Wrap Text
REVIEWED CONDENSED PROVISIONAL FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2013
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”)
REVIEWED CONDENSED PROVISIONAL FINANCIAL RESULTS FOR THE YEAR ENDED 28
FEBRUARY 2013
CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION
2013 2012
Figures in R’000 Reviewed Audited
Assets
Non-Current Assets
Property, plant and equipment 3,485 5,528
Goodwill 1,318 1,318
Intangible assets 3,615 3,425
Other financial assets 1,286 57
Deferred tax 5,009 5,902
Finance lease receivables 158 241
14,871 16,471
Current Assets
Inventories 798 1,583
Other financial assets 235 1,525
Current tax receivable 71 -
Finance lease receivables 216 311
Trade and other receivables 911 1,510
Cash and cash equivalents 2,323 1,062
4,554 5,991
Non-current assets held for
sale and assets of disposal 14,893 28,994
groups
Total Assets 34,318 51,456
Equity and Liabilities
Equity
Share capital 43,641 43,641
Reserves 1,296 33
Accumulated loss (44,267) (35,432)
670 8,242
Liabilities
Non-Current Liabilities
Other financial liabilities 8,793 8,793
Finance lease obligation 346 1,121
Deferred tax 2,349 3,655
11,488 13,569
Current Liabilities
Other financial liabilities 935 1,348
Finance lease obligation 268 593
Operating lease liability 855 756
Trade and other payables 4,970 7,663
Bank overdraft 5,268 3,325
12,296 13,685
Liabilities of disposal groups 9,864 15,960
Total Liabilities 33,648 43,212
Total Equity and Liabilities 34,318 51,456
CONSOLIDATED GROUP STATEMENT OF COMPREHENSIVE INCOME
2013 2012
Figures in R’000 Reviewed Audited
Continuing operations
Revenue 42,695 55,252
Cost of sales (11,847) (13,694)
Gross profit 30,848 41,558
Other income 375 635
Operating expenses (38,741) (49,843)
Profit on sale of associate - 2,391
Operating (loss) (7,518) (5,260)
Investment revenue 109 213
Income from equity accounted
investments - 1,148
Finance costs (1,587) (1,890)
Loss before taxation (8,996) (5,789)
Taxation 391 (5,550)
Loss from continuing operations (8,605) (11,340)
Discontinued operations
Loss from discontinued operations (230) (10,758)
Loss for the year (8,835) (22,098)
Other comprehensive income (loss):
Fair value adjustments on assets at
fair value through other
comprehensive income 1,253 -
Exchange differences on translating
foreign operations 13 62
Taxation related to components of
other comprehensive income (3) (1,340)
Other comprehensive income /(loss)
for the year net of taxation 1,263 (1,278)
Total comprehensive loss (7,572) (23,377)
Attributable to:
Owners of the parent:
Loss for the year from continuing
operations (8,605) (11,340)
Loss for the year from discontinuing
operations (230) (10,758)
Loss for the year attributable to
owners of the parent (8,835) (22,098)
Total comprehensive loss
attributable to:
Owners of the parent (7,572) (23,377)
Loss per share
From continuing and discontinued
operations
Basic and diluted loss per share (c) (5.58) (13.96)
Basic and diluted loss per share
(5.44) (7.16)
from continuing operations (c)
Basic and diluted loss per share
(0.14) (6.80)
from discontinued operations (c)
CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Accumulat Total
FCTR FVA
Figures in R’000 capital ed loss equity
Balance at 01
43,641 (11) - (12,011) 31,619
March 2011
Changes in
equity
Total
comprehensive
- 44 (1,323) (22,098) (23,377)
income /(loss)
for the year
Transfer between
- - 1,323 (1,323) -
reserves
Total changes - 44 - (23,421) (23,377)
Balance at 1
43,641 33 - (35,432) 8,242
March 2012
Changes in
equity
Total
comprehensive
- 10 1,253 (8,835) (7,572)
income /(loss)
for the year
Total changes - 10 1,253 (8,835) (7,572)
Balance at 28
43,641 43 1,253 (44,267) 670
February 2013
FCTR – Foreign Currency Translation Reserve
