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Unaudited condensed interim results for the six months ended 31 August 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 code : ZAE000156485
UNAUDITED CONDENSED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST
2014
The unaudited financial statements are presented on a consolidated basis
Unaudited Unaudited Audited
Condensed Consolidated Six months Six months Year ended
Income Statement
for the period ended 31 Aug 2014 31 Aug 2013 28 Feb 2014
R’000 R’000 R’000
Revenue 19,300 19,224 36,039
Cost of Sales (11,501) (11,193) (21,101)
Gross Profit 7,799 8,031 14,938
Operating loss before
interest (1,562) (1,708) (5,575)
Reversal of impairment of
intangible asset - - (38)
Finance costs (420) (192) (488)
Finance income - 14 -
(Loss) before taxation (1,982) (1,886) (6,101)
Taxation (44) (51) (50)
(Loss) for the period (2,026) (1,937) (6,151)
Other comprehensive income
for the year net of taxation - - -
Attributable to ordinary
shareholders (2,026) (1,937) (6,151)
(Loss) per share (cents) –
basic and diluted (0.11) (0.10) (0.32)
Headline (loss) per share
(cents) – basic and diluted (0.11) (0.10) (0.32)
Number of ordinary shares in issue (000)
- issued net of treasury
shares 1,907,368 1,907,368 1,907,368
- weighted-average 1,907,368 1,907,368 1,907,368
- Diluted weighted-average 1,907,368 1,907,368 1,907,368
Calculation of headline earnings
(Loss) for the period (2,026) (1,937) (6,151)
Impairment of intellectual
property rights - - 38
Loss on disposal of
property, plant and - - 84
equipment
Headline (loss)attributable
to ordinary shareholders (2,026) (1,937) (6,029)
Condensed Consolidated
Statement of Financial Unaudited Unaudited Audited
Position for the period Six months Six months Year ended
ended 31 Aug 2014 31 Aug 2013 28 Feb 2014
R’000 R’000 R’000
ASSETS
Non-current assets
Property, plant and 13,523 13,945 13,438
equipment
Intangibles 12,662 12,156 12,494
Deferred taxation 8,193 8,302 8,256
34,378 34,403 34,188
Current assets
Inventories 5,568 5,396 5,141
Trade and other receivables 5,262 6,049 4,662
Loans receivable 9 9 9
Bank balance and cash 138 165 94
10,977 11,619 9,906
Non-current assets
held for sale 70 - 70
TOTAL ASSETS 45,425 46,022 44,164
EQUITY AND LIABILITIES
Capital and reserves
Stated capital 131,722 131,722 131,722
Reserves 5,659 5,659 5,659
Accumulated Losses (109,791) (103,551) (107,765)
Total shareholders' funds 27,590 33,830 29,616
Non-current liabilities
Interest-bearing borrowings 133 199 167
Deferred taxation 2,992 3,058 3,012
3,125 3,257 3,179
Current liabilities
Trade and other payables 5,946 3,783 4,953
Bank overdraft 5,853 5,092 5,344
Loans from related parties 2,845 - 1,009
Current portion of interest- 66 60 63
bearing borrowings
14,710 8,935 11,369
TOTAL EQUITY AND LIABILITIES 45,425 46,022 44,164
Net asset value per share 1.4 1.8 1.6
(cents)
Condensed Consolidated Unaudited Unaudited Audited
Statement of Cash Flows For Six months Six months Year ended
the period ended 31 Aug 2014 31 Aug 2013 28 Feb 2014
R’000 R’000 R’000
(Loss) before taxation (1,982) (1,886) (6,101)
Depreciation 290 404 769
Loss on disposal of assets - - 84
Interest received - (14) -
Finance costs 420 192 488
Impairments - - 38
(Increase) in working
capital (35) (3,886) (1,067)
Cash utilised by operations (1,307) (5,190) (5,789)
Finance costs (420) (192) (488)
Finance income - 14 -
Cash flows from operating
activities (1,727) (5,368) (6,277)
Cash flows from investing
activities (544) (687) (1,080)
Cash flows from financing
activities 1,806 (28) 952
Net (decrease)increase in
cash and cash equivalents (465) (6,083) (6,405)
Cash and cash equivalents at
beginning of period (5,250) 1,155 1,155
Cash and cash equivalents at
end of period (5,715) (4,928) (5,250)
Condensed
consolidated Total
Statement of Changes ordinary
in Equity for the Stated Trea- Total Reval- Re- Share-
period ended capital sury stated uation tained holders’
31 August 2014 shares capital reserve earnings funds
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 28
February 2013 -
audited 138,463 (6,741) 131,722 5,659 (101,614) 35,767
Total comprehensive
loss for the period
- (1,937) (1,937)
Balance at 31 August
2013 – unaudited 138,463 (6,741) 131,722 5,659 (103,551) 33,830
Total comprehensive
loss for the period - (4,214) (4,214)
Balance at 28
February 2014 –
audited 138,463 (6,741) 131,722 5,659 (107,765) 29,616
Total comprehensive
loss for the period - (2,026) (2,026)
Balance at 31 August
2014 – unaudited 138,463 (6,741) 131,722 5,659 (109,791) 27,590
