Wrap Text
Unaudited condensed consolidated interim results for the 6 month period ended 30 June 2014
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 interim results for the 6 month period ended 30 June 2014
Salient features
Profit for the period of R81.6 million at 30 June 2014
Net finance costs down from R3.6 million to June 2013 to a net finance income of R2.1 million in June 2014
Basic earnings per share of 68.5c per share compared to basic earnings per share of 9.3c in June 2013
Net asset value per share increased to 238.9c per share at 30 June 2014 from 203.5 c per share at 31 December 2013
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30 JUNE 2014
Unaudited
re-
presented
Unaudited 30 June
Figures in R'000s Note 30 June 2014 2013
Continuing operations
Revenue 1 53 977 46 348
Other income 2 128 4 187
Investment revenue 12 207 4 317
Interest received from investments 1 401 516
Net (loss)/profit on disposal of assets (75) 1 284
Fair value adjustments and impairments 2 (13 165) 18 555
Operating expenses (67 137) (63 272)
Results from operating activities (10 664) 11 935
Finance income 3 445 955
Finance costs (1 323) (4 592)
Net finance income/(cost) 2 122 (3 637)
Results from operating activities after net finance costs (8 542) 8 298
Equity accounted earnings (net of income tax) 114 1
(Loss)/ profit before income tax (8 428) 8 299
Income tax expense (707) (592)
(Loss)/ profit from continuing operations (9 135) 7 707
Discontinued operations
Profit from discontinued operations (net of income tax) 3 90 700 (833)
PROFIT FOR THE PERIOD 81 565 6 874
OTHER COMPREHENSIVE INCOME
Exchange differences on translating foreign operations 30 -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 81 595 6 874
Profit/(loss) for the period attributable to :
Equity holders of Vunani Limited 68 764 9 339
Non-controlling interest 12 801 (2 465)
81 565 6 874
Total comprehensive income for the period attributable to :
Equity holders of Vunani Limited 68 773 9 339
Non-controlling interest 12 822 (2 465)
81 595 6 874
Basic and diluted earnings per share (cents) 68.5 9.3
Basic and diluted (loss)/earnings per share from continuing operations (cents) (8.7) 9.9
Basic and diluted earnings/ (loss) per share from discontinued operations (cents) 77.2 (0.6)
Basic and diluted headline (loss)/earnings per share (cents) 4 (18.4) 7.2
Basic and diluted headline (loss)/earnings per share from continuing operations (cents) (10.1) 7.9
Basic and diluted headline loss per share from discontinued operations (cents) (8.3) (0.7)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2014
Unaudited Audited
Figures in R'000s Note 30 June 2014 31 Dec 2013
ASSETS
Property and equipment
6 622 1 934
Goodwill
34 123 34 123
Intangible assets
1 839 2 207
Investments in and loans to associates
14 126 22 425
Other investments 5
101 019 115 317
Deferred tax asset
41 868 40 397
Other non-current assets
28 331 25 358
Total non-current assets
227 928 241 761
Other investments 5 9 611
-
Non-current assets held for sale
- 2 634
Other current assets
3 399 1 451
Taxation prepaid
1 123 1 041
Trade and other receivables
46 347 30 729
Accounts receivable from trading activities
317 037 113 077
Trading securities
1 407 320
Cash and cash equivalents
71 207 42 271
Total current assets
450 131 191 523
Total assets
678 059 433 284
EQUITY
Stated capital 6
614 744 610 088
Treasury shares
(15 265) (15 265)
Share based payment reserve
11 538 10 256
Foreign currency translation reserve
(888) (897)
Accumulated loss
(351 174) (389 709)
Equity attributable to equity holders of Vunani Limited
258 955 214 473
Non-controlling interest
(1 505) (6 226)
Total equity
257 450 208 247
LIABILITIES
Other financial liabilities
5 45 932 45 605
Deferred tax liabilities
6 763 4 061
Total non-current liabilities
52 695 49 666
Other financial liabilities
5 3 201 7 870
Non-current liabilities held for sale
- 2 479
Taxation payable
17 161 9 896
Trade and other payables
30 346 39 274
