Wrap Text
Unaudited Consolidated Condensed Interim Results
for the six months ended 30 September 2015
DENEB INVESTMENTS LIMITED
Registration number: 2013/091290/06
(Incorporated in the Republic of South Africa)
JSE share code: DNB ISIN: ZAE000197398
("Deneb" or "the Group" or "the company")
UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS
for the six months ended 30 September 2015
STATEMENT OF FINANCIAL POSITION
as at 30 September 2015
Rand thousands Unaudited Unaudited
30 Sep 2015 30 Sep 2014*
ASSETS
Non-current assets 1 723 114 1 697 977
Plant and equipment 312 639 303 774
Owner-occupied property 385 799 334 409
Investment property 701 409 690 340
Intangible assets 23 042 17 987
Goodwill 15 024 17 743
Other investments 3 644 43 708
Long-term receivables 157 506 156 299
Net receivable from discontinued operations - 74 979
Deferred tax 124 051 58 738
Current assets 1 532 430 1 429 804
Non-current assets held for sale 3 665 54 437
Inventories 729 429 672 235
Trade and other receivables 795 196 695 444
Current tax asset 2 859 7 210
Cash and cash equivalents 1 281 478
Total assets 3 255 544 3 127 781
EQUITY AND LIABILITIES
Total equity 1 866 234 1 619 860
Stated capital 1 717 287 1 623 143
Reserves 148 947 (2 950)
Equity attributable to owners of the parent 1 866 234 1 620 193
Non-controlling interests - (333)
Non-current liabilities 111 920 148 039
Deferred tax 3 009 6 059
Post-employment medical aid benefits 103 635 91 055
Interest-bearing liabilities 4 266 13 674
Share-based liabilities - 35 631
Operating lease accruals 1 010 1 620
Current liabilities 1 277 390 1 359 882
Current tax payable 493 204
Net liabilities from discontinued operations - 4 654
Post-employment medical aid benefits 6 472 6 205
Interest-bearing liabilities 35 540 32 397
Trade and other payables 554 386 533 447
Bank overdrafts 680 499 782 975
Total liabilities 1 389 310 1 507 921
Total equity and liabilities 3 255 544 3 127 781
Net asset value 1 866 234 1 620 193
Net asset value per share (cents) 332 300
* Restated, refer to note 6
CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the six months ended 30 September 2015
Rand thousands Unaudited Unaudited
6 months 6 months %
30 Sep 2015 30 Sep 2014* Change
Revenue 1 303 975 1 231 785 5,9
Gross profit 312 908 287 634 8,8
Operating profit before impairments 58 347 25 772 126,4
Net impairment of assets (2 456) -
Operating profit before finance costs 55 891 25 772 116,9
Finance income 5 854 4 145
Finance expenses (34 752) (19 459)
Profit before tax 26 993 10 458 158,1
Income tax expense (12 662) (1 624)
Profit for the period 14 331 8 834 62,2
Loss for the period from discontinued operations - (3 940)
TOTAL PROFIT FOR THE PERIOD 14 331 4 894 192,8
Other comprehensive income for the period - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 14 331 4 894 192,8
Profit attributable to:
Owners of the parent 12 079 5 227
Non-controlling interests 2 252 (333)
14 331 4 894
Total comprehensive income attributable to:
Owners of the parent 12 079 4 894
Non-controlling interests 2 252 -
14 331 4 894
* Restated, refer to note 6
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2015
Rand thousands Unaudited Unaudited
6 months 6 months
30 Sep 2015 30 Sep 2014
Net cash flow from operating activities (148 631) (211 989)
Net cash flow from investing activities (16 156) (66 119)
Net cash flow from financing activities 15 011 29 815
Net decrease in cash and cash equivalents (149 776) (248 293)
Cash and cash equivalents at the beginning of the period (529 442) (534 204)
Cash and cash equivalents at the end of the period (679 218) (782 497)
* Restated, refer to note 6
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2015
Rand thousands Common Non-
Stated Other control Retained controlling Total
capital reserves reserves income Total interest equity
Balance at 1 April 2014* 1 496 346 337 244 (15 902) (329 519) 1 488 169 - 1 488 169
Total comprehensive profit
for the period - - - 5 227 5 227 (333) 4 894
Transactions with owners
Capitalisation of loan 126 797 - - - 126 797 - 126 797
Balance at 30 September 2014 1 623 143 337 244 (15 902) (324 292) 1 620 193 (333) 1 619 860
