Wrap Text
Interim financial results for the six months ended 30 September 2014
Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number:2005/003306/06)
Share code: SEP
ISIN: ZAE000138459
Unaudited interim financial results for the six months ended 30 September 2014
Commencement of clinker and cement production at the Aganang integrated plant marks the end of Sephaku
Cement's construction phase and Metier increases its plant complement to eleven.
Sephaku Holdings Limited ("SepHold" or "the Company") hereby announces the group's financial results for
the six months ended 30 September 2014. SepHold, Metier Mixed Concrete Proprietary Limited ("Metier" or "the subsidiary")
and Sephaku Cement Proprietary Limited ("SepCem" or "the associate") are collectively referred to as the group.
The results roadshow presentation can be downloaded from the Company website www.sephakuholdings.com on 4 November 2014.
Highlights
Metier
- Revenue increased by 34% from R301,6 million to R404,2 million
- Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 41% from
R55,1 million to R77,5 million
- Operating profit increased by 43% from R43,7 million to R62,6 million
- Metier added another plant with a capacity of 70m3/hour in Gauteng
SepCem
- Delmas milling plant reached 80% annualised capacity utilisation
- Aganang integrated plant commenced clinker and cement production
Group
- Normalised headline earnings of 9,69 cents per share (calculated excluding the Metier contingent
consideration loss of R22.2 million)
- Operating profit increased by 57% from R33,8 million to R53,1 million
Financial review
The group achieved revenue of R404,2 million compared to R301,6 million for the 2013 interim period essentially due
to Metier's plant expansion in the Gauteng province since 2011. The subsidiary has also managed to sustain its
historical gross profit margin as it successfully gains market share. The resultant group operating profit
increased to R53,1 million (2013: R33,8 million) with Metier's contribution increasing by 43% to R62,6 million. The
difference between the subsidiary profit and the group is due to SepHold's total overheads. Profit before tax
decreased from R16,3 million to R10,5 million mainly because of a once off non-cash contingent consideration loss
of R22,2 million (included under current liabilities) for the outstanding Metier acquisition share-based payment of
R100 million. The group taxation was R14,3 million payable essentially on the Metier income that reduced the
profit before tax to a loss of R3,7 million. The headline loss per share was 2,0 cents and normalised headline
earnings per share (which is calculated after excluding the once-off contingent consideration on the Metier
acquisition of R22.2 million from headline earnings) was 9.69 cents.
During SepCem's interim reporting period, January 2014 to June 2014, the associate successfully commenced and
continued to ramp up production at the Delmas milling plant. SepCem also completed commissioning of the Aganang
integrated plant enabling it to start production of both clinker and cement in the third quarter. The combination
of revenue from purchased clinker and pre-production expenditure at Aganang resulted in SepCem recording a loss of
R25.9 million. SepHold's 36% equity-accounted loss for SepCem's six months ended June 2014 was therefore R9,3
million. In SepCem's third quarter which is not accounted for by SepHold in the current interim reporting period,
the associate reached an annualised capacity utilisation of 80% at Delmas and increased its market penetration as
indicated by its reported revenues for the nine months ended September 2014. SepCem achieved revenue of R206
million for the interim period ended 30 June 2014 and R309 million for the three months ending September 2014, an
increase of over 100% quarter on quarter. The total revenue achieved to the end of September 2014 was R515 million
essentially from the Delmas production output.
Metier purchase consideration and contingent consideration
The total nominal purchase consideration payable for Metier was R365 million and consisted of a combination of cash
payments and the issue of fully paid SepHold shares.
A final payment is due on 1 December 2014 and includes:
(i)a final cash payment of R125 million, which will be funded through acquisition finance; and
(ii)to the extent that the 11 111 111 shares issued, based on a 60-day volume-weighted average share price ("VWAP") on
1 December 2014, are less than R100 million, SepHold shall issue additional consideration shares, to be calculated
by dividing the shortfall by the future 60-day VWAP.
