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BIOSCIENCE BRANDS LIMITED - Audited Condensed Consolidated Financial Results for the year ended 30 June 2012

Release Date: 28/09/2012 08:00
Code(s): BIO     PDF:  
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Audited Condensed Consolidated Financial Results for the year ended 30 June  2012

BIOSCIENCE BRANDS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/005805/06)
("BioScience" or "the Company")
ISIN Code: ZAE000115036 Share code: BIO

AUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS
FOR THE YEAR ENDED 30 JUNE 2012

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2012

                                                                    30 June 2012    30 June 2011
                                                                               R               R
ASSETS
Non-current assets                                                    37 944 572      39 401 277
Plant and equipment                                                      393 095         543 032
Intangible assets                                                     35 732 938      37 232 683
Deferred tax                                                           1 818 539       1 625 562
Current assets                                                        13 227 017      12 382 447
Inventories                                                            5 708 267       4 574 525
Trade and other receivables                                            7 452 671       7 738 342
Cash and cash equivalents                                                 66 079          69 580
Total assets                                                          51 171 589      51 783 724
EQUITY AND LIABILITIES
Total equity                                                          13 366 235      17 922 031
Issued capital                                                           262 136         262 136
Share premium                                                        113 138 607     113 138 607
Share-based payments reserve                                           1 638 352               
Retained loss                                                       (101 672 860)    (95 478 712)
Non-current liabilities                                                6 519 223       2 037 328
Loans and borrowings                                                   6 519 223       2 037 328
Current liabilities                                                   31 286 131      31 824 365
Trade and other payables                                              22 821 151      15 794 478
Short-term portion of loans and borrowings                             2 450 532       3 672 594
Taxation payable                                                       1 989 445       2 220 826
Bank overdraft                                                         4 025 003      10 136 467
Total equity and liabilities                                          51 171 589      51 783 724

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                   
FOR THE YEAR ENDED 30 JUNE 2012  
                                                                   
                                                                    30 June 2012    30 June 2011   
                                                                               R               R   
Revenue                                                               24 515 103      29 762 219   
Trading Loss                                                          (2 612 708)     (9 859 541)   
Share-based payment expense                                           (1 638 352)                 
Brand Impairments                                                                   (14 926 333)   
Operating loss                                                        (4 251 060)    (24 785 874)   
Net financing costs                                                   (2 136 065)     (1 833 092)   
Loss before taxation                                                  (6 387 125)    (26 618 966)   
Taxation                                                                  192 977         279 036   
Loss and comprehensive loss for the year                              (6 194 148)    (26 339 930)   
Loss attributable to:                                                                               
Equity holders of the parent                                          (6 194 148)    (26 339 930)   
Basic and diluted loss per share (cents)                                   (0.23)          (1.00)   
Headline earnings reconciliation:                                                                   
Loss attributable to equity holders of the parent                     (6 194 148)    (26 339 930)   
Adjusted for:                                                                                       
Profit on sales of intangible assets (tax impact is nil)                (420 379)                 
Loss on sale of plant and equipment (tax impact is nil)                        1           41 760   
Impairment of intangible assets (tax impact is nil)                                   14 926 333   
Headline loss                                                         (6 614 526)    (11 371 837)   
Headline and diluted loss per share (cents)                                (0.24)          (0.43)   
Weighted average number of shares on which loss and headline loss                                   
per share are based                                                2 719 510 467   2 621 362 758   


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2012
                                                                    30 June 2012   30 June 2011
                                                                               R              R
Cash flows from (used in) operating activities:
Cash operating loss                                                   (2 820 623)    (9 502 667)
Working capital requirements                                           6 000 185      2 887 764
Cash generated from (used in) operations                               3 179 562     (6 614 903)
Financing costs and taxation                                          (2 198 246)    (1 833 092)
Cash flows from (used in) operating activities                           981 316     (8 447 995)
Cash flows from investing activities:
Plant and equipment acquired                                             (53 310)       (37 960)
Proceeds on disposal of plant and equipment                                             90 831
Intangible assets acquired                                               (79 876)             
Proceeds on disposal of intangible assets                              2 000 000      2 500 000
Cash flows from investing activities                                   1 866 814      2 552 871
Cash flows from financing activities                                   3 259 833      4 943 807
Net increase (decrease) in cash and cash equivalents                   6 107 963       (951 317)
Cash and cash equivalents at beginning of year                       (10 066 887)    (9 115 013)
Cash and cash equivalents at end of year                              (3 958 924)   (10 066 887)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                   
FOR THE YEAR ENDED 30 JUNE 2012                                                    
                                                                    30 June 2012    30 June 2011   
                                                                               R               R   
Share capital                                                                      
Balance at beginning and end of the year                                 262 136         262 136   
Share premium                                                                      
Balance at beginning and end of the year                             113 138 607     113 138 607   
Share-based payments reserve                                                       
Balance at beginning of the year                                                                 
Issue of new shares                                                    1 638 352                  
Balance at end of the year                                             1 638 352                  
Retained Loss                                                                      
Balance at beginning of the year                                     (95 478 712)    (69 138 782)   
Comprehensive loss for the year                                       (6 194 148)    (26 339 930)   
Balance at end of the year                                          (101 672 860)    (95 478 712)   
Total equity                                                          13 366 235      17 922 031   

