| Thu 5 Jan 2006, 16:39 | | Mathomo Group Limited - Reviewed Group Results For |
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MTO
MTO
Mathomo Group Limited - Reviewed Group Results For The 6 Months Ended 31 August
Mathomo Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1995/004783/06)
(Share code: MTO ISIN: ZAE000037214)
("Mathomo" or "the Company" or "the Group")
Part 1: Reviewed Group Results For The 6 Months Ended 31 August 2005
ABRIDGED CONSOLIDATED INCOME STATEMENT
Restated Restated
Reviewed Unaudited Reviewed
6 months 6 months 17 months
ended ended ended
31 August 31 March 28 February
2005 2004 2005
R000"s R000"s R000"s
Revenue 145 978 132 118 402 753
Operating profit before
finance costs 7 344 3 572 6 804
Net finance costs (2 694) (2 790) (10 813)
Interest received 10 149 289
Interest paid (2 004) (2 221) (8 993)
Preference dividend (700) (718) (2 109)
Net profit (loss) before
exceptional items 4 650 782 (4 009)
Exceptional items - 1 501 2 056
Net profit (loss) before
taxation 4 650 2 283 (1 953)
Taxation (1 506) (227) (3 584)
Profit (Loss) attributable
to ordinary shareholders 3 144 2 056 (5 537)
Number of shares in issue 47 179 214 47 179 214 47 179 214
Weighted number of shares
in issue 47 179 214 47 179 214 47 179 214
Profit (Loss) per share (cents) 6,7 4,4 (11,7)
Headline earnings (loss)
per share (cents) 6,7 1,2 (13,3)
Reconciliation of net
profit (loss) for the period
to headline earnings (loss):
Net profit (loss) for the period 3 144 2 056 (5 537)
Add back exceptional items:
Profit on sale of trademark - (1 501) (1 363)
Closure of the Freezerwear
factory - - 624
Headline earnings (loss) 3 144 555 (6 276)
ABRIDGED CONSOLIDATED BALANCE SHEET
Restated Restated
Reviewed Unaudited Reviewed
31 August 31 March 28 February
2005 2004 2005
R000"s R000"s R000"s
Assets
Non-current assets 18 627 19 347 19 257
Property 10 071 9 650 10 071
Plant and equipment 8 556 9 697 9 186
Current assets 104 237 109 254 93 561
Inventories 46 909 57 459 46 332
Accounts receivable 57 328 51 795 47 229
Total assets 122 864 128 601 112 818
Equity and Liabilities
Capital and reserves 12 889 17 337 9 745
Ordinary share capital 472 472 472
Share premium 122 763 122 763 122 763
Non-distributable reserve 2 325 2 325 2 325
Accumulated loss (112 671) (108 223) (115 815)
Non-current liabilities 23 252 31 142 23 970
Interest bearing liabilities 3 252 5 142 3 970
Preference shares 20 000 26 000 20 000
Current liabilities 86 723 80 122 79 103
Accounts payable 46 028 45 019 35 625
Bank overdrafts 31 469 34 063 35 276
Interest bearing liabilities 1 327 226 1 495
Taxation 7 899 814 6 707
Total equity and liabilities 122 864 128 601 112 818
Net asset value per share (cents) 27,3 36,7 20,7
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Restated Restated
Reviewed Unaudited Reviewed
6 months 6 months 17 months
ended ended ended
31 August 31 March 28 February
2005 2004 2005
R000"s R000"s R000"s
Cash generated from (utilised in)
operating activities 4 785 (2 224) 5 202
Cash utilised in investing
activities (92) (3 215) (5 363)
Cash utilised in financing
activities (886) (3 445) (9 936)
Net cash inflow (outflow)
for the period 3 807 (8 884) (10 097)
Cash and cash equivalents
at beginning of the period (35 276) (25 179) (25 179)
Cash and cash equivalents
at end of the period (31 469) (34 063) (35 276)
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Restated Restated
Reviewed Unaudited Reviewed
6 months 6 months 17 months
ended ended ended
31 August 31 March 28 February
2005 2004 2005
R000"s R000"s R000"s
Balance at beginning of the period 9 745 15 281 15 282
Profit (Loss) for the period 3 144 2 056 (5 537)
Balance at end of the period 12 889 17 337 9 745
SEGMENTAL ANALYSIS
Distribution
of PPE Retail Other Total
R000"s R000"s R000"s R000"s
Revenue 2005: 6 months 111 189 34 789 - 145 978
Revenue 2004: 6 months 103 788 28 330 - 132 118
Revenue 2005: 17 months 314 684 88 069 - 402 753
