Wrap Text
Audited Provisional Summarised Results for the year ended 28 February 2019
Long4Life Limited
("L4L", "the group", or "the company")
Incorporated in the Republic of South Africa
Registration number: 2016/216015/06
Share code: L4L
ISIN: ZAE000243119
AUDITED PROVISIONAL SUMMARISED RESULTS
for the year ended 28 February 2019
BUILDING ON OUR VISION
Commentary
SALIENT FEATURES
for the financial year ended 28 February 2019
Revenue:
R3.6bn
Trading profit:
R454.2m
Trading profit before depreciation and amortisation:
R534.9m
HEPS:
38.7 cents
Cash:
R1.1bn
Long4Life Limited ("L4L" or "the Company" or "the group") was listed on the JSE Limited in April
2017. L4L's strategy is focused on investment in the leisure and lifestyle sectors in both the
emerged and emerging consumer markets. The group is currently structured into three operating
divisions: Sport and Recreation, Beverages and Personal Care and Wellness, each with their own
management teams.
FINANCIAL OVERVIEW
The group delivered pleasing results for the year under review, notwithstanding a weak consumer
market. Revenue of R3.642 billion for the year was achieved and gross profit amounted to R1.446
billion, at a gross margin of 39.7%. Trading profit for the year was R454.2 million at a trading
margin of 12.5%.
Divisional performance for the year under review is set out below:
Personal
Sport and Care and Central/
Recreation Beverages Wellness corporate Total
Revenue (R'm) 2 113.0 1 355.5 173.8 - 3 642.3
Trading profit (R'm) 321.1 153.8 38.9 (59.6) 454.2
Trading margin (%) 15.2 11.3 22.4 - 12.5
The group maintained gross profit and trading margins across its businesses despite consumer
pricing pressure, the increase in VAT and the devaluation in the Rand. Corporate costs, whilst
well controlled, cater for the potential of managing a larger platform of businesses.
The divisions due to seasonality had significant operating leverage in the second half of the financial year.
Beverage consumption, as well as demand for beauty treatments, increases substantially in the summer months and the Sport
and Recreation retail stores experience significant increase in trading over the holiday and
Christmas periods.
The group's financial position is solid with cash of R1.1 billion at year-end. Return on funds
employed amounted to 42%. Cash generated from operations was strong at R465.1 million.
Comparatives
As 2019 is the group's first full 12-month trading period since listing, comparatives are largely
not meaningful. The results for the previous financial period include trading results for a four-
month period and incorporate finance income earned on cash balances for eleven months.
Holdsport, Sorbet and Inhle Beverages were acquired effective 1 November 2017, Chill
Beverages effective 1 March 2018, and the ClaytonCare Group effective 1 September 2018.
OPERATIONAL REVIEW
L4L has positioned its respective businesses for continued growth and efficiency enhancement,
and the last year's performance is indicative of the inherent potential within the various
businesses. Management continues to introduce new and extensions of existing products and
services, while expanding the geographic store footprint and continually assessing complementary
and bolt-on acquisitions. The subsidiaries are primarily wholly owned, which enables the full
benefit of cash flows.
The group has a central function that provides financial, governance and strategic support to its
businesses all of which operate within a decentralised entrepreneurial philosophy. L4L provides
the necessary capital to support organic growth within its businesses and seeks new investments
to build capability and capacity across the branded lifestyle space.
The past year has, however, been characterised by an underperforming South African economy
weary from ongoing corruption revelations and frustrations with service delivery. Consumer
confidence and purchasing power remains low.
In the light of the difficult economic environment, the group is pleased with the performance and
the strategic progress of its businesses.
Sport and Recreation division
This division comprises sports retail, outdoor warehouse, a dedicated e-commerce division and
performance brands.
Price deflation measured 0.9% across the retail businesses and the overall weighted average
trading area increased by 3.5% relative to the previous year.
Sports Retail: Total sales increased by 10.1% and by 4.0% on a like-for-like basis. Over the past
year, Sportsmans Warehouse introduced a new mall-based concept with a smaller footprint,
which still offers an authentic and recognisable shopping experience. Three of these new
concept stores were opened during the year: Rosebank Mall, Sandton City and Eikestad Mall
in Stellenbosch, bringing the total number of Sportsmans Warehouse stores to 43. This new
concept, which creates exciting opportunity in various mall-based locations where Sportsmans
Warehouse is not currently represented, has been well received and is trading successfully.
The next store in this format is opening in Eastgate Mall in May 2019. The new design elements
and fixtures are being introduced across the existing store base and all stores are being
refurbished over the next three years to the latest concept.
Outdoor Warehouse: Sales performed satisfactorily with an increase of 3.3% and by 4.1% on
a comparable basis. Sales growth was slightly hamstrung by price deflation while the shorter
than normal December holiday restricted customers' traditional camping vacations and,
consequently their demand for outdoor merchandise. Two stores were reduced in size as part
of this business' objective to enhance trading density and ensure cost-efficiency. Outdoor
Warehouse currently trades from 26 stores and a new store in Randburg will open later this
calendar year.
