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Unaudited condensed consolidated results for the six month period ended 30 June 2013
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”)
Unaudited condensed consolidated results for the six month period ended 30
June 2013
Salient features
83% reduction in net finance costs |Results from operating activities after
net finance costs increased by 35% |Earnings per share of 9.3c per share)
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE
2013
Figures in R'000s
Unaudited Unaudited
30 June 30 June
Note 2013 2012
Revenue 1 51 191 51 183
Other income 5 369 4 410
Investment income 4 317 644
Interest received from
656 6 639
investments
Profit on disposal of assets 1 297 1 475
Fair value adjustments and
impairments 2 18 555 27 591
Operating expenses (67 490) (62 839)
Results from operating
13 895 29 103
activities
Finance income 996 1 114
Finance costs (4 600) (22 588)
Net finance cost (3 604) (21 474)
Results from operating
activities after net finance 10 291 7 629
cost
Income from associates (net of
income tax) (2 037) 2 368
Net profit before taxation 8 254 9 997
Income tax (expense)/income (1 380) 7 819
Profit for the period 6 874 17 816
Profit and total comprehensive
income for the period 6 874 17 816
Profit and total comprehensive
income for the period
attributable to :
Equity holders of Vunani Limited 9 339 15 019
Non-controlling interest (2 465) 2 797
6 874 17 816
Earnings per share (cents)
Basic and diluted basic earnings
per share 9.3 14.2
Headline and diluted headline earnings
per share 7.2 19.3
CONDENSED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2013
Figures in R'000s Note Unaudited Audited
30 June 31 December
2013 2012
ASSETS
Investment property 4 000 4 000
Property plant and equipment 2 500 2 611
Goodwill 36 330 34 123
Investment in and loans to 28 484 80 073
associates
Other investments 3 104 872 73 728
Deferred tax asset 40 982 40 917
Other non-current assets 19 946 15 984
Other intangible assets - 489
Total non-current assets 237 114 251 925
Other investments 3 - 78 513
Non-current asset held for sale 6 28 503 -
Other current assets 6 708 3 994
Taxation prepaid 204 254
Trade and other receivables 36 219 25 768
Accounts receivable from trading 478 036 199 629
activities
Trading securities 319 1 564
Cash and cash equivalents 20 216 29 378
Total current assets 570 205 339 100
Total assets 807 319 591 025
EQUITY
Share capital and share premium
595 189 595 189
Foreign currency translation
reserve (358) -
Share based payment reserve 8 427 5 906
Accumulated loss (390 566) (399 578)
Equity attributable to equity
holders of Vunani Limited 212 692 201 517
Non-controlling interest 5 061 12 794
Total equity 217 753 214 311
LIABILITIES
Other financial liabilities 3 54 647 60 080
Deferred tax liabilities 5 814 8 610
Total non-current liabilities 60 461 68 690
Other financial liabilities 3 10 197 68 646
Current tax payable 13 825 10 310
Trade and other payables 29 405 25 861
Accounts payable from trading 475 646 200 373
activities
Trading securities 29 -
Bank overdraft 3 2 834
Current liabilities 529 105 308 024
Total liabilities 589 566 376 714
Total equity and liabilities 807 319 591 025
Shares in issue (000s) 105 415 105 415
Net asset value per share (cents) * 201.8 191.2
Net tangible asset value per share 167.3 158.3
(cents) **
* Net asset value per share is the equity attributable to equity holders per shares
in issue at period end.
** Net tangible asset value per share is the equity attributable to equity holders
(excluding goodwill and intangibles) per shares in issue at period end.
CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013
Figures in R'000s Total Non- Total
attribut controllin equity
able to g interest
equity
holders
of
Vunani
Balance as at 31 December 2011 198 856 13 842 212 698
Transactions with owners
recorded directly in equity
Increase in investment in
subsidiaries - (193) (193)
Share based payment reserve
1 134 - 1 134
Comprehensive income
Profit and total comprehensive
profit for the period 15 019 2 797 17 816
Balance as at 30 June 2012 215 009 16 446 231 455
Transactions with owners
recorded directly in equity
Treasury shares
(623) - (623)
Share based payment reserve
2 248 - 2 248
Acquisition of non-controlling
interest 119 - 119
Dividends paid (12 901) (12 901)
-
Comprehensive income
Loss and total comprehensive
loss for the period (15 236) 9 249 (5 987)
Balance as at 31 December 2012 201 517 12 794 214 311
Transactions with owners
recorded directly in equity
Increase in investment in
subsidiaries 135 (135) -
Acquisition of subsidiaries - (2 112) (2 112)
Decrease in investment in
subsidiary (462) 651 189
Share based payment reserve
2 521 - 2 521
Foreign currency translation
reserve (358) (372) (730)
Dividends paid (3 300) (3 300)
-
Comprehensive income
Profit and total comprehensive
income 9 339 (2 465) 6 874
for the period
Balance as at 30 June 2013 212 692 5 061 217 753
Audited
Unaudited 31 Unaudited
30 June December 30 June
Figures in R'000s 2013 2012 2012
Net cash outflows from operating (20 322) (60 407) (1 628)
activities
Net cash inflows from investing activities 80 349 200 121 27 471
Net cash outflows from financing 66 358) (130 179) (30 757)
activities
Net (decrease)/increase in cash and cash
equivalents (6 331) 9 535 (4 914)
Cash and cash equivalents at beginning of
the year 26 544 17 009 17 009
Total cash and cash equivalents at end of
the period 20 213 26 544 12 095
SEGMENTAL REPORTING FOR THE PERIOD ENDED 30 JUNE 2013
All segments are geographically located in South Africa, with the
exception of advisory services, which operates out of South Africa and
Zimbabwe.
Reportable
Revenue segment
from profit/
external (loss) for Total
Figures in R'000s customers the period assets
Unaudited Unaudited Unaudited
30 June 30 June 30 June
2013 2013 2013
Asset management 15 951 1 274 41 644
Advisory services * - South 1 731 1 175 9 694
Africa
Advisory services * - 545 (4 140) 3 293
Zimbabwe
Investment holdings - 17 268 180 107
Securities broking 24 033 3 011 501 813
Properties - investments 521 (2 334) 58 768
and developments **
Properties - asset 4 322 1 502 758
management
Group *** 4 088 (10 882) 11 242
51 191 6 874 807 319
Unaudited 30 June 2012 Unaudited Unaudited Audited
30 June 30 June 31
2012 2012 December
2012
Asset management
10 746 532 49 440
Advisory services * 7 564 (1 854) 2 045
Investment holdings - 21 152 221 071
Securities broking 24 576 (841) 220 449
Properties - investments
and developments ** 1 115 (1 166) 89 213
Properties - asset
management 3 209 1 400 690
Group *** 3 973 (1 407) 8 117
51 183 17 816 591 025
* The Advisory services segment was previously named "Investment banking
and advisory". The name was amended in 2012.
** The Properties - investments and developments segment was previously
reported as two separate segments. In the current year, these segments
have been combined and reported as one segment.
*** The Group segment was previously named "Group overhead". The name
was amended in December 2012.
OVERVIEW AND PROSPECTS
The economic growth recovery disappointed both domestically and
internationally over the first half of the year due to varying degrees of
infrastructure bottlenecks and other capacity constraints, slower external
demand growth, lower commodity prices, financial stability concerns and
weaker policy support. In addition, the recession in Europe was deeper than
expected and the US economy expanded at a weaker pace than anticipated. The
rather sluggish real economic growth performance by the domestic economy in
the first quarter of the year can mainly be blamed on sluggish growth in
consumer demand. Consumers struggled to cope with high levels of
indebtedness in the absence of further monetary easing and also had to
absorb higher energy-related price increases. Securities markets have been
particularly volatile due to jitters regarding the inevitable prospective
termination of quantitative easing and equity markets also came under
pressure as bond yields deteriorated, triggering significant currency
weakening in emerging markets, including the Rand exchange rate.
The effect of the unpredictable market conditions was felt in a number of
segments within the group.
Overall, revenue remained at similar levels in comparison to the 6 months
ended 30 June 2012, with some segments showing good growth in revenue for
the period, while other segments’ revenues were disappointing.
