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Reviewed condensed provisional consolidated financial results for the year ended 29 February 2016
StratCorp Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2000/031842/06)
JSE code: STA ISIN ZAE 000034294
(“StratCorp” or “the company” or “the group”)
REVIEWED CONDENSED PROVISIONAL CONSOLIDATED FINANCIAL RESULTS FOR THE
YEAR ENDED 29 FEBRUARY 2016
CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION
2015
2016
Re-presented
Reviewed
Figures in R’000
Assets
Non-Current Assets
Investment property 7,237 7,237
Property, plant and equipment 1,759 2,218
Goodwill 1,318 1,318
Intangible assets 783 977
Other financial assets 353 2,066
Deferred tax 6,227 6,851
17,677 20,666
Current Assets
Inventories 1,242 523
Other financial assets 22 25
Current tax receivable 9 10
Finance lease receivables 10 36
Trade and other receivables 1,207 545
Cash and cash equivalents 239 155
2,728 1,275
Total Assets 20,405 21,961
Equity and Liabilities
Equity
Share capital 46,691 44,961
Reserves 265 1,680
Accumulated loss (54,894) (50,003)
(7,938) (3,362)
Liabilities
Non-Current Liabilities
Other financial liabilities 8,542 8,542
Finance lease obligation - 12
Operating lease liabilities 44 63
Deferred tax 709 1,194
9,295 9,811
Current Liabilities
Other financial liabilities 4,410 3,155
Finance lease obligation 11 64
Trade and other payables 11,710 8,999
Bank overdraft 2,917 3,293
19,048 15,507
Total Liabilities 28,343 25,322
Total Equity and Liabilities 20,405 21,961
CONSOLIDATED GROUP STATEMENT OF COMPREHENSIVE INCOME
2015
2016
Figures in R’000 Re-
Reviewed
presented
Revenue 17,248 24,485
Cost of sales (4,077) (4,180)
Gross profit 13,171 20,305
Other income 125 107
Impairment of tangible assets - (120)
Other operating expenses (16,078) (28,116)
Operating loss (2,782) (7,846)
Investment revenue 36 65
Finance costs (1,647) (1,832)
Loss before taxation (4,393) (9,613)
Taxation (498) 1,114
Loss for the year (4,891) (8,499)
Other comprehensive income:
Fair value adjustments on assets at
fair value through other
comprehensive income (1,735) 636
Exchange differences on translating
foreign operations -
Taxation related to components of
other comprehensive income 320 (385)
Total other comprehensive income for
the year (1,415) 250
Total comprehensive loss (6,306) (8,248)
Attributable to:
Owners of the parent:
Loss for the year attributable to
owners of the parent (4,891) (8,499)
Total comprehensive loss
attributable to:
Owners of the parent (6,306) (8,248)
Loss per share
Basic and diluted Loss per share (c) (1.57) (4.61)
CONSOLIDATED GROUP STATEMENT OF CHANGES IN EQUITY
Share Accumulated Total
FVA
Figures in R’000 capital loss equity
Balance at 1 March 2014 44,961 1,430 (41,504) 4,887
Changes in equity
Total comprehensive
income /(loss) for the - 250 (8,499) (8,249)
year
Total changes - 250 (8,499) (8,249)
Balance at 28 February
44,961 1,680 (50,003) (3,362)
2015
Changes in equity
Total comprehensive
income /(loss) for the - (1,415) (4,891) (6,306)
year
Total changes - (1,415) (4,891) (6,306)
Issue of share capital 1,730 - - 1,730
Balance at 29 February
46,691 265 (54,894) (7,938)
2016
FVA - Fair value adjustments through other comprehensive income reserve
CONSOLIDATED GROUP STATEMENT OF CASH FLOWS
2015
2016
Figures in R’000 Re-
Reviewed
presented
Cash flows from operating activities
Cash receipts from customers 16,666 27,100
Cash paid to suppliers and employees (17,535) (23,573)
Cash generated from operations (868) 3,527
Interest income 36 65
Tax paid - (3)
Cash generated from operating
(833) 3,591
activities
Cash flows from investing activities
Purchase of property, plant and
equipment - To maintain operating
capacity - (286)
Proceeds on disposal of property, plant
and equipment 5 128
Expenditure on product development - (33)
Cash utilised in from investing
activities 5 (191)
Cash flows from financing activities
Proceeds on share issue 1,730 -
Proceeds from other financial
liabilities 1,255 914
Finance lease liability payments (65) (270)
Finance costs (1,646) (1,832)
Cash generated from /(utilised in)
financing activities 1,273 (1,188)
Total cash movement for the year 445 2,211
Cash at the beginning of the year (3,156) (5,368)
Total cash at end of the year (2,711) (3,156)
HEADLINE AND DILUTED HEADLINE LOSS PER SHARE
Headline loss per share and diluted headline loss per share is
determined by dividing headline loss and diluted headline loss by the
weighted average number of ordinary shares outstanding during a period.
