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Audited Provisional Report for the year ended 31 December 2013
JOHN DANIEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: JDH - ISIN: ZAE000044343
("the Company" or "JDH" or "the Group")
AUDITED PROVISIONAL REPORT FOR JOHN DANIEL HOLDINGS LIMITED FOR
THE YEAR ENDED 31 DECEMBER 2013
HIGHLIGHTS
The Directors are pleased to inform shareholders of sustained
improvement in the Group’s performance for the period under
review. The Group’s restructuring was finally completed during
the year and the expansion strategy initiated, with an
announcement of the acquisition of four businesses, the
incorporation of an additional African business, the initiation
of a R100 million rights offer and the disposal of the last of
the underperforming assets, i.e. the SO2 gas sheet manufacturing
business housed in Vinguard Limited (“Vinguard”).
The sustainability of the existing Group is significantly
enhanced with the disposal of the SO2 gas manufacturing
operations which contributed an after tax loss of R3.4 million
(2012: R1 million) to the Group’s consolidated results.
The acquisition of the strategic and commercial business units
will take effect in the 2014 financial year, subject to the
necessary due diligence and approval processes. The Directors
envisage that the expansion strategy will continue indefinitely
subject to the resources at the Board’s disposal.
The previous period’s financial results comprised a 15 month
period as the Company and Group changed its year end from 30
September to 31 December. Consequently, the previous period
reflects a 25% longer trading period over the current year. This
makes the Group’s improvements even more substantial.
Below are highlights from the Group’s continuing operations
reflected in the 2013 audited results:
- Turnover increased by 25.3% to R37.3 million for the 12
month period ended 31 December 2013 compared to turnover of
R29.8 million for the previous 15 month period.
- Operating results improved by 119.3%, reflecting an
operating profit of R8.0 million for the 12 months ended 31
December 2013 compared to R3.6 million for the 15 months to
December 2012.
- After tax profit increased to R4.4 million for the 12 month
period ended 31 December 2013 compared to profit of R1.5
million for the 15 month period ended 31 December 2012, an
improvement of 202.9%
- The current ratio is 1.64, with current assets exceeding
current liabilities by R11.9 million.
OPERATIONAL REVIEW
Group overview
As part of the Group restructure the Board has repositioned
JDH’s strategy and initiated an expansion program focusing on
investing in financial services companies which have clear
African and Global markets. In particular, these companies are
required to produce products or provide services with high
barriers to entry and high gross profit margins.
The Board is also intent on expanding the Group’s Biotechnology
operations and to exploiting the organic growth opportunities.
Shareholders have approved a change of name of the Group to
Ecsponent Limited, which will better reflect the repositioning
of the group strategy. The change of name will be effected on
the JSE as soon as confirmation of registration is received from
CIPC.
Below is an overview of the Group’s operations during the 2013
financial year.
Financial Services
The Financial Services operations reported a 67.3% increase in
revenue to R8.7 million for the 12 months ended 31 December 2013
compared to the R5.2 million revenue for the comparative 15
month period. The operating profit increased by 148.9% from R1.9
million for the 15 months ended 31 December 2012 to R4.6 million
for the 12 months ended 31 December 2013.
The demand for credit remains buoyant and the Financial Services
operation is well positioned to maximise opportunities. The
business currently provides credit for storage of stem cells and
unsecured credit in various retail group schemes. The
feasibility of additional credit products are investigated on an
ongoing basis.
The financial results in the unsecured credit sector are
currently under severe pressure due to high bad debt ratios and
the company applies a conservative credit policy to mitigate
this risk.
The Financial Services operations continues to seek
opportunities to acquire debt books which can be profitably
recouped through the Group’s collections infrastructure.
Management has developed a thorough due diligence process to
value acquired debt books prior to purchase to maximise returns.
The primary costs in the Financial Services business is the cost
of capital required to fund the growth of the unsecured loan
book and the acquisition of debt books. Management continue to
seek alternative funding options to reduce funding costs,
thereby improving profitability.
Biotechnology
The Group’s Biotechnology operations contributed 49.7% of the
Group’s total turnover and amounted to R20.6 million for the
year. This represents an increase of 7.4% for the 12 month
period ended 31 December 2013 compared to the 15 month
comparative period.
The Cryo-Save brand (“Cryo-Save SA”) continued to improve its
penetration within the South African market and as a result
substantially improved its market share during the period.
