Wrap Text
Unaudited condensed interim financial results
RECM AND CALIBRE LIMITED
Incorporated in the Republic of South Africa
(Registration number 2009/012403/06)
Preference share code: RACP
ISIN: ZAE000145041
(“RAC”)
UNAUDITED UNREVIEWED CONDENSED INTERIM FINANCIAL RESULTS
for the six months ended 30 September 2015
COMMENTARY
During the period under review, RAC’s NAV per share (ordinary and
preference) increased by 7% to R19,86. This compares to a loss of
4% for the All Share Index for the same period.
As at 30 September 2015, the make-up of our NAV, including our
investments (equity and loans to investees) on a
look-through basis consist of:
Direc-
tors’ Direc-
fair tors'
value fair
30 Sep value
% tember 31 March
owner- Cost 2015 2015
ship Rm Rm Rm
Gaming 180,9 383 313
Goldrush # 34,5 180,9 383 313
Mining and Engineering 147,6 205,4 239,1
Transhex 25,0 94,1 64,2 84,2
West Coast Resources
and Dinoka 27,2 35,6 116,5 122,2
ELB Group 2,2 17,9 24,7 32,7
Retail 100,5 219 190
Fledge Holdings (Dischem)
Safari and Outdoor 27,6
Food and Beverage 75,7 101,1 102,8
Sovereign Food 11,3 38,7 71,3 71,4
KWV 5,1 32,2 19,3 21,7
KLK Landbou 5,6 4,8 10,5 9,7
Other investments 48,7 108 107,8
Conduit Capital 7,0 12,3 54,8 40,1
Excellerate Holdings 5,5 14,6 26,5 26,5
The American Homes – – – 41,2
JB Private Equity
Investors Partnership
(Sentula) 90,0 18,9 23,8 –
College SA 17,7 2,9 2,9 –
Non-core investments 29,2 18,1 12,7
Cash 69,8 71,3
Liabilities (mainly CGT
and contingent
consideration) (111,5) (109,8)
Net asset value 992,9 926,9
# The 34,5% ownership is made up of a 28,5% direct holding and 6%
indirect holding through a management and staff funding
structure, which is not legally controlled by RAC.
INCREASE IN NAV
The NAV per share growth of 7% for the 6 months equates to an
increase of R65,8 million. The composition of the increase on a
look-through basis is as follows:
Unaudited Unaudited
Six months Six months
ended ended
30 September 30 September
2015 2014
R R
Interest and dividends 11 022 642 9 923 434
Realised profits on sale of assets 990 175 6 970 461
Adjustments to fair value of assets
net of tax 60 930 419 1 853 360
Less: Operating expenses 7 058 377 5 027 747
Net increase in NAV 65 884 859 13 719 508
Total comprehensive income 65 884 859 13 719 508
We have not changed our valuation method. All listed assets are
held at market price, while unlisted assets are either held at
their OTC price – where one exists – or at fair value. For assets
where there is no visible market price, we perform a valuation
exercise, which culminates in a range of fair values, as required
by IFRS. Due to the inherent uncertainty of valuing large stakes
in unlisted, untraded assets, this range is necessarily quite
wide. For some of our unlisted investments, this range includes
the original cost price. Where we have purchased the investment
in the last 12 months and believe the cost price to still
approximate fair value, we continue to carry the investment at
cost.
Where we have held the investment for longer than 12 months, we
tend to value the investment towards the lower end of our fair
value range.
We explicitly take account of our provision for capital gains
tax, where applicable, when calculating fair value. We account
and disclose this very real reduction in net realisable value
properly.
Our fee structure should also be taken into account when
calculating the intrinsic value. RAC pays 1,14% p.a. of the
portfolio value for investment management services. There are
many views in the marketplace as to the value of this contractual
payment. We suggest you include your own value when calculating
your own estimate of intrinsic value.
GAMING
Growth in same store cash flow at Goldrush remains strong.
However, the bottom line result is somewhat held back by its
ongoing aggressive investment across its operating platforms:
Limited Pay-out Machines, Bingo, Online and Retail Sports Betting
as well as Gaming in other African countries. In this regard, in
the past 6 months Goldrush has been awarded new route operator
licenses in two provinces, as well as a sports betting and slots
license in Tanzania. It has also developed its new Eastern Cape
Bingo sites and rolled out 15 retail sports betting licenses.
Goldrush is actively involved in acquisitions in the gaming
market, where its existing scale provides it with a competitive
advantage. We remain excited about the prospects for this company
while remaining aware of the risks it has to manage.
