Wrap Text
Condensed unaudited interim financial results for the six months ended 28 February 2017
enX GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2001/029771/06)
JSE share code: ENX
ISIN: ZAE000222253
("enX" or "the Group")
CONDENSED UNAUDITED INTERIM FINANCIAL RESULTS
for the six months ended 28 February 2017
Revenue Up R2.4 billion
(2016: R517.7 million)
Profit before
taxation Up R175.2 million
(2016: R24.3 million)
Adjusted HEPS
Up 103.3 cps
(2016:43.6 cps#)
Net asset value
Up 1 820.6 cps
(2016: 1 355 cps#)
Successful completion of Eqstra transaction
Improved performance from Petrochemicals
NATURE OF BUSINESS
enX is a diversified industrial group that provides quality branded industrial, petrochemical, and fleet management and
logistics products and services.
enX is organised into the three business segments as follows:
- enX Equipment ("Equipment"):
- EIE provides distribution, rental and value added services for industrial and materials handling equipment in South
Africa, other African countries, the United Kingdom and Ireland ("UK"). EIE in South Africa is the market leader in
materials handling and the sole distributor of Toyota Forklifts, BT warehousing equipment and Konecranes heavy
duty forklifts and container handling equipment in Sub-Sahara Africa. Its UK operation, Impact, is the exclusive
distributor for Cat Lift Trucks and Konecranes heavy duty forklifts and container handling equipment in the UK and
Ireland ("EIE").
- New Way Power manufactures, installs and maintains diesel generators as well as provides temporary
power through Genmatics. It distributes a range of industrial and marine engines and components through
PowerO2 which is the sole distributor of John Deere and Mitsubishi industrial engines in South Africa ("Power").
- Austro distributes professional woodworking equipment, tooling, edging and provision of associated services such
as blade sharpening and equipment maintenance. It is the sole distributor of Biesse equipment and Leitz tooling in
South Africa ("Wood").
- enX Fleet ("Fleet"):
- Eqstra Fleet Management and Logistics business ("EFML") provides a full spectrum of passenger vehicle services
including leasing, fleet management, outsourcing solutions, maintenance, warranty management and vehicle
tracking solutions. It also provides fleet management solutions for commercial vehicle fleet owners and logistics
solutions. Its footprint is in South Africa and sub-Saharan Africa. The EFML's commercial vehicle operations are
supported by a nationwide network of workshops and panel repair shops.
- enX Petrochemicals ("Petrochemicals"):
- Centlube and African Group Lubricants ("AGL") produce and market oil lubricants in South Africa. They are the sole
distributors of ExxonMobil lubricants (excluding marine and aviation).
- West African International ("WAI") and enX Polymers distribute plastics, polymers, rubber and speciality chemicals
into Southern African. They are the sole agents and distributors of ExxonMobil chemicals in South Africa.
enX has a proven track record of acquiring quality industrial assets that have strong market positions, represent leading
global brands with committed customer partnerships. We instil entrepreneurial management to drive returns through the
disciplined allocation of capital. enX was founded in 2007, operates in fourteen countries and has over 2400 employees.
OVERVIEW
The board is pleased to present enX's first set of interim results incorporating EIE, EFML, WAI and AGL. These results
illustrate the extent of the transformation that enX has undergone as a result of these acquisitions. Our rapidly developing
Petrochemicals segment has begun to demonstrate its earnings potential. enX has evolved into a diversified industrial
business with significantly increased market capitalisation, assets under management and earnings base. We now have
the foundations of a much larger industrial business.
Our focus during the past six months has been on integrating acquisitions and driving profitability of existing operations:
1. The acquisition of EIE and EFML was completed in November 2016. Furthermore, we closed our R1.5 billion equity
capital raise and invested R1.4 billion in debt, mezzanine and equity instruments in eXtract Group Limited ("eXtract").
The results of these acquisitions and investments have been included for 4 months.
2. The interest on our eXtract debt was serviced in cash for the period together with some principal repayments.
The recapitalisation and unbundling of eXtract based on the proposed debt conversion is explained below under
subsequent events.
3. The results of WAI and AGL, which were acquired in July 2016, have been included for the full period. This has driven
an increase in dollar denominated revenues and market share in the oil lubricants industry. WAI introduces a stable,
defensive and cash generative speciality chemical business into enX. Volumes of ExxonMobil lubricants and chemical
products distributed by Petrochemicals have grown significantly. We have commissioned our new blend plant which
began operations in March 2017.
