Wrap Text
Condensed consolidated results for the year ended 31 March 2015
DENEB INVESTMENTS LIMITED
Registration number: 2013/091290/06 (Incorporated in the Republic of South Africa)
JSE share code: DNB ISIN: ZAE000197398
("Deneb" or "the Group" or "the company")
Provisional condensed consolidated results
for the year ended 31 March 2015
STATEMENT OF FINANCIAL POSITION
as at 31 March
Rand thousands Reviewed Audited
2015 2014
ASSETS
Non-current assets 1 723 603 1 544 389
Plant and equipment 312 365 286 364
Owner-occupied property 283 566 335 718
Investment property 766 804 669 619
Intangible assets 23 761 9 197
Goodwill 17 271 14 204
Other investments 3 644 43 709
Long-term receivables 182 040 126 840
Deferred tax assets 134 152 58 738
Current assets 1 310 204 1 122 528
Non-current assets held for sale 57 933 54 536
Inventories 610 214 536 471
Trade and other receivables 640 855 527 838
Current tax assets 765 103
Cash and cash equivalents 437 3 580
Total assets 3 033 807 2 666 917
EQUITY AND LIABILITIES
Total equity 1 868 727 1 488 169
Stated capital/Share capital and share premium 1 716 713 1 496 346
Reserves 154 266 (8 177)
Equity attributable to owners of the company 1 870 979 1 488 169
Non-controlling interest (2 252) -
Non-current liabilities 109 428 149 757
Deferred tax liabilities 3 009 6 047
Post-employment medical aid benefits 102 694 91 180
Share-based liabilities - 35 631
Interest-bearing liabilities 2 800 16 658
Operating lease accruals 925 241
Current liabilities 1 055 652 1 028 991
Current tax liabilities 868 151
Post-employment medical aid benefits 6 413 6 280
Interest-bearing liabilities 45 063 3 193
Trade and other payables 473 429 458 467
Provisions - 23 116
Bank overdraft 529 879 537 784
Total liabilities 1 165 080 1 178 748
Total equity and liabilities 3 033 807 2 666 917
Net asset value 1 870 979 1 488 169
Net asset value per share (cents) 334 276
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 31 March
Rand thousands Reviewed Audited
2015 2014*
Continuing operations
Revenue 2 665 399 2 140 324
Cost of sales (2 059 555) (1 596 652)
Gross profit 605 844 543 672
Other income 130 291 122 792
Selling and distribution expenses (271 297) (226 139)
Administrative and other expenses (271 313) (220 483)
Operating profit before impairment reversal 193 525 219 842
Net impairment reversal of assets 5 554 -
Operating profit before finance costs 199 079 219 842
Finance income 11 271 2 080
Finance expenses (58 158) (49 094)
Profit before taxation 152 192 172 828
Income tax income 72 405 4 899
Profit from continuing operations 224 597 177 727
Discontinued operations
Loss from discontinued operations, net of tax (17 284) (165 053)
Profit for the year 207 313 12 674
Other comprehensive income, net of related tax
Items that will not be reclassified to profit or loss
Revaluation of land and buildings 7 095 19 193
Post-employment medical aid benefits - actuarial loss (6 875) (4 295)
Items that are or may be reclassified to profit or loss
Fair value adjustment on available-for-sale financial assets 3 370 12 260
Other comprehensive income, net of tax 3 590 27 158
Total comprehensive income for the year 210 903 39 832
Profit attributable to:
Owners of the company 208 750 12 674
Non-controlling interest (1 437) -
207 313 12 674
Total comprehensive income attributable to:
Owners of the company 212 340 39 832
Non-controlling interest (1 437) -
210 903 39 832
* Restated (see note 2).
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March
Rand thousands Reviewed Audited*
2015 2014
Net cash flows from operating activities (154 926) 28 521
Net cash flow from investing activities (58 930) (50 921)
Net cash flow from financing activities 218 618 (9 356)
Net change in cash and cash equivalents 4 762 (31 756)
Cash and cash equivalents at the beginning of the year (534 204) (502 448)
Cash and cash equivalents at the end of the year (529 442) (534 204)
* Restated (see note 2).
