Wrap Text
Reviewed condensed consolidated interim financial results for the six months ended 30 June 2015
Andulela Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
JSE share code: AND ISIN: ZAE000172870
(“Andulela” or “the Company” or “the Group”)
www.andulelaholdings.com
Reviewed condensed consolidated interim financial statements
for the six months ended 30 June 2015
Condensed consolidated statements of financial position
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
Notes R’000 R'000 R'000
Assets
Non-current
assets 739 865 763 160 749 394
Plant and
equipment 1 307 837 313 152 308 444
Goodwill 2 418 679 418 679 418 679
Deferred tax asset 13 349 31 329 22 271
Current assets 256 332 312 508 261 885
Inventory 86 414 99 774 79 554
Trade and other
receivables 155 546 175 963 158 588
Taxation 4 185 3 510 4 239
Cash and cash
equivalents 10 187 33 261 19 504
Total assets 996 197 1 075 668 1 011 279
Equity and liabilities
Capital and reserves 452 524 416 313 440 993
Stated capital 976 114 976 114 976 114
Revaluation reserve 4 638 4 638 4 638
Cash flow hedge
reserve 3 (32 920) (79 532) (54 295)
Accumulated loss (560 514) (542 527) (546 905)
Non controlling
interest 65 206 57 620 61 441
Non-current
liabilities 176 315 271 434 213 938
Redeemable preference 25 371 14 121 10 000
share capital
Derivative financial
liabilities 3 40 668 107 211 70 343
Borrowings 4 59 812 95 700 79 750
Lease straightlining
accrual 18 044 15 945 17 274
Deferred tax liability 32 420 38 457 36 571
Current liabilities 367 358 387 921 356 348
Taxation 554 7 129 6 121
Trade and other
payables 95 397 160 300 96 702
Redeemable preference
share capital – 11 250 15 371
Derivative financial
liabilities 3 14 030 24 936 19 872
Borrowings 4 257 377 184 306 218 282
Total equity and
liabilities 996 197 1 075 668 1 011 279
Net asset value per
share (cents) 441,92 409,26 433,06
Net tangible asset
value per share (cents) 42,61 9,95 33,75
Condensed consolidated statements of comprehensive income
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
Notes R’000 R'000 R'000
Revenue 510 323 481 105 1 095 190
Cost of sales (433 791) (412 570) (948 530)
Gross profit 76 532 68 535 146 660
Loss from operations (5 458) (12 598) (11 355)
Investment income 395 1 359 1 756
Finance costs (14 152) (12 541) (25 358)
Loss before taxation (19 215) (23 780) (34 957)
Taxation 5 175 3 391 9 059
Net loss after tax (14 041) (20 389) (25 898)
Other comprehensive
income/(loss)
Items that may be
reclassified
subsequently
to profiit or loss: 25 572 (16 692) 13 499
Movement in
derivative
cash flow hedge 3 35 517 (23 184) 18 748
Deferred tax charge 3 (9 945) 6 492 (5 249)
Total comprehensive
income/(loss) 11 531 (37 081) (12 399)
Net loss
attributable to: (14 041) (20 389) (25 898)
– Equity holders of
Andulela (13 609) (19 254) (23 630)
– Non-controlling
interest (432) (1 135) (2 268)
Total comprehensive
income/(loss)
attributable to: 11 531 (37 081) (12 399)
– Equity holders of
Andulela 7 766 (33 207) (12 346)
– Non-controlling
interest 3 765 (3 874) (53)
Ordinary shares in
issue (millions)* 87,64 87,64 87,64
Weighted average
number of ordinary
shares in issue
(millions)* 87,64 87,64 87,64
Headline loss (13 609) (18 997) (19 934)
– Attributable net loss (13 609) (19 254) (23 630)
– Add back: Impairment,
scrapping and loss
on disposal of
plant and
equipment net of
deferred taxation – 257 3 696
Loss and diluted
loss per ordinary
share (cents)* (15,53) (21,97) (26,96)
Headline loss and
diluted headline
loss per ordinary
share (cents)* (15,53) (21,67) (22,74)
Dividends per
ordinary share
(cents) – – –
Condensed consolidated statements of cash flows
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Cash flows from:
Operating activities (19 218) 27 009 5 238
Investing activities (9 256) (4 616) (14 353)
Financing activities 19 157 (24 837) (7 086)
Change in cash and
equivalents (9 317) (2 444) (16 201)
Opening cash
and equivalents 19 504 35 705 35 705
Closing cash and
equivalents 10 187 33 261 19 504
Condensed consolidated statements of changes in equity
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Opening balances 440 993 454 051 454 051
Movements for the
period:
– Net (loss)
attributable to
equity holders of
Andulela (13 609) (19 254) (23 630)
– Cash flow hedge
reserve net
of deferred tax 21 375 (13 953) 11 282
– Non-controlling
interest 3 765 (4 531) (710)
