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AND - Andulela Investment Holdings Limited - Reviewed condensed interim results
for the six months ended 30 June 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 condensed interim results for the six months ended 30 June 2011
Condensed consolidated statement of financial position
Reviewed Reviewed Audited
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
Notes (R`000) (R`000) (R`000)
Assets
Non-current assets
Investment in associates 1 - - -
Property, plant and
equipment 2.1 32 570 35 103 34 060
Goodwill 2.2 418 679 418 679 418 679
Current assets 37 997 28 758 26 068
Trade and other receivables 35 659 26 683 23 647
Cash at bank 2 338 2 075 2 421
Total assets 489 246 482 540 478 807
Equity and liabilities
Capital and reserves 385 118 383 718 379 178
Share capital and share
premium 3 803 567 803 567 803 567
Accumulated loss (495 611) (496 933) (500 811)
Non-controlling interest 77 162 77 084 76 422
Non-current liabilities 82 030 80 635 81 892
Redeemable preference
share capital 75 000 75 000 75 000
Deferred tax liability 7 030 5 635 6 892
Current liabilities 22 098 18 187 17 737
Taxation 4 263 3 607 1 292
Trade and other payables 17 835 14 580 16 445
Total equity and
liabilities 489 246 482 540 478 807
Net asset value per share
(cents) 7.79 7.76 7.66
Net tangible asset value
per share (cents) (2.80) (2.84) (2.93)
Condensed consolidated statement of comprehensive income
Gross revenue 43 320 9 588 38 379
Profit/(Loss) from
operations 15 540 (3 446) (3 003)
Investment income 47 2 466 8 412
Loss from associates - (6 664) (4 536)
Proportionate share of
loss net of dividends - (6 664) (10 554)
Dividends received - - 6 018
Reversal of impairment of
investment in associates - 4 435 25 996
Impairment of goodwill on
acquisition of
subsidiaries 2.2 - (219 536) (219 536)
Finance costs (2 194) (2 614) (8 156)
Profit/(Loss) before
taxation 13 393 (225 359) (200 823)
Taxation (5 829) (673) (6 497)
Net profit/(loss) for the
period 7 564 (226 032) (207 320)
Attributable to:
- Equity holders of
Andulela Investment
Holdings Limited 5 200 (226 316) (208 619)
- Non controlling interest 2 364 284 1 299
Ordinary shares in issue
(millions) 3 951 3 951 3 951
Weighted average number of
ordinary shares
in issue (millions) 3 951 1 009 2 790
Headline earnings/(loss) 5 200 (11 215) (15 017)
- Attributable net
profit/(loss) for the
period 5 200 (226 316) (208 619)
- Less: Reversal of
impairment of investment
in associates - (4 435) (25 996)
- Add back: Impairment of
goodwill on acquisition
of subsidiaries - 219 536 219 536
- Add back: Loss on
scrapping of property,
plant
and equipment - - 62
Earnings/(loss) and
diluted earnings/(loss)
per ordinary share
(cents)(a) 0.13 (22.42) (7.48)
Headline earnings/(loss)
and diluted headline
earnings/(loss) per
ordinary
share (cents)(a) 0.13 (1.11) (0.54)
Dividends per ordinary
share (cents) - - -
(a) The earnings/(loss) and headline earnings/(loss) per ordinary share is
calculated by dividing the earnings/(loss) and headline earnings/(loss) by the
weighted average number of ordinary shares in issue during the period.
Condensed consolidated statement of cash flows
Cash flows from:
Operating activities 4 042 (2 810) 2 410
Investing activities - (415 668) 8 800
Financing activities (4 125) 418 751 (9 316)
Change in cash and equivalents (83) 273 1 894
Opening cash and equivalents 2 421 1 802 527
Closing cash and equivalents 2 338 2 075 2 421
Condensed consolidated statement of changes in equity
Opening balances 302 756 108 133 86 558
Net profit/(loss) for the period 5 200 (226 316) (208 619)
Shares issued net of expenses - 424 817 424 817
Non-controlling interest 77 162 77 084 76 422
Closing balances 385 118 383 718 379 178
Basis of preparation
The condensed consolidated interim financial information for the six months
ended 30 June 2011 has been prepared in accordance with International Financial
Reporting Standards (IFRS) of the International Accounting Standards Board (in
particular IAS 34, "Interim Financial Reporting"), the AC 500 standards as
issued by the Accounting Practices Board or its successor, the South African
Companies Act and the Listings Requirements of the JSE Limited. The condensed
consolidated interim financial information is presented in South African rands,
which is the group`s functional currency. The accounting policies adopted are
consistent with those of the previous year.
