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Reviewed Consolidated Results for the Three Month Period Ended 30 June 2012
Beige Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1997/006871/06)
Share code: BEG ISIN code: ZAE000034161
Share code: BEGP2 ISIN code: ZAE000154787
("Beige" or "the company")
REVIEWED CONSOLIDATED RESULTS FOR THE THREE MONTH PERIOD ENDED 30 JUNE 2012
Pursuant to the change in control of Beige as announced earlier this year, it should be noted that the
company has changed its year end from 31 March to 30 June each year in order to align its year end with
that of the new controlling shareholder. Accordingly, Beige will be preparing financial statements for the
three month period ended 30 June 2012 and thus the results of the Beige group presented below will not be
comparable in many instances to the prior year. The next reporting period will be for the six months ending
31 December 2012.
Condensed Consolidated Statement of Financial Position as at 30 June 2012
Reviewed Audited
30 June 2012 31 March 2012
R’000 R’000
ASSETS
Non-current assets 250 470 249 898
Property, plant and equipment 172 315 170 856
Intangible assets 55 365 55 608
Investment in joint venture (Note 1) 4 165 6 295
Other receivables 271 299
Deferred income tax assets 18 354 16 840
Current assets 242 935 224 754
Inventories 116 763 105 000
Trade and other receivables 120 288 113 224
Cash and cash equivalents 5 884 6 530
Total assets 493 405 474 652
EQUITY AND LIABILITIES
Equity attributable to equity holders of the company 187 714 191 296
Ordinary share capital 15 442 15 442
Ordinary share premium 179 898 179 898
Other reserves 13 215 13 215
Retained loss (20 841) (17 259)
Non-controlling interest 1 703 1 946
Total equity 189 417 193 242
Non-current liabilities 91 122 89 707
Borrowings 81 784 80 083
Deferred income tax liabilities 9 338 9 624
Current liabilities 212 866 191 703
Trade and other payables 168 130 141 814
Borrowings 8 933 9 335
Current income tax liabilities 1 508 1 313
Bank overdrafts 34 295 39 241
Total liabilities 303 988 281 410
Total equity and liabilities 493 405 474 652
Ordinary shares (000’s)
In issue (Note 2) 1 544 197 1 544 197
Net asset value per share information (net of non-controlling
interest)
Net asset value per share (cents) 12.16 12.39
Net tangible asset value per share (cents) 8.57 8.79
Condensed Consolidated Statement of Comprehensive Income for the three months ended 30 June
2012
Reviewed Audited
30 June 2012 31 March 2012
R’000 R’000
Revenue 182 902 618 469
Cost of sales (160 453) (511 093)
Gross profit 22 449 107 376
Distribution costs (4 584) (16 988)
Administrative expenses (20 335) (71 154)
Operating (loss)/profit before impairment (2 470) 19 234
Impairment of intangible asset (Note 4) - (31 632)
Operating loss (2 470) (12 398)
Finance income 248 421
Finance costs (3 278) (12 237)
Loss after net financing costs (5 500) (24 214)
Share of profit/(loss) of joint venture 57 (656)
Loss before income tax (5 443) (24 870)
Income tax expense 1 618 (2 846)
Loss for the period/year (3 825) (27 716)
Other comprehensive income:
Other comprehensive income for the period/year, net of tax - -
Total comprehensive loss for the period/year (3 825) (27 716)
Total comprehensive loss attributable to:
Equity holders of the company (3 582) (27 401)
Non-controlling interest (243) (315)
(3 825) (27 716)
Loss for the period/year (3 825) (27 716)
Non-controlling interest 243 315
Loss for the period/year attributable to equity holders of the
company (3 582) (27 401)
Headline earnings adjustments:
Total comprehensive loss for the period/year attributable to equity
holders of the company (3 582) (27 401)
Adjustments:
Profit on sale and leaseback of property net of tax (4) (4)
Impairment of intangible asset - 31 632
Headline earnings for the period/year attributable to equity
holders of the company (3 586) 4 227
Ordinary shares (000’s):
Weighted average shares in issue (Note 2) 1 544 197 1 541 431
Diluted (Notes 2 & 3) 1 544 197 1 541 431
Earnings per share information
Earnings per share (cents) (0.23) (1.78)
Headline earnings per share (cents) (0.23) 0.27
Diluted earnings per share (cents) (0.23) (1.78)
Diluted headline earnings per share (cents) (0.23) 0.27
Notes:
1. The 50% investment in the joint venture, U Housing (Pty) Ltd, is accounted for using the equity method
of accounting. Under the equity method, the investment in joint venture is initially recognised at cost,
and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss
of the investee after the date of acquisition.
