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LABAT AFRICA LIMITED - Reviewed Provisional Condensed Consolidated Results for the year ended 31 August 2017 & Renewal of Cautionary

Release Date: 12/12/2017 17:46
Code(s): LAB     PDF:  
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Reviewed Provisional Condensed Consolidated Results for the year ended 31 August 2017 & Renewal of Cautionary

LABAT AFRICA LIMITED
Incorporated in the Republic of South Africa
(Registration number 1986/001616/06)
JSE code: LAB ISIN: ZAE000018354
(“Labat” or “the Group”)


REVIEWED PROVISIONAL CONDENSED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED
31 AUGUST 2017 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                         31 August 2017    31 August 2016
                                                                                  R’000             R’000
                                                                               Reviewed           Audited
Revenue                                                                          52 011            14 312
Cost of sales                                                                   (40 617)           (6 728)
Gross profit                                                                     11 394             7 584
Other income                                                                      1 026             5 085
Operating expenses                                                              (14 310)          (12 414)
Operating (loss)/profit                                                          (1 890)              255
Investment revenue                                                                6 474               171
Finance costs                                                                      (435)              (59)
Profit before taxation                                                            4 149               367
Taxation                                                                            493             8 030
Profit for the year                                                               4 642             8 397
Other comprehensive income for the year net of
                                                                                      -               343
taxation
Total comprehensive income for the year                                           4 642             8 740

Attributable to:
Owners of the parent:
Profit for the year                                                               4 642             8 397
Total comprehensive income for the year                                           4 642             8 740

Per share information:
Basic and diluted earnings per share (cents)                                       1,81              3,28
Weighted average shares in issue (net of treasury
shares) (‘000)                                                                  256 140           255 992

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                         31 August 2017    31 August 2016
                                                                               Reviewed           Audited
                                                                                  R’000             R’000
ASSETS
Non-current assets
Property, plant and equipment                                                     1 867            1 176
Intangible assets                                                                 1 422                -
Deferred tax                                                                      8 389            7 896
                                                                                 11 678            9 072
Current assets
Inventories                                                                       2 587            3 142
Loans to shareholders                                                                 -              145
Other financial assets                                                              715               10
Trade and other receivables                                                      18 577            1 882
South African Revenue Services                                                    3 070                -
Cash and cash equivalents                                                         9 226            9 280
                                                                                 34 175           14 459
Total assets                                                                     45 853           23 531

EQUITY AND LIABILITIES
Equity
Share capital                                                                     2 620            2 592
Share premium                                                                    57 745           56 795
Treasury shares                                                                   (481)            (481)
Reserves                                                                           300              343
Accumulated loss                                                               (47 938)         (52 623)
                                                                                12 246            6 626
Non-current liabilities
Finance lease liabilities                                                          716                -

Current liabilities
Loans from directors and shareholders                                              399              284
Finance lease liabilities                                                          174                -
South African Revenue Services                                                     361            4 180
Trade and other payables                                                        22 764            3 517
Provisions                                                                       9 193            8 924
                                                                                32 891           16 905
Total Liabilities                                                               33 606           16 905
Total equity and Liabilities                                                    45 853           23 531

Number of ordinary shares in issue (net of treasury shares) (‘000)             258 879          255 992
Net asset value per share (cents)                                                 4,73             2,59
Net tangible asset value per share (cents)                                        4.18             2.59

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                        31 August 2017      31 August 2016
                                                                              Reviewed             Audited
                                                                                 R’000               R’000
 Cash flows from operating activities
                                                                                 2 090              (3 907)
 Cash generated from/(utilised in) operations
                                                                                    46                 171
 Investment revenue
                                                                                  (183)                (59)
 Finance costs
 Net cash generated from/ (utilised in) operating activities
                                                                                  1 953             (3 795)
 Cash flows from investing activities
 Purchase of property, plant and equipment
                                                                                    (53)              (669)
 Increase in development costs capitalised
                                                                                 (1 422)                 -
 Increase in other financial assets
                                                                                   (700)                 -
 Proceeds from loans to directors and shareholders
                                                                                     85                  -
 Net cash utilised in investing activities
                                                                                ( 2 090)              (669)
 Cash flows from financing activities
 Proceeds from share issue
                                                                                    505
 Repayment of South African Revenue Services liability
                                                                                      -             (2 612)
 Increase in loans from directors and shareholders
                                                                                      -              2 167
 Repayment of loans from directors and shareholders
                                                                                   (251)                 -
 Finance lease payments
                                                                                   (171)                 -
 Net cash generated from/(utilised in) financing activities
                                                                                     83               (445)
 Total net cash movement for the year
                                                                                    (54)            (4 909)
 Cash and cash equivalents at the beginning of the year
                                                                                   9 280            14 189
 Cash and cash equivalents at the end of the year
                                                                                   9 226             9 280


