Unaudited condensed interim results for the six months ended 31 August 2015
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 2015
CONDENSED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME CONDENSED SEGMENT REPORT
Unaudited six Unaudited six Audited Unaudited six months ended 31 August 2015 Fair Value
months ended months ended year ended Gains (Losses)
31 August 31 August 29 February Interest on financial
2015 2014 2015 Investment Industry Received Split % instruments Split %
Notes R R R Pure Ocean Aquaculture Aquaculture - 0% (930 000) 2%
Revenue - 1 422 615 3 118 105 Avalloy Superalloys - 0% (51 546 205) 98%
Fair value gains (losses) on financial instruments 1 (52 476 205) - (23 499 814) - 0% (52 476 205) 100%
Cost recovery 360 000 672 134 1 016 775
(Provision) Reversal of impairment 2 364 133 2 335 114 - Unaudited six months ended 31 Fair Value
Employee benefit expense (906 000) (1 235 848) (2 242 392) August 2014 Gains (Losses)
Provision of impairment of loans 2 (105 090 021) - - Interest on financial
Investment Industry Received Split % instruments Split %
Other expenses (refer note 1) (982 853) (1 286 169) (3 190 928)
Pure Ocean Aquaculture Aquaculture 1 332 014 100% - 0%
Profit (loss) before taxation (159 095 080) 1 936 865 (22 463 140)
Avalloy Superalloys - 0% - 0%
Finance income 107 926 2 509 200 5 130 081
1 332 014 100% - 0%
Finance costs (6 708) -
Taxation - - - Audited year ended 28 Fair Value
Profit (loss) for the period (158 993 862) 4 446 065 (17 333 059) February 2015 Gains (Losses)
Other comprehensive income - - - Interest on financial
Total comprehensive income (loss) for the period (158 993 862) 4 446 065 (17 333 059) Investment Industry Received Split % instruments Split %
Profit (loss) for the period attributable to: - - - Pure Ocean Aquaculture Aquaculture 2 969 321 100% (21 175 950) 90%
Ordinary shareholders - - - Avalloy Superalloys - 0% (2 323 864) 10%
Preference shareholders (158 993 862) 4 446 065 (17 333 059) 2 969 321 100% (23 499 814) 100%
(158 993 862) 4 446 065 (17 333 059) There is no inter-segment trading.
Total comprehensive income (loss) for the period
attributable to: CONDENSED STATEMENT OF CASH FLOWS
Ordinary shareholders - - - Unaudited six Unaudited six Audited
Preference shareholders (158 993 862) 4 446 065 (17 333 059) months ended months ended year ended
(158 993 862) 4 446 065 (17 333 059) 31 August 31 August 29 February
2015 2014 2015
R R R
CONDENSED STATEMENT OF FINANCIAL POSITION Cash flows from operating activities
Unaudited Unaudited Audited Cash absorbed by operations (2 347 407) (2 613 069) (4 616 982)
31 August 31 August 28 February Finance income 3 987 - 149 667
2015 2014 2015 Finance costs (6 708) - -
Notes R R R
Taxation - - -
Net cash from operating activities (2 350 128) (2 613 069) (4 467 315)
Cash flows from investing activities
Property, plant and equipment - 103 106 67 483
Current loan advance (122 075)
Intangible assets - 15 191 -
Repayment of loan advanced 1 553 452
Investments 1 - 75 976 019 52 476 205
Net cash from investing activities - - 1 431 377
Loans 2 - 99 968 923 106 757 048
Cash flows from financing activities
- 176 063 239 159 300 736
Share capital raised 800 - -
Share premium raised 2 999 200 - -
Loans 1 770 965 4 937 886 523 074
Repayment of loans advanced 523 074 20 260 353 255
Other receivables 1 228 068 623 275 996 711
Net cash from financing activities 3 523 074 20 260 353 255
Cash and cash equivalents 1 176 155 93 083 3 209
Total cash movement for the period 1 172 946 (2 592 809) (2 682 683)
4 175 188 5 654 244 1 522 994
Cash and cash equivalents at the beginning of the period 3 209 2 685 892 2 685 892
Total assets 4 175 188 181 717 483 160 823 730
Cash and cash equivalents at the end of the period 1 176 155 93 083 3 209
EQUITY AND LIABILITIES
Equity HEADLINE EARNINGS PER SHARE Unaudited Unaudited Audited
Share capital 1 000 200 200 31 August 31 August 28 February
Share premium 2 999 200 - - Shares in issue: 2015 2014 2015
Accumulated loss (235 204 027) (54 431 041) (76 210 165) Ordinary shares: Number of shares in issue 1 000 200 200
Total equity (232 203 827) (54 430 841) (76 209 965) Preference shares: Number of shares in issue 24 492 823 24 492 823 24 492 823
Liabilities Weighted average number of shares in issue
Non-current liabilities Ordinary shares: Number of shares in issue 1 000 200 200
Preference shares 232 926 374 232 926 374 232 926 374 Preference shares: Number of shares in issue 24 492 823 24 492 823 24 492 823
232 926 374 232 926 374 232 926 374
Current liabilities (LOSS) EARNINGS PER SHARE, IN RANDS
Trade and other payables 3 452 641 3 221 950 4 107 321
3 452 641 3 221 950 4 107 321
Ordinary shareholders - - -
Total liabilities 236 379 015 236 148 324 237 033 695
