| Wed 23 Mar 2005, 9:14 | | RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 |
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Milkworx - Abridged unaudited maiden interim results for the six months ended 31
December 2004
MILKWORX LIMITED
(Previously Acuity Group Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1998/011074/06)
Share code MKX ISIN ZAE000058020
(`Milkworx` or `the company`)
ABRIDGED UNAUDITED MAIDEN INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31
DECEMBER 2004
BALANCE SHEETS
Unaudited Audited Unaudited
31 Dec 30 Jun 30 Sep
2004 2004 2003
R`000 R`000 R`000
ASSETS
Non-current assets 19 338 822 14
Property, plant and equipment 18 841 - 14
Deferred taxation 497 822 -
Current assets 19 410 5 460 1
Inventories 6 628 - -
Trade and other receivables 10 995 5 458 -
Cash and cash equivalents 1 787 2 1
Total assets 38 748 6 282 15
EQUITY AND LIABILITIES
Capital and reserves 18 626 5 427 (503)
Share capital 4 907 1 083 1 083
Share premium 12 898 5 047 5 047
Retained income/(loss) (13 689) (15 111) (21 041)
Non-distributable reserves 14 510 14 408 14 408
Non-current liabilities 6 913 210 336
Negative goodwill 739 - -
Long-term liabilities 1 804 - -
Shareholders loans 4 160 - -
Loans payable 210 210 336
Current liabilities 13 209 645 182
Trade and other payables 12 188 645 163
Bank overdraft 665 - 19
Short-term portion of liabilities 356 - -
Total equity and liabilities 38 748 6 282 15
Net asset value per share (cents) 3.8 5.0 (0.5)
Net tangible asset value per
share (cents) 3.8 4.3 (0.5)
Closing number of shares (`000) 490 702 108 315 108 315
INCOME STATEMENTS
Unaudited Audited Unaudited
6 Months 15 Months 6 Months
ended ended ended
31 Dec 30 Jun 30 Sep
2004 2004 2003
R`000 R`000 R`000
Revenue 37 525 - -
Cost of sales (21 442) - -
Gross profit 16 083 - -
Other income 775 5 989 84
Amortisation of negative goodwill 82 - -
Operating expenses (15 043) (296) (236)
Profit before interest and taxation 1 897 5 693 (152)
Finance charges (150) (5) (2)
Profit before taxation 1 747 5 688 (154)
Taxation (325) 822 -
Net profit for the period 1 422 6 510 (154)
Reconciliation between earnings and headline earnings
Earnings per share (cents) 0.29 6.01 (0.14)
Profit on sale of assets (cps) (0.01) (0.86) (0.08)
Profit on debt written off and
settled (cps) (0.06) (0.30) -
Amortisation of goodwill (cps) (0.02) - -
Headline earnings per share (cents) 0.20 4.85 (0.22)
Weighted average number of
shares (`000) 490 702 108 315 108 315
CASH FLOW STATEMENTS
Unaudited Audited Unaudited
6 Months 15 Months 6 Months
ended ended ended
31 Dec 30 Jun 30 Sep
2004 2004 2003
R`000 R`000 R`000
Cash flows from operating activities 5 684 - (188)
Cash flows from investing activities (20 804) (32) 72
Cash flows from financing activities 16 240 50 108
Net movement in cash and
cash equivalents 1 120 (389) (8)
Cash and cash equivalents
at beginning of period 2 391 (11)
Cash and cash equivalents
at end of period 1 122 2 (19)
STATEMENTS OF CHANGES IN EQUITY
Non-
Share Share distri- Accumu-
butable lated
Capital premium reserve Profit Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 Apr 2003 1 083 5 047 14 517 (21 621) (974)
Net profit for the period - - - 6 510 6 510
Sale of subsidiaries - - (109) - (109)
Balance at 1 Jul 2004 1 083 5 047 14 408 (15 111) 5 427
Cancellation of shares (102) - 102 - -
Issue of shares 3 926 7 851 - - 11 777
Net profit for the period - - - 1 422 1 422
Balance at 31 Dec 2004 4 907 12 898 14 510 (13 689) 18 626
COMMENTARY
1. Financial and operational overview
The interim results for the six months ended 31 December 2004 reflect the first
trading period for Milkworx after the acquisition of the ice cream
manufacturing, packaging and trading businesses of Avondale and Cream Star.
Shareholders should therefore take care not to put undue significance on direct
comparisons with historical figures.
