Wrap Text
Unaudited Consolidated Results for the Six Months Ended 31 December 2015
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”)
UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2015
Condensed Consolidated Statement of Financial Position as at 31 December 2015
Unaudited Audited Reviewed
6 months 12 months 6 months
ended ended ended
31 December 30 June 31 December
2015 2015 2014
R’000 R’000 R’000
ASSETS
Non-current assets 145 158 161 407 166 829
Property, plant and equipment 130 456 145 704 151 982
Investment in joint venture 3 027 3 971 3 688
Other receivables - - 160
Deferred income tax assets - 656 996
Loan to joint venture 11 675 11 076 10 003
Current assets 169 407 126 705 157 153
Inventories 52 384 47 214 66 979
Trade and other receivables 88 965 66 530 86 317
Cash and cash equivalents 28 058 12 961 3 857
Total assets 314 565 288 112 323 982
EQUITY AND LIABILITIES
Equity attributable to equity holders of the company (55 821) (35 581) (60 648)
Ordinary share capital 75 087 75 087 15 442
Ordinary share premium 179 262 179 262 179 898
Other reserves 9 470 9 470 10 046
Accumulated loss (319 640) (299 400) (266 034)
Non-controlling interest 2 607 2 259 2 705
Total equity (53 214) (33 322) (57 943)
Liabilities
Non-current liabilities 142 072 93 563 76 020
Borrowings 56 353 66 876 61 532
Deferred income tax liabilities 4 067 3 934 6 488
Holding company loan 81 652 22 753 8000
Current liabilities 225 707 227 871 305 905
Trade and other payables 146 668 151 514 166 863
Current portion of long-term borrowings 16 031 13 020 17 128
Current income tax liabilities 1 198 1 198 1 198
Preference share loan - - 24 363
Bank overdrafts 61 810 62 139 58 655
Holding company loan - - 37 698
Total liabilities 367 779 321 434 381 925
Total equity and liabilities 314 565 288 112 323 982
UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2015
Number of Ordinary shares (000’s)
In issue 4 544 197 4 544 197 1 544 197
Net asset value per share information (net of non-
controlling interest)
Net asset value per share (cents) (1.23) (0.78) (3.93)
Net tangible asset value per share (cents)
(1.23) (0.78) (3.93)
Condensed Consolidated Statement of Comprehensive Income for the six months ended
31 December 2015
Unaudited Audited Reviewed
6 months 12 months 6 months
ended ended ended
31 December 30 June 31 December
2015 2015 2014
R’000 R’000 R’000
Revenue 195 617 478 074 278 661
Cost of sales (164 003) (448 138) (262 318)
Gross profit 31 614 29 936 16 343
Distribution costs (6 841) (10 213) (4 106)
Other income 328 - -
Administrative expenses (29 624) (58 287) (36 247)
Operating loss before impairment ( 4 523) (38 564) (24 010)
Impairment charge (5 000) (20 848) (9 555)
Operating loss (9 523) (59 412) (33 565)
Finance income 286 1 424 532
Finance costs (8 910) (22 866) (10 411)
Loss after net financing costs (18 147) (80 854) (43 444)
Share of (loss)/profit of joint venture (943) 1 467 658
Loss before income tax (19 090) (79 387) (42 786)
Income tax expense (803) (1 247) (3 460)
Loss for the period (19 893) (80 634) (46 246)
Other comprehensive income for the period net of
tax - - -
Total comprehensive loss for the period (19 893) (80 634) (46 246)
Total comprehensive loss attributable to:
Equity holders of the company (20 240) (81 254) (47 312)
Non-controlling interest 347 620 1 066
(19 893) (80 634) (46 246)
Loss for the period (19 893) (80 634) (46 246)
Non-controlling interest 347 (620) (1 066)
Loss for the year/period attributable to equity
holders of the company (20 240) (81 254) (47 312)
Headline earnings adjustments:
Total comprehensive loss for the period attributable to
equity holders of the company (20 240) (81 254) (47 312)
Adjustments:
Profit on sale and leaseback of property net of tax - - (9)
Impairment of fixed assets 5 000 20 848 9 555
Headline earnings for the period attributable to
equity holders of the company (15 240) (60 770) (37 766)
Ordinary shares (000’s):
Weighted average shares in issue 4 544 197 2 526 671 1 969 383
Earnings per share information
Earnings per share (cents) (0.45) (3.22) (2.40)
Headline earnings per share (cents) (0.34) (2.39) (1.92)
Condensed Consolidated Statement of Cash Flows for the six months ended 31 December 2015
Unaudited Audited Reviewed
6 months ended 12 months ended 6 months ended
31 December 2015 30 June 2015 31 December 2014
R’000 R’000 R’000
Cash flows from operating activities:
Net cash generated from operating
activities (37 537) (18 778) (20 365)
Cash flows from investing activities:
Net cash used in investing activities 1 575 (4 240) 111
Cash flows from financing activities:
Net cash generated from financing 51 388 8 997 613
activities
Net decrease in bank overdrafts
including cash and cash equivalents
