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LABAT AFRICA LIMITED - Reviewed Provisional Condensed Consolidated Financial Results for year ended 31 August 2018 Renewal of Cautionary

Release Date: 14/12/2018 16:35
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Reviewed Provisional Condensed Consolidated Financial Results for year ended 31 August 2018 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 2018 AND RENEWAL OF CAUTIONARY ANNOUNCEMENT


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                 31 August 2018       31 August 2017
                                                                           R’000               R’000
                                                                      Reviewed              Audited
Revenue                                                                   73 347              52 011
Cost of sales                                                           (58 963)            (40 617)
Gross profit                                                              14 384              11 394
Other income                                                               6 447               1 026
Operating expenses                                                      (20 808)            (14 310)
Operating profit/(loss)                                                       23             (1 890)
Investment revenue                                                        13 693               6 474
Finance costs                                                            (1 106)               (435)
Profit before taxation                                                    12 610               4 149
Taxation                                                                    (25)                 493
Profit for the year                                                       12 585               4 642
Other comprehensive income for the year                                        -                   -
Total comprehensive income for the year                                   12 585               4 642

Attributable to:
Owners of the parent:
Profit for the year                                                       12 585               4 642
Total comprehensive income for the year                                   12 585               4 642

Per share information:
Basic and diluted earnings per share (cents)                                4,86                1,81
Weighted average shares in issue (net of treasury
shares) (‘000)                                                           258 879             256 140

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                    31 August 2018    31 August 2017
                                                                          Reviewed           Audited
                                                                             R’000             R’000
ASSETS
Non-current assets
Property, plant and equipment                                               13 579             1 867
Intangible assets                                                            3 029             1 422
Deferred tax                                                                 8 364             8 389
                                                                            24 972            11 678
Current assets
Inventories                                                                   3 689            2 587
Other financial assets                                                            -              715
Trade and other receivables                                                  10 445           18 577
South African Revenue Services                                               17 363            3 070
Cash and cash equivalents                                                     6 435            9 226
                                                                             37 932           34 175
Total assets                                                                 62 904           45 853

EQUITY AND LIABILITIES
Equity
Share capital                                                                 2 620            2 620
Share premium                                                                57 745           57 745
Treasury shares                                                               (481)            (481)
Reserves                                                                        257              300
Accumulated loss                                                           (35 310)         (47 938)
                                                                             24 831           12 246
Non-current liabilities
Finance lease liabilities                                                     6 965             716

Current liabilities
Loans from directors and shareholders                                         1 929              399
Finance lease liabilities                                                     4 930              174
South African Revenue Services                                                3 531              361
Trade and other payables                                                      7 944           22 764
Provisions                                                                   12 774            9 193
                                                                             31 108           32 891
Total Liabilities                                                            38 073           33 606
Total equity and Liabilities                                                 62 904           45 853

Number of ordinary shares in issue (net of treasury shares) (‘000)         258 879           258 879
Net asset value per share (cents)                                              9.59             4,73
Net tangible asset value per share (cents)                                     8.42             4.18


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                31 August 2018      31 August 2017
                                                                                      Reviewed             Audited
                                                                                         R’000               R’000
Cash flows (utilised in)/ from operating activities
Cash (utilised in)/ generated from operations                                            (515)               2 090
Investment revenue                                                                           -                  46
Finance costs                                                                            (915)               (183)
Net cash (utilised in)/ generated from operating activities                            (1 430)               1 953

Cash flows from investing activities
Purchase of property, plant and equipment                                                (247)                 (53)
Increase in development costs capitalised                                              (1 607)              (1 422)
Repayment of other financial assets                                                      2 201                    -
Advances of other financial assets                                                     (1 486)                (700)
Proceeds from loans to directors and shareholders                                            -                   85
Net cash utilised in investing activities                                              (1 139)             ( 2 090)

Cash flows (utilised in)/ from financing activities
Proceeds from share issue                                                                    -                 505
Proceeds of loans from directors and shareholders                                        1 470                   -
Repayment of loans from directors and shareholders                                       (378)               (251)
Finance lease payments                                                                 (1 314)               (171)
Net cash (utilised in)/generated from financing activities                               (222)                  83

Total net cash movement for the year                                                   (2 791)                (54)
Cash and cash equivalents at the beginning of the year                                   9 226               9 280
Cash and cash equivalents at the end of the year                                         6 435               9 226


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                Share
                              capital                                      Non
                               (net of                   Total   distributable
                             treasury       Share        share       reserves/     Accumulated          Total
                              shares)     premium      capital    revaluations            loss         equity
                                 R'000      R'000        R'000           R'000           R'000          R'000
 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              -
 Balance at 31 August 2017-
 Audited                        2 139      57 745       59 884             300        (47 938)         12 246
 Profit for the year                 -          -            -               -          12 585         12 585
 Total comprehensive income
 for the year                        -          -            -               -          12 585         12 585
 Transfer of revaluation
 reserve through use                 -          -            -            (43)              43              -
 Balance at 31 August 2018 -
 Reviewed                       2 139      57 745       59 884             257        (35 310)         24 831


