| Mon 15 Mar 2004, 12:52 | | Reviewed financial for 8 months 31 Dec 03 |
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Kolosus Holdings Limited - Reviewed preliminary financial information for eight-
months ended 31 December 2003.
KOLOSUS HOLDINGS LIMITED
(Registration number 1978/000181/06)
Share code: KOS NSX share code: KOL
ISIN: ZAE000050258
Reviewed preliminary financial information for eight-months ended 31 December
2003.
Introduction
The Group has progressed significantly since it was acquired by the Daun & Cie
AG group ("Daun") and with the clawback rights issue recently completed (see
note below) a solid foundation has been laid for the group to continue the quest
for a sustained return to profitability. Trading conditions continue to be
difficult but the directors are satisfied that all continuing operations are
currently trading profitably.
These preliminary financial results have been reviewed by Deloitte and their
unqualified review report is presented below.
Review of operations
The group achieved an operating profit from continuing operations, for the eight
months, of R 32,6 million and a net profit of R 8 million. The results,
however, include an abnormal gain on the estimation of the quantum of the Seton
claim. The subsequent settlement of the claim and the conversion thereof into
rands resulted in an over estimation of the liability amounting to R 5,9
million. At year-end the translation of the Daun USD loan, that arose out of the
settlement of the Seton claim, resulted in an unrealised foreign exchange profit
of R 3,9 million. African Hide Trading Corporation (Pty) Ltd was sold, effective
31 August 2003, to a fellow subsidiary of the Daun group.
These results have been achieved in tough market conditions and are a reflection
of the continued dedication and hard work of management and staff and the
financial support and backing of the Daun group. Cost reductions have continued
and renewed focus has been placed on marketing the group more effectively.
Kolosus Automotive Leathers (KAL)
KAL has continued to generate operating profits on its limited throughput. The
strong rand will continue to put pressure on the ongoing business of KAL.
Nevertheless management will continue with its cost cutting drive and pursue new
business over the next 12 to 18 months.
Mossop Western Leathers (MWL)
Although deflation and a strong and unpredictable rand have favoured importers
and posed severe challenges in the past year, MWL"s results have exceeded
expectations due to attention to risk management, diversification of raw
material sources, optimal utilisation of raw material, and particular attention
to quality control and customer relations.
Although market conditions in 2004 are expected to remain unpredictable and
tough, the good results of the past three years, new opportunities arising from
membership of the Daun group and an experienced management and workforce provide
a sound platform for the future.
Bull Brand Foods (BBF)
BBF produced better than expected results and traded profitability for the
period under review. Short but intense, local seasonal demand, coupled with
price and availability pressures on imported proteins caused local meat prices
to rise, a trend which is expected to continue in the short term. Strong
consumer demand also prevailed in the branded canned meals category, resulting
in this division trading satisfactorily. However, overall trading conditions
remain volatile, and BBF will continue to reduce its cost profile whilst
pursuing new marketing opportunities.
Earnings per share
Pro forma earnings per share have been reflected for purposes of clarity. The
basis of the calculation is that the rights issue is assumed to have occurred at
the beginning of the period and the interest saving that would have occurred has
been adjusted for.
Changes in accounting policies and comparatives
During the period under review the Group adopted AC137 - Agricultural assets,
for the first time. The result thereof at 31 December 2003 was a revaluation of
our agricultural assets by R 1,2 million.
No adjustment was necessary to the April 2003 results as the agricultural assets
were shown at fair value.
Clawback rights issue
During December 2003 the clawback rights issue of 140,100,000 shares was
completed with 1,033,250 shares subscribed for by shareholders other than Daun
and the balance of 139,066,750 shares being taken up by Daun and settled by way
of the capitalisation of a portion of the Daun loan acquired from the Consortium
of Banks. The costs of the issue were set off against the share premium that
arose out of the issue of such shares. This had the effect of increasing Daun"s
shareholding in Kolosus to 97,82% of the company"s issued shares.
The full effect of the rights issue and the concomitant reduction of interest
bearing debt will only reflect in the group"s results during the forthcoming
financial year.
Lease and capital commitments
Lease commitments comprise mainly the current lease between KAL and the KwaZulu
National Development Corporation payable over 6,2 years. Rentals outstanding
amounted to R 35,5 million at the end of December 2003, equivalent to a
discounted net present value of R 25,7 million.
The Group has successfully negotiated the purchase of the property, which is the
subject of this lease. Refer post balance sheet events comment below.
Solvency and going concern
The Group"s current trading and borrowing position and it"s trading and cash
flow forecasts indicate that the Group is, and will remain, solvent and will
continue to be a going concern. Our bankers and Daun continue to provide
facilities on the same basis as previously. The financial statements have
accordingly been prepared on a going concern basis.
Post balance sheet events
The group has concluded an agreement to purchase the property, as a going
concern, currently leased by Kolosus Automotive Leathers (see leases and capital
commitments above) for an amount of R 23 million and is proceeding to finalise
the transfer thereof.
