AH-VEST LIMITED - Capital Raising Roadshow and Forecast Financial Information

Capital Raising Roadshow and Forecast Financial Information

AH-VEST LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1989/000100/06)
("AH-Vest" or "the Company")
Share code: AHL      ISIN code: ZAE000129177


CAPITAL RAISING ROADSHOW ("ROADSHOW"), PROFIT ESTIMATE FOR THE YEAR ENDED 30 JUNE 2020
AND PROFIT FORECAST FOR THE YEARS ENDING 30 JUNE 2021 AND 30 JUNE 2022

The Board of AH-Vest has resolved to raise additional cash for the Company through the issue of
shares under the existing General Authority to issue shares for cash ("the placement") in order to
substantially increase the Company's inventory levels to meet increased order levels and to further
automate the packaging of its products, which is currently a bottleneck. The Company is seeking to
raise up to R30m.

As a result of a change in customer buying trends, AH-Vest lost around R22m in sales for the year
ended 30 June 2019 and estimates lost orders of more than R30m for the year ended 30 June 2020.
Building up stock levels will assist in meeting this requirement and the growing demand for the
Company's products. In addition to this, the Company is seeking to address its shareholder spread
and to improve liquidity of the shares in accordance with its undertakings to the JSE.

The placement will be offered to qualifying investors through a road show and neither constitutes,
nor is intended to constitute, an offer to the public to purchase or subscribe for any shares.

The roadshow has commenced and will be conducted during July 2020 and August 2020, or until the
cash is raised. The issue of shares will be announced as soon as practicable following the closing of
the roadshow.

AcaciaCap Advisors is assisting AH-Vest on the capital raising and roadshow. For further information
or to request a presentation, please contact Michelle Krastanov on +2711 480 8570 or Kay Stoler on
+27 11 480 8628, or by way of e-mail at michelle@acaciacap.co.za or kay@acaciacap.co.za.

The Company has prepared a profit estimate for the year ended 30 June 2020 as well as a profit
forecast for the two years ending 30 June 2021 and 30 June 2022 on a pre-investment and post-
investment basis in order to ensure that the general market has access to all of the same information
as is being presented to potential investors. The investor presentation is available for downloading
on the Company's website, www.alljoy.co.za.

No trading update has been issued for the year ended 30 June 2020 as, per the profit estimate,
earnings per share ("EPS") and headline earnings per share ("HEPS") are not expected to differ by
more than 20% from the EPS and HEPS reported for the prior year.

Whilst the audit for the year ended 30 June 2020 is in progress, the profit estimate has not been
audited or reviewed and reported on by either the Company's auditors or a reporting accountant
in accordance with ISAE 3000 nor has the profit forecast been reviewed and reported on by the
Company's auditor or r by a reporting accountant in accordance with ISAE 3400 and all financial
information is being issued on a voluntary basis due to the road show.
Statement of compliance
The profit estimate and the two year forecast have been 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), IAS 34 - Interim Financial Reporting and the Listings Requirements of the JSE Limited.

The profit estimate for the year ended 30 June 2020 is set out below:

                                           Unreviewed Profit Estimate for
                                                           the Year Ended          Audited 12 months
                                                             30 June 2020                      Ended
                                                                                        30 June 2019
                                                                   R'000                      R'000
 Revenue                                                          188 598                    177 106
 Cost of sales                                                   (116 390)                  (105 298)
 Gross profit                                                      72 208                     71 808
 Other Income                                                         296                        912
 Operating expenses                                               (58 642)                   (60 402)
 Operating profit                                                  13 862                     12 318
 Finance costs                                                     (5 580)                    (4 015)
 Profit before taxation                                             8 282                      8 303
 Taxation                                                          (2 319)                    (2 377)
 Total comprehensive income for the
 year                                                               5 963                      5 926

 Attributable to:
 Equity holders of the parent                                     5 963                      5 926



 Total comprehensive income for the                                 5 963                       5926
 period

Headline earnings reconciliation
The headline earnings reconciliation is set out below:

                                                        Unreviewed Profit
                                                    Estimate for the Year
                                                                    Ended         Audited 12 months
                                                             30 June 2020                     Ended
                                                                                       30 June 2019
                                                                    R'000              R'000
                                                                    R'000                     R'000
 Profit for the period attributable to equity
 holders of the parent                                              5 963                     5 926
 Headline earnings attributable to
 shareholders of the Company                                        5 963                     6 016