Notes to the reviewed condensed financial results
Reviewed Reviewed Audited
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(R`000) (R`000) (R`000)
1. Investment in associates
Opening carrying value at cost - 450 000 450 000
Shares at cost - 335 679 335 679
Loan receivable at acquisition - 114 321 114 321
Loan receivable subsequent to
acquisition(b) - 20 978 20 978
Share of net loss from associate net
of dividends received - (19 805) (19 805)
Brought forward from prior period - (9 251) (9 251)
Current period - (10 554) (10 554)
- Share of associate (loss) -
current year - (4 536) (4 536)
- Less: Dividend received - (6 018) (6 018)
Less: Impairment(c) - (255 09) (255 509)
- Balance brought forward from prior
year - (281 505) (281 505)
- Add: Current period reversal - 25 996 25 996
Less: Disposal of associates,
controlling interest acquired - (195 664) (195 664)
Carrying value - - -
(b) These loans represent the interest accrued and not paid on the acquisition
loans from the date of acquisition to the reporting date. 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 persons` report dated 29
January 2010 and updated on 19 January 2011.
2. Non-current assets
Reviewed Reviewed Audited
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(R`000) (R`000) (R`000)
Tangible
2.1 Property, plant and equipment
Opening balance 34 060 - -
Plant and machinery acquired through
business combinations - 35 083 35 083
Additions - 531 933
Depreciation (1 490) (511) (1 956)
Plant and machinery at carrying value 32 570 35 103 34 060
Intangible
2.2 Goodwill
Opening balance 418 679 - -
Arising on acquisition of
controlling interest in subsidiary - 638 215 638 215
Impairment of goodwill on acquisition - (219 536) (219 536)
Closing balance at period end 418 679 418 679 418 679
The goodwill has been impaired based on a valuation of the controlling interest
per the competent persons` report dated 29 January 2010 and updated on 19
January 2011.
3. Share capital and share premium
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
No. of shares No. of shares No. of shares
3.1 Ordinary shares of R0.01
each
Authorised
5 500 000 000 ordinary
shares of R0.01 each
Opening balance 5 500 000 000 1 925 000 000 1 925 000 000
Increase - 3 575 000 000 3 575 000 000
Authorised share
capital at period end 5 500 000 000 5 500 000 000 5 500 000 000
Issued
Opening balance 3 950 660 296 419 000 000 419 000 000
Issued at a premium of
R0.1103 per share - 3 531 660 296 3 531 660 296
Closing balance 3 950 660 296 3 950 660 296 3 950 660 296
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(R`000) (R`000) (R`000)
3.1 Ordinary shares of R0.01 each
Authorised
5 500 000 000 ordinary
shares of R0.01 each
Opening balance 55 000 19 250 19 250
Increase - 35 750 35 750
Authorised share
capital at period end 55 000 55 000 55 000
Issued
Opening balance 39 507 4 190 4 190
Issued at a premium of
R0.1103 per share - 35 317 35 317
Closing balance 39 507 39 507 39 507
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(R`000) (R`000) (R`000)
3.2 Share premium
Opening balance 764 060 374 560 374 560
Issued at a premium of R0.1103 per
share - 389 683 389 683
Share issue costs - (183) (183)
Closing balance 764 060 764 060 764 060
Total ordinary share capital and
share premium 803 567 803 567 803 567
4. Business combinations
On 1 May 2010, the group acquired a controlling interest in Kilken Platinum
(Pty) Limited ("Kilken") of 83.6% (previously 41.8%) through the combined
holding of subsidiaries Abalengani Mining Investments (Pty) Limited ("AMI") and
JB Platinum Holdings (Pty) Limited ("JBPH"). At acquisition, the previously held
investment in associates was fairly valued, based on the competent persons`
report.
The following table summarises the fair value of the consideration paid for
Kilken and the fair value of the assets acquired and liabilities assumed,
recognised at the acquisition date, as well as the fair value at the acquisition
date of the non-controlling interest in Kilken.
Six months Six months 18 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
(R`000) (R`000) (R`000)
Equity instruments issued in respect
of option exercised - 425 000 425 000
Fair value of previously held
associate interests - 195 664 195 664
Fair value of non-controlling
interest - 76 799 76 799
- 697 463 697 463
Fair value of net assets acquired - 59 248 59 248
Property, plant and equipment - 35 083 35 083
Bank and cash - 3 766 3 766
Trade and other receivables - 35 344 35 344
Trade and other payables - (14 945) (14 945)
Goodwill arising on acquisition of
controlling interest - 638 215 638 215
Financial information in respect of the subsidiaries` investment in Kilken
Summarised statement of financial position
Non-current assets 32 570 35 103 34 060
Current assets 37 622 28 666 25 717
Equity and reserves (50 879) (51 103) (46 371)
Non-current liabilities (7 030) (5 635) (6 892)
Current liabilities (12 283) (7 031) (6 514)
Results of operations
Revenue 43 320 9 588 38 379
Operating profit 20 201 2 376 9 509
Finance income 36 28 94
Profit before taxation 20 237 2 404 9 603
Taxation (5 829) (673) (3 786)
Profit for the period 14 408 1 731 5 817
5. Material related party transactions
Purchases from related parties
- Tailing Technologies (Pty) Limited 7 525 5 373 17 104
- GTS Technologies (Pty) Limited 4 810 3 602 6 984
Administration and management fees paid
to related parties
- Jonah Capital (Pty) Limited - 686 1 765
Consulting fees per agreement
- D N Rosen - 1 515 3 165
Interest received on shareholders` loans
- Abalengani Mining Investments
(Pty) Limited - 1 235 4 910
- JB Platinum Holdings (Pty) Limited - 1 178 3 357
Interest paid on working capital loans
- Newshelf 1005 (Pty) Limited - 134 447
- Jonah Capital (Pty) Limited - - 231
6. Segment reporting
No segmental reporting has been presented as the entity has no separately
reportable segments. It operates in one geographical location and only derives
income from one customer.
