| Fri 25 Feb 2005, 17:37 | | Cautionary Announcement |
|
Proper - Abridged Audited Consolidated Financial Results For The Year Ended
31 August 2004 And Cautionary Announcement
Proper Group Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1998/001940/06)
Share code: PRO ISIN: ZAE000027181
(`Proper` or `the company` or `the group`)
ABRIDGED AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST
2004 AND CAUTIONARY ANNOUNCEMENT
BALANCE SHEET
(Figures in R`000) As at As at
31 Aug 31 Aug
2004 2003
ASSETS
Non-current assets 378 18 193
Fixed assets - 17 270
Intangible assets - 40
Deferred tax assets - 703
Loans receivable 378 180
Current assets 2 5 177
Receivables and deposits 2 3 229
Inventories - 14
Cash and cash equivalents - 1 934
Total assets 380 23 370
EQUITY AND LIABILITIES
Capital and reserves 38 108
Issued capital 307 307
Share premium 5 866 5 866
Retained earnings/(Accumulated loss) (6 135) (12 619)
Revaluation reserve - 6 521
Outside shareholders interest - 33
Non-current liabilities 341 11 685
Long-term liabilities - 11 225
Deferred tax liabilities - 460
Loans payable 341 -
Current liabilities 11 577
Accounts payable - 5 038
Bank overdraft 1 6 539
Total equity and liabilities 380 23 370
Net asset value per share (cents) 0.13 0.24
Net tangible asset value per share 0.13 0.11
(cents)
Shares in issue - closing (`000) 30 746 30 746
CONSOLIDATED INCOME STATEMENT
(Figures in R`000) Year ended Year ended
31 Aug 31 Aug
2004 2003
Revenue 616 99 168
Cost of sales - (85 932)
Gross profit 616 13 236
Other income 12 753 3 219
Operating expenses (6 885) (22 623)
Profit/(Loss) before interest and 6 484 (6 168)
taxation
Net finance costs - (2 861)
Profit/(Loss) before taxation 6 484 (9 029)
Taxation - (22)
Net profit/(loss) after taxation 6 484 (9 051)
Outside shareholders` interest - 15
Net profit/(loss) for the year 6 484 (9 036)
Reconciliation of profit/(loss) and
headline profit/(loss)
Profit/(loss) for the year (cents per 21.09 (29.39)
share)
Loans and investments written off 19.77
(cents per share)
Profit on writing off of subsidiaries (18.26) -
(cents per share)
Gain on compromise with creditors (23.22)
(cents per share)
Amortisation of intangibe assets - 0.54
(cents per share)
Intangible assets written off (cents - 11.28
per share)
Headline loss (cents per share) (0.62) (17.57)
Shares in issue - weighted average 30 746 30 746
(`000)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Figures in R`000) Share Share Revaluat Accumulat Total
Capita Premium ion ed
l Reserve Profit
Balance at 01 Sep 2002 307 5 866 7 421 (3 583) 10 011
Revaluation of land and - - (900) - (900)
buildings
Net loss for the period - - - (9 036) (9
036)
Balance at 31 Aug 2003 307 5 866 6 521 (12 619) 75
Writing off of - - (6 521) - (6
subsidiaries 521)
Net profit for the period - - - 6 484 6 484
Balance at 31 Aug 2004 307 5 866 - (6 135) 38
CONSOLIDATED CASH FLOW STATEMENT
(Figures in R`000) Year ended
31 Aug 2003
Cash flows from operating activities (692) (3 868)
Cash received from clients 618 104 392
Cash paid to suppliers and employees (1 310) (105 867)
Cash utilised by operations (692) (1 475)
Net finance costs - (2 861)
Taxation paid - 468
Cash flows from investing activities (588) 2 135
Acquisition of equipment and vehicles - (35)
Proceeds on the disposal of fixed - 410
assets
Acquisition of financial assets - 685
(Increase)/Decrease in loans receivable (588) 1 075
Cash flows from financing activities 1 261 1 562
Decrease in outside shareholders` - (15)
interest
Long term liabilities raised 1 261 1 577
(Decrease)/increase in cash and cash (19) (171)
equivalents
Cash and cash equivalents at beginning 18 (4 434)
of year
Balance at beginning of year (4 605) (4 434)
Writing off of subsidiaries 4 623 -
Cash and cash equivalents at end of (1) (4 605)
year
Commentary
Review of operations and restructuring activities
The interim results for the 12 months ended 31 August 2004 reflect the ongoing
restructuring of the group. It was previously announced that corporate
restructuring specialists, Gandalf Trust, acquired control of Proper in October
2003 in order to restructure and consider new opportunities for the struggling
group. Previous miscalculated decisions in one of the subsidiaries, Propermark
(Pty) Ltd, caused extensive losses for the group as a whole and, following
failed negotiations with the commercial banks involved, resulted in the
liquidation of Propermark (Pty) Ltd and its subsidiaries. The remainder of
Proper`s subsidiaries are either in liquidation or are in the process of
`running out` their businesses, being earmarked for voluntary liquidation and/or
for sale at a nominal value thereafter. Shareholders were informed of the
majority of these events in previous announcements (in line with previous
transactions concluded by the Gandalf-appointed management team).
