Wrap Text
Reviewed Provisional Condensed Consolidated Results for the 14 Month Period ended 29 February 2016
VUNANI LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/020641/06)
JSE code: VUN
ISIN: ZAE000163382
(“Vunani” or “the company” or “the group”)
REVIEWED PROVISIONAL CONDENSED CONSOLIDATED RESULTS FOR THE 14 MONTH PERIOD ENDED
29 FEBRUARY 2016
The Reviewed Provisional Condensed Consolidated Results have been prepared under
the supervision of the Chief Financial Officer, Aphrodite Judin CA(SA).
Listed on AltX on the JSE Limited (“JSE”)
These results are available on our website www.vunanilimited.co.za
SALIENT FEATURES
REVENUE OF R154.2 million compared to R115.0 million at 31 December 2014
PROFIT FOR THE PERIOD FROM CONTINUING OPERATIONS OF R8.3 million compared to a loss
of R25.3 million at 31 December 2014
BASIC EARNINGS PER SHARE FROM CONTINUING OPERATIONS OF 6.3c compared to a loss of
22.5c at 31 December 2014
ACQUIRED 70% STAKE IN Fairheads International Holdings (SA)in May 2015
Condensed consolidated statement of comprehensive income for the 14 month period
ended 29 February 2016
14 12
months Months
Reviewed Audited
29 31
Figures in R’000 Note February December
2016 2014
Continuing operations
Revenue 1 154 190 115 016
Other income 12 546 5 475
Investment revenue 8 263 14 220
Interest received from investments 2 047 2 384
Fair value adjustments and impairments 2 (18 934) (17 922)
Equity accounted earnings (net of income tax) * 31 797 (86)
Operating expenses (183 291) (146 040)
Results from operating activities 6 618 (26 953)
Finance income 4 505 6 060
Finance costs (2 697) (2 960)
Net finance income 1 808 3 100
Profit/(loss) before income tax 8 426 (23 853)
Income tax expense (116) (1 462)
Profit/(loss) from continuing operations 8 310 (25 315)
Discontinued operations
(Loss)/profit from discontinued operations
(net of income tax) 3 (141) 92 300
Profit for the period 8 169 66 985
Other comprehensive income
Items that are or may be reclassified to profit
or loss
Exchange differences on translating foreign operations 142 243
Total comprehensive income for the period 8 311 67 228
Profit/(loss) from continuing operations
attributable to:
Equity holders of Vunani Limited 6 860 (23 069)
Non-controlling interest 1 450 (2 246)
8 310 (25 315)
Profit for the period attributable to:
Equity holders of Vunani Limited 6 750 56 039
Non-controlling interest 1 419 10 946
8 169 66 985
Total comprehensive income for the period
attributable to:
Equity holders of Vunani Limited 6 417 56 036
Non-controlling interest 1 894 11 192
8 311 67 228
Basic and diluted earnings per share (cents) 6.2 54.6
Basic and diluted earnings/(loss) per share from
continuing operations (cents) 6.3 (22.5)
Basic and diluted (loss)/earnings per share from (0.1) 77.1
discontinued operations (cents)
Basic and diluted headline earnings/(loss) per 5.8 (27.5)
share (cents) 4
Basic and diluted headline earnings/(loss) per share 5.9 (24.7)
from continuing operations (cents)
(0.1) (2.8)
Basic and diluted headline loss per share from
discontinued operations (cents)
* In the current period, the equity accounted earnings (net of income tax) were
presented as part of operating activities. The prior year comparatives have been
re-presented to reflect this change in presentation.
Condensed consolidated statement of financial position at 29 February 2016
14 months 12 months
Reviewed 29 Audited
February 31 December
2016 2014
Figures in R’000 Note
Assets
Property, plant and equipment 8 655 6 787
Goodwill 34 123 34 123
Intangible assets 184 1 042
Investments in and loans to associates 76 909 17 686
Other investments 5 34 318 102 270
Deferred tax asset 46 203 44 890
Other non-current assets 22 504 22 005
Total non-current assets 222 896 228 803
Other investments 5 3 769 8 900
Other current assets 1 598 2 823
Taxation prepaid 1 267 886
Non-current assets held for sale 6 42 504 –
Trade and other receivables 25 186 39 085
Accounts receivable from trading 648 817 120 573
Trading securities 131 251
Cash and cash equivalents 17 562 67 773
Total current assets 740 834 240 291
Total assets 963 730 469 094
Equity
Stated capital 7 624 888 624 888
Treasury shares (15 571) (15 571)
Share-based payments reserve 12 871 13 249
Foreign currency translation reserve (1 233) (900)
Accumulated loss (365 474) (364 004)
Equity attributable to equity holders of Vunani Limited 255 481 257 662
Non-controlling interest 1 670 (2 818)
Total equity 257 151 254 844
Liabilities
Other financial liabilities 5 10 150 20 298
Deferred tax liabilities 2 152 7 825
Total non-current liabilities 12 302 28 123
Other financial liabilities 5 10 982 25 282
Taxation payable 4 498 9 648
Trade and other payables 30 458 29 555
Accounts payable from trading activities 647 872 120 525
Bank overdraft 467 1 117
Current liabilities 694 277 186 127
Total liabilities 706 579 214 250
Total equity and liabilities 963 730 469 094
Shares in issue (000s) 7 114 665 114 665
Net asset value per share (cents) 222.8 224.7
Net tangible asset value per share 192.9 194.0
Net asset value per share (cents)
Net asset value per share is the equity attributable to equity holders of Vunani
Limited, utilising all shares in issue, including treasury shares.