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Rand thousands Stated
capital/
Share Common
capital and Other control Retained
share reserves reserve income
Balance at 31 March 2013* 1 477 489 307 741 (7 452) (316 947)
Total comprehensive income - 31 453 - 8 379
Profit - - - 12 674
Other comprehensive income - 31 453 - (4 295)
Fair value adjustment on
available-for-sale
financial assets - 12 260 - -
Revaluation of land
and buildings - 19 193 - -
Post-employment medical
aid benefits - actuarial loss - - - (4 295)
Transfers to other reserves - (1 950) - 1 580
Reclassification of revaluation
surplus - (1 950) - 1 580
Transactions with owners of
the company 1 749 - - (22 531)
Share scheme - expense - - - 4 511
Share scheme - recharge
revaluation - - - (19 878)
Loan capitalisation 1 749 - - -
Dividends paid - - - (7 164)
Changes in ownership
interest 17 108 - (8 450) -
Acquisition of subsidiary with
non-controlling interests 17 108 - (8 450) -
Reviewed
Balance at 31 March 2014 1 496 346 337 244 (15 902) (329 519)
Total comprehensive income - 10 465 - 201 875
Profit - - - 208 750
Other comprehensive income - 10 465 - (6 875)
Fair value adjustment on
available-for-sale financial assets - 3 370 - -
Revaluation of land and buildings - 7 095 - -
Post-employment medical aid benefits
- actuarial loss - - - (6 875)
Transfers to other reserves - (82 339) - 82 339
Reclassification of
revaluation surplus - (82 339) 82 339
Transactions with owners of
the company 220 367 - - (49 897)
Share scheme - expense - - - (1 140)
Share scheme - recharge revaluation - - - (94)
Share scheme - options
exercised 5 229 - - (5 229)
Loan capitalisation 140 577 - - -
Share issue 50 029 - - -
Share incentive receivable
capitalised 24 532 - - -
Dividends paid - - - (43 434)
Changes in ownership interest - - - -
Acquisition of subsidiary
with non-controlling interests - - - -
Balance at 31 March 2015 1 716 713 265 370 (15 902) (95 202)
* Restated (see note 2).
Rand thousands Non-
controlling
Total Interest Total
Audited
Balance at 31 March 2013* 1 460 831 - 1 460 831
Total comprehensive income 39 832 - 39 832
Profit 12 674 - 12 674
Other comprehensive income 27 158 - 27 158
Fair value adjustment on available-
for-sale financial assets 12 260 - 12 260
Revaluation of land and buildings 19 193 - 19 193
Post-employment medical aid
benefits - actuarial loss (4 295) - (4 295)
Transfers to other reserves (370) - (370)
Reclassification of revaluation surplus (370) - (370)
Transactions with owners of the company (20 782) - (20 782)
Share scheme - expense 4 511 - 4 511
Share scheme - recharge revaluation (19 878) - (19 878)
Loan capitalisation 1 749 - 1 749
Dividends paid (7 164) - (7 164)
Changes in ownership interest 8 658 - 8 658
Acquisition of subsidiary with
non-controlling interests 8 658 - 8 658
Reviewed
Balance at 31 March 2014 1 488 169 - 1 488 169
Total comprehensive income 212 340 (1 437) 210 903
Profit 208 750 (1 437) 207 313
Other comprehensive income 3 590 - 3 590
Fair value adjustment on available
-for-sale financial assets 3 370 - 3 370
Revaluation of land and buildings 7 095 - 7 095
Post-employment medical aid benefits
- actuarial loss (6 875) - (6 875)
Transfers to other reserves - - -
Reclassification of revaluation surplus - - -
Transactions with owners of the company 170 470 - 170 470
Share scheme - expense (1 140) - (1 140)
Share scheme - recharge revaluation (94) - (94)
Share scheme - options exercised - - -
Loan capitalisation 140 577 - 140 577
Share issue 50 029 - 50 029
Share incentive receivable capitalised 24 532 - 24 532
Dividends paid (43 434) - (43 434)
Changes in ownership interest - (815) (815)
Acquisition of subsidiary with
non-controlling interests - (815) (815)
Balance at 31 March 2015 1 870 979 (2 252) 1 868 727
* Restated (see note 2).
