Wrap Text
AND - Andulela Investment Holdings Limited - Reviewed provisional condensed
consolidated results for the year ended 31 December 2011
ANDULELA INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
Share code: AND ISIN: ZAE000125894
("Andulela" or "the company")
Reviewed provisional condensed consolidated results for the year ended
31 December 2011
Reviewed Audited
Year ended 18 months ended
31 December 2011 31 December 2010
Condensed consolidated
statements of financial
position Notes (R`000) (R`000)
Assets
Non-current assets 827,686 452,739
Investment in associates 1 - -
Plant and equipment 2.1 409,007 34,060
Goodwill 2.2 418,679 418,679
Current assets 278,437 26,068
Inventory 54,906 -
Trade and other receivables 165,276 23,647
Cash and cash equivalents 58,255 2,421
Total assets 1,106,123 478,807
Equity and liabilities
Capital and reserves 584,600 379,178
Share capital and share premium 3 976,114 803,567
Accumulated loss (471,981) (500,811)
Non-controlling interest 80,467 76,422
Non-current liabilities 308,468 81,892
Redeemable preference share capital 60,000 75,000
Deferred tax liability 78,676 6,892
Other financial liabilities 169,792 -
Current liabilities 213,055 17,737
Taxation 2,048 1,292
Redeemable preference share capital 15,000 -
Other financial liabilities 87,627 -
Trade and other payables 108,380 16,445
Total equity and liabilities 1,106,123 478,807
Net asset value per share (cents) 11.53 7.66
Net tangible asset value per
share (cents) 3.53 (2.93)
Condensed consolidated
statements of comprehensive
income Notes (R`000) (R`000)
Gross revenue 542,788 38,379
Profit/(loss) from operations 59,681 (3,003)
Investment income 452 8,412
Loss from associates - (4,536)
Proportionate share of loss
net of dividends - (10,554)
Dividends received - 6,018
Reversal of impairment of
investment in associates - 25,996
Impairment of goodwill on
acquisition of subsidiaries 2.2 - (219,536)
Finance costs (9,736) (8,155)
Profit/(loss) before taxation 50,397 (200,824)
Taxation (17,794) (6,497)
Net profit/(loss) for the year/period 32,603 (207,321)
Other comprehensive income net
of tax for the year/period 4,638 -
Gains on revaluation of plant
and equipment 6,441 -
Deferred tax charge on
revaluation of plant and equipment (1,803) -
Total comprehensive
income/(loss) for the year/period 37,241 (207,321)
Net profit/(loss) for the
year/period attributable to: 32,603 (207,321)
- Equity holders of Andulela
Investment Holdings Limited 24,954 (208,619)
- Non-controlling interest 7,649 1,298
Total comprehensive
income/(loss) for the
year/period attributable to: 37,241 (207,321)
- Equity holders of Andulela
Investment Holdings Limited 28,831 (208,619)
- Non-controlling interest 8,410 1,298
Ordinary shares in issue (millions) 4,371 3,951
Weighted average number of
ordinary shares in issue (millions) 4,091 2,790
Headline earnings/(loss) 24,954 (15,016)
- Attributable net profit/
(loss) for the year/period 24,954 (208,619)
- Less: Reversal of impairment
of investment in associates - (25,996)
- Add back: Impairment of
goodwill on acquisition of subsidiaries - 219,536
- Add back: Loss on scrapping
of plant and equipment - 63
Earnings/(loss) per ordinary
share (cents) (a) 0.61 (7.48)
Diluted earnings/(loss) per
ordinary share (cents) (a) 0.61 (7.48)
Headline earnings/(loss) per
ordinary share (cents) (a) 0.61 (0.54)
Diluted headline
earnings/(loss) per ordinary
share (cents) (a) 0.61 (0.54)
Dividends per ordinary share (cents) - -
(a) The earnings/(loss) and the headline earnings/(loss) per ordinary share is
calculated by dividing the earnings/(loss) and the headline earnings/(loss) by
the weighted average number of ordinary shares in issue during the year/period.
