Wrap Text
Unaudited Consolidated Condensed Interim Results For The Six Months Ended 30 September 2016
DENEB INVESTMENTS LIMITED
Registration number: 2013/091290/06
(Incorporated in the Republic of South Africa)
JSE share code: DNB ISIN: ZAE000197398
Income tax registration number: 9844426156
('Deneb' or 'the Group' or 'the company')
UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2016
Unaudited Unaudited
30 Sep 30 Sep
2016 2015
R'000 R'000
ASSETS
Non-current assets 1 712 770 1 723 114
Plant and equipment 312 631 312 639
Owner-occupied property 435 345 385 799
Investment property 729 170 701 409
Intangible assets 22 583 23 042
Goodwill 42 872 15 024
Other investments 3 391 3 644
Loan receivables - 90 139
Long-term receivables 79 665 67 367
Deferred tax 87 113 124 051
Current assets 1 801 261 1 532 430
Non-current assets held for sale 16 034 3 665
Loan receivables 87 955 -
Inventories 839 335 729 429
Trade and other receivables 851 287 795 196
Current tax asset 2 120 2 859
Cash and cash equivalents 4 530 1 281
Total assets 3 514 031 3 255 544
EQUITY AND LIABILITIES
Total equity 1 688 475 1 866 234
Stated capital 1 448 501 1 717 287
Reserves 239 861 148 947
Shareholders' equity 1 688 362 1 866 234
Non-controlling interests 113 -
Non-current liabilities 703 897 111 920
Deferred tax 5 009 3 009
Post-employment medical aid benefits 91 966 103 635
Interest-bearing liabilities 6 063 4 266
Interest-bearing medium-term loan 600 000 -
Operating lease accruals 859 1 010
Current liabilities 1 121 659 1 277 390
Current tax payable 1 460 493
Post-employment medical aid benefits 6 876 6 472
Interest-bearing liabilities 89 343 35 540
Trade and other payables 657 534 554 386
Amount owing to related party 267 014 -
Bank overdrafts 99 432 680 499
Total liabilities 1 825 556 1 389 310
Total equity and liabilities 3 514 031 3 255 544
Net asset value (attributable to equity holders) 1 688 362 1 866 234
Net asset value per share (attributable to
equity holders) (cents) 394 332
CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Unaudited Unaudited
6 months 6 months
30 Sep 30 Sep
2016 2015
% change R'000 R'000
Revenue 3,6 1 351 356 1 303 975
Gross profit 8,4 339 228 312 908
Core operating profit 33,1 62 088 46 651
Foreign exchange (losses)/gains (20 369) 11 696
Net impairment of assets - (2 456)
Net restructuring and retrenchment costs (806) -
Operating profit before finance costs (26,8) 40 913 55 891
Finance income 5 802 5 854
Finance expenses (35 270) (34 752)
Profit before tax (57,6) 11 445 26 993
Income tax expense (4 531) (12 662)
TOTAL PROFIT FOR THE PERIOD (51,8) 6 914 14 331
Other comprehensive income for the period - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD (51,8) 6 914 14 331
Profit attributable to:
Equity holders 7 384 12 079
Non-controlling interests (470) 2 252
6 914 14 331
Total comprehensive income attributable to:
Equity holders 7 384 12 079
Non-controlling interests (470) 2 252
6 914 14 331
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Unaudited Unaudited
6 months 6 months
30 Sep 30 Sep
2016 2015
R'000 R'000
Net cash flow from operating activities (160 424) (148 631)
Net cash flow from investing activities (64 121) (16 156)
Net cash flow from financing activities 648 105 15 011
Net increase/(decrease) in cash and cash equivalents 423 560 (149 776)
Cash and cash equivalents at beginning of period (518 462) (529 442)
Cash and cash equivalents at end of period (94 902) (679 218)
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Non-
control-
Stated Other Retained ling Total
capital reserves income Total interest equity
R'000 R'000 R'000 R'000 R'000 R'000
Balance at
1 April 2015 1 716 713 249 468 (95 202) 1 870 979 (2 252) 1 868 727
Total
comprehensive
profit for the
period - - 12 079 12 079 2 252 14 331
Transactions with
owners
Distribution - - (16 824) (16 824) - (16 824)
Share scheme -
options exercised 574 - (574) - - -
Balance at
30 September 2015 1 717 287 249 468 (100 521) 1 866 234 - 1 866 234
Balance at
1 April 2016 1 717 286 242 999 (10 522) 1 949 763 583 1 950 346
Total
comprehensive
profit for the