Closing balances 452 524 416 313 440 993
Notes to the condensed consolidated financial statements
Basis of preparation
The reviewed condensed consolidated interim financial statements
for the six months ended 30 June 2015 are prepared in accordance
with the JSE Limited Listings Requirements for provisional reports
and the requirements of the Companies Act of South Africa. The JSE
Listings Requirements require provisional reports to be prepared
in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Pronouncements
as issued by Financial Reporting Standards Council and to also,
as a minimum, contain the information required by IAS
34 Interim Financial Reporting.
The accounting policies applied in the preparation of the condensed
consolidated interim financial statements for the six months ended
30 June 2015 are in terms of IFRS and consistent with those of the
annual financial statements for the year ended 31 December 2014.
The directors take responsibility for the preparation of the
condensed consolidated interim financial statements based on the
underlying financial information. These results were prepared
under the supervision of Pieter de Jager, the Group Chief
Financial Officer.
1. Plant and equipment
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Opening balance 308 444 318 301 318 301
Additions 9 410 4 616 14 491
Disposals and loss
on scrapping of plant
and equipment (42) (358) (5 269)
Depreciation (9 975) (9 407) (19 079)
Plant and equipment at
carrying value 307 837 313 152 308 444
2. Goodwill
The goodwill of R418,7 million arose from the acquisition of the
remaining interests in Abalengani Mining Investments Proprietary
Limited (“AMI”) and JB Platinum Holdings Proprietary Limited
(“JBPH”) by the Company in 2010, AMI and JBPH respectively hold
49,63% and 33,96% in Kilken Platinum Proprietary Limited
(“Kilken”) as their only investments. The carrying amount as at
30 June 2015 has been tested for impairment and the board is
satisfied that no impairment is required for the six months ended
30 June 2015.
3. Derivative financial liability
In 2012, Kilken entered into a hedge agreement for 30% of its cash
flow from the production revenue of platinum, palladium and gold
in favour of a financier in line with its funding requirements.
The hedge mitigates the cash flow risk related to commodity price
fluctuations and movements in the ZAR/USD exchange rate in order to
repay the funding facility to the financier.
In accordance with IAS39, the cash flow hedge was recognised as a
hedging instrument at fair value for the first time in the statement
of financial position at 31 December 2012, without taking account of
any collateral held or other credit enhancements over the remainder
of the hedge contract term which started on 1 September 2012 and
will end on 30 September 2018.
For the six months ended 30 June 2015, a R25.6 million gain (June
2014: R16,7 million loss) after deferred tax has been recognised in
other comprehensive income and a decrease in the cash flow hedge
reserve from December 2014 to June 2015 of R21,4 million, net of
non-controlling interests, in the statement of financial
position. The loss realised and netted off against the revenue was
R7,5 million for the six months ended 30 June 2015 (June 2014:
R8,8 million).
The fair value of the cash flow hedge is apportioned between current
and non-current liabilities depending on the remaining maturity
period of the derivative contract and its contractual cash flows.
The cash flow hedge cost will be accounted for as either a profit
or a loss as it becomes effective and the settlements are actually
made over the duration of the term of the hedge contract.
4. Borrowings
Total borrowings of the Group amounted to R317,2 million as at
30 June 2015 compared to R280,0 million as at 30 June 2014, and
can be summarised as follows:
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Absa Bank Limited* 155 700 182 525 171 650
Reichmans Capital
Proprietary Limited 131 385 67 653 96 278
Thunder Rate Investments
Proprietary Limited 29 474 29 121 29 474
The Rafik Mohamed
Family Trust 630 707 630
Total borrowings 317 189 280 006 298 032
Less: short term
borrowings 257 377 184 306 218 282
Non-current liabilities 59 812 95 700 79 750
* R60 million of the Absa Bank debt is a revolving credit facility
which is renewable annually. As at the date of these financial
statements, the discussions for the renewal of the facility are
still in progress.
