| Fri 30 Sep 2011, 12:38 | | JDH - John Daniel Holdings Limited - Reviewed second interim financial |
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JDH
JDH
JDH - John Daniel Holdings Limited - Reviewed second interim financial
statements for the 12 months ended 30 June 2011
JOHN DANIEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: JDH - ISIN: ZAE000136677
("the Company" or "JDH" or "the Group")
REVIEWED SECOND INTERIM FINANCIAL STATEMENTS FOR THE 12 MONTHS ENDED 30 JUNE
2011
Reviewed Statement of Financial Position as at 30 June 2011
30 June 30 June
2011Reviewed 2010Audited
Group Group
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 2 332 3 204
Intangible assets 936 936
Deferred tax 4 455 3 365
Total current assets 1 932 1 270
TOTAL ASSETS 9 655 8 775
EQUITY AND LIABILITIES
Equity (2 860) 1 170
Non-controlling interest (2 623) (433)
Non-current liabilities
Interest bearing borrowings 7 534 121
Deferred tax - 182
Total current liabilities, short
term interest bearing borrowings 7 604 7 735
and shareholders` loans
TOTAL EQUITY AND LIABILITIES 9 655 8 775
Net asset value (2 860) 1 170
Net tangible asset value (3 796) 234
Net asset value per share (cents) (1.90) 0.78
Net tangible asset value per share (2.52) 0.16
(cents)
Reviewed Statement of Comprehensive Income for the 12 months ended 30 June 2011
30 June 30 June
2011Reviewed 2010Audited
Group Group
R`000 R`000
REVENUE 2 931 5 714
COST OF SALES (870) (4 093)
GROSS PROFIT 2 061 1 621
Other income 546 125
Selling, distribution and (9 573) (10 811)
administration expenses
LOSS BEFORE NET FINANCE COSTS AND (6 966) (9 065)
TAXATION
Net Finance costs (525) (1 046)
Taxation income 1 272 1 027
LOSS FOR THE YEAR (6 219) (9 084)
Attributable to non-controlling 2 189 2 439
interest
NET LOSS ATTRIBUTABLE TO ORDINARY (4 030) (6 645)
SHAREHOLDERS
BASIC AND HEADLINE LOSS
Basic loss (4 030) (6 645)
Headline loss (4 023) (5 503)
Basic loss per share (cents) (2.68) (8.13)
attributable to equity holders of
the parent
Headline loss per share (cents) (2.67) (6.74)
attributable to equity holders of
the parent
Number of shares in issue 150 500 000 150 500 000
Weighted average number of shares 150 500 000 81 703 640
RECONCILIATION BETWEEN BASIC LOSS
AND HEADLINE LOSS
IAS 33 Basic loss (4 030) (6 645)
IAS 16 Loss disposal of property 7 -
plant and equipment
IAS 36 Impairment of property, plant - 516
and equipment
IAS 36 Impairment of intangible - 626
assets
Headline Loss (4 023) (5 503)
Reviewed Segmental Information for the 12 months ended 30 June 2011
The Group has adopted IFRS 8 Operating Segments as its segmental reporting
standard which requires an entity to report financial and descriptive
information about its reportable segments, which are operating segments or the
aggregation of operating segments that meet specified criteria. Operating
segments are components of an entity in respect of which separate financial
information is available is evaluated regularly by management.
