Wrap Text
Unaudited condensed consolidated interim financial statements for the six months ended 30 June 2016
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”)
Unaudited condensed consolidated interim financial statements
for the six months ended 30 June 2016
Condensed consolidated statements of financial position
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
Notes R’000 R’000 R’000
ASSETS
Non-current assets 735 321 739 865 722 653
-Plant and equipment 1 299 474 307 837 290 286
-Goodwill 2 418 679 418 679 418 679
-Deferred tax asset 17 168 13 349 13 688
Current assets 295 732 256 332 275 144
-Inventory 112 554 86 414 79 746
-Trade and other
receivables 168 292 155 546 177 777
-Taxation 4 013 4 185 4 013
-Cash and cash
equivalents 10 873 10 187 13 608
Total assets 1 031 053 996 197 997 797
EQUITY AND LIABILITIES
Capital and reserves 447 682 452 524 446 668
-Stated capital 976 114 976 114 976 114
-Revaluation reserve 4 638 4 638 4 638
-Cash flow hedge
reserve 3 (33 242) (32 920) (30 609)
-Accumulated loss (563 417) (560 514) (568 539)
-Non controlling
interest 63 589 65 206 65 064
Non-current
liabilities 135 133 176 315 154 549
-Redeemable preference
share capital 28 377 25 371 27 529
-Derivative financial 3 32 893 40 668 37 151
liabilities
-Borrowings 4 19 938 59 812 39 875
-Operating lease
liabilities 17 390 18 044 18 113
-Deferred tax
liability 36 535 32 420 31 881
Current liabilities 448 238 367 358 396 580
-Taxation 294 554 546
-Trade and other
payables 126 822 95 397 115 271
-Operating lease
liabilities 1 250 - 479
-Derivative financial
liabilities 3 22 340 14 030 13 707
-Borrowings 4 297 532 257 377 266 577
Total liabilities 583 371 543 673 551 129
Total equity and
liabilities 1 031 053 996 197 997 797
Net asset value per
share (cents) 438,24 441,92 435,40
Net tangible asset
value per share (cents) 38,93 42,61 36,04
Condensed consolidated statements of comprehensive income
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
Notes R’000 R’000 R’000
Revenue 619 514 510 323 1 132 870
Cost of sales (499 983) (433 791) (961 022)
Gross profit 119 531 76 532 171 848
Profit/(loss) from
operations 21 832 (5 458) 5 569
Investment income 335 395 1 215
Profit/(Loss) on
sale/scrapping of
plant and equipment - - 365
Impairment of plant
and equipment - - (8 463)
Finance costs (15 606) (14 152) (28 385)
Profit/(loss) before
taxation 6 561 (19 215) (29 699)
Taxation (2 397) 5 175 7 037
Net profit/(loss)
after tax 4 164 (14 041) (22 662)
Other comprehensive
(loss)/income
Items that may be
reclassified
subsequently
to profit or loss: (3 150) 25 572 28 336
Movement in cash flow
hedge 3 (4 374) 35 517 39 356
Deferred tax charge 3 1 224 (9 945) (11 020)
Total comprehensive
income 1 014 11 531 5 674
Net profit/(loss)
attributable to: 4 164 (14 041) (22 662)
– Equity holders of
Andulela 5 122 (13 609) (21 634)
– Non-controlling
interest (958) (432) (1 028)
Total comprehensive income/
(loss) attributable to: 1 014 11 531 5 674
– Equity holders of
Andulela 2 489 7 766 2 052
– Non-controlling
interest (1 475) 3 765 3 622
Ordinary shares in issue
(millions)* 87,64 87,64 87,64
Weighted average
number of ordinary
shares in issue
(millions)* 87,64 87,64 87,64
Headline profit/(loss) 5 122 (13 609) (15 804)
– Attributable net
profit/(loss) 5 122 (13 609) (21 634)
– Add back: Impairment,
scrapping and loss on
disposal of plant and
equipment – – 8 098
- Tax effect of the
above - - (2 268)
Profit/(loss) and
diluted profit/(loss)
per ordinary share
(cents)* 5,84 (15,53) (24,68)
Headline profit/(loss) and
diluted headline
profit/(loss) per ordinary
share (cents)* 5,84 (15,53) (18,03)
Dividends per ordinary share
(cents) – – –
* The profit/(loss) and diluted profit/ (loss) per ordinary share
and the headline profit/ (loss) and diluted headline profit/ (loss)
per ordinary share are calculated by dividing the profit/ (loss) and
diluted profit/ (loss), and the headline profit/ (loss) and headline
diluted profit/ (loss) by the weighted average number of ordinary
shares in issue during the year.