During the period we have made further payments relating to our
original purchase of Goldrush shares. These related to
performance targets agreed at the time of purchase. While this
meant a cash outflow, it has had no impact on the NAV as the
amount had already been provided for at year-end.
We have agreements in place that could take our shareholding up
to 50% over the next 2 years.
MINING AND ENGINEERING
At Transhex, volumes are slightly below target, while prices
received have declined, in some cases sharply. This will impact
profitability during the period under review negatively. However,
the balance sheet remains strong, and provides the company with
flexibility in a difficult time for mining. The market price of
Transhex has declined by 24% since year-end.
West Coast Mining expects to be fully operational by the first
quarter of next year. In the meantime, results from the tailings
dump are below expectations. As a result, we have reduced our
valuation for this asset.
For the year ended June 2015, the ELB Group suffered from margin
pressure, as industry conditions deteriorated. Despite a decline
in earnings per share, they were able to maintain their dividend,
due to their consistently conservative financial management. The
company has a strong balance sheet, and is well prepared to
weather any storm that might arise. The market price of ELB has
declined by 24% since year-end.
RETAIL
Safari and Outdoor continues to trade well. A new CEO with
extensive retail experience was recently appointed, and he has
some interesting plans to further accelerate the growth of the
business. We have revalued Safari and Outdoor in line with its
profit growth for the period. Our stake has increased somewhat
from 27% to 27,6% by virtue of Safari and Outdoor doing a small
share buy-back.
RAC effectively owns a 2,5% stake in Dischem. This business also
continues to do well, growing organically and through the roll-
out of new stores. We have revalued our stake in Dischem in line
with profit growth, as well as dividend payments to Fledge, the
leveraged structure through which we own our stake. Due to the
fact that it is unlisted and housed in an illiquid structure, we
value it at a significant discount to its closest competitor,
Clicks Holdings. This methodology is the same as that applied in
our year-end results. If the business were to be listed, this
value might change.
FOOD AND BEVERAGE
Sovereign Foods grew earnings strongly during the period. Sales
volumes were pedestrian, but margins improved dramatically. Cash
flow was strong, and the balance sheet is almost ungeared. This
places Sovereign in a good positon to expand its business, as
well as to invest in further productivity enhancements. Despite
earning good returns on equity, the share trades at a significant
discount to its NAV. The share price was almost unchanged during
the period under review.
Results at KWV continue to improve, but remain at relatively low
levels. The share trades very sporadically, after the recent
termination of its over-the-counter trading license. The last
trades – and the price which we use for valuation purpose – value
the business at close to 25% of NAV. In most cases, such a
discount to NAV would point to a dramatic undervaluation of any
business. RAC continued to add to its holding in this investment.
KLK Landbou is performing very well. Its share price has
increased by 8% since year-end.
OTHER INVESTMENTS
Conduit Capital is under new management and, as discussed in our
year-end results, has changed strategic focus. It now aims to be
more aggressive in building out its insurance business, while
focusing on its investment operations. The market likes the
company’s new direction, pushing it share price up by 36% over
the past 6 months.
Our valuation for Excellerate has not changed in the last six
months.
During the period, RAC acquired additional shares in mining
services group Sentula in the open market, after which we
injected our full holding into the JB Private Equity Investors
Partnership. This investment partnership holds, as its only
asset, a 19,6% stake in Sentula. RAC (which is a limited
liability partner) owns 90% of the partnership. Recently, Jacques
Badenhorst, a co-investor with RAC in the partnership, has taken
over as the interim CEO of Sentula. There is no doubt that
Sentula operates in a tough industry, which faces significant
headwinds at present. However, we remain hopeful of creating
value for shareholders over time.
College SA represents our first step of investing into tertiary
and distance learning. RAC owns just over 17,5% of the business.
It is a recent acquisition, and is still valued at the price we
paid to acquire our equity stake. Certain payments remained
outstanding as at 30 September 2015, pending fulfilment of
certain conditions.
NON-CORE INVESTMENT
We have added the remaining portion – R12 million – of our
investment in The American Home (“TAH”) to this part of our
portfolio. TAH is in the process of being bought out. We received
the first payment – R36 million – which is still being held
offshore. It is included in our cash balance in the table on page
1. The rest of the payment should take place within the next 12
months.
We continue to make progress in exiting our other non-core
investments.
Cash available for investing has declined marginally to R69
million from R71 million at year-end. We have also finalised a
R150 million funding facility with ABSA, which gives us
additional transactional capability.