 Share information
 Basic and diluted earnings per share
 (cents)                                                             5.85                      5.81
 
 Basic and diluted headline earnings per
 share (cents)                                                       5.85                      5.90
 
 Weighted average shares in issue ('000)                          101 973                   101 973
 Number of shares in issue at period end                          101 973                   101 973

Details of the profit forecast for the two years ending 30 June 2021 and 30 June 2022, together with
assumptions, are set out below:

                                                 Pre-investment                          Post investment
                                            12 months      12 months              12 months       12 months
                                               Ending         Ending                 Ending          Ending
                                              30 June        30 June                30 June         30 June
                                                 2021           2022                   2021            2022
                        R'000          R'000                  R'000           R'000
 
Revenue                                      206 084        226 692                 216 126         248 545
 Cost of sales                               (128 527)      (142 413)              (134 596)       (155 743)
 Gross profit                                  77 557         84 279                 81 530    92 802
 Other Income                                     257            242                  2 818           3 215
 Operating expenses                           (64 065)       (69 944)               (64 402)        (70 555)
 Operating profit                              13 749         14 577                 19 946          25 462
 Finance costs                                 (5 255)        (4 231)                (5 255)         (4 231)
 Profit before taxation                         8 494         10 346                 14 691          21 231
 Taxation                                      (2 378)        (2 897)                (4 113)         (5 945)
 Total comprehensive income for the
 year                                           6 116          7 449                 10 578          15 286

 Attributable to:
 Equity holders of the parent                   6 116          7 449                 10 578          15 286



 Total comprehensive income for the             6 116          7 449                 10 578          15 286
 period

Headline earnings reconciliation
The headline earnings reconciliation is set out below:

                                                 Pre-investment                        Post investment
                                                                                  12 months       12 months
                                             12 months      12 months                Ending          Ending
                                                Ending         Ending               30 June         30 June
           30 June 2021   30 June 2022                  2021            2022
                                                 R'000          R'000                 R'000           R'000
 Profit for the period attributable to
 equity holders of the parent                    6 116          7 449                10 578          15 286
 Headline earnings attributable to
 shareholders of the Company                6 116          7 449                10 578          15 286

 Share information
 Basic and diluted earnings per share
(cents)                                           6.00           7.30                  7.30           10.54
 
 Basic and diluted headline earnings per
 share (cents)                                    6.00           7.30                  7.30           10.54
 
 Weighted average shares in issue ('000)       101 973        101 973               144 973         144 973
 Number of shares in issue at period end       101 973        101 973               144 973         144 973

Basis of preparation
The profit estimate for the year ended 30 June 2020 and the profit forecast for the years ending 30
June 2021 and 2022 have been prepared using the accounting policies of AH-Vest used in the
preparation of the audited results for the year ended 30 June 2019 and the interim results for the six
months ended 31 December 2019. The financial information on which the profit estimate and
forecast have been prepared as well as the assumptions on which the forecast information is based
are the responsibility of the directors of AH-Vest. New accounting standards introduced over these
three periods have been considered 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 recognised. The profit forecast assumes a provision for credit losses at a rate of 0.3%
based on the estimated net invoiced sales.

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 recognising revenue when the
entity satisfies a performance obligation. The amendments have no impact on the Company's profit
forecast and revenue has been assumed to be earned in line with historical revenue recognition.

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. This had a material impact on the results of AH-Vest and was adopted
during the year ended 30 June 2019.

Key Assumptions:
The assumptions utilised in the profit forecast for the years ending 30 June 2021 and 2022 and which
are considered by management to be significant or are key factors on which the results of the
Company will depend, are disclosed below. The assumptions disclosed are not intended to be an
exhaustive list. There are other routine assumptions, which are not listed. The actual results achieved
during the forecast period may vary from the forecast and the variations may or may not be material.
The forecast financial information is based on the assumption that circumstances which affect the
Company's business, but which are outside the control of the Directors, will not materially alter in
such a way as to affect the trading of the Company.

