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VUN - Vunani Limited - Reviewed preliminary condensed consolidated

Release Date: 30/03/2012 17:48
Code(s): VUN
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VUN - Vunani Limited - Reviewed preliminary condensed consolidated results for the year ended 31 December 2011 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 preliminary condensed consolidated results for the year ended 31 December 2011 Salient features Revenue from continued operations increased by 58% on the back of a heightened focus on the professional services operations Benefit of disposal-led restructuring resulted in net finance costs decreasing by 57% Loss per share reduced by 55% CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2011 Figures in R`000s Note Reviewed Audited 31 December 31 December
2011 2010 CONTINUING OPERATIONS Revenue 106 755 67 454 Other income 9 360 25 637 Operating expenses (152 140) (95 078) Operating loss (36 025) (1 987) Investment income 4 737 12 747 Loss on disposal of assets (6 099) (1 235) Fair value adjustments and 1 47 381 (141 322) impairments Income from associates, net of 5 715 54 094 taxation Net finance cost (39 337) (91 027) Net loss before taxation (23 628) (168 730) Taxation (1 263) 15 069 Loss from continuing (24 891) (153 661) operations DISCONTINUED OPERATIONS (Loss)/profit from 3 (33 944) 108 959 discontinued operations (net of taxation) Loss and total comprehensive loss (58 835) (44 702) for the period Loss and total comprehensive loss attributable to: Equity holders of Vunani (47 603) (95 551) Limited Non-controlling interest (11 232) 50 849 (58 835) (44 702)
Loss per share (cents) Basic loss per share (1.0) (2.2) Diluted basic loss per share (1.0) (2.2) CONDENSED STATEMENT OF FINANCIAL POSITIONAT 31 DECEMBER 2011 Figures in R`000s No Reviewed Audited te 31 December 31 December 2011 2010
ASSETS Non current assets Investment property 4 000 915 623 Property, plant and equipment 4 191 32 514 Goodwill 34 123 46 858 Investment and loans to 97 333 93 434 associates Other investments 2 238 741 380 243 Deferred tax asset 93 886 62 475 Other non current assets 4 709 3 323 Other intangible assets 1 466 2 443 478 449 1 536 913
Current assets Other investments 2 181 687 180 565 Non-current asset held for sale - 147 939 Inventory 3 287 3 335 Taxation prepaid 154 389 Trade and other receivables 21 289 19 253 Accounts receivable from trading 95 638 124 939 activities Trading securities 1 030 19 Cash and cash equivalents 17 169 22 073 320 254 498 512 Total assets 798 703 2 035 425 EQUITY Share capital and share premium 595 812 602 008 Share based payment reserve 2 524 - Accumulated loss (399 480) (351 877) Equity attributable to equity 198 856 250 131 holders Non-controlling interest 13 842 174 088 Total equity 212 698 424 219 LIABILITIES Non current liabilities Other financial liabilities 2 137 936 843 013 Deferred tax liabilities 46 784 73 823 184 720 916 836 Current liabilities Other financial liabilities 2 263 789 391 825 Non-current liabilities held for - 111 871 sale Taxation payable 445 3 538 Trade and other payables 47 225 50 105 Accounts payable from trading 89 666 122 668 activities Bank overdraft 160 14 363 401 285 694 370 Total liabilities 586 005 1 611 206
Total equity and liabilities 798 703 2 035 425 Net asset value per share 3.8 5.3 Net tangible asset value per 3.1 4.2 share CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2011 Figures in R`000s Reviewed Audited 31 31 December December 2010 2011
Net cash inflows from operating 27 494 124 353 activities Net cash inflows from investing 295 928 48 912 activities Net cash outflows from financing (314 123) (169 328) activities Increase in cash and cash equivalents 9 299 3 937 Cash and cash equivalents at 7 710 3 773 beginning of the year Cash and cash equivalents at end of 17 009 7 710 the year CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2011 Figures in R`000s Total Non- Total attributa controllin equity
ble to g interest equity holders of Vunani
Audited Balance as at 31 Dec 21 693 117 960 139 653 2009 Issue of shares 323 989 - 323 989 Acquisition of - 5 279 5 279 subsidiary Total comprehensive (95 551) 50 849 (44 702) (loss)/income for the period Balance as at 31 December 2010 250 131 174 088 424 219 Reviewed Issue of shares 35 832 - 35 832 Treasury shares (14 277) - (14 277) Cancellation of (27 751) - (27 751) shares Share based payment 2 524 - 2 524 reserve Disposal of - (149 014) (149 014) subsidiaries Total comprehensive loss for (47 603) (11 232) (58 835) the period Balance as at 31 December 2011 198 856 13 842 212 698 SEGMENTAL REPORTING FOR THE YEAR ENDED 31 DECEMBER 2011 Figures in R`000s Note Revenue Reportable Total segment assets profit/