Cryo-Save SA operation continued to expand into Africa during
the period and is fast establishing a reputation as the pre-
eminent family stem cell bank in Africa. African countries have
numerous complexities, including logistical and regulatory
challenges, consequently, the Company is currently reviewing its
strategy in respect of the channels to market for the continent.
Revenues derived from the African markets during the period
amounted to less than 2% of total Biotechnology revenues.
Cryo-Save SA, with technical support from Cryo-Save NV,
concluded the transfer of the Cape Town laboratory to a state of
the art cryogenic laboratory in Gauteng at the beginning of the
year. Investment in the new enlarged laboratory amounted to an
additional R2.4 million and significantly improved the capacity
in order to support projected volume growth. The move of the
operational activities to Gauteng has realised operational cost
savings and enhanced the efficiency of logistics. The new
facility operates to the highest quality standards applied
internationally by Cryo-Save NV Group.
The operational loss reported for the combined Biotechnology
operations incorporate once off charges that will benefit future
results, primarily associated with the move to Gauteng and
start-up costs of the new laboratory. In addition the volatility
of the Rand/Euro exchange rate resulted in the Biotechnology
operations incurring a loss on forex based loans of R351 230.
At a purely operational level, excluding the impact of the once
off charges, the biotechnology operations realised a profit for
the period.
Agricultural packaging – discontinued operations
The agricultural packaging operations, focused on the
manufacture and distribution of SO2 gas generating sheets,
reported a decrease in turnover of 47.0% from R7.8 million for
the 15 month 2012 period compared to R4.1 million for the 12
month period ended 31 December 2013.
The restructuring of the operations and the reengineering of the
production process resulted in significant reductions in the
manufacturing cost per unit mitigating a portion of the drop in
revenue. Operating expenses were however increased in an attempt
to penetrate the market. This resulted in an increased operating
loss of R3.4 million for 2013 compared to the R2.0 million
operating loss for 2012, an increase of 71.0%.
As a result of the inability of the business to achieve critical
mass the Board decided to dispose of the SO2 gas sheet
manufacturing operation and negotiations with Grapetek (Pty) Ltd
were concluded shortly before the close of the period under
review. Shareholder’s attention is drawn to the events after
reporting date note in the notes to the Financial Statements
included below.
PROSPECTS
Key elements of the Group’s expansion strategy are:
- to acquire businesses which underpin the strategic
direction of the Group and in particular in the financial
services sector;
- to acquire additional businesses which complement the
existing business operations; and
- to acquire or develop businesses which provide a meaningful
contribution to the profitability of the Group.
The strategy result is aimed at developing a robust and
complementary Group of companies which provide sustainable
returns.
During the last quarter the Company announced a R100 million
rights offer which will be partially underwritten by Escalator
Capital (RF) Limited (“Escalator”), the controlling shareholder
of the Company. As announced on SENS the board has entered into
a funding agreement with Escalator to cover any shortfall in the
proceeds of the rights offer.
The Directors have also advised shareholders of a number of
acquisitions in line with the roll out of the Group strategy,
summarized as follows.
Escalator Financial Services (Pty) Limited is a company which
holds key FSB licenses which are important in respect of the
Group’s ability to provide financial services products. The
acquisition is an important building block in the Group’s
strategy to become a financial services provider.
Sanceda Collections (Pty) Limited is a specialised collections
organisation and provides the Group with its own collections
infrastructure and IP. The acquisition also ensures that
collection fees and related revenues accrue to the Group.
The acquisitions of Escalator Investment Holdings Limited
(Botswana), Escalator Swaziland Limited and Grey Pages Financial
Services are part of the Group’s African expansion. All three
companies are well positioned to penetrate the markets in their
respective countries thereby extending the Groups footprint and
revenues.
RESULTS
Presented below are the audited results for the year ended 31
December 2013.