The diluted earnings/loss) and the diluted headline earnings/(loss) per ordinary
share is calculated by dividing the diluted earnings/(loss) and the diluted
headline earnings/(loss) by the weighted average number of ordinary shares in
issue and issuable during the year/period.
Condensed consolidated statements of cash flows
Cash flows from:
Operating activities 5,861 2,410
Investing activities (79,185) 8,800
Financing activities 129,158 (9,316)
Change in cash and equivalents 55,834 1,894
Opening cash and equivalents 2,421 527
Closing cash and equivalents 58,255 2,421
Condensed consolidated statements of changes
in equity
Opening balances 379,178 86,558
Movements for the year/period:
- Net profit/(loss) for the year/period 24,954 (208,619)
- Shares issued 167,914 424,817
- Vendor shares 4,633 -
- Revaluation net of deferred tax 3,877 -
- Non-controlling interest 4,044 76,422
Closing balances 584,600 379,178
Reviewed Audited
Year ended 18 months ended
31 December 2011 31 December 2010
Notes to the reviewed provisional
condensed consolidated financial results (R`000) (R`000)
Basis of preparation
The provisional condensed consolidated financial information for the year ended
31 December 2011 has been presented in accordance with the framework concepts
and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), the information required by IAS 34, `interim
financial reporting`, the AC 500 standards as issued by the Accounting Practices
Board or its successor, requirements of the South African Companies Act, as
amended and the JSE Limited Listings Requirements. The condensed consolidated
interim financial information is presented in South African rands, which is the
group`s functional currency. The results have been prepared in accordance with
the accounting policies of the company that are in terms of IFRS and that are
consistent with those accounting policies of the previous financial year, except
for plant and equipment which is no longer accounted for at cost less
depreciation, but at revalued amounts less depreciation. These results were
prepared under the supervision of Pieter de Jager, the Group Chief Financial
Officer.
1. Investment in associates
Opening carrying value at cost - 450,000
Shares at cost - 335,679
Loan receivable at acquisition - 114,321
Loan receivable subsequent to
Acquisition (b) - 20,978
Share of net loss from associate net of
dividends received - (19,805)
Brought forward from prior period - (9,251)
Current period - (10,554)
- Share of associate (loss) - current year - (4,536)
- Less: Dividend received - (6,018)
Less: Impairment (c) - (255,509)
- Balance brought forward from prior year - (281,505)
- Add: Current period reversal - 25,996
Less: Disposal of associates,
controlling interest acquired - (195,664)
Carrying value - -
(b) These loans represent the interest accrued and not paid on the acquisition
loans from the date of acquisition to 31 December 2010. These loans are
unsecured, bore interest at prime bank overdraft rates less 1% up to 31 March
2010, and have no fixed terms of repayment. As of 1 April 2010, the loans are
interest free.
(c) Based on fair value of investments as per competent person`s report dated 29
January 2010 updated on 19 January 2011.
2. Non-current assets
Tangible
2.1 Plant and equipment
Opening balance 34,060 -
Plant and machinery acquired through business
combinations 379,462 35,083
Revaluation of plant and equipment 6,441 -
Additions 801 933
Depreciation (11,757) (1,956)
Plant and machinery at carrying value 409,007 34,060
Intangible
2.2 Goodwill
Opening balance 418,679 -
Arising on acquisition of controlling interest in
subsidiary - 638,215
Impairment of goodwill on acquisition - (219,536)
Closing balance at period end 418,679 418,679
The goodwill has been impaired in the prior period based on a valuation of the
controlling interest per a competent persons` report dated 29 January 2010
updated on 19 January 2011. No further impairment has been identified based on
the competent persons` report updated on 6 March 2012 for the year ended 31
December 2011.
