Wrap Text
Audited Condensed Consolidated Provisional Financial Results for the nine months ended 31 March 2013
SEPHAKU HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/003306/06)
Share code: SEP ISIN: ZAE000138459
("Sephaku Holdings" or "the company" or "the group")
AUDITED CONDENSED CONSOLIDATED PROVISIONAL FINANCIAL RESULTS
for the nine months ended 31 March 2013
- Delmas and Aganang cement plants on track to commence production early in 2014
- Acquisition of 100% of Metier Mixed Concrete
- Finalisation of R1,95 billion debt funding for Sephaku Cement
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 March 30 June
2013 2012
Audited Audited
R'000 R'000
Assets
Non-current assets 995 956 644 424
Current assets 98 594 29 181
Total assets 1 094 550 673 605
Equity and liabilities
Equity attributable to equity holders of the parent 740 525 672 623
Non-current liabilities 260 379
Current liabilities 93 646 982
Total equity and liabilities 1 094 550 673 605
Net asset value per share (cents) 394,10 391,54
Tangible net asset value per share (cents) 267,37 391,54
Ordinary shares in issue 187 901 843 171 790 732
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
9 months 12 months
ended ended
31 March 30 June
2013 2012
Audited Audited
R'000 R'000
Revenue 37 195
Cost of sales (21 574)
Gross profit 15 621
Other income 356 463
Operating expenses (35 825) (16 157)
Loss on disposal of interest in companies - (5 629)
Investment income 820 127
Profit/(loss) from equity accounted investment 6 191 (107)
Finance costs (1 949) -
Loss before taxation (14 786) (21 303)
Taxation (1 141) -
Loss from continuing operations (15 927) (21 303)
Profit for the period from discontinued operations - 22 296
(Loss)/profit for the period (15 927) 993
Other comprehensive (loss)/income for the period (1 208) 12 683
Total comprehensive (loss)/income for the period (17 135) 13 676
Total comprehensive (loss)/income attributable to:
Equity holders of the parent (17 135) 13 676
Basic (loss)/earnings per share from total operations (cents): (9,17) 0,58
Continuing operations (9,17) (12,45)
Discontinued operations - 13,03
Diluted (loss)/earnings per share from total operations (cents): (8,93) 0,53
Continuing operations (8,93) (11,42)
Discontinued operations - 11,95
Headline loss per share from total operations (cents): (9,20) (13,27)
Continuing operations (9,20) (26,96)
Discontinued operations - 13,69
Diluted headline loss per share from total operations (cents): (8,96) (12,17)
Continuing operations (8,96) (24,73)
Discontinued operations - 12,56
Reconciliation of basic earnings to diluted earnings and
headline loss: R'000 R'000
Basic (loss)/earnings and diluted (loss)/earnings from total
operations attributable to equity holders of the parent (15 927) 993
(Profit)/loss on sale of non-current assets (50) 5 629
Profit on unbundling of Sephaku Fluoride Ltd - (30 445)
Impairments - 1 119
Headline loss attributable to equity holders of the parent (15 977) (22 704)
Reconciliation of weighted average number of shares:
Basic weighted average number of shares 173 613 522 171 080 349
Diluted effect of share options 4 646 656 15 423 470
Diluted weighted average number of shares 178 260 178 186 503 819
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
9 months 12 months
ended ended
31 March 30 June
2013 2012
Audited Audited
R'000 R'000
Cash flows from operating activities (22 089) (19 776)
Cash flows from investing activities (96 972) (34 712)
Cash flows from financing activities 116 770 73 282
Total cash movement for the period (2 291) 18 794
Cash at beginning of the period 24 629 5 835
Cash at end of the period 22 338 24 629
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Total Retained Total
capital reserves earnings equity
R'000 R'000 R'000 R'000
Balance at 30 June 2011 Audited 592 128 (6 610) 161 266 746 784
Total comprehensive income for the year - 12 683 993 13 676
Issue of shares 9 000 - - 9 000
Employees share option scheme - 4 222 34 4 256
Dividend in specie (101 093) - - (101 093)
Balance at 30 June 2012 Audited 500 035 10 295 162 293 672 623
Total comprehensive loss for the period (1 208) (15 927) (17 135)
Issue of shares 80 556 - - 80 556
Employees share option scheme - 4 481 - 4 481
Balance at 31 March 2013 Audited 580 591 13 568 146 366 740 525
NOTES TO THE CONDENSED CONSOLIDATED PROVISIONAL FINANCIAL RESULTS
Basis of preparation
The condensed consolidated provisional financial results for the nine months ended 31
March 2013 ("annual reporting period") have been prepared in accordance with IAS 34:
Interim Financial Reporting, the disclosure requirements of the JSE Limited Listings
Requirements, the Companies Act No 71 of 2008 (as amended), the SAICA financial reporting
guides as issued by the Accounting Practices Board and conform to International Financial
Reporting Standards ("IFRS").
