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UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2012
STRATCORP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2000/031842/06)
JSE code: STA ISIN ZAE 000034294
(“StratCorp” or “the company” or “the group”)
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE SIX MONTHS
ENDED 31 AUGUST 2012
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Aug 2011
Aug 2012 Unaudited Feb 2012
Figures in R’000 Unaudited Reclassif Audited
ied*
Assets
Non-Current Assets
Property, plant and equipment 4,834 5,523 5,528
Goodwill 1,318 1,318 1,318
Intangible assets 3,233 3,461 3,425
Investments in associates - 2,796 -
Financial assets 67 43 57
Deferred tax 5,643 8,653 5,902
Finance lease receivables 173 353 241
15,268 22,147 16,471
Current Assets
Inventories 1,051 1,087 1,583
Financial assets 286 919 1,525
Finance lease receivables 281 378 311
Trade and other receivables 1,100 4,525 1,510
Cash and cash equivalents 168 397 1,062
2,886 7,306 5,991
Current assets held for sale and
28,434 38,714 28,994
assets of disposal groups
Total Assets 46,588 68,167 51,456
Equity and Liabilities
Equity
Share capital 43,641 43,641 43,641
Reserves - 50 33
Accumulated loss (40,503) (12,568) (35,432)
3,138 31,123 8,242
Liabilities
Non-Current Liabilities
Financial liabilities 8,793 8,893 8,793
Finance lease obligation 829 914 1,121
Deferred tax 3,465 - 3,655
13,087 9,807 13,569
Current Liabilities
Financial liabilities 1,646 2,258 1,348
Finance lease obligation 499 393 593
Operating lease liability 847 637 756
Trade and other payables 5,567 5,694 7,663
Bank overdraft 4,626 3,332 3,325
13,185 12,314 13,685
Liabilities of disposal groups 17,178 14,922 15,960
Total Liabilities 43,450 37,044 43,212
Total Equity and Liabilities 46,588 68,167 51,456
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Aug 2012 Aug 2011 Feb 2012
Unaudited Unaudited Audited
Figures in R’000 Reclassif
ied*
Continuing operations
Revenue 24,411 28,483 55,252
Cost of sales (7,145) (6,235) (13,694)
Gross profit 17,266 22,248 41,558
Other income 895 1,131 635
Operating expenses (22,129) (22,312) (49,843)
Profit on sale of associate - - 2,391
Operating (loss) profit (3,968) 1,067 (5,260)
Investment revenue 69 45 213
Income from equity accounted - 1,003 1,148
investments
Finance costs (1,049) (953) (1,890)
Loss before taxation (4,948) 1,162 (5,789)
Taxation (92) (458) (5,550)
Loss from continuing operations (5,039) 704 (11,340)
Discontinued operations
Loss from discontinued operations (65) (1,261) (10,758)
Loss for the period (5,104) (557) (22,098)
Other comprehensive loss:
Exchange differences on translating - 88 62
foreign operations
Taxation related to components of - (27) (1,340)
other comprehensive income
Other comprehensive loss for the
- 61 (1,278)
period net of taxation
Total comprehensive loss (5,104) (496) (23,377)
Attributable to:
Owners of the parent:
Loss for the period from continuing (5,039) 704 (11,340)
operations
Loss for the period from (65) (1,261) (10,758)
discontinuing operations (3)
Loss for the period attributable to
(5,104) (557) (22,098)
owners of the parent
Total comprehensive loss attributable
to:
Owners of the parent (5,104) (496) (23,377)
Loss per share
From continuing and discontinued
operations
Basic and diluted loss per share (c) (3.22) (0.35) (13.96)
Basic and diluted (loss)/profit per (3.18) 0.44 (7.16)
share from continuing operations (c)
Basic and diluted loss per share from (0.04) (0.79) (6.80)
discontinued operations (c)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Accumulated Total
Figures in R’000 FCTR FVA
capital loss equity
Balance at 1 43,641 (11) - (12,011) 31,619
March 2011
Changes in
equity
Total - 61 - (557) (496)
comprehensive
loss
Balance at 1
43,641 50 - (12,568)) 31,123
Sept 2011
Changes in
equity
Total - (17) (1,323) (21,541) (22,881)
comprehensive
income for the
year
Transfer between - - 1,323 (1,323) -
reserves
Balance at 1
43,641 33 - (35,432) 8,242
March 2012
Changes in
equity
Total - - - (5,104) (5,104)
comprehensive
income for the
year
Transfer between - (33) 33 -
reserves
Balance at 31
43,641 - - (40,503) 3,138
August 2012
FCTR – Foreign Currency Translation Reserve
FVA - Fair value adjustments through other comprehensive income reserve
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Aug 2011
Aug 2012 Unaudite Feb
Figures in R’000 Unaudite d 2012
d Reclassi Audited
fied*
Cash flows from operating activities (3,712) 375 (2,524)
Cash flows from discontinued operations 1,750 212 (932)
Cash flows from investing activities 903 (1,379) 3,196
Cash flows from financing activities (1,137) 2,572 2,902
Total cash movement for the period (2,195) 1,780 2,642
Cash at the beginning of the period (2,263) (4,715) (4,905)
Total cash at end of the period (4,458) (2,935) (2,263)
HEADLINE AND DILUTED HEADLINE LOSS PER SHARE
Headline loss per share and diluted headline loss per share are
determined by dividing headline loss and diluted headline loss by the
weighted average number of ordinary share outstanding during a period.