Audited Statement of Financial Position as at 31 December 2013
31 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
ASSETS
Non-current assets
Property, plant and equipment 4 716 6 745
Intangible assets 706 1 650
Other financial assets 13 666 6 667
Deferred tax 11 138 11 636
Total current assets 26 426 28 321
Assets of discontinued operations 4 046 -
TOTAL ASSETS 60 698 55 019
EQUITY AND LIABILITIES
Equity 23 773 21 717
Non-controlling interest (1 240) (194)
Non-current liabilities
Other financial liabilities 18 798 20 166
Deferred tax 768 862
Total current liabilities 18 599 12 468
TOTAL EQUITY AND LIABILITIES 60 698 55 019
Net asset value 23 773 21 717
Net tangible asset value 23 067 20 067
Net asset value per share (cents) 5.35 4.89
Net tangible asset value per share
(cents) 5.19 4.52
Audited Statement of Profit and Loss and Other Comprehensive
Income for the 12 months ended 31 December 2013
12 months 15 months
ended 31 ended 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
Revenue 37 317 29 793
Cost of sales (8 215) (7 968)
GROSS PROFIT 29 102 21 825
Other income 75 241
Operating expenses (21 206) (18 432)
OPERATING PROFIT 7 971 3 634
Fair value adjustment – acquired
debt books - 1001
Net finance costs (1 818) (1 314)
PROFIT BEFORE TAXATION 6 153 3 321
Taxation (1 725) (1 859)
PROFIT FROM CONTINUING OPERATIONS 4 428 1 462
Loss from discontinued operations (3 395) (954)
PROFIT FOR THE PERIOD 1 033 508
(Loss) attributable to non-
controlling interest (1 092) (1 485)
NET PROFIT ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 2 125 1 993
BASIC AND HEADLINE EARNINGS
Basic earnings 2 125 1 993
Headline earnings 2 335 2 001
Basic earnings per share (cents)
attributable to equity holders of
the parent 0.479 0.483
Headline earnings per share (cents)
attributable to equity holders of
the parent 0.526 0.485
Number of shares in issue 444 131 678 444 131 678
Weighted average number of shares 444 131 678 412 524 515
RECONCILIATION BETWEEN BASIC
EARNINGS AND HEADLINE EARNINGS
IAS 33 Basic earnings 2 125 1 993
IAS 16 Loss on disposal of property
plant and equipment 147 8
IAS 16 Impairment of property, plant
and equipment 63 -
Headline earnings 2 335 2 001
Audited Segmental Information for the year ended 31 December
2013
The segments identified are based on the operational and
financial information reviewed by management for performance
assessment and resource allocation.
12 months ended 31 December 2013
Segment Revenue Operating
profit /
(loss)
R’ 000 R’000
Financial Services 8 724 4 643
Biotechnology 20 611 (310)
Agricultural packaging – discontinued 4 138 (3 373)
operation
Corporate 11 350 784
Eliminations (3 368) 2 803
Transfer to discontinued operations (4 138) 3 423
Group total 37 317 7 970
15 months ended 31 December 2012
Segment Revenue Operating
profit /
(loss)
R’ 000 R’000
Financial Services 5 214 1 865
Biotechnology 19 197 (2 147)
Agricultural packaging 7 803 (1 972)
Corporate 9 918 3 913
Eliminations (4 536) 363
Transfer to discontinued operations (7 803) 1 613
Group total 29 793 3 635
Audited Statement of Changes in Equity for the 12 months ended
31 December 2013
Share Non Accumul- Non- Total
capital distribute- ated loss controlli equity
able ng
reserves interest
R’000 R’000 R’000 R’000 R’000
Balance at
1 October
2011 36 496 7 752 (41 519) 1 118 3 847
Total
comprehensive
profit for
the 15 months - - 1 993 (1 485) 508
Issue of
shares 18 730 - - - 18 730
Acquisition
of non-
controlling
interest - (3 840) 2 105 173 (1 562)
Balance at 31
December
2012 55 226 3 912 (37 421) (194) 21 523
Total
comprehensive
profit for
the 12 months - - 2 125 (1 092) 1 033
Acquisition
of non-
controlling
interest - (70) - 45 (25)
Balance at 31
December
2013 55 226 3 842 (35 296) (1 240) 21 531
Audited Cash Flow Statement for the 12 months ended 31 December
2013
12 months 15 months
ended 31 ended 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
NET CASH INFLOW FROM OPERATING
ACTIVITIES 7 880 1 418
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (7 208) (29 454)
NET CASH (OUTFLOW) / INFLOW FROM
FINANCING ACTIVITIES (23) 27 963
Movement in cash and cash
equivalents for the period 649 (73)
Cash and cash equivalents at the
beginning of the period 236 309
Cash and cash equivalents at the end
of the period 885 236
Notes to the Financial Statements for the 12 months ended 31
December 2013
ACCOUNTING POLICIES AND BASIS OF PREPARATION OF RESULTS
The audited provisional results have been prepared in accordance
with IAS 34 – Interim Financial Reporting in accordance with the
accounting policies that comply with International Financial
Reporting Standards, the SAICA Financial Reporting Guides and in
the manner required by the Companies Act and the JSE Listings
Requirements. The principle accounting policies adopted in
preparation of these financial statements are consistent with
those of the prior period.
