Wrap Text
Unaudited Condensed Consolidated Interim Results for the 6 month period ended 30 June 2015
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
(“Vunani” or “the company” or “the group”)
Unaudited Condensed Consolidated Interim Results For The 6 Month Period
Ended 30 June 2015
Listed on Alt-X on the JSE Limited (“JSE”)
These results are available on our website www.vunanilimited.co.za
The unaudited condensed consolidated interim results have not been reviewed.
The unaudited condensed consolidated interim results were published on 18
August 2015. The unaudited condensed consolidated interim results have been
prepared under the supervision of the Chief Financial Officer, Aphrodite
Judin CA(SA).
SALIENT FEATURES
REVENUE OF R58.6 million compared to R54.0 million at 30 June 2014
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS OF R3.7 million compared to
a loss of R9.1 million at 30 June 2014
BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS OF 3.0c compared to a
loss of 8.7c at 30 June 2014
ACQUIRED 70% STAKE IN Fairheads International Holdings (SA) for R210 million
in May 2015
Condensed consolidated statement of comprehensive income for the 6 month
period ended 30 June 2015
Unaudited Unaudited
30 June 30 June
2015 2014
Figures in R’000 Note
Continuing operations
Revenue 1 58 600 53 977
Other income 7 541 2 128
Investment revenue 4 145 12 207
Interest received from investments 152 1 401
Net profit on disposal of assets 108 (75)
Fair value adjustments and impairments 2 1 540 (13 165)
Operating expenses (71 577) (67 137)
Results from operating activities 509 (10 664)
Finance income 2 656 3 445
Finance costs (1 183) (1 323)
Net finance income 1 473 2 122
Results from operating activities after net finance 1 982 (8 542)
costs
Equity accounted earnings (net of income tax) 2 449 114
Profit/(loss) before income tax 4 431 (8 428)
Income tax expense (750) (707)
Profit/(loss) from continuing operations 3 681 (9 135)
Discontinued operations
Profit from discontinued operations (net of income tax) 3 164 90 700
Profit for the period 3 845 81 565
Other comprehensive income
Items that are or may be reclassified to profit or loss
Exchange differences on translating foreign operations 497 30
Total comprehensive income for the period 4 342 81 595
Profit/(loss)from continuing operations attributable to:
Equity holders of Vunani Limited 3 241 (8 741)
Non-controlling interest 440 (394)
3 681 (9 135)
Profit for the period attributable to:
Equity holders of Vunani Limited 3 371 68 764
Non-controlling interest 474 12 801
3 845 81 565
Total comprehensive income for the period attributable to:
Equity holders of Vunani Limited 3 510 68 773
Non-controlling interest 832 12 822
4 342 81 595
Basic and diluted earnings per share (cents) 3.1 68.5
Basic and diluted earnings/(loss) per share from 3.0 (8.7)
Continuing operations (cents)
Basic and diluted earnings per share from 0.1 77.2
discontinued operations (cents)
Basic and diluted headline earnings/(loss) per 4 3.0 (18.4)
share (cents)
Basic and diluted headline earnings/(loss) per 2.9 (10.1)
share from continuing operations (cents)
Basic and diluted headline earnings/(loss) per 0.1 (8.3)
share from discontinued operations (cents)
Condensed consolidated statement of financial position at 30 June 2015
Unaudited Audited
30 June 31
December
Figures in R’000 Note 2015 2014
Assets
Property, plant and equipment 7 133 6 787
Goodwill 34 123 34 123
Intangible assets 674 1 042
Investments in and loans to associates 67 507 17 686
Other investments 5 93 879 102 270
