| Thu 28 Jun 2012, 17:32 | | JDH - John Daniel Holdings Limited - Unaudited interim results for the 6 month |
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JDH
JDH
JDH - John Daniel Holdings Limited - Unaudited interim results for the 6 month
period ended 31 March 2012
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")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTH PERIOD ENDED 31 MARCH 2012
OPERATIONAL REVIEW
Group overview
JDH continues to conduct business as a venture capital investment holding
company, focusing on investing in companies which operate in niche markets that
are 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 generate
high gross profit margins.
The Group`s restructuring has resulted in an improvement in the period,
remedying solvency issues and generating substantial revenue growth. Turnover
increased by 846% to R12 million for the 6 month period ended 31 March 2012
compared to the previous comparative interim period.
The Group`s net asset value improved to 4.03 cents per share, an increase of
730%. Total tangible net assets increased to R15.9 million from negative R1.9
million, an improvement of 935%. The current ratio is 1.61 with current assets
exceeding current liabilities by R4.5 million. The Group`s cash resources
increased by 1 191% to R1.7 million at period end.
Below is an overview of the JDH Group`s operations during the interim period.
Biotechnology
The Group`s Biotechnology operations incorporate the results of Lazaron
Biotechnologies (SA) Limited ("Lazaron") and Cryo-Save SA (Pty) Ltd ("Cryo-Save
SA"). The combined turnover of the two companies contributed 63% of the Group`s
total turnover and amounted to R7.6 million for the interim period. This
represents an increase of 667% compared to the comparative interim period and an
increase of 31% compared to the 15 month financial period ended 30 September
2011.
In terms of the agreement between Cryo-Save NV and JDH, Cryo-Save NV established
a state of the art cryogenic laboratory in Cape Town as the operational base of
Cryo-Save SA. The new facility operates to the highest quality standards applied
by Cryo-Save Group N.V. internationally. The new Cryo-Save SA lab became fully
operational in October 2011 at the start of the interim period.
The Biotechnology operations expanded into two other African countries during
the period. The African expansion will continue with the objective of
establishing Cryo-Save SA as the pre-eminent family stem cell bank in Africa.
Lazaron is in the process of being repositioned in the market. The restructuring
has resulted in Lazaron becoming profitable for the first time since its
incorporation.
Agricultural packaging
Vinguard Limited`s ("Vinguard") turnover increased by 943% from R280 000 for the
6 months to December 2010 to R2.9 million for the 31 March 2012 interim period.
The improvement would have been more radical had increased funding been
available for the procurement of additional raw material. Vinguard`s entire
production volume had been sold by the end of the interim period.
Vinguard`s operations remain restricted by the relatively extended working
capital cycle and the board is investigating alternatives to procure sufficient
funding to ensure production volumes of Vinguard sheets meet increased demand.
Vinguard`s operational result further benefited from the restructure strategy
which substantially reduced the operation`s breakeven point. Breakeven sales are
achieved at volumes approximately 33% lower than before the restructure.
In addition, continued improvement to the production process has further reduced
the direct input cost of the sheets by an estimated 18% to 20%, subject to
volume growth.
Financial services
JDH acquired 100% of JDH Credit Services (Pty) Ltd ("Credit Services"),
effective 1 September 2011. The acquisition was the first in the new JDH
Financial Services Division.
The unsecured micro finance environment is growing at a rapid rate and Credit
Services is ideally positioned to maximise the opportunity. Credit Services
provides loans to third party company employees and secures repayment through
the payroll deductions.
During the period under review the loan book increased by 89% from R4.6 million
at 30 September 2011 to R8.7 million by 31 March 2012.
The primary cost in the business is interest on loan capital required to fund
the growth of the loan book. Management are actively seeking alternative funding
options to reduce costs, thereby improving profitability.
PROSPECTS
Key elements of the on-going restructure process are the continued turnaround of
subsidiaries through product and market extension, aggressive trading and cost
reduction as well as the acquisition of new subsidiaries which are profit
generating and aligned with the group`s strategy.
The abovementioned approach is aimed at developing a robust and complementary
Group of companies which provide sustainable returns.
New acquisition opportunities are evaluated on an ongoing basis and, subject to
the availability of funding, further business acquisitions are likely in future.
