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LAB - Labat Africa Limited - Audited condensed consolidated results for the year
ended 28 February 2010 and Notice of Annual General Meeting
LABAT AFRICA LIMITED
Incorporated in the Republic of South Africa)
(Registration number: 1986/001616/06)
Share Code: LAB ISIN: ZAE000018354
("Labat" or "the company")
Audited condensed consolidated results
for the year ended 28 February 2010 and Notice of Annual General Meeting
In terms of JSE Listings Requirements, the Company is required to publish the
audited annual financial results as the audited results differ from the
previously published reviewed consolidated results which were published on SENS
on 14 June 2010.
Condensed consolidated statement of financial position at 28 February 2010
Audited Restated Audited
28 Audited 28
February 28 February
2010 February 2008
R`000 2009 R`000
R`000
ASSETS
Non-current assets 55 1 546 775
Property, plant and 55 92 170
equipment
Financial assets - 1 454 650
Current assets 458 1 384 3 658
Financial assets 179 179 -
Trade and other receivables 26 1 037 3 104
Cash and cash equivalents 253 168 554
Assets of disposal group 58 302 125 735 220 165
classified as held for sale
Total Assets 58 815 128 665 224 598
EQUITY AND LIABILITIES
Equity and reserves
Share capital 1 972 1 972 1 972
Share premium 49 065 49 065 49 065
Retained loss (102 547) (71 447) (69 430)
Treasury shares (482) (482) -
Total equity (51 992) (20 892) (18 393)
Minority - - 8 610
Non-current liabilities - - -
Current liabilities 9 894 6 284 4 094
Trade and other payables 9 019 3 422 3 738
Provisions 875 2 862 356
Liabilities directly 100 913 143 273 230 287
attributable to assets held
for sale
Total Equity and Liabilities 58 815 128 665 224 598
Net asset value per share (26.37) (10.60) 16
issued (cents)
Net tangible asset value per (26.37) (10.60) 16
share (cents)
Shares in issue at year end 197 155 197 155 197 155
(`000)
Condensed consolidated statement of comprehensive income for
the year ending 28 February 2010
Audited Audited
12 Months 12 months
to to
28 28
February February
2010 2009
R`000 R`000
Revenue 28 108 42 201
Continuing operations - -
Discontinuing operations 28 108 42 201
Operating loss before depreciation (7 141) (4 995)
and amortisation
Continuing operations (2 196) (8 791)
Discontinuing operations (4 945) 3 796
Depreciation and amortisation (6 363) (8 393)
Continuing operations (37) (78)
Discontinuing operations (6 326) (8 315)
Operating loss before interest and (13 504) (13 388)
taxation
Continuing operations (2 233) (8 869)
Discontinuing operations (11 271) (4 519)
Interest paid (4 603) (9 264)
Continuing operations (683) (3)
Discontinuing operations (3 920) (9 261)
Interest received 350 2 491
Continuing operations 1 3
Discontinuing operations 349 2 488
Loss before taxation, sale and fair (17 757) (20 161)
value adjustments
Continuing operations (2 915) (8 869)
Discontinuing operations (14 842) (11 292)
Disposal of investments and fair (17 020) 50 072
value adjustments
Continuing
Surplus/(Deficit) on restructuring - 1 392
Fair value adjustment to investment - (113)
Discontinuing
Impairment of property, plant, (17 020) -
equipment and inventory
Profit on sale of subsidiary - 48 793
(Loss)/Profit before taxation (34 777) 29 911
Continuing operations (3 987) 36 490
Discontinuing operations (30 790) (6 579)
Taxation - 15 286
Discontinuing operations - 15 286
(Loss)/Profit after taxation (34 777) 45 197
Continuing operations (3 987) 36 490
Discontinuing operations (30 790) 8 707
Other comprehensive loss
Discontinued operations
Gain on land and buildings 2 028 17 344
Impairment on plant and equipment (37 218) -
Income tax relating to components of 10 872 (5 217)
other comprehensive income
Other comprehensive loss for the year (24 318) (12 137)
net of tax
Total comprehensive loss for the year (59 095) 57 324
(Loss)/Profit attributable to:
Non-controlling interest - -
Owners of the company (34 777) 45 197
(Loss)/Earnings per share
Basic (loss)/profit per share (cents) (17.6) 22.9
Continuing operations (2.0) 18.5
Discontinued operations (15.6) 4.4
Diluted basic loss per share (cents) (17.6) 22.9
(34 777) 45 197
Headline loss reconciliation