period - - 7 384 7 384 (470) 6 914
Transactions with
owners
Share buyback (268 785) - - (268 785) - (268 785)
Balance at
30 September 2016 1 448 501 242 999 (3 138) 1 688 362 113 1 688 475
2016 2015
R'000 R'000
Composition of other reserves
Revaluation of investments (253) -
Common control reserve (15 902) (15 902)
Surplus on revaluation of land and buildings 259 154 265 370
242 999 249 468
CONDENSED SEGMENTAL REPORT
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Head
office
Branded and
Product Industrial Textile Centra-
Distri- Manufac- Manufac- lised
Properties bution turing turing Services Total
R'000 R'000 R'000 R'000 R'000 R'000
2016
Segment revenue
Gross sales 74 379 592 331 306 117 402 789 113 1 375 729
Inter-segment sales
(these transactions
are at arm's
length) (21 961) (2 412) - - (24 373)
52 418 589 919 306 117 402 789 113 1 351 356
Segment results
Operating profit
before foreign
exchange
(losses)/gains 52 697 4 116 23 861 (2 697) (16 695) 61 282
Foreign exchange
(losses)/gains - (17 852) 31 (8 815) 6 267 (20 369)
Operating profit
before finance costs 52 697 (13 736) 23 892 (11 512) (10 428) 40 913
2015
Segment revenue
Gross sales 66 185 630 026 244 570 381 677 - 1 322 458
Inter-segment sales
(these transactions
are at arm's
length) (18 483) - - - - (18 483)
47 702 630 026 244 570 381 677 - 1 303 975
Segment results
Operating profit
before foreign
exchange
(losses)/gains 46 778 (5 482) 16 814 2 854 (16 769) 44 195
Foreign exchange
(losses)/gains - 6 691 (398) 4 591 812 11 696
Operating profit
before finance
costs 46 778 1 209 16 416 7 445 (15 957) 55 891
STATISTICS PER SHARE
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
Unaudited Unaudited
6 months 6 months
30 Sep 30 Sep
2016 2015
Weighted average number of shares in issue ('000) 561 490 560 922
Number of shares in issue ('000) 427 982 561 490
Diluted weighted average number of shares
in issue ('000) 562 546 567 417
Basic earnings (cents) 1,3 2,2
Headline earnings (cents) 1,2 2,6
Diluted earnings (cents) 1,3 2,1
Diluted headline earnings (cents) 1,2 2,5
Reconciliation between profit and
headline earnings
Income attributable to shareholders (R'000) 7 384 12 079
Impairment of goodwill (R'000) - 2 249
Impairment of intangible assets (R'000) - 207
Surplus on disposal of property, plant
and equipment (R'000) (926) (160)
Loss on disposal of property, plant
and equipment (R'000) - 18
Total tax effect of adjustments (R'000) 260 40
Headline earnings 6 718 14 433
NOTES TO THE UNAUDITED CONSOLIDATED CONDENSED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016
1. Basis of preparation
The unaudited consolidated condensed results for the six months to September 2016
have been prepared in accordance with, and containing the information as required
by, International Accounting Standard (IAS) 34: Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
the Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council and are in compliance with the Listings Requirements of the
JSE Limited and the requirements of the South African Companies Act, as amended.
These results do not include all the information required for a complete set of
IFRS financial statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding of the
changes in the Group's financial position and performance since the last annual
consolidated financial statements as at and for the year ended 31 March 2016.
These results have been prepared under the supervision of by the Financial
Director, Gys Wege (CA)SA, and have not been audited or reviewed by the
Group's auditors, KPMG Inc.
2. Significant accounting policies
The unaudited consolidated condensed results have been prepared under the
historical cost convention, except for the revaluation of certain properties
and financial instruments. The accounting policies adopted are in terms of
IFRS and consistent with those followed in the preparation of the Group's
annual financial statements for the year ended 31 March 2016, except for the
adoption of new standards and interpretations effective as at 1 April 2016.
The new standards have no impact on the consolidated condensed financial
statements.
