| Fri 18 Nov 2005, 17:10 | | Wellco - Unaudited Consolidated Interim Results |
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Wellco - Unaudited Consolidated Interim Results for the six months ended 31
August 2005
Wellco Health Limited
(formerly Nungu Trading 279 (Pty) Ltd)
(Incorporated in the Republic of South Africa)
(Registration number 2005/005805/06)
Share code: WLL & ISIN: ZAE000071841
("Wellco" or "the company")
Warning: The listing of ordinary shares in the company is on the AltX.
Shareholders are advised of the risks of investing in a company listed on the
AltX. Shareholders are advised that the JSE does not guarantee the viability or
the success of a company listed on the AltX. In terms of the JSE Listings
Requirements a Designated Advisor has to be retained by the company. The
Designated Advisor is required to, inter alia, attend all board meetings held by
the company to ensure that all JSE Listings Requirements and applicable
regulations are complied with, approve the financial director of the company and
guide the company in a competent, professional and impartial manner. If the
company fails to retain a Designated Advisor it must make arrangement to appoint
a new Designated Advisor within 10 business days, failing which the company
faces suspension of trading of its securities. If a Designated Advisor is not
appointed within 30 days of its suspension the company faces the termination of
its listing without an offer to minority shareholders.
Unaudited Consolidated Interim Results
For the six months ended 31 August 2005
Commentary
Overview:
Wellco Health has delivered results consistent with the prospectus forecast for
the six months ended 31 August 2005.
The group"s brand portfolio includes Herbology, SuperStars, KGB and Igugu
Lempilo. The focus of the brand portfolio has been to develop strong health
offerings, across multiple income segment groups, in the vitamin, minerals and
herbal supplementation category. The premium Herbology range continues to be a
key focus of the company and we anticipate the full repackaging and variant
extension process to be complete by year end. KGB Anti-hangover is a strong
seasonal brand that derives eighty percent of its revenues during the festive
period from November through to January. The launch of the new brand extension,
KGB Liver Protect, in November seeks to generate more regular revenue streams
over the full twelve months of trading. The launch in August of the traditional
African herbal medicine range, Igugu Lempilo, has enabled the company to enter
this high growth area within the complementary medicine industry. Initial
indications show a strong consumer desire for a more credible and regulated,
national African traditional medicine brand.
The group"s private line business is receiving significant interest and we
anticipate the finalisation of two key partnerships within the next two months.
If successful, revenue to be derived from these partnerships will be earned in
the next financial year. This area of the business has the potential to deliver
strong and stable revenue streams as retail groups seek to leverage their
respective brand offerings in the lucrative health and wellness sector. Without
the required formulatory, regulatory and product development expertise, as well
as the need for a GMP licensed manufacturing capability, these retail groups
will need to partner with existing producers to ensure a viable product
offering. We are ideally placed to leverage our expertise and capabilities in
this sector.
The group"s retail concepts business is to incorporate two further retail
offerings and trials will continue in these two new channels at the beginning of
2006. In order to maintain strong consumer traffic through their stores and
achieve a destination focus, retail groups will pursue more interactive in-store
experiences. The `store within a store" concept is an innovative experience that
allows the retailer to achieve these objectives and grow their customer base. We
believe that the roll out of this concept will enable us to become more
influential at point of purchase and consolidate our consumer offerings.
Financial results
Balance Sheet and Cash flow
We would like to bring to the attention of the shareholders that these results
are before listing on the 22nd of September and the funds raised are not
included in the Balance Sheet as reflected, and would like to refer shareholders
to annexure 3 of the prospectus issued on the 15th of September which clearly
reflects the effect of the R9 million raised on the Balance Sheet and Cash flow
Statement.
Income Statement
We are very happy to report to shareholders that the loss shown in the Income
Statement shown below is in line with the forecast shown in the prospectus dated
the 15th of September and the Group is on track to achieve the forecast as
published in the prospectus dated the 15th of September.
