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Reviewed results for the year ended 28 February 2014
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”)
Reviewed results for the year ended 28 February 2014
COMMENTARY
1. Introduction
During the financial year ended 28 February 2014, The Board of Directors (“the Board”) has focussed on stabilising its
investee businesses, in an attempt to protecting shareholders value.
The Company continued to experience difficult and challenging conditions with respect to the procurement of finance for
the Company as well as its investee companies. The Company is also in the process of replacing its CEO. It is hoped that
current uncertainty can be resolved in time to publish the audited accounts.
The Board managed to successfully enter into various financing arrangements to obtain working capital for the investee
companies.
As communicated to the market previously (refer to SENS announcement dated 8 November 2012), BK One had entered
into a call option (“Call Option”) with Isitsaba Investment Group Proprietary Limited (“IIG”) whereby BK One was
granted the option to obtain certain assets from IIG.
BK One exercised the Call Option on 31 August 2013 and effectively increased its interest in its underlying investee
companies (Avalloy Proprietary Limited [“Avalloy”] and Pure Ocean Aquaculture Proprietary Limited [“POA”]) as set
out in paragraph 2 below.
2. Call Option
The Call Option was out of the money as at 28 February 2013 and the terms were renegotiated in the current year.
2.1. POA
BK One effectively acquired IIG’s shareholding and claims in POA and its subsidiaries, i.e. Pure Ocean East London
Proprietary Limited (“POEL”) and Highlands Trout Proprietary Limited (“Highlands Trout”), for R34m. This was
settled by issuing 4 250 000 BK One preference shares at a fixed price of R8.00 per share to IIG.
2.2. Avalloy
At the time of entering into the revised Call Option it was foreseeable that Avalloy would enter into business rescue
proceedings. As a result of the implementation of Avalloy’s business rescue plan the Company’s total interest in
Avalloy, including its investments in preference shares, options and loans receivable was converted into ordinary
shares, based on allocated ratios as defined by the business rescue plan. This resulted in a shareholding in Avalloy of
23.04%. BK One, by virtue of the Call Option further acquired 5.37% of Avalloy from IIG (and its related entities)
for R1 126 584. This was settled by issuing 140 823 BK One preference shares at a fixed price of R8.00 per share to
IIG.
The acquisitions of further stakes in the investee companies had a positive effect on the investment portfolio.
3. Investment Portfolio
BK One Ltd has investments in 2 entities:
3.1 Pure Ocean Aquaculture (POA)
POA holds two entities: Highlands Trout and POEL, which are independently valued.
3.1.1 Highlands Trout
Highlands Trout has a licence to operate in Katse Dam in the Kingdom of Lesotho (“Lesotho”). Further
activities during the year included Highlands Trout securing a twelve-month off-take agreement with
one of the largest Japanese retailers and securing a further licence to farm in the nearby Mohale Dam.
There have been continued sales into the South African market and the processing facilities at Highlands
Trout are currently being upgraded to facilitate the growing harvesting needs. All the above has had a
positive impact on BK One’s investment portfolio.
POA has taken pride in increasing its corporate social responsibility footprint in Lesotho, by driving
training workshops for up-skilling workers and focussing on the creation of employment opportunities
around the Lesotho based operations.
3.1.2 POEL
In the current year the fundamental assumptions of the POEL business plan model were not realised;
this has had a negative effect on the overall valuation of POA. A provision for partial impairment of the
investment in POA was raised in the current year under review.
3.2 Avalloy
The directors of Avalloy placed the company into business rescue in compliance with the provisions of Section 150 of
the Companies Act of 2008 on 31 August 2013 in order to, amongst other reasons, restructure the balance sheet of
Avalloy and protect stakeholder value.
Avalloy is currently operational and has secured some of its required funding. It continues with efforts to raise
working capital funding from various sources. Market dynamics remain positive in the industry and Avalloy remains
well positioned in an industry with high barriers to entry.
The restructure of the balance sheet by virtue of the business rescue plans and the securing of funding have had a
positive effect on the investment portfolio.