Other income increased by 22% compared to the comparative period for 2012.
Other income includes the amortisation of deferred revenue that arose on the
acquisition of the investment in Black Wattle Colliery Proprietary Limited,
directors’ fees earned where the group’s executive directors serve on
investee company boards and foreign exchange translation gains resulting
from the group’s investment in Vunani Capital Zimbabwe (Private) Limited
(“VCZ”).
Investment income increased from R0.6 million in June 2012 to R4.3 million
in June 2013 due to dividends being declared by a number of the group’s
investments in the current year. Profit on disposal of assets of R1.3
million (June 2012: R1.5 million) resulted from the disposal of two of the
group’s associates, Integrated Managed Investments Proprietary Limited
(“IMI”) and Buttonwood Proprietary Trading Proprietary Limited
(“Buttonwood”). Interest received from investments reduced by 90% from R6.6
million in June 2012 to R0.7 million in June 2013 due to the disposal of the
groups’ interest earning investments at the end of 2012. Positive fair value
adjustments of R17.3 million (June 2012:R34.1 million) related to
revaluation of assets and liabilities designated as fair value through
profit and loss.
Operating expenses increased by 7% to R67.5 million (June 2012: R62.9
million). A significant portion of the increase is attributable to the
consolidation of VCZ’s cumulative loss to date in the current period (please
refer to note 5 below for further details).
Finance income reduced by 11% to R1.0 million (June 2012: R1.1 million).
Finance costs have decreased by 80% from R22.6 million in June 2012 to R4.6
million in June 2013 as a result of the reduction in other financial
liabilities. Income from associates reflected a loss of R2.0 million
compared to earnings of R2.4 million in June 2012. The loss in the current
year is attributable to our share of associate company losses that arose in
the property segment resulting from costs incurred in winding down property
development companies where the developments have been completed and sold.
Taxation is reflected as a charge of R1.4 million compared to a credit of
R7.8 million in June 2012. The charge is attributable mainly to the
investment holding segment and arises as a result of capital gains tax
recognised on the disposal of investments.
Goodwill increased by R2.2 million following the group’s acquisition of 11%
in Vunani Private Clients Proprietary Limited (refer to note 4 for
additional information). Investments and loans to associates reduced as a
result of the disposal of IMI and Buttonwood and the anticipated disposal of
the groups’ investment in Greenstone Hill Office Park Proprietary Limited
(“GHOP”), which has been reflected as a non-current asset held for sale. The
group also received dividends of R18.6 million (June 2012: R2.2m) from
associate companies during the period.
Other investments have decreased by R78.5 million following the disposal of
Redefine Properties Limited shares to settle the related liability to
financial institutions.
SEGMENTAL OVERVIEW
Asset management
The asset management segment reported a profit of R1.3 million for the 6
months ended June 2013 compared to a profit of R0.5 million in June 2012.
The segment saw the disposal of the group’s investment in IMI and is now
underpinned by the investment in Vunani Fund Managers Proprietary Limited
(“VFM”). VFM has successfully tendered for new business with assets under
management increasing by R1.9 billion to R13.3 billion during the first six
months of the year.
Advisory
The corporate finance business had a tough start to the year on the back of
significant uncertainty in the market delaying in the execution of
transactions. Furthermore, the results of Vunani Capital Zimbabwe Private
Limited (“VCZ”) were consolidated in this segment. VCZ was previously
accounted for as an associate of which the group owns 49%. With the
application of new accounting standards (refer to note 5 below), the result
of VCZ are now consolidated as the group controls the investment. Overall,
the segment recognised a loss of R3.0 million during the period.
Investment holdings
This segment reflected a profit of R17.3 million to June 2013 (June 2012:
R21.2 million). Positive fair value adjustments and reduced interest costs
reflect the considerable effort that has been devoted to further
restructuring the investment holding portfolio. Included in this segment are
all listed and unlisted equity investments, together with any related
liabilities. During the year, part of the investment in Redefine Properties
Limited was disposed of. The corresponding liabilities to RMB Bank Limited
and Standard Bank Group Limited were redeemed.
