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JDH - John Daniel Holdings Limited - Unaudited interim results for the 6 month
period ended 31 December 2010 and renewal of cautionary announcement
JOHN DANIEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: JDH - ISIN: ZAE000136677
("the Company" or "JDH" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2010 AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Unaudited Statement of Financial Position as at 31 December 2010
Unaudited Group Restated Audited Group
31 December 2010 Unaudited 30 June 2010
Group
31 December
2009
ASSETS
Non-current assets
Property, plant and 2 493 4 130 3 204
equipment
Intangible assets 936 1 790 936
Deferred tax 3 447 2 062 3 365
Total current assets 1 185 4 801 1 270
TOTAL ASSETS 8 061 12 783 8 775
EQUITY AND LIABILITIES
Equity (970) (6 484) 1 170
Non-controlling interest (1 041) 1 438 (433)
Non-current liabilities
Interest bearing 2 995 249 121
borrowings
Deferred tax - - 182
Total current 7 077 17 580 7 735
liabilities, short term
interest bearing
borrowings and
shareholders` loans
TOTAL EQUITY AND 8 061 12 783 8 775
LIABILITIES
Net asset value (970) (6 484) 1 170
Net tangible asset value (1 906) (8 274) 234
Net asset value per share (0.64) (11.08) 0.78
(cents)
Net tangible asset value (1.27) (14.14) 0.16
per share (cents)
Unaudited Statement of Comprehensive Income for the 6 month period ended 31
December 2010
Unaudited Restated Audited
Group Unaudited Group
31 December Group 30 June
2010 31 December 2010
2009
REVENUE 1 273 3 686 5 714
COST OF SALES (629) (2 951) (4 093)
GROSS PROFIT 644 735 1 621
Other income 312 - 125
Selling, distribution (3 860) (3 625) (10 811)
and administration
expenses
LOSS BEFORE NET FINANCE (2 904) (2 890) (9 065)
COSTS AND TAXATION
Net Finance costs (108) (633) (1 046)
Taxation 264 (94) 1 027
LOSS FOR THE PERIOD (2 748) (3 617) (9 084)
Attributable to non- 609 569 2 439
controlling interest
NET LOSS ATTRIBUTABLE TO (2 139) (3 048) (6 645)
ORDINARY SHAREHOLDERS
BASIC AND HEADLINE LOSS
Basic loss (2 139) (3 048) (6 645)
Headline loss (2 076) (3 048) (5 503)
Basic loss per share (1.42) (5.21) (8.13)
(cents) attributable to
equity holders of the
parent
Diluted loss per share (1.38) (5.21) (8.13)
(cents)
Headline loss per share (1.38) (5.21) (6.74)
(cents) attributable to
equity holders of the
parent
Diluted headline loss (1.34) (5.21) (6.74)
per share (cents)
Number of shares in 150 500 58 520 150 500
issue (`000)
Weighted average number 150 500 58 520 81 704
of shares(`000)
RECONCILIATION BETWEEN
BASIC LOSS AND HEADLINE
LOSS
IAS 33 Basic loss (2 139) (3 048) (6 645)
IAS 16 Loss / (Profit) 63 - -
on disposal of property
plant and equipment
IAS 36 Impairment of - - 516
property, plant and
equipment
IAS 36 Impairment of - - 626
intangible assets
Headline Loss (2 076) (3 048) (5 503)
Unaudited Segmental Information for the period ended 31 December 2010
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 and is evaluated regularly by management.
