Wrap Text
Reviewed Interim Condensed Consolidated Results for the 12 month period ended 31 December 2015
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
(“Vunani” or “the company” or “the group”)
REVIEWED INTERIM CONDENSED CONSOLIDATED RESULTS FOR THE 12 MONTH PERIOD ENDED 31
DECEMBER 2015
The Reviewed Interim Condensed Consolidated Results have been prepared under the
supervision of the Chief Financial Officer, Aphrodite Judin CA(SA).
Listed on AltX on the JSE Limited (“JSE”)
These results are available on our website www.vunanilimited.co.za
SALIENT FEATURES
REVENUE OF R131.4 million compared to R115.0 million at 31 December 2014
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS OF R8.6 million compared to a loss
of R25.3 million at 31 December 2014
BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS OF 5.9c compared to a loss of
22.5c at 31 December 2014
ACQUIRED 70% STAKE IN Fairheads International Holdings (SA)in May 2015
Condensed consolidated statement of comprehensive income for the 12 months period ended 31
December 2015
Reviewed Audited
31 December 31 December
2015 2014
Figures in R’000 Note
Continuing operations
Revenue 1 131 350 115 016
Other income 12 049 5 475
Investment revenue 8 803 14 220
Interest received from investments 1 681 2 384
Fair value adjustments and impairments 2 598 (17 922)
Operating expenses (154 072) (146 040)
Results from operating activities 409 (26 867)
Finance income 4 094 6 060
Finance costs (2 141) (2 960)
Net finance income 1 953 3 100
Results from operating activities after net 2 362 (23 767)
finance costs
Equity accounted earnings (net of income tax) 9 098 (86)
Profit/(loss) before income tax 11 460 (23 853)
Income tax expense (2 813) (1 462)
Profit/(loss) from continuing operations 8 647 (25 315)
Discontinued operations
(Loss)/profit from discontinued operations (net of 3 (403) 92 300
income tax)
Profit for the period 8 244 66 985
Other comprehensive income
Items that are or may be reclassified to profit or
loss
Exchange differences on translating foreign operations 553 243
Total comprehensive income for the period 8 797 67 228
Profit/(loss) from continuing operations
attributable to:
Equity holders of Vunani Limited 6 395 (23 069)
Non-controlling interest 2 252 (2 246)
8 647 (25 315)
Profit for the period attributable to:
Equity holders of Vunani Limited 6 116 56 039
Non-controlling interest 2 128 10 946
8 244 66 985
Total comprehensive income for the period
attributable to:
Equity holders of Vunani Limited 6 089 56 036
Non-controlling interest 2 708 11 192
8 797 67 228
Basic and diluted earnings per share (cents) 5.6 54.6
Basic and diluted earnings/(loss) per share from 5.9 (22.5)
continuing operations (cents)
Basic and diluted (loss)/earnings per share from
discontinued operations (cents) (0.3) 77.1
Basic and diluted headline earnings/(loss) per 4
share (cents) 5.6 (27.5)
Basic and diluted headline earnings/(loss) per share from
continuing operations (cents)
5.9 (24.7)
Basic and diluted headline loss per share from
discontinued operations (cents) (0.3) (2.8)
Condensed consolidated statement of financial position at 31 December 2015
Reviewed Audited
31 December 31 December
Figures in R’000 Note 2015 2014
Assets
Property, plant and equipment 8 312 6 787
Goodwill 34 123 34 123
Intangible assets 307 1 042
Investments in and loans to associates 77 320 17 686
Other investments 5 28 551 102 270
Deferred tax asset 48 394 44 890
Other non-current assets 27 832 22 005
Total non-current assets 224 839 228 803
Other investments 5 6 044 8 900
Other current assets 1 557 2 823
Taxation prepaid 1 100 886
Non-current assets held for sale 6 35 945 –
Trade and other receivables 30 128 39 085
Accounts receivable from trading 122 494 120 573
activities
Trading securities 504 251
Cash and cash equivalents 21 304 67 773
Total current assets 219 076 240 291
Total assets 443 915 469 094
Equity
Stated capital 7 624 888 624 888
Treasury shares (15 571) (15 571)
Share-based payments reserve 14 427 13 249
Foreign currency translation reserve (927) (900)
Accumulated loss (367 080) (364 004)
Equity attributable to equity holders of Vunani Limited 255 737 257 662
Non-controlling interest 1 450 (2 818)
Total equity 257 187 254 844
Liabilities
Other financial liabilities 5 11 699 20 298
