Wrap Text
Unaudited condensed consolidated interim results for the 6 month period ended 31 August 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”)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE 6 MONTH PERIOD ENDED 31
AUGUST 2016
The Unaudited Condensed Consolidated Interim 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 R75 million compared to R58.6 million at 30 June 2015
PROFIT FOR THE PERIOD OF R15.4 million compared to R3.8 million at 30 June 2015
BASIC EARNINGS PER SHARE OF 13.4c compared to 3.1c at 30 June 2015
Condensed consolidated statement of comprehensive income for the 6 month period ended
31 August 2016
Unaudited Unaudited
31 August 30 June
2016 2015
Figures in R’000 Note Re-presented*
Continuing operations
Revenue 1 75 005 58 600
Other income 339 7 541
Investment revenue 1 603 4 145
Interest received from investments 873 152
Net profit on disposal of assets 2 806 108
Fair value adjustments and impairments 2 3 010 1 540
Equity-accounted earnings (net of income tax) * 13 250 2 449
Operating expenses (77 394) (71 577)
Results from operating activities 19 492 2 958
Finance income 744 2 656
Finance costs (893) (1 183)
Net finance (costs)/income (149) 1 473
Profit before income tax 19 343 4 431
Income tax expense (3 951) (750)
Profit from continuing operations 15 392 3 681
Discontinued operations
Profit from discontinued operations (net of
income tax) – 164
Profit for the period 15 392 3 845
Other comprehensive income
Items that are or may be reclassified to profit
or loss
Exchange differences on translating foreign (674) 497
operations
Total comprehensive income for the period 14 718 4 342
Profit from continuing operations attributable
to:
Equity holders of Vunani Limited 14 700 3 241
Non-controlling interest 692 440
15 392 3 681
Profit for the period attributable to:
Equity holders of Vunani Limited 14 700 3 371
Non-controlling interest 692 474
15 392 3 845
Total comprehensive income for the period
attributable to:
Equity holders of Vunani Limited 14 361 3 510
Non-controlling interest 357 832
14 718 4 342
Basic and diluted earnings per share (cents) 13.4 3.1
Basic and diluted earnings per share from
continuing operations (cents) 13.4 3.0
Basic and diluted earnings per share from
discontinued operations (cents) – 0.1
Basic and diluted headline earnings per share
(cents) 3 11.5 3.0
Basic and diluted headline earnings per share
from continuing operations (cents) 11.5 2.9
Basic and diluted headline earnings per share
from discontinued operations (cents) – 0.1
* In the current period, the equity-accounted earnings (net of income tax) are
presented as part of operating activities, as these are considered to be part of the
company's main operations. The prior year comparatives have been re-presented to
reflect this change in presentation
Condensed consolidated statement of financial position
at 31 August 2016
6 months 14 months
Unaudited Audited
31 August 29
February
Figures in R’000 Note 2016 2016
Assets
Property, plant and equipment 8 012 8 655
Goodwill 34 123 34 123
Intangible assets – 184
Investments in and loans to associates 81 580 76 909
Other investments 4 31 545 34 318
Deferred tax asset 45 530 46 203
Other non-current assets 22 691 22 504
Total non-current assets 223 481 222 896
Other investments 4 3 530 3 769
Other current assets 1 682 1 598
Taxation prepaid 1 178 1 267
Non-current assets held for sale 5 52 923 42 504
Trade and other receivables 36 134 25 186
Accounts receivable from trading activities 698 274 648 817
Trading securities 289 131
Cash and cash equivalents 15 126 17 562
Total current assets 809 136 740 834
Total assets 1 032 617 963 730
Equity
Stated capital 6 631 690 624 888
Treasury shares (15 915) (15 571)
Share-based payments reserve 14 458 12 871
Foreign currency translation reserve (1 572) (1 233)
Accumulated loss (364 190) (365 474)
Equity attributable to equity holders of Vunani 264 471 255 481
Limited
Non-controlling interest 3 033 1 670
Total equity 267 504 257 151
Liabilities
Other financial liabilities 4 10 755 10 150
Deferred tax liabilities 2 858 2 152
Total non-current liabilities 13 613 12 302
Other financial liabilities 4 12 092 10 982
Taxation payable 6 560 4 498
Trade and other payables 34 284 30 458
Accounts payable from trading activities 698 503 647 872
Bank overdraft 61 467
Current liabilities 751 500 694 277
Total liabilities 765 113 706 579
Total equity and liabilities 1 032 617 963 730
Shares in issue (000s) 6 118 916 114 665
Net asset value per share (cents) 222.4 222.8
Net tangible asset value per share (cents) 193.7 192.9
Net asset value per share (cents)
Equity attributable to equity holders of Vunani Limited, divided by the total
shares in issue, including treasury shares.