3. Share capital and share premium Year ended 18 months ended
31 December 2011 31 December 2010
No. of shares (`000) No. of shares (`000)
3.1 Ordinary shares of R0.01 each
Authorised
5 500 000 000 ordinary
shares of R0.01 each
Opening balance 5,500,000 1,925,000
Increase - 3,575,000
Authorised share capital at period end 5,500,000 5,500,000
Issued
Opening balance 3,950,660 419,000
Issued at a premium of R0.39 per
share (2010: R0.1103 per share) 420,000 3,531,660
Vendor shares issuable at a
premium of R0.39 per share 11,582 -
Closing balance 4,382,242 3,950,660
Year ended 18 months ended
31 December 2011 31 December 2010
(R`000) (R`000)
Authorised
5 500 000 000 ordinary shares
of R0.01 each
Opening balance 55,000 19,250
Increase - 35,750
Authorised share capital at period end 55,000 55,000
Issued
Opening balance 39,507 4,190
Issued at a premium of R0.39 per share
(2010: R0.1103 per share) 4,200 35,317
Vendor shares issuable at a premium of
R0.39 per share 115 -
Closing balance 43,822 39,507
3.2 Share premium
Opening balance 764,061 374,560
Issued at a premium of R0.39 per share
(2010: R0.1103 per share) 163,800 389,683
Vendor shares issuable at a premium of
R0.39 per share 4,517 -
Share issue costs (86) (183)
Closing balance 932,292 764,060
Total ordinary share capital and share
premium 976,114 803,567
Reviewed Audited
Year ended 18 months ended
31 December 2011 31 December 2010
(R`000) (R`000)
4. Business combinations
On 1 May 2010, the group acquired a controlling interest in Kilken Platinum
(Pty) Ltd ("Kilken") of 83.6% (previously 41.8%) through the combined holding of
subsidiaries Abalengani Mining Investments (Pty) Ltd ("AMI") and JB Platinum
Holdings (Pty) Ltd ("JBPH"). At acquisition, the previously held investment in
associates was fairly valued, based on the competent persons` report.
With effect from 1 September 2011 the group acquired a 100% controlling interest
in Pro Roof Steel Merchants (Pty) Limited and its subsidiaries ("PRSM") through
the issue of a maximum of 630 million and a minimum of 420 million Andulela
ordinary shares as purchase consideration, at an issue price of 40 cents per
share, based on the consolidated tangible net asset value ("NAV") of PRSM and
its subsidiaries as at 31 August 2011. The remaining 11.58 million ordinary
shares, still to be issued, are included as Vendor Shares in the Statement of
Changes in Equity. The transaction costs incurred in the acquisition of PRSM
amounted to R1.48 million. Had the results of PRSM been consolidated for the
entire year it would have contributed R 1 021.2 million to Gross Revenue and a
Net Loss of R14.1 million to the Consolidated Net Profit for the year ended 31
December 2011.
The following table summarises the fair value of the consideration paid and the
fair value of the assets acquired and liabilities assumed, recognised at the
acquisition dates of Kilken (2010) and PRSM (2011), as well as the fair value,
at the acquisition date, of the non-controlling interest in Kilken.
