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Unaudited Interim Results for the six months ended 30 June 2016 and declaration of cash dividend
Trencor Limited
(Incorporated in the Republic of South Africa)
Registration No. 1955/002869/06
Share code: TRE
ISIN: ZAE000007506
("Trencor" or "the company")
Unaudited Interim Results
for the six months ended 30 June 2016 and declaration of cash dividend
COMMENTARY
GROUP
- Trading profit after net financing costs decreased by 228% from R1 017 million (restated*)
for the corresponding six month period in 2015 to a loss of R1 305 million. The trading loss
for the six months ended 30 June 2016 includes additional depreciation required under
International Financial Reporting Standards ("IFRS") and the impairment of the Hanjin
Shipping Company Limited ("Hanjin") receivables (see below).
- Headline loss per share (including the effect of realised and unrealised foreign exchange
translation losses/gains) was 324,1 cents (2015: earnings 278,2 cents - restated*).
- Adjusted headline loss per share (which excludes the effect of net unrealised foreign
exchange translation losses/gains) was 314,6 cents (2015: earnings 263,6 cents - restated*).
- These various (losses)/earnings are better presented in tabular form:
Year ended
Six months ended 30 June 31 December
2016 2015 Restated* 2015
Cents per share Cents per share Cents per share
Headline (loss)/earnings (324,1) 278,2 512,6
Deduct: Net unrealised foreign
exchange translation losses/(gains) 9,5 (14,6) (69,3)
Adjusted headline (loss)/earnings (314,6) 263,6 443,3
Period-end rate of exchange:
SA rand to US dollar 14,88 12,25 15,53
Average rate of exchange for the
period: SA rand to US dollar 15,39 11,83 12,75
* Refer note 11.
- Based on the spot exchange rate of US$1 = R14,88 and the price of Textainer's shares listed
on the NYSE on 30 June 2016 (US$11,14), the net asset value of Trencor at that date was as
follows:
R million Rand per share
Beneficiary interest in Textainer 4 522 25,53
Beneficiary interest in TAC 280 1,58
Net interest in long-term receivables 489 2,76
Cash 2 173 12,27
Net liabilities (115) (0,65)
7 349 41,49
- Consolidated gearing ratio at 30 June 2016 was 302% (2015: 210% - restated*).
- Interim dividend of 80 cents per share declared (2015: 80 cents per share).
TEXTAINER (48,2% beneficiary interest) - US GAAP results
- Net loss for the half year was US$4,9 million (2015: profit US$75,6 million). Textainer recorded
US$36,8 million of container impairments (2015: US$7,9 million) resulting from a transfer to
held for sale and a write-down of its inventory of containers pending disposal to their
estimated fair value.
- There was no impairment to the leased container fleet for the six months ended 30 June 2016
(2015: Nil).
- Average fleet utilisation for the six months to 30 June 2016 was 94,6% (2015: 97,6%).
- Continued expansion with US$432 million of capital expenditure year-to-date in 2016 in
respect of the owned and managed fleet.
- Total fleet under management at 30 June 2016 was 3 195 378 (2015: 3 276 509) twenty foot
equivalent units of which Textainer itself owned 81,0% (2015: 79,7%).
- Declared dividends of US$0,24 per share in respect of quarter 1 and US$0,03 per share in
respect of quarter 2 of 2016.
- Textainer's results may be viewed on its website www.textainer.com.
REPORTING RESULTS OF TEXTAINER AND TAC UNDER IFRS
The results of Textainer and TAC, reporting under US GAAP, are converted to IFRS for
inclusion in the results of Trencor, which is required to report under IFRS. In years prior
to 2015, limited adjustments were necessary in so converting from US GAAP to IFRS.
However, in the year to 31 December 2015 and continuing into the six months ended
30 June 2016, a decline in market conditions meant that differences in accounting
treatment between US GAAP and IFRS, in the areas of impairment testing and a revision
of the residual values of the container fleets, caused significant differences in financial
results reported under the respective accounting conventions.
Adjusted to conform with IFRS, Trencor's consolidation of the results of Textainer
requires that net losses of US$289,2 million be recorded for the half year (2015: profit of
US$76,1 million). This included a non-cash impairment loss on the leased container fleet
as required under IFRS of US$223 million (2015: Nil). No impairment was necessary under
US GAAP at 30 June 2016 or 30 June 2015. Trencor recorded an additional depreciation
charge required under IFRS for the six months to 30 June 2016 over and above the
amount provided under US GAAP of US$42,5 million.
Adjusted to conform with IFRS, Trencor's consolidation of the results of TAC requires that
net losses of US$21,7 million be recorded for the half year (2015: profit of US$5,1 million).
This included a non-cash impairment loss on the leased container fleet as required under
IFRS of US$19,2 million (2015: Nil). An impairment of US$0,4 million (2015: Nil) was
recorded under US GAAP at 30 June 2016. Trencor recorded an additional depreciation
charge required under IFRS for the six months to 30 June 2016 over and above the
amount provided under US GAAP of US$1,1 million.