Deferred tax asset 47 729 44 890
Other non-current assets 26 206 22 005
Total non-current assets 277 251 228 803
Other investments 5 5 122 8 900
Other current assets – 2 823
Taxation prepaid 1 155 886
Trade and other receivables 24 370 39 085
Accounts receivable from trading activities 360 277 120 573
Trading securities 185 251
Cash and cash equivalents 24 072 67 773
Total current assets 415 181 240 291
Total assets 692 432 469 094
Equity
Stated capital 6 624 888 624 888
Treasury shares (15 571) (15 571)
Share-based payments reserve 14 021 13 249
Foreign currency translation reserve (761) (900)
Accumulated loss (366 645) (364 004)
Equity attributable to equity holders of Vunani Limited 255 932 257 662
Non-controlling interest (3 593) (2 818)
Total equity 252 339 254 844
Liabilities
Other financial liabilities 5 18 572 20 298
Deferred tax liabilities 8 811 7 825
Total non-current liabilities 27 383 28 123
Other financial liabilities 5 21 245 25 282
Taxation payable 11 028 9 648
Trade and other payables 20 513 29 555
Accounts payable from trading activities 359 500 120 525
Bank overdraft 424 1 117
Current liabilities 412 710 186 127
Total liabilities 440 093 214 250
Total equity and liabilities 692 432 469 094
Shares in issue (000s) 6 114 665 114 665
Net asset value per share (cents) 223.2 224.7
Net tangible asset value per share (cents) 192.9 194.0
Condensed consolidated statement of changes in equity for the period ended
30 June 2015
Total
attributable Non-
to equity controlling Total
holders
Figures in R’000 of Vunani interest equity
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
Issue of shares 4 656 – 4 656
Dividends paid (30 016) (11 677) (41 693)
Share-based payments reserve 1 282 – 1 282
Total transactions with owners (24 078) (8 102) (32 180)
Total comprehensive income
Profit for the period 68 764 12 801 81 565
Other comprehensive income for the period 9 21 30
Total comprehensive income for the period 68 773 12 822 81 595
Balance as at 30 June 2014 – Unaudited 259 168 (1 506) 257 662
Transactions with owners, recorded directly in
equity
Disposal to non-controlling interest (318) 318 –
Issue of shares 10 144 – 10 144
Treasury shares acquired (306) – (306)
Share-based payments reserve 1 711 – 1 711
Total transactions with owners 11 231 318 11 549
Total comprehensive income
Profit for the period (12 725) (1 855) (14 580)
Other comprehensive income for the period (12) 225 213
Total comprehensive income for the period (12 737) (1 630) (14 367)
Balance as at 31 December 2014 – Audited 257 662 (2 818) 254 844
Transactions with owners, recorded directly in
equity
Dividends paid (6 012) (1 607) (7 619)
Share-based payments reserve 772 – 772
Total transactions with owners (5 240) (1 607) (6 847)
Total comprehensive income
Profit for the period 3 371 474 3 845
Other comprehensive income for the period 139 358 497
Total comprehensive income for the period 3 510 832 4 342
Balance as at 30 June 2015 – Unaudited 255 932 (3 593) 252 339
DIVIDENDS
Unaudited Audited
30 June 31 December
Figures in R’000 2015 2014
Ordinary dividend paid
Ordinary dividend number 2 of 5.5 cents per share 6 012 5 003
(2014: 5.0 cents) declared on 30 March 2015 and paid
to ordinary shareholders on 28 April 2015 (net of
treasury shares held)
Special dividend paid
2015: No special dividend declaration
2014: Special dividend number 1 of 25.0 cents per – 25 013
share (net of treasury shares held)
6 012 30 016
On 30 March 2015, ordinary dividend number 2 of 5.5 cents per share was declared
totalling R6.3 million and was paid on 28 April 2015.
