Wrap Text
Unaudited interim financial results for the six months ended 30 September 2016 and change in board of directors
Sephaku Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/003306/06)
Share code: SEP
ISIN: ZAE000138459
Unaudited interim financial results for the six months ended 30 September 2016 and change in board of directors.
CEMENT increases revenue and Metier begins construction of 12th batch plant in Gauteng
Sephaku Holdings Limited ("SepHold" or "the Company") hereby announces the group's unaudited financial results for
the six months ended 30 September 2016. SepHold, Metier Mixed Concrete Proprietary Limited ("Metier" or "the
subsidiary") and Dangote Cement South Africa Proprietary Limited ("CEMENT" or "the associate") are collectively
referred to as the group.
Highlights
- Metier EBITDA and EBIT margins remained flat at 15% and 13% respectively in spite of intensifying competition in
both Gauteng and KwaZulu Natal ("KZN")
- CEMENT equity accounted profit at approximately R1,0 million compared to a loss of R8,8 million recorded for the
six months ended 30 June 2016*
- Group net profit increased by 36% to R25,2 million from R18,5 million in the comparative period ended
30 September 2015
- Basic earnings per share increased by 36% to 12.49 cents from 9.20 cents
- Net asset value increased by 8% from 430,1 cents per share in the period ended 30 September 2015 to 463,0 cents
per share
Post period
Following the results announcement by Dangote Cement PLC on 27 October 2016, for the nine months ended
30 September 2016, CEMENT recorded a cumulative EBITDA margin of 24,6% (2015: 22,8%) and revenue of approximately
R1,7 billion. CEMENT's third quarter results will be included in the SepHold final audited financial results for
the twelve months ending 31 March 2017*.
* CEMENT has a December year-end as a subsidiary of Dangote Cement PLC
Financial review
The group recorded revenue of R447,95 million compared to R461,37 million for the previous interim period.
The 3% decline in revenue was mainly due to a reduction in mixed concrete volumes during the six months. Metier's
gross profit margin was 0,3% lower at R180,59 million as a result of raw material costs increasing more than pricing.
Metier management focussed on controlling expenses to support profitability and maintained the EBITDA margin at
15%. Furthermore the subsidiary recorded EBIT of R56,98 million (13%) compared to R59,83 million (13%) for the
comparative interim period. The group net profit for the period was R25,25 million compared to the R18,51 million
profit recorded in the comparative period. The group EBIT was R48,63 million (2015: R42,70 million).
SepHold's 36% interest in CEMENT operations for the interim period January 2016 to June 2016 resulted in an equity
accounted profit of R0,97 million compared to the loss of R8,78 million for the period ended June 2015. CEMENT's
revenue increased by 13% to R1,15 billion from R1,01 billion with a net profit of R2,68 million. The sales volumes
increased by 18% but the price per tonne decreased by 2,7% year on year. In the six months from January 2016 to
June 2016 the average pricing decreased by 2%. The entry of the new producer in January 2016 intensified
competition resulting in lower prices and margins. Therefore the associate recorded EBITDA margin of 19% compared
to 21% in the comparative period. CEMENT continued to operate at steady state capacity utilisation of approximately
80% in the interim period.
CEMENT pursued the optimisation programme to improve margins in the interim period. Minor capital expenditure of
between R12 million to R16 million is required on the plant to achieve the targeted raw materials efficiency.
Although the programme has not yet yielded the expected results, the associate is still targeting a 5-7% EBITDA
increase for the foreseeable future.
Following the Dangote Cement PLC results released on 27 October 2016 for the nine months ended 30 September 2016,
CEMENT recorded EBITDA of R423,52 million (24,6%) and revenue of R1,72 billion compared to R378,22 million (22,8%)
and R1,66 billion respectively, for the period ended September 2015. The associate's improved margin was mainly due
to a once-off R124,27 million income as a result of a settlement agreement with Sinoma on the final handover of
the plants. In the third quarter, which is not accounted for in the current interim reporting period, the associate
recorded revenue of R574,89 million (2015: R648,08 million) for the three months ending September 2016. The decline
in revenue was as a result of reduced quarterly volumes caused by CEMENT taking the lead on implementing price
increases in mid-July. All the cement producers implemented price increases during the third quarter. Due to the
staggered manner in which these increases were implemented by the producers, the full impact is anticipated in the
fourth quarter results for the period ended 31 December 2016.
Summary comparison of earnings
2016 2015 Change
Metier net profit 33 671 34 819 down 3.3%
SepHold expenses (9 375) (8 442) up 11.1%
CEMENT 36% equity profit/(loss) 966 (8 783) up 110.9%
GROUP 25 248 18 511 up 36.4%
Operational review
Metier
The mixed concrete supply market continued to be characterised by intense competition and downward pricing
pressure. Metier observed an increased number of new entrants in the period under review in both Gauteng and KZN.