This summarised report is extracted from audited information,
but is not itself audited. The directors’ take full
responsibility for the preparation of this provisional report
and that the financial information has been correctly extracted
from the underlying financial statements.
The results of the Company, which were prepared under
supervision of the Group’s financial director, Mr D van der
Merwe CA(SA), were audited by the Group’s auditors, AM Smith and
Company Inc. and the opinion was not modified. The audit
opinion is available for inspection at the Company’s registered
office.
COMPARATIVE INFORMATION
The current financial year comprises a 12 month period ended 31
December 2013 and is not comparable to the 31 December 2012
period as the Company changed its year end from 30 September to
31 December during the comparative period, resulting in a 15
month financial period ended 31 December 2012.
The SO2 gas sheet manufacturing division, disposed of with effect
from 31 January 2014 is classified as a discontinued operation
in the 31 December 2013 financial statements and the comparative
consolidated statement profit or loss and other comprehensive
income has been restated to show the discontinued operation
separately from continuing operations.
REVIEW OF RESULTS AND FINANCIAL POSITION
The 31 December 2013 audited consolidated financial results
represents the trading results of the corporate head office and
its subsidiaries, which are active in the financial services,
biotechnology and agricultural packaging markets.
The Group results continue to benefit from the restructure
initiatives implemented over the last 3 years. The restructure
concluded with the disposal of the SO2 gas sheet manufacturing
business.
The loss from the discontinued operations will not be included
in future financial periods which will significantly enhance the
Group’s sustainability. The loss incurred from the discontinued
operation amounted to R3.4 million in the 2013 financial year.
Group turnover from continuing operations increased to R37.3
million for the 12 months ended 31 December 2013. A 25.3%
increase in turnover compared to the R29.8 million achieved for
the comparative 15 months ended 31 December 2012.
The Group increased its investment in operating structures and
processes required to underpin continued operational growth. In
addition, the Group’s credit committee has tightened its
provisioning policies governing unsecured lending activities,
resulting in an increase in provisions. These aspects have led
to the increased operating expenses for the year compared to the
comparative period.
The strategy of combining aggressive management of existing
subsidiaries and further strategic acquisitions is aimed at
ensuring the future sustainability of the Group.
EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any material event which occurred
after the reporting date and up to the date of this report
requiring disclosure, other than the matter listed below:
Disposal of the SO2 gas sheet manufacturing business
In line with the above repositioning strategy, the Group entered
into an agreement with Grapetek (Pty) Ltd on 20 December 2013 to
dispose of its SO2 gas sheet manufacturing business and related
assets of a Vinguard, as a going concern. The manufacturing
operations were regarded as being non-strategic to the future
growth plans of the Group.
The Vinguard shareholders approved the going concern disposal in
terms of Section 112 of the Companies Act, 2008 in a general
meeting held on 24 January 2014, with and the effective date of
the transaction determined being 31 January 2014. The purchase
consideration comprised R6.3 million for the going concern
assets, less the face value of the going concern liabilities
plus the value of stock, payable in cash.
The SO2 gas sheet manufacturing operations have been disclosed as
a discontinuing operation in the 31 December 2013 annual
financial statements.
Results of discontinued operation
12 months 15 months
ended 31 ended 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
Revenue 4 138 7 803
Cost of sales (3 772) (6 060)
Gross profit 366 1 743
Operating expenses (3 789) (3 356)
Operating loss (3 423) (1 613)
Finance costs (1 292) (1 065)
Loss before taxation (4 715) (2 678)
Taxation 1 321 1 724
Loss for the year from discontinuing
operations (3 395) (954)
Discontinued operations impact on
earnings per share (cents) (0.76) (0.23)
Cash flows used in discontinued operation
12 months 15 months
ended 31 ended 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
Net cash used in operating activities (5 685) (2 550)
Net cash used in investing activities 210 15
Total 5 475 2 535
Effect of the disposal on the financial position of the Group
31 31
December December
2013 2012
Audited Audited
Group Group
R’000 R’000
Property, plant and equipment 1 717 -
Intangible assets 1 113 -
Inventories 1 216 -
Total 4 046 -
Rights offer and convertible loan
On 5 March 2014, JDH entered into an underwriting agreement with
Escalator, its controlling shareholder, whereby Escalator would
partially underwrite the JDH rights offer of R100 million at an
issue price of 14 cents per share.