5. Financial instruments
The following table shows the carrying amounts and fair values of
financial assets and financial liabilities, including their levels
in the fair value hierarchy for financial instruments measured at
fair value. It does not include fair value information for financial
assets and liabilities which are not measured at fair value if the
carrying amount approximates the fair value.
Carrying value June 2015 - Reviewed
Loan and Amortised Fair
receivables cost value Total
R'000 R'000 R'000 R'000
Financial assets not
measured at fair value
Cash and cash
equivalents 10 187 10 187
Trade and other
receivables 155 546 155 546
Financial liabilities
measured at fair value
Derivative financial
instrument – cash
flow hedge* (54 698) (54 698)
Financial liabilities
not measured at
fair value
Preference shares (25 371) (25 371)
Borrowings (317 189) (317 189)
Trade and other
payables (93 438) (93 438)
Total 165 733 (435 998) (54 698) (324 963)
Carrying value June 2014 - Reviewed
Loan and Amortised Fair
receivables cost value Total
R'000 R'000 R'000 R'000
Financial assets not
measured at
fair value
Cash and cash
equivalents 33 261 33 261
Trade and other
receivables 165 954 165 954
Financial liabilities
measured at fair value
Derivative financial
instrument – cash
flow hedge* (132 147) (132 147)
Financial liabilities
not measured at
fair value
Preference shares (25 371) (25 371)
Borrowings (280 006) (280 006)
Trade and other
payables (155 465) (155 465)
Total 199 215 (460 842) (132 147) (393 774)
Carrying value June 2014 - Audited
Loan and Amortised Fair
receivables cost value Total
R'000 R'000 R'000 R'000
Financial assets not
measure at
fair value
Cash and cash
equivalents 19 504 19 504
Trade and other
receivables 154 353 154 353
Financial liabilities
measured at fair value
Derivative financial
instrument – cash
flow hedge* (90 215) (90 215)
Financial liabilities
not measured at
fair value
Preference shares (25 371) (25 371)
Borrowings (298 032) (298 032)
Trade and other
payables (94 771) (94 771)
Total 173 857 (418 174) (90 215) (334 532)
* Derivative financial instrument – Cash flow hedge: The fair
value of the derivative financial liability is a level 2 recurring
fair value measurement. The fair value of the cash flow hedge is
obtained directly from the service provider and is calculated as the
present value of the estimated future cash flows based on the
observable commodity prices and current exchange rates.
6. Material related party transactions and balances
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Revenue (48 331) (47 219) (95 886)
Purchases 34 615 28 331 80 388
Administration and
management fees 567 525 1 050
Investment income (125) – (414)
Preference dividend expense 756 786 1 582
Rent expense 8 326 6 737 14 084
Trade receivables 21 418 20 022 20 611
Loan accounts – owing to
related parties (30 105) (29 543) (30 105)
Cumulative redeemable
preference shares (25 371) (25 371) (25 371)
Trade payables (7 744) (24 061) (3 756)
7. Segment reporting
The board of directors (“the Board”) is the Group’s chief operating
decision-maker. Management has determined the operating segments
based on the information reviewed by the Board for the purposes of
allocating resources and assessing performance. The Board considers
the business from a product perspective. The Group has two sources of
income namely, the production of platinum group metals (“PGM”)
at the Kilken tailings treatment facility and the processing and
distribution of steel products by Pro Roof Steel Merchants (“PRSM”).
Reviewed Reviewed Audited
Period ended Period ended Year ended
30 June 30 June 31 Dec
2015 2014 2014
R’000 R'000 R'000
Tailings treatment facility 22 149 9 705 26 683
Steel processing 488 174 471 400 1 068 507
Total revenue 510 323 481 105 1 095 190
There are no sales
between segments.
