Wrap Text
Unaudited Consolidated Results For The Six Months Ended 31 December 2013 And Renewal Of Cautionary Announcement
Beige Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1997/006871/06)
Share code: BEG ISIN code: ZAE000034161
("Beige" or "the company")
UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013 AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT
Condensed Consolidated Statement of Financial Position
Unaudited 31 Audited Unaudited 31
December 2013 30 June 2013 December
R’000 R’000 2012
R’000
ASSETS
Non-current assets 227 490 215 802 257 088
Property, plant and equipment 166 535 160 990 173 111
Intangible assets 31 948 32 945 55 366
Investment in joint venture* (Note 1) 9 334 11 672 6 954
Other receivables 1 571 160 167
Deferred income tax assets 18 102 10 035 21 490
Current assets 201 426 185 582 207 825
Inventories 77 676 66 173 102 568
Trade and other receivables 117 819 116 505 102 504
Cash and cash equivalents 5 931 2 904 2 753
Total assets 428 916 401 384 464 913
EQUITY AND LIABILITIES
Equity attributable to equity holders of Beige
Holdings Limited 70 233 88 581 174 308
Ordinary share capital 15 442 15 442 15 442
Share premium 179 898 179 898 179 898
Other reserves 13 325 11 775 12 351
Retained (loss)/earnings (138 432) (118 534) (33 383)
Non-controlling interest 949 1 282 1 416
Total equity 71 182 89 863 175 724
Non-current liabilities 87 196 92 078 100 077
Borrowings 82 767 91 423 91 511
Deferred income tax liabilities 4 429 655 8 566
Current liabilities 270 538 219 443 189 112
Trade and other payables 187 118 145 176 134 744
Borrowings 8 421 16 250 8 652
Current income tax liabilities 1 122 518 280
Bank overdrafts 39 987 38 566 41 436
Shareholder loan 33 890 18 933 4 000
Total liabilities 357 734 311 521 289 189
Total equity and liabilities 428 916 401 384 464 913
*Amounts less than R’000
Ordinary shares (000’s)
In issue (Note 2) 1 544 197 1 544 197 1 544 197
Net asset value per share information (net of
non-controlling interest)
Net asset value per share (cents) 4.55 5.74 11.29
Net tangible asset value per share (cents) 2.48 3.60 7.70
Diluted net asset value per share (cents) 4.55 5.74 11.29
Diluted net tangible asset value per share 2.48 3.60 7.70
(cents)
Condensed Consolidated Statement of Comprehensive Income
Unaudited six
Unaudited six months
months ended Audited 12 ended 31
31 December months ended December
2013 30 June 2013 2012
R’000 R’000 R’000
Revenue 273 232 694 689 329 768
Cost of sales (247 787) (641 621) (295 932)
Gross profit 25 445 53 068 33 836
Distribution costs (5 433) (16 067) (9 103)
Administrative expenses (38 244) (123 032) (38 095)
Operating (loss)/profit (18 232) (86 031) (13 362)
Finance income 136 937 555
Finance costs (7 685) (15 191) (6 928)
(Loss)/profit after net financing costs (25 781) (100 285) (19 735)
Share of profit of joint venture* 231 1 445 77
(Loss)/profit before income tax (25 550) (98 840) (19 658)
Income tax credit/(expense) 6 869 (714) 5 958
(Loss)/profit for the period (18 681) (99 554) (13 700)
Other comprehensive income:
Gain on property revaluation - - 12
Income tax expense - - (3)
Other comprehensive income for the period
net of tax - - 9
Total comprehensive (loss)/profit for the
period (18 681) (99 554) (13 691)
Total comprehensive loss attributable to:
Equity holders of Beige Holdings Limited (18 348) (99 133) (13 406)
Non-controlling interest (333) (421) (285)
(18 681) (99 554) (13 691)
(Loss)/profit for the period (18 681) (99 554) (13 691)
Non-controlling interest 333 421 285
(Loss)/profit for the period attributable to
equity holders of Beige Holdings (18 348) (99 133) (13 406)
*Amounts less than R’000
Headline earnings adjustments:
Total comprehensive (loss)/profit for the period
attributable to equity holders of Beige Holdings
Limited (18 348) (99 133) (13 406)
Adjustments:
Profit on disposal of property net of tax - (9)
