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Unaudited interim results for the period ended 29 February 2016
African Equity Empowerment Investments Limited
(Incorporated in the Republic of South Africa)
Registration number: 1996/006093/06
Share code: AEE and ISIN: ZAE0000195731
("AEEI" or "the Group" or "the Company")
Unaudited interim results for the period ended 29 February 2016
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Group to Group to Group to
29 February 28 February 31 August
2016 2015 2015
6 months 6 months 12 months
R'000 R'000 R'000
Revenue 305 318 258 874 672 185
Cost of sales (207 594) (178 010) (443 546)
Gross profit 97 724 80 864 228 639
Other income 3 761 4 290 3 595
Other operating expenses (78 752) (80 904) (156 517)
Fair-value adjustments 50 405 48 686 106 405
Gain on disposal of subsidiaries and equity accounted investments 465 - 6 660
Investment revenue 11 234 3 354 16 976
Loss from equity accounted investments - - (316)
Finance cost (11 069) (10 367) (19 695)
Profit before taxation 73 768 45 923 185 747
Taxation (16 261) (10 624) (36 491)
Profit for the period 57 507 35 299 149 256
Total comprehensive income for the period 57 507 35 299 149 256
Total comprehensive income attributable to:
Equity holders of the parent 68 991 41 217 152 897
Non-controlling interest (11 484) (5 918) (3 641)
57 507 35 299 149 256
Basic and diluted earnings per ordinary share (cents) 14.04 8.39 31.12
Headline earnings per ordinary share (cents) 14.02 10.72 31.06
Weighted (and fully diluted) average number of ordinary shares in issue (000s) 491 339 491 339 491 339
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
Group to Group to Group to
29 February 28 February 31 August
2016 2015 2015
R'000 R'000 R'000
Assets
Non-current assets 1 273 331 1 004 625 1 096 519
Property, plant and equipment 151 712 140 188 153 422
Goodwill 56 832 55 469 56 832
Intangible assets 329 365 319 747 339 697
Other financial assets 718 791 477 773 530 275
Deferred tax 14 460 11 156 16 162
Prepayments 2 171 292 131
Current assets 262 534 238 324 228 952
Inventory 43 622 26 174 31 503
Biological assets 46 262 36 343 46 162
Other financial assets 11 981 2 140 7 734
Current tax receivable 154 521 450
Trade and other receivables 100 760 119 143 111 037
Cash and cash equivalents 59 755 54 003 32 066
Assets of disposal groups classified as held for sale - 1 852 20 000
Total assets 1 535 865 1 244 801 1 345 471
Equity and liabilities
Equity
Equity attributable to equity holders of parent
Share capital and share premium 403 177 403 177 403 177
Reserves 8 034 8 034 8 034
Retained income 357 594 189 215 300 895
768 805 600 426 712 106
Non-controlling interest 78 366 89 698 92 443
847 171 690 124 804 549
Liabilities
Non-current liabilities 503 666 357 482 354 637
Other financial liabilities 255 647 139 752 112 800
Operating lease liability 2 760 2 436 2 713
Deferred tax 245 188 215 044 239 015
Other non-current liabilities 71 250 109
Current liabilities 185 028 197 195 186 285
Trade and other payables 107 578 122 904 95 698
Other financial liabilities 12 007 20 434 45 609
Current tax payable 9 093 8 595 6 869
Provisions 20 932 17 626 23 568
Other current liabilities 1 580 234 1 122
Bank overdraft 33 838 27 402 13 419
Total equity and liabilities 1 535 865 1 244 801 1 345 471
Net asset value per share (cents) 156.47 122.20 144.93
CONDENSED GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Group to Group to Group to
29 February 28 February 31 August
2016 2015 2015
R'000 R'000 R'000
Cash generated by operations 32 913 21 090 67 844
Investment revenue 11 234 3 354 16 976
Finance cost (11 069) (10 367) (19 695)
Other operating activities (4 355) (3 405) (14 331)
Net cash flows from operating activities 28 723 10 672 50 794
Net movement in property, plant and equipment (7 185) (11 418) (33 423)
Net movement in intangible assets (940) - (3 549)
Movement in other investing activities 2 589 (1 541) (2 786)
Proceeds on sale of financial assets 20 000 - -
Purchase of financial assets (136 509) - -
Net cash flow from investing activities (122 045) (12 959) (39 758)
Repayment of other financial liabilities (53 925) (13 073) (33 006)
Receipt of other financial liabilities 166 809 9 842 8 078
Dividends paid (12 292) (10 247) (9 827)
Net cash flows from financing activities 100 592 (13 478) (34 755)
Total cash movement for the period 7 270 (15 765) (23 719)
