Wrap Text
Reviewed provisional condensed consolidated results for the year ended 31 December 2014
VUNANI LIMITED
(“Vunani” or “the company” or “the group”)
Incorporated in the Republic of South Africa
Registration number: 1997/020641/06
JSE code: VUN ISIN: ZAE000163382 Listed on Alt-X on the JSE Limited (“JSE”)
The reviewed Provisional Condensed Consolidated Results have been prepared under the
supervision of the Chief Financial Officer, Aphrodite Judin CA (SA)
These results are available on our website www.vunanilimited.co.za
SALIENT FEATURES
REVENUE OF R115.0 million compared to R108.0 million at 31 December 2013
PROFIT FOR THE YEAR OF R67.0 million compared to R8.3 million in December 2013
NET FINANCE INCOME OF R3.1 million compared to net finance cost of R2.6 million in
December 2013
BASIC EARNINGS PER SHARE OF 54.6c per share compared to basic earnings per share of
9.9c in December 2013
NET ASSET VALUE PER SHARE INCREASED TO 224.7c per share at 31 December 2014 from 203.5c
per share at 31 December 2013
Condensed Consolidated Statement of Comprehensive Income for the year ended 31
December 2014
Reviewed Audited
31 31
December December
2014 2013
Re-
Figures in R’000s Note presented
Continuing operations
Revenue 1 115 016 108 005
Other income 5 475 6 254
Investment revenue 14 220 10 469
Interest received from investments 2 384 2 575
Net profit on disposal of assets – 1 304
Fair value adjustments and impairments 2 (17 922) 19 904
Operating expenses (146 040) (141 584)
Results from operating activities (26 867) 6 927
Finance income 6 060 2 357
Finance costs (2 960) (5 004)
Net finance income/(costs) 3 100 (2 647)
Results from operating activities after net finance
(23 767) 4 280
costs
Equity accounted earnings (net of income tax) (86) 442
(Loss)/profit before income tax (23 853) 4 722
Income tax (1 462) 1 475
(Loss)/profit from continuing operations (25 315) 6 197
Discontinued operations
Profit from discontinued operations (net of income
3 92 300 2 109
tax)
Profit for the year 66 985 8 306
Items that are or may be reclassified to profit or
loss
Other comprehensive income
Exchange differences on translating foreign
243 (897)
operations
Total comprehensive income for the year 67 228 7 409
Profit/(loss) for the year attributable to:
Equity holders of Vunani Limited 56 039 9 869
Non-controlling interest 10 946 (1 563)
66 985 8 306
Total comprehensive income for the year attributable
to:
Equity holders of Vunani Limited 56 036 9 205
Non-controlling interest 11 192 (1 796)
67 228 7 409
Basic and diluted earnings per share (cents) 54.6 9.9
Basic and diluted (loss)/earnings per share from
continuing operations (cents) (22.5) 8.3
Basic and diluted earnings per share from
discontinued operations (cents) 77.1 1.6
Basic and diluted headline (loss)/earnings per share
4
(cents) (27.5) 2.5
Basic and diluted headline (loss)/earnings per share
from continuing operations (cents) (24.7) 6.2
Basic and diluted headline loss per share from
discontinued operations (cents) (2.8) (3.7)
Condensed Consolidated Statement of Financial Position at 31 December 2014
Reviewed Audited
31 31
December December
Figures in R’000s Note 2014 2013
Assets
Property, plant and equipment 6 787 1 934
Goodwill 34 123 34 123
Intangible assets 1 042 2 207
Investments in and loans to associates 17 686 22 425
Other investments 5 102 270 115 317
Deferred tax asset 44 890 40 397
Other non-current assets 22 005 25 358
Total non-current assets 228 803 241 761
Other investments 5 8 900 –
