To view the PDF file, sign up for a MySharenet subscription.

LABAT AFRICA LIMITED - Unaudited Interim Results for the six months ended 28 February 2019 and Renewal of Cautionary Announcement

Release Date: 13/06/2019 16:30
Code(s): LAB     PDF:  
 
Wrap Text
Unaudited Interim Results for the six months ended 28 February 2019 and Renewal of Cautionary Announcement

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


UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019 AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                           6 months            6 months    12 months
                                                              ended               ended        ended
                                                             28-Feb              28-Feb       31-Aug
                                                               2019                2018         2018
                                                          Unaudited           Unaudited      Audited
                                                              R’000               R’000        R’000
Revenue                                                     312 151              55 611       73 347
Cost of sales                                             (284 743)            (42 158)     (58 962)
Gross profit                                                 27 408              13 453       14 384
Other income                                                  (162)                   -        6 447
Operating expenses                                         (26 741)             (8 375)     (20 808)
Operating profit                                                505               5 078           23
Investment revenue                                              561                  25       13 693
Finance costs                                               (5 970)               (376)      (1 106)
(Loss)/Profit before taxation                               (4 904)               4 727       12 610
Taxation                                                      1 373               (289)         (25)
(Loss)/Profit for the period                                (3 531)               4 438       12 585
Other comprehensive income                                        -                   -            -
Total comprehensive (loss)/income
for the period                                              (3 531)               4 438       12 585


Attributable to:
Equity holders of the parent                                (3 531)               4 438       12 585
Non-controlling interest                                          -                   -            -

Total comprehensive (loss)/income
for the period                                              (3 531)               4 438       12 585

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                  28-Feb-19   31-Aug-18     28-Feb-18
                                                  Unaudited     Audited     Unaudited
                                                      R’000       R’000         R’000
ASSETS
Non-current assets
Property, plant and equipment                        26 180      13 579         1 891
Intangible assets                                    40 169       3 029         2 342
Goodwill                                             79 636           -             -
Deferred tax                                          8 020       8 364         8 234
                                                    154 005      24 972        12 471
Current assets
Inventories                                           9 543       3 689         2 725
Other financial assets                                  473           -         2 215
Trade and other receivables                          48 341      10 446        16 090
South African Revenue Services                       32 331      17 363         2 547
Cash and cash equivalents                             6 261       6 435         4 814
                                                     96 949      37 933        28 391
Total assets                                        250 954      62 905        40 862

EQUITY AND LIABILITIES
Equity
Share capital and share premium                      74 095      59 885        59 885
Reserves                                                257         257           270
Accumulated loss                                   (38 841)    (35 310)      (43 501)
Total equity and reserves                            35 511      24 832        16 654
Non-current liabilities
Long Term Liabilities                                     -       6 965         1 197
Other financial liabilities                         101 617           -             -
Deferred Taxation                                     4 420           -           138
                                                    106 037           -         1 335
Current liabilities
Loans from directors and shareholders                 3 771       1 929             -
Finance lease liabilities                                 -       4 930            96
South African Revenue Services                       17 865       3 177             -
Trade and other payables                             66 570       7 944        13 513
Bank overdraft                                        5 843           -             -
Provisions                                           15 357      13 128         9 264
                                                    109 406      31 108        22 873
                           Total Liabilities        215 443      38 073        24 208
Total equity and Liabilities                        250 954      62 905        40 862


Number of ordinary shares in issue (net of
                                                    292 909     258 879       258 879
treasury shares) (‘000)   
Net asset value per share (cents)                     12.12        9.59          6.43
Net tangible asset value per share (cents)          (28.78)        8.42          5.53

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                 6 months     6 months    12 months
                                                    ended        ended        ended
                                                   28-Feb       28-Feb       31-Aug
                                                     2019         2018         2018
                                                Unaudited    Unaudited      Audited
                                                    R’000        R’000        R’000

Cash flows from/(used in) operating
activities:
Cash receipts from customers                      343 501        2 974       81 478
Cash paid to suppliers and
employees                                       (326 918)      (4 947)     (81 993)
Cash generated from/(used in)
operations                                         16 583      (1 973)        (515)
Investment revenue                                     46           25            -
Finance costs                                     (5 970)        (376)        (915)
Taxation paid                                          34            -            -
Net cash from/(used in) operating
activities                                         10 693      (2 324)      (1 429)