Deferred tax liabilities 7 651 7 825
Total non-current liabilities 19 350 28 123
Other financial liabilities 5 4 911 25 282
Taxation payable 9 435 9 648
Trade and other payables 27 493 29 555
Accounts payable from trading activities 123 277 120 525
Trading securities 7 –
Bank overdraft 2 255 1 117
Current liabilities 167 378 186 127
Total liabilities 186 728 214 250
Total equity and liabilities 443 915 469 094
Shares in issue (000s) 7 114 665 114 665
Net asset value per share (cents) 223.0 224.7
Net tangible asset value per share 193.0 194.0
(cents)
Condensed consolidated statement of changes in equity for the 12 month period
ended 31 December 2015
Total
attributable Non-
Figures in R’000 of equity controlling Total
to Vunani interest equity
Balance as at 31 December 2013 – Audited 214 473 (6 226) 208 247
Transactions with owners, recorded directly in
equity – 3 575 3 575
Business combination
Issue of shares 14 800 – 14 800
Dividends paid (30 016) (11 677) (41 693)
Share-based payments reserve 2 993 – 2 993
Disposal to non-controlling interest (318) 318 –
Treasury shares acquired (306) – (306)
Transactions with owners, recorded directly in (12 847) (7 784) (20 631)
equity
Total comprehensive income
Profit for the year 56 039 10 946 66 985
Other comprehensive income for the year (3) 246 243
Total comprehensive income for the year 56 036 11 192 67 228
Balance as at 31 December 2014 – Audited 257 662 (2 818) 254 844
Transactions with owners, recorded directly
in equity
Acquisition of non-controlling interest (3 178) 3 178 –
Share-based payments reserve 1 178 – 1 178
Dividends paid (6 014) (1 618) (7 632)
Total transactions with owners (8 014) 1 560 (6 454)
Total comprehensive income
Profit for the period 6 116 2 128 8 244
Other comprehensive income for the period (27) 580 553
Total comprehensive income for the period 6 089 2 708 8 797
Balance at 31 December 2015- Reviewed 255 737 1 450 257 187
DIVIDENDS
Reviewed Audited
Figures in R’000 31 December 31 December
2015 2014
Ordinary dividend paid
Ordinary dividend number 2 of 5.5 cents per share (2014:
ordinary dividend number 1 of 5.0 cents per share)
declared on 30 March 2015 and paid to ordinary shareholders on 6 014 5 003
28 April 2015 (net of treasury shares held)
Special dividend paid
Special dividend number 1 of 25.0 cents per share (net of – 25 013
treasury shares held)
6 014 30 016
Condensed consolidated statement of cash flows for the 12 month period ended 31 December 2015
Reviewed Audited
31 December 31 December
Figures in R’000 Note 2015 2014
Cash flows from operating activities
Net cash utilised by operating activities 8 (25 414) (35 260)
Investment revenue received 8 803 12 787
Finance income received 4 416 7 473
Finance costs paid (2 035) (3 047)
Dividends paid to shareholders (6 014) (30 016)
Dividends paid to non-controlling (1 618) (11 677)
interest
Income tax paid (3 726) (17 706)
Net cash utilised by operating activities (25 588) (77 446)
Cash flows from investing activities
Proceeds on disposal of business 15 000 102 000
Acquisition of property, plant and equipment (1 575) (678)
Repayment of loans to associates – 2 239
Increase in investment and loans to associates (49 620) (4 089)
Increase in other non-current assets (4 032) (798)
Proceeds from repayment of other non-current assets 4 257 331
Acquisition of other investments (1 010) (2 833)
Proceeds on disposal of other investments 37 163 –
Net cash inflow from investing activities 183 96 172
Cash flows from financing activities
Proceeds on issue of share capital – 14 800
Repayments of other financial liabilities (22 202) (6 718)
Net cash (outflow)/inflow from financing activities (22 202) 8 082
Net (decrease)/increase in cash and cash equivalents (47 607) 26 808
Cash and cash equivalents at the beginning of the period 66 656 39 360
Cash acquired in business acquisitions – 488
Total cash and cash equivalents at end of the period 19 049 66 656
Segmental reporting
for the 12 month period ended 31 December 2015
The asset management, advisory services and private equity segments are
geographically located in South Africa and, on a smaller scale, in Zimbabwe. The
institutional securities broking and private wealth and investments segments are
geographically located in South Africa.