Condensed consolidated statements of cash flows
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Cash flows from:
Operating activities 5 476 (19 218) (4 063)
Investing activities (19 229) (9 256) (10 091)
Financing activities 11 018 19 157 8 258
Change in cash and
equivalents (2 735) (9 317) (5 896)
Opening cash and equivalents 13 608 19 504 19 504
Closing cash and equivalents 10 873 10 187 13 608
Condensed consolidated statements of changes in equity
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Opening balances 446 668 440 993 440 993
Movements for the period:
– Net profit/(loss)
attributable to equity 5 122 (13 609) (21 634)
holders of Andulela
– Cash flow hedge reserve net
of deferred tax (2 633) 21 375 23 687
– Non-controlling interest (1 475) 3 765 3 622
Closing balances 447 682 452 524 446 668
Notes to the condensed consolidated interim financial statements
Basis of preparation
The unaudited condensed consolidated interim financial statements
for the six months ended 30 June 2016 are prepared in accordance
with the JSE Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The JSE Listings
Requirements require provisional 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 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 interim financial statements for the six months ended
30 June 2016 are in terms of IFRS and consistent with those of the
annual financial statements for the year ended 31 December 2015,
except for the adoption of statements and amendments which became
effective during the period. These standards and amendments had no
material impact on the results reported on for the six months ended
30 June 2016. The directors take responsibility for the preparation
of the condensed consolidated interim financial statements based on
the underlying financial information. These results were prepared
under the supervision of Henk Engelbrecht CA(SA), the Group Chief
Financial Officer. The interim financial statements have not been
reviewed or reported on by the Group’s auditors.
1. Plant and equipment
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Opening balance 290 286 308 444 308 444
Additions 19 478 9 410 11 244
Disposals and loss on
scrapping of plant and
equipment (246) (42) (789)
Depreciation (10 044) (9 975) (20 150)
Impairment of plant and
equipment - - (8 463)
Plant and equipment at
carrying value 299 474 307 837 290 286
PRSM invested R19,5 million in plant and equipment in the past six
months as part of its strategy to replace ageing equipment and to
expand its business.
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 30 June 2016
has been considered for impairment and the bard is satisfied that no
impairment is required.
3. Cash flow hedge
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 IAS39, 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 six months ended 30 June 2016, a R3,1 million loss (June
2015: R25,6 million gain) after deferred tax has been recognised in
other comprehensive income and an increase in the cash flow hedge
reserve from December 2015 to June 2016 of R2,6 million, net of non-
controlling interests, in the statement of financial position. The
loss realised and netted off against the revenue was R7,8 million
for the six months ended 30 June 2016 (June 2015: R7,5 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 R317,5 million as at 30
June 2016 compared to R317,2 million as at 30 June 2015, and can be
summarised as follows:
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Absa Bank Limited 119 813 155 700 139 750
Reichmans Capital
Proprietary Limited 167 552 131 385 136 597
Thunder Rate Investments
Proprietary Limited 29 397 29 474 29 397
The Rafik Mohamed Family
Trust 708 630 708
Total borrowings 317 470 317 189 306 452
Current liabilities 297 532 257 377 266 577
Non-current liabilities 19 938 59 812 39 875
The facilities from Absa Bank are being restructured with the
intention to convert the revolving credit facility of R60 million to
a loan facility with a final settlement date of 30 June 2018.
The Reichmans facilities to PRSM are working capital and asset
finance facilities which have been structured as short-term
facilities. In the current year PRSM invested R19,5 million in
plant and equipment, which was funded from short-term facilities.
Over the past five years approximately R60 million was incurred on
capital expenditure utilising the Reichmans facility.