As required by IFRS 3 and based on management's assessment, SepHold has accounted for a contingent consideration
loss of R22,2 million as a provision for this final share allocation. Management will further adjust for the fair
value of the contingent consideration based on the VWAP on 1 December 2014 and report on the final share issuance
accordingly.
Operational review
Metier
The subsidiary continued its plant capacity expansion through the construction of another plant with a capacity of
70m3/hour added to its Gauteng footprint in September 2014. Metier has continued to focus on the specialised high-value
concretes. Metier has a solid order book with new contracts worth over R250 million recently secured.
SepCem
SepCem is supplying its brand to all the major retail (bag) market distributors and has managed to grow its
revenues exponentially since production started in January 2014. The success of the sales and marketing strategy is
largely due to the highly experienced sales team headed by seasoned industry executives.
The Aganang integrated plant commenced clinker and cement production in August and October 2014 respectively. The
internally produced clinker completely replaced the purchased clinker within the initial weeks of production.
Delmas has been milling the internally produced clinker only since early September 2014. The internally produced
clinker is expected to reduce input costs and further strengthen SepCem's competitiveness.
Outlook
SepCem is targeting to reach steady state production at both plants during the first half of the 2015
calendar year. SepCem will focus on attaining the earnings and capacity utilisation targets in line with market
demand. The associate will also continue to ensure that it produces the highest quality and most consistent cement
products whilst offering excellent service to the market.
Metier will continue to maintain operational efficiency and improve its financial performance to increase earnings.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 30 September 2014
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Assets
Non-current assets 983 827 996 316 990 253
Current assets 166 358 125 132 116 559
Total assets 1 150 185 1 121 448 1 106 812
Equity and liabilities
Equity attributable to equity holders of the parent 747 818 752 605 747 724
Non-current liabilities 169 374 208 685 159 350
Current liabilities 232 993 160 158 199 738
Total liabilities 402 367 368 843 359 088
Total equity and liabilities 1 150 185 1 121 448 1 106 812
Net asset value per share (cents) 392,60 398,21 393,80
Tangible net asset value per share (cents) 270,53 272,21 270,70
Ordinary shares in issue 190 479 645 188 998 646 189 872 979
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 6 months ended 12 months ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 404 157 301 569 571 545
Cost of sales (225 941) (167 744) (319 156)
Gross profit 178 216 133 825 252 389
Other income 5 027 6 511 13 945
Operating expenses (130 171) (106 575) (215 181)
Operating profit 53 072 33 761 51 153
Investment income 1 366 855 2 693
Loss on contingent consideration (22 222) - -
Loss from equity accounted investments (9 318) (5 703) (14 746)
Finance costs (12 356) (12 589) (25 676)
Profit before taxation 10 542 16 324 13 425
Taxation (14 278) (10 061) (16 242)
(Loss)/profit for the period (3 736) 6 263 (2 818)
Total comprehensive (loss)/income attributable to:
Equity holders of the parent (3 736) 6 263 (2 818)
Basic (loss)/earnings per share (cents) (1,96) 3,32 (1,49)
Diluted (loss)/earnings per share (cents) (1,82) 3,16 (1,39)
Headline (loss)/earnings per share (cents) (2,00) 2,78 (2,36)
Diluted headline (loss)/earnings per share (cents) (1,85) 2,64 (2,20)
Reconciliation of basic (loss)/earnings to diluted
(loss)/earnings and headline (loss)/earnings:
Basic (loss)/earnings and diluted (loss)/earnings from total operations
attributable to equity holders of the parent (3 736) 6 263 (2 818)
Profit on sale of non-current assets (91) (1 031) (1 077)
Profit on disposal of other financial assets held for sale - - (860)
Total taxation effect of adjustments 25 - 302