Reportable
segment
profit/(loss) Total Total
Revenue after tax assets liabilities
Reviewed Reviewed Reviewed Reviewed
31 December 31 December 31 December 31 December
Figures in R’000 2015 2015 2015 2015
Continuing operations
Asset management 50 187 (55) 52 522 (4 354)
Asset administration – 7 692 50 647 (4 776)
Advisory 947 (1 885) 1 271 (690)
services
Investment banking Institutional 60 160 5 699 144 089 (145 333)
securities broking
Private equity** 8 525 (257) 191 366 (27 364)
Private wealth and 11 531 (2 547) 3 095 (2 527)
investments
131 350 8 647 442 990 (185 044)
Discontinued operations
Property asset management – (403) 925 (1 684)
Total 131 350 8 244 443 915 (186 728)
Reportable
segment
profit/(loss) Total Total
Revenue after tax assets liabilities
Audited Audited Audited Audited
31 December 31 December 31 December 31 December
2014 2014 2014 2014 2014
Continuing operations
Asset management 38 383 (5 287) 47 283 (2 904)
Advisory services 3 138 (3 276) 2 008 (573)
Investment banking
Institutional securities 52 256 2 409 155 070 (141 507)
broking
Private equity** 10 592 (14 444) 246 094 (63 236)
Private wealth and 10 647 (4 717) 2 275 (2 666)
investments
115 016 (25 315) 452 730 (210 886)
Discontinued
operations
Property asset 1 571 94 093 14 990 (1 707)
management
Property developments – (1 793) 1 374 (1 657)
and investments
1 571 92 300 16 364 (3 364)
Total 116 587 66 985 469 094 (214 250)
Vunani previously reported a “Group” segment, however this segment supports all ofthe group’s businesses.
In fine-tuning the reportable segments, this segment has consequently been reallocated across the other
segments and has fallen away. Prior period segmental results have been restated.
* In the current period, the group introduced a new reporting segment "Asset administration" after the
acquisition of Fairheads.
** The Private equity segment was previously named “Investment holdings”. The segment name was amended in 2015.
Notes to the condensed consolidated interim results
(all figures in R´000)
BASIS OF PREPARATION
The reviewed condensed consolidated interim financial statements for the 12 months
ended 31 December 2015 are prepared in accordance with International Financial
Reporting Standard, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of these
interim financial statements are in terms of International Financial Reporting
Standards and are consistent with those applied in the previous annual financial
statements.
The reviewed condensed consolidated interim financial statements have been presented
on the historical cost basis, except for other investments and certain other financial
liabilities, which are fair valued. These condensed consolidated financial statements
are presented in South African Rand, rounded to the nearest thousand, which is the
group’s functional and presentation currency.
These reviewed condensed consolidated interim financial statements incorporate the
financial statements of the company, its subsidiaries and entities that, in substance,
are controlled by the group and the group's interest in associates. Results of
subsidiaries and associates are included from the effective date of acquisition up
to the effective date of disposal. All significant transactions and balances between
group enterprises are eliminated on consolidation.
CHANGE IN FINANCIAL REPORTING PERIOD
A decision was taken during 2015 to change the financial year-end of Vunani Limited
and its subsidiaries (“Vunani Group”) from 31 December to the last day of February.
The change was primarily motivated by Vunani’s acquisition of an effective interest
of 70% in Fairheads International Holdings Proprietary Limited (“Fairheads”) in May
2015, which has a February year-end. Financial reporting standards requires that
all companies in the group have the same reporting period. The JSE Listings
Requirements require that in the instance where the financial year-end of a company
has been changed and this results in the financial period being longer than 12
months, reviewed interim reports are to be published and distributed in respect of
the 12-month period commencing on the first day of such financial period.
Accordingly, Vunani has prepared this interim report for the period 1 January 2015
to 31 December 2015. The reviewed condensed preliminary financial statements for the
period 1 January 2015 to 29 February 2016 will be released by the end of May 2016.
NOTES
1. Revenue
Revenue includes trading revenue and fees earned from advisory services,
brokerage, asset management fees and client service fees.
2. Fair value adjustments and impairments
Reviewed Audited
31 December 31 December
Figures in R’000 2015 2014
Fair value adjustment on financial assets and liabilities 1 896 (18 866)
designated at fair value through profit or loss
Fair value adjustment on re-measurement of stepped up – 1 742
acquisition of subsidiary
Impairment of loans in other non-current assets (1 298) (798)
598 (17 922)
3. Discontinued operations
A strategic decision was made in November 2013 to dispose of the group’s property
asset management business. This culminated in the group disposing of the property
management contract that was held in Vunani Property Asset Management Proprietary
Limited (“VPAM”). The sale of VPAM's business included the transfer of VPAM’s
executive management and staff employment contracts to the purchaser. As this
disposal related to a major line of the group’s business, the related activities
have been presented as a discontinued operation. The non-controlling interest
relating to the disposal of VPAM's business has been calculated in terms of an
agreement between the shareholders of Vunani Properties Proprietary Limited, a 78%
held subsidiary of Vunani Limited, that owns 100% of VPAM.
