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Audited Provisional Report for the 15 months ended 31 December 2012
JOHN DANIEL HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 1998/013215/06
JSE Code: JDH - ISIN: ZAE000044343
("the Company" or "JDH" or "the Group")
AUDITED PROVISIONAL REPORT FOR JOHN DANIEL HOLDINGS LIMITED FOR
THE 15 MONTHS ENDED 31 DECEMBER 2012
HIGHLIGHTS
The Directors are pleased to inform shareholders of sustained
improvement in the Group’s performance for the period under
review, resulting in enhanced profitability. The Group’s
restructuring continues to benefit the subsidiaries operations
generating substantial revenue growth and improving solvency and
liquidity.
The Company changed its year end from 30 September to 31
December during the period. In the prior period the Company also
extended its year end from 30 June to 30 September, consequently
both the current and comparative periods comprise of 15 months.
Below are certain highlights of the 2012 audited results:
- Turnover increased by 482% to R37.6 million for the period
ended 31 December 2012 compared to turnover of R6.4 million
for the comparative 15 month period.
- The operating results improved by 138% to an operating
profit of R2 million for the 15 months ended 31 December
2012 compared to an operating loss of R5.3 million for the
15 months to September 2011.
- The Group’s net asset value improved to 4.89 cents per
share (2011 – 1.73 cents), an increase of 183%,
notwithstanding an increase of 182% in the issued share
capital of the Company.
- Total net assets increased to R21.7 million from R2.7
million, an improvement of 696%. The current ratio is 2.27
with current assets exceeding current liabilities by R15.9
million.
OPERATIONAL REVIEW
Group overview
JDH continues to conduct business as an investment holding
company, focusing on investing in companies which operate in
niche markets that are strategic in nature. Preference is given
to companies which have clear African and Global markets. In
particular, these companies are required to produce products or
provide services with high barriers to entry and generate high
gross profit margins.
Below is an overview of the JDH Group’s operations during the
period.
Biotechnology
The Group’s Biotechnology operations incorporate the results of
Cryo-Save SA (Pty) Ltd (“Cryo-Save SA”) and Lazaron
Biotechnologies (SA) Limited (“Lazaron”). The combined turnover
of the two companies contributed 51% of the Group’s total
turnover and amounted to R19.2 million for the 15 month period.
This represents an increase of 231% compared to the 15 month
comparative period.
Cryo-Save SA significantly increased its market share within the
South African market during the period.
The Biotechnology operations expanded into five African
countries during the period. The African expansion will continue
with the objective of establishing Cryo-Save SA as the pre-
eminent family stem cell bank in Africa. Revenues derived from
the African markets during the 15 months amounted to less than
1% of Biotechnology revenues but is expected to reflect
significant growth in future.
Cryo-Save SA, with technical support from Cryo-Save NV,
transferred the Cape Town laboratory to a state of the art
cryogenic laboratory in Gauteng. The investment in the new
enlarged laboratory amounted to an additional R2.4 million and
significantly improved the capacity in order to support
projected volume growth. The move of the operational activities
to Gauteng will secure significant operational cost savings and
enhance the efficiency of the logistic to the main markets and
the expanding African operations.
The new facility became fully operational in January 2013 and
operates to the highest quality standards applied
internationally by Cryo-Save Group NV.
The operational loss reported for the combined Biotechnology
operations incorporates once off charges that will benefit
future results. The once off charges include the Cryo-Save SA
startup costs, cost related to the establishment of the Gauteng
laboratory, and ramp up of the operational capacity to support
the significant volume growth in the business.
The restructuring has resulted in Lazaron becoming profitable
for the first time since its incorporation. The directors
continue to evaluate further opportunities for Lazaron.
Agricultural packaging
Vinguard Limited’s (“Vinguard”) turnover increased R7.4 million,
an increase of 2 020%, to R7.8 million for the 15 months ended
31 December 2012 compared to R368 000 for the comparative 15
month period.
The restructuring of Vinguard’s operations and the reengineering
of the production process resulted in significant reductions in
the manufacturing cost per unit during the period under review.
This enhanced Vinguard’s competitiveness and resulted in
increased market share under difficult market conditions.
Vinguard’s operating loss reported for the period under review
reflects the challenges inherent in this part of the Group’s
business and will be one of the directors’ areas of particular
focus during 2013.
Financial services
JDH Credit Services (Pty) Ltd (“Credit Services”) also reflected
growth for the period under review with the loan book increasing
by 478% from R3.8 million at 30 September 2011 to R22.2 million
at 31 December 2012. The company posted a profit after tax of
R743 331, a 190% increase compared to 2011.