Condensed consolidated statement of cash flows for the period ended 30 June
2015
Unaudited Audited Unaudited
30 June 31 30 June
December
Figures in R’000 Note 2015 2014 2014
Cash flows from operating activities
Net cash utilised by operating activities 7 (16 843) (35 260) (22 856)
Investment revenue received 4 145 12 787 3 228
Finance income received 2 408 7 473 1 246
Finance costs paid (1 206) (3 047) (1 280)
Dividends received – – 4 257
Dividends paid to shareholders (6 012) (30 016) (30 229)
Dividends paid to non-controlling interest (1 607) (11 677) (11 676)
Income tax paid (1 736) (17 706) (231)
Net cash utilised by operating activities (20 851) (77 446) (57 541)
Cash flows from investing activities
Proceeds on disposal of business 15 000 102 000 102 000
Taxation paid on disposal of business – – (7 287)
Acquisition of property, plant and equipment (566) (678) (269)
Repayment of loans to associates – 2 239 1 273
Increase in investment and loans to associates (47 372) (4 089) –
Increase in other non-current assets (2 390) (798) (2 753)
Proceeds from repayment of other non-current – 331 –
assets
Acquisition of other investments – (2 833) (3 495)
Proceeds on disposal of other investments 17 274 – –
Net cash (outflow)/ inflow from investing (18 054) 96 172 89 469
activities
Cash flows from financing activities
Proceeds on issue of share capital – 14 800 4 656
Repayments of other financial liabilities (4 103) (6 718) (4 917)
Net cash (outflow)/inflow from financing (4 103) 8 082 (261)
activities
Net (decrease)/increase in cash and cash (43 008) 26 808 31 667
equivalents
Cash and cash equivalents at the beginning of the 66 656 39 360 39 360
period
Cash acquired in business acquisitions – 488 175
Total cash and cash equivalents at end of the 23 648 66 656 71 202
period
Segmental reporting for the period ended 30 June 2015
The asset management, advisory services and investment holdings segments are
geographically located in South and to a lesser extent in Zimbabwe. The institutional
securities broking, private wealth and investments and group segments are
geographically located in South Africa.
Reportable
segment
profit/
(loss) Total Total
Revenue after tax assets liabilities
Unaudited Unaudited Unaudited Unaudited
30 June 30 June 30 June 30 June
Figures in R’000 2015 2015 2015 2015
Continuing operations
Asset management 21 746 2 947 91 278 (2 767)
Advisory services 115 (1 360) 1 252 (575)
Investment holdings 587 1 973 197 109 (46 411)
Institutional securities broking 25 221 3 059 382 649 (379 665)
Private wealth and investments 5 989 (309) 3 093 (3 568)
Group 4 942 (2 629) 15 698 (4 904)
58 600 3 681 691 079 (437 890)
Discontinued operations
Properties asset management – 138 6 (622)
Property developments and investments – 26 1 347 (1 581)
– 164 1 353 (2 203)
Total 58 600 3 845 692 432 (440 093)
Reportable
segment
profit/
(loss) Total Total
Revenue after tax assets liabilities
Unaudited Unaudited Audited Audited
30 June 30 June 31 December 31 December
2014 2014 2014 2014 2014
Continuing operations
Asset management 21 137 1 571 47 283 (2 904)
Advisory services 1 552 (1 374) 2 008 (573)
Investment holdings 530 (5 642) 207 422 (47 685)
Institutional securities broking 21 741 1 412 155 070 (141 507)
Private wealth and investments 5 047 53 2 275 (2 666)
Group 3 970 (5 155) 38 672 (15 551)
53 977 (9 135) 452 730 (210 886)
Discontinued operations
Properties asset management 1 571 91 592 14 990 (1 707)
Property developments and investments – (892) 1 374 (1 657)
1 571 90 700 16 364 (3 364)
Total 55 548 81 565 469 094 (214 250)
Notes to the Condensed Consolidated Interim Results
(all figures in R´000)
BASIS OF PREPARATION
The unaudited condensed consolidated interim results for the six months ended
30 June 2015 have been prepared in accordance with the framework concepts
and recognition and measurement principles of International Financial
Reporting Standards and Financial Pronouncements as issued by the Financial
Reporting Standards Council. The unaudited condensed consolidated interim
results have been presented in accordance with the minimum content, including
disclosures, prescribed by IAS 34 Interim Financial Reporting applied to
year end reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee, the 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 2014 are in terms of International Financial
Reporting Standards and have been consistently applied. The unaudited
condensed consolidated interim results have been presented on the historical
cost basis, except for other investments and other financial liabilities,
which are fair valued. These condensed consolidated financial statements are
presented in South African Rand, rounded to the nearest thousand, which is
the group’s functional and presentation currency.