4 BK One Portfolio - Investment Impact:
As at 28 February 2013 the fair value of the portfolio was R164.9m. As at 28 February 2014 the fair value of the portfolio
increased to R174.6m. This equates to a 6% increase in fair value since 28 February 2013. The increase was primarily due
to the acquisition of further interests in the investee companies in terms of the revised Call Option per paragraph 2 above.
The increase in the investment portfolio would have been more significant had it not been negatively affected by the
change in POEL’s valuation methodology from Discounted Cash Flow to Net Asset Value and the potential dilution of its
equity in POA to accommodate funders in the underlying subsidiaries.
Both valuations at 29 February 2013 and at 28 February 2014 were performed by an independent valuation expert using
financial information 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, raising adequate funding, 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.
5 Going Concern
The Directors draw your attention to the going concern status of the Company. BK One is currently experiencing liquidity
issues, which are being addressed by the Directors via the implementation of various solutions. For more details refer to
note 4 of the attached abridged financial statements.
6 Conclusion
The potential in the BK One portfolio companies remains, and we believe that the individual projects have the ability to
deliver value for shareholders upon the successful implementation of their business plans. Critical to this is the ability of
the underlying investments to attract the funding required to do so. The Board will continue to strive to minimize risk
exposure in its underlying investment interests and extract value for all its stakeholders.
Directors
P K V Ncetezo, P G Gaylard, H P van Noort, A de Nobrega Thorold
Registered office
12th Floor
2 Long Street
Cape Town
8000
Auditors
Deloitte & Touche
Secretary
SecCorp Secretarial Services (Pty) Ltd
Sponsor
Nedbank Capital
30 May 2014
CONDENSED STATEMENT OF FINANCIAL POSITION
28 February 2014 Reviewed Audited
2014 2013
R R
ASSETS
Non-current assets 173 896 940 128 285 402
Property, plant and equipment 132 304 84 065
Intangible asset 33 825 70 790
Investments 75 976 019 51 067 624
Long term loans receivable 97 754 792 77 062 923
Current assets 3 620 875 37 374 353
Short term loans receivable 876 329 36 816 209
Other receivables 58 654 88 095
Cash and cash equivalents 2 685 892 470 049
___________ ___________
Total assets 177 517 815 165 659 755
________ ___ ___________
EQUITY AND LIABILITIES
Capital and reserves (58 876 906) (38 602 892)
Share capital 200 200
Accumulated loss (58 877 106) (38 603 092)
Non-current liabilities 232 926 374 197 799 790
Preference shares 232 926 374 197 799 790
Current liabilities 3 468 347 6 462 857
Loan - 5 000 000
Trade and other payables 3 468 347 1 462 857
___________ ___________
Total equity and liabilities 177 517 815 165 659 755
___________ ___________
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2014
Reviewed Audited
2014 2013
R R
Revenue 2 673 225 11 039 322
Fair value gains (losses) on financial instruments 21 131 335 (43 180 258)
Employee benefits expense (2 089 542) (801 000)
Impairment of loans (30 296 724) (35 731 071)
Other expenses (11 016 867) (5 505 997)
___________ ___________
Loss before finance income/costs (19 598 573) (74 179 004)
Finance income 2 324 559 -
Finance costs (3 000 000) -
___________ ___________
Loss before taxation (20 274 014) (74 179 004)
Taxation - 6 866 453
___________ ___________
Loss for the year (20 274 014) (67 312 551)
Other comprehensive income for the year, net of tax - -
___________ ___________
Total comprehensive loss for the year (20 274 014) (67 312 551)
___________ ___________
Loss for the year attributable to:
Ordinary shareholders - -
Preference shareholders (20 274 014) (67 312 551)
___________ ___________
Total comprehensive loss attributable to:
Ordinary shareholders - -
Preference shareholders (20 274 014) (67 312 551)
___________ ___________
Loss per share, in Rands
Ordinary shareholders - -
Diluted loss per share, in Rands
Ordinary shareholders - -
___________ ___________
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2014
Share Accumulated
capital loss Total
R R R
Balance at 29 February 2012 - Audited 200 28 709 459 28 709 659
Total comprehensive loss for the year - (67 312 551) (67 312 551)
___________ ___________ ___________
Balance at 28 February 2013 - Audited 200 (38 603 092) (38 602 892)
Total comprehensive loss for the year - (20 274 014) (20 274 014)
___________ ___________ ___________
Balance at 28 February 2014 - Reviewed 200 (58 877 106) (58 876 906)
