RNS Number:4242L
Technoplast Industries Ld
22 May 2003
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENTS
31st MARCH 2003
UNAUDITED
TECHNOPLAST INDUSTRIES LIMITED
FINANCIAL STATEMENTS AS AT 31st MARCH 2003
TABLE OF CONTENTS
Page
Management Discussion and Analysis A-J
Auditor's Review Report 2
Condensed Consolidated Profit and Loss Account 3
Condensed Consolidated Statement of Recognised Gains and Losses 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Cash Flow Statement 5-7
Notes to the Financial Statements 8-14
The Board of Directors of 20 May 2003
Technoplast Industries Ltd.
Dear Sirs:
Re: Review of the Unaudited Condensed Interim Consolidated
Financial Statements for the three month period ended 31 March 2003
At your request, we have reviewed the condensed interim consolidated balance
sheet of TECHNOPLAST INDUSTRIES LIMITED and its subsidiaries as at 31 March
2003, the condensed consolidated profit and loss accounts, condensed statements
of recognised gains and losses, condensed statements of changes in shareholders'
equity and the condensed consolidated statements of cash flows for the three
month period then ended.
Our review was conducted in accordance with procedures prescribed by the
Institute of Certified Public Accountants in Israel and included, inter alia,
reading the said financial statements, reading the minutes of the shareholders'
meetings and of the meetings of the Board of Directors and its committees, as
well as making inquiries of persons responsible for financial and accounting
matters.
We did not review the financial statements of certain subsidiaries, whose assets
as at 31 March 2003 constitute approximately 38% of total consolidated assets
and whose revenues for the three month period approximately 35% of total
consolidated revenues. In addition, the data presented in the consolidated
financial statements, which relate to the equity value of the investments and to
the equity of the Company in the results of affiliated companies are based on
financial statements that were audited by other auditors.
Since the review performed is limited in scope and does not constitute an audit
in accordance with generally accepted auditing standards, we do not express an
opinion on the condensed financial statements.
During the performance of our review, including reading review reports of other
subsidiaries as stated above, nothing came to our attention that would
necessitate any material modifications to the condensed financial statements
referred to above in order for them to be in conformity with generally accepted
accounting principles and in accordance with Section D of the Securities
Regulations (Periodic and Immediate Reports), 1970.
Fahn Kanne & Co. Schmidt & Co.
Certified Public Accountants (Isr.) Certified Public Accountants (Isr.)
The accompanying notes are an integral part of these condensed statements.
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
(Adjusted to NIS of March 2003)
Convenience
translation
Year ended Three months Three months Three months
31st December ended ended ended
31st March 31st March 31 March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Turnover 153,492 46,038 39,471 5,329
Cost of sales 134,413 38,432(*) 32,034 4,325
_______ ______ ______ _____
Gross profit 19,079 7,606 7,437 1,004
Selling, general and administrative expenses (32,510) (7,730)(*) (9,633) (1,301)
_______ ______ ______ _____
Operating loss before other expenses (13,431) (124) (2,196) (297)
Other income (expenses) (778) 41 839 113
_______ ______ ______ _____
Loss on ordinary activities before financial (14,209) (83) (1,357) (184)
expenses
Net financial expenses (3,927) (1,457) (1,229) (166)
_______ ______ ______ _____
Loss on ordinary activities before taxation (18,136) (1,540) (2,586) (350)
Tax benefit 1 - 198 27
_______ ______ ______ _____
Loss on ordinary activities after taxation (18,135) (1,540) (2,388) (323)
Net minority share in losses (profits) of 847 (1,268) 643 87
consolidated subsidiaries
Net equity in profits of associated - - 146 20
undertakings
_______ ______ ______ _____
Loss for the period (17,288) (2,808) (1,599) (216)
