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BEG
BEG
BEG - Beige - Unaudited Group Results For The Six Months Ended 30 September
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")
UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2008 AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Revenue up 60% Operating profit up 123% Attributable earnings per
share up 109%
Following the announcement dated 24 November 2008 whereby shareholders were
advised that prior period results would be restated, the board presents its
results for the six months ended 30 September 2008 below, together with
unaudited restated results for both the year ended 31 March 2008 and for the
six months ended 30 September 2007.
Group Balance Sheets
Unaudited six Unaudited Audited Unaudited Unaudited
months ended and 31 March and six
30 September restated 2008 restated months
2008 31 March six months ended
2008 ended 30
30 September
September 2007
2007
R`000 R`000 R`000 R`000 R`000
ASSETS
Non-current 276 733 173 304 172 790
assets 246 107 245 654
Property, 138 303 59 812 59 812
plant and
equipment 112 791 112 791
Intangible 124 314 107 315 107 315
assets 118 031 118 031
Deferred 14 116 6 177 5 663
taxation 15 285 14 832
Current assets 238 238 222 479 228 038 185 845 187 680
Inventories 76 778 59 669 62 580 52 109 53 944
Trade and 155 939 86 534 86 534
other
receivables 114 372 117 020
Cash and cash 5 521 47 202 47 202
equivalents 48 438 48 438
Total assets 514 971 468 586 473 692 359 149 360 470
EQUITY AND
LIABILITIES
Capital and 248 822 172 241 173 562
reserves 230 746 236 298
Share capital 17 114 17 028 17 028 18 525 18 525
Share premium 297 343 295 460 295 460 320 659 320 659
Reserves 12 345 12 237 10 965 1 132 1 132
Accumulated (77 980) (93 979) (87 155) (168 075) (166 754)
loss
Non-current 43 660 47 932 47 932
liabilities 51 581 51 581
Long-term 43 660 47 932 47 932
liabilities 51 581 51 581
Current 222 489 138 976 138 976
liabilities 186 259 185 813
Accounts 144 727 128 051 127 605 96 979 96 979
payable and
provisions
Current 40 558 10 389 10 389
portion of
long-term
liabilities 30 388 30 388
Taxation 8 533 3 443 3 443 11 532 11 532
Bank overdraft 28 671 24 377 24 377 20 076 20 076
Total equity 514 971 468 586 473 692 359 149 360 470
and
liabilities
Ordinary
shares in
issue (000`s):
At period end 1 692 657 1 842 582 1 842 582
(Note 1) 1 684 097 1 684 097
Fully diluted 1 712 424 1 702 331 1 702 331 1 883 549 1 883 549
(Note 1 & 2)
Net asset
value per
share
information:
Net asset 14.70 9.35 9.42
value per
share (cents) 13.70 14.03
Net tangible 7.36 3.52 3.60
asset value
per
share (cents) 6.69 7.02
Fully diluted:
Net asset 14.53 13.55 13.88 9.14 9.21
value per
share (cents)
Net tangible 7.27 6.62 6.95 3.45 3.52
asset value
per share
(cents)
Group Income Statements
Unaudited Unaudited Audited Unaudited Unaudited
six months and 31 March and six
ended restated 2008 restated months
30 September 31 March six ended
2008 2008 months 30
ended September
30 2007
R`000 September
R`000 2007
R`000 R`000 R`000
Revenue 303 553 452 396 454 611 189 153 189 153
Cost of sales (237 020) (359 378) (356 467) (147 803) (145 969)
Gross profit 66 533 93 018 98 144 41 350 43 184
Operating (42 373) (68 635) (65 256) (29 295) (29 295)
expenses
Operating profit 24 160 12 055 13 889
before goodwill 24 383 32 888
impairment
Goodwill - (70 535) (70 535) (116 884) (116 884)
impairment
Discount on - 12 719 12 719 - -
acquisition
Operating 24 160 (104 829) (102 995)
profit/(loss) (33 433) (24 928)
after goodwill
impairment
Investment income 2 250 6 460 6 460 2 402 2 402
Net profit/(loss)
from operations
before finance 26 410 (26 973) (18 468) (102 427) (100 593)
charges
Finance charges (4 066) (5 554) (5 554) (1 227) (1 227)
Net profit/(loss) 22 344 (103 654) (101 820)
before taxation (32 527) (24 022)
Taxation (6 345) 721 (960) (3 333) (3 846)
Net profit/(loss) 15 999 (106 987) (105 666)
for the period (31 806) (24 982)
Headline earnings
adjustments:
- Profit on
disposal of plant - (16) (16) - -
and equipment
- Goodwill - 70 535 70 535 884 116 884
impairment
- Discount on - (12 719) (12 719) - -
acquisition
- Gain on
utilisation of - - (2 500) - -
treasury shares
Headline earnings 15 999 25 994 30 318 9 897 11 218
for the period
Ordinary shares
in issue (000`s):
Weighted average 1 684 803 1 332 425 1 332 425 1 051 034 1 051 034
shares in issue
Fully diluted 1 704 569 1 350 659 1 350 659 1 092 001 1 092 001
weighted average
shares in issue
Earnings per
share
information:
Earnings per 0.95 (2.39) (1.87) (10.18) (10.05)
share (cents)
Headline earnings 0.95 1.95 2.28 0.94 1.07
per share (cents)
Fully diluted:
Earnings per 0.94 (2.35) (1.85) (9.80) (9.68)
share (cents)
Headline earnings 0.94 1.92 2.24 0.91 1.03
per share (cents)
Notes
4 316 667 shares held as treasury stock have been subtracted from the
respective share totals for purposes of calculating earnings per share
information.
