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Labat - Update on disposal of Acme stores, acquisition of Africard, possible
restatement of 2004 annual financial statements and further cautionary
LABAT AFRICA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1986/001616/06)
Share Code: LAB
ISIN: ZAE000018354
("Labat")
UPDATE ON THE DISPOSAL OF ACME STORES (PROPRIETARY) LIMITED, ACQUISITION OF
AFRICARD (PROPRIETARY) LIMITED, POSSIBLE RESTATEMENT OF 2004 ANNUAL FINANCIAL
STATEMENTS AND FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
1.1 Shareholders are referred to the further cautionary announcement dated 18
April 2005 and to the announcement dated 18 February 2005 where details of
the disposal by Labat of its retail business, Acme Stores (Proprietary)
Limited ("Retail Disposal") were set out.
1.2 There has been a delay in the approval by the JSE Securities Exchange South
Africa ("JSE") of the circular setting out, inter alia, details of the
Retail Disposal ("the Circular").
1.3 In addition, the JSE also advised Labat that a previous acquisition of
Africard (Proprietary) Limited ("Africard") is classified as a category 3
transaction, requiring notification by way of a formal announcement.
1.4 Details of the reasons for the delay in the approval of the Circular and
the publication of provisional financial statements for the year ended 28
February 2005 ("2005 AFS"), as well as details of the Africard acquisition
are set out below.
2. Delay in publication of the Circular, and provisional financial statements
for 2005
2.1 The publication of Labat"s 2005 AFS will be delayed due to Labat"s 2004
annual financial statements ("2004 AFS") being revisited in terms of their
compliance with the South African Statements of Generally Accepted
Accounting Practice ("GAAP"), which may result in a restatement of the 2004
AFS. Labat and its auditors are attending to the aforesaid matter.
2.2 Shareholders should note that Labat"s provisional accounts for the period
ended 28 February 2005 ("Provisional Accounts") will, accordingly, not be
published within the prescribed three month period as per the JSE Listings
Requirements.
2.3 The Circular will only be re-submitted to the JSE once the Provisional
Accounts have been published as the reporting accountants will have to
report on the most recent financial year end, being 28 February 2005. Once
finalized the approval process will resume and the Circular will be
dispatched to shareholders, which, at this stage looks to be mid July 2005.
3. Africard Acquisition
3.1 Background
Labat, on Monday, 16 February 2004, concluded an agreement with Altech Data
(Proprietary) Limited ("Altech Data") and Allied Technologies Limited
("Altech") to acquire 100% of Africard (excluding its card personalisation
business) ("Acquisition"). The closing date of the Acquisition was 7 July
2004 ("Closing Date").
3.2 Nature of business
Africard was a wholly owned subsidiary of Altech, licensed to manufacture
MasterCard and Visa security cards, one of only two such manufacturers in
South Africa. The business has enjoyed growth over the past decade, and has
become one of the largest producers of cards in South Africa, producing
approximately 25 million cards per annum. Cards are manufactured to strict
ISO standards using imported raw materials where the process includes
printing on PVC, collation, lamination, die cutting (punching), chip
embedding and implanting and the application of signature panels, magnetic
stripes and holograms.
3.3 Rationale for the Acquisition
3.3.1 Labat has for some years been pursuing a strategy of positioning itself
to take part in the smart card business through its wholly owned
subsidiary South African Micro Electronic Systems (Proprietary) Limited
("SAMES") an Information Communication ("IC") manufacturing company.
3.3.2 Africard fits logically into the longer term ambitions of SAMES, to
become a downstream provider of end products rather than the manufacturer
of component parts.
3.4 Purchase consideration
3.4.1 The purchase consideration was equivalent to 75% of the book value of
Africard"s net tangible assets at the last day of the month in which all
the conditions precedents of the Acquisition were fulfilled ("the
Effective Date"), being 1 May 2004, as determined in accordance with
Generally Accepted Accounting Practice and recorded in the financial
statements of Africard for the period commencing on 1 March 2003 and
ending on the day prior to the Effective Date.
3.4.2 The purchase consideration of R5 827 908, payable by Labat to Altech Data
for Africard was and is discharged as follows:
3.4.2.1 R1 456 977 on the Closing Date, being 25% of the purchase
consideration; and
3.4.2.2 the balance, together with all accrued interest thereon, by no later
than 1 May 2006.
3.4.3 Any amount outstanding bears interest from the Effective Date to date of
payment, both dates inclusive, at a prime rate of interest charged by
Absa Bank Limited, from time to time less 2%.
3.5 Suspensive Conditions
There are no outstanding suspensive conditions.
3.6 Financial effects
3.6.1 The unaudited pro forma financial effects of the Acquisition on the
earnings, headline earnings, net asset value and net tangible asset value
per share for Labat, are set out below. The unaudited pro forma financial
effects have been prepared for illustrative purposes only and, because of
their nature, may not fairly reflect the financial position of Labat
after the Acquisition or results of its operations going forward. The
unaudited pro forma financial effects provided are the responsibility of
the board of directors of Labat.
Per Labat ordinary After the Before Change
share (1) the(2) (%)
Acquisition Acquisition
(Cents) (Cents)
Earnings(3) (5.4) (6.2) 12.9
Headline earnings3 (5.5) (6.3) 12.7
Net asset value and 70.8 68.9 2.8
Net tangible asset
value3
Number of Labat 184,415 184,415 -
Africa Limited shares
in issue (`000)
Notes:
1. The "after the Acquisition" column is based on the published interim results
of Labat for the six month period ended 31 August 2004.
2. The "before" column reflects the pro-forma financial position of Labat prior
to the Acquisition.
3. The earnings and headline earnings are calculated based on the following
assumptions:
- the Acquisition was effective 1 March 2004;
- net asset value and net tangible net asset value are calculated based on
the assumption that the acquisition was effective 31 August 2004.
4. Cautionary announcement
Shareholders are advised to exercise caution when dealing in their Labat shares
until the publication of the Provisional Accounts and/or a further announcement
is made regarding the issues raised herein. Similarly, caution should also be
exercised by shareholders until the Circular approval process is completed and
the Circular has been posted.
Johannesburg
6 June 2005
Sponsor to Labat
- Brait Sponsors -
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