Non-current assets held for sale – 2 634
Other current assets 2 823 1 451
Taxation prepaid 886 1 041
Trade and other receivables 39 085 30 729
Accounts receivable from trading activities 120 573 113 077
Trading securities 251 320
Cash and cash equivalents 67 773 42 271
Total current assets 240 291 191 523
Total assets 469 094 433 284
Equity
Stated capital 6 624 888 610 088
Treasury shares (15 571) (15 265)
Share-based payment reserve 13 249 10 256
Foreign currency translation reserve (900) (897)
Accumulated loss
(364 004) (389 709)
Equity attributable to equity holders of Vunani
257 662 214 473
Limited
Non-controlling interest (2 818) (6 226)
Total equity 254 844 208 247
Liabilities
Other financial liabilities 5 36 144 45 605
Deferred tax liabilities 7 825 4 061
Total non-current liabilities 43 969 49 666
Other financial liabilities 5 9 436 7 870
Non-current liabilities held for sale – 2 479
Taxation payable 9 648 9 896
Trade and other payables 29 555 39 274
Accounts payable from trading activities 120 525 112 941
Bank overdraft 1 117 2 911
Current liabilities 170 281 175 371
Total liabilities 214 250 225 037
Total equity and liabilities 469 094 433 284
Shares in issue (000s) 6 114 665 105 415
Net asset value per share (cents) 224.7 203.5
Net tangible asset value per share (cents) 194.0 169.0
Condensed Consolidated Statement of Changes in Equity for the year ended 31 December
2014
Total
attributable Non-
to equity controllin
holders g Total
Figures in R’000s of Vunani interest equity
Balance as at 31 December 2012 – Audited 201 517 12 794 214 311
Transactions with owners, recorded directly in
equity
Business combination – (2 112) (2 112)
Acquisition of non-controlling interest (1 117) 1 117 –
Disposal to non-controlling interest 884 (884) –
Dividends paid – (15 345) (15 345)
Treasury shares acquired (366) – (366)
Share-based payment reserve 4 350 – 4 350
Total transactions with owners 3 751 (17 224) (13 473)
Total comprehensive income
Profit/(loss) for the year 9 869 (1 563) 8 306
Other comprehensive income for the year (664) (233) (897)
Total comprehensive income for the year 9 205 (1 796) 7 409
Balance as at 31 December 2013 – Audited 214 473 (6 226) 208 247
Transactions with owners, recorded directly in
equity
Business combination – 3 575 3 575
Disposal to non-controlling interest (318) 318 –
Issue of shares 14 800 – 14 800
Dividends paid (30 016) (11 677) (41 693)
Treasury shares acquired (306) – (306)
Share-based payment reserve 2 993 – 2 993
Total transactions with owners (12 847) (7 784) (20 631)
Total comprehensive income
Profit for the year 56 039 10 946 66 985
Other comprehensive income for the year (3) 246 243
Total comprehensive income for the year 56 036 11 192 67 228
Balance as at 31 December 2014 – Reviewed 257 662 (2 818) 254 844
DIVIDENDS
Reviewed Audited
31 31
December December
Figures in R’000s 2014 2013
Ordinary dividend declared
Ordinary dividend number 1 of 5.0 cents per
share (2013: nil) declared on 24 March 2014 and
paid on 19 April 2014 (net of treasury shares
held) 5 003 –
Special dividend declared
Special dividend number 1 of 25.0 cents per
share (2013: nil) declared on 24 March 2014 and
paid on 19 April 2014 (net of treasury shares
held) 25 013 –
30 016 –
On 30 March 2015, ordinary dividend number 2 of 5.5 cents per share in respect of
the year ended 31 December 2015 was declared totalling R6.3 million payable on 28
April 2015. These provisional condensed consolidated results do not reflect this
dividend payable.