2. 87 624 017 (March 2012: 87 624 017) shares held as treasury stock have been subtracted from the
respective share totals for purposes of calculating earnings per share information.
3. 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: convertible preference shares. Diluted earnings, and the
weighted average number of ordinary shares for June 2012 and March 2012, have however not been
adjusted in this regard as the effect of the convertible preference share conversion is antidilutive, even
though the ruling share price at 30 June 2012 and 31 March 2012 is more than the conversion strike
price. Potential ordinary shares are antidilutive when their conversion to ordinary shares would increase
earnings per share or decrease loss per share from continuing operations. The calculation of diluted
earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares
that would have an antidilutive effect on earnings per share.
4. The impairment of intangible asset in the prior period is in relation to the goodwill that arose on the
acquisition of Crystal Pack (Pty) Ltd in 2007. The intangible asset is required to be tested for any
possible impairment on an annual basis. The packaging segment incurred losses during the prior period
and as a result of the uncertain economic environment relating to the packaging industry in general, and
the packaging segment, the impairment test resulted in an impairment of the full value of the goodwill
relating to the packaging segment of R31.6 million in the prior period.
Condensed Consolidated Statement of Cash Flows for the three months ended 30 June 2012
Reviewed Audited
30 June 2012 31 March 2012
R’000 R’000
Cash flows from operating activities:
Net cash generated from operating activities 6 367 2 902
Cash flows from investing activities:
Net cash used in investing activities (3 366) (34 975)
Cash flows from financing activities:
Net cash generated from financing activities 1 299 32 554
Net decrease in bank overdrafts including
cash and cash equivalents 4 300 481
Bank overdrafts including cash and cash
equivalents at the beginning of the period/year (32 711) (33 192)
Bank overdrafts including cash and cash
equivalents at the end of the period/year (28 411) (32 711)
Condensed Consolidated Statement of Changes in Equity for the three months ended 30 June 2012
Ordinary share Ordinary treasury Ordinary share Revaluation Share based Total other
capital shares premium reserve payment reserve reserves
R’000 R’000 R’000 R’000 R’000 R’000
Group
Balance at 31 March 2011 16 319 (923) 179 570 16 463 1 979 18 442
Comprehensive income:
Loss for the year -- -- -- -- -- --
Total comprehensive income for the year -- -- -- -- -- --
Realisation of revaluation reserve -- -- -- (5 227) -- (5 227)
Profit on sale of treasury shares net of
taxation -- -- -- -- -- --
Sale of treasury shares -- 46 328 -- -- --
Dividends paid -- -- -- -- -- --
Total contributions by and distributions
to owners of the company, recognised
directly in equity -- 46 328 (5 227) -- (5 227)
Other comprehensive income:
Other comprehensive income for the year -- -- -- -- -- --
Balance at 31 March 2012 16 319 (877) 179 898 11 236 1 979 13 215
Comprehensive income:
Loss for the period -- -- -- -- -- --
Total comprehensive income -- -- -- -- -- --
Total contributions by and distributions
to owners of the company, recognised
directly in equity -- -- -- -- -- --
Other comprehensive income: -- -- -- -- -- --
Other comprehensive income for the period -- -- -- -- -- --
Balance as at 30 June 2012 16 319 (877) 179 898 11 236 1 979 13 215
Condensed Consolidated Statement of Changes in Equity for the three months ended 30 June 2012
cont…
Retained Non-controlling
(loss)\earnings Total Interest Total equity
R’000 R’000 R’000 R’000