4. Power's order book has recovered after being awarded large tender and contract manufacturing projects.
5. Subsequent to period end the first partial redemption of our restructured EQS05 note of R300 million took place.
In terms of transformation, the Group has been verified as a level 5 contributor in terms of the amended B-BBEE codes of
good practice. Certain subsidiaries within the Group have achieved level 2 and 4 status.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
as at as at as at
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
ASSETS
Non-current assets 6 480 481 318 690 424 902
Property, plant and equipment 379 753 118 811 121 928
Leasing assets 5 115 365 – –
Goodwill 480 930 164 776 151 336
Intangible assets 442 408 21 000 128 393
Trade and other receivables 11 697 – 5 985
Investment in associate 1 149 491 971
Other investments and loans 12 007 – –
Deferred taxation 37 172 13 612 16 289
Current assets 3 846 976 656 773 999 415
Inventories 1 207 683 351 086 542 626
Trade and other receivables 1 115 834 243 032 394 552
Taxation receivable 12 143 – 2 087
Bank and cash balances 376 026 62 655 60 150
Assets held for sale - eXtract 1 135 290 – –
Total assets 10 327 457 975 463 1 424 317
EQUITY AND LIABILITIES
Total shareholders' interests 3 273 993 692 455 687 420
Stated capital 3 087 083 559 046 634 565
Non-distributable reserve (10 599) – (40)
Accumulated profits 167 019 133 409 52 895
Equity attributable to equity holders of the parent 3 243 503 692 455 687 420
Non-controlling interests 30 490 – –
Non-current liabilities 4 832 483 42 575 178 059
Interest-bearing liabilities 4 307 191 26 824 75 891
Deferred vendor consideration 42 588 8 194 65 864
Deferred taxation 482 704 7 557 36 304
Current liabilities 2 220 981 240 433 558 838
Interest-bearing liabilities 453 170 10 507 65 343
Deferred vendor consideration 23 840 4 762 33 897
Trade and other payables 1 536 798 224 716 405 962
Taxation payable 144 022 448 1 483
Bank overdrafts 63 151 – 52 153
Total equity and liabilities 10 327 457 975 463 1 424 317
Supplementary information:
Number of shares in issue # 180 439 447 51 120 636 54 562 187
Number of shares in issue (net of treasury shares) # 178 156 747 51 120 636 54 562 187
Net asset value per share (cents) # 1 820.6 1 354.6 1 259.9
Net tangible asset value per share (cents) # 1 367.8 1 002.1 812.9
Share consolidation
Number of shares in issue 562 327 001 600 184 057
Weighted average number of shares in issue 559 252 947 566 256 129
Net asset value per share (cents) 123.1 114.5
Net tangible asset value per share (cents) 91.1 73.9
Basic earnings/(loss) per share (cents) 3.1 (12.6)
Headline earnings per share (cents) 3.1 1.6
Adjusted headline earnings per share (cents) 4.0 3.7
(#) The 29 February 2016 and 31 August 2016 amounts have been presented taking into account the share consolidation of 11:1 that
took place during the period.
CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Revenue 2 399 978 517 726 1 150 951
Net operating expenses (1 707 749) (477 926) (1 111 076)
Profit from operations before depreciation and
amortisation 692 229 39 800 39 875
Depreciation and amortisation (409 852) (5 436) (9 799)
(Loss)/profit on disposal of property, plant
and equipment (30) – 379
IFRS 2 charges (2 319) (6 579) (6 323)
Foreign exchange losses (8 173) (1 547) (876)
Operating profit 271 855 26 238 23 256
Impairment of property, plant and equipment – – (2 941)
Impairment of goodwill – – (78 205)
Fair value adjustment of investments (12 506) – –
Profit/(loss) before interest and taxation 259 349 26 238 (57 890)
Net finance costs (81 929) (1 750) (8 484)
Interest received 65 542 1 419 3 016
Interest paid (147 471) (3 169) (11 500)
Share of (losses)/profits from associates (2 226) (187) 293
Net profit/(loss) before taxation ("PBT") 175 194 24 301 (66 081)
Taxation (58 392) (6 851) (5 312)
Net profit/(loss) after taxation 116 802 17 450 (71 393)
Attributable to:
Equity holders of the parent 114 124 17 450 (71 393)
Non-controlling interests 2 678 – –
Net profit/(loss) after taxation ("PAT") 116 802 17 450 (71 393)
Other comprehensive income/(loss) net
of taxation:
Net profit/(loss) after taxation 116 802 17 450 (71 393)
Items that may be reclassified subsequently to
profit or loss:
– Foreign currency translation reserve (10 559) – (40)
Total comprehensive income/(loss) 106 243 17 450 (71 433)
Attributable to:
Equity holders of the parent 103 565 17 450 (71 433)
Non-controlling interests 2 678 – –