Accounts payable from trading activities
317 201 112 941
Bank overdraft
5 2 911
Current liabilities
367 914 175 371
Total liabilities
420 609 225 037
Total equity and liabilities
678 059 433 284
Shares in issue (000s) 6 108 415 105 415
Net asset value per share (cents) 238.9 203.5
Net tangible asset value per share (cents) 205.7 169.0
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2014
Total
attributable
to equity Non-
holders of controlling Total
Figures in R'000s Vunani interest equity
Balance as at 31 December 2012 - Audited 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)
Disposal to non-controlling interest (462) 651 189
Dividends paid - (3 300) (3 300)
Foreign currency translation reserve (358) (372) (730)
Share based payment reserve 2 521 - 2 521
Total transactions with owners 203 353 7 526 210 879
Total comprehensive income
Profit/ (loss) for the period 9 339 (2 465) 6 874
Balance as at 30 June 2013 - Unaudited 212 692 5 061 217 753
Decrease in investment in subsidiary 1 346 (1 535) (189)
Acquisition of non-controlling interest (1 252) 1 252 -
Treasury shares acquired (366) - (366)
Dividends paid - (12 045) (12 045)
Share based payment reserve 1 829 - 1 829
Total comprehensive income
Profit for the period 530 902 1 432
Other comprehensive income for the period (306) 139 (167)
Balance as at 31 December 2013 - Audited 214 473 (6 226) 208 247
Transactions with owners, recorded directly in equity
Acquisition of subsidiaries - 3 575 3 575
Issue of shares 4 656 - 4 656
Share based payment reserve 1 282 - 1 282
Dividends paid (30 229) (11 676) (41 905)
Total comprehensive income
Profit for the period
68 764 12 801 81 565
Other comprehensive income for the period 9 21 30
Balance as at 30 June 2014 - Unaudited 258 955 (1 505) 257 450
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30 JUNE 2014
Unaudited Audited Unaudited
Figures in R'000s Note 30 June 2014 31 Dec 2013 30 June 2013
Cash flows from operating activities
Net cash utilised by operating activities 7 (22 856) (13 525) (18 536)
Investment revenue 3 228 10 469 1 385
Finance income received 1 246 4 809
Finance costs paid (1 280) (10 594) (3 381)
Dividends received 4 257 - 4 317
Dividends paid to non-controlling interest (11 676) (15 345) -
Dividends paid to shareholders of Vunani (30 229) - -
Income tax paid (231) (10 630) (4 107)
Net cash utilised by operating activities (57 541) (34 816) (20 322)
Cash flows from investing activities
Proceeds on disposal of business 102 000 - -
Taxation paid on the disposal of business (7 287) - -
Acquisition of property and equipment (269) (894) (678)
Proceeds from loans to associates repaid 1 273 35 186 10 793
Proceeds on disposal of associates - 26 119 10 200
Increase in investment in associates - (1 835) -
Dividends received from associates - 2 725 -
Increase in other non-current assets (2 753) (2 220) (2 614)
Proceeds from repayment of other non-current assets - 186
Proceeds on disposal of other investments - - 66 748
Acquisition of other investments (3 495) (9 252) (4 100)
Proceeds on disposal of other investments - 65 423 -
Net cash inflow from investing activities 89 469 115 438 80 349
Cash flows from financing activities
Proceeds on issue of share capital 4 656 - -
Repayments of other financial liabilities (4 917) (68 036) (66 358)
Increase in other financial liabilities - 107 -
Net cash outflow from financing activities (261) (67 929) (66 358)
Net increase in cash and cash equivalents 31 667 12 693 (6 331)
Cash and cash equivalents at the beginning of the 39 360 26 544 26 544
period
Transfer to non-current assets held for sale - (1) -
Cash acquired in business acquisitions 175 124 -
Total cash and cash equivalents at end of the period 71 202 39 360 20 213
SEGMENTAL REPORTING FOR THE PERIOD ENDED 30 JUNE 2014
All segments are geographically located in South Africa, with the exception of advisory services and investment holdings,
which operate out of South Africa and Zimbabwe.