3. Significant investing activities
3.1 Capital expenditure and commitments
Unaudited Unaudited Unaudited Unaudited
capital capital contractual contractual
expenditure expenditure commitments commitments
2016 2015 2016 2015
R'000 R'000 R'000 R'000
Investment property 6 009 15 358 1 550 -
Land and buildings 3 279 22 607 - 6 236
Plant and equipment 17 173 16 028 3 742 8 577
Total capital expenditure 26 461 53 993 5 292 14 813
3.2 Business combinations
Subsidiaries acquired during the period
Revenue Net profit
contributed contributed
% voting to the to the
Subsidiary Acquisition interest Group Group
name date Segment acquired Description R'000 R'000
Premier 1 June 2016 Industrials 100% A manufac- 34 160 3 394
Rainwater- turer of
goods galvanised
steel roofing
accessories
Consideration transferred
The following table summarises the consideration paid for the entity and the
amount of the assets acquired and liabilities assumed recognised at the
acquisition date.
Consideration R'000
Cash 67 865
Contingent consideration 9 086
Total consideration 76 951
Recognised amounts of identifiable assets acquired and liabilities assumed
Property plant and equipment 5 993
Inventories 22 181
Trade and other receivables 15 791
Cash and cash equivalents 24 307
Deferred liabilities (820)
Deferred tax liability (829)
Trade and other payables (6 783)
Taxation payables (10 737)
Total identifiable net assets 49 103
Goodwill 27 848
Total consideration 76 951
Cash flow from this investing activity
Cash transferred 67 865
Less cash and cash equivalents in the business acquired (24 307)
43 558
Measurement of fair values
The assets and liabilities acquired have been measured on a provisional basis.
If new information is obtained within one year of the date of acquisition
about the facts and circumstances that existed at the date of acquisition,
the accounting for the acquisition will be revised.
4. Significant financing activities
4.1 Share buyback
During the period the company repurchased 133 507 226 shares from the Southern
African Clothing and Textile Workers' Union (Sactwu) for a consideration of
R267 014 452. The repurchased shares were delisted and cancelled on
30 September 2016.
4.2 Related parties
The note below is an explanation of transactions and balances with related
parties that have significantly changed from the information contained in
the financial statements for the year ended 31 March 2016.
Transaction with Sactwu (shareholder).
Income/(Expenses)
Transaction values Balances receivable/(owing)
for the period ending Balances outstanding as at
12 months 12 months
2016 31 March 2016 2016 31 March 2015
R'000 R'000 R'000 R'000
Amount due to Sactwu relating
to the share buyback - - (267 014) -
The amount was paid subsequent to period-end.
4.3. Banking facilities
The Group has renegotiated its banking facilities whereby R650 million has
been converted to term funding of which R50 million is repayable
within 12 months.
5. Diluted weighted average number of shares
The difference between the weighted average number of shares and the diluted
weighted average number of shares are due to the impact of the unexercised
options under the Group's incentive scheme.
6. Post-period-end events
There has been no reportable post-period-end events.
7. Dividends/distributions
The directors have resolved not to declare a dividend/distribution for the
six months ended 30 September 2016 (2015: Nil).
Commentary
The first half of the financial year has been characterised by significant
currency volatility. The Group imports a large proportion of its products
either in the form of finished goods or raw materials. It's the Group's
policy to cover forward any foreign exchange exposure once the selling price
has been established thereby locking in the cash margin. In the first half
of the financial year, the Group builds inventory ahead of the busy Christmas
and back-to-school periods. The mark-to-market adjustment on the hedging
instrument is recognised at the end of the reporting period whilst the gross
margin adjustment will only be realised once the product is sold in the
second half of the financial year. The Group's foreign exchange policy has
been consistently applied in both the current and prior periods and this
accounting adjustment does not have an operational or cash flow effect.
During the current period, the Group recorded an aggregate foreign exchange
loss of R20,4 million compared to an aggregate profit of R11,7 million in the
corresponding period. Accordingly, at face value, the results for the first
half of the financial year appear disappointing with HEPS down 54%. However,
excluding the effects of the currency adjustments, HEPS is up 255%, admittedly
off a very low base in the prior year but a pleasing result nonetheless
given the difficult trading environment. A better measurement of the improvement
year-on-year is on the core operating profit line, which at R62,1 million in
the current period is 33% higher than the R46,7 million profit recorded
in the prior period.
The period under review saw revenue rise 3,6% on the back of strong growth in
the industrial manufacturing segment helped by the acquisition of Premier
Rainwatergoods effective 1 June 2016. This growth was offset by turnover
decline in the Branded Product Distribution segment reflecting the pressure
in the retail environment.