The unsecured micro finance environment is growing at a rapid
rate and Credit Services is ideally positioned to maximise the
opportunity. Credit Services provides loans to third party
company employees and secures repayment through payroll
deductions.
During the period Credit Services further diversified its
operations and acquired a distressed loan book for a
consideration of 10% of projected future collectable amounts. In
addition, Credit Services entered the SME market and granted its
first secured funding during the final quarter of the 2012
calendar year.
The primary cost in the business is interest on loan capital
required to fund the growth of the loan book. Management are
actively seeking alternative funding options to reduce costs,
thereby improving profitability.
PROSPECTS
Key elements of the on-going restructure process are the
continued turnaround of subsidiaries through product and market
extension, aggressive trading and cost reduction, expansion into
selected African countries and the acquisition of new
subsidiaries which are profit generating and aligned with the
group’s strategy.
The abovementioned approach is aimed at developing a robust and
complementary Group of companies which provide sustainable
returns.
RESULTS
Presented below are the audited results for the 15 month period
ended 31 December 2012.
Audited Statement of Financial Position as at 31 December 2012
31 30
December September
2012 2011
Audited Audited
Group Group
R’000 R’000
ASSETS
Non-current assets
Property, plant and equipment 6 745 4 572
Intangible assets 1 650 1 555
Other financial assets 6 667 2 323
Deferred tax 11 341 11 404
Total current assets 28 321 6 293
TOTAL ASSETS 54 724 26 147
EQUITY AND LIABILITIES
Equity 21 717 2 729
Non-controlling interest (194) 1 118
Non-current liabilities
Other financial liabilities 20 166 13 477
Deferred tax 567 495
Total current liabilities 12 468 8 328
TOTAL EQUITY AND LIABILITIES 54 724 26 147
Net asset value 21 717 2 729
Net tangible asset value 20 067 1 173
Net asset value per share (cents) 4.89 1.73
Net tangible asset value per share
(cents) 4.52 0.75
Audited Statement of Comprehensive Income for the 15 months
ended 31 December 2012
15 months 15 months
ended 31 ended 30
December September
2012 2011
Audited Audited
Group Group
R’000 R’000
Revenue 37 593 6 464
Cost of sales (14 024) (2 484)
GROSS PROFIT 23 569 3 980
Other income 268 2 260
Operating expenses (21 815) (11 511)
OPERATING PROFIT / (LOSS) 2 022 (5 271)
Fair value adjustment – unsecured
loan book 1001 -
Net finance costs (2 380) (1 884)
PROFIT / (LOSS) BEFORE TAXATION 643 (7 155)
Taxation (135) 7 435
PROFIT FOR THE PERIOD 508 280
(Loss) attributable to non-
controlling interest (1 485) (426)
NET PROFIT ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 1 993 706
BASIC AND HEADLINE EARNINGS
Basic earnings 1 993 706
Headline earnings 2 001 204
Basic earnings per share (cents)
attributable to equity holders of
the parent 0.48 0.47
Headline earnings per share (cents)
attributable to equity holders of
the parent 0.49 0.14
Number of shares in issue 444 131 678 157 652 363
Weighted average number of shares 412 524 515 150 970 550
RECONCILIATION BETWEEN BASIC
EARNINGS AND HEADLINE EARNINGS
IAS 33 Basic earnings 1 993 706
IAS 16 Loss on disposal of property
plant and equipment 8 30
IAS 36 Reversal of impairment of
intangible assets - (532)
Headline earnings 2 001 204
Audited Segmental Information for the 15 months ended 31
December 2012
The segments identified are based on the operational and
financial information reviewed by management for performance
assessment and resource allocation.