5. 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 June 2016 – Unaudited
Loans and Amortised Fair
receivables cost value Total
R’000 R’000 R’000 R’000
Financial assets
not measured at
fair value
Cash and cash
equivalents 10 873 10 873
Trade and other
receivables 161 989 161 989
Financial
liabilities
measured at
fair value
Derivative
financial
instrument – cash
flow hedge* (55 233) (55 233)
Financial
liabilities not
measured at
fair value
Preference shares (28 377) (28 377)
Borrowings (317 470) (317 470)
Trade and other
payables (123 162) (123 162)
Total 172 862 (469 009) (55 233) (351 380)
Carrying Value June 2015 – Reviewed
Loans and Amortised
receivables cost Fair value Total
R’000 R’000 R’000 R’000
Financial assets
not measured at
fair value
Cash and cash
equivalents 10 187 10 187
Trade and other
receivables 155 546 155 546
Financial
liabilities
measured at fair
value
Derivative
financial
instrument – cash
flow hedge* (54 698) (54 698)
Financial
liabilities not
measured at
fair value
Preference shares (25 371) (25 371)
Borrowings (317 189) (317 189)
Trade and other
payables (93 438) (93 438)
Total 165 733 (435 998) (54 698) (324 963)
Carrying value December 2015 - Audited
Loans
and
receiv- Amortised Fair
*
ables cost value Total Der
R’000 R’000 R’000 R’000 iva
tiv
Financial assets not e
fin
measured at fair anc
value ial
ins
Cash and cash tru
men
equivalents 13 608 13 608 t –
Cas
Trade and other h
receivables 177 420 177 420 flo
w
Financial liabilities hed
ge:
measured at fair
The
value fai
r
Derivative financial val
instrument – cash ue
of
flow hedge* (50 858) (50 858) the
cas
Financial liabilities h
not measured at fair flo
w
value hed
ge
Preference shares (27 529) (27 529) is
a
Borrowings (306 451) (306 451) lev
el
Trade and other 2
payables (114 762) (114 762) rec
urr
Total 191 028 (448 742) (50 858) (308 572) ing
fai
r 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.
6. Material related party transactions and balances
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Sales (81 046) (48 331) (101 622)
Purchases 14 607 34 615 67 597
Administration and
management fees 623 567 850
Investment income - (125) -
Preference dividend
expense 848 756 1 548
Rent expense 9 244 8 326 17 961
Trade receivables 31 158 21 418 34 376
Loan accounts – owing to
related parties (30 105) (30 105) (30 105)
Cumulative redeemable
preference shares (28 377) (25 371) (27 529)
Trade payables (2 871) (7 744) (18 558)
7. Segment reporting
The board of directors (“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 (“PGM”) at the
Kilken tailings treatment facility and the processing and
distribution of steel products by Pro Roof Steel Merchants (“PRSM”).
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Revenue
Tailings treatment facility 20 886 22 149 47 690
Steel processing 598 628 488 174 1 085 180
UNAUDITED REVIEWED AUDITED
6 months 6 months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
R’000 R’000 R’000
Total revenue 619 514 510 323 1 132 870
There are no sales between
segments.
Profit/(loss) after tax
Tailings treatment facility (5 841) (2 867) (6 265)
Steel processing 11 585 (9 735) (14 332)
Other unallocated (1 580) (1 439) (2 065)
Total profit/(loss) after
tax 4 164 (14 041) (22 662)
Assets
Tailings treatment 152 338 196 715 179 355
Steel processing 547 204 509 150 510 664
Inter-group eliminations (87 235) (128 718) (110 901)
Reportable segment assets 612 307 577 147 579 118
Goodwill 418 679 418 679 418 679
Other unallocated assets of
parent 68 371 -
Total assets 1 031 053 996 197 997 797
Liabilities
Tailings treatment 184 149 218 903 202 177
Steel processing 455 664 424 557 430 709
Inter-group eliminations (86 541) (127 752) (110 251)
Reportable segment
liabilities 553 272 515 708 522 635
Redeemable preference shares 28 377 25 371 27 529
Other unallocated
liabilities of parent 1 722 2 594 965
Total liabilities 583 371 543 673 551 129
8. Events subsequent to the period end
No events occurred subsequent to the period-end up to the date of
this announcement which could have a material effect on the results
of the Group or its subsidiaries.
9. Commitments
The Group had no outstanding capital commitments at 30 June 2016
(June 2015: R-).
10. Going concern
The interim 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 reported a net profit for the six months ended 30
June 2016 of R4,2 million and as at that date its current
liabilities exceeded its current assets due largely to the
short-term nature of some of its debt. Discussions are
continuing with the financial institutions to restructure the
debt facilities in the respective group companies, as well as
to ensure that sufficient funding is available to meet the
obligations of the respective companies as and when they become
due. The Company and the preference shareholder have
furthermore mutually agreed to suspend the repayment of the
preference shares and the accrued dividends until at least
1 January 2019.
Market conditions are expected to remain tough for the
industries in which the group operate, with continued
volatility in commodity prices and the local currency against
major foreign currencies.