3. Discontinued operations (continued)
The results of the discontinued operations are as follows:
Reviewed Audited
31 December 31 December
Figures in R’000 2015 2014
Revenue – 1 571
Other income 110 –
Profit on disposal of assets – 116 318
Operating expenses (676) (10 782)
Results from operating activities (566) 107 107
Finance income 163 747
Finance costs – (87)
Net finance income 163 660
Results from operating activities after net finance costs (403) 107 767
Equity-accounted earnings (net of income tax) – (30)
(Loss)/profit before income tax (403) 107 737
Income tax expense – (15 437)
(Loss)/profit for the period (403) 92 300
Attributable to equity holders of Vunani (279) 79 108
Attributable to non-controlling interest (124) 13 192
(403) 92 300
Effect on basic and diluted earnings per share (cents) (0.3) 77.1
Effect on basic and diluted headline loss per share (cents) (0.3) (2.8)
Cash flows from discontinued operations
Net cash generated/(utilised) by operating activities 11 548 (106 912)
Net cash inflow from investing activities – 103 593
Net cash outflow from financing activities (11 556) (2 213)
Net cash outflow for the period (8) (5 532)
4. Reconciliation of headline earnings for the period
Reviewed Audited 31
31 December 31 December
Figures in R’000 2015 2014
Profit for the period attributable to equity holders of 6 116 56 039
Vunani
Adjusted for:
Discontinued operations
Profit on disposal of discontinued operations – (116 318)
Taxation – 21 691
Non-controlling interest – 12 617
Associates
Gross revaluation of investment property – (467)
Deferred taxation on revaluation – 131
Non-controlling interest – 74
Business combinations
Fair value adjustment on stepped up acquisition – (1 742)
Bargain purchase – (298)
6 116 (28 273)
Headline earnings/(loss) per share (cents) 5.6 (27.5)
Basic and diluted headline earnings/(loss)
5.9 (24.7)
per share from continuing operations
Basic and diluted headline loss per share (0.3) (2.8)
from discontinued operations
5. Other investments and other financial liabilities
Unlisted investments are fair valued annually by the directors. Listed investment
prices are determined with reference to the share price at period-end.
Both listed and unlisted investments are designated at fair value through profit
or loss. Financial liabilities are either accounted for at amortised cost or
designated at fair value through profit or loss. The group designates certain
financial liabilities at fair value through profit or loss upon initial
recognition.
Ring-fenced special purpose entities have historically been used to house the
group’s geared equity investments and any financial liabilities that relate to such
investments. Financial assets and liabilities that arise in terms of these ring-
fenced structures are both fair valued through profit or loss in terms of IAS 39
Financial instruments: Recognition and measurement.
The reason for the above designation was to reduce the measurement inconsistency
on ring-fenced liabilities relative to the assets that they funded. Because the
liability to lenders is limited to the fair value of the assets, if the assets
were fair valued through profit or loss and the liabilities carried at amortised
cost, inconsistency would arise that would not reflect the true liability of the
group. In order to eliminate this inconsistency on ring-fenced structures, these
specific liabilities are designated at fair value through profit or loss on initial
recognition. Financial liabilities at fair value include capitalised interest and
attributable profit participation.
6. Non-current assets held for sale
During the period, the group made a decision to dispose of its listed investments
in BSI Limited and Workforce Holdings Limited, which fall under the private equity
segment. The assets and liabilities relating to the sale of investments have been
presented as non-current assets held for sale. It is expected that the sale of
these assets will be concluded within the next 12 month period. At 31 December
2015, the non-current assets held for sale were stated at fair value and consisted
of assets of R35.9 million.
As at 31 December 2015 the non-current assets held for sale were detailed as
follows:
Reviewed Audited
31 December 31 December
2015 2014
Assets classified as held for sale
BSI Limited
Other investment 8 060 –
Workforce Holdings Limited
Other investment 36 885 –
Other financial liabilities (9 000) –
35 945 –
7. Authorised and issued stated capital
The authorised stated capital at 31 December 2015 was 200 million ordinary shares
of no par value (2014: 200 million ordinary shares of no par value). 114 664 649
shares were in issue at 31 December 2015 (2014: 114 664 649).