Cash flows used in investing
activities:
Purchase of property, plant and
equipment                                           (173)        (241)        (247)
Purchase of intangible assets                       (808)            -      (1 607)
Acquisition of subsidiary, net of cash
acquired                                          (7 308)            -            -
Loans from group companies -
received                                                -      (1 500)            -
Proceeds from disposal of financial
assets                                                  -            -        2 201
                                                                                 -1
Advances of other financial assets                  2 987            -          486
                                                                                
Loans from group companies paid                   (2 467)        (920)            -
Net flow used in investing activities             (7 769)      (2 661)      (1 139)

Net flow (used in)/from financing
activities:
Statutory levies claimed by South
Africa Revenue Services                                 -         (78)            -
Finance lease payments                                  -            -      (1 314)
Repayment of loans                                (8 502)            -            -
Proceeds on shares issue                              410            -            -
Directors and shareholders loans
received                                              531            -        1 470
Directors and shareholders loans
repaid                                            (1 380)          650        (378)
Net flow (used in)/from financing
activities                                        (8 941)          572        (222)
Net increase/(decrease) in cash                   (6 017)      (4 413)      (2 791)
Cash at beginning of period                         6 435        9 226        9 226
Cash at end of period                                 418        4 813        6 435

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                     Share    Total share               Non        Accumulated       Total
                                    capital       capital      Distributable              loss      equity
                                                                   reserves/
                                                                Revaluations
                                      R'000         R'000              R'000             R'000       R'000
Opening balance at
                                      2 111        58 905                343          (52 621)       6 627
1 September 2016
Profit for the period                     -             -                  -             1 006       1 006
Balance at 28 February 2017
                                      2 111        58 905                343          (51 615)       7 633
- Unaudited
Issue of shares                          29           980                  -                 -         980
Profit for the period                     -             -                  -             3 634       3 634
Transfer of revaluation
reserve                                   -             -                 43                43           -
Balance at 31 August 2017 -
Audited                               2 140        59 885                300          (47 938)      12 246
Profit for the period                     -             -                  -             4 438       4 438
Transfer of revaluation
reserve                                   -             -                 30                 -         -30
Balance 28 February 2018 –
Unaudited                             2 140        59 885                270          (43 500)      16 654

Profit for the period                     -             -                  -             8 147       8 147
Transfer of revaluation
reserve                                                                   13                43          30
Balance 31 August 2018 –
Audited                               2 140        59 885                257           -35 310      24 832
Issue of shares                      14 210        14 210                  -                 -      14 210
Loss for the period                       -             -                  -           (3 531)     (3 531)
Balance at 28 February 2019
- Unaudited                          16 350        74 095                257           -38 841      35 511


SEGMENTAL INFORMATION

                                       28-Feb-19  28-Feb-18  31-Aug-18
                                       Unaudited  Unaudited    Audited
                                           R’000      R’000      R’000
Revenue
Technology – External                      7 659      6 439     12 834
Bulk logistics – External                 15 311     49 172     60 513
Wholesale - Fuel                         289 182          -          -
Wholesale - Fuel - Inter segmental         1 610          -          -
Elimination adjustments                  (1 610)          -          -
Head office – Inter segmental                  -          -      3 000
Elimination adjustments                        -          -    (3 000)
Total revenue as per statement of
profit and loss                          312 151     55 611     73 347

Profit/(Loss) for the year before
disclosable items
Technology                                 2 572      1 006      1 898
Bulk logistics                           (2 462)      4 071      4 707
Wholesale - Fuel                         (5 429)          -          -
Head office                                    -          -    (5 726)

Investment income
Technology                                    46         25     13 693
Bulk logistics                                 -          0          -
Wholesale - Fuel                             516          -          -
Head office                                    -          -          -

Finance costs
Technology                                     -          -        (1)
Bulk logistics                             (181)      (376)      (475)
Wholesale - Fuel                         (5 789)          -          -
Head office                                    -          -      (630)

Depreciation and amortisation
Technology                                 (120)      (120)      (256)
Bulk logistics                                 -       (97)      (431)
Wholesale - Fuel                         (2 300)          -          -
Head office                                    -          -      (169)

Taxation
Technology                                   720      (289)       (25)
Bulk logistics                             (689)          -          -
Wholesale - Fuel                           1 342          -
Head office                                    -          -          -