Reportable
segment
profit/
(loss) after
tax
Figures in R'000s Revenue (Note I) Total assets
Unaudited Unaudited Unaudited
2014 30 June 2014 30 June 2014 30 June 2014
Continuing operations
Asset management 21 137 1 571 45 895
Advisory services (Note II) 1 552 (1 374) 2 028
Investment holdings 530 (5 642) 200 659
Institutional securities broking 21 741 1 412 345 313
Private wealth and investments 5 047 53 2 918
Group 3 970 (5 155) 58 563
53 977 (9 135) 655 376
Discontinued operations
Properties asset management 1 571 91 592 21 299
Property developments and investments - (892) 1 384
1 571 90 700 22 683
TOTAL 55 548 81 565 678 059
Unaudited
Unaudited re-presented
re-presented 30 June 2013 Audited
2013 30 June 2013 (Note I) 31 Dec 2013
Continuing operations
Asset management 15 951 1 274 42 030
Advisory services - South Africa (Note II) 1 731 1 175 10 958
Advisory services - Zimbabwe (Note II) 545 (4 140) 190
Investment holdings - 13 800 195 830
Institutional securities broking 22 105 2 772 140 140
Private wealth and investments 1 928 239 2 470
Group 4 088 (7 413) 19 332
46 348 7 707 410 950
Discontinued operations
Properties asset management 4 322 1 502 3 129
Property developments and investments 521 (2 335) 19 205
4 843 (833) 22 334
TOTAL 51 191 6 874 433 284
Note I The allocation of executive staff and overhead costs has been refined in order to reflect these costs in the
segments that enjoy the benefit of the time and effort spent by the executives. Accordingly, the comparative
segmental information has been represented to take into account this amendment in order to afford a meaningful
comparison.
Note II In 2013, the Advisory Services segment was split into two segments, namely Advisory Services – South Africa and
Advisory Services – Zimbabwe, however in 2014 the two segments have been consolidated into one segment due to the
Zimbabwean advisory operations being downscaled.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM RESULTS (all figures in R’000)
BASIS OF PREPARATION
The unaudited condensed consolidated interim results for the 6 months ended 30 June 2014 have been prepared in accordance with the
framework concepts and recognition and measurement principles of International Financial Reporting Standards and Financial
Pronouncements as issued by the Financial Reporting Standards Council. The unaudited condensed consolidated interim results have been
presented in accordance with the minimum content, including disclosures, prescribed by IAS 34 Interim Financial Reporting applied to
year end reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Listing Requirements of
the JSE Limited 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 2013 have been consistently
applied. The unaudited condensed consolidated interim results have been presented on the historical cost basis, except for other
investments and other financial liabilities, which are fair valued. These condensed consolidated financial statements are presented in
South African Rand, rounded to the nearest thousand, which is the group’s functional and presentation currency.
These unaudited condensed consolidated interim 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.
Comparatives on the statement of comprehensive income have been re-presented to show the effect of the discontinued operations (refer
to note 3).
NOTES
1. Revenue
Revenue includes trading revenue and fees earned from advisory services, brokerage, asset management fees, client service fees and
proprietary trading revenues.
2. Fair value adjustments and impairments
Unaudited Unaudited
Figures in R'000s 30 June 2014 30 June 2013
Financial assets and
liabilities designated at fair
value through profit and loss (14 907) 17 286
Fair value adjustment on re-
measurement of
stepped up acquisition of
subsidiary (refer to note 8) 1 742 -
Reversal of impairment of loans
to associates on consolidation
of associate - 1 240
Other impairments - 29
(13 165) 18 555
3. Discontinued operations
A strategic decision was made in November 2013 to dispose of the group's property asset management business. This culminated in the
group disposing of the property management contract that was held in Vunani Property Asset Management Proprietary Limited (“VPAM”).
The sale of the VPAM business included the transfer of VPAMS’s executive management and staff’s employment contracts to the purchaser.
As this disposal related to a major line of the group's business, the related activities have been presented as a discontinued
operation. The non-controlling interest relating to the disposal of the VPAM business has been calculated in terms of an agreement
between the shareholders of Vunani Properties Proprietary Limited, which owns 100% of VPAM.
The property investment and development business saw a period of significant realisation during 2012 and 2013 and the managing
director of this segment resigned early in 2014. At 31 December 2013, this segment included an investment in one completed development
(held in Orion Properties 14 Proprietary Limited) that has been reclassified into the investment holdings segment in the current
period. Consequently, the balance of the property investment and development segment has been classified as a discontinued operation.
The comparative information in the June 2013 consolidated statement of comprehensive income has been re-presented to disclose the
discontinued operations separately from continuing operations.