Net tangible asset value per share (cents)
Equity attributable to equity holders of Vunani Limited, excluding goodwill and
intangible assets divided by the total shares in issue, including treasury
shares.
Condensed consolidated statement of changes in equity for the 6 month period ended 31
August 2016
Total
Share- Foreign attribu
based currency -
table Non-
Stated Treasury payment translati Accumulated to controlli Total
Figures in R'000 on equity ng
capital shares reserve reserve loss holders interest equity
Balance as 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 year – – – – 3 371 3 371 474 3 845
Other comprehensive income for – – – 139 – 139 358 497
the period
Total comprehensive income for
the period – – – 139 3 371 3 510 832 4 342
Transactions with owners,
recorded directly in equity
Dividends paid – – – – (6 014) (6 014) (1 618) (7 632)
Share-based payments – – 772 – – 772 – 772
Total transactions with – – 772 – (6 014) (5 242) (1 618) (6 860)
owners as at 30 June 2015 -
Balance 624 888 (15 571) 14 021 (761) (366 647) 255 930 (3 604) 252 326
Unaudited
Total comprehensive income for
the period
Profit for the period – – – – 3 379 3 379 945 4 324
Other comprehensive income for – – – (472) – (472) 117 (355)
the period
Total comprehensive income for
the period – – – (472) 3 379 2 907 1 062 3 969
Transactions with owners,
recorded directly in equity
Share-based payments – – 856 – – 856 – 856
Transfer between reserves – – (2 006) – 2 006 – –
Acquisition of non-controlling – – – – (4 212) (4 212) 4 212 –
interests
Total transactions with owners,
recorded directly in equity – – (1 150) – (2 206) (3 356) 4 212 856
Balance as at 29 February 2016 – 624 888 (15 571) 12 871 (1 233) (365 474) 255 481 1 670 257 151
Audited
Total comprehensive income for
the period
Profit for the period – – – – 14 700 14 700 692 15 392
Other comprehensive income for – – – (339) – (339) (335) (674)
the period
Total comprehensive income for
the period – – – (339) 14 700 14 361 357 14 718
Transactions with owners,
recorded directly in equity
Share-based payments – – 1 587 – – 1 587 – 1 587
Dividends paid – – – – (503) (503) – (503)
Capitalisation share issue 6 802 (344) – – (6 458) – – –
award
Acquisition of non-controlling – – – – (6 455) (6 455) 1 006 (5 449)
interests
Total transactions with owners,
recorded directly in equity 6 802 (344) 1 587 – (13 416) (5 371) 1 006 (4 365)
Balance as at 31 August 2016 – 631 690 (15 915) 14 458 (1 572) (364 190) 264 471 3 033 267 504
Unaudited
DIVIDENDS
Unaudited Audited
31 August 29 February
Figures in R’000 2016 2016
Capitalisation share issue award (with cash
alternative)
A scrip dividend of 4 shares for every 100 shares held 6 458 –
(4.3 million shares) was issued on 26 August 2016 (net of
treasury shares)
As an alternative to the capitalisations share issue 503 –
award, shareholders were able to elect to receive a gross
dividend of 6c per. For those shareholders electing to
receive cash, the dividend was paid to ordinary
shareholders on 29 August 2016 (net of treasury shares
held)
Ordinary dividend paid
2016: Nil (2015: ordinary dividend number 2 of 5.5 cents – 6 014
per share, (net of treasury shares held))
6 961 6 014
Condensed consolidated statement of cash flows for the 6 month period ended 31
August 2016
6 months 14 months 6 months
Unaudited Audited Unaudited
31 August 29 30 June
February
Figures in R’000 Note 2016 2016 2015
Cash flows from operating activities
Net cash utilised by operating activities 7 (6 976) (28 523) (16 843)
