Wrap Text
Provisional audited condensed financial results for the year ended 30 November 2015
STELLAR CAPITAL PARTNERS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/015580/06)
Share code: SCP
ISIN: ZAE000198586
PROVISIONAL AUDITED CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2015
INTRODUCTION
Stellar Capital Partners Limited ("Stellar Capital" or "the Company" or "the Group") presents its results for the year ended 30 November 2015
following the completion of the Company's conversion from an operating entity to an investment holding company.
HIGHLIGHTS: YEAR ENDED 30 NOVEMBER 2015
- Successful conversion from an operating entity to an investment holding company;
- Completed disposals of Digicore Holdings Ltd and Goliath Gold Mining Ltd;
- Completed acquisition of 34.62% of Torre Industries Ltd and 45.99% of Cadiz Holdings Ltd;
- Raised a total of R1.15bn of new capital via the issue of R0.55bn of new ordinary shares and R0.6bn of convertible preference
shares; and
- Increased the scale and improved the quality of the investment portfolio, setting a stronger base for the new financial year.
SUM-OF-THE-PARTS NET ASSET VALUE
The Company's sum-of-the-parts ("SOTP") net asset value is presented as follows:
30-Nov-
15
Asset/Liability Note R'000 % of
reference portfolio
Torre Industries Ltd 7.1.1 900,833 36%
Cadiz Holdings Ltd 7.2.2 134,390 5%
Tellumat (Pty) Ltd 7.2.1 100,119 4%
Praxis Financial Services (Pty) Ltd(1) 7.2.4 and 9 40,000 2%
Integrated Equipment Rentals (Pty) Ltd(1) 7.2.3 and 9 23,417 1%
Other Assets
-Cash and Cash Equivalents 797,760 32%
-Other financial assets 10 370,525 15%
-Loan portfolio 8 73,602 3%
-Other listed investments(1) 25,582 1%
-Other assets 7,049 0%
Total Assets 2,473,277 100%
Convertible redeemable preference share funding -548,478
Trade and other payables -42,778
Total SOTP value 1,882,021
Shares in issue (m) 925.46
SOTP value per share pre-convertible preference share conversion (Rand) 2.03
SOTP value per share post-convertible preference share conversion (Rand)(2) 2.13
Notes
(1) Fair value of equity and loan to portfolio company
(2) Assumed issuance of a maximum 215.8 million ordinary shares at R2.78 per share in settlement of convertible preference share funding
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
At 30 November 2015
R'000 Notes 2015 2014
ASSETS
Non-current assets 1,278,806 6,483
Listed investments at fair value 7.1 914,859 3,267
Unlisted investments at fair value 7.2 234,509 -
Loan investments 8 56,631 -
Loans to portfolio companies 9 18,978 -
Other financial assets 10 46,803 -
Deferred taxation 7,026 3,216
Current assets 1,194,471 76,638
Loan investments 8 16,971 22,231
Loans to portfolio companies 9 55,995 -
Other financial assets 10 323,722 50,502
Trade and other receivables 23 571
Cash and cash equivalents 797,760 3,334
Non-current assets held for sale - 129,668
TOTAL ASSETS 2,473,277 212,789
EQUITY AND LIABILITIES
Equity 1,882,021 179,108
Equity attributable to owners of the parent 11 1,882,021 193,329
Non-controlling interest - (14,221)
LIABILITIES
Non-current liabilities 497,660 -
Preference share liability 11 497,660 -
Current liabilities 93,596 4,132
Preference share liability 11 50,818 -
Current tax payable 204 421
Trade and other payables 12 42,574 3,711
Liabilities of disposal group held for sale - 29,549
TOTAL EQUITY AND LIABILITIES 2,473,277 212,789
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 November 2015
Year ended 15 months ended 30
R'000 30 November 2015 November 2014
Continuing operations
Fair value adjustments (21,334) 414
Interest revenue 24,308 7,913
Dividends received 9 -
Service revenue - 797
Cost of sales - (490)
Gross income from investments 2,983 8,634
Other income 7,356 10,853
Finance costs (202) (2,360)
Net income before operating expenses 10,137 17,127
Operating expenses
- Management fee (8,292) -
- Impairment (1,173) (2,950)
- Loss on disposal of Consolidated Subsidiaries (13,935) -
- Other operating expenses (16,183) (12,378)
(Loss)/profit before taxation (29,446) 1,799
Taxation 1,505 1,617
(Loss)/profit from continuing operations (27,941) 3,416
Discontinued operations
Net loss from discontinued operations (8,747) (92,469)
Loss for the period (36,688) (89,053)
Loss for the period attributable to: (36,688) (89,053)