Cash and cash equivalent at the beginning of the period 18 647 42 366 42 366
Cash and cash equivalents at the end of the period 25 917 26 601 18 647
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
For the period ended 29 February 2016
Attributable Non-
to controlling Total
parent interest equity
R'000 R'000 R'000
Balance at 1 September 2014 569 036 96 036 665 072
Profit for the period 152 897 (3 641) 149 256
Dividends paid (9 827) 48 (9 779)
Balance at 31 August 2015 712 106 92 443 804 549
Profit/(loss) for the period 68 991 (11 484) 57 507
Dividends paid (12 292) (2 593) (14 885)
Balance at 29 February 2016 768 805 78 366 847 171
CONDENSED GROUP SEGMENTAL REPORT
Technology Marine Healthcare
Unaudited Unaudited Unaudited
29 February 29 February 29 February
2016 2016 2016
R'000 R'000 R'000
Revenue 107 136 170 378 2 024
External sales 107 136 170 378 2 024
Segment results
Operating profit/(loss) 19 124 22 498 (1 916)
Included in segment results:
Carrying amount of assets 92 994 289 768 17 899
Carrying amount of liabilities 40 231 153 727 2 007
Events and
Biotechnology Tourism Corporate Group
Unaudited Unaudited Unaudited Unaudited
29 February 29 February 29 February 29 February
2016 2016 2016 2016
R'000 R'000 R'000 R'000
Revenue - 25 780 - 305 318
External sales - 25 780 - 305 318
Operating profit/(loss) (4 397) (5 789) 44 084 73 603
Included in segment results:
Reversal of impairments 335 - - 335
Fair-valuation of investments - - 50 405 50 405
Carrying amount of assets 346 423 52 506 736 275 1 535 865
Carrying amount of liabilities 88 400 40 416 363 913 688 694
Technology Marine Healthcare
Unaudited Unaudited Unaudited
28 February 28 February 28 February
2015 2015 2015
R'000 R'000 R'000
Revenue 95 587 139 584 8 856
External sales 95 587 139 584 8 856
Segment results
Operating profit/(loss) 12 541 18 633 (610)
Included in segment results:
Reversal of impairments - - 436
Carrying amount of assets 94 841 247 052 29 165
Carrying amount of liabilities 56 506 128 049 8 563
Events and
Biotechnology Tourism Corporate Group
Unaudited Unaudited Unaudited Unaudited
28 February 28 February 28 February 28 February
2015 2015 2015 2015
R'000 R'000 R'000 R'000
Revenue - 14 759 88 258 874
External sales - 14 759 88 258 874
Segment results
Operating profit/(loss) (19 695) (1 440) 43 507 52 936
Included in segment results:
Impairments (15 200) - - (14 764)
Fair valuation of investments - - 48 686 48 686
Carrying amount of assets 337 448 54 445 481 850 1 244 801
Carrying amount of liabilities 85 735 50 899 224 925 554 677
Notes
Strategic investments have been included under the corporate division as these were managed under the corporate office for the first six months.
Determination of headline earnings
Unaudited Unaudited Audited
Group to Group to Group to
29 February 28 February 31 August
2016 2015 2015
R'000 R'000 R'000
Earnings attributable to ordinary equity holders of parent entity IAS 33 68 991 41 217 152 897
Adjusted for:
Impairment of intangible assets IAS 38 241 10 944 4 368
Loss on disposal of property, plant and equipment IAS 16 - 523 145
Gain on disposal of subsidiaries and equity accounted investments IFRS 3 (335) - (4 795)
Headline earnings 68 897 52 684 152 615
Headline earnings per ordinary share (cents) 14.02 10.72 31.06
Reconciliation of reportable segments profit or loss
Unaudited Unaudited
Group to Group to
29 February 28 February
2016 2015
R'000 R'000
Total operating profit for reportable segments 73 603 52 936
Adjusted for:
Investment revenue 11 234 3 354
Finance cost (11 069) (10 367)
Profit before taxation 73 768 45 923
Highlights compared to the prior year interim period:
Revenue increased by 18% from R259m to R305m.
Operating profit increased by 39% from R53m to R74m.
Earnings per share increased by 67% to 14.04c.
Headline earnings per share increased by 31% to 14.02c.
Total assets increased by 23% from R1 245m to R1 536m.
Net asset value increased by 23% to R847m.
Net cash generated from operating activities increased by 169% from R11m to R29m.
A dividend of R12,3m paid to shareholders on 22 February 2016.
Group performance
The Group delivered a record turnover and excellent profit growth as a result of strong contributions from all its underlying operations and investments for
the period under review.
Group revenue, showed strong growth for the reporting period, increasing by 18% to R305m, mainly due to greater revenue growth achieved from the Marine
and Technology divisions.
