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Unaudited condensed interim results for the six months ended 31 August 2014
BK One Limited
Company Registration Number: 2011/008103/06
(Incorporated in the Republic of South Africa)
ISIN Number: ZAE 000161352 Share Code: BK1P
Unaudited Condensed Interim Results for the Six Months ended 31 August 2014
CONDENSED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME CONDENSED SEGMENT REPORT
Unaudited six Unaudited six Audited Unaudited six months ended 31 August 2014 Fair Value
months ended months ended year ended Gains (Losses)
31 August 31 August 29 February Interest on financial
2014 2013 2014 Investment Industry Received Split % instruments Split %
R R R Pure Ocean Aquaculture Aquaculture 1 332 014 94% - 0%
Revenue 1 422 615 5 343 482 2 673 225 Avalloy Superalloys - 0% - 0%
Fair value gains (losses) on financial instruments - 1 521 656 21 131 335 Other Other 90 601 6% - 0%
Cost recovery 672 134 - - 1 422 615 100% - 0%
Reversal of impairment 2 364 133 - - Unaudited six months ended 31 August 2013 Fair Value
Employee benefit expense (1 235 848) (1 169 000) (2 089 542) Gains (Losses)
Impairment of loan - - (30 296 724) Interest on financial
Other expenses (1 286 169) (3 051 124) (11 016 867) Investment Industry Received Split % instruments Split %
Profit (loss) before taxation 1 936 865 2 645 014 (19 598 573) Pure Ocean Aquaculture Aquaculture 4 763 040 89% 1 521 656 100%
Finance income 2 509 200 - 2 324 559 Avalloy Superalloys 82 938 2% - 0%
Finance costs - (3 000 000) (3 000 000) Other Other 497 504 9% - 0%
Taxation - - - 5 343 482 100% 1 521 656 100%
Profit (loss) for the period 4 446 065 (354 986) (20 274 014) Audited year ended 29 February 2014 Fair Value
Other comprehensive income - - - Gains (Losses)
- - - Interest on financial
Total comprehensive income (loss) for the period 4 446 065 (354 986) (20 274 014) Investment Industry Received Split % instruments Split %
Loss for the period attributable to: Pure Ocean Aquaculture Aquaculture 2 313 272 87% 14 454 464 69%
Ordinary shareholders - - - Avalloy Superalloys 97 900 4% 6 676 871 31%
Preference shareholders 4 446 065 (354 986) (20 274 014) Other Other 262 053 9%
4 446 065 (354 986) (20 274 014) 2 673 225 100% 21 131 335 176%
Total comprehensive loss for the period attributable to: There is no inter-segment trading.
Ordinary shareholders - - -
Preference shareholders 4 446 065 (354 986) (20 274 014)
4 446 065 (354 986) (20 274 014)
CONDENSED STATEMENT OF CASH FLOWS
Unaudited six Unaudited six Audited
months ended months ended year ended
CONDENSED STATEMENT OF FINANCIAL POSITION 31 August 31 August 29 February
Unaudited Unaudited Audited 2014 2013 2014
31 August 31 August 28 February R R R
2014 2013 2014 Cash flows from operating activities
R R R Cash absorbed by operations (2 613 069) (3 341 025) (10 977 210)
ASSETS Finance income - 307 690 106 656
Non-current assets Finance costs - (3 000 000) (3 000 000)
Property, plant and equipment 103 106 162 388 132 304 Taxation - - -
Intangible assets 15 191 52 155 33 825 Net cash from operating activities (2 613 069) (6 033 335) (13 870 554)
Investments 75 976 019 58 289 375 75 976 019 Cash flows from investing activities
Loans 99 968 923 130 760 038 97 754 792 Investments made - (5 213 751) -
176 063 239 189 263 956 173 896 940 Purchase of plants, equipment and intangibles - (105 542) (105 542)
Current assets Non- current loans advanced - - -
Loans 4 937 886 1 185 182 876 329 Net cash from investing activities - (5 319 293) (105 542)
Other receivables 623 275 509 626 58 654 Cash flows from financing activities
Cash and cash equivalents 93 083 4 485 240 2 685 892 Current loans advanced - 7 500 000 7 500 000
5 654 244 6 180 048 3 620 875 Loans paid - (6 925 183) (6 947 240)
Total assets 181 717 483 195 444 004 177 517 815 Loans repaid - (12 500 000) (12 500 000)
EQUITY AND LIABILITIES Net cash from financing activities 20 260 27 293 002 28 139 179
Equity Total cash movement for the period (2 592 809) 4 015 191 2 215 843
Share capital 200 200 200 Cash and cash equivalents at the beginning of the period 2 685 892 470 049 470 049
Accumulated loss (54 431 041) (38 958 078) (58 877 106) Cash and cash equivalents at the end of the period 93 083 4 485 240 2 685 892
Total equity (54 430 841) (38 957 878) (58 876 906) HEADLINE EARNINGS PER SHARE Unaudited Unaudited Audited
Liabilities 31 August 31 August 29 February
Non-current liabilities 2014 2013 2014
Preference shares 232 926 374 197 799 790 232 926 374 Shares in issue:
