Wrap Text
Abridged report for the year ended 31 December 2015 and notice of annual general meeting
Andulela Investment Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1950/037061/06)
JSE share code: AND
ISIN: ZAE000172870
(“Andulela” or “the Company” or “the Group”)
Abridged Report for the year ended 31 December 2015 and notice of annual general meeting
Abridged statement of financial position
Year ended Year ended
31 December 31 December
2015 2014
Notes R’000 R’000
Assets
Non-current assets 722 653 749 394
Plant and equipment 1 290 286 308 444
Goodwill 2 418 679 418 679
Deferred tax asset 13 688 22 271
Current assets 275 144 261 885
Inventory 79 746 79 554
Trade and other receivables 177 777 158 588
Taxation 4 013 4 239
Cash and cash equivalents 13 608 19 504
Total assets 997 797 1 011 279
Equity and liabilities
Capital and reserves 446 668 440 993
Stated capital 976 114 976 114
Revaluation reserve 4 638 4 638
Cash flow hedge reserve 3 (30 609) (54 295)
Accumulated loss (568 539) (546 905)
Non-controlling interest 65 064 61 441
Non-current liabilities 154 549 213 938
Redeemable preference share
capital 5 27 529 10 000
Derivative financial
liabilities 3 37 151 70 343
Borrowings 4 39 875 79 750
Operating lease liabilities 18 113 17 274
Deferred tax liability 31 881 36 571
Current liabilities 396 580 356 348
Taxation 546 6 121
Trade and other payables 115 271 96 702
Operating lease liabilities 479 -
Redeemable preference share
capital 5 - 15 371
Derivative financial
liabilities 3 13 707 19 872
Borrowings 4 266 577 218 282
Total equity and
liabilities 997 797 1 011 279
Net asset value per share
(cents) 435,40 433,06
Net tangible asset value per
share (cents) 36,04 33,75
Abridged statement of comprehensive income
Year ended Year ended
31 December 31 December
2015 2014
Notes R’000 R’000
Revenue 1 132 870 1 095 190
Cost of sales (961 022) (948 530)
Gross profit 171 848 146 660
Profit/(loss) from
operations before
impairment/scrapping of
plant and equipment 5 569 (6 222)
Investment income 1 215 1 756
Profit/(Loss) on
sale/scrapping of plant and
equipment 1 365 (5 133)
Impairment of plant and
equipment 1 (8 463) -
Finance costs (28 385) (25 358)
(Loss) before taxation (29 699) (34 957)
Taxation 7 037 9 059
Net (loss) for the year (22 662) (25 898)
Other comprehensive income
Items that may be
reclassified subsequently
to profit or loss: 28 336 13 499
Movement in derivative cash
flow hedge 4 39 356 18 748
Deferred tax charge 4 (11 020) (5 249)
Total comprehensive
income/(loss) 5 674 (12 399)
Net (loss) attributable to: (22 662) (25 898)
– Equity holders of Andulela (21 634) (23 630)
– Non-controlling interest (1 028) (2 268)
Total comprehensive income/(loss)
attributable to: 5 674 (12 399)
– Equity holders of Andulela 2 052 (12 346)
– Non-controlling interest 3 622 (53)
Ordinary shares in issue (millions)* 87,64 87,64
Weighted average number of ordinary
shares in issue (millions)* 87,64 87,64
Headline (loss) (15 804) (19 934)
– Attributable net (loss) (21 634) (23 630)
– Add back: (gain)/loss on
sale/scrapping of plant and equipment (365) 5 133
Add back: loss on impairment of plant
and equipment 8 463 -
Tax effect of the above (2 268) (1 437)
(Loss) and diluted (loss) per ordinary
share (cents)* (24,68) (26,96)
Headline (loss) and diluted headline
(loss) per ordinary share (cents)* (18,03) (22,74)
Dividends per ordinary share (cents) – –
* The (loss) and diluted (loss) per ordinary share and the headline (loss) and diluted headline (loss)
per ordinary share arecalculated by dividing the (loss) and diluted (loss), and the headline (loss) and
headline diluted (loss) by the weighted average number of ordinary shares in issue during the year.