Preference shareholders (6,49) 0,18 (0,71)
Total equity and liabilities 4 175 188 181 717 483 160 823 730
Earnings(loss) per share, in Rands
CONDENSED STATEMENT OF CHANGES IN EQUITY Ordinary shareholders -
Share Share Retained Total Preference shareholders (6,49) 0,18 (0,71)
capital Premium income equity Reconciliation of headline earnings (loss)
Balance at 29 February 2013 200 - (38 603 092) (38 602 892) Profit (loss) attributable to preference shareholders (158 993 862) 4 446 065 (17 333 059)
Loss for the first six months period - - (354 986) (354 986) (158 993 862) 4 446 065 (17 333 059)
Balance at 31 August 2013 200 - (38 958 078) (38 957 878) Headline earnings (loss) per ordinary share (Rand) - -
Loss for the last six month period - - (19 919 028) (19 919 028) Diluted earnings (loss) per ordinary share (Rand) - -
Balance at 28 February 2014 200 - (58 877 106) (58 876 906) Headline earnings (loss) per preference share (Rand) (6,49) 0,18 (0,71)
Profit for the first six months period - - 4 446 065 4 446 065 Diluted earnings (loss) per preference share (Rand) (6,49) 0,18 (0,71)
Balance at 31 August 2014 200 - (54 431 041) (54 430 841)
Loss for the last six months period - - (21 779 124) (21 779 124)
Balance at 28 February 2015 200 - (76 210 165) (76 209 965)
Share issue 800 - 800
Share premium - 2 999 200 - 2 999 200
Loss for the six month period - - (158 993 862) (158 993 862)
Balance at 31 August 2014 1 000 2 999 200 (235 204 027) (232 203 827)
Introduction owed to AVA’s creditors and therefore the likelihood that the Company will realise any value in
its favour is remote.
During the interim period ended 31 August 2015, the Company continued to face challenging
headwinds as had been reported in its Annual Report for the period ended 28 February 2015
(“Annual Report”) and previous financial statements and reports. It was noted in the Annual Call Options
Report that the ability of the Company to continue as a going concern was dependent on a
Given the above state of affairs, it is not considered probable that the call options pertaining to
number of factors. The most significant of those included:
AVA and or POA will be exercised at their agreed values, if at all.
a) that the ultimate shareholders continue to financially support the Company after the existing
funding facilities have been utilised. It was noted by the Directors in the Annual Report that
these facilities will be utilised by February 2016; and / or Mr Peter Gaylard has resigned as director of the Company with effect from 1 October 2015.
b) the ability of the Directors to procure adequate additional funding for the Company from Dividend
a combination of alternative sources once the facilities referred to had been utilised. No interim dividend has been declared
The significant alternative sources available are to sell part or whole of its investments;
implement plans to actively recover short term loans receivable; restructure the operations
of the Company; settle the largest trade payable by issuing shares; secure the largest trade It is regrettable that due to circumstances and events entirely outside of the Board’s control, the
payable by procuring a third party guarantee for same; issue additional Preference Shares; Company is faced with imminent closure. While considerable progress, and indeed success in
procure the subordination of one million Rand in management fees owing to the Company’s attracting and securing the funding required by the underlying investments, had been achieved
investment advisor, Kwanda Capital Investments, at year end for twelve months. since the publication of the previous interim results, such progress has been fatally undermined
by the events surrounding its major preference shareholders and funders and the reputational
While the Directors managed to successfully address several of the alternative sources of
challenges that this has had on further fund-raising efforts both for the Company and its
funding, it was established that the Company’s three largest preference share shareholders are
unable to support the Company as the largest preference share shareholder has been placed
under administration in the Bailiwick of Guernsey and cannot make any funding decisions on The Board of the Company has called a special shareholders meeting simultaneously with the
any of it investments, the second largest preference share shareholder of the Company is in publication of these results and shareholders are referred to such notice for further information
the process of being dissolved (and its shares in the Company being distributed to several
shareholders) and the third largest preference share shareholder has indicated that they wish
to disinvest from the Company.