The continued drive to shed lower margin turnover and transition the business
into higher margin areas saw gross margins improve by 110 basis points to
25,1%. The higher margin resulted in gross profit increasing by 8,4%
compared to the corresponding period.
Good cost containment and efficiency drives saw selling and administration
cost increases restricted to 3,1%.
The result of the above is that core operating profit increased by 33,1% to
R62,1 million.
Specific share repurchase
As announced on SENS on 30 September 2016, the Group repurchased
133 507 226 shares, representing almost 24% of the shares in issue at
the time, held by the South African Clothing and Textile Workers' Union
for an aggregate repurchase consideration of R267 million. One of the
consequences of the share repurchase is that the book net asset value
per share has increased by 18,7% to R3,94 per share from R3,32 per share
at the end of the comparative period.
Segmental results
Properties
Revenue is up 12% to R74 million with 70% of the revenue derived from
tenants external to the Group. Operating profit is up 13% to R53 million.
The property segment remains a key focus area for the Group and we continue
to look for suitable properties to augment the portfolio. We will remain
patient and only look to acquire properties that fit within our
strict criteria.
Industrial Manufacturing
We are pleased with the performance of our industrial manufacturing
businesses. These businesses interface into the mining, agriculture,
construction and automotive sectors, none of which have been going
through particularly good times. Despite the industry headwinds,
this segment delivered turnover growth of 25% helped by the acquisition
of Premier Rainwatergoods effective 1 June 2016. Excluding the Premier
Rainwatergoods transaction, the remaining businesses in this segment
delivered turnover growth of 11% on the back of various initiatives
to widen distribution channels.
The increased turnover saw operating profit grow by 46% to R24 million.
Branded Product Distribution
Revenue for this segment was down by 6% to R592 million. The decline
in turnover is a reflection of the tough retail environment. Given
the pressures, retail buying decisions are moving later in the cycle,
which negatively affects the results for the first half of the year.
On the positive side, we have managed to improve the gross margins
and this, coupled with good cost control, saw operating profit before
foreign exchange adjustments improve by R9 million to a profit of
R4 million as compared to a loss of R5 million in the prior year.
After recognising the R25 million swing in foreign currency losses
and gains, the operating profit before finance cost is down
R15 million year-on-year.
The results of the Branded Product Distribution segment are impacted
by the losses being incurred in the start-up and turnaround businesses.
The start-up businesses have shown good progress and the losses
are declining year-on-year. Our office automation business has
faced a number of challenges, including a general market for office
automation products that has declined year-on-year. We mentioned
at year-end that the cost savings derived from the restructuring
would be realised in the second half of the financial year and
this remains on track. In addition, a new management team has
been put in place and they are working on improving a number of
aspects within the business. We are optimistic that the performance
of this business will be much improved over the medium term.
Textile Manufacturing
The current period saw revenue grow by 6% to R403 million.
Pressure on margins saw the businesses in this segment record
an operating loss before foreign exchange losses of R3 million,
a decline of R6 million from the R3 million profit recorded in
the prior period. After recognising the R13 million swing in
foreign currency losses and gains, the operating profit before
finance cost is down R19 million year-on-year.
On behalf of the board
Stuart Queen Gys Wege
Chief Executive Officer Financial Director
23 November 2016
Cape Town
CORPORATE INFORMATION
DENEB INVESTMENTS LIMITED
('Deneb' or 'the Group' or 'the company')
The company's shares are listed under the Financial Services -
Speciality Finance sector.
Registration number: 2013/091290/06
(Incorporated in the Republic of South Africa)
JSE share code: DNB ISIN: ZAE000197398
Income tax registration number: 9844426156
Registered office:
5th Floor, Deneb House, Cnr Main and Browning Roads,
Observatory 7925, Cape Town
PO Box 1585, Cape Town 8000
Directors:
J A Copelyn* (Non-executive Chairperson), M H Ahmed*^
(Lead Independent Director),
D Duncan, T G Govender*, L Govender*^, N Jappie*^,
A M Ntuli, S A Queen (Chief Executive Officer),
Y Shaik*, R D Watson*^, G D T Wege (Financial Director)
(* Non-executive ^ Independent)
Company secretary:
C Philip
Transfer secretaries:
Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg 2001.
PO Box 61051, Marshalltown 2107
Auditors:
KPMG Inc.
Sponsors:
PSG Capital Proprietary Limited
Date: 23/11/2016 08:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
