| Thu 28 Oct 2004, 11:18 | | RESULTS FOR THE YEAR ENDED 30 JUNE 2004 |
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EC-HOLD LIMITED - REVIEWED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2004
EC-HOLD LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/020093/06)
Share code: ECH ISIN: ZAE000016705
(`EC-Hold` or `the Company` or `the group`)
REVIEWED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2004
Summarised consolidated income statement
Reviewed Audited
12 months to 12 months to
R`000 30 June 2004 30 June 2003
Revenue 12 231 62 987
Operating loss before foreign
exchange gain/(loss), depreciation,
exceptional items and interest (2 941) (11 724)
Foreign exchange gain/(loss) 67 (5 302)
Operating loss before depreciation,
exceptional items and interest (2 874) (17 026)
Depreciation (241) (717)
Operating loss before exceptional items
and interest (3 115) (17 743)
Exceptional profit 1 036 3 974
Operating loss before interest (2 079) (13 769)
Net interest (paid)/received (788) 48
Loss before taxation (2 867) (13 721)
Taxation (49) (64)
Loss after taxation (2 916) (13 785)
Outside shareholders` share of income (95) (33)
Attributable loss (3 011) (13 818)
Number of ordinary shares in issue (`000) 104 040 104 040
Weighted average number of
ordinary shares in issue (`000) 104 040 104 040
Headline loss per ordinary share (cents) (3,8) (17,1)
Loss per ordinary share (cents) (2,9) (13,3)
Negative asset value per share (11,9) (9,0)
Reconciliation of headline earnings
Attributable loss (3 011) (13 818)
Loss/(profit) on sale of property,
plant and equipment 53 (47)
Capital profit on sale of division
and/or subsidiary (1 355) (5 437)
Impairment of investments, loans
and fixed assets 319 1 463
Headline loss restated in terms of AC306 (3 994) (17 839)
Segmental analysis by region
Operating
loss before
exceptional Capital
items and Operating Depre- expen-
R`000 Revenue interest assets Liabilities ciation diture
Audited
12 months
ended
30 June 2003
South Africa 25 602 (3 369) 20 384 29 265 551 736
Botswana 37 385 (14 374) - 137 166 114
62 987 (17 743) 20 384 29 402 717 850
Reviewed
12 months
ended
30 June 2004
South Africa 12 231 (3 115) 3 923 15 904 241 557
Botswana - - - - - -
12 231 (3 115) 3 923 15 904 241 557
Summarised consolidated balance sheet
Reviewed Audited
at at
R`000 30 June 2004 30 June 2003
ASSETS
Non-current assets 535 536
Property, plant and equipment 535 536
Current assets 3 388 19 848
Inventories 857 3 325
Deferred taxation 56 -
Prepaid taxation 719 531
Trade and other receivables 610 4 052
Bank balances 1 146 11 940
Total assets 3 923 20 384
EQUITY AND LIABILITIES
Equity capital and reserves (11 981) (9 018)
Ordinary shareholders` interest (12 422) (9 364)
Outside shareholders` interest 441 346
Non-current liabilities
Subordinated inter-company loan (Note 1) 14 000 11 000
Current liabilities 1 904 18 402
Short-term interest bearing
borrowings - 8 687
Short-term non-interest bearing
borrowings 1 002 -
Trade and other payables 728 5 396
Deferred revenue - 4 307
Bank overdrafts 174 12
Total equity and liabilities 3 923 20 384
Note 1: For the prior year, this loan was interest bearing for the full period
and for the current year, it was only interest bearing for the six months to
31 December 2003.
Statements of changes in equity
Non-
distri- Distri-
Share Share butable butable
R`000 capital premium reserves reserves Total
Balance at 30 June 2002 1 040 11 118 7 600 (15 351) 4 407
Loss for the year - - - (13 818) (13 818)
Foreign currency
translation reserve - - 47 - 47
Balance at 30 June 2003 1 040 11 118 7 647 (29 169) (9 364)
Loss for the year - - - (3 011) (3 011)
Transfer of non
distributable reserve - - (7 600) 7 600 -
Sale of subsidiary - - (62) - (62)
Foreign currency
translation reserve - - 15 - 15
Balance at 30 June 2004 1 040 11 118 - (24 580) (12 422)
Summarised consolidated cash flow statement
Reviewed Audited
12 months ended 12 months ended
R`000 30 June 2004 30 June 2003
Cash utilised in operations
before working capital changes (2 821) (13 300)
(Increase)/decrease in net
working capital (1 777) 22 625
Cash (utilised in)/generated by
operations (4 598) 9 325
Net interest (paid)/received (788) 48
Normal taxation paid (294) (529)
Net cash (outflow)/inflow from
operating activities (5 680) 8 844
Net cash (outflow)/inflow from
investing activities (360) 312
Net cash (outflow)/inflow
from financing activities (4 916) 683
Net (decrease)/increase in cash
and cash equivalents (10 956) 9 839
Cash and cash equivalents
at beginning of year 11 928 2 089
Cash and cash equivalents
at end of year 972 11 928
Bank balances 1 146 11 940
Bank overdrafts (174) (12)
COMMENTS
THE PERIOD IN RETROSPECT
Profile
EC-Hold has a 70% interest in Barlow Communications (Pty) Limited (`Barlows`),
which is an exclusive distributor of RADCOM - suppliers of network diagnostic
equipment. EC-Hold also has investments in Correlate Technologies (Israel) and
Connect One (USA), the carrying values of both are fully impaired. The
Company`s interest in its loss-making division, Exsol, was sold on 1 January
2004. EC-Hold is listed in the Development sector of the JSE Securities
Exchange South Africa (`JSE`) lists. Its shares are currently suspended.