Performance Brands: This business owns, designs, procures, manufactures and distributes the
First Ascent, Capestorm, Second Skins, OTG Active and African Nature brands. Total external
sales were 2.5% lower than the previous year whilst sales to the group's retail divisions increased
by 0.5% year on year. A new manufacturing facility was commissioned in 2018 and management
is committed to build production capacity with unique technical skills which will support design
excellence and provide customised merchandise to key markets. Performance Brands was recently
awarded the exclusive distribution rights for Speedo swimwear, effective January 2020.
Beverages division
L4L acquired Inhle Beverages, which manufactures in Heidelberg (Gauteng), in 2017 and
Stellenbosch (Western Cape) based Chill Beverages, in 2018. Although the division's plants have
different capabilities and capacities, there is complementary production back-up and synergy
which will prove to be beneficial in future years.
Own Brands are products (such as Score Energy, Bashews and Fitch & Leedes) where the
trademarks and intellectual property are owned, while the manufacture of products for third
parties is referred to as contract packing. The division packs for and services both multinational
and local beverage brands. Private label develops products to the needs of a specific customer,
and can include a combination of product development, manufacture and/or distribution.
Future growth is aligned to the constantly changing consumer trends: wellness, eco-footprint,
authenticity, urbanisation, de-formalisation, function, flavour, as well as e-shopping.
Total volumes for this division, which includes Own Brands, Contract Packing and Private
Label, increased by 19% year on year. Own Brands, Contract Packing and Private Label
accounted for 53%, 41% and 6% of the division's revenue respectively. Growth in Own Brands
was particularly pleasing with 50% increase in volumes year on year.
The now familiar demand and supply challenges faced by the South African economy affected
the Beverage division in varying degrees. Water shortages in the Western Cape did not have a
material effect, but power outages had a slightly negative influence over both the Stellenbosch
and Heidelberg plant's production output. The "sugar tax" became effective on 1 April 2018,
and whilst it has not significantly affected beverage consumption volumes, it has had a small
impact on gross margins.
There has been a substantial upgrade to the division's canning and glass packaging capacity as
well as new infrastructure, which resulted in capital expansion expenditure of R61.4 million.
Continued product innovation and incremental growth in targeted categories through the
introduction of new brands and flavours is continuing while attention is being focused on
digitisation, which is important to achieve future efficiency gains and insightful consumer
interaction.
Personal Care and Wellness division
This division comprises both the beauty and grooming businesses Sorbet and LimeLight and
the Health business ClaytonCare. L4L intends expanding this division, largely through bolt-on
acquisitions that are complementary to the current core offering. Various opportunities are
being considered, together with an assessment of additional and/or new products and services.
Sorbet: Performance has exceeded expectations for the year and annual revenue reached the
R100 million mark for the first time, a growth of 19% year on year. Most gratifying has been the
significantly improved performance and returns with trading profit up year on year by 74%.
Sorbet (Sorbet salons, nail bars, dry bars, Sorbet Man and Candi & Co) offers a fully franchised,
owner-operator, beauty treatment business and the brand has exceptionally strong recognition
and a loyal client base. The overall store base has grown to 207 outlets countrywide and
interest from potential franchisees remains strong. Sorbet Man in particular exceeded growth
expectations, with this offering now extended to 21 stores.
With the ongoing modernisation programme, a revamp of some 60 existing franchise stores is
planned for the current year. Sorbet will be launching Sorbet SK-N, a high-end skin and aesthetic
treatment offering, with the first store scheduled to open in May 2019 in Hyde Park Corner,
Johannesburg.
LimeLight: This business procures and distributes hair and beauty products and equipment to
professional salons and has been acquired to enhance the range of beauty products and create a
distribution channel that will augment the division as a professional services and brands supplier.
The business is building its portfolio of products as part of the ongoing strategy and has acquired
the exclusive distribution rights for various international brands including American Crew (men's
grooming products) and OWAY (organic hair and skin products). Other opportunities are currently
being explored in this space.
ClaytonCare: Long4Life Health, of which 59% is held by Long4Life group, acquired 61% of
ClaytonCare Group ("Clayton"), which has resulted in an effective 36% economic interest
therein. Clayton is a sub-acute rehabilitation medical group which is located in two facilities:
one in Randview and the other in Midstream. It has 83 sub-acute beds with 16 beds being High
Care. The sub-acute care model is attractive in terms of the rising demand for cost-effective
healthcare. Clayton provides the group with a platform on which to build post-acute and
rehabilitation business and creates opportunities to participate in the transformation of the
current healthcare delivery model.
PROSPECTS
The group is proud of its achievements in the past two years in a difficult and competitive
environment. Whilst the consumer is expected to continue to be under significant pressure,
the group remains cautiously optimistic about the future. The group is confident in its business model,
the positioning of the respective businesses and the ability of the experienced management teams to achieve
above average returns.