These unaudited condensed consolidated interim results incorporate the
financial statements of the company, its subsidiaries and entities that, in
substance, are controlled by the group and the group's interest in
associates. Results of subsidiaries and associates are included from the
effective date of acquisition up to the effective date of disposal. All
significant transactions and balances between group enterprises are
eliminated on consolidation.
Comparatives on the statement of comprehensive income have been re-presented
to show the effect of the discontinued operations (refer to note 3).
Notes
1. Revenue
Revenue includes trading revenue and fees earned from advisory services,
brokerage, asset management fees and client service fees.
2. Fair value adjustments and impairments
Unaudited Unaudited
30 June 30 June
Figures in R’000 2015 2014
Fair value adjustment on financial assets and 5 238 (14 907)
liabilities designated at fair value through profit or
loss
Fair value adjustment on remeasurement of – 1 742
stepped up acquisition of subsidiary
Impairment of loans in other non-current assets (3 698) –
1 540 (13 165)
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 VPAM's business included the transfer of VPAM’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 VPAM's business has been calculated in terms of an
agreement between the shareholders of Vunani Properties Proprietary Limited, a
78% held subsidiary of Vunani Limited, that owns 100% of VPAM.
The results of the discontinued operations are as follows:
Unaudited Unaudited
30 June 30 June
2015 2014
Figures in R’000
Revenue – 1 571
Other income 107 –
Interest from investments – 217
Profit on disposal of assets – 116 260
Fair value adjustments and impairments – (509)
Operating expenses (99) (11 758)
Results from operating activities 8 105 781
Finance income 156 10
Finance costs – (90)
Net finance income/(costs) 156 (80)
Results from operating activities after net finance costs 164 105 701
Equity accounted earnings (net of income tax) – (22)
Profit before income tax 164 105 679
Income tax expense – (14 979)
Profit for the period 164 90 700
Attributable to equity holders of Vunani 130 77 505
Attributable to non-controlling interest 34 13 195
164 90 700
Effect on basic and diluted earnings per share (cents) 0.1 77.2
Effect on basic and diluted headline loss per share (cents) 0.1 (8.3)
Cash flows from discontinued operations
Net cash utilised by operating activities (1 883) (93 248)
Net cash inflow from investing activities 14 068 94 713
Net cash (outflow)/ inflow from financing activities (12 189) 32
Net cash (outflow)/inflow for the period (4) 1 497
4. Reconciliation of headline earnings for the period
Unaudited Unaudited
30 June 30 June
Figures in R’000 2015 2014
Profit for the period attributable to equity holders of 3 371 68 764
Vunani
Adjusted for:
Discontinued operations
Profit on disposal of discontinued operations – (116 260)
Taxation – 17 248
Non-controlling interest – 13 210
Disposal of assets
Loss on disposal 16 75
Taxation (3) (14)
Disposal of subsidiaries
Profit on disposal (124) –
Taxation 23 –
Business combinations
Fair value adjustment on stepped up acquisition – (1 742)
Bargain purchase – (77)
Tax – 339
3 283 (18 457)
Headline earnings/(loss) per share (cents) 3.0 (18.4)
Basic and diluted headline earnings/(loss) per share from 2.9 (10.1)
continuing operations
Basic and diluted headline earnings/(loss) per share from 0.1 (8.3)
discontinued operations
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 period-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 30 June 2015 was 200 million ordinary shares of
no par value (2014: 200 million ordinary shares of no par value). 114 664 649
shares were in issue at 30 June 2015 (2014: 108 414 649).
