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Conafex - Preliminary unaudited results for the year ended 31st August 2005.
Conafex Holdings Societe Anonyme
(Incorporated in Luxembourg - RC Luxembourg No. B 17789)
("Conafex")
JSE CODE: CNX & ISIN: LU0167907293
Registered Office
6 rue Adolphe Fischer,
L-1520, Luxembourg
Preliminary announcement of unaudited results for the year ended 31st August
2005.
Group Profile
Conafex is a pan African agri-resource group listed on the Luxembourg and
Johannesburg stock exchanges. Conafex takes strategic, controlling and private
equity stakes in businesses focused on horticulture, niche and value-added
agriculture.
Overview
- Accord Services, the tea packing business in the United Kingdom, turned in an
improved performance over the previous year in a highly competitive environment.
Jane Pettigrew, the well-known tea expert, writer and lecturer on tea, has
recently joined Accord as Sales and Marketing Director. We expect that Jane"s
contacts and experience will assist in the continued growth of this business
producing high quality and personalised tea-packaging solutions.
- On 12th January 2005, it was announced that Conafex had accepted an
unsolicited but conditional offer to acquire its 50% interest in The Coffee, Tea
& Chocolate Company ("CTC"). Conafex originally acquired the CTC stake on 19th
November 2003. All conditions were satisfied in February 2005 and the purchase
price together with interest was settled on 1st April 2005. In simple terms and
including our share of profits since acquisition, we have realised a gain before
tax of US$543,000 (R3,992,392) on a cost of US$1,114,000 (R7,165,763). CTC was
accounted for as a joint venture last year and this disposal causes the
reduction in revenue and operating costs reported this year.
- Cape Natural Tea Products (Pty) Limited, the herbal tea processing and
marketing business based in Cape Town, improved its performance and reported a
small profit for the year. Following the year-end we increased our investment
in the company from 38% to 52% by underwriting a rights issue at a cost of
US$188,000 (R1,215,030). During the past few years the business has been
constrained by limited supplies of its core product, rooibos herbal tea, caused
by a series of poor rainy seasons. The strong rand also impacted negatively on
exports. The recent good rainy season in the Cape should see a significant
increase in the supply of tea available in 2006 and an improvement in the
fortunes of the business.
- The acquisition of a 26.86% interest in Grassroots Group (Pty) Limited with
effect from 1st October 2004 was announced on 12th October 2004. The Grassroots
Group, based in Cape Town, is uniquely positioned as a leader in the field of
aromatic and medicinal plants indigenous to South Africa. It is structured into
five divisions specialising in essential oils, plant propagation, medical
plants, honeybush tea, and harvesting, drying and packaging of decorative and
edible natural products. Most of the group"s products are exported. Grassroots
exceeded the earnings on which the purchase was based and a deferred
consideration of US$39,000 (approximately R241,500) was paid bringing the total
purchase consideration to US$500,000 (approximately R3 million). The Group"s
share of earnings from Grassroots amounted to US$138,000.
- Intertrading Limited is an agri-service and marketing company listed on the
JSE Securities Exchange South Africa that procures Southern African fresh fruit,
vegetables and macadamia nuts and markets them internationally. It also
provides freight forwarding and logistics services for the export of perishable
agricultural cargo. The company has laboured under the strong rand, an
indifferent 2004/5 agricultural season and an over supply of citrus in European
markets. Intertrading reported a loss of US$117,000 (R729,000) for its half
year to 31st August 2005. We own 17.5% of Intertrading and exercise control
with our concert partners, Katope International Societe Anonyme, who recently
increased their holding to 35.25%. The Intertrading group is actively pursuing
a strategy of growth to increase the scale of operations and benefit from the
resultant economies arising from increased volumes.