The group has reviewed several investment opportunities in the past year, however, sellers'
expectations and asset valuations have not reflected the difficult economic climate and in
many instances have not met the group's valuation criteria. Nonetheless, the group remains
optimistic on investment opportunities materialising in the forthcoming year.
The group's balance sheet strength, access to an appropriate transactional pipeline as well as a
wide spectrum of investors are all catalysts for its ongoing yet diligent assessment of organic and
acquisitive possibilities. The focus is on businesses that can provide satisfactory growth
and returns to shareholders and where L4L's capital and strategic capability can be successfully
leveraged. The group continues to seek acquisitions and trading opportunities in order to scale its activities.
DIVIDEND
The board has resolved not to declare a dividend for the year under review. In arriving at this
decision, the board has taken into consideration the R159.6 million spent on share repurchases and
the prospects for further investments. Whilst the group has no formal dividend policy at this stage, this position
will be reviewed and assessed by the board.
Signed on behalf of the board
Brian Joffe Mireille Levenstein
Chief executive officer Chief financial officer
Johannesburg, South Africa
14 May 2019
Summarised consolidated statement of profit or loss
for the year ended 28 February 2019
Audited
Restated
Audited 11 months
2019 2018
Notes R'000 R'000
Revenue 4 3 642 342 884 750*
Cost of sales (2 196 554) (466 220)*
Gross profit 1 445 788 418 530
Operating expenses (929 467) (263 046)
Other income 18 618 15 717
Trading profit before depreciation and
amortisation 534 939 171 201
Amortisation (41) (453)
Depreciation (80 741) (23 298)
Trading profit 454 157 147 450
Share-based payment expense (21 939) (12 100)
Acquisition costs (8 285) (16 839)
Net capital items 4 752 (1 469)
Operating profit 428 685 117 042
Net finance income 71 579 122 298
Share of losses from associate (1 572) -
Profit before taxation 498 692 239 340
Taxation (142 676) (69 680)
Profit for the year 356 016 169 660
Attributable to
Shareholders of the company 351 512 168 948
Non-controlling interests 4 504 712
356 016 169 660
Basic earnings per share (cents) 39.0 30.0
Diluted basic earnings per share (cents) 38.5 29.6
* Refer to note 9.
Summarised consolidated statement of comprehensive income
for the year ended 28 February 2019
Audited
Audited 11 months
2019 2018
R'000 R'000
Profit for the year 356 016 169 660
Other comprehensive income (loss) net of taxation
Items that may be reclassified subsequently to profit and loss
Exchange differences on translating foreign operations (25) (393)
Total comprehensive income for the year 355 991 169 267
Attributable to
Shareholders of the company 351 520 169 061
Non-controlling interest 4 471 206
355 991 169 267
Summarised consolidated statement of financial position
at 28 February 2019
Audited Audited
2019 2018
Notes R'000 R'000
ASSETS
Non-current assets 3 597 478 2 800 362
Property, plant and equipment 526 502 198 955
Goodwill 2 252 854 1 927 606
Intangible assets 785 887 644 127
Deferred taxation assets 22 762 6 692
Interests in associate 3 428 -
Other investments and loans 6 045 22 982
Current assets 2 199 185 2 344 015
Inventories 812 525 580 363
Trade and other receivables 291 768 66 642
Taxation receivable 6 747 5 348
Cash and cash equivalents 1 088 145 1 691 662
Total assets 5 796 663 5 144 377
EQUITY AND LIABILITIES
Capital and reserves 4 871 375 4 523 863
Stated capital 4 314 291 4 339 723
Reserves attributable to shareholders of the
company 496 795 163 361
Non-controlling interests 60 289 20 779
Non-current liabilities 398 284 257 089
Deferred taxation liabilities 227 419 159 610
Long-term portion of borrowings 74 839 -
Other financial liability 8 48 000 48 000
Long-term provisions - 2 126
Long-term portion of straight-lining of leases 48 026 47 353
Current liabilities 527 004 363 425
Trade and other payables 497 495 200 377
Short-term portion of borrowings 18 105 160 338
Provision for taxation 11 404 2 710
Total equity and liabilities 5 796 663 5 144 377
Summarised consolidated statement of cash flows
for the year ended 28 February 2019
Audited
Audited 11 months
2019 2018
Notes R'000 R'000
Cash flows from operating activities 390 195 200 135
Cash generated by operations 5 465 090 151 702
Net finance income received 71 579 122 298
Taxation paid (146 474) (73 865)
Cash effects of investment activities (566 462) (489 878)
Additions to property, plant and equipment (155 316) (41 234)
Proceeds on disposal of property, plant and
equipment 6 456 15 650
Additions to intangible assets (4 782) (58)
Acquisition of subsidiaries 6 (426 132) (399 309)
Acquisition of associate (5 146) -
Acquisition of investments (6 368) (64 927)
Proceeds on disposal of investments 24 826 -
Cash effects of financing activities (427 250) 1 981 411
Capital raised on listing - 2 000 000
Purchase of treasury shares (159 573) -
Borrowings repaid (215 887) (17 850)
Dividends paid (51 790) (739)
Net (decrease)/increase in cash and cash
equivalents (603 517) 1 691 668
Cash and cash equivalents at beginning of year 1 691 662 *
Effects of exchange rate fluctuations on cash
and cash equivalents - (6)
Cash and cash equivalents at end of year 1 088 145 1 691 662
* Amount below R1 000.