Presented below are the unaudited interim results for the 6 month period ended
31 March 2012.
Unaudited Condensed Statement of Financial Position as at 31 March 2012
Interim Interim Audited
Unaudited Unaudited Group
Group Group 30 September
31 March 31 December 2011
2012 2010
R `000 R `000 R `000
ASSETS
Non-current assets
Property, plant and 4 407 2 493 4 572
equipment
Intangible assets 1 825 936 1 555
Other financial assets 3 613 - 2 323
Deferred tax 12 154 3 447 11 404
Total current assets 11 812 1 185 6 293
TOTAL ASSETS 33 811 8 061 26 147
EQUITY AND LIABILITIES
Equity 17 746 (970) 2 729
Non-controlling interest 1 267 (1 041) 1 118
Non-current liabilities
Interest bearing 6 937 2 995 13 477
borrowings
Deferred tax 509 - 495
Total current 7 352 7 077 8 328
liabilities, short term
interest bearing
borrowings and
shareholders` loans
TOTAL EQUITY AND 33 811 8 061 26 147
LIABILITIES
Net asset value 17 746 (970) 2 729
Net tangible asset value 15 921 (1 906) 1 173
Net asset value per 4.03 (0.64) 1.73
share (cents)
Net tangible asset value 3.62 (1.27) 0.75
per share (cents)
Unaudited Condensed Statement of Comprehensive Income for the 6 month period
ended 31 March 2012
Interim Interim 15 months
Unaudited Unaudited Audited
Group Group31 Group
31 March December 30 September
2012 2010 2011
R `000 R `000 R `000
REVENUE 12 048 1 273 6 464
COST OF SALES (5 591) (629) (2 484)
GROSS PROFIT 6 457 644 3 980
Other income 166 312 2 260
Selling, distribution (8 700) (3 860) (12 396)
and administration
expenses
LOSS BEFORE NET FINANCE (2 077) (2 904) (6 156)
COSTS AND TAXATION
Net Finance costs (1 024) (108) (999)
Taxation 735 264 7 435
(LOSS) / PROFIT FOR THE (2 366) (2 748) 280
PERIOD
Attributable to non- 86 609 426
controlling interest
NET (LOSS)/ PROFIT (2 280) (2 139) 706
ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS
BASIC AND HEADLINE
(LOSS)/ EARNINGS
Basic (loss) / profit (2 280) (2 139) 706
Headline (loss) / profit (2 273) (2 076) 204
Basic (loss)/earnings (0.62) (1.42) 0.47
per share (cents)
attributable to equity
holders of the parent
Headline (loss)/earnings (0.62) (1.38) 0.14
per share (cents)
attributable to equity
holders of the parent
Number of shares in 440 406 150 500 157 652
issue (`000)
Weighted average number 366 353 150 500 150 971
of shares (`000)
RECONCILIATION BETWEEN
BASIC (LOSS)/ PROFIT AND
HEADLINE (LOSS) /
EARNINGS
IAS 33 Basic (loss) / (2 280) (2 139) 706
profit
IAS 16 Loss / (Profit) 7 63 30
on disposal of property
plant and equipment
IAS 36 Reversal of - - (532)
impairment of intangible
assets
Headline (Loss) / (2 273) (2 076) 204
Earnings
Unaudited Condensed Segmental Information for the period ended 31 March 2012
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 and is evaluated regularly by management.