Profit before tax for the period increased by 61% to R74m (2015: R46m), due to consistent improved returns from our diversified portfolio.
Group earnings increased by 65% from R35m in the prior interim period to R58m. Headline earnings per share ("HEPS") increased from 10.72c to 14.02c
and earnings per share ("EPS") increased from 8.39c to 14.04c for the six months under review compared to the prior period.
NAV of the Group increased to R847m (2015: R690m) as a result of the excellent underlying operational and investments performance. The net
asset value per share increased by 28% from 122.20c in the prior period to 156.47c.
The Group's asset base increased by R291m to R1 536m (2015: R1 245m), mainly due to the increase in operations and aquisitions and the increased value in
the strategic investments since the prior year's interim period.
As a result of the solid financial performance from the underlying divisions and the requirement of less working capital, R29m net cash from operations was
generated.
Due to the cyclical nature of the underlying operations and investments, historically the Group's expected performance is stronger during in the second half
of the year.
Strategic investments
The Group's strategic investments consist of British Telecom Communication Services South Africa (Pty) Ltd ("BTSA"), Pioneer Foods Group Limited, ("Pioneer"),
Sygnia Limited ("Sygnia") and Saab Grintek Defence (Pty) Ltd ("SGD").
AEEI restructured its shareholding in Saab SA (Pty) Ltd by disposing of its 5% investment shareholding in Saab SA and acquiring an equity interest of 25%
plus 1 share in its operating subsidiary SGD, on 29 October 2015.
The investment in Sygnia was acquired on 14 October 2015 for R10m which subsequently increased by 80% during the period under review.
The fully paid-up investment in BTSA is well positioned to grow consistently over the next few years. Earnings have grown and dividend returns are expected
to continue in the foreseeable future.
The value of Pioneer performed exceptionally well from the date of acquisition. However, owing to the drought and market perception of
the possible impact thereof, the share price declined from August last year. We believe this to be a temporary decline. The share value has subsequently
shown improvement at reporting date.
Marine
Premier Fishing SA (Pty) Ltd ("Premier Fishing") is the largest black-owned, controlled and managed fishing company in South Africa and the most transformed
in terms of its management and employees.
Premier Fishing delivered excellent growth in earnings for the interim period. Revenue increased by 22% from R139m to R170m as a result of improved catch
rates and greater sales volumes. Improved pricing and the weaker rand also contributed to the improved operating profit of R22m (2015: R18m).
The Abalone division's performance is stable and improving year on year, which gives us a degree of control to manage production outputs consistently.
Technology
The Information Communication Technology ("ICT") division focuses on the acquisition and development of niche-market information and communication
technology companies.
The ICT division performed well, with revenues increasing by 12% to R107m from its underlying operations, which is in line with their budget.
The ICT division achieved significant growth in its operating profit of R19m (2015: R12,5m). The revenue growth experienced is organic, with acquisitive
growth expected during the second half of 2016.
Health Care
The companies under the Health Care division, focuses on ethical and consumer products, as well as the production of natural products to promote
health and hygiene and food security in the agricultural and food processing sectors.
The Health Care division continued to incur marginal operating losses mainly due to further regulatory work undertaken on the dossiers as well as greater
investment for trials in the food and sanitation markets in order to diversify its product portfolio.
This division obtained the right to be the global manufacturer and distributor from its principal. The business is well positioned to commence with local
manufacturing and penetration into a larger global market.
Biotechnology
Genius Biotherapeutics ("Genius") South Africa and Africa's largest medical biotechnology company, continues with its research and development activities.
Genius' management made good progress to upgrade its erythropoietin ("EPO") technology and embarked on its plans to improve production efficiencies at the
Centurion facility.
The collaboration with the University of Cape Town on the dendritic cell vaccine project is progressing well has broadened the scope of the novel technology
to treat other cancer and infectious diseases.
Events and Tourism
The Events and Tourism division manages and owns an event planning and production company, espAfrika, and travel service company, Tripos Tourism Investments
as well as radio station - Magic 828.
AEEI Events and Tourism's operating loss increased from R1,4m to R5,8m mainly due to the startup costs incurred by Magic 828. The radio station went live
on 1 October 2015 and contributed to the Group's revenue for the period under review.
espAfrika, a group subsidiary, hosted a very successful 17th Cape Town International Jazz Festival post-interim period. The company's performance for the
six months is in line with expectation. espAfrika has most of its events and profits during the second half of the financial year.