Headline (loss)/earnings for the period
attributable to equity holders of Beige
Holdings Limited (18 348) (99 133) (13 415)
Ordinary shares (000’s):
Weighted average shares in issue (Note 2) 1 544 197 1 544 197 1 544 197
Diluted (Notes 2 & 3) 1 544 197 1 544 197 1 544 197
Earnings per share information
(Loss)/earnings per share (cents) (1.19) (6.42) (0.87)
Headline (loss)/earnings per share (cents) (1.19) (6.42) (0.87)
Diluted (loss)/earnings per share (cents) (1.19) (6.42) (0.87)
Diluted (loss)/headline earnings per share (1.19) (6.42) (0.87)
(cents)
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 a 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 (June 2013: 87 624 017/December 2012: 92 311 517) 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 December 2013, 30 June 2013 and 31 December 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 31 December 2013, 30 June 2013 and 31
December 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.
Condensed Consolidated Statement of Cash Flows
Six months Audited year Six months
ended 31 ended ended 31
December 30 June 2013 December
2013 R’000 2012
Net cash generated from/(used in) operating activities 11 629 (19 805) (16 132)
Net cash used in investing activities (8 494) (23 335) (7 587)
Net cash generated from financing activities (1 529) 35 889 13 447
Net (increase)/decrease in bank overdrafts
including cash and cash equivalents 1 606 (7 251) (10 272)
Bank overdrafts including cash and cash equivalents
at the beginning of the period/year (35 662) (28 411) (28 411)
Bank overdrafts including cash and cash
equivalents at the end of the period (34 056) (35 662) (38 683)
Condensed Consolidated Statement of Changes in Equity
Share
Ordinary Ordinary Ordinary based Total
share treasury Share Revaluation payment other
capital shares premium reserve reserve reserves
R’000 R’000 R’000 R’000 R’000 R’000
Balance as at 31 March 2012 16 319 (877) 179 898 11 236 1 979 13 215
Comprehensive income:
Loss for the period - - - - - -
Other comprehensive income:
Other comprehensive income for
the period - - - - - -
Total comprehensive income - - - - - -
Transactions with owners:
Realisation of revaluation reserve - - - (288) - (288)
Total contributions by and
distributions to owners of the
company, recognised directly
in equity - - - (288) - (288)
Balance at 30 June 2012 16 319 (877) 179 898 10 948 1 979 12 927
Comprehensive income:
Loss for the period - - - - - -
Other comprehensive income:
Other comprehensive income for
the period - - - - - -
Total comprehensive income - - - - - -
Transactions with owners:
Realisation of revaluation reserve - - - (576) - (576)
Total contributions by and
distributions to owners of the
company, recognised directly
in equity - - - (576) - (576)
Balance at 31 December 2012 16 319 (877) 179 898 10 372 1 979 12 351
Comprehensive income:
Loss for the period - - - - - -
Other comprehensive income:
Other comprehensive income
for the period - - - - - -
Total comprehensive income - - - - - -
Transactions with owners:
Realisation of revaluation
reserve - - - (576) - (576)
Total contributions by and
distributions to owners of the
company, recognised directly
in equity - - - (576) - (576)
Balance at 30 June 2013 16 319 (877) 179 898 9 796 1 979 11 775
Comprehensive income:
Loss for the period - - - - - -
Other comprehensive income:
Other comprehensive income
for the period - - - - - -
Total comprehensive income - - - - - -
Transactions with owners:
Realisation of revaluation
reserve - - - 1 550 - 1 550
Total contributions by and
distributions to owners of the - - - 1 550 - 1 550
Share
Ordinary Ordinary Ordinary based Total
share treasury Share Revaluation payment other
capital shares premium reserve reserve reserves
company, recognised directly
in equity
Balance at 31 December 2013 16 319 (877) 179 898 11 346 1 979 13 325
Condensed Consolidated Statement of Changes in Equity (continued…..)