The results of the discontinued operations are as follows:
Unaudited Unaudited
30 June 30 June
Figures in R'000s 2014 2013
Revenue 1 571 4 843
Other income - 1 182
Interest from investments 217 140
Profit on disposal of assets 116 260 13
Fair value adjustments and (509) -
impairments
Operating expenses (11 758) (4 218)
Results from operating activities 105 781 1 960
Finance income 10 41
Finance costs (90) (8)
Net finance (costs)/ income (80) 33
Results from operating activities
after net finance costs 105 701 1 993
Equity accounted earnings (net of
income tax) (22) (2 038)
Profit/(loss) before income tax 105 679 (45)
Income tax expense (14 979) (788)
Profit/(loss) from operations 90 700 (833)
77 505 (650)
Attributable to equity holders of
Vunani
Attributable to non-controlling 13 195 (183)
interest
90 700 (833)
Effect on basic and diluted
earnings/(loss) per share (cents)
77.2 (0.6)
Effect on basic and diluted
headline loss per share (cents)
(8.3) (0.7)
NOTES TO THE CONDENSED CONSOLIDATED INTERIM RESULTS (all figures in R’000) (continued)
NOTES (CONTINUED)
3. Discontinued operations (continued)
Unaudited Unaudited
30 June 2014 30 June 2013
Figures in R'000s
Cashflows from discontinued
operations
Net cash generated by operating
activities (93 248) 1 669
Net cash outflow from investing
activities 94 713 (1 418)
Net cash inflow/(outflow) from
financing activities 32 (13 536)
Net cash inflow/(outflow) for the 1 497 (13 285)
period
4. Reconciliation of headline earnings for the period
Unaudited Unaudited
Figures in R'000s 30 June 2014 30 June 2013
Total comprehensive income
attributable to equity holders
of Vunani 68 764 9 339
Adjusted for:
Profit on disposal of
discontinued operations (116 260) -
Taxation 17 248 -
Non-controlling interest 13 210 -
Associates
Reversal of impairments
- (1 240)
Taxation
- 231
Other impairments
- (29)
Taxation
- 5
Business acquisition
Fair value adjustment on stepped
up acquisition (1 742) -
Bargain purchase
(77) -
Taxation
339 -
Disposal of assets
Loss/(profit) on disposal 75 (1 284)
Taxation (14) 239
(18 457) 7 261
Headline (loss)/earnings per share
(cents) (18.4) 7.2
Basic and diluted headline (loss)/
earnings per share from continuing
operations (10.1) 7.9
Basic and diluted headline loss per
share from discontinued operations (8.3) (0.7)
5.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 the end of the period.
Both listed and unlisted investments are designated at fair value through profit or loss. Financial liabilities are either accounted
for at amortised cost or designated at fair value through profit or loss. The group designates certain financial liabilities at fair
value through profit or loss upon initial recognition.
5. Other investments and other financial liabilities (continued)
Ring-fenced special purpose entities have historically been used to house the group’s geared equity investments and any financial
liabilities that relate to such investments. Financial assets and liabilities that arise in terms of these ring-fenced structures are
both fair valued through profit or loss in terms of IAS 39 Financial instruments: Recognition and measurement.
The reason for the above designation was to reduce the measurement inconsistency on ring-fenced liabilities relative to the assets
that they funded. Because the liability to lenders is limited to the fair value of the assets, if the assets were fair valued through
profit or loss and the liabilities carried at amortised cost, inconsistency would arise that would not reflect the true liability of
the group. In order to eliminate this inconsistency on ring-fenced structures, these specific liabilities are designated at fair value
through profit or loss on initial recognition. Financial liabilities at fair value include capitalised interest and attributable
profit participation.
6. Authorised and issued stated capital
The authorised stated capital at 30 June 2014 was 200 million ordinary shares of no par value (2013: 200 million ordinary shares of no
par value). 108 414 649 shares were in issue at 30 June 2014 (2013: 105 414 649).