The group has negotiated the settlement of a claim raised against a third party
for R 5 million and this amount will be received during March 2004. After this
claim has been settled the group no longer has any pending litigation.
During February 2004 the group repaid the USD 5 million loan from Daun, that
resulted from the settlement of the Seton claim, and has converted the remaining
USD 1 million loan to a rand denominated loan on 29 February 2004. The repayment
resulted in an outflow of R 33,45 million. Consequently the group no longer has
any foreign currency denominated loans.
Various dormant and loss making subsidiaries and the investment in an associate,
Camdeboo Meat Processors (Pty) Ltd, that related to the activities of African
Hide Trading, were disposed of effective the 1 January 2004, to African Hide
Trading Corporation (Pty) Ltd and Courthiel Holdings Ltd. The net proceeds of
these sales amounted to R 2,4 million. The net asset value of the businesses
sold amounted to R 2,8 million.
Future prospects
The group is adapting to conditions of a volatile rand and is continuing to seek
ways of reducing costs further and increasing operational efficiencies.
The Board wishes to express its sincere appreciation to management and staff for
their commitment to the Group and their continuing efforts to return the Group
to profitability. A special note of thanks must also be directed to Mr Claas
Daun of the Daun group, our majority shareholder, who"s involvement in the group
and contribution thereto has saved many jobs and contributed to a restructured
group which can look to the future with renewed hope.
By order of the Board
Paul Schouten
Chairperson and Managing Director
9 March 2004
Secretary and registered office
Grant Stuart Phillips CA(SA)
3 Condale Road, Krugersdorp , 1739
Transfer Secretaries
Computershare Limited
70 Marshall Street, Johannesburg, 2001
Directors
PCT Schouten (chairperson)*, CL Campher*, CE Daun, RD Radford*, AZ Keyser* *
Executive
Sponsor
PSG Capital Limited
REVIEW REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF
KOLOSUS HOLDINGS LIMITED
We have reviewed the accompanying condensed consolidated balance sheet of
Kolosus Holdings Limited and its subsidiaries at 31 December 2003 and the
related condensed consolidated statements of income and cash flows for the eight
months then ended. The preliminary financial information is the responsibility
of the company"s directors. Our responsibility is to issue a report on the
preliminary financial information based on our review.
Scope
We conducted our review in accordance with the statement of South African
Auditing Standards applicable to review engagements. This standard requires
that we plan and perform the review to obtain moderate assurance that the
preliminary financial information is free of material misstatement. A review is
limited primarily to enquiries of company personnel and analytical procedures
applied to financial data and thus provide less assurance than an audit. We have
not performed an audit and, accordingly, we do not express an audit opinion.
Review opinion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying condensed consolidated preliminary financial information
is not fairly presented, in all material respects, in accordance with the South
African Statement of Generally Accepted Accounting Practice and the Companies
Act in South Africa.
Deloitte
Registered Accountants and Auditors
Chartered Accountants (SA)
9 March 2004
Reviewed Audited Audited
8 months 12 months 12 months
31 December 30 April 30 April
Financial statistics 2003 2003 2003
Restated Previous
Note 3
Number of shares in issue (million) 168.1 168.1 560.4
Weighted average number of
shares in issue (million) 37.2 168.1 560.4
Pro forma earnings per share (see note 2) 11.12 (72.49) (21.75)
Earnings / (loss) per share basic (cents) 21.71 (72.49) (21.75)
Earnings / (loss) per share diluted (cents) 21.49 (72.33) (21.46)
Earnings / (loss) per share headline (cents) 31.53 (47.35) (5.03)
Earnings / (loss) per share headline
diluted (cents) 31.21 (47.25) (4.96)
Net Asset value per share 121.26 33.50 10.05
Reconciliation of headline earnings
R 000"s R 000"s
Net profit 8,068 (121,878)
Profit on sale of leased assets - (4,200)
Settlement of the Seton claim - 50,100
Impairment of property, plant & equipment - 37,503
Loss on sale of subsidiary 148 -
Impairment on African Hide Trading loan 1,252 -
Restructuring costs, discontinued and other
abnormal costs - 6,449
Headline earnings as previously stated (32,026)
Settlement of the Seton claim (see note 4) - (50,100)
Legal and consulting costs (see note 4) - (1,335)
Loss on sale of property plant &
equipment (see note 4) 2,250 3,853
Headline earnings 11,718 (79,608)
CONDENSED GROUP INCOME STATEMENT
Reviewed Audited
8 months 12 months
31 December 30 April
2003 2003
R 000"s R 000"s
Sales 616,524 1,158,367
- continuing operations 539,276 1,158,367
- discontinued operations 77,248 -