CONDENSED CONSOLIDATED SEGMENTAL REPORT
Operating
Inter- profit/(loss)
Gross segment External before Segment Segment
Rand thousands revenue revenue revenue finance costs assets liabilities
Reviewed
2015
Continued operations
Property 129 114 (33 595) 95 519 153 082 1 129 952 15 219
Branded Product
Distribution 1 408 968 (863) 1 408 105 19 576 811 109 224 406
Textiles 718 310 (7 568) 710 742 40 614 521 469 150 593
Industrials 451 033 - 451 033 24 618 266 329 64 201
Head office and centralised
services - - - (38 811) 300 275 708 600
Total continued operations 2 707 425 (42 026) 2 665 399 199 079 3 029 134 1 163 019
Discontinued operations
Clothing 9 581 - 9 581 (17 284) 4 673 2 061
Total discontinued operations 9 581 - 9 581 (17 284) 4 673 2 061
Total 2 717 006 (42 026) 2 674 980 181 795 3 033 807 1 165 080
Audited
2014*
Continued operations
Property 118 926 (47 379) 71 547 103 769 1 075 261 10 777
Branded Product Distribution 957 545 (3 622) 953 923 37 359 550 763 174 271
Textiles 736 920 (46 767) 690 153 35 306 478 092 218 251
Industrials 424 701 - 424 701 35 115 271 467 89 953
Head office and centralised
services - - - 8 293 125 816 607 280
Total continued operations 2 238 092 (97 768) 2 140 324 219 842 2 501 399 1 100 532
Discontinued operations
Clothing 627 651 - 627 651 (151 305) 165 518 78 216
Total discontinued
operations 627 651 - 627 651 (151 305) 165 518 78 216
Total 2 865 743 (97 768) 2 767 975 68 537 2 666 917 1 178 748
* Restated (see note 2).
Statistics per share
In cents, where applicable Reviewed Audited
2015 2014*
Number of shares in issue ('000) 560 812 539 776
Weighted average number of shares in issue ('000) 547 315 539 776
Diluted weighted average number of shares in issue ('000) 553 242 539 776
Basic earnings 38,14 2,35
Continued operations 41,30 32,93
Discontinued operations (3,16) (30,58)
Headline earnings (27,55) 4,36
Continued operations 30,35 29,37
Discontinued operations (2,8) (25,01)
Diluted earnings 37,74 2,35
Continued operations 40,86 32,93
Discontinued operations (3,12) (30,58)
Diluted headline earnings 27,26 4,36
Continued operations 30,03 29,37
Discontinued operations (2,77) (25,01)
Reconciliation between profit and headline earnings
(net of taxation)
Profit attributable to equity holders of the parent ('000) 208 750 12 674
Impairment of assets ('000) 7 102 3 324
Reversal of impairment of assets ('000) (9 195) -
Insurance claim for capital asset ('000) - (73)
Remeasurement of investment property ('000) (56 449) (16 861)
Surplus on disposal of property, plant and equipment ('000) (253) (2 639)
Loss on disposal of property, plant and equipment ('000) 368 26 994
Loss on disposal of investment property ('000) 489 81
Headline earnings ('000) 150 812 23 500
* Restated (refer to note 2).
Notes to the reviewed condensed consolidated results for the year ended 31 March 2015
1 BACKGROUND
On 1 December 2014 Deneb Investments Limited ("Deneb", "the Group" or "the company")
unbundled and listed on the JSE Limited (JSE) under the Financial Services -
Speciality Finance sector.
Prior to the unbundling and listing, Deneb was a wholly-owned subsidiary of Seardel
Investment Corporation Limited (Seardel) and on 1 October 2014 acquired all of
Seardel's non-media businesses.
2 BASIS OF PREPARATION
The reorganisation of Deneb represents a common control transaction as Hosken
Consolidated Investments Limited is the ultimate controlling entity before and after
the transaction. Common control transactions fall outside the scope of IFRIC 17 and
is not specifically addressed in IFRS. Accordingly, the financial results are presented
as if the restructuring had taken place at the start of the first reporting period
presented. The current year and comparative figures were prepared on a carve-out basis
by extracting the historical assets, liabilities, revenues and expenses reflected in
the consolidated financial statements of Seardel for the period prior to 1 October 2014.
The provisional reviewed condensed consolidated results presented in this publication
have been prepared:
- on the basis that the current year and the prior year comparatives have been
restated on the assumption that the unbundling and business combination had occurred
at the start of the prior year reporting period in accordance with IAS 8; and
- in accordance with and containing the information as required by International
Accounting Standard (IAS) 34: Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the Financial
Reporting Pronouncements as issued by the Financial Reporting Accountants Council
and are in compliance with the Listings Requirements of the JSE and the Companies
Act, No 71 of 2008, as amended.
These results do not include all the information required for a complete set of
IFRS financial statements. However, selected explanatory notes are included to explain
events and transactions that are significant to an understanding of the changes in
the Group's financial position and performance since the carve-out historical financial
information that was published in the Deneb Pre-listing Statement for the year ended
31 March 2014.
These results have been prepared under the supervision of the Financial Director,
Gys Wege (CA)SA and have been reviewed by the Group's auditors, KPMG Inc.