R`000 R`000 R`000 R`000 R`000
30 June 2011
Biotech- Packag- Corpo- Elimin- Consoli-
nology ing rate ations dated
Revenues 2 562 369 1 571 (1 571) 2 931
TOTAL 2 931
EXTERNAL
REVENUE
Operating (2 439) (2 477) (2 050) - (6 966)
loss
30 June 2010
Biotech- Packag- Corpo- Elimin- Consoli-
nology ing rate ations dated
Revenues 1 937 3 777 1 353 (1 353) 5 714
TOTAL 5 714
EXTERNAL
REVENUE
Operating (992) (6 369) (11 102) 9 398 (9 065)
loss
Reviewed Statement of Changes in Equity for the 12 months ended 30 June 2011
Share Non Accumul- Non- Total
capital distribute- ated loss controlli equity
able ng
reserves interest
R`000 R`000 R`000 R`000 R`000
Balance at 1 24 415 7 729 (35 580) 2 007 (1 429)
July 2009
Total - - (6 645) (2 439) (9 084)
comprehensive
loss for the
year
Issue of 11 893 - - - 11 893
shares
Share issue (643) - - - (643)
expenses
Balance at 30 35 665 7 729 (42 225) (433) 736
June 2010
Total - - (4 030) (2 189) (6 219)
comprehensive
loss for the
year
Balance at 30 35 665 7 729 (46 255) (2 622) (5 483)
June 2011
Reviewed Cash Flow Statement for the 12 months ended 30 June 2011
30 June 30 June
2011Reviewed 2010Audited
Group Group
R`000 R`000
NET CASH (OUTFLOW)/INFLOW FROM (5 841) 21
OPERATING ACTIVITIES
NET CASH INFLOW/ (OUTFLOW) FROM 430 (200)
INVESTING ACTIVITIES
NET CASH INFLOW/(OUTFLOW) FROM 5 530 (129)
FINANCING ACTIVITIES
Increase / (Decrease) in cash and 119 (308)
cash equivalents
Cash and cash equivalents at the 34 342
beginning of the year
Cash and cash equivalents at the end 153 34
of the year
COMMENTARY
REVIEW OF RESULTS AND FINANCIAL POSITION
The reviewed consolidated financial results for the 12 months ended 30 June 2011
represents income and expenses from the JDH corporate head office and the
group`s two trading subsidiaries, Vinguard Limited ("Vinguard") and Lazaron
Biotechnologies (SA) Limited ("Lazaron").
The Group`s loss attributable to ordinary shareholders amounted to R4 million, a
39.4% reduction in the loss compared to the comparative period. The improved
loss is attributable to a combination of the following factors:
the reduction of the group finance costs resulting from the settlement, through
a conversion to equity, of the Golden Oak Corporate Advisors (Pty) Ltd interest
bearing loan account; and
cost saving initiatives significantly reducing Vinguard`s operational expenses.
The group operations experienced significant working capital constraints
impacting on the trading performance of both subsidiaries. The impact of the
working capital constraints resulted in a reduction of 48.7% in the group`s
revenue.
To alleviate the working capital constraints the previous board entered into a
finance restructure agreement with Escalator Capital Limited ("Escalator") at
the end of the first quarter of the period under review. (Refer Group
restructure and recapitalisation below).
Vinguard`s turnover for the 12 months reduced to R370 000, a 90% reduction
compared to the previous 12 months. The majority of Vinguard`s sales are
generated from mid-November during the South African table grape harvesting
season. Unfortunately the Escalator funding, released to the business at end
September 2010, was too late and was also limited, resulting in Vinguard being
unable to secure raw materials in terms of the production schedules. The
business was unable to produce SO2 sheets for distribution during the 2010/2011
South African season as well as for the traditional international markets. The
new directors reduced overheads for the second six months under review in order
to limit losses. This however incurred once off restructuring expenses.
In comparison Lazaron`s revenue increased by 32% to R2.6 million. The increased
sales performance was realised over the latter half of the 12 months under
review due to the development of focused channels to market. During the first
six months up to 31 December 2010 revenue was down by 7.4% compared to the
comparative interim period. The cost of development of the sales channels
increased overheads during the same period.
The Group statement of financial position reflects a negative net asset value
position due to the continued operating losses. The operating losses and Group
restructure is being funded by Escalator through the finance restructure
facility. The board obtained a letter of continued financial support from
Escalator undertaking the continued funding of the restructuring process until
the Group operations return to profitability.
The sustainability of the group has in the short term been addressed through the
increased funding. The directors are confident that the combination of the
corporate restructuring, aggressive management of the existing subsidiaries and
further strategic acquisitions will ensure the future sustainability of the
group.
