| Fri 30 May 2008, 7:05 | | BEG - Beige - Reviewed Results For The Year Ended 31 March 2008 And |
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BEG
BEG
BEG - Beige - Reviewed Results For The Year Ended 31 March 2008 And
Withdrawal Of Cautionary Announcement
Beige Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1997/006871/06)
Share code: BEG & ISIN code: ZAE000034161
("Beige" or "the company")
REVIEWED RESULTS FOR THE YEAR ENDED 31 MARCH 2008 AND WITHDRAWAL OF
CAUTIONARY ANNOUNCEMENT
- Revenue up 67%
- Operating profit up 40%
- Headline earnings up 90%
- Headline earnings per share up 10%
Group Balance Sheets
Reviewed Audited
31 Mar 31 Mar
2008 2007
R`000 R`000
ASSETS
Non-current assets 244 971 76 041
Plant, equipment and equipment 112 791 23 495
Intangible assets 117 037 45 921
Deferred taxation 15 143 6 625
Current assets 234 700 130 223
Inventories 66 959 34 831
Trade and other receivables 119 303 61 043
Secured loans receivable - 7 812
Cash and cash equivalents 48 438 26 537
Total assets 479 671 206 264
EQUITY AND LIABILITIES
Capital and reserves 235 867 70 360
Share capital 16 985 7 862
Share premium 295 072 123 127
Reserves 10 965 1 544
Accumulated loss (87 155) (62 173)
Non-current liabilities 79 023 31 405
Long-term liabilities 79 023 31 405
Current liabilities 164 781 104 499
Provisions 7 341 5 148
Trade and other payables 120 949 79 983
Current portion of long-term 8 671 7 516
liabilities
Taxation 3 443 7 689
Bank overdraft 24 377 4 163
Total equity and liabilities 479 671 206 264
Ordinary shares in issue (000`s) 1 684 097 771 865
Net asset value per share (cents) 14.02 9.13
Tangible net asset value per share 7.06 3.17
(cents)
Fully diluted shares (000`s) 1 702 531 838 199
Fully diluted net asset value per share 13.85 8.39
(cents)
Fully diluted net tangible asset value 6.98 2.92
per share (cents)
Notes
Fully diluted net asset value per share information reflected shows the
potential effect of full dilution for 18 233 387 options held by directors
and key executive staff to subscribe for new shares at 7.5 cents each. Key
executives exercised options in relation to 5 700 018 shares by 31 March 2007
at 7.5 cents per share. The balance of the options expire on 31 March 2011.
Group Income Statements
Reviewed Audited
Year Year
ended ended
31 Mar 31 Mar
2008 2007
R`000 R`000
Revenue 454 609 273 209
Cost of sales (354 341) (223 223)
Gross profit 100 268 49 986
Operating expenses (69 628) (28 178)
Operating profit 30 640 21 808
Investment income 7 584 2 226
Goodwill impairment (70 535) --
Discount on acquisition of subsidiary 12 719 --
Net (loss)/profit before finance (19 592) 24 034
charges
Finance charges (4 430) (949)
Net (loss)/profit before taxation (24 022) 23 085
Taxation (960) (7 110)
Net (loss)/profit for the year (24 982) 15 975
Calculation of headline earnings
Net (loss)/profit for the year (24 982) 15 975
Adjustments for:
Goodwill impairment - Crystal Pack 70 535 --
(Pty) Ltd
Discount on acquisition of subsidiary (12 719) --
Utilisation of treasury shares (2 500) --
Profit on disposal of plant and (16) (25)
equipment
Headline earnings 30 318 15 950
Ordinary shares in issue
Weighted average 1 332 425 771 065
Fully diluted weighted average 1 350 659 837 399
Attributable earnings per ordinary (1.87) 2.07
share (cents)
Headline earnings per ordinary share 2.28 2.07
(cents)
Fully diluted attributable earnings per (1.85) 1.91
ordinary share (cents)
Fully diluted headline earnings per 2.24 1.90
ordinary share (cents)
Notes
The 4 316 667 treasury shares held by Zizmax Investments (Pty) Ltd, a
subsidiary of Beige, have been excluded from the number of shares in issue
for purposes of calculating earnings and headline earnings per share
information.