Details of the different requirements under US GAAP and IFRS and their materially different
impact on the reported results of Textainer and TAC and those of Trencor are as follows:
- Impairment testing - under US GAAP the container fleets are required to be impaired to fair
value where the undiscounted expected future cash flows are less than the carrying value
of the container fleet. As this was not the case, no impairment was necessary at 30 June
2016 under US GAAP. IFRS on the other hand requires that, where there is an indicator of
impairment, expected future cash flows should be discounted to present value. Applying
this methodology results in a non-cash impairment of US$242 million (R3 615 million) in
respect of the Textainer and TAC fleets in Trencor's financial statements for the six months
ended 30 June 2016, which has been recorded in profit or loss but excluded from headline
earnings, as required in respect of all such impairment losses. The impact on earnings after
tax and non-controlling interests, is a net charge of R1 823 million or 1 030 cents per share.
- Residual values and useful lives of containers - IFRS requires the reassessment of the
residual values and useful lives of containers at each reporting period, which are then used
to determine the amount by which containers are depreciated. In accordance with IFRS,
residual values are determined using current market conditions and are therefore likely to
fluctuate over time as market prices fluctuate (ie will reflect market volatility). IFRS defines the
residual value of a container as the estimated amount that would currently be obtained from
the disposal of a container, after deducting the estimated costs of disposal, if the container
was already of the age and in the condition expected at the end of its useful life. This
requirement necessitated a reassessment of the residual values of the container fleets at
30 June 2016. This is in contrast to US GAAP which takes a long-term view of the value to
be realised on disposal of each container at the end of its useful life (ie market fluctuations
in price are not taken into account in the reassessment of residual values unless they persist
for extended periods of time). At 30 June 2016, the reassessment of the useful lives of the
container fleets resulted in the useful lives of certain container types being extended with
effect from 1 July 2016.
The resale values of containers can vary significantly depending on, among other
factors, location, time of sale, the condition of the container and customer demand.
Recent average sales prices for containers were considered by major asset type and
the residual values were adjusted accordingly at period-end. The consequence of the
reassessment of residual values and useful lives is an estimated increase of R493 million
in the depreciation charge to be recorded prospectively in the six months to 31 December
2016 financial period over and above what it would have been had the residual values and
useful lives not been revised (the impact on earnings and headline earnings, after tax and
non-controlling interests, is estimated to be a net charge of R251 million or 141,8 cents
per share). This depreciation charge is calculated after adjusting the carrying value of
the container fleet for impairment at 30 June 2016. This estimate presumes no material
changes to the composition of the container fleets and no significant changes for the next
six months to market factors prevailing at 30 June 2016. Changes in these factors will
influence the depreciation that may be charged in future periods.
EVENT AFTER REPORTING PERIOD
On 31 August 2016, Hanjin filed in South Korea for protection from its creditors, and a receiver
was appointed on 1 September 2016. On 2 September 2016, Hanjin also filed for protection in
the United States of America under Chapter 15 of the US Bankruptcy Code. At this time it is not
clear if Hanjin will be able to restructure and resume operations under court order protection or
will be forced to liquidate in bankruptcy.
Textainer is in the early stages of assessing the full financial impact that this event will have. At
present many containers are still on vessels and not accessible to Textainer. It is anticipated that
the recovery process will be protracted and difficult. As it is not possible at this point to predict
potential recoveries the impact on Textainer remains uncertain.
The ultimate level of loss Textainer may suffer depends on many factors among which are:
- the number of units which will be recovered;
- the average cost, including ransom, repair, repossession, and other charges, to recover
units;
- which units will be written off and their book values; and
- the amount of insurance that will be collected and how these proceeds will be applied to
offset the losses.
In accordance with IAS 10 Events after the Reporting Period ("IAS 10"), an impairment has been
made to the operating and finance lease receivables recorded at 30 June 2016 due to Textainer
related to Hanjin (included in the amount disclosed in note 3). The amounts receivable under
finance leases have been impaired to the current best estimate of the fair value of the containers
which serve as collateral.
As a result of the factors and uncertainties mentioned above, Textainer is currently unable to
determine whether any loss will ultimately be incurred on the recovery of the containers on
operating and finance lease to Hanjin. Other publicly traded container lessors are in a similar
position as Textainer in this regard. In accordance with IAS 10, the Hanjin filings in September
2016 is considered a non-adjusting event as it relates to the underlying container fleet on
operating and finance lease to Hanjin, and an estimate of its financial effect cannot be made at
the date of this report for the reasons mentioned above.
The US GAAP net book value of the units on lease to Hanjin by Textainer is US$280 million of
which US$237 million is effectively owned by Textainer. Based on the total fleet of units leased to
Hanjin, 53% of these containers measured by unit count and 31% measured by net book value
(based on US GAAP) are on finance lease. It should be noted that the net book value of these
containers, as reported by Textainer under US GAAP, differs from the lower IFRS values reported
by Trencor as a result of significant IFRS impairment losses recorded at 31 December 2015 and
being recorded in this reporting period (see above).
CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the trading statement, delayed interim results in respect of the six
months ended 30 June 2016 and cautionary announcement released on the Stock Exchange
News Service on 3 October 2016. On the basis that the impact of the Hanjin matter is still
being assessed, shareholders are advised to continue to exercise caution when dealing in their
Trencor shares, until a further announcement is made.
PREPARATION OF FINANCIAL STATEMENTS
These unaudited interim condensed consolidated financial statements have been prepared by
management under the supervision of the financial director, Mr RA Sieni (CA)SA, and have not
been audited or reviewed by Trencor's external auditors.
DECLARATION OF CASH DIVIDEND
The board has declared an interim gross cash dividend (number 102) of 80 cents per share out
of distributable reserves in respect of the six months ended 30 June 2016.