Investment revenue received 1 603 8 263 4 145
Finance income received 768 5 421 2 408
Finance costs paid (289) (1 965) (1 206)
Dividends paid to shareholders (503) (6 014) (6 012)
Dividends paid to non-controlling interest – (1 618) (1 607)
Income tax paid (1 908) (5 472) (1 736)
Net cash utilised by operating activities (7 305) (29 908) (20 851)
Cash flows from investing activities
Proceeds on disposal of business 494 15 000 15 000
Acquisition of property, plant and equipment (846) (1 575) (566)
Proceeds from repayment of loans to 481 – –
associates
Increase in investment and loans to (271) (50 949) (47 372)
associates
Increase in other non-current assets – (4 032) (2 390)
Proceeds from repayment of other non-current 8 4 257 –
assets
Acquisition of other investments (1 332) (1 010) –
Proceeds on disposal of other investments 6 724 40 994 17 274
Net cash inflow/(outflow) from investing activities 5 258 2 685 (18 054)
Cash flows from financing activities
Increase in other financial liabilities 17 – –
Repayments of other financial liabilities – (22 338) (4 103)
Net cash inflow/(outflow) from financing activities 17 (22 338) (4 103)
Net decrease in cash and cash equivalents (2 030) (49 561) (43 008)
Cash and cash equivalents at the beginning of 17 095 66 656 66 656
the period
Total cash and cash equivalents at end of the period 15 065 17 095 23 648
Segmental reporting for the 6 month period ended 31 August 2016
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.
Reportable
segment
profit/ Total Total
(loss)
Revenue after tax assets liabilities
Unaudited Unaudited Unaudited Unaudited
31 31 August 31 August 31 August
August
Figures in R’000 2016 2016 2016 2016
Continuing
operations
Fund management* 33 042 5 007 27 232 (4 954)
Asset – 2 148 56 744 (5 448)
administration**
Advisory 2 973 (412) 3 352 (1 461)
services
Investment banking
Institutional 32 364 2 461 710 352 (716 952)
securities broking
Private equity* 4 364 5 136 234 937 (36 298)
Private wealth and investments 2 262 1 052 – –
Total 75 005 15 392 1 032 617 (765 113)
Reportable
segment
profit/ Total Total
(loss)
Revenue after tax assets liabilities
Unaudited Unaudited Unaudited Unaudited
30 June 30 June 30 June 30 June
Figures in R’000 2015 2015 2015 2015
Continuing
operations
Fund management* 21 746 53 # 47 735 (2 767)
Asset – 2 368 # 43 543 –
administration**
Advisory 115 (1 885) # 1 252 (575)
services
Investment banking
Institutional 25 221 2 533 # 382 649 (379 665)
securities
broking
Private equity* 5 529 # 1 447 # 212 807 # (51 315)
Private wealth and investments 5 989 (835) # 3 093 (3 568)
58 600 3 681 691 079 (437 890)
Discontinued operations
Property asset management – 138 6 (622)
Property developments and – 26 1 347 (1 581)
investments
– 164 1 353 (2 203)
Total 58 600 3 845 692 432 (440 093)
# Vunani previously reported a “Group” segment, however, this segment supports all of the
group’s businesses. In reviewing 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" and the Private
equity segment was previously named “Investment holdings”. The segments names were
amended in 2015.
** In 2015, the group introduced a new reporting segment “Asset administration” after
the acquisition of Fairheads International Holdings Proprietary Limited ("Fairheads").
At 30 June 2015 the asset administration segment was presented as part of the fund
management segment. The comparative segmental results have been adjusted to reflect the
segments separately.