PROSPECTS
Our investment pipeline has never been as interesting as it is
today. Our investment strategy remains simple. We aim to buy good
businesses, managed by good people, at good prices. If you are
involved in any business that meets these criteria, and needs
expansion or replacement capital, please give us a call. We can’t
promise to add management expertise to your business (we most
likely have none), but we can promise to be solid partners. And,
if the phone were to ring, we definitely can promise a quick
answer.
Signed on behalf of the board
PG Viljoen
Cape Town
5 November 2015
DIRECTORS:
PG Viljoen (Chairman), T de Bruyn, Z Matlala, T Rossini, JG
Swiegers, JC van Niekerk
COMPANY SECRETARY: G Simpson
FINANCIAL RESULTS PREPARER: D Schweizer CA(SA)
REGISTERED OFFICE: 8th Floor Claremont Central, 8 Vineyard Road,
Claremont, 7700 South Africa
TRANSFER SECRETARIES: Link Market Services South Africa (Pty)
Ltd, 13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein,
2004
SPONSOR: Questco (Pty) Ltd, The Pivot, 1 Montecasino Boulevard,
Entrance D, 2nd Floor, Fourways, 2055
STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
30 September 31 March 30 September
2015 2015 2014
Notes R R R
ASSETS
Non-current
assets 995 630 978 883 595 786 613 750 447
Investments 2 995 630 978 714 253 898 516 321 461
Loans and other
receivables – 169 341 888 97 428 986
Current assets 2 661 441 74 418 456 31 808 636
Investments 2 – 67 971 006 25 336 293
Loans and other
receivables 2 241 3 097 497 4 864 592
Cash and cash
equivalents 2 659 200 3 349 953 1 607 751
Total assets 998 292 419 958 014 242 645 559 083
EQUITY AND
LIABILITIES
EQUITY
Share capital
– ordinary
shareholders 4 50 000 000 50 000 000 50 000 000
Share capital
– preference
shareholders 4 450 000 000 450 000 000 450 000 000
Reserves 5 – 79 950 251 58 627 126
Retained income 5 492 858 304 347 023 194 71 040 457
Total equity 992 858 304 926 973 445 629 667 583
LIABILITIES
Non-current
liabilities – 29 196 620 13 148 075
Deferred tax 6 – 29 196 620 13 148 075
Current
liabilities 5 434 115 1 844 177 2 743 425
Trade and other
payables 568 045 1 704 985 1 042 462
Current tax
payable 4 866 070 139 192 1 700 963
Total equity and
liabilities 998 292 419 958 014 242 645 559 083
NET ASSET VALUE
Net asset value
attributable to
ordinary
shareholders 99 285 830 92 697 345 62 966 758
Net asset value
attributable to
preference
shareholders 893 572 474 834 276 101 566 700 825
Net asset value
per ordinary
share (cents) 7 1 986 1 854 1 259
Net asset value
per preference
share (cents) 7 1 986 1 854 1 259
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
Notes R R R
Revenue 48 838 30 720 051 9 923 434
Operating
expenses (950 656) (10 140 930) (5 027 747)
Operating
(loss)/profit (901 818) 20 579 121 4 895 687
Other income 93 094 588 17 149 208 7 726 232
Fair value
gains on
subsidiaries
and associates 42 174 311 287 223 959 –
Impairments
recycled
through profit
and loss – (21 225 692) –
Profit before
taxation 134 367 081 303 726 596 12 621 919
Taxation 11 468 029 (17 317 153) (2 195 213)
Profit after
taxation 145 835 110 286 409 443 10 426 706
Other
comprehensive
income:
Items that may
be reclassified
subsequently to
profit or loss (79 950 251) 24 615 927 3 292 802
Net gain on
available-for-
sale financial
instruments – 26 189 347 11 774 805
Realised gain on
sale of
available-for-
sale investments
recycled to
profit or loss (93 094 588) (17 149 208) (7 726 232)
Impairment loss
reclassified – 21 225 692 –
Taxation related
to components
of other
comprehensive
income 13 144 337 (5 649 904) (755 771)
Total
comprehensive
income 65 884 859 311 025 370 13 719 508
Earnings and
headline earnings
per share
Per share
information
(ordinary and
preference)
Basic and
diluted earnings
per share
(cents) 8 292 573 21*
Headline and
diluted headline
earnings per
share (cents) 8 105 579 8*
* Restated (refer note 8).
