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Audited Provisional Financial Results for the year ended 28 FEBRUARY 2014
Nutritional Holdings Limited
Reg no 2004/002282/06
(Incorporated in the Republic of South Africa)
("the Group" or "the Company")
Share code : NUT ISIN : ZAE000156485
AUDITED PROVISIONAL FINANCIAL RESULTS FOR THE YEAR ENDED 28
FEBRUARY 2014
The audited provisional financial results are presented on a
consolidated basis
Condensed Consolidated Statement of Comprehensive Income for
the year ended
Audited Audited
R’000 28 Feb 2014 28 Feb 2013
Revenue 36 039 34 178
Operating loss before interest,
taxation and impairment (5 575) (5 861)
Impairment – Intellectual property
and Distribution rights (38) (7 200)
Finance costs (488) (696)
Finance income - 186
Loss before taxation (6 101) (13 571)
Taxation (50) 138
Loss for the year (6 151) (13 433)
Other comprehensive income for the - -
year net of taxation
Total comprehensive loss (6 151) (13 433)
Loss per share (cents) – basic and
diluted (0.32) (0.89)
Headline loss per share (cents) -
basic and diluted (0.32) (0.41)
Number of ordinary shares in issue
(000)
- issued net of treasury shares 1 907 368 1 907 368
- weighted-average 1 907 368 1 515 068
- Diluted weighted-average 1 907 368 1 515 068
Calculation of headline loss
(R’000)
Loss attributable to ordinary
shareholders (6 151) (13 433)
Impairment of intangible assets 53 10 000
Loss/(profit) on disposal of
property, plant and equipment 117 (14)
Total tax effect of adjustments (48) (2 796)
Headline loss attributable to
ordinary shareholders (6 029) (6 243)
Condensed Consolidated Statement of Financial Position as at
Audited Audited
R’000 28 Feb 2014 28 Feb 2013
ASSETS
Non-current assets
Property, plant and equipment 13 438 14 052
Intangible assets 12 494 11 766
Deferred taxation 8 256 8 410
34 188 34 228
Current assets
Inventories 5 141 3 385
Trade and other receivables 4 662 4 376
Loans receivable 9 9
Cash and cash equivalents 94 2 588
9 906 10 358
Non-current assets held for sale 70 -
TOTAL ASSETS 44 164 44 586
EQUITY AND LIABILITIES
Stated capital 131 722 131 722
Reserves 5 659 5 659
Accumulated loss (107 765) (101 614)
Total shareholders’ funds 29 616 35 767
Non-current liabilities
Instalment sale creditors 167 230
Deferred taxation 3 012 3 115
3 179 3 345
Current liabilities
Trade and other payables 4 953 3 984
Loans from related parties 1 009 -
Bank overdraft 5 344 1 433
Instalment sale creditors 63 57
11 369 5 474
Total liabilities 14 548 8 819
TOTAL EQUITY AND LIABILITIES 44 164 44 586
Net asset value per share (cents) 1.6 1.9
Condensed Consolidated Statement of Cash Flows for the year
ended
Audited Audited
28 Feb 2014 28 Feb 2013
R’000
Cash used in operations (5 789) (2 086)
Finance costs (488) (696)
Interest income - 186
Cash flows from operating
activities (6 277) (2 596)
Cash flows from investing
activities (1 080) (556)
Cash flows from financing
activities 952 9 308
Net (decrease)/increase in cash
and cash equivalents (6 405) 6 156
Cash and cash equivalents at
beginning of year 1 155 (5 001)
Cash and cash equivalents at end
of year (5 250) 1 155
Condensed Consolidated Statement of Changes in Equity
Total
Stated Treasury share
R’000 capital shares capital
Balance at 29 February 2012
- audited 129 972 (6 741) 123 231
Issue of shares 8 491 - 8 491
Total comprehensive loss for - - -
the year
Balance at 28 February 2013
- audited 138 463 (6 741) 131 722
Total comprehensive loss for - - -
the year
Balance at 28 February 2014
- audited 138 463 (6 741) 131 722
Revaluation Accumulated Total
reserve loss equity
R’000
Balance at 29 February
2012 - audited 5 659 (88 181) 40 709
Issue of shares - - 8 491
Total comprehensive loss
for the year - (13 433) (13 433)
Balance at 28 February
2013 – audited 5 659 (101 614) 35 767
Total comprehensive loss
for the year - (6 151) (6 151)
Balance at 28 February
2014 5 659 (107 765) 29 616
Condensed Group Segmental Analysis
Business Nutritional
Segments Foods Pharmaceuticals Services Consolidated
R'000
For the year
ended 28
February 2014 -
audited
Revenue from
external sales 30 082 5 957 - 36 039
Revenue from
internal sales - - 2 640 2 640
Segment
(loss)/profit (1 660) 181 (4 622) (6 101)
before tax
Taxation (50)
Segment loss for
the year - - - (6 151)
Total assets 5 020 7 295 11 849 44 164
For the year
ended 28
February 2013 -
audited
Revenue from
external sales 29 014 5 164 - 34 178
Revenue from
internal sales - - 1 849 1 849
Segment loss
before tax (5 242) (3 145) (5 184) (13 571)
Taxation 138
Segment loss for
the year - - - (13 433)
Total assets 24 220 6 253 14 113 44 586
For management purposes the Group is organised into three
major operating divisions, namely Nutritional Foods,
Pharmaceuticals and Services. These divisions are the basis on
which the company reports its primary segment information.