Net tangible asset value per share (cents)
Net tangible asset value per share is the equity attributable to equity holders of
Vunani Limited, (excluding goodwill and intangible assets) utilising all shares in
issue, including treasury shares.
Condensed consolidated statement of changes in equity for the 14 month period ended
29 February 2016
Total
Share Foreign attribu-
based currency table Non-
Transl Accumul Cont-
Stated Treasury payment ation -ated to equity rolling Total
Figures in Rand 000's capital shares reserve reserve loss holders interest equity
Balance at 31
December 2013 -
Audited 610 088 (15 265) 10 256 (897) (389 709) 214 473 (6 226) 208 247
Total comprehensive income for
the year
Profit for the year – – – – 56 039 56 039 10 946 66 985
Other comprehensive
income for the year – – – (3) – (3) 246 243
Total comprehensive
– – – (3) 56 039 56 036 11 192 67 228
income for the year
Transactions with owners, recorded directly in
equity
Shares issued 14 800 – – – – 14 800 – 14 800
Share based payments – 2 993 – – 2 993 – 2 993
Treasury shares
acquired – (306) – – – (306) – (306)
Dividends paid – – – (30 016) (30 016) (11 677) (41 693)
Disposal to non-
controlling interest – – – – (318) (318) 318 –
Acquisition of non-
controlling interests – – – – – – 3 575 3 575
Total transactions
with owners 14 800 (306) 2 993 – (30 334) (12 847) (7 784) (20 631)
Balance at 31
December 2014 -
Audited 624 888 (15 571) 13 249 (900) (364 004) 257 662 (2 818) 254 844
Total comprehensive income for
the period
Profit for the period – – – – 6 750 6 750 1 419 8 169
Other comprehensive
income for the period – – – (333) – (333) 475 142
Total comprehensive
– – – (333) 6 750 6 417 1 894 8 311
income for the period
Transactions with owners, recorded directly in
equity
Share based payments – – 1 628 – – 1 628 – 1 628
Transfer between
reserves – – (2 006) – 2 006 – –
Dividends paid – – – – (6 014) (6 014) (1 618) (7 632)
Acquisition of non-
controlling interests – – – – (4 212) (4 212) 4 212 –
Total transactions
with owners, recorded – – (378) – (8 220) (8 598) 2 594 (6 004)
directly in equity
Balance at 29
February 2016 - 624 888 (15 571) 12 871 (1 233) (365 474) 255 481 1 670 257 151
Reviewed
DIVIDENDS
Reviewed Audited
29 31 December
Figures in R’000 February 2014
2016
Ordinary dividend paid
Ordinary dividend number 2 of 5.5 cents per share (2014: 6 014 5 003
declared on 30 March 2015 and paid to ordinary shareholders on
28 April 2015 (net of treasury shares held)
Special dividend paid
Special dividend number 1 of 25.0 cents per share (net of – 25 013
6 014 30 016
Condensed consolidated statement of cash flows for the 14 month period ended 29
February 2016
14 12 months
months Audited
Reviewed 31
Figures in R’000 Note 29 December
February 2014
2016
Cash flows from operating activities
Net cash utilised by operating activities 8 (28 523) (35 260)
Investment revenue received 8 263 12 787
Finance income received 5 421 7 473
Finance costs paid (1 965) (3 047)
Dividends paid to shareholders (6 014) (30 016)
Dividends paid to non-controlling (1 618) (11 677)
Income tax paid (5 472) (17 706)
Net cash utilised by operating activities (29 908) (77 446)
Cash flows from investing activities
Proceeds on disposal of business 15 000 102 000
Acquisition of property, plant and equipment (1 575) (678)
Repayment of loans to associates – 2 239
Increase in investment and loans to associates (50 949) (4 089)
Increase in loans to other non-current assets (4 032) (798)
Proceeds from repayment of other non-current assets 4 257 331
Acquisition of other investments (1 010) (2 833)
Proceeds on disposal of other investments 40 994 –
Net cash inflow from investing activities 2 685 96 172
Cash flows from financing activities
Proceeds on issue of share capital – 14 800
Repayments of other financial liabilities (22 338) (6 718)
Net cash (outflow)/inflow from financing activities (22 338) 8 082
Net (decrease)/increase in cash and cash equivalents (49 561) 26 808
Cash and cash equivalents at the beginning of the period 66 656 39 360
Net cash acquired in business acquisitions – 488
Total cash and cash equivalents at end of the period 17 095 66 656
Segmental reporting for the 14 month period ended 29 February 2016
14 months
Reportable
segment
profit/(loss)
Total Total
Revenue after tax assets liabilities
Reviewed Reviewed Reviewed Reviewed
29 29
29 February 29 February
February February
Figures in R’000 2016 2016 2016 2016
Continuing operations
Fund management* 60 468 519 51 594 (3 594)
Asset administration ** – 7 407 52 487 (5 162)
Advisory
1 007 (2 493) 1 035 (1 135)
services
Investment banking
Institutional
securities 69 780 5 108 659 507 (666 796)
broking
Private equity* 10 102 1 172 195 847 (25 846)
Private clients* 12 833 (3 403) 2 363 (2 441)