15 426 (14 021) (19 641)
Bank overdrafts including cash and
cash equivalents at the beginning of
the period (49 178) (35 157) (35 157)
Bank overdrafts including cash and
cash equivalents at the end of the
period (33 752) (49 178) (54 798)
Condensed Consolidated Statement of Changes in Equity for the six months ended 31 December 2015
Share
Ordinary Ordinary Ordinary Total Non-
Revaluation based Accumulated Total
share treasury Share other Total controlling
reserve payment Loss equity
capital shares premium reserves interest
reserve
Group R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000 R’000
Balance at 30 June 2014 16 319 (877) 179 898 8 643 1 979 10 622 (218 993) (13 031) 1 953 (11 078)
Comprehensive income:
Loss for the period - - - - - - (47 312) (47 312) 1 066 (46 246)
Total comprehensive (loss) /
income for the period - - - - - - (47 312) (47 312) 1 066 (46 246)
Realisation of revaluation
reserve - - - (576) - (576) 576 - - -
Purchase of additional interest
in Herbal and Homeopathic - - - - - - (305) (305) (314) (619)
Total contributions by and
distributions to owners of the
company, recognised directly
in equity - - - (576) - (576) (305) (305) (314) (619)
Balance at 31 December 2014 16 319 (877) 179 898 8 067 1 979 10 046 (266 034) (60 648) 2 705 (57 943)
Comprehensive income:
Loss for the period - - - - - - (33 942) (33 942) (446) (34 388)
Total comprehensive (loss)
for the period - - - - - - (33 942) (33 942) (446) (34 388)
Other comprehensive
Condensed Consolidated Statement of Changes in Equity for the six months ended 31 December 2015
Share
Ordinary Ordinary Ordinary Total Non-
Revaluation based Accumulated Total
share treasury Share other Total controlling
reserve payment Loss equity
capital shares premium reserves interest
reserve
income:
Realisation of revaluation
reserve - - - (576) - (576) 576 - - -
Clawback offer 59 645 - (636) - - - - 59 009 - 59 009
Sale of treasury shares (877) 877 - - - - - - - -
Balance at 30 June 2015 75 087 0 179 262 7 491 1 979 9 470 (299 400) (35 581) 2 259 (33 322)
Comprehensive income: - - - - - -
Loss for the period - - - - - - (20 240) (20 240) 347 (19 893)
Total comprehensive (loss) /
income for the period - - - - - - (20 240) (20 240) 347 (19 893)
Balance as at 31 December
2015 75 087 0 179 262 7 491 1 979 9 470 (319 640) (55 821) 2 607 (53 214)
Condensed Consolidated Segmental Analysis for the six months ended 31 December 2015
Outsource Packaging Holding Group
manufacturing Company
R’000 R’000 R’000 R’000
Total segment revenue
- unaudited six months ended 31 December 2015 190 283 10 129 - 200 412
- audited year ended 30 June 2015 452 129 35 905 - 488 034
- unaudited six months ended 31 December 2014 263 140 20 810 - 283 950
Inter-segment revenue1
- unaudited six months ended 31 December 2015 (603) (4 192) - (4 795)
- audited year ended 30 June 2015 - (9 960) - (9 960)
- unaudited six months ended 31 December 2014 (1 434) (3 855) - (5 289)
Revenue from external customers
- unaudited six months ended 31 December 2015 189 680 5 937 - 195 617
- audited year ended 30 June 2015 452 129 25 945 - 478 074
- unaudited six months ended 31 December 2014 261 706 16 955 - 278 661
Operating profit/(loss) before impairments
- unaudited six months ended 31 December 2015 4 976 (7 382) (2 117) (4 523)
- audited year ended 30 June 2015 (27 170) (9 503) (1 891) (38 564)
- unaudited six months ended 31 December 2014 (15 772) (4 843) (3 395) (24 010)
Impairment of fixed assets
- unaudited six months ended 31 December 2015 - (5 000) - (5 000)
- audited year ended 30 June 2015 (19 733) (1 115) - (20 848)
- unaudited six months ended 31 December 2014 (8 438) (1 117) - (9 555)
Operating profit/(loss) after impairment
- unaudited six months ended 31 December 2015 4 976 (12 382) (2 117) (9 523)
- audited year ended 30 June 2015 (46 903) (10 618) (1 891) (59 412)
- unaudited six months ended 31 December 2014 (24 210) (5 960) (3 395) (33 565)
Net finance costs
- unaudited six months ended 31 December 2015 (8 275) (968) 619 (8 624)
- audited year ended 30 June 2015 (18 339) (3 017) (86) (21 442)
- unaudited six months ended 31 December 2014 (8 173) (716) (990) (9 879)
Profit/(loss) before tax and share of profit of
joint venture
- unaudited six months ended 31 December 2015 (3 298) (13 351) (1 498) (18 147)
- audited year ended 30 June 2015 (65 242) (13 635) (1 977) (80 854)
- unaudited six months ended 31 December 2014 (32 383) (6 676) (4 385) (43 444)
Total assets
- unaudited as at 31 December 2015 246 233 31 386 36 946 314 565
- audited as at 30 June 2015 227 509 43 611 16 992 288 112
- unaudited as at 31 December 2014 257 783 48 903 17 296 323 982
Total liabilities
- unaudited as at 31 December 2015 199 671 22 432 145 676 367 779