Weighted average Unaudited Audited Unaudited
number of ordinary 30 June 2014 31 Dec 2013 30 June 2013
shares (000s)
Issued ordinary
shares at the
beginning of the
year 105 415 105 415 105 415
Effect of share
issue 182 - -
Effect of own
shares held (5 211) (5 211) (5 008)
Weighted average
number of shares 100 386 100 204 100 407
Number of shares in
issue at the end of
the period (000s) 108 415 105 415 105 415
The shares issued as part of the employee share incentive scheme could potentially dilute basic earnings in the future. In the current
period, the employee shares have no dilutive effect.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM RESULTS (all figures in R’000) (continued)
NOTES (CONTINUED)
7. Net cash utilised by operating activities
Unaudited Audited Unaudited
30 June 31 Dec 2013 30 June
Figures in R'000 2014 2013
Loss before income tax expense from continuing operations (8 428) 8 248 8 299
Profit before income tax expense from discontinued operations 105 679 2 489 (45)
Adjusted for:
Depreciation of plant and equipment 774 1 962 789
Net loss/(profit) on disposal of assets 75 - (1 284)
Profit on discontinued operations (116 260) (19) (13)
Profit on disposal of associates - (11 150) -
Equity accounted earnings (net of income tax) (92) 3 438 2 037
Gain on bargain purchase (77) - -
Fair value adjustments and impairments 13 674 (18 470) (18 555)
Rental guarantee reversal - (9)
(3 575) (1 786)
Realisation of deferred income (1 786)
(934) -
Movement in impairment allowance -
489 489
Amortisation of intangible assets 368
4 350 2 521
Share based payments expenses 1 282
(813) (731)
Foreign currency translation 9
- (980)
Foreign exchange profits -
(5 137) (1 652)
Interest received from investments and finance income (5 073)
(10 469) (4 317)
Investment revenue (12 207)
5 353 4 333
Finance costs 1 413
Prior period effect of consolidating Vunani Capital Zimbabwe (Private) Limited in 2 223 -
terms of IFRS 10 -
Changes in working capital:
(Increase)/decrease in trading securities (1 087) 1 244 1 244
(692) (8 595)
Decrease /(increase ) in trade and other receivables 7 264
5 789 3 544
(Decrease)/increase in trade and other payables (8 930)
2 158 (3 105)
Decrease /(increase)in accounts receivable and payable from trading activities 546
(13 525) (18 536)
Cash utilised from operations (22 856)
8. Business acquisition
Vunani increased its investment in Purpose Vunani Asset Management (Private) Limited (“PVAM”), a Zimbabwean asset management business,
from 45% to 55% on 27 January 2014, in line with the group’s strategy to expand its footprint into the African continent. Part of this
strategy is to replicate the South African operating model on the African continent. As such, acquiring a controlling stake in an
asset management business in Zimbabwe was in line with this strategy. The 45% investment was acquired for R1.8 million in 2013. Prior
to the stepped-up acquisition, the 45% investment was valued at R3.5 million, resulting in a positive fair value adjustment of R1.7
million in the current period. The consideration for the additional 10% acquired during the period amounted to R0.718 million.
An after tax loss of R0.538 million has been included in Vunani’s profit or loss for the period ended 30 June 2014. R0.242 million of
this loss is attributable to non-controlling interests. R2.934 million has been included in Vunani's revenue since the acquisition of
PVAM in January 2014.
The acquisition resulted in the recognition of a gain on bargain purchase of R0.077 million at acquisition date. The bargain purchase
resulted from the fair value of net assets acquired being higher than the purchase price. The purchase price for the additional 10%
stake was based on a value outlined in the agreement for the acquisition of the original 45% investment in PVAM.
Trade receivables acquired are at fair value and are expected to be collected in their entirety. No contingent liabilities arose as a
result of the business combination. The valuation of the non-controlling interest was based on the net asset value of PVAM at
acquisition date.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM RESULTS (all figures in R’000) (continued)
NOTES (CONTINUED)
8. Business acquisition (continued)
A preliminary purchase price allocation in terms of IFRS 3 is presented below:
Figures in R'000s PVAM
Net assets acquired
Plant and equipment 5 193
Financial assets designated at fair value 556
Deferred tax asset 70
Trade and other receivables 1 568
Cash and cash equivalents 175
Other assets 383
Non-controlling interests (3 575)
Cost of investment 4 370
Purchase price 4 293
Gain on bargain purchase 77
9. Financial instruments carried at fair value
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a
liability in an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is a
presumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its
operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive or
pay in a forced transaction, involuntary liquidation or distressed sale.
The existence of published price quotations in an active market is the best evidence of fair value and, where they exist, they are
used to measure the financial asset or financial liability. A market is considered to be active if transactions occur with sufficient
volume and frequency to provide pricing information on an ongoing basis. Financial instruments fair valued using quoted prices would
generally be classified as level 1 in terms of the fair-value hierarchy.
Where a quoted price does not represent fair value at the measurement date or where the market for a financial instrument is not
active, the group establishes fair value by using a valuation technique. These valuation techniques include reference to the value of
the assets of underlying business, earnings multiples (e.g. unlisted investments), discounted cash flow analysis (e.g. unlisted
investments, loans and advances) and various option pricing models.
