Wrap Text
Reviewed Provisional Condensed Consolidated Results for the year ended 31 December 2013
ANDULELA INVESTMENT HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
Share code: AND ISIN: ZAE 000125894
("Andulela" or "the company")
www.andulelaholdings.com
Reviewed provisional condensed consolidated results for the year
ended 31 December 2012
Condensed consolidated statements of financial position
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
Notes R000 R000
Assets
Non-current assets 758 392 827 686
Plant and equipment 1 326 498 409 007
Goodwill 418 679 418 679
Deferred tax asset 13 215 -
Current assets 278 000 278 437
Inventory 62 960 54 906
Trade and other receivables 181 083 165 276
Taxation 3 395 -
Cash and cash equivalents 29 521 58 255
Non-current assets held for sale 1 1 041 -
Total assets 1 036 392 1 106 123
Equity and liabilities
Capital and reserves 470 906 584 600
Stated capital 2 976 114 976 114
Revaluation reserve 4 638 4 638
Cash flow hedge reserve 3 (48 055) -
Accumulated loss (529 830) (476 618)
Non controlling interest 68 039 80 466
Non-current liabilities 285 715 308 468
Redeemable preference share
capital 38 327 60 000
Deferred tax liability 40 273 78 676
Derivative financial
liabilities 3 73 715 -
Borrowings 133 400 169 792
Current liabilities 279 771 213 055
Taxation 10 976 2 048
Redeemable preference share
capital 15 780 15 000
Derivative financial
liabilities 3 6 130 -
Borrowings 151 864 87 627
Trade and other payables 95 021 108 380
Total equity and liabilities 1 036 392 1 106 123
Net asset value per share (cents) 9,19 11,53
Net tangible asset value per
share (cents) 1,21 3,53
Condensed consolidated statements of comprehensive income
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
Notes R?000 R?000
Gross revenue 1 471 972 542 788
Cost of sales (1 281 040) (403 524)
Gross profit 190 932 139 264
Profit from operations 26 230 59 681
Investment income 1 317 452
Impairment of plant and
equipment 1 (47 262) -
Loss on scrapping of plant and
equipment 1 (20 769) -
Finance costs (27 910) (9 735)
(Loss)/profit before taxation (68 394) 50 398
Taxation 18 508 (17 794)
Net (loss)/profit for the year (49 886) 32 604
Other comprehensive (loss)/income
net of tax for the year (57 488) 4 637
Gains on revaluation of plant
and equipment - 6 441
Deferred tax charge on revaluation
of plant and equipment - (1 804)
Loss on accrual of derivative
cash flow hedge 3 (79 845) -
Deferred tax reversal on
derivative cash flow hedge 3 22 357 -
Total comprehensive
(loss)/income for the year (107 374) 37 241
Net (loss)/profit for the year
attributable to: (49 886) 32 604
- Equity holders of Andulela
Investment Holdings Limited (53 212) 24 955
- Non-controlling interest 3 326 7 649
Total comprehensive
(loss)/income for the year
attributable to: (107 374) 37 241
- Equity holders of Andulela
Investment Holdings Limited (101 266) 28 831
- Non-controlling interest (6 108) 8 410
Ordinary shares in issue
(millions) 4 382 4 371
Weighted average number of
ordinary shares in issue
(millions) 4 376 4 091
Headline (loss)/earnings (4 049) 24 955
- Attributable net
(loss)/profit for the year (53 212) 24 955
- Add back: Impairment, scrapping
and loss on sale of plant and
equipment net of deferred taxation 49 163 -
(Loss)/earnings and diluted
(loss)/earnings per ordinary
share (cents) * (1,22) 0,61
Headline (loss)/earnings and
diluted headline (loss)/earnings per
ordinary share (cents) * (0,09) 0,61
Dividends per ordinary share
(cents) - -
- The (loss)/earnings and the headline (loss)/earnings per ordinary
share is calculated by dividing the (loss)/earnings and the headline (loss)/earnings by the weighted average number of ordinary shares in
issue during the year. The diluted (loss)/earnings and the diluted
headline (loss)/earnings per ordinary share is calculated by dividing
the diluted (loss)/earnings and the diluted headline (loss)/earnings
by the weighted average number of ordinary shares in issue and
issuable during the year.
