Wrap Text
Reviewed results for the year ended 28 February 2015
BK ONE LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 2011/008103/06
JSE share code: BK1P
ISIN: ZAE000161352
(“BK One” or “the Company”)
Reviewed results for the year ended 28 February 2015
COMMENTARY
Introduction
During the financial year end 28 February 2015, the Company continued to face challenging headwinds with
respect to the procurement of finance for itself, and particularly for its portfolio companies, however these
challenges have been largely overcome and new financing arrangements were either successfully concluded or
were close to completion at year end (and have subsequent year end been successfully concluded) in order to
secure working capital and trade finance for the portfolio companies. It should be noted that while the working
capital and trade finance facilities have been secured, initial advances had not been received in respect of all of the
facilities as at the date of this report. Furthermore, the facilities were connected to the provision of call options in
respect of the Company’s shareholding in the investee companies to which further reference is made below.
Subscription of Ordinary shares
BK One entered into a subscription agreement in terms of which the Subscriber in terms thereof subscribed for 800
no par value ordinary shares (“Issue Shares”) for a subscription price of R3 000 000.00 (three million Rand) (“the
Subscription Price”).The Issue Shares are reserved for issuance in terms of the subscription agreement. The
effective date of the subscription agreement is 10 September 2014. The Subscription Price was outstanding as at
the 28 February 2015 however subsequent year end, on 22 May 2015, the first tranche of R1 000 000.00 (one
million Rand) was received and 267 no par value ordinary shares in the Company are in the process of being issued
to the subscriber.
The Subscription Price will address the Company’s working capital requirements for the next twelve months
although the Board is presently assessing further alternatives to provide additional bolster for such requirements.
Pure Ocean Aquaculture Proprietary Limited (“POA”)
POA is an investment holding company that holds aquaculture-based investments. POA holds two major entities:
Highlands Trout (Proprietary) Limited (“HT”), a Lesotho-based company, and Pure Ocean East London
(Proprietary) Limited (“POEL”) which are independently valued of each other.
POA’s business plan as read with those of its underlying entities has been previously modified, as alluded to in
previous reports, to adapt to the fluid environment in which these businesses exist, the development and refinement
of their business plans as better operating information has become available and funding delays and constraints.
The latter delays have been largely addressed or were close to being addressed at year end such that both of these
investments were expected to stabilize, all things remaining equal.
1. Highlands Trout Proprietary Limited ( Lesotho) / “ HT”
HT has a licence to operate a salmon trout farm on the Katse and Mohale Dam in the Kingdom of Lesotho. Sales
into the South African and Lesotho markets continue to increase steadily while new markets are presently being
explored in the East, Asia, Western Europe and North America. Further possibilities for offtake of its farm harvest
appear to be promising with demand for its product increasing worldwide following problems that are being
experienced at sea-based salmon trout farms in Chile and Norway particularly. That being stated, the closure of the
Russian market to especially Norwegian producers has led to them competing in other markets that were
previously less interesting to them. The processing facilities at HT have been upgraded to facilitate the growing
harvesting needs and are presently operational.
Different assumptions were made for the Katse and Mohale dams as these entities are in different operational
stages. In the current year of review, the directors of the HT elected to focus on the Katse operations and not
expansion into Mohale. Therefore, Mohale is not valued at on Discounted Cash Flow basis but on the value of the
Mohale licence. This change in focus has had a negative effect on the valuation of POA as will be noted from the
accompanying financial statements.
2. Pure Ocean East London Proprietary Limited / “POEL”
POEL owns and operates a land-based dusky cob fish farm in the Industrial Development Zone of East London.
The POEL Board have indicated that they are now comfortable, lessons having been learnt during the pilot phase
of its development, that the biological fundamentals for the pilot phase have been substantially proven hence a
decision has been made to commence with the procurement of funding for the implementation of the next phase of
the development of the business – the construction of a 450 ton production facility on the same site. Low level
offtake arrangements in order to test the market have furthermore been concluded with one of the largest fish
distributors in South Africa with initial feedback from the market regarding the POEL production being very
favourable.