Summarised consolidated statement of changes in equity
for the year ended 28 February 2019
Audited
Audited 11 months
2019 2018
Notes R'000 R'000
Equity attributable to shareholders of the company 4 811 086 4 503 084
Stated capital 7 4 314 291 4 339 723
Balance at beginning of the year 4 339 723 *
Shares issued during the year 134 141 4 339 723
Treasury shares held by subsidiaries (159 573) -
Transactional costs for issuing equity instruments (20 435) (20 435)
Balance at beginning of the year (20 435) (18 763)
Transaction costs incurred - (1 672)
Foreign currency translation reserve (385) (393)
Balance at beginning of the year (393) -
Exchange differences on translating foreign
operations 8 (393)
Equity-settled share-based payment reserve 41 068 15 371
Balance at beginning of the year 15 371 -
Recognition of share-based payment expense 21 939 12 100
Deferred taxation recognised directly in reserve 3 758 3 271
Retained earnings 471 097 168 818
Balance at beginning of the year 168 818 (130)
Profit for the year 351 512 168 948
Dividends paid (49 233) -
Deferred consideration 5 450 -
Equity attributable to non-controlling interests
of the company 60 289 20 779
Balance at beginning of the year 20 779 -
Other comprehensive income 4 471 206
Profit for the year 4 504 712
Exchange differences on translating foreign
operations (33) (506)
Dividends paid (2 557) (739)
Arising on acquisition of subsidiaries 37 596 21 312
Total equity 4 871 375 4 523 863
* Amount below R1 000.
Notes to the summarised consolidated financial statements
for the year ended 28 February 2019
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
These summarised consolidated financial statements have been prepared in accordance with the
framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, and includes, at a minimum, disclosure as required by IAS 34 Interim Financial
Reporting, and complies with the requirements of the Companies Act of South Africa and the JSE
Listings Requirements. Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the group's financial position and performance.
The accounting policies applied in these summarised consolidated financial statements are in
terms of IFRS and, where applicable, are consistent with those applied in the consolidated financial
statements for the period ended 28 February 2018, except for the adoption of IFRS 9 Financial
Instruments and IFRS 15 Revenue from Contracts with Customers as noted below.
These summarised consolidated financial statements are extracted from the audited consolidated
financial statements. The directors take full responsibility for the preparation of the preliminary
report and that the summarised financial information has been correctly extracted from the
underlying audited consolidated financial statements.
IFRS STANDARDS THAT BECAME EFFECTIVE DURING THE PERIOD
Effective from 1 March 2018 the group adopted IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers.
As reported previously, the adoption of these standards had no material impact on the group's performance and results.
The group's revised policy regarding financial instruments and revenue are summarised below:
IFRS 9: Financial Instruments
The impact of IFRS 9 for the group relates to the application of the Expected Credit Loss (ECL)
model in the measurement of the impairment allowance of our trade and other receivables (through
the application of the simplified approach). In terms of IAS 39, trade and other receivables were
impaired when there was objective evidence of default. IFRS 9 dictates that the impairment is based
on the lifetime expected credit losses on trade and other receivables. In general, the ECL model
is expected to result in a higher impairment allowance than the historical incurred loss model, as
provision rates must now reflect all possible future losses based on past experience as well as future
economic factors. To measure ECLs, trade receivables are assessed on an individual basis. The ECL
rates are based on historical credit losses experienced during the period, adjusted to reflect current
and forward looking information on macro economic factors affecting the ability of the debtor to
settle the receivable. The group applied IFRS 9 with an initial application date of 1 March 2018. The
group applied the standard retrospectively but has elected not to restate comparative information,
which continues to be reported under IAS 39.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 relates to the measurement, classification and disclosure of
revenue from contracts with customers and establishes a five-step model to account for revenue
arising from contracts with customers. Under IFRS 15, revenue is recognised as the group satisfies
performance obligations and transfers control of goods or services to its customers as opposed to the
application of the risks and rewards criteria under IAS 18. The measurement of revenue is determined
based on the amount to which the group expects to be entitled, allocated to each specific performance
obligation. Depending on whether certain criteria are met, revenue is recognised either over time or
at a point in time, as or when control of goods or services is transferred to the customer. IFRS 15 uses
the terms 'contract asset' and 'contract liability' to describe what might more commonly be known as
'accrued revenue' and 'deferred revenue', however the Standard does not prohibit an entity from using
alternative descriptions in the statement of financial position. The group has adopted the terminology
of 'deferred revenue' to describe such balances. The only impact on adoption of this standard was
on classification of deferred revenue, previously disclosed as other payables as part of the trade and
other payables note in the consolidated annual financial statements. Relevant prior period financial
information has been restated, with no impact on the group's previously reported earnings and
headline earnings.