Abridged Group Cash Flow Statements
Reviewed Reviewed
31 March 31 March
2008 2007
R`000 R`000
Net cash (ouflow)/inflow from operating (20 611) 27 782
activities
Net cash outflow from investing (207 542) (57 784)
activities
Net cash inflow from financing 229 840 54 153
activities
Cash and cash equivalents at beginning 22 374 (1 777)
of year
Cash and cash equivalents at end of 24 061 22 374
year
Group Statement of Changes in Equity
Share capital Share premium Preference Preference
R`000 R`000 share share
capital premium
R`000 R`000
Balance at 31 5 756 107 853 -- --
March 2006
209 777 060 2 098 15 222 -- --
shares issued at
800 016 share 8 52 -- --
options
exercised
Share based -- -- -- --
payments
Profit for the -- -- -- --
year
Balance at 31 7 862 123 127 -- --
March 2007
873 148 887 8 732 80 909
ordinary shares
issued
14 285 714 (15 000) 143 14 857
preference
shares issued
Fair valuation 89 473
of Crystal Pack
24 133 409 Share 248 1 706
options
exercised
Share-based
payments
Revaluation of
property
Loss for the
year
Balance at 31 16 842 280 215 143 14 857
March 2008
Table continued
Revaluation Share based Accumulated Total
reserve payments loss
R`000 reserve R`000 R`000
R`000
Balance at 31 -- -- (78 148) 35 461
March 2006
209 777 060 -- -- -- 17 320
shares issued at
800 016 share -- -- -- 60
options
exercised
Share based -- 1 544 -- 1 544
payments
Profit for the -- -- 15 975 15 975
year
Balance at 31 -- 1 544 (62 173) 70 360
March 2007
873 148 887 89 641
ordinary shares
issued
14 285 714 --
preference
shares issued
Fair valuation 89 473
of Crystal Pack
24 133 409 Share 1 954
options
exercised
Share-based 219 219
payments
Revaluation of 9 202 9 202
property
Loss for the (24 982) (24 982)
year
Balance at 31 9 202 1 763 (87 155) 235 867
March 2008
SEGMENTAL REPORTING
The group has early adopted IFRS 8 Operating Segments in the current year.
This Standard requires an entity to report financial and descriptive
information about its reportable segments, which are operating segments or
aggregations of operating segments that meet specified criteria. Operating
segments are components of an entity about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The amount reported for each segment item is the measure
reported to the chief operating decision maker for these purposes. For
management purposes, the group has two main operating segments which exhibit
similar long-term financial performance and economic characteristics, have
the same products, processes, customers, distribution lines and regulatory
environments.
2008 Plastics Other Manufactu
ring Group
R`000 R`000 R`000 R`000
Segment revenue 65497 -- 389112 454609
Segment loss before 2591 (495) 28545 30641
taxation
Investment income -- 934 6649 7583
Depreciation of segment 1763 126 3009 4898
assets
Impairment losses -- (70535) -- 70535
recognised in profit or
loss
Other gains -- 12719 -- 12719
2131 2250 4430
Finance cost 49
Segment assets 75306 233851 155456 464613
(adjusted for deferred
tax assets)
Deferred tax assets 173 -- 15505 15678
Acquisition of segment
assets
Segment liabilities 50273 143813 240361
(adjusted for deferred 46275
tax and current tax
liabilities)
Deferred tax -- 535 -- 535
liabilities
Current tax payable -- 913 2530 3443
No prior year segmental information has been presented as the company only
acquired the plastics business during the current year.
COMMENTARY
The directors of Beige are pleased to announce the results for the year ended
31 March 2008. These results show the consolidated position of Beige,
becoming the largest fully empowered contract manufacturer in the personal
care industry.
The reviewed abridged results have been presented in accordance with
International Financial Reporting Standards ("IFRS"). The accounting
policies adopted for purposes of this report comply, and have been
consistently applied in all material respects, with IFRS. The same
accounting policies and methods of computation have been followed as compared
to the prior year ended 31 March 2007.
The results have been reviewed by Nexia Levitt Kirson, whose unmodified
review report is available for inspection at the company`s registered office.
1. Group review
Beige is a registered holding company operating through twelve subsidiaries.
The Beige group primarily operates as a contract manufacturer, manufacturing
and distributing cosmetics, soaps, laundry soaps and allied products on
behalf of brand owners for both the local and international home and personal
care industry, but has recently diversified its operations through the
acquisition of a plastics manufacturing business to complement its contract
manufacturing operations. The business operations are undertaken by clearly
focused subsidiaries, located in Gauteng and Kwa-Zulu Natal. Beige is listed
on the Alternative Exchange ("AltX") of the JSE Limited.
During the year, the company acquired 100% of Crystal Pack (Pty) Ltd
("Crystal Pack") and related manufacturing contracts ("Star"), which
acquisition was approved by shareholders at a general meeting held on 31 May
2007.
