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Reviewed condensed consolidated interim results for the six months ended 30 June 2013
Andulela Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
Share code: AND ISIN: ZAE000172870
("Andulela" or "the company" or "the group")
www.andulelaholdings.com
Reviewed condensed consolidated interim results for the six months ended
30 June 2013
Condensed consolidated statements of financial position
Reviewed Reviewed Audited
Notes Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Assets
Non-current assets 758 108 820 775 758 392
Plant and equipment 1 324 378 401 403 326 498
Goodwill 418 679 418 679 418 679
Deferred tax asset 15 051 693 13 215
Current assets 302 662 372 658 278 000
Inventory 93 408 85 616 62 960
Trade and other
receivables 157 419 214 240 181 083
Taxation 3 576 3 395
Cash and cash
equivalents 48 259 72 802 29 521
Non-current assets held
for sale 1 041
Total assets 1 060 770 1 193 433 1 036 392
Equity and liabilities
Capital and reserves 470 041 571 408 470 906
Stated capital 2 976 114 976 114 976 114
Revaluation reserve 4 638 4 638 4 638
Cash flow hedge reserve 3 (51 147) (48 055)
Accumulated loss (526 598) (484 993) (529 830)
Non-controlling interest 67 034 75 649 68 039
Non-current liabilities 262 192 329 742 285 715
Redeemable preference
share capital 27 916 53 081 38 327
Deferred tax liability 37 111 73 694 40 273
Derivative financial
liabilities 3 74 640 73 715
Borrowings 122 525 202 967 133 400
Current liabilities 328 537 292 283 279 771
Taxation 10 200 3 102 10 976
Redeemable preference
share capital 15 780 13 647 15 780
Derivative financial
liabilities 3 10 344 6 130
Borrowings 189 563 70 664 151 864
Trade and other payables 102 650 204 870 95 021
Total equity and 1 060 770 1 193 433 1 036 392
liabilities
Net asset value per
share (cents)* 459,82 567,00 459,66
Net tangible asset value
per share (cents)* 60,51 167,00 60,35
* The June 2012 and December 2012 net asset value and net tangible
asset value per ordinary share has been recalculated to take the
share consolidation of 50:1 into account, which was approved by
shareholders on 27 February 2013.
Condensed consolidated statements of comprehensive income
Reviewed Reviewed Audited
Notes Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Gross revenue 426 174 693 691 1 471 972
Cost of sales (318 098) (611 361) (1 281 040)
Gross profit 108 076 82 330 190 932
Profit from operations 20 906 1 014 26 230
Investment income 1 416 355 1 317
Impairment of plant and
equipment 1 (47 262)
Loss on scrapping of
plant and equipment 1 (20 769)
Profit on disposal of
plant and equipment 262
Finance costs (12 085) (9 372) (27 910)
Profit/(loss) before
taxation 10 499 (8 003) (68 394)
Taxation (4 857) 1 132 18 508
Net profit/(loss) 5 642 (6 871) (49 886)
Other comprehensive
(loss)/income net of tax (3 700) (57 488)
Loss on accrual of derivative
cash flow hedge 3 (5 139) (79 845)
Deferred tax reversal on
derivative cash flow hedge 3 1 439 22 357
Total comprehensive
income/(loss) 1 942 (6 871) (107 374)
Net profit/(loss)
attributable to: 5 642 (6 871) (49 886)
Equity holders of
Andulela 3 232 (8 374) (53 212)
Non-controlling
interest 2 410 1 503 3 326
Total comprehensive
income/(loss) attributable to: 1 942 (6 871) (107 374)
Equity holders of
Andulela 139 (8 374) (101 266)
Non-controlling
interest 1 803 1 503 (6 108)
Ordinary shares in issue
(millions)* 87,64 87,42 87,64
Weighted average number of
ordinary shares in issue
(millions)* 87,64 86,02 87,52
Headline earnings/(loss) 2 970 (8 374) (4 049)
Attributable net
profit/(loss) 3 232 (8 374) (53 212)
Add back: Impairment and
scrapping of plant and equipment
net of deferred taxation 49 163
Deduct: Profit on sale of
plant and equipment net of
deferred taxation (262)
Earnings/(loss) and diluted
earnings/(loss) per ordinary
share (cents)* 3,69 (9,50) (60,80)
Headline earnings/(loss) and
diluted headline earnings/(loss)
per ordinary share (cents)* 3,39 (9,50) (4,63)
* The earnings/(loss) and the headline earnings/(loss) per ordinary
share is calculated by dividing the earnings/(loss) and the headline
earnings/(loss) by the weighted average number of ordinary shares in
issue during the period. The diluted earnings/(loss) and the diluted
headline earnings/(loss) per ordinary share is calculated by dividing
the diluted earnings/(loss) and the diluted headline earnings/(loss)
by the weighted average number of ordinary shares in issue during the
period. The June 2012 and December 2012 number of ordinary shares in
issue and weighted average number of shares in issue, as well as the
earnings/(loss) and the headline earnings/(loss) per ordinary share
has been recalculated to take the share consolidation of
50:1 into account, which was approved by shareholders on 27 February 2013.