The group followed SAICA Circular 3/2009 in calculating headline loss
and diluted headline loss per share for the group and company.
Headline loss and diluted headline loss are determined by adjusting
basic earnings and diluted earnings by excluding separately identifiable
re-measurement items. Headline loss and diluted headline loss are
presented after tax and non- controlling interest.
Diluted headline loss per share is equal to headline loss per share
because there are no dilutive potential ordinary shares in issue.
Headline loss per share was based on a headline loss of the group of
R5.053 million (2011: loss of R578 thousand) and a weighted average
number of ordinary shares of 158,311,597 (2011: 158,311,597).
Aug 2011
Aug 2012 Feb 2012
Unaudite
Unaudited d Audited
Headline and diluted headline loss per
share (c) (3.19) (0.37) (10.76)
Reconciliation between loss and headline
loss R’000
Basic loss (5,104) (557) (22,098)
Adjusted for: -
Profit on disposal of investment in
associate - (2,390)
Loss recognised on the measurement to fair
value less cost to
sell constituting discontinued operations 7,101
Loss (profit) on disposal of investment
properties 14
Loss/(Profit) on disposal of property
plant and equipment 12 (24) 15
Loss on disposal of investments in
subsidiaries 41 (3)
Impairment of intangible assets
Tax effect thereon (2) 3 331
(5,053) (578) (17,030)
Condensed Segmental Analysis
Aug 2012 Aug 2011 Feb 2012
Unaudited Unaudited Audited
Reclassified*
R’000 R’000 R’000
Revenue
Continuing operations
Financial products 19,751 16,506 33,981
Health & Wellness products 7,371 11,333 19,245
General finance 149 196 365
Corporate services & other - 9,501 1,661
Inter segment eliminations (2,860) (9,533) -
24,411 28,003 55,252
Discontinued operations 1,267 3,339 4,992
Profit / (loss)
Continuing operations
Financial products (323) 1,611 47
Health & Wellness products (2,065) (1,507) (2,414)
General finance (53) (113) (583)
Corporate services & other (2,667) 1,390 (8,390)
Inter segment eliminations 69 (194) -
(5,039) 704 (11,340)
Discontinued operations (65) (1,261) (10,758)
(5,104) (557) (22,098)
Segment assets
Financial products 4,720 5,502 3,579
Health & Wellness products 1,625 4,383 2,921
General finance 835 1,635 881
Corporate services & other 15,591 61,460 15,081
Assets of disposal groups 28,434 38,714 28,994
Inter segment eliminations (4,617) (43,527) -
46,588 68,167 51,456
Segment liabilities
Financial products 2,245 2,962 3,715
Health & Wellness products 2,105 1,789 3,491
General finance 18 27 61
Corporate services & other 20,064 17,344 19,987
Liabilities of disposal groups 17,178 14,922 15,960
Inter segment eliminations 1,840 - -
43,450 37,044 43,214
*Reclassified to reflect the effect of the discontinued operations
BUSINESS OVERVIEW
The tough market and trading conditions that the company reported on for
its 2012 financial year continued for the six month period under review.
The disposable income of the client base of the group remained under
pressure and the group companies experienced a net decline in
subscriptions over this period.
I-Cura. Various initiatives have been implemented in order to increase
revenue, which includes telesales and the distribution of the health and
wellness products through wholesale and retail markets. The telesales
in I-Cura has shown promising growth over the last four months of the
period under review, as well as to the date of this announcement. I-
Cura has also been successful in introducing a number of wholesalers for
its product range, and introduced new products such as the energizer and
multi-vitamin, throat spray and mouthwash products to its client base.
Various marketing initiatives are being implemented to attract a higher
LSM client base.