Abridged statement of cash flows
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Cash flows from:
Operating activities (4 063) 5 238
Investing activities (10 091) (14 353)
Financing activities 8 258 (7 086)
Change in cash and equivalents (5 896) (16 201)
Opening cash and equivalents 19 504 35 705
Closing cash and equivalents 13 608 19 504
Abridged statement of changes in equity
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Opening balances 440 993 454 051
Movements for the period:
– Net (loss)/profit for the year
attributable to equity holders of
Andulela (21 634) (23 631)
– Cash flow hedge reserve net of
deferred tax 23 687 11 283
– Non-controlling interest 3 622 (709)
Closing balances 446 668 440 993
Notes
Basis of preparation
The abridged financial statements are prepared in accordance with the
requirements of the JSE Listings Requirements for abridged reports, and
the requirements of the Companies Act applicable to summary financial
statements. The JSE Listings Requirements require abridged reports to be
prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting
Standards (IFRS) and the SAICA Financial Reporting Guides as issued by
the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council and to also, as a
minimum, contain the information required by IAS 34 Interim Financial
Reporting.
The accounting policies applied in the preparation of the consolidated
annual financial statements, from which this abridged report were
derived, are in terms of International Financial Reporting Standards
and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial statements.
The directors take full responsibility for the preparation of the
abridged reports and the financial information has been correctly
extracted from the underlying annual financial statements. These
results were prepared under the supervision of Henk Engelbrecht CA(SA),
the Group Chief Financial Officer.
1. Plant and equipment
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Opening balance 308 444 318 301
Additions 11 244 14 491
Disposals on scrapping of plant and
equipment (789) (5 269)
Impairment of plant and equipment (8 463) -
Depreciation (20 150) (19 079)
Plant and equipment at carrying value 290 286 308 444
The fair value of plant and equipment is determined at a Level 3
recurring fair value measurement. An impairment of R8,5 million has been
recognised against plant and equipment for assets where the valuation
was lower than carrying value of these assets at 31 December 2015. The
recoverable amount was calculated based on the estimated fair value less
cost to sell. The impairment is included in the steel segment. The
directors are of the opinion that the carrying values of plant and
equipment approximate fair.
2. Goodwill
The goodwill of R418.7 million arose from the acquisition of the
remaining interests in Abalengani Mining Investments Proprietary
Limited (“AMI”) and JB Platinum Holdings Proprietary Limited
(“JBPH”) by the Company in 2010. AMI and JBPH respectively hold
49,63% and 33,96% in Kilken Platinum Proprietary Limited
(“Kilken”) as their only investments. The carrying amount as at 31
December 2015 has been tested for impairment and the Board is
satisfied that no impairment is required.
3. Derivative financial liability
In 2012 Kilken entered into a hedge agreement for 30% of its cash
flow from the production revenue of platinum, palladium and gold
in favour of a financier in line with its funding requirements.
The hedge mitigates the cash flow risk related to commodity price
fluctuations and movements in the ZAR/USD exchange rate in order
to repay the funding facility to the financier.
In accordance with IAS 39, the cash flow hedge was recognised as a
hedging instrument at fair value for the first time in the
statement of financial position at 31 December 2012, without
taking account of any collateral held or other credit enhancements
over the remainder of the hedge contract term which started on 1
September 2012 and will end on 30 September 2018.
For the year ended 31 December 2015, a R28.3 million gain (2014:
R13.5 million) after deferred tax has been recognised in other
comprehensive income and a decrease in the cash flow hedge reserve
of R23.7 million, net of non-controlling interests, in the
statement of financial position. The loss realised and netted off
against the revenue was R12.1 million for the year ended 31
December 2015(2014: R18.1 million).