Condensed Consolidated Statement of Cash Flows for the year ended 31 December 2014
Reviewed Audited
31 31
December December
Figures in R’000s Note 2014 2013
Cash flows from operating activities
Net cash utilised by operating activities 7 (35 260) (13 525)
Investment revenue received 12 787 10 469
Finance income received 7 473 4 809
Finance costs paid (3 047) (10 594)
Dividends paid to shareholders (30 016) –
Dividends paid to non-controlling interest (11 677) (15 345)
Income tax paid (17 706) (10 630)
Net cash utilised by operating activities (77 446) (34 816)
Cash flows from investing activities
Proceeds on disposal of business 102 000 –
Acquisition of property, plant and equipment (678) (894)
Repayment of loans to associates 2 239 35 186
Proceeds on disposal of associates – 26 119
Increase in investment and loans to associates (4 089) (1 835)
Dividends received from associates – 2 725
Increase in other non-current assets (798) (2 220)
Proceeds from repayment of other non-current assets 331 186
Acquisition of other investments (2 833) (9 252)
Proceeds on disposal of other investments – 65 423
Net cash inflow from investing activities 96 172 115 438
Cash flows from financing activities
Proceeds on issue of share capital 14 800 –
Repayments of other financial liabilities (6 718) (68 036)
Increase in other financial liabilities – 107
Net cash inflow/(outflow) from financing activities 8 082 (67 929)
Net increase in cash and cash equivalents 26 808 12 693
Cash and cash equivalents at the beginning of the
39 360 26 544
year
Transfer to non-current assets held for sale – (1)
Cash acquired in business acquisitions 488 124
Total cash and cash equivalents at end of the year 66 656 39 360
Segmental Reporting for the year ended 31 December 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 Total
Revenue (Note I) assets
Reviewed Reviewed Reviewed
Figures in R’000s 31 December 31 December 31 December
2014 2014 2014 2014
Continuing operations
Asset management 38 383 (2 643) 47 283
Advisory services (Note II) 3 138 (632) 2 008
Investment holdings 959 (11 800) 207 422
Institutional securities broking 52 256 5 053 155 070
Private wealth and investments 10 647 (2 073) 2 275
Group 9 633 (13 220) 38 672
115 016 (25 315) 452 730
Discontinued operations
Properties asset management 1 571 94 093 14 990
Property developments and investments – (1 793) 1 374
1 571 92 300 16 364
Total 116 587 66 985 469 094
Audited Audited Audited
31 December 31 December 31 December
2013 2013 2013
2013 Re-presented Re-presented Re-presented
Continuing operations
Asset management 36 822 992 42 030
Advisory services – South Africa (Note II) 5 860 554 10 958
Advisory services – Zimbabwe (Note II) 621 (4 655) 190
Investment holdings – 18 629 195 830
Institutional securities broking 46 463 7 945 140 140
Private wealth and investments 7 624 (601) 2 470
Group 10 615 (16 667) 19 332
108 005 6 197 410 950
Discontinued operations
Properties asset management 8 858 1 611 3 129
Property developments and investments 1 953 498 19 205
10 811 2 109 22 334
Total 118 816 8 306 433 284
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 Reviewed Provisional Condensed Consolidated Results
BASIS OF PREPARATION
The provisional condensed consolidated results for the year ended 31 December 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 provisional
condensed consolidated 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 Listings 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 reviewed provisional
condensed consolidated results have been presented on the historical cost basis, except
for other investments and certain financial liabilities, which are fair valued. These
provisional condensed consolidated results are presented in Rands, rounded to the
nearest thousand, which is the functional currency of Vunani and the group presentation
currency.
These reviewed provisional condensed consolidated results incorporate the financial
statements of the company, its subsidiaries and companies 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 and related notes have been re-
presented to show the effect of the discontinued operation (refer to note 3).
NOTES
1. Revenue
Revenue includes trading revenue and fees earned from advisory services,
brokerage, asset management fees and client service fees.
2. Fair value adjustments and impairments
Reviewed Audited
31 31
December December
2014 2013
Re-
Reviewed
Figures in R’000s presented
Financial assets and liabilities designated at
(18 866) 22 709
fair value through profit or loss
Impairment of other non-current assets (798) (3 576)
Impairment of loans to associates – (530)
Reversal of impairment of loans to associates – 60
Reversal of impairment of loans to associates on
– 1 241
consolidation of associate
Fair value adjustment on remeasurement of
stepped up acquisition of subsidiary (refer to note –
8) 1 742
(17 922) 19 904
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
2014, 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 year. Consequently, the balance of the property
investment and development segment has been classified as a
discontinued operation.
