| Thu 16 Nov 2006, 8:36 | | Wellco - Unaudited consolidated interim results: 6 |
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WLL
WLL
Wellco - Unaudited consolidated interim results: 6 months ended 31 August 2006
Wellco Health Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/005805/06)
Share code: WLL & ISIN: ZAE000071841
("Wellco" or "the company")
UNAUDITED CONSOLIDATED INTERIM RESULTS FOR THE 6 MONTHS ENDED 31 AUGUST 2006
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the 6 months ended 31 August 2006
Consolidated Balance Sheet
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 August 2006 31 August 2005 28 February 2006
R R R
ASSETS
NON CURRENT ASSETS 32,362,792 25,265,091 27,711,886
Plant and equipment 1,282,931 856,488 1,212,136
Goodwill 13,548,702 13,605,190 13,548,702
Intangible assets 16,367,808 10,599,941 12,765,740
Deferred tax 1,163,351 203,472 185,308
CURRENT ASSETS 14,798,885 5,842,992 8,173,037
Inventory 8,109,081 2,886,068 4,771,055
Trade and other
receivables 6,670,262 2,953,924 3,401,968
Cash and cash
equivalents 19,542 3,000 14
TOTAL ASSETS 47,161,677 31,108,083 35,884,923
EQUITY AND LIABILITIES
SHARE CAPITAL
AND RESERVES 32,055,599 20,443,972 28,616,778
Issued share capital 7,683 3,883 5,683
Share premium 35,420,530 20,825,913 29,321,482
Accumulated loss (3,086,725) (385,824) (710,387)
Minority interest (285,889) - -
LIABILITIES
NON-CURRENT
LIABILITIES 413,608 302,591 332,798
Interest bearing
borrowings 208,623 302,591 332,798
Other loans 204,985 - -
CURRENT LIABILITIES 14,692,470 10,361,520 6,935,347
Taxation 2,184,644 1,976,200 2,184,637
Trade and other
payables 9,553,944 5,765,525 4,469,888
Short term portion of
non-current liabilities 119,428 74,554 127,736
Bank overdraft 2,834,454 2,545,241 153,086
TOTAL EQUITY AND
LIABILITIES 47,161,677 31,108,083 35,884,923
Net asset value
per share (cents) 49,58 52,65 50,36
Net tangible assets
per share (cents) 3,31 (9.69) 4,05
Weighted average number of
shares in issue 64,658,031 38,827,842 56,827,842
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the 6 months ended 31 August 2006
Consolidated Income Statement
Unaudited Unaudited Audited
6 months ended 6 months ended for the year ended
31 August 2006 31 August 2005 28 February 2006
R R R
Revenue 10,682,619 5,265,844 14,538,057
Cost of sales (5,718,511) (2,232,608) (5,056,467)
Gross profit 4,964,108 3,033,236 9,481,590
Other operating income 508,227 244,929 230,234
Operating expenses (8,992,684) (3,685,248) (10,184,566)
Advertising expenses (2,793,150) (1,154,346) (3,520,981)
Overhead costs (6,199,535) (2,530,902) (6,663,585)
Operating loss (3,520,349) (407,082) (472,742)
Investment income 81 29 -
Finance costs (120,003) (124,523) (389,442)
Loss before taxation (3,640,271) (531,576) (862,184)
Taxation 978,043 145,752 151,797
Net loss attributable to
ordinary shareholders (2,662,227) (385,824) (710,387)
HEADLINE EARNINGS PER SHARE
Net profit/(loss) (2,662,227) (385,824) (710,387)
Profit on sale of plant
and equipment (11,355) (2,579) (2,579)
Profit on sale of intangible
assets - (133,773) (133,773)
Headline earnings (2,673,582) (522,176) (846,739)
Earnings per share (cents) (4,12) (0,99) (1,25)
Headline earnings
per share (cents) (4,13) (1,34) (1,49)
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the 6 months ended 31 August 2006
Consolidated Statement of Changes in Equity
Share Share Accumulated Minority Total
Capital Premium Loss Interest
R R R R R
Balance at 1 March 2005
Issue of share capital 5,683 29,321,482 - - 29,327,165
Net loss for the year - - (710,387) - (710,387)
Balance at
28 February 2006 5,683 29,321,482 (710,387) - 28,616,778
Issue of share capital 2,000 6,099,048 - - 6,101,048
Net loss for the period - - (2,662,227) - (2,662,227)
Minority interest - - 285,889 (285,889) -
Balance at 31 August 2006 7,683 35,420,530 (3,086,725) (285,889) 32,055,599
UNAUDITED CONSOLIDATED INTERIM RESULTS
for the 6 months ended 31 August 2006
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months ended 6 months ended for the year ended
31 August 2006 31 August 2005 28 February 2006
R R R
CASH FLOWS FROM OPERATING
ACTIVITIES (3,996,850) (1,085,993) (4,612,854)
Cash generated by operating
activities (3,876,928) (961,499) (4,431,848)
Net Interest paid (119,922) (124,494) (389,442)
Taxation paid - - 208,436
CASH FLOWS FROM INVESTING
ACTIVITIES (4,846,849) (609,327) (5,686,548)
Non-current assets acquired (558,918) (38,760) (670,751)
Intangible assets developed (2,196,591) (828,553) (2,815,140)
Intangible assets acquired (2,383,520) - -
Acquisition of subsidiary - - (2,458,643)
Proceeds on disposal of
intangible assets - 201,000 201,000
Proceeds on disposal of
Non-current assets 292,180 56,986 56,986
CASH FLOWS FROM FINANCING
ACTIVITIES 6,181,859 (70,308) 11,491,067
Increase in share capital
and reserves 6,101,048 - 11,498,493
Decrease in loans receivable - (32,675) -
Decrease/(Increase) in
non-current liabilities 80,811 (37,633) (7,426)
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS (2,661,840) (1,765,628) 1,191,665
Cash and cash equivalents
at the beginning of the period (153,072) (776,613) (1,344,737)
CASH AND CASH EQUIVALENTS AT
THE END OF THE PERIOD (2,814,912) (2,542,241) (153,072)
BASIS OF PREPARATION
The unaudited results of the group for the 6 months ended 31 August 2006 have
been prepared in accordance with accounting policies that comply with the
International Financial Reporting Standards (IFRS).