In addition, on 10 June 2011, the directors announced two partially underwritten
rights offers, in JDH for R15 million and in Lazaron for R4.4 million, to
recapitalise the Group and return the statement of financial position to
solvency.
OPERATIONAL REVIEW
Group Overview
In the period under review JDH continued to conduct business as a venture
capital investment holding company, and will continue to do so, focusing on
investing in companies which are niche players and strategic in nature.
Preference is given to companies which have clear African and Global markets. In
particular, these companies are required to produce products or provide services
with high barriers to entry and high gross profit margins. At 30 June 2011 JDH
had two such subsidiaries, Lazaron and Vinguard.
Vinguard
The Vinguard product has proved its efficacy and table grape farmers reported
excellent results on exports. The product is well placed to penetrate the
significant South African and international export table grape industries.
The company`s operations involve a relatively extended production and working
capital cycle. The Group`s restrained working capital position and the resultant
inability to fund production resulted in a significantly reduced market during
the past SA season.
The 90% reduction in turnover to R370 000 was off-set to an extent by the
reduction in operating expenses resulting from the rationalization of the
company`s operations. The company`s loss before non-controlling interest, which
includes the once-off restructure expenses in the 12 months under review,
reduced from R6.4 million to R2.7 million.
The Vinguard cost structure and processes have been rationalized through the
restructuring efforts ensuring that the breakeven point is achieved at a 33%
reduced turnover value than in the comparative period.
The business is poised to take advantage of its reduced overhead structure in
the upcoming 2011/2012 SA table grape season.
In addition, the board continues to drive efforts to diversify the Vinguard
product offering into other produce markets as well as Northern Hemisphere
production areas.
Lazaron
The establishment of a dedicated sales division in Lazaron as part of the group
restructure resulted in significant sales growth for the business during the
period under review. The 32% increase in the company`s revenue was generated in
the last six months of the period under review.
The accompanying cost involved in repositioning the strategic direction of the
business, investing in marketing collateral, strategic initiatives and the
development of the sales force increased the operating expense base. The company
did not realise the full benefit of the investment during the period and as a
result the company reported an increased loss of R1.96 million compared to R990
000 in the previous period.
The encouraging sales performance and the healthy gross profit percentages
resulted in the business approaching breakeven performance on a month to month
basis by the end of the period under review.
The restructure efforts focused on Lazaron and the resultant improved
performance brought about the negotiations with Cryo-Save NV and the subsequent
Cryo-Save SA joint venture announced at the end of the 12 month period, with an
effective date of 1 July 2011.
Subject to shareholder approval Lazaron will cease to provide a stem cell
harvesting and storage service and these functions will be provided by the Cryo-
Save SA joint venture laboratory in Belville, Cape Town. Lazaron will however
continue to store the existing clients` samples generating annual storage
income. The annuity income in Lazaron and its reduced cost base will result in
the Lazaron business being profitable.
EVENTS AFTER THE REPORTING PERIOD
Corporate actions
The new board, as detailed below, had been reviewing various options aimed at
strengthening the Group`s statement of financial position. This process
comprised continuing discussions with Escalator to renegotiate the terms of the
Escalator loan including the possibility of Escalator underwriting a JDH Rights
Offer. On 10 June 2011 the board announced the following partially underwritten
rights offers:
a R15 million JDH Rights Offer at 7 cents per share underwritten to the value of
R10 million by Escalator; and
a R4.4 million Lazaron Rights Offer underwritten to a minimum value of R1.5
million by JDH.
The main objectives of the corporate actions are to recapitalise the Group and
return the statement of financial position to solvency.
The JDH Rights Offer has been approved by the JSE and the salient dates
announced. The rights offer will close out on 14 October 2011. Shareholders`
attention is drawn to the circular which has been issued and will be available
on the Company`s website (www.john-daniel.com).
The final salient dates for the Lazaron Rights Offer will be announced and a
circular to Lazaron shareholders will be distributed as soon as the final
approval is received from the Takeover Regulation Panel.