Equity owners of the parent (36,688) (94,293)
Non-controlling interest - 5,240
(Loss)/profit from continuing operations attributable to: (27,941) 3,416
Equity owners of the parent (27,941) (1,824)
Non-controlling interest - 5,240
Loss from discontinued operations attributable to: (8,747) (92,469)
Equity owners of the parent (8,747) (92,469)
Non-controlling interest - -
Loss per share
Basic and diluted loss per share (cents) (12.29) (94.12)
From continuing operations (9.36) (1.82)
From discontinued operations (2.93) (92.30)
Reconciliation between loss and headline loss 2015 2014
Continuing operations
Basic loss attributable to equity owners of parent (27,941) (1,824)
Loss on disposal of Consolidated Subsidiaries 13,935 -
Impairment of intangible assets - 32
Tax effects of adjustments - -
Headline loss attributable to equity owners of parent (14,006) (1,792)
Discontinued operations
Basic loss attributable to equity owners of parent (8,747) (92,469)
Loss on disposal of Consolidated Subsidiaries 4,847 71,466
Loss on disposal of property, plant and equipment 109 1,058
Impairment of goodwill - 5,435
Tax effects of adjustments (31) -
Headline loss attributable to equity owners of parent (3,822) (14,510)
Headline and diluted headline loss per share for the period (cents) (5.97) (16.27)
From continuing operations (4.69) (1.79)
From discontinued operations (1.28) (14.48)
The issue of 600 convertible redeemable preference shares (refer note 11) has not been treated as dilutive in calculating diluted earnings
and headline earnings per share as the conversion thereof will result in a decrease in loss per share from continuing operations (i.e. the
conversion is anti-dilutive).
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 November 2015
Attributable
to equity
owers of Non-
R'000 the parent controlling interest Total equity
Balance at 1 September 2013 219,113 (8,605) 210,508
(Loss)/profit for the period (94,293) 5,240 (89,053)
Equity settled share based payments 3,420 - 3,420
Shares vested in terms of forfeitable share plan 1,350 - 1,350
Own shares acquired by subsidiaries, held as treasury shares (78) - (78)
Transactions with non-controlling interest 63,817 (10,856) 52,961
Balance at 1 December 2014 193,329 (14,221) 179,108
Loss for the year (36,688) - (36,688)
Issue of shares 1,734,313 - 1,734,313
Capitalisation of share issue costs (20,641) - (20,641)
Disposal of treasury shares 1,114 - 1,114
Disposal of subsidiary 10,594 14,221 24,815
Balance at 30 November 2015 1,882,021 - 1,882,021
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
For the year ended 30 November 2015
R'000 2015 2014
Cash generated from operating activities 45,458 2,258
Cash (utilised in) / generated from investing activities (279,154) 26,958
Cash generated from / (utilised in) financing activities 1,028,122 (26,761)
Net cash increase in cash and cash equivalents 794,426 2,455
Cash and cash equivalents at the beginning of the period 3,334 (377)
Transferred to disposal group held for sale - 1,256
Total cash and cash equivalents at end of the period 797,760 3,334
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL RESULTS
1. REPORTING ENTITY
Stellar Capital is a South African domiciled investment holding company listed on the main board of the Johannesburg Stock
Exchange ("JSE").
The Company has adopted the investment entity exemption in IFRS 10 Consolidated Financial Statements ("IFRS 10") as at 30
November 2015, which results in the holding company being classified as an Investment Entity. Subsidiaries that mainly perform an
investment holding function are accounted for as Investment Entities at fair value through profit and loss (Investment Entities at
FVTPL). ConvergeNet Management Services (Pty) Ltd, a subsidiary which provides services to the Group and to third parties and
which does not hold investments continues to be consolidated.
During the year under review, the Company disposed of its 100% interest in ConvergeNet SA (Pty) Ltd, Navix Distribution (Pty) Ltd,
Northbound Communication Solutions (Pty) Ltd and Simat Management Company SA (Pty) Ltd which were previously held as
dormant subsidiaries.
These results have been prepared by DJ Hoek CA(SA) under the supervision of CB de Villiers CA(SA), the Chief Financial Officer of
Stellar Capital.