The salient dates pertaining to the dividend payment are as follows:
Last day to trade cum the dividend Tuesday, 8 November 2016
Trading commences ex the dividend Wednesday, 9 November 2016
Record date Friday, 11 November 2016
Payment date Monday, 14 November 2016
Share certificates may not be dematerialised or rematerialised between Wednesday,
9 November 2016 and Friday, 11 November 2016, both days inclusive.
Note that:
- Dividend withholding tax at the rate of 15% will be applicable to shareholders who are not
exempt, which will result in a net dividend of 68 cents per share to these shareholders;
- Trencor's tax reference number is 9676002711; and
- Trencor's issued share capital at the declaration date is R885 340 (177 068 011 ordinary
shares of 0,5 cent each).
CHANGES TO DIRECTORATE AND BOARD COMMITTEES
As announced on 8 August 2016, with effect from 5 August 2016:
- Messrs NI Jowell and C Jowell retired as executive directors and members of the executive
committee and from all other positions within the Trencor group;
- Mr DM Nurek was appointed as independent non-executive chairman of the board in the place
of Mr NI Jowell;
- Mr JE McQueen (CEO) was appointed chairman of the executive committee in the place of
Mr NI Jowell;
- Mr RJA Sparks was appointed as chairman of the remuneration committee in the place of
Mr DM Nurek (who remains a member of this committee); and
- Mr RA Sieni (financial director) was appointed as a member of the social and ethics committee
in the place of Mr C Jowell.
On behalf of the board
DM Nurek Chairman
21 October 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 June 2016
Unaudited
Unaudited Restated Audited
30 June 30 June 31 December
R million 2016 2015 2015
ASSETS
Property, plant and equipment 52 375 49 152 59 636
Intangible assets and goodwill 425 413 486
Investment in equity accounted investee 119 110 145
Other investments - 45 45
Long-term receivables 455 441 506
Net investment in finance leases 1 867 1 481 1 465
Derivative financial instruments - 13 10
Deferred tax assets 23 26 19
Restricted cash 445 459 450
Total non-current assets 55 709 52 140 62 762
Inventories 439 492 766
Trade and other receivables 1 801 1 498 1 930
Current portion of long-term receivables 121 160 134
Current portion of net investment in
finance leases 907 657 758
Cash and cash equivalents 3 780 3 189 4 241
Total current assets 7 048 5 996 7 829
Total assets 62 757 58 136 70 591
EQUITY
Share capital and premium 44 44 44
Reserves 8 512 9 832 11 736
Total equity attributable to equity holders
of the company 8 556 9 876 11 780
Non-controlling interests 6 493 8 433 9 479
Total equity 15 049 18 309 21 259
LIABILITIES
Interest-bearing borrowings 43 936 36 941 46 006
Amounts attributable to third parties in
respect of long-term receivables 68 70 71
Derivative financial instruments 248 53 40
Deferred revenue 36 33 40
Deferred tax liabilities 136 227 271
Total non-current liabilities 44 424 37 324 46 428
Trade and other payables 1 592 812 1 170
Current tax liabilities 168 135 144
Current portion of interest-bearing
borrowings 1 506 1 527 1 571
Current portion of amounts attributable
to third parties in respect of long-term
receivables 14 25 14
Current portion of deferred revenue 4 4 5
Total current liabilities 3 284 2 503 2 904
Total liabilities 47 708 39 827 49 332
Total equity and liabilities 62 757 58 136 70 591
Capital expenditure incurred during the
period 3 830 3 478 6 095
Capital expenditure committed and
authorised, but not yet incurred 1 407 124 166
Directors' valuation of unlisted investments - 45 45
Ratio to total equity:
Total liabilities (%) 317,0 217,5 232,1
Interest-bearing debt (%) 302,0 210,1 223,8
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2016
Unaudited
Unaudited Restated Audited
Six months ended Year ended
30 June 30 June 31 December
R million 2016 2015 2015
Revenue (note 2) 5 055 4 249 9 277
Trading (loss)/profit before items listed below (396) 1 589 2 784
Realised and unrealised exchange (losses)/gains on
translation of long-term receivables, excluding fair
value adjustment (38) 55 278
Fair value adjustment on net long-term receivables 63 (7) (77)
Impairment of property, plant and equipment (note 4) (3 615) (2) (1 912)
Available-for-sale financial asset - reclassification
from other comprehensive income 33 - -
Compensation receivable from third party in respect
of impairment of property, plant and equipment - - 98
Operating (loss)/profit before net finance
expenses (note 3) (3 953) 1 635 1 171
Net finance expenses (note 5) (909) (572) (1 176)
Finance expenses Interest expense (638) (482) (1 025)
Realised and unrealised losses
on derivative financial instruments (296) (101) (174)
Finance income Interest income 25 11 23
Share of (loss)/profit of equity accounted investee
(net of tax) (20) 5 9
(Loss)/Profit before tax (4 882) 1 068 4
Income tax (credit)/expense (88) 48 61
(Loss)/Profit for the period (4 794) 1 020 (57)
Other comprehensive (loss)/income
Items that are or may be reclassified subsequently
to profit or loss
Foreign currency translation differences (816) 1 024 5 695
