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Trading statement, update of 2nd tranch payment to AHL shareholders and redemption of preference shares
AFROCENTRIC INVESTMENT CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration umber 1988/000570/06)
JSE Code: ACT, ACTP ISIN: ZAE000078416, ZAE000082269
(“AfroCentric” or “the Company”)
- TRADING STATEMENT
- UPDATE OF SECOND TRANCHE PAYMENT TO AFROCENTRIC HEALTH;
LIMITED SHAREHOLDERS (FORMERLY LETHIMVULA INVESTMENTS LIMITED);
AND
- UPDATE ON CONVERSION OF PREFERENCE SHARES
In terms of paragraph 3.4 (b) of the Listings Requirements of the JSE Limited, a listed
company is required to publish a trading statement as soon as it is satisfied that a
reasonable degree of certainty exists that the financial results for the period to be reported
on next, will differ by at least 20% from those of the previous corresponding period.
Before the expected range of earnings for the year ended 30 June 2013 are detailed in this
Trading Statement, it is appropriate to summarise certain significant events that surround the
performance of the Group’s two principal investments during the period under review. These
are its subsidiary, AfroCentric Health Limited (formerly Lethimvula) (“AHL”), and its
associate, Jasco Electronic Holdings Limited (“Jasco”).
HEALTH SUBSIDIARY – AFROCENTRIC HEALTH LIMITED (“AHL”)
AfroCentric’s acquisition of a controlling interest in AHL in 2008 included a profit warranty
provision that, on fulfillment, could trigger a Second Tranche issue of shares and the
payment of additional cash consideration to vendor shareholders. The warranty considers
the Aggregate Profits after Taxation (“PAT”) over a three year period which ended on the 30
June 2013 (“the measurement period”). The quantum of the Second Tranche issue of
shares and cash consideration to vendor shareholders is based on the actual PAT delivered
over the measurement period (as calculated in terms of a purposely fashioned definition of
PAT).
The positive results of the warranty measurement and the quantum of the Second Tranche
shares to be issued and cash to be paid will be appropriately disclosed in the Audited Annual
Financial Results Announcement, to be released in the press and on SENS by the 30
September 2013.
In considering the need and purpose therefore of this Trading Statement, the Second
Tranche shares to be issued in the near future in terms of the level of attainment of the profit
warranty, will need to be taken into account in the calculation of diluted Earnings per Share
and diluted Headline Earnings per Share “as if” the Second Tranche shares to be issued,
were in issue on 30 June 2013.
Furthermore, having regard to the three year duration of the profit warranty and its
measurement period, certain non-recurring and, in certain cases, non-cash costs (only
determinable and qualifying for payment at the end of the warranty period) will be provided
for in this year which, not unexpectedly, will have a once-off impact on the Group’s Basic
and Headline Earnings.
The 2008 Acquisition Agreement also contemplated an award of a minimum of 20 million
AfroCentric shares to certain Executives of AHL, to be awarded at the end of the warranty
period. During the course of that period, those Executive Shares already allocated and/or
reserved for Executives, were categorised as share based payments in terms of IFRS 2 and
the actuarially determined “non-cash” costs were provided for in each of the company’s
relevant reporting periods. The Boards of AfroCentric and AHL have finally approved an
allocation marginally in excess of 20 million shares and the actuarial values will be disclosed
as “non-cash” deductions in the Consolidated Statement of Comprehensive Income as
consistently described in each year as an IFRS 2 Compliance Adjustment. The Executive
Share Awards, although still to be issued, will also be included in the calculation of diluted
Earnings per Share and diluted Headline Earnings per Share “as if” these share awards
were in issue on 30 June 2013.
In addition, shareholders will be aware that the AfroCentric Preference Shares are
redeemable or convertible prior to 31 December 2013. In compliance with IFRS, the
Ordinary Shares to be issued on conversion of the Preference Shares, will also be included
in the calculation of diluted Earnings per Share and diluted Headline Earnings per Share “as
if” the additional Ordinary Shares (on conversion at 100%) were in issue on 30 June 2013.