2. STATEMENT OF COMPLIANCE
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS")
as issued by the International Accounting Standards Board ("IASB") including IAS 34: Interim Financial Reporting ("IAS 34") and
comply with the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the JSE Listings
Requirements and the requirements of the South African Companies Act, No 71 of 2008. The results include, as a minimum the
information required by IAS 34. They 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 audited consolidated financial statements as at and for the
fifteen months ended 30 November 2014. Shareholders are therefore advised that, in order to obtain a full understanding of the
nature of the auditor's engagement, they should obtain a copy of the auditor's report together with the accompanying financial
information from the Company's registered office.
3. APPROVAL, STATEMENT OF RESPONSIBILITY and AUDITOR'S OPINION
These consolidated condensed financial statements were approved by the Board of Directors on 22 February 2016 and are not
themselves audited. The directors take full responsibility for the preparation of these results, which have been correctly extracted
from the audited annual financial statements of the Group.
The unmodified audit opinion of the auditors, Grant Thornton Cape Inc. in respect of the consolidated financial statements of the
Group for the year ended 30 November 2015 is available for inspection at the offices of the Company at Third Floor, The Terraces,
25 Protea Road, Claremont, Cape Town.
4. ACCOUNTING POLICIES
The accounting policies are consistent with those applied in the previous period except for the adoption of the investment entity
exemption in IFRS 10 as detailed in note 1. The Group has also adopted new, revised or amended accounting standards issued by
the IASB and IFRS Interpretation Committee (IFRIC) which were effective and applicable to the Group from 1 January 2014.
Given the nature of the Group's operations, all portfolio investments are accounted for at fair value through profit and loss ("FVTPL") in terms of IAS 39 Financial
Instruments: Recognition and Measurement ("IAS 39"), irrespective of whether they are subsidiaries or associates.
Subsidiaries are entities that the Group controls by being exposed to, or having rights to, variable returns from its involvement with
that entity and, where the Group has the ability to affect those returns through its power over the entity.
The subsidiaries of the Group are entities that:
i. comprise portfolio investments; and
ii. provide services to third parties and related companies.
Subsidiaries classified as (i) are classified as Investment Entities under IFRS 10. Investment Entities are exempt from consolidation
and measured at fair value on date of acquisition in terms of IAS 39. Changes in fair value subsequent to acquisition, primarily driven
by revaluation of portfolio investments, are recognised in profit and loss in the period of change. Subsidiaries classified as (ii) are not
Investment Entities and continue to be consolidated ("Consolidated Subsidiaries").
Where the Group does not have control, but has significant influence, these investments are classified as associates. The Group
does not have any joint ventures. Given the nature of the Group's operations, associates are accounted for at acquisition at FVTPL
in line with the exemption from applying the equity method of accounting provided in IAS 28 Investments in Associates and Joint
Ventures. Changes in fair value subsequent to acquisition are recognised in profit or loss in the period of change.
4.1. Transitional provisions under IFRS 10
The directors have assessed the impact of the adoption of IFRS 10 on the prior reporting period and have concluded that the
effect thereof is not material due to the investment entity exemption in IFRS 10 only being applied to investments acquired
upon the conversion of the Company to an investment entity during the current period, which investments were not held by the
Company during the prior reporting period. Subsidiaries that provide services to the Group or third parties held during the prior
period and current period have continued to be consolidated in accordance with IFRS 10. As a result, there are no investments
in subsidiaries measured at FVTPL which were previously consolidated and therefore no restatement of prior period
disclosures is required under the transitional provisions of IFRS 10. The only subsidiaries of the Company held in the prior
year which would have qualified as Investments at FVTPL in the current year were classified as a disposal group held for sale
measured at fair value less costs to sell in accordance with the requirements of IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations and disposed of during the current financial year. The non-current assets and liabilities of the
disposal group classified as held for sale were presented a single amounts in the statement of financial position. Should the
disposal group have been held as an Investment at FVTPL in the prior reporting period, the non-current assets and liabilities of
the disposal group held for sale would have been presented as a single non-current Investment at FVTPL at the same amount
as disclosed in the prior reporting period due to selling costs being immaterial. The post-tax losses of the discontinued
operations as well as the post-tax losses recognised on the measurement to fair value less costs to sell, which were disclosed
as a single amount in the statement of comprehensive income would have been disclosed as fair value adjustments. No
change would have resulted in the Group's key reporting metric of net asset value per share or shareholder equity.
5. COMPARATIVE FIGURES
Unless otherwise indicated, comparative figures refer to the fifteen months ended 30 November 2014. The financial year-end of the
Company was amended from August to November during the prior reporting period. As such, the prior reporting period covers
fifteen months of operations which is not directly comparable to the twelve months of trading during the current reporting period.