The fair value of the cash flow hedge is apportioned between
current and non-current liabilities depending on the remaining
maturity period of the derivative contract and its contractual
cash flows. The cash flow hedge cost will be accounted for as
either a profit or a loss as it becomes effective and the
settlements are actually made over the duration of the term of the
hedge contract.
4. Borrowings
Total borrowings of the Group amounted to R306.5 million as at 31
December 2015 compared to R298.0 million as at 31 December 2014,
and can be summarised as follows:
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Absa Bank Limited* 139 750 171 650
Reichmans Capital Proprietary Limited 136 597 96 277
Thunder Rate Investments Proprietary
Limited 29 397 29 397
The Rafik Mohamed Family Trust 708 708
Total borrowings 306 452 298 032
Less: Short-term borrowings 266 577 218 282
Non-current liabilities 39 875 79 750
* R60 million of the ABSA debt is a revolving credit facility which is
renewable annually. As at the date of these financial statements, the
discussions for the renewal of the facility are still in progress.
5. Redeemable preference share capital
The Company and the preference shareholder mutually agreed to suspend
the repayment of the redeemable preference shares capital and the
accrued preference dividends to at least 30 June 2017. The redeemable
preference share capital and the accrued preference dividends have
therefore been classified as non-current liabilities for the 2015
financial year.
6. Financial instruments
The following table shows the carrying amounts and fair values of
financial assets and financial liabilities, including their levels in
the fair value hierarchy for financial instruments measured at fair
value. It does not include fair value information for financial assets
and liabilities which are not measured at fair value if the carrying
amount approximates the fair value.
Carrying value 2015
Loans
and
receiv- Amortised Fair
ables cost value Total
R’000 R’000 R’000 R’000
Financial assets not
measured at fair
value
Cash and cash
equivalents 13 608 13 608
Trade and other
receivables 177 420 177 420
Financial liabilities
measured at fair
value
Derivative financial
instrument – cash
flow hedge* (50 858) (50 858)
Financial liabilities
not measured at fair
value
Preference shares (27 529) (27 529)
Borrowings (306 451) (306 451)
Trade and other
payables (114 762) (114 762)
Total 191 028 (448 742) (50 858) (308 572)
Carrying Value 2014
Financial assets not
measured at fair
value
Cash and cash 19 504 19 504
equivalents
Carrying Value 2014
Trade and other
receivables 154 353 154 353
Financial liabilities
measured at fair
value
Derivative financial
instrument – cash
flow hedge* (90 215) (90 215)
Financial liabilities
not measured at fair
value
Preference shares
plus dividend (26 141) (26 141)
Borrowings (298 032) (298 032)
Trade and other
payables (94 000) (94 000)
Total 173 857 (418 174) (90 215) (334 532)
* Derivative financial instrument – cash flow hedge: The fair
value of the derivative financial liability is a level 2 recurring
fair value measurement. The fair value of the cash flow hedge is
obtained directly from the service provider and is calculated as
the present value of the estimated future cash flows based on the
observable commodity prices and current exchange rates.
7. Material related-party transactions and balances
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Sales to related parties (101 622) (95 886)
Purchases from related parties 67 597 80 388
Administration and management fees
paid to related parties 850 1 050
Management fees received from
related parties (1 662) -
Interest received from related
parties - (414)
Preference dividends expense 1 548 1 582
Rent expenses paid to related
parties 17 961 14 084
Trade receivables 34 376 20 611
Loan accounts – owing to related
parties (30 105) (30 105)
Cumulative redeemable preference
shares (27 529) (25 371)
Trade payables (18 558) (2 986)
8. Segment reporting
The Board is the Group’s chief operating decision-maker. Management
has determined the operating segments based on the information
reviewed by the Board for the purposes of allocating resources and
assessing performance. The Board considers the business from a
product perspective. The Group has two sources of income, namely
the production of Platinum Group Metals (“PGMs”) at the Kilken
Platinum tailings treatment facility and the processing and
distribution of steel products by Pro Roof Steel Merchants and its
subsidiaries (“PRSM”).