The subsidiary successfully extended a major supply contract by a further three years which has contributed to
volumes. Construction of the 12th batch plant commenced in Gauteng and is targeted to start production in
March 2017. Metier continues to focus on maintaining its revenue and profitability. The subsidiary's medium term
goals are to commission the 12th batch plant and to enhance market penetration.
CEMENT
The associate continued to pursue the optimisation programme and increased the production capacity to 2,8 million
tonnes per annum. The progress update on the four components of the programme is as follows:
1. Logistics - a plan to rationalise logistics is well advanced with the benefit expected in first quarter of 2017.
2. Sales - the sales strategy and action plans to optimise the different market segments has been finalised and the
benefit is expected to materialise by June 2017.
3. Raw materials - the anticipated results from the replacement materials were not achieved due to challenges
encountered in the initial production trials. A plant process design limitation was identified which will be
rectified by the capex stated above of R12 million to R16 million. The benefit of this component is targeted for
the third quarter 2017.
4. Production - production efficiency has been impacted by the lower than expected performance of particular
components that have reduced plant reliability. Management continues to assess the plant and is confident that
the issues will be resolved.
The cement market continued to be characterised by price competition but appears to be stabilising following the
implementation of price increases by all producers in the third quarter. The bagged cement market continues to
perform better than that of bulk cement as the large construction projects dwindle.
The imports have significantly declined on a year on year basis, particularly from Pakistan. By the end of
June 2016 approximately 156kt had been imported compared to 500kt in the comparative period with 75% of the volume
from China. In the short to medium term, CEMENT will focus on achieving higher prices and quality earnings.
Group
The group continued to assess growth opportunities and is currently focussed on developing an aggregate business.
The group is exploring a greenfield quarry asset which when operational will supply into the ready mixed
concrete, asphalt and building industries.
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
for the six months ended 30 September 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 September 2016 30 September 2015 31 March 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Assets
Non-current assets 1 084 416 999 867 1 035 526
Current assets 176 967 234 522 227 435
Total assets 1 261 383 1 234 389 1 262 961
Equity and liabilities
Equity attributable to equity holders of the parent 939 822 865 415 910 592
Non-current liabilities 233 736 253 701 249 155
Current liabilities 87 825 115 273 103 214
Total liabilities 321 561 368 974 352 369
Total equity and liabilities 1 261 383 1 234 389 1 262 961
Net asset value per share (cents) 463,04 430,07 450,99
Tangible net asset value per share (cents) 350,92 315,76 337,68
Ordinary shares in issue 202 969 487 201 224 508 201 908 654
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 6 months ended 12 months ended
30 September 2016 30 September 2015 31 March 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Revenue 447 945 461 370 874 253
Cost of sales (267 345) (274 101) (523 460)
Gross profit 180 600 187 269 350 793
Other income 10 637 6 112 15 593
Operating expenses (143 573) (141 899) (282 137)
Operating profit 47 664 51 482 84 249
Investment income 3 445 3 243 8 127
Profit/(loss) from equity accounted investments 966 (8 783) 18 154
Finance costs (14 126) (14 261) (28 271)
Profit before taxation 37 949 31 681 82 259
Taxation (12 701) (13 170) (21 839)
Profit for the period 25 248 18 511 60 420
Total comprehensive income for the period 25 248 18 511 60 420
Basic earnings per share (cents) 12,49 9,20 30,00
Diluted earnings per share (cents) 12,41 8,87 28,97
Headline earnings per share (cents) 12,36 9,12 29,84
Diluted headline earnings per share (cents) 12,28 8,79 28,82
Reconciliation of basic earnings to diluted
earnings and headline earnings:
Basic earnings and diluted earnings from total operations
attributable to equity holders of the parent 25 248 18 511 60 420
(Profit)/loss on sale of non-current assets (374) (216) (431)
Total taxation effect of adjustments 105 61 121
Headline earnings attributable to equity holders
of the parent 24 979 18 356 60 110
Reconciliation of weighted average number of shares:
Basic weighted average number of shares 202 080 131 201 224 508 201 426 940
Diluted effect of share options 1 304 252 7 522 096 7 139 452
Contingent issuable shares - - -
Diluted weighted average number of shares 203 384 383 208 746 604 208 566 392
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months ended 6 months ended 12 months ended
30 September 2016 30 September 2015 31 March 2016
Unaudited Unaudited Audited
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 56 299 50 883 117 037