Unaudited Audited Unaudited
30 June 31 30 June
December
Weighted average number of ordinary shares (000s) 2015 2014 2014
Issued ordinary shares at the beginning of the 114 665 105 415 105 415
period
Effect of share issue – 2 588 182
Effect of own shares held (5 364) (5 364) (5 211)
Weighted average number of shares 109 301 102 639 100 386
Number of shares in issue at the end of the period 114 665 114 665 108 415
(000s)
Dilutive weighted average number of ordinary shares
(000s)
Issued ordinary shares at the beginning of the 114 665 105 415 105 415
period
Effect of share issue – 2 588 182
Effect of own shares held (5 364) (5 364) (5 211)
Effect of dilutive shares 136 – –
Weighted average number of shares 109 437 102 639 100 386
Number of shares in issue at the end of the period 114 665 114 665 108 415
(000s)
The shares issued as part of the employee share incentive scheme could potentially
dilute basic earnings in the future. In the current period, the employee shares
have a dilutive effect.
7. Net cash utilised by operating activities
Unaudited Audited Unaudited
30 June 31 30 June
December
2015 2014 2014
Figures in R’000
Profit/(loss) before income tax expense from 4 431 (23 853) (8 428)
continuing operations
Profit before income tax expense from discontinued 164 107 737 105 679
operations
Adjusted for:
Depreciation of property, plant and equipment 236 1 570 774
Profit on discontinued operations – (116 318) (116 260)
Loss on disposal of assets 16 – 75
Equity accounted earnings (net of income tax) (2 449) 116 (92)
Gain on bargain purchase – (298) (77)
Fair value adjustments (5 238) 17 922 13 674
Profit on disposal of subsidiaries (124) – –
Impairment of other non-current assets 3 698 – –
Realisation of deferred income (1 786) (3 573) (1 786)
Movement in impairment allowance – (297) –
Amortisation of intangible assets 368 1 165 368
Share-based payments expenses 772 2 993 1 282
Foreign currency translation 848 (920) 9
Lease straight-line adjustment – (82) –
Interest received from investments and finance (2 964) (9 191) (5 073)
income
Investment revenue (4 145) (14 220) (12 207)
Finance costs 1 183 3 047 1 413
Changes in working capital:
Decrease/(increase) in trading securities 66 69 (1 087)
(Increase)/decrease in trade and other receivables (2 775) 8 473 7 264
Decrease in trade and other payables (9 042) (9 688) (8 930)
(Increase)/decrease in accounts receivable and (102) 88 546
payable from trading activities
Cash utilised by operating activities (16 843) (35 260) (22 856)
8. 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 depends 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 period.
Unaudited Audited
30 June 31
December
2015 2014
Fair values Carrying Fair Carrying Fair
Figures in R’000 amount value amount value
Financial assets measured at fair value
Designated at fair value through profit or 122 614 122 614 134 874 134 874
loss on initial recognition
Trading securities 185 185 251 251
Financial assets not measured at fair
value
Loans to associates 26 777 20 496 14 325 11 537
Loans in other non-current assets 4 380 5 345 4 788 5 786
153 956 148 640 154 238 152 448
Financial liabilities measured at fair
value
Designated at fair value through profit or – – (2 554) (2 554)
loss on initial recognition
Financial liabilities not measured at fair
value
Other financial liabilities (61 919) (56 946) (45 580) (42 760)
(61 919) (56 946) (48 134) (45 314)
The carrying amounts of cash and cash equivalents, accounts receivable from trading
activities, trade and other receivables, bank overdraft, accounts payable from
trading activities and trade and other payables reasonably approximate their fair
values.
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets
and financial liabilities. These fair value measurements are categorised into
different levels in the fair value hierarchy based on inputs to the valuation
techniques used.