R`000 R`000 R`000 R`000 R`000
Unaudited
Group 31
December
2010
Biotech- Packag- Corpo- Elimin- Consoli-
nology ing rate ations dated
Revenues 993 280 484 (484) 1 273
TOTAL 1 273
EXTERNAL
REVENUE
Operating (782) (1 730) (392) - (2 904)
loss
Restated
Unaudited
Group 31
December
2009
Biotech- Packag- Corpo- Elimin- Consoli-
nology ing rate ations dated
Revenues 1 072 2 614 - - 3 686
TOTAL 3 686
EXTERNAL
REVENUE
Operating (195) (1 588) - - (1 783)
loss
Unallocated - - - - (1 834)
group loss
Loss for the (3 617)
period
Audited
Group 30
June 2010
Revenues 1 937 3 777 1 353 (1 353) 5 714
TOTAL 5 714
EXTERNAL
REVENUE
Operating (922) (6 369) (11 102) 9 398 (9 065)
loss
Unaudited Statement of Changes in Equity for the Period Ended 31 December 2010
Share Non Accumul- Minority Total
capital distribute- ated loss interest equity
able
reserves
R`000 R`000 R`000 R`000 R`000
Unaudited
Group 31
December 2010
Balance as at 35 665 7 729 (42 225) (432) 737
30 June 2010
Total - - (2 139) (609) (2 748)
comprehensive
loss for the
period
Balance as at 35 665 7 729 (44 364) (1 041) (2 011)
31 December
2010
Restated
Unaudited
Group 31
December 2009
Balance at 30 24 415 13 088 (39 423) 491 (1 429)
June 2009
Prior period - (5 359) 3 843 1 516 -
error
Balance as at 24 415 7 729 (35 580) 2 007 (1 429)
1 July 2009
as restated
Total - - (3 048) (569) (3 617)
comprehensive
loss for the
period
Balance as at 24 415 7 729 (38 628) 1 438 (5 046)
31 December
2009
Audited Group
30 June 2010
Balance as at 24 415 13 127 (35 852) 2 238 3 928
30 June 2008
Prior period - (5 359) 4 737 622 -
error
Balance as at 24 415 7 768 (31 115) 2 860 3 928
1 July 2008
as restated
Total - - (4 504) (853) (5 357)
comprehensive
loss for the
year
Share options - (39) 39 - -
forfeited
Balance as at 24 415 7 729 (35 580) 2 007 (1 429)
1 July 2009
Total - - (6 645) (2 439) (9 084)
comprehensive
loss for the
period
Issue of 11 893 - - - 11 893
shares
Share issue (643) - - - (643)
expenses
Balance as at 35 665 7 729 (42 225) (432) 737
30 June 2010
Unaudited Cash Flow Statement for the Period Ended 31 December 2010
Unaudited Restated Audited
Group Unaudited Group
31 December Group 30 June
2010 31 December 2010
2009
NET CASH (3 152) (160) 21
(OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES
NET CASH INFLOW 378 (203) (200)
/(OUTFLOW)FROM INVESTING
ACTIVITIES
NET CASH INFLOW / 2 874 450 (129)
(OUTFLOW) FROM FINANCING
ACTIVITIES
Increase / (Decrease) in 100 87 (308)
cash and cash
equivalents
Cash and cash 34 339 342
equivalents at the
beginning of the period
Cash and cash 134 426 34
equivalents at the end
of the period
Notes to the Unaudited Financial Statements for the Period Ended 31 December
2010
Prior period errors
The reported prior period figures were restated for:
- IAS 27 requires the allocation of comprehensive losses to the owners of the
parent company and to the non-controlling (minority) interest. The
appropriate allocation of losses to the non-controlling interest is
performed even if the non-controlling interest reflects a deficit balance.
Prior to the amendments to IAS 27, which became effective for financial
periods starting on or after 1 July 2009, the allocation of losses to the
non-controlling interest was limited to the investment. The restatement to
the prior period figures is performed to the extent that the non-
controlling interest for the 2009 and prior financial years reflected a
deficit balance.
- The non-distributable reserve (NDR) was disclosed in prior periods as
arising from goodwill. The NDR has now been transferred to retained income
in the first year of adopting the International Financial Reporting
Standard (IFRS).
Unaudited Restated Audited
Group Unaudited Group
31 December Group 30 June
2010 31 December 2010
2009
STATEMENT OF FINANCIAL
POSITION
Non-controlling interest - (1 516) -
Opening accumulated loss - (3 843) -
Non-distributable - 5 359 -
reserve
STATEMENT OF
COMPREHENSIVE INCOME
Attributed to non- - (78) -
controlling interest
Attributed to equity - 78 -
holders of the parent
Comments
REVIEW OF RESULTS AND FINANCIAL POSITION
The unaudited interim consolidated financial results for the period ended 31
December 2010 represents results from the corporate head office and the group`s
two trading subsidiaries, Vinguard Ltd ("Vinguard") and Lazaron Biotechnologies
(SA) Ltd ("Lazaron").
The group, excluding minorities, has shown an improved loss of R2.7 million
compared to a loss of R3.6 million for the comparative reporting period. The
improved loss is largely attributable to the reduction of the group finance
costs resulting from the settlement, through a conversion to equity, of the
Golden Oak Corporate Advisors (Pty) Ltd interest bearing loan account.