No further impairment of the POEL shareholder’s loan was undertaken following the securing of a working capital
facility for POEL together with a non-binding undertaking to secure funding for the construction of the
aforementioned 450 ton production facility. A positive side effect of the new financing arrangements has been that
previous impairment of POEL short term loan due by POEL to the Company has been reversed.
POEL has been valued using the net asset value of the entity, according to the unaudited management accounts as
at 28 February 2015. This is consistent with last year’s approach. Notwithstanding the above, this has had a
negative effect on the valuation of POA as will be noted from the accompanying financial statements.
POA Call Option
The Company entered into a call option agreement (“Call Option 1”) in terms of which the Company granted a call
option to Pure Ocean Aquaculture Limited, a Gibraltar-based company (the “Acquirer”), to acquire the Company’s
entire right, interest and title in and to shareholding and loan claims held in POA and additional claims held in Pure
Ocean East London Proprietary Limited (“POEL”) (the “Subject Matter”);
Acquirer: Pure Ocean Aquaculture Limited (Gibraltar)
Price: US$ 14 577 898
Settled in: Company convertible loan notes (“CLs”) in respect of Pure Ocean Aquaculture Limited
(Gibraltar)
Effective date: 28 October 2014
Stop date: 28 October 2016 or market capital of the Acquirer reaches US$ 100 000 000 (one hundred
million United States Dollars)
Subject matter: 131 655 050 shares in POA ,BK One loan claims in POA and BK One loan claims in POEL.
Rate: $1 = 11.57 as at the 28 February 2015
Security: the Subject Matter
Acquisition price: as at the 28 February 2015 (US$ 14 577 898 x 11.57): R168 666 280
The sale price is based in and payable US Dollars or convertible into equity in the Acquirer.
Advance Vacuum Alloys Proprietary Limited (previously known as Avalloy Proprietary Limited) (“AVA”)
AVA is currently operational at a relatively low level. Market dynamics remain positive in the superalloy industry
and AVA remains well positioned in an industry with high barriers to entry to exploit its position as one of very
few, if not the only, independent superalloy producers in the world able to operate in both the spot and long term
offtake markets.
AVA’s fair valuation was based in USD and converted to Rands at year end on the basis that it sells its production
and purchases its raw materials in USD. An exchange rate of 11.57 ZAR to 1 USD was used in the calculation
(exchange rate as at the 28 February 2015). The AVA valuation has been updated predominantly by updating the
sales pricing matrix used in the valuation to reflect current market prices. The Company’s equity value held in
AVA has been determined on a non-marketable and non-controlling basis.
AVA Call Option
While not having an effect on these financial statements, it should be noted that the Company entered into a call
option agreement (“Call Option 2”) after year end in terms of which the Company granted a call option to
Advanced Vacuum Alloys Limited, a Gibraltar-based company (the “Acquirer”), to acquire the Company’s entire
right, interest and title in and to its shareholding held in AVA (the “Subject Matter”);
Acquirer: Advanced Vacuum Alloys Limited (Gibraltar)
Price: US$ 4 296 232
Settled in: Company convertible loan notes (“CLs”) in respect of Advanced Vacuum Alloys Limited
(Gibraltar)
Effective date: 11 March 2015
Stop date: 11 March 2017 or market capital of the Acquirer reaches US$ 68 500 000 (Sixty-eight million
and five hundred thousand United States Dollars)
Subject matter: 5 960 611 shares in AVA.
Rate: $1 = 12.27 as at the 11 March 2015
Security: the Subject Matter
Sale value as at the 11 March 2015 (US$ 4 296 232 x 12.27) R52 714 767
The sale price is based in and payable US Dollars or convertible into equity in the Acquirer.