Notes to Financial Statements
Basis of preparation
The Company has, in close conjunction with the boards of its underlying investments,
investigated several options to sell its shareholding in its underlying investments however having The interims are prepared using the liquidation basis of accounting to present relevant
regard to the funding constraints being experienced by the said investments, the possibility of information about an entity’s expected resources in liquidation by measuring and presenting
any such trade sale is presently remote and remains viable in the medium to long term (if at all) assets at the amount of the expected cash proceeds from liquidation.
which, given the circumstances of the Company, are of no great assistance to it. Reason for basis of preparation
The Company has furthermore restructured those parts of its operations that are capable The Board in consultation with the Company’s auditors, legal advisors and sponsor, have now
of restructuring. These efforts have been finalised and include significant reduction of non- determined that they are not in a position to release the Company’s interim results for the six
executive director fees, renegotiation of secretarial functions and the elimination of any months ended 31 August 2015 (“interim results”) on a “going concern” basis due to the risks as
expenses not deemed core to the Company’s function. fully set out in the annual financial statements for the period ended 28 February 2015 having
Negotiations have been on-going with the Company’s largest and significant creditor in order materialised. This will result in the preparation of BK One’s interim results on a “liquidation”
to settle the amount due to them through the issue of preference shares. The authority to basis and as a result. IFRS provides no guidance on the requirements for the preparation of
issue such shares was however not supported by the Company’s preference shareholders at financial statements on a liquidation basis.
the most recent Annual General Meeting and as such, this alternative is not an option. This In addition, the following developments have taken place:
has further constrained the Company’s ability to raise funds, such ability already being heavily 1. The Company’s three largest shareholders are unable to support the Company as the
constrained by the issues being experienced by shareholders and funders of the Company and largest shareholder has been placed under administration in the Bailiwick of Guernsey and
its underlying investments that furthermore led to the collapse of the financing arrangements cannot make any funding decisions on any of it investments, the second largest shareholder
and capital injection agreements that were successfully concluded by the Company’s investee of the Company is in the process of being dissolved (and its shares in the Company being
companies and further materially compromised the possibilities to secure replacement funding distributed to several shareholders) and the third largest shareholder has indicated that they
for the investee companies. wish to disinvest from the Company.
Until recently, the Company had made significant progress in securing a third party guarantee 2. The Company has, in close conjunction with the boards of its underlying investments,
for the claim of its largest trade creditor through the pledge of shares by its second largest investigated several options to sell its shareholding in its underlying investments however
preference shareholder however such shareholder chose to withdraw from these discussions at having regard to the funding constraints being experienced by the said investments; the
a late stage and has taken the decision to dissolve in the interim. possibility of any such trade sale is presently remote within the requisite timeframes of the
As such, as indicated in the Annual Report and above, the Company is not in a position to Company.
continue on a “going concern” basis due to the risks as fully set out in the annual financial 3. The Company has furthermore restructured those parts of its operations that are capable
statements for the year ended 28 February 2015 having materialised. of restructuring. These efforts have been finalised and include significant reduction of non-
executive director fees, renegotiation of secretarial functions and the elimination of any
Investment Portfolio expenses not deemed core to the Company’s function.
Pure Ocean Aquaculture (“POA”) 4. Negotiations have been on-going with the Company’s largest significant creditor in order
to settle the amount due to them through the issue of preference shares. The authority to
POA is an investment holding company that holds aquaculture-based investments. POA holds
issue such shares was however not supported by the Company’s preference shareholders
two entities: Highlands Trout (“HT”), a Lesotho-based company, and Pure Ocean East London
at the most recent Annual General Meeting and as such, this alternative is no longer an
(“POEL”) which are independently valued. Both investments have been impaired to nil value
option. This has further constrained the Company’s ability to raise funds, such ability already
due to the likelihood that neither investment is considered likely to deliver any value to the
being heavily constrained by the issues being experienced by shareholders and funders of
Company within the time frames available to the Company for such realisation.
the Company and its underlying investments.