The different levels are defined as follows:
– Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
– Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
– Level 3: Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
Unaudited 30 June 2015
Figures in R’000 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value 97 990 – 24 624 122 614
through profit or loss
Financial assets measured at fair value 185 – – 185
Financial assets at amortised cost – – 25 841 25 841
Financial liabilities designated at fair – – – –
value through profit or loss
Financial liabilities at amortised cost – – (56 946) (56 946)
98 175 – (6 481) 91 694
Audited 31 December 2014 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value 96 430 – 38 444 134 874
through profit or loss
Financial assets measured at fair value 251 – – 251
Financial assets at amortised cost – – 17 323 17 323
Financial liabilities designated at fair – – (2 554) (2 554)
value through profit or loss
Financial liabilities at amortised cost – – (42 760) (42 760)
96 681 – 10 453 107 134
Unaudited Audited
30 June 31 December
Figures in R’000 2015 2014
Level 3 comprises:
Balance at beginning of period 35 890 57 674
Total gains or losses in profit or loss (13 687) (24 927)
Proceeds from loan, interest and repayments – –
Purchases, transfers, sales, issues and settlements 2 421 3 143
Balance at end of the period 24 624 35 890
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.
Unaudited Audited
30 June 31 December
Effect on statement of comprehensive income 2015 2014
(profit/(loss)) and equity before taxation
Net asset value
10% increase 144 1 309
10% decrease (27) (1 192)
Free cash flow
10% increase 3 672 777
10% decrease 1 391 821
OVERVIEW AND PROSPECTS
Domestic economic activity remained subdued over the first half of the year
as a combination of domestic and international factors weighed on consumer
and business confidence. Structural inefficiencies which include
intermittent electricity supply, as well as a very bad summer crop season,
limited domestic output. In addition, global resources prices continued upon
their declining trajectory as prospects for demand dimmed as a result of a
marked slowdown in China’s economic growth. That, in conjunction with
heightened global financial jitters due to Greek debt issues, culminated in
an essentially risk-off investor approach which did not bode well for
resources based markets and currencies like the Rand.
Vunani generated total comprehensive income for the period of R4.3 million
(2014: R81.6 million). Total comprehensive income attributable to equity
holders of the company amounts to R3.5 million (2014: R68.8 million). The
results for the period ended 30 June 2015 have been presented such that 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).
Asset management
The asset management segment reflected a profit of R2.9 million for the
period ended 30 June 2015 (2014: R1.6 million). The segment has historically
included the group’s investments in Vunani Fund Managers Proprietary Limited
(“VFM”) and Purpose Vunani Private Limited (“PVAM”). VFM’s performance and
profitability improved during the period and its assets under management
increased from R12.4 billion at December 2014 to R13.4 billion at June 2015.
This increase in assets under management is mainly attributable to market
growth.
PVAM faced challenging economic conditions in Zimbabwe, but despite this,
PVAM’s assets under management increased to $19.4 million at June 2015 from
$16.2 million at December 2014. Operating margins in this business remain
tight and costs are monitored closely.
In May 2015, the group concluded the acquisition of 70% of Fairheads
International Holdings (SA) Proprietary Limited (“Fairheads”) through
Mandlalux Proprietary Limited (“Mandlalux”), a subsidiary of the group.
Mandlalux has performed well since the acquisition, contributing R2.5 million
in equity accounted earnings.
Advisory services
This segment also faced challenging conditions during the period. The segment
reflected a loss for the period of R1.4 million (2014: R1.4 million). This
segment assisted in the conclusion of the Fairheads acquisition, however
intersegment revenues are eliminated for reporting purposes and the fee
earned by this segment on the transaction has consequently been excluded
from the segment’s results.
Investment holdings
The segment includes the group’s listed and unlisted investments. The segment
reported a profit of R2.0 million for the period (2014: loss of R5.6 million)
mainly as a result of positive fair value adjustments and dividends received.
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
period of R3.1 million (2014: R1.4 million). Revenue increased by 16%
compared to 2014, while costs were closely managed. The focus for the period
was on revenue growth through the expansion of the client base and exploring
diversified product offerings, which are progressing positively.