Notes to the condensed consolidated interim financial statements
(all figures in R´000)
BASIS OF PREPARATION
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by Financial Reporting Standards Council, the
Listings Requirements of the JSE Limited and the requirements of the Companies Act of
South Africa. The accounting policies applied in the preparation of these interim
financial statements are in terms of International Financial Reporting Standards and
are consistent with those applied in the previous annual financial statements.
The unaudited condensed consolidated interim financial statements have been presented
on the historical cost basis, except for other investments and certain other financial
liabilities, which are fair valued. These unaudited condensed consolidated interim
financial statements are presented in South African Rand, rounded to the nearest
thousand, which is the functional and presentation currency of the parent company.
The unaudited condensed consolidated interim financial statements of the group at and
for the period ended 31 August 2016 comprise the company and its subsidiaries (the
'group') and the group's interests 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.
Comparatives on the statement of comprehensive income have been re-presented to show
the effect of the change in presentation of equity- accounted earnings.
CHANGE IN FINANCIAL REPORTING PERIOD
The unaudited condensed consolidated financial statements for the six months covers the
period 1 March 2016 to 31 August 2016, as a result of a decision 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.
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
Unaudited Unaudited
31 August 30 June
Figures in R’000 2016 2015
Fair value adjustment on financial assets and liabilities 2 527 5 238
designated
Impairment at fair value through profitother non-current
reversal/(loss) of loans in or loss 8 (3 698)
assets
Impairment reversal on loans to associates 475 –
3 010 1 540
3. Reconciliation of headline earnings for the period
Unaudited Unaudited
31 30
Figures in R’000 August June
2016 2015
Profit for the period attributable to equity holders of 14 700 3 371
Vunani
Adjusted for:
Asset disposal
Loss on disposal – 16
Taxation – (3)
Disposal of subsidiaries
Profit on disposal (2 806) (124)
Taxation 629 23
12 523 3 283
Headline earnings per share (cents) 11.5 3.0
Basic and diluted headline earnings per share from 11.5 2.9
continuing operations
Basic and diluted headline earnings per share from – 0.1
discontinued operations
4. 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
The group made a decision to dispose of its listed investments in BSI Limited and
the Workforce Holdings Limited shares (held in Verbicept Proprietary Limited).
The assets 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 a 12-month period. At 31 August 2016, the non-current assets
held for sale were stated at fair value and consisted of assets of R52.9 million.
As at 31 August 2016 the non-current assets held for sale were detailed as
follows:
Unaudited Audited
31 August 29 February
2016 2016
Assets classified as held for sale
Other investment
BSI Limited 8 322 7 260
Investment in associate
Verbicept Proprietary Limited 44 601 35 244
52 923 42 504
6. Authorised and issued stated capital
The authorised stated capital at 31 August 2016 was 200 million ordinary shares of
no par value (2016: 200 million ordinary shares of no par value). 118 915 865
shares were in issue at 31 August 2016 (2016: 114 664 649). 4 251 396 shares were
issued on 29 August in terms of capitalisation share issue award described in
note 10.
