| Fri 8 Feb 2002, 0:00 | | Mathomo Group Limited - Results For The Year Ended |
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Mathomo Group Limited
(Registration number 1995/004783/06)
("Mathomo" or "the Company")
Share code: MTO
ISIN code: ZAE000010542
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2001
CONSOLIDATED INCOME STATEMENT Audited Audited
Year ended Year ended
30 30
September September
2001 2000
R'000 R'000
Turnover 264 357 202 506
Continuing operations 172 970 128 779
BRM - In provisional liquidation 91 387 73 727
Operating (loss)/income before finance (12 357) 11 939
costs and depreciation
Continuing operations 8 154 11 320
BRM - In provisional liquidation (20 511) 619
Net finance costs (13 128) (5 468)
Continuing operations (9 972) (2 737)
BRM - In provisional liquidation (3 156) (2 731)
Depreciation (1 831) (2 547)
Net (loss)/income before exceptional (27 316) 3 924
item
Continuing operations (3 649) 6 816
BRM - In provisional liquidation (23 667) (2 892)
Exceptional items (23 506) (20 952)
Net loss before taxation (50 822) (17 028)
Taxation (1 220) (735)
Net loss for the year ended (52 042) (17 763)
Shares in issue 72 583 406 72 583 406
Headline (loss)/earnings per share (39,3) 4,4
(cents)
Loss per share (cents) (71,7) (24,5)
Reconciliation of headline (loss)/earnings to net loss for the year ended:
Net loss (52 042) (17 763)
Add back exceptional item 23 506 20 952
Further write-down of the Duchini
receivable account 16 975 5 000
Provision for loss on the liquidation of
Eldons 4 714 15 952
Provision for decline in value of loan to
share incentive trust 1 444
Write-off of goodwill 373
Headline (loss)/earnings (28 536) 3 189
CONSOLIDATED BALANCE SHEET Audited Audited
30 30
September September
2001 2000
R'000 R'000
ASSETS
Non-current assets 25 120 23 758
Land and buildings 12 500 7 311
Plant and equipment 4 285 10 813
Investments 8 335 5 634
Current assets 67 192 129 573
TOTAL ASSETS 92 312 153 331
EQUITY AND LIABILITIES
Capital and reserves (7 008) 42 609
Ordinary share capital and share premium 106 074 106 074
Non-distributable reserve
2 425
Accumulated loss (115 507) (63 465)
Non-current interest bearing liabilities 6 111 11 853
Current liabilities 93 209 98 869
Interest bearing liabilities 65 269 62 967
Non-interest bearing liabilities 27 940 35 902
TOTAL EQUITY AND LIABILITIES 92 312 153 331
Net (deficit)/asset value per share (cents) (9.7) 58,7
SUMMARISED CASH FLOW Audited Audited
Year ended Year ended
30 30
September September
2001 2000
R'000 R'000
Cash generated from operating activities 4 208 16 966
Cash generated from / (applied to) investing (768) (2 716)
activities
Cash applied to financing activities (5 742) (3 331)
Net cash (outflow) / inflow (2 302) 10 919
STATEMENT OF CHANGES IN EQUITY
Ordinary Non Accumulated Total
share capital distributable loss
and share premium reserve
R'000 R'000 R'000 R'000
Balance at 30
September 1999 106 074 - (45 702) 60 372
Net loss for
the year - (17 763) (17 763)
Balance at 30
September 2000 106 074 (63 465) 42 609
Net loss for
the year (52 042) (52 042)
Revaluation of
land and
buildings 2 425 2425
Balance at
30 September
2001 106 074 2 425 (115 507) (7 008)
HISTORY
Mathomo was listed on the JSE in April 1996 and initially comprised the
following operations:
M -Stores - Retail outlets in the mining and related sectors; and
BRM - Branded clothing supply.
In an effort to diversify its income stream, expand its customer base and
broaden its range of products and services, Mathomo made the following
acquisitions and investments:
Eldons - Stationery distribution;
Duchini - Footwear wholesaling;
Alsafe - Workwear and protective clothing distribution;
MFS - Supply of financial services to miners; and
PPE - Supply of personal protective equipment to the mining
industry.
The acquisition strategy, however, diverted Mathomo from its primary focus
on the delivery of goods and services to the mining and industrial sectors
through its dominant distribution channels.
Duchini was placed into liquidation in June 1999 as a result of the
systematic misrepresentation of the financial results and the Company has
instituted legal proceedings against, inter alia, the vendors and management
of Duchini in an attempt to recover its investment. Eldons was placed into
liquidation in July 2000 after incurring substantial losses. BRM has
recently been placed into provisional liquidation in order to stem the
ongoing losses incurred by it. This decision was taken after a critical
review of its business model indicated that BRM could not trade profitably
in its current form and that it was not financially viable for Mathomo to
restructure the business.
The demise of Duchini, Eldons and BRM has adversely affected Mathomo's
financial resources and resulted in an excessive level of debt. This debt
has limited the growth and trading opportunities available to Mathomo, as
management's primary focus has been on servicing the debt. Due to an over-
reliance on the potential recoveries in relation to Duchini, the extent and
timing of which remain uncertain, the funding issue has until recently not
been adequately dealt with.