- audited as at 30 June 2015 208 758 24 654 88 022 321 434
- unaudited as at 31 December 2014 213 346 26 628 141 951 381 925
¹Includes intra-segment revenue
Additional information
Unaudited Audited Unaudited six
6 months ended Year ended months ended
31 December 2015 30 June 2015 31 December 2014
R’000 R’000 R’000
Capital Commitments 14 439 10 541 11 536
Depreciation of property, plant 8 673 18 864 10 141
and equipment
Purchase of property, plant and 346 3 621 730
equipment
Impairment of fixed assets 5 000 20 848 9 555
Operating lease commitments 85 414 93 416 126 826
COMMENTARY
The directors of Beige present the unaudited results for the six months ended 31 December 2015. These
results show the consolidated position of Beige compared to the reviewed six months ended 31 December
2014 and the audited results for the year ended 30 June 2015.
1. Nature of business
The Beige Group primarily operates as a contract and packaging manufacturer, manufacturing and
distributing cosmetics, soaps, laundry soaps, packaging, pharmaceutical and nutraceutical and
allied products on behalf of brand owners for both the local and international home and personal
care industry. The Group is the largest fully empowered contract manufacturer in the South African
home and personal care industry.
2. Listing information
Beige is listed on the Alternative Exchange (“AltX”) of the Johannesburg Stock Exchange (“the
JSE”) under the share code: BEG and ISIN number is ZAE 000034161.
3. Basis of preparation
The condensed consolidated interim financial statements for the six months ended 31 December
2015 were prepared in accordance with the requirements of the Johannesburg Stock Exchange’s
Listings Requirements and the requirements of the Companies Act of South Africa. The Listings
Requirements require interim reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and to also, as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The principal accounting policies used in the preparation of the results for the six
months ended 31 December 2015 are consistent with those applied for the year ended 30 June
2015. During the period, the Group adopted all the IFRS and interpretations being effective and
deemed applicable to the Group. None of these had a material impact on the results of the Group.
The results were prepared under the supervision of the Group’s Chief Executive Officer, Mr Raoof
Jagot.
4. Segment reporting
The chief operating decision-makers during the period under review have been identified as the
executive directors being the Executive Chairman and the Financial Director. These decision
makers consider the business from a product perspective for purposes of assessing the
performance of Outsource Manufacturing and Packaging products. The operating segments are
determined based on these reports.
5. Business review
During the period under review, South Africa has fared poorly compared to its peers in the emerging
market sector. Growth has been hampered by the massive fluctuations in the exchange rate,
increase in interest rates, outflow of foreign investments and the ratings downgrade of the country.
The threat of a further downgrade in the country’s investment grading to junk status continues to
create uncertainty in the market as is seen by the lack of foreign direct investment by overseas
investors. All these factors have contributed to a devaluation of the South African Rand versus the
major currencies.
At a company level, Beige has certainly felt the impact of the depressed economy. The contract
manufacturing sector continues to labour under the effects of higher costs of manufacturing, lower
throughput and lack of demand.
Revenue from the Outsourced Manufacturing segment declined by 27.7% compared to that of the
period ended 31 December 2014. This is consequent to a change to a new business model where
revenue now excludes the supply of the bulk of the raw material and packaging material. This has,
however, been offset by an increase in margins.
In light of the weaker exchange rate, the opportunity to attract exports is expected to further enhance
demand. The process of improving operational efficiencies in order to be able to meet this expected
demand is on-going.
Herbal & Homeopathic (“H&H”) continued to produce a positive set of results.
The Packaging operation revenues have declined, despite strategic efforts to turn the business
around. A revised strategic initiative is now in place.
6. Financial and operational overview
With effect from April 2015, the business model for the major part of the business changed from
fully-sourced to a free issue model. The results for the period ended 31 December 2015 incorporate
the financial impact of the free issue model on the Group’s reporting.