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Revenue
Tailings treatment facility 47 690 26 683
Steel processing plants 1 085 180 1 068 507
Total revenue 1 132 870 1 095 190
There are no sales between segments.
(Loss) after tax
Tailings treatment facility (6 265) (13 821)
Steel processing plants (14 332) (6 783)
Other unallocated (2 065) (5 294)
Total (loss) after tax (22 662) (25 898)
Assets
Tailings treatment facility 179 355 225 910
Steel processing plants 510 664 507 394
Inter-group eliminations (110 901) (144 067)
Reportable segment assets 579 118 589 237
Goodwill 418 679 418 679
Other unallocated assets of parent - 3 364
Total assets 997 797 1 011 279
Liabilities
Tailings treatment facility 202 177 270 804
Steel processing plants 430 709 413 107
Other unallocated liabilities 965 959
Inter-group eliminations (110 251) (139 955)
Reportable segment liabilities 523 600 544 915
Redeemable preference shares 27 529 25 371
Year ended Year ended
31 December 31 December
2015 2014
R’000 R’000
Total liabilities 551 129 570 286
Audit conclusion
This abridged report is extracted from audited information, but is
not itself audited. The directors take responsibility for the
preparation of this abridged report based on the underlying
audited annual financial statements. The annual financial
statements were audited by BDO South African Incorporated, who
expressed an unmodified opinion thereon. The audited annual
financial statements and the auditor’s report thereon are
available for inspection at the Company’s registered office.
9. Going concern
The annual financial statements have been prepared on the basis of
accounting policies applicable to a going concern. The basis
presumes that funds will be available to finance future operations
and that the realisation of assets and settlement of liabilities,
contingent obligations and commitments will occur in the ordinary
course of business. The Group incurred a net loss for the year
ended 31 December 2015 of R22.7 million and as at that date its
current liabilities exceeded its current assets due to inter alia,
the short term nature of some of its debt facilities with some of
its financial institutions. Management are in discussions with
its financiers to restructure its debt facilities in the
respective group companies. The Company and the preference
shareholder have mutually agreed to suspend the repayment of the
preference shares and the accrued dividends to at least 30 June
2017.
Whilst market conditions are expected to remain tough, the Group
expects improved efficiencies and increased production levels at Kilken
which should result in increased revenue and cash flows, as well as
further improvements at PRSM continuing from its achievements in the
past financial years. Both operational subsidiaries continue to improve
their trading results and continue to service their borrowings and
other financial obligations as they become due. The directors are
satisfied with applying the going concern principle.
Nature of the business
The Company is an investment holding company with controlling interests
in the group companies.
Directorate and company secretary
PC de Jager resigned as Chief Financial Officer on 30 September 2015 and
JHP Engelbrecht was appointed in that position with effect from 1
October 2015. Post year-end Ms GH Miller was appointed as company
secretary with effect from 8 March 2016 in place of Mrs HI Kazi who
resigned on 7 March 2016. The current directors of the Company at the
date of this report are as follows:
Name Appointment
MJ Husain (Chairman)# 26 February 2010
A Kaka (CEO) 26 February 2010
JHP Engelbrecht (CFO) 1 October 2015
BW Smith# 1 October 2014
PE du Preez# 1 October 2011
NMS Hadjee# 1 July 2014
#Independent non-executive
Financial review
The Group’s turnover increased to R1.13 billion in 2015 from R1.09
billion in 2014 with both subsidiaries contributing to the increased
revenue. The increase in Kilken’s revenue is mainly due to the low base
for 2014 as a result of the labour unrest at the platinum mines during
2014.