Loss after tax
Tailings treatment facility (2 867) (6 917) (13 821)
Steel processing (9 735) (6 186) (6 783)
Other unallocated (1 439) (7 286) (5 294)
Total loss after tax (14 041) (20 389) (25 898)
Assets
Tailings treatment 196 715 254 193 225 910
Steel processing 509 150 554 887 507 394
Inter-group eliminations (128 718) (153 477) (144 067)
Reportable segment assets 577 147 655 603 589 237
Goodwill 418 679 418 679 418 679
Other unallocated assets
of parent 371 1 386 3 364
Total assets 996 197 1 075 668 1 011 279
Liabilities
Tailings treatment 218 903 322 374 270 804
Steel processing 424 557 460 046 413 107
Inter-group eliminations (127 752) (149 041) (139 955)
Reportable segment
liabilities 515 708 633 379 543 956
Redeemable preference shares 25 371 25 371 25 371
Other unallocated
liabilities of parent 2 594 605 958
Total liabilities 543 673 659 355 570 286
8. Events subsequent to the period end
Andulela reached an agreement with the holder of the preference
shares, Newshelf 1005 Proprietary Limited, on 11 September 2015
to extend the suspension of the preference share capital and
dividend repayments until 31 December 2016 to allow the Group to
optimise its cash position.
9. Commitments
The Group had no outstanding capital commitments at 30 June 2015
(June 2014: R2,3 million).
10. Going concern
The interim financial statements have been prepared on the basis
of accounting policies applicable to a going concern. The basis
presumes that funds will be available to finance future operations
and that the realisation of assets and settlement of liabilities,
contingent obligations and commitments will occur in the ordinary
course of business.
Although the Group’s current assets do not exceed its current
liabilities, both operational subsidiaries continue to improve
their trading results and the Group continues to service its
loans and other financial obligations as they become due.
Review conclusion
These condensed consolidated interim financial statements for
the six months ended 30 June 2015 have been reviewed by BDO
South Africa Incorporated, who expressed an unmodified review
conclusion. A copy of the auditor’s review report is available
for inspection at the Company’s registered office together
with the financial statements identified in the auditor’s report.
Nature of the business
The Company is an investment holding company.
Directorate
There were no changes to the board for the six months under review.
The current directors of the Company at the date of this report
are as follows:
MJ Husain (Chairman)# Appointed as Chairman 26 February 2010
A Kaka (CEO) Appointed as CEO 26 February 2010
PC de Jager (CFO) Re-appointed as CFO 1 July 2014
BW Smith# Appointed 1 October 2014
PE du Preez# Appointed 1 October 2011
NMS Hadjee# Appointed 1 July 2014
# Independent non-executive.
Financial review
Andulela’s interim results for the six months ended 30 June 2015
reflect a headline loss of R13,6 million compared to a headline
loss of R19,0 million for the comparative period ended 30 June
2014. This was mainly due to the improved PGM production
recoveries at Kilken during the first half of 2015 compared to
the same period in 2014 when the platinum mining sector was
affectedby an extended labour strike.
PRSM wrote down inventory as a result of the sharp decline in
steel prices during the period by R7,6 million which was the
main contributor to the loss after tax increasing from R6,2 million
for the six months ended 30 June 2014 to R9,7 million for the
current period.
The continued weakening of the Rand against the US Dollar and the
relatively lower average PGM pricing from 30 June 2014 to 30 June
2015 resulted in a net positive movement in Kilken’s cash flow
hedge reserve position at the period end, resulting in a gain
after deferred tax of R25,6 million being recognised against in
other comprehensive income. Kilken also realised a lower actual
net hedge settlement loss totalling R7,5 million for the six months
ended 30 June 2015 (June 2014: R8,8 million loss) for the
aforementioned reasons.
As a result of the business impact of the weak PGM commodity prices
for Kilken and the depressed world demand and pricing for steel
products, management continued to aggressively manage working
capital throughout the Group to preserve cash resources.
The Group retained a positive net cash position of R10,2 million at
30 June 2015 (June 2014: R33,3 million). Overall borrowing levels
remained high at R317,2 million at June 2015 (June 2014: R280,0
million) as a result of the aforementioned production interruptions,
with PRSM still being the main borrower, utilising external debt of
R284,1 million at June 2015 (June 2014: R249,7 million).
Andulela reached an agreement with the holder of the preference
shares, Newshelf 1005 Proprietary Limited, to temporarily suspend
preference share capital and dividend payments until December 2016.
This will allow the Group to optimise its cash position. The
outstanding redeemable preference share capital remained at
R25,4 million at 30 June 2015.