Review opinion
These results have been reviewed by the company`s auditors, BDO South Africa
Inc., 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 statements have 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 Rosenthal # Appointed 26 February 2010
# Independent non-executive
Commentary
Introduction
For the six months to 30 June 2011, the consolidated group results reflect
normal operating earnings post the prior period impairment and transaction costs
related to the acquisition of controlling stakes in Abalengani Mining
Investments (Pty) Limited ("AMI") and JB Platinum Holdings (Pty) Limited
("JBPH").
The group`s attributable headline earnings rose to R5.2 million from the loss of
R11.2 million and from the loss of R15.0 million reported for the periods ended
30 June 2010 and 31 December 2010 respectively due to stable and improved PGM
production at Kilken coupled with stronger Platinum Group Metals ("PGM") prices.
Financial review
As at the reporting date Andulela had access to a working capital facility of
R5.0 million which was renewed to the end of August 2011 and which was
subsequently settled and is no longer required.
Preference dividends on the cumulative redeemable preference shares due to the
holder thereof (Newshelf) in the amount of R2.2 million were accrued and
expensed as finance costs in the current period in accordance with the rights
attaching to the preference shares. R2.5 million was paid towards the arrear
preference dividends owing and the cumulative arrears amount to R9.8 million
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 two quarters, management is
confident of the improved fundamentals for the real value of the underlying
investment in Kilken.
Kilken Platinum
Andulela owns an effective 83.6% stake in Kilken`s PGM tailings retreatment
facility that deliver s PGM concentrate to Rustenburg Platinum Mines (Pty)
Limited ("RPM").
A proactive maintenance and refurbishment regime has been implemented to improve
efficiency and plant availability. These initiatives yielded the expected
positive returns. Kilken`s PGM production improved by 41% for the six months to
June 2011 compared to the comparative period in 2010 and by 10% compared to the
18 months ended 31 December 2010. This represents a marked improvement in
constant production volumes with less unplanned stoppages.
Management remains optimistic about the continued positive growth outlook for
PGM`s for the foreseeable future.
Events subsequent to the period end
The improved production recoveries of Kilken for the period under review have
continued for the period up to 31 August 2011. As at the date of this report,
production for the eight months has already surpassed that of the 12 months to
31 December 2010 of the prior financial year by more than 34% with four months
of production still left in the current year.
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 Pro Roof Steel Merchants (Pty) Limited
("PRSM"), a steel processing, distribution and services group with six branches
in South Africa, from both The Rafik Mohamed Family Trust and Pro Roof Steel
Merchants (East London) (Pty) Limited. As at 30 August 2011 all the suspensive
conditions were fulfilled and the effective date of the transaction is
consequently 1 September 2011, from which date PRSM will be consolidated into
the results of Andulela. The purchase consideration of a maximum of R252 million
and a minimum of R168 million, based on the consolidated tangible net asset
value ("NAV") of PRSM and its subsidiaries as at 31 August 2011, will be settled
by the issue of a maximum of 630 million and a minimum of 420 million Andulela
shares, at an issue price of 40 cents per share. The company is in the process
of determining the effective date NAV, subsequent to which the number of
purchase consideration shares will be calculated and issued to the Sellers.
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.
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. The 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.
Restructuring review
As indicated in the annual report for the 18 months ending 31 December 2010,
management have initiated a review of the newly formed group structure. The
review is expected to be completed before the next reporting period. The outcome
of the review and the initiatives implemented will be reported to shareholders.
For and on behalf of the board
M J Husain
Independent Non-executive Chairman
A Kaka
Chief Executive Officer
Sandton
20 September 2011
Directors
Mohamed J Husain* (Chairman), Ashruf Kaka (CEO)
Pieter de Jager (CFO), Graham Rosenthal*
(*Independent non-executive)
Registered office
108 4th Street, Parkmore, Sandton, 2196
Company secretary
J R Jones (Mrs)
Transfer secretaries
Link Market Services (Pty) Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
Sponsor
Java Capital
2 Arnold Road, Rosebank, Sandton, 2196
23 September 2011
Date: 23/09/2011 07:05:34 Supplied by www.sharenet.co.za
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