3 SIGNIFICANT ACCOUNTING POLICIES, ASSUMPTIONS AND ESTIMATES
The Group results have been prepared under the historical cost convention, except
for the revaluation of certain properties and financial instruments. The accounting
policies adopted are in terms of IFRS and are consistent with those followed in the
preparation of the Group's carve-out historical financial information for the year
ended 31 March 2014, except for the adoption of new standards and interpretations
effective as at 1 April 2014 and as contained in this note. The new standards have
no impact on the financial information.
Taxation
The directors have considered the future profitability of the entities which contain
computed tax losses and to the extent that the entities are projected to produce
taxable income in the foreseeable future, a deferred tax asset has been recognised.
It is assumed that Seardel Group Trading Proprietary Limited (SGT), a wholly-owned
subsidiary of Deneb, will comprise mainly of the Group's property investments and
therefore the directors are of the view that the deferred tax asset is fully recoverable.
Share incentive
With effect from 1 October 2014 the participants of the Seardel Share Incentive Scheme
(scheme) have no further rights under the Scheme and all unvested share options issued
in terms of the scheme have lapsed. This is as a result of the change in control of
the relevant employer company which came about as a result of an internal restructure.
The Deneb Investments Long Term Incentive Plan was established on 10 October 2014 and
adopted by the company and the employer companies on 13 October 2014. An initial tranche
of first allocation Deneb options totalling 22 351 660 have been granted to selected
participants who were holders of unvested Seardel share options at 30 September 2014.
Discontinued operations
Operations classified as discontinued operations in the consolidated financial statements
consist of the clothing factory stores and the apparel manufacturing businesses, the
latter of which was disposed to a related party (an associated company of SACTWU), as
a going concern.
The results of the discontinued operations have been separately disclosed on the face
of the statement of comprehensive income. Where practical, the prior year results have
been restated accordingly, in accordance with IAS 8.
4 INDEPENDENT REVIEW
The provisional consolidated statement of financial position at 31 March 2015, the
condensed consolidated statement of profit or loss and other comprehensive income,
the consolidated statement of changes in equity, the condensed consolidated statement
of cash flows, the condensed consolidated segmental report and statistics per share
for the year then ended have been reviewed by KPMG Inc. Their unmodified report is
available for inspection at the registered office of the company. The board of directors
take responsibility for the content of the provisional condensed consolidated results.
5 CAPITAL EXPENDITURE AND COMMITMENTS
Rand thousands Capital expenditure Contractual commitments
Reviewed Audited Reviewed Audited
2015 2014 2015 2014
Investment property 42 387 37 499 39 435 2 152
Land and buildings - 196 - -
Plant and equipment 57 189 29 255 - 14 578
Business combinations 1 400 26 500 - -
Intangible assets 19 608 5 071 - 21 000
Total 120 584 98 521 39 435 37 730
The above include amounts acquired through business combinations (refer note 6).
The capital commitments are expected to be incurred during the remainder of the
financial year ending 31 March 2016.
6 BUSINESS COMBINATIONS
For the year ended 31 March 2015
Subsidiaries acquired during the period
Net profit/
Revenue (loss)
% voting contributed contributed
Acquisition interest to the Group to the Group
Subsidiary name date Segment acquired Description R'000 R'000
Provider of
access security
solutions,
Limtech Biometric Branded specialising in
Solutions Proprietary Product biometric fingerprint
Limited 1 April 2014 Distribution 100% recognition 4 458 198
Deneb Invest 141 Branded
Holdco Proprietary Product Distributor
Limited 1 August 2014 Distribution 51% of stationery 1 913 (680)
Consideration transferred
The following table summarises the consideration paid for the entities and the amount
of the assets acquired and liabilities assumed recognised at the acquisition date.
Rand thousands Branded
products Industrials Total
Cash - - -
Contingent consideration - 1 400 1 400
Own shares issued - - -
Total consideration - 1 400 1 400
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and
liabilities assumed.