PREPARER OF THE SUMMARISED PROVISIONAL CONSOLIDATED FINANCIAL STATEMENTS
The summarised consolidated financial statements have been prepared by Sarah Bishop CA(SA)
(group financial manager) under the supervision of Mireille Levenstein CA(SA) (chief financial
officer) and were approved by the board of directors on 14 May 2019.
REPORT OF INDEPENDENT AUDITORS
The auditors, Deloitte & Touche, have issued their opinion on the consolidated financial statements
for the year ended 28 February 2019. The audit was conducted in accordance with International
Standards on Auditing. They have issued an unmodified opinion. A copy of the auditor's report
together with a copy of the audited consolidated financial statements are available for inspection at
the company's registered office.
These summarised consolidated financial statements have been derived from the consolidated
financial statements and are consistent in all material respects with the consolidated financial
statements. The summarised consolidated financial statements have been audited by the company's
auditors who have issued an unmodified opinion. The auditors' report does not necessarily report
on all of the information contained in this announcement. Shareholders are advised, that in order
to obtain a full understanding of the nature of the auditors' engagement they should obtain a copy
of that report together with the accompanying financial information from the company's registered
office. Any reference to future financial information included in this announcement has not been
reviewed or reported on by the auditors.
EVENTS AFTER THE REPORTING PERIOD
There are no material subsequent events from the reporting date.
Comparative figures
L4L's year-end was changed in the prior year from the end of March to the end of February,
to align the company's financial year to that of its largest investee company, Holdsport. The
comparative year's financial statements therefore represent an 11-month period from 1 April 2017
to 28 February 2018, whilst the current year's financial statements represent performance for
12 months. In addition, the group's performance for the year needs to be considered in the context
that the comparative period comprised of finance income earned on cash balances for eleven
months and four months of trading from its operations whilst the current year's results includes a
full twelve months of trading by the group's three divisions - Sport and Recreation, Beverages and
Personal Care and Wellness.
Restatement
Shareholders are advised that the company has restated revenue and cost of sales contained
in the group financial results for the eleven-month period ended 28 February 2018. The
restatement has no impact on the group's profit, earnings per share, headline earnings per share
or its financial position. Further detail of the restatement is contained in note 9 to the audited
summarised financial statements presented herewith.
Change in directorate
Mireille Levenstein was appointed as an executive director to the board on 15 October 2018
and Peter Riskowitz resigned from the board as executive director on 31 October 2018.
1. Segmental report
The group has identified that the chief executive officer, in conjunction with the group
executive committee, fulfils the role of the chief operating decision-maker (CODM).
The executive committee, as distinct from the board of directors, consists only of senior
executives. All operating segments' results are reviewed regularly by the CODM to make
decisions about the allocation of resources to the operating segments and to assess its
performance. Reportable segments have been identified after applying the quantitative
thresholds per IFRS 8: Operating Segments, and after aggregating operating segments with
similar economic characteristics.
Performance is measured based on segmental trading profit as included in the monthly
management reports reviewed by the CODM. As this is the first full year of trading, trading
profit was deemed as the appropriate measure in the current financial year for measuring
segmental performance. Net finance income and income taxes are managed on a group basis
and are not allocated to operating segments.
For management purposes, the following operating divisions have been identified as the
group's reportable segments:
- Sports and Recreation division comprising Sports Retail (Sportsmans Warehouse,
OTG and Shelflife), Outdoor Warehouse and Performance Brands.
- Beverages division comprising the operations of Chill and Inhle.
- Personal Care and Wellness comprising of the beauty and grooming division (Sorbet and
Lime Light) and the healthcare division (ClaytonCare).
- Corporate provides services to the trading divisions including but not limited to
secretarial, finance, advisory, risk management, corporate finance, group legal, treasury,
internal audit, group marketing and other related services.
