| Wed 22 Sep 2010, 16:58 | | UBU - Ububele Holdings Limited - Reviewed provisional financial statements for |
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UBU
UBU
UBU - Ububele Holdings Limited - Reviewed provisional financial statements for
the year ended 30 June 2010
Ububele Holdings Limited (formerly Milkworx Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 1998/011074/06)
Share code: UBU
ISIN code: ZAE000144739
("Ububele" or "the Company" or "the Group")
Reviewed Provisional Financial Statements for the year ended 30 June 2010
OVERVIEW
GROSS REVENUE +36%
PROFIT FOR THE PERIOD +57%
HEADLINE EARNINGS PER SHARE +843%
Given the deferred effect of the economic downturn, the past financial year has
been a unique challenge. The third successive year of favourable farming
conditions led to another large maize crop and low commodity prices throughout
the year. The further strengthening of the Rand against the major international
currencies put pressure on agriculture and food export margins. We were,
however, able to counter the negative effect on sales prices and sales margins,
through volume growth in both our agricultural and food divisions.
COMMENTARY ON RESULTS
Ububele Holdings Limited is pleased to present its first set of reviewed full-
year financial results since its reverse listing on the JSE`s AltX in November
2009. The previous financial year was a 16-month period; therefore, percentage
comparisons for gross revenue and operating profit will include a 12-month
adjustment for 2009. This adjustment is a simple proportional adjustment and
does not take into account seasonal variations within the business.
Ububele has managed strong growth over the past seven years. We started with a
turnover of R2.7 million in 2002, which grew to R482 million in the 2010
financial year. Mainly due to an increase in sales volumes, Ububele`s gross
revenue increased by 36% from 2009 to 2010, calculated over a 12-month period.
Due to a higher volume output in agriculture during 2010, the agriculture
division experienced an increase of 17% in total sales. Sales prices were,
however, under pressure from the stronger Rand, resulting in a 1.5% reduction in
sales prices. Fortunately, sales volume in agriculture increased by 18.5%,
resulting in a commensurate Rand value sales increase of 17%.
The more competitive retail environment also affected the food division during
2009 and 2010, with sales prices only increasing by 2%. However, like in our
agriculture division, we experienced an increase in sales volumes of 137%. This
resulted in a net increase in sales from food of 139%. The exponential volume
increase was mainly due to the acquisition of Milkworx`s operations during the
year.
The Gross Profit margin decreased from 31.45% to 29.40%, mainly due to the
decrease in selling prices in our agriculture division of 1.5% and the small 2%
increase in the average prices in our Food division. However, due to the
increase in sales volumes in both the agriculture-and food divisions, the total
gross profit increased by 27%.
The operating profit margin decreased from 3.6% to 3.3%, as a result of the
following non-recurring costs:
1. Impairment - The total impairment attributable to a customer contract held in
Linktrade Foods (Pty) Ltd was R4.4 million. Linktrade was founded in 2001 after
its founder shareholders were approached by a Japanese Import Company to produce
and manufacture fruit and vegetable juice concentrates for the Japanese market.
However, Japan is particularly hard hit by the current world economic crisis and
it may take some years for it to recover. The downturn of the world economies
and the effect of sales into Japan were clearly felt by the company`s sales
dropping by more than 50% from 2008 to 2010. The strengthening of the Rand
against the US Dollar and the Yen has put a lot of pressure on the company`s
competitiveness. Sales have only recently started picking up again, but at much
lower levels and prices compared to two years ago. It is with this in mind, that
we felt it necessary to re-value our investment in Linktrade and made provision
for an impairment adjustment. Should market and trade conditions change in
whatever way, we shall re- visit this impairment.
2. Restructuring of Ububele Dairy Products (previously Milkworx) - The total
cost during this financial year attributable to the re-construction and
amalgamation processes at Milkworx, cost the group approximately R2.5 million.
However, this spending was necessary and should result in future cost savings of
approximately R3.2 million per year. Already, with the improved production
processes, Milkworx made an operational profit before interest, depreciation and
amortisation for the 2010 year compared to a substantial loss during the
previous financial year.
3. Listing costs - The direct cost attributable to Ububele listing on the AltX
in November 2009 was R2.4 million.
Note: Again, due to the increase in sales volumes, the total operating profit
increased by 22%.
Debt collection was somewhat slow towards the end of the reporting period.