Rand thousands Branded Product
Distribution
Recognised amounts of identifiable assets acquired and
liabilities assumed
Property, plant and equipment 93
Inventories 701
Trade and other receivables 3 211
Cash and cash equivalents 256
Trade and other payables (6 673)
Bank overdrafts (70)
Total identifiable net assets (2 482)
Less: Non-controlling Interest 815
Goodwill 3 067
Goodwill directly to equity as transaction with owners -
Total consideration 1 400
Cash flow from this investing activity
Cash consideration transferred -
Add: Cash and cash equivalents in the business acquired 256
Less: Overdraft in the business acquired (70)
Net cash inflow from investing operations 186
For the year ended 31 March 2014
Subsidiaries acquired during the period
Net profit/
Revenue (loss)
% voting contributed contributed
Acquisition interest to the Group to the Group
Subsidiary name date Segment acquired Description R'000 R'000
Branded Online
Clever Little Monkey Product furniture
Proprietary Limited 1 August 2013 Distribution 100% and décor 2 898 (318)
Extrusion and
Custom Extrusion weaving of
Proprietary Limited 1 July 2013 Industrial 100% polypropylene 66 888 6 637
Consideration transferred
The following table summarises the consideration paid for the entities and the amount
of the assets acquired and liabilities assumed recognised at the acquisition date.
Rand thousands Branded
products Industrials Total
Cash 500 - 500
Contingent consideration 786 8 106 8 892
Own shares issued - 17 108 17 108
Total consideration 1 286 25 214 26 500
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and
liabilities assumed.
Rand thousands Branded
products
distribution Industrials Total
Recognised amounts of identifiable
assets acquired and liabilities assumed
Property, plant and equipment 11 11 905 11 916
Long-term receivables - 93 93
Inventories 96 8 305 8 401
Trade and other receivables 48 13 002 13 050
Cash and cash equivalents 58 - 58
Deferred liabilities - (3 707) (3 707)
Deferred tax liability - (1 023) (1 023)
Trade and other payables (111) (11 506) (11 617)
Interest bearing liability - (8 626) (8 626)
Bank overdrafts - (4 697) (4 697)
Total identifiable net assets 102 3 744 3 846
Common control reserve - 8 450 8 450
Goodwill 1 184 13 020 14 204
Total consideration 1 286 25 214 26 500
Cash flow from this investing activity
Cash consideration transferred (500) - (500)
Less: Cash and cash equivalents in the
business acquired 58 - 58
Add: Overdraft in the business acquired - (4 697) (4 697)
Net cash inflow from investing operations (442) (4 697) (5 139)
7 DISCONTINUED OPERATIONS
During the prior year the directors resolved to dispose of the Group's apparel
manufacturing business to an associated company of SACTWU. The sale consisted of
all plant, equipment and inventory within the business. As a consequence the results
of the Group's apparel manufacturing and clothing factory stores are reported as
discontinued operations. The effect of the discontinued operations on the financial
results is disclosed as follows:
Rand thousands 2015 2014
Revenue 9 581 627 651
Cost of revenue (15 903) (548 154)
Gross loss (6 322) 79 497
Other income 150 3 806
Distribution costs (4 740) (108 953)
Administrative and other expenses (3 725) (45 918)
Operating loss before impairments and restructuring
and retrenchment costs (14 637) (71 568)
Impairment of assets (2 647) (4 617)
Restructuring and retrenchment costs - (43 860)
Loss on sale of plant, equipment and inventory - (31 260)
Operating loss before finance costs (17 284) (151 305)
Finance income - 66
Finance expenses - (13 814)
Loss before taxation (17 284) (165 053)
Income tax expense - -
Loss for the period from discontinued operations (17 284) (165 053)
8 RELATED PARTIES
The note below is an explanation of transactions and balances with related parties
that have significantly changed from note 30 in the carve-out historical financial
information in the Deneb Pre-listing Statement for the period ending 31 March 2014.
Transactions with Hosken Consolidated Investments Limited (HCI) (ultimate holding
company), entities in which HCI has an interest and SACTWU (shareholder in Deneb
and HCI)
Income/(expenses) Balances receivable/(owing)
Transaction values Balance outstanding
Rand thousands 2015 2014 2015 2014
Loan to SACTWU at prime: relating
to the disposal of the apparel
manufacturing operation 7 508 (31 260) 68 070 107 588
Loan from SACTWU at prime: advance
relating to the disposal of the apparel
manufacturing operation - (957) - (30 957)
Loan from HCI at prime, repayable
on demand - (2 499) - -
Loan to HCI at prime, repayable on demand 2 040 - 21 083 -
During the prior year period the Group disposed of its South African apparel manufacturing
operations and advanced on loan account an amount equal to the purchase price to SACTWU.