(loss) for the year Reviewed 31 December 2011 Continuing operations Asset management 22 663 5 916 34 895 Investment banking and 22 174 8 733 12 991 advisory Investment holdings - (13 899) 536 972 Securities broking 50 693 (791) 129 273 Properties 5 6 516 8 594 84 572 Group overhead 4 709 (33 444) - 106 755 (24 891) 798 703 Discontinued operations Asset management 2 157 411 - Properties 77 799 (34 355) - 79 956 (33 944) - Audited 31 December 2010 Continuing operations* Asset management 16 334 (17 105) 202 466 Investment banking and 10 227 (3 587) 136 229 advisory Investment holdings (41) (108 679) 504 996 Securities broking 26 271 14 062 158 550 Properties 5 4 764 (21 414) 1 033 184 Group overhead 9 899 (16 938) - 67 454 (153 661) 2 035 425 Discontinued operations Asset management 5 085 945 - Properties 120 648 108 014 - 125 733 108 959 -
* Comparatives have been re-presented to reflect "Group overhead" as a new segment. OVERVIEW AND PROSPECTS Vunani presents the results for the financial year ended 31 December 2011 against a background of volatility in global markets in 2011. Significant increases in the oil price, rising global inflation and poor consumer demand were the main features of the economic environment. Austerity measures imposed on Greece Italy and Spain squeezed business confidence, with signs of a mild recession creeping into the EU, a significant trading partner with South Africa. Domestically the country did not escape the pervasive negative sentiment, a situation not helped by political developments on the continent related to the "Arab Spring". A season of violent industrial action by NUMSA coupled with Moody`s placing the country on negative watch, threatened to make 2011 a forgettable year. As it turned out a year expected to be dominated by rising interest rates and rising inflation did not materialise. Interest rates remained steady allowing South Africa to achieve modest growth close to 3% and inflation in the upper end of the 6% inflation band. Vunani`s objective for the year was to limit the negative impact of expected interest rate increases on the statement of financial position and reduce debt service costs. Accordingly the group restructured the statement of financial position through asset sales and, where possible, used the proceeds to redeem debt and strengthen the cash generating businesses. The structural changes in the business model mean that the current year`s results are differentiated on the basis of continuing and discontinued operations, in order to separately disclose the impact of businesses that will no longer form the core of Vunani`s activities. Continuing operations Revenue increased by 58% from R67.5m in 2010 to R106.7m to in 2011, on the back of a heightened focus on the professional services operations. Other income declined by 63% to R 9.3m (2010: R 25.6m) primarily because of the inclusion of a R22.8m gain in the 2010 results, arising from the bargain purchase of Kagiso Securities Limited. Operating expenses increased by 60% to R152.1m (2010: R95.1m), reflecting the growth of operating business segments. The group now employs 120 people. Key contributors were the consolidation of a full year of Vunani Fund Managers costs, the skilling up of Vunani Technology Ventures to meet deadlines on a significant advisory mandate and the costs associated with integrating Kagiso Securities. Whilst a number of these costs are not expected to recur, the impact on the group results showed a higher operating loss of R36.0m (2010: R2.0m), the biggest contributor being personnel costs. The disposal of some dividend paying investments reduced Investment Income by 63% to R 4.7m (2010: R12.7m). Losses on disposal of assets of R6.1m (2010: R 1.2m) highlight the intensity of restructuring activity during the year. This was mitigated by positive fair value adjustments of R47.4m (2011: R141.3m loss) reflecting the improved valuation of residual investments as markets ended 2011 stronger. Income from associates declined to R5.7m in 2011 (2010: R54.1m) due mainly to the disposal of the group`s interest in Edge Holding Company Proprietary Limited, in which Vunani was a significant non- controlling shareholder. The benefit of this disposal-led restructuring is mostly seen in the 57% reduction in finance costs to R39.3m (2010: R91.0m), an achievement which management are particularly