The Group companies continue with their focus on improving
efficiencies and increasing production levels, especially at Kilken
where production challenges impacted on the results for the past six
months.
As a result, the directors are satisfied that the Group is a going
concern and applied the going concern principle.
Nature of the business
The Company is an investment holding company.
Directorate
There were no changes to the board for the six months under review.
The current directors of the Company at the date of this report are
as follows:
MJ Husain (Chairman)# Appointed as Chairman 26 February 2010
A Kaka (CEO) Appointed as CEO 26 February 2010
JHP Engelbrecht (CFO) Appointed as CFO 1 October 2015
BW Smith# Appointed 1 October 2014
PE du Preez# Appointed 1 October 2011
NMS Hadjee# Appointed 1 July 2014
#
Independent non-executive.
Financial review
(References to 2015 and 2016 relates to the six month periods to 30
June 2015 and 2016 respectively, unless indicated otherwise in the
contents)
Revenue increased by 21,4% from 2015 to 2016 and profitability also
improved from a headline loss of R13,6 million for 2015 to a
headline profit of R5,1 million for 2016. This was mainly due to the
improved revenue at PRSM during the period under review.
Borrowings remained consistent at R317 million whilst capital
expenditure of R19,5 million was incurred at PRSM during the period
under review.
Kilken
The overall commodity market and the local currency remained
extremely volatile during the period under review, with political
uncertainty contributing significantly to the volatility during the
first part of the current financial year. This, coupled with
production challenges experienced by the Joint Venture and the
negative impact of the cash flow hedge, contributed to the poor
results of this company during the period under review.
Revenue declined from R22,1 million in 2015 to R20,9 million in 2016
with the cash flow hedge reducing revenue by R7,8 million(2015:R7,5
million) and cost of sales increasing significantly from R14,9
million in 2015 to R19,0 million in 2016 as a result of the
production challenges experienced at the plant. The net result of
this was an increase in the loss after tax from R2,6 million in 2015
to R5,8 million in 2016.
The volatility of the commodity prices and the local currency also
resulted in a loss after tax being reflected on the cash flow hedge
through Other Comprehensive Income of R3,2 million compared to a
profit after tax of R25,6 million in 2015.
As mentioned in note 4 above, the loan facilities with Absa Bank
Limited are being restructured.
Management’s attention is focussed on resolving the production
challenges at the plant to improve production and efficiency levels
during the next six months, which should result in increased revenue
and lower costs.
PRSM
Pro Roof Steel Merchants Proprietary Limited and its subsidiaries
(“PRSM”) continued to improve top line revenue from R488,2 million
in 2015 to R598,6 million in 2016. Earnings before interest, tax,
depreciation, amortisation and impairments improved from R5,2
million in 2015 to R36,3 million in 2016.
The net profit after tax improved from a loss of R9,7 million in
2015 to a profit of R11,6 million to June 2016. Increased sales
volumes and the steel price increases during the period under review,
as well as continued stringent management of expenses, contributed
to the improved results.
Working capital levels increased by R9 million during 2016 compared
to the same period in 2015 and total interest bearing debt levels
decreased by R5 million in 2016 compared to 2015.
Capital expenditure of R19,5 million was incurred during the period
under review to acquire assets as part of the PRSM group’s medium-
term strategy to modernise its plants.
Overall the domestic steel industry remains challenging due to the
continued uncertainty in the world economy and an oversupply of
steel, but PRSM managed to report good results in these difficult
markets.
For and on behalf of the board
Mohamed Husain
Independent non-executive chairman
Ashruf Kaka
Chief executive officer
Sandton
26 September 2016
Andulela Investment Holdings Limited
Registered Office: 108 4th Street, Parkmore, Sandton 2196
Website: www.andulelaholdings.com
Directors: Mohamed Husain# (Chairman); Ashruf Kaka (CEO); Henk
Engelbrecht (CFO); Brian Smith#; Pieter du Preez#; Naeem Hadjee#
#
Independent non-executive
Company Secretary: Gillian Miller
Auditors: BDO South Africa Incorporated, 22 Wellington Road,
Parktown, Johannesburg, 2193
Transfer Secretaries: Trifecta Capital Proprietary Limited, Trifecta
Capital House, 31 Beacon Road, Florida North, 1709
Sponsor: Java Capital, 2nd Floor, 6A Sandown Valley Crescent,
Sandton, 2196
28 September 2016
Date: 28/09/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
