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BEG
BEG
BEG - Beige Holdings Limited - Reviewed Consolidated Results For The Year Ended
31 March 2010 And 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")
REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2010 AND CAUTIONARY
ANNOUNCEMENT
Condensed Consolidated Statement of Financial Position as at 31 March 2010
Reviewed Audited
31 March 2010 31 March 2009
R`000 R`000
ASSETS
Non-current assets 249 938 263 503
Property, plant and equipment 145 063 139 909
Intangible assets 90 581 107 179
Deferred income tax assets 14 294 16 415
Current assets 224 964 202 917
Inventories 88 242 70 720
Trade and other receivables 130 952 122 792
Cash and cash equivalents 5 770 9 405
Total assets 474 902 466 420
EQUITY AND LIABILITIES
Equity attributable to owners of the parent 200 215 201 472
Ordinary share capital 15 399 16 011
Ordinary share premium 268 968 274 476
Reserves 10 842 10 842
Accumulated loss (94 994) (99 857)
Minority interest 2 602 --
Total equity 202 817 201 472
Non-current liabilities 35 261 76 545
Long-term borrowings 32 317 71 657
Call option liability -- 2 362
Deferred income tax liabilities 2 944 2 526
Current liabilities 236 824 188 403
Trade and other payables 143 729 117 986
Current portion of long-term borrowings 49 206 32 561
Call option liability 696 --
Current income tax liabilities 1 893 7 777
Bank overdrafts 41 300 30 079
Total liabilities 272 085 264 948
Total equity and liabilities 474 902 466 420
Ordinary shares (000`s)
In issue (Note 2) 1 539 810 1 596 697
Diluted (Notes 2 and 3) 1 539 810 1 608 260
Net asset value per share information (net
of minority interest)
Net asset value per share (cents) 13.00 12.62
Net tangible asset value per share (cents) 6.20 5.91
Diluted net asset value per share (cents) 13.00 12.53
Diluted net tangible asset value per share 6.20 5.86
(cents)
Condensed Consolidated Statement of Comprehensive Income for the year ended 31
March 2010
Reviewed Audited
31 March 2010 31 March 2009
R`000 R`000
Revenue 603 803 599 020
Cost of sales (486 943) (480 304)
Gross profit 116 860 118 716
Distribution costs (15 329) (12 068)
Administrative expenses (72 274) (75 700)
Operating profit 29 257 30 948
Gain on the re-measurement of call option 1 666
liability (Note 1) 14 917
Profit before finance costs 30 923 45 865
Finance income 452 1 657
Finance costs (11 407) (11 982)
Profit before income tax 19 968 35 540
Income tax expense (5 858) (6 477)
Profit for the year 14 110 29 063
Other comprehensive income for the year, net -- --
of tax
Total comprehensive income for the year 14 110 29 063
Total comprehensive income attributable to:
Equity holders of the company 13 394 29 063
Minority interest 716 --
14 110 29 063
Headline earnings adjustments:
Total comprehensive income for the year 13 394 29 063
attributable to equity holders of the company
Adjustments:
--
Profit on sale of property, plant and (48)
equipment after tax
Profit on sale of investment after tax (24) --
Headline earnings for the year attributable 13 322 29 063
to equity holders of the company
1 584 384
Ordinary shares (000`s)
Weighted average shares in issue (Note 2) 1 672 843
Diluted (Note 2 and 3) 1 584 384 1 684 405
Earnings per share information
Earnings per share (cents) 0.85 1.74
Headline earnings per share (cents) 0.84 1.74
Diluted earnings per share (cents) 0.85 1.73
Diluted headline earnings per share (cents) 0.85 1.73
Notes
1. On 2 July 2007 the company issued to its ordinary shareholders a
capitalisation award of redeemable preference shares that are convertible
into ordinary shares at the holder`s option. These preference shares have
been classified as a debt instrument, amounting to R14.6 million (2009:
R13.9 million) with an embedded call option liability amounting to R0.7
million (2009: R2.4 million). On initial recognition and subsequent re-
measurement the preference shares and the embedded call option liability
were measured at fair value, based on the prevailing interest rates, the
Beige share price, the conversion ratio, and the strike price of 15 cents
per ordinary share. As a result, Beige has recorded a gain of R1.7 million
(2009: R14.9 million) in profit and loss, primarily due to the decrease in
the Beige share price.
2. 91 716 667 (2009: 91 716 667) shares held as treasury stock have been
subtracted from the respective share totals for purposes of calculating
earnings per share information.
3. Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The company has two categories of dilutive
potential ordinary shares: redeemable preference shares and share options.