The group followed SAICA Circular 2/2015 in calculating headline loss
and diluted headline loss per share for the group and company.
Headline loss and diluted headline loss are determined by adjusting
basic loss and diluted loss by excluding separately identifiable
re-measurement items. Headline loss and diluted headline loss are
presented after tax and non-controlling interest.
Diluted headline loss per share are equal to headline loss per share
because there are no potential dilutive ordinary shares in issue.
Headline loss per share was based on a headline loss of the group of
(R4,895,820) (2015: (R3,265,483)) and a weighted average number of
ordinary shares of 313,001,809 (2015: 184,193,950).
Headline and diluted headline (loss)/earnings
per share (c) (1.56) (1.77)
Reconciliation between earnings and headline
earnings R’000
Basic (loss)/ profit (4,891) (8,499)
Adjusted for:
After tax reversal of impairment recognized on
the measurement to fair value on properties - 5,160
(Profit) on disposal of property plant and
equipment (5) (38)
Impairment loss on property plant and equipment - 120
Impairment loss on Intangibles - -
Reclassification of foreign exchange translation
reserve - 15
Tax effect thereon - (23)
Headline (loss)/earnings (4,896) (3,265)
Condensed Segmental Analysis
Reviewed Re-presented
2016 2015
R’000 R’000
Revenue
Financial products 12,845 19,447
Health & Wellness products 4,444 4,931
General finance 25 106
Corporate services & other 2,888 6,887
Inter segment eliminations (2,955) (6,887)
17,248 24,485
Profit/(Loss)
Financial products 1,462 (3,217)
Health & Wellness products (269) (2,091)
General finance - 18
Corporate services & other (5,232) (4,523)
Inter segment eliminations (861) 1,315
(4,891) (8,499)
Other items included in consolidated
results
Depreciation 460 650
Amortisation 194 596
Impairment of property, plant and
- 120
equipment
Impairment of intangible assets - -
Segment assets
Financial products 8,409 7,753
Health & Wellness products 1,303 489
General finance 50 91
Corporate services & other 2,744 3,392
12,506 11,727
Reconciling items
Unlisted investments 353 2,066
Deferred tax 6,228 6,850
Goodwill 1,318 1,318
20,405 21,961
Segment liabilities
Financial products 8,026 7,171
Health & Wellness products 1,843 1,097
General finance - 2
Corporate services & other 4,814 4,163
14,683 12,432
Reconciling items
Deferred tax 709 1,194
Interest bearing liabilities 12,951 11,696
28,343 25,323
BUSINESS OVERVIEW
StratCorp is an investment holding company that owns and invests in
companies with high growth potential. Its focus is on providing its
subsidiaries with infrastructural support and management services, which
include centralised information technology systems and support, legal and
human resource administration and support, and finance support and funding
facilities. StratCorp also provides its subsidiary companies with a
central client base that has been built up over the past 15 years.
There were a number of factors that negatively affected the performance
of the group in the last financial year:
a. Decline in client bases - The Financial Products’ division
experienced a net decline in the client base over the last year,
mainly as a result of the direct and indirect actions taken by
Selective Empowerment Investments 1 Limited (“SEI1”) and Selective
Empowerment Investments 2 Limited (“SEI2”) (collectively referred to
as the “SEI Companies”) referred to in (b) below;
b. Legal and other actions against the group - Legal proceedings
instituted against various companies in the group during last year
continued in the new year. Most of these cased were instigated by the
SEI Companies and their directors. (The details are listed under the
“LITIGATION AND ACTIONS” section below);
c. Repayment of overdraft facilities - The group reduced its overdraft
facilities from R0.8 million in February 2015 to R0.5 million in
February 2016. The net effect of this was that the group had limited
resources available to invest in generating revenue.