154 190 8 310 962 833 (704 974)
Discontinued operations
Property asset
management – 320 5 (4)
Property developments
and investments – (461) 892 (1 601)
– (141) 897 (1 605)
Total 154 190 8 169 963 730 (706 579)
12 months
Reportable
segment
profit/(loss)
Total Total
Revenue after tax assets liabilities
Audited Audited Audited Audited
31 31
31 December 31 December
December December
Figures in R’000 2014 2014 2014 2014
Continuing operations
Fund management* 38 383 (5 287) 47 283 (2 904)
Advisory services 3 138 (3 276) 2 008 (573)
Investment banking
Institutional
52 256 2 409 155 070 (141 507)
securities broking
Private equity* 10 592 (14 444) 246 094 (63 236)
Private clients* 10 647 (4 717) 2 275 (2 666)
115 016 (25 315) 452 730 (210 886)
Discontinued operations
Property asset
94 093 14 990 (1 707)
management 1 571
Property developments and investments – (1 793) 1 374 (1 657)
1 571 92 300 16 364 (3 364)
Total 116 587 66 985 469 094 (214 250)
The fund management, advisory services and private equity segments are
geographically located in South Africa and, on a smaller scale, in Zimbabwe. The
institutional securities broking and private client segments are geographically
located in South Africa.
# Vunani previously reported a “Group” segment, however this segment supports all
of the group’s businesses. In fine-tuning the reportable segments, this segment
has consequently been reallocated across the other segments and has fallen away.
Prior period segmental results have been adjusted.
* The Fund management segment was previously named "Asset management", the Private
clients segment was previously named "Private wealth and investments" and the
Private equity segment was previously named “Investment holdings”. The segments
names were amended in 2015.
** In the current period, the group introduced a new reporting segment “Asset
administration” after the acquisition of Fairheads International Holdings
Proprietary Limited ("Fairheads").
Notes to the condensed consolidated results
(all figures in R´000)
BASIS OF PREPARATION
The condensed consolidated financial statements are prepared in accordance with
the requirements of the JSE Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The Listing Requirements
require provisional reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International
Financial Reporting Standard (IFRS) and the SAICA "Financial Reporting Guides" as
issued by the Accounting Practices Committee and Financial Pronouncements as
issued by 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 condensed consolidated financial
statements are in terms of IFRS and are consistent with those applied in the
previous consolidated annual financial statements.
The reviewed condensed consolidated provisional financial statements have been
presented on the historical cost basis, except for other investments and certain other
financial liabilities, which are fair valued. These condensed consolidated financial
statements are presented in South African Rand, rounded to the nearest thousand, which
is the group’s functional and presentation currency.
These reviewed condensed consolidated provisional financial statements incorporate
the financial statements of the company, its subsidiaries and entities that, in
substance, are controlled by the group and the group's interest in associates.
Results of subsidiaries and associates are included from the effective date of
acquisition up to the effective date of disposal. All significant transactions and
balances between group enterprises are eliminated on consolidation.
CHANGE IN FINANCIAL REPORTING PERIOD
A decision was taken during 2015 to change the financial year-end of Vunani
Limited and its subsidiaries (“Vunani Group”) from 31 December to the last day of
February. The change was primarily motivated by Vunani’s acquisition of a
significant interest in Fairheads International Holdings Proprietary Limited
(“Fairheads”) in May 2015, which has a February year-end. Financial reporting
standards require that all companies in the group have the same reporting period.
The JSE Listings Requirements require that in the instance where the financial
year-end of a company has been changed and this results in the financial period
being longer than 12 months, reviewed interim reports are to be published and
distributed in respect of the 12-month period commencing on the first day of such
financial period. Accordingly, Vunani has prepared the interim report for the
period 1 January 2015 to 31 December 2015. This report was published on 29
February 2016 and is available on Vunani website.
NOTES
1. Revenue
Revenue includes trading revenue and fees earned from advisory services,
brokerage, asset management fees and client service fees.