Valuation techniques applied by the group would result in financial instruments being classified as level 2 or level 3 in terms of the
fair?value hierarchy. The determination of whether a financial instrument is classified as level 2 or level 3 is dependent on the
significance of observable inputs versus unobservable inputs in relation to the fair value of the financial instrument.
Inputs typically used in valuation techniques include discount rates, expected future cash flows, dividend yields, earnings multiples,
volatility, equity prices and commodity prices.
Valuation methodologies and techniques applied for level 3 financial instruments include a combination of discounted cash flow
analysis, application of earnings multiples on sustainable after tax earnings, current and projected net asset values to determine
overall reasonability. The valuation technique applied to specific financial instruments depend on the nature of the financial
instrument and the most appropriate valuation technique is determined on that basis.
After the valuations of the unlisted financial assets and liabilities are performed, these are presented to the group's investment
committee for independent review. All significant valuations are approved by the investment committee.
9. Financial instruments carried at fair value (continued)
The valuation methodologies, techniques and inputs applied to the fair value measurement of the financial instruments have been
applied in a manner consistent with that of the previous financial year.
Figures in R'000s
Unaudited Audited
Fair values 30 June 2014 31 Dec 2013
Carrying Fair Carrying Fair
amount value amount value
Financial assets
Designated at fair
value through profit
or loss on initial
recognition 140 197 140 197 144 885 144 885
Loans and
receivables 380 796 380 796 164 519 164 519
Non-current assets
held for sale - - 34 34
Trading securities 1 407 1 407 320 320
Cash and cash
equivalents 71 207 71 207 42 271 42 271
593 607 593 607 352 029 352 029
Financial
liabilities
Designated at fair
value through profit
or loss on initial
recognition (4 306) (4 306) (6 971) (6 971)
Amortised cost (392 374) (392 374) (198 720) (198 720)
Non-current
liabilities held for
sale - - (2 479) (2 479)
Bank overdraft (5) (5) (2 911) (2 911)
(396 685) (396 685) (211 081) (211 081)
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair value hierarchy based on inputs to the valuation techniques used.
The different levels are defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Unaudited 30 June 2014
Figures in R'000s Level 1 Level 2 Level 3 Total
Financial assets
designated at fair value
through profit or loss 81 804 - 58 393 140 197
Financial liabilities
designated at fair value
through profit or loss - - (4 306) (4 306)
81 804 - 54 087 135 891
NOTES TO THE CONDENSED CONSOLIDATED INTERIM RESULTS (all figures in R’000) (continued)
NOTES (CONTINUED)
9. Financial instruments carried at fair value (continued)
Audited 31 December 2013
Level Level Level
1 2 3 Total
Financial assets
designated at fair value
through profit or loss 80 240 - 64 645 144 885
Financial liabilities
designated at fair value
through profit or loss - - (6 971) (6 971)
80 240 - 57 674 137 914
Unaudited Audited
Figures in R'000s 31 Dec 2013 31 Dec 2013
Level 3 comprises:
Balance at beginning of year 57 674 (38 635)
Total gains or losses in profit or
loss (7 120) 19 573
Proceeds from loan, interest and
repayments 3 240 70 697
Purchases, transfers, sales,
issues and settlements 293 6 039
Balance at end of the period 54 087 57 674
A change of 10% in the fair value of investment and liability
at the reporting date would have increased/(decreased) equity
and profit or loss by the amount shown below. This analysis
assumes that all other variables remain constant.
Unaudited Audited
Effect on profit/(loss) and equity 30 June 2014 31 Dec 2013
10% increase 5 409 5 767
10% decrease (5 409) (5 767)
OVERVIEW AND PROSPECTS
Amidst rising global geopolitical tension, domestic economic conditions deteriorated over the reporting period. Rising inflation on
the back of a significantly weaker Rand exchange rate prompted monetary tightening, culminating in a 50 basis points hike in domestic
lending rates. Moreover, the already struggling consumer sector came under additional pressure as a result of protracted strike action
in the platinum mining industry, which further eroded domestic output and – consumer demand. Nevertheless, investors largely ignored
prevailing fundamentals as equity markets continued to rally. The domestic equity market was no exception in this regard as the JSE
All Share Index reached record levels.
Vunani generated total comprehensive income for the period of R81.6 million (2013: R6.9 million). Total comprehensive income
attributable to equity holders of the company amounts to R68.8 million (2013: R9.3 million), which is a pleasing result. The results
for the six months ended 30 June 2014 have been presented such that the disposal of the property asset management business in VPAM and
the winding down of the property investment and development segment have been reflected as discontinued operations (refer to note 3).