No repayment period has been determined and as security SACTWU has ceded and assigned
in favour of Deneb its rights to receive payments and distributions from HCI and Seardel.
9 DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
The difference between the weighted average number of shares and the diluted weighted
average number of shares is due to the impact of the unexercised options under the
Group's share incentive scheme.
10 POST-PERIOD-END EVENTS
There have been no reportable post-year-end events.
11 CHANGES TO THE BOARD
Mr L Govender has been appointed as an independent non-executive director of the
company with effect from 11 March 2015.
12 RECONCILIATION BETWEEN ASSUMPTIONS USED IN THE PRE-LISTING STATEMENT AND THE COMPARATIVE
RESULTS OF DENEB FOR THE YEAR ENDED 31 MARCH 2015
Deneb did not prepare financial statements in the normal course of business up to
and including 31 March 2014.
Accordingly carve-out historical information was prepared for the Pre-listing Statement
published on 21 November 2014 on a basis of extracting historical assets, liabilities,
revenue and expenses reflected in the consolidated financial statements of Seardel.
The financial statements of Deneb as presented was prepared on book value accounting
as the reorganisation presented a common control transaction due to HCI being the
ultimate controlling entity before and after the transaction.
Book value accounting requires the assets acquired and the liabilities assumed through
the reorganisation to be accounted for using the book values in the financial statements
of the transferor, Seardel.
The following assumptions were used in the basis of preparing the Pre-listing Statement:
Taxation
Carve-out historical information in the Pre-listing Statement assumed that the deferred
tax asset in Seardel Group Trading is fully recoverable. This assumption was applied
retrospectively from 31 March 2011 as noted in the basis of preparation.
The assets acquired through the reorganisation was accounted for at the book value in
the financial statements of Seardel and the deferred tax asset in Seardel Group Trading
was assessed as fully recoverable in the current period in the financial statements.
Financial effect:
Deneb
Pre-listing financial
Statement statements
31 March 2014 31 March 2014
Rand thousands
Statement of financial position Dr/(Cr)
Deferred tax asset 141 399 58 738
Statement of profit or loss and other
comprehensive income
Income/(expenses) (15 506) 21 228
Discontinued operations
Operations classified as discontinued operations on 31 March 2014 in the consolidated
financial statements of Seardel consisted of the apparel manufacturing businesses which
was disposed of to a third party as a going concern during the period ending 31 March 2014.
For the purpose of the preparation of the carve-out historical financial information
of the Pre-listing Statement it was assumed that the sale of the apparel businesses
took place on 31 March 2011. Accordingly also no discontinued operations were disclosed
in the statement of profit or loss and other comprehensive income in the Pre-listing Statement.
Assets and liabilities of the business that were not part of the sale were disclosed
as "Net receivables from discontinued operations" in the Pre-listing Statement
(refer to note 35 of the Pre-listing Statement).
Deneb's financial statements used book value accounting and therefore the sale occurred
during the 2014 financial period and the assets and liabilities were disclosed on the line
items as per Seardel's financials.
Financial effect:
Deneb
Pre-listing financial
Statement statements
31 March 2014 31 March 2014
Rand thousands
Statement of financial position Dr/(Cr)
Loans receivable from SACTWU - 76 631
Trade and other receivables - 56 777
Trade and other payables - (57 712)
Provisions - (23 309)
Net receivable from discontinued operations 52 387 -
Net assets and liabilities 52 387 52 387
Statement of profit or loss and other comprehensive income
Loss from discontinued operations, net of tax - (159 901)
Furthermore, the factory shops of the apparel manufacturing business was discontinued
during the period ending 31 March 2015 and accordingly the comparative figures in the
March 2014 financial statements were restated. At the period the Pre-listing Statement
were issued the factory shops were still considered continued operations.
Financial effect:
Deneb
Pre-listing financial
Statement statements
31 March 2014 31 March 2014
Rand thousands
Statement of profit or loss and other comprehensive income
Revenue 23 195 -
Gross profit 6 268 -
Net loss (5 151) -
Loss from discontinued operations, net of tax - (5 151)
Share-based benefits
With effect from 1 October 2014 the participants of the Seardel Share Incentive
Scheme had no further rights under the scheme and all unvested share options issued
in terms of the scheme have lapsed. This is as a result of the change in control of
the relevant employer company which came about as a result of the disposal of
shareholding by Seardel to Deneb.
The Deneb Share Incentive Scheme was established on 10 October 2014.
Seardel required the subsidiaries to make payment of the rights. This type of
intra-group payment arrangement is commonly referred to as a "recharge arrangement".