Equity instruments issued in respect of
acquisition 168,000 -
Equity instruments still to be issued in
respect of acquisition (vendor shares) 4,633 -
Equity instruments issued in respect of
option exercised - 425,000
Fair value of previously held associate interests - 195,664
Fair value of non-controlling interest - 76,799
172,633 697,463
Fair value of net assets acquired 172,633 59,248
Plant and equipment 379,462 35,083
Bank and cash 3,003 3,766
Inventory 48,897 -
Trade and other receivables 145,198 35,345
Non-current liabilities (180,860) -
Bank overdraft (81,386) -
Trade and other payables (141,681) (14,946)
Goodwill arising on acquisition of
controlling interest - 638,215
Financial information in respect of the subsidiaries
Kilken Platinum Kilken Platinum
PRSM Group (Pty) Ltd (Pty) Ltd
31 December 2011 31 December 2011 31 December 2010
(4 months) (12 months) (8 months)
(R`000) (R`000) (R`000)
Summarised statement of
financial position
Non-current assets 371,486 37,521 34,060
Current assets 227,352 49,681 25,717
Equity and reserves (169,743) (71,019) (46,371)
Non-current liabilities (239,401) (9,067) (6,892)
Current liabilities (189,694) (7,116) (6,514)
Results of operations
Revenue 419,228 123,560 38,379
Operating profit 1,165 65,253 9,509
Finance income 335 94 94
Finance costs (5,330) - -
(Loss)/profit
before taxation (3,830) 65,347 9,603
Taxation 940 (18,709) (3,786)
(Loss)/profit for
the year/period (2,890) 46,638 5,817
5. Related party transactions and balances
Sales to related parties
- E-Tile (Pty) Limited (15,714) -
- Changing Tides 74 (Pty) Limited (2,039) -
- Pro Steel International Trading (Pty) Limited (3,153) -
- Help-U-Build (Pty) Limited (4,217) -
- Mixshelf 1119 CC (217) -
Purchases from related parties
- Tailing Technologies (Pty) Limited 16,341 17,104
- GTS Technologies (Pty) Limited 15,449 6,984
- Pro Steel International Trading (Pty) Limited 217 -
- E-Tile (Pty) Limited 1,296 -
- Mono Steel Works 49 -
Administration and management fees expenses
to related parties
- Jonah Capital (Pty) Limited - 1,765
- Akzam Management Services (Pty) Limited 1,005 -
Consulting fees per agreement
- D N Rosen - 3,165
Interest income on shareholders` loans
- Abalengani Mining Investments (Pty) Limited - 4,910
- JB Platinum Holdings (Pty) Limited - 3,357
Interest expenses on working capital loans
- Newshelf 1005 (Pty) Limited - 447
- Jonah Capital (Pty) Limited - 231
Rent expenses to related parties
- Sheerprops 97 (Pty) Limited 7,056 -
- Wideprops 1087 CC 2,899 -
- Changing Tides 74 (Pty) Limited 2,147 -
- Normarc Investments 71 -
Trade receiveables
- Changing Tides 74 (Pty) Limited 474 -
- E-Tile (Pty) Limited 3,773 -
- Pro Steel International Trading (Pty) Limited 990 -
- Help-U-Build (Pty) Limited 2,064 -
- Mixshelf 1119 CC 247 -
Loan accounts - Owing to related parties
- The Rafik Mohamed Trust (647) -
- Thunder Rate Investments (Pty) Limited (36,940) -
Trade payables
- Euro Tile (Pty) Limited (46) -
- Mixshelf 1119 CC (1,099) -
- Tailing Technologies (Pty) Limited (1,424) (1,225)
Reviewed Audited
Year ended 18 months ended
31 December 2011 31 December 2010
(R`000) (R`000)
6. Segment reporting
The strategic steering committee is the group`s chief operating decision-maker.
Management has determined the operating segments based on the information
reviewed by the strategic steering committee for the purposes of allocating
resources and assessing performance. The strategic steering committee considers
the business from a product perspective. The group has two sources of income
namely, the production of Platinum Group Metals ("PGM") at the Kilken tailings
treatment facility and the processing and distribution of steel products by
PRSM.
Revenue
Tailings treatment facility 123,560 38,379
Steel processing plants 419,228 -
Total revenue 542,788 38,379
There are no sales between segments
Profit/(loss) after tax
Tailings treatment facility 46,638 5,817
Steel processing plants (2,890) -
Other unallocated (6,507) (213,138)
Total profit/(loss) after tax 37,241 (207,321)
Assets
Tailings treatment 87,202 59,777
Steel processing 598,838 -
Other unallocated 420,083 419,030
Total assets 1,106,123 478,807
Liabilities
Tailings treatment 16,183 6,892
Steel processing 429,095 -
Other unallocated 76,245 92,735
Total liabilities 521,523 99,627
Review opinion
These results have been reviewed by the company`s auditors, BDO South Africa
Incorporated, whose unmodified review opinion is available for inspection at the
company`s registered office.