The results have been prepared on a historical cost basis, except for the measurement of
property at revalued amounts.
The accounting policies adopted for the annual reporting period are consistent with those
applied in the annual financial statements for the group for the year ended 30 June 2012.
The preparation of the financial statements have been supervised by NR Crafford-Lazarus
CA(SA).
Audit opinion
The financial results have been audited by the group's external auditors, PKF (Gauteng)
Inc. A copy of their unqualified report is available for inspection at the company's
registered office.
Ready mix Head Group
concrete office totals
Segment information R'000 R'000 R'000
Segment revenue external revenue 37 195 37 195
Segment expenses (11 614) (24 211) (35 825)
Profit from equity accounted investment 6 191 6 191
Segment profit/(loss) after taxation 1 995 (17 922) (15 927)
Taxation (1 141) (1 141)
Interest received 168 652 820
Interest paid (1 394) (555) (1 949)
Depreciation (1 691) (1 691)
Segment assets 197 356 897 194 1 094 550
Capital expenditure included in segment assets 5 145 5 145
Segment liabilities (248 232) (105 793) (354 025)
The only mineral or commodity actively managed by Metier Mixed Concrete (Pty) Ltd
("Metier") is ready mixed concrete. Sephaku Cement (Pty) Ltd ("Sephaku Cement") is an
associate of Sephaku Holdings. No segment report has been presented for Cement as the
amounts attributable to Cement have been included in the "Head office segment".
Acquisition of subsidiary
Business combination R'000
Property, plant and equipment 113 462
Other financial assets 4 756
Inventories 5 817
Trade and other receivables 53 643
Cash and cash equivalents 20 800
Other loans and payables (67 529)
Deferred taxation (9 681)
Current taxation payable (10 410)
Trade and other payables (52 421)
Deferred income (1 308)
Net assets acquired at provisional fair values 57 129
Goodwill 238 138
295 267
Consideration paid
Cash 110 000
Equity instruments at the listed share price of R5 per share as
on 28 February 2013 80 556
Deferred vendor loan of R125 million discounted to net present value 104 711
295 267
Net cash outflow on acquisition
Cash consideration paid (110 000)
Cash acquired 20 800
(89 200)
On 28 February 2013 the group acquired 100% of the issued share capital of Metier for a
total nominal purchase consideration of R365 million in a combination of acquisition
finance and Sephaku Holdings securities. The total fair value of the purchase considera-
tion amounted to R295 267 125.
Goodwill
In terms of IFRS, goodwill acquired in a business combination should be allocated to
the acquirer's cash-generating units that are expected to benefit from the synergies
of the combination. This allocation of goodwill should be performed at acquisition date.
If the initial allocation cannot be completed before the end of the annual period in
which the business combination is effected, that initial allocation should be completed
before the end of the first annual period beginning after acquisition date.
As the purchase price allocation has not yet been performed at the reporting date, the
acquisition resulted in goodwill amounting to R238 137 854 based on the net asset value
of Metier on 28 February 2013. Based on the results of an impairment test performed, no
impairment of goodwill is required.
Group revenue and profit for full financial period
Revenue of R37 195 338 and profit before taxation of R3 135 986 for the month of March
2013 of Metier has been included in the current year results of Sephaku Holdings. Had
the acquisition been effective at the beginning of the reporting nine months, management
estimates that Metier would have contributed R292 215 435 to revenue and R38 322 894 to
profit before taxation. This estimate is based on management accounts for nine-month
period. Metier earned revenue of R414 267 766 and profit before taxation of R63 356 713
for the 12 months ended 28 February 2013 based on their audited annual financial
statements.
Impairment of related-party loan receivable
An impairment provision of R6 835 864 has been raised on the receivable from Cross
Company Management (Pty) Ltd during the period.
Change of financial year-end
At a shareholders meeting held on 11 January 2013 it was decided to change the financial
year-end of the group from 30 June to 31 March.
The reason for the change of year-end is to enable Sephaku Holdings to include the
audited financial results of Sephaku Cement (an associate with a year-end of December),
in its annual financial statements.