2. Fair value adjustments and impairments
14 months 12 months
Reviewed Audited
29 31 December
Figures in R’000 February 2014
2016
Fair value adjustment on financial assets and liabilities (11 233) (18 866)
Fair value adjustment on re-measurement of stepped up – 1 742
Impairment of loans in other non-current assets (4 646) (798)
Impairment of loans to associates (3 055) –
(18 934) (17 922)
3. Discontinued operations
A strategic decision was made in November 2013 to dispose of the group’s
property asset management business. This culminated in the group disposing of
the property management contract that was held in Vunani Property Asset
Management Proprietary Limited (“VPAM”) in 2014. The sale of VPAM's business
included the transfer of VPAM’s executive management and staff employment
contracts to the purchaser. As this disposal related to a major line of the
group’s business, the related activities have been presented as a discontinued
operation. The non-controlling interest relating to the disposal of VPAM's
business has been calculated in terms of an agreement between the shareholders of
Vunani Properties Proprietary Limited, a 78% held subsidiary of Vunani Limited,
that owns 100% of VPAM.
3. Discontinued operations (continued)
The results of the discontinued operations are as follows:
14 12
months months
Reviewed Audited
Figures in R’000 29 31 December
February 2014
2016
Revenue – 1 571
Other income 113 –
Profit on disposal of assets – 116 318
Operating expenses (603) (10 782)
Results from operating activities (490) 107 107
Finance income 166 747
Finance costs – (87)
Net finance income 166 660
Results from operating activities after net (324) 107 767
Equity-accounted earnings (net of income tax) – (30)
(Loss)/profit before income tax (324) 107 737
Income tax expense 183 (15 437)
(Loss)/profit for the period (141) 92 300
Attributable to equity holders of Vunani (110) 79 108
Attributable to non-controlling interest (31) 13 192
(141) 92 300
Effect on basic and diluted earnings per (0.1) 77.1
Effect on basic and diluted headline loss per (0.1) (2.8)
Cash flows from discontinued operations
Net cash generated/(utilised) by operating 11 754 (106 912)
Net cash inflow from investing activities – 103 593
Net cash outflow from financing activities (11 753) (2 213)
Net cash flow for the period 1 (5 532)
4. Reconciliation of headline earnings for the period
14 12
months months
Reviewed Audited
Figures in R’000 29 31 December
February 2014
2016
Profit for the period attributable to equity 6 750 56 039
Adjusted for:
Asset disposal
Profit on disposal of discontinued – (116 318)
Taxation – 21 691
Non-controlling interest – 12 617
Associates
Gross revaluation of investment property (704) (467)
Deferred taxation on revaluation 197 131
Non-controlling interest 112 74
Business combinations
Fair value adjustment on stepped up – (1 742)
Bargain purchase – (298)
6 355 (28 273)
Headline earnings/(loss) per share (cents) 5.8 (27.5)
Basic and diluted headline earnings/(loss) per share from 5.9 (24.7)
continuing operations
Basic and diluted headline loss per share from (0.1) (2.8)
discontinued operations
5. Other investments and other financial liabilities
Unlisted investments are fair valued annually by the directors. Listed investment
prices are determined with reference to the share price at period-end.
Both listed and unlisted investments are designated at fair value through profit
or loss. Financial liabilities are either accounted for at amortised cost or
designated at fair value through profit or loss. The group designates certain
financial liabilities at fair value through profit or loss upon initial
recognition.
Ring-fenced special purpose entities have historically been used to house the
group’s geared equity investments and any financial liabilities that relate to
such investments. Financial assets and liabilities that arise in terms of these
ring-fenced structures are both fair valued through profit or loss in terms of
IAS 39 Financial instruments: Recognition and measurement.
The reason for the above designation was to reduce the measurement
inconsistency on ring-fenced liabilities relative to the assets that they
funded. Because the liability to lenders is limited to the fair value of the
assets, if the assets were fair valued through profit or loss and the
liabilities carried at amortised cost, inconsistency would arise that would not
reflect the true liability of the group. In order to eliminate this
inconsistency on ring-fenced structures, these specific liabilities are
designated at fair value through profit or loss on initial recognition.
Financial liabilities at fair value include capitalised interest and
attributable profit participation.
5. Non-current assets held for sale
During the period, the group made a decision to dispose of its listed
investments in BSI Limited and Workforce Holdings Limited, which fall under the
private equity segment. The assets and liabilities relating to the sale of
investments have been presented as non-current assets held for sale. It is
expected that the sale of these assets will be concluded within the next 12-
month period. At 29 February 2016, the non- current assets held for sale were
stated at fair value and consisted of assets of R43.0 million.
As at 29 February 2016 the non-current assets held for sale were detailed as
follows:
Reviewed Audited 31
29 December
February 2014
2016
Assets classified as held for sale
Other investment
BSI Limited 7 260 –
Investment in associate
Verbicept Proprietary Limited 35 244 –
42 504 –
6. Authorised and issued stated capital
The authorised stated capital at 29 February 2016 was 200 million ordinary shares
of no par value (2014: 200 million ordinary shares of no par value). 114 664 649
shares were in issue at 29 February 2016 (2014: 114 664 649).