Reviewed Audited
31 December 31 December
Weighted average number of ordinary shares (000s) 2015 2014
Issued ordinary shares at the beginning of the period 114 665 105 415
Effect of share issue – 2 588
Effect of own shares held (5 364) (5 364)
109 301 102 639
Number of shares in issue at the end of the period (000s) 114 665 114 665
Dilutive weighted average number of ordinary shares (000s)
Issued ordinary shares at the beginning of the period 114 665 105 415
Effect of share issue – 2 588
Effect of own shares held (5 364) (5 364)
Effect of dilutive shares (199) –
Weighted average number of shares 109 102 102 639
Number of shares in issue at the end of the period (000s) 114 665 114 665
The shares issued as part of the employee share incentive scheme could potentially dilute basic
earnings in the future. In the current period, the employee shares have a dilutive effect.
The impact of the potential dilutive shares is immaterial.
8. Net cash utilised by operating activities
Reviewed Audited
31 December 31 December
Figures in R’000 2015 2014
Profit/(loss) before income tax expense from continuing 11 460 (23 853)
(Loss)/profit before income tax expense from discontinued
operations (403) 107 737
operations
Adjusted for:
Depreciation of property, plant and equipment 1 138 1 570
Profit on discontinued operations – (116 318)
Reversal of other financial liabilities (1 483) –
Equity-accounted earnings (net of income tax) (9 098) 116
8. Net cash utilised by operating activities (continued)
Reviewed Audited
31 December 31 December
2015 2014
Gain on bargain purchase – (298)
Fair value adjustments and impairments (598) 17 922
Realisation of deferred income (3 573) (3 573)
Movement in impairment allowance 128 (297)
Amortisation of intangible assets 735 1 165
Share-based payments expense 1 178 2 993
Foreign currency translation gain (3 055) (920)
Lease straight-line adjustment (534) (82)
Interest received from investments and finance income (5 938) (9 191)
Investment revenue (8 803) (14 220)
Finance costs 2 141 3 047
Changes in working capital:
(Increase)/decrease in trading securities (246) 69
(Increase)/decrease in trade and other receivables (1 702) 8 473
Decrease in trade and other payables (4 700) (9 688)
(Increase)/decrease in accounts receivable and payable from (2 061) 88
trading activities
Cash utilised by operating activities (25 414) (35 260)
9. Financial instruments carried at fair value
The fair value of a financial instrument is the price that would be received for
the sale of an asset or paid for the transfer of a liability in an orderly
transaction between market participants at the measurement date. Underlying the
definition of fair value is a presumption that an entity is a going concern
without any intention or need to liquidate, to curtail materially the scale of
its operations or to undertake a transaction on adverse terms. Fair value is
not, therefore, the amount that an entity would receive or pay in a forced
transaction, involuntary liquidation or distressed sale.
The existence of published price quotations in an active market is the best
evidence of fair value and, where they exist, they are used to measure the
financial asset or financial liability. A market is considered to be active if
transactions occur with sufficient volume and frequency to provide pricing
information on an ongoing basis. Financial instruments fair valued using quoted
prices would generally be classified as level 1 in terms of the fair value
hierarchy.
Where a quoted price does not represent fair value at the measurement date or
where the market for a financial instrument is not active, the group establishes
fair value by using valuation techniques. These valuation techniques include
reference to the value of the assets of the underlying business, earnings
multiples (e.g. unlisted investments), discounted cash flow analysis (e.g.
unlisted investments, loans and advances) and various option pricing models.
Inputs typically used in valuation techniques include discount rates, expected
future cash flows, dividend yields, earnings multiples, volatility, equity prices
and commodity prices.
Valuation methodologies and techniques applied for level 3 financial instruments
include a combination of discounted cash flow analysis, application of earnings
multiples on sustainable after tax earnings and current and projected net asset
values to determine overall reasonability. The valuation technique applied to
specific financial instruments depends on the nature of the financial instrument
and the most appropriate valuation technique is determined on that basis.
After the valuations of the unlisted financial assets and liabilities are
performed, these are presented to the group’s investment committee for
independent review. All significant valuations are approved by the investment
committee.
The valuation methodologies, techniques and inputs applied to the fair value
measurement of the financial instruments have been applied in a manner
consistent with that of the previous financial period.