Included in the Lazaron Rights Offer circular is a resolution for the proposed
shareholder approval of the Section 112 disposal of the Lazaron sales
infrastructure as well as some of the Lazaron laboratory equipment to JDH, which
will on sell same to the Cryo-Save joint venture. This transaction removes all
significant overheads from the Lazaron company. In addition, a General Offer to
Lazaron non-controlling shareholders to swap their Lazaron shares for JDH shares
is included in the corporate action. The swap provides Lazaron shareholders with
incremental value and enhanced tradability. The Lazaron Rights Offer Circular
will be available on the Company`s website.
Cryo-Save South Africa - Joint Venture
On 2 June 2011, the board announced that JDH and Cryo-Save Group N.V. ("Cryo-
Save") a leading international family stem cell bank, signed a memorandum of
understanding, to establish a new stem cell bank joint venture in South Africa.
This joint venture will contain the South African sales and marketing operations
of both companies and the Cape Town processing and storage facility of Lazaron
and will immediately expand its operations into several African countries.
The joint venture combines Cryo-Save`s leading expertise in stem cell processing
and storage with JDH`s local and African market expertise. The joint venture
will offer customers the option of storing cord tissue and stem cells from cord
blood in South Africa or off shore in Belgium.
The Lazaron laboratory located in Cape Town has been upgraded to cater for the
increase in volumes and will meet the highest quality standards applied by Cryo-
Save around the world.
The joint venture will trade under the name Cryo-Save South Africa.
The conditions precedent to concluding this joint venture and sale of businesses
to the joint venture is subject to the approval of the company`s shareholders,
directors and regulatory bodies, where applicable.
Acquisition of a Micro-financing credit provider
With effect from 01 July 2011, an agreement providing for the acquisition by JDH
of 100% of the shares in, and claims against, Viscacom was signed for a cash
consideration of R100. At the effective date, Viscacom had a loan of
approximately R1.5 million owing to Escalator. This loan will be settled or
capitilised through the JDH Rights Offer, either from cash received or through
the Underwriting Agreement with Escalator.
Viscacom is a micro finance organisation providing financial services to third
party company employees and is the first acquisition by JDH in its new Financial
Services Division. Viscacom was established in 2010 and has shown exponential
growth since its incorporation. As at 30 June 2011 the company had over 200
clients and a loan book of R2.6 million.
CONTINGENT LIABILITY
A dispute with an off-shore supplier exists in terms of which the supplier is
claiming an amount due of USD 464 126 ("disputed liability"). The statement of
financial position has provided for an amount of USD 279 394, converted at the
30 June 2011 spot rate, in respect of this disputed liability.
GROUP RESTRUCTURE AND RECAPITALISATION
In September 2010 the Company entered into a finance restructure agreement with
Escalator in terms of which the Company secured a convertible loan facility
("Escalator loan"). The conditions of the finance restructure agreement included
the appointment of, inter alia, new executive directors, independent of
Escalator, who were appointed to the Company board on 22 September 2010. All the
previous board members resigned during the period September 2010 to November
2010. Three new independent non-executive directors, detailed below, were
subsequently appointed to the board to complete the composition of the board
("new board").
The new board continues to review and evaluate Group operations and Group
structures in order to steer the Group restructure with the objective of
returning Group operations to profitability, both organically and acquisitively
if necessary, thereby creating enhanced shareholder value.
In terms of the Group restructure the board of directors was re-constituted and
at the date of this announcement comprised:
Name Designation Date Appointed
TP Gregory Chief Executive Officer 22 September 2010
DP van der Merwe Financial Director 22 September 2010
B Topham Independent Non-Executive 24 November 2010
Director
KA Rayner Independent Non-Executive 20 January 2011
Director
RJ Connellan Independent Non-Executive 03 February 2011
Director and Chairman
The appropriate statutory documentation was submitted to both the JSE and CIPC
to formally update the company records regarding the directors` changes. At the
date of this announcement, only the appointments of TP Gregory and DP van der
Merwe have been effected on the CIPC system. The board will continue to follow
up with CIPC until the records are appropriately updated.