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                 Non
                                                                Total   distributable
                                    Share       Share           share        reserves/     Accumulated          Total
                                   capital     premium        capital    revaluations             loss         equity
                                     R'000       R'000          R'000           R'000            R'000          R'000
  Balance 31 August 2015
- Audited                            2 111      56 795         58 906               -          (61 019)        (2 113)
  Profit for the year                    -           -              -               -            8 396          8 396
  Gains on plant and
  machinery revaluation                  -           -              -             343                -            343
  Balance 31 August 2016 –
  Audited                            2 111      56 795         58 906             343          (52 623)         6 626
  Profit for the year                    -           -              -               -            4 642          4 642
  Total comprehensive income
  for the year                           -           -              -                            4 642          4 642
  Issue of shares                       28         950            978               -                -            978
  Transfer of revaluation
  reserve through use                    -           -              -             (43)              43              -
  Total contributions by and
  distributions to owners of the
  company recognised
  directly in equity                    28         950            978             (43)              43            978
  Balance at 31 August 2017-
  Reviewed                           2 139      57 745         59 884              300         (47 938)        12 246

SEGMENT INFORMATION
                                                             31 August 2017   31 August 2016
                                                                   Reviewed          Audited
                                                                      R’000            R’000
Technology
External sales                                                        9 617           13 619
Inter segmental revenue                                                   -                -
Bulk logistics
External sales                                                       42 394                -
Inter segmental revenue                                                   -                -
Head office
External sales                                                            -              693
Inter segmental revenue                                                 200              250
Elimination adjustments
                                                                       (200)            (250)
Inter segmental revenue
Total revenue as per statement of comprehensive income               52 011           14 312
Profit/(Loss) for the year before disclosable items
Technology                                                            2 289            6 339
Bulk logistics                                                        4 104                -
Head office                                                          (7 951)          (6 132)
Investment income
Technology                                                            6 469              171
Bulk logistics                                                            -                -
Head office                                                               5            7 874
Finance costs
Technology                                                                -                -
Bulk logistics                                                            -                -
Head office                                                            (435)             (59)
Depreciation and amortisation
Technology                                                             (201)             (56)
Bulk logistics                                                            -                -
Head office                                                            (131)              (5)
Taxation
Technology                                                              493             8 030
Bulk logistics                                                            -                 -
Head office                                                               -                 -
Other comprehensive income
Technology                                                                -               343
Bulk logistics                                                            -                 -
Head office                                                               -                 -
Elimination adjustments                                                   -            (7 765)
Profit/(Loss) for the year and other comprehensive income
Technology                                                            9 050            14 935
Bulk logistics                                                        4 104                 -
Head office                                                          (8 512)           (6 195)
Total for the year as per statement of comprehensive income           4 642             8 740

Segment assets
Technology                                                           23 835            22 263
Bulk logistics                                                       16 566                 -
Head office                                                           6 826             2 173
Elimination adjustments                                             (1 374)              (905)
Total assets as per statement of financial position                 45 853             23 531
Segment liabilities
Technology                                                         (33 386)           (41 728)
Bulk logistics                                                     (21 471)                 -
Head office                                                        (10 987)           (11 829)
Elimination adjustments                                              32 237            36 652
Total liabilities as per statement of financial position           (33 607)           (16 905)

COMMENTARY

BASIS OF PREPARATION

Statement of compliance
These reviewed condensed consolidated financial results are prepared in accordance with the framework
concepts and the recognition and measurement criteria of International Financial Reporting Standards (IFRS),
its interpretations adopted by the International Accounting Standards Board (IASB), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as
issued by Financial Reporting Standards Council (FRSC), IAS 34: Interim Financial Reporting, the Listings
Requirements of the JSE Limited and the requirements of the Companies Act of South Africa (Act 71 of 2008),
as amended.

The reviewed condensed consolidated financial results are prepared in accordance with the going concern
principle under the historical cost basis as modified by the fair value accounting of certain assets and liabilities
where required or permitted by IFRS.

These condensed consolidated financial results incorporate the financial results of the company and its
subsidiaries. Results of subsidiaries are included from the effective date of acquisition. All significant
transactions and balances between group enterprises are eliminated on consolidation.

All financial information presented in South African Rand has been rounded to the nearest thousand. These
condensed consolidated financial statements have been prepared using accounting policies that comply
with IFRS. The accounting policies used are consistent with those used in the audited annual consolidated
financial statements for the year ended 31 August 2016.