Diluted earnings, and the weighted average number of ordinary shares for
2010, have not been adjusted in this regard as the effect of the redeemable
preference share conversion is anti-dilutive, i.e. the ruling share price
at 31 March 2010 is less than the conversion strike price. For the share
options, a calculation is done to determine the number of shares that could
have been acquired at fair value (determined as the average annual market
share price of the company`s shares) based on the monetary value of the
subscription rights attached to the outstanding share options. The number
of shares calculated is compared with the number of shares that would have
been issued assuming the exercise of the share options. Diluted earnings,
and the weighted average number of ordinary shares for 2010, have not been
adjusted with regard to the share options as the effect of the share
options is anti-dilutive.
Condensed Consolidated Statement of Cash Flows for the year ended 31 March 2010
Reviewed Audited
31 March 2010 31 March 2009
R`000 R`000
Net cash generated from 24 114 12 969
operating activities
Net cash used in investing (11 194) (49 814)
activities
Acquisition of subsidiary (note (2 993) (19 962)
5)
Net acquisition of PPE (8 201) (29 852)
Net cash used in financing (27 776) (7 890)
activities
Net decrease in cash, cash (14 856)
equivalents and bank overdrafts (44 735)
Cash, cash equivalents and bank (20 674)
overdrafts at the beginning of 24 061
the year
Cash, cash equivalents and bank (35 530) (20 674)
overdrafts at the end of the
year
Condensed Consolidated Statement of Changes in Equity for the year ended 31
March 2010
Ordinary Ordinary Ordinary Revalu- Share
share treasury share ation based
capital shares premium reserve payment
reserve
R`000 R`000 R`000 R`000 R`000
Balance at 31
March 2008 16 885 -- 280 603 8 863 1 763
Comprehensive
income
Profit for the -- -- -- -- --
year
Total
comprehensive
income -- -- -- -- --
Transactions
with owners
Purchase of
treasury shares -- (874) (6 127) -- --
Employees share
option scheme:
-
Value of
employee -- -- -- -- 216
services
Total
transactions -- (874) (6 127) -- 216
with owners
Balance at 31
March 2009 16 885 (874) 274 476 8 863 1 979
Comprehensive
income
Profit for the -- -- -- -- --
year
Total
comprehensive
income -- -- -- -- --
Transactions
with owners
Treasury shares (43) (388) -- --
held by
subsidiary --
Acquisition
(note 5) -- -- -- -- --
Cancellation of
issued shares (569) -- (5 120) -- --
Total
transactions (569) (43) (5 508) -- --
with owners
Balance at 31
March 2010 16 316 (917) 268 968 8 863 1 979
Condensed Consolidated Statement of Changes in Equity for the year ended 31
March 2010 continued
Preference Accum- Total Minority Total
share ulated interest
option loss
R`000 R`000 R`000 R`000 R`000
Restated
balance at 31
March 2008 (17 427) (111 493) 179 194 -- 179 194
Comprehensive
income
Profit for the -- 29 063 29 063 -- 29 063
year
Total
comprehensive
income -- 29 063 29 063 -- 29 063
Transactions
with owners
Purchase of
treasury shares -- -- (7 001) -- (7 001)
Employees share
option scheme:
-
Value of
employee -- -- 216 -- 216
services
Total
transactions -- -- (6 785) -- (6 785)
with owners
Balance at 31
March 2009 (17 427) (82 430) 201 472 -- 201 472
Comprehensive
income
Profit for the -- 13 394 13 394 716 14 110
year
Total
comprehensive
income -- 13 394 13 394 716 14 110
Transactions
with owners
Treasury shares -- -- (431) -- (431)
held by
subsidiary
Acquisition -- -- -- 1 886 1 886
(note 5)
Cancellation of -- (8 531) (14 220) -- (14 220)
issued shares
Total
transactions -- (8 531) (14 651) 1 886 (12 765)
with owners
Balance at 31
March 2010 (17 427) (77 567) 200 215 2 602 202 817
Condensed Outsource
Consolidated Manufactur Packaging Other Group
Segmental Analysis ing R`000 R`000 R`000
R`000
Total segment revenue
- reviewed year ended 501 316 121 916 -- 623 232
31 March 2010
- audited year ended 521 919 100 589 -- 622 508
31 March 2009
Inter-segment revenue
- reviewed year ended (10 957) (8 472) -- (19 429)
31 March 2010
- audited year ended (17 481) (6 007) -- (23 488)
31 March 2009
Revenue from external
customers
- reviewed year ended 490 359 113 444 -- 603 803
31 March 2010
- audited year ended 504 438 94 582 -- 599 020
31 March 2009
Operating
profit/(loss)
- reviewed year ended 34 036 (2 439) (2 340) 29 257
31 March 2010
- audited year ended 37 129 (4 949) 30 948
31 March 2009 (1 232)
Segment assets
- reviewed year ended 352 603 120 262 2 037 474 902
31 March 2010
- audited year ended 309 173 153 752 3 495 466 420
31 March 2009
Segment liabilities
- reviewed year ended 173 163 44 934 53 988 272 085
31 March 2010
- audited year ended 166 259 47 644 51 045 264 948
31 March 2009
Additional information
Reviewed Audited
Year ended Year ended
31 March 2010 31 March 2009
R`000 R`000
Amortisation of intangible 2 376 2 374
assets
Depreciation of property, 9 766 8 172
plant and equipment
Operating lease 57 358 64 946
commitments
COMMENTARY
The directors of Beige are pleased to announce the reviewed results for the year
ended 31 March 2010. These results show the consolidated position of Beige, the
largest fully empowered contract manufacturer in the personal care industry.