232 926 374 197 799 790 232 926 374 Ordinary shares: Number of shares in issue 200 200 200
Current liabilities Preference shares: Number of shares in issue 24 492 823 20 102 000 24 492 823
Trade and other payables 3 221 950 2 602 092 3 468 347
3 221 950 2 602 092 3 468 347 Weighted average number of shares in issue
Total liabilities 236 148 324 234 401 882 236 394 721 Ordinary shares: Number of shares in issue 200 200 200
Total equity and liabilities 181 717 483 195 444 004 177 517 815 Preference shares: Number of shares in issue 24 492 823 20 102 000 22 297 437
CONDENSED STATEMENT OF CHANGES IN EQUITY (LOSS) EARNINGS PER SHARE, IN RANDS
Share capital Retained Total Basic
income equity Ordinary shareholders - - -
Balance at 29 February 2013 200 (38 603 092) (38 602 892) Preference shareholders 0,18 (0,02) (0,83)
Changes: Earnings (loss) per share, in Rands
Loss for the period - (354 986) (354 986) Diluted
Other comprehensive income for the period - - - Ordinary shareholders -
Balance at 31 August 2013 200 (38 958 078) (38 957 878) Preference shareholders 0,18 (0,02) (0,83)
Changes: Reconciliation of headline earnings (loss)
Profit for the six month period - (19 919 028) (19 919 028) Profit (loss) attributable to preference shareholders 4 446 065 (354 986) (20 274 014)
Other comprehensive income for the period - - - 4 446 065 (354 986) (20 274 014)
Balance at 28 February 2014 200 (58 877 106) (58 876 906) Headline earnings (loss) per ordinary share (Rand) - -
Changes: Diluted earnings (loss) per ordinary share (Rand) - -
Loss for the six month period - 4 446 065 4 446 065 Headline earnings (loss) per preference share (Rand) 0,18 (0,02) (0,83)
Other comprehensive income for the period - - - Diluted earnings (loss) per preference share (Rand) 0,18 (0,02) (0,83)
Balance at 31 August 2014 200 (54 431 041) (54 430 841)
Commentary Advanced Vacuum Alloys (“AVA”)
Basis of preparation Having successfully emerged from business rescue, AVA is currently operational at a relatively
low level and is in the process of finalising both a working capital and trade finance facility that
The unaudited condensed interim financial statements for the six months ended 31 August
is envisaged to be implemented in the first quarter of 2015. Market dynamics remain positive
2014 have been prepared in accordance with the framework concepts and the recognition
in the industry and Avalloy remains well positioned in an industry with high barriers to entry to
and measurement requirements of International Financial Reporting Standards (“IFRS”), the
exploit its position as one of very few independent superalloy producers in the world able to
information requirements of IAS34: Interim Financial Reporting, the AC 500 standards as issued
operate in both the spot and long term offtake markets.
by the Accounting Practices Board and the requirements of the Companies Act of South Africa.
The restructure of the balance sheet by virtue of the business rescue plan and the securing
The accounting policies and method of computation applied in presentation of these unaudited
of interim post commencement funding, had a positive effect on the investment portfolio as
condensed interim financial statements are consistent with those applied in the audited
reported in previous Company reports. Once the aforementioned working capital and trade
financial statements for the year ended 28 February 2014. The above information has not been
finance facilities have been secured, AVA will be poised to return to full production capacity.
reviewed or audited by the Company’s auditors.
The unaudited condensed interim financial statements have been prepared by A de Nobrega
– Thorold CA (SA). Investment Impact
As at 28 February 2014 the fair value of the portfolio was R174.6m as determined by an
independent valuation expert using financial information provided by management of the
Introduction individual projects. As at 31 August 2014 the fair value of the portfolio increased to R179.5m.
During the interim period ended 31 August 2014, the Company has continued to focus on This equates to a 2.8% increase in fair value for the interim period 2014 predominantly as a
stabilising its portfolio companies, and has made significant progress towards protecting result of the re-recognition of previously impaired loan to the POA portfolio companies to the
shareholders’ value through finding funding solutions in conjunction with the Company’s co- value of R903 737 and accrued interest following the securing of funding arrangement for them.
shareholders and stakeholders in the businesses operated by its portfolio companies.
