| Tue 30 Sep 2008, 15:58 | | BIO - BioScience Brands - Audited Results For The 16-Month Period Ended 30 |
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BIO
BIO
BIO - BioScience Brands - Audited Results For The 16-Month Period Ended 30
June 2008, Proposed Rights Offer And Cautionary Announcement
BIOSCIENCE BRANDS LIMITED
(Formerly Wellco Health Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2005/005805/06)
("BioScience Brands" or "the company")
ISIN Code: ZAE000115036 & Share code: BIO
AUDITED RESULTS FOR THE 16-MONTH PERIOD ENDED 30 JUNE 2008, PROPOSED RIGHTS
OFFER AND CAUTIONARY ANNOUNCEMENT
CONDENSED GROUP BALANCE SHEETS
30 June 2008 28 February
2007
R R
ASSETS
Non-current assets 43 548 063 14 928 537
Plant and equipment 952 437 986 651
Intangible assets 42 144 154 13 941 886
Deferred tax 451 472 -
Current assets 35 339 967 7 345 901
Inventories 15 604 661 2 484 631
Trade and other receivables 16 892 094 4 860 955
Cash and cash equivalents 2 843 212 315
Total assets 78 888 030 22 274 438
EQUITY AND LIABILITIES
Total equity 40 311 834 4 637 356
Issued capital 169 305 9 208
Share premium 88 110 297 40 100 751
Accumulated loss (47 967 768) (35 472 603
)
Non-current liabilities 25 308 994 731
Deferred taxation - 363 027
Interest bearing liabilities 25 308 152 574
Non Interest bearing liabilities - 479 130
Current liabilities 38 550 888 16 642 351
Taxation payable 600 537 2 477 466
Trade and other payables 21 506 636 11 004 845
Short term portion of long term 13 332 806 117 523
liabilities
Bank overdraft 3 110 909 3 042 517
Total equity and liabilities 78 888 030 22 274 438
Net asset value per share 2.38 5.04
(cents)
Net tangible asset value per (0.11) (10.10)
share (cents)
Number of shares in issue at 1 693 054 381 92 083 686
period end
CONDENSED GROUP INCOME STATEMENTS
16 months ended Year ended
30 June 2008 28 February
2007
R R
Revenue 27 985 573 16 975 822
Operating loss (13 162 825) (33 113 658)
Net financing costs (1 182 459) (1 100 223)
Loss before taxation (14 345 284) (34 213 881)
Taxation 1 850 119 (548 335)
Net loss after taxation (12 495 165) (34 762 216)
attributable to shareholders of
BioScience Brands Limited
Determination of basic and
diluted earnings :
Basic and diluted loss per share (2.80) (37.75)
(cents)
Determination of headline
earnings :
IAS 33 net loss attributable to (12 495 165) (34 762 216)
shareholders
Adjusted for:
Impairment of goodwill - 13 548 702
Loss on disposal of plant and 360 522 20 161
equipment
Impairment of intangible assets 788 352 5 784 546
(Profit) on sale of intangible - (7 800)
assets
Headline loss for year (11 346 291) (15 416 607)
Headline and diluted loss per (2.54) (16.74)
share (cents)
Weighted average number of 446 020 463 92 083 686
shares on which loss and
headline loss per share are
based
CONDENSED GROUP CASH FLOW STATEMENTS
16 month period Year
ended ended
30 June 2008 28 February
2007
R R
Cash flows from operating and
investing activities:
Cash operating profit (6 010 999) (13 275 496
)
Working capital requirements (5 126 909) 7 362 394
Cash generated from operations (11 137 908) (5 913 102)
Replacement capital expenditure (104 008) (565 480)
Financing costs, taxation and (2 462 675) (807 394)
dividend
Net investment in future (30 032 446) (6 674 641)
operations
Net cash (outflow)/inflow before (43 737 037) (13 960 617
financing activities )
Net cash inflow/(outflow) from 46 511 542 11 071 487
financing activities
Net increase/(decrease) in cash 2 774 505 (2 889 130)
and cash equivalents
Cash and cash equivalents at (3 042 202) (153 072)
beginning of year
Cash and cash equivalents at end (267 697) (3 042 202)
of year
STATEMENT OF CHANGES IN EQUITY
16 months ended Year ended
30 June 2008 28 February
2007
R R
Share capital and share premium
Balance at beginning of the year 40 109 959 29 327 165
Issue of new shares 48 169 643 10 782 794