The net result of the above was that revenue from continuing operations
decreased from R 24.5 million in 2015 to R 17.2 million in 2016. The group
recorded a net loss of R 4.9 million in 2016 from continuing and
discontinuing operations compared to a loss of R 8.5 million in 2015.
CASH FLOWS
A positive cash movement of R 0.4 million was recorded for 2016, compared
to R 2.2 million for 2015. Cash generated from operations decreased from
R 3.5 million in 2015 to a negative outflow of R 0.8 million in 2016 due
to a decrease in the client bases in some segments of the group.
Cash flow is managed tightly, and unnecessary expenses have been eliminated
to improve efficiencies within the group.
STRATEGY
The main focus of the board over the past year was to ensure that costs
were kept under control. As a result of continuous decline in the client
bases of I-Cura, Virtus and WealthNet (Pty) Ltd (“WealthNet”) in the
previous years, the board added a range of insurance related products to
the Virtus product range. The latter was launched in February 2015. It
initially heeled immediate positive effects but was not enough to make up
for the loss in income due to the negative effect of the actions of the
SEI companies. The business model of I-Cura was revised and implemented
during March 2015 and the company is currently sourcing other products in
the beauty segment of the market to expand its offering to a wider target
market.
Consumer affordability remains the major contributor towards the revenue
of the group, and management continues with its efforts to produce and
deliver affordable value for money products and services to its customers
that meet their needs.
During the next year, efforts will be concentrated on increasing the
Revenue streams in the operating subsidiaries with new products and
streamlining changes in the business models.
GOING CONCERN
The reviewed condensed provisional consolidated financial results 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 that the realisation of assets and settlement of
liabilities, contingent obligations and commitments will occur in the
ordinary course of business. The directors constantly review the business
models of the group and its operating subsidiaries to ensure sustainability
and the ability to operate profitably and generate positive cash flows.
Funding facilities are also reviewed regularly to ensure that the group
has sufficient facilities in place to finance its operations.
The group incurred a net loss of R 4.9 million for the year ended 29
February 2016, compared to a net loss of R 8.5 million for 2015.
The liabilities of the group exceed its assets as at 28 February 2016, due
to inter alia, the nature of the group operations which is mostly cash
based.
Management’s focus is restructuring the group through the elimination of
non-essential costs, to secure an injection of capital into the Company
and the expansion of the revenue channels over the next financial year,
in order to confirm the going concern of the group.
There is however a number of significant risks still threatening the group
in its current form, which results in material uncertainty relating to the
Group’s ability to continue as a going concern. The strained relationship
between the company and the SEI Companies must also be resolved in order
to ensure a continuing mutually beneficial relationship where the company
and the SEI Companies could exist independently in future and the
shareholders of the SEI Companies (which are mostly clients of Virtus) do
not suffer. It is management’s intentions to resolve these issues amicably
and to the benefit of all stakeholders.
The injection of capital is essential for the continued sustainability of
the company and various options are being explored at the moment, including
a rights issue.
STATEMENT OF COMPLIANCE
The reviewed condensed provisional consolidated financial results comprise
a condensed consolidated statement of financial position at 29 February
2016, a condensed consolidated statement of comprehensive income, a
condensed consolidated statement of changes in equity and a condensed
consolidated statement of cash flow for the year ended 29 February 2016
along with key notes thereto. The reviewed condensed provisional
consolidated financial results have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (“IFRS”),its interpretation
adopted by the International Accounting Standards Board (IASB), SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee
and Financial Reporting Pronouncements as issued by Financial Reporting
Standards Council, as a minimum the presentation and disclosure
requirements of IAS34 - Interim Financial reporting, the JSE Listings
Requirements and the Companies Act 71 of 2008 of South Africa. The
financial results have been prepared under the supervision of Jaco Le
Grange, Financial Director of the Group.
The accounting policies applied for the year, which are in terms of IFRS,
are consistent with those of the prior year.
The financial results have been prepared on the historical cost basis,
except in the case of financial instruments which are measured using fair
value and amortised cost models, and investment properties that are
measured at fair value.
