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BEG - Beige Holdings Limited - Reviewed consolidated results for the year ended

Release Date: 30/06/2011 11:56
Code(s): BEG
Wrap Text

BEG - Beige Holdings Limited - Reviewed consolidated results for the year ended 31 March 2011 and declaration of maiden ordinary cash dividend Beige Holdings Limited (Incorporated in the Republic of South Africa) (Registration No: 1997/006871/06) Share code: BEG ISIN code: ZAE000034161 ("Beige" or "the company") REVIEWED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2011 AND DECLARATION OF MAIDEN ORDINARY CASH DIVIDEND Condensed Consolidated Statement of Financial Position as at 31 March 2011 Reviewed Audited 31 March 2011 31 March 2010
R`000 R`000 ASSETS Non-current assets 260 454 249 938 Property, plant and equipment 156 589 145 063 Intangible assets 88 205 90 581 Other receivables 410 -- Deferred income tax assets 15 250 14 294
Current assets 192 516 224 964 Inventories 82 726 88 242 Trade and other receivables 105 274 130 952 Cash and cash equivalents 4 516 5 770 Total assets 452 970 474 902 EQUITY AND LIABILITIES Equity attributable to equity holders 221 533 200 215 of the company Ordinary share capital 15 396 15 399 Ordinary share premium 179 570 268 968 Other reserves 18 442 10 842 Retained earnings/(loss) 8 125 (94 994) Non-controlling interest 2 261 2 602 Total equity 223 794 202 817 Non-current liabilities 34 025 35 261 Borrowings 25 829 32 317 Deferred income tax liabilities 8 196 2 944 Current liabilities 195 151 236 824 Trade and other payables 128 095 143 729 Borrowings 28 239 49 206 Call option liability -- 696 Current income tax liabilities 1 109 1 893 Bank overdrafts 37 708 41 300 Total liabilities 229 176 272 085 Total equity and liabilities 452 970 474 902 Ordinary shares (000`s) In issue (Note 1) 1 539 510 1 539 810 Diluted (Note 2) 1 539 510 1 539 810 Net asset value per share information (net of non-controlling interest) Net asset value per share (cents) 14.39 13.00 Net tangible asset value per share 8.66 6.20 (cents) Diluted net asset value per share 14.39 13.00 (cents) Diluted net tangible asset value per 8.66 6.20 share (cents) Condensed Consolidated Statement of Comprehensive Income for the year ended 31 March 2011 Reviewed Audited 31 March 31 March 2010 2011 R`000 R`000
Revenue 594 687 603 803 Cost of sales (485 537) (486 943) Gross profit 109 150 116 860 Distribution costs (17 510) (15 329) Administrative expenses (65 715) (72 274) Operating profit 25 925 29 257 Gain on the re-measurement of call option 696 1 666 liability Profit before finance costs 26 621 30 923 Finance income 1 041 452 Finance costs (10 651) (11 407) Profit before income tax 17 011 19 968 Income tax expense (3 707) (5 858) Profit for the year 13 304 14 110 Other comprehensive income: Gain on property valuation 9 287 -- Income tax relating to components of other (1 687) -- comprehensive income Other comprehensive income for the year, 7 600 -- net of tax Total comprehensive income for the year 20 904 14 110 Total comprehensive income attributable to: Equity holders of the company 21 245 13 394 Non-controlling interest (341) 716 20 904 14 110 Profit for the year 13 304 14 110 Non-controlling interest 341 (716) Total comprehensive income for the year 13 645 13 394 attributable to equity holders of the company Headline earnings adjustments: Profit on sale of property, plant and -- (48) equipment after tax Profit on sale of investment after tax -- (24) Headline earnings for the year attributable 13 645 13 322 to equity holders of the company Ordinary shares (000`s) 1 539 742 1 584 384 Weighted average shares in issue (Note 1) Diluted (Note 2) 1 539 742 1 584 384 Earnings per share information Earnings per share (cents) 0.89 0.85 Headline earnings per share (cents) 0.89 0.84 Diluted earnings per share (cents) 0.89 0.85 Diluted headline earnings per share (cents) 0.89 0.84