The comparative information for December 2013 consolidated
statement of comprehensive income and related notes have been
re-presented to disclose the discontinued operations separately
from continuing operations.
The results of the discontinued operations are as
follows:
Reviewed Audited
31 31
December December
2014 2013
Re-
Figures in R’000s presented
Revenue 1 571 10 811
Other income – 11
Interest from investments – 158
Profit on disposal of assets 116 318 9 865
Fair value adjustments and impairments – (1 434)
Operating expenses (10 782) (9 214)
Results from operating activities 107 107 10 197
Finance income 747 47
Finance costs (87) (349)
Net finance income/(costs) 660 (302)
Results from operating activities after net finance
107 767 9 895
costs
Equity accounted earnings (net of income tax) (30) (3 880)
Profit before income tax 107 737 6 015
Income tax expense (15 437) (3 906)
Profit for the year 92 300 2 109
Attributable to equity holders of Vunani 79 108 1 645
Attributable to non-controlling interest 13 192 464
92 300 2 109
Effect on basic and diluted earnings per share (cents) 77.1 1.6
Effect on basic and diluted headline loss per share
(2.8) (3.7)
(cents)
Cash flows from discontinued operations
Net cash utilised by operating activities (106 912) (55 326)
Net cash inflow from investing activities 103 593 45 672
Net cash (outflow)/ inflow from financing activities (2 213) 87
Net cash outflow for the year (5 532) (9 567)
4
Reconciliation of headline earnings for the year
.
Reviewed Audited
31
31 December
December
Figures in R’000s 2014 2013
Profit for the year attributable to equity
holders of Vunani 56 039 9 869
Adjusted for:
Discontinued operations
Profit on disposal of discontinued operations (116 318) –
Taxation 21 691 –
Non-controlling interest 12 617 –
Subsidiaries
Fair value adjustment on investment property – 1 400
Deferred taxation on fair value adjustment – (261)
Non-controlling interest on fair value adjustment – (251)
Disposal of associates
Profit on disposal – (11 150)
Taxation – 2 079
Non-controlling interest – 1 762
Disposal of subsidiaries
Profit on disposal – (19)
Taxation – 4
Associates
Gross revaluation of investment property (467) (1 400)
Deferred taxation on revaluation 131 261
Non-controlling interest 74 251
Business acquisitions
Fair value adjustment on stepped up acquisition (1 742) –
Bargain purchase (298) –
(28 273) 2 545
Headline (loss)/earnings per share (cents) (27.5) 2.5
Basic and diluted headline (loss)/ earnings per
share from continuing operations (24.7) 6.2
Basic and diluted headline loss per share from
discontinued operations (2.8) (3.7)
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 year-end.
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.
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 31 December 2014 was 200
million ordinary shares of no par value (2013: 200 million
ordinary shares of no par value). 114 664 649 shares were in
issue at 31 December 2014 (2013: 105 414 649). Vunani issued
9.25 million shares during the year for R14.8 million.
Reviewed Audited
31 31
December December
Weighted average number of ordinary shares (000s) 2014 2013
Issued ordinary shares at the beginning of the year 105 415 105 415
Effect of share issue 2 588 –
Effect of own shares held (5 364) (5 211)
Weighted average number of shares 102 639 100 204
Number of shares in issue at the end of the year (000s) 114 665 105 415
The shares issued as part of the employee share incentive
scheme could potentially dilute basic earnings in the
future. In the current year, the employee shares have no
dilutive effect.