The preparation of the condensed consolidated financial results for the year ended 31 August 2017 was
supervised by the Financial Director, Mr. D.J.O’ Neill (CA(SA)).

The directors take full responsibility for the preparation of the condensed consolidated financial results for the
year ended 31 August 2017.

Review Conclusion
These condensed consolidated financial results for the year ended 31 August 2017, have been reviewed by
our auditors Nexia SAB&T, who expressed an unmodified review conclusion. A copy of the auditor’s review
report is available for inspection at the Company’s registered office.

Results
The directors of Labat (“Board”) are pleased to announce a profit of R4, 642m for the year ended 31 August
2017.

Revenue increased substantially to R52.0m for the year ended 31 August 2017 from R14, 3m in the year ended
31st August 2016. This substantial increase is primarily due to revenue generated in the logistics business, which
was only started in August 2016. This is a major achievement for a start-up business and revenue generation
has continued to grow in the subsequent quarter. The Company has won some attractive new logistics
contracts. Cost of sales similarly increased in relation to the logistics business. Gross profit increased to R11.4m
from R7.5m. Whilst the gross margin percentage from the logistics segment is lower than that of the SAMES
electronic chip business, the growth in the logistics business has been exponential.

Other income has dropped to R1m for the year under review from R5.0m in the prior year. In the prior year
R3.2m of the R5.0m related to VAT liabilities that were waived. Operating expenses were relatively well
contained with an increase to R14.3m from R12.4m from the prior year, despite substantial start- up costs,
which had to be absorbed for the logistics business. The group made a small operating loss of R1.9m for the
year compared to the a small operating profit in the prior year, primarily due to Other Income being R4m
higher in the prior year.

The Company realised R6.5m (2016: R171k) of investment revenue in the current year, which arose from
interest receivable from overdue SARS receivables. Finance costs of R493k were higher during the year under
review due to invoicing facilities taken out during the year to assist with the rapid growth of the logistics
business.

Profit before taxation of R4.1m was achieved for the year ended 31 August 2017 against the prior year of
R367k, whilst the taxation credit in the prior year was substantially higher due to the raising of a deferred
taxation asset on a portion of the assessed losses in SAMES. This resulted in profit after taxation of R4.6m in the
current year compared to R8.4m in the prior year.

During the current year, intangible assets of R1.4m arose from the capitalisation of development costs of
energy measurement devices by SAMES. Trade and other receivables showed a substantial increase to
R18.6m from R1.9m due to the commencement of the logistics business. Trade and other payables showed
a similar quantum growth to R22.8m from R3.5m. Amounts receivable from SARS of R3.1m arose mainly as a
result of interest receivable on overdue SARS receivables.

The improved performance of the group has also led to the net asset value of the group increasing by 82%
to 4.73 cents per share.

Going Concern
The Board is of the opinion that, having regard to the current status and the future strategy of the Group, the
Group has sufficient resources to continue as a going concern. The Group is projecting positive cash flows for
the year ahead from its existing and new business.

South African Micro-Electronic Systems Proprietary Limited (“SAMES”)
SAMES continues to trade profitably. Development of new products is ongoing and management are
confident that its 10-year plan will yield positive growth for the Group. In addition, SAMES has embarked on its
next development phase which entails the recruitment of highly skilled development engineers and support
staff to support the Group’s growth strategy.

Prospects
Prospects for the year ahead are excellent. With the exponential growth of the newly established logistics
business, the Board is of the view that the Group is well-positioned to explore greater opportunities and use
current resources to broadly diversify the Group’s logistics strategy, which includes a seamless franchising
model.

Litigation
The Group has various claims and counter claims made by and against Labat which have risen in the normal
course of business as previously disclosed. One of these, a claim by GEM Global Yield Fund LLC SCS was
dismissed and costs were awarded to Labat. These matters are being dealt with by the Company’s attorneys.
No material changes to litigation have occurred since the previous year.

Post Balance Sheet events
Labat has acquired a 55% shareholding in Labat Kufika Logistics a new logistics business with effect from
1 September 2017. This is a venture with two brothers Adriaan and Pieter Aucamp who have many years of
experience in the logistics industry. The Board is confident that this venture will further contribute to the
Group’s growth in the logistics industry. We have just agreed a R40 million factoring facility with Transaction
Capital to support the growth of the expanded logistics business.

Changes to Property, Plant and Equipment
The Group purchased property, plant and equipment to the value of R1m. There were no disposals during the
year.