Biotech- Packag- Financial Corpo- Elimin- Consoli-
nology ing Services rate ations dated
R`000 R`000 R`000 R`000 R`000 R`000
Unaudited Group for the 6 months ended 31 March 2012
Revenues 7 614 2 920 1 431 808 (725) 12 048
TOTAL 12 048
EXTERNAL
REVENUE
Operating (477) (575) (891) (902) 768 (2 077)
loss
Unaudited Group for the 6 months ended 31 December 2010
Revenues 993 280 - 484 (484) 1 273
TOTAL 1 273
EXTERNAL
REVENUE
Operating (782) (1 730) - (392) - (2 904)
loss
Audited Group for the 15 months ended 30 September 2011
Revenues 5 797 368 126 1 549 (1 376) 6 464
TOTAL 6 464
EXTERNAL
REVENUE
Operating (2 944) (361) (49) (2 802) (2 802) (6 156)
loss
Unaudited Statement of Changes in Equity for the 6 months Ended 31 March 2012
Share Non Accumul- Minority Total
capital distribute- ated loss interest equity
able
reserves
R`000 R`000 R`000 R`000 R`000
Unaudited Group 31 March 2012
Balance as at 36 496 7 752 (41 519) 1 118 3 847
30 September
2011
Total - - (2 280) (86) (2 366)
comprehensive
loss for the
period
Issue of 19 793 - - - 19 793
shares
Share issue (975) - - - (975)
expenses
Change in - (1 522) - 1 522 -
ownership
Business - - - (1 286) (1 286)
combinations
Balance as at 55 314 6 230 (43 799) 1 268 19 013
31 March 2012
Unaudited Group 31 December 2010
Balance at 1 35 665 7 729 (42 225) (432) 737
July 2010
Total - - (2 139) (609) (2 748)
comprehensive
loss for the
6 months
Balance as at 35 665 7 729 (44 364) (1 041) (2 011)
31 December
2010
Audited Group 30 September 2011
Balance as at 24 415 7 729 (35 580) 2 006 (1 430)
1 July 2009
Total - - (6 645) (2 439) (9 084)
comprehensive
loss for the
12 months
Issue of 11 893 - - - 11 893
shares
Share issue (643) - - - (643)
expenses
Balance as at 35 665 7 729 (42 225) (433) 736
1 July 2010
Issue of 831 - - - 831
shares
Total - - 706 (426) 280
comprehensive
profit for
the 15 months
Change in - 23 - (23) -
ownership
Business - - - 2 000 2 000
combinations
Balance as at 36 496 7 752 (41 519) 1 118 3 847
30 September
2011
Unaudited Condensed Cash Flow Statement for the 6 months Ended 31 March 2012
Unaudited Unaudited Audited
Group Group Group
31 March 31 December 30 September
2012 2010 2011
R `000 R `000 R `000
NET CASH OUTFLOW FROM (6 190) (3 152) (8 406)
OPERATING ACTIVITIES
NET CASH (OUTFLOW)/ (5 629) 378 (582)
INFLOW FROM INVESTING
ACTIVITIES
NET CASH INFLOW FROM 13 240 2 874 9 263
FINANCING ACTIVITIES
Increase in cash and 1 421 100 275
cash equivalents
Cash and cash 309 34 34
equivalents at the
beginning of the period
Cash and cash 1 730 134 309
equivalents at the end
of the period
Notes to the Unaudited Financial Statements for the 6 months Ended 31 March 2012
REVIEW OF RESULTS AND FINANCIAL POSITION
The 31 March 2012 unaudited interim consolidated financial results represents
the trading results of the JDH corporate head office and its subsidiaries active
in the financial services, biotechnology and agricultural packaging markets.
The Group`s financial reporting date was extended by three months from 30 June
2011 to 30 September 2011, during the previous financial period. The 2011 Group
results comprised of 15 months ended on 30 September 2011, compared to the
preceding financial year that ended on 30 June 2010. The extended 2011 financial
reporting period resulted in the 6 month interim results, presented above,
ending on 31 March 2012, while the comparative 6 month interim period ended 31
December 2010.
The JDH restructure process initiated in September 2010 materially impacted on
the operations of the group during the 30 September 2011 financial period. The
changes included, inter alia, the re-constitution of the board of directors,
repositioning the strategic direction of the Group and its trading subsidiaries,
aggressive cost reduction measures in certain operational areas while increasing
investment in others.
The benefits of the measures implemented resulted in improved trading
performance during the last quarter of the 30 September 2011 financial period.
These improvements continued to realise enhanced operational performance during
the interim period ended 31 March 2012.
In addition, the directors announced two partially underwritten rights offers in
June 2011 to recapitalise the Group and ensure its solvency. The JDH rights
offer of R15 million concluded in October 2011 and was fully subscribed. The
R4.4 million rights offer announced by the board of Lazaron concluded in January
2012 and raised R3.2 million including a further R1.5 million investment by JDH
in Lazaron.
The impact of the restructure measures are reflected in the improved trading
performance of the Group.
Group turnover increased to R12 million for the 6 month period ended 31 March
2012. This is an 846% increase in turnover compared to the R1.3 million achieved
for the comparative 6 months ended 31 December 2010.
Operational expenses increased by 125% to R8.7 million for the interim period
compared to the R3.9 million for the 6 months ended 31 December 2010. Key
elements of the increase include the startup costs for the new Cryo-Save
operation, moving the companies` offices to new premises, the increase in shared
services infrastructure to facilitate the new acquisitions and the increased
operational expenses resulting from investment in operational support structures
and resources required to underpin the continued turnover growth.
The increase in operational expenses of 125% was leveraged in the period to grow
turnover by 846%, resulting in an improved loss before interest and taxation
("EBIT")of R2.1 million compared to the R2.9 million for the comparative period.