7. Net cash utilised by operating activities
Reviewed Audited
31 31
December December
2014 2013
re-presented
Figures in R’000
(Loss)/Profit before income tax expense from
continuing operations (23 853) 4 722
Profit before income tax expense from
discontinued operations 107 737 6 015
Adjusted for:
Depreciation of plant and equipment 1 570 1 962
Profit on discontinued operations (116 318) (19)
Profit on disposal of associates – (11 150)
Equity accounted earnings (net of income tax) 116 3 438
Gain on bargain purchase (298) –
Fair value adjustments and impairments 17 922 (18 470)
Rental guarantee reversal – (9)
Realisation of deferred income (3 573) (3 575)
Movement in impairment allowance (297) (934)
Amortisation of intangible assets 1 165 489
Share based payments expenses 2 993 4 350
Foreign currency translation (920) (813)
Lease straight line adjustment (82) –
Interest received from investments and finance income (9 191) (5 137)
Investment revenue (14 220) (10 469)
Finance costs 3 047 5 353
Prior period effect of consolidating Vunani
Capital Zimbabwe (Private) Limited in terms of
IFRS 10 – 2 223
Changes in working capital:
Decrease in trading securities 69 1 244
Decrease/(increase ) in trade and other receivables 8 473 (692)
(Decrease)/increase in trade and other payables (9 688) 5 789
Decrease in accounts receivable and payable
from trading activities 88 2 158
Cash utilised by operating activities (35 260) (13 525)
8. Business acquisitions
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
Vunani's strategy is to replicate the South African operating model
on the African continent, and 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 fair
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 year amounted to R0.718
million.
Since acquisition, an after tax loss of R2.5 million has been
included in Vunani’s profit or loss for the year ended 31 December
2014. R1.1 million of this loss is attributable to non-controlling
interest. R5.1 million has been included in Vunani’s revenue for the
year ended 31 December 2014 since the acquisition of PVAM.
The acquisition resulted in the recognition of a gain on bargain
purchase of R0.077 million at acquisition date. The additional 10%
was acquired in terms of an option to take up an additional stake at
predetermined price, which resulted in the bargain purchase. The
purchase price for the additional 10% stake was based on a value
outlined in the agreement for the original acquisition of the
initial 45% investment in PVAM.
Trade receivables acquired are at fair value and are expected to be
collected in their entirety. No intangible assets or contingent
liabilities arose as a result of the business combination. The
measurement of the non-controlling interest was based on the net
asset value of PVAM at acquisition date.
A purchase price allocation in terms of IFRS 3 is presented
below:
Figures in R’000s PVAM
Net assets acquired
Property, 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
Investments (current) 383
Non-controlling interest (3 575)
Net assets acquired 4 370
Cost of investment (fair value of associate prior to
4 293
stepped-up acquisition plus cash)
Gain on bargain purchase 77
Vunani increased its investment in Loato Properties Proprietary
Limited (“Loato”), an investment holding company, from 31.6% to
100% on 1 July 2014, when an arbitrage opportunity arose to acquire
an additional 68.4% for consideration less than fair value resulting
in a bargain purchase. The 31.6% investment was acquired for a
nominal amount in 2006. Prior to the stepped-up acquisition, the
31.6% investment was valued at R0.116 million. The consideration for
the additional shareholding acquired during the year amounted to
R0.03 million.
Since acquisition an after tax loss of R0.07 million has been
included in Vunani's profit or loss for the year ended 31 December
2014. Had the acquisition occurred at the beginning of the year, an
after tax loss of R0.13 million would have been included in Vunani's
profit or loss for the year ended 31 December 2014. No revenue was
generated by the company for the year. The acquisition resulted in
the recognition of a gain on bargain purchase of R0.2 million at
acquisition date.
Trade receivables acquired are at fair value and are expected to be
collected in their entirety. No intangible assets or contingent
liabilities arose as a result of the business combination.
A provisional purchase price allocation in terms of IFRS 3
is presented below:
Figures in R’000s Loato
Net assets acquired
Deferred tax asset 6
Trade and other receivables 99
Cash and cash equivalents 313
Other liabilities (51)
Net assets acquired 367
Cost of investment (fair value of associate prior to
146
stepped-up acquisition plus cash)
Gain on bargain purchase 221
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.
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.