Although cash flow was affected, the positive outcome was a net interest income
of R688 000, compared to a net interest cost of R1 million during the previous
financial period.
The earnings per share increased from 1.03 cents per share to 5.90 cents per
share and the headline earnings per share increased from 0.88 cents per share to
8.30 cents per share. The amount of shares used in these calculations was
adjusted for the effect of the share consolidation after year-end of 50:1.
On the back of volume growth and longer trading periods current assets increased
by 2.7%. Stock levels were 15% lower than prior period and debtor levels were
20% higher than the previous period. The current liabilities decreased by 1.6%
from the prior year. The net current assets increased by R5.6 million. This is
also as a result of the higher sales volumes, together with the increase in
profitability and the cash generated from operations. The cash generated from
operations increased by R18.9 million.
Statement of Financial Position as at 30 June 2010
Group
Reviewed Audited
2010 2009
R R
ASSETS
Non-current assets
Property, plant and equipment 23 692 743 10 122 756
Goodwill 80 085 181 63 632 737
Intangible assets 23 710 249 25 688 462
Deferred taxation 14 396 117 3 021 353
Available-for-sale financial assets at fair value 3 239 928 1 566 937
145 124 218 104 032 245
Current assets
Trade and other receivables 75 098 265 62 498 095
Inventories 49 609 325 58 406 471
Loans receivable 99 078 108 934
Cash and cash equivalents 8 132 912 10 069 883
Taxation 1 686 885 -
134 626 465 131 083 383
TOTAL ASSETS 279 750 683 235 115 628
EQUITY AND LIABILITIES
Equity
Share capital and premium 99 649 329 67 774 997
Other reserves 1 388 800 248 210
Accumulated profit 26 891 008 17 017 912
Non-controlling interest 16 737 894 17 186 305
144 667 031 102 227 424
LIABILITIES
Non-current liabilities
Loans payable 1 405 473 -
Interest-bearing borrowings 6 312 064 6 872 678
Deferred taxation 3 792 822 374 115
11 510 359 7 246 793
Current liabilities
Trade and other payables 62 495 697 65 146 238
Loans from shareholders 2 832 601 42 331 551
Loans payable 36 306 267 1 260 546
Taxation 4 532 063 3 046 460
Interest-bearing borrowings 2 625 960 1 825 950
Derivative financial instruments 44 391 41 290
Bank overdrafts and acceptances 14 736 314 11 989 376
123 573 293 125 641 411
TOTAL EQUITY AND LIABILITIES 279 750 683 235 115 628
Statement of Comprehensive Income
Group
Reviewed Audited
12 months 16 months
ended ended
30 June 30 June
2010 2009
R R
Gross revenue 481 973 805 471 769 348
Cost of sales (340 254 716) (323 403 512)
GROSS PROFIT 141 719 089 148 365 836
Other income 11 159 638 5 102 300
Operating expenses (137 107 360) (136 273 448)
OPERATING PROFIT 15 771 367 17 194 688
Investment revenue 6 660 760 4 715 659
Income from equity accounted investments - 453 105
Finance costs (5 337 010) (5 727 266)
PROFIT BEFORE TAXATION 17 095 117 16 636 186
Taxation (1 209 432) (6 523 460)
PROFIT FOR THE PERIOD 15 885 685 10 112 726
ATTRIBUTABLE TO:
Equity holders of the parent 9 873 096 1 409 345
Non-controlling interest 6 012 589 8 703 381
Other comprehensive income 1 140 590 248 210
- Net change in fair value of
available-for-sale financial asset 1 140 590 248 210
Total comprehensive income for the period 17 026 275 10 360 936
ATTRIBUTABLE TO:
Equity holders of the parent 11 013 686 1 657 555
Non-controlling interest 6 012 589 8 703 381
17 026 275 10 360 936
EARNINGS PER SHARE (CENTS)BEFORE SHARE CONSOLIDATION
Note
Basic 4 0.12 0.02
Headline 4 0.17 0.02
Number of ordinary shares in issue 4 8 854 541 003 215 440 435
Weighted average number of ordinary shares
in issue 4 8 370 737 400 6 829 489 800
EARNINGS PER SHARE (CENTS)AFTER SHARE CONSOLIDATION
Note
Basic 4 5.90 1.03
Headline 4 8.30 0.88
Number of ordinary shares in issue 4 177 090 820 4 308 809
Weighted average number of ordinary shares
in issue 4 167 414 748 136 589 796
Statement of Changes in Equity
Total share
Share Share capital and Other
capital premium premium reserves
R R R R
GROUP
Balance at 1 March
2008 17 775 33 990 238 34 008 013 -
Total comprehensive
income for the period - - - 248 210
Issue of shares 4 103 36 762 881 36 766 984 -
Repurchase of shares (334) (2 999 666) (3 000 000) -