The profit forecast of Milkworx represents the only appropriate yardstick of the
performance for the period. In the circular to shareholders in respect of the
acquisitions, the company projected a turnover of R56.5 million and a net profit
of R2.5 million for the full financial year to 30 June 2005. The company`s June
year-end allows for two roughly comparable six months trading periods, although
the unpredictability of weather conditions may disturb this equation in any
given year. Against this background, the board is pleased with the return for
Milkworx`s first six-month period. The highlights of the financial results are
that revenue, at R37.5 million, exceeded the forecast for the period by 33% and
that net profit after tax, at R1.4 million, was 13% higher than expected.
A number of factors contributed to the strong growth in turnover, including:
* acquiring the rights to manufacture, distribute and sell certain of Cas Ice
Cream`s products, which also opened up access to their existing client base
in Gauteng;
* breaking into the supermarket trade;
* extending Milkworx`s geographical reach by taking over a depot in
Johannesburg and becoming involved in a Durban depot, and by signing
distribution agreements with various companies to expand distribution in
other parts of the country; and
* developing and acquiring new product lines for the retail market.
These initiatives all formed part of a strategic decision by management to grow
market share in a controlled fashion and ensure that the new combined business
obtain critical mass. The long-term benefits of the growth strategy are seen as
optimising the available production capacity, benefiting from bulk procurement,
achieving greater pricing power and reducing exposure to specific clients,
contracts or product lines. As expected though, the immediate impact was to
increase costs and reduce margins. The gross profit margin, though at a still
acceptable 43%, was slightly lower than the projected 45% for the period under
review mostly because of promotions and lower mark-ups available in the
supermarket trade. Operating costs for the period were 42% above the forecast,
linked in most cases directly to the increased turnover growth. Higher
distribution costs, following the expansion of the fleet for both the Pretoria
and Johannesburg operations, played the most important role. Other higher than
forecast expenditure items included additional labour overtime requirements and
usage of electricity, establishing an infrastructure for the new depots,
commencing with the process of co-ordinating and centralising the administrative
and logistics functions and the installation of new enterprise resource planning
software. A large proportion of these expenditure items are of a non-recurring
nature.
Listing on the Alternative Exchange not only assisted in increasing market
awareness, but also facilitated improved access to debt funding for Milkworx.
To this extent the company obtained overdraft facilities of R3 million and a
further rolling asset funding credit line of R4 million. Operating activities
delivered R5.7 million in cash flows, which were mostly reinvested in building
capacity.
The board is particularly pleased to congratulate CEO Stephan Roux on being
selected as one of the six South African entrepreneurs to participate in the
Endeavour programme. Endeavour is a US-based, international organisation `which
identifies high growth, innovative emerging-market entrepreneurs who have the
ability to create jobs and grow fast` and then helps to fast-track their
businesses even further `by supplying mentoring, training, networks and access
to capital`. The SA affiliate launched its programme in 2004 and Milkworx is
excited to benefit from this initiative over the next 18 months. (Quotations
from the Financial Mail of 4 February 2005).
2. Prospects
The company invested strongly in its production, distribution and administrative
capacity during the period under review and is hence well positioned to satisfy
the growing demand for its products. Despite the short-term costs associated
with scaling up operations, the board expects the potential increase in revenue
originating from newly acquired product lines and improved access to other
geographical and retail markets to lead to satisfactory growth in earnings for
the current financial year. It therefore believes that Milkworx will achieve
the R2.5 million in net profit after tax as previously stated.
3. Accounting policies
The accounting policies of the company comply in all material respects with
South African Statements of Generally Accepted Accounting Practice and the
Companies Act of 1973. The accounting policies and methods of measurement and
recognition are consistent with those applied in the previous financial period.
4. Dividends
No dividends were recommended or declared for the interim period.
For and on behalf of the board
Stephan Roux
Chief Executive Officer
18 March 2005
Directors: SA Roux, CP Bradshaw, T Dajcar, CM Botha, KJ Gribnitz*, JP Nel*, PE
du Preez*
(*non-executive)
Transfer secretaries Registered address
Computershare Investor Services 2004 (Pty) Ltd 167 Alumina Street,
Silvertondale, Pretoria
Designated Advisor Corporate Advisor
River Sponsors (Pty) Ltd Radagast Capital (Pty) Ltd
Date: 23/03/2005 08:00:05 AM
Produced by the JSE SENS Department