Reviewed Audited
29 31
Weighted average number of ordinary shares February December
(000s) 2016 2014
Issued ordinary shares at the beginning of 114 665 105 415
Effect of share issue – 2 588
Effect of own shares held (5 364) (5 364)
Weighted average number of shares 109 301 102 639
Number of shares in issue at the end of the 114 665 114 665
Dilutive weighted average number of ordinary
Issued ordinary shares at the beginning of 114 665 105 415
Effect of share issue – 2 588
Effect of own shares held (5 364) (5 364)
Effect of dilutive shares 221 –
Diluted weighted average number of shares 109 522 102 639
Number of shares in issue at the end of the 114 665 114 665
The shares issued as part of the employee share incentive scheme could
potentially dilute basic earnings in the future. In the current period, the
employee shares have a dilutive effect. The impact of the potential dilutive
shares is immaterial.
7. Net cash utilised by operating activities
Reviewed Audited
29 31
Figures in R’000
February December
2016 2014
Loss before income tax expense from 8 426 (23 853)
(Loss)/profit before income tax expense from (324) 107 737
Adjusted for:
Depreciation of property, plant and equipment 1 743 1 570
Profit on discontinued operations – (116 318)
Reversal of other financial liabilities (1 483) –
Equity-accounted earnings (net of income tax) (31 797) 116
Gain on bargain purchase – (298)
Fair value adjustments and impairments 18 934 17 922
Realisation of deferred income (3 574) (3 573)
Movement in impairment allowance 1 083 (297)
Amortisation of intangible assets 858 1 165
Share-based payments expense 1 628 2 993
Foreign currency translation gain (3 460) (920)
Lease straight-line adjustment (394) (82)
Interest received from investments and (6 718) (9 191)
Investment revenue (8 263) (14 220)
Finance costs 2 697 3 047
Changes in working capital:
Decrease in trading securities 120 69
(Increase)/decrease in trade and other (6 747) 8 473
Decrease in trade and other payables (2 155) (9 688)
Increase in accounts receivable and payable 903 88
Cash utilised by operating activities (28 523) (35 260)
8. Financial instruments carried at fair value
The fair value of a financial instrument is the price that would be received
for the sale of an asset or paid for the transfer of a liability in an orderly
transaction between market participants at the measurement date. Underlying
the definition of fair value is a presumption that an entity is a going concern
without any intention or need to liquidate, to curtail materially the scale of
its operations or to undertake a transaction on adverse terms. Fair value is
not, therefore, the amount that an entity would receive or pay in a forced
transaction, involuntary liquidation or distressed sale.
The existence of published price quotations in an active market is the best
evidence of fair value and, where they exist, they are used to measure the
financial asset or financial liability. A market is considered to be active if
transactions occur with sufficient volume and frequency to provide pricing
information on an ongoing basis. Financial instruments fair valued using quoted
prices would generally be classified as level 1 in terms of the fair value
hierarchy.
Where a quoted price does not represent fair value at the measurement date or
where the market for a financial instrument is not active, the group establishes
fair value by using valuation techniques. These valuation techniques include
reference to the value of the assets of the underlying business, earnings
multiples (e.g. unlisted investments), discounted cash flow analysis (e.g.
unlisted investments, loans and advances) and various option pricing models.
Inputs typically used in valuation techniques include discount rates, expected
future cash flows, dividend yields, earnings multiples, volatility, equity prices
and commodity prices.
Valuation methodologies and techniques applied for level 3 financial instruments
include a combination of discounted cash flow analysis, application of earnings
multiples on sustainable after tax earnings and current and projected net asset
values to determine overall reasonability. The valuation technique applied to
specific financial instruments depends on the nature of the financial instrument
and the most appropriate valuation technique is determined on that basis.
After the valuations of the unlisted financial assets and liabilities are
performed, these are presented to the group’s investment committee for
independent review. All significant valuations are approved by the investment
committee.
The valuation methodologies, techniques and inputs applied to the fair value
measurement of the financial instruments have been applied in a manner consistent
with that of the previous financial period.
Reviewed Audited
29 February 31 December
2016 2014
Fair values Carrying Fair Carrying Fair
amount Value amount Value
Figures in R’000
Financial assets measured at fair value
Designated at fair value through profit or 57 160 57 160 134 874 134 874
Non-current assets held for sale 7 260 7 260 – –
Trading 131 131 251 251
Financial assets not measured at fair
Loans to associates 27 298 25 150 14 325 11 537
Loans in other non-current assets 5 030 8 141 4 788 5 786
96 879 97 842 154 238 152 448
9. Financial instruments carried at fair value (continued)
Reviewed 29 Audited 31
February December
2016 2014
Fair values Carrying Fair Carrying Fair
amount value amount value
Figures in
R’000
Financial liabilities measured at fair
value
Designated at fair value through profit or (4 290) 4 290) (2 554) (2 554)
loss on initial recognition
Financial liabilities not measured at fair
value
Other financial liabilities (16 842) (16 226) (43 026) (42 760)
(21 132) (20 516) (45 580) (45 314)
Total 75 747 77 326 108 658 107 134
The carrying amounts of cash and cash equivalents, accounts receivable from
trading activities, trade and other receivables, bank overdraft, accounts payable
from trading activities and trade and other payables reasonably approximate their
fair values.