Change in fair value of available-for-sale financial
asset (9) (21) (21)
Available-for-sale financial asset - reclassification
to profit and loss (33) - -
Related income tax 7 4 4
Total comprehensive (loss)/income for the period (5 645) 2 027 5 621
Total comprehensive (loss)/income for the period
attributable to:
Equity holders of the company (2 848) 1 009 2 832
Non-controlling interests (2 797) 1 018 2 789
(5 645) 2 027 5 621
(Loss)/Profit for the period attributable to:
Equity holders of the company (2 369) 492 (146)
Non-controlling interests (2 425) 528 89
(4 794) 1 020 (57)
(Loss)/Earnings per share (cents) (1 337,7) 277,7 (82,7)
Diluted (loss)/earnings per share (cents) (1 337,7) 277,7 (82,7)
Number of shares in issue (million) 177,1 177,1 177,1
Weighted average number of shares in issue (million) 177,1 177,1 177,1
Period-end rate of exchange: SA rand to US dollar 14,88 12,25 15,53
Average rate of exchange for the period:
SA rand to US dollar 15,39 11,83 12,75
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2016
Cash generated from operations (before items listed
below) 3 974 3 416 7 561
Increase in container leasing equipment (3 414) (3 842) (6 277)
Finance income received 25 11 23
Finance lease income received 103 102 184
Finance expenses paid (626) (479) (1 037)
Decrease in finance leases 405 379 823
Receipts from long-term receivables 98 134 257
Payments to third parties in respect of long-term
receivables (10) (22) (39)
Dividends paid to equity holders of the company (390) (345) (487)
Dividends paid to non-controlling interests (218) (338) (665)
Income tax paid (24) (26) (57)
Net cash (outflow)/inflow from operating activities (77) (1 010) 286
Cash inflow from investing activities 12 205 321
Cash (outflow)/inflow from financing activities (227) 648 (556)
Net (decrease)/increase in cash and cash equivalents
before exchange rate fluctuations (292) (157) 51
Cash and cash equivalents at the beginning of the
period 4 241 3 160 3 160
Effects of exchange rate fluctuations on cash and
cash equivalents (169) 186 1 030
Cash and cash equivalents at the end of the period 3 780 3 189 4 241
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2016
Equity holders of the company
Gain/(Loss)
Foreign Share- on changes
currency based in ownership Non-
Share Share Fair value translation payment interests in Retained controlling Total
R million (unaudited) capital premium reserve reserve reserve subsidiaries income Total interests equity
Six months ended 30 June 2016
Balance at 1 January 2016 1 43 35 5 760 374 533 5 034 11 780 9 479 21 259
Total comprehensive loss for the period
Loss for the period - - - - - - (2 369) (2 369) (2 425) (4 794)
Other comprehensive loss for the period
Foreign currency translation differences - - - (444) - - - (444) (372) (816)
Available-for-sale financial asset - change in fair value net
of tax - - (7) - - - - (7) - (7)
Available-for-sale financial asset - reclassification to profit
and loss - - (28) - - - - (28) - (28)
Total comprehensive loss for the period - - (35) (444) - - (2 369) (2 848) (2 797) (5 645)
Transactions with owners, recorded directly in equity
Contributions by/(distributions to) owners
Share-based payments - - - - 21 - - 21 22 43
Dividends - - - - - - (390) (390) (218) (608)
Total contributions by/(distributions to) owners - - - - 21 - (390) (369) (196) (565)
Changes in ownership interests in subsidiaries - - - - - (7) - (7) 7 -
Total transactions with owners - - - - 21 (7) (390) (376) (189) (565)
Balance at 30 June 2016 1 43 - 5 316 395 526 2 275 8 556 6 493 15 049
Six months ended 30 June 2015
Balance at 1 January 2015 1 43 52 2 774 334 342 5 722 9 268 7 953 17 221
Restatement (Refer note 11) - - - (9) - - (55) (64) (241) (305)
Restated balance at 1 January 2015 1 43 52 2 765 334 342 5 667 9 204 7 712 16 916
Total comprehensive (loss)/income for the period
Profit for the period (restated) - - - - - - 492 492 528 1 020
Other comprehensive (loss)/income for the period
Foreign currency translation differences (restated) - - - 534 - - - 534 490 1 024
Available-for-sale financial asset - change in fair value net
of tax (previously described as impairment) - - (17) - - - - (17) - (17)
Total comprehensive (loss)/income for the period (restated) - - (17) 534 - - 492 1 009 1 018 2 027
Transactions with owners, recorded directly in equity
Contributions by/(distributions to) owners
Share-based payments - - - - 22 - - 22 25 47
Share options exercised - - - - - - - - 2 2
Dividends - - - - - - (345) (345) (338) (683)
Total contributions by/(distributions to) owners - - - - 22 - (345) (323) (311) (634)
Changes in ownership interests in subsidiaries - - - - - (14) - (14) 14 -
Total transactions with owners of the company - - - - 22 (14) (345) (337) (297) (634)
Balance at 30 June 2015 (restated) 1 43 35 3 299 356 328 5 814 9 876 8 433 18 309
Notes to the condensed consolidated financial statements
for the six months ended 30 June 2016
1. 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,
the Financial Pronouncements as issued by Financial Reporting Standards Council 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.