Reviewed Audited
31 31
December December
2014 2013
Fair values Carrying Carrying
Fair Fair
Figures in R’000s amount value amount value
Financial assets measured at fair
value
Designated at fair value through
profit or loss on initial 134 783 134 783 144 885 144 885
recognition
Financial assets not measured at
fair value
Loans and receivables 179 445 179 445 164 519 164 519
Non-current assets held for sale – – 34 34
Trading securities 251 251 320 320
314 479 314 479 309 758 309 758
Financial liabilities measured at
fair value
Designated at fair value through
profit or loss on initial (2 554) (2 554) (6 971) (6 971)
recognition
Financial liabilities not measured
at fair value
Amortised cost (193 106) (193 106) (198 720) (198 720)
Non-current liabilities held for
– – (2 479) (2 479)
sale
(195 660) (195 660) (208 170) (208 170)
At 31 December 2014 the fair values of all the financial instruments are
substantially identical to the carrying amount reflected in the statement of
financial position.
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).
Reviewed 31 December 2014
Figures in R’000s Level 1 Level 2 Level 3 Total
Financial assets designated at fair
96 339 – 38 444 134 783
value through profit or loss
Financial liabilities designated at
– – (2 554) (2 554)
fair value through profit or loss
96 339 – 35 890 132 229
Audited 31 December 2013 Level 1 Level 2 Level 3 Total
Financial assets designated at fair
80 240 – 64 645 144 885
value through profit or loss
Financial liabilities designated at
– – (6 971) (6 971)
fair value through profit or loss
80 240 – 57 674 137 914
Reviewed Audited
31 31
December December
Figures in R’000s 2014 2013
Level 3 comprises:
Balance at beginning of year 57 674 (38 635)
Total gains or losses in profit or
(24 927) 19 573
loss
Proceeds from loan, interest and
– 70 697
repayments
Purchases, transfers, sales, issues
3 143 6 039
and settlements
Balance at end of the year 35 890 57 674
A change of 10% in the unobservable inputs of the 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.
Reviewed Audited
31 31
December December
Effect on statement of
comprehensive income
(profit/(loss)) and equity before
taxation 2014 2013
10% increase 5 867 5 767
10% decrease (1 725) (5 767)
OVERVIEW AND PROSPECTS
The South African economy disappointed in 2014 by achieving estimated real growth of a
mere 1.4% as growth in final household demand was limited to only about 2.0% on the
back of an aggregate 75 basis points increase in prime lending rates over the first
half of the year. Moreover growth in Europe, South Africa’s most important export
market, virtually ground to a halt while the rest of the developed world battled to
achieve significant growth in spite of various stimulus programmes. Dollar commodity
prices remained weak amidst sluggish global demand, and further eroded by a sustained
strengthening of the US Dollar. Moreover, in spite of a concomitant weakening of the
Rand exchange rate which assisted Rand-export prices, domestic labour and
infrastructure constraints (i.e. electricity) limited output. Business conditions
remained challenging throughout the year as the significant drop in global oil prices
and resultant reduction in local fuel prices came too late in the year to have had a
material impact on the economic outcome.
Vunani generated total comprehensive income for the year of R67.2 million
(2013: R7.4 million). Total comprehensive income attributable to equity holders of the
company amounts to R56.0 million (2013: R9.2 million), which is a very pleasing result.
The results for the year ended 31 December 2014 have been presented such that the
disposal of the property asset management business in Vunani Property Asset Management
Proprietary Limited (“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 6.5% to R115.0 million (2013: R108.0
million) for the year ended 31 December 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 by 36% to an amount of R14.2 million compared to
December 2013, which reflected an amount of R10.5 million. This increase was a result
of dividend declarations by investee companies.
Negative fair value adjustments and impairments of R17.9 million (2013: positive
adjustment of R19.9 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 3% from R141.6 million to R146.0 million. The
increase in costs is mainly due to the stepped up acquisition of PVAM, which was
acquired at the beginning of the 2014 financial 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 substantially increased to R6.1 million in 2014 compared to R2.4
million in 2013 due to higher cash resources in the group. Finance costs have decreased
from R5.0 million to December 2013 to R3.0 million to December 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 year amounts to R92.3 million (2013: R2.1 million).
