| Thu 19 Apr 2012, 16:18 | | RAR - RARE Holdings Limited - Unaudited abridged financial results for the 6 |
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RAR
RAR
RAR - RARE Holdings Limited - Unaudited abridged financial results for the 6
months ended 31 December 2011
RARE Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration Number: 2002/025247/06)
Share Code: RAR ISIN: ZAE000092714
("Rare" or "the Company")
UNAUDITED ABRIDGED FINANCIAL RESULTS FOR THE 6 MONTHS ENDED 31 DECEMBER 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June
2011 2010 2011
R`000 R`000 R`000
Revenue 174 238 215 211 315 165
Cost of sales (174 662) (164 012) (261 951)
Gross profit (424) 51 199 53 214
Other income 577 696 51 969
Operating expenses (53 194) (52 254) (152 956)
EBITDA (53 041) (359) (47 773)
Depreciation and amortisation (3 552) (5 804) (5 897)
Investment income 35 344 2 260
Finance costs (11,450) (9 164) (17 571)
Loss before taxation (68,008) (14 983) (68 981)
Income tax (2 162) 6 535 2 038
Loss for the period from continuing
operations (70 170) (8 448) (66 943)
Loss for the period from discontinuing
operations (13 374) (6 372) (58 464)
Attributable to:
Equity holders of the parent (85 297) (10 665) (91 430)
Non-controlling interest 1 753 (4 155) (33 977)
Weighted average number of ordinary
shares in issue 292 449 88 750 104 091
Loss per ordinary share (cents)
From continuing and discontinued
operations(basic and diluted) (29.17) (12.02) (87.84)
From discontinued operations (4.57) (7.18) (56.17)
Headline earnings per share
Loss attributable to equity holders of
the parent (85 297) (10 665) (91 430)
Impairment of goodwill 457 - 5 284
Impairment of loans receivable 1 393 - 59 724
Impairment of investment - - 64
Profit on disposal of Angolan entities - - (35 867)
Loss on disposal of property, plant
and equipment 571 - 72
Headline loss attributable to ordinary
shareholders from
continuing and discontinuing operations (82 876) (10 665) (62 153)
Discontinuing operations (13 374) (6 372) (58 464)
Weighted average number of ordinary
shares in issue 292 449 88 750 104 091
Headline loss per ordinary share (cents)
From continuing and discontinued
operations(basic and diluted) (28.34) (12.02) (59.71)
From discontinued operations (4.57) (7.18) (56.17)
Condensed consolidated statement of other comprehensive income
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June
2011 2010 2011
R`000 R`000 R`000
Loss for the period (83 544) (14 820) (125 407)
Exchange difference on translating foreign - 1 01 1 523
operations
Gains/(losses) on property revaluation - - (2 177)
Realisation of revaluation reserve on
disposal - - (13 520)
Taxation related to components of other
comprehensive income - - 625
Total comprehensive loss for the year net
of taxation (83 544) (13 807) (138 956)
Consolidated statement of financial position
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June
2011 2010 2011
R`000 R`000 R`000
Assets
Non-current assets
Property, plant and equipment 68 013 93 283 60 444
Goodwill 6 089 457
Intangible assets 2 897 12 272 6 093
Investment in associates 900 900 900
Other financial assets - 663 285
Deferred taxation 5 671 9 811 5 671
Current Assets
Inventories 50 262 160 658 115 321
Loan to associates 2 574 3 841 3 189
Trade and other receivables 57 092 128 575 106 051
Other financial assets 245 5 365 10 041
Construction contracts and receivables - 7 745
Current taxation receivable 1 088 1 941 2 452
Prepayments 816 - 243
Cash and cash equivalents 14 626 23 750 10 504
Total Assets 204 184 447 148 329 396
Equity and liabilities
Equity
Share capital 142 525 72 598 12 876
Reserves 5 856 11 951 5 856
(Accumulated loss)/Retained income (138 478) 27 584 (53 181)
Equity attributable to equity holders
of parent 9 903 112 133 65 551
Non-controlling interest 2 281 (9 430) -
12 184 102 703 65 551
Liabilities
Non-current liabilities
Other financial liabilities 6 548 19 254 8 132
Operating lease liability 115 - 116
Deferred taxation 1 537 2 308 757
8 200 21 562 9 005
Current liabilities
Trade and other payables 67 899 164 693 138 214
Other financial liabilities 115 271 156 928 113 247
Current taxation payable 391 862 439
Loans from minority shareholders 239 - -
Bank overdraft - 400 2 940
Total liabilities 192 000 344 445 263 845
Total equity and liabilities 204 184 447 148 329 396