___________ ___________ ___________
CONDENSED STATEMENT OF CASH FLOWS
for the year ended 28 February 2014
Reviewed Audited
2014 2013
R R
Cash flows from operating activities
Cash absorbed by operations (10 977 210) (5 734 184)
Interest received 106 656 3 020 916
Finance costs paid (3 000 000) -
___________ ___________
Net cash outflow from operating activities (13 870 554) (2 713 268)
___________ ___________
Cash flows from investing activities
Investments made - (12)
Purchase of plant and equipment and intangibles (105 542) (160 037)
Non-current loans advanced - (5 380 000)
___________ ___________
Net cash outflow from investing activities (105 542) (5 540 049)
___________ ___________
Cash flows from financing activities
Loans received 7 500 000 5 000 000
Loans advanced (6 947 240) (4 935 000)
(Repayment) advance of loans payable (12 500 000) 7 380 288
Repayment of loans advanced 28 139 179 -
___________ ___________
Net cash inflow from financing activities 16 191 939 7 445 288
___________ ___________
Net increase (decrease) in cash and cash equivalents 2 215 843 (808 029)
Cash and cash equivalents at beginning of the year 470 049 1 278 078
___________ ___________
Cash and cash equivalents at end of the year 2 685 892 470 049
___________ ___________
Non cash transaction
During the current year the Company entered into a non cash investing and financing activity which is not reflected in the
statement of cash flows. The Company acquired equity and loan claims in Pure Ocean Aquaculture Proprietary Limited
and Avalloy Proprietary Limited which was paid for by issuing 4 390 823 BK One preference shares at a fixed price of
R8.00 per share.
1. REVIEW OF ACTIVITIES
The Company holds investments as its principal activity and operates principally in the Republic of South Africa.
2. BASIS OF PREPARATION
The provisional condensed reviewed financial statements have been prepared in accordance with the requirements
of the JSE Limited Listing Requirements for provisional reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require provisional reports to be prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee
and the Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a
minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting policies
applied in the preparation of the provisional condensed reviewed financial statements are in terms of IFRS and
consistent with those applied in the previous annual financial statements.
The provisional condensed reviewed financial statements were prepared by A de Nobrega-Thorold CA (SA) under
the supervision of Messrs H van Noort CA (SA) and D P Richards (previous Chief Executive Director).
The provisional condensed financial statements for the year ended 28 February 2014 have been reviewed by
Deloitte & Touche. The review was conducted in accordance with ISRE 2410 Review of Interim Financial
Information performed by the Independent Auditor of the Entity. They have issued a modified review conclusion
with an emphasis of matter relating to going concern. The auditor’s report does not necessarily cover all the
information in this announcement. Shareholders are therefore advised that in order to obtain a full understanding
of the nature of the auditor’s work they should obtain a copy of that report, together with the accompanying
financial information, from the registered office of the Company.
3. SIGNIFICANT ACCOUNTING POLICIES
These provisional financial statements for the year ended 28 February 2014 have been prepared on the historical
cost basis. The accounting policies and methods of computation applied in the presentation of the financial results
are consistent with those applied for the year ended 28 February 2013, except for the following new or revised
standards, amendments thereto and interpretations as issued by the International Accounting Standards Board,
which are effective for the current reporting period that were adopted:
– IAS 1 (amendment) Presentation of Financial Statements: Presentation of Items of Other
Comprehensive Income
– IFRS 13 Fair Value Measurement
The adoption of these new and revised accounting standards did not have a material impact on the results and as
such there is no change to comparative information resulting from the adoption of these standards.
4. GOING CONCERN
The annual financial statements have been prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that there will be sufficient funds available to finance future operations and that the
realisation of assets and the settlement of liabilities will occur in the ordinary course of business.
We draw attention to the fact that at 28 February 2014, the Company’s total liabilities exceeded its total assets by
R58 876 906 (2013: R38 602 892).