_______ ______ ______ _____
_______ ______ ______ _____
Basic loss per share (NIS/#) (0.51) (0.08) (0.05) (0.007)
____ _____ ______ _____
____ _____ ______ _____
CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES
(Adjusted to NIS of March 2003)
Convenience
translation
Three months Three months Three months
Year ended ended ended ended
31st December 31st March 31st March 31 March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Total recognised losses for the year (17,288) (2,808) (1,599) (216)
_______ ______ ______ _____
_______ ______ ______ _____
The accompanying notes are an integral part of these condensed statements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Adjusted to NIS of March 2003)
Convenience
translation
31st December 31st March 31st March 31st March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Minority receivable 319 - 962 130
Intangible assets 10,710 11,628 10,405 1,405
Fixed assets
Tangible assets 105,496 112,646 102,965 13,903
Investments in affiliated company - - 1,143 154
Deposits 72 51 72 10
_______ _______ _______ ______
105,568 112,697 104,180 14,067
Funded amounts in respect of redundancy - - 70 10
provision
Deferred tax - - 240 32
Current assets
Stocks 18,607 18,227 21,924 2,960
Debtors 37,827 55,930 41,099 5,550
Cash at bank and in hand 952 1,522 2,248 304
_______ _______ _______ ______
57,386 75,679 65,271 8,814
Creditors: amounts falling due within one year
Bank loans and overdrafts 63,486 63,824 70,844 9,566
Creditors 47,123 52,906 51,591 6,966
_______ _______ _______ ______
110,609 116,730 122,435 16,532
Net current assets (53,223) (41,051) (57,164) (7,718)
Total assets less current liabilities
Creditors: amounts falling due after more
than one year
Minority rights - 1,796 - -
Capital notes 5,643 5,626 5,615 758
Non-convertible bank loans 34,761 37,647 31,857 4,302
Deferred income 220 267 204 27
_______ _______ _______ ______
40,624 45,336 37,676 5,087
Provisions for liabilities and charges
Redundancy provision 331 1,039 197 27
_______ _______ _______ ______
Net assets 22,419 36,899 20,820 2,812
_______ _______ _______ ______
_______ _______ _______ ______
Capital and reserves (Note 5)
Share capital 43,887 43,887 43,887 5,926
Share premium account 44,795 44,795 44,795 6,049
Capital fund 336 336 336 45
Capital fund from transaction with (5,469) (5,469) (5,469) (738)
controlling interest
Loss account (61,130) (46,650) (62,729) (8,470)
_______ _______ _______ ______
Shareholders' funds 22,419 36,899 20,820 2,812
_______ _______ _______ ______
_______ _______ _______ ______
Date of approval: 20 May 2003.
Itamar Patishi Daniel Stern Moshe Katz
Chairman of the Board General Manager Deputy General Manager -
Finance
The accompanying notes are an integral part of these condensed statements.
CONSOLIDATED CASH FLOW STATEMENTS
(Adjusted to NIS of March 2003)
Convenience
translation
Three months Three months Three months
Year ended ended ended ended
31st December 31st March 31st March 31 March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Net cash inflow (outflow) from operating 2,344 (2,808) (2,867) (388)
activities (Appendix A)
______ _____ _____ ____
Investing activities
Decrease (increase) in deposits (39) (20) - -
Payments to acquire tangible fixed assets (5,196) (1,675) (1,698) (229)
Receipts from sales of tangible fixed assets 368 52 738 100
______ _____ _____ ____
Net cash outflow to investing activities (4,867) (1,643) (960) (129)
______ _____ _____ ____
Financing activities
Receipt of long-term bank loans 4,750 - - -
Repayment of long-term bank loans (11,386) (2,182) (3,321) (448)
Short-term bank loans and credit, net 9,364 7,408 8,444 1,140
______ _____ _____ ____
Net cash inflow from financing activities 2,728 5,226 5,123 692
______ _____ _____ ____
Decrease in cash and cash equivalents 205 775 1,296 175
Opening balance 747 747 952 129
______ _____ _____ ____
Cash and cash equivalents - closing balance 952 1,522 2,248 304
______ _____ _____ ____
______ _____ _____ ____
The accompanying notes are an integral part of these condensed statements.