Dividends paid - - - -
Net acquisition of
subsidiaries - - - -
Balance at 1 July 2009 21 544 67 753 453 67 774 997 248 210
Issue of unlisted shares 244 2 195 761 2 196 005 -
Share conversion at
3465 per 100 75 495 572 (5 524 570) 69 971 002 248 210
Effective shares
issued to Milkworx
shareholders 11 686 654 15 192 651 26 879 305 -
Issue of shares 1 363 184 1 435 838 2 799 022 -
Total comprehensive
income for the period - - - 1 140 590
Dividends paid - - - -
Balance at 30 June
2010 88 545 410 11 103 919 99 649 329 1 388 800
Total
attributable
to equity
holders of Non-
Accumulated the group controlling Total
profit interest equity
R R R R
GROUP
Balance at 1
March 2008 17 385 967 51 393 980 2 008 793 53 402 773
Total comprehensive
income for the
period 1 409 345 1 657 555 8 703 381 10 360 936
Issue of shares - 36 766 984 - 36 766 984
Repurchase of shares - (3 000 000) - (3 000 000)
Dividends paid (1 777 400) (1 777 400) - (1 777 400)
Net acquisition
of subsidiaries - - 6 474 131 6 474 131
Balance at 1
July 2009 17 017 912 85 041 119 17 186 305 102 227 424
Issue of unlisted shares - 2 196 005 - 2 196 005
Share conversion
at 3465 per 100 17 017 912 87 237 124 17 186 305 104 423 429
Effective
shares issued to
Milkworx
shareholders - 26 879 305 - 26 879 305
Issue of shares - 2 799 022 - 2 799 022
Total comprehensive
income for the
period 9 873 096 11 013 686 6 012 589 17 026 275
Dividends paid - - (6 461 000) (6 461 000)
Balance at 30
June 2010 26 891 008 127 929 137 16 737 894 144 667 031
Statement of cash flows
Group
Reviewed Audited
12 months 16 months
ended ended
30 June 30 June
2010 2009
R R
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 21 734 542 2 781 239
Interest income 6 025 228 4 684 584
Dividends received 635 532 31 075
Finance costs (5 337 010) (5 727 266)
Taxation paid (7 864 422) (8 401 540)
Dividends paid (6 461 000) (1 777 400)
Net cash from operating activities 8 732 870 (8 409 308)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment
to expand operations (5 832 785) (4 796 614)
Proceeds on disposal of property, plant and
equipment 1 470 826 1 334 194
Acquisition of intangible assets (527 256) (963 721)
Acquisition of interest in subsidiaries (7 835 039) 5 093 165
Proceeds on disposal of investments - 165 083
Loans receivable repaid 9 856 82 682
Acquisition of available-for-sale financial assets (532 401) (41 717)
Proceeds on disposal of unlisted investment 431 957 -
Proceeds on disposal of associate - 539 269
Net cash from investing activities (12 814 842) 1 412 341
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on share issue 4 995 027 12 682 070
Loans payable repaid - (8 908 099)
Loans payable raised 25 256 665 -
Loans from shareholders raised - 5 432 869
Loans from shareholders repaid (31 093 025) -
Interest-bearing borrowings raised 2 905 784 4 156 915
Interest-bearing borrowings repaid (2 666 388) (1 966 380)
Repurchase of shares - (5 222 223)
Net cash from financing activities (601 937) 6 175 152
Decrease in cash and cash
equivalents for the period (4 683 909) (821 815)
Cash and cash equivalents at the beginning of the
period (1 919 493) (1 097 678)
Cash and cash equivalents at the end of the period (6 603 402) (1 919 493)
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Nolands Inc., the Group`s independent auditor has reviewed the provisional
financial statements contained in this provisional report and has expressed an
unmodified conclusion on the provisional financial statements. The review report
is available for inspection at the Company`s registered office. These financial
statements for the year ended 30 June 2010 have been prepared in accordance
with, and containing the information required by IFRS (including IAS 34: Interim
Financial Reporting) and the AC 500 Standards as issued by the Accounting
Practices Board or its successor and the requirements of the South African
Companies Act, as amended and the JSE Limited Listings Requirements. The
accounting policies and methods of computation applied in the preparation of
these financial statements are in accordance with IFRS and, except as presented
below, are consistent with those applied in the preparation of the Group`s
annual financial statements for the year ended 30 June 2009.