Significant events:
Other financial assets and other financial liabilities
The increase in other financial assets arises from the acquisition of an equity interest of 25% plus 1 share in Saab Grintek Defence (Pty) Ltd ("SGD"), the
largest subsidiary of Saab SA (Pty) Ltd concluded on 29 October 2015 for a purchase consideration of R126,5m. The acquisition was funded via a preference
share issued at 80% of prime to the value of R103m, which will be settled by SGD dividends. The balance was settled in cash upon the sale of AEEI's 5% stake
in Saab SA (Pty) Ltd for R20m.
On 14 October 2015, AEEI purchased 1 190 476 (one million one hundred and ninety thousand four hundred and seventy six) shares in Sygnia Limited at R8,40
per share to a total value of R10m. The value of the share as at 29 February 2016 increased to R15,80 per share.
Sale of businesses
Included in the six-month results is the disposal of non-core subsidiaries as part of the continued restructure which were included under the Corporate and
Health Care divisions. The net effect of the disposals resulted in a gain on disposal of subsidiaries amounting to R0,4m. At the date of sale, the Net asset
value ("NAV") of these companies was R4,6m, of which the consideration received amounted to R5m.
Basis of preparation
The condensed consolidated financial statements are prepared in accordance with the JSE Limited ("JSE") Listings Requirements and the requirements of the
Companies Act, 2008 (No. 71 of 2008), as amended, applicable to summarised financial statements. The JSE Listings Requirements require financial reports to
be prepared in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards
("IFRS"), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and also that they, as a minimum, contain the information
required by IAS 34 - Interim Financial Reporting. The accounting policies applied in the preparation of the summarised consolidated financial statements
from which the summary consolidated financial statements were derived are in terms of IFRS and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial statements.
The unaudited interim financial results were prepared by Wakeel Mclachlan BCom (Hons), CA(SA) and were not reviewed or audited by the Group's external
auditors, Grant Thornton Cape Inc.
Reporting entity
AEEI is a company domiciled in South Africa. These condensed consolidated interim financial statements for the six months ended 29 February 2016
comprises AEEI the Company and its subsidiaries ("the Group") and interests in associates and joint ventures.
AEEI is a black-controlled entity, which holds interests in six sectors and promotes Broad-Based Black Economic Empowerment and sound corporate
governance practices.
Use of judgements and estimates
In preparing these condensed interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as
those that were applied to the audited consolidated financial statements for the year ended 31 August 2015.
Measurement of fair values
The Group has an established control framework with respect to the measurement of fair values. The fair-valuation calculations are performed by the Group's
finance department and operational team on an annual basis. The finance department reports to the Group's chief financial officer. The valuation reports
are approved by the investment committee in accordance with the Group's reporting policies.
Related parties
The Group, in the ordinary course of business, entered into various sales and purchases transactions on an arm's length basis with related parties.
Events after the reporting period
Other than the matters disclosed, the directors are not aware of any events arising subsequent to the Statement of Financial Position date, up to the date
of this report, which will affect these results.
Prospects
The Group will continue its strategic focus to grow the value of its core operational investments and improve the value-add to our strategic investments.
Due to the cyclical nature of the underlying operations and investments, historically the Group's expected performance is stronger during the second half
of the financial year.
The AEEI Group has built a solid platform for further organic growth and has positioned itself well to increase its investments through acquisitions.
Management is focussed on its five-year strategic plan and has firmed up its acquisition pipeline for both its Marine and IT sectors with the
view of listing these assets over the next three to five years.
The Group's auditors have not reviewed, nor reported on any comments relating to future prospects.
Dividends
Dividends were declared and approved by the board of directors on 4 November 2015. A dividend of R12,3m was paid to shareholders on 22 February 2016.
No interim dividend has been declared.
Appreciation
We wish to thank our staff, Group executives, management, our board of directors, as well as our strategic partners, stakeholders and business partners for
their loyalty and dedication in contributing to the success of the Group.
Prof Vukile Mehana Mr Khalid Abdulla
Non-executive chairman Chief executive officer
Cape Town
4 May 2016
Directors
*Khalid Abdulla (Chief executive officer); Prof Vukile Mehana (Non-executive chairman); Johannes Mihe Gaomab; Salim Young (Deputy chairman); Aziza Amod;
Takudzwa Hove; *Cherie Felicity Hendricks; *Chantelle Ah Sing; Zenariah Barends
*Executive directors
Company secretary: Carmelita Arendse
Registered address: Quay 7, East Pier, Victoria & Alfred Waterfront, Cape Town 8001
Email: Carmen@aeei.co.za
Transfer secretaries: Link Market Services South Africa (Pty) Ltd,
19 Ameshoff Street, 13th Floor, Rennie House, Braamfontein, Johannesburg 2000
Auditors: Grant Thornton Cape Inc.
Sponsor: PSG Capital, Stellenbosch
Date: 04/05/2016 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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