APPENDIX A
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
(Adjusted to NIS of March 2003)
Convenience
translation
Year ended Three months Three months Three months
31st December ended ended ended
31st March 31st March 31 March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Loss for the period (17,288) (2,808) (1,599) (216)
Depreciation of tangible fixed assets and 14,626 3,542 3,682 497
intangible assets
Amortisation of deferred income (64) (16) (16) (2)
Decrease in write-down of investment in other - - (997) (135)
company
Loss on sale of tangible fixed assets, net 592 6 114 15
Erosion in the value of capital note (55) - (28) (4)
Erosion in the value of deposits (1) - - -
Change in deferred tax, net (38) - (240) (32)
Increase (erosion) in the value of long-term 900 1,638 (669) (90)
liabilities
Decrease (increase) in stocks 3,600 3,978 (3,317) (448)
Decrease (increase) in trade debtors 8,054 (9,415) (4,967) (671)
Decrease (increase) in other debtors (1,943) (2,619) 1,695 229
Increase (decrease) in trade creditors (3,161) (519) 2,926 395
Increase (decrease) in other creditors (1,246) 2,215 1,542 208
Decrease in redundancy provision (785) (78) (134) (18)
Increase in funded amounts in respect of - - (70) (9)
redundancy provision
Net minority in losses (profits) of (847) 1,268 (643) (87)
consolidated subsidiaries
Company's equity in profits of associates - - (146) (20)
undertakings
_____ _____ _____ _____
Net cash (outflow) inflow from operating 2,344 (2,808) (2,867) (388)
activities
_____ _____ _____ _____
_____ _____ _____ _____
The accompanying notes are an integral part of these condensed statements.
APPENDIX B
MAJOR NON-CASH TRANSACTIONS
(Adjusted to NIS of March 2002)
Convenience
translation
Three months Three months Three months
Year ended ended ended ended
31st December 31st March 31st March 31 March
2002 2002 2003 2003
NIS' 000 NIS' 000 NIS' 000 #' 000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Acquisition of tangible fixed assets on credit 385 - - -
Transfer from long-term loans to short-term 2,672 - - -
credit
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 1 - GENERAL
1. Company activities
Technoplast Industries Limited (hereafter - the Company) is a public company
engaged in the manufacture and marketing of plastic products. It has two
plants, located in Barkan and Migdal Ha'emek.
On 15 October, 2002, the Board of Directors of the Company decided to merge the
Company's production operation in order to cut costs. To further this end, it
was decided to shut down production at the Barkan plant and transfer its
machinery to the plant in Migdal HaEmek.
As at 31 March 2003, the Company had a working capital deficit that amounted to
NIS 32 million and the group's consolidated operating capital amounted to NIS 57
million. As at 31 March 2003, the group had an accumulated loss of NIS 63
million. The group concluded the period under report with a negative cash flow
from current operations in the amount of NIS 2.9 million.
During the period under report, the Company continued the implementation of its
rehabilitation plan which was begun toward the end of 2001. The plan is based
on three components: expanding its marketing efforts into new markets and
broadening its basket of products; streamlining its operations by reducing
direct costs, and by cutting back on overhead. During the past few months, the
marketing network has been expanded in Europe, the U.S. and Israel, and more
products have been added to the Company's product line (mainly the new products,
the rights to which were transferred from Z.A.G.). In addition, reductions were
carried out in manpower and in management salaries, and an operating efficiency
plan was drafted and put into effect. As part of this plan, the Company's
operations at the Barkan plant will be shut down, as above.
In the year 2002, the Company signed an agreement whereby it put a floating
charge in favor of one of the banks, and a fixed charge on its building and
property in Migdal Haemek and a first pledge on its building and property in
Barkan. These charges guarantee the expansion of the Company's credit framework
at one of the banks.
Concurrently, the Company is continuing its negotiations with the banks to
expand its credit framework and to reschedule the repayment dates of its
long-term loans.
Further to a letter the Company received from one of its banks, that demanded
the immediate repayment of its entire indebtedness to the bank (in an amount of
NIS 4.7 million), this bank informed the Company during May 2003, that it agrees
to the Company's request to postpone the immediate repayments of the long-term
loans. The bank withdrew its demand, and agreed that the loans will be repaid
commencing at the end of 2003. In addition, this bank agreed in principal, to
join the inter-bank agreement between the Company and the other banks.
Company management believes that the measures it has taken, including obtaining
arrangements with the banks pertaining to the rescheduling of repayment dates of
the loans and the bank loans mentioned in the preceding paragraph, will enable
it to continue its business operations in an orderly fashion with a normal cash
flow.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 1 - GENERAL (cont.)
2. The consolidated interim financial statements (hereinafter - "the interim
statements") have been prepared as at 31st March 2003 and for the three month
period then ended. These financial statements are to be read in conjunction
with the audited annual financial statements of the Company at 31st December
2002 and their accompanying notes.
The financial statements for the period are prepared in accordance with the
accounting principles applicable to interim periods.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the interim statements are
consistent with those applied in the annual financial statements of the Company
at 31st December 2002.