- We have recently acquired a 25% interest in Kenya Highland Seeds Limited, a
company specialising in the importation and distribution of vegetable seeds from
leading international plant breeders. East Africa, and in particular Kenya, has
become the "salad bowl" of Europe and this investment should see significant
future growth in that region. The total cost of our investment, equity and
loans, amounted to US$190,000
- Operations in Zimbabwe ceased in early 2005 following the compulsory
acquisition of our estate. We are seeking to protect our remaining assets in
the country from misappropriation and the impact of devaluation. The remaining
capital in Zimbabwe has been invested in assets that provide a hedge against
currency devaluation and inflation. The payment of compensation from the
Government of Zimbabwe for the compulsory acquisition of the estates and the
moveable property remains unresolved but your board remains confident that
compensation will be settled, if Zimbabwe is to rejoin the International
Community.
- The African headquarters of Conafex has been relocated from Harare to Cape
Town.
Zimbabwe.
There has been no progress in the year by the Government of Zimbabwe in the
agreement of a valuation for the Group"s two agricultural estates, namely
Highbury and Trelawney Estates, which have been compulsorily acquired, nor for
the valuation of the assets that we were legally obliged to leave on the
estates. Your directors have therefore deemed it prudent to make a further
provision of US$2 million reducing the carrying value of our subsidiary in
Zimbabwe to nil. In the past two years some US$8.4 million has been provided
for in respect of Zimbabwean assets.
Dividends are currently remittable from Zimbabwe and we continue to seek to
acquire the necessary foreign currency to enable us to remit dividends that have
been approved by the Authorities.
Financial
The Group incurred a pre-tax profit on ordinary activities of US$22,000 (2004 -
loss US$51,000) before exceptional items. However the impairment provision
against possible losses arising from the compulsory acquisition of the Group"s
agricultural estates in Zimbabwe, referred to above, resulted in a loss
attributable to shareholders of US$1,944,000 (2004 - loss of US$6,483,000).
Capital Reconstruction.
As a result of the increase in losses following on from the further impairment
provision mentioned above, we are required under Luxembourg law to hold an
Extraordinary General Meeting at which shareholders can consider whether the
company should continue to trade. This EGM will be held in late January 2006 at
which the Board will recommend that the company continues to trade. The Board
will also recommend a capital reconstruction at the Annual General Meeting.
Details of the capital reconstruction will be more fully covered in the Annual
Report, but the objective is (i) to reduce the issued share capital in order to
eliminate the deficit on the Profit and Loss Account, (ii) obtain approval to
place a limited number of new shares with new investors, (iii) hive off our
remaining Zimbabwean assets into a new holding company to be directly owned by
existing shareholders, (iv) issue options to incentivise managers and (v) issue
warrants to existing shareholders so that they can benefit from future increases
in the value of the Company.
The hiving off of the new holding company will permit existing shareholders to
retain any future upside arising from remittances from Zimbabwe, while
simplifying the valuation of Conafex for new investors. The new holding company
will have the right to use any future remittances from Zimbabwe to subscribe for
shares in Conafex which will then be distributed as a dividend in specie to
existing shareholders.
Dividend
As a result of the provision made against the investments in Zimbabwe, the
Company is unable to pay a dividend for the year ended 31st August 2005.
Prospects
The Conafex Group has been in a transitional phase since it was reorganised in
1998 and has been encumbered by its exposure to Zimbabwe. This exposure has
adversely affected its ability to raise capital and fulfil its strategy of
growth by acquisition of agri-related businesses in the region. The initial
dependence on Zimbabwe has been substituted with a more balanced portfolio of
investments now concentrated in South Africa. Following the proposed
reconstruction and the planned introduction of fresh capital, this position will
be corrected.
MARK BURRELL
Chairman
29th November 2005
NOTICE OF MEETING
The Annual General Meeting will take place on Friday 24th February 2006 at 3.30
p.m. at the registered office of the Company, 6 rue Adolphe Fischer L-1520
Luxembourg. Copies of the annual report and accounts will be posted to
shareholders in December 2005.