Balance at end of the year 88 279 602 40 109 959
Accumulated Loss
Balance at beginning of the year (35 472 603) (710 387)
Net loss for the year (12 495 165) (34 762 216
)
Balance at end of the year (47 967 768) (35 472 603
)
Total equity 40 311 834 4 637 356
OTHER SALIENT FEATURES 16 months ended Year ended
30 June 2008 28 February
2007
Operating margin (%) -47.0% -195.1%
Gearing (%) 20.3% 5.8%
Interest cover (times) -11.1 -30.1
Return on net assets (%) -31.0% -749.6%
Depreciation 580 050 492 553
Investment expenditure 43 604 008 7 533 372
- expansion 43 500 000 6 967 892
- replacement 104 008 565 480
Lease commitments
- land and buildings 955 220 -
Net financing costs 1 182 459 1 100 223
Interest Paid 1 434 406 1 100 409
Less: Interest Received 251 947 186
COMMENTARY
The board presents the results for the 16 months ended 30 June 2008.
Shareholders are reminded that the company has changed its year end to June
each year.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed report has been prepared in accordance with IAS 34: Interim
Financial Reporting and using accounting policies in compliance with
International Financial Reporting Standards, the Companies Act of South
Africa, 1973, and the disclosure requirements of the Listing Requirements of
the JSE Limited.
BioScience Brands has adopted all the statements and interpretations issued
and effective during the current period by the International Accounting
Standards Board ("IASB"). The accounting policies adopted are consistent with
those applied in the previous financial year, except for the following
changes which did not have any significant impact on the financial results:
Adoption of IFRS 7: Financial Instruments: Disclosure;
Circular 8/07: Headline Earnings per Share.
In the February 2007 financial statements, the then management of Wellco
Health Limited (as the company then was) ("the old Wellco") identified the
existing intangible assets as having useful lives of 10 years and would be
amortised from 1 March 2007. This treatment was applied in the August 2007
and February 2008 interim results and the Circular to Shareholders issued 13
August 2008. Management has decided that this treatment has no merit and is
inconsistent with the accounting treatment of brands of other listed
companies in South Africa, and indeed as to how Bioharmony and Muscle Science
were treated by their previous holding company.
Indefinite-life intangible assets principally comprise those trademarks for
which there is no foreseeable limit to the period over which they are
expected to generate net cash inflows. Our brands are considered to have an
indefinite life given the strength and durability of these brands and the
level of marketing support. They have been in the market for many years, and
the nature of the industry we operate in is such that brand obsolescence is
not common, if appropriately supported by advertising and marketing spend. As
a result our brands with indefinite useful lives will not be amortised but
will be reviewed annually to determine whether indefinite life assessment
continues to be supportable.
This change has no impact on prior reporting periods as the `old Wellco`
brands were not amortised but tested for impairment. Given the re-launch and
renewed trading of these brands further impairment is deemed unnecessary.
RESULTS
BioScience Brands Limited has started its rise from the poor position that
the old Wellco found itself in during 2007, prior to the takeover by the
consortium headed by Arcay Merchant (Pty) Ltd ("Arcay Merchant") on 24
October 2007. The new management team introduced by the consortium is now in
place and the acquisitions of Bioharmony (Pty) Ltd ("Bioharmony") and Aldabri
53 (Pty) Ltd trading as Muscle Science ("Muscle Science") have been completed
following the raising of approximately R 41 million though a specific issue
of shares for cash.