STATEMENT OF CHANGES IN EQUITY
Fair value
adjustment
assets
Preference Ordinary available-
share share for-sale
capital capital reserve
R R R
Balance at
31 March 2014 450 000 000 50 000 000 55 334 324
Changes in equity
Profit – – –
Other comprehensive
income – – 3 292 802
Balance at
30 September 2014 450 000 000 50 000 000 58 627 126
Changes in equity
Profit – – –
Other comprehensive
income – – 21 323 125
Balance at
31 March 2015 450 000 000 50 000 000 79 950 251
Changes in equity
Profit – – –
Other comprehensive
income – – (79 950 251)
Balance at
30 September 2015 450 000 000 50 000 000 –
Notes 4 4 5
STATEMENT OF CHANGES IN EQUITY (continued)
Retained Total
income equity
R R
Balance at
31 March 2014 60 613 751 615 948 075
Changes in equity
Profit 10 426 706 10 426 706
Other comprehensive
loss – 3 292 802
Balance at
30 September 2014 71 040 457 629 667 583
Changes in equity
Profit 275 982 737 275 982 737
Other comprehensive
income – 21 323 125
Balance at
31 March 2015 347 023 194 926 973 445
Changes in equity
Profit 145 835 110 145 835 110
Other comprehensive
income – (79 950 251)
Balance at
30 September 2015 492 858 304 992 858 304
Notes 5
STATEMENT OF CASH FLOWS
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
Cash flows from
operating activities
Cash utilised in
operations (737 350) (9 637 731) (3 525 202)
Interest income 46 597 13 125 860 4 237 828
Dividends received – 21 023 155 5 685 606
Tax paid – (7 650 927) (2 121 628)
Net cash (outflow)/
inflow from
operating activities (690 753) 16 860 357 4 276 604
Cash flows from
investing activities
Loans to related parties – (149 419 476) (77 506 574)
Purchase of investments – (81 758 828) (58 289 712)
Proceeds on disposal of
financial investments – 217 566 023 133 025 556
Net cash outflow from
investing activities – (13 612 281) (2 770 730)
Total cash movement for
the period (690 753) 3 248 076 1 505 874
Cash at beginning
of period 3 349 953 101 877 101 877
Total cash and cash
equivalents at end
of period 2 659 200 3 349 953 1 607 751
NOTES TO THE CONDENSED INTERIM RESULTS for the period ended 30
September 2015
GROUP STRUCTURE
RECM and Calibre Limited (“RAC”) was established in 2009 as a
closed-end investment entity that makes long-term investments,
with the objective of generating high real returns. Investments
can be listed or unlisted, public or private, and there are no
limits as to the geographic location.
Given that the investment infrastructure of RAC has been set up
to facilitate investments and funding in the most efficient
manner, investments are made either through a fully owned
subsidiary incorporated in South Africa, RAC Investment Holdings
(Pty) Ltd (“RIH”), or directly.
During the period all the investments held by RAC were
transferred to the wholly-owned subsidiary RIH, primarily to
facilitate future funding. This transfer had no impact on the NAV
of RAC. Given this structure, RAC has provided the fair value
disclosure in two parts in note 2. Page 9 discloses the
investment in RIH as required by IFRS and page 11 provides
additional disclosures looking through RIH to the underlying
investments. The transfer of the investments, (previously held as
available-for-sale), to RIH has resulted in the unrealised gains
of R93 094 558, previously recognised in other comprehensive
income, being reclassified to profit or loss. All fair value
movements on the investment in RIH will be recognised in profit
or loss going forward.
1. ACCOUNTING POLICIES – PRESENTATION OF CONDENSED INTERIM
FINANCIAL STATEMENTS
BASIS OF ACCOUNTING PREPARATION
The accounting policies applied for the six months are
consistent, in all material respects, with those used in the
annual financial statements for the year ended 31 March 2015
and are in accordance with the recognition and measurement
criteria of International Financial Reporting Standards
(IFRS), the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council. In
addition, these interim results have been prepared in
accordance with the presentation and disclosure requirements
of International Accounting Standard 34, Interim Financial
Reporting, as well as the listings requirements of the JSE and
the Companies Act of South Africa.
Entities that meet the definition of an investment entity
within IFRS 10 are required to measure their subsidiaries at
fair value rather than consolidate them. The criteria which
define an investment entity are, as follows:
– An entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
– An entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both;
– An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
Based on the above, the Company is considered to meet all
three conditions of the definition and, hence, qualifies as an
investment entity.
Investment entities with interests in associates and joint
ventures may elect to account for those investments at fair
value provided they meet the criteria of IAS 28 and IAS 39.