In addition, the Competition Commission gave their unconditional approval for
Beige to acquire 100% of Amcos Cosmetics (Proprietary) Limited ("Amcos") in
December 2007 and the Beige management team, in conjunction with the Amcos
managing director, have been instrumental in turning this business around.
These initiatives all form part of a strategic decision by management to grow
market share in a controlled fashion and to obtain critical mass at the
factories. The long term benefits of this growth strategy include the
optimisation of available production capacity, improvements in efficiency and
the achievement of greater benefits resulting from bulk procurement.
Shareholders are also referred to subsequent events.
2. Financial and operational overview
The growth and development of Beige has been dramatic in the year under
review and the board is pleased with the results, which reflect the continued
implementation of the organic and acquisitive growth strategy underway at
Beige. The figures for the year ended 31 March 2008 reflect a substantial
increase throughout, due largely to Beige substantially growing the business
of Quality Products since it became a 100% subsidiary in the prior year. The
highlights of these results include the substantial increase in net profit
after tax, compared to the year ended 31 March 2007, from a headline earnings
of R16 million to headline earnings of R30 million in the current year.
Revenue increased substantially from R273 million in the comparative period
to R455 million for the year under review, an increase of 67%. The gross
profit margin of 22.0% (2007: 18.3%) is acceptable in the contract
manufacturing industry, where the margins vary depending on the length of the
contracts. The longer term contracts, however, typically provide for more
constant volumes of production at lower margins.
Overall the group is in a much stronger position than in the comparative
period as represented by a stronger balance sheet and the continuing positive
cash flow position.
Ignoring the anomalous charge to the income statement relating to the
impairment of Crystal Pack in accordance with IFRS 3 - Business Combinations,
which is more fully explained below, the figures for the year ended 31 March
2008 all reflect a substantial increase throughout. The highlights of these
results include an increase in operating profit of R9 million, compared to
the year ended 31 March 2007 and a 10% growth in headline earnings per share,
from 2.07 cents to 2.28 cents per share.
During the period, shareholders approved the acquisition of 100% of Crystal
Pack and related manufacturing contracts known as Star. The company
manufactures injection moulded and injection stretch blow moulded rigid
bottle containers for the beverage, personal care and allied industries. The
company supplies plastic bottles and closures into this sector in HDPE, PVC
and PET, primarily to markets in Gauteng and Kwa-Zulu Natal. Shareholders
are also referred to subsequent events below.
The effective date of this acquisition is 01 January 2007 as per the
acquisition agreements, but conditions precedent were only completed in mid-
June 2007. Crystal Pack has therefore been consolidated in the results from
01 July 2007, with the loss incurred to 30 June 2007 being adjusted against
the purchase price.
The goodwill recognised on the acquisition is attributable mainly to the
intellectual property skills and technical know-how of the acquired
business`s workforce and the existing customer contractual relationships that
exist in the business.
In December 2007 the Competition Commission gave their unconditional approval
for Beige to acquire 100% of Amcos. Amcos is involved in the production of
cosmetics, toiletries and hair care products. The effective date of this
acquisition is 01 July 2007 as per the acquisition agreements, but conditions
precedent were only completed in mid December 2007. Amcos has therefore been
consolidated in the results from 01 January 2008, with the loss incurred to
31 December 2007 being adjusted against the purchase price.
The goodwill recognised on the acquisition is attributable mainly to the
intellectual property skills and technical know-how of the acquired
business`s workforce and the existing customer contractual relationships that
exist in the business.
International Financial Reporting Standard (IFRS) effects in the current
reporting period
IFRS 3 Business Combinations requires the fair value of the acquisition of
Crystal Pack and Star at the acquisition date to be determined by the market
price of the shares issued. Whilst profits were made by Crystal Pack and
Star, due to a difficult trading year with, inter alia, higher input and
import costs, warranted profits were not achieved and the purchase price for
Crystal Pack was reduced by R18 million, resulting in the cancellation of
184 574 939 shares that were held in escrow.
On this basis the fair value of the acquisition at 30 June 2007 is R149
million based on a share price of 25 cents per share. The goodwill on
acquisition is therefore deemed to be R126 999 000 at year end as opposed to
R171 378 000 as reported as at 30 September 2007.
The fair value of the Crystal Pack investment in terms of IFRS 39 at 31 March
2008 is R62 416 000. The effect of this fair valuation is an impairment of
the goodwill of R70 535 000 as opposed to the interim estimate of
R116 884 000 reported for the six months ended 30 September 2007, which has
been charged to the income statement in the current period. This impairment
has been excluded from the calculation of headline earnings.