Profit/(Loss) for the year and other
comprehensive income
Technology                                 1 852        742     15 309
Bulk logistics                           (1 773)      3 696      3 801
Wholesale - Fuel                         (3 610)                     -
Head office                                    -          -    (6 525)
Total comprehensive income for the
year                                     (3 531)      4 438     12 585

Segment assets
Technology                                57 562     38 379     40 567
Bulk logistics                            44 660     17 537     21 115
Wholesale - Fuel                         163 059          -
Head office                                    -          -      4 589
Elimination adjustments                 (13 986)   (15 054)    (3 366)
Total assets as per statement of
financial position                       250 954     40 862     62 905

Segment liabilities
Technology                               (19 181)  (16 292)   (35 672)
Bulk logistics                           (25 798)  (21 542)   (16 668)
Wholesale - Fuel                        (180 306)         -          -
Head office                                     -         -   (20 174)
                                                                    
Elimination adjustments                     9 842    13 626     34 441
                                                                 
Total liabilities as per statement of
financial position                      (215 443)  (24 208)   (38 073)

COMMENTARY

Labat Strategy
The Labat group has recently adopted a new strategy to leverage on the current asset base with the view to
grow its current portfolio through acquisitions of adjacent businesses that have a similar strategic fit. It is
expected that the acquisition strategy will derive the following synergies:

   •   Improved performance – accelerated revenue growth and radical reduction in operational costs to
       improve margins and cash flows;
   •   Removing excess capacity from the industry by improving utilisation of the combined resources; and
   •   Improving market access and reach for products and logistics services

Labat currently consists of South African Micro Electronics Systems (Pty) Ltd (“SAMES”), an electronic chip
business, Labat Logistics a division of Labat Africa (“Labat Logistics”) and recently acquired Force Fuel (Pty)
Ltd (“Force Fuel”), which are fuel distribution businesses.

Results
The directors of Labat (“the Board”) are pleased to announce that the Company’s revenue for the six months
ended 28 February 2019 increased by 461% to R312.2 million from R55.6 million reported in the previous
corresponding period, which is primarily due to the Company’s growth in the wholesale fuel industry through
the acquisition of Force Fuel Proprietary Limited (“Force Fuel”).

Gross profit increased by 104% from R13.5 million to R27.4 million. 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. The Gross margin for the fuel business is generally a low margin business but has
been operating well within the industry norm despite the challenges in the fuel industry. The recent on-going
fuel price increases has negatively impacted the margins in both the fuel and logistics industry of late.

Operating expenses
Operating expenses has increased by 219% from R8.4 million to R26.7 million. This is mainly due to the operating
cost in Force Fuel. Additional restructuring and other costs relating to the acquisition were incurred to improve
the operations of Force Fuel, which are considered once off in nature. The fuel business is well geared for
expansion with its current operating capacity and new sales team. Any further increase in revenue will not
require a substantial increase in operating costs.

Operating profit
Operating profit has decreased from R5.0 million to R0.5 million primarily due to the once off operating costs
incurred. The board is confident that the margins will improve again for the next period given the growth in
revenue from all segments and in stabilising the Logistics and Fuel business.

Investment revenue
Investment revenue increased by R0.5m due to better cash management and related services within the
group.

Finance costs
Finance Costs mainly relates to funding within Force Fuel and is set to decrease in the following period given
the projected reduction in commercial loans.

Loss before taxation of R4.9 million was achieved for the six months ended 28 February 2019 against R4.7
million reported for the previous period. A tax credit of R1.7 million resulted in a loss after taxation of R3.2
million.

Trade and other receivables increased to R48.3 million from R10.4 million due to Force Fuel customers of which
the customer profile operates with a 3 day to 30 days payment cycle. Trade and other payables showed a
similar quantum increase to R67 million from R7.9 million due to the guarantee facilities provided to Force Fuel
by Labat.

