| Wed 20 Aug 2008, 17:53 | | BEG - Beige - Audited Results For The Year Ended 31 March 2008 And Notice Of |
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BEG
BEG
BEG - Beige - Audited Results For The Year Ended 31 March 2008 And Notice Of
Annual General Meeting
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")
AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2008 AND NOTICE OF ANNUAL GENERAL
MEETING
The audited results for the year ended 31 March 2008 have been restated from
the reviewed results previously published due to reallocations within the
income statement and balance sheet categories. However, the attributable
earnings for the period has not changed from the results previously
published.
Group Balance Sheets
Audited Audited
31 Mar 31 Mar
2008 2007
R`000 R`000
ASSETS
Non-current assets 245 654 76 041
Property, plant and equipment 112 791 23 495
Intangible assets 118 031 45 921
Deferred taxation 14 832 6 625
Current assets 228 038 130 223
Inventories 62 580 34 831
Trade and other receivables 117 020 61 043
Secured loans receivable - 7 812
Cash and cash equivalents 48 438 26 537
Total assets 473 692 206 264
EQUITY AND LIABILITIES
Capital and reserves 236 298 70 360
Share capital 17 028 7 862
Share premium 295 460 123 127
Reserves 10 965 1 544
Accumulated loss (87 155) (62 173)
Non-current liabilities
Long-term liabilities 51 581 31 405
Current liabilities 185 813 104 499
Provisions 4 393 5 148
Trade and other payables 123 212 79 983
Current portion of long-term liabilities 30 388 7 516
Taxation 3 443 7 689
Bank overdraft 24 377 4 163
Total equity and liabilities 473 692 206 264
Ordinary shares in issue (000`s) 1 684 771 865
097
Net asset value per ordinary share (cents) 14.03 9.12
Tangible net asset value per ordinary share 7.02 3.17
(cents)
Fully diluted ordinary shares (000`s) 1 702 838 199
331
Fully diluted net asset value per ordinary share 13.88 8.39
(cents)
Fully diluted net tangible asset value per 6.95 2.92
ordinary 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
Audited Audited
Year Year
ended ended
31 Mar 31 Mar
2008 2007
R`000 R`000
Revenue 454 611 273 209
Cost of sales (356 (223 223)
467)
Gross profit 98 144 49 986
Operating expenses (65 256) (28 178)
Operating profit 32 888 21 808
Investment income 6 460 2 226
Goodwill impairment (70 535) -
Discount on acquisition of subsidiary 12 719 -
Net (loss)/profit before finance charges (18 468) 24 034
Finance charges (5 554) (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 (Pty) Ltd 70 535 -
Discount on acquisition of subsidiary (12 719) -
Utilisation of treasury shares (2 500) -
Profit on disposal of plant and equipment (16) (25)
Headline earnings 30 318 15 950
Ordinary shares in issue
Weighted average 1 332 771 065
425
Fully diluted weighted average 1 350 837 399
659
Attributable earnings per ordinary share (cents) (1.87) 2.07
Headline earnings per ordinary share (cents) 2.28 2.07
Fully diluted weighted average attributable (1.85) 1.91
earnings per ordinary share (cents)
Fully diluted weighted average headline earnings 2.24 1.90
per ordinary share (cents) 1.78 1.90
Fully diluted headline earnings per 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
Audited Audited
31 March 31 March
2008 2007
R`000 R`000
Net cash (outflow)/inflow from operating (14 842) 27 782
activities
Net cash outflow from investing activities (215 (57 784)
832)
Net cash inflow from financing activities 232 361 54 153
Cash and cash equivalents at beginning of year 22 374 (1 777)
Cash and cash equivalents at end of year 24 061 22 374
Group Statement of Changes in Equity
Preference
share Preference
Share Treasury Share capital share
capital shares premium R`000 premium
R`000 R`000 R`000 R`000
Balance at
31 March 5 613 143 107 853 - -
2006
209 777 060 2 098 15 222 - -
shares
issued
800 016
share 8 52 - -
options
exercised
Share based
payments - - - -
Profit for - - - -
the year
Balance as
previously
reported as 7 719 143 123 127 - -
at 31 March
2007
Correction
to share
based
payment
Restated
balance as 7 719 143 123 127 - -
at 31 March
2007
877 465 554
ordinary 8 775 81 384
shares
issued
14 285 714
preference (15 000) 143 14 857
shares
issued
Fair
valuation 89 473
of Crystal
Pack
24 133 409
Share 248 1 705
options
exercised
Utilisation
of treasury 100 (100)
shares
Share issue (86)
cost
Share-based
payments
Revaluation
of property
Loss for
the year
Balance at
31 March 16 842 43 280 603 143 14 857
2008
Table continues
Share
based
Revaluation payments Accumulated Total
reserve reserve loss
R`000 R`000 R`000 R`000
Balance at 31
March 2006 - - (78 148) 35 461
209 777 060 - - - 17 320
shares issued
800 016 share