Non-
Retained controlling
(loss)\earnings Total interest Total equity
R’000 R’000 R’000 R’000
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)
Other comprehensive income:
Other comprehensive income for the
period - - - -
Total comprehensive income (3 582) (3 582) (243) (3 825)
Transactions with owners :
Realisation of revaluation reserve 288 - - -
Total contributions by and
distributions to owners of the
company, recognised directly in
equity 288 - - -
Balance at 30 June 2012 (20 553) 187 714 1 703 189 417
Comprehensive income:
Loss for the period (13 415) (13 415) (285) (13 700)
Other comprehensive income:
Other comprehensive income for the
period 9 9 - 9
Total comprehensive income (13 406) (13 406) (285) (13 691)
Transactions with owners :
Realisation of revaluation reserve 576 - - -
Total contributions by and
distributions to owners of the
company, recognised directly in
equity 576 - - -
Balance at 31 December 2012 (33 383) 174 308 1 418 175 726
Comprehensive income:
Loss for the period (85 727) (85 727) (136) (85 863)
Other comprehensive income:
Other comprehensive income for the
period - - - -
Total comprehensive income (85 727) (85 727) (136) (85 863)
Transactions with owners :
Realisation of revaluation reserve 576 - - -
Total contributions by and
distributions to owners of the
company, recognised directly in
equity - - - -
Balance at 30 June 2013 (118 534) 88 581 1 282 89 863
Comprehensive income:
Loss for the period (18 348) (18 348) (333) (18 681)
Other comprehensive income:
Other comprehensive income for the
period - - - -
Total comprehensive income (18 348) (18 348) (333) (18 681)
Transactions with owners :
Transfer to revaluation reserve (1 550) - - -
Total contributions by and
distributions to owners of the
company, recognised directly in
equity (1 550) - - -
Balance at 31 December 2013 (138 432) 70 233 949 71 182
Condensed Consolidated Segmental Analysis
Outsource
manufacturing Packaging Other Group
R’000 R’000 R’000 R’000
Total segment revenue 31 915
- unaudited six months ended 31
December 2013 251 530 31 915 - 283 445
- audited as at 30 June 2013 657 395 75 974 - 733 369
- unaudited six months ended 31
December 2012 313 882 37 775 - 351 657
1
Inter-segment revenue
- unaudited six months ended 31
December 2013 (5 349) (4 864) - (10 213)
- audited as at 30 June 2013 (30 270) (8 410) - (38 680)
- unaudited six months ended 31
December 2012 (16 915) (4 974) - (21 889)
Revenue from external customers
- unaudited six months ended 31
December 2013 246 181 27 051 - 273 232
- audited as at 30 June 2013 627 125 67 564 - 694 689
- unaudited six months ended 31
December 2012 296 967 32 801 - 329 768
Operating profit/(loss)
- unaudited six months ended 31
December 2013 (8 791) (4 928) (4 513) (18 232)
- audited as at 30 June 2013 (39 036) (40 845) (6 150) (86 031)
- unaudited six months ended 31
December 2012 (2 487) (9 048) (1 827) (13 362)
Total assets
- unaudited six months ended 31
December 2013 358 094 61 398 9 424 428 916
- audited as at 30 June 2013 336 662 52 737 11 985 401 384
- unaudited six months ended 31
December 2012 365 888 90 075 8 950 464 913
- Total liabilities
- unaudited six months ended 31
December 2013 240 037 25 893 91 804 357 734
- audited as at 30 June 2013 203 561 27 966 79 994 311 522
- unaudited six months ended 31
December 2012 200 969 26 743 61 477 289 189
1 Includes intra-segment revenue.
COMMENTARY
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 company has unlisted preference shares in issue, which
preference shares are held by the holding company.