Notes 1 92 311 517 (2010: 91 716 667) shares held as treasury stock have been subtracted from the respective share totals for purposes of calculating earnings per share information. 2. Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has one category of dilutive potential ordinary shares being share options. For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company`s shares) based on the monetary value of the subscription rights attached to the outstanding share options. The number of shares calculated is compared with the number of shares that would have been issued assuming the exercise of the share options. Diluted earnings, and the weighted average number of ordinary shares for 2011, have not been adjusted with regard to the share options as the effect of the share options is anti-dilutive. These share options were exercisable up to and including 31 March 2011 and have therefore subsequently expired post year end. Condensed Consolidated Statement of Cash Flows for the year ended 31 March 2011 Reviewed Audited 31 March 2011 31 March 2010 R`000 R`000 Cash flows from operating activities: Net cash generated from operating 45 135 24 114 activities Cash flows from investing activities: Net cash used in investing activities (13 794) (11 194) Cash flows from financing activities: Net cash used in financing activities (29 003) (27 776) Net increase/(decrease) in cash, cash 2 338 (14 856) equivalents and bank overdrafts Cash, cash equivalents and bank (35 530) (20 674) overdrafts at the beginning of the year Cash, cash equivalents and bank (33 192) (35 530) overdrafts at the end of the year Condensed Consolidated Statement of Changes in Equity for the year ended 31 March 2011 Ordinar Ordinary Ordinar Other Retain Total Non- Total y share treasury y share reserv ed control
capital shares premium es (loss) ling / R`000 interes R`000 R`000 R`000 R`000 R`000 earnin t gs
R`000 R`000 Balance at 31 16 885 (874) 274 476 10 842 (99 201 472 -- 201 March 857) 472 2009 Comprehen sive income Profit -- -- -- -- 13 394 13 394 716 14 110 for the year Total comprehen -- -- -- -- sive 13 394 13 394 716 14 110 income Transacti ons with owners Acquisiti -- 1 886 1 886 on of -- -- -- -- -- subsidiar y Cancellat (569) -- (5 120) -- (8 (14 -- (14 ion of 531) 220) 220) shares Treasury -- (43) (388) -- (431) -- (431) shares -- held by subsidiar y Total (14 1 886 (12 transacti (569) (43) (5 508) -- (8 651) 765) ons with 531) owners Balance (94 200 215 2 602 202 at 31 16 316 (917) 268 968 10 842 994) 817 March 2010 Comprehen sive income Profit/(l -- -- -- -- 13 645 13 645 (341) 13 304 oss) for the year Other comprehen sive income Gain on -- -- -- 7 600 -- 7 600 -- 7 600 property revaluati on Total -- -- -- 7 600 -- 7 600 -- 7 600 other comprehen sive income Total -- -- -- 7 600 13 645 21 245 (341) 20 904 comprehen sive income/(l oss) Transacti ons with owners Reclassif -- -- (89 -- 89 474 -- -- -- ication 474) of fair value adjustmen t (Note 1) Share (6) -- (24) -- -- (30) -- (30) buyback (Note 2) Treasury -- (6) (24) -- -- (30) -- (30) shares acquired by subsidiar y (Note 2) Share -- -- (1) -- -- (1) -- (1) issue costs (Note 2) Conversio 9 -- 125 -- -- 134 -- 134 n of preferenc e shares (Note 2) Total 3 (6) (89 -- 89 474 73 -- 73 transacti 398) ons with owners Balance 16 319 (923) 179 570 18 442 8 125 221 533 2 261 223 at 31 794 March 2011 Notes 1 Reclassification of fair value adjustment previously included in share premium in respect of Crystal Pack in order to reflect the statutory share premium. 2 Refer to note 11 in the commentary. Condensed Consolidated Outsource Segmental Analysis Manufactur Packaging Other Group ing R`000 R`000 R`000 R`000
Revenue - reviewed as at 31 March 490 874 103 813 -- 594 687 2011 - audited as at 31 March 490 359 113 444 -- 603 803 2010 Operating profit/(loss) - reviewed as at 31 March 21 768 3 235 922 25 925 2011 - audited as at 31 March 34 036 (2 439) (2 340) 29 257 2010 Net finance costs - reviewed as at 31 March (5 872) (1 691) (2 047) (9 610) 2011 - audited as at 31 March (5 566) (2 649) (2 740) (10 955) 2010 Profit/(loss) before tax - reviewed as at 31 March 15 895 1 544 (428) 17 011 2011 - audited as at 31 March 28 470 (5 087) (3 415) 19 968 2010 Total assets - reviewed as at 31 March 328 230 123 031 1 709 452 970 2011 - audited as at 31 March 352 603 120 262 2 037 474 902 2010 Total liabilities - reviewed as at 31 March 140 786 42 660 45 730 229 176 2011 - audited as at 31 March 173 163 44 934 53 988 272 085 2010 Additional information Reviewed Audited