BK One Portfolio - Investment Impact:
As at 28 February 2014 the fair value of the portfolio was R174.6m. As at 28 February 2015 the fair value of the
portfolio decreased to R159.8m. This equates to an 8.5% decrease in fair value since 28 February 2014. The
decrease was primarily due to a larger decrease in the valuation of POA of R21 175 950 predominantly relating to
HT.
Both valuations at 28 February 2014 and at 28 February 2015 were performed by an independent valuation expert
using financial information provided by management of the individual projects.
Notwithstanding our valuation, the true value negotiated between parties may differ from this value as it is
dependent upon other considerations, including, but not limited to, differing views of micro and macro-economic
conditions and forecasts, as well as different assessments of risk. True and fair values negotiated between parties
can only be determined through a process of negotiation.
Going Concern
The Directors draw your attention to the going concern status of the Company. BK One is currently experiencing
liquidity issues, which are being addressed by the Directors via the implementation of various solutions. For more
details refer to note 4.
Conclusion
The Board has endeavoured to concentrate, as a primary focus point, on securing the value represented by the
Company’s loans into the portfolio companies without underemphasizing the equity positions held by the
Company is these investments. The potential in the BK One portfolio companies remains, and we believe that the
individual projects have the ability to deliver value for shareholders upon the successful implementation of their
business plans. BK One has also largely neutralised the negative effects experienced by the loss of its co-
investment partner. The Board will continue to strive to minimize risk exposure in its underlying investment
interests and extract value for all its stakeholders.
Directors
P K V Ncetezo, A Keet, P G Gaylard, W Voigt, A de Nobrega Thorold
Registered office
Boundary Terraces
1 Mariendahl road
Mill house
3rd Floor
Newlands
Cape Town
7700
Auditors
Moore Stephens Cape Town Incorporated
Secretary
SecCorp Secretarial Services Proprietary Limited
Sponsor
Nedbank
29 May 2015
CONDENSED STATEMENT OF FINANCIAL POSITION
for the year ended 28 February 2015
Reviewed Audited
2015 2014
R R
ASSETS
Non-current assets 159 300 736 173 896 940
Property, plant and equipment 67 483 132 304
Intangible asset - 33 825
Investments 52 476 205 75 976 019
Long term loans receivable 106 757 048 97 754 792
Current assets 1 522 994 3 620 875
Short term loans receivable 523 074 876 329
Other receivables 996 711 58 654
Cash and cash equivalents 3 209 2 685 892
___________ ___________
Total assets 160 823 730 177 517 815
___________ ___________
EQUITY AND LIABILITIES
Capital and reserves (76 209 965) (58 876 906)
Share capital 200 200
Accumulated loss (76 210 165) (58 877 106)
Non-current liabilities 232 926 374 232 926 374
Preference shares 232 926 374 232 926 374
Current liabilities 4 107 321 3 468 347
Trade and other payables 4 107 321 3 468 347
___________ ___________
Total equity and liabilities 160 823 730 177 517 815
___________ ___________
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2015
2015 2014
R R
Revenue 3 118 105 2 673 225
Fair value gains (losses) on financial instruments (23 499 814) 21 131 335
Employee benefits expense (2 242 392) (2 089 542)
Reversal (impairment) of loans 2 335 114 (30 296 724)
Other expenses (3 190 928) (11 016 867)
Cost recovery 1 016 775
___________ ___________
Loss before finance income/costs (22 463 140) (19 598 573)
Finance income 5 130 081 2 324 559
Finance costs - (3 000 000)
___________ ___________
Loss before taxation (17 333 059) (20 274 014)
Taxation - -
___________ ___________
Loss for the year (17 333 059) (20 274 014)
Other comprehensive income for the year, net of tax - -
___________ ___________
Total comprehensive loss for the year (17 333 059) (20 274 014)
___________ ___________
Loss for the year attributable to:
Ordinary shareholders - -
Preference shareholders (17 333 059) (20 274 014)
___________ ___________
Total comprehensive loss attributable to:
Ordinary shareholders - -
Preference shareholders (17 333 059) (20 274 014)
___________ ___________
Loss per share, in Rands
Ordinary shareholders - -
Diluted loss per share, in Rands
Ordinary shareholders - -