Interest income 4 057 3 243 8 127
Finance costs (14 315) (13 838) (28 271)
Taxation paid (11 728) (9 541) (18 422)
Net cash from operating activities 34 313 30 747 78 471
Cash flows from investing activities
Purchase of property, plant and equipment (14 191) (10 729) (36 589)
Disposal of property, plant and equipment 1 070 550 1 000
Net loans advanced 1 158 856 514
Investment in associate (48 572) - -
Government grant received 556 - -
Net cash (utilised in) investing activities (59 979) (9 323) (35 075)
Cash flows from financing activities
Proceeds on share issue 2 453 - 825
Proceeds from other financial liabilities - - 28 238
Repayment of other financial liabilities (29 200) (12 500) (52 142)
Increase in loans with group companies (517) - -
Net cash (utilised in) financing activities (27 264) (12 500) (23 079)
Total cash movement for the period (52 930) 8 924 20 317
Cash at beginning of period 91 231 70 914 70 914
Cash at end of period 38 301 79 838 91 231
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total share Total Retained Total
capital Reserves earnings equity
R'000 R'000 R'000 R'000
Balance at 31 March 2015 - Audited 631 127 15 685 197 907 844 720
Total comprehensive loss for the period - - 18 511 18 511
Issue of shares - - - -
Employees' share option scheme - 2 138 47 2 184
Balance at 30 September 2015 - Unaudited 631 127 17 823 216 465 865 415
Total comprehensive income for the period - - 41 910 41 910
Issue of shares 1 823 - - 1 823
Employees' share option scheme - 1 088 356 1 444
Balance at 31 March 2016 - Audited 632 950 18 911 258 731 910 592
Total comprehensive income for the period - - 25 248 25 248
Issue of shares 2 453 - - 2 453
Employees' share option scheme - (189) 1 718 1 529
Balance at 30 September 2016 - Unaudited 635 403 18 722 285 697 939 822
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS
Segment information
The segments identified are based on the operational and financial information reviewed by management for
performance assessment and resource allocation. There has been no change in the basis of operational segmentation
or in the basis of measurement of segment profit or loss since the 2016 annual financial statements.
Ready-mixed Head office and Group totals
concrete consolidation
R'000 R'000 R'000
for the 6 months ended 30 September 2016 - Unaudited
Segment revenue - external revenue 447 945 - 447 945
Segment cost of sales (267 345) - (267 345)
Segment expenses (134 198) (9 375) (143 573)
Profit from equity-accounted investment - 966 966
Segment profit/(loss) after taxation 33 671 (8 423) 25 248
Taxation (13 183) 482 (12 701)
Interest received 3 388 57 3 445
Interest paid (14 126) - (14 126)
Depreciation and amortisation (12 392) (1 755) (14 147)
Segment assets 415 396 845 987 1 261 383
Investment in associate included in the above
total segment assets - 720 005 720 005
Capital expenditure included in segment assets 13 822 369 14 191
Segment liabilities (318 404) (3 157) (321 561)
for the 6 months ended 30 September 2015 - Unaudited
Segment revenue - external revenue 461 370 - 461 370
Segment cost of sales (274 101) - (274 101)
Segment expenses (133 457) (8 442) (141 899)
Loss from equity-accounted investment - (8 783) (8 783)
Segment profit/(loss) after taxation 34 819 (16 308) 18 511
Taxation (13 652) 482 (13 170)
Interest received 2 897 346 3 243
Interest paid (14 260) (1) (14 261)
Depreciation and amortisation (15 417) (1 748) (17 165)
Segment assets 455 738 778 651 1 234 389
Investment in associate included in the above
total segment assets - 643 530 643 530
Capital expenditure included in segment assets 10 693 36 10 729
Segment liabilities (365 834) (3 140) (368 974)
The only commodity actively managed by Metier is ready-mixed concrete. The group does not rely on any single
external customer or group of entities under common control for 10% or more of the group's revenue as disclosed in
the interim financial results. CEMENT is an associate of SepHold. No segment report has been presented for CEMENT
as the amounts attributable to CEMENT have been included in the "head office segment".
Basis of preparation
The condensed consolidated interim financial results for the six months ended 30 September 2016 ("interim reporting
period") have been prepared in accordance with IAS 34: Interim Financial Reporting, the requirements of the
JSE Limited Listings Requirements, the Companies Act, 2008, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and the Financial Pronouncements as issued by the Financial Reporting Standards
Council. The interim financial results are prepared in accordance with International Financial Reporting Standards
("IFRS").
The results have been prepared on a historical cost basis, except for the measurement of land at revalued amounts.
Construction of the new building was only completed after the 2016 year-end. The fair value and useful life of
this asset will be assessed at the 2017 year-end.
The accounting policies for the interim reporting period are consistent with those applied in the annual financial
statements for the group for the year ended 31 March 2016.