The improvement in operational results is illustrated when expressing EBIT as a
percentage of total turnover, refer table below, with 31 March 2012 improving to
a negative 17% compared to 228% for the comparative period.
31 March 2012 30 September 31 December
2011 2010
EBIT / Turnover (17%) (95%) (228%)
The restructure process initiated in September 2010 has been funded through the
Escalator Capital (RF) Limited ("Escalator") convertible loan facility and from
operational cash flows. Due to the operational improvements alternative funders
have expressed interest in providing funding for the group.
The reduction in non-controlling interest is due to a combination of the
subsidiaries improved operational results and the increase in JDH`s investment
in Lazaron.
The result of the restructure process and the corporate actions is reflected in
the dramatic improvement in the Group`s statement of financial position; refer
key indicators summarised below that illustrate the improvement:
Unaudited Unaudited %
Interim 31 Interim 31 Improvement
March 2012 December
2010
Net asset value per 4.03 (0.64) 730%
share (cents)
Tangible net asset value R15.9m (R1.9m) 935%
Net current assets / R4.5m (R5.9m) 176%
(liabilities)
Cash and cash R1.7m R0.1m 1 191%
equivalents
Current ratio 1.61 0.17
The improvement in the Group`s statement of financial position is largely due to
the:
- Improvement in operational results with turnover translating into accounts
receivable and cash receipts;
- The funding of the Credit Services short term loan book with long term
funding; and
- The recapitalisation of the Group through the JDH and Lazaron rights
offers.
The strategy of combining aggressive management of existing subsidiaries and
further strategic acquisitions is aimed at ensuring the future sustainability of
the Group.
CORPORATE ACTIONS
The directors announced two partially underwritten rights offers in June 2011
with the main objective of recapitalising the Group.
The JDH rights offer concluded on 14 October 2011 and was fully subscribed,
resulting in 214 285 714 rights offer shares being issued to shareholders,
shareholders who applied for excess shares and Escalator the underwriter. By
virtue of its underwriting, Escalator became the controlling shareholder in JDH,
exceeding the 35% mandatory offer threshold. The JDH minority shareholders
approved a waiver of the mandatory offer from Escalator in a general meeting
held on 17 October 2011.
The Lazaron corporate action comprised of a:
- section 112 disposal of assets;
- R4.4 million rights offer; and
- general offer by JDH to Lazaron`s shareholders to acquire the Lazaron
shares in exchange for JDH shares in the ratio 5 Lazaron shares for 1 JDH
share.
The section 112 resolution approved by Lazaron shareholders on 7 December 2011
disposed of the Lazaron sales infrastructure and certain laboratory equipment to
JDH, who in turn onsold these assets to Cryo-Save SA. This transaction removed
all significant overheads from Lazaron whilst retaining annuity income from the
existing client base.
The Lazaron rights offer closed on 20 January 2012 and was partially subscribed,
with 73% of the available rights offer shares taken up, increasing the total
Lazaron shares in issue to 369 970 339. JDH acquired 150 000 000 Lazaron rights
offer shares by virtue of agreeing to partially underwrite the Lazaron rights
offer to the value of R1.5 million. The additional investment increased JDH`s
interest in Lazaron to 44.18%
The JDH general offer to Lazaron shareholders opened on 23 January 2012 and
closed on 9 March 2012 with approximately 91% of Lazaron shareholders electing
to swap their Lazaron shares for JDH shares in the 5:1 ratio. This resulted in
JDH acquiring a further 187 883 066 Lazaron shares increasing JDH`s interest in
Lazaron to 95.41%.
EVENTS AFTER THE REPORTING PERIOD
The general offer circular to Lazaron shareholders (referred to above) indicated
that JDH intended acquiring all of the Lazaron shares held by Lazaron
shareholders for the offer consideration of 1 JDH share for every 5 Lazaron
shares held.
The offer circular stated that, in accordance with the provisions of section 124
of the Companies Act, if within 4 months after the date of the general offer,
the general offer was accepted by Lazaron shareholders holding at least 90% of
the offer shares, JDH would become entitled to a compulsory acquisition of the
remaining offer shares on the same terms that applied to Lazaron shareholders
who accepted the general offer.
The offer was accepted by Lazaron shareholders holding approximately 91% of the
offer shares.
A circular to Lazaron shareholders was distributed on 25 April 2012 informing
the remaining shareholders of JDH`s intention to acquire all of the remaining
offer shares in terms of section 124 of the Companies Act.