Headline (loss)/earnings attributable to equity holders of the parent (3 802) 5 232 (4 453)
Reconciliation of weighted average number of shares:
Basic weighted average number of shares 190 145 200 188 456 030 188 987 697
Diluted effect of share options 10 073 076 9 589 283 9 556 129
Contingent issuable shares* 5 555 556 3 747 730
Diluted weighted average number of shares 205 773 832 198 045 313 202 291 556
* Diluted loss per share has been adjusted for 5 555 556 (March 2014: 3 747 730) contingent issuable shares to the
sellers of Metier to provide for the contingency that the SepHold share price, based on a 60-day volume-weighted
average price, is below R9 and above R4 at 1 December 2014. The contingent issuable shares were calculated based on
the SepHold share price at period-end of R6 (March 2014: R6,73) as required by IAS 33.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months ended 6 months ended 12 months ended
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash flows from operating activities 34 846 17 667 40 835
Cash flows from investing activities (21 543) (15 815) (27 253)
Cash flows from financing activities (3 094) 11 948 (9 919)
Total cash movement for the period 10 209 13 800 3 663
Cash at beginning of period 26 001 22 338 22 338
Cash at end of period 36 210 36 138 26 001
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total Share Total Retained
capital Reserves earnings Total equity
R'000 R'000 R'000 R'000
Balance at 31 March 2013 - Audited 580 591 13 569 145 988 740 148
Total comprehensive income for the period - - 6 263 6 263
Issue of shares 2 742 - - 2 742
Employees' share option scheme - 2 487 965 3 452
Balance at 30 September 2013 - Unaudited 583 333 16 056 153 216 752 605
Total comprehensive loss for the period - - (9 081) (9 081)
Issue of shares 2 240 - - 2 240
Employees' share option scheme - 1 569 391 1 960
Balance at 31 March 2014 - Audited 585 573 17 625 144 526 747 724
Total comprehensive loss for the period - - (3 736) (3 736)
Issue of shares 1 561 - - 1 561
Employees' share option scheme - 1 690 579 2 269
Balance at 30 September 2014 - Unaudited 587 134 19 315 141 369 747 818
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
Segment information
Ready-mixed Head office and
concrete consolidation Group totals
R'000 R'000 R'000
for the 6 months ended 30 September 2014 - Unaudited
Segment revenue - external revenue 404 157 - 404 157
Segment cost of sales (225 941) - (225 941)
Segment operating expenses (120 657) (9 514) (130 171)
Loss on contingent consideration - (22 222) (22 222)
Loss from equity-accounted investment - (9 318) (9 318)
Segment profit/(loss) after taxation 40 426 (44 162) (3 736)
Taxation (14 760) 482 (14 278)
Interest received 1 343 23 1 366
Interest paid (8 743) (3 613) (12 356)
Depreciation and amortisation (14 953) (1 723) (16 676)
Segment assets 290 660 859 525 1 150 185
Investment in associate included in the above total segment assets - 607 071 607 071
Capital expenditure included in segment assets 23 333 19 23 352
Segment liabilities (261 810) (140 557) (402 367)
for the 6 months ended 30 September 2013 - Unaudited
Segment revenue - external revenue 301 569 - 301 569
Segment cost of sales (167 744) - (167 744)
Segment operating expenses (97 250) (9 325) (106 575)
Loss from equity-accounted investment - (5 703) (5 703)
Segment profit/(loss) after taxation 24 483 (18 220) 6 263
Taxation (10 061) - (10 061)
Interest received 655 200 855
Interest paid (9 198) (3 391) (12 589)
Depreciation (11 383) - (11 383)
Segment assets 233 090 888 358 1 121 448
Investment in associate included in the above total segment assets - 625 431 625 431
Capital expenditure included in segment assets 26 571 - 26 571
Segment liabilities (259 483) (109 360) (368 843)
The only commodity actively managed by Metier is ready-mixed concrete. The group does not rely on any single
external customer or group of entities under common control for 10% or more of the group's revenue as disclosed in
the interim financial results. SepCem is an associate of SepHold. No segment report has been presented for cement
as the amounts attributable to cement have been included in the "head office segment".