Total comprehensive income/(loss) 106 243 17 450 (71 433)
Supplementary information:
Basic earnings/(loss) per share (cents) # 73.6 34.3 (138.7)
Headline earnings per share (cents) # 73.6 34.3 17.9
Adjusted headline earnings per share (cents) # 103.3 43.6 41.1
Diluted earnings per share (cents) 72.8 34.3 ^
Diluted headline earnings per share (cents) 72.8 34.3 ^
EBIT 257 123 26 238 (57 597)
Adjusted EBIT 306 749 32 817 40 122
Adjusted headline earnings 160 268 22 175 21 135
Number of shares in issue # 180 439 447 51 120 636 54 562 187
Weighted average number of shares in issue -
net of treasury shares # 155 154 559 50 841 177 51 477 830
Diluted number of shares in issue 156 867 245 50 841 177 ^
^ Dilutionary instruments in issue do not have a dilutionary effect.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Stated capital 3 087 083 559 046 634 565
Balance at beginning of the period 634 565 345 387 345 387
Increase through the issue of shares (net of costs) 2 452 518 213 659 289 178
Non-distributable reserve (10 599) – (40)
Balance at beginning of the period (40) – –
Foreign currency translation reserve (10 559) – (40)
Accumulated profits 167 019 133 409 52 895
Balance at beginning of the period 52 895 115 959 115 959
Total comprehensive income/(losses) 114 124 17 450 (71 393)
Transferred from non-controlling interest – – 8 329
Non-controlling interest 30 490 – –
Balance at beginning of the period – – –
At acquisition of subsidiary 27 812 – 9 979
Total comprehensive income 2 678 – –
Transactions with non-controlling interest – – (1 650)
Transferred to accumulated profits – – (8 329)
Balance at end of the period 3 273 993 692 455 687 420
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
for the six for the six Audited
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Cash flows from operating activities 765 398 (32 848) 12 294
Cash generated from operations before working
capital movements 698 495 50 006 42 178
Working capital movements 163 068 (78 774) (20 016)
Interest received 65 542 1 419 3 016
Interest paid (143 996) (2 539) (7 725)
Taxation paid (17 711) (2 960) (5 159)
Cash flows from investing activities (1 750 885) (72 911) (276 701)
Capital expenditure (492 761) (12 405) (20 135)
Proceeds on disposal of assets 6 038 606 754
Business combinations (1 315 228) (61 112) (257 320)
Proceeds from other investments and loans 51 066 – –
Cash flows from financing activities 1 290 365 155 780 259 770
Net decrease in interest-bearing borrowings (114 824) – 80 000
Deferred vendor consideration (36 808) (57 879) (67 093)
Payments on transactions with non-controlling interest – – (9 340)
Net proceeds from shares issued 1 441 997 213 659 256 203
Net increase in cash and cash equivalents 304 878 50 021 (4 637)
Cash and cash equivalents at beginning of the period 7 997 12 634 12 634
Cash and cash equivalents at end of the period 312 875 62 655 7 997
HEADLINE EARNINGS RECONCILIATION
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Net profit/(loss) after taxation attributable to
equity holders of the parent 114 124 17 450 (71 393)
Adjusted for:
Loss/(profit) on disposal of property, plant
and equipment 30 (17) 379
Impairment of property, plant and equipment – – 2 941
Impairment of goodwill – – 78 205
Taxation effect on adjustments (8) 5 (929)
Headline earnings attributable to
ordinary shareholders 114 146 17 438 9 203
Adjusted for:
IFRS 2 charges 2 319 6 579 6 323
Restructuring costs – – 5 426
IFRS 3 transaction costs 22 203 – 4 824
Amortisation of intangible assets* 10 194 – –
Fair value adjustment of investments 12 506 – –
Share of losses from eXtract 2 404 – –
Taxation effect on adjustments (3 504) (1 842) (4 641)
Adjusted headline earnings attributable to
ordinary shareholders 160 268 22 175 21 135
EBIT RECONCILIATION
Earnings before interest, taxation,
depreciation and amortisation ("EBITDA") 670 662 34 697 (39 595)
Depreciation and amortisation (413 539) (8 459) (18 002)
EBIT 257 123 26 238 (57 597)
IFRS 2 charges 2 319 6 579 6 323
IFRS 3 transaction costs 22 203 – 4 824
Restructuring costs – – 5 426
Amortisation of intangible assets* 10 194 – –
Share of losses from eXtract 2 404 – –
Fair value adjustment of investments 12 506 – –
Impairment of property, plant and equipment – – 2 941
Impairment of goodwill – – 78 205
Adjusted EBIT 306 749 32 817 40 122
Adjusted EBIT % 13 6 3
* The amortisation of intangible assets arising as part of business combinations has been added back for adjusted headlines
earnings and adjusted EBIT.