The section 124 offer concluded on 25 June 2012 on which date JDH acquired the
remaining Lazaron shares and Lazaron became a wholly owned subsidiary.
CONTINGENCIES
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 dispute arose
in 2006 based on transactions between Vinguard and the supplier. The amount of
the disputed liability has not been incorporated in the financial results as it
is unlikely that a future outflow of funds will occur.
Litigation has been suspended against a former employee of Vinguard who obtained
a CCMA ruling granting a R100 000 cash settlement and the issue of shares in
Vinguard. The former employee seems to have abandoned his claim in light of the
counter claim by Vinguard for the PAYE payable on this possible issue of
Vinguard shares.
APPOINTMENT OF NEW DIRECTORS
The appointment of Mr E Engelbrecht as a non-executive director was announced on
27 February 2012. Mr Engelbrecht is a director of Escalator, the controlling
shareholder of JDH.
The appropriate statutory documentation was submitted to both the JSE and CIPC
to formally update the company records regarding the abovementioned director
change. At the date of this announcement the change had not been effected on the
CIPC system. The board will continue to follow up with CIPC until the records
are appropriately updated.
The board is able to confirm that, other than the appointment of Mr Engelbrecht,
all other board appointments have been updated on the CIPC system.
The board announced the appointment of a new company secretary, CL Tromp, on 6
June 2012.
ACQUISITIONS AND DISPOSALS
JDH increased its stake in Lazaron from 27.45% to 95.41% during the period. The
increased investment in Lazaron at a cost of R4.1 million was obtained as
follows:
- Acquired 150 000 000 Lazaron shares in terms of JDH`s undertaking to
partially underwrite the Lazaron rights offer to the value of R1.5 million;
and
- Acquired 187 883 066 Lazaron shares as a result of the general offer to
Lazaron non-controlling shareholders. The offer comprised 1 JDH share for
every 5 Lazaron shares held, with the total issue value of the JDH shares
amounting to R2.6 million.
There were no disposals during the period under review.
As noted elsewhere, the board is actively investigating acquisition
opportunities aimed at improving earnings and cash generation for the group.
ISSUE OF SHARES
During the period under review the following share issues, all at 7 cents a
share, were approved by shareholders and the shares listed for trade on the JSE:
Share issue (date of issue) Number of Total value of
shares issued shares
R
Issue of shares in terms of 214 285 714 15 000 000
the JDH rights offer (14
October 2011)
Issue of shares to directors 30 890 815 2 162 357
as settlement of unpaid
remuneration and/or fees (2
March 2012)
Issue of shares to Lazaron 37 576 613 2 630 363
shareholders in terms of the
JDH general offer (9 March
2012)
Total 282 753 142 19 792 720
No shares were issued during the period in terms of the directors` general
authority to issue shares.
At the end of the interim period the issued share capital increased to 440 405
505 shares.
It is expected that a further 3 726 173 shares will be issued at the end of June
2012 in terms of the section 124 offer to acquire the remaining Lazaron shares.
The Company will apply for the listing of these further shares.
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 financial support of certain
parties to the group and in particular by the Company to its subsidiaries.
DIVIDENDS
No dividends have been declared and no dividend is proposed.
ACCOUNTING POLICIES
The abridged 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 Company`s Act and the JSE Listing Requirements. The principle
accounting policies adopted in preparation of these financial statements are
consistent with those of the prior period.
The interim results of the Company were not reviewed or audited by the auditors.
AUDITORS
The shareholders resolved to re-appoint AM Smith and Company Inc. as the Group
auditors on 2 March 2012 at the annual general meeting.
For and on behalf of the Board
Johannesburg
28 June 2012
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive Officer), DP
van der Merwe (Financial Director), BP Topham*, KA Rayner*, E Engelbrecht#.
(* Independent Non-executive)
(# Non-executive)
Company Secretary: CL Tromp
Registered Office: 1st Floor Bushwillow House, Green Hill Village Office Park,
on Lynnwood Road, Cnr Botterklapper and Nentabos Street, The Willows, Pretoria
East.
Transfer Secretaries: Link Market Services (Pty) Ltd, 13th Floor Rennie House,
19 Ameshoff Street, Braamfontein 2000, PO Box 4844, Johannesburg 2000
Auditors: AM Smith and Company Inc.
Sponsor: Arcay Moela Sponsors (Pty) Ltd
Date: 28/06/2012 17:32:01 Produced by the JSE SENS Department.
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