Operating profit before
finance
cost 2005: 6 months 4 249 3 699 (604) 7 344
Operating profit before
finance
cost 2004: 6 months 3 455 641 (524) 3 572
Operating profit before
finance
cost 2003: 17 months 3 499 7 154 (3 849) 6 804
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
IFRS 6 months 17 months
transition ended ended
1 October 31 March 28 February
2003 2004 2005
R000"s R000"s R000"s
Balance sheet
Shareholders interest
Shareholders interest as
previously reported: SA GAAP 14 300 16 331 8 439
IFRS adjustment
Property, plant and equipment 981 1 006 1 306
Restated shareholders
interest - IFRS 15 281 17 337 9 745
INCOME STATEMENT
Shareholders interest
Net profit (loss) attributable to
shareholders as previously
reported: SA GAAP 2 031 (5 861)
IFRS adjustment
Property, plant and equipment 25 324
Restated net profit (loss)
attributable to shareholders
- IFRS 2 056 (5 537)
INTRODUCTION
During the period under review, the Group continued its restructuring process.
The board decided to make certain management and structural changes to
reposition the business and its thrusts. The focus is on the financial and
operational structures of the Group and their effective functioning and
delivery. Attention is drawn to the disposal of the Select PPE business unit
and the delisting of Mathomo Group Limited as published in the circular
released on 15 December 2005.
These changes are having the desired effect and the board continues with its
efforts to make each of the business units profitable in the near term.
Mathomo has elected to adopt International Financial Reporting Standards
(IFRS) with effect from 1 March 2005.
Basis of preparation
The abridged interim financial information has been prepared in accordance
with IFRS (with the date of transition to IFRS for the Group being 1 October
2003) and the Companies Act 1973 (as amended). The results are presented in
terms of IFRS statements and interpretations at the date of publication. As
there may be changes to standards and interpretations prior to 28 February
2006, the impact will need to be assessed.
In terms of IFRS 1, the Group has restated its opening reserves at 1 October
2003, the consolidated balance sheets as at 28 February 2005 and 31 March 2004
and the consolidated income statements for the periods then ended. There have
been no adjustments to the cash flows previously reported as a result of the
adoption of IFRS.
Accounting policies
The abridged interim financial information has been prepared in accordance
with IAS 34 ("Interim Financial Reporting"). The accounting policies used in
the preparation of the abridged interim financial statements are compliant
with IFRS and consistent, with those applied in the annual financial
statements for the year ended 28 February 2005, except as disclosed below:
Adjustments of adoption of IFRS
During the period, the Group changed its accounting policies with regard to
property, plant and equipment to comply with the requirements of IFRS.
The reassessment of residual values in property, plant and equipment: In
calculating the depreciation charge the Group has reduced the depreciable
amount of its assets in each period by its estimated residual value. In
previous years, in terms of SA GAAP, the estimated residual value was fixed on
recognition of the asset and was not subject to reassessment. The Group now
reassesses the residual value of its property, plant and equipment at each
balance sheet date. The continuous reassessment of the residual value
typically leads to a change in depreciation charges annually. Depreciation
ceases when the carrying value of an asset equals its residual value.
Assessment of useful lives: The Group has reassessed the useful lives of all
its property, plant and equipment. In instances where items of property, plant
and equipment were fully depreciated, these assets have now been reinstated to
reflect their appropriate carrying values.