Group
Balance at 31 March 2011 8 125 221 533 2 261 223 794
Comprehensive income:
Loss for the year (27 401) (27 401) (315) (27 716)
Total comprehensive income for the year (27 401) (27 401) (315) (27 716)
Realisation of revaluation reserve 5 227 -- -- --
Profit on sale of treasury shares net of
taxation 242 242 -- 242
Sale of treasury shares -- 374 -- 374
Dividends paid (3 452) (3 452) -- ( 3452)
Total contributions by and distributions to
owners of the company, recognised
directly in equity 2 017 (2 836) -- (2 836)
Other comprehensive income:
Other comprehensive income for the year -- -- -- --
Balance at 31 March 2012 (17 259) 191 296 1 946 193 242
Comprehensive income:
Loss for the period (3 582) (3 582) (243) (3 825)
Total comprehensive income (3 582) (3 582) (243) (3 825)
Total contributions by and distributions to
owners of the company, recognised
directly in equity -- -- -- --
Other comprehensive income:
Other comprehensive income for the
period -- -- -- --
Balance as at 30 June 2012 (20 841) 187 714 1 703 189 417
Condensed Consolidated
Segmental Analysis for the
three months ended 30 June Outsource
2012 manufacturing Packaging Other Group
R’000 R’000 R’000 R’000
Total segment revenue
-reviewed as at 30 June 2012 177 190 20 615 -- 197 805
- audited as at 31 March 2012 579 508 96 188 -- 675 696
1
Inter-segment revenue
reviewed as at 30 June 2012 (12 846) (2 057) -- (14 903)
- audited as at 31 March 2012 (50 653) (6 574) -- (57 227)
Revenue from external
customers
- reviewed as at 30 June 2012 164 344 18 558 -- 182 902
- audited as at 31 March 2012 528 855 89 614 -- 618 469
Operating profit/(loss) before
impairment
- reviewed as at 30 June 2012 3 952 (4 374) (2 048) (2 470)
- audited as at 31 March 2012 21 876 (6 062) 3 420 19 234
Net finance costs
- reviewed as at 30 June 2012 (2 226) (292) (512) (3 030)
- audited as at 31 March 2012 (5 676) (1 630) (4 510) (11 816)
Profit/(loss) before tax
- reviewed as at 30 June 2012 1 727 (4 667) (2 503) (5 443)
- audited as at 31 March 2012 16 201 (39 325) (1 746) (24 870)
Total assets
- reviewed as at 30 June 2012 401 810 85 824 5 771 493 405
- audited as at 31 March 2012 349 008 116 101 9 543 474 652
Total liabilities
- reviewed as at 30 June 2012 221 486 29 662 52 840 303 988
- audited as at 31 March 2012 193 499 29 606 58 305 281 410
1
Includes intra-segment revenue.
Additional information
Reviewed Audited
Three months ended Year ended
30 June 2012 31 March 2012
R’000 R’000
Amortisation of intangible assets 243 967
Depreciation of property, plant and
equipment 4 269 13 755
Purchase of property, plant and
equipment 5 728 48 098
Operating lease commitments 39 663 45 281
COMMENTARY
The directors of Beige and its subsidiaries are pleased to announce the reviewed results for the three
months ended 30 June 2012. These results show the consolidated position of Beige, as compared to the
audited results for the year ended 31 March 2012.
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
and ISIN number is ZAE 000034161. The preference shares issued by the Company are listed
under the share code: BEGP2 and ISIN number ZAE000154787, but have been suspended
following the election by The Lion Match Company (Proprietary) Limited (“Lion Match”) to acquire
all the remaining preference shares pursuant to Lion Match exceeding a holding of more than 90%
of the preference shares following the mandatory offer earlier this year. The preference shares will
be delisted on 03 October 2012.
3. Basis of preparation and change in year end
In order to align its year end with that of Lion Match, the company has changed its year end from
31 March to 30 June each year, which has resulted in the preparation of financial statements for
the three month period ended 30 June 2012.