The preparation of the interim financial results has been supervised by NR Crafford-Lazarus CA (SA).
The financial information on which these interim period results are based has not been reviewed or reported on by
the group's auditors.
Statement of going concern
The interim financial results have been prepared on the basis of accounting policies applicable to a going concern.
This 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.
Stated capital
There were no changes to the authorised stated capital of the company during the interim reporting period under
review.
A total number of 1 060 833 shares issued during the interim period for a cash amount of R2 453 032 relates to
share options that were exercised by employees.
All the authorised and issued shares have no par value.
Events after the interim reporting period
The directors are not aware of any material fact or circumstance arising between the end of the interim reporting
period and the date of this report that would require adjustments to or disclosure in the interim financial
results.
Changes to the board
MG Mahlare resigned as independent non-executive director with effect from 22 September 2016, and MJ Janse van
Rensburg was appointed as Independent non-executive director of SepHold on 22 September 2016.The board extends a
grateful farewell to Gustav whose invaluable contribution to the success of the group is acknowledged. He
effectively led as the head of audit committee by ensuring that the group not only complied with all regulatory
requirements but applied best practice.
Following the appointment of Jurgens du Toit as the managing director of Metier who has successfully headed the
subsidiary during the interim period, Kenneth Capes has resigned as a member of the Metier board with effect
9 November 2016. Kenneth will dedicate his efforts to achieving the SepHold business development targets which
include the establishment of an aggregates business in the Group. Further update regarding this expansion
opportunity will be announced as soon as material milestones have been achieved.
In pursuance of its commitment to gender and skills diversity, the Board appointed Ms Basani Maluleke as an
independent non-executive director effective 9 November 2016. Basani is a director of Transcend Capital (Pty) Limited,
a boutique corporate finance firm specialising on B-BBEE ownership advisory for multinationals. She has over
ten years of financial services experience in the areas of corporate finance, private banking and private equity.
She was admitted as an attorney of the High Court after serving articles at Edward Nathan and Friedland
(now Edward Nathan Sonnenbergs). She holds a B.Com (Accounting) and LL.B degrees from the University of Cape Town
as well as an MBA from the Kellogg School of Management at Northwestern University. Basani is a fellow of the
African Leadership Initiative and the Aspen Global Leadership Network.
Change to the Company Secretary
There were no changes to the Company Secretary during the interim reporting period under review.
Company information
Directors
B Williams# (chairman)
MJ Janse van Rensburg#
PM Makwana#
MM Ngoasheng#
J Pitt#+
Dr. Lelau Mohuba* (chief executive officer)
NR Crafford-Lazarus* (financial director)
RR Matjiu*
KJ Capes*
PF Fourie^
*Executive #Independent +Alternate ^Non executive
Company Secretary
Acorim Proprietary Limited
Telephone: +27 11 325 6363
Registered office
Southdowns Office Park
First floor, Block A
Cnr Karee and John Vorster Streets
Irene, X54, 0062
Telephone: +27 12 612 0210
Transfer secretaries
Computershare Investor Services Proprietary Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2017
South Africa
Telephone: +27 11 380 5000
JSE sponsor
Questco Proprietary Limited
Telephone: +27 11 011 9200
Investor presentation webcast and conference call
A presentation audio webcast and conference call for analysts will be held on Thursday, 10 November 2016
at 1000hs CAT. The results presentation can also be downloaded from the Company website www.sephakuholdings.com.
Webcast link: http://themediaframe.eu/links/sephold161110.html
Conference live call access numbers for participants
Other Countries - International +27 11 535 3600
Other Countries - International +27 10 201 6800
South Africa - Cape Town 021 819 0900
South Africa - Durban 031 812 7600
South Africa - Johannesburg Telkom 011 535 3600
South Africa - Johannesburg Neotel 010 201 6800
Playback Access Numbers - Playback Code: 54038
Other Countries - International +27 11 305 2030
South Africa 011 305 2030
On behalf of the board
Pretoria
Chief executive officer Financial director
Dr. Lelau Mohuba Neil Crafford-Lazarus
10 November 2016
Enquiries contact:
Sakhile Ndlovu
Sephaku Holdings
Investor Relations
012 612 0210
Sponsor to Sephaku Holdings: Questco (Pty) Ltd
About Sephaku Holdings Limited
Sephaku Holdings Limited is a building and construction materials company with a portfolio of investments in the
cement sector in South Africa. The company's core investments are a 36% stake in Dangote Cement SA (Pty) Ltd and
100% in Metier Mixed Concrete (Pty) Ltd. SepHold's strategy is to generate growth and realise value for shareholders
through the production of cement and ready mixed concrete in Southern Africa.
www.sephakuholdings.com
Date: 10/11/2016 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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