The Company continued to face challenging headwinds with respect to the procurement of
Subsequent Events
finance for itself, as well as its investee companies, however these challenges have been largely
overcome and new financing arrangements and capital injection agreements were successfully Trading of shares
concluded (or are close to completion) to obtain working capital and trade finance both for the Trading of our shares since listing has been limited with wide spreads between bids and offers
Company and the investee companies. evident. This state of affairs has led to ad hoc and uncharacteristic high volatility in the share
price with small trades having a large impact on the quoted price of the Company’s preference
shares. While the share price at the time of this commentary being published was quoted at
Investment Portfolio 2 cps, it has been noted that the cause of this decrease relates to one minor share trade that
Pure Ocean Aquaculture took place on 2 December 2014 leading to, in the Company’s opinion, an aberrational effect on
POA is an investment holding company that holds aquaculture-based investments. POA holds the share price. It remains our belief that our initial investors understand the nature of Private
two entities: Highlands Trout (“HT”), a Lesotho-based company, and Pure Ocean East London Equity and are therefore willing to wait for the growth to emerge over time.
(“POEL”) which are independently valued.
POA’s business plan has been previously modified, as alluded to in previous reports, to adapt Going concern
to funding delays and constraints. These delays have been largely addressed or are close to
Previous reports by the Company indicated that it was facing liquidity issues which were being
being addressed such that both of its investments are expected to stabilise and be poised
addressed by the Directors via the implementation of various solutions.
for consolidation followed by growth over the short to medium term. As such, no fair- value
adjustments have been made to the POA investments for the interim period. Subsequent to year end, 28 February 2014, the Company has successfully concluded a
subscription for its remaining unissued ordinary share capital for three million rand (see SENS
announcement dated 5 September 2014). These funds are anticipated to flow in January 2015,
Highlands Trout which upon receipt will generate the cash flow for the Company to continue as a going concern.
Highlands Trout has a licence to operate a salmon trout farm on the Katse Dam in the Kingdom The Company furthermore recouped a previously impaired loan to Kawuleza Connect (now in
of Lesotho. Sales of its salmon trout in terms of a twelve-month off-take agreement with one of liquidation) in the amount of R1 580 162 during October 2014 from the guarantor thereof that
the largest Japanese retailers have commenced while sales into the South African and Lesotho created additional liquidity in the Company. The previous impairment of R 1 460 395 has been
markets continue to increase steadily. Further possibilities for offtake of its farm harvest appear reversed for the interim period due to the recoupment of the loan.
to be promising with demand for its product increasing worldwide following problems that
are being experienced at sea-based salmon trout farms in Chile and Norway particularly. The
processing facilities at HT have been upgraded to facilitate the growing harvesting needs and Changes in board of directors
are presently being commissioned. D Richards (Chief Executive Officer) resigned 30 April 2014
A Keet (Chief Executive Officer) appointed 16 October 2014
POEL H van Noort (Independent Non-executive) resigned 9 October 2014
POEL owns and operates a land-based dusky cob fish farm in the Industrial Development Zone W Voigt (Independent Non-executive) appointed 1 December 2014
of East London. The POEL Board have indicated that they are now comfortable, lessons having
been learnt during the pilot phase of its development, that the biological fundamentals for
the pilot phase have been proven hence a decision has been made to procure funding for the Dividend
implementation of the next phase of the development of the business – the construction of a No interim dividend has been declared.
500 ton production facility on the same site. Low level offtake arrangements have furthermore
been concluded with one of the largest fish distributors in South Africa with initial feedback
from the market regarding the POEL production being very favourable. Corporate Responsibility
No further impairment of the POEL investment was undertaken following the securing of a We remain committed to the transformation of our country and, together with our business
working capital facility for POEL together with a non-binding undertaking to secure funding for partners and shareholders, will actively look for opportunities to support this objective.
the construction of the aforementioned 500 ton production facility. A positive side effect of the
new financing arrangements has been that previous impairment of POEL short term loan due by Conclusion
POEL to the Company has been reversed.
The potential in the BK One portfolio companies remains, and we believe that the individual
Several other prospective funders have also indicated willingness to participate in the funding of projects have the ability to deliver value for shareholders upon the successful implementation
the production facility and the POEL Board are now concentrating their efforts in this direction. of their business plans. Critical to this is the ability of the underlying investments to attract the
funding required to do so and the Board are happy to report that considerable progress has been
POA Call Option made in this respect during the interim period. The Board will continue to strive to minimize risk
exposure in its underlying investment interests and extract value for all its stakeholders.
The Company entered into a Call Option (see SENS announcement dated 5 November 2014) in
terms of which the Company has granted a call option, subject to various conditions precedent,
to Pure Ocean Aquaculture Limited (“the Acquirer”) to acquire the Company’s entire right, On behalf of the Board
interest and title in the claims and shares held in POA and claims held in POEL. P Ncetezo A Keet
It remains to be seen whether the Call Option shall be exercised by the Acquirer however Chairperson Chief Executive Officer
irrespective of whether the Call Option is in fact exercised, the Company is of the view that
either alternative will be favourable for it in that the granting of the Call Option has secured
funding for the POA investments while providing a possibility (subject to the Call Option being
exercised) to convert its holdings in POA into more easily tradable instruments in the future
should the Company so elect.
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