The condensed consolidated financial statements for the three months ended 30 June 2012 were
prepared in accordance with the recognition and measurement criteria of International Financial
Reporting Standards (“IFRS”), IAS 34: Interim Financial Reporting, Section 8.57 of the Listing
Requirements of the Johannesburg Stock Exchange (“the JSE”), the requirements of the
Companies Act 2008 (No. 71 of 2008) and were prepared under the supervision of the Group’s
financial director, Mr M Easter (CA)(SA).
The principal accounting policies used in the preparation of the results for the three months ended
30 June 2012 are consistent with those applied for the year ended 31 March 2012. During the
period, 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 three months ended 30 June 2012, that comprise the
condensed consolidated statement of financial position at 30 June 2012, 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 period 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
Trading conditions in the local and international retail trading environment remain challenging as a
result of continued economic uncertainty. This is borne out in the substantial fluctuations in the
monthly demand book and provides for an extremely volatile trading environment.
Revenue from outsource manufacturing remain under pressure and margins similarly remain under
pressure resulting from increased raw material costs and higher production costs attributable to
above-inflationary energy cost increases and additional labour costs linked to the volatility of the
monthly demand book. These costs were not fully recoverable by price increases given the
competitive environment in which the Group operates. Revenue from the packaging operation is
also lower than expected.
In order to mitigate the risks associated with the uncertain economic environment and in line with its
strategy of pursuing value enhancing opportunities, the Company continues to pursue vertical
integration opportunities to secure sources of supply of raw materials and to improve margins. In
line with this strategy, the Company has secured a credit facility for the construction and installation
of new soap noodle manufacturing plant and equipment through the Industrial Development
Corporation. The soap noodle plant, which is expected to be completed by December 2012, will
further enable the Company to manage its input cost as a result of a higher degree of control over
the value chain.
7. Financial and operational overview
The results for the three months ended 30 June 2012 again reflect a period characterised by a
challenging trading environment in which economic uncertainty continued to impact the production
decisions made by Beige’s local and multi-national clients. Whilst the Group’s facilities enable it to
accommodate changes to the demand book and product mix, this did have an impact on the gross
profit margin, which showed a decline of 5.1% from the prior year of 17.4% to 12.3%. In addition,
the reporting period of three months is an exceptional period on which to report results and is only as
a result of the change of year end to June. Accordingly, this reflects some seasonal distortions
which traditionally are smoothed in the normal twelve month reporting period and to some extent
makes comparisons meaningless.
However, the major contributor to the operating loss before impairment has been the packaging
segment with an operating loss before impairment of R4.3 million (March 2012: R6.0 million). The
loss in the current period is primarily as a result of the difficult trading conditions in this sector, with a
reduction in sales volumes and margin pressures. Management is confident however that this can
be turned around in the 2013 financial year.
The variance in the loss before income tax from a R24.9 million loss to a R5.4 million loss in the
current period is primarily as a result of the impairment of the goodwill attributable to the packaging
segment in the prior year, which goodwill arose on the acquisition of Crystal Pack (Pty) Ltd. The
variance, excluding the goodwill impairment, is further compounded by the fact that the current
reporting period is only for three months, making a reasonable comparison meaningless. In addition,
a number of once off costs were incurred in the three month period, including costs associated with
the requirement for a full statutory audit for the three month period.
The effective tax rate of 29.7% is affected primarily by the dividends on preference shares not being
deductible for tax purposes and other allowable permanent tax deductions.