Condensed consolidated statements of cash flows
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Cash flows from:
Operating activities 12 236 19 586 (15 836)
Investing activities (5 738) (7 290) (9 523)
Financing activities 12 240 2 251 (3 375)
Change in cash and
equivalents 18 738 14 547 (28 734)
Opening cash and
equivalents 29 521 58 255 58 255
Closing cash and
equivalents 48 259 72 802 29 521
Condensed consolidated statements of changes in equity
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Opening balances 470 906 584 600 584 600
Movements for the period:
Net profit/(loss)
attributable to equity
holders of Andulela 3 232 (8 374) (53 212)
Cash flow hedge reserve
net of deferred tax (3 092) (48 055)
Non-controlling interest (1 005) (4 818) (12 427)
Closing balances 470 041 571 408 470 906
Notes to the reviewed condensed consolidated interim results
Basis of preparation
The reviewed condensed consolidated interim results for the six
months ended 30 June 2013 have 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 reviewed condensed consolidated
interim results are presented in South African Rand, which is the
groups functional currency. The results have been prepared in
accordance with the accounting policies of the company that are in
terms of IFRS and are consistent with those of the previous financial
year. These results were prepared under the supervision of
Henk Engelbrecht, the Group Chief Financial Officer.
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
1. Plant and equipment
Opening balance 326 498 409 007 409 007
Impairment of plant and (47 262)
equipment
Loss on scrapping of plant
and equipment (20 769)
Transferred to non-current
assets held for sale (1 041)
Additions 8 737 7 291 9 817
Disposals (1 958) (540)
Depreciation (8 899) (14 895) (22 714)
Plant and equipment at
carrying value 324 378 401 403 326 498
During the 2012 financial year Pro Roof Steel Merchants (Pty) Ltd
and its subsidiaries (PRSM) 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.
PRSM also scrapped plant and equipment to the value of R21 million
at the December 2012 year end, which had no material future economic
benefits. The plant and equipment of the Nelspruit operation, which
was disposed of as a going concern with effect from 1 March 2013,
was classified as non-current assets held for sale during the 2012
financial year.
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
2. Stated capital
2.1 Ordinary shares
Authorised
5 500 000 000 ordinary
shares of 1 cent each* 55 000
220 000 000 ordinary shares
of no par value*
Issued
4 382 241 731 ordinary
shares of 1 cent each* 43 822
87 644 836 ordinary shares
of no par value* 976 114 976 114
976 114 43 822 976 114
2.2 Share premium
Opening balance 932 292 932 292
Transfer to stated capital (932 292)
Closing balance 932 292
Total stated capital 976 114 976 114 976 114
* At the annual general meeting held on 8 August 2012,
shareholders approved the special resolution in terms of which the
share capital of the company was converted from par value shares
of one cent each to no par value shares. At the general meeting of
shareholders held on 27 February 2013 the authorised share capital
of 5 500 000 000 ordinary shares and issued share capital of
4 382 241 731 of the company was consolidated on a 50 to 1 basis,
resulting in an authorised share capital of 110 000 000 ordinary
shares and an issued share capital of 87 644 836 ordinary shares of
no par value.