Virtus. The Virtus range of products has been restructured to provide
clients with flexibility in their choice of products they want to
subscribe for. The investment product remains the main choice of the
client base. Plans are being implemented in attracting a higher LSM
client base.
StratProp. The disposal of the Soldonné Residential complex has been
finalised with the transfer of the properties to the purchaser on 9
November 2012. The proceeds were inter alia used to reduce interest
bearing debt by R6.45 million, which will result in an annual interest
saving of R675 000 for the group.
Group. The restructuring program that was implemented in May 2012, have
reduced expenditure within the group by R500 000 per month since July
2012. Since March 2012 to the date of this report overall expenditure of
the group has been reduced by R1 000 000 per month. The only
outstanding issue with regards to cost reduction from the restructuring
plan that needs to be finalised is the lease over the head office in
Centurion and management is in discussions with the landlord to resolve
this as soon as possible. There were a number of initiatives planned and
implemented from September 2012 to ensure that revenues in the
subsidiaries increase in future.
CASH FLOWS
A net cash inflow of R0.9 million was recorded for the period under
review, through the tight management of cash and reduction of expenses.
Cash utilised in the operations increased from R0.2 million in 2011 to
R2.5 million in 2012. The final payment received from the purchaser of
StratCol in April 2012 alleviated some of the cash requirements of the
group. Infrastructural expenses (property, plant and equipment)
decreased from R1.3 million in 2011 to R0.5 million for 2012.
PROSPECTS
The group has implemented various strategies to increase revenue and
manage costs tightly. Some of the cost savings from the restructuring
program has already filtered through in the financial results of the
group. Management do not expect a significant improvement in trading
conditions and results for the remainder of the financial year, but are
positive that the income generating strategies will start contributing
to increased revenue and results in the 2014 financial year.
The remaining cash that was realised from the sale of the Soldonné
complex will be utilised to support the current operational cash
shortfall and to implement the various marketing strategies in the other
subsidiaries.
The financial information on which the prospects are based has not been
reviewed or reported on by the company`s auditors.
GOING CONCERN
The condensed consolidated interim financial results have been prepared
on the basis of accounting policies applicable to a going concern. This
basis presumes that funds will be available to finance future operations
and that the realisation of assets and settlement of liabilities,
contingent obligations and commitments will occur in the ordinary course
of business. The directors constantly review the business models of the
group and its operating subsidiaries to ensure sustainability and the
ability to operate profitably and generate positive cash flows. Funding
facilities are also reviewed regularly to ensure that the group has
sufficient facilities in place to finance its operations.
The Group incurred a net loss of R 5.1 million for the six months ended
31 August 2012, and the current liabilities of the Group exceed its
current assets at 31 August 2012. The continued losses incurred by the
Group over the last financial year have placed the cash flows of the
Group under considerable pressure, which threatens the going concern of
the group. The disposal of the Soldonné Residential complex and the
restructuring plan that was implemented to reduce costs, realise non-
core assets and reduce debt, enables the Group to continue operating as
a going concern. The continued going concern of the Group is subject to
the successful implementation of the growth strategies of the Group and
the access to sufficient cash resources to enable the Group to implement
the growth strategy.
BASIS OF PREPARATION
Statement of compliance
The unaudited condensedconsolidatedinterim financial results comprise a
condensed consolidated statement of financial position at 31 August
2012, a condensed consolidated statement of comprehensive income, a
condensed consolidated statement of changes in equity and a condensed
consolidated statement of cash flow for the six months ended 31 August
2012. The unaudited condensed consolidated interimfinancial results
have been prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial
Reporting Standards (“IFRS”), the AC500 standards as issued by the
Accounting Practices Board, the presentation and disclosure requirements
of IAS34 - Interim Financial reporting, the JSE Listings Requirements
and the South African Companies Act 71 of 2008.
The accounting policies applied for the year, which are in terms of
IFRS, are consistent with those of the prior year.
The interim financial results have been prepared on the historical cost
basis, except in the case of financial instruments which are measured
using fair value and amortised cost models, investment properties that
are measured at fair value and non-current assets held for sale and
assets of disposal groups that are measured in terms of IFRS 5.
RECLASSIFICATION OF COMPARATIVE FIGURES
Certain comparative figures have been reclassified. All income, expenses
and taxation relating to the discontinued operations have been
reclassified to discontinued operations on the statement of
comprehensive income, all assets of the discontinued operation have been
reclassified as non-current assets held for sale and assets of disposal
groups and all liabilities of the discontinued operations have been
reclassified as liabilities of disposal groups on the statement of
financial position.