The group operations experienced significant working capital constraints
impacting on the trading performance of both subsidiaries. The impact of the
working capital constraints resulted in a reduction of R2.4 million in group
turnover to R1.3 million for the six month interim period.
In September 2010 the Company entered into a finance restructure agreement with
Escalator Capital Limited ("Escalator") in terms of which the Company secured a
convertible loan facility ("Escalator loan"). The conditions of the finance
restructure agreement included the appointment of, inter alia, three new
executive directors, independent of Escalator, who were appointed to the Company
board on 22 September 2010. All the previous board members resigned during the
period September 2010 to November 2010. Three new independent non executive
directors, detailed below, were subsequently appointed to the board to complete
the composition of the board ("new board").
The new board has been reviewing and evaluating Group operations and Group
structure in order to design and implement a Group restructure strategy with the
objective of returning Group operations to profitability, both organically and
acquisitively if necessary, thereby creating enhanced shareholder value.
A significant weakness identified in both subsidiaries was the lack of
appropriate channels to market. The restructure program involves a reduction in
the Group`s operating expenses and rationalization of the administration and
support functions. It also includes the establishment of a dedicated Lazaron
sales division and development of new markets for the subsidiaries.
The Group restructure process resulted in certain once-off expenses incurred,
such as retrenchment costs, included in the operating expense line. The cost
saving initiatives ensured that, despite the inclusion of once-off restructure
expenses, the total operating costs increased by only 6.5% compared to the
interim period ended 31 December 2009.
The Group statement of financial position reflects a negative net asset value
position due to the continued operating losses. The board obtained a letter of
continued financial support from Escalator to fund the ongoing Group
restructuring efforts.
OPERATIONAL REVIEW
Group Overview
In the period under review JDH continued to conduct business as a venture
capital investment holding company, and will continue to do so, focusing on
investing in companies which have clear African and Global markets, companies
which are niche players and strategic in nature. In particular, these companies
are required to produce products or provide services with high barriers to entry
and have minimal competition. Currently JDH, has two such subsidiaries, namely,
Vinguard and Lazaron.
Vinguard
The Vinguard product has proved its efficacy and table grape farmers reported
excellent results on exports. The product is well placed to penetrate the
significant South African and International export table grape industries.
The company operations involve a relatively extended working capital cycle. The
Group`s restrained working capital position and the resultant inability to fund
production resulted in a significantly reduced market share with a number of
unfulfilled orders. The company`s turnover decreased to R280 000 from R2.6
million in the comparative period.
The reduction in turnover and increased operating expenses, which include
restructuring expenses, has resulted in an operating loss of R1.7 million before
the non-controlling interest.
During the period, the Vinguard business structures and processes have been
rationalized resulting in a reduction of the breakeven point of sales volumes
by 33%.
The business is poised to take advantage of its reduced overhead structure and
the board is continuing the process of evaluation regarding the nature and
structure of the Vinguard business.
Lazaron
Lazaron largely maintained its sales performance with turnover reducing by only
7.4% in the working capital constrained environment. The company contributed 78%
of the group`s turnover.
The restructure process resulted in further investment in the company`s sales
channels resulting in increased operating costs for the period.
The reduction in turnover and increased operating expenses, which include
restructuring expenses, has resulted in an operating loss of R594 000. As
mentioned above the operating expenses include the investment made in the
company`s sales channels with the objective of increasing future sales volumes.
During the period under review the company attended the annual Asia Pacific Cord
Blood Banking Consortium conference as a full member, and is planning to build
on these relationships in the future.
EVENTS AFTER THE REPORTING PERIOD, CONTINGENCIES AND APPOINTMENT OF NEW
DIRECTORS
The terms of the Escalator finance restructure facility were agreed by the
previous board in August 2010, excluding the final terms of the conversion.
The new board, as detailed below, has been reviewing various ways of
strengthening the Company`s statement of financial position. This review process
has, inter alia, resulted in continuing discussions with Escalator to
potentially renegotiate the terms of the Escalator loan including the
possibility of Escalator partially or fully underwriting a rights offer of at
least R10 million, depending on the Company`s funding requirements, at a price
of around 10 cents per share.
The Group statement of financial position includes a shareholder`s loan of R1.5
million. A dispute has arisen during the period regarding the repayment terms of
this loan. In addition, a dispute with an off-shore supplier exists in terms of
which the supplier is claiming an amount due of USD 464 126 ("disputed
liability"). The statement of financial position has provided for an amount of
USD 279 394, converted at the 31 December 2010 spot rate, in respect of this
disputed liability.