Componentisation: Where significant components of an item of property,
plant and equipment have different useful lives or residual values those
components are accounted for as separate items of property, plant and
equipment. Previously, all parts of an item of property, plant and equipment
were depreciated at the same rate.
Subsequent costs: The Group recognises in the carrying amount of an item
of property, plant and equipment the cost of replacing a part of such an item
when that cost is incurred if it is probable that the future economic benefits
embodied within the item will flow to the Group and the cost of the item can
be measured reliably. All other costs are recognised in the income statement
as an expense when incurred.
REVIEW BY THE AUDITORS
These results have been reviewed by Deloitte & Touche and their review report
is available for inspection at the Company"s registered office.
The report includes an emphasis of matter paragraph with respect to going
concern. The relevant paragraph reads as follows:
Going concern
Without qualifying our opinion, we draw attention to the paragraph in the
directors" report which refers to this matter. The directors" are continuing
with their efforts to restructure and re-arrange the affairs of the company.
These plans include the proposed disposal of the Personal Protective Equipment
("PPE") business. As noted in the directors report, the disposal provides an
opportunity to significantly reduce the Group"s current debt levels. The
directors have initiated discussions with the Group"s banker to secure revised
borrowing facilities in light of the proposed disposal of the PPE business. We
have been informed that these discussions have substantially been concluded
pending the fulfilment of the various conditions precedent with respect to the
sale of the PPE business. These conditions, along with other matters, as set
out in the directors" report, indicate the existence of a material
uncertainty, which may cast significant doubt on the ability of the company
and Group to continue as a going concern.
OPERATIONAL REVIEW
The Group consists of the following businesses:
- Alsafe - the distributor of personal protective equipment and clothing
("PPE");
- Select PPE - the onsite supplier of PPE;
- M Stores - the workplace retailer; and
- Select Corporate - the supplier of corporate gifts and apparel.
All the businesses operated in a challenging market, that resulted in pressure
on our margins throughout the reporting period. We have focused on sourcing
competitively priced merchandise and this is proving to be beneficial to the
Group.
FINANCIAL OVERVIEW
Vigorous steps have been taken to improve working capital management.
The range of inventory carried has been reviewed, and this focus has led to a
more pro-active and demand-driven approach being taken to source and carry
product. Attention has also been given to the management of credit and the
collection of our debtors" book. These are yielding positive results.
We are also pleased with the terms extended to us by our suppliers and
bankers. We are mindful of our obligations to them and are working to continue
to reduce our short-term obligations.
The Group recorded an operating profit of R7,3 million for the period. This
compares to R6,8 million for the seventeen-month period ended 28 February
2005. Net finance costs paid for the six-month period amounts to R2,7 million.
This compares to R10,8 million for the seventeen-month period ended 28
February 2005 (inclusive of interest accrual of R2,9 million on amounts due in
respect of outstanding taxation).
The Group recorded a net profit of R3,1 million for the period (2005: loss of
R5,5 million). The major reason for the loss of R5,5 million in 2005 is due to
the restructuring and other once-off expenses.
In our annual report for the seventeen-months ended 28 February 2005 we drew
attention to the taxation issues we were engaged on with SARS. The matter is
still subject to discussions and the directors are engaged in consultation
with SARS in an attempt to resolve the matter. However, we have adopted a
cautious stance and to the extent that revised income tax assessments have
been received, tax has been fully provided for in the period under review.
A deferred tax asset on the estimated tax loss has not been raised and this
shall be reviewed once the matter has been resolved with SARS.
DISPOSAL OF SELECT PPE BUSINESS
As communicated to shareholders in our announcement dated 20 October 2005, the
Group has agreed to dispose of its Select PPE division to Jungle Arrow Trading
34 (Proprietary) Limited, a subsidiary of Mine Safety Appliances Company, a
company listed on the New York Stock Exchange. The disposal provides an
opportunity to significantly reduce Mathomo"s current debt levels.
Consequently, the disposal removes a substantial amount of financial risk from
the over-geared position of the Mathomo Group.