Condensed consolidated statements of cash flows
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
Cash flows from:
Operating activities (15 836) 5 861
Investing activities (9 523) (79 185)
Financing activities (3 375) 129 158
Change in cash and equivalents (28 734) 55 834
Opening cash and equivalents 58 255 2 421
Closing cash and equivalents 29 521 58 255
Condensed consolidated statements of changes in equity
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R?000 R?000
Opening balances 584 600 379 178
Movements for the year:
- Net (loss)/profit for the year
attributable to equity holders of
Andulela Investment Holdings Limited (53 212) 24 954
- Shares issued - 167 914
- Vendor shares 4 633
- Revaluation net of deferred tax - 3 877
- Cash flow hedge reserve net of
deferred tax (48 055) -
- Non controlling interest (12 428) 4 044
Closing balances 470 905 584 600
Notes to the reviewed provisional condensed consolidated financial
results
Basis of preparation
The provisional condensed consolidated financial information for the
year ended 31 December 2012 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 SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued
by the Financial Reporting Standards Council, the requirements of the
South African Companies Act, 2008 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. These results were prepared under the
supervision of Pieter de Jager, the Group Chief Financial Officer.
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
1. Plant and equipment
Opening balance 409 007 34 060
Plant and equipment acquired through
business combinations - 379 462
Revaluation of plant and equipment - 6 441
Impairment of plant and equipment (47 262) -
Loss on scrapping of plant and
equipment (20 769) -
Transferred to non-current assets
held for sale (1 041) -
Additions 9 818 801
Disposals (540) -
Depreciation (22 715) (11 757)
Plant and equipment at carrying value 326 498 409 007
During the year under review Pro Roof Steel Merchants (Pty) Ltd
and its subsidiaries ("PRSM group") had a professional valuer
re-assess the recoverable amounts of a specific line of plant and
equipment resulting in an impairment of R47 million before deferred
tax. The PRSM group also scrapped plant and equipment to the value
of R21 million at year end, which has no material future economic benefits.
Negotiations are at an advanced stage to dispose of a marginal and
non-strategic manufacturing and distribution operation in Nelspruit
as a going concern, and its plant and equipment is accordingly
classified as non-current assets held for sale. Management reviewed
and amended the residual value and useful lives of the plant and
equipment during the year.
2. Stated capital
As at Year ended As at Year ended
31 December 31 December 31 December 31 December
2012 2011 2012 2011
No. of shares No. of shares
R 000 R 000 R 000 R 000
2.1 Ordinary
no par value
shares
Authorised
Ordinary no
par value
shares
(2011: Ordinary
shares of
R0,01 each) 5 500 000 5 500 000 - 55 000
Issued
Opening
balance 4 382 242 3 950 660 976 114 39 506
Issued - 420 000 - 4 200
Vendor shares
issuable - 11 582 - 116
Closing
balance 4 382 242 4 382 242 976 114 43 822
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
2.2 Share premium
Opening balance - 764 061
Issued at a premium of R0,39 per
share (2011) - 163 800
Vendor shares issuable at a premium
of R0,39 per share (2011) - 4 517
Share issue costs - (86)
Closing balance - 932 292
Total stated capital 976 114 976 114
3. Derivative financial liability
Kilken Platinum (Pty) Ltd ("Kilken") hedged 30% of its cash flow
from production revenue of Platinum, Palladium and Gold in favour of
a financier in line with the funding requirements. The hedge mitigates
the cash flow risk related to commodity price fluctuations and movements
in the ZAR/USD exchange rate in order to repay the funding facility to
the financier.
In accordance with IAS 39, R79,8 million of the cash flow hedge has been
recognised as a hedging instrument at fair value in the statements of
financial position at the reporting date, without taking account of any
collateral held or other credit enhancements, over the remainder of the
hedge contract term which started on 1 September 2012 and will end on
30 September 2018.
This resulted in a R57,5 million loss after deferred taxation in other
comprehensive income and a cash flow hedge reserve of R48,1 million,
net of non-controlling interests. The fair value of the cash
flow hedge is apportioned between current and non-current liabilities
depending on the remaining maturity period of the derivative contract
and its contractual cash flows.
