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BIO
BIO
BIO - Bioscience Brands - Audited Condensed Consolidated Financial Results for
the Year Ended 30 June 2009
BIOSCIENCE BRANDS 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 CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2009
CONDENSED CONSOLIDATED BALANCE SHEET
Year ended 16 months
30 June 2009 ended 30
June 2008
R R
ASSETS
Non-current assets 56 269 945 43 548 063
Plant and equipment 951 498 952 437
Intangible assets 54 659 016 42 144 154
Deferred tax 659 431 451 472
Current assets 29 371 752 35 339 967
Inventories 12 944 918 15 604 661
Trade and other receivables 14 453 195 16 892 094
Cash and cash equivalents 1 973 639 2 843 212
Total assets 85 641 697 78 888 030
EQUITY AND LIABILITIES
Total equity 48 923 129 40 311 834
Issued capital 244 287 169 305
Share premium 111 371 533 88 110 297
Accumulated loss (62 692 691) (47 967 768)
Non-current liabilities 16 535 25 308
Loans and borrowings 16 535 25 308
Current liabilities 36 702 033 38 550 888
Taxation payable 1 928 433 600 537
Trade and other payables 21 404 054 21 506 636
Short-term portion of loans and 4 490 894 13 332 806
borrowings
Bank overdraft 8 878 652 3 110 909
Total equity and liabilities 85 641 697 78 888 030
CONDENSED CONSOLIDATED INCOME STATEMENT
Year ended 16 Months
ended
30 June 2009 30 June 2008
R R
Revenue 66 503 641 27 985 573
Operating loss (10 403 370) (13 162 825)
Net financing costs (2 998 453) (1 182 459)
Loss before taxation (13 401 823) (14 345 284)
Taxation (1 323 100) 1 850 119
Loss for the year (14 724 923) (12 495 165)
Loss attributable to:
Equity holders of the parent (14 724 923) (12 495 165)
Basic and diluted loss per share (0.71) (2.80)
(cents)
Headline earnings reconciliation:
IAS 33 Loss attributable to equity (14 724 923) (12 495 165)
holders of the parent
Adjusted for:
Loss on disposal of plant and (9 225) 360 522
equipment
Impairment of intangible assets - 788 352
Headline loss (14 734 148) (11 346 291)
Headline and diluted loss per (0.71) (2.54)
share (cents)
Weighted average number of shares 2 076 377 504 446 020 463
on which loss and headline loss
per share are based
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Year ended 16 months
30 June 2009 ended 30 June
2008
R R
Cash flows from operating
activities:
Cash operating profit (7 846 485) (6 010 999)
Working capital requirements 4 792 897 (5 126 909)
Cash used in operating activities (3 053 588) (11 137 908)
Financing costs, taxation and (2 998 453) (2 462 675)
dividend
Cash flows from operating (6 052 041) (13 600 583)
activities
Cash flows from investing
activities:
Replacement capital expenditure (407 121) (104 008)
Net investment in future (12 481 468) (30 032 446)
operations
Cash flows from investing (12 888 589) (30 136 454)
activities
Cash flow from financing 12 303 314 46 511 542
activities
Net (decrease)/increase in cash (6 637 316) 2 774 505
and cash equivalents
Cash and cash equivalents at (267 697) (3 042 202)
beginning of year
Cash and cash equivalents at end (6 905 013) (267 697)
of year
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 16 months
30 June 2009 ended 30
June 2008
R R
Share capital
Balance at beginning of the year 169 305 9 208
Issue of new shares 46 838 160 097
Shares in the process of being 32 988 -
issued
Cancellation of share issue (4 844) -
Balance at end of the year 244 287 169 305
Share premium
Balance at beginning of the year 88 110 297 40 100 751
Issue of new shares 13 802 429 48 009 546
Shares in the process of being 11 149 231 -
issued
Cancellation of share issue (1 690 424) -
Balance at end of the year 111 371 533 88 110 297
Accumulated Loss
Balance at beginning of the year (47 967 768) (35 472 603)
Loss for the year (14 724 923) (12 495 165)
Balance at end of the year (62 692 691) (47 967 768)
Total equity 48 923 129 40 311 834
OTHER SALIENT FEATURES Year ended 16 months
30 June 2009 ended 30 June
2008
Net asset value per share 2.00 2.38
(cents)
Net tangible asset value per (0.23) (0.11)
share (cents)
Number of shares in issue at 2 442 870 452 1 693 054 381
period end
Depreciation (R) 383 891 580 050
Investment expenditure (R) 12 888 584 43 604 008
- expansion 12 481 468 43 500 000
- replacement 407 121 104 008
Lease commitments (R)
- land and buildings 1 746 661 955 220
Net financing costs (R) 2 998 453 1 182 459
Interest paid 3 002 702 1 434 406
Less: Interest received (4 249) (251 947)
COMMENTARY
The board presents the results for the year ended 30 June 2009.