Such election must be applied consistently as a matter of
accounting policy choice. The Company reports to its investors
via annual and semi-annual results and to its management, via
internal management reports, on a fair value basis. All
investments are reported at fair value to the extent allowed
by IFRS in the Company’s annual reports.
The Board has also concluded that the Company meets the
additional characteristics of an investment entity, in that it
has exposure to more than one investment (through its 100%
held subsidiary); the investments are predominantly in the
form of equities and similar securities; and its investors are
not related parties. The Board has concluded that the Company
continues to meet the definition of an investment entity and
will reassess this on an annual basis.
The impact of not consolidating had no impact on the Net Asset
Value of the Company, given that the fair value of the
subsidiary materially approximates the Net Asset Value of the
subsidiary.
The interim results have been prepared in accordance with the
IFRS and IFRIC interpretations at the time of the preparation
of the information. As these standards and interpretations
are the subject of ongoing review, they may be amended between
the date of this report and the finalisation of the annual
financial statements for the year ending 31 March 2016.
SEGMENTAL ANALYSIS
The directors considered the implications of IFRS 8: Operating
Segments and are of the opinion that the operations of the
Company are substantially similar and that the risks and
returns of these operations are likewise similar. Resource
allocation and the management of the operations are performed
on an aggregated basis, and as such the Company is considered
to be a single aggregated business and therefore there are no
additional reporting requirements in terms of IFRS 8.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
2. INVESTMENTS
Fair value hierarchy
of financial assets
Level 1
Class 1 – Listed
shares – Quoted – 241 132 347 196 646 401
Class 2 – Unlisted
shares – Quoted – 31 390 404 35 297 800
– 272 522 751 231 944 201
Level 2
Class 3 – Unit trusts – 34 956 206 147 322 849
Listed investments
held by unit trust – – 71 521 437
Cash held by unit
trust – 34 956 206 75 801 412
Class 4 – Call accounts – 33 014 800 25 326 080
– 67 971 006 172 648 929
Level 3
Class 5 – Unlisted
shares – Unquoted –
available-for-sale – 70 999 261 53 556 698*
Class 5 – Unlisted
shares – Unquoted
– fair value
through profit and
loss – other – 253 681 269 83 487 926*
Class 5 – Unlisted
shares – Unquoted
– fair value
through profit
and loss – RIH 995 630 978 117 050 617 20 000*
995 630 978 441 731 147 137 064 624
Total financial
assets at fair
value 995 630 978 782 224 904 541 657 754
Non-current
assets 995 630 978 714 253 898 516 321 461
Current assets – 67 971 006 25 336 293
Total
Investments 995 630 978 782 224 904 541 657 754
* In the prior interim results, investments to the value of
R83 507 926 were incorrectly disclosed as part of available-
for-sale investments. The prior period interim disclosure has
been amended to correctly disclose the investments as at fair
value through profit and loss. This had no effect on the
statement of financial position or statement of comprehensive
income. The fair values approximated cost and thus no fair
value movements had to be recognised.
AVAILABLE CASH
Cash is held both directly and indirectly on call, along with
indirectly through a money market unit trust investment. The
cash holdings are reflected in Class 3 and Class 4 above,
where applicable.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
2. Investments
(continued)
Level 3
reconciliation
Opening balance 441 731 147 130 694 101 130 694 101
Acquisitions
(including capital
contribution in
current period
to RIH) 837 680 226 6 632 549 3 632 584
Assets transferred
to RIH (325 954 706) – –
Gains on
investments
recognised in
other comprehensive
income – 17 180 537 2 737 939
Gains on investments
recognised in
profit and loss 42 174 311 287 223 960 –
Closing balance 995 630 978 441 731 147 137 064 624
LEVEL 1
Class 1 available-for-sale financial assets are valued at the
listed price per the exchange on which they trade.
Class 2 available-for-sale financial assets are valued at the
quoted price based on the latest over the counter trades.
LEVEL 2
Class 3 available-for-sale financial assets are valued at the
net asset value of the unit trust.
Class 4 available-for-sale financial assets are valued by
taking the following market observable data into account and
applying them to the holdings:
– credit spread of the institution at which the funds are
held
– any difference in the interest rate earned and what is
available in the market
LEVEL 3
Class 5 financial assets are valued using a number of
valuation techniques based on the following unobservable
market data for each investment:
– Net profit of investee
– Equity and net debt of investee
– Return on capital
– Price/Earnings ratio
– Expected cash flows
– NAV of the investee if it recognises its assets and
liabilities at fair value
Management uses the above information in multiple valuation
techniques by comparing the investee information to similar
type entities in the listed market. The nature of the fair
value calculations means that fair values range greatly and
are sensitive to indirect and direct quantifiable and
unquantifiable inputs.