Year ended Year ended 31 March 2011 31 March 2010 R`000 R`000 Amortisation of intangible assets 2 376 2 376 Depreciation of property, plant 11 557 9 766 and equipment Purchase of property, plant and 13 794 8 512 equipment Sale of property, plant and -- 148 equipment Sale of investment -- 163 Operating lease commitments 23 433 57 358 Commitments to purchase property, 33 250 -- plant and equipment (Refer to note 13 in the commentary) COMMENTARY The directors of Beige and its subsidiaries are pleased to announce the reviewed results for the year ended 31 March 2011. These results show the consolidated position of Beige. 1 Nature of business The Beige Group primarily operates as a contract and packaging manufacturer, manufacturing and distributing cosmetics, soaps, laundry soaps, packaging and allied products on behalf of brand owners for both the local and international home and personal care industry and is the largest fully empowered contract manufacturer in the South African home and personal care industry. 2 Listing information Beige is listed on the Alternative Exchange ("AltX") of the JSE Limited under the share code: BEG. The company`s ISIN number is ZAE 000034161. 3 Basis of preparation The condensed consolidated financial statements for the year ended 31 March 2011 were prepared in accordance with IAS 34: Interim Financial Reporting, Section 8.57 of the Listing Requirements of the Johannesburg Stock Exchange ("the JSE"), and the requirements of the Companies Act of South Africa. The principal accounting policies used in the preparation of the results for the year ended 31 March 2011 are consistent with those applied for the year ended 31 March 2010. During the year, the Group adopted all the IFRS and interpretations being effective and deemed applicable to the Group. None of these had a material impact on the results of the Group. 4 Reviewed results PricewaterhouseCoopers Inc, the Group`s independent auditors, have reviewed the condensed consolidated financial information for the year ended 31 March 2011, that comprise the condensed consolidated statement of financial position at 31 March 2011, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of changes in equity, and the condensed consolidated statement of cash flows for the year then ended, and have expressed an unqualified and unmodified review opinion on these condensed consolidated financial statements. A copy of the review opinion is available for inspection at the company`s registered office. 5 Segment reporting The chief operating decision-maker has been identified as the board of directors. The board considers the business from a product perspective, from which management assesses the performance of outsource manufacturing and packaging products. Management has determined the operating segments based on these reports. 6 Business review During the year under review, most of the operating units have performed in line with or slightly better than expected in the economic climate, maintaining similar revenue levels to the prior comparative period although margin pressure was experienced. The Durban operation had a continued increase in demand through new customers but declines in demand from existing customers as well as unpredictable demand levels during this period. The Chloorkop operation has continued to show substantially improved operational and financial results, whilst Crystal Pack has shown a significant improvement from the prior year comparative period. Herbal & Homeopathic has been included for a full year following the acquisition of a controlling interest in the business with effect from October 2009. During the year under review, Beige opened two repacking facilities through which it repacks damaged goods on behalf of an international brand owner. These facilities, based in Pietermaritzburg and Johannesburg, have already contributed profit to the Group on start up and are expected to become more profitable in future years as operations grow. In addition, Beige has continued to make additional investments in infrastructure and capacity, and both the Durban and Johannesburg operations have been expanded. The Group is experiencing a gradual return to growth in demand for certain of the goods and services that it provides, although the year showed a continued substitution of luxury products for more affordable products by consumers. The Board is pleased to report that following a BBBEE Audit Rating by Empowerdex, the Group has once again been awarded an "AA" rating level (Level 3 contributor) in terms of the Department of Trade and Industry`s Code of Good Practice. 