Condensed Group Nutritional Pharmaceutical Services Consolidated
Segmental Analysis Foods
R’000 R’000 R’000 R’000
Business segments
for the six months ended 31
August 2014 - unaudited
Revenue from external sales 16,917 2,383 - 19,300
Segment Profit (Loss)
before tax 206 156 (2,344) (1,982)
Taxation (44)
Segment (Loss) for the
period (2,026)
for the six months ended 31
August 2013 - unaudited
Revenue from external sales 16,403 2,821 - 19,224
Segment Profit (Loss)
before tax (28) 184 (2,042) (1,886)
Taxation 51
Segment (Loss) for the
period (1,937)
for the year ended 28
February 2014 - audited
Revenue from external sales 30,082 5,957 - 36,039
Segment Profit (Loss)
before tax (1,660) 181 (4,622) (6,101)
Taxation (50)
Segment (Loss) for the year (6,151)
COMMENTARY
Basis of presentation
The condensed interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS) and IAS 34 – Interim
Financial Reporting as issued by the International Accounting Standards
Board (IASB) (the interpretations adopted by the International Accounting
Standards Board (IASB)), The SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee, the Financial Reporting Pronouncement as
issued by the Financial Reporting Accountants Council, the Listings
Requirements of the JSE Limited and the Companies Act, No 71 of 2008, as
amended.
Accounting Policies
The condensed financial results have been prepared on the historical cost
basis, except for certain financial instruments which are measured at fair
value or at amortised cost. The significant accounting policies and methods
of computation are consistent in all material respects with those applied in
the previous financial year, except for the adoption of improved, revised or
new standards and interpretations. The aggregate effect of these changes in
respect of the period ended 31 August 2014 is nil.
The condensed financial results have been prepared under the supervision of
the Chief Financial Officer, CD Angus CA(SA).
Neither these condensed interim financial results, nor any reference to
future financial performance included in this results announcement, has been
reviewed or reported on by the Company’s external auditor, Grant Thornton.
Nature of business
The Group comprises two operating and one service division. Nutritional
Foods manufactures a range of fortified staple dry foods from soya, sorghum
and maize at its ISO 22000:2005 accredited factory in Klerksdorp. Impilo
Marketing distributes a range of medicines registered with the Medicines
Control Council and other non-registered “complementary” medicines.
Overview
The past six months have proven to be extremely trying with management’s
main focus during the period being the re-capitalisation of the Group as
well as concluding an agreement with a suitable black empowerment partner.
Meanwhile the Group continues to deal with cash flow pressures.
During the past six months management have focused on discussions with
strategic suppliers into the FMCG trade as well as negotiating with third
parties to undertake contract/toll manufacturing.
Nutritional Foods Division -
The Company’s planned entry into the FMCG market has been hampered due to a
lack of funding. The re-branding exercise started in the previous financial
year has been placed on hold pending the successful re-capitalisation of the
Company. The current depressed state of the economy with specific emphasis
on consumer spending in the lower LSM brackets has continued to hamper the
Company’s ability to grow turnover. This trend is expected to continue into
the second half of the 2015 financial year. The mining strike during January
2014 to June 2014 did not helped matters as consumers and their dependants
in this sector have been hit hard resulting in disposable income being
decreased even further. Coupled to this, orders from the mining sector for
the Company’s products reduced dramatically. Despite these difficulties
turnovers remained in line with those of the previous corresponding period.
The Company’s lack of BEE credentials have affected its ability to tender
directly with government departments resulting in the Company having to
negotiate via third party service providers. This was identified as a
critical area requiring urgent attention, which will be addressed by the
conclusion of a BEE deal.
Pharmaceutical Division -
During the latter half of the previous reporting period management took the
decision to appoint additional contract manufacturers to its registered
dossiers to ensure consistency of supply. This process was finalised in
January 2014 with all production moving to a new contract manufacturer.
