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Reviewed condensed consolidated interim financial statements for the six months ended 30 June 2014
Andulela Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
JSE share code: AND ISIN: ZAE000172870
(“Andulela” or “the Company” or "the Group")
www.andulelaholdings.com
Reviewed condensed consolidated interim financial statements for the
six months ended 30 June 2014
Condensed consolidated statements of financial position
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
R’000 R’000 R’000
Assets
Non-current assets 763 160 758 108 759 127
Plant and equipment 1 313 152 324 378 318 301
Goodwill 2 418 679 418 679 418 679
Deferred tax asset 31 329 15 051 22 147
Current assets 312 508 302 662 256 732
Inventory 99 774 93 408 69 689
Trade and other
receivables 175 963 157 419 147 828
Taxation 3 510 3 576 3 510
Cash and cash
equivalents 33 261 48 259 35 705
Total assets 1 075 668 1 060 770 1 015 859
Equity and liabilities
Capital and reserves 416 313 470 041 454 050
Stated capital 3 976 114 976 114 976 114
Revaluation reserve 4 638 4 638 4 638
Cash flow hedge reserve 4 (79 532) (51 147) (65 579)
Accumulated loss (542 527) (526 598) (523 274)
Non-controlling interest 57 620 67 034 62 151
Non-current liabilities 271 434 276 784 277 296
Redeemable preference
share capital 14 121 27 916 18 361
Derivative financial
liabilities 4 107 211 74 640 92 554
Borrowings 5 95 700 122 525 111 650
Lease straightlining
accrual 15 945 14 592 14 580
Deferred tax liability 38 457 37 111 40 151
Current liabilities 387 921 313 945 284 513
Taxation 7 129 10 200 6 836
Trade and other payables 160 300 88 059 62 415
Redeemable preference
share capital 11 250 15 780 15 000
Derivative financial
liabilities 4 24 936 10 344 16 408
Borrowings 5 184 306 189 562 183 854
Total equity and
liabilities 1 075 668 1 060 770 1 015 859
Net asset value per
share (cents)* 409,26 459,82 459,66
Net tangible asset value
per share (cents)* 9,95 60,51 60,35
* A share consolidation of 50:1, which was approved by shareholders
on 27 February 2013 and became effective on 29 April 2013 has been
taken into account in both the 30 June 2013 and 31 December 2013
comparative periods.
Condensed consolidated statements of comprehensive income
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
Notes 2014 2013 2013
R’000 R’000 R’000
Gross revenue 481 105 426 174 902 528
Cost of sales (412 570) (318 098) (711 288)
Gross profit 68 535 108 076 191 240
(Loss)/profit from
operations (12 598) 21 168 40 665
Investment income 1 359 1 416 3 092
Finance costs (12 541) (12 085) (25 164)
(Loss)/profit before
taxation (23 780) 10 499 18 593
Taxation 3 391 (4 857) (8 755)
Net (loss)/profit after
tax (20 389) 5 642 9 838
Other comprehensive
(loss)/income
Items that may be
reclassified subsequently
to profiit or loss: (16 692) (3 700) (20 964)
Loss on accrual of
derivative cash flow
hedge 4 (23 184) (5 139) (29 117)
Deferred tax reversal on
derivative cash flow
hedge 4 6 492 1 439 8 153
Total comprehensive
(loss)/income (37 081) 1 942 (11 126)
Net (loss)/profit
attributable to: (20 389) 5 641 9 838
– Equity holders of
Andulela (19 254) 3 232 6 557
– Non-controlling
interest (1 135) 2 409 3 281
Total comprehensive
(loss)/income
attributable to: (37 081) 1 941 (11 126)
– Equity holders of
Andulela (33 207) 139 (10 967)
– Non-controlling
interest (3 874) 1 802 (159)
Ordinary shares in issue
(millions)# 87,64 87,64 87,64
Weighted average number of
ordinary shares in issue
(millions)# 87,64 87,64 87,64
Headline (loss)/earnings (18 997) 2 970 6 194
– Attributable net
(loss)/profit (19 254) 3 232 6 557
– Add back: Impairment,
scrapping and loss of
plant and equipment net
of deferred taxation 257 (262) (363)