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The consolidated financial results of the company and its subsidiaries
(together referred to as the "group") has been prepared in accordance with
IAS 34: Interim Financial Reporting and using accounting policies in
compliance with International Financial Reporting Standards (IFRS), 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.
2. RESULTS
BioScience Brands took advantage of its new brand acquisitions and the
recessionary environment during the past year to invest in brand
revitalisation, extension and where necessary consolidation in order to
secure the best position for market recovery. These include as detailed
below, the relaunch of the Muscle Science brand and extension into new
large categories, the complete revitalisation of the Herbology range and
the development of an extensive Bioharmony marketing campaign around
Patrick Holford, the internationally renowned nutritional expert and
prolific author.
2009 was always going to be a difficult year for BioScience Brands as it
consolidated the three acquired businesses into one homogenous business. As
a result, restructuring, reorganisation and resolving legacy issues
relating to the old Wellco Health Limited business were undertaken in a
difficult trading environment as South Africa entered a recession.
During this period under review, BioScience Brands was subjected to a
number of costs, including non-recurring costs, that relate to acquisition
transaction, working capital of the acquired businesses, restructuring and
reorganisation. These included:
- R4.0m of stock write-offs and provisions, mainly related to ageing
stocks acquired with the Bioharmony (Pty) Ltd, Aldabri 53 (Pty) Ltd
t/a Muscle Science and Wellco Health Limited acquisitions;
- R2.5m of restructuring and reorganisation costs;
- R2.2m related to the 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;
- R2.1m relating to a 2004 tax assessment and other prior years taxes
that was negotiated by third party consultants in the prior year,
which has recently been disputed by SARS;
- R2.3m related to interest incurred on a loan required to complete the
purchase of Bioharmony (Pty) Ltd and Aldabri 53 (Pty) Ltd t/a Muscle
Science when the delay in the unsuspension of BioScience Brands
postponed the Rights Offer which raised the additional funding
required as per the Circular to shareholders dated 13 August 2008;
- R0.7m related to interest incurred on an overdraft facility that was
inherited from Wellco Health Limited and for which settlement is now
being negotiated with the relevant bank.
Excluding the above costs totalling R13.8m, the underlying trading loss
that BioScience Brands made in its first year of trading is R0.9m.
BioScience Brands traded profitably at an operating level before these
costs until March 2009. However poor sales over the last three months of
the year, as the retail trade reacted to falling consumer demand,
negatively impacted this result. This has corrected in September with sales
reflecting our aggressive tactical marketing and improved consumer demand.
The final part of the restructuring was undertaken in June 2009 to further
downsize the cost-base in the business. In addition, the company has found
discrepancies in the process of taking over Wellco Health Limited and the
related transactions. This relates firstly to 48 436 229 shares which are
in the process of being cancelled ab initio and the administration thereof
is being attended to by CIPRO and the JSE and secondly, the R2.1m 2004 tax
query detailed above. The company directors have elected to adopt a
conservative approach in recording these issues and they are reflected as
such in the annual financial statements. The directors are pursuing their
speedy resolution to the benefit of shareholders.
Muscle Science
Muscle Science was unable to fulfil consumer demand in 2009, due to poor
supply from outsourced manufacturers and distribution into key retail
accounts. This has been addressed with new manufacturing and distribution
arrangements in place and operational. The demand for this performance
brand remains very strong and the complete re-launch and extension into new
large categories such as the ready-to-drink and nutritional bar markets in
the September and October 2010 has been met with much consumer excitement.
In addition BioScience Brands identified the need for a lifestyle sports
nutrition brand resulting in the acquisition of the Nutrimax brand as
detailed below in June 2009.
Bioharmony
The tougher economic climate has had a significant impact on Bioharmony as
its consumers are very brand-loyal, buying numerous products in the range.
However it appears that some consumers, whilst remaining loyal to
Bioharmony`s specialist products, have postponed buying the more general
products such as the multi-vitamins until they can afford them again.
Coinciding with the forecast improved trading conditions later this year,
the tour and television shows by the internationally renowned nutritionist
and author, Patrick Holford, is expected to grow the brand and attract new
consumers. This tour coincides with the global launch in South Africa of
Patrick Holford`s new book "The 10 Secrets of 100% Healthy People", which
recommends many Bioharmony products.
Herbology
Herbology was relaunched recently with innovative packaging and excellent
new formulations. Listings have been achieved nationally and the brand has
been heavily promoted at point-of-purchase. It has been difficult to
encourage consumer trial in the recessionary environment, however the
retailer support garnered ensures that the product is well positioned for
market recovery.
Phyto Nova
Thebe Medicare (Pty) Ltd ("TMC") had the option to attain up to a 40%
shareholding in BioScience Brands by exercising an option at 3.5 cents
before 31 August 2009 through either the injection of new brands into
BioScience Brands or cash. On 1 September 2008, TMC exercised part of that
option through the injection of the brand, Phyto Nova, into BioScience
Brands. Phyto Nova is a range of natural medicines with excellent clinical
support. These natural products are relatively premium priced due to their
sophisticated formulations. They did not achieve the initial targeted
volumes as some consumers chose cheaper pharmaceutical equivalents until
they are able to afford these preferred natural products again.