Fair value hierarchy
The table below analyses recurring fair value measurements for financial assets
and financial liabilities. These fair value measurements are categorised into
different levels in the fair value hierarchy based on inputs to the valuation
techniques used.
The different levels are defined as follows:
– Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
– Level 2: Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
– Level 3: Inputs for the asset or liability that are not based on observable market
data (unobservable inputs).
Reviewed 29 February 2016
Figures in R’000 Level 1 Level Level 3 Total
Financial assets designated at fair value 29 556 – 27 604 57 160
through profit or loss
Financial assets measured at fair value 7 391 – – 7 391
Financial assets at amortised cost – – 33 291 33 291
Financial liabilities measured at fair value – – (4 290) (4 290)
Financial liabilities at amortised cost – – (16 226) (16 226)
36 947 – 40 379 77 326
Audited 31 December 2014 Level 1 Level 2 Level 3 Total
Financial assets designated at fair value 96 430 – 38 444 134 874
Financial assets measured at fair value 251 – – 251
Financial assets at amortised cost – – 17 323 17 323
Financial liabilities designated at fair – – (2 554) (2 554)
Financial liabilities at amortised cost – – (42 760) (42 760)
96 681 – 10 453 107 134
Reviewed Audited
29 31
Figures in R’000 February December
2016 2014
Level 3 comprises:
Balance at beginning of period 35 890 57 674
Total gains or losses in profit or loss (14 971) (24 927)
Purchases, transfers, sales, issues and 2 395 3 143
Balance at end of the period 23 314 35 890
A change of 10% in the unobservable inputs of the investment and liability at
the reporting date would have increased/(decreased) equity and profit or loss
by the amount shown below. This analysis assumes that all other variables
remain constant.
14 months 12 months
Reviewed Audited
29 February 31
Effect on statement of comprehensive income (profit/(loss)) 2016 December
and equity before taxation 2014
Net asset value
10% increase 1 204 1 309
10% decrease (1 113) (1 192)
Free cash flow 2 844 777
10% increase (5 471) 821
10% decrease
Foreign exchange movement
10% increase 799 –
10% decrease (572) –
10. Events after reporting date
During the period, the group acquired an additional 9.5% in Vunani Fund
Managers Proprietary Limited. This resulted in the group increasing its
shareholding from 90.5% to 100%.
11. Dividends
Paid
A gross ordinary dividend of 5.5 cents per share (2014: 5 cents per share and a
gross special dividend of 25 cents per share) were declared out of income
reserves on 30 March 2015 and paid to ordinary shareholders on 28 April 2015.
Proposed
It is proposed that a scrip capitalisation share distribution with a cash
alternative be declared in the ratio of 4 shares for every 100 shares held, with
the alternative being a 6c cash payment per share. This is subject to a
circular being submitted to and approved by the JSE. A formal dividend
declaration will be made once the requisite approvals have been obtained.
12. Going concern
The directors have made an assessment of the ability of the company and its
subsidiaries to continue as going concerns and have no reason to believe the
businesses will not continue as going concerns for the foreseeable future.
13. Contingent liability
Dreamworks Investments 125 Proprietary Limited (“Dreamworks”), a subsidiary of
Vunani Limited, developed a mixed-use property (“the development”) in Long
Street Cape Town during 2004. A local company purchased a section in the
development. The purchaser (“plaintiff”) alleged that the section was defective
and that beneficial occupation had been delayed. The Plaintiff instituted a civil
claim against Dreamworks as the first defendant, Vunani Limited as the second
defendant and Herbert Penny Proprietary Limited as the third defendant
(collectively “the defendants”). The Plaintiff has been dilatory in pursuing this
matter; however during 2015 the plaintiff amended its particulars of claim,
increasing the value of the alleged damages claim to R8.9 million, which had
grown to an estimated R10.6 million by 29 February 2016.
The First Defendant and their legal advisors are of the opinion that the section
was made available for beneficial occupation timeously and in the required state
and therefore dispute the validity of the alleged claim. Notwithstanding the
aforesaid, the Defendants have not pleaded to the Plaintiff’s particulars of
claim. Vunani Limited’s board of directors have sought independent legal advice
regarding the validity and enforceability of the alleged claim against it. The
directors do not believe that there will be a negative outcome for Vunani Limited
as a result the claim.
Notwithstanding the aforesaid, the Plaintiff’s claim has not prescribed, been
withdrawn or settled. Therefore a possibility exists that the Plaintiff will
proceed with such claim and the possibility of a liability remains.
OVERVIEW AND PROSPECTS
Domestic growth prospects and business conditions deteriorated over the
course of 2015 and into 2016. The period was characterised by growing
uncertainty amidst weaker global demand for resources, rising interest rates
and increased concerns regarding the prospects for domestic inflation. The
heightened risk of ratings downgrades which contributed towards the
deterioration of the Rand and higher import prices due to severe drought
weakened economic growth prospects. These factors caused tougher business
conditions compared to what was envisaged at the beginning of the 2015 year.