The accounting policies used in the preparation of the results are consistent
with those applied in the audited annual financial statements from the year
ended 28 February 2006.
COMMENTARY
Overview
Wellco Health has delivered results lower than anticipated in the prospectus
forecast for the six months ended 31 August 2006.
Income Statement
The loss shown in the Income Statement below is greater than expected per the
forecast disclosed in the prospectus dated 15 September 2005 and with the
current information available to the Board of Directors it will be a challenge
for the Group to achieve the February 2007 forecast as published in that
prospectus.
Shareholders are advised that the Group is involved in a number of international
business development initiatives that if successful will enable the Group to
achieve, and possibly exceed, the forecast. These initiatives are a function of
time and, as has been shown in the past, their realisation in a particular
financial period can not be determined with reasonable certainty.
Balance Sheet and Cash Flow
The working capital management of the business continues to be a key focus of
the executive. Growth in inventories is a function of the growth in the brand
sales and a desire to increase infill rates to retailers and minimise out of
stocks. The challenges presented by extended payment terms to key retail debtor
accounts means cash flows operate on tight parameters.
General
The strong growth in turnover (103%) is attributable to positive consumer
purchasing sentiment for the repackaged Herbology product range, the successful
launch of the KGB brand in international markets, the inclusion of the Nutrimax
range into the Wellco product basket and the launch of the African Traditional
range into the Gauteng region.
Whilst there has been a positive growth in revenue and the commensurate matching
of cost of sales consistent with prior periods, the company has had to invest
significantly in resources and marketing.
Staffing costs have doubled to R2,2m. This is a function of the company
increasing their executive resource capability to meet the group"s obligations
as a listed entity and to develop a sound business model to ensure growth in the
different commercial areas.
The additions to the Herbology product range, most notably in the Lifestyle and
Oils range, have meant a commensurate increase in the investment in launching
these new variants. Whilst the investment took place in the first half of the
year the revenue streams are anticipated to accrue over the next 12 months. The
marginal increase in costs is approximately R1,3m.
The costs of integration of the acquired Nutribrands business have been higher
than initially expected. The integration process had to be extended to ensure
that all the acquired products were compliant with Medical Control Council and
Department of Health regulations. This entailed the revision of packaging,
product formulations and composition, as well as the recall of non compliant
products. Please note that the correct marginal cost of integration is
approximately R0,8m and not R1.8m as previously reported in the trading update
on the 16 November 2006.
Prospects
The growth in Herbology sales is a positive indication that the repositioning
initiative for the Herbology brand has been successful and future revenue
streams will achieve sustainable growth. We anticipate that new retail market
development will provide a greater retail footprint in South Africa and ease of
availability to a wider consumer purchasing segment.
The export initiatives for KGB into European markets are closer to realisation
and after the successful launch into Portugal and over the coming 6 months and
beyond, we anticipate strong revenue streams into Spain and other regional
markets, being Brazil and the United Kingdom. The festive season in South Africa
is the focus of 60% - 70% of our domestic KGB revenue generation and we
anticipate continued strong seasonal demand.
The launch of the Igugu Lempilo (African Traditional) brand into Gauteng,
Limpopo and Mpumalanga provinces is advanced and retail sales have shown a vast
improvement on the comparative period. Achieving dominant market share in this
crowded market will require patience and the maintenance of effective marketing
and consumer brand communication programmes.
The executive continues to focus on export development initiatives in Africa,
America and Europe. These initiatives include the distribution of current and
new nutriceutical, complementary medicinal and enriched food products into
previously unrecognized markets. Significant time, energy and resources have
been invested to date to align the Group with knowledgeable and experienced
strategic partners and negotiations with these partners are close to fruition.
These initiatives, if successful, will have a material effect on the revenue and
earnings growth of the Group.
Midrand
16 November 2006
Designated Advisor
River Group
Warning: The listing of the 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 arrangements 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.
Date: 16/11/2006 08:36:43 AM Produced by the JSE SENS Department