satisfied with. Whilst the loss of R24.9m for continuing operations is considerably better than the R153.7m loss in 2010, management is disappointed with the overall result. Discontinued operations Discontinued operations are represented by the group`s disposal of its investment property portfolio and Vunani Portfolio Solutions Proprietary Limited (refer to note 3). The total loss of R33.9m is largely attributable to losses incurred on the sale of units to pay down debt on listing of the fund. The loss from discontinued operations contributes 0.5c (2010: profit of 1.1c) per share to the basic loss per share of 1.0c in 2011 (2010: loss of 2.2c). Asset management The asset management segment of the business performed significantly better than last year with revenues rising by 39% to R 22.7 m (2010: R 16.3 m). The team is winning new mandates and profitability has improved to R5.9m, reversing a loss of R17.1m in 2010. Investment banking and advisory The investment banking segment, underpinned by the group`s corporate finance division, performed commendably. Revenues more than doubled to R 22.1m and the segment made a profit of R8.7 m (2010: R3.6m loss). The business opened a satellite office in Harare Zimbabwe and has been appointed the primary advisor to the National Indigenisation Board. Securities broking The securities broking division made a small loss of R0.8m (2010: R14m profit) as it struggled to digest the integration of Kagiso Securities. Management is pleased with the progress made and big gains were made in the positioning of the franchise as the equities broking business improved its JSE ranking from 39th to 19th on volume and value traded. Properties The properties segment made a profit of R 8.6m (2010: R21.4m loss) as a result of profits made in associate companies. Revenues of R6.5 million, up from R 4.8m in 2010, represent asset management revenue derived from the management of VPIF. The biggest development in this division was the listing of VPIF, dropping the value of investment property on the statement of financial position from R915.6m to R4.0m and long term debt from R843.0m to R R137.9m. Going forward Vunani will reflect its investment in VPIF under Other Investments at fair value on the group statement of financial position. Investment holdings Long-term Investment holdings reduced from R380.2m to R 238.7m, which positively influenced the drop in finance costs in the current financial year. There are two particularly difficult investments that remain in the portfolio, PSV and Brikor, which are key to resolving the residue of the legacy debt and stabilising the investment portfolio. Group overhead Group overhead is where the statement of comprehensive income has suffered the most. Group overhead includes expenses that have not been allocated to other business segments because they are not directly related to operations. This includes expenses associated with the restructuring activity that took place during the year. Revenue of R 4.7m (2010: R9.9m) generated through opportunistic transactions was R 5.2m lower than the previous year. Operational expenses increased on the back of the establishment of a group IT department; recruitment costs; share based payment recognition in terms of IFRS; provision for anticipated legal fees and claims relating to outstanding restructuring matters and accrued performance bonus and incentives. As a result the segment made losses of R33.4m (2010: R16.9m). This highlights the difficulties encountered in trying to resolve outstanding issues designed to right size the business. Notwithstanding once-off costs in 2011, it is an area where management will be looking for improvement in the 2012 financial year. Statement of financial position Following the restructuring of investments and debt and listing of the investment property portfolio, the group`s statement of financial position has changed considerably. Total assets have decreased from R2.0 billion to R798.7m and the net asset value has decreased from R250m (tangible 4.2 cents per share) to R198.9m (tangible 3.1 cents per share). R705.1m of long-term debt and R128.0m of short-term debt was paid down on the back of the restructuring. This has left the statement of financial position considerably lighter, which management believes will be helpful in the bid to return the group to profitability. Prospects Vunani`s short term objective is to get to the point where operating profits and residual investment activity yields a comprehensive profit. Management believes the group is on track; this being confirmed