The Group adopted the revised IAS 1, IFRS 8, Circular 3/2009 (the revised
Headline Earnings per Share circular) and revised IAS 27: Consolidated and
Separate Financial Statements. The presentation of the financial statements (IAS
1) and operating segment disclosures (IFRS 8) have been changed accordingly,
with no adjustment necessary on the adoption of Circular 3/2009. IAS 27 requires
that losses from subsidiary companies be allocated to non-controlling interest,
even if doing so causes the non-controlling interest to be in a deficit
position. IAS 27 was applied prospectively from 1 July 2009 and resulted in R109
296 losses being allocated to non-controlling interest in the current year that
would not have been allocated to non-controlling interest prior to the
amendment.
2. BUSINESS COMBINATION
The Ububele Group listed on the JSE`s AltX on 11 November 2009 through a reverse
listing into Milkworx Limited. The effective date of the transaction was 22
October 2009. In terms of an agreement signed on 2 July 2009 and a reinstatement
and addendum dated 7 September 2009 , Milkworx Limited made an offer to acquire
100% of the issued share capital of Ububele on the basis of a share swap of 3
465 Milkworx shares for every 100 Ububele shares held.
As a result of the offer, 7 549 557 142 new Milkworx shares were issued to the
"old" Ububele shareholders.
The consolidated results were prepared in terms of IFRS 3 Business Combinations.
Consequently, the consolidated results for the year ended 30 June 2010 include
the trading results of Milkworx Limited since the effective date, as well as the
trading results of Ububele Holdings Limited for the entire period under review.
In a reverse acquisition, the acquirer is the entity whose equity interest has
been acquired (the legal subsidiary) and the issuing entity (the legal parent)
is the acquiree. Although, legally, the issuing entity is regarded as the parent
and the entity whose equity interest has been acquired is regarded as the
subsidiary, the legal subsidiary is the acquirer as it has the power to govern
the financial and operating policies of the legal parent so as to obtain
benefits from its activities. Consolidated financial statements prepared
following a reverse acquisition are issued under the name of the legal parent,
but are a continuation of the financial statements of the legal subsidiary (i.e.
the acquirer for accounting purposes). Because such consolidated financial
statements represent a continuation of the financial statements of the legal
subsidiary:
- the assets and liabilities of the legal subsidiary are recognised and measured
in those consolidated financial statements at their pre-combination carrying
amounts;
- the retained earnings and other equity balances recognised in the consolidated
financial statements are the retained earnings and other equity balances of the
legal subsidiary immediately before the business combination;
- the amount recognised as issued equity instruments in the consolidated
financial statements shall be determined by adding to the issued equity of the
legal subsidiary immediately before the business combination, the cost of the
combination. However, the equity structure appearing in the consolidated
financial statements (i.e. the number and type of equity instruments issued)
reflects the equity structure of the legal parent, including the equity
instruments issued by the legal parent to effect the combination; and
- comparative information presented in the consolidated financial statements is
that of the legal subsidiary.