Unfortunately the Company’s lack of cash flow hampered its ability to invest
in inventories during the change over to the new manufacturer, which in turn
resulted in stock-outs occurring.
After careful consideration of the Group’s strengths and weaknesses, as well
as cash flow constraints, management has resolved to enter into a long term
royalty contract with “Avid Brands” whereby AVID with take over full control
of the manufacture, marketing and sale of its schedule zero registered
medicines. In return, the Company will receive royalties from all sales with
guaranteed minimums put in place. This will free up management’s time and
resources to concentrate on its core business, being the manufacture of
fortified dry foods.
Impilo Drugs will however continue to explore unlocking the tender market
for its range of products and looks forward to the successful conclusion of
a suitable BEE transaction.
Financial overview
Group Turnover remained stagnant at R19,3 million compared to R19,2 million
in the previous corresponding period. Gross Profit decreased by 3% to R7,8m,
with the Headline Loss for the period being R2 million compared to R1.9
million.
The Group’s gearing remains low at 0.7% before short term overdraft banking
facilities and 18% after accounting for its short term banking facilities.
The Company has no long term debt with all assets on the balance sheet
remaining unencumbered with the exception of the Klerksdorp factory premises
which has been pledged as security via a covering bond for the Group’s
overdraft facilities.
Events after the reporting period
Management are pleased to advise shareholders that the Group has entered
into an agreement with a BEE consortium “Philisani”, whereby “Philisani”
will, upon conclusion of the transaction, own 34% of the issued share
capital of the Group by way of an issue of shares for cash (“the BEE
transaction”).
This exercise will raise R10 million to re-capitalise the Group’s trading
companies but more importantly give the Group the necessary BEE credentials
required to participate in tenders with government and parastatal entities.
The board has appointed PSG Capital to attend to the statutory requirements
for the transaction. A Special General Meeting of shareholders will be held
on 5 December 2014 for shareholder approval.
Philisani is headed by Mr Thabo Mogkatlha. Thabo is a Chartered Accountant
who has served on the following boards in the past, Impala Platinum Limited,
York Timbers Limited, Astrapak Limited and Hyprop Limited.
There are no other material events after the period ended 31 August 2014 to
report
Deferred Tax Assets
The Group is made up of three trading companies and the holding company. No
deferred tax asset has been recognised for tax losses available for set-off
against future taxable income where it is not probable that future taxable
income will be available. Two of the companies in the Group earned a taxable
income in the current and previous reporting period and it is probable that
taxable profit will be available in future in order to utilise the assessed
losses available. A deferred tax asset has therefore been raised on these
two companies’ assessed losses. A deferred tax asset has also been
recognised 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.
Going concern
Shareholders are advised that the unaudited interim results for the six
months ended 31 August 2014 have been prepared on the going concern concept.
The annual report for the year ended 28 February 2014 contained emphasis of
matter as to going concern.
Prospects
The BEE transaction will see Philiani inject much needed funding into the
Group as well as create a base from which management will be able to unlock
the potential of its dry food manufacturing plant in Klerksdorp. Upon the
successful conclusion of the BEE transaction Mr Mokgatahla will take up the
position of Group Chief Executive Officer. Mr Rob Etchells will remain a
director of the Company as the Chief Operating Officer.
Changes to the Group’s board
The following changes to the board of directors occurred during the past
financial period:-
- Mr ARJ Spanjaard resigned as Group Sales Director effective 21 May 2014;
- Mrs JA Etchells resigned as a non-executive director from the board
effective 15 August 2014. Mrs Etchells remains Company Secretary;
- Mr AR Pinfold resigned as a member of the audit committee and was
appointed as a member of the remuneration committee effective 15 August
2014; and
- Dr C Kapnias was appointed as an independent non-executive director to the
board as well as a member of the audit committee effective 15 August 2014.
On behalf of the board
R.S.Etchells
Chief Executive Officer
Umhlanga Rocks
6 November 2014
Registered office
Suite 3, Ground Floor, 49 Richefond Circle, Ridgeside, 4319
Tel: +27 31 584 7100
Directors
RS Etchells (Chief Executive Officer)
CD Angus (Chief Financial Officer)
TR Hendry (Independent Non-executive)
C Kapnias (Independent Non-executive)
AR Pinfold (Non-executive)
GR Wambach (Independent Non-executive Chairman)
Registered office
Suite 3, Ground Floor, 49 Richefond Circle, Ridgeside, 4319
Tel: +27 31 536 8066
Designated Advisor
PSG Capital Proprietary Limited
Transfer secretaries
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, Johannesburg,
2001
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