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Reviewed provisional results for the year ended 31 December 2016 and declaration of cash dividend
Trencor Limited
(Incorporated in the Republic of South Africa)
Registration number 1955/002869/06
Share code: TRE
ISIN: ZAE000007506
("Trencor" or "the company")
Reviewed Provisional Results for the year ended 31 December 2016 and declaration of cash dividend
COMMENTARY
GROUP
- Trading profit after net financing costs decreased by 216% from R1 608 million in
2015 to a trading loss of R1 862 million. This loss reflects a weaker performance by
Textainer due to difficult trading conditions, and also includes additional depreciation
required under International Financial Reporting Standards ("IFRS") over and above
that required under US GAAP as well as the impairment of the Hanjin Shipping Co
("Hanjin") receivables, such depreciation and impairment representing non-cash
items (refer below).
- Headline loss per share (including the effect of net realised and unrealised foreign
exchange translation gains) was 435,1 cents (2015: headline earnings per share
512,6 cents).
- Adjusted headline loss per share (which excludes the effect of net unrealised foreign
exchange translation gains) was 435,1 cents (2015: adjusted headline earnings per
share 443,3 cents).
- Net unrealised foreign exchange gains arising on translation of net dollar receivables
and the related valuation adjustments, not included in adjusted headline earnings,
was nil (2015: R123 million or 69,3 cents per share).
- These amounts are better reflected in tabular form:
2016 2015
Cents Cents
per share per share
Headline (loss)/earnings per share (435,1) 512,6
Deduct:
Net unrealised foreign exchange translation gains - 69,3
Adjusted headline (loss)/earnings per share (435,1) 443,3
Year-end rate of exchange: SA rand to US dollar 13,58 15,53
Average rate of exchange for the year:
SA rand to US dollar 14,72 12,75
- Consolidated gearing ratio at 31 December 2016 was 289% (2015: 224%), with all
debt in Textainer and TAC (refer to Events after the Reporting Period below).
- TAC procured the subscription by its holding company, Halco Holdings Inc, for
additional shares in TAC to the value of US$56,4 million, thereby strengthening the
TAC balance sheet.
- The long-term receivables were settled.
- Final dividend of 50 cents per share declared, making a total of 130 cents per share
for the year (2015: total 300 cents per share).
TEXTAINER: 48,04% beneficiary interest at 31 December 2016 (2015: 48,25%) -
US GAAP results
- Net loss for the year was US$50,7 million (2015: profit US$108,4 million - an immaterial
correction was recorded for US GAAP statutory reporting purposes from the
US$106,9 million profit previously reported). Textainer recorded a container
impairment of US$22,1 million, net of estimated insurance proceeds of
US$20,2 million for containers on operating and direct financing leases to Hanjin, a
lessee that filed for bankruptcy, and recorded US$19,0 million for bad debt expense,
net of insurance proceeds of US$2,6 million, to fully reserve for that lessee's
outstanding accounts receivable.
- Recorded US$66,5 million of container impairments (2015: US$32,7 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.
- Additional depreciation of US$25,4 million was charged in the second half of 2016
arising from the decrease in estimated residual values and an increase in the
estimated useful life of certain container types.
- Average fleet utilisation for the year was 94,7% (2015: 96,8%).
- Continued expansion with approximately US$480 million (2015: US$600 million) of
capital expenditure in 2016 in respect of the owned and managed fleet.
- Total fleet under management at 31 December 2016 was 3 142 556 (2015: 3 147 690)
20 foot equivalent units of which Textainer itself owned 81,0% (2015: 80,1%).
- Textainer's results may be viewed on its website www.textainer.com.
CONVERTING US GAAP RESULTS OF TEXTAINER AND TAC TO IFRS FOR FINANCIAL
REPORTING BY TRENCOR
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 insignificant adjustments were necessary in so converting from US GAAP
to IFRS. However, in the year to 31 December 2015 and continuing for the year ended
31 December 2016, 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$260,6 million be recorded for the year (2015: profit of
US$23,0 million). This included a non-cash impairment loss on the leased container
fleet as required under IFRS of US$155 million (2015: US$88 million). No impairment
was necessary under US GAAP at 31 December 2016 or 31 December 2015. Trencor
recorded an additional depreciation charge of US$78,1 million required under IFRS for the
year to 31 December 2016, over and above the amount provided under US GAAP.