Condensed segmental analysis
Equipment
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Revenue 1 160 989 357 873 606 394
– External South Africa 871 724 357 873 606 353
– External Rest of world 287 869 – –
– Intercompany 1 396 – 41
EBITDA@ 335 500 37 358 26 976
Depreciation and amortisation (202 445) (5 327) (11 218)
EBIT 133 055 32 031 15 758
– South Africa 108 877 32 031 15 758
– Rest of world 24 178 – –
Adjusted EBIT 133 885 24 653 24 255
Net finance costs (58 929) (3 359) (6 559)
Adjusted PBT 74 956 21 294 17 696
Total assets 4 467 754 642 315 523 025
– Goodwill and intangibles 50 106 38 845 38 845
– Leasing assets 2 497 207 – –
– Inventory 859 996 226 627 208 853
– Trade and other receivables 508 249 218 168 145 501
– Other assets 552 196 158 675 129 826
Total liabilities 3 373 528 200 360 123 762
– Interest-bearing liabilities and overdraft 2 479 231 8 300 6 531
– Deferred vendor consideration 8 927 12 957 13 442
– Trade and other payables and provisions 693 385 178 756 103 789
– Other liabilities 191 985 347 –
Capital expenditure 305 354 9 551 16 720
Number of employees 1 779 466 362
GEOGRAPHICAL SEGMENTATION
Total assets 4 467 754 642 315 523 025
– South Africa 3 279 054 642 315 523 025
– Rest of world 1 188 700 – –
Total liabilities 3 373 528 200 360 123 762
– South Africa 2 409 876 200 360 123 762
– Rest of world 963 652 – –
Fleet
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
Revenue 554 848 – –
– External South Africa 481 543 – –
– External Rest of world 63 127 – –
– Intercompany 10 178 – –
EBITDA@ 341 422 – –
Depreciation and amortisation (196 745) – –
EBIT 144 677 – –
– South Africa 124 899 – –
– Rest of world 19 778 – –
Adjusted EBIT 145 269 - -
Net finance costs (62 286) – –
Adjusted PBT 82 983 – –
Total assets 3 280 261 – –
– Goodwill and intangibles 9 251 – –
– Leasing assets 2 618 158 – –
– Inventory 28 662 – –
– Trade and other receivables 344 498
– Other assets 279 692 – –
Total liabilities 2 927 531 – –
– Interest-bearing liabilities and overdraft 2 252 360 – –
– Deferred vendor consideration – – –
– Trade and other payables and provisions 386 587 – –
– Other liabilities 288 584 – –
Capital expenditure 174 321 – –
Number of employees 552 – –
GEOGRAPHICAL SEGMENTATION
Total assets 3 280 261 – –
– South Africa 2 919 016 – –
– Rest of world 361 245 – –
Total liabilities 2 927 531 – –
– South Africa 2 743 762 – –
– Rest of world 183 769 – –
Petrochemicals
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R’000 R’000 R’000
Revenue 695 716 159 853 546 633
– External South Africa 660 521 159 853 534 230
– External Rest of world 35 195 – 10 368
– Intercompany – – 2 035
EBITDA@ 48 450 11 213 39 154
Depreciation and amortisation (3 777) (3 011) (5 999)
EBIT 44 673 8 202 33 155
– South Africa 40 054 8 202 33 293
– Rest of world 4 619 – (138)
Adjusted EBIT 44 744 8 281 33 254
Net finance costs (12 702) (5 316) (13 192)
Adjusted PBT 32 042 2 965 20 062
Total assets 649 423 212 804 656 543
– Goodwill and intangibles 17 177 1 000 17 143
– Leasing assets – – –
– Inventory 373 260 124 459 333 773
– Trade and other receivables 244 910 55 044 247 039
– Other liabilities 14 076 32 301 58 588
Total liabilities 347 931 86 491 394 114
– Interest-bearing liabilities and overdraft 14 454 20 031 17 595
– Deferred vendor consideration – – –
– Trade and other payables and provisions 328 457 64 683 74 959
– Other liabilities 5 020 1 777 301 560
Capital expenditure 6 952 2 813 6 011
Number of employees 96 48 91
GEOGRAPHICAL SEGMENTATION
Total assets 649 423 212 804 656 543
– South Africa 621 459 212 804 632 592
– Rest of world 27 964 – 23 951
Total liabilities 347 931 86 491 394 114
– South Africa 319 732 86 491 366 243
– Rest of world 28 199 – 27 871
Group, financing and consolidation
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R’000 R’000 R’000
Revenue (11 575) – (2 076)
– External South Africa 37 295 19 152 25 260
– External Rest of world – – –
– Intercompany (48 870) (19 152) (27 336)
EBITDA@ (54 710) (14 061) (105 725)
Depreciation and amortisation (10 572) (121) (785)
EBIT (65 282) (13 995) (106 510)
– South Africa (65 282) (13 995) (106 510)
– Rest of world – – –
Adjusted EBIT (17 149) (117) (17 387)
Net finance costs 51 988 6 924 11 267
Adjusted PBT 34 839 6 807 (6 120)
Total assets 1 930 019 120 344 244 749
– Goodwill and intangibles 846 804 145 931 223 741
– Leasing assets – – –
– Inventory (54 235) – –
– Trade and other receivables 29 874 (46 107) –
– Other liabilities 1 107 576 20 521 21 008
Total liabilities 404 474 (3 843) 219 021
– Interest-bearing liabilities and overdraft 77 467 9 000 89 158