Unaudited Audited Unaudited
Weighted average number of ordinary shares (000s) 31 29 30
August February June
2016 2016 2015
Issued ordinary shares at the beginning of the 114 665 114 665 114 665
period of share issue
Effect 35 – –
Effect of own shares held (5 366) (5 364) (5 364)
Weighted average number of shares in issue during 109 334 109 301 109 301
the period
Number of shares in issue at the end of the period 118 916 114 665 114 665
(000s)
Dilutive weighted average number of ordinary shares
(000s)
Issued ordinary shares at the beginning of the 114 665 114 665 114 665
period of share issue
Effect 35 – –
Effect of own shares held (5 366) (5 364) (5 364)
Effect of dilutive shares 246 221 136
Diluted weighted average number of shares in issue 109 580 109 522 109 437
during the period
Number of shares in issue at the end of the period 118 916 114 665 114 665
(000s)
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
6 months 14 months 6 months
Unaudited Audited Unaudited
31 August 29 30 June
February
Figures in R’000 2016 2016 2015
Profit before income tax expense from 19 343 8 426 4 431
continuing operations
(Loss)/profit before income tax expense – (324) 164
from discontinued operations
Adjusted for:
Depreciation of property, plant and 387 1 743 236
equipment
Profit on disposal of subsidiaries (2 806) – (124)
Reversal of other financial liabilities – (1 483) –
Equity-accounted earnings (net of income (13 250) (31 797) (2 449)
tax)
Loss on disposal of assets – – 16
Fair value adjustments and impairments (3 010) 18 934 (1 540)
Realisation of deferred income – (3 574) (1 786)
Movement in impairment allowance – 1 083 –
Amortisation of intangible assets – 858 368
Share-based payments expense 1 587 1 628 772
Foreign currency translation loss/(gain) 316 (3 460) 848
Lease straight-line adjustment (161) (394) –
Interest received from investments and (1 617) (6 718) (2 964)
finance income
Investment revenue (1 603) (8 263) (4 145)
Finance costs 893 2 697 1 183
Changes in working capital:
(Increase)/decrease in trading securities (158) 120 66
Increase in trade and other receivables (12 862) (6 747) (2 775)
Increase/(decrease) in trade and other 4 164 (2 155) (9 042)
payables
Increase/(decrease) in accounts 1 801 903 (102)
receivable and payable from trading
activities
Cash utilised by operating activities (6 976) (28 523) (16 843)
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.
8. Financial instruments carried at fair
value (continued) Unaudited Audit
31 August ed
29 February
2016 2016
Fair values Carrying Fair Carrying Fair
Figures in R’000 amount value amount value
Financial assets measured at fair value
Designated at fair value through profit or 54 148 54 148 57 160 57 160
loss on initial recognition
Non-current assets held for sale 8 322 8 322 7 260 7 260
Trading securities 289 289 131 131
Financial assets not measured at fair
value to associates
Loans 28 075 25 805 27 298 25 150
Loans in other non-current assets 5 300 8 352 5 030 8 141
96 134 96 916 96 879 97 842
Financial liabilities measured at fair
value
Designated at fair value through profit or (5 231) (5 231) (4 290) (4 290)
loss on initial recognition
Financial liabilities not measured at fair
value
Other financial liabilities (17 616) (16 606) (16 842) (16 226)
(22 847) (21 837) (21 132) (20 516)
Total 73 287 75 079 75 747 77 326
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).
Unaudited 31 August 2016
Figures in R’000 Level 1 Level Level 3 Total
Financial assets designated at fair value 26 570 2
– 27 578 54 148
through profit or loss
Financial assets measured at fair value 8 611 – – 8 611
Financial assets at amortised cost – – 34 157 34 157
Financial liabilities designated at fair – – (5 231) (5 231)
value through profit or loss
Financial liabilities at amortised cost – – (16 606) (16 606)
35 181 – 39 898 75 079
Audited 29 February 2016 Level 1 Level Level 3 Total
Financial assets designated at fair value 29 556 2
– 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 designated at fair – – (4 290) (4 290)
value through profit or loss
Financial liabilities at amortised cost – – (16 226) (16 226)
36 947 – 40 379 77 326
Unaudited Audited
31 August 29
February
Figures in R’000 2016 2016
Level 3 comprises:
Balance at beginning of period 23 314 35 890
Total gains or losses in profit or loss (967) (14 971)
Purchases, transfers, sales, issues and settlements – 2 395
Balance at end of the period 22 347 23 314
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.
8. Financial instruments carried at fair value (continued)
Unaudited Audited
31 August 29
February
Effect on statement of comprehensive income (profit/(loss))
and equity before taxation 2016 2016
Net asset value
10% increase 1 202 1 204
10% decrease (1 111) (1 113)
Free cash flow
10% increase 11 083 2 844
10% decrease 1 182 (5 471)
Foreign exchange movement
10% increase 799 799
10% decrease (572) (572)
9. Events after reporting date
On 30 August 2016, at the annual general meeting of shareholders, Vunani Limited
approved the issue of 1.9 million Vunani ordinary shares for cash. The shares
were issued at a price of 160 cents per share. The gross proceeds amounted to R3
million. The ordinary shares were issued and allotted on 5 September 2016.