As a result the last seven months have been a period of consolidation and re-
structuring with the three companies, namely `old Wellco`, Bioharmony and
Muscle Science, being consolidated into one business operating out of the
Muscle Science head office in Durban.
Each company had its own unique business model. Management has had to
evaluate the strengths and weaknesses of each over the past 7 months before
selecting the optimum business model for BioScience that is capable of
delivering the operational efficiencies whilst realising the benefits of
consolidation. This has included consolidating the sales force, establishing
a uniform warehousing and distribution network, centralising manufacturing
with a few key manufacturers and the closure of the old Bioharmony office in
Wynberg, Cape Town.
During this 16 month period, BioScience recorded a Net Loss of R 12.5m.
Prudent, yet pragmatic, provisions have been made in respect of `old Wellco`
debtors and all restructuring and re-organisation costs have been expensed.
The results of Bioharmony and Muscle Science have been consolidated from 1
March 2008. BioScience earned a management fee from Fluxrab Investments 163
(Pty) Ltd ("Fluxrab"), a company incorporated in order to fund the
restructuring of BioScience, equal to the net profit of Bioharmony and Muscle
Science for the period 1 December 2007 to 29 February 2008. Fluxrab was
utilised as a warehousing arrangement involving Arcay Merchant purchasing
Bioharmony and Muscle Science and, following the incorporation of Fluxrab,
selling these companies to Fluxrab and was undertaken as old Wellco was, at
the time of the acquisition of Bioharmony and Muscle Science, technically
insolvent, as well as to accommodate the vendor of Bioharmony and Muscle
Science`s requirement that all suspensive conditions to the sale/acquisition
be completed by 1 December 2007. As shareholders were advised, these brands
were injected into the Company as part of the acquisition of Bioharmony and
Muscle Science for the agreed purchase consideration of R 43.5m on
4 March 2008.
Herbology and KGB have traded only marginally since September 2007, with
Herbology having been licensed to a third party by the management of the old
Wellco, as part of the `Turnaround Programme` announced on SENS during June
2007 and KGB having not been manufactured due to cashflow constraints at that
time. The Herbology licence agreement was cancelled with effect from 1 March
2008 and the brand subsequently re-launched by the company with new packaging
and new, modern formulations in August 2008. KGB manufacture was also re-
started and the brand is trading.
Restructuring and reorganisation costs primarily impacted Bioharmony and
Muscle Science resulting in their Net Profit contribution being only R 0.5m
during the time that they have formed part of the BioScience portfolio.
IFRS accounting treatment of the specific issue of shares to directors and
key members of the management team, as contained in the Circular to
shareholders dated 13 August 2008 and as approved by shareholders at the
General Meeting of 1 September 2008, is included in the results.
Segmental Reporting
The group`s brands operate in one market segment and sales are made in South
Africa.
ACQUISITIONS AND DISPOSALS
On 4 March 2008, the group acquired 100% of the share capital of Bioharmony
for a purchase consideration of R28 924 575. The acquired business
contributed revenues of R15 987 280 and net profit of R962 584 to the group
for the period 1 March 2008 to 30 June 2008.
In addition, on 1 March 2008, the group also acquired 100% of the share
capital of Muscle Science for a purchase consideration of R14 575 425. The
acquired business contributed revenues of R6 683 587 and net loss of
R2 052 755 to the group for the period 1 March 2008 to 30 June 2008.
As agreed with Oxyboost (Proprietary) Limited ("Oxyboost"), and following
shareholder approval, the licence agreement to market and sell the Herbology
range of products was reversed with effect from 1 March 2008 and, as noted
above, BioScience Brands has taken over the marketing and manufacture of
Herbology and has re-launched the brand.
The board accepted an offer for the purchase of the intellectual property
relating to the Nutrimax brand for a purchase consideration of R 3.8 million,
which disposal was approved by shareholders at the general meeting held on 1
September 2008.