Consolidated statement of changes in equity
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June
2011 2010 2011
R`000 R`000 R`000
Opening balance 65 551 116 581 116 581
Changes in equity
Loss for the year (85 297) (10 665) (91 430)
Foreign currency revaluation reserve - (3 213) (341)
Revaluation reserve - (8 849)
Sale of treasury shares - - 278
Non-controlling interest 1 752 9 312
Issue of shares 29 700 40 000
Investment in subsidiary 529 - -
Purchase of treasury shares (51) - -
Total changes (53 367) (13 878) (51 030)
Closing balance 12 184 102 703 65 551
Comprising of:
Share capital 5 385 885 2 886
Share premium 137 140 71 713 109 990
Foreign currency translation reserve - (2 755) -
Revaluation reserve 5 856 14 706 5 856
Retained income (138 478) 27 584 (53 181)
Non-controlling interest 2 281 (9 430) -
Total equity 12 184 102 703 65 551
Consolidated cash flow statement
Unaudited Unaudited Audited
6 Months 6 Months 12 Months
December December June
2011 2010 2011
R`000 R`000 R`000
Cash flows from operating activities
Cash generated from/(used in)operations (16 060) (14 798) (721)
Interest income 35 223 6 346
Dividends received - 120 -
Finance costs (11 450) (9 164) (13 314)
Tax received/paid) (2 162) (1 534) 1 749
Net cash from operating activities (29 637) (25 153) (5 940)
Cash flow from investing activities
Purchase of property, plant
and equipment (7 570) (594) (3 641)
Sale of property, plant and equipment - - 295
Sale of other intangible assets 3 196 - -
Purchase of other intangible assets - (2 688) (4 547)
Loans advanced to group companies - (771) (20 148)
Loans to group companies repaid 612 - 906
Sale of other financial assets 10 081 - 13 150
Purchase of other financial assets - (141) (39 992)
Net cash from investing activities 6 319 (4 194) (53 977)
Cash flows from financing activities
Proceeds from share issue 29 700 40 000
Proceeds from other financial liabilities 680 17 795 3 495
Repayment of other financial liabilities - - (4 408)
Proceeds from loans from minority
shareholders - - -
Repayment of shareholders` loan - (2 282) -
Net cash from financing activities 30 380 15 513 39 087
Total cash movement for the period 7 062 (13 834) (20 830)
Cash at the beginning of the period 7 564 36 241 28 393
Effect of exchange rate movements - 943 -
Total cash at end of the period 14 626 23 350 7 564
Condensed Unaudited segmental information - primary segment report business
segments
For the 6 months ending 31 December 2011
R`000 Trading Water Pipeline Invest- Total Discontinued
Utilities services ment continuing operations
operations Factories
Total
revenue 102 986 16 540 54 712 1 888 176 126 -
Inter-
segmental
revenue - - - (1 888) (1 888) -
External 102 986 16 540 54 712 - 174 238 -
revenue
Segment (11 584) 321 7 733 (1 127) (4 567) (13 374)
results
Impairment
of goodwill - - - - (457) -
Profit on sale
of assets - - - - 571 -
Impairment
of other
financial
assets - - - - (1 968) -Angola
Write down
of stock - - - - (24 215) -
Provision
For bad debt - - - - (26 131) -
Finance cost - - - - (11 323) -
Investment - - - - 171 -
income
Income tax
expense - - - - (2 161) -
Net loss
for the year - - - - (70 170) (13 374)
Condensed Unaudited segmental information - primary segment report business
segments
For the 6 months ending 31 December 2010
R`000 Trading Water Pipeline Invest- Total Discontinued
Utilities services ment continuing operation
operations Angola
Total
revenue 97 239 11 971 69 129 1 716 180 055 57 742
Inter-
segmental
revenue (20 870) - - (1 716) (22 586) -
External 76 369 11 971 69 129 - 157 469 57 742
revenue
Segment (5 831) (4 024) 5 819 (2 127) (6 163) (6 372)
results
Finance cost - - - - (9 164) -
Investment - - - - 344 -
income
Income tax
expense - - - - (6 535) -
Net loss
for the year - - - - (8 448) (6 372)
Condensed segmental information - primary segment report business segments
For the twelve months ending 30 June 2011
R`000 Trading Water Pipeline Invest- Total Discontinued
Utili- services ment continuing operation
ties operations Angola
Total 238 359 16 328 61 561 4 060 320 308 50 284
revenue
Inter- (1 083) - - (4 060) (5 143) -
segmental
revenue
External 237 276 16 328 61 561 - 315 165 50 284
revenue
Segment (23 382) (4 255) (130) (1 027) (28 794) (56 886)
results
Impairment
of goodwill - - - - (5 284) -
Profit on
disposal of
