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Change Statement and Notice of Annual General Meeting
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" or “the Group”)
CHANGE STATEMENT AND NOTICE OF ANNUAL GENERAL MEETING
The company confirms that the board of directors has approved and published the Integrated
Report of the Group for the year ended 30 June 2014. Furthermore, the Company advises that
there were certain changes to the Provisional Condensed Reviewed Consolidated Results of the
Group for the year ended 30 June 2014 which were released on SENS on 31 October 2014. The
changes, together with explanations for these changes, are detailed below:
Extract from Audited Consolidated Statement of Financial Position as at 30 June 2014
Audited Audited
12 months 12 months
30 June 2014 30 June 2013
R’000 R’000
Non-current assets 185 075 215 802
Intangible assets - 32 945
EQUITY AND LIABILITIES
Accumulated loss (218 993) (118 534)
Net asset value per share information
Net asset value per share (cents) (0.84) 5.74
Net tangible asset value per share (cents) (0.84) 3.60
The audited results differ from the results previously published due to the further impairment of
goodwill in relation to Beige's investment in Quality Products Durban due to a reassessment of the
discount rate during the course of the audit, thereby reducing goodwill to nil and increasing the
accumulated loss by R17.4 million respectively. The impairment in goodwill has been recognised
despite operating profits being achieved at the Durban site.
The net tangible asset value per share remains unchanged as previously published.
Extract from Audited Consolidated Statement of Comprehensive Income for the year ended 30
June 2014
Audited Audited
12 months 12 months
30 June 2014 30 June 2013
R’000 R’000
Revenue 620 454 694 689
Cost of sales (571 716) (641 621)
Gross profit 48 738 53 068
Distribution costs (8 706) (16 067)
Administrative expenses (77 201) (85 464)
Operating loss before impairment (37 169) (48 463)
Impairment charge (32 945) (37 568)
Operating loss (70 114) (86 031)
Finance income 1 049 937
Finance costs (21 509) (15 191)
Loss after net financing costs (90 574) (100 285)
Share of profit of joint venture 1 658 1 445
Loss before income tax (88 916) (98 840)
Income tax expense (12 025) (714)
Loss for the year (100 941) (99 554)
Ordinary shares (000’s):
Weighted (and diluted) average shares in issue 1 544 197 1 544 197
Earnings and diluted per share information
Earnings per share (cents) (6.58) (6.42)
Headline earnings per share (cents) (4.43) (3.99)
Similarly further impairment of intangible assets has increased from R15.521m to R32.945m. This
impact has flowed through the statement of comprehensive income to the total comprehensive
loss for the year. There was also a reallocation between cost of sales and administrative expenses
which has no impact on the operating loss before impairments.
There has been no effect on the headline loss per share as previously published.
Audited results
PricewaterhouseCoopers Inc, the Group's independent auditor, have audited the annual financial
statements of the Group for the year ended 30 June 2014, and has expressed a modified opinion
on the audited consolidated financial statements and have included an emphasis of matter in their
report. A copy of the audit opinion is available for inspection at the company's registered office.
An extract of the qualification and emphasis of matter paragraphs are set out below:
“Basis for Qualified Opinion
The carrying value of property, plant and equipment (“PPE”) relating to the Chloorkop Cash
Generating Unit (the “Chloorkop assets”) in the consolidated statement financial position as
at 30 June 2014 amounted to R19.5 million. A valuation of the Chloorkop assets was not
obtained by management as required by International Accounting Standard (IAS) 36
Impairment of Assets, to determine whether any impairment relating to the assets should be
recorded. We were unable to obtain sufficient appropriate audit evidence regarding the
recoverable value of the Chloorkop assets by alternative means.
Consequently, we were unable to satisfy ourselves as to the appropriateness of the carrying
value of PPE relating to the Chloorkop Cash Generating Unit in the consolidated financial
statements. Similarly, we were unable to satisfy ourselves as to the carrying value of the
investment in subsidiaries amounting to R 41.1 million in the separate financial statements.
Qualified Opinion
In our opinion, except for the possible effects of the matter described in the Basis for Qualified
Opinion paragraph, the consolidated and separate financial statements present fairly, in all
material respects, the consolidated and separate financial position of Beige Holdings Limited
as at 30 June 2014, and its consolidated and separate financial performance and its
consolidated and separate cash flows for the year then ended in accordance with
International Financial Reporting Standards and the requirements of the Companies Act of
South Africa.