Adjusted to conform with IFRS, Trencor's consolidation of the results of TAC requires that
net losses of US$8,8 million be recorded for the year (2015: net losses of US$20,5 million).
This included a non-cash impairment recovery on the leased container fleet as required
under IFRS of US$0,1 million (2015: US$26,2 million impairment loss). An impairment of
US$0,4 million (2015: nil) was recorded under US GAAP at 31 December 2016. Trencor
recorded an additional depreciation charge required of US$1,8 million under IFRS for the
year ended 31 December 2016 over and above the amount provided under US GAAP.
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 31 December 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 net non-cash
impairment of US$155 million in respect of the Textainer and TAC fleets (R2 107 million)
in Trencor's financial statements for the year ended 31 December 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 loss after tax and non-
controlling interests, is a net charge of R967 million or 546 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 often fluctuate over time as market prices
fluctuate (i.e. 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, as if the container were
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 and again at 31 December 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 (i.e. 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 30 June 2016 and again on
31 December 2016. The consequence of the reassessment of residual values and
useful lives at 30 June 2016 is an estimated increase of R663 million in the depreciation
charge recorded for the six months from 1 July to 31 December 2016 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 R355 million or 201 cents per share). This
depreciation charge is calculated after adjusting the carrying value of the container
fleet for impairment at 30 June 2016. In addition, the reassessment of residual values
at 31 December 2016 will result in an estimated reduction in depreciation in 2017 of
R199 million over what it would have been had the residual values not been so revised.
This estimate presumes no material changes to the composition of the container
fleets and no significant changes for the next year to market factors that prevailed at
31 December 2016. Changes in these factors will influence the depreciation that may
be charged in future periods.
- Treatment of classification of interest-bearing borrowings (refer to Events after the
Reporting Period below).
HANJIN
On 31 August 2016, Hanjin filed for bankruptcy protection in South Korea. In the
following months its services ceased operation. At the time of its insolvency Hanjin was
the 7th largest shipping line in the world and its bankruptcy has substantially impacted
Textainer.
Containers leased to Hanjin with ownership interests attributable to Textainer represented
approximately 4,8% of the Textainer owned and managed fleet expressed in 20 foot
equivalent units. Substantial losses from the Hanjin bankruptcy have been incurred, arising
from container recovery expenses, unpaid current and future rental income from Hanjin,
container repair expenses, container repositioning expenses, re-leasing expenses and the
loss of unreturned containers.
On 16 February 2017 Textainer disclosed that 80% of the containers formerly leased to
Hanjin had been either turned in to Textainer or approved for return. It was also disclosed
that a further 13% of the containers are under active recovery discussions. It may be
uneconomic or impossible to recover certain containers under recovery discussions and
Textainer may not recover a meaningful number of the containers not currently accounted
for. The financial effects related to the Hanjin default will continue in 2017.
Textainer recorded an impairment of US$24,9 million in US GAAP terms during the year
ended 31 December 2016 based on an estimate that 10% of the fleet will not be recovered.
The effect of the Hanjin bankruptcy for the year ended 31 December 2016 has been an
impairment on the estimated unrecoverable containers in the amount of R50 million as
well as impairments to the finance lease receivables and accounts receivable amount to
R325 million and R220 million respectively.
Insurance cover is maintained to cover certain costs and losses from default customers.
However, the policy contains various exclusions and limitations and there can be no
assurance that the full claim will be paid or, if paid in full, the insurance will be sufficient to
cover the losses related to Hanjin.
EVENTS AFTER THE REPORTING PERIOD
On 21 December 2016, Textainer entered into amendments for certain of its secured
debt, credit and term loan facilities, whereby the testing of certain covenants was delayed
until 28 February 2017. At 31 December 2016, Textainer did not have the unconditional
right to defer settlement of R33,8 billion of interest-bearing borrowings beyond
31 December 2017, which resulted in these borrowings being recorded by Trencor as
current liabilities in accordance with IFRS. Under US GAAP these amounts due after
31 December 2017 under the facilities are not recorded as current liabilities, as is required
under IFRS. Subsequently, on 27 February 2017, Textainer entered into amendments
of these facilities, which resulted in various changes to the related covenants and an
increase in the interest margin of 0,55% for the secured debt facilities and to a range of
between 1,5% and 2,5% for the revolving credit and term loan facilities with effect from
that date. An assessment has not yet been made as to whether these amendments
represent substantial modifications of the terms of these interest-bearing borrowings in
accordance with IAS 39 Financial Instruments: Recognition and Measurement.