POEL owns and operates a land-based dusky cob fish farm in the Industrial Development Zone
5. Until recently, the Company had made significant progress in securing a third party guarantee
of East London. The POEL investment via POA, due predominantly to the failure of its working
for the claim of its largest trade creditor through the pledge of shares by its second largest
capital funders to continue to advance funds as agreed in terms of its financing arrangements
preference shareholder however such shareholder chose to withdraw from these discussions
but also as a result of a complete lack of governmental support despite the programs announced
at a late stage and has taken the decision to dissolve in the interim.
as being available for this purpose and, for instance, the publication of the Operation Phakisa
initiative, has been impaired to a nil value. While remote opportunities exist to secure a sale of Glossary
the POEL business or stakeholding, it is considered remote that any such sale will result in the Fair Value: The price that would be received to sell an asset or paid to transfer a liability in an
realisation of value in favour of the Company. orderly transaction between market participants at the measurement date.
Highlands Trout has a licence to operate a salmon trout farm on the Katse Dam in the Kingdom Liquidation: The process by which an entity converts its assets to cash or other assets and settles
of Lesotho. The HT investment via POA has similarly been impaired to a nil value. Despite there its obligations with creditors in anticipation of the entity ceasing all activities. Upon cessation of
being value attributable to such investment, the associated preferent debt (not held by the the entity’s activities, any remaining cash or other assets are distributed to the entity’s investors
Company) in POA is likely to exceed any value realised by the sale of the HT investment in POA or other claimants (albeit sometimes indirectly).
at the time of this report and therefore the likelihood that the Company will realise any value Measurement
in its favour is remote.
Assets are initially recognised at the estimated amount of cash or other consideration that it
Advanced Vacuum Alloys (“AVA”) expects to collect in settling or disposing of those assets in carrying out its plan for liquidation.
AVA is a superalloy producer located in the North West province of South Africa. The AVA In some cases, fair value may approximate the amount that an entity expects to collect.
investment, due predominantly to the failure of its working capital funders to advance any The fair value adjustments are recognised in profit and loss.
funds as agreed in terms of its financing arrangements but also as a result of a complete lack
of governmental support despite the programs announced as being available for this purpose, For financial assets carried at amortised cost, the amount of the impairment is the difference
has been impaired to a nil value. AVA is presently mothballed and the Board is of the view that between the asset’s carrying amount and the present value of estimated future cash flows,
the realisable value of the AVA assets is likely to be consumed in its entirety by the secured debt discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all different scenarios ranging from a consolidation of current activities through to various levels
financial assets. Impairments and/or reversal of impairments are recognised in profit and loss of expansion however such model has still to be approved by HT’s shareholders. Each scenario
Cash and cash equivalents comprise cash on hand, other deposits held at call with banks and requires varying levels of funding and has a material effect on the valuation of POA. POEL is a
others short-term highly liquid investments that have original maturities of three months or small pilot facility with a much lower certainty around future income and current sale value.
less. Cash equivalents are short-term highly liquid investments that are readily convertible to A decision was made in the previous financial year to value the POEL business on a net asset
known amounts of cash and which are subject to an insignificant risk of change in value. Cash value basis due to the uncertainty of future income. Thus BK One board, with the advice from
and cash equivalents are carried at amortised cost which approximates fair value. their advisory team, has valued POA equity value at nil primarily due to the POA exposure to
Transholding Investments Limited.
Revenue is measure at the fair value of the consideration received or receivable when it is
probable that the economic benefits will flow to the entity.
Interest revenue is accrued on a time basis, by reference to the principal outstanding and at the 31 August 2015 31 August 2014 28 February 2015
effective interest rate applicable, which is the rate that exactly discounts estimated future cash
Opening balance 930 000 22 105 950 22 105 950
receipts through the expected life of the financial asset to that asset’s net carrying amount.