SEGMENT INFORMATION

                                                            31 August 2018 31 August 2017
                                                                  Reviewed        Audited
                                                                     R’000          R’000
Revenue
Technology – External                                               12 834          9 617
Bulk logistics – External                                           60 513         42 394
Head office – Inter segmental                                        3 000            200
Elimination adjustments                                            (3 000)          (200)
Total revenue as per statement of profit and loss                  73 347          52 011

Profit/(Loss) for the year before disclosable items
Technology                                                           1 898           2 289
Bulk logistics                                                       4 707           4 104
Head office                                                        (5 726)         (7 951)

Investment income
Technology                                                          13 693           6 469
Bulk logistics                                                           -               -
Head office                                                              -               5

Finance costs                                                                            -
Technology                                                             (1)               -
Bulk logistics                                                       (475)               -
Head office                                                          (630)           (435)

Depreciation and amortisation
Technology                                                           (256)           (201)
Bulk logistics                                                       (431)               -
Head office                                                          (169)           (131)

Taxation
Technology                                                            (25)            493
Bulk logistics                                                           -              -
Head office                                                              -              -

Profit/(Loss) for the year and other comprehensive income
Technology                                                          15 309           9 050
Bulk logistics                                                       3 801           4 104
Head office                                                        (6 525)         (8 512)
Total comprehensive income for the year                            12 585            4 642

Segment assets
Technology                                                          40 567          23 835
Bulk logistics                                                      21 115          16 566
Head office                                                          4 588           6 826
Elimination adjustments                                            (3 366)         (1 374)
Total assets as per statement of financial position                62 904          45 853
Segment liabilities
Technology                                                        (35 672)        (33 386)
Bulk logistics                                                    (16 668)        (21 471)
Head office                                                       (20 174)        (10 987)
Elimination adjustments                                             34 441          32 237
Total liabilities as per statement of financial position          (38 073)        (33 607)

COMMENTARY

BASIS OF PREPARATION

Statement of compliance
The reviewed condensed consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for provisional reports and the requirements of the
Companies Act of South Africa. The Listings Requirements require provisional 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 Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the condensed consolidated financial statements are
in terms of IFRS and are consistent with those applied in the previous consolidated annual financial
statements.

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. All significant transactions and balances between group enterprises are eliminated on
consolidation.

The Group adopted IAS 7 on 1 September 2017 which resulted in enhanced disclosures of the financing
activities section of the statement of cash flows.

All financial information presented in South African Rand has been rounded to the nearest thousand.

The preparation of the condensed consolidated financial results for the year ended 31 August 2018 was
supervised by the Financial Director, Mr Gorden Walters.

The directors take full responsibility for the preparation of the condensed consolidated financial results for
the year ended 31 August 2018.

Review Conclusion
These condensed consolidated financial results for the year ended 31 August 2018, have been reviewed by
our auditors Nexia SAB&T, who expressed an unmodified review conclusion. The Auditor’s Report does not
necessarily report on all of the information contained in this announcement. 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 Report together with the accompanying financial information from the
company’s registered office.

Results
The directors of Labat (“Board”) are pleased to announce a profit of R12.5m for the year ended 31 August
2018.

Revenue increased by 41% to R73.3m for the year ended 31 August 2018 from R52m in the year ended
31 August 2017. This substantial increase is primarily due to revenue generated in the logistics business. The
company has won some attractive new logistics contracts. Net Profit and Cost of Sales similarly increased
proportionately in the logistics business. Gross profit increased by 26% from R11.3m to R14.3m. 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 very satisfactory.

Other income has increased substantially to R6.4m for the year under review from R1.0m in the prior year.
This income primarily relates to transaction fees raised on the Force Fuel (Pty) Ltd acquisition effective from
1 September 2018. Operating expenses were increased to R20.8m from R14.3m from the prior year. This
included substantial start-up costs and provision for executive director’s remuneration. The group made a
negligible operating profit of R23k for the year compared to an operating loss of R1.9m in the previous year.

The Company realised R13.6m (2017: R6.4m) of investment revenue in the current year, which arose from
interest receivable from overdue SARS receivables. Finance costs of R1.1m 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 and interest incurred on the finance leases from the acquisition of 8 trucks and 8 trailers, emanating
from the Labat-Kufika transaction, subsequent to the dissolution thereof.

Profit before taxation of R12.6m was achieved for the year ended 31 August 2018 against the prior year of
R4.1m, A tax charge of R25k resulted in a profit after taxation of R12.5m.

During the current year, intangible assets from the capitalisation of development costs of energy
measurement devices by SAMES rose by R1.6m compared to the R1.4m capitalised in the previous financial
period.

Trade and other receivables showed a substantial decrease to R10.4m from R18.5m due to better cash flow
management and the reduction of 60 day accounts. Trade and other payables showed a similar quantum
reduction to R7.9m from R22.7m. Amounts receivable from SARS of R17.3m arose mainly as a result of interest
receivable on overdue SARS receivables.

The Company acquired 8 trucks and 8 trailers after the dissolving of the Labat-Kufika JV. This resulted in a
total increase in the finance lease liability with R11.0m.