Unaudited
Unaudited Restated Audited
Six months ended Year ended
30 June 30 June 31 December
R million 2016 2015 2015
2. Revenue
Goods sold 1 078 880 1 930
Leasing income 3 934 3 236 6 905
Management fees 80 74 156
Finance income 1 4 8
5 093 4 194 8 999
Realised and unrealised exchange differences (38) 55 278
5 055 4 249 9 277
3. Operating (loss)/profit before net finance
expenses
Other significant items which have been included in
operating (loss)/profit before net finance expenses:
Depreciation 2 377 1 112 2 601
Impairment losses incurred - financial assets 463 21 101
Write-down of inventories 734 93 430
4. Impairment of property, plant and equipment
Container leasing equipment
Impairment recognised at end of reporting period 3 615 - 1 770
Impairment recognised in respect of containers
on operating leases not recovered from defaulting
customers - 2 142
3 615 2 1 912
An impairment loss has been recognised at 30 June 2016, reducing the carrying value of
container leasing equipment to its recoverable amount. For the purposes of calculating the
impairment loss, the container fleets were grouped by ownership entity and then by cash-
generating units ("CGUs"). CGUs were defined as containers grouped by container type, as
cash flows for the same type of containers are independent of cash flows of different container
types, and are interchangeable with any other container of the same type within the container
fleet. The recoverable amount of a CGU has been calculated based on its value in use. The
pre-tax discount rates used to discount the future estimated cash flows were 4,99% and
6,77% for Textainer and TAC, respectively. Projected future cash flows were estimated using
the assumptions that are part of the long-term planning forecasts of the entities concerned.
These projected future cash flow assumptions have weakened during the period as a result of a
further decline in market conditions. Some of the significant estimates and assumptions used to
determine future estimated cash flows were: estimated future lease rates, estimated utilisation,
remaining useful lives, remaining on-hire periods for expired fixed-term leases, estimated
future lease rates, direct container expenses and estimated disposal prices of containers. In
performing the impairment analysis, assumptions used reflected the contractually stipulated per
diem rates, with renewal based on current market rates.
5. Net finance expenses
Finance expenses 934 583 1 199
Interest expense - Textainer 581 434 922
Interest expense - TAC 57 48 103
Realised and unrealised losses on derivative
financial instruments 296 101 174
Finance income
Interest income - cash and cash equivalents (25) (11) (23)
909 572 1 176
6. Headline (loss)/earnings
(Loss)/Profit attributable to equity holders of the
company (2 369) 492 (146)
Impairment of property, plant and equipment 3 615 2 1 912
Compensation receivable from third party in respect
of impairment of property, plant and equipment - - (98)
Available-for-sale financial - asset reclassification
from other comprehensive income (33) - -
Total tax effects of adjustments (50) - (24)
Total non-controlling interests' share of adjustments (1 737) (1) (736)
Headline (loss)/earnings (574) 493 908
Weighted average number of shares in
issue (million) 177,1 177,1 177,1
Headline (loss)/earnings per share (cents) (324,1) 278,2 512,6
Diluted headline (loss)/earnings per share (cents) (324,1) 278,2 512,6
Adjusted headline (loss)/earnings
Headline (loss)/earnings (as above) (574) 493 908
Net unrealised foreign exchange losses/(gains) on
translation of long-term receivables 24 (36) (171)
Total tax effects of adjustments (7) 10 48
Adjusted headline (loss)/earnings (557) 467 785
Undiluted adjusted headline (loss)/earnings per
share (cents) (314,6) 263,6 443,3
Diluted adjusted headline (loss)/earnings per share
(cents) (314,6) 263,6 443,3
7. Segmental reporting
Revenue
Reportable segments
Containers - finance (including exchange
differences) (36) 60 288
Containers - owning, leasing, management and
trading 5 091 4 189 8 989
5 055 4 249 9 277
Operating (loss)/profit before net finance expenses
Reportable segments
Containers - finance 21 48 200
Containers - owning, leasing, management and
trading (3 987) 1 596 1 004
(3 966) 1 644 1 204
Unallocated 13 (9) (33)
(3 953) 1 635 1 171
(Loss)/Profit before tax
Reportable segments
Containers - finance 21 48 200
Containers - owning, leasing, management and
trading (4 938) 1 019 (185)
(4 917) 1 067 15
Unallocated 35 1 (11)
(4 882) 1 068 4
Assets
Capital expenditure incurred by the container
owning, leasing, management and
trading segment 3 830 3 478 6 095
Unaudited Unaudited Audited
30 June 2016 30 June 2015 31 December 2015
Carrying Fair Carrying Fair Carrying Fair
R million amount value amount value amount value
8. Financial instruments
The carrying amounts and fair values of financial assets and financial liabilities are as follows:
Assets
Equity securities - available for
sale:
Other investments - - 45 45 45 45
Designated at fair value through
profit or loss:
Long-term receivables 576 576 601 601 640 640
Held for trading:
Derivative financial instruments - - 13 13 10 10
Loans and receivables:
Restricted cash 445 445 459 459 450 450
Trade and other receivables 1 515 1 515 1 390 1 390 1 793 1 793
Cash and cash equivalents 3 780 3 780 3 189 3 189 4 241 4 241
Other:
Net investment in finance leases 2 774 2 741* 2 138 2 113 2 223 2 203
9 090 9 057 7 835 7 810 9 402 9 382
Liabilities
Liabilities at amortised cost:
Interest-bearing borrowings
(excluding debt issuance costs)
(June 2015 restated) 45 749 45 301 38 763 38 784 47 935 47 711
Trade and other payables 1 592 1 592 812 812 1 170 1 170
Designated at fair value through
profit or loss:
Amounts attributable to third
parties in respect of long-term
receivables 82 82 95 95 85 85
Held for trading:
Derivative financial instruments 248 248 53 53 40 40
47 671 47 223 39 723 39 744 49 230 49 006
* The amounts receivable under finance leases relating to Hanjin (refer note 10), which represent 29.2% of
the total carrying amount, have been impaired to the current best estimate of the fair value of the containers
which serve as collateral. The determination of this fair value is influenced primarily by the container type,
age, location and condition, among other factors, some of which are difficult to determine with regard to the
containers on lease to Hanjin for the reasons mentioned in the commentary. It is impracticable to disclose the
extent of the possible effects of changes to these fair value assumptions at 30 June 2016, and it is reasonably
possible, on the basis of existing knowledge, that outcomes in the future that are different from the fair value
assumptions made at 30 June 2016 could require an adjustment to the carrying amount of the assets affected.