Pursuant thereto, based on the rights and covenants attaching to the Preference Shares, the
conversion formula will be applied to Ordinary Shares already issued, including those now
deemed issued in respect of the Second Tranche issue of shares and the Executive Share
Awards.
TECHNOLOGY ASSOCIATE – “Jasco”
AfroCentric has a 27.3% non-controlling interest in JSE-Listed Jasco. Jasco reported its
Audited Results for the year ended 30 June 2013 on 18 September 2013 and these are
available for more detailed inspection on the Stock Exchange News Service (SENS) under
the code: JSC. The significant event in the case of Jasco substantially arises from
impairments disclosed in its recent results announcement, more specifically the material
impairment of Jasco’s 51% investment in Malesela-Taihan Electric Cables (“M.Tech”). Apart
from a mark-to-market fair value adjustment, given the material impairment in M.Tech,
AfroCentric’s consequential share of losses from this associate will be accounted for as part
of normal earnings. This “non-cash” share of associate losses will rank for adjustment in
headline earnings determinations for AfroCentric. It is common cause that M.Tech has
continually under-performed and has been a retarding feature of Jasco’s overall progress.
Jasco has reported that M.Tech, (which has a substantial net asset value) has been
classified as an “asset held for sale”.
GENERAL
Given the significant events recorded herein and the particularly uncommon and
extraordinary impact on Earnings, Diluted Earnings and Diluted Headline Earnings per Share
in the 2013 Financial Year, AfroCentric’s Final Results Announcement will, in addition to the
disclosures mandated by IFRS, include data that the Board believes more appropriately
presents the consistency in the Group’s comparable growth and the improvement in its
comparable quality of earnings. This data will be presented under the heading of
“Normalised Earnings” and “Cash Earnings”, in each case adjusting for the shares in issue
and the non-recurring, closure and extraordinary deductions, chargeable during this period.
TRADING STATEMENT
In compliance therefore with the provisions of paragraph 3.4 (b) referred to in the pre-amble
to this Trading Statement, the following estimate of Earnings per share and Headline
Earnings per share are provided.
Year Ended 30 Year Ended 30
June 2013 June 2012
Cents per Share Cents per Share
(Between) (Actual)
Earnings
Attributable to ordinary shares 57.60 to 63.50 61.55
Fully diluted 34.00 to 38.10 52.31
Headline Earnings
Attributable to ordinary shares 46.00 to 50.10 55.67
Fully diluted 26.70 to 30.20 47.58
Cash Earnings
Attributable to ordinary shares 124.20 to 128.30 95.48
Fully diluted 72.60 to 76.50 76.77
SECOND TRANCHE PAYMENTS
AfroCentric will soon be advising vendor shareholders (as defined in the 2008 acquisition
agreement and the 2008 and 2009 Circulars) details of the Second Tranche payments due
to such parties, in particular the process to be adopted for such Second Tranche payments
and the verification of the contact details relating to each of such shareholders. Much of this
information is already on file from previous registers and CSDP institutions where such are
applicable.
PREFERENCE SHARE CONVERSION
AfroCentric will also soon be notifying Preference Shareholders of the means by which they
can elect to convert their AfroCentric Preference Shares (ACTP) into AfroCentric Ordinary
Shares (ACT). The communication to Preference Shareholders will be in the form of a
SENS announcement and press announcements in major newspapers early in October 2013
together with a circular that will be posted to AfroCentric Preference shareholders on the
same day, which circular will include the form of exercise, surrender and acceptance.
The financial information, on which this trading statement is based, has not been reviewed or
reported on by AfroCentric’s Auditors. The Audited Annual Financial Results for the year
ended 30 June 2013 are expected to be published by the 30 September 2013.
Johannesburg
25 September 2013
Sponsor:
Sasfin Capital
(a division of Sasfin Bank Limited)
Date: 25/09/2013 01:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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