As a result of these amendments, R31,9 billion of interest-bearing borrowings, which
are reflected as current liabilities at 31 December 2016, will only become due after
31 December 2017.
In addition, Textainer prepaid certain debt facilities with a total aggregate principal balance
of more than R5,8 billion on 20 April 2017 and funded the repayment with proceeds from
a new debt facility arranged with several financial institutions.
CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the renewal of cautionary announcement issued on
24 March 2017 in which attention was drawn, inter alia, to the fact that the full impact
of the Hanjin bankruptcy, suffered by Textainer, on Trencor under IFRS remained
uncertain and could only be determined after further major analysis. Such impact up to
31 December 2016 has been taken into account in these results. However, the analysis
continues in respect of the future impact, and will be completed as soon as reasonably
practical. Accordingly, shareholders are reminded to continue to exercise caution when
dealing in their Trencor shares until a further announcement is made.
DECLARATION OF CASH DIVIDEND
The board has declared a final gross cash dividend (number 103) of 50 cents per share out
of distributable reserves in respect of the year ended 31 December 2016.
The salient dates pertaining to the dividend payment are as follows:
Last day to trade cum the dividend Tuesday, 16 May 2017
Trading commences ex the dividend Wednesday, 17 May 2017
Record date Friday, 19 May 2017
Payment date Monday, 22 May 2017
Share certificates may not be dematerialised or rematerialised between Wednesday,
17 May 2017 and Friday, 19 May 2017, both days inclusive.
Note that:
- Dividend withholding tax at the rate of 20% will be applicable to shareholders who are
not exempt from this tax, which will result in a net dividend of 40 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).
PREPARATION OF FINANCIAL STATEMENTS
These provisional results have been prepared by management under the supervision
of the financial director, Mr RA Sieni CA(SA). The directors take full responsibility for the
preparation of the provisional results and the financial information has been correctly
extracted from the underlying condensed consolidated financial statements.
REVIEW REPORT
The condensed consolidated financial statements for the year ended 31 December 2016
have been reviewed by KPMG Inc, who expressed an unmodified review conclusion.
The auditor's report does not necessarily report on all of the information contained in
these financial results. Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement, they should obtain a copy
of the auditor's report together with the accompanying financial information from the
company's registered office.
DIRECTORATE
As announced on 19 January 2017, at the forthcoming annual general meeting ("AGM"),
and with effect therefrom:
- Mr JE McQueen will retire as chief executive officer, executive director and chairman
of the executive committee but will remain on the board in a non-executive capacity;
and
- Mr HR van der Merwe, previously managing director of Trencor from 2003 to 2011
and currently a part-time executive director, will be appointed as chief executive
officer and chairman of the executive committee in the place of Mr McQueen.
The above changes are subject to Mr McQueen and Mr Van der Merwe, both of whom
retire by rotation at the AGM, being re-elected as directors. They are both available and
offer themselves for re-election.
As announced on 31 March 2017 Mr JE Hoelter will retire as a non-executive director at
the forthcoming AGM.
On behalf of the board
DM Nurek
Chairman
28 April 2017
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, Rosebank Towers,
15 Biermann Avenue, Rosebank, 2196 (PO Box 61051, Marshalltown 2107)
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
at 31 December 2016
Reviewed Audited
R million 2016 2015
ASSETS
Property, plant and equipment 49 060 59 636
Intangible assets and goodwill 367 486
Investment in equity accounted investee 121 145
Other investments - 45
Long-term receivables - 506
Net investment in finance leases 983 1 465
Derivative financial instruments 63 10
Deferred tax assets 18 19
Restricted cash 737 450
Total non-current assets 51 349 62 762
Inventories 434 766
Trade and other receivables 2 017 1 930
Current portion of long-term receivables - 134
Current portion of net investment in finance leases 467 758
Current tax asset 18 -