6. SEGMENT INFORMATION
As the Group has only one business segment which is managed as a single pool of capital irrespective of the sector in which the
Group's investees trade, segmental reporting is not applicable.
During the prior reporting period, as the Group had no continuing operations at 30 November 2014 pending completion of the sale of
Chrystalpine Investments 9 (Pty) Ltd group and Structured Connectivity Solutions (Pty) Ltd, no segmental reporting was applicable to
the prior reporting period as the key operating decision maker in the prior year, Mr PJ van Zyl, managed the continuing operations of
the Group as a single segment. The Group did not manage the discontinued operations as segments during the interim period
between the date of the sale agreements having been entered into and the effective date of the sale transactions.
7. INVESTMENTS AT FAIR VALUE
Principle
place of
% held Nature of operations business
Investments in listed shares
Torre Industries Ltd 34.62% Industrial group that distributes and South Africa
rents capital equipment and supplies
aftermarket parts to the mining,
construction, manufacturing and
industrial markets across Africa
Goliath Gold Mining Ltd 21.77% Mining exploration South Africa
Mine Restoration Investments Ltd 33.58% Processing and screening of coal South Africa
fines, a by-product of coal mining
Investments in unlisted shares
Tellumat (Pty) Ltd 30.00% Technology solutions and services in South Africa
Manufacturing, air traffic control
systems, defence and security and
turnkey infrastructure solutions for the
telecommunications industry
Cadiz Holdings Ltd (held indirectly and via Friedshelf 1678 Ltd) 45.99% Financial services group specialising in South Africa
institutional and personal investments
Integrated Equipment Rentals (Pty) Ltd 50.00% Specialised ICT Asset Finance South Africa
Solutions
Praxis Financial Services (Pty) Ltd 51.00% Provider of short term finance to the South Africa
panel beating industry to address
motor body repairers' working capital
needs
Reconciliation of investments at fair value through profit and loss
R'000 Opening Proceeds from Realised Unrealised Closing
Group 2015 balance Acquisitions disposals gains/(losses) (losses)/gains balance
Torre Industries Ltd(1) - 913,822 (1,376) 78 (11,691) 900,833
Goliath Gold Mining Ltd(2) 316 64,199 (46,803) (17,712) - -
Mine Restoration Investments Ltd 2,951 25,272 (51) - (14,146) 14,026
Digicore Holdings Ltd(3) - 192,748 (209,848) 17,100 - -
Tellumat (Pty) Ltd(4) - 100,119 - - - 100,119
Cadiz Holdings Ltd - 129,353 - - 5,037 134,390
Integrated Equipment Rentals (Pty) Ltd - - - - - -
Praxis Financial Services (Pty) Ltd - - - - - -
3,267 1,425,513 (258,078) (534) (20,800) 1,149,368
(1) Prior to the acquisition 34.62% of Torre Industries Ltd, 290,000 shares were purchased for R1.3 million and later disposed of for R1.4 million. The total acquisition cost per the
above table includes both the R1.3 million purchase and the 34.62% acquisition for R912.6 million.
(2) On 18 November 2015 the Company disposed of its investment in Goliath Gold Mining Ltd for R51.7 million, which is receivable on 6 June 2017. The present value of these
proceeds (R46.8 million) has been recognised in other financial assets (refer to note 10).
(3) The acquisition cost of Digicore Holdings Ltd includes the issue of 36,758,132 ordinary Stellar Capital shares at R2.00 per share in terms of a purchase price adjustment agreed
upon with the original vendors and as detailed in the Company Circular to shareholders dated 18 August 2015
(4) The investment in Tellumat (Pty) Ltd was acquired as settlement of the consideration due in respect of the sale of Chrystalpine (Pty) Ltd Group (incorporating Andrews Kit (Pty)
Ltd) and Structured Connectivity Solutions (Pty) Ltd, which were previously classified as a Disposal Group held for sale (refer to note 13).
R'000 Opening Proceeds from Realised Unrealised Closing
Group 2014 balance Acquisitions disposals gains gains / (losses) balance
Torre Industries Ltd - 10,874 (11,734) 860 - -
Goliath Gold Mining Ltd - 409 - - (93) 316
Mine Restoration Investments Ltd - 3,304 - - (353) 2,951
- 14,587 (11,734) 860 (446) 3,267
7.1. Listed investments
7.1.1. Torre Industries Ltd (listed investment)
The investment in Torre, comprising 34.62% of the ordinary issued share capital of Torre, was acquired on or about
26 October 2015. The purchase consideration was settled by way of:
i. The issue of 390,086,494 ordinary shares in the Company at R2.00 per share; and
ii. Cash payment in the amount of R132.4 million,
(collectively comprising the R912.6 million "Transaction Value" or R5.20 per Torre share).