Provisions increased with R3.6m as a result of the increase in executive director emoluments during the year.

The improved performance of the group has also led to the net asset value of the group increasing by 102%
to 9,59 cents per share.

Property, plant and equipment
Property, plant and equipment of the Group increased by R11.7m by means of finance leases taken over
from Labat-Kufika amount to R8.1m for trucks as well R4.1m for trailers, together with depreciation of R0.8m
for the current financial period, There were no disposals during the year other than the scrapping of assets
of a R0 carrying value and that were no longer is use.

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:
                                                                                 2018                      2017
    Plant and equipment
    Opening balance                                                               759                       876
    Transferred                                                                   114                         -
    Additions                                                                       -                         -
    Fair value adjustment                                                           -                         -
    Depreciation                                                                (148)                     (117)
    Fair value closing balance                                                    725                       759
    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
2017.

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.
New IFRS Standards and Interpretations
Standards effective for financial year commencing 1 September 2018:
-        IFRS 15 Revenue from Contracts with Customers
-        IFRS 9 Financial Instruments

Standards effective for reporting periods starting on or after 1 September 2019:
-       IFRS 16 Leases

The Group will adopt the above standards and interpretations when they become effective. The Board is in
the process of assessing the financial impact associated with the adoption of the above standards and
interpretations.

Headline earnings and share information
                                                                             31 August 2018     31 August 2017
                                                                                      R’000              R’000
                                                                                   Reviewed            Audited
Headline earnings reconciliation:
Profit attributable to shareholders of the group                                     12 585              4 642
Profit on sale of fixed assets                                                            -                (3)
Headline earnings attributable to shareholders of the
group                                                                                12 585              4 639

Earnings and diluted earnings per share:                                              cents              cents
Basic and diluted earnings per share (cents)                                           4,86               1,81

Headline earnings and diluted headline earnings per
share
Headline and diluted headline earnings per share
                                                                                       4,86               1,81
(cents)

Share information                                                                    (‘000)             (’000)
Weighted average shares in issue                                                    258 879            256 140
Number of ordinary shares in issue (net of treasury                                 258 879            258 879
shares)
Shares in issue at year end (Including. treasure shares)                            262 089            262 089

Share Capital
During the year under review, the Company did not issue shares under its general authority to issue shares
which authority was approved by shareholders at the Company last annual general meeting held during
May 2018. There were no share repurchases effected.

Dividends
No dividend has been declared for the period under review (August 2017: Rnil).

Acquisitions and Disposals
Other than the acquisition of the 100% stake in Force Fuel (Pty) Ltd, effective 1 September 2018, there were
no other acquisitions concluded by the Company during the year under review. The acquisition of Force
Fuel (Pty) Ltd was fully described in the SENS announcement dated 1 June 2018.

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.

Relationships
Shareholders with significant influence          Link Private Equity Investments (Pty) Ltd
Directors and members of key management          Brian van Rooyen
                                                 David O’Neill
                                                                             31 August         31 August
                                                                                  2018              2017
                                                                                 R’000             R’000
Related party balances                                                        Reviewed           Audited
David O’Neill
Owing (to) by shareholders and directors with significant influence            (1 000)                 -
Link Private Equity Investments (Pty) Ltd
Owing (to) by shareholders and directors with significant influence              (644)             (115)
Director services raised as provision
Provisions from directors                                                     (12 231)           (8 488)

Related party transactions
Link Private Equity Investments (Pty) Ltd
Rent paid to (received from) related parties                                       360               366
Compensation to directors and other key management
Short-term employee benefits                                                     2 604             3 979

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.

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. 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
We have agreed to finalise our Labat-Kufika relationship as follows: Kufika and the Aucamp brothers will take
over the remaining trucks and trailers and release Labat from any sureties outstanding on these vehicles as
a full and final settlement.

We have also acquired Force Fuel (Pty) Ltd as disclosed under the Acquisitions and Disposals section of the
financial results.

The Group entered into guarantee agreements with various third party suppliers of Force Fuel (Pty) Ltd in the
amount of R110 million.

Other than the matters noted above, there have been no further post Balance Sheet events which need to
be reported on.

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. In addition, the acquisition of Force Fuel (Pty) Ltd, a large fuel distribution business, has given Labat
the scale it requires for its growth strategy giving access to a diversified range of customers, including many
in the logistics industry.

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.

Changes to the Board
As announced on 30 August 2018, Mr D O’ Neill changed his role from financial director to an executive
director, Mr G. Walters was appointed as financial director and Mr T. Mogapi was appointed as an
executive director of the Company with effect from 30 August 2018.

Renewal of cautionary announcement
Shareholders are referred to the cautionary announcement issued on 8 August 2018, last renewed on
28 November 2018 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                                                                               G WALTERS
CHIEF EXECUTIVE OFFICER                                                             FINANCIAL DIRECTOR

Johannesburg
14 December 2018

Directors:
BG van Rooyen*, DJ O’Neill*, NS Mogapi*, GRI Walters*, RM Majiedt^, R Rustum^, BA 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: 14/12/2018 04:35:00 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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