OTHER SALIENT FEATURES                                              30 June 2012    30 June 2011   
Net asset value per share (cents)                                           0.51            0.68   
Net tangible asset value per share (cents)                                 (0.85)          (0.74)   
Number of shares in issue at period end                            2 621 362 758   2 621 362 758   
Depreciation (R)                                                         203 246         286 910   
Lease commitments (R)                                                              
- land and buildings                                                                    133 148   
Net financing costs (R)                                                2 136 065       1 833 092   
Interest paid                                                          2 136 070       1 833 092   
Less: Interest received                                                       (5)                 

COMMENTARY

The board presents the results for the year ended 30 June 2012.

1.   BASIS OF PREPARATION AND ACCOUNTING POLICIES

     The condensed consolidated financial results of the Company and its subsidiaries (together referred to as the "Group") has
     been prepared in accordance with the framework concepts and the measurement and recognition requirements of International
     Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Practices Board, the Companies Act
     of South Africa, including section 29(1) of the Companies Act, the disclosure requirements of the Listing Requirements of the
     JSE Limited, and the information as required by IAS 34: Interim Financial Reporting. The condensed consolidated financial
     statements were prepared under the supervision of the financial director, R Jubber.

     BioScience Brands Limited ("BioScience") has adopted all the statements and interpretations issued and effective during the
     current period by the International Accounting Standards Board ("IASB"). The accounting policies adopted are consistent with
     those applied in the previous financial year and are in compliance with IFRS.

2.   RESULTS

     BioScience initiated a far reaching restructuring at the end of the prior financial year. This aimed at significantly reducing the
     cost base of the business, whilst enhancing the footprint of the Group's products in the market. This was achieved through the
     implementation of the Management Agreement concluded between BioScience and Akacia Heathcare (Pty) Ltd ("Akacia") on
     1 April 2011 and as announced on SENS on 18 February 2011 (the "Management Agreement").

     Over and above the operational restructuring, the Board has undertaken initiatives to redress legacy issues in 2012, remaining
     from pre-2008 when the Company was known as Wellco Health Limited ("Wellco"). A favourable arrangement with Wellco's
     bankers was reached resulting in a R3m reduction in the amount owing with structured repayment terms. This is reflected in a
     reduction in the bank overdraft of R6m and a corresponding increase in borrowings of R3m. In addition, and as announced
     earlier, the board has explored other working capital opportunities, and has initiated a programme to streamline and simplify its
     trading activities with the liquidation of the old Wellco subsidiaries, Vitamology (Pty) Ltd and Rare Earth Minerals (Pty) Ltd on
     3 July 2012 and as announced on SENS on 27 July 2012.

     BioScience has been successful in improving the turnover of Muscle Science and its related brands during the 2012 financial
     year by 4.7% in a market that is increasingly competitive. Bioharmony grew by 13% in 2012 when the Holford licensed range is
     excluded from the comparative 2011 financial year. This Holford license was the subject of a dispute which was settled in 2011
     with the last deliveries to customers being in December 2010. Bioharmony, whilst enjoying good distribution, trades in a high
     discretionary spend sector which has seen significant down-trading and a slow-down in consumer offtake. Nevertheless
     Bioharmony's sales grew by 12% when comparing the second half of the 2012 financial year with the first half, showing that
     the brand is gathering momentum, which faltered when the Holford licence ceased in the previous financial year.

     Muscle Science sales are currently being further enhanced by the launch of the MSP range in June 2012, focusing on speed
     and power and targeting rugby and team sports, and the Muscle Science Ambassador Programme, a direct to consumer
     internet sales initiative based on the recommendations of high profile Muscle Science Ambassadors.

     Gross Margins have improved by 6.1% over 2011.

     The trading loss of the Group before share-based payments expense, impairments, interest and taxes for the year of R 2.6m is
     a R 7.2m improvement on 2011. This is a result of the improved margins and the reduced cost base, even though the turnover
     was 17.6% down on 2011 due to the cessation of sales of the Holford licensed products under Bioharmony.