3. Basis of preparation and change in year end
In order to align its year end with that of its holding company, The Lion Match Company Proprietary
Limited, Beige has changed its year end from 31 March to 30 June each year.
The condensed consolidated financial statements for the six months ended 31 December 2013 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 J. Bridgmohan CA(SA).
The principal accounting policies used in the preparation of the results for the six months ended 30
December 2013 are consistent with those applied for the year ended 30 June 2013.
4. Segment reporting
The chief operating decision-maker has been identified as the executive directors being the
Executive Chairman and the Group Financial Director. These directors consider the business from a
product perspective for purposes of assessing the performance of outsource manufacturing and
packaging products. The operating segments are determined based on these reports.
5. Business review
The period under review has been extremely challenging characterised by continued economic
uncertainty which has had an impact on both the multi-nationals and local retailers for which Beige
manufactures its products. The tightening of the trading conditions resulted in subdued volumes for
the six month period under review as key customers in-sourced product and changes in the product
mix were often to lower margin products.
Macro-economic issues such as above-inflationary wage settlements, rising fuel and energy costs, a
decline in the volumes of higher value products partially offset by an increase in lower value products
and a weakening exchange rate also impacted on the group’s business. Price increases were
implemented in the 2013 calendar year which did not fully offset the input price increases. This in turn
had a negative impact on Beige’s cost base as such costs are often unseen by customers and
therefore difficult to recover.
Revenue from outsource manufacturing remains 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. Whilst customers and product lines historically produced by this business
remain largely unchanged, monthly volumes by product and customer had declined.
The company relocated its packaging operation during the early part of the previous calendar year and
cost savings have started to be realised. However, revenue from the packaging operation is also
lower than expected and margins remain under severe pressure due to the intense competition and
downward pricing pressures. Import parity pricing of key raw materials was adopted by suppliers. The
rising crude oil prices and weakening exchange rates has resulted in raw material prices increasing
substantially.
In order to mitigate the risks associated with the uncertain economic environment and in line with its
strategy of pursuing value enhancing opportunities, the group continued 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 is expected to be completed during the current financial year. Once commissioned, this
plant will enable the group to manage its input cost as a result of a higher degree of control over the
value chain.
Existing customers are being mined to maximise revenues. To this end, the sales and new product
development teams have aligned closely with customers to ensure that Beige secures the launch of
new products and different variants of existing products. The pipeline of new business is being actively
managed. Strategies adopted to secure new customers are beginning to bear fruit as a large customer
has been contracted with and opportunities to secure further new customers are being progressed.
A critical review of all overheads within the Group was embarked on during the period under review.
Production costs have been critically looked at. All non productive costs and overheads have been
reduced substantially. This has resulted in terminating contract workers at various sites within the
Group. Manufacturing efficiencies and output is being carefully monitored. This has served to identify
inefficient areas of production and management have successfully been able to increase productivity
throughout all the manufacturing facilities. Products that are produced at low margins are being
reviewed. Plans have been implemented to improve the production process and thereby reduce the
cost of manufacture, whilst an active engagement process with customers to increase prices is
underway. Procurement is centrally managed and initiatives have been embarked upon to harness the
Group’s buying power to negotiate lower prices on common raw materials.
6. Financial and operational overview
The six months ended 31 December 2013 has proved to be a difficult trading period as the weak
economic conditions and inflationary pressures that were prevalent in the previous financial year
continued in the first half of this financial year. Consequently, revenue declined by 17.1% compared to
the six month period ended 31 December 2012. This was exacerbated by the seasonal increase in
volumes building towards the end of the calendar year not materialising in 2013. Gross margins have
fallen from 10.3% to 9.3% due primarily to the reasons mentioned in the business review above.
Active steps are being taken to improve the gross margin through both price increases and input cost
management.
Operations and efficiencies were impacted by the shorter production runs as a result of declining
volumes.