The effect of the free issue model has reduced revenue in the Outsourced Manufacturing segment to
R190.3m, but this has been compensated for by an increase in the gross profit margin. Sales in the
Packaging segment continues to be depressed due to low demand. Notwithstanding this, total gross
margins improved by 10.3% compared to December 2014.
The operating profit before impairment in Outsource Manufacturing of R5m showed an improvement
of R20.7m from the previous year due to the impact of the turnaround strategy. The Packaging
segment contributed R7.4m to the Group operating loss before impairment, which was a
deterioration of R2.5m from the previous year. Consequently the operating loss before impairment of
the Group amounted to R4.5m compared to December 2014 of R24m, an improvement of R19.5m.
The net interest expense was R8.6m and included the interest on the finance lease capitalised in
respect of the buildings and recognised the increased borrowings to finance the working capital
requirements of the business.
The 50% investment in the joint venture, U Housing (Pty) Ltd, is accounted for using the equity
accounting method. Under the equity method, the investment in the joint venture is initially
recognised at cost and the carrying amount is either increased or decreased to recognise the
investor’s share of the profit or loss of the investment after the date of acquisition.
7. Prospects
Negotiations for new contracts are on-going, but these are only expected to show an impact in the
next financial year. Further opportunities are being explored to manufacture a broader range of
products for the South African, other African markets and certain European markets, with a specific
focus on supplying goods on a larger scale to the African markets.
8. Turnaround Strategy
The turnaround strategy previously reported on has been implemented over the past year. Whilst
the initial impact has been seen in the period under review, further improvements are being
evaluated.
Report Back on Key Strategic Improvement Initiatives:
- Recapitalisation of the current business
The business has received further funding of R60m from its holding company during
the period under review.
- Inculcate a customer centric culture
The process of free-issue has been successfully implemented and further initiatives
are being investigated. This has yielded positive results with customers and
continues to be a focus area.
- Reassess non-performing, non-core assets and/or products
Whilst various key initiatives have been assessed they have been more time
consuming than anticipated and accordingly not finalised. This continues to be a
key focus area for management.
- Build turnover utilising current capability
Negotiations for new contracts with existing clients are at an advanced stage.
- Consolidation of product manufacture to drive efficiencies
A final proposal to consolidate product manufacture should be concluded before
financial year-end.
- Centralise key services
This has been concluded.
- Implement management and leadership interventions
A new CEO was appointed with effect from 6 January 2016.
9. Contingent liabilities
The Company has a joint and severally continuing suretyship limited to R79m relating to the Durban
and Alrode property owned by U-Housing (Pty) Ltd.
10. Going Concern
The Lion Match Company (Pty) Ltd (“Lion Match”) has provided funding of R81.7m, which will only
be payable on 1 July 2018.
Taking into account the above funding, the directors have reviewed the group and company’s
budget and cash flow forecast and, whilst the group and company’s financial position is
challenging, have satisfied themselves that by successfully implementing the strategies set out
below, the group and the company will have access to sufficient funding to enable them to meet
their foreseeable cash requirements.
The strategies on which the directors have already embarked on include the following:
- The potential disposal of certain non-core assets;
- The proposed consolidation of manufacturing plants to drive efficiencies.
On the basis of this review, the directors consider it appropriate to adopt the going concern basis in
preparing the group and company’s interim financial statements.
11. Changes to the board
During the period under review and to the date of this announcement:
- Mr RA Jagot was appointed as Group Chief Executive Officer on 6 January 2016.
- Mr MA Sultan was appointed as an independent non-executive director and member of the
Audit Committee with effect from 4 December 2015.
- Mr J van Wyk was appointed as a non-executive director with effect from 26 October 2015.
- Mr AH Trikamjee stepped down as lead independent non-executive director with effect from 31
December 2015 and Mr MA Sultan was appointed as lead independent non-executive director
with effect from 1 January 2016.
- Mr J Bridgmohan resigned as Group Financial Director with effect from 8 February 2016.
- Mr NMI Abdoola stepped down as Acting CEO with effect from 6 January 2016.
By order of the Board
NMI (Gora) Abdoola Raoof Jagot
Executive Chairman Group Chief Executive Officer
31 March 2016
Johannesburg
Company Secretary: Arbor Capital Company Secretarial (Pty) Ltd (Registration number
1998/025284/07)
Registered Office: 20 Mahatma Gandhi Road, Point, Durban, 4001
Directors:
NMI (Gora) Abdoola (Executive Chairman), AH Trikamjee (Deputy Chairman) (#*), RA Jagot (CEO), A
Heeralal(#), AMI Abdoola (#), PW Jooste (#), AGS Osman (#*), J van Wyk(#), MA Sultan (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: 31/03/2016 05:26:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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