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 R0.3
million for the period ended 30 June 2015 (2014: profit of R0.05 million),
despite an increase in revenue. The established platform in place provides
a good foundation and management’s focus will be dedicated to ensure growth
in the number of actively trading clients.
Property developments and investments and property asset management
The property developments and investments and property asset management
segments have gone through realisation and as a result have been reflected
as discontinued operations.
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.
Revenue from continuing operations increased by 9% to R58.6 million (2014:
R54.0 million) for the period ended 30 June 2015. Other income comprises the
amortisation of deferred revenue that arose on the historic acquisition of
Black Wattle Colliery Proprietary Limited, directors’ fees earned where the
group’s executive directors serve on investee company boards and the effect
of the write back of certain financial liabilities that have prescribed.
Investment income (in the form of dividends) amounting to R4.1 million (2014:
R12.2 million) was received during the period. This decrease was a result of
lower dividend declarations by investee companies.
Positive fair value adjustments and impairments of R1.5 million (2014:
negative fair value adjustments of R13.2 million) relate to the valuation of
the groups’ listed and unlisted investments, which have been designated at
fair value through profit or loss.
Operating expenses have increased by 7% from R67.1 million to R71.6 million.
The increase in costs is attributable to cost of living adjustments in staff
costs and increases in information and technology costs, specifically those
that are dollar denominated. 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 decreased to R2.7 million in 2015 compared to R3.4 million
in 2014 due to lower cash resources in the group. Finance costs have decreased
from R1.3 million for the period ended June 2014 to R1.1 million for the
period ended June 2015.
Discontinued operations relates to the disposal of VPAM’s business and the
winding down of the property investment and development businesses. The
discontinued operations generated a profit of R0.2 million (R90.7 million).
The balance of the proceeds on the disposal of the business amounting to R15
million were received on 28 February 2015 in accordance with the agreement.
Investments in and loans to associates have increased following the
acquisition of Fairheads in May 2015. Vunani owns 70% of the shares in
Fairheads, with Fairheads’ management holding the remaining 30%. The
investment is equity accounted as a result of the fact that the shareholders
agreement does not give Vunani outright control over the strategic decision
making within the business. The net decrease in other investments during the
period is attributable to the disposal of a portion of the group’s
listed investment portfolio.
The share-based payments reserve movement of R0.8 million is attributable to
the current period IFRS 2 charge (2014: charge of R1.3 million). Dividends
paid to Vunani’s shareholders during the period amounted to R6.0 million
(2014: R30.0 million). Cash and cash equivalents decreased by R43 million
since December 2014 (2014: increase of R31.7 million) primarily as a result
of the acquisition of Fairheads and the payment of the dividend.
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 steady deal-flow and management is cautiously optimistic that
this will have a positive impact in the second half of the year.
EVENTS AFTER REPORTING DATE
There have been no material events between the period end and the date of
the signing of the results.
DIVIDENDS PAID
A gross ordinary dividend of 5.5 cents per share (2014: 5 cents and a gross
special dividend of 25 cents per share) was declared out of income reserves
on 30 March 2015 and paid to ordinary shareholders on 28 April 2015.
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 condensed
consolidated interim results.
Signed on behalf of the board of directors by EG Dube and A Judin on 18
August 2015.
CORPORATE INFORMATION
Executive directors
EG Dube (Chief Executive Officer)
A Judin (Chief Financial Officer)
BM Khoza
NM Anderson
Independent non-executive directors
LI Jacobs (Chairman)
Dr XP Guma
NS Mazwi
G Nzalo
JR Macey
S Mthethwa
Company secretary
A Judin (resigned 22 June 2015)
CIS Company Secretaries
Designated adviser
Grindrod Bank Limited
Transfer secretaries
Computershare Investor Services
70 Marshall Street
Johannesburg
2001
Sandton
18 August 2015
Designated Adviser
Grindrod Bank Limited
Date: 18/08/2015 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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