The cash flow hedge cost will be accounted for as either a profit or a
loss as it becomes effective and the settlements are actually made over
the duration of the term of the hedge contract.
4. Business combinations
With effect from 1 September 2011, the group acquired a 100% controlling
interest in the PRSM Group through the issue of a total of 431,5 million
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 final
11,58 million ordinary shares, which were included as vendor shares in
the Statement of Changes in Equity of 2011, were issued to the sellers
on 11 July 2012 pursuant to the fulfilment of all suspensive conditions.
The transaction costs incurred in the acquisition of PRSM in 2011
amounted to R1,48 million.
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 date of PRSM (2011).
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
Equity instruments issued in respect
of acquisition - 168 000
Equity instruments still to be issued
in respect of acquisition (vendor shares) - 4 633
- 172 633
Fair value of net assets acquired - 172 633
Plant and equipment - 379 462
Bank and cash - 3 003
Inventory - 48 897
Trade and other receivables - 145 198
Non-current liabilities - (180 860)
Bank overdraft - (81 386)
Trade and other payables - (141 681)
Goodwill arising on acquisition of
controlling interest - -
Financial information in respect of the subsidiaries
PRSM Group PRSM Group Kilken Platinum Kilken Platinum
Group Group
31 December 31 December 31 December 31 December
2012 2011 2012 2011
(12 Months) (4 Months) (12 Months) (12 Months)
R 000 R 000 R 000 R 000
Summarised
statement of
financial position
Non-current assets 292 320 371 486 232 167 37 521
Current assets 209 328 227 352 60 468 49 681
Equity and
reserves (104 733) (169 743) 4 831 (71 022)
Non-current
liabilities (225 047) (239 401) (207 115) (9 067)
Current
liabilities (171 868) (189 694) (90 351) (7 113)
Results of operations
Revenue 1 372 888 419 228 99 084 123 560
Operating
(loss)/profit (9 511) 1 165 37 334 65 253
Impairment of plant
and equipment (47 262) - - -
Loss on scrapping
of plant and
equipment (20 769) - - -
Finance income 467 335 8 168 95
Finance costs (16 529) (5 330) (15 006) -
(Loss)/profit
before
taxation (93 604) (3 830) 30 496 65 348
Taxation 28 594 940 (10 360) (18 734)
(Loss)/profit for the
year/period (65 010) (2 890) 20 136 46 614
- Kilken Platinum (Pty) Ltd and its joint venture with Imbani Minerals
and its subsidiary Kinlela (Pty) Ltd.
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
5. Material related party
transactions and balances
Sales to related parties
- E-Tile (Pty) Ltd (41 714) (15 714)
- Changing Tides 74 (Pty) Ltd (14 616) (2 039)
- Pro Steel International Trading
(Pty) Ltd (9 968) (3 153)
- Help-U-Build (Pty) Ltd (9 429) (4 217)
- Beautiful Connections (Pty) Ltd (2 135) -
- Thunder Rate Investments (Pty) Ltd (28 545) -
- Ferrochrome Furnaces (Pty) Ltd (28 545) -
- Mixshelf 1119 CC (156) (217)
Purchases from related parties
- Tailing Technologies (Pty) Ltd 14 143 16 341
- GTS Technologies (Pty) Ltd 14 895 15 449
- Pro Steel International Trading
(Pty) Ltd 706 217
- E-Tile (Pty) Ltd 6 273 1 296
- Mono Steel Works - 49
- Changing Tides 74 (Pty) Ltd 8 -
- Help-U-Build (Pty) Ltd 6 -
- Beautiful Connections (Pty) Ltd 125 -
Administration and management fees
paid to related parties
- Akzam Management Services (Pty) Ltd 900 1 005
Preference dividends paid to related parties
- Newshelf 1005 (Pty) Ltd 3 762 4 388
Rent expenses to related parties
- Sheerprops 97 (Pty) Ltd 7 247 7 056
- Wideprops 1087 CC 3 507 2 899
- Changing Tides 74 (Pty) Ltd 4 060 2 147
- Windfall Trading (Pty) Ltd 1 332 71
Trade Receiveables
- Changing Tides 74 (Pty) Ltd 2 791 474