Distribution costs have been well controlled as shown through the percentage to sales decline from
2.8% to 2.0%, with administrative costs declining compared to the comparative period in real terms, as
the benefits of the overhead reduction measures adopted begin to be realised.
Loss and headline loss per share increased compared to December 2012 due to declining sales and
margins which has negatively impacted on the bottom line.
Working capital management continues to be a core focus for the company, particularly with regard to
improving the days in trade receivables and reducing the investment in inventories.
Borrowings relate to the loan obtained from the IDC (Industrial Development Corporation) which was
used to fund the Argo facility and funds advanced by The Lion Match Company (Pty) Ltd for working
capital purposes.
The cash flow position is expected to improve as a result of the aggressive cost saving strategies
being implemented by management and revenue enhancement initiatives begin to bear fruit.
7. Prospects
Whilst the economic conditions have not eased, the group's revenues and order book for the
remaining period of the financial year is robust and healthy in the Outsource Manufacturing segment.
Volumes are expected to increase materially compared to the first half of the financial year from both
existing customers and new business. The Packaging segment volumes are expected to remain flat
for the rest of this financial year. However, the cost reductions in Packaging will serve to reduce the
losses substantially.
The Group has already returned to profitability in the first two months of the 2014 calendar year. It is
expected that the cost reductions and healthy order book will continue to enhance the prospects of the
group.
8. 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.
9. 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.
10. Going Concern
The directors have reviewed the group and company’s budget and cash flow forecasts and have
satisfied themselves that the group and company are in a sound financial position and they have
access to sufficient borrowing facilities to meet their foreseeable cash requirements.
On the basis of this review, the directors consider it appropriate to adopt the going concern basis in
preparing the group and company’s financial statements.
The Lion Match Company (Pty) Ltd has provided a further funding facility to support the cash
requirements of the group. Amounts drawn against this facility will be repayable in July 2017 or such
earlier date at the discretion of Beige. The existing facility will be repaid from the proceeds of the
forthcoming claw-back offer.
11. Events after reporting period
As announced, the Company intends proceeding with a claw back offer which will be partly
underwritten by The Lion Match Company Proprietary Limited. A detailed announcement will be
made in due course. Other than normal trading, no other material events have occurred subsequent
to the period end that are required to be reported on.
12. Changes to the board
During the period under review:
- Mr NMI (Gora) Abdoola was appointed executive chairman with effect from 18 July 2013 and was
appointed as acting chief executive officer with effect from 15 December 2013.
- Mr MM Di Nicola resigned from the board as a non-executive director on 5 September 2013 due
to increasing business interests outside the borders of South Africa.
- Mr J Bridgmohan was appointed to the Board on 1 December 2013 as the Group Financial
Director.
- Mr MG Allan resigned as Chief Executive Officer with effect from 15 December 2013.
13. Claw back offer and renewal of cautionary announcement
Shareholders are referred to the previous cautionary announcements released on SENS regarding the
board’s decision to restructure the share capital of the company and raise additional capital to fund the
working capital requirements and growth of the group by way of a claw back offer (“the offer”) of new
ordinary shares. The pricing and ratio of the claw-back offer will be finalised following the restructuring
of the share capital and shareholders are accordingly advised to continue to exercise caution when
dealing in the company’s securities until full details of the proposed offer have been announced.
By order of the Board
Gora Abdoola Jithan Bridgmohan
Executive Chairman Group Financial Director
9 April 2014
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 (Executive Chairman), AH Trikamjee (Deputy Chairman) (#*), J Bridgmohan (Group
Financial Director), A Heeralal (#), AMI Abdoola (#), C de Jager (#), AGS Osman (#*), M Tembe (#*)
(#) Non-executive (*) Independent
Designated Advisor Transfer Office
Arcay Moela Sponsors Proprietary Limited Link Market Services South Africa Proprietary Limited
Auditors
PricewaterhouseCoopers Inc.
Date: 09/04/2014 11:54:00 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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