(Loss)/earnings and diluted
(loss)/earnings per ordinary
share (cents)# (21,97) 3,69 7,48
Headline (loss)/earnings and (21,67) 3,39 7,07
diluted headline (loss)/
earnings per ordinary share
(cents)#
Dividends per ordinary share
(cents) – – –
# The (loss)/earnings and the headline (loss)/earnings per ordinary
share is calculated by dividing the (loss)/earnings and the headline
(loss)/earnings by the weighted average number of ordinary shares in
issue during the year. The diluted (loss)/earnings and the diluted
headline (loss)/earnings per ordinary share is calculated by dividing
the diluted (loss)/earnings and the diluted headline (loss)/earnings
by the weighted average number of ordinary shares in issue and
issuable during the year. Both the 30 June 2013 and 31 December 2013
ordinary shares in issue and weighted average number of shares in
issue, as well as the (loss)/earnings and the headline
(loss)/earnings per ordinary share has been calculated to take the
share consolidation of 50:1, which was approved by shareholders on
27 February 2013 and became effective on 29 April 2013, into account.
Condensed consolidated statements of cash flows
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
Cash flows from:
Operating activities 27 009 12 236 33 985
Investing activities (4 616) (5 738) (9 121)
Financing activities (24 837) 12 240 (18 680)
Change in cash and
equivalents (2 444) 18 738 6 184
Opening cash and equivalents 35 705 29 521 29 521
Closing cash and equivalents 33 261 48 259 35 705
Condensed consolidated statements of changes in equity
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
R’000 2014 2013 2013
Opening balances 454 051 470 906 470 906
Movements for the period:
– Net (loss)/profit
attributable to equity
holders of Andulela (19 254) 3 232 6 557
– Cash flow hedge reserve net
of deferred tax (13 953) (3 093) (17 524)
– Non-controlling interest (4 531) (1 004) (5 889)
Closing balances 416 313 470 041 454 050
Notes to the condensed consolidated interim financial statements
Basis of preparation
The condensed consolidated interim financial statements are prepared
in accordance with the JSE Limited Listings Requirements for interim
reports and the requirements of the Companies Act of South Africa and
International Financial Reporting Standards, IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee. The accounting policies applied in the
preparation of these interim financial statements are consistent with
those applied in the previous annual financial statements. The directors
take full responsibility for the preparation of the condensed interim
financial statements. The financial information has been correctly
extracted from the underlying interim financial statements. These
results were prepared under the supervision of Pieter de Jager,
the Group Chief Financial Officer.
1. Plant and equipment
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
Opening balance 318 301 326 498 326 498
Additions 4 616 8 737 11 779
Disposals (358) (1 958) (2 167)
Depreciation (9 407) (8 899) (17 809)
Plant and equipment at
carrying value 313 152 324 378 318 301
2. Goodwill
The goodwill of R418,7 million arose from the acquisition of the
remaining interests in Abalengani Mining Investments Proprietary
Limited (“AMI”) and JB Platinum Holdings Proprietary Limited
(“JBPH”) by the Company in 2010. AMI and JBPH respectively hold
49,63% and 33,96% in Kilken Platinum Proprietary Limited (“Kilken”)
as their only investments. The carrying amount as at 30 June 2014
has been tested for impairment and the board is satisfied that no
impairment is required for the six months ended 30 June 2014.
3. Stated capital
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
3.1 Ordinary shares
Authorised
220 000 000 ordinary shares
of no par value* – – –
Issued
87 644 836 ordinary shares
of no par value* 976 114 976 114 976 114
* 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 ordinary shares of no par value 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 further 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.
4. Derivative financial liability
In 2012, Kilken entered into a hedge agreement for 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, the cash flow hedge was recognised as a
hedging instrument at fair value for the first time 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.
For the six months ended 30 June 2014 a R16,7 million loss after
deferred tax (June 2013: R3,7 million loss) has been recognised in
other comprehensive income and an increase in the cash flow hedge
reserve of R28,4 million (June 2013: R3,1 million), net of
non-controlling interests in the statement of financial position. The
loss realised and netted against the revenue for the period was
R8,8 million for the six months ended 30 June 2014
(June 2013: R4,5 million).
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 will be 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.
5. Borrowings
Total borrowings of the Group amounted to R280,0 million as at
30 June 2014 compared to R312,1 million as at 30 June 2013, and can
be summarised as follows:
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
Absa Bank Limited* 182 525 199 200 193 400
Reichmans Capital Proprietary
Limited 67 653 68 128 72 352
Thunder Rate Investments
Proprietary Limited 29 121 44 130 29 121
The Rafik Mohamed Family Trust 707 629 631
Total borrowings 280 006 312 087 295 504
Less: short term borrowings 184 306 189 562 183 854
Non-current liabilities 95 700 122 525 111 650
* R60 million of the Absa Bank debt is a revolving credit facility
which is annually renewable and the current year renewal discussions
are in progress.