Unaudited Consolidated Profit and Loss Account
Year ended 31st August 2005 2004
US$000 US$000
Group revenue including share of Associates 4,514 4,247
Less share of revenue of Associates (2,002) (271)
Revenue 2,512 3,976
Operating costs (2,751) (4,152)
Operating loss (239) (176)
Share of associated companies" results 212 (26)
Income from investment in Zimbabwe
subsidiary - dividend 7 131
Dividend receivable 13 14
Interest receivable 90 58
Exchange gains 38 103
Interest paid and similar charges (99) (155)
Profit/(Loss) on ordinary activities before 22 (51)
exceptional items and tax
Exceptional items (1,778) (6,379)
Loss before tax and minority interests (1,756) (6,430)
Taxation on ordinary activities (181) (44)
Loss after tax before minority interests (1,937) (6,474)
Minority interests (7) (9)
Loss attributable to shareholders of the
Group (1,944) (6,483)
Reconciliation of headline earnings per
share
Loss per share (US cents) (36)c (120)c
Adjusted for exceptional item, net of tax
and minority interests (US cents) 35 c 118c
Headline loss per share (US cents) (1)c (2)c
Unaudited Consolidated Statement of Recognised Gains and Losses
Year ended 2005 2004
US$000 US$000
Exchange differences on translation of the
financial statements of foreign entities 45 41
Fair value adjustment on investments 236 (195)
Dividend forfeited/(paid in respect of
prior year) 10 (163)
Net profit/(loss) not recognised in the
income statement 291 (317)
Net loss for the year (1,944) (6,483)
Total recognised loss and change in (1,653) (6,800)
shareholders" funds
Opening shareholders" funds 4,948 11,748
Closing shareholders" funds 3,295 4,948
Unaudited Consolidated Balance Sheet
At 31st August 2005 2004
US$000 US$000
Assets
Non current assets
Property, plant & equipment 41 124
Intangibles - 296
Investments 2,026 3,056
2,067 3,476
Current assets
Inventories 146 571
Accounts receivable 446 1,460
Cash and bank balances 1,419 1,099
2,011 3,130
Current liabilities
Accounts payable falling due within one
year (702) (1,540)
Net current assets 1,309 1,590
Total assets less current liabilities 3,376 5,066
Capital and reserves
Called up share capital 8,130 8,130
Other reserves (note 4) 452 91
Retained earnings (5,287) (3,273)
Shareholders" funds 3,295 4,948
Minority interests 81 118
3,376 5,066
Unaudited Consolidated Cash Flow Statement
Year ended 2005 2004
US$000 US$000
Cash Flows from Operating Activities
Cash utilised by operations (321) (792)
Interest paid (99) (155)
Taxation paid (181) (38)
Net cash outflow from operating activities (601) (985)
Investment activities
Purchase of tangible assets (2) (56)
Purchase of investments (589) (796)
Proceeds on disposal of investment in joint 1,820 -
venture
Further acquisition of minority interest in (76) (73)
subsidiary
Dividends received from Zimbabwean 7 131
subsidiary
Interest received and other investment 103 72
income
Net cash inflow/(outflow) from investment 1,263 (722)
activities
Net cash inflow/(outflow) before financing 695 (1,707)
Financing
Dividend paid to minorities (2) (3)
Dividends paid to shareholders - (163)
(2) (166)
Net increase /(decrease) in funds 660 (1,873)
Net funds at start of period 631 2,510
Effect of foreign exchange rate changes (8) (6)
Net funds at end of period 1,283 631
Notes:
1. As described in the Chairman"s Review, the earnings, assets and liabilities
of Zimbabwean subsidiaries and associated companies have not been
consolidated. Investments have been reflected in accordance with IAS 39.
The results for the year ended 31st August 2005 and the balance sheet at
that date, which are unaudited, have been prepared on the basis of
accounting policies adopted for the year ended 31st August 2004. The
financial statements comply with International Financial Reporting
Standards. The results, which have been reviewed by the Company"s
auditors, AGN Horsburgh & Co., are unaudited.
2. Capital expenditure during the year was US$2,000 (2004 US$56,000). At 31st
August 2005, there were no material outstanding capital commitments (2004
-US$nil).
3. Earnings per share are based on the results attributable to shareholders
and the average number of shares in issue during the year - 5,420,152 (2004
- 5,420,152).
30 November 2005
Sponsor
Imara Corporate Finance South Africa (Pty) Ltd
Date: 30/11/2005 03:00:08 PM Produced by the JSE SENS Department