Kilken
Kilken experienced a slow but steady ramp-up in production but has
not yet reached production output levels comparable to the pre-
strike period of 2014. Management continues to deploy various PGM
production specialists to assist with improving recovery levels.
Kilken incurred capital expenditure on various production control
components in the early part of 2015, which should result in an
improvement in PGM recoveries.
Kilken’s attributable revenue improved from R9,7 million for the six
months to June 2014, to R22,2 million for the period ended 30
June 2015. This resulted in the net loss after tax improving from
R6,9 million for the comparative period, to a loss after tax of
R2,9 million for the six months ended June 2015. The net loss was
also driven by weaker commodity prices resulting in a softer overall
Rand based PGM basket price. Kilken still managed to retain a
positive cash balance of R6,6 million as at 30 June 2015 (June 2014:
R29,8 million).
Despite the prior year strike and the current year’s weak commodity
price cycle, Kilken continues to service the full interest and
capital repayments of the term loan, its contractual cashflow hedge
settlements and other obligations from normal operational cashflows.
PRSM
Pro Roof Steel Merchants Proprietary Limited and its subsidiaries
(“PRSM”) continued to improve its top line revenue for the six
months ended 30 June 2015 from R471,4 million for the period ended
June 2014 to R488,2 million. Earnings before interest, tax,
depreciation, amortisation and impairments (“EBITDA”) for the year
deteriorated from a profit for the six months ended 30 June of
R9,9 million in 2014 to R5,2 million in 2015.
The net loss after tax increased from R6,2 million for the period
ended June 2014 to R9,7 million in June 2015 mainly due to the steel
price decreases introduced into the South African market by
ArcelorMittal South Africa fuelled by weaker world steel demand
and consumption.
Management continues to drive better overhead cost recoveries through
increased volume throughput of selected high-demand product lines as
well as improvements in production efficiencies. PRSM’s most
significant working capital changes to 30 June 2015 were the
following:
(i) Inventory decreased by R13,4 million from 30 June 2014 but
increased by R6,9 million from 31 December 2014 which was the result
of December normally being a low volume trading month. The effect of
the increased purchases of raw material and the extended credit terms
thereof is evident in the Reichmans Capital overdraft facility as
discussed in (iv) below.
(ii) Accounts receivable decreased by 15,6% from 30 June 2014 and
by 2,3% from 31 December 2014 against the backdrop of increasing
turnover in both periods, but with greater efficiency in the
management and collection of accounts receivable.
(iii) Accounts payable decreased by 46,3% (R68,1 million) from
30 June 2014 and by 8,7% (R7,5 million) from 31 December 2014.
There was an increase in local raw material purchases versus imported
material over the past six months due to local steel price decreases
and the general tightening of credit facilities granted to developing
countries by European credit insurers. In the previous financial year
PRSM utilised 120 – 180 days credit terms from certain overseas
suppliers. PRSM has utilised more of the Reichmans Capital overdraft
facility for procurement of raw materials as discussed in (iv) below.
(iv) The Reichmans Capital overdraft increased by R63,7 million from
June 2014 and by R35,1 million from 31 December 2014. However total
long-term loans reduced by R29,9 million, year on year, coupled with
the decrease in longer-term trade credit facilities
on imports as discussed above.
Overall the domestic steel industry remains weak as a result of the
global slowdown and this is expected to continue in the short term.
Management’s strategic planning and operational restructuring
continues to contribute towards PRSM’s overall cashflow contribution
and sustainability.
For and on behalf of the board
Mohamed J Husain
Independent non-executive chairman
Ashruf Kaka
Chief executive officer
Sandton
21 September 2015
Andulela Investment Holdings Limited
Registered Office: 108 4th Street, Parkmore, Sandton 2196
Directors: Mohamed Husain# (Chairman); Ashruf Kaka (CEO);
Pieter de Jager (CFO); Brian Smith#; Pieter du Preez#;
Naeem Hadjee#
#Independent non-executive
Company Secretary: Humeira Kazi
Auditors: BDO South Africa Incorporated, 22 Wellington Road,
Parktown, Johannesburg, 2193
Transfer Secretaries: Link Market Services Proprietary Limited,
13th Floor Rennie House, 19 Ameshoff Street, Braamfontein, 2004
Sponsor: Java Capital, 2nd Floor, 6A Sandown Valley Crescent,
Sandton, 2196
Date: 21/09/2015 05:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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