Financial instruments carried at fair value
Fair value hierarchy
The table below analyses the 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 the inputs to valuation techniques used. The different levels are defined as
follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the
group can access at measurement date.
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly or indirectly. Textainer uses FINCAD Analytics Suite, a third-party
valuation software, to perform the fair valuation of its interest rate swap transactions.
The fair valuation of interest rate swaps is derived from the discounting of future
net cash flows utilising the US dollar swap curve (US$ LIBOR) and incorporates an
appropriate credit risk adjustment.
Level 3: Unobservable inputs for the asset or liability.
R million Level 1 Level 2 Level 3 Total
At 30 June 2016 (unaudited)
Assets
Long-term receivables - - 576 576
Liabilities
Amounts attributable to third parties
in respect of long-term receivables - - 82 82
Derivative financial instruments - 248 - 248
- 248 82 330
At 30 June 2015 (unaudited)
Assets
Other investments - 45 - 45
Long-term receivables - - 601 601
Derivative financial instruments - 13 - 13
- 58 601 659
Liabilities
Amounts attributable to third parties
in respect of long-term receivables - - 95 95
Derivative financial instruments - 53 - 53
- 53 95 148
At 31 December 2015 (audited)
Assets
Other investments - 45 - 45
Long-term receivables - - 640 640
Derivative financial instruments - 10 - 10
- 55 640 695
Liabilities
Amounts attributable to third parties
in respect of long-term receivables - - 85 85
Derivative financial instruments - 40 - 40
- 40 85 125
Details of the determination of Level 3 fair value measurements during the six months ended
30 June 2016 are set out below:
Long-term receivables and amounts attributable to third parties in respect of long-term
receivables are valued by discounting future cash flows. The discount rate applied to the
long-term receivables (denominated in US$) is 8,5% per annum (2015: 8,5%), and amounts
attributable to third parties in respect of long-term receivables is 10% per annum (2015: 10%).
An appropriate fair value adjustment is made to the net investment for the estimated timing of
receipt and the possible non-collectability of these receivables, and the related effect on the
payment to third parties. The net present value of the long-term receivables and the related fair
value adjustment were translated into SA rand at US$1=R14,88 (30 June 2015 US$1=R12,25
and 31 December 2015 US$1=R15,53).
The following table shows a reconciliation from the opening balances to the closing balances for
fair value measurements in Level 3 of the fair value hierarchy:
Amounts
attributable to
third parties
in respect of
Long-term long-term
R million receivables receivables Total
Six months ended 30 June 2016 (unaudited)
Balance at the beginning of the period 640 (85) 555
Total gains/(losses) in profit or loss 32 (7) 25
Settlements (98) 10 (88)
Balance at the end of the period 574 (82) 492
Six months ended 30 June 2015 (unaudited)
Balance at the beginning of the period 679 (115) 564
Total gains/(losses) in profit or loss 56 (2) 54
Settlements (134) 22 (112)
Balance at the end of the period 601 (95) 506
Year ended 31 December 2015 (audited)
Balance at the beginning of the year 679 (115) 564
Total gains/(losses) in profit or loss 218 (9) 209
Settlements (257) 39 (218)
Balance at the end of the year 640 (85) 555
Total gains/(losses) included in profit or loss for the six months in the above table are presented
in the statement of comprehensive income as follows:
Six months to 30 June 2016 (unaudited)
Total gains/(losses) included in profit or loss for the
period
Operating profit 32 (8) 24
Associate tax credit - 1 1
Total unrealised gains for the period included in profit
or loss for assets and liabilities held at the end of
the period
Operating profit 14 (5) 9
Six months to 30 June 2015 (unaudited)
Total gains included in profit or loss for the period
Operating profit 56 (3) 53
Associate tax credit - 1 1
Total unrealised gains for the period included in profit
or loss for assets and liabilities held at the end of
the period
Operating profit 25 1 26
Year ended 31 December 2015 (audited)
Total gains/(losses) included in profit or loss for the
year
Operating profit 218 (11) 207
Associate tax credit - 2 2
Total unrealised gains for the year included in profit
or loss for assets and liabilities held at the end of
the year
Operating profit 150 (2) 148
Although the estimates of fair value are considered to be appropriate, the use of different
assumptions could lead to different measurements of fair value. For fair value measurement in
Level 3 of the fair value hierarchy, changing one or more of the unobservable inputs used, to
reasonably possible alternative assumptions, would have the following effects:
Unaudited Unaudited Audited
30 June 30 June 31 December
2016 2015 2015
Increase/(Decrease) in Favourable/(Unfavourable)
R million unobservable inputs impact on profit or loss
Interest rates - discount rate:
Long-term receivables 100 basis points (18) (19) (21)
(100) basis points 18 19 21
Amounts attributable to third
parties in respect of long-term
receivables 100 basis points 2 3 2
(100) basis points (2) (3) (2)
Exchange rates (SA rand to US dollar):
Long-term receivables 1% 4 4 6
(1%) (4) (4) (6)
9. Change in estimate
Residual values of the container fleets have been reassessed at 30 June 2016. The useful lives
of certain container types have also been extended. In accordance with IAS 16 Property, Plant
and Equipment residual values are the estimated amounts that the entities would currently obtain
at the financial reporting date from the disposal of containers, after deducting the estimated
costs of disposal, if the containers were already of the age and in the condition expected at
the end of their useful lives. The reassessment of residual values and useful lives are accounted
for prospectively as a change in accounting estimate from the date of change in estimate, in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The
consequence of the reassessment of residual values and the useful lives is an estimated increase
of R493 million in the depreciation charge for the remainder of the year over what it would
have been had the residual values and useful lives not been revised. This estimate presumes
no material changes to the composition of the container fleets and no significant changes for
the next six months to market factors prevailing at 30 June 2016. Changes in these factors will
influence the depreciation that may be charged in future periods.