Balance at 1 April 2015 1 716 713 265 370 (15 902) (95 202) 1 870 979 (2 252) 1 868 727
Total comprehensive profit
for the period - - - 12 079 12 079 2 252 14 331
Transactions with owners
Dividends paid - - - (16 824) (16 824) - (16 824)
Share scheme - options exercised 574 - - (574) - - -
Balance at 30 September 2015 1 717 287 265 370 (15 902) (100 521) 1 866 234 - 1 866 234
Composition of other reserves 2015 2014*
Revaluation of investments - 32 186
Surplus on revaluation of land and buildings 265 370 305 058
265 370 337 244
* Restated, refer to note 6
CONDENSED SEGMENTAL REPORT
for the six months ended 30 September 2015
Rand thousands Branded Head office
Product Industrial Textile and Cen-
Distri- Manu- Manu- tralised
Properties bution facturing facturing Services Total
2015
Segment revenue
Gross sales 66 185 630 026 244 570 381 677 - 1 322 458
Inter-segment sales (these
transactions are at arm's
length) (18 483) - - - - (18 483)
47 702 630 026 244 570 381 677 - 1 303 975
Segment results
Operating profit/(loss) from
continuing operations 46 778 1 209 16 416 7 445 (15 957) 55 891
2014*
Segment revenue
Gross sales 64 850 631 952 225 585 334 384 - 1 256 771
Inter-segment sales (these
transactions are at
arm's length) (17 905) - - (7 081) - (24 986)
46 945 631 952 225 585 327 303 - 1 231 785
Segment results
Operating profit/(loss) from
continuing operations 44 076 2 202 9 836 (12 326) (18 016) 25 772
* Restated, refer to note 6
STATISTICS PER SHARE
for the six months ended 30 September 2015
In cents, where applicable Unaudited Unaudited
6 months 6 months
30 Sep 2015 30 Sep 2014*
Weighted average number of shares in issue ('000) 560 922 539 776
Number of shares in issue ('000) 561 490 539 776
Diluted weighted average number of shares in issue ('000) 567 417 539 776
Basic earnings 2,2 1,0
Continuing operations 2,2 1,7
Discontinued operations - (0,7)
Headline earnings 2,6 0,9
Continuing operations 2,6 1,6
Discontinued operations - (0,7)
Diluted earnings 2,1 1,0
Continuing operations 2,1 1,7
Discontinued operations - (0,7)
Diluted headline earnings 2,5 0,9
Continuing operations 2,5 1,6
Discontinued operations - (0,7)
Reconciliation between profit and headline earnings
Income attributable to shareholders 12 079 5 227
Impairment of goodwill 2 249 -
Impairment of intangible assets 207 -
Surplus on disposal of property, plant and equipment (160) (205)
Loss on disposal of property, plant and equipment 18 -
Total tax effect of adjustments 40 25
Headline earnings 14 433 5 047
* Restated, refer to note 6
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS
for the six months ended 30 September 2015
1. BASIS OF PREPARATION
The unaudited consolidated condensed results for the six months to September 2015
have been prepared in accordance with, and containing the information as required
by, International Accounting Standard (IAS) 34: Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
the Financial Reporting Pronouncements as issued by the Financial Reporting Standards
Council and are in compliance with the Listings Requirements of the JSE Limited and
the requirements of the South African Companies Act as amended. These results do not
include all the information required for a complete set of IFRS financial statements.
However, selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the Group's financial position
and performance since the last annual consolidated financial statements for the year
ended 31 March 2015.
These results have been prepared under the supervision of the Financial Director,
Gys Wege (CA)SA, and have not been audited or reviewed by the Group's auditors, KPMG Inc.
2. SIGNIFICANT ACCOUNTING POLICIES
The unaudited consolidated condensed results have been prepared under the historic
cost convention, except for the revaluation of certain properties and financial
instruments. The accounting policies adopted are in terms of IFRS and consistent with
those followed in the preparation of the Group's annual financial statements for the
year ended 31 March 2015, except for the adoption of new standards and interpretations
effective as at 1 April 2015. The new standards have no impact on the consolidated
condensed financial statements.