     The net loss for the year includes an expense of R 1.6m for the shares to be issued to Akacia as part of the Management
     Agreement and as approved by shareholders on 27 February 2012 as well as higher finance charges than 2011. The higher
     finance charges are due to the debt financing from Akacia and Herbal-Homeopathic (Pty) Ltd as announced on SENS on
     18 February 2011.

     Loss per share has decreased from 1.00 cents per share in 2011 to 0.23 cents per share, with headline loss per share
     decreasing from 0.43 cents per share to 0.24 cents per share.

3.   SEGMENTAL REPORTING

     The Group's brands operate in one market segment and sales are made in South Africa.

     The Group makes sales to three customers who individually account for more than 10% of the Group's sales; sales to these
     customers respectively in the current year were:
        customer 1: R 9.2m (38%) (2011: R 12.3m (41%)),
        customer 2: R 5.0m (20%) (2011: R 4.7m (16%)), and
        customer 3: R 4.3m (18%) (2011: R 4.4m (15%)).

4.   ACQUISITIONS AND DISPOSALS

     BioScience disposed of the Nutrimax brand for R 2.0m on 1 June 2012, which was settled by way of R 2m in cancellation of
     debt owing to Akacia and/or its subsidiaries or related companies. The terms of the transaction also provided that BioScience
     has the right but not the obligation to reacquire Nutrimax from Akacia one year following the effective date but not more than
     two years after the effective date, at its discretion, subject to that there should be no amounts owing to Akacia by BioScience
     that are either overdue or outside of the terms of the Management Agreement and Loan Agreement signed by Akacia and
     BioScience on 5 April 2011. The repurchase price for Nutrimax would be based on the same valuation method as the original
     purchase by Akacia.

5.   CONTINGENCIES AND COMMITMENTS

     Other than a 2006 claim for R 1 425 417 by a previous supplier against Bioharmony, which the directors believe will be
     successfully defended, there are no other contingencies and commitments that the directors are aware of.

6.   DIVIDENDS

     No dividend has been declared for the period under review (2011: R nil)

7.   BOARD CHANGES

     Richard Jubber was appointed Financial Director on 1 March 2012. Prior to this, M Allan had been appointed temporarily as
     Financial Director.

8.   SHARE CAPITAL

     There were no shares issues during the year. A share-based payments reserve of R 1.6m has been created to account for the
     expense related to shares due to be issued to Akacia in terms of the management agreement.

9.   PROSPECTS AND GOING CONCERN

     BioScience has completed its restructuring and dealt with some of the significant legacy issues remaining from the old Wellco.
     The cost base of the business has been reduced and margins have been improved, while the old Wellco overdraft has been
     favourably renegotiated. Whilst the Muscle Science brands are achieving their sales targets, the Bioharmony brand has not as
     yet delivered the sales growth necessary to reach the sales level it enjoyed in 2010 and most of 2011 when the licensed
     Holford products were also part of the portfolio. Growth in this brand and Menoclove remains a key objective based on
     aggressive marketing and promotion at key retailers. Cashflow remains severely constrained and as a result the material
     uncertainty of the Group's ability to continue as a going concern and the emphasis of matter included in the audit report also
     remain. BioScience is grateful to Akacia for the support received in managing these constraints through further advances on
     the loan and deferment of loan and management fee payments.

     BioScience is now poised to grow through acquisition. As a result the directors are aggressively pursuing a number of
     acquisition opportunities, to be financed through share issues and placement of shares for cash, of complementary brands and
     businesses which offer synergies to the existing business, and are confident that one or more of these acquisitions coupled
     with some ongoing organic growth of existing brands will result in the Group continuing as a going concern. The Company and
     Group financial statements have been prepared on this basis.

10. AUDITED RESULTS  AUDITOR'S OPINION

     The auditors, Deloitte & Touche, have issued their opinion on the Group's financial statements for the year ended
     30 June 2012. The audit was conducted in accordance with International Standards on Auditing. They have issued an
     unqualified audit opinion with an emphasis of matter relating to the material uncertainty of the Group's ability to continue as a
     going concern. These summarised financial statements have been derived from the Group financial statements and are
     consistent in all material respects, with the Group financial statements. A copy of their audit report is available for inspection at
     the Company's registered office. Any reference to future financial performance included in this announcement has not been
     reviewed or reported on by the Company's auditors.

By order of the Board
MG Allan
Chief Executive Officer

27 September 2012
Johannesburg

Company Secretary and Registered Office
Statucor (Pty) Ltd
4 Brewery Street, Isando, 1609
PO Box 195, Isando, 1600

Directors
JJ Fenster (Chairman)*#, MG Allan (Chief Executive Officer), 
RP Jubber (Financial Director), Y Bhayat*, S Schutz*.
(* Non-executive) (# Independent)

Transfer Office
Computershare Investor Services (Pty) Ltd

Designated Advisor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 28/09/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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