7 Financial and operational overview The results for the year ended 31 March 2011 reflect the continued difficult trading environment in the home and personal care markets. Turnover has been largely maintained, with a marginal decline of 1.5% against the comparative year. Gross profit margin declined from 19.4% in the prior year to 18.4% this year. This decline can be attributed to the product mix changes to more affordable products as well as a move from the traditional long production runs to just-in-time short production runs for large customers. This directly impacted operating profit which is down 11.4% on the prior year. Operating margins decreased from 4.8% in the prior year to 4.4%, which was primarily as a result of the lower gross profit. This reduction in operating profit has been mitigated to some extent by the 9.1% reduction in administration costs compared to the prior year, achieved due to effective cost control within the Group, which should benefit the Group going forward. Distribution costs have increased by 14.2% due to product mix changes and the general increases in the costs of product distribution. Reduction in net finance costs to R9.6 million (2010: R11.0 million) was due to the continuing lower interest rate environment and a decrease in Group borrowings, partly attributable to the redemption of the preference shares and improved management of working capital. The effective tax rate is affected by permanent differences due to the dividends on preference shares not being deductible for tax and other allowable permanent tax deductions. The other comprehensive income for the year arises on the fair value revaluation, net of tax, of the existing Chloorkop property. Subsequent to year end, Beige entered into a joint venture agreement in terms of a sale and leaseback of the Chloorkop property, for a consideration amounting to R42.8 million. In terms of the accounting policies of the Group the after tax fair value adjustment of R7.6 million has been accounted for in other comprehensive income Cash generated from operations improved substantially from R24.1 million to R45.1 million, which further demonstrates the improvement in working capital management throughout the Group. The Group also increased its investment in plant and equipment during the year by R13.8 million from R8.5 million in the prior year. Repayment of borrowings of R29.0 million has increased marginally compared to R27.8 million in the prior year. Borrowings reduced substantially from the prior period partly due to the preference shares being redeemed or converted into ordinary shares during the period, other than those preference shareholders who had committed to underwrite the rights offer, and the final repayment of obligations in relation to the acquisition of Quality Products. Overall the Group is in a much stronger position than in the comparative period as represented by a stronger balance sheet, with tangible net asset value increasing by 21.6% from that of the prior comparative period. 8 Prospects The Group expects to see an increased recovery in demand for its products and a return by consumers to luxury products as the economy recovers. Improved performance in the coming year is expected with further integration of Group facilities planned and the strengthening of management at these facilities. Beige has started to unlock synergies and cost benefits. 9 Contingent assets As announced in prior years, Beige has initiated criminal and civil legal actions against all parties who were involved in the material irregularities at Crystal Pack and steps to recover all amounts involved, including costs and damages are ongoing. No asset in relation to this claim has been recognised in these results or previous results as the claim is still in progress. Beige has assisted with the appointment and funding of forensic auditors. As advised previously, the company has managed to recover 56 887 561 shares from some of the members of the CAVI consortium, that were issued in relation to the profit warranty, but to date, has been unable to enter into agreements with the remaining parties to recover the remaining 18 892 490 profit warranty shares. These shares were subsequently sold by the remaining parties. 10 Dividends The third and final preference dividend of 8.40 cents per share was paid to all preference shareholders recorded in the preference share register of the company at the close of business on Friday, 3 September 2010. The board is pleased to declare a maiden ordinary cash dividend of 0.15 cents per ordinary share in respect of the year ended 31 March 2011. The ordinary cash dividend will be payable to shareholders recorded in the share register of the Company at the close of business on Friday, 22 July 2011 and the directors confirm that the company will satisfy the solvency and liquidity test immediately after completing the distribution. Salient dates: 2011 Last day to trade "cum" the cash dividend ("LDT"): Friday, 15 July Date trading commences "ex" the cash dividend: Monday, 18 July Record date for payment of the cash dividend: Friday, 22 July Date of payment of the cash dividend: Monday, 25 July Share certificates may not be dematerialised or rematerialised between Monday, 18 July 2011 and Friday, 22 July 2011 both dates inclusive. 