NOTE 3 - FINANCIAL STATEMENTS IN ADJUSTED VALUES
The accompanying financial statements are prepared on the basis of historical
cost adjusted for the changes in the general purchasing power of the new Israeli
Shekel ("NIS").
Comparative figures in these financial statements were adjusted to the NIS of
March 2003.
The percentage change in the Israeli Consumer Price Index ("CPI") and in the
representative foreign currency exchange rates are as follows:
CPI # $
2003 2002 2003 2002 2003 2002
% % % % % %
For the three months ended 31 March 0.78 2.36 (2.98) 3.92 (1.06) 5.71
For the year ended 31 December - 6.5 - 19.27 - 7.27
NOTE 4 - CONVENIENCE TRANSLATION
The adjusted financial statements at 31 March 2003 (including the profit and
loss account and the balance sheet) have been translated into Sterling using the
representative exchange rate at the balance sheet date (#1 = NIS 7.4057). The
translation has been made solely for the convenience of the reader. The amounts
presented in these financial statements should not be construed to represent
amounts receivable or payable in Sterling or convertible into Sterling, unless
otherwise indicated in these statements.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 5 - IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
In 2001, the Israeli Accounting Standards Board issued Standard No. 12, "
Discontinuance of Adjusting Financial Statements for Inflation". In December
2002, the Board approved Standard No. 17, "Postponement of the Cessation of the
Adjustment of Financial Statements". According to Standard No. 12 and Standard
No. 17, financial statements will no longer be adjusted for changes in the
general purchasing power of the Israeli currency, commencing on January 1, 2004.
Until December 31, 2003, the Company will continue to prepare its financial
statements in accordance with Opinion No. 36 of the Institute of Certified
Public Accountants in Israel. The adjusted values to be presented in the
financial statements as of December 31, 2003 will serve as the basis for the
nominal financial reporting commencing on January 1, 2004.
The Company implemented for the first time during the reported period Standard
No. 14 of the Israeli Accounting Standards Board, Financial Reporting for
Interim Periods. This standard replaced Opinion No. 43 of the Institute of
Certified Public Accountants in Israel. Disclosure of information pertaining to
segmental data appears in Note 7, below.
NOTE 6 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
A. Adjusted to NIS of March 2003
(Unaudited)
Share Premium Capital Capital fund from Loss Total
capital on shares funds transaction with account
controlling
interest
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Three month period ended
31 March 2003
Balances at 1 January 2003 43,887 44,795 336 (5,469) (61,130) 22,419
Net loss for three months - - - - (1,599) (1,599)
______ ______ ____ _____ ______ ______
Balances at 31 March 2003 43,887 44,795 336 (5,469) (62,729) 20,820
______ ______ ____ _____ ______ ______
______ ______ ____ _____ ______ ______
B. Convenience Translation
(Unaudited)
Share Premium Capital Capital fund from Loss Total
capital on shares funds transaction with account
controlling
interest
# '000 # '000 NIS' 000 # '000 # '000 # '000
Three month period ended
31 March 2003
Balances at 1 January 2003 5,926 6,049 45 (738) (8,254) 3,028
Net loss for three months - - - - (216) (216)
_____ _____ ___ ____ _____ ______
Balances at 31 March 2003 5,926 6,049 45 (738) (8,470) 2,812
_____ _____ ___ ____ _____ ______
_____ _____ ___ ____ _____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 6 - STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (cont.)
C. Adjusted to NIS of March 2003
(Unaudited)
Share Premium Capital Capital fund from Profit Total
capital on shares funds transaction with and loss
controlling account
interest
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Three month period ended
31 March 2002
Balances at 1 January 2002 43,887 44,795 336 (5,469) (43,842) 39,707
Net loss for three months - - - - (2,808) (2,808)
______ ______ ____ _____ ______ ______
Balances at 31 March 2002 43,887 44,795 336 (5,469) (46,650) 36,899
______ ______ ____ _____ ______ ______
______ ______ ____ _____ ______ ______
D. Adjusted to NIS of March 2003
Year ended 31 December 2002
(Audited)
Share Premium Capital Capital fund from Profit Total
capital on shares funds transac-tion with and loss
a controlling account
shareholder
NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000 NIS' 000
Balances at 1 January 2002 43,887 44,795 336 (5,469) (43,842) 39,707
Changes during 2002
Loss for the year - - - - (17,288) (17,288)
______ ______ ___ _____ _____ ______
Balances at 31 December 2002 43,887 44,795 336 (5,469) (61,130) 22,419
______ ______ ___ _____ _____ ______
______ ______ ___ _____ _____ ______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 7 - BUSINESS SEGMENTS
A. General
Group companies are engaged in three main business segments:
Manufacture of Smart warehouses and products for the construction
industry, manufacture and marketing for subcontractors (including Z.A.G.), and
manufacture of self manufactured products.