The Pre-listing Statement assumed that Deneb company already received the receivable
owing by the subsidiaries of the Group from the recharge arrangement.
In the financial statement of Deneb this share-based liability is shown separately on
the face of the balance sheet as at 31 March 2014 as it was only transferred from
Seardel to Deneb on 1 October 2014.
Financial effect:
Deneb
Pre-listing financial
Statement statements
31 March 2014 31 March 2014
Rand thousands
Statement of financial position Dr/(Cr)
Share-based liability - 35 631
Shares in Seardel Investment Corporation held by Seardel Group Trading
All shares held by Seardel Group Trading in Seardel were disclosed as treasury shares
in the Seardel consolidated financial statements.
In the Deneb financial statements these shares were disclosed as investment and revalued
to fair value through equity each period-end.
The shares were given as dividend in specie to Seardel on 10 November 2014 at value
of R43,43 million.
Financial effect:
Deneb
Pre-listing financial
Statement statements
31 March 2014 31 March 2014
Rand thousands
Statement of financial position Dr/(Cr)
Investments - 40 065
Statement of profit or loss and other comprehensive income
Fair value adjustment on available for sale, net of tax 12 260
Reconciliation between the Pre-listing Statement and the Deneb financials for the
period ending 31 March 2014 based on the above assumptions
Statement of profit Weighted Earnings/
or loss and other average loss per
comprehensive income number of share
R'000 shares (cents)
Pre-listing Statement profit 133 973 539 776 24,82
Continued operations 133 973 24,82
Discontinued operations - -
Taxation 36 734 6,81
Discontinued operations
- apparel manufacturing business (159 901) (29,62)
Easywear restated as discontinued
operations - -
Deferred tax through income statement
due to fair value of investments 1 868 ,35
Deneb financial statement profit 12 674 2,35
Continued operations 177 727 32,93
Discontinued operations (165 053) (30,58)
13 DISTRIBUTION
Notice is hereby given that a final distribution of three cents (gross) per ordinary
share in respect of the 12 months ended 31 March 2015 has been declared out of capital
reserves through the reduction of contributed tax capital (distribution).
In compliance with the requirements of Strate and the JSE Limited, the following dates
are applicable:
- Distribution declared Thursday, 22 May 2015
- Last day to trade cum distribution Friday, 5 June 2015
- Shares trade ex distribution Monday, 8 June 2015
- Record date Friday, 12 June 2015
- Payment date Monday, 15 June 2015
Share certificates may not be dematerialised or rematerialised between Monday,
8 June 2015 and Friday, 12 June 2015, both days inclusive.
Signed for and on behalf of the board
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
Cape Town
22 May 2015
Commentary
The businesses that comprise Deneb are the non-media businesses that were unbundled out
of Seardel Investment Corporation Limited (Seardel) and separately listed on the JSE Limited
(JSE) effective 1 December 2014. Although the Deneb Group has only been in existence in its
current form for a few months the common control principle allows us to report the numbers
for the 12 months ended 31 March 2015 and the comparative period as if the Group had been in
its current form for the entire period. We believe that reporting the numbers in this way
will be the most meaningful for users of the information.
The results to March 2015 reflect the two main themes that have been recurring in the results
for the past few years.
- The first is that the economic environment, particularly for the manufacturing businesses,
remains challenging. Indeed the past financial year, with the industrial action that took
place within our own businesses as well as those of our customer and supplier bases coupled
with inconsistent electricity supply, has proven to be particularly challenging.
- The second is that we have been working diligently to make incremental changes to the
businesses so that they become more resilient to adversity. These incremental changes take
the form of discontinuing unprofitable businesses or product lines whilst, on the other hand,
looking to enter new growth areas and diversify and deepen quality revenue streams.
The above factors have meant that we were able, despite the tough conditions, to report an
attributable profit of R209 million.
Although details of the underlying factors affecting the results are dealt with in the
commentary under the various segments, it should be noted that the attributable profit as
reported contains the following notable items:
1 R72 million of tax income was recorded in the current year through the recognition of a
deferred tax asset arising from historic assessed losses;
2 Investment properties were revalued up by R70 million in the current period against
R21 million in the prior period;
3 R17 million of losses from discontinued operations were recorded relating to the closure
of the Group's factory stores. This business was the last remnant of the Group's apparel
manufacturing business which was disposed of in the prior financial period; and
4 The comparative financial results included R38 million of once-off income relating to the
settlement of a legal claim.