The Nutritional Foods division involves the manufacture of
high-protein, fortified dry foods and food supplements. The
Pharmaceuticals division involves the sale of registered
pharmaceuticals, complimentary and natural medicines. The
Services division involves the providing of administration and
management services.
These operating segments are monitored by the Group’s chief
decision maker and strategic decisions are made on the basis
of adjusted segment operating results.
BASIS OF PRESENTATION
The provisional financial results for the year ended 28
February 2014 have been prepared in accordance with
International Financial Reporting Standards (“IFRS”), the
presentation and disclosure requirements of IAS 34, the SAICA
Financial Reporting Guides as issued by the Accounting
Practices Board, the Listing Requirements of the JSE Limited
and the requirements of the Companies Act, No 71 of 2008. The
results have been prepared in terms of IFRS on the historical
cost basis and are consistent, in all material respects, with
the accounting policies and methods applied in the previous
corresponding period, except for the measurement of land and
buildings and certain financial instruments which are measured
at fair value and the adoption of improved, revised or new
standards and interpretations (“Accounting Changes”). The
aggregate effect of these Accounting Changes in respect of the
year ended 28 February 2014 is nil. The condensed financial
results have been prepared by the Chief Financial Officer,
C.D. Angus CA(SA).
NATURE OF BUSINESS
The Group’s primary business focus is to manufacture, market
and sell fortified dry food products and supplements,
manufactured from maize, sorghum and soya as well as the sale
of scheduled pharmaceuticals registered with the Medicines
Control Council and other complementary/natural medicines.
OVERVIEW
Management’s main focus during the year under review was to
contain overheads at the Group’s operating companies as well
as to set the platform from which sustainable growth in
turnover could be achieved. This exercise has proven to be
both time consuming and frustrating with the pharmaceutical
division having to apply to the Medicines Control Council to
move its production to a new contract manufacturer in order to
achieve the desired increase in gross margins. Coupled to
this, the factory in Klerksdorp has continued to operate at
below efficient levels due to low orders for its traditional
products resulting in lower than anticipated overhead
recoveries. The Group continues to deal with cash flow
pressures, which will only abate as and when turnovers
increase. This is proving to be challenging for the executive
team, however progress is being made with the Groups entry
into the FMCG market with product listings expected during the
first quarter of the new financial year.
Management are however under no illusions that without an
injection of capital to fund expenditure on certain
operational assets to alleviate bottle necks in the production
flow at its Klerksdorp factory, as well as increased working
capital requirements, to fund the growth in turnover,
achieving the turnaround strategy will prove difficult.
Nutritional Foods Division
The company continued its program of re-engineering its entire
packaging range to facilitate entry into the FMCG market as
well as increasing it’s offering to the traditional industrial
kitchen sector. It is envisaged that this will assist
management in building sustainable levels of turnover and by
doing so improve operational efficiencies at the factory. As
highlighted in last year’s report it is anticipated that the
financial effects of this strategy will be seen in the next 12
to 18 months.
Pharmaceutical Division
During the year under review the Impilo business unit operated
via a contract manufacturing agreement with a 3rd party
contract manufacturer in KwaZulu Natal. Supply problems from
the 3rd party contractor have severely hampered the company’s
ability to meet orders as well as acceptable gross margins.
During the latter half of the previous reporting period
management took the decision to source additional contract
manufacturers to ensure consistency of supply. To this end the
company applied to the Medicines Control Council of South
Africa to have additional contract manufacturers approved on
its registered dossiers. This process was finalised in
November 2013 with all production moving to a new contract
manufacturer in January 2014.
It is anticipated that the results of this initiative will
pull through to the statement of comprehensive income in the
next financial year.
Financial Performance
Group Turnover of R36,039 million was 5% up on the R34,178
million of the previous year. Gross profit increased by R1,127
million to R14,938 million (+8.2%). The loss for the year
decreased from a loss of R13,433 million to a loss of R6,151
million. The headline loss decreased from a loss of R6,243
million to a loss of R6,067 million, this includes a R625 295
write-off of a trade debtor Edge to Edge Global Investments
Limited.
The Group’s gearing remains low at 1%.
After taking into account “short term financing (overdraft
facilities)” gearing increases to 16%.