8. Prospects
The Group expects the trading conditions over the next year to remain challenging. However, the
volume demand which was deferred by the groups customers during the current reporting period, is
anticipated to be brought into production during the first half of next year. Whilst price increases to
address the significant increases in input costs experienced over the prior financial year have
already been implemented in most cases, further increases to recover costs will have to be carefully
managed and cost control throughout the Group will continue to be a key focus area. The Group
continues to make additional investments in infrastructure and capacity and both the Durban and
Gauteng operations have been expanded in expectation of the future growth in demand for the
goods and services it provides. These initiatives all form part of a strategic decision by the Group to
grow market share in a controlled fashion. The long term benefits of this growth strategy include the
optimisation of available production capacity, improvements in efficiency and the achievement of
greater benefits resulting from consolidated procurement. The recent change in control of the
Company provides an opportunity for Beige to harness the benefits of being associated with a larger
group and well-known brand that is not in direct competition with the Group’s customer base and this
association is expected to present upside potential for the Group.
9. Contingent liabilities
A contingent liability exists in respect of tax, penalties and interest for approximately R3.8 million.
Based on legal advice obtained, the board is of the opinion that no exposure exists in this regard.
10. 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 (Pty) Ltd 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.
11. Change in control
During the prior year The Lion Match Company (Pty) Ltd (“Lion Match”) acquired a controlling
interest in the voting shares of the Company thus requiring it to make an offer to minority
shareholders to acquire all or part of their ordinary and preference shareholdings in the Company.
The mandatory offer closed during the period under review, with Lion Match acquiring an additional
46.54% of the issued ordinary share capital and 96.20% of the issued preference share capital of
the Company. In accordance with Section 3.83(b) of the JSE Listings Requirements, Beige
confirms having received notification from Lion Match in accordance with Section 122 of the
Companies Act, 2008 to the effect that its beneficial interest in the ordinary share capital of the
Company amounts to 78.53% of the ordinary shares in issue and its beneficial interest in the
preference share capital of the Company amounts to 95.04% of the preference shares in issue.
Given that the treasury shares held by Beige are not entitled to vote at a general shareholders
meeting, Lion Match accordingly now owns 82.99% of the voting ordinary share capital and
96.20% of the voting preference share capital of the Company.
12. Events after reporting period
During the period under review the majority of the suspensive conditions relating to the acquisition
by Beige of a 50% interest in Kgalagadi Soap Industries (Pty) Ltd (“KSI”) were fulfilled, with the
exception of the payment of the purchase price. However, post the end of the reporting period, the
Company received notice that the pre-emptive rights existing in the Shareholder Agreement were
being exercised by the existing shareholder in KSI, which pre-emptive rights were triggered by the
change in control of Beige earlier in the year and which exercise thereof has the effect of
terminating the acquisition process by Beige of KSI. Accordingly, KSI has not been consolidated in
the group results for the period ended 30 June 2012. The company will only account for fees due
in terms of an interim management agreement, and not for a share of the profits, which results
would be immaterial to the group.
13. Changes to the board
Following the change in control of Beige, the board has been restructured in order to accommodate
the appointment of additional directors nominated by Lion Match. In line with this, Messrs M
Fandeso, MM Du Preez and AP Du Preez (alternate to MM Du Preez) and Ms L Gadd resigned from
the board with effect from 27 June 2012.The board is extremely grateful to these directors for their
principled leadership and wise counsel over the years and wishes them well in their future
endeavours. Also with effect from 27 June 2012, Messrs AH Trikamjee, AGS Osman, AMI Abdoola,
A Heeralal, NMI (Gora) Abdoola, M Tembe and C De Jager have been appointed to the board as
non-executive directors, while Mr G Wade has been appointed to the board in an executive capacity.
By order of the Board
Ashwin Trikamjee Mark Di Nicola
Deputy Chairman Chief Executive Officer
02 October 2012
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
NMI (Gora) Abdoola (Chairman)(#), AH Trikamjee (Deputy Chairman)(#), MM Di Nicola (CEO), G Wade (Deputy CEO), MC Easter,
AMI Abdoola (#), C de Jager (#), A Heeralal (#), LI Karp (#), AGS Osman (#), M Tembe(#), RH Weissenberg (#) (#) Non-executive
Designated Advisor Transfer Office
Arcay Moela Sponsors (Pty) Ltd Link Market Services South Africa (Pty) Ltd
Auditors
PricewaterhouseCoopers Inc
Date: 02/10/2012 02:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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