Cash and cash equivalents 2 837 4 241
Total current assets 5 773 7 829
Total assets 57 122 70 591
EQUITY
Share capital and premium 44 44
Reserves 8 155 11 736
Total equity attributable to equity holders of the company 8 199 11 780
Non-controlling interests 6 218 9 479
Total equity 14 417 21 259
LIABILITIES
Interest-bearing borrowings (note 10) 4 913 46 006
Amounts attributable to third parties in respect of long-term
receivables - 71
Derivative financial instruments 17 40
Deferred revenue 30 40
Deferred tax liabilities 66 271
Total non-current liabilities 5 026 46 428
Trade and other payables 719 1 170
Current tax liabilities 136 144
Current portion of interest-bearing borrowings (note 10) 36 755 1 571
Current portion of amounts attributable to third parties in
respect of long-term receivables 65 14
Current portion of deferred revenue 4 5
Total current liabilities 37 679 2 904
Total liabilities 42 705 49 332
Total equity and liabilities 57 122 70 591
Capital expenditure incurred during the year 7 210 6 095
Ratio to total equity:
Total liabilities (%) 296,2 232,1
Interest-bearing borrowings (%) 289,0 223,8
CONDENSED CONSOLIDATED
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Reviewed Audited
R million 2016 2015
Revenue (note 2) 9 373 9 277
Trading (loss)/profit before items listed below: (468) 2 784
Realised and unrealised exchange (losses)/gains on translation
of long-term receivables, excluding fair value adjustment (89) 278
Fair value adjustment on net long-term receivables 338 (77)
Impairment of property, plant and equipment (note 4) (2 460) (1 912)
Available-for-sale financial asset - reclassification from other
comprehensive (loss)/income 33 -
Compensation receivable from third party in respect of
impairment of property, plant and equipment 289 98
Operating (loss)/profit before net finance expenses (note 3) (2 357) 1 171
Net finance expenses (note 5) (1 394) (1 176)
Finance expenses Interest expense (1 406) (1 025)
Realised and unrealised losses on
derivative financial instruments (45) (174)
Finance income Interest income 57 23
Share of (loss)/profit of equity accounted investee (net of tax) (6) 9
(Loss)/Profit before tax (3 757) 4
Income tax (credit)/expense (11) 61
Loss for the year (3 746) (57)
Other comprehensive (loss)/income
Items that are or may be reclassified subsequently
to profit or loss
Foreign currency translation differences (2 370) 5 695
Change in fair value of available-for-sale financial asset (9) (21)
Available-for-sale financial asset - reclassification
to profit and loss (33) -
Related income tax 7 4
Total comprehensive (loss)/income for the year (6 151) 5 621
Total comprehensive (loss)/income for the year attributable to:
Equity holders of the company (3 055) 2 832
Non-controlling interests (3 096) 2 789
(6 151) 5 621
Loss for the year attributable to:
Equity holders of the company (1 743) (146)
Non-controlling interests (2 003) 89
(3 746) (57)
Loss per share (cents) (984,4) (82,7)
Diluted loss per share (cents) (984,4) (82,7)
Number of shares in issue (million) 177,1 177,1
Weighted average number of shares in issue (million) 177,1 177,1
Year-end rate of exchange: SA rand to US dollar 13,58 15,53
Average rate of exchange for the year: SA rand to US dollar 14,72 12,75
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Reviewed Audited
R million 2016 2015
Cash flows from operating activities
Cash generated from operations 7 465 7 561
Increase in container leasing equipment (7 635) (6 277)
Finance income received 57 23
Finance lease income received 167 184
Finance expenses paid (1 236) (1 037)
Decrease in finance leases 874 823
Receipts from long-term receivables 928 257
Payments to third parties in respect of long-term receivables (49) (39)
Dividends paid to equity holders of the company (531) (487)
Dividends paid to non-controlling interests (231) (665)
Income tax paid (205) (57)
Net cash (outflow)/inflow from operating activities (396) 286
Cash flows from investing activities
Acquisition of property, plant and equipment (22) (15)
Proceeds on disposal of available-for-sale financial asset 36 -
Increase in equity accounted investee - (8)
Increase/(Decrease) in restricted cash (372) 344
Net cash (outflow)/inflow from investing activities (358) 321
Cash flows from financing activities
Interest-bearing borrowings repaid (1 052) (6 824)
Interest-bearing borrowings raised 945 6 566
Acquisition of non-controlling interest without a change in control - (82)
Shares bought back by subsidiary - (131)
Debt issuance costs incurred (88) (89)