On 16 September 2016, through a private placement, Vunani Limited issued 30
million shares for cash at a price of 160 cents per share. The gross proceeds
amounted to R48 million.
10. Dividends
For the period ended 31 August 2016: Capitalisation share issue award, with a
cash alternative
A capitalisation share award with a cash alternative was declared in the ratio of
4 shares for every 100 shares held, with the alternative being a 6 cents cash
payment per share. The capitalisation share award of 4 251 396 million shares at
160 cents per share was issued on 29 August 2016. Those shareholders not electing
to receive capitalisation shares received a gross ordinary dividend of 6 cents per
share (2016: 5.5 cents per share). The dividend was paid to ordinary
shareholders on 29 August 2016. Total cash of R0.5 million was paid.
For the period ended 30 June 2015: Ordinary dividend
A gross ordinary dividend of 5.5 cents per share was declared out of income
reserves on 30 March 2015 and paid to ordinary shareholders on 28 April 2015.
11. 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.
12. Contingent liability
A full and final settlement agreement on the contingent liability matter
relating to the Dreamworks Investments 125 Proprietary Limited, disclosed in the
results to 29 February 2016 was reached with all parties on 31 August 2016. As a
result, Vunani Limited paid R0.1 million as the full and final payment on the
matter.
OVERVIEW AND PROSPECTS
The reporting period was dominated by heightened uncertainty in the
run-up to the local authority elections and concomitant volatile
Rand- exchange rate, driven by the increased threat of further
sovereign rating downgrades – potentially to below investment grade.
Domestic business conditions remained tight amidst a rising inflation
and interest rate trajectory, suppressing local demand. The demand
for exports was equally uninspiring as commodity prices remained
depressed as world economic growth struggled to gain traction in
spite of sustained stimulus efforts.
Despite difficult market conditions, Vunani’s performance for the
period has shown improvement when compared to the 6 months ended 30
June 2015.
Vunani generated total comprehensive income for the period of
R14.7 million (2015: R4.3 million), while total comprehensive
income attributable to equity holders of the company amounted to
R14.4 million (2015: R3.5 million).
The group’s reportable segments are as follows:
• Fund management
• Asset administration
• Investment banking – Advisory services
• - Institutional securities broking
• Private equity
• Private wealth and investments
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
revenue of R33.0 million for the period (June 2015: R21.7 million),
which is an increase of 52%. The reportable segment profit amounted
to R5.0 million for the period compared to a profit of R0.05
million at 30 June 2015.
VFM’s performance and profitability improved during the period as
its assets under management increased from R14.1 billion at 29
February 2016 to R15.7 billion at 31 August 2016. This increase
is mainly attributable to good performance on the existing assets
being managed.
PVAM’s performance improved during the period despite the ongoing
challenging economic conditions in Zimbabwe. PVAM’s assets under
management increased to $22.5 million at 31 August 2016 from $17.8
million at 29 February 2016. The increase in assets under management
and diversification of product offering has contributed to the return
to profitability of PVAM.
Asset administration
The asset administration segment includes the group’s investment in
Fairheads Beneficiary Services Proprietary Limited (“Fairheads”).
Fairheads has encountered a tough start to the financial year
following the withdrawal of a significant mandate. In light of
this, Fairheads successfully implemented corrective action and has
resized it operations to ensure that the effect on profitability
from the loss of the mandate is offset through a corresponding
reduction of cost. Fairheads is making good progress in increasing
its assets under administration, which amounted to R6.2 billion at
31 August 2016 (29 February 2016: R7.8 billion). Fairheads
contributed R3.9 million in equity-accounted after tax earnings to
the group for the period ended 31 August 2016 (for the two months’
post acquisition to 30 June 2015: R2.5 million).