Revenue from continuing operations increased by 16% to R54.0 million (2013: R46.3 million) for the period ended 30 June 2014. Other
income comprises the amortisation of deferred revenue that arose on the historic acquisition of Black Wattle Colliery Proprietary
Limited and directors’ fees earned where the group’s executive directors serve on investee company boards.
Investment income has increased substantially to an amount of R12.2 million compared to June 2013, which reflected an amount of
R4.3 million. This increase was a result of dividend declarations by investee companies.
Negative fair value adjustments and impairments of R13.2 million (2013: positive adjustment of R18.6 million) relate to the valuation
of the groups’ investments, which have been designated at fair value through profit or loss.
Operating expenses have increased by 6% from R63.3 million to R67.1 million. The increase in costs is mainly due to the consolidation
of PVAM, which has been consolidated from the beginning of the year. The group remains focused on cost containment, but is cognisant
that the underlying operating businesses are in a growth phase therefore managing costs is critical such that growth continues to be
facilitated.
Finance income has increased to R3.4 million in 2014 compared to R1.0 million in 2013 due to higher cash resources in the group.
Finance costs have decreased from R4.6 million to June 2013 to R1.3 million to June 2014 following the benefit of the redemption of
legacy debt issues.
Discontinued operations relates to the disposal of VPAM’s business and the winding down of the property investment and development
businesses. The profit attributable to the discontinued operation during the period amounts to R90.7 million (2013: loss of R0.8
million). The proceeds on the disposal of the business amounted to a total of R117 million. Net of taxation, R77.5 million is
attributable to the group and R13.2 million attributable to non-controlling interests. Cash of R102.0 million was received on 28
February 2014 and the settlement of the balance has been deferred to 28 February 2015 in accordance with the agreement. A profit of
R116.3 million has been recognised in the period ended 30 June 2014 (refer to note 3).
Property and equipment has increased significantly as a result of the stepped up acquisition of PVAM. Investments in and loans to
associates have reduced significantly due to loan repayments from the associates. The net decrease in other investments during the
period is attributable to the negative fair value adjustments on investments that are carried at fair value through profit or loss.
The share based payment reserve movement of R1.3 million is attributable to the current period IFRS 2 charge (2013: R2.5 million).
Non-controlling interests increased by a net R4.7 million as a result of the disposal of VPAM’s business and the declaration of a
dividend of R11.7 million to non-controlling interests, as well as the acquisition of PVAM, which resulted in non-controlling interest
of R3.6 million. Cash and cash equivalents increased by R31.8 million (2013: R6.3 million decrease) in the first six months of the
year. Cash flows from operating activities include dividends paid to shareholders of R30.2 million (2013: R nil) and dividends paid to
non-controlling interests of R11.7 million (2013: R15.3 million).
Asset management
The asset management segment reflected a profit of R1.6 million for the six months ended 30 June 2014 (2013: R1.3 million).
Historically, the segment has been underpinned by Vunani Fund Managers Proprietary Limited (“VFM”) as the major operating subsidiary
included in this segment.
During the period, the group acquired an additional 10% interest in the Zimbabwean asset management company PVAM, resulting in the
group now having control of PVAM. The acquisition resulted in a fair value adjustment of R1.7 million being recognised on the stepped
up acquisition. PVAM’s operating losses for the first six months amounted to R0.5 million and have been consolidated into the asset
management segment for the first time. PVAM’s assets under management at June 2014 amounted to $13.8 million.
OVERVIEW AND PROSPECTS (continued)
Asset management (continued)
VFM has faced a challenging six-month period. Assets under management reduced from R14.6 billion in December 2013 to R13.4 billion in
June 2014, mainly as a result of the loss of lower fee generating mandates. Challenges faced with VFM’s leadership culminated in
Butana Khoza being appointed VFM’s chief executive officer following the departure of Romeo Makhubela.
As a result of Butana’s redeployment at an operational level into VFM, his responsibilities as managing director of Vunani Limited
together with the initiatives and transactions that he was responsible for have been redistributed between the remaining executives.
As such, the role of managing director has fallen away.