Loss attributable to owners of the
parent
Adjusted for:
Surplus on restructuring - (1 392)
Impairment of plant and equipment 8 214 113
Unbundling of subsidiary - (48 793)
Headline loss for the period (26 563) (4 875)
Headline loss per share
Headline loss per share (cents) (13.4) (2.5)
Diluted headline loss per share (13.4) (2.5)
(cents)
Weighted average number of shares in 197 155 197 155
issue (`000)
There are no securities with potential dilutive effects as at 28 February 2010
(2009: Nil) and accordingly, diluted loss per share equals basic loss per share,
and headline loss per share equals diluted headline loss per share
Condensed consolidated statement of cash flows for the year ending 28 February
2010
Audited Audited
28 February 28 February
2010 2009
R`000 R`000
Net cash outflow from operating (10 082) (29 792)
activities
Net cash inflow/(outflow) from 2 442 (2 322)
investing activities
Net cash outflow from financing (2 333) (581)
activities
Net decrease in cash and cash (9 973) (32 695)
equivalents
Cash and cash equivalents at 11 417 44 112
beginning of the year
Cash and cash equivalents at end 1 444 11 417
of the year
Consolidated statement of changes in equity for the year ending 28 February 2010
Share Share Non- Retained
Capital Premium distribut- income
able reserve /(loss)
R`000 R`000 R`000
Balance at 1 March 2008 1 972 49 065 41 099 (69 430)
Total comprehensive - - 12 127 45 197
loss for the year
Dividends paid - - - (57 020)
Direct transfer to - - (9 806) 9 806
reserves - after tax
effect of depreciation
Effect of change in tax - - - -
rate
Treasury shares - - - -
Buyout of minorities - - - -
Non-distributable - - (43 420) -
reserve of disposal
group classified as
held for sale
Balance at 28 February 1 972 49 065 43 420 (71 447)
2009
Opening balance - - 43 420 -
transferred to non-
current assets held for
sale
Total comprehensive - - (24 318) (34 777)
loss for the year
Direct transfer to - - (3 677) 3 677
reserves - after tax
effect of depreciation
Non-distributable - - (15 425) -
reserve of disposal
group classified as
held for sale
Balance at 28 February 1 972 49 065 - (102 547)
2010
(Continued)
Treasury Total Minority Total
Shares interest
R`000 R`000 R`000
Balance at 1 March 2008 - 22 706 8 610 31 316
Profit for the year - 57 324 - 57 324
Dividends paid - (57 020) - (57 020)
Direct transfer to - - - -
reserves - after tax
effect of depreciation
Effect of change in tax - - - -
rate
Treasury shares (482) (482) - (482)
Buyout of minorities - - (8 610) (8 610)
Non-distributable - (43 420) - (43 420)
reserve of disposal
group classified as
held for sale
Balance at 28 February (482) (20 892) - (20 892)
2009
Opening balance - 43 420 - 43 420
transferred to non-
current assets held for
sale
Comprehensive loss for - (59 095) - (59 095)
the year
Direct transfer to - - - -
reserves - after tax
effect of depreciation
Non-distributable - (15 425) - (15 425)
reserve of disposal
group classified as
held for sale
Balance at 28 February (482) (51 992) - (51 992)
2010
BASIS OF PREPARATION
The Group`s consolidated financial information for the year ending 28 February
2010 has been prepared in accordance with IAS 34 - Interim Financial Reporting.
The accounting policies, which comply with International Financial Reporting
Standards ("IFRS"), have been applied consistently in all material aspects in
the current and comparative periods.
The 2008 comparatives are also disclosed as IAS 1.1 (f) requires a statement of
financial position as at the beginning of the earliest comparative period when
an entity reclassifies items in its financial statements. Labat reclassified
certain assets to assets held for sale.
The results have been audited by the company`s auditors, Ngubane Zeelie Inc.,
whose unmodified audit report is available for inspection at the registered
office of the company. Whilst the audit report was unqualified, attention was
drawn to the subsequent events in relation to going concern.
BUSINESS AND MARKET OVERVIEW
The company is an investment operating company which, through its subsidiaries,
was engaged in two main businesses during the period under review, being the
design and marketing of integrated circuits and the manufacture and sale of
security hardware.