An offer of compromise to creditors of the holding company, Proper, was
sanctioned by the High Court in June 2004 in terms of Section 311 of the
Companies Act, which restored the company to solvency and was a critical first
step in and condition to the recapitalisation of the company. Various
possibilities are currently being considered for Proper with the assistance of
Gandalf. The board expects the process to be completed within the next few
months and is confident it will assist in restoring the fortunes of the company.
Financial treatment of the restructuring and financial results
The board decided that the most appropriate financial treatment of the
restructuring would be not to consolidate the abovementioned subsidiaries in
terms of the group financial statements. This decision was based on the grounds
that it would be misleading and that it would entail expense or delay out of
proportion to the value to members of the company (in accordance with Section
291 of the Companies Act). The liquidation of the subsidiaries will not result
in the creation of any contingent liabilities for Proper Group. The required
documentation was submitted and approval was obtained from the Registrar of
Companies as well as the JSE not to consolidate the subsidiaries into the group
financial statements.
The financial results therefore indicate a company that has been completely
restructured, with investments written down to realisable values and creditors
compromised, as part of a planned strategy. Gandalf has assumed responsibility
for the remaining creditors (consisting of the compromised amounts as well as
the few post-S311 creditors) and has agreed to underwrite the value of the
remaining investments (including loan accounts) in the subsidiaries and to
subordinate its loan account to ensure the ongoing solvency of the company.
Due to the subsidiaries not being consolidated into the group, reference to
comparative figures on a group basis is misleading. The profit for the year of
R6.5 million was entirely owing to the R12.8 million in other income, reflecting
gains made on the compromise offer and on the writing off of insolvent
subsidiaries. This explains most of the large difference between attributable
profit and headline loss per share of, respectively, 21.1 cents (2003: loss of
29.4 cents) and 0.6 cents (2003: headline loss of 17.6 cents).
Modified audit opinion
The auditors of the company, Compendium (Pretoria) Incorporated, without
qualifying their audit opinion, drew attention to the fact that the company`s
ability to continue as a going concern is reliant on the ongoing financial
support of its major shareholder. The audit report is available for inspection
at the registered office of the company.
Accounting policies
The accounting policies of the Group comply in all material respects with South
African Statements of Generally Accepted Accounting Practice and the Companies
Act of 1973 and are consistent with those applied during the previous financial
period.
Dividend
No dividend has been declared or recommended for the interim period.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that the company has entered into negotiations, which
if successfully concluded, may have a material effect on the price of the
company`s securities. Accordingly, shareholders are advised to exercise caution
when dealing in the company`s securities until a full announcement is made.
For and on behalf of the board
KJ Gribnitz
Chairman
25 February 2005
Directors: KJ Gribnitz*, JP Nel, PE du Preez, C Badenhorst (*Executive)
Transfer secretaries
Computershare Investor Services 2004 (Pty) Ltd
Registered address
Mirkwood Estate, Klipkop JR 396, Gauteng
Sponsor
River Sponsors (Pty) Ltd
Corporate Advisor
Radagast Capital (Pty) Ltd
Restructuring Advisor
Gandalf Trust