6. Material related party transactions and balances
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
Sales to related parties (47 219) (29 312) (65 387)
Purchases from related parties 28 331 15 663 27 580
Administration and management
fees paid to related parties 525 486 972
Preference dividends paid to
related parties 786 1 366 2 437
Rent expenses to related
parties 6 737 8 780 13 362
Trade receivables 20 022 29 672 11 941
Loan accounts – owing to
related parties (29 543) (45 110) (29 752)
Cumulative redeemable
preference shares (25 371) (43 696) (33 361)
Trade payables (23 813) (2 111) (4)
7. Segment reporting
The strategic steering committee is the Group’s 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 Pro Roof Steel Merchants (“PRSM”).
Reviewed Reviewed Audited
Period Period Year
ended ended ended
30 June 30 June 31 December
2014 2013 2013
R’000 R’000 R’000
Revenue
Tailings treatment facility 9 705 54 384 91 729
Steel processing 471 400 371 790 810 799
Total revenue 481 105 426 174 902 528
There are no sales between segments
(Loss)/profit after tax
Tailings treatment facility (6 917) 14 680 19 994
Steel processing (6 186) (6 325) (3 703)
Other unallocated (7 286) (2 713) (6 453)
Total (loss)/profit after tax (20 389) 5 642 9 838
Assets
Tailings treatment 254 193 285 670 270 242
Steel processing 554 887 527 940 512 731
Inter-group eliminations (153 477) (179 895) (197 387)
Reportable segment assets 655 603 633 715 585 586
Goodwill 418 679 418 679 418 679
Other unallocated assets of
parent 1 386 8 376 11 594
Total assets 1 075 668 1 060 770 1 015 859
Liabilities
Tailings treatment 322 374 296 492 310 813
Steel processing 460 046 429 532 411 703
Inter-group eliminations (149 041) (179 037) (194 325)
Reportable segment liabilities 633 379 546 987 528 191
Redeemable preference shares 25 371 43 696 33 361
Other unallocated liabilities
of parent 605 46 257
Total liabilities 659 355 590 729 561 809
Review opinion
These condensed consolidated interim financial statements for the
six months ended 30 June 2014 have been reviewed by BDO South Africa
Incorporated, who expressed an unmodified review conclusion. A copy
of the auditor’s review report is available for inspection at the
Company’s registered office together with the financial statements
identified in the auditor’s report.
Nature of the business
The Company is an investment holding company.
Going concern
The financial information has been prepared on a going concern basis.
Although the Group reported a net loss for the period and its current
liabilities exceed its current assets as at 30 June 2014, the
directors are satisfied that the Group companies will continue to
have the necessary funds available to finance future operations and
that the realisation of assets and settlement of liabilities,
contingent obligations and commitments will occur in the ordinary
course of business. Refer to the more detailed discussion on Kilken
and PRSM hereunder.
Directorate
CWN Molope resigned as a non-executive director on 30 May 2014,
JHP Engelbrecht resigned as Chief Financial Officer on 30 June 2014
and PC de Jager was re-appointed in that position with effect from
1 July 2014. NMS Hadjee was appointed as independent non-executive
director with effect of 1 July 2014. 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
PC de Jager (CFO) Re-appointed as CFO 1 July 2014
GR Rosenthal# Appointed 26 February 2010
PE du Preez# Appointed 1 October 2011
NMS Hadjee# Appointed 1 July 2014
#Independent non-executive
Financial review
Andulela’s results for the six months ended 30 June 2014 reflect a
headline loss of R19,0 million compared to a headline profit of
R3,0 million for the comparative six months ended 30 June 2013. As
a result of the well documented extended platinum sector strike
discussed in more detail below, Kilken posted its first ever net loss
after tax since acquisition in 2008, for the six months ended
30 June 2014 in the amount of R6,9 million compared to a profit of
R14,7 million in the comparative six months ended June 2013.
PRSM’s loss after tax reduced from R6,3 million for the six months
ended 30 June 2013 to R6,1 million in the current period. The
weakening of the Rand against the US Dollar had a negative effect on
the cash flow hedge over the first six months of the current
financial year, resulting in a further R16,7 million loss being
recognised against other comprehensive income for the period.
As a result of the impact on the business of the production
interruptions at Kilken, management employed aggressive working
capital management throughout the Group to protect cash resources.
This resulted in cash flow from operations improving from an inflow
of R12,2 million for the six months ended 30 June 2013 to an inflow
of R27,0 million in 2014. Overall interest bearing borrowing levels
however remained high at R280,0 million as at June 2014 but have
shown some improvement from the position of R312,1 million as at
30 June 2013, with PRSM still mainly utilising the external debt at
a level of R249,7 million in June 2014 (2013: R274,1 million).