1.    The current market conditions in the food industry in which the business operates are not
      expected to change substantially following the COVID-19 pandemic.
2.    The post investment forecast numbers assume that the capital of R30 million is raised primarily
      for investment into growing the inventory levels needed to grow the business. The number of
      shares in issue has been assumed to increase by 43 million shares, although this number may
      vary.
3.    The forecast numbers have been prepared in terms of IFRS and are based on the accounting
      policies of the Company.
4.    The forecast for the twelve month period ending 30 June 2021 commences from 1 July 2020.
5.    Expenses have been forecast on a line-by-line basis and reflect the current budgeted
      expenditure and take into account the cost of being listed.
6.    The present level of interest and tax rates will remain substantially unchanged.
7.    The expected impact on financial results due to foreign exchange movement has been kept
      consistent with current ruling market conditions at an estimated average exchange rate over
      the period. The average exchange rate used is a rate of USD1:R17.
8.    Depreciation expense is provided for over the useful life of the assets used.
9.    Revenue is based on an estimated percentage contribution between current clients and
      expected new business.
10.   Finance Costs are assumed at the current prime rate of Absa Bank Limited, being the current
      lending rate enjoyed by the Company.

Detailed assumptions

1.   REVENUE AND GROSS PROFIT ASSUMPTIONS AND COMMENTARY

     An analysis of the revenue of the Company is set out below:

                                          Pre-investment                   Post investment
                                      Year           Year             Year                 Year
                                    ending         ending           ending               ending
                        30 June 2021   30 June 2022     30 June 2021         30 June 2022
                                     R'000          R'000            R'000                R'000
      Total Revenue                206 084        226 692          216 126              248 545
      Cost of sales               (128 527)      (142 413)        (134 596)            (155 743)
      Gross profit               77 557         84 279           81 530               92 802

     For the 2021 and 2022 period the projected growth rate, pre-investment is 10% each year
     based on current capacity and demand. Post investment, the growth in turnover is projected
     at 15% each year based on the expectation that the Company will be able to meet existing
     excess demand and also from the increased product range.

2.   OPERATIONAL EXPENSES

     The main components of operational expenses are salaries and wages, sales and distribution
     costs and promotional expenses. The forecasts for salaries and wages for 2021 and 2022 are
     based on the existing headcount.

     The balance of the operational costs is based on the existing expense base of the Company.

     The operating expenses are higher than the operating expenses for the year ended 30 June
     2019 due to inflation and higher production and revenue. Whilst foreign exchange gains or
     losses have been forecast, they are immaterial.

     Depreciation and amortisation have been assumed on the basis of the existing depreciation
     and amortisation rates used by the Company as well as on expected capital expenditure.
     Details of the projected EBITDA, depreciation and amortisation are set out in the table below:

                                         Pre-investment                   Post investment
                                   30 June          30 June         30 June          30 June
                                      2021             2022            2021             2022
                     R'000            R'000           R'000            R'000
      EBITDA                        17 953           18 932          24 150           29 816
      Depreciation                  (4 610)          (4 760)         (4 610)          (4 760)
      Amortisation of Intangibles      406              406             406              406

     No impairment of any assets has been assumed. The Company does not have any goodwill
     on the balance sheet.

3.   TAXATION

     Taxation has been assumed at 28%.

4.   FACTORS UNDER DIRECT INFLUENCE OF DIRECTORS

     Revenue, cost of sales and operating expenses can be influenced by director actions.

5.   FACTORS THAT ARE EXCLUSIVELY OUTSIDE THE INFLUENCE OF DIRECTORS

     Regulatory, economic or political factors, including the short and medium term impact of
     COVID-19 and the effect that the economic lockdown will have on customers, suppliers and
     the industry, which in turn may have an impact on the Company.

6.   FORWARD LOOKING STATEMENTS

     This report may contain certain forward-looking statements concerning AH-Vest'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 Company. 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.

     The Company does not undertake to update any forward-looking statements and does not
     assume responsibility for any loss or damage, however arising, as a result of the reliance by any
     party thereon, including, but not limited to, loss of earnings, profits or consequential loss or
     damage.

JOHANNESBURG
14 August 2020


Designated Advisor
AcaciaCap Advisors (Pty) Ltd

Date: 14-08-2020 04:50:00
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