options - - - 60
exercised
Share based
payments - 459 - 459
Profit for - - 17 060 17 060
the year
Balance as
previously
reported as - 459 (61 088) 70 360
at 31 March
2007
Correction to
share based 1 085 (1 085) -
payment
Restated
balance as at - 1 544 (62 173) 70 360
31 March 2007
877 465 554
ordinary 90 159
shares issued
14 285 714
preference -
shares issued
Fair
valuation of 89 473
Crystal Pack
24 133 409
Share options 1 953
exercised
Utilisation
of treasury -
shares
Share issue (86)
cost
Share-based 219 219
payments
Revaluation 9 202 9 202
of property
Loss for the (24 982) (24 982)
year
Balance at 31
March 2008 9 202 1 763 (87 155) 236 298
PRIOR PERIOD ERROR
The full vesting value of options granted had not been accounted for. The
comparative figures have been restated and the effect of the restatement is
reflected below:
2007 R`000
Increase in share based payments 1 085
Decrease in retained income 1 085
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.
Outsource
2008 Manufacturing Packaging Other Group
R`000 R`000 R`000 R`000
Segment revenue 389 114 65 497 - 454 611
Segment profit before 29 953 2 591 344 32 888
taxation
Investment income 5 526 - 934 6 460
Depreciation of segment 3 009 1763 126 4 898
assets
Impairment losses - - (70 (70 535)
recognised in profit or 535)
loss
Other gains - - 12 719 12 719
Finance cost 3 374 2 131 49 5 554
Segment assets (adjusted 155 456 75 306 228 458 860
for deferred tax assets) 098
Deferred tax assets 15 211 156 963 16 330
Segment liabilities 139 779 48 563 233 951
(adjusted for deferred tax 45 609
and current tax
liabilities)
Deferred tax liabilities - - 1 498 1 498
Current tax payable 2 530 - 913 3 443
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 audited 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 audited abridged results have been presented in accordance with IAS 34 -
Interim Financial Reporting. The accounting policies adopted for purposes of
this report comply, and have been consistently applied in all material
respects, with International Financial Reporting Standards ("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 audited by Nexia Levitt Kirson, whose unqualified audit
report is available for inspection at the company`s registered office. The
audit report contains an emphasis of matter relating to a reportable
irregularity in one of Beige`s recently acquired subsidiaries, which matter
has since been rectified and has no financial impact on Beige.
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 International (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 R11 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
180 258 272 shares and the return of 4 316 667 treasury 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 R127 000 000 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 R243 673
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, 180 258 272 have been cancelled and
delisted and 4 316 667 continue to be held as treasury shares, 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 still 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 ordinary
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 ordinary shares held.
The first preference dividend of 8.40 cents per share was recently announced
on SENS and is to be paid to all preference shareholders recorded in the
preference share register of the company at the close of business on Friday,
29 August 2008.
Shareholders are reminded of the dates relating to the preference dividend as
follows:
2008
Last date to trade: Friday, 22 August
Securities (preference shares) start Monday, 25 August
trading ex dividend:
Record date to determine who receives the Friday, 29 August
preference dividend:
Electronic transfer of funds or cheques Monday, 01 September
posted/CSDPs and brokers credited
Preference shares may not be dematerialised or rematerialised between Monday,
25 August 2008 and Friday, 29 August 2008, both dates inclusive.
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. Notice of annual general meeting
Notice is hereby given that the annual general meeting of the company will be
held in the boardroom, Arcay House II, Number 3 Anerley Road, Parktown,
Johannesburg, at 10:00 on Friday, 05 September 2008, to transact the business
as stated in the notice of annual general meeting included in the Annual
Report which has been posted to shareholders.
By order of the Board
Yaseen Bhayat Mark Di Nicola
Chairman Chief Executive Officer
20 August 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: 20/08/2008 17:53:01 Produced by the JSE SENS Department.
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