Advisory services
The segment has shown improved deal flow during the period which
has resulted in an improvement in revenue generated, being R3.0
million compared to R0.1 million for the period ended 30 June 2015.
While the segment reported a marginal loss for the period of R0.4
million (2015: R1.9 million), the division is working on a good
pipeline of transactions and is expected to return to profitability
by year-end.
Institutional securities broking
This segment includes equity, derivative and capital market trading
services to institutional clients. Revenue increased by 28% compared
to 30 June 2015. The segment reported a profit for the period of
R2.5 million (30 June 2015: R2.5 million). The focus for the period
was on revenue growth through the expansion of the client base and
exploring diversified products, which is progressing well.
Private equity
The segment has refined its focus into three investment sub-
categories, namely mining, property and African investments. The
segment holds the remaining listed investments in its portfolio. It
is the group’s intention 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 focus in the current
period was to generate revenue from the mining operations.
The group is progressing with its effort to create a property
portfolio. The strategy involves partnering with investors who have
experience in the property sector and several opportunities are
currently being explored. Furthermore, Vunani is continuing its
investment strategy onto the African continent through relationships
with large corporates. The segment reported a profit of R5.1 million
for the period (30 June 2015: R1.4 million).
Private wealth and investments
During the period, the retail securities-broking part of this
business segment was sold to management. Subsequently, the
segment’s main business activity is providing private wealth and
investment products to high net worth retail clients. The segment
reported a profit of R1.1 million for the period ended 31 August
2016 (2015: a loss of R0.8 million).
Discontinued operations
The group’s legacy property development, investments and property
asset management segments went through a realization phase and have
been reflected as discontinued operations since 2014.
Financial performance
Revenue from continuing operations increased by 28% to R75.0
million (2015: R58.6 million) for the period ended 31 August 2016.
Other income historically primarily comprised the amortisation of
deferred revenue that arose on the historic acquisition of Black
Wattle Colliery Proprietary Limited. The deferred revenue was
amortised over a period of five years and at 29 February 2016,
the total deferred revenue had been amortised. Other once-off
income was realised during the period ended 30 June 2015 and
would consequently not be expected to be repeated in subsequent
financial periods. As a result, other income for the current
period has reduced significantly as compared to the prior period.
Investment income is received in the form of dividends. Total
investment income for the current period amounted to R1.6 million
as compared to R4.1 million for the period ended 30 June 2016.
Positive fair value adjustments and impairments of R3.0 million
(2015: R1.5 million) relate to a net increase in the value of the
groups’ listed and unlisted investment portfolio that has been
designated at fair value through profit or loss.
Equity-accounted earnings for the period amounted to R13.3
million (2015: R2.4 million). The group’s investment in
Fairheads is classified as an associate and as such, its
earnings are equity accounted. As Fairheads was acquired with
effect from 4 May 2015, the results for the period to 30 June
2015 included two months’ worth of Fairheads’ earnings, while
the current period includes the full six months’ worth of
earnings. Furthermore, Vunani’s investment in Workforce
Holdings Limited (“Workforce”) is structured such that
Vunani’s interest is considered to be a joint venture and
accordingly, the fluctuations in the fair value of Workforce
are accounted for under the equity accounted earnings line
item.
Operating expenses increased by 8% from R71.6 million to R77.4
million. The increase is attributable to additional share based
payment expenses as a result of the introduction of the new share
scheme in November 2015. The devaluation of the Rand 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 decreased to R0.7 million for the period ending 31
August 2016 compared to R2.7 million for the period ended 30 June
2015. Finance costs decreased from R1.2 million for the period
ended 30 June 2015 to R0.9 million for the period ended 31 August
2016, as result of a reduction in financial liabilities.
The decrease in other investments was due to the disposal of a small
portion of the group’s listed investment portfolio during the
period. In line with the presentation at 29 February 2016, the
investments in Workforce and BSi Steel Limited (“BSi”) have been
presented as non-current assets held for sale. It is expected that
the sale of these assets will be concluded within a 12-month period.
The non-current assets held for sale are stated at fair value.