The directors take full responsibility for the preparation of the
provisional report and that the financial information has been correctly
extracted from the underlying financial results.
RE-PRESENTATION OF ASSETS AND LIABILITIES OF DISPOSAL GROUPS AND
DISCONTINUED OPERATIONS
Shareholders were advised in the 2012 results announcement that the Board
had taken a decision to discontinue its property development operations,
and to reflect its interests in property as part of the discontinued
operations.
A review on the status of these assets have shown that these assets no
longer meet the requirements of IFRS 5 as such sales are no longer highly
probable.
Management have therefore decided to cease to classify these assets as
held for sale. The results of the 2015 financial year have been re-
presented as required by par 36 of IFRS 5. The total comprehensive income,
earnings per share, headline earnings per share and net asset value for
the 2015 comparative year has remained unchanged.
BANKING FACILITIES
Over the past financial year StratCorp reduced its over draft facility
with Absa Bank from R0.8 million to R0.5 million. This reduction in
facilities is financed mainly from operational cash flow. The Group also
has an overdraft facility under StratCorp Property Holdings of R2,45
million.
OTHER EVENTS
ANNUAL GENERAL MEETING
At the annual general meeting of the company held on 16 October 2015, all
the special and ordinary resolutions were passed by the requisite
majorities of votes of shareholders present.
SPECIFIC ISSUE OF SHARES FOR CASH
The company did a specific issue of shares to Kose-Kose Investments Ltd
of 408 824 944 shares for an aggregate amount of R 2,044,124.72 on 9
November 2015 after obtaining approval through a shareholders vote for
this issue at a general meeting held on 6 November 2015.
LITIGATION AND ACTIONS
As reported in SENS announcements on several occasions, Virtus is being
investigated by the Financial Services Board (“FSB”), which investigation
originated from a complaint received by the FSB in 2007 of the alleged
contravention by Virtus of certain provisions of the Financial Advisory
and Intermediary Services Act (Act no. 37 of 2002). This matter has now
been finalised with the FSB having withdrawn the authorisation of Virtus
to act as an authorised Financial Service Provider(“FSP”) on 26 April
2016. The board have been engaging with the Regulator in this regard and
the Registrar confirmed to the Company that a period of two months would
be sufficient and reasonable for Virtus to inform its clients and product
suppliers of the withdrawal of Virtus’ authorisation to act as an FSP, and
to transfer the outstanding clients and FAIS related business to an
authorised FSP. The company therefore has until 26 June 2016 to meet this
requirement.
As a result of the FSB’s investigation in Virtus, the FSB issued a summons
against Virtus during October 2014 for the recovery of the FSB’s inspection
costs. As the parties have agreed to settle, this case has been removed
from the roll. The board awaits on the outcome of the submissions made in
this regard.
As reported previously, a summons was served by SEI1 on Virtus during 2013
and inter alia two of the previous directors of the Group, claiming payment
of damages in excess of R23 million. The claim arises from an investment
made by SEI1 in 2008 in a company that was liquidated in 2010. Virtus
acted in an advisory capacity SEI1. Virtus and the other defendants are
opposing the matter.
As reported previously, the application by one of the Company’s largest
shareholders, Kose-Kose Investments Limited (“Kose-Kose”) during January
2014 to place the group under supervision and business rescue is still
instituted although no further steps have been taken by Kose-Kose since
it was struck form the urgent roll of the North Gauteng High Court on 28
February 2014, with a cost order awarded in favour of StratCorp.
On 30 October 2014 a preference shareholder of Stratprop (which is also a
director of the SEI Companies) lodged a complaint with the Companies and
Intellectual Properties Commission (“CIPC”) with regards to the procedures
followed by Stratprop regarding the notice to the general shareholders
meeting dated 30 September 2014, which meeting was dismissed by the
Chairman of that meeting on the day. Stratprop received notice of the
complaint on 30 January 2015 and submitted its response to the CIPC on 27
February 2015. Stratprop has not received any further communication in
this regard.
On 10 February 2015, the SEI Companies delivered a motion against Virtus
and StratCorp with regards to a number of issues that relates mainly to
the disclosure, handover and in certain cases the debasement of certain
information. Virtus and StratCorp delivered its answering affidavit to
the SEI Companies’ motion on 23 March 2015 which included, amongst others,
its opposition to providing privileged information to the SEI Companies.