FVA - Fair value adjustments through other comprehensive income reserve
CONSOLIDATED GROUP STATEMENT OF CASH FLOWS
2013 2012
Figures in R’000 Reviewed Audited
Cash flows from operating activities
Cash receipts from customers 44,087 42,569
Cash paid to suppliers and employees (50,052) (45,211)
Cash used in operations (5,965) (2,642)
Interest income 109 213
Tax paid (121) (95)
Cash flows of discontinued operations 7,814 (932)
Net cash from operating activities 1,837 (3,456)
Cash flows from investing activities
Purchase of property, plant and
equipment - To maintain operating
capacity (362) (756)
Sale of property, plant and equipment 838 224
Purchase of other intangible assets -
To maintain operating capacity (1,196) (1,045)
Sale of equity accounted business - 5,333
Purchase of financial assets - (1,152)
Sale of financial assets 1,302 592
Net cash from investing activities 582 3,196
Cash flows from financing activities
Proceeds from other financial
liabilities - 5,152
Repayment of other financial
liabilities (413) -
Finance lease liability payments (1,236) (466)
Finance costs (1,451) (1,783)
Net cash from financing activities (3,100) 2,903
Total cash movement for the year (681) 2,642
Cash at the beginning of the year (2,263) (4,905)
Total cash at end of the year (2,944) (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
R8,377,610 (2012: R17,030,582) and a weighted average number of ordinary
shares of 158,311,597 (2012: 158,311,597).
Headline and diluted headline loss per share (c) (5.44) (10.76)
Reconciliation between loss and headline loss
R’000
Basic loss (8,835) (22,098)
Adjusted for:
Profit on disposal of investment in associate - (2,390)
After Tax Loss recognised on the measurement to
fair value less cost tosell constituting
discontinued operations - 7,101
Loss (profit) on disposal of investment
properties - 14
Loss/(Profit) on disposal of property plant and
equipment 9 15
Impairment loss on property plant and equipment 132 -
Impairment loss on Intangibles 173 -
Loss on disposal of investments in subsidiaries - (3)
Tax effect thereon (87) 331
(8,608) (17,030)
Condensed Segmental Analysis
Reviewed Audited
2013 2012
R’000 R’000
Revenue
Continuing operations
Financial products 30,993 33,981
Health & Wellness products 11,298 19,245
General finance 263 365
Corporate services & other 141 1,661
42,695 55,252
Discontinued operations 15,750 4,992
Profit / (loss)
Continuing operations
Financial products 8,034 47
Health & Wellness products (1,082) (2,414)
General finance (161) (583)
Corporate services & other (15,396) (8,390)
(8,605) (11,340)
Discontinued operations (230) (10,758)
(8,835) (22,098)
Segment assets
Financial products 6,833 3,579
Health & Wellness products 1,362 2,921
General finance 737 881
Corporate services & other 10,493 15,081
Assets of disposal groups 14,893 28,994
34,318 51,456
Segment liabilities
Financial products 2,950 3,715
Health & Wellness products 1,217 3,491
General finance 42 61
Corporate services & other 19,575 19,987
Liabilities of disposal groups 9,864 15,960
33,648 43,214
BUSINESS OVERVIEW
StratCorp is an investment holding company that owns and invests in
companies with high growth potential. Its focus is on providing its
subsidiaries with infrastructural support and management services, which
include centralised information technology systems and support, legal
and human resource administration and support, and finance support and
funding facilities. StratCorp also provides its subsidiary companies
with a central client base that has been built up over the past 12
years.
The Group currently operates in three segments, namely Financial
Products through Virtus and WealthNet, Health and Wellness Products
through I-Cura, and General Finance through StratFin.