1. Accounting policies
The condensed consolidated financial information has been prepared in
accordance with International Financial Reporting Standards ("IFRS"). The
condensed consolidated financial statements for the year ended 31 March
2010 were prepared in accordance with IAS 34: Interim Financial Reporting,
the requirements of the Companies Act of South Africa and in compliance
with the Listing Requirements of the Johannesburg Securities Exchange ("the
JSE").
The principal accounting policies used in the preparation of the results
for the year ended 31 March 2010 are consistent with those applied for the
year ended 31 March 2009 with the exception of the adoption of the revised
IAS 1 - Presentation of Financial Statements, IAS 23 - Borrowing Costs, and
IFRS 8 - Operating Segments. The presentation of the financial information
and operating segment disclosures have been changed accordingly to the
changes in IAS 1 and IFRS 8 respectively.
2. Reviewed results
PricewaterhouseCoopers Inc, the group`s independent auditors, have reviewed
the condensed consolidated financial information for the year ended 31
March 2010, that comprise the condensed consolidated statement of financial
position at 31 March 2010, the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of changes in
equity, and the condensed consolidated statement of cash flows for the year
then ended, and have expressed an unqualified and unmodified review opinion
on these condensed consolidated financial statements. A copy of the review
opinion is available for inspection at the company`s registered office.
3. Group review
Beige is a registered holding company operating through eight 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 the local and international home and
personal care industry. During 2007, the company diversified its
operations through the acquisition of a plastics manufacturing business to
complement its contract manufacturing operations and expanded this
operation through the acquisition of Rap Products (Pty) Ltd ("Rap") during
the 2009 financial year. Beige is listed on the Alternative Exchange
("AltX") of the JSE.
During the year under review, all the operating units performed
significantly better than expected in the economic climate, maintaining
similar revenue levels to the prior comparative period although margin
pressure was experienced. Quality Products, the largest subsidiary, had a
continued increase through new customers but declines in demand from
existing customers as well as unpredictable demand levels during this
period. The Chloorkop operation has continued to show 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. Rap has been included for a
full year following its acquisition with effect from September 2008.
The group is experiencing a return to growth in demand for the goods and
services that it provides and a more predictable order book. The year
showed a continued substitution of luxury products for more affordable
products by consumers.
4. B-BBEE status
The company is pleased to report that it recently achieved an independent,
external B-BBEE rating, as a Level 3 contributor (2009: Level 4
contributor) in terms of the Department of Trade and Industry`s Code of
Good Practice.
5. Financial and operational overview
The growth in revenue and business of Beige has continued in the year under
review, despite an anticipated decline in revenue due to the economic
conditions, and the board is pleased with the results, which reflect the
continued implementation of the organic and acquisitive growth strategy
underway at Beige.
Revenue increased marginally from R599 million in the comparative period to
R604 million for the year under review. The gross profit declined by 1.6%
to R117 million from R119 million and the gross profit margin has declined
marginally to 19.4% from 19.8% in the prior year. This decline can be
attributed to the product mix changes to more affordable products as well
as a move from the traditional long production runs to just-in-time short
productions runs for large customers.
Distribution costs have increased by 27% due to the inclusion of Rap for a
full financial year, the inclusion of Herbal & Homeopathic Pty Ltd
("Herbal") and general increases in the costs of product distribution.
Administration costs have been well contained with a reduction from the
prior year by approximately 4.5%. This has been achieved through the
combining of plastic manufacturing operations as well as a focused project
during the year to contain and reduce costs. This will serve the business
well going forward.
The decline in operating profit from R30.9 million to R29.3 million can
primarily be attributed to the marginal decline in gross profit.
The gain of R1.7 million (2009: R14.9 million) on the re-measurement of the
call option liability is non cash flow in nature.
Net finance costs increased over the prior period due to the company having
to finance Crystal Pack (Pty) Ltd ("Crystal Pack") losses and related
working capital requirements in the prior year, which lead to a higher
average level of gearing for the current year. Finance costs include the
preference dividend in accordance with IAS 32 and IAS 39.