There have been no significant changes to the inputs to the
fair valuation calculations of the investments to which RAC is
exposed. RIH has continued to be valued based on its NAV which
is driven by the valuation of the underlying investments.
In terms of IFRS, RAC is an Investment Entity, and therefore
no consolidated results are required to be prepared. IFRS
requires the fair value disclosure to be prepared at the Unit
of Account Level (i.e.: at the level of shares that RAC owns:
being RIH). The Board of Directors has decided
to provide the following voluntary investment disclosures
looking through RIH to the underlying investments. In
addition, a summary of the NAV of RIH as well as the
underlying valuation techniques and sensitivities have been
provided.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
2. INVESTMENTS
(continued)
Net asset value of
RIH (Look-through)
Fair value hierarchy
of financial assets
Level 1
Class 1 – Listed
shares – Quoted 221 304 327 – –
Class 2 – Unlisted
shares – Quoted 29 842 286 – –
251 146 613 – –
Level 2 – – –
Level 3
Class 5 – Unlisted
shares – Unquoted
– available-
for-sale 60 640 115 – –
Class 5 – Unlisted
shares – Unquoted
– fair value through
profit and loss 641 530 525 313 312 036 77 506 574
702 170 640 313 312 036 77 506 574
Total financial
assets at fair
value 953 317 253 313 312 036 77 506 574
Non-current assets 953 317 253 313 312 036 77 506 574
Current assets – – –
Total investments 953 317 253 313 312 036 77 506 574
Summary of net
asset value of RIH
Total investments
from above 953 317 253 313 312 036 77 506 574
Loans and
receivables 81 660 481 – –
Cash and cash
equivalents 67 158 526 809 –
Deferred tax (65 297 813) (24 134 156) –
Accruals and
contingent
consideration (41 207 469) (58 030 305) –
Loans and payables – (114 097 767) (77 486 574)
Net asset value
of RIH 995 630 978 117 050 617 20 000
2. INVESTMENTS (continued)
Description of significant unobservable inputs and their
sensitivities (level 3 investments)
30 September 2015 (Unaudited)
Signifi-
Valua- cant
tion Fair unobser-
tech- value vable
nique R’m inputs Range Sensitivity
Retail: Multi- 189 EBITDA 4 – 8 A change in
Safari and ples multiple up by
Outdoor; 1 would result
Fledge in an increase
(Dischem) in fair value
(excluding of approximately
loans) R25 million.
Discount 35% – A change in
for lack 45% discount rate
of of 10% would
marketa- result in a
bility change in fair
and value of
liquidi- approximately
ty to R31 million.
listed
entity
Goldrush Multi- 383 EBITDAR 5 – 7 A change in
Group ples the EBITDAR
multiple by 1
would result
in an increase
or decrease in
fair value of
approximately
R50 million.
Excellerate Last 26,5 Delisted 115
obser- market cents –
vable price 220 cents
price per share
versus
last
obser-
vable
price
P/E Mul- 6 – 8,5 Using a
tiple, multiple of 6
as check to 8,5 would
on last result in a
observa- price of 222
ble to 314 cents
price per share,
before
applying a
discount for
liquidity.
Discount 25% - 30% A change in
for lack discount rate
of of 10% would
marketa- result in a
bility change in
and fair value of
liquidi- approximately
ty on R4 million. A
P/E 30% discount
Multiple is currently
as a being applied
check on for lack of
last liquidity.
obser-
vable
price
JB Private NAV 23,8 Fair Market- The NAV of
Equity value related the JB Group
Investors calcula- interest is directly
Partnership tion of rates linked to the
(Setula) trade underlying
and investment
other which is
payables listed on the
JSE and is
not signi-
ficantly
impacted by
the fair
value
adjustment to
trade and
other
payables and
therefore NAV
of the JB
Group is
considered to
be fair
value.
Mining: NAV 77,8 Valua- 10% A multi-
West Coast tion of period excess
Resources mining earnings
rights method was
used to
calculate the
mining rights
in WCR. There
are numerous
unseen inputs
into this
calculation. A
change in the
value of the
mining rights
by 10% would
result in a R14
million change
in the NAV of
RAC.
Other level 3
investments 2,1
Total 702,17
31 March 2015 (Audited)
Signifi-
Valua- cant
tion Fair unobser-
tech- value vable
nique R’m inputs Range Sensitivity
Retail: Multi- 170 EBITDA 4 – 8 A change in
Safari and ples multiple up
Outdoor; result in an
Fledge increase in
(Dischem) fair value of
(excluding approximately
loans) R20 million.