11 Cancellation and issue of shares (i) Odd Lot Offer During the year under review, the company and its subsidiaries repurchased 1 190 814 shares in terms of an odd lot offer to shareholders holding 5 000 or less shares in the capital of the company. 594 850 of these shares were purchased by a wholly-owned subsidiary of the company, and are held as treasury shares, whilst the remaining 595 964 shares were cancelled. (ii) Conversion and Redemption of Preference shares Preference shareholders holding 127 305 preference shares elected to convert their preference shares into ordinary shares, resulting in the company issuing 891 135 ordinary shares at 15 cents per share, based on a conversion ratio of seven new ordinary shares for every one preference share held. The remaining 14 158 409 preference shares were redeemed by the company with effect from 25 October 2010 at a price of R1.0698, which amount included interest of 1.98 cents per share. 12 Changes to the board Mr M Fandeso, the Chairman of the Board, has been designated as Independent Non-executive Chairman with immediate effect following his resignation from Thebe Investment Corporation (Pty) Ltd. Ms L Gadd, previously an alternate director to Messrs V Khanyile and M Fandeso, was appointed to the board with effect from 19 April 2010 and Mr V Khanyile was appointed as alternate director to Ms L Gadd and Mr M Fandeso. Mr V Khanyile resigned as an alternate director on 1 September 2010. Mr James Alderslade, alternate director to Mr Monwabisi Fandeso, resigned from the board with effect from 10 November 2010. 13 Subsequent events (i) Restructure of Property Interests and Property Acquisition Following the year end, Beige entered into a joint venture agreement with True Group Limited which joint venture will purchase Beige`s existing property at Chloorkop Extension 1 from a Beige subsidiary for a purchase consideration of R42.8 million and as well as the property occupied by Beige`s Durban-based Quality Products factory at 174 Chamberlain Road, Jacobs, Durban from Metboard Properties Limited for a purchase consideration of R33.3 million. The transaction will result in the existing Chloorkop property debt being repaid, whilst new property funding has been secured by the joint venture. The rationale for the transaction is to enable Beige to own its factory premises via the joint venture, as opposed to leasing those properties where large investments in infrastructure and plant and equipment have and will continue to be made. This strategy is expected to maximize the utilisation of the company`s existing assets, avoid the losses, disruption and costs associated with a large scale factory move and ensure sustainable production for its customers. In addition, the restructure will result in release of approximately R9.5 million in cash to the Beige Group, which cash will be used for working capital and expansion purposes. The restructure and acquisition is expected to be effective from 1 August 2011, once the transfers of the properties are effected through the Deeds Office and other suspensive conditions have been fulfilled. (ii) Rights Offer Subsequent to year end, Beige issued 25 000 000 new variable rate, cumulative, non-participating, convertible, redeemable preference shares ("preference share(s)") at an issue price of R1.00 per preference share. The preference shares were issued pursuant to a partially underwritten rights offer to ordinary shareholders of 25 000 000 preference shares in the ratio of 1.53203 preference shares for every 100 Beige ordinary shares. The rights offer was oversubscribed by 30%. By order of the Board Monwabisi Fandeso Mark Di Nicola Chairman Chief Executive Officer 30 June 2011 Johannesburg Company Secretary and Registered Office Arcay Client Support (Pty) Ltd (Registration number 1998/025284/07) Arcay House, Number 3 Anerley Road, Parktown, 2193 PO Box 62397, Marshalltown, 2107 Directors MP Fandeso*#; MM Di Nicola Chief Executive Officer; MC Easter Financial Director; MM du Preez*; L Gadd*; LI Karp*#; RH Weissenberg*# (* Non-executive) (# Independent) Designated Advisor Transfer Office Arcay Moela Sponsors (Pty) Ltd Link Market Services South Auditors Africa (Pty) Ltd PricewaterhouseCoopers Inc Date: 30/06/2011 11:56:01 Supplied by www.sharenet.co.za 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. 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