Shareholders also approved a special resolution at the same general
meeting to increase the authorised share capital of the company to
220 000 000 ordinary shares of no par value.
3. Derivative financial liability
In 2012, Kilken Platinum (Pty) Ltd (Kilken) hedged 30% of its cash
flow from the production revenue of platinum, palladium and gold in
favour of a financier in line with its 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 IAS39, R79,8 million of the cash flow hedge was
recognised as a hedging instrument at fair value in the statements of
financial position at 31 December 2012, 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 in the
statements of financial position.
For the period ended 30 June 2013 a R3,7 million loss after deferred
tax has been recognised in other comprehensive income and an increase
in the cash flow hedge reserve of R3,1 million, net of
non-controlling interests in the statements of financial position.
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 is 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. Material related party transactions and balances
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Sales to related parties (29 312) (29 552) (135 108)
Purchases from related
parties 15 664 20 656 36 156
Administration and management
fees paid to related parties 486 450 900
Preference dividends paid to
related parties 1 366 2 071 3 762
Interest received from
related parties (696)
Rent expenses to related
parties 8 780 12 784 16 146
Trade receivables 29 672 11 261 39 342
Loan accounts owing to
related parties (45 110) (38 089) (38 367)
Cumulative redeemable
preference shares (43 696) (66 728) (54 107)
Trade payables (2 111) (2 558) (5 926)
5. Segment reporting
The strategic steering committee is the groups 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 Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Revenue
Tailings treatment facility 54 384 44 946 99 084
Steel processing plants 371 790 648 745 1 372 888
Total revenue 426 174 693 691 1 471 972
There are no sales between segments
Reviewed Reviewed Audited
Period Period Year ended
30 June 30 June 31 December
2013 2012 2012
(R000) (R000) (R000)
Profit/(loss) after tax
Tailings treatment facility 14 680 11 738 20 266
Steel processing plants (6 325) (12 043) (65 010)
Other unallocated (2 713) (6 566) (5 142)
Total profit/(loss) after
tax 5 642 (6 871) (49 886)
Assets
Tailings treatment 285 670 73 589 292 765
Steel processing 527 940 694 621 500 607
Steel processing assets
held for sale 1 041
Inter-group eliminations (179 895) (12 002) (183 413)
Reportable segment assets 633 715 756 208 611 000
Goodwill 418 679 418 679 418 679
Other unallocated assets of
parent 8 376 18 546 6 713
Total assets 1 060 770 1 193 433 1 036 392
Liabilities
Tailings treatment 296 492 31 912 297 466
Steel processing 429 532 537 569 396 915
Inter-group eliminations (179 036) (14 544) (183 317)
Reportable segment
liabilities 546 988 554 937 511 064
Redeemable preference
shares 43 696 66 728 54 107
Other unallocated
liabilities of parent 45 360 316
Total liabilities 590 729 622 025 565 487
Review opinion
These results have been reviewed by the companys auditors, BDO South
Africa Incorporated, whose unmodified review opinion is available for
inspection at the companys 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
I Kajee resigned as a non-executive director on 9 May 2013.
PC de Jager resigned as Chief Financial Officer on 30 June 2013, but
remains on the board of directors as a non-executive director.
JHP Engelbrecht was appointed as Chief Financial Officer with effect
from 1 July 2013. The current directors of the company at the date of
this report are as follows:
Name Date of appointment
MJ Husain (Chairman)# Appointed as Chairman 26 February 2010
A Kaka (CEO) Appointed as CEO 26 February 2010
JHP Engelbrecht (CFO) Appointed as CFO 1 July 2013
PC de Jager* Appointed 26 February 2010
GR Rosenthal# Appointed 1 October 2011
PE du Preez# Appointed 1 October 2011
CWN Molope# Appointed 1 July 2012
# Independent non-executive; * Non-executive
Financial review
Andulelas results for the six months to 30 June 2013 reflect a
headline profit of R2,9 million compared to a headline loss of
R8,4 million for the comparable period ended 30 June 2012. Kilken
produced excellent results for the six months, while PRSMs loss
reduced from R12,0 million for the six months to 30 June 2012 to
R6,3 million for the current period. The weakening of the Rand
against the US Dollar had a negative effect on the cash flow hedge
over the last six months, resulting in a further R3,7 million loss
being recognised against other comprehensive income for the reporting
period.