Proceeds on issue of shares by subsidiary - 4
Net cash outflow from financing activities (195) (556)
Net (decrease)/increase in cash and cash equivalents before
exchange rate fluctuations (949) 51
Cash and cash equivalents at the beginning of the period 4 241 3 160
Effects of exchange rate fluctuations on cash and cash equivalents (455) 1 030
Cash and cash equivalents at the end of the year 2 837 4 241
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 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 capital premium reserve reserve reserve subsidiaries income Total interests equity
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 year
(Loss)/Profit for the year - - - - - - (146) (146) 89 (57)
Other comprehensive (loss)/income for the year
Foreign currency translation differences - - - 2 995 - - - 2 995 2 700 5 695
Available-for-sale financial asset - change in fair value
net of tax - - (17) - - - - (17) - (17)
Total other comprehensive (loss)/income for the year - - (17) 2 995 - - - 2 978 2 700 5 678
Total comprehensive (loss)/income for the year - - (17) 2 995 - - (146) 2 832 2 789 5 621
Transactions with owners, recorded directly in equity
Contributions by/(distributions to) owners
Share-based payments - - - - 40 - - 40 43 83
Share options exercised - - - - - - - - 4 4
Shares bought back by subsidiary - - - - - - - - (131) (131)
Dividends paid - - - - - - (487) (487) (665) (1 152)
Total contributions by/(distributions to) owners - - - - 40 - (487) (447) (749) (1 196)
Changes in ownership interests
Acquisition of non-controlling interest without a change
in control - - - - - 204 - 204 (286) (82)
Other changes in ownership interests in subsidiaries - - - - - (13) - (13) 13 -
Total changes in ownership interests - - - - - 191 - 191 (273) (82)
Total transactions with owners - - - - 40 191 (487) (256) (1 022) (1 278)
Balance at 31 December 2015 1 43 35 5 760 374 533 5 034 11 780 9 479 21 259
Total comprehensive loss for the year
Loss for the year - - - - - - (1 743) (1 743) (2 003) (3 746)
Other comprehensive loss for the year
Foreign currency translation differences - - - (1 277) - - - (1 277) (1 093) (2 370)
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 other comprehensive loss for the year - - (35) (1 277) - - - (1 312) (1 093) (2 405)
Total comprehensive loss for the year - - (35) (1 277) - - (1 743) (3 055) (3 096) (6 151)
Transactions with owners, recorded directly in equity
Contributions by/(distributions to) owners
Share-based payments - - - - 34 - - 34 37 71
Dividends paid - - - - - - (531) (531) (231) (762)
Total contributions by/(distributions to) owners - - - - 34 - (531) (497) (194) (691)
Changes in ownership interests in subsidiaries - - - - - (29) - (29) 29 -
Total transactions with owners - - - - 34 (29) (531) (526) (165) (691)
Balance at 31 December 2016 1 43 - 4 483 408 504 2 760 8 199 6 218 14 417
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
for the year ended 31 December 2016
1. The condensed consolidated financial statements are prepared in accordance with the Listings
Requirements of the JSE Limited for provisional reports and the requirements of the Companies
Act of South Africa. The Listings Requirements require provisional reports to be prepared in
accordance with the framework concepts and the measurement and recognition requirements
of IFRS and the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial
Reporting. The accounting policies applied in the preparation of the condensed consolidated
financial statements are in terms of IFRS and are consistent with those applied in the previous
consolidated annual financial statements.
Reviewed Audited
R million 2016 2015
2. Revenue
Goods sold 2 202 1 930
Leasing income 7 101 6 905
Management fees 158 156
Finance income 1 8
9 462 8 999
Realised and unrealised exchange differences (89) 278
9 373 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 4 861 2 601
Impairment losses incurred - financial assets 638 101
Write-down of inventories 527 430
4. Impairment of property, plant and equipment
Container leasing equipment
Net impairment recognised during the reporting period 2 107 1 770
Impairment recognised in respect of containers on operating
leases not recovered from defaulting customers 353 142
2 460 1 912
A net impairment loss has been recognised for the year ended 31 December 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 4,3%
(2015: 4,8%) and 5,1% (2015: 5,7%) 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.