DIRECTOR APPOINTMENTS AND RESIGNATIONS
Appointed Resigned
Dean Marais 13 April 2005 31 December 2007
Clifford Sossen 12 July 2005 23 March 2007
Andile Khumalo 22 April 2006 12 June 2007
Terrence Michael Wynne 30 October 2006 12 June 2007
Bheki Shongwe 11 April 2007 15 November 2007
Antony Sean McKeever 24 July 2007 25 October 2007
Norman Robert Preston 27 July 2007 25 October 2007
Linda Cameron 25 October 2007 09 June 2008
Carol Ann Ansara 25 October 2007 13 May 2008
Michael Garth Allan 25 October 2007
Mark Strydom 19 November 2007
John Ian Black 19 November 2007
Yaseen Bhayat 19 November 2007
Peter Andrew Ireland 09 June 2008
CONTINGENCIES AND COMMITMENTS
There are no contingencies or commitments that the directors are aware of.
AUDIT OPINION
The auditors, Deloitte & Touche, have issued their opinion on the group`s
financial statements for the 16 month period ended 30 June 2008. The audit
was conducted in accordance with the International Standards on Auditing.
They have issued a modified audit opinion. The modification to the audit
report relates to an emphasis of matter relating to the improvement of future
trading results. The condensed financial statements have been derived from
the group financial statements and are consistent in all material respects
with the group financial statements. Copies of their audit reports on the
annual financial statements and the summarised financial statements are
available for inspection at the registered office of the group.
DIVIDENDS
No dividend has been declared for the period under review (2007: Rnil)
PROPOSED RIGHTS OFFER
Shareholders are reminded that, as the final component of the restructuring
and recapitalisation of the group, the company intends to proceed with a
partly underwritten rights offer to shareholders at 3.5 cents per share in
the ratio of four rights offer shares for every one BioScience Brands share
held.
The final terms and salient dates of the proposed rights offer will be
published as soon as the suspension in trade of the company`s securities on
the JSE has been lifted. The company intends applying for the lifting of the
suspension immediately after the publication of these audited results.
NAME CHANGE
Following the approval of shareholders at a meeting held on 28 February 2008,
the company`s name was changed from Wellco Health Limited to BioScience
Brands Limited. The company began trading on the JSE under the name
BioScience Brands Limited on 14 March 2008.
SHARE CAPITAL
During the period under review, the authorised share capital was increased
from R50 000 divided into 500 000 000 ordinary shares of R0.0001 each to R500
000 comprising 5 000 000 000 ordinary shares of R0.0001 per share, which
additional ordinary shares, in all respects, rank pari passu with the
existing ordinary shares in the capital of the company and 1 174 522 399
shares were issued for cash at a subscription price of 3.5 cents per share.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the company has entered into negotiations,
which if successfully concluded, may have a material effect on the price at
which the company`s securities trade. Accordingly, shareholders are advised
to exercise caution in dealing in the company`s securities until such time as
a further announcement is made on SENS.
APPRECIATION
I would like to express my appreciation to all those who have supported us on
the incredibly long and arduous journey which will culminate in the `old
Wellco` evolving into this new bigger and exciting business, called
BioScience Brands Limited. Special appreciation goes to those shareholders
who have patiently waited for the lifting of suspension of the shares after
contributing to the acquisition of Bioharmony and Muscle Science and the team
at Arcay who, despite all obstacles thrown at them, diligently persevered to
get this deal completed.
By order of the Board
JI Black / MG Allan
Chairman / Chief Executive Officer
30 September 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
JI Black (Chairman)*#, MG Allan (Chief Executive Officer), PA Ireland, M
Strydom, Y Bhayat*.
(* Non-executive) (# British)
Designated Advisor Transfer Office
Arcay Moela Sponsors (Pty) Ltd Computershare Investor Services (Pty) Ltd
Date: 30/09/2008 15:58:26 Produced by the JSE SENS Department.
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