Discount 35% – A change in
for lack 45% discount rate
of of 10% would
marketa- result in a
bility change in
and fair value of
liquidity approximately
to listed R27 million.
entity
Excellerate Last 26,5 Delisted 115
obser- market cents
vable price per – 220
price share cents
versus
last
obser-
vable
price
P/E 6 – 8,5 Using a
Multiple, multiple of 6
as check to 8,5 would
on last result in a
observa- price of 222
ble price to 314 cents
per share,
before
applying a
discount for
liquidity.
Discount 25% - A change in
for lack 30% discount rate
of of 10% would
marketa- result in a
bility change in
and fair value of
liquidity approximately
on P/E R4 million. A
Multiple 30% discount
as a is currently
check on being applied
last for lack of
obser- liquidity.
vable
price
RAC NAV 117 EBITDAR 5 – 7 A change in
Investment of the EBITDAR
Holdings substan- multiple of
(“RIH”) tial the
underly- underlying
ing investment by
invest- 1 would
ments in result in an
RIH increase or
decrease in
fair value of
approximately
R38 million.
Mining: NAV 83,8 Valuation 10% A multi-
West Coast of mining period excess
Resources rights earnings
method was used
to calculate
the mining
rights in WCR.
There are
numerous unseen
inputs into
this calcu-
lation. A
change in the
value of the
mining rights
by 10% would
result in a R14
million change
in the NAV of
RAC.
The Credit 41 Discount 20% – A change in
American and due to 30% discount rate
Home time the time of 10% would
value value of result in a
of money change in
money (5%) and fair value of
dis- the approximately
count increased R1,5 million.
credit A 30%
risk of a discount is
future currently
dated being
receipt applied.
of
redemp-
tion
proceeds
Other level 3
investments 3,4
Total 441,7
Factors that were taken into account by the directors in all
valuations include the current market conditions, the invested
market segment and interest rate certainty. The market for these
instruments often has significant barriers to entry, making the
comparison pool of similar entities very shallow. Specifically,
the retail pharmaceutical industry and hunting equipment industry
have few market entrants with little reliable comparative data.
The nature of the fair value calculations means that the
calculated fair values could range greatly and are sensitive to
indirect and direct quantifiable and unquantifiable inputs. Like
all our investments, we plan on seeing the value of the business
grow over a number of years to realise their true potential.
Where we have influence over our investee companies, we plan to
play an active role in the long-term strategy of the Company,
ensuring that our interests are aligned.
3. RELATED PARTY TRANSACTIONS
During the current reporting period, the Company disposed of
all of its investments to its 100% held subsidiary, RIH, in
exchange for shares in RIH. The sale has taken place at the
fair value of the investments. As the transaction has been
completed in terms of section 42 of the Income Tax Act of
South Africa, there are no income tax consequences. In
addition, the loan of R114 059 440 has been converted into
equity through the issue of additional shares to RAC.
Apart from the above, there were no other significant changes
to related parties or related party transactions since the
year ended 31 March 2015.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
4. SHARE CAPITAL
Authorised
5 000 000 ordinary
shares of R0,01
each 50 000 50 000 50 000
200 000 000 non-
cumulative redeemable
participating
preference shares
of no par value – – –
250 000 redeemable
preference shares
of no par value – – –
1 500 000 000
perpetual preference
shares of no
par value – – –
50 000 50 000 50 000
The 250 000 redeemable preference shares will have the
rights and privileges, restrictions and conditions as
determined by the directors upon issue thereof, but
which are intended to rank in priority to the participating
preference shares, the perpetual preference shares and
ordinary shares in respect of dividends and on winding up.