The performance of the Group has also led to the net asset value of the Group increasing by 41.4% with
property plant and equipment doubling due to the two acquisitions. Intangible assets and goodwill arose
from the acquisition of Force Fuel, with an amount of existing goodwill acquired of R46.2million.
Headline earnings reconciliation
The headline earnings reconciliation is set out below:

                                                                                        R’000             R’000
 (Loss)/Profit for the period                                                         (3 521)             4 438
 Adjustments                                                                                -                 -
 Headline earnings attributable to shareholders of the group                          (3 521)             4 438

 Share information
 Basic and diluted earnings per share (cents)                                          (1.21)               1.71
 Basic and diluted headline earnings per share (cents)                                 (1.21)               1.71
 Weighted average shares in issue (‘000)                                              292 189            258 879
 Number of shares in issue at period end                                              292 909            258 879

 Goodwill
 The movement of goodwill for the 6-month period ended is as follows:

 Figures in Rands                                                                   28-Feb-19          28-Feb-18
 Balance at the beginning of the
 period                                                                                     -                  -
 Additions through business combinations                                               79 636                  -
 Goodwill impairment                                                                        -                  -
 Total goodwill at the end of the
 period                                                                                79 636                  -
 

 Acquisitions and Disposals
 With effect from 1 September 2018, the Group concluded the acquisition of 100% of Force Fuel and
 Force Props. The investments were accounted for at fair value of consideration payable. The aggregate
 business combinations are disclosed below:

 Figures in R’000                                             Force Fuel         Force Props                 Total
 Property, plant and equipment                                    14 533              12 673               27 206
 Intangible assets                                                35 934                   -               35 934
 Goodwill                                                         46 195                   -               46 195
 Inventory                                                         3 754                   -                3 754
 Other financial assets                                           11 703                   -               11 703
 Deferred tax asset /(liability)                                 (6 134)                (74)              (6 208)
 Trade and other receivables                                      40 322                 211               40 533
 Cash and cash equivalents                                           292                 116                  408
 Other financial liabilities                                   (112 773)             (4 246)            (117 019)
 Deferred income                                                       -                   -                    -
 Bank overdraft                                                  (7 716)             (7 166)             (14 882)
 Trade and other payables                                       (46 465)               (799)             (47 264)
 Total identifiable net assets/(liabilities)                    (20 355)                 715             (19 640)
 Non-controlling interest                                              -                   -                    -
 Goodwill                                                         34 155               (715)               33 440
 Purchase consideration                                           13 800                   -               13 800

The contribution to the trading results of businesses acquired has been accounted for from the effective date
of the acquisitions. In determining the purchase consideration paid, the profit history of the relevant business
and its growth prospects within the Group, are considered. The fair value of shares issued as part of the
purchase price was determined based on the 30-day average share price at the effective date. The
accounting of these subsidiaries and businesses is based on best estimates and provisional fair values.
Goodwill relates primarily to future profits of these businesses and the anticipated synergies that the businesses
bring to the Group. There were no disposals during the period under review.
The accounting of these business combinations is based on best estimates and provisional fair values. The
Group has not yet completed its assessment of the fair value of all identifiable assets, liabilities, and/or
contingent liabilities. The fair values will be accurately determined within 12 months from the date of
acquisition.

South African Micro Electronic-Systems Proprietary Limited (“SAMES”)
Revenue has increased by 18.9% to R7.7 million from R6.4 million in the previous corresponding period and is
expected to grow in the next two years when newly developed products and services are introduced.

Logistics business
During the period under review, the logistics business generated provided solid gross margin and operating
profit. The Company’s marketing efforts are now beginning to show suitable results and the Group is well
positioned for growth based on work done over the past three years.

Wholesale Fuel Business
During the period under review, Labat acquired the business of Force Fuel with effect from 1 September 2018.
The fuel industry has been in a difficult environment with the continued fuel price increases and illegal
products that have entered the market. Despite that, the business continued to show growth and have
strengthened the management team with recruitment of a dedicated sales force team. The business has
secured new customers, which will show positive results in the coming year.

Prospects
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, 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. Additionally, the Company has
negotiated a number of long-term contracts with some of the large mining companies, whereas previously
the Company only secured short-term contracts. The prospects for the rest of the year are exciting and all
indications are that the Company will continue to grow the business.

BASIS OF PREPARATION

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

Statement of compliance
These unaudited interim 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 presentation and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by Financial Reporting Standards Council, IAS 34 – Interim Financial Reporting, the
Listings Requirements of the JSE Limited, and the requirements of the Companies Act of South Africa, No. 71
of 2008, as amended.

The unaudited interim 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, and where applicable.

The unaudited interim results for the six months ended 28 February 2019 were prepared under supervision of
the Group’s financial director, Mr Gorden Walters. Any reference to future financial performance included
in this announcement has not been reviewed nor reported on by Labat’s external auditor.