While economic conditions were challenging, the 2016 year saw exciting
developments and accomplishments within the Vunani group.
The acquisition of Fairheads International Holdings SA Proprietary Limited
(“Fairheads”) was one of Vunani’s major achievements of 2016. Fairheads’
business is complementary to the group’s existing financial services product
offering in that it operates within the asset administration sphere. The
acquisition has also resulted in Vunani aligning its year-end reporting
period with that of Fairheads and Vunani has therefore changed its year-end
from December to February.
Another development is that the group has, where possible, systematically
reduced its exposure to other listed investments and the proceeds have been
utilised within the operating businesses.
One of the group’s most important assets is its employees and the approval
and implementation of a new share incentive scheme has been an important step
in retaining key management and staff. The scheme aligns the individuals’
objectives and performance to the creation of shareholder value.
Vunani generated total comprehensive income for the period of R8.3 million
(2014: R67.2 million). The 2014 results include a profit of R116.3 million
made from discontinued operations, which did not reoccur in the current
period. Total comprehensive income attributable to equity holders of the
company amounts to R6.4 million (2014: R56.0 million). In line with the
presentation at 31 December 2014, the results for the 14 month period ended
29 February 2016 have been presented such that the disposal of the property
asset management business in Vunani Property Asset Management Proprietary
Limited (“VPAM”) and the winding down of the property investment and
development segment are reflected as discontinued operations (refer to note
3).
The group’s reportable segment structure was refined further based on the key
sectors that the group operates in.
The reportable segments are as follows:
• Fund management
• Asset administration
• Investment banking – Advisory services
- Institutional securities broking
• Private equity
• Private clients
Fund Management
The fund management segment includes the group’s investments in Vunani
Fund Managers Proprietary Limited (“VFM”) and Purpose Vunani Asset
Management (Private) Limited (“PVAM”). The segment reported a 58% increase in
revenue and a profit of R0.5 million for the period ended 29 February 2016
(2014: loss of R5.3 million).
VFM’s performance and profitability improved during the period and its
assets under management increased from R12.4 billion at December 2014 to
R14.1 billion at February 2016. This increase in assets under management
is mainly attributable to good performance in all the funds across the
business.
PVAM continued to face challenging economic conditions in Zimbabwe, but
despite this, PVAM’s assets under management increased to $17.8 million at
February 2016 from $16.2 million at December 2014. Operating margins in
this business remain tight and costs are monitored closely.
Asset administration
In May 2015, the group concluded the acquisition of a significant
interest in Fairheads. Subsequently, Vunani disposed of a 30% interest to
Fairheads’ key management and an effective 7.5% to a non-controlling
interest. International Financial Reporting Standards (“IFRS”) require
that the investment in Fairheads is equity-accounted because of specific
provisions pertaining to control that were contained in the structuring of
the acquisition. Fairheads’ performance has been pleasing and the
investment has contributed R9.7 million in equity- accounted after tax
earnings to the group for the period.
Advisory services
The arduous market conditions have impacted this segment and have
contributed to greater lead times in finalisation of transactions. The
corporate finance team was integrally involved in the structuring and
ultimate conclusion of the Fairheads acquisition. The segment reported a
loss for the period of R2.5 million (2014: R3.3 million).
Institutional securities broking
This segment includes equity, derivative and capital market trading
services to institutional clients. Revenue increased by 34% compared to
2014, while costs were closely managed. The segment reported a profit for
the period of R5.1 million (2014: R2.4 million). The focus for the period
was on revenue growth through the expansion of the client base and exploring
diversified products, which is progressing positively.
Private equity
The segment has refined its focus into three investment sub-categories,
namely mining, property and African investments. While a portion of the
listed investment portfolio has been disposed of, the remaining investments
still held at 29 February 2016 have been included in this segment. The
intention is to dispose of the listed investment portfolio, except in cases
where the holding of listed equities supports regulatory capital
requirements. The return on the investments and optimal use of capital is
monitored to ensure that an efficient structure is maintained. Mining
investments are focused primarily on coal and are considered in partnership
with well-capitalised and strategic associates.
The next phase of the group’s involvement in the property sector is
being explored. Furthermore, Vunani is continuing its investment strategy
onto the African continent through its existing relationships. The
segment reported a profit of R1.2 million for the period (2014: loss of
R14.4 million).
Private clients
The segment’s main business activities are providing retail securities
broking, private wealth and investment products to retail clients.
The segment reported a loss of R3.4 million for the period ended 29
February 2016 (2014: R4.7 million), despite a 21% increase in revenue. The
established platform in place provides a foundation for growth and
executive management’s focus will be dedicated to ensuring that the number
of actively trading clients improves.
Discontinued operations
The group’s legacy property development, investments and property asset
management segments went through a realisation phase and have been
reflected as discontinued operations since 2014.
Financial performance
Revenue from continuing operations increased by 34% to R154.2 million
(2014: R115.0 million) for the period ended 29 February 2016.