15 months ended 31 December 2012
Segment Revenue Operating
profit /
(loss)
R’ 000 R’000
Financial Services 5 214 1 865
Biotechnology 19 197 (2 147)
Agricultural packaging 7 803 (1972)
Corporate 9 918 4 599
Eliminations (4 539) (323)
Group total 37 593 2 022
15 months ended 30 September 2011
Segment Revenue Operating
profit /
(loss)
R’ 000 R’000
Financial Services 126 (49)
Biotechnology 5 797 (2 538)
Agricultural packaging 368 (136)
Corporate 1 549 (1 980)
Eliminations (1 376) (568)
Group total 6 464 (5 271)
Audited Statement of Changes in Equity for the 15 months ended
31 December 2012
Share Non Accumul- Non- Total
capital distribute- ated controlling equity
able loss interest
reserves
R’000 R’000 R’000 R’000 R’000
Balance at 1
July 2010 35 665 7 729 (42 225) (433) 736
Total
comprehensive
profit for
the 15 months - - 706 (426) 280
Issue of 831 - - - 831
shares
Change in
ownership - 23 - (23) -
Business
combination - - - 2 000 2 000
Balance at
1 October
2011 36 496 7 752 (41 519) 1 118 3 847
Total
comprehensive
profit for
the 15 months - - 1 993 (1 485) 508
Issue of 18 730 - - - 18 730
shares
Acquisition
of non- - (3 840) 2 105 173 (1 562)
controlling
interest
Balance at 31
December
2012 55 226 3 912 (37 421) (194) 21 523
Audited Cash Flow Statement for the 15 months ended 31 December
2012
15 months 15 months
ended 31 ended 30
December September
2012 2011
Audited Audited
Group Group
R’000 R’000
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES (1 117) (8 406)
NET CASH OUTFLOW FROM INVESTING
ACTIVITIES (26 919) (582)
NET CASH INFLOW FROM FINANCING
ACTIVITIES 27 963 9 263
Movement in cash and cash
equivalents for the period (73) 275
Cash and cash equivalents at the
beginning of the period 309 34
Cash and cash equivalents at the end
of the period 236 309
Notes to the Financial Statements for the 15 months ended 31
December 2012
ACCOUNTING POLICIES AND BASIS OF PREPARATION OF RESULTS
The audited provisional results have been prepared by the
financial director, DP van der Merwe, in accordance with IAS 34
– Interim Financial Reporting in accordance with the accounting
policies that comply with International Financial Reporting
Standards, the SAICA Financial Reporting Guides and in the
manner required by the Companies Act and the JSE Listings
Requirements. The principle accounting policies adopted in
preparation of these financial statements are consistent with
those of the prior period.
The results of the Company were audited by the auditors, namely
AM Smith and Company Inc., and the opinion was not modified.
The audit opinion is available for inspection at the Company’s
registered office.
RECLASSIFICATION OF COMPARATIVE INFORMATION
Raising fees and certain administration charges amounting to
R884 880 classified as operating expenses in the 30 September
2011 period were reclassified as finance costs in the 2012
comparative results. The reclassification was deemed appropriate
as these expenses related directly to the cost of funding.
OTHER FINANCIAL ASSETS
The other financial asset category incorporate the JDH Credit
Services (Pty) Ltd loan books which increased by 478% in total
during the period. Below is detail regarding the group’s other
financial assets:
31 30
December September
2012 2011
Audited Audited
Group Group
R’000 R’000
At fair value through profit and
loss – designated
Unsecured distressed debtor book 1 301 057 -
Loans and receivables
Unsecured micro loans 11 228 074 4 591 564
Secured SME loans 10 495 647 -
Escalator Global Mauritius 5 217 320 -
Cryo-Save - 85 502
Total other financial assets 28 242 098 4 677 066
Non-current assets
at fair value through profit and 1 181 057 -
loss – designated
Loans and receivables 5 486 395 2 322 852
Total included in non-current assets 6 667 452 2 322 852
Current assets
At fair value through profit and 120 000 -
loss – designated
Loans and receivables 21 454 646 2 354 214
Total included in current assets 21 574 646 2 354 214
REVIEW OF RESULTS AND FINANCIAL POSITION
The 31 December 2012 audited consolidated financial results
represents the trading results of the corporate head office and
its subsidiaries active in the financial services, biotechnology
and agricultural packaging markets.
The JDH restructure process initiated in September 2010
materially impacted on the operations of the group during the 30
September 2011 financial period. The changes included, inter
alia, the re-constitution of the board of directors,
repositioning the strategic direction of the Group and its
trading subsidiaries, aggressive cost reduction measures in
certain operational areas while increasing investment in others.
The benefits of the measures implemented resulted in improved
trading performance during the last quarter of the 30 September
2011 financial period. These improvements continued to realise
enhanced operational performance during the 15 months ended 31
December 2012.
Strategic acquisitions concluded during the 2011 financial
period contributed to both profitability and sustainability.
In addition, the directors announced two partially underwritten
rights offers in June 2011 to recapitalise the Group and ensure
its solvency. The JDH rights offer of R15 million concluded in
October 2011 and was fully subscribed. The R4.4 million rights
offer announced by the board of Lazaron concluded in January
2012 and raised R3.2 million including a further R1.5 million
investment by JDH in Lazaron. These actions also reduced the
external interest burden.
The impact of the restructure measures are reflected in the
improved trading performance of the Group.
Group turnover increased to R37.6 million for the 15 months
ended 31 December 2012. This is a 482% increase in turnover
compared to the R6.5 million achieved for the comparative 15
months ended 30 September 2011.