The Transaction Value represented a 16.8% premium to the 30-day VWAP of Torre on the date on which the Company
published its firm intention announcement (6 July 2015 at R4.46), which management views as in line with comparable
market transactions for the acquisition of marketable, non-controlling stakes in listed entities above R500 million (Market
Premium). The average bid premia since 2006 for similar transactions is 26%. The Market Premium in relation to the Torre
investment of 16.8% is therefore considered to be reasonable in relation to similar market transactions concluded.
Management have considered the impact of the following factors in assessing the fair value of the investment in Torre:
- The investment was acquired in an orderly market transaction;
- The size of the investment acquired represents a significant marketable, non-controlling stake exceeding R500 million,
which is measured by management as a single unit of account; and
- The investment was acquired within close proximity to the measurement date.
As a result of the impact of the aforementioned factors, the Torre investment has been valued at FVTPL at R900.8 million
or R5.14 per Torre share by reference to the price of recent transactions at Transaction Value, which has been adjusted
downwards in the amount of R11.7 million or 6 cents per Torre share by management for the change in the 30-day VWAP
of Torre shares between the date of the firm intention announcement (6 July 2015 at R4.46 per Torre share) and the close
of the financial reporting period (30 November 2015 at R4.40 per Torre share).
7.1.2. Goliath Gold Mining Ltd (listed investment)
On 21 September 2015 Gold One Africa Ltd made a firm intention offer to acquire all of the shares in Goliath Gold not
already owned by way of a scheme of arrangement (Offer). In terms of the Offer, shareholders may elect to receive either
R1.00 on the implementation date, being 28 December 2015, or R1.60 after the expiry of a period of 18 months after the
implementation date, being 6 June 2017 (Deferred Consideration). On 18 November 2015, all outstanding conditions
precedent to the Scheme were fulfilled. The Company has elected to receive the Deferred Consideration in respect of its
21.77% holding in the ordinary shares of Goliath Gold. The deferred proceeds have been recognised as other financial
assets (refer to note 10).
7.1.3. Mine Restoration Investments Ltd (listed investment)
The increased investment in MRI to 33.58% of the issued ordinary shares of MRI, was acquired on or about 16 January
2015, bringing the total investment value to R28.2 million or 10 cents per share ("Transaction Value"). On 20 July 2015,
MRI announced that its operations had been placed under care and maintenance.
As a result, management have valued the MRI investment at the R14.0 million or 5 cents per MRI share by reference to
the price of recent transactions at Transaction Value, which has been adjusted downwards in the amount of 5 cents per
MRI share primarily due to a lack of liquidity and market activity in MRI shares. The valuation represents a discount to the
6 cents per share closing market price of MRI shares on 30 November 2015.
The adjusted market value method applied is considered to be appropriate given that while MRI's operations have been
placed under care and maintenance, pricing has taken into account the announced intention to acquire a strategic stake in
Iron Mineral Beneficiation Services (Pty) Ltd ("IMBS"), which is to be funded by way of a capital raise at 7 cents per share.
7.2. Unlisted investments
7.2.1. Tellumat (Pty) Ltd (unlisted investment)
The investment in Tellumat was acquired on or about 16 January 2015 at R100.1 million ("Transaction Value").
The Tellumat investment has been valued at FVTPL at R100.1 million by reference to the price of recent transactions at
Transaction Value. Management are not aware of any factors or circumstances which require adjustment to the carrying
value of the Tellumat investment.
7.2.2. Cadiz Holdings Ltd (unlisted investment)
The investment in Cadiz, comprising a 45.99% shareholding in the ordinary shares of Friedshelf 1678 Ltd, the unlisted
holding company of Cadiz, was increased to R129.4 million ("Transaction Value") on or about 15 October 2015, from an
initial acquisition value of R50.6 million.
The Cadiz investment has been valued at FVTPL at R134.4 million by reference to the price of recent transactions at
Transaction Value. Management are not aware of any factors or circumstances which require adjustment to the carrying
value of the Cadiz investment.