3. CAPITAL EXPENDITURE AND COMMITMENTS
Rand thousands Unaudited Unaudited Unaudited Unaudited
capital capital contractual contractual
expenditure expenditure commitments commitments
2015 2014 2015 2014
Investment property 15 358 20 721 - 40 000
Land and buildings 22 607 436 6 236 -
Plant and equipment 16 028 31 832 8 577 -
Intangible assets - 9 690 - -
Total 53 993 62 679 14 813 40 000
4. ISSUE OF SHARES
During the period 677 746 ordinary shares were issued in terms of the Group's share
incentive scheme.
5. DILUTED WEIGHTED AVERAGE NUMBER OF SHARES
The difference between the weighted average number of shares and the diluted weighted
average number of shares are due to the impact of the unexercised options under the
Group's incentive scheme.
6. CHANGE IN COMPARATIVES
Deneb unbundled from Seardel Investment Corporation Limited (Seardel) and listed on
the JSE on 1 December 2014. Deneb did not prepare consolidated results in the normal
course of business and accordingly prepared the pre-listing statement and interim
financial statements for the six months ended 30 September 2014 by extracting historical
assets, liabilities, revenue and expenses from the consolidated financial statements
of Seardel (carve-out results).
The carve-out results contains the financial performance of the businesses which formed
part of the newly constituted Deneb Group, excluded the results of the discontinued
businesses and assumed amounts owing to Seardel by Deneb and its subsidiaries were
acquired at the beginning of the comparative period. The directors are of the opinion
that the preparation of the carve-out results on this basis provided shareholders with
the most appropriate representation of the past performance of Deneb.
The comparative results contained in these interim results to September 2015,
however, have been prepared in accordance with the principles of book value accounting.
This requires the assets and the liabilities acquired by Deneb to be accounted for
using the same book values as contained in the interim consolidated financial statements
of the transferor, Seardel. This basis of preparation differs from the basis of
preparation as applied in the carve-out interim results for the six months to
September 2014 as follows:
6.1 Discontinued operations
The carve-out interim results assumed that the apparel manufacturing businesses were
disposed to a third party as a going concern on 31 March 2011. The comparatives in
these results have been prepared using book value accounting and therefore the sale
of the apparel manufacturing businesses are disclosed as contained in the interim
financial statements of Seardel:
Financial effect:
Rand thousands Interim
carve-out Interim
results results
2014 2014
Statement of profit or loss and other comprehensive income
Profit from discontinued operations, net of tax - 380
In addition, the clothing factory shop operation was discontinued during the period
ending 31 March 2015 and the comparatives are restated accordingly.
Financial effect:
Rand thousands Interim
carve-out Interim
results results
2014 2014
Statement of profit or loss and other
comprehensive income - profit/(loss)
Revenue 12 672 -
Gross profit 44 -
Net loss included in continued operations (4 320) -
Loss from discontinued operations, net of tax - (4 320)
6.2 Taxation
The carve-out interim results assumed that the deferred tax asset in a subsidiary
is fully recoverable retrospectively from 31 March 2011. The comparatives in these
results have been prepared using the book value of the deferred tax asset as contained
in the interim financial statements of Seardel.
Financial effect:
Rand thousands Interim
carve-out Interim
results results
2014 2014
Statement of financial position
Deferred tax asset 141 399 58 738
6.3 Share-based benefits
With effect from 1 October 2014 the participants of the Seardel Share Incentive Scheme
had no further rights under the scheme and all unvested share options issued in terms
of the scheme lapsed. The Deneb Share Incentive Scheme was established on 10 October 2014.
The carve-out interim results assumed that Deneb received all amounts owing by its
subsidiaries in terms of the Seardel incentive scheme. The comparatives in these results
reflect the book value of the share-based liability as reflected in the interim financial
statements of Seardel.
Financial effect:
Rand thousands Interim
carve-out Interim
results results
2014 2014
Statement of financial position
Share-based liability - (35 631)
6.4 Treasury shares in Seardel Investment Corporation held by a subsidiary
Shares held by a subsidiary in Seardel were disclosed as treasury shares in the
carve-out interim results. In the comparative results these shares have been disclosed
as investments and revalued to fair value through equity at period-end.