Operational expenses increased by 89.5% to R21.8 million for the
15 months ended 31 December 2012 compared to the R11.6 million
for the 15 months ended 30 September 2011. Key elements of the
increase include the startup costs for the new Cryo-Save
operation, moving the company’s offices to new premises, the
increase in shared services infrastructure to facilitate the new
acquisitions and the increased operational expenses resulting
from investment in operational support structures and resources
required to underpin the continued turnover growth.
The increase in operational expenses of 89.5% was leveraged in
the period to grow turnover by 482%, resulting in an operating
profit of R2 million compared to the operating loss of R5.3
million for the comparative period.
Included in the reduction in non-controlling interest is the
purchase of the Lazaron non-controlling interest thereby
increasing JDH’s investment in Lazaron from 27.45% to 100%
during the period.
The result of the restructure process and the corporate actions
is reflected in the dramatic improvement in the Group’s
statement of financial position; which is largely due to the:
- improvement in operational results with turnover
translating into accounts receivable and cash receipts;
- the funding of the Credit Services short term loan book
with long term funding;
- stringent overhead controls; and
- the recapitalisation of the Group through the JDH and
Lazaron rights offers.
The strategy of combining aggressive management of existing
subsidiaries and further strategic acquisitions is aimed at
ensuring the future sustainability of the Group.
CORPORATE ACTIONS
The directors announced two partially underwritten rights offers
in June 2011 with the main objective of recapitalising the
Group.
The JDH rights offer concluded on 14 October 2011 and was fully
subscribed, resulting in 214 285 714 rights offer shares being
issued to shareholders, shareholders who applied for excess
shares and Escalator Capital (RF) Limited (“Escalator”) the
underwriter. By virtue of its underwriting, Escalator became the
controlling shareholder in JDH, exceeding the 35% mandatory
offer threshold. The JDH non-controlling shareholders approved a
waiver of the mandatory offer from Escalator in a general
meeting held on 17 October 2011.
The Lazaron corporate action comprised of a:
- section 112 (of the Companies Act) disposal of assets;
- R4.4 million rights offer;
- general offer by JDH to Lazaron’s shareholders to acquire
the Lazaron shares in exchange for JDH shares in the ratio
5 Lazaron shares for 1 JDH share; and
- section 124 (of the Companies Act) compulsory acquisition
to acquire the balance of the Lazaron shares.
The section 112 resolution approved by Lazaron shareholders on 7
December 2011 disposed of the Lazaron sales infrastructure and
certain laboratory equipment to JDH, who in turn on sold these
assets to Cryo-Save SA. This transaction removed all significant
overheads from Lazaron whilst retaining annuity income from the
existing client base.
The Lazaron rights offer closed on 20 January 2012 and was
partially subscribed, with 73% of the available rights offer
shares taken up, increasing the total Lazaron shares in issue to
369 970 339. JDH acquired 150 000 000 Lazaron rights offer
shares by virtue of agreeing to partially underwrite the Lazaron
rights offer to the value of R1.5 million. The additional
investment increased JDH’s interest in Lazaron to 44.18%
The JDH general offer to the remaining Lazaron shareholders
opened on 23 January 2012 and closed on 9 March 2012 with
approximately 91% of the remaining Lazaron shareholders electing
to swap their Lazaron shares for JDH shares in the 5:1 ratio.
This resulted in JDH acquiring a further 187 883 066 Lazaron
shares, increasing JDH’s total interest in Lazaron to 95.41%.
The general offer circular to Lazaron shareholders indicated
that, in accordance with the provisions of section 124 of the
Companies Act, if within 4 months after the date of the general
offer, the general offer was accepted by Lazaron shareholders
holding at least 90% of the offer shares, JDH would become
entitled to a compulsory acquisition of the final remaining
offer shares on the same terms that applied to Lazaron
shareholders who accepted the general offer.
A circular to Lazaron shareholders was distributed on 25 April
2012 informing the final remaining Lazaron shareholders of JDH’s
intention to acquire all of the remaining offer shares in terms
of section 124 of the Companies Act.
The section 124 offer concluded on 25 June 2012 on which date
JDH acquired the final remaining Lazaron shares and Lazaron
became a wholly owned subsidiary of JDH.
On 12th July 2012 shareholders were advised to exercise caution
when dealing with their securities in the company as JDH had
entered into negotiations with Escalator and Escalator Capital
Global Limited (“Escalator Global”) with the intention of
acquiring some or all of the equity and /or assets of Escalator
Capital. Escalator Capital is the controlling shareholder of
JDH. If negotiations are successfully concluded, they may have a
material effect on the price of the Company’s securities.