The following reflects the cumulative net assets through acquisitions during the
year under review:
Group
2010 2009
R R
Property, plant and equipment 14 110 821 1 788 848
Intangible assets 39 415 1 310 236
Loans receivable - 66 696
Investments - 2 195 992
Loans to shareholders - 136 466
Inventories 5 610 267 38 074 258
Trade and other receivables 5 559 400 35 846 451
Trade and other payables (8 202 712) (41 127 005)
Deferred taxation 1 680 000 (438 049)
Loans payable (320 419) (21 269 255)
Borrowings - (58 898)
Cash and cash equivalents (681 092) 5 093 406
Taxation - liability - (1 623 147)
Provisions (214 872) -
Fair value of identifiable net assets 17 580 808 19 995 999
Consideration paid
Cash paid - 241
Issue of ordinary shares 26 879 305 22 275 402
Loan account - Ububele Holdings Ltd - 28 890 839
Fair value of identifiable net assets (17 580 808) (19 995 999)
Goodwill 9 298 497 31 170 483
Increase in consideration of previously acquired
subsidiaries
- Novon WTP (Pty) Ltd 5 678 947 -
- Erintrade (Pty) Ltd 1 475 000 -
Total goodwill for the period 16 452 444 31 170 483
Net cash outflow on acquisition
Cash consideration paid (7 153 947) (241)
Cash acquired (681 092) 5 093 406
(7 835 039) 5 093 165
3. SEGMENT INFORMATION
The Group has two operating segments as described below, which are the Group`s
strategic business units. The strategic business units are managed separately as
they offer entirely different services. For each of the strategic business
units, the board reviews internal management reports on at least a quarterly
basis. The following summary describes the operations in each of the Group`s
reportable segments, being agriculture and foods.
Information regarding the results of each reportable segment is included below.
Performance is measured based on segment profit before interest and income tax,
as included in the internal management reports. Segment profit before net
finance income/expenses and income tax is used to measure performance as
management believes that such information is the most relevant in evaluating the
results of certain segments relative to other entities that operate within these
industries.
Business segments
Agriculture Foods Total
R R R
2010
Revenue - external 349 430 712 132 543 093 481 973 805
Revenue - internal 81 643 145 1 000 000 82 643 145
Interest income 5 909 859 115 369 6 025 228
Finance costs (4 303 926) (1 033 084) (5 337 010)
Depreciation and amortisation 1 754 547 3 981 755 5 736 302
Impairment of intangible assets - 4 365 935 4 365 935
Segment profits/(losses)
attributable to parent shareholders 11 464 617 (450 931) 11 013 686
Segment profits attributable to
non-controlling interests 3 268 340 2 744 249 6 012 589
2009
Revenue - external 397 724 621 74 044 727 471 769 348
Revenue - internal 63 364 435 90 000 63 454 435
Interest income 4 594 885 89 699 4 684 584
Finance costs (4 618 640) (1 108 626) (5 727 266)
Depreciation and amortisation 3 569 664 2 458 860 6 028 524
Segment profits attributable to
parent shareholders 712 710 944 845 1 657 555
Segment profits attributable to
non-controlling interests 8 703 381 - 8 703 381
4. EARNINGS PER SHARE
The calculation of basic and headline earnings per share is based on the
following attributable profits and weighted average number of shares:
2010 2009
Profits attributable to parent shareholders 9 873 096 1 409 345
Adjusted for:
Loss/(profit) on disposal of property,
plant and equipment 85 493 (12 115)
Profit on disposal of investment (431 957) (195 338)
Impairment of investment 4 365 935 -
Headline earnings 13 892 567 1 201 892
Weighted average number of ordinary shares
in issue 8 370 737 381 197 099 273
Weighted average number for diluted shares 8 370 737 381 197 099 273
Adjustment for share conversion at 3 465
listed shares per 100 unlisted shares - 6 632 390 536
8 370 737 381 6 829 489 809
Adjustment for share conversion at 50:1
after year-end (8 203 322 633) (6 692 900 013)
Adjusted weighted average number of shares 167 414 748 136 589 796
Basic earnings per share (in cents) 5.90 1.03
Headline earnings per share (in cents) 8.30 0.88
Diluted earnings per share (in cents) 5.90 1.03
Diluted headline earnings per share (in cents) 8.30 0.88
On behalf of the board
JT Kleinhans HW Cloete
Executive Chairman Financial director
Cape Town
22 September 2010
Directors: JT Kleinhans (Executive Chairman)*, HW Cloete (Financial Director)*,
MP Mocke*, SA Roux*, JMK Matlala*, Dr DWR Hertzog#, GI Bayne# (*executive #non-
executive)
Secretary and registered office: Fusion Corporate Secretarial Services (Pty)
Limited, 56 Regency Road, Route 21 Corporate Park, Irene, Pretoria
Transfer Secretaries: Computershare Investor Services (Pty) Limited, Ground
Floor, 70 Marshall Street, Johannesburg, 2001
Designated Adviser: PSG Capital
Auditors: Nolands Inc
Date: 22/09/2010 16:58:01 Produced by the JSE SENS Department.
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