– Deferred vendor consideration 57 501 – 86 319
– Trade and other payables and provisions 128 369 (18 722) (85 820)
– Other liabilities 141 137 5 880 129 364
Capital expenditure 96 41 57
Number of employees 13 7 7
GEOGRAPHICAL SEGMENTATION
Total assets 1 930 019 120 344 244 749
– South Africa 1 930 019 120 344 244 749
– Rest of world – – –
Total liabilities 404 474 (3 843) 219 021
– South Africa 404 474 (3 843) 219 021
– Rest of world – – –
Total
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R’000 R’000 R’000
Revenue 2 399 978 517 726 1 150 951
– External South Africa 2 051 083 536 878 1 165 843
– External Rest of world 386 191 – 10 368
– Intercompany (37 296) (19 152) (25 260)
EBITDA@ 670 662 34 510 (39 595)
Depreciation and amortisation (413 539) (8 459) (18 002)
EBIT 257 123 26 238 (57 597)
– South Africa 208 548 26 238 (57 459)
– Rest of world 48 575 – (138)
Adjusted EBIT 306 749 32 817 40 122
Net finance costs (81 929) (1 751) (8 484)
Adjusted PBT 224 820 31 066 31 638
Total assets 10 327 457 975 463 1 424 317
– Goodwill and intangibles 923 338 185 776 279 729
– Leasing assets 5 115 365 – –
– Inventory 1 207 683 351 086 542 626
– Trade and other receivables 1 127 531 227 105 392 540
– Other liabilities 1 953 540 211 497 209 422
Total liabilities 7 053 464 283 008 736 897
– Interest-bearing liabilities and overdraft 4 823 512 37 331 113 284
– Deferred vendor consideration 66 428 12 957 99 761
– Trade and other payables and provisions 1 536 798 224 717 92 928
– Other liabilities 626 726 8 004 430 924
Capital expenditure 486 723 12 405 22 788
Number of employees 2 440 521 460
GEOGRAPHICAL SEGMENTATION
Total assets 10 327 457 975 463 1 424 317
– South Africa 8 749 548 975 463 1 400 366
– Rest of world 1 577 909 – 23 951
Total liabilities 7 053 464 283 008 736 897
– South Africa 5 877 844 283 008 709 026
– Rest of world 1 175 620 – 27 871
* The group segments have been brought in line with the three segments as previously reported in the Revised Listing Particulars
issued on 24 August 2016.
The Power and Wood segments were previously reported separately and have been combined into the Equipment segment with comparative
amounts aggregated.
(@)Excludes intercompany management fees, which was not previously adjusted for by EIE and EFML.
BASIS OF PREPARATION
The condensed unaudited interim financial results for the six months ended 28 February 2017 have been prepared in
accordance with International Financial Reporting Standards ("IFRS") and complies with IAS 34 – Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Board or its successor, the
requirements of the Companies Act, No. 71 of 2008 of South Africa and the Listings Requirements of the JSE Limited.
The accounting policies used in the preparation of the condensed unaudited interim financial results for the six months
ended 28 February 2017, are consistent with those applied in the audited financial statements for the year ended
31 August 2016.
During the current period the Group adopted those standards and interpretations in issue and effective for the period.
The adoption of these new and amended standards and interpretations has not had a significant impact on the Group's
adopted accounting policies.
These results have been compiled under the supervision of Irwin Lipworth CA(SA), the financial director. The condensed
interim financial results have not been reviewed or reported on by the Group auditors.
BUSINESS COMBINATION
With effect from 8 November 2016, the Group acquired an effective 100% shareholding in Eqstra Investments Proprietary
Limited which owned EIE and EFML. The transaction was settled by enX as follows:
- the allotment and issue to eXtract of 52 715 390 new enX shares ("Consideration Shares") at R21.00 per enX share;
- the recapitalisation of eXtract to the value of approximately R1.4 billion by way of enX:
– subscribing for 101 400 000 new eXtract ordinary shares at R1.00 per eXtract ordinary share;
– subscribing for 400 new MCC Contracts Proprietary Limited ("MCC"), a wholly owned subsidiary of eXtract,
preference shares for an aggregate subscription price of R600 million; and
– advancing a loan of R700 million to MCC.
On 15 November 2016, the Consideration Shares were distributed to eXtract shareholders in the ratio of 0.13 enX shares
for every 1 eXtract share.
enX funded this transaction by:
- issuing the Consideration Shares; and
- raising R1.5 billion of cash to fund the recapitalisation of eXtract and approximately R100 million for enX transaction
costs and general corporate purposes.