Securities broking
Revenue of R24.0 million for the six months to 30 June 2013 remained
relatively flat in comparison to June 2012. Profitability improved
significantly with the segment reporting a profit of R3.0 million for the
six months to June 2013 compared to a loss of R0.8 million in June 2012.
The turnaround is attributable to reduced operating costs in the segment.
Properties – investments and developments
This segment was previously reported as two separate segments. In the
financial year ended 31 December 2012, the segmental reporting was combined.
The completion of a number of developments in the last half of 2012 resulted
in the segment reflecting revenue of R0.52 million to June 2013, compared to
R1.1 million in June 2012. The segment reflects a loss of R2.3 million (June
2012:R1.2 million) after taking into account equity accounted losses of R2.0
million (June 2012: profit of R0.3 million).
Properties - asset management
This segment is underpinned by the operations of Vunani Property Asset
Management Proprietary Limited (“VPAM”), who provides asset management
services to Vunani Property Investment Fund Limited. The segment reflected
revenue of R4.3 million (June 2012: R3.2 million) and profit of R1.5 million
(June 2012: R1.4 million) for the period.
Group
Revenue in this segment is generated from services provided by directors to
clients and opportunistic transactions, which may involve arbitrage
opportunities and/or result in facilitation fees being earned. The segment
losses increased from R1.4 million in June 2012 to R10.9 million in 2013.
Prospects
Notwithstanding the significant strides made by the group in the last 3
reporting periods, the state of global markets and their impact on domestic
trading conditions continue to be challenging. However the board has
confidence in management’s ability to find opportunities that are value
accretive to shareholders. Good progress has been made in building and
strengthening the business platforms and they are poised to make more
meaningful contributions to the group in the future.
NOTES TO THE CONDENSED CONSOLIDATED RESULTS (all figures in R’000)
BASIS OF PREPARATION
The unaudited condensed consolidated results for the 6 months ended 30 June
2013 have been prepared in accordance with IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and the requirements of the Companies Act of South
Africa.
The accounting policies as set out in the audited financial statements for
the year ended 31 December 2012 have been consistently applied. The
unaudited condensed consolidated results have been presented on the
historical cost basis, except for other investments, investment property 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 unaudited condensed consolidated results 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.
1. Revenue
Revenue includes fees earned from advisory services, brokerage, asset
management fees, client service fees and proprietary trading revenue.
2. Fair value adjustments and (impairments) for continuing operations
Unaudited Unaudited
30 June 30 June
2013 2012
R'000 R'000
Financial assets and liabilities 17 286 34 146
designated as fair value through profit
and loss
Goodwill impairment - (271)
Reversal of Impairment/ (impairment) of 1 240 (3 459)
investments and loans to associates
Other impairments 29 (2 825)
18 555 27 591
3. 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 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 any liabilities
that are linked to the listed investments.
4. Business acquisitions
On 1 May 2013, Vunani increased its holding in Vunani Private Clients
Proprietary Limited (“VPC”) from 40% to 51% for a nominal amount. The 40%
shareholding was previously held indirectly through Vunani Private Client
Holdings Proprietary Limited (“VPCH”), which owned 100% of VPC. VPCH then
sold 51% of its shareholding in VPC to Vunani and 49% to the other
minorities. The carrying amount of the investment in VPC in VPCH was a
nominal amount. The acquisition resulted in goodwill of R2.2m. R2.1m of the
acquisition date net asset value of VPC was allocated to the non-controlling
interest. Since acquisition an after tax profit of R0.3m has been included
in Vunani’s profit or loss. R0.1m of this profit is attributable to non-
controlling shareholders interests. If the acquisition had taken place at
the beginning of the year, an after tax profit of R0.7m would have been
included in Vunani’s profit or loss. R0.3m of this profit would have been
attributable to non-controlling shareholders interests. A preliminary
purchase price allocation in terms of IFRS 3 has been presented below. This
purchase price allocation may be adjusted before 31 December 2013 in the
event of new or additional information relating to the acquisition in terms
of IFRS 3.