- E-Tile (Pty) Ltd 3 530 3 773
- Pro Steel International Trading
(Pty) Ltd 1 534 990
- Help-U-Build (Pty) Ltd 1 830 2 064
- Beautiful Connections (Pty) Ltd 1 616 -
- Thunder Rate Investments (Pty) Ltd 13 996 -
- Ferrochrome Furnaces (Pty) Ltd 13 996 -
- Mixshelf 1119 CC 49 247
Loan accounts
- Owing to related parties
- The Rafik Mohamed Trust (630) (647)
- Thunder Rate Investments (Pty) Ltd (37 737) (36 940)
Cumulative redeemable preference shares
- Newshelf 1005 (Pty) Ltd (54 107) (75 000)
Trade Payables
- E-Tile (Pty) Ltd (305) (46)
- Mixshelf 1119 CC - (1 099)
- Changing Tides 74 (Pty) Ltd (832) -
- Pro Steel International Trading (Pty)
Ltd (178) -
- Beautiful Connections (Pty) Ltd (143) -
- Sheerprops 97 (Pty) Ltd (1 490) -
- Wideprops 1087 CC (721) -
- Windfall Trading (Pty) Ltd (285) -
- Tailing Technologies (Pty) Ltd (1 972) (1 424)
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.
Reviewed Audited
As at Year ended
31 December 31 December
2012 2011
R 000 R 000
Revenue
Tailings treatment facility 99 084 123 560
Steel processing plants 1 372 888 419 228
Total revenue 1 471 972 542 788
There are no sales between segments
(Loss)/profit after tax
Tailings treatment facility 20 266 46 638
Steel processing plants (65 010) (2 890)
Other unallocated (5 142) (11 144)
Total (loss)/profit after tax (49 886) 32 604
Assets
Tailings treatment 292 765 87 202
Steel processing 501 648 598 838
Other unallocated 241 979 420 083
Total assets 1 036 392 1 106 123
Liabilities
Tailings treatment 297 466 16 183
Steel processing 396 915 429 095
Other unallocated (128 895) 76 245
Total liabilities 565 486 521 523
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 a going concern basis.
Directorate
The current directors of the company at the 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
C W N Molope Appointed 1 July 2012
- Independent non-executive
Commentary
Introduction
As more fully detailed hereunder, 2012 was a year of consolidation
and restructuring for the Andulela group in relation to its steel
processing subsidiary. As a result mainly of the Marikana mining
incident and the indirect effect of the extended mining strike action,
Kilken experienced a decline in production of PGMs.
The consolidated group results for the year ending 31 December 2012
resulted in a headline loss of R4,0 million compared to headline earnings
of R24,9 million reported for the year ended 31 December 2011. This is
mainly attributable to an impairment and scrapping of plant and equipment
totalling R68 million following an in-depth review and restructure by
management of the PRSM group operations which included reassessment of
the carrying values and useful lives of its production assets. The comprehensive operational restructuring of PRSM nationally involves
the closure and consolidation of smaller outlying branches, as detailed
in the events subsequent to year end below.
Financial review
The results of PRSM have been consolidated for the full year under
review compared to only four months in the comparative period of 2011
during which it was acquired by the Andulela group.
During the year under review the group restructured the borrowings of
PRSM by procuring a R205 million, 5 year term loan bank facility into
Kilken and on-lending this facility to PRSM via a new 100% owned
subsidiary of Kilken called Kinlela (Pty) Ltd ("Kinlela"), in the
place of previous direct funding. The aforementioned new term loan facility
attracted a once-off raising fee of R5,7 million and Kilken hedged 30%
of its production revenue in favour of the financiers to protect cash
flows. The total cost of the production revenue hedge settlements for
two months in the year amounted to R1 million.