Results
EC-Hold incurred a loss of R3 million for the year after taking into account
that MGX Holdings Limited (`MGX`) had waived interest on its loans to
EC-Hold from 1 January 2004. The loss was attributable to Exsol and corporate
and listing costs. Barlows recorded a profit after tax of R0,3 million which
was lower than the prior year.
Accounting policies and change in presentation
The accounting policies and methods of computation are in compliance with the
South African Standards of Generally Accepted Accounting Practice. They are
consistent with those used in the prior financial periods, other than for an
amended presentation of commissions in the adjusted comparative figures.
The group`s financial statements at 30 June 2004 have been reviewed by Deloitte
& Touche and their unqualified review opinion is available for inspection at
the Company`s registered office. This opinion contains an emphasis of matter
with regards to the going concern position of the group.
Winding-up
Liabilities in EC-Hold exceed assets by R12 million and its ability to
continue as a going concern has only been possible due to the subordination of
a portion of MGX`s loan account and a working capital support letter from MGX
(which are subject to various conditions).
In consultation with certain of the large minority shareholders of EC-Hold the
new boards of both MGX and EC-Hold instructed Deloitte & Touche to carry out a
forensic audit in the second half of 2003 covering all transactions between
EC-Hold group and MGX group since 1999 and also addressing the queries of the
relevant minorities. No material issues arose from the report but the costs of
about R500 000 had once again to be funded by the financiers to MGX.
The Company`s running costs continue to be funded by MGX. MGX is, in turn,
funded by its financiers who are thereby indirectly funding the costs of
continuing to run EC-Hold as a listed Company. Clearly this situation cannot
continue.
If EC-Hold was to sell its remaining asset, the costs of complying with JSE
Listings Requirements relating to the disposal would absorb a large portion of
the proceeds, making such a sale of little commercial benefit. Accordingly,
the Company approached the JSE to waive some of the requirements relating to a
disposal, or alternatively to waive some of the requirements relating to a
delisting or alternatively to waive some of the requirements relating to a
continued listing so that the costs to the Company of each of these options
could be reduced.
The JSE indicated that the Company could delist if it complied with the
relevant sections of the JSE Rules. In the event of a delisting, MGX intended
to make an offer to the minority shareholders at a nominal value supported by
an independent fair and reasonable opinion, in terms of JSE Listings
Requirements. MGX would allow shareholders to continue to remain invested if
they so wished and point out clearly to shareholders that the current
Securities Regulation Panel (`SRP`) action against MGX and others might enable
them to receive a substantially higher offer for their shares if the SRP
succeeded in their action that is being vigorously defended.
After some consideration, MGX advised the Company that it would provide the
funds for the delisting as these would be one-off costs. The SRP confirmed
that `the proposed termination of the listing of EC-Hold on the JSE Securities
Exchange is a matter outside the jurisdiction of the SRP and as such it is a
matter which must be negotiated between EC-Hold (and its advisors) and the JSE
Securities Exchange`. Nonetheless, the SRP indicated that `until such time as
the panel`s ruling (for a mandatory offer of 240 cents per share to certain
EC-Hold shareholders) is complied with, or a Court judgement is given that
such offer need not be made, the panel will not condone an offer made to EC-
Hold shareholders for a lesser amount by MGX or any party acting in concert
with MGX`. This statement was made by the SRP, notwithstanding that the
delisting circular to shareholders would highlight this possible alternative.
As there does not appear to be any route available to the Company to dispose
of its assets at minimum cost, or to continue remaining listed at a reduced
cost, or to delist without the probability of the additional costs of legal
actions, the Company has decided to apply for a liquidation order. EC-Hold
will accordingly cease to function as a going concern. Currently MGX has
indicated that it does not intend to renew the Letter of Support and the
Subordination Agreement. Shareholders will be kept advised through the JSE SENS
Service of the status of the liquidation application.
The annual financial statements and these group results have been prepared on
a going concern basis. On application for liquidation, these accounts will be
reviewed and prepared on a liquidation basis post the liquidation application.
MGX has indicated to EC-Hold that, subject to certain conditions, it will
procure that all the current known creditors of EC-Hold are paid 100 cents in
the Rand. These are not expected to exceed R500 000.
Dividends
It is not anticipated that any dividend will be available for shareholders
after the proceeds of the winding-up have been applied to a distribution to
creditors.
Norman Webster Roy Midlane
Chairman Acting Chief Financial Officer
28 October 2004
Directors: N J Webster*, S R Midlane,
G Mamdoo*, R D Shirley*
* Non-executive
Sponsor: Brait Sponsors (Proprietary) Limited