Emphasis of Matter
Without further qualifying our opinion, we draw attention to Note 26 to the consolidated and
separate financial statements, which indicates that the group incurred a net loss of R100.9
million during for the year ended 30 June 2014 and, as of that date, the group’s current
liabilities exceeded its current assets. This, along with other matters as described in Note 26,
indicates the existence of a material uncertainty which may cast significant doubt about the
ability of the group and the company to continue as a going concern.”
Commentary on the qualified opinion
Shareholders are advised that due to the reassessment of the discount rate as mentioned above,
this triggered an audit requirement for an independent valuation of the property, plant and
equipment at the Quality Products Chloorkop site. Due to time constraints, an independent
valuation as required by the Accounting Standards could not be obtained, thus resulting in the
above qualification. However, the directors have obtained a high level independent assessment
which does not indicate a material change to the carrying value of the above property, plant and
equipment.
Prospects
The volumes from the multi-national customers that were secured in the second six month period
are anticipated to grow materially in the forthcoming year. These new customers do not have
manufacturing capabilities in South Africa or Sub-Saharan Africa. Further opportunities are being
explored to manufacture a broader range of products for South Africa and other African markets in
addition to certain European markets. In addition, new contracts have been secured in the new
financial reporting period.
Turnaround Strategy
It is evident that, whilst there has been a trading improvement over the latter six months of the
financial year, the business is required to place even greater emphasis on expediting a number of
business improvement strategies to reset the current base and position itself for profitable growth.
This turnaround is predicated on recapitalising the business, immediately rectifying short-term
deficiencies and ensuring that the positive momentum achieved is sustained moving forward. The
management team has been tasked to ensure the implementation of this turnaround strategy, the
key elements of which are set out below:
Key Strategic Improvement Initiatives:
• Recapitalisation of the current business
• Inculcate a customer-centric culture
• Reassess and rationalise non-performing, non-core assets and/or products
• Build turnover utilising current capability and vertical integration
• Consolidation of product manufacture to drive efficiencies
• Centralise key services and drive other cost saving initiatives
• Focus on key capital improvements
Turnover: The holding company's commitment to the recapitalisation of the current business in the
short term will ensure continuous production and the improvement of overall manufacturing
efficiencies. It is envisaged that a move towards a more “customer centric” business model will
ensure greater focus, improved transparency and better service delivery which will ultimately
deliver superior and profitable growth.
Management's primary focus will be to work with customers to profitably grow the current core
product portfolio and to prioritise its efforts on new key projects that will effectively step change the
growth of the business. The projects are expected to further ensure that the business leverages its
inherent core capabilities and capacity and limits the need to invest in any significant
manufacturing plant in the short term.
The business has historically succumbed to an extensive and somewhat fragmented “tail” of
products within the portfolio. This position will be rectified following a review and rationalisation of
all low volume, low margin SKU's. Any new product development will be reassessed based on the
achievement of targeted thresholds.
Margin: The business will move to immediately consolidate the production of key lines to drive
greater efficiencies through the value chain. Further margin improvement measures include the
immediate implementation of a new shift system; targeting yield improvements; a full review of all
manning levels; leveraging the group?s central procurement resource; steadily increasing
automation utilising the Group?s in-house engineering capability; relocating key strategic bottle
mould machines to the manufacturing site, which will improve product margins and a move to
implement quarterly pricing reviews across all customers as applicable.
Expenses: Immediate interventions and projects have been instituted to generate savings. Some of
these initiatives include: immediate hold on the filling of vacancies; centralisation of payroll;
centralised procurement; containment of travel costs and significantly reducing legal costs.
Going Concern
The directors have reviewed the Group and Company?s budget and cash flow forecasts and,
whilst the Group and Company?s financial position is challenging, the directors have satisfied
themselves that they have access to sufficient borrowing facilities to meet their foreseeable cash
requirements.