by the profit from continuing operations of R0.4m in the second half of the 2011 financial year. We look forward to developments in public sector infrastructure investment initiatives where Vunani has significant business exposure and a strong franchise. NOTES TO THE CONDENSED CONSOLIDATED RESULTS (all figures in R`000) BASIS OF PREPARATION The preliminary condensed financial statements for the year ended 31 December 2011 have been prepared in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) in particular, the presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the AC 500 series issued by the Accounting Practices Board, the Listing Requirements and the Companies Act of South Africa. The accounting policies as set out in the audited financial statements for the year ended 31 December 2010 have been consistently applied for the year ended 31 December 2011. The preliminary condensed consolidated financial statements have been presented on the historical cost basis, except for investments and other financial liabilities, which are fair valued. These condensed consolidated financial statements are presented in Rand rounded to the nearest thousand, which is the group`s functional and presentation currency. These condensed consolidated financial statements incorporate the financial statements of the company, its subsidiaries and special purpose 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. NOTES 1. Fair value adjustments and impairments for continuing operations 2. 3. Reviewed Audited 31 December 31 December 2011 2010 Investment property 810 3 858 Financial assets and liabilities 47 786 (88 819) designated as fair value through profit and loss Impairment of non-current assets (201) (30 700) held for sale Goodwill impairment - (20 011) Impairment of investments and loans - (5 472) to associates Other impairments (1 014) (178) 47 381 (141 322) 4. 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 year end. Both listed and unlisted investments are designated as fair value through profit and loss. Financial liabilities are either accounted for at amortised cost or designated as fair value through profit and loss. An independent valuer is used to determine the fair values of listed assets and their related liabilities. 5. Discontinued operations A strategic decision was made early in the year to restructure the property assets of the group in order to reduce debt on the statement of financial position. This culminated in Vunani listing a significant portion of its investment property portfolio on the JSE Limited on 11 August 2011. As these assets related to a major line of Vunani`s business, the related activities have been presented as a discontinued operation. The segment was not classified as held for sale or a discontinued operation at 31 December 2010. The comparative for the December 2011 condensed consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continuing operations. The group also disposed of its investment in Vunani Portfolio Solutions Proprietary Limited ("VPS"). This investment was previously classified in the asset management segment. It was not classified as held for sale or a discontinued operation at 31 December 2010. The comparative for the December 2011 condensed consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continuing operations. Reviewed Audited
31 December 31 December 2011 2010 Results of discontinued operation Revenue 79 956 125 733 Other income 96 973 Operating expenses (36 171) (50 365) Operating profit 43 881 76 341 Fair value adjustments and (206) 116 580 impairments Net finance cost (54 234) (67 983) Results from operating activities (10 559) 124 938 Taxation (262) (15 979) Results from operating activities (10 821) 108 959 after taxation Loss on sale of discontinued (23 123) - operation (Loss)/profit for the year (33 944) 108 959 Attributable to non-controlling 8 101 (61 084) interest Attributable to equity holders of (25 843) 47 875 Vunani Limited Effect on basic (loss)/earnings (0.5) 1.1 per share (cents) Effect on diluted earnings per (0.5) 1.1 share (cents) Effect on headline earnings per (0.2) 0.1 share (cents) 6. Authorised and issued share capital The authorised share capital at 31 December 2011 was 10 billion (2010:10 billion) ordinary shares of R0.0001 each. The following movement in the number of shares occurred during the year: Number of shares in issue at the beginning of the year4 763 502 216 * Unwinding of Edge Holdings Company Proprietary Limited transaction on 15 April 2011 (114 367 925) * Acquisition of 20 million shares