19,901,413 -19,901,413
Issue of share capital 150 3,451,850 3,452,000
Prior period error 103,068 103,068
Reduction of share -171,000 -171,000
capital
Balance at 30 April 1,114 27,624,271 -42,548,048 -14,992,663
2007
Issue of share capital 412 8,319,589 8,320,001
Share issue expenses -228,001 -228,001
Profit for the 9 months 12,226,665 12,226,665
Balance at 31 January 1,526 35,715,859 -30,321,383 5,396,002
2008
CASH FLOW STATEMENTS
for the periods ended:
Audited Reviewed Audited
9 months 6 months 12 months
31 Jan 08 30 Oct 07 30 Apr 07
R`000 R`000 R`000
Cash from operational activities -575 -4,634 -981
Cash from investment activities -326 -17 -302
Cash flows from financing 1,206 5,531 1,231
activities
(Decrease)/increase in cash and
cash equivalents 306 879 -52
Cash at the beginning of the -733 -733 -681
period
Cash at the end of the period -428 146 -733
Notes to the financial information
Presentation of financial statements
The audited financial statements above and the forecasts below have been
prepared in accordance with International Financial Reporting Standards, and the
Companies Act, 1973. The audited financial statements have been prepared on the
historical cost basis, and incorporate the principal accounting policies set out
below. These accounting policies are consistent with the previous period, except
for the changes regarding the reversal of the intangible asset impaired in the
prior year`s financial statements. This resulted in an increase in profits of
R4,738,365. The company`s auditors have audited these financial results and
these results containing the unqualified audit report of the auditors is
available for inspection at the company`s offices. The abdriged results above
have been extracted from the audited results for the 9 months ended 31 January
2008 and have been audited and are disclosed in accordance with IAS 34.
Seasonality of interim operations
The interim operations of Beget are not subject to seasonality or cyclicality.
Unusual transactions
The following transactions affected assets, liabilities, equity, net income or
cash flows because of their size, nature or incidence:
The impairment of the intangible asset in the prior year to the value of
R5,922,956 was reversed in the audit during the 9 month period ended 31 January
2008 because the company is using the intangible asset concerned in the process
of generating profits. This amount will be amortised over a period of 5 years,
which is the period of the contract.
An additional intangible asset to the value of R8,170,000 was capitalised. This
amount was the result of the issue of 204,250,000 shares at 4 cents per share in
respect of a BEE transaction (referred to in note 11 below), which transaction
was predicated on the procurement of a supply agreement. As a result of the
award of the tender referred to above, the debit entry in relation to the above
BEE transaction now meets the definition of an intangible asset to be
capitalised and amortised over the 5-year period of the contract and
accordingly, an amount of R5,922,956 which was previously expensed has now been
entered as a debit to the intangible asset referred to above. As a result, the
BEE transaction is now recorded in the books of account on the basis that share
capital is increased by R408.50 and share premium by R8,169,591.
An additional issue of 1,671,581 shares for cash at market value during July
2007, resulted in an increase in capital of R3,47 and additional share premium
of R149,996. This was the result of an arrangement between Beget and one of its
suppliers.Shares for Cash and it was issued and listed in July 2007.
The deferred tax asset of R5,012,250 was calculated on the temporary differences
on the depreciation of assets as well as on the carried over assessed loss. As
this is the first time the company has shown a profit and has tangible proof of
future economic benefit flowing to the company, it was possible to account for
such asset. The future tax liability on profits of the company will be set off
against such asset until it is exhausted.
Changes in estimates
Save for the reversal of the impairment and subsequent amortization thereof,
there were no material changes in the estimates of amounts reported in prior
interim periods of the current financial year.
Dividends
No dividends were paid or declared to Beget shareholders for the period under
review.
Segment report
MobileBio SMS Other Elimi-
operations nations Consolidated
31 Jan 08 31 Jan 08 31 Jan 08 31 Jan 08 31 Jan 08
REVENUE
External sales -8,112,277 -3,727,295 -5,892,578 -17,732,151
Internal- - - - - -
segment sale
-8,112,277 -3,727,295 -5,892,578 - -17,732,151
RESULT
Segment result -4,267,254 -899,154 -5,221,440 -10,387,848
Unallocated -2,986,179
corporate
expenses
Interest 1,155,103
expense
Interest income -7,741
PROFIT -12,226,665
OTHER
INFORMATION
Segment assets 11,507,835 1,244,424 - 12,752,259
Unallocated 14,330,901
corporate
assets
27,083,160
Segment 4,977,435 1,189,559 - 6,166,994
liabilities
Unallocated 15,520,166
corporate
liabilities
21,687,160
Events after reporting date
There were no material events after the end of the interim period that have not
been reflected in the interim financial statements.
Changes in composition
There were no changes in the composition of the entity during the interim
period.
Contingent liabilities and assets
There were no changes in contingent liabilities or contingent assets since the
last annual balance sheet date.