KGB
KGB remains a brand with high consumer awareness but with small, seasonal
sales with its current product offering.
3. SEGMENTAL REPORTING
The group`s brands operate in one market segment and sales are made in
South Africa.
4. ACQUISITIONS AND DISPOSALS
Phyto Nova was acquired on 1 September 2008 and was independently valued at
R9.0m. In addition, BioScience Brands acquired the brand Nutrimax from
Oxyboost (Pty) Ltd for R1 579 621 on 1 June 2009. There were no disposals.
5. DIRECTOR APPOINTMENTS
The following director appointments occurred during the year
under review and up to and including the date of this
announcement:
Appointed
MM Di Nicola
JJ Fenster
22 January 2009
10 September 2009
6. CONTINGENCIES AND COMMITMENTS
There are no contingencies and commitments that the directors are aware of.
7. FORECAST AND GOING CONCERN
With TMC exercising a further portion of its options through the injection
of the TMC Consumer brands into BioScience Brands and very encouraging
sales in September 2009, BioScience Brands is immediately able to trade
quite profitably. The complete re-launch of Muscle Science in October,
including the launch of Muscle Science Xplode and Staminade into the retail
beverage and bar markets, together with more stable supply and improved
distribution, is expected to boost Muscle Science sales significantly.
With all known legacy issues related to Wellco Health Limited dealt with,
the directors are confident that BioScience Brands is now well positioned
to benefit from improved trading conditions. In the interim it has many
initiatives in place to drive market share gain such as the upcoming
Patrick Holford tour and television show and the global launch in South
Africa of his new book that recommends the Bioharmony products.
On the basis of this, the directors are of the opinion that the group will
continue as a going concern. The company and the group financial statements
have been prepared on a going-concern basis.
8. NOTIFICATION OF ELECTION TO EXERCISE OPTIONS
In terms of the circular dated 13 August 2008, and as approved by
shareholders on 01 September 2008, TMC has the right, but not the
obligation to subscribe for up to a maximum of 571 428 571 additional
shares at 3.5 cents per share. BioScience Brands has received notification
from TMC that they have elected to exercise a portion of their option
through the injection of Thebe owned and licensed consumer brands. The
exercise of options will be subject to an independent valuation, an
agreement being signed, as well as satisfying regulatory approvals.
Subject to the completion of the conditions precedent as stated, it is the
intention of TMC to exercise their option to a value of 5 million Rand,
which is equivalent to 142 857 143 shares
9. AUDITED RESULTS - AUDITOR`S OPINION
The auditors, Deloitte & Touche, have audited the consolidated annual
financial statements of BioScience Brands Limited from which the condensed
consolidated financial results have been derived, and have expressed a
modified audit opinion on the consolidated annual financial statements. The
modification to the audit report contains an emphasis of matter relating to
a material uncertainty on the future trading results of the group which
will impact the group`s ability to continue as a going concern. The
condensed consolidated financial results comprise the condensed
consolidated balance sheet at 30 June 2009, the condensed consolidated
income statement, condensed consolidated statement of changes in equity and
condensed consolidated cashflow statement for the year then ended, and
selected explanatory notes. The audit report is available for inspection at
the company`s registered office.
10. DIVIDENDS
No dividend has been declared for the period under review (2008: Rnil)
11. SHARE CAPITAL
During the year under review:
i. 396,946,172 shares were issued in terms of the rights offer to
shareholders effective 23 January 2009, included therein are
48,436,229 shares cancelled during the year;*
ii. 71,428,571 shares were issued to acquire brands in terms of the
cancellation of the Herbology Licence Agreement and 257,142,857 shares
are in the process of being issued in terms of the Thebe option, as
contained in the Circular to shareholders dated 13 August 2008; and
iii. 72,734,700 shares are in the process of being issued to executive
management in terms of the Executive Options as contained in the
Circular to shareholders dated 13 August 2008 and as approved by
shareholders in the general meeting held on 1 September 2008.
*The administration of this cancellation is being attended to by CIPRO and
the JSE.
12. CHANGE IN DESIGNATED ADVISOR
BioScience Brands has appointed PricewaterhouseCoopers Corporate Finance (Pty)
Ltd as its Designated Advisor on 10 September 2009.
By order of the Board
JI Black / MG Allan
Chairman / Chief Executive Officer
30 September 2009
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*, MM Di Nicola*, JJ Fenster*.
(* Non-executive) (# British)
Designated Advisor Transfer Office
PricewaterhouseCoopers Computershare Investor
Corporate Finance (Pty) Ltd Services (Pty) Ltd
Date: 30/09/2009 17:00:01 Produced by the JSE SENS Department.
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