Reviewed Audited
31 December 2015 31 December 2014
Carrying Fair Carrying Fair
Fair values Amount value amount value
Figures in R’000
Financial assets measured at fair value
Designated at fair value through profit or 58 208 58 208 134 874 134 874
loss on initial recognition
Non-current assets held for sale 35 945 35 945 – –
Trading securities 504 504 251 251
Financial assets not measured at fair
value
Loans to associates 29 940 22 759 14 325 11 537
Loans in other non-current assets 5 776 7 252 4 788 5 786
130 373 124 668 154 238 152 448
Reviewed Audited
31 December 2015 31 December 2014
Fair values Carrying Fair Carrying Fair
amount value amount value
Figures in
R’000
Financial liabilities measured at fair
value
Designated at fair value through profit – – (2 554) (2 554)
or loss on initial recognition
Trading securities (7) (7) – –
Financial liabilities not measured at
fair value
Other financial liabilities (16 610) (14 589) (45 580) (42 760)
(16 617) (14 596) (48 134) (45 314)
Total 113 756 110 072 106 104 107 134
The carrying amounts of cash and cash equivalents, accounts receivable from
trading activities, trade and other receivables, bank overdraft, accounts payable
from trading activities and trade and other payables reasonably approximate their
fair values.
9. Financial instruments carried at fair value (continued)
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets
and financial liabilities. These fair value measurements are categorised into
different levels in the fair value hierarchy based on inputs to the valuation
techniques used.
The different levels are defined as follows:
– Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
– Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
– Level 3: Inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
Reviewed 31 December 2015
Figures in R’000 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value 33 850 – 24 358 58 208
through profit or loss
Financial assets measured at fair value 36 449 – – 36 449
Financial assets at amortised cost – – 30 011 30 011
Financial liabilities measured at fair value (7) – – (7)
Financial liabilities at amortised cost – – (14 589) (14 589)
70 292 – 39 780 110 072
Audited 31 December 2014 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value 96 430 – 38 444 134 874
through profit or loss
Financial assets measured at fair value 251 – – 251
Financial assets at amortised cost – – 17 323 17 323
Financial liabilities designated at fair – – (2 554) (2 554)
value through profit or loss
Financial liabilities at amortised cost – – (42 760) (42 760)
96 681 – 10 453 107 134
Reviewed Audited
31 December 31 December
2015 2014
Level 3 comprises:
Balance at beginning of period 35 890 57 674
Total gains or losses in profit or loss (13 921) (24 927)
Proceeds from loan, interest and repayments – –
Purchases, transfers, sales, issues and 2 389 3 143
settlements
Balance at end of the period 24 358 35 890
A change of 10% in the unobservable inputs of the investment and liability at
the reporting date would have increased/(decreased) equity and profit or loss
by the amount shown below. This analysis assumes that all other variables
remain constant.
Reviewed Audited
Effect on statement of comprehensive income (profit/(loss)) 31 December 31 December
and equity before taxation 2015 2014
Net asset value
10% increase 139 1 309
10% decrease (22) (1 192)
Free cash flow
10% increase 3 782 777
10% decrease (4 003) 821
OVERVIEW AND PROSPECTS
Domestic economic growth prospects and business conditions deteriorated over the
course of 2015. Weaker global demand for resources culminated in plummeting resource
prices and, together with other factors, contributed towards an eventual dramatic
weakening in the Rand. Rising international interest rates and increased concerns
regarding the prospects for domestic inflation – predominantly on the back of
significantly higher import prices and aggravated by a severe drought – also resulted
in higher domestic interest rates in spite of weakening economic growth prospects.
These factors caused tougher business conditions compared to what was envisaged at
the beginning of the 2015 year.
While economic conditions were trying, the 2015 year saw exciting developments and
accomplishments within the Vunani group.
The acquisition of Fairheads International Holdings SA Proprietary Limited
(“Fairheads”) was one of Vunani’s major achievements of 2015. Fairheads’ business is
complementary to the group’s existing financial services product offering in that it
operates within the asset administration sphere. The acquisition has also resulted in
Vunani aligning its year-end reporting period with that of Fairheads and Vunani has
therefore changed its year-end from December to February.
Another significant development is that the group has, where possible, systematically
reduced its exposure to other listed investments and the proceeds have been utilised
within the operating businesses.
One of the group’s most important assets is its employees and the approval and
implementation of a new share incentive scheme has been an important step in retaining
key management and staff. The scheme aligns the individuals’ objectives and
performance to the creation of shareholder value.