The summary of the net assets acquired through this business combination, for which the purchase price has been
allocated to the respective assets and liabilities, are as follows:
R'000
Non-current assets 6 621 907
Current assets 1 664 473
Non-current liabilities (5 199 469)
Current liabilities (1 298 848)
Total identifiable net assets 1 788 063
Non-controlling interests (27 812)
Total identifiable net assets acquired 1 760 251
Goodwill arising from business combination 319 221
Total consideration transferred 2 079 472
Ordinary shares acquired in eXtract (at fair value) 34 476
Loans advanced to and preference shares acquired in MCC 1 300 000
Impairment raised on MCC loans and preference shares (991 000)
Consideration shares (at fair value) (1 021 548)
Purchase consideration settled in cash 1 401 400
Purchase consideration settled in cash 1 401 400
Cash balances taken over (86 172)
Net cash outflow on total acquisition 1 315 228
The purchase price allocation is provisional and will be finalised on the first anniversary of the business combination.
Revenue of R1 716 million and net profit after taxation of R111 million have been included in these results since the
acquisition date. If the acquisition had occurred on 1 September 2016, the following amounts would have been included in
these results: Revenue of R2 586 million and net profit after taxation of R146 million.
NOTES
Unaudited
for the six
months ended
28 February 2017
R'000
1. Capital commitments
Total capital commitments contracted 6 000
Contingent liabilities –
Guarantees 22 412
Expenditure will be financed from cash generated from operations and existing banking facilities.
There were no capital commitments in the prior period.
2. Assets held for sale – eXtract
Ordinary shares in eXtract (at fair value) 21 174
Loans and preference shares (net) 1 114 116
Loans in MCC 1 505 116
Preference shares in MCC 600 000
Gross value of loans and preference shares 2 105 116
Impairments raised (991 000)
Total assets held for sale 1 135 290
Unaudited Unaudited Audited
for the six for the six for the
months ended months ended year ended
28 February 2017 29 February 2016 31 August 2016
R'000 R'000 R'000
3. Interest-bearing borrowings
Notes 1 531 051 – –
Bank debt and overdraft – South Africa 2 523 266 37 331 141 234
Bank debt and overdraft – Rest of world 769 195 – –
Deferred vendor consideration 66 428 12 956 99 761
4 889 940 50 287 240 995
Comprising:
Non-current 4 349 779 35 018 141 755
Current 540 161 15 269 99 240
4 889 940 50 287 240 995
4. Net finance costs
Interest received – other 4 743 1 419 3 016
Interest received – MCC 60 799 – –
Interest paid (147 471) (3 169) (11 500)
(81 929) (1 750) (8 484)
5. Fair value hierarchy disclosures
Valuation methodology
Level 1 – Valuations with reference to quoted prices in an active market:
Financial instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active
markets where the quoted price is readily available and the price represents actual and regularly occurring market
transactions on an arm's length basis.
Level 2 – Valuations based on observable and unobservable inputs include:
Financial instruments valued using inputs other than quoted prices as described above for Level 1 but which are
observable for the asset or liability, either directly or indirectly, such as a quoted price for similar assets or liabilities
in an active market; a quoted price for identical or similar assets or liabilities in inactive markets; a valuation model
using observable inputs; and a valuation model using inputs derived from/corroborated by observable market data.
The table below shows the Group's financial asset and liabilities that are recognised and subsequently measured at
fair value, analysed by valuation technique.
Level 1 Level 2 Fair value
28 February 2017 R'000 R'000 R'000
Financial assets
Assets held for sale 21 174 1 114 116 1 135 290
Available-for-sale investments – 12 007 12 007
Designated as fair value through profit and loss
– Derivative financial assets – 2 990 2 990
21 174 1 129 113 1 150 287
Financial liabilities
Financial liabilities designated as fair value
through profit and loss
– Derivative financial liabilities – 29 128 29 128
– 29 128 29 128
FINANCIAL RESULTS
Overview
Revenue for the year increased to R2.4 billion (2016: R517.7 million) with the inclusion of EIE and EFML for four months
totalling R1 716 million. Revenues for Petrochemicals increased to R695.7 million (2016: R159.9 million) following the
inclusion of WAI and AGL for the full period. The Group's EBIT improved to R257.1 million (2016: R26.2 million) and PBT
improved to R175.2 million (2016: R24.3 million). PBT includes once-off IFRS 3 transaction costs of R22.2 million and
a fair value adjustment of R12.5 million in order to account for eXtract as an 'Asset held for sale'. Consistent with
prior disclosures, management has elected to disclose adjusted EBIT which provides a more meaningful reflection of
sustainable earnings. Adjusted EBIT increased to R306.7 million (2016: R32.8 million).