The proceeds on the disposal of the business amounted to a total of R117.0 million. Net
of taxation, R79.1 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 of R15 million was received on 28 February 2015 in
accordance with the agreement. A profit of R116.3 million has been recognised in 2014
(refer to note 3).
Property, plant and equipment has increased as a result of the stepped up acquisition
of PVAM. Investments in and loans to associates have reduced due to the repayment of
loans by the associates. The net decrease in other investments during the year is
primarily attributable to the negative fair value adjustments on investments that are
carried at fair value through profit or loss.
Vunani issued an additional 9.25 million shares for cash during the year, resulting in
stated capital increasing by R14.8 million. The share-based payment reserve movement of
R3.0 million is attributable to the current year IFRS 2 charge (2013: R4.4 million).
Non-controlling interest decreased by a net R3.4 million. A decrease of R11.7 million
in non-controlling interests resulted from a dividend declaration of R11.7 million to
non-controlling interests, while the acquisition of PVAM resulted in an increase in
non-controlling interest of R3.6 million. Dividends paid to shareholders of the group
amounted to R30.0 million, comprising a special dividend of 25c per share and an
ordinary dividend of 5c per share (2013: R nil). Cash and cash equivalents increased by
R27.3 million (2013: R12.8 million) in December 2014.
Asset management
The asset management segment reflected a loss of R2.6 million for the year ended 31
December 2014 (2013: profit of R1.0 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 year, 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 positive fair value adjustment of R1.7 million being
recognised on the stepped up acquisition. PVAM’s operating losses for the year ended 31
December 2014 amounted to R2.5 million amidst challenging economic conditions in
Zimbabwe. A co-ordinated approach to both increase revenue while reducing expenditure
was undertaken since Vunani’s additional investment was made. The results of these
efforts are expected to become prevalent during the 2015 financial year. PVAM’s assets
under management grew by $3.4 million since Vunani acquired a majority stake and at 31
December 2014 amounted to $16.2 million.
VFM faced a challenging year, with assets under management reducing from R14.6 billion
in December 2013 to R12.4 billion in December 2014. The reduction in assets under
management was attributable to the withdrawal of lower fee generating mandates.
Challenges faced with VFM’s leadership culminated in Butana Khoza being appointed VFM’s
chief executive officer in July 2014 following the departure of VFM’s previous chief
executive. The business has stabilised since Butana’s appointment and significant
strides have been made to improve VFM’s performance and to secure new mandates.
The outcome of these efforts are expected to transpire in the 2015 financial year.
Advisory services
This segment also faced challenging conditions during the year. The segment reflected a
loss for the year of R0.6 million (2013: loss of R4.1 million). Advisory deal flow in
the Zimbabwean market stalled due to difficult 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, which has provided fresh
leadership and renewed energy into this segment. The deal flow pipeline has
strengthened and fresh initiatives in deal generation are being explored.
Investment holdings
The segment includes the group’s listed and unlisted investments. The segment reported
a loss of R11.8 million for the year (2013: R18.6 million profit). Negative fair value
adjustments to listed and unlisted investments have resulted in the decrease in profit.
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
This segment includes equity, derivative and capital market trading services to a
spread of institutional clients. The segment reported a profit for the year of R5.1
million (2013: R7.9 million). Revenue increased by 12% compared to 2013, but higher
direct trading costs reduced overall profitability within the segment. With a stable
team and closely managed cost base for both the institutional equity, derivative and
capital markets businesses, the focus for the year was on revenue growth through the
expansion of the client base and exploring diversified product offerings.
Private wealth and investments
The segment focuses on retail securities broking and providing private wealth and
investment products to clients. The segment reflected a loss of R2.1 million for the
year ended 31 December 2014 (2013: loss of R0.6 million), despite an increase in
revenue. The established platform in place provides a growth foundation and intense
attention will be given to the vigorous growth of the number of actively trading
clients.
Property developments and investments and property asset management
The property developments and investments segment has gone through a realisation phase
and by December 2014 the only remaining property investment related to 33 units held in
a completed development in Dainfern, Johannesburg. This equity accounted investment has
been reclassified to the investment holdings segment, while the balance of the property
developments and investments segment has been reflected as a discontinued operation.