Vunani generated total comprehensive income for the period of R8.8 million (2014:
R67.2 million). Total comprehensive income attributable to equity holders of the
company amounts to R6.1 million (2014: R56.0 million). In line with the presentation
at 31 December 2014, the results for the 12-month period ended
31 December 2015 have been presented such that the disposal of the property asset
management business in Vunani Property Asset Management Proprietary Limited (“VPAM”)
and the winding down of the property investment and development segment are reflected
as discontinued operations (refer to note 3).
The group’s reportable segment structure was refined further based on the key sectors
that the group operates in.
The reportable segments are as follows:
• Asset management
• Asset administration
• Investment banking – Advisory services
- Institutional securities broking
• Private equity
• Private wealth and investments
Asset management
The asset management segment includes the group’s investments in Vunani Fund Managers
Proprietary Limited (“VFM”) and Purpose Vunani Asset Management (Private) Limited
(“PVAM”). The segment reported a 31% increase in revenue and a loss of R0.06 million
for the period ended 31 December 2015 (2014: loss of R5.3 million).
VFM’s performance and profitability improved during the period and its assets under
management increased from R12.4 billion at December 2014 to R14.4 billion at December
2015. This increase in assets under management is mainly attributable to good
performance in all the funds across the business.
PVAM continued to face challenging economic conditions in Zimbabwe, but despite this,
PVAM’s assets under management increased to $20.3 million at December 2015 from $16.2
million at December 2014. Operating margins in this business remain tight and costs
are monitored closely.
Asset administration
In May 2015, the group concluded the acquisition of 70% of Fairheads.
The balance of the shareholding in Fairheads has been retained by Fairheads’ key
management. International Financial Reporting Standards (“IFRS”) require that the
investment in Fairheads is equity- accounted because of specific provisions
pertaining to control that were contained in the structuring of the acquisition.
Fairheads’ performance has been pleasing and the investment has contributed R9.3
million in equity-accounted after tax earnings to the group for the period.
Advisory services
The arduous market conditions have impacted this segment and have contributed to
greater lead times in finalisation of transactions. The corporate finance team was
integrally involved in the structuring and ultimate conclusion of the Fairheads
acquisition. The segment reported a loss for the period of R1.9 million (2014: R3.3
million).
Private equity
The segment has refined its focus into three investment sub-categories, namely mining,
property and African investments. While a portion of the listed investment portfolio
has been disposed of, the remaining investments still held at 31 December 2015 have
been included in this segment. The intention is to dispose of the listed investment
portfolio, except in cases where the holding of listed equities supports regulatory
capital requirements. The return on the investments and optimal use of capital is
monitored to ensure that an efficient structure is maintained. Mining investments are
focused primarily on coal and are considered in partnership with well-capitalised and
strategic associates. The next phase of the group’s involvement in the property sector
is being explored. Furthermore, Vunani is continuing its investment strategy onto the
African continent through its existing relationships. The segment reported a loss of
R0.3 million for the period (2014: loss of R14.4 million).
Institutional securities broking
This segment includes equity, derivative and capital market trading services to
institutional clients. Revenue increased by 15% compared to 2014, while costs were
closely managed. The segment reported a profit for the period of R5.7 million (2014:
R2.4 million). The focus for the period was on revenue growth through the expansion
of the client base and exploring diversified products, which are progressing
positively.
Private wealth and investments
The segment’s main business activities are providing retail securities broking,
private wealth and investment products to retail clients. The segment reported a
loss of R2.5 million for the period ended 31 December 2015 (2014: R4.7 million),
despite an 8% increase in revenue. The established platform in place provides a
foundation for growth and executive management’s focus will be dedicated to ensuring
that the number of actively trading clients improves.
Discontinued operations
The group’s legacy property development, investments and property asset management
segments went through a realisation phase and have been reflected as discontinued
operations since 2014.
Financial performance
Revenue from continuing operations increased by 14% to R131.4 million (2014: R115.0
million) for the period ended 31 December 2015. Other income comprises the
amortisation of deferred revenue that arose on the historic acquisition of Black
Wattle Colliery Proprietary Limited, directors’ fees earned where the group’s
executive directors serve on investee company boards and the effect of the write back
of certain financial liabilities that have prescribed.
Investment income (in the form of dividends) amounting to R8.8 million (2014: R14.2
million) was received during the period. This decrease was a result of lower dividend
declarations by investee companies.
Positive fair value adjustments and impairments of R0.6 million (2014: negative fair
value adjustments and impairments of R17.9 million) relate to the valuation of the
groups’ investment portfolio that has been designated at fair value through profit or
loss.