Fair value adjustment (930 000) - (21 175 950)
Notes to Interims Closing balance
The fair values of financial assets and financial liabilities are determined as follows: - 22 105 950 930 000
• the fair value of financial assets and financial liabilities with standard terms and conditions 131 655 050 ordinary shares of R0, 000001 each (31 August 2015 representing 15% interest;
and traded on active liquid markets is determined with reference to quoted market prices; 28 February 2014 representing 15% interest and 31 August 2014 representing 37.4% interest)
• the fair value of other financial assets and financial liabilities (excluding derivative 2. Long term loans
instruments) is determined in accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current market transactions. 31 August 2015 31 August 2014 28 February 2015
Specifically significant assumptions used in fair valuing the investments (financial assets) are Pure Ocean Aquaculture – Loan 1 16 162 373 15 045 236 16 162 373
set out below: Pure Ocean Aquaculture – Loan 2 8 851 833 8 332 546 8 851 833
The financial statements include holdings in unlisted shares which are measured at fair value. Pure Ocean Aquaculture – Loan 3 42 688 058 40 222 323 42 688 058
These are all level 3 fair value measurements which are those derived from valuation techniques
that include inputs that are not based on observable market data (unobservable inputs). There Pure Ocean Aquaculture – Loan 4 - - 1 667 026
are no instruments which are measured at level 1 or level 2. Pure ocean East London – Loan 1 36 368 817 36 368 817 36 368 817
The fair values of investments held are estimated by an independent valuator using a discounted Pure Ocean East London – Loan 2 1 018 941` ` 1 018 941
cash flow model which includes some assumptions that are not supportable by observable
Impairments (105 090 021)
market prices or rates. Business assumptions are not generally supported by historical
performance, and also assume that the required funding support is received. - 99 968 923 106 757 048
The fair value of the investments is monitored by the Board by ensuring that a member of the
Board or advisory team serves on the board of directors of the underlying investment. The fair There have been formal offers for HT but none these will have any benefit for BK One equity
value of the investments, are reviewed quarterly. The fair value gains (losses) are reviewed and portion or loan payments. Thus BK One board, with the advice from their advisory team,
approved and adjusted by the Board on a bi-annual basis. has valued POA value of loans is nil due to all the loans been subordinated to Transholding
In the period under review, due to the fact that the funding source has not materialised in the Investments Limited.
underlying investments and no other reasonable prospects exist for alternative funding sources. The Interest for the six month period hasn’t been recognised as interest is only payable on the
Both investments will be valued at fair value by measuring and presenting assets at the amount maturity of the loans payable to BK One, provided POA is liquid and solvent.
of the expected cash proceeds from liquidation thereof. .
3. Prior period error: Incorrect classification of loans advanced in the statement of
1. Investments cash flows (“SOCF”)
During the JSE Proactive monitoring of the annual financials for year ended 28 February 2015,
31 August 2015 31 August 2014 28 February 2015
the following classification errors in the cash flow statement were identified.
Unlisted investments at fair value:
Loans advanced – amount R 122 075.
Investment in Advanced Vacuum Alloys - 53 870 069 51 546 205
Loan advanced to Pure Ocean Aquaculture Proprietary Limited. The loan was a short term loan
to bridge a shortfall of working capital in the underlying investment. It was advanced on the 31
Ordinary shares October 2014 and repaid on the 1 December 2014.
Investment in Pure Ocean Aquaculture - 22 105 950 930 000 This was incorrectly classified as a financing activity by management and should have been
classified as investing activities in terms of 7.16 (c).
- 75 976 019 52 476 205
Repayment of loans advanced R 1 906 707, consist of the following individual movements:
The repayment of the loan advanced to Kawuleza Connect Proprietary Limited – R1 431 377:
Advance Vacuum Alloys Proprietary Limited “AVA” • This was incorrectly classified by management as a financing activity and should have been
On the 14 October 2015, all the then directors resigned from AVA as there had been no support classified as investment activities in terms if 7.16 (f).
from the shareholders. On the 12 November, a new director was appointed to board. AVA The part payment of a loan account in Highlands Trout Proprietary Limited - R353 255:
is not operating at date of this report and the expected value from sale is not anticipated to
• This loan was obtained via the Call Option with Isitsaba. BK One preference shares were
will not have any financial benefit for BK One. Thus BK One board, with the advice from their
issued as payment for the loan obtained. This was correctly classified as it was cash flows
advisory team, has valued AVA equity value at nil as its assets are held as security in favour of
raised from financing activities as per 7.17(a) –“cash proceeds from issuing shares or other
Transholding Investments Limited for loans due to the latter.
31 August 2015 31 August 2014 28 February 2015 The repayment of the loan advanced to Pure Ocean Aquaculture –R122 075
Opening balance 51 546 205 53 870 069 53 830 069 • This was incorrectly classified by management as a financing activity and should have been
Fair value adjustment (51 546 205) - (2 323 864) classified as investment activities in terms if 7.16 (f).
Closing balance The above classification errors have been corrected in the interims comparatives figures of
28 February 2015.
- 53 870 069 51 546 205
5 960 611 ordinary shares of R0.001 each (representing 28.41% interest), in current and
Pure Ocean Aquaculture Proprietary Limited “POA”
POA consists of two investments: Highlands Trout Proprietary Limited (“HT”) and Pure
Ocean East London Proprietary Limited (“POEL”). HT is the predominant value driver in the
POA valuation. The Board of HT has engaged with several investors that have expressed an
interest in either purchasing HT in its entirety or providing expansion capital. These discussions
are ongoing. A reworked HT financial model was prepared by management comprising of
Nedbank Corporate and Investment Banking
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