Nature of the business
The company is an investment holding company.
Going concern
The financial information has been prepared on the going concern basis.
Directorate
The current directors of the company at date of this report are as follows:
Name Date of appointment
M J Husain (Chairman)# Appointed as Chairman 26 February 2010
A Kaka (CEO) Appointed as CEO 26 February 2010
P C de Jager (CFO) Appointed as CFO 25 October 2010
G R Rosenthal # Appointed 26 February 2010
P E du Preez # Appointed 1 October 2011
I Kajee ** Appointed 1 October 2011
# Independent non-executive; ** Non-executive
Commentary
Introduction
With reference to the announcements on SENS, the last of which was dated 2
September 2011, Andulela concluded the transaction to acquire the entire issued
share capital of, and all claims against PRSM. As at 30 August 2011 all the
suspensive conditions were fulfilled and the effective date of the transaction
was consequently 1 September 2011, from which date PRSM is consolidated into the
group results.
The consolidated group results for the year ending 31 December 2011 resulted in
attributable headline earnings rising to R24.9 million from a loss of R15.0
million reported for the period ended 31 December 2010. This is solely
attributable to Kilken`s performance and the continued improvements in PGM
production recoveries coupled with stronger average PGM prices. This resulted in
a profit after tax for Kilken of R46.6 million.
Financial review
In the current year preference share dividends on the cumulative redeemable
preference shares due to the holder thereof (Newshelf 1005 (Pty) Limited), in
the amount of R4.4 million were accrued and expensed as finance costs, in
accordance with the rights attaching to the preference shares. R14.1 million was
paid towards the arrear preference dividends owing. At the year-end the
cumulative arrears amounted to R0.4 million unpaid which is included in current
liabilities.
The value of Kilken is recorded at fair value in terms of IFRS 3 for the purpose
of recording the business combination of AMI, JBPH and Kilken. As a result of
the business combination, the group continues to carry goodwill of R419 million
in the financial statements of Andulela. In accordance with IFRS, management
will continue to assess the fair value of the investment. Having regard to the
improved production and PGM prices over the last year, management is confident
of the improved fundamentals for the real value of the underlying investment in
Kilken.
The group realised an improved net asset value per share of 11.53 cents compared
to 7.66 cents as reported for the period ended 31 December 2010.
The production improvements at Kilken and stronger average PGM basket prices
mentioned above was the main driver for the improved headline earnings per share
of 0.61 cents compared to the headline loss per share of 7.48 cents for the 18
months ended 31 December 2010.
Kilken Platinum
Andulela owns an effective 83.6% stake in Kilken`s PGM tailings retreatment
facility that delivers PGM concentrate to Rustenburg Platinum Mines (Pty)
Limited ("RPM").
As reported in the interim results for the six months ended 30 June 2011, a
proactive maintenance and refurbishment regime has been implemented to improve
efficiency and plant availability. These initiatives are currently yielding
positive returns. Kilken`s PGM production improved by 123% for the 12 months to
December 2011 compared to the comparative 12-month period in 2010. More
significantly, the 12 months to December 2011 when compared to the 18 months
ended 31 December 2010 of the previous audited financial statements shows an
improvement of 16%. This represents a marked improvement in constant production
volumes with less unplanned stoppages.
The introduction of Atomaer high shear reactors into the froth flotation process
during 2010 has yielded improved production recoveries over time by an average
of 30% as verified by an independent competent expert.
Kilken continues to be a profitable and low-cost PGM producer which is a
valuable cash-generative asset for the group and management remains optimistic
about the continued positive growth outlook for the PGM market in the medium to
long term.
Kilken has been solely responsible for the profitability and overall improved
results for the group.
Pro Roof Steel Merchants
PRSM is a steel processing, distribution and services group with a footprint of
six branches throughout South Africa.