Other financial liabilities
The other financial liabilities as at 31 January 2008 are made up of the
following amounts:
Current liabilities
IDC loan 2,176,275
Baker Finance 25,771
Hertford 1,220,681
Shareholders loans 149,160
Beacham Capital 62,000
3,633,387
Non-current liabilities
VAT 2,938,956
Treatment of BEE deal
In terms of paragraph 7.2.3 of the circular to shareholders dated 21 December
2007 relating to the introduction of a BEE shareholder, it was stated that an
intangible item resulting from the transaction "does not meet the definition of
an intangible asset and, therefore, does not qualify for recognition as an
intangible asset." The amount in respect of the `intangible asset` was therefore
expensed in terms of the applicable IFRS requirements.
At that date, although negotiations were in progress, Beget had not yet been
appointed as a subcontractor to SMMT to participate in the Gauteng on-line
tender (referred to elsewhere above). Subsequently, however, Beget was so
appointed by SMMT and that appointment was made prior to the meeting of
shareholders on 18 January 2008. At that general meeting, the BEE transaction
was approved.
The subcontractor appointment resulted directly from the introduction of the BEE
shareholder. Accordingly, the `intangible asset` thereafter did meet the
relevant definition of an intangible asset in terms of IFRS and therefore became
recognisable as an intangible asset from the date of the general meeting. As a
result, the amount in respect of the `intangible asset` is no longer expensed as
would previously have been required.
PROFIT FORECASTS
Given the anticipated significant impact of the award of the supply agreement
referred to above and in order to keep shareholders informed of the prospects of
the company, the board has resolved to issue the profit forecasts as set out
below:
Forecast income statements for the following financial periods:
Year Interims Year
ending ending ending
30 Apr 08 31 Oct 08 30 Apr 09
R`000 R`000 R`000
Sales 25,485 39,282 78,565
Cost of sales 11,343 25,681 51,364
Gross profit 14,142 13,600 27,201
Expenses 7,000 5,100 10,032
Operating profit 7,142 8,500 17,170
interest 1,581 787 787
Net profit before tax, 5,561
depreciation and 7,713 16,382
amortisation
Less depreciation and 3,392
amortisation 2,670 5,339
Plus reversal of impairment 5,675 - -
Income before tax 7,844 5,043 11,043
Taxation 5,012 2,159 4,587
Net profit after tax 12,856 2,883 6,455
Reconciliation between earnings and headline earnings
Earnings 12,856 2,883 6,455
Impairment -5,675 0 0
Headline earnings 7,181 2,883 6,455
Weighted average number of 626,296 381,440 762,880
shares in issue (`000)
Earnings per share 2,05 0,76 0,85
Headline earnings per share 1,15 0,76 0,85
Forecast balance sheets as at:
30-Apr-08 31-Oct-08 30-Apr-09
R`000 R`000 R`000
Assets
Non-current assets 17,344 12,437 7,339
Property, plant and 569 509 449
equipment
Deferred taxation 5,012 2,852 424
Intangible assets 11,686 9,076 6,466
Loans to shareholders 77 0 0
Current assets 7,543 11,716 19,907
Inventories 1,295 1,529 1,338
Trade and other receivables 6,248 8,344 6,864
Cash and cash equivalents 0 1,842 11,704
Total assets 24,887 24,153 27,247
Equity and liabilities
Capital and reserves 6,026 9,109 12,681
Issued capital 35,717 35,717 35,717
Accumulated loss -29,690 -26,607 -23,035
Non-current liabilities 9,316 8,753 6,953
Shareholder`s loan 2,238 2,238 2,238
Funding of School project 563 0 0
Long Term liabilities 189 189 189
Other financial liabilities 2,939 2,939 1,139
Deferred income 3,387 3,387 3,387
Other financial liabilities
Current liabilities 9,544 6,929 7,613
Other financial liabilities 1,834 0 0
Current portion of 53 26 0
borrowings
Taxation 12 0 0
Trade and other payables 5,222 1,998 1,367
Deferred income 1,685 4,104 6,053
Bank overdraft 600 0 0
Provisions 138 161 192
Total equity and liabilities 24,887 24,153 27,247
Number of shares in issue 762,880 762,880 762,880
(`000)
Net asset value (cents) 0,08 0,11 0,17
Tangible net asset value -0,07 -0,02 0,08
(cents)
The audited results for the 9 months ended 31 January 2008, the unqualified
audit opinion of the auditors in respect thereof and the letter of the auditors
in respect of the above forecasts are available for inspection at the offices of
Beget during business hours.
The auditors of Beget have given their consent in writing to the publication of
the forecasts in this announcement and to the reference to their audit opinion
and the forecast letter and to the mention of their name in the form and
contexts in which they appear herein.
BY ORDER OF THE BOARD
21 April 2008
Registered office
85 Durham Street, Clubview, Centurion
(PO Box 13983, Clubview, 0014)
Transfer secretaries
Link Market Services South Africa (Pty) Ltd
11 Diagonal Street, Johannesburg, 2001
(PO Box 4844, Johannesburg, 2000)
Sponsor
Merchant Sponsors
Auditors
PKF (Pta) Inc
Corporate adviser
Beacham Capital Limited
Date: 21/04/2008 14:48:01 Produced by the JSE SENS Department.
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