- Cash flows from operating, investing and financing activities for
discontinued operations have also been reclassified as
cash flows from discontinued operations on the statement of cash flows;
- All deferred tax assets and liabilities and taxation income and
expenses relating to discontinued operations have been reclassified
as tax from discontinued operations; and
- Earnings per share from continuing and discontinued operations have
also been reclassified.
These reclassifications of prior year comparatives were done in terms of
IFRS 5.
The effects of the reclassifications on the 2011 condensed consolidated
interim financial results were as follows:
Consolidated Statement of comprehensive income
Figures in R’000 Previously Reclassified
stated
Continuing operations
Revenue 31,342 28,483
Operating profit 14 1,067
Investment revenue 45
Income from equity accounted investments 1,003 1,003
Finance cost (1,669) (953)
Loss before taxation (652) 1,162
Taxation 184 (458)
Loss from continuing operations (468) 704
Discontinued operations
Loss from discontinued operations (89) (1,261)
Loss for the period (557) (557)
Other comprehensive income:
Exchange differences on translating
foreign operations 88 88
Taxation related to components of other
comprehensive income (27) (27)
Total comprehensive loss for the period (496) (496)
Loss per share
Basic and diluted loss per share (c) (0.35) (0.35)
? From continuing operations (c) (0.30) 0.44
? From discontinued operations (c) (0.05) (0.79)
Headline loss (c) (0.37) (0.37)
Consolidated Statement of financial position
Previously Reclassifi
Figures in R’000 stated ed
Assets
Non-Current Assets
Property, plant and equipment 6,212 5,523
Goodwill 1,318 1,318
Intangible assets 3,461 3,461
Investments in associates 2,796 2,796
Financial assets 43 43
Deferred tax 11,531 8,653
Finance lease receivables 353 353
25,714 22,147
Current Assets
Inventories 37,738 1,087
Financial assets 919 919
Finance lease receivables 378 378
Trade and other receivables 5,234 4,525
Cash and cash equivalents 397 397
44,666 7,306
Current assets held for sale and assets of
27 38,714
disposal groups
Total Assets 70,407 68,167
Equity and Liabilities
Equity
Share capital 43,641 43,641
Reserves 50 50
Accumulated loss (12,568) (12,568)
31,123 31,123
Liabilities
Non-Current Liabilities
Financial liabilities 11,842 8,893
Finance lease obligation 914 914
Deferred tax 2,204 -
14,960 9,807
Current Liabilities
Financial liabilities 2,281 2,258
Finance lease obligation 393 393
Operating lease liability 688 637
Trade and other payables 12,008 5,695
Bank overdraft 8,725 3,332
24,095 12,315
Liabilities of disposal groups 229 14,923
Total Liabilities 39,284 37,045
Total Equity and Liabilities 70,407 68,167
Consolidated Statement of cash flows
Figures in R’000 Previously Reclassified
stated
Cash flows from operating activities (173) 375
Cash flows from discontinued operations 60 212
Cash flows from investing activities (1,334) (1,379)
Cash flows from financing activities 1,811 2,572
Total cash movement for the year 364 1,780
Cash at the beginning of the year (8,692) (4,715)
Total cash at end of the year (8,328) (2,935)
DIVIDENDS
No dividends were declared or paid to shareholders during the year.
LITIGATION
There is a potential dispute between a subsidiary of the company and
regulators. The outcome is uncertain and therefore the impact on the
company, if any, cannot be determined at this time. Depending on how
matters develop, it may have a material effect on the company’s
securities.
The directors are not aware of any other legal or arbitration
proceedings, pending or threatened against the group, which may have or
have had, in the 12 months preceding the date of this report, a material
effect on the group’s financial position.
On behalf of the board.
D B Harington
Chief Executive Officer
JHP Engelbrecht
Group Financial Director
27 November 2012
CORPORATE INFORMATION
Non-executive directors: PJ de Jongh (Chairman), M Patel*
(Chairman of Audit Committee), TG Ratau
*Independent
Executive directors: DB Harington (CEO), JHP Engelbrecht (GFD), IM
Wright (CIO)
Registered address: 3rd Floor, Lakeside Building A, 2004 Gordon Hood
Drive, Centurion, 0046
Postal address: PO Box 12022, Centurion, 0046
Company secretary: NW Moffatt
Telephone: (012) 643 7400
Facsimile: (012) 663 2914
Transfer secretaries: Computershare Investor Services (Pty) Limited
Auditors: Nexia SAB&T
Designated Adviser: Exchange Sponsors
Date: 27/11/2012 03:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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