___________ ___________
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2015
Share Accumulated
capital loss Total
R R R
Balance at 29 February 2013 200 (38 603 092) (38 602 892)
Total comprehensive loss for the year - (20 274 014) (20 274 014)
___________ ___________ ___________
Balance at 28 February 2014 200 (58 877 106) (58 876 906)
Total comprehensive loss for the year - (17 333 059) (17 333 059)
___________ ___________ ___________
Balance at 28 February 2015 200 (76 210 165) (76 209 965)
___________ ___________ ___________
CONDENSED STATEMENT OF CASH FLOWS
for the year ended 28 February 2015
2015 2014
R R
Cash flows from operating activities
Cash absorbed by operations (4 616 982) (10 977 210)
Interest received 149 667 106 656
Finance costs paid - (3 000 000)
___________ ___________
Net cash outflow from operating activities (4 467 315) (13 870 554)
___________ ___________
Cash flows from investing activities
Purchase of plant and equipment and intangibles - (105 542)
___________ ___________
Net cash outflow from investing activities - (105 542)
___________ ___________
Cash flows from financing activities
Loans received - 7 500 000
Loans advanced (122 075) (6 947 240)
(Repayment) advance of loans payable - (12 500 000)
Repayment of loans advanced 1 906 707 28 139 179
___________ ___________
Net cash inflow from financing activities 1 784 632 16 191 939
___________ ___________
Net increase (decrease) in cash and cash equivalents (2 682 683) 2 215 843
Cash and cash equivalents at beginning of the year 2 685 892 470 049
___________ ___________
Cash and cash equivalents at end of the year 3 209 2 685 892
___________ ___________
2014: Non cash transaction
During the 2014 financial year the Company entered into a non cash investing and financing activity which is not
reflected in the statement of cash flows. The Company acquired equity and loan claims in Pure Ocean Aquaculture
Proprietary Limited and Avalloy Proprietary Limited which was paid for by issuing 4 390 823 BK One preference
shares at a fixed price of R8.00 per share.
1. REVIEW OF ACTIVITIES
The Company holds investments as its principal activity and operates principally in the Republic of South
Africa.
2. BASIS OF PREPARATION
The provisional condensed reviewed financial statements have been prepared in accordance with the
requirements of the JSE Limited Listing Requirements for provisional reports and the requirements of the
Companies Act of South Africa. The Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and the Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the provisional
condensed reviewed financial statements are in terms of IFRS and consistent with those applied in the
previous annual financial statements.
The provisional condensed reviewed financial statements were prepared by A de Nobrega-Thorold CA
(SA).
The provisional condensed financial statements for the year ended 28 February 2015 have been reviewed
by Moore Stephens Cape Town Incorporated. The review was conducted in accordance with ISRE 2410
Review of Interim Financial Information performed by the Independent Auditor of the Entity. They have
issued a modified review conclusion with an emphasis of matter relating to going concern. The auditor’s
report does not necessarily cover all the information in this announcement. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the auditor’s work they should obtain a
copy of that report, together with the accompanying financial information, from the registered office of the
Company.
3. SIGNIFICANT ACCOUNTING POLICIES
These provisional financial statements for the year ended 28 February 2015 have been prepared on the
historical cost basis. The accounting policies and methods of computation applied in the presentation of the
financial results are consistent with those applied for the year ended 28 February 2014, except for the
following new or revised standards, amendments thereto and interpretations as issued by the International
Accounting Standards Board, which are effective for the current reporting period that were adopted:
– IAS 1 (amendment) Presentation of Financial Statements: Presentation of Items of Other
Comprehensive Income
- Annual Improvements
The adoption of these new and revised accounting standards did not have a material impact on the results
and as such there is no change to comparative information resulting from the adoption of these standards.