Personal
Sport and Care and
Recreation Beverages Wellness Corporate Total
For the year ending
28 February 2019
Revenue 2 113 026 1 355 450 173 866 - 3 642 342
Trading profit before
depreciation and
amortisation 379 682 172 172 40 801 (57 716) 534 939
Depreciation and
amortisation (58 549) (18 419) (1 891) (1 923) (80 782)
Trading profit 321 133 153 753 38 910 (59 639) 454 157
Share-based payment
expense (21 939)
Acquisition costs (8 285)
Net capital items 4 752
Operating profit 428 685
Net finance income 71 579
Share of losses from
associate (1 572)
Profit before tax 498 692
Segmental assets 649 632 764 917 202 327 5 016 935 6 633 811
Inter-group eliminations (837 148)
5 796 663
Segmental liabilities 393 416 664 080 109 440 595 500 1 762 436
Inter-group eliminations (837 148)
925 288
Personal
Sport and Care and
Recreation Beverages Wellness Corporate Total
Segmental capital
expenditure
Spent on expansion 22 100 60 532 1 875 83 84 590
Spent on replacement 68 858 868 1 000 - 70 726
90 958 61 400 2 875 83 155 316
For the period ended
28 February 2018
Revenue 791 597* 60 384 32 769 - 884 750*
Trading profit before
depreciation and
amortisation 159 455 23 855 10 128 (22 237) 171 201
Depreciation and
amortisation (20 922) (1 185) (380) (1 264) (23 751)
Trading profit 138 533 22 670 9 748 (23 501) 147 450
Share-based payment
expense (12 100)
Acquisition costs (16 839)
Net capital items (1 469)
Operating profit 117 042
Net finance income 122 298
Profit before tax 239 340
Segmental assets 3 962 188 101 146 104 573 5 095 365 9 263 272
Inter-group eliminations (4 118 895)
5 144 377
Segmental liabilities 2 968 997 26 411 39 225 1 704 776 4 739 409
Inter-group eliminations (4 118 895)
620 514
Segmental capital
expenditure
Spent on expansion 5 512 8 774 62 7 583 21 931
Spent on replacement - 19 003 300 - 19 303
5 512 27 777 362 7 583 41 234
* Refer to note 8.
2. Headline earnings per share
Audited
Audited 11 months
2019 2018
R'000 R'000
Profit attributable to shareholders of the company 351 512 168 948
Adjusted for:
Profit on disposal of property, plant and equipment (780) -
Gain on reacquired intangible asset (3 024) -
Loss on disposal of property, plant and equipment - 105
Impairment of associate - 1 364
Tax effects 1 106 (29)
Headline earnings 348 814 170 388
Weighted average number of shares in issue ('000) 902 054 564 067
Headline earnings per share (cents) 38.7 30.2
Diluted headline earnings per share (cents) 38.2 29.8
3. Net asset value and tangible net asset value per share
Audited
Audited 11 months
2019 2018
R'000 R'000
Equity attributable to ordinary shareholders of the
company (R'000) 4 811 086 4 503 084
Ordinary no par value shares in issue net of treasury
shares ('000) 877 386 889 642
Net asset value per share attributable to ordinary
shareholders of the company (cents) 548 506
Tangible net asset value 1 772 345 1 931 351
Ordinary no par value shares in issue net of treasury
shares ('000) 877 386 889 642
Tangible net asset value per share attributable to
ordinary shareholders of the company (cents) 202 217
4. Revenue
Audited
Audited 11 months
2019 2018
R'000 R'000
Sale of goods
Rendering of services 3 523 242 859 522*
Royalty income 48 739 2 688
Franchise income, royalties and administration fees 69 432 22 540
Other - rental income 929 -
3 642 342 884 750*
The application of IFRS 15 has not had an impact on the financial position and/or
financial performance of the group as the group is not involved in material multiple-
element arrangements with customers. Therefore, no transition adjustments have been
processed to retained earnings.
* Refer to note 9.
5. Cash generated from operations
Audited
Audited 11 months
2019 2018
R'000 R'000
Reconciliation of operating profit to cash generated
from operations:
Operating profit 428 685 117 042
Acquisition costs 8 285 11 384
Depreciation and amortisation 80 782 23 751
Non-cash items: 19 192 17 569
Share-based payment expense 21 939 12 100
Unrealised profit on investments - (5 631)
Increase in charges for straight-lining of leases 526 2 032
Executive remuneration settled by way of share issue 5 000 4 584
Fair value gain on foreign exchange contracts (3 703) 5 334
(Profit)/loss on sale of property, plant and equipment (780) 105
Gain on reacquired intangible assets (3 024) -
Other non-cash items (766) (955)
Cash generated from operations before working
capital changes 536 944 169 746
Working capital changes (71 854) (18 044)
(Increase)/decrease in inventories (104 017) 29 171
(Increase)/decrease in trade and other receivables (37 145) 992
Increase/(decrease) in trade and other payables 69 308 (48 207)
465 090 151 702
6. Acquisition of subsidiaries
During the reporting period, the group acquired the following subsidiaries:
- With effect 1 March 2018, the group acquired 100% of Chill Beverages, a leading
producer, packer and distributor of a range of beverages.
- Effective 1 September 2018, L4L through a 59% stake in newly established L4L Health,
acquired 61% of the ClaytonCare Group. ClaytonCare is a sub-acute rehabilitation
medical group which is located in two facilities in Gauteng.
- The group made a number of smaller acquisitions during the year, including 100%
of Limelight with effect 1 March 2018, a company that distributes hair and beauty
products and equipment to professional salons.
The acquisitions were funded through a combination of cash and shares as set out below.
Goodwill represents the value paid in excess of the fair value of the acquisitions. This
consists largely of the values assigned to the unique operating models, future growth and
future market development of the businesses acquired. The benefits are not separately
recognised from goodwill because they do not meet the recognition criteria for
identifiable intangible assets. The acquisitions have enabled the group to further establish
its presence in the lifestyle sector and as a consequence, has broadened the group's base
in the market place. The group controls an investee when it is exposed, or has the rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its
power over the investee.