The purchaser will pay Mathomo, on or before the sixth business day following
the date on which the conditions precedent are fulfilled, a cash price of R48
million, subject to a downward adjustment on a Rand-for-Rand basis to the
extent that the net asset value of the PPE business as at the effective date
is less than the net asset value as at 28 February 2005. In addition, the
purchaser will assume and discharge the book value of the liabilities of the
PPE business, as at the effective date.
The conditions precedent, as set out in the announcement dated 20 October
2005, have been fulfilled, except for the shareholders" meeting which is
scheduled for 10 January 2006. The directors have secured irrevocable
undertakings from 90,3 percent of the shareholders, entitled to vote at the
meeting, in support of the disposal.
DEBT REDUCTION PROGRAMME
The debt reduction plan was set out in our 2005 Annual Report. As noted above,
the sale of Select PPE will further reduce the debt structure of the Group. It
is the intention of the directors to utilise the proceeds from the sale of
Select PPE to redeem the preference shares.
The Group continues to examine other methods of furthering the repayment of
debt and the restructuring of its balance sheet and business activities.
DIVIDENDS
No interim dividend has been declared for the period under review (2005:
R nil).
GOING CONCERN
Over the past year, the Mathomo directors have implemented a restructuring
programme in order to restore certain divisions to profitability and to
strengthen the Group"s financial position. The effects of the restructuring
process continue to yield positive results. Accordingly, the directors believe
the Group to be a going concern and have therefore adopted the going concern
basis in preparing these interim financial statements.
During the period under review, the directors have continued their discussions
with The Standard Bank of South Africa Limited ("SBSA" or "Group"s banker").
Whilst the Group has secured revised facilities from SBSA during June 2005,
the recent discussions have considered the impact of the proposed sale of the
Select PPE division of the Group. The discussions have yielded an undertaking
from SBSA to continue to provide facilities to the Group post the sale of the
Select PPE division.
As discussed above, the significant reduction of the Group"s debt levels
removes a substantial amount of financial risk from the Mathomo Group. The
directors are confident that the restructuring plans already put in place
together with the proposed sale of the PPE division will yield positive
results and will enable the Group to meet its obligations to the Group"s
banker and creditors.
PROSPECTS
The Group continues to face considerable challenges. The repositioning is
achieving expected results.
Over the past year, much progress was made improving the focus and size of our
business. Market conditions have gradually improved and we expect that better
execution and greater operating efficiencies in the Group will continue to
drive margin expansion and revenue growth.
By order of the board
A P Nkuna L Matuson
Chairman Chief Executive Officer
Part 2: Disposal Of The Personal Protective Equipment Business
(The "disposal")
The circular to shareholders dated 15 December 2005 contains details of the
proposed sale of the Select PPE division of Mathomo. The pro forma financial
effects contained therein was based on the audited results at 28 February
2005. Below are the pro forma financial effects based on the reviewed results
for the six-month period ended 31 August 2005:
PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the disposal on the historical earnings,
headline earnings, net asset value and tangible net asset value per Mathomo
share set out below, are the responsibility of the directors of Mathomo, have
been prepared for illustrative purposes only to show how the disposal may have
affected Mathomo"s published results for the six month period ended 31 August
2005 and may not fairly represent Mathomo"s financial position and results of
its operations.
Pro forma Pro forma
Before the After the Percentage
disposal disposal change
(cents) (cents) (%)
Historical earnings per share 6.7 (1) 56.8 (2) 748
Historical headline earnings
per share 6.7 (1) 1.2 (3) (82)
Historical net asset value
per share 27.3 (1) 78.5 (4) 188
Historical tangible net asset
value per share 27.3 (1) 78.5 (4) 188
The decrease in the historical headline earnings per share as shown in the
"Pro forma After the disposal" column of the table above is evident for the
following reasons:
- the PPE business generated a major portion of the profits in the Mathomo
group ("the PPE profits") over the period and is being swapped for a low
return on the preference shares (at rates of between 35% and 46,67% of the
prime overdraft rate) as well as a low interest rate saving on the reduction
of Mathomo"s bank overdraft;
- there was no taxation applied to the PPE profits in the 6 month period ended
31 August 2005; and
- the R1,5 million fee to Credit Management Solutions (Proprietary) Limited
("the CMS fee"), referred to below, has not been added back for the purpose of
calculating the headline earnings.