Advisory services
This segment also faced some challenges in the first six months of the year. The segment reflected a loss for the six months of R1.4
million. Advisory deal flow in the Zimbabwean market stalled due to challenging market conditions after the 2013 elections, which
resulted in the group significantly scaling back its advisory service operation in Zimbabwe. While capacity exists to provide these
services, the group has focused its energy on its investment strategy into that market. Consequently, the presentation of the advisory
services segment has been changed and the results of both the South African and Zimbabwean advisory services business are reported as
one segment.
A new head of corporate finance was appointed in June 2014 and he is expected to provide fresh leadership and renewed the energy into
this segment in order to profitably promote the corporate finance initiatives of the group.
Investment holdings
The segment includes the group’s listed and unlisted investments. The segment reported a loss of R5.6 million for the first six months
of the year (2013: profit of R13.8 million). Negative fair value adjustments to listed investments has resulted in the loss. The
group’s investment strategy continues to focus on investing alongside well-capitalised strategic partners and the use of innovative
funding mechanisms to lower risk and exposure to the group’s balance sheet.
Institutional securities broking
The segment reported a profit for the six month period of R1.4 million (2013: R2.8 million), despite a slight reduction in revenue
compared to the comparative period to June 2013. With a stable team and closely managed cost base for both the institutional equity,
derivative and capital markets businesses, the focus for the second half of the year will be on revenue growth.
Private wealth and investments
The segment’s focus is retail securities broking and providing private wealth and investment products to clients. The segment reflects
a break even position for the period to June 2014. The focus remains on the retail securities broking and wealth management markets
and growing active clients in the segment’s portfolio.
Property developments, investments and asset management
The property developments and investments segment has undergone a period of realisation in 2012 and 2013. At June 2014, the only
remaining property investment related to 33 units held in a completed development in Dainfern, Johannesburg. This investment has been
reclassified to investment holdings and the remaining segment has been reflected as a discontinued operation.
The sale of the property asset management business was concluded in February 2014 and consequently this segment has also been
classified as a discontinued operation.
The group is exploring the next phase of its involvement in the property market, but this is still in its early stages.
Group
This segment represents the central operating platform that is provided by the group executive, finance and support. Revenues are
generated by executives from external directorships as well as initiatives that are driven by the executives. During the period, the
classification of certain executive staff and overhead costs has been re-examined and certain costs have been reclassified in order to
reflect these costs in the segments that enjoy the benefit of the time and effort spent by the executives. The comparative segmental
information has been re-presented to take into account this amendment and in order to afford a meaningful comparison.
Prospects
The group’s focus remains on building the operating businesses through strong leadership and a high-quality product offering. The
strategic partnerships and alliances that have been formed, both locally and on the African continent, will boost the group’s ability
to produce sustainable growth in earnings
Despite the slowdown of South Africa’s economic growth, Vunani has experienced increased deal-flow. Management is optimistic that this
will result in an improvement in the group’s earnings.
EVENTS AFTER REPORTING DATE
There have been no material events between the period end and the date of signing of the results.
DIVIDENDS PAID
A gross ordinary dividend of 5 cents per share (2013: nil) and a gross special dividend of 25 cents per share (2013: nil) were
declared out of income reserves on 24 March 2014 and paid to ordinary shareholders on 22 April 2014.
FORWARD LOOKING STATEMENTS
Statements made throughout this announcement regarding the future financial performance of Vunani have not been reviewed or audited by
the company's external auditors. The company cannot guarantee that any forward-looking statement will materialise and accordingly,
readers are cautioned not to place undue reliance on any forward looking statements. The company disclaims any intention and assumes no
obligation to update or revise any forward-looking statement even if new information becomes available as a result of future events or
for any other reason, other than as required by the JSE Listing Requirements.
GOING CONCERN
The directors have made an assessment of the ability of the company and its subsidiaries to continue as going concerns and have no
reason to believe the businesses will not continue as going concerns for the foreseeable future.
Signed on behalf of the board of directors by EG Dube and A Judin
26 August 2014
CORPORATE INFORMATION
Independent non-executive directors
WC Ross (Chairman) (resigned 21 May 2014)
LI Jacobs (Chairman) (appointed 21 May 2014)
Dr XP Guma
NS Mazwi
G Nzalo
JR Macey
Executive directors
EG Dube (Chief Executive Officer)
A Judin (Chief Financial Officer)
BM Khoza
NM Anderson
CE Chimombe-Munyoro (resigned 1 March 2014)
Company secretary
A Judin
Designated Adviser
Grindrod Bank Limited
CORPORATE INFORMATION (continued)
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
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