The re-constitution of the board continues and an additional independent non-
executive director will be appointed shortly. In addition, the board will also
announce the appointment of a new company secretary.
PROSPECTS
The turnaround of current subsidiaries through product and market extension,
aggressive trading and cost reduction continues.
This includes the evaluation of product range extension in subsidiaries,
development of new markets for subsidiaries and rationalization of
administration and support structures. Ongoing shareholders support is required
to continue to develop the current companies and look for new opportunities.
The new board of directors is actively investigating acquisition opportunities
that will improve earnings and cash generation for the group. It is the
intention of the board to develop a robust and complementary group of companies
which provide sustainable returns.
YEAR END CHANGE
JDH and its subsidiaries year ends have been changed to 30 September. The Group
will report its next audited results for the 15 months ending 30 September 2011.
The Second Interim Report will be available on the Company`s website.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The second interim financial statements have been prepared in accordance with
IAS 34 - Interim Financial Reporting in accordance with the accounting policies
that comply with International Financial Reporting Standards and in the manner
required by the Companies Act (71 of 2008) and the JSE Listing Requirements. The
principle accounting policies adopted in preparation of these financial
statements are consistent with those of the prior period.
REVIEW OPINION
These results have been reviewed by the group`s auditors, AM Smith and Company
Inc, whose modified review opinion, with an emphasis of matter is available for
inspection at the company`s registered office.
The emphasis of matter states that "without qualifying our opinion, we draw
attention to the commentary which indicates that the company incurred a net loss
of R4 029 558 after minority interest for the year ended 30 June 2011 and, as at
that date, the Company`s total liabilities exceeded its total assets by R5 483
038. The commentary also indicates that these conditions along with other
matters indicate the existence of a material uncertainty which may cast
significant doubt on the company`s ability to continue as a going concern."
ACQUISITIONS AND DISPOSALS
There were no acquisitions or disposals during the 12 months under review.
INCREASE IN AUTHORISED SHARE CAPITAL AND ISSUE OF SHARES
During the period under review no new shares were issued and the issued share
capital of the company was 150 500 000 ordinary shares and the authorised share
capital was 150 000 000. At the Annual General Meeting of the Company held on 28
January 2011, a special resolution to increase the authorised share capital to 1
000 000 000 shares was passed by the requisite majority of shareholders. The
special resolution has been submitted and lodged with CIPC.
The previous board had issued 500 000 shares in excess of the authorised share
capital and also committed to the issue of 5 290 023 shares as settlement of a
current liability. Both these share issues were approved by shareholders during
previous financial periods.
The 500 000 and 5 290 023 shares were listed and issued in August 2011 to honour
the Company`s commitments.
DIVIDENDS
No dividends have been declared and no dividend is proposed.
GOING CONCERN
The directors are of the opinion that the group will continue as a going concern
for the foreseeable future due to the continued support of certain parties to
the group and in particular by the holding company to its subsidiaries.
The corporate actions referred to under "Events after the reporting period", are
expected to restore the Group`s solvency and raise cash resources to support the
continued turnaround of the Group operations.
For and on behalf of the Board
TP Gregory DP Van der Merwe (Preparer)
Pretoria
30 September 2011
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive Officer), DP
van der Merwe (Financial Director), KA Rayner*, B Topham*. (* Independent Non-
Executives)
Company Secretary: DP van der Merwe
Registered Office: Suite 4 Building 9, Tijger Valley Office Estate, Silver Lakes
Road, Pretoria 0081, PO Box 39660, Garsfontein East 0060
Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Marshalltown 2001, PO Box 61051, Marshalltown 2107
Auditors: AM Smith and Company Inc
Sponsor: Arcay Moela Sponsors (Pty) Limited
Date: 30/09/2011 12:38:02 Produced by the JSE SENS Department.
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