Fully diluted per share information has been incorporated to show the
potential effect of full dilution for 19 766 739 options held by directors
and senior management to subscribe for new shares at 7.5 cents per share.
The directors and senior management options, which were approved by
shareholders at the general meeting held on 13 November 2006, were granted
with effect from 01 April 2006 and expire on 31 March 2011.
Abridged Group Cash Flow Statements
Unaudited Unaudited Audited Unaudited Unaudited
six months and 31 March and six months
ended restated 2008 restated ended
30 31 March six 30
September 2008 months September
2008 ended 2007
30
September
R`000 2007 R`000
R`000 R`000 R`000
Net cash outflow (566) (12 800) (12 800)
from operating
activities (14 842) (14 842)
Net cash outflow (43 712) (214 982) (214 982)
from investing
activities (215 832) (215 832)
Net cash (2 933) 232 534 232 534
(outflow)/inflow
from financing
activities 232 361 232 361
Net (47 211) 1 687 1 687 4 752 4 752
(decrease)/increase
in cash and cash
equivalents
Bank balance at 24 061 22 374 22 374
beginning of period 22 374 22 374
Bank balance at end (23 150) 27 126 27 126
of period 24 061 24 061
Group Statement of Changes in Equity
Ordinary Ordinary Ordinary Ordinary Preference
share treasury shares to share share
capital shares be issued premium capital
R`000 R`000 R`000 R`000 R`000
Balance at 31 7 719 143 -- 123 127 --
March 2007
Ordinary 9 123 -- -- 157 476 --
shares issued
Utilisation -- (100) -- -- --
of treasury
shares
Preference -- -- -- -- 143
shares issued
Share-based -- -- -- -- --
payments
Revaluation -- -- -- -- --
of property
Loss for the -- -- -- -- --
year
Balance at 31 16 842 43 -- 280 603 143
March 2008
Ordinary -- -- 1 969 -- --
shares to be
issued
Share-based -- -- -- -- --
payments
Profit for -- -- -- -- --
the year
Balance at 30 16 842 43 1 969 280 603 143
September
2008
Preferenc Reserves Accumulated Total
e share (see table loss
premium below) R`000 R`000
R`000 R`000
Balance at -- 1 544 (62 173) 70 360
31 March
2007
Ordinary -- -- -- 166 599
shares
issued
Utilisation -- 2 500 -- 2 400
of treasury
shares
Preference 14 857 -- -- 15 000
shares
issued
Share-based -- 219 -- 219
payments
Revaluation -- 7 974 -- 7 974
of property
Loss for the -- -- (31 806) (31 806)
year
Balance at 14 857 12 237 (93 979) 230 746
31 March
2008
Ordinary -- -- -- 1 969
shares to be
issued
Share-based -- 108 -- 108
payments
Profit for -- -- 15 999 15 999
the year
Balance at 14 857 12 345 (77 980) 248 822
30 September
2008
Group Statement of Changes in Equity - continued
Reserves
Revaluation Share based Treasury share Total
reserve payments reserve reserves
R`000 reserve R`000
R`000 R`000
Balance at 31 March -- 1 544 -- 1 544
2007
Utilisation of -- -- 2 500 2 500
treasury shares
Share-based payments -- 219 -- 219
Revaluation of 7 974 -- -- 7 974
property
Balance at 31 March 7 974 1 763 2 500 12 237
2008
Share-based payments -- 108 -- 108
Balance at 30 7 974 1 871 2 500 12 345
September 2008
Segmental Reporting
Outsource Plastic
manufacturing products Other Group
Segment revenue
- Six months ended - 266,223 37,330 - 303,553
30 September 2008
- Year ended -
31 March 2008 389,114 63,282 - 452,396
- Six months ended -
30 September 2007 174,920 14,233 - 189,153
Segment operating
profit/(loss)
- Six months ended - 32,589 (3,248) (5,181) 24,160
30 September 2008
- Year ended -
31 March 2008 29,953 (3,414) (2,156) 24,383
- Six months ended -
30 September 2007 14,316 (1,728) (533) 12,055)
Segment profit/(loss)
before taxation
- Six months ended - 31,590 (4,901) (4,345) 22,344
30 September 2008
- Year ended -
31 March 2008 32,105 (5,545) (59,087) (32,527)
- Six months ended -
30 September 2007 12,424 (2,189) (113,889) (103,654)
Segment assets
- Six months ended - 182,443 95,429 237,099 514,971
30 September 2008
- Year ended -
31 March 2008 170,667 71,584 226,335 468,586
- Six months ended -
30 September 2007 178,164 76,468 104,517 359,149
Segment liabilities
- Six months ended - 158,592 51,420 56,137 266,149
30 September 2008
- Year ended -
31 March 2008 139,779 49,009 49,052 237,840
- Six months ended -