The goodwill arose because VPC has a very large client base which will
ensure revenue streams for the future. VPC also has significant
intellectual capital and top management has over 10 years in the private
client management industry. VPC also has significant trading platforms in
place, which will enable it to service any increase in the client base with
ease. The trade receivables acquired are at fair value and are expected to
be collected in their entirety. The valuation of the non-controlling
interest was based on the net asset value of VPC at acquisition date.
The provisional values of the net assets in terms of the business
combination are presented below:
VPC
Net assets acquired R'000
Property plant and equipment
254
Goodwill
2 207
Deferred tax asset
68
Trade and other receivables
2 729
Cash and cash equivalents
124
Other financial liabilities
(3 390)
Trade and other payables
(4 104)
Outside shareholders’ interests
2 112
Cost of investment
-
5. Impact of new accounting standards
A number of new IFRS standards become applicable to the group in the 2013
financial year. An assessment of the applicability of these standards for
Vunani was performed. The requirements of the consolidation suite of
standards (IFRS 10, 11 and 12) were assessed and in the assessment, it was
determined that the group’s investment in Vunani Capital Zimbabwe (Private)
Limited will need to be consolidated. The standards require retrospective
application and if the impact of the application is material, prior periods
will need to be restated to reflect the impact of application. The impact of
the application of the standard has been quantified and is considered
immaterial for the prior periods. Consequently, the full impact of
consolidating the subsidiary has been included in the 2013 interim results.
The consolidation of the subsidiary also resulted in a foreign currency
translation reserve of R0.7 million at 30 June 2013, of which R0.4 is
attributable to non-controlling interest.
6. Non-current assets held for sale
Part of the group’s interest in an investment in associate, in the Property
Investments and Developments segment is presented as a non-current asset
held for sale following the commitment of the group's management, to a plan
to sell the group’s interest in the associate. The sale decision was
concluded on 12 April 2013. As at 30 June 20113 the non-current asset held
for sale was valued at R28.5 million, which is detailed as follows:
7. Authorised and issued share capital
The authorised share capital at 30 June 2013 was 200 million ordinary shares
of no par value (2012: 200 million ordinary shares of no par value).
Weighted average number of Unaudited Unaudited Audited
ordinary shares (000s) 30 June 30 June 31 December
2013 2012 2012
Issued ordinary shares at the 105 415 5 270 732 5 270 732
beginning of the period
Effect of share consolidation - (5 165 317) (5 165 317)
Effect of own shares held (5 008) - (4 793)
Issued ordinary shares at the 100 407 105 415 100 622
end of the period
8. Headline profit
Unaudite Unaudited
d 30 June
30 June 2012
2013
Total profit attributable to equity 9 339 15 019
holders of Vunani
Adjusted for
Goodwill impairment - 271
(Reversal of)/impairment of (1 240) 3 459
investment and loans to associates
Taxation 231 -
Other impairments (29) 2 825
Taxation 5 (527)
Profit on disposal of assets (1 297) (1 475)
Taxation 242 413
Non-controlling shareholders' - 234
interest
7 251 20 219
SUBSEQUENT EVENTS
There have been no material subsequent events between the period-end to
the date of signing of the results.
DIVIDENDS
No dividends were declared or paid to shareholders during the year under
review (2012: R nil).
GOING CONCERN
The directors have made an assessment of the company and its subsidiaries
ability to continue as going concerns and have no reason to believe the
company and group will not continue as going concerns for the foreseeable
future.
CORPORATE INFORMATION
Executive directors Independent non-executive directors
EG Dube (Chief Executive Officer) WC Ross (Chairman)
BM Khoza (Managing Director) Dr.XP Guma (appointed 1 July 2013)
A Judin (Chief Financial Officer) NS Mazwi
CE Chimombe-Munyoro G Nzalo
NM Anderson JR Macey
Company secretary A Judin
Physical and registered address Postal address
Vunani House PO Box 652419
Athol Ridge Office Park Benmore
151 Katherine Street 2010
Sandown
Sandton
2196
Telephone number +27 11 263 9500
Facsimile number +27 11 784 3095
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
Designated Adviser
Grindrod Bank Limited
EG Dube A Judin
6 August 2013 6 August 2013
Date: 06/08/2013 11:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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