The tough market conditions that the Group experienced during the 2012
financial year continued into the 2013 with a constant decline in
subscriptions from all the businesses in the Group. The disposable
income of the main client base of the Group remained under pressure and
customers cancelled their subscriptions in order to meet other, more
pressing expenses.
A restructuring plan was implemented in May 2012 to reduce the expenses
of the group and return the Group to profitability. This plan included
the reduction of staff, especially in the support functions within the
Group, renegotiating leases for the branches, sharing of certain
premises by the Group companies, reduction of directors’ remuneration
and the disposal of the Soldonné Residential complex effective from
November 2012. Although the restructuring plan reduced expenses by on
average R1 million per month, this was not sufficient to address the
continued decline in revenue over the same period.
I-Cura which distributes health and wellness products was the main
contributor to the poor performance of the Group during the financial
year, with revenue decreasing from R19.2 million for the 2012 year to
R11.6 million for the 2013 year, a decrease of 39.6% over the year.
In February 2013 the Board of Directors of the company resolved that a
second, more aggressive restructuring plan should be implemented to
return the group to profitability. This plan entailed the further
reduction of staff on managerial and support functions, the closure of
branches that were not contributing to Group revenue or profits, a
further reduction in directors’ remuneration, and renegotiation of the
Head Office lease with the landlord.
As a result of the tough market conditions, Revenue from continuing
operations decreased from R55.2 million in 2012 to R42.7 million in
2013. The net loss after tax from continuing operations decreased from
R11.3 million in 2012 to R8.6 million in 2013. The total loss from
discontinued operations for 2013 amounted to R0.2 million compared to
R10.8 million for 2012.
ASSETS OF DISPOSAL GROUPS
Shareholders were advised in the 2012 results announcement that the
Board has taken a decision to discontinue its property development
operations, and to reflect its interests in property as part of the
discontinued operations. The Soldonné Residential complex that the
Group owned was sold with effect from November 2012. The Group still
owns two vacant properties in Karenpark and Orchards, which is for sale,
but only at reasonable prices. Management believe that the two
properties have value and will reconsider its intention with regards to
the two properties over the next six months.
While the Group still owes the vendor of the Orchards property R4,8
million, the payment terms are linked to the development of that
property, with an amount payable per stand sold and developed. There
are no time constraints imposed on the company to perform with regard to
when the development must commence or be finalised.
CASH FLOWS
A net cash outflow of R0.7 million was recorded for the period compared
to a net inflow of R2.7 million for 2012, but this included the
repayment of debt of R6.7 million, mainly from the proceeds of the
disposal of the Soldonné Residential complex in November 2012. Cash
generated from operations decreased from an outflow of R2.6 million in
2012 to an outflow of R5.9 million in 2013, which includes the costs of
the restructuring exercises that the Group implemented during the 2013
year.
The restructuring plan and the reduction of costs over the past twelve
months have started to produce positive results for the Group, with the
Group returning to a net positive cash flow position. Cash flow is
managed tightly, and unnecessary expenses have been eliminated to
improve efficiencies within the Group.
STRATEGY
General market conditions remain sluggish and the Group is not expecting
this to change soon. The focus of the Group is on expanding its product
range and its distribution channels to increase revenue and diversify
its exposure from the current direct marketing channels. With the costs
now under control, any new expenditure focuses on the marketing of the
products and to this extent the Telemarketing division within I-Cura has
already proven itself by delivering growing sales volumes each month.
This division will be expanded with the appointment of more agents,
mainly from the reallocation of expenses from other areas where savings
are extracted through improved efficiencies.
Consumer affordability remains a major contributor towards the revenue
of the Group, and management continues with its efforts to produce and
deliver affordable products and services to its customers that meet
their needs.