Angola - - - - 49 815 -
Impairment
of loan to
associate - - - - (839) -
Impairment
of other
financial
assets - - - - (59 788) -Angola
Write down - - - - (8 780) -
of stock
Finance cost - - - - (17 571) (1 578)
Investment - - - - 2 260 -
income
Income tax
expense - - - - 2 038 -
Net loss
for the year - - - - (66 943) (58 464)
NOTES
BASIS OF PREPARATION
The consolidated interim financial information for the six months ended 31
December 2011 from which these provisional financial statements have been
derived has been prepared in accordance with International Financial Reporting
Standards (IFRS), the AC 500 standards as issued by the Accounting Practices
Board, the interpretations adopted by the International Accounting Standards
Board (IASB), the Listings Requirements of the JSE Limited and the requirements
of the South African Companies Act. These condensed interim financial results
are presented in compliance with IAS 34 - Interim Financial Reporting and should
be read in conjunction with the annual financial statements for the year ended
31 December 2011.
These financial results were internally compiled by R Viljoen CA(SA).
ACCOUNTING POLICIES
The accounting policies adopted in the preparation of the condensed interim
financial information are consistent with those of the annual financial
statements of the year ended 30 June 2011. For a full list of standards and
interpretations which have been adopted we refer you to the 30 June 2011 annual
financial statements.
COMMENTARY
FINANCIAL RESULTS
Revenue for the financial period is down by 19.04% at R174.2m (2010: R215.2m) as
further explained under the Operational Review below.
The gross loss reflected is as a result of stock clearances and provisions.
Operating expenses, excluding debtor provisions, reduced to R33.5m (2010:
R52.3m).
Headline loss attributable to equity holders amounted to R85.3m (2010: R10.7m).
OPERATIONAL REVIEW
In the commentary to the 30 June 2011 annual financial statements the Board made
reference to various restructuring activities that were being undertaken to turn
the business to profitability and to its former success. These included the
termination of unprofitable business units, reduction of overheads, lowering of
stock levels and the re-engineering of certain processes, e.g. supply chain
management. Much progress was made with this very challenging task, but not
without a severe impact on our profitability.
The Polokwane and Centurion manufacturing operations were discontinued during
the second half of 2011 resulting in retrenchment costs and right-offs on stock
and fixed assets no longer required in the business going forward. At 31
December 2011 total losses of R13,4m are attributable to these discontinued
operations. Significant retrenchment and other right sizing costs were also
incurred in the rest of the business as a result of aligning the overhead
structure to lower levels of sales.
Sales volumes decreased despite improving trading conditions in our areas of
business. The reason for this was an incorrect mix of stock which did not
match our client needs. To redress this situation we sold unwanted stock at
discounted prices which, together with write-offs against non-core stock on hand
at 31 December 2011, had a further negative impact on our bottom line. The
liquidity arising from the sale of this stock was used to acquire new stock
which we now believe meets the requirements of our client base.
During the last few months we have come to the conclusion that the new IT system
that was implemented during 2010 was causing great disruption to our Supply
Chain Management and Sales function as well as our Finance function. A
substantial amount was spent to rectify the problem, however, the lack of
available external expertise to fully support Rare in this regard resulted in
persistent problems with the functionality of the system. The Board has
requested management to devise a plan to either rectify these problems or to
replace the system with a simpler and more functional one.
Following the resignation of our Chief Executive and Finance Officers the new
management team critically reviewed the valuation of our debtors` book, work in
progress and fixed assets as well as the adequacy of our provisions. This has
resulted in further impairments and provisions which the Board deems prudent.