Other income comprises the amortisation of deferred revenue that arose on
the historic acquisition of Black Wattle Colliery Proprietary Limited and
the effect of the write back of certain financial liabilities that have
prescribed.
Investment income (in the form of dividends) amounting to R8.3 million
(2014: R14.2 million) was received during the period.
This decrease was a result of lower dividend declarations by investee
companies.
Negative fair value adjustments and impairments of R18.9 million
(2014: fair value adjustments and impairments of R17.9 million) relate to the
valuation of the groups’ investment portfolio that has been designated at
fair value through profit or loss.
Operating expenses have increased by 26% from R146.0 million to R183.3
million. The increase is because of a 14 month period. Furthermore, the
devaluation of the Rand has resulted in increases in information and
technology costs, which are typically dollar denominated. The group remains
focused on cost containment and monitors spending on an ongoing basis.
Finance income has decreased to R4.5 million in 2016 compared to R6.0
million in 2014, while finance costs have also decreased from R3.0 million
for the year ended December 2014 to R2.7 million for the period ended
February 2016.
Discontinued operations generated a loss of R0.1 million (2014: profit of
R92.3 million). The deferred payment on the disposal of the business in
2014 amounting to R15 million was received on 28 February 2015 in
accordance with the agreement.
Investments in and loans to associates have increased primarily as a result
of the acquisition of Fairheads and additional investments made into mining
related private equity activities.
The overall decrease in other investments has resulted from the decision
to systematically dispose of a portion of the group’s listed investment
portfolio. The proceeds from the disposal of other investments were used
to repay other financial liabilities. Investments in listed assets that
do not provide a capital adequacy underpin have been presented as non-
current assets held for sale. It is expected that the sale of these
assets will be concluded within the next 12 month period. The non-current
assets held for sale are stated at fair value.
Cash and cash equivalents decreased by R49.6 million since December 2014
(2014: increase of R26.8 million) primarily as a result of the acquisition of
Fairheads and the payment of dividends.
The share-based payments reserve movement of R1.6 million is attributable
to the current period IFRS 2 charge (2014: charge of R3.0 million).
Dividends paid to Vunani’s shareholders during the period amounted to R6.0
million (2014: R30.0 million).
Prospects
Vunani has been fortunate in that it has seen steady deal-flow and
promising opportunities despite subdued market conditions. We expect
domestic securities markets to look through the expected 2016 slump in the
economy and focus beyond the inflation peak to be reached by late this
year. The prospect of improved business conditions into 2017 should also
bring the concomitant opportunity for organic growth to the respective
Vunani businesses, as the envisaged economic recovery gains traction.
Organic growth and effective management of margins remains central to our
plans, yet we remain vigilant and open to all opportunities on a case-by-
case basis to evaluate if they are value enhancing for shareholders. The
group’s emphasis remains on the development and growth of the operating
businesses through strong leadership and a first-rate product offering. The
strategic partnerships and alliances that have been formed, both locally
and on the African continent, are expected to make a meaningful
contribution to the group and its ability to produce sustainable earnings.
REVIEW OPINION
The provisional condensed consolidated results of Vunani Limited for the
period ended 29 February 2016 have been reviewed by the company’s
auditor, KPMG Inc. In their review report dated 24 May 2016, which is
available for inspection at the Company’s Registered Office, KPMG Inc.
state that their review was conducted in accordance with the International
Standard on Review Engagements 2410, Review of Interim Information
Performed by the Independent Auditor of the Entity, which applies to a
review of condensed consolidated financial information, and have expressed
an unmodified conclusion on the condensed consolidated results.
FORWARD-LOOKING STATEMENTS AND DIRECTORS’ RESPONSIBILITY
Statements made throughout this announcement regarding the future financial
performance of Vunani have not been reviewed or audited by the company's
external auditors. The company cannot guarantee that any forward-looking
statement will materialise and accordingly, readers are cautioned not to
place undue reliance on any forward-looking statements. The company
disclaims any intention and assumes no obligation to update or revise any
forward-looking statement even
if new information becomes available as a result of future events or for
any other reason, other than as required by the JSE Listings
Requirements.
The directors take full responsibility for the preparation of the
condensed consolidated interim results.
Signed on behalf of the board of directors by EG Dube and A Judin on 24 May
2016.
CORPORATE INFORMATION
Executive directors
EG Dube (Chief Executive Officer)
A Judin (Chief Financial Officer)
BM Khoza
NM Anderson
Non-executive directors
LI Jacobs – independent chairman
XP Guma – independent
NS Mazwi – independent
G Nzalo – independent
JR Macey – independent S Mthethwa
Company secretary
CIS Company Secretaries Proprietary Limited
Designated adviser
Grindrod Bank Limited
Financial communications adviser
Singular Systems Proprietary Limited (appointed 1 November 2015)
Transfer secretaries
Computershare Investor Services Proprietary Limited 70 Marshall
Street
Johannesburg 2001www.vunanilimited.co.za
Date: 24/05/2016 08:58:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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