Other IFRS impacts on the earnings for the year include a charge of R1 536
000 to straight line the Groups property operating lease payments over the
term of the leases and a charge for employee share option costs of R219 000.
During December 2007, the company acquired the factory and administration
offices at Chloorkop for a purchase consideration of R21.6 million, following
a decision to exercise its option to acquire the Chloorkop property, which
option was due to expire on 1 December 2007. Bond finance of R26 million
has arisen in relation to the acquisition of the property. The property has
a valuation of R32.3 million, and has been revalued in the Group financial
statements at 31 March 2008.
3. Prospects
The group has excellent prospects for strong, sustained growth in earnings,
with the Durban based Quality Products showing further strong organic growth
and the commencement of production of Unilever products through the Chloorkop
factory. With the acquisition of Crystal Pack, the company has vertically
integrated into the packing aspect of its industry and expects synergies and
cost benefits to flow in due course. Phase 1 of the Star contract, which
formed part of the Crystal Pack acquisition, has been implemented and the
second phase of the Star contract is forecast for implementation later in
2008. The Beige group intends to continue a careful acquisition strategy, as
evidenced by its recent acquisition of Amcos from Bowler Metcalf Limited and
the acquisition of RAP as announced on 26 May 2008. The Amcos acquisition was
approved by Competition Commission during December 2007 and initiatives to
return Amcos to profitability have already proven successful. Amcos has been
consolidated in the group results for the three months to 31 March 2008,
contributing positively to the results.
The industry remains dynamic and the Group will continue to explore all
opportunities which will enhance its capability and utilise any excess
capacity that may arise. The growth in, and consolidation of, the business
over the past year, has laid a strong foundation for the company to continue
to deliver growth, stability and sustainability for the year ahead and Beige
remains committed to its vision of being a leading, truly South African,
globally competitive outsource manufacturer.
As a consequence of the Crystal Pack and Amcos deal, there are now
substantially more shares in issue. However, as a result of the phased
integration of the Crystal Pack and Amcos businesses, contributions are only
expected to be fully on-stream in the next financial year.
Given that Beige has established itself as the leading contract manufacturer,
has much higher levels of liquidity, coupled with stable and increasing sales
and profit levels, the board will, in all probability, consider paying
dividends in future financial years.
4 Acquisitions and issue of shares
Finalisation of the Crystal Pack acquisition
On 31 May 2007, shareholders approved the 100% acquisition by Beige of
Crystal Pack for a purchase consideration of R78 106 497 to be settled by the
issue of 781 064 976 ordinary Beige shares. At the same general meeting,
shareholders approved the issue of 264 885 725 shares to Thebe in order to
restore Thebe`s shareholding in Beige to 25% following the implementation of
the Crystal Pack acquisition. Of the 781 064 976 shares issued for the
Crystal Pack and Star acquisition, 184 574 939 have been cancelled ab initio
due to a shortfall in the achieved warranted profits and have been delisted.
As the implementation of the Crystal Pack and Star acquisition resulted in
the vendors jointly holding more than 35% of the issued share capital of
Beige, a mandatory offer of 10 cents per shares was made to minority
shareholders, this being the highest price at which shares were acquired by
the vendors. There were no acceptances of the offer by minorities.
Issue of preference shares:
On 13 August 2007, Beige issued 14 285 714 cumulative, non-participating,
convertible, redeemable preference shares to the shareholders of Beige at
R1.05 via means of a capitalisation award. The preference shares bear a
coupon rate of 8% per annum and are redeemable after three years and one day
for cash or are convertible into 7 Beige shares at 15 cents, for every 1
preference share held. The preference shares are listed on AltX.
Staff and Thebe share options:
During the financial year 5 700 018 staff share options were exercised at 7.5
cents in terms of the company`s share option scheme and Thebe exercised its
options of 19 066 584 at 8 cents.
Acquisition of 80% of the ordinary shares in and the claims against Amcos
Cosmetics International (Pty) Ltd ("Amcos")
Beige acquired 80% of the issued share capital in and the loan accounts
against Amcos, a subsidiary of Bowler Metcalf Limited, with effect from 01
July 2007. The consideration for the acquisition for the Amcos shares was
R13 044 896, which was settled by a cash payment of R6 522 448 and the
allotment and issue of 26 089 792 Beige shares at an issue price of 25 cents
per share. The consideration for the shareholder loans was R24 297 848 to be
settled in cash in eighteen equal monthly installments. The consideration
for the loan accounts is cash neutral to Beige as it is paid against the
recovery of inventory, accounts receivable and DTI grants received and, in
the event of any shortfall, such amount will be set-off against any remaining
balance due to Bowler. Beige subsequently acquired the remaining 20%
shareholding in Amcos for cash.