10. Event after reporting period
On 31 August 2016, Hanjin filed in South Korea for protection from its creditors, and a receiver
was appointed on 1 September 2016. On 2 September 2016, Hanjin also filed for protection in
the United States of America under Chapter 15 of the US Bankruptcy Code. At this time it is not
clear if Hanjin will be able to restructure and resume operations under court order protection or
will be forced to liquidate in bankruptcy. For more information on this event after the reporting
period refer to the commentary above.
11. Restatement
Note 35 to the annual financial statements for the year ended 31 December 2015 noted a
restatement in respect of converting the financial statements of TAC from US GAAP to IFRS and in
calculating the fair values of the assets and liabilities of TAC on step-up to control at 1 July 2013.
The comparative amounts in these condensed consolidated interim financial statements have
been restated to account for the effect for the six months ended and at 30 June 2015.
Amount
previously Restated
R million reported Change amount
Condensed consolidated statement of
financial position
at 1 January 2015
Intangible assets and goodwill 288 128 416
Others 53 641 - 53 641
Total assets 53 929 128 54 057
Interest-bearing borrowings (31 976) (397) (32 373)
Current portion of interest-bearing
borrowings (3 128) (36) (3 164)
Others (1 604) - (1 604)
Total liabilities (36 708) (433) (37 141)
Retained income (5 722) 55 (5 667)
Foreign currency translation reserve (2 774) 9 (2 765)
Non-controlling interests (7 953) 241 (7 712)
Others (772) - (772)
Total equity (17 221) 305 (16 916)
Total equity and liabilities (53 929) (128) (54 057)
at 30 June 2015
Intangible assets and goodwill 277 136 413
Others 57 723 - 57 723
Total assets 58 000 136 58 136
Interest-bearing borrowings (36 517) (424) (36 941)
Current portion of interest-bearing
borrowings (1 501) (26) (1 527)
Others (1 359) - (1 359)
Total liabilities (39 377) (450) (39 827)
Retained income (5 865) 51 (5 814)
Foreign currency translation reserve (3 312) 13 (3 299)
Non-controlling interests (8 683) 250 (8 433)
Others (763) - (763)
Total equity (18 623) 314 (18 309)
Total equity and liabilities (58 000) (136) (58 136)
Condensed consolidated statement of
comprehensive income
for the six months ended 30 June 2015
Net finance expenses (562) (10) (572)
Others 1 592 - 1 592
Profit for the period 1 030 (10) 1 020
Other comprehensive income
Foreign currency translation differences 1 043 (19) 1 024
Others (17) - (17)
Total comprehensive income for the profit 2 056 (29) 2 027
Total comprehensive income for the profit
attributable to:
Equity holders of the company 1 009 - 1 009
Non-controlling interests 1 047 (29) 1 018
2 056 (29) 2 027
Profit for the year attributable to:
Equity holders of the company 488 4 492
Non-controlling interests 542 (14) 528
1 030 (10) 1 020
Earnings per share (cents) 275,3 2,4 277,7
Diluted earnings per share (cents) 275,3 2,4 277,7
Headline earnings per share (cents) 275,8 2,4 278,2
Diluted headline earnings per share (cents) 275,8 2,4 278,2
Adjusted headline earnings per share (cents) 261,2 2,4 263,6
Diluted adjusted headline earnings per share
(cents) 261,2 2,4 263,6
Condensed consolidated statement of
cash flows
for the six months ended 30 June 2015
Cash generated from operations 3 416 - 3 416
Dividends paid to non-controlling interests (358) 20 (338)
Others (4 088) - (4 088)
Net cash outflow from operating activities (1 030) 20 (1 010)
Cash inflow from investing activities 205 - 205
Cash inflow from financing activities 668 (20) 648
Net decrease in cash and cash equivalents
before exchange rate fluctuations (157) - (157)
Cash and cash equivalents at the beginning
of the period 3 160 - 3 160
Effects of exchange rate fluctuations on cash
and cash equivalents 186 - 186
Cash and cash equivalents at the end of
the period 3 189 - 3 189
In order to provide a better appreciation of the results of the group's activities, a condensed
consolidated income statement and a condensed consolidated statement of financial position
are also presented in US dollars, as virtually all of the group's consolidated revenue and assets
and much of its expenditure are denominated in that currency. The unaudited amounts stated
in US dollars have been prepared by management and have been calculated by translating
the assets and liabilities at the period-end rate of exchange, income statement items at the
average rate of exchange with the difference allocated to the foreign currency translation reserve
included in equity.