1. The historical earnings and historical headline earnings per share as set
out in the "Pro forma Before the disposal" column of the table are based on
Mathomo"s reviewed results for the 6 months ended 31 August 2005. The
historical net asset value and tangible net asset value per share as set out
in the "Pro forma Before the disposal" column of the table are based on
Mathomo"s reviewed results at 31 August 2005.
2. The historical earnings per share as set out in the "Pro forma After the
disposal" column of the table has been calculated on the assumption that the
disposal occurred on 1 March 2005 and that the cash consideration was received
on that date. In addition, the following adjustments have been made:
- the income and expenses of the PPE business for the 6 months ended 31 August
2005 have been excluded, with the exception of the interest paid and received
on Mathomo"s bank overdraft relating to the PPE business and inter-divisional
loans;
- the dividends on the preference shares and associated secondary tax on
companies savings have been accounted for on the basis that the preference
shares have been redeemed in an amount of R20 million;
- after the reversal of the abovementioned dividend, an interest cost saving
at the company"s average interest rate cost for the 6 months has been
effected;
- the taxation raised of R1,5 million has been reversed as the disposal moved
the Group into a tax loss position;
- the profit on the sale of approximately R30 million less the capital gains
taxation of approximately R4,3 million has been raised;
- transaction costs amount to R3,4 million, which costs include an incentive
fee of R2 million to the PPE businesss management. These costs have been set
off the profit on the disposal of the PPE business; and
- the CMS fee has been set off against operating profit.
3. The historical headline earnings per share as set out in the "Pro forma
After the disposal" column of the table has been calculated in the manner
described for historical earnings per share above but excludes the net gain
after capital gains taxation on the disposal of the PPE business.
4. The historical net asset value and historical tangible net asset value per
share as set out in the "Pro forma After the disposal" column of the table has
been calculated on the assumption that the disposal occurred on 31 August 2005
and that the cash consideration was received on that date. In addition, the
following adjustments have been made:
- the asset and liabilities of the PPE business at 31 August 2005 have been
excluded, with the exception of the bank overdraft relating to the PPE
business and inter-divisional loans;
- the preference shares have been redeemed and the company"s overdraft reduced
by the cash consideration;
- the net profit on the disposal of approximately R24,1 million less the
capital gains taxation of approximately R4,3 million has been raised along
with the provision for transaction costs; and
- a provision for taxation in an amount of R1,5 million has been reversed as
the disposal will move the Group into a tax loss position.
5. It was assumed that there were 47 179 214 Mathomo shares in issue, being
the number in issue as at 31 August 2005.
Reporting accountants" report
The pro forma financial effects have been reviewed by Deloitte & Touche and
their report is available for inspection at the Company"s registered office.
INFORMATION IN RESPECT OF SELECT PPE
Reviewed
6 months ended
31 August 2005
R000"s
Income Statement
Revenue 51 023
Operating profit 4 739
Finance costs
Interest paid (198)
Net income 4 541
Reveiwed
31 August 2005
R000"s
Assets and liabilities statement
Assets
Non-current assets
Plant, equipment, fittings and vehicles 1 793
Current assets 39 781
Inventories 20 031
Accounts receivable 19 750
Total assets 41 574
Non-current interest bearing
Liabilities
Interest bearing liabilities 254
Current liabilities 25 107
Accounts payable 24 744
Short-term loans 363
Total liabilities 25 361
Review by the auditors
The results of the Select PPE division have been reviewed by Deloitte & Touche
and their report is available for inspection at the Company"s registered
office.
Johannesburg
5 January 2006
Sponsor
Java Capital (Proprietary) Limited
Date: 05/01/2006 04:39:35 PM Produced by the JSE SENS Department