Operating expenses have increased by 5% from R146.0 million to R154.1 million. The
increase in costs is mainly attributable to professional fees and costs relating to
the acquisition of Fairheads, which are required to be expensed in terms of IFRS.
Furthermore, the devaluation of the Rand has resulted in increases in information and
technology costs, which are typically dollar denominated. The group remains focused
on cost containment and monitors spending on an ongoing basis.
Finance income has decreased to R4.1 million in 2015 compared to R6.0 million in
2014, while finance costs have decreased from R3.0 million for the period ended
December 2014 to R2.1 million for the period ended December 2015.
Discontinued operations generated a loss of R0.4 million (2014: profit of R92.3
million). The deferred payment on the disposal of the business in 2014 amounting to
R15 million was received on 28 February 2015 in accordance with the agreement.
Investments in and loans to associates have increased primarily as a result of the
acquisition of Fairheads and mining related private equity investments.
The overall decrease in other investments has resulted from the decision to
systematically dispose of a portion of the group’s listed investment portfolio. The
proceeds from the disposal of other investments were used to repay other financial
liabilities. Investments in listed assets that do not provide a capital adequacy
underpin have been presented as non-current assets held for sale. It is expected
that the sale of these assets will be concluded within the next 12-month period. At
31 December 2015, the non- current assets and liabilities held for sale were stated
at fair value.
Cash and cash equivalents decreased by R47.6 million since December 2014 (2014:
increase of R26.8 million) primarily as a result of the acquisition of Fairheads and
the payment of dividends.
The share-based payments reserve movement of R1.2 million is attributable to the
current period IFRS 2 charge (2014: charge of R3.0 million). Dividends paid to Vunani’s
shareholders during the period amounted to R6.0 million (2014: R30.0 million).
Prospects
Vunani has been fortunate in that it has seen steady deal-flow and promising
opportunities despite subdued market conditions. The group’s emphasis is on the
development and growth of the operating businesses through strong leadership and a
first-rate product offering. The strategic partnerships and alliances that have been
formed, both locally and on the African continent, are expected to make a meaningful
contribution to the group and its ability to produce sustainable earnings.
EVENTS AFTER REPORTING DATE
There have been no material events between the period end and the date of the signing
of the results.
DIVIDENDS PAID
A gross ordinary dividend of 5.5 cents per share (2014: 5 cents per share and a
gross special dividend of 25 cents per share)were declared out of income reserves
on 30 March 2015 and paid to ordinary shareholders on 28 April 2015.
GOING CONCERN
The directors have made an assessment of the ability of the company and its subsidiaries
to continue as going concerns and have no reason to believe the businesses will not
continue as going concerns for the foreseeable future.
REVIEW OPINION
The interim condensed consolidated results of Vunani Limited for the period ended 31
December 2015 have been reviewed by the company’s auditor, KPMG Inc. In their review
report dated 29 February 2016, which is available for inspection at the Company’s
Registered Office, KPMG Inc. state that their review was conducted in accordance with
the International Standard on Review Engagements 2410, Review of Interim Information
Performed by the Independent Auditor of the Entity, which applies to a review of
condensed consolidated interim financial information, and have expressed an unmodified
conclusion on the interim condensed consolidated results.
FORWARD-LOOKING STATEMENTS AND DIRECTORS’ RESPONSIBILITY
Statements made throughout this announcement regarding the future financial
performance of Vunani have not been reviewed or audited by the company's external
auditors. The company cannot guarantee that any forward-looking statement will
materialise and accordingly, readers are cautioned not to place undue reliance on any
forward-looking statements. The company disclaims any intention and assumes no
obligation to update or revise any forward-looking statement even if new information
becomes available as a result of future events or for any other reason, other than as
required by the JSE Listings Requirements.
The directors take full responsibility for the preparation of the condensed
consolidated interim results.
Signed on behalf of the board of directors by EG Dube and A Judin on 29 February 2016.
CORPORATE INFORMATION
Executive directors
EG Dube (Chief Executive Officer)
A Judin (Chief Financial Officer)
BM Khoza
NM Anderson
Non-executive directors
LI Jacobs - Independent Chairman
XP Guma - Independent
NS Mazwi – Independent
G Nzalo - Independent
JR Macey - Independent
S Mthethwa
Company secretary
CIS Company Secretaries Proprietary Limited
Financial communications adviser
Singular Systems Proprietary Limited (Appointed 1 November 2015)
Designated adviser
Grindrod Bank Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
Date: 29/02/2016 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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