Basis of preparation
The condensed consolidated interim financial results for the six months ended 30 September 2014 ("interim reporting
period") have been prepared in accordance with IAS 34: Interim Financial Reporting, the disclosure requirements of
the JSE Limited Listings Requirements, the Companies Act No 71 of 2008, the SAICA financial reporting guides as
issued by the Accounting Practices Board and the Financial Pronouncements as issued by the Financial Reporting
Standards Council and conform to International Financial Reporting Standards ("IFRS").
The results have been prepared on a historical cost basis, except for the measurement of land at revalued amounts.
The accounting policies for the interim reporting period are consistent with those applied in the annual financial
statements for the group for the year ended 31 March 2014.
The preparation of the interim financial results has been supervised by NR Crafford-Lazarus CA (SA).
The financial information on which these interim period results are based has not been reviewed or reported on by
the group's auditors.
Statement of going concern
The interim financial results have been prepared on the basis of accounting policies applicable to a going concern.
This basis presumes that funds will be 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.
Stated capital
606 666 ordinary shares were issued during the reporting period, resulting in the total number of ordinary shares
issued at period end of 190 479 645 and total stated capital of R587 134 300.
Change in estimate
The Metier agreement stipulates that SepHold shall issue additional consideration shares if the 11 111 111 shares
issued, based on a 60-day VWAP on 1 December 2014, are less than R100 million. At time of closing, 28 February
2013, management assessed the possibility to issue additional shares to be small and therefore no liability was
recognised.
As required by IFRS 3 and based on management's assessment during the current interim reporting period, SepHold has
accounted for a contingent consideration loss of R22,2 million as a provision for this final share allocation.
The effect on future periods is impracticable to estimate as the fair value of the contingent consideration is
based on a 60-day VWAP on 1 December 2014. SepHold will report on the final share issuance accordingly.
Events after the interim reporting period
The directors are not aware of any material fact or circumstance arising between the end of the interim reporting
period and the date of this report that would require adjustments to or disclosure in the interim financial
results.
Changes to the board
Name Position Change
CRDW de Bruin Non-executive director Resigned 21 April 2014
Dr D Twist Non-executive director Resigned 21 August 2014
J Pitt Alternate director to MM Ngoasheng Appointed 21 August 2014
Company information
Directors
B Williams+ (chairman)
MG Mahlare+
PM Makwana+
MM Ngoasheng+
J Pitt+ -
Dr L Mohuba* (chief executive officer)
NR Crafford-Lazarus* (financial director)
RR Matjiu*
KJ Capes*
PF Fourie
*Executive +Independent -Alternate
Company secretary
Jennifer Bennette, email: JBennette@sepman.co.za,
Telephone: +27 12 684 6300
Registered office
Southdowns Office Park
Ground floor, Block A
Cnr Karee and John Vorster Streets
Irene, X54, 0062
Telephone: +27 12 612 0210
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2017
South Africa
Telephone: +27 11 380 5000
JSE sponsor
QuestCo Proprietary Limited
Claudia Adamson, Telephone: +27 11 011 9209
On behalf of the board
Pretoria
Chief executive officer Financial director
Dr. Lelau Mohuba Neil Crafford Lazarus
3 November 2014
Enquiries contact:
Sakhile Ndlovu
Sephaku Holdings
Investor Relations
012 612 0210
Sponsor to Sephaku Holdings: Questco (Pty) Ltd
About Sephaku Holdings Limited
Sephaku Holdings Limited ("SepHold") is a building and construction materials company with a portfolio of
investments in the cement sector in South Africa. The company's core investments are a 36% stake in Sephaku Cement
(Pty) Ltd ("SepCem") and 100% in Metier Mixed Concrete (Pty) Ltd ("Metier"). The strategy of SepHold is to generate
growth and realise value for shareholders through the production of cement and ready mixed concrete in Southern Africa.
www.sephakuholdings.com
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