The recoverable amounts and impairment amounts of the CGUs which were impaired are
as follows:
Reviewed Audited
2016 2015
Container type Recoverable Recoverable
R million amount Impairment amount Impairment
20' Flatrack 205 11 10 1
20' Dry freight 15 462 503 19 332 102
20' Refrigerated 261 2 242 9
40' Hi cube 18 974 1 363 23 139 1 507
40' Dry freight 2 563 (9) 3 242 111
40' Refrigerated 11 166 234 10 778 40
45' Hi cube 12 3 - -
48 643 2 107 56 743 1 770
Reviewed Audited
2016 2015
5. Net finance expenses
Finance expenses 1 451 1 199
Interest expense - Textainer 1 189 922
Interest expense - TAC 217 103
Realised and unrealised losses on derivative financial
instruments 45 174
Finance income
Interest income - cash and cash equivalents (57) (23)
1 394 1 176
6. Headline (loss)/earnings
Loss attributable to equity holders of the company (1 743) (146)
Impairment of property, plant and equipment 2 460 1 912
Compensation receivable from third party in respect of
impairment of property, plant and equipment (289) (98)
Available-for-sale financial asset - reclassification from other
comprehensive (loss)/income (33) -
Total tax effects of adjustments (31) (24)
Total non-controlling interests' share of adjustments (1 135) (736)
Headline (loss)/earnings (771) 908
Weighted average number of shares in issue (million) 177,1 177,1
Headline (loss)/earnings per share (cents) (435,1) 512,6
Diluted headline (loss)/earnings per share (cents) (435,1) 512,6
Adjusted headline (loss)/earnings:
Headline (loss)/earnings (as above) (771) 908
Net unrealised foreign exchange gains on translation
of long-term receivables - (171)
Total tax effects of adjustments - 48
Adjusted headline (loss)/earnings (771) 785
Undiluted adjusted headline (loss)/earnings per share (cents) (435,1) 443,3
Diluted adjusted headline (loss)/earnings per share (cents) (435,1) 443,3
7. Segmental reporting
Revenue
Reportable segments
Containers - finance (including exchange differences) (86) 288
Containers - owning, leasing, management and trading 9 459 8 989
9 373 9 277
Operating (loss)/profit before net finance expenses
Reportable segments
Containers - finance 240 200
Containers - owning, leasing, management and trading (2 523) 1 004
(2 283) 1 204
Unallocated (74) (33)
(2 357) 1 171
(Loss)/Profit before tax
Reportable segments
Containers - finance 240 200
Containers - owning, leasing, management and trading (3 975) (185)
(3 735) 15
Unallocated (22) (11)
(3 757) 4
Assets
Capital expenditure incurred by the container owning, leasing,
management and trading segment 7 210 6 095
Reviewed Audited
2016 2015
Carrying Fair Carrying Fair
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
Designated at fair value through profit or loss
Long-term receivables - - 640 640
Held for trading
Derivative financial instruments 63 63 10 10
Loans and receivables
Restricted cash 737 737 450 450
Trade and other receivables 1 731 1 731 1 793 1 793
Cash and cash equivalents 2 837 2 837 4 241 4 241
Other
Net investment in finance leases 1 450 1 451 2 223 2 203
6 818 6 819 9 402 9 382
Liabilities
Liabilities at amortised cost
Interest-bearing borrowings (excluding debt
issuance costs) 41 926 41 300 47 935 47 711
Trade and other payables 719 719 1 170 1 170
Designated at fair value through profit or loss
Amounts attributable to third parties in respect of
long-term receivables 65 65 85 85
Held for trading
Derivative financial instruments 17 17 40 40
42 727 42 101 49 230 49 006
9. Change in estimate
Residual values of the container fleets were reassessed at 30 June 2016 and at 31 December
2016. The useful lives of certain container types have also been extended at 30 June 2016.
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 at 30 June 2016 is an increase of R663 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. The reassessment of residual values at 31 December 2016 will
result in an estimated reduction in depreciation in 2017 of R355 million over what it would have
been had the residual values not been revised. This estimate presumes no material changes to
the composition of the container fleets and no significant changes for the next year to market
factors prevailing at 31 December 2016. Changes in these factors will influence the depreciation
that may be charged in future periods.
10. Events after the reporting period
On 21 December 2016, Textainer entered into amendments for certain of its secured
debt, credit and term loan facilities, whereby the testing of certain covenants was
delayed until 28 February 2017. At 31 December 2016, Textainer did not have the
unconditional right to defer settlement of R33,8 billion of interest-bearing borrowings
beyond 31 December 2017, which resulted in these borrowings being recorded as
current liabilities in accordance with IFRS. Under US GAAP these amounts due after
31 December 2017 under the facilities are not recorded as current liabilities, as is the
case under IFRS. Subsequently, on 27 February 2017, Textainer entered into amendments of
these facilities, which resulted in various changes to the related covenants and an increase in
the interest margin of 0,55% for the secured debt facilities and to a range of between 1,5% and
2,5% for the revolving credit and term loan facilities with effect from that date. An assessment
has not yet been made as to whether these amendments represent substantial modifications of
the terms of these interest-bearing borrowings in accordance with IAS 39 Financial Instruments:
Recognition and Measurement.