Prospects
During the year under review management’s strategy of
transforming the Group’s activities into three legs, being the
manufacture and sale of traditional products into industrial
kitchens/feeding schemes, entry into the FMCG market and 3rd
party contract/toll manufacturing has taken longer than
originally expected due to very tight cash flow constraints
and price competitive issues due to efficiencies at the
Klerksdorp factory. Management are however confident that with
increased volumes it will be able to improve overhead
recoveries which in turn will assist with its ability to
become more competitive from a pricing perspective. In this
regard management have been actively discussing possible joint
ventures and co-branding opportunities with strategic
partners. This strategy will continue during the coming
financial year with the intention of unlocking production
potential at the Klerksdorp manufacturing plant. With the move
of all manufacturing of its pharmaceutical division to a new
3rd party contract manufacturer, management expect gross
margins to increase as well as to become more competitive in
the market place regarding pricing on the shelf. Management
have identified the need to introduce a Broad Based Black
Economic Empowerment partner to facilitate growth in the
industrial catering environment within the mining industry, as
well as access to government tenders in state run facilities,
and are actively pursuing this at present.
Events after the reporting period
ARJ Spanjaard resigned as an executive director of Nutritional
Holdings Limited effective 21 May 2014.
In November 2013, management informed shareholders that legal
action had been instituted against Edge to Edge Global
Investments Limited for the recovery of a trade debtor owed to
Nutritional Foods Proprietary Limited.
Shareholders are further advised that on the 23rd of May 2014,
the KwaZulu Natal division of the High Court of South Africa
granted a final liquidation order against Edge to Edge Global
Investments Limited in favour of a Group of minority
shareholders in Edge to Edge Global Investments Limited.
As a result thereof the full amount owing to Nutritional Foods
Proprietary Limited, being R625,295 was written off in the
statement of comprehensive income of the Group. Shareholders
are advised that at this stage management see little
possibility, if any, of any future revenue streams from the
“exclusive manufacturing agreement” entered into with Edge to
Edge Global Investments Limited for the manufacture of the
Imuniti Nutritional Supplement Combo Pack. The full value of
this investment was written down to Nil in the previous
reporting period.
There are no other material events after the period ended 28
February 2014 to report on.
Deferred tax assets
The Group is made up of three trading companies and the
holding company. Two of the companies in the Group earned
taxable income and it is probable that taxable profit will be
available in future in order to utilize the assessed losses
available. A deferred tax asset has therefore been raised on
these two companies assessed losses. These companies (separate
legal entities) did not suffer a loss in the current or
previous period in the tax jurisdiction to which the deferred
tax assets relates. A deferred tax asset has also been
recognized on the assessed loss of the other trading company
to the extent of the deferred tax liability arising from
capital allowances on the property, plant and equipment.
No deferred tax asset has been recognized for tax losses
available for set off against future taxable income where it
is not probable that future taxable income will be available.
The amount not recognized in deferred tax assets is R4,274,812
(2013: R3,042,578). Tax losses available for set off against
future taxable income is only recognized for subsidiaries that
generate taxable income in the current and preceding period.
Going Concern
Shareholders are advised that the audited results for the year
ended 28 February 2014 have been prepared on a going concern
basis. This basis presumes that funds will be available to
finance future operations and that the realization of assets
and settlement of liabilities, contingent obligations and
commitments will occur in the ordinary course of business.
DIVIDEND
In view of the Group’s current financial position, no dividend
has been declared for the year.
AUDIT OPINION
Grant Thornton have audited the annual financial statements
for the year ended 28 February 2014 and their modified audit
report with an emphasis of matter relating to the Group’s
ability to continue as a going concern owing to the fact that
the Group has an accumulated loss of R107,765 million (2013:
R101,614 million). This report is available for inspection at
the Company’s registered office.
These condensed results are extracted from audited
information, but are not in itself audited. The directors
therefore take full responsibility for the preparation of the
condensed results and that the financial information has been
correctly extracted from the underlying financial statements.
The auditor’s report does not necessarily cover all of the
information contained in this announcement/financial report.
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.
On behalf of the Board
RS Etchells Umhlanga Rocks
Chief Executive Officer 30 May 2014
Registered Office:
Suite 3, 49 Richefond Circle. Ridgeside Office Park, Umhlanga
Ridge, 4319
Tel: +27 31 536 8066
Auditors
Grant Thornton
Designated advisors
PSG Capital Proprietary Limited
Transfer secretaries:
Link Market Services South Africa Proprietary Limited, 13th
Floor, Rennie House, 19 Ameshoff Street, Braamfontein,
Johannesburg, 2001
Company secretary
JA Etchells CA(SA)
Directors:
CD Angus (Chief Financial Officer), RS Etchells (Chief
Executive Officer), JA Etchells (Non-Executive), TR Hendry
(Non-Executive), AR Pinfold (Non-Executive), AR Spanjaard
(Executive Director)*, GR Wambach (Non-Executive Chairman)
*resigned on 21 May 2014
Date: 30/05/2014 03:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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