The SAMES manufacturing facility was eventually closed in November 2009. The
remaining integrated circuit business, the design and marketing of integrated
circuits would continue using production facilities in China. This process
entails a re-design of the company`s products and will take some time but is
well in hand. All other Labat business have ceased or have been disposed of.
As announced in previous communications to shareholders, the board would pursue
a suitable transaction which could lead to the de-listing of the company or to
enter into a transaction to sell the company to new vendors together with the
disposal of the current operations of the company to an unlisted entity.
Even though the directors are very positive about the opportunities available to
the company, these opportunities are medium to long term and will entail further
losses and access to substantial funding in the short term which is not
compatible with a listed entity in the current market conditions.
FINANCIAL RESULTS
The results for the year take into account the closure of the SAMES factory at
Koedoespoort as well as the consequent write down of the plant and equipment,
which resulted in the before tax loss of R32.7 million for the year. The
results reflect that these assets and associated liabilities are held for
resale.
SEGMENTAL REPORTING
The Group has adopted IFRS 8 Operating Segments as its segmental reporting
standard which requires an entity to report financial and descriptive
information about its reportable segments, which are operating segments or the
aggregation of operating segments that meet specified criteria. Operating
segments are components of an entity in respect of which separate financial
information is available is evaluated regularly by management.
The Group had two segments which are as follows:
* Technology which manufactures and distributes integrated circuits (chips)
and security hardware. This segment has been discontinued and has been
transferred to non-current assets held for sale.
* Head office operations which provide management services to the group.
* The segments as reported in the segmental analysis are consistent with the
internal reports that are provided to the chief operation decision makers
* Revenue totals show the other operations revenue for the Group after
inter-company elimination of R 2 ,1 million
* The Technology segment has not had any extensive reliance on any single
customer.
Audited 28 Audited 28
February 2010 February 2009
R`000 R`000
Revenue by Segment 28 108 42 201
Technology 28 108 42 201
Other operations - -
Loss from operations before (13 504) (13 388)
finance costs and fair value
adjustments by segment
Technology (11 271) (4 519)
Other operations (2 233) (8 869)
Property, Plant and Equipment by 55 92
segment
Technology - -
Other operations 55 92
Trade and Accounts receivable by 26 1 037
segment
Technology - -
Other operations 26 1 037
Trade and Accounts payable by 9 894 6 283
segment
Technology - -
Other operations 9 894 6 283
Capital Expenditure 25 703
Technology 25 703
Other operations - -
Depreciation 6 363 8 393
Technology 6 327 8 315
Other operations 36 78
ACQUISITIONS AND DISPOSALS
There were no acquisitions or disposals during the year under review. However,
shareholders are referred to subsequent events.
MANDATORY OFFER AND CHANGE IN CONTROL
The board refers shareholders to various SENS announcements made on 20th July
2010, 23rd July 2010, 16th August 2010 and 31st August 2010 relating to the
change in control of Labat and the envisaged sale of the assets in the company
to a new legal entity.
The Company is preparing a circular to shareholders which includes a mandatory
offer as well as the capitalisation of the R4 million loan, both at 5 cents per
share.
The disposal of the SAMES facility will be included in a separate circular to
shareholders that will also include the acquisition of the Primrose assets as
previously announced and which circular will also include Revised Listings
Particulars.
RESIGNATION OF COMPANY SECRETARY
A Britto has resigned as company secretary and a new company secretary will be
appointed during October 2010.
ISSUE OF SHARES
No new shares were issued during the year under review.
DIRECTORS AND EXECUTIVE MANAGEMENT
During the year under review and to the date of this report, the directors of
the Group were as follows:
Director Date appointed Date resigned
D J O`Neill 23 July 2010
R Mohamed 1 June 2009 23 July 2010
T van der Walt 31 May 2009
V J Labat 23 July 2010
K C Zuma* (Chairman) 23 July 2010
Z Z G Mandela (CEO) 23 July 2010
M Hulley* 23 July 2010
S T Z Ngubane 23 July 2010
B G van Rooyen* 23 July 2010
* non-executive
The role of Mr BG van Rooyen has changed from executive to non-executive with
immediate effect.
The board of directors are in the process of nominating new non-executive
independent directors to the board.
GOING CONCERN, SUBSEQUENT EVENTS AND FUTURE PROSPECTS
The company`s liabilities exceeded its assets at the balance sheet date, and
management took the following steps to correct this situation:
There has been a change in control over the company post the financial year end
of Labat.