Andulela redeemed R7,99 million of its redeemable preference share
capital obligations during the period under review resulting in a
balance of R25,4 million outstanding as at 30 June 2014.
Andulela reached an agreement with the holder of the preference
shares (Newshelf 1005 Proprietary Limited) to temporarily suspend
preference share capital and dividend payments from May 2014 until
such time as Kilken has reached normal production levels.
Kilken
The first six months of the 2014 financial year were marred by
unprecedented and violent industry-wide labour actions in the
platinum mining sector resulting in very limited PGM production and
tailings feed from the Amandelbult mine. Management proactively
engaged with Kilken’s own workforce on wage negotiations and there
were no disagreements, but the labour strike at all the platinum
producers had a severe impact on Kilken. The effect of this was
significantly reduced production, revenue and profitability
compared to the same period in 2013.
Kilken’s revenue decreased from R54,4 million for the six months
ended June 2013 in the prior year to R9,7 million for the current
period up to 30 June 2014. The resulting net profit after tax
deteriorated from a profit of R14,7 million for the six months to
June 2013 compared to a loss of R6,9 million for the current
period. Kilken’s cash flow from operations was negatively affected,
reducing to R9,1 million for the six months ended June 2014 from
R18,7 million for the comparative period in 2013. Kilken however
managed to produce a marginal overall positive cash inflow of
R5,2 million for the current six months under review compared to
R6,8 million in the prior period as a result of proactive management
of working capital and variable costs.
Management is confident that the ramp-up in production from the
Amandelbult plant will continue to improve in line with the positive
production results for the period after the reporting period up to
the date of this report.
PRSM
The extensive operational restructuring during 2012 and 2013 started
to yield positive results at PRSM during the current six months under
review to 30 June 2014.
Pro Roof Steel Merchants’ revenue for the six months ended 30 June
improved from R371,8 million in 2013 to R471,4 million for the
current year. Earnings before interest, tax, depreciation and
amortisation for the six months ended 30 June improved from
R8,3 million in 2013 to R9,9 million for 2014, which improved the cash
inflow from operating activities to R23,6 million for the first
six months of 2014 compared to R1,5 million for the comparative
period in 2013. The net loss after tax also improved marginally from
R6,3 million in 2013 to R6,1 million in 2014. The improvement in the
earnings before interest, tax, depreciation and amortisation is
attributable to inter alia, improved margins and cost savings from the
closure of the Polokwane branch, the sale of the Nelspruit branch and
the restructuring of the KZN branch to a distribution centre only, as
well as a restructuring at the Vereeniging operations during July 2013,
as previously reported.
Predominant reasons for changes in working capital as at
30 June 2014 are as follows:
(i) Accounts receivable increased by 23% over both 30 June 2013 and
31 December 2013 due to sales in the month of June 2014 being
84% higher than the comparative period end. The fact that receivables
only increased by 23% is an indication of greater efficiency in the
management and collection of accounts receivable.
(ii) Inventory increased by R6 million over 30 June 2013 and by
R30 million over 31 December 2013 which was the result of June 2014
being a high volume trading month and as a result of more focus
on increased stock holding from both local and foreign suppliers. The
effect of the increased purchases of raw material and the extended
credit terms thereof is evident in accounts payable as discussed in
(iii) below.
(iii) Accounts payable increased mainly due to the higher sales
volumes achieved in June and also as a result of extended credit
terms negotiated with suppliers.
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 PRSM’s sales volumes.
Management’s aggressive strategic and operational restructuring
contributed markedly to PRSM’s overall better performance and
sustainability taking account of the aforementioned market conditions.
As announced on 6 March 2014, the aggreement for the disposal of PRSM
lapsed due to suspensive conditions not being fulfilled.
Events subsequent to the period-end
The platinum industry strike was resolved late in June 2014, which
resulted in limited production at Kilken for more than five months.
The cash flow effect of this issue will be experienced until
October 2014 due to the normal cash conversion cycle in Kilken. From
July 2014 production and tailings feed start-up from the Amandelbult
plant have been showing a slow but steady improvement and are
expected to reach optimum production output levels in the near
future.
PRSM’s results were also negatively affected by the three week strike
in the steel and engineering sector during July 2014. Management of
PRSM utilised planned counter-measures to mitigate the impact of the
strike to a large degree. No other events occurred subsequent to the
period-end and up to the date of this announcement, which could have
a material effect on the results of the Group or its subsidiaries.
Commitments
The Group had outstanding capital commitments of R2,3 million at
30 June 2014.
For and on behalf of the board
Mohamed J Husain Ashruf Kaka
Independent non-executive chairman Chief executive officer
Sandton
23 September 2014
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: 23/09/2014 01:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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