Statement on going concern
The financial statements for the annual reporting period have been prepared on the basis
of accounting policies applicable to a going concern. This basis presumes that funds will
be available to finance future operations and that the realisation of assets and
settlement of liabilities, contingent obligations and commitments will occur in the
ordinary course of business.
Events after the annual reporting period
The directors are not aware of any material fact or circumstance arising between the end
of the financial period and the date of this report that would require adjustments to or
disclosure in the financial results.
Changes to the board
On 2 July 2012 Dr GS Mahlati resigned as non-executive director and Mr PM Makwana was
appointed as independent non-executive director on 11 January 2013.
On behalf of the board
Neil Crafford-Lazarus Lelau Mohuba
Financial director Chief executive officer
Pretoria
27 June 2013
COMMENTARY
Sephaku Holdings has achieved important milestones in the nine months to 31 March 2013 in
preparation for its entry into the cement industry early in 2014.
Following the unbundling of non-core investments and confirming its core business as a
focus on cement, Sephaku Holdings has moved to position itself in the industry. In line
with its undertaking to shareholders, Sephaku has focused on investing in new productive
capacity in the cement industry, preparing for its market entry and acquiring
complementary capacity during the period under review.
The construction of Sephaku Cement's R3,2 billion Delmas milling plant and the Aganang
clinker and cement plant were both at an advanced stage of development at the year-end
and both plants are on schedule to commence production in the first two quarters of 2014.
The Delmas cement milling plant in Mpumalanga will receive approximately 55% of the
clinker produced at Aganang for further processing and is on track for completion in the
final quarter of 2013, with production due to start in January 2014. The Delmas plant
will have annual capacity of 1,4 million tons per annum ("Mtpa") of cement. The Aganang
plant in North West Province will commence production in the second quarter of 2014 with
the capacity to produce 1,9 Mtpa of clinker and 1,2 Mtpa of cement when fully commissioned.
The acquisition of Metier supports Sephaku's growth and investment strategy to strengthen
its positioning in cement and cement-related products and services. With its core
business the manufacture and supply of quality ready mixed concrete products for the
residential, commercial and industrial market in South Africa, Metier offers Sephaku
Holdings a broader revenue base in the construction materials market and the immediate
benefit of cash flows. It also offers asset and geographic diversification and the
potential for vertical integration as Metier is a consumer of cement and fly ash which
are both supplied by Sephaku Cement. In return, Sephaku offers Metier critical mass.
Sephaku has a unique set of competitive advantages that are strongly supportive of its
market entry and longer-term growth objectives:
- Sephaku Cement is the first new entrant into the domestic cement market since 1934 and
has secured one of the last economic limestone deposits with proven raw materials
supporting a 30 year life of mine.
- With its own fly ash supply at Eskom's Kendal Power Station, Sephaku Cement controls
its extender source, while Kendal's proximity to the Delmas plant will provide a cost
advantage in the markets served by the Delmas plant.
- The application of advanced world-class technologies at the new plants will allow for
more efficient and environmentally sustainable operations, enabling Sephaku to be a
lower cost producer.
- Sephaku Cement and Metier both have management teams with extensive experience in
their sectors.
- Sephaku has the backing of Dangote, the largest cement producer in Africa which offers
considerable opportunity for longer-term geographic expansion.
Customer service will be a key differentiator in Sephaku Cement's market penetration and
retention and the business has implemented several strategies to ensure that it maintains
consistently high service levels.
Outlook
Sephaku Holdings is well positioned with significant competitive advantages to compete
successfully and generate value for shareholders. In the year ahead, Sephaku Cement will
focus on ramping up production volumes, testing product and customer acceptance and
positioning for market entry. The financial results of Metier were fully consolidated
into Sephaku Holdings with effect from 1 March 2013. Metier will pursue the ongoing
expansion of its plant network in Gauteng and KwaZulu-Natal. Maintaining growth in
revenue and profits in challenging market conditions remains its key strategic focus.
Company information
Directors
B Williams (Independent chairman), Dr L Mohuba* (Chief executive officer),
NR Crafford-Lazarus* (Financial director), RR Matjiu* (ISD executive director),
CRDW de Bruin, PF Fourie, Dr D Twist, MM Ngoasheng, MG Mahlare (Independent),
PM Makwana (Independent), J Bennette#, JW Wessels#
*Executive #Alternate
Company secretary
Jennifer Bennette
Registered office
1st Floor, Hennops House
Riverside Office Park
1303 Heuwel Avenue
Centurion, 0157
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg, 2001
JSE sponsor
QuestCo (Pty) Ltd
www.sephakuholdings.co.za
Date: 27/06/2013 03:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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