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Audited results for the year ended 28 February 2013
BK ONE LIMITED
(Incorporated in the Republic of South Africa)
Registration Number: 2011/008103/06
JSE share code: BK1P
ISIN: ZAE000161352
(“BK One” or “the Company”)
Audited results for the year ended 28 February 2013
COMMENTARY
Introduction
The financial year ended 28 February 2013 has been a challenging one for the Company. The Board has, however
proactively managed the adversity and the Company was able to protect the shareholder value by means of the steps
detailed below.
After the major loss for our co-investment partner ((Basileus Capital (Proprietary) Limited (“Basileus”)) through the
untimely death of its CEO, which then resulted in a capital shortage, the remaining directors of Basileus decided to place
the company into business rescue during August 2012.
As Basileus was responsible for the sourcing and primary management of the investee companies in which the Company
is invested, it required a swift response from the Board of Directors of BK One (the “Board”) to protect the value of BK
One’s investments and, in turn, BK One’s preference shareholders.
The Board consequently decided to reconsider the co-investment relationship with Basileus and, to ensure that BK One
would be able to direct the future of the investee companies in a manner which would benefit BK One preference
shareholders, entered into a Memorandum of Understanding (“MoU”) with Basileus whereby BK One, or its nominee,
would acquire a number of assets held by Basileus (please refer to the SENS announcement dated 28 August 2012 in this
regard). The Board also identified the importance of creating a new management team capable of successfully managing
the assets being acquired from Basileus.
After entering into the MoU, the Board, in consultation with its advisors, examined a number of options and, for the
reasons set out in the SENS announcement dated 8 November 2012, decided to enter into an assignment and option
agreement (“option agreement”) with Isitsaba Investment Group (Proprietary) Limited (“IIG”), in terms of which it would
take control of the assets being acquired from Basileus.
Investment portfolio
Pure Ocean Aquaculture (Proprietary) Limited (“POA”) remains an exciting and, to date, successful business. The
business plan has been modified to adapt to funding constraints. Nevertheless, significant progress has been made at both
of its production farms.
Highlands Trout (Proprietary) Limited (“Highlands”) has made substantial progress and as at 28 February 2013 had some
220 000 fish in the water. The first harvest started in November 2012 to secure a six-month off take agreement with one of
the largest Japanese retailers. Sales are also being made to the South African market. The processing facilities at Highlands
are complete and are able to handle the harvesting needs. Substantial progress has been made in securing further rights and
approval has been obtained to build the second farm on Mohale Dam.
The East London plant has completed the hatchery phase.
Avalloy (Proprietary) Limited (“Avalloy”) continues to require working capital and has been operating on a reduced
operating budget. Avalloy requires no further capital expenditure and has adjusted its business strategy to deal with the
funding challenges and to ensure that the business will react quickly when new working capital becomes available.
Avalloy continues with efforts to raise working capital funding from various sources. Market dynamics remain positive in
this industry and Avalloy remains well positioned in an industry with high barriers to entry, having completed the lengthy
accreditation processes needed to ensure marketability of its products.
Investment impact
One of the first consequences of the capital shortage at Basileus, together with the particular industry challenges facing
Tor Construction (Proprietary) Limited (“Tor”) , was a decision taken by Basileus to apply for voluntary liquidation of Tor
in August 2012. Therefore, the Board decided to provide for the impairment of the loan to Tor Holdings (Proprietary)
Limited (“Tor Holdings”) at full value, amounting to R35 731 071. The demise of Basileus meant that all three of the
companies in which BK One had invested lost their major shareholder, placing all of these companies under severe capital
funding constraints.
The original investments were made in December 2011 at which time the initial investment, at carrying value, was
R196m. The first year end results as at 29 February 2012 had the fair value of the portfolio at R232.9m. As at 28 February
2013 the fair value of the portfolio was R164.9m. This equates to a 16% reduction in fair value from 8 December 2011
(listing date) and a 29% reduction in fair value since 29 February 2012.
Both valuations at 29 February 2012 and at 28 February 2013 were performed by an independent professional valuation
expert. The relevant financial information for the valuations was provided by management of the individual projects.
Notwithstanding our valuation, the true value negotiated between parties may differ from this value as it is dependent upon
other considerations, including, but not limited to, differing views of micro and macro-economic conditions and forecasts
as well as different assessments of risk. True and fair values negotiated between parties can only be determined through a
process of negotiation.
The key reasons for this reduction in investment value were firstly, the write down of Tor Holdings and secondly, a
change in the valuation assumptions on the remaining investments due to the change in circumstances.
The period under review has been a difficult one for both global and local economies, resulting in difficult trading
conditions for investment companies. This pressure is more difficult to absorb for companies which are early in their life
cycle, making it harder to weather adverse market conditions than it has been for established competitors.