7.2.3. Integrated Equipment Rentals (Pty) Ltd (unlisted investment)
The investment in IE Rentals, comprising 50% of the issued ordinary shares of IE Rentals, was acquired for a nil
consideration in July 2015 as this represented the first month of trading for the company ("Transaction Value"). As at
30 November 2015, IE Rentals is trading materially at break-even. Assets, when fairly valued, are exceeded by liabilities in
the amount of R0.1 million due to start-up costs. The EBIT of IE Rentals sufficiently covers the cash flow required to
service the loan from Stellar Capital. The loan to IE Rentals (refer to note 9) is considered fully recoverable from the
ordinary operating cash flows of the entity.
The IE Rentals investment has been valued at FVTPL at Rnil by reference to the price of recent transactions at
Transaction Value. Management are not aware of any factors or circumstances which require adjustment to the carrying
value of the IE Rentals investment.
7.2.4. Praxis Financial Services (Pty) Ltd (unlisted investment)
The investment in Praxis was acquired for a nominal consideration during May 2015 ("Transaction Value"), during which
time the company was in a period of shareholder and operational restructuring. The company has returned to marginal
profitability following the period of restructuring. Assets, when fairly valued, are exceeded by liabilities in the amount of
R21.7 million, mainly due to historic losses. The EBIT of Praxis sufficiently covers the cash flow required to service the
loan from Stellar Capital. The loan to Praxis (refer to note 9) is considered fully recoverable from the ordinary operating
cash flows of the entity.
The Praxis investment has been valued at FVTPL at Rnil by reference to the price of recent transactions at Transaction
Value. Management are not aware of any factors or circumstances which require adjustment to the carrying value of the
Praxis investment.
8. LOAN INVESTMENTS
Loan syndication agreements have been entered into between Stellar Capital and AfrAsia Special Opportunities Fund (Pty) Ltd
("ASOF"), whereby the Company has participated in loans advanced by ASOF to various private entities unrelated to the Company
and which earn yields between 18% and 26.5% per annum. As a minimum, the security held over each loan covers the outstanding
loan balance. Loans are repayable on or before 31 August 2017. The carrying amount of loan investments is considered to
approximate fair value as the current rates charged are commensurate with the credit risks associated with each loan and are
therefore considered to be market-related.
9. LOANS TO PORTFOLIO COMPANIES
R'000 Interest Rate 2015 2014
Integrated Equipment Rentals (Pty) Ltd 7,372 -
Initial facility
The loan is secured by a cession in securitatem debiti of the book debts 18% per annum
and bank accounts and a shareholder guarantee and cession in
securitatem debiti of all shares in IE Rentals not held by the Company.
The value of the security held is considered to cover the initial facility and
the drawdown facility. Interest and capital is repaid monthly. The loan is
to be fully repaid on or before 31 May 2020.
Integrated Equipment Rentals (Pty) Ltd 16,045 -
Drawdown facility
In addition to the initial loan advanced above, a drawdown agreement is Prime + 5%
in place, which holds the same security as the initial facility. The value of
the security held is considered to cover the initial facility and the drawdown
facility. Interest is serviced monthly with capital repayments being made
as available cash allows. The total facility available is R25 million as at
the reporting date and was increased to R50 million on 22 February 2016.
Each drawdown is repayable within 70 months from the advance date. The
average remaining term of all drawdowns is 69 months.
Mine Restoration Investments Ltd 11,556 -
The loan is secured by subordination of Iron Mineral Beneficiation Prime + 2%
Services (Pty) Ltd shareholder loans and shareholder guarantees to the
value of R9.7 million and by a cession and pledge of 100% MRI
shareholding of and claims against its wholly-owned subsidiary.
Subsequent to year end, the loan terms were amended. With effect from
1 January 2016 the interest rate was increased to prime plus 6%. Interest
accruing up until 31 December 2015 is capitalised to the loan and is only
repayable on 31 March 2016. Interest accruing from 1 January to 31
March 2016 on capital of R9,5 million is repayable monthly in arrears.
Remaining interest and capital is repayable on 31 March 2016.
Praxis Financial Services (Pty) Ltd 40,000 -
The loan is secured by cession of book debts, bank accounts and 20% per annum
intellectual property and software, a pledge of shares in Praxis and a
subordination of shareholder claims against Praxis. The value of the
security held provides a 100% cover ratio. Interest is serviced monthly.
The loan terms were amended with effect from 1 January 2016 as
follows: interest rate was reduced to prime plus 8%; and the loan became
repayable in three bullet payments of R12 million on 31 December 2016,
R12 million on 31 December 2017 and the remaining balance on 31 December 2018.