Andulela posted an operating loss of R2.6 million in 2015, after taking
into account an impairment loss against plant and equipment at PRSM of
R8.5 million, compared to an operating loss of R11.4 million in 2014 and
a total comprehensive profit for 2015 of R5.7 million compared to a
total comprehensive loss of R12.4 million for 2014. Excluding the fair
value adjustment on the cash flow hedge through other comprehensive
income, the Group posted a net loss after tax of R22.7 million for 2015
compared to a net loss after tax of R25.9 million in 2014. In the steel
industry, steel prices were adjusted downwards by the major raw material
supplier during the second quarter of the year which resulted in an
increase in cost of sales of R8.2 million and contributed R5.9 million
to the loss after tax incurred by the Group.
Overall secured interest-bearing borrowing levels remained high at
R306.5 million as at 31 December 2015 (2014: R298.0 million) with PRSM
still being the main borrower, having external debt of R166.7 million as
at 31 December 2015 (2014: R126.4 million). Kilken reduced its debt to
Absa from R171.6 million in 2014 to R139.8 million as at 31 December
2015.
The overall business environment within which the Group operates
remained tough during the past financial year with platinum and
palladium prices declining by an average of 30% in US Dollar terms from
2014, and the Rand weakening by almost 30% against the US Dollar over
the same period. Steel producers in South Africa implemented price
reductions in the first half of the year in order to compete with
cheaper imported products from China, the latter dumping its products in
international markets due to the downturn in its own economy and the
over production of steel products.
The uncertain political climate in South Africa and the downgrading of
the country’s investment rating, as well as questionable decisions by
the government especially during the latter half of the year contributed
to the weakening of the Rand against all the major currencies.
Kilken
The environment within which the platinum industry operated in the past
year remained tough, with significant decreases in commodity prices from
2014 due to a decrease in demand for these products amid concerns for
declining growth in China.
Whilst the 2014 financial year was marred by one of the worst strikes in
the history of the platinum mines with 5 months of production lost, the
2015 financial year’s results were affected by production inefficiencies
at the plant and a higher chrome content in the tailings.
Capital expenditure of R5.6 million was incurred at the plant to upgrade
the information systems and improve efficiencies.
Kilken’s revenue (after the realised effects of the cash flow hedge)
increased from R26.7 million in 2014 to R47.7 million in 2015, with the
cash flow hedge reducing revenue by R12.1 million (2014: R18.1 million).
The loss before interest improved from R16.2 million in 2014 to R4.8
million in 2015, mainly due to the increase in revenue and limiting
operating expenses to R18.8 million, slightly higher than the R18.2
million for 2014. The net loss after tax improved from of R13.8 million
in 2014 to R6.3 million in 2015 as a result of the above mentioned
factors.
The cash flow hedge the company entered into in 2012 to provide security
to Absa for the loan extended to the company, has another 33 months to
run until September 2018. During the current financial year revenue was
reduced by R12.1 million (2014: R18.1 million) and a liability of R50
million (2014:R90 million) is reflected on the Statement of Financial
Position of the Group. The Revaluation reserve was reduced by R28.3
million (2014: R13.5 million) after tax as a result of the decrease in
commodity prices.
The company furthermore reduced its exposure to Absa from R171.6 million
in 2014 to R139.7 million during 2015.
Commodity prices, especially platinum and gold have improved since year
end whilst the Rand remains volatile against the major currencies, which
makes it difficult to estimate and manage cash flows.
Management of Kilken implemented action plans to improve the
efficiencies at the plant and to increase production to the levels it
was at before the strike in 2014. Various challenges with regard to the
quality of the tailings and the extraction process are being addressed
which should result in improved production and cash flows for the
company.
PRSM
Conditions in the local market remained depressed during 2015. The
continued weakness of the local economy, the slow implementation of
infrastructure projects by the government, low levels of fixed
investment by the mining industry and continued manufacturing weakness
were the major factors that continued to contribute to the depressed
market.