The 1 500 000 000 perpetual preference shares will have the
rights and privileges, restrictions and conditions as
determined by the directors prior to issue thereof, but
which are intended to rank in priority to the participating
preference shares and ordinary shares in respect of
dividends and on winding up.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
4. SHARE CAPITAL
(continued)
Issued
5 000 000 ordinary
shares of R0,01 each 50 000 50 000 50 000
Share premium 49 950 000 49 950 000 49 950 000
50 000 000 50 000 000 50 000 000
45 000 000 non-
cumulative redeemable
participating
preference 450 000 000 450 000 000 450 000 000
450 000 000 450 000 000 450 000 000
5. RESERVES AND RETAINED INCOME
The reserves comprise all fair value adjustments on available-
for-sale financial instruments. When an asset or liability is
derecognised, the fair value adjustment relating to that asset
or liability is transferred to profit or loss.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
Available-for-
sale financial
instruments – 93 094 588 72 074 038
Deferred tax on
available-for-
sale financial
instruments – (13 144 337) (13 446 912)
Reserves – 79 950 251 58 627 126
Retained income 492 858 304 347 023 194 71 040 457
Total reserves and
retained income 492 858 304 426 973 445 129 667 583
6. CURRENT AND
DEFERRED TAXATION
Taxation expense
Current taxation – (6 195 408) (2 227 880)
Current taxation –
prior year
underaccrual
of CGT (4 726 878) – –
Deferred taxation 16 194 907 (11 121 745) 32 667
Taxation expense 11 468 029 (17 317 153) (2 195 213)
Reconciliation of
deferred tax
liability
At beginning
of year 29 196 620 12 424 971 12 424 971
Temporary difference
on receivables and
payables 71 312 (1 039 721) (32 667)
Temporary difference
on fair value
gains through
profit and loss (16 123 595) 16 123 595 –
Temporary difference
on available-for-
sale instruments
through other
comprehensive
income (13 144 337) 1 687 775 755 771
– 29 196 620 13 148 075
Deferred tax has not been recognised on the fair value
gains on the investment in RIH as the manner of expected
recovery of the investment is unlikely to result in future tax
consequences. Temporary differences not recognised in terms of
IAS 12 amount to R199 508 498 (March 2015: R200 847 560,
September 2014: Rnil). Deferred tax has been recognised in RIH on
the investments that it expects to incur taxes on when realising
their value.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
7. NET ASSET VALUE
Net asset value
attributable to
ordinary
shareholders 99 285 830 92 697 345 62 966 758
Net asset value
attributable to
preference
shareholders 893 572 474 834 276 101 566 700 825
Number of shares
in issue
Ordinary shares 5 000 000 5 000 000 5 000 000
Preferences shares 45 000 000 45 000 000 45 000 000
Net asset value
per ordinary
share (cents) 1 986 1 854 1 259
Net asset value
per preference
share (cents) 1 986 1 854 1 259
8. EARNINGS AND HEADLINE EARNINGS PER SHARE
Earnings and headline earnings per shares are based on the
profit attributable to ordinary and preference shareholders in
issue during the year.
Unaudited Audited Unaudited
Six months Twelve months Six months
ended ended ended
30 September 31 March 30 September
2015 2015 2014
R R R
Number of shares
in issue
Ordinary shares 5 000 000 5 000 000 5 000 000
Preferences shares 45 000 000 45 000 000 45 000 000
Earnings
Net profit
after tax 145 835 110 286 409 443 10 426 706
Adjusted to
headline earnings
as follows:
Profit on asset
disposal (93 094 588) (17 149 208) (7 726 232)
Impairment – 21 225 692 –
Tax adjustment – ( 760 982) 1 442 302
Headline earnings 52 740 522 289 724 945 4 142 776
Basic and diluted
earnings per
ordinary and
preference
shares (cents) 292 573 21*
Headline earnings
per ordinary and
preference
shares (cents) 105 579 8*
* Restated – The prior year interim results figures were
amended to include both preference and ordinary shares. In
the prior year interims, earnings per share was calculated
based on the number of ordinary shares of 5 000 000.
Earnings per share should have been calculated on the total
number of ordinary and preference shares (i.e.: 50 000 000)
as both classes of share have equal right to participate in
the residual interest and profits of the Company. As a
result, the earnings per share for the interim period ended
30 September 2014 changed from 209 cents per share to 21
cents per share for basic and diluted earnings per share and
from 83 cents per share to 8 cents for headline earnings per
share.
9. EVENTS AFTER THE REPORTING PERIOD
Subsequent to 30 September 2015, RIH has purchased an
additional 3% in Goldrush for R30 million in terms of the
existing option agreement. Apart from the above, the
directors are not aware of any matter or circumstance arising
since the end of the reporting period.
10. CESSION AND GUARANTEE
During the period, RIH entered into an agreement with ABSA
Bank Limited ("ABSA")to provide it with funding in the amount
of R150 million for the purchase of additional investments.
In terms of the agreement, RAC has provided a guarantee in
favour of ABSA should RIH not meet its financial commitments
in terms of the funding agreement. Given that the probability
of RIH not meeting its funding requirements is very remote,
no financial liability has been raised by RAC as the fair
value is considered to be negligible. As at 30 September
2015, RIH had not drawn any funding from ABSA.
11. DIVIDENDS
No dividend has been declared.
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