74,973 -
Short term portion of loans to portfolio companies 55,995 -
Long term portion of loans to portfolio companies 18,978 -
74,973 -
Balances are not considered to be past due or impaired at year end. A relief period was granted to Praxis from 1 January to 30 June
2015, over which time interest was not serviced monthly, but was capitalised to the loan balance. Once the relief period had ended,
Praxis returned to a monthly repayment schedule and has since repaid all accrued interest to date at year end.
10. OTHER FINANCIAL ASSETS
A refundable deposit of R200 million has been paid to Asgard Capital Assets, Friedshelf 1638 (Pty) Ltd and Makana Financial
Services (Pty) Ltd in respect of the acquisition of an additional shareholding in Friedshelf 1678 Ltd and Tellumat (Pty) Ltd. The
deposit does not accrue interest and is repayable upon completion of the transactions, which is expected to be within a period of six
months.
As at 30 November 2015, all shares had been listed in terms of the Rights Offer, however proceeds on the ordinary share issuance
of R89.0 million were only received on 1 and 2 December 2015 in respect of excess applications and shares taken up by
underwriters, which were allotted on 2 December 2015.
Proceeds of the disposal of the investment in Goliath Gold are to be received on 6 June 2017 (refer note 7.1.2) and have therefore
been discounted in order to obtain a present value of R46.8 million. The 3-month JIBAR rate of 6.3% has been used as a discount
rate. The discount rate is considered to be commensurate with the credit risk associated with the receivable, which is guaranteed by
Rand Merchant Bank.
A loan of R34.7 million to Lavender Sky Investments 40 (Pty) Ltd accrues interest at the prime rate and is secured by a pledge of
ordinary shares in Friedshelf 1678 Ltd, which approximates the full value of the loan. The loan was repaid in January 2016.
11. SHARE CAPITAL
Ordinary share capital
With effect from 20 January 2015, the authorised ordinary share capital of the Company was increased from 200,000,000 ordinary
shares of no par value to 1,000,000,000 ordinary shares of no par value. On 19 November 2015, the authorised share capital of the
Company was increased by a further 1,000,000,000 ordinary shares of no par value such that the Company had 2,000,000,000
authorised ordinary shares of no par value at the reporting date.
During the year under review the Company issued a total of 824,509,803 ordinary shares as follows:
Number of ordinary Issue Price
shares issued Date (Rands)
Specific issue of shares for cash 75,000,000 30-Jan-15 2.00
Specific issue of shares to settle underwriting and commitment fees 2,525,000 30-Jan-15 2.00
Specific acquisition issue - Digicore Holdings Ltd 59,615,963 30-Jan-15 2.00
Specific acquisition issue - Goliath Gold Ltd 32,062,131 30-Jan-15 2.00
Specific acquisition issue - Mine Restoration Investments Ltd 12,636,332 30-Jan-15 2.00
Specific acquisition issue - Digicore Holdings Ltd purchase price adjustment 36,758,132 05-Oct-15 2.00
Specific acquisition issue - Torre Industries Ltd 390,086,494 26-Oct-15 2.00
Specific acquisition issue - Cadiz Holdings Ltd 41,912,707 02-Nov-15 2.00
Issue in terms of rights offer 173,913,044 30-Nov-15 2.30
Preference share capital
On 30 November 2015, the Company issued 600 convertible redeemable preference shares at R1 million each to raise R600 million
in funding. The preference shares were issued at a dividend rate of 95% of Prime and an initial conversion price of R2.78. The
redemption date is 31 May 2019. The preference shares are convertible, at the election of the holders, into a maximum of
215,827,338 ordinary shares.
Cumulative convertible redeemable preference shares issued by the Group have been treated as compound financial instruments in
accordance with IAS 32 Financial Instruments: Presentation ("IAS 32"). The liability and equity components of the Preference Shares
have been separately classified as financial liabilities at amortised cost in accordance with the effective interest rate method and
equity instruments respectively. The carrying amount of the financial liability component of the preference shares has been
determined with reference to the fair value by discounting the net present value of future cash flows, net of transaction costs, at
market rate at inception for a similar instrument without the equity conversion option, being 115% of Prime rate. The carrying amount
of the equity component of the compound financial instrument has been determined by deducting the fair value of the financial
liability component from the fair value of the compound financial instrument as a whole.