In terms of the Group restructure the board of directors was re-constituted and
at the date of this announcement comprised:
Name Designation Date Appointed
TP Gregory Chief Executive Officer 22 September 2010
DP van der Merwe Financial Director 22 September 2010
B Topham Independent Non-Executive 24 November 2010
Director
K Rayner Independent Non-Executive 20 January 2011
Director
RJ Connellan Independent Non-Executive 03 February 2011
Director and Chairman
Messrs S Tshiki and SD Serex, previous non-executive directors, resigned from
the board with effect from 15 October 2010. In addition, Messrs H Minnie and N
Ackermann, resigned from the board on 5 November 2010, following their
resignation as employees of the Group on 29 October 2010.
Mr L Rehrl, one of the three new JDH executive directors appointed on 22
September 2010, resigned as a director of JDH on 04 February 2011 in order to
focus on an executive director position on the board of Lazaron.
The appropriate statutory documentation was submitted to both the JSE and CIPRO
to formally update the company records regarding the abovementioned directors`
changes. At the date of this announcement the changes had not been effected on
the CIPRO system. The board will continue to follow up with CIPRO until the
records are appropriately updated.
ACQUISITIONS AND DISPOSALS
There were no acquisitions or disposals during the period under review.
As noted above, the new board of directors are actively investigating
acquisition opportunities that will improve earnings and cash generation for the
group. It is the intention of the board to develop a robust and complimentary
group of companies which provide sustainable returns.
ISSUE OF SHARES
During the period under review no new shares were issued and the issued share
capital of the company was 150 500 000 ordinary shares and the authorized share
capital was 150 000 000. At the Annual General Meeting of the Company held on 28
January 2011, a special resolution to increase the authorised share capital to 1
000 000 000 shares was passed by the requisite majority of shareholders, which
special resolution is in the process of being registered with CIPRO.
The previous board had issued 500 000 shares in excess of the authorised share
capital and also committed to the issue of 4 640 371 shares as settlement of a
current liability.
Once the special resolution has been registered and the authorised share capital
increased the current board will issue the 500 000 and 4 640 371 shares. Both
these share issues were approved by shareholders during previous financial
periods.
PROSPECTS
The turnaround of current subsidiaries continues through product and market
extension, aggressive trading and cost reductions. This includes the evaluation
of product range extension in both subsidiaries, development of new markets for
both subsidiaries and rationalization of administration and support structures.
Ongoing shareholders support is required to continue to develop the current
companies and look for new opportunities.
At the end of the interim period the Group operations were well placed to take
advantage of the reduced overhead structures.
In addition, initiatives are ongoing and are aimed at possible further
acquisitions with the specific intention of broadening the Group`s interests
within the core focus area of a venture capital investment holding company.
Further expansion is likely in the financial services and property sectors to
broaden the base of the group.
The board is considering a rebranding exercise to emphasize the expanded vision
for and new energy within the Group and its restructured focus as a venture
capital investment holding company.
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.
BASIS OF PREPARATION
The abridged financial statements have been prepared in accordance with IAS 34 -
Interim Financial Reporting in accordance with the accounting policies that
comply with International Financial Reporting Standards and in the manner
required by the Company`s Act and the JSE Listing Requirements. The principle
accounting policies adopted in preparation of these financial statements are
consistent with those of the prior year.
The interim results of the Company were not reviewed or audited by the auditors.
AUDITORS
The company appointed AM Smith and Company Inc as new auditors on 21 September
2010, replacing PKF (CPT) Inc.
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement dated 24 March 2011, shareholders are
advised to continue exercising caution in dealing with the company`s securities
until the terms of the convertible loan with Escalator and the possible rights
offer terms are announced.
For and on behalf of the Board
Johannesburg
31 March 2011
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive Officer), DP
van der Merwe (Financial Director), B Topham*, K Rayner*, (* Independent Non-
executive)
Company Secretary: DP van der Merwe
Registered Office: 4 SS Building 9, Tijger Valley, Silver Lakes Road, Pretoria.
Transfer Secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Marshalltown 2001, PO Box 61051, Marshalltown 2107
Auditors: AM Smith and Company Inc
Sponsor: Arcay Moela Sponsor (Pty) Limited
Date: 31/03/2011 11:19:01 Supplied by www.sharenet.co.za
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