Conclusion
The period under review started in a positive light but this was overshadowed by the setback with our co-investment
partner in July 2012. The challenges that resulted from this event required a rapid response from BK One to protect the
interests of preference shareholders. In order to provide effective management and funding to the businesses the Board
moved to secure the rights to acquire certain key assets of Basileus. The Company is actively considering various strategic
options with the investee companies and investors will be kept informed of progress made. These transactions were not
completed in the financial period under review. The potential in the BK One portfolio companies remains, the past period
notwithstanding, and we believe that the individual projects have the ability to deliver value for shareholders upon on the
successful implementation of their business plans.
Directors
P K V Ncetezo, P G Gaylard , H P van Noort , D P Richards , S J Sieff
Registered office
12th Floor
2 Long Street
Cape Town
8000
Auditors
Deloitte & Touche
Secretary
SecCorp Secretarial Services (Pty) Ltd
Sponsor
Nedbank Capital
31 May 2013
STATEMENT OF FINANCIAL POSITION
28 February 2013 Audited Audited
2013 2012
R R
ASSETS
Non-current assets 128 285 402 232 904 956
Property, plant and equipment 84 065 -
Intangible assets 70 790 -
Investments 51 067 624 94 247 870
Loans 77 062 923 138 657 086
Current assets 37 374 353 1 278 078
Loans 36 816 209 -
Other receivables 88 095 -
Cash and cash equivalents 470 049 1 278 078
___________ ___________
Total assets 165 659 755 234 183 034
___________ ___________
EQUITY AND LIABILITIES
Capital and reserves (38 602 892) 28 709 659
Share capital 200 200
Accumulated (loss) profit (38 603 092) 28 709 459
Non-current liabilities 197 799 790 204 666 243
Preference shares 197 799 790 197 799 790
Deferred taxation - 6 866 453
Current liabilities 6 462 857 807 132
Loan 5 000 000 -
Trade and other payables 1 462 857 807 132
___________ ___________
Total equity and liabilities 165 659 755 234 183 034
___________ ___________
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2013
Audited Audited
year 11 months
ended ended
28 February 29 February
Notes 2013 2012
R R
Revenue 11 039 322 4 992 021
Fair value adjustment on investments (43 180 258) 34 046 192
Employee benefits expense (801 000) (340 000)
Impairment of loan (35 731 071) -
Other expenses (5 505 997) (3 122 301)
___________ ___________
(Loss) profit before taxation (74 179 004) 35 575 912
Taxation 6 866 453 (6 866 453)
___________ ___________
(Loss) profit for the year (67 312 551) 28 709 459
Other comprehensive income - -
Other comprehensive income for the year, net of tax - -
___________ ___________
Total comprehensive (loss) profit for the year, net of tax (67 312 551) 28 709 459
___________ ___________
(Loss) profit for the year attributable to:
Ordinary shareholders - -
Preference shareholders (67 312 551) 28 709 459
___________ ___________
Total comprehensive (loss) profit attributable to:
Ordinary shareholders - -
Preference shareholders (67 312 551) 28 709 459
___________ ___________
(Loss) earnings per share, in Rands
Ordinary shareholders 5 - -
Preference shareholders 5 (3,35) 1,43
Diluted (loss) earnings per share, in Rands
Ordinary shareholders 5 - -
Preference shareholders 5 (3,35) 1,43
___________ ___________
STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2013
Audited Audited Audited
Share Accumulated
capital (loss) profit Total
R R R
Balance at 28 February 2011 - - -
Ordinary shares issued 200 - 200
Total comprehensive profit for the period - 28 709 459 28 709 459
___________ ___________ ___________
Balance at 29 February 2012 200 28 709 459 28 709 659
Total comprehensive loss for the year - (67 312 551) (67 312 551)
___________ ___________ ___________
Balance at 28 February 2013 200 (38 603 092) (38 602 892)
___________ ___________ ___________
STATEMENT OF CASH FLOWS
for the year ended 28 February 2013
Audited Audited
year 11 months
ended ended
28 February 29 February
2013 2012
R R
Cash flows from operating activities
Cash absorbed by operations (5 734 184) (2 655 170)
Interest received 3 020 916 -
___________ ___________
Net cash outflow from operating activities (2 713 268) (2 655 170)
___________ ___________
Cash flows from investing activities
Investments made (12) (52 168 813)
Purchase of plant and equipment and intangibles (160 037) -
Non-current loans advanced (5 380 000) (108 776 921)
___________ ___________
Net cash outflow from investing activities (5 540 049) (160 945 734)
___________ ___________
Cash flows from financing activities
Share capital raised - 200
Preference share capital raised - 197 799 790
Loans received 5 000 000 -
Loans advanced (4 935 000) (34 921 008)
Loans repaid 7 380 288 2 000 000
___________ ___________
Net cash inflow from financing activities 7 445 288 164 878 982
___________ ___________
Net (decrease) increase in cash and cash equivalents (808 029) 1 278 078
Cash and cash equivalents at beginning of the year 1 278 078 -
___________ ___________
Cash and cash equivalents at end of the year 470 049 1 278 078
___________ ___________
1. REVIEW OF ACTIVITIES
The Company holds investments as its principal activity and operates principally in South Africa.