The tailings retreatment operation at Kilken, through its joint venture
with Imbani Minerals, continues to perform well overall and contributed
significantly to the group's results, achieving earnings before interest,
taxation and depreciation ("EBITDA") of R40,9 million. The steel processing operations of PRSM yielded positive EBITDA of R13,3 million before adjusting for the lease smoothing (IAS 17). PRSM's loss after interest amounted to R2,7 million. The impairment and scrapping of plant and equipment as well as interest on borrowings and depreciation charges were the most significant contributors to its net loss after tax of R65 million.
All outstanding vendor shares in terms of the acquisition of PRSM were
issued on 11 July 2012. For the current year, preference share dividends on the cumulative redeemable preference shares in the amount of R3,8 million were expensed as finance costs, in accordance with the rights attaching to the preference shares. As at 31 December 2012 there were no arrear preference dividends. In accordance with the announcement on SENS dated 14 February 2012,
it was agreed that the preference shares shall be redeemed on an orderly basis over an extended five year period. The company redeemed R20,9 million preference share capital during the year under review from positive operational cash flows and remains well ahead of minimum capital redemption payments.
Kilken Platinum
Kilken continues to improve its average recovery of PGMs over a number of
years. During the 2012 financial year, the large scale industrial action
in the mining sector impacted production. Kilken was also adversely affected
by weaker PGM basket prices in the 2012 financial year compared to 2011.
The proactive maintenance regime continued to prove successful in ensuring
production availability and up-time exceeding 98%. Kilken erected a bund
walled dam of 200 m3 to assist with the retention of potential spillage.
This initiative proved very successful in increasing recoveries and in
minimising the impact of the industrial action. The group also reorganised operational management staff at Kilken to streamline efficiencies, reduce costs and to improve reporting and compliance.
Pro Roof Steel Merchants
Management's review of the values and useful lives of production plant
and equipment, coupled with the aggressive restructuring, as further
detailed in events subsequent to year end below, is intended to result
in a more focused and efficient business model for PRSM in order to yield
positive returns.By optimising production throughputs in the main regional branches of Vereeniging, Pretoria and Cape Town, the strategic intention is to reduce production cost per ton whilst still maintaining a limited national
presence in the market. Customers in the smaller regions will continue
to be serviced from these main branches. Following an independent review and the restructuring of the production workflow efficiencies, a number of plant and equipment items were impairedand in some instances decommissioned and scrapped. A review of the proactive repairs and maintenance programmes justified a minor adjustment in useful economic lives of the remaining production machinery from 20 years to 25 years. PRSM employed Mr Brian MacDonald, a qualified chartered accountant with experience in the steel industry, as the new financial director of the steel division with effect from 10 September 2012.
Events subsequent to the year end After an in-depth analysis of the PRSM group?s operational strategy, budgets and cash flow forecasts, it was decided to rationalise the marginal non-strategic operational manufacturing and distribution branches. As a result the Polokwane and Durban branches will be scaled down to representative sales offices at smaller premises.
Plant and equipment from these branches will be distributed amongst Vereeniging, Pretoria and Cape Town branches where needed. Management is also negotiating more favourable structuring of the current rental agreements with the landlords. Negotiations are at an advanced stage to dispose of the marginal and non-strategic manufacturing and distribution operation in Nelspruit as a going concern.
Commitments
Capital commitments contracted by PRSM amounted to an estimated
R5,7 million.
For and on behalf of the board
Mohamed J. Husain Ashruf Kaka
Independent Non-Executive Chairman Chief Executive Officer
Sandton
26 March 2013
Directors
Mohamed J Husain (Chairman); Ashruf Kaka (CEO);
Pieter C de Jager (CFO); Graham R Rosenthal;
Pieter E du Preez; Ismail Kajee; Nosipho Molope
(Independent non-executive)
Registered Office
108 4th Street, Parkmore, Sandton, 2196
Company Secretary
Humeira Kazi
Auditors
BDO South Africa Incorporated
Building C, Riverwalk Office Park, 41 Matroosberg Road, Ashlea
Gardens, Pretoria
Transfer Secretaries
Link Market Services (Pty) Ltd
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein
Sponsor
Java Capital
2 Arnold Road, Rosebank, Sandton
Date: 26/03/2013 05:06:00 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
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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,
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