R'000
Preference share capital 2015 2014
Recognised as equity 33,119 -
Recognised as a liability 566,881 -
600,000 -
R'000
Reconciliation of preference share liability 2015 2014
Portion of capital raised recognised as a liability 566,881 -
Transaction costs (18,403) -
548,478 -
Short term portion of preference share liability 50,818 -
Long term portion of preference share liability 497,660 -
548,478 -
12. TRADE AND OTHER PAYABLES
Trade and other payables comprise trade payables of R35.2 million, other payables of R7.3 million. The trade payables primarily
relate to costs incurred in relation to the rights offer of R400 million and issuance of R600 million convertible preference share
funding (refer note 11).
13. DISCONTINUED OPERATIONS
On 5 September 2014, the Group concluded the terms of the sale of 100% of the Group's interest in Chrystalpine Investments
9 (Pty) Ltd (the 100% holding company of Andrews Kit (Pty) Ltd) and Structured Connectivity Solutions (Pty) Ltd, for R95.1 million and
R5 million respectively, to Tellumat (Pty) Ltd. The criteria for classification of these entities as a disposal group held for sale was met
on 31 August 2014 as management was committed to a plan to sell these entities which were available for immediate sale. An active
programme to locate a buyer had been initiated under the Group's restructuring mandate and negotiations in respect thereof were in
an advanced stage resulting in management concluding that the sale was highly probable within 12 months of classification as held
for sale. The purchase consideration was settled by Tellumat (Pty) Ltd by way of the issue of ordinary shares in Tellumat (Pty) Ltd
such that the Group holds 30% of the total issued ordinary shares of Tellumat (Pty) Ltd following the share issue (refer to note 7.2.1).
14. DIVIDEND
No dividend has been proposed for the year under review (2014:Rnil).
15. CHANGE TO THE BOARD OF DIRECTORS
- Mr PJ van Zyl was appointed as the permanent Chief Executive Officer of Stellar Capital with effect from 1 February 2015;
- On 5 October 2015, Mr CE Pettit, previously an independent non-executive director of the Company, replaced Mr Van Zyl as
Chief Executive Officer. Mr Van Zyl remains on the board as a non-executive director;
- Mr CB de Villiers was appointed a Chief Financial Officer with effect from 1 February 2015; and
- Mr CJ Roodt was appointed as an independent non-executive director with effect from 5 October 2015. He replaced Ms CH
Wiese, who acts as an alternate director for Ms CC Wiese.
16. CONTINGENT LIABILITIES
At the reporting date, the Company has issued a limited corporate guarantee in favour of the creditors of Praxis Financial Services
(Pty) Ltd in the amount of R11 million which expires on 30 September 2016. Subsequent to the reporting date, a further guarantee in
the amount of R5 million was issued which expires on 8 December 2016.
17. EVENTS AFTER THE REPORTING PERIOD
- On 1 and 2 December 2015, the Company received R89 million and on 2 December allotted a further 38,702,737 ordinary
shares in respect of the Rights Offer;
- On 21 January 2016, Stellar Capital announced the further acquisition of 12.18% of Cadiz Holdings Ltd (held via Friedshelf 1678
Ltd) for R35.2 million, which acquisition became unconditional on 27 January 2016; and
- On 9 February 2016, the Company announced the acquisition of a further 6.86% of Tellumat (Pty) Ltd for a total consideration of
R12.9 million, such that following the transaction, Tellumat (Pty) Ltd will be a wholly-owned subsidiary of Stellar Capital.
The directors are not aware of any other events after the reporting date which have a material impact on financial statements as
presented.
On behalf of the Board
CE Pettit CB de Villiers
Chief Executive Officer Chief Financial Officer
25 February 2016
CORPORATE INFORMATION
Directors
DD Tabata (Chairman)*^, CE Pettit (Chief Executive Officer), CB de Villiers (Chief Financial Officer), CJ Roodt*^, PJ Van Zyl^, L Mangope*^,
J de Bruyn*^, CC Wiese*^, CH Wiese*^~
(* Independent) (^ Non –executive) (~ Alternate)
Company Secretary
The Secretarial Company
Empire Park
Parktown
Johannesburg
2193
Registered office and business address
Third Floor
The Terraces
25 Protea Road
Claremont
Cape Town
7708
Postal address
Suite 229, Private Bag X1005
Claremont
Cape Town
7735
Transfer Secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street
Johannesburg
2001
Sponsor
Rand Merchant Bank (a division of First Rand Bank Limited)
Date: 25/02/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.