The group incurred a net loss for the year ended 30 June 2014 of R 100.9 million (2013: R 99.5 million)
and, as at that date its current liabilities exceeded its current assets by R 63 million (after deducting
the preference share loan and shareholder loan). The financial statements have been prepared on
the basis of accounting policies applicable to a going concern. This basis presumes that funds will
be available to finance future operations and to realise assets and discharge liabilities in the normal
course of business. The holding company (“Lion Match”) has provided a loan facility of R 100 million
of which an amount of R 10 million was advanced subsequent to the year end. The directors are
also negotiating with the holding company to provide additional capital, on an ongoing basis, to
serve as head room to the above facility. The holding company's application for funding to
enable it to meet its commitment to this loan facility was not finalised at the date of issue of these
financial statements. This facility is in addition to the loan of R 35.8m advanced to the Company as
at 30 June 2014. The loan provided and any advances on the R 100m facility, will be payable on 01
July 2017.
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 be unable to realise its
assets and discharge its liabilities in the normal course of business.
The financial statements are prepared on the basis of accounting policies applicable to a going
concern. This basis presumes that the company will continue to receive the support of its holding
company and that the realisation of assets and settlements of liabilities will occur in the ordinary
course of business.
In addition, if further capital funding is required by the group, it has the ability to consider the
disposal of certain non-core assets.
The Directors have embarked on a strategy to recapitalise the business which includes:
• An increase in the value of the announced claw-back offer from R 30 million to R 60 million.
The Group's holding company (Lion Match) will act as the effective "underwriter" for the full
value of the claw-back offer by subscribing for the shares that will form the subject of the
claw-back offer.
• The effect of the claw-back subscription is to capitalise the holding company loan in the
amount of R 35m outstanding at 30 June 2014 and the capitalisation of the preference
shares.
On the basis of this review, the directors consider it appropriate to adopt the going concern basis in
preparing the Group and Company's annual financial statements.
Events after reporting period
i) Claw-back subscription
As announced, the Company intends proceeding with a claw-back offer, the value of which will
now be increased to R 60 million and the shares in respect of which will be fully subscribed for by
Lion Match. Final salient dates of the claw-back offer will be announced on SENS in due course.
ii) Loan Facility
The holding company, The Lion Match Company (Pty) Limited has provided a further funding
facility amounting to R 100 million, which is in addition to the facility of R35.8 million provided during
the year. The Board has satisfied themselves that the holding company has the ability to provide
funding in terms of this funding facility.
iii) Herbal and Homeopathic
The Company has, subsequent to the financial year end, increased its shareholding in H&H from
61.4% to 68.6%.
Financial information
Summarised financial statements, together with the notice of Annual General Meeting, for the year
ended 30 June 2014 have been posted to shareholders on 31 January 2015 and the full annual
report will be available on the Company's website at www.beigeholdings.co.za from 31 January
2015. The record date for the posting of the summarised financial report is Friday, 23 January 2015.
Notice of Annual General Meeting
The Annual General Meeting of the Company will be held at 09h00 on Friday, 6 March 2015 at the
offices of The Lion Match Company at 36 Essex Terrace, Westville, Kwazulu Natal. The record date
on which shareholders of the Company must be registered in the Company's securities register in
order to attend and vote at the meeting is Friday, 27 February 2015 and the last day to trade in
order to be eligible to vote at the annual general meeting will be Friday, 20 February 2015.
By order of the Board
NMI (Gora) Abdoola Jithan Bridgmohan
Executive Chairman Group Financial Director
31 January 2015
Westville
Company Secretary and Registered Office
Arbor Capital Company Secretarial (Pty) Ltd (Registration number 1998/025284/07)
Ground Floor, One Health Building, Woodmead North Office Park, 54 Maxwell Drive, Woodmead,
2191
Suite # 439, Private Bag X29, Gallo Manor, 2052
Directors
NMI (Gora) Abdoola (Executive Chairman), AH Trikamjee (Deputy Chairman) (#*), J Bridgmohan
(Group FD), A Heeralal(#), AMI Abdoola (#), PW Jooste (#), AGS Osman (#*), AD Sinclair(#),
M Tembe (Lead independent non-executive director) (#*)
(#) Non-executive, * independent
Designated Advisor Transfer Office
Arbor Capital Sponsors Proprietary Limited Link Market Services South Africa Proprietary Limited
Auditors
PricewaterhouseCoopers Inc
Date: 02/02/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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