The Board takes full responsibility for the preparation of the unaudited interim results for the six months ended
28 February 2019.
All financial information presented in South African Rand has been rounded to the nearest thousand. The
unaudited interim results 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 2018, except for the adoption of new standards effective as of 1
January 2018, as follows.

IFRS 9: Financial instruments
The standard requires financial assets to be measured either at amortized cost or fair value, depending on
the business model under which they are held and the cash flow characteristics of the instrument. In addition,
the standard replaces the incurred loss impairment model in IAS 39 with an expected loss model. It will no
longer be necessary for a credit event to have occurred before credit losses are recognized. The
amendments have not materially impacted the Group’s financial statements as presented.

IFRS 15: Revenue from contracts with customers
The IFRS replaces IAS 18 Revenue and provides a single, principles based five-step model to be applied to all
contracts with customers. The steps involve identifying the contract, identifying the performance obligations
under the contract, determining the transaction price, allocating the transaction price to the performance
obligations in the contract, and recognizing revenue when the entity satisfies a performance obligation. The
amendments have no impact on the Group’s financial statements as presented.

New standards and interpretations not yet adopted
A new standard has been issued by the International Accounting Standards Board (IASB), but is effective only
in future accounting periods, as listed below:

IFRS16: Leases – Effective date: 1 January 2019
The IFRS 16 replaces IAS 17 Leases. IFRS 16 has one model for lessees which will result in almost all the leases
being included on the Statement of Financial Position. Lessors continue to classify leases as operating or
finance leases.

The Group has chosen not to early adopt this new standard and its interpretations. The Board is in the process
of assessing the financial impact associated with the adoption thereof.

ACQUISITIONS AND DISPOSALS
The proposed acquisition of a stake in Labat-Kufika in the prior period was not successful and the arrangement
was cancelled. No Labat-Kufika revenues or profits have been taken into account in these results. Following
the dissolving of the Labat-Kufika joint venture, as previously announced, the Company acquired 8 trucks and
8 trailers. It has since been agreed that 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.

Effective 1 September 2018, the Company acquired a 100% stake in Force Fuel Proprietary Limited (“Force
Fuel”) and Force Fuel Properties Proprietary Limited (“Force Prop”), which transaction was in line with the
Company’s expansion into the logistics industry, and which was fully described in the SENS announcement
dated 1 June 2018. The Group has since entered into guarantee agreements with various third-party suppliers
of Force Fuel in the amount of R110 million.

There were no other acquisitions or disposals during the period under review.

SHARE CAPITAL
During the year under review, the Company issued 30 million shares at an issue price of R1.00 per share in
settlement of the purchase price in respect of the acquisition of Force Fuel and ForceProp. The issue price
and acquisition were accounted for at a fair value of 46 cents per share in accordance with IFRS 3.

In addition, 820 000 shares were issued for cash at an issue price of 50 cents per share with effect from 7
February 2019, which share issue was effected under the Boards’ general authority to issue shares, as
approved by shareholders at the Company’s annual general meeting held on 15 May 2018.

No shares were repurchased during the period under review.

CHANGES TO THE BOARD
Mr. Gorden Walters (“Gorden”) and Mr. Ndebele Stephen Mogapi (“Tebogo”) were appointed as executive
directors with effect from 1 September 2018 following the acquisitions of Force Fuel and Force Properties.

DIVIDENDS
No dividend has been declared for the period under review (February 2018: Rnil).

RELATED PARTIES
There were no material transactions with related parties during the period under review, save for transactions
with related parties which were in the ordinary course of business, and on an arm’s length basis.

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 corresponding period.

POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.

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 previous renewal of cautionary announcements, the last of which was dated
2 May 2019. Labat advises that the acquisitions of Senna Motors Proprietary Limited (t/a Elf Trans) and
Centenary Tankers are still subject to significant conditions precedent. The successful conclusion of these
acquisitions may have a material effect on the price of the Company’s securities. Accordingly, shareholders
are reminded to continue exercising caution when dealing in the securities of the Company until further
announcements are made.

For and on behalf of the board
BG VAN ROOYEN                                                                                   G WALTERS
CHIEF EXECUTIVE OFFICER                                                                FINANCIAL DIRECTOR

13 June 2019

Directors
BG van Rooyen*, DJ O’Neill*, NS Mogapi*, GRI Walters*, RM Majiedt^, R Mohamed^, 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: 13/06/2019 04:30:00 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.

Email this JSE Sens Item to a Friend.

Share This Story