Overall we view the current year's results as mixed. On the one hand, we are pleased to report
the strong attributable profit, however, as is explained in the segmental commentary below,
the year was not without its challenges. That being said, the fact that the Group is quite
strongly profitable in a challenging year is testament to the improving resilience of the various
businesses.
Much work has gone into improving the balance sheet over the past few years. To this end,
interest-bearing debt stands at 19% of total asset value at year-end, down from 21% a year ago.
We believe that the quality of assets reflected on the balance sheet has also improved over the
last few years with properties now representing 37% of the R3 billion total asset value,
whilst plant and equipment comprises a little over 10%.
We are pleased to be in a position to recommence dividend payments to our long-suffering and,
mercifully, patient shareholders. A three cents per share distribution has been declared.
Property segment
The value of Deneb's total property portfolio increased by 4% to just over R1.1 billion.
This growth is after accounting for R68 million of disposals during the period, countered by
development expenditure of R43 million.
Revenue increased by 9% to R129 million, whilst revenue from external tenants increased by 34%
to R96 million and now represents 74% of the total revenue for this segment.
Operating profit before finance costs increased by 48% to R153 million, up from R104 million in
the prior period. However, it should be noted that the current year's profit number includes a
R70 million upwards revaluation of investment properties against R21 million in the prior period.
The upward revaluations are testament to the success of the New Germany and Mobeni Industrial Park
developments.
Branded Product segment
The Branded Product segment recorded revenue growth of 47% to R1,4 billion however operating
profit before finance costs declined 52% to R20 million.
The performance of this segment was affected by our decision to invest heavily in Seartec,
our office automation and electronics distribution business. This investment included
strengthening the management structures, expanding the product profile, improving the facilities
by moving into higher-profile properties in a number of the major centres, spending on the
IT backbone of the business and increasing its exposure by upping the marketing spend.
These interventions increased the cost base quite significantly, but we are confident that
the investments made will see enduring benefits over the medium term.
The performance of this segment was also affected by challenges in the toy business
notwithstanding continued turnover growth. The rapid depreciation of the Rand leading up to
the busy Christmas season put pressure on margins and this, coupled with an increased level
of returns post Christmas, saw operating profits fall below those achieved in the prior period.
On the positive side, the distribution of interactive gaming delivered a strong performance,
with operating profits up year on year on the back of securing the rights to distribute
Electronic Arts games.
In addition, the acquisition of the sports brands, mentioned in the prior year report,
saw Brand ID's performance improve markedly. This start-up business has now reached breakeven,
in line with expectation, and we anticipate that it will become a contributor going forward.
As a more general point on this segment, we have previously mentioned that we were continuing
to invest in marketing and distribution platforms, with much of this investment being ahead of
expected future revenue growth. In the main, these investments have been completed and we would
anticipate that, in the absence of any new acquisitions, the operating cost base will remain more
stable over the next few years. Should the anticipated turnover growth materialise, we should see
an improvement in operating margins.
Textile segment
Trading conditions for the businesses within this sector remained challenging throughout the period under review.
Although operating profit is up 15% this year's profit includes an impairment reversal of
R13 million. Adjusting for this non-recurring item sees operating profit fall by 21% to
R28 million. The performance of this segment was influenced by a reduction in the value of public
procurement tenders awarded, which directly affected revenues resulting in a reduction of 3%.
Rising energy costs, downtime as a result of loadshedding and a strike at one of the operations
in this segment, as well as industrial action in the customer and supplier base, all combined to
negatively affect the result.
Having said that, given the problems experienced, we are pleased at how well the textile
businesses withstood the tough year and this reflects the work that the management teams within
these entities have done to improve the quality of revenue and operating efficiencies.
Operating margins remain wafer-thin and are weighed down by the last of the loss-making
businesses in our manufacturing space. Progress is being made on a number of new initiatives
that will look to address the margin concern.
Industrial segment
Although revenue was up 6%, operating profit was down 30% to R25 million. However, the current
year's profit includes an asset impairment of R3 million relating to an asset that is surplus to
requirements and is to be sold to free up property space for external rental. Adjusting for the
once-off impairment sees operating profit falling by 20%.
The decline in profitability within this segment is for the same reasons as those mentioned for
the textile segment. As with the textile businesses, we are pleased that the initiatives taking
place within this segment resulted in relatively stable results in spite of the headwinds
experienced.
Sponsor: PSG Capital
Date: 22/05/2015 07:14:00 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.