Cost of sales (544,426) (1,052,191)
Gross profit 72,098 106,176
Impairment of assets - (37,503)
Abnormal items (1,650) (3,315)
Seton claim provision 5,900 (50,100)
Distribution, administration and other expenses (52,643) (110,120)
Operating profit / (loss) 23,705 (94,862)
- continuing operations 32,599 (93,818)
- discontinued operations (8,894) (1,044)
Finance costs (13,636) (26,460)
Share of associates losses (1,964) (603)
Profit / (loss) before taxation 8,105 (121,925)
Taxation (9) 29
Profit / (loss) from ordinary activities 8,096 (121,896)
Minority interest (28) 18
Net profit / (loss) attributable to
ordinary shareholders 8,068 (121,878)
CONDENSED GROUP STATEMENT OF CHANGES IN
EQUITY
Reviewed Audited
8 months 12 months
31 December 30 April
2003 2003
R 000"s R 000"s
Share capital 33,624 5,604
Share premium 626,391 515,718
Non-distributable reserves 13,488 13,488
Currency translation differences 780 484
Hedging reserve - (1,941)
Accumulated loss (470,418) (477,028)
Balance at beginning of period (478,486) (355,150)
Profit/ (loss) for the period as
previously reported 8,068 (121,878)
203,865 56,325
CONDENSED GROUP CASH FLOW STATEMENT
Reviewed Audited
8 months 12 months
31 December 30 April
2003 2003
Operating profit / (loss) 23,705 (94,862)
Depreciation 8,898 17,878
Loss on sale of property, plant and equipment (2,250) (3,853)
Impairment of assets - 37,503
(Reversal) / Provision for Seton claim (5,900) 50,100
Non cash flow items 2,294 283
Foreign exchange differences (2,777) 90
23,970 7,139
Changes in working capital (6,970) 27,952
Finance costs (13,636) (26,460)
Taxation paid (199) (913)
Net cash flow from operating activities 3,165 7,718
Net cash flow from investing activities 12,286 9,708
Total flows from operating and
investing activities 15,451 17,426
Proceeds on rights issue 138,693 -
(Decrease) / Increase in interest
bearing borrowings (132,584) 35,468
Increase in interest free borrowings 6,710 -
Net cash inflows from financing activities 12,819 35,468
Net increase in cash and cash equivalents 28,270 52,894
Cash and cash equivalents at beginning of year 8,975 (43,919)
Cash and cash equivalents at end of year 37,245 8,975
CONDENSED GROUP BALANCE SHEETS
Reviewed Audited
8 months 12 months
31 December 30 April
2003 2003
R 000"s R 000"s
Assets
Non-current assets 71,671 70,707
Fixed assets 50,333 54,705
Investment and loans 350 8,849
Long-term debtors 20,988 7,153
Current assets 285,601 333,415
Inventories 152,559 205,163
Receivables and prepayments 95,797 119,277
Cash and cash equivalents 37,245 8,975
Total Assets 357,272 404,122
Equity and liabilities
Capital and reserves 203,865 56,325
Share capital 33,624 5,604
Share premium 626,391 515,718
Reserves (456,150) (464,997)
Minority interest 72 44
Non-current liabilities 10,154 13,279
Long term interest bearing borrowings 47 237
Long term interest free borrowings 185 185
Retirement benefit obligation 9,922 12,857
Deferred taxation liabilities -
Current liabilities 143,181 334,474
Trade and other payables 56,602 117,555
Bank overdrafts and short term interest
bearing borrowings 63,138 155,275
Short term interest free borrowings 6,710 -
Provisions 11,472 60,186
Taxation liabilities 5,259 1,458
Total equity and liabilities 357,272 404,122
Reviewed Audited
8 months 12 months
31 December 30 April
2003 2003
GROUP SEGMENTAL REPORT R 000"s R 000"s
Revenue
Foods 355,547 534,627
Leather 260,977 623,740
Investments - -
Other - -
Total 616,524 1,158,367
Operating profit
Foods 12,131 3,341
Leather 769 (21,642)
Investments 3,417 (14,001)
Other 7,388 (62,560)
Total 23,705 (94,862)
Assets
Foods 193,250 190,785
Leather 135,308 213,253
Investments 9,165 11,346
Other 737,837 522,367
Intergroup (718,288) (533,629)
Total 357,272 404,122
Liabilities
Foods 157,898 163,380
Leather 358,128 438,031
Investments 63,251 65,483
Other 85,206 78,953
Intergroup (511,148) (398,094)
Total 153,335 347,753
NOTES TO THE PRELIMINARY RESULTS
1) The principal accounting policies adopted are consistent with the previous
annual financial statements with the exception of the adoption of AC137 (see
commentary above). The financial information has been prepared in accordance
with and complies with South African Statement of Generally Accepted Accounting
Practice and the Companies Act.
2) Pro forma earning per share has been calculated as if the rights issue had
occurred at the beginning of the period and the interest savings had been
effective for the full period. The number of shares used amounted to 168,1
million and the earnings used was R 8,068,000 plus the calculated interest of R
10,633,000.
3) During the period under review, the company consolidated its share capital on
a one for twenty basis. All the comparative financial statistics have been
restated to include the above and the effect of the clawback rights issue.
4) Restatement to comply with SAICA circular 7/2002.
Date: 15/03/2004 12:42:35 PM Produced by the JSE SENS Department