General
Due to the increased activity in the last two months with new product launches,
trade receivables have increased. The investment in existing stock holding and
new product launches have increased due to strong retail and consumer support,
and increasing our national retail footprint.
Prospects
A significant portion of the brand revenue forecast in the prospectus will be
generated in the second half of the financial year. This is a direct result of:
The launch of five new brands over the six month period to February 2006. Igugu
Lempilo, Lulama, and KGB Liver Protect have been launched into the trade as at
the date of release of these interim results and are exhibiting strong consumer
acceptance. Two further brands will be launched during January 2006 and we
expect strong retail and consumer support due to their innovative and category
`busting" positioning and application.
KGB Anti-hangover being a strong seasonal brand that derives eighty percent of
its revenues during the festive period from November through to January. We
anticipate strong domestic demand to continue as a result of the success of the
prior year launch and heightened awareness campaign during the year. We have
explored international export opportunities and have recently signed
distribution agreements in the United Kingdom, Ireland, India and Russia. We
anticipate export revenues being generated over the last quarter of the
financial year.
The extension of the variants within the range under the Herbology brand
umbrella will be complete in January 2006. The repositioning of the Herbology
brand has enabled us to develop an extensive vitamin, mineral and herbal
supplement offering to a broader target market. In addition we are actively
pursuing a wider national retail footprint and growing our listings in non-
traditional pharmaceutical sales channels.
The executive team expects a strong performance by the group in the forthcoming
six months based on the factors expressed above and the anticipated positive
trading environment over the festive period. We are confident that we will
achieve the profit forecast as disclosed in our prospectus on listing.
We are actively pursuing a basket of potential acquisition targets that meet our
commercial qualifications. These qualifications include: an innovative or unique
food, beverage or health offering, need for sophisticated marketing, sales and
distribution investment and support, potential for strong and sustainable
revenue streams and a synergy of culture and passion.
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2005
Consolidated Balance Sheet
Unaudited Unaudited
six months ended restated
year ended
31 August 2005 28 February
2005
R R
Assets
Non current assets 25,265,091 3,856,992
Tangible fixed assets 856,488 987,066
Goodwill 13,605,190 -
Intangibles assets 10,599,941 2,812,206
Deferred tax 203,472 57,720
Current assets 5,842,992 5,106,441
Inventories 2,886,068 2,933,899
Trade and other receivables 2,953,924 1,661,091
Loans receivable - 508,451
Cash 3,000 3,000
Total assets 31,108,083 8,963,433
Equity and liabilities
Share capital and reserves 20,443,972 65,655
Issued Capital 3,883 100
Share premium 20,825,913 -
Distributable Reserve -385,824 65,555
Non current liabilities
Interest bearing borrowings 302,591 340,224
Current liabilities 10,361,520 8,557,554
Short term loan 96,945 129,620
Taxation 1,976,200 1,976,200
Trade and other payables 5,668,580 5,030,748
Current portion of 74,554 73,249
borrowings
Bank overdraft 2,545,241 1,347,737
Total equity and liabilities 31,108,083 8,963,433
Net asset value per share - 52.65 53.65
cents
Net tangible assets per -9.69 -6.92
share - cents
Weighted average number of 38,827,842 38,827,842
shares in issue
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2005
Consolidated Income
Statement
Unaudited Unaudited
six months ended restated
year ended
31 August 2005 28 February
2005
R R
Gross revenue 5,265,844 25,456,156
(Loss) / Profit before -219,282 54,247
interest, taxation,
depreciation
and amortisation ("EBITDA")
Depreciation and -187,800 -248,238
amortisation
(Loss) from operation -407,082 -193,991
Net interest paid -124,494 -116,225
Loss before taxation -531,576 -310,216
Taxation 145,752 -407,141
Net loss for the year -385,824 -717,357