The main supplier of raw materials in South Africa implemented price
reductions of its products during the second quarter of 2015 to remain
competitive against the cheaper imports from especially China where
economic growth is slowing down and where there is surplus production.
Import levies and other protection mechanisms have been implemented by
the Government in South Africa in an effort to protect the local market
against the dumping of cheaper products.
Excess Chinese steel capacity and continued slowing economic growth are
expected to put pressure on raw material prices in 2016. Chinese steel
imports into South Africa constitute around 68% of all steel imports in
2015.
Sales prices per ton decreased by an average of 7% over the year with
sales prices 12% lower in December 2015 than in January 2015. The cost
of materials also decreased by an average of 8% over the year.
PRSM Group’s revenue for the year ended 31 December 2015 improved to
R1.08 billion from R1.07 billion in 2014. Earnings before interest for
the year improved to R11.1 million compared to R8.2 million in 2014.
The improvement in the earnings before interest is attributable to
better overhead cost recoveries through increased volume throughput of
selected high-demand product lines as well as improvements in production
efficiencies. The net loss after tax from normal operations increased
from R6.8 million in 2014 to R8.2 million in 2015 mainly due to an
adjustment of the value of inventories following price cuts implemented
by the main raw material supplier during the period April to June 2015.
The effect of this was a R5.9 million increase in the net loss after tax.
Excluding this adjustment in the value of inventories, the net loss
after tax would have shown an improvement of R4.4 million for the year
under review.
Plant and equipment to the value of R8,5 million were impaired during
the year through other comprehensive income in PRSM and is excluded from
the amounts disclosed in this commentary. This impairment is reflected
as an impairment profit and loss of the Group.
The Pro Roof Group’s interest expense for 2015 increased to R22.3
million compared to R19.4 million for 2014 due to increased interest-
bearing debt levels during the year.
Capital expenditure of R7.3 million was incurred during 2015 to replace
old machines with newer technology which, once commissioned, will reduce
production costs and improve profitability. A further R13 million in
capital expenditure has been approved by the Board.
Trading conditions are expected to remain tough in 2016. The steel
industry experienced an increase in steel prices at the beginning of
February 2016 which should support an increase in gross margins for the
year ahead. Management continues with its efforts to return PRSM to
profitability. PRSM is cash positive at an operating level and
continues to meet its obligations as and when they become due.
Events subsequent to the year-end
No events occurred subsequent to the year-end up to the date of
this announcement which could have a material effect on the
results of the Group or its subsidiaries.
Commitments
The Group had capital commitments of R13 million at 31 December
2015 (2014:RNil).
Notice of annual general meeting
The integrated annual report contains a notice of annual general
meeting which will be held at the offices of Andulela, Moti Group
Office Block, 108 4th Street, Parkmore, Sandton on Friday, 13 May
2016 at 10h00.
The last day to trade in order to be eligible to participate in
and vote at the annual general meeting is Friday, 29 April 2016
and the record date for voting purposes is Friday, 6 May 2016.
The integrated annual report including the notice of the annual
general meeting is also available on the Company's website at
www.andulelaholdings.com.
For and on behalf of the Board
Mohamed J Husain Ashruf Kaka
Independent Non-executive Chairman Chief Executive Officer
Sandton
29 March 2016
Registered Office
108 4th Street, Parkmore, Sandton 2196
Directors
MJ Husain# (Chairman), A Kaka (CEO), JHP Engelbrecht (CFO), BW
Smith#, PE du Preez#, NMS Hadjee#
#Independent non-executive
Company Secretary
Ms G Miller
Auditors
BDO South Africa Incorporated
22 Wellington Road
Parktown
Johannesburg, 2193
Transfer Secretaries
Link Market Services Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street
Braamfontein
Sponsor
Java Capital, 6A Sandton Valley Crescent, Sandton, 2196
www.andulelaholdings.com
Date: 29/03/2016 08:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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