30 September 2007 120,792 47,878 18,238 186,908
COMMENTARY
The directors of Beige are pleased to announce the group results for the
period ended 30 September 2008. These unaudited results show the
consolidated position of Beige, post the acquisition of RAP Products
International (Proprietary) Limited ("RAP"), which has been consolidated with
effect from 01 September 2008. Beige is the largest fully empowered contract
manufacturer in the South African personal care industry.
The abridged results have been prepared 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").
1. Group review
Beige is a registered holding company operating through thirteen
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 plastics manufacturing businesses to complement
its contract manufacturing operations. Beige is listed on the Alternative
Exchange ("AltX") of the JSE Limited.
During the period under review, with the exception of Crystal Pack (Pty) Ltd
("Crystal Pack"), which was acquired in the prior year and further details of
which are provided below, all the operating units performed significantly
better than the prior comparative period. Quality Products, the largest
subsidiary, saw continued increase in organic growth, from both key and new
customers. The combined operations at Chloorkop and Argo have also showed
substantially improved operational and financial results. Beige has made
additional investments in infrastructure and capacity and both the Durban and
Johannesburg operations have been expanded. The company continues to
experience a growth in demand for the goods and services that it provides.
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, with Amcos
now contributing positively to the group and Amcos has been relocated and
integrated into the Chloorkop facility during this period.
In addition, the Competition Commission gave their unconditional approval for
Beige to acquire 100% of the shares in RAP Products (Proprietary) Limited
("RAP") at the end of August 2008 and the results of RAP have been
consolidated into the group from September 2008. RAP carries on the business
of manufacturing injection and blow moulded plastic packaging products,
primarily for the cosmetics industry.
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 consolidated procurement.
Restatement of prior period results
During the previous financial 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. Shareholders are advised that the board of directors has
uncovered material accounting irregularities at Crystal Pack, a wholly-owned
subsidiary of Beige. Suspicions were raised in September 2008 and Beige
immediately commissioned a forensic audit into Crystal Pack`s financial
affairs. Crystal Pack was acquired by Beige from the CAVI consortium from 1
July 2007 and was subject to profit and other warranties for the year to 31
March 2008. The forensic audit revealed accounting irregularities, which
Beige is of the opinion constitutes serious manipulation of financial
accounts from both prior to the Crystal Pack acquisition date, and during the
warranty period. The matter has been referred to the National Prosecuting
Authorities and steps are being taken to recover damages and/or losses from
the various parties associated with Crystal Pack.
The financial effects of the irregularities above have mostly affected the
financial results of the prior year ended 31 March 2008 and these results
have consequently been restated.
The cumulative effect of the accounting irregularities after taxation is
estimated at R5.5 million with approximately R1.2 million impacting on the
six months ended 30 September 2008. The prior year profit before taxation
impact is estimated at R4.3 million, of which R1.3 million has affected the
prior year six month comparative figure.
Beige does not expect any further material adjustments to the above numbers.
However, Beige now has a contingent asset as detailed in paragraph 6 below.
In addition to the above, the results for the year ended 31 March 2008 have
also been restated by R2.5 million in relation to the recovery of shares at
no cost to Beige, as detailed in note 2 below.