Headline Earnings per share
Net Loss -385,824 -717,357
Amortisation of intangible 72,871 80,698
assets
Headline earnings -312,954 -636,659
EPS-cents -0.99 -1.85
HEPS-cents -0.81 -1.64
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2005
Consolidated Changes in
Equity
Unaudited Unaudited
Six months ended restated
year ended
31 August 2005 28 February
2005
R R
Reinstated balance at - 5,922,873
beginning of period
Balance at the beginning of
the period as
previously stated - 5,922,873
Change in accounting - -
interpretation
Net loss for the year -385,824 -717,357
Dividend paid - -5,139,861
Net movement in share - -
capital
Balance at the end of the -385,824 65,655
period
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2005
Consolidated Cash flow
Statement
Unaudited Unaudited
six months ended restated
year ended
31 August 2005 28 February
2005
R R
Net cash flow from operating -1,085,993 -3,399,472
activities
Cash generated by operations -961,499 2,572,819
Dividend paid - -5,139,861
Net interest paid -124,494 -116,225
Taxation paid - -716,205
Net cash flow from -609,327 -3,078,891
investing activities
Expended on non current -867,313 -3,123,390
assets
Proceeds from non current 257,986 44,499
assets
Decrease/(increase) in loans - -
receivable
Net cash inflow from -70,308 1,460,473
financing activities
(Decease)/increase in share - -
capital and reserves
(Decease)/increase in loans -32,675 1,460,473
receivable
(Decease)/increase in long- -37,633 -
term liabilities
Change in cash and cash -1,765,628 -5,017,890
equivalent
Cash and cash equivalents at -776,613 3,673,153
beginning of period
Cash and cash equivalents at -2,542,241 -1,344,737
end of period
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the six months ended 31 August 2005
Basis of preparation
Wellco Health Limited changed its accounting policy from General Accepted
Accounting Practise (GAAP) to International Financial Reporting Standards (IFRS)
as required by the Listing Requirements of the JSE Limited. Being a first-time
adopter of IFRS for the 2006 financial year, the Groups date of transition to
IFRS is 1 March 2004
The following summarises the impact of the change from GAAP to IFRS
1 The unaudited results of the group for the six months ended 31 August 2005
have been prepared in accordance with accounting policies that comply with
the International Financial Reporting Standards (IFRS), with the date of
transition to IFRS for the group being 1 March 2004.
2 The accounting policies used in the preparation of the results are
consistent with those applied in the comparative financial statements from
the year ended 28 February 2005, except for those which have arisen due to
the transition of IFRS.
3 The audited results for the 12 months ended 28 February 2005 have been
restated as unaudited due to the IFRS adjustments not having been audited
by the company auditors.
4 IAS 18 - Revenue Recognition Revenue is measured at the fair value of the
consideration received or receivable taking into account the amount of any
trade discounts and volume rebates allowed.
5 IAS 17 - Leases
IAS 17 requires operating lease costs to be accounted for on a straight
line basis over the lease period. Future lease increases in terms of lease
contracts are calculated and the average lease expense is recognised in
equal amounts over the lease period. The adjustment is not of a material
nature as the existing lease expires at the end of March 2006.
6 IAS 38 - Intangible Fixed Assets
In accordance with IAS 38, intangible assets and trademarks have been
assessed to have finite useful life. The Group amortises both trademarks
and intangibles from the commencement of the commercial production of the
brands to which they relate on a straight line basis over the period of
their expected benefit, but not exceeding ten years.
7 IAS 3 - Goodwill
In terms of IAS 3, Business Combinations, Goodwill is no longer amortised,
but is subject to at least an annual impairment review. The Group
recognises Goodwill on acquisition at cost. In terms of the Business
Combination, the impairment review will be conducted at year end.
Pretoria
18 November 2005
Designated Adviser
River Group
Date: 18/11/2005 05:10:15 PM Produced by the JSE SENS Department