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENT IN US DOLLARS
for the six months ended 30 June 2016
Unaudited
Unaudited Restated* Unaudited
Six months ended Year ended
30 June 30 June 31 December
US$ million 2016 2015 2015
Revenue 330,7 354,7 707,5
Trading (loss)/profit before items listed below (27,3) 133,5 217,7
Realised and unrealised exchange (losses)/gains
on translation of long-term receivables, excluding
fair value adjustment (0,3) 0,2 1,5
Fair value adjustment on net long-term
receivables 3,3 1,3 2,4
Impairment of property, plant and equipment (242,9) (0,2) (125,2)
Available-for-sale financial asset - reclassification
from other comprehensive income 2,1 - -
Compensation receivable from third party in
respect of impairment of property, plant and
equipment - - 7,7
Operating (loss)/profit before net finance
expenses (265,1) 134,8 104,1
Net finance expenses (59,0) (48,3) (92,1)
Finance expenses Interest expense (41,4) (40,8) (80,4)
Realised and unrealised
losses on derivative financial
instruments (19,3) (8,4) (13,6)
Finance income Interest income 1,7 0,9 1,9
Share of (loss)/profit of equity accounted investee
(net of tax) (1,3) 0,4 0,7
(Loss)/Profit before tax (325,4) 86,9 12,7
Income tax (credit)/expense (5,2) 3,4 1,9
(Loss)/Profit for the period (320,2) 83,5 10,8
Attributable to:
Equity holders of the company (158,6) 38,8 (6,3)
Non-controlling interests (161,6) 44,7 17,1
(320,2) 83,5 10,8
Number of shares in issue (million) 177,1 177,1 177,1
Weighted average number of shares
in issue (million) 177,1 177,1 177,1
(Loss)/Earnings per share (US cents) (89,6) 21,9 (3,6)
Diluted (loss)/earnings per share (US cents) (89,6) 21,9 (3,6)
Headline (loss)/earnings per share (US cents) (21,4) 22,0 35,0
Diluted headline (loss)/earnings per share
(US cents) (21,4) 22,0 35,0
Adjusted headline (loss)/earnings per share
(US cents) (21,3) 21,7 34,2
Diluted adjusted headline (loss)/earnings per
share (US cents) (21,3) 21,7 34,2
Period-end rate of exchange:
SA rand to US dollar 14,88 12,25 15,53
Average rate of exchange for the period:
SA rand to US dollar 15,39 11,83 12,75
Trading (loss)/profit from operations comprises:
Textainer and TAC (24,9) 135,2 221,0
Other (2,4) (1,7) (3,3)
27,3 133,5 217,7
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION IN US DOLLARS
at 30 June 2016
Unaudited
Unaudited Restated* Unaudited
30 June 30 June 31 December
US$ million 2016 2015 2015
ASSETS
Property, plant and equipment 3 519,8 4 012,4 3 840,1
Long-term receivables 30,6 36,0 36,0
Other non-current assets 193,9 208,1 165,3
Total non-current assets 3 744,3 4 256,5 4 041,4
Total current assets 473,3 489,5 504,1
Inventories 29,5 40,2 49,3
Trade and other receivables 120,7 122,3 124,3
Current portion of long-term receivables 8,1 13,1 8,6
Current portion of net investment in finance
leases 61,0 53,6 48,8
Cash and cash equivalents 254,0 260,3 273,1
Total assets 4 217,6 4 746,0 4 545,5
EQUITY
Equity attributable to equity holders of the
company 575,1 805,7 758,6
Non-controlling interests 436,4 689,1 610,4
Total equity 1 011,5 1 494,8 1 369,0
LIABILITIES
Interest-bearing borrowings 2 952,7 3 015,6 2 962,4
Amounts attributable to third parties in
respect of long-term receivables 4,5 5,8 4,5
Derivative financial instruments 16,7 4,3 2,6
Deferred revenue 2,4 2,7 2,5
Deferred tax liabilities 9,1 18,5 17,5
Total non-current liabilities 2 985,4 3 046,9 2 989,5
Total current liabilities 220,7 204,3 187,0
Trade and other payables 107,0 66,3 75,3
Current tax liabilities 11,3 11,0 9,3
Current portion of amounts attributable
to third parties in respect of long-term
receivables 0,9 2,0 0,9
Current portion of interest-bearing
borrowings 101,2 124,7 101,2
Current portion of deferred revenue 0,3 0,3 0,3
Total liabilities 3 206,1 3 251,2 3 176,5
Total equity and liabilities 4 217,6 4 746,0 4 545,5
Ratio to total equity:
Total liabilities (%) 317,0 217,5 232,1
Interest-bearing debt (%) 302,0 210,1 223,8
* Refer note 11. The restatements have been reflected in US dollars in line with the basis
of US dollar preparation above.
Directors: DM Nurek (Chairman), JE Hoelter (USA), JE McQueen* (CEO), E Oblowitz,
RA Sieni* (Financial), RJA Sparks, HR van der Merwe*, H Wessels (*executive)
Secretaries: Trencor Services Proprietary Limited Registered Office: 13th Floor,
The Towers South, Heerengracht, Cape Town 8001
Transfer Secretaries: Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg 2001 (PO Box 61051, Marshalltown 2107)
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
www.trencor.net
Date: 21/10/2016 02:17:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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