in BSI Steel Limited on 18 July 2011 239 852 770 * Acquisition of 49% of Vunani Fund Managers Proprietary Limited on 12 August 2011 100 000 000 * Acquisition of investment in Buttonwood Proprietary Limited on 20 October 2011 31 104 000 * Issue in terms of VPS sale agreement 20 October 2011 12 684 762 * Issued to the Vunani Employee Share Scheme on 29 June 2011 237 956 639 Number of shares in issue at the end of the year 5 270 732 462 Weighted average number of Reviewed Audited ordinary shares (000s) 31 December 31 December 2011 2010 Issued ordinary shares at the 4 763 502 1 340 562 beginning of the year Less cancelled shares (32 900) - Less treasury shares (121 260) - Effect of issued shares 277 612 2 941 903 Weighted average number of 4 886 954 4 282 465 ordinary shares at the end of the year 7. Properties (continuing operations) The properties segment is broken down as follows: Reviewed 31 December 2011 Revenue Reportable Total assets segment profit/(los s) for the
year Continuing operations Property developments 249 2 131 45 567 Asset management - 6 267 (671) 398 properties Properties investments - 7 132 38 607 6 516 8 594 84 572
Audited 31 December 2010 Continuing operations Property developments 4 283 15 891 41 469 Asset management - 481 (25) 101 properties Properties investments - (37 280) 991 614 4 764 (21 414) 1 033 184 8. Headline loss 9. 10. Reviewed Audited 31 December 31 December
2011 2010 Total comprehensive loss (47 603) (95 551) attributable to equity holders of Vunani Adjusted for: - Loss on disposal of investment 23 007 - property in subsidiaries Taxation (77) - Non-controlling shareholders` (5 045) - interest -Revaluation of investment property (604) (116 580) in subsidiaries Deferred taxation 85 16 321 Non-controlling shareholders` 114 58 730 interest - Revaluation of investment property (3 476) (20 859) in associates Deferred taxation 231 4 045 Non-controlling shareholders` 714 3 699 interest - Goodwill impairment - 20 011 - Loss on disposal of subsidiaries 14 269 - Taxation (1 998) - - Loss on disposal group - 30 700 Taxation - (4 298) - Profit on disposal of associates (7 969) - Taxation 1 116 - - Profit on disposal of other - (2 573) investments Taxation - 360 - Business combinations - bargain (346) (22 770) purchase Taxation 48 3 188 (27 534) (125 577) Headline loss/ (earnings) per share (cents) Basic and diluted loss per share (0.6) (2.9) - Continuing operations (0.4) (3.0) - Discontinuing operations (0.2) 0.1 SUBSEQUENT EVENTS Subsequent to year end: Vunani Limited converted its ordinary shares to no par value shares and subsequently consolidated its share capital on a 50:1 basis. The consolidation was effective on 12 March 2012. The number of issued shares after the consolidation amounted to 105 414 701 ordinary shares of no par value. The group increased its investment in Vunani Technology Ventures from 51% to 75% for a notional consideration. DIVIDENDS No dividends were declared or paid to shareholders during the year under review (2010: R nil). GOING CONCERN The directors have made an assessment of the company`s ability to continue as a going concern and have no reason to believe the company will not continue as a going concern for the foreseeable future. REVIEWED RESULTS The condensed consolidated financial statements of Vunani Limited for the year ended 31 December 2011 have been reviewed by the company`s auditor KPMG Inc. In their review opinion dated 30 March 2012, 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 Financial Information performed by the independent auditor of the entity and have expressed an unmodified conclusion on the preliminary condensed consolidated financial statements. CORPORATE INFORMATION Executive directors EG Dube (Chief Executive Officer) BM Khoza (Managing Director) A Judin (Chief Financial Officer) CE Chimombe-Munyoro NM Anderson Independent non-executive directors WC Ross (Chairman) Dr.BA Khumalo NS Mazwi G JR Macey Nzalo Company secretary A Judin Physical and registered address Vunani House Athol Ridge Office Park 151 Katherine Street Sandown Sandton 2196 Postal address PO Box 652419 Benmore 2010 Telephone number +27 11 263 9500 Facsimile number +27 11 784 3095 Transfer secretaries and registered office Computershare Investor Services Proprietary Limited 70 Marshall Street Johannesburg 2001 Lead Designated Adviser Grindrod Bank Limited Joint Designated Adviser Vunani Corporate Finance 30 March 2012 Date: 30/03/2012 17:48:56 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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