PROSPECTS
The directors and management of Mathomo have, in consultation with the
Company's debt funders and advisers, formulated a restructuring plan for the
Company, which should significantly reduce the debt burden and place the
Company on an improved financial and business footing. The restructured
Mathomo will comprise only two operating divisions, Alsafe Protectowear
("Alsafe") and M-Stores, each with a specific area of focus and promising
growth prospects.
Alsafe
Alsafe is a wholesaler and retailer of work-wear and protective clothing to
industry. It has a niche manufacturing operation and markets its own range
of branded work-wear and protective equipment. Over the last three years,
Alsafe has developed a national presence supplying blue chip clients and
parastatal organisations. It enjoys a dominant market position in the
Western Cape and Kwa-Zulu Natal. A newly established presence in Gauteng
focusing on the servicing of its established national customers presents a
unique opportunity for organic growth.
The existing management team of Alsafe has grown the profitability of the
division by an average of 44% per annum over the past two years. Alsafe has
been the most significant and consistent contributor of profits to Mathomo.
PPE is still in the early stages of development and has made losses to date.
Significant management emphasis will be placed on tightening its operational
procedures and its sourcing and distribution model. The opportunity
presented in the outsourced supply of personal protective equipment to the
mining industry remains significant.
M-Stores
M-Stores is a workplace retailer that has proven to be very resilient in a
declining retail environment. The 98 free-standing outlets are located in
the hostel complexes and at the shafts of the mining and related industries.
The stores have historically sold their merchandise to mineworkers against a
30- day payroll deduction.
M-Stores has delivered meaningful profits and cash flows over the last two
trading years. The division continually monitors the relative performance
of each of its outlets and actively repositions its stores to match
demographic shifts in the industry. M-Stores will manage Mathomo's
investment in MFS to encourage greater synergies between MFS and itself. It
is also investigating offering extended credit to its customers in a joint
venture with a proven credit provider to avoid funding and credit risk.
Head Office
Due to the refocusing of the Company's activities into a focused operating
trading company, the head office infrastructure has been simplified and
costs substantially reduced. All head office staff will now be directly
involved in day-to-day operational functions.
DEBT REDUCTION PROGRAMME
The Company wishes to reduce its excessive debt exposure and will implement
a debt reduction programme as set out below. This will be project managed
together with non-executive directors and advisers to allow the executive
management to focus primarily on Mathomo's ongoing operations.
The board has announced its intention to recapitalise the Company, by way of
a rights offer at 5 cents per share, in order to raise approximately R20
million. The rights offer has been underwritten by The Standard Bank of
South Africa Ltd and Mineworkers Investment Company (Pty) Ltd has given an
irrevocable undertaking that it will follow its rights in the amount of R7
million;
the Company and its funders have agreed in principle to amend the terms and
conditions of R20 million of its existing banking facilities;
Mathomo and the joint liquidators of Duchini have initiated numerous legal
proceedings to effect substantial recoveries from a variety of parties.
Certain amounts may be recovered in the next 12 months, but the extent and
timing of such recoveries remains uncertain;
liquidators have been appointed to attend to the winding up of BRM, the
collection of its debtors' book and the sale of its assets; and
the Company is exploring the sale of its commercial properties.
FINANCIAL RESULTS
The financial results have been prepared in accordance with Generally
Accepted Accounting Practices ("GAAP"). The directors wish to highlight the
following issues:
The uncertainty pertaining to the timing and realisable value of the Duchini
claims, which are significant, has necessitated a full provision in the
accounting records. This in no way indicates that the directors believe that
no funds will be recovered but that they deem it prudent not to reflect this
asset due to its contingent nature and as required by changes to GAAP.
Subsequent to 30 September 2001, BRM was placed into provisional
liquidation. The bank overdraft of BRM, which is guaranteed by the Company
and it's subsidiaries, amounted to R21,5 million. It is probable that the
entire overdraft will be repaid out of the proceeds of the liquidation. A
contingent liability exists in the event that there is a shortfall.
The auditors have expressed concern at Mathomo's ability to continue as a
going concern if the rights offer is not implemented and the restructuring
as detailed above is unsuccessful. Without qualifying their opinion they
draw attention to the fact that the Company's total liabilities exceed its
total assets prior to the implementation of the rights offer. These
conditions indicate the existence of a material uncertainty, which may cast
significant doubt over the Company's ability to continue as a going concern
failing the successful implementation of the restructuring.
Significant restructuring costs will be incurred in the current financial
period.
The Company and its funders have agreed in principle to amend the terms and
conditions relevant to R20 million of its existing banking facilities.
Shareholders are referred to the announcement detailing the proposed rights
offer and consolidation of shares, which appears elsewhere in this
publication today.
CONCLUSION
The Company should be in a position to generate positive returns to
shareholders in the medium term following the successful implementation of
the restructuring, which has the following objectives:
to convert Mathomo from an investment company into a focused operating and
trading company with profitable divisions; and
to reduce Mathomo's debt to a manageable level.
By order of the Board
Johannesburg
8 February 2002