The effective tax rate for the period was 33.3% (2016: 28.2%). The higher charge is primarily due to the transaction costs
and fair value adjustments. If these were excluded be effective taxation rate would have been 27.8%.
Earnings
Headline earnings increased to R114.1 million (2016: R17.4 million). This translates into HEPS of 73.6 cents (2016:
34.3 cents). Adjusted headline earnings increased to R160.3 million (2016: R22.2 million) and translated into adjusted
HEPS of 103.3 cents (2016: 43.6 cents). The corresponding financial period HEPS amounts are after adjusting for the share
consolidation in the ratio of 11:1 that took place on 24 October 2016. Prior to the share consolidation HEPS and Adjusted
HEPS were reported as 3.1 and 4.0 cents per share respectively.
Capex
The capital expenditure increased to R492.8 million (2016: R12.4 million) primarily to maintain and grow
leasing fleets.
Funding
With the completion of the Eqstra transaction, the Group's net interest-bearing debt levels (including deferred vendor
consideration and cash) increased to R4 513.9 million resulting in a net gearing ratio of 139.2%. This was against an increase in
leasing assets of R5 115.4 million (2016: Rnil). Bank covenants were met for the period. The higher debt resulted in the
Group's net interest charge increasing to R81.9 million (2016: R1.8 million). Included in interest received is an amount
of R60.8 million from MCC to service its loan obligations. This will not re-occur due to the proposed restructure and
unbundling of eXtract (Refer to subsequent events).
Investments
With the proposed restructure and unbundling, the ordinary shares in eXtract, loans advanced to and preference shares
acquired in MCC of R1 135.2 million, have been classified as assets held for sale. As part of the purchase price allocation
an impairment of R991 million was made to the loans and preference shares. Following the change in classification of
these assets a fair value adjustment was made to the ordinary shares held to reflect the share price of eXtract at the
period end date.
Cash flow
Cash flows from the Group were positive over the period. Cash outflows from investing activities totalled R1 750.9 million
outflow, of which R1 315.2 million was due to the business combination. In addition to this MCC repaid R51.1 million
towards their principal obligations to the Group.
OPERATIONAL OVERVIEW
Equipment
The segment performed in line with expectations for the period. Revenues of R1 161.0 million, adjusted EBIT of
R133.9 million and adjusted PBT of R75.0 million were achieved. The inclusion of EIE's results for the first four months
was the primary reason for the improvement. The SA and UK materials handling equipment market shares were stable.
The ZAR strength during the period, assisted all the businesses to remain price competitive and in some instances, widen
margins. The current rental fleet in South Africa and UK stands at 8320 and 4550 units respectively.
Power has rebuilt its order book after the decline in revenues and losses experienced in the second half of 2016. Together
with a reduction in its cost base this business returned to profitability. Revenues in Wood came under pressure but
stronger margins and cost controls resulted in a material improvement in operating profit compared to the prior period.
Fleet
Revenues of R554.8 million, adjusted EBIT of R145.3 million and adjusted PBT of R83.0 million were achieved. EFML
continued to show respectable returns in a challenging environment. Leasing assets remained stable. EFML maintained
its high quality blue chip customer base. Continued traction in value added products ("VAPs") particularly GPS and
accident management contributed positively to margins for the period.
The division embarked on the implementation to its new ERP operating environment, called Quest, in November 2016.
Petrochemicals
Revenues of R695.7 million, adjusted EBIT of R44.7 million and adjusted PBT of R32.0 million were achieved. The inclusion of
WAI and AGL for the full period combined with growth in toll blending volumes and product profitability in the lubricants
business contributed to a strong performance. As a result of the additional production volumes we have commissioned
a new lubricants blend plant. WAI experienced lower than expected polymers volumes through its distribution business.
January 2017 saw the establishment of enX Polymers as the agency business for ExxonMobil in South Africa which has
introduced a new profit center.
PROSPECTS
Strategy
Our goal is to build a growing, cash generative industrial business which over time consistently delivers returns on equity
in excess of its cost of capital. We aim to do this by investing in assets and opportunities that:
- Drive differentiation and scale;
- Strengthen our partnerships with leading global brand owners;
- Expand our businesses geographically;
- Build an entrepreneurial culture;
- Maintain strong financial disciplines; and
- Ensure an ongoing social license to do business.
The specific initiatives that we are and intend to pursue to deliver on these strategic priorities are as follows:
Equipment:
- EIE will seek to grow its South Africa share of the forklift market in line with Toyota's aspirations.
- EIE aims to expand its UK market share through the acquisition of complementary forklift businesses and strengthen
its long-term partnership with Mitsubishi, the supplier of Cat Lift Trucks.
- Power will drive its contract manufacturing volumes while continuing to consolidate its operations to reduce costs and
improve efficiencies. Over time it will aim to generate new sources of power related revenues by moving into prime
power and solar activities.