Financial effect:
Rand thousands Interim
carve-out Interim
results results
2014 2014
Statement of financial position
Other investments - 40 065
6.5 Earnings per share
The effect of the above change in the basis of preparation between the comparatives
for the six months to September 2015 and the interim carve-out results for the
period ended 30 September 2014 are as follows:
Rand thousands Statement
of profit or Weighted
loss and other average
comprehensive number Earnings/(loss)
income of shares per share
'000 cents
Interim carve-out results 4 847 539 776 0,90
Continued operations 4 847 0,90
Discontinued operations - -
Discontinued operations - apparel
manufacturing business 380 0,10
Interim comparative results 5 227 1,00
Continued operations 9 167 1,70
Discontinued operations (3 940) (0,70)
7. POST-PERIOD END EVENTS
There has been no reportable post-period end events.
8. DIVIDENDS
The directors have resolved not to declare a dividend for the six months ended
30 September 2015 (2014: Nil).
COMMENTARY
for the six months ended 30 September 2015
The period under review saw revenue rise by 6% on the back of stronger demand in the
manufacturing businesses. The increased turnover, particularly in the textile segment,
is largely due to the prior period representing a low base rather than any robust demand.
The current period has remained challenging particularly for the businesses that interface
with the retail, mining and agricultural sectors. However, all the work that has gone into
deepening and diversifying revenue streams, is bearing fruit and we are pleased with the
growing resilience of the Group.
Operating profit was up 126% to R58,3 million through a combination of increased revenue,
improved gross margins which were up 600 basis points to 24%, and good cost containment.
The increase in finance costs is largely due to the prior period being lower than normal
as Deneb had short-term use of the cash raised in the Seardel rights issue. This,
together with increased working capital levels and rate increases, saw finance costs
rise by 88% on a net basis.
SEGMENTAL RESULTS
PROPERTIES
Revenue was up 2% to R66 million with 72% of the revenue derived from tenants external
to the Group. The property segment's results need to be considered in light of the fact
that the average gross lettable area reduced from 427 500 square metres in the prior
period to 396 250 square metres in the current period, a reduction of 7,3%. The reduction
is because the Group has disposed of properties that were not expected to deliver
acceptable yields. In time the Group will look to augment the property portfolio with
new property acquisitions or developments.
BRANDED PRODUCTS
Revenue was flat when compared to the prior period as the prior period included quite
substantial revenue from the launch of Xbox One. In addition, retail customers are
buying later in the cycle and the net overall retail environment is under increased
pressure. On the positive side, good progress is being made at Seartec and Brand ID,
where revenue is up 54% and 29% respectively.
The operating margins within this segment are being influenced by some loss-making
start-up and turnaround businesses, which effect is more strongly felt in the traditionally
slower first half. The start-up businesses form part of a strategy to deepen and widen
distribution channels and we remain confident that this segment will deliver enduring
benefits to shareholders in the medium term.
INDUSTRIAL MANUFACTURING
The absence of any significant industrial action in the current period saw revenue grow
by 8% whilst operating profit grew by 69% off a low base. The businesses in this segment
mostly run at below capacity and any incremental turnover that can be derived should
have a disproportional effect on the operating profit line. We see this segment as a
further growth area for the Group and we will look to acquire complementary businesses
in the industrial manufacturing space as and when opportunities arise.
TEXTILE MANUFACTURING
The current period saw revenue grow by 14% and operating profit improve by R19 million
from a loss of R12 million in the prior period, to a profit of R7 million in the current
period. The reduced level of tenders around election time and the effects of the
industrial action experienced meant that the prior period was particularly poor.
Although it is pleasing that the businesses in this segment returned a profit, operating
profit margins remain extremely thin. We continue to look for ways to unlock value in
this segment.
Signed for and on behalf of the board in Cape Town on 19 November 2015.
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
Registered office:
5th Floor, Deneb House, Cnr Main and Browning Roads, Observatory 7925, Cape Town
PO Box 1585, Cape Town 8000
Income tax registration number: 9844426156
Directors: J A Copelyn* (Non-executive Chairperson), M H Ahmed*^ (Lead Independent
Director), D Duncan, T G Govender*, L Govender*^, N Jappie*^, A M Ntuli,
S A Queen (Chief Executive Officer), Y Shaik*, R D Watson*^, G D T Wege (Financial Director)
(* Non-executive ^ Independent)
Company secretary: HCI Managerial Services Proprietary Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg 2001; PO Box 61051, Marshalltown 2107
Auditors: KPMG Inc.
Sponsors: PSG Capital Proprietary Limited
www.deneb.co.za
Date: 19/11/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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