GOING CONCERN
The reviewed condensed provisional consolidated 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 8,8 million for the year ended 28
February 2013, compared to a net loss of R23,377 million during 2012,
and the current liabilities of the Group exceed its current assets as at
28 February 2013. The losses incurred by the Group over the last
financial year have placed the cash flows of the Group under a
considerable pressure, which threatens the going concern of the group.
The restructuring plan that has been approved by the Board and
implemented to reduce costs, realise non-core assets and reduce debt to
enable the Group to continue operating as a going concern, has already
resulted in a considerable reduction in debt and expenses, as well as
the cash requirements of the Group, with the Group returning to a
positive cash flow position. While it is early days and the next few
months will determine whether the restructuring of the Group has been
successful, the Board believes that Group costs has been reduced
sufficiently to return the Group to positive cash flows to allow the
management to focus on revenue and the expansion of the revenue channels
over the next financial year and confirm the going concern of the Group.
Although the board is optimistic that the corner has been turned, the
continued going concern of the Group remains subject to the continuous
successful results due to the implementation of the restructuring plan
and the access to sufficient cash resources.
BASIS OF PREPARATION
Statement of compliance
The reviewed condensed provisional consolidated financial results
comprise a condensed consolidated statement of financial position at 28
February 2013, 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 year ended 28
February 2013. The reviewed condensed provisional consolidated
financial results have been prepared in accordance with the framework
concepts and the measurement and recognition requirements of
International Financial Reporting Standards (“IFRS”), SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by Financial Reporting
Standards Council , 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 financial statements 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, and 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.
REVIEW OPINION
The reviewed condensed provisional consolidated financial results of the
company and group have been reviewed by Nexia SAB&T. The auditors’
review report, which is available for inspection at the company’s
register office, contains an emphasis of matter with regard to the going
concern of the Group, as follows:
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed provisional consolidated financial results do
not present fairly the consolidated financial position of the entity as
at 28 February 2013, and of its consolidated financial performance and
its cash flows for the year ended in compliance with the JSE Listings
Requirements.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to the these
condensed provisional consolidated financial results which indicates
that the Group incurred a net loss of R8.8 million for the year ended 28
February 2013, and the current liabilities of the Group exceeded its
current assets as at 28 February 2013. The condensed provisional
consolidated financial results also indicate that these conditions,
along with other matters, indicate the existence of a material
uncertainty which may cast significant doubt on the Group’s ability to
continue as a going concern.
DIVIDENDS
No dividends were declared or paid to shareholders during the year.
LITIGATION
The directors are not aware of any 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.
As reported in the Sens announcement on 20 May 2013, a major subsidiary
of the Company is being investigated by the Financial Services Board
(“FSB”). The FSB’s investigation of the Company’s subsidiary originated
from a complaint received by the FSB in 2007 of the alleged
contravention by the subsidiary of certain provisions of the Financial
Advisory and Intermediary Services Act (Act no. 37 of 2002. The matter
is receiving attention, and the Company’s subsidiary has been engaging
with the Regulator in this regard.
CHANGES TO THE BOARD
Steven Firer resigned as an independent non-executive director on 12 May
2012, and Ian Wright resigned as executive director on 28 February 2013.
Since year end Tumelo Ratau resigned as non-executive director on 17 May
2013 and Henk Engelbrecht resigned as Financial Director of the Group
with effect from 31 May 2013.
The Board is in the process of filling the vacancies on the board to
increase the number of directors to the minimum of four in terms of the
Listings Requirements of the JSE.
On behalf of the board.
D B Harington
Chief Executive Officer
MM Patel
Independent Non-Executive Director
31 May 2013
CORPORATE INFORMATION
Non executive directors: PJ de Jongh* (Chairman), M Patel*
(Chairman of Audit Committee)
*Independent
Executive director: DB Harington (CEO)
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) Ltd
Auditors: Nexia SAB&T
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
Date: 03/06/2013 09:30:00 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.
Sharenet Sites 