The capitalisation share issue award resulted in an increase in stated
capital of R6.8 million. The cash alternative for the award resulted
in a cash dividend payment to shareholders who elected to receive
cash amounting to R0.5 million (2015: cash dividend declared of R6.0
million). The share-based payments reserve movement
of R1.6 million is attributable to the current period IFRS 2 charge
(2015: charge of R0.8 million). Furthermore, during the period, the
group acquired the entire non-controlling interest of 9.5% in VFM for
R5.4 million and, as a result, VFM is now a 100% held subsidiary.
Prospects
Vunani’s executive is exploring a number of interesting opportunities
to further grow the business and enhance shareholder value. The focus
on the operating businesses is a key strategy to solidify the group as
a formidable financial services player and ultimately ensure the long-
term success of Vunani. It is therefore critical that these businesses
are run by high-calibre staff who are strong leaders. Vunani is
positive about the growth that it has seen in the current financial
period and expects that the momentum created in the first six months
can be maintained into the second half of the year.
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 E Dube and A Judin on 5
October 2016.
CORPORATE INFORMATION
Executive directors
E 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
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
RESULTS PRESENTATION
Vunani will be hosting the interim results presentation by CEO
Ethan Dube and CFO Aphrodite Judin, followed by a question and
answer session, on Thursday, 6 October 2016, at 11:30 via a
web/audio cast. The web/audio cast link is as follows:
http://www.corpcam.com/Vunani06102016.
CHANGES TO THE BOARD
APPOINTMENT OF NON-EXECUTIVE DIRECTOR
In accordance with paragraph 3.59 of the Listings Requirements of the
JSE Limited, shareholders are advised that Mr. Marcel Golding
(“Marcel”) has been appointed as a non-executive director to the Vunani
board with effect from 6 October 2016.
Marcel has over 30 years of experience working in various industries in
South Africa.
Marcel served as an office-bearer in the National Union of Mineworkers
from 1987 to 1994, ultimately becoming deputy general secretary. He was
also involved in the Congress of South African Trade Unions since its
inception in 1986 and served as a member of parliament from 1994 to
1997. Marcel was a founding director of the Mineworkers Investment
Company in 1993.
In 1997, Marcel cofounded Hosken Consolidated Investments Limited
(“HCI”) and served as the executive chairman of HCI between 1997 and
2014. Since its formation, HCI has been built into a prominent JSE
listed company with majority shareholdings in a number of industries
including buses, casinos and hotels, television, clothing and textiles,
mining, renewable gas, property and motor component manufacture.
Marcel has served on numerous boards in varying capacities, including
as the chief executive officer of ETV from 1999 to 2014. His current
significant directorships include Tsogo Sun Holdings, KWV Holdings
Limited, Geomer Investments Proprietary limited, Rex Trueform Clothing
Company Limited and African & Overseas Enterprises Limited.
Vunani welcomes Marcel to the board and is looking forward to working
closely with him on new opportunities and building the business.
OTHER MATTERS
In compliance with paragraph 3.59 of the Listings Requirements of the
JSE Limited, Aphrodite Judin, the current chief financial officer, has
notified the board that she will be stepping aside from her role with
effect from 9 December 2016 as her family will be moving abroad.
The board is pleased to announce that Tafadzwa Mika (“Tafadzwa”) will
be appointed in the role of chief financial officer with effect from 9
December 2016.
Tafadzwa qualified as a Chartered Accountant (SA) in 2009, after
completing
his training contract with Moore Stephens South Africa. He worked as an
audit manager at Rain Chartered Accountants from May 2009 to February
2010 and joined Vunani in 2010. In 2011 he was promoted to group
financial manager.
Tafadzwa has worked closely with Aphrodite since he joined and a
handover process has been planned in the ensuing months to ensure a
smooth and seamless transition of roles.
The board wishes to express its sincere thanks to Aphrodite for her
years of dedication to Vunani and wish her and the Judin family well in
the new chapter of their lives abroad.
6 October 2016
Designated Adviser
Grindrod Bank Limited
Date: 06/10/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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