The sale of the property asset management business out of VPAM 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 segment, but
this is still in its early stages. While in this phase, any property related activities
will be classified in the investment holdings segment.
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
A sale of shares agreement, dated 10 March 2015, has been entered into by Mandlalux
Proprietary Limited (“Mandlalux), a subsidiary of Vunani, to acquire 100% of the shares
of Fairheads International Holdings (SA) Proprietary Limited (“Fairheads”) for a total
purchase consideration of R210 million. Fairheads’ key management will receive 30% of
Mandlalux as part of the purchase consideration. The agreement contains legal
warranties and indemnities which are considered normal in respect of a transaction
of this nature.
Fairheads is a provider of administration services to beneficiary funds and umbrella
trusts for retirement funds and a registered pension funds administrator in terms of
section 13B of the Pension Funds Act, No 24 of 1956.
The acquisition of Fairheads represents an opportunity for Vunani to enter a new market
and allows Vunani to grow and diversify its existing service offering within the
financial services sector.
Although Fairheads operates in an industry where Vunani currently has no exposure,
Vunani will be able to add value and assist in the growth of Fairheads via Vunani’s
current relationships, empowerment status and client base all of which are anticipated
to strengthen Fairheads’ position in the market and allow it to penetrate into new
funds. This acquisition has not been finalised as certain conditions precedent need to
be met. These are expected to be concluded by May 2015.
Please refer to the SENS announcement issued on 20 March 2015 for additional
information.
DIVIDENDS DECLARED
Notice is hereby given that a gross ordinary dividend of 5.5 cents per share
(2013: 5 cents and a gross special dividend of 25 cents per share) has been declared
out of income reserves on 30 March 2015 and are payable to ordinary shareholders in
accordance with the following timetable.
In terms of dividend tax effective since 1 April 2012, the following additional
information is disclosed:
- The local dividend tax rate is 15%
- 114 664 649 shares are in issue
- The net ordinary dividend is 4.675 cents per share for ordinary shareholders who
are not exempt from dividends tax
- Vunani Limited’s tax reference number is 9841003032
Timetable
Declaration date Monday, 30 March 2015
Last day to trade cum dividend Friday, 17 April 2015
Shares commence trading ex-dividend Monday, 20 April 2015
Record date Friday, 24 April 2015
Dividend payment date Tuesday, 28 April 2015
No dematerialisation or rematerialisation of shares will be allowed for the period
from Monday, 20 April 2015 to Friday, 24 April 2015, both dates inclusive.
Dividends are declared in the currency of the Republic of South Africa. The directors
have confirmed that the company will satisfy the liquidity and solvency requirements
immediately after the payment of the dividend.
REVIEW OPINION
The provisional condensed consolidated results of Vunani Limited for the year ended 31
December 2014 have been reviewed by the company’s auditor, KPMG Inc. In their review
report dated 30 March 2015, which is available for inspection at the Company’s
Registered Office, KPMG Inc. state that their review was conducted in accordance with
the International Standard on Review Engagements 2410, Review of Interim Information
Performed by the Independent Auditor of the Entity, which applies to a review of
condensed consolidated provisional financial information, and have expressed an
unmodified conclusion on the condensed consolidated provisional results.
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.
FORWARD LOOKING STATEMENTS AND DIRECTORS’ RESPONSIBILITY
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
Listings Requirements.
The directors take full responsibility for the preparation of the provisional condensed
consolidated results.
Signed on behalf of the board of directors by EG Dube and A Judin on 30 March 2015.
CORPORATE INFORMATION
Executive directors
EG Dube (Chief Executive Officer)
A Judin (Chief Financial Officer)
BM Khoza
NM Anderson
CE Chimombe-Munyoro (resigned 1 March 2014)
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
S Mthethwa (appointed 21 November 2014)
Company secretary
A Judin
Designated adviser
Grindrod Bank Limited
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
Date: 30/03/2015 12:19:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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