2. BASIS OF PREPARATION
The financial statements have been prepared in accordance with the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), Interpretations issued by the IFRS Interpretations Committee
(IFRIC), containing the information required by the Companies Act of South Africa, as well as the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council, the Listings Requirements of the JSE
Limited and the information required by IAS 34 “Interim financial reporting”. These financial statements have
been prepared on a going concern basis with accounting policies consistent with those applied in the prior period.
They are presented in South Africa Rands. No standards or interpretations have been early adopted.
The condensed financial statements were prepared by A de Nobrega-Thorold CA (SA) under the supervision of
Messrs D P Richards and J S Sieff.
The auditors, Deloitte & Touche, have issued their opinion on the annual financial statements for the year ended
28 February 2013. The audit was conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. These condensed financial statements have been derived from the annual
financial statements and are consistent, in all material respects, with the annual financial statements. A copy of
their audit report is available for inspection at the company’s registered office. The audit report does not
necessarily cover all the information contained in this announcement. Shareholders are therefore advised that in
order to obtain a full understanding of the nature of the auditors’ work they should obtain a copy of that report
together with the accompanying financial information from the registered office of the company.
3. EVENTS AFTER THE REPORTING DATE
BK One has entered into the option agreement with IIG. In terms of the option agreement, the Company is entitled
to acquire the assets of IIG at a pre-determined price. The option was extended to 31 July 2013 (SENS 3 May
2013). The option agreement was out of the money at the reporting date.
In order to meet the short term funding needs of IIG companies, BK One obtained a loan advance from Winn
Development CC of R12 500 000. Of this amount, R5 000 000 was advanced before year-end and is reflected as a
current liability on the statement of financial position. The balance of R7 500 000 was advanced subsequent to
year-end.
This funding was subsequently on-lent to the following IIG companies on the same terms as the current project
loans with these entities:
Avalloy (Proprietary) Limited (“Avalloy”) R930 000
Burgan Oil Services (Proprietary) Limited (“Burgan” or “BOS”) R490 000
Kawuleza Connect Holdings (Proprietary) Limited (“Kawuleza”) R320 000
Pure Ocean Aquaculture (Proprietary) Limited (“POA”) R4 101 000
On 30 May 2013, IIG entered into a binding Sale and Purchase agreement in respect of the Cash Connect business.
In connection with this agreement, the loan of R26 423 002 owing by Cash connect Rental Treasury Trust to the
company will be repaid in full. This will enable the settlement of the short-term funding received from Winn
Developments CC.
The company purchased 598,161 additional shares in POA on 17 May 2013 resulting in an increase in the
ownership percentage in POA from 10.37% to 10.85%.
The Directors are not aware of any other matter or circumstance arising since the end of the financial year.
4. DIVIDENDS
No dividends were declared or paid to shareholders during the year.
5. (LOSS) EARNINGS PER SHARE
(Loss) earnings and headline (loss) earnings per share are based on the profit (loss) attributable to ordinary and
preference shareholders in issue during the year. The number of ordinary and preference shares in issue for the
period under review was 200 and 20,102,000 respectively. There are no dilutive instruments in issue.
Ordinary shareholders only participate in earnings per share above an annualised hurdle rate of 20% after
10 years.
(Loss) earnings and headline (loss) earnings per share and the corresponding diluted (loss) earnings and diluted
headline (loss) earnings per share are identical as no adjustments are required, and are therefore calculated as
follows:
For the year ended February 2013
Ordinary share Preference
holders shareholders Total
Loss - (67 312 551) (67 312 551)
Number of shares issued 200 20 102 000 -
Loss per share (Rands) - (3.35)
For the 11 months ended February 2012
Ordinary share Preference
holders shareholders Total
Earnings - 28 709 459 28 709 459
Number of shares issued 200 20 102 000 -
Earnings per share (Rands) - 1.43
6. SEGMENT REPORTING
BK One is an investment company with investments in certain industries with differing risk profiles. The
information reported to the chief decision maker for the purposes of resource allocation and assessment of
segment performance is provided per investment, which is currently per industry. The reportable segments under
IFRS 8 are therefore noted below. The only transactions that affect BK One are the fair value adjustments and
interest which are:
For year ended 28 February 2013
Fair value Interest
Investment Industry adjustment received
R R
POA Aquaculture (8 575 908) 7 673 827
Avalloy Superalloys (26 323 058) 344 579
Tor Construction (8 281 292) -
For 11 months ended 29 February 2012
Fair value Interest
Investment Industry adjustment received
R R
POA Aquaculture 20 633 006 1 593 863
Avalloy Superalloys 5 131 912 309 395
Tor Construction 8 281 274 731 071
Date: 31/05/2013 04:00:00 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. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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