2. Prior year adjustment
Unaudited Unaudited
and and
restated restated
31 March six
2008 months
ended
30
R`000 September
2007
R`000
Total equity as 236 298 173 562
reported
During 2008 ordinary shares
were returned to Beige as part
of a court settlement to the
value of R2 500 000 and were
partly used to fund the
acquisition of Amcos Cosmetics
International (Pty) Ltd. This
was treated as income in the
2008 annual financial
statements, but is now ( 2 500) --
allocated to reserves. The 2 500 --
effect of the restatement is
as follows:
Increase in operating expenses
Increase in ordinary share
premium
During 2008 the Brine Road
property was revalued and
deferred tax was raised on the
full revaluation at the
capital gains tax rate.
Deferred tax should have been
raised at the company tax rate (1 228) --
on the improvements portion.
The effect of the restatement
is as follows:
Decrease in deferred tax asset
As a result of certain
material accounting
irregularities identified at
Crystal Pack (Pty) Ltd, a
wholly owned subsidiary, for
the 8 month period ended 31
March 2008, the prior results
are required to be restated.
These irregularities have
resulted in the following
restatements to the prior year
results
Decrease in sales (2 092) --
Increase in cost of sales (2 910) (1 835)
Increase in operating expenses (1 003) --
Tax effect 1 681 514
Total equity restated 230 746 172 241
3. Financial and operational overview
Despite the issues surrounding Crystal Pack, the board is pleased with
the results for the first six months of the year. The highlights of
these results include an increase in operating profit of 123%, compared
to the six month period ended 30 September 2007 and a 62% growth in
headline earnings, from restated earnings of R9.9 million to R16.0
million for the period.
Turnover increased from R189.1 million in the comparative period to
R303.5 million for the period under review, an increase of 60%. The
gross profit margin has been maintained at 22%.
The performance of Crystal Pack has been extremely disappointing and has
impacted negatively on an otherwise superb performance of the rest of
the group. Action has been taken to turn the Crystal Pack business
around, and with the recent acquisition of RAP additional management has
been deployed.
RAP carries on the business of manufacturing injection and blow moulded
plastic packaging products, primarily for the cosmetics industry. For
the one month ending 30 September 2008 the subsidiary contributed R396
000 in net profit after tax.
Overall the group is in a much stronger position than in the comparative
period as represented by a stronger balance sheet, with tangible net
asset value almost doubling from that of the prior comparative period.
4. Prospects
The group has excellent prospects for strong, sustained growth in
earnings. Although the company is now entering its traditionally busier
season the slow down in the economic activity could have an effect on
the second half of the year. With the acquisition of Crystal Pack and
RAP, the company has vertically integrated into the packing aspect of
its industry, has strengthened management with the introduction of the
RAP management team, and expects synergies and cost benefits to flow in
due course.
5. Acquisitions and issue of shares
Acquisition of RAP
As announced on 26 May 2008, and post Competition Commission approval,
Beige has concluded agreements in terms of which Beige acquired 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 was also agreed that Bruce Frewen and Andrea Protti (but not Mark
Dunn) would 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, being 23 cents per share.
RAP is involved in the manufacture of packaging, primarily for the
cosmetics industry and synergies and economies of scale with Crystal
Pack are expected.
6. Contingent assets
Beige has initiated legal action against all parties who have been
involved in the material accounting irregularities at Crystal Pack and
preliminary steps to recover all amounts involved, including costs and
damages have commenced. No asset in relation to this claim has been
recognised in these results as the claim is in a preliminary stage.
7. Dividends
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 was paid to all preference shareholders recorded
in the preference share register of the company at the close of business
on Friday, 29 August 2008.
No ordinary dividends are proposed for the period.
8. Changes to the board
During the period, Michael ten Hope resigned from the board of Beige
effective 18 August 2008.
9. Change in auditors
PriceWaterhouseCoopers Inc. have been appointed as auditors of the group
during the period.
10. Withdrawal of cautionary announcement
Pursuant to the publication of this announcement, shareholders are advised
that the cautionary announcement is hereby withdrawn.
By order of the Board
Yaseen Bhayat Mark Di Nicola
Chairman Chief Executive Officer
26 November 2008
Johannesburg
Company Secretary and Registered Office
Arcay Client Support (Pty) Ltd (Registration number
1998/025284/07)
Arcay House, 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*; RH Weissenberg*
(* Non-executive) (# British)
Designated Advisor Transfer Office
Arcay Moela Sponsors Link Market Services South
(Proprietary) Limited Africa (Pty) Ltd
Date: 26/11/2008 15:32:01 Produced by the JSE SENS Department.
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