4. GOING CONCERN
The annual financial statements have been prepared on the basis of accounting policies applicable to a
going concern. This basis presumes that there will be sufficient funds available to finance future operations
and that the realisation of assets and the settlement of liabilities will occur in the ordinary course of
business.
We draw attention to the fact that at 28 February 2015, the Company’s total liabilities exceeded its total assets
by R76 209 965 (2014:58 876 906).
The ability of the Company to continue as a going concern is dependent on a number of factors. The most
significant of these include:
a) that the ultimate shareholders continue to financially support the Company after the existing funding
facilities have been utilised. It is expected by the Directors that these facilities will be utilised by
February 2016; or
b) the ability of the Directors to procure adequate additional funding for the Company from a combination
of alternative sources once the facilities referred to above have been utilised. The significant alternative
sources available are to:
i) sell part or whole of its investments;
ii) implement plans to actively recover short term loans receivable;
iii) restructure the operations of the Company; and/or
iv) settle the largest trade payable by issuing shares.
The Company’s ability to continue as a going concern is at risk if the Directors are (i) unable to secure
additional funding from the ultimate shareholders, or (ii) unable to obtain additional funding from the
alternative sources detailed above.
These conditions give rise to a material uncertainty which may cast significant doubt about the Company’s
ability to continue as a going concern and therefore, that it may not be able to realise its assets and settle its
liabilities in the ordinary course of business
5. EVENTS AFTER THE REPORTING DATE
Subscription of ordinary shares:
BK One entered into a contract with Transholding Investments Limited to subscribe for 800 no par value
ordinary shares (“Issue Shares”) at a subscription price of R3 000 000.The Issue Shares are reserved for
issuance under contract. The effective date of the contract is the 10 September 2014. The subscription price
of 3 000 000 (three million rand) was still owing as at the 28 February 2015.The Shares have not been
issued to Transholding Investment Limited at year end.
On the 22 May 2015, the first tranche of one million of the subscription price was received and 267
shares were issued to Transholding Investment Limited.
Call Option: Advance Vacuum Alloys Proprietary Limited “AVA”
BK One entering into a call option agreement (“Call Option ”) on the 11 March 2015 in terms of which the
Company grants a call option to Advanced Vacuum Alloys Limited (the “Acquirer”) to acquire the
Company’s entire right, interest and title in the shares held in Advanced Vacuum Alloys (Proprietary)
Limited (“AVA”) (the “Subject Matter”);
Acquirer: Advanced Vacuum Alloys Limited (Gibraltar)
Price: US$ 4 296 232.00
Settled in: Company convertible loan notes (“CLs”) in respect of Advanced Vacuum Alloys Limited
(Gibraltar)
Effective date: 11 March 2015
Stop date: 11 March 2017 or market capital of the Acquirer reaches US$ 68 500 000 (Sixty-eight million
and five hundred thousand United States Dollars)
Subject matter: Share Equity of 28.41% or 5 960 611 shares in AVA
Rate: $1 = 12.27 as at the 11 March 2015
Sale value as at the 11 March 2015 (US$ 4 296 232.00 x 12.27) R52 714 767
The Directors are not aware of any further matter or circumstance arising after the reporting period.
6. DIVIDENDS
No dividends were declared or paid to shareholders during the year (2014: Nil).
7. LOSS PER SHARE
Loss and headline loss per share are based on the loss attributable to ordinary and preference shareholders in
issue during the period. The number of ordinary and preference shares in issue for the period under review
was 200 and 24 492 823 respectively.
There are no dilutive instruments in issue.
Ordinary shareholders only participate in earnings per share above an annualised hurdle rate of 20% after
10 years.