As a result these amendments, R31,9 billion of interest-bearing borrowings, which are reflected
as current liabilities at 31 December 2016, will become due after 31 December 2017.
In addition, Textainer prepaid certain debt facilities with a total aggregate principal balance of
more than R5,8 billion on 20 April 2017 and funded the repayment with proceeds from a new
debt facility arranged with several financial institutions.
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 unreviewed 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.
UNREVIEWED CONDENSED CONSOLIDATED INCOME STATEMENT
IN US DOLLARS
for the year ended 31 December 2016
Unreviewed Unreviewed
US$ million 2016 2015
Revenue 641,8 707,5
Trading (loss)/profit before items listed below: (32,2) 217,7
Realised and unrealised exchange (losses)/gains on translation
of long-term receivables, excluding fair value adjustment (0,9) 1,5
Fair value adjustment on net long-term receivables 22,1 2,4
Impairment of property, plant and equipment (178,9) (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 19,4 7,7
Operating (loss)/profit before net finance expenses (168,4) 104,1
Net finance expenses (95,1) (92,1)
Finance expenses Interest expense (95,9) (80,4)
Realised and unrealised losses on
derivative financial instruments (3,1) (13,6)
Finance income Interest income 3,9 1,9
Share of (loss)/profit of equity accounted investee (net of tax) (0,4) 0,7
(Loss)/Profit before tax (263,9) 12,7
Income tax expense 0,2 1,9
(Loss)/Profit for the year (264,1) 10,8
Attributable to:
Equity holders of the company (122,0) (6,3)
Non-controlling interests (142,1) 17,1
(264,1) 10,8
Number of shares in issue (million) 177,1 177,1
Weighted average number of shares in issue (million) 177,1 177,1
Loss per share (US cents) (68,9) (3,6)
Diluted loss per share (US cents) (68,9) (3,6)
Headline (loss)/earnings per share (US cents) (28,5) 35,0
Diluted headline (loss)/earnings per share (US cents) (28,5) 35,0
Adjusted headline (loss)/earnings per share (US cents) (28,3) 34,2
Diluted adjusted headline (loss)/earnings per share (US cents) (28,3) 34,2
Year-end rate of exchange: SA rand to US dollar 13,58 15,53
Average rate of exchange for the year: SA rand to US dollar 14,72 12,75
Trading (loss)/profit from operations comprises:
Textainer and TAC (23,4) 221,0
Other (8,8) (3,3)
(32,2) 217,7
UNREVIEWED CONDENSED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION IN US DOLLARS
at 31 December 2016
Unreviewed Unreviewed
US$ million 2016 2015
ASSETS
Property, plant and equipment 3 612,7 3 840,1
Long-term receivables – 36,0
Other non-current assets 168,5 165,3
Total non-current assets 3 781,2 4 041,4
Total current assets 425,0 504,1
Inventories 31,9 49,3
Trade and other receivables 149,8 124,3
Current portion of long-term receivables – 8,6
Current portion of net investment in finance leases 34,4 48,8
Cash and cash equivalents 208,9 273,1
Total assets 4 206,2 4 545,5
EQUITY
Equity attributable to equity holders of the company 603,7 758,6
Non-controlling interests 457,8 610,4
Total equity 1 061,5 1 369,0
LIABILITIES
Interest-bearing borrowings 361,8 2 962,4
Amounts attributable to third parties in respect of long-term
receivables – 4,5
Derivative financial instruments 1,2 2,6
Deferred revenue 2,3 2,5
Deferred tax liabilities 4,8 17,5
Total non-current liabilities 370,1 2 989,5
Total current liabilities 2 774,6 187,0
Trade and other payables 52,9 75,3
Current tax liabilities 10,0 9,3
Current portion of amounts attributable to third parties in
respect of long-term receivables 4,8 0,9
Current portion of interest-bearing borrowings 2 706,6 101,2
Current portion of deferred revenue 0,3 0,3
Total liabilities 3 144,7 3 176,5
Total equity and liabilities 4 206,2 4 545,5
Ratio to total equity:
Total liabilities (%) 296,2 232,1
Interest-bearing borrowings (%) 289,0 223,8
Date: 28/04/2017 05:07:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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