Tax is lower due to the reduced profit levels. The tax rate is also
affected by permanent differences due to the interest on preference shares
not being deductible for tax and the gain on the re-measurement of call
option liability not being taxable.
The results of Rap were consolidated into the group from September 2008 in
the prior financial year and have been consolidated for the full year ended
31 March 2010. 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.
6. Business combination
Effective from 01 October 2009, Beige Holdings Limited acquired 61.41% of
Herbal, a contract manufacturer of nutri-ceutical products, for an amount
of R3 million settled in cash. The acquisition is in line with the group`s
strategy to become the preferred contract packing manufacturer in South
Africa, supplying more products to its customer base.
The acquired business contributed revenues of R12.5 million and net profit
after tax of R0.9 million to the group for the period from acquisition to
31 March 2010. If the acquisition had occurred on 1 April 2009,
consolidated revenue and consolidated net profit after tax for the year
ended 31 March 2010 would have been R27.5 million and R 0.9 million
respectively.
Details of net assets acquired and goodwill are as follows:
R`000
Purchase consideration:
Cash paid 3 000
Direct costs relating to the acquisition --
Total purchase consideration 3 000
The assets and liabilities arising from the acquisition are
as follows:
Acquiree`s Fair value
carrying on
amount acquisition
R`000 R`000
Property, plant and equipment 6 625 6 500
Deferred taxation 1 712 1 712
Inventories 2 569 1 277
Trade and other receivables 6 981 6 111
Cash and cash equivalents 7 7
Borrowings (2 964) (2 964)
Trade and other payables (7 757) (7 757)
Net identifiable assets acquired 7 173 4 886
Minority interest (2 768) (1 886)
4 405 3 000
Outflow of cash to acquire business, net of cash acquired:
R`000
- cash consideration 3 000
- direct costs relating to acquisition --
- cash and cash equivalents in subsidiary acquired (7)
- cash outflow on acquisition 2 993
7. Cancellation of shares issued
Certain of the shares that were issued in relation to Crystal Pack profit
warranties were cancelled ab initio during the year under review in terms
of agreements signed with certain of the CAVI consortium members for the
cancellation of 56 887 561 shares. The cancellation of these shares has
resulted in a reduction of the group intangible assets by R14.2 million
with a corresponding reduction of equity of R14.2 million.
8. Prospects
The group expects to see an increased recovery in demand for its products
and a return by consumers to luxury products as the economy recovers.
Improved performance in the coming year is expected with further
integration of group facilities planned and the strengthening of management
at these facilities. Beige has started to experience synergies and cost
benefits in the year under review.
9. Director appointments and resignations
Mr V Khanyile resigned from the board with effect from 05 March 2010,
following the reassignment of responsibilities amongst the various members
of Thebe Investment Corporation (Proprietary) Limited`s executive team. Ms
L Gadd, previously an alternate director to Messrs V Khanyile and M
Fandeso, was appointed to the board with effect from 19 April 2010 and Mr V
Khanyile was appointed as alternate director to Ms L Gadd and Mr M Fandeso.
10. Dividends
Pursuant to the acquisition of Crystal Pack in 2007, 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. A
preference share dividend of 8.40 cents was paid to all preference
shareholders recorded in the preference share register of the company at
the close of business on 25 September 2009.
No ordinary dividend has been declared for the year ended 31 March 2010.
11. Contingent assets
As announced in the prior year, Beige has initiated criminal and civil
legal actions against all parties who were involved in the material
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 still in
progress. Beige has assisted with the appointment and funding of forensic
auditors.
12. Subsequent events, proposed rights offer and cautionary announcement
Subsequent to the financial year end, the board has resolved to raise
additional capital through the issue of new preference shares by means of a
rights offer of preference shares to all ordinary shareholders. R11.25
million of the proceeds of the rights offer will be used to redeem the
existing preference shares in August 2010. Certain of the larger existing
preference shareholders have indicated that they will underwrite a portion
of the rights offer. Full details of the proposed rights offer will be
released on SENS in due course.
Accordingly, shareholders are advised to exercise caution when dealing in
the Company`s securities until such time as full details of the proposed
rights offer have been announced.
Other than the intended rights offer, there have been no material
subsequent events that require disclosure at the date of this announcement.
By order of the Board
Monwabisi Fandeso Mark Di Nicola
Chairman Chief Executive Officer
1 July 2010
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
MP Fandeso*; MM Di Nicola Chief Executive Officer; MC Easter Financial
Director; MM du Preez*; L Gadd*; LI Karp*; RH Weissenberg*
(* Non-executive)
Designated Advisor Transfer Office
Arcay Moela Sponsors (Pty) Ltd Link Market Services South Africa (Pty) Ltd
Auditors
PricewaterhouseCoopers Inc
Date: 02/07/2010 07:05:05 Produced by the JSE SENS Department.
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