Wood aims to maintain its leading market share and gradually build a leasing and rental businss.
Fleet:
- EFML is focused on growing revenues derived from VAP's, which are not-capital intensive. Capital will be made
available to this division to pursue new leasing contracts. The implementation of Quest will present opportunities to
offer outsourced processing and fleet management services and drive operational efficiencies.
Petrochemicals:
- The lubricants component will focus on growing its distribution and contract manufacturing volumes. It will also seek
new product distribution opportunities through its relationship with ExxonMobil. These growth opportunities have
been enabled through the successful commissioning of its new inland blending plant.
- The chemicals business will focus on growing volumes in selected polymer and speciality chemicals. The business will
also seek new distributorships, whereby it can sell more volume through its existing infrastructure.
The remainder of the financial year will see us work towards the completion of the conversion of our debt and preference
share investments in eXtract and subsequent unbundling to enX shareholders.
The broader industrial focus of enX may in time result in the addition of new segments should the business be aligned with
our strategic priorities.
Outlook
We expect EIE to marginally improve on its first half reported performance as the fruit harvesting season drives sales
and short-term rentals. Our UK operations are expected to perform in line with plan. The effect of these earnings on our
full year results will be dependent on currency fluctuations. The order book that Power has built up over the past six
months will begin to translate into revenues resulting in a marked improvement in 2017 second half performance, while
performance of Wood should continue to be stable.
EFML expects to perform in line with its current performance, although PBT margins may come down as a result of higher
low-margin revenues.
Petrochemicals to continue with its strong half year performance. Higher contract manufacturing volumes, the integration
of Group's lubricant businesses, increased activity the mining clients, the take-on of the ExxonMobil polymer agency
business and improved polymer distribution volumes should all contribute to this result.
Risks to our business are posed by the macroeconomic impact on growth, currency and interest rates of recent sovereign
debt downgrades. It is still too early to assess the effect that these may have on our businesses. Whilst recognising this,
enX believes its business model and current portfolio of businesses have defensive characteristics given the annuity
generating nature of its assets, strong market positions, brand partnerships and long-term client commitments. We have
an experienced management team who will maintain the strong relationships with our OEMs, drive cost efficiencies and be
alert to the opportunities to grow that macro events present.
SUBSEQUENT EVENTS
Repositioning, recapitalisation and unbundling of eXtract
Following a strategic review of the business of eXtract the board of eXtract concluded that it wishes to engage in a
structured exit of its sub-optimal contract mining contracts and reposition eXtract by establishing a new funding model
for future diverse resource investments. The enX Board wishes to support this repositioning.
Accordingly enX will convert R2.1 billion of the debt owed by MCC into 5.2 billion new shares in eXtract. These shares
together with the existing ordinary shares held by enX in eXtract amounting in aggregate to 5.3 billion shares will then be
unbundled to enX shareholders. enX shareholders will receive approximately 29.5 eXtract shares for every enX share held.
Furthermore, enX provided collateralised financial assistance to eXtract of R44 million. Shareholders are referred to the
joint announcement released on SENS on 18 April 2016 for more details.
The unbundling of eXtract moulds enX into a pure-play industrial company and unlocks the associated benefits of certainty
and simplicity for our stakeholders.
Apart from the above, there have been no other material events subsequent to period end that have been taken into
account in the financial statements.
DIVIDENDS
In line with the Group policy to reinvest for growth, no dividend has been declared for the period.
DIRECTORS
Executive directors: PD Mansour (Executive Deputy Chairman), JL Serfontein (Chief Executive Officer), IM Lipworth (Financial Director)
Non-executive directors: SB Joffe (Chairman), PM Makwana* (Lead), PC Baloyi, SF Booysen*, NV Lila*, LN Molefe*, TC Moodley, PS O’Flaherty,
AJ Phillips*, LL von Zeuner*
(* Independent)
As previously reported the following changes to directorships took place during the period:
• M Motjope resigned as an alternate director to PC Baloyi on 1 September 2016;
• LN Molefe was appointed as an independent non-executive director, effective 21 October 2016;
• TC Moodley was appointed as a non-executive director, effective 21 October 2016;
• JL Serfontein was appointed as CEO, with PD Mansour assumed the role of the Executive Deputy Chairman, effective 8 November 2016; and
• LL von Zeuner and SF Booysen were appointed as independent non-executive directors effective 8 November 2016.
For and on behalf of the board
PD Mansour JL Serfontein IM Lipworth
Executive Deputy Chairman Chief Executive Officer Financial Director
15 May 2017
Registered office: 61 Maple Street, Kempton Park, 1619
Postal address: PostNet Suite X86, Private Bag X7, Aston Manor, 1630
Sponsor: Java Capital
Company secretary: L Möller
Transfer secretaries: Computershare Investor Services Proprietary Limited
Date: 15/05/2017 07:30:00 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,
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