The new controlling shareholders being Aurora Empowerment Systems (Pty) Ltd
("Aurora") as well as Cyndara 131 (Pty) Ltd trading as Aurora Investment
Holdings ("AIH") have acquired 45.7% of the Labat listed shares and have
irrevocables to acquire another 21.3% of Labat.
Aurora is a black owned empowerment vehicle and wishes to utilise Labat as the
vehicle to house selected empowerment and other investments in resources and
mining. Aurora has to date already injected the Primrose Gold Smelting plant as
well as the ERPM Gold operations. Shareholders are referred to the SENS dated
20th July 2010 wherein the board of directors announced that Labat had entered
into an agreement to acquire the gold processing and smelting operations known
as Primrose Gold Metallurgical as well as ERPM Gold Metallurgical from Primrose
Gold Mines (Pty) Limited, a wholly owned subsidiary of Aurora Empowerment
Systems (Pty) Limited, for a purchase consideration of R38 000 000 through the
issue of 38 000 000 Labat ordinary shares at R1.00 per share ("the
acquisition"). The acquisition gives Labat control over two of only four ore
crushing and gold smelting plants on the East Rand. The businesses and related
assets are acquired as going concerns and no liabilities are assumed.
The acquisition is expected to unlock shareholder value as there are significant
unmined gold resources available. The acquisition will provide Labat with a
sound foundation in the gold industry.
Shareholders are notified that the Primrose acquisition has, in terms of the
Listings Requirements of the JSE Limited, been deemed to be a category 1 related
party transaction and also a "reverse take-over" (due to the fact that the
acquisition will result in a fundamental change in the business) and will
therefore require a fairness opinion, and shareholders` approval as well as the
inclusion of listing particulars in the relevant circular to shareholders. A
circular to shareholders is being prepared.
Shareholders are also notified that the continued listing of Labat will be
dependent on the JSE`s approval of the suitability of the businesses acquired
through the acquisition (or any other assets/business that Labat may acquire in
the interim) for a listing.
In addition Aurora has secured an Equity line of credit from GEMS, an offshore
hedge fund, which as disclosed in the media, have undertaken to invest up to
USD100 million into Aurora`s listed company (Labat).
Aurora has also agreed to sell to the historical shareholders of Labat, all the
SAMES subsidiaries as well as the related businesses and obligations for R4.5
million. The completion of the Aurora/SAMES transaction will result in the
removal of the SAMES and Labat assets and creditors from the company going
forward.
Aurora also decided to inject an additional R4 million as equity into Labat once
approved at the shareholders general meeting to be held later this year.
In addition Aurora has other income producing assets which they intend to inject
into Labat, post appropriate votes at the shareholders meeting, and will accept
a combination of cash and Labat scrip as payment, thus further strengthening the
balance sheet of Labat.
Aurora has received an amount of R13.2 million from GEMS against the security of
Aurora`s Labat shares. These funds are expected to be invested directly into
Labat, post the general meeting of shareholders, as a fresh issue of shares for
cash in Labat.
With sufficient irrevocable votes being in place which will vote in favour of
the above at the Labat shareholders` meeting, it is expected that all the above
will be implemented.
Because of the above it is the opinion of the directors that the company will
continue to trade as a going concern and it has thus applied all accounting
principles to companies trading as a going concern.
CONTINGENT LIABILITIES
At the balance sheet date the Group does not have any contingent liabilities
(2009: RNil).
DIVIDENDS
The directors have decided not to declare a dividend for the year under review
(2009: R Nil).
NOTICE OF ANNUAL GENERAL MEETING
Shareholders are advised that the Annual General Meeting of the Company will be
held at 10h00 at Arcay House II, Number 3 Anerley Road, Parktown, Johannesburg
on 10 November 2010.
By order of the Board
KC Zuma ZZG Mandela
Chairman Chief Executive Officer
01 October 2010
Johannesburg
Registered Office
23 Krowton Avenue, Weltevreden Park, Johannesburg, 1079
Private Bag X09-248, Welteverden Park, 1715
Directors
KC Zuma (Chairman)*, ZZG Mandela (CEO), BC Van Rooyen*, STZ
Ngubane, M Hulley*
* Non-executive
Transaction sponsor Transfer Office
Arcay Moela Sponsors Computershare Investor Services
(Proprietary) Limited (Proprietary) Limited
Date: 01/10/2010 14:49:01 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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