It started as a roofing company in 1988, and has expanded its product range to
the most commonly used steel products including:
- welded beam line (universal columns/beams and T-beams);
- roofing solutions (corrugated, inverted box rib, widespan);
- fencing and wire products;
- tubing and cold formed;
- flat and long products; and
- value added services (slitting, cut-to-length, blanking, de- and recoiling,
guillotine, tube saw).
The increase in plant and equipment, inventory, trade and other receivables,
trade and other payables, other finance liabilities as well as the deferred tax
liabilities are as a result of this acquisition.
In line with management`s strategy to diversify the investment base of the group
into growth markets, the investment in PRSM was identified as a suitable
investment for the group.
With reference to further announcements on SENS the last of which was dated 22
June 2011, Andulela or its nominee will acquire the entire steel processing and
distribution business, including the assets and liabilities, of GIBB Steel (Pty)
Limited ("GIBB Steel") indivisibly as a going concern, which will be merged with
the PRSM processing and distribution business. The combined production
throughputs are anticipated to yield lower costs per ton, thus positioning the
steel processing division more competitively in its market segment. The
increased production volumes will benefit from the economies of scale and the
inherent savings from the merger in order to offer significant added value and a
diversified risk profile for shareholders.
The maximum transaction purchase consideration of R95 million will be based on
the tangible net asset value ("TNAV") of GIBB Steel at the anticipated effective
date, and will be settled by way of a maximum cash amount of R35 million and the
balance by way of the issue of the maximum of 150 million Andulela ordinary
shares at an issue price of 40 cents per share. The effective date TNAV of GIBB
Steel is anticipated to be R95 million.
Although we are witnessing a lack of stability in the steel market which has
prevailed longer than anticipated and further due to the world economic
downturn, there is still significant consolidation needed and implementation of
planned restructuring to be effected to maximise returns on the recovery of this
economic cycle.
Management are confident that the planned restructuring and reduction of costs
should enable PRSM to contribute positively to the profitability of the group
notwithstanding its lack of profitability in the current financial year.
Events subsequent to the year-end
With reference to the announcement on SENS dated 14 February 2012, the holder of
the preference shares and the company have agreed that the preference shares
shall be redeemable on an orderly basis over an extended five-year period, for a
minimum redemption amount of R1.25million per month, payable on the last day of
each calendar month. Such redemption payments may also be accelerated subject to
the company`s cash flow requirements as well as the company`s ability to satisfy
the solvency and liquidity test as set out in the Companies Act, 2008. Andulela
will continue to accrue for and pay preference share dividends on the reducing
unredeemed capital portion of the preference shares in line with the rights
attaching thereto.
The GIBB Steel transaction is conditional upon the fulfilment or waiver of
certain suspensive conditions as detailed in the announcement of 1 February
2011. As at the date of this report all the suspensive conditions have not been
fulfilled.
Commitments
Capital commitments related to capital expenditure contracted to PRSM amounted
to an estimated R4.9 million.
Restructuring review
As indicated in the interim results report for the six months ending 30 June
2011, management has completed a review of the group structure. Management has
opted to first improve the trading results of PRSM and conclude the acquisition
of GIBB Steel before proceeding with any restructuring. The restructuring
initiatives implemented will be reported to shareholders in due course.
For and on behalf of the board
Mohamed J Husain Ashruf Kaka
Chairman Chief Executive Officer
Sandton
16 April 2012
Directors
Mohamed J Husain# (Chairman); Ashruf Kaka (CEO); Pieter C de Jager (CFO);
Graham R Rosenthal#; Pieter E du Preez#; Ismail Kajee**
(#Independent non-executive; **Non-executive)
Registered office
108 4th Street, Parkmore, Sandton, 2196
Transfer secretaries
Link Market services (Pty) Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
Company Secretary
Joan R Jones
Sponsor
Java Capital
2 Arnold Road, Rosebank, Sandton, 2196
Date: 16/04/2012 14:50:01 Supplied by www.sharenet.co.za
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