The group has measured the identifiable assets and liabilities of the acquisitions at their
acquisition date fair values as presented below.
Audited Audited
2019 2018
Chill ClaytonCare Other Total Total
R'000 R'000 R'000 R'000 R'000
Fair value of tangible assets/
(liabilities) acquired
Property, plant and equipment 235 480 2 538 20 630 258 648 196 774
Trademarks 136 945 - - 136 945 644 530
Other intangible assets - - - - 45
Other investments and loans 347 (24) - 323 92 790
Inventories 121 670 323 6 152 128 145 609 534
Trade and other receivables 166 307 18 645 3 022 187 974 67 634
Cash and cash equivalents 22 683 14 582 878 38 143 48 356
Straight-lining of leases - - - - (45 141)
Borrowings (143 170) (1 607) (4 054) (148 831) (178 869)
Put option liability - - - - (48 000)
Trade and other payables (224 100) (7 237) (345) (231 682) (223 622)
Provisions - - - - (2 136)
Deferred taxation (57 178) 879 (1 754) (58 053) (161 978)
Taxation (7 796) (1 033) 292 (8 537) 4 241
Total identifiable assets at fair value 251 188 27 066 24 821 303 075 1 004 158
Cash 367 539 39 869 48 728 456 136 436 281
Issue of shares 125 295 - 3 846 129 141 2 335 973
Fair value of previously held interest - - - - 45 408
Inter-group loan - - - - 92 790
Deferred consideration - - 5 450 5 450 -
Consideration transferred 492 834 39 869 58 024 590 727 2 910 452
Consideration transferred 492 834 39 869 58 024 590 727 2 910 452
Plus: Non-controlling interest
measured at their share of fair value
of net assets - 37 596 - 37 596 21 312
Less: Identifiable assets at fair value (251 188) (27 066) (24 821) (303 075) (1 004 158)
Goodwill arising at acquisition 241 646 50 399 33 203 325 248 1 927 606
Consideration paid in cash (367 539) (39 869) (48 728) (456 136) (436 281)
Cash acquired 22 683 14 582 878 38 143 48 356
Costs incurred in respect of
acquisitions (1 798) (572) (170) (2 540) (11 384)
Cost incurred in respect of potential
acquisitions (5 599) (5 599) -
Net cash outflow on acquisition of
subsidiaries (346 654) (25 859) (53 619) (426 132) (399 309)
Contribution to results for the year
Revenue 1 205 632 42 513 28 237 1 276 382 730 661
Trading profit 96 884 4 455 5 006 106 345 164 604
As all the acquisitions save for ClaytonCare were acquired effective 1 March 2018 and
were therefore included in the results for the 12 months, the directors consider the
financial statements to represent an approximate measure of the performance of the
combined group for the full year. The group holds an effective 36% of ClaytonCare and
results from this acquisition are not significant in relation to the group performance.
7. Stated capital
Audited Audited
2019 2018
R'000 R'000
Balance at beginning of the year 4 339 723 *
134 141 4 339 723
Shares issued pursuant to listing on the JSE - 2 000 000
Shares issued for business acquisitions 129 141 2 335 973
Shares issued for executive remuneration 5 000 3 750
Less: Shares held by subsidiary as treasury shares (159 573) -
Balance at the end of the year 4 314 291 4 339 723
Authorised
4 000 000 000 ordinary shares of no par value
(2018: 4 000 000 000 ordinary shares of no par value)
Issued
913 909 909 ordinary shares of no par value
(2018: 889 775 767 ordinary shares of no par value)
Stated capital and treasury shares
No par value ordinary shares are classified as equity. Incremental costs directly
attributable to the issuance of new no par value ordinary shares are deducted against the
stated capital account.
Shares in the company, held by its subsidiary, are classified as the group's shareholders' interest
as treasury shares. These shares are treated as a deduction from the issued and weighted
average number of shares. The cost price of the treasury shares is presented as a deduction
from total equity. Distributions received on treasury shares are eliminated on consolidation.
During the year, group subsidiaries acquired 36 389 582 (2018: 134 103) Long4Life
Limited shares at an average cost of R4,38 (2018: nil) per share, totalling R159,6 million
(2018: nil). 13 199 478 of the company's shares are held in escrow on behalf of participants
of the L4L Forfeitable Share Plan at a cost of R59,3 million.
At the reporting date, the group owned 36 523 695 (2018:134 103), Long4Life Limited
shares held by subsidiaries, at a total cost of R159,6 million (2018: Nil).
Incremental costs directly attributable to the issuance of new no par value ordinary shares
are deducted from the stated capital account.
* Amount below R1 000.
8. Financial instruments
When measuring the fair value of an asset or a liability, the group uses market observable
data as far as possible. Fair values are categorised into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques categorised as follows:
Level 1: Measured using unadjusted, quoted prices in an active market for identical financial
instruments.