On the 14th December 2012 the board released a further detailed
cautionary announcement informing shareholders that it had
signed an acquisition agreement, subject to certain conditions
precedent, to acquire three Escalator Global subsidiaries.
Escalator, the controlling shareholder of JDH, is one of the
subsidiaries and the acquisition may result in a reverse
takeover requiring shareholder approval in general meeting.
EVENTS AFTER THE REPORTING PERIOD
The negotiations with Escalator are continuing and shareholders
are accordingly advised to continue to exercise caution in
dealing in their securities
CONTINGENCIES
Litigation has been suspended against a former employee of
Vinguard who obtained a CCMA ruling granting a R100 000 cash
settlement and the issue of shares in Vinguard. The former
employee seems to have abandoned his claim in light of the
counter claim by Vinguard for the PAYE payable on the possible
issue of Vinguard shares.
APPOINTMENT OF NEW DIRECTORS
The appointment of Mr E Engelbrecht as a non-executive director
was announced on 27 February 2012. Mr Engelbrecht is a director
of Escalator, the controlling shareholder of JDH.
APPOINTMENT OF NEW COMPANY SECRETARY
The board announced the appointment of a new company secretary,
CL Tromp, on 6 June 2012.
ACQUISITIONS AND DISPOSALS
JDH increased its stake in Lazaron from 27.45% to 100.00% during
the period. The increased investment in Lazaron at a cost of
R4.8 million was effected as follows:
- the acquisition of 150 000 000 Lazaron shares in terms of
JDH’s undertaking to partially underwrite the Lazaron
rights offer to the value of R1.5 million;
- the acquisition of 187 883 066 Lazaron shares as a result
of the general offer to Lazaron non-controlling
shareholders. The offer comprised 1 JDH share for every 5
Lazaron shares held, with the total issue value of the JDH
shares amounting to R2.6 million; and
- the acquisition of 18 630 857 Lazaron shares as a result of
the section 124 (of the Companies Act) compulsory
acquisition of the final remaining Lazaron shares on the
same terms as listed above. The value of JDH shares issued
amounted to R260 832.
Although JDH held less than 50% of the voting powers in Lazaron
before the corporate actions listed above, the investment was
considered a subsidiary because JDH held the power to govern the
financial and operating policies of Lazaron. The increase in
shareholding therefore is not considered a business combination
and the entries reflected in the statement of changes in equity
represent the further acquisition of the remaining Lazaron non-
controlling interest.
There were no disposals during the period under review.
As noted elsewhere, the board is actively investigating
acquisition opportunities aimed at improving earnings and cash
generation for the group.
ISSUE OF SHARES
During the period under review the following share issues, all
at 7 cents per share, were approved by shareholders and listed
on the JSE:
Share issue Number of Total value of
(date of issue) shares issued shares
R
Issue of shares in terms of
the JDH rights offer (14
October 2011) 214 285 714 15 000 000
Issue of shares to directors
for additional services
rendered and/or fees (2 March
2012) 30 890 815 2 162 357
Issue of shares to Lazaron
shareholders in terms of the
JDH general offer (9 March
2012) 37 576 613 2 630 363
Issue of shares to Lazaron 3 726 173 260 832
shareholders in terms of the
JDH section 124 compulsory
acquisition general offer (25
June 2012)
Total (before deduction for 286 479 315 20 053 552
share issue expenses)
No shares were issued during the period in terms of the
directors’ general authority to issue shares.
At the end of the period the issued share capital increased to
444 131 678 shares.
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.
AUDITORS
The shareholders resolved to re-appoint AM Smith and Company
Inc. as the Group auditors on 2 March 2012 at the annual general
meeting.
For and on behalf of the Board
TP Gregory
Pretoria
28 March 2013
Directors: RJ Connellan* (Chairman), TP Gregory (Chief Executive
Officer), DP van der Merwe (Financial Director), E Engelbrecht
(Non-Executive), KA Rayner*, BR Topham*. (* Independent Non-
Executives)
Company Secretary: CL Tromp
Registered Office: Acasia House, Green Hill Village Office Park,
on Lynnwood, Cnr Botterklapper and Nentabos Street, The Willows,
Pretoria East, PO Box 39660, Garsfontein East 0060
Transfer Secretaries: Link Market Services (Pty) Ltd, 13th Floor
Rennie House, 19 Ameshoff Street, Braamfontein 2000, PO Box
4844, Johannesburg 2000
Auditors: AM Smith and Company Inc
Sponsor: Arcay Moela Sponsors (Pty) Ltd
Date: 02/04/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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