The ability of the Company to continue as a going concern is dependent on a number of factors. The most significant
of these include:
a) that the ultimate shareholders continue to financially support the Company after the existing funding facilities
have been utilised. It is expected by the Directors that these facilities will be utilised by July 2014; or
b) the ability of the Directors to procure adequate additional funding for the Company from a combination of
alternative sources once the facilities referred to above have been utilised. The significant alternative sources
available are to:
i) issue additional ordinary shares;
ii) sell part or whole of its investments;
iii) recover the loan receivable from Kawuleza Connect (Pty) Ltd;
iv) implement plans to actively recover short term loans receivable;
v) restructure the operations of the Company; and/or
vi) settle the largest trade payable by issuing shares.
The Company’s ability to continue as a going concern is at risk if the Directors are (i) unable to secure additional
funding from the ultimate shareholders, or (ii) unable to obtain additional funding from the alternative sources
detailed above.
These conditions give rise to a material uncertainty which may cast significant doubt about the Company’s ability
to continue as a going concern and therefore, that it may not be able to realise its assets and settle its liabilities in
the ordinary course of business
5. EVENTS AFTER THE REPORTING DATE
D P Richards, the Chief Executive Director, resigned on 30 April 2014.
In May 2014 an agreement in principle was reached that the shareholding of the Company in Pure Ocean
Aquaculture Proprietary Limited (“POA”) will be diluted, in order to facilitate the further funding requirements of
POA. As at the date of this report no formal agreements had been entered into. This dilution was taken into
account in the assumptions used to determine the fair value of POA.
6. DIVIDENDS
No dividends were declared or paid to shareholders during the year (2013: Nil).
7. LOSS PER SHARE
Loss and headline loss per share are based on the loss attributable to ordinary and preference shareholders in issue
during the period. The number of ordinary and preference shares in issue for the period under review was 200 and
24 492 823 respectively.
Ordinary shareholders only participate in earnings per share above an annualised hurdle rate of 20% after 10 years.
Loss and headline loss per share and the corresponding diluted loss and diluted headline loss per share are identical
as no adjustments are required, and are therefore calculated as follows:
Ordinary Preference
For the year ended February 2014 shareholders shareholders Total
Loss for the year - (20 274 014) (20 274 014)
Weighted average number of shares 200 22 297 437 -
Loss per share (Rands) - (0.91) -
Ordinary share Preference
For the year ended February 2013 shareholders shareholders Total
Loss for the year - (67 312 551) (67 312 551)
Weighted average number of shares 200 20 102 000 -
Loss per share (Rands) - (3.35) -
8. FAIR VALUE GAINS (LOSSES) ON FINANCIAL INSTRUMENTS
Financial instruments designated as held at FVTPL (32 614 937) (43 180 258)
- Equity investments
Avalloy Proprietary Limited (2 378 964) (26 323 058)
Pure Ocean Aquaculture Proprietary Limited (30 235 973) (8 575 908)
Tor Holdings Proprietary Limited - (8 281 292)
Financial instruments measured at FVTPL 53 746 272 -
- Isitsaba option
Equity investment in Avalloy Proprietary Limited 9 055 835 -
Equity investment in Pure Ocean Aquaculture Proprietary Limited 22 878 834 -
Loan claims 21 811 603 -
___________ __________
21 131 335 (43 180 258)
___________ ___________
9. SEGMENT REPORTING
The Company 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 the Company are the fair value gains (losses) and interest
which are:
For the year ended 28 February 2014
Fair value Interest
Investment Industry gains accrued
R R
Avalloy Superalloys 6 676 871 97 900
Pure Ocean Aquaculture 14 454 464 4 637 831
___________ __________
21 131 335 4 735 731
___________ ___________
For the year ended 28 February 2013
Fair value Interest
Investment Industry losses accrued
R R
Avalloy Superalloys (26 323 058) 344 579
Pure Ocean Aquaculture (8 575 908) 7 673 827
Tor Construction (8 281 292) -
___________ ___________
(43 180 258) 8 018 406
___________ ___________
Date: 30/05/2014 02:07:00 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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