While the cash balances of the group improved since its year-end,
this was negated by the increased inventory levels at PRSM, partially
due to unplanned stoppages at its main steel supplier which firstly
resulted in inventory shortages, and then excess inventory levels
when the supplier cleared its back-orders, and an increase in
short-term borrowings.
Andulela redeemed a further R10,4 million of its preference share
capital during the period under review, with a balance of
R43,7 million outstanding as at 30 June 2013.
As mentioned in the 2012 Integrated Annual Report, management is
considering all its options with regard to the operations of PRSM,
as it continues to trade below expectations in the current weak
market conditions.
Kilken
Andulela holds an effective interest of 83,6% in Kilken, which in
turn has a 70% interest in the Kilken/Imbani Joint Venture (the
JV). The JV processes tailings from Rustenburg Platinum Mines
Limited (RPM), extracts the PGM concentrate, and sells it to RPM
at market related prices. Over the last six months Kilkens
revenue increased by 21% due to improved processing of the
tailings and an increase in average production volumes of 13,4% in
PGM concentrate per month, compared to the comparable period to 30
June 2012. The average basket price of the PGMs also increased by
12,7% over the comparable period. The cash flow hedge however limited
the overall attributable revenue increase for the company to 21%,
compared to the revenue increase of the JV of 27,5% over the same
period. Overall, Kilken increased its profit after tax for the six
months to 30 June 2013 by 25% compared to the profit after tax for
the six months ended 30 June 2012. Certain suppliers service
contracts have been renegotiated with effect from 1 July 2013 and
should contribute to increased profits from this company.
PRSM
As a result of an unplanned shutdown by its main supplier in
February 2013 due to severe damage at its Vanderbijlpark plant, a
number of industry players (including PRSM) imported additional
material to deal with the resultant inventory shortage. This, together
with the supplier clearing its back-orders, resulted in the industry
and PRSM having a substantial oversupply and consequently inventory
being sold at or below cost.
The Polokwane operation has been closed, the KZN operation scaled
down to a distribution centre and the Nelspruit operation was sold at
net asset value with effect from 1 March 2013, resulting in improved
profit margins for PRSM and contributing to the reduction of the loss
after tax from R12.0 million for June 2012 to R6.3 million for the
six months ended 30 June 2013. Finance costs increased due to the
high debt levels of PRSM.
Overall the domestic steel market remains weak as a result of the
global slowdown and this is expected to continue in the short term
and hence impact the local demand for steel and PRSMs sales volumes.
The above factors, together with the other operational restructuring
initiatives of PRSM, contributed to the decline in overall revenue in
the period to June 2013, compared to the same period in 2012.
Events subsequent to the period end
Shareholders are referred to the cautionary announcement released on
18 September 2013 advising them that the company has entered into
negotiations for the disposal of the companys interest in PRSM,
which if successfully concluded may have a material effect on the
price of the companys securities. Shareholders are accordingly
advised to exercise caution when dealing in the companys securities
until a further announcement is made.
Commitments
There are no outstanding capital commitments for the group as at
30 June 2013.
For and on behalf of the board
Mohamed J Husain Ashruf Kaka
Independent Non-Executive Chairman Chief Executive Officer
Sandton
23 September 2013
Directors
MJ Husain# (Chairman); A Kaka (CEO); JHP Engelbrecht (CFO);
PC de Jager; GR Rosenthal#; PE du Preez#; CWN Molope#
(#Independent non-executive)
Registered Office
108 4th Street, Parkmore, Sandton, 2196
Company Secretary
H 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: 23/09/2013 10:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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