CORPORATE ACTIVITIES AND CAUTIONARY ANNOUNCEMENT
The salient background on corporate activities in the recent past and the way
forward:
1 During the months leading up to December 2010, Rare experienced severe cash
flow shortages as a result of the failed Angolan operation and bad debtors
management at the time. Rare obtained short term funding on the back of a
recapitalisation plan and commitment by Stafric Investment and Management
Services (Pty) Ltd ("Stafric") to underwrite a claw-back offer (`the 1st
claw-back offer`) to all shareholders;
2 Following the conclusion of the 1st claw-back offer during June 2011 which
raised further capital of R40 million, Stafric became the majority
shareholder of Rare with a 66% shareholding;
3 Management presented a turnaround plan to Stafric and other stake holders,
which included plans to shorten the working capital cycle, monetize older
and slow moving stock and aggressively collect overdue debtors. At the time
the plan was well received by all interested parties;
4 However, during the period July to December 2011, management had to procure
further financing support in the form of a further short term loan
facility to satisfy unforeseen working capital shortages which arose as a
result of the Company`s failure to achieve its financial targets as set
out in the turnaround plan;
5 Following various meetings between management, the Board and other
interested parties, including the largest suppliers and customers, an
ultimatum was put to management during October 2011 to implement the
corrective measures which would have put the Company on its growth path
again, with the prospect of restoring it to profitability within the
foreseeable future.
6 The losses incurred during the period under review necessitated yet
another round of capital raising and Stafric agreed to once again
underwrite a second claw-back offer, which was concluded during the month
of February 2012 where R30 million was raised by issuing 250 million shares
at a consideration of 12 cents each ("the 2nd claw-back offer");
7 Following the 2nd claw-back offer, the introduction of Thembinkosi Siyolo
(`Themba`)as Rare`s new BEE partner (also see note 11 below) and Theunie
Lategan as Non-executive chairman, who both acquired significant stakes in
Rare from Stafric during 2011 and 2012, Stafric now owned 41% of the
issued share capital;
8 The provisional results for the 6 months ended 31 December 2011 were
critically reviewed and interrogated by the Board and audit committee and
as a result, new debtors and stock write-offs of the order of R52.3m caused
considerable delays in the finalisation of these results;
9 Following the resignation of the Company`s former CEO and CFO, a new
management team, headed by Wally van Coller (CEO) and Renier Viljoen (CFO)
have taken of over the reigns and will simplify the business offering,
reduce the overhead structure and minimize the risk associated with doing
business in Africa;
10 The new management team reconfirmed the committed R50 million funding line
from Mayfair Speculators (Pty) Ltd ("Mayfair") (undrawn facilities of R25m
as at 31 March 2012). The debtors securitisation term loan, which was
refinanced by Mayfair in October 2011 following the previous financier`s
decision to discontinue its funding relationship with Rare, has been
confirmed and remains in place as negotiated at the time. The stock finance
facility from China Construction Bank has been reduced from R85 million to
R64 million, which is considered sufficient to enable Rare to secure the
optimum stock levels that are required to support its business activities.
11 In December 2011 Stafric entered into an agreement of sale with effect from
February 2012 in terms of which it disposed of a 22,51% interest to Themba.
Themba has furthermore indicated his commitment to underwrite a third round
of capital raising following which it is likely that he will become Rare`s
controlling shareholder. An amount of R50 million is currently envisaged to
be the requirement in terms of such a capital infusion, the terms and
conditions of which are in the process of being finalized and will be
announced during May 2012. Until such time as this announcement is released
on SENS, shareholders are advised to exercise caution in their dealings in
Rare shares. Upon the successful implementation of this transaction, Rare
will be one of the only companies in its industry to have Black majority
ownership base, thereby further entrenching its BEE credentials.
12 Furthermore, management and major shareholders commenced preliminary
discussions to incentivise the new management via a stake in the company in
the region of 10% of the issued shares. Details of the transaction will be
finalised within the coming weeks, shareholders are advised to exercise
caution in their dealings in Rare shares.
PROSPECTS
Although it will take some time to bed down Rare`s restructuring plans the Board
believes that with the restructured business model, in conjunction with the
further recapitalization of the Company as envisaged under "Corporate
Activities" above, the Company will be able to take advantage of market
opportunities.
CHANGES TO THE BOARD OF DIRECTORS
Messrs. David Scheepers and Pierre Willemse resigned as executive directors from
the Board with effect from 20 March 2012.
Mr. Alwyn Martin resigned as non-executive director from the Board with effect
from 10 April 2012.
Messrs. Wally van Coller and Renier Viljoen were appointed as Chief Executive
and Finance Officers respectively with effect from 13 April 2012.
Johannesburg
19 April 2012
Designated Adviser: PSG Capital Proprietary Limited
Date: 19/04/2012 16:18:01 Produced by the JSE SENS Department.
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