Financial instruments
Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the
fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:

-     Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
      entity can access at the measurement date;
-     Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the
      asset or liability, either directly or indirectly; and
-     Level 3 inputs are unobservable inputs for the asset or liability.

The following non-financial assets were recognised at fair value:

                                                                                 2017                       2016
 Plant and equipment
 Opening balance                                                                  876                          9
 Addition                                                                           -                        418
 Fair value adjustment                                                              -                        476
 Depreciation                                                                    (117)                       (27)
 Fair value closing balance                                                       759                        876
 Fair value hierarchy                                                         Level 3                    Level 3
 Valuation technique                                             Discounted cash flow       Discounted cash flow

Financial risk management and fair value
There has been no material change in the Group's financial risk management objectives and policies
compared to those disclosed in the condensed consolidated financial results for the year ended 31 August
2016.

The Group does not currently carry any assets or liabilities at fair value which required any disclosure on its fair
value measurement, other than those disclosed above. The carrying value of the Group’s financial
instruments however approximates their fair values.

Headline earnings and share information
                                                                                 31 August 2017     31 August 2016
                                                                                          R’000              R’000
                                                                                       Reviewed            Audited
Headline earnings reconciliation:
Profit attributable to shareholders of the group                                          4 642              8 397
Profit on sale of fixed assets                                                               (3)                 -
Headline earnings attributable to shareholders of the
group                                                                                     4 639              8 397

Earnings and diluted earnings per share:                                                  cents              cents
Basic and diluted earnings per share (cents)                                               1,81               3,28

Headline earnings and diluted headline earnings per
share
Headline and diluted headline earnings per share
                                                                                           1,81               3,28
(cents)

Share information                                                                         (’000)             (’000)
Weighted average shares in issue                                                        256 140            255 992
Shares in issue at year end                                                             262 089            259 202

It should be noted that the prior year reviewed results reflected earnings and headline earnings of 0.14 cents
per share. This was correctly reflected at 3.28 cents per share in the published audited results, incorporated
in the Annual Report.

Share Capital
During the year under review, the Company issued 2,886,625 under its general authority to issue shares which
authority was approved by shareholders at the Company last annual general meeting held during May 2017.
There were no share repurchases effected.

Acquisitions
Other than the acquisition of the 55% stake in Kufika Transport, effective 1 September 2017, there were no
other acquisitions concluded by the Company during the year under review.

Related party transactions and balances
The Group entered into transactions with related parties which were in the ordinary course of business, and
on an arm’s length basis, and which were consistent with the previous year and are not considered to be
material to an understanding of these results.

Changes to the Board
As announced on 2 May 2017, the re-election of Mr B Jacobs as a director and appointment as an Audit and
Risk Committee member was not approved. Mr D Asmal also resigned as an independent non-executive
director of the Company with effect from 24 May 2017 but remains available to assist the Company with
various mandates.

On 30 May 2017, Mr Rustum Mohamed was appointed as an independent non-executive director of the
Company. Subsequent to the year-end, Ms Beverley Penny was appointed as an independent non-
executive director of the Company effective from 30 November 2017.

Dividends
No dividend has been declared for the period under review (August 2016: Rnil).

Forward looking statements
This report may contain certain forward?looking statements concerning Labat’s operations, economic
performance and financial condition, plans and expectations. Such views involve both known and unknown
risks, assumptions, uncertainties and other important factors that could materially influence the actual
performance of the group. No assurance can be given that these will prove to be correct and no
representation or warranty expressed or implied is given as to the accuracy or completeness of such views or
as to any of the other information in this report.

Renewal of cautionary announcement
Shareholders are referred to the cautionary announcement issued on 8 August 2017, last renewed on
3 November 2017, and are advised that the Company is still in discussions relating to various acquisitions,
which, if successfully concluded, may have a material effect on the price of the Company’s securities.

Accordingly, shareholders are advised to continue exercising caution when dealing in the Company’s
securities until a full announcement is made.

For and on behalf of the board.

B G VAN ROOYEN                                                                                 D O’NEILL
CHIEF EXECUTIVE OFFICER                                                               FINANCIAL DIRECTOR

Johannesburg
12 December 2017

Directors:
B. van Rooyen*, D.J O’Neill*, R. Majiedt^, R. Rustum^, B. Penny^
Executive*, Independent non-executive^

Company Secretary: Arbor Capital Company Secretarial Proprietary Limited

Registered Address: 23 Kroton Avenue, Weltevreden Park, 1709

Sponsor: Arbor Capital Sponsors Proprietary Limited

Transfer Secretary: Computershare Investor Services Proprietary Limited

Date: 12/12/2017 05:46:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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