The rights offer will be partially underwritten by Escalator
through the capitalisation of its existing and future loan
account in JDH, expected to amount to approximately R45 million
at the date of closing of the rights offer. In addition,
Escalator has advised of its intention to provide a funding
facility to the Group up to R100 million, less the proceeds of
the rights offer. The funding facility will be convertible into
ordinary shares in JDH at the rights offer price, subject to
regulatory compliance and any necessary shareholder approvals
(“the Convertible Loan”).
Acquisition agreements
The R100 million capital raised via the rights offer and
convertible loan will be utilised to fund the continued organic
growth of the existing operations, as well as the acquisitions
of a number of growth businesses from Escalator and other
related parties, entered into by the Group on 5 March 2014,
subject to the fulfilment of certain announced suspensive
conditions.
Name change
At the Annual General Meeting (“AGM”) held on 31 July 2013, JDH
shareholders approved the change in name of the company from
John Daniel Holdings Limited to Escalator Investment Holdings
Limited. In the intervening period leading up to 31 December
2013, JDH received an objection to the use of the name
“Escalator” and elected not to proceed with the change in name
to “Escalator Investment Holdings Limited”.
Shareholders subsequently passed another special resolution
approving the change in name of the Company to “Ecsponent
Limited” by way of a Section 60 shareholder round robin special
resolution. The special resolution has been lodged for
registration at CIPC.
In accordance with the Companies Act, 2008 and the JSE Listings
Requirements, for a period of not less than one year, the former
name “John Daniel Holdings Limited” will be reflected in
brackets on all Ecsponent’s documents of title beneath the new
name.
CONTINGENCIES
Litigation has been suspended against a former employee of
Vinguard who obtained a CCMA ruling granting a R100 000 cash
settlement and the issue of shares in Vinguard. The former
employee seems to have abandoned his claim in light of the
counter claim by Vinguard for the PAYE payable on the possible
issue of Vinguard shares.
DIRECTOR CHANGES
No changes in the directorate took place during the year.
APPOINTMENT OF NEW COMPANY SECRETARY
The board announced the appointment of a new company secretary,
Timbavati Business Consultants, represented by HJ van der Merwe,
on 31 October 2013.
ACQUISITIONS AND DISPOSALS
JDH increased its stake in Vinguard Limited from 73.38% to
75.87% during the year.
There were no disposals during the period under review, other
than the agreement reached to dispose of the SO2 gas sheet
manufacturing business, referred to above.
As noted elsewhere, the board is actively investigating
acquisition opportunities aimed at improving earnings and cash
generation for the Group.
SHARE CAPITAL
At the AGM held on 31 July 2013 shareholders approved the
following special resolutions impacting on the share capital:
- converting the authorised and issued share capital into no
par value shares; and
- increasing the company’s authorised share capital from
1 000 000 000 no par value shares to 1 500 000 000 no par
value shares.
No shares were issued during the period in terms of the
directors’ general authority to issue shares for cash.
GOING CONCERN
The directors are of the opinion that the Group will continue as
a going concern for the foreseeable future due to the continued
financial support of certain parties to the Group and in
particular, by the Company to its subsidiaries.
DIVIDENDS
No dividends have been declared and no dividend is proposed for
the year.
AUDITORS
At the annual general meeting held on 31 July 2013, shareholders
resolved to re-appoint AM Smith and Company Inc. as the Group
auditors.
For and on behalf of the Board
TP Gregory
Pretoria
31 March 2014
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive
Officer), DP van der Merwe (Financial Director), E Engelbrecht
(Non-Executive), KA Rayner*, BR Topham*. (* Independent Non-
Executives)
Company Secretary: Timbavati Business Consultants represented by
HJ van der Merwe
Registered Office: Acacia House, Green Hill Village Office Park,
on Lynnwood, Cnr Botterklapper and Nentabos Street, The Willows,
Pretoria East, PO Box 39660, Garsfontein East 0060
Transfer Secretaries: Link Market Services South Africa (Pty)
Ltd, 13th Floor Rennie House, 19 Ameshoff Street, Braamfontein
2000, PO Box 4844, Johannesburg 2000
Auditors: AM Smith and Company Inc.
Sponsor: Arcay Moela Sponsors (Pty) Ltd
Date: 31/03/2014 11:21:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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