Level 2: Valued using techniques based significantly on observable market data.
Instruments in this category are valued using:
(a) Quoted prices for similar instruments or identical instruments in markets which
are not considered to be active, or
(b) Valuation techniques where all the inputs that have a significant effect on the
valuation are directly or indirectly based on observable market data.
Level 3: Valued using valuation techniques that incorporate information other than
observable market data and where at least one input (which could have a significant
effect on instruments' valuation) cannot be based on observable market data.
The following table shows the carrying amounts and fair values of financial assets and
financial liabilities, including their levels in the fair value hierarchy for financial instruments
measured at fair value. It does not include fair value information for financial assets
and financial liabilities not measured at fair value if the carrying amount is a reasonable
approximation of fair value.
Audited
Carrying Within 1 - 2 2 - 5 More than
amount 1 year years years 5 years
Level R'000 R'000 R'000 R'000 R'000
At 28 February 2019
Financial assets
At fair value
Investment in listed
shares 1 5 776 5 776 - - -
Financial liabilities
At fair value
Foreign exchange
contracts 1 (1 631) (1 631) - - -
Other financial liability
- NCI put option 3 (48 000) - (23 721) (24 279) -
Total (49 631) (1 631) (23 721) (24 279) -
Audited
Carrying Within 1-2 2 - 5 More than
amount 1 year years years 5 years
Level R'000 R'000 R'000 R'000 R'000
At 28 February 2018
Financial assets
At fair value
Investments - listed
held-for-trading 1 22 982 22 982 - - -
Financial liabilities
At fair value
Foreign exchange
contracts 1 (5 334) (5 334) - - -
Other financial liability
- NCI put option 3 (48 000) - (23 721) (24 279) -
Total (53 334) (5 334) (23 721) (24 279) -
Valuation technique
The value of the put option liability was determined using a profit multiple designed to
approximate the fair value of the shares of the non-controlling interest's proportionate share
of the profit after tax for the year ending 28 February 2019, discounted using a risk adjusted
discount rate.
2019 2018
Significant unobservable inputs
Profit after tax growth rates 30% to 35% 25% to 32%
Profit after tax multiple 8.5 to 9.0 9.0 to 9.5
Risk-adjusted discount rate 16% 16%
Inter-relationship between significant unobservable inputs and fair value measurement
The estimated fair value would increase (decrease) if:
- the profit after tax were higher (lower); or
- the risk-adjusted discount rate were lower (higher).
9. Restatement
A reporting error in the Sport and Recreation segment, which comprises Holdsport Limited's
financial information arising from the elimination of intergroup revenue and costs of sales in
the period prior to acquisition by Long4Life, has required a restatement of the group's results
for the period ending 28 February 2018 as set out below. This restatement had no impact on
the group's profit, earnings per share, headline earnings per share or financial position.
As previously
reported
11 months
2018 Restated
Audited Adjusted Audited
R'000 R'000 R'000
Revenue 730 661 154 089 884 750
Cost of sales (312 131) (154 089) (466 220)
Gross profit 418 530 - 418 530
10. Capital commitments
Audited Audited
2019 2018
R'000 R'000
The board of directors' policy is to maintain a strong
capital base so as to sustain future growth of the business
so that it can continue to generate benefits to its
shareholders.
Capital expenditure approved:
Contracted for 37 992 17 500
Not contracted for 166 266 89 700
204 258 107 200
Capital expenditure is in respect of property, plant and equipment, and it is anticipated that
the capital expenditure will be financed out of cash resources.
Administration
DIRECTORS
Independent non-executive directors
Graham Dempster (Chairman)
Lionel Jacobs
Keneilwe Moloko
Syd Muller
Tasneem Abdool-Samad
Executive directors
Brian Joffe (Chief executive officer)
Mireille Levenstein (Chief financial officer)
Colin Datnow (Executive)
COMPANY SECRETARY
Marlene Klopper
CORPORATE INFORMATION
Long4Life Limited Independent auditors
("L4L", "the group", or "the company") Deloitte & Touche
Incorporated in the Republic of South Africa Practice number: 902276
Registration number: 2016/216015/06 Deloitte Place, The Woodlands
Share code: L4L 20 Woodlands Drive, Woodmead, Sandton, 2193
ISIN: ZAE000243119 Private Bag X6, Gallo Manor, 2052
Transfer secretaries Registered office
Computershare Investor Services 7th Floor, Rosebank Towers
Proprietary Limited 13 - 15 Biermann Avenue
Registration number: 2004/003647/07 Rosebank, Johannesburg, 2196
1st Floor, Rosebank Towers Box 521870, Saxonwold, 2132
13 - 15 Biermann Avenue
Rosebank, Johannesburg, 2196 Further information regarding our group can be
PO Box 61051, Marshalltown, 2107 found on the Long4Life website:
Telephone +27 (11) 370-5000 www.long4life.co.za
Sponsor
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank
South Africa, 2196
Date: 15/05/2019 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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