5. Special resolutions
Special resolutions passed during the period under review were as follows:
- Increase in authorised share capital to 2 500 000 000 shares;
- The creation of 14 285 714 cumulative, non-participating, convertible,
redeemable preference shares of 1 cent each to facilitate the preference
share capitalisation award; and
- The alteration of the Memorandum and Articles of Association to
facilitate the above.
6. Subsequent events
Acquisition of RAP International (Pty) Ltd ("RAP")
As announced on 26 May 2008, subject to Competition Commission approval,
Beige has concluded agreements signed on 22 May 2008 and 23 May 2008 in terms
of which Beige will acquire 100% of the shares in RAP from Corvest
(Proprietary) Limited, Rino Protti, Keith Smith, Bruce Frewen, Mark Dunn and
Andrea Protti, ("the Vendors"), for a purchase consideration of R14 700 000
plus the Vendors` Claims at face value to a limit of R3 688 890. In
addition, Beige has agreed to purchase Management Claims totalling R1 159
028, payment of which is subject, in part, to warranted earnings performance
as further detailed below. Management comprises Andrea Protti, Bruce Frewen
and Mark Dunn.
The Management Claims totalling R1 159 028 will be paid following achieving
an EBITDA warranty, adjusted for rental savings, of R8 024 000 for the 12
(twelve) month period ending 31 March 2009. The above Management Claims will
be paid by the Purchaser on 31 May 2009, subject to the performance of the
Company as measured against the above EBITDA warranty. Should the actual
EBITDA achieved for the 12 (twelve) month period ending 31 March 2009 be less
than that calculated as mentioned above, then the payment due will be reduced
proportionately.
It has also been agreed that within 7 (seven) days of the Vendors receiving
payment in terms of the Corvest Sale of Shares and Claims Agreement, Bruce
Frewen and Andrea Protti (but not Mark Dunn) will subscribe for new publicly
listed shares of the Purchaser at the then ruling price thereof to the order
of 75% (seventy five percent) of the amount they each received in terms of
the Corvest Sale of Shares and Claims Agreement.
RAP is involved in the manufacture of packaging, primarily for the cosmetics
industry and synergies and economies of scale with Crystal Pack are expected.
The RAP acquisition is subject to Competition Commission approval.
7. Director appointments and resignations
Mr AP du Preez was appointed as alternate director to Mr MM du Preez with
effect from 31 May 2007, whilst Mr M Hyland was appointed to the board as
alternate director to Mr MF ten Hope with effect from 13 November 2007.
8. Dividends and capitalisation awards
Pursuant to the acquisition of Crystal Pack, a capitalisation award of
redeemable, convertible, cumulative 8% preference shares was made to
shareholders, prior to the issue of shares to the vendors of Crystal Pack.
The capitalisation award was made in the ratio of one preference share for
every 55.03271 Beige shares held. No other dividends were declared or
recommended during the period.
9. Litigation
There are no legal or arbitration proceedings, including any proceedings that
are pending or threatened, or which Beige or any of its subsidiaries is aware
and that may have or have had, in the 12-month period preceding the date of
issue of this annual report, a material effect on the financial position of
Beige or any of its subsidiaries.
10. Withdrawal of cautionary
Shareholders are referred to the cautionary announcement released on SENS on
21 February 2008 and subsequent renewal on 11 April 2008 and are advised that
following the announcement of the acquisition of RAP and the cancellation of
the issue of 184 574 939 shares for the Crystal Pack and Star acquisition,
the cautionary announcement is now withdrawn.
By order of the Board
Yaseen Bhayat Mark Di Nicola
Chairman Chief Executive Officer
29 May 2008
Johannesburg
Company Secretary and Registered Office
Arcay Client Support (Pty) Ltd (Registration number
1998/025284/07)
Arcay House II, Number 3 Anerley Road, Parktown, 2193
PO Box 62397, Marshalltown, 2107
Directors
Y Bhayat* Chairman*; MM Di Nicola Chief Executive Officer; MC
Easter Financial Director; GT Anderson, J Black*#; MM du
Preez*; LI Karp*; MF ten Hope* RH Weissenberg*
(* Non-executive) (# British)
Designated Advisor Transfer Office
Arcay Moela Sponsors (Pty) Ltd Link Market Services South
Africa (Pty) Ltd
Date: 30/05/2008 07:05:44 Produced by the JSE SENS Department.
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