B. Business segments
Adjusted to NIS of March 2003
Production Production & Smart Cancellations Total
of self marketing - warehouses & consolidated
manufactured subcontracting construction
products (including industry
Z.A.G.) products
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Three month period
ended 31 March 2003
(unaudited)
Segmental turnover 14,684 11,344 13,785 (342) 39,471
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
Segmental results (267) (605) (1,324) - (2,196)
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
Convenience translation
(unaudited)
Production Production & Smart Cancellations Total
of self marketing - warehouses & consolidated
manufactured subcontracting construction
products (including industry
Z.A.G.) products
# '000 # '000 # '000 # '000 # '000
Three month period
ended 31 March 2003
(unaudited)
Segmental turnover 1,983 1,532 1,860 (46) 5,329
_____ _____ _____ ___ _____
_____ _____ _____ ___ _____
Segmental results (36) (82) (179) - (297)
_____ _____ _____ ___ _____
_____ _____ _____ ___ _____
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 7 - BUSINESS SEGMENTS (cont.)
B. Business segments (cont.)
Adjusted to NIS of March 2003
Production Production & Smart Cancellations Total
of self marketing - warehouses & consolidated
manufactured subcontracting construction
products (including industry
Z.A.G.) products
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Three month period
ended 31 March 2002
(unaudited)
Segmental turnover 10,297 12,557 23,458 (274) 46,038
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
Segmental results (2,433) (698) 3,007 - (124)
_____ ______ ______ ____ ______
_____ ______ ______ ____ ______
Adjusted to NIS of March 2003
Production Production & Smart Cancellations Total
of self marketing - warehouses & consolidated
manufactured subcontracting construction
products (including industry
Z.A.G.) products
NIS'000 NIS'000 NIS'000 NIS'000 NIS'000
Year ended 31
December 2002
(audited)
Segmental turnover 44,506 51,752 58,270 (1,036) 153,492
______ ______ ______ _____ _______
______ ______ ______ _____ _______
Segmental results (10,961) (3,006) 586 - (13,431)
______ ______ ______ _____ _______
______ ______ ______ _____ _______
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE 8 - EVENTS DURING THE REPORTING PERIOD
A. In February 2003, the Company signed a long-term agreement pertaining to
real estate it owns in the Barkan industrial zone. In respect of this
agreement, the Company will receive annual rents (linked to changes in the
exchange rate of the U.S. dollar) in an amount of NIS 630 thousand.
B. The Company owns 25.1% of the shares of AFIC. At the end of 2001, the
Company wrote off the entire investment in AFIC which amounted to NIS 1.1
million.
The year 2002 and the first quarter of 2003 were characterised by a
significant increase in AFIC's activities and a transition from loss to profit.
On 27 March 2003, Itamar Patishi and Moshe Latz were appointed to the
board of AFIC.
In view of the above, Company management decided to include the
investment in AFIC in the financial statements, on the equity basis.
C. During the period, a fixed pledge, first degree mortgage, and assignment
of rights (in favor of banks) were recorded on all of the monies and monetary
rights of any kind due to the subsidiary, Smart Modular Storage Ltd.
(hereinafter - SMS), from SMS Smart Storage Enterprises Inc., USA, a wholly
owned subsidiary of SMS. In addition, a fixed pledge was placed on all of the
shares of SMS USA held by the subsidiary, as well as on related rights.
In addition, floating charges were recorded on all of the assets of the
subsidiary, its rights and other assets, as well as a fixed pledge on the
unpaid-in capital, the goodwill, monies, notes, securities and other pledges
that currently exist or will exist in the future, and on the rights deriving
from pledged property insurance.
NOTE 9 - SUBSEQUENT EVENTS
On 27 April, 2003, the general shareholders meeting of the Company
authorized an increase in the share capital of the Company by an amount of NIS
100,000,000 by creating an additional 100,000,000 ordinary shares, par value NIS
1 each.
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