This application is still pending.
On 20 March 2015, the SEI Companies submitted a motion to the CIPC to
inter alia investigate the affairs of Virtus with relation to the sale of
the shares in the SEI Companies and purchasing other investments. Virtus
opposed the motion and submitted its reply to the SEI Companies and to the
CIPC on 21 April 2015 and have not received any further communication in
this regard.
Beside the fact that the legal costs in defending these legal proceedings
have an effect on the cash flows of the group (which amounted to nearly
R700 000 during the financial year), it also takes up valuable time from
the senior management that could have been spent on efforts to increase
revenues. The board intends to finalise these various proceedings during
the course of the next financial year.
Shareholders are advised to continue exercising caution when dealing in
the company’s securities until a further announcement is made in this
regard.
Except for the above, the directors are not aware of any other legal or
arbitration proceedings, pending or threatened against the group, which
may have or have had, in the 12 months preceding the date of this report,
a material effect on the group’s financial position.
REVIEW CONCLUSION
These reviewed condensed provisional consolidated financial results of the
group for the year ended 29 February 2016 have been reviewed by Nexia
SAB&T. The auditors’ review report is available for inspection at the
company’s registered office and contains an emphasis of matter with regard
to the going concern of the Group, as follows:
“Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed provisional consolidated financial results of
StratCorp Limited for the year ended 29 February 2016 are not prepared,
in all material respects, in accordance with the requirements of the JSE
Limited Listings Requirements for provisional reports, as set out in the
compliance paragraph of the condensed provisional consolidated financial
results, and the requirements of the Companies Act of South Africa.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to these condensed
provisional consolidated financial results which indicates that the total
liabilities of the group exceeded its total assets as at 29 February 2016.
The condensed provisional consolidated financial results indicate that
these conditions, along with other matters, indicate the existence of a
material uncertainty which may cast significant doubt on the group’s
ability to continue as a going concern.”
The auditor’s review report does not necessarily report on all of the
information contained in this announcement/financial results. Shareholders
are therefore advised that in order to obtain a full understanding of the
nature of the auditor’s engagement they should obtain a copy of the
auditor’s review report together with the accompanying financial
information from the issuer’s registered office.
The condensed consolidated financial results are extracted from reviewed
information, but are not itself reviewed.
DIVIDENDS
No dividends were declared or paid to shareholders during the year.
CHANGES TO THE BOARD
MM Patel resigned as a director of the company on 29 June 2015.
S Coetzee resigned as a director of the company on 30 June 2015.
SI Kallen resigned as a director of the company on 30 June 2015.
TM Masasa resigned as a director of the company on 1 July 2015.
DB Harington resigned as CEO and director of the company on 13 July
2015.
A Kissoonduth was appointed as interim CEO of the company on 14 July
2015.
K Pillay was appointed as director of the company on 18 September 2015.
RD Botha was appointed as director of the company on 18 September 2015.
MK Ramabulana was appointed as director of the company on 28 September
2015.
JHP Engelbrecht resigned as a director of the company on 30 September
2015.
HJ Le Grange was appointed as the Group Financial director of the
company on 20 November 2015.
A Kissoonduth was appointed CEO of the company on 20 November 2015.
NW Moffat resigned as company secretary on 31 January 2016.
HJ Le Grange was appointed as acting company secretary on 1 February
2016.
On behalf of the board
A Kissoonduth
Chief Executive Officer
31 May 2016
CORPORATE INFORMATION
Non-executive directors: TG Ratau, K Pillay*; RD Botha*, MK
Ramabulana*
*Independent
Executive directors: A Kissoonduth (CEO), HJ Le Grange (GFD)
Registered address: 3rd Floor, Lakeside Building B, Heuwel Avenue,
Centurion, 0157
Postal address: PO Box 12022, Centurion, 0046
Company secretary: HJ Le Grange(Acting)
Telephone: (087) 151 0025
Facsimile: (087) 807 5061
Transfer secretaries: Computershare Investor Services (Pty) Ltd
Auditors: Nexia SAB&T
Designated Adviser: Exchange Sponsors (2008) (Pty) Ltd
Date: 01/06/2016 04:44:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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