Loss and headline loss per share and the corresponding diluted loss and diluted headline loss per share are
identical as no adjustments are required, and are therefore calculated as follows:
Ordinary Preference
For the year ended February 2015 shareholders shareholders Total
Loss for the year - (17 333 059) (17 333 059)
Weighted average number of shares 200 24 492 823 -
Loss per share (Rands) - (0.71) -
Ordinary share Preference
For the year ended February 2014 shareholders shareholders Total
Loss for the year - (20 274 014) (20 274 014)
Weighted average number of shares 200 22 297 437 -
Loss per share (Rands) - (0.91) -
8. FAIR VALUE GAINS (LOSSES) ON FINANCIAL INSTRUMENTS
Financial instruments designated as held at FVTPL
- Equity investments
Avalloy Proprietary Limited (2 323 864) (2 378 964)
Pure Ocean Aquaculture Proprietary Limited (21 175 950) (30 235 973)
Financial instruments measured at FVTPL
- Isitsaba option
Equity investment in Avalloy Proprietary Limited - 9 055 835
Equity investment in Pure Ocean Aquaculture Proprietary Limited - 22 878 834
Loan claims - 21 811 603
___________ __________
(23 499 814) 21 131 335
___________ ___________
9. SEGMENT REPORTING
The Company is an investment company with investments in certain industries with differing risk profiles.
The information reported to the chief decision maker for the purposes of resource allocation and assessment
of segment performance is provided per investment, which is currently per industry. The reportable
segments under IFRS 8 are therefore noted below. The only transactions that affect the Company are the fair
value gains (losses) and interest which are:
For the year ended 28 February 2015
Fair value Interest
Investment Industry (losses) accrued
R R
Pure Ocean Aquaculture (21 175 950) 2 969 321
Avalloy Superalloys (2 323 864) -
For the year ended 28 February 2014
Fair value Interest
Investment Industry Gains accrued
R R
Pure Ocean Aquaculture 14 454 464 4 637 831
Avalloy Superalloys 6 676 871 97 900
10. RELATED PARTIES
The following related party relationships exist:
Key management
D P Richards (Executive Director) – resigned 30 April 2014
A de Nobrega – Thorold (Executive Director)
A Keet (Executive Director) – appointed 16 October 2014
P K V Ncetezo (Non-executive Director)
P G Gaylard (Non-executive Director)
H P van Noort (Non-executive Director) – resigned 9 October 2014
W Voigt (Non-executive Director) – appointed 1 December 2014
Key management of the following related parties
D P Richards Isitsaba Investment Group Proprietary Limited, Pure Ocean Aquaculture
Proprietary Limited, Pure Ocean Retail Proprietary Limited, Pure Ocean
East London Proprietary Limited, Highlands Trout Proprietary Limited and
Kwanda Capital Investments Proprietary Limited.
H P Van Noort Isitsaba Investment Group Proprietary Limited
A Keet Pure Ocean Aquaculture Proprietary Limited, Pure Ocean East
London Proprietary Limited, Highlands Trout Proprietary Limited and
Kwanda Capital Investments Proprietary Limited
Immediate and ultimate holding company
Kwanda Capital Investments Proprietary Limited.
D P Richards resigned from BK One and all the related parties on 30 April 2014.
Other related parties Nature of relationship
Isitsaba Investment Group Proprietary Limited Common key management
Avalloy Proprietary Limited Investment
Pure Ocean Aquaculture Proprietary Limited and its Investment
subsidiaries (Pure Ocean East London Proprietary
Limited and Highlands Trout Proprietary Limited) Investment
Basileus Capital Proprietary Limited Shareholder
2015 2014
R R
Related party transactions
Interest income 2 969 321 2 673 225
Fair value gains (losses) on financial instruments (23 499 814) 21 131 335
Reversal of impairment / (impairment of loans) 903 737 (30 296 724)
Investment management fees paid - KCI 1 834 352 1 806 537
Key management compensation
- directors’ fees 1 462 397 1 350 000
- consulting fees - 1 280 000
Related party balances
Investments 52 476 205 75 976 019
Long term loans receivable 106 757 048 97 754 792
Short term loans receivable 523 074 876 329
Trade payables 1 370 777 830 450
Date: 29/05/2015 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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